1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio News. 2 00:00:07,840 --> 00:00:10,719 Speaker 2: We'd like to welcome all of our viewers and listeners 3 00:00:10,800 --> 00:00:15,240 Speaker 2: on Bloomberg Television and radio worldwide. And we are here 4 00:00:15,240 --> 00:00:18,120 Speaker 2: in Victor, Idaho at the Rocky Mountain Economic Summit at 5 00:00:18,120 --> 00:00:21,760 Speaker 2: the Bronze Buffalo Ranch at Titon Springs. And Mary Daly 6 00:00:21,840 --> 00:00:25,279 Speaker 2: is joining us, the president of the San Francisco FED, 7 00:00:25,520 --> 00:00:28,760 Speaker 2: and this is her district, so she's very familiar with 8 00:00:28,840 --> 00:00:32,879 Speaker 2: everything that's going on around here. Now. We have, of 9 00:00:32,920 --> 00:00:37,680 Speaker 2: course followed several other speakers, including Paul McCully, who I 10 00:00:37,680 --> 00:00:40,480 Speaker 2: think most of our viewers know as the former chief 11 00:00:40,520 --> 00:00:43,840 Speaker 2: economist at PIMCO and a number of other important jobs. 12 00:00:43,840 --> 00:00:46,560 Speaker 2: And he was talking earlier about the American dream of 13 00:00:46,640 --> 00:00:49,360 Speaker 2: chicken in every pot, and he said that one thing 14 00:00:49,400 --> 00:00:52,239 Speaker 2: that everybody agrees, including at the FED, is that we 15 00:00:52,280 --> 00:00:54,960 Speaker 2: all would like to have a bigger chicken. And I 16 00:00:55,040 --> 00:00:57,000 Speaker 2: just want to make sure that that he's speaking for 17 00:00:57,040 --> 00:00:57,400 Speaker 2: the FED. 18 00:00:57,680 --> 00:00:59,760 Speaker 3: Absolutely we were going to have a bigger chicken or 19 00:00:59,760 --> 00:01:01,960 Speaker 3: a big your vegetable, whatever it is you eat it. 20 00:01:02,200 --> 00:01:03,480 Speaker 1: It's really about prosperity. 21 00:01:03,680 --> 00:01:06,960 Speaker 3: There is no part of our democracy that really doesn't 22 00:01:06,959 --> 00:01:08,120 Speaker 3: want more prosperity. 23 00:01:08,120 --> 00:01:09,520 Speaker 1: And the FED is included in that. 24 00:01:09,880 --> 00:01:13,959 Speaker 3: And our job is challenging but important and good, which 25 00:01:14,000 --> 00:01:17,920 Speaker 3: is we want to support prosperity, support, you know, the 26 00:01:18,000 --> 00:01:21,160 Speaker 3: labor market, and do so without having. 27 00:01:20,920 --> 00:01:23,880 Speaker 1: Price stability be challenged. And that's the role of the FED. 28 00:01:23,920 --> 00:01:26,319 Speaker 3: And if we do our job well and then stay 29 00:01:26,319 --> 00:01:29,319 Speaker 3: in the background, all other things are possible from the 30 00:01:29,360 --> 00:01:31,880 Speaker 3: businesses and consumer's households in our economy. 31 00:01:33,080 --> 00:01:35,279 Speaker 2: Everybody asked me, what are you going to ask Mary? 32 00:01:35,680 --> 00:01:38,399 Speaker 2: And I said, well, I'll wake up on Thursday morning 33 00:01:38,480 --> 00:01:41,760 Speaker 2: and I'll look at the president's social media feed and 34 00:01:42,160 --> 00:01:44,400 Speaker 2: that will tell me what the story of the day is. 35 00:01:44,440 --> 00:01:48,400 Speaker 2: And of course he can't. He can't lay off. So 36 00:01:48,440 --> 00:01:51,400 Speaker 2: I have to ask you, how is all that affecting 37 00:01:51,640 --> 00:01:54,200 Speaker 2: you as a policymaker and your colleagues. 38 00:01:54,920 --> 00:01:56,920 Speaker 1: You know, our work is really important. 39 00:01:56,960 --> 00:02:01,120 Speaker 3: On the front lobby of the San Francisco FAT Head Office, 40 00:02:01,640 --> 00:02:03,080 Speaker 3: we put a sign up. I put it up the 41 00:02:03,200 --> 00:02:05,440 Speaker 3: very first day I became president. It says our work 42 00:02:05,480 --> 00:02:09,680 Speaker 3: serves every Americans and countless global citizens, but that every 43 00:02:09,720 --> 00:02:14,000 Speaker 3: American is really important. And that's the work Congress gave us, 44 00:02:14,040 --> 00:02:17,520 Speaker 3: As Paul said, Congress gave us our responsibilities and our 45 00:02:17,520 --> 00:02:20,240 Speaker 3: responsibilities our price stability and full employment. 46 00:02:20,360 --> 00:02:22,560 Speaker 1: We work to carry those out every time. 47 00:02:22,960 --> 00:02:27,400 Speaker 3: Our teams are the Committee, the FMC, we are laser 48 00:02:27,480 --> 00:02:31,000 Speaker 3: focused on doing those responsibilities. And if you look at 49 00:02:31,000 --> 00:02:34,400 Speaker 3: the headline numbers on inflation, we still have some work 50 00:02:34,440 --> 00:02:37,119 Speaker 3: to do, but we are in a good place and 51 00:02:37,200 --> 00:02:39,400 Speaker 3: we need to finish the job. So that's where we 52 00:02:39,440 --> 00:02:42,119 Speaker 3: are and other things. You know, there have been periods 53 00:02:42,120 --> 00:02:46,280 Speaker 3: of political pressure before and history serves us best as 54 00:02:46,520 --> 00:02:48,880 Speaker 3: a guide there. When you stick to your work, the 55 00:02:48,919 --> 00:02:50,880 Speaker 3: work that Congress gave us, the work that is for 56 00:02:50,919 --> 00:02:55,760 Speaker 3: the American people, then everything else falls into place. 57 00:02:56,200 --> 00:03:00,160 Speaker 2: So the President has obviously been sort of direct in 58 00:03:00,360 --> 00:03:04,400 Speaker 2: his criticism of Chairman Pole. Jugury Secretary Scott Besson said 59 00:03:04,400 --> 00:03:08,120 Speaker 2: on Bloomberg Television this week that the President is just 60 00:03:08,280 --> 00:03:12,960 Speaker 2: working the refs, trying to create a favorable view of 61 00:03:13,000 --> 00:03:16,960 Speaker 2: what should be done. Does that make any impression on you? 62 00:03:17,040 --> 00:03:18,359 Speaker 2: Does it work to work the refs? 63 00:03:19,240 --> 00:03:21,720 Speaker 3: You know? For me, what is really important is looking 64 00:03:21,760 --> 00:03:23,200 Speaker 3: at the incoming information. 65 00:03:23,960 --> 00:03:26,320 Speaker 1: How close we are? I think one of the Pauls said, 66 00:03:26,360 --> 00:03:28,000 Speaker 1: you know, we're really close. 67 00:03:28,120 --> 00:03:32,000 Speaker 3: We have an economy that's working, we have solid growth, 68 00:03:32,040 --> 00:03:35,000 Speaker 3: we have a solid labor market. You know, the consumers 69 00:03:35,040 --> 00:03:38,920 Speaker 3: are spending, but they're you know, making their way and 70 00:03:38,960 --> 00:03:43,600 Speaker 3: their families. Ultimately, what is still bothersome is not we 71 00:03:43,640 --> 00:03:46,960 Speaker 3: haven't achieved price stability. And you know, I define price 72 00:03:47,000 --> 00:03:49,320 Speaker 3: stability this way. I do think it's sort of an 73 00:03:49,400 --> 00:03:52,760 Speaker 3: ethos part. It's when people don't have to worry about inflation. 74 00:03:52,880 --> 00:03:54,680 Speaker 3: When I go out and ask people. 75 00:03:54,840 --> 00:03:56,600 Speaker 1: Across the twelfth district, across the. 76 00:03:56,560 --> 00:04:00,200 Speaker 3: Country, what's your top worry and they stop saying inflation, well, 77 00:04:00,200 --> 00:04:02,640 Speaker 3: then that's going to be a victory because they suffered 78 00:04:02,680 --> 00:04:05,680 Speaker 3: for too long. And remember, inflation is like the largest 79 00:04:05,680 --> 00:04:06,640 Speaker 3: tax people pay. 80 00:04:06,840 --> 00:04:08,120 Speaker 1: It's an unpredictable tax. 81 00:04:08,160 --> 00:04:11,160 Speaker 3: You're on a treadmill, you earn well, you've invest in 82 00:04:11,200 --> 00:04:14,440 Speaker 3: your business, and inflation eroads you're well being. So I 83 00:04:14,480 --> 00:04:16,640 Speaker 3: think ultimately that's what we have to think about. And 84 00:04:16,680 --> 00:04:19,720 Speaker 3: that's really enough to think about, frankly, and that's where 85 00:04:19,760 --> 00:04:23,200 Speaker 3: my focus is. So other things are not distracting us 86 00:04:23,200 --> 00:04:26,200 Speaker 3: from our core missions. And our core missions, as we 87 00:04:26,240 --> 00:04:27,760 Speaker 3: all know, have come from Congress. 88 00:04:28,279 --> 00:04:31,920 Speaker 2: So essentially you're saying we are going to remain focused 89 00:04:31,960 --> 00:04:34,640 Speaker 2: on inflation. We're not going to consider cutting rates until 90 00:04:34,680 --> 00:04:35,839 Speaker 2: we are sure inflation. 91 00:04:36,080 --> 00:04:36,840 Speaker 1: I did not say that. 92 00:04:38,960 --> 00:04:40,480 Speaker 2: I have many words in her mouth to make it 93 00:04:40,560 --> 00:04:42,440 Speaker 2: easier for the headline writers. 