Latest / Trumponomics / Kevin Warsh Eyes Fed ‘Regime Change’ With Less Talk, New Models

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Kevin Warsh Eyes Fed ‘Regime Change’ With Less Talk, New Models · Trumponomics

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: He would not answer any question that might be as
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  Speaker 2: little smallest way disapply of Donald Trump.
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  Speaker 1: JEM believed to all who will watch it that Kevin
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  Speaker 1: Worrishon will be a great slock puppet for Donald Trump.
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  Speaker 3: I'm committed to ensuring that the conduct of monetary policy
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  Speaker 3: remains strictly independent, equally committed to work with the administration
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  Speaker 3: in Congress a non monetary matters that are part of
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  Speaker 3: the Fed's remit, and I commit myself to accountability.
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  Speaker 4: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
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  Speaker 4: and this is Trumponomics, the podcast that looks at the
• 0:54
  Speaker 4: economic world of Donald Trump, how he's shaking the global
• 0:58
  Speaker 4: economy and what on earth is going to happen next.
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  Speaker 4: And this week we're turning our attention back to the
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  Speaker 4: Federal Reserve and we're recording this on the morning of Wednesday,
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  Speaker 4: April twenty ninth, a few hours before what is likely
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  Speaker 4: to be Japow's final meeting charing the Board. Now, usually
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  Speaker 4: that would be a rather stupid, badly time thing to do,
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  Speaker 4: but with one exception, and we'll get to that, there's
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  Speaker 4: not a lot hanging on this meeting. The big focus
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  Speaker 4: is on the man who's likely to be leading the
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  Speaker 4: world's most important central bank at the next meeting, Trump's pick,
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  Speaker 4: Kevin Walsh. Now, we had an episode back in February.
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  Speaker 4: I encourage you to go and listen to it about
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  Speaker 4: what we could expect from a FED led by mister Walsh,
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  Speaker 4: featuring my friend and the former senior advisor at the
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  Speaker 4: New York Federal Reserve, Krishna Guha, who's now Vice Chairman
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  Speaker 4: and head of Economics and Central Bank Strategy at Evercore ISI. Well,
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  Speaker 4: since then a lot has happened with implications for that
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  Speaker 4: future FED. The Iran warf for status, also a bit
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  Speaker 4: more evidence on how AI might or might not be
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  Speaker 4: paving the way to looser policy in the US. And
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  Speaker 4: most recently, we had a very lively confirmation hearing for
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  Speaker 4: mister Walsh in front of the Senate Banking Committee on
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  Speaker 4: April twenty first. Now I was away for the hearing,
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  Speaker 4: but catching up afterwards looking at the coverage, it seemed
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  Speaker 4: how you felt about it depended pretty heavily on where
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  Speaker 4: you sat, So it made me more to check in
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  Speaker 4: with Krishna again how he was looking at a Walsh
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  Speaker 4: fed Krishna, thanks so much for doing this again and
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  Speaker 4: on FED.
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  Speaker 2: Day no less. Great to see you.
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  Speaker 4: Now we were going to try and save your breath.
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  Speaker 4: So we've got a few top lines here from what
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  Speaker 4: you told us in February, and then we'll get onto
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  Speaker 4: what you think now.
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  Speaker 1: So I think it is true that Kevin Walsh has
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  Speaker 1: for most of his career as channeled and represented what
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  Speaker 1: one might think of a small C conservative Republican leaning
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  Speaker 1: economic thinking and principles. There has generally been more concerned
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  Speaker 1: with inflation than the labor market, let's say, more focused
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  Speaker 1: on supply side issues than demand side management. And so
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  Speaker 1: I think there is an aspect that is channeling a
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  Speaker 1: set of thinking on one side, if you like, of
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  Speaker 1: the political and economic debates. I think it's also the
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  Speaker 1: case that Kevin believes that the really big inflation risks
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  Speaker 1: come when you have a combination of fiscal expansion on
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  Speaker 1: the part of the government and money financing on the
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  Speaker 1: parts of the central bank. So Kevin would say the
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  Speaker 1: inflation risks today are completely different from the inflation risks
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  Speaker 1: that were there in the early phase of the pandemic,
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  Speaker 1: which is why I was a Hawk then and I'm
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  Speaker 1: a dove now. I think that the crewed version of
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  Speaker 1: concerns about Wash, which is he's super hawkish on inflation,
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  Speaker 1: interest rates and he's super hawkish on QT, just don't
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  Speaker 1: bear particularly close examinations. That's not what we should be
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  Speaker 1: worrying about. That doesn't mean that there are no points
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  Speaker 1: of vulnerability or things that we should be tended to
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  Speaker 1: in the case of a Wash FED. I think the
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  Speaker 1: question is it's fine, and indeed, I think very legitimate
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  Speaker 1: to critique some of the shortcomings of traditional FED models
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  Speaker 1: and backward looking data dependence, but it's going to be
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  Speaker 1: very hard to replace that with something that is coherent
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  Speaker 1: and systematic and well communicated, and that could go badly
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  Speaker 1: wrong if Wash were to turn his back on the
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  Speaker 1: old ways of doing business without having figured out a
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  Speaker 1: fully coherent set of approach or set of approaches to
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  Speaker 1: replace it.
