1 00:00:00,080 --> 00:00:03,280 Speaker 1: Fetcherman J. Powell making comments at the Economic Club of 2 00:00:03,480 --> 00:00:06,160 Speaker 1: New York about his view of the economy and interest rates. 3 00:00:06,320 --> 00:00:07,880 Speaker 1: You can be sitting down on the fireside chat with 4 00:00:07,920 --> 00:00:08,479 Speaker 1: David Weston. 5 00:00:08,600 --> 00:00:11,080 Speaker 2: Let me start with something you just referred to, which 6 00:00:11,119 --> 00:00:13,640 Speaker 2: is the surprise of the upside in the economic data, 7 00:00:13,640 --> 00:00:16,480 Speaker 2: despite as you've turned it, I think historically fast pace 8 00:00:16,800 --> 00:00:19,640 Speaker 2: of growth. Are you surprised at how resilient the United 9 00:00:19,680 --> 00:00:20,560 Speaker 2: States economy. 10 00:00:20,280 --> 00:00:20,720 Speaker 1: Is just today. 11 00:00:20,720 --> 00:00:23,480 Speaker 2: We've got jobless claims members surprised because they were low. 12 00:00:23,560 --> 00:00:25,759 Speaker 2: We got the retail sales numbers you mentioned, We've got 13 00:00:25,800 --> 00:00:28,440 Speaker 2: industrial production across the board. It seems like a very 14 00:00:28,440 --> 00:00:31,400 Speaker 2: strong economy despite all you've done to try to slow 15 00:00:31,440 --> 00:00:31,760 Speaker 2: it down. 16 00:00:33,040 --> 00:00:38,320 Speaker 1: Yes, so we certainly have a very resilient economy on 17 00:00:38,320 --> 00:00:41,920 Speaker 1: our hands. We've got the economy growing strongly. If you 18 00:00:41,960 --> 00:00:44,640 Speaker 1: think back a year, many forecasts called for the US 19 00:00:44,720 --> 00:00:48,000 Speaker 1: economy to be in recession this year. Not only has 20 00:00:48,040 --> 00:00:51,040 Speaker 1: that not happened, growth is now running for this year 21 00:00:51,560 --> 00:00:54,320 Speaker 1: above its longer run trend. So that's been a surprise, 22 00:00:54,760 --> 00:00:58,600 Speaker 1: driven largely by consumer spending, driven by a very strong 23 00:00:58,760 --> 00:01:02,520 Speaker 1: job market, with people getting jobs with high first high 24 00:01:02,600 --> 00:01:05,520 Speaker 1: nominal wages, and that as inflation has come down real 25 00:01:05,560 --> 00:01:08,520 Speaker 1: wages which is spurring spending, and we've also had inflation 26 00:01:08,600 --> 00:01:12,520 Speaker 1: coming down, so you know that's it really is a 27 00:01:12,560 --> 00:01:15,800 Speaker 1: story of much stronger demand. There may also be there 28 00:01:15,840 --> 00:01:19,399 Speaker 1: may be some ways in which the economy is less 29 00:01:19,400 --> 00:01:22,959 Speaker 1: affected by interest rates. It's hard to know precisely, but 30 00:01:23,080 --> 00:01:27,160 Speaker 1: for example, companies, many companies, any company with bond market 31 00:01:27,200 --> 00:01:30,400 Speaker 1: access will have termed out its debt right and therefore 32 00:01:30,640 --> 00:01:33,039 Speaker 1: may not be feeling the effects of higher rates. The 33 00:01:33,080 --> 00:01:36,040 Speaker 1: same may be true of homeowners who have a long term, 34 00:01:36,080 --> 00:01:39,840 Speaker 1: fixed rate, low rate mortgage, who then are therefore not 35 00:01:39,880 --> 00:01:42,920 Speaker 1: because it's not an adjustable rate or a higher rate, 36 00:01:42,959 --> 00:01:46,200 Speaker 1: they're not feeling that increase in rates. So the economy 37 00:01:46,240 --> 00:01:50,400 Speaker 1: may be somewhat less susceptible to the effects of rate increases. 38 00:01:50,480 --> 00:01:53,200 Speaker 1: On the other hand, if you look at look at 39 00:01:53,240 --> 00:01:57,880 Speaker 1: interra sensitive spending, these are very much the places where 40 00:01:57,880 --> 00:02:00,840 Speaker 1: we see where we expect to see and do see effects. 41 00:02:00,840 --> 00:02:04,880 Speaker 1: So for example, in housing or you know in the 42 00:02:04,920 --> 00:02:08,160 Speaker 1: housing effectors sector has been very affected by higher rates. 43 00:02:08,240 --> 00:02:12,120 Speaker 1: As purchases of durable goods. If you look at surveys, 44 00:02:12,160 --> 00:02:14,000 Speaker 1: people will not say that it's a good time to 45 00:02:14,000 --> 00:02:16,520 Speaker 1: buy a car or a house. Quite the contrary, So 46 00:02:16,560 --> 00:02:20,840 Speaker 1: we see policy working through its usual channels. It may 47 00:02:20,919 --> 00:02:23,359 Speaker 1: just be that rates haven't been high enough for long enough. 48 00:02:23,400 --> 00:02:26,240 Speaker 1: And again it's all happening in the context of very 49 00:02:26,240 --> 00:02:28,440 Speaker 1: strong demand. We've put other speculators. 50 00:02:28,480 --> 00:02:30,280 Speaker 2: Maybe the terming out of debt, as you say, both 51 00:02:30,320 --> 00:02:34,680 Speaker 2: corporate debt and hushole debt may diminish the effectiveness of 52 00:02:34,760 --> 00:02:37,320 Speaker 2: rate hikes. Do you have a view of whether that's true, 53 00:02:37,480 --> 00:02:39,640 Speaker 2: And if it is true, what does it say about 54 00:02:39,639 --> 00:02:41,600 Speaker 2: matre pussy. Does it mean you have to go farther 55 00:02:42,120 --> 00:02:43,680 Speaker 2: in the rate hikes or do you just not have 56 00:02:43,720 --> 00:02:44,480 Speaker 2: the power to affect it. 57 00:02:45,440 --> 00:02:49,680 Speaker 1: So no, I don't think that there's a fundamental shift 58 00:02:49,760 --> 00:02:52,160 Speaker 1: in the way that interest rates affect the economy. There 59 00:02:52,160 --> 00:02:54,840 Speaker 1: may be some differences in this cycle because of what 60 00:02:54,880 --> 00:02:58,960 Speaker 1: I mentioned. As I mentioned, we are seeing those the 61 00:02:58,960 --> 00:03:01,480 Speaker 1: effects where we expect to see them, which is interrasensitive 62 00:03:01,520 --> 00:03:05,240 Speaker 1: spending and also asset prices to some extent, and the 63 00:03:05,280 --> 00:03:07,920 Speaker 1: exchange rate, which you're also seeing a strong exchange rate, 64 00:03:07,960 --> 00:03:11,760 Speaker 1: which is disinflationary. So I don't think there's a fundamental 65 00:03:11,840 --> 00:03:14,680 Speaker 1: change in the way monetary policy affects the economy, and 66 00:03:14,720 --> 00:03:17,200 Speaker 1: again it goes back to just very strong demand. We 67 00:03:17,280 --> 00:03:20,400 Speaker 1: take the economy as it is, We take fiscal policy 68 00:03:20,639 --> 00:03:22,800 Speaker 1: and the economy and all the things we don't control, 69 00:03:22,880 --> 00:03:26,680 Speaker 1: they come to us, and we conduct policy always to 70 00:03:26,760 --> 00:03:31,000 Speaker 1: achieve maximum employment and stable prices. So we just take 71 00:03:31,040 --> 00:03:35,240 Speaker 1: what comes. The fact that we have a strong growing economy, 72 00:03:35,240 --> 00:03:40,280 Speaker 1: a strong growing labor market, and inflation coming down. These 73 00:03:40,280 --> 00:03:43,080 Speaker 1: are the elements that we want to see that to 74 00:03:43,120 --> 00:03:46,600 Speaker 1: achieve the outcome we want. It may take more time, 75 00:03:46,680 --> 00:03:50,520 Speaker 1: but ultimately this is the kind of thing you would 76 00:03:50,520 --> 00:03:53,400 Speaker 1: want to see along the path to getting through this 77 00:03:53,480 --> 00:03:54,960 Speaker 1: without a big increase in unemployment. 78 00:03:55,160 --> 00:03:58,800 Speaker 2: How much effect thus far has the FED had We 79 00:03:58,840 --> 00:04:01,040 Speaker 2: will have memorized now long and variable legs? 80 00:04:01,680 --> 00:04:02,800 Speaker 1: How long? How variable? 81 00:04:02,840 --> 00:04:05,000 Speaker 2: And where are you in that process? Are you at 82 00:04:05,000 --> 00:04:07,120 Speaker 2: the twenty five percent point the fifty in terms of 83 00:04:07,160 --> 00:04:08,400 Speaker 2: seeing it in the effect in. 84 00:04:08,400 --> 00:04:13,240 Speaker 1: The real economy. So there's there's no precision in our 85 00:04:13,360 --> 00:04:17,880 Speaker 1: understanding of how long legs are. One thing that has 86 00:04:17,960 --> 00:04:22,599 Speaker 1: changed in the modern era is that markets now, over 87 00:04:22,640 --> 00:04:25,479 Speaker 1: the course of the last thirty years, central banks have decided, 88 00:04:25,560 --> 00:04:28,560 Speaker 1: instead of being secretive, to be very transparent. And what 89 00:04:28,560 --> 00:04:32,560 Speaker 1: that has meant is that markets move actually well in anticipation, 90 00:04:32,760 --> 00:04:37,640 Speaker 1: well before our policy moves, So the transmission from policy 91 00:04:37,720 --> 00:04:41,800 Speaker 1: moves to financial conditions actually happens before the moves now, 92 00:04:41,839 --> 00:04:44,200 Speaker 1: whereas that was not the case fifty years ago when 93 00:04:44,360 --> 00:04:49,479 Speaker 1: Milton Friedman coined the phrase long and variable legs. But 94 00:04:49,600 --> 00:04:52,400 Speaker 1: now you have financial conditions changing, and the questions how 95 00:04:52,440 --> 00:04:56,520 Speaker 1: does it affect the economy? The standard channels are asset 96 00:04:56,600 --> 00:04:59,880 Speaker 1: prices in such intrasensitive spending in the exchange rate, for example. 