WEBVTT - A Bloomberg Surveillance Jackson Hole Special 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:12.000 --> 0:00:15.600 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.640 --> 0:00:19.000 with Paul Sweeney. Join us each day for insight from 0:00:19.000 --> 0:00:23.159 the best in economics, finance, investment, and international relations. You 0:00:23.200 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.320 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.320 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.040 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.400 --> 0:00:42.920 or anywhere else you listen. And always I'm Bloomberg Radio, 0:00:43.120 --> 0:00:47.760 the Bloomberg Terminal and the Bloomberg Business app from Wyoming. 0:00:47.840 --> 0:00:52.320 From Jackson Hole, Wyoming for our audience worldwide, Bloomberg Surveillance 0:00:52.680 --> 0:00:54.520 on television, on radio. 0:00:54.720 --> 0:00:57.280 And it is a perfect, perfect. 0:00:56.840 --> 0:00:59.880 August Friday here in Jackson Hall with a back to 0:01:00.120 --> 0:01:02.640 up with the political miles from the Democratic Convention. I 0:01:02.640 --> 0:01:05.160 know you stayed up Lisa time and watch the entire 0:01:05.720 --> 0:01:07.240 every minute of it as well. 0:01:07.400 --> 0:01:09.040 But now we turn to the Powell speech. 0:01:09.319 --> 0:01:11.880 The key question here is how much can this fed 0:01:11.959 --> 0:01:14.120 share ratify what we're seeing in markets, which is the 0:01:14.160 --> 0:01:16.959 expectation for a rate cutting cycle after one of the 0:01:17.000 --> 0:01:20.919 longest periods without any move whatsoever after a rate hiking 0:01:20.959 --> 0:01:22.760 cycle by a federal reserve and modern history. 0:01:22.760 --> 0:01:24.560 A question here, can they stick this. 0:01:24.520 --> 0:01:27.200 Soft landing and will think give any guidance whatsoever to 0:01:27.880 --> 0:01:28.720 a lot of people think. 0:01:28.640 --> 0:01:28.880 That it's not. 0:01:29.120 --> 0:01:32.080 I'm data dependent of at fourteen cups of coffee this morning. 0:01:32.120 --> 0:01:33.040 They're data dependent. 0:01:33.080 --> 0:01:35.640 They're going to get out to the speech today and 0:01:35.680 --> 0:01:39.919 then on to the September sixth employment report, and maybe 0:01:39.959 --> 0:01:42.640 we staggered to the believe it's September twenty. 0:01:42.440 --> 0:01:44.800 One, meeting September eighteen. They're going to give us ense 0:01:44.959 --> 0:01:47.400 whether they of whether they actually are. 0:01:47.319 --> 0:01:48.800 Going to cut rates or not. 0:01:49.040 --> 0:01:50.920 A key question that I have is how far have 0:01:51.000 --> 0:01:52.960 we already come. Take a look at We are seeing 0:01:52.960 --> 0:01:55.640 a rally right now in markets after yesterday's sell off, 0:01:55.680 --> 0:01:56.680 which is the biggest. 0:01:56.320 --> 0:01:58.880 In two weeks. But what I find fascinating is just. 0:01:58.800 --> 0:02:00.480 That we've seen the two year yield to move so 0:02:00.560 --> 0:02:02.520 much more than anything else. It is down more than 0:02:02.520 --> 0:02:05.080 a percentage point from the last time that we were 0:02:05.120 --> 0:02:07.480 here in Jackson Hole August twenty sixth, and. 0:02:07.440 --> 0:02:08.160 You see that move. 0:02:08.280 --> 0:02:11.160 We're up more than twenty five percent since that day 0:02:11.480 --> 0:02:12.440 on the s and P five. 0:02:12.440 --> 0:02:14.520 I'm going to get out front with an essay that 0:02:14.560 --> 0:02:17.280 I only discovered. Thank you Peter or zagat Lazard for 0:02:17.320 --> 0:02:19.760 this and that. What we're battling with here in the 0:02:19.840 --> 0:02:22.640 years and years i've come here is we're still coming 0:02:22.680 --> 0:02:26.320 off the pandemic. Peter or Zag with Robin Brooks at 0:02:26.320 --> 0:02:30.720 Brookings writing a beautiful essay about do we really know 0:02:30.840 --> 0:02:33.720 where we are off the pandemic? And that's an overlain 0:02:33.840 --> 0:02:36.320 not being discussed here is where are we in that 0:02:36.360 --> 0:02:37.120 continuum and. 0:02:37.120 --> 0:02:39.480 Just sort of accentuating that overlay where the jobs or 0:02:39.560 --> 0:02:42.920 visions that we had just earlier this week the idea 0:02:43.000 --> 0:02:45.840 of eight hundred and eighteen thousand jobs fewer that were 0:02:45.840 --> 0:02:49.079 added in the year ended in March versus the initially 0:02:49.080 --> 0:02:51.600 reported we've got an incredible lineup today. We do have 0:02:51.639 --> 0:02:53.720 about a six ten percent gain in the SMP. I 0:02:53.800 --> 0:02:55.840 want to just get set up with Michael McHugh sitting 0:02:55.840 --> 0:02:57.560 on set with us not wearing his hat. He's been 0:02:57.560 --> 0:03:02.120 told not to by HMRT. Why because I think your 0:03:02.160 --> 0:03:04.440 ten gallon hat looks absolutely fabulous when you head to 0:03:04.440 --> 0:03:06.280 the rodeo, Mike, what are you expecting today? 0:03:06.400 --> 0:03:08.960 Smaller hat this year? Maybe only five six gallons. 0:03:10.520 --> 0:03:13.200 We're expecting kind of what you laid out with Tom, 0:03:13.280 --> 0:03:16.680 the idea that the FED is fed chairman is going 0:03:16.680 --> 0:03:21.440 to ratify the idea that rate cuts are coming without 0:03:21.800 --> 0:03:26.880 absolutely promising it or giving any kind of amount, And 0:03:26.919 --> 0:03:29.600 I think the markets have basically priced that in. The 0:03:29.720 --> 0:03:32.560 rate cuts are coming is what's got the two year 0:03:32.680 --> 0:03:37.280 yield lower. But going beyond that, the question then becomes 0:03:37.320 --> 0:03:39.000 where do they stop? How far do they go and 0:03:39.040 --> 0:03:41.960 how fast do they get there? And that's something else 0:03:42.000 --> 0:03:43.280 we probably won't hear today. 0:03:43.560 --> 0:03:47.040 What's so important? Mike McKee's the expert on this, much 0:03:47.120 --> 0:03:50.160 less so me. The number one question I get here 0:03:50.200 --> 0:03:53.600 at Jackson Hole, particularly by media, why hasn't there been 0:03:53.640 --> 0:03:54.320 a recession? 0:03:54.600 --> 0:03:57.160 Mike McKee? Why haven't we had the recession? 0:03:57.480 --> 0:04:01.240 Everyone except Rafaelbostis predicted since time began we sent at 0:04:01.320 --> 0:04:02.120 least out shopping. 0:04:05.320 --> 0:04:08.560 We've had a number of reasons. Two things in particular, 0:04:08.560 --> 0:04:11.320 well three things in particular. One is the pandemic savings. 0:04:11.600 --> 0:04:13.920 The people got extra checks during the pandemic and they 0:04:13.960 --> 0:04:18.720 had extra money to spend. We've also had some government 0:04:18.880 --> 0:04:24.640 fiscal spending with the IRA and the other acts that 0:04:24.720 --> 0:04:27.960 the Biden administration got passed. Most of that money hasn't 0:04:28.000 --> 0:04:30.920 gone out yet, but some has and businesses have started 0:04:30.920 --> 0:04:34.040 committing based on the idea that it's going to come in. 0:04:34.320 --> 0:04:37.799 And then, of course, because unemployment was low, wages were rising, 0:04:37.880 --> 0:04:42.599 and on the political side, wages have been rising faster 0:04:42.640 --> 0:04:45.200 than inflation. But nobody really gets that. But people have 0:04:45.240 --> 0:04:46.840 had enough money to spend well. 0:04:46.839 --> 0:04:48.960 I will say that when I went shopping, I went 0:04:49.040 --> 0:04:51.440 shopping in the Atlanta Airport because we were laid over 0:04:51.440 --> 0:04:52.240 there for about. 0:04:52.040 --> 0:04:53.120 Three and a half hours. 