WEBVTT - Fed's Beth Hammack Talks Jobs Report, Rate Decision and Powell

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Well, we welcome our Bloomberg TV and radio audiences worldwide.

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<v Speaker 2>I'm Michael McKee joining me now as Cleveland FED President

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<v Speaker 2>Beth Hammock.

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<v Speaker 1>And Beth, if we only had something to talk about this,

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<v Speaker 1>I mean, it's been a really quiet, quiet morning.

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<v Speaker 2>Yeah, were you gobsmacked by these numbers?

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<v Speaker 3>It was a disappointing report, to be sure, But when

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<v Speaker 3>I look at the data, we don't try not to

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<v Speaker 3>make too much of any one individual report, and so

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<v Speaker 3>we look at the confluence of data, we look at

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<v Speaker 3>the longer term picture. What we have is a labor

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<v Speaker 3>market that is showing signs that we should be watching carefully.

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<v Speaker 3>Having the headline numbers come down makes sense to me

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<v Speaker 3>given what we've seen happening on the immigration side, and

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<v Speaker 3>the headline number on unemployment, which is the most reliable

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<v Speaker 3>indicator we have, is still within that four one to

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<v Speaker 3>four to three range that it's been at for the

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<v Speaker 3>past year. So it looks like a market that a

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<v Speaker 3>healthy labor market that's still well in balance, but with

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<v Speaker 3>some disappointing signs that we should watch very carefully.

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<v Speaker 2>Well, one thing that caught everybody's attention is the revisions.

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<v Speaker 2>We went from one forty seven in June to just

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<v Speaker 2>fourteen thousand. And I want to point out the statement

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<v Speaker 2>from Chris Waller earlier today on why he dissented. He

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<v Speaker 2>had a line in there that said, basically, when labor

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<v Speaker 2>markets turn, they often turn fast. Does that suggest maybe

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<v Speaker 2>that you made a mistake by not moving in July.

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<v Speaker 3>I feel confident with the decision that we made earlier

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<v Speaker 3>this week. We have to look at the whole picture

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<v Speaker 3>of the data. When I step back and look at

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<v Speaker 3>where we are, I see a labor market that is

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<v Speaker 3>largely in balance. Again, today's report is just one report.

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<v Speaker 4>We'll watch it carefully.

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<v Speaker 3>We'll look to see if the dynamism in the labor

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<v Speaker 3>market is picking up, because that's been something.

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<v Speaker 4>That we haven't really seen.

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<v Speaker 3>If you have a job, you're able to keep your job,

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<v Speaker 3>but if you don't have a job, it's harder to

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<v Speaker 3>find one. But in aggregate, we're still seeing unemployment in

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<v Speaker 3>that four to two range where it came out today,

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<v Speaker 3>but it's been for one to four to three for.

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<v Speaker 4>The entire year. We're seeing pressure on the inflation side

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<v Speaker 4>of our mandate.

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<v Speaker 3>That's where our miss has been bigger, and it's been

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<v Speaker 3>lasting for longer. We haven't hit on inflation in four.

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<v Speaker 4>And a half years.

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<v Speaker 3>And when I'm out talking to people across the district,

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<v Speaker 3>whether it's Wheeling, Toledo, Cincinnati, what I hear from people

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<v Speaker 3>is that the pain of inflation is really biting. They're

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<v Speaker 3>making very difficult choices. They're trading down from buying ground

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<v Speaker 3>beef to buying hot dogs. The four hundred dollars emergency

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<v Speaker 3>fund that they have, they're not able to stretch as

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<v Speaker 3>far as they used to. And so we have to

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<v Speaker 3>balance those two sides of our mandates when we think

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<v Speaker 3>about setting correct policy, and we have to look at

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<v Speaker 3>if we're missing by how much and for how long

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<v Speaker 3>do we expect those misses to last. And right now

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<v Speaker 3>we're missing by much more on the inflation side than

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<v Speaker 3>we're missing on the employment side.

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<v Speaker 2>It's basically sort of the message that Chairman Powell gave

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<v Speaker 2>on his Wednesday news conference. But we're looking at backward

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<v Speaker 2>data always of course looking forward. To get back to

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<v Speaker 2>what you were saying about, when you're talking to people,

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<v Speaker 2>what are companies telling you about their plans?

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<v Speaker 1>Let me put a two part question.

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<v Speaker 2>Does the poor job numbers that we got for the

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<v Speaker 2>last two months now comport with what you had been

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<v Speaker 2>told by companies and what are they saying about what

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<v Speaker 2>they're going to do about tariff price increases.

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<v Speaker 3>So what we've heard from businesses consistently is that uncertainty

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<v Speaker 3>has been high for all of this year.

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<v Speaker 4>They've had a difficult.

