1
00:00:02,480 --> 00:00:17,759
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:18,079 --> 00:00:21,000
Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.

3
00:00:21,120 --> 00:00:22,840
Speaker 2: I'm Tracy Alloway and I'm Joey.

4
00:00:22,920 --> 00:00:23,799
Speaker 3: Isnt thal Joe.

5
00:00:23,840 --> 00:00:26,720
Speaker 2: It's that time of year again, Jackson Hole. It's my

6
00:00:26,760 --> 00:00:27,640
Speaker 2: favorite time of year.

7
00:00:27,720 --> 00:00:30,800
Speaker 4: Yeah, I mean, it's a great time year anyway, but

8
00:00:31,040 --> 00:00:33,200
Speaker 4: in Jackson HALLWI only come.

9
00:00:33,080 --> 00:00:36,360
Speaker 2: On for many reasons. Okay, So this is the Kansas

10
00:00:36,360 --> 00:00:41,199
Speaker 2: City Fed's annual Economic Symposium in Jackson Hole, Wyoming, and

11
00:00:41,440 --> 00:00:43,519
Speaker 2: they basically get together a bunch of different you know,

12
00:00:43,640 --> 00:00:47,239
Speaker 2: FED presidents, a bunch of different speakers on economic policy,

13
00:00:47,320 --> 00:00:50,360
Speaker 2: and then everyone geeks out while looking at mountains.

14
00:00:50,400 --> 00:00:53,080
Speaker 4: Basically, it's really extraordinary. So this will be the third

15
00:00:53,159 --> 00:00:56,320
Speaker 4: year that will have been there. We're recording this August eighteenth,

16
00:00:56,320 --> 00:00:58,160
Speaker 4: but by the time people are listening to this, the

17
00:00:58,360 --> 00:01:01,280
Speaker 4: event will have just will be kicking off. It really

18
00:01:01,320 --> 00:01:04,400
Speaker 4: is extraordinary because you really have the top minds and

19
00:01:04,480 --> 00:01:07,720
Speaker 4: this stuff from truly all around the world. But also

20
00:01:07,920 --> 00:01:12,319
Speaker 4: it's late summer. People chill, people hike, people recognize that

21
00:01:12,319 --> 00:01:14,800
Speaker 4: they're in an amazing location and they would be wasting

22
00:01:14,840 --> 00:01:17,280
Speaker 4: their time if they just spent the whole time inside

23
00:01:17,280 --> 00:01:18,200
Speaker 4: talking monetary pole.

24
00:01:18,319 --> 00:01:20,480
Speaker 2: This is true, but I think part of the planning

25
00:01:20,600 --> 00:01:22,520
Speaker 2: of this event is this idea of, Okay, you get

26
00:01:22,560 --> 00:01:25,320
Speaker 2: everyone out in this really nice place in the wilderness,

27
00:01:25,319 --> 00:01:27,360
Speaker 2: and people are maybe a little bit more forthcoming or

28
00:01:27,440 --> 00:01:30,520
Speaker 2: maybe a little bit more open to having creative discussions

29
00:01:30,840 --> 00:01:33,919
Speaker 2: about policy. And it's interesting, you know, you mentioned people

30
00:01:33,959 --> 00:01:36,720
Speaker 2: talking about like this year's theme. I have a pop

31
00:01:36,800 --> 00:01:39,640
Speaker 2: quiz for you, which is do you remember the themes

32
00:01:39,680 --> 00:01:41,959
Speaker 2: from the last two Jackson Holes that we went to?

33
00:01:43,319 --> 00:01:44,800
Speaker 2: We've been to this will be our third.

34
00:01:44,920 --> 00:01:48,880
Speaker 4: I'm a little embarrassed. Is monetary policy at a changing world?

35
00:01:49,080 --> 00:01:49,160
Speaker 5: No?

36
00:01:49,280 --> 00:01:50,400
Speaker 4: I Actually, here's a good question.

37
00:01:50,640 --> 00:01:54,200
Speaker 2: You're not that far off. Actually, so last year it

38
00:01:54,280 --> 00:01:58,200
Speaker 2: was reassessing the effectiveness and transmission of monetary policy. The

39
00:01:58,280 --> 00:02:00,840
Speaker 2: first Jackson Hole we went to in twenty twenty three,

40
00:02:00,880 --> 00:02:03,160
Speaker 2: that was structural shifts in the global economy. That one,

41
00:02:03,200 --> 00:02:06,360
Speaker 2: I got to say a little I could forgive you

42
00:02:06,400 --> 00:02:09,520
Speaker 2: for oh forgetting that one. But this year's theme, it

43
00:02:09,680 --> 00:02:11,960
Speaker 2: just came out, you know, just got announced. So this

44
00:02:12,000 --> 00:02:17,440
Speaker 2: theme is labor markets in transition, demographics, productivity, and macroeconomic policy.

45
00:02:17,639 --> 00:02:20,400
Speaker 2: It's a good topic for many reasons. So obviously, you know,

46
00:02:20,520 --> 00:02:22,880
Speaker 2: the future of AI and its impact on the labor

47
00:02:22,919 --> 00:02:27,640
Speaker 2: force will certainly fit under that particular thematic umbrella. But

48
00:02:27,760 --> 00:02:30,480
Speaker 2: also it goes straight into the heart of what a

49
00:02:30,520 --> 00:02:33,080
Speaker 2: lot of FED policy makers seem to be discussing right

50
00:02:33,120 --> 00:02:34,320
Speaker 2: now and arguing right.

51
00:02:34,160 --> 00:02:37,160
Speaker 4: All kinds of things, immigration, aging, et cetera. How does

52
00:02:37,200 --> 00:02:39,200
Speaker 4: that bear on the data that we're seeing right now.

53
00:02:39,320 --> 00:02:41,480
Speaker 4: It's a great topic for both the short term and

54
00:02:41,560 --> 00:02:44,120
Speaker 4: the long term of monetary policy, so it should be

55
00:02:44,160 --> 00:02:45,600
Speaker 4: a fascinating conference.

56
00:02:45,280 --> 00:02:47,360
Speaker 2: Right and so on that note, I'm very happy to

57
00:02:47,360 --> 00:02:49,440
Speaker 2: say we do, in fact have the perfect guest. We

58
00:02:49,480 --> 00:02:51,400
Speaker 2: are going to be speaking with Jeff Schmidt. He is,

59
00:02:51,440 --> 00:02:54,280
Speaker 2: of course the president of the Kansas City FED and

60
00:02:54,360 --> 00:02:57,600
Speaker 2: responsible for putting on this event every year. So Jeff,

61
00:02:57,880 --> 00:02:59,840
Speaker 2: thank you so much for coming on. Odd thoughts.

62
00:03:00,680 --> 00:03:01,680
Speaker 5: Oh, it's my pleasure.

63
00:03:01,800 --> 00:03:04,760
Speaker 6: It's great to finally meet both of you officially, and

64
00:03:04,919 --> 00:03:08,120
Speaker 6: we follow you quite intently, so it's really great to

65
00:03:08,160 --> 00:03:08,760
Speaker 6: be on We're.

66
00:03:08,720 --> 00:03:11,720
Speaker 2: Leaving that in that's right. Well, I mean it is

67
00:03:11,800 --> 00:03:14,679
Speaker 2: mutual to be fair because we follow you quite intently.

68
00:03:14,960 --> 00:03:17,120
Speaker 2: So first of all, let me just extend a personal

69
00:03:17,120 --> 00:03:19,760
Speaker 2: thanks for putting on an event which allows Joe and

70
00:03:19,800 --> 00:03:22,000
Speaker 2: I to go to one of the most beautiful places

71
00:03:22,040 --> 00:03:25,520
Speaker 2: on earth every year that is truly wonderful for both

72
00:03:25,520 --> 00:03:28,520
Speaker 2: of us. And then I just going back to the

73
00:03:28,520 --> 00:03:31,280
Speaker 2: theme for a second. How do you come up with

74
00:03:31,320 --> 00:03:33,920
Speaker 2: the themes for these events every year? Is there like

75
00:03:33,960 --> 00:03:36,840
Speaker 2: a brainstorming session and everyone goes into a room and

76
00:03:36,920 --> 00:03:39,720
Speaker 2: twelve hours later you emerge with some sort of consensus,

77
00:03:39,840 --> 00:03:42,160
Speaker 2: much like an FMC meeting, I suppose.

78
00:03:41,840 --> 00:03:45,520
Speaker 6: But yeah, it's a great behind baseball question. And as

79
00:03:45,560 --> 00:03:48,080
Speaker 6: you can imagine, you know, we're in our forty eighth years.

80
00:03:48,160 --> 00:03:51,800
Speaker 6: So every year, you know, immediately after it's over, we

81
00:03:52,240 --> 00:03:54,240
Speaker 6: get in a room and we talk about what went well,

82
00:03:54,320 --> 00:03:57,520
Speaker 6: what can we make better? And I really give credit

83
00:03:57,600 --> 00:04:01,800
Speaker 6: to Joe Gruber, I ri chief economists in his team.

84
00:04:02,000 --> 00:04:05,480
Speaker 6: It's probably the most nerve wracking decision that has to

85
00:04:05,520 --> 00:04:08,520
Speaker 6: be made, because you know, Jackson will get over in

86
00:04:08,680 --> 00:04:12,840
Speaker 6: late August, and then probably by sometime early the fourth quarter,

87
00:04:13,160 --> 00:04:16,080
Speaker 6: you're starting to talk about what should we create a

88
00:04:16,120 --> 00:04:19,680
Speaker 6: theme around for the following year, and so they actually

89
00:04:19,800 --> 00:04:22,880
Speaker 6: end up deciding on that by the end of the year.

90
00:04:23,600 --> 00:04:26,480
Speaker 6: And it's nerve wracking because you hope that all the

91
00:04:26,520 --> 00:04:29,520
Speaker 6: research you've asked these brilliant people to do and present

92
00:04:30,520 --> 00:04:34,080
Speaker 6: is applicable by August because you know how fast things

93
00:04:34,160 --> 00:04:37,080
Speaker 6: move in the business and economic world, and boy, they

94
00:04:37,080 --> 00:04:39,680
Speaker 6: are so good at it. And they do think forward

95
00:04:39,960 --> 00:04:42,960
Speaker 6: about some of the emerging issues that are going to

96
00:04:42,960 --> 00:04:44,599
Speaker 6: be dealt with, but whether it be with the Central

97
00:04:44,600 --> 00:04:47,359
Speaker 6: Bank or with the global economy. And I tell you what,

98
00:04:47,440 --> 00:04:50,000
Speaker 6: they hit a home run this year because I'm actually,

99
00:04:50,600 --> 00:04:55,320
Speaker 6: as a you know, economist and FED president, I'm very

100
00:04:55,360 --> 00:04:59,680
Speaker 6: interested in the dynamic of demographics, not just nationally but internationally.

101
00:04:59,760 --> 00:05:03,719
Speaker 6: There's things going on that you'll hear and we'll be

102
00:05:03,800 --> 00:05:08,000
Speaker 6: presented on Friday and Saturday that I think are going

103
00:05:08,080 --> 00:05:10,280
Speaker 6: to really spur a lot of thinking and a lot

104
00:05:10,320 --> 00:05:14,640
Speaker 6: of conversation about how demographic behaviors and movements move the

105
00:05:14,720 --> 00:05:18,200
Speaker 6: workforce and labor force in the US and abroad. So

106
00:05:18,800 --> 00:05:23,120
Speaker 6: so it is it's a tenuous eight months because you've

107
00:05:23,160 --> 00:05:27,520
Speaker 6: got you know, novel level economists doing the research and

108
00:05:27,560 --> 00:05:29,360
Speaker 6: preparing these papers around a topic.

109
00:05:29,839 --> 00:05:31,560
Speaker 5: And I think this one is really going to hit

110
00:05:31,680 --> 00:05:32,560
Speaker 5: a really good court.