97 00:05:00,000 --> 00:05:03,240 Speaker 1: And again we do see that happening, just not as 98 00:05:03,240 --> 00:05:05,520 Speaker 1: fast as we would like. And I would attribute some 99 00:05:05,640 --> 00:05:10,000 Speaker 1: of that to just stronger demand. Household savings were turned 100 00:05:10,000 --> 00:05:12,800 Speaker 1: out to be higher. Household spending has been stronger, and 101 00:05:12,839 --> 00:05:14,720 Speaker 1: that's by far the largest part of the economy. 102 00:05:14,839 --> 00:05:17,240 Speaker 2: In order to conduct monetary policy effectively, do you need 103 00:05:17,240 --> 00:05:21,000 Speaker 2: at least hypothesis about how much has already hit the economy, 104 00:05:21,000 --> 00:05:22,560 Speaker 2: because it's hard to know how much more you need 105 00:05:22,600 --> 00:05:24,400 Speaker 2: to do if you don't know how far you've come. 106 00:05:24,760 --> 00:05:27,400 Speaker 1: So on legs, I think if you think back, it's 107 00:05:27,400 --> 00:05:30,760 Speaker 1: been a year now since the last seventy five basis 108 00:05:30,760 --> 00:05:33,320 Speaker 1: point hike we did. It was the November meeting in 109 00:05:33,360 --> 00:05:36,359 Speaker 1: twenty twenty two. The first one was in June, so 110 00:05:36,400 --> 00:05:38,520 Speaker 1: it's more than a year, so we should be seeing 111 00:05:39,120 --> 00:05:41,480 Speaker 1: the effects. By the way, they don't all just arrive 112 00:05:41,640 --> 00:05:44,039 Speaker 1: on one day. They arrive and then they're thought to 113 00:05:44,160 --> 00:05:46,839 Speaker 1: peak and then to diminish. So there's a lot of 114 00:05:46,880 --> 00:05:49,880 Speaker 1: uncertainty around lags, and one of the reasons why we 115 00:05:49,960 --> 00:05:53,599 Speaker 1: have slowed down significantly this year is to give monetary 116 00:05:53,600 --> 00:05:56,800 Speaker 1: policy time to work. The truth is, though you can 117 00:05:56,839 --> 00:06:02,040 Speaker 1: find academic support for different different diferent speeds and duration 118 00:06:02,160 --> 00:06:05,440 Speaker 1: of lags, So we have to use our eyes and 119 00:06:05,600 --> 00:06:08,719 Speaker 1: a little bit of risk management in patients in slowing 120 00:06:08,720 --> 00:06:10,720 Speaker 1: down the pace to make sure that we are seeing 121 00:06:10,960 --> 00:06:13,560 Speaker 1: the full effects. And I think again that's part of 122 00:06:13,600 --> 00:06:16,919 Speaker 1: why we've slowed down this year. We went very quickly 123 00:06:16,960 --> 00:06:19,440 Speaker 1: in twenty twenty two to catch up to where we 124 00:06:19,480 --> 00:06:22,839 Speaker 1: needed to be, and now we're moving carefully with these decisions. 125 00:06:23,720 --> 00:06:26,920 Speaker 2: So when you spoke back in August of twenty twenty 126 00:06:26,960 --> 00:06:29,359 Speaker 2: and sort of laid out the revisions to the framework 127 00:06:29,360 --> 00:06:32,520 Speaker 2: as it were, you said that in terms of anticipated growth, 128 00:06:32,600 --> 00:06:34,800 Speaker 2: the sort of consensus have gone from something like two 129 00:06:34,800 --> 00:06:36,680 Speaker 2: point five to one point eight percent. I think we're 130 00:06:36,680 --> 00:06:38,920 Speaker 2: the numbers you laid out of that. Where are you now? 131 00:06:38,960 --> 00:06:40,880 Speaker 2: Where's the fed? Where are you? And what you think? 132 00:06:40,920 --> 00:06:44,520 Speaker 1: Basically? The long run growth is long run potential growth 133 00:06:45,400 --> 00:06:47,719 Speaker 1: is not something that moves around a lot over time. 134 00:06:47,760 --> 00:06:50,520 Speaker 1: But I would my own guess is it's around two percent. 135 00:06:50,960 --> 00:06:55,040 Speaker 1: I think that the standard mainstream view would be a 136 00:06:55,080 --> 00:06:57,040 Speaker 1: little bit below two percent, But I would just say 137 00:06:57,080 --> 00:07:01,040 Speaker 1: two percent real growth over time. And you know what 138 00:07:01,400 --> 00:07:04,159 Speaker 1: causes growth is you know, growth in hours worked plus 139 00:07:04,200 --> 00:07:07,240 Speaker 1: growth in productivity. Growth in hours worked is a function 140 00:07:07,279 --> 00:07:09,800 Speaker 1: of population growth in the long run and also labor 141 00:07:09,840 --> 00:07:13,200 Speaker 1: force participation. Many things affect productivity. But if you if 142 00:07:13,200 --> 00:07:17,400 Speaker 1: you drop in reasonable standard longer term estimates of hours 143 00:07:17,440 --> 00:07:20,680 Speaker 1: worked growth and productivity, which is just output per hour 144 00:07:20,920 --> 00:07:23,720 Speaker 1: productivity growth, you get something around two percent. And that's 145 00:07:23,960 --> 00:07:26,080 Speaker 1: that's higher than most other advanced economies. 146 00:07:26,520 --> 00:07:29,640 Speaker 2: As you look at it, do you see historical precedents 147 00:07:29,680 --> 00:07:33,800 Speaker 2: for having growing economy with high rates over a long 148 00:07:33,840 --> 00:07:35,720 Speaker 2: period of time? I mean, as you look back, I mean, 149 00:07:35,800 --> 00:07:38,880 Speaker 2: is it like the late nineties? For example? What analogies 150 00:07:38,920 --> 00:07:40,960 Speaker 2: do you draw as you try to determine what this 151 00:07:41,040 --> 00:07:42,960 Speaker 2: might be doing at the economy of the longer term. 152 00:07:43,320 --> 00:07:47,360 Speaker 1: So that's really a question about the what the level 153 00:07:47,360 --> 00:07:49,760 Speaker 1: of rates will be going for, what the neutral level 154 00:07:49,800 --> 00:07:51,720 Speaker 1: will be, And I think it's it's very hard to 155 00:07:51,840 --> 00:07:54,560 Speaker 1: know confidently what the answer to that will be in 156 00:07:54,640 --> 00:07:58,160 Speaker 1: five years. Some of the reasons why rates were low 157 00:07:58,280 --> 00:08:01,280 Speaker 1: for the last twenty five years were just the aging 158 00:08:01,320 --> 00:08:05,800 Speaker 1: of the global population and globalization and you know, so 159 00:08:05,920 --> 00:08:10,080 Speaker 1: lots of savings and relatively with an aging population, savings 160 00:08:10,120 --> 00:08:13,440 Speaker 1: greater than investments, so rates are lower and productivity was low. 161 00:08:13,520 --> 00:08:16,120 Speaker 1: So all of those led to low interest rates. So 162 00:08:16,160 --> 00:08:19,600 Speaker 1: what has changed with the pandemic. You might see less 163 00:08:19,720 --> 00:08:23,320 Speaker 1: effects from globalization, certainly demographics that the aging of the 164 00:08:23,320 --> 00:08:27,560 Speaker 1: global population is not changed. I mean, this is a 165 00:08:27,600 --> 00:08:30,160 Speaker 1: discussion we're having on an ongoing basis. It doesn't really 166 00:08:30,200 --> 00:08:34,080 Speaker 1: affect current policy. But where will rates settle out? What 167 00:08:34,120 --> 00:08:37,680 Speaker 1: will be at a normal rate. So if a typical 168 00:08:37,840 --> 00:08:41,240 Speaker 1: FED tightening cycle would leave you at five or six percent, 169 00:08:41,440 --> 00:08:44,800 Speaker 1: and this is in the before the pandemic and before 170 00:08:45,160 --> 00:08:48,640 Speaker 1: the low inflation period, you would have had had FED 171 00:08:48,800 --> 00:08:51,199 Speaker 1: rates in four or five percent or even higher. Frequently 172 00:08:51,320 --> 00:08:52,800 Speaker 1: are we going back to that? I really don't know. 173 00:08:52,800 --> 00:08:55,040 Speaker 1: I wouldn't want to speculate. I mean, my guess is 174 00:08:55,080 --> 00:08:57,360 Speaker 1: it'll be somewhere in the middle. But I don't know. 175 00:08:57,440 --> 00:09:00,280 Speaker 1: I mean, I think we can say this now, the 176 00:09:00,320 --> 00:09:03,079 Speaker 1: effective lower bound is not an issue. You know, we 177 00:09:03,200 --> 00:09:06,079 Speaker 1: were very concerned about that. Right now we're very far 178 00:09:06,120 --> 00:09:08,760 Speaker 1: from the effective lower bound, and the economy's handling it 179 00:09:08,880 --> 00:09:11,600 Speaker 1: just fine. But that's you know, that's because we're at 180 00:09:11,640 --> 00:09:16,200 Speaker 1: a time of really elevated demand coming out of the pandemic. 181 00:09:16,240 --> 00:09:19,200 Speaker 1: As we reopened with fiscal stimulus and monetary stimulus. We 182 00:09:19,200 --> 00:09:21,680 Speaker 1: have very strong demand of the United States. Hard to 183 00:09:21,720 --> 00:09:24,400 Speaker 1: know what the economy will want in the way of 184 00:09:24,400 --> 00:09:27,160 Speaker 1: interest rates when five years from now, in all of 185 00:09:27,160 --> 00:09:29,079 Speaker 1: the effects of the pandemic are behind us. 186 00:09:29,160 --> 00:09:31,920 Speaker 2: You mentioned the long term equilibrium rate, which you talked 187 00:09:31,920 --> 00:09:34,760 Speaker 2: about again back in Jackson Hole in August of twenty twenty. 