0:04:53.160 --> 0:04:55.520 So that really is the key place that we want 0:04:55.520 --> 0:04:57.360 to focus right now, and we are so glad to 0:04:57.400 --> 0:04:59.240 have shopping expert in the Atlanta Airport. 0:04:59.279 --> 0:05:00.320 Atlanta fed price is it at. 0:05:00.360 --> 0:05:02.920 Raphael Bostik, who is with us here on site, really 0:05:02.960 --> 0:05:05.800 appreciate you being with us. President bos Tak, I want 0:05:05.800 --> 0:05:07.760 to start with a change in tone that we have 0:05:07.839 --> 0:05:10.320 heard from you over the past couple of weeks. It 0:05:10.360 --> 0:05:13.520 seems like three months ago you were not that urgent, 0:05:13.880 --> 0:05:17.200 urgently feeling like we needed to see lower rates. You've 0:05:17.240 --> 0:05:20.480 kind of changed recently and really seen the need for it. 0:05:20.839 --> 0:05:23.440 What's caused that change, Well, I think two things have 0:05:23.600 --> 0:05:25.599 really happened to lead to that change. 0:05:25.640 --> 0:05:26.839 First of all, good morning. 0:05:26.560 --> 0:05:28.320 It's good to see Y'all's good to see, really good 0:05:28.360 --> 0:05:31.520 to be here. The one change is that inflation has 0:05:31.600 --> 0:05:35.240 moved a lot faster than I had anticipated. We've for 0:05:35.279 --> 0:05:38.679 the last two years have really been in a mission 0:05:39.200 --> 0:05:42.200 of getting inflation back to our two percent goal. We 0:05:42.240 --> 0:05:44.599 had seen a lot of progress early this year, it 0:05:44.640 --> 0:05:46.280 seemed like it may have been stalling out. 0:05:46.720 --> 0:05:48.320 I'm really gratified. 0:05:47.760 --> 0:05:50.200 To see that it's continuing back on that pace, and 0:05:50.240 --> 0:05:52.760 that's a very good thing. And then the second part 0:05:52.839 --> 0:05:56.080 is the employment side. So we know that unemployment rates 0:05:56.080 --> 0:05:58.320 have gone from about three point four percent to four 0:05:58.320 --> 0:06:02.000 point three percent. That's a big change. Now it's from 0:06:02.240 --> 0:06:04.880 super hot to solid, right. So I don't want to 0:06:04.920 --> 0:06:07.360 make it seem like labor markets are a week, but 0:06:07.600 --> 0:06:09.680 it really starts to tell me that things are much 0:06:09.720 --> 0:06:12.800 more in balance than they have been for quite some time. 0:06:13.040 --> 0:06:16.840 And that's really a sign that our policy has done 0:06:16.880 --> 0:06:20.359 his job, and now we need to start the path 0:06:20.480 --> 0:06:22.760 back to our more neutral stance. 0:06:22.960 --> 0:06:24.720 More than anyone at the FED, you've got a more 0:06:24.760 --> 0:06:27.400 holistic view with John Show and at Stanford, with all 0:06:27.440 --> 0:06:31.279 the academics you've done in southern California about racism, about 0:06:31.320 --> 0:06:34.599 society and all. We're in the maelstream of a political election. 0:06:34.720 --> 0:06:36.920 Greg Ypp, writing in the Wall Street Journal in the 0:06:37.000 --> 0:06:42.360 last twenty four hours, says, the politicians are not practicing economics. 0:06:42.600 --> 0:06:44.400 How does the FED get to the. 0:06:44.400 --> 0:06:48.720 September meeting, get to the November meeting and avoid the 0:06:48.760 --> 0:06:52.600 first Tuesday of November. How do you maintain FED independence 0:06:52.800 --> 0:06:55.080 with this crazy economic dialogue? 