111
00:05:32,760 --> 00:05:35,880
Speaker 4: It is definitely a great topic for right now because

112
00:05:35,960 --> 00:05:38,159
Speaker 4: of you know, there's all the questions at least you know,

113
00:05:38,200 --> 00:05:40,120
Speaker 4: and here is just I'm talking to us specifically, but

114
00:05:40,160 --> 00:05:42,840
Speaker 4: as you mentioned, it is a global story because there

115
00:05:42,880 --> 00:05:44,640
Speaker 4: is aging and the effect that that's going to have

116
00:05:44,760 --> 00:05:47,599
Speaker 4: on the workforce, and especially in many advanced economies and

117
00:05:47,680 --> 00:05:51,200
Speaker 4: non advanced economies frankly, and then obviously AI is a

118
00:05:51,279 --> 00:05:54,040
Speaker 4: huge one. And then in the US specifically changing immigration

119
00:05:54,160 --> 00:05:57,799
Speaker 4: policy and so forth. Just on the inside baseball part

120
00:05:57,839 --> 00:06:02,400
Speaker 4: a little bit more. Okay, establish the team establishes the theme,

121
00:06:03,000 --> 00:06:05,680
Speaker 4: how do you then like figure out it's probably almost

122
00:06:05,680 --> 00:06:08,200
Speaker 4: anyone I assume would say yes to an invite to

123
00:06:08,240 --> 00:06:10,919
Speaker 4: present to Jackson Hole, But how what is that actual

124
00:06:11,000 --> 00:06:14,400
Speaker 4: process like where you identify the presenters that you're looking for?

125
00:06:15,120 --> 00:06:18,560
Speaker 6: Yeah, so here again, as you can imagine, there's a

126
00:06:18,640 --> 00:06:24,040
Speaker 6: community of economists and researchers both nationally and abroad. While

127
00:06:24,040 --> 00:06:28,080
Speaker 6: it's a big community, it's pretty connected. And so the

128
00:06:28,160 --> 00:06:30,159
Speaker 6: team's going to get together and they're going to do

129
00:06:30,200 --> 00:06:32,240
Speaker 6: a couple of things. One is they're going to try

130
00:06:32,240 --> 00:06:35,400
Speaker 6: to break down maybe inside the topic, what are some

131
00:06:35,560 --> 00:06:38,400
Speaker 6: of the nuances of because I think we have four

132
00:06:38,800 --> 00:06:42,520
Speaker 6: papers that will be released on Friday and Saturday, and

133
00:06:42,600 --> 00:06:45,680
Speaker 6: so within that topic there's subtopics and so you're going

134
00:06:45,760 --> 00:06:49,080
Speaker 6: to have researchers in university settings, you're going to have

135
00:06:49,120 --> 00:06:50,880
Speaker 6: researchers inside of central.

136
00:06:50,520 --> 00:06:54,279
Speaker 5: Banks, and a lot of that community is going to kind.

137
00:06:54,080 --> 00:06:58,080
Speaker 6: Of focus itself on certain micro and macro topics. So

138
00:06:59,000 --> 00:07:03,120
Speaker 6: that are really good inventory of experts that they'll reach

139
00:07:03,200 --> 00:07:03,520
Speaker 6: out to.

140
00:07:03,800 --> 00:07:05,520
Speaker 5: And I would say, you're right.

141
00:07:05,680 --> 00:07:08,400
Speaker 6: I mean, I think in most cases the researchers would

142
00:07:08,440 --> 00:07:12,800
Speaker 6: really covet the opportunity to do this research and submit

143
00:07:12,840 --> 00:07:16,000
Speaker 6: the paper, but they're also very thoughtful about it. You know,

144
00:07:16,280 --> 00:07:20,200
Speaker 6: some will just maybe not take the engagement just because

145
00:07:20,200 --> 00:07:23,360
Speaker 6: it's not well aligned to the research that they're either

146
00:07:23,480 --> 00:07:27,320
Speaker 6: doing or they feel their experts out But by and large,

147
00:07:27,560 --> 00:07:30,560
Speaker 6: it's really a great honor and we tip typically have

148
00:07:30,760 --> 00:07:34,840
Speaker 6: a very positive response. The challenge is time. You know

149
00:07:34,880 --> 00:07:37,000
Speaker 6: a lot of these things might take a year or

150
00:07:37,000 --> 00:07:40,080
Speaker 6: two to research, but they have a very tight window

151
00:07:40,200 --> 00:07:42,880
Speaker 6: once they're asked and they agree, you know, they might

152
00:07:43,000 --> 00:07:47,160
Speaker 6: have to submit within four or five months. And sometimes

153
00:07:47,160 --> 00:07:50,240
Speaker 6: when you're talking about a very macro topic, that can

154
00:07:50,280 --> 00:07:52,680
Speaker 6: be a super big challenge for a researcher.

155
00:07:53,280 --> 00:07:56,160
Speaker 2: So, speaking of challenges, why don't we get right into

156
00:07:56,320 --> 00:07:59,720
Speaker 2: more of that theme. The idea of labor markets in transition,

157
00:08:00,600 --> 00:08:02,080
Speaker 2: Why don't you go ahead and give us your sort

158
00:08:02,080 --> 00:08:06,080
Speaker 2: of a high level interest in this particular topic. I guess,

159
00:08:06,120 --> 00:08:10,679
Speaker 2: how does something like AI, How does something like aging demographics,

160
00:08:10,760 --> 00:08:15,440
Speaker 2: lower birth rates actually complicate the task of setting monetary policy,

161
00:08:15,600 --> 00:08:18,440
Speaker 2: especially when you think about things like the neutral rate

162
00:08:18,480 --> 00:08:20,560
Speaker 2: of interest. Our star, you know, our star is a

163
00:08:20,600 --> 00:08:23,760
Speaker 2: nebulous concept at the best of times. I can only

164
00:08:23,800 --> 00:08:26,320
Speaker 2: imagine what it's like trying to estimate our star at

165
00:08:26,320 --> 00:08:29,160
Speaker 2: a time when we're also talking about, you know, AI

166
00:08:29,320 --> 00:08:32,400
Speaker 2: potentially transforming the way everyone on Earth is working.

167
00:08:33,320 --> 00:08:36,800
Speaker 6: Yeah, so let me kind of set the stage for this, because,

168
00:08:37,360 --> 00:08:39,520
Speaker 6: first of all, my backgrounds, I'm a little bit of

169
00:08:39,520 --> 00:08:42,200
Speaker 6: a hybrid FED president. So you're going to typically have

170
00:08:42,800 --> 00:08:45,640
Speaker 6: maybe FED presidents that are in two different camps. One

171
00:08:46,040 --> 00:08:51,320
Speaker 6: is going to be a traditional camp of economist PhD researcher, scholar,

172
00:08:51,720 --> 00:08:58,000
Speaker 6: really focusing attention on the monetary policy discussions, relating their

173
00:08:58,120 --> 00:09:02,679
Speaker 6: background to making good decisions at the policy table with FOMC.

174
00:09:02,880 --> 00:09:05,079
Speaker 5: The second is going to be more in my camp.

175
00:09:05,280 --> 00:09:09,120
Speaker 6: I'm much more of a practitioner, not a professor of economics.

176
00:09:09,160 --> 00:09:11,880
Speaker 6: I mean, I've run banks, I've been a bank supervisor

177
00:09:11,920 --> 00:09:14,400
Speaker 6: with the FDIC early in my career. I've done a

178
00:09:14,440 --> 00:09:17,400
Speaker 6: little bit of leadership teaching at SMU the last couple

179
00:09:17,440 --> 00:09:21,480
Speaker 6: of years, but I'll take my banker experiences through my

180
00:09:21,640 --> 00:09:25,760
Speaker 6: thirty plus years of building banks. The most important part

181
00:09:25,800 --> 00:09:29,040
Speaker 6: of that is really the workforce of people that you

182
00:09:29,160 --> 00:09:32,240
Speaker 6: put together and through that thirty years to your points,

183
00:09:32,480 --> 00:09:36,079
Speaker 6: There's really two big drivers on the demographic end that

184
00:09:36,440 --> 00:09:39,559
Speaker 6: are of interest to me. One is just the behavioral

185
00:09:39,760 --> 00:09:43,600
Speaker 6: nature of the labor force generationally, how they're changing, how

186
00:09:43,600 --> 00:09:46,720
Speaker 6: they use technology. I'm a baby boomer. The twenty to

187
00:09:46,760 --> 00:09:50,360
Speaker 6: thirty something coming in has a different sense of what

188
00:09:50,480 --> 00:09:53,600
Speaker 6: the job is and how they're going to be successful

189
00:09:53,640 --> 00:09:56,600
Speaker 6: at that work. The second thing is just and there's

190
00:09:56,640 --> 00:09:59,520
Speaker 6: a very compelling paper that's going to be released on

191
00:09:59,760 --> 00:10:03,520
Speaker 6: the addresses things like fertility rates and so that's not

192
00:10:03,600 --> 00:10:07,280
Speaker 6: only a national but that's an international phenomenon. Is does

193
00:10:07,800 --> 00:10:10,320
Speaker 6: how does the labor force migrate, Let's say in the

194
00:10:10,440 --> 00:10:14,839
Speaker 6: US state to state, what drives that migration of labor force,

195
00:10:15,200 --> 00:10:19,640
Speaker 6: and then what's happening in other large labor centric countries

196
00:10:20,120 --> 00:10:24,600
Speaker 6: where the fertility rates are actually affecting the workforce Going forward?

197
00:10:24,600 --> 00:10:28,720
Speaker 6: I mean, China is a really stark example, Japan. India

198
00:10:29,160 --> 00:10:34,040
Speaker 6: is something a country I think everybody's really watching relative

199
00:10:34,080 --> 00:10:38,640
Speaker 6: to how their labor force is maturing, educating, growing. I

200
00:10:38,640 --> 00:10:41,120
Speaker 6: think all those dynamics are going to play a really

201
00:10:41,160 --> 00:10:45,240
Speaker 6: important piece to the puzzle of where are things going

202
00:10:45,240 --> 00:10:48,360
Speaker 6: to be made and how are economies going to grow

203
00:10:48,640 --> 00:10:52,680
Speaker 6: because most economists and people in the markets would argue,

204
00:10:52,880 --> 00:10:55,800
Speaker 6: you've got to have a growing labor force for your

205
00:10:55,840 --> 00:10:59,120
Speaker 6: economy to grow. And that probably gets to the next

206
00:10:59,360 --> 00:11:03,560
Speaker 6: observation you made, I think, Tracy, and that's how does technology,

207
00:11:03,720 --> 00:11:08,880
Speaker 6: maybe specifically artificial intelligence weave its way into this conversation

208
00:11:09,080 --> 00:11:13,000
Speaker 6: and you'll see some really good arguments about maybe the

209
00:11:13,200 --> 00:11:16,800
Speaker 6: advent of AI is going to be perfectly timed for

210
00:11:17,120 --> 00:11:20,040
Speaker 6: the nature of the labor force and how it's shifting.

211
00:11:20,080 --> 00:11:24,120
Speaker 6: Because overall, when you add fertility rates and you add

212
00:11:24,240 --> 00:11:28,079
Speaker 6: labor market at large, it's pretty static. It's not growing

213
00:11:28,280 --> 00:11:30,640
Speaker 6: in a big way. Probably the only areas that are

214
00:11:30,679 --> 00:11:34,840
Speaker 6: growing significantly would be India and maybe the African continent.

215
00:11:35,200 --> 00:11:36,880
Speaker 6: Though all those things are going to play into this

216
00:11:37,040 --> 00:11:40,440
Speaker 6: mix of both national and global labor force.

217
00:11:56,400 --> 00:11:58,880
Speaker 4: So speak of technology. A couple weeks ago, we interviewed,

218
00:11:58,920 --> 00:12:02,160
Speaker 4: said President Mary Day. She was talking about the iPhone

219
00:12:02,200 --> 00:12:04,679
Speaker 4: and for example, that the current iPhone can do so

220
00:12:04,800 --> 00:12:07,720
Speaker 4: much more than the first iPhone. You know, however many

221
00:12:07,920 --> 00:12:09,959
Speaker 4: years that go. And then I thought of a follow

222
00:12:10,040 --> 00:12:12,199
Speaker 4: up question to that, but I forgot to ask her.

