Speaker 1: Welcome back to the Bloomberg Bench, my podcast, a show
Speaker 1: about the global economy. I'm Daniel Moss, Bloomberg News Executive
Speaker 1: editor for Global Economics in New York. It's September twenty one,
Speaker 1: and this edition is devoted entirely to the Federal Reserve, only,
Speaker 1: the world's most powerful economic policy body. Joining me and
Speaker 1: my colleagues Scott Landman and Matt Bosler in Washington, who
Speaker 1: have been dissecting this decision for the past couple of hours. Scott, Matt,
Speaker 1: you're not quite up for air yet, but you're almost there.
Speaker 1: We're just coming up right now. It's been a busy
Speaker 1: day so far, but we are ready to hash it out.
Speaker 1: The Fed walked up to the line but didn't cross it.
Speaker 1: Interest rates held at the current level again, but with
Speaker 1: more than a hint that something will come soon, possibly
Speaker 1: as early as December. Why not pull the trigger today?
Speaker 1: Well that's a great question, you know, because Janet Yellen
Speaker 1: made very clear that they think they're going to be
Speaker 1: in a position to do so in just a matter
Speaker 1: of weeks, as soon as December. That's twelve weeks away,
Speaker 1: so why not today? And the answer she gave was
Speaker 1: basically just that we didn't really feel like we needed
Speaker 1: to do anything today. We have some time here. Things
Speaker 1: aren't getting away from us, The economy isn't overheating, so
Speaker 1: why not just sit back and collect some more information,
Speaker 1: make sure we're on the right track before pulling the
Speaker 1: trigger and actually raising rates. Ultimately, what it seemed to
Speaker 1: come down to was, you know, and she actually said this,
Speaker 1: that perhaps a rate hike would harm the economy, would
Speaker 1: harm some of the growth in the labor market and
Speaker 1: add to what she called slack in the market. So
Speaker 1: you know, that's what they don't want to do. And
Speaker 1: it sounds like it was a fairly fierce debate as
Speaker 1: far as these things go. You know, Yelling led the
Speaker 1: way in deciding not to pull the trigger. At the
Speaker 1: press conference that followed the meeting, the first couple of
Speaker 1: questions seemed to be devoted almost entirely to this issue.
Speaker 1: If you're confident there will still be a right increase
Speaker 1: in t and that's what the famous dots show again,
Speaker 1: what changes between now and then? And inevitably, given the decision,
Speaker 1: she was asked about the election. Yeah, and I think
Speaker 1: these questions kind of get to an important point, which
Speaker 1: is just that you know, not a lot is going
Speaker 1: to change between now in December. Like you said, so,
Speaker 1: a lot of the message that we got from Janet
Speaker 1: Yelling is maybe the economy is not ready for a
Speaker 1: rate increase. She gave all of these reasons why they
Speaker 1: didn't need to go and so sort of the sore
Speaker 1: thumb sticking out there, if you will, is this desire
Speaker 1: or expectation that they actually will raise rates as soon
Speaker 1: as December. As much as she can say, and she
Speaker 1: repeated many times that the FED is not influenced politically,
Speaker 1: It takes no political considerations into account. You won't see
Speaker 1: anything in the transcripts. You know, it's going to be
Speaker 1: hard for the broader public to accept that, and you know,
Speaker 1: we're still likely to see some blowback from people like
Speaker 1: Donald Trump continuing to accuse Janet Yellen and the FED
Speaker 1: of acting politically to support Democrats in an election year. Now.
Speaker 1: In her answer to one of those questions at the
Speaker 1: press conference, she said, the FIT does not take into
Speaker 1: consideration partisan politics. Is it reading too much into it
Speaker 1: to talk about the modifier partisan. That's not to say
Speaker 1: they don't take politics into account. Am I looking at
Speaker 1: this too closely? There? Was another question in the press
Speaker 1: conference that tried to get at the issue more broadly,
Speaker 1: which was, do you think uncertainty surrounding the election in
Speaker 1: general is having an impact on spending on the economy,
Speaker 1: And that's something that some of Yellen's colleagues have suggested
Speaker 1: maybe the case, But when she was asked about it today,
Speaker 1: she said she wasn't really aware of any evidence that
Speaker 1: would suggest the election is actually weighing on the economy.