188 00:09:34,840 --> 00:09:37,319 Speaker 2: Back then you said you thought it had served, consensus 189 00:09:37,320 --> 00:09:39,360 Speaker 2: had come down. I think it was from like four 190 00:09:39,360 --> 00:09:41,560 Speaker 2: point twenty five percent to two point five percent. 191 00:09:41,640 --> 00:09:47,000 Speaker 1: Where is it today? So, I think, by any reckoning, 192 00:09:47,280 --> 00:09:50,360 Speaker 1: long term interest rates and the neutral interest rate came 193 00:09:50,400 --> 00:09:54,720 Speaker 1: down steadily over the course of several decades. So where 194 00:09:54,800 --> 00:10:00,480 Speaker 1: is it today? I don't know, you know, we're finding it. Basically, 195 00:10:01,840 --> 00:10:06,079 Speaker 1: the idea was, I think the median indication of what 196 00:10:06,120 --> 00:10:08,920 Speaker 1: the real neutral rate was around fifty basis points before 197 00:10:08,960 --> 00:10:11,880 Speaker 1: the pandemic. It may have risen in the near term. 198 00:10:11,920 --> 00:10:14,400 Speaker 1: The real question that matters, though, is will it rise 199 00:10:14,400 --> 00:10:16,560 Speaker 1: in the long term, and that we don't know. 200 00:10:17,720 --> 00:10:19,319 Speaker 2: But do you need to know in order to conduct 201 00:10:19,400 --> 00:10:21,320 Speaker 2: monetary busy? I mean you must have to have at 202 00:10:21,400 --> 00:10:23,160 Speaker 2: least a theory. I mean, I'm not saying you have 203 00:10:23,200 --> 00:10:24,280 Speaker 2: to be right about it, but you have to have 204 00:10:24,320 --> 00:10:26,440 Speaker 2: a hypothesis, don't you. As you look at the data, 205 00:10:26,480 --> 00:10:29,760 Speaker 2: you have to put the data through some sort of theory. 206 00:10:29,840 --> 00:10:32,600 Speaker 1: So we all write down our estimates of the longer 207 00:10:32,679 --> 00:10:36,000 Speaker 1: run neutral rate every quarter in the summary of economic projections, 208 00:10:36,280 --> 00:10:39,760 Speaker 1: and that's based on models. It's based on also looking 209 00:10:39,760 --> 00:10:43,319 Speaker 1: out the window and including lags, thinking how are our 210 00:10:43,360 --> 00:10:46,360 Speaker 1: current rates affecting the economy. So the evidence of your 211 00:10:46,360 --> 00:10:50,000 Speaker 1: eyes is that the economy is handling much higher rates 212 00:10:50,080 --> 00:10:54,680 Speaker 1: at least for now, without difficulties. So notionally, that might 213 00:10:54,760 --> 00:10:57,120 Speaker 1: tell you that the neutral rate has risen, or it 214 00:10:57,120 --> 00:10:59,439 Speaker 1: may just tell you that we haven't had rates high 215 00:10:59,559 --> 00:11:02,480 Speaker 1: enough for long long enough. You're right, though, but you know, 216 00:11:03,480 --> 00:11:06,560 Speaker 1: we have models for everything, we have formulists for everything. Ultimately, 217 00:11:06,600 --> 00:11:10,120 Speaker 1: as a practitioner, we have to, you know, focused on 218 00:11:10,160 --> 00:11:13,319 Speaker 1: what the economy is telling us, even taking legs into account. 219 00:11:13,480 --> 00:11:16,480 Speaker 1: What's it telling us? Does it feel like policy is 220 00:11:16,520 --> 00:11:18,559 Speaker 1: too tight right now? I wouldn't have to say no. 221 00:11:19,080 --> 00:11:21,080 Speaker 1: I think the evidence is not that policy is too 222 00:11:21,080 --> 00:11:24,960 Speaker 1: tight right now. So we'd five five and a quarter 223 00:11:25,000 --> 00:11:25,840 Speaker 1: to five and a half percent. 224 00:11:26,240 --> 00:11:28,480 Speaker 2: Do you think we're entering into a new phase in 225 00:11:28,520 --> 00:11:32,240 Speaker 2: monetary policy? We had the vulgar disinflation I think you 226 00:11:32,320 --> 00:11:33,839 Speaker 2: referred to it as and then we had sort of 227 00:11:33,880 --> 00:11:37,679 Speaker 2: inflation targeting. For a time, there was concerned about secular stagnation. 228 00:11:37,800 --> 00:11:39,960 Speaker 2: We were pushing the zero bound, as you said, we 229 00:11:39,960 --> 00:11:41,920 Speaker 2: were concerned with that, and then we had the pandemic 230 00:11:41,960 --> 00:11:44,640 Speaker 2: and we had the real problem with inflation. 231 00:11:45,400 --> 00:11:48,480 Speaker 1: What's the next phase look like? How would you describe 232 00:11:48,640 --> 00:11:52,680 Speaker 1: what we've been through? Is in all of the advanced 233 00:11:52,679 --> 00:11:56,600 Speaker 1: economies around the world was a period where the effective 234 00:11:56,679 --> 00:12:00,840 Speaker 1: lower bound, the proximity of interest rates free interest rates 235 00:12:00,880 --> 00:12:02,800 Speaker 1: to the effective lower bound, which is zero or a 236 00:12:02,840 --> 00:12:05,720 Speaker 1: little bit less, was a big problem for monetary policy, 237 00:12:05,800 --> 00:12:08,040 Speaker 1: and just rates came down and down and down. And 238 00:12:08,080 --> 00:12:11,120 Speaker 1: the problem is if rates are going to be close 239 00:12:11,160 --> 00:12:14,320 Speaker 1: to zero in good times, then how do you cut? 240 00:12:14,400 --> 00:12:17,360 Speaker 1: And so have central banks lost the power of their 241 00:12:17,400 --> 00:12:20,120 Speaker 1: most important tool, which is interest rates. This was a 242 00:12:20,160 --> 00:12:25,440 Speaker 1: subject of a vast literature in monetary policy research for 243 00:12:25,520 --> 00:12:29,960 Speaker 1: twenty years, and the most common answer was some kind 244 00:12:29,960 --> 00:12:32,319 Speaker 1: of a makeup strategy. So you would credibly promise to 245 00:12:32,720 --> 00:12:35,840 Speaker 1: run inflation a little bit hot and above two percent, 246 00:12:35,880 --> 00:12:38,559 Speaker 1: and that would anchor inflations two percent to counter the 247 00:12:38,559 --> 00:12:41,840 Speaker 1: times when it was below. So that was a very 248 00:12:41,840 --> 00:12:44,840 Speaker 1: serious problem which filled books worth of research. Then comes 249 00:12:44,920 --> 00:12:47,560 Speaker 1: the pandemic, Then comes the response to the pandemic, and 250 00:12:47,600 --> 00:12:50,000 Speaker 1: then comes the pandemic inflation, not just the United States 251 00:12:50,000 --> 00:12:53,880 Speaker 1: but everywhere. The question is that a secular change or 252 00:12:53,920 --> 00:12:56,720 Speaker 1: are these factors that brought us to that place? Are 253 00:12:56,760 --> 00:13:00,840 Speaker 1: they still out there waiting to come back? And you know, 254 00:13:00,880 --> 00:13:03,760 Speaker 1: books are written on this subject. Now you can argue that, 255 00:13:04,960 --> 00:13:09,080 Speaker 1: and some have argued that effectively, the last twenty years 256 00:13:09,080 --> 00:13:12,079 Speaker 1: before the pandemic, we're kind of a perfect storm of disinflation, 257 00:13:12,800 --> 00:13:15,680 Speaker 1: and now that's all gone and we're going into a 258 00:13:15,720 --> 00:13:19,760 Speaker 1: more inflationary period that will be characterized by more supply 259 00:13:19,880 --> 00:13:23,480 Speaker 1: shocks and things like that and therefore more inflationary pressure. 260 00:13:24,000 --> 00:13:26,160 Speaker 1: So are we going into such a I don't know. 261 00:13:26,240 --> 00:13:28,840 Speaker 1: I mean all I can tell you I think it's unknowable. 262 00:13:28,880 --> 00:13:33,079 Speaker 1: And you know, great theorists and researchers have different views 263 00:13:33,080 --> 00:13:35,680 Speaker 1: on this. It's not something you can settle in advance. 264 00:13:35,720 --> 00:13:38,480 Speaker 1: We'll have to see. I think our issue is right 265 00:13:38,520 --> 00:13:43,719 Speaker 1: now trying to achieve a sufficiently restrictive stance of policy 266 00:13:43,800 --> 00:13:46,000 Speaker 1: to bring inflation down to two percent over time. That's 267 00:13:46,000 --> 00:13:47,160 Speaker 1: what we're really focused on. 268 00:13:47,880 --> 00:13:51,120 Speaker 2: Whenever any of us goes, particularly institutions, go through tumultuous times, 269 00:13:51,120 --> 00:13:53,920 Speaker 2: and know, as you've been through the tumultuous time, we 270 00:13:54,000 --> 00:13:55,760 Speaker 2: look back and think, O coo do we learn? So 271 00:13:56,040 --> 00:13:59,800 Speaker 2: after action report, look at the pandemic and then pandemic inflation, 272 00:14:00,120 --> 00:14:03,160 Speaker 2: what would you say you learned in terms of macroeconomics, 273 00:14:03,200 --> 00:14:05,160 Speaker 2: in terms of the economy from that experience. 274 00:14:06,040 --> 00:14:09,240 Speaker 1: So, hindsight is always a wonderful thing, right. I think 275 00:14:09,280 --> 00:14:11,760 Speaker 1: the fair way to judge the actions that were taken 276 00:14:12,600 --> 00:14:18,040 Speaker 1: is to put yourself in the place of legislators and 277 00:14:18,520 --> 00:14:21,760 Speaker 1: policy of other you know, and central bankers around the world, 278 00:14:22,120 --> 00:14:25,480 Speaker 1: And there was no playbook. You know, we've never seen 279 00:14:25,560 --> 00:14:29,920 Speaker 1: we hadn't seen a global economic shutdown. People were thinking 280 00:14:29,960 --> 00:14:32,680 Speaker 1: that the pandemic might kill a whole lot of people, 281 00:14:32,720 --> 00:14:34,560 Speaker 1: and that we wouldn't have a vaccine for five years. 