223
00:12:12,480 --> 00:12:14,000
Speaker 4: So I'm like, Okay, I'm just going to ask the

224
00:12:14,040 --> 00:12:17,520
Speaker 4: next FED president. So I'm asking you the question that

225
00:12:17,600 --> 00:12:20,480
Speaker 4: I actually should be asking very daily. I apologize for

226
00:12:20,960 --> 00:12:24,319
Speaker 4: the unfairness, but I think this could inform the AI discussion,

227
00:12:24,559 --> 00:12:27,080
Speaker 4: which is that we have seen already sitting aside AI,

228
00:12:27,440 --> 00:12:31,520
Speaker 4: these incredible tech advances, undeniable that have changed the world, right,

229
00:12:32,240 --> 00:12:36,199
Speaker 4: no one would deny that, and yet measured productivity gains

230
00:12:36,520 --> 00:12:38,959
Speaker 4: have not been particularly extraordinary. So if you look at

231
00:12:39,000 --> 00:12:41,800
Speaker 4: like since the first iPhone or the from the pre

232
00:12:41,920 --> 00:12:45,400
Speaker 4: iPhone era to now, the world's changed dramatically on account

233
00:12:45,440 --> 00:12:50,480
Speaker 4: to the technology changes, and yet productivity nothing particularly special,

234
00:12:50,480 --> 00:12:52,559
Speaker 4: at least in the data. And I'm curious, like, when

235
00:12:52,559 --> 00:12:54,520
Speaker 4: you think about the effect of AI, do you have

236
00:12:54,559 --> 00:12:57,720
Speaker 4: any sort of theory for why that is or why

237
00:12:57,760 --> 00:13:02,079
Speaker 4: it is that these obvious technolog breakthroughs haven't actually moved

238
00:13:02,080 --> 00:13:04,480
Speaker 4: the dial in some of these important measures.

239
00:13:06,120 --> 00:13:10,000
Speaker 6: Well, I have some personal thoughts, maybe some observations within

240
00:13:10,040 --> 00:13:13,000
Speaker 6: the FED itself, at least with the Kansas City FED.

241
00:13:13,480 --> 00:13:18,160
Speaker 6: One is just be patient. A lot of things are happening.

242
00:13:18,360 --> 00:13:21,200
Speaker 6: I think a lot of this technology is emerging now.

243
00:13:21,240 --> 00:13:24,880
Speaker 6: Now granted it'll go fast, but the adoption, I mean,

244
00:13:25,000 --> 00:13:28,400
Speaker 6: even I think about the Kanasity FED itself, you know,

245
00:13:28,920 --> 00:13:33,480
Speaker 6: getting comfortable with what's kind of embedded inside let's.

246
00:13:33,240 --> 00:13:35,559
Speaker 5: Say, the AI technology.

247
00:13:35,720 --> 00:13:38,079
Speaker 6: You know, the thing I worry a lot about is

248
00:13:38,120 --> 00:13:41,840
Speaker 6: just things like copyright laws. You know that we're sensitive

249
00:13:41,920 --> 00:13:45,480
Speaker 6: to using that technology and is it safe for us

250
00:13:45,520 --> 00:13:48,360
Speaker 6: to use as we try to figure out ways to

251
00:13:48,400 --> 00:13:52,720
Speaker 6: be more productive inside our bank. From a more macro standpoint,

252
00:13:53,080 --> 00:13:56,200
Speaker 6: I think everybody's trying to figure out. I would kind

253
00:13:56,200 --> 00:13:59,160
Speaker 6: of categorize the AI phenomena today as kind of a

254
00:13:59,200 --> 00:14:02,800
Speaker 6: low fruit to high fruit process. So what everybody's trying

255
00:14:02,840 --> 00:14:05,200
Speaker 6: to do is say, what are the what's the nature

256
00:14:05,480 --> 00:14:09,280
Speaker 6: job of things? Inside my job? They actually can make

257
00:14:09,360 --> 00:14:13,680
Speaker 6: me more productive, just inherently more productive, whether it be

258
00:14:14,360 --> 00:14:17,520
Speaker 6: narrative in a legal brief or let's say taking a

259
00:14:17,520 --> 00:14:21,160
Speaker 6: bank examination report and trying to download things that would

260
00:14:21,240 --> 00:14:25,440
Speaker 6: normally take you hours or days to populate an examination

261
00:14:25,600 --> 00:14:28,280
Speaker 6: report with. I think we're at that kind of cross

262
00:14:28,680 --> 00:14:31,000
Speaker 6: roads where we're trying to figure out what's the easy

263
00:14:31,040 --> 00:14:34,040
Speaker 6: low fruit, and then I think over time, I don't

264
00:14:34,040 --> 00:14:37,400
Speaker 6: know if you're going to get this blast of productivity

265
00:14:37,640 --> 00:14:40,239
Speaker 6: that all of a sudden it's this moment of epiphany.

266
00:14:40,280 --> 00:14:41,000
Speaker 5: I think you're going to.

267
00:14:41,320 --> 00:14:45,080
Speaker 6: I think it's actually perfectly time, because over time, I

268
00:14:45,120 --> 00:14:48,080
Speaker 6: think you're going to be able to integrate this technology

269
00:14:48,400 --> 00:14:53,280
Speaker 6: and you're going to figure out where it's best used. Now, granted,

270
00:14:53,520 --> 00:14:55,640
Speaker 6: and people are doing studies on this, there are some

271
00:14:56,400 --> 00:15:00,480
Speaker 6: jobs that I think I'll give Mary Daily credit coined

272
00:15:00,520 --> 00:15:03,080
Speaker 6: the phrase soul sucking jobs. What are the things that

273
00:15:03,160 --> 00:15:07,280
Speaker 6: people are let's say, more monotonous or boring, or things

274
00:15:07,280 --> 00:15:11,040
Speaker 6: that just don't move needles, that aren't like super interesting

275
00:15:11,280 --> 00:15:14,160
Speaker 6: and challenging. And I think you're going to see that's

276
00:15:14,200 --> 00:15:16,120
Speaker 6: going to be the part of the low fruit process.

277
00:15:16,400 --> 00:15:19,160
Speaker 6: The upper half of the tree. I think you might

278
00:15:19,280 --> 00:15:21,360
Speaker 6: see some real productivity gains.

279
00:15:21,680 --> 00:15:23,720
Speaker 5: But in the end, when.

280
00:15:23,560 --> 00:15:27,640
Speaker 6: You see shifts in like immigration policy, and you see

281
00:15:28,040 --> 00:15:31,560
Speaker 6: workforce is not growing, you're actually going to need to

282
00:15:31,680 --> 00:15:34,960
Speaker 6: integrate that technology to keep a balance in the supply

283
00:15:35,040 --> 00:15:38,320
Speaker 6: and demand. I think jer Paul mentioned this in his

284
00:15:38,480 --> 00:15:42,840
Speaker 6: last conference after the FOMC when he was addressing some

285
00:15:42,960 --> 00:15:45,360
Speaker 6: of the data that came out in the workforce in

286
00:15:45,440 --> 00:15:48,560
Speaker 6: the summer, in some of the adjustments that while it

287
00:15:48,720 --> 00:15:51,680
Speaker 6: was a little bit eye opening, we feel like there's

288
00:15:51,720 --> 00:15:54,800
Speaker 6: a balancing and supplying demand of the labor force today,

289
00:15:55,000 --> 00:15:58,280
Speaker 6: and it's probably why you're not seeing, at least today

290
00:15:58,480 --> 00:16:01,880
Speaker 6: a major uptick in the unemployment rate. It's kind of

291
00:16:01,880 --> 00:16:05,000
Speaker 6: rebalancing itself going into the next couple quarters.

292
00:16:05,280 --> 00:16:08,160
Speaker 2: This was going to be exactly my next question. Since

293
00:16:08,200 --> 00:16:10,160
Speaker 2: you brought up immigration, why don't you go ahead and

294
00:16:10,240 --> 00:16:12,600
Speaker 2: tell us what you're seeing in the labor market right now,

295
00:16:12,680 --> 00:16:15,560
Speaker 2: because the debate that seems to be emerging is that, yes,

296
00:16:15,680 --> 00:16:19,560
Speaker 2: we've seen these big revisions to pay rolls recently, but

297
00:16:19,880 --> 00:16:21,760
Speaker 2: on the other hand, if we have a lot of

298
00:16:21,760 --> 00:16:25,280
Speaker 2: people exiting the workforce because they're aging out of it

299
00:16:25,520 --> 00:16:30,000
Speaker 2: or because of new immigration policies, then maybe that break

300
00:16:30,120 --> 00:16:33,640
Speaker 2: even labor rate doesn't really matter as much anymore, and

301
00:16:33,720 --> 00:16:36,320
Speaker 2: we can tolerate it as long as the employment rate

302
00:16:36,440 --> 00:16:39,400
Speaker 2: stays pretty strong and we are pretty close to full

303
00:16:39,440 --> 00:16:43,040
Speaker 2: employment levels still. So what are you seeing now, how

304
00:16:43,040 --> 00:16:44,080
Speaker 2: would you characterize it?

305
00:16:45,240 --> 00:16:47,320
Speaker 6: So, Tracy, I would say that there was a bit

306
00:16:47,360 --> 00:16:50,880
Speaker 6: of a convergence of things in the first and second quarter.

307
00:16:51,040 --> 00:16:53,840
Speaker 6: So when we talk about being data depend that there's

308
00:16:53,920 --> 00:16:57,520
Speaker 6: two buckets of data that I really focus on. One

309
00:16:57,640 --> 00:16:59,720
Speaker 6: is the kind of a hard data that's issued by

310
00:17:00,120 --> 00:17:04,800
Speaker 6: third parties or internally by government agencies, things that would

311
00:17:04,960 --> 00:17:07,600
Speaker 6: that they track and have tracked for a long long time.

312
00:17:07,680 --> 00:17:11,560
Speaker 6: That emerged with things like unemployment rates. The second bucket

313
00:17:11,680 --> 00:17:14,959
Speaker 6: is really my travels in and around the tenth district.

314
00:17:15,040 --> 00:17:19,080
Speaker 6: Were seven states, twenty million people in businesses trying to

315
00:17:19,119 --> 00:17:22,080
Speaker 6: get four cornered in the district to try to get

316
00:17:22,119 --> 00:17:25,679
Speaker 6: as much real time information. And so the convergence, the

317
00:17:25,720 --> 00:17:28,800
Speaker 6: way I see it, I think a couple things were

318
00:17:29,119 --> 00:17:32,280
Speaker 6: at odds in some of the information and data that

319
00:17:32,359 --> 00:17:34,480
Speaker 6: was that emerged here in the last month or two.

320
00:17:34,840 --> 00:17:37,119
Speaker 6: The first is that there was a lot you know,

321
00:17:37,160 --> 00:17:40,840
Speaker 6: we could hear the word uncertainty everywhere we went. You

322
00:17:40,920 --> 00:17:44,639
Speaker 6: got to change it administrations, you got some big policy rocks,

323
00:17:44,680 --> 00:17:48,080
Speaker 6: you had a budget that was being debated. All those

324
00:17:48,080 --> 00:17:51,760
Speaker 6: things create uncertainty in a business person's mind.

325
00:17:51,880 --> 00:17:52,120
Speaker 5: Right.

326
00:17:52,600 --> 00:17:56,280
Speaker 6: The second thing was a major change in immigration policy,

327
00:17:56,320 --> 00:18:00,840
Speaker 6: and so that created its own set of uncertainties and dynamics.

328
00:18:01,240 --> 00:18:03,600
Speaker 6: And I think what we're finding, at least what we're

329
00:18:03,600 --> 00:18:06,000
Speaker 6: seeing in the tenth district is a lot of those

330
00:18:06,040 --> 00:18:09,520
Speaker 6: things converged over a very short period of time. And

331
00:18:09,600 --> 00:18:12,040
Speaker 6: what normally will happen, and this kind of gets me

332
00:18:12,080 --> 00:18:16,000
Speaker 6: back to my banker days, is businesses will actually they'll

333
00:18:16,040 --> 00:18:19,959
Speaker 6: slow their decisioning down, they'll let's say, freeze hiring for

334
00:18:20,000 --> 00:18:22,600
Speaker 6: a time, They'll be a little bit more conservative what

335
00:18:22,640 --> 00:18:26,160
Speaker 6: they're spend on certain things. And so I actually think

336
00:18:26,200 --> 00:18:29,920
Speaker 6: that affected some of the labor numbers that came out

337
00:18:30,359 --> 00:18:34,120
Speaker 6: in the most recent tabletops we've done with businesses, they

338
00:18:34,160 --> 00:18:37,439
Speaker 6: seem to be digesting a lot of that change and

339
00:18:37,480 --> 00:18:40,480
Speaker 6: those changes. In the last couple of weeks, I've seen

340
00:18:40,520 --> 00:18:44,400
Speaker 6: a level of confidence back in both the business sectors

341
00:18:44,480 --> 00:18:48,080
Speaker 6: and some of the discussions about labor and workforce. So

342
00:18:48,200 --> 00:18:51,560
Speaker 6: we'll see I mean, I would expect maybe a bit

343
00:18:51,560 --> 00:18:53,760
Speaker 6: of a rebound in some of the labor statistics, but

344
00:18:54,119 --> 00:18:56,520
Speaker 6: at the end of the day, it really is about

345
00:18:56,560 --> 00:19:00,159
Speaker 6: balancing the supply and demand of the labor force. What

346
00:19:00,280 --> 00:19:03,640
Speaker 6: emergence from that over the next I'd say a couple

347
00:19:03,640 --> 00:19:04,200
Speaker 6: of quarters.

