WEBVTT - Plosser on Fed: Data Reliance Fluctuates, No Strategy (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleventh Rio to Washington,

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<v Speaker 1>d C. Bloomberg to Boston, Bloomberg twelve hundred to San Francisco,

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<v Speaker 1>Bloomberg nine to the country, Jam General one and around

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<v Speaker 1>the globe the Bloomberg Radio plus SAP and Bloomberg got gone.

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<v Speaker 1>This is taking Stock. I'm Kathleen Hayes long pim Fox,

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<v Speaker 1>a special edition of Taking Stock. As we look at

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<v Speaker 1>the Federal Reserves, a decision is decision to hold his

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<v Speaker 1>key rate steady and send a message to the market said, well,

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<v Speaker 1>it may be less worried about the economy, that doesn't

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<v Speaker 1>mean it's ready to send a signal yet that it's

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<v Speaker 1>ready to hike than pim Now we're gonna have more

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<v Speaker 1>with Charles Plosser, former president of the Philadelphia Federal Reserve.

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<v Speaker 1>Also coming up, we've got earnings from Alphabet, the parent

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<v Speaker 1>company of Google, as well as Facebook, am Chin and

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<v Speaker 1>Whole Foods. Right now, that's got to Charlie Pellet in

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<v Speaker 1>the Bloomberg News from for Bloomberg Business Plan. I thank

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<v Speaker 1>you very much, pim Fox. Thank you, Kathleen Hayes. Let's

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<v Speaker 1>begin with stock quotes there on Alphabet parent of Google

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<v Speaker 1>up seven tenths of one percent, seven forty three seventy

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<v Speaker 1>four right now on alphabet Facebook half of the ball

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<v Speaker 1>is tim mentioned up one point four percent, gaining a

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<v Speaker 1>dollar seventy two one right now on shares of Facebook.

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<v Speaker 1>While we're talking about earnings in the Bay Air Hill,

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<v Speaker 1>let's talk about Apple surging seven point three percent, up

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<v Speaker 1>seven oh seven right now one oh three seventy three

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<v Speaker 1>on Apple. But the other big story, Twitter, it is

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<v Speaker 1>plunging fourteen point two percent, down two sixty two to

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<v Speaker 1>fifteen dollars and eighty three cents. Today's big story. We've

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<v Speaker 1>got the Federal Reserve. It does see diminished economy risks,

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<v Speaker 1>Stock showing a little reaction right now the f SMP

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<v Speaker 1>five hundred index climbing a point to seventy, a gain

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<v Speaker 1>of less than point one percent. The Fed leaving interest

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<v Speaker 1>rates unchanged, while saying risks to the U S economy

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<v Speaker 1>have subsided. On the labored market is getting tighter, suggesting

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<v Speaker 1>conditions are getting more favorable for an increase in borrowing costs.

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<v Speaker 1>Arianna Coach Lacorda is a Bloomberg View columnist former FED official.

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<v Speaker 1>He is now at the University of Rochester, and he

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<v Speaker 1>was interviewed reacting to today's FED decision on Bloomberg Radio

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<v Speaker 1>and Television. I think the big challenge with the FED

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<v Speaker 1>is that you're not It's not just about your what

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<v Speaker 1>we were with the central Bankers like to call your

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<v Speaker 1>modal outlook where you expect the economy to go. It's

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<v Speaker 1>about the risk that outlook, and in particular, you're really

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<v Speaker 1>worried about the downside risk that outlook because you don't

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<v Speaker 1>have as many tools in your your kid to offset

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<v Speaker 1>those those downside risks. P five hundred indecks off a point,

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<v Speaker 1>a little change. Their gold up one to thirteen thirty

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<v Speaker 1>seventy ounce. Now the other stories making news. Thank you,

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<v Speaker 1>Charlie from the Bloomberg Newsroom. I'm Jill Schneider. This news

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<v Speaker 1>update is brought to you by the Jeep Grand Cherokee,

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<v Speaker 1>by four capability. Drive one your local Jeep dealer. Today,

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<v Speaker 1>Republican presidential nominee Donald Trump lashed out at President Obama

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<v Speaker 1>at a press conference in Florida today. I think President

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<v Speaker 1>Obama has been the most ignorant president in our history.

