Fed Chair Jerome Powell spoke on Monday about the economy.
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NewsTranscript
00:00David, I
00:29think I'll leave the markets out of it for a second, if I can, and just say that it was
00:33really a very sad day for our country.
00:36Political violence has no place in our society, and I condemn it in the strongest terms.
00:40I know we all do.
00:42A man died at a political rally.
00:45Two other people were critically injured.
00:46So just a sad day, and I'll say that I'm grateful that the injuries to the former president
00:50were not more serious.
00:51I'd rather not comment on the markets.
00:52It's too...
00:53No foreplay, huh?
01:20So I'm going to take that as a great opportunity to talk a little bit about the economy, and
01:25then talk about where that leaves us with policy.
01:28So I would just start by saying that the U.S. economy has performed really remarkably well
01:32over the last couple of years.
01:352023, last year, was a year in which the economy grew well above 3%.
01:40The labor market remained very strong.
01:43Unemployment remained very low.
01:44And inflation came down at quite a sharp pace, particularly in the second half of the year,
01:49by a very large amount.
01:51And that forecast was almost unheard of.
01:55It was unheard of before 2023.
01:57So big upside surprise that year.
02:00This year, we had expected the economy to slow a bit gradually, the labor market to
02:04continue to gradually cool off after being overheated a couple of years ago, and inflation
02:09to continue to make progress.
02:11And something like that is basically what has happened.
02:15The economy is growing now at about 1.5% in the first half of the year.
02:20Most forecasters have about a 2% growth rate for the full year.
02:22The labor market, again, has moved into better and better balance, to the point where I think
02:26you can now say it's essentially no tighter than it was in 2019 before the pandemic.
02:32Remember that the labor market of 2019 was a very strong labor market.
02:36So we're back to that place, no longer overheated.
02:39On inflation, in the first quarter, we didn't make any more progress.
02:43The second quarter, actually, we did make some more progress.
02:47We've had now three better readings.
02:49And if you average them, that's a pretty good pace.
02:52So turning to policy, your question, what we said is that we didn't think it would be
02:57appropriate to begin to loosen policy until we had greater confidence that inflation was
03:02moving sustainably down to 2%.
03:05We've been waiting on that.
03:06And I would say we didn't gain any additional confidence in the first quarter.
03:10But the three readings in the second quarter, including the one from last week, do add somewhat
03:14to confidence.
03:15We've also said that we're a dual-mandate bank.
03:19For a long time, since inflation arrived, it's been appropriate to focus mainly on inflation.
03:24But now that inflation has come down and the labor market has, indeed, cooled off, we're
03:29going to be looking at both mandates.
03:31They're in much better balance.
03:33And that means that if we were to see an unexpected weakening in the labor market, then that might
03:38also be a reason for reaction by us.
03:42Yeah, I think that makes sense.
03:44And so, in terms of, I can make sure I understand, the markets are suggesting, futures markets,
03:53that there's a 90% chance that the Fed will lower its discount rate in September.
04:00Do you think the markets are worthy of your talking about?
04:03So today, I'm not going to be sending any signals one way or the other on any particular
04:10meeting.
04:11So, just to ruin the fun right at the beginning, I simply, you know, we're going to make these
04:16decisions meeting by meeting, and we're going to make them on the basis of the data as they
04:19come in, the evolving data, the evolving outlook, and also the balance of risks, now that the
04:24two mandates are basically close to being in balance.
04:27There are some people who say that the Fed is not likely to lower its rate.
04:31The President is a campaigner.
04:33If you criticize something on the market, do you have any comment on whether that's
04:37accurate or not?
04:38I do.
04:39I do.
04:40So, our undertaking, at all times, is that we'll make our decisions based on the incoming
04:45data, the evolving outlook, balance of risks, and only on that.
04:49We don't take political considerations into account.
04:51We don't put up a political filter on our decisions.
04:54That would not, it's hard enough to make these decisions based on the appropriate factors.
04:59If you're going to add a whole different filter in an area where we're not experts, that's
05:03not going to improve the quality of our decisions, and it's also not the orders we have from
05:07Congress.
05:08Our orders from Congress are to use our tools to foster maximum employment and price stability
05:12and to do so without political considerations.
05:15That's what we're always going to do.
05:17If you look at the modern record, that is what we do, and we don't think about election
05:21cycles or anything that's political.
05:23Okay.
05:24So, the Fed has set a target for inflation of 2%.
05:28Now, can you clarify, does that mean that the inflation rate has to be at 2% before
05:33you're ready to move, if you are ready to move, or does it have to be within sight,
05:37and what does it mean to be within sight?
