WEBVTT - BONUS EPISODE: Bloomberg Surveillance in Jackson Hole 0:00:00.240 --> 0:00:03.640 This is a special edition of Bloomberg Surveillance. In your 0:00:03.760 --> 0:00:07.600 od loots podcast feed. We're in Jackson Hawayyoming, along with 0:00:07.680 --> 0:00:12.880 Joe and Tracy covering the fed's annual Symposium. Keep listening 0:00:12.920 --> 0:00:18.400 for conversations with Peterson Institute President Adam Posen and Philadelphia 0:00:18.400 --> 0:00:22.120 Fed President Patrick Harker. That's coming up on the special 0:00:22.280 --> 0:00:31.400 edition of Bloomberg Surveillance. This is the Bloomberg Surveillance Podcast. 0:00:31.480 --> 0:00:35.400 I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. 0:00:35.600 --> 0:00:40.040 Join us each day for insight from the best an economics, geopolitics, 0:00:40.080 --> 0:00:45.000 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:45.240 --> 0:00:49.720 Spotify and anywhere you get your podcasts, and always on 0:00:49.840 --> 0:00:54.160 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 0:00:54.440 --> 0:00:57.400 Perfect guest for reaction to this speech as Mohammad al 0:00:57.440 --> 0:01:00.360 Aaron of Bloomberg Opinion and Queen's College, cambridgemammed. Thanks for 0:01:00.400 --> 0:01:02.440 being with us and being through with us through that 0:01:02.480 --> 0:01:04.880 speech as well. What were your thoughts when you heard 0:01:04.880 --> 0:01:06.760 some of those words from Chairman Power just moments ago. 0:01:07.200 --> 0:01:11.000 I had three takeaways. John, First, it's a speech that 0:01:11.120 --> 0:01:12.920 said very little that is new. 0:01:13.440 --> 0:01:14.440 He repeated what he. 0:01:14.400 --> 0:01:17.399 Has said in the past, and he has retained maximum 0:01:17.400 --> 0:01:22.039 policy optionality. Second, he reminded us that with the exception 0:01:22.280 --> 0:01:26.160 of the inflation target, which he said is two percent 0:01:26.240 --> 0:01:30.360 and will remain two percent, everything else is uncertain. And 0:01:31.240 --> 0:01:34.560 his reference to our star in particular was very interesting. 0:01:35.080 --> 0:01:38.479 And third, what I thought was also curious is how 0:01:38.520 --> 0:01:41.680 he ended the speech. He ended the speech talking about 0:01:41.720 --> 0:01:46.600 we will follow the stars in a cloudy sky. Everybody 0:01:46.680 --> 0:01:49.080 sees the cloudy sky, But what's interesting is that the 0:01:49.160 --> 0:01:52.920 west of Jackson Hall will be about moving stars. All 0:01:52.960 --> 0:01:56.200 the structural changes that are going on domestically and internationally, 0:01:56.680 --> 0:01:59.040 and that just adds to the topic that the three 0:01:59.080 --> 0:02:01.560 of you have been talking. That is a very complex 0:02:01.600 --> 0:02:04.400 world out there, and the FED has to navigate a 0:02:04.480 --> 0:02:05.680 lot of moving pieces. 0:02:07.200 --> 0:02:09.400 Mohammed. One conversation you and I have had over the 0:02:09.440 --> 0:02:11.720 last several weeks, the last several months for that matter, 0:02:11.880 --> 0:02:14.960 people having this discussion here as well, are we, from 0:02:14.960 --> 0:02:18.120 your standpoint, in your opinion, sufficiently restrictive? 0:02:19.919 --> 0:02:23.040 John. This goes immediately to what is the right inflation target? 0:02:23.560 --> 0:02:26.680 If the right inflation target is two percent and they 0:02:26.720 --> 0:02:31.040 want to get there in a credible period of time, 0:02:31.520 --> 0:02:35.560 then we are not sufficiently restrictive. If the right inflation target, 0:02:35.560 --> 0:02:38.880 as you've heard many people say, including Adam Posen today, 0:02:39.480 --> 0:02:42.520 is above two percent, giving all the structural changes, and 0:02:42.800 --> 0:02:44.399 the way we're going to get there is not by 0:02:44.440 --> 0:02:50.400 announcing the new target, but by following a shadow target, 0:02:50.760 --> 0:02:54.280 and then once we see it stable at adopting it. 0:02:54.320 --> 0:02:56.000 I think that's the most likely outcome, by the way, 0:02:56.440 --> 0:02:58.000 then we are sufficiently restrictive. 