Speaker 1: Good morning.
Speaker 2: I'm Nathan Hager and I'm Karen Moscow. Here are the
Speaker 2: stories we're following today.
Speaker 3: We begin with an appeal to the American people from
Speaker 3: President Biden. As the wars in Israel and Ukraine rage on.
Speaker 3: The President used a rare primetime address from the Oval
Speaker 3: Office to make the case that both conflicts represent parallel
Speaker 3: fights for democracy.
Speaker 4: I know these conflicts can seem far away, and snatch
Speaker 4: will ask why does this matter to America? So let
Speaker 4: me share with you why making sure Israel and Ukraine
Speaker 4: succeed is vital for America's national security. You know, history
Speaker 4: has taught us that when terrorists don't pay a price
Speaker 4: for their terror, when dictators don't pay a price for
Speaker 4: their aggression, they cause more chaos and death and more destruction.
Speaker 4: They keep going, and the cost and the threats to
Speaker 4: America and the world keep rising.
Speaker 3: In his roughly fifteen minute speech, President Biden argue that
Speaker 3: supporting Ukraine and Israel is vital for America's national security.
Speaker 3: The White House now plans of formal request to Congress
Speaker 3: for about one hundred billion dollars in resources for both countries,
Speaker 3: along with Taiwan and the Southern US border.
Speaker 5: Well, Nathan.
Speaker 2: The President's speech comes as tensions heightened in the Middle
Speaker 2: East and Bloomberg's Oliver Crook is covering the war from Tel.
Speaker 6: Aviv and as fears of escalation and spillover mount. We
Speaker 6: should also say Hamas has called for a day of
Speaker 6: rage today across the Islamic world, where last time they
Speaker 6: called for it we saw protesters take to the street,
Speaker 6: really raising the temperatures. Also raising the temperatures of the
Speaker 6: United States, saying that they're seeing more drone attacks and
Speaker 6: their installations in Iraq and Syria, and that they've also
Speaker 6: intercepted fire from Yemen headed towards Israel. There is the
Speaker 6: small matter of a huge country that sits between Yemen
Speaker 6: and Israel, It's called Saudi Arabia, with huge geopolitical influence.
Speaker 2: And Bloomberg's Oliver Crook says the death toll continues to mount.
Speaker 2: More than fourteen hundred people in Israel have been killed.
Speaker 2: The Hamas run Gaza Health Ministry says more than thirty
Speaker 2: seven hundred Palestinians have also been killed.
Speaker 3: Now and Karen will have much more the war ahead.
Speaker 3: But we now turn our attention back here to the US,
Speaker 3: where a search for a Speaker of the House is
Speaker 3: still underway. Round three for Jim Jordan's quest hold the
Speaker 3: gavel is scheduled for this morning.
Speaker 1: In Bloomberg's Edd Baxter has the story.
Speaker 7: More twist and turns to even get to this space.
Speaker 7: Jordan has come off as support of an interim speaker
Speaker 7: after very heated response from his caucus.
Speaker 8: So I'm still running for speaker, and I plan to
Speaker 8: go to the floor and get the votes and win
Speaker 8: this race. But I want to go talk with a
Speaker 8: few of my colleagues, particularly, I want to talk with
Speaker 8: the twenty individuals voted against me.
Speaker 7: Whether that will land him what he needs is a
Speaker 7: big question as it hangs in the wind and delays
Speaker 7: action on aid for Israel or Ukraine. Ed Baxter, Bloomberg Radio.
Speaker 2: All right, Ed, thank you, We turned to the markets now.
Speaker 2: Jay Powell signaling the Fed will stand pat at it's
Speaker 2: November meeting. After speaking at the Economic Club of New York,
Speaker 2: the fetch here told Bloomberg's David Weston the economy is
Speaker 2: doing a good job of handling tighter monetary policy.
Speaker 9: So the evidence of your eyes is that the economy
Speaker 9: is handling much higher rates at least for now without difficulties.
Speaker 9: So notionally, that might tell you that the neutral rate
Speaker 9: has risen, or it may just tell you that we
Speaker 9: haven't had rates high enough for long enough. If we
Speaker 9: have models for everything, we have formulists for everything. Ultimately,
Speaker 9: as a practitioner, we have to focused on what the
Speaker 9: economy is telling us, even taking legs into account, what's
Speaker 9: it telling us?
Speaker 5: Does it feel like policy is too tight right now?
