Transcript

Nick Timiraos: Joining us for the next session. My name is Nick Timiraos, I cover the economy for the Wall Street Journal. And I want to thank Sabu for having me to moderate this panel with Austin Goolsbee, who is the president of the Federal Reserve Bank of Chicago. Austin previously served as the chairman of the Council of Economic Advisers for President Barack Obama, and was a professor at the University of Chicago. So, Austin, let's get right into what we're seeing in the economy right now. But last week, there was an inflation report that showed that the CPI showed that now for three months, inflation has been a little bit firmer than maybe what people were expecting it after we had seen better readings at the end of last year. My first question to you Austin is have the the first three readings this year on inflation changed your view about how long it's going to take to get inflation all the way back to the Feds 2% goal.

Austan Goolsbee: Mechanically, yes. Just the way we add up the inflation. It's it's, it's going to make it it's going to take longer I always say one month is no months, but you know, three months that's that's at least one real month. So if you take a broad view, inflation got way above where we were comfortable with and it's down a lot. 2023 was an excellent year for the mandate for the dual mandate that inflation fell as much close to as much as it's ever fallen. And we did that without having an increase in unemployment, and without a recession, which is mostly unprecedented. But now that we're seeing after six, seven months of very strong improvement and close to 2% inflation, something that's well above that. Now, I think we have to recalibrate and we have we had to wait and see. I mean the it doesn't look like it's going to be as rapid as it looked for the previous six or seven months. And I always say that I'm part of the you know, I'm one of the proud data dogs. I looked up what's a gift, a group of dogs is either a pack or a kennel. And so if you want to join the kennel of data dogs, the What's up first rule of the kennel if you are unclear stop walking and start sniffing and with these numbers we need to do more sniffing to to get the get where we are.

Nick Timiraos: Now the Fed is always looking ahead right you have to set policy based on the forecast for where you see the economy going did and so maybe, you know, a couple months ago, I don't know where your forecast was, but your colleagues, you know, put down projections and I think it was 2.4% core inflation at the end of this year that moved up a little bit. In March 2.6%. What difference does it really make? If core inflation is at 2.4 or 2.7%? At the end of this year, should that really make that big of a difference to how you're setting policy? I mean, to be clear, inflation was 5% Almost 5% A year ago.

Austan Goolsbee: He is look we're gonna get to 2% We said it that's the that's our stated target the mandate. We must in my view, we're credibility purposes and for content purposes, get inflation back to 2% if as the statement that the that the committee put out says we want to have confidence that we're on this path to to if you are confident that you're on a path to to the timing one month is no months you know, as I say if it's 2.4 in December, but it was 2.6 in November that that's not where it is. It's but it's the broadly are we on path to 2% in a reasonable timeframe. And that's something that we got to they've got to pay attention to. And I'm not it brings relief to my colleagues that I should have said at the outset. I don't speak for anyone else on that committee. I can only speak from my own opinion but in my opinion as a group, we're we don't just mechanically follow Hey, what was the CPI last month that should determine what the FOMC move should be next month? I think that would be kind of a overlies that will be overly indexing on on one number. Right.

Nick Timiraos: So the Fed has a dual mandate, price stability, which you've defined as 2.0% inflation over time, and then maximum employment, which I would interpret as a reasonably healthy labor market. Last year, early this year you and you'd refer to this sort of soft landing as a golden path that we're on this golden path towards being able to achieve have the economy achieve those goals. Without without a big trade off, right. There has been a fear that maybe there will be a trade off. Is that fair to say the golden path would would essentially be not much of a trade off but

