WEBVTT - Fed Decision and Big Tech Earnings 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.440 us live on YouTube Now. 0:00:27.640 --> 0:00:30.480 Joining us for extensive comments is loud brainer. We are 0:00:30.600 --> 0:00:35.000 thrilled that she is here, young duty at Wesleyan in 0:00:35.080 --> 0:00:37.800 Connecticut and up to Harvard and her public service, and 0:00:37.840 --> 0:00:41.199 really were the more policy effort? Well, I'm dying to 0:00:41.280 --> 0:00:44.519 ask you this question. We just head on the show 0:00:45.080 --> 0:00:49.760 Magnificent Stephanie Stancheva out of Harvard, and then I see 0:00:49.760 --> 0:00:53.960 a Nobel Prize of Claudia Golden out of Harvard. What 0:00:54.040 --> 0:00:57.279 was it like for you to have the courage to 0:00:57.320 --> 0:01:01.800 do economics a number of years ago? How lonely was 0:01:01.840 --> 0:01:05.920 it to be a woman in economics back in the 0:01:05.959 --> 0:01:07.720 time of Laurence Summer at the school. 0:01:09.319 --> 0:01:12.280 Well, I would say that by the time I got 0:01:12.280 --> 0:01:15.480 to Harvard, obviously we did have some women on the faculty. 0:01:15.560 --> 0:01:20.679 Claudia Golden arrived while I was there, Susan Collins was 0:01:20.720 --> 0:01:24.040 there for a period of time. There were some really 0:01:24.040 --> 0:01:29.280 outstanding young women professors, and you know, it was an 0:01:29.360 --> 0:01:33.280 exciting time. I care a lot, of course about how 0:01:33.319 --> 0:01:38.280 we use economics to better outcomes in policy, and so 0:01:38.360 --> 0:01:41.600 it was just great to be studying with some of 0:01:41.640 --> 0:01:47.600 the people who have really shaped economic policy making in 0:01:47.640 --> 0:01:49.440 the preceding decades. 0:01:49.600 --> 0:01:52.400 Doctor Braner, I was laying out the differences between a 0:01:52.440 --> 0:01:55.000 Clarida and a Brainer, where you look at Dsge and 0:01:55.040 --> 0:01:58.400 all the mathewness of Clarida and Gertler, and you were 0:01:58.440 --> 0:02:02.760 the really historic policy the effort of getting things done 0:02:03.000 --> 0:02:08.000 in economics color. The nature of the uncertainty now that 0:02:08.040 --> 0:02:11.200 the FED has to face is we bounce from copper 0:02:11.280 --> 0:02:14.400 down the most in forty years to a non printed 0:02:14.480 --> 0:02:19.360 India trade agreement. What's the nature of our present uncertainty? 0:02:20.639 --> 0:02:24.440 So, on the one hand, we know a lot about 0:02:24.520 --> 0:02:30.040 how tariffs generally affect the economy. We had a little 0:02:30.080 --> 0:02:34.560 trial run back in twenty eighteen when Trump, the first 0:02:34.600 --> 0:02:38.600 Trump administration, imposed tariffs on China, mostly on China as 0:02:38.639 --> 0:02:41.840 well as steel and aluminum. We do know that tariffs 0:02:42.320 --> 0:02:47.000 raise prices. Ultimately, that that time between when tariffs are 0:02:47.040 --> 0:02:50.160 imposed and when you can see it actually in prices 0:02:50.600 --> 0:02:53.480 varies a great deal, but the last time through four 0:02:53.520 --> 0:02:57.040 to six months. And we also know that tariffs are 0:02:57.120 --> 0:03:01.880 like a supply shock and they can disrupt the labor market. 0:03:01.960 --> 0:03:03.800 So we know all of that. What we don't know, 0:03:03.960 --> 0:03:08.040 and where this uncertainty is so important is twofold. First 0:03:08.040 --> 0:03:10.920 of all, we have not seen tariffs at these levels 0:03:11.440 --> 0:03:16.119 for decades. These are smooth, holly level tariffs in many cases, 0:03:16.680 --> 0:03:20.040 and so the extent of the changes we just haven't seen. 0:03:20.480 --> 0:03:23.520 And secondly, of course, the administration is still in the 0:03:23.600 --> 0:03:26.600 process of telling us what those tariff levels are in 0:03:26.639 --> 0:03:30.960 those trade agreements are not yet very firm or very clear. 