Kocherlakota Sees Labor Market Slack, Calls for Hike Caution

SoundCloud and at Bloomberg dot com. We are broadcasting live from the Women for Climate Conference at Columbia University Low Library and the City of New York, and we are also expecting a press conference scheduled by Federal Reserve Chair Janet Yellen following the conclusion of a two day f O m C meeting at which it is widely expected the Federal Reserve will raise interest rates twenty five basis points.

Here to tell us more. Nriana Coacha Lakota, Bloomberg View Columnists also happens to just be the former president of the Minneapolis Federal Reserve. Nrianna Cutchlacarta, thank you very much for being with us. I want you to just begin, maybe by describing what is it like to sit at the table at these meetings, and maybe you can tell us if you've ever been to any of them. On a virtual basis, like by a video because that's the sort of essence of one of your columns that I

want to bring up. Yeah, no, thanks for having me on tim. UM. No. The regular meetings are held in Washington. UM. We all sit around a large one of the biggest tables you've ever seen in your life, and try to hash through the policy and economic issues at the time to to get to to get to a good decision. UM. People are usually really prepared remarks that they've put together with the help of their staffs. UM and UH. But

I think that is there a specific order. It's that the order is usually the chair goes last in the two different go hounds that we have. So there's an discussion the economy where the chair will go last, and then the chair typically goes last the discussion of what's going to be done with policy. But other than that, it's pretty flexible. People will go in different orders depending on where they want to be, and it's the secretary of the committee will will hash it out. It's nothing

really predetermined there. On the video conferences, UM, those are hald on a more ad hoc basis. UM. Sometimes on for emergencies that come up during the course of the between the in the regular scheduled meetings, but sometimes just because the committee wants to do a deeper dive into two two questions before coming together. And I always found those very useful when I was on the committee. UM. The thing is, you can't get everyone in Washington on a on an ad hoc basis, but so then you'll

you'll end up doing things by by video conference. You know, Marianna, I was noticing that you wrote to us ahead of this that you will be against the FED raising rates by a quarter of a percentage point. UH today Why yeah, So I have a thanks for the question, that's UH. I think I have a couple of reasons where I would be pretty cautious about raising rates at this time time. So one is that I continue to think there's more slack and labor markets than UH than I think most

members of the FOMC do UM. And the reason I say that is we've continue to see very strong employment growth UM. Most economists think that over the longer run, employment growth has to settle down something in the low hundreds per months hundred thousand per months as opposed to UM. The the the numbers we've been seeing which are really

closer to two hundreds. And so given that we've seen that kind of fast employment growth without seeing high inflationary pressures or wage pressures, that's really a strong signal that we have still a lot of slack left and labor markets, and the the committee should be really uh doing what it and to facilitate the that that taking up of

that flat by the economy. Well, but Marianna, aren't you a little bit concerned about these incredible enthusiasm that we've seen in stock markets and in junk bond markets and other areas that you know, frankly have stemmed from this low rate environment. I mean, isn't it the FEDS responsibility to try to uh inject some discipline into markets that may not otherwise be there. I don't see that. I never thought that as a FED. Fed's job. It's not the job that's Mandy to buy Congress. The job is

to promote max employment and promote price stability. Uh. Their concerns on the financial side, UM, the Dodd Frankine introduced a number of changes in the regulatory system. The FED has responsibility those through the Board of Governors. Uh if if IF a FETE is worried about financial institutions taking on too much risk. They have a number of tools that are disposal through through their regulatory function where they can can start to start to bring pure pressure to

bear on those institutions. It's not monetary policy is just way too blunt and frankly, just too an effective a tool to be used in that kind of kind of kind of disciplining device. Can you tell us a little bit about the process of selecting new presidents of the Board of Governors as well as those that sit on the committee, because I believe we're going to get a new president in the Atlanta FED, but then the president also has some appointments that could reshape the Federal Reserve. Right.

We just got announced this week that UM there was a new president for the Federals of Bank of Atlanta,

replacing retiring Dennis Lockhart. Raphbaiel Bostic is going to be replaced Dennis um And that appointment process is that the Board of Directors and the UH subset of the Board of Directors, those who are not bankers UH in Atlanta UM name appoint Mr Bostic subject to the approval of the Board of Governors in Washington and UH I think I think it's notable that you know Mr bostick Is, I think brings a great range of experiences both in the public sector and an academ um, and he is

the first African American to be a president of a reserve bank in the history of the Federal Reserve. So I think a lot of good things coming from this disappointment. Nanna, I wanted to I was just gonna quickly say about the government. The governor appointments I think of as being UM potentially much more consequential because the governor's in Washington always vote on every EFFEMC decision and they have this

larger regulatory function I alluded to earlier. UM Governor Trulo Dan trula Is announced he's gonna step away from the border governors in early April. That means there's gonna be three openings for for President Trump to to fill UM, probably in short order, and so that could give him a lot of It gives him the opportunity have a

