Hon. Jerome Powell, Chair of the Board of Governors of the Federal Reserve System

foreign [Music] so as I think everybody knows our special guest is the chairman of the Federal Reserve board who has now completed five years as chairman as of two days ago your fifth year and now been on the FED board for almost 12 years so Jay um thank you very much for being here and why don't we start with an easy question so you made a speech last week commenting on the fomc's decision to raise the FED discount rate by a small amount relatively speaking 25 basis points some people would say that was small but at the time it wasn't clear that the jobs report would be as strong as it turned out to be subsequently had you known that the jobs report was going to be as strong would you have done 25 basis points or something different David thank you for that question and thank you thank you for inviting me here today it's great to be here so we don't get to play it that way unfortunately we have to uh but I'll I'll take it this way so the message we were sending at the fomc meeting last Wednesday was really that the disinflationary process the process of getting inflation down has begun and it's begun in the good sector which is about a quarter of our economy but it has a long way to go these are the very early stages of disinflation so the services sector really except for Housing Services pardon me is not really showing any any disinflation yet so our message really was this process is likely to take quite a bit of time it's not going to be we don't think smooth it's probably going to be bumpy and so we think that we're going to need to do further rate increases as we said and we we think that we'll need to hold policy at a restrictive level for a period of time then comes the the labor market report for January and it's very strong it's certainly stronger than anyone I know expected and so but but I would say we didn't expect it to be this strong but I would say it it kind of shows you why we think that this will be a process that takes a significant period of time the the labor Market's extraordinarily strong and by the way it's good it's a good thing that inflation has started to come down without it that has not happened at the cost of a strong labor market so and of course since then labor work sorry Financial conditions have tightened significantly since then so let me ask it another way um so by the way when the the numbers coming out the jobs numbers 519 000 jobs does anybody call you up in the government give you a little heads up this is going to happen or they never do that so on on some uh data sometimes we get data just the night before and it's only me only me and uh so but not on all pieces of data it's it's a it's a it's a very small amount of data and we get it just just the night before for example if we if we were going to get a big piece of data in the middle of an fomc meeting as often happens on the day of an FMC meeting it will help me to to know it the night before okay so the markets um after your speech last week the markets assumed that therefore there would probably be another 25 basis point increase in your next fomc meeting was that a bad assumption by the markets so what again what we said at the meeting was [Applause] was that uh we we believe that we anticipate is what we said that uh ongoing rate increases will be appropriate and the reason is we're trying to achieve a stance of policy that is sufficiently restrictive to bring inflation down to two percent over time and we don't think we've achieved that yet so we said that uh and I and you know now you see the labor market report and I think again Financial conditions are are more well aligned with that than they were before so the Assumption when you made your speech was that probably their fed might even consider uh decreasing rates by the end of this year the markets no longer assume that you think the markets are wrong well so let me say these are um all of these numbers that we're throwing around here are conditional on incoming data and what happens so we never say this is this is what we think will happen we you know we we make a tentative forecast and then we let the data come in for example if the data were to continue to come in stronger than we expect and we were to conclude that we needed to raise rates more than is priced into the markets or then we wrote down at our last group of forecasts in December then we would certainly do that we would certainly raise rates more okay so um today for people who aren't familiar with the fomc who is actually is on the fomc so they're uh the U.S Central Bank consists of a Board of Governors here in Washington there are seven Governors those governors are nominated by the president and uh confirmed by the Senate and we serve terms that are that are not synced up with the election cycle so we're we're independent there are also 12 reserve banks around the country which have a degree of Independence and they're so they so each each Reserve Bank is led by a president who works there full-time all 12 of them sit on the fomc so that's 19 people sit on the FMC so it's quite a large Committee of which 12 vote in any given year The Reserve Bank president's vote on a rotating basis except New York which votes every year so when you vote um do you vote at the beginning of an fomc meeting and then just kind of have discussions afterwards or do you wait to the very end and then you vote no we vote at the end I mean the whole the fomc meeting process takes you know more than a full week I'm talking to all of the participants all night all the 18 other ones and staff has sent around memos and there's something called the teal book which is the staff's assessment of the uh you know of the economy and an international economy and monetary