WEBVTT - Surveillance: Powell Talks Tough at Jackson Hole 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.800 --> 0:00:23.799 To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:29.880 and of course on the Bloomberg terminal. We've got to 0:00:29.920 --> 0:00:32.320 start with this one right here, though, Patrick Harker, the 0:00:32.360 --> 0:00:35.800 president of the Philadelphia Fed. Mr President, I think you've 0:00:35.800 --> 0:00:38.239 got a good slot because about an hour ago it 0:00:38.320 --> 0:00:44.240 was much colder than this. Good morning to you. Let's 0:00:44.240 --> 0:00:46.120 get straight into it. Forget about the weather. We've got 0:00:46.159 --> 0:00:48.800 a beautiful backdrop. I want to start here. As we 0:00:48.880 --> 0:00:51.480 sit here today. The biggest risk today is it doing 0:00:51.520 --> 0:00:55.200 too much for you guys or doing too little. Well, 0:00:55.240 --> 0:00:57.200 I think what we need to do is just act, 0:00:57.240 --> 0:00:59.440 and we're acting, and so I think we need to 0:00:59.480 --> 0:01:04.600 move and need to move methodically toward a clearly restrictive stance, 0:01:04.640 --> 0:01:07.800 which we're doing. And then in my view, then we 0:01:07.920 --> 0:01:10.160 either pause, depending on the data, We're gonna have to 0:01:10.200 --> 0:01:13.120 see how this plays out, we get to above three 0:01:13.120 --> 0:01:16.560 point four. By year end, we're at or above three 0:01:16.560 --> 0:01:18.759 point four and then we see we have to let 0:01:18.800 --> 0:01:20.440 some of this play out. We don't have to keep 0:01:20.440 --> 0:01:24.600 climbing climbing, climbing. Then it go down very quickly. Let's 0:01:24.600 --> 0:01:27.240 stay up there and let the economy do its think 0:01:27.560 --> 0:01:30.560 so for how long? Right? And this is point where 0:01:30.600 --> 0:01:33.640 he said keep it there for possibly years and see 0:01:33.680 --> 0:01:36.000 the trickle out effect. We don't know. I mean, we 0:01:36.040 --> 0:01:38.560 really need to let the data play out. You just 0:01:38.600 --> 0:01:40.800 don't know. I'll pray Art, what date are you looking at? 0:01:41.080 --> 0:01:43.880 Inflation number one? For sure? That's the issue that's headline 0:01:43.880 --> 0:01:47.840 of four core for sure, because you know the volatile 0:01:48.000 --> 0:01:52.280 the volatility of energy and food is extreme, particularly because 0:01:52.280 --> 0:01:54.559 of the situation we have in Ukraine and around the world. 0:01:55.400 --> 0:01:59.960 This has been this whole set up in the chairman's speech. 0:02:00.000 --> 0:02:02.480 Don't think of a totemic issue for Wall Street and 0:02:02.480 --> 0:02:04.960 everybody is gonna be tuning in at the top of 0:02:05.000 --> 0:02:07.960 the next hour. What's the message that the Fed would 0:02:08.040 --> 0:02:11.880 like investors to take away today? I don't know what 0:02:12.080 --> 0:02:15.480 the Fed has. I can only speak for myself. I 0:02:15.520 --> 0:02:19.200 think the message is for me that we need to 0:02:19.240 --> 0:02:21.400 get inflation under control. We will do what it takes 0:02:21.400 --> 0:02:24.280 to get inflation under control, and hopefully we can do 0:02:24.320 --> 0:02:26.840 that in a way that does not ruin what otherwise 0:02:26.919 --> 0:02:29.560 is a good economy. You look at the jobs data, 0:02:29.639 --> 0:02:32.280 you look at other parts of the economy. We don't 0:02:32.320 --> 0:02:34.639 want to do this in a way that really just 0:02:34.880 --> 0:02:38.919 squashes the jobs market right now? Is this whatever it takes? 