Ethan Harris has had a long illustrious career on Wall Street, notably at B of A, where he was head of the global economics, Lehman Brothers as its chief economist, and a stint as an international economist at JP Morgan. Importantly, he also worked for nine years at the New York Fed to this as head of domestic research.
So what does this seasoned Wall Street pro see the Fed doing now as the latest inflation report continues to show “mild” even “tame” inflation as the financial press describes it, and the latest U.S. GDP report depicts an economy that still appears to be chugging along even as some economists predict it’s on the verge of a recession if the Fed does not start cutting rates now?
Fed officials are “getting what they want,” he says. “In fact, they’re getting even a little better than they want,” as the last few months of inflation data show that the worrisome acceleration in inflation in the first part of the year is being replaced now by lower readings.
So is it time for the Fed step up to the policy plate and cut as the September meeting as so many are expecting?
”The world isn’t on some kind of knife edge,” Ethan says. “The reality is that the slowdown…is occurring at a very gradual pace. It’s a very benign trend right now. It’s weakening but not in a way that gets you concerned. There are no big shocks hitting the economy right now.”
In sum, he says he is not concerned that the Fed will waits “one meeting too long or something to cut” the key rate.
”I think the risks are widely balanced right now. I think they are doing the right thing. They were right to pause (rate hikes) last year, they were right (this year) to delay the first cut. And now I think they are weighing the data correctly.”
As for the markets weighing things correctly? Maybe not.
”I do think the markets are too optimistic about the Fed,” Ethan says.” I don’t think September is a done deal. It really requires that the data continue to cooperate.”
”The markets are pricing in almost a 90% chance of a cut by this September meeting., he notes. “THAT’S MUCH TOO HIGH (my emphasis). It should be like 70%. Maybe it’s (only) better than even odds.”
And listen to this. Three rate rate cuts this year?
”Why would they move that fast? If the economy looks okay, it’s too fast,” he says. bringing in his view that the current neutral interest rate is much higher than the Fed has been estimating.
So hear, see for yourself. We talked about much more, including why the Fed should be looking more at is own carefully designed but not closely followed “secondary” inflation indicators like the Dallas Fed’s Trimmed Mean and the Cleveland Fed’s Median PCE Inflation indicator.
Be sure to listen to the part later in the interview where Ethan told me he thinks the FOMC will use its language very carefully at next week’s July meeting to signal just how prepared it is to cut rates at the September meeting.
Here’s the transcript. There are plenty of time codes if there’s a part you want to zero in on easily.
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Kathleen Hays: Welcome to Central Bank Central. I'm Kathleen Hayes today. Another inflation report out. Of course, we're all looking to the Feds meeting next week, but even more importantly, to the September meeting, because that's where the bets for the 1st rate cut
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Kathleen Hays: settling in right now, and a and a tame a mild report. Those are the headlines that all the big news services are saying today. Preceded by what some people called a fairly strong growth report. The Gdp report yesterday. So where does that leave the fed? How do we put it all together? Very happy to welcome someone I have known for many, many years, and happy to have the 1st time on Central Bank Central.
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Kathleen Hays: Ethan Harris. Ethan Harris, of course, started his career at so many Wall Street economists did at the New York Federal Reserve Bank. As an economist he spent 12 years at Lehman Brothers, and then about another. Well, more than a decade at Bank of America. You can correct me on any of those numbers you want, Ethan. But I'm just very happy to have you on the show. Thanks for joining.
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ethansfbtharris: Yeah, I think to summarize it all, I'm old.
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Kathleen Hays: Number.
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Kathleen Hays: You're matured like fine fine, that's what it is. Yes, and that's why I like to talk to people like you, because, you know you. You've gone through many cycles, and there every cycle is different. Right? The post, the pandemic and post pandemic cycle is is certainly been marked by inflation that went way up. Then it came down pretty quickly, and now it has come down. But has it come down enough for
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Kathleen Hays: the fed to start cutting rates. So let's just start with today's inflation report. What do you see there? What's the message?
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ethansfbtharris: Yeah, I mean, the the last 2 reports have kind of made up for some pretty ugly numbers at the start of the year. You know, core inflation in the end of last year was running at about a 2% annual rate. So the fed had kind of like won the war.