lot of influence over over the border governors. So Nariana just to push all that back a little bit about idea that it would be a mistake for the Fed to hy quarter percentage point and isn't the market sort of acceptance of this pricing it in without a big disruption, basically a tacit understood the acknowledgement that it's the right thing to do. Oh you know, I markets are sometimes overly enthusiastic about about economic events, and sometimes they're not

as enthusiastics as you would like. You don't make monetary policy based on what the stock markets doing. I think you make monetary policy based on how you see the economy evolving. Um, you know, I continue to see that there's the opportunity for strong growth in America without having inflationary pressures, and and the ft should be doing what it can. I think the facilitate that. Um, that's that's uh, that's its job is to promote max employment as long

as that doesn't prove a danger to price stability. Thank you so much for joining us. It was really a pleasure to speak with you. Marianna Cultural a Quota Bloom Review columnist, professor of economics at the University of Rochester, and of course, former Minneapolis Fed president. We're broadcasting live from the Women for Climate Conference at Columbia University in New York City, and I am honored to bring in mural. Muriel Bowser. She is the mayor of the District of

Columbia and she joins us now on the phone. Muriel, I'm so happy to speak with you, in particular because Washington, d C. Is the first US city to establish a green bank and only the second in the world. What is a green bank? Well, actually, we're working to get

it established. This is a piece of legislation that I am going to introduce to my council UH in the upcoming weeks and as you mentioned, will be the first city UH US city to do it, and it will be a tool, as we see it, to create green jobs. We're going to expand solar power. It will help us lower energy costs for the government UH and reduce greenhouse gas emissions. It would also help us increase our investments

in clean energy for for the district. So this is a financing tool UM that will allow us to more quickly get money out into green infrastructure in our city. Mayor Bowser, you're the seventh elected mayor of the district. You took office in January of twenty and fifteen. What if you could speak to the role of affordable housing and its relationship to our conference Women for Climate and

the Effects of Climate Change. Well, we recognize and I was with Mayor Hidalgo in Mexico City recently when C forty met, and we so appreciate her global leadership and what she has put a focus on is the disproportionate impact on love climate change on women around the world UH as as it relates to housing and drought and all other types of issues. Women of color, women who live in poverty are bearing the brunt of drastic changes

in our climate. In our city, we have focused and we have been a leader in sustainability, and we recognize that mayors play a critical role when many times, and not just in our in our nation, but in others, there can be uncertainty at the federal level, but mayors have the obligation and the ability uh to make quick infrastructure decisions and procurement decisions that collectively, if you put all the big city mayorts together, in the small ones too,

will have the type of American policy that fights climate change. Well, Mayor Bowser, you know, you raise a good question, which is you know even and if maybe perhaps we hear a lot about the federal government rolling back some of the environmentally protective regulations that President former President Obama put in place, and we hear a lot about how the e p A is kind of, uh, perhaps going to

have a curtailed budget. You're implying that basically it won't matter if the mayors of big cities are able to implement their own, uh sort of climate change friendly or sort of environmentally friendly programs. But is that true? I mean, is there some kind of effect from the fact that the federal government is cutting the money that they devote

to reducing greenhouse gases. Yeah, I wouldn't say. I wouldn't say that it doesn't matter, um, because we do, for for example, in our city, Uh, we we get money from the e p A that funds a lots lots of grants in our department. UM. But we do have the ability to make up the difference. UM. So it's not sustainable to think that cities won't ever needs some federal support. But we are able to drive innovation invest practices that inform um the commitments that the federal government

is able to make. We are preparing right now to stand in the breach, uh, to to make sure that cuts in in federal grants to our to Our department, for example, are made up mayor bowser. Municipalities tend to have their own culture and their own dynamic in a variety of areas, whether that's culture or in politics. And I'm wondering if you could describe the special situation that you're in as the mayor of the district with the

federal government right there. I'm wondering if you could tell us about that relationship and how you believe maybe you do that uh it can be improved in change to help the people of the district. Uh. Well, we are proud of our status as the nation's capital and host too many federal government agencies, the White House and the Capital included. We're a little different in the federal structure and that we operate as a city, accounty, and a

state all at once. Um. So there are many functions, for example, that I have that other mayors don't have because we we function as a state, uh in many regards. UH. For example, had of meeting just the other day with the President where we focused on the federal workforce in their implement weather policy. So there's just some kind of practical things like that, uh, that that define our relationship

with the federal government. Uh, special events, people coming to the nation's capital to exercise their First Amendment rights or other ways. Um that we that we work with the federal government. I want to thank you very much for joining us. Muriel Bowser, Mayor Bowser the District of Columbia, and she can be thank you for covering this special event. Thank you at Mayor Bowser. What we're gonna learn this afternoon of course, Bloomberg Radio, Bloomberg Television. We'll be covering

it on Bloomberg dot com. Uh. The press conference following the rate decision is reportedly to be one of the most important signals of what the Federal Reserves timeline will be for when they will raise rates yet again, if I guess the world has not fall into well, let's let's let's get a sense of what Mark Stefanski is thinking. He's chairman and CEO of Third Federal Savings and Loan Bank in Cleveland. Mark, what are you hoping the Federal