0:03:00.240 --> 0:03:02.919 Mohammed, Does it concern you that we've heard a lot 0:03:02.919 --> 0:03:06.680 of people who sound pretty happy, actually, other than Jay Powell, 0:03:06.680 --> 0:03:09.200 who is taking sort of the adult tone of we're 0:03:09.200 --> 0:03:11.799 not there yet, Stop declaring victory. There's a lot more 0:03:11.840 --> 0:03:15.800 down the pike, everybody else sounds like things are going 0:03:15.840 --> 0:03:19.280 really well and the FED policy is achieving exactly what. 0:03:19.160 --> 0:03:19.560 It saw to. 0:03:20.680 --> 0:03:23.040 So I don't think it's everybody else, but most people are, 0:03:23.160 --> 0:03:26.280 especially in the marketplace, not so the economists. You have 0:03:26.360 --> 0:03:29.480 Larry Summers, for example, reminding us this morning that if 0:03:29.480 --> 0:03:34.480 you look at the seventies inflation cycle, this one looks 0:03:34.680 --> 0:03:38.480 very similar. He has to do graphs up and he's 0:03:38.520 --> 0:03:41.960 sort of warning implicitly that we may see a pickup 0:03:42.000 --> 0:03:46.280 in inflation. So I think the marketplace is much more 0:03:46.320 --> 0:03:50.080 complacent than the economists saw. The economists recognize that the 0:03:50.440 --> 0:03:54.520 many moving pieces, whereas the marketplace things that we've gotten 0:03:54.560 --> 0:03:57.720 to a new equilibrium and from here is going to 0:03:57.760 --> 0:04:00.840 be cut next year remains to be seen. 0:04:03.080 --> 0:04:05.280 Do you think, Muhammad, that it's important for the Fed 0:04:05.760 --> 0:04:09.000 to get ahead of a potential resurgence in inflation, or 0:04:09.000 --> 0:04:12.720 do you think that Jay Powell's approach of watching the 0:04:12.760 --> 0:04:15.480 stars and seeing what they are will be sufficient to 0:04:15.600 --> 0:04:17.800 curtail some sort of more embedded inflation. 0:04:18.880 --> 0:04:21.920 It's hard, Lisa, because as you know, they have not, 0:04:22.240 --> 0:04:26.440 like past Feds, opted for a strategic view of inflation, 0:04:26.720 --> 0:04:31.960 nor do they have a functional monetary policy framework. So 0:04:32.000 --> 0:04:35.840 they've become highly data dependent, which means that they are 0:04:36.000 --> 0:04:41.880 using instruments with lags on backward looking data. So they 0:04:41.920 --> 0:04:44.560 are in a bit of a tough situation. They're going 0:04:44.600 --> 0:04:48.240 to remain data dependent. So I don't think he knows 0:04:48.560 --> 0:04:50.360 what they will do in September. He's going to wait 0:04:50.400 --> 0:04:52.240 to see what the drop report is. He's going to 0:04:52.279 --> 0:04:54.919 wait for the CPI numbers, and then they're going to 0:04:54.960 --> 0:04:57.880 decide what to do. But this is the irony is 0:04:57.920 --> 0:05:02.240 it's a highly dependent data and then fed using instruments 0:05:02.360 --> 0:05:03.360 that act with a lag. 0:05:04.360 --> 0:05:06.360 Plenty of feedback, Tom, This coming from No Data of 0:05:06.400 --> 0:05:09.000 renmactis church and please send the following. I thought Pow 0:05:09.080 --> 0:05:11.880 delivered a neutral speech. The Fed seas its monetary policy 0:05:11.880 --> 0:05:14.080 stance is restrictive, and we'll make a more tempered approach 0:05:14.120 --> 0:05:17.800 to future meetings. Proceed carefully, risk management. These are all 0:05:17.839 --> 0:05:20.760 catchphrases for do nothing right now. The view from No 0:05:20.880 --> 0:05:21.760 Data just Manasa guy. 0:05:21.920 --> 0:05:24.640 A lot more response coming in here. Mixed market, red 0:05:24.640 --> 0:05:27.880 and green on the screen, Doctor Orion. I want to 0:05:27.880 --> 0:05:31.640 touch upon your iconic work and game theory, and that 0:05:31.760 --> 0:05:34.400 with the word that I'm hearing this morning is complexity. 