WEBVTT - Fed's Mester: Compelling Case To Move Rates Gradually (Audio) 0:00:00.080 --> 0:00:03.320 I want to welcome now to our special Bloomberg Radio 0:00:03.400 --> 0:00:07.360 broadcast are Bloomberg Television audience. I'm live today the Federal 0:00:07.360 --> 0:00:11.000 Reserve Bank of Cleveland with the Cleveland Fed Bank President 0:00:11.080 --> 0:00:14.560 Loretta Mester to thank you for inviting us here. Thanks 0:00:14.600 --> 0:00:16.720 for coming. It's exciting for us. Well, it's exciting to 0:00:16.760 --> 0:00:18.279 be here with you because you know what you just 0:00:18.440 --> 0:00:20.760 sent it a couple of weeks ago to Federal Reserve meeting, 0:00:21.040 --> 0:00:23.200 first time you've done this since you joined the f 0:00:23.280 --> 0:00:26.599 O m c UH. You are looking at an economy 0:00:26.600 --> 0:00:29.040 that's performing well, and you say the outlook is that 0:00:29.080 --> 0:00:31.400 it will continue to perform well. But what's the urgency 0:00:31.520 --> 0:00:35.160 why descent? Is the economy overheating? Well, it's not overheating. 0:00:35.159 --> 0:00:37.239 And I don't think we're behind the curve yet, but 0:00:37.400 --> 0:00:40.360 I thought there was a very compelling case for taking 0:00:40.360 --> 0:00:43.239 another gradual step up on the path. As you know 0:00:43.360 --> 0:00:47.519 from the Summary of economic projections, the modal path and 0:00:47.560 --> 0:00:50.959 the or the median path across participants is a gradual 0:00:51.000 --> 0:00:53.639 path op. We've made a lot of progress, I think, 0:00:53.640 --> 0:00:56.200 on both parts of our dual mandate goals. In terms 0:00:56.240 --> 0:00:58.840 of labor markets, you know we've We've seen a hundred 0:00:58.840 --> 0:01:02.760 and eighty thousand jobs added per month this year on average, 0:01:03.320 --> 0:01:06.120 which is a pretty good pace, especially after last year's 0:01:06.160 --> 0:01:08.800 pace and previous year. So we're doing well on the 0:01:08.880 --> 0:01:12.039 labor front. Inflation still still below our two percent goal, 0:01:12.120 --> 0:01:15.040 but again, you know, it's moved up over the past year, 0:01:15.080 --> 0:01:18.600 and monetary policy has to be forward looking. So you know, 0:01:18.640 --> 0:01:20.960 my my view, there was a compelling case for moving 0:01:20.959 --> 0:01:23.760 the rate up gradually, um taking another step on that 0:01:23.800 --> 0:01:27.040 gradual path. And you know there's some you know, people 0:01:27.040 --> 0:01:29.479 who think like, oh, you want to curtail the expansion. 0:01:29.520 --> 0:01:31.880 Not at all. Right. The reason I think it was 0:01:31.920 --> 0:01:35.080 appropriate to move the rate up by twenty five basis 0:01:35.120 --> 0:01:38.720 points is that we want we want the sustainable expansion, 0:01:38.760 --> 0:01:41.280 and I think moving rates up is consistent with that. 0:01:41.760 --> 0:01:44.240 Last week, the numbers on consumers spending were weak enough 0:01:44.720 --> 0:01:48.800 that the Atlanta Fed cut its GDP tracker down to 0:01:48.800 --> 0:01:51.040 two point four percent. It had been up as sighs 0:01:51.120 --> 0:01:54.720 three point eight percent. You know, the first half the 0:01:54.760 --> 0:01:58.840 GDP barely grew over one percent. Does that make you 0:01:59.400 --> 0:02:02.680 just think it isn't Maybe the weight could be a 0:02:02.720 --> 0:02:05.200 little bit longer. There there's a risk of hitting the 0:02:05.240 --> 0:02:07.080 economy with the rate hike when it's really not all 0:02:07.080 --> 0:02:09.679 that strong yet. Well, you're right, the first half of 0:02:09.720 --> 0:02:12.920 the year growth was around one percent UM. I still 0:02:12.960 --> 0:02:15.320 think we're going to see a rebound in the second half. Yeah, 0:02:15.400 --> 0:02:18.440 around two two to three percent in the second half, 0:02:18.480 --> 0:02:21.200 which about two percent for the year. And my view 0:02:21.240 --> 0:02:23.600 is that we're going to be growing about two little 0:02:23.600 --> 0:02:26.960 bit over trend um over the next two years UM. 0:02:27.000 --> 0:02:29.160 