1
00:00:02,840 --> 00:00:05,840
Speaker 1: The most important figure traditionally in monetary policy in the

2
00:00:05,920 --> 00:00:08,119
Speaker 1: United States is the chairman of the Federal Reserve Board.

3
00:00:08,400 --> 00:00:11,360
Speaker 1: The current chairman is JPW someone I've known for many years.

4
00:00:11,520 --> 00:00:13,200
Speaker 1: I had a chance to sit down with him recently.

5
00:00:13,200 --> 00:00:16,320
Speaker 1: You talk about interest rates, inflation, and the overall economy.

6
00:00:16,560 --> 00:00:19,439
Speaker 1: There are a few billion people in the world are

7
00:00:19,440 --> 00:00:21,720
Speaker 1: waiting to see what interest rates are going to be doing.

8
00:00:22,720 --> 00:00:25,400
Speaker 1: Do you have any insights on where interest rates might

9
00:00:25,440 --> 00:00:25,799
Speaker 1: be going?

10
00:00:28,920 --> 00:00:32,440
Speaker 2: So I'm going to take that as a great opportunity

11
00:00:32,440 --> 00:00:34,120
Speaker 2: to talk a little bit about the economy and then

12
00:00:34,240 --> 00:00:36,879
Speaker 2: talk about where that leaves us with policy. So I

13
00:00:36,880 --> 00:00:39,559
Speaker 2: would just start by saying that the US economy has

14
00:00:39,600 --> 00:00:42,560
Speaker 2: performed really remarkably well over the last couple of years.

15
00:00:42,920 --> 00:00:45,480
Speaker 2: Twenty twenty three. Last year was a year in which

16
00:00:45,479 --> 00:00:49,840
Speaker 2: the economy grew well above three percent. The labor market

17
00:00:49,840 --> 00:00:53,280
Speaker 2: remained very strong, unemployment remained very low, and inflation came

18
00:00:53,320 --> 00:00:56,440
Speaker 2: down at quite a sharp pace, particularly in the second

19
00:00:56,480 --> 00:01:00,960
Speaker 2: half of the year by a very large amount. That

20
00:01:01,040 --> 00:01:05,039
Speaker 2: forecast was almost unheard of. It was unheard of before

21
00:01:05,120 --> 00:01:08,640
Speaker 2: twenty twenty three, so big upside surprise that year. This year,

22
00:01:08,680 --> 00:01:11,560
Speaker 2: we had expected the economy to slow a bit gradually,

23
00:01:11,600 --> 00:01:14,960
Speaker 2: the labor market to continue to gradually cool off after

24
00:01:15,000 --> 00:01:17,560
Speaker 2: being overheated a couple of years ago, and inflation to

25
00:01:17,560 --> 00:01:21,560
Speaker 2: continue to make progress. And something like that is basically

26
00:01:21,600 --> 00:01:25,039
Speaker 2: what has happened. The economy is growing now at about

27
00:01:25,040 --> 00:01:26,720
Speaker 2: one and a half percent in the first half of

28
00:01:26,720 --> 00:01:29,480
Speaker 2: the year. Most forecasters have about a two percent growth

29
00:01:29,560 --> 00:01:32,360
Speaker 2: rate for the full year. The labor market again has

30
00:01:32,440 --> 00:01:34,679
Speaker 2: moved into better and better balance, to the point where

31
00:01:34,720 --> 00:01:37,360
Speaker 2: I think you can now say it's essentially no tighter

32
00:01:37,440 --> 00:01:40,880
Speaker 2: than it was in twenty nineteen before the pandemic. Remember

33
00:01:40,880 --> 00:01:43,360
Speaker 2: that the labor market of twenty nineteen was a very

34
00:01:43,400 --> 00:01:46,120
Speaker 2: strong labor market, So we're back to that place, no

35
00:01:46,200 --> 00:01:50,680
Speaker 2: longer overheated on inflation. In the first quarter, we didn't

36
00:01:50,680 --> 00:01:54,240
Speaker 2: make any more progress. The second quarter, actually we did

37
00:01:54,360 --> 00:01:57,000
Speaker 2: make some more progress. We've had now three better readings,

38
00:01:57,720 --> 00:02:00,880
Speaker 2: and if you average them, that's a pretty good So

39
00:02:01,000 --> 00:02:04,400
Speaker 2: turning to policy your question, what we've said is that

40
00:02:04,480 --> 00:02:07,040
Speaker 2: we didn't think it would be appropriate to begin to

41
00:02:07,080 --> 00:02:10,160
Speaker 2: loosen policy until we were more we had greater confidence

42
00:02:10,160 --> 00:02:13,239
Speaker 2: that inflation was moving sustainably down to two percent. We've

43
00:02:13,240 --> 00:02:15,960
Speaker 2: been waiting on that and I would say we didn't

44
00:02:15,960 --> 00:02:18,320
Speaker 2: gain any any additional confidence in the first quarter, but

45
00:02:18,360 --> 00:02:20,360
Speaker 2: the three readings in the second quarter, including the one

46
00:02:20,360 --> 00:02:23,919
Speaker 2: from last week, do add somewhat to confidence. We've also

47
00:02:24,040 --> 00:02:27,960
Speaker 2: said that, you know, we're a dual mandate bank. For

48
00:02:28,000 --> 00:02:30,760
Speaker 2: a long time, since inflation arrived, it's been appropriate to

49
00:02:30,760 --> 00:02:33,959
Speaker 2: focus mainly on inflation. But now that inflation has come

50
00:02:34,000 --> 00:02:37,359
Speaker 2: down and the labor market has indeed cooled off, we're

51
00:02:37,400 --> 00:02:39,800
Speaker 2: going to be looking at both mandates there. They're much better,

52
00:02:39,960 --> 00:02:42,360
Speaker 2: in much better balance, and that means that if we

53
00:02:42,360 --> 00:02:45,200
Speaker 2: were to see an unexpected weakening in the labor market,

54
00:02:45,440 --> 00:02:49,000
Speaker 2: then that might also be a reason for reaction by US.

