Jacob Frenkel: Doesn't Expect Fed to Raise In September (Audio)

of course in New York at Bloomberg World Headquarters. We're going to be joined by Jacob Frankel. He's been coming out this Jackson Hole Symposium PIM for more than thirty years. Yes, we're gonna find out what he thinks about federal reserve policy, but also whether the Federal Reserve can actually increase interest rates despite or at least during the election cycle, maybe

even before December. We've got much more coming up right now, Let's go to Charlie Pellett in the Bloomberg news room for a Bloomberg Business Flat and I think you Pim Fox traders pushing down the value of stock spawns and the dollar ahead of tomorrow's speech by FED Shair Janet yelling in Jackson Hole. The SMP five hundred index down three now to a drop of two tenths of one percent. The ten year down four thirty seconds yield one point

five seven percent. Dallas FED chief Robert Kaplan was interviewed on Bloomberg Radio from Jackson Hole. He touched on a number of topics, including the case for removing accommodation. I think any removal of accommodation should be patient, slow, gradual, because we've got a number of persistent headwinds that we have to adjust to. But yes, I think the strength the case for removing some amount of accommodation. It has

strengthened Sears Holdings. That's the retailer run by hedge fund manager Edward Lampert posted a second quarter loss of sales continued to shrink Sears holdings down four point four percent. St Jude Medical shares plunging. Today, Carson blocked the down short seller and founder research for Muddy Waters, warning the tens of thousands of Americans are living with taking time bombs, and that is St. Jude pacemakers and defibrillators that are

easily compromised, causing potentially fatal disruptions. The company says allegations are quote absolutely untrue and several layers of security r in place. St. Jude Chairs down now by five point two percent, SMP five hundred index down to a drop of one tenth of one percent down, Industrials down twenty six also a drop of one tenth of one percent, Gold down four ninety ounce one, a drop of four

tenths of one percent three thirty two on Wall Street. Now, let's take a look at other news from around the world. Thank you, Charlie from the Bloomberg newsroom. I'm John Lauder. This news update is brought to you by the jeep Grand Cherokee, the most awarded suv ever. The Grand Cherokee continues to raise the bar with its luxurious interior and legendary four by four capability. Drive on at your local

dealer today. Donald Trump is trying to woo minority voters, promising his economic policies and hardline stance on a legal immigration will benefit low income Americans and protect jobs. But White House Press Secretary Josh Ernest says the Obama administration and the Democratic Party beg to differ, it would have a devastating impact fiscally and economically by doling out significant tax cuts to those at the top of the income scale UH and leaving the rest of us to pay

the tab. Meanwhile, Democrat Hillary Clinton speaks later today in Reno, Nevada. She'll press her view that Trump is quote taking a hate movement mainstream shall also try to link his candidacy to the so called alt right wing of American politics. A car bomber detonated a vehicle near the new Turkish Embassy compound in the Somali capital of Mogadishu. Police opened fire on the car when the bomber refused orders to

stop at a checkpoint near the beach side embassy. The Arizona Coyotes are breaking new ground in the National Hockey League. The team has hired what's believed to be the first full time female coach, Dawn brey Will service skating coach.

She worked part time for the team last year, and the city's Conflict of Interest Board has levied a fifteen thousand dollar font on Brooklyn District Attorney Ken Thompson a settlement over personal meals charged to the d a's office Thompson admitted improperly billing more than five thousand dollars to the King's County d A's Office, which he's repaid. The

sanctions among the largest in a decade. Global News twenty four hours a day, power by more than twenty d journalists and analysts in more than a hundred and twenty countries. I'm John Lauder. This is Bloomberg, Charlie, and we thank you. And that's a Bloomberg business flash. You're listening to Taking a stock with Kathleen has fim Fox line from the Jackson Hole Economic Symposium von Bloomberg Radio. The theme of this year's a conference here in Jackson Hole, Wyoming is

