WEBVTT - Boston Fed Pres Susan Collins Talks Market and Rates

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Welcome to all of our Bloomberg TV viewers and Bloomberg

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<v Speaker 2>Radio listeners around the world. I'm Michael McKee, the international

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<v Speaker 2>economics and Policy correspondent for Bloomberg, and we are at

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<v Speaker 2>the Boston Federal Reserve Bank today. They're holding their sixty

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<v Speaker 2>eighth Annual Economics Conference, and we're joined by the President

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<v Speaker 2>of the Boston Fed, Susan Collins. Thank you very much

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<v Speaker 2>for being with us today.

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<v Speaker 1>It's delighted to be here. Thanks for being at the

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<v Speaker 1>Boston Fed.

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<v Speaker 3>It's great.

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<v Speaker 2>We tell everybody. It's a beautiful day. But it's thirty

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<v Speaker 2>nine degrees so winter is finally hit here.

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<v Speaker 3>The seasons are wonderful.

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<v Speaker 2>So speaking of winter, December eighteenth, you have another FED meeting,

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<v Speaker 2>and at this point there seem to be some questions

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<v Speaker 2>about whether or not the Fed will be cutting rates again,

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<v Speaker 2>because this week we got some firm inflation news. Retail

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<v Speaker 2>sales were okay but not particularly strong. At this point,

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<v Speaker 2>are you thinking that we should see a cut or

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<v Speaker 2>is it better to pause and wait?

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<v Speaker 1>So I think it's important to say there's no preset path.

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<v Speaker 1>I do see rates as still in the restrictive range,

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<v Speaker 1>which means that over time, some amount of easing.

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<v Speaker 3>Will be appropriate.

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<v Speaker 1>But you know, the economy is in a very good

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<v Speaker 1>place right now, and inflation's coming back down to target.

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<v Speaker 1>The labor markets are healthy, we're seeing solid growth. The

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<v Speaker 1>goal of policies really to sustain that healthy set of conditions, recognizing,

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<v Speaker 1>you know, there are risks on both sides, and so

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<v Speaker 1>I think we're well positioned. I certainly wouldn't take another

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<v Speaker 1>ease in December off the table, but again, we're not

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<v Speaker 1>in a preset path, and so we'll have to look

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<v Speaker 1>carefully at the data and see what makes sense when

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<v Speaker 1>we get to December eighteenth.

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<v Speaker 2>Well, the data this week showed inflation a little bit

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<v Speaker 2>stronger than it had been in the CPI and the PPI,

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<v Speaker 2>and those who do the nerdy calculations for the PCE say,

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<v Speaker 2>we're going to see the same thing. Should you keep

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<v Speaker 2>your foot on the brake a little more then, because

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<v Speaker 2>inflation is not back down to your target.

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<v Speaker 1>So you know, I don't focus too much on any

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<v Speaker 1>one data point. I think it's really important to look holistically.

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<v Speaker 1>And when I do that, what I see is that,

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<v Speaker 1>first of all, inflation has come down significantly. I focus

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<v Speaker 1>on the you know, a couple of month averages, and

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<v Speaker 1>if you take food, energy, and in particular shelter out,

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<v Speaker 1>the rest of inflation has actually been in the range

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<v Speaker 1>consistent with the two percent, exactly what we'd like to see.

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<v Speaker 3>What's really still elevated as.

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<v Speaker 1>Shelter and that is taking time to come back down,

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<v Speaker 1>and a lot of that really reflects shocks from the past.

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<v Speaker 1>I'm not seeing evidence of new price pressures, and so

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<v Speaker 1>I think it's important to stay the course.

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<v Speaker 3>But that.

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<v Speaker 1>Analogs of the data is part of why I thought

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<v Speaker 1>it was really appropriate for us to begin easing in

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<v Speaker 1>September and to be in an environment where we are

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<v Speaker 1>really looking over time methodically, perhaps patiently, to be normalizing

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<v Speaker 1>policy to maintain those healthy conditions that I talked about

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<v Speaker 1>a moment ago.

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<v Speaker 2>Well, let's look at the other side of the mandate. Employment.

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<v Speaker 2>We had a very strong employment report, and then we

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<v Speaker 2>had a very weak employment report, granted affected by hurricanes

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<v Speaker 2>and strikes. So what's your judgment of where the labor

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<v Speaker 2>market is when you look holistically at all of the

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<v Speaker 2>labor data.

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<v Speaker 1>So again, when I look at all of the data,

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<v Speaker 1>and you're absolutely right, there have been some stronger readings,

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<v Speaker 1>there have been some readings over time that were a bit.

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<v Speaker 3>Weaker, and there are a lot of special factors.

