1
00:00:02,520 --> 00:00:07,000
Speaker 1: Bloomberg Audio Studios, podcasts, radio News.

2
00:00:08,240 --> 00:00:11,440
Speaker 2: Welcome back to Bloomberg Radio and television viewers and listeners

3
00:00:11,480 --> 00:00:14,240
Speaker 2: around the world. Our guests this morning. Now Austin gools

4
00:00:14,240 --> 00:00:17,480
Speaker 2: will be the president of the Chicago Federal Reserve. And

5
00:00:17,520 --> 00:00:19,760
Speaker 2: of course everybody wants to know what the Fed's going

6
00:00:19,800 --> 00:00:22,119
Speaker 2: to do. The Fed's worried about jobs, and today you

7
00:00:22,160 --> 00:00:23,200
Speaker 2: had a number to worry about.

8
00:00:23,440 --> 00:00:26,079
Speaker 1: He has a tough mess on the jobs report today.

9
00:00:26,800 --> 00:00:29,800
Speaker 1: You never want to over index on one month's report,

10
00:00:29,960 --> 00:00:34,320
Speaker 1: and I've been consistently saying, well, it's not index on

11
00:00:35,280 --> 00:00:39,280
Speaker 1: total payroll employment anyway, because a lot of stuff is

12
00:00:39,320 --> 00:00:39,840
Speaker 1: going on.

13
00:00:39,840 --> 00:00:41,839
Speaker 3: With immigration, with population growth.

14
00:00:42,440 --> 00:00:46,839
Speaker 1: That said, you saw the unemployment rate inching up, and

15
00:00:47,800 --> 00:00:50,479
Speaker 1: it's one month is not a trend, but it's not

16
00:00:50,520 --> 00:00:52,760
Speaker 1: a good month. If you got several months like that,

17
00:00:53,520 --> 00:00:56,040
Speaker 1: you would be that'd be a concerning spot for the

18
00:00:56,080 --> 00:00:56,720
Speaker 1: labor market.

19
00:00:56,920 --> 00:01:00,000
Speaker 2: Well, what's your feeling about what the Open Market Committee

20
00:01:00,200 --> 00:01:03,400
Speaker 2: going to do? I know you've been waiting to see data.

21
00:01:03,520 --> 00:01:06,679
Speaker 2: Chris Waller has been saying he's still in favor of cutting,

22
00:01:06,720 --> 00:01:09,680
Speaker 2: as is Steven Myron. Where do you come down now?

23
00:01:10,319 --> 00:01:13,520
Speaker 1: Well, as you know, and I appreciate you asked it

24
00:01:13,600 --> 00:01:15,640
Speaker 1: that way. I'm not allowed to speak for the committee

25
00:01:15,680 --> 00:01:16,640
Speaker 1: or for anybody else.

26
00:01:16,600 --> 00:01:17,280
Speaker 3: Just myself.

27
00:01:18,080 --> 00:01:23,039
Speaker 1: I've been saying for some months that we've had relative

28
00:01:23,080 --> 00:01:27,479
Speaker 1: steadiness in the job market. In my view, the strongest

29
00:01:27,480 --> 00:01:30,920
Speaker 1: thing in the economy is not AI data center investment,

30
00:01:31,040 --> 00:01:34,640
Speaker 1: has been consumer spending being solid in a kind of

31
00:01:34,640 --> 00:01:38,480
Speaker 1: a broad based way in the economy. But the inflation

32
00:01:39,160 --> 00:01:42,800
Speaker 1: hasn't been ideal. It's at least stalled out at kind

33
00:01:42,840 --> 00:01:47,760
Speaker 1: of three percent, and some of the latest measures the

34
00:01:47,920 --> 00:01:52,560
Speaker 1: inflation disturbingly high in non tear offf categories like services.

35
00:01:53,800 --> 00:01:58,920
Speaker 1: I think we're still basically in that same spot. I

36
00:01:59,160 --> 00:02:04,840
Speaker 1: remain old full slash, expecting that conditions will improve, that

37
00:02:04,880 --> 00:02:08,680
Speaker 1: will start to see some progress on inflation, head us

38
00:02:08,720 --> 00:02:10,760
Speaker 1: back to two percent, and by the end of this

39
00:02:10,919 --> 00:02:14,160
Speaker 1: year that we would be in a situation that we

40
00:02:14,200 --> 00:02:18,840
Speaker 1: could commence our march back down to something like the

41
00:02:18,880 --> 00:02:22,760
Speaker 1: settling point, which is below where we are today, but

42
00:02:23,720 --> 00:02:28,600
Speaker 1: each time we add an uncertainty. I think the job

43
00:02:28,720 --> 00:02:36,520
Speaker 1: market characterized by low hiring simultaneously with low layoffs is

44
00:02:36,560 --> 00:02:39,880
Speaker 1: a weird combination. And when I talk to business people

45
00:02:39,880 --> 00:02:44,000
Speaker 1: out in the Midwest, they characterize as because of the uncertainty.

