00:00Coming out of the last two years, the focus seemed to be on the unemployment rate, on the labor market
00:06and cutting rates to get ahead of a problem with the labor market.
00:10But listening to you this morning, it sounds like you're more concerned about inflation, that inflation may have become the
00:17primary risk.
00:18Yeah, I would say in my head in 23 and 24, since I've been on the Fed, inflation has never
00:28gone away as a central focus.
00:32When the labor market is deteriorating, it comes back in a major way.
00:39But I'm a little more concerned about inflation right now because I think the job market is pretty steady.
00:47I think growth is pretty steady.
00:50I think there's some promising stuff in the inflation reports, but there's also some warning signs.
00:58So, as I say, I'm not hawkish about rates.
01:02I'm pretty optimistic that we can get rates down further, multiple cuts in 2026, as long as we see the
01:12progress on inflation.
01:15Forecasters have been forecasting that it's supposed to start coming down.
01:18And I just want us to see some progress on that front and not get ahead of ourselves.
01:25Well, you talk about that a little bit, and it's a question I asked Jay Powell once.
01:28It seems like every time you put out a summary of economic projections, the economic outlook by the various members
01:34of the Open Market Committee, the 2% target gets hit two years from now.
01:38The next one, it's two years from now.
01:40That's exactly what we don't want.
01:41So what goes wrong?
01:43A lot of things can go wrong.
01:47In this case, what I want to make sure is not going wrong is that we need inflation not to
01:55be persistent.
01:58The part of inflation that has come from tariffs is supposed to go away, is supposed to be transitory.
02:06And when you see things like the forecast say inflation is going to peak out and then start falling by
02:15the end of 2025, and then that moves the goalpost.
02:21Well, maybe it'll be the first quarter of 26.
02:25And now they're saying, well, maybe it will be the second quarter of 26.
02:29That's not a great sign.
02:31We need to see, we should see, especially on the good side, if the tariff inflation is transitory, it's supposed
02:42to start going away.
02:44And as soon as we start getting some evidence that we're back on the path to 2%, as I say,
02:51I think rates can still keep going down.
02:53And if you look at the at the SEP dot plot, a large group of the committee thinks that where
03:00rates will eventually settle is still well below where we are today.
03:06It's just we we must get inflation down from this 3% level that we've been stalled out at for
03:16now a year or more.
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