Speaker 5: I would have to say no.
Speaker 9: I think the evidence is not that a policy is
Speaker 9: too tight right now.
Speaker 2: And the Fed chief also said a recent run up
Speaker 2: and long term treasury yields, if they persist, could lessen
Speaker 2: the need for further hikes at the margin. For the
Speaker 2: full conversation with FED chair J Powell, head over to
Speaker 2: our Bloomberg Talks podcast feed, available anywhere you get your podcasts.
Speaker 1: Well, Karen, there was plenty of reaction to Powell's remarks.
Speaker 3: Yields on two your treasuries declined tenure yields paired an
Speaker 3: increase that pushed them near the five percent mark. Former
Speaker 3: New York Fed President Bill Dudley says Powell was pretty
Speaker 3: out the mystic about the economy.
Speaker 10: Basically, you got the impression that he's pretty comfortable with
Speaker 10: the level of rates and the fact that the economy
Speaker 10: is a little stronger than expected, well that's a you know,
Speaker 10: that's a nice problem to have. And the fact that
Speaker 10: boniles are a little higher, well that's actually maybe going
Speaker 10: to help deal with the fact that.
Speaker 5: Growth is a little bit stronger than expected.
Speaker 10: He also implied that he expected growth to slow in
Speaker 10: the fourth quarter going into next year. So yeah, I
Speaker 10: think the Fed's on hold until they see whether the
Speaker 10: economy is slow as much as they anticipate or not.
Speaker 3: Former New York Fed President Bill Dudley is now a
Speaker 3: Bloomberg opinion columnist.
Speaker 2: Well, many on Wall Street think rate hikes are over Nathan.
Speaker 2: In fact, in our latest Bloomberg Monthly survey, economists think
Speaker 2: the Fed is done raising rates, but they also anticipate
Speaker 2: a slower pace of rate cuts next year. The economists
Speaker 2: are also raising their growth projections and reducing their odds
Speaker 2: of a recession.
Speaker 1: There's also some optimism on the auto strike. This morning.
Speaker 3: Karen, a top union negotiator, says General Motors and the
Speaker 3: United Auto Workers are moving toward a tentative agreement that
Speaker 3: would put an end to a major strike that has
Speaker 3: dragged on for more than a month. GM, along with
Speaker 3: rivals Ford and Stillantis, have been trying to cut a
Speaker 3: deal to end a walk out that started September fifteenth.
Speaker 3: A GM spokesperson declined to comment.
Speaker 2: Another corporate news Nathan, more job cuts may be on
Speaker 2: the way at UBS. The Financial News is reporting the
Speaker 2: Swiss bank is poised to target about ten percent of
Speaker 2: its support staff at credit Sueeze. UBS is taking over
Speaker 2: its longtime Swiss rival and a government orchestrated deal and
Speaker 2: pairing a combined workforce that swelled to about one hundred
Speaker 2: and twenty thousand.
Speaker 3: Let's get you updated on the Sam Bankman freed Trialcaren.
Speaker 3: The third week ended with the testimony of FTX former
Speaker 3: general counsel can Son, who told the court he resigned
Speaker 3: after finding a massive hole in ftx's balance sheet. The
Speaker 3: trial will now take a week long break. It's due
Speaker 3: to resume October twenty sixth.
Speaker 1: Sorry, Nathan.
Speaker 2: Thanks. It's time now for a look at some of
Speaker 2: the other stories making news around the world. For that,
Speaker 2: we're joined by Bloomberg's John Tucker, John Good Morning, and.
Speaker 11: Karen the Pentagonist reaffirming that Israel was not behind that
Speaker 11: deadly rocket strike on a how but in Ganza this week,
Speaker 11: Rerigadier General pat Ryder says the US is using its
Speaker 11: own information to make the determination.
Speaker 12: It is our assessment that Israel was not responsible for
Speaker 12: that explosion. We're continuing to assess that. Initial indications are
Speaker 12: that this was from an errant rocket that was launched
Speaker 12: by the Palestinian Islamic Jahad.
Speaker 11: Hundreds were killed in the attack. The president of New
Speaker 11: York based private equity giant Blackstone, John Gray, says he
Speaker 11: remains committed to funding low income students and cancer research
Speaker 11: at the University of Pennsylvania, while acknowledging concerns over anti
Speaker 11: Sabbitic speech on campus.
