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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Authoughts podcast.

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Speaker 2: I'm Tracy Alloway.

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Speaker 3: And I'm Joe. Why isn't thal Joe?

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Speaker 2: We're in Boston.

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Speaker 1: I know.

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Speaker 3: We've never done an odd lotch thing in Boston of

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Speaker 3: any sort, have we?

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Speaker 2: No, this is actually my first time in Boston. I've

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Speaker 2: been to the airport a few times, but I've never

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Speaker 2: actually stayed in the city. And everything I know about

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Speaker 2: Boston comes from the Boston New York rivalry as depicted

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Speaker 2: in thirty Rocks. So I know nothing basically, you know what.

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Speaker 3: And I lived in Vermont for several years in high school.

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Speaker 3: Boston that was the big city. Like people in like

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Speaker 3: people aspire to go to Boston and when people I

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Speaker 3: knew a lot of people went to college here and

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Speaker 3: stuff like that. I love it here. I'm excited to

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Speaker 3: be here.

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Speaker 2: You know. The big city closest to my house in

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Speaker 2: Connecticut is Worcester, Massa Tuessetts.

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Speaker 3: That's the big one. That's a niceity.

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Speaker 2: It's about forty minutes away. So all right, Well, the

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Speaker 2: reason we are here is for the Boston Fed, which

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Speaker 2: is holding their sixty ninth Economic Conference, and the theme

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Speaker 2: of this year's is the US economy in a changing

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Speaker 2: global landscape, which is putting it mildly.

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Speaker 3: I think it is putting it mildly. There's a lot

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Speaker 3: going on globally, all kinds of things. You could just

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Speaker 3: run down the list. We don't even have to summarize it.

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Speaker 3: But it is a time of change, both macro big

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Speaker 3: picture globally, but also just for the near term. Direction

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Speaker 3: of monetary policy right now in the United States probably

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Speaker 3: as as ambiguous as it's been in a while.

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Speaker 2: Yeah, I think so. And we're seeing that reflected in

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Speaker 2: a lot of the Fed speak that's been coming out

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Speaker 2: at the moment. We have doves on the one side,

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Speaker 2: who are talking about a deteriorating labor market, and then

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Speaker 2: we have hawks on the other side who are still

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Speaker 2: very concerned that basically, after five years of inflation, we

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Speaker 2: have still not returned to the two percent target.

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Speaker 3: It's been half a decade, right and as of right

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Speaker 3: now recording this November nineteenth, twenty twenty five, the work

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Speaker 3: function looking at FED fund futures gives about a forty

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Speaker 3: five percent chance of a rate cut in December. That

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Speaker 3: was in the high sixties just a couple of weeks ago.

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Speaker 3: So a lot of things, a lot of uncertainty, more

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Speaker 3: or less a coin flip right now. We don't know

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Speaker 3: what's going on in the medium term or the long term.

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Speaker 2: I'm going to say one more thing before we get

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Speaker 2: to our very esteemed guest. But there is another complication,

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Speaker 2: which is we've had the government shut down, right, so

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Speaker 2: we haven't had a lot of the economic data. By

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Speaker 2: the time this episode comes out, there might have been

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Speaker 2: some of the economic data, but we also have FED

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Speaker 2: minutes that are due out later today. But to emphasize,

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Speaker 2: as of this morning, everything is very very uncertain.

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Speaker 4: Uh.

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Speaker 3: The fog, that's like the term everyone's using.

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Speaker 2: Yeah, there's a little bit of fog out in the

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Speaker 2: Boston Harbor right now as well, so fog fog everywhere. Okay, So,

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Speaker 2: without further ado, we have the perfect guest to talk

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Speaker 2: about the changing US economic landscape and what it means

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Speaker 2: from my arry policy. We're going to be speaking with

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Speaker 2: Boston Fed President Susan Collins. So, Susan, thank you so

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Speaker 2: much for coming on all thoughts.

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Speaker 4: I am delighted to be here and welcome to Boston.

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Speaker 2: Thank you so much. I heard I'm supposed to eat

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Speaker 2: beans and lobster.

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Speaker 4: Is that right?

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Speaker 2: All right, I'll do that all of it. Okay, perfect?

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Speaker 2: So tell us firstly about this research conference. What's the

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Speaker 2: purpose of the FED gathering people together to talk about

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Speaker 2: you know, you have a series of papers here, all

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Speaker 2: with different themes and topics. Why do this?

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Speaker 4: Sure happy to talk about our conference. And I have

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Speaker 4: to say, I and our entire team are delighted that

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Speaker 4: you are both going to be joining us for our

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Speaker 4: day and a half conference.

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Speaker 2: We can't say no to a conference full of academic

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Speaker 2: economic papers.

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Speaker 4: Well, it will be quite meady and informative. You know,

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Speaker 4: it's not just academics, and that's one of the things

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Speaker 4: that I think is really important to us and one

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Speaker 4: of the things that makes it particularly valuable. So we

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Speaker 4: bring together and this is the sixty ninth Boston Conference.

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Speaker 4: It's our flagship. You know, we do other meetings and

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Speaker 4: conferences and other things, but this one is our flagship.

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Speaker 4: And we bring together academics, certainly, we bring together policy

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Speaker 4: makers from different institutions, We bring together business leaders. We

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Speaker 4: have a wide range of people. We actually have people

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Speaker 4: from different disciplines. So one of the papers is from

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Speaker 4: a political scientist as well, so that is as kind

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Speaker 4: of a hallmark of the conference is to really do

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Speaker 4: a deep dive to understand dimensions of a topic. And

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Speaker 4: we picked a pretty big one this time. So I'm

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Speaker 4: not going to suggest we're going to cover the entire thing,

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Speaker 4: but understanding the US economy in what is a changing

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Speaker 4: global landscape related to risks and uncertainties, to fragmentation. It's

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Speaker 4: a lot to talk about, and I'm really looking forward

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Speaker 4: to being part of it, to learning and to hearing

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Speaker 4: the presentations.

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Speaker 3: I don't want to create any tension between you and

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Speaker 3: the fellow regional FED president, but doesn't it feel like

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Speaker 3: Kansas City cheats a little bit by having their conference

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Speaker 3: in Wyoming and August, et cetera.

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Speaker 2: Like I we're in Boston in November, which is great.

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Speaker 4: And it's lovely here, and it's lovely with Boston in November,

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Speaker 4: but I.

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Speaker 3: Always feel like it's kind of cheating. That's like, oh,

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Speaker 3: we're not even going to have it in our in

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Speaker 3: the exact location, and we're going to have it some

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Speaker 3: in the middle of summer in this beautiful location. It

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Speaker 3: is kind of cheating a little bit.

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Speaker 4: Well, you know, the Jackson Hall conference is a very

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Speaker 4: special one. I have been participating in that for a

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Speaker 4: long time and I am a huge proponent, and I

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Speaker 4: just say, the more the merrier, right, you know, it's

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Speaker 4: a lot to talk about.

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Speaker 3: A positive abundance mindset for conference.

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Speaker 2: That's right.

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Speaker 4: That's right.

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Speaker 3: So let's talk Actually, you know, we'll get into we

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Speaker 3: want to talk about some of the big themes we

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Speaker 3: want to talk. Let's talk a little bit of near

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Speaker 3: term monetary policy, et cetera. Odds of a December cut

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Speaker 3: have come in dramatically because you and some of the

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Speaker 3: other members of the FOMC have been talking about this

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Speaker 3: concern that inflation remains stubbornly over target. That big said,

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Speaker 3: there does seem to be a lot of evidence of

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Speaker 3: labor market weakening, right, And we haven't got the unemployment

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Speaker 3: rate for a while, but basically every measure seems to

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Speaker 3: show a significant I don't know, stall et cetera. Talk

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Speaker 3: to us about your read on the labor market right now.

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Speaker 3: Are you concerned that some of the weakness that we've

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Speaker 3: seen could snowball into seriously deteriorating environment and a sharp

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Speaker 3: increase in the unemployment rate.

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Speaker 4: Yeah, So I appreciate your framing of that. You know,

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Speaker 4: I have to start by saying, I'm really focused on

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Speaker 4: both parts of our mandate, and that does mean the

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Speaker 4: labor market, say more about that in just a hot second,

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Speaker 4: but also concerns about the elevated inflation and what I

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Speaker 4: hear about that and our commitment to price stability, So

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Speaker 4: you know, they both really matter and I'm looking at

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Speaker 4: both of them. That's really what I've been emphasizing. As

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Speaker 4: far as the labor market, you know it it's kind

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Speaker 4: of an unusual situation in some ways, right. I mean,

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Speaker 4: what I think is pretty clear that we have seen

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Speaker 4: softening in the labor market. We are pulling together all

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Speaker 4: the data that we can find, but as you pointed

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Speaker 4: out earlier, we don't have the official data yet. We'll

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Speaker 4: get a job support from September tomorrow morning, and really

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Speaker 4: eager to see that, and so it's hard to tell

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Speaker 4: how much that softening has been, but I do think

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Speaker 4: it's clear it reflects both labor supply growth having slowed

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Speaker 4: pretty notably, but also labor demand growth. And so so

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Speaker 4: far it seems, and again we'll learn more that there's

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Speaker 4: a kind of rough unusual balance there, and so we

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Speaker 4: haven't seen a significant unemployment change, But that's something I'm

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Speaker 4: watching really carefully and I'm really attuned to.