282 00:14:34,600 --> 00:14:36,320 Speaker 1: We might now have an economy for five years. So 283 00:14:36,800 --> 00:14:39,680 Speaker 1: these things were all very possible in March of twenty twenty, 284 00:14:40,240 --> 00:14:42,800 Speaker 1: and so we pulled out all the stops in Congress, 285 00:14:42,800 --> 00:14:45,600 Speaker 1: put at all the stops. With the benefit of hindsight, 286 00:14:45,920 --> 00:14:47,800 Speaker 1: Could we have done a little bit less and had 287 00:14:47,840 --> 00:14:50,200 Speaker 1: a little bit of inflation, I guess we could. But 288 00:14:50,240 --> 00:14:52,200 Speaker 1: I think if you look overall at the performance of 289 00:14:52,240 --> 00:14:56,640 Speaker 1: the US economy, our economy is the strongest. We have 290 00:14:56,720 --> 00:14:59,480 Speaker 1: the you know, we're actually also making the most progress 291 00:14:59,480 --> 00:15:02,560 Speaker 1: on inflation, but we certainly have the strongest growth. We're 292 00:15:02,600 --> 00:15:07,320 Speaker 1: back to prior growth trend, you know, not just the 293 00:15:07,440 --> 00:15:09,400 Speaker 1: level of where we were, were actually back to the 294 00:15:09,440 --> 00:15:13,360 Speaker 1: prior trend. The labor market. The last time we had 295 00:15:13,680 --> 00:15:17,240 Speaker 1: this many consecutive months of unemployment below four percent was 296 00:15:17,280 --> 00:15:19,680 Speaker 1: in the late nineteen sixties, so it's more than fifty 297 00:15:19,760 --> 00:15:22,520 Speaker 1: years ago. So our economy is doing very well from 298 00:15:22,560 --> 00:15:25,360 Speaker 1: all of that. But if you had perfect hindsight you 299 00:15:25,440 --> 00:15:28,000 Speaker 1: might have. You might not have had as much inflation 300 00:15:28,080 --> 00:15:30,680 Speaker 1: if we'd done less, although other countries who didn't do 301 00:15:31,280 --> 00:15:34,040 Speaker 1: as much as we did also had substantial inflation problems. 302 00:15:34,320 --> 00:15:36,040 Speaker 1: I think my question was just a little bit different. 303 00:15:36,080 --> 00:15:38,160 Speaker 2: It's not so much of assigning blame or saying to 304 00:15:38,200 --> 00:15:41,320 Speaker 2: somebody make a mistake, as are there things that going 305 00:15:41,400 --> 00:15:44,600 Speaker 2: forward would change the way you conduct monetary policy that 306 00:15:44,640 --> 00:15:46,960 Speaker 2: you learned from that that maybe nobody had reason to 307 00:15:47,000 --> 00:15:49,160 Speaker 2: know at the time, but it was an experience you 308 00:15:49,200 --> 00:15:49,640 Speaker 2: went through. 309 00:15:50,640 --> 00:15:53,400 Speaker 1: Well, you know, we were in a time of a 310 00:15:53,520 --> 00:15:58,320 Speaker 1: very long time, in a reasonably long time, of disinflationary forces, 311 00:15:58,800 --> 00:16:03,280 Speaker 1: and I think everybody's in instinct had been attuned to 312 00:16:04,280 --> 00:16:06,760 Speaker 1: risks coming from this direction, which is too low inflation. 313 00:16:07,360 --> 00:16:09,320 Speaker 1: And so what this has taught us is that you 314 00:16:09,320 --> 00:16:13,480 Speaker 1: know that period, that period is over, and we now 315 00:16:13,520 --> 00:16:17,520 Speaker 1: have probably going forward, a more balanced set of risks 316 00:16:17,520 --> 00:16:21,480 Speaker 1: where high inflation and low inflation are both risks. In fact, 317 00:16:21,560 --> 00:16:23,760 Speaker 1: right now the risk is still high inflation, but I'm 318 00:16:23,760 --> 00:16:26,480 Speaker 1: assuming once we get back to two percent we won't 319 00:16:26,480 --> 00:16:29,800 Speaker 1: have that. But we've certainly learned that. And I mean, 320 00:16:32,400 --> 00:16:36,880 Speaker 1: events are the possible range of events is so much 321 00:16:36,920 --> 00:16:39,800 Speaker 1: wider than what we think it is on any given day. Right, 322 00:16:39,840 --> 00:16:42,680 Speaker 1: the tails are so wide, and it's just not human 323 00:16:42,760 --> 00:16:45,840 Speaker 1: nature to constantly be thinking about things that are way 324 00:16:45,880 --> 00:16:48,520 Speaker 1: out in the tail. But they happen in financial markets 325 00:16:48,600 --> 00:16:52,920 Speaker 1: and in economies. They happen far more regularly than they should. 326 00:16:53,120 --> 00:16:55,400 Speaker 2: I suspect every person in this room as well. Where 327 00:16:55,440 --> 00:16:58,240 Speaker 2: it's going on with yields with bonds, it's been a 328 00:16:58,240 --> 00:17:01,320 Speaker 2: big story, particularly in the longer end of the curve. 329 00:17:01,960 --> 00:17:03,800 Speaker 2: What is your understanding of what is going on in 330 00:17:03,800 --> 00:17:05,719 Speaker 2: the bond market and why those yields are going up, 331 00:17:05,760 --> 00:17:06,760 Speaker 2: particularly again at. 332 00:17:06,640 --> 00:17:09,440 Speaker 1: The longer end of the curve. So it's it's really 333 00:17:09,480 --> 00:17:11,840 Speaker 1: two questions. One is why is it happening? And the 334 00:17:11,880 --> 00:17:14,560 Speaker 1: other is why does it matter for policy? And so 335 00:17:14,600 --> 00:17:16,560 Speaker 1: I would say, on the why is this happening question, 336 00:17:16,600 --> 00:17:19,320 Speaker 1: I think it's appropriate to have a little bit of humility. 337 00:17:19,320 --> 00:17:21,879 Speaker 1: It's always hard to say exactly what's going on with 338 00:17:22,119 --> 00:17:24,320 Speaker 1: longer term yields, but this is what I think we 339 00:17:24,400 --> 00:17:29,639 Speaker 1: can say. First what it's not. It's not apparently about 340 00:17:29,720 --> 00:17:34,159 Speaker 1: expectations of higher inflation, and it's also not mainly about 341 00:17:34,600 --> 00:17:37,560 Speaker 1: shorter term policy moves. So FED funds moves over the 342 00:17:37,600 --> 00:17:39,879 Speaker 1: next year or two. Really, if you can look at 343 00:17:39,880 --> 00:17:42,359 Speaker 1: the two year for example, and two years moved up 344 00:17:42,359 --> 00:17:44,440 Speaker 1: a little bit since September. But really the move is 345 00:17:44,480 --> 00:17:47,440 Speaker 1: in longer run bonds. So it's really happening in term premiums, 346 00:17:47,440 --> 00:17:51,080 Speaker 1: which is the compensation for holding longer run securities, and 347 00:17:51,119 --> 00:17:55,160 Speaker 1: not principally a function of the market looking at near 348 00:17:55,280 --> 00:17:59,520 Speaker 1: term fund rate. I think a few other ideas about 349 00:17:59,840 --> 00:18:04,080 Speaker 1: the many candidate ideas and many people feeling their priors 350 00:18:04,080 --> 00:18:06,440 Speaker 1: have been confirmed by this event, I'll say as well. 351 00:18:06,880 --> 00:18:11,480 Speaker 1: But so one would be just that markets and analysts 352 00:18:11,480 --> 00:18:14,600 Speaker 1: are seeing the resilience of the economy two high interest rates, 353 00:18:14,600 --> 00:18:18,399 Speaker 1: and they're they're revising their view about the overall strength 354 00:18:18,400 --> 00:18:21,040 Speaker 1: of the economy and thinking even longer term. This may 355 00:18:21,040 --> 00:18:24,679 Speaker 1: require higher rates that could be part of it. You know, 356 00:18:25,000 --> 00:18:28,560 Speaker 1: there may be a heightened focus on fiscal deficits that 357 00:18:28,560 --> 00:18:31,399 Speaker 1: could be part of it. QT could be part of it. 358 00:18:31,640 --> 00:18:34,480 Speaker 1: Another one you hear very often is the change changing 359 00:18:34,520 --> 00:18:37,960 Speaker 1: correlation between bonds and equities. If we're going forward into 360 00:18:38,160 --> 00:18:40,320 Speaker 1: if we are going forward into a world of more 361 00:18:40,359 --> 00:18:44,000 Speaker 1: supply shocks rather than demand shocks, that could make bonds 362 00:18:44,400 --> 00:18:47,159 Speaker 1: a less attractive hedge to equities, and therefore you need 363 00:18:47,200 --> 00:18:49,679 Speaker 1: to be paid more to own bonds, and therefore the 364 00:18:49,760 --> 00:18:54,400 Speaker 1: term premium goes up. So all of those are possible ideas. 365 00:18:54,520 --> 00:18:57,080 Speaker 1: Then the question is does it matter for us as 366 00:18:57,119 --> 00:19:01,119 Speaker 1: long as I'm talking about this. So the way I 367 00:19:01,160 --> 00:19:05,800 Speaker 1: think about it is, uh, you know, we change our policy. 