LIVE: Federal Reserve Chair Powell Speaks at Jackson Hole

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I think this is the toughest position the Fed has basically ever been in, in my lifetime.

The data is not there and the uncertainty around trade and its impact on prices is still making its way through the system.

The Fed talks time and time again about wanting to be data-dependent.

Now, it always is, but it's more intensely data-dependent now than normal.

I don't think there's a lot that can be said that's really going to impact the real issue,

which is a longer end of the curve.

We still have a fair bit of information that we're going to get before September

or the whole fall to determine what path we're going to be on. This is Bloomberg Surveillance, live from Jackson Hole,

with Tom Keen and Lisa Abramowitz.

From Jackson Hole for our audience worldwide, this is Bloomberg Surveillance on television and radio. We're sitting in front of the beautiful Grand Tetons, as we typically do in late August for the Fed's annual gathering. But this year, under the glare of the global spotlight, it feels different. Good morning. I'm Lisa Abramowitz alongside Tom Keene and you can just feel the different air this year. Dramatically different

in 18 years here. It's one of like 07 08 has been a couple other years, but this is absolutely unique and it's not that it's one thing unique. it's four, five, six, seven ideas that fold into the speech in one hour.

We have the idea of the political potential, interference or discussion. On the flip side, the economics of the moment, quite distinct. We came into 2022, the pain speech, there will be pain. 2023 from Fed Chair Jay Powell, he talked about operating under a cloudy sky. And then last year, the beginning of accommodation. Where are we now with the dual mandate in

question?

Well, the dual mandate is a question that we don't know. We have James Bullard later, and he put the dot always at the bottom. Mike McKee's smarter about that than I am. But yes, it'll be about the framework. We're not going to get 50 beefs, 25 beefs, raise rates. It may move the markets.

That's true. But the mystery here forward with the politics is the independence of this central bank, not only for America, but for the international audience as well.

Which is the reason why a lot of people are looking at two particular securities. On one hand, 10-year Treasury yields given the question of unmoored inflation or getting under control. And then, of course, the dollar and how much it has weakened or will weaken going forward. To me, since the last Fed meeting, 10-year Treasurer yields up 50 basis points right now, hovering just around that 4.3 percent. The dollar down 2 percent, weaker just by 2 percent at a time where there's a real question, what is going to be the release value? I'm glad somebody did their homework here.

I didn't do my homework. I'm going farther out the curve. Susan Collins, Jim Bullard and others will say, don't do that. It doesn't matter. I'm sorry. The 10-year yield matters. But a 30-year bond through 5 percent, we're really not there yet. That will be important. And I look at the Japanese paper as an international litmus system with the own idiosyncratic Japanese story. I'm sorry, you have price down, yield up in too many places.

Yeah, well let's get to an incredible lineup and we will be talking about that as well. Coming up this hour, do not miss this, Boston Fed President Susan Collins, Adam Pozen of the Peterson Institute for the International View, Bundesbank President Yachim Nagel, and former Philly Fed President Patrick Harker. In the next hour also, the incredible reaction to the speech, former Fed Vice Chair Rich Clarida, former St. Louis Fed President Jim Bullard,

and City Wealth CIO Kate Moore. But first, our ace economics correspondent, Michael McKee, is here alongside us. Mike, what are we expecting to hear in this particular speech?

Well, I think what you're gonna get from Jay Powell is a bit of a pushback to market expectations that a rate cut is locked in because you've got two things going on, a slowing labor market which would call for rate cuts, but inflation starting to tick up because of tariffs which would call for at least holding. So where does he come down? The markets at this point are pricing in a rate cut.

Does he want to push back, get them a little more flexible as we get more

data? Yeah, and Mike, stand by because we do have an incredible guest with us here on set. Joining us now, Boston Fred President Susan Collins, who has been in this meeting and coming here for what, 20 years, 20 some odd years? Absolutely. This one feels different, doesn't it?

Well, there's a lot going on with this meeting, I will say, and delighted to be here with you. The framework review, which we will hear more about, very complicated context, obviously, and I'd love to tell you a little bit about how I'm seeing economic conditions in the

outlook. So let's get into that. There is this dual mandate that's in question, the idea of inflation versus labor. Where are you in the continuum of which you need to be most worried about?

Well, you need to be – this is a time when you need to be looking at the balance. You need to be looking at all of it. And, you know, growth has been slowing recently, but at the same time, overall economic fundamentals are relatively solid. And that's a context in which it's not surprising to see the indicators being mixed. Some are stronger and some are a bit weaker.

So you've got to look at the whole picture and not focus too much on any one or two specific indicators.

There's a lot of people who are concerned that you might be late getting to the economy if you wait for unemployment to rise significantly. On the other hand, you might see inflation rise fast. What about the compromise that's been floated by some people that you cut rate once and then you wait?

Well, so you do have to be thinking about all of it. We cannot wait until all of the uncertainty is behind us. You've got to make decisions in real time. So I think that part is true. It is a complex context for monetary policy because I see upside risks to inflation related to tariffs.

We're already starting to see some of that and downside risks on the labor market side. And so, it's about balancing those features. And I don't get ahead of a decision that we're going to make four weeks from now. We're going to see data in between now and then. But it's going to be about balancing those to really offset our risks and focus on both sides of that mandate.

Well, I know data is important, but it's also backward-looking. So what are companies in your district telling you about their plans for both employment and prices?

Yeah, absolutely, because I do think that complementing all of the statistical analysis that we are always, you know, I'm a total data geek, right, you've got to be in this role, with what we're hearing is really important. And what I'm hearing is pretty consistent with what I'm seeing in the data, actually. And so on the labor market side, while the job growth has certainly slowed, it's somewhat more concentrated, at the same time, a number of those indicators are quite healthy.

And so on that side of it, there, you know, I think that there are arguments for taking a bit more time. But I'm very focused on how those downside risks are evolving. And then on the inflation side, what I'm hearing is that early days in terms of the impact of tariffs coming through into prices over time for a number of different reasons. So what I'm hearing from firms around my district, which is most of New England, and what we're

seeing in the data as we do that analysis at the Boston Fed are pretty much telling a similar story from that context.

I was looking at where inflation was the last time that we were here and heard a Jackson Hole speech versus now, and it's crept higher. It's gone in the wrong direction when you look at CPI. It's basically ground around the same place in core PCE. Why did there seem to be confidence before that inflation was on a sustainable path down to 2 percent?

Why is it no longer?

Well, you know, that underlying inflation, I was quite confident a year ago that that trajectory was back down to restoring price stability. And in terms of what I hear around the district, high price level and concern about inflation is one of the number one things that I hear about, which is one of the reasons I'm so focused on the importance of that side of the mandate as well as maximum employment. But, you know, the tariff impacts are significant.

And we have done analysis in the Boston Fed, understanding that it's not just direct imports, but the range of goods and services that rely on imported intermediate goods as well. A much broader range, it would surprise many people how many kinds of services actually use imported intermediates as part of what's happening there. And so we are anticipating that over the next couple of quarters, so the rest of this year into early next year, inflation is going to remain elevated.

And then my baseline would be it would start to come back down, but I don't rule out a larger and more persistent impact.

But to Mike's earlier point, what is the harm in cutting by 25 basis points or even 50 basis points? Because would that really cause runaway inflation at a time when, I know that the chair has talked about policy being relatively restrictive?

Well, it's about the balance, right? I mean, the inflation side, and again, that is what I hear about in every conversation I have across the First District, which is most of New England. And so it's about balancing that commitment to restoring price stability with an understanding that preserving healthy labor markets also really matters for the public. And so doing that balance, I would say it's not a done deal in terms of what we do at the next meeting, but a range of possibilities is on the table, and we're going to get more data between now and then.

Definitely. And everybody out there listening, that's good advice. Wait. Don't bet yet. Is it more likely that we see a rapid rise in unemployment, because that tends to be what happens when it starts to go up, or a more long-term but steady rise in inflation

that would lead to inflation expectations becoming undue?

Well, so from my perspective, the risks on the two sides have come into rough balance. And so that's a really complex context for monetary policy when you could see the unemployment rate rising and you could see higher inflation. You know, my baseline is not one that is as concerned about inflation expectations rising at the moment. Earlier in the year, I had more concerns about that.

I would say that at the moment monetary policy is kind of modestly restrictive. That's actually appropriate for a period when inflation is elevated. We haven't brought back price stability, at which I am more than I'm totally committed to.

But at the same time there are those risks with the slower employment growth that could lead unemployment rates to rise and balancing those risks. So I think at the moment where we are is appropriate but if we start to see worsening labor market risks relative to inflation and starting to dial back the restrictedness would become appropriate. Dr. Collins I was going to ask you a bowtie

question about the privilege of taking your PhD under Rudy Dornbusch and what it means for the future of the dollar and that. Unfortunately, the economist Donald Trump is watching. Thank you, President Trump, for watching this morning. May I quote, the United States is the quote hottest unquote country anywhere in the world. There is no other country that is even close. And just think one year ago, we were a, quote, all-caps, dead country, with no hope of ever

seeing all-caps great and speaking. Is the Fed too exposed right now? Does the Fed just have to wait, because so many things are firing on all cylinders, as the president just noted?

Well, you know, I am laser-focused on the data and the range of data from what's happening in the relative short term to what the indicators are suggesting in terms of longer term trajectories. I think, as I said earlier, those underlying fundamentals are still quite healthy.

Have we broken the disinflation vector here? Or do we sit at this Jackson Hole where we've got a service vector and a goods vector nudging upwards? We sit at this Jackson Hole where we've got a service vector and a goods vector nudging upwards.

I think my baseline is, again, it's going to remain elevated for some time related to those tariffs, which are still unfolding. There's a lot of uncertainty with that. But it's possible that we'll see more persistence. There are a lot of unusual dimensions of behavior right now, which means that some of the history doesn't give us as much of an indicator of how things are going to unfold.

We got to realize that, but again, we can't wait until all of that uncertainty is resolved before we make our decisions. Those fundamentals are still healthy, and keeping that balance in mind of the mandate that Congress gave us for price stability and maximum employment is where I will keep my focus.

We just have about 30 seconds. What's Fed Chair Powell going to say? No one's listening.

Well, I don't want to get ahead of the chair. He's going to talk about, obviously, the framework. We have had a robust process there, which I feel really good about, and about what he's seeing in conditions and the outlook.

That was really good.

Really good massaging. Boston Fed President Susan Collins, thank you so much. I didn't understand a word of that. She said that she's going to talk about economics. Yeah, basically. That was sort of the intent. I mean, look, this is a complicated moment.

And as you said, you've got the president coming out and jawboning. At the same time, the economic story is really complicated here. That, to me, is what I keep saying. There's an ambiguity to it. Yeah, very much so. I've seen that from a number of people. The kitsch jukes at Sok Chin was brilliant today on that.

It's just hugely ambiguous.

Which is the reason why I think all these different Fed officials have completely different views as well as the economists and analysts. Coming up next, one of those views, Adam Posen of the Peterson Institute, will be joining

us next. This is Bloomberg Surveillance on television and radio. . And we'll see you next time. In case you missed it on Bloomberg Brief. We do see that there are some really inflationary pressures. I mean one thing it's of course coming from from the tariffs. We are seeing some push from various kind of climate situation. And so that is why we also think that there is a link between climate risk and financial risk. I do think there is for sure a danger that inflation could be quite persistent here. Don't miss Bloomberg

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The last inflation report that came in where you saw services inflation, which is probably not driven by the tariffs, really starts shooting up. Is it danger? That's a dangerous data point. I'm hoping that that's a bit of a blip. So I think we still have a fair bit of information that we're going to get before September

or the whole fall to determine what path we're going to be on.

That was Chicago Fed President Austin Goolsbee. This is Bloomberg Surveillance on television and radio live from Jackson Hole, Wyoming, ahead of a very different Jackson Hole speech from Fed Chair Jay Powell. Tom, to me, I'm watching markets right now and wondering how much they are potentially hinged for a pretty big move right now. Can we break five straight days of losses on the S&P? And do we see that sustained yield drop on the S and P and do we see

that sustained yield drop on the long end ahead of what a lot of people expect could be a hawkish move from this venture. Well, we might have the speech and maybe a hawkish

move, but the answer is we don't know. We don't know. We don't know. And we're going to go line by line in the speech. I am going to use a fixed income market. It's a litmus paper not only the two-year, but curve steepening. I'm going to go to two's thirties, not the vanilla two's tens. Adam Pozen taught me how to do that. And the answer is I want you to 30-year bond. It's different in Japan. It's different in the U.S. It's different in Italy doing better than France right now in terms of yield. And

the answer is it's going to be very nuanced internationally. Yeah, which is a reason why a lot of people from the international community are here joining us now, who has been writing FIRE recently, Adam Pozen of the Peterson Institute for International Economics, who has been pretty aggressively talking about some of the harmful ramifications from a New World Order. But before we get to all of that, I want to get to how this is set up and how this feels very different than previous Jackson Hole meetings.

Thank you, Lisa, for having me back. It's good to be back with you and Tom. And you're right, it is different. It's different inherently because it will be Powell's last speech as chair and he's had quite the tenure. And there's always the combination now, it so happens, of his potential legacy speech, talking about the framework review, and the fact that the economic situation is genuinely unclear. But then, of course, there's this whole overlay

of the Trump administration's variegated attempts to put pressure on the Fed in an overt way, using personal attacks, and using social media in a way that is unprecedented and harmful.

I know that human nature is such that if someone tells you what to do again and again and again, and you have somewhat of a rebellious spirit, you want to do the opposite. And I wonder how academics who get together and who want to do what they think is right are erring on the side of being overly hawkish in order to sort of thumb their nose at what they see as political interference and something that isn't their fault.

Do you feel that in some capacity?

I feel they're thinking about it. I feel that they're trying to be very self-aware of that. And there is a history, Lisa, of central bank independence, and Tom and I are old enough to remember this, that when the Bundesbank was like the leading bank setting policy outside the U.S., whenever a left-wing finance minister, or for that matter a conservative finance minister, would say, you're too tight, the central bank would explicitly, Hans Dietmeier would explicitly say, you yell at me, I'm not doing anything.

So there is that element. But I think what Powell has said, what President Collins, who you just had, has said, is they are trying to make the right call in the economy. And in the end, I think, if anything, they're going to bend over backwards to not be hawkish today, because they want to show that no matter what the Trumpies do, they're going to make the call on the basis of the economy.

And I'm posing with us from the Peterson Institute. We welcome all of you worldwide. Good morning on Bloomberg Radio and on Bloomberg Television as well. To call this for you in the limited time that we have, Dr. Pozen's essay in Foreign Affairs days ago sets the table for a post-American world. Dr. Pozen, of course, channeling the economist

Joni Mitchell from 1970. It was good of you to end the essay looking at a parking lot with the lights turned out. In the 70s, the inflation was 6.8%. We've been running three-ish, four-ish, depending how Jason Furman measures it for me.

The answer is, do you fear an inflation back to the time of Big Yellow Taxi?

Yeah. Tom, thank you. I know you curate foreign affairs articles for your audience, and I'm grateful you've picked up on mine. And I think people have been missing the big picture. This is an economic regime change.

It's not just the tariffs. It goes to the 30-year bonds and the international flows that you were talking about. And so is inflation going to get out of hand? No. Ultimately, no matter who succeeds Powell, who Trump appoints, they'll be forced to turn around if it gets big.

But what you're going to get is the stuff we saw in the early 80s. You're going to get a steeper yield curve. You're going to get a higher yield curve. You're going to get risk premia, you're going to get more out of the dollar.

