1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,800 --> 00:00:09,480 Speaker 2: Well, thank you very much. We'd like to welcome all 3 00:00:09,600 --> 00:00:12,240 Speaker 2: our viewers and listeners around the world to Bloomberg Radio 4 00:00:12,280 --> 00:00:15,000 Speaker 2: and Television, and we'd like to welcome Austin Goolsby. Yeah, 5 00:00:15,000 --> 00:00:18,440 Speaker 2: thank you for having Bloomberg Radio and Television. I want 6 00:00:18,480 --> 00:00:22,439 Speaker 2: to start with the next meeting and the meetings beyond, 7 00:00:22,480 --> 00:00:26,599 Speaker 2: because that's the general focus of the folks on trading desks. 8 00:00:27,240 --> 00:00:30,080 Speaker 2: Coming out of the last two years, the focus seemed 9 00:00:30,080 --> 00:00:33,199 Speaker 2: to be on the unemployment rate, on the labor market, 10 00:00:33,520 --> 00:00:36,599 Speaker 2: and cutting rates to get ahead of a problem with 11 00:00:36,960 --> 00:00:39,320 Speaker 2: the labor market. But listening to you this morning, it 12 00:00:39,400 --> 00:00:43,040 Speaker 2: sounds like you're more concerned about inflation, that inflation may 13 00:00:43,120 --> 00:00:45,080 Speaker 2: have become the primary risk. 14 00:00:45,520 --> 00:00:49,080 Speaker 1: Yeah, I would say in my head in twenty three 15 00:00:49,240 --> 00:00:53,720 Speaker 1: and twenty four since I've been on the FED, inflation's 16 00:00:53,760 --> 00:00:58,560 Speaker 1: been it has never gone away as a central focus, 17 00:01:00,040 --> 00:01:02,720 Speaker 1: and the labor market is deteriorating. 18 00:01:02,880 --> 00:01:06,720 Speaker 3: It comes back in a major way. 19 00:01:07,280 --> 00:01:11,800 Speaker 1: But I'm a little more concerned about inflation right now 20 00:01:11,800 --> 00:01:14,840 Speaker 1: because I think the job market is pretty steady, I 21 00:01:14,880 --> 00:01:19,839 Speaker 1: think growth is pretty steady. I think there's some promising 22 00:01:20,680 --> 00:01:25,160 Speaker 1: stuff in the inflation reports, but there's also some warning signs. 23 00:01:25,680 --> 00:01:30,319 Speaker 1: So as I say I'm not hawkish about rates, I'm 24 00:01:30,560 --> 00:01:35,360 Speaker 1: pretty optimistic that we can get rates down further multiple 25 00:01:35,480 --> 00:01:39,720 Speaker 1: cuts in twenty twenty six, as long as we see 26 00:01:39,720 --> 00:01:44,160 Speaker 1: the progress on inflation that forecasters have been forecasting that 27 00:01:44,240 --> 00:01:47,200 Speaker 1: it's supposed to start coming down, and I just want 28 00:01:47,880 --> 00:01:51,360 Speaker 1: us to see some progress on that front and. 29 00:01:51,400 --> 00:01:52,480 Speaker 3: Not get ahead of ourselves. 30 00:01:52,560 --> 00:01:54,080 Speaker 2: Well, you talk about that a little bit, and it's 31 00:01:54,080 --> 00:01:56,480 Speaker 2: a question I asked J Powell once is it seems 32 00:01:56,520 --> 00:01:58,280 Speaker 2: like every time you put out a summary of economic 33 00:01:58,320 --> 00:02:02,040 Speaker 2: projections that outlooked by the various members of the Open 34 00:02:02,040 --> 00:02:05,320 Speaker 2: Market Committee, the two percent target gets hit two years 35 00:02:05,320 --> 00:02:08,480 Speaker 2: from now. The next one it's two years from now exactly. 36 00:02:08,600 --> 00:02:12,200 Speaker 1: So what goes wrong, That's a lot of things can 37 00:02:12,240 --> 00:02:12,720 Speaker 1: go wrong. 