WEBVTT - Fed Governor Stephen Miran Talks Outlook for Inflation, Rates

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. So here's the license.

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<v Speaker 2>This morning, the New York Fed President John Williams pushing

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<v Speaker 2>back against hawkish commentary from the FMC and Wall Street

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<v Speaker 2>now pricing in better than fifty percent odds the Fed

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<v Speaker 2>will cut race in December. FED Governor Stephen Marram was

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<v Speaker 2>the loan to sent for a fifty basis point raid

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<v Speaker 2>cut at last month FMC meeting, and Governor Maron joins

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<v Speaker 2>us now for more.

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<v Speaker 1>Governor Maron, good.

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<v Speaker 2>Morning, Good morning once again, thanks for being here, Thanks

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<v Speaker 2>for having me back. We've got to start with the

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<v Speaker 2>labor market. Your reflections on what we saw yesterday. Does

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<v Speaker 2>it lean one way or the other?

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<v Speaker 3>Yeah, I mean I think the implications of yesterday were

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<v Speaker 3>obviously dubvish, and if anyone was on the fence, I

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<v Speaker 3>would hope that this would move them in the direction

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<v Speaker 3>of cutting. I mean, you saw the unemployment rate edged

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<v Speaker 3>up a bit. You know, you saw some other indicators

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<v Speaker 3>like an increase in permanent layoffs. You know, those are

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<v Speaker 3>indications that the labor market has been affected by restrictive

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<v Speaker 3>FED policy. And given the outlook for inflation, there's not

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<v Speaker 3>really much of a need to be as restrictive as

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<v Speaker 3>we are, and.

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<v Speaker 1>Yet on the committee we have pushedback.

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<v Speaker 2>Maybe after that, FED Governor Michael Bach had this to say,

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<v Speaker 2>I'm concerned that we're seeing inflation still around three percent.

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<v Speaker 2>Inflation's closer to three that it is to two. What

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<v Speaker 2>do you make of that argument? How percisive is it?

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<v Speaker 4>It's not persuasive to me. And I'll tell you why.

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<v Speaker 3>All of the inflation excess, sorry, almost all of the

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<v Speaker 3>inflation excess is a mirage. It's not indicative of supplied

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<v Speaker 3>demand in balances. And so, for example, if you look

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<v Speaker 3>at the housing market, right, market rents have been running

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<v Speaker 3>at about one percent for a couple of years. Measured

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<v Speaker 3>inflation in the index is actually much higher than that

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<v Speaker 3>because it takes a really long time for the index

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<v Speaker 3>to converge down.

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<v Speaker 4>To where market rents are.

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<v Speaker 3>That's a statistical artifact, right, That's an artifact of the

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<v Speaker 3>statistical measurement process. It's indicative of a supplied demand in

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<v Speaker 3>balance that was there in twenty twenty two, twenty twenty three.

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<v Speaker 3>Monterre policy works with lags. It has to be set

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<v Speaker 3>now for twenty twenty seven. So when you look at

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<v Speaker 3>the housing data, right, you see market rents running about

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<v Speaker 3>one percent for a couple of years. There's no supply

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<v Speaker 3>demand in balance there. We should not be setting policy

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<v Speaker 3>for twenty twenty seven based on a supply demand in

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<v Speaker 3>balance that existed in twenty twenty two or twenty twenty three.

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<v Speaker 4>That doesn't make any sense.

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<v Speaker 3>There's other things too, like portfolio management services which confuse

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<v Speaker 3>quantities for prices. This stuff is all well known. If

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<v Speaker 3>you look at market based measures of inflation, they're much

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<v Speaker 3>closer too than they are to three. So I think

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<v Speaker 3>that the excess the overage is a mirage, and it's

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<v Speaker 3>a mistake to ask people to lose their jobs because

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<v Speaker 3>of course of the statistical measurement process.