05:39So, when we change interest rates, that tightens financial conditions, and that in turn affects
05:45economic outcomes, you know, growth, labor markets, and ultimately inflation, but with
05:50lags that can be long and variable, as Milton Friedman famously said.
05:55And the implication of that is that if you wait until inflation gets all the way down
05:59to 2%, you've probably waited too long, because the tightening that you're doing, or the
06:04level of tightness that you have, is still having effects which will probably drive inflation
06:08below 2%.
06:09So, we've been very clear that you wouldn't wait for inflation to get all the way down
06:13to 2%.
06:14Our test has been for the past quite some time that we wanted to have greater confidence
06:20that inflation was moving sustainably down toward our 2% target, and what increases that
06:26confidence in that is more good inflation data, and lately here, we have been getting
06:30some of that.
06:31Okay.
06:32So, when you say we, let's talk about who we is.
06:35The FOMC, for those who don't follow Washington acronyms, it stands for what?
06:40What is the FOMC?
06:41It's the Federal Open Market Committee.
06:43Okay, and who is on that committee?
06:46It's a little bit complicated, our structure is.
06:48We have seven governors here in Washington, all nominated by the president and confirmed
06:53to staggered 14-year terms, and we have 12 reserve bank presidents at reserve banks around
06:59the country.
07:00All 19, 7 plus 12, are participants on the FOMC.
07:05In any given year, all of the seven governors vote, and five of the 12 reserve bank presidents
07:11vote, but one of the voters is always the New York Fed.
07:14Okay, and so when you have an FOMC meeting, how many do you have a year?
07:17We have eight a year.
07:19Okay, so you have eight a year, and when you get together, you get together for two days
07:23or so?
07:24We do.
07:26So it generally starts at noon or in the morning of a Tuesday, and we go all day.
07:31We generally talk about the economy, the financial stability issues, whatever special topics
07:36there may be, and at the end of the day, each person speaks on those things, and I speak
07:41at the end of that day.
07:43Then there's a brief presentation on monetary policy, and then we go to dinner upstairs
07:47in the Martin Building, and we come back the next morning, we come in at 9 o'clock, and
07:51we talk about monetary policy until we're satisfied with the outcome of monetary policy,
07:55and that usually takes most of the morning.
07:58Okay, so when you go into an FOMC meeting the first day, do you pretty much know where
08:05you want to come out at the end of the second day, or do you want to listen to everybody
08:08and you haven't made up your mind yet?
08:10You know, the way it works is that I talk to the other 18 participants regularly, and
08:16I talk to all of them at least once in the 10 days before the meeting, and I'm thinking
08:21about this three or four weeks before the meeting, you know, what should we want to
08:25achieve, what data do we need to see, how do we want to change our communications, all
08:29those things.
08:30And so I talk to people, listen to them, and I try to put together an answer that has broad
08:36support on the committee.
08:37And so when we go into the committee on Tuesday morning, you know, I'm confident, usually,
08:44that I know where this is going to go, but, you know, things happen, we get data during
08:48the meeting sometimes, events happen, but largely you go in kind of knowing what the
08:54likely outcome is, and that's the design of it.
08:58So normally, you know, if somebody calls somebody, you call all the other board members, FOMC
09:03members from time to time, when you call them, do you have trouble getting your call returned
09:07or do you get a call right back, or do they take your call right away?
09:12These calls are scheduled, generally, and they go all day long.
09:16I have, like, the Friday before the meeting, I think I have 11 half-hour calls, and it's
09:21pretty, you know, we talk about the economy, we talk about very specific aspects of the
09:26economy, about our mandate, and then we talk about policy.
09:29So there's a lot to talk about, and I take pretty careful notes, and people think, but
09:34by this point, they've read all of the preparatory materials probably twice, they've talked about
09:39their staffs, and so, you know, you get a really good sense of what people's thinking
09:43is.
09:44It's a very good process.
09:45But you don't feel you have to have unanimity when you make a decision, right?
09:49No.
09:50You know, I always try to listen carefully to everybody, and I find that if you do listen
09:56and understand people's points and try very hard to incorporate them into what we're doing,
10:01for most people, most of the time, that's going to be enough.
10:04People do dissent, that's completely fine.
10:07We actually have, given that we have 12 reserve banks with their own economic staff, and people
10:12with different backgrounds on the board and among the reserve banks, we have a disparity
10:16of views at every meeting on every question.
10:19And, but people do, I mean, I think there's a, you want to dissent on important things,
10:24and so people are perfectly able to dissent, and when they think that's appropriate, they
10:29do.
10:30So a lot of people in Washington government agencies are very good at leaking things.
10:34You're not that good at that.
10:36Why doesn't the Fed, why doesn't the Fed leak more?
