Bloomberg Audio Studios, podcasts, radio news.
So here's the licest this morning, All eyes on tomorrow's CPI print, the first major day to release in weeks, expected to show inflationary precious mounting on the economy. The former Boston Fed president Eric Rosenngrant has seen it all. He joins us now for more. Eric, welcome back to the program sir, What are you anticipating to see? What do you expect to see tomorrow morning at a thirty easton time?
Expecting to see that both the CPI and the core CPI are at three point one percent. So for the overall CPI it was at two point nine percent before. That's a bit of an increase. It partly reflects some of the pressures coming from tariffs continuing to flow through so goods like apparel, furniture, sporting goods. But it's also that we're seeing food prices go up in a variety of areas, and I think that indicates that we're not
getting much progress on inflation. That this report actually is going to be a continuation of numbers that are at three percent or higher rather than moving down towards two percent. So that is a challenge for the FED as it tries to weigh how much emphasis to put on inflation and how much emphasis to put on what's happening in the labor market.
Well, Eric, let's stay on that theme. Are the sources of inflation that this Feder reserve can ignore?
I don't think it should ignore the labor market, while it has been softer, is still fairly close to the Fed's estimate of full employment. And in some of the areas, both in food prices, we've seen cost of electricity going up. Some of those trends I think are something we have to keep an eye on. And while there have been some negative pressures, for example, shelters come in a little bit better, natural gas is likely to come in a
little bit better. I think the overall pack. I mean, we've been above the two percent inflation target for over four years, so at some point the FED has to start seeing some improvement inflation. So I would not be somebody who would view this as because it's partly coming from tariffs, that it should be ignored.
Eric, is a lot of this inflation policy induced?
Well, I think it is partly policy induced. It's certainly fiscal policy induced. So tariffs definitely have an impact on what the reported prices are going to be. I would also say that the immigration policy is a policy that probably means that some of the food prices have gone up as labor costs have gone up for people that are trying to harvest crops, and fruits and vegetables have been an area in particular where we've seen rising prices.
In terms of monetary policy, I think the question is how much of the pressures that we're seeing have been accommodate. So the FED thinks it's restrictive, But if you think that the economy is more productive and that AI may contribute to that productivity, then it's a little unclear that we should be going back to the same interest rate that we were at prior to the pandemic. So the summary of economic projections that the FED puts out is assuming that we'll see something FED funds rate in the
long run closer to three percent. So that would indicate a lot more room. But the fact that we've seen so little progress on inflation for the last six months indicates that you shouldn't be so confident that you know exactly what the real interest rate ought to be.
Well, not only that, the fact of the matter is the FED will be sitting down and they won't have the labor market report. They're just going to have this inflation report. Do you think it's a mistake if the Fed cuts interest rates next week?
I think that given the softness and labor market, I can understand a twenty five base point cut. I would highlight that while we're getting the CPI report, a lot of government workers left their jobs at the end of September, and a lot of the source data may not be available, So this CPI report probably is going to be using more estimated results than normal. It will be interesting if the report highlights that this data may not be as reliable,
which means it could be noisier. And if it's noisier, it could be a surprise on the upside or the downside. But it just says, as we continue to have pressures on statistical organizations having enough people to gather the data, that this data may become noisier and harder to rely on.
Eric forgive the snak, but how reliable was the data when we had it?
Is it? Sorry?
How reliable was the data when we had it?
I think the CPI report was a pretty good report. So I mean they had significant amount of surveys across the country. They have had to cut back over time on the amount of survey work that they do. They've closed some offices. So I think that over the last few years it has deteriorated a little bit. But I think if we continue to be cutting back on statistical agencies, it'll get more unreliable as we go forward.
Eric here Jent, thanks for being generous with your time this morning. We appreciate it. The former Boston Fed President Eric Rosengren