1 00:00:07,160 --> 00:00:10,320 Speaker 1: Welcome back to the Bloomberg Bench, my podcast, a show 2 00:00:10,400 --> 00:00:14,880 Speaker 1: about the global economy. I'm Daniel Moss, Bloomberg News Executive 3 00:00:15,000 --> 00:00:18,520 Speaker 1: editor for Global Economics in New York. It's September twenty one, 4 00:00:18,520 --> 00:00:22,680 Speaker 1: and this edition is devoted entirely to the Federal Reserve, only, 5 00:00:22,720 --> 00:00:26,560 Speaker 1: the world's most powerful economic policy body. Joining me and 6 00:00:26,640 --> 00:00:30,040 Speaker 1: my colleagues Scott Landman and Matt Bosler in Washington, who 7 00:00:30,040 --> 00:00:34,640 Speaker 1: have been dissecting this decision for the past couple of hours. Scott, Matt, 8 00:00:34,760 --> 00:00:37,760 Speaker 1: you're not quite up for air yet, but you're almost there. 9 00:00:37,960 --> 00:00:40,520 Speaker 1: We're just coming up right now. It's been a busy 10 00:00:40,600 --> 00:00:42,840 Speaker 1: day so far, but we are ready to hash it out. 11 00:00:42,960 --> 00:00:45,879 Speaker 1: The Fed walked up to the line but didn't cross it. 12 00:00:46,200 --> 00:00:49,240 Speaker 1: Interest rates held at the current level again, but with 13 00:00:49,479 --> 00:00:52,639 Speaker 1: more than a hint that something will come soon, possibly 14 00:00:52,680 --> 00:00:55,920 Speaker 1: as early as December. Why not pull the trigger today? 15 00:00:56,280 --> 00:00:59,320 Speaker 1: Well that's a great question, you know, because Janet Yellen 16 00:00:59,480 --> 00:01:01,320 Speaker 1: made very clear that they think they're going to be 17 00:01:01,360 --> 00:01:03,640 Speaker 1: in a position to do so in just a matter 18 00:01:03,680 --> 00:01:06,280 Speaker 1: of weeks, as soon as December. That's twelve weeks away, 19 00:01:06,319 --> 00:01:08,600 Speaker 1: so why not today? And the answer she gave was 20 00:01:08,640 --> 00:01:11,160 Speaker 1: basically just that we didn't really feel like we needed 21 00:01:11,160 --> 00:01:14,000 Speaker 1: to do anything today. We have some time here. Things 22 00:01:14,040 --> 00:01:17,160 Speaker 1: aren't getting away from us, The economy isn't overheating, so 23 00:01:17,200 --> 00:01:19,679 Speaker 1: why not just sit back and collect some more information, 24 00:01:19,920 --> 00:01:22,440 Speaker 1: make sure we're on the right track before pulling the 25 00:01:22,480 --> 00:01:25,160 Speaker 1: trigger and actually raising rates. Ultimately, what it seemed to 26 00:01:25,200 --> 00:01:28,000 Speaker 1: come down to was, you know, and she actually said this, 27 00:01:28,120 --> 00:01:31,800 Speaker 1: that perhaps a rate hike would harm the economy, would 28 00:01:32,600 --> 00:01:35,160 Speaker 1: harm some of the growth in the labor market and 29 00:01:35,319 --> 00:01:38,319 Speaker 1: add to what she called slack in the market. So 30 00:01:38,680 --> 00:01:40,839 Speaker 1: you know, that's what they don't want to do. And 31 00:01:41,040 --> 00:01:43,759 Speaker 1: it sounds like it was a fairly fierce debate as 32 00:01:43,760 --> 00:01:46,319 Speaker 1: far as these things go. You know, Yelling led the 33 00:01:46,360 --> 00:01:50,040 Speaker 1: way in deciding not to pull the trigger. At the 34 00:01:50,040 --> 00:01:53,800 Speaker 1: press conference that followed the meeting, the first couple of 35 00:01:53,920 --> 00:01:57,760 Speaker 1: questions seemed to be devoted almost entirely to this issue. 