WEBVTT - Eric Rosengren Previews CPI Report

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

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<v Speaker 2>So here's the licest this morning, All eyes on tomorrow's

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<v Speaker 2>CPI print, the first major day to release in weeks,

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<v Speaker 2>expected to show inflationary precious mounting on the economy. The

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<v Speaker 2>former Boston Fed president Eric Rosenngrant has seen it all.

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<v Speaker 2>He joins us now for more. Eric, welcome back to

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<v Speaker 2>the program sir, What are you anticipating to see? What

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<v Speaker 2>do you expect to see tomorrow morning at a thirty

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<v Speaker 2>easton time?

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<v Speaker 1>Expecting to see that both the CPI and the core

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<v Speaker 1>CPI are at three point one percent. So for the

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<v Speaker 1>overall CPI it was at two point nine percent before.

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<v Speaker 1>That's a bit of an increase. It partly reflects some

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<v Speaker 1>of the pressures coming from tariffs continuing to flow through

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<v Speaker 1>so goods like apparel, furniture, sporting goods. But it's also

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<v Speaker 1>that we're seeing food prices go up in a variety

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<v Speaker 1>of areas, and I think that indicates that we're not

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<v Speaker 1>getting much progress on inflation. That this report actually is

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<v Speaker 1>going to be a continuation of numbers that are at

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<v Speaker 1>three percent or higher rather than moving down towards two percent.

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<v Speaker 1>So that is a challenge for the FED as it

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<v Speaker 1>tries to weigh how much emphasis to put on inflation

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<v Speaker 1>and how much emphasis to put on what's happening in

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<v Speaker 1>the labor market.

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<v Speaker 2>Well, Eric, let's stay on that theme. Are the sources

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<v Speaker 2>of inflation that this Feder reserve can ignore?

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<v Speaker 1>I don't think it should ignore the labor market, while

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<v Speaker 1>it has been softer, is still fairly close to the

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<v Speaker 1>Fed's estimate of full employment. And in some of the areas,

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<v Speaker 1>both in food prices, we've seen cost of electricity going up.

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<v Speaker 1>Some of those trends I think are something we have

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<v Speaker 1>to keep an eye on. And while there have been

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<v Speaker 1>some negative pressures, for example, shelters come in a little

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<v Speaker 1>bit better, natural gas is likely to come in a

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<v Speaker 1>little bit better. I think the overall pack. I mean,

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<v Speaker 1>we've been above the two percent inflation target for over

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<v Speaker 1>four years, so at some point the FED has to

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<v Speaker 1>start seeing some improvement inflation. So I would not be

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<v Speaker 1>somebody who would view this as because it's partly coming

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<v Speaker 1>from tariffs, that it should be ignored.

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<v Speaker 3>Eric, is a lot of this inflation policy induced?

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<v Speaker 1>Well, I think it is partly policy induced. It's certainly

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<v Speaker 1>fiscal policy induced. So tariffs definitely have an impact on

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<v Speaker 1>what the reported prices are going to be. I would

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<v Speaker 1>also say that the immigration policy is a policy that

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<v Speaker 1>probably means that some of the food prices have gone

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<v Speaker 1>up as labor costs have gone up for people that

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<v Speaker 1>are trying to harvest crops, and fruits and vegetables have

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<v Speaker 1>been an area in particular where we've seen rising prices.

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<v Speaker 1>In terms of monetary policy, I think the question is

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<v Speaker 1>how much of the pressures that we're seeing have been accommodate.

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<v Speaker 1>So the FED thinks it's restrictive, But if you think

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<v Speaker 1>that the economy is more productive and that AI may

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<v Speaker 1>contribute to that productivity, then it's a little unclear that

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<v Speaker 1>we should be going back to the same interest rate

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<v Speaker 1>that we were at prior to the pandemic. So the

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<v Speaker 1>summary of economic projections that the FED puts out is

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<v Speaker 1>assuming that we'll see something FED funds rate in the

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<v Speaker 1>long run closer to three percent. So that would indicate

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<v Speaker 1>a lot more room. But the fact that we've seen

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<v Speaker 1>so little progress on inflation for the last six months

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<v Speaker 1>indicates that you shouldn't be so confident that you know

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<v Speaker 1>exactly what the real interest rate ought to be.

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<v Speaker 3>Well, not only that, the fact of the matter is

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<v Speaker 3>the FED will be sitting down and they won't have

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<v Speaker 3>the labor market report. They're just going to have this

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<v Speaker 3>inflation report. Do you think it's a mistake if the

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<v Speaker 3>Fed cuts interest rates next week?

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<v Speaker 1>I think that given the softness and labor market, I

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<v Speaker 1>can understand a twenty five base point cut. I would

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<v Speaker 1>highlight that while we're getting the CPI report, a lot

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<v Speaker 1>of government workers left their jobs at the end of September,

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<v Speaker 1>and a lot of the source data may not be available,

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<v Speaker 1>So this CPI report probably is going to be using

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<v Speaker 1>more estimated results than normal. It will be interesting if

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<v Speaker 1>the report highlights that this data may not be as reliable,

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<v Speaker 1>which means it could be noisier. And if it's noisier,

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<v Speaker 1>it could be a surprise on the upside or the downside.

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<v Speaker 1>But it just says, as we continue to have pressures

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<v Speaker 1>on statistical organizations having enough people to gather the data,

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<v Speaker 1>that this data may become noisier and harder to rely on.

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<v Speaker 2>Eric forgive the snak, but how reliable was the data

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<v Speaker 2>when we had it?

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<v Speaker 1>Is it? Sorry?

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<v Speaker 2>How reliable was the data when we had it?

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<v Speaker 1>I think the CPI report was a pretty good report.

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<v Speaker 1>So I mean they had significant amount of surveys across

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<v Speaker 1>the country. They have had to cut back over time

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<v Speaker 1>on the amount of survey work that they do. They've

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<v Speaker 1>closed some offices. So I think that over the last

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<v Speaker 1>few years it has deteriorated a little bit. But I

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<v Speaker 1>think if we continue to be cutting back on statistical agencies,

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<v Speaker 1>it'll get more unreliable as we go forward.

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<v Speaker 2>Eric here Jent, thanks for being generous with your time

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<v Speaker 2>this morning. We appreciate it. The former Boston Fed President

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<v Speaker 2>Eric Rosengren