368 00:19:06,359 --> 00:19:11,040 Speaker 1: Actual and expected changes in our policy affect financial conditions, 369 00:19:11,280 --> 00:19:16,159 Speaker 1: and persistent changes in financial conditions affect economic activity, hiring, 370 00:19:16,160 --> 00:19:20,199 Speaker 1: and inflation. So one question is are we seeing the 371 00:19:20,560 --> 00:19:23,879 Speaker 1: longer run bonds? Are they increases in rates? Are we 372 00:19:23,920 --> 00:19:27,600 Speaker 1: seeing those come through in financial conditions in a persistent way? 373 00:19:27,640 --> 00:19:29,919 Speaker 1: And I think if you look at financial conditions indexes, 374 00:19:30,200 --> 00:19:34,600 Speaker 1: the answer so far would be yes, you are persistence. 375 00:19:34,640 --> 00:19:36,800 Speaker 1: It will be a matter of just seeing with our 376 00:19:36,840 --> 00:19:38,959 Speaker 1: own eyes. But certainly they're coming. If you look at 377 00:19:38,960 --> 00:19:41,440 Speaker 1: financial conditions indexes, they're showing tightening and it's a lot 378 00:19:41,480 --> 00:19:45,040 Speaker 1: because of longer rates. Then the question is is indigenous 379 00:19:45,119 --> 00:19:48,679 Speaker 1: and is it just because the market expects us to 380 00:19:48,760 --> 00:19:54,160 Speaker 1: take things, to take further actions to tighten monetary policy, 381 00:19:54,359 --> 00:19:56,520 Speaker 1: in which case, if you have to follow through, but 382 00:19:56,600 --> 00:19:58,840 Speaker 1: that doesn't seem to be the case, is it doesn't 383 00:19:58,840 --> 00:20:03,600 Speaker 1: seem to be principally about expectations of us doing more. 384 00:20:03,640 --> 00:20:06,600 Speaker 1: It seems that the other factors are the more the 385 00:20:06,640 --> 00:20:10,040 Speaker 1: more prominent ones. Another question is bottom bottom line? Know 386 00:20:10,200 --> 00:20:13,520 Speaker 1: that that means it probably does over time, it makes sense, 387 00:20:13,560 --> 00:20:14,880 Speaker 1: it's something that we'll be looking at. 388 00:20:15,040 --> 00:20:17,920 Speaker 2: Well, that's the question I say, is over time. From 389 00:20:18,040 --> 00:20:19,639 Speaker 2: what you understand right now, do you think this is 390 00:20:19,640 --> 00:20:22,119 Speaker 2: a temporary phenomenon or do you think there are structural 391 00:20:22,119 --> 00:20:24,280 Speaker 2: factors whatever they are, and we can talk about what 392 00:20:24,320 --> 00:20:26,960 Speaker 2: they might be, that would really are This is the 393 00:20:27,000 --> 00:20:28,160 Speaker 2: future that we're looking at now. 394 00:20:28,240 --> 00:20:31,320 Speaker 1: So of the factors I just listed, some of them 395 00:20:31,400 --> 00:20:33,280 Speaker 1: are shorter terms, some of them are longer term, and 396 00:20:33,320 --> 00:20:35,680 Speaker 1: some of them could be either. So for example, fiscal 397 00:20:35,760 --> 00:20:39,480 Speaker 1: concerns over fiscal deficits that that could be a longer 398 00:20:39,560 --> 00:20:43,320 Speaker 1: term factor. The change in correlations between but stocks and 399 00:20:43,359 --> 00:20:45,399 Speaker 1: bonds could be a long term I don't think we know. 400 00:20:45,760 --> 00:20:50,320 Speaker 1: I think you know. Basically, bond prices are set by 401 00:20:50,560 --> 00:20:54,439 Speaker 1: supply and demand. The supply of treasuries is is a 402 00:20:54,480 --> 00:20:57,639 Speaker 1: known thing, but demand can be affected by any and 403 00:20:57,680 --> 00:21:00,639 Speaker 1: all of these theories, and also just by sentiment. Sentiment too, 404 00:21:00,680 --> 00:21:03,480 Speaker 1: which is hard to characterize. So you know, markets have 405 00:21:03,520 --> 00:21:06,560 Speaker 1: been volatile, they've been longer than you know. You've seen 406 00:21:06,600 --> 00:21:09,400 Speaker 1: the rates moving up and down a lot. I think 407 00:21:09,440 --> 00:21:12,159 Speaker 1: we have to let this play out and watch it. 408 00:21:12,560 --> 00:21:15,639 Speaker 1: But you know, for now, it looks it's clearly a 409 00:21:15,760 --> 00:21:18,440 Speaker 1: tightening in financial conditions, and so we'll be watching. 410 00:21:18,119 --> 00:21:20,239 Speaker 2: It carefully talking about the physical side. And you've been 411 00:21:20,280 --> 00:21:22,240 Speaker 2: very careful repeated to say you want to stay in 412 00:21:22,240 --> 00:21:24,639 Speaker 2: your lane. You're not responsible for fiscal issues. At the 413 00:21:24,680 --> 00:21:26,800 Speaker 2: same time, you have to take into an account and 414 00:21:26,840 --> 00:21:28,399 Speaker 2: it looks like the United States is going to have 415 00:21:28,440 --> 00:21:29,840 Speaker 2: to borrow a fire amount of money, by the way, 416 00:21:29,880 --> 00:21:32,280 Speaker 2: other countries are as well. Around the world, we have 417 00:21:32,520 --> 00:21:36,479 Speaker 2: a big, big supply of treasuries coming on board. To 418 00:21:36,520 --> 00:21:38,320 Speaker 2: what extent do you think that is a longer term issue? 419 00:21:38,320 --> 00:21:39,520 Speaker 2: And let me tie it back to something you refer 420 00:21:39,560 --> 00:21:42,040 Speaker 2: to in your marks. Actually, when we see geopolitical conflict 421 00:21:42,040 --> 00:21:45,119 Speaker 2: around the world, like in Israel, like in Ukraine, some 422 00:21:45,160 --> 00:21:47,479 Speaker 2: of the build up with respect to China, the defense 423 00:21:47,520 --> 00:21:49,600 Speaker 2: spending is going to be elevated for the United States 424 00:21:49,640 --> 00:21:52,080 Speaker 2: and for other countries. Do you take that into account 425 00:21:52,080 --> 00:21:54,439 Speaker 2: and figuring monetary policy, because it may well mean that 426 00:21:54,480 --> 00:21:56,399 Speaker 2: we're borrowing a lot more money than we have in 427 00:21:56,440 --> 00:21:58,920 Speaker 2: the past, so we. 428 00:21:59,000 --> 00:22:01,760 Speaker 1: Of course see the same things that everyone else. So 429 00:22:02,000 --> 00:22:05,280 Speaker 1: I just came back from IMF meetings this weekend, and 430 00:22:05,600 --> 00:22:08,560 Speaker 1: there's a lot of talk of the very large resource 431 00:22:08,600 --> 00:22:12,840 Speaker 1: demands that organizations like the IMF and of course countries 432 00:22:12,880 --> 00:22:16,240 Speaker 1: are facing, and the need for substantial amounts of revenue. 433 00:22:16,240 --> 00:22:19,199 Speaker 1: You mentioned military. There's also dealing with climate change and 434 00:22:19,240 --> 00:22:22,040 Speaker 1: things like that, so it's a there's a lot of 435 00:22:22,040 --> 00:22:25,040 Speaker 1: that we don't as you mentioned, we don't comment on 436 00:22:25,320 --> 00:22:29,360 Speaker 1: on fiscal policy. Actually, the fiscal authorities have oversight over 437 00:22:29,440 --> 00:22:31,800 Speaker 1: us and not the other way around, so we stay 438 00:22:31,840 --> 00:22:37,040 Speaker 1: away from that. So I would just say everyone knows 439 00:22:37,119 --> 00:22:39,800 Speaker 1: that it's not a secret, and about all I can 440 00:22:39,840 --> 00:22:43,040 Speaker 1: say is we know that we're on an unsustainable path fiscally. 441 00:22:43,480 --> 00:22:45,600 Speaker 1: It's not that the level of the debt is unsustainable. 442 00:22:45,640 --> 00:22:48,840 Speaker 1: It's not it's that where the path we're on is unsustainable, 443 00:22:48,840 --> 00:22:50,920 Speaker 1: and we'll have to get off that path sooner res 444 00:22:50,920 --> 00:22:54,240 Speaker 1: and later. It's not really something though, that affects a 445 00:22:54,280 --> 00:22:57,240 Speaker 1: monetary policy decision about whether how much we raise rates 446 00:22:57,240 --> 00:22:59,359 Speaker 1: in the next six months. It's not going to be 447 00:23:00,080 --> 00:23:04,399 Speaker 1: driven by Uh. I mean if there were some vast 448 00:23:04,440 --> 00:23:07,440 Speaker 1: new fiscal policy that we're about to be enacted, and 449 00:23:07,480 --> 00:23:09,439 Speaker 1: then that that would have an effect on the models 450 00:23:09,440 --> 00:23:12,400 Speaker 1: and have an effect on projections, and indirectly that would 451 00:23:12,400 --> 00:23:14,200 Speaker 1: affect us, but we would not be in a position 452 00:23:14,240 --> 00:23:16,159 Speaker 1: of responding directly in fiscal policy. 453 00:23:16,359 --> 00:23:18,639 Speaker 2: When we talk about the treasure market, obviously there's there's 454 00:23:18,720 --> 00:23:22,080 Speaker 2: buying and selling, and the United States government is issuing 455 00:23:22,119 --> 00:23:24,600 Speaker 2: a lot of treasuries. There's also a question of who's buying, 456 00:23:24,840 --> 00:23:27,359 Speaker 2: and we're we now have one buyer who stepped out 457 00:23:27,400 --> 00:23:30,200 Speaker 2: of the marketplace, namely the FED, which is a big buyer. 458 00:23:30,720 --> 00:23:32,479 Speaker 2: At the same time, we're getting reports that maybe some 459 00:23:32,520 --> 00:23:35,480 Speaker 2: of the overseas buyers may be pulling back as well. 460 00:23:35,640 --> 00:23:38,600 Speaker 2: How do you take that into account and assessing where 461 00:23:38,640 --> 00:23:40,640 Speaker 2: we're going with long term bobb yells? 