BONUS EPISODE: Jay Powell Speaks with David Rubenstein

meeting and the market reaction that followed. Let's listen into that conversation now. So, Jay Um, thank you very much for being here. Why don't we start with an easy question. So you made a speech last week commenting on the f O m c s decision to raise the Fed discount rate by um a small amount relatively speaking, basis points. Someone people would say that was small, UM, But at the time it wasn't clear that the job's report would

be as strong as it turned out to be. Subsequently, hadn't you known that the Job's report was going to be as strong, would you have done twenty five basis points or something different? David, Thank you for that question, 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, but I'll take

it this way. So the message we were sending at the phone C meeting last Wednesday was really that the disinflationary process, the process of getting inflation down, has begun, and it's begun in the goods 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 gonna be bumpy. And so we think that we're gonna need to do further rate increases, as we said, and we think that we'll need to hold policy at a restrictive level for a period of time. Then comes the 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 kind of shows you why we think that this will be a process that takes a significant period of time. The labor markets extraordinarily strong. And by the way, it's good. It's a good thing that inflation has started to come down without that has not happened at the

at the cost of a strong labor market. So and of course since then, labor marketing, sorry, financial conditions have tightened significantly since then, So let me ask it another way. UM. So, by the way, when the numbers coming out, the job numbers, five thousand jobs, does anybody call you up in the government and give you a little heads up this is

gonna happen, or they never do that? So on. On some um data, sometimes we get data just the night before, and it's only me, only me and 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 fm C meeting, as often happens on the day of an f MC meeting,

it will help me to to know it the night before. Okay, So the markets, um, after your speech from last week. The markets assumed that therefore there would probably be another basis point increase in your next f I MC meeting. Um, was that a bad assumption by the markets. So what again, what we said at the meeting was was that we we believe that we anticipate is what we said, that

ongoing rate increases will be appropriate. Uh. 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 and you know, now you see the labor market report, and I think again financial conditions are are are more well aligned with that

than they were before. So the assumption when you made your speech was that probably they're fed might em and consider uh decreasing rates by the end of this year, and the markets no longer assume that you think the markets are wrong. Well, so let me say these are 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. 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 four group of forecasts in December, then we would certainly do that. We would certainly raise rates more. Okay, So today, for people who aren't familiar with the f O m C, who is actually is on the f O m C. So there the US Central Bank consists of a board of governors.

Here in Washington, they're seven governors. Those governors are nominated by the President and confirmed by the Senate, and we serve terms that are that are not syncd up with the election cycle, so we're we're independent. They are also twelve reserve banks around the country which have a degree of independence, and they're so so each each reserve bank is led by a president who works there full time. All twelve of them sit on the FMC. So that's nineteen people sit on the FMC, so it's quite a

large committee, of which twelve vote. In any given year. The reserve bank presidents vote on a rotating basis, except new York, which votes every year. So when you vote, do you vote at the beginning of an f o MC meeting and then just kind of have discussions afterwards, or do you wait till the very end and then you vote. Now we vote at the end, I mean the whole the f MC meeting process takes, you know,

more than a full week. I'm talking to all of the participants, all ninth eighteen other ones, and staff has sent around memos and there's something called the Teal Book, which is the staff's assessment of the you know, of the economy and international economy and monetary policy and all that. Then 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 around noon on the second day. So there's 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 in different ways, and so I tend I've tended to do what my precessor media precessor 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 their reserve bank president. And I listened 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 the inflation rate target is two percent um, But why two percent and not three percent? Three percent?