Speaker 13: Some of my colleagues in the financial field and more
Speaker 13: broadly have raised some really legitimate concerns about hate speech
Speaker 13: masquerading as free speech in the context of anti Semitism
Speaker 13: on college campuses at penn and other places.
Speaker 11: Jan has bet the center of controversy at her high
Speaker 11: profile alum demanded that the president and board chair stepped down.
Speaker 11: A Maryland Circuit Court judge was fatally shot in the
Speaker 11: driveway of his home last night. Circuit Court Judge Andrew
Speaker 11: Wilkinson was found with the parent gunshot wounds around eight pm.
Speaker 11: He was taken from his home in Hagerstown Demeritis Medical Center,
Speaker 11: where he died of his injuries. The Sheriff's office investigating
Speaker 11: the fatal shooting. That Army private, who fled to North
Speaker 11: Korea before being returned home to the US last month,
Speaker 11: has now been detained by the US military and is
Speaker 11: facing charges including desertion and possessing sexual images of a child.
Speaker 11: The accounts against Private Travis king Or detailed in a
Speaker 11: charging document CVS. Calling some of the most common decongestions
Speaker 11: off the store shelves, An advisory panel at the FDA
Speaker 11: declared that the common ingredient in cold medicines, fenel efrine,
Speaker 11: does not work. It's supposed to be the decongested and
Speaker 11: cold medications. It's in some of the most known and
Speaker 11: widely used cold medications. Global news twenty four hours a day,
Speaker 11: wherever you want it with Bloomberg News.
Speaker 1: Now.
Speaker 11: I'm John Tucker and this is Bloomberg Karen.
Speaker 2: All right, John, thank you well. We do bring you
Speaker 2: news throughout the day here on Bloomberg Radio. But now,
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Speaker 2: Get informed on your schedule. You can listen and subscribe
Speaker 2: to Bloomberg News Now on the Bloomberg Business app, Bloomberg
Speaker 2: dot com, plus Apple, Spotify, and anywhere else you get
Speaker 2: your podcasts. It is time now for the Bloomberg Sports updates,
Speaker 2: and here's John Stash Hour John.
Speaker 1: Karn Thursday Night Football.
Speaker 14: To kick off Week seven, the Jaguars in New Orleans
Speaker 14: to face the Saints. Jacksonville jumped in front twenty four
Speaker 14: to nine. Travis Etn scored twice. The Jags had a
Speaker 14: pick six back came the Saints to tie the game.
Speaker 14: Jacksonville ball just over three minutes left.
Speaker 15: Jock you going empty backfield for driver three right two
Speaker 15: Lefty drops look, checks it down underneath. That's a cross
Speaker 15: round to Christin Karkcurty twenty five, twenty fifty ten. Christian
Speaker 15: Kirk pull one touchdown Jacksonville, but crossing route to Christian Kirk.
Speaker 14: Tags Radio had it and they beat the Saints thirty
Speaker 14: one to twenty four. Jacksonville's now won four games in
Speaker 14: a row at five and two it's their best start
Speaker 14: since two thousand and seven. Jimmy Garoppolo is not going
Speaker 14: to play for the Raiders Sunday against Chicago. He's got
Speaker 14: a back injury, and the Bears are expected to be
Speaker 14: without justin fields. Not knowing if the Raiders will go
Speaker 14: with the veteran Brian Hoyer or the rookie Aidan O'Connell.
Speaker 14: Sean Watson may play Sunday for Cleveland. He missed last
Speaker 14: week's game with a shoulder injury. Baseball Playoffs, the Arizona
Speaker 14: Diamondbacks top the Phillies two to one, and the con
Speaker 14: Tell Marte hit bottom of the ninth to eighty his
Speaker 14: hurt third hit of the game as the d Backs
Speaker 14: take a lead in the series for the first time,
Speaker 14: but the Phillies are still up two games to one
Speaker 14: with Game four tonight in Phoenix. All Astros in Texas
Speaker 14: taking Game four ten to three. Jose Abrad who had
Speaker 14: a big three run homer, Chas McCormick at two run
Speaker 14: shot for Jose al two by three hits three runs.
Speaker 14: That series is now tie to two heading into today's
Speaker 14: Game five, justin Berland are against Jordan mcgommery, John Stashy.
Speaker 1: I were Bloomberg.
Speaker 16: Sports from coast to coast, from New York to San Francisco,
Speaker 16: Boston to Washington, DC, nationwide on Syrias exam the Bloomberg
Speaker 16: Business app in Bloomberg dot Com. This is Bloomberg Daybreak.
