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Speaker 1: Bloomberg Audio Studios, podcasts, radio.

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Speaker 2: News plus turns of a Federal Reserve recent descents highlighting

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Speaker 2: the lack of consensus of that institution, as the Central

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Speaker 2: Bank struggles with the data drought, the former Kansas City

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Speaker 2: Fed president as the George Johns just now for more

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Speaker 2: As the way, we just tracking that story with Mike McKay.

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Speaker 2: I'm sure you were following along. Do you think this

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Speaker 2: Federal Reserve is attempting to address a structural problem with

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Speaker 2: interest rates?

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Speaker 3: Yes, I do, Jonathan, and I think that's what makes

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Speaker 3: this so challenging for the committee. You can't ignore the

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Speaker 3: story you just heard, which is there's something going on

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Speaker 3: in the labor market. Things are moving in a way,

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Speaker 3: and yet you can't really put your finger on is

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Speaker 3: this change happening in real time? Is this going to

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Speaker 3: settle out to a more stable view of what's going

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Speaker 3: on with that labor market, particularly when you are looking

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Speaker 3: at what I would characterize as easy financial conditions and

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Speaker 3: many of the other traditional signs that would go along

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Speaker 3: with this labor market, data would lead you to think

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Speaker 3: something different. So it is a challenging time and those

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Speaker 3: cross currents of information and data are making it a

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Speaker 3: tough job for the f OMC.

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Speaker 1: And it's an even tougher job for investors to understand

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Speaker 1: how the FOMC is going to respond to that data

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Speaker 1: because the reaction function doesn't seem clear. You have a

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Speaker 1: lot of dissent, you've got a lot of fissures on

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Speaker 1: the committee, but you also have, frankly, a question of

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Speaker 1: how much they're looking at the unemployment rate versus the

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Speaker 1: actual total number of jobs, and how much that's taking

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Speaker 1: priority over inflation. Do you have a greater sense of

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Speaker 1: what that reaction function is?

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Speaker 3: Well, I do not, Lisa, and I think you see

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Speaker 3: that in the discussion at the committee level, which is

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Speaker 3: to say where are we putting our weight. In September,

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Speaker 3: the Committee came out very clearly and said, we're putting

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Speaker 3: our weight on the labor market. When we see this softening,

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Speaker 3: we're inclined to bring our policy rate back to something

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Speaker 3: that we are guessing is more normal than where it

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Speaker 3: currently sits. And that narrative is held through to two meetings,

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Speaker 3: and this meeting, of course, we got the question mark,

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Speaker 3: I think, of whether that narrative would continue. So the

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Speaker 3: information coming in and the fact that you don't have

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Speaker 3: official data to back up some of those views is

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Speaker 3: going to make this, I think difficult for individual members

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Speaker 3: to really reconcile their views and come to terms with that.

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Speaker 1: Is this a FED that has a dual mandate still

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Speaker 1: or does it have more mandates than that? And I

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Speaker 1: wonder if it's also keeping interest rates within a reasonable level,

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Speaker 1: especially with the deficit where it is, if that's an

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Speaker 1: increasing factor, even if not verbalized in the back of

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Speaker 1: people's heads.

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Speaker 3: Well, it is the idea that the FED needs to

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Speaker 3: keep rates low to assist the federal government's debt position

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Speaker 3: is certainly not one of its man dates. Notwithstanding the

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Speaker 3: pressure that you see coming from various corners to try

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Speaker 3: to accommodate that. It is going to become, I think,

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Speaker 3: an increasingly difficult issue that will intersect with monetary policy

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Speaker 3: because we know that these higher debt levels without some

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Speaker 3: plan in place to bring those deficit spendings down, are

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Speaker 3: going to put pressure on the FED. It will put

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Speaker 3: higher interest rates in front of them. Inflation issues will

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Speaker 3: begin to become more dominant, I think, And so that

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Speaker 3: intersection is a very difficult one for a monetary policy

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Speaker 3: group that is assigned to judge labor markets. And price

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Speaker 3: stability in their mandate ast what.

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Speaker 2: Do you think will be on December tenth. I've got

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Speaker 2: no idea how much dates it will have. Do you

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Speaker 2: think we can settle any of these debates by the

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Speaker 2: time we get to the middle of next month.

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Speaker 3: Well it doesn't seem likely. And Jonathan, what you hope

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Speaker 3: is whenever you're in a period of uncertainty and trying

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Speaker 3: to weigh risk, that you don't get an unexpected shock

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Speaker 3: to the economy. And again, I don't see anything out

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Speaker 3: there that says we resolve this uncertainty. But I think

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Speaker 3: that's why it makes it a difficult time for this

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Speaker 3: committee to reconcile views, is because that uncertainty looks like

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Speaker 3: it is going to persist for some time.

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Speaker 2: So Ester's that another way of saying that race might

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Speaker 2: remain on hold for some time, at least until say

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Speaker 2: spring of next year.

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Speaker 3: Well they could, and you're going to have people argue

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Speaker 3: for that for sure. But I also think the committee

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Speaker 3: will have to wrestle with the narrative of the labor

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Speaker 3: market signs of weakening, and that was the beginning of

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Speaker 3: their rate cut. So the Chairman's put the markets on

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Speaker 3: notice not to presume that that cut is coming. On

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Speaker 3: the other hand, if the data, however informal, however pieced

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Speaker 3: together it might be, does not change that narrative, they

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Speaker 3: could be inclined to continue that cutting cycle.

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Speaker 1: Aster if the Supreme Court overturns the president's use of

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Speaker 1: IEPA for tariffs, and you don't have that revenue coming in,

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Speaker 1: and that isn't necessarily any kind of discussion on the

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Speaker 1: inflationary pressure if that money gets refunded, do you think

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Speaker 1: that gives the incentive to the federal reserves the FOMC

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Speaker 1: to cut rates more aggressively.

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Speaker 3: Well, not necessarily Lison. The reason I think that is

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Speaker 3: because I think this throws another log of uncertainty onto

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Speaker 3: the fire. If the federal government has to do something

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Speaker 3: different with those tariffs, That then raised the prospect of

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Speaker 3: where do we find that happening. Will it be sectorial,

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Speaker 3: Is it going to be in terms of lowering revenues

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Speaker 3: immediately or in the long term. It is another, I think,

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Speaker 3: reminder of why it is so important for policy makers,

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Speaker 3: not at the FED, but policymakers that are thinking about

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Speaker 3: our fiscal situation to really begin to be more forward

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Speaker 3: looking about what we face as a way delay a

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Speaker 3: foundation for future economic growth, because right now we're in

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Speaker 3: a bit of a soup that isn't isn't providing the

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Speaker 3: kind of foundation that I think we need.

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Speaker 2: As the powerful final point, I appreciate an update from you,

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Speaker 2: as always the former Kansas City Fed President, as the

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Speaker 2: George there on the federal serve