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Speaker 3: Just to follow up though on we have not seen

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Speaker 3: a significant unemployment change, setting aside the data which is

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Speaker 3: going to be noisy for all kinds of reasons because

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Speaker 3: that's September, which is ages ago, and then the data

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Speaker 3: after that will be affected by the government shutdown itself,

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Speaker 3: which why we're't getting data. So who knows how long

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Speaker 3: it'll be until we have cleaned data. But that being said,

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Speaker 3: do you have any way to anticipate actual deterioration because

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Speaker 3: the concern is that once the unemployment the layoffs really

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Speaker 3: starts to snowball, then they start to feed on each

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Speaker 3: other and they accelerate, and people talk about nonlinearity potential.

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Speaker 3: Do you are you concerned that by waiting or too

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Speaker 3: much for the data to reveal oh the weakness is here,

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Speaker 3: that you won't have been able to get around get

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Speaker 3: in front of a deterioration.

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Speaker 4: It's really important to be forward looking. And as you say,

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Speaker 4: I also have seen past episodes where there's been a

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Speaker 4: dynamic which can move quickly, and so it's important to

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Speaker 4: recognize that. So are there risks on the labor market side, absolutely,

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Speaker 4: and that's something that I'm attuned to. But that's not

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Speaker 4: the only consideration in terms of making monetary policy decisions.

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Speaker 4: It's really about balancing those risks and looking at to

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Speaker 4: the best of one's ability, you know, how do you

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Speaker 4: assess which of our goals from cos is further away?

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Speaker 4: And I think that the reasons that you're talking about,

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Speaker 4: some of that shift in risks, increase in risks in

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Speaker 4: the labor market was a good reason for the easing

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Speaker 4: the fifty percent basis point cuts that we have already

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Speaker 4: done this fall, and I think that that has actually

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Speaker 4: positioned us given what I know now and obviously still

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Speaker 4: watching for lots of caveats, and so I think that

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Speaker 4: the shift in that balance of risks that I started

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Speaker 4: being quite focused on over the summer was really a

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Speaker 4: rationale for those cuts that we've already seen. At the

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Speaker 4: same time, we have now moved much closer to a

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Speaker 4: neutral rate, and we're balancing those risks on the labor

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Speaker 4: market side with continued risks related to inflation and elevation,

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Speaker 4: and policies really only mildly restrictive in my view, And

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Speaker 4: so I given what I'm seeing so fartinue to see

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Speaker 4: that as appropriate for now.

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Speaker 2: We're going to get into each one of those points.

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Speaker 2: But I have a very quick process question, and I

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Speaker 2: realize we're in unusual circumstances at the moment. But when

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Speaker 2: the jobs number hits, presumably tomorrow on Thursday, again, we're

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Speaker 2: you know, we're recording this on Wednesday, November nineteenth. But

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Speaker 2: when it comes out, what actually happens? What do you

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Speaker 2: do when you see that number? Do you, you know,

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Speaker 2: immediately go into analysis mode? Do you start calling fellow

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Speaker 2: FED presidents and talking about what it means?

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Speaker 4: That's a great question. So you know, of course, we

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Speaker 4: have busy schedules and all kinds of other things going on,

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Speaker 4: and sometimes when the data hits, I'm in other meetings

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Speaker 4: or with other groups. I am well aware of when

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Speaker 4: it is due, and we do have a process. I

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Speaker 4: have a very strong Boston research team of experts, and

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Speaker 4: so you know, as soon as the numbers come out,

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Speaker 4: I do try to take a quick look at them,

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Speaker 4: and then we are sometimes virtually and you know, get

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Speaker 4: together relatively quickly to assess what we're seeing in those numbers.

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Speaker 4: So I have help to try to unpack them. Often

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Speaker 4: the real information is in the details. It's not necessarily

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Speaker 4: just the headline number. In fact, that can mask a

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Speaker 4: lot of what's really interesting about the information. We then

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Speaker 4: take some time to unpack it, and we want to

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Speaker 4: contrast those data with what we had already seen, right,

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Speaker 4: because you're adding new information. It's not going onto a

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Speaker 4: kind of totally clean palate, right, it's additional information. So

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Speaker 4: we're doing all of that, and I'm working with my team,

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Speaker 4: and then I do, of course talk to my colleagues

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Speaker 4: as well. But the immediate analysis is more within our

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Speaker 4: teams in each of our reserve banks.

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Speaker 2: And one more process question. But it strikes me that

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Speaker 2: one of the unusual features of our very unusual environment

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Speaker 2: at the moment is just the sheer amount of FED

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Speaker 2: speakers that we've had in recent days. I started counting

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Speaker 2: them up yesterday and I got nine in less than

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Speaker 2: a week. And I think than our friend Tom Barkin,

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Speaker 2: friend of the pod, put out a speech or a

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Speaker 2: research note as well, so that brings it up to

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Speaker 2: ten in less than a week. What's going on? Why

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Speaker 2: does everyone have the urge to sort of stake their

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Speaker 2: ground ahead of a meeting that you know, the market

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Speaker 2: currently implies could be a coin flip.

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Speaker 4: Well, all the more reason to hear a range of views.

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Speaker 4: I mean, I think one of the strengths of the

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Speaker 4: structure of our federated system is it really does bring

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Speaker 4: different viewpoints. And you know, it's interesting because sometimes there's

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Speaker 4: a claim that there's too much group think. I don't

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Speaker 4: see group think. I see this week. No, No, I

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Speaker 4: really don't. And so I think we have also a

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Speaker 4: responsibility to explain what we're seeing, how we're thinking about things,

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Speaker 4: and that's part of that communication that we do. And

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Speaker 4: so I actually think that's important, and I think recognizing

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Speaker 4: that the breadth of views is partly us coming together,

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Speaker 4: is sharing information, and as part of that process, they're

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Speaker 4: different windows. When I think you hear lots of speeches.

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Speaker 4: This is certainly not an isolated time, but it's when

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Speaker 4: there's you know, kind of less clarity, perhaps when they're

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Speaker 4: turning points in the economy, when you're more likely to

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Speaker 4: see many of us out there talking about what we're seeing,

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Speaker 4: also talking about how our regional information contributes to that

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Speaker 4: in different ways. And we're often talking while we're out

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Speaker 4: in our regions connecting with different people, and so there's

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Speaker 4: kind of multiple dimensions about why we're out and about

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Speaker 4: and what we're doing.

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Speaker 3: Let's talk about inflation. So core PCE as of the

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Speaker 3: August reading, which again feels like ages ago now, but

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Speaker 3: it's the data that we have came into two point

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Speaker 3: nine per ten. So that's clearly elevated solidly above target.

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Speaker 3: You know, if you just hit like a snapshot, you're

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Speaker 3: looking at the unemployment rate, you're looking at the inflation

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Speaker 3: reading that two point nine percent. How much does the

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Speaker 3: significance of that change because it comes after years of

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Speaker 3: missing the inflation target to the upside versus if we

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Speaker 3: just had the snapshot, Like, how much of your thinking

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Speaker 3: is sort of informed by the fact that not only

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Speaker 3: has it been high, but it's been high for a

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Speaker 3: really long time.

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Speaker 4: I do think that the longevity of that elevation is

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Speaker 4: a key factor to figure. It's hard to, you know,

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Speaker 4: to put a particular weight on that, but I think.

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Speaker 3: About the balance of risks.

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Speaker 4: Yeah, but so let me say a few things on

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Speaker 4: the inflation side. But first related to that specific question.

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Speaker 4: You know, I do think that it is a bit

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Speaker 4: of a reminder that it's economic behavior that is not

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Speaker 4: you know, one hundred percent predictable, and many of our

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Speaker 4: analyzes that are based on periods when people were really

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Speaker 4: used to very low inflation, maybe a bit noisier signals

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Speaker 4: of what kind of responses and changes we're going to see.

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Speaker 4: And so I do think that complementing those analyzes, you know,

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Speaker 4: of course, those are extremely valuable, and we continue to

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Speaker 4: look at total We're all data geeks here, you know,

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Speaker 4: that's kind that's kind of what we do with the conversations.

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Speaker 4: We have understanding how businesses are thinking about things, and

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Speaker 4: so I hear that businesses are mindful that they have

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Speaker 4: raised prices significantly over recent years. They're concerned about what

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Speaker 4: consumer responses will be. I've recently been hearing a number

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Speaker 4: of firms, at least in the New England district, the

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Speaker 4: Boston Fed's district, which is most of New England, saying

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Speaker 4: that that they have been passing price increases and they

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Speaker 4: have been perhaps surprised in some cases that consumers are

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Speaker 4: not pushing back, and that's leading them to expect that

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Speaker 4: they might continue to do that.