0:05:34.440 --> 0:05:36.120 I heard it from you, I heard it from John 0:05:36.200 --> 0:05:40.920 Lipsky and others. The simplicity we're all begging for is 0:05:41.040 --> 0:05:42.080 teed decisions. 0:05:42.400 --> 0:05:43.280 You are known for. 0:05:43.320 --> 0:05:48.600 This This is a Jackson Hall devoid of teed decisions. 0:05:48.839 --> 0:05:53.520 How do our viewers and listeners handle the complexity? Now? 0:05:53.680 --> 0:05:57.599 And to come, Tom, I think the most important thing 0:05:57.640 --> 0:06:01.200 to understand is that we have left the world of 0:06:01.279 --> 0:06:04.440 insufficient demand and we are now in a world of 0:06:04.520 --> 0:06:08.200 insufficient supply, and there's many reasons for that. It's a 0:06:08.240 --> 0:06:11.039 world that's not going to go away anytime soon. It's 0:06:11.120 --> 0:06:15.000 not pandemic issues that are fully reversible quickly. There are 0:06:15.040 --> 0:06:20.000 longer term issues going on change, globalization, supply change management, 0:06:20.600 --> 0:06:23.240 the functioning of the labor market, and the list goes on. 0:06:23.720 --> 0:06:26.880 So we are now in a different world of supply 0:06:27.520 --> 0:06:31.680 side constraints, and that world will mean that countries will 0:06:31.680 --> 0:06:35.840 become more inwardly looking, which we've seen already, and it 0:06:35.880 --> 0:06:38.760 also means that policy has to adjust to that. Now 0:06:38.760 --> 0:06:41.840 put on top of that the layer of industrial policy 0:06:42.360 --> 0:06:47.760 as we embark more meaningfully on a green transition, And 0:06:48.040 --> 0:06:51.000 it's all about the supply side, tom and that's where 0:06:51.040 --> 0:06:54.280 monetary policy is really challenged, because it acts on the 0:06:54.320 --> 0:06:55.560 demand side. 0:06:56.520 --> 0:07:00.159 We're thrilled, Mohaman to have doctor Gerghavin with us, and 0:07:00.160 --> 0:07:02.680 then you and Christian Laguard with us later. And the 0:07:02.720 --> 0:07:06.039 heart of the matter is, are we beyond the supply 0:07:06.240 --> 0:07:10.760 shocks of this pandemic? Where are we on that Continueum Muhammad? 0:07:10.920 --> 0:07:12.600 Have we escaped COVID? 0:07:14.120 --> 0:07:16.360 I mean, we've escaped the worst of COVID, but we're 0:07:16.400 --> 0:07:19.080 dealing with the legacy of COVID, but we're also dealing 0:07:19.080 --> 0:07:21.280 with the legacy of the war. We're also dealing with 0:07:21.320 --> 0:07:24.560 many other legacies. You know, Tom is fascinating that you 0:07:24.640 --> 0:07:28.600 will have President Lagard on because if you think the 0:07:28.760 --> 0:07:32.880 US is complicated, then in terms of degrees of complexity, 0:07:33.400 --> 0:07:36.680 Europe is even higher. The UK is even higher than that. 0:07:37.000 --> 0:07:39.200 So it's going to be really interesting to talk as 0:07:39.240 --> 0:07:43.640 you will do to President Laguard because even though she 0:07:43.840 --> 0:07:48.840 has a single mandate, her environment is significantly more complicated 0:07:48.880 --> 0:07:51.040 than the FEDS, which is already complicated. 0:07:52.720 --> 0:07:55.040 So Mohammed, she is so much more exposed. Europe is 0:07:55.120 --> 0:07:58.280 much more exposed to what's developing in China at the moment, Muhammed, 0:07:58.280 --> 0:08:01.679 if you took the US out of the equation right now, 0:08:01.840 --> 0:08:05.560 and we've been talking just about Europe and China, wouldn't 0:08:05.560 --> 0:08:08.600 we be talking about things like rate cuts and easing 0:08:08.880 --> 0:08:10.240 and stimulating the economy. 