462 00:23:42,119 --> 00:23:47,639 Speaker 1: So, actually, I think buying by overseas entities has actually 463 00:23:47,680 --> 00:23:49,880 Speaker 1: been pretty robust this year. So there have been some 464 00:23:49,960 --> 00:23:52,280 Speaker 1: small changes, but I think by and large it's been 465 00:23:52,400 --> 00:23:56,000 Speaker 1: it's they've they've been buying, uh, you know, robustly. Again, 466 00:23:56,800 --> 00:23:59,159 Speaker 1: look at we look at the broad financial conditions, We 467 00:23:59,160 --> 00:24:02,239 Speaker 1: look at interest rates, other asset prices. That's what we 468 00:24:02,240 --> 00:24:05,879 Speaker 1: look at. We're not you know, we don't focus on 469 00:24:05,920 --> 00:24:11,560 Speaker 1: fiscal policy. We wouldn't change monetary policy because of for example, 470 00:24:12,080 --> 00:24:14,000 Speaker 1: you know, because we think that the US is on 471 00:24:14,000 --> 00:24:18,000 Speaker 1: an unsustainable path. Everyone knows that we're just going to 472 00:24:18,040 --> 00:24:21,480 Speaker 1: do monetary policy to achieve maximum employment and stable prices, 473 00:24:22,520 --> 00:24:23,919 Speaker 1: and that's how we think about it. 474 00:24:24,480 --> 00:24:28,680 Speaker 2: I'm curious, though, one of the things you're most concerned 475 00:24:28,720 --> 00:24:29,639 Speaker 2: about is the real economy. 476 00:24:29,680 --> 00:24:30,760 Speaker 1: What's going on in the real economy. 477 00:24:31,080 --> 00:24:33,159 Speaker 2: You distinguish yourself from some of your predecessors, and that 478 00:24:33,240 --> 00:24:36,520 Speaker 2: you have a significant exposure to the private sector, not 479 00:24:36,560 --> 00:24:40,119 Speaker 2: just the voice academics. As you talk to CEOs people 480 00:24:40,160 --> 00:24:43,159 Speaker 2: in business, what are you hearing about the cost of capital, 481 00:24:43,359 --> 00:24:46,240 Speaker 2: Because these bond prices are really affecting cost of capital 482 00:24:47,040 --> 00:24:47,320 Speaker 2: for the. 483 00:24:47,240 --> 00:24:48,080 Speaker 1: First time in a while. 484 00:24:48,200 --> 00:24:49,800 Speaker 2: There was a long time the cost of capital felt 485 00:24:49,800 --> 00:24:52,720 Speaker 2: like was almost zero, and business changes an awful lot 486 00:24:52,760 --> 00:24:54,800 Speaker 2: when you really when the price of money goes up. 487 00:24:56,200 --> 00:25:01,080 Speaker 1: I talked to several people this week who run companies, 488 00:25:01,280 --> 00:25:04,919 Speaker 1: and they each said that the economy remains strong and 489 00:25:05,000 --> 00:25:08,480 Speaker 1: that they don't see the consumer you know, you see 490 00:25:10,359 --> 00:25:14,919 Speaker 1: there's some areas where we're spending is softening. But overall, 491 00:25:14,960 --> 00:25:17,240 Speaker 1: I mean, look at the retail sales number. The consumer 492 00:25:17,320 --> 00:25:22,080 Speaker 1: is strong. Volume is not going up very much, but 493 00:25:22,880 --> 00:25:26,280 Speaker 1: companies are profitable. You don't know now if you get 494 00:25:26,320 --> 00:25:28,600 Speaker 1: to where I think the cost of capital would really matter, 495 00:25:28,600 --> 00:25:32,080 Speaker 1: would be for smaller companies and early stage companies, and 496 00:25:32,119 --> 00:25:35,119 Speaker 1: that really does matter. So, you know, we don't have 497 00:25:35,160 --> 00:25:37,760 Speaker 1: a lot of tools. We have interest rates, and they're 498 00:25:37,800 --> 00:25:41,359 Speaker 1: far from perfect perfect. It's famously a blunt tool, but 499 00:25:41,440 --> 00:25:45,359 Speaker 1: it's what we have to get inflation down. And really 500 00:25:45,359 --> 00:25:49,920 Speaker 1: the world counts on us to deliver low and stable inflation. 501 00:25:50,080 --> 00:25:52,600 Speaker 1: That's what we have to do. And you know, at 502 00:25:52,640 --> 00:25:54,320 Speaker 1: a time like this, there are you know, we know 503 00:25:54,359 --> 00:25:56,520 Speaker 1: that we're having negative effects on you know, we had 504 00:25:56,520 --> 00:25:58,520 Speaker 1: the homebuilders in this week. It's a very tough time 505 00:25:58,560 --> 00:26:02,160 Speaker 1: in the whole home building industry and we know that. 506 00:26:02,760 --> 00:26:05,560 Speaker 1: But ultimately, what we want to get back to is 507 00:26:05,600 --> 00:26:08,920 Speaker 1: a long period of price stability. That's the best thing 508 00:26:08,960 --> 00:26:12,240 Speaker 1: we can provide, and that that policy makers and businesses 509 00:26:12,720 --> 00:26:15,680 Speaker 1: and everyone can and people can just lead their lives 510 00:26:15,720 --> 00:26:17,920 Speaker 1: not worrying about inflation. This is what we can deliver, 511 00:26:17,960 --> 00:26:20,480 Speaker 1: it's what we have to deliver, and this is the time. 512 00:26:20,760 --> 00:26:23,440 Speaker 1: You know, our independence is not for times when we're 513 00:26:23,440 --> 00:26:26,400 Speaker 1: really popular. It's for when we're now, when we're doing 514 00:26:26,440 --> 00:26:29,440 Speaker 1: something that that that really the public counts on us 515 00:26:29,440 --> 00:26:32,680 Speaker 1: to do. Notwithstanding that, it's that it's challenging and difficult, 516 00:26:32,840 --> 00:26:36,520 Speaker 1: and you know, higher interest rates are difficult for everybody. 517 00:26:37,560 --> 00:26:39,600 Speaker 2: You have not wavered from your commitment to two percent 518 00:26:40,080 --> 00:26:43,080 Speaker 2: again today two percent, no question about it. There are 519 00:26:43,080 --> 00:26:46,159 Speaker 2: those who suggested, including some colleagues in the FED, that 520 00:26:46,200 --> 00:26:48,280 Speaker 2: maybe the bond market is doing part of your job 521 00:26:48,320 --> 00:26:48,600 Speaker 2: for you. 522 00:26:48,920 --> 00:26:52,920 Speaker 1: Is that the way you see it, look, I would 523 00:26:52,920 --> 00:26:56,399 Speaker 1: I would say it this way. The whole idea of 524 00:26:57,480 --> 00:27:00,800 Speaker 1: tightening policy is to affect financial condition and to the 525 00:27:00,840 --> 00:27:04,320 Speaker 1: extent higher bond rates to reflect that they do, they're 526 00:27:04,359 --> 00:27:07,119 Speaker 1: producing tighter financial conditions right now. So that is that's 527 00:27:07,160 --> 00:27:11,280 Speaker 1: how monetary policy works. That's literally how it works. So again, 528 00:27:11,320 --> 00:27:13,880 Speaker 1: in principle, as long as they're as long as bond 529 00:27:13,960 --> 00:27:16,959 Speaker 1: rates are going up for some reasons, and they're not 530 00:27:17,000 --> 00:27:18,960 Speaker 1: going up just because they expect us to do things 531 00:27:19,000 --> 00:27:20,479 Speaker 1: so that if we don't do them, they'll come right 532 00:27:20,520 --> 00:27:22,680 Speaker 1: back down, as long as and we don't think that's 533 00:27:22,720 --> 00:27:24,560 Speaker 1: the case, actually doesn't I don't think it's the case. 534 00:27:24,560 --> 00:27:28,400 Speaker 1: It doesn't seem to me. That's where analysis leads you. Then, 535 00:27:28,440 --> 00:27:30,680 Speaker 1: sure that's a tightening. That's exactly what we're trying. 536 00:27:30,480 --> 00:27:33,480 Speaker 2: To achieve, And therefore it seems like almost arithmetic. It 537 00:27:33,560 --> 00:27:36,400 Speaker 2: must reduce some of the impetus for you to continue 538 00:27:36,400 --> 00:27:37,240 Speaker 2: to raise rates. 539 00:27:37,040 --> 00:27:38,760 Speaker 1: At the margin. It could. I mean, I think that 540 00:27:38,800 --> 00:27:40,479 Speaker 1: remains to be seen. And by the way, I'm not 541 00:27:40,480 --> 00:27:44,159 Speaker 1: blessing any particular level of longer term rates, but just 542 00:27:44,520 --> 00:27:48,840 Speaker 1: in principle, that's right. So let's talk about the labor market. 543 00:27:49,160 --> 00:27:51,960 Speaker 2: You refer to that in your marks as well, And 544 00:27:52,000 --> 00:27:55,399 Speaker 2: as you say, vacancies have come down some, although they 545 00:27:55,440 --> 00:27:58,359 Speaker 2: still are pretty elevated. If I'm not mistaken, quits have 546 00:27:58,400 --> 00:28:00,480 Speaker 2: actually gone up some. It seems to be a type 547 00:28:00,480 --> 00:28:02,000 Speaker 2: of the labor worker. What do you make of what's 548 00:28:02,000 --> 00:28:03,240 Speaker 2: going on in the labor marker right now? 549 00:28:04,000 --> 00:28:07,199 Speaker 1: Labor market has been extraordinarily strong. So what happened in 550 00:28:07,240 --> 00:28:10,440 Speaker 1: the pandemic was we had a negative labor supply shock 551 00:28:10,640 --> 00:28:12,520 Speaker 1: is one way to think about it. So a whole 552 00:28:12,560 --> 00:28:15,120 Speaker 1: lot of people left the labor market when the pandemic 553 00:28:15,119 --> 00:28:17,919 Speaker 1: happened and then didn't come back. And so when the 554 00:28:17,920 --> 00:28:20,880 Speaker 1: economy reopened and everybody you know, there was remember there 555 00:28:20,920 --> 00:28:25,560 Speaker 1: was revenge, travel and revenge everything, very strong demand, and 556 00:28:26,080 --> 00:28:28,880 Speaker 1: there just weren't the people. So you had two job 557 00:28:28,920 --> 00:28:32,359 Speaker 1: openings for every person actively seeking employment. We've never been 558 00:28:32,400 --> 00:28:35,399 Speaker 1: any where you're close to that. There was panic that 559 00:28:35,560 --> 00:28:38,520 Speaker 1: you know, and wages and bonuses, and particularly in things 560 00:28:38,680 --> 00:28:42,360 Speaker 1: like in person services where people had not gotten big 561 00:28:42,400 --> 00:28:44,240 Speaker 1: wage increases and didn't want to come back to work. 562 00:28:44,280 --> 00:28:47,800 Speaker 1: So that's that's where we were. So since then, there 563 00:28:47,800 --> 00:28:50,200 Speaker 1: are very many signs that the labor market is getting 564 00:28:50,240 --> 00:28:52,160 Speaker 1: back into balance, and I talked about some of that 565 00:28:52,280 --> 00:28:56,520 Speaker 1: in my remarks. Surveys of work. You know, we survey businesses. 