Austan Goolsbee: yes, I was this was a reference to 2023 that if you take the history of not just the Fed but central banks in all the advanced economies, they virtually never got inflation down significantly without a deep recession. So the trade off you're describing and I said through 2023 That because of supply chain healing, because labor force participation was rising, because productivity growth looked like it was relat stronger than trend and because fed credibility had not gone away. So inflation expectations remained basically anchored at 2%. That opened a door to the golden path that you could do, you could get inflation down without the trade off, and we did that so that happened in 2023. That was a golden year. It's a It's definitely more difficult for 24 Because as the supply chain heals is not going to heal again. So the part that comes from that will be smaller. I still think that the labor force participation and higher population growth because immigration that we didn't, some of those, make it a little Is it complicated? It's not complicated, but they make you should just be a little hesitant to over interpret quantity numbers as an indicator of overheating. Okay, so the center of the trade off, conflict comes if the economy starts overheating. Then you got to decide do we want to do we which side of the mandate do we want to emphasize? Right? In a way it's been easy? Not easy. It's been straightforward, because we've been doing great on the employment side of the mandate unemployment rate 3.8%. Many of us are old enough to remember 4% was supposed to be full employment. So we've done great on the employment side and we have not succeeded over a multi year stint now, on the inflation side. We did that in 23. without messing up the other side. My view of the level of monetary policy restrictiveness. If you just look at the real Fed funds rate, the interest rate minus inflation, that's high that's historically quite high as high as it's been in some decades. And and I would characterize you got to decide you will have to, if you hold that, at that level of restrictiveness for too long, you will definitely have to start thinking about the employment side of the mandate. To write and all of that hinges on inflation gotta keep coming down.

Nick Timiraos: So I guess the question I'm building up to is have these first three months of the year where inflation looks like it's running closer to 3% than making more progress to 2%. The economy's adding jobs. Maybe it's labor, supply driven immigration, so you don't have to worry about overheating. But you also don't have to worry about you don't see obvious cracks in the labor market. Has Has the data so far this year changed your view about whether you can hit your goals staying on this golden path, or are the trade offs going to become harder this year?

Austan Goolsbee: It definitely becomes harder this year. And I've been saying that that 23 It was controversial when when I was saying in 23 that I thought we could get inflation down a lot without without a recession. As some of those factors we get the benefits of them. It definitely becomes more challenging and 24. I sometimes find it helpful to break out the components of inflation, and kind of think through what happened so you started

Nick Timiraos: doing this last year you said I started doing it last year, and goods came down and it stayed down and good

Austan Goolsbee: stayed down. So the the the one topper sentence that I will say is we were at or below 2% COVID And that wasn't from AD the inflation rate of everything wasn't 2%. Okay. And it's important to remember that it doesn't have to be that housing inflation gets back to 2% and services back to 2% and goes back to 2%. It would that's not what it was before. goods were at minus 1%. services were at two and a half housing was three and a half. That's what it was for the decade before COVID. Goods are back to minus 1%. deflation, largely from healing of the supply chain. Services. We're making progress they were above two and a half but they were coming down that services went way up for a couple of now for a couple of months. That's that's one we need to highlight and watch. But this I consistently emphasize this housing part. That's the one that has not behaved the way we thought it would. So it's down from its peak, but it's still five and a half 6% inflation. And mechanically we thought we understood how that number gets added up. And the market rent inflation is well as well down. But it hasn't flowed through into the official measures. If it doesn't, I still think it will. But if it doesn't, I think we're going to have a hard time. It's definitely going to be more difficult to to get to 2% Overall, if we do not see progress on that.

Nick Timiraos: So let's take this hypothetical forward, then let's say that progress on housing continues but at a much slower rate than what you're expecting and maybe you have to wonder if housing is going to settle out at four, four and a half percent instead. Of a free three and a half percent we have in the past decade. In that situation. Do you just accept inflation? You know, let's say core PCE is running at two and three quarters. Do you just accept that? No.

Austan Goolsbee: Well, look, we will get inflation back to 2%. I don't know how to say it any different way we will get inflation back to 2%. Now

Nick Timiraos: I guess I'm not over what period of time when you over

Austan Goolsbee: a reasonable period of time. I'm not I'm not going to it's not over 20 years, but it's the answer to that is not a like is does that mean December of what year? That's not how we think of it. It's on a are we on a reasonable path to get inflation down to 2%. And we had seven straight months at the end of last year where we were at 2% or even below. So it is conceivable and there's not a it's not like breaking the speed of light that physicists tell you is impossible. But it's getting more complicated as we work through several of the beneficial things. Of that we had in 23.