55
00:02:50,200 --> 00:02:54,480
Speaker 1: Okay, I think I understand, So to put it in

56
00:02:54,600 --> 00:02:59,280
Speaker 1: terms I can for sure understand, the markets are suggesting

57
00:03:00,600 --> 00:03:04,320
Speaker 1: the future's markets that there's a ninety percent chance that

58
00:03:04,360 --> 00:03:09,000
Speaker 1: the FED will lower its discount rate in September. Do

59
00:03:09,040 --> 00:03:11,120
Speaker 1: you think the markets know what they're talking about?

60
00:03:11,480 --> 00:03:15,480
Speaker 2: So I'm so today I'm not going to be sending

61
00:03:15,520 --> 00:03:18,800
Speaker 2: any signals one way or the other on any particular meeting.

62
00:03:18,880 --> 00:03:21,240
Speaker 2: So just to ruin the fund right at the beginning,

63
00:03:22,320 --> 00:03:24,800
Speaker 2: I simply you know, we're going to make these decisions

64
00:03:24,880 --> 00:03:26,720
Speaker 2: meeting by meeting, and we're going to make them on

65
00:03:26,760 --> 00:03:28,640
Speaker 2: the basis of the data as they come in, the

66
00:03:28,680 --> 00:03:32,040
Speaker 2: evolving data, the evolving outlook, and also the balance of risks.

67
00:03:32,120 --> 00:03:35,440
Speaker 2: Now that the two mandates are basically close to being.

68
00:03:35,280 --> 00:03:37,520
Speaker 1: In balance, right, there are some people who say that

69
00:03:37,560 --> 00:03:39,920
Speaker 1: the FED would not like to lower interest rates in

70
00:03:39,960 --> 00:03:43,040
Speaker 1: a presidential campaign period because you could be criticized for

71
00:03:43,080 --> 00:03:45,440
Speaker 1: helping one party or another. Do you have any comment

72
00:03:45,480 --> 00:03:46,920
Speaker 1: on whether that's an accurate view.

73
00:03:47,160 --> 00:03:50,720
Speaker 2: I do so. Our undertaking at all times is that

74
00:03:50,840 --> 00:03:54,400
Speaker 2: we'll make our decisions based on the incoming data, the

75
00:03:54,400 --> 00:03:57,880
Speaker 2: evolving outlook, balance of risks, and only on that. We

76
00:03:57,960 --> 00:04:00,720
Speaker 2: don't take political considerations into accoun We don't put up

77
00:04:00,720 --> 00:04:04,240
Speaker 2: a political filter on our decisions. That would It's hard

78
00:04:04,320 --> 00:04:07,640
Speaker 2: enough to make these decisions based on the appropriate factors.

79
00:04:07,640 --> 00:04:09,560
Speaker 2: If you're going to add a whole different filter in

80
00:04:09,600 --> 00:04:12,200
Speaker 2: an area where we're not experts, that's not going to

81
00:04:12,200 --> 00:04:15,000
Speaker 2: improve the quality of our decisions. And it's also not

82
00:04:15,280 --> 00:04:17,640
Speaker 2: the orders we have from Congress or orders from Congress.

83
00:04:17,640 --> 00:04:20,520
Speaker 2: Sort of use our tools to foster maximum employment and

84
00:04:20,560 --> 00:04:24,440
Speaker 2: price stability, and to do so without political considerations. That's

85
00:04:24,480 --> 00:04:26,080
Speaker 2: what we're always going to do if you look at

86
00:04:26,080 --> 00:04:28,760
Speaker 2: the modern record, that is what we do, and we

87
00:04:28,800 --> 00:04:31,440
Speaker 2: don't think about election cycles or anything that's political.

88
00:04:31,680 --> 00:04:36,599
Speaker 1: Many people use the phrase hard landing to describe hard

89
00:04:36,640 --> 00:04:38,520
Speaker 1: landing is a euphanism for recession.

90
00:04:38,560 --> 00:04:39,839
Speaker 2: I guess people.

91
00:04:39,600 --> 00:04:42,080
Speaker 1: Thought in twenty twenty three we might have a hard landing.

92
00:04:42,320 --> 00:04:44,120
Speaker 1: People thought in twenty twenty four we might have a

93
00:04:44,160 --> 00:04:47,520
Speaker 1: hard landing. And none of these people were economists, professionally

94
00:04:47,520 --> 00:04:50,159
Speaker 1: trained economists, but they seem to be wrong. So do

95
00:04:50,200 --> 00:04:52,680
Speaker 1: you rely on these economists very much in the future

96
00:04:52,720 --> 00:04:56,720
Speaker 1: when you're get projecting whether you should listen to their

97
00:04:56,800 --> 00:04:59,479
Speaker 1: views and where the economy is going, or how do

98
00:04:59,520 --> 00:05:01,200
Speaker 1: you react the fact that we haven't had a hard

99
00:05:01,279 --> 00:05:05,160
Speaker 1: landing and disappointed all those economists.

100
00:05:05,839 --> 00:05:10,960
Speaker 2: So I'll just say that, you know, as someone famously said,

101
00:05:11,000 --> 00:05:14,520
Speaker 2: predictions are very difficult, especially about the future. On the

102
00:05:14,520 --> 00:05:18,600
Speaker 2: hard landing question, I have always felt like that there

103
00:05:18,720 --> 00:05:21,840
Speaker 2: was a pathway to getting inflation back down to our

104
00:05:21,880 --> 00:05:26,760
Speaker 2: two percent goal on a sustainable basis without the kind

105
00:05:26,839 --> 00:05:29,279
Speaker 2: of pain in the labor market, the kind of high

106
00:05:29,320 --> 00:05:33,760
Speaker 2: unemployment that has been typical of tightening cycles and getting

107
00:05:33,760 --> 00:05:37,000
Speaker 2: inflation down. And the reason why. My colleagues and I