That'll be strong enough to put some downward pressure on 0:02:29.200 --> 0:02:31.359 the unemployment rate. I expected to go down from where 0:02:31.480 --> 0:02:34.239 the current level. And I believe that, you know, the 0:02:34.480 --> 0:02:38.160 the day is in place for inflation to move gradually 0:02:38.160 --> 0:02:41.520 back to two UM. And my view inflation expectations are 0:02:41.520 --> 0:02:45.000 reasonably you know, well anchored. We've seen inflation move up 0:02:45.040 --> 0:02:48.040 over the past year, and I think the economic conditions 0:02:48.040 --> 0:02:50.000 are such that we're going to be, you know, going 0:02:50.000 --> 0:02:52.560 gradually back to our two percent coals. So again we 0:02:52.639 --> 0:02:54.560 have to be a little pre emptive and sort of 0:02:54.600 --> 0:02:58.400 making sure that we're moving the interest right up UM 0:02:58.480 --> 0:03:02.240 so that we can keep the the expansion sustained. So 0:03:02.680 --> 0:03:04.880 but still, when I think of the urgency to hike, 0:03:04.960 --> 0:03:09.000 now many FED officials or some I could try to 0:03:09.000 --> 0:03:10.400 think of how the f hom C would say a 0:03:10.480 --> 0:03:14.000 few some several, but a lot of economists and many 0:03:14.000 --> 0:03:16.440 people of race the issue, but inflation is undershot for 0:03:16.480 --> 0:03:19.320 so long. Again, what's the urgency is? Would it not 0:03:19.400 --> 0:03:22.960 only be okay, but would be a good idea to 0:03:23.080 --> 0:03:25.320 let inflation get up to two percent and let it 0:03:25.360 --> 0:03:28.760 overshoot the forecast? And you too say not till were 0:03:28.760 --> 0:03:30.919 going to see a two percent inflation rate. Look, I mean, 0:03:31.000 --> 0:03:34.160 I think we've learned over history that the FED should 0:03:34.160 --> 0:03:37.440 be looking ahead and not just waiting. I want to 0:03:37.440 --> 0:03:40.960 be consistent with our communications and our summary econ on 0:03:41.040 --> 0:03:44.240 projections that basically they say a gradual path is appropriate. 0:03:44.760 --> 0:03:47.520 I think if we wait until you know, some people 0:03:47.520 --> 0:03:50.040 say wait until you see the inflation get back to 0:03:50.120 --> 0:03:53.240 your goal. Um, then there's a higher potential that we're 0:03:53.240 --> 0:03:55.680 gonna have to raise interest rates on a steeper path. 0:03:56.320 --> 0:03:58.960 And in the past, when people when when FED and 0:03:59.000 --> 0:04:01.400 other policy nations have on that in other central banks, 0:04:01.440 --> 0:04:03.200 it really doesn't turn out to be a good outcome. 0:04:03.280 --> 0:04:06.960 So again, my preference would be moved rights up gradually. 0:04:07.400 --> 0:04:09.119 You know, the gradual path. If you look at what's 0:04:09.120 --> 0:04:11.400 in the SEPs and of course that's the assessment today 0:04:11.400 --> 0:04:14.440 about what what we think is appropriate. It doesn't mean 0:04:14.440 --> 0:04:16.960 moving rates up every meeting, right, it's it really is 0:04:16.960 --> 0:04:21.320 a gradual path, and you know, policy will remain accommodative 0:04:21.400 --> 0:04:24.120 even if we take another step on the gradual path. Okay, 0:04:24.160 --> 0:04:26.680 So the FED has been telling us repeatedly that all 0:04:26.760 --> 0:04:30.680 meetings are live, there's potential for a policy policy change. 0:04:31.160 --> 0:04:36.520 Um you argued for hiking rates in September, The FED 0:04:36.640 --> 0:04:39.120 chair said, recently the cases strengthened for a rate hike 0:04:39.720 --> 0:04:42.440 if the data stay strong. It seems like the economies 0:04:42.480 --> 0:04:45.960 on even a better footing for November rate hike. If 0:04:46.000 --> 0:04:48.320 the outlook doesn't change, if the reports come in strong, 0:04:48.360 --> 0:04:50.279 are you going to argue for a rate hike in November? 