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ethansfbtharris: And then suddenly, we get 4 months in a row above target running at about little over 4 annual rate.
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ethansfbtharris: And you look at that and go. The fed was absolutely right to wait here before cutting. You know that that that cancels out a lot of that good news.
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ethansfbtharris: What's happened the last 2 months is we've gone the other direction. Now we're back to the lower readings. Again, annualizing the data
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ethansfbtharris: core PC inflation, which is obviously the thing. The fed seems to focus the most on
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ethansfbtharris: one and a half percent in May
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ethansfbtharris: 2.2% in June.
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ethansfbtharris: They're getting what they want. In fact, they're getting even a little better than they want. So I think that that today's data, certainly, the inflation data keeps us on track for
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ethansfbtharris: cut later this year. Probably in September. That's been my view for a while now. But this was a good report.
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Kathleen Hays: So this isn't the biggest thing from the report itself. But the 1st thing that comes to my mind is well, I've heard many people say that the year over year comparisons, right are going to start looking not as good when we get to. This is the June report to the July to the August report. And we can all say, that's okay. It's it's all just these year over year comparisons.
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Kathleen Hays: It's it's but I think the more important point is to continue to stay at the levels where it is now on a yearly basis. You're gonna have to very well behave monthly increases right? And do you think that's the point where the economy is? When you look at services versus goods, when you look at, you know, core services X. Energy X. Housing, etc.
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ethansfbtharris: Well, I think that we're now down to probably the low twos with inflation. If you kind of look at the underlying picture. So we're
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ethansfbtharris: W. We're right where the fed wants the to be. Really, I mean, they've been pretty lucky here. Actually, they've inflation even with the bad numbers early in the year are now pretty much on track to hit the 2% target sometime next year or the year after. So we're we're definitely on the right path.
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ethansfbtharris: And they've done it while having a pretty moderate slowdown in the economy. I don't think their luck's gonna remain quite as good. I think the economy is gonna continue to slow. But still it's been a it's been a great outcome.
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ethansfbtharris: And and I think that
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ethansfbtharris: you know, this year over year stuff? Or should he go 6 months, 3 months, 12 months.
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Kathleen Hays: And Daniel eyes. Yes, yeah.
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ethansfbtharris: You can do. You can do it. You can slice it any way you want, and come up with any answer you want. I think that they're more focused on the short term. I think Powell tried really hard to get people to not be obsessed with year over year at the beginning of the year when he's talking about 6 month periods. Listen. If we wait for the 12 month change to get down to 2, then we're probably gonna undershoot or target.
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ethansfbtharris: So we need to look at some shorter timeframe.
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ethansfbtharris: And I think that's the right way to think about it right now, if you look at the 6 month growth inflation still too high.
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ethansfbtharris: 3 months is moving in the right direction
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ethansfbtharris: hopefully, by the September meeting.
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ethansfbtharris: those kind of measures will look good enough, and the fed goes ahead and cuts.
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Kathleen Hays: So again I'm I'm I'm here to be the the other side of the coin. Right? The devil's advocate.
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Kathleen Hays: So what about some of the inflation measures.
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Kathleen Hays: you know, develop. I
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Kathleen Hays: various Feds. The trim mean the Cleveland Fed Median Number.
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Kathleen Hays: How do they look? That's something you are following very closely. It's kind of a secondary thing it's there, but it doesn't get much focused. Is that also a very favorable indicator for the fed in terms of cutting rates by September.
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ethansfbtharris: I wouldn't call you the devil's advocate. I'd call you preaching to the choir.
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ethansfbtharris: I really I really think that
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ethansfbtharris: there's been a kind of a tangent in the way people think about inflation for many years now.
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ethansfbtharris: and I'm gonna give you a little, my old man history here. So in the seventies the Arthur Burns invented the idea of the core where you take out food and energy right? Because you have these massive commodity shocks.
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ethansfbtharris: and it made sense at the time.
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ethansfbtharris: He then went on to start slicing out other high inflation components.
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ethansfbtharris: and he kind of abused the concept frankly.
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ethansfbtharris: that's what we're left with today, which I find remarkable.
