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“Reserve cut interest rates for the third time. And some experts think there s no no need for additional stimulus. Before 2020. Now live is yahoo finance s brian chung chicago fed.
President charlie evans. Ryan. All right we are sitting down. Here.
Which chicago fed president charles evans here at the council on foreign relations. Thank you so much for joining us as well sure. It s great to be here. So let s talk a little bit about the feds decision last week to cut interest rates by the third consecutive time by 25 basis points.
There seems like there s some indication from fed speakers and fed officials that you re on pause for right now. Do you see it that as the case for right now. And if that were to be the case. What would you need to see to maybe make a case for further accommodation down the road.
I think that the economy is doing quite well at the moment. I think the consumers. Very strong labor markets are strong most recent employment report was quite good especially with the adjustments revisions upward and previous months so economy is in a good place and i think we ve made good adjustments to the stance of monetary policy. So cutting funds rate target by 75 basis points.
Three cuts as you mentioned. I think that puts us in a good place. I m at this point looking at the data looking for some of the effects of the policies that we put in place our communication strategy from the beginning of the year. That should help support and mitigate risks support the economy and mitigate risks that you know we re seeing.
So. What am i looking for you know i d like to see inflation pick up i d like to see the economy continue to grow and i d like to see business investment pick up so the last inflation reading for a core pce was actually at one point eight percent are you look are you seeing that as a sign that maybe we are getting closer to 2 or is that just kind of but one deviation and one reading that we shouldn t try to clean too much from well i think one point eights better than one and a half. We d been down at one and a half you know not too long ago. And so i think we re moving in the right direction.
But getting the two sustainably has been a challenge. We ve sort of touched two before and then fallen back. And i really think that this is the point in the economic cycle. Where ten years into the expansion.
This is the time when we ought to be delivering inflation well above 2 in support of our symmetric objective..
We should have visited 2 sustainably. By this time so i think our accommodative stance from our most recent three cuts is helpful for achieving that my own expectation is that we will get to two and overshoot just a little bit completely in line with our symmetric objective. So i think we re you know in a good place. So a lot of reference to 1995 1996 for the current path of insurance cuts.
It seems like they also stopped in france setting five basis points. In 95 96. As well why is that the template for trying to steer clear of a recession. Right now is there a reason to think that because the times are different interest rates are about half.
What they were in 95. That maybe. This is a different time well you know it might just be a coincidence that three cuts you know with the episodes that you mentioned. I would say that what we ve just done is an even more substantial reduction.
When you take into account that we had an expected path that was going to continue to increase rates in 2019 as of late 2018 you know going into the december 2018 fomc meeting where we did raise rates by 25 basis points. I expected that we would probably increase rates by three times in 2019. But in fact we ve cut rates three times. So that s 150 basis point turnaround relative to what we had been indicating.
I think that s a pretty substantial adjustment and i think i think that it s helpful and you know it s just sort of a mid cycle correction because you know i don t see that we necessarily have to cut rates more..
We ll see how the data come in we re at a 1 and a half to 1 and 3 4. You know percent point. I think that will serve us well. But we want to see how the data play out so your district covers michigan.
The lower half of wisconsin iowa. So you have a good view of the manufacturing sector through the first two states and then through farming in iowa. So what are you seeing in terms of the impact of the trade war there s this phase 1 deal on the table right now have you seen that maybe that s inspiring some to make the investments that we ve seen lagging in the past few quarters. We ve got indiana illinois.
Too and so we ve got you know a healthy amount of automobile manufacturing auto supplier network. We ve got heavy equipment manufacturing on the western part related to construction equipment agricultural equipment and things like that so definitely the you know the tariffs have you know hit the ag sector. Quite a lot i think that the the additional support payments to the farmers has been helpful for their farm incomes. But i don t think it s changed their attitude enough towards buying you know that additional farm implement for the next year you know people are doing what they have to do of course.
But i think that that s you know sort of been definitely a downward risk for for that side of it automobiles. I think you know getting us mca past would be helpful for them. And just getting the trade policy uncertainty to move off to the side and go away would be extremely helpful so i will have to see how that plays out and lastly you are a voting member of this year s fomc your last meeting will be december 10 and 11 as you mentioned a big pivot on the fomc through this year has it been contentious at times. What is the discussion like in those meetings.
When you have you know three members dissenting in the september meeting is it kind of a very interesting time given the tenure that you ve had at the federal reserve so far we definitely had good discussions..
I would say that it s it s it s pretty evident from the dissents as you mentioned from our summary of economic projections and also my colleagues speeches that we just have different opinions about the appropriate stance of policy. I think there s generally good agreement on you know what the economic outlook is the economic outlook is really quite good. I think the risk assessment is something that you know you kind of look at and you kind of go i m not sure that you know the economy is gonna be dragged down by this and in fact we ve done so well it seems really quite resilient. So you know maybe we don t need to do that i hear those arguments.
I think we ve had very you know collegial discussions as we always have been fed president for now twelve years we have had far more contentious discussions over that time period. When we had disagreements on how much accommodation to put in place during the crisis. How long to put it in place and things like that so this is pretty typical affair. Engaging conversations and i always come away learning more from those discussions and i went in with so they ve been good hey investors.
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