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Speaker 1: You know.

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Speaker 4: So I think that gathering a range of information to

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Speaker 4: complement how what our understanding of behavior is important, and

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Speaker 4: that does factor into some of the scenarios I think

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Speaker 4: are plausible, they're not necessarily my baseline. My baseline scenario

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Speaker 4: on the inflation side is that inflation's likely I think,

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Speaker 4: to stay elevated through the rest of this year into

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Speaker 4: early next, and then as tariffs work their way through

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Speaker 4: the system, which I think is going to take some time,

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Speaker 4: and I'm happy to talk more about tariffs suspect we

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Speaker 4: may want to come back to that. Absolutely, you know,

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Speaker 4: I think that the disinflation process, perhaps slow and uneven,

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Speaker 4: that we had seen earlier, is likely to kick in.

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Speaker 4: So my baseline is a relatively benign one, both on

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Speaker 4: the inflation side and on the real side of the economy.

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Speaker 4: But I don't rule out scenarios where there's a larger

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Speaker 4: increase in inflation or there's more persistence. And some of

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Speaker 4: that has to do with behavioral responses that might reflect

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Speaker 4: having been in an elevated environment for a long time

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Speaker 4: and concerns about profit margins, concerns about catching up to

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Speaker 4: some of the past changes, and how people think about

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Speaker 4: price levels, which is something that many of our models

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Speaker 4: are not as focused on. I hear a lot about

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Speaker 4: price levels when I'm out and about, but high cost

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Speaker 4: of living, housing in particular, but not only childcare, food

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Speaker 4: that that is the number one challenge that I hear

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Speaker 4: about when I'm talking to people, particularly and moderate income communities.

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Speaker 4: But not only so.

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Speaker 2: Since we're at a research conference at the Boston Fed,

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Speaker 2: I need to bring up a really good research paper

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Speaker 2: that came out of the Boston Fed back in October,

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Speaker 2: I think, and it was looking at inflation expectations now

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Speaker 2: and comparing them to what happened in the early and

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Speaker 2: late nineteen seventies. And the finding was that the rise

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Speaker 2: in inflation expectations around COVID might not have had that

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Speaker 2: much to do with actual prices, but actually outran the

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Speaker 2: prices and sort of became de anchored a little bit

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Speaker 2: from reality, which is what we saw on the late

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Speaker 2: nineteen seventies. Is the concern that people, you know, after

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Speaker 2: five years of above target inflation, after price levels going up,

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Speaker 2: as you just put it, that our expectations for inflation

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Speaker 2: start to become unmoored from reality. Is that the nightmare

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Speaker 2: scenario for you at the moment.

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Speaker 4: It certainly would be a concern if I were to

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Speaker 4: see evidence that especially medium to longer term inflation expectations

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Speaker 4: were becoming an unmoored I'm not seeing that right now,

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Speaker 4: but it is something I watch carefully, and I do

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Speaker 4: think that at least certainly so far. And my baseline,

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Speaker 4: as I said, is on the more benign side. You know,

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Speaker 4: it's not expecting that that would happen. In particular, we're

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Speaker 4: not seeing those labor market pressures with a softer labor market.

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Speaker 4: But is it a concern? Is it something to watch carefully?

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Speaker 4: It is, and you know it's something that I know

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Speaker 4: some are more concerned about than others.

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Speaker 2: Well, talk to us about how tariffs play into inflation expectations,

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Speaker 2: because this seems to be a difficult one to call.

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Speaker 2: You have the initial rise in prices, and then no

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Speaker 2: one is quite sure what happens after that. The consensus

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Speaker 2: seems to be that it's this one off shift and

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Speaker 2: then you know, inflation should start to cool. But on

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Speaker 2: the other hand, we're hearing a lot from consumers, as

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Speaker 2: you say, about price levels themselves.

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Speaker 4: So quite a bit to say about tariffs. So you know,

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Speaker 4: let me unpack a few of the things that are

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Speaker 4: really top of mind for me. One is when certainly

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Speaker 4: when I say that, you know, my baseline expectation would

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Speaker 4: be that tariffs have a one time impact on prices.

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Speaker 4: One time doesn't mean it just happens in a week

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Speaker 4: and it's done that one time can get implemented over months,

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Speaker 4: a year, something like that. It just says that it's

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Speaker 4: not expected to be a continual increase. Once the level

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Speaker 4: has adjusted, did you don't get additional impacts, but that

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Speaker 4: can happen over time. So that's one point. And I

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Speaker 4: do think that in a period of high uncertainty and

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Speaker 4: the tariffs are really intertwined with uncertainty something to come

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Speaker 4: back to and the long elevation of higher prices that

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Speaker 4: we were just talking about, you might actually expect the

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Speaker 4: time for businesses to pass things through to be elongated, right,

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Speaker 4: And so then you start worrying more that people get

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Speaker 4: used to these continual price increases and you kind of

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Speaker 4: get stuck. Right. So that's a scenario, again not my baseline,

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Speaker 4: but is one that I think one could think about.

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Speaker 4: So a few things about tariffs. One is the tariffs

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Speaker 4: are really intertwined with uncertainty, which makes you know it's

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Speaker 4: uncertainty about the tariffs, which is one of the key

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Speaker 4: things that's having influence. For example, in terms of hiring decisions,

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Speaker 4: spent decisions, some of the reticence that firms have to

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Speaker 4: make major decisions and projects, and also in terms of

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Speaker 4: teasing out empirically right, it's going to take some time.

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Speaker 4: Our staff at the Boston FED is doing quite a

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Speaker 4: bit of work on a variety of dimensions, and that

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Speaker 4: includes analysis that takes into account that, you know, many

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Speaker 4: of the tariffs are impacting imported intermediates, and so there

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Speaker 4: are multiple dimensions and levels and you've got to take

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Speaker 4: all of that into account. And we're also doing a

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Speaker 4: lot of analysis on what happened in twenty eighteen. What

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Speaker 4: can we learn from that, because we've had enough time

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Speaker 4: that's elapsed, and actually one of the papers at our

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Speaker 4: conference will be drawing some of the lessons from a

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Speaker 4: kind of more comprehensive analysis of that experience. You know,

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Speaker 4: just one thing that they've already been talking about is

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Speaker 4: then it was a much smaller tear of increase, It

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Speaker 4: was narrower, and it was implemented over a relatively short

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Speaker 4: time period. It still took five months or more before

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Speaker 4: the peak impact on price levels was seen, and there

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Speaker 4: are reasons to think it might take even longer this time,

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Speaker 4: and then the survey data when we're doing survey data

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Speaker 4: at the Boston FED, particularly focused on small businesses, which

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Speaker 4: isn't a group we don't have as much line of

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Speaker 4: sight into, and the conversations that I've talked about that

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Speaker 4: helps to inform things. And then just one final thing,

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Speaker 4: because I think it's both intellectually interesting, you know, if

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Speaker 4: I put my academic hat on, but also really important.

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Speaker 4: We've also seen significant increases in productivity, and that is

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Speaker 4: interacting with some of the tariffs, perhaps offsetting the extent

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Speaker 4: to which we're seeing the impacts of tariffs on prices,

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Speaker 4: because productivity growth is actually an opportunity not to pass

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Speaker 4: things through because it enables you know, cost savings, et cetera.

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Speaker 4: So there's a lot of things going on with tariffs

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Speaker 4: which make them hard. I think this is going to

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Speaker 4: be an area we will be able to we will

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Speaker 4: continue studying and learning about for some time to come.

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Speaker 3: I like your characterization of I guess maybe you'd call

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Speaker 3: it the long one off, right. There can be a

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Speaker 3: one off, but it doesn't just mean the price level

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Speaker 3: resets from today to tomorrow. It could just be the

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Speaker 3: sort of long process where some new equilibrium is formed

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Speaker 3: maybe months, maybe years, et cetera. I'm really interested, though,

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Speaker 3: in those conversations that you have with New England businesses

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Speaker 3: about tariffs. You mentioned perhaps some of their surprise that

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Speaker 3: they were able to pass on price increases to the

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Speaker 3: degree that they have. What else are companies saying about

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Speaker 3: sort of the operational effects, the day to day effects

438
00:23:38,440 --> 00:23:42,400
Speaker 3: of how they're managing their business in light of tariffs.

439
00:23:42,400 --> 00:23:44,520
Speaker 3: What substance of things do you hear about, So.

440
00:23:44,680 --> 00:23:47,720
Speaker 4: A number of different, number of different things. A lot

441
00:23:47,760 --> 00:23:51,680
Speaker 4: of the tariff conversations that I've had really are intertwined

442
00:23:51,840 --> 00:23:55,280
Speaker 4: with navigating uncertainty. So one of the things that you know,

443
00:23:55,400 --> 00:24:00,960
Speaker 4: I've heard is it's challenging to navigate and make adjustments

444
00:24:01,000 --> 00:24:03,600
Speaker 4: based on a very different tariff level. But if we

445
00:24:03,680 --> 00:24:05,439
Speaker 4: knew exactly what it was and it was going to

446
00:24:05,440 --> 00:24:07,639
Speaker 4: stay there, that would be much easier to adjust to.