0:03:31.480 --> 0:03:34.440 Low. What did you take away from the FED minutes 0:03:34.560 --> 0:03:37.240 yes the FED news yesterday, the meeting yesterday from Fed 0:03:37.320 --> 0:03:38.800 Chairman Jpow What was your takeaway? 0:03:40.000 --> 0:03:43.640 So the takeaway I think was that the large majority 0:03:43.800 --> 0:03:48.040 of members of the Open Markets Committee want two more 0:03:48.080 --> 0:03:52.240 months of data and they will get it before the 0:03:52.280 --> 0:03:57.800 next meeting in September. That they are still quite concerned 0:03:58.000 --> 0:04:02.320 about potential risks to the upside to inflation, which has 0:04:02.400 --> 0:04:05.240 been running high over the last few years, and of 0:04:05.280 --> 0:04:08.680 course that means they have to be particularly attentive to 0:04:08.760 --> 0:04:13.600 inflation expectations. But that they're also attentive to potential weakening. 0:04:13.640 --> 0:04:16.560 And of course we got the GDP report on the 0:04:16.600 --> 0:04:19.520 same day, and if you look underneath the hood, there 0:04:19.560 --> 0:04:23.360 has been quite a bit of moderation in those core 0:04:23.440 --> 0:04:27.320 domestic components, particularly the consumer, over the first half of 0:04:27.360 --> 0:04:31.839 the year. So they are balancing those two potential risks, 0:04:32.320 --> 0:04:37.320 and they really want that additional data before they make 0:04:37.480 --> 0:04:42.080 a decision to move further potentially on cutting rates. 0:04:42.320 --> 0:04:44.080 You know, LOI, We've had a number of guests over 0:04:44.120 --> 0:04:47.000 the last several days, maybe even weeks, say, well, it 0:04:47.040 --> 0:04:49.320 just kind of feels like a year ago, or maybe 0:04:49.360 --> 0:04:51.400 the Fed decided not to move in July when the 0:04:51.480 --> 0:04:54.120 data suggested maybe they should, and then they were forced 0:04:54.160 --> 0:04:55.520 to maybe go a little bit more than they wanted 0:04:55.520 --> 0:04:58.080 to do in September. You feel like the Fed might 0:04:58.120 --> 0:05:01.080 be behind the times here a little bit in terms 0:05:01.120 --> 0:05:02.760 of cutting rates. 0:05:03.160 --> 0:05:06.359 So I think there is always that risk that the 0:05:06.520 --> 0:05:10.640 Federal Reserve, in the effort to get more data to 0:05:10.680 --> 0:05:14.680 be more certain, waits a little longer than would have 0:05:14.800 --> 0:05:19.160 been ideal with the benefit of hindsight. But we already 0:05:19.200 --> 0:05:24.279 were talking about just how much uncertainty the evolving tariff 0:05:24.360 --> 0:05:29.080 landscape is injecting into the outlook for the dual mandate 0:05:29.200 --> 0:05:33.440 for both inflation and unemployment, and that explains, I think 0:05:33.839 --> 0:05:35.880 why they are stuck waiting. 0:05:37.040 --> 0:05:39.200 I've got two things to talk about here, doctor brainer 0:05:39.279 --> 0:05:42.680 that I think are important. What a nasty I'll ed 0:05:42.760 --> 0:05:45.760 by you in the Washington Boast a few weeks ago 0:05:46.200 --> 0:05:49.760 it was the close ara out Low Brainerd going after 0:05:49.800 --> 0:05:55.600 the president. The treatment of chair of Chair Pole love Brainerd. 0:05:55.720 --> 0:05:58.960 Is things smoothed down a little bit even with Trump 0:05:59.000 --> 0:06:03.640 treats even the morning is well, does the industry have 0:06:03.800 --> 0:06:05.080 mister Powell's back? 0:06:06.720 --> 0:06:10.120 Well, Look, I think what has been surprising to me 0:06:10.839 --> 0:06:14.320 is to hear the President talk about lowering rates as 0:06:14.360 --> 0:06:19.719 though it is the Federal Reserves responsibility to lower rates 0:06:19.800 --> 0:06:25.279 for US Treasury debt management. And that, of course is 0:06:25.360 --> 0:06:31.000 exactly how central banks go wrong in emerging markets like Turkey. 