0:08:11.360 --> 0:08:13.800 If you take the US out of the equation, you 0:08:13.840 --> 0:08:18.400 would be talking about stagflation, and that's what everybody is 0:08:18.440 --> 0:08:22.760 afraid of. The US is exceptional, and it's exceptional in 0:08:22.800 --> 0:08:26.640 its economic performance, and if you take the US away, 0:08:26.800 --> 0:08:29.200 then you're taking away the only engine of growth for 0:08:29.240 --> 0:08:32.360 this global economy. But you're not taking away to supply 0:08:32.440 --> 0:08:35.240 side issues that are causing the inflationary pressure. So if 0:08:35.240 --> 0:08:37.680 you take the US away, we would be talking about 0:08:37.760 --> 0:08:40.800 not just the risk of stackflation in Europe, but you 0:08:40.840 --> 0:08:43.120 would be talking about the risk of stackflation in the 0:08:43.120 --> 0:08:43.960 global economy. 0:08:45.440 --> 0:08:47.960 Muhammed, is that the risk or the reality in Europe 0:08:48.000 --> 0:08:48.440 right now? 0:08:49.600 --> 0:08:50.920 John, is still the risk? 0:08:51.840 --> 0:08:52.040 You know? 0:08:52.160 --> 0:08:55.600 Yes, Germany is struggling the most, and that is if 0:08:55.600 --> 0:08:58.640 you like the engine for Europe, but there's also good 0:08:58.640 --> 0:09:04.000 things happening in Europe. Away from Germany. It's a high risk. 0:09:04.040 --> 0:09:08.520 It's flashing WED, not even yellow, it's flashing WED. But 0:09:09.040 --> 0:09:12.200 it's not yet a done deal. The US is much 0:09:12.200 --> 0:09:15.800 better off. China, ironically, is the one that's suffering the most. 0:09:16.480 --> 0:09:20.640 If you've been discussing all morning, there is no obvious 0:09:20.720 --> 0:09:26.839 policy response. And now these piecemeala responses are being rejected 0:09:26.880 --> 0:09:30.679 by the marketplace really quickly. The marketplace is no longer 0:09:30.920 --> 0:09:34.680 embracing the notion that China can get itself out of 0:09:34.720 --> 0:09:36.199 the mess is finds itself in. 0:09:38.360 --> 0:09:41.320 And that's perhaps the cause of the manufacturing recession that 0:09:41.320 --> 0:09:43.800 we see in Germany and parts of Europe, but the 0:09:43.840 --> 0:09:46.920 service aside, we've been talking about how that's maybe more 0:09:46.920 --> 0:09:50.600 directly affected by the ECB's policies and where rates are 0:09:50.760 --> 0:09:54.079 and the more direct transmission mechanism than in the US. J. 0:09:54.240 --> 0:09:57.400 Powell just said that there is evidence that the long 0:09:57.480 --> 0:09:59.679 and variable lags are coming to the fore and will 0:09:59.679 --> 0:10:02.360 actually reduce growth materially in the US. Is Europe a 0:10:02.400 --> 0:10:05.240 model for the US is headed with respect to services 0:10:05.240 --> 0:10:07.480 in the next couple of months or in the next year. 0:10:08.240 --> 0:10:09.200 I hope not, Lisa. 0:10:10.160 --> 0:10:13.160 Our service sector has been stronger, and even though the 0:10:13.200 --> 0:10:15.800 PMI numbers this week were disappointing, at least there were 0:10:15.840 --> 0:10:20.120 over fifty for the service sector. We don't want pmis 0:10:20.360 --> 0:10:26.720 south of sixty or fifty. And also, ironically, the service 0:10:26.720 --> 0:10:29.320 sector is where Europe just to staflation as well. It's 0:10:29.360 --> 0:10:31.400 not the goods sector, it's a service sector that's the 0:10:31.440 --> 0:10:34.600 inflation problem, source of an inflation problem. So I hope 0:10:34.640 --> 0:10:38.319 we don't follow Europe, because if we do, then we 0:10:38.360 --> 0:10:41.640 will be talking about a very different outlook for the US. 0:10:43.559 --> 0:10:46.800 We're silso talking about the potential for some sort of 0:10:46.880 --> 0:10:47.760 weakness down the pike. 0:10:47.840 --> 0:10:48.760 One thing that J. 0:10:48.920 --> 0:10:51.559 Powell speech did we seem to remove rate cuts in 0:10:51.600 --> 0:10:55.080 the near future, at least for the foreseeable future, and 0:10:55.080 --> 0:10:58.520 you can see that shifting upward in the rate expectations. 0:10:58.520 --> 0:11:00.480 Do you think that this economy can hand a five 0:11:00.480 --> 0:11:03.240 percent fed funds rate for the remainder of next year, 0:11:03.600 --> 0:11:05.920 even with all the strength that you're hearing about. 