Nick Timiraos: So let me ask you about the labor market that does job growth need to slow down for you to have more conviction that inflation is going to get to 2%

Austan Goolsbee: This, this gets at the is it the elephant in the room maybe it's the elephant and this gets at the elephant in the room is the inflation that we have seen in the last two months. That followed on the disinflation that we saw for the second half of 23. Is this a sign of overheating? Or is this something else? We don't know the answer. This is where the sniffing comes in. Now we wait and we see and we we figure that out. I just want us to be careful over indexing on jobs numbers looking strong when I gave this speech last year that that we talked about if you have positive supply developments happening like labor force participation rates going up like immigration bigger than what you thought so population is increasing, like productivity growth higher than trend. Then you are going to get stronger quantity numbers aggregate GDP growth is going to be higher labor force, number of jobs created is going to be higher than what you thought was this steady state sustainable level. And that's it so it's not you got to just be careful taking aggregate numbers as a sign of overheating in that environment. So I'd say we're still looking, we still gotta understand what's the nature of economic growth and it's relevant in my eyes to look at what's happening in other countries, okay, so the growth experience in the United States, you've seen is well higher through and post COVID. than in Europe and then in most other advanced economies. If you start to see a rise in inflation all around the advanced economies, that's suggestive evidence that something else is happening like supply chain supply shocks, oil prices, etc. And there are definitely geopolitical events and and the Taylor Swift album came out and other things that are that are influencing the whole world, not just the not just the United States, so I keep an eye on that too.

Nick Timiraos: So but back tying it back to this housing issue that you were on a minute ago. I mean, rent is the main channel through which wages determine price why should we expect the kind of big housing disinflation that a lot of people have been looking for? If the labor market is holding up? Okay,

Austan Goolsbee: we'd say so they say, so you said rent is what happens when wages meet housing,

Nick Timiraos: that's kind of your I mean, I my job wages

Austan Goolsbee: are strong but if you think overheating, so So let's let's back up, there's two parts. One is just specific to housing and the other is the overall what are the indicators of whether it's overheating or not overheating? We got big jobs numbers. We got very strong and stable consumer spending, and those are kind of the strongest parts of the economy. There are other things in the job market that suggest you might call getting into better balance rather than spiraling up and overheating. The vacancies the unemployment rate, coming back down closer to normal the voluntary quit rate back to little bull the basically matching what it was recovered wage growth moderating to something that depending what the productivity growth rate is, might be totally consistent with 2% inflation so that that doesn't feel exactly like overheating. So that's why I say there's actually some cross currents, then on housing, as wage growth is moderating. Is something like what it was pre COVID. And as the market rents have come down to something like what they were pre COVID Or even below, that is what makes the puzzle of housing greater so the your, your puzzle, which is if wage growth is strong, then how could rents ever come down? They did look at market rents, the market rents came down the puzzle right now is this mechanical puzzle of why is the official data looking so different from the from the market data, and I still we still don't know that, right?

Nick Timiraos: So you've been clear that you need to see more, you need to be more confident that inflation is coming down to two before you cut rates. I want to ask about the other scenario under what circumstances would you say hey, you know what, we need to start thinking about raising interest rates maybe we haven't raised rates enough financial conditions haven't been tight enough maybe to provide meaning full support to reduce inflation. How do you get into that? You know, all scenario.

Austan Goolsbee: A never speculate. That's how you don't as I always say, don't think that anything is never not on the table, you know, like the job of a central banker is the look, the job of central banker is to be paranoid about everything. And and so we are about to contemplate all possible scenarios. We're going to get inflation back to 2%. I just didn't say that again. That's our thing. We will do that. And now we're just trying to figure out how what is necessary. how restrictive do we need to be and for any given level of rates, if you hold the rates where they are and you see inflation coming down? You are tightening, okay, because the real rate is getting bigger as inflation comes down. If inflation is going up, you're loosening, even if you're holding it steady, and you know, this is the this is the toolkit we have this is a business we've chosen, you know, in the in the words of the Godfather, we have one tool and that tool is a screwdriver and we can tighten the thing and we can loosen a thing and that is the tool we have if your bumper fell off and tightening the screw was how to fix it. That's great. If it's like can you make me breakfast? Where now? Yeah, I said that before and somebody was like I have orange juice with vodka for breakfast. I was like okay, then the tool will work but you know if it's, if it's not, if it's not in that then then we're you know, if it's hammer this thing together, then we we will need to think think that through, but I'm not going to I don't think it's productive to speculate on the should we raise what would be the condition hypothetically that you would raise rates that you would cut rates? Because we have weeds months? To find out we're going to get all this data my basic premise is the way you we should determine our monetary policy restrictiveness depends on what happens in the data.