You could be tolerable, really, I mean most for most of organized history, three percent is considered. Okay, why do you want two percent? Two percent is the global standard, and that is our objective two percent piece as measured by the PC 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 gonna 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 two thousand, twenty three 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 PC inflation is running about five percent. This is on a twelve month basis. Core is running

at four point four. My guess is it will take certainly into not just this year, but next year to get down close to two. Okay, So two percent is firm that you're not that yes, okay. So 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 a record mow. 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 weekend. Um, it's just

that 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 US workers is now more than five million greater than the available supply, and the available supply consists of people who were 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 marks

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 unemployment 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 are we have two goals that Congress is 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. By many would say that it 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, you know, a different 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 COVID hit the economy and we chected five trillion dollars of physical policy into the economy and the Fed did quantity to be using 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 stand still. People were talking about depression. People were talking and we didn't think. 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 that 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 you know, the pandemic itself to shut down and in the reopening. That's a big part of it. The quantitative using program has increased the

balance sheet. I guess of the FED, and what is your balance sheet now? I think it's eight point four trillion dollars if you must sound like you know, found eight point that was yesterday's not? Okay? Alright? Eight point four trilla 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, is I should say? So what happens is his treasury securities on our balance

sheet mature up to a cap, a monthly cap. We we that the balance sheet shrinks in that amount. Same thing with mortgage backed securities as they are prepaid, or so we we 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 reserves are ample, kind of where we were before the pandemic, then we'll slow down and we'll sort of test where we are, and but it'll be a couple of years, we think, till we get to that level. The FED does not sell securities. They wait for them to mature and then you just uh cash them in. 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 and being actively considered. So some people that are worried about the federal debt limit and that we might not we have an extended on time, we have thirty one point four 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 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 US can pay all of its bills one 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 moving too slow. So you don't have any program in place ready to go if in fact that limit isn't passed in time. This is something that Congress has

to deal with. And the same that the so called trillion dollar gold coin solution is not one year in favor of I guess, as I said, this ends in only one way, and that way is Congress voting to raise the debt ceiling so that the US can pay all of our bills. Okay. In terms of consultation, um, do you consult regularly with the Treasury Secretary 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, sixty or seventy years there. 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 treasure secretaries that I've had as FED Chair. I've also had a regular article it called irregular Lunches with the head of the NBC. We also have regularly regularly scheduled lunches with the Council of Economic Advisors.

And that's that's really the that's the that's the institutional structure of our of our contact with the administration. So and 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 Fellow Reserve Act. I mean, I think it does work.

The structure that I discussed earlier, where you've got the twelve 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 background, 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, pread 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 in 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 them at advance with with staff at the Board of Governors, and then you've got to wait forty five days for that to execute. Also, you can't own individual stocks and there there you can only do these you can only authorize these transactions or execute them during specific times. Um. And it's you know, it's it's a and we we

just of course all of these are disclosed. 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 cheaping that kind of thing, that's just not something that will work. What is the salary of the chairman of the Federal Reserve Board. It's um, it's around a hundred and ninety dollars, I believe, okay, So you're you live on the d dollars. If you need to sell something, what do you do? You have to

clear it for forty five days? Or that's right. We we've you know too, if we we have family expenses that if we have them that exceed myself even we have to sell and as I think that fair salary for the job or I do yes, okay, So today, um, how do you coordinate with central banks, let's say it in England or Japan 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 at at in Bosil, 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'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 we keep those discussions going because particularly in a crisis, You're gonna need to know each other, and you're gonna need to know you're gonna be able to trust each other. And do you think the US economy is pretty much in control of its own inflation rate?

Or 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, 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 man agricultural commodities are priced globally, so that there there are certainly it's an integrated global economy and global markets, and we you know we are, or that you get data from all the US government agencies, But do you ever use anecdotal things like you go to the supermarket and mices are high and you say this price is high, or how do you get you ever

get anecdotal things? Or people ever call you up our friends and say, by the way you should do this or that. You ever get that kind of information is you only get it from the government reports. I mostly get data, but I will say the the I do