0:11:06.320 --> 0:11:08.800 Lisa, We don't know. And he did use the word agile, 0:11:09.200 --> 0:11:13.320 and that's absolutely correct. He's got to be agile. Look, 0:11:13.360 --> 0:11:15.760 there are all sorts of sectors that adjust. 0:11:15.600 --> 0:11:17.000 With a lag. 0:11:17.800 --> 0:11:20.839 We haven't seen the full impact yet of the higher rates. 0:11:21.600 --> 0:11:25.319 You're starting to see it play out in various segments, 0:11:25.320 --> 0:11:27.960 but in a very small way. Remember, not everything that's 0:11:28.000 --> 0:11:33.800 refinanced immediately. This is very unlike the UK economy, where 0:11:33.800 --> 0:11:36.720 the effective duration is much shorter, so you get refinancing 0:11:36.800 --> 0:11:40.040 quickly and the weights happen, the great effects happen much quicker. 0:11:40.400 --> 0:11:43.520 So we don't know how well we can navigate the 0:11:43.559 --> 0:11:47.840 five percent. It seems that the big issues in the 0:11:47.880 --> 0:11:51.280 banking sector are behind us, but so far, and it's 0:11:51.360 --> 0:11:54.120 really important to stress this, we've dealt only with interest 0:11:54.200 --> 0:11:57.040 rate risk. We have not dealt with credit risk. We 0:11:57.120 --> 0:11:59.760 have not dealt with liquidity risk, and that's what people 0:11:59.800 --> 0:12:01.400 in the marketplace have to keep an eye on. 0:12:02.040 --> 0:12:04.599 Stuart Kaiser, a city publishing just moments ago, give you 0:12:04.640 --> 0:12:06.560 a flavor of what's happening on the south side. Not 0:12:06.600 --> 0:12:09.440 a game changer for markets from Chair Power, but remind 0:12:09.520 --> 0:12:13.320 us on upside risk to inflation, that demand downside risks 0:12:13.800 --> 0:12:16.280 to growth. Mohammedel Airan still with us, Mohammed, I just 0:12:16.320 --> 0:12:18.600 want to finish on that with you. The downside risk 0:12:18.640 --> 0:12:22.560 to growth to counter the upside risk to inflation. Is 0:12:22.600 --> 0:12:24.600 that something we all need to be cautious of, gone 0:12:24.600 --> 0:12:25.600 into year round and beyond. 0:12:26.040 --> 0:12:30.160 Yes, and that's why Chair Pal had a speech full 0:12:30.400 --> 0:12:34.400 of optionality. You know, I go back to what Mike 0:12:34.480 --> 0:12:38.600 McKee correctly said. It's not that the content was new. 0:12:38.800 --> 0:12:41.360 It wasn't. There was nothing in that speech that we 0:12:41.400 --> 0:12:44.040 didn't know before. Whether it was explaining what has been 0:12:44.040 --> 0:12:47.320 behind inflation, or whether it was explaining the range of 0:12:47.360 --> 0:12:51.440 policy possibilities and the risks and the need for risk management. 0:12:51.520 --> 0:12:52.760 All that has been said before. 0:12:53.320 --> 0:12:57.120 What was notable this time is that it was packaged 0:12:57.440 --> 0:13:02.280 slightly more hawkish than than dubvish, and that's what people 0:13:02.280 --> 0:13:05.400 are picking up on. But ultimately, John, if we step back, 0:13:07.280 --> 0:13:10.120 the only thing he said is that what we know 0:13:10.240 --> 0:13:13.600 for sure is his belief is that two percent is 0:13:13.640 --> 0:13:16.560 the right inflation target and will remain the right inflation target. 0:13:16.880 --> 0:13:20.480 That issue is going to be hotly discussed in the 0:13:20.600 --> 0:13:23.320 next quarters as we get more and more data. 0:13:24.880 --> 0:13:26.480 Yeah, Muhammed, and I think that device is gon and 0:13:26.520 --> 0:13:29.240 go away anytime soon, even if you havevin power tries 0:13:29.240 --> 0:13:30.640 to put it to bad. Mhammed, thanks for being with 0:13:30.720 --> 0:13:33.680 us today. I appreciate it as always Mohammed al Arion. 0:13:44.040 --> 0:13:47.240 It will be analysis and interpretation owning the high ground 0:13:47.280 --> 0:13:53.040 on that is Joseph Wisenthal and Tracy Alloway. They host 0:13:53.280 --> 0:13:58.480 a podcast odd Lot's. Alloway had to redo her fireplace 0:13:58.920 --> 0:14:00.480 mantle because. 0:14:00.240 --> 0:14:02.480 The awards have come in outright so large. 