WEBVTT - Fed's Alberto Musalem Talks Fed Policy

0:00:02.520 --> 0:00:07.000
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

0:00:07.760 --> 0:00:10.120
<v Speaker 2>We consider the path forward for this conflict and of course,

0:00:10.200 --> 0:00:13.040
<v Speaker 2>ultimately what it means for the global economy. That is

0:00:13.039 --> 0:00:15.840
<v Speaker 2>a challenge that policymakers have to deal with not just

0:00:15.920 --> 0:00:18.439
<v Speaker 2>on Capitol Hill, but inside the Federal Reserve Building, in

0:00:18.440 --> 0:00:21.320
<v Speaker 2>the various buildings across the country that the FED inhabits,

0:00:21.360 --> 0:00:24.200
<v Speaker 2>as they consider the economic picture, in the inflation picture

0:00:24.560 --> 0:00:26.639
<v Speaker 2>that this has created. And it's on that note we

0:00:26.680 --> 0:00:30.800
<v Speaker 2>turn now to the Rekuvic Economic Conference, where the Saint

0:00:30.840 --> 0:00:34.080
<v Speaker 2>Louis FED President ALBERTA Muslim is sitting down with Bloomberg's

0:00:34.120 --> 0:00:36.839
<v Speaker 2>very own Stephanie Flanders. Let's go live now to Iceland.

0:00:39.720 --> 0:00:41.879
<v Speaker 3>Well, thank you so much. I am indeed here in

0:00:42.000 --> 0:00:46.680
<v Speaker 3>Rekievik with Alberto Musalem. Thank you very much for joining us.

0:00:47.200 --> 0:00:50.960
<v Speaker 3>In your speech here at this conference, you pointed out

0:00:50.960 --> 0:00:54.960
<v Speaker 3>that the US has inflation running meaningfully above target, long

0:00:55.040 --> 0:01:01.760
<v Speaker 3>run inflation expectations creeping higher, and yet a real policy

0:01:01.840 --> 0:01:06.959
<v Speaker 3>rate that was below the level that the Federal Open

0:01:06.959 --> 0:01:11.400
<v Speaker 3>Market Committee think is neutral, so not actually applying any

0:01:11.680 --> 0:01:15.080
<v Speaker 3>restraining force on the economy. All those things together sound

0:01:15.160 --> 0:01:17.800
<v Speaker 3>like someone who wants to raise interest rates crazy to

0:01:17.840 --> 0:01:18.200
<v Speaker 3>be with you.

0:01:19.319 --> 0:01:19.759
<v Speaker 1>That's right.

0:01:19.800 --> 0:01:22.080
<v Speaker 4>The real policy rate right now is running at around

0:01:22.240 --> 0:01:24.400
<v Speaker 4>half a percent, which is lower than the one percent

0:01:24.480 --> 0:01:27.680
<v Speaker 4>that the Committee believes is the neutral rate. I think

0:01:27.720 --> 0:01:29.640
<v Speaker 4>you have to look at the full picture, and it

0:01:29.680 --> 0:01:32.360
<v Speaker 4>looks to me like policy is at or slightly below

0:01:32.800 --> 0:01:34.720
<v Speaker 4>the committee's long run neutral level.

0:01:35.240 --> 0:01:37.399
<v Speaker 3>But if you combine that with the other things you

0:01:37.440 --> 0:01:41.680
<v Speaker 3>talk about, you had emphasized the risks of the inflationary

0:01:41.720 --> 0:01:44.399
<v Speaker 3>pressures on the demand side and the supply side of

0:01:44.400 --> 0:01:47.320
<v Speaker 3>the economy. It it sounds like you think they should

0:01:47.360 --> 0:01:49.680
<v Speaker 3>be leaning towards tightening. It sounds like you probably you

0:01:49.720 --> 0:01:51.920
<v Speaker 3>might have been one of the policy makers in the

0:01:51.960 --> 0:01:54.720
<v Speaker 3>April meeting who actually thought they should have removed the

0:01:56.160 --> 0:01:59.440
<v Speaker 3>statement against tightening in the statement.

0:01:59.640 --> 0:02:02.480
<v Speaker 4>So yeah, I supported the interest rate decision, but I

0:02:02.640 --> 0:02:06.200
<v Speaker 4>thought the easing bias was no longer consistent with the

0:02:06.240 --> 0:02:08.920
<v Speaker 4>outlook and the balance of risks, which in my mind,

0:02:09.480 --> 0:02:12.200
<v Speaker 4>the bouncer's risk has shifted a little bit towards the

0:02:12.240 --> 0:02:14.920
<v Speaker 4>inflation side, unless towards the employment side.

