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Fed Chair Powell Says Effects of Tariffs Take Time to See

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Bloomberg Jun 24 18:54 · 10.3k Views

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  • 00:00 If you look back and you're teaching a history class,
  • 00:02 what, what would you blame the, the
  • 00:05 increase in prices on
  • 00:07 back in that time period?
  • 00:08 So I'll start with the fact that it was extremely global.
  • 00:11 So we saw there literally was a
  • 00:13 point at which not a single country in the world had inflation 2% or below.
  • 00:18 So it was everywhere.
  • 00:19 So you have to look to common factors.
  • 00:20 And I, I would say that the, the pandemic
  • 00:23 and the closing of the global economy and then the reopening of it
  • 00:27 in all cases with some support, that's, that's a big part of the story.
  • 00:30 Clearly, though,
  • 00:32 there's a role in that for fiscal policy, There's a role in that for monetary policy.
  • 00:37 And
  • 00:38 I think I like to think all of those factors were were involved
  • 00:42 and
  • 00:43 you know, it's, but when it happens everywhere in the world, you can't, you can't look to one thing.
  • 00:47 You got to look to something a common factor.
  • 00:49 And I think that common factor is what happened around the pandemic.
  • 00:52 Sure, good.
  • 00:53 And and building that idea.
  • 00:54 I
  • 00:55 mean, I know I hate it Monday morning quarterback, but if you had to do it over again,
  • 00:59 you had this opportunity.
  • 01:00 As you know, the rate stayed pretty flat in 2021 as inflation creeped up.
  • 01:05 What would you do differently today
  • 01:08 if you had the opportunity to look back and and make some changes?
  • 01:12 I have perfect hindsight in this.
  • 01:13 Yes, Sir.
  • 01:14 If you had it.
  • 01:14 Yeah,
  • 01:15 sure.
  • 01:15 So I clearly I would have raised rates a little earlier.
  • 01:18 I honestly don't believe it would have made much difference to the
  • 01:21 to the outcomes, but we would have looked a lot smarter.
  • 01:25 But that's that's something I would have done.
  • 01:27 The other thing is, you mean,
  • 01:29 you know, ultimately
  • 01:31 we did get all the way back to full to
  • 01:34 2% inflation just about
  • 01:37 without having a big increase in, in employment.
  • 01:39 So
  • 01:40 that's, that's, that was not at all expected.
  • 01:42 So I, I don't know how that would have affected my behavior, but somehow
  • 01:46 things really came out much better than everyone had anticipated was, was that it would take, you know, high unemployment to restore inflation.
  • 01:53 But it didn't.
  • 01:55 And, and the other pressure point that I heard a lot of people talking about is this idea
  • 01:59 of the tariff issue
  • 02:00 that I've heard for months now that the sky is falling.
  • 02:03 But it seems at this point at least
  • 02:06 that the inflation rate is pretty
  • 02:08 steady.
  • 02:09 And how many months of steadiness do you need before you might look at an even larger rate cut from the 4.33 I think we have today?
  • 02:18 Yeah.
  • 02:18 So you're, you're right,
  • 02:20 inflation, the the non tariff parts of inflation that we've been working on for 3-4 years
  • 02:26 are, are behaving really well.
  • 02:28 And that, that was our forecast.
  • 02:29 But it's good to see, see it coming true.
  • 02:31 I would say we have, we have expected that
  • 02:34 tariffs take a while to work their way through the distribution chain several months.
  • 02:38 And I would say we would expect to see meaningful effects,
  • 02:42 you know,
  • 02:43 you know, kind of June, July, August.
  • 02:45 And if we don't,
  • 02:46 you know, we'll be learning something it, you know, maybe
  • 02:48 we have a highly adaptive,
  • 02:51 flexible economy.
  • 02:52 And it's certainly a possibility that the, that the tariffs that we expect
  • 02:57 will come through in a much smaller level.
  • 02:59 We, we don't, we can't know that until we actually see it.
  • 03:01 But I think we'll be learning as we go.
  • 03:03 And, and if we see that, then that would lead us to want to cut earlier.
  • 03:07 The other thing that would lead us to want to cut earlier is if we actually did see some weakness in the labor market of a troubling nature.
  • 03:13 We don't see that.
  • 03:14 Those are the two things we'll be looking for.