Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let me start with I don't respond to comments by
Speaker 2: other officials, whoever they may be. It's just not appropriate
Speaker 2: to do that. I will tell you why I attended.
Speaker 2: I would say that that case is perhaps the most
Speaker 2: important legal case in the FED one hundred and thirteen
Speaker 2: year history, and as I thought about it, I thought
Speaker 2: it might be hard to explain why I didn't attend.
Speaker 2: In addition, Paul Volker went to a Supreme Court case famously,
Speaker 2: and I guess nineteen eighty five or so, so it's precedented,
Speaker 2: and I thought it was an inappropriate thing, and I
Speaker 2: did it.
Speaker 3: That was Federal Reserve Chairman Jerome Palell answering questions today
Speaker 3: on why he attended the Supreme Court hearing regarding President
Speaker 3: Trump's attempt to dismiss FED Governor Lisa Cook. As we
Speaker 3: also wait to hear who President Trump's next FED chair
Speaker 3: pick will be, let's discuss all this with Laol. She
Speaker 3: is Distinguished Fellow at the Georgetown Center for Financial Markets
Speaker 3: and Policy. She's also the former Vice chair of the
Speaker 3: Federal Reserve and the former NEC director. It's fantastic to
Speaker 3: have you with us. There was a lot. Jerome Prow
Speaker 3: did not address today, nothing on the dollar, nothing on
Speaker 3: his plans as to whether he'll leave the FED in May,
Speaker 3: and nothing really more on political pressure on the Fed
Speaker 3: on himself. But he did comment on that case against
Speaker 3: Lisa Cook his decision to attend that hearing. Do you
Speaker 3: agree with that characterization that this potentially is the most
Speaker 3: important legal case in the Fed's one hundred and thirteen
Speaker 3: year history.
Speaker 4: I do. I think that the Supreme Court case on
Speaker 4: whether the President can fire a sitting governor of the
Speaker 4: Federal Reserve Board without any due process and without showing
Speaker 4: clearer connection to their ability to undertake the responsibilities that
Speaker 4: they were confirmed by the Senate to do, is extremely
Speaker 4: important for the independence of the FED. And I think
Speaker 4: that the press conference the statement today just really conveyed
Speaker 4: the message that the Federal Reserve is doing its job.
Speaker 4: It is staying out of the political fray. It is
Speaker 4: looking carefully at the data and making policy exactly on
Speaker 4: the lines that Congress told it to, which is to
Speaker 4: preserve a strong labor market, maximum employment, and to get
Speaker 4: inflation down to two percent. And I think that was
Speaker 4: the focus of the Federal Reserve Chair today in the
Speaker 4: press conference, didn't allow himself to get distracted, didn't really
Speaker 4: get pulled into the political fray.
Speaker 3: How much longer, though, do you think that the Fed
Speaker 3: can stay out of that political phray, especially as we
Speaker 3: approach May, when the President will have his pick of
Speaker 3: who to nominate to the Federal Reserve. Of course, the
Speaker 3: chair is just one of many votes, but even still,
Speaker 3: you have to imagine that ideological they will fall in
Speaker 3: line with the President's thinking on interest rates.
Speaker 4: Well, certainly that is important to the president. He has
Speaker 4: said that many times that the chair that he selects
Speaker 4: needs to reflect his views. On the other hand, all
Speaker 4: of the candidates also will be looking carefully at the data.
Speaker 4: We heard a lot about the data today from share pal.
Speaker 4: We saw that the statement reflected the fact that there's
Speaker 4: been an upgrade to the labor market. There's less concern
Speaker 4: now about unemployment. And so the new chair is going
Speaker 4: to have to get support from the remainder of the committee,
Speaker 4: that committee that's been in place for some time now
Speaker 4: if he wants to take the committee in a very
Speaker 4: different direction, and he'll have to do it based on
Speaker 4: the dual mandate that was provided by Congress and based
Speaker 4: on the evolution of the outlook and.
Speaker 1: The I'm curious though with regards to that data level.