38 00:02:15,040 --> 00:02:15,920 Speaker 3: In this case. 39 00:02:16,200 --> 00:02:19,280 Speaker 1: What I want to make sure is not going wrong 40 00:02:19,480 --> 00:02:26,400 Speaker 1: is that we need inflation not to be persistent when 41 00:02:26,800 --> 00:02:29,800 Speaker 1: the part of inflation that has come from tariffs is 42 00:02:29,840 --> 00:02:34,120 Speaker 1: supposed to go away, is supposed to be transitory, and 43 00:02:35,440 --> 00:02:40,240 Speaker 1: when you see things like the forecasts say inflation's going 44 00:02:40,320 --> 00:02:43,160 Speaker 1: to peak out and then start falling by the end 45 00:02:43,240 --> 00:02:48,640 Speaker 1: of twenty twenty five, and then that moves the goalpost. Well, 46 00:02:48,880 --> 00:02:52,880 Speaker 1: maybe it'll be the first quarter of twenty six, and 47 00:02:52,960 --> 00:02:55,280 Speaker 1: now they're saying, well, maybe it will be the second 48 00:02:55,360 --> 00:02:56,440 Speaker 1: quarter of twenty six. 49 00:02:57,200 --> 00:03:01,519 Speaker 3: That's not a great sign. We need to see. 50 00:03:01,440 --> 00:03:05,800 Speaker 1: What we should see, especially on the good side. If 51 00:03:06,320 --> 00:03:11,120 Speaker 1: the tariff inflation is transitory, it's supposed to start going away. 52 00:03:11,560 --> 00:03:14,920 Speaker 1: And as soon as we start getting some evidence that 53 00:03:14,960 --> 00:03:18,080 Speaker 1: we're back on the path to two percent, as I say, 54 00:03:18,240 --> 00:03:21,680 Speaker 1: I think rates can still keep going down. And if 55 00:03:21,720 --> 00:03:25,760 Speaker 1: you look at the at the SEP dot plot, a 56 00:03:25,919 --> 00:03:28,680 Speaker 1: large group of the committee thinks that where rates will 57 00:03:28,720 --> 00:03:33,280 Speaker 1: eventually settle is still well below where we are today. 58 00:03:33,720 --> 00:03:38,440 Speaker 3: It's just we must get inflation down. 59 00:03:38,360 --> 00:03:42,520 Speaker 1: From this three percent level that we've been stalled out 60 00:03:42,760 --> 00:03:44,560 Speaker 1: at for now a year more. 61 00:03:44,720 --> 00:03:47,000 Speaker 2: Well, now you've got this whole new tariff uncertainty from 62 00:03:47,040 --> 00:03:50,360 Speaker 2: the Supreme Court. President's going to impose when you started today, 63 00:03:50,400 --> 00:03:53,440 Speaker 2: a ten percent tariff universally brings down the tariff rates some, 64 00:03:53,960 --> 00:03:57,240 Speaker 2: but they say they're going to use other means to 65 00:03:57,280 --> 00:04:00,160 Speaker 2: get the tariff rates back up to about where they were. 66 00:04:00,400 --> 00:04:03,360 Speaker 2: So now you'll have this dip perhaps in inflation, and 67 00:04:03,400 --> 00:04:05,360 Speaker 2: then it could go back out again. So you said 68 00:04:06,000 --> 00:04:10,840 Speaker 2: you want to see inflation going down. Does that get 69 00:04:10,920 --> 00:04:13,560 Speaker 2: pushed out? Does it become later in this year when 70 00:04:13,560 --> 00:04:14,960 Speaker 2: you can even think about things. 71 00:04:15,280 --> 00:04:18,200 Speaker 1: I think when I'm out in the seventh District in 72 00:04:18,240 --> 00:04:23,080 Speaker 1: the Midwest talking to folks, they talk a lot about uncertainty, 73 00:04:23,440 --> 00:04:29,200 Speaker 1: policy uncertainties and geopolitical uncertainties. The thing to remember about 74 00:04:29,240 --> 00:04:35,120 Speaker 1: the terriffs, even if the tariffs stay exactly as they were, 75 00:04:35,160 --> 00:04:40,120 Speaker 1: just in a different form, the inflation impact is supposed 76 00:04:40,160 --> 00:04:45,159 Speaker 1: to go away. So if the rates are lower than 77 00:04:45,320 --> 00:04:48,560 Speaker 1: what they were before, that should be that should make 78 00:04:48,600 --> 00:04:51,320 Speaker 1: it even more true that we should see the inflation 79 00:04:51,440 --> 00:04:57,120 Speaker 1: going down. I think that the policy uncertainty we're seeing. 