Speaker 16: Good morning, I'm Nathan Hager. On day fourteen of war
Speaker 16: between Israel and Hamas. There are new concerns about a
Speaker 16: wider conflict, with US bases in Iraq and Syria experiencing
Speaker 16: attacks at runback groups and Yemen trying to fire missiles
Speaker 16: at Israel. All as President Biden defense continued US support
Speaker 16: for Israel and Ukraine in a direct appeal to the
Speaker 16: American people.
Speaker 4: I'm awesome food and represent different threats, but they share
Speaker 4: this in common. They both want to completely annihilate in
Speaker 4: neighboring democracy.
Speaker 3: Completely annihilated, President Biden speaking. They're in a rare Oval
Speaker 3: office address this morning. We're joined by a team of reporters.
Speaker 3: Bloomberg's news director for Europe, the Least and Africa, Roslind
Speaker 3: Matheson is with us, along with Bloomberg's Oliver Crook in
Speaker 3: Tel Aviv.
Speaker 1: Good morning to you both.
Speaker 3: I want to start with you Oliver for just to
Speaker 3: get the latest on what's been happening overnight in the
Speaker 3: war between Israel and Hamas.
Speaker 17: So some of the context we should give for Friday
Speaker 17: today is another day of rage that has been called
Speaker 17: by Hamas. So this is sort of protests across the
Speaker 17: Islamic world, is what they called for last week. We
Speaker 17: saw this, you know, thousands took to the streets. And
Speaker 17: it comes as the IDEF continues to strike targets in Gaza,
Speaker 17: continues to strike targets in Lebanon. It has not sort
Speaker 17: of escalated dramatically on the border of Lebanon, but there
Speaker 17: are still skirmishes there. There are more civilians evacuating from
Speaker 17: the north, and as you mentioned, the US saying that
Speaker 17: seeing some of their installations coming under more attack in
Speaker 17: Iraq and Syria. And also these missiles apparently intercepted by
Speaker 17: the US Navy fired from Yemen. And there's a small
Speaker 17: matter of a big country of huge influence in the
Speaker 17: region that sits between Yemen and Israel, and that is
Speaker 17: Saudi Arabia, And that'll push us forward to a summit
Speaker 17: that we understand will be held tomorrow in Egypt, where
Speaker 17: again there's a lot of information on the flying around,
Speaker 17: and according to people familiar that we have that the
Speaker 17: Crown prints will be at that meeting, along with President Erdawan,
Speaker 17: the King of Jordan, and some representative from Western and
Speaker 17: European countries as well, to discuss peace in Caira.
Speaker 3: There has been a real difficulty getting the Arab world
Speaker 3: more involved in what's happening here to try to keep
Speaker 3: this conflict contained. Rosalind matheson what's your assessment of how
Speaker 3: diplomacy is going at this point.
Speaker 18: Well, certainly, we do know there's a lot of conversation
Speaker 18: going on, as Oliver was just pointing out, although how
Speaker 18: you have a peace summit without Israel is slightly tricky
Speaker 18: given there at they're a key player in the conflict.
Speaker 5: Obviously with Hamas.
Speaker 18: We do know that there is an endless parade of
Speaker 18: officials from Europe and elsewhere into the region. We do
Speaker 18: know that also the Arab's talking to each other. A
Speaker 18: very important thing to note this morning is that we're
Speaker 18: hearing that the leaders of Saudi Arabia and the UAE
Speaker 18: are holding a meeting. That's their first public meeting that
Speaker 18: we know of in three years in real and that's
Speaker 18: a very significant mood, because that shows perhaps a desire
Speaker 18: on the part of these key powerbrokers in the region
Speaker 18: to work together to limit the possibility of contagion from
Speaker 18: this conflict. We do know that some of these states
Speaker 18: are under pressure from their own people who angry what
Speaker 18: they sees the treatment of people inside Gaza. But equally,
Speaker 18: the leaders of these countries have been working delicately and
Speaker 18: carefully towards sort of improving ties with Israel and certainly
Speaker 18: sort of keeping a greater calm across the region, promoting
Speaker 18: economic and trade their economies and trade and investment. So
Speaker 18: they've got an interest in doing that. So that's one
Speaker 18: meeting that's happening this morning. It's very much when we
Speaker 18: should pay attention to.