Can we go all nerd now? Please. What were we doing before Tom?

They're awake in the club. Come on. Carry on.

Full nerd with Adam Pozen. Buried in the middle of every textbook, chapter 20 or so, is in a chapter on insurance. Your essay is that we've given up the ghost of us being the insurer for the world in the 70s, in the 60s, post-World War II. Can we recover after Trump back to an insured world where they trust America to be the

insurer? Just as some foreign policy types talked about after Vice President Vance at the Munich Summit and all the stuff against NATO, you don't do it in a day. If the president realizes the mistake, if the Congress steps up, if there's an election and there are changes, we can go back. But you have to think of it like Germany or Japan after the war. You have to rebuild trust. You have to invest. The longer this goes on, the longer the U.S. ceases to provide the kinds of insurance that it did, other countries self-insure.

And so they take money out of the dollar, they invest in different institutions, they make different trade deals, they try to build things up. So the longer it goes, the harder it's going to be to turn it back.

And everybody's worse off, including the U.S., but they make the best of it they can. That's the big picture as you see it. Some people would say that this was already fracturing in other ways heading into this. And we saw that in the post-pandemic reality. But shifting to the inflation side that Tom so rightly picked up on, if the Fed does cut by 25 or 50 basis points now, and you do see inflation pick up materially, what do you see as the risk that they have to hike materially next year? Something that Ken Rogoff has talked about.

Well, I mean, nothing against Ken, but you and I have been talking about this on your show for a year and a half.

All right, you were first.

Carry on.

No, but anyway, but so I'm aligned with the brilliant Rogoff. I think they have a reversal built in at this point, because essentially they're gambling on the fact that the R star hasn't risen. They're gambling on the fact that the recessionary effects of the tariffs and the anti-migration will more than offset the inflationary effects. They're gambling on the fact that long-term inflation expectations will remain fully anchored,

which amidst everything else, after the last few years and after the attacks on the Fed, seems like a bad gamble. And ultimately, they're gambling on the fact that the pass-through of these things is going to be very limited, which gets us back to Tom's 70s analogy.

At the same time, if you look at the unemployment rate of young adults, 16 to 24, it's 10 percent. It's the highest it's ever been outside of a recession. You see an increasing number of people remaining on jobless claims, receiving those roles because they cannot get a job. Doesn't the labor market worry you at this point?

It does, but that's different from what you and I were just talking about, Lisa. This is what happens when you run a terrible policy mix when you get stagflation is you have no good choice and then you're stuck worrying about inflation despite the fact people are suffering. This is the problem. It's not because there aren't going to be problems and aren't already problems in the

labor market. It's because the inflation threat is worse at this point. And if the Trump administration hadn't done all the things that it done, we wouldn't be

facing this terrible trade-off. I noticed last night, I looked at the Nielsen ratings and there were two people listening in Wyoming as the Red Sox beat the Yankees. It was me and Adam. We were sitting in our little, he was in a pup tent, I'm in a little bigger tent, and we were listening to the Red Sox on our radio.

Oh yeah, is that, is this your transistor radio that you have? Yeah, this is the little major transistor radio. Yeah, yeah, I think everyone's buying that out here. Those are really good.

Do they have a chance?

Is that all you want to know today?

Of course they have a chance.

They always have a chance.

Adam Posnick of the Peterson Institute for International Economics on economics, on policy and on the Red Sox. Thank you so much for being with us. Is that what you were doing last night? The whole night you were watching the Red Sox instead of- No, you watch it on radio.

It's great. It's like they're playing in August, the games matter. We're not the Yankees.

Well, in seriousness, this is really the key debate. What is the potential risk reward of cutting now? Not just because of any political pressure, but also because there is a sign of weakness in the labor market at the same time that those inflationary pressures are passing. It doesn't make good news for radio and TV but the

framework is important. They did a framework a couple years ago, they're gonna change it and maybe they change it with a new humility. Yeah, well we'll be

talking about the framework, we'll also be talking about the German Central Bank coming up with the Bundesbank president, Joachim Nagel. This is Bloomberg

Surveillance. . So so Mm. So, I'm going Weston.

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In case you missed it on Bloomberg Tech Asia.

How does Samsung think about competition because you have also so many Chinese makers coming

out with foldables, with good cameras. You know, rather than focusing on competition, I think we have been focusing on our consumers. I think healthy competition with other companies, I think will bring more innovations and then bring more benefits to consumers.

Don't miss Bloomberg Tech Asia every month. Can we break five straight days of losses in this August? Moments away from the start of trading, I hear Tom saying that this is gloomy. Well, it's less gloomy when you take a look at S&P futures up about three-tenths of a percent as we have just seconds. Meanwhile, yields just slightly lower on the long end as people look to potentially more hawkish message from the Federal Reserve. The NASDAQ trying to bounce back as well. And the Russell 2000 up some six cents of a percent. We do have an open market at this moment and we are looking at yields that are lower on the day, at least in the long end.

Front end is up just a touch. When you take a look at what's going on Expectations for a Fed rate cut next month have gone from 90% to 70% in the past week.

And they wait for the next tea leaf, right? Including a speech. Well I mean we've gotten

some data from it. It's not just tea leaves, but yes we've got a speech coming up.

Can we go to WEI and get rid of the Bramble gloom here and mention that year to date we're in a raging bull market. Okay, I was just giving a sense of where we were coming from. The DAX in Germany is a Saturn V moonshot of superiority.

Well, we're going to be talking in just a minute with someone who has watched that all happen with the recovery. I will just say, I have been talking about how the S&P is up 13% since the last time we were here. I know you have. And that the Nasdaq's up 18%. And this has been absolutely a really strong market

pretty much across the board.

It's been a strong market. And of course, that's part of the issue of why are we cutting 20. The 50-beat break cut, that all went away.

Yeah, that's absolutely not in the market at all.

But again, I would say all in all, these commodities and we are in an August doldrums which is going to end at 10.01 Wall

Street time this morning.

Well maybe, we'll see. I mean we've seen some speeches that have left it in doldrums. I don't think this time around though and I think that's going to be important. One thing that's been interesting is the euro versus the dollar has strengthened about 4% since the last time we were here in Jackson Hole and someone who's been watching that but also watching their own central bank policy as someone who has made the 11 12 13 hour track I'm actually my guessing it's probably somewhat longer than that

Bundesbank president Joachim Nagel who sits alongside us. Joachim, so great to have you here. Good morning. Thank you so much for being here. I want to start with a sort of overlay that makes this Jackson Hole different. It feels like there is the question of central bank independence that no one really wants to talk about, but it's something that's very much at the forefront of your mind. How important was that question in your decision to make the trek out to Jackson

Hole? I think, as always, the Jackson Hole conference is a very important conference for central bankers, but maybe this year even more important. And when it comes to central bankers, but maybe this year even more important. When it comes to central bank independence, this is the DNA of good monetary policy. This is the conditio scenic one on to do what we have to do

to fulfill our mandate, to achieve price stability. And so central bank independence, we have to fight for it.

Do you have any fear that that has already been compromised in some capacity in the Federal Reserve, which people used to call the central bank to the world?

Let me put it like this. I don't want to comment on U.S. politics. I hear one or the other comments I really do not like. But just to point out, to give you maybe a kind of a reminder when it comes to the history of my country, Germany, going back to 1948 and we are grateful to the United States that you gave us an independent central bank.

This was the starting point for the famous German Wirtschaftswunder. So central bank independence is key to achieve price stability, to build the basis for economic growth. So, we have to take this into account.

This is critically important, and to me this Jackson Hole is far more international than any other Jackson Hole I've been at. Bill Rhodes' great phrase, central banker to the world. Jerome Powell has to speak today to the developed nation's central banks and also fragile EM central banks as well. What's the message you need to hear from Chairman Powell that reaffirms independence at a central

bank?

J. Paul gave many important relevant speeches here in Jackson Hole and this year, I guess for him, it's a very important meeting. It's his last meeting in this role giving such a speech. And what I expect from him, he is an outstanding, excellent central banker. And what I expect from him to deliver a clear message on price stability, the mandate of central bank, of central banking, and this is price stability. And so he gives us this certainty we need in a very complicated world.

I want to ask this question. Bill called me up this morning and said, let's get Nagel in trouble. So here we go. I want you to talk about...

You're making him nervous.

I want you to talk not about American exceptionalism, but from where we sit, there's Leica exceptionalism, Mercedes exceptionalism, everything of Germany that we know. Tell us now about the future of German exceptionalism that you have to steer forward with monetary policy.

I think Germany, we are in a situation that is definitely not an easy one. When you take the second quarter numbers for GDP, it was minus 0.3. So this year we expect maybe stagnation or a mild recession. But what I can tell you and what I can promise to you is that Germany has the capability to adapt to different situations. I think the world is changing. We are not happy with the current situation, so the trade conflict and everything is definitely not helpful. But at the end, we showed in the past our, let me say, strengths to come back and have a strong economy.

Post-Trump, can you and France and the other leaders of Europe reaffirm that growth, that spirit of growth that you had? I guess we do something in the moment. We are going in the direction that you alluded to. We have structural reforms. We will do a lot of spending in new investments over the next year. So I think we do a lot of things in the moment.

And I can guarantee you that there is a strong coalition on the European side, Germany, France, this axis is working again. And so I'm really confident that there is a strong coalition on the European side, Germany, France, this axis is working again. And so I'm really confident that we can achieve a lot.

Given the fact that you could see some sort of mild recession in Germany, are you open to cutting interest rates further after getting to 2%, which is sort of balanced?

Is it appropriate to become a little bit more accommodative?

Maybe a mild recession for this year, yes, this is true, but maybe we have also to think about that next year economic growth, there's a high probability that economic growth is coming back. When it comes to interest rate policy, I believe that we are in a kind of equilibrium. We have a 2%, we are on our target, this is good news. Interest rates are at 2%. So this is an equilibrium. So I

do not see so many arguments that brings me to the point that we should do more here. So it's something. So I believe that inflation is not the point anymore.

Inflation is not the point anymore, that now it's potentially growth.

We are on our target.

But this is the issue. If inflation is not the issue, at what point do you see risk of disinflation, given the fact that the euro has been strengthening, right, that's importing disinflation? You have the potential for Chinese goods to be coming into the European region, cheap Chinese cars, that's sort of the cliche, that could lower prices. At what point are you

going to be fighting disinflation again? Well, it's definitely not time for complacency. So taking for example service inflation is still very high. It's above 3%. So we have to have this wait and see attitude. So this meeting to meeting approach is I guess the best way to do monetary policy in the Euro system. When it comes to our September meeting we will get new data, new projections and then we will see. But at the moment if I take all the numbers that I know, PMI numbers, I

think not giving me enough arguments to change the bars. How high is the bar to cut? I think think the bar is high. And so it needs a lot to convince me to change monetary policy.

The day after Russia invaded Ukraine, I had the honor of David Fulkert's Lando on, and he was absolutely brilliant in predicting the fiscal expansion, the unleashing of a fiscal impulse across Europe. You're providing leadership on that. Is there a new nominal GDP to Germany which makes the business process that the Bundesbank looks over more,

you're not gonna like this phrase, but more Anglo-American, more modern, more new world? Is there a new nominal GDP permanence because of this fiscal impulse?

I think Volker Zlandau made a great analysis in 2022. But let me take this opportunity first to say Russia has to stop this war. I think this unprovoked war of aggression against Ukraine did a lot of harm to us. I think, first of all, this war has to be stopped. And then I can give you maybe my interpretation of the to us. I think first of all this war has to be stopped. And then I can give you maybe my interpretation of the current situation. Yes, you can say well this was an eye-opener for Germany,

for the whole European Union, and we should take every step that is necessary to become

more competitive. This is so important I have to interrupt. Do you see a new German political regime led by Mr. Merz, or there'll be a new impulse by Germany to say to Russia, stop?

I think Friedrich Metz, the new chancellor, he did it right over the past couple of months since he is in office. So he did a lot of reforms. I think he put the right things into the cupboard and say, well, we have to improve on all the structural issues. the right things into the cupboard and say, well, we have to improve on all the structural issues.

And I guess it was the right policy up till now, but now we have to implement all the things. Now, this is what I can say from a central bank perspective. Now we have to come into action. We have to do it. The money is there.

The funding is there.

Now we have to- Is the will.

I think there's a political will to do it.

Definitely. I think there's a political will to do it, definitely. We're about 20 minutes away from the Jackson Hole speech from Fed Chair Jay Powell at a time where all of these different international issues are very much at the forefront. A big question will be domestically how it sort of has ramifications on rates and internationally the currency blowback as well. How independent are your policies from what the Fed does? In other words, how susceptible are you to either a more dovish or a more hawkish Federal Reserve?

I think central banking in a globalized world is like family business. So we are looking at each other for sure. But we are doing our own monetary policy. We are checking our data. Yes we know that there are some spillovers from the U.S. policy to the euro system. But we are doing our independent own monetary policy. We are checking our data. Yes, we know that there are some spillovers from the US policy to the Euro system, but we are doing our independent own monetary policy.

One real ramification that people have looked at so far this year has been the dollar and how much it's weakened, particularly against the Europe in the first six months. We've seen sort of a plateauing out recently, and I am wondering how much of a concern that is for you. I know that different people have talked about levels at which point it becomes a concern. Is there a point where you start to say, maybe this strength is something we don't really

want? So when it comes to exchange rates, I'm often, let me say, not too outspoken. What I can see when I'm checking the data, if you take the long-term mean of the exchange rate between the US dollar and the euro. So we are pretty much on this mean. So it's not something that is maybe producing too many concerns.

Jakob, I'm Mr. Outdoors and so I have a question. Do the Tetons compare to the IBC loop?

Oh yeah, you also have an incredible language.

Is this like even close to the sound of music?

I did a lot of hiking here. The Tetons are outstanding. It's so nice to be here. And now I have to go back to the conference. It is a little bit something you are allowed to see the nice scenery, but listening to a great speech that I expect from Governor Powell. But you can be very proud to have this Teton Mountain in the United States.

A commensurate diplomat.

Just avoid talking about the Alps and how gorgeous they are.

But you have to come to Bavaria. It is so nice there.

We'd like to do a surveillance remote from there.

I would agree, actually.

And we'll see.

I hope you will invite me.

I hope you will invite me.

Absolutely. Look out for that one. Bundesbank president, Jaakob Nagel.

I'm thinking October.

Thank you so much for being here. And we'll see you in the Alps when we're singing The Hills Are Alive with The Sound of Music. Right now, we are just 18 minutes away from that key Fed speech. Coming up next, don't miss this.

Patrick Harker, former Philadelphia Fed President. As we look at a market that's calm, up about 5.4% now on the S&P and yields just slightly lower on the 10-year, 4.3% on the dot.

This is Bloomberg Surveillance on television on radio. ♪♪ . In case you missed it, I'm bound to play it. the president says grocery prices are dropping.

Is that what you're seeing?

If you go back to COVID and everything, they've obviously gone up since then. I think you see a pause in grocery prices right now because we don't know what to do as far as buying prices right now because we don't know what to do as far as buying those right now. The other big one that hit us today was was death. India India grows most of the shrimp in the world right now. And now this what do we do now? This just

got 50. Is it 50 percent or 25 percent? I don't even know. So how long do you think you can sustain margins here if these tariffs do not change? You mentioned the holidays. Is that when this starts to kick in?

Yeah, we're hanging by our fingernails right now. I mean, we can't do this forever. And I'm hoping all of Trump's tariff deals and everything will work themselves out.