46
00:02:44,200 --> 00:02:48,000
Speaker 1: So as we get more uncertainties, I kind of think

47
00:02:48,080 --> 00:02:51,760
Speaker 1: the time at which it makes sense to act keeps

48
00:02:51,800 --> 00:02:55,360
Speaker 1: getting pushed back. I always say the first rule of

49
00:02:55,400 --> 00:02:59,520
Speaker 1: the data dogs is to recognize there's a time for sniffing,

50
00:02:59,840 --> 00:03:03,560
Speaker 1: and there's a time for walking. And when there's uncertainty

51
00:03:03,639 --> 00:03:09,440
Speaker 1: and you're getting conflicting data points, that's the time for sniffin.

52
00:03:10,440 --> 00:03:12,440
Speaker 2: I'm sure everyone out there is very glad to hear

53
00:03:12,480 --> 00:03:14,959
Speaker 2: you bring back the data dogs. It's been a while

54
00:03:15,240 --> 00:03:18,760
Speaker 2: since we've heard that. Speaking of data dogs, one dog

55
00:03:18,760 --> 00:03:21,280
Speaker 2: that is marking very loudly right now is oil prices.

56
00:03:21,280 --> 00:03:22,960
Speaker 3: But the Fed tends to look through that.

57
00:03:24,240 --> 00:03:29,320
Speaker 1: Yes, I mean, as with any supply side shock, it

58
00:03:29,360 --> 00:03:32,919
Speaker 1: can lead in a stagflationary direction, which is to say,

59
00:03:33,480 --> 00:03:37,440
Speaker 1: the inflation side of the mandate getting worse at the

60
00:03:37,480 --> 00:03:39,640
Speaker 1: same time the employment.

61
00:03:39,160 --> 00:03:40,560
Speaker 3: Side of the mandate is getting worse.

62
00:03:40,800 --> 00:03:44,440
Speaker 1: And that's always the worst case scenario for the central bank.

63
00:03:44,440 --> 00:03:49,640
Speaker 1: Because there's not an obvious monetary policy answer to a

64
00:03:49,720 --> 00:03:55,440
Speaker 1: stagflationary shock oil prices going up, we need to think

65
00:03:55,480 --> 00:03:59,400
Speaker 1: about is this a transitory thing that's going to be temporary?

66
00:03:59,520 --> 00:04:00,200
Speaker 3: Is this going to be.

67
00:04:00,240 --> 00:04:04,440
Speaker 1: Long lived, how much, how big will it be, how

68
00:04:04,480 --> 00:04:07,000
Speaker 1: long will it last, and how is it affecting the

69
00:04:07,120 --> 00:04:07,920
Speaker 1: supply chain?

70
00:04:08,600 --> 00:04:11,240
Speaker 3: Before we can really say anything about it.

71
00:04:11,280 --> 00:04:15,160
Speaker 2: I would assume that you would assume that March is

72
00:04:15,200 --> 00:04:17,080
Speaker 2: not going to see March eighteenth is not going to

73
00:04:17,080 --> 00:04:19,200
Speaker 2: see any kind of rate move because there's still too

74
00:04:19,279 --> 00:04:23,760
Speaker 2: much uncertainty. Do you think it would have enough data

75
00:04:23,800 --> 00:04:26,480
Speaker 2: by April to even make a decision one way or another.

76
00:04:27,600 --> 00:04:30,719
Speaker 1: You know that I don't like, and you assume that

77
00:04:30,760 --> 00:04:33,120
Speaker 1: I assume I don't.

78
00:04:32,920 --> 00:04:36,560
Speaker 3: Know what you know.

79
00:04:36,720 --> 00:04:40,280
Speaker 1: I don't like tying our hands ahead of the meetings.

80
00:04:40,360 --> 00:04:42,080
Speaker 1: I want to hear what my colleagues have to say.

81
00:04:42,120 --> 00:04:45,520
Speaker 1: I want to get as much information as possible, especially

82
00:04:45,560 --> 00:04:49,560
Speaker 1: at moments like this where we're getting conflicting pieces of information.