0:04:50.320 --> 0:04:52.360 So I think all meetings are live, and I would 0:04:52.400 --> 0:04:55.760 include November in that all meetings are live. Um As 0:04:55.800 --> 0:04:58.160 I said in September, I thought the case was compelling 0:04:58.200 --> 0:05:01.360 to take another another step on the gradual path. If 0:05:01.360 --> 0:05:04.640 the data come in um as we anticipate, you know, 0:05:04.680 --> 0:05:08.320 consistent with my forecast over the meeting run, then I 0:05:08.320 --> 0:05:11.719 would expect, you know, to that the case would remain compelling. 0:05:11.720 --> 0:05:13.120 But of course We're going to look at all the 0:05:13.200 --> 0:05:16.679 data that comes in between now and November, between November 0:05:16.720 --> 0:05:18.320 and December, as we do all the time as we 0:05:18.520 --> 0:05:20.719 step through meetings. We'd like to look at all the 0:05:20.760 --> 0:05:23.839 incoming information. But you're right, if the data comes in 0:05:24.000 --> 0:05:28.080 as consistent with what we've been seeing, then yes, I 0:05:28.120 --> 0:05:30.440 would think that it would still remain of compelling, and 0:05:30.480 --> 0:05:32.120 you would you would vote for a rate hike. Well, 0:05:32.279 --> 0:05:34.279 I we'll see when we get to the meeting, but again, 0:05:34.400 --> 0:05:37.840 the case would be compelling. Uh, it is a few 0:05:37.880 --> 0:05:40.880 days before an election, and the FED says it's not political. 0:05:41.240 --> 0:05:43.600 I'm a long time FED watcher. I've seen moves right 0:05:43.640 --> 0:05:46.720 before elections. I believe it. But it would certainly raise 0:05:46.760 --> 0:05:49.560 a lot of attention. The markets would notice, are the 0:05:49.680 --> 0:05:52.240 rules for a rate hike in November, especially this year 0:05:52.640 --> 0:05:55.760 any different? Does the hurdle for the rate hike get 0:05:55.760 --> 0:05:58.599 a little bit higher? November said? You said it yourself. 0:05:58.760 --> 0:06:01.880 We are in a political institution. We have been in 0:06:01.920 --> 0:06:05.320 a political institution all along. We're designed to be have 0:06:05.400 --> 0:06:08.800 an independent monetary policy. I can tell you I've been 0:06:08.800 --> 0:06:12.000 going to FOMC meetings since I became research director at 0:06:12.000 --> 0:06:15.040 the Philly Fed, so over the past sixteen years. I've 0:06:15.040 --> 0:06:17.880 been in the FED thirty years. Yes, we are in 0:06:17.960 --> 0:06:21.080 a political institution. We don't Politics do not come into 0:06:21.080 --> 0:06:23.760 our decisions. We look at the economy, we do our 0:06:23.760 --> 0:06:26.800 best to evaluate it relative to our dual mandate goals, 0:06:26.920 --> 0:06:30.040 and we set policy based on the economic outlook. So 0:06:30.080 --> 0:06:32.320 you'll push and you think other FOMC members will vote 0:06:32.320 --> 0:06:35.039 for a rate hike if called for even six days 0:06:35.040 --> 0:06:37.880 before an election. I think we're a political Politics doesn't 0:06:37.880 --> 0:06:41.160 come into it. President Bill Dudley said today the FED 0:06:41.600 --> 0:06:44.880 should be cautious raising rates, especially at the time when 0:06:44.920 --> 0:06:47.800 the key rate is so low, so close to zero. 0:06:48.240 --> 0:06:50.600 If there's recession, the Fed doesn't have much room to 0:06:50.640 --> 0:06:52.479 find it. And he built Uley's not the only person 0:06:52.560 --> 0:06:54.520 making that argument. How do you respond with it, because 0:06:54.520 --> 0:06:56.760 its pretty clear you don't share that view. Right again, 0:06:56.920 --> 0:07:01.880 I'm basing it one monetary policy, well standardized you know, 0:07:01.920 --> 0:07:04.440 ways of doing policy. I view the economy and I 0:07:04.480 --> 0:07:06.480 look at our goals. We've made progress on both the 0:07:06.520 --> 0:07:09.640 employment part of our mandate and on the inflation part 0:07:09.640 --> 0:07:12.000 of our mandate, and to me, bringing the rate up 0:07:12.040 --> 0:07:15.480 a little bit is appropriate. Yes, of course, we always 0:07:15.480 --> 0:07:18.400 have to think about the risk um going forward. But 0:07:18.480 --> 0:07:21.640 again I think it's a compelling case taking another little 0:07:21.680 --> 0:07:24.760 step on our gradual path, which the participants of the 0:07:24.840 --> 0:07:27.920 