0:06:55.080 --> 0:06:58.039 We're here so I actually don't think it's that hard 0:06:58.080 --> 0:07:00.960 to remain independent. I think for us us the job 0:07:01.080 --> 0:07:04.640 is to keep our heads down, do our work, read 0:07:04.680 --> 0:07:08.440 the data, study it, get input from businesses and people 0:07:08.520 --> 0:07:11.400 all over this country to get a good handle about 0:07:11.400 --> 0:07:13.920 where the economy is, how it's moving, and how people 0:07:13.960 --> 0:07:16.680 feel is going to move forward, and then use that 0:07:16.760 --> 0:07:20.200 information to figure out what the most appropriate policy is. 0:07:20.600 --> 0:07:22.920 The worst thing that we can do is not do 0:07:23.280 --> 0:07:27.760 the right thing for reasons other than this not being 0:07:27.760 --> 0:07:30.320 the right thing right and to me, I think we 0:07:30.440 --> 0:07:35.040 must at all times be true to Our job is 0:07:35.080 --> 0:07:38.280 to set up a long run environment for this economy 0:07:38.320 --> 0:07:41.320 so that it's got a firm foundation, and that means 0:07:41.360 --> 0:07:44.840 we can't be focused and pulled into the shorter run issues. 0:07:45.040 --> 0:07:46.160 So I'm just gonna keep my head down. 0:07:46.280 --> 0:07:49.360 The FED has a long history of doing whatever it takes, 0:07:49.400 --> 0:07:52.520 whenever it takes, and that's what I expect we'll do too. 0:07:53.040 --> 0:07:55.520 You've been criticized. The Fed's been criticized by a lot 0:07:55.520 --> 0:07:57.920 of people on Wall Street who say you're too data dependent, 0:07:58.000 --> 0:08:01.360 you're looking backwards too much. I don't think they realize 0:08:01.360 --> 0:08:03.960 that you're constantly talking to people in your district to 0:08:04.000 --> 0:08:05.320 get the current lay of the land. 0:08:05.600 --> 0:08:06.880 So what is that lay of the lane? 0:08:06.920 --> 0:08:09.880 What are CEOs telling you about their plans and their 0:08:09.960 --> 0:08:12.760 view of demand and business going forward? 0:08:12.960 --> 0:08:15.840 Well, you should tell people more often. We spend a 0:08:15.840 --> 0:08:18.440 lot of time looking forward. That's actually a really important thing. 0:08:18.680 --> 0:08:22.200 We do surveys. Our bank has a lot of surveys 0:08:22.200 --> 0:08:24.360 that we do, asking what's your outlook for the next 0:08:24.360 --> 0:08:25.760 six months, for the next twelve months. 0:08:25.760 --> 0:08:28.080 In the light we hear a couple things. 0:08:28.320 --> 0:08:32.800 So one we hear the demand for product is weakening. 0:08:32.360 --> 0:08:33.920 But it's still quite solid. 0:08:34.640 --> 0:08:38.760 We hear that businesses are not expecting to expand their 0:08:38.760 --> 0:08:42.080 workforces in a very significant way, but they're also not 0:08:42.120 --> 0:08:44.840 expecting to light people off that that is not the mode. 0:08:44.880 --> 0:08:47.200 That they're really in a steady state where they can 0:08:47.240 --> 0:08:50.120 handle where things are, and their outlook for the next 0:08:50.280 --> 0:08:53.400 six to twelve months is by and large positive. Maybe 0:08:53.400 --> 0:08:56.480 a little lower in terms of revenues and profits from 0:08:56.600 --> 0:08:58.240 where we've been last two or three years, but last 0:08:58.280 --> 0:09:01.559 two or three years have been record breaking pretty much 0:09:01.600 --> 0:09:04.840 in every sector, every industry. So it's a solid picture, 0:09:05.440 --> 0:09:08.320 and it's one of the reasons why I do think 0:09:08.320 --> 0:09:11.000 that we've had some space to be patient with our 0:09:11.000 --> 0:09:14.119 policy moves, and we'll just have to see. 0:09:13.880 --> 0:09:16.360 Whether their outlook plays out. I'm hopeful that it does. 0:09:16.880 --> 0:09:19.040 Given the problems least we talked about earlier with the 0:09:19.120 --> 0:09:21.280 data and coming out of the pandemic and everything. How 0:09:21.280 --> 0:09:24.760 certain are you that your data is correct enough that 0:09:24.800 --> 0:09:25.959 you're not behind the curve? 