Me now with a look ahead what to expect Bloomberg's global economics and policy editor Mike McKay Let me guess the Democrats are going to try to get him to blame Republicans the Republicans are going to try to get him to claim the Democrats You know too much about American politics Anything substantive coming out of this or what There will be substantive discussions but whether there will be anything we don't already know I would doubt because he just had a news conference for an hour last week and basically explained where the fed is Now he left some things uncertain One of the biggest questions is what do they do next 50 or 75 He said they could do either one To that he'll say we won't know and then maybe somebody asked him well what are you going to be looking at What will tell you that you need to go a bigger if that's indeed the case And so maybe there's something from the markets to learn there But other than that it's probably going to be more of an explanation of why the fed doesn't really know what's going to happen Okay that news conference is talking about some wise acre got up and asked if they can really control the type of inflation that we're seeing Yeah I wouldn't know that You know when I go to the gas station fill up for 70 bucks for my car and go buy groceries at the grocery store and that cost me $200 for a jar of peanut butter I asked him whether they were looking at the core rate or the headline rate because the headline rate I only buy and he said the consumer He said John Tucker in particular doesn't understand core inflation Because he pays for gasoline and food But that's really the argument is the has to look at the impact of headline inflation the impact of gasoline prices And food prices because they're particularly concerned about inflation expectations That's what drove them to change their minds and go 75 basis points to jump in the University of Michigan's consumer sentiment measure of consumer inflation expectations And can we stop there What's the big deal about the expectations from consumers far out The concern is that if expectations elevate and remain elevated then what people are going to do is expect inflation to occur and then take steps to mitigate it like going to their boss and asking for a raise and they'll say well the other cost of living sir I got to give you a raise but to pay for it I'm going to raise prices even more That's what we saw happen in the 1970s and central bankers everywhere have basically learned that less than and said we're not going to do that again You mentioned the 1970s There were some comparisons to the Volcker era We're not there Are we There are many differences between now and the Volcker era For one thing the central banks understand the problem better and are going to attack it Energy is not as central to the economy Yes you don't like paying 5 $6 a gallon For gasoline but in terms of the gasoline that you use you're using much less because cars are much more efficient And the same with power In our houses So there are differences between now and then The biggest difference that they don't seem to have been able to get across to the public yet is that they're coming out of the coronavirus pandemic And prices went up on a lot of things for a lot of reasons related to the pandemic When the pandemic shut everything down the rental car companies didn't need cars because nobody could travel So they sold off their car fleets And then we reopened And now everybody's going on vacation and needs a car And so rental car prices are way up And because they had to restock their fleets used car prices went way up Those things are going to disappear as inflation providers because the red car companies will have their fleets And they will have made back enough money when the fleets get big enough Somebody will start undercutting other people and prices will level off And that's what the fed meant by transitory The problem is COVID wasn't transitory It kept coming back And so the problem hasn't gone away yet Some of those things will disappear inflation will go down but is there a fundamental built in inflation that's what the fed is worried about that people are starting to think there's going to be inflation So prices are going to keep rising Yeah and there was a lot of spending on the part of the government and the Federal Reserve building up its balance sheet What was the alternative back in 2008 in the financial crisis What was the alternative Probably complete disaster There's two arguments One that there was no alternative at the time when they first started doing that And some people would say that when the Biden plan was put forward it was too large And they kind of knew that but as you said what's the alternative The other aspect and argument that's made is that even if you did that you should have recognized sooner that that was going to be inflationary and started taking steps to mitigate it The fed should have stopped buying bonds in QE much earlier and started maybe raising rates earlier So they wouldn't have to go as far as fast as they are now All right Mike always a pleasure Bloomberg global economics and policy editor.