0:02:16.320 --> 0:02:18.520
<v Speaker 1>So whether the.

0:02:18.480 --> 0:02:21.639
<v Speaker 4>Economy will require a hike or a cut or hold

0:02:21.680 --> 0:02:25.359
<v Speaker 4>will depend on the scenario. There is a scenario where

0:02:25.560 --> 0:02:29.680
<v Speaker 4>inflation remains high, there's no disinflation in the next quarter

0:02:29.800 --> 0:02:32.760
<v Speaker 4>or two, and in that scenario, the economy will probably

0:02:32.760 --> 0:02:36.800
<v Speaker 4>require a hike. There's also a scenario where the economy

0:02:36.800 --> 0:02:39.160
<v Speaker 4>weakens materially in the second half of the year because

0:02:39.360 --> 0:02:42.840
<v Speaker 4>real incomes are challenged and corporate margins are challenged. In

0:02:42.840 --> 0:02:46.200
<v Speaker 4>that scenario, inflation could come down. In that scenario, we

0:02:46.280 --> 0:02:50.480
<v Speaker 4>would be thinking of no hikes, maybe even a cut.

0:02:50.639 --> 0:02:52.880
<v Speaker 4>So there are two scenarios to play with here.

0:02:53.040 --> 0:02:55.400
<v Speaker 3>But looking down the track, at least the markets are

0:02:55.440 --> 0:02:59.360
<v Speaker 3>now fully pricing a rate hike by March twenty twenty seven.

0:02:59.400 --> 0:03:02.680
<v Speaker 3>Given where we are now, how we think things are

0:03:02.680 --> 0:03:05.000
<v Speaker 3>going to proceed with oil prices and some of the

0:03:05.080 --> 0:03:06.959
<v Speaker 3>risks on the supply side that you talk about, do

0:03:07.000 --> 0:03:09.680
<v Speaker 3>you think that's a sensible thing for them to.

0:03:09.639 --> 0:03:13.119
<v Speaker 4>Price again, I think there are two scenarios here, and

0:03:14.960 --> 0:03:16.960
<v Speaker 4>I don't comment nor with on market pricing. I'm more

0:03:17.000 --> 0:03:19.560
<v Speaker 4>focused on what's best for the economy and from main

0:03:19.560 --> 0:03:23.080
<v Speaker 4>street markets, every price materially in the US and in

0:03:23.120 --> 0:03:26.680
<v Speaker 4>other countries, and the front end of the curve, I

0:03:26.680 --> 0:03:30.120
<v Speaker 4>think that's markets trying to understand what our reaction function is.

0:03:30.919 --> 0:03:32.880
<v Speaker 3>So I'm going to quit here because in your speech

0:03:32.919 --> 0:03:36.720
<v Speaker 3>you talk very directly about the impact of AI on

0:03:36.760 --> 0:03:39.920
<v Speaker 3>productivity and the long run impact that could have on

0:03:40.000 --> 0:03:42.920
<v Speaker 3>monetary policy and on interest rates, But you warn that

0:03:43.000 --> 0:03:46.640
<v Speaker 3>policy makers cannot depend on a potential productivity boom from

0:03:46.760 --> 0:03:51.000
<v Speaker 3>artificial intelligence to ease elevated inflation right now in the

0:03:51.000 --> 0:03:53.400
<v Speaker 3>short term, and in fact, you seem to suggest that

0:03:53.440 --> 0:03:57.880
<v Speaker 3>the buildout of all the data centers associated with AI

0:03:58.360 --> 0:04:01.240
<v Speaker 3>was actually putting upward pressure on inflation. Do you think

0:04:01.280 --> 0:04:03.880
<v Speaker 3>the incoming FED chairman Kevin Walsh is one of those

0:04:04.160 --> 0:04:07.200
<v Speaker 3>policy makers that's inclined to be hoping for that.

0:04:07.480 --> 0:04:08.760
<v Speaker 1>So I'll speak about my views.