Don't miss Balance of Power, live every day. I'm David all of Trump's tariff deals and everything will work themselves out. Don't miss Balance of Power, live every day.

I'm David Weston. Join me for the next generation of Wall Street Week. This week, central bankers travel to Jackson, Wyoming, and we go with them to the richest county in the country. In Dallas, we take a look at its plans to challenge New York's position on top of the financial world.

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There may be a change because I don't see any chance that there's a nod toward a September cut or any promise of a September cut or any promise to September got I think he's going to focus primarily on the decision framework and not give any indication of where he's leaning for September.

That was former Fed Governor Betsy Duke as everybody awaits for that key speech at about 14 minutes time. We will hear from Fed Chair Jay Powell here in Wyoming. This is Bloomberg surveillance on television and radio. As we count you down to that speech we do see in markets a sense of calm after five straight days of losses after a lot of gains. Tom we've had a big market game this year. We didn't see five. We saw a pause in August pause five days of losses and now we're up about a half a percent on the S&P and seeing yields come in just slightly. I take umbrage. We've forgotten what a correction is.

We've forgotten what a bear market is and we've forgotten what a 35% drawdown is.

You know, we could still mention that markets were down for five straight days in a row.

Because we're a Bramowitz and that's what we do.

Because we're a Bramowitz, this is what we're doing. Right now. Let's have someone save us. Michael McKee is going to join us and he's going to try to weigh in on this.

Am I going to save you?

You're going to save us, absolutely.

I'm going to save you.

Also who's going to save us is former Philadelphia Fed President Patrick Harker Yellowstone. You wonder why everyone knows now everybody knows that you are hiking in Yellowstone. We've been talking about this with everyone that it feels very different this time around. How much behind closed doors do all of the Fed members talk about the importance of central bank independence? Is that something very much at the forefront?

It's essential. It's absolutely essential. We know history, right? We know when that gets lost, what happens. We know that in this country, and we know it in countries around the world. So it is absolutely critical, the independence of the Fed. That does not mean the Fed is not held accountable. I think this is important. Independence doesn't mean you get to do whatever you want to do.

There is still an accountability. There's an accountability to Congress, and there's an accountability to the markets, right? There's an accountability to the American people more generally. So I think you can't lose sight of that. There is an argument that ultimately,

if there is a policy on the Fed, whether it's response to political pressure or not, to ease now and then inflation picks back up, the markets will be the ultimate arbiter, right? That ultimately, you will see some sort of market reaction that will be a natural check on whatever that is. Do you ascribe to that? Yes, the bond markets. I mean, I look at the bond markets.

Equities, you know, they're choppy. They're always choppy. The fixed income folks, they're making longer term decisions. And so that's what I watch. And I think that's right. They will police the Fed in some ways, because monetary policy flows through the markets. That's right. They will police the Fed in some ways. Because monetary policy flows through the markets. That's the implementer of monetary policy, not the Fed. The Fed moves one rate, the overnight rate. It's the market that makes monetary policy work.

So today, Jay Powell gets up with the markets anticipating a rate cut. What does he say? Does he care what the markets are doing right now? Does he make the point that there's a lot of data? Does he open the door to a rate increase?

Yes.

Or cut, cut.

The answer is yes to all those things. I think Jay will be cautious. I think he will try to, my own sense, move things more to neutral. That is, there's a possibility of a September cut. I mean, if I think back, lo, these seven weeks ago when I left the Fed, my last SEP, I had two rate cuts in for this year.

I think that's still appropriate. There's one other tool, though, that he's not going to signal, which I think is important to put on the table, which is the balance sheet. Right? which I think is important to put on the table, which is the balance sheet. Right. We're talking about the rate cut, but the balance sheet runoff. My own view is I think we could the Fed should stop the runoff now. Right. And that's a signal that we want to sit here and see how things play out.

And then maybe in September, a cut or later. But I think the balance sheet, we often forget about it. And again, it's small now because we slowed the rate, but it's still there. And I think it's an important signal that we want to sit and wait. We are entering a period I'm worried about. It feels, it's not the 70s, but it does feel like stagflation light, right?

It doesn't feel great. When I talk to my contacts, it's something that just doesn't feel right.

Well, what's the balance of risks right now? Because we've heard a lot of your former colleagues say, we're worried about the labor market, but it still seems to be solid. We're worried about inflation, although it's only ticked up a little bit. We think it might in the future.

So I'm more worried about inflation in some ways, because the labor market numbers are hard to discern right now. You think we're shrinking the labor force in some ways. Right. And so we're keeping unemployment steady ish. It's going to tick up but steady ish. So we're not going to see those big numbers of 100 and 2,000 200,000 jobs, part of it is because the labor market is shrinking.

We are mourning here at this Jackson Hole a wonderful guy, Charlie Plosser just died. He was head of the Philadelphia Fed before you. I want you to capitulate here, recapitulate here right now, freshwater optimism about the American economic experiment that was with Finn Kinlan, Ned Prescott, and Charlie Plosser in real business cycle theory. Explain how that innovation isn't going to go away, even with the political intrusion

of the moment.

No, I mean, Charlie was one of my mentors, and I just have tremendous respect for him. I was a director of the Fed when he was president, so I got to know him well. I knew him as a business school dean when I was a business school dean. He made tremendous contributions to education, to economics, and not just in macroeconomics, but economics more broadly. And so he's going to be really missed. And he was an incredibly strong and powerful voice for Fed independence.

Speak about centrist America, centrist Republicans, centrist Democrats that took, you know, within the criticisms of RBC, said, you know what, this is about America and this is about our spirit. Is that at risk right now?

Yeah. So I label, I used to, people would ask, what am I, a hawk or a dove? And I'd say I'm an eagle because I'm from Philadelphia. But now, I don't get it.

Oh, God.

Carry on. Ask people from Kansas City. They'll tell you all about it.

Ooh, sick burn.

But I consider myself right now a radical pragmatist, a radical centrist. We've got to get the center to rise up in the spirit of what Charlie and his colleagues did, and reaffirm the centrality of markets, reaffirm the centrality of democracy. Those two go hand in hand. Human agency is what it's all about.

So we're about seven minutes ahead of this speech, and one thing that you talked about a year ago when we were sitting here was something that stuck in my mind for the rest of the year, which is that at this point, you are looking at anecdotes with almost more importance than the hard data that gave you a more real-time view of things. How much is that even more so now, given some of the questions around,

forget the politics of the moment, just the collection of data, the surveys that people aren't responding to, things of that nature.

Oh, yeah. Just look at employment, right? You have the establishment survey, the household survey. Those two aren't quite adding up. There's a lot of choppiness in that data right now. And so, yeah, you have to take that data seriously.

And you have to be careful not to make anecdotes data, right? But you do need to listen to what people are saying, and people right now are sitting on their hands. What I'm hearing from lots of people is, I need to let some of this uncertainty — no, the only exception to that are data centers, right? It's roaring ahead. The only problem is we don't have enough power to power these data centers. But there are areas of the economy that are growing,

but a lot of people are just waiting. Can I interrupt here?

Mike wants to get a question in.

The temperature's dropped since we started live.

Oh, it feels warmer than usual.

It's gone 43 degrees. I'm not complaining.

Do we expect snow today?

You need to.

Oh my gosh.

It is actually warmer than usual.

Tom is not an outdoorsman.

42 degrees. Yeah, understatement of the year. Carry on. I want to ask you about the framework review, which is something that Mr. Powell is likely to talk about today.

What's the most important change that they are likely to make?

If you read the framework review, it was written in a period where we thought interest rates were going to be zero or low forever, and inflation was going to be under 2%. And so there was that color to the previous review. That's all going to be taken out, obviously.

And I hope that—I haven't seen the final, but I hope that they then emphasize more a balanced approach and more principles as opposed to tactics. We don't need to get into the details of the tactics. That's what the committee does. They need to reassert the principles of the dual mandate.

Going forward, under whatever new framework they have, do you think they can eliminate some of the risk that we saw coming into 2020 when Jay Powell here unveiled the last framework, which less than a year later was being junked because of COVID.

Yeah, you know, I get this question a lot. Like before I went into every meeting, FOMC meeting, did I review the framework and that guided my decisions? The answer was no, right? You face the situation you have in front of you and you deal with the cards you're dealt.

And so the framework provides a broad sense of where the committee needs to go, but day-to-day, meeting by meeting, it does not drive this.

Wait, this is too important. This is breaking news. Do you read the Fed Minutes?

Yeah. Wow.

I was in there, yeah.

Exactly, of course. He actually listens, too. I am wondering, though, what the risk reward here is. And just to sort of crystallize the moment, what the harm would be of cutting by 25 or 50 basis points. And you talked about how you penciled that in. It wouldn't be that big of a deal.

Are we just making these big, grand pronouncements about the same thing, that essentially it might make sense to cut on the margins but not necessarily go wholesale to 1 percent? I mean, is that essentially what everyone seems to be coalescing around?

I don't see how you would go 1%. That's just simply not in the cards. What matters is not the number, but the signal it sends. Because it's 25 basis points going to move the 10-year? No, not really. The market's going to move the 10 year? Not really. The market's going to move the 10 year. It's more the signal of where the Fed thinks the economy is right and where it's going. That's

why I like the idea of pausing the balance sheet runoff as a signal. These are signals not actual. They're not going to be reflected in people's mortgage rates or credit card

rates. Before we let you go. How much are people talking about who's going to come in to replace Fed Chair Jay Powell?

Well all the time. You guys are talking about all the time. I mean, among the Fed members. Yeah, that I don't know. I mean, I haven't really – part of my deal when you leave the Fed is you have to sort of stay on the sidelines for a while. I mean, obviously people are concerned about that. It's a very important position for this country. And so, yeah, I'm cheering for the team that's making this selection, that they make the right choice.

Patrick Harker, thank you so much for being here. Really appreciate it. And I guess, go Eagles. Patrick Harker, former Philadelphia Fed president, we are awaiting that speech from Chair Powell, who is going to be speaking here in Jackson Hole in less than three minutes' time. Mike, we have been hearing from a number of people the fear of a 70s type of stagflation light, not exactly 70s, but that seems to be the emphasis so far in the Fed speak we've heard so far.

Well, it's the data that we're seeing. We're seeing a slowdown in the labor market. We're seeing an increase in inflation, but I think the emphasis at this point would be on the light part of it, because it's nothing like what happened in the 1970s. And this is also very early in the process. We recognize what's going on because of what we went through the last time. So the Fed can react. And in the current framework, and I assume this will stay in the future framework, the

Fed will do whatever it needs to do to keep price stability. That's going to be their main focus.

And if that's the case, then hopefully they are ahead of any stagflation.

Totally unfair question to you, but I'm going to go with it. With a new framework, whatever it may be, does the Fed become ever more ex post after the fact waiting for data?

It's going to depend on how you define it, because what the Fed is going to do is take out the idea that we're going to make policy based on what we think is going to happen, and they're going to say we're going to look at all the data that comes in. So it could be ex post or it could be just consensus.

Do the dots stay?

Look, the dots are, it's all the communication tool and how do you communicate? Maybe get on Twitter. I will say that we are waiting for Jerome Powell to come out and give his speech. We're less than a minute away. Unclear exactly how he prepped for it. How do you think he prepped?

He had breakfast at the Pioneer Grill. You saw him? I said good morning to the chairman this morning and I did not see if it was I didn't see if he went healthier in the full English.

Oh yeah, I can guarantee you didn't go full English ahead of this, but this is going to be a monumental moment for him. His last speech at Jackson Hole as Fed chair with the whole world watching. Does he address independence? Does he deal with the inflation side of the band-aid more than potentially the labor market side of things and frankly the international feel here really

notable as you mentioned. To me that's a major theme for me is the international

communities screen. Mike has some headlines. The headlines are out. The chairman has

started speaking and here is the key phrase the shifting balance of risks may warrant adjusting policy. That's going to get Wall Street's attention because it's opening the door to a rate cut. Here's the key sentence. With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.

The Fed is also announcing its new framework, which is pretty much as we were just talking about with Pat Harker, dropping the reference to the effective lower bound, eliminating the inflation makeup strategy, committing to contain inflation expectations and concern about labor market shortfalls. But the key here is that there are downside risks to employment, the Fed chairman says. The inflation outlook is that it will rise rise but perhaps at a slower pace. So right now we are looking at Fed that has the door open for a September 17th cut. And I guess Lisa we're probably going to see the long end and the short end reacting here. an absolute catering in yields on the heels of this opening up to the potential for rate

cuts coming out. The downside risks to employment are rising, which you can see also rising. The S&P 500 now up 1.3 percent, yields down eight basis points on the long end for the 10-year, even more for the two-year.

And looking at the inflation adjusted yield, the 10-year real yield comes in six basis points. That is substantial. It's still within the range. But at one point, 86 percent, it's a real reversal towards a presumption of Fed accommodation.

Yeah. And this comes at a time where there is this question of how they are going to message this, given that inflation has remained above that 2 percent target since 2021. Mike, do we hear anything about why this is a Fed willing to look through that kind of inflation?

They do anticipate that tariffs are going to add to inflation and they think it will take place over time, but they're still looking, at least as Chairman Powell puts it, they're still looking at these as one-time price adjustments within each sector. So it's likely that inflation is going to go up,

but then they think it stabilizes and might go down again.

All right, now let's take a listen to Jay Powell, chair of the Tevedra Reserve.

In my remarks today, I will first address the current economic situation and the near-term outlook for monetary policy. I will then turn to the results of our second public review of our monetary policy framework as captured in the revised statement on longer run goals in monetary policy strategy that we released today. When I appeared at this podium one

year ago, the economy was at an inflection point. Our policy rate had stood at 5.25 to 5.5 percent for more than a year. That restrictive policy stance was appropriate to help bring down inflation and to foster a sustainable balance between aggregate demand and supply. Inflation had moved much closer to our objective and the labor market had cooled from its formerly overheated state. Upside risks to inflation had diminished, but the unemployment rate had increased

by almost a full percentage point, a development that historically has not occurred outside of recessions. Over the subsequent three Federal Open Market Committee meetings, we recalibrated our policy stance, setting the stage for the labor market

to remain in balance near maximum employment over the past year. This year the economy has faced new challenges. Significantly higher tariffs across our trading partners are remaking the global trading system. Tighter immigration policy has led to an abrupt slowdown in labor force growth. Over the longer run, changes in tax, spending, and regulatory policies may also have important implications for economic growth and productivity.

There is significant uncertainty about where all of these policies will eventually settle and what their lasting effects on the economy will be. Changes in trade and immigration policies are affecting both demand and supply. In this environment, distinguishing cyclical

developments from trend or structural developments is difficult. This distinction is critical because monetary policy can work to stabilize cyclical fluctuations, but can do little to alter structural changes. The labor market is a case in point.

The July employment report released earlier this month showed that payroll job growth slowed to an average pace of only 35,000 per month over the past three months, down from 168,000 per month during 2024. This slowdown is much larger than assessed just a month ago, as the earlier figures for May and June were revised

down substantially. But it does not appear that the slowdown in job growth has opened up a large margin of slack in the labor market, an outcome we want to avoid. The unemployment rate, while edging up in July, stands at a historically low level of 4.2 percent

and has been broadly stable over the past year. Other indicators of labor market conditions are also little changed or have softened only modestly, including quits, layoffs, the ratio of vacancies to unemployment, and nominal wage growth. Labor supply has softened in line with demand,

sharply lowering the break-even rate of job creation needed to hold the unemployment rate constant. Indeed, labor force growth has slowed considerably this year with the sharp fall-off in immigration, and the labor force participation rate has edged down in recent months. Overall, while the labor market appears to be in

balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment. At the same time, GDP growth has slowed notably in the first

half of this year to a pace of 1.2%, roughly half the 2.5% pace in 2024. The declining growth has largely reflected a slowdown in consumer spending. As with the labor market, some of the slowing in GDP likely reflects slower growth of supply or potential output.