0:06:31.560 --> 0:06:36.719 When the President the administration lean on a central bank 0:06:36.920 --> 0:06:41.720 to prioritize lowering the cost of borrowing to the government, 0:06:42.440 --> 0:06:47.240 it undermines the inflation control credibility of the central bank, 0:06:47.279 --> 0:06:51.040 and so for me, of course, what is very important 0:06:51.360 --> 0:06:55.560 is that the Federal Reserve continue to have that credibility 0:06:55.600 --> 0:06:59.200 for inflation fighting. Now it's more important than ever, having 0:06:59.320 --> 0:07:02.559 just come off period of high inflation and of course 0:07:02.600 --> 0:07:08.159 facing some inflation from tariff, so that independence is more 0:07:08.200 --> 0:07:09.039 important than ever. 0:07:09.680 --> 0:07:12.080 Well, I look at the tariff you know what's changed 0:07:12.120 --> 0:07:15.080 since your Washington Post op ed. I look at the 0:07:15.120 --> 0:07:18.240 tariff debate, erning Tedesky doing great work at the budget 0:07:18.280 --> 0:07:21.520 lab at Yale, allile Yale's to college in New Haven. 0:07:21.560 --> 0:07:24.240 I don't know if you're familiar with that, but you know, 0:07:24.520 --> 0:07:27.960 I look lol at the tariffs now, JP Morgan modeling 0:07:28.040 --> 0:07:32.320 eighteen percent, clearly Smoot Hawley nineteen thirty three, maybe back 0:07:32.320 --> 0:07:36.400 to the Gilded Age. Will the president be overcome by 0:07:36.520 --> 0:07:41.920 events if we see job jobless increase, if we see 0:07:42.040 --> 0:07:45.840 GDP decrease, do you just assume at some point, like 0:07:45.920 --> 0:07:49.200 mckinnley adjusted, and I think it was nineteen oh one, 0:07:49.720 --> 0:07:53.320 is Trump going to have to adjust to the failure 0:07:53.440 --> 0:07:56.400 of the magnitude move in tariffs? 0:07:57.280 --> 0:07:59.440 Well, it's very hard to say right now. Of course 0:07:59.480 --> 0:08:03.200 I don't have any insights into that, but I would 0:08:03.280 --> 0:08:06.280 say what is clear to me, because I have been 0:08:06.280 --> 0:08:09.960 listening carefully to the Treasury Secretary and the President, is 0:08:10.000 --> 0:08:13.480 that they see tariffs as a way of raising revenues, 0:08:13.560 --> 0:08:17.960 and they have a very aggressive revenue target for tariffs. 0:08:18.360 --> 0:08:22.040 They want to raise hundreds of billions, three hundred billion 0:08:22.160 --> 0:08:25.760 dollars a year in tariff revenues, which is an order 0:08:25.800 --> 0:08:29.840 of magnitude larger than what we have seen recently, and 0:08:29.880 --> 0:08:33.559 that means that tariff rights have to be at those 0:08:33.720 --> 0:08:38.720 high smooth Haley levels with the attendant potential effects on 0:08:38.800 --> 0:08:44.240 the labor market. And we've already seen substantial slowing in 0:08:44.280 --> 0:08:49.719 the second quarter in terms of underlying private domestic final demand. 0:08:49.840 --> 0:08:55.400 Consumers look like they are feeling a little bit cautious. 0:08:55.600 --> 0:08:59.959 We can see that even in today's personal consumption expenditures day, 0:09:00.280 --> 0:09:04.079 which really was very modest growth. So yes, I do 0:09:04.160 --> 0:09:08.160 believe there's some risk that by trying to achieve those 0:09:08.280 --> 0:09:11.960 very aggressive tariff revenue goals, they really are putting a 0:09:12.000 --> 0:09:15.120 big dampener on what could be a very dynamic and 0:09:15.160 --> 0:09:17.079 exciting period in American growth. 0:09:17.760 --> 0:09:20.839 Lyle, the FED has that dual mandate, of course, of 0:09:21.640 --> 0:09:24.320 full employment and price stability. Do you think one is 0:09:24.360 --> 0:09:28.120 taking a precedent over the other these days within the Fed? 0:09:29.600 --> 0:09:33.000 Well, I think we heard the chair talk about both 0:09:33.040 --> 0:09:36.800 sides of the dual mandate yesterday risks to the upside 0:09:36.880 --> 0:09:41.480 potentially on inflation, and we see it in this morning's 0:09:42.520 --> 0:09:47.520 preferred Fed inflation gauge. You see those core goods going 0:09:47.559 --> 0:09:50.080 back up again after a long period where they had 0:09:50.080 --> 0:09:52.880 been coming down. But of course you also see it 0:09:53.000 --> 0:09:58.360 in the labor market, where private hiring has really ground 0:09:58.440 --> 0:10:01.959 to a halt. Now super market is in balance. As 0:10:02.000 --> 0:10:07.760 the chair told everyone yesterday multiple times, the unemployment rate 0:10:07.840 --> 0:10:11.000 has remained low, and that in part reflects the fact 0:10:11.000 --> 0:10:14.120 that labor demand is falling at the same time that 0:10:14.240 --> 0:10:18.199 labor supply is also being constricted on the immigration front. 