Nick Timiraos: So is monetary policy tight right now?

Austan Goolsbee: I think it's tight. You know, I think like I said, I think take the real federal funds right there too. There are two basic camps to answering that question. There's three bay two and a half basic camps of how to answer that question. One is to have a model and derive an R star and say is the are higher than the R star. There is a historical comparison and then there is the de facto Pete I want to see pain and blood in the street. And if I see that, then we're restrictive. And if I don't see that, then we're not I'm more in the at this moment, that historical camp I just think the real federal funds rate is as high as has been in a long time. If inflation keeps coming down, that is getting higher even as we're just sitting and waiting. And if you hold at that level of restrictiveness for too long, then you got to start keeping your eye on the other side of the mandate to that you would start seeing slow down and all of those things I said of why don't over interpret strong quantity aggregate numbers, as overheating should be sobering in that environment. If you let's say with added immigration and labor force participation that the true steady state job growth is 200,000 a month instead of 100,000 a month. If you start seeing 100,000 or 80,000 you will you want to be a little careful of saying oh no, everything's fine, because actually that would be a sign that it's

Nick Timiraos: that it's starting to go the other way. So So I asked you about monetary policy and which is you're trying to type policies trying to reduce aggregate demand, right? What about the stance of macro? Economic Policy more broadly, we have the IRA and the chips Act, which are proven to be more popular, you see some more subsidies going out? Or you may have a multiplier effect or TSMC or Intel says we're going to invest here alongside the US. Is it possible that macro economic policy, even though monetary policy is tight that fiscal policy is to some extent offsetting what you at the Fed are doing?

Austan Goolsbee: I joined the Fed. If you become a Fed woman or a Fed man, you get out of the fiscal policy business so I'm not as the Chicago fed. I always say I look our motto is a Midwest thing. There is no bad weather there is only bad clothing, you give us that conditions and we'll deal with it and and if the fifth to me the fiscal policy input that just the conditions we'll look we'll figure out I don't know is the answer. I could conceive of a scenario let's say we saw in the 2000s, China booming, booming, booming like crazy driving up the price of a whole series of commodities, and that was having a tough impact. On a lot of other countries because they are dealing with the with those costs. There are definitely things that can happen that change the underlying conditions that have nothing to do with monetary policy for sure. That's true. The second part of the question relates to a broader thing, which is sort of what can the Feds how much impact does the Fed's monetary policy have on business investment on traditional drivers and one of the complications of this moment this these last two, three years moment is that the traditional business cycle I told you, we have one tool basically we can tighten we can loosen and that normally works because the business cycle the most cyclically sensitive industries are also the most interest rate sensitive industries. And so, it usually monetary policy is the direct stabilizer. And what happened this time as you know, is that we had a recession that was driven by nobody can go to the dentist and consumer durables demand went way up in the recession. And so now if you ask the question, how interest rate sensitive are elective plastic surgeries? I have no idea and you know what we're so we're we were trying to match our tool to the moment and and that's not totally straightforward,

Nick Timiraos: but we have I mean, we have 6% Close to 6% deficits and a peacetime full employment full employment economy, which we haven't seen. Is that making it harder to get inflation back down?

Austan Goolsbee: Look, like I say whatever the condition, you see what the inflation rate is, you see what the GDP growth rate is we can see employment. If you're alleging that's from fiscal policy in the United States, some people are alleging it's because slowdowns elsewhere in the world what the value of the dollar whatever there you can have anything in your model. But at the end of the day, the Fed people have to take the conditions and make forecasts of the conditions and respond to those and that's what we're gonna do.