Turning to inflation, higher tariffs have begun to push up prices in some categories of goods. Estimates based on the latest available data indicate that total PCE prices rose 2.6 percent over the 12 months ending in July. Excluding the volatile food and energy categories, core PCE prices rose 2.6% over the 12 months ending in July.

Excluding the volatile food and energy categories, core PCE prices rose 2.9% above their level of a year ago. Within core, prices of goods increased 1.1% over the past 12 months, a notable shift from the modest decline seen over the course of 2024. In contrast, housing services inflation remains

on a downward trend and non-housing services inflation is still running at a level a bit above what has been historically consistent with a 2 percent inflation. The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months

with high uncertainty about both timing and amounts.

The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem. A reasonable base case is that the effects will be relatively short-lived, a one-time shift in the price level. Of course, one time does not mean all at once.

It will continue to take time for tariff increases to work their way through supply chains and distribution networks. Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process. It's also possible, however, that the upward pressure on prices from tariffs could spur

a more lasting inflation dynamic, and that is a risk to be assessed and managed. One possibility is that workers who see their real incomes decline because of higher prices demand and get higher wages from employers, setting off adverse wage price dynamics. Given that the labor market is not particularly tight and faces increasing downside risks, that outcome does not seem likely.

Another possibility is that inflation expectations could move up, dragging actual inflation with them. Inflation has been above our target for more than four years and remains a prominent concern for households and businesses. Measures of longer-term inflation expectations,

however, as reflected in market and survey-based measures, appear to remain well anchored and consistent with our longer-run inflation objective of 2 percent. Of course, we cannot take the stability of inflation expectations for granted. Come what may, we will not allow a one-time increase

in the price level to become an ongoing inflation problem. So, putting the pieces together, what are the implications for monetary policy? In the near term, risks to inflation are tilted to the upside and risks to employment to the downside, a challenging situation.

When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate. Our policy rate is now 100 basis points closer to neutral than it was a year ago. And the stability of the unemployment rate and other labor market measures allows us to proceed carefully

as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. Monetary policy is not on a preset course. FOMC members will make these decisions based solely on their assessment of the data and

its implications for the economic outlook and the balance of risks. We will never deviate from that approach. So turning then to my second topic, our monetary policy framework is built on the unchanging foundation of our mandate from Congress to foster maximum employment and stable prices for the American people. We remain fully committed to fulfilling our statutory mandate, and the revisions to our

framework will support that mission across a broad range of economic conditions. Our revised statement on longer-run goals and monetary policy strategy, which we refer to as our consensus statement to save time, describes how we pursue our dual mandate goals. It is designed to give the public a clear sense of how we think about monetary policy

and that understanding is important both for transparency and accountability and for making monetary policy more effective. The changes we made in this review are a natural progression, grounded in our ever-evolving understanding of our economy. We continue to build upon the initial consensus statement adopted in 2012 under Chairman Ben

Bernanke's leadership. Today's revised statement is the outcome of the second public review of our framework, which we conduct at five-year intervals. This year's review included three elements, Fed listens events at reserve banks around the country, a flagship research conference, and policymaker discussions

and deliberations supported by staff analysis at a series of FOMC meetings. In approaching this year's review, a key objective has been to make sure that our framework is suitable across a broad range of economic conditions.

At the same time, the framework needs to evolve with changes in the structure of the economy and our understanding of those changes. The Great Depression presented different challenges from those of the Great Inflation and the Great Moderation, which in turn are different from the ones we face today.

At the time of the last review, we were living in a new normal, characterized by the proximity of interest rates to the effect of lower bound, or ELB, along with low growth, low inflation, and a very flat Phillips curve, meaning that inflation was not very responsive to slack in the economy. To me, a statistic that captures that era is that our policy rate was stuck at the ELB for seven long years following the onset of the global financial crisis in

late 2008. Many here will recall the sluggish growth and painfully slow recovery of that era. It appeared highly likely that if the economy experienced even a mild downturn, our policy rate would be back at the ELB very quickly, probably for another extended period. Inflation and inflation expectations could then decline in a weak economy, raising real interest rates as

nominal rates were pinned near zero. Higher real rates would further weigh on job growth and reinforce the downward pressure on inflation and inflation expectations, triggering an adverse dynamic. The economic conditions that brought the policy rate to the ELB and drove the 2020 framework changes were thought to be rooted

in slow-moving global factors that would persist for an extended period. And they might well have done so, if not for the pandemic. The 2020 consensus statement included several features that addressed the ELB-related risks that had become increasingly prominent

over the preceding two decades. We emphasized the importance of anchored longer-term inflation, to support both our price stability and maximum employment goals. Drawing on an extensive literature on strategies to mitigate risks associated with the ELB,

we adopted flexible average inflation targeting, a make-up strategy to ensure that inflation expectations would remain well anchored even with the ELB constraint. In particular, we said that following periods when inflation had been running persistently above 2%,

appropriate monetary policy would likely aim to achieve inflation moderately above 2% for some time. In the event, rather than low inflation in the ELB, the post-pandemic reopening brought the highest inflation in 40 years to economies around the world. Like most other central banks and private sector analysts,

through year-end 2021, we thought that inflation would subside fairly quickly without a sharp tightening in our policy stance, as this slide will show. When it became clear this was not the case, we responded forcefully, raising our policy rate by 5.25 percentage points over 16 months.

That action, combined with the unwinding of pandemic supply disruptions, contributed to inflation moving much closer to our target without the painful rise in unemployment that has accompanied previous efforts to counter high inflation. This year's review considered how economic conditions have evolved over the past five years. During this period, we saw that the inflation situation can change rapidly in the face of large shocks.

In addition, interest rates are now substantially higher than was the case during the era between the global financial crisis and the pandemic. With inflation above target, our policy rate is restrictive, modestly so in my view. We cannot say for certain where rates will settle

out over the longer run, but their neutral rate may now be higher than during the 2010s, reflecting changes in productivity, demographics, fiscal policy, and other factors that affect the balance between saving and investment.

During the review, we discussed how the 2020 statement's focus on the ELB may have complicated communications about our response to high inflation. We concluded that the emphasis on an overly specific set of economic conditions may have led to some confusion, and as a result, we made several important changes

to the consensus statement to reflect that insight. First, we removed language indicating that the ELB was a defining feature of the economic landscape. Instead, we noted that our monetary policy strategy is designed to promote maximum employment and stable prices

across a broad range of economic conditions. The difficulty of operating near the ELB remains a potential concern, but it is not our primary focus. The revised statement reiterates that the committee is prepared to use its full range of tools to achieve its maximum employment and price stability goals, particularly if the federal funds rate is constrained by the ELB.

Second, we return to a framework of flexible inflation targeting and eliminated the make-up strategy. As it turned out, the idea of an intentional moderate inflation overshoot had proved irrelevant. There was nothing intentional or moderate about the inflation that arrived a few months after we announced our 2020 changes to the consensus statement as I acknowledged publicly in 2021.

Well-anchored inflation expectations were critical to our success in bringing down inflation without a sharp increase in unemployment. Anchored expectations promote the return of inflation to target when adverse shocks drive inflation higher and limit the risk of deflation when the economy weakens. Further, they allow monetary policy to support maximum

employment in economic downturns without compromising price stability. Our revised statement emphasizes our commitment to act forcefully to ensure that longer-term inflation expectations remain well-anchored to the benefit of both sides of our dual mandate. It also notes that price stability is essential for a sound and stable economy

and supports the well-being of all Americans. This theme came through loud and clear at our Fed Listens events. The past five years have been a painful reminder of the hardship that high inflation imposes, especially on those least able to meet the higher costs of necessities. Third, our 2020 statement said that we would mitigate shortfalls rather than deviations from maximum employment.

The use of shortfalls reflected the insight that our real-time assessments of the natural rate of unemployment, and hence of maximum employment, are highly uncertain. The later years of the post-global financial crisis recovery featured employment running for an extended period above mainstream estimates of its sustainable level, along with inflation running persistently below our 2%

target. In the absence of inflationary pressures, it might not be necessary to tighten policy based solely on uncertain real-time estimates of the natural rate of unemployment. We still have that view, but our use of the term shortfalls was not always interpreted as intended, raising communications challenges. In particular, the use of shortfalls was not

intended as a commitment to permanently forswear preemption or to ignore labor market tightness. Accordingly, we removed shortfalls from our statement. Instead, the revised document now states more precisely that the committee recognizes that employment may run, at times, above real-time assessments

of maximum employment without necessarily creating risks to price stability. Of course, preemptive action would likely be warranted if tightness in the labor market or other factors pose risks to price stability. The revised statement also notes that maximum employment is the highest level of employment that can be achieved on a sustained basis in a context of price stability. This focus on promoting a strong labor market underscores the

principle that durably achieving maximum employment fosters broad-based economic opportunities and benefits for all Americans. The feedback we received at FedList and events reinforced the value of a strong labor market for American households, employers, and communities. Fourth, consistent with the removal of shortfalls, we made changes to clarify our approach

in periods where our employment and inflation objectives are not complementary. In those circumstances, we will follow a balanced approach in promoting them. The revised statement now more closely aligns with the original 2012 language. We take into account the extent of departures from our goals and the potentially different time horizons

over which each is projected to return to a level consistent with our dual mandate. These principles guide our policy decisions today as they did in the 2022 to 24 period when the departure from our 2 percent inflation target was the overriding concern.

In addition to these changes, there is a great deal of continuity with past statements. The document continues to explain how we interpret the mandate Congress has given us and describes the policy framework that we believe will best promote maximum employment and price stability. We continue to believe that monetary policy must be forward-looking and consider the lags in its effects on the

economy. For this reason, our policy actions depend on the economic outlook and the balance of risks to that outlook. We continue to believe that setting a numerical goal for employment is unwise because the maximum level of employment is not directly measurable and changes over time for reasons unrelated to monetary policy. We also continue to view a longer-run inflation rate of 2 percent as most consistent with our dual mandate goals.

We believe that our commitment to this target is a key factor helping keep longer-term inflation expectations well anchored. Experience has shown that 2 percent inflation is low enough to ensure that inflation is not a concern in household and business decision-making, while also providing a central bank with some policy flexibility to provide accommodation during economic downturns. Finally, the revised consensus statement retained our

commitment to conduct a public review roughly every five years. There's nothing magic about the five year pace. That frequency allows policymakers to reassess structural features of the economy and to engage with the public, practitioners, and academics on the performance

of our framework. It is also consistent with several global peers. To wrap up, I want to thank President Schmid and all of his great Kansas City staff who work so diligently to host this outstanding event annually, counting a couple of virtual appearances

during the pandemic. This is the eighth time I've had the honor to speak from this podium. Each year, this symposium offers the opportunity for Fed leaders to hear ideas from leading economic thinkers and focus on the challenges we face. The Kansas City Fed was very wise to lure Chair Volcker here to this National Park

more than 40 years ago and I am so proud to be part of that tradition. Thank you

very much. That was Fed Chair Jerome Powell wrapping up his annual Jackson Hole remarks. What a Jackson Hole speech that was. This is Bloomberg Surveillance on television and radio live from Jackson Hole, Wyoming. What we heard there is they are prepared to move rates lower on the heels of their dual mandate being in conflict. We see a marked market reaction. We could see 10-year yields are lower by 10 basis points. Two-year yields are down by

10 basis points. So 10-year yields are down by 7 basis points. What you see is a weaker dollar, stronger euro by some 7 tenths of a percent, which you can see the dollar just weakening across the board. And you can see that increase on the equity space. We have been getting some other news. President Trump has been tweeting, saying that if Lisa Cook, Fed governor, doesn't resign,

he will fire her. There also was some drama in the main hall of the Jackson Lake Lodge. Bloomberg's Michael McKee is with us. Mike, can you give us a picture of what's been going on as Jay Powell was speaking?

Well, it was I guess shortly before he spoke, Lisa Cook walked into the Jackson Lake Lodge. She was not here last night. I guess she's just arrived. And James Fishback, who runs Azora Capital, he sued the Fed in court trying to get the Fed to open its meetings to the public and the court threw that out. But he was standing there and started shouting at her, why did you commit mortgage fraud? He was apparently, according to the Bloomberg reporters who were there, escorted out by sheriff's deputies.

Yeah.

I think we have to be clear here that these are allegations at the best.

Absolutely. That there are no charges, no processes in place at this time, right? No processes in place at this time and what we've seen from Bill Pulte from the Federal Housing Finance Administration and from the President are fact, they're trying to say factually that she committed fraud and there is no evidence of that yet.

We will discuss that at a later point. Right now we're just still digesting the text of a 40 to 45 minute speech by Jerome Powell. It really compares to the eight minute speech back in 2022, there will be pain. This was, this is a complicated moment. The market sees it as maybe a little less complicated and to really digest what we just heard CityWealth Chief Investment Officer Kate Moore, who's on set with us in her beloved Jackson Hole.

That's right.

Wyoming. And Kate, what's your impression? I mean, how much do what we just hear from Fed Chair Jay Powell change your view of what their reaction function is going to be? So it hasn't really changed my view. What I will say is in the last couple of weeks and talking to other people on the buy side and really getting a sense for investors, people were moving a little bit more towards the 50-50 in September, even if that's not what was getting price into the market. There was the sense that this tension between the labor market and inflation was going to make the decision really difficult.

And I think what we're hearing this morning is that the Fed is on path to start easing rates again or proceed with the cycle. But I don't think that the rest of the meetings to the end of this year and through 2026 are done deals yet. So much is going to be data dependent.

So I see the market price moves and now with near certainty for September and on through the balance of the year. And I think we just have to watch the data. In watching the data in the Heritage City Group, economics, as Willem Bouter, Catherine

Mann out at the Bank of England and all, there's a complete international and holistic view. Is this ginormous, that's a fancy word, CFA word, folks, this ginormous investment that we're seeing in AI, is the certitudes of this summer. Are they at risk given the tumult.

Well I mean tell me you point out something. The market's been really crowded. Most investor segments have been crowded around these secular themes and for good reason. Right. These companies are putting up great numbers. Every company across every industry is investing in AI and technology. So if you had uncertainty around policy or economic growth or geopolitical tensions or international relations or you know fractures in the U.S. consumer. Everyone was crowded in this space. That said they're not crowded because these are companies with these are they're crowded because

these companies have great fundamentals and the path forward looks great. But what we'll have to see as we go into the back end of the year if we get OK growth numbers or if we get inflation that's a little bit too perky, if we get rotations in the market. I think some of the rotations in August into the small gap was unwarranted in my view. So we are sitting here after digesting that speech and I'm going to have to go read it about three more times to really internalize all of the complicated messages laid out by

Jerome Powell. Then his last speech as Fed Chair. Mike, before we continue, Michael McKee here, our chief economics correspondent. Can you just wrap through some of the key headlines once more so that we can really understand just how big of a policy shift in some ways this really was?