0:02:39.000 --> 0:02:41.880 Or is this Mario dragging whatever it takes? Because everybody 0:02:41.880 --> 0:02:44.640 on Wall Street wants to know, would you risk recession 0:02:45.080 --> 0:02:49.960 to bring inflation down? It's possible, It's always possible to 0:02:49.960 --> 0:02:51.959 have a recession at this point. I don't think it's 0:02:52.080 --> 0:02:54.799 in my forecast that it's probable. I think we can 0:02:54.880 --> 0:02:56.880 we can still do this. There's still a path to 0:02:56.919 --> 0:02:59.919 do this, to have if if there is a recession, 0:03:00.360 --> 0:03:03.680 it would be shallow and short. In my view, there's 0:03:03.919 --> 0:03:06.120 two camps. One says get to the terminal rate as 0:03:06.160 --> 0:03:08.760 quickly as possible to get ahead of inflation. The other says, 0:03:08.800 --> 0:03:11.080 move more slowly because you want to make sure that 0:03:11.120 --> 0:03:14.200 the lags don't bring down the economy. Which camp are 0:03:14.200 --> 0:03:16.400 you in? Again? Where I am is, let's get up 0:03:16.400 --> 0:03:20.000 to the clearly restrictive stance. Three point four is a 0:03:20.000 --> 0:03:23.119 good number. Three point five, and then let's see how 0:03:23.200 --> 0:03:25.960 things play out from there. This word neutral has been 0:03:25.960 --> 0:03:28.040 thrown around a lot in the last couple of weeks. 0:03:28.040 --> 0:03:30.239 You're smiling already, So I talked to me about what 0:03:30.320 --> 0:03:33.160 you think neutral is, what's restrictive? What is it? And 0:03:33.160 --> 0:03:36.800 how do we know it's clearly above free? For sure? 0:03:37.400 --> 0:03:39.440 How much above? Again? I think we just have to 0:03:39.480 --> 0:03:42.640 see today's data. We can talk about that we're seeing 0:03:42.600 --> 0:03:45.440 glimmers of hope, and I emphasize glimmers of hope on 0:03:45.480 --> 0:03:48.520 the inflation front. We're not done and so we need 0:03:48.560 --> 0:03:50.720 to continue to raise raids to make sure that those 0:03:50.720 --> 0:03:53.680 glimmers turned into a clear downward trend. How do you 0:03:53.680 --> 0:03:56.120 know when we have a clear down with Trent and clearly, 0:03:56.120 --> 0:03:57.800 as she pointed out as two ways of looking at this, 0:03:57.840 --> 0:04:00.000 she keep hiking until you see two percent. That's clearing 0:04:00.120 --> 0:04:01.520 where you want to go. You want to get to 0:04:01.520 --> 0:04:03.480 this place where you're restrictive and you're waiting, and you're 0:04:03.480 --> 0:04:06.520 convinced that we've got this trajectory we're moving back down 0:04:06.560 --> 0:04:08.880 towards too. I think what we'd all like is just 0:04:08.880 --> 0:04:10.920 a better understanding of what that world looks like. How 0:04:10.960 --> 0:04:13.560 do we know when we see that world? So clearly 0:04:13.560 --> 0:04:16.599 we have the numbers right, corps and headline. I also 0:04:16.600 --> 0:04:19.640 look at the distribution of inflation. That's how many goods 0:04:19.640 --> 0:04:22.440 and services are about five percent, about four percent. As 0:04:22.520 --> 0:04:25.279 we see that distribution shrinking at you think about the 0:04:25.320 --> 0:04:27.680 beginning of the pandemic was all about use cars and 0:04:27.720 --> 0:04:30.720 some other commodities. Let's start to bring that down because 0:04:30.800 --> 0:04:33.400 right now it's pretty widespread. That to me would be 0:04:33.440 --> 0:04:36.440 a clear sign that we're making progress. Financial conditions are 0:04:36.440 --> 0:04:40.080 an important mechanism for you to get your policy into 0:04:40.120 --> 0:04:43.280 the economy. Would you say we've seen an unwarranted easy 0:04:43.520 --> 0:04:47.120 financial conditions through the summer. I don't know if it's unwarranted, 0:04:48.279 --> 0:04:50.280 but we need to continue to do what we have 0:04:50.360 --> 0:04:53.200 to do with respect of the Fed funds right which 0:04:53.520 --> 0:04:56.440 we've committed, But clearly financial conditions would need to be 0:04:56.480 --> 0:04:59.200 tighter for you to achieve that. Well, no, let's let's 0:04:59.200 --> 0:05:01.320 talk about the housing market, and we've already have a 0:05:01.400 --> 0:05:03.640 very tight We already have a very tight housing market, 0:05:03.680 --> 0:05:06.560 so there already is progress being amazing comfortable. You don't 0:05:06.560 --> 0:05:08.720 believe it's a disconnect between what you're saying as a 0:05:08.760 --> 0:05:11.640 committee and on what you're saying plant and Finance. Not yet, 0:05:11.880 --> 0:05:14.680 Not yet. I mean, it's something clearly watched, but I'm 0:05:14.680 --> 0:05:18.400 not worried about it at this point. Unemployment, you're expecting 0:05:18.480 --> 0:05:21.039 that to rise a little bit, that's the Fed's message. 