566 00:28:57,120 --> 00:28:59,320 Speaker 1: We don't do it, but other people survey businesses and 567 00:28:59,360 --> 00:29:02,720 Speaker 1: say our work plentiful, and that measure that measure was no. 568 00:29:03,160 --> 00:29:07,280 Speaker 1: But now it's back to pre pandemic levels. Survey workers 569 00:29:07,360 --> 00:29:10,520 Speaker 1: are jobs plentiful, and that was at an all time 570 00:29:10,600 --> 00:29:13,840 Speaker 1: high and now it's still high, but back. So wage 571 00:29:13,880 --> 00:29:16,480 Speaker 1: increases are coming back down to more normal levels. Job 572 00:29:16,520 --> 00:29:19,360 Speaker 1: openings are down from two to one point four. They 573 00:29:19,360 --> 00:29:22,280 Speaker 1: were at one point two in the very tight labor 574 00:29:22,320 --> 00:29:26,080 Speaker 1: market of twenty nineteen. By the work week, by so 575 00:29:26,160 --> 00:29:30,400 Speaker 1: many measures. The labor market is gradually cooling, and part 576 00:29:30,440 --> 00:29:33,280 Speaker 1: of that is this all through twenty twenty two, we 577 00:29:33,320 --> 00:29:35,840 Speaker 1: thought we were going to get more labor supply and 578 00:29:35,920 --> 00:29:38,680 Speaker 1: we didn't, and I personally thought, well, I guess we 579 00:29:38,720 --> 00:29:41,000 Speaker 1: won't get any and then we've gotten a substantial amount 580 00:29:41,080 --> 00:29:45,800 Speaker 1: this year. The female labor. First participation is that in 581 00:29:45,880 --> 00:29:49,320 Speaker 1: prime age workers is at an all time high, which 582 00:29:49,360 --> 00:29:52,440 Speaker 1: has to be related in some way to work from home. 583 00:29:52,880 --> 00:29:57,760 Speaker 1: But labor force participation increased, immigration increased, and now you 584 00:29:57,840 --> 00:30:00,960 Speaker 1: see that in the overall cool of the labor market. 585 00:30:01,000 --> 00:30:03,479 Speaker 1: So even though job creation is still very high, there 586 00:30:03,520 --> 00:30:06,440 Speaker 1: are the workers to fill those jobs. And again businesses 587 00:30:06,480 --> 00:30:08,640 Speaker 1: will tell you it's that it's very different. It's still 588 00:30:08,640 --> 00:30:10,720 Speaker 1: a very tight labor market, but it's loosening. 589 00:30:11,160 --> 00:30:13,280 Speaker 2: Coming back to your goal of two percent inflation, what 590 00:30:13,280 --> 00:30:15,880 Speaker 2: have you learned from this experience about the relationship between 591 00:30:15,880 --> 00:30:17,880 Speaker 2: inflation and labor I mean, there's a lot of talk 592 00:30:17,920 --> 00:30:20,360 Speaker 2: about Phillips curve, whether it still applies, whether it's weaker, 593 00:30:20,400 --> 00:30:22,960 Speaker 2: what is it? What's your hypothesis right now with the 594 00:30:23,000 --> 00:30:25,040 Speaker 2: relationship between inflation and labor market. 595 00:30:25,280 --> 00:30:29,080 Speaker 1: Let me tell you what it was before. So one 596 00:30:29,120 --> 00:30:31,080 Speaker 1: of my favorite charts is just the slope of the 597 00:30:31,120 --> 00:30:33,520 Speaker 1: Phillips curve over forty years, and so it shows the 598 00:30:33,560 --> 00:30:36,760 Speaker 1: relationship between unemployment and inflation. If you go back to 599 00:30:36,760 --> 00:30:39,160 Speaker 1: the high inflation of the seventies, it was a very 600 00:30:39,200 --> 00:30:42,520 Speaker 1: tight relationship, and that relationships went down and down and 601 00:30:42,520 --> 00:30:44,080 Speaker 1: down to the fact where the Phillips curve there was 602 00:30:44,080 --> 00:30:47,959 Speaker 1: almost no relationship, meaning that the Phillips curve was very 603 00:30:48,040 --> 00:30:53,240 Speaker 1: very flat. Now, actually, if you just ignore cause and 604 00:30:53,320 --> 00:30:55,440 Speaker 1: just look at the data, it will tell you that 605 00:30:55,920 --> 00:30:59,320 Speaker 1: the relationship is back. Do we really think that's a 606 00:30:59,360 --> 00:31:02,760 Speaker 1: sustainable thing. I don't know. What happened though, was that 607 00:31:03,640 --> 00:31:07,520 Speaker 1: people came to seriously expect two percent inflation, something like 608 00:31:07,560 --> 00:31:11,440 Speaker 1: two percent inflation. And if people expect that, if companies expected, 609 00:31:11,560 --> 00:31:14,760 Speaker 1: and workers expected, and you expect that in your shopping, 610 00:31:14,800 --> 00:31:17,360 Speaker 1: then that's what will happen in a way, And that's 611 00:31:17,400 --> 00:31:20,120 Speaker 1: what happened. So even in very very tight labor markets, 612 00:31:20,360 --> 00:31:23,040 Speaker 1: we didn't have high inflation. I was at the FED 613 00:31:23,160 --> 00:31:26,880 Speaker 1: since twenty twelve as unemployment went from six to five 614 00:31:27,040 --> 00:31:30,120 Speaker 1: to four into the threes for the first time, and 615 00:31:30,520 --> 00:31:32,320 Speaker 1: you know, the models were all saying that we should 616 00:31:32,360 --> 00:31:34,920 Speaker 1: be seeing some inflation, and we never saw we never 617 00:31:34,960 --> 00:31:38,560 Speaker 1: really saw two percent inflation on a sustained basis during 618 00:31:38,600 --> 00:31:40,880 Speaker 1: that era. So we learned that the Phillips curve was 619 00:31:40,920 --> 00:31:46,840 Speaker 1: really flat. Some pronounced it dead. Now I don't think 620 00:31:46,880 --> 00:31:49,840 Speaker 1: most of the inflation we're seeing at all is from 621 00:31:49,880 --> 00:31:51,840 Speaker 1: the Phillips curve, though, I think it was built really 622 00:31:51,880 --> 00:31:56,160 Speaker 1: the collision of very strong demand, really strong demand with 623 00:31:56,920 --> 00:32:01,280 Speaker 1: constrained supply. Cars being a great example. Many people wanted cars, 624 00:32:01,320 --> 00:32:03,800 Speaker 1: didn't want to ride public transportation, wanted to move to 625 00:32:03,840 --> 00:32:07,400 Speaker 1: the suburbs, unlimited demand for cars. Interest rates are low, 626 00:32:07,920 --> 00:32:10,920 Speaker 1: yet we couldn't get semiconductors, so there are no more cars. 627 00:32:11,080 --> 00:32:13,640 Speaker 1: Car production went down. How do you solve that problem? 628 00:32:13,760 --> 00:32:16,560 Speaker 1: Prices just go way way up for cars. That's how 629 00:32:16,560 --> 00:32:19,080 Speaker 1: you clear the market. So that's a classic example of 630 00:32:19,080 --> 00:32:21,400 Speaker 1: what happened here. Really wasn't about the Phillips curve. It 631 00:32:21,440 --> 00:32:24,760 Speaker 1: was more about constraints supply and demand more broadly, especially 632 00:32:24,800 --> 00:32:25,840 Speaker 1: for goods. At the beginning. 633 00:32:26,240 --> 00:32:28,640 Speaker 2: Let's chend you another responsiblit years, which is the banking system. 634 00:32:28,920 --> 00:32:31,040 Speaker 2: Last March we had something was scare because of I 635 00:32:31,040 --> 00:32:33,760 Speaker 2: guess interest rate risk with Silicon Valley Bank, and then 636 00:32:33,760 --> 00:32:34,320 Speaker 2: some others. 637 00:32:35,240 --> 00:32:37,200 Speaker 1: Are we through that? Now? Where are we in that process? 