Well, it's a policy shift, but one that has been signaled for a little while, which is why the markets have been buying into it but Powell basically accepted the markets argument that it looks like the labor market is weakening and that is a threat to the overall economy and inflation is rising but it may not rise as quickly as the Fed had feared and so therefore the door is open to a rate cut if we get supportive data from the CPI

and the employment report that we get at the beginning of September. Now the thing about what he said today that I think is important is once you open the door like that as Fed chair, it's almost impossible to close it. It would take a lot in these data points that are coming out to change that view. And the market's going to go overwhelmingly towards the idea of a rate cut. So he's pretty much baked it in at this point. So I think

what then happens is it goes to Kate's point about where we go from there. The focus will be on the other two meetings this year and then what you do into 2026. And I think if you ask the chairman he would say we don't know yet. That's the data dependent part. But for

right now, we're going to give you what you think you need. And right now, what you are seeing is almost a certainty priced in for a rate cut next month. But Kate, one other thing you're seeing is weakness in the dovish more dovish approach. Yeah. You know we got a pause in terms of the weakening of the dollar after a really vicious weakening in the first part of this year. And I've heard a lot of currency strategists say you know we're going to tread water for a little bit. We've made a lot of the adjustment. But if the market really believes with high conviction that we're going to continue on a rate cutting cycle. You know I think it's fair to assume that the dollar would weaken a little bit. I think most people would say over the longer term they agree that the dollar has been overvalued for a considerable period of time. And I expect that we'll see a little bit more of that adjustment on balance though. I think we're going to see

an appreciation in some U.S. assets particularly the U.S. equity space even as the dollar weakens a little bit. And I'm hedging some of the stuff and some of the concerns I have in the portfolio around uncertainty and perhaps picks up pick up in volatility in September into the beginning of October with a little bit of gold. Interesting. We'll catch up with Kate Moore. She's going to be sticking with us. City Wealth chief investment officer as we get through all the headlines and get some commentary, joining us now is someone who is very familiar with these types of speeches, St. Louis Fed President James Bullard, who recently was in the media talking about his preference for 100 basis points of rate cuts

this year heading into 2026, also a potential contender, I should say, to be the next Fed chair. James, Jim, how much are you seeing what we heard from Fed Chair Jay Powell and seeing anything different that you would really say if you were at that podium?

He used the speech to solidify expectations for 25 basis points in September. I was expecting that anyway. Markets were expecting that. He leaned into the most recent labor market report, which was very soft. And so I think that's a done deal.

He didn't say too much about beyond that, what you want to do with the October meeting or the December meeting. I have set 100 basis points going into 2026, so I think you could adjust as you go forward and eventually get a full 100 basis points, but I would go slowly in order to watch the data. And then on the

framework review, I'm sure much earlier in the year they had targeted that they would have the framework discussion and that they would use the Jackson Hole speech to talk about changes to the framework. I thought those were thoughtful and they were well presented in this speech and they're about what many have speculated on. So I think they did about as much as they can on the framework side.

Jim Boller, Tom Kainan, good morning to you. I definitely consider this my conversation of the day. You served a lengthy term at the St. Louis Fed. You have lived the decline of a greater economy decades and decades ago in the effort to provide for a resurgent St. Louis. Is the next chairman of the Fed, whoever that may be, do they have to manage for two American

economies, a technology-driven exceptional economy and another, to use a cliche, America flat on their back? How would a chairman execute those two Americas?

Yeah, I think income and wealth distribution have become more salient topics for the Fed. It's not that clear how much the Fed can really do providing interest rate policy for the whole economy. If you change the rate structure, that affects everyone, not just one particular group that you might be targeting. So I think that's been something we've had to wrestle with, and I've actually done research on it myself to try to understand it better from my point of view. So I think this has been a theme for a while

and that will be an important theme in macroeconomics going forward.

Mike McKee's got a lot of smarter questions than me on the immediacy of this speech. I'm going to ask one more distant question, Jim Bullard. You're at Purdue executing online technology education every single day. How do you define the new technology productivity that America faces? Is it enough to save us?

Is it enough to really add on to our present GDP?

Oh, yeah. Oh yeah, I think that the AI boom is, you know, it's a general purpose technology that will diffuse through the economy. I think the key question is how fast does that actually diffuse and sometimes markets can get ahead of themselves and think it's going to happen sooner. Sometimes they're too late and it happens faster than markets think. But nevertheless, any way you look at it, it's an important technology. It can drive productivity, and I think in higher education is one of the places where

you can really have the biggest impact. We put an AI requirement in at the Daniels School here for every single student, and we're trying to expand that to all of Purdue. So I think that just shows you how important this technology is.

Jim, it's Mike McKee. I have a question about sort of the process involved in this speech. The chairman is giving his own speech, but basically when he says it's time to maybe adjust policy, he's speaking for the entire Open Market Committee. Going into a speech like this,

would he have polled everybody? Does he think he has the votes for that? Because we've been speaking with Fed officials here in Jackson Hole, and there are still some who are saying, well, we're not sure that we need to do that yet.

He's going to report on the center of gravity of the committee, even though there might be people that have misgivings. At the June meeting, the committee had a median dot plot of two rate reductions by the end of the year. And I think the minutes suggested something that was more like 50-50, but then the labor market report came in.

I think that tilted the balance. So he could have pushed back a little bit. I think financial markets were expecting him to be a little bit more hawkish here and try to set up a 50-50 meeting where you would wait and see for the rest of the data to come in, but I don't think that's where the center of gravity is on the committee. So he went ahead and leaned in. I thought there was quite a bit of talk about the labor market at the

beginning. You could have been a little more emphasis on the low unemployment rate, for instance. He did come out at the end of that discussion saying, well, it's in balance, but we're a little bit nervous. So I think he's accurately describing where the bulk of the

committee is. Where would you be on this question? Because we've heard Fed officials for some time now saying, yes, we had poor job creation in recent months, but the unemployment rate, as you just mentioned, has been low. And they've described the labor market as solid. Now this seems to be sort of a major shift in the way they view the outlook and the sort of balance between the two mandates?

Yeah, what he did at the end of that discussion, he said, well, it's in balance. But I think the committee is nervous. I think it has been slowing. And I think the policy rate is moderately restrictive, is maybe, you know, 125 basis points above the neutral rate. Is that really where you want to be in this circumstance? I think the answer is no. So you can come down some and still have moderately restrictive monetary policy that puts gentle

downward pressure on inflation. And then the other thing I think has happened is that this argument from Chris Waller and others on the committee that you should look through the one-time increase in goods prices coming from tariffs, I think that's carrying the day. And then he emphasized that inflation expectations remain anchored and so on. And so I think that sets up a modest move downward in September.

Jim, we've been talking with you for years and you are very focused on the discipline of economics. Right now I'm looking at the headlines that are crossing from the past hour. The top one, of course, is Jerome Powell, Fed chair, saying that shifting risks may warrant adjusting rates. The second one is that Trump says that he'll fire the Fed's Lisa Cook if she doesn't resign. As someone who is thought to be a contender to become the next Fed chair, Jim, how much does it concern you that there's this increasing political

noise around the seat and exactly what the path of policy forward looks like. Yeah, I want to see due process around something like this.

I want to see, you know, you can make charges against anybody about anything, I guess, and you know, the person can answer the charges and the DOJ can decide what they want to do and so on. So I think this has, you think this should have longer to play out before you took that step. Otherwise, it's just kind of the wild west

and should you get reinstated later, I guess, or something if there wasn't a conviction. So it seems messy to me. I think these kinds of charges are made from time to time against various officials around Washington, but I'd like to see due process there.

Jim, there's another question here, and aside from Governor Cook and what happens there, about how the perception of political interference handles the market reaction to Fed policy. There is this perception that that could cause the dollar to weaken more because there is more of an emphasis on supporting growth and supporting the labor market than containing inflation. And some people are worried that if the Fed does cut by 50, 75, 100 basis points, as you were talking about this past week, that you could see a move up in long-end yields akin to what we saw last year.

If you are on the Fed currently and you did see yields along the long end moving up in response to near-term Fed rate cuts, what would you do?

That would definitely be a concern and that's the tricky part of this business is that you think you're pursuing a dovish policy at the short end, but the long end goes up because inflation expectations start to rise, markets start to lose confidence in the Fed and the credibility of the Fed, and that can go very, very badly and unfortunately fairly quickly. So I think you do have to be careful here. But I'm saying that I think the committee has room to maneuver if they proceed carefully

over the remainder of 25 and the first half of 2026.

I don't want to get out front of the debate here at the moment, Jim Bullard, but what I would say to Chairman Bullard and Mike McKeon, I got to turn to you. You and I used to sit and look at the dots and go, which one is Bullard, but what I would say to Chairman Bullard and Mike McKeon, I got to turn to you. You and I used to sit and look at the dots and go which one is Bullard.

I mean you and I have done that. It's fairly easy after a while to figure out. I know Jim would probably agree with that.

Chairman Bullard is your first act if you take over the Fed president, I threatened to withdraw from the dot plot. I think this could be done better. This was discussed at the framework conference and former chair Bernanke gave a very nice presentation and talk about a quarterly monetary policy report, get more organized about it, put out a forecast. I think all of that could be done.

I've advocated that for a long time. And so I think that would sort of clear up some of the misconceptions around the dot

plot.

OK, this is really, really important, folks. As Jim Bullard made economic history, I would say a decade ago, with a small, short paper forceful on regime change. How do we get a new Fed away from the guessing and the certitude and the silly parlor game of it, Jim Bullard, with great respect,

how do we get to that more disciplined study around the game of the Fed and regime change?

Yeah, I think regime switching is a great way to think about the global economy and the U.S. economy and how it operates. There are relatively long periods of time where you might have, let's say, slow growth and very low interest rates, and then you might switch to another time with faster growth and higher interest rates. I think understanding that and understanding how that affects policy choices is a great thing to study further and talk about further in the years ahead.

So I think it's very salient for what the committee does.

Jim Bullard, former Fed President of the St. Louis Bank, will be sticking with us right now in markets. You can see a cheering across Wall Street to the opening of the door to a potential rate cut next month, potentially more. You could see equities surging higher across the different the different indexes led by some of the more interest rate sensitive sectors. The Russell 2000 you can see 10 year yields down now about six basis points even more at the front end down 10 basis points. As people look to the prospect of the Fed looking through some of the inflation from tariffs, you could see the dollar markedly weaker, 1.17 on the euro-dollar cross, up 0.9% in terms of just the percentage rise up about a basis point.

And there's a real question here about what this means going forward. City Wealth Chief Investment Officer Kate Moore is still with us, freezing a little bit because it is a little bit chilly here in the morning. I am curious, though, about what you're hearing in terms of prospective Fed chairs and the politicization of the Federal Reserve, if this is a Fed willing to err on the dovish side. Does that mean something that materially is higher with respect to returns and with respect

to risk appetite? Look, markets love certainty and our investors love certainty. And we want a certainty in terms of the process around making monetary policy decisions. So I don't have any insight into who might be named next Fed chair. But what I will say is, if there is a sense that the process is changing, I think that will lead to some pause and perhaps some volatility in the market.

You know, our expectation is that regardless of who takes the next chair and what seats are filled, we'll have a continuous continuation of the process of being data dependent, of being thoughtful, of having, you know, great debate and discussion amongst the Fed governors and their staff. But if that were to change, I think that would introduce volatility. I think the most important thing for us right now is to recognize that so much of the data is going

to be mixed through the back half of the year. And that's going to have a huge impact, I think, in terms of investor sentiment. And I would suggest even more crowding in some of the favored trades.

We tend to get reactions like we're seeing in the market now on a day when news breaks. But I think we're probably going to see extended rally here because people are anticipating this rate cut. Does that worry you in terms of a bubble forming or some sort of excess spending that would

push up inflation because of inflated asset prices?

Yeah. So I have been a little bit worried actually about positioning. I feel like I've been a little bit more cautious frankly than some of my peers on the street and saying you know people own the highest quality parts of the market. It's quite crowded. Some of the shorts when we're looking at some of the fast money community are very similar across the board. And we've seen people kind of shrug off concerns around economic growth or even the technological disruption across a lot of industries. We've seen significant improvements in terms of the earnings revision ratios. City Economic Surprise Index has moved up. You know and all of this together I think

sets us up for you know a little bit of weakness if there was a bad data point or if there was a bit of a shock. There's a lot of consensus positioning. Well Jim Jim Bullard I'd love to bring you back in here. How much does that concern you. That's sort of a bias to cut rates could cause asset price inflation to get ahead maybe

of where the economy is. Yeah. Equity is except for just recently, equities have been doing very well as they've digested the new trade policy of the US and how that's gonna play out globally. You've got the AI boom going on, really a driver for the big tech companies. And I do get concerned that things we get ahead of ourselves. Sure, it's a great technology and everything,

but how fast is it really going to diffuse into actual productivity in the economy. But overall I would say you know it's it's possible that we'll get higher productivity growth ahead and and really a good outcome for the second half of the 20 20s here much as we had in the half of the 2020s here, much as we had in the second half of the 1990s.

All right, let me talk to the chief investment strategist at Purdue University right now. I'm going to do a double barrel question first to Dr. Bullard and then to Dr. Moore. Jim Bullard, as simple as I can, all of my conversations, whether Yacom Nagel, Bundesbank, Cape Moore City Group, and on and on is about an elevated or persistent nominal GDP. Do you frame out that we're going to have an animal spirit in the country, whether it's

better real growth, okay, inflation, too much inflation, okay, real growth, but what we're talking about forward is an elevated nominal GDP.

If you think real growth is going to be faster than yes nominal GDP growth would be faster even if the Fed hits its 2 percent inflation target over that period. So yeah you would see higher faster nominal GDP growth.

I mean I look at this Cape Horn it's a higher the matter. I'm really surprised by your comments. I mean, I look at this, Kate, more, and it's a harder matter. I'm really surprised by your comments. I think they're extremely important. You're back to U.S. quality, etc. But it sounds like Citigroup is modeling out through all the emotion, the fear, the turmoil, the political debate, as we just saw next to the eight-foot bear in the lobby.

The answer here is you're modeling out that we'll be okay and there'll be a better nominal GDP. It leads into revenue, et cetera.

Look, I think we're going to have an okay growth environment. But one thing we keep on talking about is sort of the K-shape, right? There are the haves and have-nots across all the different industries, different consumer groups. And so I don't think that we want to assume that everyone is going to experience strong growth in the second half of the year. And we're seeing this of course in the consumer companies. We're seeing this across segments of different households. We're seeing this even in technology companies. Those that have made the investments are reaping dividends from it. So yes we may have these

good headline numbers. But I think as investors we have to really pay attention to what's going on beneath the surface and I think there's an opportunity for differentiation over the next couple quarters. We are looking at a market that is moving, we are looking at headlines that are coming and I want to bring this to you that Canada is planning to remove retaliatory tariffs on many US products and an olive branch to President Trump. And there is this feeling that maybe some of the tariffs are fungible, that we are going to see some of them removed or used as a negotiating stick.

I strongly agree with what you're saying. This was sort of out there in the ether last night. But to see these headlines is another example we adjust.

And that's one of the reasons why there has been a focus on the labor market. Fed Chair Jerome Powell speaking just moments ago, really focusing on the complications for the labor market.

Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.

Some people might say that Fed Chair Jay Powell is coming around to the Chris Waller view of things, that there is this feeling of potentially the weakening in the labor market, taking priority over inflation at a time where some of these tariffs are put on, taken off, and that's what we're seeing a little bit in terms of negotiation this morning.

Well, the give and the take, and it goes back to Kate Moore's optimism on investment in America, and you see it in dollar. Thank you, New York, for putting up that wonderful dollar loonie chart. And you see things adjust and you wonder, okay, what do we do with China? What do we do with Mexico with the produce debate and pharmaceuticals with Europe? Guess what? There may be constructive surprises as the certitude of the tariff debate gives way. It makes it easier for the next chairman and maybe I'll get out of triple leveraged

all cash. It's 50-50.