Speaker 3: As we await the comments from Arab leaders. Alie, we
Speaker 3: did hear from President Biden last night from the Oval
Speaker 3: Office defending continued US support for Israel as well as
Speaker 3: Ukraine and other global conflict points around the world. How
Speaker 3: is that message from the President being re in Israel?
Speaker 17: I mean, I think it's received positively in Israel. He
Speaker 17: echoed many of the things that he said when he
Speaker 17: was here in Tel Aviv just a few days ago.
Speaker 17: But I think that the tougher cell and the cell
Speaker 17: that is more important for Israelis is how is this
Speaker 17: going to go down with the American people? And this
Speaker 17: is a question that Biden asked openly. Why should the Americans?
Speaker 17: Why does this matter to the American people? And this
Speaker 17: is where he was saying that basically terrorism and dictatorship
Speaker 17: here talking about Hamas and Putin need to pay the price,
Speaker 17: otherwise there will be more death, more destruction, and it
Speaker 17: is in the national security interests of the United States.
Speaker 17: And he does this appeal to the people of the
Speaker 17: United States because he's going to ask for a lot
Speaker 17: of money. We understand sixty billion dollars of that is
Speaker 17: for Ukraine and fourteen billion is for Israeli defense, but
Speaker 17: also another ten for humanitarian efforts, including Gaza. And again
Speaker 17: he warned Israel in this speech, as he's done repeatedly,
Speaker 17: evoking nine to eleven, saying the US sought revenge, they
Speaker 17: got justice, but they should not be blinded by rage
Speaker 17: because they made mistakes.
Speaker 1: What is the risk that this spills over more widely.
Speaker 18: Well, that really depends on a ground war if or
Speaker 18: when it starts. It certainly seems that is Israel's intent
Speaker 18: still to go into Gaza and what that looks like.
Speaker 18: We do know that there's been some discussion, including from
Speaker 18: the US, about perhaps helping frame that. Would it be
Speaker 18: a more targeted incursion than a full scale war and
Speaker 18: a lot will depend on that, quite frankly, but also
Speaker 18: the unknowns of Iran and does Iran just say we
Speaker 18: can't sit by, We need to do something. The risk
Speaker 18: has to be high, and that's why you're seeing that
Speaker 18: level of diplomacy in the region to try and avert it.
Speaker 3: Rosalind Matheson and Oliver Crook of Bloomberg News team coverage
Speaker 3: as the war between Israel and Hamas extends Intoday fourteen,
Speaker 3: Olie Roz, thanks to you both for being with us
Speaker 3: this morning. Now we want to turn from geopolitics to
Speaker 3: the US economy. We did hear from Federal Reserve Chairman
Speaker 3: Jerome Powell at the Economic Club of New York giving
Speaker 3: a speech followed by a conversation with bloom David Weston.
Speaker 1: Let's go to part of that discussion.
Speaker 19: Now, are you surprised at how resilient the United States
Speaker 19: economiation across the board. It seems like a very strong
Speaker 19: economy despite all you've done to try to slow it down.
Speaker 9: Yes, so we certainly have a very resilient economy on
Speaker 9: our hands. We've got the economy growing strongly. If you
Speaker 9: think back a year, many forecasts called for the US
Speaker 9: economy economy to be in recession this year.
Speaker 5: Not only has that.
Speaker 9: Not happened, growth is now running for this year above
Speaker 9: its longer run trend. So that's been a surprise, driven
Speaker 9: largely by consumer spending, driven by a very strong job
Speaker 9: market with people getting jobs with high first time nominal wages,
Speaker 9: and that as inflation has come down real wages, which
Speaker 9: is spurring spending. And we've also had inflation coming down,
Speaker 9: so you know that's it really is a story of
Speaker 9: much stronger demand. There may also be there may be
Speaker 9: some ways in which the economy is less affected by
Speaker 9: interest rates. It's hard to know precisely, but for example, companies,
Speaker 9: many companies, any company with bond market access will have
Speaker 9: termed out its debt right and therefore may not be
Speaker 9: feeling the effects of higher rates. The same may be
Speaker 9: true of homeowners who have a long term, fixed rate,
Speaker 9: low rate mortgage, who then are therefore not because it's
Speaker 9: not an adjustable rate or a higher rate, they're not
Speaker 9: feeling that increase in rates, so the economy may be
Speaker 9: somewhat less susceptible to the effects.
Speaker 5: Of rate increases.
