Federal Reserve, Brunner, Dr Yellen discussed on Prime Minister's Questions


The issuance treasuries already undertaking. So we don't believe that our issuance is is an important part of the story of the market turbulence that began in the fourth quarter last year. But I'll say again, if we reach a different inclusion, we wouldn't hesitate to make a change if we came to the view that the balance sheet normalization planner any other aspect of normalization was part of the problem. We wouldn't hesitate to make a change. Let's Brunner conversation. Now, Dr Yellen if this expansion lessons next summer, it'll be the longest on record. You played a significant role in making the case. How confident are you that this is on track to keep going through two thousand nineteen how wearing do you? Find these latest moves in markets and some of the survey data. Well, I agree with care of Powell's that he just offered up the oldest suggest we have a pretty strong economy consumers consumer spending is two thirds of all of this spending in the economy. With strong job growth and income growth. Burdens having been reduced substantially housing prices having risen oil prices down putting some money in consumers pockets. Sumer spending. And we just looks is Jay said is those spending over Christmas with strong. That's a strong base for the economy next year. I don't think that expansions just die of old age to things usually in tham one is financial balances and the other is the fed. And usually when the fed into recession in expansion is because inflation has gotten out of control and the fed needs to tighten to bring it down. And I think the fed is very well positioned with inflation being low inflation dynamics feeing favorable in the sense that the linkage so I believe that there is a linkage between slack in the labor market in product markets in inflation. But the strength of that linkage is not very great. So we have relatively flat Phillips curve is another way of putting that and. In addition inflation expectations seem will anchor didn't so inflationary dynamics are very favorable. My former colleagues the opportunity to be careful to move gradually to be data dependent to manage the risks. And I have confidence to fill be able to do that. And I don't really see financial imbalances in the economy at this point that look to be threatening. So of course, we have had a tightening the financial conditions markets are obviously worried about downside risk. There are some we are seeing some slowing in the global economy. I believe growth is likely to slow quite a bit next year, but still likely end up being above the growth rate of potential, which is consistent with the strong labor market. And maybe even some further tightening doctrinaire you you spoke once a Wylie Coyote effect as this fiscal stimulus impact of the tax cuts. Fades, we might. Find ourselves in a in a bad spot over cliff looking down are we are we looking at that? Now is that part of what's being priced in? And how much is that fear something imminent? Well, I think we have an excellent chance of breaking the all time record for an expansion the ten year expansion middle of next year. Is likely that the economy will grow more slowly in two thousand nine hundred then in two thousand eighteen and maybe even more slowly in twenty twenty. This is not something that is news. I mean, we've debated this for a long time because the fiscal policy in particular that was active close to a full employment starting point. We knew that barring changes in the law that stimulus was going to be dying down over time. And that's that's certainly going to be. Slowing growth LLC qual. Financial conditions were anything a little bit of Bouillon in two thousand seventeen early two thousand eighteen to some extent, what we've seen this tightening we've seen as a take back of some of that particularly with concerns about geopolitical considerations trade wars, and the like, and then of course, you know, the perfect confluence a synchronized growth, we saw in two thousand seventeen is also globally has also been a little bit less strong. So all these things do suggest some some moderation. But as Janet says expansions don't dive old age I'd like to say to get murdered instead and here. Right now. I don't see any anyone's coking behind hiding behind the curtains. But some slowing this does seem likely to say that it is a good thing that the fed has the flexibility to respond in a way that will be responsive to the data responsive to the markets, and that manages the risks that are obviously on both sides of this. So as all three of, you know, all too well being Federal Reserve.

Coming up next