저자: ChristopherWaller · 외국인
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노동시장이 힘들어 보이며 민간 고용이 부진하다고 봄. 이민 감소가 실업률 상승의 원인이라는 주장은 대졸 실업률(7%) 등을 근거로 반박. 관세의 인플레이션 영향은 일회성 가격 효과로 3분의1씩 기업·공급자·소비자가 부담하며 수개월 내 소멸한다고 봄. 장기 기대인플레이션은 안정적이며, 7월 금리 인하 필요성을 강하게 주장. 연준 독립성 우려에 대해서는 시장 기대가 여전히 앵커되어 있다고 평가.
다듬은 글
Bloomberg Audio Studios, podcasts, radio, news. Making the case for a rate cut, Fed Governor Chris Waller telling an audience here in New York, looking across the soft and hard data, I get a picture of a labor market on the edge. Joining us now here in New York City, the Federal Reserve Governor Chris Waller.
Governor Waller, good morning. Oh, good morning, Jonathan. Lisa Henry, nice to be here. It's good to see you, sir. Let's talk about why we're losing the luxury of waiting. Have we lost that already? No, I think we haven't. Like I said last night, the headline numbers for the labor market, what we're seeing are okay, but it's like when you get underneath and start looking at the data, the private sector is not doing as well as everybody thinks it is.
Like most of the half of the employment growth we saw last month was in the public sector and that means the private sector is not doing particularly well. So, um, I was just joking that, uh, you know, if you're walking on a lake and the ice is frozen and it sounds safe, but when you start hearing cracks, and that's what I feel like, it's too late once you go through the ice.
So, you've got to start prepping in advance before you have that happen. How do you square that with what we've heard from corporate America so far? What corporate America has told Lisa, sitting down with Scott Kirby of United Airlines talking about a rebound in the second half, what we've heard from the big banks so far this week.
How do you square what you're seeing in the data with what we're hearing from CEOs? Yeah, I mean, when I talk to CEOs, I get the same thing. We're we're in just hold pattern in terms of certainly the labor market. They're not hiring. They're not firing. They're just watching. And that's kind of what you see in this underlying private sector data.
There's not not much happening. So, it wouldn't take much to sort of tip it. Now, could I be wrong? Absolutely. I mean, last year we got a couple of weak labor market reports that led us to cut in September and then everything kind of reversed and back uh went back up. So, I'm not saying that couldn't happen again, but it's just we've constantly seen little bits of data continually coming down.
The beige book yesterday came out. Uh some other stuff that we get out of the jolts, quits rates, hiring rates. These things are not indicating a super healthy private sector labor market. As you know, you're facing potentially, and I stress potentially, negative supply shocks on both side of the mandate.
I want to sit on the labor market. Just for one further note, immigration. How are you thinking about that when you look at a labor market at the moment when we have people coming on the program on Bloomberg surveillance on Bloomberg TV every single morning 6:00 till 9 coming on here and saying, "Look at the data.
Unemployment could stay at these levels even with job gains of 50 to 100,000 because of tighter immigration." How does that factor into your thinking as you look at the US labor market? Well, yeah, the labor market doesn't necessarily have to be affected by it because if workers flow in and they get jobs at roughly the same rate as the existing workers, the unemployment rate doesn't change even though the labor force is higher.
And when they go back out, the same thing happens. If they leave the employment and leave the labor force, you don't see a big change. the uh inflation rate now can potentially affect the break even rate that you would need to have uh the market going well and that's what we're still trying to kind of get a sense of because you basically brought 5 years of immigration forward and you know of that eight or nine million most of them haven't disappeared so they're still here somewhere whether they're going to work they're not going to work but they're but they're still here I don't where I think the immigration stuff if immigration was a big factor you'd be seeing shortages and you might see some in, you know, some industries, but like I've pointed out that if you look at the new college graduate unemployment rate, it's 7%.
It's much higher than it has. These are not jobs that are being uh opened up because immigrants are are not not coming in. That's it should be just the opposite. If immigrants are leaving and these jobs are open, then the unemployment rate should go the other way. So that unemployment rate to me is telling me immigration is not the source of the problem.
firms are just holding off on hiring decisions, even if their earnings are doing well. That's that's just what I'm saying they're doing on the labor side. I wanted to say there's a mutual friend of ours that feels like he's missing out this morning. So, we wanted to catch up with you as well. He's out in Victor, Idaho.
He's having a good time, isn't he? Mike McKe joins us now. Good morning, Mike. Good morning, John. And good morning, Governor Waller. I would say I'm sorry I'm not there with you, but I bet you're sorry you're not here with me. I know you have. I've been there before. It's a nice place. You've made the case now a couple of times for a July rate cut, but uh how committed are you?
Are you willing to disscent at this meeting if the majority votes the other way? Well, I never want to commit to an action before the meeting. Otherwise, if everybody committed before, you don't even need to have the meeting to have a discussion. So, the goal is to always go to the meeting, sit down, listen to all sides.
People will try to convince me of their view, I'll try to convince them of my views. And in the end of the day, you make the decision on what you think is the right the right outcome and the right data uh how the data is coming in. And right now I laid out my case last I don't think I could be any more clear I hope as to what my position is and why I think we need to do this.
