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I'm pleased to saying that we are now joined live by former Kansas City FED President Esther. George Esther, thank you so much for joining us today from where you sit as a former regional FED president. Do you see this as a legal dispute between President Trump and Lisa Cook, the private citizen who applied for mortgages before she was named to the FED board? Or is this more dispute between President Trump and the Federal Reserve as an institution.
Yeah, well, good afternoon. I think clearly this is another step in an ongoing pressure and attack on the institution in terms of the authorities of the Executive branch relative to the Federal Reserve. And so however this plays out in terms of the details of the specific case that's been brought forward, I think what's at stake here for the American public is really to understand who will be influential in the decisions that the Federal Reserve makes in the years to come.
And personnel determines policy, as we've heard so many times from this administration, and the concern here is that the President will next target the appointments or the renewal of appointments of regional FED presidents in February of next year. How concern are you about that, Well.
I think it would be very concerning, and I'll tell you why, Scarlett. If you think about the origins of this institution, they were firmly anchored in making sure that political pressure would be as limited as possible in terms of the critical decisions that the Federal Open Market Committee
has to make for the long run. And so the idea that you would structure the institution in a way that would protect that long run view and not drive it in the direction of short run decisions was critical, and it proved to be relatively durable over the last
one hundred plus years. So that's what's at stake. I think as we look at how this unfolds, is how will the decision making process of this institution play out and really take a more long term focus as opposed to shorter term interest and esther.
How much of a distraction is this for FED officials. Again, we do have a closely watched FED decision next month. Given the back and forth with President Donald Trump.
Yeah, so there is a lot of noise going on, and I think it's most unfortunate because there is already enough uncertainty that's coming at the decision they have to
make relative to the performance of the economy. This is a time as the economy is showing shifts, whether it's from policy, whether it's from cyclical factors, that you really want the Committee to be able to focus on the debates they will be having at their meeting and September, and I suspect they are doing their best to spend their time focused on those key issues so that when they come to the table in a few weeks they can really make those decisions in a manner that serves
the public, serves the economy longer term.
And with that in mind, how does cutting interest rates next month? Again, the market's pricing in an eighty five percent chance, we have inflation still hotter than people were expecting, we have a jobs market that is strong, and consumer spending showing no signs of slowing down. So what does that signal if and when we do get a FED cut next month.
Well, I think that's at the center of the debate. And we've heard the narrative that has come out of the committee talking about the balance of risk, where they see upside to inflation where they see downside potentially to the jobs market. And of course next week we will get another piece of what I call the economic puzzle, to see how is the job market faring as they come into this meeting. So the economy looks to be
performing pretty good. The decision is do they see something ahead that suggests the economy will slow in away the job market will be damaged in a way that requires them to ease policy at a time when inflation is holding in there pretty strong.
You point out the jobs report that's coming out next week. We know that the president fired the head of economic staticis statistics over at BLS, and we don't know whether that will affect the quality of the data immediately or in the long term, but it does open this door to doubt creeping in over the quality of that data. If you are sitting fed president still, how would you broaden out your reliance on other data?
Well? As a regional fed president, Scarlet, you know that there were a lot of confirming sources of data, so obviously you do rely on official statistics to guide your understanding of the economy. But when you serve a regional area, as I did, some seven states. You spend a lot of time talking to those that are working in the economy. How are they making decisions six months ahead, twelve months ahead, which give you tremendous insights to things like hiring, to
things like pricing for their products. So that is a key component. It has always been a key component, and I think at a time when you're beginning to see a transition around thinking about the stance of policy, it becomes ever more important for this committee to lean into those anecdotal as well as their official statistics.
Right on the ground research that keeps you close by to what your region is telling you. If the President successfully remakes the FED to reflect his priorities, which is lower rates and a lower rate cycle overall, what would that mean for debates on things like the neutral rate, the two percent inflation target, the framework overall? Do they just become academic discussions and not as relevant to the actual policy making.
So Scarlett, I don't know how those conversations will unfold, obviously, but I think the point you make is this is an institution, as with many institutions, that we want the public to trust. We want the public to believe that the decisions are made in the interest of long run economic stability for this country, that growth can be promoted, and if people begin to see cracks in the ability to trust an institution making decisions on that basis, that
can be problematic. So we will continue to hope that people that come into these roles will carry out that tradition, carry out that very important role of focusing on what serves the long term interest of this country.
Sir, we really appreciate your joining us today. A Sir George is a former Kansas City fed at President. Thank you so much.