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  Speaker 4: So first things first, Krishna, was there anything that struck
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  Speaker 4: you from Kevin Walsh's testimony that led you to change
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  Speaker 4: your expectations for his kind of Federal Reserve in any way?
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  Speaker 1: Not so much change my view, but I thought there
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  Speaker 1: were some very interesting parts to that hearing. First and
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  Speaker 1: foremost Kevin really doubled down on his promise.
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  Speaker 2: Of quote RESI gen change end quote at the Fair. Now,
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  Speaker 2: there's still a lot of gaps.
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  Speaker 1: In terms of filling out what that really means, but
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  Speaker 1: I think it's very clear that he's presenting himself not
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  Speaker 1: just as a change candidate in general, but as a
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  Speaker 1: break with his immediate predecessors, So not just Powell, but
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  Speaker 1: that period of relative continuity from Benanti to Yellen to Powell.
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  Speaker 2: To the extent that Walsh has a role model.
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  Speaker 1: In central banking, it's really Greenspan, not one of his
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  Speaker 1: immediate predecessors.
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  Speaker 4: Yeah, and I was struck that he was pretty straightforward
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  Speaker 4: in blaming the inflation after COVID on central bankers, which
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  Speaker 4: the central bankers who were there at the time, I've
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  Speaker 4: never got them to really admit that. He was critical
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  Speaker 4: of the new framework for inflation targeting that was introduced
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  Speaker 4: just around that time. What key aspects of regime change
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  Speaker 4: were you thinking about?
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  Speaker 1: Well, I think we should break that down into a
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  Speaker 1: work tools and communication. Right, So with respect to the framework,
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  Speaker 1: I mean you started there already, right, highly critical of
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  Speaker 1: the framework of the FED foot in place during the pandemic,
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  Speaker 1: and in fact of course that the FED is itself revised,
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  Speaker 1: but looking to develop a difference, and he would say
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  Speaker 1: better understanding of the inflation process and the inflation outlook
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  Speaker 1: through new models, more extensive modeling of the supply side,
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  Speaker 1: not just nu Kaunsian modeling of the demand side, looking
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  Speaker 1: at different and potentially better ways of measuring underlying inflation.
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  Speaker 1: He's talked about wanting to lean more on trend mean
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  Speaker 1: or median as opposed to the core PCE measure that
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  Speaker 1: the FED is typically used to represent underlying inflation on tools.
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  Speaker 2: There are going to be important changes on communication too. Now.
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  Speaker 1: Watsh wants to get out of the business of forward guidance.
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  Speaker 1: I think many would agree that that was overdone in
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  Speaker 1: recent years, but he wants to go further than that.
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  Speaker 1: He thinks that central banks have made a fetish out
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  Speaker 1: of communication, that they just say too much, talk too much.
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  Speaker 1: He wants to say less talk less. And I think
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  Speaker 1: that's going to be quite an adjustment for us to
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  Speaker 1: get used to after.
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  Speaker 2: A long period in which the FED and other.
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  Speaker 1: Central banks embraced the idea that by being more transparent,
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  Speaker 1: by sharing more information with the markets, they would actually
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  Speaker 1: make policy, not just better understood, but more effective too.
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  Speaker 4: I was very struck by what he said about communications,
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  Speaker 4: because it is interesting, even in your and my sort
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  Speaker 4: of time of looking at markets and thinking about monetary policy,
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  Speaker 4: the expectations around communications have gone up and up. The
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  Speaker 4: bond markets, you could argue, have been really spoon fed
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  Speaker 4: by the FED and got used to thinking they know
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  Speaker 4: everything about what the Fed's going to do ahead of time.