believe that actdotal information is very useful. And one of the things the Reserve banks are great at is all twelve of them have big operations where they talk to businesses and nonprofits, universities in every sector of the of the country and the economy, and they bring that back to the FMC meetings and they talk about what they're seeing because often, you know, but steering at data is great, but you need to need to have a story, 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, you can't be watching economic numbers all the time. So what do you do to relieve the stress? Other than interviews like this? You know the usual things. I read pretty light fiction, detective and spy fiction. I exercise as much as I can, as you know, I'd like to ride my bike, I

play the guitar, play music. M say, is that safe riding a bike? You know, dangerous and it's it's stayed. Sorry, it's safe if you stay on the bike and they're good at That's what I tried. And you still play the guitar or I do? I do? Yeah? Bare hair is awfully short for playing the guitar. Interest need longer hair, your hair longer when you were younger and grey? Or it's too great too, it's okay. So let me ask you about, um, the the issue of what it's like

to be chairman of the FED. You you can't go have you regular friendship kind of dinners or meetings. Can people people treat you much differently, I assume than they used to write. When you go to a restaurant, are people listening to what you're saying or something like that. I have always thought that my jokes were funny, David, but no, so yes, it's um, I've never been a public figure before like this, and it's very different. But

you know, it's it's a great honor to serve. But yeah, if you when you go in public places, you have to be very careful about and um, which is the president Nited States ever call you with any advice or you don't really say he doesn't the President Trump ever call you or President but I never 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.

What did he call you? Um, No, I haven't had that kind of I haven't gotten any calls from from President Biden. Okay. So the biggest challenge you have now he is being able to keep a straight face, not telling people what you're gonna 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 goods 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 PC inflation index that we look at. There's fifty six 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 gonna 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 eleven times, not that I'm counting, but eleven times, so you were saying that disinflation is

beginning to appear. Would you use that word eleven times again today after the jobs report or would less trying to use that word so much? I might use the the I might say, I would certainly use the word disinflation, yes,

which means declining inflation. And I would call it declining inflation to for and today, what about the debt total debt of the United States, which produces some inflation thirty one point where you leaving aside the debt limit, Are you worried about the total indebtiness the United States loosing inflation or you don't think that's a big problem. Yeah, it's not. The level of debt. I would say. The thing 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 it. Better to deal with it sooner rather than later. Now, many of your predecessors were economists,

your trained as a lawyer. Um so um. They spoken what I call FED speak, which is to say incomprehensible kind of economic language, which was done intentionally, I think because sometimes they would say, so you tend to speak in English. Ums. That have been a plus to saying 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 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, in particularly the two oversight committee 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 gonna keep doing 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 hearing is under the Humphrey Hawkins Act, and they're actually on any anything that's any political issues. So it's it's quite extensive. You have to prepare for everything that the FIT is involved in and many things that the FIT is not involved in. Uh So it's it's a lot of preparations. 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 um, the country's economy, what is the biggest worry you have about inflation? Is it just that, um, the physical policy is not completely under control, we have exogious 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 one 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 disinfo disinflation or declining inflation in core services ex 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 there there are those are things that can affect our economy and the path of inflation. Right, So the balloon was not You're worried though, you don't care about the balloon. It's not not within our ambit. Okay, So today the

Federal Reserve gets data from all over the country. And are you convinced that you get the best data, you have the best data collection methods, or do you think it's not as 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 and 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 that the bitness and the beige not not the page book, the page book, the page book, putting together the beige book, and also coming in 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 its just the hall of information we get through that through that network 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 wanted Secretary of the Treasury now but Ben Bernacky for example, or I do I I talked to former Chamber of Bannaky, I talked

to you know, Secretary Yellen. I still talk to Alan Greenspan now and again. And when you're dealing with this with 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 agreement, and um, 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 think you can tell today we are blessed with the

diversity of perspectives on the FMC with nineteen people. Of course we are. But 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. Okay, it's like you