94 00:04:42,800 --> 00:04:44,919 Speaker 3: I know that, and so that's why I did not 95 00:04:45,000 --> 00:04:47,560 Speaker 3: say that, so that they understand the next part of that. 96 00:04:47,800 --> 00:04:49,919 Speaker 1: No, seriously, I think right now. 97 00:04:49,720 --> 00:04:52,479 Speaker 3: When I look at the economy and policy, I see 98 00:04:52,480 --> 00:04:54,800 Speaker 3: them as both in a good place. But when I 99 00:04:54,839 --> 00:04:59,280 Speaker 3: look out, we really have interest rates for a significant 100 00:04:59,360 --> 00:05:02,640 Speaker 3: number of years now in restrictive territory, and what we 101 00:05:02,680 --> 00:05:06,279 Speaker 3: have is an underlying economy that is responding those higher 102 00:05:06,279 --> 00:05:06,880 Speaker 3: interest rates. 103 00:05:06,920 --> 00:05:08,000 Speaker 1: You have growth slowing. 104 00:05:08,360 --> 00:05:12,160 Speaker 3: The frothy labor market that was pervasive after the pandemic 105 00:05:12,520 --> 00:05:15,840 Speaker 3: has now moved to a more sustainable place. People are 106 00:05:15,880 --> 00:05:18,400 Speaker 3: getting jobs, but firms are finding it easier to find 107 00:05:18,440 --> 00:05:21,840 Speaker 3: workers and importantly keep workers so that they're not constantly 108 00:05:21,880 --> 00:05:24,760 Speaker 3: on that revolving door of train and work of the 109 00:05:24,760 --> 00:05:27,240 Speaker 3: worker leaves. So I think those are all good positions. 110 00:05:27,640 --> 00:05:31,120 Speaker 3: Then we have inflation coming down, and if we extract 111 00:05:31,200 --> 00:05:34,599 Speaker 3: our move away from just the goods price inflations, which 112 00:05:34,760 --> 00:05:37,760 Speaker 3: do show those numbers have been showing, and certainly showed 113 00:05:37,760 --> 00:05:41,120 Speaker 3: in this week's print, the effect of tariffs, some of 114 00:05:41,120 --> 00:05:43,200 Speaker 3: those being passed through but if you look at the 115 00:05:43,240 --> 00:05:47,159 Speaker 3: other areas of inflation, you just don't see that inflation 116 00:05:47,320 --> 00:05:48,200 Speaker 3: is pushing back up. 117 00:05:48,240 --> 00:05:49,960 Speaker 1: You see it gradually going down. 118 00:05:50,320 --> 00:05:54,480 Speaker 3: And housing services inflation, which has long been elevated, has 119 00:05:54,560 --> 00:05:59,080 Speaker 3: been coming down over this year. Services inflation without housing 120 00:05:59,279 --> 00:06:02,680 Speaker 3: has been coming down, slowly but coming down. So I 121 00:06:02,720 --> 00:06:05,359 Speaker 3: see these is the result of the policy that we 122 00:06:05,400 --> 00:06:08,520 Speaker 3: have in place. But at some point, if you hold 123 00:06:08,560 --> 00:06:11,400 Speaker 3: the economy too tight, the reins we're in horse country. 124 00:06:11,480 --> 00:06:14,360 Speaker 3: If you hold the bridle too tight, you actually end 125 00:06:14,440 --> 00:06:15,120 Speaker 3: up stopping. 126 00:06:15,360 --> 00:06:18,120 Speaker 1: And if you stop, then you take the problem people. 127 00:06:17,880 --> 00:06:20,200 Speaker 3: Did have, which was inflation, and turn it into a 128 00:06:20,200 --> 00:06:22,960 Speaker 3: problem that they don't have, which is the labor market. 129 00:06:23,040 --> 00:06:25,640 Speaker 3: So that's why I see these two goals. The dual 130 00:06:25,680 --> 00:06:28,440 Speaker 3: mandate is so critical because it gives you the kind 131 00:06:28,480 --> 00:06:31,559 Speaker 3: of balance that ensures people have both things they need, 132 00:06:31,800 --> 00:06:35,159 Speaker 3: opportunities in the labor market and price stability so that 133 00:06:35,160 --> 00:06:38,120 Speaker 3: when they work and they invest, they can build careers 134 00:06:38,160 --> 00:06:40,280 Speaker 3: and families and communities. 135 00:06:41,200 --> 00:06:44,159 Speaker 2: So let me ask you how you're thinking about the 136 00:06:44,200 --> 00:06:46,680 Speaker 2: economy and what you should do right now. In the 137 00:06:46,720 --> 00:06:48,560 Speaker 2: sense that this was a big data week, we had 138 00:06:49,000 --> 00:06:51,919 Speaker 2: consumer prices and producer prices both come in at the 139 00:06:51,920 --> 00:06:58,040 Speaker 2: headline level lower than anticipated, slowing in economy, especially service prices, 140 00:06:58,560 --> 00:07:01,760 Speaker 2: but we see some under lying pressures in sectors that 141 00:07:01,800 --> 00:07:05,480 Speaker 2: are affected by tariffs. A retail sales today came in 142 00:07:05,640 --> 00:07:09,200 Speaker 2: stronger than expected, much stronger than expected, except for a 143 00:07:09,200 --> 00:07:13,520 Speaker 2: couple areas that would be affected by tariffs. So could 144 00:07:13,560 --> 00:07:15,880 Speaker 2: you explain to this audience, and of course the guy 145 00:07:15,880 --> 00:07:19,680 Speaker 2: at sixteen hundred Pennsylvania Avenue if he's listening, how you 146 00:07:19,800 --> 00:07:23,040 Speaker 2: put all that together and decide when do winterest rates 147 00:07:23,080 --> 00:07:23,520 Speaker 2: come down? 148 00:07:23,840 --> 00:07:26,760 Speaker 3: Well, there's always been three scenarios that were possible. 149 00:07:27,280 --> 00:07:28,240 Speaker 1: So the first. 150 00:07:28,120 --> 00:07:30,600 Speaker 3: Scenario was that we'd get the tariff effect and it 151 00:07:30,640 --> 00:07:35,280 Speaker 3: would spill over into all other sectors. So if the 152 00:07:35,520 --> 00:07:39,520 Speaker 3: price of a tariff good goes up, then your person 153 00:07:39,560 --> 00:07:41,880 Speaker 3: cutting your hair, since we were talking about barber's earlier 154 00:07:42,120 --> 00:07:44,840 Speaker 3: raises his or her prices, and suddenly you've got spillover 155 00:07:45,120 --> 00:07:47,840 Speaker 3: that would make it more persistent. We haven't seen any 156 00:07:47,920 --> 00:07:51,160 Speaker 3: evidence that that's occurring. And I think that the house 157 00:07:51,200 --> 00:07:55,400 Speaker 3: price inflation, the house services inflation, and the services inflation 158 00:07:55,520 --> 00:07:59,400 Speaker 3: coming down reassures you that we're not getting that persistent component. 159 00:08:00,000 --> 00:08:01,600 Speaker 1: And there's two other scenarios. 160 00:08:01,640 --> 00:08:03,360 Speaker 3: One is that you get the tariff effect and it's 161 00:08:03,760 --> 00:08:06,000 Speaker 3: relatively contained and it becomes a one off. 162 00:08:06,280 --> 00:08:07,360 Speaker 1: And the second is you just. 163 00:08:07,280 --> 00:08:11,280 Speaker 3: Don't see much of the effect because what happens is 164 00:08:11,600 --> 00:08:13,920 Speaker 3: that as the tariffs settle in to whatever level they're 165 00:08:13,960 --> 00:08:16,680 Speaker 3: going to be, you know, firms who are importing from 166 00:08:16,720 --> 00:08:19,040 Speaker 3: other countries say you take half, I'll take half to 167 00:08:19,080 --> 00:08:22,400 Speaker 3: the country. Then down the spy chain or the production chain, 168 00:08:22,680 --> 00:08:24,360 Speaker 3: you're splitting it all the way and so that by 169 00:08:24,440 --> 00:08:27,520 Speaker 3: the time it hits consumers it's a more muted impact 170 00:08:27,840 --> 00:08:30,000 Speaker 3: than what is the announced tariffs. You know, one of 171 00:08:30,000 --> 00:08:32,160 Speaker 3: the pieces of evidence we have for that is that 172 00:08:32,240 --> 00:08:36,160 Speaker 3: the effective teriff right as of last week was calculator 173 00:08:36,200 --> 00:08:39,360 Speaker 3: around sixteen percent, but tariff revenue is only eight percent. 174 00:08:39,440 --> 00:08:43,120 Speaker 3: So that tells you there's some splitting, there's some leakages, 175 00:08:43,160 --> 00:08:46,040 Speaker 3: some workarounds. Companies are very innovative, they're figuring out other 176 00:08:46,080 --> 00:08:48,480 Speaker 3: ways to do things, and you know, this is a 177 00:08:48,520 --> 00:08:51,880 Speaker 3: global shock, and so they're all companies across the globe 178 00:08:51,880 --> 00:08:54,000 Speaker 3: are figuring it out. So when I think of that, 179 00:08:54,360 --> 00:08:56,400 Speaker 3: I'm really of the mind, well, we might end up 180 00:08:56,440 --> 00:08:57,520 Speaker 3: with a more muted. 181 00:08:57,240 --> 00:08:59,360 Speaker 1: Impact of tariffs than we thought, and. 182 00:08:59,400 --> 00:09:02,960 Speaker 3: Then I I've been this is something I've said publicly 183 00:09:03,000 --> 00:09:06,560 Speaker 3: since you know, January, is all administrations come in not 184 00:09:06,640 --> 00:09:07,320 Speaker 3: with one. 185 00:09:07,120 --> 00:09:09,120 Speaker 1: Policy, but with a slate of policies. 186 00:09:09,480 --> 00:09:11,839 Speaker 3: And you know, Paul Ryan said this this morning, and 187 00:09:11,880 --> 00:09:15,320 Speaker 3: I think it's worth emphasizing the slate of policies have 188 00:09:15,840 --> 00:09:20,520 Speaker 3: you know, push and pull effects, So deregulation and tax policy, 189 00:09:20,600 --> 00:09:24,280 Speaker 3: tax relief, those are growth inducing policies. The tariffs could 190 00:09:24,280 --> 00:09:29,040 Speaker 3: be and the immigration policy could be growth impairing policies. 