on the FOMC continue to see as the appropriate path. 0:07:29.040 --> 0:07:30.880 Another person I want to site as a fellow FED 0:07:30.920 --> 0:07:35.640 bank president, another monetary theory expert on the FED, Jim 0:07:35.680 --> 0:07:38.120 Bullard of St. Louis, because he said on Friday the 0:07:38.160 --> 0:07:41.240 December is his base case for a rate hike this 0:07:41.320 --> 0:07:44.920 year because a lot of members want to raise the 0:07:45.000 --> 0:07:46.520 key rate by the end of the year. Let's see, 0:07:46.520 --> 0:07:50.320 doesn't happen in November. Should markets be all but convinced 0:07:51.000 --> 0:07:53.800 that it will happen in December if it's even Jim 0:07:53.800 --> 0:07:56.160 Bullard's base case? Now, yeah, So I think that I 0:07:56.160 --> 0:07:58.280 don't like to look at it in terms of calendar gear. 0:07:58.360 --> 0:08:00.040 I looked to look at it in terms of of 0:08:00.160 --> 0:08:04.440 sort of the appropriate path. So you're right, doesn't doesn't 0:08:04.440 --> 0:08:07.280 happen in December November? I mean, and that and sent sons, 0:08:07.320 --> 0:08:11.200 that's less important than is the economic outlook consistent with 0:08:11.240 --> 0:08:14.000 a gradual increase in the in the level of the 0:08:14.000 --> 0:08:17.240 interest rate. And each meeting is a liar. You know 0:08:17.280 --> 0:08:20.640 you mentioned the the steps the Summary of Economic Prevention 0:08:20.760 --> 0:08:24.400 Projections that includes the dot plots. Of course, each member 0:08:24.440 --> 0:08:26.120 gives their idea of based on their view of the 0:08:26.160 --> 0:08:30.280 economy where the interest rates are going two hiks two 0:08:30.320 --> 0:08:35.280 hikes in. Is is that a realistic path or does 0:08:35.320 --> 0:08:37.920 the FOMC risk under delivering Again, I mean that's not 0:08:38.000 --> 0:08:40.320 quite the same as promising four rate hikes at the 0:08:40.360 --> 0:08:44.080 beginning of and ending maybe with one, but still okay, 0:08:44.160 --> 0:08:47.000 So firstly, it's not a promise, that's true. I used 0:08:47.040 --> 0:08:49.520 the wrong word. I shouldn't have used that. Basically, we 0:08:49.600 --> 0:08:51.480 get to get you know, we sit down and each 0:08:51.600 --> 0:08:54.679 participant decides what they think of the appropriate path of 0:08:54.720 --> 0:08:57.400 policy has given what they see in the economy happening 0:08:57.400 --> 0:09:00.440 and what their forecast is over the meeting run um, 0:09:00.480 --> 0:09:03.480 and you know, we're we're all committed to hitting our 0:09:03.520 --> 0:09:06.679 goals right and moving the economy in that direction. And 0:09:06.720 --> 0:09:09.160 then we write down what we think the appropriate policy 0:09:09.160 --> 0:09:12.560 path will be. If the economy involves differently than we expect, 0:09:12.600 --> 0:09:15.000 then that path is going to be moving around and 0:09:15.080 --> 0:09:17.480 so and if different shocks at the economy, then you'd 0:09:17.480 --> 0:09:20.520 expect that path to to move around. So again it's 0:09:20.559 --> 0:09:22.360 not a commitment to the path, but we want to 0:09:22.360 --> 0:09:25.199 be as transparent as we can with the public about 0:09:25.240 --> 0:09:28.520 where we are seeing the economy going and what policy 0:09:28.600 --> 0:09:31.720 is associated with that. Semester we're just getting going, and 0:09:31.760 --> 0:09:33.800 I'm so glad you've given me an hour here on 0:09:33.840 --> 0:09:35.880 Bloomberg Radio to continue this conversation. I want to thank 0:09:35.920 --> 0:09:39.360 our Bloomberg Television listeners for joining us. Will be continuing 0:09:39.400 --> 0:09:43.520 this conversation with Loretta Mester, president of the Cleveland FED. 0:09:43.880 --> 0:09:50.440 I'm Kathleen Hayes. This is Taking Stock with Pim Box 0:09:50.480 --> 0:09:55.760 and Kathleen Hayes on Bloomberg Radio Very special show today. 