00:00What's your assessment of developments in the Middle East and ultimately what it means for you and the committee?
00:04Yeah, I mean, I guess that's exactly the thing is what you're going to see is you're going to see
00:08a spike in gasoline prices.
00:10That's what the American citizens are going to see when they go to the pump and they're going to stare
00:13at it and be a little shocked in terms of how things go.
00:16But for us, thinking about policy going forward, this is unlikely to cause sustained inflation.
00:22There's one reason we don't look at energy prices when we look at core.
00:26Core is a better predictor of future inflation.
00:29You're going to see this.
00:30But once these kind of supply chain issues that you laid out, Lisa, once they unravel, this will start coming
00:36back down.
00:37So it's kind of very odd to think about the Fed maybe changing rates six months from now based on
00:43this.
00:44If it's unwound in a like, as you said, Jonathan, a couple of weeks or even two months, it's not
00:49going to be a big factor down the road.
00:51So this is why we never look at energy prices.
00:53They bounce up.
00:54They come back down.
00:55It's not that it's something that we don't feel sympathy for people, that that's what they have to pay when
01:00they put the gas in their cars.
01:02But for us, thinking about the longer term in terms of policy, this is something we're just going to have
01:06to kind of put off for now.
01:07When does it become something bigger, if it's all?
01:09It becomes bigger if it becomes more permanent, because then what's going to happen, you're going to see this jump
01:14in prices.
01:15Then it'll start bleeding through to other parts of the economy.
01:18Energy is a big part.
01:19It feeds into everything else.
01:21And then somehow those energy costs get passed along like everything else.
01:24So that's what you're more worried about.
01:26Economists on any given day, Lisa, Mike, myself, and they'll talk about the experience of the 70s and coming out
01:31of the pandemic.
01:32And they'll say things like that officials of the Federal Reserve are somewhat conditioned, scarred by some of that.
01:37Is that your experience of things?
01:38Well, in the 70s, remember, we didn't just have one.
01:40We had massive oil shocks.
01:42If you take 73, the price of oil quadrupled overnight.
01:46It went from $4 a barrel to $12 a barrel, or it went from $3 to whatever the numbers were.
01:52But that was a shock, and it never came back down.
01:54And then there was another one.
01:55Every time you turned around, there was another oil shock.
01:57Then Iran oil embargo in 79.
02:00So that was kind of the problem with the oil shocks.
02:02They just kept coming and coming and coming.
02:04So it's not clear this will be one shock after another after another.
02:08So that's why I'm more willing to say this is, I hate to say it, but more like a one
02:13-off event than what we saw in the 1970s.
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