10:39Why don't you kind of leak a lot more about what you're going to do?
10:41You just don't leak that much.
10:43I am, I'm kind of proud of that, actually.
10:45We, we do take our obligations to confidentiality very, very seriously, and because we know,
10:52you know, how consequential it would be for someone at the Fed to be leaking.
10:57You know, we just, our, our whole success depends on having the public's confidence
11:03that we're, that we're ethical, and that we're working on behalf of all Americans,
11:07and not on behalf of ourselves, and we're not leaking, and that kind of thing.
11:11So we do have a culture, when we're working on a, for example, a regulatory matter, or
11:18some, you know, matter involving one of the banks, it never leaks out of the Fed.
11:22So I am proud of that record.
11:25Okay, so if you go back into history, when inflation began to arise after COVID,
11:32at some point people said, including you, that it was transitory.
11:36In hindsight, what do you think people missed about the nature of the inflation?
11:42Why was it more enduring than people initially thought?
11:45So these are, this is a question that people will be writing papers about
11:49and debating longer after all of us are gone.
11:52So, and it's early, it's actually kind of, kind of soon to be answering it,
11:56but I think it's, so here's my answer to that question.
11:59When inflation arrived in March of 2023, it was really coming out of the goods sector,
12:06and it was connected to really high demand for goods, and it was, and, and, you know,
12:11the supply chains, global supply chains, which account for most manufactured goods,
12:15collapsed because of too much demand and because of COVID.
12:18And, you know, so, but, and to us, that looked like a temporary fleeting situation.
12:25We also lost several million people out of the labor force.
12:28So wages went way up as the economy really boomed when we reopened the economy.
12:33And we thought, you know, there, we were getting, vaccines were coming in,
12:37and we thought that that would fix itself too.
12:40Kids would go back to school.
12:41We essentially overestimated how quickly the economy would return to normal.
12:46It finally, these things finally did happen in 2023, but it didn't happen in 2021 or 2.
12:53And what we meant by transitory was that it would go away fairly quickly
12:57without the need for our intervention.
13:00You don't want to intervene with interest rates if,
13:03if something's going to go away quickly without us intervening because, you know,
13:07monetary policy, as I mentioned, works with long and variable lags.
13:10So the lure is you look through things like contemporary oil shock.
13:15So that was the mistake was that it actually, it actually didn't reverse itself.
13:20The problem with the supply side didn't reverse themselves until 2023 when they really did,
13:25when we got, we got a big burst of employment and also the supply chains were fixed.
13:30So in hindsight, now knowing everything you now know, would you have done anything differently?
13:34Would you have had less quantitative easing?
13:36Would you have changed interest rates differently?
13:38What would you have done differently now knowing everything we now know?
13:41You know, it's, it's almost unfair.
13:43You know, hindsight's always 2020, right?
13:46You know, we remember what we were doing in real time.
13:49We went from a really nice economy in December of 2019 to a global partial shutdown of the economy.
13:58And we were contemplating, there was no thought that vaccines were around the corner.
14:03The economy's closing down.
14:04We were looking at severe and perhaps prolonged downside risks.
14:09Literally people thinking and doing work on, are we going to have another depression?
14:12Is it going to be the 1930s?
14:14So governments around the world, and particularly the United States government,
14:18really went to work to provide a lot of support to the economy.
14:22We did everything we could, including many things that were right, you know, that we,
14:26red lines that we'd never crossed.
14:28We crossed them to support the economy and support the financial system.
14:32And it was all done because we were managing severe downside risks, which did not materialize.
14:37We did not have a depression.
14:39And part of that is because of what we did.
14:42Then the economy reopens, and demand is very, very strong.
14:46And we saw, basically we saw a big burst of inflation everywhere, including in the United States.
14:52It was different in different places.
14:54But, you know, so that's what happened.
14:56And, you know, it's not, that's how I would answer that.
14:59Okay, but so what you did, you're happy with what you did in hindsight, you would say?
15:04In foresight.
15:05I think that the work that we did in 2020 in response to the pandemic will stand up very well in history.
15:13I think people will look at the things that we did, and essentially the financial system was grinding to a halt all around the world.
15:21We acted, we were the first central bank, and we were the most, you know, supportive.
15:26And, you know, I think that work will hold together when historians are looking back on it in the long term.
15:33I think when you get to the inflation era, that becomes a different question.
15:37And, you know, people were going to be arguing about that for a long time.
15:40As a result of the action we took, and the economy was thought to slow down a fair bit,
15:47and many people used the phrase hard landing to describe, hard landing is a euphemism for recession, I guess.
15:54People thought in 2023 we might have a hard landing.