348
00:19:04,600 --> 00:19:08,840
Speaker 2: It's interesting you talk about maybe people feeling slightly more comfortable,

349
00:19:08,840 --> 00:19:12,680
Speaker 2: at least relatively compared to the beginning of the year recently,

350
00:19:12,720 --> 00:19:17,320
Speaker 2: because I've seen some chatter about maybe an economic reacceleration

351
00:19:17,560 --> 00:19:19,680
Speaker 2: right now. You know, some of the tariffs have now

352
00:19:19,800 --> 00:19:23,760
Speaker 2: been finalized. It looks so far like we haven't had

353
00:19:23,800 --> 00:19:27,679
Speaker 2: that huge inflationary uptick, although, of course producer prices that

354
00:19:27,720 --> 00:19:30,119
Speaker 2: we saw last week maybe tell a slightly different story.

355
00:19:30,160 --> 00:19:33,360
Speaker 2: We did have that retail spending report out on Friday

356
00:19:33,400 --> 00:19:36,200
Speaker 2: that showed people were still spending or quite a lot

357
00:19:36,200 --> 00:19:39,080
Speaker 2: of money. Yeah, do you see signs of a sort

358
00:19:39,119 --> 00:19:41,920
Speaker 2: of like recovery or reacceleration at the moment?

359
00:19:43,440 --> 00:19:44,000
Speaker 5: I don't know.

360
00:19:44,119 --> 00:19:47,000
Speaker 6: I mean, we got good GDP numbers, kind of a

361
00:19:47,000 --> 00:19:49,879
Speaker 6: bit of a rebound sling back in the second quarter

362
00:19:49,960 --> 00:19:52,080
Speaker 6: from the first quarter's weakness, and that had a lot

363
00:19:52,119 --> 00:19:54,280
Speaker 6: of noise in at the first quarter. I think, I

364
00:19:54,320 --> 00:19:57,240
Speaker 6: don't know if I necessarily categorize it as a rebound.

365
00:19:57,280 --> 00:20:00,480
Speaker 6: I think that they're just there's a lot of things

366
00:20:00,480 --> 00:20:02,800
Speaker 6: that are kind of working themselves through. I mean, you've

367
00:20:02,840 --> 00:20:06,800
Speaker 6: got a major major cycle change with a new administration,

368
00:20:07,000 --> 00:20:11,439
Speaker 6: with a lot of really very interesting macro ideas that

369
00:20:11,480 --> 00:20:14,480
Speaker 6: they're putting in place, and you know, I think you

370
00:20:14,520 --> 00:20:16,360
Speaker 6: could make a fair argument that a lot of those

371
00:20:16,400 --> 00:20:20,359
Speaker 6: are pro growth types of policies and processes and programs.

372
00:20:20,720 --> 00:20:24,080
Speaker 6: So I think the nature of what we see in

373
00:20:24,119 --> 00:20:28,560
Speaker 6: both the labor data and the inflation data are going

374
00:20:28,600 --> 00:20:31,159
Speaker 6: to be pretty interesting. And there's a lot yet to

375
00:20:31,240 --> 00:20:36,359
Speaker 6: emerge between even this week and our September FMC meeting,

376
00:20:36,400 --> 00:20:39,679
Speaker 6: But I think the nature of how people are thinking

377
00:20:39,680 --> 00:20:43,320
Speaker 6: about the economy, what the markets are, how they're performing,

378
00:20:43,680 --> 00:20:47,920
Speaker 6: there is an optimism I think shift from it wasn't

379
00:20:47,920 --> 00:20:50,560
Speaker 6: that they were down in the first couple quarters, They

380
00:20:50,600 --> 00:20:54,640
Speaker 6: just weren't sure, and so there was some pausing happening,

381
00:20:54,680 --> 00:20:58,520
Speaker 6: And then I think we're sensing that the nature of

382
00:20:58,560 --> 00:21:01,960
Speaker 6: the next couple cycles as we get into the holiday

383
00:21:02,040 --> 00:21:05,040
Speaker 6: seasons toward the end of the year, there just seems

384
00:21:05,040 --> 00:21:08,119
Speaker 6: to be a pretty good optimism about what's going to

385
00:21:08,160 --> 00:21:10,040
Speaker 6: happen in the next couple quarters.

386
00:21:10,600 --> 00:21:12,359
Speaker 4: Let me us a good question about the latest jobs

387
00:21:12,359 --> 00:21:15,720
Speaker 4: report that actually sort of ties near term cyclical story

388
00:21:15,840 --> 00:21:19,159
Speaker 4: with the broader term theme of the conference, which is

389
00:21:19,200 --> 00:21:21,840
Speaker 4: that the two sectors that basically in the most recent

390
00:21:21,920 --> 00:21:24,600
Speaker 4: jobs report, the two sectors that basically added all of

391
00:21:24,640 --> 00:21:29,160
Speaker 4: the jobs were healthcare and social assistance. And these sectors

392
00:21:29,200 --> 00:21:33,520
Speaker 4: basically add employment virtually every month without fail. And it's

393
00:21:33,600 --> 00:21:36,880
Speaker 4: very easy to connect that to aging, because people who

394
00:21:36,880 --> 00:21:40,000
Speaker 4: are elderly are retired and you need a certain type

395
00:21:40,000 --> 00:21:43,200
Speaker 4: of you know, nurses and so to take care of them.

396
00:21:43,640 --> 00:21:46,600
Speaker 4: But these aren't considered to be particularly high productivity jobs.

397
00:21:46,880 --> 00:21:49,439
Speaker 4: Looking in the medium term, do you worry about this,

398
00:21:49,680 --> 00:21:53,399
Speaker 4: like how much of the productive labor force will be

399
00:21:53,680 --> 00:21:57,720
Speaker 4: necessary to essentially take care of old people and what

400
00:21:57,760 --> 00:22:00,840
Speaker 4: that means for productivity overall.

401
00:22:01,000 --> 00:22:03,880
Speaker 6: So when we kind of interview a lot of our

402
00:22:03,960 --> 00:22:07,680
Speaker 6: healthcare professionals in the district, there is still a huge

403
00:22:07,720 --> 00:22:10,800
Speaker 6: demand need in that sector, and so I think there's

404
00:22:10,880 --> 00:22:14,840
Speaker 6: a big up potential specifically in the healthcare industry. And

405
00:22:15,240 --> 00:22:17,560
Speaker 6: here again, I'm a baby boomer, so I'm using more

406
00:22:17,560 --> 00:22:20,760
Speaker 6: of those services. And as you do experience that, you

407
00:22:20,840 --> 00:22:25,360
Speaker 6: do see that there's a real demand need for healthcare

408
00:22:25,400 --> 00:22:29,040
Speaker 6: professionals in kind of all spectrums of that industry. And

409
00:22:29,080 --> 00:22:33,040
Speaker 6: so I do think that there are pockets by industry

410
00:22:33,880 --> 00:22:36,280
Speaker 6: that could still use a lot.

411
00:22:36,119 --> 00:22:36,920
Speaker 5: Of labor talent.

412
00:22:37,080 --> 00:22:41,600
Speaker 6: I'd say healthcare, certain agricultural industries in the tenth district.

413
00:22:41,760 --> 00:22:45,840
Speaker 6: There's certainly some technology and manufacturing that I think could

414
00:22:45,960 --> 00:22:48,400
Speaker 6: you could see a bit of nice growth in over

415
00:22:48,440 --> 00:22:52,159
Speaker 6: the next several quarters. So I think what's going to

416
00:22:52,280 --> 00:22:54,600
Speaker 6: be interesting, and kind of getting a little bit back

417
00:22:54,640 --> 00:22:58,240
Speaker 6: to the AI conversation, is I think the nature of

418
00:22:58,520 --> 00:23:02,120
Speaker 6: jobs insight industries is going to change. So we talk

419
00:23:02,200 --> 00:23:04,879
Speaker 6: a little bit about this in the Reserve Bank is

420
00:23:05,400 --> 00:23:08,000
Speaker 6: we just launched a new five year strategic plan, and

421
00:23:08,240 --> 00:23:12,280
Speaker 6: embedded in the plan is really to re explore the

422
00:23:12,480 --> 00:23:16,080
Speaker 6: skill sets that are necessary to make this plan happen.

423
00:23:16,520 --> 00:23:18,800
Speaker 6: And I think the things that we used to be

424
00:23:18,880 --> 00:23:21,560
Speaker 6: doing the last five or ten years need to be

425
00:23:21,640 --> 00:23:25,440
Speaker 6: shifted to something else to stay a high performing reserve bank.

426
00:23:25,560 --> 00:23:29,320
Speaker 6: So I do believe in a lot of these industry areas,

427
00:23:29,359 --> 00:23:32,240
Speaker 6: with I think healthcare being at the top of the list,

428
00:23:32,760 --> 00:23:35,679
Speaker 6: I think you're going to see a reskilling in a

429
00:23:35,720 --> 00:23:38,359
Speaker 6: lot of these job areas as some of the jobs

430
00:23:38,480 --> 00:23:42,440
Speaker 6: that can be done by a more artificial intelligence technology

431
00:23:42,800 --> 00:23:46,000
Speaker 6: are going to shift to much more let's say intellectual

432
00:23:46,160 --> 00:23:51,360
Speaker 6: or behavioral based job skills going forward. So I think

433
00:23:51,400 --> 00:23:54,919
Speaker 6: here again, I think that's The message I give to

434
00:23:55,000 --> 00:23:59,560
Speaker 6: our business associates in the tenth district is tell us

435
00:23:59,760 --> 00:24:02,560
Speaker 6: how you're reskilling your workforce.

436
00:24:02,359 --> 00:24:04,520
Speaker 5: Because I think that's where AI is.

437
00:24:04,480 --> 00:24:06,639
Speaker 6: Going to really play a big role. You can't be

438
00:24:06,760 --> 00:24:09,880
Speaker 6: static in the job you're doing. You have to reimagine

439
00:24:09,880 --> 00:24:12,159
Speaker 6: that job with new technologies.

440
00:24:12,840 --> 00:24:16,399
Speaker 2: You know, you mentioned markets earlier, and clearly there's a

441
00:24:16,440 --> 00:24:19,280
Speaker 2: lot of enthusiasm about AI still in the markets, and

442
00:24:19,280 --> 00:24:21,959
Speaker 2: that's one of the reasons we've seen stocks, you know,

443
00:24:22,160 --> 00:24:26,840
Speaker 2: hovering around all time highs and credit spreads are now

444
00:24:26,880 --> 00:24:31,000
Speaker 2: at what like a thirty year low. Basically, talk to

445
00:24:31,119 --> 00:24:34,240
Speaker 2: us about where you see rates at the moment in

446
00:24:34,320 --> 00:24:37,720
Speaker 2: terms of their restrictiveness, because some of your fellow FED

447
00:24:37,760 --> 00:24:40,879
Speaker 2: presidents will say that they think rates are still restrictive.

448
00:24:41,000 --> 00:24:43,919
Speaker 2: And then when I look at something like credit spreads

449
00:24:44,400 --> 00:24:47,440
Speaker 2: at you know, a three decade low, I think, actually,

450
00:24:47,720 --> 00:24:50,199
Speaker 2: this doesn't look that restrictive to me.

451
00:24:50,440 --> 00:24:53,160
Speaker 4: And with inflation right, and with inflation.

452
00:24:52,920 --> 00:24:55,920
Speaker 2: Still above target, how restrictive are rates at the moment.