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ethansfbtharris: Why, in the face of a pandemic, would we look at core inflation, excluding food and energy. Let's focus on where the volatility is coming from, and there's a little some of it's coming from quantity markets.
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ethansfbtharris: but a lot of it is nothing to do with commodity markets. It's crazy stuff going on. Insurance used cars all that stuff.
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ethansfbtharris: Those are the main sources of volatility. Now, then, there's some food, too, you know, like eggs and and gasoline and stuff.
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ethansfbtharris: But why are we focusing on a measure of core inflation that was designed it for the 19 seventies.
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ethansfbtharris: And so the fed and they're not the only central bank. Many central banks develop these alternative metrics back in the 19 nineties
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ethansfbtharris: where they said, okay. Instead of just picking categories, we're gonna eliminate.
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ethansfbtharris: Let's let the data speak. Let's take out the weird stuff that's going way up or way down. And let's trim the the data down to the more stable components, you know, that are either going up modestly or down modestly, but aren't doing these, you know, 5% swings every month, and we'll take all those out.
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ethansfbtharris: And that's what the trim mean. Does the trim mean? Takes out the 2 ends of the the 2 extremes of inflation.
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ethansfbtharris: It's automatically calculated as a spreadsheet, not as a decision by the economist. It's not Ethan Harris going in there saying, oh, that number looks a little too high. Let's take that out and.
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Kathleen Hays: Yeah.
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ethansfbtharris: I don't like that one. Let's take that out. But I'll leave this one in here because that's more fundamental.
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ethansfbtharris: So it there, it's a. It's really dangerous. When you go, you take the traditional measure of the core, including food and energy, and then you, cherry, pick away at the rest of the inflation reading, and you end up with some, you know. Here's the 3 items in the Cpi.
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Kathleen Hays: Yeah.
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ethansfbtharris: So if you look at the if you look at these alternative measures that were developed, most of the work was done in the nineties
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ethansfbtharris: they have a great track record. They correctly predicted that inflation was not transitory in 2,021, because these measures were going up rapidly, even though you're stripping out the most wall of all components. And today they're slightly high.
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ethansfbtharris: You know, we're right as we speak, we're waiting for the the the Dallas Feds trim mean to come out, and I've actually been refreshing my screen. I can still can multitask, even though I'm not a student.
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Kathleen Hays: All right.
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ethansfbtharris: But but they're they're they've been coming in a little bit harder.
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ethansfbtharris: and I do think the fed pays a little bit of attention to them. But they're better measures of core. It's time to throw out food and the ex food and energy.
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ethansfbtharris: and, you know, move into the the current century.
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Kathleen Hays: Well, you know, let again. So the other side of the coin let me push back against everybody. Says they're going to cut rates in September, including many fit officials who have indicated either their
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Kathleen Hays: dying for it. Austin Gules Beach, President Chicago fed, or Chris Waller, one of the thought leaders at the Board of Governors, who make very important recent paper speech, saying, Yes, things seem to. Things are getting closer but I guess what I my question is is to what extent cause there are people who are generally very worried. The Feds gonna wait too long, and they're gonna allow, not have the ability to slow down or stop extreme slowdown. Something looks more like a recession. Are you worried about that?
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ethansfbtharris: Design.
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Kathleen Hays: Because to me, that's that's the question of is the are we crying out? Do we need rate cuts, or is just as more of a sense of well, it's normalized. It's a good time. Inflation has come down.
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ethansfbtharris: Yeah, I'd say a few things there. You know. 1st of all,
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ethansfbtharris: the world isn't on some kind of knife edge. I mean? Obviously, we're, you know, we're in the business of, you know, covering the current news and
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ethansfbtharris: and trying to, you know, get a story out there. But the reality is that the slowdown? The economy is occurring at a very gradual pace. It's a very benign trend right now. It's weakening, but not in a way that gets you concerned. There are no big shocks hitting the economy right now. So I think the idea that if the fed waits one meeting too long or something to cut.
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ethansfbtharris: I don't really care. Frankly. I do, as a fed watcher is trying to tell people when.
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Kathleen Hays: They're gonna.