0:04:09.640 --> 0:04:14.680
<v Speaker 4>I am an AI enthusiast and productivity optimist, but at

0:04:14.800 --> 0:04:19.200
<v Speaker 4>present it's unclear that productivity, first of all, is higher

0:04:19.200 --> 0:04:21.559
<v Speaker 4>than the long term average, is actually at or below

0:04:21.600 --> 0:04:25.840
<v Speaker 4>the long term average, And so to rely on productivity

0:04:25.880 --> 0:04:30.839
<v Speaker 4>to do the inflation job seems a risky proposition because

0:04:30.880 --> 0:04:34.440
<v Speaker 4>what if the productivity doesn't materialize in the future, we

0:04:34.480 --> 0:04:37.640
<v Speaker 4>could end up with higher inflation today and in the future.

0:04:37.760 --> 0:04:40.840
<v Speaker 4>And what AI is doing right now, it is not

0:04:40.880 --> 0:04:44.440
<v Speaker 4>really expanding the supply side of the economy. Yet what

0:04:44.480 --> 0:04:48.320
<v Speaker 4>it's doing is is putting upward demand pressures. You know,

0:04:48.360 --> 0:04:51.360
<v Speaker 4>through chip prices for the build out in my district,

0:04:51.440 --> 0:04:55.160
<v Speaker 4>I hear of construction companies shipping workers all over the country.

0:04:55.720 --> 0:05:01.680
<v Speaker 4>It is specialized trades persons to bill out the data centers.

0:05:01.720 --> 0:05:05.360
<v Speaker 4>So at present, it's more of a demand story from

0:05:05.400 --> 0:05:08.839
<v Speaker 4>AI than a supply story, and you see that in

0:05:08.880 --> 0:05:12.599
<v Speaker 4>the AGGRI demand numbers, and the percentage of CAPEX that

0:05:12.720 --> 0:05:15.400
<v Speaker 4>is coming from the AI build out is material.

0:05:15.520 --> 0:05:17.280
<v Speaker 3>But of course a lot of this does come down

0:05:17.320 --> 0:05:19.960
<v Speaker 3>to how you think in the scenario the next sort

0:05:19.960 --> 0:05:21.719
<v Speaker 3>of year and a half, that that's what you're focused

0:05:21.760 --> 0:05:23.520
<v Speaker 3>on when you think about where the policy is right

0:05:23.560 --> 0:05:27.159
<v Speaker 3>now and in the next few quarters. There's obviously different

0:05:27.200 --> 0:05:31.120
<v Speaker 3>pressures right There's some have emphasized, even John Williams has

0:05:31.160 --> 0:05:34.960
<v Speaker 3>talked about the disinflationary forces that come from AI. If

0:05:35.000 --> 0:05:36.919
<v Speaker 3>you start to see people lose their jobs, if you

0:05:36.920 --> 0:05:41.680
<v Speaker 3>see jobs eliminated as AI is rolled out. You've highlighted

0:05:41.800 --> 0:05:44.240
<v Speaker 3>more of the supply side, the sort of upside pressures

0:05:44.279 --> 0:05:46.800
<v Speaker 3>that come from data centers and other things, those kind

0:05:46.839 --> 0:05:49.560
<v Speaker 3>of pressures on resources. You seem pretty clear that those

0:05:49.680 --> 0:05:52.800
<v Speaker 3>upside pressures are going to be the larger factor at

0:05:52.839 --> 0:05:55.240
<v Speaker 3>least coming from the AI revolution in the next year.

0:05:55.800 --> 0:05:57.360
<v Speaker 1>I think there are two things. In the short run.

0:05:57.400 --> 0:05:59.560
<v Speaker 4>I think the demand pressures are more prominent than the

0:05:59.600 --> 0:06:04.400
<v Speaker 4>supply relief. I'm prepared to change my view if and

0:06:04.440 --> 0:06:09.760
<v Speaker 4>when I see AI actually contributing to agrig productivity growth,

0:06:09.760 --> 0:06:12.080
<v Speaker 4>which we don't see just yet in the data, and

0:06:12.480 --> 0:06:16.120
<v Speaker 4>when that becomes evident that that's actually putting downward pressure

0:06:16.400 --> 0:06:19.839
<v Speaker 4>on inflation. At present, that's not where we are now

0:06:20.120 --> 0:06:24.320
<v Speaker 4>in terms of the long run productivity and AI.

0:06:25.080 --> 0:06:26.640
<v Speaker 1>If and when we get.

