Welcome back to the Bloomberg Bench, my podcast, a show about the global economy. I'm Daniel Moss, Bloomberg News Executive editor for Global Economics in New York. It's September twenty one, and this edition is devoted entirely to the Federal Reserve, only, the world's most powerful economic policy body. Joining me and my colleagues Scott Landman and Matt Bosler in Washington, who
have been dissecting this decision for the past couple of hours. Scott, Matt, you're not quite up for air yet, but you're almost there. We're just coming up right now. It's been a busy day so far, but we are ready to hash it out. The Fed walked up to the line but didn't cross it. Interest rates held at the current level again, but with more than a hint that something will come soon, possibly as early as December. Why not pull the trigger today?
Well that's a great question, you know, because Janet Yellen made very clear that they think they're going to be in a position to do so in just a matter of weeks, as soon as December. That's twelve weeks away, so why not today? And the answer she gave was basically just that we didn't really feel like we needed
to do anything today. We have some time here. Things aren't getting away from us, The economy isn't overheating, so why not just sit back and collect some more information, make sure we're on the right track before pulling the trigger and actually raising rates. Ultimately, what it seemed to come down to was, you know, and she actually said this, that perhaps a rate hike would harm the economy, would harm some of the growth in the labor market and add to what she called slack in the market. So
you know, that's what they don't want to do. And it sounds like it was a fairly fierce debate as far as these things go. You know, Yelling led the way in deciding not to pull the trigger. At the press conference that followed the meeting, the first couple of questions seemed to be devoted almost entirely to this issue. If you're confident there will still be a right increase in t and that's what the famous dots show again, what changes between now and then? And inevitably, given the decision,
she was asked about the election. Yeah, and I think these questions kind of get to an important point, which is just that you know, not a lot is going to change between now in December. Like you said, so, a lot of the message that we got from Janet Yelling is maybe the economy is not ready for a
rate increase. She gave all of these reasons why they didn't need to go and so sort of the sore thumb sticking out there, if you will, is this desire or expectation that they actually will raise rates as soon as December. As much as she can say, and she repeated many times that the FED is not influenced politically, It takes no political considerations into account. You won't see
anything in the transcripts. You know, it's going to be hard for the broader public to accept that, and you know, we're still likely to see some blowback from people like Donald Trump continuing to accuse Janet Yellen and the FED of acting politically to support Democrats in an election year. Now. In her answer to one of those questions at the press conference, she said, the FIT does not take into consideration partisan politics. Is it reading too much into it
to talk about the modifier partisan. That's not to say they don't take politics into account. Am I looking at
this too closely? There? Was another question in the press conference that tried to get at the issue more broadly, which was, do you think uncertainty surrounding the election in general is having an impact on spending on the economy, And that's something that some of Yellen's colleagues have suggested maybe the case, But when she was asked about it today, she said she wasn't really aware of any evidence that would suggest the election is actually weighing on the economy.
So it's unclear how top of mind that really is, even though you actually have some reports that confidence indexes things like that that do show that people are thinking about the election and it does seem to influence their views on sentiment, right, Matt, Yeah, that's right. Even one of the fat's own reports, the Beach Book, which is just a collection of anecdotes from business contacts they talked to, has raised this issue. So she wasn't she was keen
to downplay that today. I would say she's she's being excessively, excessively cautious. That's very cautious in trying to not talk about the election, and clearly she's sensitive to any anything about that. Three voting members of the Fed's Rate Setting Committee dissented today one Esther George from Kansas City, not a surprise. She's been in that position before. Let's talk a bit about Eric rosen Grin from Boston. Now he has dissented both on the Dovish side and now today
on the hawkish side. Should he get Man of the Year award for his independent thought in action? Yeah, that's a good question. You know, he's like one of these fat officials on the committee who's really undergone a bit of a shift. Whereas, like you said, before he was seen as more of a dove and now he's seen as as more of a hawk. And one of my colleagues made a related point, um just a few minutes ago, we were talking about it and the fact that Yelling
had three descents today from within her own committee. In addition to all the external pressure, it took some guts for her to do what she did as well. So I think there's some of that on both sides of the debate right now. Well, two descents is not unusual, and as we just said, Esther George from Kansas City not infrequently finds herself in that position. Could rosen Grin's descent when the history of this meeting is written ultimately be the thing that stands out. M That's a good question.
He stumped me on that. Yeah, I mean as an indicator of the degree of tension behind the scenes, and as a directional indicator. Here we have even a dove voting for writing. Chris, that's exactly the way to put it. I mean, just the fact that you have three descents and enough is one thing, and that's a relative rarity
in recent fo MC history. When one of them is a guy who clearly expressed more dubbish views in the past and even dissented that way at a couple of meetings, it does show that the overall shift is moving in that hawkish direction, and that creates more tension the committee. It does take some more effort, willpower and intellectual argument
to lay that out and push against that. Now, as our listeners can probably gather by this conversation, there's an entire industry to vote it to passing every word, every comma, every vote. Let's take this out of one land for a moment, Matt. What does it mean for you personally? You're at the start of your working life. Yeah, that's right, and I live in New York, so I'm excited that, you know, property prices are no longer going up as quickly as they used to be. So it's a good question.
Not much has really changed, right, But Um, the Fed seem to be trying to get things going faster still, even though they're acknowledging that monetary policy doesn't have necessarily a lot of scope to do that, they're still trying to get the economy to a point where things are going a little faster for everyone. Um. And so you know,
hopefully that works out. And when you say things going a bit faster for everyone, we're talking about this issue of how survey after survey shows not every American believes or can feel that we're close to full employment. Right. And you know, you've heard a lot more of this coming out of the FED recently, where they've been talking about differentials between unemployment rates for white people and for
black people, for example. Uh, this is stuff that the FED did not historically talk about, but lately they have been more cognizant of addressing these issues, putting them out in the public, talking about the distributional consequences of economic policies. Um. And so, especially with Janet Yellen, given her focus on the labor market and her background, her previously stated desires. She's getting exactly what she wants right now, which is
bringing some of those people at the lower end back end. Finally, as the economy starts to run a little hotter, and even if they did increase interest rates today, historically borrowing costs are still at very low levels. It's really mean anything outside this building. As Matt was just showing me this morning, the rate hike that the Fed did last December has had virtually no impact on borrowing costs and
savings rates. In fact, they've actually come down. And let's due more to global forces that have kept interest rates low around the world and that's spilled over to the United States. Now. If they do hike, though, something's going to have to give, and we could actually see a bump up in the savings rates the kind of people who have money market accounts, savings accounts, those kinds of things, especially older folks, and that might actually give a boost.
And and at the same time interest rates, borrowing costs are still probably going to stay relatively low. So they hiked it could still be a win win for the economy. This won't be the last time we're discussing monetary policy on this podcast, but between now and when we do, hopefully conditions on this podcast will strengthen somewhat further. We'll be back next week, and until then, you can find us on the Bloomberg Terminal and Bloomberg dot com, as
well as iTunes, pocket cast, and Stitcher. Why did they take a minute to rate, not interest rate, but rate the show so more listeners can find us and let us know what you thought of the show. You can talk to and follow us on Twitter at at Daniel Moss, d c at scott Landmann s c O T T l A N m A n at bows b o E s underscore, love your Twitter hand on Matt, See you next time.