Oh, now is the time to definitely do it. By the first year. Yeah, for sure. Jim, before we let you get on with your day, I do want to finish there. That have we seen from tariffs that there is this fungibility there, that they get put on, they get taken off, and that right now the path of travel is lower from where we were maybe on April 2nd, not higher again. And so you can look through in another kind of way some of the inflationary impact.

Yeah I mean I think it was great to reach a preliminary deal with the EU. That's one of the bigger blocks in the world. China put on the back burner, markets like that for now. And then you've got Canada and Mexico. Looks like we're headed toward renegotiation of the USMCA, which I think would be a fine thing to revisit. It was scheduled for 2026 anyway. So it's maybe a little bit more settled than it was earlier this year.

And I think markets are liking that. That's making it easier to plan. So far, so good on that.

Jim Bullard, former St. Louis Fed President, joining us. Thank you so much for being with us. Maybe a future Fed Chair, we shall see. The process is ongoing. And City Wealth Chief Investment Officer Kate Moore, before we let you go, I just would like your take on this, the idea that we are at a moment where suddenly people are looking through the inflationary ramifications of tariffs. Are you seeing the same kind of thing? And if that's appropriate, this isn't 1970s.

This is a different shock that usually is a demand shock in the end.

Look, I will say people have been looking through the inflationary impact of tariffs for the entirety of the summer at this point. There's been an enormous rollercoaster ride in terms of expectations for end tariffs. But what I will say is this, even if we're at a lower rate, I'm just going to say 15% effective tariffs relative to where expectations were in the beginning of April, I think we have to keep our eye on the sectoral tariffs. This has potentially some of the biggest impact for overall

earnings. Those are sticky, we know, and are likely to endure through multiple different administrations. So this give and take between some of our trading partners around the reciprocal tariffs, we're watching that. It's very hard to trade around it. But I will say the sectoral tariffs are going to be very important for our outlook.

Kate Moore, you've been incredibly generous with your time. Thank you so much for being with us here. We will see you in New York City Wealth Chief Investment Officer Kate Moore. If you are just joining us, we did hear from Fed Chair Jay Powell. He said that this actually is a time where potentially they could start to look to the shifting policy dual mandate and what could eventually come would be a rate cut in September. Mike, it seems like that's what the market is

pricing in. That's what the market is pricing in and I'm fairly certain that's what Chair Powell is referring to. But because we're fair and balanced, I have to point out that Carl Weinberg has messaged from high frequency economics and said the chair didn't say cut, he said adjust, which means they could raise rates as well. Probably not in September.

Yeah, I don't know.

I'm not thinking that that's actually at all what he meant. What do you think, Tom?

I think it'll be great to speak to the former vice chairman here as well. What we heard there from Jim Bullard and from Kate Moore, Mike McKee, to me what is so interesting here is the outcome of the tariff debate. And the answer is we simply don't know. Today it's Canada. Monday it will be someone else.

Well, here's the thing. Tariffs are bringing in a lot of money right now. It's not that the other countries are paying it. We're all paying it because it's a tax on basically the consumer in the importing country. But what the administration seems to have done is made up for the deficit we're going to get from the big beautiful bill by raising everyone's taxes and not telling them that their taxes are going up. So people are accepting it, which may mean, as Bloomberg Intelligence is putting out in

a story today, that those don't go away. That we get used to this higher price level and get used to tariffs and they stick around because they do add revenue. It's coming out of our pockets, but they do add revenue to the government. So what's the endgame? If this is working and adding money to the Treasury's coffers, then the president, this president, could use them in many different ways, many different times, to increase revenue. So I think that we're going to be living with

this for a while, and the uncertainty it brings for a while.

Well, let's take a listen to what Fed Chair Jerome Powell had to say about tariffs and what the impact is on the economy.

Take a listen. The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months with high uncertainty about both timing and amounts. The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem.

What you can see is the response is rip roaring in markets with equities surging, yields plunging on the front end, yield curves steepening and a dollar weaker. PIMCO global economic advisor and former Fed Chair, Rich Clarida joining us now. And Rich, what's your take on what we just heard from Fed Chair Jay Powell?

Well, I think the chair certainly intended to open the door pretty wide to cutting in September. Importantly, Lisa, he spent a lot of time on balance of risk, which is what policymakers do. But at the two key junctures he highlighted the balance of risk to the labor market is to a weaker labor market,

and he basically indicated that the balance of risk to higher inflation doesn't appear to be a first-order concern in terms of persistent inflation. So I think the message was they think they're going to cut in September, we get some more data, and the markets have reacted

to that.

How much do you think that this is partly to maintain the Fed's credibility, not necessarily with respect to the president, but that right now, if they get it wrong on the labor market front, that it is that much more pernicious based on some of the jawboning by what we hear from the president?

Well, yeah. I mean, as the chair said in the remarks, it's a curious kind of balance in the labor market. The payroll employment growth has been very, very weak in the private sector, but the unemployment rate has not gone up. And so they are really focused on the balance of risk. Look, the Fed has a dual mandate. It's costly to let inflation move higher and stay there, but it's also costly to have a recession with the rise in the unemployment.

And I think, Lisa, you're correct. They are tilting in that direction now.

It feels like a very different Jackson Hole, and this is something that we've been talking about with all of our guests today, Rich, that people have come on and said there is a different tone about central banking independence and a question of how to communicate at a time of such political interference. What's your sense of where that was in the speech that we just heard from Fed Chair Jay Powell?

I think the approach the chair took was to really focus front and center, Lisa, on the dual mandate that's assigned by Congress, maximum employment and price stability. And the chair gave a very reasoned and thoughtful analysis and discussion of how they're balancing the dual mandate risks. And I think that's the J-PAL message to the issue of Fed independence. We have an assignment from Congress, and this is what we're doing to achieve it.

At this point, we also are dealing with the headlines that are coming out about Fed Governor Lisa Cook, where at the same time that Jerome Powell was giving his speech, President Trump came out with this truth post saying that he will fire Lisa Cook if she doesn't resign. We did hear reports that in the Jackson Lake Lodge in the lobby, that James Fishback was screaming at Lisa Cook that why did she commit mortgage fraud. What's your take on what this does in terms of both the Fed composition, but also just

the ability to be clear-minded about making Fed policy?

Well, obviously, I understand just looking at the headlines that you mentioned, myself, and don't know the details or the facts in this particular situation. But clearly, we're in an environment where Fed independence is under scrutiny. And my conviction is that notwithstanding all of the very relevant factors that you mentioned that the Feds is going to keep doing its job.

Richard Clarida, Tom Keene here. Thank you so much for joining us. Thanks, Tom. It's very valuable. I've got two texts I want to take care of that I think are important. You recently said that what matters is the institution, that this chairman and any future

chairman has to protect the institution. What's the day one first mandate to protect the institution for the next chairman?

Well, I think first and foremost, it's to have in place a plan and communication that will deliver expectations of price stability. I think the chair was right today to emphasize that the Fed has to focus on getting price stability because that's going to deliver the ability to deliver maximum employment. I've also written, Tom, that the Fed is sort of a complex and cumbersome institution with 19 folks around the table and the Reserve Bank presidents, but I do

think that is a strength right now of the institution.

Right. Well, this is really important because it's as fractious as a meeting of the bond team at PIMCO. In the middle of the speech, Powell channeled a few years ago at PIMCO the new normal. For a moment I thought Mohamed Hilarion had parachuted in to write this speech. What is your optimal new normal for the Fed, which Powell mentioned today? What's the best new normal for the next Fed?

Well, I think a new normal would be inflation moving down towards the 2% target, which would let the next Fed chair cut rates down towards a neutral level. You know, PIMCO in 2014, we rolled out the idea of a new neutral, and we've been operating in that new neutral world now for more than a decade. And so I think well-anchored inflation expectations, getting tariffs in the rear view mirror would allow the Fed to cut rates by probably 150 basis

points from here and achieving that ultimate soft landing. So I think that would be a good new normal destination for the next Fed chair.

What risks are there to that, given what we're seeing with the dollar, given the fact that we really have a very high level of uncertainty around which tariffs are going to stick and how much is going to get passed along to consumers?

Sure.

And I think the chair was right to point out that we are seeing evidence of tariffs showing up in the price indexes for imported goods, but that's been offset to some extent with the decline in services inflation. Again, I think where they are focused is to make sure that what is an inevitable increase in the price level from tariffs does not over time result in persistent inflation. I think the speech today addressed their thinking right now, which is that their baseline is

that that will not happen, which will give them the room possibly in September to cut rates.

Yeah, Lisa, I think it's important to mention within the market check that the market is putting on steam here an hour after the beginning of the speech and Mike McKee's bombshell headlines that Dow lifting up. I'm told I can't leave Jackson Hole unless Dow goes up a thousand points. I'm getting pretty close to it.

It sounds like you're going to be hiking for maybe another six hours and then all of a sudden not so much. I do want to know, though, about what this does in terms of the currency ramifications and where your preference lies in terms of the good investment backdrop, because what we heard from Fed Chair Jay Powell was so vastly different from what we heard from Joachim Nagel of the German Central Bank where he said we have to focus on inflation and right now that is more concerning to them than trying to support growth by cutting rates or being stimulative. The fact that that is the framework there and it is such a different framework here, does that make you want to invest in Europe a little bit more?

Well, you know, I think one of our themes at PIMCO is that we're in a world where taking advantage of a global opportunity set makes sense. Also we're in a world where it makes sense to focus on valuations. And without getting into particular markets or securities, there have been some pretty big divergences between valuation in the US and Europe, especially in equity markets. Also, you know, the Europeans are much closer to their 2% target than is the Fed, because from the Europe point of view, the tariffs are really a disinflationary force.

So we're at different points in the rate cycle, and that does open up some good opportunities.

Richard Clarida, you are definitive in the mathematics, the modern mathematics of our economics. Then, you know, we talk about a new framework, and it's a lot of jawboning about process. Maybe it's what are we gonna do with the dots? What are we gonna do with the dots? What are we going to do with the mathematics of

modern economics forward? Is it diminished after all this turmoil?

You know, Tom, you and I over the years, decades now, have talked about that a number of times. And my thinking continues to be the mathematics, the models, including my own, are tools. They're a starting point for analysis and discussion, but they're not handcuffs, nor are they the destination. And certainly, you know, the last five years have been unusual with a pandemic and all the rest, but I continue to believe that models and math are tools, not handcuffs.

My goal right now, Rich, is to get you on the short list is to be the next chairman. So let's talk tariffs here.

What is the Clarida mathematics of Trump tariffs?

Well, as Mike McKee said, they are raising a heck of a lot of revenue. And I would agree with my there you go. There you go. I think I think Washington may very quickly get hooked on the $200 or $300 billion a year in tariff revenue, especially if the initial cost of raising that revenue is in the rearview mirror, which I think I expect to be the case down the road.

Look, we're in a different regime. We talked at Pemko in June about an era of fragmentation and these trends have been accelerating. And the destination for the global trading system and global economy is going to be very different in five years than it was in the 30 years of globalization. So I think to be continued is the way I would answer your question.

He's running?

Is that what you think?

I don't know if he's running. I know Bullitt's running. I think by the time we get done with the show today, we're going to have Tracey Alloway

running.

I think that maybe.

We'll find out in just a hot second.

They're not with Tracey.

But I am?

Yeah. We will. sitting here with us. I'm sure she says I bag. Rich I am curious though going forward this idea of how inflationary tariffs could or couldn't be given the fact that this is a new world order. And we were talking with Adam Posen of the Peters Institute earlier and he was talking about how he sees inflation as having nodes of the 1970s and potentially being really pernicious. Why do you not necessarily see that? Why are markets more sanguine on that risk?

Well, I think simply because the 1970s were a very serious experience for the current group of policy makers who lived through it. And I think there were some important lessons learned. And one lesson learned is high and persistent inflation

is very costly to the economy. And I think politicians learn that as well. And so I think that central banks have earned a lot of credibility under Volcker, under Greenspan, under past Fed chairs in the US and abroad. And I think that expectations of inflation,

we're sort of in a world in which the bond markets at least think that over a five year period, the Fed is gonna do whatever it takes to get inflation down what I call two point something. And I think that's an important victory that central banks are still benefiting from.

And I would expect that and certainly hope that will continue.

Richard Clarida with us. For all of you on radio and TV, we've extended this wonderful show with a huge market move we see today off of the Powell speech. I wanna turn to Michael McKee because my head's spinning.

I've got Chairman Bullard, Chairman Clarida, Chairman Alloway, and the rest. So when they're in the Oval Office, and they're sitting on the couches, and President Trump is gonna turn to the people he trusts here,

let's start with the Secretary of Treasury, what is Besant gonna say to him about the qualifications needed for a Trump chairman?

Well, probably from Scott Besant's, you would hear the importance of being able to relate on Wall Street. It was put once to me that the Treasury Secretary's job in terms of the markets is to be able to calm them down when something is going wrong. And so that would argue for a certain number of the candidates, maybe Ms. Allaway fits

in that category, that have that gravitas to be able to do that. The idea that you want to cut rates is – that's not really part of it, because you wouldn't be on the list if you didn't want to cut rates at this point. So it's going to be somebody who is – the president will feel comfortable with. Maybe this move, if the Fed cuts rates, he's more comfortable with a wider group of people because he's started to get what he wants. And Joe Weisenthal?

We could add Joe Weisenthal because, well, we don't know. If the president is a country music fan, we'd have to find that out first. But I think going forward, the one thing you could say maybe out of this speech

is if in an ordinary administration which wasn't going to be subject kind of the whims of way Donald Trump does things this would have really given a boost to Chris Waller because essentially what they're saying is Chris Waller was right that inflation look through inflation from tariffs because it will be a one-time

price boost. Yeah now the question is going to be, and ultimately, is this going to be a hawkish cut or a dovish cut in September? Pimco's Rich Clarida, you've been incredibly generous with your time. Thank you so much for being with us as we dissect that speech. It was a lot longer than his prior speeches, and it was one that signaled the beginning of a new rate-cutting cycle.

They have not cut rates since December in 2024. Just to give you a sense of what Jerome Powell had been talking about in that speech, he addressed a number of challenges facing the Fed. In his forward projection on policy, take a listen to what he had to say.

When I appeared at this podium one year ago, the economy was at an inflection point. This year, the economy has faced new challenges. Significantly higher tariffs across our trading partners are remaking the global trading system. Tighter immigration policy has led to an abrupt slowdown in labor force growth. There is significant uncertainty about where all of these policies will eventually settle.

While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.

This has sent markets absolutely surging across the board in the equity space. Let's take a look. S&P up more than one and a half percent and as Tom was saying, as the session grows on, you see those gains just building. In the bond space. You can see two-year yields plunging by 10 basis points, 10-year yields down by eight basis points, again, gaining steam, almost a certainty that they are going to cut rates come next month. Then you have the dollar weakening dramatically. You see the euro now 1.1728 as people looked to the potential for an ongoing accommodation, even in the face of inflation, that is still above that 2% target. This to me, Tom, really does speak to the moment that we're

in. People were expecting that maybe this was going to set the tone, and certainly right now

in markets, it is. You have to wait to see what the action is. And the action this morning was to bring in a rate, a more accommodative regime. I'm sorry, we still have data coming up, and they may be sobered by the CPI data. I don't have a strong opinion on this, but I got to look at the data. I think I trust the data.