It's just how I read the data and how I think about going forward how you respond to anything that involves tariffs. There's a lot of politics in this decision coming up uh more than usual and I'm wondering Governor Bowman has also suggested she would prefer a rate cut in July. If two of you vote for a rate cut, if two of you were to desend, would you worry about the market reaction to that?
You know, one of the things that has always bothered me since I took this job is the criticism that we are nothing but group think. All the meetings are the same. Nobody desends. Nobody does anything. And I think this is healthy. I think this is a turning point in the way we want to think about policy.
Some people don't want to cut, some do want to cut. But coming out and making the case either side, that's good, healthy debate. Otherwise, if we're always going to do the same, the joke is why don't you just have one person set policy and send the other 18 FOMC members home. So this is healthy. I think this is what you want to see in a democracy.
You want to see policy makers have serious open discussion about where policy should go. It doesn't mean anything about politics or anything else. It's make the economic argument and then see if you can convince others to go along with you. And that's all I'm trying to do. We totally agree with you.
For the record, we were sick of the group thinking it's good to have descent. Yeah. Mike essentially is asking if you will descent at the end of this month. Is there value in dissenting on the Femc? Well, I mean, it's it's often the case that you dissent if you make it very clear, you think at this moment in time, this is an important thing to do.
If you were to go in and do kind of a jihadist, I'm going to disscent at every single meeting no matter what happens. Then you don't even have to show up. Everybody knows what you're going to do. So it it is important to make sure that if you disscent, you do it carefully and you have the right reasons and it's not going to turn into a serial dissenting potential case.
I mean that's how I take my job seriously and responsibly. So I only would think about doing this I desented on the balance sheet slowdown earlier this year because I felt like that was not needed. Um, and that's kind of the situation we're in now. Uh, Chris, if uh you do cut, uh, the markets will go one way.
If you don't, uh, they'll go another perhaps. Uh, are h how critical is it to get to a rate cut fairly quickly. You've mentioned the danger to the labor market, but if you do wait till September, is that going to be too late? Well, that's that's kind of the debate. What? But what does it mean to wait 6 weeks?
Is it that critical? And I the answer is probably not. It could be, but it's also the reverse. Why wait till September if it's just 6 weeks? That's exactly the thing. It doesn't kind of matter. Just start thinking about, do I want to wait and risk something happening? This is what we saw last summer, by the way.
We left July, we left rates, and then boom, we got a very weak um bad labor market report. unemployment rate jumped 2/10. Payrolls went way down from where they were and people were screaming at us last August. You guys should have cut in July. So, one month, Ken, it it always is one month. Just remember that's just one month.
But we live in a world in which we have to respond to real-time data to kind of sense of where the economy is going. And I've always said if you worry about long and variable lags, which everybody always talks about, the whole point of that is to get ahead of it, not wait for it to happen and then take a policy action that takes quarters or months down the road to actually have any impact.
The new worry is tariffs. We've just had a six-minute conversation with you about monetary policy. You've built a case for lower interest rates, and no one's talked about trade or inflation. Two assumptions in your speech yesterday, and I think they're important assumptions. a large share of tariff increases won't be passed through to consumers.
Any increase would fade over the next year or so. What data underpins that conclusion? Well, one, it's just first, it's just economic theory. So, you put on a tar tariff, as long as it's a one-time tariff and that's it, that's a onetime price effect. I mean, this is economic theory. You could not get in any serious economic model persistent inflation from that.
You would have to cook up some other amplification mechanisms. And that's what people talk about. Wages will start going up and everything will get out of control. You're not seeing that at all. This is just not those kind of amplification mechanism or wage price spirals aren't happening. Tariffs are attacks.
And in public finance, you learn that you may levy a tax on a firm, but who bears the incidence or the burden of that tax? Can be a group of people or one person, not necessarily the firm. So, this is what I've heard from a lot of firms. If there's a 10% tax, they'll force their suppliers to eat some of that cost.
Workers may eat some of that cost in terms of the less hiring and things like that, the firm will take it out of their profit margins. And then lastly, some of it will get passed on. And as I mentioned last night, I've heard this for months now, like the rule is 10% is roughly rule of thumb is a third, a third, a third.
Suppliers will eat a third, firms eat a third, consumers going to eat a third of that tariff. So if you eat a third of it and it's 10% like I've been arguing this is like 3/10en of a three bas 3 three10 on the inflation rate for a few months and that's it and it'll persist if you do 12 month over 12 month that base effect will not go away for a while and then it'll just drop off a cliff.
So that's why I've been arguing you want to look at like 3 month and six months to see if these tariff effects pop up and then go away and so that's more critical than looking at 12 month. Yes. But the way the president is putting these tariffs on might not match up with theory, Chris, the uh smooth holly tax was passed and came into effect on a certain date.
Uh the president has not yet put on most of these tariffs. They're in theory still coming and we still haven't seen the section 232 tariffs for the most part. The the national defense tariffs that he wants to put on semiconductors and pharmaceuticals, etc. So if the process is stretched out, consumers could be hit by a series an ongoing series of tariff increases.