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<v Speaker 2>And you've got to put out new forecasts on December

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<v Speaker 2>tenth as well, which is going to be complicated by

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<v Speaker 2>the fact we've had limited data more recently. How relevant

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<v Speaker 2>do you think the Canida actually is, because I'll I'll

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<v Speaker 2>offer you the perspective on more straight At the moment,

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<v Speaker 2>it goes something like this. The meeting's on the tenth,

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<v Speaker 2>you don't get the dates fro until the sixteenth. The

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<v Speaker 2>Fed's kind of constrained by that. They can't do anything

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<v Speaker 2>what's your perspective on that.

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<v Speaker 3>Yeah, so, as I said moment ago, monter policy works

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<v Speaker 3>with lags. It'ld be much easier if it hit the

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<v Speaker 3>economy immediately, but it doesn't. It works with lags, So

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<v Speaker 3>you have to set policy based on the forecast. So

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<v Speaker 3>the data matter insofar as they affect your forecast. It

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<v Speaker 3>doesn't make sense to be setting policy for where the

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<v Speaker 3>economy was three or six months ago. We should be

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<v Speaker 3>setting policy based for where the economy is going to

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<v Speaker 3>be twelve to eighteen months from now. And so if

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<v Speaker 3>we have data, it gives us the ability to update

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<v Speaker 3>our four K. But the lack of data doesn't mean

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<v Speaker 3>that we don't have a forecast. We did have a forecast.

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<v Speaker 3>It all gives us as opportunities to falsify a forecast.

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<v Speaker 3>And there hasn't been anything in the data in the news,

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<v Speaker 3>in media stories, in private sector data, alternative data that's

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<v Speaker 3>available to us that would make us think that the

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<v Speaker 3>forecast has somehow nullified. And there's been a big shock

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<v Speaker 3>to it. So, if anything, all the information that we've

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<v Speaker 3>gotten in the interim since September FMC has inclined to

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<v Speaker 3>the Duvish side. You know, we got weaker inflation than

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<v Speaker 3>people expected, and we got a higher unemployment rate than

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<v Speaker 3>folks were expecting. So all of that information should push

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<v Speaker 3>one in the Duvish direction.

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<v Speaker 5>But there are still FED officials that are looking for

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<v Speaker 5>more data, and they have said they're data dependent. They

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<v Speaker 5>want that insurance that they're cutting right now and it's

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<v Speaker 5>the right time. Potentially the unemployment rate might be moving

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<v Speaker 5>up to four point five percent on December sixteenth. Would

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<v Speaker 5>you be in favor of just moving the meeting if

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<v Speaker 5>it meant others felt more reassured to cut interest rates

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<v Speaker 5>in December?

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<v Speaker 3>So you know, I haven't really thought about that, and

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<v Speaker 3>it's not a conversation that It's not a conversation that

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<v Speaker 3>I've been part of. I mean, I agree the meeting dates,

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<v Speaker 3>see the meeting dates seem kind of arbitrary, But at

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<v Speaker 3>the same time, there's a lot of there's a lot

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<v Speaker 3>of stuff that gets done as a result of those

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<v Speaker 3>meeting dates, and you know, people have investments and contracts

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<v Speaker 3>and other decisions that are tied to the timing of

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<v Speaker 3>the meeting date, and I don't know to what extent

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<v Speaker 3>moving those dates would be disruptive for all that. So

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<v Speaker 3>it's something that I'm not sure about. But this ultimately

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<v Speaker 3>comes down to the question of data dependence. Is what

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<v Speaker 3>you do when you don't have a forecast or when

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<v Speaker 3>you don't have any confidence in your forecast. Right, we

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<v Speaker 3>should be forecast dependent, not data dependent. Being excessively data

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<v Speaker 3>dependent is to be too backward looking. And if you're

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<v Speaker 3>too backward looking, you necessarily are going to have the

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<v Speaker 3>wrong policies.