designing resilient monetary policy framers for the future. Well, our next guest says, you better not forget the past. Don't throw out the old textbooks because they still have a lot of lessons for cent old bankers today. Joining us now is someone who I have to say is a fixture. It wouldn't be Jackson Hall. About Jacob Frankel. First of all,

he's chairman of JP Morgan Chase International. He's the former chief of the Bank of Israel, so he's been a central banker who's all those decisions rested on his lab. He's also chairman of the board of trustees of the Group of Thirty. In fact, he has been a member of that group for more than thirty years. So Jacob, first of all, welcome, thank you. I'm pleased to be here. So let's start by your view of this rethink of

that policy. You are saying, don't throughout the old textbooks. Why, well, for several years we have been in an exceptional situation where a new palladim was gaining hold, and that's the unconventional monetary policy. It's very important to recognize that that unconventional monetary policy in historical perspective should be viewed as a de two at the end of which one returns to the highway of normal monetary policy, rather than becoming the new paradigm that will prevail for years to come.

The old central banking principles that are emphasizing the important of price stability and more recently financial stability. That is resting on the importance of independence of central banking, that emphasizes clarity and transparency and recognizes that central banks mandates are relatively limited. You cannot solve all the problems in the world only by relying on monetary policy. For years, we have seen a situation where monetary policy all of

the world has been overburdened. It has become the only game in town. And the reason is that it has been the only really well functioning um of economic policy. But we should not get to the habit of basically absolving the other important arms and assume away the possibility of introducing structural policies flexibility of the economic system. That's the only way in which you can really raise productivity and contribute to sustainable growth. What about increasing interest rates?

When you're asking what about increasing interest rates, we need to put it in perspective. We are now in an unprecedented level of interest rates, let's call it close to zero. Real interest rates are negative, So we need to ask ourselves, is this the new long run? The answer is no. Every central banker will tell you that the negative real interest rates, or the very long run or the zero practically zero nominal rates of the central bank in the

long run are not desirable and are not sustainable. So it is in this context that we need to ask, is this the time to move ahead with normalization? It is not only my opinion. The Federal Reserve has told us very clearly in the past that they are eager to move towards normalization, that they were looking specifically at the developments of the economy, at the developments of labor markets. So when I follow that guideline, I conclude, and I

asked myself, where is the labor market today? Clearly improved dramatically. Unemployment has declined to four point nine, Participation has improved, duration of unemployment has declined. The situation of households has improved dramatically. Spending is on the rise. We do have, of course, a negative part of the corporate investment. But I say that by and large, by these criteria, the tests have passed and it's time the economy is strong

enough to move ahead with the normalization. Okay. Jacob Franco uh rob Kaplan President Dallas FED sees there the fat moving in act direction, But the patient patient no rush to move you Are you in a different mode, would you say, FED, think about doing an interest rate increase at your next meeting in September. Well, I'm all for patients, provided somebody is doing what needs to be done during

the patient's period. Does anyone really believe that Congress will act get its act together in the coming three to six months? Does anyone really believe that we will see structural measures in the coming three to six months? And if the idea of patients means allow Congress to do it, then it means very long run. To me, I need to ask myself not only what are the risks of raising interest rates, but what are the costs of delaying the normalization. We see today's situation where there are a

lot of this location. The price of risks has been distorted. We are giving them superficial and artificial boost to financial markets. By pushing interest rates down, we divert investment from plants and equipment towards financial assets. People are happy because their value of their wealth is rising as it is reflected in prices of housing and the prices of their stocks. And therefore we say wow, but let's not forget real

investment is a problem, and one of fit. One of the reasons for it is uncertainty about many things, including threat policy, Yes or no interest rate and increase in September, you say yes. If you're asking me whether I would recommend to raise I say yes. If you're ask me, do I expect it to happen? I say no, thank you. Jacob Frank of This is Bloomberg coming up on taking Stock, will be speaking with Mark Gordon. He is the treasurer of the state of Wyoming. He is a former member

of the Kansas City Federal Reserves Board of Directors. He's going to talk about the challenges facing Wyoming and the energy industry.