Kevin Warsh, Hoover Institution distinguished visiting fellow and former Federal Reserve Governor, joins 'Squawk Box' to discuss the Fed's inflation fight, state of the economy, rate path outlook, and more.
Questions asked in this interview
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0:49Why don't you explain what you mean by saying this goes against what the Fed had been saying up to this point with their policy?
2:36What do you think about the dissent there was at the last meeting and do you think there will be more at this meeting?
5:43I saw a number like a trillion dollars. Have you looked at that?
7:19Is that a reflux and after effect of what happened in the Great Recession in the financial crisis and the moves, the extraordinary moves taken to try and normalize and stabilize things?
Revenue, though, was $876 million and the street was looking for $900 million. Harley lowering revenue guidance for the full year.
We're a few weeks away from the Fed's next meeting and our next guest says that he was puzzled by the central bank's 50 basis point cut because he thinks it contradicts everything they previously said about their policy. Joining us now is former Federal Reserve Board Governor Kevin Warsh, Distinguished Visiting Fellow at the Hoover Institute.
They had different theories, Becky, about cause of inflation, the measures they use, and people in financial markets and media have tried to follow those. They said for a long time, you'll recall a few years ago, they were flexible average inflation target. So, inflation, when it was at 1.7, they said we'll get it a little higher and try to balance around 2. They got rid of that idea without replacing it, so they don't have a broad new strategy. Then they said what really matters is core PCE, that's what we should focus on. It is running at around 2.7%, nowhere near the 2% range. About a year ago, they said, well, the best measure of inflation is now what they create a new category, they said it was core services ex-housing. That's in the 4s. Previously, Janet Yellen and embedded in the Fed model said what really matters is wages. We need wages to run at 3%, consistent with inflation around 2%. Wages running around 4%. All of this isn't to say there is -- all this is to say they don't seem to have a serious theory of inflation, that is theoretical and empirical. It is not obvious that they acknowledge what their role is in prices. Instead, it is something to do with wars and pandemics. I think in a world this dangerous, an economic policy where fiscal policy is irresponsible, central bank needs to be very clear about its reaction function, be clear about its goals and not look like it is lurching. That's what put us in the mess we have.
I understand your point. I will say I can understand their perspective if they're saying, look, it was inflation, inflation has been coming down now, maybe we need to pay attention to our other mandate, the jobs market. However, the jobs numbers have been better than anticipated too over this time. I can understand moving around and saying there are things more important at different points in time. What do you think about the dissent there was at the last meeting and do you think there will be more at this meeting?
Yeah, so it is a fair point. So what you're really saying is they have claimed they're data dependent and when times change, they should change. Of course that's right. I can't argue with that. The data since early part of the summer has gotten better. The economy has gotten stronger. The broad sense of the data is the economy is in better shape.
Warsh, K. (2024, October 24). Former Fed Governor Kevin Warsh: The Fed doesn't seem to have a serious theory of inflation [Interview transcript]. CNBC Television. CEOInterviews.AI. https://ceointerviews.ai/interview/1344985/
MLA
Kevin Warsh. "Former Fed Governor Kevin Warsh: The Fed doesn't seem to have a serious theory of inflation." CNBC Television, 24 Oct. 2024. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/1344985/.
BibTeX
@misc{warsh2024_1344985,
author = {Kevin Warsh},
title = {Former Fed Governor Kevin Warsh: The Fed doesn't seem to have a serious theory of inflation},
howpublished = {Interview transcript, CNBC Television. CEOInterviews.AI},
year = {2024},
month = {oct},
url = {https://ceointerviews.ai/interview/1344985/},
note = {Speaker-attributed transcript with timestamps}
}
