1 00:00:02,600 --> 00:00:06,960 Speaker 1: Bloomberg Audio Studios, podcasts, radio News. 2 00:00:07,640 --> 00:00:11,119 Speaker 2: Welcome to the campus of Stanford University, the Hoover Institution's 3 00:00:11,280 --> 00:00:15,200 Speaker 2: Monetary Policy Conference, and we're very excited this morning to 4 00:00:15,200 --> 00:00:18,080 Speaker 2: have with us Austin Goolsby, who is the president of 5 00:00:18,239 --> 00:00:21,960 Speaker 2: the Chicago Federal Reserve Bank. Thank you for making time 6 00:00:22,000 --> 00:00:24,880 Speaker 2: for us in a morning when all of a sudden 7 00:00:25,280 --> 00:00:29,120 Speaker 2: the disappointments the markets had on Wednesday went away. Everybody's 8 00:00:29,120 --> 00:00:32,200 Speaker 2: happy this morning because jobs came in lower than expected. 9 00:00:32,200 --> 00:00:33,640 Speaker 2: One hundred and seventy five thousand. 10 00:00:33,920 --> 00:00:36,120 Speaker 1: What was your reaction, Wow, man, one hundred and seventy 11 00:00:36,120 --> 00:00:40,640 Speaker 1: five thousands of very solid report. Some of the root 12 00:00:40,720 --> 00:00:44,400 Speaker 1: of our of our frictions here might be there's a 13 00:00:44,720 --> 00:00:48,040 Speaker 1: kind of a day trader's timetable, and there's an economic 14 00:00:48,120 --> 00:00:51,960 Speaker 1: timetable for setting monetary policy. Of course, you got to 15 00:00:52,000 --> 00:00:56,560 Speaker 1: take a longer arc view on inflation on employment, and 16 00:00:56,600 --> 00:01:01,920 Speaker 1: we're just trying to figure out after the excellent dual 17 00:01:02,000 --> 00:01:05,160 Speaker 1: mandate performance of twenty twenty three, let's call it, where 18 00:01:05,200 --> 00:01:09,880 Speaker 1: inflation fell almost as much as it has fallen on record, 19 00:01:10,840 --> 00:01:14,920 Speaker 1: and did so without a recession, how much can we 20 00:01:15,000 --> 00:01:19,360 Speaker 1: continue that into twenty twenty four? We hit a month 21 00:01:19,520 --> 00:01:21,360 Speaker 1: for sure at the start of the year on the 22 00:01:21,360 --> 00:01:25,040 Speaker 1: inflation front, and now everybody's just got to take a 23 00:01:25,080 --> 00:01:27,920 Speaker 1: step back and try to figure out is that a 24 00:01:27,959 --> 00:01:31,279 Speaker 1: sign that the economy's overheating or is that a sign 25 00:01:31,800 --> 00:01:35,160 Speaker 1: of some other thing. The more jobs reports you get 26 00:01:35,200 --> 00:01:38,759 Speaker 1: like this where they're solid but it's clearly moving back 27 00:01:38,800 --> 00:01:43,480 Speaker 1: into something that looks like pre COVID and conventional times, 28 00:01:44,040 --> 00:01:48,480 Speaker 1: the more confident we could be that the economy's not overheating. 29 00:01:48,520 --> 00:01:51,000 Speaker 1: But we got to gott to watch this. 30 00:01:51,560 --> 00:01:53,560 Speaker 2: You are one of the I don't want to use 31 00:01:53,560 --> 00:01:57,320 Speaker 2: the word dubvish, but more optimistic people about the possibility 32 00:01:57,440 --> 00:02:00,560 Speaker 2: that rates could be cut this year. How do you 33 00:02:00,600 --> 00:02:04,120 Speaker 2: feel now we do see this slow down? The ism 34 00:02:04,200 --> 00:02:08,440 Speaker 2: numbers show slow downs, spending numbers who were lower than 35 00:02:08,480 --> 00:02:11,480 Speaker 2: anticipated and lower than in the last quarter. Are we 36 00:02:11,600 --> 00:02:14,400 Speaker 2: setting up to go back to the idea that rad 37 00:02:14,440 --> 00:02:15,760 Speaker 2: cuts are going to happen this year? 38 00:02:16,919 --> 00:02:21,760 Speaker 1: I don't like committing tie in our hands of even 39 00:02:21,800 --> 00:02:24,600 Speaker 1: for the next meeting, much less when it