policy and all that then we we have an extensive discussion on the morning of the first day about the economy everybody talks about that on the second day we talk about monetary policy and then we vote on monetary policy at around noon on the second day so does the chairman of the Federal Reserve board speak first and say here's what I think and or does he wait until the end and say well thanks for what you think but let me tell you what I think what do you do different chairs have done it different ways and so I I tend I've tended to do what my prede media predecessor did I think well this is what I do I speak last on the sort of the economic go around so everyone else talks about what they think about the economy and in their district for example if they're Reserve Bank president and I listen to all that and then I give my comments at the end and I kind of sum up what people have said and then I speak first on monetary policy okay so you've said your inflation rate target is two percent um but why two percent and not three percent three percent you know could be tolerable really I mean most for most of organized history three percent is considered okay why do you want two percent so two percent is the global standard and that is our objective two percent piece as measured by the the pce index and that's just that's not something we're looking at changing that isn't going to change it's that's not going to change not going to change now but okay so you need to get the two percent and your goal to get there is by what period of time would you like to get there well we say we say that we're using our tools to get there over time if you look at our forecasts we expect 2023 to be a year of significant declines in inflation and it's actually our job to make sure that that's the case but I would tell you that uh you know with inflation headline headline pce inflation is running about five percent this is on a 12-month basis core is running it at 4.4 my guess is it will take certainly into not just this year but next year to get down close to percent okay so two percent is firm that's you're not going to get off that yes okay so uh the theory of raising interest rates um is that it will decrease economic activity and increase unemployment but you've been increasing interest rates for a while and unemployment is now at a record low so what's wrong with the theory why is unemployment not going higher well the labor market is strong because the economy is strong and as I mentioned it's a good thing that we've been able to see the beginnings of disinflation without seeing the labor market weaken um it's just that uh there's a lot of demand for workers in fact if you if you look at the supply of workers versus demand for workers demand for for U.S workers is now more than 5 million greater than the available Supply and the available Supply consists of people who are either working or actively looking for a job so this this is this was not the case before the pandemic the pandemic really had a significant left a list lasting Mark so far on labor Supply in the United States labor force participation rate came down and there now is a shortage of workers and it it feels it almost feels more structural than cyclical so that that's a that's a significant issue now you've resisted I think saying what unemployment rate would be acceptable to you I think but is there an unemployed climate rate that you think would moderate inflation such that you would tolerate unemployment at four percent five percent six percent I guess I think about it this way um you know our we have two goals that Congress has assigned us maximum employment and price stability price stability as we've agreed is two percent inflation maximum employment means if you want a job you can get one so right now the labor market is at least at maximum employment but many would say that it is out of balance with more demand than there is Supply so what we're trying to do is get inflation down we're not we're not targeting uh you know a different uh unemployment rate we're trying we're trying to use our tools to get inflation to come down over time in hindsight would you say that when Kobe hit the economy and we injected five trillion dollars of fiscal policy uh into the economy and the FED did quantitative easing and other related things kept interest rates very low would you say in hindsight that was a mistake or was the right policy at the time so I think you have to go back to the decisions that were made in real time and it was something nobody had ever seen the global economy came to a virtual standstill people were talking about depression people were talking and we didn't think we we had no idea when we would get vaccines that worked so Congress took very strong measures and we took very strong measures and you see where the economy is you've got a very very strong labor market but you have high inflation as I mentioned we're at the beginning of getting that down if you look around the world though at other countries they're also experiencing High inflation including countries that didn't that didn't do as much as we did either from a fiscal or monetary standpoint so that that tells you though that a big part of this inflation is actually related to the the you know the the pandemic itself the shutdown and then the reopening that's a big part of it now the quantitative easing program has increased the balance sheet I guess of the fed and what is your balance sheet now I think it's 8.4 trillion dollars you must sound like you know 8.4 trillion that was yesterday's number okay all right 8.4 trillion um what would you like it to get down to over the next year or two is there some lower number so we are in the process of shrinking the balance sheet actively actually passively as I should say so what