453
00:24:56,880 --> 00:24:59,239
Speaker 6: Yeah, it's a it's a great question, and I've been

454
00:24:59,359 --> 00:25:03,280
Speaker 6: very public I believe there. I would call them modestly restrictive.

455
00:25:03,280 --> 00:25:06,119
Speaker 6: They're not overly restrictive, and I think that what we

456
00:25:06,240 --> 00:25:09,600
Speaker 6: have to be careful of is kind of rebasing our

457
00:25:09,680 --> 00:25:13,040
Speaker 6: decisioning on rates. And I think the markets do this

458
00:25:13,080 --> 00:25:16,280
Speaker 6: because look, I'm a former banker. Bankers and bank clients

459
00:25:16,320 --> 00:25:20,119
Speaker 6: they love low credit rates. They like lower rates because

460
00:25:20,200 --> 00:25:23,200
Speaker 6: they can perform better on their capital base. So I

461
00:25:23,560 --> 00:25:27,120
Speaker 6: understand that piece. But I think we talk about being

462
00:25:27,240 --> 00:25:30,040
Speaker 6: range bound to a degree. I like to think about

463
00:25:30,680 --> 00:25:32,879
Speaker 6: you know, I love the nineties, right, so if you

464
00:25:32,960 --> 00:25:36,080
Speaker 6: think about how hard the eighties were. As we emerged

465
00:25:36,080 --> 00:25:40,239
Speaker 6: into the nineties, we had a technology surge, and if

466
00:25:40,280 --> 00:25:42,840
Speaker 6: you watched or looked at the nature of the economy,

467
00:25:42,880 --> 00:25:46,879
Speaker 6: it performed early well, but there were monetary policy was

468
00:25:47,200 --> 00:25:49,640
Speaker 6: became a bit of a wave. So you would start

469
00:25:49,680 --> 00:25:52,840
Speaker 6: to make decisions where if you saw things happening in

470
00:25:52,920 --> 00:25:56,119
Speaker 6: either the you know, your dual mandate, you're you know,

471
00:25:56,240 --> 00:26:00,040
Speaker 6: keeping stable prices and full employment, you would adjust that

472
00:26:00,200 --> 00:26:03,800
Speaker 6: policy rate. And when things got maybe a little bit hotter,

473
00:26:03,880 --> 00:26:06,000
Speaker 6: and then as they cooled, you bring them down.

474
00:26:06,000 --> 00:26:09,480
Speaker 5: But it was a nice range bound process for me.

475
00:26:10,280 --> 00:26:14,040
Speaker 6: The experience of the last let's say two or three shocks,

476
00:26:14,040 --> 00:26:16,520
Speaker 6: so you had theight shock, you had the twenty twenty

477
00:26:16,840 --> 00:26:21,680
Speaker 6: pandemic shock. You know, you're pushing rates down to deminimous levels.

478
00:26:22,359 --> 00:26:25,639
Speaker 6: You probably don't want rates down there that low because

479
00:26:25,840 --> 00:26:27,920
Speaker 6: if they're down there that low, you're trying to pick

480
00:26:28,000 --> 00:26:31,520
Speaker 6: something off its back, and so you're trying to create

481
00:26:31,640 --> 00:26:33,760
Speaker 6: a rate environment that creates stimulus.

482
00:26:34,000 --> 00:26:36,600
Speaker 5: So I think right now we seem to be in

483
00:26:36,640 --> 00:26:37,639
Speaker 5: a really good place.

484
00:26:38,000 --> 00:26:42,439
Speaker 6: And so you know, it almost becomes more difficult in

485
00:26:42,480 --> 00:26:45,879
Speaker 6: the debate on rates whether they should be higher or

486
00:26:45,960 --> 00:26:49,840
Speaker 6: lower when you're at the margin versus when you're trying

487
00:26:49,880 --> 00:26:53,439
Speaker 6: to use a monetary policy as more of a blunt

488
00:26:53,480 --> 00:26:58,160
Speaker 6: force instrument to try to pound a high inflation rate

489
00:26:58,240 --> 00:26:58,800
Speaker 6: down like.

490
00:26:58,720 --> 00:27:01,440
Speaker 5: We did in the twenty twenty three cycles.

491
00:27:01,480 --> 00:27:05,320
Speaker 6: So it's actually going from kind of a blunt force

492
00:27:05,480 --> 00:27:09,480
Speaker 6: tool to actually more surgical And then the debate gets

493
00:27:09,640 --> 00:27:13,840
Speaker 6: very interesting about where that you should turn those dials

494
00:27:13,920 --> 00:27:16,840
Speaker 6: relative to the data that you're seeing. So it actually

495
00:27:16,880 --> 00:27:19,919
Speaker 6: becomes more difficult when you get on the margin in

496
00:27:19,960 --> 00:27:23,159
Speaker 6: that range bound area versus when you're trying to really

497
00:27:23,640 --> 00:27:27,080
Speaker 6: sledge the economy on the inflation side down.

498
00:27:27,560 --> 00:27:31,080
Speaker 4: So Tracy mentioned that estimating the neutral rate of interest

499
00:27:31,200 --> 00:27:34,199
Speaker 4: is a sort of difficult concept in any period. But

500
00:27:34,240 --> 00:27:37,440
Speaker 4: there is this view that the neutral rate of interest

501
00:27:37,760 --> 00:27:40,199
Speaker 4: today in twenty twenty five is significantly higher than it

502
00:27:40,320 --> 00:27:42,720
Speaker 4: was in twenty nineteen, And probably some of the best

503
00:27:42,760 --> 00:27:45,280
Speaker 4: evidence for that is the fact that even though the

504
00:27:45,320 --> 00:27:48,680
Speaker 4: market is anticipating rate cuts in the short term over

505
00:27:48,720 --> 00:27:50,600
Speaker 4: the next couple of years, that the long term rates

506
00:27:50,600 --> 00:27:54,640
Speaker 4: still fairly elevated. Curves deepen higher rates for longer.

507
00:27:55,000 --> 00:27:55,639
Speaker 2: What changed.

508
00:27:55,720 --> 00:27:59,160
Speaker 4: What's the difference between twenty twenty five and twenty nineteen.

509
00:28:00,200 --> 00:28:03,399
Speaker 4: It looks like the neutral rate of interest is so

510
00:28:03,520 --> 00:28:04,520
Speaker 4: much durably higher.

511
00:28:05,560 --> 00:28:09,320
Speaker 6: Yeah, Joey, this is really interesting science. With the policy

512
00:28:09,840 --> 00:28:12,879
Speaker 6: side of our mandate, we have some some influence on

513
00:28:12,920 --> 00:28:15,000
Speaker 6: the short end of the curve, right so, but so

514
00:28:15,119 --> 00:28:19,080
Speaker 6: taking the long end, the whole concept of the long rate,

515
00:28:19,440 --> 00:28:22,040
Speaker 6: it has what we call term premiums in it, right,

516
00:28:22,119 --> 00:28:25,600
Speaker 6: you know, And you have to kind of Subka doesn't.

517
00:28:25,359 --> 00:28:28,560
Speaker 2: Believe in the term premium, but I do.

518
00:28:28,840 --> 00:28:30,600
Speaker 5: I do, Sure, I don't.

519
00:28:30,640 --> 00:28:32,240
Speaker 6: I don't know if I believe in it, but I

520
00:28:32,600 --> 00:28:35,560
Speaker 6: think there are pieces of a long rate that have

521
00:28:35,840 --> 00:28:38,520
Speaker 6: sections of it that the market is going to try

522
00:28:38,560 --> 00:28:39,200
Speaker 6: to digest.

523
00:28:39,320 --> 00:28:41,040
Speaker 4: Can I just say crazy things that I have a

524
00:28:41,080 --> 00:28:43,160
Speaker 4: complete crank. But every once in a while we get

525
00:28:43,160 --> 00:28:45,840
Speaker 4: a guest who's like, no, there's something to Joey ski.

526
00:28:45,800 --> 00:28:46,200
Speaker 3: No, no, no.

527
00:28:46,280 --> 00:28:48,760
Speaker 2: Ever, once we get a guest who will say, you know,

528
00:28:48,800 --> 00:28:50,520
Speaker 2: it's a nuanced thing, which it is.

529
00:28:50,560 --> 00:28:53,080
Speaker 3: We all agree, keep going, keep going, okay.

530
00:28:53,160 --> 00:28:55,680
Speaker 6: So so that so what I I try, what I'm

531
00:28:55,720 --> 00:28:58,080
Speaker 6: trying to do with Let's say the concept of the

532
00:28:58,120 --> 00:29:02,240
Speaker 6: long end of the curve is you've got issues of Okay,

533
00:29:02,280 --> 00:29:04,400
Speaker 6: some of the market's going to say they're going to

534
00:29:04,400 --> 00:29:07,080
Speaker 6: be influenced by the prospect of inflation because you have

535
00:29:07,120 --> 00:29:10,680
Speaker 6: to build a price into the long rate for inflation.

536
00:29:11,160 --> 00:29:12,840
Speaker 6: Some of them are going to say, it's a demand

537
00:29:13,040 --> 00:29:16,080
Speaker 6: and supply issue with the debt that's trying to be financed,

538
00:29:16,080 --> 00:29:19,960
Speaker 6: both government and private debt. The nature of that long rate,

539
00:29:20,160 --> 00:29:23,320
Speaker 6: there's pieces of it that are going to influence it.

540
00:29:23,320 --> 00:29:26,240
Speaker 6: It's interesting, you know, I talk about the Fed balance

541
00:29:26,240 --> 00:29:29,440
Speaker 6: sheet quite a bit. It's hard to second guess what

542
00:29:29,480 --> 00:29:32,480
Speaker 6: we did in the eight and twenty twenty cycle with

543
00:29:32,600 --> 00:29:37,240
Speaker 6: our balance sheet relative to trying to keep the long

544
00:29:37,400 --> 00:29:42,200
Speaker 6: rate somewhat in submission. So actually the duration of our

545
00:29:42,360 --> 00:29:45,560
Speaker 6: balance sheet is influencing the long rate to some extent,

546
00:29:46,000 --> 00:29:49,440
Speaker 6: which I think is in a positive way. So when

547
00:29:49,440 --> 00:29:52,440
Speaker 6: you think about it, the treasury duration is about four

548
00:29:52,520 --> 00:29:56,080
Speaker 6: or five years. Are balance sheets about a little over

549
00:29:56,120 --> 00:30:00,880
Speaker 6: eight years in duration. So that's that quantitative twisting that

550
00:30:00,960 --> 00:30:04,400
Speaker 6: people talk about. So we're actually influencing the long rite

551
00:30:04,400 --> 00:30:07,240
Speaker 6: a little bit in our balance sheet in a positive way.

552
00:30:07,560 --> 00:30:10,600
Speaker 6: But I think over time, as long as the market

553
00:30:10,640 --> 00:30:12,120
Speaker 6: believes that debt.

554
00:30:11,840 --> 00:30:14,280
Speaker 5: Can be financed and there's not a lot of.

555
00:30:14,160 --> 00:30:18,160
Speaker 6: Inflation expectation, you're seeing a long end of the curve

556
00:30:18,280 --> 00:30:19,280
Speaker 6: drift of downboard.

557
00:30:35,080 --> 00:30:37,160
Speaker 4: So I'm going to go to what I think, you know,

558
00:30:37,240 --> 00:30:40,520
Speaker 4: what is maybe the hot button topic of the moment.

559
00:30:40,760 --> 00:30:43,480
Speaker 4: The formal theme of this year's Jackson Hole is of

560
00:30:43,520 --> 00:30:47,920
Speaker 4: course about the labor market and various trends. The subtext theme,

561
00:30:48,720 --> 00:30:50,200
Speaker 4: and I think this is going to be a lot

562
00:30:50,200 --> 00:30:52,920
Speaker 4: of interest, is the attacks on the FED and concerns

563
00:30:52,920 --> 00:30:57,080
Speaker 4: about central bank independent Just to your point about what's

564
00:30:57,200 --> 00:30:59,959
Speaker 4: driving that long end of the curve. If there are

565
00:31:00,160 --> 00:31:03,160
Speaker 4: concerns that the political will is no longer there to

566
00:31:03,240 --> 00:31:05,680
Speaker 4: keep an independent central bank, if there are concerns that

567
00:31:05,760 --> 00:31:08,239
Speaker 4: in the future that the FED will more be at

568
00:31:08,240 --> 00:31:11,760
Speaker 4: the beck and call of elected officials. Could that also

569
00:31:11,840 --> 00:31:14,360
Speaker 4: be a factor in driving up the long end of

570
00:31:14,440 --> 00:31:18,360
Speaker 4: the curve, as investors may rationally presume that a future

571
00:31:18,360 --> 00:31:21,040
Speaker 4: FED may not be as committed to stable prices as

572
00:31:21,080 --> 00:31:21,680
Speaker 4: the current FED.