0:06:27.040 --> 0:06:31.479
<v Speaker 4>Productivity to grow above its long run average where it

0:06:31.560 --> 0:06:36.239
<v Speaker 4>currently right now is not. The impact on real interest

0:06:36.279 --> 0:06:39.520
<v Speaker 4>rates will depend on how permanent that increase in productivity

0:06:39.520 --> 0:06:42.280
<v Speaker 4>growth is expected to be. If it's expected to be

0:06:42.440 --> 0:06:46.320
<v Speaker 4>very permanent, that will put upward pressure on real interest rates.

0:06:46.800 --> 0:06:50.000
<v Speaker 4>If it's expected to be transitory, then the supply side

0:06:50.040 --> 0:06:53.680
<v Speaker 4>will win and that will put downward pressure on interest rates.

0:06:54.000 --> 0:06:56.200
<v Speaker 3>One other thing that's happened since the beginning of the

0:06:56.240 --> 0:07:00.760
<v Speaker 3>Iron Crisis is a real change in bond yields, and actually,

0:07:01.680 --> 0:07:04.200
<v Speaker 3>we certainly think of Bloomberg economics, we think that's been

0:07:04.360 --> 0:07:07.600
<v Speaker 3>largely due to an increase in the term premium slightly

0:07:08.360 --> 0:07:11.320
<v Speaker 3>an increase in what we're expecting on inflation, but mainly

0:07:11.360 --> 0:07:14.960
<v Speaker 3>on the term premium. So in that sense, has that

0:07:15.040 --> 0:07:17.320
<v Speaker 3>the bond market already done some of the Fed's work

0:07:17.400 --> 0:07:19.840
<v Speaker 3>for it? I mean, is that producing a meaningful tightening

0:07:19.920 --> 0:07:22.280
<v Speaker 3>even though you have a very low short term rate.

0:07:22.600 --> 0:07:25.520
<v Speaker 4>So my interpretation of what's happened to bond markets is

0:07:25.560 --> 0:07:28.880
<v Speaker 4>that they're seeing an economy that's resilient on the real side,

0:07:28.880 --> 0:07:31.080
<v Speaker 4>they see a labor market that's been resilient on the

0:07:31.080 --> 0:07:35.119
<v Speaker 4>real side. They see higher realized inflation, they see higher

0:07:35.120 --> 0:07:38.400
<v Speaker 4>expected inflation. When I look at the decomposition, I arrive

0:07:38.480 --> 0:07:41.840
<v Speaker 4>at a different conclusion than your team, which is a

0:07:41.840 --> 0:07:45.679
<v Speaker 4>fantastic team. My understanding, it's about three quarters of it

0:07:45.920 --> 0:07:50.480
<v Speaker 4>was an increase in the expected neutral rate policy rate,

0:07:50.520 --> 0:07:54.960
<v Speaker 4>that is in about one quarter higher term premia. Now,

0:07:54.960 --> 0:07:56.960
<v Speaker 4>if you look at forward markets.

0:07:56.560 --> 0:07:58.880
<v Speaker 3>So just on that, you don't think it is hasn't

0:07:58.960 --> 0:08:01.680
<v Speaker 3>meaningfully tightened financial conditions if you're looking on that kind

0:08:01.720 --> 0:08:02.400
<v Speaker 3>of medium term.

0:08:02.480 --> 0:08:03.840
<v Speaker 4>So I was about to say, if you look at

0:08:03.840 --> 0:08:09.239
<v Speaker 4>the forward real interest rates, Marcus have raised the real

0:08:09.520 --> 0:08:12.360
<v Speaker 4>implied forward so they real interest rate a year from now,

0:08:12.400 --> 0:08:14.720
<v Speaker 4>they're real interest rate two years from now have come

0:08:14.760 --> 0:08:17.880
<v Speaker 4>up meaningfully in the last month or two.

0:08:18.800 --> 0:08:20.960
<v Speaker 3>But just going back to the things, you don't think

0:08:21.000 --> 0:08:25.040
<v Speaker 3>that it's made that the incoming Kevin Walsh is not.

0:08:25.760 --> 0:08:28.000
<v Speaker 3>His job hasn't been made any easier by the tightening

0:08:28.000 --> 0:08:30.640
<v Speaker 3>in the bond market. You still you would still have

0:08:30.720 --> 0:08:32.240
<v Speaker 3>to be focused on that short term rate.