mean a better office or something like that. 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. And that never happens, right, No, it doesn't happen. I mean, And when you want to talk to members of the of the board of the federals Ave Board, do you go to their office or 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 barge in 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 avoiding leaks of its decisions. 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 we published these things internally for for the FMC, meaning the memos

and the Teal book and all that um. But the other thing to remember, though, is you know, we're not trying to hide our decisions from the public. We actually, in the modern 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. From the time that you make your decision on the f O m C. Whatever time it is during the day, as your press conference at two o'clock or something like that, your decision is made by two o'clock or whatever 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 gonna do? Well, we you know, we people take this very seriously. None of that happens, you know, you mean, you're 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 announced the decision, but we actually announced the decision

at two the press conferences at two thirty. So I think, you know, it's a fairly small group of senior staff and policymakers 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 jobs discussion, if next month you had another five nineteen thousand jobs created net jobs, would that be good or bad from your point of view? Have we got a lot of people working but maybe

producing more inflation? So we don't. We don't have the luxury of thinking about good or bad. It just is what it is. So but 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 and labor market conditions that goes along with that, and that is still you know, very possible and indeed likely here some softing

and labor market conditions. However, this cycle is different from other cycles because of where it came from, and it's just confound at 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 very 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 in the labor market hasn't softened. We do expect that it will soften um, 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 f o MC 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. Or does the meeting of the FOMC change 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 eighteen other participants at least once and we go through everything. What you know, what's your analysis of the economy, well, everything about montery policy, everything about the path forward and

all of that. So um, 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 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 is expected, and when you're having these FOMAC meetings, I assume somebody sweeps the room to make sure there's no bugs and anything all that, so no leaks, okay, And today, um, as you look forward, as we are going forward for the next mainder 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. Maybe run realistic, but your core inflation now or overall inflation, you think it's about four or four and a half percent something like that, or what when you're saying is it's it's in that range. There are different measures. Yes, we we expect, you know, significant progress on inflation this year. And again it's our job to produce it, 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 reports or higher higher inflation reports, it may well be the case that we have to do more in race likes more than its priced in. So if I wanted to go get a mortgage on the house I was going to buy, for example, uh, you would say, I'm not going to be any better off waiting till 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 get the house now mortgage.

So to say, surprisingly enough, I get a lot of requests for advice on those kind of things and you don't give any and I but I really can't, Okay, I can't. I really can't respond. So okay, So on the whole, to summarize where you are, you're basically saying that the job's 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 and we've had the the inflated sorry, then the labor market report, and I think that does I think it underscores the message that I was sending at the at the press conference and in the meeting that we have a significant road ahead to get inflation down to two percent. And I think there's been an expectation that it will that will go away quickly 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 to see whether we've done enough. Okay, And in two percent is the we have for the last twenty five years before inflation came along, But prior to that, for most of US history, we were higher than two percent. Is that that two percent is? We're now so used to two percent after

twenty years of it? Do you think that's the appropriate level? So for we went through this long period where inflation was really anchored around two percent, and we we think that. 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 from 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 two thousand, uh eighteen and nineteen, 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 we all want to get back to that place. But 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 that otherwise would take. Do you think immigration is an issue in terms of giving us more labor workers or do you think that's not

a factor. So, just as a matter of arithmetic, it was a factor because there was very little migration across borders during the pandemic UH and that was part of what was happening, particularly in certain sectors like the agricultural sector and food service and things like that, where they're

just warrant the people. However, just just very recently here the immigration data have turned up again, and so and I think that maybe maybe maybe part of why people are feeling somewhat less pressure in a labor market to find workers. This is an issue not for the fetter. This is immigration is obviously political issue. We do not seek to be a player on this. But it's just a fact though that that 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 and the criticial effectives to increase the value of the dollar versus other currents. Do you have any concern about the bague of the dollar going up too much or that's not something you comment on, So that 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've known you a long time. I think you've done a great job in a difficult situation. I appreciate your service to the country. At an eighty thousand dollars 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 it. Thank you.