Latest / Bloomberg Intelligence / Jacob Frenkel: Doesn't Expect Fed to Raise In September (Audio)

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Jacob Frenkel: Doesn't Expect Fed to Raise In September (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York Bloomberg eleven Brio to Washington,
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  Speaker 1: d C. Bloomber to Boston, Bloomberg Well Under, to San Francisco,
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  Speaker 1: Bloomberg to the Country, Shoe is ex General one nineteen
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  Speaker 1: and around the globe the Bloomberg Radio plus Davin Bloomberg
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  Speaker 1: got gone. This is taking Stock. I'm Kathleen Hayes in
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  Speaker 1: Jackson Whole, Wyoming at the Kansas City Fed Reserves Annual Symposium,
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  Speaker 1: a look at perhaps redesigning monetary policy this year Pim Fox,
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  Speaker 1: of course in New York at Bloomberg World Headquarters. We're
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  Speaker 1: going to be joined by Jacob Frankel. He's been coming
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  Speaker 1: out this Jackson Hole Symposium PIM for more than thirty years. Yes,
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  Speaker 1: we're gonna find out what he thinks about federal reserve policy,
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  Speaker 1: but also whether the Federal Reserve can actually increase interest
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  Speaker 1: rates despite or at least during the election cycle, maybe
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  Speaker 1: even before December. We've got much more coming up right now,
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  Speaker 1: Let's go to Charlie Pellett in the Bloomberg news room
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  Speaker 1: for a Bloomberg Business Flat and I think you Pim
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  Speaker 1: Fox traders pushing down the value of stock spawns and
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  Speaker 1: the dollar ahead of tomorrow's speech by FED Shair Janet
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  Speaker 1: yelling in Jackson Hole. The SMP five hundred index down
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  Speaker 1: three now to a drop of two tenths of one percent.
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  Speaker 1: The ten year down four thirty seconds yield one point
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  Speaker 1: five seven percent. Dallas FED chief Robert Kaplan was interviewed
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  Speaker 1: on Bloomberg Radio from Jackson Hole. He touched on a
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  Speaker 1: number of topics, including the case for removing accommodation. I
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  Speaker 1: think any removal of accommodation should be patient, slow, gradual,
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  Speaker 1: because we've got a number of persistent headwinds that we
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  Speaker 1: have to adjust to. But yes, I think the strength
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  Speaker 1: the case for removing some amount of accommodation. It has
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  Speaker 1: strengthened Sears Holdings. That's the retailer run by hedge fund
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  Speaker 1: manager Edward Lampert posted a second quarter loss of sales
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  Speaker 1: continued to shrink Sears holdings down four point four percent.
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  Speaker 1: St Jude Medical shares plunging. Today, Carson blocked the down
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  Speaker 1: short seller and founder research for Muddy Waters, warning the
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  Speaker 1: tens of thousands of Americans are living with taking time bombs,
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  Speaker 1: and that is St. Jude pacemakers and defibrillators that are
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  Speaker 1: easily compromised, causing potentially fatal disruptions. The company says allegations
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  Speaker 1: are quote absolutely untrue and several layers of security r
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  Speaker 1: in place. St. Jude Chairs down now by five point
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  Speaker 1: two percent, SMP five hundred index down to a drop
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  Speaker 1: of one tenth of one percent down, Industrials down twenty
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  Speaker 1: six also a drop of one tenth of one percent,
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  Speaker 1: Gold down four ninety ounce one, a drop of four
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  Speaker 1: tenths of one percent three thirty two on Wall Street. Now,
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  Speaker 1: let's take a look at other news from around the world.
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  Speaker 1: Thank you, Charlie from the Bloomberg newsroom. I'm John Lauder.
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  Speaker 1: This news update is brought to you by the jeep
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  Speaker 1: dealer today. Donald Trump is trying to woo minority voters,
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  Speaker 1: promising his economic policies and hardline stance on a legal
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  Speaker 1: immigration will benefit low income Americans and protect jobs. But
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  Speaker 1: White House Press Secretary Josh Ernest says the Obama administration
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  Speaker 1: and the Democratic Party beg to differ, it would have
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  Speaker 1: a devastating impact fiscally and economically by doling out significant
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  Speaker 1: tax cuts to those at the top of the income
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  Speaker 1: scale UH and leaving the rest of us to pay
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  Speaker 1: the tab. Meanwhile, Democrat Hillary Clinton speaks later today in Reno, Nevada.