108
00:05:37,080 --> 00:05:40,600
Speaker 2: thought that was that the labor market was so overheated

109
00:05:40,880 --> 00:05:43,839
Speaker 2: that it could cool down quite a bit without having

110
00:05:43,920 --> 00:05:47,680
Speaker 2: to There still is apparently no slabor, no slack in

111
00:05:47,720 --> 00:05:50,960
Speaker 2: the labor market. The labor market does not have slack. Essentially,

112
00:05:50,960 --> 00:05:53,880
Speaker 2: you're at equilibrium now, but look where inflation is. Inflation

113
00:05:53,960 --> 00:05:56,440
Speaker 2: is at two and a half percent. So this was

114
00:05:56,480 --> 00:05:58,760
Speaker 2: in defiance of a lot of conventional wisdom. But we

115
00:05:58,760 --> 00:06:02,479
Speaker 2: thought that was right, and that says that you have

116
00:06:02,560 --> 00:06:05,480
Speaker 2: to be one thing that you learn as humility and forecasting.

117
00:06:05,839 --> 00:06:07,479
Speaker 2: So I wouldn't rule it out, but I would say

118
00:06:07,480 --> 00:06:11,400
Speaker 2: that the kind of hard landing scenario is not certainly

119
00:06:11,400 --> 00:06:13,440
Speaker 2: not the most likely or a likely scenario.

120
00:06:14,040 --> 00:06:18,279
Speaker 1: I think you have said somewhere that when the Fed

121
00:06:18,400 --> 00:06:22,120
Speaker 1: does lower interest rates, not saying that you're saying it's

122
00:06:22,120 --> 00:06:23,560
Speaker 1: going to do that, but if the Fed does lower

123
00:06:23,560 --> 00:06:25,640
Speaker 1: interest rates, at some point you didn't think it was

124
00:06:25,680 --> 00:06:27,240
Speaker 1: ever going to go back to kind of the free

125
00:06:27,279 --> 00:06:30,400
Speaker 1: money practically of years ago, when the interest rates are

126
00:06:30,400 --> 00:06:32,599
Speaker 1: on the zero. Is that a fair statement that you

127
00:06:32,600 --> 00:06:34,400
Speaker 1: don't think it's a good idea to go back to

128
00:06:34,600 --> 00:06:36,520
Speaker 1: interest rates as low as they once were.

129
00:06:37,120 --> 00:06:41,200
Speaker 2: The period between the global financial crisis and the pandemic

130
00:06:41,480 --> 00:06:44,880
Speaker 2: was his historically unusual from the standpoint that we had

131
00:06:45,279 --> 00:06:49,120
Speaker 2: ever lower interest rates through that era, including a part

132
00:06:49,160 --> 00:06:52,320
Speaker 2: of the era when, for example, sovereign debt of major

133
00:06:52,360 --> 00:06:56,640
Speaker 2: European sovereigns was trading at a significantly negative rate. And

134
00:06:56,680 --> 00:07:00,000
Speaker 2: still even with rates that low, inflation was very low

135
00:07:00,120 --> 00:07:02,880
Speaker 2: below target. So and so the question, where you know,

136
00:07:03,000 --> 00:07:05,720
Speaker 2: is what caused that? And are the forces that cause

137
00:07:05,800 --> 00:07:09,880
Speaker 2: that gone for now? And I think most people attribute

138
00:07:10,160 --> 00:07:16,000
Speaker 2: the low inflation era to slow moving forces like demographics, globalization, uh,

139
00:07:16,280 --> 00:07:21,080
Speaker 2: technological evolution, things like that, and those may or may

140
00:07:21,080 --> 00:07:24,320
Speaker 2: not have changed. But I but nonetheless, I look at

141
00:07:24,440 --> 00:07:26,440
Speaker 2: where we are now or our funds rate is a

142
00:07:26,480 --> 00:07:29,800
Speaker 2: five point three percent roughly give or take, and it

143
00:07:29,840 --> 00:07:32,480
Speaker 2: seemed it feels like it's restrictive, but not not, you know,

144
00:07:32,680 --> 00:07:36,760
Speaker 2: severely restrictive. So it tells me that rates, at least

145
00:07:36,760 --> 00:07:39,800
Speaker 2: for now are the neutral rate must have risen, probably

146
00:07:39,800 --> 00:07:43,600
Speaker 2: has risen from where it was during the inter crisis period.

147
00:07:44,320 --> 00:07:47,480
Speaker 2: And I mean, I think instinctively I can't prove this.

148
00:07:47,560 --> 00:07:50,040
Speaker 2: We're gonna, we're gonna we're going to learn about this empirically,

149
00:07:50,080 --> 00:07:52,240
Speaker 2: but but it seems to me that the neutral rate

150
00:07:52,320 --> 00:07:56,640
Speaker 2: is probably higher than it was during the inter crisis period,

151
00:07:56,640 --> 00:07:57,760
Speaker 2: and so rates will be higher.

152
00:07:57,960 --> 00:08:01,000
Speaker 1: The Fetish set its target for inflation of two percent.

153
00:08:01,560 --> 00:08:04,520
Speaker 1: Now can you clarify does that mean that the inflation

154
00:08:04,640 --> 00:08:06,760
Speaker 1: rate has to be at two percent before you're ready

155
00:08:06,800 --> 00:08:08,920
Speaker 1: to move if you are ready to move, or does

156
00:08:08,960 --> 00:08:10,720
Speaker 1: it have to be within sight? And what does it

157
00:08:10,760 --> 00:08:11,800
Speaker 1: mean to be within sight?