happens is as treasury Securities on our balance sheet mature up to a cap a monthly cap we we the balance sheet shrinks in that amount same thing with mortgage-backed Securities as they are prepaid or so so we we um the balance sheet is shrinking in terms of the target level of it we haven't put a specific dollar number on it the idea is we're in a regime of ample reserves reserves are basically deposits at the at the reserve banks and when we get close to that level where we feel that we're in it reserves our ample kind of where we were before the pandemic then we'll slow down and we'll sort of test where we are and it but it'll be a couple of years we think till we get to that level the FED does not uh sell Securities that waits for them to mature and then you just uh cash them in right you don't you're not in the market selling securities that are not yet mature is that correct that is correct it's also correct though that we've said we would consider sales of mortgage-backed Securities but I will tell you that's that's not something that is on the on the list of active things things being actively considered so some people are worried about the federal debt limit and that we might not be able to extend it on time we have 31.4 trillion dollars of debt are you a little worried about the debt limit not getting extended so the debt limit is really something for the fiscal authorities to deal with the FED our only role in this is that we're that we're the Fiscal Agent of the Treasury Department we're not a policy maker on that and I will just say this this can this really can only end one way and that is with Congress raising the debt ceiling in a timely fashion so that the U.S can pay all of its bills when and as do that's what has to happen and if that doesn't happen no one should think that the FED has the ability to Shield the financial markets or the economy from the consequences of of moving too slow so you don't have any program in place ready to go if in fact the that limit isn't passed in time this is something that Congress has to deal with and the same the so-called trillion dollar gold coin solution is not one year in favor of I guess I as I said this ends in only one way in that way is Congress voting to raise the debt ceiling so that the U.S can pay all of our bills okay in terms of consultation do you consult regularly with the treasury secretary Terry or the head of the National Economic Council or the president United States how do you kind of relate to the administration for a long long time you know 60 or 70 years there's I think there's been a weekly breakfast or lunch with the treasury secretary and the Fed chair and that's what I've had with with uh treasury secretaries that I've had as Fed chair I've also had a regular article I call it irregular lunches with the head of the NEC we also have regular regularly scheduled lunches with the Council of economic advisors and that's that's really the that's that's the institutional structure of our of our contacts with the administration so in the way the Fed works today If You Could reconstruct the operations of the fed you know would you change the legislation anyway would you think the FED operates in a in a way that's as efficient as you can realistically operate we're not looking for any changes to the Federal Reserve Act I mean I think it does work the the structure that I discussed earlier where you've got the 12 Reserve Bank presidents coming in what that assures really it institutionalizes diversity of thought so we get different people coming in who've got different backgrounds different careers and they and they think different ways and I think that's enormously beneficial to our decision-making process so there has been discussion recently about the FED some fed members spread board presidents selling their Securities and maybe not doing everything they were supposed to do in terms of disclosing it what have you done to fix that process we put a new system and a new set of rules in place which I think are best in class for a public institution like the fed and uh you know the the Innovations were that that if someone wants to sell something that they own or buy something they have to clear that in advance with with staff at the Board of Governors and then you've got to wait 45 days for that to execute also you can own individual stocks and there you can only do these you can only authorize these transactions or execute them during specific times and it you know it's it's a and we just of course all of these are are disclosed if if you're if your idea is to go to trade things buy and sell them because you think you know you think this stock is cheap and that kind of thing that's just not something that will work so what is the salary of the chairman of the Federal Reserve board it's um it's around a hundred and ninety thousand dollars I believe okay so you live on 190 000 if you need to sell something what do you do you have to clear it for 45 days yes sir that's right we we've you know too if we have family expenses that if we have them that exceed my salary then we have to sell I think that's a fair salary for the job or I do yes yeah okay so today um how do you coordinate with uh central banks let's say in England or Japan or or China do you have regular conversations with them about what they're doing we do you know and I meet six times a year in Switzerland with the heads of all the many many central banks you know even the even the small and medium-sized ones in Basel at the bank for international settlements in addition among the major central banks I have regular dialogues going with with most of them and so we what we're talking though about is really what's happening in the economy and how are you thinking about policy and that kind of thing it's very important