36 00:01:58,520 --> 00:02:01,480 Speaker 1: If you're confident there will still be a right increase 37 00:02:01,520 --> 00:02:05,560 Speaker 1: in t and that's what the famous dots show again, 38 00:02:05,800 --> 00:02:10,200 Speaker 1: what changes between now and then? And inevitably, given the decision, 39 00:02:10,600 --> 00:02:13,919 Speaker 1: she was asked about the election. Yeah, and I think 40 00:02:13,960 --> 00:02:18,040 Speaker 1: these questions kind of get to an important point, which 41 00:02:18,080 --> 00:02:20,480 Speaker 1: is just that you know, not a lot is going 42 00:02:20,520 --> 00:02:22,800 Speaker 1: to change between now in December. Like you said, so, 43 00:02:22,880 --> 00:02:24,880 Speaker 1: a lot of the message that we got from Janet 44 00:02:24,919 --> 00:02:27,160 Speaker 1: Yelling is maybe the economy is not ready for a 45 00:02:27,240 --> 00:02:29,680 Speaker 1: rate increase. She gave all of these reasons why they 46 00:02:29,720 --> 00:02:32,000 Speaker 1: didn't need to go and so sort of the sore 47 00:02:32,120 --> 00:02:35,720 Speaker 1: thumb sticking out there, if you will, is this desire 48 00:02:35,919 --> 00:02:39,440 Speaker 1: or expectation that they actually will raise rates as soon 49 00:02:39,480 --> 00:02:42,440 Speaker 1: as December. As much as she can say, and she 50 00:02:42,560 --> 00:02:46,960 Speaker 1: repeated many times that the FED is not influenced politically, 51 00:02:47,120 --> 00:02:51,200 Speaker 1: It takes no political considerations into account. You won't see 52 00:02:51,200 --> 00:02:54,240 Speaker 1: anything in the transcripts. You know, it's going to be 53 00:02:54,280 --> 00:02:57,920 Speaker 1: hard for the broader public to accept that, and you know, 54 00:02:57,960 --> 00:03:01,240 Speaker 1: we're still likely to see some blowback from people like 55 00:03:01,280 --> 00:03:05,120 Speaker 1: Donald Trump continuing to accuse Janet Yellen and the FED 56 00:03:05,200 --> 00:03:08,679 Speaker 1: of acting politically to support Democrats in an election year. Now. 57 00:03:08,720 --> 00:03:11,040 Speaker 1: In her answer to one of those questions at the 58 00:03:11,080 --> 00:03:14,920 Speaker 1: press conference, she said, the FIT does not take into 59 00:03:14,960 --> 00:03:19,480 Speaker 1: consideration partisan politics. Is it reading too much into it 60 00:03:19,600 --> 00:03:23,040 Speaker 1: to talk about the modifier partisan. That's not to say 61 00:03:23,080 --> 00:03:25,960 Speaker 1: they don't take politics into account. Am I looking at 62 00:03:25,960 --> 00:03:29,120 Speaker 1: this too closely? There? Was another question in the press 63 00:03:29,160 --> 00:03:31,800 Speaker 1: conference that tried to get at the issue more broadly, 64 00:03:31,880 --> 00:03:35,200 Speaker 1: which was, do you think uncertainty surrounding the election in 65 00:03:35,240 --> 00:03:38,160 Speaker 1: general is having an impact on spending on the economy, 66 00:03:38,480 --> 00:03:41,400 Speaker 1: And that's something that some of Yellen's colleagues have suggested 67 00:03:41,440 --> 00:03:43,720 Speaker 1: maybe the case, But when she was asked about it today, 68 00:03:44,040 --> 00:03:46,800 Speaker 1: she said she wasn't really aware of any evidence that 69 00:03:46,800 --> 00:03:49,920 Speaker 1: would suggest the election is actually weighing on the economy. 