Economy Is on Bit of a 'Sugar High,' Griffin Says

Watch Economy Is on Bit of a 'Sugar High,' Griffin Says - Bloomberg on Dailymotion

Transcript

00:00The Trump administration is very much aligned with seeing the success of the American worker.

00:04So a number of the policies that are being effectuated really are about the average American family

00:11feeling that life is better and working better for them.

00:15This backdrop is fueling much of the enthusiasm that we see in markets in the United States.

00:23And then, of course, we're on a program of both fiscal and monetary stimulus

00:29that you would expect to see in the middle of a recession.

00:33We're seeing right here, right now, in a period of near full employment,

00:38several years into the business cycle.

00:40So we're definitely on a bit of a sugar high in the U.S. economy right now.

00:44So broadly, have markets moved away from the tariff issues?

00:48The tariff issue is pretty much in the rearview mirror right now

00:51from the perspective of the market day in, day out.

00:54Now, the issues that relate to tariffs, in particular high inflation, are yet to be resolved.

01:01There's a sense of almost inevitability that the inflation genie is going to go back in the bottle.

01:10But I think that's a very premature conclusion.

01:13If you look at both the immigration policies, the fiscal policies, the monetary policies,

01:20it's a very pro-inflationary environment.

01:23And I think the markets are just way too calm about the prospects of a substantial move higher in inflation.

01:32Is the Fed right to focus on the jobs, the labor market, instead of inflation?

01:37So I think that is a really interesting debate.

01:43And I remember when Janet Yellen became the chair of the Fed,

01:48she had a very simple framework that she thought about.

01:51She thought about the fact that the U.S. had gone through one significant recession

01:54and the risk of another recession and the ensuing job loss and human capital atrophy

02:04that would go with a second adjacent or nearby recession

02:08would be incredibly damaging for millions of Americans.

02:12If you lose your job twice in just a few years,

02:15you really do become separated from the broader employment market.

02:20And that was the lens to which she made a number of decisions to be,

02:26both at the time and in retrospect, reasonably dovish in terms of managing interest rate policy.

02:34Right here, right now, I think that argument is a bit hard to reach.

02:39And the Fed's trying to make a decision between buying some downside protection on the labor market

02:45and managing inflation, and I think they're making a decision that puts them at risk

02:50if we do see inflation re-accelerate early into 2026.