Latest / Bloomberg Intelligence / Plosser on Fed: Data Reliance Fluctuates, No Strategy (Audio)

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Plosser on Fed: Data Reliance Fluctuates, No Strategy (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleventh Rio to Washington,
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  Speaker 1: This is taking Stock. I'm Kathleen Hayes long pim Fox,
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  Speaker 1: a special edition of Taking Stock. As we look at
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  Speaker 1: the Federal Reserves, a decision is decision to hold his
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  Speaker 1: key rate steady and send a message to the market said, well,
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  Speaker 1: it may be less worried about the economy, that doesn't
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  Speaker 1: mean it's ready to send a signal yet that it's
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  Speaker 1: ready to hike than pim Now we're gonna have more
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  Speaker 1: with Charles Plosser, former president of the Philadelphia Federal Reserve.
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  Speaker 1: Also coming up, we've got earnings from Alphabet, the parent
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  Speaker 1: you very much, pim Fox. Thank you, Kathleen Hayes. Let's
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  Speaker 1: begin with stock quotes there on Alphabet parent of Google
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  Speaker 1: up seven tenths of one percent, seven forty three seventy
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  Speaker 1: four right now on alphabet Facebook half of the ball
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  Speaker 1: is tim mentioned up one point four percent, gaining a
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  Speaker 1: dollar seventy two one right now on shares of Facebook.
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  Speaker 1: While we're talking about earnings in the Bay Air Hill,
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  Speaker 1: let's talk about Apple surging seven point three percent, up
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  Speaker 1: seven oh seven right now one oh three seventy three
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  Speaker 1: on Apple. But the other big story, Twitter, it is
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  Speaker 1: plunging fourteen point two percent, down two sixty two to
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  Speaker 1: fifteen dollars and eighty three cents. Today's big story. We've
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  Speaker 1: got the Federal Reserve. It does see diminished economy risks,
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  Speaker 1: Stock showing a little reaction right now the f SMP
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  Speaker 1: five hundred index climbing a point to seventy, a gain
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  Speaker 1: of less than point one percent. The Fed leaving interest
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  Speaker 1: rates unchanged, while saying risks to the U S economy
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  Speaker 1: have subsided. On the labored market is getting tighter, suggesting
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  Speaker 1: conditions are getting more favorable for an increase in borrowing costs.
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  Speaker 1: Arianna Coach Lacorda is a Bloomberg View columnist former FED official.
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  Speaker 1: He is now at the University of Rochester, and he
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  Speaker 1: was interviewed reacting to today's FED decision on Bloomberg Radio
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  Speaker 1: and Television. I think the big challenge with the FED
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  Speaker 1: is that you're not It's not just about your what
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  Speaker 1: we were with the central Bankers like to call your
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  Speaker 1: modal outlook where you expect the economy to go. It's
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  Speaker 1: about the risk that outlook, and in particular, you're really
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  Speaker 1: worried about the downside risk that outlook because you don't
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  Speaker 1: have as many tools in your your kid to offset
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  Speaker 1: those those downside risks. P five hundred indecks off a point,
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  Speaker 1: Charlie from the Bloomberg Newsroom. I'm Jill Schneider. This news
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  Speaker 1: I'm Jill Schneider, and this is Bloomberg, Charlie, and we
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  Speaker 1: a point to seventy. I'm Charlie Pelt. That's a Bloomberg
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  Speaker 1: business flash. He's taking stock the Fed in focus on
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  Speaker 1: Bloomberg Radio. What did the FED say in its policy statement?
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  Speaker 1: A tersely worded I've paragraphed piece of paper that markets
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  Speaker 1: around the world dissect to get a sense of what
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  Speaker 1: the fet is telling us about a possible interest rate
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  Speaker 1: increase this year. Let's put that question to someone who
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  Speaker 1: who they are recently helped craft those policy statements. That's
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  Speaker 1: Charles Plaster, former president of the Fetter Reserve Bank of Philadelphia.
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  Speaker 1: Charlie's great to have you back on the show. Good
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  Speaker 1: to be here. Kathleen, But I want to get right
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  Speaker 1: to it. What do you take away from this statement? Well,
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  Speaker 1: I think the same. It was pretty much as expected.
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  Speaker 1: The most interesting part of it was they went a
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  Speaker 1: long way, I think, uh, to disavowing, in other words,
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  Speaker 1: undoing all the fears that they placed at the last
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  Speaker 1: meeting that prevented them from moving ahead with an interest
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  Speaker 1: rate hack. So basically what happened in June was as
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  Speaker 1: they were incredibly sensitive to short term data and they
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  Speaker 1: instilled fears about all the bad things that could happen,
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  Speaker 1: and the sense of the two biggest things that they
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  Speaker 1: stressed with employment and Brexit, those years have clearly not
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  Speaker 1: come to pass, and um, yes they're still they're always
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  Speaker 1: risks in the future. And the Committee has been really
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  Speaker 1: adept at um, you know, pulling risks out of the
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  Speaker 1: hat and emphasize them to give them an excuse not
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  Speaker 1: to to move rates up. And so now they kind
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  Speaker 1: of had to recant. And Uh, it's going to be
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  Speaker 1: entering to see what they're gonna do because they claim
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  Speaker 1: their data dependance, but they get whip side by the
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  Speaker 1: data so easily. So I think they have a huge
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  Speaker 1: communication problem with the public about what's driving their policy decisions.