Reserve will do today? Well, there's Uh, it's a double edged sword because if they do raise the race, that that will help all the banks because the interest uh, the spreads will be better. Um. So the consider um it's not so great. But if you think about things,

uh in terms of what's happened in the past. You know, I grew up in an era where interest rates at seven eight nine percent for a mortgage were pretty good, and so um, we just moved over We just over four for more thirty year fixed rate mortgages exactly, which still is pretty good if you compare that over the history of the last fifty six years. Even so, it's

still a good deal for the consumer. But Mark, how concerned, argued that the economy is not ready for it, and that a not the rate hike I mean, basis points, we're talking a quarter of percentage point that's probably priced into the market pretty fully throughout the curve. But what about you know, sort of what they might suggest afterwards, what are you hoping they indicate as far as their pace of rate hikes this year and what that could do to risk assets. Well, I'm very concerned of a

fast moving rate hike. Um. I don't think the world that kind etomy can handle something like that. I think the world economy is very very fragile, and if it wasn't, then we would have seen uh significant moves UH years ago. But UM, I still think that we have a fragile economy. I think there's a lot of momentum with the current administration in Washington. I think the optimism is there. I think the consumer confidence is UH in a good place. But we have to show that we're making gains on

the job circuit and the economy really is growing. Mark, I wonder if you could give people a little background about Third Federal savings and loan in your career, and also maybe just give us an example of one of your customers, and perhaps that would illustrate how things have changed. Sure. UM, well, my parents started Third Federal back in the midst of the depression. I'm a second generation CEO, chairman of the board, and I've been at this job for the last thirty

plus years. Um. We do business in twenty six states right now, and we're the largest mortgage lender in Ohio and we have stores in Ohio and in Florida. UM. Where what a typical UH customers thinking right now? I think two things are happening. One with the rate hikes UH that have occurred. I think UH because the consumers in general are concerned that rates are going to jump and jump too high. And priced them out of the market for a mortgage. So you see a lot of

people jumping in. But for the first time, and I think about ten years, we're looking at UH seasonality. And what I mean by that is traditionally this time of the year, especially in Ohio, you see a lot of people coming to the table buying homes and we haven't seen that in the last ten years. It has not been cyclical until this year. This is the first year since two thousand uh seven eight something like that that we've actually seen. What do you what does that mean? Well?

I think I think it's two things. That The first thing is is that there the consumer confidence is UH is back. UM. How long that will last? It's it's you know, it's it's up in the air, depending on the policies I think, and the administrative things that come out of Washington, and regulatory relief is one of them. UM. And I think UM people are very optimistic, so they're willing to take that risk. Well, and Mark, I wonder if I want to break in there, because there was

some data that was highlighted highlighted by David Schowell. Any manager that growth in loans and leases at commercial banks has pretty much come to a stop. It's kind of flatlined in the past few months. And I thought this was compelling. That flies in the face of the narrative that we've heard about how animal spirits are returning. How do you interpret this data? Well, I can't speak to commercial real estate, but I can tell you that insid

commercial loans and leases, right commercial. I can't speak to commercial loans and leases because we just specialize in home ending. That's all we do. Uh, we make more home loans and like I said, and anyone in Ohio, and that's all we do. We don't do credit cards, and we don't do commercial lending. But the consumer, the person on the street who's buying a house, is more confident today

than they've been in the last ten years. And just to show that, last last week, our applications were up thirty percent over last year at this time and that's the first time it's yeah, it's the first time we ever had a jump. And then preapprovals, which is people anticipating they're going to get into the housing market, anticipating they're going to buy a house, they're up about from

last year. So again, the seasonality is back, which is normal, and the consumer confidence seems to be there, at least in the housing sector. Well, thanks very much, Marcus Stefanski, great great insight there, Chief executive Generate Second Generation Bank, our third Federal Savings and Loan in Ohio. Up Women for Climate Conference. We are here at the Women for Climate Conference at Columbia University in the city of New York,

and I'm very glad to be here. Lisa Bramwitz. When when I think of Laureal, I confess I think cosmetics, I think lipstick, I think uh okay, but I don't necessarily think about sustainability and climate change. But here is we're going to introduce someone who's going to disabuse me of my ignorance. Alexandra Pault is the chief sustainability officer of Laureal, and she has graciously come in and jetted here from Paris via Poland via Toronto to finally arrive