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<v Speaker 1>His views of the world, as he says, don't jive,

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<v Speaker 1>and the world is a mess. Vice President Joe Biden

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<v Speaker 1>spoke to ABC News today about why so many middle

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<v Speaker 1>class Americans are supporting Donald Trump for president. Very successful

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<v Speaker 1>on playing on their fears and there's not been enough

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<v Speaker 1>focus on playing on their hopes. Biden will speak at

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<v Speaker 1>the Democratic National Convention tonight, as will President Obama. President

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<v Speaker 1>Ronald Reagan's daughter is criticizing a judge's decision to allow

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<v Speaker 1>the release of John Hinckley Jr. From a psychiatric hospital

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<v Speaker 1>where he has been confined for more than thirty five

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<v Speaker 1>years after he tried to assassinate Reagan. In a lengthy

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<v Speaker 1>statement on her website, Patty Davis says she will forever

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<v Speaker 1>be haunted by the day her father almost died in

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<v Speaker 1>one and it's the end of an era for the

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<v Speaker 1>Big Apple Circus. The New York Institution is folding its

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<v Speaker 1>tent after thirty five years, announcing the end today of

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<v Speaker 1>all public performances. Big Apples, clowns, acrobats, and animals performed

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<v Speaker 1>free for disadvantaged kids and the elderly since but the

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<v Speaker 1>nonprofit ran out of money as support from Wall Street faltered.

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<v Speaker 1>Global News twenty four hours a day, powered by more

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<v Speaker 1>I'm Jill Schneider, and this is Bloomberg, Charlie, and we

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<v Speaker 1>thank you and again recapping a move higher for equities

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<v Speaker 1>were brought to you by national Realty Providers of one

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<v Speaker 1>them at n r I a dot net smp up

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<v Speaker 1>a point to seventy. I'm Charlie Pelt. That's a Bloomberg

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<v Speaker 1>business flash. He's taking stock the Fed in focus on

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<v Speaker 1>Bloomberg Radio. What did the FED say in its policy statement?

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<v Speaker 1>A tersely worded I've paragraphed piece of paper that markets

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<v Speaker 1>around the world dissect to get a sense of what

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<v Speaker 1>the fet is telling us about a possible interest rate

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<v Speaker 1>increase this year. Let's put that question to someone who

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<v Speaker 1>who they are recently helped craft those policy statements. That's

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<v Speaker 1>Charles Plaster, former president of the Fetter Reserve Bank of Philadelphia.

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<v Speaker 1>Charlie's great to have you back on the show. Good

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<v Speaker 1>to be here. Kathleen, But I want to get right

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<v Speaker 1>to it. What do you take away from this statement? Well,

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<v Speaker 1>I think the same. It was pretty much as expected.

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<v Speaker 1>The most interesting part of it was they went a

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<v Speaker 1>long way, I think, uh, to disavowing, in other words,

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<v Speaker 1>undoing all the fears that they placed at the last

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<v Speaker 1>meeting that prevented them from moving ahead with an interest

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<v Speaker 1>rate hack. So basically what happened in June was as

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<v Speaker 1>they were incredibly sensitive to short term data and they

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<v Speaker 1>instilled fears about all the bad things that could happen,

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<v Speaker 1>and the sense of the two biggest things that they

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<v Speaker 1>stressed with employment and Brexit, those years have clearly not

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<v Speaker 1>come to pass, and um, yes they're still they're always

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<v Speaker 1>risks in the future. And the Committee has been really

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<v Speaker 1>adept at um, you know, pulling risks out of the

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<v Speaker 1>hat and emphasize them to give them an excuse not

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<v Speaker 1>to to move rates up. And so now they kind

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<v Speaker 1>of had to recant. And Uh, it's going to be

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<v Speaker 1>entering to see what they're gonna do because they claim

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<v Speaker 1>their data dependance, but they get whip side by the

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<v Speaker 1>data so easily. So I think they have a huge

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<v Speaker 1>communication problem with the public about what's driving their policy decisions.

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<v Speaker 1>They are basically have no strategy. Mr Plosser, I wonder

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<v Speaker 1>if you could comment on the distinction between being inside

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<v Speaker 1>the bubble of the Federal Reserve and now that you

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<v Speaker 1>are outside, and how you explain to people that are

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<v Speaker 1>trying to invest their money how to do so based

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<v Speaker 1>in the context of what you just described as a

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<v Speaker 1>non policy strategy from the Federal Reserve. Currently, Well, I

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<v Speaker 1>did they have a non policy. They just don't have

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<v Speaker 1>a strategy. I think it's really important for the Fed

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<v Speaker 1>to try to communicate, and I've said this for years,

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<v Speaker 1>what are the data that are driving their decisions and

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<v Speaker 1>how have they react that data? And they typically have

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<v Speaker 1>not been able to articulate that strategy or articulate their

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<v Speaker 1>reaction function, if you will, to the data. And so

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<v Speaker 1>every new meeting there is a new set of data

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<v Speaker 1>on the table that seemed to be driving their policy decisions.

