Kevin, we can talk about the state of this economy in just a moment, but I wanna begin with what you discussed yesterday. Yesterday before this Fed decision saying that you have full confidence in chair Kevin Walsh. Now it is a market that is rethinking, that is losing confidence with long-term yields pushing at their highest in more than two decades, and at the same time, economists giving counsel that they don't think that they are fully confident in this Fed either. Director Hassett, do you still have full confidence in Fed chair Walsh?
Of course. And there's a natural transition time where a new leader comes in and tries to get the house in order. I think that, you know, there were three dissents, but that happened to Jay Powell in the past as well. The dissents all came from regional Fed presidents, not from the actual governors. So it sounds like he's got his house in Washington in order, and we'll look forward to seeing how it's going forward. But I think that his job just got a little bit easier if you looked at the PCE data that just came out, which was actually a top line of negative, which is very unusual. Core dropped a lot. And so I think the inflation numbers have continued to head in the direction that we saw with the previous CPI number, which is, you know, an object of the Fed is to get those numbers down.
And we heard from him after the last CPI report not to look at one set of data discreetly. But picking up on what Dan was asking about just a moment ago, there does seem to be some concern here that there is no clear reaction function at this time, no clear analytical framework from this Fed. Is that a concern to you? Is it something that you think that the Fed chair has to work to remedy here in meetings ahead?
Well, again, I think that the Fed's old political reaction function was based on outmoded science regarding the Phillips curve. That if you get a little bit of growth, then you gotta hike rates. But that model assumes that the growth is coming from demand side factors. So I think what Kevin Walsh has done is he's brought in a brain trust of some of the smartest people on earth to help rethink what's, given all the science we've had on what happens with supply versus demand shocks, what should the Fed be doing? And it's a lot different than what the Fed staff has been advising people to do over the last few years. And so I would say we're gonna have a new, improved, and much better reaction function, and that's happening relatively quickly because Kevin's put some of the smartest people who have been working on this their whole career, like Karen Dynan at Harvard, to help him think about how to do that.
He might have his house in order, as you say, Director Hassett, but again, it's a market that is not in order. It is the long end yield, the thirty-year yield, which yesterday closed at its highest since 2007 at 5.20. Are you concerned that this is a Fed chair that does not have control of these markets? Because, Director Hassett, that makes your life much harder. It makes this economy and consumers who wanna buy a house, it makes their life much harder. And you look to at the cost of servicing debt.
Look. The bottom line is that Kevin Walsh was there before. He's an incredibly experienced guy. He's well respected and well liked by his colleagues, even the Democrats up on the board, and he'll do what the data say he should do, and he'll be independent. And the fact is that the data right now are taking the pressure off the Fed, and I think that the markets will get around to seeing that. Maybe they need another couple of prints like the one we saw today from PCE. But we should also talk about the GDP numbers today a little bit because I think that they've been miscovered quite a bit. The fact is that final sales were up almost 4%. We had a big boom in consumption, a big boom in investment. We even had big positive housing numbers, and those were offset in the bottom line because the capital spending that we're doing is imported capital goods, which you subtract imports from that. And then also because of technical changes in the price of oil, they revalue the oil inventories that subtracted from GDP as well. So I think that the final sales number of 3.9 is really what I would say is the signal. So it's not a half full glass of GDP. It's a full glass.
Full glass of GDP. I wanna pick up on something you said. You've known Kevin Walsh for an awful long time, Republican policy circles, and certainly your time together. And I'm curious. I think an open question here is, is Kevin Walsh a hawk or a dove? What would your answer to that question be?
I think he's a realist, but he's really serious about getting inflation back to its target. That's his job. He's a very, very pragmatic person who understands the responsibility of the Fed is a dual mandate, and the part of the mandate that's been out of control recently is inflation. And most of that was not the Fed's fault. Most of that happened, or at least not directly. Because remember what happened was that right after Joe Biden took office, we had this massive stimulus even though the COVID episode had mostly ended. And that massive stimulus was like a helicopter drop of cash into the economy. The thing is that the Fed was in denial that that would cause inflation for almost a year, and that's how inflation got out of control. But the stimulus that actually caused the inflation was the reckless spending by Joe Biden. And, you know, I can promise you that this administration is not gonna do anything like that.
I mean, again, Director Hassett, I would point out that we've had a lot of stimulus from this administration as well, be it COVID checks themselves or what we've seen in the one big beautiful bill. Even so, it is a president who yesterday echoed what you're saying, his confidence in Chair Walsh, at the same time said that it's a difficult task because this is a Federal Reserve who is political. Director Hassett, who is political at the Fed? Would you view the three dissents as we saw in favor of a hike? Were those political votes by those FOMC members?