0:14:02.840 --> 0:14:06.000 Yeah, they're piling up. I mean Wisenthal already had a 0:14:06.000 --> 0:14:08.720 mantle that it holds three Interpax City joining us. Tracy 0:14:08.800 --> 0:14:12.319 Alloway from Weisenthal would not get out of bed this 0:14:12.520 --> 0:14:15.880 early this morning. What I love about your work back 0:14:15.920 --> 0:14:18.160 at the f ten years ago is you own a 0:14:18.240 --> 0:14:22.920 perspective of London and New York and synthesizing the Western 0:14:23.000 --> 0:14:27.200 world China and an exceptional Japan with you waita in 0:14:27.320 --> 0:14:31.600 attendance here in this YCC disaster. Just had to listen 0:14:31.920 --> 0:14:35.840 to his hawkish one. How does Asia interpret what we 0:14:35.960 --> 0:14:36.680 heard this morning? 0:14:37.000 --> 0:14:39.120 Well, I'm kind of confused at some of the bond 0:14:39.160 --> 0:14:42.000 market action that we've seen, so two year yields going 0:14:42.080 --> 0:14:44.960 above five percent hawkish interpretation. 0:14:45.080 --> 0:14:46.160 But I'm on the Neil. 0:14:46.000 --> 0:14:50.480 Dudda side here, which is this was a very dubvish speech. Actually, 0:14:51.120 --> 0:14:55.160 Powell sort of gave a nod to the r star debate, 0:14:55.320 --> 0:14:57.680 the idea about whether or not the neutral rate of 0:14:57.760 --> 0:15:01.160 interest is structurally higher in current world. But then in 0:15:01.240 --> 0:15:03.600 the next sentence he basically goes, but we have no 0:15:03.680 --> 0:15:06.520 idea what our star is anyway, so it's completely irrelevant. 0:15:06.560 --> 0:15:08.040 And they're talking about being at restricted. 0:15:08.160 --> 0:15:10.040 It's not a small matter, John, Yeah, that's not a 0:15:10.120 --> 0:15:12.640 small matter. This has come up a couple times today. 0:15:13.120 --> 0:15:16.320 The guy from New York City, you know, the private 0:15:16.360 --> 0:15:19.520 equity guy, whatever Paul is, he's not too big on 0:15:20.400 --> 0:15:22.080 the plugins of our stir. 0:15:22.000 --> 0:15:24.520 The tracy something you've discussed. This probably shouldn't come as 0:15:24.560 --> 0:15:25.280 a surprise, should it. 0:15:25.680 --> 0:15:26.240 I don't think so. 0:15:26.480 --> 0:15:28.920 To me, it very much resembles what we saw last 0:15:29.040 --> 0:15:31.920 month from Powell. It's very much a data dependent speech, 0:15:32.240 --> 0:15:34.800 which makes sense because you have two major data points 0:15:34.840 --> 0:15:37.640 coming up before the next FED decision. Why would Powell 0:15:37.720 --> 0:15:40.320 stick his neck out at this particular moment in time? 0:15:40.560 --> 0:15:42.720 And of course there is a lot of uncertainty about 0:15:42.760 --> 0:15:44.360 those long and variable lags, as. 0:15:44.280 --> 0:15:46.720 You were talking about, Lisa, Well, this is a problem 0:15:46.840 --> 0:15:47.520 right now for j. 0:15:47.720 --> 0:15:49.920 Powell because he wants to bring things down, but he 0:15:49.960 --> 0:15:52.920 doesn't want to curtail tynamism too much. Do you think 0:15:53.280 --> 0:15:56.440 that it seems fair to view his speech as saying 0:15:56.520 --> 0:15:59.160 that rate cuts are not in the cards for a 0:15:59.280 --> 0:16:01.520 longer period of time time next year, because that's maybe 0:16:01.560 --> 0:16:05.480 what he wanted to say in the implicit sort of tone, 0:16:05.680 --> 0:16:07.040 but not what he actually said. 0:16:07.360 --> 0:16:10.160 I think he'd have to see a real deterioration in 0:16:10.280 --> 0:16:12.960 the underlying data to justify a rate cut, and that's 0:16:13.360 --> 0:16:15.480 just not happening. We have a lot of sort of 0:16:15.560 --> 0:16:19.680 anecdotal data points about maybe consumer spending is starting to weaken, 0:16:19.960 --> 0:16:23.040 but we haven't seen any of that in the unemployment 0:16:23.160 --> 0:16:26.040 rate right now. That said, I know the tone of 0:16:26.120 --> 0:16:29.240 this particular Jackson hole is very different to last year 0:16:29.280 --> 0:16:31.960 where Palell was talking about how we'd have to assume 0:16:32.080 --> 0:16:35.680 more pain in order to bring down inflation. But that said, 0:16:35.880 --> 0:16:40.080 it's still a really uncomfortable moment for central bankers because 0:16:40.120 --> 0:16:42.720 inflation is coming down in a way that they didn't 0:16:42.800 --> 0:16:44.360 necessarily expect. 