that that we keep those discussions going because particularly in a crisis you're going to need to know each other and you're going to need to know you're going to be able to trust each other and do you think the U.S economy is pretty much in control of its own inflation rate are there events outside the United States like what China is doing or the Ukraine war that are affecting inflation and make you nervous about where inflation might be going we have the tools the FED has the tools to achieve our two percent goal over time but uh in inflation in the United States is of course very closely related to things that happen here including the balance between supply and demand it's also affected by for example commodity prices that are really set on the global markets you know oil and many agricultural Commodities are priced globally so there there are certainly it's an integrated global economy and Global markets and we you know we are part of that so you get data from all the various government agencies but do you ever use anecdotal things like you go to the supermarket and you see the prices are high and say this price is high or how do you get you ever get anecdotal things or people ever call you up or friends and say by the way you should do this or that do you ever get that kind of information or you only get it from the government reports I mostly get data but I will say the the I I do believe that anecdotal information is very useful and one of the things the reserve banks are great at is all 12 of them have big operations where they talk to businesses and non-profits universities every sector of the of the country and the economy and they bring that back to the fomc meetings and they talk about what they're seeing because often you know staring at data is is great but you need to you need to have a story and and I think hearing the stories that people tell it does help me to sort of you know assess what's going on out there so as the chairman of the Federal Reserve is obviously an important job how do you reduce the stress level you have I mean uh you can't be on watching economic numbers all the time so what do you do to relieve the stress other than interviews like this [Laughter] you know the usual things I I read pretty light fiction detective and spy fiction I exercise as much as I can as you know I like to ride my bike I play the guitar I play music is that safe riding a bike you know dangerous and it's it's safe sorry it's safe if you stay on the bike and okay you're good at that that's what I try to do you still play the guitar or yourself I do I do yeah your hair is awfully short for playing the guitar and she need longer hair they put your hair longer when you were younger greater it's too great too okay so let me ask you uh about the the issue of what it's like to be chairman of the fed you you can't go have you know regular friendship kind of dinners or meetings kind of people people treat you much differently I assume than they used to right when you go to a restaurant are people listening to what you're saying or something like that I I have always thought that my jokes were funny David but uh no so it yes it's um I've never been a public figure before like this and it's very different but um you know it's it's a great honor to serve uh but yeah if you go in public places you have to be very careful about it and um which is the president United States ever call you with any advice or you don't realize it he doesn't did President Trump ever call you or President Biden ever call you or well I think it's a matter of public record that president Trump did used to call me from time to time okay what did he call you um no I I haven't had that kind of I haven't gotten any calls from uh from President Biden okay so the biggest challenge you have now is being able to keep a straight face not telling people what you're going to do in the future and look at the data and then come up with the right solution right that's mostly it I think the biggest challenge we face at the FED is completing the process of getting inflation down to two percent and what what I want to point out is that we're seeing disinflation in the good sector we're going we expect to see it in the Housing Services sector and that's that's these are the three parts of the of the core pce inflation index that we look at there's 56 percent of the economy which is the rest of the services sector it's the biggest part obviously and we're not seeing disinflation there yet and that's going to take some time and I just we we need to be patient and we think we're going to need to keep rates at a restrictive level for you know for a period of time before that comes down so when you made your speech the other day when you talked about the FED discount rate you use the word disinflation 11 times not that I'm counting but 11 times so you were saying that this inflation is beginning to appear would you use that word 11 times again today after the jobs report or it would be less inclined to use that word so much I I might use the I might say I would certainly use the word disinflation yes which means declining inflation and I I would call it declining inflation too for and uh today what about the uh the debt total debt of the United States which produces some inflation with 31.4 leaving aside the debt limit are you worried about the total indeedness United States reducing inflation or you don't think that's a big problem yeah it's not the level of debt it I I would say the thing I'd say about the level of debt is really it's not first of all it's not the fed's job but I would say that we we we're on an unsustainable fiscal path at the federal government level that has been the case for some time and it's something we will have to deal with and better to deal with it sooner