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Speaker 1: Federal Reserve Bank of New York President John Williams says

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Speaker 1: US monetary policy is in a good place, but officials

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Speaker 1: will need to parse through data to decide on how

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Speaker 1: to proceed on interest rates. He spoke in an exclusive

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Speaker 1: conversation with Bloomberg Economics enator Michael McKee at the Bloomberg

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Speaker 1: Market Forum in New York.

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Speaker 2: What makes a good sneaker?

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Speaker 3: Well, you know, I think it depends in your mood.

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Speaker 3: It depends on your day ahead of you. You know what, like,

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Speaker 3: what are you're doing that day and how you're feeling.

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Speaker 3: And some days I feel like, you know, more colorful,

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Speaker 3: flamboyant sneakers, and some days you feel like, you know,

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Speaker 3: the more traditional dress sneakers.

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Speaker 2: So you know it all, it's just it's part of

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Speaker 2: dress for your day.

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Speaker 3: That's part of a policy we have in the New

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Speaker 3: York FED. You decide what fits the work you do

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Speaker 3: in that day, and that's how I view it.

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Speaker 4: Taylor Heineke, who was a quarterback for the Washington Redskins

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Speaker 4: last year, now with the Falcons. Apparently he bought a

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Speaker 4: new pair of Jordan's every time they one. You go

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Speaker 4: out and buy a new pair of sneakers every time

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Speaker 4: you raise rates.

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Speaker 2: No I do not. I don't.

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Speaker 3: I don't think my wife would approve, given the space

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Speaker 3: we have in our closet.

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Speaker 2: No, I don't do that. And you know I let them.

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Speaker 2: I wear them a lot, so I wait till they

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Speaker 2: wear out and look for what's what's next.

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Speaker 4: All right, we've got our poll results in now. Thirty

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Speaker 4: five percent think that you should raise rates, but forty

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Speaker 4: five percent think it's time to hold This is the

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Speaker 4: everything everywhere, all at once questioned about the FED.

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Speaker 2: So let me pose it to you. Now.

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Speaker 4: We'll start off right off the top, September twentieth, Which

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Speaker 4: of those choices would you favor?

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Speaker 2: Well, you know, first of all, it's not.

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Speaker 3: The FOMC meeting, yet we still get more data between

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Speaker 3: now and then, and we you know, it's always tell

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Speaker 3: my economics team of the bank. We get a lot

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Speaker 3: more of the analysis and research and you know, kind

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Speaker 3: of the forecast coming together. There's a lot more information

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Speaker 3: and thinking that before this meeting, of course, before you know,

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Speaker 3: future meetings.

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Speaker 2: But here's how I see things now. You'll obviously always focused.

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Speaker 3: On our dual mandate maximum employment and price stability. Inflation

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Speaker 3: is far too high, but that set inflation is moving

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Speaker 3: in the right direction. We're seeing the imbalances in the

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Speaker 3: labor market which were really quite pronounced last year. They've

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Speaker 3: been closing job job openings have been coming down, the

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Speaker 3: quit rates coming down, the hiring rate in the markets

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Speaker 3: coming down. So we're seeing movement in the right direction

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Speaker 3: of bringing supplying demand back into balance, seeing inflation come

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Speaker 3: back towards our two percent long run goal. And we've

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Speaker 3: done a lot. I think everyone knows you know here

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Speaker 3: in this room. We raised raised significantly over the last

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Speaker 3: year and a half or so, and we've gotten it

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Speaker 3: to a restrictive stand. So my answer to the question is,

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Speaker 3: right now, I think we've gotten MANTE policy in a

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Speaker 3: very good place in terms of we have a restrictive

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Speaker 3: stance of policy. It is doing having the desired effects

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Speaker 3: of bringing demand and supple live more into balance. We're

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Speaker 3: seeing inflation move in the right direction, but we'll have

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Speaker 3: to watch the going forward.

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Speaker 2: We'll have to keep watching the data.

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Speaker 3: Carefully analyzing all of that and really asking ourselves the question,

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Speaker 3: is this sufficiently restrictive? Do we need to maybe raise

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Speaker 3: rates again to make sure that we're keeping that steady

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Speaker 3: progress in terms of getting imbalances, you know, shrinking balances

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Speaker 3: in the labor market and bring inflation back down. So

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Speaker 3: right now, I think, you know, things are moving in

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Speaker 3: the right direction. We've got policy in a good place,

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Speaker 3: but we're going to need to continue to be data dependent,

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Speaker 3: watch the developments and assess what we need to do.

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Speaker 2: How do you know you're restrictive? What metric do you use?

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Speaker 2: Let's see how long it take to get to our star?

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Speaker 3: Okay, so the you know, I think there's it's there's

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Speaker 3: no right answer to that question. I think you know.

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Speaker 3: The way I think about it is really in terms

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Speaker 3: of real interest rates as a Fed funds rate or

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Speaker 3: more broadly, you know, uh, you know, treasury yields relative

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Speaker 3: to expected inflation. So you know, depending how you measure it,

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Speaker 3: you look at it, real rates are you know, well

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Speaker 3: above zero, you know, moving somewhere between one and two percent,

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Speaker 3: and that seems to be above typical estimates of the

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Speaker 3: long run neutral real interest rate. And I think the

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Speaker 3: other way you see it is a little bit of

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Speaker 3: in what we're seeing in the economy. Right so, we

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Speaker 3: are seeing demand in the labor market come down according

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Speaker 3: to a lot of different measures we are seeing other

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Speaker 3: kind of signs that the economy is moving, imbalances in

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Speaker 3: the economy are coming down. So I think the two things.

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Speaker 3: One is kind of like where's our versus our star?

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Speaker 3: That's one way to think of it. Where the other

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Speaker 3: is what are we seeing happening in the economy. Now

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Speaker 3: there's a second test. There's kind of the are we restrictive?

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Speaker 3: And the second is are we are we sufficiently restrictive

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Speaker 3: to really make sure that we're bringing inflation sustainably down

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Speaker 3: to two percent and getting the job done.

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Speaker 2: So, you know, I have to I think it's pretty

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Speaker 2: clear we're restrictive.

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Speaker 3: Still an open question as we go forward, we have

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Speaker 3: we got sufficiently restrictive to achieve.

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Speaker 4: That we'll get to our star when we get to

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Speaker 4: a Tom called it the ecobabble part of our conversation here.

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Speaker 2: But first, you have raise.

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Speaker 4: Rates eleven times, you've gone up to five and a

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Speaker 4: half percent top range. But unemployment remains extraordinarily low, and

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Speaker 4: we are seeing signs of the economy accelerating. Now, So

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Speaker 4: do you really think you're sufficiently restrictive?

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Speaker 3: Well, you know, I think, first of all, the unemployment

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Speaker 3: rate has been relatively steady over the last year or so,

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Speaker 3: it's fluctuated between.

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Speaker 2: Three point four and three point eight.

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Speaker 3: Percent where it is today, and I think it's a

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Speaker 3: sign that well, clearly we're not moving, you know, significantly

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Speaker 3: to more imbalanced and unemployment even lower. Normally have we

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Speaker 3: seen the clear signs of unemployment moving you know, significantly up.

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Speaker 3: But I do think it's a unique time, right because

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Speaker 3: if you look at the unemployment rate, it seems to

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Speaker 3: kind of get to a minimum value of around three

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Speaker 3: point four percent, kind of get there, but then these

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Speaker 3: other indicators have been shifting. So I think what we've

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Speaker 3: seen in the labor market is demand exceed supply. It's

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Speaker 3: not showing up as much in the unemployment rate continuing

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Speaker 3: to go down, but just showing up in these other

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Speaker 3: things like job vacancy's quit rates, things like that. So

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Speaker 3: to me, the things I'm focused on is really how

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Speaker 3: are we seeing the demand indicators supply indicators move together.

