There's a lot going on with this meeting
I will say and delighted to be here with
you. Um the framework review which we
will hear more about very complicated
context obviously and uh love to tell
you a little bit about how I'm seeing
economic conditions in the outlook.
>> So let's get into that. There is this
dual mandate that's in question the idea
of inflation versus labor. Where are you
in the continuum of which you need to be
most worried about?
>> Well you need to be this is a time when
you need to be looking at the balance.
you need to be looking at all of it and
you know growth has been slowing
recently but at the same time overall
economic fundamentals are relatively
solid and that's a context in which it's
not surprising to see the indicators
being mixed some are stronger and some
are a bit weaker so you got to look at
the whole picture and not focus too much
on any one or two specific indicators
>> there's a lot of people who are
concerned that you might be late getting
to the economy if you wait for
unemployment to rise significant
ificantly. On the other hand, you might
see inflation rise fast. What about the
compromise that's been floated by some
people that you cut rate once and then
you wait?
>> Well, so you do have to be thinking
about all of it. We cannot wait until
all of the uncertainty is behind us. You
got to make decisions in real time. So I
think that part is true. It is a complex
context for monetary policy because I
see upside risks to inflation related to
tariffs. already starting to see some of
that and downside risks on the labor
market side. And so it's about balancing
those features. Um, and I don't get
ahead of a decision that we're going to
make four month uh four weeks from now.
We're going to see data in between now
and then. But it's going to be about
balancing those to uh to really offset
our risks and focus on both sides of
that mandate.
>> Well, I know data is important, but it's
also backwardlooking. Uh so what are
companies in your district telling you
about their plans for both employment
and prices?
>> Yeah, absolutely. Because I do think
that complementing all of the
statistical analysis that we are always,
you know, I'm a total data geek, right?
You got to be in this role um with what
we're hearing is really important. And
what I'm hearing is uh pretty consistent
with what I'm seeing in the data
actually. And so on um the labor market
side um while the uh job growth has
certainly slowed it's somewhat more
concentrated at the same time a number
of those indicators are quite healthy
and and so on that side of it there uh
you know I think that there arguments
for um taking a bit more time but I'm
very focused on how those upside uh
those downside risks are evolving and
then on the inflation side what I'm
hearing is that early days in terms of
the impact of tariffs coming through
into prices over time for a number of
different reasons. So, what I'm hearing
from firms around my uh district, which
is most of New England, and what we're
seeing in the data as we do that
analysis at the Boston Fed, are pretty
much telling a similar story from that
context.
>> I was looking at where inflation was the
last time that we were here and heard a
Jackson Hole speech versus now, and it's
crept higher. It's gone in the wrong
direction. When you look at CPI, it's
basically ground round the same place in
core PCE. Why did there seem to be
confidence before that inflation was on
a sustainable path down to 2%. Why is it
no longer? Well, you know, that
underlying inflation, I was quite
confident a year ago that that
trajectory was back down to restoring
price stability. And in terms of what I
hear around the district, high price
level and concern about inflation is one
of the number one things that I hear
about, which is one of the reasons I'm
so focused on the importance of that
side of the mandate as well as maximum
employment. But you know, the tariff
impacts are significant and we have done
analysis in the Boston Fed understanding
that it's not just direct imports, but
the range of goods and services that
rely on imported intermediate goods as
well. A much broader range. It would
surprise many people how many kinds of
services actually use imported
intermediates as part of what's
happening there. And so we are
anticipating that over the next couple
of quarters, so the rest of this year
into early next year, inflation is going
to remain elevated and then my baseline
would be it would start to come back
down. But I don't rule out a larger and
more persistent impact. But to Mike's
earlier point, what is the harm in
cutting by 25 basis points or even 50
basis points? because would that really
cause runaway inflation at a time when I
know that the the chair has talked about
policy being relatively restrictive?
>> Well, it's about the balance, right? I
mean, the inflation side and again that
is what I hear about in every uh
conversation I have across the first
district which is most of New England.
And so it's about balancing
uh that commitment to restoring price
stability with an understanding that
preserving healthy labor markets also
really matters for for the public. And
so doing that balance I would say it's
not a done deal in terms of what we do
at the next meeting. Um but a range of
of possibilities is on the table and
we're going to get more data between now
and then.
>> Definitely. And everybody out there
listening um that's good advice. Wait,
don't bet yet. Uh, is it more likely
that we see a rapid rise in unemployment
because that tends to be what happens
when it starts to go up or a more
long-term but steady rise in inflation.
Uh, that would lead to inflation
expectations becoming on board?
>> Well, so from my perspective, the the
risks on the two sides have come into
rough balance. And so that's a really
complex context for monetary policy when
you you could see the unemployment rate
rising and you could see higher
inflation. Um you know my baseline is
not one that is as concerned about
inflation expectations rising at the
moment. Earlier in the year I had more
concerns about that. I would say that at
the moment monetary policy is kind of
modestly restrictive. That's actually
appropriate for a period when inflation
is elevated. We haven't brought back
price stability at which I am more than
I'm totally committed to. But at the
same time, there are those risks with
the slower employment growth that could
lead in uh unemployment rates to rise
and balancing those risks. So I think at
the moment where we are is appropriate,
but if we start to see worsening labor
market risks relative to inflation, then
starting to dial back the
restrictiveness would become
appropriate.
>> And Dr. Collins, I was going to ask you
a bow tie question about the privilege
of taking your PhD under Rudy Dornbush
and what it means for the future of the
dollar and that unfortunately the
economist Donald Trump is watching.
Thank you, President Trump, for watching
uh this morning. May I quote, "The
United States is the quote hottest
unquote country anywhere in the world.
There is no other country that is even
close." And just think one year ago we
were a quote all caps dead country with
no hope of ever seeing all caps
greatness again. But that all changed on
election day November 5th 20124.
Many including Ken Rogoff of your
Harvard line up and say markets all-time
high economy okay inflation edging up
bond market speaking. Is the Fed too
exposed right now? Does the Fed just
have to wait because so many things are
firing on all cylinders as a president
just noted?
>> Well, you know, I am laser focused on
the data and the range of data from
what's happening in the relative short
term to what the indicators is
suggesting in terms of longer term
trajectories. I think as I said earlier,
those underlying fundamentals are still
quite high. broken the disinflation
vector here or do we sit at this Jackson
hole where we got a service vector and a
and a goods vector nudging upwards?
>> Um I think my baseline is again it's
going to remain elevated for some time
related to those tariffs which are still
unfolding. There's a lot of uncertainty
with that but it's possible that we'll
see more persistence. There a lot of
unusual dimensions of behavior right now
which means that some of the history
doesn't give us as much of an indicator
of how things are going to unfold. We
got to realize that. But again, we can't
wait until all of that uncertainty is
resolved before we make our decisions.
Those fundamentals are still healthy.
And keeping that balance in mind of the
mandate that Congress gave us for price
stability and maximum employment is
where I will keep my focus.
>> We just have about 30 seconds. What's
Fed Cher Powell going to say? No one's
listening.
>> Um, well, I don't want to get ahead out
of the chair. He's going to talk about
obviously the framework. We have had a
robust process there which I'm you know
feel really good about and about what
he's seeing in conditions and the
outlook.