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ethansfbtharris: But I don't as a citizen worried about the economy. And then the same thing's true on the inflation front. Inflation's coming down but it's uneven. It's it's and so it's it's going in the right direction. So the fact that they're talking about cuts is okay
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ethansfbtharris: but it's not the end of the world what they choose to do. Now, what are the balance of risks right now? I think that the they're moving into balances what they said in their last statement. I think that's right, I think at the beginning of the year, when they said we need more information, and so on.
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Kathleen Hays: Well, actually remember, the beginning of the year was coming out of the December dots. Beginning of the year was, Oh, boy, things are great. We're going to be doing 3 rate cuts this year.
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ethansfbtharris: Right and exactly. And so that was.
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Kathleen Hays: Back, in march.
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ethansfbtharris: That was a point where you had 2 things going on. One was the inflation data were fantastic, and second, the economy is strong.
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ethansfbtharris: right? The jobs numbers are really strong. Now you move forward. Inflation numbers aren't quite as good, right? Cause you've had that intervening bad numbers.
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ethansfbtharris: but the economy is clearly slowed since the beginning of the year, so the threshold for the fed to to cut
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ethansfbtharris: the inflation threshold to get them to cut is not as low as it would have been, say, back in December in December. They weren't willing to cut, even with 6 months of 2% inflation.
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ethansfbtharris: Now, I don't think they need to see it come all the way down to 2. I think they need to have a pretty comfortable that it's heading that direction.
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ethansfbtharris: So I think that I think the risks are wildly balanced right now. I've been very critical of the fed at times in the last few years. But right now
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ethansfbtharris: I think that they're doing the right thing. They were right to pause last year they were right to delay the 1st cut
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ethansfbtharris: and now I think they're weighing the data correctly. I do think the markets are too optimistic about the fed.
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Kathleen Hays: You wouldn't.
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ethansfbtharris: Well in 3 in 3 respects. Number one.
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ethansfbtharris: I don't think September is a done deal, I think, as you're suggesting, it's
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ethansfbtharris: it really requires that the data continue to cooperate. The the markets pricing in almost a 90 chance of a cut by this September meeting. That's much too high
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ethansfbtharris: should be like 70%. Maybe it's better than even odds.
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ethansfbtharris: the markets pricing in probably 3 cuts this year. Why would they move that fast.
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ethansfbtharris: If the economy looks okay.
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ethansfbtharris: it's too fast.
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ethansfbtharris: And the 3rd thing that they they're over they're overly optimistic about is where it's a fed heading. Where's the neutral? Right?
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ethansfbtharris: I think neutral is a lot higher than what the fed is saying.
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ethansfbtharris: Remember the history of the neutral rate right in the old days. You said it was 4%, you know, 2% inflation and 2% real interest rates. That's the kind of normal
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ethansfbtharris: rate of interest rate that gives you balance in the economy. Then it dropped down to almost 2% in the last decade.
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ethansfbtharris: But that was a fluke that was the product of the great financial crisis and the crippled banking and real estate sector. All these models that estimate what neutral is are based on a world where you have these massive headwinds to the economy, and hence the fed has to be super easy.
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Kathleen Hays: Yeah.
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ethansfbtharris: Those days are over, I think I think. And so I think that when the fed does cut, it's not to cut down to
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ethansfbtharris: 2 or 3%. It's to cut down to say 4, 4, and a half percent.
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Kathleen Hays: Okay, let me just stop you for a minute, because I always like to have people, cause I I always say, you know my one of my big sisters watches this all the time, and I think by now she fully understands the neutral rate. But there's a lot of smart people who who do follow these things that you talk about? I interview people about you right, etc, and I always want it so. The neutral rate. Why is this so important? And of course, people talk at the about the neutral rate. They talk about the real neutral rate when you take out inflation. But I think you're absolutely right, and it's 1 of the questions I was going to ask you about, because
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Kathleen Hays: if the neutral rates higher that definitely indicates the fed is
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Kathleen Hays: is not maybe as restrictive as it looks, and it's not going to have to cut that much necessarily.
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ethansfbtharris: Yeah, that's a good question. I mean, the neutral rate is one of these things that you never see. But everyone talks about
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ethansfbtharris: it's
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ethansfbtharris: it's a concept that basically summarizes a whole. The whole debate about the fed. When is the fed being tough?