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  Speaker 4: Walking back from that really means that you're promising to
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  Speaker 4: inject more uncertainty into markets and potentially volatility. How much
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  Speaker 4: you might want to get there in the end, it
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  Speaker 4: sounds like quite a dangerous sort of scary transition.
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  Speaker 2: One hundred percent that's exactly my own view.
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  Speaker 1: I think that, particularly if Kevin is also proposing that
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  Speaker 1: the FED should change some of its framework and its
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  Speaker 1: operating practices. If at the same time you also pull
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  Speaker 1: back from your communication, you're certainly going to have a
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  Speaker 1: period of more volatility and uncertainty, and so you've.
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  Speaker 2: Got to be careful how far you go in that direction.
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  Speaker 1: I also think separately that Kevin himself may run into
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  Speaker 1: a very simple problem, which is that fundamentally, the reason
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  Speaker 1: why central bankers like to communicate a lot is because
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  Speaker 1: it allows them to shape the market's rate path and
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  Speaker 1: therefore advance their own objectives in terms of monetary policy,
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  Speaker 1: either easing things or tightening things or keeping them where
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  Speaker 1: they are. The problem Kevin's going to run into sooner
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  Speaker 1: or later is the market's going to pry something he
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  Speaker 1: doesn't like, And then the question is, well, am I
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  Speaker 1: going to stay silent or am I going to say.
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  Speaker 2: Something about it?
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  Speaker 4: I think that goes to whether or not it's credible
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  Speaker 4: to make this promise. You know, there's a big tool
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  Speaker 4: that you're just saying I'm not going to use it,
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  Speaker 4: and I'm even going to put up with quite a
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  Speaker 4: lot of volatility, some of it based on maybe wrong expectations,
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  Speaker 4: in order to give up that tool once he actually
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  Speaker 4: gets there. I just wonder if that's going to last.
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  Speaker 4: But I guess if he did really get rid of it,
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  Speaker 4: then you'd be going back not to a Greenspan fed,
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  Speaker 4: but more like a Volca fed. I mean, famously, Paul
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  Speaker 4: Volka raised interest rates on a Sunday night two by
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  Speaker 4: two percentage points and actively wanted to shop the market.
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  Speaker 2: Yeah, I don't think there's any going back to Volka.
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  Speaker 1: I don't even think there's any going back really to
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  Speaker 1: Green Spans era of you know, just providing very ambiguous,
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  Speaker 1: deltic statements and leading the market to figure out what's
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  Speaker 1: going on. So I think Kevin's going to have to
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  Speaker 1: try to find a middle way, right. I think it's
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  Speaker 1: certainly true that the FED and many other central banks
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  Speaker 1: probably talk more than they necessarily need to in aggregate
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  Speaker 1: at least with and you count all the different speakers,
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  Speaker 1: and that there are lots of things that could be
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  Speaker 1: done to improve the signal to noise ratio in central
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  Speaker 1: bank communications and to sharpen up the distinction in the
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  Speaker 1: way you talk about different things. Right, the central Bank should,
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  Speaker 1: in my view, categorically communicate very clearly and comprehensively about
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  Speaker 1: its reaction function. It should also understand that it's very
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  Speaker 1: different when it talks about its understanding of the economic outlook. Right.
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  Speaker 1: That is something where it has some insights and expertise,
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  Speaker 1: good staff, good data, but fundamentally doesn't have a deep
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  Speaker 1: forecasting edge over the market and should in general be
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  Speaker 1: quite humble. Plenty of things that can be improved, but
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  Speaker 1: just backing away from communication I think ultimately won't work.
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  Speaker 4: One of the areas where he was delphick and indeed
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  Speaker 4: ambiguous was in answering questions around, for example, whether Donald
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  Speaker 4: Trump lost the twenty twenty election. And this was one
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  Speaker 4: of the things when I said, people, depending on where
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  Speaker 4: they sat, had a different focus. You know, there were
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  Speaker 4: certain people in the markets who were focusing on the
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  Speaker 4: stuff that you've just talked about. Others maybe have a
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  Speaker 4: more political mindset, not least Elizabeth Warren focused on him
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  Speaker 4: not being willing to say anything that might offend Donald Trump.