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Speaker 3: I would expect the unemployment rate to edge up over

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Speaker 3: the next year somewhat, but again, you know, I see

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Speaker 3: positive signs in the sense that the indicators of demand

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Speaker 3: and supplier moving the right direction. The unemployment rate hasn't

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Speaker 3: moved as much in terms of demand reaccelerating. You know,

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Speaker 3: I think we have to be careful not to overreact

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Speaker 3: to you know, kind of shorter term developments and kind

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Speaker 3: of look at the bigger picture.

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Speaker 2: But it's definitely one of the risks I see out.

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Speaker 3: There where GDP growth in the first half was round

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Speaker 3: two percent, the latest readings on consumer spending have been strong.

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Speaker 3: So that is one of those question marks when I said,

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Speaker 3: are we sufficient restrictive? Are we do we have policy

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Speaker 3: where it needs to be to make sure that we

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Speaker 3: bring inflation down to two percent to make sure that

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Speaker 3: we get the imbalances ring out the imbalances if you will,

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Speaker 3: I mean if demand, say, is very strong or stronger

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Speaker 3: than expected, that'd be one of the factors that goes

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Speaker 3: into my thinking on that.

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Speaker 4: There is a group of people who think that there

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Speaker 4: was a temporary bump this summer in the economy. So

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Speaker 4: I have to ask, did you see a tailor swift

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Speaker 4: effect and consumer spending?

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Speaker 3: Well, there's definitely a tailor swift effect on consumer spending

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Speaker 3: because people have been spending on the concerts and the

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Speaker 3: hotels and everything. It's been a huge phenomenon. But you know,

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Speaker 3: demand has been strong and it's been strong. A bit

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Speaker 3: of that rotation we were talking about a year ago.

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Speaker 3: We're seeing that happen from goods over to services. You know,

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Speaker 3: people are traveling more, they're going to restaurants, they're going

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Speaker 3: to shows as healthy. So we are seeing very strong

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Speaker 3: demand in those areas. I guess the question is how

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Speaker 3: much of that is driven by you know, a lot

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Speaker 3: of the fiscal stimulus we see on the past, the

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Speaker 3: excess says that people have accumulated from that period. How

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Speaker 3: much of that is you know, people finally able to

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Speaker 3: go out and travel, finally, you know, feeling comfortable going

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Speaker 3: in kind of packed rooms and things. So is that

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Speaker 3: is that can or is that something that perhaps will

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Speaker 3: last longer. So it's it's an open question. I think

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Speaker 3: there are reasons to think that consumer spending won't stay

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Speaker 3: as strong as we've been seeing. You know, saving rate

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Speaker 3: uh is obviously you know coming down. You know, the

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Speaker 3: excess savings that we saw accumulated seems to be spending down.

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Speaker 2: And there's you know, there are always the lagged effects

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Speaker 2: of monetary policy.

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Speaker 3: We raised rates a lot, is more expensive to borrow

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Speaker 3: to buy a car or a house, and those effects

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Speaker 3: of course I think we'll get kind of.

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Speaker 4: More stronger over time. You can't have an economist without

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Speaker 4: two hands. So the two handed argument about what's happening

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Speaker 4: now is that the economy may be accelerating. The third

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Speaker 4: quarter may be very strong, but then that sets a

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Speaker 4: very high starting point for the fourth quarter, and we

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Speaker 4: could see contracts because you can't keep it.

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Speaker 3: Up well, you know, again, I think you have to

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Speaker 3: look through the medium term, and I do look at

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Speaker 3: the labor market as well. I mean, we are seeing

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Speaker 3: i would say slowing in the labor market, in the

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Speaker 3: hiring rate, and I think that's probably given us perhaps

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Speaker 3: a little bit, you know, maybe cleaner read of what's

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Speaker 3: going on. But you know, have to watch the data

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Speaker 3: understand you know, why is the demand continue to be strong?

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Speaker 2: Q three does look to be strong.

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Speaker 3: So far, and this far being data dependent. Now, I

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Speaker 3: go back to if you ask me, you know what

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Speaker 3: am I most focused on? Most focused for sure is inflation.

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Speaker 3: I mean that, you know, we talked a lot about

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Speaker 3: what's GDP, what's the labor market looking like that? You know,

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Speaker 3: we got to get inflation down from currently pc. Inflation's

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Speaker 3: about a little over three percent. Core inflations about four percent.

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Speaker 3: We really need to make sure that we get inflation

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Speaker 3: sustainably down to two percent.

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Speaker 4: One of the questions about that is what happens with

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Speaker 4: this supply demand balance, particularly in the labor market. And

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Speaker 4: a fundamental question that's been asked to economists and central

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Speaker 4: bankers is do wages lead inflation or does inflation lead wages?

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Speaker 4: And what would be a sustainable level of wage growth

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Speaker 4: to bring inflation down to where you want it to be.

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Speaker 3: Yeah, you know, I think there is an answer to

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Speaker 3: the question. And kind of you asked me three years

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Speaker 3: from now, what do I think wage growth consistent with

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Speaker 3: two percent inflation is? Well, then I have a kind

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Speaker 3: of a traditional view on that. It's going to be

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Speaker 3: two percent inflation plus whatever productivity growth is. So you're

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Speaker 3: thinking of wage growth of you know, maybe three and

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Speaker 3: or quarter three and a half percent or something like that.

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Speaker 3: Right right now, I think there's just still a lot

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Speaker 3: of dynamics going on in wages and prices.

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Speaker 2: Coming out of the pandemic.

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Speaker 3: We saw huge increases and prices of goods, We saw

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Speaker 3: huge dislocations in the economy. We saw wage growth, you know,

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Speaker 3: accelerate dramatically, and now it's starting to slow. So you know,

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Speaker 3: right now I'm looking at wage growth not as like

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Speaker 3: I need to see this number on the screen, but

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Speaker 3: more that, you know, seeing signs that the labor market

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Speaker 3: is cooling somewhat. Wage growth is slowing and moving towards

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Speaker 3: something that's more sustainable. So that's that's how I think

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Speaker 3: of It's kind of more of the kind of the

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Speaker 3: how do all the pieces of the puzzle fit together

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Speaker 3: in terms of moving towards you know, our ultimate goal.

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Speaker 3: Right now, I think the wage growth has slowed kind

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Speaker 3: of as a sign that, you know, we're moving towards them.

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Speaker 4: Well, the other side of the question, Carevin Powell about

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Speaker 4: a year ago warned that there would be pain in

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Speaker 4: bringing down inflation to target. But unemployment is, as you mentioned,

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Speaker 4: three point eight percent. The Employment cost Index for the

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Speaker 4: second quarter showed wage growth at four point six percent,

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Speaker 4: above inflation.

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Speaker 2: You're not making the masochists happy. I mean, where is

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Speaker 2: the pain?

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Speaker 3: Well, I think again, you know, one of the things

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Speaker 3: that's harder to assess is my own view is that

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Speaker 3: one of the reasons we've had very strong wage growth,

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Speaker 3: very strong inflation was that demand or less a year

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Speaker 3: or two has rearely exceeded supply, and some of that

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Speaker 3: has shown up in high employment, high GDP. A lot

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Speaker 3: of that's shown up in longer weight lines. Weights to

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Speaker 3: get the things are things not being able to buy things,

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Speaker 3: companies that can't you know, meet the customer demand. So

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Speaker 3: as we've seen demand come down towards supply, and as we've.

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Speaker 2: Seen supply improve, which are thing.

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Speaker 3: Is an important dynamic right now, what we're seeing is,

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Speaker 3: you know, inventories kind of move back towards more normal levels,

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Speaker 3: supply chain battlenecks recede.

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Speaker 2: So a lot of those dynamics can reverse.

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Speaker 3: Which is a positive, you know, both in terms of

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Speaker 3: the economy's growth. It's also a positive in terms of

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Speaker 3: costs and inflation. So so from this question about well,

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Speaker 3: how high does unemployment need to get to bring down inflation,

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Speaker 3: I think, first and foremost we have to think about

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Speaker 3: how we got the high inflation, and I think a

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Speaker 3: lot of that was related to supply chain ballnecks, global

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Speaker 3: shutdowns of economy, economies reopening them, very strong fiscal and

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Speaker 3: monetary stimulus to boost demand. Now, as we reverse all

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Speaker 3: of those things, a lot of those things will also

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Speaker 3: you know, we're seeing that reverse in terms of the

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Speaker 3: inflation data.