0:05:21.040 --> 0:05:24.320 But the same time you're saying that at three five percent, 0:05:24.400 --> 0:05:26.599 it's below the natural rate. So how much of a 0:05:26.720 --> 0:05:30.000 rise is acceptable to you? And what do you say 0:05:30.000 --> 0:05:32.160 to the people who say, yeah, it's just a tiny rise, 0:05:32.240 --> 0:05:34.560 but it was my job. Yeah, I know. And that's 0:05:34.640 --> 0:05:37.000 what's difficult. And this is the balance, right that we 0:05:37.080 --> 0:05:40.400 have to try to find because we know inflation hurts 0:05:40.440 --> 0:05:44.400 the lowest income people in our country, and because of 0:05:44.520 --> 0:05:46.920 losing jobs, it hurts those people the most too, So 0:05:47.000 --> 0:05:50.040 we have to find that balance. How much higher it's 0:05:50.080 --> 0:05:53.320 hard to say exactly. I'm not in the camp of 0:05:53.360 --> 0:05:56.640 it being necessarily at five. We're going into this with 0:05:56.680 --> 0:06:01.160 an incredibly strong job market. This is not like other 0:06:01.520 --> 0:06:04.920 situations we've had historically, so I think we don't have 0:06:05.040 --> 0:06:08.640 to see a rapid rise in unemployment at to get 0:06:08.680 --> 0:06:11.279 inflation on the control at this point. So Adam pose 0:06:11.320 --> 0:06:13.680 it was on earlier and he was talking about how 0:06:13.720 --> 0:06:16.880 there has to be an acceptance of perhaps three for 0:06:16.920 --> 0:06:19.680 a longer period of time that yes, maybe the trajectory 0:06:19.680 --> 0:06:21.120 has to be okay, but that has to be a 0:06:21.200 --> 0:06:24.680 tolerated inflation rate. Do you think that that's appropriate given 0:06:24.680 --> 0:06:27.839 the concerns about unemployment. So I think what's most important 0:06:27.839 --> 0:06:31.719 is we keep moving toward two exactly the pace which 0:06:31.760 --> 0:06:34.600 we get to to. I'm less worried about that, but 0:06:34.720 --> 0:06:39.160 we keep moving forward right and get to a position 0:06:39.160 --> 0:06:43.640 where inflation is consistently going down. That's the most important thing. 0:06:43.720 --> 0:06:47.000 See do you not buy the argument that if inflation 0:06:47.160 --> 0:06:50.600 remains above a certain point, regardless of the trajectory, for 0:06:50.640 --> 0:06:54.240 a long time, it gets into the psyche of Americans 0:06:54.279 --> 0:06:56.520 and then they start to sort of have a self 0:06:56.520 --> 0:06:59.280 fulfilling prophecy inflation. You don't believe that the number one 0:06:59.360 --> 0:07:03.240 risk is getting inflation expectations on actor. We cannot let 0:07:03.320 --> 0:07:07.320 that happen. So so far it's not happened. We need 0:07:07.320 --> 0:07:09.600 to continue to act and make sure it doesn't. So 0:07:09.640 --> 0:07:12.480 are you watching the University of Michigan one to five 0:07:12.560 --> 0:07:14.440 year or five to ten year forecast? Is that's sort 0:07:14.440 --> 0:07:18.240 of the key data point all of the above. You 0:07:18.320 --> 0:07:20.280 look at all the above, whether it's the new York 0:07:20.320 --> 0:07:24.640 Fed survey or tips markets, you know all those measures. 0:07:24.840 --> 0:07:28.120 What's the response function to that? Doing what we're doing 0:07:28.200 --> 0:07:31.880 right now, continuing to move rates up methodically to get 0:07:31.920 --> 0:07:35.040 inflation down. Period. You mentioned the consumer. When you look 0:07:35.040 --> 0:07:37.240 at the economy these days, what do you see? We 0:07:37.320 --> 0:07:41.280 got the PC numbers today, The inflation data were great, 0:07:41.320 --> 0:07:45.000 wages and salaries were great, but spending was weak. Well 0:07:45.000 --> 0:07:47.240 that's a bit expected. Right as we race rates and 0:07:47.240 --> 0:07:51.280 we're trying to slow demand, you would expect that spending 0:07:51.280 --> 0:07:54.720 would come down. Are you worried about recession? I know 0:07:54.840 --> 0:07:57.240 that you say it doesn't have to happen, but what 0:07:57.280 --> 0:08:00.160 do you think the odds are? And uh, is there 0:08:00.160 --> 0:08:03.160 any way to foresee it given the unusual nature of 0:08:03.280 --> 0:08:06.680 this recession and recovery? Um So at this point it's 0:08:06.680 --> 0:08:09.680 not in my forecast that we'd hit a deep recession, 0:08:09.800 --> 0:08:12.960 not at all. Short and shallow is something we keep hearing. 