0:10:18.280 --> 0:10:21.360 So it remains in balance. But I do worry about 0:10:21.400 --> 0:10:24.400 downside risks to employment. 0:10:24.760 --> 0:10:27.960 Love bringing it a young upstart economist up at Harvard. 0:10:28.000 --> 0:10:31.040 His name is let me look here, Jason Furman. I 0:10:31.040 --> 0:10:34.760 think you may be familiar with Jason Furman. I love 0:10:34.800 --> 0:10:38.960 what he's doing onannualized analysis. Folks out moments ago on 0:10:39.360 --> 0:10:42.880 Twitter from Professor Firman driving x ten up at Harvard. 0:10:43.360 --> 0:10:48.079 One month core PCE three point one percent, three months 0:10:48.120 --> 0:10:53.720 two point six percent, six months annualize three point two percent, 0:10:54.320 --> 0:10:58.360 twelve months two point nine percent, I'm sorry, Rick Michigan 0:10:58.400 --> 0:11:02.480 and John B. Taylor at Stanford, those guys maybe policy 0:11:02.520 --> 0:11:05.680 they're on different pages. They're in the same page that 0:11:05.760 --> 0:11:09.400 core pc inflation all is too high, isn't it. 0:11:10.559 --> 0:11:14.200 Well, the core PCE inflation is too high, and it's going, 0:11:14.480 --> 0:11:19.079 unfortunately in the wrong direction. That is the bind. So 0:11:19.400 --> 0:11:23.520 you know what we were seeing before a lot of 0:11:23.520 --> 0:11:28.280 the tariffs started to get imposed was actually, finally services 0:11:28.280 --> 0:11:31.360 inflation were coming down. Core goods had already come down, 0:11:31.400 --> 0:11:37.199 and so core inflation was trending down towards the target. 0:11:37.320 --> 0:11:41.720 Now it is detouring with those core goods lifting it again. 0:11:42.040 --> 0:11:45.400 And core services actually in the last two months were 0:11:45.400 --> 0:11:49.839 a little stronger than we had previously seen. So it's 0:11:49.880 --> 0:11:52.959 moving in the wrong direction, and of course that's a concern. 0:11:53.240 --> 0:11:57.600 And Paul I can't emphasize enough the granularity of these 0:11:57.640 --> 0:12:03.000 are full time pros, heavyweights analyzing the tariff impact, guessing 0:12:03.559 --> 0:12:07.959 out to Labor Day, guessing out to Christmas, guessing into 0:12:08.040 --> 0:12:12.120 next year. And the answer is nobody's talking disinflation. 0:12:12.520 --> 0:12:15.920 Disinflation. How about the consumer, lyle, how do you, given 0:12:15.920 --> 0:12:17.959 the backdrop, so to Tom just outlined here, how do 0:12:18.040 --> 0:12:20.400 you think the consumer is these days. 0:12:21.520 --> 0:12:26.480 Well, we've got some insights into consumers and their feelings 0:12:26.480 --> 0:12:30.960 about both the economy currently and their expectations through some 0:12:31.080 --> 0:12:34.439 of the consumer surveys, and of course a little bit 0:12:34.520 --> 0:12:37.720 less negative, but still quite negative relative to where it 0:12:37.800 --> 0:12:42.200 had been before the tariff agenda started rolling out. They 0:12:42.240 --> 0:12:46.920 seem to be worried that prices just are still too high, 0:12:47.480 --> 0:12:51.360 and of course that now is creeping back into more goods. 0:12:51.400 --> 0:12:54.079 But housing has been a problem for a while, and 0:12:54.120 --> 0:12:58.400 that goes to the President's concerns, valid concerns. I think 0:12:58.720 --> 0:13:02.319 that mortgage rates are quite high and then the housing 0:13:02.360 --> 0:13:03.559 market is frozenly. 