15:57People thought in 2024 we might have a hard landing.
16:00And many of these people were economists, professionally trained economists, but they seemed to be wrong.
16:05So do you rely on these economists very much in the future when you're projecting whether you should listen to their views
16:12on where the economy is going, or how do you react to the fact that we haven't had a hard landing
16:17and disappointed all those economists?
16:21So I'll just say that, you know, as someone famously said, predictions are very difficult, especially about the future.
16:31And also, I know a lot of economic forecasters, and forecasters are a humble lot with much to be humble about.
16:41It is extremely difficult.
16:43Every good forecaster will tell you that it's very, very hard to know what the economy is going to do.
16:49To give you a good example, in our Teal book, every FOMC cycle, there's a book that goes out,
16:56and there's a baseline forecast in that.
16:58And our forecasters are really, they're really the top people in the field.
17:02And they give you that baseline.
17:04They also give you a section in that book which shows six, seven, or eight alternative scenarios,
17:10which they also regard as plausible.
17:12So it's always a probability thing like that.
17:16It's like we have this, we've identified this one thing.
17:19So last year was a big surprise, and it was a big upside surprise.
17:24So, of course, we welcome those.
17:26We'd be happy to have more of those.
17:28But it just was one of those things where, you know, things turned out much better for a whole variety of reasons.
17:34I will say that on the hard landing question,
17:36I have always felt like there was a pathway to getting inflation back down to our 2% goal on a sustainable basis
17:46without the kind of pain in the labor market,
17:49the kind of high unemployment that has been typical of tightening cycles and getting inflation down.
17:55And the reason why my colleagues and I thought that was that the labor market was so overheated
18:01that it could cool down quite a bit without having to.
18:05There still is apparently no slack in the labor market.
18:09The labor market does not have slack.
18:11Essentially, you're at equilibrium now.
18:13But look where inflation is.
18:14Inflation is at 2.5%.
18:16So this was in defiance of a lot of conventional wisdom, but we thought that was right.
18:20And that says that, you know, you have to be, one thing you learn is humility in forecasting.
18:26So I wouldn't rule it out, but I would say that the kind of hard landing scenario is certainly not the most likely or a likely scenario.
18:34So you have said you have a target of 2% inflation.
18:37You want to get an insight of 2%.
18:39Do you have a similar target for unemployment?
18:41If unemployment went to 4%, are you saying, well, that's okay because we don't need to do anything because 4% is tolerable?
18:47Or do you have a similar kind of target as you do with inflation?
18:51You can't reduce unemployment to a single number for a couple reasons.
18:57First of all, the natural rate of unemployment probably moves through the cycle and over time.
19:03Maximum employment is a function of many, many different variables.
19:07It doesn't reduce itself to a specific number that would be durable over time.
19:11So inflation has 2% inflation some years ago became the global standard that everyone aims for in one way or another.
19:20Some people have suggested that the Fed's independence is not as good as people talk about it being,
19:26and that maybe we'd better have more White House coordination with the Fed.
19:30I'm sure you've heard about this.
19:33I think that – any comments on that?
19:37I'd be happy to comment on what independence – on the point of central bank independence.
19:42So I think a long time ago people learned that a central bank that's independent of political consideration does a better job getting inflation under control.
19:51And that has now – that has accepted wisdom in all advanced economies around the world.
19:55It's also a principle that has very, very strong and broad support where it really matters, which is in Congress.
20:01You know, you talk to senior leaders in both chambers, in both political parties,
20:07and they all understand that you want an independent central bank that doesn't run monetary policy to support
20:15or oppose any particular politician or political party.
20:19Independence is one thing, but you still have some information sharing.
20:23So how do you coordinate or share information with the administration?
20:27Do you regularly meet with the Secretary of Treasury or White House staff people?
20:31Or how do you communicate with them?
20:33So there's a very standard set of relationships which doesn't change at all, administration to administration.
20:39And it – I'll start anywhere, but Council of Economic Advisers is in the White House.
20:45We have lunch with them every month or so, although they get canceled sometimes because we're all busy.
20:51But that's one thing.
20:53This – I have breakfast with the Secretary of the Treasury every week unless she's traveling or I'm traveling.
21:01I have – since there was a National Economic Council,
21:05there's been a regular slash sometimes irregular breakfast with the head of the NEC, and I do that too.
21:12Do you ever get a call from the President of the United States saying interest rates are too high or something like that?
21:17So ever? No.
21:20I would say that meetings with the President are rare and appropriately so.
21:27So you are – you were originally appointed to the board of the Fed by President Obama.
21:34Yes.
21:35And you're appointed chair by President Trump and reappointed by President Biden.