0:08:13.240 --> 0:08:17.120 You mentioned four minutes ago, twelve months ago, the buzzwords. 0:08:17.160 --> 0:08:19.520 You know what that was. I won't mention it because 0:08:19.520 --> 0:08:25.160 it's like toxic around here. Bell Rings ejected. That was 0:08:25.200 --> 0:08:27.440 clearly a massive failure and it wasn't unique to this 0:08:27.520 --> 0:08:29.680 central bank. A lot of people were sat on this 0:08:29.720 --> 0:08:32.280 program a million times. We discussed it with Mike McKee 0:08:32.320 --> 0:08:34.920 a million times. Was also a story that played out 0:08:34.960 --> 0:08:37.680 abroad and then didn't materialize. Do you worry that we're 0:08:37.720 --> 0:08:40.640 doing that again by having this conversation, because I can 0:08:40.679 --> 0:08:45.920 tell you President Harker, every single day, short shallow, short, shallow, 0:08:46.120 --> 0:08:49.160 it's all a here, It's all we hear every single day. 0:08:49.200 --> 0:08:50.800 Do you think we could be getting this wrong again? 0:08:52.679 --> 0:08:55.360 I'm not sure that we'd be getting it wrong again. 0:08:55.520 --> 0:08:57.679 What go back and what did we miss? I think 0:08:57.679 --> 0:09:02.800 what did I miss to where we were not enough 0:09:02.800 --> 0:09:05.520 emphasis on the soft data in a situation is changing 0:09:05.720 --> 0:09:08.840 very rapidly. The data is lagging, and in particular, it's 0:09:08.920 --> 0:09:13.280 lagging in those quick change moments. So more emphasis on 0:09:13.360 --> 0:09:16.360 the soft data is really important. What we're hearing from 0:09:16.360 --> 0:09:20.600 our context is the soft data. They're starting to see 0:09:20.600 --> 0:09:23.319 supply chain constraints ease a little bit. They're starting to 0:09:23.360 --> 0:09:27.640 see some relief when it comes to hiring. Not everywhere, 0:09:27.640 --> 0:09:31.080 but in some cases there's so but and they don't 0:09:31.120 --> 0:09:34.360 plan on laying people off at this point. They worked 0:09:34.440 --> 0:09:36.400 very hard to get the people they have. They don't 0:09:36.400 --> 0:09:39.079 want to let them go. So I think in that situation, 0:09:40.080 --> 0:09:44.600 I'm not sure that we're mischaracterizing a short and shallow 0:09:44.920 --> 0:09:48.400 potential and emphasized potential recession. As you said, though, the 0:09:48.480 --> 0:09:51.280 cyclists move very quickly, and there's a feeling that the 0:09:51.320 --> 0:09:54.920 post financial crisis communication architecture of this Federal Reserve, how 0:09:54.960 --> 0:09:57.160 to you back in the last twelve months, what needs 0:09:57.160 --> 0:10:00.240 to change? I think we need to keep emphasize thing 0:10:00.240 --> 0:10:02.880 that what we know, what we don't know, what we 0:10:02.960 --> 0:10:06.800 can know, what we can't know, and act appropriately. I mean, 0:10:06.880 --> 0:10:09.680 people want to level of precision in a situation that 0:10:09.720 --> 0:10:12.720 we're in where we keep getting hit right issue after 0:10:12.800 --> 0:10:16.760 issue as now it's droughts globally right that where it's 0:10:16.880 --> 0:10:19.679 just impossible to put that level of precision on these 0:10:19.720 --> 0:10:21.960 normal Would you like the dot plot to be thrown 0:10:21.960 --> 0:10:24.439 into the trash? Would you like to see that gone? 0:10:24.720 --> 0:10:27.200 I think we need to continue to communicate with the 0:10:27.240 --> 0:10:30.720 American people about what are our views on the beauty 0:10:30.720 --> 0:10:32.440 