The former Kansas City FED president as the George Ester. Welcome to the programmer, So wonderful to hear from you once again. How difficult is life about to get at the Federal Reserve.
Well, it's never an easy path when you get to a time like this. But remember, Jonathan, this institution was by design anticipating that there would be political influences on it, and so a lot of safeguards will put around it to allow the individuals that sit around that table to really maintain their focus on the American public and the mandate that was given to it by Congress.
There is a confusion though as to giving effect. Is that a lot of the potential proposals would have a fundamental effect on the trajectory of the economy, and that's certainly what the market seemed to be responding to. Do you think if you were on the Fed you'd be rethinking just how much further the Fed can cut?
Well, there's no question, Lisa, that you have to take into aunt fiscal policies and the impact they can have on the economy.
And of course, when you're making a forecast.
You have to be thinking about what are the risks around that forecast? Whatever baseline you set, you have to be thinking about what lies ahead in terms of setting a path, and I thought yesterday the Chairman was pretty clear that he wasn't going to offer any forward guidance about what comes next, and I think that's really.
The right way to handle it at this stage.
At this stage, December isn't going to be so easy because they do have to release a new statement of economic projections. I'm sure that you are very glad that you don't have to offer up yours. How do they signal a potential scenario analysis around something that the market is actively considering and responding to.
So I think where we will see that.
Certainly you could see it play out in the median assessment of those nineteen forecasts, but you'll also see it in the state where this committee will talk about the balance of risk and they will talk about their own assessment of what the path ahead might look like. Today, they're relying on what they know, which is we have the economy that's handed to us. We are saying risk
are roughly in balance. You heard the Chairman say several times what the trade offs are between going too fast versus too slow, And so it will be a while before they get any clarity on what steps will be taken in Congress in the administration that will begin to bend the curve of those forecasts.
As they can. We rewind and play the tape back, because you've lift this, you lift the tax cuts in seventeen, and you lift the trade war in eighteen. And we're asking the same questions of people now that we were asking in the back end of sixteen when President Trump was elected to his first term. Could you share with our audience your experience and at that time time how long things took to really start to consider what was happening on the other side of Washington.
So there's the real challenge for the committee when you were watching.
How fiscal policy might play out.
So you can see today, for example, if you're thinking about tax cuts, as we were back in twenty seventeen, at what point do those feed through the economy? When do you feel their full impact? And importantly, what else is going on that is going to counter whatever you.
Might estimate those effects to be. So it is really.
A process as it was when I was at the table of saying what are the various scenarios where might we see more immediate impact, and then what tends to play out over a longer timeframe, also taking into account other things going on in this very large and complex.
Economy that we're trying to make an assessment of.
So that final point, I think is the more important one. The terriss back in eighteen didn't turn out to be as inflationary as some people warned. Is there reason to believe that, given the backdrop now, given the current context for things, that it could be more inflationary this time around?
Well, I think, by the Fed's own admission, there are upside risks to inflation right now. Inflation has not returned to target even as it has come down. We are looking at a fiscal situation that is likely to bring upside risk.
Here.
We're looking at really global trade and changes and shifts. There, so many aspects of what we see playing out today, I think give good reason to be cautious to think about those upside risks even as you watch any given action taken that could be pro inflationary.
As the George, thank you for sharing your experience with us this morning. We appreciate it. As always, the former Kansas City FED president there as the George