573
00:31:22,640 --> 00:31:29,640
Speaker 5: Wow, that's Joe, Actually, there's so much. There's such an onion,

574
00:31:29,680 --> 00:31:30,560
Speaker 5: and what I know.

575
00:31:30,480 --> 00:31:32,920
Speaker 4: I know, but I try, but so strip away all

576
00:31:32,960 --> 00:31:36,080
Speaker 4: of my throat clearing, which I felt was necessary. If

577
00:31:36,080 --> 00:31:38,280
Speaker 4: there is concern that there is no longer the political

578
00:31:38,320 --> 00:31:41,120
Speaker 4: will to maintain an independent central bank, that there is

579
00:31:41,200 --> 00:31:43,760
Speaker 4: concern that a future FED may not be as committed

580
00:31:43,800 --> 00:31:46,000
Speaker 4: to inflation fighting as it ought to be to keep

581
00:31:46,040 --> 00:31:49,040
Speaker 4: that two percent goal, could that be a factor driving

582
00:31:49,160 --> 00:31:50,200
Speaker 4: up rates at the long end?

583
00:31:50,400 --> 00:31:51,560
Speaker 2: Peel the onion for us?

584
00:31:51,560 --> 00:31:54,920
Speaker 6: We have time, Okay, So the quick answer is, I

585
00:31:54,960 --> 00:31:57,880
Speaker 6: don't know. I guess I wouldn't. I don't see or

586
00:31:57,960 --> 00:32:02,920
Speaker 6: hear that acknowledge the debank eight Joe, and I believe. Look,

587
00:32:02,960 --> 00:32:04,800
Speaker 6: our country is going to be two hundred and fifty

588
00:32:04,840 --> 00:32:08,840
Speaker 6: years old next year. It's still the great experiment. It's

589
00:32:08,840 --> 00:32:15,160
Speaker 6: built on legislation. And what's fascinating to me is the

590
00:32:15,200 --> 00:32:19,120
Speaker 6: issue of FED independence. It's codified, right, so you know,

591
00:32:19,200 --> 00:32:24,400
Speaker 6: we have a mandate. It's legislative that legislative authority can

592
00:32:24,440 --> 00:32:28,720
Speaker 6: shift and change. But it's hard to argue the efficacy

593
00:32:28,800 --> 00:32:32,440
Speaker 6: of the independence piece. I mean, I think there's a

594
00:32:32,480 --> 00:32:35,360
Speaker 6: bit of perfection in me being able to go to

595
00:32:35,400 --> 00:32:39,520
Speaker 6: a table with eighteen other really committed and bright people

596
00:32:40,000 --> 00:32:42,800
Speaker 6: to try to keep this economy on a level rail.

597
00:32:43,880 --> 00:32:46,480
Speaker 6: I talk to people about the economy being this big,

598
00:32:47,080 --> 00:32:51,360
Speaker 6: very massive train, the largest most powerful train economic train

599
00:32:51,400 --> 00:32:54,960
Speaker 6: in the world, thirty trillion dollars, and you've got administration

600
00:32:55,120 --> 00:32:58,120
Speaker 6: and in Congress that really is running the train were

601
00:32:58,440 --> 00:33:01,840
Speaker 6: the American people are are riding on that train. Now,

602
00:33:02,360 --> 00:33:05,080
Speaker 6: for the FED, the FED is not the train. The

603
00:33:05,120 --> 00:33:09,280
Speaker 6: FED is actually the rails. It simplifies that to me

604
00:33:09,920 --> 00:33:13,200
Speaker 6: to think about the two rails being you know, stable

605
00:33:13,240 --> 00:33:17,560
Speaker 6: prices in full employment, and for us, it's really it

606
00:33:17,680 --> 00:33:20,760
Speaker 6: helps us not to have to worry about the market

607
00:33:20,880 --> 00:33:24,280
Speaker 6: or the politic of things, to try to keep the

608
00:33:24,400 --> 00:33:28,560
Speaker 6: rails steady and level so that train can go fast.

609
00:33:28,920 --> 00:33:31,960
Speaker 6: And so the nature of what we do in those

610
00:33:32,000 --> 00:33:34,920
Speaker 6: two rails and the decisioning we do is really more

611
00:33:35,040 --> 00:33:40,880
Speaker 6: balancing than it is trying to shoot towards some predetermined place.

612
00:33:41,360 --> 00:33:43,800
Speaker 6: We know two percent is a good place to be

613
00:33:44,000 --> 00:33:47,720
Speaker 6: for inflation. I think time has tested that we know

614
00:33:47,880 --> 00:33:53,800
Speaker 6: full employment is a really very positive friction to the

615
00:33:53,880 --> 00:33:57,239
Speaker 6: stable price mandate. So kind of getting back to the

616
00:33:57,240 --> 00:34:02,400
Speaker 6: independence thing, healthy friction in a conversation just makes the

617
00:34:02,480 --> 00:34:07,160
Speaker 6: Republic stronger in my opinion. So I'm happy with the debate.

618
00:34:07,400 --> 00:34:11,880
Speaker 6: I'm happy to express it, but frankly, it's it's less

619
00:34:11,880 --> 00:34:14,399
Speaker 6: important that I express it as what you and your

620
00:34:14,480 --> 00:34:19,719
Speaker 6: listeners believe that independence does this to the decisioning of

621
00:34:19,760 --> 00:34:21,120
Speaker 6: that massive economy.

622
00:34:21,520 --> 00:34:22,360
Speaker 5: I think it works.

623
00:34:22,360 --> 00:34:26,759
Speaker 6: I think you see other countries that disentangle it to

624
00:34:26,840 --> 00:34:30,560
Speaker 6: the body politic, and I think it's very difficult to

625
00:34:30,680 --> 00:34:35,000
Speaker 6: keep economies level set when you don't have that independence piece.

626
00:34:35,520 --> 00:34:37,799
Speaker 2: Well, on this topic, let me ask I guess a

627
00:34:37,800 --> 00:34:41,799
Speaker 2: blunter independence question, because Joe's right that this is, you know,

628
00:34:41,880 --> 00:34:45,319
Speaker 2: this is the unofficial theme of the conference. I think

629
00:34:45,360 --> 00:34:49,399
Speaker 2: and you yourself have previously stressed the importance of FED independence.

630
00:34:50,239 --> 00:34:53,480
Speaker 2: So are there steps that the FED should be taking

631
00:34:53,719 --> 00:34:58,200
Speaker 2: in order to, you know, not necessarily improve its independence

632
00:34:58,280 --> 00:35:01,560
Speaker 2: or even protect its independence, but to convince people like

633
00:35:01,680 --> 00:35:05,680
Speaker 2: us and the markets that it is truly making decisions independently.

634
00:35:07,440 --> 00:35:08,640
Speaker 5: So the proof is.

635
00:35:08,600 --> 00:35:12,400
Speaker 6: In the putting about you know, how is our policy

636
00:35:12,640 --> 00:35:18,000
Speaker 6: action affecting the level setting of those rails. And so look,

637
00:35:18,080 --> 00:35:21,640
Speaker 6: we should be held to task that are we making

638
00:35:21,680 --> 00:35:25,719
Speaker 6: decisions that are rationalized on sound data and that they

639
00:35:25,920 --> 00:35:29,960
Speaker 6: are in compliance with the congressional mandates that we have,

640
00:35:30,560 --> 00:35:34,680
Speaker 6: and so we are kind of duty bound to that framework.

641
00:35:34,760 --> 00:35:38,400
Speaker 6: And so I would say there's a measure of perfection

642
00:35:39,239 --> 00:35:42,080
Speaker 6: in the fact that even in the FED structure, where

643
00:35:42,120 --> 00:35:46,360
Speaker 6: you've got seven Board of governors and twelve reserve bank presidents,

644
00:35:46,400 --> 00:35:50,560
Speaker 6: where the nature of just how those individuals are seeded

645
00:35:51,560 --> 00:35:55,560
Speaker 6: with let's say Senate confirmation, a White House nomination for

646
00:35:55,600 --> 00:35:58,400
Speaker 6: the Board of Governors, and then the twelve reserve banks

647
00:35:58,400 --> 00:36:02,359
Speaker 6: having their own in mark get in district boards, that

648
00:36:02,440 --> 00:36:05,600
Speaker 6: really kind of act as a ballast to the whole

649
00:36:05,600 --> 00:36:09,880
Speaker 6: independence architecture. So I actually think that the nature of

650
00:36:09,880 --> 00:36:13,720
Speaker 6: how was structured in nineteen thirteen is still effective today.

651
00:36:14,160 --> 00:36:18,280
Speaker 6: We're just continuing to learn about how to make policy

652
00:36:18,480 --> 00:36:21,960
Speaker 6: better relative to what to the cycles in the economy.

653
00:36:22,280 --> 00:36:26,560
Speaker 6: Think about the twenties and thirties, think about the nineteen

654
00:36:26,760 --> 00:36:29,920
Speaker 6: seventies and eighties cycle. We're still learning as a body

655
00:36:30,760 --> 00:36:34,880
Speaker 6: to get this right, because we've got this amazing economy

656
00:36:34,960 --> 00:36:39,160
Speaker 6: thirty trillion of one hundred trillion, and if we're healthy,

657
00:36:39,400 --> 00:36:42,040
Speaker 6: the globe can be healthy. And that's the way I

658
00:36:42,080 --> 00:36:45,040
Speaker 6: see our role, and that's why I think independence matters.

659
00:36:45,160 --> 00:36:45,440
Speaker 3: All Right.

660
00:36:45,480 --> 00:36:48,319
Speaker 4: I have another question that I forgot to ask Mary

661
00:36:48,360 --> 00:36:51,239
Speaker 4: daily and now it's and I've been thinking about it,

662
00:36:51,239 --> 00:36:53,120
Speaker 4: and I was like, Okay, now you're here at the

663
00:36:53,160 --> 00:36:55,960
Speaker 4: most recent FED decision through two descents, which is not

664
00:36:56,440 --> 00:36:58,919
Speaker 4: crazy to have descents happened, but they're like fairly rare,

665
00:36:59,280 --> 00:37:03,680
Speaker 4: et cetera. Why are descents rare? How would you articulate

666
00:37:03,800 --> 00:37:06,560
Speaker 4: why descents are rare? Because I think this again could

667
00:37:06,640 --> 00:37:09,439
Speaker 4: be relevant in the future depending on who the next

668
00:37:09,440 --> 00:37:15,080
Speaker 4: FED chair is. Are they rare because generally speaking, you

669
00:37:15,160 --> 00:37:18,319
Speaker 4: and your colleagues roughly arrive at the same view of

670
00:37:18,360 --> 00:37:22,719
Speaker 4: what's appropriate policy. Or are they rare because historically, when

671
00:37:22,840 --> 00:37:26,279
Speaker 4: there is some marginal difference, the regional FED presidents and

672
00:37:26,320 --> 00:37:29,480
Speaker 4: the other governors tend to defer to the judgment of

673
00:37:29,520 --> 00:37:29,839
Speaker 4: the chair.

674
00:37:30,760 --> 00:37:34,319
Speaker 6: Yeah, it's I love that that question, and so I'd

675
00:37:34,360 --> 00:37:36,239
Speaker 6: maybe frame it in a couple of ways. One is,

676
00:37:36,880 --> 00:37:39,280
Speaker 6: I think in a lot of ways the cents are healthy.

677
00:37:39,320 --> 00:37:42,279
Speaker 6: I think there are times when we get kind of

678
00:37:42,480 --> 00:37:45,160
Speaker 6: criticized as being kind of fed speak.

679
00:37:45,280 --> 00:37:47,120
Speaker 5: You know that they're always aligned.

680
00:37:49,239 --> 00:37:52,239
Speaker 4: Two is rare, sometimes there's one frequently is there? So

681
00:37:52,280 --> 00:37:55,840
Speaker 4: what's the reason why generally speaking they are pretty rare.

