Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome to all of our Bloomberg TV viewers and Bloomberg
Speaker 2: Radio listeners around the world. I'm Michael McKee, the international
Speaker 2: economics and Policy correspondent for Bloomberg, and we are at
Speaker 2: the Boston Federal Reserve Bank today. They're holding their sixty
Speaker 2: eighth Annual Economics Conference, and we're joined by the President
Speaker 2: of the Boston Fed, Susan Collins. Thank you very much
Speaker 2: for being with us today.
Speaker 1: It's delighted to be here. Thanks for being at the
Speaker 1: Boston Fed.
Speaker 3: It's great.
Speaker 2: We tell everybody. It's a beautiful day. But it's thirty
Speaker 2: nine degrees so winter is finally hit here.
Speaker 3: The seasons are wonderful.
Speaker 2: So speaking of winter, December eighteenth, you have another FED meeting,
Speaker 2: and at this point there seem to be some questions
Speaker 2: about whether or not the Fed will be cutting rates again,
Speaker 2: because this week we got some firm inflation news. Retail
Speaker 2: sales were okay but not particularly strong. At this point,
Speaker 2: are you thinking that we should see a cut or
Speaker 2: is it better to pause and wait?
Speaker 1: So I think it's important to say there's no preset path.
Speaker 1: I do see rates as still in the restrictive range,
Speaker 1: which means that over time, some amount of easing.
Speaker 3: Will be appropriate.
Speaker 1: But you know, the economy is in a very good
Speaker 1: place right now, and inflation's coming back down to target.
Speaker 1: The labor markets are healthy, we're seeing solid growth. The
Speaker 1: goal of policies really to sustain that healthy set of conditions, recognizing,
Speaker 1: you know, there are risks on both sides, and so
Speaker 1: I think we're well positioned. I certainly wouldn't take another
Speaker 1: ease in December off the table, but again, we're not
Speaker 1: in a preset path, and so we'll have to look
Speaker 1: carefully at the data and see what makes sense when
Speaker 1: we get to December eighteenth.
Speaker 2: Well, the data this week showed inflation a little bit
Speaker 2: stronger than it had been in the CPI and the PPI,
Speaker 2: and those who do the nerdy calculations for the PCE say,
Speaker 2: we're going to see the same thing. Should you keep
Speaker 2: your foot on the brake a little more then, because
Speaker 2: inflation is not back down to your target.
Speaker 1: So you know, I don't focus too much on any
Speaker 1: one data point. I think it's really important to look holistically.
Speaker 1: And when I do that, what I see is that,
Speaker 1: first of all, inflation has come down significantly. I focus
Speaker 1: on the you know, a couple of month averages, and
Speaker 1: if you take food, energy, and in particular shelter out,
Speaker 1: the rest of inflation has actually been in the range
Speaker 1: consistent with the two percent, exactly what we'd like to see.
Speaker 3: What's really still elevated as.
Speaker 1: Shelter and that is taking time to come back down,
Speaker 1: and a lot of that really reflects shocks from the past.
Speaker 1: I'm not seeing evidence of new price pressures, and so
Speaker 1: I think it's important to stay the course.
Speaker 3: But that.
Speaker 1: Analogs of the data is part of why I thought
Speaker 1: it was really appropriate for us to begin easing in
Speaker 1: September and to be in an environment where we are
Speaker 1: really looking over time methodically, perhaps patiently, to be normalizing
Speaker 1: policy to maintain those healthy conditions that I talked about
Speaker 1: a moment ago.
Speaker 2: Well, let's look at the other side of the mandate. Employment.
Speaker 2: We had a very strong employment report, and then we
Speaker 2: had a very weak employment report, granted affected by hurricanes
Speaker 2: and strikes. So what's your judgment of where the labor
Speaker 2: market is when you look holistically at all of the
Speaker 2: labor data.
Speaker 1: So again, when I look at all of the data,
Speaker 1: and you're absolutely right, there have been some stronger readings,
Speaker 1: there have been some readings over time that were a bit.
Speaker 3: Weaker, and there are a lot of special factors.
Speaker 1: So looking at averages over time, looking at the range
Speaker 1: of information, what I see is a labor market that
Speaker 1: looks similar to condition that we've considered full employment, so
Speaker 1: in terms of job openings and quit rates, and the
Speaker 1: fact that wage growth has been coming down and given
Speaker 1: the high productivity we've seen is consistent with the move
Speaker 1: back down to two percent inflation and staying there. And
Speaker 1: unemployment has stayed in a range that is near four percent,
Speaker 1: low by historical standards, so yes, higher than a year ago.