191 00:09:29,080 --> 00:09:31,440 Speaker 3: But we don't know yet, right and we certainly don't 192 00:09:31,440 --> 00:09:33,000 Speaker 3: know thet net effect of those. 193 00:09:33,200 --> 00:09:34,200 Speaker 1: And so that's why it's. 194 00:09:34,040 --> 00:09:37,240 Speaker 3: Important to take in the information and not raise, not 195 00:09:37,360 --> 00:09:40,360 Speaker 3: lower rates, excuse me, not lower rates preemptively, because we 196 00:09:40,440 --> 00:09:41,559 Speaker 3: just don't have that certainty. 197 00:09:41,880 --> 00:09:43,680 Speaker 1: And then the economy is in a good place. 198 00:09:43,960 --> 00:09:46,800 Speaker 3: At the same time, you can't wait forever because if 199 00:09:46,800 --> 00:09:49,280 Speaker 3: we wait too inflation gets to two percent, well then 200 00:09:49,320 --> 00:09:52,360 Speaker 3: we've lost We've likely injured the economy in some way 201 00:09:52,400 --> 00:09:55,280 Speaker 3: that was completely unnecessary. And so I'm of the mind 202 00:09:55,320 --> 00:09:57,880 Speaker 3: that you know that the summary of economic projections we 203 00:09:57,920 --> 00:10:00,480 Speaker 3: put out, which had two rate cuts for this year, 204 00:10:00,520 --> 00:10:02,880 Speaker 3: I think that's a reasonable outlook to have. 205 00:10:03,200 --> 00:10:04,600 Speaker 1: Of course, we are data dependent. 206 00:10:04,720 --> 00:10:08,040 Speaker 3: If all of you who are business owners say no, Mary, 207 00:10:08,400 --> 00:10:10,640 Speaker 3: the inflation's right around the corner and is going to 208 00:10:10,640 --> 00:10:12,760 Speaker 3: spill over, well, then that's a different thing. It's one 209 00:10:12,800 --> 00:10:15,720 Speaker 3: of the reasons Reserve Bank presidents in particular spends so 210 00:10:15,880 --> 00:10:20,240 Speaker 3: much time in their communities asking questions like I asked Crystal. 211 00:10:19,920 --> 00:10:22,240 Speaker 1: This morning, what are you thinking? What are you seeing? 212 00:10:22,720 --> 00:10:25,120 Speaker 1: Are you raising prices because of this? That? And she 213 00:10:25,200 --> 00:10:25,719 Speaker 1: can give me. 214 00:10:25,720 --> 00:10:28,760 Speaker 3: That information, and so far I'm not hearing that that's 215 00:10:28,760 --> 00:10:30,000 Speaker 3: a pervasive outcome. 216 00:10:30,760 --> 00:10:32,840 Speaker 2: Let me dig deeper into that and ask you. I 217 00:10:32,880 --> 00:10:36,200 Speaker 2: know you talking to CEOs and companies all across the 218 00:10:36,200 --> 00:10:39,560 Speaker 2: district all the time, what's the basic attitude most of 219 00:10:39,640 --> 00:10:42,440 Speaker 2: the time. I'm told by folks at the FED that 220 00:10:42,520 --> 00:10:44,800 Speaker 2: everybody's just sort of sitting on their hands right now. 221 00:10:44,840 --> 00:10:45,600 Speaker 1: Not in the West. 222 00:10:45,679 --> 00:10:48,480 Speaker 3: Maybe it's our Western spirit, but I have the nine 223 00:10:48,520 --> 00:10:51,800 Speaker 3: Western states and I don't see sitting on hands behavior. 224 00:10:51,840 --> 00:10:55,439 Speaker 3: I see cautious optimism. And there's a cautiousness people, aren't. 225 00:10:55,640 --> 00:10:55,880 Speaker 3: You know. 226 00:10:55,960 --> 00:10:58,800 Speaker 1: What I heard originally was we're going to wait and see. 227 00:10:58,880 --> 00:11:01,400 Speaker 3: But now that the direction of travel on tariff seems 228 00:11:01,440 --> 00:11:04,760 Speaker 3: to be negotiation to lower rates than we're announced on 229 00:11:05,080 --> 00:11:07,640 Speaker 3: Liberation Day, and the tax policy and other things that 230 00:11:07,679 --> 00:11:10,680 Speaker 3: past people are already seeing that they can work in 231 00:11:10,320 --> 00:11:13,440 Speaker 3: this system. And so you know, I've been to a 232 00:11:13,440 --> 00:11:17,000 Speaker 3: lot of places since January, and I've been to Alaska twice, 233 00:11:17,120 --> 00:11:20,120 Speaker 3: which is at the heart of some of the changes 234 00:11:20,160 --> 00:11:22,480 Speaker 3: in programs that you see. And what they are is 235 00:11:22,520 --> 00:11:26,920 Speaker 3: cautiously optimistic. Come to the inter Mountain West cautiously optimistic. 236 00:11:27,160 --> 00:11:30,960 Speaker 3: California cautiously optimistic. So you know, whether I'm in the 237 00:11:30,960 --> 00:11:34,960 Speaker 3: coastal part of my district, the you know, Alaska, I 238 00:11:35,000 --> 00:11:37,719 Speaker 3: haven't been to a whye, but they're also cautiously optimistic. 239 00:11:38,000 --> 00:11:43,360 Speaker 3: But the inter Mountain West, I think this is a 240 00:11:43,600 --> 00:11:47,559 Speaker 3: You guys are always a little poster children for optimistic, 241 00:11:47,840 --> 00:11:50,480 Speaker 3: but I think it's really optimistic at this point. And 242 00:11:50,640 --> 00:11:53,760 Speaker 3: you know, recognizing costs may rise, other things may happen, 243 00:11:53,840 --> 00:11:57,360 Speaker 3: but workers are easier to find opportunities are out there. 244 00:11:57,520 --> 00:11:59,920 Speaker 3: Maybe not taking every risk you would take if every 245 00:12:00,040 --> 00:12:03,880 Speaker 3: thing was certain, but certainly not stalling out and waiting 246 00:12:03,880 --> 00:12:06,880 Speaker 3: to see, you know, the growth. One of my directors 247 00:12:06,880 --> 00:12:10,200 Speaker 3: put it as growth does not come to the meek. 248 00:12:10,640 --> 00:12:12,200 Speaker 1: So you have to take some risks. 249 00:12:12,000 --> 00:12:15,120 Speaker 2: To do well. When you do go to Hawaii, let 250 00:12:15,120 --> 00:12:17,280 Speaker 2: me know. I know, come out and cover. 251 00:12:17,160 --> 00:12:19,640 Speaker 1: That I go all that I go regularly. 252 00:12:19,679 --> 00:12:21,720 Speaker 3: It is in the district, but I haven't been this year, 253 00:12:21,720 --> 00:12:23,120 Speaker 3: but I will let you know next time. 254 00:12:23,640 --> 00:12:26,640 Speaker 2: Another question on what you're hearing from CEOs. The big 255 00:12:26,720 --> 00:12:30,720 Speaker 2: question about whether we have an inflation impact from tariffs 256 00:12:30,840 --> 00:12:33,760 Speaker 2: is whether companies are going to pass them along. What 257 00:12:33,840 --> 00:12:36,480 Speaker 2: are the bosses out there, the people who we should 258 00:12:36,480 --> 00:12:39,520 Speaker 2: have asked Crystal, what are they telling you about that? 259 00:12:39,920 --> 00:12:43,080 Speaker 3: Well, no, firms live in an equilibrium or an ecosystem 260 00:12:43,160 --> 00:12:46,360 Speaker 3: like everyone else, and so the impulse, of course is 261 00:12:46,400 --> 00:12:49,720 Speaker 3: to pass along any cost increase and protect margins. But 262 00:12:49,760 --> 00:12:53,559 Speaker 3: there's also a recognitions that customers, consumers are exhausted, right 263 00:12:53,600 --> 00:12:56,880 Speaker 3: They've been paying higher price levels and then with rising inflation, 264 00:12:57,160 --> 00:12:59,160 Speaker 3: and as the economy slows, and you see this in 265 00:12:59,200 --> 00:13:01,920 Speaker 3: the sentiments based for consumers, they're a little more worried 266 00:13:01,920 --> 00:13:04,000 Speaker 3: about the job markets. So they're going to be even pickier, 267 00:13:04,240 --> 00:13:07,160 Speaker 3: and so you would expect retail spending to slow today. 268 00:13:07,480 --> 00:13:09,400 Speaker 3: If you average the two months, you get something that 269 00:13:09,440 --> 00:13:13,160 Speaker 3: looks kind of normal. But we see consumer spending over time, 270 00:13:13,280 --> 00:13:16,160 Speaker 3: slowing from where it was, but not falling off a cliff. 271 00:13:16,200 --> 00:13:18,280 Speaker 3: So I think that's just part of a solid economy. 272 00:13:18,480 --> 00:13:21,680 Speaker 3: But it does discipline the idea that you'll just simply 273 00:13:21,760 --> 00:13:23,000 Speaker 3: raise prices. 274 00:13:22,600 --> 00:13:24,600 Speaker 1: And push them completely through. 275 00:13:24,679 --> 00:13:27,760 Speaker 3: And so what we're hearing is that companies are saying 276 00:13:27,880 --> 00:13:31,760 Speaker 3: they're trying to negotiate with the import country to take 277 00:13:31,800 --> 00:13:34,240 Speaker 3: a little bit, the importing firms take a little bit off, 278 00:13:34,400 --> 00:13:36,800 Speaker 3: and then they're trying to push it along the supply chains. 