0:16:44.600 --> 0:16:44.760 Right. 0:16:44.880 --> 0:16:47.680 The Phillips curve says that if inflation's coming down, the 0:16:47.760 --> 0:16:50.560 unemployment rate should be going up, but that hasn't been 0:16:50.600 --> 0:16:51.120 what's happening. 0:16:51.160 --> 0:16:52.880 So there's still a ton of uncertainty here. 0:16:53.120 --> 0:16:56.080 This is essentially, while it is a global central banker 0:16:56.160 --> 0:16:58.720 is coming together, it's also essentially an academic conference and 0:16:58.760 --> 0:17:01.760 you're here with Odds to speak to some of the 0:17:01.840 --> 0:17:05.600 academic research. What are you hoping to illuminate in this 0:17:05.680 --> 0:17:08.200 whole shifting global structure? 0:17:08.359 --> 0:17:10.840 That was sort of the theme. Yeah, that's exactly right. 0:17:11.160 --> 0:17:13.240 So I know that the focus is always going to 0:17:13.280 --> 0:17:16.000 be on the sort of short term outlook for interest rates, 0:17:16.040 --> 0:17:19.359 but really Jackson Hole is about the long term framework 0:17:19.640 --> 0:17:20.760 of monetary policy. 0:17:20.840 --> 0:17:22.760 And one of the big themes that is starting to. 0:17:22.800 --> 0:17:27.280 Emerge is this idea of higher public debt and we've 0:17:27.320 --> 0:17:29.840 seen that born out in the Fitch rating cut. Recently, 0:17:30.119 --> 0:17:32.959 bond yields higher because of some concerns over the outlook 0:17:33.040 --> 0:17:36.120 for US fiscal health. And again, the unusual thing about 0:17:36.160 --> 0:17:38.880 this moment in time is that we are seeing massive 0:17:38.920 --> 0:17:40.200 fiscal spending. 0:17:40.160 --> 0:17:43.720 At a time of low unemployment. That hasn't really happened before. 0:17:43.840 --> 0:17:45.240 And so I think there are a lot of people 0:17:45.359 --> 0:17:48.040 at this conference who are wrestling with that idea. 0:17:48.119 --> 0:17:49.119 In that dynamic, you and. 0:17:49.160 --> 0:17:52.000 Joe wis loove Rockstar hours. You're just sort of windering, 0:17:52.040 --> 0:17:53.919 and you do your podcast, and you do it by 0:17:54.040 --> 0:17:58.160 piecing together conversations where Bloomberg surveillance is complete and total 0:17:58.280 --> 0:18:03.040 chaos twenty four. What's the conversation here you're most looking 0:18:03.200 --> 0:18:04.880 for into your next podcast? 0:18:05.160 --> 0:18:07.600 Thank you for assuming that all thoughts isn't constant chaos 0:18:07.680 --> 0:18:10.120 as well. Tom, Well, we're having you on later today. 0:18:11.480 --> 0:18:13.680 Count please all. 0:18:13.600 --> 0:18:16.240 Right, it's a conversation you want right now at Jackson Hole. 0:18:16.320 --> 0:18:19.560 Okay, the big picture goes back to that bond outlook. 0:18:19.720 --> 0:18:23.240 What does a world of structurally higher debt look like? 0:18:23.560 --> 0:18:27.520 Does it necessitate higher interest rates? And what new financial 0:18:27.640 --> 0:18:30.359 risks does it introduce into the system. So we basically 0:18:30.480 --> 0:18:33.200 moved from a system that was very much reliant on 0:18:33.400 --> 0:18:36.359 bank lending to one that is far more bond based. 0:18:36.680 --> 0:18:40.080 And how do you square a world where bonds really 0:18:40.160 --> 0:18:44.440 really matter with central bank mandates to bring down inflation. 0:18:44.520 --> 0:18:45.399 There's a tension there. 0:18:45.440 --> 0:18:48.480 You can't build the financial system on bonds and assume 0:18:48.520 --> 0:18:50.880 that they're going to be very low volatility and then 0:18:50.960 --> 0:18:54.040 try to bring down inflation and have higher rates. 