Speaker 9: On the other hand, if you look at look at
Speaker 9: interra sensitive spending, these are very much the places where
Speaker 9: we see where we expect to see and do see effects.
Speaker 9: So for example, in housing or in you know, the
Speaker 9: housing effector has been sector.
Speaker 5: Has been very affected by higher rates, as purchases of
Speaker 5: durable goods.
Speaker 9: If you look at surveys, people will not say that
Speaker 9: it's a good time to buy a car or a house.
Speaker 5: Quite the contrary.
Speaker 9: So we see policy working through its usual channels. It
Speaker 9: may just be that rates haven't been high enough for
Speaker 9: long enough. And again it's all happening in the context
Speaker 9: of a very strong demand.
Speaker 5: We've had other speculators.
Speaker 19: Maybe the terming out of debt, as you say, both
Speaker 19: corporate debt and hustle debt, may diminish the effectiveness of
Speaker 19: rate hikes. Do you have a view of whether that's true,
Speaker 19: And if it is true, what does it say about
Speaker 19: mantre plus. Does it mean you have to go farther
Speaker 19: in the rate hikes or do you just not have
Speaker 19: the power to affect it.
Speaker 9: So no, I don't think that there's a fundamental shift
Speaker 9: in the way that interest rates affect the economy. There
Speaker 9: may be some differences in this cycle because of what
Speaker 9: I mentioned. As I mentioned, we are seeing those are
Speaker 9: the effects where we expect to see them, which is
Speaker 9: interrasensitive spending, and also asset prices to some extent in
Speaker 9: the exchange rate, which you're also seeing a strong exchange rate,
Speaker 9: which is disinflationary. So I don't think there's a fundamental
Speaker 9: change in the way monetary policy affects the economy. And
Speaker 9: again it goes back to just very strong demand. We
Speaker 9: take the economy as it is, We take fiscal power
Speaker 9: and the economy and all the things we don't control,
Speaker 9: they come to us, and we conduct policy always to
Speaker 9: achieve maximum employment and stable prices. So we just take
Speaker 9: what comes the fact that we have a strong, growing economy,
Speaker 9: a strong growing labor market, and you know, inflation coming down.
Speaker 9: These are the elements that we want to see that
Speaker 9: to achieve the outcome we want. It may take more time,
Speaker 9: but ultimately those that's this is the kind of thing
Speaker 9: you would want to see along the path to getting
Speaker 9: through this without a big increase in unemployment?
Speaker 19: How much effect thus far has the FED had. We
Speaker 19: all have memorized how long and variable legs? How long
Speaker 19: and how variable? And where are you in that process?
Speaker 19: Are you at the twenty five percent point the fifercent
Speaker 19: in terms of seeing it in the effect in the
Speaker 19: real economy.
Speaker 5: So there's there's no precision in our understanding of how
Speaker 5: long legs are.
Speaker 9: One thing that has changed in the modern era is
Speaker 9: that markets now, over the course of the last thirty years,
Speaker 9: central banks have decided, instead of being secretive, to be
Speaker 9: very transparent. And what that has meant is that markets
Speaker 9: move actually well in anticipation, well before our policy moves.
Speaker 9: So the transmission from policy moves to financial conditions actually
Speaker 9: happens before the moves now, whereas that was not the
Speaker 9: case fifty years ago when Milton Friedman coined the phrase
Speaker 9: along and variable legs. But now you have financial conditions
Speaker 9: changing and the questions how does it affect the economy?
Speaker 9: The standard channels are asset prices and such intersensitive spending
Speaker 9: in the exchange rate, for example. And again we do
Speaker 9: see that happening, just not as fast as we would like.
Speaker 9: And I would attribute some of that to just stronger demand.
Speaker 9: Household savings were turned out to be higher. Household spending
Speaker 9: has been stronger, and that's by far.
Speaker 5: The largest part of the economy.
Speaker 19: In order to conduct monetary policy effectively, do you need
Speaker 19: at least hypothesis about how much already hit the economy,
Speaker 19: because it's hard to know how much more you need
Speaker 19: to do if you don't know how far you've come.