279 00:13:36,960 --> 00:13:39,720 Speaker 3: They'll pass a little bit through, but unlikely to pass 280 00:13:39,800 --> 00:13:42,640 Speaker 3: the whole thing through. And importantly, in the goods sector, 281 00:13:42,760 --> 00:13:46,720 Speaker 3: this is especially a parent because if at the post 282 00:13:46,760 --> 00:13:51,040 Speaker 3: pandemic there was this massive, really large, significant you could 283 00:13:51,040 --> 00:13:54,680 Speaker 3: see it in the data rotation of consumers to goods 284 00:13:54,679 --> 00:13:59,000 Speaker 3: purchases over services purchases, and people will buying many more 285 00:13:59,000 --> 00:14:02,480 Speaker 3: goods than they bought. But now their coffers are probably full. 286 00:14:03,679 --> 00:14:05,720 Speaker 3: They have a lot of pelotons and other things and 287 00:14:05,760 --> 00:14:08,240 Speaker 3: so you know, bikes and things of that sort. So 288 00:14:08,480 --> 00:14:11,800 Speaker 3: it's very easy for consumers to be priced sensitive on 289 00:14:11,880 --> 00:14:15,400 Speaker 3: those items and then turn themselves back to services and 290 00:14:15,440 --> 00:14:17,640 Speaker 3: buy experiences over goods. 291 00:14:17,640 --> 00:14:19,640 Speaker 1: And I think the goods providers are aware of that. 292 00:14:20,040 --> 00:14:23,160 Speaker 3: So whatever the impulse is, the practicality has to meet 293 00:14:23,200 --> 00:14:23,800 Speaker 3: the consumer. 294 00:14:24,320 --> 00:14:27,400 Speaker 2: What is you use the words of solid economy? What 295 00:14:27,560 --> 00:14:31,320 Speaker 2: to you is a solid economy? And how far do 296 00:14:31,320 --> 00:14:33,320 Speaker 2: you think will be from that at the end of 297 00:14:33,360 --> 00:14:33,680 Speaker 2: the year. 298 00:14:34,120 --> 00:14:37,160 Speaker 3: You know, if we see what we've been seeing, which 299 00:14:37,200 --> 00:14:40,280 Speaker 3: is that we're slowed to a sustainable pace. And right 300 00:14:40,320 --> 00:14:43,000 Speaker 3: now you know two percent growth is the estimate of trend. 301 00:14:43,040 --> 00:14:47,000 Speaker 3: If you simply add up productivity growth and the labor 302 00:14:47,000 --> 00:14:50,400 Speaker 3: force growth, so we could get more out of productivity 303 00:14:50,440 --> 00:14:53,640 Speaker 3: and get a higher number. We could get more out 304 00:14:53,680 --> 00:14:58,280 Speaker 3: of productivity, get a higher number. We could absolutely grow 305 00:14:58,280 --> 00:15:00,520 Speaker 3: a little faster. I wouldn't be surprised about that, but 306 00:15:00,600 --> 00:15:03,480 Speaker 3: I would I don't think we need to slow precipitously 307 00:15:03,920 --> 00:15:06,600 Speaker 3: to produce the last mile on inflation. 308 00:15:06,720 --> 00:15:08,760 Speaker 1: If you will, I think we can actually do it. 309 00:15:08,800 --> 00:15:11,640 Speaker 3: With this study of growth, expansion and the labor market 310 00:15:11,680 --> 00:15:14,000 Speaker 3: that hovers around the current level. I wouldn't want to 311 00:15:14,000 --> 00:15:17,720 Speaker 3: see more weakness in the labor market. I really wouldn't 312 00:15:17,720 --> 00:15:19,480 Speaker 3: want to see that, Which is why you can't wait 313 00:15:19,520 --> 00:15:22,440 Speaker 3: forever thinking that inflation is just around the corner. So 314 00:15:22,480 --> 00:15:24,680 Speaker 3: we have to wait till we know, I think, you know, 315 00:15:24,840 --> 00:15:28,800 Speaker 3: clarity in central banking is overrated. We'd want, we want 316 00:15:28,920 --> 00:15:31,960 Speaker 3: some clarity, but we can't wait for perfect clarity, because 317 00:15:32,000 --> 00:15:34,680 Speaker 3: then we'll always be backward looking and by then it's 318 00:15:34,720 --> 00:15:35,120 Speaker 3: too late. 319 00:15:35,960 --> 00:15:39,960 Speaker 2: You mentioned potential growth, which is the sum of productivity 320 00:15:40,000 --> 00:15:43,960 Speaker 2: and labor force growth. The President has also got policies 321 00:15:43,960 --> 00:15:47,400 Speaker 2: on labor force growth, bringing it way down. Have you 322 00:15:47,480 --> 00:15:51,000 Speaker 2: seen effects on the economy in your district yet? From that? 323 00:15:51,400 --> 00:15:55,680 Speaker 3: You know, you see pockets of places where firms relied 324 00:15:55,720 --> 00:16:00,040 Speaker 3: on immigration, legal immigration as well, and people have the 325 00:16:00,120 --> 00:16:02,160 Speaker 3: is just a chilling effect on those markets, and so 326 00:16:02,280 --> 00:16:04,520 Speaker 3: you hear it, but it's in pockets. I wouldn't say 327 00:16:04,520 --> 00:16:08,280 Speaker 3: there's a broad based concern over that at this point. 328 00:16:08,320 --> 00:16:10,280 Speaker 3: I think there was a lot of concern originally, but 329 00:16:10,320 --> 00:16:13,360 Speaker 3: it just hasn't materialized that way, and so that's been 330 00:16:13,360 --> 00:16:17,280 Speaker 3: a help. Now on we talked about labor force growth. 331 00:16:17,840 --> 00:16:20,800 Speaker 3: It is a fact that we have one of the 332 00:16:20,880 --> 00:16:25,560 Speaker 3: lowest labor force participation rates in the industrialized world for 333 00:16:25,920 --> 00:16:29,800 Speaker 3: men largely, but women to between twenty five and fifty four. 334 00:16:30,240 --> 00:16:34,440 Speaker 3: So our industrialized competitors all have higher labor force participation 335 00:16:34,520 --> 00:16:37,000 Speaker 3: rates that we do. So when we talk about labor 336 00:16:37,000 --> 00:16:39,200 Speaker 3: force growth, I think we have to broaden it beyond 337 00:16:39,880 --> 00:16:45,440 Speaker 3: the immigration and if immigration's gone, where our hands are tied. Really, 338 00:16:46,560 --> 00:16:49,320 Speaker 3: what is the remedy for so many men in particular 339 00:16:49,400 --> 00:16:50,560 Speaker 3: sitting on the sidelines. 340 00:16:51,800 --> 00:16:55,320 Speaker 2: Is there a model for what you think happens to 341 00:16:55,720 --> 00:16:59,520 Speaker 2: the labor market based on the immigration policies the administration. 342 00:16:59,160 --> 00:17:03,360 Speaker 3: Has, You know, we have a way immigration has gone. 343 00:17:03,440 --> 00:17:05,800 Speaker 3: It went way up and it's come way down. One 344 00:17:05,840 --> 00:17:08,760 Speaker 3: of the remedies that firms use, frankly, is they increase 345 00:17:08,840 --> 00:17:11,879 Speaker 3: technology so that they can use the workforce that we 346 00:17:12,000 --> 00:17:14,879 Speaker 3: have and match it with technology. And you see that, 347 00:17:14,960 --> 00:17:19,080 Speaker 3: you know many we've all been to hotels and convenience 348 00:17:19,080 --> 00:17:22,160 Speaker 3: stores and other things where self checkout and self check 349 00:17:22,240 --> 00:17:25,240 Speaker 3: in and all these things have technology solutions coming. I 350 00:17:25,280 --> 00:17:28,520 Speaker 3: also think, you know, we have this Emerging Tech Economic 351 00:17:28,560 --> 00:17:31,040 Speaker 3: Research Network at the San Francisco FED. We've launched it 352 00:17:31,040 --> 00:17:34,280 Speaker 3: in January twenty twenty four, and we do CEO round 353 00:17:34,280 --> 00:17:37,560 Speaker 3: tables and other things around this topic. And it has 354 00:17:37,640 --> 00:17:42,119 Speaker 3: been just astounding how many medium and small sized businesses 355 00:17:42,359 --> 00:17:46,280 Speaker 3: are adopting generative AI or AI solutions that aren't generitive 356 00:17:46,359 --> 00:17:49,960 Speaker 3: AI just planing on machine learning to augment their talent 357 00:17:50,040 --> 00:17:54,280 Speaker 3: pool and actually expand their productivity with a smaller workforce 358 00:17:54,280 --> 00:17:55,320 Speaker 3: that can't grow as fast. 359 00:17:55,320 --> 00:17:57,120 Speaker 1: So I think there are solutions there. 360 00:17:57,160 --> 00:18:00,000 Speaker 3: And if you could put that productivity and an invasion 361 00:18:00,840 --> 00:18:03,960 Speaker 3: with some increase in the domestic labor force, then I 362 00:18:04,000 --> 00:18:06,600 Speaker 3: think that could be a very win win situation for 363 00:18:06,680 --> 00:18:08,160 Speaker 3: expanding our growth rate. 364 00:18:08,440 --> 00:18:12,800 Speaker 2: When personal computers came along, the productivity gains were talted. 