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ethansfbtharris: When are they likely to hurt the economy. Well, that will depend on
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ethansfbtharris: where they raise the interest rates. They control the funds rate and their bond buying programs. Right? Those determine
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ethansfbtharris: how financial markets are doing, and that in turn determines how the economy is doing. And so Co. Economists have this concept of
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ethansfbtharris: what's the neutral raise? What's the interest rate the fed the funds rate, the fed sets that more or less
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ethansfbtharris: keeps growth steady and keeps inflation steady. And this is a wild guess.
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ethansfbtharris: right, but you have to have some kind of guess. You need some kind of North Pole to to guide you, and so the debate sometimes is simplified among economists, including myself. To this one number, you know. Should the funds rate be 4,
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ethansfbtharris: 3, or 5, what's what's the number that the fed should guide itself to if it wants
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ethansfbtharris: the economy to be on an even keel. And there, I think there's massive debate. I think the evidence is pretty strong
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ethansfbtharris: that, as you point out, current monetary policy doesn't hurt much.
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ethansfbtharris: It just doesn't hurt much, I mean, look at the equity market. Look at home. Prices are still rising.
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ethansfbtharris: The credit markets are doing well.
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ethansfbtharris: Households are flush with wealth.
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ethansfbtharris: and the economy isn't really. It's not collapsing. It's not behaving.
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Kathleen Hays: We just had a 2.9 growth of almost 3%, you know, and it topped everybody's forecast. The Atlanta fed. Let's give them their their Gdp now forecast turned out to be one of the most, you know, accurate forecasters, I mean, it wasn't that different of the range. Everybody was somewhere below 2, but 3, I should say, and above 2. But it came in, and the consumption figure there cause a lot of it was government spending, I know, and that's that doesn't necessarily show us how strong the whole economy is. But
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Kathleen Hays: it kind of seems to indicate that, you know, like we're saying, it's the economy really isn't. Look, it's like it's hurting. And I can hear people out there if they're listening. But, Kathleen, the som rule unemployment rates gone up 4.5 in a row. It's going to be a recession. You just don't know it. You just don't see it yet.
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ethansfbtharris: Yeah. And I, and I think that so the sound rules this idea that if there's a big rise in the unemployment rate, you're probably in a recession.
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ethansfbtharris: you know. I mean, you could argue that the the the rise we see we've seen a small rise in the unemployment rate. So you could argue. Maybe that's warning us.
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ethansfbtharris: But I never focus on just one indicator.
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ethansfbtharris: the the the broad range of data, as you point out, doesn't show that pain, you know. There, obviously, there's always gonna be
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ethansfbtharris: people in the low income side of the distribution that aren't doing as well. They're always pockets of the economy that are weak.
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ethansfbtharris: But, as you said, you know, you get a quarter of almost 3% Gdp growth following quarter of about one and a half.
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ethansfbtharris: So you average the 2. And it's fine, right? So what's the what are we getting so
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ethansfbtharris: been out of shape about and that's 1 of the reasons the fed can be patient here is that the economy is slowing.
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ethansfbtharris: I wouldn't take the Q 2 number literally cause it was just one quarter. But the economy doesn't isn't demanding some big change by the fed right now.
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Kathleen Hays: So what do you expect next week? it's funny to me. Because people I talked to almost well, yeah, I I can talk to you about preview the July meeting. I don't wanna say, though, because nothing's gonna happen that kind of thing. And then I think it kind of heated up with some people saying they should be cutting right now. We've seen those stories, someone saying, Nope, why, why wait? You know, I think Bill Dudley, former New York fed bank president. I changed my mind.
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Kathleen Hays: Oh, oh, I'm wrong. Better cut now. Okay, that was that was one of the shining examples. And now I think people are sitting back again to thinking, it's gonna be messaging, you guys, it's probably gonna be messaging in July. So what's the messaging going to be in July from Jay Powell and the f. 1 c.
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ethansfbtharris: Yeah. So I 1st of all, I think they need to change their message a bit.