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<v Speaker 1>So looking at averages over time, looking at the range

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<v Speaker 1>of information, what I see is a labor market that

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<v Speaker 1>looks similar to condition that we've considered full employment, so

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<v Speaker 1>in terms of job openings and quit rates, and the

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<v Speaker 1>fact that wage growth has been coming down and given

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<v Speaker 1>the high productivity we've seen is consistent with the move

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<v Speaker 1>back down to two percent inflation and staying there. And

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<v Speaker 1>unemployment has stayed in a range that is near four percent,

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<v Speaker 1>low by historical standards, so yes, higher than a year ago.

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<v Speaker 1>So all of that, to me says healthy labor market conditions.

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<v Speaker 1>Things to watch carefully and don't focus too much on

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<v Speaker 1>any one piece of data. We have to look at

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<v Speaker 1>the whole picture.

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<v Speaker 2>All right, healthy labor market. Inflation's coming down, even if

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<v Speaker 2>it's stalled a little bit, but it's in the twos

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<v Speaker 2>and the economy is stronger than people had forecasts. So

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<v Speaker 2>do you agree with Chairman Powell and saying there is

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<v Speaker 2>nothing telling you to rate you have to cut rates

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<v Speaker 2>very quickly.

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<v Speaker 1>So I think that I agree that I don't see

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<v Speaker 1>a big urgency. At the same time, I do think

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<v Speaker 1>that preserving those healthy conditions, right, I mean, that's what

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<v Speaker 1>our mandate really is from Congress.

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<v Speaker 3>Price stability and maximum.

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<v Speaker 1>Employment sustained over time, not just at some point in time.

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<v Speaker 1>And so as I said before, I do see financial

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<v Speaker 1>the policy stances being in a restrictive place and over time,

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<v Speaker 1>normalizing that I think is going to be important. But

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<v Speaker 1>we're well positioned to be really careful in assessing the

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<v Speaker 1>data and making decisions about the pace, about the timing,

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<v Speaker 1>and so that you know that's how I think about that.

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<v Speaker 2>Let me ask about the elephant in the room, and

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<v Speaker 2>that is the new president elect of the United States.

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<v Speaker 2>His policies have not been fleshed out. Tremen Pole's made

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<v Speaker 2>it clear you don't know exactly what's going to happen,

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<v Speaker 2>but do you expect that something in whatever his fiscal

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<v Speaker 2>plans are will affect the economy, and you will have

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<v Speaker 2>to take another look, say at what your economic projections

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<v Speaker 2>are and what the plot projections are for twenty twenty five.

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<v Speaker 1>Now, as we get information about the economy, certainly that includes.

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<v Speaker 3>About fiscal policy.

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<v Speaker 1>Of course, it's really important to factor that in and

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<v Speaker 1>there are lots of things we look at. Fiscal policies

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<v Speaker 1>certainly one of them, but I don't want to speculate

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<v Speaker 1>on what policies that haven't been enacted or implemented might

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<v Speaker 1>look like.

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<v Speaker 2>Well, do you think that the tariffs as an economic

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<v Speaker 2>concept add to inflation?

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<v Speaker 1>They can, And again we would have to see if

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<v Speaker 1>there are tariffs that are implemented, more about the specifics

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<v Speaker 1>and the dynamics for those.

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<v Speaker 2>Now, if there's a fiscal impulse in whatever the President

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<v Speaker 2>elect chooses to do, is the economy growing too fast

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<v Speaker 2>for that right now? Would that be a danger or worry?

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<v Speaker 1>So again, I think there are lots of things that

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<v Speaker 1>determine how the economy evolves and grows over time. Fiscal

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<v Speaker 1>policy is certainly one of them, and certainly does have

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<v Speaker 1>an impact on that, and we'd have to factor that

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<v Speaker 1>in and look through that. You know, I do think

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<v Speaker 1>and Chair Powell has has also said this that you know,

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<v Speaker 1>fiscal policy at the moment is on a path that's

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<v Speaker 1>not sustainable. But again, we when we make our policy

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<v Speaker 1>decisions to focus on our mandate from Congress, it's really

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<v Speaker 1>based on the data that we have available and the

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<v Speaker 1>analysis and the assessments that we can do on that basis.

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<v Speaker 2>As far as I know, President like Trump has never

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<v Speaker 2>threatened to fire you. But I wanted to ask what

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<v Speaker 2>is in your mind the relationship between the Federal Reserve

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<v Speaker 2>and the executive branch.

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<v Speaker 1>So what I would say is that the FED is

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<v Speaker 1>structured by Congress as an independent body, and that that

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<v Speaker 1>is important in terms of the ability.

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<v Speaker 3>For us to do our job well.

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<v Speaker 1>There's a lot of analysis that shows that independent central

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<v Speaker 1>banks are more effective at keeping inflation low and stable.

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<v Speaker 1>And we have really seen how important it is to

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<v Speaker 1>keep inflation low and stable in terms of the impact

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<v Speaker 1>the higher prices past inflation have had. And so you know,

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<v Speaker 1>I think that is a very good structure to enable

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<v Speaker 1>us to do our jobs well.

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<v Speaker 2>So the things that come across social media basically just

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<v Speaker 2>noise in the background to you.

