We're talking about interest rates uh
there, the vice president. Uh what's
going to happen September 17th?
Well, it depends. Um I for sure it feels
to me like it's a live meeting. Uh as
you know, before April 2nd, before we
got some uncertainties coming on the
policy side, I believed that we had
pretty stable full employment that
inflation's coming down to target. the
economy is looking relatively solid and
that it made sense for rates to come
down a fair bit more from where they are
right now. In the interim, we've had
mixed messages. We've had some
inflation reports that came in milder
than we expected. And I was feeling good
because I thought if the tariffs kind of
stay in their lane and imported goods
are only 11% of the economy, there is a
real sense in which maybe we never left
the golden path. We threw a bunch of
dirt in the air as I described. So you
couldn't see the road there for a bit,
but maybe we're still on it and it'll be
fine. the last inflation report that
came in where you saw services inflation
which is probably not driven by the
tariffs really start shooting up is a
danger that's that's a dangerous data
point. I'm hoping that that's bit of a
blip. So I think we still have a fair
bit of information that we're going to
get before September or the whole fall
to determine what's what path we're
going to be on. Well, live meeting
implies that you could perhaps cut
interest rates. Are you leaning in that
direction?
Look, as you as you know, I don't like
tying our hands ahead of time,
but I like
I want to get I want to get all this
information. It's particularly important
given that we've been getting some mixed
signals
and I want to hear what my colleagues
have to say going into September or
November, December, going into next
year. The most important thing is figure
out the through line. And the through
line is either we're still on path to
get rates down a fair amount. You know,
let's let's say the the SCP dot plot
where they ask all the members of the
FOMC where do you think rates will
settle eventually? That's a 100 basis
points plus below where we are now um
for at the median. And what will
determine whether we can get back on
that path of of rates coming down is
going to be do we think inflation is
under control. We've been 4 and 1/2
years above the inflation target. I
thought and and we made a lot of
progress and I thought coming into this
year we were in a decent spot that that
you can make the case we're headed back
to 2%. I still hopeful that that's true
but I'm a little
as I say in the last report there are a
couple of little warning signs and
how we are going to react to a
stagflationary direction shock that is
something that is driving down
employment and up prices at the same
time that's always a a very difficult
spot for the central bank
I think Tyler and Mike have a question
for you.
Thanks, Mike. Mr. Goulby, it's Tyler
Kendall here in Washington, and I want
to ask you about questions surrounding
the Fed's uh independence. We just had
FHFA Director Bill PY on Bloomberg
television today. He said he's not going
to let up on his campaign when it comes
to allegations of mortgage fraud,
including against Fed Governor Lisa
Cook. Do you support Cook's decision not
to resign? And do you think that this
pressure campaign from the White House
has hurt the Fed's credibility?
[Music]
Look, I I I run the Chicago Fed. We're
regional bank. I'm not going to get in
the middle of Twitter kurfles or
whatever's happening. I know that long
before I was ever at the Fed, I was an
economist. and economists are pretty
close to unanimous that having a central
bank that is independent of political
interference is critically important to
the operation of the central bank. And
the reason that they're unanimous about
that topic is because if you just look
at places where that's not true, where
the government can order the central
bank to cut interest rates, inflation is
higher, growth is slower, unemployment
is worse, and if we don't have a an
independent central bank, inflation's
coming back. So I I think it's
absolutely critical that we maintain
independence from political
interference.
President Goulsby, I wanted to come back
to the broader question of the economy
and inflation too because uh earlier
this month we saw tariffs start to
actually take effect and be enforced and
we may have more coming still on drugs
and semiconductors. Uh where do you see
this impact playing out across the
economy and how soon will do you expect
to see businesses start to pass these
costs along to consumers?
That's kind of the critical two
questions about tariffs are how much are
they going to drive up prices and how
long is that price increase going to
last. So there is an argument that in
pure theory if it was a oneanddone
tariff that'd be a one-time increase in
the price level and then as an
inflationary
impetus it would be transitory. But as
soon as you use the word transitory, you
want to be a little careful. That's only
for a oneanddone tariff. And this hasn't
been won. And it doesn't seem like it's
close to done. So we can get on a cycle
that is inflationary. And if the tariffs
are applying to intermediate goods, that
is parts, components, supplies, things
like primary metals, semiconductors,
things that go into the cost of
production for US manufacturing. That is
one way that tariffs jump out of their
11% of GDP lane and start making me more
nervous because now it ceases to just be
an increase in the prices of the tariff
affected goods. Now those tariffs are
raising prices in the goods the
industries that are using the tariff
affected goods and we saw in co the
bigger that is the more it's affecting
the supply chain and disrupting it the
longer and more persistent that can
last. So those are kind of the the
questions floating around that that
we're grappling with.
Austin uh I want to go back to the the
the White House versus Fed situation for
a moment. The administration has alleged
mortgage fraud against three people.
Democratic Senator Adam Schiff,
Democratic Attorney General of New York,
uh, Leticia, uh, and, uh, and then now,
uh, Lisa Cook. You were the chairman of
the, uh, economic advisors council of to
President Obama. You're a Democrat. Are
you worried that they might come after
you?
I uh, I I didn't know where you were
going with that. As I say, I'm here
member of the FOMC. The the law is quite
clear of what should determine interest
rates. It's the FOMC and we're supposed
to be looking at stabilizing prices and
maximizing employment. You become a
sworn member of the Federal Reserve,
you're out of the politics business.
You're out of the elections business.
So, I'm trying not to get distracted
from the basic thread of we must figure
out where we are on those dual mandate
grounds when setting the interest rates.
And that is what we should be basing the
interest rate decisions on. It shouldn't
be about power politics. It shouldn't be
about what somebody said about somebody
else on Twitter. We go into that room
and we take the job very seriously.