The market's already pricing in September with a high degree of certainty. What are you really waiting for at this point?
Why takes the additional risk of the community deteriority further So, you know, the end of the day, it's probably not going to make a big deal, a lot of difference.
But I think you know, given the fact that the market expects the FED to cut once that decision.
Is mostly made, and I think you heard today it was mostly made, then why are you waiting for?
Why are we waiting? Here's the latest investors turning their attention to the data following yesterday's FED decision, the July payrolls report you out tomorrow, and CPI coming in just two weeks time. Fedchaed Jpower waiting for the numbers before committing to a rake cup. The former Kansas City Fed president Esther George right in this. I found the chair leaned pretty clearly to confirm market expectations for a September cup. While September looks like the meeting to take this action,
I think this room to be patient. Esther joined us now for more. Esther waterf to catch up with you. It's been far too long. Thanks for being with us. I want to talk about that word you've used, patients, What underpins that patience? Why should we have patience?
Welcome morning. I think my view on this really comes from the fact that we are looking at an economy that is growing and by the reads of the second quarter growing well above it's sustainable long run growth. You've got a strong labor market, and you still have elevated inflation. And I think that combination reminds me that the fedce mandate is a long run objective. And just as we saw earlier this year, the market had priced in a number of cuts only to have to pull back on that.
So the central Bank's job is really to pay attention to the data. And as that gets closer, of course, that's going to be more difficult for them, and they recognize that.
How big is the risk that we take that strong labor market for grants it?
Well, I think you're always looking at this because we don't know with any great certainty where that equilibrium rate is for the labor market. Obviously, we came out of the pandemic during that recovery with a very tight labor market, and so as we watch it normalize, the space between normalization and weakening is one that policy makers are going to be very attentive to. So we'll get a report tomorrow. It will give a clue. I don't expect it'll be
definitive and by any means around that. But it is the collection, the aggregate of these reports that begin to give the Committee a better sense of just where that labor market is right now.
Ester, you get the sense that this Federal Reserve still embraces the idea of transitory in that basically the inflation was largely due to the pandemic. It's come off the boil, and now some of the ramifications, the ripple effects are just being worked out of the economy.
I think that could have a lot to do with it. Lisa, you did see tremendous supply adjustments, and it had been some time since we'd had to pay attention to the supply side of the economy. So as we watched supply and that was true on the labor side, certainly good on the good side, begin to adjust, that creates a challenge, I think for the Committee and understanding just how restrictive
is our policy. How do we understand when the economy is approaching an equilibrium, and I think, as they've noted, they are close, those risks are coming into better balance right now, and now, judging how tight their policy is relative to the steady state of the economy, is there real challenge And we heard that yesterday too soon versus too late and making adjustments to that.
It seems like the market really believes that the risks at this point are greater potentially on some sort of intereration in the labor market than an increase a surge and inflation. I'm wondering if you think that maybe the Fed would have been prudent to push back just a little bit on that base on what you're seeing, considering that you believe that maybe there should have been a little bit more patients, kind of a little more discipline and viewed on the market.
Well, I would agree that the labor market again is coming into better balance for this committee, and you will have to look at some of the subtleties that come in underlying that labor market in terms of the levels
of activity and the momentum that you see there. But at the end of the day, committee is faced with an elevated inflation rate relative to the target they've established and the credibility they seek around getting back to that, and in the long run, as we've heard many times from both the chairmen and others, that sets the conditions
for a healthy labor market long run. So yes, near term they're going to be watching a lot of those signals, but the real issue, I think at the end of the day their inflation.
Mandy, So, I'd like to do two things. I want to share a quote with you, and then I'd like to lean on your experience on the committee. You've got plenty of experience of understanding how all of this works behind closed doors. The stuff that we don't see this is what ever Core had to say. We think in practice it's not very data dependent, and view the cautious evolution of the statement as intended to carry hawks along and avoid dissents. As in your experience when you hear
stuff like that, how true is that? How do things come together on the committee?
Well, it's true. This is a committee that is consensus driven. They must make a decision and the nature of a large committee with differing views is to try to achieve consensus at some point. That doesn't mean you always get unanimity around that decision, and I think anytime you begin to approach what looks like I think, in their words,
better balance, things coming into balance get more difficult. It's not as clear cut as it was when you know you have to ease, or it's not as clear cut when you see an inflation problem emerging that you have to address. And so I suspect there is challenge within the committee of trying to reconcile views and to try to bring a solid consensus to whatever the decision will be at their next meeting.
As to this was wonderful and hopefully the team gets to see you in Jackson Holle as we used to as the George there the foremost kinds of City Fed President on the latest Fed Reserve decision