158
00:08:12,440 --> 00:08:16,920
Speaker 2: So when we change interest rates, that tightens financial conditions,

159
00:08:16,920 --> 00:08:20,720
Speaker 2: and that in turn affects economic outcomes, you know, growth,

160
00:08:21,200 --> 00:08:24,440
Speaker 2: labor markets, and ultimately inflation, but with lags that can

161
00:08:24,480 --> 00:08:28,320
Speaker 2: be long and variable, as Milton Freeman famously said. And

162
00:08:28,600 --> 00:08:30,960
Speaker 2: the implication of that is that if you wait until

163
00:08:30,960 --> 00:08:33,160
Speaker 2: inflation gets all the way down to two percent, you've

164
00:08:33,160 --> 00:08:36,680
Speaker 2: probably waited too long, because you know, the tightening that

165
00:08:36,720 --> 00:08:38,640
Speaker 2: you're doing, with the level of tightness that you have,

166
00:08:39,120 --> 00:08:42,000
Speaker 2: is still having effects which will probably drive inflation below

167
00:08:42,040 --> 00:08:45,080
Speaker 2: two percent. So we've been very clear that you wouldn't

168
00:08:45,120 --> 00:08:46,840
Speaker 2: wait for inflation to get all the way down to

169
00:08:46,840 --> 00:08:51,080
Speaker 2: two percent. Our test has been for the past quite

170
00:08:51,080 --> 00:08:53,640
Speaker 2: some time that we wanted to be to have greater

171
00:08:53,720 --> 00:08:56,880
Speaker 2: confidence than inflation was moving sustainably down toward our two

172
00:08:56,920 --> 00:09:01,080
Speaker 2: percent target. And what increases that in that is more

173
00:09:01,120 --> 00:09:04,120
Speaker 2: good inflation data, and lately here we have been getting

174
00:09:04,120 --> 00:09:04,440
Speaker 2: some of that.

175
00:09:04,679 --> 00:09:08,360
Speaker 1: So if you go back in history when inflation began

176
00:09:08,559 --> 00:09:13,960
Speaker 1: to arise after COVID, at some point people said had

177
00:09:14,000 --> 00:09:17,679
Speaker 1: include a year, that it was transitory. In hindsight, what

178
00:09:17,720 --> 00:09:21,000
Speaker 1: do you think people missed about the nature of the inflation?

179
00:09:21,360 --> 00:09:24,000
Speaker 1: Why was it more enduring than people initially thought?

180
00:09:24,880 --> 00:09:27,600
Speaker 2: So, these are this is a question that people will

181
00:09:27,600 --> 00:09:30,280
Speaker 2: be writing papers about and debating long after all of

182
00:09:30,320 --> 00:09:33,120
Speaker 2: us are gone. So and it's early to say it's

183
00:09:33,120 --> 00:09:35,600
Speaker 2: actually kind of kind of soon to be answering it,

184
00:09:35,640 --> 00:09:38,040
Speaker 2: but I think it's So here's my answer to that question.

185
00:09:39,000 --> 00:09:42,160
Speaker 2: When inflation arrived, it was really coming out of the

186
00:09:42,200 --> 00:09:45,079
Speaker 2: goods sector, and it was connected to really high demand

187
00:09:45,160 --> 00:09:49,199
Speaker 2: for goods. And it was and you know, the supply change,

188
00:09:49,240 --> 00:09:53,360
Speaker 2: global supply change, which account for most manufactured goods, collapsed

189
00:09:53,400 --> 00:09:55,640
Speaker 2: because of too much demand and because of COVID, and

190
00:09:55,679 --> 00:10:00,160
Speaker 2: you know, so and to us that looked like a

191
00:10:00,160 --> 00:10:04,400
Speaker 2: a temporary fleeting situation. We also lost several million people

192
00:10:04,480 --> 00:10:07,400
Speaker 2: out of the labor force, so wages went way up

193
00:10:07,559 --> 00:10:10,720
Speaker 2: as the economy really boomed when we reopened the economy,

194
00:10:11,120 --> 00:10:13,800
Speaker 2: and we thought, you know, there we were getting vaccines

195
00:10:13,800 --> 00:10:16,680
Speaker 2: were coming in, and we thought that that would fix

196
00:10:16,720 --> 00:10:19,400
Speaker 2: itself too, kids would go back to school. We essentially

197
00:10:19,480 --> 00:10:24,200
Speaker 2: overestimated how quickly the economy would return to normal. Finally,

198
00:10:24,320 --> 00:10:27,920
Speaker 2: these things finally did happen in twenty twenty three, but

199
00:10:28,080 --> 00:10:30,400
Speaker 2: they didn't happen in twenty twenty one or two. And

200
00:10:30,559 --> 00:10:33,160
Speaker 2: what we meant by transitory was that it would go

201
00:10:33,200 --> 00:10:37,160
Speaker 2: away fairly quickly without the need for our intervention. You

202
00:10:37,200 --> 00:10:40,720
Speaker 2: don't want to intervene with interest rates if something is

203
00:10:40,760 --> 00:10:44,120
Speaker 2: going to go away quickly without us intervening, because you know,

204
00:10:44,280 --> 00:10:47,480
Speaker 2: monetary policy, as I mentioned, works with long and variable legs.

205
00:10:47,520 --> 00:10:50,560
Speaker 2: So the lore is you look through things like a

206
00:10:50,600 --> 00:10:53,400
Speaker 2: temporary oil shock. So that was the mistake was that

207
00:10:53,480 --> 00:10:57,360
Speaker 2: it actually it actually didn't reverse itself. The problems with

208
00:10:57,400 --> 00:11:01,199
Speaker 2: the supply side didn't reverse themselves until twenty twenty three,

209
00:11:01,200 --> 00:11:02,719
Speaker 2: when they really did. When we got it, we got

210
00:11:02,720 --> 00:11:06,320
Speaker 2: a big burst of employment and also the supply chains

211
00:11:06,320 --> 00:11:06,720
Speaker 2: were fixed.

212
00:11:06,760 --> 00:11:09,680
Speaker 1: So in hindsight, now knowing everything you now know, would

213
00:11:09,720 --> 00:11:11,840
Speaker 1: you have done anything differently? Would you have had less

214
00:11:11,920 --> 00:11:15,400
Speaker 1: quantitative easing? Would you have changed interest rates differently? What

215
00:11:15,440 --> 00:11:17,920
Speaker 1: would you have done differently? Now knowing everything we now know,

216
00:11:18,600 --> 00:11:22,520
Speaker 1: You know, it's almost unfair. Hindsight's always twenty twenty, right,

217
00:11:23,360 --> 00:11:25,800
Speaker 1: you know, we remember what we were doing in real time.

