Latest / Bloomberg Intelligence / Booth's Kroszner Says Hike Likely Before End of Year (Audio)

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Booth's Kroszner Says Hike Likely Before End of Year (Audio) · Bloomberg Intelligence

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  Speaker 1: You're listening to Taking a stock with Kathleen pim Fox
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  Speaker 1: line from the Jackson Hole Economic symposium. Von Bloomberg Radio
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  Speaker 1: channel is the FED chair and as she as a
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  Speaker 1: FED chirt, traditionally does here at the Kansas City Federal
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  Speaker 1: Reserve Banks Annual Symposium. She opened the symposium to Dave
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  Speaker 1: remarks about the economy, in particular how it's continuing to improve.
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  Speaker 1: She's a little bit concerned about some factors, likely productivity,
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  Speaker 1: but in the end she seemed to echo others saying, yes,
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  Speaker 1: the conditions are ripening for an interest rate move this year,
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  Speaker 1: much much more. This is the context of a very
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  Speaker 1: deep and broad discussion of how to most effectively operate
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  Speaker 1: monetary policy in a world of zero interest rates or
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  Speaker 1: even lower. Randy Krasner joins this now. He is a
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  Speaker 1: perennial attendee here. In fact, he's going to be a
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  Speaker 1: discussing and moderator one of the panels as the supposium
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  Speaker 1: continues on Saturday. Former Federal Reserve Governor, professor of economics
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  Speaker 1: with a Cargo Booth School. Randy, welcome, great to be
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  Speaker 1: with you. Jenny Allen stan Fisher, what what's the message? Well,
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  Speaker 1: I think they've been saying a fairly consistent message that
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  Speaker 1: they have been seeing the conditions getting more and more
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  Speaker 1: likely for the next hike. They they waited over the
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  Speaker 1: summer because they're concerned about what might happen if Brexit occurred.
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  Speaker 1: And then Brexit occurred, and so they wanted to see
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  Speaker 1: what the consequences were. The consequences seemed to have been
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  Speaker 1: quite small for the international markets, and so I think
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  Speaker 1: another rate rise sometime before the end of the year
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  Speaker 1: is is quite likely. Mr Krosner. If it's taking this
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  Speaker 1: long to raise interest rates basis points and this much
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  Speaker 1: discussion and hand ringing, what does that tell you about
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  Speaker 1: the actual process of crafting monetary policy. I think they're
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  Speaker 1: people have very different views sitting around that table, and
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  Speaker 1: I think given that we're in somewhat uncharted territory, reason
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  Speaker 1: why people can can disagree and uh and obviously there
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  Speaker 1: have been a lot of disagreements. Some people wanted to
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  Speaker 1: move much more rapidly than than others. And I think UM,
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  Speaker 1: as Yellen has said many times, their movements are going
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  Speaker 1: to be gradual, gentle. They're not going to move very
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  Speaker 1: rapidly up to UM let's say roughly three percent or so.
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  Speaker 1: That's going to take a long long time. Sure is
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  Speaker 1: because you know it dawned on me finally, Randy, that
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  Speaker 1: talk about gradual. The Fed raised the key rate last December.
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  Speaker 1: If it raises it this December, one basis point increase
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  Speaker 1: a year way at that rate to get to three percent,
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  Speaker 1: it's going to be a while. It certainly would be
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  Speaker 1: a while. I don't think it will necessarily be that slow.
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  Speaker 1: If the economy really does start to to come back,
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  Speaker 1: if we start to see some inflation pressures, uh, they'll
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  Speaker 1: they'll move a little bit more rapidly, but we still
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  Speaker 1: haven't seen those. The discussion here last year was exactly
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  Speaker 1: on this sort of inflation dynamic. As the labor market recovers,
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  Speaker 1: we have always seen a lot of wage pressure. We're
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  Speaker 1: discussions last year. Are we in a different regime? We've
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  Speaker 1: now been at roughly five percent unemployment rate for the
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  Speaker 1: last year, and we seem very little wage pressure. So
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  Speaker 1: a lot of controversy about whether the traditional dynamics will
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  Speaker 1: eventually kick in or we're in a new regime. Do
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  Speaker 1: you believe that they've cried wolf? What do you mean
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  Speaker 1: by that? Well, I mean that they've been talking about
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  Speaker 1: this for so long. It can be the kind of
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  Speaker 1: situation where they invite everybody to a party, nobody shows up,
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  Speaker 1: or you know, you try wolf after a while, no
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  Speaker 1: one starts listening to you, and you actually discount what
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  Speaker 1: the what the people in charge of saying. So certainly
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  Speaker 1: I think that they have focused on the data and
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  Speaker 1: they have said they've given sort of a broad outline
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  Speaker 1: of where they think they would be going, but they
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  Speaker 1: have certainly never given a concrete timetable when events like Brexit,
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  Speaker 1: war or other changes in data came in. But James
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  Speaker 1: just at breaking in, but I mean James Bullard today
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  Speaker 1: at the St. Louis FED he basically dismissed issues like Brexit,
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  Speaker 1: saying that's not necessarily going to be relevant for policy
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  Speaker 1: and the US economy. Well, and of course uh uh
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  Speaker 1: Jim Bullard um. And I'm glad he picked up on
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  Speaker 1: that pan because I think he is a voice that
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  Speaker 1: I don't hear, you don't see her here is often
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  Speaker 1: on the Federal Open Market Committee that things like Brexit, China,
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  Speaker 1: those concerns are going to be a factor that would
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  Speaker 1: influence the FEDS policy making decision. H Randy. When you
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  Speaker 1: look at what is top of the list for the
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  Speaker 1: FED right now, what would you say, is there there
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  Speaker 1: more They're they're talking a lot about global concerns, but
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  Speaker 1: is that really such a big deal or what is
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  Speaker 1: What is the number one? So I think god number
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  Speaker 1: one is certainly the potential for inflation UM and UH
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  Speaker 1: and the wage pressures that may be coming with with
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  Speaker 1: the tight tight labor markets. Certainly, if they're looking at
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  Speaker 1: at risks, they'll be looking at global risks. UM doesn't
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  Speaker 1: seem like the risks in Europe are as high as
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  Speaker 1: they had been, but they still concerned about some of
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  Speaker 1: the issues in banking there. Obviously there are risks associated
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  Speaker 1: with China that those seem to be much less than
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  Speaker 1: they were than they were last year at this time
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  Speaker 1: where there was an incredible volatively in the in the markets.
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  Speaker 1: And so with most of these global risks, UM washing
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  Speaker 1: out a bit. With UM continuing strength and the labor market,
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  Speaker 1: I think they feel that the time for the next
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  Speaker 1: next rise is coming soon, but they're not going to
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  Speaker 1: give a definitive timetable because they want to see how
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  Speaker 1: the data are evolving. Alright, Randy Krosner, thank you so
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  Speaker 1: very much, so great to have you once again joining
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  Speaker 1: us on Boomberg Radio here in Jackson Hall, Cancity. Fancy Poseum.
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  Speaker 1: Great to be with your of course, former feder Preserve
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  Speaker 1: a governor professor of economics to the Chicago Booth School. Well,
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  Speaker 1: will look forward to seeing you on Monday. We'll be
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  Speaker 1: watching to see what the market ramifications are of FED
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  Speaker 1: comments coming out of Jackson Hall. I'm Kathleen Hayes along
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