comes to 40 00:02:24,639 --> 00:02:28,280 Speaker 1: the fall and going into next year. I will say 41 00:02:30,320 --> 00:02:34,240 Speaker 1: I was optimistic in twenty twenty three that we could 42 00:02:34,400 --> 00:02:36,880 Speaker 1: hit what I was calling the golden path, that there 43 00:02:36,880 --> 00:02:41,880 Speaker 1: were reasons why in an unprecedented way we potentially could 44 00:02:41,880 --> 00:02:47,120 Speaker 1: get inflation down significantly without having a big recession, which 45 00:02:47,360 --> 00:02:51,799 Speaker 1: previous to twenty twenty three, that really doesn't happen. We 46 00:02:51,840 --> 00:02:55,000 Speaker 1: did that in twenty three, as we're looking in twenty four. 47 00:02:55,120 --> 00:02:58,240 Speaker 1: Like I said, we clearly hit a bump at the 48 00:02:58,240 --> 00:03:01,840 Speaker 1: start of this year. We've just got to get comfort 49 00:03:02,120 --> 00:03:06,360 Speaker 1: that it's not a sign of a reacceleration of the 50 00:03:06,400 --> 00:03:11,040 Speaker 1: economy and we got some cross currents going, there's no 51 00:03:11,160 --> 00:03:17,080 Speaker 1: question about that. I think what's happened so far in 52 00:03:17,160 --> 00:03:22,160 Speaker 1: the job market this year is a little color by. 53 00:03:22,600 --> 00:03:25,560 Speaker 1: You got to take into account that we actually had 54 00:03:25,639 --> 00:03:30,440 Speaker 1: significantly more immigration than we anticipated or then we thought 55 00:03:30,520 --> 00:03:33,960 Speaker 1: at the time. So everything's got to kind of be 56 00:03:34,120 --> 00:03:37,480 Speaker 1: norm to a per cap at a basis, and that 57 00:03:37,560 --> 00:03:41,760 Speaker 1: makes aggregate numbers like aggregate GDP growth or aggregate consumption 58 00:03:42,440 --> 00:03:47,720 Speaker 1: or aggregate payroll growth, you got to scale it down 59 00:03:47,800 --> 00:03:50,440 Speaker 1: a bit. And we're still trying to wrap our head 60 00:03:50,440 --> 00:03:51,240 Speaker 1: around how much. 61 00:03:51,720 --> 00:03:54,960 Speaker 2: What about the idea of the need to raise rates. 62 00:03:55,040 --> 00:03:57,200 Speaker 2: The Chairman was asked about it a number of times 63 00:03:57,240 --> 00:04:01,440 Speaker 2: on Wednesday, said it didn't see like something that was 64 00:04:01,480 --> 00:04:05,080 Speaker 2: going to happen. Is it at all on the table 65 00:04:05,120 --> 00:04:05,360 Speaker 2: for you? 66 00:04:05,640 --> 00:04:10,040 Speaker 1: Look like I said, I don't like speculating when we're 67 00:04:10,080 --> 00:04:13,280 Speaker 1: going to get a lot of information before the next 68 00:04:13,320 --> 00:04:15,520 Speaker 1: meeting and before all the meetings for the rest of 69 00:04:15,560 --> 00:04:21,320 Speaker 1: the year. In an unclear way, I say, don't think 70 00:04:21,360 --> 00:04:23,640 Speaker 1: that nothing is never not on the table. You know, 71 00:04:24,120 --> 00:04:27,160 Speaker 1: the job of a central banker is to be paranoid 72 00:04:27,160 --> 00:04:30,279 Speaker 1: about everything at all times and to have thought through 73 00:04:30,680 --> 00:04:35,120 Speaker 1: plans and how could we react to different circumstances. So 74 00:04:36,720 --> 00:04:40,920 Speaker 1: it's not productive to say something's not on the table. Ever, 75 00:04:41,120 --> 00:04:44,400 Speaker 1: something is on the table. I just think it's we're 76 00:04:44,440 --> 00:04:47,800 Speaker 1: going to find out this data, these data, and the 77 00:04:47,920 --> 00:04:53,159 Speaker 1: key element on the economic timetable, not the market trading timetable, 78 00:04:53,640 --> 00:04:58,640 Speaker 1: is are we continuing the progress slow and steady that 79 00:04:58,720 --> 00:05:02,360 Speaker 1: we saw last year, or is some other thing happening 80 00:05:02,360 --> 00:05:06,080 Speaker 1: that we're reaccelerating. The more jobs numbers like the ones 81 00:05:06,160 --> 00:05:10,440 Speaker 1: we saw today, the more you see easing of inflation, 82 00:05:10,800 --> 00:05:14,680 Speaker 1: the more comfort we would have I would have on 83 00:05:14,720 --> 00:05:18,760 Speaker 1: the committee. I don't speak for anybody else, And if 84 00:05:18,760 --> 00:05:21,440 Speaker 1: it goes the other way, we'll react to that. You know, 85 00:05:21,480 --> 00:05:25,560 Speaker 1: that's the Midwestern way. Is there is no bad weather, 86 00:05:25,720 --> 00:05:28,760 Speaker 1: there's only bad clothing. You know, we'll deal with it. 87 00:05:28,800 --> 00:05:31,880 Speaker 1: I mean, we're out here at Stanford, there's definitely no 88 00:05:31,960 --> 00:05:34,800 Speaker 1: bad weather. But back in Chicago, you know it's different. 89 00:05:35,480 --> 00:05:37,839 Speaker 2: Well, to drill down on that a little bit, the 90 00:05:37,960 --> 00:05:42,760 Speaker 2: question then becomes, do you think monetary policy is tight enough? 91 00:05:43,400 --> 00:05:45,479 Speaker 2: And if so, how do you square that with the 92 00:05:45,720 --> 00:05:48,159 Speaker 2: idea that inflation has started going up again. 93 00:05:49,520 --> 00:05:53,120 Speaker 1: There's two separate parts to that. The first is how 94 00:05:53,200 --> 00:05:57,440 Speaker 1: restrictive is monetary policy. I think it's restrictive. I think 95 00:05:57,440 --> 00:06:01,320 Speaker 1: if you look at the real federal funds rate, it's high. 96 00:06:01,480 --> 00:06:05,080 Speaker 1: It's as high as it's been in some decades. And 97 00:06:05,160 --> 00:06:08,400 Speaker 1: I think that lately, if you look at the interests 98 00:06:08,440 --> 00:06:13,760 Speaker 1: interest rate sensitive parts of the economy, you see that restrictiveness. 99 00:06:14,960 --> 00:06:17,240 Speaker 1: The second part of the question is, well, then what 100 00:06:17,400 --> 00:06:22,000 Speaker 1: happened with inflation? And I think the answer, but that's 101 00:06:22,040 --> 00:06:24,000 Speaker 1: partly what we're trying to find out is there's a 102 00:06:24,040 --> 00:06:27,600 Speaker 1: whole lot of other things besides monetary policy, and besides 103 00:06:27,640 --> 00:06:33,280 Speaker 1: that aggregate stated demand that drive inflation rates. And you've 104 00:06:33,400 --> 00:06:36,400 Speaker 1: definitely seen things happening on the supply side of the 105 00:06:36,440 --> 00:06:43,039 Speaker 1: economy with shipping and bridges and canals shut downs and 106 00:06:43,080 --> 00:06:48,080 Speaker 1: things like that. Commodity prices you've seen movement. Energy prices, 107 00:06:48,080 --> 00:06:51,080 Speaker 1: you've seen movement, and so we just got to get 108 00:06:51,440 --> 00:06:56,520 Speaker 1: a better more comfort, I think on this question of 109 00:06:56,800 --> 00:06:59,760 Speaker 1: are we on the long arc that we saw all 110 00:06:59,800 --> 00:07:03,000 Speaker 1: of last year and especially the second half of last year, 111 00:07:03,040 --> 00:07:06,359 Speaker 1: where where inflation is steadily coming down, or are we 112 00:07:06,440 --> 00:07:09,320 Speaker 1: in some different environment, And that's what we're If you're. 113 00:07:09,200 --> 00:07:12,920 Speaker 2: In some different environment, is it things that monetary policy 114 00:07:12,920 --> 00:07:13,520 Speaker 2: can affect? 