Speaker 1: So all of that, to me says healthy labor market conditions.
Speaker 1: Things to watch carefully and don't focus too much on
Speaker 1: any one piece of data. We have to look at
Speaker 1: the whole picture.
Speaker 2: All right, healthy labor market. Inflation's coming down, even if
Speaker 2: it's stalled a little bit, but it's in the twos
Speaker 2: and the economy is stronger than people had forecasts. So
Speaker 2: do you agree with Chairman Powell and saying there is
Speaker 2: nothing telling you to rate you have to cut rates
Speaker 2: very quickly.
Speaker 1: So I think that I agree that I don't see
Speaker 1: a big urgency. At the same time, I do think
Speaker 1: that preserving those healthy conditions, right, I mean, that's what
Speaker 1: our mandate really is from Congress.
Speaker 3: Price stability and maximum.
Speaker 1: Employment sustained over time, not just at some point in time.
Speaker 1: And so as I said before, I do see financial
Speaker 1: the policy stances being in a restrictive place and over time,
Speaker 1: normalizing that I think is going to be important. But
Speaker 1: we're well positioned to be really careful in assessing the
Speaker 1: data and making decisions about the pace, about the timing,
Speaker 1: and so that you know that's how I think about that.
Speaker 2: Let me ask about the elephant in the room, and
Speaker 2: that is the new president elect of the United States.
Speaker 2: His policies have not been fleshed out. Tremen Pole's made
Speaker 2: it clear you don't know exactly what's going to happen,
Speaker 2: but do you expect that something in whatever his fiscal
Speaker 2: plans are will affect the economy, and you will have
Speaker 2: to take another look, say at what your economic projections
Speaker 2: are and what the plot projections are for twenty twenty five.
Speaker 1: Now, as we get information about the economy, certainly that includes.
Speaker 3: About fiscal policy.
Speaker 1: Of course, it's really important to factor that in and
Speaker 1: there are lots of things we look at. Fiscal policies
Speaker 1: certainly one of them, but I don't want to speculate
Speaker 1: on what policies that haven't been enacted or implemented might
Speaker 1: look like.
Speaker 2: Well, do you think that the tariffs as an economic
Speaker 2: concept add to inflation?
Speaker 1: They can, And again we would have to see if
Speaker 1: there are tariffs that are implemented, more about the specifics
Speaker 1: and the dynamics for those.
Speaker 2: Now, if there's a fiscal impulse in whatever the President
Speaker 2: elect chooses to do, is the economy growing too fast
Speaker 2: for that right now? Would that be a danger or worry?
Speaker 1: So again, I think there are lots of things that
Speaker 1: determine how the economy evolves and grows over time. Fiscal
Speaker 1: policy is certainly one of them, and certainly does have
Speaker 1: an impact on that, and we'd have to factor that
Speaker 1: in and look through that. You know, I do think
Speaker 1: and Chair Powell has has also said this that you know,
Speaker 1: fiscal policy at the moment is on a path that's
Speaker 1: not sustainable. But again, we when we make our policy
Speaker 1: decisions to focus on our mandate from Congress, it's really
Speaker 1: based on the data that we have available and the
Speaker 1: analysis and the assessments that we can do on that basis.
Speaker 2: As far as I know, President like Trump has never
Speaker 2: threatened to fire you. But I wanted to ask what
Speaker 2: is in your mind the relationship between the Federal Reserve
Speaker 2: and the executive branch.
Speaker 1: So what I would say is that the FED is
Speaker 1: structured by Congress as an independent body, and that that
Speaker 1: is important in terms of the ability.
Speaker 3: For us to do our job well.
Speaker 1: There's a lot of analysis that shows that independent central
Speaker 1: banks are more effective at keeping inflation low and stable.
Speaker 1: And we have really seen how important it is to
Speaker 1: keep inflation low and stable in terms of the impact
Speaker 1: the higher prices past inflation have had. And so you know,
Speaker 1: I think that is a very good structure to enable
Speaker 1: us to do our jobs well.
Speaker 2: So the things that come across social media basically just
Speaker 2: noise in the background to you.
