A highlight from What will it actually take to achieve global tax reform?

Automatic TRANSCRIPT

In los angeles. I'm kai result monday today. The seventh of june good as always have long everybody last week. As i think i mentioned maybe a couple of times. It was jobs jobs and more jobs this week. Yes jobs still matter but attention turns to inflation. We're gonna get the latest report on the consumer price index. This thursday. The fed meets next week. Tuesday wednesday at which inflation will surely be discussed so we are going to get ahead of the story just a little bit with mohamed el aaron talk inflation and this recovery dr. Aaron is the president of queen's college cambridge also the chief economic adviser at all eons. Welcome to the program sir. Thank you for having me. You are becoming One of the more high profile people who say they are worried about inflation in this economy. And i guess i want to know is why i'm one more worried because of what i'm seeing on the ground talking to ceo's and other people that really participating in the price formation process we seeing significant supply bottlenecks. We're seeing soaring transportation. Cost the facilities in hiring. And all of these things on not immediately reversible. So when you look at the economy from the bottom up you start sensing mounting inflationary pressures that are being encouraged by incredibly loose monetary policy as you know though j pal and many others Say you know what we see all that too. But it's transitory. These are weird times in this economy. I'm paraphrasing the chairman here These are words in this economy. We've been deeply scarred. It's all gonna work itself out and and clearly. Don't buy that. I by the view that these uncertain times. What i don't buy is the notion that we ought therefore confident that inflation is transitory. Undoubtedly out to elements that are transitory uncle base effect. Simply when you compare with the previous year it really does matter that the price level came down and the other one are very short term imbalances between supply and demand. But we are seeing deepa things going on the economy. And i just think you have to be open minded to the fact that the supply side and demand side evolving structurally. In a way that may be po- inflationary can i read that as you saying That perhaps the fed is not being minded right now and maybe chair. Powell has painted himself into a corner. I feared that's the case. And i say i fear because fed credibility is key so the fed has done two things one. It has repeated the transitory narrative and it has become a mantra literally. Mantra and the second one is that it shifted unfortunate time from a forecast based approach to an outcome based approach so. If the fed is wrong it will be late. And if it is late is going to have to slam on the brakes and it has to slam on the brakes. History suggests we end up in a recession and we may end up with financial instability. So there's a lot of stake here and that's why slowly easing your foot off. The accelerator is a much better outcome than having to slam on the brakes. Let's translate here for a second. When you say slam on the brakes. You mean raise interest rates precipitously which will then drive. The economy into recession and markets will go haywire correct. And the last thing we need right now is to derail that recovery and to derail what i think is a significant economic policy. Shift the biden administration. So what are you looking at to to let you know when this might Not be translated. I mean i mean treasure. Sectarian said this weekend. She's looking at expectations right. What people are thinking about inflation. Also low wage earners and their pay increases water. Your tells here so. I i'm looking at the fact that from the aggregate data we have completely missed to surge in both cpi inflation and what's called inflation second. I listened very carefully to what companies tell us on their quarterly earnings and then look the functioning of the labour market. How do you explain that booming. Demand is not resulting in higher job being created. How do you explain the fact that we have over eight million openings. That are not being well all right so wait sorry. Sorry jump in but you look at the pay of these jobs. You look at the fact that people are still getting being scared of catching a disease and then also as you know in this country there's the whole discussion about federal ui benefits. I mean there's a lot of factors here correct and over the next few months some of them should be reverse so the argument. We will know by the end of september. We'll also get a better feel for how worried people are going back to where we will also get a better feel for what happens when you open schools but i do think childcare is important. I do think that we having skill mismatch. They're simply too many uncertainties. The alternative of just repeating over and over again that is transitory inflation suggests that you have conviction when this little foundation for that view or so. Here comes the unknowable question. When are we gonna know Whether this inflation that we are seeing. Because it's their right. When are we gonna know whether it's transitory or it's here to stay so defense has told us very clearly that they don't expect to know until the end of the year. What the beginning of next year. The markets are a little bit less certain so we have seen significant increase in facing expectations. And this is the issue is when he asked a question. If i end up making your mistake which mistake can recover from more quickly. Muhammed eleryan Is the president of queen's college Cambridge also chief economic adviser at alliens. Mama thanks very much retirement. Do appreciate thank you wall street today. Inflation chm inflation kind of a mixed bag in equities. We'll have the details

Coming up next