0:09:26.640 --> 0:09:30.959 Well, I mean, we try really hard to get our 0:09:31.080 --> 0:09:35.000 view based on the pulse that business leaders are showing 0:09:35.000 --> 0:09:38.240 at every moment. We talked to folks day to day, 0:09:38.400 --> 0:09:41.560 week to week, and we ask two questions all the time. One, 0:09:41.800 --> 0:09:44.080 what's your outlooked for the next six months, and how 0:09:44.120 --> 0:09:46.760 has that changed relative to where you were two weeks 0:09:46.760 --> 0:09:49.360 ago or three weeks ago. We are trying really hard 0:09:49.600 --> 0:09:52.679 to notice those inflection points so that we can speak 0:09:52.679 --> 0:09:55.679 to that, we can bring that to our policy table 0:09:55.720 --> 0:09:58.719 and make sure that we're not behind the curve. But 0:09:59.080 --> 0:10:01.360 this is a turbulent as you know. I mean, you'll 0:10:01.520 --> 0:10:06.360 recover the economy. Things are happening in unexpected ways, in 0:10:06.480 --> 0:10:09.959 many different venues and many different parts of the economy, 0:10:10.200 --> 0:10:13.280 and so there is a natural trend. There's always some uncertainty, 0:10:13.480 --> 0:10:15.559 and we've just got to sort of navigate our way 0:10:15.600 --> 0:10:17.640 through and do the best that we can to get 0:10:17.679 --> 0:10:19.880 as much information so we can make good policy. What 0:10:19.920 --> 0:10:24.520 does gradual means, Well, that's a very good question. So 0:10:25.080 --> 0:10:29.760 to me, I think it is taking one step at 0:10:29.760 --> 0:10:33.440 a time and after each step, looking around to see 0:10:33.440 --> 0:10:34.800 how the economy is evolved. 0:10:34.800 --> 0:10:37.480 Okay, what everyone's asking is really is that step twenty 0:10:37.480 --> 0:10:38.240 five basis points? 0:10:38.320 --> 0:10:41.240 Is it fifty basis points? Does one mean gradual? And whatnot? 0:10:41.720 --> 0:10:45.959 So I would say this the first step. It will 0:10:46.000 --> 0:10:48.120 depend on what the next couple of data points come in. 0:10:48.360 --> 0:10:51.760 The next couple of data points come in, and inflation 0:10:51.920 --> 0:10:55.280 is moving and unemployment is staying pretty stable, I think 0:10:55.720 --> 0:10:56.760 a move would be on. 0:10:56.720 --> 0:10:58.360 The lower side. 0:10:58.679 --> 0:11:01.520 But there's a there's a narrative that says inflation comes 0:11:01.559 --> 0:11:04.079 in super hot and maybe we don't move at all, 0:11:04.720 --> 0:11:08.280 or that unemployment spikes in an unexpected way and we 0:11:08.360 --> 0:11:09.200 have to move bigger. 0:11:09.600 --> 0:11:11.760 I don't want to really. 0:11:11.440 --> 0:11:16.959 Be sitting on any one action as my modal expectation today. 0:11:17.000 --> 0:11:19.440 I'm really gonna let things play out. And you know, 0:11:19.480 --> 0:11:21.240 one of the things I've learned very much in the 0:11:21.280 --> 0:11:25.800 last four years is that getting too far out ahead 0:11:25.800 --> 0:11:28.839 of what actually happens just causes me. There's been a 0:11:28.880 --> 0:11:31.360 lot of extra energy that I wind up having to 0:11:31.400 --> 0:11:34.360 sort of undo and then get to where the reality is. 0:11:34.360 --> 0:11:36.680 So I really am trying as much as possible to 0:11:36.760 --> 0:11:38.800 be in the moment and of the moment. 0:11:39.280 --> 0:11:41.560 Well, markets are forward looking, they're not in the moment. 0:11:41.640 --> 0:11:44.080 So everybody wants to know where do you end up? 0:11:44.080 --> 0:11:46.800 Where do you think neutral is going to end up 0:11:46.880 --> 0:11:48.640 when you finish your cutting cycle. 