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Speaker 2: I guess the way I would summari is this isn't kind.

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Speaker 3: Of the traditional inflation cycle where you think about like

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Speaker 3: a sacrifice ratio to bring inflation down two percent or

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Speaker 3: a percentage point you need so much unemployment now in

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Speaker 3: the end of the day, because so a lot of

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Speaker 3: this is really about effects of the pandemic on supply

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Speaker 3: and demand that are being unwound, and I think that

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Speaker 3: shows up in kind of our models and our analysis.

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Speaker 3: There is still the open question, and I don't have

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Speaker 3: the answer to that.

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Speaker 2: You know, will over.

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Speaker 3: The next year or two where we need to see,

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Speaker 3: you know, where we see the unemployment rate rise significantly.

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Speaker 2: My forecast would be, yes, we're.

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Speaker 3: Going to see the employment rise above say four percent,

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Speaker 3: to maybe somewhere in the low fource, which is above

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Speaker 3: my long run view of what the kind of normal

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Speaker 3: unemployment rate is. But that's that would be just part

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Speaker 3: of that process of really making sure the wages and

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Speaker 3: inflation come back to levels consistent with two percent.

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Speaker 4: So we should expect September twentieth, you put out a

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Speaker 4: new summary of economic projections that probably your GDP forecast

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Speaker 4: will go up, but your unemployment forecast will go up

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Speaker 4: as well.

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Speaker 3: Well, you know, I don't know, I can't speak for

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Speaker 3: my colleagues. Oh sure, yeah, and I uh and we'll see.

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Speaker 3: But you know, definitely, if you ask me where the

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Speaker 3: surprises have been in the data since, you know, over

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Speaker 3: the last several months, one is, you know, GDP growth,

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Speaker 3: demand growth has stayed remarkably strong. All that talk about

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Speaker 3: we're about to have a recession has has vanished.

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Speaker 2: Uh And I.

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Speaker 3: Think on the labor market, I guess my view is

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Speaker 3: that the you know, the unemployment it's you know, again,

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Speaker 3: my view, I think consistently has been that we're going

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Speaker 3: to we're going we are going to see some increase

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Speaker 3: in the unemployment rate, but not to levels that we've

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Speaker 3: seen in past recessions.

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Speaker 2: But it's kind of an open question. This is such

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Speaker 2: an unusual set.

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Speaker 3: Of circumstances, with the pandemic, Russia's war in Ukraine, all

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Speaker 3: the things that have happened, all the things that are

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Speaker 3: unwinding in terms of those factors, you know, you can't

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Speaker 3: say with any certainly exactly how this is playing out.

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Speaker 2: I gave you a couple of things that give me

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Speaker 2: a little.

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Speaker 3: Bit of more confidence that this this forecast of inflation

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Speaker 3: coming to over the next couple of years will happen.

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Speaker 3: First of all, inflation expectations have been with households, and

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Speaker 3: economist whiles talk about households have been incredibly well behaved.

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Speaker 3: We've seen one year a head inflation expectations.

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Speaker 2: Move up a lot when inflation went up.

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Speaker 3: That's not surprising, very consistent with pre pandemic behavior. But

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Speaker 3: short term inflation expectations have come down quite a bit.

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Speaker 2: They're still a little bit above pre pandemic levels.

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Speaker 3: Been getting closer around three and a half percent versus

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Speaker 3: around three year percent or so.

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Speaker 2: And medium and long term.

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Speaker 3: Inflation expectations are basically where they were before the pandemic.

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Speaker 3: And the second I got to sell New York Fed

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Speaker 3: research here. One of them is a servia consumer expectations,

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Speaker 3: but the other is we have this measure of trying

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Speaker 3: to figure out what the underlying rate of inflation is.

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Speaker 3: And it's a statistical, complicated statistical mall looking at the

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Speaker 3: inflation data, but it tries to read through the data

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Speaker 3: and see what's the underlying trend. Based on the July

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Speaker 3: PCE data, the underlying trend there is two point two

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Speaker 3: two and three quarters percent.

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Speaker 2: That's way down from the five and a half percent

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Speaker 2: we saw last year.

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Speaker 3: And if you look at what's happening in shelter inflation

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Speaker 3: and you realize that, you know, the shelter inflation is

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Speaker 3: inherently backward looking because it's looking at all the rents

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Speaker 3: that were signed over the last couple of years. Underlining

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Speaker 3: inflation looks more like about two and a half percent. Now,

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Speaker 3: I'm not saying that you know, the job is done

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Speaker 3: or we're at two and a half percent, but it

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Speaker 3: is showing us as a sum favorable kind of if

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Speaker 3: you will, tail wounds and bringing inflation and inflation expectations

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Speaker 3: have come down, and measures of underlying inflation have really

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Speaker 3: come down quite a bit as well, and we're seeing

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Speaker 3: that each month with the data.

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Speaker 4: Speaking of services, one of the things that Jay Powell

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Speaker 4: talks about a lot is core services ex housing. But

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Speaker 4: there's been a lot of criticism of that as sort

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Speaker 4: of a dog's breakfast of a lot of different things

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Speaker 4: that aren't related. And apparently in the last month we

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Speaker 4: saw a rise in that indicator because these people got

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Speaker 4: paid because a lot we saw a lot of financial service.

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Speaker 4: Does compensation go up is that really useful that index.

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Speaker 3: Well, you know, this is why I mentioned this, This

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Speaker 3: what called the MCT is because it takes all of

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Speaker 3: the components of PC inflation or personal consumption expenditures inflation.

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Speaker 3: It takes them all, analyzes them all, and weights them

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Speaker 3: according to kind of their signal that they carry for inflation.

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Speaker 3: So I think that's a good way to think about,

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Speaker 3: you know, because each piece kind of has its own story,

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Speaker 3: if you will, and own behavior.

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Speaker 2: You know.

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Speaker 3: I think the reason it is kind of useful to

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Speaker 3: look at this, you know, core services excluding housing, is

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Speaker 3: it because the other components of inflation have really been

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Speaker 3: moved by factors related to the pandemic. You know, goods

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Speaker 3: prices rose dramatically, car prices, appliance prices.

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Speaker 2: Now they're coming down.

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Speaker 3: We don't want to take super high signal from the

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Speaker 3: fact that car prices are coming down, cause that's kind

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Speaker 3: of what we were expecting to see. Energy prices have

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Speaker 3: come down, food inflation thankfully has come down. So we

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Speaker 3: really want to kind of understand which parts of this

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Speaker 3: is really reversals of pandemic things, supply chain issues, which

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Speaker 3: are them may be a better reflection of.

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Speaker 2: The imbalance as supply and demand.

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Speaker 3: So I think, you know, the core services category is

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Speaker 3: probably a good place to look how are we doing

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Speaker 3: on the supply demand imbalances, But shelter honestly is part

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Speaker 3: of that too.

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Speaker 2: It's a big part of the inflation index.

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Speaker 4: Something that combines kind of all these issues together, of

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Speaker 4: wages and unemployment and supply chain issues is the automobile industry.

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Speaker 4: I want to ask you how worried you are about

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Speaker 4: a United Auto Workers strike because you could put one

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Speaker 4: hundred and fifty thousand people out of work, plus then

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Speaker 4: maybe suppliers nothing like when we had millions of auto workers, but.

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Speaker 2: Still a large number of people out of work.

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Speaker 4: But if they got what they wanted, they get a

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Speaker 4: forty six percent raise, which doesn't sound really sustainable for

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Speaker 4: the economy.