of the FED is we have a diversity of opinions 0:10:32.440 --> 0:10:35.240 and that's you see those in the dots. President Harker 0:10:35.559 --> 0:10:37.679 of the Philadelphia FED, thank you, sir, that's good to 0:10:37.720 --> 0:10:39.640 catch up. The key I know you've said it a 0:10:39.679 --> 0:10:41.959 few times. Is that something you'd like to see gone 0:10:42.280 --> 0:10:44.560 out of the summary of Economic projections? Well, I wouldn't 0:10:44.559 --> 0:10:46.160 speak for the FED, but I can tell you Wall 0:10:46.160 --> 0:10:51.400 Street continually misinterprets it as a plan rather than nineteen 0:10:51.480 --> 0:10:55.520 individual forecasts. It's something that the chaman often sometimes leans on, 0:10:55.600 --> 0:10:58.800 when it's when it's good for the chan to lean on. 0:10:59.000 --> 0:11:02.160 Other times it's something the emphasizes. You know, it's such 0:11:02.160 --> 0:11:04.200 a tricky moment right now, because when you talk about 0:11:04.200 --> 0:11:06.720 the data dependency, I just keep going back to two 0:11:07.320 --> 0:11:09.800 one and how the data was wrong, How when it 0:11:09.880 --> 0:11:13.199 got revised in the job's formation, it showed this incredible 0:11:13.240 --> 0:11:17.000 strength that hadn't been foreseen in the same kind of way. 0:11:17.160 --> 0:11:19.400 So how do you remain data dependent and look for 0:11:19.400 --> 0:11:22.040 that trajectory if it's so noisy and we're dealing with 0:11:22.080 --> 0:11:24.880 so many different and unfortunately for them, it's the only 0:11:24.880 --> 0:11:26.720 tool they've got, it's the only thing they can do. 0:11:26.800 --> 0:11:29.760 So they can't do They can't say, gee, we wish 0:11:29.760 --> 0:11:33.360 we had the revised numbers yesterday. GDP gets revised up 0:11:33.600 --> 0:11:37.880 and goes domestic income is positive, and that makes uh, 0:11:38.679 --> 0:11:42.000 those two things, don't data there's something clearly wrong with 0:11:42.080 --> 0:11:45.440 the measurement right now, given that gap between GDP and 0:11:45.440 --> 0:11:47.800 g d I. President, how can it's fantastic catch Howe 0:11:47.880 --> 0:12:01.400 you said, this is Blindbeck, we walk them immediately. Here 0:12:01.840 --> 0:12:05.520 the gentleman from St. Louis in Indiana University, James Bullard, 0:12:06.080 --> 0:12:08.960 joins us with all his effort over the years, and 0:12:09.040 --> 0:12:14.280 particularly his research effort a bit ago on regime change 0:12:14.320 --> 0:12:16.960 that had a profound effect seven eight, nine years ago. 0:12:17.600 --> 0:12:20.160 And there's a new phrase from Jim Bullard right now, 0:12:20.200 --> 0:12:22.240 we'll get right to and that is the phrase of 0:12:22.280 --> 0:12:28.839 the moment. Fronting Jim Bullard, what is front moding? I 0:12:28.880 --> 0:12:33.520 think we wanted to pull the rate increases forward in 0:12:33.679 --> 0:12:40.199 time because the inflation that we got in to exploded 0:12:40.280 --> 0:12:43.280 onto the scene, so we had to move more quickly 0:12:43.360 --> 0:12:47.600 than we would have historically. Um, but that's appropriate for 0:12:47.679 --> 0:12:51.000 this situation as we're coming out of the pandemic and 0:12:51.040 --> 0:12:56.000 we've got uh, you know, a lot of fiscal policy, 0:12:56.000 --> 0:12:58.680 a lot of monetary policy during the pandemic. One of 0:12:58.720 --> 0:13:02.360 the questions that Waltz he has had after Chairman Power 0:13:02.360 --> 0:13:05.160 has spoken in the past is he said that, uh, 0:13:05.240 --> 0:13:09.120 at some point it's appropriate to slow the pace of increases, 0:13:09.320 --> 0:13:12.960 and they take that as devish. Others push back and say, 0:13:13.160 --> 0:13:17.079 it's not how fast we do it, it's where we go. Uh. 0:13:17.320 --> 0:13:19.720 Do you agree with that that that the pace doesn't 0:13:19.720 --> 0:13:22.800 really matter as much as what the term pace matters 0:13:22.800 --> 0:13:25.400 a little bit? You do have to get to the 0:13:25.520 --> 0:13:28.200 level of the policy rate that will put downward