S3 Ep 5: Anticipating FOMC's Next Move with Claudia Sahm

Great. Happy to be here.

Thank you.

Right. So Kevin Walsh came back to the Federal Reserve. He had been there as a Fed governor earlier, and has been in the years since he left the Fed in 2010-2011 pretty critical of the Fed. So we know a lot about what Kevin Walsh thinks the Fed does wrong. And so he comes in as Fed chair, a bit of a regime-change Fed chair, and has come in, you know, really saying he wants to change things. He created all these task forces on issues that touch almost every aspect of monetary policy. So I would say at this point, you know, he's planted the flag that he wants to reform the Fed. He wants to change the way it does things. Has he changed much at the Fed so far? Not really. But that's actually a sign of good leadership, right? Like he's trying to gather information before he starts making changes. It's also a sign of reality, because most of the things he would like to change at the Fed require the committee to agree, like a majority. There are very few things that the Fed chair can do unilaterally, decisions particularly in policy. Policy really does require, you know, for monetary policy a majority of the Federal Open Market Committee, and for, you know, bank supervision a majority of the board in DC. So he can't do a lot on his own. The one place where the Fed chair does have a lot of leverage is in communication, and he certainly has approached his role differently than, you know, recent chairs. So the press conferences are different than they've ever been, right? They started under Bernanke. Bernanke, Yellen, and Powell all did press conferences. They each had their own style. But Walsh's style is really distinctive, and I think has made the press conferences really harder for anybody to interpret. But I look at this as a work in progress, right? And I think there are a lot of signs that Kevin Walsh is growing into the role, getting better at it. We're getting better at understanding him. So, you know, it's been a little bumpy at times, but I think he's, you know, and policy is happening, right? Like it's not been that disruptive, but it's really too early to tell how he's going to change the Fed.

Communication at the Fed has many aspects to it. The one Walsh has very much focused on is what the Fed chair says, how that affects what market participants do in terms of how they, you know, price interest rates or options on the federal funds rate. He's really focused on this, like what the Fed says and how markets respond to that. And his argument for saying less, and in particular, he wants to give much less guidance on what the Fed might do next. Right? They decided whatever they decided. He doesn't want to talk about what they might do next. This is referred to as forward guidance, but he thinks of forward guidance very expansively. Like he really just wants to say as little as possible. I think the idea of the Fed doing less forward guidance is probably his least controversial opinion, right? Like right now the federal funds rate is not at zero. Right now the Fed has lots of optionality. They don't need to give specific guidance about the future to really affect markets. So it's like, okay, fine, we won't give anything specific about what we're thinking about doing with the funds rate. But then he kind of rolls it back to like, I don't want to talk about the economy. I don't want to talk about even like what we just did because you might infer from it what we're going to do. And at that point it starts to get a little squirrely. But he's trying to have the Fed not affect markets so that the Fed can read markets. Now I have written, I think, multiple pieces on my Substack about why I think what Kevin Walsh is trying to do is not just a bad idea, it's not going to work, right? So giving financial markets a sense of how you view the economy, how you might respond to different shocks, like the reaction function, is really useful. And there's a lot of research showing that as the Fed has developed its communication, it helps the transmission of monetary policy through financial markets be more efficient. You know, and because the markets understand, so then they can see the data, they don't have to wait for the Fed to come in to change rates because the market kind of anticipates and they can start moving. And monetary policy can work more quickly if financial markets can really interpret and, you know, move the ball forward. So I think there's a lot that we've, you know, yeah, really strict forward and sometimes gets you boxed in and that's a problem. So okay, don't do that, but that doesn't mean like stop talking. So there's the efficiency piece of it, and then I think the other thing is that markets are going to find a way to get the information. If Kevin Walsh won't talk, they'll go find some other person on the committee that they think does a reasonably good job of talking, you know, kind of giving the big picture. I think sometimes people, you know, people think of Chris Waller as that because, you know, he does talk. Like there's no... and so it's like they'll go find a different person on the committee or they'll make guesses and maybe the guesses will be bad. I mean, again, this is the efficiency piece. And then I think there's this other kind of dark outcome of finding ways to get private information, even if Fed officials aren't trying to leak the information, like if they're at an industry dinner or, you know, people will really try to find a way to learn what is the committee really thinking. And that's, you don't want that, right? So it's like kind of just be forthright. You don't want to box yourself in a corner. I understand that. You don't want to make promises about what the committee is going to do in the future, but just give people a sense of like what you're thinking. So I think he's very gradually, like he's done more, especially like at Jackson Hole, to explain his view on the economy, explain what he's thinking. So I think we're going to get there, but it certainly has been disruptive. And then the last thing I'll say on communication, and this is something that has been very important for me, is there's a whole piece of Fed communication that's about like markets, like communicating with markets and transmitting monetary policy. But really, if you go back in the history of the Fed opening up in terms of its communication, a lot of it has been about accountability. Members of Congress who wanted to know like what is the Fed doing and thinking. And you know, like so if you don't talk, you're not just losing markets, you're also losing people, members of Congress. And I mean, the Fed does need to be accountable. They need to explain what they're doing, how they're thinking. Actions speak louder than words, but words matter too. So I just, I think, I just, Walsh is fighting a battle. I'm not sure. Well, first of all, I don't think he's going to win, and I don't think it's a very good battle to be going down this route, but we'll see. We'll see what happens.