83
00:04:50,080 --> 00:04:52,039
Speaker 3: But you've been there.

84
00:04:52,160 --> 00:04:54,919
Speaker 1: It's the biggest table that I've ever seen in my

85
00:04:55,040 --> 00:04:58,320
Speaker 1: life in that FOBC room. So there's plenty of room

86
00:04:58,720 --> 00:05:02,279
Speaker 1: for everything to be on the table at every meeting.

87
00:05:03,880 --> 00:05:05,960
Speaker 1: So I'm not going to rule anything out.

88
00:05:06,279 --> 00:05:09,360
Speaker 2: We are from the data that we already have, and

89
00:05:09,520 --> 00:05:13,120
Speaker 2: other FED officials have said this, expecting a bad PCE number.

90
00:05:13,720 --> 00:05:18,240
Speaker 2: Are you still thinking of that PCEE inflation as residual

91
00:05:18,400 --> 00:05:25,600
Speaker 2: tariff as opposed to an underlying fundamental problem with inflation.

92
00:05:26,839 --> 00:05:28,000
Speaker 3: Maybe a little of both.

93
00:05:28,120 --> 00:05:32,160
Speaker 1: I mean, that's why I've been uncertain and highlighting the

94
00:05:32,880 --> 00:05:37,640
Speaker 1: inflation numbers. There's been some encouraging science in inflation. Housing

95
00:05:37,680 --> 00:05:42,520
Speaker 1: inflation has come down a lot and is likely to

96
00:05:42,560 --> 00:05:45,560
Speaker 1: continue to come down. We had the run up of

97
00:05:45,640 --> 00:05:48,560
Speaker 1: goods inflation that I think a lot of it is

98
00:05:48,600 --> 00:05:51,560
Speaker 1: tied to tariffs, and we're still trying to sort out

99
00:05:52,240 --> 00:05:54,960
Speaker 1: is there more to come or is that basically all there.

100
00:05:54,920 --> 00:05:58,440
Speaker 3: Was with tariffs and then it'll go away. But there's

101
00:05:58,600 --> 00:05:59,720
Speaker 3: also been a.

102
00:05:59,720 --> 00:06:04,240
Speaker 1: Kind of a disturbing persistence of services inflation, which I

103
00:06:04,279 --> 00:06:07,440
Speaker 1: don't think you can attribute to tariffs because the tariff

104
00:06:07,520 --> 00:06:10,760
Speaker 1: content of the services industry is not very high.

105
00:06:10,960 --> 00:06:15,760
Speaker 3: So we'll have to see what the PCE number says.

106
00:06:16,440 --> 00:06:22,080
Speaker 1: The Open Market Committee has said we watch PCE inflation.

107
00:06:22,160 --> 00:06:23,520
Speaker 3: That's in our framework review.

108
00:06:23,960 --> 00:06:27,440
Speaker 1: That's the best measure that we have of inflation, I think,

109
00:06:27,960 --> 00:06:32,760
Speaker 1: And if it comes in hot and it's just goods,

110
00:06:33,200 --> 00:06:37,560
Speaker 1: I would be more comfortable saying that looks more like

111
00:06:37,640 --> 00:06:42,120
Speaker 1: a tariff driven thing. And that's the optimist case. Maybe

112
00:06:42,640 --> 00:06:46,440
Speaker 1: that it would prove transitory if it comes in hot,

113
00:06:46,560 --> 00:06:51,320
Speaker 1: but it's heavily on healthcare, a bunch of service sector industries.

114
00:06:51,800 --> 00:06:54,440
Speaker 1: That's a different kettle of fish, and that's a little

115
00:06:54,440 --> 00:06:57,680
Speaker 1: more that feels a little more persistent.

116
00:06:58,080 --> 00:07:01,480
Speaker 2: The sentiment question. The sentiment you can not just from CEOs,

117
00:07:01,480 --> 00:07:04,960
Speaker 2: but also from just talking to regular people in your district.

118
00:07:05,520 --> 00:07:08,560
Speaker 2: You've got a situation where people are seeing gas prices

119
00:07:08,560 --> 00:07:10,480
Speaker 2: go up and up and up, and now you have

120
00:07:10,520 --> 00:07:12,720
Speaker 2: a really bad employment report at a time when people

121
00:07:12,760 --> 00:07:15,120
Speaker 2: have already said they're worried about losing their jobs. Are

122
00:07:15,120 --> 00:07:20,200
Speaker 2: you concerned that this could tip us into the stagflationary environment.