218
00:11:26,840 --> 00:11:30,240
Speaker 1: We went from a really nice economy in December of

219
00:11:30,280 --> 00:11:34,760
Speaker 1: twenty nineteen to a global partial shutdown of the economy,

220
00:11:35,200 --> 00:11:38,640
Speaker 1: and we were contemplating there was no thought that vaccines

221
00:11:38,640 --> 00:11:41,080
Speaker 1: were around the corner, the economies closing down.

222
00:11:41,440 --> 00:11:46,600
Speaker 2: We were looking at severe and perhaps prolonged downside risks. Literally,

223
00:11:46,640 --> 00:11:48,760
Speaker 2: people thinking and doing work on or are we going

224
00:11:48,800 --> 00:11:50,240
Speaker 2: to have another depression? Is it going to be the

225
00:11:50,280 --> 00:11:53,640
Speaker 2: nineteen thirties. So governments around the world, and in particularly

226
00:11:53,679 --> 00:11:57,520
Speaker 2: the United States government really went to work to provide

227
00:11:57,760 --> 00:12:00,000
Speaker 2: a lot of support to the economy. We did everything

228
00:12:00,040 --> 00:12:02,680
Speaker 2: thing we could, including many things that were right. You

229
00:12:02,679 --> 00:12:05,480
Speaker 2: know that we read lines that we'd never cross. We

230
00:12:05,520 --> 00:12:08,679
Speaker 2: crossed them to support the economy and support the financial system.

231
00:12:09,080 --> 00:12:12,040
Speaker 2: And it was all done because we were managing severe

232
00:12:12,080 --> 00:12:14,960
Speaker 2: downside risks which did not materialize. We did not have

233
00:12:15,000 --> 00:12:17,480
Speaker 2: a depression, and part of that is because of what

234
00:12:17,520 --> 00:12:22,439
Speaker 2: we did. Then the economy reopens and demand is very,

235
00:12:22,559 --> 00:12:25,640
Speaker 2: very strong, and we saw basically, we saw a big

236
00:12:25,679 --> 00:12:29,080
Speaker 2: burst of inflation everywhere, including in the United States. It

237
00:12:29,120 --> 00:12:33,000
Speaker 2: was different in different places, but so that's what happened,

238
00:12:33,000 --> 00:12:36,480
Speaker 2: and you know it's not that's how I would answer that.

239
00:12:36,480 --> 00:12:39,320
Speaker 1: Okay, but so what you did, You're happy with what

240
00:12:39,360 --> 00:12:42,520
Speaker 1: you did in hindsight, you would say, in foresight.

241
00:12:42,960 --> 00:12:45,359
Speaker 2: I think that the work that we did in twenty

242
00:12:45,480 --> 00:12:49,520
Speaker 2: twenty in response to the pandemic will stand up very

243
00:12:49,559 --> 00:12:51,680
Speaker 2: wealth in history. I think people will look at the

244
00:12:51,720 --> 00:12:57,080
Speaker 2: things that we did, and essentially the financial system was

245
00:12:57,120 --> 00:12:59,400
Speaker 2: grinding to a halt all around the world. We acted.

246
00:13:00,440 --> 00:13:02,200
Speaker 2: We were the first central bank, and we were the

247
00:13:02,240 --> 00:13:05,800
Speaker 2: most you know, supportive, and you know, I think that

248
00:13:05,840 --> 00:13:09,440
Speaker 2: work will hand we'll hold together when historians are looking

249
00:13:09,480 --> 00:13:10,640
Speaker 2: back on it in a long time. I think when

250
00:13:10,679 --> 00:13:14,400
Speaker 2: you get to the inflation era, that becomes a different question,

251
00:13:14,520 --> 00:13:16,240
Speaker 2: and you know, people are going to be arguing about

252
00:13:16,280 --> 00:13:17,200
Speaker 2: that for a long time.

253
00:13:17,280 --> 00:13:22,000
Speaker 1: The FOMC, for those who don't follow Washington acronyms, stands

254
00:13:22,040 --> 00:13:23,720
Speaker 1: for what what is the FOMC.

255
00:13:24,040 --> 00:13:27,160
Speaker 2: It's the Federal Open Market Committee. And who is on

256
00:13:27,240 --> 00:13:31,080
Speaker 2: that committee. It's a little bit complicated. Our structure is

257
00:13:31,120 --> 00:13:34,200
Speaker 2: we have seven governors here in Washington, all nominated by

258
00:13:34,240 --> 00:13:37,680
Speaker 2: the President and confirmed to staggered fourteen year terms. And

259
00:13:37,720 --> 00:13:40,920
Speaker 2: we have twelve reserve Bank presidents at reserve banks around

260
00:13:41,559 --> 00:13:46,280
Speaker 2: around the country, all nineteen seven plus twelve our participants

261
00:13:46,280 --> 00:13:49,520
Speaker 2: on the FMC. In any given year, all of the

262
00:13:49,559 --> 00:13:52,840
Speaker 2: seven governors vote, and five of the twelve reserve bank

263
00:13:52,880 --> 00:13:55,200
Speaker 2: presidents vote, but one of the voters is always the

264
00:13:55,200 --> 00:13:55,800
Speaker 2: New York FED.

265
00:13:56,720 --> 00:13:58,840
Speaker 1: And so when you have an FOMC meeting, how many

266
00:13:58,840 --> 00:13:59,520
Speaker 1: do you have a year?

267
00:14:00,120 --> 00:14:02,679
Speaker 2: We have eight a year, so you have eight a year.

268
00:14:02,760 --> 00:14:05,040
Speaker 1: And when you get together, you get together for two

269
00:14:05,120 --> 00:14:07,080
Speaker 1: days or so we do.