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<v Speaker 5>Neil Daughter rights and he says, the only question that

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<v Speaker 5>matters for you is will you descend for fifty if

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<v Speaker 5>you believe it means not being able to push through

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<v Speaker 5>a twenty five basis point cut.

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<v Speaker 4>Yeah, so absolutely not.

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<v Speaker 3>I would absolutely vote for for a twenty five basis

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<v Speaker 3>point cut if I vote were the marginal vote, There's

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<v Speaker 3>no question about that.

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<v Speaker 4>You know.

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<v Speaker 3>To do other wise would be to cause real harm

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<v Speaker 3>to the economy for purposes of vanity.

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<v Speaker 4>And that's not who I am.

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<v Speaker 6>Going into next year talking about the forecast of what's

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<v Speaker 6>going to happen. A lot of economists to come on

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<v Speaker 6>the show expect a reacceleration on the backs of the

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<v Speaker 6>tax refunds and some of the other stimulative measures that

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<v Speaker 6>could come early next year. How do you factor that

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<v Speaker 6>into your forecast for ongoing weakness in the labor market

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<v Speaker 6>and the consumer.

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<v Speaker 3>Yeah, so I think that, you know, I have not

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<v Speaker 3>been a what I would think of as excessively pessimistic

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<v Speaker 3>on the economy. I do think policy is restrictive, and

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<v Speaker 3>I do think that it's too restrictive, and we don't

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<v Speaker 3>need to be And the longer we remain restrictive, the

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<v Speaker 3>greater the chances that we are the source of an

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<v Speaker 3>economic downturn, which we should not seek to be.

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<v Speaker 4>I think that.

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<v Speaker 3>Many of the many of the factors that will be

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<v Speaker 3>kicking in over the next twelve months that might be

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<v Speaker 3>supportive of GDP growth are things that miss is. They

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<v Speaker 3>really don't have hawks implications for Monterey policy because they

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<v Speaker 3>affect the supply side. And when you think about things

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<v Speaker 3>like relaxing regulations, and I think that that has been

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<v Speaker 3>going on at actually an impressive pace, these are things

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<v Speaker 3>that push out the supply side of the economy and

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<v Speaker 3>therefore don't necessarily create a demand excess of supply. Right,

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<v Speaker 3>Montere policy should be tight if demands is too much

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<v Speaker 3>an excess of supply, and if you push out the

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<v Speaker 3>supply side of the economy, then that's not something you

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<v Speaker 3>worry about.

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<v Speaker 6>There's a duration mismatch here though, the idea that if

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<v Speaker 6>you reduce regulations and you allow people to build supply,

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<v Speaker 6>that it takes a longer time than say, if you

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<v Speaker 6>give people two thousand dollars checks right up front that

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<v Speaker 6>they can spend immediately, or if they get a rebate

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<v Speaker 6>that's a lot bigger from their tax from the tax filings.

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<v Speaker 6>How do you factor in that timing mismatch? Would you

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<v Speaker 6>look through any bump up in inflation next year from

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<v Speaker 6>both stimulative measures as well as a price increases that

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<v Speaker 6>we're hearing from a lot of retailers that they're going

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<v Speaker 6>to pass along.

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<v Speaker 3>So you know, I wouldn't look through I wouldn't look

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<v Speaker 3>through bumps from uh from from checks like.

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<v Speaker 4>That, right, you know, I don't think that. I don't

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<v Speaker 4>think that you'd be able to.

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<v Speaker 3>However, a policy like that has been hasn't been formalized,

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<v Speaker 3>it hasn't been introduced, We don't know the parameters of it.

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<v Speaker 3>It's too early to sort of think about basing a

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<v Speaker 3>forecast on something like that. What we do know is

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<v Speaker 3>that the is that the labor market data have been

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<v Speaker 3>coming in not as strong as we'd like them to

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<v Speaker 3>be in that policy is too restrictive.

