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Benchmark Special: Here's What You Need to Know About the Fed · Trumponomics

• 0:07
  Speaker 1: Welcome back to the Bloomberg Bench, my podcast, a show
• 0:10
  Speaker 1: about the global economy. I'm Daniel Moss, Bloomberg News Executive
• 0:15
  Speaker 1: editor for Global Economics in New York. It's September twenty one,
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  Speaker 1: and this edition is devoted entirely to the Federal Reserve, only,
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  Speaker 1: the world's most powerful economic policy body. Joining me and
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  Speaker 1: my colleagues Scott Landman and Matt Bosler in Washington, who
• 0:30
  Speaker 1: have been dissecting this decision for the past couple of hours. Scott, Matt,
• 0:34
  Speaker 1: you're not quite up for air yet, but you're almost there.
• 0:37
  Speaker 1: We're just coming up right now. It's been a busy
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  Speaker 1: day so far, but we are ready to hash it out.
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  Speaker 1: The Fed walked up to the line but didn't cross it.
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  Speaker 1: Interest rates held at the current level again, but with
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  Speaker 1: more than a hint that something will come soon, possibly
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  Speaker 1: as early as December. Why not pull the trigger today?
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  Speaker 1: Well that's a great question, you know, because Janet Yellen
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  Speaker 1: made very clear that they think they're going to be
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  Speaker 1: in a position to do so in just a matter
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  Speaker 1: of weeks, as soon as December. That's twelve weeks away,
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  Speaker 1: so why not today? And the answer she gave was
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  Speaker 1: basically just that we didn't really feel like we needed
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  Speaker 1: to do anything today. We have some time here. Things
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  Speaker 1: aren't getting away from us, The economy isn't overheating, so
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  Speaker 1: why not just sit back and collect some more information,
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  Speaker 1: make sure we're on the right track before pulling the
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  Speaker 1: trigger and actually raising rates. Ultimately, what it seemed to
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  Speaker 1: come down to was, you know, and she actually said this,
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  Speaker 1: that perhaps a rate hike would harm the economy, would
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  Speaker 1: harm some of the growth in the labor market and
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  Speaker 1: add to what she called slack in the market. So
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  Speaker 1: you know, that's what they don't want to do. And
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  Speaker 1: it sounds like it was a fairly fierce debate as
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  Speaker 1: far as these things go. You know, Yelling led the
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  Speaker 1: way in deciding not to pull the trigger. At the
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  Speaker 1: press conference that followed the meeting, the first couple of
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  Speaker 1: questions seemed to be devoted almost entirely to this issue.
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  Speaker 1: If you're confident there will still be a right increase
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  Speaker 1: in t and that's what the famous dots show again,
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  Speaker 1: what changes between now and then? And inevitably, given the decision,
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  Speaker 1: she was asked about the election. Yeah, and I think
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  Speaker 1: these questions kind of get to an important point, which
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  Speaker 1: is just that you know, not a lot is going
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  Speaker 1: to change between now in December. Like you said, so,
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  Speaker 1: a lot of the message that we got from Janet
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  Speaker 1: Yelling is maybe the economy is not ready for a
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  Speaker 1: rate increase. She gave all of these reasons why they
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  Speaker 1: didn't need to go and so sort of the sore
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  Speaker 1: thumb sticking out there, if you will, is this desire
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  Speaker 1: or expectation that they actually will raise rates as soon
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  Speaker 1: as December. As much as she can say, and she
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  Speaker 1: repeated many times that the FED is not influenced politically,
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  Speaker 1: It takes no political considerations into account. You won't see
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  Speaker 1: anything in the transcripts. You know, it's going to be
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  Speaker 1: hard for the broader public to accept that, and you know,
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  Speaker 1: we're still likely to see some blowback from people like
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  Speaker 1: Donald Trump continuing to accuse Janet Yellen and the FED
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  Speaker 1: of acting politically to support Democrats in an election year. Now.