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  Speaker 1: She'll press her view that Trump is quote taking a
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  Speaker 1: hate movement mainstream shall also try to link his candidacy
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  Speaker 1: to the so called alt right wing of American politics.
• 3:40
  Speaker 1: A car bomber detonated a vehicle near the new Turkish
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  Speaker 1: Embassy compound in the Somali capital of Mogadishu. Police opened
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  Speaker 1: fire on the car when the bomber refused orders to
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  Speaker 1: stop at a checkpoint near the beach side embassy. The
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  Speaker 1: Arizona Coyotes are breaking new ground in the National Hockey League.
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  Speaker 1: The team has hired what's believed to be the first
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  Speaker 1: full time female coach, Dawn brey Will service skating coach.
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  Speaker 1: She worked part time for the team last year, and
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  Speaker 1: the city's Conflict of Interest Board has levied a fifteen
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  Speaker 1: thousand dollar font on Brooklyn District Attorney Ken Thompson a
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  Speaker 1: settlement over personal meals charged to the d a's office
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  Speaker 1: Thompson admitted improperly billing more than five thousand dollars to
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  Speaker 1: the King's County d A's Office, which he's repaid. The
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  Speaker 1: sanctions among the largest in a decade. Global News twenty
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  Speaker 1: four hours a day, power by more than twenty d
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  Speaker 1: journalists and analysts in more than a hundred and twenty countries.
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  Speaker 1: I'm John Lauder. This is Bloomberg, Charlie, and we thank you.
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  Speaker 1: And that's a Bloomberg business flash. You're listening to Taking
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  Speaker 1: a stock with Kathleen has fim Fox line from the
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  Speaker 1: Jackson Hole Economic Symposium von Bloomberg Radio. The theme of
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  Speaker 1: this year's a conference here in Jackson Hole, Wyoming is
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  Speaker 1: designing resilient monetary policy framers for the future. Well, our
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  Speaker 1: next guest says, you better not forget the past. Don't
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  Speaker 1: throw out the old textbooks because they still have a
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  Speaker 1: lot of lessons for cent old bankers today. Joining us
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  Speaker 1: now is someone who I have to say is a fixture.
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  Speaker 1: It wouldn't be Jackson Hall. About Jacob Frankel. First of all,
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  Speaker 1: he's chairman of JP Morgan Chase International. He's the former
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  Speaker 1: chief of the Bank of Israel, so he's been a
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  Speaker 1: central banker who's all those decisions rested on his lab.
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  Speaker 1: He's also chairman of the board of trustees of the
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  Speaker 1: Group of Thirty. In fact, he has been a member
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  Speaker 1: of that group for more than thirty years. So Jacob,
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  Speaker 1: first of all, welcome, thank you. I'm pleased to be here.
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  Speaker 1: So let's start by your view of this rethink of
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  Speaker 1: that policy. You are saying, don't throughout the old textbooks. Why, well,
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  Speaker 1: for several years we have been in an exceptional situation
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  Speaker 1: where a new palladim was gaining hold, and that's the
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  Speaker 1: unconventional monetary policy. It's very important to recognize that that
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  Speaker 1: unconventional monetary policy in historical perspective should be viewed as
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  Speaker 1: a de two at the end of which one returns
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  Speaker 1: to the highway of normal monetary policy, rather than becoming
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  Speaker 1: the new paradigm that will prevail for years to come.
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  Speaker 1: The old central banking principles that are emphasizing the important
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  Speaker 1: of price stability and more recently financial stability. That is
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  Speaker 1: resting on the importance of independence of central banking, that
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  Speaker 1: emphasizes clarity and transparency and recognizes that central banks mandates
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  Speaker 1: are relatively limited. You cannot solve all the problems in
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  Speaker 1: the world only by relying on monetary policy. For years,
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  Speaker 1: we have seen a situation where monetary policy all of
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  Speaker 1: the world has been overburdened. It has become the only
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  Speaker 1: game in town. And the reason is that it has
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  Speaker 1: been the only really well functioning um of economic policy.