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<v Speaker 2>Governor, if we can stay on inflation. Do you know

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<v Speaker 2>when we're going to get some inflation data? When are

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<v Speaker 2>we going to get that? Because we've heard about the

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<v Speaker 2>payroll schedule. I haven't really heard anything about the CPI schedule.

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<v Speaker 2>You've got any indication whatsoever when it's coming.

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<v Speaker 3>Yeah, the BLS put it out on its website this week.

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<v Speaker 3>I think that we're not going to get the November

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<v Speaker 3>CPI data until after the next FMC, so we've got

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<v Speaker 3>to wait for that too. We've got we've got to

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<v Speaker 3>waste that.

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<v Speaker 1>Do you see that, Lisa, Yes, I did.

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<v Speaker 6>I saw that we have to wait and it's not

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<v Speaker 6>clear exactly when we're going to get it, but there's

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<v Speaker 6>a real question going forward about when we might get.

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<v Speaker 1>We don't have the DACE ship, but we don't have.

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<v Speaker 4>The data are on the website.

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<v Speaker 3>Yeah, the BLS has a has a as a list

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<v Speaker 3>of the release dates on.

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<v Speaker 1>The payrolls one. But I've missed the CPI one.

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<v Speaker 2>Which doesn't that just make it an even stronger case

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<v Speaker 2>just to wait and have this meeting when we've got

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<v Speaker 2>all this data.

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<v Speaker 1>Why is it that we have to wait so much

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<v Speaker 1>long before at governor.

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<v Speaker 4>Wait for the data.

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<v Speaker 3>Yes, well, because the government shutdown introduced a whole number

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<v Speaker 3>of snags into the data collection process, and so that

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<v Speaker 3>those snags mean extra time to collect the data, extra

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<v Speaker 3>time to process the data. People have a log gym

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<v Speaker 3>of work to get back to. I mean, we just

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<v Speaker 3>you know, sort of spent several years talking about talking

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<v Speaker 3>about bullwhips from supply chains, right and you know, gets

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<v Speaker 3>pulled in at once. And when you have a government shutdown,

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<v Speaker 3>all the government employees aren't working and they come back

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<v Speaker 3>to work and they've got a ton of work to do,

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<v Speaker 3>all at once. And so you know, we have those

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<v Speaker 3>those bullwhips in government data right now. And you know,

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<v Speaker 3>if that were a market, you'd see some inflation in

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<v Speaker 3>the price of data.

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<v Speaker 4>But it's not a market.

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<v Speaker 2>So give me for coming out with the hawkish hits.

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<v Speaker 2>But we got another one in the last twenty four

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<v Speaker 2>hours two and it came from Beth Hammock laring interest

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<v Speaker 2>rights to support the labor market risk prolonging this period

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<v Speaker 2>of elevated inflation, and it could also encourage risk taking

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<v Speaker 2>and financial markets. Can we finish on that last point,

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<v Speaker 2>risk taking and financial markets. How excessive is it and

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<v Speaker 2>should it be on the ritar of the f WEBC sure.

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<v Speaker 3>So, first of all, as I said before, the excess

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<v Speaker 3>of inflation is a quirk of the statistical process. And

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<v Speaker 3>it is a mistake to ask people to lose their

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<v Speaker 3>jobs as a result of a quirk of the satistical

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<v Speaker 3>process on financial markets. You know, Look, I think that

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<v Speaker 3>lots of things affect financial markets. Tax policy does, regulation

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<v Speaker 3>does technology like artificial intelligence does. It's a mistake to

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<v Speaker 3>conflate the stance of the status of financial markets with

0:09:30.920 --> 0:09:33.559
<v Speaker 3>the status of montary policy. Right, even when you look

0:09:33.559 --> 0:09:37.600
<v Speaker 3>at us something as a financial market as deeply connected

0:09:37.640 --> 0:09:41.880
<v Speaker 3>to mantary policy, like interest rates, We've lived through periods

0:09:41.920 --> 0:09:45.640
<v Speaker 3>of conundrums, right, We're passing through of the Fed funds

0:09:45.679 --> 0:09:48.800
<v Speaker 3>rate into longer term interest rates was confusing to people.