70 00:03:50,000 --> 00:03:52,760 Speaker 1: So it's unclear how top of mind that really is, 71 00:03:53,360 --> 00:03:57,840 Speaker 1: even though you actually have some reports that confidence indexes 72 00:03:58,320 --> 00:04:01,080 Speaker 1: things like that that do show that people are thinking 73 00:04:01,120 --> 00:04:04,120 Speaker 1: about the election and it does seem to influence their 74 00:04:04,200 --> 00:04:06,760 Speaker 1: views on sentiment, right, Matt, Yeah, that's right. Even one 75 00:04:06,760 --> 00:04:08,920 Speaker 1: of the fat's own reports, the Beach Book, which is 76 00:04:08,960 --> 00:04:12,000 Speaker 1: just a collection of anecdotes from business contacts they talked to, 77 00:04:12,120 --> 00:04:15,120 Speaker 1: has raised this issue. So she wasn't she was keen 78 00:04:15,160 --> 00:04:18,680 Speaker 1: to downplay that today. I would say she's she's being excessively, 79 00:04:18,920 --> 00:04:23,640 Speaker 1: excessively cautious. That's very cautious in trying to not talk 80 00:04:23,680 --> 00:04:28,080 Speaker 1: about the election, and clearly she's sensitive to any anything 81 00:04:28,120 --> 00:04:31,720 Speaker 1: about that. Three voting members of the Fed's Rate Setting 82 00:04:31,760 --> 00:04:36,000 Speaker 1: Committee dissented today one Esther George from Kansas City, not 83 00:04:36,120 --> 00:04:39,600 Speaker 1: a surprise. She's been in that position before. Let's talk 84 00:04:39,640 --> 00:04:42,800 Speaker 1: a bit about Eric rosen Grin from Boston. Now he 85 00:04:42,880 --> 00:04:46,919 Speaker 1: has dissented both on the Dovish side and now today 86 00:04:46,960 --> 00:04:49,560 Speaker 1: on the hawkish side. Should he get Man of the 87 00:04:49,680 --> 00:04:53,520 Speaker 1: Year award for his independent thought in action? Yeah, that's 88 00:04:53,520 --> 00:04:55,359 Speaker 1: a good question. You know, he's like one of these 89 00:04:55,760 --> 00:04:58,520 Speaker 1: fat officials on the committee who's really undergone a bit 90 00:04:58,520 --> 00:05:00,760 Speaker 1: of a shift. Whereas, like you said, before he was 91 00:05:01,279 --> 00:05:03,200 Speaker 1: seen as more of a dove and now he's seen 92 00:05:03,279 --> 00:05:05,200 Speaker 1: as as more of a hawk. And one of my 93 00:05:05,240 --> 00:05:08,000 Speaker 1: colleagues made a related point, um just a few minutes ago, 94 00:05:08,040 --> 00:05:10,880 Speaker 1: we were talking about it and the fact that Yelling 95 00:05:11,000 --> 00:05:14,479 Speaker 1: had three descents today from within her own committee. In 96 00:05:14,520 --> 00:05:17,920 Speaker 1: addition to all the external pressure, it took some guts 97 00:05:17,960 --> 00:05:21,280 Speaker 1: for her to do what she did as well. So 98 00:05:21,320 --> 00:05:22,800 Speaker 1: I think there's some of that on both sides of 99 00:05:22,839 --> 00:05:25,960 Speaker 1: the debate right now. Well, two descents is not unusual, 100 00:05:26,000 --> 00:05:28,919 Speaker 1: and as we just said, Esther George from Kansas City 101 00:05:29,320 --> 00:05:34,000 Speaker 1: not infrequently finds herself in that position. Could rosen Grin's 102 00:05:34,040 --> 00:05:37,200 Speaker 1: descent when the history of this meeting is written ultimately 103 00:05:37,279 --> 00:05:40,960 Speaker 1: be the thing that stands out. M That's a good question. 