0:09:55.800 --> 0:09:58.640 We're broadcasting live today from the FED to Reserve Bank 0:09:58.800 --> 0:10:02.040 of Cleveland. The Reddemester, president of Cleveland FED, is my 0:10:02.160 --> 0:10:04.000 very special guest. Want to thank you again, Lort. It's 0:10:04.000 --> 0:10:06.160 still great to be here in Cleveland at the bank. Yeah. 0:10:06.200 --> 0:10:07.840 I'm glad that you were able to come to a 0:10:07.920 --> 0:10:10.800 regional reserve bank to sort of see how we work 0:10:10.800 --> 0:10:13.720 in the regional bank. Everyone focuses on the board of governors, 0:10:13.720 --> 0:10:15.920 but this regional structure of the FED, I think is 0:10:16.040 --> 0:10:19.600 very important. Since you brought that up, explain that because 0:10:20.080 --> 0:10:22.120 from time to time in a political you're even not 0:10:22.160 --> 0:10:24.760 in a particular it comes you're up, let's change the fit, 0:10:24.920 --> 0:10:27.440 and somebody wants you a regional banks or someone wants 0:10:27.480 --> 0:10:32.200 this explain to our listeners and your constituents, right, why 0:10:32.440 --> 0:10:34.559 regional banks pay an important role and keep the Federal 0:10:34.600 --> 0:10:36.800 Reserve doing a good job. Right. So the Federal Reserved 0:10:36.800 --> 0:10:41.160 with design as an institution that sort of balances private 0:10:41.160 --> 0:10:44.000 sector and public sector, right, it has. You know, there 0:10:44.080 --> 0:10:46.560 was a concern about it being too concentrated on Wall 0:10:46.600 --> 0:10:50.360 Street concerns. The FED, by the regional structure, really brings 0:10:50.440 --> 0:10:53.960 main street concerns and views to the f MC meeting. 0:10:54.080 --> 0:10:57.160 So each of the Reserve bank presidents, you know, monitor 0:10:57.200 --> 0:11:01.199 their district. You had both Taught and David on before 0:11:01.559 --> 0:11:06.400 umber and our Business Advisory Council, So they bring a 0:11:06.400 --> 0:11:10.040 lot of regional information to us UM at the Cleveland FED, 0:11:10.080 --> 0:11:13.240 and that regional information. I can't emphasize how much that's 0:11:13.280 --> 0:11:15.280 important for us to get a handle on what's happening 0:11:15.559 --> 0:11:18.720 in our regional economies and that actually we bring that 0:11:18.800 --> 0:11:20.360 to d C. So I always make it a point 0:11:20.360 --> 0:11:23.280 in FMC meanings to talk about what's happening in my region. 0:11:23.640 --> 0:11:25.960 And of course the other presidents bring what's happening in 0:11:26.000 --> 0:11:28.559 their region, we talk about it, and then we're making 0:11:28.600 --> 0:11:32.240 monetary policy at the national levels. But that information is 0:11:32.320 --> 0:11:35.480 very important, and the regional structure of the FED is 0:11:35.600 --> 0:11:38.400 a way of bringing that information so that it can 0:11:38.440 --> 0:11:40.959 affect national monetary apology. You have any sense, and you've 0:11:40.960 --> 0:11:42.319 been with the FED for a long time, and you 0:11:42.440 --> 0:11:45.520 like in monetary policy academically, your expertise you've been following, 0:11:45.679 --> 0:11:47.440 do you have any sense that that the intent to 0:11:47.480 --> 0:11:49.760 try to restructure the FIT or change the FED is 0:11:49.800 --> 0:11:52.360 any more intense now than it has been. I think 0:11:52.400 --> 0:11:55.400 that it's reasonable that to given we've been through very 0:11:55.400 --> 0:11:58.280 hard economic times, that it's time. You know that they're 0:11:58.280 --> 0:11:59.480 going to be a lot of people who want to 0:11:59.520 --> 0:12:01.880 relook at things. But I want to point out to 0:12:01.960 --> 0:12:05.120 people that you know, the FED structure has lasted for 0:12:05.240 --> 0:12:08.520 over a hundred years, and we've had two attempts at 0:12:08.559 --> 0:12:12.240 central banking before the Federal Reserve system, and neither one 0:12:12.320 --> 0:12:15.720 lasted more than twenty years. So there is something very 0:12:15.760 --> 0:12:19.520 good about this balance of the regional with d C 0:12:20.280 --> 0:12:23.160 and you know, with the New York FED coming together 0:12:23.200 --> 0:12:25.480 and making policy on behalf of the nation, and so 0:12:25.520 --> 0:12:26.800 one of the good things we could say it again 0:12:26.840 --> 0:12:29.040 one of things about regional FED bank presidents. They have 0:12:29.120 --> 0:12:32.560 boards of directors and advisory council, so they're the regional economy. 