0:18:54.480 --> 0:18:56.560 Tricy, this was great. Good to have you here. Thank you, 0:18:56.720 --> 0:18:59.159 thank you having Thank you very much, Tricy Anaway the 0:18:59.280 --> 0:19:06.080 host the co host of the Odlots podcast. Joining us 0:19:06.359 --> 0:19:09.600 is Patrick Kaker, the Philadelphia FED President, Patrick good Mornick, 0:19:10.400 --> 0:19:12.720 Let's start right here, not what Chairman Pal said, but 0:19:12.800 --> 0:19:14.560 what your colleague over at the Boston Fed said in 0:19:14.600 --> 0:19:16.840 the last twenty four hours, that this resilience of this 0:19:16.960 --> 0:19:19.720 economy suggests maybe we might have to do more. You 0:19:19.800 --> 0:19:20.560 take a different view. 0:19:20.760 --> 0:19:23.560 Why so, Look, we have to get inflation down to 0:19:23.640 --> 0:19:26.560 two percent. We all agree on that, I mean everybody is. 0:19:27.080 --> 0:19:29.520 We're all committed to that. The question is how to 0:19:29.600 --> 0:19:32.440 get there. We are at a restrictive stance in my view, 0:19:32.920 --> 0:19:36.680 and we're putting pressure on the economy to slow inflation. 0:19:38.400 --> 0:19:40.480 The question is whether we need to increase the pressure, 0:19:40.640 --> 0:19:43.120 just keep pushing pushing, pushing, and I'm in the camp 0:19:43.440 --> 0:19:45.920 right now. Just keep the pressure going, let this work 0:19:46.000 --> 0:19:50.240 through again. The data may dictate that we change course 0:19:50.720 --> 0:19:53.040 or I change course, But for right now, what I'm 0:19:53.080 --> 0:19:55.720 seeing and what I'm hearing, particularly soft data. What I'm 0:19:55.760 --> 0:19:59.200 hearing I've been around my district all summer talking to people, 0:19:59.800 --> 0:20:02.600 is the clea I hear is you've done a lot 0:20:02.840 --> 0:20:05.359 very quickly. Right, You've taken a lot of pressure quickly. 0:20:05.960 --> 0:20:08.560 Now let us work through that, Let the banking system 0:20:08.600 --> 0:20:12.600 work through it, let the corporations work through that. So 0:20:12.720 --> 0:20:14.760 that I agree with that, I think we just keep 0:20:14.800 --> 0:20:17.800 the pressure on and see how things turn out. J. 0:20:17.960 --> 0:20:21.480 Paul didn't really say anything new, but he did sort 0:20:21.480 --> 0:20:23.360 of cast it in a hawkish light, and he talked 0:20:23.359 --> 0:20:27.480 about how the economy is perhaps growing faster than anticipated 0:20:27.720 --> 0:20:30.800 and that could increase inflationary pressures. So what would it 0:20:30.920 --> 0:20:33.120 take to get you to change your view and think 0:20:33.320 --> 0:20:34.639 we need to raise rates more. 0:20:34.800 --> 0:20:38.719 If we saw that the decreases in inflation, we're stalling right, 0:20:38.800 --> 0:20:41.200 that we weren't making that progress that we need to make. 0:20:41.760 --> 0:20:46.080 But what would that How would that manifest itself? Because 0:20:46.640 --> 0:20:50.639 people who calculate CPI the analysts suggest we're going to 0:20:50.680 --> 0:20:53.560 see it go back up, just essentially for mechanical. 0:20:53.160 --> 0:20:55.760 Reasons on the headline side, Yeah, for sure, But we 0:20:55.880 --> 0:20:59.000 also were going to see shelter inflation come down, right 0:20:59.080 --> 0:21:01.600 that it's coming down now. You see this with real 0:21:01.680 --> 0:21:05.960 time rents. So if service inflation in particular, or core 0:21:06.040 --> 0:21:08.840 service inflation, whatever you want to call it, supercore, if 0:21:08.920 --> 0:21:11.600 that continues to stall, then I'd say we have to 0:21:11.680 --> 0:21:14.280 do more. But again, I really want to emphasize we 0:21:14.480 --> 0:21:19.040 are doing something right now. It's not as though keeping 0:21:19.119 --> 0:21:22.200 rates where they are is doing nothing. We're actually continuing 0:21:22.280 --> 0:21:23.560 to put pressure on the economy. 0:21:23.800 --> 0:21:25.760 You said, and Jay Powell just said that it was 0:21:25.760 --> 0:21:27.760