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<v Speaker 1>So that's what I mean is they don't really have

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<v Speaker 1>a having they will articulate a strategy to the markets,

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<v Speaker 1>and I think that's part of the problem that the

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<v Speaker 1>markets have and why you can get whipstocks so reacently.

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<v Speaker 1>So as an investor, you know I think you need

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<v Speaker 1>to look at fundamentals, and I don't think paying much

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<v Speaker 1>attention to the short term movements and and uh comments

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<v Speaker 1>by the said is as important as some people like

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<v Speaker 1>to think. If you're a FED policy meet or UM,

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<v Speaker 1>you could you could argue that in fact, they are

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<v Speaker 1>focused on fundamentals of the economy, and they've got two mandates.

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<v Speaker 1>One is inflation. It's got to get up to two

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<v Speaker 1>on that key measure they watch, and unemployment has to

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<v Speaker 1>move lower. And part of the mandate has occurred, and

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<v Speaker 1>unemployment has moved a lot lower, but the inflation number

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<v Speaker 1>has not moved up that much. That seems to be

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<v Speaker 1>one of the reason why people have been hesitant without

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<v Speaker 1>a clear inflation signal, a clear need to fight inflation. Now,

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<v Speaker 1>it seems that many, including FED chair yelling, have been

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<v Speaker 1>willing to just wait and see what happens. So so

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<v Speaker 1>let's let's let's be clear here one on the employment

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<v Speaker 1>mandate monetary policy in terms of its stance, it's accommodative stance.

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<v Speaker 1>It's more accommodative today on the unemployment rate is four

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<v Speaker 1>point or seven percent, whatever it is, UM, it's more

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<v Speaker 1>accommodative today than it was when the unemployment rate was

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<v Speaker 1>ten percent. Now with an economy that's moved from ten

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<v Speaker 1>percent to less in five percent unemployment rates, and we

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<v Speaker 1>still have an accommodative monetary policy that's even more accommodated

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<v Speaker 1>than it was earlier on. And too we have inflation.

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<v Speaker 1>I agree inflation is below it's its target, although not

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<v Speaker 1>all elements of inflation. If you look at you know,

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<v Speaker 1>the c p I UM you've got, the core c

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<v Speaker 1>p I is to percent or better. UH. The CPI

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<v Speaker 1>for services, which is what what consumers spend their money on,

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<v Speaker 1>is over three percent, and the trimmin and medium c

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<v Speaker 1>p I s are all two percent or better. So

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<v Speaker 1>the only thing that's really holding back headline inflation seems

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<v Speaker 1>to be mostly energy and its effects on the overall.

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<v Speaker 1>So so it's not my concern that inflation is UH

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<v Speaker 1>is a little bit below two percent. You know, wh

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<v Speaker 1>who's going to tell we are we can't forecast. The

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<v Speaker 1>FED nor anyone else can either forecast or even control

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<v Speaker 1>inflation as precisely if somehow we think they can. And

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<v Speaker 1>you know, what's the difference between one point eight inflation

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<v Speaker 1>and to persent inflation? Most people can't tell the difference.

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<v Speaker 1>They only can tell the difference when they read the numbers.

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<v Speaker 1>So I think we're getting a little fixated on the

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<v Speaker 1>precision by which the FED can control inflation. So I'm

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<v Speaker 1>all for the fact that inflation below target means, uh,

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<v Speaker 1>the FED funds rate and the target for FED policy

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<v Speaker 1>ought to be somewhat more accommodated than if there were

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<v Speaker 1>at two. That's perfectly reasonable, but that's it's hard to

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<v Speaker 1>justify it near zero interest rates because inflation is running,

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<v Speaker 1>you know, few tenth books and few tenths below its target.

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<v Speaker 1>We're gonna leave it there, Thank you very much, Charles

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<v Speaker 1>plas a former president of the Philadelphia Federal Reserve. You're

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<v Speaker 1>listening to taking Stockheim pim Fox my co host Kathleen Hayes.

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<v Speaker 1>This is Bloomberg coming up, a look at the markets,

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<v Speaker 1>the reaction or lack of reaction the Fed's decision, and

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<v Speaker 1>we're also going to be looking at Apple's impact on

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<v Speaker 1>the markets today. This is Bloomberg