pressure 0:13:28.200 --> 0:13:32.000 on inflation. Now, and we've been able to get some 0:13:32.040 --> 0:13:34.880 download pressure on inflation during the first half of this year. 0:13:35.320 --> 0:13:37.680 Most of that came through market pricing, not through the 0:13:37.720 --> 0:13:40.240 actual level of the funds rate. But now you have 0:13:40.320 --> 0:13:42.200 to follow through and get the funds rate to the 0:13:42.480 --> 0:13:45.839 to a level that's defensible that you can say, hey, 0:13:45.840 --> 0:13:48.200 I'm I'm putting downward pressure on inflation. We've got an 0:13:48.200 --> 0:13:52.120 EID handle on headline CPI inflation. Uh, this is more 0:13:52.120 --> 0:13:54.160 inflation than we've seen in forty years. We've got to 0:13:54.160 --> 0:13:57.320 get the rate up well. The concern that some members 0:13:57.360 --> 0:14:00.400 of the committee have had is that as you it's 0:14:00.440 --> 0:14:03.000 been market pricing, it's not the full effects yet of 0:14:03.040 --> 0:14:05.640 the tightening, and when that hits, the economy may be weak, 0:14:06.160 --> 0:14:09.000 and then you're doing a disservice by sending us into 0:14:09.320 --> 0:14:13.240 you know, long and variable lags something uttered by Milton Freedman, 0:14:13.280 --> 0:14:15.880 but that was based on data from the fifties and sixties. 0:14:15.920 --> 0:14:19.160 I think today's market, it's partly because of media like this. 0:14:20.040 --> 0:14:24.560 It moved very quickly in response to projected paths of policy. 0:14:24.600 --> 0:14:27.760 And I would site as exhibit number one the housing market, 0:14:28.080 --> 0:14:32.200 which has already slowed down substantially in the spring here, 0:14:32.240 --> 0:14:34.400 and it started to do that before we even made 0:14:34.560 --> 0:14:36.720 much of a move. We would only move twenty five 0:14:36.800 --> 0:14:39.600 or or made one or two moves, and and hadn't 0:14:39.640 --> 0:14:42.760 even started the battlestreet runoff. So I don't think this 0:14:42.880 --> 0:14:46.200 long and variable lags thing is as accurate as it 0:14:46.280 --> 0:14:48.760 might have been historically. I think you're getting a lot 0:14:48.760 --> 0:14:51.680 of the impact now, but we can't just rely on markets. 0:14:51.720 --> 0:14:54.160 We have to get our rate up to the level 0:14:54.240 --> 0:14:56.680 that will put down the pressure on inflation. I've said 0:14:56.880 --> 0:14:59.320 three point seven, five or four percent by the end 0:14:59.360 --> 0:15:01.920 of this year. I'd like to get to that level, 0:15:02.080 --> 0:15:04.160 and sooner is better as far as I'm concerning, A 0:15:04.200 --> 0:15:07.560 lot of people have said neutral is higher than Chairman suggested. 0:15:07.640 --> 0:15:09.400 We were there almost at two and a half percent, 0:15:09.480 --> 0:15:13.280 but the inflation is making that that's a long runner 0:15:13.400 --> 0:15:16.480 that's a long run neutral that that you can read 0:15:16.520 --> 0:15:20.200 that off the summary of economic projections, and that's if 0:15:20.240 --> 0:15:23.320 the economy is on the balanced growth path, inflation was 0:15:23.360 --> 0:15:26.360 at two percent expected to remain at two percent, then 0:15:26.400 --> 0:15:29.160 that would be a logical level for the policy rate then. 0:15:29.640 --> 0:15:32.000 But that's not where we are today. We've got all 0:15:32.040 --> 0:15:35.160 this inflation and we've got a very strong labor market. 0:15:35.200 --> 0:15:38.800 So that's why it makes sense to go well above 0:15:38.880 --> 0:15:41.400 that to a recommended policy rate that's well above that 0:15:41.400 --> 0:15:44.560 has that longer run neutral point. Change for you is 0:15:44.600 --> 0:15:46.200 that how to lift Do you think we go back 0:15:46.240 --> 0:15:48.800 to the old world, the pre pandemic world of low inflation, 0:15:48.880 --> 0:15:52.040 low growth and a lower long term neutral rate. What 0:15:52.160 --> 0:15:57.520 are we going towards? Uh? You know, I don't like 0:15:57.600 --> 0:15:59.360 to get wrapped up in this because this