0:08:33.760 --> 0:08:35.600
<v Speaker 4>I think when he comes in, he's going to take

0:08:35.640 --> 0:08:36.920
<v Speaker 4>a look at the Oh he has come in, he's

0:08:36.920 --> 0:08:38.319
<v Speaker 4>been sworn in. You know, he's gonna he's gonna have

0:08:38.360 --> 0:08:41.640
<v Speaker 4>his first meeting next the next two weeks, and he's

0:08:41.679 --> 0:08:43.040
<v Speaker 4>going to have to look at the economy, and we're

0:08:43.080 --> 0:08:44.720
<v Speaker 4>all gonna have to look at the economy and you know,

0:08:44.800 --> 0:08:47.319
<v Speaker 4>exchange views on the economy and exchange views on what

0:08:48.240 --> 0:08:50.600
<v Speaker 4>the best policy for the American people is at that

0:08:50.640 --> 0:08:51.200
<v Speaker 4>point in time.

0:08:51.520 --> 0:08:53.320
<v Speaker 3>Well, the other thing that the incoming FED chair has

0:08:53.360 --> 0:08:57.400
<v Speaker 3>talked a lot about is changing the Fed's communication tools.

0:08:57.400 --> 0:08:59.719
<v Speaker 3>He said he doesn't want to see so much or

0:08:59.720 --> 0:09:04.079
<v Speaker 3>indeed any forward guidance. He wants to have fewer public speeches,

0:09:04.120 --> 0:09:07.640
<v Speaker 3>he wants to get rid of the dot plot. Lots

0:09:07.640 --> 0:09:09.439
<v Speaker 3>of people come in saying they want to have less

0:09:09.600 --> 0:09:11.640
<v Speaker 3>less forward guidance and then they find they want to

0:09:11.679 --> 0:09:13.439
<v Speaker 3>say things to the markets. Do you think that he's

0:09:13.480 --> 0:09:15.240
<v Speaker 3>going to have a similar kind of learning curve.

0:09:16.080 --> 0:09:18.800
<v Speaker 4>Well, he's been in the FED before, so his learning

0:09:18.800 --> 0:09:22.520
<v Speaker 4>curve will probably be much lower than somebody who had

0:09:22.559 --> 0:09:25.520
<v Speaker 4>not been there before. You know, he's expressed some views

0:09:25.840 --> 0:09:28.880
<v Speaker 4>during the last year or so. Once he's in the seat,

0:09:29.000 --> 0:09:31.240
<v Speaker 4>once he consults with the full committee, and I expect

0:09:31.280 --> 0:09:33.679
<v Speaker 4>him to consult with the full Committee and all these matters,

0:09:34.080 --> 0:09:35.679
<v Speaker 4>you know he will he will try and steer the

0:09:35.679 --> 0:09:38.440
<v Speaker 4>committee in a direction or another.

0:09:39.120 --> 0:09:40.559
<v Speaker 1>And I think it's always.

0:09:40.320 --> 0:09:43.960
<v Speaker 4>Healthy to look at your communications policy, your monetary policy

0:09:44.000 --> 0:09:49.440
<v Speaker 4>framework and see how to adjust each or both to

0:09:49.520 --> 0:09:52.280
<v Speaker 4>make sure we're fulfilling the dual mandage as best we can.

0:09:52.320 --> 0:09:53.760
<v Speaker 3>But you're kind of on the opposite side of this,

0:09:53.800 --> 0:09:58.160
<v Speaker 3>because you wanted to actually connect the dots to the

0:09:58.280 --> 0:10:02.120
<v Speaker 3>whole forecast, not review whose dots they were, but make

0:10:02.160 --> 0:10:05.000
<v Speaker 3>a bit more sense of what the dots represented the

0:10:05.040 --> 0:10:08.120
<v Speaker 3>bigger picture, whereas he, instead of elaborating on the dots,

0:10:08.120 --> 0:10:09.760
<v Speaker 3>he wants to get rid of them all together. I mean,

0:10:09.840 --> 0:10:11.240
<v Speaker 3>that's just a straightforward disagreement.