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  Speaker 4: You and your own notes said it was jarring, which
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  Speaker 4: you're very careful with your words. I think shocking would
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  Speaker 4: be the word other people might use if I sort
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  Speaker 4: of translate it out of Krishna speak. But did you
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  Speaker 4: also find it concerning?
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  Speaker 1: I think that while it is a sad statement on
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  Speaker 1: the Times that it is controversial to state who did
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  Speaker 1: or didn't win the twenty twenty election, I think you could,
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  Speaker 1: if you were being generous, make an excuse to Kevin that, look,
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  Speaker 1: you're starting to get drawn into political controversy. This is
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  Speaker 1: not a question that is pertinent to the role for
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  Speaker 1: which he's being considered, which is that of fed chair.
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  Speaker 1: But what I found jarring and Somewhat concerning was the
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  Speaker 1: fact that Kevin did not seem to feel able to
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  Speaker 1: say the words tariff and inflation in the same sentence.
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  Speaker 1: Now that is in his core wheelhouse as FED chair.
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  Speaker 1: It is central to understanding the evolution of inflation, including
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  Speaker 1: by the way, why one might be cautiously optimistic that
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  Speaker 1: inflation will come down once these tariff effects have washed
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  Speaker 1: through the price series. I think it's quite problematic that
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  Speaker 1: the next FED chair apparently feels unable to say something
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  Speaker 1: which is essentially a matter of fact among economists, that
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  Speaker 1: tariffs have pushed up the inflation rate over the last year,
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  Speaker 1: even though this may well ultimately prove to be a
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  Speaker 1: one time change in the price level and not underlying
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  Speaker 1: ongoing inflation. It'd be perfectly fine Forash to.
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  Speaker 2: Make that distinction. Poals made that distinction. Wash could even
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  Speaker 2: make it more sharply.
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  Speaker 1: But I think it doesn't help your credibility if you
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  Speaker 1: can't accept the basic fact that tariff's pushed up prices.
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  Speaker 4: And without getting too into the weeds, I guess related
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  Speaker 4: to that you pointed in your note talking about potentially
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  Speaker 4: changing the focus of the sort of the inflation measure
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  Speaker 4: that he's going to be most focused on. And there
• 13:40
  Speaker 4: is a suggestion that in that choice of rate, because
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  Speaker 4: it's sort of adjusting out of away from tariffs, he's
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  Speaker 4: kind of escaping that issue around tariffs, but also shopping
• 13:50
  Speaker 4: for measures which support lower rate.
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  Speaker 1: So look, I think it's unfortunate that he backed into
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  Speaker 1: that discussion of inflation measures by way of trying trying
• 14:00
  Speaker 1: to avoid talking about tariffs, right, because of course one
• 14:04
  Speaker 1: of the measures the emphasizer trimmed mean.
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  Speaker 2: Trimmed mean is where you just lop off the outliers.
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  Speaker 4: Do you look off the things that are increasing inflation?
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  Speaker 1: Yes, if you're trying to understand the underlying trajectory, the
• 14:16
  Speaker 1: central tendency of prices, you may well want to exclude outliers,
• 14:22
  Speaker 1: providing you doing in a fairly symmetric way on to
• 14:24
  Speaker 1: the downside as well as the upside. But of course,
• 14:27
  Speaker 1: what was politically convenient at this point in time is that,
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  Speaker 1: of course the categories that are going up the most
• 14:34
  Speaker 1: and are getting trimmed out of your trimmed mean are
• 14:36
  Speaker 1: of course all the things that have tariffs on them, right,
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  Speaker 1: So I think that was unfortunate. But there is a
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  Speaker 1: substance economic sort of question here, which is, we do
• 14:46
  Speaker 1: want to focus on underlying inflation and the medium term
• 14:49
  Speaker 1: inflation outlook.
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  Speaker 2: And it is the case that core PCD.
• 14:53
  Speaker 1: Inflation, the metric the fact typically refers to, is just
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  Speaker 1: one of a number of measures that try to capture
• 15:00
  Speaker 1: what that underlying trajectory of inflation is now. In the presence,
• 15:06
  Speaker 1: Chair Powell has been saying, look, core pc inflation continues
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  Speaker 1: to be elevated. In fact, it's just going up still
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  Speaker 1: to crest in the low threes.
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  Speaker 2: But Chair Powell is saying.