rather than later now many of your predecessors were economists you're trained as a lawyer so they spoke in what I call Fed speak which is to say incomprehensible kind of economic language which was done intentionally I think sometimes they would say so you tend to speak in English has that have been a A plus you'd say when you're dealing with members of Congress they can understand what you're saying I like to think so you know I've made it a real priority to um to engage a lot with Congress in our system of government unlike the parliamentary system our accountability is to the legislature it's to send it in the house and particularly the two oversight committees Senate Banking and house financial services and I think it's very important that we respect that and explain what we're doing and listen to their concerns and and share with them how we're thinking about things and I think they appreciate that and but that is you know we have this precious Independence we can't be removed from office we serve these long terms the other side of that has to be accountability and the way for us to get accountability is to be as transparent as possible and try to reach you know the people of the United States through their elected representatives so this is a very high priority and we're going to keep doing it so when you testify in front of Congress how much time does it take to prepare for that is that a one-hour preparation session or is it a one-day session or a one-week session you know they're supposed to these are supposed to be monetary policy hearings under the Humphrey Hawkins act and they're actually on any anything that's any political issue so you it's it's quite extensive you have to prepare for everything that the FED is involved in and many things that the FED is not involved in uh so it's it's a lot of preparation so when you get questions from some members you have to bite your tongue and say why are you asking a question like that or you never have that problem that never happens never happens okay okay all right well good um so today as you look at the country's economy what is the biggest worry you have about inflation is it just that that fiscal policy is not completely under control we have exogenous events outside what is your biggest worry about inflation today well it's it's kind of what I was saying earlier which is we're just at the beginning of this process right Goods inflation so we need that process to continue Goods that the whole thing began the inflation began with people not being able to buy Services instead buying goods and then Global Supply chains collapsing and so you couldn't get goods and prices of goods went up and that's where it started but that is now starting to get better as Supply chains are improving and as people are rotating their purchases back to Services you move on though we're not seeing it yet in Housing Services which is either rent or or the ownership the imputed costs of house ownership but we expect to see that so we need that to happen that's another big part of the economy it's got to come it should come in the second half of this year then the biggest piece of it and what I worry about the most is when are we going to see disinflation or declining inflation in core Services X housing so that's what I worry about the last thing I worry about is just another exogenous event it's a risky world out there uh you know with the war in Ukraine and the reopening of China and you know we they're they're those are things that can affect our economy and the path of inflation right so the balloon was not your worry though you don't care about the balloon it's not not within our Amity okay so today um the Federal Reserve gets data from all over the country and um are you convinced that you get the best data you have the best data collection methods uh or do you think it's not as uh modern as what Wall Street gets we so most of the data that we get are just the same you know we don't collect the data on unemployment or inflation or most things so most of that's just government data and a lot of that's for example very high quality the labor market data is very high quality we what we get which I think is better and different from what everybody else gets is what I mentioned earlier and that is the reserve banks putting together the the um yeah the beige no not the beige book The Facebook yeah the beige book putting together the beige book and also coming in and and you know sharing the anecdotes and you know what they're hearing what's happening with each district is different you have agricultural districts districts and energy districts and so that I think I think our anecdotal but also just the Hall of information we get through that through that network is is I don't I don't think anybody else has that so do you consult regularly with some of your predecessors I mean obviously one is Secretary of the Treasury now but uh Ben Bernanke for example or I do I talked to uh former chairman Bernanke I talked to you know secretary Yellen I still talked to Alan Greenspan now and again and uh when you're dealing with this with the your colleagues on the FED board and you disagree with them do you say look I'm the chairman of the FED I am the person who has to make the final decision and this is what we should do or you don't quite do it that way it's a it's a process of reaching uh agreement and I hear what people have to say I tell them what I think and then I'm the one who has to bring a proposal in front of the full committee not just the board in front of the full committee on monetary policy and it works you know we have to reach an agreement and uh you know we get to a place I I think you can tell today we are blessed with a diversity of perspectives on the fomc with 19 people of course we are but you you