0:12:32.720 --> 0:12:35.880 So how do you respond then to people who feel 0:12:36.040 --> 0:12:38.560 that the Fed is maybe not responsive enough to the 0:12:38.640 --> 0:12:41.480 demands of labor. And within that context, I want to 0:12:41.480 --> 0:12:45.480 mention that the Labor Market Conditions Index, which Janet Yellen 0:12:45.520 --> 0:12:47.559 has praised, is such a good view of the labor 0:12:47.600 --> 0:12:49.800 market has as some of a different view of the economy. 0:12:49.800 --> 0:12:53.000 I would say than the low unemployment rate UH. It's 0:12:53.000 --> 0:12:55.840 been below its post recession average of plus four every 0:12:55.880 --> 0:12:59.920 month since January year did date average has been negative 0:13:00.240 --> 0:13:03.280 out of UH seven eight seven seven out of eight 0:13:03.320 --> 0:13:05.760 months this year. In the past, this has been a 0:13:05.840 --> 0:13:08.679 precursor a signal of recession. Is that something the right 0:13:08.760 --> 0:13:11.440 ms you and others who want to high rates now 0:13:11.640 --> 0:13:14.120 need to pay closer attention to. We look at many, 0:13:14.160 --> 0:13:16.760 many different statistics on the labor market. In fact, one 0:13:16.760 --> 0:13:20.040 of the authors of that that index is actually here 0:13:20.040 --> 0:13:22.800 at the Cleveland Fed UM, Bruce falc And so we 0:13:22.840 --> 0:13:24.520 look at that, we look at a lot of other 0:13:24.559 --> 0:13:27.480 indicators of the labor markets UM, and I think most 0:13:27.480 --> 0:13:30.560 ecconists would agree that the labor markets are doing quite well. 0:13:30.600 --> 0:13:32.320 In fact, it's one of the strengths of the economy. 0:13:32.440 --> 0:13:36.319 That said, not everyone in the labor market is doing well, 0:13:36.559 --> 0:13:41.040 and there are long term issues with labor workforce development 0:13:41.080 --> 0:13:44.560 issues UM. I recently was in Hazard, Kentucky, part of 0:13:44.559 --> 0:13:48.040 my district in Appalachia, and you know, there are people 0:13:48.120 --> 0:13:51.440 hurting there because of the coal um industry. And you know, 0:13:51.480 --> 0:13:54.200 I saw a program that's actually making you know, taking 0:13:54.559 --> 0:13:56.960 you know, coal miners and they were in a course 0:13:57.040 --> 0:13:59.600 to learn how to be electrical alignment and and firebrock 0:13:59.679 --> 0:14:02.520 to line it. It's one small program, but I think, 0:14:02.679 --> 0:14:04.280 you know, one of the roles of the FED and 0:14:04.320 --> 0:14:06.320 one of the value adds we can do is study 0:14:06.720 --> 0:14:09.520 how to scale those programs up. We have a community 0:14:09.600 --> 0:14:12.959 development function here at the Cleveland FED that does first 0:14:13.080 --> 0:14:15.600 rate work UM and looking at some of these issues 0:14:15.640 --> 0:14:19.960 in terms of low and moderate income neighborhoods and what 0:14:20.120 --> 0:14:24.600 kinds of programs can help transition right from certain industries 0:14:24.640 --> 0:14:27.800 that are undiversified into more into the jobs that are 0:14:27.800 --> 0:14:29.560 going to be in demand in the future. So again, 0:14:29.880 --> 0:14:32.720 I think the FED can can help that conversation and 0:14:32.920 --> 0:14:37.520 by providing our objective research on which programs work, which 0:14:37.520 --> 0:14:40.880 programs don't work, which kinds of policies can the nation 0:14:41.560 --> 0:14:45.920 UM rely on to actually help these transitional economies. That's 0:14:46.000 --> 0:14:48.600 different than saying we should use monetary policy as a 0:14:48.680 --> 0:14:51.280 tool to affect those longer run issues. Zeroing in on 0:14:51.320 --> 0:14:55.280 the living recognitions index and the weakness we've seen that 0:14:55.400 --> 0:14:57.200 you don't take that as a sign that maybe this 0:14:57.280 --> 0:14:59.840 economy really doesn't need or is really