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<v Speaker 3>Time making investments, executing on the plans that they had

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<v Speaker 3>going into this year because they just didn't know where

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<v Speaker 3>the economy is going to go. They didn't know how

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<v Speaker 3>tariffs were going to impact their businesses. What we've heard

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<v Speaker 3>consistently is that they thought really long and hard to

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<v Speaker 3>get their labor force together to train employees and make

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<v Speaker 3>sure that they were really able to help produce, and

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<v Speaker 3>that they're loath to let them go. But that can't

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<v Speaker 3>last forever if demand ticks down, and so they're watching

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<v Speaker 3>carefully to see if they're able to continue seeing that demand,

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<v Speaker 3>if they need to pass on price increases to keep

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<v Speaker 3>their margins where they need to be.

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<v Speaker 4>And so I would.

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<v Speaker 3>Anticipate that we could see some weakening. It's something we've

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<v Speaker 3>been talking about and watching for that we could see

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<v Speaker 3>some weakening on the labor side of the picture. And

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<v Speaker 3>if we see that, it would be something that we

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<v Speaker 3>might want to respond to again, having to balance that

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<v Speaker 3>against the inflation side where we continue to really mess

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<v Speaker 3>on that side of the mandate.

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<v Speaker 1>Well, what's the inflation outlook?

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<v Speaker 2>Basically our company saying we can't absorb too much of

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<v Speaker 2>this or are they going to try to hold off

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<v Speaker 2>as long as possible. Americans going to feel the tariffs

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<v Speaker 2>sometime soon.

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<v Speaker 3>Yeah, I mean my expectation, my forecast is that we

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<v Speaker 3>will see the inflation numbers tick up. The thirty billion

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<v Speaker 3>dollars a month in tariff revenues is being paid by someone,

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<v Speaker 3>it looks like it's more being paid by importers and

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<v Speaker 3>consumers at this point. I think importers have borne a

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<v Speaker 3>lot of that to this date, and it's.

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<v Speaker 4>Likely that will start to get pushed.

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<v Speaker 3>We're hearing from the business as we talk to that

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<v Speaker 3>they can't absorb those costs anymore and they will start

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<v Speaker 3>pushing that out into prices to consumers. If you look

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<v Speaker 3>at look at some of our forecasts, if you look

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<v Speaker 3>at my forecast, I do expect that we're going to

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<v Speaker 3>see inflation continue to tick up into the end of

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<v Speaker 3>this year, and I expect that we'll see lit labor

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<v Speaker 3>market weekend into the end of this year, and again,

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<v Speaker 3>how we need to manage that really depends on by

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<v Speaker 3>how much and for how long we're going to miss

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<v Speaker 3>on each side.

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<v Speaker 1>Well, let's talk about your forecast.

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<v Speaker 2>Were you a two dot person or a one dot

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<v Speaker 2>person for twenty twenty five?

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<v Speaker 4>There are other.

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<v Speaker 3>Choices than that. There are seven people at no dots.

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<v Speaker 3>I don't usually disclose my dot, but you know, part

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<v Speaker 3>of my view has been that we see an economy

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<v Speaker 3>that's operating right around full employment. We've been reasonably closed

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<v Speaker 3>not all the way where we need to be on

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<v Speaker 3>the inflation side of our mandate, and the growth numbers

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<v Speaker 3>continue to do well.

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<v Speaker 4>So to me, I think that the economy.

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<v Speaker 3>Is operating right around a neutral long term rate.

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<v Speaker 4>We're a little bit restrictive.

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<v Speaker 3>I think I said modestly restrictive, but I don't think

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<v Speaker 3>we have much further to go to get to a

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<v Speaker 3>neutral Fed funds rate.

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<v Speaker 2>I know that you're going to say one month's data

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<v Speaker 2>are not determinative when I ask you this question, but

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<v Speaker 2>I've got to ask because the markets are posing the question.

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<v Speaker 2>We went from forty percent chance of a rate move

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<v Speaker 2>in September to over seventy percent. After these numbers came out,

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<v Speaker 2>is September a realistic possibility?

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<v Speaker 3>Now, one month's data is not determinative. I will back

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<v Speaker 3>say that, but I enter every meeting with an open mind.

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<v Speaker 3>I think you know my job, and I think all

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<v Speaker 3>of my colleagues around the table walk into every meeting

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<v Speaker 3>with an open mind to make sure we're looking at

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<v Speaker 3>the data.

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<v Speaker 4>And we're going to get an awful lot more.

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<v Speaker 3>Data between now and the September meeting. We'll get another

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<v Speaker 3>jobs report, we'll get two inflation reports, and there'll be

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<v Speaker 3>a lot more time to be out in the district

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<v Speaker 3>talking with business leaders, talking with community leaders, understanding their

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<v Speaker 3>experiences to try to put everything together. So I walk

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<v Speaker 3>into every meeting with an open mind to make sure

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<v Speaker 3>that we can support the American people and that we

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<v Speaker 3>can have an economy that's working for everyone.

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<v Speaker 2>Well, obviously the markets today are looking at the labor situation,

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<v Speaker 2>and you were referencing the inflation situation. If inflation's going up,

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<v Speaker 2>you can't cut rates. If the economy's collapsing, you have

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<v Speaker 2>to cut rates. So how do you balle two right now?

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<v Speaker 3>Yeah, this is a really tricky time for monetary policy makers.