115 00:07:14,040 --> 00:07:17,680 Speaker 1: It might be, you know, if it's all supply shock, 116 00:07:18,400 --> 00:07:21,840 Speaker 1: probably not. I mean, we kind of saw that dynamic 117 00:07:21,920 --> 00:07:24,600 Speaker 1: play out at the beginning of the pandemic when the 118 00:07:24,640 --> 00:07:32,240 Speaker 1: supply chains shut down. So that's another important aspect that's 119 00:07:32,280 --> 00:07:32,800 Speaker 1: in this. 120 00:07:34,280 --> 00:07:34,679 Speaker 2: Effort. 121 00:07:34,760 --> 00:07:38,239 Speaker 1: You know, as I kind of say that everyone thinks 122 00:07:38,320 --> 00:07:42,559 Speaker 1: it's a battle between dovishness and hawkishness, but it's really 123 00:07:42,680 --> 00:07:45,600 Speaker 1: it's not about the birds. It's the data dogs. And 124 00:07:45,640 --> 00:07:48,960 Speaker 1: the first rule of the data dogs is no when 125 00:07:49,040 --> 00:07:51,360 Speaker 1: to walk and no when to sniff. And you know, 126 00:07:51,440 --> 00:07:54,760 Speaker 1: the time to sniff is when we're trying to figure 127 00:07:54,760 --> 00:07:55,160 Speaker 1: these out. 128 00:07:55,920 --> 00:07:59,559 Speaker 2: Well, when you look at the overall economy, we mentioned 129 00:07:59,560 --> 00:08:03,800 Speaker 2: earlier that we're seeing some slow down. FED officials have said, 130 00:08:04,920 --> 00:08:07,920 Speaker 2: we can wait because the economy is in good shape, 131 00:08:08,440 --> 00:08:10,680 Speaker 2: but how much do you worry that you're going to 132 00:08:10,720 --> 00:08:14,200 Speaker 2: slow the economy too much? And because things like unemployment 133 00:08:14,280 --> 00:08:19,640 Speaker 2: are a lagging indicator, that you'll find yourself with really 134 00:08:19,680 --> 00:08:22,480 Speaker 2: slow growth or recession before you can react. 135 00:08:23,080 --> 00:08:27,720 Speaker 1: That's the balance. You definitely have to strike that delicate balance. 136 00:08:28,800 --> 00:08:32,680 Speaker 1: That's the dual mandate. And there was a time when 137 00:08:33,480 --> 00:08:39,800 Speaker 1: the job market was explosively hot and inflation was well 138 00:08:39,920 --> 00:08:44,640 Speaker 1: off the chart in it worse than we wanted, and 139 00:08:45,200 --> 00:08:48,840 Speaker 1: there's no balance in an environment like that. You're just 140 00:08:49,000 --> 00:08:51,840 Speaker 1: trying to get the inflation right down. If we remain 141 00:08:52,400 --> 00:08:57,400 Speaker 1: as restrictive as this for too long, we're, in my view, 142 00:08:57,720 --> 00:09:00,360 Speaker 1: definitely going to have to be thinking about the Woyment's 143 00:09:00,360 --> 00:09:04,000 Speaker 1: side of the mandate. So far, we've got some cross 144 00:09:04,040 --> 00:09:07,720 Speaker 1: currents going. As I say, the job numbers today are solid. 145 00:09:07,840 --> 00:09:11,600 Speaker 1: There's not in a previous world. If you said, you know, 146 00:09:11,640 --> 00:09:14,040 Speaker 1: you're getting jobs numbers in the one hundred seventy five 147 00:09:14,480 --> 00:09:17,320 Speaker 1: two hundred thousand range, people be quite happy with that. 148 00:09:19,320 --> 00:09:21,440 Speaker 1: So we'll just say I have to see it is 149 00:09:21,600 --> 00:09:26,360 Speaker 1: true that in normal times when the business cycle turns 150 00:09:26,400 --> 00:09:30,679 Speaker 1: the wrong way. It doesn't do so, it's not subtle, 151 00:09:30,679 --> 00:09:33,719 Speaker 1: there's no subtlety about it. The unemployment rate goes up 152 00:09:33,800 --> 00:09:39,240 Speaker 1: quite significantly. You see credit delinquencies deteriorate a lot. You 153 00:09:39,280 --> 00:09:45,760 Speaker 1: see durable goods manufacturing, which and other cyclically sensitive sectors 154 00:09:46,440 --> 00:09:52,480 Speaker 1: deteriorate in a noticeable way. And you haven't really seen that. 155 00:09:52,880 --> 00:09:55,480 Speaker 1: And that's part of where we're as part of where 156 00:09:55,480 --> 00:09:56,120 Speaker 1: we're monitoring. 