not strong enough 0:14:59.880 --> 0:15:02.160 to stand another industrate hyke, I don't. I think if 0:15:02.200 --> 0:15:04.760 you look at across a number of statistics, the unemployment 0:15:04.880 --> 0:15:08.120 rate is down, The other indicators of labor market health 0:15:08.440 --> 0:15:12.200 have improved. UM, hiring rates are going up. You know, 0:15:12.240 --> 0:15:14.560 if you look at the unemployment rates across race and 0:15:14.640 --> 0:15:19.360 general gender, they've improved. They're not perfect, obviously, but again, 0:15:19.520 --> 0:15:23.640 some of those differences reflect longer run issues that monetary 0:15:23.680 --> 0:15:26.800 policy really isn't meant to address. So again, I think 0:15:26.800 --> 0:15:31.160 if you look at the the job creation rates UM, 0:15:31.200 --> 0:15:33.440 the number of jobs being created at a hundred and 0:15:33.520 --> 0:15:36.560 eighty thousand per month on average this year, that's well 0:15:36.600 --> 0:15:40.680 above the range um that most economists say would be 0:15:41.120 --> 0:15:43.720 the steady state or the sustainable rate, and so I 0:15:43.760 --> 0:15:46.360 think that's you know, to me, those are good numbers. 0:15:46.720 --> 0:15:49.000 More with Lotermester, she's president of the Federals or of 0:15:49.000 --> 0:15:52.880 Bank of Cleveland. Coming up here on taking Stock. This 0:15:53.080 --> 0:15:58.440 is Bloomberg. You're listening to taking Stock with Kathleen Hayes 0:15:58.520 --> 0:16:03.600 and Pim Fox on Bloomberg Radio, our very special show. Today, 0:16:03.640 --> 0:16:05.840 we're live at the Fed of Reserve Bank of Cleveland 0:16:05.920 --> 0:16:09.720 with Cleveland Fed President Loretta Mester. Loretta, I want to 0:16:09.960 --> 0:16:12.280 follow up on some of the things we've been discussing. Actually, 0:16:12.280 --> 0:16:15.240 I'm getting notes from listeners and others who are who 0:16:15.240 --> 0:16:19.400 are hanging on your every word. And one question, how 0:16:19.480 --> 0:16:22.160 deep right now is a split on the Federal Open 0:16:22.240 --> 0:16:27.400 Market Committee, the FEDS policy making body. Three dissenters the 0:16:27.440 --> 0:16:30.800 most people. I don't know if people realize in fact, 0:16:30.800 --> 0:16:33.120 you don't people like you don't dissent lightly, it's a 0:16:33.120 --> 0:16:37.120 big deal. Three people descended how deep is a split? Well, 0:16:37.480 --> 0:16:40.600 if you look at the vote count, yeah, you'll say 0:16:40.640 --> 0:16:42.840 three to centers. But I don't think we're that far apart. 0:16:42.920 --> 0:16:46.160 I think we all as as Cherry Ellen Senator press conference. 0:16:46.600 --> 0:16:48.440 You know, the case has strengthened. We said that in 0:16:48.480 --> 0:16:51.640 our statement after the meeting. It's just really a matter 0:16:51.800 --> 0:16:53.840 of where you see the risk and where you see 0:16:53.840 --> 0:16:56.680 the economy. I think one of the things that struck 0:16:56.720 --> 0:16:59.600 me over time is the resiliency the U S economy 0:16:59.640 --> 0:17:02.280 is shown into a number of bumps in the road 0:17:02.360 --> 0:17:05.040 on this road to of expansion. So if you just 0:17:05.080 --> 0:17:06.960 think over the past year. We started the year, we 0:17:07.000 --> 0:17:09.879 had that volatility UM in January and February and the 0:17:09.920 --> 0:17:13.760 financial markets we got over that. We had the readjustment 0:17:13.800 --> 0:17:16.480 to sort of fears about the growth rate in China 0:17:16.560 --> 0:17:21.240 being revised down. UM, economy made it through. UM. We 0:17:21.359 --> 0:17:25.640 had the Brexit vote UM again, lots of concern about that, 0:17:25.720 --> 0:17:28.520 and the economy made it through. So to my mind, 0:17:28.600 --> 0:17:31.720 you know, we've continued to make this progress UM and 0:17:31.760 --> 0:17:35.160 we focus on the monetary policy goals. To my mind, 0:17:35.200 --> 0:17:38.280 that means that it's a compelling case to take another step. 0:17:38.400 --> 0:17:42.080 So the FETE has been cautious up till now about 0:17:42.119 --> 0:17:44.640 how it's