447
00:24:08,280 --> 00:24:12,320
Speaker 4: Then back and forth and uncertainty, and that creates some hesitancy.

448
00:24:12,760 --> 00:24:15,920
Speaker 4: It also creates or adds to, because I think this

449
00:24:16,119 --> 00:24:20,080
Speaker 4: was already there, what I'm calling almost an efficiency mindset

450
00:24:20,480 --> 00:24:25,600
Speaker 4: where firms are reticent to hire because they're not sure

451
00:24:25,800 --> 00:24:31,639
Speaker 4: how things are evolving, and tariffs are a cost increase

452
00:24:32,160 --> 00:24:35,600
Speaker 4: to the extent that you can offset that through efficiencies,

453
00:24:36,400 --> 00:24:39,359
Speaker 4: that is one way forward that it's almost kind of

454
00:24:39,359 --> 00:24:42,240
Speaker 4: like a no regrets type of investment, because whatever happens

455
00:24:42,240 --> 00:24:45,480
Speaker 4: with the tariffs, if you found efficiency improvements, that will

456
00:24:45,480 --> 00:24:48,960
Speaker 4: have been a helpful kind of context. So that links

457
00:24:49,080 --> 00:24:51,520
Speaker 4: up with AI. But it's certainly not only AI. It's

458
00:24:51,560 --> 00:24:58,200
Speaker 4: production processes, it's automation. It's addressing some longer standing areas

459
00:24:58,280 --> 00:25:02,280
Speaker 4: where it was difficult to hire be because of skilled shortages.

460
00:25:02,720 --> 00:25:04,800
Speaker 4: So a number of things that I have been hearing

461
00:25:04,840 --> 00:25:07,880
Speaker 4: since I started in the role in twenty twenty two

462
00:25:08,520 --> 00:25:12,800
Speaker 4: continue and then there's this additional set of things that

463
00:25:12,840 --> 00:25:16,879
Speaker 4: are added on. So for many businesses, especially the larger ones,

464
00:25:16,960 --> 00:25:20,640
Speaker 4: I actually hear some kind of cautious optimism as they

465
00:25:20,720 --> 00:25:24,399
Speaker 4: look out ahead. It depends someone on the sector or

466
00:25:24,440 --> 00:25:27,639
Speaker 4: some differences, and it depends what some of the global

467
00:25:27,640 --> 00:25:31,080
Speaker 4: linkages are and some of those other competitive effects. But

468
00:25:31,400 --> 00:25:33,800
Speaker 4: I've heard quite a bit of that and a bit

469
00:25:33,880 --> 00:25:38,040
Speaker 4: more stress and concern among some of the smaller firms

470
00:25:38,440 --> 00:25:40,840
Speaker 4: in some places, and so that's part of why we're

471
00:25:40,840 --> 00:25:45,360
Speaker 4: trying to add to the information there through a quarterly

472
00:25:45,480 --> 00:25:48,119
Speaker 4: Small Business Survey that we started doing recently.

473
00:26:04,200 --> 00:26:07,200
Speaker 2: I hesitate to ask too many theoreticals here, but I

474
00:26:07,280 --> 00:26:10,080
Speaker 2: think this has actually become less of a theoretical recently.

475
00:26:10,160 --> 00:26:12,760
Speaker 2: But there is a good chance that the Supreme Court

476
00:26:13,320 --> 00:26:17,879
Speaker 2: strikes down a big chunk of these tariffs. How would

477
00:26:17,880 --> 00:26:21,240
Speaker 2: you as a policymaker actually deal with, you know, the

478
00:26:21,400 --> 00:26:25,160
Speaker 2: proximate cause of this one time shift of inflation suddenly

479
00:26:25,359 --> 00:26:28,119
Speaker 2: being put in doubt. And then on top of that,

480
00:26:28,200 --> 00:26:30,879
Speaker 2: you also have more uncertainties on the margin about whether

481
00:26:30,960 --> 00:26:33,840
Speaker 2: or not people might get tariff bonuses, and then whether

482
00:26:33,960 --> 00:26:38,120
Speaker 2: or not businesses would receive refund checks if the tariffs

483
00:26:38,160 --> 00:26:41,280
Speaker 2: were struck down by the Supreme Court. That seems like

484
00:26:41,560 --> 00:26:45,000
Speaker 2: a very complicated scenario to be thinking about, and much

485
00:26:45,040 --> 00:26:45,760
Speaker 2: less planning for.

486
00:26:46,600 --> 00:26:50,879
Speaker 4: There is considerable uncertainty in this space, as you just

487
00:26:51,000 --> 00:26:54,880
Speaker 4: pointed out, and you know, I don't know how things

488
00:26:54,920 --> 00:26:58,440
Speaker 4: will unfold, and for some of those things, I think

489
00:26:58,560 --> 00:27:03,200
Speaker 4: recognizing the uncertainty and making assessments based on the things

490
00:27:03,240 --> 00:27:07,160
Speaker 4: that we know to some extent looking at scenario planning,

491
00:27:07,200 --> 00:27:10,320
Speaker 4: but some of the really hard to ferret out how

492
00:27:10,359 --> 00:27:13,560
Speaker 4: things would unfold. It may not be helpful to get

493
00:27:13,560 --> 00:27:16,320
Speaker 4: too far ahead of that so you know, again to

494
00:27:16,359 --> 00:27:20,879
Speaker 4: your point, the uncertainty remains elevated, maybe the nature of

495
00:27:20,880 --> 00:27:24,919
Speaker 4: the uncertainty is shifted in some ways, and it's something

496
00:27:25,000 --> 00:27:30,360
Speaker 4: that I think firms, households, local governments are navigating quick question.

497
00:27:30,960 --> 00:27:34,919
Speaker 3: Even with the slowdown in hiring, et cetera, and the

498
00:27:35,040 --> 00:27:36,720
Speaker 3: sort of big changes of the labor market in the

499
00:27:36,760 --> 00:27:39,560
Speaker 3: last few years, do you still regularly hear about skilled

500
00:27:39,640 --> 00:27:40,520
Speaker 3: labor shortages?

501
00:27:41,000 --> 00:27:44,159
Speaker 4: I do in some sectors, in some areas. And let

502
00:27:44,200 --> 00:27:47,159
Speaker 4: me give you a couple of examples. So, for you know,

503
00:27:47,200 --> 00:27:50,160
Speaker 4: parts of New England. New England is actually aging faster

504
00:27:50,600 --> 00:27:53,320
Speaker 4: than the rest of the country. That's one of our

505
00:27:53,359 --> 00:27:56,040
Speaker 4: distinguishing features. We're you know, quite seasoned and we have

506
00:27:56,119 --> 00:27:59,879
Speaker 4: many wonderful advantages. And so there are places where they're

507
00:28:00,119 --> 00:28:03,880
Speaker 4: is more of almost a labor shortage. There's some skilled

508
00:28:04,000 --> 00:28:07,840
Speaker 4: areas where firms continue to tell me maybe it's gotten

509
00:28:07,880 --> 00:28:10,439
Speaker 4: a bit easier, but it's still challenging to hire for

510
00:28:10,520 --> 00:28:13,440
Speaker 4: certain kinds of trades. And so one of the things

511
00:28:13,440 --> 00:28:18,280
Speaker 4: that I've been really inspired to see are innovative collaboration. So,

512
00:28:18,560 --> 00:28:23,959
Speaker 4: for example, in eastern Connecticut related to skilled manufacturing, pulling

513
00:28:24,000 --> 00:28:30,439
Speaker 4: private sector together with higher education and support across local

514
00:28:30,440 --> 00:28:34,040
Speaker 4: public sector, bringing people together to solve those problems and

515
00:28:34,080 --> 00:28:37,280
Speaker 4: to identify pipelines. You know, the Cape Cud Community College

516
00:28:37,320 --> 00:28:42,360
Speaker 4: has one too. They're training aviation technology maintenance. They have

517
00:28:42,440 --> 00:28:46,200
Speaker 4: a new, relatively new program which will soon, I believe,

518
00:28:46,320 --> 00:28:48,440
Speaker 4: be the biggest in the country. And that is an

519
00:28:48,480 --> 00:28:52,000
Speaker 4: area where there is a skilled shortage nationally. So there

520
00:28:52,000 --> 00:28:55,800
Speaker 4: are shortages in some areas, and they are also initiatives

521
00:28:55,800 --> 00:28:58,200
Speaker 4: to try to address them, which I find inspiring.

522
00:28:58,960 --> 00:29:02,360
Speaker 3: So I certainly take your point obviously that you have

523
00:29:02,400 --> 00:29:04,200
Speaker 3: to the FED has to be or ought to be

524
00:29:04,320 --> 00:29:06,880
Speaker 3: very mindful of the fact that inflation is still above

525
00:29:06,920 --> 00:29:09,760
Speaker 3: target and that there are scenarios even if they're not

526
00:29:09,800 --> 00:29:13,280
Speaker 3: your base case, will become a real problem. That being said,

527
00:29:13,520 --> 00:29:17,040
Speaker 3: you know, at what point is it worth cutting even

528
00:29:17,040 --> 00:29:20,800
Speaker 3: if inflation is above target? Where is the labor market weakness?