0:10:11.679 --> 0:10:15.600
<v Speaker 4>Well, I would say what I think I would like

0:10:15.679 --> 0:10:17.840
<v Speaker 4>the most favor of the most is that we have

0:10:17.920 --> 0:10:21.680
<v Speaker 4>a communications policy that is very effective at transmitting what

0:10:21.720 --> 0:10:24.640
<v Speaker 4>our reaction function is at any point in time. Right

0:10:24.679 --> 0:10:26.600
<v Speaker 4>now we have the dots. We can make the dots

0:10:26.600 --> 0:10:31.120
<v Speaker 4>more effective by connecting the dots in terms of transmitting

0:10:31.160 --> 0:10:34.400
<v Speaker 4>our reaction function. Now you could also think of not

0:10:34.440 --> 0:10:37.200
<v Speaker 4>having the dots, but replacing them with something else that

0:10:37.320 --> 0:10:40.840
<v Speaker 4>is effective in transmitting to the markets and households and

0:10:40.880 --> 0:10:42.640
<v Speaker 4>businesses what our reaction function is.

0:10:43.280 --> 0:10:46.160
<v Speaker 3>The other big thing that certainly people in the financial

0:10:46.240 --> 0:10:50.200
<v Speaker 3>markets have been very focused on in Kevin Walsh's comments

0:10:50.679 --> 0:10:53.440
<v Speaker 3>is about wanting to shrink the fed's balance sheet, And

0:10:53.480 --> 0:10:57.360
<v Speaker 3>actually Governor Michael Barr said just the other day that

0:10:57.400 --> 0:10:59.599
<v Speaker 3>he thought that was just the wrong goal, that it

0:10:59.640 --> 0:11:03.160
<v Speaker 3>would actually raise risk for financial stability, and that it

0:11:03.160 --> 0:11:06.240
<v Speaker 3>wouldn't necessarily reduce the footprint in financial markets.

0:11:06.679 --> 0:11:07.520
<v Speaker 1>What do you make of that.

0:11:08.400 --> 0:11:10.880
<v Speaker 4>I think that's something that needs to be studied and

0:11:10.920 --> 0:11:15.200
<v Speaker 4>we need to all review what the options are for

0:11:15.360 --> 0:11:18.199
<v Speaker 4>doing that if we so desired. And I think it's

0:11:18.240 --> 0:11:21.000
<v Speaker 4>very different to reduce the balance sheet from the supply side,

0:11:21.320 --> 0:11:24.080
<v Speaker 4>which could be very disruptive, or reduce the balance sheet

0:11:24.080 --> 0:11:26.920
<v Speaker 4>from the demand side for reserves. Demand for reserves are

0:11:26.920 --> 0:11:30.560
<v Speaker 4>supposed to apply for reserves. If we went in the

0:11:30.559 --> 0:11:33.920
<v Speaker 4>direction of taking measures that would reduced the banking system's

0:11:34.440 --> 0:11:36.920
<v Speaker 4>demand for reserves, then that would be I think a

0:11:36.960 --> 0:11:41.040
<v Speaker 4>smoother path towards a lower balance sheet and percenta GDP

0:11:41.840 --> 0:11:44.240
<v Speaker 4>or a lower growth of the balance sheet in nominal

0:11:44.320 --> 0:11:48.360
<v Speaker 4>terms than simply reducing supply, which could be disruptive.

0:11:47.920 --> 0:11:50.880
<v Speaker 3>But other things equal, do you do you kind of

0:11:50.920 --> 0:11:54.160
<v Speaker 3>share the desire on balance to have a smaller balance sheet.

0:11:55.000 --> 0:11:58.840
<v Speaker 4>I think I'm going to do a two handed economists. Now,

0:11:59.080 --> 0:12:01.240
<v Speaker 4>there are some benefits having a large balance in terms

0:12:01.240 --> 0:12:06.440
<v Speaker 4>of financial stability, but it's also I think healthy for

0:12:06.480 --> 0:12:09.600
<v Speaker 4>the Central Bank to have the minimal or minimum balancee

0:12:09.640 --> 0:12:13.120
<v Speaker 4>that it needs to have to operate its monetary framework

0:12:13.480 --> 0:12:15.640
<v Speaker 4>and to promote financial stability. Now, so I think we

0:12:15.679 --> 0:12:18.920
<v Speaker 4>need to understand that where that is.

0:12:19.120 --> 0:12:21.800
<v Speaker 3>Just a last question when you talk about communications, and

0:12:22.000 --> 0:12:24.240
<v Speaker 3>we've certainly had a lot of communications about the FED

0:12:24.280 --> 0:12:27.200
<v Speaker 3>from the White House, but also we have ordinary people

0:12:27.240 --> 0:12:30.840
<v Speaker 3>who are coping with the impact of higher gasoline prices.