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Speaker 3: Well, I'm not going to comment on the negotiations in

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Speaker 3: that industry, so to me, that's not something for me

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Speaker 3: to to comment on. But I do think from the

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Speaker 3: broader perspective, I mean, hopefully, you know, any kind of

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Speaker 3: negotiation or issue like that is you'll handle, you know,

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Speaker 3: kind of on its own, so we're focused on the

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Speaker 3: bigger picture.

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Speaker 2: You know, this is a ginormous if.

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Speaker 3: I can use a technical term economy, you know, obviously,

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Speaker 3: and look, we're always looking at the bigger picture, and

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Speaker 3: there are factors that happen that affect how the economy

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Speaker 3: performs at any point in time that we have to

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Speaker 3: take into account in understanding.

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Speaker 2: What's happened in the economy. But again we're looking at

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Speaker 2: the medium term.

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Speaker 3: You know, Monte policy takes typically a year or two

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Speaker 3: to have its full effective economy, So you know, I'm

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Speaker 3: thinking about where are we going to be, you know,

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Speaker 3: next September, where we could be in after that, and

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Speaker 3: how we're setting that policy today and in the future

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Speaker 3: to best achieve those goals. Again, I think we're moving

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Speaker 3: in the right direction, but we still have a way

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Speaker 3: quite a way to go.

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Speaker 2: I have to ask you about it.

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Speaker 4: Another besides the auto industry, interest rates sensitive sector and

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Speaker 4: that's housing. Existing home sales basically are frozen at this point.

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Speaker 2: So many people refinanced or took.

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Speaker 4: Out mortgages that are extremely low at this point, and

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Speaker 4: the mortgage rate's like eight percent, so nobody wants to sell.

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Speaker 4: Have you crippled the housing market for maybe a generation

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Speaker 4: until those people die and sell their homes.

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Speaker 3: No, I don't think that's true. I mean we've seen

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Speaker 3: this kind of dynamic in the past. I mean, this

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Speaker 3: isn't the first time that interest rates have been very

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Speaker 3: low and then have gone up or you know, in

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Speaker 3: these interest rates today or mortgage rates, so at least

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Speaker 3: in our lifetimes, Mike, you know, are not the highest

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Speaker 3: we've ever seen. But I do think that there is

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Speaker 3: part of that dynamic. But I would kind of take

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Speaker 3: a step back. I mean, there's definitely that dynamic taking place,

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Speaker 3: kind of people choosing not to sell their house because

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Speaker 3: there's this you know, value of the existing fixed interest mortgage.

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Speaker 3: But I would go back to the broader I think

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Speaker 3: context of this is. I think demand for housing is

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Speaker 3: significantly stronger today than it was before the pandemic. I

441
00:20:53,640 --> 00:20:57,200
Speaker 3: think that the work from home, the hybrid, the remote work,

442
00:20:57,240 --> 00:21:01,439
Speaker 3: all of that that has created more demand overall in

443
00:21:01,440 --> 00:21:04,520
Speaker 3: our economy for housing. Uh, and that has to be

444
00:21:04,560 --> 00:21:07,200
Speaker 3: met with supply, and that takes a long time to

445
00:21:07,240 --> 00:21:09,800
Speaker 3: bring on. We know that housing construction, you know, has

446
00:21:09,840 --> 00:21:12,000
Speaker 3: has not kept up with demand. So I think that

447
00:21:12,119 --> 00:21:14,119
Speaker 3: part of the dynamic that we are seeing with the

448
00:21:14,160 --> 00:21:15,080
Speaker 3: housing market.

449
00:21:15,119 --> 00:21:16,920
Speaker 2: Is still a lot of demand out there. That's why

450
00:21:16,960 --> 00:21:18,000
Speaker 2: rants are still high.

451
00:21:18,200 --> 00:21:20,560
Speaker 3: That's why house prices are in the market is kind

452
00:21:20,560 --> 00:21:24,360
Speaker 3: of moving in that kind of still coming back now

453
00:21:24,400 --> 00:21:26,119
Speaker 3: even with the higher interest rates. So I guess my

454
00:21:26,200 --> 00:21:29,040
Speaker 3: answer to your question is I think that the demand

455
00:21:29,119 --> 00:21:31,560
Speaker 3: out there will actually kind of kind of push the

456
00:21:31,960 --> 00:21:35,280
Speaker 3: housing market along given the kind of the changes we've seen.

457
00:21:35,440 --> 00:21:37,760
Speaker 3: That clearly interest rates are a factor in that, but

458
00:21:37,800 --> 00:21:41,280
Speaker 3: I don't think that they're the only factor that are

459
00:21:41,280 --> 00:21:42,480
Speaker 3: going to people's decision making.

460
00:21:43,560 --> 00:21:46,240
Speaker 4: Let's shift gears a little bit here and bringing the

461
00:21:46,240 --> 00:21:49,440
Speaker 4: eco babble as Tom Keane said, Uh, and talk about

462
00:21:49,440 --> 00:21:52,440
Speaker 4: our star, because you obviously have done the most work

463
00:21:52,480 --> 00:21:56,639
Speaker 4: of any economists I know on our star. Before we

464
00:21:56,680 --> 00:21:59,560
Speaker 4: go into a little more depth, have you got a

465
00:21:59,600 --> 00:22:02,040
Speaker 4: short explanation of what our star.

466
00:22:02,000 --> 00:22:04,879
Speaker 2: Is for people? By sure, you mean thirty minutes or

467
00:22:04,920 --> 00:22:05,480
Speaker 2: forty five.

468
00:22:05,359 --> 00:22:08,760
Speaker 4: Minutes, probably anything less than an hour.

469
00:22:08,880 --> 00:22:11,439
Speaker 3: We'll okay, now, I mean the idea of our stars

470
00:22:11,640 --> 00:22:14,359
Speaker 3: is actually pretty simple. You just ask yourself the question

471
00:22:14,720 --> 00:22:18,080
Speaker 3: that if the economy is kind of just going at

472
00:22:18,200 --> 00:22:21,320
Speaker 3: crew speed growing as potential rate the economy is of

473
00:22:21,359 --> 00:22:24,639
Speaker 3: full employment inflation is you know, two percent, If everything

474
00:22:24,800 --> 00:22:27,560
Speaker 3: just moving along at that, what would the real interest

475
00:22:27,640 --> 00:22:30,920
Speaker 3: rate be and you know, our estimates, you know, over

476
00:22:30,960 --> 00:22:33,920
Speaker 3: time have changed because the factor is, in effect, what's

477
00:22:33,960 --> 00:22:37,120
Speaker 3: the equilibrium of savings and investment in the economy. Those

478
00:22:37,160 --> 00:22:39,960
Speaker 3: things can change for a variety of reasons. We heard

479
00:22:40,000 --> 00:22:42,680
Speaker 3: one earlier about demographics. I think that is really important,

480
00:22:42,760 --> 00:22:45,320
Speaker 3: or others too. So it's basically kind of some kind

481
00:22:45,359 --> 00:22:46,800
Speaker 3: of basically.

482
00:22:46,640 --> 00:22:49,520
Speaker 2: Normal interest rate you would expect in normal times, and

483
00:22:49,640 --> 00:22:51,040
Speaker 2: we're not in normal times right now.

484
00:22:51,080 --> 00:22:53,960
Speaker 3: Right inflation is very high, the economy is still going

485
00:22:54,000 --> 00:22:57,199
Speaker 3: through a transition, so, you know, so it's really a

486
00:22:57,200 --> 00:22:59,359
Speaker 3: benchmark to think about where do you think real interest

487
00:22:59,440 --> 00:23:02,760
Speaker 3: rates are like to be headed towards real inflation adjusted

488
00:23:02,800 --> 00:23:05,320
Speaker 3: interest rates? So it's it's a nice benchmark to think

489
00:23:05,320 --> 00:23:07,720
Speaker 3: of it that way. But of course it doesn't tell

490
00:23:07,760 --> 00:23:10,760
Speaker 3: you today what an interest rate should be or shouldn't be.

491
00:23:10,800 --> 00:23:12,560
Speaker 3: It's just it's kind of a benchmark.