is the 0:15:59.400 --> 0:16:01.920 thing we know the least about. So it's good to 0:16:01.960 --> 0:16:04.440 think about it and it's good to project about it, 0:16:04.480 --> 0:16:07.680 but we don't really know where the where this everything 0:16:07.720 --> 0:16:10.120 will settle out, let's say five to ten years from now. 0:16:10.640 --> 0:16:13.000 But you know, you've got this a media problem now 0:16:13.080 --> 0:16:15.120 where you've got the inflation today, that's where you got 0:16:15.120 --> 0:16:17.080 to fight your battle today. Can you tell me what 0:16:17.160 --> 0:16:20.360 ballets sheet reduction fits into that. We've had numbers like 0:16:20.400 --> 0:16:23.200 a trillion dollars bantons sheet reduction over the next twelve months. 0:16:23.400 --> 0:16:25.880 What is that to you in terms of tightening policy? 0:16:25.880 --> 0:16:27.960 And how does that complement your thoughts? Somewhere right should be? 0:16:28.320 --> 0:16:31.040 And I think it's uh, it is a compliment to 0:16:31.440 --> 0:16:35.520 the rate policy. Um. I'm hopeful that we'll get uh. 0:16:35.560 --> 0:16:38.880 And I do think that we've gotten some downward pressure 0:16:39.000 --> 0:16:42.440 or upward pressure on longer term interest rates through this channel. 0:16:42.840 --> 0:16:46.360 I think that econometric estimates are you know, all over 0:16:46.400 --> 0:16:49.880 the map, they're they're very wide. UM, so we'll we'll see. 0:16:50.640 --> 0:16:53.320 One thing that I think maybe pretty effective here is 0:16:53.360 --> 0:16:56.840 that this is a global quantitative tightening and so you've 0:16:56.880 --> 0:17:00.200 got many central banks moving in the same direction here, 0:17:00.240 --> 0:17:03.240 all at once. That may push longer term meals higher 0:17:03.240 --> 0:17:07.280 and help us keep inflation under control globally. St. Louis Cardinals, 0:17:07.400 --> 0:17:11.320 who had a spectacular August. There's no question you're looking 0:17:11.440 --> 0:17:13.880 like the best team in baseball right now. And they've 0:17:13.920 --> 0:17:17.560 got a manager who is unique, young and different. He 0:17:17.600 --> 0:17:22.359 has a communication strategy that is original. What's the next 0:17:22.400 --> 0:17:28.560 communication strategy for the FED? Is there too much communication? Though? Uh? 0:17:29.520 --> 0:17:33.200 I think we do a great job because I think 0:17:33.240 --> 0:17:36.480 it's good to have a big committee. There's information is 0:17:36.480 --> 0:17:40.679 coming in and continuous time. If you'll appreciate and uh, 0:17:40.720 --> 0:17:43.600 and you have to react. Markets want to know, well, 0:17:43.960 --> 0:17:45.800 you know, what do you think about? What do you 0:17:45.840 --> 0:17:49.080 think about that? Dade twice in this conversation blame the 0:17:49.160 --> 0:17:56.120 media for the mess word. We asked President Hawkin whether 0:17:56.119 --> 0:17:58.200 we should get rid of the doult clock. Do you 0:17:58.240 --> 0:18:02.840 think we should? I've felt that we should do something 0:18:02.840 --> 0:18:05.000 with the dot plot, but we haven't figured out what 0:18:05.160 --> 0:18:09.240 to do. I have talked with you guys about stepping 0:18:09.240 --> 0:18:12.560 out of it. But I don't like the emphasis on 0:18:13.119 --> 0:18:15.719 let's say, three years from now, here's where we're gonna be. 0:18:16.320 --> 0:18:19.240 The information content of that is close to zero. So 0:18:19.400 --> 0:18:22.160 I don't think we should pretend that we're saying something 0:18:22.160 --> 0:18:25.440 when we don't really know. Uh. And we should probably 0:18:25.520 --> 0:18:28.080 keep a shorter term about, well, here's where we think 0:18:28.119 --> 0:18:30.080 we are here. If you have pools up to the 0:18:30.160 --> 0:18:32.520 lunch room at the St. Louis Fed, you know, in 0:18:32.560 --> 0:18:35.280 his retirement, can you have this surveillance team come out 0:18:35.320 --> 0:18:39.760 to celebrate that. Okay, you think he's gonna hit I 0:18:39.800 --> 0:18:42.480 don't know the the the home running hit the other 0:18:42.560 --> 0:18:45.679 day pensioning in the third inning was extraordinary, that grand slam. 0:18:47.320 --> 0:18:50.119 What's the grand slam Sherman Paul has to do before 0:18:50.119 --> 0:18:53.440 the September meeting? What is the communication strategy he needs 0:18:53.480 --> 0:18:55.800 to do to hit a grand stand? Like the gentleman, 0:18:56.119 --> 0:18:58.440 I think he'll do a great job in this speech here. 0:18:58.760 --> 0:19:01.800 Um I I haven't seen it, so I don't know exactly. 