0:13:03.720 --> 0:13:05.400 One more thing, I'll be quick here. This is the 0:13:05.440 --> 0:13:08.280 magic of Twitter, if they would get if they get 0:13:08.280 --> 0:13:12.840 their ex straightened out. I've got Jason Furman, Steve Rattner, 0:13:13.360 --> 0:13:17.839 and Ernie Tedesky back to back to back in my feed. Lyle, 0:13:17.960 --> 0:13:22.520 this is stunning from Ernie Tedesky. Now at Yale, durable 0:13:22.559 --> 0:13:26.199 goods have risen by one point seven percent other than 0:13:26.240 --> 0:13:30.640 the depths of COVID. That's the strongest six months rise 0:13:31.440 --> 0:13:38.920 since nineteen eighty seven. Does Washington understand that, Lyle brainerd So, 0:13:39.160 --> 0:13:42.160 I think Ernie is doing a great job pointing out 0:13:42.200 --> 0:13:43.679 the granular. 0:13:43.160 --> 0:13:48.960 Effects which have to be in part reflecting tariff effects. 0:13:49.280 --> 0:13:52.520 And when we get pronouncements from the White House, sweeping 0:13:52.559 --> 0:13:56.400 pronouncements that a country is going to see twenty five 0:13:56.480 --> 0:14:01.839 percent tariffs, nineteen percent tariffs, you really wonder whether they've 0:14:01.840 --> 0:14:04.720 had the time and the bandwidth to do the kind 0:14:04.760 --> 0:14:08.080 of detailed analysis that would allow them to see that 0:14:08.200 --> 0:14:10.560 some of those tariffs they're imposing are actually going to 0:14:10.720 --> 0:14:15.760 disadvantage American producers because input prices are going up. It's 0:14:15.760 --> 0:14:19.400 going to actually not only hurt American consumers, but in 0:14:19.440 --> 0:14:25.080 many cases, like in US domestic auto producers, is actually 0:14:25.120 --> 0:14:29.120 making their supply chains more expensive and will make them 0:14:29.400 --> 0:14:30.280 less competitive. 0:14:30.560 --> 0:14:35.480 This has been fabulous. I got goosebumps right, that's great. Love, Brainerd, 0:14:35.560 --> 0:14:37.960 thank you so much with Richard Clarita in this hour 0:14:38.480 --> 0:14:41.840 on our nation's economy and what it means for us. 0:14:41.880 --> 0:14:44.920 Thank you to ninety two nine FM Boston or Boston 0:14:44.960 --> 0:14:55.440 News Bureau for bringing us doctor Brainerd. This morning. 0:14:55.800 --> 0:14:59.400 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:14:59.440 --> 0:15:02.480 weekday after noons from seven to ten am Eastern. Listen 0:15:02.520 --> 0:15:06.080 on Applecarplay and Android otto with the Bloomberg Business app 0:15:06.280 --> 0:15:08.040 or watch us live on YouTube. 0:15:08.160 --> 0:15:10.760 We are honored to have with us Richard clarda always 0:15:10.800 --> 0:15:14.560 with Columbia University, with Pimco as well. The former Vice 0:15:14.640 --> 0:15:19.160 chairman of the Fed, Ian Lincoln at Bank of Montreal, 0:15:19.760 --> 0:15:24.040 the iconic Bank of Canada, just published and he said, 0:15:24.080 --> 0:15:29.120 I'm sorry, every inflation series is ticking up. Do we 0:15:29.200 --> 0:15:33.920 see tariffs in the minutia of price change already? Do 0:15:33.960 --> 0:15:35.320 we see tariffs now? 0:15:36.000 --> 0:15:38.320 Sure, they're starting to show up to some extent in 0:15:38.360 --> 0:15:41.800 the inflation data, in particular in those sectors exposed to tariff. 0:15:42.400 --> 0:15:46.920 Goods prices are moving up. The overall indexes are are 0:15:47.080 --> 0:15:50.200 coming in more or less in line with expectations because 0:15:50.240 --> 0:15:53.760 services inflation continues to fall. 0:15:53.880 --> 0:15:56.560 So if you're the Fed, yeah, what did you hear 0:15:56.640 --> 0:15:59.480 yesterday from our chairman? Yes, he send it a little 0:15:59.520 --> 0:16:02.440 bit more hawkish than maybe the statement. 