0:09:48.880 --> 0:09:50.520
<v Speaker 3>So it's just a mistake to do a one for

0:09:50.600 --> 0:09:53.040
<v Speaker 3>one mapping of these things. And I think that when

0:09:53.040 --> 0:09:55.560
<v Speaker 3>you look at financial conditions, the financial condition that matters

0:09:55.559 --> 0:09:58.120
<v Speaker 3>most for the real economy is and remain, has been

0:09:58.160 --> 0:10:00.400
<v Speaker 3>and remains housing, right, And this this is an area

0:10:00.400 --> 0:10:03.079
<v Speaker 3>where financial conditions are not tight, so are not loose.

0:10:03.280 --> 0:10:05.760
<v Speaker 3>This is an area where financial conditions are still quite

0:10:05.800 --> 0:10:08.160
<v Speaker 3>tight going out getting a mortgage. You know, this is

0:10:08.640 --> 0:10:11.320
<v Speaker 3>not something that's not a financial condition that I would

0:10:11.320 --> 0:10:14.600
<v Speaker 3>consider to be excessively easy. And so I think it's

0:10:14.640 --> 0:10:16.640
<v Speaker 3>a mistake. And I think it's also a mistake, as

0:10:16.679 --> 0:10:22.160
<v Speaker 3>I said before, to ask people to experience job losses

0:10:23.040 --> 0:10:25.000
<v Speaker 3>because you think the stock market is too high. I

0:10:25.000 --> 0:10:26.840
<v Speaker 3>don't know what the right level for the stock market is,

0:10:27.760 --> 0:10:30.280
<v Speaker 3>and I think that it's a very challenging question to

0:10:30.440 --> 0:10:31.760
<v Speaker 3>be able to answer credibly.

0:10:32.040 --> 0:10:34.000
<v Speaker 4>And to say that we need to create job.

0:10:33.840 --> 0:10:37.000
<v Speaker 3>Losses in order to sort of restore the stock market

0:10:37.000 --> 0:10:38.839
<v Speaker 3>to some level that we think is more reflective of

0:10:38.880 --> 0:10:41.320
<v Speaker 3>fair value is just not a policy view that I hold.

0:10:41.559 --> 0:10:43.040
<v Speaker 6>A lot of people have come on this show and

0:10:43.080 --> 0:10:45.400
<v Speaker 6>said that right now the FED is stuck between a

0:10:45.400 --> 0:10:48.080
<v Speaker 6>conundrum of the K shaped economy where you have people

0:10:48.120 --> 0:10:50.079
<v Speaker 6>at the upper end who are doing just fine and

0:10:50.120 --> 0:10:52.760
<v Speaker 6>are supporting consumption, and people on the lower end who

0:10:52.800 --> 0:10:55.959
<v Speaker 6>are experiencing lack of wage gains and they're experiencing those

0:10:56.040 --> 0:11:00.719
<v Speaker 6>job losses more significantly. How concerned are you about sort

0:11:00.760 --> 0:11:03.160
<v Speaker 6>of your dual roles of trying to help prop up

0:11:03.600 --> 0:11:06.439
<v Speaker 6>and prevent some of those job losses from really escalating,

0:11:06.920 --> 0:11:10.320
<v Speaker 6>while at the same time, potentially cutting rates would exacerbate

0:11:10.360 --> 0:11:13.720
<v Speaker 6>that case shape, and you only exacerbate what you're seeing

0:11:13.920 --> 0:11:15.719
<v Speaker 6>with respect to the wealth divide.