Speaker 1: As a policymaker, I am very focused on doing my
Speaker 1: job and there is more than enough to keep me
Speaker 1: very focused and very busy.
Speaker 2: Now, the people, well you can't see if I could
Speaker 2: see them out there, all the traders on their knees
Speaker 2: going tell us when you're going to do this sort
Speaker 2: of thing. Can we basically say, because of the potential
Speaker 2: changes that are coming, and the data that we have
Speaker 2: seen that the dot plot for twenty twenty five and
Speaker 2: the SEP for twenty twenty five, those are kind of
Speaker 2: out the window now and we should really wait until
Speaker 2: December or even later to get a good idea of
Speaker 2: where you think you're going to be and the economy
Speaker 2: is going to be.
Speaker 1: All things I think always evolve, and so in about
Speaker 1: a month or so we will have a new SEP
Speaker 1: and information from all of the policymakers about what they think.
Speaker 1: And so I think it's always true that you know,
Speaker 1: in the middle of the SEP information you don't want
Speaker 1: to take too much from what might have been written down,
Speaker 1: penciled in. I would say a number of weeks earlier,
Speaker 1: a lot of the data evolves.
Speaker 2: What are the people who in these tall buildings around us,
Speaker 2: all the corporate leaders in your district telling you about
Speaker 2: how they see the economy going forward and their plans.
Speaker 1: Yeah, and I appreciate you asking about that. I think
Speaker 1: one of the really important things that I do that
Speaker 1: my colleagues do is talk to people across the economy
Speaker 1: in lots of different sectors. So being out and about
Speaker 1: throughout New England, and what I'm hearing is pretty consistent
Speaker 1: with what I said at the outset that people are
Speaker 1: cautiously optimistic. They see an economy that seems resilient. Labor
Speaker 1: markets have moved into much more normal conditions relative to
Speaker 1: the unsustainable, more overheated conditions from a year or more ago,
Speaker 1: and the price pressures really have abated considerably.
Speaker 3: So that's all very consistent.
Speaker 1: But of course, you know, the aggregate data masks a
Speaker 1: range of different specifics across individual firms and sectors and regions,
Speaker 1: and it's really I think helpful to hear all of
Speaker 1: that and pull the qualitative information together with the statistics.
Speaker 2: Well, last question at your conference, it's on financial technology
Speaker 2: this year, and the Boston Fed's been in the middle
Speaker 2: of financial technology and just coincidentally, coming up at the
Speaker 2: top of the hour, we have our Bloomberg technolog Show.
Speaker 2: So let me ask you. A lot of tech talk
Speaker 2: over the last five, six, seven years has been tech talk.
Speaker 2: How fast are we going to see some sort of
Speaker 2: impact on the average person from new payment systems. I
Speaker 2: realize you have FED now in place, but how fast
Speaker 2: are people going to say, hey, this is something different
Speaker 2: and are we going to see any kind of digital
Speaker 2: currency adoption, whether it's private or government in the next
Speaker 2: few years.
Speaker 1: So, you know, the impacts of technology have many, many dimensions,
Speaker 1: and I think we're already seeing some impacts in terms
Speaker 1: of the roles at fintech are playing across our economy
Speaker 1: in different ways. And the conference today and tomorrow is
Speaker 1: intended to really bring experts together who have knowledge and
Speaker 1: have done analysis from different vantage points to see, as
Speaker 1: we put together the things we know, what are some
Speaker 1: of the things we don't know and need to know better.
Speaker 1: And so what we're really focusing on is a number
Speaker 1: of different themes, including financial inclusion, what are some of
Speaker 1: the implications of the innovations for access to financial services?
Speaker 1: And then also what are some of the implications of
Speaker 1: technological innovation for the transmission of monetary policy, for our
Speaker 1: supervision and regulation of financial institutions, and also for financial stability.
Speaker 1: So thinking about both the opportunities and the risks, and
Speaker 1: I think we are already seeing some of those implications,
Speaker 1: but it's still unfolding, it's complicated, and it's moving pretty quickly.
Speaker 1: So that's what we're trying to better understand. And again
Speaker 1: we're delighted that you're all here while we're in the
Speaker 1: midst of a conference on an important topic.
Speaker 2: Well, thank you for having us. Susan Collins, the President
Speaker 2: of the Federal Reserve Bank of Boston,