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The former Fed governor Bessie two writes in the following, it would take something extraordinary to derail a twenty five basis point cut in September, the question, we've all got what it would take to make if fifty Bessie joined us. Now for more, Betsy, wonderful to see you once again. Let's start with Friday and that speech on Friday, Lisa, and I've got a similar question, and I think he might have the answer. Was the chairman speaking for the committee on Friday or speaking for himself?
So for the entire speech, he was speaking for the committee except for the one line when he said, my confidence has grown that inflation is on a sustainable path. And there he said my and that's very unusual for
this chairman. And I think what he was doing there was he was expressing his own opinion, but giving the committee room, not frontrunning the committee, but giving the committee room in September through the sep to all put out their own estimates of both where the various indicators are going to be and their confidence in their forecasts.
Bessie, how big do you think the range will be? In the summary of economic projections come September eighteenth. How wide is that range going to be?
The range of the projections themselves are the confidence. So the projections themselves I don't think are going to be a terribly wide range, or not more than usual wide range. But what I'm really watching for is the confidence, and particularly the confidence in the inflation forecast. So in the June projections there were just one or two participants who had more than actually normal confidence in their projections. All
the rest of them said more uncertainty than usual. So that's the confidence piece that I'll be looking for.
Betsy, do you think that it's appropriate for this federal reserve to be so disproportionately weighted to cutting rates at a time or we're not seeing true weakness in a labor market?
Well, cutting rates is right now only reducing the amount of tightness. It's not in any way becoming stimulative, and so I think it is appropriate to begin that, But I think they'll go fairly slowly and feel their way along. The one piece that I don't think there's consensus on is what is the level of neutral What is the neutral level of interest rates? Those that are neither stimulative nor restrictive, and I think they'd be feeling that went along to that point.
They also didn't really resolve the other issue, which was the theme of the whole conference, which was how much was monetary policy responsible for bringing down inflation and how much could it be responsible for preventing some sort of downside to the labor market in general. I mean, did we get any answers to some of the bigger questions other than simply a FED show came out and said, yes, we're going to cut rates, We're going to start the process, and we could potentially cut a lot.
So actually, I think he did address that question. The piece that he talked about is the importance of inflation expectations, and what I heard him say was, yes, you know, we were wrong on transitory. Once we realized we were wrong,
we acted. And so what I heard from that is so the FED might get the individual settings wrong from time to time, but its commitment to its mandate and willingness to act in furtherance of that mandate is most important for the confidence and anchoring inflation expectations, And that piece I think he declared victory on not necessarily inflation, but inflation expectations. Remaining anchored through this cycle of inflation.
Can we deal with inflation that contribution to actually bringing inflation down from eight down towards three. Let's see what's your impression of things, because in that speech on Friday, I think we certainly walked away with this idea that the Federal Reserve chair was acknowledging that a lot of the work came from elsewhere.
Well, the problem this was a supply side driven inflation anyway, So a lot all of the work was on the supply side, which effect can't really effect. All the VET could do was whole demand in check as best it could while supply caught up. And that's true for the labor market as well as the goods market. And I think they did that. But I heard in this speech he recognized that the reduction inflation has come entirely from supply, including on the labor side. So when you look at labor,
I don't think we have a weak labor market. It's coming into balance, but it's coming into balance because of improvements and participation and increases in immigration, both of which have a limit to how much they can continue to contribute.
Bessie Joke, appreciate it. Thank you. Former Fed governor Bessie Joke found the latest