365 00:18:12,920 --> 00:18:15,760 Speaker 2: That didn't show up for quite some time. I know 366 00:18:15,800 --> 00:18:19,840 Speaker 2: you followed the tech world very closely, silicon valleys in 367 00:18:19,880 --> 00:18:24,640 Speaker 2: your district. When are we going to see the productivity 368 00:18:24,680 --> 00:18:30,359 Speaker 2: gains from AI and how is that offset by job 369 00:18:30,480 --> 00:18:34,080 Speaker 2: losses that are going to come when the computers do 370 00:18:34,320 --> 00:18:35,440 Speaker 2: what some of us do. 371 00:18:36,400 --> 00:18:38,959 Speaker 3: So one of the things that are really important to know. 372 00:18:39,040 --> 00:18:41,679 Speaker 3: So a little known fact. Maybe I remember it like 373 00:18:41,680 --> 00:18:43,960 Speaker 3: it was yesterday, but one of my first jobs I 374 00:18:44,000 --> 00:18:46,280 Speaker 3: come in as an economist. I'm a micro economist labor 375 00:18:46,320 --> 00:18:50,240 Speaker 3: economist by training. But Chairman Greenspan, as you remember, was 376 00:18:50,440 --> 00:18:53,960 Speaker 3: very thoughtful about productivity and he thought it was there 377 00:18:54,000 --> 00:18:56,040 Speaker 3: even if we can't measure it in the statistics. The 378 00:18:56,080 --> 00:18:59,080 Speaker 3: statistics are always the last to find productivity. So he 379 00:18:59,200 --> 00:19:01,960 Speaker 3: set me out. His team set me out to be 380 00:19:02,000 --> 00:19:08,080 Speaker 3: the collector of anecdotal information qualitative information on this, and 381 00:19:08,119 --> 00:19:11,080 Speaker 3: you could see it everywhere. Companies were testing things, they 382 00:19:11,119 --> 00:19:13,199 Speaker 3: were trying to bring it to scale, etc. So the 383 00:19:13,240 --> 00:19:17,919 Speaker 3: productivity improvements were there long before they ever aggregated up 384 00:19:17,960 --> 00:19:21,720 Speaker 3: into the aggregate statistics. So now we're going to talk 385 00:19:21,760 --> 00:19:25,800 Speaker 3: about the job issues. Well, computerization was a technology that 386 00:19:26,200 --> 00:19:33,160 Speaker 3: actually replaced workers more quickly than it augmented possibilities. Generative 387 00:19:33,160 --> 00:19:36,600 Speaker 3: AI has a different component of possibility, and I think 388 00:19:36,600 --> 00:19:39,720 Speaker 3: it's useful for us to remember this. So generative AI 389 00:19:39,920 --> 00:19:43,840 Speaker 3: can make people who aren't as skilled in something newly 390 00:19:44,119 --> 00:19:48,080 Speaker 3: minted workers people who are the best example I can 391 00:19:48,080 --> 00:19:53,520 Speaker 3: find is physicians assistants. Physicians assistants can now triage people 392 00:19:54,080 --> 00:19:58,800 Speaker 3: in the frontline medical places if they allow it with 393 00:19:59,080 --> 00:20:03,320 Speaker 3: generative AI assistance. So they say you sprain your ankle, well, 394 00:20:03,440 --> 00:20:05,080 Speaker 3: they have a protocol that gets spit out. 395 00:20:05,160 --> 00:20:07,040 Speaker 1: Did you break your ankle? How would I know? Would 396 00:20:07,040 --> 00:20:08,760 Speaker 1: I get the X ray? I put the X ray 397 00:20:08,760 --> 00:20:09,240 Speaker 1: into there. 398 00:20:09,400 --> 00:20:11,560 Speaker 3: So they can do these things and it makes the 399 00:20:11,560 --> 00:20:16,159 Speaker 3: physician assistant more productive right away. It doesn't mean we 400 00:20:16,240 --> 00:20:18,719 Speaker 3: replace doctors, but we have a shortage of doctors, and 401 00:20:18,760 --> 00:20:21,720 Speaker 3: so it's a way to give care and increased productivity 402 00:20:21,760 --> 00:20:24,160 Speaker 3: and a medical profession. And you know, it's a long 403 00:20:24,200 --> 00:20:26,960 Speaker 3: way from being scalable, but I think those are the 404 00:20:27,040 --> 00:20:31,040 Speaker 3: kinds of experiences where generative AI has the possibility to 405 00:20:31,200 --> 00:20:35,399 Speaker 3: make us better overall. And then the biggest productivity gains 406 00:20:35,440 --> 00:20:37,399 Speaker 3: come from things we don't even imagine today and we 407 00:20:37,440 --> 00:20:41,800 Speaker 3: certainly don't have. So I am not evangelist for generative AI, 408 00:20:42,040 --> 00:20:44,639 Speaker 3: but I'm also not a pessimist, and I think the 409 00:20:44,920 --> 00:20:47,120 Speaker 3: big fact I keep keeping in my head is that 410 00:20:47,119 --> 00:20:50,560 Speaker 3: that no technology in the history of technologies has ever 411 00:20:50,720 --> 00:20:52,879 Speaker 3: taken reduced jobs on net. 412 00:20:53,200 --> 00:20:54,080 Speaker 1: But it does. 413 00:20:54,080 --> 00:20:57,560 Speaker 3: Change who is working and who's not and what skills 414 00:20:57,560 --> 00:21:00,320 Speaker 3: are demanded. And so when I speak to younger PEO people, 415 00:21:00,520 --> 00:21:03,919 Speaker 3: I say, you have an imperative to keep up with 416 00:21:03,960 --> 00:21:06,640 Speaker 3: the new technology and figure out. If you're a welder, 417 00:21:06,760 --> 00:21:10,800 Speaker 3: how can generative AI help you. If you're a computer 418 00:21:10,920 --> 00:21:13,040 Speaker 3: coder and you're worried about your job, then learn the 419 00:21:13,080 --> 00:21:15,920 Speaker 3: AI so that you can do the next job that's available. 420 00:21:15,920 --> 00:21:17,800 Speaker 3: And I think that's the way we stay ahead of 421 00:21:17,840 --> 00:21:18,760 Speaker 3: the job losses. 422 00:21:19,320 --> 00:21:21,439 Speaker 2: I want to ask you a pre amible question to 423 00:21:21,480 --> 00:21:24,640 Speaker 2: my next question. But the first part of this is 424 00:21:24,840 --> 00:21:28,439 Speaker 2: just that the President keeps saying in his tweets J. 425 00:21:28,600 --> 00:21:32,000 Speaker 2: Powell should lower the interest rates today. But doesn't work 426 00:21:32,040 --> 00:21:32,480 Speaker 2: that way. 427 00:21:32,400 --> 00:21:33,800 Speaker 1: Does it. 428 00:21:33,320 --> 00:21:37,879 Speaker 3: It does not well mean first say what we've already 429 00:21:37,880 --> 00:21:41,320 Speaker 3: talked about several times today. But the committee is tasked 430 00:21:41,359 --> 00:21:45,080 Speaker 3: the FMC is tasked by Congress with price stability and 431 00:21:45,119 --> 00:21:47,960 Speaker 3: full employment. We have a diverse set of members. There's 432 00:21:48,040 --> 00:21:52,520 Speaker 3: nineteen of us. We debate and discuss vigorously what we 433 00:21:52,560 --> 00:21:55,600 Speaker 3: should do for the American people again those things, and 434 00:21:55,640 --> 00:21:59,720 Speaker 3: so there's two components of that that are important. All 435 00:21:59,720 --> 00:22:03,160 Speaker 3: members of the committee are important and influential because they're 436 00:22:03,160 --> 00:22:06,119 Speaker 3: bringing different places, whether they're reserve bank presidents and they 437 00:22:06,119 --> 00:22:08,679 Speaker 3: have a different view from the context they talk to. 438 00:22:09,119 --> 00:22:10,760 Speaker 1: Whether we're just from different perspectives. 439 00:22:10,800 --> 00:22:13,240 Speaker 3: We're looking at different you know, we're looking at the 440 00:22:13,280 --> 00:22:15,680 Speaker 3: same data and the same models, but we're coming to 441 00:22:15,760 --> 00:22:18,359 Speaker 3: a different judgment. And of course we're always trying to 442 00:22:18,400 --> 00:22:21,679 Speaker 3: look ahead. And the people who are the most you know, 443 00:22:21,720 --> 00:22:25,000 Speaker 3: I've been working at the FED for a while and 444 00:22:25,119 --> 00:22:27,639 Speaker 3: been a policymaker for a while now. The people who 445 00:22:27,640 --> 00:22:29,879 Speaker 3: are the most valued to me on the committee. Are 446 00:22:29,920 --> 00:22:32,119 Speaker 3: the people who don't agree with me? You know, I've 447 00:22:32,160 --> 00:22:34,560 Speaker 3: got Randy Quarrels here who is along. It was a 448 00:22:34,600 --> 00:22:38,719 Speaker 3: colleague of mine at the Federalserve, and Randy and I 449 00:22:38,760 --> 00:22:41,280 Speaker 3: would always talk in a way that I really took away. 450 00:22:41,440 --> 00:22:42,919 Speaker 1: Randy challenged my thinking. 451 00:22:43,160 --> 00:22:45,720 Speaker 3: I believe I challenged Randy's thinking, but I believe that 452 00:22:45,760 --> 00:22:48,600 Speaker 3: to him to say, I know Randy challenged my thinking. 453 00:22:48,720 --> 00:22:52,400 Speaker 3: I was a better policymaker because I sat with somebody 454 00:22:52,560 --> 00:22:54,160 Speaker 3: who was able to challenge that thinking. 455 00:22:54,160 --> 00:22:55,600 Speaker 1: And that's how the FMC works. 456 00:22:55,640 --> 00:22:58,200 Speaker 3: And whether you're the chair and all the committee members 457 00:22:58,200 --> 00:23:01,040 Speaker 3: are challenging your thinking, or you're committee member and the 458 00:23:01,119 --> 00:23:04,680 Speaker 3: chair is challenging you're thinking, the collective is we share 459 00:23:04,720 --> 00:23:07,880 Speaker 3: equal responsibility when we take that vote and we walk 460 00:23:07,960 --> 00:23:11,000 Speaker 3: out of there. Ultimately we're all answerable to the American people. 461 00:23:11,400 --> 00:23:12,240 Speaker 1: That's what works. 462 00:23:12,960 --> 00:23:15,760 Speaker 2: And now to my question, most of your colleagues have 463 00:23:15,880 --> 00:23:19,679 Speaker 2: suggested that July thirtieth meeting is too soon. There's not 464 00:23:19,800 --> 00:23:22,879 Speaker 2: enough information yet. Although we got this important set of 465 00:23:22,960 --> 00:23:26,000 Speaker 2: data this week, two members of the committee have already 466 00:23:26,040 --> 00:23:29,600 Speaker 2: said that they could see cutting rates in July. What's 467 00:23:29,640 --> 00:23:31,680 Speaker 2: your position on the next meeting. 