80 00:04:56,800 --> 00:04:58,359 Speaker 3: More on the labor side. 81 00:04:58,400 --> 00:05:03,760 Speaker 1: I think the low hiring, low firing environment is what 82 00:05:03,800 --> 00:05:07,080 Speaker 1: you would expect when there's a lot of uncertainty. That's 83 00:05:07,200 --> 00:05:10,919 Speaker 1: not really what the beginning of a recession looks like. 84 00:05:11,720 --> 00:05:15,599 Speaker 3: Low hiring with high layoffs, that's what the beginning of 85 00:05:15,600 --> 00:05:16,640 Speaker 3: a recession looks like. 86 00:05:17,160 --> 00:05:19,320 Speaker 1: For both of those to be low is a bit 87 00:05:19,360 --> 00:05:23,920 Speaker 1: of a weird duck, and I think is explained by 88 00:05:25,279 --> 00:05:29,240 Speaker 1: a lot of we want to wait and see what's 89 00:05:29,320 --> 00:05:32,359 Speaker 1: going to happen, and so if you have question marks 90 00:05:32,600 --> 00:05:36,680 Speaker 1: coming from the Supreme Court, coming from other policy responses, 91 00:05:37,080 --> 00:05:40,280 Speaker 1: I think you're likely to see continuation of that low hiring, 92 00:05:40,320 --> 00:05:41,440 Speaker 1: low firing environment. 93 00:05:41,720 --> 00:05:45,440 Speaker 2: Well, what are CEOs telling you they want to see 94 00:05:45,680 --> 00:05:47,680 Speaker 2: before they would be willing to hire again. 95 00:05:49,320 --> 00:05:52,080 Speaker 1: What they tend to say is, we want to know 96 00:05:52,120 --> 00:05:53,680 Speaker 1: what the rules of the road are going to be, 97 00:05:54,200 --> 00:05:56,000 Speaker 1: And right now we don't know what the rules of 98 00:05:56,040 --> 00:05:57,960 Speaker 1: the road are going to be, and there could be 99 00:05:58,200 --> 00:06:04,200 Speaker 1: very significant changes. And look, I'm sympathetic with that the 100 00:06:04,279 --> 00:06:07,479 Speaker 1: rules are moving around. If you're in a business like 101 00:06:07,560 --> 00:06:12,240 Speaker 1: the auto industry. The Chicago Fed District has by far 102 00:06:12,279 --> 00:06:15,719 Speaker 1: the most auto production in the United States. It's a 103 00:06:15,920 --> 00:06:20,679 Speaker 1: global supply chain for the auto industries. They're very amped 104 00:06:20,800 --> 00:06:25,080 Speaker 1: up about what will be the treatment of parts, components, 105 00:06:25,080 --> 00:06:29,479 Speaker 1: supplies that they used to make the cars. So far, 106 00:06:30,000 --> 00:06:36,640 Speaker 1: they were pleasantly surprised that anything USMCA compliant was kind 107 00:06:36,640 --> 00:06:43,200 Speaker 1: of exempted. Now, if the rumors are to be true 108 00:06:43,320 --> 00:06:50,080 Speaker 1: that whatever they might renegotiate the USMCA or would Canada 109 00:06:50,160 --> 00:06:55,600 Speaker 1: be in the USMCA, of course, that's what they're going 110 00:06:55,640 --> 00:06:58,440 Speaker 1: to express. Uncertainty about things like that, and it's going 111 00:06:58,480 --> 00:07:01,480 Speaker 1: to affect their decisions in short run. 112 00:07:02,760 --> 00:07:04,760 Speaker 3: Over the long run, as I say. 113 00:07:04,760 --> 00:07:09,600 Speaker 1: I still think the American consumer has been pretty solid. 