123
00:07:20,600 --> 00:07:22,280
Speaker 3: I don't want to say recession.

124
00:07:21,920 --> 00:07:25,040
Speaker 2: Yet, but it could cause people to pull back.

125
00:07:26,160 --> 00:07:27,840
Speaker 3: It might cause people to pull back.

126
00:07:29,280 --> 00:07:34,800
Speaker 1: The last five to eight years, however, there's been a

127
00:07:34,840 --> 00:07:40,120
Speaker 1: breaking of the link between consumer sentiment and actual consumer

128
00:07:40,160 --> 00:07:44,720
Speaker 1: spending for some reasons we understand and some reasons we

129
00:07:44,760 --> 00:07:48,920
Speaker 1: don't understand. So if you saw a deterioration of consumer

130
00:07:49,000 --> 00:07:53,800
Speaker 1: sentiment as say, gas prices go up, which historically when

131
00:07:53,840 --> 00:07:57,760
Speaker 1: gas prices go up, consumer sentiment goes down, if that

132
00:07:57,800 --> 00:08:00,720
Speaker 1: did not translate into a slowing of concer who we're spending,

133
00:08:00,880 --> 00:08:04,960
Speaker 1: I would be much less nervous. As I've highlighted in

134
00:08:05,000 --> 00:08:08,360
Speaker 1: twenty twenty five, the strongest thing that we have going

135
00:08:08,400 --> 00:08:11,840
Speaker 1: for us was not AI data center investment.

136
00:08:12,280 --> 00:08:14,360
Speaker 3: Yeah, that was great, but the main thing.

137
00:08:14,360 --> 00:08:21,160
Speaker 1: Driving growth was a strong, stable consumer, broad based spending,

138
00:08:21,760 --> 00:08:26,440
Speaker 1: which drove growth in the country. And that still continues

139
00:08:27,280 --> 00:08:33,920
Speaker 1: until it doesn't. So if sentiment deteriorated, and there's a

140
00:08:33,960 --> 00:08:37,360
Speaker 1: lot of concern as I'm going around the Midwest and

141
00:08:37,480 --> 00:08:41,400
Speaker 1: the Chicago Fed District, a lot of expression of concern

142
00:08:41,440 --> 00:08:45,880
Speaker 1: about affordability, about costs on both the business side and

143
00:08:45,960 --> 00:08:50,680
Speaker 1: the consumer side. If people begin to be nervous about

144
00:08:50,720 --> 00:08:56,880
Speaker 1: their employment, Historically that tends to show up as they're

145
00:08:56,880 --> 00:09:01,840
Speaker 1: trying to build a little precautionary buffer, so the savings

146
00:09:01,880 --> 00:09:03,200
Speaker 1: rate would start to rise.

147
00:09:03,920 --> 00:09:05,679
Speaker 3: That'd be a thing to watch out.

148
00:09:05,920 --> 00:09:07,880
Speaker 2: Let's end on a little bit of a positive note here.

149
00:09:08,040 --> 00:09:10,960
Speaker 2: Productivity down from the third quarter, but still two point

150
00:09:11,000 --> 00:09:14,520
Speaker 2: eight percent for the fourth quarter. That's got to be

151
00:09:14,679 --> 00:09:16,480
Speaker 2: something that makes you feel a little bit.

152
00:09:16,600 --> 00:09:20,400
Speaker 1: Yeah, all of our inner economists are getting a little

153
00:09:20,440 --> 00:09:24,079
Speaker 1: bit of a warm glow. Productivity growth is what makes

154
00:09:24,160 --> 00:09:27,800
Speaker 1: us rich. Incomes can go up, wages can grow faster

155
00:09:27,960 --> 00:09:32,200
Speaker 1: without inflation if productivity growth is going to remain highlight

156
00:09:32,320 --> 00:09:38,560
Speaker 1: this so I don't think that the adoption of AI

157
00:09:39,120 --> 00:09:44,520
Speaker 1: has been big enough to explain that number completely. So

158
00:09:44,800 --> 00:09:48,680
Speaker 1: I think there actually might be even some more running

159
00:09:48,760 --> 00:09:50,239
Speaker 1: room to go with the productivity.

160
00:09:50,640 --> 00:09:52,640
Speaker 2: Austin Goolsby, thank you very much. We'll have you back

161
00:09:52,640 --> 00:09:56,240
Speaker 2: to have a name the Data Dogs contest right, President

162
00:09:56,280 --> 00:09:57,200
Speaker 2: of the Chicago Fan