270
00:14:08,080 --> 00:14:10,839
Speaker 2: So generally starts at noon or in the morning of

271
00:14:11,200 --> 00:14:14,480
Speaker 2: a Tuesday, and we go all day. We generally talk

272
00:14:14,520 --> 00:14:18,480
Speaker 2: about the economy, the financial stability issues, whatever special topics

273
00:14:18,480 --> 00:14:20,600
Speaker 2: there may be. And at the end of the day,

274
00:14:20,840 --> 00:14:23,440
Speaker 2: each person speaks on those things, and I speak at

275
00:14:23,440 --> 00:14:26,520
Speaker 2: the end of that day. Then there's a brief presentation

276
00:14:26,600 --> 00:14:29,040
Speaker 2: on monetary policy, and then we go to dinner upstairs

277
00:14:29,080 --> 00:14:31,440
Speaker 2: in the Martin Building and we come back the next morning.

278
00:14:31,520 --> 00:14:34,000
Speaker 2: We come in at nine o'clock and we talk about

279
00:14:34,040 --> 00:14:37,840
Speaker 2: monetary policy until we're satisfied with the outcome on monetary policy,

280
00:14:38,200 --> 00:14:40,000
Speaker 2: and that usually takes most of the morning.

281
00:14:40,960 --> 00:14:45,840
Speaker 1: So when you go into an FOMC meeting that the

282
00:14:45,880 --> 00:14:47,920
Speaker 1: first day, do you pretty much know where you want

283
00:14:47,960 --> 00:14:49,600
Speaker 1: to come out at the end of the second day

284
00:14:49,680 --> 00:14:51,640
Speaker 1: or you want to listen to everybody and you haven't

285
00:14:51,640 --> 00:14:52,560
Speaker 1: made up your mind yet.

286
00:14:53,000 --> 00:14:56,000
Speaker 2: You know, the way it works is that you know,

287
00:14:56,040 --> 00:14:59,200
Speaker 2: I talk to the other eighteen participants regularly, and I

288
00:14:59,240 --> 00:15:01,400
Speaker 2: talk to all of them at least once in the

289
00:15:01,560 --> 00:15:04,480
Speaker 2: ten days before the meeting, and I'm thinking about this

290
00:15:05,240 --> 00:15:07,360
Speaker 2: three or four weeks before the meeting. You know, what

291
00:15:07,360 --> 00:15:09,400
Speaker 2: what should we want to achieve? What data do we

292
00:15:09,400 --> 00:15:11,920
Speaker 2: need to see, how do we want to change our communications?

293
00:15:11,960 --> 00:15:14,520
Speaker 2: All those things? And so I talk to people, listen

294
00:15:14,600 --> 00:15:16,600
Speaker 2: to them, and I try to I try to put

295
00:15:16,640 --> 00:15:20,080
Speaker 2: together an answer that has broad support on the committee.

296
00:15:20,120 --> 00:15:22,600
Speaker 2: And so when we go into the committee on Tuesday morning,

297
00:15:23,200 --> 00:15:27,640
Speaker 2: you know, I'm confident usually that I know where this

298
00:15:27,760 --> 00:15:30,000
Speaker 2: is going to go. But you know, things happen. We

299
00:15:30,040 --> 00:15:33,680
Speaker 2: get data during the meetings, sometimes events happen, but largely

300
00:15:33,720 --> 00:15:36,800
Speaker 2: you go in kind of knowing what's what the likely

301
00:15:36,840 --> 00:15:40,160
Speaker 2: outcome is, and that's that's that's that's the design of it.

302
00:15:40,760 --> 00:15:43,200
Speaker 1: So a lot of people in Washington government agencies are

303
00:15:43,280 --> 00:15:46,120
Speaker 1: very good at leaking, leaking things. You're not that good

304
00:15:46,120 --> 00:15:49,120
Speaker 1: at that. Why don't't the Fed? Why doesn't the FED

305
00:15:49,200 --> 00:15:49,640
Speaker 1: leak more?

306
00:15:49,800 --> 00:15:50,400
Speaker 2: Why don't you.

307
00:15:50,440 --> 00:15:51,960
Speaker 1: Kind of leak a lot more about what you're going

308
00:15:52,000 --> 00:15:53,360
Speaker 1: to do? You just don't leak that much?

309
00:15:54,040 --> 00:15:57,320
Speaker 2: I am. I'm kind of proud of that. Actually, we

310
00:15:57,320 --> 00:16:01,080
Speaker 2: we do take our obligations to confidentiality very very seriously,

311
00:16:01,760 --> 00:16:04,920
Speaker 2: and because we know, you know, how consequential it would

312
00:16:04,960 --> 00:16:08,120
Speaker 2: be for someone at the FED to be leaking. You know,

313
00:16:08,360 --> 00:16:13,840
Speaker 2: just our whole success depends on having the public's confidence

314
00:16:13,880 --> 00:16:16,840
Speaker 2: that were ethical and that we're working on behalf of

315
00:16:16,840 --> 00:16:19,560
Speaker 2: all Americans and not on behalf of ourselves. And we're

316
00:16:19,560 --> 00:16:22,120
Speaker 2: not leaking in that kind of thing. So we do

317
00:16:22,200 --> 00:16:25,400
Speaker 2: have a culture when we're working on a for example,

318
00:16:27,120 --> 00:16:31,280
Speaker 2: a regulatory matter or or some matter involving one of

319
00:16:31,280 --> 00:16:33,120
Speaker 2: the banks, it never leaks out of the FED. So

320
00:16:33,520 --> 00:16:34,640
Speaker 2: I am proud of that record.

321
00:16:34,880 --> 00:16:38,240
Speaker 1: Some people have suggested that the Fed's independence is not

322
00:16:38,360 --> 00:16:41,040
Speaker 1: as good as people talk about it a being, and

323
00:16:41,080 --> 00:16:43,960
Speaker 1: that maybe we better have more White House coordination with

324
00:16:44,040 --> 00:16:44,400
Speaker 1: the FED.

