Speaker 1: The market's already pricing in September with a high degree
Speaker 1: of certainty. What are you really waiting for at this point?
Speaker 2: Why takes the additional risk of the community deteriority further So,
Speaker 2: you know, the end of the day, it's probably not
Speaker 2: going to make a big deal, a lot of difference.
Speaker 3: But I think you know, given the fact that the
Speaker 3: market expects the FED to cut once that decision.
Speaker 2: Is mostly made, and I think you heard today it
Speaker 2: was mostly made, then why are you waiting for?
Speaker 3: Why are we waiting? Here's the latest investors turning their
Speaker 3: attention to the data following yesterday's FED decision, the July
Speaker 3: payrolls report you out tomorrow, and CPI coming in just
Speaker 3: two weeks time. Fedchaed Jpower waiting for the numbers before
Speaker 3: committing to a rake cup. The former Kansas City Fed
Speaker 3: president Esther George right in this. I found the chair
Speaker 3: leaned pretty clearly to confirm market expectations for a September cup.
Speaker 3: While September looks like the meeting to take this action,
Speaker 3: I think this room to be patient. Esther joined us
Speaker 3: now for more. Esther waterf to catch up with you.
Speaker 3: It's been far too long. Thanks for being with us.
Speaker 3: I want to talk about that word you've used, patients,
Speaker 3: What underpins that patience? Why should we have patience?
Speaker 1: Welcome morning. I think my view on this really comes
Speaker 1: from the fact that we are looking at an economy
Speaker 1: that is growing and by the reads of the second
Speaker 1: quarter growing well above it's sustainable long run growth. You've
Speaker 1: got a strong labor market, and you still have elevated inflation.
Speaker 1: And I think that combination reminds me that the fedce
Speaker 1: mandate is a long run objective. And just as we
Speaker 1: saw earlier this year, the market had priced in a
Speaker 1: number of cuts only to have to pull back on that.
Speaker 1: So the central Bank's job is really to pay attention
Speaker 1: to the data. And as that gets closer, of course,
Speaker 1: that's going to be more difficult for them, and they
Speaker 1: recognize that.
Speaker 3: How big is the risk that we take that strong
Speaker 3: labor market for grants it?
Speaker 1: Well, I think you're always looking at this because we
Speaker 1: don't know with any great certainty where that equilibrium rate
Speaker 1: is for the labor market. Obviously, we came out of
Speaker 1: the pandemic during that recovery with a very tight labor market,
Speaker 1: and so as we watch it normalize, the space between
Speaker 1: normalization and weakening is one that policy makers are going
Speaker 1: to be very attentive to. So we'll get a report tomorrow.
Speaker 1: It will give a clue. I don't expect it'll be
Speaker 1: definitive and by any means around that. But it is
Speaker 1: the collection, the aggregate of these reports that begin to
Speaker 1: give the Committee a better sense of just where that
Speaker 1: labor market is right now.
Speaker 2: Ester, you get the sense that this Federal Reserve still
Speaker 2: embraces the idea of transitory in that basically the inflation
Speaker 2: was largely due to the pandemic. It's come off the boil,
Speaker 2: and now some of the ramifications, the ripple effects are
Speaker 2: just being worked out of the economy.
Speaker 1: I think that could have a lot to do with it. Lisa,
Speaker 1: you did see tremendous supply adjustments, and it had been
Speaker 1: some time since we'd had to pay attention to the
Speaker 1: supply side of the economy. So as we watched supply
Speaker 1: and that was true on the labor side, certainly good
Speaker 1: on the good side, begin to adjust, that creates a challenge,
Speaker 1: I think for the Committee and understanding just how restrictive
Speaker 1: is our policy. How do we understand when the economy
Speaker 1: is approaching an equilibrium, and I think, as they've noted,
Speaker 1: they are close, those risks are coming into better balance
Speaker 1: right now, and now, judging how tight their policy is
Speaker 1: relative to the steady state of the economy, is there
Speaker 1: real challenge And we heard that yesterday too soon versus
Speaker 1: too late and making adjustments to that.
Speaker 2: It seems like the market really believes that the risks
Speaker 2: at this point are greater potentially on some sort of
Speaker 2: intereration in the labor market than an increase a surge
Speaker 2: and inflation. I'm wondering if you think that maybe the
Speaker 2: Fed would have been prudent to push back just a
Speaker 2: little bit on that base on what you're seeing, considering
Speaker 2: that you believe that maybe there should have been a
Speaker 2: little bit more patients, kind of a little more discipline
Speaker 2: and viewed on the market.
Speaker 1: Well, I would agree that the labor market again is
Speaker 1: coming into better balance for this committee, and you will
Speaker 1: have to look at some of the subtleties that come
Speaker 1: in underlying that labor market in terms of the levels
Speaker 1: of activity and the momentum that you see there. But
Speaker 1: at the end of the day, committee is faced with
Speaker 1: an elevated inflation rate relative to the target they've established
Speaker 1: and the credibility they seek around getting back to that,
Speaker 1: and in the long run, as we've heard many times
Speaker 1: from both the chairmen and others, that sets the conditions
Speaker 1: for a healthy labor market long run. So yes, near
Speaker 1: term they're going to be watching a lot of those signals,
Speaker 1: but the real issue, I think at the end of
Speaker 1: the day their inflation.
Speaker 3: Mandy, So, I'd like to do two things. I want
Speaker 3: to share a quote with you, and then I'd like
Speaker 3: to lean on your experience on the committee. You've got
Speaker 3: plenty of experience of understanding how all of this works
Speaker 3: behind closed doors. The stuff that we don't see this
Speaker 3: is what ever Core had to say. We think in
Speaker 3: practice it's not very data dependent, and view the cautious
Speaker 3: evolution of the statement as intended to carry hawks along
Speaker 3: and avoid dissents. As in your experience when you hear
Speaker 3: stuff like that, how true is that? How do things
Speaker 3: come together on the committee?
Speaker 1: Well, it's true. This is a committee that is consensus driven.
Speaker 1: They must make a decision and the nature of a
Speaker 1: large committee with differing views is to try to achieve
Speaker 1: consensus at some point. That doesn't mean you always get
Speaker 1: unanimity around that decision, and I think anytime you begin
Speaker 1: to approach what looks like I think, in their words,
Speaker 1: better balance, things coming into balance get more difficult. It's
Speaker 1: not as clear cut as it was when you know
Speaker 1: you have to ease, or it's not as clear cut
Speaker 1: when you see an inflation problem emerging that you have
Speaker 1: to address. And so I suspect there is challenge within
Speaker 1: the committee of trying to reconcile views and to try
Speaker 1: to bring a solid consensus to whatever the decision will
Speaker 1: be at their next meeting.
Speaker 3: As to this was wonderful and hopefully the team gets
Speaker 3: to see you in Jackson Holle as we used to
Speaker 3: as the George there the foremost kinds of City Fed
Speaker 3: President on the latest Fed Reserve decision