Speaker 9: So on legs, I think if you think back, it's
Speaker 9: been a year now since the last seventy five basis
Speaker 9: point hike we did. It was the November meeting in
Speaker 9: twenty twenty two. The first one was in June, so
Speaker 9: it's more than a year, so we should be seeing
Speaker 9: the effects. By the way, they don't all just arrive
Speaker 9: on one day. They arrive and then they're thought to
Speaker 9: peak and then to diminish. So there's a lot of
Speaker 9: uncertainty around lags, and one of the reasons why we
Speaker 9: have slowed down significantly this year is to give monetary
Speaker 9: policy time to work. The truth is, though you can
Speaker 9: find academic support for different different speeds and duration of lags,
Speaker 9: so we have to use our eyes and a little
Speaker 9: bit of risk management. In patients in slowing down the
Speaker 9: pace to make sure that we are seeing the full effects.
Speaker 9: And I think again that's part of why we've slowed
Speaker 9: down this year. We went very quickly in twenty twenty
Speaker 9: two to catch up to where we need to be,
Speaker 9: and now we're moving carefully with these decisions.
Speaker 19: So when you spoke back in August of twenty twenty
Speaker 19: and sort of laid out the revisions to the framework
Speaker 19: as it were, you said that in terms of anticipated growth,
Speaker 19: the sort of consensus have gone from something like two
Speaker 19: point five to one point eight percent. I think we're
Speaker 19: the numbers you laid out of that.
Speaker 5: Where are you now? Where's the FED? Where are you?
Speaker 19: And what you think? Basically?
Speaker 5: The long run growth is.
Speaker 9: Long run potential growth is not something that moves around
Speaker 9: a lot over time. But I would my own guess
Speaker 9: is it's around two percent. I think that the standard
Speaker 9: mainstream view would be a little bit below two percent,
Speaker 9: but I would just say two percent real growth over time.
Speaker 9: And you know what causes growth is you know, growth
Speaker 9: in hours worked plus growth in productivity.
Speaker 5: Growth in hours worked is.
Speaker 9: A function of population growth in the long run and
Speaker 9: also labor force participation. Many things affect productivity but if
Speaker 9: you if you drop in reasonable standard longer term estimates
Speaker 9: of hours work growth and productivity, which is just out
Speaker 9: put per hour productivity growth, you get something around two percent,
Speaker 9: and that's higher than most other advanced economies.
Speaker 19: As you look at it, do you see historical precedents
Speaker 19: for having growing economy with high rates over a long
Speaker 19: period of time, I mean as you look back, I
Speaker 19: mean like the late nineties, for example. What analogies do
Speaker 19: you draw as you try to determine what this might
Speaker 19: be doing at the economy with a longer term.
Speaker 9: So that's really a question about what the level of
Speaker 9: rates will be going for what the neutral level will be,
Speaker 9: And I think it's very hard to know confidently what
Speaker 9: the answer to that will be in five years. Some
Speaker 9: of the reasons why rates were low for the last
Speaker 9: twenty five years were just the aging of the global
Speaker 9: population and globalization, and so lots of savings and relatively
Speaker 9: with an aging population, savings greater than investment, so rates
Speaker 9: are lower and productivity was low. So all of those
Speaker 9: led to low interest rates. So what has changed with
Speaker 9: the pandemic. You might see less effect from globalization, certainly
Speaker 9: demographics that the aging of the global population is not changed.
Speaker 9: I mean, this is a discussion we're having on an
Speaker 9: ongoing basis. It doesn't really affect current policy. But where
Speaker 9: will rates settle out? What will be at a normal rate?
Speaker 9: So if a typical FED tightening cycle would leave you
Speaker 9: at five or six percent, and this is in the
Speaker 9: before the pandemic and before this the low inflation period,
Speaker 9: you would have had had FED rates in four or
Speaker 9: five percent or even higher. Frequently are we going back
Speaker 9: to that?
Speaker 5: I really don't know.
Speaker 9: I wouldn't want to speculate. I mean, my guess is
Speaker 9: it'll be somewhere in the middle.
Speaker 5: But I don't know.
Speaker 9: I mean, I think we can say this now, the
Speaker 9: effective lower bound is not an issue.
Speaker 5: You know, we were very concerned about that.
Speaker 9: Right now we're very far from the effective lower bound
Speaker 9: and the economy's handling it just fine. But that's you know,
Speaker 9: that's because we're at a time of really elevated demand
Speaker 9: coming out of the pandemic. As we reopened with fiscal
Speaker 9: stimulus and monetary stimulus. We have very strong deman in
Speaker 9: the United States. Hard to know what the economy will
Speaker 9: want in the way of interest rates when when five
Speaker 9: years from now, in all of the effects of the
Speaker 9: pandemic are behind us.
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