468 00:23:31,760 --> 00:23:34,360 Speaker 3: So I'm going to tell you how I really think 469 00:23:34,400 --> 00:23:37,960 Speaker 3: of this, and then I will give you a vague 470 00:23:38,040 --> 00:23:40,560 Speaker 3: version of that an answer to that question. But let 471 00:23:40,560 --> 00:23:42,679 Speaker 3: me just say this is how we go back and 472 00:23:42,720 --> 00:23:44,560 Speaker 3: forth all the time. He wants a date, I say no, 473 00:23:45,320 --> 00:23:48,199 Speaker 3: But seriously, I think we're asking the wrong question. I 474 00:23:48,240 --> 00:23:50,040 Speaker 3: don't think the question is is it going to be 475 00:23:50,119 --> 00:23:52,919 Speaker 3: July or September. I think the question is which the 476 00:23:52,960 --> 00:23:55,600 Speaker 3: direction of travel? And there, when you look out the 477 00:23:55,640 --> 00:23:57,560 Speaker 3: direction of travel and you saw this in the summary 478 00:23:57,600 --> 00:24:02,240 Speaker 3: of economic projections, is rates will be reduced consistent with 479 00:24:02,320 --> 00:24:05,480 Speaker 3: the fact that inflation's coming down and we don't want 480 00:24:05,520 --> 00:24:09,520 Speaker 3: to unnecessarily tighten the economy in a way that you know, 481 00:24:09,680 --> 00:24:13,080 Speaker 3: hurts the labor market or growth. So that's the direction 482 00:24:13,160 --> 00:24:15,720 Speaker 3: of travel. Whether it happens in July or September some 483 00:24:15,840 --> 00:24:18,800 Speaker 3: other month is really not the most relevant piece. The 484 00:24:18,840 --> 00:24:21,840 Speaker 3: second most relevant piece is where will the rates settle? 485 00:24:22,200 --> 00:24:24,119 Speaker 3: And there I'm very much on the camp that's going 486 00:24:24,200 --> 00:24:27,119 Speaker 3: to be higher than it was in the pre pandemic era. 487 00:24:27,240 --> 00:24:29,000 Speaker 3: You know, if you thought it was two and a 488 00:24:29,080 --> 00:24:31,240 Speaker 3: half in the pre pandemic era, I think you have 489 00:24:31,280 --> 00:24:35,520 Speaker 3: to look three or north for the nominal neutral going forward, 490 00:24:35,640 --> 00:24:38,160 Speaker 3: and so that just gives us a lot of understanding 491 00:24:38,240 --> 00:24:41,000 Speaker 3: of you know, we're not going back to pre pandemic rates, 492 00:24:41,040 --> 00:24:46,120 Speaker 3: but some continued ongoing normalization of policy as we finish 493 00:24:46,359 --> 00:24:49,679 Speaker 3: getting through the battle of high inflation and we ensure 494 00:24:49,680 --> 00:24:52,639 Speaker 3: that we're trying to balance both full employment and price stability. 495 00:24:52,760 --> 00:24:56,520 Speaker 3: For my own view, I think that, you know, there's 496 00:24:56,520 --> 00:24:58,719 Speaker 3: a lot more information we could collect. And the thing 497 00:24:58,760 --> 00:25:01,280 Speaker 3: I was looking at between you know, should we move 498 00:25:01,680 --> 00:25:05,840 Speaker 3: quicker and should we move a little less quickly has 499 00:25:05,880 --> 00:25:08,280 Speaker 3: to do with where's the labor market today. You know, 500 00:25:08,600 --> 00:25:12,000 Speaker 3: initial claims for unemployment insurance remain low and below expectations. 501 00:25:12,080 --> 00:25:13,960 Speaker 1: Inflation actually came in right on our. 502 00:25:13,840 --> 00:25:17,880 Speaker 3: Expectation, my expectation, and it's not surprising. There's some inflation 503 00:25:17,920 --> 00:25:20,960 Speaker 3: in the good sector, and it's very encouraging that there 504 00:25:21,000 --> 00:25:24,879 Speaker 3: continues to be some disinflation and other sectors. So I 505 00:25:24,920 --> 00:25:27,600 Speaker 3: think we've got policy in a good place today, and 506 00:25:27,720 --> 00:25:30,600 Speaker 3: we will continue to learn more about how the uncertainty 507 00:25:30,600 --> 00:25:33,679 Speaker 3: on tariffs and other things prove out. And you know, 508 00:25:33,720 --> 00:25:35,960 Speaker 3: one of the big jobs we all have between now 509 00:25:36,000 --> 00:25:39,199 Speaker 3: and through the rest of the year is to be 510 00:25:39,280 --> 00:25:44,560 Speaker 3: out in among businesses, community groups, workers, asking what's the 511 00:25:44,600 --> 00:25:46,879 Speaker 3: lived experience of the economy, and not what did you 512 00:25:46,920 --> 00:25:49,920 Speaker 3: do yesterday, which is largely with the published data, tell us, 513 00:25:49,960 --> 00:25:52,040 Speaker 3: but what are you going to do tomorrow? How are 514 00:25:52,080 --> 00:25:54,520 Speaker 3: you planning? Are you are you building? You know, I've 515 00:25:54,520 --> 00:25:57,600 Speaker 3: been doing crane counting. That's a really fascinating thing to do. 516 00:25:58,000 --> 00:26:00,480 Speaker 3: If you're like men, look at the sort and I 517 00:26:00,480 --> 00:26:03,320 Speaker 3: count cranes. And if you count cranes, cranes are still 518 00:26:03,359 --> 00:26:06,119 Speaker 3: going up. They're not stop and they're working. We have 519 00:26:06,160 --> 00:26:08,359 Speaker 3: to look at whether they're working or they're just sitting there. 520 00:26:08,640 --> 00:26:13,480 Speaker 3: So I was in Boise, Idaho, just a couple a 521 00:26:13,520 --> 00:26:15,600 Speaker 3: month ago for a commencement speech, and what I saw 522 00:26:15,760 --> 00:26:20,160 Speaker 3: was crane's still being constructed, going up. So there's optimism there, 523 00:26:20,200 --> 00:26:23,480 Speaker 3: and there's also continuing to work and to build. So 524 00:26:23,640 --> 00:26:26,840 Speaker 3: I don't want to be too optimistic, but I'm certainly 525 00:26:26,840 --> 00:26:27,760 Speaker 3: not pessimistic. 526 00:26:28,000 --> 00:26:29,760 Speaker 2: Well, you mentioned that interest rates are going to settle 527 00:26:29,760 --> 00:26:30,760 Speaker 2: at a higher rate than they were. 528 00:26:30,800 --> 00:26:33,680 Speaker 1: I don't think in all likelihood, probably. 529 00:26:33,320 --> 00:26:35,440 Speaker 2: Nobody expects them to go back to zero again. 530 00:26:36,160 --> 00:26:38,120 Speaker 3: Two and a half though, I think is where they 531 00:26:38,200 --> 00:26:39,639 Speaker 3: used to be as a nominal neutral. 532 00:26:39,760 --> 00:26:41,359 Speaker 2: I know somebody who got basically a two and a 533 00:26:41,400 --> 00:26:44,040 Speaker 2: half percent mortgage and cheat lets me know about that 534 00:26:44,160 --> 00:26:47,880 Speaker 2: all the time. Where do you think it is? This 535 00:26:47,920 --> 00:26:51,440 Speaker 2: is the question that the Paul's discussed. Where is neutral? 536 00:26:51,880 --> 00:26:53,760 Speaker 3: I think, you know, my own personal view is it's 537 00:26:53,880 --> 00:26:56,000 Speaker 3: I penciled in a you in. 538 00:26:56,000 --> 00:26:56,800 Speaker 1: My head of three. 539 00:26:57,200 --> 00:26:59,639 Speaker 3: But if you really are a student of any of 540 00:26:59,640 --> 00:27:02,040 Speaker 3: the star variables other than the one that we name, 541 00:27:02,080 --> 00:27:05,080 Speaker 3: which is two percent inflation, you know that there's a 542 00:27:05,119 --> 00:27:07,639 Speaker 3: great deal of humility that comes with the estimate. So 543 00:27:07,680 --> 00:27:09,520 Speaker 3: I think a better way to think about it is 544 00:27:09,760 --> 00:27:11,480 Speaker 3: it's three or north of three. 545 00:27:12,080 --> 00:27:12,960 Speaker 1: I don't see a lot. 546 00:27:12,800 --> 00:27:16,080 Speaker 3: Of evidence that it's south of three, But again you 547 00:27:16,160 --> 00:27:18,120 Speaker 3: have to have an open mind on these things, and 548 00:27:18,280 --> 00:27:21,399 Speaker 3: the place you know it is in the economy. So 549 00:27:21,560 --> 00:27:24,400 Speaker 3: right now we have interest rates much higher than three 550 00:27:24,600 --> 00:27:28,600 Speaker 3: hundred basis points higher, and we still have growth coming out. 551 00:27:28,440 --> 00:27:30,800 Speaker 1: Solid, And does it sells me? 552 00:27:30,840 --> 00:27:34,239 Speaker 3: They're modestly restrictive, maybe moderately I don't know how to 553 00:27:34,240 --> 00:27:38,159 Speaker 3: really dice and slice moderately versus modestly, but a little restrictive. 554 00:27:38,680 --> 00:27:42,040 Speaker 3: And if the neutral rate was something like two and 555 00:27:42,040 --> 00:27:44,879 Speaker 3: a half, they would be potentially much more restrictive than 556 00:27:44,920 --> 00:27:47,040 Speaker 3: we're seeing them play out in the economy. 