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  Speaker 1: That this is overwhelmingly because of tariffs, and if you
• 15:23
  Speaker 1: sort of take out tariffs, inflation next tariffs is running
• 15:26
  Speaker 1: a lot closer to two percent. When what points you
• 15:30
  Speaker 1: to trimmed mean on the Dallas version saying two point
• 15:34
  Speaker 1: three percent, He's basically saying the same thing Power is saying,
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  Speaker 1: which is, if you trim out the tariff goods, the
• 15:41
  Speaker 1: inflation's a bit above two, but it's not anything like
• 15:44
  Speaker 1: as high as it looks.
• 15:45
  Speaker 4: He's at least here he's sticking to the idea of
• 15:47
  Speaker 4: being much less clear in his communication.
• 15:50
  Speaker 1: Will Yeah, And I think the problem also is that
• 15:53
  Speaker 1: I think it's legitimate to say, look, we want to
• 15:55
  Speaker 1: look at a range of measures of underlying inflation. But
• 15:58
  Speaker 1: if it looks like you're shifting the goalpost, shopping around
• 16:01
  Speaker 1: for metrics to suit your story, again, that's just going
• 16:04
  Speaker 1: to weaken your credibility, and that's not going to wash
• 16:07
  Speaker 1: with the rest of the committee, never mind with financial markets.
• 16:11
  Speaker 1: But it links to something else there, which is which
• 16:14
  Speaker 1: Kevin Walsh showed up, the hawkish Kevin or the dubvish Kevin.
• 16:21
  Speaker 4: Some of the sort of Wall Street commentary that I
• 16:23
  Speaker 4: read felt that he is slightly more hawkish. Kevin Walsh
• 16:26
  Speaker 4: had turned up and was struck in particular about the
• 16:29
  Speaker 4: way he talked about the mandate only in terms of inflation,
• 16:32
  Speaker 4: when I think even sort of cursory FED watchers know
• 16:36
  Speaker 4: that the FED famously has a dual mandate for full
• 16:39
  Speaker 4: employment as well, even though it tends to talk more
• 16:41
  Speaker 4: about inflation. Did you read anything into that.
• 16:45
  Speaker 1: I certainly heard the same things that those folks are
• 16:48
  Speaker 1: talking about, but I interpret them in a very different way.
• 16:52
  Speaker 1: I think we want to make a distinction between two things.
• 16:55
  Speaker 1: One is how Kevin thinks about the Fed's mandate, and
• 17:00
  Speaker 1: the second is how he's positioning on policy.
• 17:05
  Speaker 2: So on the mandate. It's very clear it's been the
• 17:07
  Speaker 2: case for.
• 17:08
  Speaker 1: A long time that Kevin washes somebody who believes that
• 17:12
  Speaker 1: the FED dual mandates can, to a large extent, be
• 17:16
  Speaker 1: reduced in practice to a single mandate for inflation because
• 17:21
  Speaker 1: in the longer run, in Kevin's view, consistent with any
• 17:24
  Speaker 1: conservative economists, in fact, consistent with many economists period, in
• 17:28
  Speaker 1: the longer run, the FED doesn't get to effect these
• 17:31
  Speaker 1: real variables, and the best contribution it can make to
• 17:34
  Speaker 1: keeping unemployment low is to keep inflation low and stable.
• 17:38
  Speaker 2: So Kevin would say that he's legally.
• 17:40
  Speaker 1: Compliant with the dual mandate, but he's really focused on
• 17:43
  Speaker 1: inflation stability as being the foundation for everything else right,
• 17:48
  Speaker 1: and so that necessarily means that he's going to be
• 17:51
  Speaker 1: less twitchy on labor market weakness or risk of labor
• 17:55
  Speaker 1: market weakness than.
• 17:57
  Speaker 2: His recent predecessors.
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  Speaker 1: I personally think that's a mistake to jump from that
• 18:03
  Speaker 1: to say that he's therefore being more hawkish. I think
• 18:07
  Speaker 1: what we're saying here is we're seeing the new FED
• 18:12
  Speaker 1: chair retire an old form of FED dubbishness and replace
• 18:17
  Speaker 1: it with a new form of FED dubbishness. Farewell, labor
• 18:22
  Speaker 1: market risk dubbish, Hello AI, productivity dubbish.