682
00:37:56,719 --> 00:38:00,000
Speaker 6: So so here again, we're at the margin on things

683
00:38:00,239 --> 00:38:05,080
Speaker 6: like the policy rate today, So the data could shift

684
00:38:05,360 --> 00:38:08,040
Speaker 6: people's opinions one way or the other on the dual

685
00:38:08,120 --> 00:38:12,080
Speaker 6: mandate relative to their vote on dissent or not. So

686
00:38:12,600 --> 00:38:16,719
Speaker 6: I think the two descents were fairly rational public statements

687
00:38:16,760 --> 00:38:20,400
Speaker 6: about concern about the the labor market and the labor force.

688
00:38:21,520 --> 00:38:24,200
Speaker 6: There was great debate, and so you're trying to figure

689
00:38:24,200 --> 00:38:26,919
Speaker 6: out where do you settle on the debate. The other

690
00:38:27,000 --> 00:38:30,600
Speaker 6: influence really is the chair. I've worked with Jerome Powell

691
00:38:30,800 --> 00:38:35,000
Speaker 6: for a couple of years now. He's a principled he's committed.

692
00:38:35,560 --> 00:38:40,120
Speaker 6: I think he appreciates in his background and experience trying

693
00:38:40,160 --> 00:38:43,560
Speaker 6: to collaborate with people at the table to get a

694
00:38:43,600 --> 00:38:47,319
Speaker 6: sense of where they are in their opinions of where

695
00:38:47,320 --> 00:38:49,920
Speaker 6: the economy is and where the policy rate should be.

696
00:38:50,400 --> 00:38:53,200
Speaker 6: And I've really enjoyed working with them, and we don't

697
00:38:53,239 --> 00:38:56,000
Speaker 6: always agree, but at the nature of once you get

698
00:38:56,040 --> 00:38:58,879
Speaker 6: to the table, you've got to make a decision. And

699
00:38:58,920 --> 00:39:01,800
Speaker 6: I think that you just have to have good data,

700
00:39:01,920 --> 00:39:06,560
Speaker 6: good back ground, good discussions in your district about where

701
00:39:06,560 --> 00:39:08,680
Speaker 6: do you think that the policy rate should go?

702
00:39:09,320 --> 00:39:10,720
Speaker 5: And so I think it really does.

703
00:39:11,800 --> 00:39:15,319
Speaker 6: It's healthy discussion and at times, I suppose it's going

704
00:39:15,360 --> 00:39:18,000
Speaker 6: to be a votive dissent a time or two. But

705
00:39:18,239 --> 00:39:20,960
Speaker 6: we're in the margin play now relative to where that

706
00:39:21,000 --> 00:39:22,160
Speaker 6: policy rate should be.

707
00:39:22,840 --> 00:39:25,279
Speaker 2: Okay, So speaking of where the policy rate should go

708
00:39:25,880 --> 00:39:29,200
Speaker 2: and healthy discussion, obviously there's a lot of stuff happening

709
00:39:29,239 --> 00:39:31,920
Speaker 2: between now and the September meeting. We have the Jackson

710
00:39:31,960 --> 00:39:35,600
Speaker 2: Hole Economic Symposium itself. We have a couple more big

711
00:39:35,719 --> 00:39:40,799
Speaker 2: data points. What specific data or developments would signal to

712
00:39:40,920 --> 00:39:44,960
Speaker 2: you that perhaps it is time to start really thinking

713
00:39:45,160 --> 00:39:47,800
Speaker 2: or advocating for that rate cut. What are you watching

714
00:39:47,840 --> 00:39:48,080
Speaker 2: out for?

715
00:39:48,880 --> 00:39:51,520
Speaker 6: Yeah, so i'd be watching what a lot of us watch,

716
00:39:51,640 --> 00:39:54,000
Speaker 6: you know, some of the inflation data. There's quite a

717
00:39:54,040 --> 00:39:55,520
Speaker 6: bit of it going to come out in the next

718
00:39:55,560 --> 00:39:58,640
Speaker 6: four or five weeks. Certainly we're going to be very

719
00:39:58,920 --> 00:40:03,440
Speaker 6: determined to network are inside the tenth district about what's

720
00:40:03,440 --> 00:40:06,839
Speaker 6: happening inside labor and the workforce, just try to get

721
00:40:07,000 --> 00:40:10,440
Speaker 6: a better be on where unemployment is and supply and

722
00:40:10,480 --> 00:40:13,440
Speaker 6: demand where that is. So I think those are the

723
00:40:13,480 --> 00:40:18,000
Speaker 6: principal data points. Then I think that that's what's beautiful

724
00:40:18,040 --> 00:40:20,840
Speaker 6: about the Jackson Hole timing. I think there's going to

725
00:40:20,840 --> 00:40:24,520
Speaker 6: be a lot of discussion, not just domestically but internationally.

726
00:40:24,560 --> 00:40:28,040
Speaker 6: I mean, we've got one hundred and fifty people experts

727
00:40:28,080 --> 00:40:31,399
Speaker 6: in their own rights, central bankers, some of those most

728
00:40:31,400 --> 00:40:35,440
Speaker 6: amazing economists on the globe, all four corners, just to

729
00:40:35,480 --> 00:40:40,160
Speaker 6: get a calibration of where everybody is just globally, and

730
00:40:40,200 --> 00:40:44,560
Speaker 6: I think we'll be able to emerge with solid decisioning

731
00:40:44,640 --> 00:40:47,600
Speaker 6: in September. We'll see where that goes. Like I said,

732
00:40:48,520 --> 00:40:51,440
Speaker 6: when I put everything in the basket, it just seems

733
00:40:51,440 --> 00:40:54,360
Speaker 6: like we're in a pretty good place right now, but

734
00:40:54,560 --> 00:40:57,600
Speaker 6: look that data can shift and change, and we're in

735
00:40:57,680 --> 00:41:00,560
Speaker 6: kind of, as I mentioned, kind of the nuance of

736
00:41:00,640 --> 00:41:03,279
Speaker 6: the range of where we want to be with policy rate,

737
00:41:03,320 --> 00:41:05,520
Speaker 6: and we'll see where it goes in September.

738
00:41:05,960 --> 00:41:09,160
Speaker 4: My last question is, and it's basically just a restatement

739
00:41:09,320 --> 00:41:11,680
Speaker 4: of Tracy's earlier question, but I'm still trying to wrap

740
00:41:11,680 --> 00:41:15,040
Speaker 4: my head around this. You know, Americans have experienced years

741
00:41:15,040 --> 00:41:18,120
Speaker 4: of above target inflation. It's still running a little warm.

742
00:41:18,520 --> 00:41:21,960
Speaker 4: As Tracy mentioned, stock markets at all time high, credit

743
00:41:22,040 --> 00:41:26,520
Speaker 4: spreads very low, and again inflation still warm. And you

744
00:41:26,600 --> 00:41:28,919
Speaker 4: also say that you think the labor market is all right,

745
00:41:28,960 --> 00:41:32,359
Speaker 4: it's fine, that maybe businesses have a little confidence just

746
00:41:32,640 --> 00:41:35,839
Speaker 4: articulate what is it therefore that's restrictive or even even

747
00:41:35,880 --> 00:41:41,440
Speaker 4: modestly restrictive about the current stance. Well, so you're how

748
00:41:41,480 --> 00:41:43,080
Speaker 4: do you demonstrate that it's restrictive.

749
00:41:43,320 --> 00:41:48,120
Speaker 6: Yeah, yeah, So look, there's a lot of market opinion

750
00:41:48,239 --> 00:41:51,239
Speaker 6: about kind of the nature of where the policy rate

751
00:41:51,400 --> 00:41:54,759
Speaker 6: is to say, let's say where the two year treasury is,

752
00:41:54,840 --> 00:41:57,680
Speaker 6: and just that you know, everybody has kind of that

753
00:41:57,840 --> 00:42:01,839
Speaker 6: they go back to this whole neutral rate conversation, which

754
00:42:01,880 --> 00:42:04,680
Speaker 6: I think has some value. I mean, the are star

755
00:42:04,880 --> 00:42:07,920
Speaker 6: processes of value. There's going to be some really interesting

756
00:42:08,239 --> 00:42:09,799
Speaker 6: discussion on the tailor rule.

757
00:42:09,800 --> 00:42:11,200
Speaker 5: I mean, some of the tailor rule.

758
00:42:11,080 --> 00:42:13,600
Speaker 6: Data today would suggest that maybe rates ought to be

759
00:42:13,600 --> 00:42:17,520
Speaker 6: a little higher. So we're gonna, I think we're going

760
00:42:17,600 --> 00:42:22,080
Speaker 6: to really bear down on the nature of how restrictive

761
00:42:22,160 --> 00:42:26,480
Speaker 6: things might be. And to your point, Joe, with all

762
00:42:26,560 --> 00:42:29,680
Speaker 6: the data sets that you just espoused, along with the

763
00:42:29,760 --> 00:42:33,319
Speaker 6: dual mandate data sets. It just seems like we're in

764
00:42:33,400 --> 00:42:36,560
Speaker 6: a pretty good place. I don't think we should not

765
00:42:36,719 --> 00:42:40,480
Speaker 6: talk about it. Would there be a scenario where rates

766
00:42:40,520 --> 00:42:43,960
Speaker 6: could go higher. On the policy side, the PPI was

767
00:42:44,400 --> 00:42:45,400
Speaker 6: a bit eye opening.

768
00:42:45,600 --> 00:42:48,160
Speaker 5: We'll see where the CPE comes.

769
00:42:47,920 --> 00:42:51,839
Speaker 6: In and later here in August and September. Not that

770
00:42:51,840 --> 00:42:55,040
Speaker 6: that necessarily it needs to go higher, but you have

771
00:42:55,120 --> 00:43:00,279
Speaker 6: to be willing to anchor yourself in side those mandates.

772
00:43:00,360 --> 00:43:04,759
Speaker 6: So if in fact you see something that needs more restriction,

773
00:43:04,960 --> 00:43:09,000
Speaker 6: you should shouldn't be unafraid to act. That's our job.

774
00:43:09,200 --> 00:43:13,960
Speaker 6: So we'll see. But right now, it seems like we're

775
00:43:13,960 --> 00:43:16,439
Speaker 6: in a good place. By the way, we brought that

776
00:43:16,520 --> 00:43:19,600
Speaker 6: policy right down one hundred basis points since a year ago,

777
00:43:19,800 --> 00:43:21,160
Speaker 6: so it's.

778
00:43:21,000 --> 00:43:22,799
Speaker 5: Not like we haven't moved it.

779
00:43:22,920 --> 00:43:24,760
Speaker 6: And the yield curve seems to be in a pretty

780
00:43:24,760 --> 00:43:29,200
Speaker 6: good place too, And so I don't know. I like

781
00:43:29,280 --> 00:43:32,560
Speaker 6: what I'm seeing right now, with a bit of caution on,

782
00:43:33,080 --> 00:43:36,319
Speaker 6: let's just keep our eye on this inflation number as

783
00:43:36,360 --> 00:43:37,040
Speaker 6: they emerge.

784
00:43:38,040 --> 00:43:40,400
Speaker 2: So I have one more question, because I realized it

785
00:43:40,440 --> 00:43:42,120
Speaker 2: would be bad if we had you on and we

786
00:43:42,160 --> 00:43:45,839
Speaker 2: didn't ask you at least one banking question given your

787
00:43:46,280 --> 00:43:50,640
Speaker 2: previous career history. But the other forgotten theme of our

788
00:43:50,800 --> 00:43:55,080
Speaker 2: macroeconomic policy moment is quantitative tightening, right QT is still

789
00:43:55,120 --> 00:43:59,200
Speaker 2: going on in the background, and recently we've seen use

790
00:43:59,320 --> 00:44:03,240
Speaker 2: of our the REPO facility going to less than fifty billion,

791
00:44:03,280 --> 00:44:05,640
Speaker 2: and so people are talking again about are we getting

792
00:44:05,680 --> 00:44:07,560
Speaker 2: to a point where we are going to see bank

793
00:44:07,600 --> 00:44:11,160
Speaker 2: preserves start to drop and maybe they will become scarce.