0:16:02.480 --> 0:16:06.040 I don't know, Harry Truman. I think once said he 0:16:06.080 --> 0:16:09.360 wanted he wanted to meet the one armed economist because 0:16:09.360 --> 0:16:11.320 he kept getting on the one hand, on the other hand, 0:16:11.360 --> 0:16:14.080 I think that was that's what we got yesterday from 0:16:14.200 --> 0:16:18.280 from chair Powe. You know, very balanced. I think the 0:16:18.320 --> 0:16:20.800 revealing moment was when he was asked by a reporter 0:16:21.520 --> 0:16:25.360 about whether or not the dots at the June meeting 0:16:25.360 --> 0:16:27.800 were indicative of where the committee was where they showed 0:16:27.840 --> 0:16:31.200 two cuts this year. He basically said, look, that was 0:16:31.240 --> 0:16:33.640 six weeks ago. We're not paying attention to that. So 0:16:33.920 --> 0:16:37.160 he clearly, I think, came in with the goal of 0:16:37.800 --> 0:16:41.720 giving himself and the committee optionality in September to pause 0:16:42.440 --> 0:16:44.480 or to cut, and I think I think he achieved 0:16:44.480 --> 0:16:45.120 that for sure. 0:16:45.440 --> 0:16:47.360 I got to get this side of the way. I 0:16:47.440 --> 0:16:50.120 have to ask, have you been contacted by the Trump 0:16:50.160 --> 0:16:56.480 administration about future employment in our central Bank? I have not. Okay, 0:16:56.560 --> 0:16:59.080 we're waiting on it. There was Psias Glenn Ubberd the 0:16:59.120 --> 0:17:03.120 same question at the same silence treatment as well. In 0:17:03.160 --> 0:17:07.640 your work in folks, this is wicked fancy mathematics called 0:17:07.720 --> 0:17:14.640 dynamic stochastic general equilibrium theorem. Uncertainty is outside the system. 0:17:14.680 --> 0:17:19.600 It's what we call exogenous. Our listeners, our viewers are 0:17:19.680 --> 0:17:24.000 living indgenous uncertainty right now with all of these shocks 0:17:24.040 --> 0:17:27.639 to the system led by tariffs. How do you color 0:17:27.720 --> 0:17:31.080 the uncertainty that the PhDs, the FED face. 0:17:33.720 --> 0:17:37.359 It is elevated. I think perhaps less elevated than it 0:17:37.359 --> 0:17:40.280 may have been after Liberation Day. I think, in particular, 0:17:40.320 --> 0:17:42.320 I think we have a better sense and firms have 0:17:42.359 --> 0:17:44.320 a better sense of where we're going to end up 0:17:44.359 --> 0:17:47.800 in terms of the new trade regime. And importantly also 0:17:49.080 --> 0:17:51.680 we now sort of know the parameters of fiscal policy, 0:17:52.040 --> 0:17:54.800 tariff revenue, the deals that are being caught in terms 0:17:54.800 --> 0:17:58.040 of investment in the US. So there is uncertainty, but 0:17:58.119 --> 0:18:01.560 I think it's moving in both directions. For the economy, 0:18:01.840 --> 0:18:02.920 do we have clarity? 0:18:02.960 --> 0:18:04.880 I mean, I look at the Yell budget lab Ernie 0:18:04.920 --> 0:18:10.200 Tanowsky and that crew yesterday, Bob Michael modeling eighteen percent 0:18:10.320 --> 0:18:13.760 blended work at JP Morgan maybe up to twenty percent 0:18:13.840 --> 0:18:17.000 as well. How do people like you that have actually 0:18:17.040 --> 0:18:21.000 studied the history give us I like to say, there's 0:18:21.040 --> 0:18:24.480 Hubert Heaver tariffs, we're back to the thirties, We're back 0:18:24.480 --> 0:18:27.480 to FDR and some you look at the series, we're 0:18:27.480 --> 0:18:34.199 back late McKinley like, how do you process the magnitude 0:18:34.280 --> 0:18:36.200 change in tariffs? 0:18:36.240 --> 0:18:38.879 Well, sure, and we haven't seen we haven't seen trade 0:18:38.880 --> 0:18:41.920 policy like this in a very long time. I think 0:18:42.080 --> 0:18:45.200 right now I would say the economy's shown good resilience 0:18:45.640 --> 0:18:48.480 so far, both both in the labor market and on 0:18:48.520 --> 0:18:52.159 the GDP side. But I think anyone who pretends to 0:18:52.160 --> 0:18:55.639 have a precise model or estimate. But I think importantly 0:18:55.720 --> 0:18:58.320 what's going on here, Tom is you know that the 0:18:58.359 --> 0:19:01.600 Trump folks are really trying to change the trading regime, 0:19:01.960 --> 0:19:05.080 and it's early days in that, but I think that's 0:19:05.080 --> 0:19:07.639 an important part of the story as well. 0:19:08.520 --> 0:19:14.280 So, Richard, we had two FED Board governors dissented yesterday. 0:19:13.880 --> 0:19:16.399 Both very good friends of mine and former colleagues. 