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ethansfbtharris: So if you read their last statement it. It had it. It it you know. You obviously got a lot of boilerplate and stuff. But there are 2 things in there that I thought, we're telling you we're not ready to move.
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ethansfbtharris: One was that they said inflation remains elevated
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ethansfbtharris: right? And so that doesn't sound like a central bank right to cut. And then later, they said, Well, the economy is in better balance. But we're still a little more worried about inflation.
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ethansfbtharris: So those 2 statements kind of
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ethansfbtharris: we're more balanced but not completely balanced, and.
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ethansfbtharris: Relationship elevate to me. That's the implicit message there is. We're not ready to cut.
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ethansfbtharris: I think they have to tweak that if they want to cut in September. I don't think they wanna go into the September meeting with the markets, confused about what their plans are.
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Kathleen Hays: Well.
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ethansfbtharris: To change the language, but not in a big way. They need to say something like inflation is a little elevated or.
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Kathleen Hays: I know.
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ethansfbtharris: We're a little bit concerned. We're concerned about inflation.
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ethansfbtharris: Just toss in whatever
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ethansfbtharris: whatever qualifier you want. And it's there's always. It's interesting to try to exactly guess the word change, but anyways some kind of slight softening of the language that
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ethansfbtharris: confirms what the markets pricing right, because the fed knows the markets, expecting in September.
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ethansfbtharris: They know that if they don't change their language at all.
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ethansfbtharris: they're deliberately then trying to change market pricing if they don't change at all because there's a little bit of a fun mirror back and forth between the fed and the markets.
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ethansfbtharris: So I think that they will nudge the language a bit. But they're not gonna cut.
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ethansfbtharris: i i i i think these the arguments for waiting
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ethansfbtharris: for not waiting.
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ethansfbtharris: You know, if we made that same argument in December and January. The fed would have cut back then, only to see inflation accelerate for 4 months in a row, and they would look like idiots frankly. So I think their caution they're taking makes sense.
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ethansfbtharris: And I think it makes sense. Given that the growth side of the economy is evolving slowly. So
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ethansfbtharris: waiting to
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ethansfbtharris: for confirmation has served them well in the last year.
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Kathleen Hays: So
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Kathleen Hays: Jackson Hall end of the month. You know the Kansas City Federal Reserve Banks Symposium at the
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Kathleen Hays: Jackson Lake Lodge, in the shadow of the Grand Tetons and all one of the the big parts of the kickoff. It starts always on a Thursday evening with a reception and dinner, and then Friday morning the Kansas City fed. President introduces fed chair. This time it's Jay Powell. And over the years is we've all been watching. It became more and more. It's become more and more of a a platform for the fed chair. If it he or she chooses to announce something in a way right bernanke did it with what
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Kathleen Hays: Qe. 2. I believe it was but this has happened. So when it when we get to the Jackson Hall meeting, and it's still gonna be ahead of the the September meeting where Cut make could happen.
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Kathleen Hays: What do you guess? What do you think Powell's message could be will be. What would you advise him to focus on? I've had his.
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ethansfbtharris: Yeah.
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Kathleen Hays: From, you know, neutral rate to Central Bank independence. What do you think.
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ethansfbtharris: Yeah. Well, I mean, I I think that well, the second way I get independence, so you know, is
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ethansfbtharris: a fraught subject for them.
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Kathleen Hays: Up.
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ethansfbtharris: His best approach to that is to keep his head down and look
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ethansfbtharris: technocratic.
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ethansfbtharris: walk, walk like a technocrat.
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Kathleen Hays: Okay.
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ethansfbtharris: I think that the idea of compromising the fed independence, by the way, is a horrible idea.
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ethansfbtharris: Imagine if
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ethansfbtharris: Congress, the same guys who give us the budget dysfunction
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ethansfbtharris: controlled monetary policy or the
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ethansfbtharris: incumbent political party controlled monetary policy. They would gun the economy into elections
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ethansfbtharris: and create an inflation bias. So it's a terrible thing. What should he talk about? It's the reason Jackson Hole is important, is it's it's it's kind of a the 9th fomc meeting in the sense that it's a platform for the chair to speak. It's kind of like the 9th Press Conference, I guess, because there's a gap right in their calendar.