794
00:44:11,280 --> 00:44:14,760
Speaker 2: I know the FED has been watching this. Is funding

795
00:44:14,840 --> 00:44:17,319
Speaker 2: on your radar at the moment? Is there a possibility

796
00:44:17,360 --> 00:44:20,240
Speaker 2: that we do start to see some signs of additional

797
00:44:20,239 --> 00:44:21,400
Speaker 2: stress in the funding market?

798
00:44:22,320 --> 00:44:22,720
Speaker 5: Okay?

799
00:44:22,800 --> 00:44:26,840
Speaker 6: So I would say that right now there's a I

800
00:44:26,920 --> 00:44:30,719
Speaker 6: think a general consensus that we are in an abundant

801
00:44:30,760 --> 00:44:35,680
Speaker 6: reserves policy framework. But there's also debate on both the

802
00:44:35,719 --> 00:44:38,600
Speaker 6: size of the FED balance sheet and the size of

803
00:44:38,640 --> 00:44:42,200
Speaker 6: the reserves in the system. There's actually actually very good

804
00:44:42,239 --> 00:44:46,800
Speaker 6: debate relative to the cost or non cost of ample

805
00:44:46,960 --> 00:44:50,800
Speaker 6: or abundant reserves in the system. Does it create an inefficiency?

806
00:44:51,040 --> 00:44:53,360
Speaker 6: Does it create too much of a footprint of the

807
00:44:53,400 --> 00:44:57,320
Speaker 6: FED into the markets? I will say that I'm encouraged

808
00:44:57,360 --> 00:45:01,319
Speaker 6: that we're in a project now that's I think, going

809
00:45:01,360 --> 00:45:04,759
Speaker 6: to modernize the discount window process. So I think there's

810
00:45:04,760 --> 00:45:08,440
Speaker 6: an opportunity where the FED, as the nation central bank,

811
00:45:08,760 --> 00:45:12,239
Speaker 6: can make the activities inside the discount window much more

812
00:45:12,280 --> 00:45:16,000
Speaker 6: fungible and much easier for banks to access. And I

813
00:45:16,040 --> 00:45:19,720
Speaker 6: think you could start to see the in future years

814
00:45:20,280 --> 00:45:24,440
Speaker 6: where reserves and discount window act or react in a

815
00:45:24,520 --> 00:45:28,880
Speaker 6: positive way, where you can actually see a smaller footprint

816
00:45:29,000 --> 00:45:32,560
Speaker 6: of reserves, where banks are much more comfortable having the

817
00:45:32,600 --> 00:45:36,480
Speaker 6: backstop and having a much much easier way to access

818
00:45:36,840 --> 00:45:40,000
Speaker 6: reserves through the discount window and other tools as a

819
00:45:40,040 --> 00:45:43,040
Speaker 6: way to make the market comfortable that there's plenty of

820
00:45:43,080 --> 00:45:44,880
Speaker 6: liquidity in the system.

821
00:45:45,040 --> 00:45:46,600
Speaker 5: So I'm excited about that.

822
00:45:46,760 --> 00:45:50,440
Speaker 6: It's very timely that we do that because here again,

823
00:45:50,640 --> 00:45:53,120
Speaker 6: two years ago we launched FED now. So I think,

824
00:45:53,200 --> 00:45:57,160
Speaker 6: what's the other fascinating thing about the ecosystem of banking

825
00:45:57,400 --> 00:46:01,440
Speaker 6: is we are moving to an instant payment economy. I mean,

826
00:46:01,520 --> 00:46:04,240
Speaker 6: you're starting to see even businesses start to think about

827
00:46:04,680 --> 00:46:07,880
Speaker 6: paying people every day, you know, and just the nature

828
00:46:07,960 --> 00:46:12,319
Speaker 6: of how we move money instantly seven days a week,

829
00:46:12,560 --> 00:46:15,640
Speaker 6: twenty four hours a day, the nature of that is

830
00:46:15,680 --> 00:46:18,839
Speaker 6: really going to be a very interesting dynamic, and it's

831
00:46:18,880 --> 00:46:21,759
Speaker 6: going to be necessary for the Central Bank to be

832
00:46:22,200 --> 00:46:26,680
Speaker 6: accommodative to the immediacy of that money movement, and so

833
00:46:26,920 --> 00:46:30,400
Speaker 6: I'm excited about some of the conversations we're having to

834
00:46:30,480 --> 00:46:34,120
Speaker 6: make that to make our system a money movement movement.

835
00:46:33,880 --> 00:46:34,720
Speaker 5: Much more modern.

836
00:46:35,680 --> 00:46:37,239
Speaker 2: All right, well, Jeff, we're going to have to end

837
00:46:37,239 --> 00:46:39,680
Speaker 2: it there. We could go on forever, but we'll save

838
00:46:39,760 --> 00:46:41,960
Speaker 2: some of it for in person at Jackson Hall.

839
00:46:42,000 --> 00:46:44,440
Speaker 5: I so sorry, thank you, so look forward to that.

840
00:46:44,560 --> 00:46:47,080
Speaker 2: Yeah, thank you so much, so much for coming on

841
00:46:47,200 --> 00:46:49,320
Speaker 2: and giving us a preview, and we'll see.

842
00:46:49,200 --> 00:47:04,360
Speaker 3: You in Wyoming. Very welcome to see that, Joe.

843
00:47:04,520 --> 00:47:06,440
Speaker 2: There was a lot to pick out of that conversation,

844
00:47:06,719 --> 00:47:09,040
Speaker 2: and it was a really good preview of I think

845
00:47:09,120 --> 00:47:11,600
Speaker 2: what's going to be like hot button topics. Yeah, at

846
00:47:11,640 --> 00:47:14,600
Speaker 2: the event itself, but one sentence kind of jumped out

847
00:47:14,719 --> 00:47:16,919
Speaker 2: at both of us, I think, which is the idea that, well,

848
00:47:16,960 --> 00:47:19,239
Speaker 2: you know, there are scenarios where interest rates you could

849
00:47:19,320 --> 00:47:20,799
Speaker 2: argue interest rates should be higher here.

850
00:47:20,920 --> 00:47:23,760
Speaker 4: Yeah, that was a little bit interesting, and he phrased

851
00:47:23,800 --> 00:47:25,360
Speaker 4: it in an interesting way. And I have to go

852
00:47:25,480 --> 00:47:27,080
Speaker 4: back to the tape because it was like I think

853
00:47:27,120 --> 00:47:31,160
Speaker 4: a double negative in there. But I mean, look, you

854
00:47:31,200 --> 00:47:33,719
Speaker 4: said it stock share record high credits for is a

855
00:47:33,800 --> 00:47:37,439
Speaker 4: record low. He characterized, maybe we've already seen the worst

856
00:47:37,440 --> 00:47:39,719
Speaker 4: of the labor market for ventum for twenty twenty five,

857
00:47:39,760 --> 00:47:42,279
Speaker 4: with the unemployment rates still in the low fours and

858
00:47:42,400 --> 00:47:44,000
Speaker 4: inflation is still warm.

859
00:47:44,600 --> 00:47:45,040
Speaker 3: Well, I know.

860
00:47:45,120 --> 00:47:47,719
Speaker 2: He also he pushed back on the specific use of

861
00:47:48,120 --> 00:47:52,840
Speaker 2: re economic reacceleration that word, but it is true we

862
00:47:53,000 --> 00:47:55,719
Speaker 2: have seen, in addition to some of the data like

863
00:47:55,800 --> 00:47:58,120
Speaker 2: turning negative or showing a slow down, we have seen

864
00:47:58,239 --> 00:48:00,439
Speaker 2: some of the data start to tick up at least

865
00:48:00,440 --> 00:48:02,080
Speaker 2: compared to like recent months.

866
00:48:02,120 --> 00:48:04,000
Speaker 4: So this is an interesting thing. We got that recent

867
00:48:04,080 --> 00:48:06,399
Speaker 4: jobs report and you say, oh, we're like slowing down.

868
00:48:06,640 --> 00:48:09,200
Speaker 4: But when we did our recent episode with Scanda, he

869
00:48:09,200 --> 00:48:12,160
Speaker 4: made the good point like, well, actually, maybe that data

870
00:48:12,239 --> 00:48:15,919
Speaker 4: was weak because that was the immediate post Terra volatility

871
00:48:16,040 --> 00:48:18,400
Speaker 4: and you slammed the brakes on the hiring and so forth.

872
00:48:18,760 --> 00:48:21,880
Speaker 4: And assuming that the uncertainty measures have come down certainly

873
00:48:21,960 --> 00:48:24,680
Speaker 4: since the middle of April, it is plausible that we've

874
00:48:24,680 --> 00:48:29,280
Speaker 4: already seen the softest labor market of twenty twenty five. Anyway,

875
00:48:29,480 --> 00:48:31,319
Speaker 4: lots are interesting there and I think like it's a

876
00:48:31,360 --> 00:48:33,600
Speaker 4: really good theme. I mean too, it's a good theme

877
00:48:34,000 --> 00:48:36,279
Speaker 4: for this year's conference because it does feel like some

878
00:48:36,360 --> 00:48:39,520
Speaker 4: of the things that are happening immediately right now also

879
00:48:39,680 --> 00:48:42,359
Speaker 4: intersect with long term definitely, and so there's a lot

880
00:48:42,400 --> 00:48:43,359
Speaker 4: of moving parts.

881
00:48:43,440 --> 00:48:46,200
Speaker 2: It's one of those conference themes that is not just

882
00:48:46,239 --> 00:48:49,120
Speaker 2: like theoretical, you know, ten or twenty years in the distance.

883
00:48:49,160 --> 00:48:51,839
Speaker 2: It's sort of like, yeah, it's very much now. And

884
00:48:52,040 --> 00:48:53,719
Speaker 2: on that note, you know, we're going to have some

885
00:48:53,800 --> 00:48:56,719
Speaker 2: good episodes that we record with people who are presenting

886
00:48:56,760 --> 00:48:58,160
Speaker 2: papers almost time, very.

887
00:48:58,000 --> 00:49:01,520
Speaker 4: Excited, So listeners should be prepared for most Jackson a

888
00:49:01,520 --> 00:49:02,439
Speaker 4: Hole content to come.

889
00:49:02,560 --> 00:49:03,920
Speaker 2: Yeah, all right, shall we leave it there.

890
00:49:04,000 --> 00:49:04,680
Speaker 4: Let's leave it there.

891
00:49:04,800 --> 00:49:07,040
Speaker 2: This has been another episode of the Odd Loots podcast.

892
00:49:07,120 --> 00:49:09,920
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

893
00:49:10,040 --> 00:49:12,840
Speaker 4: And I'm Jill Wisenthal. You can follow me at the Stalwart.

894
00:49:13,080 --> 00:49:16,160
Speaker 4: Follow our producers Kerman Rodriguez at Kerman armand dash Ol

895
00:49:16,160 --> 00:49:19,479
Speaker 4: Bennett a Dashbod, Kile Brooks and Kilbrooks. For more Odd

896
00:49:19,520 --> 00:49:22,160
Speaker 4: Logs content, go to Bloomberg dot com slash odd lotch

897
00:49:22,160 --> 00:49:25,080
Speaker 4: We're the daily newsletter and all of our episodes and

898
00:49:25,120 --> 00:49:27,120
Speaker 4: you can chat about all of these topics twenty four

899
00:49:27,160 --> 00:49:31,440
Speaker 4: seven in our discord discord do gg Slash outline.

900
00:49:31,440 --> 00:49:33,600
Speaker 2: And if you enjoy Odd Lots, if you like it

901
00:49:33,640 --> 00:49:35,719
Speaker 2: when we go to Jackson Hole, then please leave us

902
00:49:35,760 --> 00:49:39,040
Speaker 2: a positive review on your favorite podcast platform. And remember,

903
00:49:39,120 --> 00:49:41,560
Speaker 2: if you are a Bloomberg subscriber, you can listen to

904
00:49:41,719 --> 00:49:43,239
Speaker 2: all of our episodes.

905
00:49:42,760 --> 00:49:44,040
Speaker 3: Absolutely add free.

906
00:49:44,160 --> 00:49:46,880
Speaker 2: All you have to do is find the Bloomberg channel

907
00:49:46,920 --> 00:49:50,000
Speaker 2: on Apple Podcasts and follow the instructions there. Thanks for

908
00:49:50,080 --> 00:49:50,480
Speaker 2: listening

909
00:50:07,200 --> 00:50:07,239
Speaker 6: In