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

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
0:07
Speaker 2: He would not answer any question that might be as
0:12
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,
0:52
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.
1:00
Speaker 4: And this week we're turning our attention back to the
1:03
Speaker 4: Federal Reserve and we're recording this on the morning of Wednesday,
1:07
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
1:14
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
1:21
Speaker 4: not a lot hanging on this meeting. The big focus
1:24
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,
1:38
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
1:44
Speaker 4: and head of Economics and Central Bank Strategy at Evercore ISI. Well,
1:49
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
2:00
Speaker 4: paving the way to looser policy in the US. And
2:03
Speaker 4: most recently, we had a very lively confirmation hearing for
2:06
Speaker 4: mister Walsh in front of the Senate Banking Committee on
2:09
Speaker 4: April twenty first. Now I was away for the hearing,
2:12
Speaker 4: but catching up afterwards looking at the coverage, it seemed
2:15
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
2:21
Speaker 4: with Krishna again how he was looking at a Walsh
2:24
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.
2:30
Speaker 4: Now we were going to try and save your breath.
2:32
Speaker 4: So we've got a few top lines here from what
2:35
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
2:48
Speaker 1: one might think of a small C conservative Republican leaning
2:52
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
3:01
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
3:09
Speaker 1: set of thinking on one side, if you like, of
3:11
Speaker 1: the political and economic debates. I think it's also the
3:14
Speaker 1: case that Kevin believes that the really big inflation risks
3:18
Speaker 1: come when you have a combination of fiscal expansion on
3:22
Speaker 1: the part of the government and money financing on the
3:25
Speaker 1: parts of the central bank. So Kevin would say the
3:27
Speaker 1: inflation risks today are completely different from the inflation risks
3:31
Speaker 1: that were there in the early phase of the pandemic,
3:33
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
4:01
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
4:51
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
6:00
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,
6:11
Speaker 1: and in fact of course that the FED is itself revised,
6:15
Speaker 1: but looking to develop a difference, and he would say
6:18
Speaker 1: better understanding of the inflation process and the inflation outlook
6:23
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
7:33
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
7:40
Speaker 4: bond markets, you could argue, have been really spoon fed
7:44
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
7:54
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
8:15
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
8:43
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,
8:52
Speaker 1: either easing things or tightening things or keeping them where
8:55
Speaker 1: they are. The problem Kevin's going to run into sooner
8:57
Speaker 1: or later is the market's going to pry something he
9:00
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,
9:13
Speaker 4: and I'm even going to put up with quite a
9:15
Speaker 4: lot of volatility, some of it based on maybe wrong expectations,
9:20
Speaker 4: in order to give up that tool once he actually
9:23
Speaker 4: gets there. I just wonder if that's going to last.
9:25
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,
9:29
Speaker 4: but more like a Volca fed. I mean, famously, Paul
9:31
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
9:53
Speaker 1: going on. So I think Kevin's going to have to
9:56
Speaker 1: try to find a middle way, right. I think it's
9:58
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
10:20
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
10:34
Speaker 1: different when it talks about its understanding of the economic outlook. Right.
10:40
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
11:08
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
11:13
Speaker 4: they sat, had a different focus. You know, there were
11:15
Speaker 4: certain people in the markets who were focusing on the
11:17
Speaker 4: stuff that you've just talked about. Others maybe have a
11:19
Speaker 4: more political mindset, not least Elizabeth Warren focused on him
11:25
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
11:32
Speaker 4: you're very careful with your words. I think shocking would
11:34
Speaker 4: be the word other people might use if I sort
11:36
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,
11:53
Speaker 1: if you were being generous, make an excuse to Kevin that, look,
11:56
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
12:03
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
12:11
Speaker 1: fact that Kevin did not seem to feel able to
12:15
Speaker 1: say the words tariff and inflation in the same sentence.
12:19
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
12:28
Speaker 1: by the way, why one might be cautiously optimistic that
12:32
Speaker 1: inflation will come down once these tariff effects have washed
12:36
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
12:49
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
13:03
Speaker 1: one time change in the price level and not underlying
13:08
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
13:16
Speaker 2: make it more sharply.
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Speaker 1: But I think it doesn't help your credibility if you
13:22
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
13:30
Speaker 4: to that you pointed in your note talking about potentially
13:33
Speaker 4: changing the focus of the sort of the inflation measure
13:38
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
13:44
Speaker 4: it's sort of adjusting out of away from tariffs, he's
13:47
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
13:56
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.
14:06
Speaker 2: Trimmed mean is where you just lop off the outliers.
14:09
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,
14:31
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,
14:38
Speaker 1: So I think that was unfortunate. But there is a
14:42
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.
14:51
Speaker 2: And it is the case that core PCD.
14:53
Speaker 1: Inflation, the metric the fact typically refers to, is just
14:57
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
15:10
Speaker 1: to be elevated. In fact, it's just going up still
15:14
Speaker 1: to crest in the low threes.
15:16
Speaker 2: But Chair Powell is saying.
15:18
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,
15:38
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.
18:00
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.
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Speaker 4: So pull your finger out, give us your rating wherever
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Speaker 4: you listen