No, I do not. I know there's been a lot of comparisons of Walsh to Greenspan. Walsh is his own person. He is not a typical central banker. I think the, and maybe I think of it not just in communication style but also in terms of like, Greenspan was the ultimate data consumer, right? And Walsh makes fun of data, like he keeps, you know, so like anyway, so there's a lot of differences. But even I think like with Greenspan, you know, we often think of Fed communication opening up under Bernanke, and there certainly was a lot coming out of the global financial crisis where that's when the press conferences started, and that's when, you know, they expanded the summary of economic projections to have the dot plot. And like so there's a lot that happened starting with Bernanke in terms of opening up communication. But really communication at the Fed started opening up under Greenspan, and some of it again was Congress, you know, we need to know more. They started publishing the transcripts with the six-year lag, and that was very much goes back to a member of Congress. But also, in one of the hiking cycles, Greenspan started talking more about not just what they did, but what they might do, right? Because in a hiking cycle, you really don't want things to get out of hand, right? So giving some sense, are we doing a modest adjustment, a gradual adjustment, or do we really need to move rates up, right? And you wouldn't, you know, under, there was a period under Greenspan where they did a very gradual increase in the federal funds rate, and there was communication, they said things to kind of set that up because you don't want people at that time to jump to the conclusion of, oh, this is Volcker again, like we're, you know, the Fed's going to raise rates because that, you could get a lot, you could tighten things up a lot, raise rates a lot when the Fed didn't think they needed to do that. So even Greenspan spoke when it mattered, right? And so I think that's where it's, I can see some parallels, but I really kind of bristle at comparing Walsh to Greenspan or to Volcker, or like he really, Walsh. And that's, you know, every Fed chair has their aspects that make them unique.