21:38And your term as chair goes through, I think, May of 2026.
21:42That's right.
21:43Any thought about staying through all the way through May 2026?
21:47Are you going to do that?
21:49Yes.
21:50Okay.
21:51And if some president came along and said, well, you did a great job, I'd like to reappoint you, would you consider that?
21:58I have nothing for you on that today.
22:01Okay.
22:03And is being chair of the Fed an enjoyable job or not so much?
22:11It is, actually.
22:13I think I enjoy it.
22:16I enjoy it quite a bit.
22:18I do.
22:19First of all, it's a great honor.
22:20It's incredibly interesting.
22:21I love the people we work with.
22:22I love the institution.
22:24At this time in my life, it's just been a great thing.
22:27I'm in my 13th year there now, and it's just been – it's been, you know, really challenging and all that.
22:33But what else would you want?
22:34You know, I'm very happy doing the job.
22:36So you're obviously in pretty good shape.
22:38How do you stay in shape?
22:39Do you walk a lot or you ride bikes or what do you do?
22:42Yes, I do those things.
22:44I swim, I ride my bike, I go to the gym a lot.
22:46I try to stay fit, as you will remember from our days together.
22:48Right.
22:49So are you – but when you were, let's say, riding a bike, did people, you know, get out of the way or do you have –
22:56Nobody knows you with a bike helmet and goggles on.
22:59You're just another person on the road.
23:01So I think you have said somewhere that when the Fed does lower interest rates, not saying that you're saying it's going to do that,
23:10but if the Fed does lower interest rates at some point, you didn't think it was ever going to go back to kind of the free money
23:15practically of years ago when interest rates were almost zero.
23:19Is that a fair statement that you don't think it's a good idea to go back to interest rates as low as they once were?
23:25The period between the global financial crisis and the pandemic was historically unusual from the standpoint that we had ever lower
23:34interest rates through that era, including part of the era when, for example,
23:39sovereign debt of major European sovereigns was trading at a significantly negative rate.
23:45And so that was quite unusual.
23:47And still, even with rates that low, inflation was very low below target.
23:52And so the question is, what caused that?
23:55And are the forces that caused that gone for now?
23:59And I think most people attribute the low inflation era to slow-moving forces like demographics, globalization, technological evolution,
24:09things like that.
24:11And those may or may not have changed.
24:13But nonetheless, I look at where we are now.
24:16Our funds rate is 5.3 percent roughly, give or take.
24:20And it feels like it's restrictive, but not severely restrictive.
24:25So it tells me that rates, at least for now, are the neutral rate must have risen,
24:30probably has risen from where it was during the inter-crisis period.
24:35And I think instinctively, I can't prove this.
24:39We're going to learn about this empirically.
24:41But it seems to me that the neutral rate is probably higher than it was during the inter-crisis period.
24:48And so rates will be higher.
24:49So the Federal Reserve, without saying you're going to lower interest rates at this point,
24:53if you did lower interest rates at some time, I thought you had said you didn't want to lower interest rates
24:59and then maybe say, well, maybe we made a mistake and we're going to increase them again.
25:02You want to have a policy that's fairly consistent for a while.
25:06In other words, lower interest rates but not bounce back and forth every FOMC meeting.
25:10Is that a fair summary?
25:12That wouldn't be a great outcome.
25:14But we don't want to be too risk-averse.
25:16We know that the economy is unpredictable.
25:19And the test we've said is we want to have greater confidence that inflation is moving sustainably down to 2 percent
25:26or alternatively if we see unexpected weakening in the labor market or some combination of those two.
25:31And when we see that and the data really show that and that's reflected in our confidence and our understanding,
25:38then it will be time for us to move.
25:40And we won't worry.
25:41Of course, it wouldn't be great if you were moving up and down quite a bit.
25:45That wouldn't be ideal.
25:47Some of your predecessors used to speak in what I call Fed speak,
25:50which is to say incomprehensible to the average person.
25:54You try to actually explain things.
25:57Is that because you're not an economist or you just like to explain things better
26:01because you actually sort of explain what you're likely to do at the Fed and then you actually explain afterwards?
26:06Does that upset a lot of people at the Fed that you actually try to put it in English?
26:11No, I don't think so.
26:14No, as you know, I enjoy communicating with people.
26:17And I didn't have a career as an academic economist.
26:21I'm not a trained economist, so I don't speak like one.
26:25And that seems to – I do hear a lot from, for example,
26:28people on Capitol Hill that they really appreciate that they can understand what I'm saying.
26:32So today the ECB lowered their interest rates recently.
26:39So why do you think the ECB lowered interest rates before the Federal Reserve?