• 18:39
  Speaker 4: Normal human beings will be listening to this and wondering
• 18:41
  Speaker 4: how on earth we had not got to the implications
• 18:43
  Speaker 4: for interest rates, the short term interest rates that the
• 18:46
  Speaker 4: Federal Reserve has control over in all of this conversation.
• 18:50
  Speaker 4: But I guess the implication of what you just said
• 18:52
  Speaker 4: is it might not matter a whole lot.
• 18:54
  Speaker 1: In the near term, let's say next quarter or two, certainly,
• 18:58
  Speaker 1: and plausibly beyond that, a live debate about changing the
• 19:03
  Speaker 1: policy rate in the US.
• 19:05
  Speaker 2: I think it's very clear that with the oil inflation.
• 19:08
  Speaker 1: Shock coming on top of all the prior inflation shocks,
• 19:12
  Speaker 1: including the tariff shock that's only now cresting, the FED
• 19:16
  Speaker 1: is going to be firmly in the mode of policing
• 19:19
  Speaker 1: inflation developments at least here through the end of the
• 19:23
  Speaker 1: summer and potentially long beyond that before they can return
• 19:26
  Speaker 1: to any consideration of the case for rate cuts. At
• 19:30
  Speaker 1: the same time, I think they're very very far away
• 19:33
  Speaker 1: from contemplating any serious consideration of a rate hike, So
• 19:38
  Speaker 1: the next few FED meetings simply aren't live. And what
• 19:42
  Speaker 1: happens around iron, the war, energy and the economic data
• 19:46
  Speaker 1: is really in the driving seat, but I think it
• 19:49
  Speaker 1: still matters what position the new chair is starting to
• 19:54
  Speaker 1: set out, and I think he is setting the foundations
• 19:58
  Speaker 1: for making the case potentially later this year to shift
• 20:04
  Speaker 1: from backward looking policing of current inflation shocks to forward
• 20:11
  Speaker 1: looking monetary policy with rate cuts motivated by an expectation
• 20:20
  Speaker 1: that AI and technology more broadly will raise the potential
• 20:26
  Speaker 1: growth rates of the US and reduce inflation pressures going forward.
• 20:32
  Speaker 1: So I think what we're seeing here is that Walsh recognizes,
• 20:35
  Speaker 1: for the time being, there is no debate about rates.
• 20:38
  Speaker 2: You're in this monitoring policing phase. But I think he's
• 20:42
  Speaker 2: positioning so.
• 20:44
  Speaker 1: That at the earliest responsible moment, when he can say
• 20:51
  Speaker 1: the tariff stuff has rolled over and the oil inflation
• 20:54
  Speaker 1: indeed is looking like a one time hit to the
• 20:58
  Speaker 1: pedline prices, then he can say to the Committee, and
• 21:03
  Speaker 1: now is the time to look forward and to ask
• 21:07
  Speaker 1: what the inflation outlook looks like over the next several
• 21:10
  Speaker 1: years and make the case that that is tech driven,
• 21:13
  Speaker 1: this inflationary and therefore the FED should be willing to
• 21:17
  Speaker 1: move to consider cuts not because the labor market's weak,
• 21:20
  Speaker 1: but because.
• 21:21
  Speaker 2: Tech is going to drive this inflation going forward.
• 21:23
  Speaker 4: You said, there's not very much live about these next
• 21:27
  Speaker 4: few meetings and the meeting that's happening after we speak
• 21:29
  Speaker 4: today on Wednesday, except there was one question today, which
• 21:33
  Speaker 4: is whether or not Jay Powell is going to stick
• 21:36
  Speaker 4: around once Kevin Welsh is confirmed and in place in
• 21:41
  Speaker 4: the FED. There's been a lot of background to this,
• 21:44
  Speaker 4: the investigation and the case against Jay Powell on grounds
• 21:48
  Speaker 4: of excessive expenditure on the FED renovation that has been
• 21:51
  Speaker 4: withdrawn at least for the time being. That's what's allowed
• 21:55
  Speaker 4: Kevin Walsh's confirmation to go forward. If we imagine that
• 21:58
  Speaker 4: we're in a world in the day's time, people are
• 22:00
  Speaker 4: listening and he said that he's going to stick around
• 22:03
  Speaker 4: at least for a bit. Does that change the first
• 22:06
  Speaker 4: few months of Walsh's tenure Do you think significantly?
• 22:09
  Speaker 1: I think it does matter if power stays or goes,
• 22:13
  Speaker 1: if he stays on.