Nick Timiraos: So you were talking a little bit earlier, has your estimate for the neutral rate of interest. This is sort of the Nirvana where you're at your goal, you're probably you know, there's no shocks in the economy, very rare, but you know, you have to have some kind of estimate of what your neutral rate might be in that scenario. Has your neutral rate estimate gone up? Do you think there's a short run neutral rate that might be you know, higher right now but comes down to policy gets more restrictive is that they

Austan Goolsbee: pulled a sleight of hand they're okay to call it the neutral rate is better. Our star I budgeted hours and that's the same thing. But when you say it as our star, then you realize like, wait a minute, somebody's got like a mathematical formula in there. And to call it neutral is to make it sound better than my thing about our star and you can ask the research staff they don't like that. I said, I started calling it our Sasquatch, because it's not fundamentally not observable. Okay. And so you can have their two styles of how do you identify what is our star? One is you can build a model and John Williams as as done some of the most pathbreaking work on building those models and what goes into the model there are a bunch of slow moving things like demographics and and stuff like that. Or you can indirectly say well, this was the policy and inflation was still rising. So it must be that our star was higher. I'm a little impatient with the r star is a long run concept and our whole debate in public seems to be about a short run long run rate. And that's, I'm uncomfortable with that even concept, which really leads me back to the I'm mostly looking at the historical, recent historical, what's the real federal funds rate? That's kind of my indicator. Now, if you really want an R star, you can back out from the median SAP, they ask what do you think that rate will be in the long run? And I think that median SCP is like two and a half percent. And that might have moved a little bit but it hadn't moved a ton. And you don't think of things like ours are moving a ton in the short run. So I, I guess I'm a little impatient with the argument that you would see wild swings in long run interest rates over a short run period.

Nick Timiraos: I want to turn it over to questions from the audience. Are there any, any questions in the audience? We have a mic if you could state your name and affiliation.

Austan Goolsbee: James Madore. I work for Newsday, and I want to ask you a little bit about the impact of migration, immigration, on our economy, because obviously we are seeing more people come to the country, the state that I live in lives and dies on immigration. So how is immigration going to affect our economy in the short term and the long term? Okay, super deep question. Which I'm mostly not going to answer but I'm gonna say for us for fed where we are thing is dual mandate law tells us fed your job is stabilize prices, maximize employment. How does immigration affect stabilizing prices and maximizing of employment A, it means aggregate job growth is higher than otherwise because population is growing in a way the measures of overheating in the economy are kind of per capita. And so if the Capita is getting bigger, the aggregate total can be bigger on inflation. I don't know what the impact on wages are at various parts of the distribution. But I do know that there are some sectors in the economy that have had massive labor shortages through the COVID times where there are a high share of the workforce or immigrants and leisure and hospitality and in some of the other categories, you would think that you would see job growth stronger in those. So I think in the short run, that there is more immigration makes the dual mandate goals a little easier to accomplish. And then there's always the caveat of but isn't everything relative to what you expected it was going to be. And there I don't so one thing we found out the CBO put out this report on immigration and it said last year, there were millions more people than we thought there were that it feels very impactful. If everybody knows how many people are going to come in and then as many people exactly as many people as what we thought are what come in. I think there are some aspects in which that's less impactful.

Lillian Berbick:Lillian Berbick Oregon Public Broadcasting. I have a nerdy question and no fun question. Are those different?

Austan Goolsbee: They might be the same in this audience. So my nerdy question is, you mentioned that you have kind of one tool in the toolbox. But there's actually another tool that the Fed has that we haven't really seen be used, which is reserve requirements. Do you feel like especially with some of the smaller bank failures that we saw last year of changing reserve requirements?

This opens the door lens in the whole discussion about both the balance sheet and the what the capital requirements are. I'm not going to get into the regulatory the banking system I view is overall, the safety and soundness of the banking system. Hinges critically on have them having adequate capital, I believe that they do have that but Vice Chair bar is is kind of the point person thinking through those. The balance sheet is another tool in a way in the spirit of reserve requirements, but remember, brought broadly defined is still the same tool. We're operating through a channel of through a credit channel that can be tightening or loosening.