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  Speaker 1: But we should not get to the habit of basically
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  Speaker 1: absolving the other important arms and assume away the possibility
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  Speaker 1: of introducing structural policies flexibility of the economic system. That's
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  Speaker 1: the only way in which you can really raise productivity
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  Speaker 1: and contribute to sustainable growth. What about increasing interest rates?
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  Speaker 1: When you're asking what about increasing interest rates, we need
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  Speaker 1: to put it in perspective. We are now in an
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  Speaker 1: unprecedented level of interest rates, let's call it close to zero.
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  Speaker 1: Real interest rates are negative, So we need to ask ourselves,
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  Speaker 1: is this the new long run? The answer is no.
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  Speaker 1: Every central banker will tell you that the negative real
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  Speaker 1: interest rates, or the very long run or the zero
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  Speaker 1: practically zero nominal rates of the central bank in the
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  Speaker 1: long run are not desirable and are not sustainable. So
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  Speaker 1: it is in this context that we need to ask,
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  Speaker 1: is this the time to move ahead with normalization? It
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  Speaker 1: is not only my opinion. The Federal Reserve has told
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  Speaker 1: us very clearly in the past that they are eager
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  Speaker 1: to move towards normalization, that they were looking specifically at
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  Speaker 1: the developments of the economy, at the developments of labor markets.
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  Speaker 1: So when I follow that guideline, I conclude, and I
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  Speaker 1: asked myself, where is the labor market today? Clearly improved dramatically.
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  Speaker 1: Unemployment has declined to four point nine, Participation has improved,
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  Speaker 1: duration of unemployment has declined. The situation of households has
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  Speaker 1: improved dramatically. Spending is on the rise. We do have,
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  Speaker 1: of course, a negative part of the corporate investment. But
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  Speaker 1: I say that by and large, by these criteria, the
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  Speaker 1: tests have passed and it's time the economy is strong
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  Speaker 1: enough to move ahead with the normalization. Okay. Jacob Franco
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  Speaker 1: uh rob Kaplan President Dallas FED sees there the fat
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  Speaker 1: moving in act direction, But the patient patient no rush
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  Speaker 1: to move you Are you in a different mode, would
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  Speaker 1: you say, FED, think about doing an interest rate increase
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  Speaker 1: at your next meeting in September. Well, I'm all for patients,
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  Speaker 1: provided somebody is doing what needs to be done during
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  Speaker 1: the patient's period. Does anyone really believe that Congress will
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  Speaker 1: act get its act together in the coming three to
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  Speaker 1: six months? Does anyone really believe that we will see
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  Speaker 1: structural measures in the coming three to six months? And
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  Speaker 1: if the idea of patients means allow Congress to do it,
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  Speaker 1: then it means very long run. To me, I need
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  Speaker 1: to ask myself not only what are the risks of
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  Speaker 1: raising interest rates, but what are the costs of delaying
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  Speaker 1: the normalization. We see today's situation where there are a
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  Speaker 1: lot of this location. The price of risks has been distorted.
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  Speaker 1: We are giving them superficial and artificial boost to financial markets.
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  Speaker 1: By pushing interest rates down, we divert investment from plants
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  Speaker 1: and equipment towards financial assets. People are happy because their
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  Speaker 1: value of their wealth is rising as it is reflected
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  Speaker 1: in prices of housing and the prices of their stocks.
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  Speaker 1: And therefore we say wow, but let's not forget real
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  Speaker 1: investment is a problem, and one of fit. One of
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  Speaker 1: the reasons for it is uncertainty about many things, including
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  Speaker 1: threat policy, Yes or no interest rate and increase in September,
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  Speaker 1: you say yes. If you're asking me whether I would
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  Speaker 1: recommend to raise I say yes. If you're ask me,
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  Speaker 1: do I expect it to happen? I say no, thank you.
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  Speaker 1: Jacob Frank of This is Bloomberg coming up on taking Stock,
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  Speaker 1: will be speaking with Mark Gordon. He is the treasurer
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  Speaker 1: of the state of Wyoming. He is a former member
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  Speaker 1: of the Kansas City Federal Reserves Board of Directors. He's
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  Speaker 1: going to talk about the challenges facing Wyoming and the
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  Speaker 1: energy industry.