104 00:05:41,760 --> 00:05:44,800 Speaker 1: He stumped me on that. Yeah, I mean as an 105 00:05:44,839 --> 00:05:49,200 Speaker 1: indicator of the degree of tension behind the scenes, and 106 00:05:49,279 --> 00:05:53,240 Speaker 1: as a directional indicator. Here we have even a dove 107 00:05:53,880 --> 00:05:56,680 Speaker 1: voting for writing. Chris, that's exactly the way to put it. 108 00:05:56,720 --> 00:05:58,359 Speaker 1: I mean, just the fact that you have three descents 109 00:05:58,360 --> 00:06:01,960 Speaker 1: and enough is one thing, and that's a relative rarity 110 00:06:02,040 --> 00:06:05,240 Speaker 1: in recent fo MC history. When one of them is 111 00:06:05,800 --> 00:06:10,120 Speaker 1: a guy who clearly expressed more dubbish views in the 112 00:06:10,160 --> 00:06:13,480 Speaker 1: past and even dissented that way at a couple of meetings, 113 00:06:14,040 --> 00:06:17,000 Speaker 1: it does show that the overall shift is moving in 114 00:06:17,040 --> 00:06:20,880 Speaker 1: that hawkish direction, and that creates more tension the committee. 115 00:06:20,920 --> 00:06:26,000 Speaker 1: It does take some more effort, willpower and intellectual argument 116 00:06:26,120 --> 00:06:29,440 Speaker 1: to lay that out and push against that. Now, as 117 00:06:29,480 --> 00:06:32,760 Speaker 1: our listeners can probably gather by this conversation, there's an 118 00:06:32,960 --> 00:06:38,000 Speaker 1: entire industry to vote it to passing every word, every comma, 119 00:06:38,640 --> 00:06:41,919 Speaker 1: every vote. Let's take this out of one land for 120 00:06:41,960 --> 00:06:44,760 Speaker 1: a moment, Matt. What does it mean for you personally? 121 00:06:45,040 --> 00:06:47,680 Speaker 1: You're at the start of your working life. Yeah, that's right, 122 00:06:47,720 --> 00:06:49,800 Speaker 1: and I live in New York, so I'm excited that, 123 00:06:50,240 --> 00:06:52,640 Speaker 1: you know, property prices are no longer going up as 124 00:06:52,680 --> 00:06:55,599 Speaker 1: quickly as they used to be. So it's a good question. 125 00:06:55,680 --> 00:06:58,960 Speaker 1: Not much has really changed, right, But Um, the Fed 126 00:06:59,640 --> 00:07:03,400 Speaker 1: seem to be trying to get things going faster still, 127 00:07:03,480 --> 00:07:07,400 Speaker 1: even though they're acknowledging that monetary policy doesn't have necessarily 128 00:07:07,440 --> 00:07:09,640 Speaker 1: a lot of scope to do that, they're still trying 129 00:07:09,680 --> 00:07:12,120 Speaker 1: to get the economy to a point where things are 130 00:07:12,120 --> 00:07:15,440 Speaker 1: going a little faster for everyone. Um. And so you know, 131 00:07:15,520 --> 00:07:18,200 Speaker 1: hopefully that works out. And when you say things going 132 00:07:18,280 --> 00:07:22,160 Speaker 1: a bit faster for everyone, we're talking about this issue 133 00:07:22,160 --> 00:07:26,800 Speaker 1: of how survey after survey shows not every American believes 134 00:07:27,280 --> 00:07:31,520 Speaker 1: or can feel that we're close to full employment. Right. 135 00:07:31,640 --> 00:07:33,320 Speaker 1: And you know, you've heard a lot more of this 136 00:07:33,440 --> 00:07:35,720 Speaker 1: coming out of the FED recently, where they've been talking 137 00:07:35,720 --> 00:07:39,680 Speaker 1: about differentials between unemployment rates for white people and for 138 00:07:39,720 --> 00:07:42,680 Speaker 1: black people, for example. Uh, this is stuff that the 139 00:07:42,720 --> 00:07:45,760 Speaker 1: FED did not historically talk about, but lately they have 140 00:07:45,920 --> 00:07:49,480 Speaker 1: been more cognizant of addressing these issues, putting them out 141 00:07:49,520 --> 00:07:54,080 Speaker 1: in the public, talking about the distributional consequences of economic policies. Um. 142 00:07:54,160 --> 00:07:57,680 Speaker 1: And so, especially with Janet Yellen, given her focus on 143 00:07:57,720 --> 00:08:02,720 Speaker 1: the labor market and her background, her previously stated desires. 