Do you think that there is risk here to
Fed credibility if and when the Fed does
cut rates?
Well, that's always the concern because
the Fed has been designed to be
insulated from political pressure and
the more that pressure comes to bear, it
begins to create uh sort of a cloud over
their decision-making for the public. I
think that is not true for the
individuals around the table. They are
quite focused on uh their
responsibilities to the American public,
but of course the communication that
runs uh into this issue can become more
difficult.
President George, were you expecting to
hear a little bit more perhaps from
Jerome Powell uh in defense of central
bank independence given that this is in
essence his validictory speech at
Jackson Hole?
Yeah, I wasn't surprised. I mean, I'm
not sure what could be said at this
point that hasn't already been said. And
he has been very clear that he is
focused on the job that was given to
this committee. So talking about the
economy, talking about the framework
which describes how the Fed goes about
its business, I think was his way of
saying we are sticking to uh the
business at hand. And I I think that was
appropriate for him.
Well, let's pick up on that framework
and what we learned today because I do
want to ask you about inflation concerns
because the monetary policy framework
review was revised to emphasize
maintaining 2% inflation expectations.
But what can the Fed do if uh you were
advising here to keep consumer
expectations well anchored when we
really haven't seen them deliver on that
2% target in recent memory?
a couple.
Yeah, I think it's a pretty big issue
right now for the Federal Reserve and of
course you heard the chairman
characterize the upside risk to
inflation that exist. You heard his
emphasis in the framework review that
having well anchored long run inflation
expectations would be critical uh for
this committee to do its work. And so
right now, depending on where you are
looking for evidence of the anchoring of
those inflation expectations, I think
you have consumers feeling one way, you
have businesses uh beginning to think
about how the inflation pressures that
lie ahead might be affecting them. And
so I think it creates a tentative
environment, if you will, about what the
public expects inflation to be down the
road. And that of course is going to be
I think one of this committee's biggest
challenges ahead is that you have an
inflation dynamic right now where
inflation was already running well above
the Fed's stated target their definition
of price stability. Now you have the
tariff effects which again the committee
might be willing to look through but it
becomes pretty difficult to disentangle
where some of those effects are coming
from. So it is a time I think of really
having to lean into where are the risk
around this monetary policy.
President George, I wanted to dial into
that question of tariffs and their
impact on prices. And today during his
remarks, Jerome Powell did indicate that
he saw it more as a uh fleeting impact
on inflation rather than uh something
that would be persistent, but he did not
rule out the latter scenario entirely.
What is your view about the risk down
the road, especially given that the
administration isn't done with the
imposition of tariffs?
I think that's why this question becomes
so difficult to answer because if
tariffs were coming in one discreet move
in a very precise amount then you might
feel more comfortable saying this is a
one-time hit to the price level and and
we can look through that. But the truth
is you now have inflation that is
reacting to uh how these tariffs are
being uh carried out. They're being
carried out with a fair amount of
discretion by country. uh companies will
be responding to those in different ways
and that's why I think it is going to be
more difficult and frankly more
challenging as the committee tries to
keep its credibility tries to keep that
inflation expectation anchored to know
what is driving the impact of inflation
here. So it just creates a lot of
uncertainty and I think you heard that
today in the chairman's speech. This is
being conducted in the context of
significant uncertainty.
significant uncertainty and we also
heard Fed Chair Jerome Powell talk about
uh the idea of how tightening
immigration policy is impacting the
labor market and I'm curious what you
think about this idea as uh firms try to
absorb some of the excess costs when it
comes to tariffs and passing that on to
consumers. Are they also going to be uh
perhaps faced with some higher labor
costs here too as we watch more of the
administration's policies play out?
So I think this is also a very open
question. The dynamics between these two
are going to be worth watching because
you'll be watching for the wage impact
as we see price effects come into play
and companies will have to make
decisions here about whether their
ability to pass on cost to pay workers
all of that mix is going to be very
important in how the Fed judges what its
next steps are going forward. So yes,
those two are very tightly linked I
think when it comes to trying to
decipher the economy. And you heard the
chairman say today the labor market is
reacting to both supply and demand
factors right now which make and I think
he used the word a curious uh mix to
come up with the current unemployment
rate. So it is a time of uncertainty and
understanding the dynamics that are
affecting both the price inflation as
well as labor rates is going to be an
important one for them to decipher.