Yeah. So this, the idea of the inflation-growth trade-off, this goes, this is actually one of what I find to be one of Walsh's more fascinating viewpoints. He's been really adamant that like there's not a trade-off, right? And that you can, you know, not just on growth, but also he talks about like with employment, you know, he doesn't see the dual mandate as in conflict. And I kind of take that as not just like he doesn't see it in conflict right now, but just kind of like conceptually he doesn't see the trade-off. Now, I am not a Phillips curve diehard, right? Like I, you know, was pretty critical of how some in kind of academia or kind of around the Fed used it during 2022. And I think there are times where the trade-off might be weaker than other times. But the idea that like there's no trade-off kind of gets me wondering exactly how Kevin Walsh thinks monetary policy works, right? Because I mean, when you raise interest rates, the standard story is you're raising interest rates to try and pull demand out of the economy. Well, that's, you know, you may not throw the economy into a recession, and maybe the economy was overheated and you needed to pull out some demand, right? Like it's not like the trade-off is always bad, right? But it's like you're pulling out demand, you're making consumers more price sensitive, that, you know, businesses can't pass on like costs to the same extent. So inflation softens. So I actually, I'm a little puzzled about like how the mechanism is even working here. Like what are the Fed's rate increases doing to get inflation down if it's not somehow pulling demand out, right? Like anyway, I'm just really fascinated by the idea that like there's this trade-off. So I question, I don't think the trade-off is stable, right? Like my big problem with the Phillips curve is not that like, oh, there's a trade-off. It's just that thing is so unstable and largely because you have different kind of supply shocks hitting the economy. So there's not like, there are other variables that are really important. So I wouldn't want to be too like calibrate policy off of a very specific assumption about the Phillips curve. But you know what I think of the Fed doing with their current rate increase, and we're in a little bit of an in-between phase because like we've heard Kevin Walsh at the press conference kind of talk about what the committee is thinking, but we had to wait three weeks to get the minutes from the committee. So, and then we got the dot plot. So it's a little hard for me to know exactly what the Fed is thinking. But I think the idea that the Fed did a rate increase, the summary of economic projections, most Fed officials are looking for maybe one more rate increase this year, maybe two more rate increases, but like a small amount of rate increases. That it's more about taking out some insurance. Like inflation has been elevated. We think inflation will probably start moving down next year, particularly after energy prices, if there's a resolution in the Middle East. So like there's energy price effects will wane in all likelihood next year. Tariffs could, you know, be at their peak and so those effects wane. So the main reason the Fed thinks inflation is coming down next year is not about their rate increases. It's about these temporary factors are going to unwind. And also AI, which really is more on the, is a demand factor, not supply like energy and tariffs. It's just that like the AI buildout, it's going to continue, but its effects on inflation aren't going to broaden out. Like it's not going to get worse, right? So that's the main story about why the Fed thinks inflation is coming down. And I think they have gotten worried, as I certainly did in the recent weeks, that with progress very much stalling out in the Middle East and frankly energy prices rising again and distilled products prices rising even more, like diesel, and the trade war with Canada, like maybe we're not at peak tariff rate. Like there were just, there have been events that kind of call into question that baseline of inflation and with energy kind of make you worry about second-round effects. Like the longer energy prices stay high, it can bleed into a lot of other goods and services. So it's just kind of the Fed reacting to all of that. The risks look worse with inflation. The chances of the bleed-through are getting larger. So you just do a little bit to just try and keep a bad situation from getting worse, right? That's what the Fed's rate increases are doing. They're not trying to get energy prices down. They're not trying to completely, you know, overwhelm the tariffs and they're not trying to stop the AI build. Right. But just because they're not trying to stop the AI build doesn't mean that this won't have some effects, particularly if they end up having to do more than what they're expecting right now.

Yeah. So the data in hand, particularly if you think about the inflation data that we have through August, I think you could say they probably hit the bar for improvement. I know Walsh actually says he doesn't see a lot of improvement in the inflation data, but I think we've seen, particularly relative to the spring. So the data on their own probably would have kept me in hold, right? But the Fed talks about when they do their, when they think about policy, they think about the data, the outlook, and the risks to the outlook. And for me, the really deciding factor to go from thinking a hold was appropriate to a hike was appropriate was on the risks, right? And so just seeing the headlines of what's happening in the Middle East, seeing what's happening with Canada and the tariff, and also like the AI buildout still going strong, right? Like, and so I think it was almost those headlines and the reality of what was happening, and also just knowing the longer these energy prices stay high, the greater the risk is that this shows up in other parts of inflation, like that it bleeds out into other inflation. So for me, it was really about the risks and not about the data in hand. And you know, the connecting tissue here is when the Fed makes a decision about what's the appropriate federal funds rate today, they need to be thinking about what does the economy look like nine months, twelve months from now. And I got to the point, and I think this is clear, the committee got to the point too, that they could no longer say, I'm confident that with the Fed funds rate where it is right now, inflation's coming down in the next year or two. So it's that confidence piece, the risk piece. That's for me what really switched from hold to hike. I think it will be interesting to hear from Fed officials as they come out of the blackout, like what they individually, I mean, we knew there were already some Fed officials who wanted to hike in July, right? So they have, you know, we've heard a lot from Logan and Kashkari and Hammack about their views. It will be really interesting to hear from, say, Williams and Cook and Waller, like why did they vote for the hike. Right. And we'll just have to see, but for me it was about the risk that was the driver.