this morning here with us. Thank you very much for being here. Good morning. Thanks, that's a long that's a long trip to make. And so what message do you bring, uh that you've been doing this you said twenty years. I can't believe that, but that's another story. But you've been doing this company. They're probably good creams anyway, tell us what message you bring about Loreal sustainability and what

people can take away that they may not know. Yes, UM at Loreal women gender equality is one of our core commitments, of course, and that for many years more than sixty of our brands are led by women. Almost half of our board the female So we are really committed to gender equality and that for a very long time. And we are also committed to fighting climate change. This is a core orientation of our company and that has resulted in already a sixty seven percent reduction of common

emissions UM around the world. We had an goal of target of minors in two thousand twenty and we reached minus sixty seven percent in two south sixteen. Well, what were some of the sources the biggest sources of greenhouse gas emissions at Loyale. Well, uh, that's at the consumer level. Actually, when you look at the life cycle of a product, it's when you use hot water during a shower to wash your hair. That's the biggest source of carbon emission.

But in our value chain that we can directly UM control, it's through the sourcing of raw materials, packaging, UM it is suppliers, it's production and distribution, and so we have worked on all our value change. So how much more expensive is it to be sustainably sustainability minded and and sort of to go to fair trade types of suppliers and other types of measures that you've taken. Well, um, actually,

we think that it's not more expensive. And we have demonstrated that decoupling carbon emissions from growth is completely possible because we during the time where we have reduced by sixty seven also put our production group by almost exactly. So we showed that you can the couple growth from your carbon emission, production increase from carbon emissions. And of course when you work on your carbon emissions, the first source of what you're doing is working on energy efficiency.

When you work on energy efficiency, you are saving money. That's very clear. And so one third of our savings and carbon emissions came from energy savings. So and then

there is another point. We think we really are convinced that without these commitments to sustainability, we are not going to be a performing company in company in the twenty one century, and Loreal is around for more than one years and we want to be around for another quite a while of time, and so we have to adapt to this changing world because otherwise we are not going

to be successful. The combination of brands that fall under loreal, if we were to align them up, they go everywhere, for professional brands to consumer brands, luxury George ARMANI you name it. Maybe lean everything right now as far as the packaging goes, that is such an integral part of

the relationship with the customer has with the product. Has The popularity and the emergence of a climate aware customer made it easier for you to rethink the packaging, to lower the amount of waste, to get rid of things that are not essential to the product. But maybe for a previous time, we're okay, but the needs to change

needs to be updated. Well. This is a very complicated question because what you ask is basically, is the consumer willing um too to change with change with us and um the question the answer is is as it's complete, it's complex. Some consumers are it's not the new normal yet. It's not the new normal yet. And basically what we see in studies around the world is that consumers very

often say we are very interesting in sustainability. We want a brand that is committed, but when they go to the shops, they don't think about sustainability in the moment that they have the pleasure of buying a beauty product. So what we are trying to do is to make more and more sustainable products that consumers still want to buy. So we are not making compromise on performance and desirability, and very often it's possible. So bigger is not always

more beautiful. That's already that, and now we have introduced, for example, we're starting to introduce a lot of recycled material in our packaging, which doesn't change the outside uh vision. And then our consumers more and more coming up that are completely into this new model of a sustainable lifestyle, that the new good life is going to be a sustainable life, and I think they will become more and more and more, and Loreal is going to be prepared

to respond to that market. You know. I find it interesting, especially given the new US administration stands and some of the environmental rules that we've had in place and some of the agreements, and I do think it's interesting that in corporate America it seems like, I mean, you've been working on this for for more than two decades. You know, what's the next front for corporate sustainability from your point of view, especially given what's going on and this sort

of backlash on a political level that we're starting to see. Well, I see also a lot of encouragement around the world, you know, because I think what is clear is UM, we cannot go back on that path UM. It seems quite too dangerous for the majority of people around the world. And I think for a corporate and for everybody, what is now at stake is scale, impact and scale. So UM we have to make this the new normal altogether. And so that means consumers, citizens, corporations, local governments and

also natural governments as possible. But this UM is really something that you can slow down, but you will not be able to stop it. Also because people think nowadays when you look into UM consumer studies that are working with people who show a little bit way that the good life, what people understand by the good life, is a more sustainable lifestyle. So people do not feel they are not going to feel attracted by the frenetic um

use of natural resources without respect. They feel guilty about it, they don't feel comfortable, and this is going to come more and more and more so the sense of history. Will will won't be able to stop it will just there's just some people who might slow it down. It's a fascinating topic. Thank you very much for being with Yeah, we really appreciate Alexandra Palt she sustainability officer at Loreal based in Paris, but tracked all the way here to

New York City. Thank you so much. We really appreciate your time. Thanks for listening to the Bloomberg pien L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.