0:11:48.800 --> 0:11:51.800 So I'll say two things on this one. In the 0:11:51.920 --> 0:11:54.000 SEPs and the dot plus, we have to put a 0:11:54.040 --> 0:11:56.240 long run number for me. Right now, that long run 0:11:56.320 --> 0:11:58.960 number is three percent. I think it's a little higher 0:11:59.000 --> 0:12:01.479 than where it was that the depths of the pandemic, 0:12:02.840 --> 0:12:06.320 But where that is precisely is unclear. The second thing 0:12:06.360 --> 0:12:09.160 I would say, though, is I've really been focused much 0:12:09.200 --> 0:12:11.400 more on making sure that inflation gets to two percent 0:12:11.679 --> 0:12:14.720 than what a long run number is, and now that 0:12:14.760 --> 0:12:19.280 we're close to moving on that way, that's a question 0:12:19.320 --> 0:12:21.440 that I will spend a lot more time with my 0:12:21.520 --> 0:12:25.480 team trying to figure out. In my building, we started 0:12:25.480 --> 0:12:29.520 to have discussion slash arguments about this, and in my book, 0:12:29.559 --> 0:12:32.280 I get views ranging from two and a half to 0:12:32.360 --> 0:12:35.400 four and a quarter. Right, that's a large range, and 0:12:35.480 --> 0:12:38.200 we're going to have to narrow that down, and so 0:12:38.240 --> 0:12:40.960 I'm really looking forward to a robust discussion that will 0:12:40.960 --> 0:12:43.760 help me get a sense of where I think it is. 0:12:43.840 --> 0:12:46.680 Two years ago, J. Powell's speech was eight minutes long. 0:12:46.760 --> 0:12:48.000 How long do you think this speech. 0:12:47.760 --> 0:12:48.120 Is going to be? 0:12:48.640 --> 0:12:50.839 So you know, I don't get any insights on that. 0:12:51.480 --> 0:12:56.319 Eight is historically a record breaking short. I'm not expecting 0:12:56.400 --> 0:12:59.840 a break records today, but we'll have to see what happens. 0:13:00.360 --> 0:13:02.360 President of the Atlanta Fed, thank you so much for 0:13:02.400 --> 0:13:15.680 being with us. She is former Cleveland FED president Loretta Mester. 0:13:15.920 --> 0:13:18.720 This is the first time that she's joining us as 0:13:18.880 --> 0:13:22.240 a non FED member in ten years. At this Jackson 0:13:22.240 --> 0:13:25.880 Hole meeting, Lorettamester, President Master, I will still call you 0:13:25.920 --> 0:13:29.040 that You've always been a thought leader. How much do 0:13:29.080 --> 0:13:33.560 you hear more dissent than usual among members at a 0:13:33.600 --> 0:13:36.160 time where we really are at a pivot. 0:13:36.880 --> 0:13:39.240 I'm not hearing that much to send Frankly, I think 0:13:39.280 --> 0:13:41.440 we're in a good place in terms of where the 0:13:41.480 --> 0:13:44.640 economy is. If you think about inflation, look how much 0:13:44.640 --> 0:13:46.599 it's come down. You know, we're in two and a 0:13:46.679 --> 0:13:50.480 half percent range, and the labor market is moderating. There's 0:13:50.480 --> 0:13:54.240 definite signs of that, but it's not weak, right, It 0:13:54.280 --> 0:13:57.880 hasn't turned into a strong you know, weakness coming into it. 0:13:57.960 --> 0:14:00.680 So we're in a good spot. And now what the 0:14:00.679 --> 0:14:03.920 Fed needs to do is make sure that it can 0:14:04.200 --> 0:14:06.679 maintain the momentum of inflation going all the way back 0:14:06.679 --> 0:14:10.000 down to two percent while keeping the labor market healthy. 0:14:10.040 --> 0:14:12.560 And I think that's where the focus is gonna be. 0:14:12.640 --> 0:14:15.800 If you remember at the start of the tightening cycle, 0:14:16.320 --> 0:14:19.880 you know, we had to go very aggressively because policy 0:14:19.920 --> 0:14:23.240 wasn't well calibrated to where the economy is and where 0:14:23.240 --> 0:14:26.080 it was going, uh or was and where it was going. 0:14:26.200 --> 0:14:28.720 And now we wanna make sure that you know, the 0:14:28.760 --> 0:14:32.160 FED wants to make sure that policy stays well calibrated 0:14:32.200 --> 0:14:34.560 to the economy. So the discussion now, I think, is 0:14:34.600 --> 0:14:37.480 about we have a dual mandate. We have to focus 0:14:37.560 --> 0:14:40.400 on both parts of that. We have to be forward looking. 0:14:40.720 --> 0:14:43.040 You know, it's where the economy is going, not necessarily 0:14:43.040 --> 0:14:46.080 where it death is here today, but where it's going. 