have one thing that unites all of us and that is a very strong commitment to getting inflation down so in some parts of Washington people say if you give me this I'll give you that I'll trade this for that you never do that at the FED when you're coming up with the decision I'll do what you want if you do what I want that doesn't happen ever not really no oh no okay like you mean a better office or something like that uh well just uh you know I'll say what you want me to say if you say what I want you to say or something that never happens right no no it doesn't happen I mean and when you want to talk to members of the of the board of the Federal Reserve board do you go to their office or do they come to your office I like to do both I mean I really don't like to sit in my office all day and and have just have people come to see me I like to go barging on people and you know I think it's much better to get up and walk around and see people the FED has been pretty good at uh avoiding leaks of its decisions uh how do you do that because most people in Washington are not so good at that how do you avoid leaks we do have you know we've got very strict rules around confidentiality particularly around the written materials that we have you know we publish these things internally for for the FMC meeting the memos and the teal book and all that but the other thing to remember though is you know we're not trying to hide our decisions from the public we actually in in the modern in modern monetary policy we want the public to understand how we think how we're thinking and and you know if markets really understand how you're thinking in a new a new piece of data comes in the markets will go where they're going to do this and it sort of happens organically and that happened all last year as we were you know talking about raising rates the market priced in rate increases long before we actually enacted them so it's not we want to be transparent we're not looking to surprise markets with these decisions but from the time that you make your decision on the fomc whatever time it is at the end of the day and your press conference at two o'clock or something like that 2 30 2 30. your decision is made by two o'clock or whenever it is or something like that so you got a half hour but you have to avoid leaks during that half hour because that's very Market sensitive information how do you make sure nobody is calling their spouse and saying guess what we're going to do well we you know we people take this very seriously then none of that happens you know I mean you're taking your professional life in your hands if you do something like that I think people have a sense of self-preservation so they're you know people are very careful about about this information there is a period of a couple of hours after the meeting and until we announce the decision but we actually we announced the decision at two the press conference is at 2 30. so I think you know it's a fairly small group of senior staff and policy makers that that kind of know what happened and what we're going to say and I just think everybody understands that that you've just got to be really careful with that to go back to the jobs discussion if next month you had another 519 000 jobs created net jobs would that be good or bad from your point of view having a lot of people working but maybe producing more inflation so we don't we do not have the luxury of thinking about good or bad it just is what it is so but I I would say again we most most analysts most economists would say that to get inflation down from high levels that we've had if you look at history there is some softening in labor market conditions that goes along with that and that is still you know very possible and indeed likely here some softening and labor market conditions however this cycle is different from other Cycles because of where it came from and it's just confounded all all sorts of attempts to predict what it would do so it is good that we have seen very strong labor market but at the same time we're seeing wages moderating wages are still wage increases are still very high but wage increases have come down to a level that is closer to what would be sustainable still well above what would be sustainable with two percent inflation and same thing with inflation inflation is starting to come down and the labor market hasn't softened we do expect that it will soften but you know it will do what it will do our job is to get inflation down to two percent and preserve maximum employment so when the fomc meets as it does regularly eight times a year yes eight times you pretty much know how the decision is going to come out before you actually get together because you've been talking to each other where does the meeting of the flomc changed Minds in ways that you might not have expected before the meeting started it depends on the meeting you know I do I talk to each of the 18 other participants at least once and we go through everything what you know what's your analysis of the economy we'll have everything about monetary policy how are we thinking about the path forward and all of that so in some some meetings I will say some of the time you get into a discussion at the meeting which suggests that maybe you should communicate differently and then we'll think about that and we might actually take a break in the middle of the meeting and then go off with a smaller group and think about that and come back and make changes sometimes though everything plays out as expected and when you're having these fomc meetings I assume somebody sweeps the room to make sure there's no bugs and anything else all that no no leaks no okay and today um as you look forward as we are going forward for the next remainder of this year your basic view would be you'd