114 00:07:10,400 --> 00:07:14,720 Speaker 1: We've got a steady job market. If we'd make progress 115 00:07:14,760 --> 00:07:18,440 Speaker 1: on inflation, I think rates are trending now. 116 00:07:18,760 --> 00:07:23,120 Speaker 2: Well, we've seen productivity rise a little bit in the 117 00:07:23,160 --> 00:07:26,840 Speaker 2: last couple of months. When you look at what the 118 00:07:26,880 --> 00:07:30,560 Speaker 2: companies are telling you, are they saying, maybe we don't 119 00:07:30,640 --> 00:07:32,840 Speaker 2: need to hire as many people because we're getting this 120 00:07:33,040 --> 00:07:36,560 Speaker 2: job done, We're keeping up with orders. 121 00:07:37,120 --> 00:07:41,680 Speaker 1: Some I mean, the economy is extremely diverse, and the 122 00:07:41,920 --> 00:07:45,760 Speaker 1: answer to the question of what are the labor market 123 00:07:45,800 --> 00:07:48,880 Speaker 1: prospects and do they need to hire depends very much 124 00:07:48,920 --> 00:07:53,200 Speaker 1: on the industry. If you talk to software companies, a 125 00:07:53,240 --> 00:07:56,920 Speaker 1: lot of them are saying, hey, the AI technologies, there's 126 00:07:56,960 --> 00:08:01,360 Speaker 1: some uncertainty, but the only uncertainty is should we not 127 00:08:01,680 --> 00:08:05,800 Speaker 1: higher or should we actually let people go. But if 128 00:08:05,800 --> 00:08:10,120 Speaker 1: you look in the healthcare sector, it's a booming sector. 129 00:08:11,120 --> 00:08:15,320 Speaker 1: Employment continues to expand in that sector, and you don't 130 00:08:15,360 --> 00:08:18,400 Speaker 1: hear some of those So the answer that depends a 131 00:08:18,440 --> 00:08:19,680 Speaker 1: lot on who you're talking to. 132 00:08:20,000 --> 00:08:22,080 Speaker 2: Well, productivity is going to be a big issue for 133 00:08:22,360 --> 00:08:25,320 Speaker 2: the FED coming up with a new chairman coming in 134 00:08:25,560 --> 00:08:28,320 Speaker 2: Kevin Warsh, who's pretty much weed to the idea that 135 00:08:28,360 --> 00:08:31,560 Speaker 2: AI is going to create a lot of additional productivity 136 00:08:31,600 --> 00:08:34,760 Speaker 2: which will bring inflation down. Now, having talked to you, 137 00:08:34,800 --> 00:08:37,480 Speaker 2: I know that you're not as sure about that. 138 00:08:38,559 --> 00:08:43,160 Speaker 3: Yeah, look, I hope that that is what happens. 139 00:08:43,320 --> 00:08:46,960 Speaker 1: Let's remember, productivity growth is the thing that makes us rich. 140 00:08:47,160 --> 00:08:50,480 Speaker 1: So if we get high productivity growth, incomes are going 141 00:08:50,559 --> 00:08:54,600 Speaker 1: to go up. There are a balance of things that 142 00:08:54,679 --> 00:08:58,520 Speaker 1: happen when productivity goes up, though that we should remember. 143 00:08:59,080 --> 00:09:04,240 Speaker 1: It can be deflationary. At the same time, it can 144 00:09:04,559 --> 00:09:07,720 Speaker 1: still and you have seen it. It can stimulate a 145 00:09:07,720 --> 00:09:11,120 Speaker 1: lot of investment, and in the short run, people counting 146 00:09:11,240 --> 00:09:17,840 Speaker 1: on future productivity growth can overheat the economy just in 147 00:09:17,880 --> 00:09:20,960 Speaker 1: the near term. And as you go around the country 148 00:09:21,160 --> 00:09:25,920 Speaker 1: you hear a lot of discussion about data center investment demand, 149 00:09:26,760 --> 00:09:30,440 Speaker 1: using up all the HVAC people, buying up all the 150 00:09:30,440 --> 00:09:35,600 Speaker 1: electrical equipment, using up computer chips, and in a way 151 00:09:35,800 --> 00:09:40,640 Speaker 1: making prices higher for the rest of the economy. We 152 00:09:40,800 --> 00:09:44,280 