26:45Are their economies weaker than ours or what?
26:48Yeah, so there are differences if you look around the world.
26:54And the big difference between the United States and many other nations is just that our economy has been so much stronger.
27:01The European Union went through a significant period of very, very low growth,
27:09while we were growing 3 percent-plus last year.
27:12So we're in a different place.
27:14And actually what's more remarkable about the current situation is how much there is in common between what happened.
27:24Inflation broke out everywhere.
27:26Central banks did kind of very similar things.
27:29There's little differences in timing in terms of starting to loosen policy.
27:34But really the era, I think, will be known much more for its commonalities than it is for its differences like this.
27:40So when the FOMC makes a decision, let's say, to increase rates or lower rates, they finish their final meeting.
27:47You are authorized then to go out and explain what it is.
27:52How long after the meeting ends before you go out and publicly explain it?
27:56Is it 20 minutes or so?
27:58It's three or four hours usually.
28:00Three or four hours?
28:01Yes, because the meeting might end at, you know, I'm out at 2.30 p.m.
28:05That's when the press conference starts at 2.30.
28:07So usually the meeting is over by 11.
28:09And you don't worry that things will leak out in that interim period of time, I assume?
28:12No, no, I don't.
28:14Okay.
28:15You know, people know better than that, I think.
28:17So in some parts of the society these days, people are making decisions based on something called artificial intelligence, AI.
28:26Have you ever thought about, you know, calling up ChatGBT and saying, you know, here's all the data we have.
28:33What do you think about would be a good idea?
28:35Have you ever thought about that, or are they not going to like you do that?
28:38We haven't done that.
28:39I mean, we have done little things, like we've asked ChatGBT to generate questions for the press conference.
28:47And I'm happy to report for any journalists who are here that the questions were not as good as the ones we get from real journalists.
28:53What about my questions?
28:54How do they compare to my questions?
28:57Okay.
28:58No comment.
28:59All right.
29:00So they weren't that great.
29:01Okay.
29:02So today at the Federal Reserve Board, you are not involved in picking anybody who's on the Federal Reserve Board.
29:10The president makes those decisions.
29:12Do they ever call you for advice on who you might pick or they might pick?
29:16It has happened, but it's, I would say, not the norm now.
29:21The Reserve Bank presidents are different.
29:23We play a role with the search committees from the Reserve Banks on that.
29:26So every summer there's a meeting of the Federal Reserve people out in Jackson Hole.
29:33What do you all do out there?
29:34I mean, I always wonder.
29:35You wear cowboy boots.
29:37You go and ride horses.
29:38What do you all do?
29:39Why do you need to go to Jackson Hole?
29:40Why not go to someplace closer to Washington, D.C., Baltimore-like?
29:44Cowboy boots are worn by some, but not all.
29:49I don't wear them myself.
29:51So what it is, it's an academic conference.
29:53So the Kansas City Fed, which puts this on, they'll pick a topic,
29:57and then they'll find really top economists to write papers about that topic or more than one topic.
30:03You come to Jackson Hole.
30:06They present their paper.
30:08People critique it.
30:09They praise it and that kind of thing, and that's the mornings.
30:12And in the afternoon, people go take a hike.
30:14And let me be clear, this is not a rate hike.
30:16It's an actual physical hike.
30:19You usually make a speech out there, I think, every year.
30:22Yes.
30:23Traditionally, I've done this every year, but not every Fed chair has done it every year.
30:30But I give the opening speech, and it doesn't have to have anything to do with the topic of the conference.
30:34I just give a speech.
30:36And is it carefully worked on by the staff?
30:38Do you make sure you say something that sounds interesting, but you don't make any news?
30:42No, actually.
30:43I try to do, you know, typically what I do is I talk about the, you know,
30:47it's really focused on the economic outlook and that kind of thing at any given point in time.
30:52At Jackson Hole, I've tried to take a step back or move to a higher level
30:56and try to say things that have a little more generality to them and see what can we learn, for example.
31:01Now, the Federal Reserve is over 100 years old.
31:04It was created under Woodrow Wilson.
31:06If you were around then, what would you have suggested they do better than they did in creating the system?
31:12Or do you think the system works pretty well after 100 years and you wouldn't change it very much?
31:16So I'm giving myself perfect hindsight here.
31:18I would do what Congress did in 1933.
31:23So the original Fed didn't have an FOMC,
31:26and it really didn't function very well during the early parts of the Depression or during other.
31:33So in 1933, the current structure was put in place, and that's with the FOMC, with a number of governors,
31:41and the voting arrangements.
31:43And I think that arrangement is fine.
31:45It works really well.
31:46In the 70s, the dual mandate was added.