0:19:01.840 --> 0:19:10.560 What would you like to just single sense you like 0:19:11.680 --> 0:19:14.399 I just said, I don't know what, but he'll do 0:19:14.440 --> 0:19:16.040 a great job with it, and it's a it's a 0:19:16.080 --> 0:19:19.119 great opportunity and he'll use it effectively to UH to 0:19:19.359 --> 0:19:23.719 lay out the committee strategy. Very diplomatic there than if 0:19:23.760 --> 0:19:35.000 they St. Louis Fed Right now, we have with us, 0:19:35.000 --> 0:19:38.560 of course, Atlanta FED President Raphael Bostick, who has provided 0:19:38.560 --> 0:19:42.000 the intellectual leadership for the region and has really been 0:19:42.080 --> 0:19:44.919 vocal recently about what's going to happen in September. And 0:19:44.920 --> 0:19:46.959 that's where we have to start. Where you said recently 0:19:47.000 --> 0:19:49.639 in a recent interview, that's it's a coin toss between 0:19:49.680 --> 0:19:52.480 fifty and seventy five in terms of how many basis 0:19:52.520 --> 0:19:55.880 points you HiPE. What will determine that coin toss for you? Well, 0:19:55.920 --> 0:19:57.520 for me, it will be the data that comes in 0:19:57.520 --> 0:19:59.760 over the next couple of weeks. You know, PC today 0:19:59.840 --> 0:20:02.359 is actually an important one showing the economy is slowing 0:20:02.359 --> 0:20:05.280 down in an orderly way, which is helpful. But we 0:20:05.320 --> 0:20:07.880 also have a job report that's coming in I guess 0:20:07.880 --> 0:20:10.199 a week from now, and then ten days later we 0:20:10.280 --> 0:20:13.400 have the CPI. I think the three of those together 0:20:13.960 --> 0:20:17.440 will start to give me a sense of the big 0:20:17.480 --> 0:20:20.400 story about how the economy is responding to our policies 0:20:20.840 --> 0:20:24.080 and also just the changing dynamic. And and if it 0:20:24.160 --> 0:20:27.720 comes in strong and start strong, as if there's no change, 0:20:27.960 --> 0:20:31.760 I'll probably be leaning seventy. If it comes in slowing 0:20:31.800 --> 0:20:34.200 like we've seen today, it's the first piece of evidence 0:20:34.520 --> 0:20:37.119 I'll probably lane your fifty. Okay, So is there a 0:20:37.160 --> 0:20:40.400 certain threshold with the jobs data in particular that you're 0:20:40.400 --> 0:20:42.840 looking for because you mentioned that we saw a pretty 0:20:43.000 --> 0:20:45.760 a pretty elevated number the last time around. How is 0:20:45.800 --> 0:20:47.240 that going to inform you what's sort of the cut 0:20:47.280 --> 0:20:49.720 off that you're looking for there? Well, I don't know 0:20:50.160 --> 0:20:52.880 these things. There is some art here, right, So it's 0:20:52.920 --> 0:20:57.880 not if it hits to seventies seven then I'm good, right. 0:20:58.240 --> 0:21:00.200 I do think that you have to think of out 0:21:00.240 --> 0:21:02.880 this as you know, what does the jobs number tell 0:21:02.920 --> 0:21:06.199 us in terms of trajectory and the jobs. You know, 0:21:06.320 --> 0:21:08.720 the economy has been producing a lot of jobs on 0:21:08.720 --> 0:21:13.520 a monthly basis, food people a month, and that's a 0:21:13.600 --> 0:21:16.840 lot um. I think we want to start to see 0:21:16.880 --> 0:21:20.119 that slow, uh, And that would be consistent with the 0:21:20.160 --> 0:21:23.240 idea that our policies are starting to take demand and 0:21:23.520 --> 0:21:27.560 pull it down and reduce that in balance that is underlying, uh, 0:21:27.640 --> 0:21:30.080 the inflation that we're seeing. So that's kind of what 0:21:30.080 --> 0:21:32.720