529
00:29:20,920 --> 00:29:23,040
Speaker 3: Have to get to say, you know what, we're not

530
00:29:23,160 --> 00:29:24,880
Speaker 3: back to two percent, but that we have a real

531
00:29:24,920 --> 00:29:28,000
Speaker 3: problem on the labor market side, that that becomes the priority.

532
00:29:28,240 --> 00:29:31,480
Speaker 4: So they're clearly, as I mentioned before, there clearly does

533
00:29:31,600 --> 00:29:34,200
Speaker 4: need to be a balance of those risks, and so

534
00:29:34,320 --> 00:29:39,080
Speaker 4: I do think about how far each of our dual

535
00:29:39,160 --> 00:29:43,920
Speaker 4: mandated goals is from the target, and so if.

536
00:29:43,800 --> 00:29:47,840
Speaker 3: The unemployment doesn't have one, not like we have that

537
00:29:47,960 --> 00:29:50,120
Speaker 3: nice two percent number on the inflation side.

538
00:29:50,360 --> 00:29:52,440
Speaker 4: Yeah, so that's that is a you know, a little

539
00:29:52,440 --> 00:29:56,320
Speaker 4: bit less specifically concrete than inflation. Absolutely, but I do

540
00:29:56,400 --> 00:29:59,600
Speaker 4: think that we have a sense of what full employment

541
00:29:59,640 --> 00:30:02,040
Speaker 4: looks like like. And you know, this is something we

542
00:30:02,080 --> 00:30:05,240
Speaker 4: talked about as part of the framework review that was

543
00:30:05,240 --> 00:30:09,400
Speaker 4: completed recently that you know describes that as the maximum

544
00:30:09,400 --> 00:30:13,200
Speaker 4: employment that you can sustain over time that's consistent with

545
00:30:13,280 --> 00:30:15,240
Speaker 4: price stability. And I think that's a helpful way of

546
00:30:15,280 --> 00:30:18,080
Speaker 4: thinking about it because it also evolves over time. It's

547
00:30:18,080 --> 00:30:19,960
Speaker 4: not just one number, and I think it's appropriate to

548
00:30:19,960 --> 00:30:23,480
Speaker 4: think about it that way. So if we were seeing evidence,

549
00:30:23,520 --> 00:30:26,240
Speaker 4: if I were seeing evidence that the labor market were

550
00:30:27,000 --> 00:30:30,840
Speaker 4: notably deteriorating, I would take that very seriously and that

551
00:30:31,080 --> 00:30:36,400
Speaker 4: certainly could justify you know, near term additional easing. And

552
00:30:36,480 --> 00:30:39,480
Speaker 4: so you careful to kind of qualify my statements based

553
00:30:39,520 --> 00:30:42,280
Speaker 4: on what I'm seeing at the moment that it is

554
00:30:42,320 --> 00:30:45,600
Speaker 4: based on balancing risks. But I think it's important not

555
00:30:45,720 --> 00:30:50,880
Speaker 4: to forget about the real concerns related to the inflation side,

556
00:30:50,960 --> 00:30:55,640
Speaker 4: as well as staying very attentive to what's happening on

557
00:30:55,800 --> 00:31:00,520
Speaker 4: the labor market side. And you know, with much slower demand,

558
00:31:00,640 --> 00:31:04,560
Speaker 4: much lower hiring, even though the labor supply growth is

559
00:31:04,640 --> 00:31:08,280
Speaker 4: clearly much lower as well, there is a risk that

560
00:31:08,360 --> 00:31:10,960
Speaker 4: the demand would fall well below the supply growth and

561
00:31:11,000 --> 00:31:14,480
Speaker 4: we would start to see more notable unemployment increases. So

562
00:31:14,640 --> 00:31:18,680
Speaker 4: something to watch very carefully. And the data from September

563
00:31:18,720 --> 00:31:21,840
Speaker 4: that we'll get tomorrow is helpful, you know, the initial

564
00:31:21,880 --> 00:31:25,680
Speaker 4: claims unemployment, the other information that many of us are

565
00:31:25,720 --> 00:31:28,080
Speaker 4: gathering and looking at as helpful as well, but you

566
00:31:28,080 --> 00:31:31,280
Speaker 4: know that's still from September, and so there's more information

567
00:31:31,360 --> 00:31:31,720
Speaker 4: to come.

568
00:31:32,400 --> 00:31:34,720
Speaker 2: So one thing I'm wondering about the labor market, and

569
00:31:34,840 --> 00:31:38,080
Speaker 2: you know, we've heard the supply argument, you know, the

570
00:31:38,080 --> 00:31:41,880
Speaker 2: break even rate argument from a number of policymakers at

571
00:31:41,880 --> 00:31:45,200
Speaker 2: this point. But if supply in the labor market is

572
00:31:45,760 --> 00:31:49,440
Speaker 2: the issue here because of immigration or whatever, and it's

573
00:31:49,440 --> 00:31:54,000
Speaker 2: about that supply rather than a deterioration in demand, shouldn't

574
00:31:54,000 --> 00:31:57,240
Speaker 2: we have expected to see some tightness showing up in

575
00:31:57,280 --> 00:32:03,560
Speaker 2: other statistics, like we earned hours worked, the quits rate,

576
00:32:03,800 --> 00:32:07,200
Speaker 2: something like that, and we haven't really seen that yet.

577
00:32:07,000 --> 00:32:09,800
Speaker 4: So I think it's both okay, right, I mean the

578
00:32:09,880 --> 00:32:13,480
Speaker 4: fact I don't think we are seeing significant wage pressures.

579
00:32:14,280 --> 00:32:15,880
Speaker 4: I think that's been true for a while. I think

580
00:32:15,920 --> 00:32:18,840
Speaker 4: if anything, the more recent data I've seen, but again,

581
00:32:19,360 --> 00:32:21,800
Speaker 4: you know, don't have the most recent information. You know,

582
00:32:21,840 --> 00:32:24,480
Speaker 4: has come down a bit. It's been higher than it

583
00:32:24,560 --> 00:32:27,160
Speaker 4: was pre pandemic. At the same time, given the productivity

584
00:32:27,160 --> 00:32:32,200
Speaker 4: that we'd seen, that is consistent, in my view, you know,

585
00:32:32,240 --> 00:32:35,080
Speaker 4: with price stability. So I have not been as concerned

586
00:32:35,080 --> 00:32:38,120
Speaker 4: about the labor market, and that speaks to both demand

587
00:32:38,160 --> 00:32:40,880
Speaker 4: and supply having come down, which is this kind of

588
00:32:40,960 --> 00:32:43,959
Speaker 4: unusual balance that I was talking about before. I see,

589
00:32:44,160 --> 00:32:48,920
Speaker 4: but looking out ahead, it's hard to really project what

590
00:32:49,040 --> 00:32:53,520
Speaker 4: those trajectories will be. Will the labor demand fall more

591
00:32:53,600 --> 00:32:57,000
Speaker 4: quickly than the supply has fallen, then you'd start to

592
00:32:57,040 --> 00:32:59,600
Speaker 4: see the unemployment go up, but of course it was

593
00:32:59,600 --> 00:33:02,280
Speaker 4: the other way around. You tend to see more wage pressures.

594
00:33:02,720 --> 00:33:05,200
Speaker 3: Let's talk about AI for a second.

595
00:33:05,800 --> 00:33:06,240
Speaker 2: What is it?

596
00:33:06,280 --> 00:33:09,760
Speaker 3: What are the businesses that you're talking to say about there?

597
00:33:09,840 --> 00:33:15,240
Speaker 3: I don't know, adoption, implementation, investment in AI, I'm all.

598
00:33:15,440 --> 00:33:18,880
Speaker 3: You know, clearly it feels like everyone is experimenting everything.

599
00:33:19,000 --> 00:33:22,000
Speaker 3: It's very hard to detect whether there are obvious productivity

600
00:33:22,080 --> 00:33:26,000
Speaker 3: gains being seen, perhaps outside of coding and engineering. What

601
00:33:26,040 --> 00:33:28,680
Speaker 3: are they telling you about their sort of their budgets

602
00:33:28,720 --> 00:33:32,280
Speaker 3: and their plans for adoption of this technology.

603
00:33:32,440 --> 00:33:35,040
Speaker 4: Yeah, you know so, if I think back even six months,

604
00:33:35,360 --> 00:33:39,560
Speaker 4: it was a kind of interesting piece of the conversation

605
00:33:39,680 --> 00:33:41,920
Speaker 4: that I would have when I'm meeting with a group

606
00:33:41,960 --> 00:33:45,120
Speaker 4: of different business leaders from different sectors. It's now a

607
00:33:45,560 --> 00:33:50,520
Speaker 4: significant share of the conversation, and typically there's not one

608
00:33:50,560 --> 00:33:54,520
Speaker 4: of the people around the table who isn't telling me

609
00:33:54,760 --> 00:33:57,680
Speaker 4: how they're thinking about it, what they're doing, what they're finding.