Well, we have two prospective Fed chairs here joining us now, Tracy Alloway and Joe Weisenthal. They also are the co-hosts of Bloomberg's Oddlots podcast. And I believe you were actually sitting in the lobby, were you not? Yes. When we heard James Azura. So what actually happened? Yeah. Yeah. I mean, this is this is really a different kind of Jackson Hole that's fraught with that political question.

There's always someone who jumps into the lobby and says something, you know.

Is that really? But this is the tone shift though because a year or two ago it was about climate change

and now it's about mortgage fraud.

Yes. No, there is. So now it's like a direct attack of this sort of attempt to maybe like change the composition of the governor. There's always someone who makes a scene but this time obviously more directed at this

impulse coming from the White House about changing the board. There's also just more security around, which I'm sure you've noticed. Plus, there's more journalists around, which kind of indicates that the story has gotten even bigger.

Yeah, although Tracy, and this is something that I know that we've talked about before, this idea of the economic discussion being so interesting at this moment, whether it's immigration, whether it's what's going on with AI, whether it's youth unemployment. And based on what we heard from that speech, he really was trying to massage that and talk about his concern there.

Yeah.

I know you guys were joking about me and Fed, me and Joe running for Fed chair. I'm just going to say right now, I don't want it. I don't want it. This is one of the most confusing moments in economic history that I can remember. Because you could make a strong argument either way for staying the course on rates, for cutting rates, or for even hiking rates. We spoke to Kansas City Fed President Jeff Schmitt, and he was talking about how if you look at the Taylor rule right now, the Taylor rule actually suggests that maybe we should be

thinking about a hike. I'm not saying you have to stick to the Taylor rule all the time,

but it's something to think about. Pro tip, if you want a good habit as you go into autumn, listen to Joe, read rather Joe Weisenthal's newsletter. You had a newsletter within the last 48 hours, you're talking about a set of narratives. Which narrative today won within the Weisenthal newsletter?

Well look, today is about the short-term cyclical, the short-term question of the cycle. And as Tracy pointed out, I think this is a very interesting moment precisely because there are many people, they're not necessarily saying like, oh we need to hike right now, but they're not, they are saying like, look there are conditions in which when you look at stocks, spreads, unemployment, and inflation, maybe many people, you know, if this were a Severance, you're just woken up right now, you'd say, no, we need higher rates. And you didn't really hear that from the, from Paul.

Is this a one-off cut that we're talking about or do we still maintain

a green Spanian anchor where we're going to set up a trend here of rate cuts?

I think what, the only thing I can say or that thinks there's a ton of room to come.

Joe's still an efficient market hypothesis guy. Right now I'm watching the crowds gather for the walk that we're expecting when Fed Chair Jay Powell comes out. And we are expecting him to be with some of the other international leaders. And we were talking about the international tone here at this particular Federal Reserve confab.

How much does that really influence, do you think, the message that we're hearing from the U.S. central bank? I mean, I think Powell has to walk a really fine line here where he's clearly paying attention to the U.S. domestic economy. That's the mandate, the dual mandate, right? But on the other hand, you do have other central bankers here, and as everyone knows, when the U.S. economy coughs, the rest of the world catches a cold and all of that.

So it's a fine line. It's a diplomatic exercise in many ways.

I also think, if there are questions about central bank independence at the Fed, there's going to be questions everywhere. Right? Like the U.S. is, you would think, sort of the gold standard globally for a good institutional arrangement and so forth, and aspired to by many places elsewhere. If this is an important debate here, it's going to be an important debate everywhere.

This actually was the reason why Joachim Nagel really got emotional actually talking about this, and really was really focusing on how the United States allowed Germany to fall the mold of an independent central bank, which allowed it to emerge from World War II with a currency and with an economy. I mean, that to me is really this ultimate key question. How much does a loss of independence or even perceived loss of independence in the United States really trickle out into central banking policy around the world.

I think the difficulty is no matter what they do now, there's an optics problem. You know, even if Powell really convincingly feels that he should be cutting rates, there are gonna be some people who say like, well, maybe he felt the pressure from Trump

and so he's sort of doing it because of that reason. Central bank credibility takes a long time to build up. And you could argue the Fed has been building it up basically since the 1980s now, since Volcker. It goes away really, really quickly.

It goes suddenly. Suddenly is the operative adverb. Now, you guys spent August in Alaska. And the rumor is you're heading for Japan. Is it September or October? We're going to get to walk from up here. And the guy with the biggest headache at the walk right now is Ueda of Japan if he makes an appearance.

I just looked at the Bloomberg, folks. The magic of the Bloomberg on your cell phone is when you need to look at the 20-year Japanese piece, you can look at it. Tracing, nobody's talking about this. Yields unraveling. Price down.

Yields up in Japan. What does that signal to the international central bank community?

I mean, I'm still kind of surprised that Bessant was jawboning the BOJ recently. Like that, that to me is like a new angle in politics meets central bank policy.

That's all I'm going to say.

I'll just say, look, you look at the last five years, there's a global factor to all of this. You know, inflation rose and fall everywhere, to like varying degrees, etc. But almost every, especially developed market government, is essentially dealing with the same set of questions all in unison. There's slight changes at the margin, inflation peaks a little lower here, a little lower

there, but all of these stories are really global stories. The entire developed world.

Can we talk about investment in America? Give me the wide shot right now, if you would, if anybody's still awake in the tent. Give me a wide shot here. And the most important thing here at Jackson Hole this year, besides Chairman Allaway, is the split rail fence behind us,

of which the leaders of Central Bank World are going to walk up to next. We have an investment in a brand new split rail fence at Jacksonville. The last one was installed

by Lewis and Clark.

Is that so? Thank you for this breaking news, Tom. This is really definitely the way to

go. This again is the investment of America that you're going to see. We have a spanking new fence.

Yeah, and it's going to generate energy for all of the power centers that we have to try to generate AI.

I know this is kind of a joke, but I think this is an important point here, right? Because I was, you know, one of the questions I've been asking, like we've been asking lots of people, it's like, okay, 2025 versus 2019, why is that long-term rate higher? Why did Margaret Prince expect? There's just a lot of investment going on globally. Part of this reshoring involves, yeah, etc. And so I think, you know,

I think we should take the split.

There's capacity issues as well. And the thing about this Jackson Hole is it resembles the 2021 Jackson Hole quite a bit. I think you were both there at the time. You remember the argument back then was, okay, pandemic supply chain issues were going to be transitory. We don't expect them to feed into services inflation, just goods. You're hearing something very similar right now when it comes to tariffs, right? Like we think tariffs are going to be a one-time price level change, just isolated and goods probably not seeping into services. I guess we'll see. Well, to me, this is the key question. How much were people scarred by transitory?

It seems like maybe not so much. So inflation is all top of mind for all of us, right? Think back to 2020. We hadn't seen interest rates like much above zero for years and years and years. We all remember inflation now. I'm sure a bunch of companies remember the inflationary playbook now. So indeed, which is the reason why potentially they could adjust and adapt and keep prices going higher. Tracy Alloway, Joe Weisenthal of Bloomberg's Odd Lots podcast. Thank you so much both. And just for the record, Tracy is not in the running for a Fed chair. Well, she just said she doesn't

want it. So there we go. Exactly. There we go. So Joe is going to run himself right now. Let's take a look at markets because it really has been a dramatic move. We have seen equities across the board shooting higher. The Russell 2000 let's just focus on that up three point nine percent. As people looked the prospect of rate cuts the S&P up one point six percent. The Y is in the next board which is bonds. You could see yields plunging, particularly on the front end, with expectations of a Fed that is going to cut next month. What we are seeing is across the board, two digit returns, two year yields, five year yields lower by 11 and 10 basis points apiece. Ten-year yields are lower by eight basis points.

Even the 30-year are responding, but not that much.

This is yield-crimp steepening that is global.

Yeah, I agree with that.

You think the 30-year would be a bigger move, and it's just not.

Well, you aren't necessarily seeing yields rise, which is a good thing, but you also aren't seeing them fall as much as people look to growth and potentially inflation. If you play this out in the currency space, it is the story you would expect. Dollar weakness in a significant way, down by nine-tenths of a percent on the Bloomberg US dollar spot. And we can see that across the different currency pairs with the euro, the yen, as well as the other majors. Right now, I'm really focused on the euro in particular, given the fact that we just talked to a member of the European Central Bank about why they will not cut, and why they think they're in a good place at 2%,

which I think is notable.

I agree, they're in a good place, but there's a wonderful debate about what's next for the ECB. It's off the U.S. radar, but again, I go back, folks, to animal spirit, to the nominal GDP. They just don't have the technology oomph that we have. So is there right now where it should be? I don't think Christine Lagarde knows the

answer to that.

Well, Christine Lagarde, I believe, is here. Also here is Michael McKee, a very similar person in ranking and stature for us here at Bloomberg. And what are we looking for? We are waiting for this walk with global central bank leaders at a time when potentially we could hear more about what this cut really looks like. Is it a hawkish or is it a dovish cut next month?

Well I don't think they're gonna say anything that we can hear. It's sort of set up that way, but one of the things that this may do is add some symbolic support for Jay Powell because he's going to be walking with the three major central bankers in the world besides himself who all agree that central bank independence is important. And at a time when Powell's under political pressure, it's a picture that's worth having

for the Federal Reserve. They're going to do it a little bit differently this time, walk down a different ramp so we get a nice picture of them with the mountains in the background. But this has become a staple of Jackson Hole and ordinarily it doesn't mean a whole lot other than it gives the TV networks a chance

to have pictures of the Fed chairman here. In this case, it may mean a little bit more.

It shows the marking of time. I had the clearest memory of 07 was Stan Fisher, the late Stan Fisher, I should say, on the phone, down the walkway here on the phone for three hours as the world fell apart. How does the walk and how do these meetings, how are they different from 15 years ago?

Well, 15 years ago, television was barely getting started here. It wasn't such a big deal. And it has now put a focus on the chairman's speech that was never there before. This is an academic conference. Now that Chairman Powell is done, they're talking about academic papers, discussing them in a way that university professors do, about things that will happen years from now, or trends that are going to extrapolate out. The Fed chairman's speech has now become a focal point for Wall Street

because there's not a lot of other news in August. And so that's the major change here is that we're all here because of that. And the other change with an aged Alan Greenspan is it used to be the chairman only spoke about monetary policy, never the fiscal space, never ever the dollar. Remember Phil Graham taking Greenspan's head off one day over that. Now everything's fair game, isn't it, for each and every central banker?

Well, you watch Jay Powell. He avoids, very strongly avoids anything that would represent a judgment on fiscal policy. The Fed doesn't have a choice. It has to accept the fact that there's going to be tariffs and that's going to have an economic effect. So he talks about that,

but he will never say whether tariffs are a good thing or a bad thing. He won't even say what I'm saying, whether the tariffs are a tax on you and me. So that, when Alan Greenspan did that, which was basically when we were running a budget surplus and he endorsed a Republican tax cut.

Every other chairman felt like the Fed got its fingers burned there. And so they're not going near that stove. They want to stay away from fiscal policy. Now the question is, where does the Trump administration go? Because they have talked about giving the fiscal side, the Treasury Secretary, the president,

more control over monetary policy. Lisa, cut me off or we have to go to the walk. This is an important question for both of you. Are we beyond the pandemic at this Jackson Hole?

That's a great question.

I don't know if we are or not.

I guess my question back to you would be,

what do you mean by that?

The supply chain disruptions marked by the pandemic have continued. The fracture of the nation. But maybe for different reasons. And the labor market has been transformed. And whether that's the pandemic that accelerated it or whether it's the post-pandemic economy, that I think is something that they're grappling with.

Do those academics in that lodge, do they believe we're beyond the pandemic?

I don't know if they believe we're beyond it, but yes, the pandemic, as Lisa said, has changed the economy completely for the future because we've seen a move to work from home and work from wherever, work from Jackson, which Kate Moore is doing, that sort of thing. And it has had an effect on the economy overall. We've seen the baby boomers retire faster than they had been before, and that raises questions about what the size of the labor force is going to be.

So it had profound effects on the overall economy that we're still going to be dealing with for a long time.

There's something else that has changed materially since 20 years ago, 30 years ago, or even just five years ago, which is the type of communication that the Fed has to engage with has changed. And it has changed with some of the political pressure and some of the true social posts that are coming out in real time, as Jerome Powell does speak. And it raises the question, how does this Fed message to the American people?

We actually want to be true to our dual mandate, and we are not politically motivated in any way. And that was something that Patrick Harker mentioned, that maybe this would be dovish in spite of the political pressure to say, look, we're not going to cut off our nose despite it too. We are going to stick to the economic data and we want to prioritize some sort of soft

landing above getting inflation very quickly down to 2%.

Well, just there. I mean, what you're saying encapsulates where we are because the Fed would be reacting to the tariff effects on the economy no matter what but now people are going to look at all of this through a partisan lens it becomes a political thing I was talking with Ben Bernanke last night here and he's saying it's a good thing that social media wasn't around when we had the great financial crisis because you can only imagine with the steps they had to take at the time, how so many people would have reacted.

Lisa, I'm looking down the alley where you and I played bocce one night, drunk, when we came out of the grill here. And the press down there, folks, you can't see this on camera right now or radio, but

the press is triple what I've ever seen. And that's the reason why security has also been triple or quadruple as Tracy Alloway was talking about, because there is this renewed focus for the political reasons, let alone the framework review. I'm sure that all those journalists are very interested in the details of the framework review, but I have a feeling that that might have been another reason why they came here

today.

I just, I look at the moment we're in're in and yes we've got the market move. I haven't looked. I don't know where Dow futures are or that. But we're lifting Mike and it's sort of a all clear feel into what you're expert at which is that next inflation report that next jobs day already. What's the gaming of those two reports. Well it's going to take a

lot in there to change the Fed's path now because I said earlier, once you open that door, it's very hard to close it. And the interesting thing is going to be that when we get that CPI report, we will be in the Fed blackout period. So whatever we get out of the jobs report will be what the market sets its expectations on until we get to CPI.

The market may move a little bit, but the Fed's not going to have a chance to influence it after that. So we're looking at this rate cut, and then it becomes, and I guarantee you, Lisa and Tom, we're going to be talking on September 17th before the Fed meeting. We're going to be saying, well, so what is he going to say about the next meeting? Because then that's going to be the next question.

Do we continue this string of rate cuts or is this one and we wait for a while?

I mean, a little vignette here, folks. Yesterday, the papers come out. They won't let me see him. I'm a danger to society. McKee gets them all and he prints them out and he reads them just like, you them, just like freshman year in economics. Mike, within the grind that you do, where does this end up for the November meeting,

the December meeting into next year? Are people like you just completely focused on the 17th of September?

Right now you have to focus on the 17th of September, but I say that economists are more focused on the 5th of September for the jobs report and the 11th of September for the CPI report, because those are going to inform us as to what the odds are that the Fed is going to do something or need to do something going forward into the rest of the year. If inflation rises faster than Chair Powell suggested today, then they might have to say we're going to pause for a while. Lisa, is it rude to ask Mike if we can trust the numbers, the jobs report numbers?

No, I think that that's very much, you could speak it actually not even in a whisper.

Really?

Yeah.

Do you trust the numbers of the jobs report?

I'm not kidding. I trust the numbers of the jobs report as, that they are as good as they can be under the circumstances. The people at the BLS are dedicated public servants who don't have a partisan bent to them. They are more interested in statistics than anything else. And yes, there are problems with the surveys, especially declining response rates, but that's not a political effort to manipulate the data. They're doing the best

they can. And as we've always said about the Fed, they have to work with the numbers that they have. There will be revisions, but when they're making their decision, they work with the numbers that they have.