0:14:46.600 --> 0:14:49.720 And that's why I think now it's it's actually appropriate 0:14:49.800 --> 0:14:53.000 to really be thinking about, Okay, it's time now to 0:14:53.120 --> 0:14:56.920 enter this new phase where we can start normalizing the 0:14:56.920 --> 0:14:57.640 policy rate. 0:14:58.120 --> 0:15:02.560 Wall Street and the financial media want specificity, they want certitude, 0:15:02.560 --> 0:15:05.120 they want single point statements. 0:15:04.600 --> 0:15:06.000 About exactly where we are. 0:15:06.600 --> 0:15:09.320 The reality is just a look at productivity is a 0:15:09.320 --> 0:15:13.440 capital analysis, a labor analysis, and an all in analysis, 0:15:13.520 --> 0:15:17.600 call it total factor productivity. The noise in there, to me, 0:15:17.840 --> 0:15:22.200 with the overlay of technology is highly uncertain. Do you 0:15:22.240 --> 0:15:26.840 have any handle of the overlay of productivity and technologies 0:15:26.840 --> 0:15:29.760 effect on the Cleveland and American economy. 0:15:30.160 --> 0:15:33.960 Well, I mean we've seen over history, right, that technology 0:15:34.040 --> 0:15:37.160 can be very additive to productivity growth, right, I mean, 0:15:37.160 --> 0:15:41.200 that's kind of the engine of an economy that's increasing 0:15:41.280 --> 0:15:46.600 and having potential growth rise. But in any point in time. 0:15:46.640 --> 0:15:48.680 It's very hard to measure productivity growth. 0:15:48.720 --> 0:15:49.240 Even if we. 0:15:49.200 --> 0:15:53.880 Didn't have this big technological innovation of AI, it's very 0:15:53.880 --> 0:15:56.240 difficult to measure it. So you have to take into 0:15:56.240 --> 0:15:59.440 account that there's uncertainty around productivity growth. I mean, some 0:15:59.600 --> 0:16:02.360 estimates saying that we're still in a low productivity regime. 0:16:03.760 --> 0:16:06.520 Other restamates are saying, well, let's look forward and maybe 0:16:06.520 --> 0:16:08.480 we're going to be in a higher But for the 0:16:08.480 --> 0:16:11.000 FED right now, right that's not sort. 0:16:10.840 --> 0:16:11.400 Of the focus. 0:16:11.440 --> 0:16:15.720 The focus is, you know, are we calibrated well, it's 0:16:15.800 --> 0:16:17.040 policy calibrating well. 0:16:17.120 --> 0:16:19.880 To the court, you've been great on this. She just 0:16:19.880 --> 0:16:23.400 said they're not focused on productivity. We have to be 0:16:23.400 --> 0:16:28.000 because business leaders every day are focused on those outcomes 0:16:28.240 --> 0:16:28.960 and they're invested. 0:16:29.000 --> 0:16:31.640 Well, they've sort of been forced to by inflation and 0:16:31.680 --> 0:16:34.000 a lack of workers, and they've been forced to put 0:16:34.800 --> 0:16:36.720 investment into productivity and. 0:16:36.720 --> 0:16:38.480 We'll see if it starts to pay off. 0:16:38.720 --> 0:16:41.080 But Loretta is right, at the moment, you know, you don't, 0:16:41.120 --> 0:16:43.960 you're not seeing it. But that's not the key for them. 0:16:44.640 --> 0:16:47.720 But I do want to know how you respond to 0:16:47.760 --> 0:16:51.960 the criticism that the FED has not communicated well what 0:16:52.000 --> 0:16:56.440 it's thinking and what it's planning, or if not planning, 0:16:56.480 --> 0:16:59.160 you know, what are the potential outcomes because we've seen 0:16:59.200 --> 0:17:02.040 some very wild in the markets as data comes around. 