610
00:33:58,040 --> 00:34:02,080
Speaker 4: It's out there, it's everywhere, and that's true, you know So.

611
00:34:02,440 --> 00:34:05,200
Speaker 4: I was not too long ago visiting a lumber mill

612
00:34:05,480 --> 00:34:09,719
Speaker 4: in northern Vermont and learned about how they have been

613
00:34:09,800 --> 00:34:14,680
Speaker 4: using AI in order to sort planks, in part because

614
00:34:14,719 --> 00:34:17,400
Speaker 4: they were having trouble hiring that skilled labor in that

615
00:34:17,520 --> 00:34:19,840
Speaker 4: part of the country. But then they told me about

616
00:34:19,840 --> 00:34:23,040
Speaker 4: all of the other benefits they were finding in ways

617
00:34:23,080 --> 00:34:26,200
Speaker 4: that they were teaching it to do additional things. I

618
00:34:26,239 --> 00:34:28,200
Speaker 4: hadn't expected going to a lumber mill that we were

619
00:34:28,200 --> 00:34:30,320
Speaker 4: going to spend quite a bit of time talking about AI,

620
00:34:30,600 --> 00:34:35,040
Speaker 4: so it's much broader. I am hearing that there are

621
00:34:35,200 --> 00:34:39,640
Speaker 4: some ways that the AI is really supporting workers and

622
00:34:39,760 --> 00:34:43,280
Speaker 4: enabling them to do more and be more focused, saving

623
00:34:43,320 --> 00:34:46,720
Speaker 4: time in terms of reporting and a variety of different

624
00:34:46,760 --> 00:34:50,400
Speaker 4: back office kinds of things. I have some people telling

625
00:34:50,440 --> 00:34:54,799
Speaker 4: me that they actually expected it to enable them to

626
00:34:54,960 --> 00:34:59,000
Speaker 4: grow because of some of the savings in ways that

627
00:34:59,040 --> 00:35:01,640
Speaker 4: they're excited about, and then others that are telling me

628
00:35:01,719 --> 00:35:04,600
Speaker 4: that it may be enabling them to downsize. I think

629
00:35:04,600 --> 00:35:09,279
Speaker 4: it's still early days, and there are many, many different dimensions,

630
00:35:09,320 --> 00:35:12,040
Speaker 4: and there's still a lot of experimentation, to your point,

631
00:35:12,080 --> 00:35:15,520
Speaker 4: So I'm hearing all of it. It's really interesting, and

632
00:35:15,880 --> 00:35:18,600
Speaker 4: I think it's much too early to tell how it's

633
00:35:18,600 --> 00:35:19,520
Speaker 4: all going to play out.

634
00:35:20,760 --> 00:35:23,600
Speaker 2: I hate to ask another theoretical question, but I apologize

635
00:35:23,600 --> 00:35:27,640
Speaker 2: in advance a research research conference. Why not? But when

636
00:35:27,640 --> 00:35:30,120
Speaker 2: you think about AI, does it make you think about

637
00:35:30,160 --> 00:35:35,480
Speaker 2: the unemployment side of the mandate and the policy making

638
00:35:35,560 --> 00:35:37,960
Speaker 2: capacity at the FED? And what I mean by that is,

639
00:35:38,120 --> 00:35:40,600
Speaker 2: you know, traditionally you lower interest rates if you want

640
00:35:40,640 --> 00:35:44,360
Speaker 2: to try to boost employment, and that's supposed to encourage

641
00:35:44,400 --> 00:35:49,440
Speaker 2: businesses to invest in new capital, and historically a lot

642
00:35:49,520 --> 00:35:52,880
Speaker 2: of that capital has meant additional jobs. Although we can

643
00:35:52,920 --> 00:35:55,279
Speaker 2: debate automation and all of that, but when it comes

644
00:35:55,320 --> 00:35:57,960
Speaker 2: to AI, you lower interest rates people invest in AI,

645
00:35:58,280 --> 00:36:02,160
Speaker 2: and I think the concern is that means fewer jobs. Now,

646
00:36:02,640 --> 00:36:04,480
Speaker 2: how do you think about that as someone at the

647
00:36:04,480 --> 00:36:07,560
Speaker 2: FED whose primary tool is the benchmark rate.

648
00:36:08,719 --> 00:36:11,080
Speaker 4: Lots of pieces to that and a lot of thinking

649
00:36:11,160 --> 00:36:13,600
Speaker 4: going on, right, So let me just let me say

650
00:36:13,600 --> 00:36:16,200
Speaker 4: a couple of things. So I do think that even

651
00:36:16,239 --> 00:36:20,320
Speaker 4: though we're mildly restrictive, we are seeing considerable investments across

652
00:36:20,320 --> 00:36:23,239
Speaker 4: a wide range of firms and sectors in AI. That

653
00:36:23,440 --> 00:36:25,960
Speaker 4: is one of the things that firms are clearly leaning into.

654
00:36:26,640 --> 00:36:29,239
Speaker 4: And you know, I do think of AI as a

655
00:36:29,239 --> 00:36:33,560
Speaker 4: general purpose technology, which is like the Internet or like electricity.

656
00:36:34,080 --> 00:36:36,879
Speaker 4: And if you go back in history, in those when

657
00:36:36,880 --> 00:36:41,319
Speaker 4: those were being adopted, there was also discussion that introduction

658
00:36:41,640 --> 00:36:45,000
Speaker 4: of those new technologies was going to, you know, just

659
00:36:45,080 --> 00:36:48,160
Speaker 4: really eliminate a huge number of jobs. And what all

660
00:36:48,200 --> 00:36:48,840
Speaker 4: the people.

661
00:36:48,640 --> 00:36:50,680
Speaker 2: Lighting gas lamps are going to be unemployed?

662
00:36:51,200 --> 00:36:54,480
Speaker 4: Electricity and guess, you know, and other things were developed

663
00:36:54,480 --> 00:36:57,200
Speaker 4: and some of them we don't We're not imagining. Yet,

664
00:36:57,680 --> 00:37:00,920
Speaker 4: so I do think that that history is important. At

665
00:37:00,960 --> 00:37:05,320
Speaker 4: the same time, it does seem potentially like this general

666
00:37:05,320 --> 00:37:09,600
Speaker 4: purpose technology might unfold more quickly and that could create

667
00:37:09,800 --> 00:37:13,479
Speaker 4: more transition challenges. Again, it's really early days in terms

668
00:37:13,480 --> 00:37:15,920
Speaker 4: of thinking about how that may play out. But I

669
00:37:15,960 --> 00:37:18,680
Speaker 4: am expecting there'll be new opportunities in newb you know.

670
00:37:18,719 --> 00:37:20,799
Speaker 4: I mean, when women join the labor market, the view

671
00:37:21,000 --> 00:37:23,239
Speaker 4: was that will mean there are no jobs for men,

672
00:37:23,320 --> 00:37:27,319
Speaker 4: and therefore and on. Obviously, what we've seen is a

673
00:37:27,560 --> 00:37:32,800
Speaker 4: significant increase in job opportunities, vibrancy, and the US economy

674
00:37:32,920 --> 00:37:36,680
Speaker 4: is a vibrant, dynamic economy in a number of different ways,

675
00:37:36,760 --> 00:37:40,319
Speaker 4: but early days important to play out. The other thing

676
00:37:40,400 --> 00:37:42,200
Speaker 4: I will say is there are a lot of things

677
00:37:42,239 --> 00:37:45,480
Speaker 4: that Fed focuses on and cares deeply about because they

678
00:37:45,560 --> 00:37:50,360
Speaker 4: impact economic conditions, they impact employment, they impact inflation. We

679
00:37:50,440 --> 00:37:53,239
Speaker 4: need to understand them, we need to follow them, but

680
00:37:53,719 --> 00:37:57,960
Speaker 4: they aren't the direct thing that our policy tools are

681
00:37:58,040 --> 00:38:00,640
Speaker 4: able to influence. I think I think we need to

682
00:38:00,760 --> 00:38:03,919
Speaker 4: kind of recognize and separate those things. You know. One

683
00:38:04,000 --> 00:38:08,359
Speaker 4: reason to have you know, eased a bit is it

684
00:38:08,440 --> 00:38:12,239
Speaker 4: could facilitate an environment where it's easier for labor to

685
00:38:12,280 --> 00:38:15,360
Speaker 4: make transitions to two different kind of areas in places.

686
00:38:15,520 --> 00:38:19,240
Speaker 4: So I think there are lots of considerations there. But again,

687
00:38:19,560 --> 00:38:22,360
Speaker 4: this one's going to unfold over some period of time.

688
00:38:22,680 --> 00:38:22,880
Speaker 4: You know.