We are sitting here in front of the Grand Tetons, waiting for the walk with Fed Chair Jay Powell and other luminaries. We understand Christine Lagarde among them, as they walk out for a picture with the Grand Tetons as the backdrop, as is the tradition for Jackson Hole and the speech that we get at the symposium of the Fed. We have not necessarily heard that there is any kind of movement yet. We will bring that to you when we see it.

What has been notable is that the speech took longer. There was a little bit of a delay with him getting to the speech. And it seems like maybe this has to do with security, maybe it has to do with the sort of import of the moment, but this has definitely been a different type of moment.

I was not in the room, but I understand one of the reasons for the delay was that the

audience gave him a standing ovation as he went up to the podium.

Very strong sense of trying to celebrate him in his last speech. And audible here as we wait for the walk. We have a beautiful shot for Bloomberg

Radio. It's of this magnificent international architecture of the Jackson Lake Lodge. Lisa, this was the architect who put the series together of the lodges and we think of them like North by Northwest, Alfred Hitchcock, these gorgeous traditional Americana lodges and And then 40, no, more than 40, 60 years ago, OMG, they made a modern international lodge. This lodge, when it was built, caused an uproar in the West. Absolute uproar.

Yeah, and Rockefeller, John Rockefeller, very much present here. You can see his name emblazoned on a rock that is up this trail here. You can see his name emblazoned on a rock that is up this trail here. I do want to bring you some headlines that we're hearing from other Fed members. Beth Hammack coming out and saying, I heard the chair is open-minded about September. My expectation is we will see inflation continue to rise. She has been out there talking about the importance of keeping focus on inflation. She said, we

may see unemployment continue to rise as well. We need to maintain a modestly restrictive stance of policy, so not necessarily endorsing this wholesale dovish policy, as the market seems to be taking and running with, at a time when inflation has actually crept higher from the last time we were here. That said, a one-time price shock, as Jerome Powell described it, isn't something that should derail the labor market.

And one thing that I thought was really interesting, Mike, in the speech that he gave, was this idea that their dual mandate, when it comes into conflict, they need to weigh them equally. But it does seem like the labor market is taking a front and center focus at a time where inflation is still expected to creep higher over the long term.

The last framework set up what to do in case of tension between the mandates. And they kept this idea in the new framework. As you look at both of those and you see which one is going to move the fastest in the wrong direction. And in this case, Powell was suggesting that unemployment, that the labor market could deteriorate faster than inflation rises because the tariffs take time to work their way into

the economy. And so that's their concern. That is why he is essentially signing on to the idea of a rate cut, because they want to make sure they get ahead of the labor market weakening. They have time to react to the inflation.

Marud, I asked you this before, but I think it's so important we've got to do it again. Do you assume this was stated as a one-off or maybe a two-off rate cut, or do they set a vector here of three or four, whatever number of rate cuts?

Well, I think what it is is it's set up up for one rate cut and he's not endorsing a continuing series of rate cuts. Is that a radical change from previous? Well it's a radical change in the sense that the Fed was not committing to September and now while he didn't specifically say that we're going to cut he essentially did that the markets are going to take it that way. Where they go from there will depend on what happens with the data and the economy. And

I would point out that September is a month where they will give us new economic projections and a new dot plot. So we will get an idea of where they think they're going to go from here and how much more they think they're going to have to do when we get to September

17th. Yeah, we are sitting here as we talk about what potentially will come down the pike. Six minutes late, this is unusual for Jerome

Powell. He is very punctual usually. That's really interesting. It's not up to him on the walk. What they are doing, as soon as he's done, they start the first session, the first paper. They discussed it and then they have the discussion of the papers and I'm told from our reporters inside the meeting who are sitting in my chair that the session has wrapped. So we could see this any moment now.

They've got to get everybody together and walk out. Very quickly here, what happens the rest of the day and into Saturday here?

The press leaves, I leave, McKee stays, what happens?

Well, you leave, but we don't leave. The rest of the day we have another paper and we have another discussion. Then there is a luncheon speech today. Ruth Porat from Alphabet is the luncheon speaker today.

Well, right now we do see Jerome Powell walking out with Christine Lagarde in tow. I believe Andrew Bailey also there. They are all walking and talking as they walk down the staircase. Mr. Ueda of Japan, a very long way to fly from there as they approach the family photo this year in front of the Grand Teton.

I can state in all the years I've been here, there's never been a photo like this. This is the absolute first for my comment on this, of the international audience standing up for the central banker of the world.

I think you can read some symbolism into it. I wouldn't read too much, but because they normally walk with a central banker from another country if they happen to be here. But the choice to have all three of them go out there at the same time is sort of an idea that we all support central bank independence. We probably will hear that from them. Bailey Ueda and Christine Lagarde are

speaking tomorrow on a panel together. And I think that that will be, we've been told from the reporting from our Bloomberg News colleagues in Europe, that that's going to be a message that they deliver. Not maybe mentioning Jay Powell by name, but mentioning the idea that central bank independence is very important.

Can we just sit on how historic this moment is? The last time that Jerome Powell will be giving this speech that he just gave at Jackson Hall at the symposium held by the Kansas City Fed in the Grand Tetons. You have the head of the European Central Bank, you have the head of the Bank of England, you have the head of the Bank of Japan standing alongside the head of the Federal Reserve looking out over the mountains at a time of highly complicated economic questions.

And really, to me, goes to the question of how they deal with it going forward, how they fend off potential accusations and jawbonings from administrations around the world.

In the single most, tightest, most intense 30 seconds of this show today, folks, from Jackson Hole, was a gentleman from Germany, Jakob Nagel, speaking, Russia must end the war. And for these central bankers, particularly Madame Lagarde, they're distracted by that

war. Mike, can you give a sense of the international presence here this year versus prior years? There typically is an international presence. But does it feel different this time around?

There are more international central bankers here. And one thing that I found unusual in the guest list is there are central bankers who haven't been here before from the Middle East. So there's an expansion in the efforts by the Fed to bring people into this situation who are becoming

more and more important. It's not just the big four central banks but others who are going to play a role in the future so they're integrating them into the discussions here because certainly from Africa and the Middle East you're going to have a much bigger economies

going forward. Mike McKee, Adam Posen was earlier saying it is a post-American world. He talks about a new economic geography for the world.

For these three central bankers, do they feel less support from the American central bank? I don't think they feel any less support from the American central bank. They may worry that the central bank in the U.S. gets its powers crimped by the administration. One of the big innovations of the Bernanke years was the use of the swap lines. And if the swap lines were to go away and the president has criticized those, then that would worry them because it's the way you can keep dollars flowing through the global economy at a time when dollars start

to disappear. The Fed can send them overseas. And that's been a very important way of keeping the global system working at times. They used it certainly during COVID.

Am I right that this has been the longest perp walk we've ever had at Jackson Hole? They've restructured it this year. They look, I mean, I mean, Powell's cotton chiseled, but you know, I haven't, Governor Bailey, I think, looked a little peaked, as they say.

Well, we're up 6,000 feet above sea level here, which is a lot higher than London is. You know, it's interesting, we use the term perp walk. It's the old crime reporter's term where the police department would march a suspect out so that the newspaper photographers could get a picture of them.

And it's kind of a shorthand. And the Fed fought us, the press, for years saying it's not a performance. That's a terrible term to use. And now they use it too. It's just so convenient way to explain what we're doing.

Well, it definitely feels that way digest some of the language. Yes, maybe Carl Weinberg talking about how an adjustment could mean a hike. But it doesn't seem like the market is taking it that way. What you could see in equities across the board surging higher. If you take a look at the Russell 2000 up almost 4 percent. The idea that rate cuts will help the smallest companies the more leveraged companies. Most of all you could see yields plunging more at the front end than at the long end, down double digits, 10 basis points, 11 basis points on the two and the five-year yields as people price in a Fed rate cut next month. And then maybe a sequence of them, and what I think is notable here before we go to the currency space, Tom, is this idea we are seeing yields down at the long end. Yes, maybe not as much as at the front end,

but this is bringing the whole curve lower. This isn't just an issue of front end going lower and then inflation picking up like what we saw necessarily, at least implied markets last year when there were 100 basis points of recourse.

We have the 10-year real yield come in. It's still within range. Yes, it's a lower yield, but the drama there of yield curve dynamics really wasn't displayed this morning.

Which I think is really notable. You are, though, seeing the currency dynamics that so many people had been expecting to be in play. The dollar weaker, the euro stronger, the yen stronger. Across the board, strength in other currencies as people wonder if this is a real decision by the Central Bank of the United States to allow inflation to remain above 2% for that much longer in order to avoid disrupting any type of labor market strength that otherwise could gain some cloud. Mike, if this had been

another type of Jackson Hole, we would have been talking about the immigration disruptions, we would have been talking about AI and what that means in terms of job losses or job gains and productivity. And I just wonder how they understand labor market data at a time of such dramatic transformation, not to mention the demographic shifts. We're all getting older. And who is going to really pay for this economy and the debt that's coming?

All our social security taxes are going to pay for Tom here. The academic papers that are being presented here are kind of on those issues.

You said that's funny, huh?

I didn't laugh.

You're on.

They're aimed at looking forward. The challenges that central banks will face with demographics and immigration, et cetera, right now. The problem for the Fed is they have to deal with the immediate, which is the economy and its reaction to the new fiscal policies that have come into place. In the short run, what we're seeing is a labor market weakening, and the Fed uses that as a proxy, their best proxy, for what's happening to the economy. Because if people

lose their jobs, then they don't have money to spend and companies pull back and the economy starts to really slow down or actually contract. And so that's the marker they're looking at. And as you see, saw Jay Powell suggest today that that is the bigger danger.

The risks are pretty balanced, but if you had to pick one, it would be that the labor market weakens and that weakens the whole economy.

Well, let's take a listen. Fed Chair Jerome Powell had just delivered his final speech in his position at Jackson Hole, and we had the perp walk, as you talked about it, with Andrew Bailey, Christine Lagarde, as well as the Bank of Japan's Ueda, as they support their colleague in his swan song at the Federal Reserve. Let's take a listen to some of the outclips from what he had to say.

The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. Our policy rate is restrictive, modestly so in my view. The stability of the unemployment rate and other labor market measures allows us to proceed carefully. While the labor market appears to be in balance, it is a curious kind of balance, longer term inflation expectations. However, as reflected in market and survey based measures, appear to remain well anchored. We will not allow a one-time increase in the price level to become an ongoing inflation

problem. That speech has sent off an absolute eruption in markets. You could see stocks surging. You could see particularly the Russell 2000 gaining clout and you could see yields plunging. We will continue to look at exactly what the significance of this coming up. This is Bloomberg

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With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. Monetary policy is not on a preset course. FOMC members will make these decisions based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach.

That was Fed Chair Jerome Powell in his last speech as the head of the U.S. Central Bank, as he signaled that, yes, next month it would be live. They would be cutting rates. That was the implication, at least, picked up by the markets, and they ran with it.

The Russell 2000, I keep focusing on that. American economy, I go back to nominal GDP and you know what? We may get to September 30th and I'm shocked. Earnings may be okay, the word that Chairman Powell would use is solid, we may get a better mag 7, but I am going to back at this historic meeting just as we're at a break, waving to the former governor of the Bank of Israel, formerly with JPMorgan International, one of the giants of economics, Jacob Frenkel is here. And what Dr. Frenkel would say, with all of his history at the University of Chicago,

it's a dynamic space and things adjust over time. And that's what Powell alluded to today.

And certainly currency adjusting as well, as you look at the dollar, markedly weaker, although back from some of the earlier weakness from the immediate knee-jerk reaction from the speech, dollar spot index down about, you know, just about eight tenths of a percent. But really the euro-dollar cross, the idea of 117, back again, 120 in sight as people look to a central bank in Europe that really is firm and that 2% level, yes they were ahead of the Federal Reserve when it came to their

cutting cycle, but nonetheless saying even with concerns about weakness we really don't want to see inflation picking up again.

It's still the litmus paper of the system, but on Monday when I get back you won't, but on Monday when we get back, I'm't. But on Monday, when we get back, I'm sorry, fixed income is becoming the new foreign exchange when you correlate the dynamics between each country to country to country. I mean, just as a complete aside here, to see Italy pricing their yields better than France, has that ever been in any realm of thinking I've ever had.

Yeah, well this is the reason why, Michael McKee, there is such an international presence here as you chart toward a busy weekend for you, because you are not leaving. You will be here for all of those speeches. What are you focusing in on? What are we missing that we really ought to be picking up on at a time where some people, Carl Weinberg, saying maybe we're over over running too far with this idea of adjustment

meaning a rate cut.

Well I'll go back to something Tim Geithner once said when he was Treasury Secretary, what keeps me up at night is what I don't know is keeping me up at night. You don't know what is going to happen going forward with inflation. That's going to be the biggest question. We can talk to companies and get a sense of what they're doing with their employees. The jobless claims numbers will give us an idea.

But when the tariff payments hit those companies, what are they going to do? Are they going to absorb some of it or are they going to pass it all along? And when we see the market reaction like we're seeing today, and you were talking about good earnings for this quarter, what's going through my head is, yes, but what are margins going to do? And what message will that send to investors? If margins start to get squeezed, then how do companies react?

Then they start laying off people. Do we know where their hints are yet? Well, you get different answers from different Fed people. When we talked to Austin Goolsbee, he said people are telling him that in the Chicago district, things are getting a little bit better, they're able to live with the prices that they're getting. And then when we talked to Susan Collins, she says it's much more difficult.

Well, this to me is actually something that's really important, which is the region by region and how different United States regions are. You hear some anecdotes from corporations that actually there is still quite a bit of strength in the labor market and confidence. And you hear in others not so much, that actually they're worried about the prospects of the labor market going forward.

How hard is it to aggregate all of this, the different regions of the United States, the different political persuasions and what that does with sentiment in different regions of the United States, and come up with some sort of cohesive policy at a time where there's a fracturing even within the United States and come up with some sort of cohesive policy at a time where there's a fracturing even within the United States?

Well, it is difficult. At least we have 50 United States, whereas Christine Lagarde has to deal with 27 separate countries who all will have their own opinions. In this case, all of the people representing the regions of the United States are part of one organization. It was part of the great design of the Fed that you have input from all around the country, and it's not just decisions being made by the bankers in New York. But it is difficult because you do have different situations going on in different parts of

the country. If you ask Mary Daly, she's got a tremendous lot going on in California and that area with the AI growth and that sort of thing. And then you look at Texas, while the president wants to drill baby drill, drillers are stopping because oil prices have gone down, because demand has gone down. And so that's going to have a completely different impact in that region.

Right now we are sitting here. Just to wrap up what we have just heard, because to me this really has been a seminal moment for markets heading into the fall, but also for central banks around the world. This was the swan song for Fed Chair Jay Powell, his last big speech as the head of the biggest and most important central bank of the world, coming out and opening the door to potentially cutting rates as soon as next month,

talking about some sort of adjustment that could come, which could be open to interpretation. And markets took that and they ran with that. And what markets are seeing right now is a Federal Reserve that will rather err on the side of inflation remaining higher for longer, even if they could protect the United States labor market.

And continue to watch how everyone reacts to President Trump. The fact is, he's the change agent of the moment. And to see what Canada did with tariffs today, there's going to be 10 more of those tweaks, announcements, adjustments. And as Kate Moore said, maybe that gets us to a better space.

But no tweak from Donald Trump yet on what Jay Powell has said, which surprised me.

Well, maybe that actually is a bonus, because if the blessed that there could be some interference, maybe the better for the members here. Thank you so much. Thank you so much. That does it for us.