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  Speaker 1: They are basically have no strategy. Mr Plosser, I wonder
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  Speaker 1: if you could comment on the distinction between being inside
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  Speaker 1: the bubble of the Federal Reserve and now that you
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  Speaker 1: are outside, and how you explain to people that are
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  Speaker 1: trying to invest their money how to do so based
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  Speaker 1: in the context of what you just described as a
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  Speaker 1: non policy strategy from the Federal Reserve. Currently, Well, I
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  Speaker 1: did they have a non policy. They just don't have
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  Speaker 1: a strategy. I think it's really important for the Fed
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  Speaker 1: to try to communicate, and I've said this for years,
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  Speaker 1: what are the data that are driving their decisions and
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  Speaker 1: how have they react that data? And they typically have
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  Speaker 1: not been able to articulate that strategy or articulate their
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  Speaker 1: reaction function, if you will, to the data. And so
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  Speaker 1: every new meeting there is a new set of data
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  Speaker 1: on the table that seemed to be driving their policy decisions.
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  Speaker 1: So that's what I mean is they don't really have
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  Speaker 1: a having they will articulate a strategy to the markets,
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  Speaker 1: and I think that's part of the problem that the
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  Speaker 1: markets have and why you can get whipstocks so reacently.
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  Speaker 1: So as an investor, you know I think you need
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  Speaker 1: to look at fundamentals, and I don't think paying much
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  Speaker 1: attention to the short term movements and and uh comments
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  Speaker 1: by the said is as important as some people like
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  Speaker 1: to think. If you're a FED policy meet or UM,
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  Speaker 1: you could you could argue that in fact, they are
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  Speaker 1: focused on fundamentals of the economy, and they've got two mandates.
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  Speaker 1: One is inflation. It's got to get up to two
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  Speaker 1: on that key measure they watch, and unemployment has to
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  Speaker 1: move lower. And part of the mandate has occurred, and
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  Speaker 1: unemployment has moved a lot lower, but the inflation number
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  Speaker 1: has not moved up that much. That seems to be
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  Speaker 1: one of the reason why people have been hesitant without
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  Speaker 1: a clear inflation signal, a clear need to fight inflation. Now,
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  Speaker 1: it seems that many, including FED chair yelling, have been
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  Speaker 1: willing to just wait and see what happens. So so
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  Speaker 1: let's let's let's be clear here one on the employment
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  Speaker 1: mandate monetary policy in terms of its stance, it's accommodative stance.
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  Speaker 1: It's more accommodative today on the unemployment rate is four
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  Speaker 1: point or seven percent, whatever it is, UM, it's more
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  Speaker 1: accommodative today than it was when the unemployment rate was
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  Speaker 1: ten percent. Now with an economy that's moved from ten
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  Speaker 1: percent to less in five percent unemployment rates, and we
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  Speaker 1: still have an accommodative monetary policy that's even more accommodated
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  Speaker 1: than it was earlier on. And too we have inflation.
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  Speaker 1: I agree inflation is below it's its target, although not
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  Speaker 1: all elements of inflation. If you look at you know,
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  Speaker 1: the c p I UM you've got, the core c
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  Speaker 1: p I is to percent or better. UH. The CPI
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  Speaker 1: for services, which is what what consumers spend their money on,
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  Speaker 1: is over three percent, and the trimmin and medium c
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  Speaker 1: p I s are all two percent or better. So
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  Speaker 1: the only thing that's really holding back headline inflation seems
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  Speaker 1: to be mostly energy and its effects on the overall.
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  Speaker 1: So so it's not my concern that inflation is UH
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  Speaker 1: is a little bit below two percent. You know, wh
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  Speaker 1: who's going to tell we are we can't forecast. The
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  Speaker 1: FED nor anyone else can either forecast or even control
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  Speaker 1: inflation as precisely if somehow we think they can. And
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  Speaker 1: you know, what's the difference between one point eight inflation
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  Speaker 1: and to persent inflation? Most people can't tell the difference.
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  Speaker 1: They only can tell the difference when they read the numbers.
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  Speaker 1: So I think we're getting a little fixated on the
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  Speaker 1: precision by which the FED can control inflation. So I'm
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  Speaker 1: all for the fact that inflation below target means, uh,
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  Speaker 1: the FED funds rate and the target for FED policy
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  Speaker 1: ought to be somewhat more accommodated than if there were
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  Speaker 1: at two. That's perfectly reasonable, but that's it's hard to
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  Speaker 1: justify it near zero interest rates because inflation is running,
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  Speaker 1: you know, few tenth books and few tenths below its target.
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  Speaker 1: We're gonna leave it there, Thank you very much, Charles
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  Speaker 1: plas a former president of the Philadelphia Federal Reserve. You're
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  Speaker 1: listening to taking Stockheim pim Fox my co host Kathleen Hayes.
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  Speaker 1: This is Bloomberg coming up, a look at the markets,
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  Speaker 1: the reaction or lack of reaction the Fed's decision, and
• 11:07
  Speaker 1: we're also going to be looking at Apple's impact on
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  Speaker 1: the markets today. This is Bloomberg