325
00:16:44,720 --> 00:16:49,880
Speaker 2: I'm sure you've heard about this I think that any

326
00:16:49,920 --> 00:16:54,200
Speaker 2: comments on that, I'm happy to comment on what independence.

327
00:16:54,440 --> 00:16:57,480
Speaker 2: On the point of central bank independence, so I think

328
00:16:57,520 --> 00:17:01,240
Speaker 2: a long time ago people that learned that a central

329
00:17:01,240 --> 00:17:04,040
Speaker 2: bank that's independent of political consideration does a better job

330
00:17:04,080 --> 00:17:07,000
Speaker 2: getting inflation under control, and that is now that has

331
00:17:07,040 --> 00:17:10,200
Speaker 2: accepted wisdom in all advanced economies around the world. It's

332
00:17:10,240 --> 00:17:13,280
Speaker 2: also a principle that has very very strong and broad

333
00:17:13,320 --> 00:17:16,720
Speaker 2: support where it really matters, which is in Congress. You know,

334
00:17:16,840 --> 00:17:21,560
Speaker 2: you talk to senior leaders in both chambers, in both

335
00:17:21,600 --> 00:17:25,600
Speaker 2: political parties, and they all understand that you want an

336
00:17:25,640 --> 00:17:29,920
Speaker 2: independent central bank that doesn't run monetary policy to support

337
00:17:30,040 --> 00:17:33,119
Speaker 2: or oppose any particular politician or political party.

338
00:17:33,440 --> 00:17:35,400
Speaker 1: Do you ever get a call from the President, I'd say,

339
00:17:35,560 --> 00:17:38,080
Speaker 1: saying interest rates are too high or something like that.

340
00:17:39,160 --> 00:17:44,280
Speaker 2: So Ever, no, I would say that, you know, meetings

341
00:17:44,280 --> 00:17:48,159
Speaker 2: with the president are rare and appropriately so.

342
00:17:49,240 --> 00:17:53,399
Speaker 1: You are you are originally appointed to the Board of

343
00:17:53,440 --> 00:17:56,400
Speaker 1: the Fed and by President Obama, and you're appointed chair

344
00:17:56,480 --> 00:17:59,720
Speaker 1: by President Trump and reappointed by President Biden, and your

345
00:17:59,760 --> 00:18:02,920
Speaker 1: turn mischair goes through I think May of twenty twenty six.

346
00:18:03,720 --> 00:18:05,600
Speaker 2: So any thought.

347
00:18:05,400 --> 00:18:08,800
Speaker 1: About staying through all the way through May twenty twenty six,

348
00:18:08,880 --> 00:18:13,480
Speaker 1: you're going to do that? Yes, And if some president

349
00:18:13,520 --> 00:18:15,360
Speaker 1: came along and said, well, you did a great job,

350
00:18:16,160 --> 00:18:18,880
Speaker 1: I'd like you to reappoint you, would you consider that.

351
00:18:19,400 --> 00:18:24,280
Speaker 2: I have nothing for you on that today, Okay? Right?

352
00:18:25,119 --> 00:18:30,440
Speaker 1: And is being chair of the FED a enjoyable job

353
00:18:30,560 --> 00:18:31,359
Speaker 1: or not so much?

354
00:18:32,680 --> 00:18:38,480
Speaker 2: It is? Actually I think I enjoy it. I enjoy

355
00:18:38,480 --> 00:18:39,840
Speaker 2: it quite a bit. I do. It's a first of all,

356
00:18:39,880 --> 00:18:42,720
Speaker 2: it's a great honor. It's incredibly interesting. I love the

357
00:18:42,760 --> 00:18:46,240
Speaker 2: people we work with, I love the institution. At this

358
00:18:46,320 --> 00:18:48,640
Speaker 2: time in my life, it's just been a great thing.

359
00:18:48,880 --> 00:18:50,919
Speaker 2: I'm in my thirteenth year there now and it's just

360
00:18:50,960 --> 00:18:54,119
Speaker 2: been it's been, you know, really challenging and all that.

361
00:18:54,160 --> 00:18:56,120
Speaker 2: But what else would you want? You know, I'm very

362
00:18:56,119 --> 00:18:57,440
Speaker 2: happy doing the job now.

363
00:18:57,480 --> 00:18:59,919
Speaker 1: The Federal Reserve is over one hundred years old, was

364
00:19:00,040 --> 00:19:05,000
Speaker 1: created under Woodrow Wilson. If you were around then, what

365
00:19:05,000 --> 00:19:07,040
Speaker 1: would you have suggested they do better than they did?

366
00:19:07,119 --> 00:19:09,000
Speaker 1: And creating the system where you think the system works

367
00:19:09,040 --> 00:19:11,000
Speaker 1: pretty well after one hundred years and you wouldn't change

368
00:19:11,000 --> 00:19:11,720
Speaker 1: it very much.

369
00:19:11,920 --> 00:19:15,480
Speaker 2: So I'm giving myself perfect hindsight here. I would do

370
00:19:15,600 --> 00:19:20,280
Speaker 2: what Congress did in nineteen thirty three. So the original

371
00:19:20,320 --> 00:19:24,359
Speaker 2: FED didn't have an FOMC, and it really didn't function

372
00:19:24,520 --> 00:19:28,320
Speaker 2: very well during the early parts of the depression or

373
00:19:28,400 --> 00:19:32,680
Speaker 2: during other So in nineteen thirty three the current structure

374
00:19:32,760 --> 00:19:35,119
Speaker 2: was put in place, and that's with the FOMC, with

375
00:19:36,080 --> 00:19:39,119
Speaker 2: the number of governors and the voting arrangements, and I

376
00:19:39,119 --> 00:19:42,520
Speaker 2: think that arrangement is fine. It works really well. In

377
00:19:42,560 --> 00:19:46,720
Speaker 2: the seventies, the dual mandate was added. But ultimately we're

378
00:19:46,760 --> 00:19:48,520
Speaker 2: not looking for any law change. We think we have

379
00:19:48,600 --> 00:19:50,560
Speaker 2: the authorities that we need. We think that the law

380
00:19:51,040 --> 00:19:52,359
Speaker 2: is in just a fine place.