492
00:23:12,680 --> 00:23:16,520
Speaker 4: So is it a practical application that you use on

493
00:23:16,560 --> 00:23:19,520
Speaker 4: a regular basis or is it a theoretical concept that's

494
00:23:19,600 --> 00:23:20,440
Speaker 4: nice to talk about?

495
00:23:20,520 --> 00:23:22,480
Speaker 2: Well, I think I think I think it's both.

496
00:23:22,600 --> 00:23:24,960
Speaker 3: I think it is useful to when you think about,

497
00:23:25,160 --> 00:23:28,080
Speaker 3: like you go back to the tailor rule, which is,

498
00:23:28,119 --> 00:23:31,200
Speaker 3: you know, John Taylor's you know, basic kind of insight

499
00:23:31,320 --> 00:23:34,040
Speaker 3: that you can think of monetary policy as as doing

500
00:23:34,200 --> 00:23:36,560
Speaker 3: kind of two things. One is, when leaning against the

501
00:23:36,560 --> 00:23:39,119
Speaker 3: wind when the economy is strong, interest rates tend to

502
00:23:39,119 --> 00:23:41,560
Speaker 3: go up. When inflation is high, interest rates tend to

503
00:23:41,600 --> 00:23:43,760
Speaker 3: go up, and vice versa. But then you go back

504
00:23:43,760 --> 00:23:46,240
Speaker 3: to the tailor world. You got to say, but up

505
00:23:46,280 --> 00:23:49,880
Speaker 3: relative to what I mean, it's it's end down relative

506
00:23:49,880 --> 00:23:50,160
Speaker 3: to why.

507
00:23:50,200 --> 00:23:52,439
Speaker 2: And so it is a nice theoretical thing to.

508
00:23:52,400 --> 00:23:55,399
Speaker 3: Say, well, there's a neutral normal position that you're in,

509
00:23:55,600 --> 00:23:58,119
Speaker 3: kind of cruise control, and then there's the one that

510
00:23:58,160 --> 00:23:59,800
Speaker 3: you're and you're adjusting.

511
00:23:59,400 --> 00:24:01,879
Speaker 2: Relative to that. Now, in terms of a practical point of.

512
00:24:01,920 --> 00:24:04,639
Speaker 3: View, I do you know, obviously, I do think it's useful.

513
00:24:05,520 --> 00:24:07,320
Speaker 3: I think it's useful because it's a way, it's a

514
00:24:07,359 --> 00:24:09,880
Speaker 3: summary statistic. It's like the unemployment rate in a way,

515
00:24:09,920 --> 00:24:13,160
Speaker 3: it's like other GDP or something. It summarizes a lot

516
00:24:13,160 --> 00:24:15,719
Speaker 3: of information into one statistic.

517
00:24:15,800 --> 00:24:17,520
Speaker 2: And you know, are the work we did on this,

518
00:24:17,640 --> 00:24:19,440
Speaker 2: and there's a lot of other people who've done work

519
00:24:19,440 --> 00:24:20,000
Speaker 2: on this as.

520
00:24:19,920 --> 00:24:22,760
Speaker 3: Valuable is just saying, okay, based on the data, we're

521
00:24:22,760 --> 00:24:25,040
Speaker 3: seeing what we're seeing in inflation and interest rates and

522
00:24:25,600 --> 00:24:29,239
Speaker 3: GDP growth what seems to be kind of what that

523
00:24:29,320 --> 00:24:33,439
Speaker 3: neutral rate or that neutral interest rate is, And you

524
00:24:33,440 --> 00:24:35,480
Speaker 3: get different answers depending on how you do it. So

525
00:24:35,520 --> 00:24:37,720
Speaker 3: I think it's a useful kind of thing to as

526
00:24:37,760 --> 00:24:41,080
Speaker 3: a summary statistic. It's not the only thing you look at, obviously,

527
00:24:41,080 --> 00:24:44,159
Speaker 3: it's you know, it's part of the broad set of

528
00:24:44,720 --> 00:24:48,639
Speaker 3: kind of indicators and things we look at. But again,

529
00:24:48,720 --> 00:24:51,439
Speaker 3: I find it as a way to capture some of

530
00:24:51,480 --> 00:24:54,639
Speaker 3: these longer run trends in the economy that are moving

531
00:24:54,760 --> 00:24:57,480
Speaker 3: slowly over time and we should just keep.

532
00:24:57,359 --> 00:24:57,840
Speaker 2: Our mind on.

533
00:24:57,880 --> 00:25:01,600
Speaker 3: And they're like proactivity, they're demri graphics or factors like

534
00:25:01,640 --> 00:25:02,600
Speaker 3: that that are.

535
00:25:02,440 --> 00:25:03,639
Speaker 2: Not about the today and.

536
00:25:03,680 --> 00:25:07,640
Speaker 3: Tomorrow, but more about what's the underlying backdrop that monetary

537
00:25:07,640 --> 00:25:08,560
Speaker 3: policy is operating.

538
00:25:08,800 --> 00:25:10,320
Speaker 2: We kind of leads in to my next question.

539
00:25:11,040 --> 00:25:13,680
Speaker 4: It's been very hard, as you're pointing out, to forecast

540
00:25:13,720 --> 00:25:15,560
Speaker 4: what's going on with the economy. A lot of quirks

541
00:25:15,600 --> 00:25:19,200
Speaker 4: in the data these days following the pandemic. But when

542
00:25:19,240 --> 00:25:22,840
Speaker 4: you look ahead and we have the pandemic distortions behind us,

543
00:25:23,480 --> 00:25:25,640
Speaker 4: what kind of economy are we going to have? Are

544
00:25:25,640 --> 00:25:27,879
Speaker 4: we going to have a new normal, a new new normal,

545
00:25:28,080 --> 00:25:28,879
Speaker 4: the old normal.

546
00:25:29,560 --> 00:25:30,600
Speaker 2: What do you see ahead?

547
00:25:31,480 --> 00:25:33,919
Speaker 3: You know, it's you're right, it's hard to know. I

548
00:25:33,920 --> 00:25:36,840
Speaker 3: wrote a lot about the new normal after the financial crisis,

549
00:25:36,840 --> 00:25:38,240
Speaker 3: so I do feel like we're getting.

550
00:25:37,960 --> 00:25:41,000
Speaker 2: Into the new new normal. I go back to these

551
00:25:41,040 --> 00:25:42,119
Speaker 2: supply side factories.

552
00:25:42,160 --> 00:25:43,760
Speaker 3: I mean, some people say, you know, the fad is

553
00:25:43,800 --> 00:25:46,080
Speaker 3: focused on demand, demand, demand, but you know, we think

554
00:25:46,119 --> 00:25:47,919
Speaker 3: a lot about the supply side of the economy and

555
00:25:47,920 --> 00:25:51,720
Speaker 3: our work. So I do think about labor force, you know, demographics,

556
00:25:51,760 --> 00:25:55,119
Speaker 3: I think about productivity, and I think about you know,

557
00:25:55,320 --> 00:26:00,240
Speaker 3: kind of the fundamental drivers of the economy rather than

558
00:26:00,560 --> 00:26:03,479
Speaker 3: the short term cycle. So I think in many ways,

559
00:26:03,640 --> 00:26:06,440
Speaker 3: the new economy, I think is going to be similar

560
00:26:06,440 --> 00:26:09,840
Speaker 3: to the pre pandemic economy. We've seen labor force participation

561
00:26:10,440 --> 00:26:14,040
Speaker 3: surprisingly in a good way, come back in many.

562
00:26:13,840 --> 00:26:15,440
Speaker 2: Ways back to where it was before.

563
00:26:15,480 --> 00:26:17,760
Speaker 3: It's actually quite strong for that twenty five to fifty

564
00:26:17,800 --> 00:26:24,040
Speaker 3: four year old group. We've seen immigration and visa people

565
00:26:24,080 --> 00:26:27,439
Speaker 3: coming in to work on the seasonal employmenter through visas

566
00:26:27,600 --> 00:26:29,640
Speaker 3: that comeback. So we've seen a lot of things kind

567
00:26:29,680 --> 00:26:31,480
Speaker 3: of get closer to where they were before.