31:49But ultimately, we're not looking for any law change.
31:52We think we have the authorities that we need.
31:54We think that the law is in just a fine place.
31:57Okay.
31:58So basically, you think the system works reasonably well as it is today.
32:02And today, what is the biggest economic challenge you think facing the country?
32:08Is it growth?
32:09Is it inflation?
32:11Hard landing potentially?
32:13What are you most worried about?
32:15What keeps you up at night, if anything, in the economy?
32:17So I'll say in the short term, that's what keeps me up at night.
32:21Literally, the thing I'm thinking about in the middle of the night is always this balance we have between not wanting to –
32:27if we ease too early, we can undermine the progress on inflation.
32:30And if we wait too late, we can undermine economic activity.
32:33We can undermine the expansion.
32:36So we want to get this right.
32:38And getting it right is incredibly important for the people we serve.
32:41So that is really – that's what I spend a lot of my thinking time on.
32:46Longer term, there are lots of things to worry about.
32:49But that's really what keeps me up at night.
32:51So most people, they have dinner with friends sometimes.
32:53How can you have dinner with friends without hinting at what you're thinking about?
32:57And do you ever get suggestions from your friends at dinner, this is what you should do?
33:01And how do you respond when they kind of say, maybe you should lower interest rates?
33:04Do you just keep eating or what?
33:07You might define the word friend to mean doesn't ask you about interest rates.
33:11So – no, people don't do that generally.
33:14You know, people I don't know will always say, hey, cut rates.
33:17Somebody said that in the elevator this morning.
33:21Did that influence you or no?
33:25I said, thank you, sir.
33:27No, but I mean, you know, people say things, but, you know, it's fine.
33:32So today, for somebody that would like to be the chairman of the Federal Reserve Board in the future,
33:37is it a job you would recommend to your best friend or your best enemy?
33:41I think it's a great job.
33:43I think, again, what I – the last thing Chairman Bernanke said to me as he was – that day,
33:49I went to see him that day, his last day at the Fed.
33:52He said, you learn so much at the Fed.
33:54Remember, Ben Bernanke was a top five monetary economist in the world when he arrived at the Fed.
34:01He learned a lot at the Fed.
34:02So can you imagine how much I've learned, you know, starting?
34:04So it's just – it's never felt like work.
34:07It's so interesting all the time.
34:09And also, you know, the dedication of the people who work there, 90 – you know, and the staff,
34:14these are people who have chosen a life of not being in the public spotlight.
34:19They just want to do their work and serve the public, and they're very dedicated.
34:23It's a wonderful place, and I would recommend the job.
34:26So the Fed is also responsible for – the way the Fed is set up,
34:29you're worried about a stable currency, I assume –
34:33No.
34:34Well, not currency.
34:35You're worried about –
34:36Stable prices.
34:37Inflation.
34:38Yeah.
34:39And you're worried about unemployment.
34:41But you have no – you don't make any decisions about what the impact is going to be on the currency or the dollar.
34:46In other words, the impact of what you decide to do on the dollar
34:49is not something you're mandated to worry about.
34:51Is that right?
34:52That's right.
34:53The administration has that portfolio, the management of the dollar for what that is.
34:57It used to be something different than what it is now.
34:59But we – for us, the effects of the things that we do or don't do on the dollar
35:04are just another financial variable like equity prices or things like that.
35:07But do you worry – if you're worried about inflation, as you obviously are,
35:10what about the debt the United States has?
35:12We have $35 trillion of outstanding government indebtedness,
35:16and we're adding about $1.6 to $2 trillion more or less every year.
35:20Aren't you worried about that on the impact of the economy on inflation?
35:24It's – so I am very worried over time about the deficits that we're running.
35:32It's not the Fed's job.
35:33We don't give Congress advice.
35:35But let me just say that we're on an unsustainable path.
35:38That doesn't mean that the level of debt we have is unsustainable.
35:41It's not.
35:42But the path we're on, where we're running large deficits at a time of full employment
35:46and healthy growth, is not a sustainable one over time.
35:50And we really need to get to work on that.
35:52I would hope this is a top-line issue for elected people whose job it is.
35:57It's not our job.
35:58And I believe that if you – I do talk to quite a few elected officials in Congress,
36:03and I think there is a rising sense that it's time to do something about that.
36:06And it will take bipartisan action to address.
36:10Let me ask you, in dealing with Congress, you testify I think at least twice a year
36:14before members of Congress.
36:16You do the House side and the Senate side.
36:18Have you ever suggested them having a joint committee so you don't have to say the same thing twice
36:21or they don't like that?
36:23This is in the law.
36:24It's twice in February and twice in July, so it's four times a year.