381
00:19:52,800 --> 00:19:55,639
Speaker 1: So basically, do you think the system works reasonably well

382
00:19:56,040 --> 00:19:57,119
Speaker 1: as it is today?

383
00:19:57,720 --> 00:19:58,400
Speaker 2: And today?

384
00:19:59,359 --> 00:20:03,040
Speaker 1: What is the the biggest economic challenge you think facing

385
00:20:03,040 --> 00:20:03,520
Speaker 1: the country?

386
00:20:03,640 --> 00:20:04,360
Speaker 2: Is it growth?

387
00:20:04,840 --> 00:20:09,240
Speaker 1: Is it inflation, hard landing potentially or what are you

388
00:20:09,440 --> 00:20:11,119
Speaker 1: most worried about what keeps you up at night of

389
00:20:11,200 --> 00:20:12,280
Speaker 1: anything in the economy.

390
00:20:12,840 --> 00:20:15,439
Speaker 2: So I'll say in the short term, that's what keeps me.

391
00:20:15,560 --> 00:20:18,120
Speaker 2: But like literally, you know, the thing I'm thinking about

392
00:20:18,160 --> 00:20:20,520
Speaker 2: in the middle of the night is always this balance

393
00:20:20,560 --> 00:20:23,320
Speaker 2: we have between not wanting to if we ease too early,

394
00:20:24,000 --> 00:20:25,920
Speaker 2: you know, we can undermine the progress on inflation, and

395
00:20:25,960 --> 00:20:28,879
Speaker 2: if we wait too late. We can undermine economic activity,

396
00:20:28,920 --> 00:20:31,840
Speaker 2: we can undermine the expansion, and you know, so we

397
00:20:31,920 --> 00:20:34,800
Speaker 2: want to get this right and getting it right is

398
00:20:34,800 --> 00:20:37,199
Speaker 2: incredibly important for the people we serve. So that is

399
00:20:37,320 --> 00:20:39,560
Speaker 2: really that's that's what I spend a lot of my

400
00:20:40,200 --> 00:20:42,520
Speaker 2: you know, thinking time on you know, longer term. There

401
00:20:42,560 --> 00:20:45,320
Speaker 2: are lots of things to worry about, but that's really.

402
00:20:45,320 --> 00:20:48,360
Speaker 1: What most people they have dinner with friends or sometimes

403
00:20:48,480 --> 00:20:51,520
Speaker 1: how can you have dinner with friends without hinting what

404
00:20:51,560 --> 00:20:54,360
Speaker 1: you're thinking about? And do you ever get suggestions from

405
00:20:54,359 --> 00:20:56,080
Speaker 1: your friends at dinner this is what you should do?

406
00:20:56,200 --> 00:20:58,040
Speaker 1: Or and how do you respond when they kind of

407
00:20:58,080 --> 00:21:00,800
Speaker 1: say maybe you should lower interest rates just keep eating.

408
00:21:00,640 --> 00:21:04,480
Speaker 2: Or what you might define the word friend to mean

409
00:21:04,680 --> 00:21:09,120
Speaker 2: doesn't ask you about interest rates. So no, people don't

410
00:21:09,160 --> 00:21:11,160
Speaker 2: do that generally. You know, people I don't know will

411
00:21:11,160 --> 00:21:13,359
Speaker 2: always say, hey, cut rates. Somebody said that in the

412
00:21:13,400 --> 00:21:20,640
Speaker 2: elevator this morning. Did that influence you or no? I said,

413
00:21:20,680 --> 00:21:23,080
Speaker 2: thank you, sir? You know, no, but I mean, you know,

414
00:21:23,119 --> 00:21:25,399
Speaker 2: we people say things, but you know, it's fine.

415
00:21:25,560 --> 00:21:29,120
Speaker 1: So in some parts of the society these days, people

416
00:21:29,119 --> 00:21:33,320
Speaker 1: are making decisions based on something called artificial intelligence AI.

417
00:21:34,280 --> 00:21:35,960
Speaker 2: Have you thought if you thought about, you.

418
00:21:35,920 --> 00:21:39,560
Speaker 1: Know, calling up chat GBT and saying, you know, you know,

419
00:21:39,600 --> 00:21:41,359
Speaker 1: here's the all the data we have. What do you

420
00:21:41,359 --> 00:21:42,679
Speaker 1: think about would be a good idea?

421
00:21:42,800 --> 00:21:44,359
Speaker 2: Have you ever thought about that? Or are they're not

422
00:21:44,400 --> 00:21:47,040
Speaker 2: going to like to do that. We haven't done that.

423
00:21:47,160 --> 00:21:49,800
Speaker 2: I mean we have. We have done little things like

424
00:21:49,840 --> 00:21:53,520
Speaker 2: we've asked chat GDP, GPT to generate questions for the

425
00:21:53,520 --> 00:21:56,920
Speaker 2: press conference, and I'm happy to report for any journalists

426
00:21:56,920 --> 00:21:58,600
Speaker 2: who are here that the questions were not as good

427
00:21:58,640 --> 00:22:00,200
Speaker 2: as the ones we get from real journal.

428
00:22:00,240 --> 00:22:02,520
Speaker 1: So what about my questions? How do they compare to

429
00:22:02,560 --> 00:22:11,400
Speaker 1: my questions? Okay, so they weren't that great. Okay, thanks

430
00:22:11,480 --> 00:22:13,880
Speaker 1: for listening to hear more of my interviews. You can

431
00:22:13,880 --> 00:22:18,159
Speaker 1: subscribe and download my podcast on Spotify, Apple, or wherever

432
00:22:18,200 --> 00:22:18,680
Speaker 1: you listen