I'm a little uneasy if we draw we're trying to get sector specific in our like there's no monetary policy that's just for the housing industry just for manufacturing or or that kind of thing.

I think mostly what we do on Capitol for banks should be about safety and soundness of the banking system. Not really monetary policy and on the balance sheet. We've been doing this Qt and running down the balance sheet, but everybody should understand that under the way we do monetary policy now since 2006, or seven or whenever we change to the so called ample reserves regime.

You've got to have enough balance sheet that the private sector is not out, trying to hoard its own liquidity. And that means the balance sheet is going to be bigger on a steady state basis than it ever was in the old days. And if you get it too small.

As I kind of say, my understanding is that the human body can live for three to four days with no water before you die. And how long exactly depends on conditions? Is it hot? How human is it? You know, did you drink a Gatorade right before you started? But do you want to know like, what do we really want to figure out? Oh no, it's 37 hours or it's played out like how many hours we're going to get to a point where the balance sheet. It's definitely not a fixed number.

It's probably not even a constant share of GDP, but it's going to be close to a constant share of GDP and GDP grows. So balance sheet will stop shrinking will start growing eventually. And it is kind of related to this question of bank reserves. I don't think of that. I think of that as something separate from our what we're doing with monetary policy. Okay, time for the fun question. Yeah, that well I thought that was a fun. What's the I agree?

Lillian Berbick: Um, so, you know, reporting on monetary policy and fed movements can get really rote. Like, here, we're gonna get to 2% is about a week and I say how was that wrote?

Is there any stories about monetary policy and economic data that you wish were being told by journalists?

Austan Goolsbee: let's answer a different question. But related, the what? What have we been missing? If productivity growth is going to be as fast as it's been for the last three quarters?

That's fundamentally going to change everything about the economy in a way and it would have direct implications for monetary policy. It would put us back in an environment that would very much be like the late 90s, where you can have faster wage growth, without inflation gonna have faster GDP growth without generating inflation. And that's a series that is noisy but it's worth absolutely paying attention to that. That's not even mostly about the Fed.

But it has definite implications for the Fed. So I will watch that. If you ask, are there stories about the Fed?

Yes. And I've dried so one of the stories was in Detroit, Chicago Fed has a Detroit branch.

And our Detroit employees are super loyal to the Detroit Lions. And the Detroit Lions after decades of being horrible, almost made the Superbowl and we run hundreds of millions of dollars of cash in and out of the Feds each day because we're we're bank to the banks. So when they put cash in their ATMs, it's coming from us.

So we have these bomb dogs, and our bomb dogs moonlight as the bomb sniffing dogs at the lions game. So I told the people I was like, these are the hardest working dogs in Detroit. You got to get them because some press coverage and they did. They got up they went they went on TV and there were the dogs and N eyes. I had said nothing to their greatest sniffing they're in the data dog kennel like I asked for permission. Can I join you? You know it was effing out the bonds.

I said that if the lions one I was gonna give each of these dogs there's two of them over there Fox and.

And krill Fox and krill I said Fox and krill get a steak. We're gonna get a steak and give it to each one. The Lions laws but then they had a vote of the Fed employees and by a 95 to five vote. They said it wasn't the dog's fault that they went forward on fourth down. So we gave him the stakes anyway. And so there is a human side to the feds, especially the regional Feds that that is worth that is worth covering their role in the in the community right down here.

Sarah Foster: It would probably be wrong to call this a fun question, but thank you for being here, letting us ask you this. I'm Sarah Foster at Bankrate. I'm curious what you think about delinquency rates right now, particularly for credit cards and auto loans. They've been rising even though the unemployment rate is low. What would happen if there is a slight increase in the unemployment rate and kind of two part question? Yeah, you know, considering how much more debt consumers have how some auto loans off cars are obviously not worth what they were a few years ago. Could a slight increase results and maybe something slightly more painful thing worse?

Austan Goolsbee:

Okay. This is this an important question. I'm glad you raised it when I talked about the crosscurrents. And I said, Look, there's some things about the job market that don't really look like overheating. They look like coming back to normal. There are also some measures in the economy that historically do not portend well. So, if you look at normal times, if the delinquencies rate of consumer loans starts rising, that is often a leading indicator for things are about to get worse.