0:12:32.360 --> 0:12:35.480
<v Speaker 3>We're definitely having a conversation about higher interest rates now

0:12:35.520 --> 0:12:37.360
<v Speaker 3>that we wouldn't have expected to have six months ago.

0:12:37.440 --> 0:12:38.959
<v Speaker 3>And I think a lot of people, whether in the

0:12:38.960 --> 0:12:41.760
<v Speaker 3>White House or in the broader economy, would say, hang on,

0:12:42.559 --> 0:12:46.480
<v Speaker 3>what is the Fed doing thinking about raising interest rates

0:12:46.800 --> 0:12:49.880
<v Speaker 3>in an environment where it can't affect the global energy

0:12:49.960 --> 0:12:53.160
<v Speaker 3>price that's the thing pushing up inflation, and it definitely

0:12:53.160 --> 0:12:56.360
<v Speaker 3>can't affect the rollout of AI because that seems to

0:12:56.400 --> 0:12:58.080
<v Speaker 3>be just an unstoppable force.

0:12:58.320 --> 0:12:59.760
<v Speaker 1>So why raise.

0:12:59.640 --> 0:13:03.599
<v Speaker 4>Interest So our mandate is price stability and maximum employment.

0:13:04.160 --> 0:13:07.000
<v Speaker 4>And right now we're above target on inflation, and so

0:13:08.120 --> 0:13:11.040
<v Speaker 4>the possibility or probability that we might consider and interest

0:13:11.080 --> 0:13:13.200
<v Speaker 4>rate increase in the future I think has to be

0:13:13.280 --> 0:13:17.240
<v Speaker 4>greater than zero. You know, the economy has been robust,

0:13:17.480 --> 0:13:20.559
<v Speaker 4>GDP growth has been at or around potential, The lave

0:13:20.640 --> 0:13:24.360
<v Speaker 4>market is right around in terms of unemployment, right around

0:13:24.360 --> 0:13:26.800
<v Speaker 4>its natural rate around four point three four point four,

0:13:28.240 --> 0:13:30.319
<v Speaker 4>And so we're missing on one side of the mandate.

0:13:31.360 --> 0:13:35.600
<v Speaker 4>Inflation expectations are drifting higher to some degree, and we're

0:13:35.720 --> 0:13:38.520
<v Speaker 4>not missing on the other side of the mandate. So

0:13:38.960 --> 0:13:41.840
<v Speaker 4>you have to take all all the factors, and you know,

0:13:41.840 --> 0:13:45.959
<v Speaker 4>we have a statutory responsibility to hit both sides of

0:13:45.960 --> 0:13:46.400
<v Speaker 4>the mandate.

0:13:46.679 --> 0:13:49.160
<v Speaker 3>And finally you did mention. Kevin Walsh was sort of

0:13:49.240 --> 0:13:53.000
<v Speaker 3>as in the building and has been sworn in. He

0:13:53.080 --> 0:13:56.200
<v Speaker 3>talked in the past about wanting to shake break, break

0:13:56.280 --> 0:13:59.920
<v Speaker 3>some heads and have a sort of revolution, be an

0:14:00.080 --> 0:14:02.800
<v Speaker 3>agent of change in the FED. Is that the way

0:14:02.840 --> 0:14:04.599
<v Speaker 3>that he's presented himself Internally?

0:14:04.840 --> 0:14:08.559
<v Speaker 4>I think the new chair or Chair Warsh i should say,

0:14:08.720 --> 0:14:13.280
<v Speaker 4>will be asking some very profound and deep questions about

0:14:14.360 --> 0:14:19.800
<v Speaker 4>many ways in which we operate monetary policy, communications operations,

0:14:20.480 --> 0:14:24.640
<v Speaker 4>and so I think that's refreshing. You know, a new

0:14:24.920 --> 0:14:28.960
<v Speaker 4>leader should always come in with a vision and asking

0:14:29.040 --> 0:14:32.400
<v Speaker 4>very deep questions about how things were done in the past.

0:14:32.760 --> 0:14:35.240
<v Speaker 1>I expect that to be the case. All A bet Massalam.

0:14:35.280 --> 0:14:36.800
<v Speaker 3>Thank you very much for joining us, and I think

0:14:36.800 --> 0:14:40.360
<v Speaker 3>we'll even forgive you for disagreeing with our US economics team.

0:14:40.480 --> 0:14:41.240
<v Speaker 1>Thanks very much,