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  Speaker 1: In her answer to one of those questions at the
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  Speaker 1: press conference, she said, the FIT does not take into
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  Speaker 1: consideration partisan politics. Is it reading too much into it
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  Speaker 1: to talk about the modifier partisan. That's not to say
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  Speaker 1: they don't take politics into account. Am I looking at
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  Speaker 1: this too closely? There? Was another question in the press
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  Speaker 1: conference that tried to get at the issue more broadly,
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  Speaker 1: which was, do you think uncertainty surrounding the election in
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  Speaker 1: general is having an impact on spending on the economy,
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  Speaker 1: And that's something that some of Yellen's colleagues have suggested
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  Speaker 1: maybe the case, But when she was asked about it today,
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  Speaker 1: she said she wasn't really aware of any evidence that
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  Speaker 1: would suggest the election is actually weighing on the economy.
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  Speaker 1: So it's unclear how top of mind that really is,
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  Speaker 1: even though you actually have some reports that confidence indexes
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  Speaker 1: things like that that do show that people are thinking
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  Speaker 1: about the election and it does seem to influence their
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  Speaker 1: views on sentiment, right, Matt, Yeah, that's right. Even one
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  Speaker 1: of the fat's own reports, the Beach Book, which is
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  Speaker 1: just a collection of anecdotes from business contacts they talked to,
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  Speaker 1: has raised this issue. So she wasn't she was keen
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  Speaker 1: to downplay that today. I would say she's she's being excessively,
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  Speaker 1: excessively cautious. That's very cautious in trying to not talk
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  Speaker 1: about the election, and clearly she's sensitive to any anything
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  Speaker 1: about that. Three voting members of the Fed's Rate Setting
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  Speaker 1: Committee dissented today one Esther George from Kansas City, not
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  Speaker 1: a surprise. She's been in that position before. Let's talk
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  Speaker 1: a bit about Eric rosen Grin from Boston. Now he
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  Speaker 1: has dissented both on the Dovish side and now today
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  Speaker 1: on the hawkish side. Should he get Man of the
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  Speaker 1: Year award for his independent thought in action? Yeah, that's
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  Speaker 1: a good question. You know, he's like one of these
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  Speaker 1: fat officials on the committee who's really undergone a bit
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  Speaker 1: of a shift. Whereas, like you said, before he was
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  Speaker 1: seen as more of a dove and now he's seen
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  Speaker 1: as as more of a hawk. And one of my
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  Speaker 1: colleagues made a related point, um just a few minutes ago,
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  Speaker 1: we were talking about it and the fact that Yelling
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  Speaker 1: had three descents today from within her own committee. In
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  Speaker 1: addition to all the external pressure, it took some guts
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  Speaker 1: for her to do what she did as well. So
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  Speaker 1: I think there's some of that on both sides of
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  Speaker 1: the debate right now. Well, two descents is not unusual,
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  Speaker 1: and as we just said, Esther George from Kansas City
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  Speaker 1: not infrequently finds herself in that position. Could rosen Grin's
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  Speaker 1: descent when the history of this meeting is written ultimately
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  Speaker 1: be the thing that stands out. M That's a good question.
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  Speaker 1: He stumped me on that. Yeah, I mean as an
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  Speaker 1: indicator of the degree of tension behind the scenes, and
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  Speaker 1: as a directional indicator. Here we have even a dove
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  Speaker 1: voting for writing. Chris, that's exactly the way to put it.
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  Speaker 1: I mean, just the fact that you have three descents
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  Speaker 1: and enough is one thing, and that's a relative rarity
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  Speaker 1: in recent fo MC history. When one of them is
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  Speaker 1: a guy who clearly expressed more dubbish views in the
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  Speaker 1: past and even dissented that way at a couple of meetings,
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  Speaker 1: it does show that the overall shift is moving in
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  Speaker 1: that hawkish direction, and that creates more tension the committee.