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<v Speaker 1>As a policymaker, I am very focused on doing my

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<v Speaker 1>job and there is more than enough to keep me

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<v Speaker 1>very focused and very busy.

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<v Speaker 2>Now, the people, well you can't see if I could

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<v Speaker 2>see them out there, all the traders on their knees

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<v Speaker 2>going tell us when you're going to do this sort

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<v Speaker 2>of thing. Can we basically say, because of the potential

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<v Speaker 2>changes that are coming, and the data that we have

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<v Speaker 2>seen that the dot plot for twenty twenty five and

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<v Speaker 2>the SEP for twenty twenty five, those are kind of

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<v Speaker 2>out the window now and we should really wait until

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<v Speaker 2>December or even later to get a good idea of

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<v Speaker 2>where you think you're going to be and the economy

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<v Speaker 2>is going to be.

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<v Speaker 1>All things I think always evolve, and so in about

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<v Speaker 1>a month or so we will have a new SEP

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<v Speaker 1>and information from all of the policymakers about what they think.

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<v Speaker 1>And so I think it's always true that you know,

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<v Speaker 1>in the middle of the SEP information you don't want

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<v Speaker 1>to take too much from what might have been written down,

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<v Speaker 1>penciled in. I would say a number of weeks earlier,

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<v Speaker 1>a lot of the data evolves.

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<v Speaker 2>What are the people who in these tall buildings around us,

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<v Speaker 2>all the corporate leaders in your district telling you about

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<v Speaker 2>how they see the economy going forward and their plans.

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<v Speaker 1>Yeah, and I appreciate you asking about that. I think

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<v Speaker 1>one of the really important things that I do that

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<v Speaker 1>my colleagues do is talk to people across the economy

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<v Speaker 1>in lots of different sectors. So being out and about

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<v Speaker 1>throughout New England, and what I'm hearing is pretty consistent

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<v Speaker 1>with what I said at the outset that people are

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<v Speaker 1>cautiously optimistic. They see an economy that seems resilient. Labor

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<v Speaker 1>markets have moved into much more normal conditions relative to

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<v Speaker 1>the unsustainable, more overheated conditions from a year or more ago,

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<v Speaker 1>and the price pressures really have abated considerably.

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<v Speaker 3>So that's all very consistent.

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<v Speaker 1>But of course, you know, the aggregate data masks a

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<v Speaker 1>range of different specifics across individual firms and sectors and regions,

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<v Speaker 1>and it's really I think helpful to hear all of

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<v Speaker 1>that and pull the qualitative information together with the statistics.

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<v Speaker 2>Well, last question at your conference, it's on financial technology

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<v Speaker 2>this year, and the Boston Fed's been in the middle

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<v Speaker 2>of financial technology and just coincidentally, coming up at the

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<v Speaker 2>top of the hour, we have our Bloomberg technolog Show.

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<v Speaker 2>So let me ask you. A lot of tech talk

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<v Speaker 2>over the last five, six, seven years has been tech talk.

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<v Speaker 2>How fast are we going to see some sort of

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<v Speaker 2>impact on the average person from new payment systems. I

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<v Speaker 2>realize you have FED now in place, but how fast

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<v Speaker 2>are people going to say, hey, this is something different

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<v Speaker 2>and are we going to see any kind of digital

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<v Speaker 2>currency adoption, whether it's private or government in the next

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<v Speaker 2>few years.

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<v Speaker 1>So, you know, the impacts of technology have many, many dimensions,

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<v Speaker 1>and I think we're already seeing some impacts in terms

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<v Speaker 1>of the roles at fintech are playing across our economy

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<v Speaker 1>in different ways. And the conference today and tomorrow is

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<v Speaker 1>intended to really bring experts together who have knowledge and

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<v Speaker 1>have done analysis from different vantage points to see, as

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<v Speaker 1>we put together the things we know, what are some

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<v Speaker 1>of the things we don't know and need to know better.

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<v Speaker 1>And so what we're really focusing on is a number

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<v Speaker 1>of different themes, including financial inclusion, what are some of

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<v Speaker 1>the implications of the innovations for access to financial services?

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<v Speaker 1>And then also what are some of the implications of

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<v Speaker 1>technological innovation for the transmission of monetary policy, for our

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<v Speaker 1>supervision and regulation of financial institutions, and also for financial stability.

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<v Speaker 1>So thinking about both the opportunities and the risks, and

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<v Speaker 1>I think we are already seeing some of those implications,

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<v Speaker 1>but it's still unfolding, it's complicated, and it's moving pretty quickly.

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<v Speaker 1>So that's what we're trying to better understand. And again

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<v Speaker 1>we're delighted that you're all here while we're in the

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<v Speaker 1>midst of a conference on an important topic.

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<v Speaker 2>Well, thank you for having us. Susan Collins, the President

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<v Speaker 2>of the Federal Reserve Bank of Boston,