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<v Speaker 3>This is when both sides of our mandate could potentially

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<v Speaker 3>be in conflict, and we'll really have to look at

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<v Speaker 3>what is the size of the mess and for how

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<v Speaker 3>long do we think that is going to persist. And

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<v Speaker 3>so again, it will take a lot of conversations with businesses,

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<v Speaker 3>with community leaders, it will take a lot of careful

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<v Speaker 3>analysis of the data. And it makes sense that there

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<v Speaker 3>can be disagreement at these particular moments because this is

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<v Speaker 3>really the most challenging time for monetary policy.

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<v Speaker 2>Well, I've talked to a lot of your colleagues around

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<v Speaker 2>the country and basically they're saying companies are on hold.

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<v Speaker 1>Now we've got the tariff numbers.

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<v Speaker 2>If you have any indication of how fast companies are

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<v Speaker 2>going to make decisions about what they're going to do

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<v Speaker 2>in terms of staffing, in terms of investment, companies.

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<v Speaker 4>Have been making decisions all along.

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<v Speaker 3>I think they've been delaying or postponing or scaling back

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<v Speaker 3>from what I've heard. So, we have a franchisee who

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<v Speaker 3>was looking at building new stores and they decided instead

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<v Speaker 3>they were just going to renovate existing stores, and so

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<v Speaker 3>they were kind of downsize their plans. If you will,

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<v Speaker 3>hopefully with more clarity around tariffs, and hopefully the policies

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<v Speaker 3>that we have are durable policies, because that's really important

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<v Speaker 3>to the businesses that I talk to that they have

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<v Speaker 3>certainty in what the policies are going to be against

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<v Speaker 3>which they're making decisions. So it's possible that we could

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<v Speaker 3>see some more investment being spurred here given more confidence

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<v Speaker 3>in the overall picture.

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<v Speaker 2>The other issue that is hanging out there, of course,

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<v Speaker 2>is FED credibility and the pressure you're getting from Washington.

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<v Speaker 2>Donald Trump tweeting this morning that if Chair Powell continues

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<v Speaker 2>to refuse to lower interest rates, the Board should assume control,

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<v Speaker 2>leaving aside the fact that the Board doesn't take this

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<v Speaker 2>is not a Banana Republic kind of situation. How does

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<v Speaker 2>the Board and the Open Market Committee feel about Chairman Paul?

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<v Speaker 3>I have the enormous respect for Chair Powell. I know

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<v Speaker 3>him to be a person of incredibly high integrity, and

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<v Speaker 3>I know he walks into every meeting and approaches every

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<v Speaker 3>day making sure he can do what's best for the

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<v Speaker 3>American people like I and all my colleagues around the

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<v Speaker 3>table do, and so I think each one of us

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<v Speaker 3>goes into a meeting with an open mind, we have

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<v Speaker 3>a really rich discussion. We learn from one another, We

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<v Speaker 3>listen carefully, and people reading the exact same data can disagree.

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<v Speaker 3>That's what makes markets and it's no different for economists

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<v Speaker 3>or policymakers.

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<v Speaker 4>But it's a good conversation.

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<v Speaker 3>It's very collegial, it's very collaborative, and we make sure

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<v Speaker 3>that we're doing what we think is in the best

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<v Speaker 3>interest in the American public.

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<v Speaker 2>Now I can't really say what the President is thinking,

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<v Speaker 2>but he tries to give the impression that if only

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<v Speaker 2>this meddlesome priest were taken care of, interest, rates would

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<v Speaker 2>go down.

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<v Speaker 1>You'll be a voter next year if you get a.

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<v Speaker 2>New chair appointed by the President who comes in and

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<v Speaker 2>says I want rates to go down.

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<v Speaker 1>How will you vote.

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<v Speaker 3>I will look at where the data is, I will

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<v Speaker 3>look at how the economy is performing, and I will

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<v Speaker 3>approach that the same way that I've approached it all

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<v Speaker 3>of this year and all of last year, which is

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<v Speaker 3>to make sure that we're hitting as close as we

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<v Speaker 3>can on both sides of our dual mandate of maximum

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<v Speaker 3>employment and stable prices.

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<v Speaker 2>Do you worry that the Fed's credibility has been damaged

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<v Speaker 2>by all of this in the public mind or in

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<v Speaker 2>the business mind.

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<v Speaker 3>I've been really reassured by a number of business leaders

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<v Speaker 3>and the Treasury Secretary who all talk about the importance

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<v Speaker 3>of monetary policy.

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<v Speaker 4>There is a large body of literature about.

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<v Speaker 3>How economies that have independent central banks have much better

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<v Speaker 3>economic outcomes for their population than ones that don't have

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<v Speaker 3>that level of independence.

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<v Speaker 4>What you've seen across.

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<v Speaker 3>The globe is a bigger move towards independence, and so

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<v Speaker 3>I'm encouraged that.

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<v Speaker 4>Our leaders, our business leaders.

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<v Speaker 3>And hopefully our government leaders recognize that that's critically important for.

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<v Speaker 4>The American people.

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<v Speaker 2>Beth Hammick, thank you very much for joining us. The

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<v Speaker 2>president of the Cleveland Federal Reserve,