568
00:26:31,680 --> 00:26:34,640
Speaker 2: Proactivity trends don't seem to have changed yet.

569
00:26:35,040 --> 00:26:36,680
Speaker 3: Always hard to know if there is that, But the

570
00:26:36,760 --> 00:26:40,040
Speaker 3: data don't seem to suggest that my view of our

571
00:26:40,119 --> 00:26:43,280
Speaker 3: star hasn't fundamentally changed from what it was before. So

572
00:26:43,320 --> 00:26:45,840
Speaker 3: I think there's a lot of macro at the thirty

573
00:26:45,880 --> 00:26:48,679
Speaker 3: thousand foot level things that seem to be similar. But

574
00:26:48,880 --> 00:26:52,399
Speaker 3: underneath that, a lot of changes in relative demand, like

575
00:26:52,480 --> 00:26:55,640
Speaker 3: I said, for housing, maybe for cars, maybe for other things.

576
00:26:55,640 --> 00:26:58,000
Speaker 3: A lot happening underneath the hood. I think the big

577
00:26:58,119 --> 00:27:03,320
Speaker 3: question for me is how do new technologies change its equation.

578
00:27:03,520 --> 00:27:06,760
Speaker 3: We talk a lot about you know, AI and things

579
00:27:06,840 --> 00:27:09,840
Speaker 3: like that, so those are open questions, you know, But

580
00:27:09,960 --> 00:27:12,640
Speaker 3: I think that so far a lot of these kind

581
00:27:12,680 --> 00:27:16,000
Speaker 3: of kind of factors I think fundamentally drive our economy

582
00:27:16,000 --> 00:27:18,720
Speaker 3: over the long time. They look to be getting back

583
00:27:18,720 --> 00:27:22,080
Speaker 3: to similar to the way they were before the pandemic.

584
00:27:22,560 --> 00:27:24,960
Speaker 4: Well we could go back to where we were before

585
00:27:25,000 --> 00:27:27,560
Speaker 4: the pandemic, or we could go back even farther. I

586
00:27:27,600 --> 00:27:29,840
Speaker 4: talked to at Jackson Hall, one of your colleagues, and

587
00:27:29,880 --> 00:27:30,760
Speaker 4: we were talking about.

588
00:27:30,600 --> 00:27:32,000
Speaker 2: Well, what if John's wrong about.

589
00:27:31,760 --> 00:27:36,080
Speaker 4: Our star and our star is actually higher. And this

590
00:27:36,119 --> 00:27:39,480
Speaker 4: person was pointing out that in the nineteen nineties we

591
00:27:39,520 --> 00:27:42,520
Speaker 4: had to hire our star, we had higher interest rates.

592
00:27:42,560 --> 00:27:44,800
Speaker 4: We had higher inflation, but we also had a lot

593
00:27:44,920 --> 00:27:45,600
Speaker 4: higher growth.

594
00:27:46,520 --> 00:27:49,200
Speaker 3: Well absolutely, So you know, when Thomas Laubach and I

595
00:27:49,320 --> 00:27:51,440
Speaker 3: first started working on this, so a little over twenty

596
00:27:51,520 --> 00:27:54,920
Speaker 3: years ago, we were really actually interested in the high

597
00:27:54,920 --> 00:27:55,760
Speaker 3: growth theory for all.

598
00:27:56,280 --> 00:27:58,760
Speaker 2: For those who remember, we had the dot com boom,

599
00:27:58,800 --> 00:27:59,880
Speaker 2: we had the you know, the.

600
00:28:00,440 --> 00:28:03,040
Speaker 3: The productivity boom of the late nineties early two thousands,

601
00:28:03,080 --> 00:28:06,240
Speaker 3: which was real, I mean that really drove real incomes,

602
00:28:06,240 --> 00:28:09,040
Speaker 3: It drove GDP growth of drove productivity. And according to

603
00:28:09,280 --> 00:28:11,639
Speaker 3: the theory that you know, we had studied, like all

604
00:28:11,680 --> 00:28:14,200
Speaker 3: of us had studied, it would suggest that if you're

605
00:28:14,200 --> 00:28:16,600
Speaker 3: in a high growth economy, you're going to have higher

606
00:28:17,240 --> 00:28:20,560
Speaker 3: neutral interest rates because demand for investment is high a

607
00:28:20,600 --> 00:28:23,280
Speaker 3: relative to savings. Everyone's you know, trying to invest more

608
00:28:23,320 --> 00:28:24,560
Speaker 3: for this high growth economy.

609
00:28:24,640 --> 00:28:27,280
Speaker 2: That pushes our SAR up. We actually found it did.

610
00:28:27,840 --> 00:28:29,840
Speaker 3: Our high est estimates of our star you know, over

611
00:28:29,880 --> 00:28:32,119
Speaker 3: the last thirty forty years are in that period.

612
00:28:32,400 --> 00:28:34,679
Speaker 2: And that's really what drove that research is.

613
00:28:34,680 --> 00:28:37,560
Speaker 3: To understand, hey, you know, we're this you know, you

614
00:28:37,560 --> 00:28:40,640
Speaker 3: know tech boom. Isn't this changing kind of the backdrop

615
00:28:40,640 --> 00:28:42,760
Speaker 3: for monetary policy? And I think it did, and I

616
00:28:42,840 --> 00:28:45,920
Speaker 3: you know, that was where we focused after the global

617
00:28:45,960 --> 00:28:49,360
Speaker 3: financial crisis, we saw the reverse happen for different reasons.

618
00:28:49,640 --> 00:28:52,240
Speaker 3: So yes, the answer is if we got another and

619
00:28:52,280 --> 00:28:54,920
Speaker 3: I hope we do another period of very high productivity

620
00:28:54,960 --> 00:28:58,920
Speaker 3: growth strong you know, underlying growth that would change this equation.

621
00:28:59,080 --> 00:29:02,440
Speaker 3: Haven't has seen in the data yet, but clearly that would.

622
00:29:02,240 --> 00:29:04,640
Speaker 2: Be that would be something that we would be you know,

623
00:29:04,760 --> 00:29:05,680
Speaker 2: the would move our.

624
00:29:05,680 --> 00:29:09,920
Speaker 3: Star on the other factors like demographics and other kind

625
00:29:09,920 --> 00:29:13,280
Speaker 3: of things. I don't think we've seen those changes yet,

626
00:29:13,320 --> 00:29:16,920
Speaker 3: but again, you know, this is something that keeps it's

627
00:29:16,920 --> 00:29:17,600
Speaker 3: an open question.

628
00:29:17,640 --> 00:29:19,040
Speaker 2: We'll just keep watching the data.

629
00:29:19,120 --> 00:29:22,360
Speaker 4: Now, I can't let you go from this audience without

630
00:29:22,440 --> 00:29:23,520
Speaker 4: asking about the dollar.

631
00:29:23,640 --> 00:29:24,680
Speaker 2: I know what you're going to say.

632
00:29:25,080 --> 00:29:28,600
Speaker 4: It's not the Fed's responsibility, but the dollar's impact on

633
00:29:28,680 --> 00:29:29,760
Speaker 4: the economy is.

634
00:29:30,320 --> 00:29:32,040
Speaker 2: So how do you take it into account?

635
00:29:32,120 --> 00:29:34,280
Speaker 4: How do you account for what's happening when the dollar

636
00:29:34,280 --> 00:29:35,360
Speaker 4: goes up a dollar goes down.