be happy if the inflation rate were to get down by the end of the year to two percent may be unrealistic but your core inflation now or overall inflation you think is about four or four and a half percent something like that or what would you say it is it's it's in that range there are different measures right yes we we expect you know significant progress on inflation this year and again it's our job to produce it and and I want to I want to say again you know we put we throw these numbers around but the reality is we're going to react to the data so if we continue to get for example strong labor market uh reports or higher higher inflation reports it may well be the case that we have to do more in race more than a surprise ten so if I wanted to go get a mortgage on a house I was going to buy for example uh you would say I'm not going to be any better off waiting to next year than now because rates aren't going to come down that much at the beginning of next year so I might as well go to the house now mortgage surprisingly enough I get a lot of requests for advice on those kind of things and you don't give any and I I but I really can't okay I can't I really can't respond so uh okay so on the whole to summarize where you are you're basically saying that the jobs data was that came out was a little bit surprising but in the end you're taking you've taken into account and you're pretty comfortable with the guidance you gave last time and you're not prepared to give anything that's completely different guidance than you gave last week well I mean this is a world in which we've had the the inflate sorry the the the labor market report and I think that does I think it underscores the message that I was sending at the at the um press conference and in the meeting that we have a significant road ahead to get inflation down to two percent and and I think there's been an expectation that it'll that'll go away quickly uh and painlessly and I don't think that's at all guaranteed that's not the base case the base cases it will for me is that it will take some time and we will have to do more rate increases and then we'll have to look around and see whether we've done enough okay and and two percent is the rate we have for the last 25 years before inflation came along but prior to that for most of U.S history we were higher than two percent is it that two percent is we're now uh so used to two percent after 25 years of it that you think that's the appropriate level so for we went through this long period where inflation was was really anchored around two percent and we we think that and you know economists think that that's because people start to expect two percent inflation and inflation it's in a way if people if everyone expects that prices are going to go up prices and wages are going to go up two percent per year then plus productivity in the case of wages then it will that's what will happen having that having price stability real price stability for an extended period of time is just enormously beneficial to the public because you can then on the back of that you can build a very strong labor market as we had we had a labor market with really three and a half percent unemployment in 2018 and 19. and we had inflation running you know just barely getting to two percent wages moving up the most for people at the lower end of the of the spectrum and so this was a we all want to get back to that place but the the Bedrock of the whole thing is to get inflation under control the unemployment rate hasn't come down as much as people are going up as much as people thought in part some people say because we don't have as many immigrants coming in the country legal immigrants coming in taking some of the jobs they otherwise would take do you think immigration is an issue in terms of giving us more labor workers or you think that's not a factor so it just as a matter of arithmetic it was a factor because there was very little migration across borders during the pandemic and that was part of of what was happening particularly in certain sectors like the agricultural sector and food service and things like that where there just weren't the people however just just very recently here the the immigration data have turned up again and so and I think that may be part of why people are feeling somewhat less pressure in a labor market to find workers this is an issue not for the feather this is immigration is obviously a political issue we do not seek to be a player on this but it's just a fact though that that um you know right now the United States has has fewer available workers than it has Jobs Plus job openings and when you increase interest rates the traditional effect is to increase the value of the dollar versus other currencies do you have any concern about the value of the dollar going up too much or that's not something you comment on so the the actually the responsibility for the for the exchange rate is really rests with the treasury Department and the administration not with us of course that's another that's another Financial variable that goes into every economic model but we don't we don't look at it as something that we're working on all right well I think I haven't been able to get you to say anything you didn't want to say so um you know I would say Jay I I've known you a long time I think you've done a great job uh in a difficult situation I appreciate your service to the country at a 180 000 a year or whatever the salary is something like that so thanks very much for being here and thank you for your service thank you David great to see you thank you

Channel: The Economic Club of Washington, D.C.

Views: 14,834

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Id: iLAjjqYkzJk

Length: 38min 44sec (2324 seconds)

Published: Wed Feb 08 2023