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  Speaker 1: It does take some more effort, willpower and intellectual argument
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  Speaker 1: to lay that out and push against that. Now, as
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  Speaker 1: our listeners can probably gather by this conversation, there's an
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  Speaker 1: entire industry to vote it to passing every word, every comma,
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  Speaker 1: every vote. Let's take this out of one land for
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  Speaker 1: a moment, Matt. What does it mean for you personally?
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  Speaker 1: You're at the start of your working life. Yeah, that's right,
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  Speaker 1: and I live in New York, so I'm excited that,
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  Speaker 1: you know, property prices are no longer going up as
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  Speaker 1: quickly as they used to be. So it's a good question.
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  Speaker 1: Not much has really changed, right, But Um, the Fed
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  Speaker 1: seem to be trying to get things going faster still,
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  Speaker 1: even though they're acknowledging that monetary policy doesn't have necessarily
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  Speaker 1: a lot of scope to do that, they're still trying
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  Speaker 1: to get the economy to a point where things are
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  Speaker 1: going a little faster for everyone. Um. And so you know,
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  Speaker 1: hopefully that works out. And when you say things going
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  Speaker 1: a bit faster for everyone, we're talking about this issue
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  Speaker 1: of how survey after survey shows not every American believes
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  Speaker 1: or can feel that we're close to full employment. Right.
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  Speaker 1: And you know, you've heard a lot more of this
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  Speaker 1: coming out of the FED recently, where they've been talking
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  Speaker 1: about differentials between unemployment rates for white people and for
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  Speaker 1: black people, for example. Uh, this is stuff that the
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  Speaker 1: FED did not historically talk about, but lately they have
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  Speaker 1: been more cognizant of addressing these issues, putting them out
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  Speaker 1: in the public, talking about the distributional consequences of economic policies. Um.
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  Speaker 1: And so, especially with Janet Yellen, given her focus on
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  Speaker 1: the labor market and her background, her previously stated desires.
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  Speaker 1: She's getting exactly what she wants right now, which is
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  Speaker 1: bringing some of those people at the lower end back end. Finally,
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  Speaker 1: as the economy starts to run a little hotter, and
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  Speaker 1: even if they did increase interest rates today, historically borrowing
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  Speaker 1: costs are still at very low levels. It's really mean
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  Speaker 1: anything outside this building. As Matt was just showing me
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  Speaker 1: this morning, the rate hike that the Fed did last
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  Speaker 1: December has had virtually no impact on borrowing costs and
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  Speaker 1: savings rates. In fact, they've actually come down. And let's
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  Speaker 1: due more to global forces that have kept interest rates
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  Speaker 1: low around the world and that's spilled over to the
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  Speaker 1: United States. Now. If they do hike, though, something's going
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  Speaker 1: to have to give, and we could actually see a
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  Speaker 1: bump up in the savings rates the kind of people
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  Speaker 1: who have money market accounts, savings accounts, those kinds of things,
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  Speaker 1: especially older folks, and that might actually give a boost.
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  Speaker 1: And and at the same time interest rates, borrowing costs
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  Speaker 1: are still probably going to stay relatively low. So they
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  Speaker 1: hiked it could still be a win win for the economy.
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  Speaker 1: This won't be the last time we're discussing monetary policy
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  Speaker 1: on this podcast, but between now and when we do,
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  Speaker 1: hopefully conditions on this podcast will strengthen somewhat further. We'll
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  Speaker 1: be back next week, and until then, you can find
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  Speaker 1: us on the Bloomberg Terminal and Bloomberg dot com, as
• 9:25
  Speaker 1: well as iTunes, pocket cast, and Stitcher. Why did they
• 9:29
  Speaker 1: take a minute to rate, not interest rate, but rate
• 9:32
  Speaker 1: the show so more listeners can find us and let
• 9:35
  Speaker 1: us know what you thought of the show. You can
• 9:37
  Speaker 1: talk to and follow us on Twitter at at Daniel Moss,
• 9:41
  Speaker 1: d c at scott Landmann s c O T T
• 9:44
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  Speaker 1: E s underscore, love your Twitter hand on Matt, See
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  Speaker 1: you next time.