00:00So the market, the labor market's just not strong enough to worry about it?
00:03I think the labor market still could use additional support from monetary policy,
00:07and that's why I dissented last meeting, as I have continued to dissent for all previous meetings.
00:11How lonely were you at that committee meeting just last week,
00:14voting for a 25 basis point reduction in the face of an energy shock?
00:18How robust was the conversation around the table?
00:20Look, I think a lot of people around the table, like me,
00:23were hesitant to draw conclusions from the oil news thus far,
00:27because, as I said before, we have to look 12 to 18 months out,
00:30not what happened to the oil price yesterday, right?
00:32And so looking 12 to 18 months out, there's still not enough clarity
00:36to think that monetary policy itself should adjust in response to what's happened.
00:40Well, check out the all futures curve. That has changed.
00:42I've just had one eye on December over the last three weeks or so.
00:45That's gone from the 60s and threatening to break out into the 90s at one point earlier on this morning.
00:50That's a change. That's a real step up, no?
00:52It has, and I boosted my, you know, in the summary of economic projections,
00:55I boosted my inflation dot for the end of the year to 2.7 percent, reflecting that in part, right?
01:00So there is some expectation of higher headline inflation.
01:03However, as I said before, I think it's way too early to draw conclusions
01:06that it's bleeding beyond headline inflation in a way that matters for monetary policy.
01:10Don't forget, higher oil prices also depress demand, right?
01:13They take money out of the pockets of consumers that we're spending on other goods and services
01:16and redirects it towards gas and other energy costs.
01:19And that depresses demand and causes unemployment to move a little bit higher.
01:23That offsets some of the increase in inflation.
01:24One of your colleagues this morning, Austin Galsby of the Chicago Fed,
01:28speaking to the press saying we could see a circumstance where we'd need to raise interest rates.
01:32How high is the bar to raise interest rates?
01:34What kind of circumstances would you personally need to see?
01:37Yeah, so I just laid out a couple of them before, right?
01:39If it looks like the oil shock is bleeding into inflation expectations beyond the first year,
01:45then you get really concerned about second-round effects.
01:47Or it looks like you're starting to cause a wage price spiral.
01:49Then you get really concerned about second-round effects.
01:51First-round effects are not something you traditionally respond to as a central bank.
01:55Now, I'll say one thing beyond that, which is that these oil shocks have been things that this Fed has
02:01looked through for a long time, right?
02:03It would be highly unusual for the Fed to start looking through them now.
02:06And when you think about what happened in 2021 and 2022, we did have negative supply shocks, like the oil
02:12shock from the Russia-Ukraine invasion.
02:14But in my view, part of the reason why it was able to reverberate through the economy the way it
02:18did was because policy settings at the time were very different.
02:21Monetary policy and fiscal policy were at all-time historical accommodative levels.
02:26We were doing $120 billion a month of QE.
02:28We were doing $2 trillion fiscal packages at a time.
02:31That's not the case right now.
02:33We're not hitting the gas on demand that would interact with the higher oil price in a way that would
02:38reverberate these prices through the economy now.
02:40That's not the case at all.
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