The only thing so that that is an area of concern. What people are trying to figure out right now is that's went way down. Okay, so it is rising, but the level that it's risen to is if I just told you the level and you compare that to pre COVID It doesn't look that different, but if I told you delinquencies went up by however many percent you would say, Oh, if they go up that much, that's a terrible sign.

So that's a different way to say we don't know sniffing Musk commands. You know where that's one we're watching the consumer balance sheet got unprecedentedly strong after stimulus that the excess savings you're you're familiar with that that old fight so I think much of that is gone. We're back to more normal levels. Overall consumer debt levels are not especially high. But look, as you know, when things start to turn wrong on the real side of the economy, that doesn't just tend to be like, Oh, that happened one month and then they don't continue. So that's that's our concern. I think this consumer delinquencies is one of the that's one of the more concerning parts in the in the data at this moment.

Chuck Jaffe: Chuck Jaffe, with money life and the Fed historically, and what experts say all the time is that the Fed doesn't necessarily make moves until things break. But a lot of the time Well, a lot of people who were watching and expecting rate cuts this year, were saying that if the Fed made them early this year, that the Fed was moving from a position of strength, but now that rate cuts and I know you're not going to speculate on what's going to cause them or when they're going to happen. But now that we are looking at rate cuts taking longer when the Fed finally moves on rate cuts, will it be moving from a position of strength or will it be moving from a position of weakness?

Austan Goolsbee: The only reason I hesitate is that last part of is that a position of strength or position of weakness on the ground I can't I can't fully understand what what that means. Like what like what does it mean to be a position of weakness or position you are forced to act because otherwise you will get to that or things break. If you don't do that you're gonna fall behind they're gonna fall behind. Okay, if we don't want to always be late. We want to anticipate and that's the language in the statement of are we on a path to 2% inflation connotes that to my mind that we are forward looking we're not you don't just want to have what happened last month to the CPI that should determine what the rate should be. Now, that said when the SEP comes out, so like, take in December, the Feds median, SEP said there would be three rate cuts and 24 and the market immediately concluded that must mean seven. And they and so then the market said they're going to be seven cuts. And then Nick is how to be so why do you say three if the market says seven? Look, the thing is, there's only eight meetings a year. So my thing is you faff around you're gonna find out you know, and so the Silicon Valley just click up don't don't fight the Fed. We had a board member was said he tells us people, we can fight the Fed as long as we want but the last time I checked, they're still undefeated. And there is a component of Silicon Valley Bank had hedges on the interest rate and they got rid of the hedges. If you go back and read the bar report. Why did they get rid of the hedges? Because they took a bet. The Fed will never raise rates as much as they as they say, and the market is telling us that the rates are going to come down.I'm not. I came from the old school. My friend and mentor was Paul Volcker. And Paul Volcker used to always say our job is to act and their job is to react and let's not get the order mixed up.

So I think that means I'm saying whether we wait or don't wait, we're always operating from a position of strength.

And we should be forward looking definitely not just backward looking.

Nick Timiraos: Before before we finish, I want to be stuck. But in we only have time for one but actually yet another one. So we didn't talk about the election. I thought it might come up in the q&a. You know, before you took this job. You spent time in the political arena, you would go on Fox News as you know, defend the Democratic Party priorities. You were very critical of Donald Trump, especially after he lost the election.

And I know the Fed says it doesn't take politics into account but given how you felt about Trump. Can you unseal that when you're balancing the trade offs? Look, I told you I'm a Fed man. Now and the Fed does not include elections in our we have a mandate there's nothing about even if you elections in the mandate, there's nothing about the stock market.

Austan Goolsbee: Are you tell me the weather I tell you what code I'm wearing with this what we're doing I have no, you you read this minutes. You read the transcripts? The FOMC The elections are not in the transcripts, and they shouldn't be the mandate is what the dual mandate is what drives our decisions. And that's what's going to drive our decisions this year. Austin, thank you for joining us. Stay tuned.