637
00:29:35,480 --> 00:29:37,200
Speaker 3: Yeah, So if you think about any kind of our

638
00:29:37,240 --> 00:29:40,720
Speaker 3: analysis we do in the FED, clearly we understand that

639
00:29:40,760 --> 00:29:44,200
Speaker 3: we're not you know, a yes, we don't make the

640
00:29:44,200 --> 00:29:46,840
Speaker 3: policy for the US dollar. You know, we're not targeting

641
00:29:46,920 --> 00:29:49,520
Speaker 3: the dollar absolutely not. We're focused on maximum employment and

642
00:29:49,520 --> 00:29:52,440
Speaker 3: price stability. But in thinking about setting interest rates in

643
00:29:52,480 --> 00:29:56,640
Speaker 3: the path of policy, that clearly affects financial conditions, effects yields,

644
00:29:56,880 --> 00:30:00,400
Speaker 3: effects a fix fix, income markets, effects equity market, It

645
00:30:00,440 --> 00:30:04,920
Speaker 3: affects for exchange markets. These are the basic transmission mechanisms

646
00:30:04,920 --> 00:30:05,920
Speaker 3: of monetary policy.

647
00:30:06,080 --> 00:30:08,480
Speaker 2: So we think about, you know, how our.

648
00:30:08,160 --> 00:30:11,520
Speaker 3: Actions affect financial conditions and feedback to the US economy

649
00:30:11,520 --> 00:30:14,360
Speaker 3: and abroad. We also think about how other changes in

650
00:30:14,400 --> 00:30:16,920
Speaker 3: the global economy that affect the dollar and other things

651
00:30:17,080 --> 00:30:19,520
Speaker 3: then feedback to our economy. So it's part of, if

652
00:30:19,560 --> 00:30:21,920
Speaker 3: you will, our models so that we use that are

653
00:30:22,040 --> 00:30:24,640
Speaker 3: inherently global and understand those interactions.

654
00:30:24,800 --> 00:30:26,600
Speaker 2: It's part of the dynamics of our system.

655
00:30:26,640 --> 00:30:30,360
Speaker 3: So you know, we understand that and do our best

656
00:30:30,400 --> 00:30:33,840
Speaker 3: to take that into into account. Again, focused on our

657
00:30:33,920 --> 00:30:35,760
Speaker 3: maximum employment and price sability.

658
00:30:36,120 --> 00:30:39,000
Speaker 4: And Jackson Hole, we have a lot in common with

659
00:30:39,040 --> 00:30:40,680
Speaker 4: the other central bankers of the world.

660
00:30:41,160 --> 00:30:42,960
Speaker 2: We saw the Chairman walking along with the.

661
00:30:43,640 --> 00:30:46,400
Speaker 4: Head of the ECB and the Bank of Japan, and

662
00:30:46,440 --> 00:30:50,560
Speaker 4: everybody's focused on inflation. Three of you are looking to

663
00:30:50,600 --> 00:30:53,680
Speaker 4: bring inflation down. The Japanese are looking to bring it up.

664
00:30:53,680 --> 00:30:57,560
Speaker 4: But how much coordination and talk is there at a

665
00:30:57,560 --> 00:31:00,960
Speaker 4: place like that or even around the world world during

666
00:31:01,000 --> 00:31:04,400
Speaker 4: the year in terms of, as you say, how your

667
00:31:04,440 --> 00:31:07,160
Speaker 4: policies affect other people and how their policies affect you.

668
00:31:07,640 --> 00:31:11,400
Speaker 3: So we, you know, we go and have meetings of

669
00:31:11,440 --> 00:31:13,600
Speaker 3: the governors of the central banks from around the world

670
00:31:13,640 --> 00:31:17,040
Speaker 3: every two months and and discuss what's happening in our economies,

671
00:31:17,040 --> 00:31:19,480
Speaker 3: what we're what we're seeing, how those are We think

672
00:31:19,520 --> 00:31:22,520
Speaker 3: of those as spillovers and spillbacks, how the effects of

673
00:31:22,600 --> 00:31:25,239
Speaker 3: our economies and our actions are affecting the others. So

674
00:31:25,640 --> 00:31:28,360
Speaker 3: I think, you know, it's not monetary policy coordination. We

675
00:31:28,400 --> 00:31:32,520
Speaker 3: pretty much all of us have domestic goals and inflation, employment,

676
00:31:32,840 --> 00:31:35,840
Speaker 3: financial stability, but we do share a lot of information

677
00:31:35,960 --> 00:31:38,800
Speaker 3: on understanding what's going on in the global economy where

678
00:31:38,840 --> 00:31:42,840
Speaker 3: the risks are, understanding kind of how our policies are

679
00:31:42,840 --> 00:31:45,320
Speaker 3: affecting other countries, how their policies.

680
00:31:44,920 --> 00:31:47,200
Speaker 2: Are affecting us, and and.

681
00:31:46,920 --> 00:31:48,800
Speaker 3: So it's not coordination so much, but it is a

682
00:31:48,840 --> 00:31:51,680
Speaker 3: really good dialogue. And I think I think one of

683
00:31:51,720 --> 00:31:56,040
Speaker 3: the big benefits of being transparent and open around our

684
00:31:56,080 --> 00:31:59,520
Speaker 3: policy actions and being very clear, including the dot plot

685
00:31:59,600 --> 00:32:03,000
Speaker 3: and all Our other communication is it helps people around

686
00:32:03,000 --> 00:32:06,400
Speaker 3: the world to have at least an understanding what's the

687
00:32:06,440 --> 00:32:09,520
Speaker 3: FED thinking, how are they going about the policy, similarly

688
00:32:09,520 --> 00:32:12,800
Speaker 3: for other central banks, and hopefully that reduces some of

689
00:32:12,800 --> 00:32:16,920
Speaker 3: the uncertainty or surprises or were kind of unintended consequences

690
00:32:16,960 --> 00:32:19,240
Speaker 3: I mean around the world. I mean, one thing that's

691
00:32:19,280 --> 00:32:21,880
Speaker 3: been absolutely a positive is that over the last few years

692
00:32:22,000 --> 00:32:25,840
Speaker 3: we've seen dramatic policy actions by the FED, ECB, emerging

693
00:32:25,840 --> 00:32:29,240
Speaker 3: market countries, even you much stronger actions, and yet the

694
00:32:29,280 --> 00:32:32,800
Speaker 3: global financial system has operated well. We haven't seen the

695
00:32:32,880 --> 00:32:36,320
Speaker 3: kind of big shocks or taper tantrum kind of things. So,

696
00:32:36,680 --> 00:32:39,360
Speaker 3: you know, as we've all taken the strong and appropriate

697
00:32:39,400 --> 00:32:42,800
Speaker 3: actions to deal with the events, we've also seen you know,

698
00:32:43,480 --> 00:32:45,600
Speaker 3: I think you know, this all working kind of as

699
00:32:45,960 --> 00:32:51,760
Speaker 3: as intended without you know, creating unintended or accidental negative

700
00:32:51,760 --> 00:32:52,840
Speaker 3: effects across boarders.

701
00:32:53,640 --> 00:32:56,000
Speaker 4: Paper got the most attention at Jackson the whole was

702
00:32:56,000 --> 00:32:59,400
Speaker 4: Barry Eiching Green's warning that debt is unsustainable in the

703
00:32:59,520 --> 00:33:04,920
Speaker 4: US and other countries, and part two, which seemed to

704
00:33:04,920 --> 00:33:07,280
Speaker 4: really upset the audience was that he said nothing is

705
00:33:07,320 --> 00:33:09,640
Speaker 4: going to get done about it because there's no political

706
00:33:09,680 --> 00:33:12,960
Speaker 4: will How much of a threat is debt? Do you

707
00:33:13,000 --> 00:33:16,120
Speaker 4: think from an economic standpoint, how much does the FED

708
00:33:16,160 --> 00:33:16,840
Speaker 4: worry about it?