638 00:32:37,200 --> 00:32:37,480 Speaker 1: Are you? 639 00:32:37,560 --> 00:32:40,400 Speaker 2: Are you resting easy? 640 00:32:40,560 --> 00:32:42,480 Speaker 1: So what you pay us for is not to rest easy. 641 00:32:43,640 --> 00:32:46,680 Speaker 1: We don't do that. So, but I would say where 642 00:32:46,680 --> 00:32:49,040 Speaker 1: we are is this though things have certainly settled down, 643 00:32:49,160 --> 00:32:54,040 Speaker 1: certainly have settled down. We see the funding markets as fine. 644 00:32:54,080 --> 00:32:56,600 Speaker 1: We see and you know, we paid a lot of 645 00:32:56,640 --> 00:33:01,200 Speaker 1: attention to banks that looked anything thing like the banks 646 00:33:01,200 --> 00:33:03,720 Speaker 1: that had the problems and made sure that they that 647 00:33:03,760 --> 00:33:07,040 Speaker 1: they had credible liquidity plans and plenty of liquidity and 648 00:33:08,040 --> 00:33:09,479 Speaker 1: all of that. And so I think all of that 649 00:33:09,520 --> 00:33:12,520 Speaker 1: has worked, and we set up this facility that's available 650 00:33:12,800 --> 00:33:15,760 Speaker 1: for banks to borrow, and so all of that has 651 00:33:15,840 --> 00:33:18,840 Speaker 1: led to a real settling down. But you know, our 652 00:33:18,920 --> 00:33:20,400 Speaker 1: job is to be on the case. And you know, 653 00:33:20,440 --> 00:33:24,960 Speaker 1: we're still on the case, and we'll, you know, we'll 654 00:33:25,000 --> 00:33:29,000 Speaker 1: we'll keep after that. Banks are generally very well capitalized 655 00:33:29,040 --> 00:33:32,320 Speaker 1: and highly liquid in our country. Banks are strong. You know, 656 00:33:32,360 --> 00:33:35,080 Speaker 1: we benefit from all those years of reform under DoD 657 00:33:35,080 --> 00:33:38,920 Speaker 1: Frank and Buzzle three that we went through, you know, 658 00:33:38,960 --> 00:33:43,320 Speaker 1: with former Governor Trula and many others, and so we 659 00:33:43,360 --> 00:33:47,120 Speaker 1: benefit from a very strong, well capitalized banking system that's 660 00:33:47,200 --> 00:33:49,200 Speaker 1: much better at managing its risks than the one that 661 00:33:49,320 --> 00:33:52,760 Speaker 1: entered the global financial crisis very well capitalized. But you 662 00:33:52,800 --> 00:33:57,320 Speaker 1: want some more proposal Buzzle three proposal, which is you know, 663 00:33:57,360 --> 00:33:59,400 Speaker 1: it's a it's a rule that's out for comments. So 664 00:33:59,440 --> 00:34:01,160 Speaker 1: there's not a lot I can say, but we do 665 00:34:01,240 --> 00:34:03,080 Speaker 1: expect a lot of comment, and we do expect to 666 00:34:03,120 --> 00:34:04,640 Speaker 1: take those comments very seriously. 667 00:34:05,080 --> 00:34:08,600 Speaker 2: Talk about the commercial real estate, there are some concerns 668 00:34:08,640 --> 00:34:10,680 Speaker 2: out there in the marketplace what's going on Because obviously 669 00:34:10,680 --> 00:34:13,960 Speaker 2: there's a repricing that comes with your increased rates. It's 670 00:34:13,960 --> 00:34:16,520 Speaker 2: thought that there's some real estate that it's not worth 671 00:34:16,560 --> 00:34:19,800 Speaker 2: the money that was originally financed with it. How concerned 672 00:34:19,800 --> 00:34:22,399 Speaker 2: should we be about that as something lurking out there 673 00:34:22,440 --> 00:34:25,239 Speaker 2: that could really affect the system overall, not just to 674 00:34:25,239 --> 00:34:25,960 Speaker 2: be able invested. 675 00:34:26,400 --> 00:34:29,080 Speaker 1: So there's work from home and that's affecting downtown real 676 00:34:29,200 --> 00:34:32,919 Speaker 1: estate in a lot of big cities and higher rates 677 00:34:32,960 --> 00:34:35,319 Speaker 1: as well, as you point out, So this is an 678 00:34:35,360 --> 00:34:38,040 Speaker 1: issue that we pay a great deal of very careful 679 00:34:38,080 --> 00:34:41,719 Speaker 1: attention to. Commercial real estate is not a is not 680 00:34:41,760 --> 00:34:45,399 Speaker 1: a principal risk or a major risk for the very 681 00:34:45,480 --> 00:34:49,960 Speaker 1: large largest banks. It is much more for regional and 682 00:34:50,080 --> 00:34:54,440 Speaker 1: really the smaller banks have proportionally much larger exposure to 683 00:34:54,960 --> 00:34:57,560 Speaker 1: real estate, so commercial real estate. So what we've done 684 00:34:57,719 --> 00:35:01,759 Speaker 1: is the supervisors are in there look at real estate portfolios. 685 00:35:01,760 --> 00:35:03,600 Speaker 1: They're working with banks to make sure that they have 686 00:35:04,040 --> 00:35:06,799 Speaker 1: they have plans to deal with the problems they have 687 00:35:06,840 --> 00:35:11,200 Speaker 1: in their portfolio. These problems evolve over time, they don't 688 00:35:11,400 --> 00:35:14,080 Speaker 1: they don't land with great suddenness like a market event, 689 00:35:14,239 --> 00:35:16,680 Speaker 1: and so we're working with all of the bank regulars, 690 00:35:16,680 --> 00:35:20,640 Speaker 1: are working with banks that have, you know, concentrations of 691 00:35:20,680 --> 00:35:24,600 Speaker 1: troubled real estate to work it out. There will be losses, 692 00:35:24,680 --> 00:35:27,799 Speaker 1: for sure. You can drive down through most downtowns in 693 00:35:27,880 --> 00:35:30,920 Speaker 1: many downtowns anyway and see buildings that are empty and 694 00:35:30,920 --> 00:35:34,880 Speaker 1: things like that. But we're working through it, and you know, 695 00:35:35,080 --> 00:35:39,680 Speaker 1: we're on that case and don't see it as you know, 696 00:35:39,719 --> 00:35:42,040 Speaker 1: as presenting much broader problems. But our job is to 697 00:35:42,040 --> 00:35:43,000 Speaker 1: make sure that it doesn't. 698 00:35:43,360 --> 00:35:45,320 Speaker 2: As you mentioned regional banks or where a lot of 699 00:35:45,360 --> 00:35:49,239 Speaker 2: people focus on this as you conceptualize the bank system, 700 00:35:49,239 --> 00:35:51,080 Speaker 2: what is the role of the regional banks. We have 701 00:35:51,160 --> 00:35:54,680 Speaker 2: the super big banks that don't look like they're going anywhere, 702 00:35:55,000 --> 00:35:57,400 Speaker 2: and we've got the community banks, the smaller banks that 703 00:35:57,440 --> 00:36:00,520 Speaker 2: we understand are critical for portunity, for small businessinesses and 704 00:36:00,880 --> 00:36:03,160 Speaker 2: local context. But what about the regional banks, how much 705 00:36:03,160 --> 00:36:05,920 Speaker 2: pressure is on them and what would the would the 706 00:36:06,040 --> 00:36:07,640 Speaker 2: damage be to the system if in fact there was 707 00:36:07,680 --> 00:36:09,400 Speaker 2: more consolidation with some of the big banks. 708 00:36:09,560 --> 00:36:13,200 Speaker 1: I think the regional banks are very important, extremely important. 709 00:36:13,200 --> 00:36:15,719 Speaker 1: You know, we are we have forty five hundred banks, 710 00:36:15,760 --> 00:36:18,200 Speaker 1: which is a lot more than any other country per 711 00:36:18,239 --> 00:36:22,000 Speaker 1: capita or per dollar of GDP. But we have you know, 712 00:36:22,080 --> 00:36:25,440 Speaker 1: our gesibs. The largest banks are deleting banks in the 713 00:36:25,440 --> 00:36:28,400 Speaker 1: world in profitability and in their success in their business. 714 00:36:28,680 --> 00:36:33,120 Speaker 1: We have community banks and you know, deal in smaller communities. 715 00:36:33,760 --> 00:36:36,000 Speaker 1: But we also have these great regionals and I think 716 00:36:36,040 --> 00:36:38,960 Speaker 1: they do. They do a great business among with you know, 717 00:36:39,000 --> 00:36:43,239 Speaker 1: with many companies, and I do think their business model 718 00:36:43,320 --> 00:36:45,600 Speaker 1: is under pressure, and I would not like to see 719 00:36:45,640 --> 00:36:49,920 Speaker 1: us add to that by treating them exactly like gesibs. 720 00:36:50,000 --> 00:36:52,560 Speaker 1: I think they need, they don't need exactly the same 721 00:36:52,680 --> 00:36:56,480 Speaker 1: attention that a GCIM gets. So but I would say we, 722 00:36:56,600 --> 00:36:58,680 Speaker 1: I personally think and I think we have to fed 723 00:36:58,840 --> 00:37:02,280 Speaker 1: strongly think that that that the regionals and the smaller 724 00:37:02,320 --> 00:37:06,479 Speaker 1: regionals are an enormously important part of our banking system. Okay, 725 00:37:06,480 --> 00:37:07,719 Speaker 1: you've been very generous for your time. 726 00:37:07,719 --> 00:37:10,080 Speaker 2: Really appreciate. I have one last question. Are you having 727 00:37:10,080 --> 00:37:14,680 Speaker 2: a good time? You have so wide? No, no, no, 728 00:37:15,520 --> 00:37:17,839 Speaker 2: I assume this wasn't that pleasant, but in general you're 729 00:37:17,920 --> 00:37:18,600 Speaker 2: enjoying your job. 730 00:37:19,520 --> 00:37:22,080 Speaker 1: I would say this, first of all, it's an incredible 731 00:37:22,080 --> 00:37:24,640 Speaker 1: honor to do this job, and every day I do it, 732 00:37:24,719 --> 00:37:28,560 Speaker 1: I feel so fortunate and so lucky and blessed to 733 00:37:28,640 --> 00:37:31,200 Speaker 1: be entrusted with this. And you know, all I want 734 00:37:31,200 --> 00:37:32,719 Speaker 1: to do is do the best job I can for 735 00:37:32,760 --> 00:37:37,160 Speaker 1: the public that we all serve. And yes, there's a 736 00:37:37,200 --> 00:37:39,640 Speaker 1: lot that is enjoyable about it, but mostly it's just 737 00:37:40,320 --> 00:37:41,920 Speaker 1: so important to get it right and that's what we're 738 00:37:41,920 --> 00:37:45,440 Speaker 1: trying to do. Thank you so much, Jared Pobble, it's 739 00:37:45,440 --> 00:37:47,880 Speaker 1: really good at you all right. That was fed Shair J. 740 00:37:48,080 --> 00:37:51,319 Speaker 1: Pale speaking at the New York Economic Club with our 741 00:37:51,600 --> 00:37:52,320 Speaker 1: David Weston.