557 00:27:47,640 --> 00:27:51,000 Speaker 2: Question about I'll just go slide in a little technical 558 00:27:51,080 --> 00:27:54,880 Speaker 2: question here that came up in the earlier discussion. Why 559 00:27:54,920 --> 00:27:57,639 Speaker 2: does the FED look at the personal Consumption index and 560 00:27:57,680 --> 00:28:00,439 Speaker 2: make that their target instead of the CPI, which is 561 00:28:00,480 --> 00:28:01,679 Speaker 2: what everybody's familiar with. 562 00:28:01,880 --> 00:28:04,280 Speaker 3: So I guess it would be useful to recognize, or 563 00:28:04,320 --> 00:28:08,240 Speaker 3: to say, allows everybody knows, just because we have a 564 00:28:08,600 --> 00:28:11,240 Speaker 3: target variable doesn't mean we're not looking at all the 565 00:28:11,280 --> 00:28:15,280 Speaker 3: other indices. When you have price stability, these indicies are 566 00:28:15,320 --> 00:28:17,800 Speaker 3: all moving in the same way, and so they look 567 00:28:17,880 --> 00:28:20,359 Speaker 3: really tight there next to each other. They all have 568 00:28:20,440 --> 00:28:23,080 Speaker 3: a little bit of difference, but that difference is historical. 569 00:28:23,160 --> 00:28:25,960 Speaker 3: It's a constant, and you can figure out that they're 570 00:28:25,960 --> 00:28:28,879 Speaker 3: all moving the same way. When you don't have price stability, 571 00:28:29,040 --> 00:28:33,399 Speaker 3: you're pouring over every single aspect, not just the headline numbers, 572 00:28:33,400 --> 00:28:36,719 Speaker 3: but all the different sectors, trying to understand what are 573 00:28:36,720 --> 00:28:39,640 Speaker 3: the leading indicators for inflation spilling over what are the 574 00:28:39,720 --> 00:28:41,760 Speaker 3: lagging ones that are already behind us? 575 00:28:41,760 --> 00:28:44,240 Speaker 1: So we should worry about them? And that's what we do. 576 00:28:44,280 --> 00:28:47,320 Speaker 3: I mean, I have pages of what we call the 577 00:28:47,440 --> 00:28:50,720 Speaker 3: dashboard of inflation indicators, and the ones that have been 578 00:28:50,840 --> 00:28:54,400 Speaker 3: proven most useful are actually not those headline numbers at all, 579 00:28:54,720 --> 00:28:57,120 Speaker 3: but the things that are proven most useful are There's 580 00:28:57,160 --> 00:29:00,320 Speaker 3: a survey that the Bureau of Labor Statistics has done 581 00:29:00,360 --> 00:29:04,800 Speaker 3: which asks what percentage of prices have gone up and 582 00:29:05,280 --> 00:29:07,680 Speaker 3: what percentage of firms say they're going to raise prices 583 00:29:07,680 --> 00:29:10,160 Speaker 3: in the future. And then the second part of their 584 00:29:10,200 --> 00:29:14,080 Speaker 3: series is how frequently are firms changing their prices? In 585 00:29:14,120 --> 00:29:17,360 Speaker 3: the heat of the seven percent inflation, firms only had 586 00:29:17,400 --> 00:29:20,480 Speaker 3: one direction, I'm moving prices up, and the frequency of 587 00:29:20,520 --> 00:29:24,520 Speaker 3: price changes had skyrocketed relative to normal. So we have 588 00:29:24,560 --> 00:29:28,320 Speaker 3: this theory in economics called menu cost, meaning you all 589 00:29:28,320 --> 00:29:30,400 Speaker 3: don't want to change your prices very frequently. 590 00:29:30,160 --> 00:29:31,120 Speaker 1: You have to change the menu. 591 00:29:31,600 --> 00:29:33,960 Speaker 3: Well, if you go to the local businesses out in 592 00:29:34,000 --> 00:29:36,280 Speaker 3: Oakland where I live, you would see that people just 593 00:29:36,360 --> 00:29:38,120 Speaker 3: took the sharpies and they just. 594 00:29:39,080 --> 00:29:41,480 Speaker 1: They just wrote through the price and then wrote a 595 00:29:41,520 --> 00:29:41,920 Speaker 1: new one. 596 00:29:42,040 --> 00:29:44,960 Speaker 3: It was all in these paper and pencil kind of 597 00:29:45,000 --> 00:29:47,960 Speaker 3: things because the prices was changing so much. So we 598 00:29:48,000 --> 00:29:51,640 Speaker 3: don't see that happening now, and that's a good good sign. 599 00:29:51,720 --> 00:29:54,640 Speaker 3: So the PCEE why did we pick it? You know, 600 00:29:54,720 --> 00:29:58,880 Speaker 3: there's people might tell you different things, but here's ultimately why. 601 00:29:59,200 --> 00:30:02,280 Speaker 3: If you look at a set of statistical analysis that 602 00:30:02,400 --> 00:30:06,760 Speaker 3: say what's the best predictor of underlying inflation going forward, 603 00:30:07,040 --> 00:30:10,400 Speaker 3: the PCE is the most reliable predictor and it is 604 00:30:10,440 --> 00:30:13,120 Speaker 3: one where it's analytically important, So it gives us a 605 00:30:13,120 --> 00:30:16,800 Speaker 3: good guidance for how to follow inflation that's not moved 606 00:30:16,840 --> 00:30:20,760 Speaker 3: around by idiosyncratic factors. But I will definitely offer to 607 00:30:20,800 --> 00:30:23,240 Speaker 3: you if that was all we looked at, we wouldn't 608 00:30:23,320 --> 00:30:24,320 Speaker 3: have the complete picture. 609 00:30:24,480 --> 00:30:25,440 Speaker 1: So we look at everything. 610 00:30:26,040 --> 00:30:30,400 Speaker 2: A couple of questions on prices. Chaos in Washington. We 611 00:30:30,520 --> 00:30:32,440 Speaker 2: all have seen that for the last couple of months, 612 00:30:32,440 --> 00:30:35,040 Speaker 2: and yet the stock market keeps going up and up 613 00:30:35,200 --> 00:30:38,280 Speaker 2: and up. How do you think about asset prices? How 614 00:30:38,320 --> 00:30:43,320 Speaker 2: does that play into your view of inflation and what 615 00:30:43,400 --> 00:30:44,920 Speaker 2: you need to do in terms of policy. 616 00:30:45,360 --> 00:30:48,920 Speaker 3: Well, it's one variable, one financial variable in an array 617 00:30:48,960 --> 00:30:51,040 Speaker 3: of financial variables that we take in. All of this 618 00:30:51,200 --> 00:30:55,720 Speaker 3: is inputs to my thinking about how loose or tight 619 00:30:55,800 --> 00:31:00,000 Speaker 3: our monetary policy and conditions. Financial conditions, not just monetary policy. 620 00:31:00,240 --> 00:31:03,120 Speaker 3: And the stock market moves around for a variety of reasons. 621 00:31:03,120 --> 00:31:06,080 Speaker 3: The mag seven is very hot and that continues to 622 00:31:06,120 --> 00:31:09,280 Speaker 3: be Other stocks are building as well. But if you 623 00:31:09,520 --> 00:31:12,640 Speaker 3: step back now, I think of this as just another 624 00:31:12,960 --> 00:31:17,320 Speaker 3: measure of optimism or lack thereof in the economy. And 625 00:31:18,040 --> 00:31:20,360 Speaker 3: if the stock market was very much out of line 626 00:31:20,400 --> 00:31:22,800 Speaker 3: with what I hear when I go and talk to businesses, 627 00:31:23,080 --> 00:31:25,920 Speaker 3: then I would have more concern. But right now I 628 00:31:26,000 --> 00:31:29,960 Speaker 3: hear is a reflection of the optimism people have in 629 00:31:30,000 --> 00:31:32,960 Speaker 3: the economy. I mean, I have the benefit of not 630 00:31:33,040 --> 00:31:35,920 Speaker 3: living in Washington, and it gives you some distance, and 631 00:31:35,960 --> 00:31:39,360 Speaker 3: so I spend more time with businesses and communities, and 632 00:31:39,680 --> 00:31:42,760 Speaker 3: people aren't as I think. They don't read the news 633 00:31:42,800 --> 00:31:45,160 Speaker 3: every day. They actually work on their business every day. 634 00:31:45,480 --> 00:31:47,400 Speaker 3: And so when you work on your business every day, 635 00:31:47,680 --> 00:31:50,640 Speaker 3: you're looking at do I have a demand for my products? 636 00:31:50,840 --> 00:31:53,320 Speaker 3: How much does it cost to get the inputs I need? 637 00:31:53,480 --> 00:31:56,600 Speaker 3: What are the opportunities for expansion than I see? And 638 00:31:56,680 --> 00:31:59,240 Speaker 3: I do see that there is that cautious optimism, and 639 00:31:59,280 --> 00:32:01,240 Speaker 3: that's reflected in the stock market as well. 640 00:32:01,520 --> 00:32:04,640 Speaker 2: Now there are questions about how the bond market reacts 641 00:32:04,680 --> 00:32:07,920 Speaker 2: to all of this, and how you affect the bond 642 00:32:08,000 --> 00:32:11,120 Speaker 2: market were some of us are old enough to remember 643 00:32:11,160 --> 00:32:13,960 Speaker 2: the bond vigilantes, and that's a very good analogy for 644 00:32:14,040 --> 00:32:18,120 Speaker 2: out here in the West. Are you worried that they 645 00:32:18,640 --> 00:32:23,800 Speaker 2: will affect the economy if you do something that they 646 00:32:23,800 --> 00:32:29,840 Speaker 2: don't like? We saw yesterday a big increase in interest rates, market, 647 00:32:29,840 --> 00:32:33,600 Speaker 2: interest rates at the longer end, spreads, corporate spreads when 648 00:32:33,640 --> 00:32:36,280 Speaker 2: it was felt that the president was going to fire J. Powle. 