36:30This is – Humphrey Hawkins put that in.
36:33And, you know, it's a really – it's a tradition.
36:35And so the Senate went first last week.
36:38The House went first in this March.
36:41So they alternate.
36:42I think it would take – I don't know, but it would take –
36:44Do you get a lot of questions from members that you think are really adding a lot of good advice to you?
36:50I think the members ask excellent questions, yes.
36:53Thank you for asking.
36:54Hey, Joe.
36:55I'm generally very much pleased.
36:57But you spend a fair amount of time with members of Congress compared to some of your predecessors.
37:01Is that because you think that they add a lot of value or you just think it's a good courtesy to do that?
37:06I think it's part of our job.
37:07You know, in our system of government, it is the legislature that has oversight over the Fed.
37:11It's not the executive branch.
37:13In a parliamentary system, they're sort of one and the same.
37:15So it's the two committees.
37:17And so I spend a great deal of time up on the Hill talking to people in both political parties, House and Senate,
37:24just finding out what's on their mind
37:26and really trying to take on board their thoughts on the economy and on what we're doing.
37:31And I think they appreciate that.
37:33And I think that, to me, is really a big part of this job.
37:37The Fed depends on data.
37:39But how good is the Fed data collection efforts?
37:42In other words, are you using the same data collection methods you used 20, 30 years ago?
37:46Or because of technology, you have better data collection methods than before?
37:50And are you convinced you have data that's as good as the private sector has?
37:54Most of the data that we get is the same that everybody else gets,
37:57the unemployment data, the inflation data, not collected by the Fed.
38:00We do some data collection.
38:02And we've actually been, you know, dabbling in big data efforts for more than a decade.
38:07So I think we're, you know, we're very focused on the quality of data
38:11and collecting different kinds of economic data.
38:14During the pandemic, of course, it became necessary to do all kinds and find all sorts of, you know,
38:20different sorts of data to reflect what was going on in the economy.
38:23We did a lot of that, too.
38:24So when you became the chair of the Fed, what was the best advice somebody gave you,
38:28who was a previous chair of the Fed?
38:33What comes to mind, I can't think of one thing.
38:36I thought that what Chairman Greenspan said was get a set of earmuffs.
38:43And when you eventually are not the chair of the Fed and somebody succeeds you,
38:48what would be the advice you would give them about how to be a good chair of the Fed?
38:52You know, to me, I think it's a very special American institution.
38:59And it's one that works to serve all Americans.
39:02And absolutely critical to that is staying in our lane, sticking to our knitting,
39:07not, you know, running to reach out to the big, hot political issues of the day.
39:12And I think that's critical because once you do that, if that's going to be what you do,
39:16what's the case for your independence?
39:18You know, Congress has given us these powers.
39:20They've left us alone to do it.
39:22And really we need to do those things and resist the temptation to expand that mandate.
39:27That's what I probably will say to my successor.
39:30Now, when you want to go out to, let's say, have a dinner in a restaurant,
39:33do you worry that people are listening to what you're saying, they're eavesdropping,
39:36or you don't say anything that anybody has to make you worry about?
39:41So that is exactly what I worry about.
39:43I have found that.
39:45I get recognized now, and people at the next table are always listening.
39:48So we don't really go to restaurants.
39:50So what do you do?
39:51You just go in a private room or you don't go to restaurants?
39:53If you're at a restaurant, you need to be in a private room because, of course, the people free to eat.
39:58And, by the way, if someone at your table were to be well-served and start to speak loudly,
40:03everyone's hearing that too.
40:05So you've got to be – we just don't do that for now.
40:09We go to – we eat at home a lot.
40:11We eat at friends' house.
40:13Okay.
40:14Well, your wife is here.
40:15Where is she?
40:16She's right there.
40:17How long have you been married?
40:20About 15.
40:22Oh, 39 years.
40:24You have to add that up.
40:25You do the arithmetic, yeah.
40:2639 years.
40:27Okay.
40:28And you have how many children?
40:29Three children.
40:30And any grandchildren?
40:31We have three grandchildren.
40:32Three little boys, the oldest of whom is three, and all in the same family.
40:37So this is going to be quite a little place to visit.
40:41Okay.
40:42Well, look, we've known each other a long time.
40:45I congratulate you on doing a great job at the Fed and avoiding the hard landing.
40:49And thanks for earlier telling me when you were going to lower interest rates in our private meeting.
40:55I now know when interest rates are going to go down.
40:57No, actually, that's not true.
40:58You said you wouldn't tell anyone.
41:00Right, okay.
41:01Of course.
41:02Jay, thanks for a great job you're doing for the country.
41:04Thank you, David.