0:17:02.560 --> 0:17:04.680 Have you said data dependent too much? 0:17:05.520 --> 0:17:08.720 I think there's a misunderstanding what data dependant means, and 0:17:08.760 --> 0:17:12.760 that means that I think Chairpal today will be explaining 0:17:13.359 --> 0:17:17.879 where he sees policy going, not necessarily at the next meeting, 0:17:17.920 --> 0:17:20.280 whether fifteen to twenty five, which in some sense is 0:17:20.320 --> 0:17:23.600 really not the big issue. I know for financial markets 0:17:23.640 --> 0:17:26.120 it is, but not in terms of monetary policy. It's 0:17:26.160 --> 0:17:29.600 really what's the path forward? Are we beginning now to 0:17:29.720 --> 0:17:33.760 bring policy down? And the pace, of course, and the 0:17:34.000 --> 0:17:37.520 magnitude eventually of how far our indust rates go down, 0:17:37.600 --> 0:17:40.680 that's going to depend on how the economy evolves, right, 0:17:40.720 --> 0:17:43.000 But we're going to enter this new phase, I think, 0:17:43.080 --> 0:17:47.040 and appropriately so in July. I probably wouldn't have supported 0:17:47.560 --> 0:17:49.640 actually moving the rate down in July, and of course 0:17:49.680 --> 0:17:52.080 the committee didn't, but I could have made a case 0:17:52.119 --> 0:17:55.000 for it. And that's a change, right, That's the economy 0:17:55.040 --> 0:17:58.000 has changed enough, Inflation has come down quite a bit. 0:17:58.440 --> 0:18:00.640 It's on a path I think where we can be 0:18:00.680 --> 0:18:03.200 pretty confident it'll get back to two percent, and now 0:18:03.280 --> 0:18:05.360 we really have to balance both sides of the mandate. 0:18:05.520 --> 0:18:09.000 So it's basically keep the momentum going on inflation at 0:18:09.040 --> 0:18:12.520 the same time making sure that labor markets remain healthy. 0:18:13.040 --> 0:18:15.280 What do you think it would take for the committee 0:18:15.280 --> 0:18:17.840 to decide you needed to do more than the standard 0:18:17.880 --> 0:18:19.840 twenty five basis point cut? 0:18:20.160 --> 0:18:23.040 So I think it would have to be that, you know, 0:18:23.520 --> 0:18:26.399 somehow they thought they were a little behind and they 0:18:26.440 --> 0:18:28.639 needed to catch up, and frankly, I don't see that 0:18:28.720 --> 0:18:30.800 in the data. I think they're actually in a very 0:18:30.840 --> 0:18:34.040 good place now. If it turns out that, you know, 0:18:34.119 --> 0:18:36.680 the forecasts are saying, wow, you know, we may be 0:18:36.920 --> 0:18:42.720 seeing the moderation in labor markets being more than moderation 0:18:42.840 --> 0:18:45.520 and we actually see a weakening, they may have to 0:18:45.560 --> 0:18:48.680 adjust that and then do more. But I think there's 0:18:48.720 --> 0:18:50.879 sort of a record if you think about when we 0:18:51.000 --> 0:18:54.280 started to raise rates, right, we started at a twenty 0:18:54.280 --> 0:18:56.400 five and then a fifty. Then we did our seventy five, 0:18:56.520 --> 0:18:59.840 and that's sort of the preferred path because that means you're, no, 0:19:00.280 --> 0:19:03.080 you're not doing too much too ahead of time, And 0:19:03.119 --> 0:19:05.160 the other thing I think I would be worried about 0:19:05.280 --> 0:19:08.159 is if you do a fifty to start with the 0:19:08.240 --> 0:19:11.120 market send you know, building even more. And I think 0:19:11.160 --> 0:19:13.400 that's a calibration that you have to think about when 0:19:13.400 --> 0:19:17.760 you're doing this. So I think being steady right, thinking 0:19:17.800 --> 0:19:21.080 about what the right pace is gear to how the 0:19:21.119 --> 0:19:24.080 economy is working and evolving, it's the right way to go. 0:19:24.359 --> 0:19:25.399 You said that you expect j. 0:19:25.560 --> 0:19:27.440 Powell to come out and give a sense of where 0:19:27.440 --> 0:19:29.639 we're going. And I think that's actually the frustration for 0:19:29.640 --> 0:19:31.760 a lot of people in markets. We don't know where 0:19:31.800 --> 0:19:33.520 we're going. We don't have a sense of what the 0:19:33.560 --> 0:19:36.120 neutral rate is. Right now, the market has about two 0:19:36.160 --> 0:19:38.280 hundred basis points of rate cuts priced in by the 0:19:38.359 --> 0:19:39.080 end of next year. 0:19:39.600 --> 0:19:40.520 Is that appropriate? 0:19:40.640 --> 0:19:41.520 What is neutral? 0:19:41.640 --> 0:19:44.920