144 00:08:02,720 --> 00:08:05,200 Speaker 1: She's getting exactly what she wants right now, which is 145 00:08:05,480 --> 00:08:09,200 Speaker 1: bringing some of those people at the lower end back end. Finally, 146 00:08:09,240 --> 00:08:11,520 Speaker 1: as the economy starts to run a little hotter, and 147 00:08:11,680 --> 00:08:16,920 Speaker 1: even if they did increase interest rates today, historically borrowing 148 00:08:17,000 --> 00:08:20,640 Speaker 1: costs are still at very low levels. It's really mean 149 00:08:20,720 --> 00:08:24,040 Speaker 1: anything outside this building. As Matt was just showing me 150 00:08:24,120 --> 00:08:26,920 Speaker 1: this morning, the rate hike that the Fed did last 151 00:08:27,000 --> 00:08:31,520 Speaker 1: December has had virtually no impact on borrowing costs and 152 00:08:31,640 --> 00:08:35,040 Speaker 1: savings rates. In fact, they've actually come down. And let's 153 00:08:35,080 --> 00:08:38,800 Speaker 1: due more to global forces that have kept interest rates 154 00:08:38,840 --> 00:08:41,360 Speaker 1: low around the world and that's spilled over to the 155 00:08:41,480 --> 00:08:45,560 Speaker 1: United States. Now. If they do hike, though, something's going 156 00:08:45,600 --> 00:08:47,840 Speaker 1: to have to give, and we could actually see a 157 00:08:47,880 --> 00:08:50,400 Speaker 1: bump up in the savings rates the kind of people 158 00:08:50,440 --> 00:08:54,439 Speaker 1: who have money market accounts, savings accounts, those kinds of things, 159 00:08:54,960 --> 00:08:58,160 Speaker 1: especially older folks, and that might actually give a boost. 160 00:08:58,240 --> 00:09:02,120 Speaker 1: And and at the same time interest rates, borrowing costs 161 00:09:02,160 --> 00:09:05,720 Speaker 1: are still probably going to stay relatively low. So they 162 00:09:05,800 --> 00:09:08,320 Speaker 1: hiked it could still be a win win for the economy. 163 00:09:08,920 --> 00:09:12,000 Speaker 1: This won't be the last time we're discussing monetary policy 164 00:09:12,080 --> 00:09:15,400 Speaker 1: on this podcast, but between now and when we do, 165 00:09:15,760 --> 00:09:20,840 Speaker 1: hopefully conditions on this podcast will strengthen somewhat further. We'll 166 00:09:20,840 --> 00:09:23,200 Speaker 1: be back next week, and until then, you can find 167 00:09:23,240 --> 00:09:25,880 Speaker 1: us on the Bloomberg Terminal and Bloomberg dot com, as 168 00:09:25,920 --> 00:09:29,520 Speaker 1: well as iTunes, pocket cast, and Stitcher. Why did they 169 00:09:29,640 --> 00:09:32,600 Speaker 1: take a minute to rate, not interest rate, but rate 170 00:09:32,640 --> 00:09:35,360 Speaker 1: the show so more listeners can find us and let 171 00:09:35,480 --> 00:09:37,719 Speaker 1: us know what you thought of the show. You can 172 00:09:37,760 --> 00:09:41,360 Speaker 1: talk to and follow us on Twitter at at Daniel Moss, 173 00:09:41,400 --> 00:09:44,480 Speaker 1: d c at scott Landmann s c O T T 174 00:09:44,760 --> 00:09:47,599 Speaker 1: l A N m A n at bows b o 175 00:09:47,840 --> 00:09:51,360 Speaker 1: E s underscore, love your Twitter hand on Matt, See 176 00:09:51,360 --> 00:09:51,920 Speaker 1: you next time.