Speaker 1: just got to think about some of those issues. What 153 00:09:44,720 --> 00:09:48,800 Speaker 1: are the implications of high productivity growth? But overall, if 154 00:09:48,880 --> 00:09:53,160 Speaker 1: that is Kevin Walsh's position, I've known them a long time. 155 00:09:53,400 --> 00:09:56,520 Speaker 3: I respect him a great deal. I mostly agree with him. 156 00:09:56,960 --> 00:09:59,280 Speaker 2: Now in March, you have to come up with a 157 00:09:59,320 --> 00:10:03,080 Speaker 2: new economic projections, a set of forecasts for where you 158 00:10:03,080 --> 00:10:06,719 Speaker 2: think the economy will go. You're probably going to be 159 00:10:06,800 --> 00:10:08,960 Speaker 2: waiting a while till you have to actually put those 160 00:10:09,000 --> 00:10:11,560 Speaker 2: on paper. But let me ask this, how much confidence 161 00:10:11,559 --> 00:10:13,960 Speaker 2: are you going to have given everything that's going on 162 00:10:14,040 --> 00:10:15,840 Speaker 2: right now in the numbers you put down. 163 00:10:17,679 --> 00:10:20,439 Speaker 1: Do you want to view that as much confidence as 164 00:10:20,440 --> 00:10:24,160 Speaker 1: we ever have or it's not very much confidence? 165 00:10:24,440 --> 00:10:26,520 Speaker 3: Both of those can be true. 166 00:10:27,240 --> 00:10:31,320 Speaker 1: There's a lot of uncertainty, and we have to make 167 00:10:31,400 --> 00:10:36,480 Speaker 1: decisions with the data we have, So I take my 168 00:10:36,640 --> 00:10:38,400 Speaker 1: own views and. 169 00:10:38,440 --> 00:10:40,719 Speaker 3: That of my staff with a heavy. 170 00:10:40,480 --> 00:10:43,280 Speaker 1: Grain of salt. When things are changing a lot. We've 171 00:10:43,280 --> 00:10:50,520 Speaker 1: seen in the last three years, unexpected, unprecedented shocks hitting us. 172 00:10:50,640 --> 00:10:55,240 Speaker 3: I'm sure we'll get some more in twenty six, But. 173 00:10:55,360 --> 00:11:00,640 Speaker 1: As I say, I'm still optimistic that we're basically along 174 00:11:00,800 --> 00:11:05,480 Speaker 1: with solid growth a steady labor market. We've got some 175 00:11:06,559 --> 00:11:10,679 Speaker 1: encouraging and some discouraging signs coming on the inflation side. 176 00:11:11,080 --> 00:11:13,480 Speaker 1: If we could just get some improvement, I feel like 177 00:11:13,679 --> 00:11:17,880 Speaker 1: we could still get back on the golden path that 178 00:11:17,920 --> 00:11:18,800 Speaker 1: we were on before. 179 00:11:19,200 --> 00:11:21,960 Speaker 2: Another Kevin Warsh idea is that the FED should go 180 00:11:22,040 --> 00:11:27,920 Speaker 2: back to a scarce reserves way of managing monetary policy. 181 00:11:27,960 --> 00:11:29,040 Speaker 2: Would you support that. 182 00:11:31,080 --> 00:11:37,320 Speaker 1: We should constantly be evaluating as a body what we're 183 00:11:37,360 --> 00:11:41,200 Speaker 1: doing and the efficacy of doing that. We switched out 184 00:11:41,240 --> 00:11:47,120 Speaker 1: of that scarce reserves based regime to what we do 185 00:11:47,240 --> 00:11:53,800 Speaker 1: now because in crisis there were some holes in a 186 00:11:53,840 --> 00:11:59,200 Speaker 1: scarce reserves regime. It's possible we should study it, we 187 00:11:59,200 --> 00:12:04,560 Speaker 1: should contemplate that if we're going to seriously think about 188 00:12:04,600 --> 00:12:08,120 Speaker 1: doing that, we probably do want to revisit some of 189 00:12:09,440 --> 00:12:11,839 Speaker 1: the logic of how we got to where we are 190 00:12:11,920 --> 00:12:13,600 Speaker 1: now and moved away from that. 191 00:12:15,240 --> 00:12:20,800 Speaker 2: Coming up as J Powle's in theory he'll leave the chairmanship, 192 00:12:20,960 --> 00:12:24,160 Speaker 2: he could stay on the board. A lot of people 193 00:12:24,200 --> 00:12:28,040 Speaker 2: looked at the last decision and noted that in January 194 00:12:28,120 --> 00:12:30,880 Speaker 2: you always choose the chairman for the rest of the 195 00:12:30,960 --> 00:12:33,760 Speaker 2: year for the Open Market Committee, and that's what you 196 00:12:33,840 --> 00:12:36,040 Speaker 2: did this time, instead of as has been done in 197 00:12:36,080 --> 00:12:40,000 Speaker 2: the past, saying chairman until successor is in place. If 198 00:12:40,520 --> 00:12:43,600 Speaker 2: Kevin Walsh is not confirmed by then, would you support 199 00:12:43,840 --> 00:12:46,719 Speaker 2: J Powell remaining as chairman of the Open Market Committee. 200 00:12:47,440 --> 00:12:48,000 Speaker 3: I don't know. 201 00:12:48,320 --> 00:12:51,199 Speaker 1: It sounds like you have a lot more expertise on 202 00:12:51,240 --> 00:12:57,200 Speaker 1: the language of these decisions. I've said unapologetically, I think 203 00:12:57,280 --> 00:12:59,920 Speaker 1: Jay Pole's a first ballot Hall of Fame FED chair 204 00:13:00,280 --> 00:13:02,400 Speaker 1: and I'm a big supporter of his. 205 00:13:03,360 --> 00:13:08,400 Speaker 3: I don't know what the what the rules are when 206 00:13:08,559 --> 00:13:09,880 Speaker 3: people's terms. 207 00:13:09,640 --> 00:13:13,439 Speaker 1: Expire as chair, are they allowed to stay on if 208 00:13:13,480 --> 00:13:16,120 Speaker 1: they are I'm a I'm a big Jay Pali support. 209 00:13:16,320 --> 00:13:16,480 Speaker 3: Well. 210 00:13:16,559 --> 00:13:19,679 Speaker 2: J Paul can stay on as a governor, certainly, and 211 00:13:19,880 --> 00:13:21,040 Speaker 2: would you like to see him do that? 212 00:13:22,120 --> 00:13:26,280 Speaker 3: I don't know. I like being him being around for sure. 213 00:13:27,679 --> 00:13:30,120 Speaker 2: So you're not gonna have you talked to him about 214 00:13:30,160 --> 00:13:30,520 Speaker 2: it at all. 215 00:13:30,679 --> 00:13:33,680 Speaker 1: I haven't talked to him about that, And it's not 216 00:13:34,000 --> 00:13:36,040 Speaker 1: it's not my place, you know. The rules of the 217 00:13:36,280 --> 00:13:39,560 Speaker 1: thing are we speak only for ourselves. We're not supposed 218 00:13:39,600 --> 00:13:43,280 Speaker 1: to talk about what anybody else's thoughts are, opinions, or 219 00:13:43,320 --> 00:13:44,319 Speaker 1: speak for the committee. 220 00:13:44,360 --> 00:13:45,760 Speaker 3: So I don't really have. 221 00:13:45,800 --> 00:13:47,840 Speaker 2: It, okay, I think to add on it, last question, 222 00:13:47,880 --> 00:13:50,880 Speaker 2: all politics are local for the Chicago district. This is 223 00:13:50,920 --> 00:13:53,800 Speaker 2: a message for you. Do you support the Bears going 224 00:13:53,800 --> 00:13:54,360 Speaker 2: to Indiana? 225 00:13:57,080 --> 00:14:00,640 Speaker 1: Look at the Chicago Bears wherever they build a stadium, 226 00:14:01,920 --> 00:14:04,760 Speaker 1: they better be called the Chicago Bears. 227 00:14:05,679 --> 00:14:11,840 Speaker 3: But where the public financing? That's out of the FEDS, 228 00:14:12,240 --> 00:14:13,520 Speaker 3: that's out of the fed's length. 229 00:14:13,880 --> 00:14:17,440 Speaker 2: Saved the toughest question for exactly Austin Golby, thank you 230 00:14:17,520 --> 00:14:20,000 Speaker 2: very much for the president of the Chicago Fed.