709
00:33:17,080 --> 00:33:20,080
Speaker 3: Well, you know, as long as I've been in I

710
00:33:20,120 --> 00:33:22,840
Speaker 3: guess in my profession, which is close to thirty years now,

711
00:33:23,840 --> 00:33:27,760
Speaker 3: we've had unsustainable physical policy. When you think about these

712
00:33:27,960 --> 00:33:31,440
Speaker 3: just projections, if nothing changes, what will happen to the

713
00:33:31,480 --> 00:33:34,000
Speaker 3: debt to GDP ratio or something like that. Now, I

714
00:33:34,000 --> 00:33:37,320
Speaker 3: do think it's really incumbent on the elected officials to

715
00:33:37,400 --> 00:33:40,080
Speaker 3: address that kind of issue. And I think over our

716
00:33:40,120 --> 00:33:43,680
Speaker 3: lifetimes it has happened in different ways through either tax

717
00:33:43,760 --> 00:33:46,640
Speaker 3: or spending policies. So from my point of view, it's

718
00:33:46,680 --> 00:33:50,360
Speaker 3: really the responsibility of Congress administration to make sure that

719
00:33:50,360 --> 00:33:54,480
Speaker 3: they're keeping getting us on a sustainable path and physical policy.

720
00:33:54,920 --> 00:33:58,080
Speaker 3: From my perspective as a Monte policymaker, it doesn't.

721
00:33:58,520 --> 00:34:01,400
Speaker 2: We're not constrained in any way by that. We're able to.

722
00:34:01,360 --> 00:34:03,360
Speaker 3: Carry out our policy actions as we need to do

723
00:34:03,560 --> 00:34:07,280
Speaker 3: to achieve our goals. But again, it is something that

724
00:34:07,480 --> 00:34:10,240
Speaker 3: you think about when you realize that if something doesn't

725
00:34:10,280 --> 00:34:14,759
Speaker 3: happen over next so many years, the physical situation in

726
00:34:14,760 --> 00:34:17,640
Speaker 3: a way gets worse, not better. And we've seen that

727
00:34:17,680 --> 00:34:19,840
Speaker 3: in the past. So we saw that with Social Security,

728
00:34:20,680 --> 00:34:23,520
Speaker 3: medicare you know back in the eighties. You know, we're

729
00:34:23,560 --> 00:34:25,680
Speaker 3: seeing that again with some of those issues, and they

730
00:34:25,760 --> 00:34:28,040
Speaker 3: do need to be addressed, but again that's those are

731
00:34:28,040 --> 00:34:29,480
Speaker 3: decisions by elected officials.

732
00:34:29,600 --> 00:34:34,040
Speaker 4: One last question revolves around comments from two of our

733
00:34:34,080 --> 00:34:38,640
Speaker 4: guests on Bloomberg Television. One said, when he was asked

734
00:34:38,640 --> 00:34:40,320
Speaker 4: what he would like to hear from you, he said, op,

735
00:34:40,400 --> 00:34:44,200
Speaker 4: the FED only speaks in platitudes, and another another was

736
00:34:45,160 --> 00:34:47,160
Speaker 4: the FED doesn't know what it wants to do, so

737
00:34:47,200 --> 00:34:48,360
Speaker 4: what can they tell us?

738
00:34:48,760 --> 00:34:52,160
Speaker 2: So I would like to ask you, with this audience

739
00:34:52,200 --> 00:34:54,560
Speaker 2: here for one last thought on what.

740
00:34:54,440 --> 00:34:56,640
Speaker 4: You would tell them now that you're not giving as

741
00:34:56,719 --> 00:34:59,040
Speaker 4: much explicit guidance as.

742
00:34:58,800 --> 00:34:59,319
Speaker 2: You used to.

743
00:35:00,080 --> 00:35:03,000
Speaker 3: I think we are telling people really powerful things. I

744
00:35:03,080 --> 00:35:05,680
Speaker 3: think one is, you know, we are absolutely committed to

745
00:35:05,719 --> 00:35:09,319
Speaker 3: achieving the two percent inflation on a sustained basis, So

746
00:35:09,320 --> 00:35:10,920
Speaker 3: there's not a debate about it. Are we trying to

747
00:35:10,960 --> 00:35:13,440
Speaker 3: get to two percent or three percent or one percent.

748
00:35:14,320 --> 00:35:16,000
Speaker 3: We're getting to get to two percent, and we're going

749
00:35:16,040 --> 00:35:19,239
Speaker 3: to take the actions to do that and do the

750
00:35:19,320 --> 00:35:23,120
Speaker 3: very best we can, and with given our dual mandate.

751
00:35:22,840 --> 00:35:24,360
Speaker 2: So that's a pretty powerful message.

752
00:35:24,360 --> 00:35:26,560
Speaker 3: When I started the FED back in the early nineties,

753
00:35:26,680 --> 00:35:28,920
Speaker 3: we didn't have an inflation target. We weren't able to

754
00:35:29,000 --> 00:35:31,640
Speaker 3: say to people what are we trying to do and how.

755
00:35:31,520 --> 00:35:32,560
Speaker 2: We're going to go about it.

756
00:35:32,680 --> 00:35:35,000
Speaker 3: Today we're able to say, this is what good looks like,

757
00:35:35,200 --> 00:35:36,640
Speaker 3: this is what we're working towards.

758
00:35:36,880 --> 00:35:39,000
Speaker 2: Here's our view of where the economy is going.

759
00:35:39,360 --> 00:35:41,840
Speaker 3: You know, you get to look forward to another economic

760
00:35:41,920 --> 00:35:46,960
Speaker 3: projections in September. That's our collective view of growth, inflation,

761
00:35:47,200 --> 00:35:47,960
Speaker 3: interest rates.

762
00:35:48,239 --> 00:35:50,279
Speaker 2: That's a snapshot, if you will, of.

763
00:35:51,840 --> 00:35:54,239
Speaker 3: Nineteen people of how we're thinking about that. So I

764
00:35:54,280 --> 00:35:58,919
Speaker 3: think we are providing an honest view of what we're

765
00:35:58,960 --> 00:36:02,080
Speaker 3: trying to get to, how we think it's going to evolve, and.

766
00:36:01,960 --> 00:36:02,680
Speaker 2: What we're going to do.

767
00:36:02,960 --> 00:36:08,080
Speaker 3: And importantly, as the situation changes and developments are different

768
00:36:08,120 --> 00:36:11,560
Speaker 3: than we expect, we're going to adapt and change and a.

769
00:36:11,400 --> 00:36:13,200
Speaker 2: Way to is appropriate.

770
00:36:13,360 --> 00:36:15,759
Speaker 3: I think the past year and a half I think

771
00:36:15,800 --> 00:36:18,840
Speaker 3: has proven that point. I mean, we've moved quickly, we

772
00:36:19,000 --> 00:36:22,880
Speaker 3: moved appropriately, and we've adjusted as the facts have changed,

773
00:36:23,200 --> 00:36:27,279
Speaker 3: and always with the same focus and unanimous focus on

774
00:36:27,440 --> 00:36:30,520
Speaker 3: we need to achieve our price stability goal. Price stability

775
00:36:30,600 --> 00:36:36,040
Speaker 3: is absolutely foundational to financial stability, macroeconomic stability, prosperity.

776
00:36:36,280 --> 00:36:37,279
Speaker 2: So we need to get that.

777
00:36:37,640 --> 00:36:40,120
Speaker 3: And now the questions that everyone's asking is, well, what

778
00:36:40,239 --> 00:36:41,200
Speaker 3: exactly doesn't mean?

779
00:36:41,280 --> 00:36:43,200
Speaker 2: What exactly is the peak funds? Right? How long do

780
00:36:43,239 --> 00:36:45,000
Speaker 2: you keep RaSE high? Well that's going to depend on

781
00:36:45,040 --> 00:36:45,560
Speaker 2: the data.

782
00:36:45,600 --> 00:36:48,279
Speaker 3: But what we're doing and why we're doing it, I

783
00:36:48,280 --> 00:36:49,319
Speaker 3: think that's crystal clear.

784
00:36:49,520 --> 00:36:52,799
Speaker 1: That's John William's, President of the Federal Reserve Bank of

785
00:36:52,800 --> 00:36:58,239
Speaker 1: New York, speaking with Bloomberg Economics editor Michael McKee. I'm

786
00:36:58,360 --> 00:37:00,960
Speaker 1: Charlie Pellett, and this is Bloomberg