Speaker 1: I mean, obviously, you know, a lot of a big
Speaker 1: takeaway from the statement in the press conference was the
Speaker 1: idea that the economy is kind of a surprisingly stronger
Speaker 1: I think I'm kind of paraphrasing his words there than
Speaker 1: what they thought a little bit more stabilization in the
Speaker 1: labor market. But then towards the end of that press conference,
Speaker 1: he started talking about I think what a lot of
Speaker 1: us has talked about, this K shaped economy, the idea
Speaker 1: that yeah, overall we're doing good, but there is some bifurcation,
Speaker 1: and I'm wondering if it's the fed's job to address
Speaker 1: that or do they ignore that and just focus on
Speaker 1: the aggregate.
Speaker 4: Well, we're certainly seeing this divergence with strong aggregate growth
Speaker 4: clearly being driven by the AI boom, the boom and
Speaker 4: data centers and semiconductors in AI infrastructure. But on the
Speaker 4: other hand, we're seeing the labor market basically treading water,
Speaker 4: with low hiring, low firing being kind of the characterization
Speaker 4: really the last several months in the labor market and
Speaker 4: in consumer sentiment. We saw yesterday that the combination of
Speaker 4: high prices and diminished job opportunities are leading to some
Speaker 4: real concern on the part of consumers, with the lowest
Speaker 4: consumer sentiment since twenty fourteen, which is a little just
Speaker 4: a little hard to understand given the pandemic. But the
Speaker 4: job of the Federal Reserve is to focus on the
Speaker 4: overall labor market, and it does look like the labor
Speaker 4: market is in pretty good balance. It certainly has stabilized.
Speaker 4: We saw some uptick in the unemployment rate, but then
Speaker 4: in the last month or so it seems to be
Speaker 4: holding steady, and growth is certainly strong, and of course
Speaker 4: you've still got strong inflation, which the chair talked about
Speaker 4: core PCE, which is really their focus three point one percent.
Speaker 1: Yeah, well, I am curious, so lil too about another
Speaker 1: aspect of this talk about the FED being data dependent.
Speaker 1: One of the reporters asked them a question about the
Speaker 1: reliability of the FED models, specifically in the context of
Speaker 1: some meaningful structural changes going on in our economy, whether
Speaker 1: it's the potential advocation for a week or dollar. Obviously
Speaker 1: a huge shift in trade policies and other things here,
Speaker 1: and you seem to suggest that those are to a
Speaker 1: certain degree or another incorporated into the FED models, are
Speaker 1: they so?
Speaker 4: Look, I think every policy maker on the FOMC uses
Speaker 4: a combination of both the fed's models but also outside models.
Speaker 4: They look at private sector forecasts, They talk to business contacts.
Speaker 4: I certainly talk to community leaders, labor leaders, consumers. You
Speaker 4: gather as much information as you can about how the
Speaker 4: economy is likely to evolve, so it's not really driven
Speaker 4: by a single model. I think that would lead to
Speaker 4: perhaps much less robust policy making. And of course you're
Speaker 4: right that with AI driving potentially a real structural shift
Speaker 4: in the economy, they have to be getting data from
Speaker 4: businesses and from workers on the ground to get a
Speaker 4: sense of that turning point, which is so hard to
Speaker 4: capture in models that are based on past data and
Speaker 4: past relationships.
Speaker 1: Well, I have to ask you, with all the things
Speaker 1: going on in Washington right now, do you have faith
Speaker 1: conviction that this will remain an independent FED.
Speaker 4: Well, it will, I think, remain to be seen. It
Speaker 4: will hinge on whether or not the Supreme Court strengthens
Speaker 4: the independence of the Federal Reserve by making clear that
Speaker 4: the four cause protection that Congress put into the Statute
Speaker 4: in nineteen thirty five is really observed, or whether it
Speaker 4: turns out the president can fire a governor at will,
Speaker 4: in which case I think the independence of the Federal
Speaker 4: Reserve will be fundamentally compromised.
Speaker 1: Loyle, always great to have you, great insights. Leil Brainer,
Speaker 1: former vice chair of the FED. Now where we're at
Speaker 1: the Georgetown Center for Financial Markets and Policy