• 22:15
  Speaker 2: If we're in a world where you know he's staying.
• 22:17
  Speaker 1: On for a bit, it does slow the transition in
• 22:21
  Speaker 1: the composition of the FED Board and the FMC. It
• 22:24
  Speaker 1: means it takes longer for that seat to become vacant
• 22:27
  Speaker 1: and for Trump to be able to put in another appointee,
• 22:30
  Speaker 1: presumably a wash ally, onto the board, and so it
• 22:34
  Speaker 1: slows down a little bit the process by which Kevin
• 22:38
  Speaker 1: is going to be able to build majorities in favor
• 22:42
  Speaker 1: of some of the changes that he wants to make
• 22:44
  Speaker 1: that require votes either of the FED Board or of
• 22:47
  Speaker 1: the FMC.
• 22:49
  Speaker 2: But I don't see Powell staying on to lead the resistance.
• 22:54
  Speaker 1: I think he has a sort of narrow and circumscribed
• 22:58
  Speaker 1: view of why it could be appropriate for him to
• 23:03
  Speaker 1: stay on. That would be really to see out the
• 23:07
  Speaker 1: remaining aspects of this legal threat to FED independence from
• 23:13
  Speaker 1: the DOJ investigation, to make sure that all the loose
• 23:16
  Speaker 1: ends are firmly tied up, and in doing so, not
• 23:20
  Speaker 1: just to settle the question in this case and the precedent,
• 23:25
  Speaker 1: but also to avoid any suggestion that he walked under
• 23:29
  Speaker 1: pressure with an implied threat that if he didn't, they'd
• 23:32
  Speaker 1: come back at him with more legal suits. I think
• 23:36
  Speaker 1: he will feel it as to be very important that
• 23:40
  Speaker 1: institutionally he leaves having upheld the independence of the FED
• 23:45
  Speaker 1: to the greatest of his ability, And I think if
• 23:48
  Speaker 1: we're in a world where he's staying that's the reason
• 23:51
  Speaker 1: why he's staying not because he wants to fight Kevin
• 23:55
  Speaker 1: Walsh over regime change, to frameworks, balance sheet, for communications.
• 24:01
  Speaker 1: That's for the larger committee to assess. And I think
• 24:05
  Speaker 1: that conduct of FED policy FED institutional reform will be
• 24:09
  Speaker 1: a negotiation between the new chair and the old committee.
• 24:14
  Speaker 1: The POWE, I think, to the greatest extent, even if
• 24:17
  Speaker 1: he's around, will try not to be at the forefront
• 24:20
  Speaker 1: of that.
• 24:20
  Speaker 4: In that spirit, I guess we can expect that this
• 24:23
  Speaker 4: week's press conference will be the last time for quite
• 24:28
  Speaker 4: a while that we hear substantial commentary from him on
• 24:31
  Speaker 4: monetary policy, though possibly not from you, Krishner, given that
• 24:34
  Speaker 4: we seem to have a revealed preference for having you
• 24:36
  Speaker 4: on the show quite often. Thank you so much.
• 24:39
  Speaker 1: It's incredibly kind of you, Steff. I'd be happy to
• 24:41
  Speaker 1: be back olive.
• 24:46
  Speaker 4: So it's weird. Kevin Walsh seemingly wants a regime change
• 24:50
  Speaker 4: at the FED, fundamentally different approach to forecasting, inflation, setting policy,
• 24:55
  Speaker 4: managing its balance sheet, dealing with the treasury, and most
• 25:00
  Speaker 4: of all, he wants a lot fewer communications about everything
• 25:03
  Speaker 4: it's doing. But if we're just looking on the outside,
• 25:07
  Speaker 4: we may be waiting a long time for anything to change.
• 25:16
  Speaker 4: Thanks for listening to Trump Andnomics from Bloomberg. It was
• 25:18
  Speaker 4: hosted by me Stephanie Flanders, and I was joined by
• 25:20
  Speaker 4: Krishna Guha from Evercore ISI. Trumpnomics was produced by Summer
• 25:25
  Speaker 4: Sadi and Moses and with help from Amy Keen and
• 25:28
  Speaker 4: sound design by Blake Maples and Kelly Garry. And I
• 25:32
  Speaker 4: know for a fact that we have loyal, appreciative listeners
• 25:35
  Speaker 4: who listen every week and have not bothered to review it.
• 25:38
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• 25:41
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