0:11:16.040 --> 0:11:21.640
<v Speaker 3>So Congress didn't task us with addressing all social problems

0:11:21.640 --> 0:11:23.800
<v Speaker 3>in the world, in equality one of them. They tasked

0:11:23.840 --> 0:11:28.160
<v Speaker 3>us with tackling aggregate maximum employment and stable prices. And

0:11:28.200 --> 0:11:31.439
<v Speaker 3>so therefore the right policy to take is to stabilize

0:11:31.440 --> 0:11:34.520
<v Speaker 3>employment and prices, and that's the policy.

0:11:34.559 --> 0:11:35.840
<v Speaker 4>That's the policy that I support.

0:11:36.200 --> 0:11:38.960
<v Speaker 3>I do think though, while discussing the subject of inequality,

0:11:39.200 --> 0:11:41.160
<v Speaker 3>it would be much worse for the people at the

0:11:41.160 --> 0:11:43.920
<v Speaker 3>lower end of the income distribution if the unemployment rate

0:11:43.960 --> 0:11:46.520
<v Speaker 3>continued to go up as a result of our policies.

0:11:47.160 --> 0:11:48.360
<v Speaker 4>That's not something that they.

0:11:48.320 --> 0:11:50.000
<v Speaker 3>Would be that they would welcome, and it's not something

0:11:50.000 --> 0:11:50.880
<v Speaker 3>that I would welcome either.

0:11:51.000 --> 0:11:52.640
<v Speaker 5>Governor arts with the President this week and you have

0:11:52.640 --> 0:11:54.760
<v Speaker 5>an office and I asked them about the FED interviews.

0:11:54.880 --> 0:11:55.880
<v Speaker 4>It says lots of names.

0:11:55.880 --> 0:11:58.079
<v Speaker 5>We may go the standard way quote, it's nice every

0:11:58.080 --> 0:12:00.640
<v Speaker 5>once in a while to go politically correct. Out of

0:12:00.720 --> 0:12:03.400
<v Speaker 5>the names that we know that are being interviewed, who

0:12:03.480 --> 0:12:04.520
<v Speaker 5>is politically correct?

0:12:05.320 --> 0:12:06.720
<v Speaker 4>You know? I don't really know the n work.

0:12:07.240 --> 0:12:09.080
<v Speaker 5>You worked for the president, so you understand how his

0:12:09.080 --> 0:12:11.120
<v Speaker 5>mine works. Do you think it means someone that is

0:12:11.160 --> 0:12:14.679
<v Speaker 5>currently on the board, like a Governor Waller or someone

0:12:14.679 --> 0:12:17.160
<v Speaker 5>that's very close to him in your former colleague Kevin

0:12:17.200 --> 0:12:17.480
<v Speaker 5>has it.

0:12:17.960 --> 0:12:19.680
<v Speaker 3>Yeah, So I mean it should be pretty clear that

0:12:19.720 --> 0:12:21.360
<v Speaker 3>I just always say what's on my mind, and therefore

0:12:21.360 --> 0:12:23.520
<v Speaker 3>I don't even know what politically correct is. So I

0:12:23.520 --> 0:12:25.680
<v Speaker 3>don't even know how to begin addressing that, you know,

0:12:25.679 --> 0:12:27.320
<v Speaker 3>but look, don't I don't make being.

0:12:27.200 --> 0:12:28.559
<v Speaker 5>Too politically correct right now?

0:12:28.600 --> 0:12:31.400
<v Speaker 3>Actually am I've never been accused of that before, so hey,

0:12:31.559 --> 0:12:33.040
<v Speaker 3>you know, I'm happy to have it first.

0:12:33.240 --> 0:12:35.120
<v Speaker 2>Govin a very diplomatic it's going to see you, thanks

0:12:35.120 --> 0:12:36.920
<v Speaker 2>for dropping by, Thanks for having me, Thank you, sir,

0:12:36.920 --> 0:12:37.560
<v Speaker 2>Thank you very much.

0:12:37.600 --> 0:12:39.240
<v Speaker 1>The fact Govin is Stephen Myron