0:19:16.480 --> 0:19:19.359 So I FED people tell me that's kind of something 0:19:19.400 --> 0:19:20.439 we should pay attention to that. 0:19:20.480 --> 0:19:21.320 What did you make of it? 0:19:21.320 --> 0:19:24.520 It's the first time I think in thirty plus years 0:19:24.640 --> 0:19:30.720 that two governors have dissented. Reserve Bank presidents dissent more 0:19:30.760 --> 0:19:36.159 and more frequently. Both Chris Waller and Mickey Bowman, I 0:19:36.200 --> 0:19:39.240 think before the meeting indicated that that was going to 0:19:39.280 --> 0:19:42.000 be their preference, and I think that I'm sure they 0:19:42.000 --> 0:19:45.040 came into the meeting with sound and reasonable arguments for 0:19:45.200 --> 0:19:48.359 beginning rate cuts right now. We'll probably hear from them 0:19:48.359 --> 0:19:51.160 after the blackout is over as well. But share Powell 0:19:51.200 --> 0:19:54.320 also acknowledged that he thought it was a good discussion 0:19:54.840 --> 0:19:56.320 at the committee. 0:19:55.720 --> 0:19:59.399 Do they negotiate descents like if there's someone who's the 0:19:59.480 --> 0:20:02.080 third descent? Did they say, now you can wait to 0:20:02.240 --> 0:20:04.720 the next meeting. Come on, you know, not at the 0:20:04.760 --> 0:20:08.040 table in the Eckles building. Wait the tables under construction 0:20:08.240 --> 0:20:12.040 fore right now? But is there a discussion within the 0:20:12.119 --> 0:20:16.840 propriety of American we're all on the same page economics 0:20:17.080 --> 0:20:19.959 that we almost negotiate who and who does not dissent? 0:20:21.400 --> 0:20:24.200 I wouldn't, I wouldn't call the negotiation. What does happen? 0:20:24.240 --> 0:20:27.400 And I think this happened under Bernanki and yelling as well. 0:20:27.400 --> 0:20:29.800 But certainly during my time at the Palfeed, the chair 0:20:30.240 --> 0:20:35.320 before each meeting had individual conversations with all all eighteen people. 0:20:35.400 --> 0:20:38.440 Interesting and so there's there. You know, no one gets 0:20:38.440 --> 0:20:41.760 blindsided going into the meeting about about the views on 0:20:41.800 --> 0:20:42.760 the on the outlooks. 0:20:42.960 --> 0:20:45.240 This is original. This goes back to Larry Myers and 0:20:45.280 --> 0:20:49.040 Green spent in that meeting. Is it a courtesy that 0:20:49.119 --> 0:20:51.480 you tell the chairman where you're heading? 0:20:53.920 --> 0:20:55.639 Again, those conversations were typically by the. 0:20:56.480 --> 0:21:01.240 Share really unhappy and showed ups today. No, no, no. 0:21:01.960 --> 0:21:06.320 The During my time there, the chair did have individual 0:21:06.359 --> 0:21:10.200 conversations with all eighteen folks. Obviously they were nineteen total, 0:21:11.240 --> 0:21:14.680 and the purpose of those conversations was so that both 0:21:14.720 --> 0:21:17.960 sides had a sense of where policy makers were heading 0:21:18.080 --> 0:21:20.320 going into the meeting, and then during the meeting, which 0:21:20.359 --> 0:21:22.800 go on for a day and a half. Sometimes minds 0:21:22.880 --> 0:21:25.400 change as well during the meeting, but at least going 0:21:25.440 --> 0:21:27.960 into the meeting, people all have a sense of where 0:21:28.000 --> 0:21:29.240 other folks are. 0:21:29.480 --> 0:21:31.160 I tell you what's changed this in the last couple 0:21:31.200 --> 0:21:35.080 of days, Richard is. I think after yesterday's discussion, the 0:21:35.119 --> 0:21:37.359 market's kind of pulling back a little bit on the 0:21:37.400 --> 0:21:41.800 two rate cuts this year. I don't know before between 0:21:41.840 --> 0:21:43.840 now in September, the Fed's going to get some more 0:21:43.840 --> 0:21:46.760 inflation data. They're going to get some more labor market data. 0:21:46.960 --> 0:21:49.159 Yeah. Are they just going to wait for that? 0:21:49.200 --> 0:21:49.560 I guess. 0:21:49.640 --> 0:21:52.000 I mean that's being data dependent. I guess right. 