157 00:09:56,240 --> 00:09:59,520 Speaker 2: You have a manufacturing intensive district, but also a lot 158 00:09:59,520 --> 00:10:03,640 Speaker 2: of service. This is what are CEOs telling you about 159 00:10:03,880 --> 00:10:07,120 Speaker 2: their vision for what's coming, and they're planning in terms 160 00:10:07,200 --> 00:10:10,000 Speaker 2: of employment and in terms of prices. 161 00:10:11,400 --> 00:10:13,679 Speaker 1: As you point out, the Chicago Fed's district is the 162 00:10:13,720 --> 00:10:17,559 Speaker 1: most manufacturing intensative of all the FED, and four of 163 00:10:17,640 --> 00:10:22,280 Speaker 1: the five most manufacturing intensive states are in the are 164 00:10:22,280 --> 00:10:27,559 Speaker 1: in the district. Our business contacts on the manufacturing side, 165 00:10:27,920 --> 00:10:32,680 Speaker 1: mostly they convey more of the same that twenty twenty four. 166 00:10:33,200 --> 00:10:38,640 Speaker 1: It's not accelerating, it's not decelerating. They're just trudging along 167 00:10:38,960 --> 00:10:43,600 Speaker 1: in a decent environment. I think we still are seeing 168 00:10:44,120 --> 00:10:48,520 Speaker 1: play out. We've we got past the supply chain bottlenecks. 169 00:10:48,520 --> 00:10:53,240 Speaker 1: You don't hear a lot of input on that, but 170 00:10:53,440 --> 00:10:57,400 Speaker 1: we're still in the what you might call the consumer 171 00:10:57,440 --> 00:11:04,080 Speaker 1: spending transformation that in CODVID services went down, which normally 172 00:11:04,120 --> 00:11:07,640 Speaker 1: doesn't happen in a recession because people couldn't go to 173 00:11:07,720 --> 00:11:10,440 Speaker 1: the dentists, and people couldn't go to the movies or 174 00:11:10,920 --> 00:11:13,960 Speaker 1: see sports, and they shifted to buying physical goods. So 175 00:11:14,080 --> 00:11:17,880 Speaker 1: the share of their budget that they spent on manufactured 176 00:11:17,920 --> 00:11:21,520 Speaker 1: goods went way up, and we're shifting back. You're seeing 177 00:11:21,520 --> 00:11:24,559 Speaker 1: that shift back. So that's playing out in manufacturing too 178 00:11:25,120 --> 00:11:25,480 Speaker 1: very quick. 179 00:11:25,600 --> 00:11:28,880 Speaker 2: Last question or two questions you could answer with yes 180 00:11:29,040 --> 00:11:32,160 Speaker 2: or no. The things people wanted me to ask you. 181 00:11:32,600 --> 00:11:35,280 Speaker 2: Was there any talk at the meeting of raising rates 182 00:11:35,360 --> 00:11:39,319 Speaker 2: or about raising rates? And did you have an advanced 183 00:11:39,320 --> 00:11:41,040 Speaker 2: look at the jobs numbers? 184 00:11:41,280 --> 00:11:45,840 Speaker 1: Okay, you don't have an advanced look at the jobs numbers. 185 00:11:47,000 --> 00:11:49,120 Speaker 1: You're going to have to wait five years to get 186 00:11:49,120 --> 00:11:52,920 Speaker 1: the transcript from the meetings. The minutes will come out 187 00:11:52,960 --> 00:11:55,280 Speaker 1: in a few weeks. So I'm definitely not going to 188 00:11:55,520 --> 00:11:59,440 Speaker 1: say what people talk about I. As you know, I 189 00:11:59,520 --> 00:12:02,480 Speaker 1: never put anything on the table or off the table. 190 00:12:03,040 --> 00:12:06,480 Speaker 1: I try to be as paranoid as possible about about 191 00:12:06,720 --> 00:12:09,839 Speaker 1: all potentialities and what could happen. 192 00:12:10,000 --> 00:12:12,959 Speaker 2: Very good Dodge on that last question, your auditioning for 193 00:12:13,880 --> 00:12:17,480 Speaker 2: Austin goldsby the President of the Chicago fat joining us 194 00:12:17,520 --> 00:12:21,600 Speaker 2: today from the Hoover Institution's Monetary Policy Conference in Stanford.