689
00:38:22,920 --> 00:38:25,600
Speaker 3: One of the things you mentioned is people don't just

690
00:38:25,680 --> 00:38:29,280
Speaker 3: care about the rate of inflation. They care about affordability overall.

691
00:38:29,360 --> 00:38:32,279
Speaker 3: So the price level which has gone up very significantly,

692
00:38:32,600 --> 00:38:36,600
Speaker 3: and one segment of people's consumption basket that's gone up

693
00:38:36,600 --> 00:38:39,120
Speaker 3: a lot in several years at the cost of housing

694
00:38:39,280 --> 00:38:41,920
Speaker 3: and so forth. And this is something that comes up

695
00:38:41,960 --> 00:38:44,279
Speaker 3: from time to time, which is the rate. Policy when

696
00:38:44,280 --> 00:38:46,920
Speaker 3: it comes to housing can sort of cut in multiple

697
00:38:46,960 --> 00:38:51,480
Speaker 3: directions because higher interest rates might you know, make mortgages

698
00:38:51,520 --> 00:38:54,160
Speaker 3: more costly and you get a depression a little bit

699
00:38:54,280 --> 00:38:57,200
Speaker 3: and demand and maybe that helps balance prices. On the

700
00:38:57,200 --> 00:39:00,680
Speaker 3: other hand, that could also curtail development, and developers are

701
00:39:00,760 --> 00:39:03,680
Speaker 3: very attuned to the interest rates. We have seen a

702
00:39:03,680 --> 00:39:07,040
Speaker 3: lot of measures of housing starts come down, housing activity,

703
00:39:07,400 --> 00:39:11,279
Speaker 3: et cetera. How do you think about getting that balance right,

704
00:39:11,360 --> 00:39:15,360
Speaker 3: and this particularly given the salience of residents when it

705
00:39:15,400 --> 00:39:18,120
Speaker 3: comes to the price level, et cetera. How do you

706
00:39:18,160 --> 00:39:22,120
Speaker 3: think about optimal policy for housing supply?

707
00:39:22,800 --> 00:39:26,560
Speaker 4: Yeah, housing is really important for variety of reasons. It

708
00:39:26,600 --> 00:39:29,239
Speaker 4: is one of the most frequent concerns that I hear,

709
00:39:29,640 --> 00:39:32,080
Speaker 4: not just for lower moderate income, right, I mean the

710
00:39:32,680 --> 00:39:37,120
Speaker 4: accessibility availability is much broader than that. So you know,

711
00:39:37,160 --> 00:39:42,480
Speaker 4: it matters in terms of economic vibrancy individuals households. It

712
00:39:42,640 --> 00:39:45,719
Speaker 4: matters in terms of it can be a barrier to

713
00:39:45,760 --> 00:39:49,160
Speaker 4: participating in the economy, right, So I worry about that

714
00:39:49,200 --> 00:39:53,239
Speaker 4: from a fast standpoint. We got in the context that

715
00:39:53,320 --> 00:39:57,080
Speaker 4: we're in now with real challenges with affordability, and there

716
00:39:57,120 --> 00:39:59,919
Speaker 4: are lots of statistics that demonstrate the lack of house

717
00:40:00,239 --> 00:40:03,880
Speaker 4: and affordability challenges over a long period of time, and

718
00:40:03,920 --> 00:40:06,760
Speaker 4: it's going to take a number of different groups working

719
00:40:06,800 --> 00:40:11,440
Speaker 4: together to be able to really address them. So you know,

720
00:40:11,640 --> 00:40:15,360
Speaker 4: it is true that in the short run higher interest

721
00:40:15,440 --> 00:40:18,479
Speaker 4: rates do have an impact. At the same time, of course,

722
00:40:18,520 --> 00:40:22,120
Speaker 4: the shorter the longer term rates that are often relevant

723
00:40:22,160 --> 00:40:25,200
Speaker 4: there are influenced by a number of different factors. I

724
00:40:25,239 --> 00:40:29,280
Speaker 4: would say importantly, I guess two just quick things. One

725
00:40:29,440 --> 00:40:35,400
Speaker 4: is that restoring and maintaining price stability and maximum employment

726
00:40:35,480 --> 00:40:41,160
Speaker 4: creates an environment that's really conducive to addressing our housing challenges,

727
00:40:41,520 --> 00:40:46,759
Speaker 4: and sustaining that environment, that infrastructure over time, and so

728
00:40:47,160 --> 00:40:50,680
Speaker 4: it's you know, it's maintaining that broader environment that I

729
00:40:50,719 --> 00:40:53,640
Speaker 4: think is what Congress has charged us to do, and

730
00:40:53,680 --> 00:40:55,759
Speaker 4: that we'll create that environment. The other thing is that

731
00:40:55,840 --> 00:41:01,200
Speaker 4: you know, as a nonpartisan, trusted data geekish, the FED

732
00:41:01,280 --> 00:41:05,600
Speaker 4: can help to bring different groups together to share information,

733
00:41:05,920 --> 00:41:09,080
Speaker 4: to help be a convener. The Boston FED hosted a

734
00:41:09,080 --> 00:41:14,200
Speaker 4: conference this summer with the Harvard Center Housing Studies that

735
00:41:14,640 --> 00:41:18,160
Speaker 4: put out their annual report, and we had our colleagues

736
00:41:18,200 --> 00:41:20,760
Speaker 4: from eight different reserve banks. All of us are engaged

737
00:41:20,800 --> 00:41:25,279
Speaker 4: and interested in working in our communities to support addressing

738
00:41:25,320 --> 00:41:27,880
Speaker 4: the housing challenges. So it's top of mind, and there

739
00:41:27,880 --> 00:41:30,200
Speaker 4: are things that we can influence, and then there's some

740
00:41:30,239 --> 00:41:31,600
Speaker 4: things that, of course we cannot.

741
00:41:32,320 --> 00:41:35,320
Speaker 2: We've been talking a lot about the economy for obvious reasons.

742
00:41:35,400 --> 00:41:37,120
Speaker 2: But I am aware that we are in Boston and

743
00:41:37,160 --> 00:41:39,120
Speaker 2: you are the Boston Fed President. And if there's one

744
00:41:39,120 --> 00:41:41,120
Speaker 2: thing I do know about the city is that it

745
00:41:41,200 --> 00:41:43,959
Speaker 2: is a financial center. There are a lot of financial firms,

746
00:41:44,040 --> 00:41:47,080
Speaker 2: especially on the buyside over here. Can I ask, very quickly,

747
00:41:47,440 --> 00:41:50,200
Speaker 2: how much have you been watching the markets and reflecting

748
00:41:50,200 --> 00:41:52,439
Speaker 2: on what's been going on there, because of course we've

749
00:41:52,440 --> 00:41:55,680
Speaker 2: had lots of talk about an AI bubble, although maybe

750
00:41:55,760 --> 00:41:58,080
Speaker 2: some of the error has been kicked out of that

751
00:41:58,239 --> 00:42:02,040
Speaker 2: bubble's tires in recent days and weeks. But we also

752
00:42:02,120 --> 00:42:05,279
Speaker 2: have some strains in the funding markets. You know, we've

753
00:42:05,320 --> 00:42:08,759
Speaker 2: seen some kerffuffles, to put it mildly, in repot and

754
00:42:08,800 --> 00:42:11,440
Speaker 2: things like that. Are you watching those as well as

755
00:42:11,480 --> 00:42:12,960
Speaker 2: what's happening with the broader economy.

756
00:42:13,200 --> 00:42:17,320
Speaker 4: Absolutely so. You know, our teams are also very carefully

757
00:42:17,360 --> 00:42:20,279
Speaker 4: watching developments in financial markets, and you know, we are

758
00:42:20,360 --> 00:42:24,359
Speaker 4: seeing some more volatility certainly, you know, compared to the

759
00:42:24,360 --> 00:42:27,440
Speaker 4: beginning of the year. Markets are still up, but spreads

760
00:42:27,440 --> 00:42:30,040
Speaker 4: are still relatively low, and so there are a number

761
00:42:30,080 --> 00:42:33,360
Speaker 4: of things to be focused on and to be aware

762
00:42:33,360 --> 00:42:37,279
Speaker 4: of as we think about our broader responsibilities and charge.

763
00:42:37,800 --> 00:42:40,400
Speaker 2: All right, Susan Collins, Boston FED President, We're going to

764
00:42:40,440 --> 00:42:43,200
Speaker 2: try to grab you later at the conference after the

765
00:42:43,320 --> 00:42:46,280
Speaker 2: jobs numbers come out and see if anything has changed.

766
00:42:46,280 --> 00:42:47,960
Speaker 2: But thank you so much for coming on all thoughts,

767
00:42:48,040 --> 00:42:49,160
Speaker 2: really appreciate.

768
00:42:48,719 --> 00:42:57,799
Speaker 4: It a pleasure. We're delighted you're here.