0:21:53.040 --> 0:21:55.760 The chair indicated that yesterday. I think that that would 0:21:55.840 --> 0:21:59.560 make sense. He'll also have another bite at the communications 0:21:59.560 --> 0:22:04.280 apple to mixed metaphors at Jackson Hole in three weeks 0:22:04.320 --> 0:22:08.480 and not always, but oftentimes the chairs do use Jackson 0:22:08.520 --> 0:22:12.879 Hole as a way to preview the September meeting. So 0:22:12.920 --> 0:22:17.760 perhaps another motivation for the two handed economist. Yesterday from 0:22:17.840 --> 0:22:22.159 Jay Powell is I'll have the stage to himself at 0:22:22.160 --> 0:22:23.159 the end of the month. 0:22:23.080 --> 0:22:24.960 For all of you on your commute across the nation. 0:22:25.080 --> 0:22:29.000 A wonderful treat today within the technology earnings allow Brainer 0:22:29.119 --> 0:22:31.520 scheduled to be with us here later on in this 0:22:31.600 --> 0:22:34.240 half hour, of course, all every work with our central bank, 0:22:34.320 --> 0:22:37.679 and now Richard Clarida with us with Pimco, a former 0:22:37.760 --> 0:22:40.800 vice chairman. I hate torst and Slock because on a 0:22:40.840 --> 0:22:44.760 Wednesday he sends me an email from Apollo Global Management 0:22:45.200 --> 0:22:48.320 with six seven things to read, and usually the top 0:22:48.359 --> 0:22:51.200 ones are a little light quick reads. Here's what he 0:22:51.320 --> 0:22:58.000 sends today. Clarida post pandemic, global inflation, disinflation and central 0:22:58.040 --> 0:23:01.280 Bank policy responses, goes on, It's like a movie. It's 0:23:01.280 --> 0:23:04.000 got a British movie. It's got a long title. Yeah, 0:23:04.280 --> 0:23:07.800 Nber a paper you just published with your thoughts on 0:23:07.960 --> 0:23:11.359 twenty one and twenty two. Take this important paper that 0:23:11.400 --> 0:23:15.560 Torsten Slock mentions and bring it forward to present day 0:23:15.800 --> 0:23:16.679 policy making. 0:23:17.400 --> 0:23:21.600 I'll give you the quick elevator version. Please, global surgeon inflation, 0:23:23.040 --> 0:23:26.040 Where did it come from? How do we think about it? 0:23:26.040 --> 0:23:28.440 And what are the lessons learned, and the basic point 0:23:28.480 --> 0:23:30.639 of that paper is essentially to summarize a lot of 0:23:31.119 --> 0:23:33.480 sort of one stop shopping. If you don't read fifty papers, 0:23:33.520 --> 0:23:35.240 you can read my summary of the papers. And the 0:23:35.280 --> 0:23:38.879 basic story is the inflation came from three factors. A 0:23:38.960 --> 0:23:41.840 once in a century pandemic which led to a shock 0:23:41.880 --> 0:23:47.320 to supply, triggered a fiscal and monetary policy response, and 0:23:47.320 --> 0:23:48.879 then on top of that, of course, you had the 0:23:48.960 --> 0:23:55.080 Russian invasion of Ukraine. Policy reacted right, rates, inflation came down, 0:23:55.480 --> 0:23:58.159 central banks were confident enough to cut rates. So I 0:23:58.160 --> 0:24:01.000 think the lessons learned to me is once in a 0:24:01.080 --> 0:24:05.000 century pandemic shocks are very challenging for policy, and on 0:24:05.040 --> 0:24:08.159 the other side of it, inflation expectations are anchored. And 0:24:09.160 --> 0:24:09.880 that's where we are. 0:24:10.000 --> 0:24:12.480 Peter Orzag at Lazard Now I'm in a shop at 0:24:12.560 --> 0:24:16.400 Lazard and also working and Brookings really emphasize the supply 0:24:16.560 --> 0:24:19.800 side shocks that we had. Are we there now? Is 0:24:20.160 --> 0:24:25.800 the tariff uncertainty now one big supply side shock. I mean, 0:24:25.800 --> 0:24:29.240 witness copper, biggest drop for years that yesterday. Sure. 0:24:29.320 --> 0:24:33.320 The other thing I'd like to emphasize as well is 0:24:33.480 --> 0:24:34.720 the unemployment rate is low. 0:24:34.760 --> 0:24:35.600 And that is great. 0:24:35.880 --> 0:24:39.720 It's at a very low historical level, but there's still 0:24:39.840 --> 0:24:42.119 room for the labor market to expand. In terms of 0:24:42.200 --> 0:24:45.800