moved RACE. I think that strategy has really 0:17:44.640 --> 0:17:48.040 served us well. But in an economy where we're continuing 0:17:48.080 --> 0:17:50.280 to make progress on our goals, and we expect to 0:17:50.320 --> 0:17:53.840 make further progress on our goals. I think being prudence 0:17:53.920 --> 0:17:56.159 sometimes means moving the rate up, and that's kind of 0:17:56.200 --> 0:17:58.800 where I was, and other people had different views. Well, 0:17:58.640 --> 0:18:00.359 we're going to get a little better a view of 0:18:00.359 --> 0:18:02.639 this when we get the FOMC minutes, but that's not 0:18:02.760 --> 0:18:04.920 for uh, Well on the week and a half or so, 0:18:06.200 --> 0:18:09.359 the dynamic at the meeting where there were If we 0:18:09.400 --> 0:18:11.440 get those f and FMC minutes, are we going to 0:18:11.520 --> 0:18:13.679 see that there were a number of people, not just 0:18:13.840 --> 0:18:18.440 as centers, who were more in favor of moving in September? 0:18:19.080 --> 0:18:21.760 How did that? Can you give us a sense of 0:18:21.760 --> 0:18:24.520 of you just said that, No, maybe the split is 0:18:24.520 --> 0:18:26.280 in as deep as we might think. Is that because 0:18:26.280 --> 0:18:28.399 there's more people who were leading in that direction they 0:18:28.440 --> 0:18:31.840 just didn't dissent. The meetings always have every participant, whether 0:18:31.920 --> 0:18:35.080 a vote or not. You bring your view about the 0:18:35.240 --> 0:18:38.680 both the economy and policy to the table, so there's 0:18:38.680 --> 0:18:42.560 a rich discussion. I always come into the meetings very um, 0:18:42.640 --> 0:18:44.800 very much looking forward to the other view points I'm 0:18:44.840 --> 0:18:47.120 going to hear around the table. Of course, I come 0:18:47.119 --> 0:18:49.520 in with my idea of where I think things have 0:18:49.680 --> 0:18:52.080 been and where they're going. You know my forecast and 0:18:52.080 --> 0:18:54.119 then what I think of the appropriate policy is. But 0:18:54.119 --> 0:18:57.920 it's a very good discussion. We exchange views. I commend 0:18:58.040 --> 0:19:01.800 Janet Yalen, the chairman, for allowing that kind of give 0:19:01.840 --> 0:19:05.359 and take and for encouraging it. So my my fundamental 0:19:05.440 --> 0:19:07.680 is that when you know you bring a diversity of views, 0:19:07.720 --> 0:19:09.920 you actually get and have that discussion, you actually get 0:19:09.920 --> 0:19:13.240 better policy as an outcome. So how worried are you 0:19:13.280 --> 0:19:15.879 are you You're not so much in the financial bubbles camp, 0:19:16.880 --> 0:19:19.480 but are you a bit worried that investors are reaching 0:19:19.520 --> 0:19:22.879 for yield and they've gone into commercial real estate? Is 0:19:23.000 --> 0:19:26.720 Eric rosen Grand from the Boston emphasized junk bonds et cetera, 0:19:26.840 --> 0:19:29.760 and if people start exiting all at once, that that 0:19:29.800 --> 0:19:32.359 could deed stabilize the markets. And that is something that 0:19:32.400 --> 0:19:36.160 you're putting on the plate when you make that list 0:19:36.240 --> 0:19:38.560 of reasons why the Fed should move now and raise 0:19:38.600 --> 0:19:40.520 that rate. Okay, we certainly always have to look at 0:19:40.560 --> 0:19:44.119 all the risks that our policies in gender um. My 0:19:44.280 --> 0:19:46.959 case was based on the progress we've made on our 0:19:47.000 --> 0:19:50.520 dual mandated goals. UM, but you know it would we 0:19:50.640 --> 0:19:52.840 have to take into account that we've had interest rates 0:19:52.880 --> 0:19:56.359 at very very low levels um for a very long time, 0:19:56.400 --> 0:19:58.680 and so of course you're going to be looking for 0:19:59.080 --> 0:20:02.720 whether financial when balances are building up. I don't see them, 0:20:02.840 --> 0:20:05.800 um right now is building up you know, and and 0:20:05.840 --> 0:20:08.119 the reason to race rates, But it's certainly something that 0:20:08.160 --> 0:20:10.840 we're going to have to continue to monitor. We did 0:20:10.880 --> 0:20:13.439