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ethansfbtharris: and there's fed. Doesn't talk a lot in the summer, because, like the rest of us, they tend to take vacations in August.
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ethansfbtharris: so it can be, it can serve as a
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ethansfbtharris: potential placeholder. For do I want to say something interesting?
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ethansfbtharris: And so some years you get it, and some years you don't.
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ethansfbtharris: He's gonna at that point have to decide whether the markets pricing the fed correctly.
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ethansfbtharris: He doesn't want to the the reluctance. There's some reluctance for the chair to say something really aggressive, because the he really wants to be sure that he's representing the committee to some degree. I think it's gotten easier for PAL, because he does communicate a lot with the members of the committee, so he can
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ethansfbtharris: take their temperature and feel more comfortable.
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ethansfbtharris: Pushing the view there. So I I think we'll see. I my guess is that he'll reiterate the July message, which is, we're getting a little closer
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ethansfbtharris: to cutting, but we're not guaranteeing it.
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ethansfbtharris: And but it'll it'll it's it's it'll be interesting. One way or another.
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Kathleen Hays: Absolutely it always is. So anything else you wanna add before I say, well, you can continue, go back and continue to write your book that's gonna be out bed watching, etc, or get ready for a nice weekend or a barbecue tonight. The weather's finally pretty nice here.
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ethansfbtharris: It is nice. Gonna do some tourist stuff we have relatives in town. I I'd like to, just for a second go back to the the Fed Independence Question.
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Kathleen Hays: Sure.
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ethansfbtharris: Sparked my my interest.
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ethansfbtharris: It's a pretty big risk right now.
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ethansfbtharris: There was a fed independence is not.
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ethansfbtharris: and, you know, etched into the Constitution or something. It's a product of the political environment.
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ethansfbtharris: And the
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ethansfbtharris: fed had been moving steadily into a stronger position over the years where you had the appointment process for the chair, and the governors had become less political. So you had
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ethansfbtharris: every fed, every Us. President before Trump reappointed a fed chair who'd been appointed by the President from the other party.
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ethansfbtharris: And that was a pretty strong, symbolic.
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ethansfbtharris: Treatment around.
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ethansfbtharris: You know the bipartisan nature of the job.
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ethansfbtharris: I'm really worried about politic politicized governors coming in. And it's it's really up to the President and the Senate
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ethansfbtharris: together. They've got to decide, are we? Gonna put good technocrats in?
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ethansfbtharris: And there's, you know, there's regular turnover going on.
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ethansfbtharris: So if you want to, and you've got the Senate and the President working together, they can.
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ethansfbtharris: They can really damage the independence of the institution. And so I I think it's incredibly important that we stay away from that. We've got histories just loaded with examples of.
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ethansfbtharris: We're politicized. Central Bank
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ethansfbtharris: braided a mess.
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ethansfbtharris: And this is like a fundamental aspect of effective
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ethansfbtharris: policy to have an independent central bank.
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Kathleen Hays: We can hear us. Thank you so much for joining me, as I said 1st time on Central Bank Central. I'm sure we'll get you back soon anyway. Have a great weekend and again
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Kathleen Hays: you know, you could always take your your relatives. This would be so exciting joke. You have to take them to the the what is it? The Monetary Museum Museum of? It's right down there by the New York Fed.
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ethansfbtharris: Oh, down to the fed! We could look at the gold or something.
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Kathleen Hays: Here you go!
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ethansfbtharris: Look at the gold anymore.
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Kathleen Hays: Probably not.
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ethansfbtharris: Yeah, I think it's close the Po used to be. You'd have you could go in there. Look at it. And there it was very exciting, you know.
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Kathleen Hays: Alright. Well, anyway, thanks so much, and have, as I said, have a great weekend.
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ethansfbtharris: Thank you. Take care now.
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Kathleen Hays: Alright. That was Ethan Harris. He's we mentioned, start his career at the New York fed years ago. He was at Lehman Brothers. He was at Bank of America for many years. He's now blogging, writing, and joining me right here on Central Bank Central. I'm Kathleen Hayes, and thank you for joining us.
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Fed Rate Cut in September Not "A Done Deal" Yet: Harris