769
00:43:03,239 --> 00:43:06,160
Speaker 2: Joe, I really enjoyed that conversation. I think it is

770
00:43:06,200 --> 00:43:09,120
Speaker 2: such an interesting time to be talking with anyone on

771
00:43:09,160 --> 00:43:11,520
Speaker 2: the FED. I guess I'm still trying to wrap my

772
00:43:11,600 --> 00:43:18,359
Speaker 2: head around whether the division among policymakers currently whether it's

773
00:43:18,400 --> 00:43:22,080
Speaker 2: about how they see the state of the economy right now,

774
00:43:22,719 --> 00:43:24,239
Speaker 2: because actually, there does seem to be a lot of

775
00:43:24,239 --> 00:43:27,880
Speaker 2: consensus the labor market is deteriorating and inflation, you know,

776
00:43:27,960 --> 00:43:30,800
Speaker 2: you can't deny that it is above target, or whether

777
00:43:30,880 --> 00:43:34,600
Speaker 2: it's about which side of the mandate they want to emphasize,

778
00:43:35,080 --> 00:43:38,399
Speaker 2: or whether it's about which side of the mandate has

779
00:43:38,480 --> 00:43:42,200
Speaker 2: the potential to get out of hand basically, and you know,

780
00:43:42,320 --> 00:43:46,560
Speaker 2: either rise or decrease exponentially the inflation rate or the

781
00:43:46,600 --> 00:43:47,399
Speaker 2: unemployment rate.

782
00:43:47,640 --> 00:43:51,160
Speaker 3: Yeah, I think that's a very good way of summarizing

783
00:43:51,640 --> 00:43:56,200
Speaker 3: why there is so much debate and disagreement because a look, again,

784
00:43:56,719 --> 00:44:00,600
Speaker 3: even setting aside the data blackout from the official sources,

785
00:44:00,920 --> 00:44:03,600
Speaker 3: there's confusion. But then you add in the data blackout

786
00:44:04,040 --> 00:44:08,040
Speaker 3: and then the questions about look, I mean, the labor market.

787
00:44:08,360 --> 00:44:11,640
Speaker 3: The risk to the labor market is that sort of nonlinearity,

788
00:44:11,760 --> 00:44:13,680
Speaker 3: right that you get an increase and then an increase,

789
00:44:13,680 --> 00:44:15,440
Speaker 3: and then an increase, and then suddenly you have very

790
00:44:15,480 --> 00:44:18,520
Speaker 3: severe unemployment, you're very far away from your mandate. The

791
00:44:18,680 --> 00:44:22,200
Speaker 3: risk to the inflation is that, yeah, as Susan and

792
00:44:22,280 --> 00:44:24,840
Speaker 3: others have noted, they've been missing for a long time,

793
00:44:25,120 --> 00:44:28,920
Speaker 3: they're still not back to their target. Even in Susan's

794
00:44:28,920 --> 00:44:30,960
Speaker 3: base case, they don't get back to their target for

795
00:44:31,000 --> 00:44:34,840
Speaker 3: a while, and there are concerns about something more deeper

796
00:44:34,960 --> 00:44:37,880
Speaker 3: becoming embedded. I thought it was very interesting that she

797
00:44:38,040 --> 00:44:41,080
Speaker 3: said that the context that she talked to have been

798
00:44:41,160 --> 00:44:44,040
Speaker 3: surprised by the degree to which they can pass price

799
00:44:44,520 --> 00:44:48,040
Speaker 3: in this environment, and so yeah, very easy to see

800
00:44:48,360 --> 00:44:52,319
Speaker 3: all the different ways that you could derive uncertainty. Now

801
00:44:52,400 --> 00:44:55,520
Speaker 3: to mention the fact that policy itself, the fiscal policy

802
00:44:55,560 --> 00:44:58,280
Speaker 3: through tariffs and so forth, remains uncertain there absolutely.

803
00:44:58,360 --> 00:45:00,359
Speaker 2: I thought it was also really interesting she was talking

804
00:45:00,440 --> 00:45:04,360
Speaker 2: about the idea that the one off tariff price increase

805
00:45:04,520 --> 00:45:07,799
Speaker 2: can take some time to materialize, and she called back

806
00:45:07,840 --> 00:45:10,480
Speaker 2: to the research paper that they're going to be discussing

807
00:45:10,480 --> 00:45:12,960
Speaker 2: at the Boston FED about the twenty eighteen tariffs and

808
00:45:13,000 --> 00:45:16,240
Speaker 2: this idea that even those which we're you know, looking

809
00:45:16,320 --> 00:45:21,080
Speaker 2: back fairly straightforward, took months to actually work their way

810
00:45:21,120 --> 00:45:24,280
Speaker 2: through the economy. Now we're in a place where the tariffs,

811
00:45:24,320 --> 00:45:26,839
Speaker 2: you know, they've been on and then they're off, and

812
00:45:26,920 --> 00:45:30,200
Speaker 2: there's some discussion about what's going to happen. Now, it

813
00:45:30,480 --> 00:45:33,000
Speaker 2: seems likely that you could see that those would take

814
00:45:33,160 --> 00:45:36,000
Speaker 2: even longer to work their way through. I should just

815
00:45:36,040 --> 00:45:39,600
Speaker 2: say we are going to be releasing a special episode

816
00:45:39,640 --> 00:45:41,520
Speaker 2: of the podcast where we talk to a lot of

817
00:45:41,560 --> 00:45:45,360
Speaker 2: the researchers who are presenting at this Boston FED conference,

818
00:45:45,400 --> 00:45:48,960
Speaker 2: So look out for that. And also, if you're interested,

819
00:45:49,040 --> 00:45:52,600
Speaker 2: the Boston Fed will actually be live streaming this conference,

820
00:45:52,680 --> 00:45:56,880
Speaker 2: so you can follow along in real time on Friday

821
00:45:57,000 --> 00:46:00,240
Speaker 2: and Saturday and listen to all the papers actually get toss.

822
00:46:00,520 --> 00:46:03,239
Speaker 3: Yeah, all the PDFs are there, and so that's what

823
00:46:03,320 --> 00:46:05,400
Speaker 3: Tracy and I are going to be doing on Friday

824
00:46:05,440 --> 00:46:07,799
Speaker 3: and Saturday. We're going to be listening to speakers. We're

825
00:46:07,840 --> 00:46:10,320
Speaker 3: going to be reading their PDFs, so you can virtually

826
00:46:10,440 --> 00:46:13,439
Speaker 3: join with us, read all the PDFs yourself, and talk

827
00:46:13,440 --> 00:46:14,799
Speaker 3: about them in the discord with us.

828
00:46:14,840 --> 00:46:16,960
Speaker 2: We should actually outsource some of our work and just

829
00:46:17,040 --> 00:46:19,360
Speaker 2: ask people read this paper and then tell us what

830
00:46:19,480 --> 00:46:20,799
Speaker 2: questions we should ask about it.

831
00:46:20,840 --> 00:46:22,600
Speaker 3: No, no, no, that's what cha GPTs for.

832
00:46:22,760 --> 00:46:25,239
Speaker 2: Yeah, all right, Well, we'll be in a Both of

833
00:46:25,320 --> 00:46:27,080
Speaker 2: us are probably going to be in a Boston bar

834
00:46:27,360 --> 00:46:29,840
Speaker 2: in the next day or so, eating beans and reading

835
00:46:29,880 --> 00:46:32,759
Speaker 2: research papers, So that's what we'll be doing. Shall we

836
00:46:32,840 --> 00:46:33,600
Speaker 2: leave it there for now?

837
00:46:33,760 --> 00:46:34,520
Speaker 3: Let's leave it there.

838
00:46:34,840 --> 00:46:37,200
Speaker 2: This has been another episode of the aud Thoughts podcast.

839
00:46:37,239 --> 00:46:40,440
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

840
00:46:40,200 --> 00:46:42,160
Speaker 3: And I'm Joe wi isn't Thal. You can follow me

841
00:46:42,239 --> 00:46:45,680
Speaker 3: at the Stalwart. Follow our producers Carman Rodriguez at Carmen

842
00:46:45,760 --> 00:46:49,000
Speaker 3: armand dash Ol Bennett at Dashbot and Kilbrooks at Keil Brooks.

843
00:46:49,239 --> 00:46:51,680
Speaker 3: For more odd Lats content, go to Bloomberg dot com

844
00:46:51,680 --> 00:46:54,120
Speaker 3: slash odd Laws. We have the daily newsletter and all

845
00:46:54,120 --> 00:46:56,680
Speaker 3: of our episodes, and you can chat about all these

846
00:46:56,719 --> 00:47:00,160
Speaker 3: topics twenty four to seven in our discord discord do

847
00:47:00,320 --> 00:47:01,640
Speaker 3: gg slashd loots.

848
00:47:01,880 --> 00:47:04,279
Speaker 2: And if you enjoy odd Lots, if you like it

849
00:47:04,360 --> 00:47:07,200
Speaker 2: when we go to regional FED conferences, then please leave

850
00:47:07,239 --> 00:47:10,640
Speaker 2: us a positive review on your favorite podcast platform. And remember,

851
00:47:10,680 --> 00:47:13,120
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852
00:47:13,160 --> 00:47:15,879
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853
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854
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