And given what they've just been through, isn't there a danger that inflation psychology starts to seep in? Well, that's exactly the point I that all my examples been is if you put the 10% uniform tariff on and keep it roughly in that range, then what I've described is what will happen. If there's constantly a sequence of higher and higher and higher tariffs, then you are going to get this rolling potential impact on prices that that that's true.
If it's still just a question of delaying it, that doesn't change my argument. Whether you see the spike in July or it happens in June or I mean August or September, when it happens is irrelevant for the economics. That's that's a that's a non-starter of an argument. firms could also just spread it out in smaller increments over several months.
The total effect still ends up being the same. They just get there in a later fashion and it'll be smaller amounts. So the bigger thing is if we just continually get another wave of tariffs, another wave of tariffs, another waves of tariffs, that's when things become more problematic thinking about what's going to happen with inflation.
You don't think the Federal Reserve should wait? I just want to talk about the experience of last year. I think Lisa has done a fantastic job of covering this over the last 6, seven, eight months. the move we saw last year, 100 basis point reduction in interest rates on Fed funds and then we saw a corresponding move of a 100 basis points higher at the long end of the yield curve.
Yields down did not happen. It was yields up and mortgage costs up as well. How do you think one informed the other and how might that shape your approach to cutting interest rates this time around? Well, I think last September there was a lot of remember the long-term rates were going down through August and early September.
This was not any contradiction of what we were doing. It's just after the September meeting, the data just came back in the opposite way. Growth was up, productivity was up, employment suddenly took back off and then you have real growth expectations being much higher. We were seeing productivity growth and GDP growth of close to 3%.
So in that case, long rates go up anyway. So it's not necessarily there was some counter reaction to what we were doing. I never saw inflation expectations adjust that caused all this. You don't think it was the market questioning your commitment to the inflation mandate? If it would have been, you'd have seen it inflation expectations in the market, not the Michigan thing, but we didn't see it.
I mean, inflation expectations stayed fairly anchored all through this rise. So, I think the increase in long rate was just all the data was coming in for a better, stronger economy than we thought it was going to be in September. That's fine with me. You know, I sometimes you're going to do these things taking a shot that I want to make sure we don't have a hard landing.
And as I said with any kind of an insurance cut, sometimes you don't need the insurance. It didn't work out. But that doesn't mean you go back and say, "Oh, that was a stupid decision to make." Market based expectations of inflation. Let's sit on this. There are clear and obvious threats to the central bank's independence right now.
Every single day on this program, we're quoting the president calling the chairman too late and going after lower interest rates. And I think a way that you and I can have this conversation without addressing those those calls directly is to think about what's happening with inflation expectations. Do these threats threaten to deanker market-based inflation expectations?
And is that something you and the committee might become increasingly sensitive to in the months to come? Well, like I said, I look at the influ, you know, after the tariffs come on, everybody was worried about deankering expectations, particularly after some of these Michigan surveys came up. But when I I always look at the market based expectation because money people have money in the game.
Firms are making decisions on what their chief economists are saying and if those things are wrong, they're going to lose a lot of money. So I've always paid more attention. I haven't seen much in the way of market expectations being unanchored in any ways you want to measure them any forward. Now in the near term, of course, they might go up because you would see inflation in the short term, but in the longer term ones, I'm not I'm not seeing it.
So either the market is just dismissing all of this as chatter and noise or at some point if something happens such that it becomes much more serious then you might see a discrete jump uh and then you know that's that's going to be a problem for everybody. One of the questions that we get all the time, Chris, from people on Wall Street is or one of the p posits they make is that all this criticism of the Fed is hurting Fed credibility and that the next chairman's going to have a tough job because there are going to be expectations for the next chairman uh set by the White House rather than by the e economy.
Uh do you feel that inside the building? No, I to be absolutely honest, we just do our job every day. I go in, I just focus on my work on monetary policy, payments, and oversight of the reserve banks. That's what I do. I let this stuff go and then just try to focus on my job. And I think that's how all of us are proceeding with this.
I mean, at the end of the day, the president, winning, whoever they choose, you're going to have to have somebody that has credibility with the markets or you will see, as Jonathan was just talking about, you're going to see inflation expectations spike. You will not get lower interest rates. You will get higher interest rates.
This is well known. We've seen this everywhere around the world when this happens. And I I know Scott Dustin knows this. So, this is not something that is lost on anybody. You've been nominated by this president for the seat on the board. Yes. You were previously director of research for Jim Bullard way back then.
Is it a position you would like? Is it something you would like to do in the future? Look, in 2019, the president contacted me and said, "Would you serve?" And I said, "Yes." If the president contacted me and said, "I want you to serve." I would do it. But he's not contacting me. What say if he does?
If he says, "Chris, I want you to do the job." I'll say, "Yes." But he's not talking to me. So that's it. It's a hypothetical that um that might change, sir. It's good to see you. We appreciate your time. All right. Thank you. You've been very generous with it. Thank you very much. the Federal Reserve Governor there, Christopher Waller.
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