Listen: Federal Reserve, US And Paul Krugman discussed on Bloomberg Best
"This is Bloomberg best. Traders of US interest rate futures are losing confidence that the Federal Reserve will continue to raise rates with a December rate hike coming into doubt. And almost no tightening expected for next year. Bloomberg's Caroline Hyde spoke with renowned economist Paul Krugman about the Federal Reserve's monetary policy. When you're looking at what the Federal Reserve is doing do, you think it's? Dumbest sentiment being sent out to the market. I read the speech, and what he actually said was the the fed funds rate is near the bottom of the range of estimates of. And so it actually that's a statement of fact, it wasn't actually saying much. So now fed chairs are supposed to wash their words, very carefully. But I suspect in this case he really wasn't trying to send a message who's actually just trying to do some economics. Which was always a mistake. Paul we've seen over and over again, the fed overestimate things like inflation inflation is going to go wage growth unemployment continuing to plunge models like the Phillips curve not been particularly helpful does get to be a point rate. You just have to throw these models out and say, they really don't help that much some sense. There has to be some point that we're trying to for further. You know, if you if you print enough money and let the economy grad Espy inflation. But we don't know where that point is. And I've been saying for years now don't don't hike until you see the whites of inflation's is I guess gonna say we can't have two percents on employment. They'll given what's happened in the past God knows, but but that the entire concept is rumble Clooney. The numbers are extremely uncertain. What do you think though, the rationale was for the fed being so aggressive over the past year and continuing on that message? That it might continue like that in twenty. I think I think the fed is something that comes with being a central banker maybe something in the in the food, and the fed canteen or some the that you always or any central Bank. You always are worried about inflation, and however much they may say it's a metric we won't have target whereas concerned about being above the below as we are above the they never actually behave that way, they're incredibly allergic to inflation. Somehow or other the nightmare of the nineteen. Seventies is always there. No matter how much we've been through since then we never really got to any real inflation target. I mean, whatever metric wanted us. We never really we're we're we're floating by fairness measures either at or a bit below the two percent Tara, why am I supposed to believe their data dependent? If they're making decisions on data that hasn't arrived. Yeah. That's right. It's a there is a clear. I mean, the reality is clear bias of the real fed target is more like the old ECB target two percent or below. Man, it's close to but below I think was the target. Let's talk about easy. Because does it do? They in any way does the fed have any viewpoint on the fact that they can give more breathing space to other central banks. If they put on a pause, I think the fed doesn't do a lot of thinking that way they're aware of it that certainly they think globally. Swap lines in a crisis. I think they're probably bet is that the is a big boy. And what the US doesn't does doesn't affect them that much just to be clear, we've kind of danced around it if you're. If you were the fed chair, you would not be raising rates further at this point. That's right. Fires phychi. I'd be pausing until until we had clear a sequence of of inflation numbers that were above two percent at the minimum. And not, you know, I I actually think too percents is too low at target that that that's an important you try and make that argument of the fed Nikko crazy. Inflation because Well, I I think there's certainly three maybe our estimates of the neutral, the real neutral rate have been drifting down there down by various estimates half one and a half two percentage points since the two percent target became orthodoxy. So that should say reduced inflate raising by that amount that you're looking at me which read I'm a core PC or something like that. It it shouldn't matter too much. You're you're over the sense of the data. If it depends, which one do you think right now, the economy's rolling over at all? I mean, we see the yield curve flattening. We see housing data. This year has been pretty I guess mediocre in the US how robust is forget the fed for a second robust in your views the economy right now, my you know, as very good at this. And I'm not especially good know, we had a tax cut tax cut gave you some fiscal stimulus. But no more after this. In fact, if anything it tends to fade out, there's probably the crowding out effects from the higher interest rates take time. So you would expect the economy to slow down. I don't know about a role rolling over. I don't see it from a economists perspective though, when you think about the tax cuts. Why didn't we see more of that money? Roll from businesses roll into cap axe or."