649 00:32:37,600 --> 00:32:39,680 Speaker 2: How closely do you watch that and how does that 650 00:32:39,720 --> 00:32:40,080 Speaker 2: figure it? 651 00:32:41,120 --> 00:32:44,600 Speaker 3: You know, certainly you watch the bond market. And what 652 00:32:44,640 --> 00:32:48,640 Speaker 3: I'm seeing now is volatility as opposed to some significant 653 00:32:48,760 --> 00:32:52,360 Speaker 3: change in how investors are pricing things. I mean that 654 00:32:52,440 --> 00:32:56,640 Speaker 3: volatility that you mentioned yesterday went it went down and 655 00:32:56,640 --> 00:32:58,360 Speaker 3: then up again, you know, and so it goes up 656 00:32:58,360 --> 00:33:01,600 Speaker 3: and then goes down again. So my eye on longer 657 00:33:01,600 --> 00:33:05,120 Speaker 3: periods of time than the daily the daily bond movements, 658 00:33:05,120 --> 00:33:07,480 Speaker 3: and I think that's really important. Right now, we have, 659 00:33:08,000 --> 00:33:14,959 Speaker 3: you know, financial conditions that are slightly restrictive to growth, 660 00:33:15,120 --> 00:33:17,440 Speaker 3: and I think that's going to That's something that I'm 661 00:33:17,520 --> 00:33:20,440 Speaker 3: keep in my eye on. If they got overly loose, 662 00:33:20,800 --> 00:33:23,320 Speaker 3: then we would have to take into account that into account. 663 00:33:23,320 --> 00:33:25,720 Speaker 3: But I just don't see that happening, and so many 664 00:33:25,760 --> 00:33:28,840 Speaker 3: factors affect the bond market, not just the fad. It's 665 00:33:28,880 --> 00:33:31,920 Speaker 3: really we are often seen as the center of the 666 00:33:32,000 --> 00:33:35,200 Speaker 3: attention there, but that's really not I think true. There's 667 00:33:35,280 --> 00:33:37,920 Speaker 3: lots of things that affected, including, you know, issueing for 668 00:33:38,080 --> 00:33:44,400 Speaker 3: the treasury, global factors, negotiations between countries on fiscal policy, 669 00:33:44,680 --> 00:33:47,720 Speaker 3: geopolitical issues, and so I don't overread the bond market 670 00:33:47,760 --> 00:33:51,000 Speaker 3: because that that actually is a perilous outcome. 671 00:33:51,440 --> 00:33:54,640 Speaker 2: Another price question that I'm sure you get wherever you 672 00:33:54,720 --> 00:33:59,120 Speaker 2: go is how much do house prices weigh on you? 673 00:33:59,160 --> 00:34:01,560 Speaker 2: And is it your fault that nobody's buying houses because 674 00:34:01,600 --> 00:34:05,320 Speaker 2: interest rates are too high? Which would be the follow 675 00:34:05,360 --> 00:34:08,319 Speaker 2: up question to that would be what's it going to 676 00:34:08,360 --> 00:34:09,880 Speaker 2: take to get housing going again? 677 00:34:10,239 --> 00:34:12,959 Speaker 3: So I think this is a terrific question, but one 678 00:34:13,040 --> 00:34:17,880 Speaker 3: that when discussions I've been in, people have certain aspects 679 00:34:17,920 --> 00:34:20,640 Speaker 3: of the facts, and I think we all will know this, 680 00:34:20,719 --> 00:34:23,040 Speaker 3: but I'm want to put it together in the ecosystem. 681 00:34:23,200 --> 00:34:23,920 Speaker 1: So we came. 682 00:34:23,800 --> 00:34:28,080 Speaker 3: Into at the pre pandemic twenty nineteen, we had a 683 00:34:28,120 --> 00:34:31,880 Speaker 3: housing shortage, a significant housing shortage. Then of course the 684 00:34:31,880 --> 00:34:35,240 Speaker 3: pandemic made the housing shortage worse, and we build bigger 685 00:34:35,239 --> 00:34:38,040 Speaker 3: and bigger homes because people want it bigger and bigger homes, 686 00:34:38,120 --> 00:34:40,680 Speaker 3: but at the cost of smaller homes. So then interest 687 00:34:40,719 --> 00:34:45,480 Speaker 3: rates rise, and rightly so to combat high inflation. And 688 00:34:45,520 --> 00:34:50,000 Speaker 3: now people have the problem of higher priced homes and 689 00:34:50,200 --> 00:34:53,160 Speaker 3: now high interest rates. But what I have seen as 690 00:34:53,200 --> 00:34:56,280 Speaker 3: interest rates have started to normalize last year is builders 691 00:34:56,280 --> 00:34:59,120 Speaker 3: are coming off the sidelines. They're getting started, so they 692 00:34:59,120 --> 00:35:01,080 Speaker 3: don't want to overbuild. Part of the reason we have 693 00:35:01,080 --> 00:35:02,960 Speaker 3: a housing shortage is because there were a lot of 694 00:35:02,960 --> 00:35:07,399 Speaker 3: builders scarred after the global financial crisis, and they don't 695 00:35:07,400 --> 00:35:09,319 Speaker 3: want to get in that position again. So we have 696 00:35:09,360 --> 00:35:12,360 Speaker 3: a lot of pent up demand for homes, especially starter homes, 697 00:35:12,840 --> 00:35:15,200 Speaker 3: the ones that you know, most new families want to 698 00:35:15,200 --> 00:35:18,759 Speaker 3: go to, and importantly retired retiring people who want to 699 00:35:18,800 --> 00:35:21,240 Speaker 3: live close to their grandkids but don't want a mansion anymore. 700 00:35:21,360 --> 00:35:22,840 Speaker 3: You know, they don't want something that can support a 701 00:35:22,840 --> 00:35:25,920 Speaker 3: family of for they want something that supports a family 702 00:35:25,960 --> 00:35:27,880 Speaker 3: of two. So that's a problem we need to solve, 703 00:35:27,880 --> 00:35:32,000 Speaker 3: and I'm seeing localities try to solve this. So do 704 00:35:32,120 --> 00:35:36,520 Speaker 3: interest rates matter for housing demand? Absolutely, will lower interest 705 00:35:36,560 --> 00:35:40,440 Speaker 3: rates solve the housing shortage? No, you need you need 706 00:35:40,520 --> 00:35:45,000 Speaker 3: some more resolved locally and maybe nationally, that's not our 707 00:35:45,040 --> 00:35:49,359 Speaker 3: side of the house. And fortunately and the ultimately do 708 00:35:48,840 --> 00:35:53,280 Speaker 3: I do I worry about high interest rates? Yes, because 709 00:35:53,360 --> 00:35:56,160 Speaker 3: but that's not because of a specific sector, but because 710 00:35:56,200 --> 00:35:58,600 Speaker 3: they're an indication that inflation. 711 00:35:58,560 --> 00:36:00,200 Speaker 1: Rows and now we have to get it back. 712 00:36:00,320 --> 00:36:02,719 Speaker 3: When price stability is restored, then we can have the 713 00:36:02,800 --> 00:36:06,480 Speaker 3: rate at neutral and we can proceed on. And ultimately, 714 00:36:06,600 --> 00:36:08,560 Speaker 3: what I hope for is next year we come around 715 00:36:08,600 --> 00:36:11,279 Speaker 3: and nobody asked me about inflation because it's now in 716 00:36:11,320 --> 00:36:12,040 Speaker 3: the background. 717 00:36:12,239 --> 00:36:15,040 Speaker 1: We have price stability, and we are able to. 718 00:36:15,000 --> 00:36:17,880 Speaker 3: Make decisions based on the other things like what's the 719 00:36:17,920 --> 00:36:22,200 Speaker 3: best growth industry, how do I do things like your 720 00:36:22,239 --> 00:36:25,360 Speaker 3: crystal was talking about, grow my business past that legacy 721 00:36:25,400 --> 00:36:27,839 Speaker 3: on so that my family can inherit it. So those 722 00:36:27,840 --> 00:36:30,000 Speaker 3: are the kinds of things we want people to think about. 723 00:36:30,440 --> 00:36:31,960 Speaker 2: I'm going to ask one more question and we'll do 724 00:36:31,960 --> 00:36:36,680 Speaker 2: a couple of audience questions. We've talked a lot about tariffs, 725 00:36:37,040 --> 00:36:40,319 Speaker 2: but what's your modeling showing you about the effect of 726 00:36:40,360 --> 00:36:41,720 Speaker 2: the budget bill that just passed? 727 00:36:42,080 --> 00:36:45,200 Speaker 3: You know, it's really early days, and again I'm going 728 00:36:45,239 --> 00:36:48,520 Speaker 3: to put us back to something that was we talked 729 00:36:48,560 --> 00:36:52,399 Speaker 3: about earlier in the Sessions, but also I mentioned what's 730 00:36:52,440 --> 00:36:55,000 Speaker 3: really important is the net net of all of these policies, 731 00:36:55,239 --> 00:36:58,160 Speaker 3: and so you need to know what is the growth impetus, 732 00:36:58,200 --> 00:37:00,319 Speaker 3: how does it stack up, what's the time You know, 733 00:37:00,600 --> 00:37:04,239 Speaker 3: bills that are tax policy, will they give relief immediately? 734 00:37:04,480 --> 00:37:07,919 Speaker 3: Bills that are investment policies, those take time to work 735 00:37:07,960 --> 00:37:10,880 Speaker 3: themselves out, as Paul said this morning. So this just 736 00:37:11,160 --> 00:37:12,960 Speaker 3: there's a timing issue. And then of course we have 737 00:37:13,000 --> 00:37:15,560 Speaker 3: the tariffs and the uncertainty there, and we have immigration. 738 00:37:15,920 --> 00:37:18,080 Speaker 3: And what's really going to be important for the economy, 739 00:37:18,160 --> 00:37:20,279 Speaker 3: both for the growth and. 740 00:37:19,960 --> 00:37:22,919 Speaker 1: For inflation, is how does this sort itself out? 741 00:37:23,160 --> 00:37:27,600 Speaker 3: And does the timing support those policies together or does 742 00:37:27,640 --> 00:37:30,160 Speaker 3: the timing off and we end up with things that 743 00:37:30,200 --> 00:37:32,960 Speaker 3: are growth constraining before we get growth relief. 744 00:37:33,280 --> 00:37:33,799 Speaker 1: Those are the. 745 00:37:33,760 --> 00:37:35,759 Speaker 3: Things that I have to keep looking on as a 746 00:37:35,760 --> 00:37:36,520 Speaker 3: policy maker. 747 00:37:36,520 --> 00:37:38,000 Speaker 1: But it's early days on all of this.