Speaker 1: So it's unclear how top of mind that really is,
Speaker 1: even though you actually have some reports that confidence indexes
Speaker 1: things like that that do show that people are thinking
Speaker 1: about the election and it does seem to influence their
Speaker 1: views on sentiment, right, Matt, Yeah, that's right. Even one
Speaker 1: of the fat's own reports, the Beach Book, which is
Speaker 1: just a collection of anecdotes from business contacts they talked to,
Speaker 1: has raised this issue. So she wasn't she was keen
Speaker 1: to downplay that today. I would say she's she's being excessively,
Speaker 1: excessively cautious. That's very cautious in trying to not talk
Speaker 1: about the election, and clearly she's sensitive to any anything
Speaker 1: about that. Three voting members of the Fed's Rate Setting
Speaker 1: Committee dissented today one Esther George from Kansas City, not
Speaker 1: a surprise. She's been in that position before. Let's talk
Speaker 1: a bit about Eric rosen Grin from Boston. Now he
Speaker 1: has dissented both on the Dovish side and now today
Speaker 1: on the hawkish side. Should he get Man of the
Speaker 1: Year award for his independent thought in action? Yeah, that's
Speaker 1: a good question. You know, he's like one of these
Speaker 1: fat officials on the committee who's really undergone a bit
Speaker 1: of a shift. Whereas, like you said, before he was
Speaker 1: seen as more of a dove and now he's seen
Speaker 1: as as more of a hawk. And one of my
Speaker 1: colleagues made a related point, um just a few minutes ago,
Speaker 1: we were talking about it and the fact that Yelling
Speaker 1: had three descents today from within her own committee. In
Speaker 1: addition to all the external pressure, it took some guts
Speaker 1: for her to do what she did as well. So
Speaker 1: I think there's some of that on both sides of
Speaker 1: the debate right now. Well, two descents is not unusual,
Speaker 1: and as we just said, Esther George from Kansas City
Speaker 1: not infrequently finds herself in that position. Could rosen Grin's
Speaker 1: descent when the history of this meeting is written ultimately
Speaker 1: be the thing that stands out. M That's a good question.
Speaker 1: He stumped me on that. Yeah, I mean as an
Speaker 1: indicator of the degree of tension behind the scenes, and
Speaker 1: as a directional indicator. Here we have even a dove
Speaker 1: voting for writing. Chris, that's exactly the way to put it.
Speaker 1: I mean, just the fact that you have three descents
Speaker 1: and enough is one thing, and that's a relative rarity
Speaker 1: in recent fo MC history. When one of them is
Speaker 1: a guy who clearly expressed more dubbish views in the
Speaker 1: past and even dissented that way at a couple of meetings,
Speaker 1: it does show that the overall shift is moving in
Speaker 1: that hawkish direction, and that creates more tension the committee.
Speaker 1: It does take some more effort, willpower and intellectual argument
Speaker 1: to lay that out and push against that. Now, as
Speaker 1: our listeners can probably gather by this conversation, there's an
Speaker 1: entire industry to vote it to passing every word, every comma,
Speaker 1: every vote. Let's take this out of one land for
Speaker 1: a moment, Matt. What does it mean for you personally?
Speaker 1: You're at the start of your working life. Yeah, that's right,
Speaker 1: and I live in New York, so I'm excited that,
Speaker 1: you know, property prices are no longer going up as
Speaker 1: quickly as they used to be. So it's a good question.
Speaker 1: Not much has really changed, right, But Um, the Fed
Speaker 1: seem to be trying to get things going faster still,
Speaker 1: even though they're acknowledging that monetary policy doesn't have necessarily
Speaker 1: a lot of scope to do that, they're still trying
Speaker 1: to get the economy to a point where things are
Speaker 1: going a little faster for everyone. Um. And so you know,
Speaker 1: hopefully that works out. And when you say things going
Speaker 1: a bit faster for everyone, we're talking about this issue
Speaker 1: of how survey after survey shows not every American believes
Speaker 1: or can feel that we're close to full employment. Right.
Speaker 1: And you know, you've heard a lot more of this
Speaker 1: coming out of the FED recently, where they've been talking
Speaker 1: about differentials between unemployment rates for white people and for
Speaker 1: black people, for example. Uh, this is stuff that the
Speaker 1: FED did not historically talk about, but lately they have
Speaker 1: been more cognizant of addressing these issues, putting them out
Speaker 1: in the public, talking about the distributional consequences of economic policies. Um.
Speaker 1: And so, especially with Janet Yellen, given her focus on
Speaker 1: the labor market and her background, her previously stated desires.
Speaker 1: She's getting exactly what she wants right now, which is
Speaker 1: bringing some of those people at the lower end back end. Finally,
Speaker 1: as the economy starts to run a little hotter, and
Speaker 1: even if they did increase interest rates today, historically borrowing
Speaker 1: costs are still at very low levels. It's really mean
Speaker 1: anything outside this building. As Matt was just showing me
Speaker 1: this morning, the rate hike that the Fed did last
Speaker 1: December has had virtually no impact on borrowing costs and
Speaker 1: savings rates. In fact, they've actually come down. And let's
Speaker 1: due more to global forces that have kept interest rates
Speaker 1: low around the world and that's spilled over to the
Speaker 1: United States. Now. If they do hike, though, something's going
Speaker 1: to have to give, and we could actually see a
Speaker 1: bump up in the savings rates the kind of people
Speaker 1: who have money market accounts, savings accounts, those kinds of things,
Speaker 1: especially older folks, and that might actually give a boost.
Speaker 1: And and at the same time interest rates, borrowing costs
Speaker 1: are still probably going to stay relatively low. So they
Speaker 1: hiked it could still be a win win for the economy.
Speaker 1: This won't be the last time we're discussing monetary policy
Speaker 1: on this podcast, but between now and when we do,
Speaker 1: hopefully conditions on this podcast will strengthen somewhat further. We'll
Speaker 1: be back next week, and until then, you can find
Speaker 1: us on the Bloomberg Terminal and Bloomberg dot com, as
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Speaker 1: take a minute to rate, not interest rate, but rate
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Speaker 1: E s underscore, love your Twitter hand on Matt, See
Speaker 1: you next time.