Yes.

Right. So when I talked about my reason for switching from a hold to a hike, it was a lot about the risks and the uncertainty with the inflation coming down. A different story, and would be very consistent with the pieces of information that came out of the Fed this week, is if you see growth has strengthened and you see the prospect of growth strengthening, and the forecast really did show from the officials a lot of people raising their growth forecasts, then one reason you might think the Fed needs to raise is because in a stronger economy, the interest rate that's kind of the neutral rate, the one that kind of balances out supply and demand, it can be higher, right? Like higher interest rates can be a sign of a very healthy economy if it's like growth and productivity. So there could be an argument if you think things are really strengthening, then you could have a view that the neutral interest rate is higher, and so the Fed just to like as a reflection of a stronger economy needs to raise the federal funds rate because if they stand still, they actually are, you know, being more accommodative, right? Or like it's, you know, so now this would have been like looking at the dot plot, looking at the projections, I was like, this could be a way to frame this, and the growth is stronger. And so then it's, you know, the economy not only can tolerate a higher interest rate, it kind of needs a higher interest rate just to stay in balance, right? But we went into the press conference and, you know, a journalist kind of trying to, you know, pose this question because it seemed like this could be plausible, got kind of a disappointing answer from Kevin Walsh, and that he's just like, yeah, the neutral rate, it's an academic concept. Uh, we don't... Oh yes, oh yes. It was kind of wild. So yeah, he's like, oh, it's an academic concept. I learned about it in school, but it doesn't affect the operation of monetary policy. And you're like, interesting. Wow, okay. So like, you know, now to be fair, you know, Powell had one of his first speeches was on kind of the navigating by the stars, and he did kind of, it's like these are, I do think the neutral rate is very useful in the operation of monetary policy, if nothing else, as a concept. Like you're trying to think about what is that interest rate that balances the economy, and it's, you know, we never see it. It can, I do think there's a difference between what it probably is in the long run and what it is currently, but it is like some kind of anchor, and you don't want it, you do all these estimates, and I think Powell was one that, you know, kind of made sure people didn't take the estimates too seriously, right? It's just like me being worried about getting too religious about the Phillips curve. I mean, this thing isn't stable. So conceptually it's helpful, but you don't want to tie yourself in knots over a specific number. I think that's true with the neutral rate too. But the idea that I like, I really kind of go back to like, how is Kevin Walsh thinking about what the federal funds rate should be if the neutral rate is not conceptually a useful thing? So it was kind of a funny, we try to keep a sense of humor here, right? Like you're trying to kind of tell the story from the dots and what it could be, and then the press conference, it's like, nope, it can't be that. So, and it's like, we'll see. So I do think there could be, there absolutely could be some members of the committee that go to that explanation. It would make sense, and in the dot plot we did see things like the long-run federal funds rate dot did move up. So that is consistent with people kind of raising their neutral rates, but yeah. So it's not, again, it's not the, like strengthening the economy is not the direction I would have gone for like why they're hiking. I just, I think inflation is high and it's hard to be confident it's coming down. And I honestly don't pin that on the growth of the US economy. I pin it on a lot of really bad supply shocks.

No, I think the neutral rate has been rising since the pandemic. The US has had economic growth coming out of the pandemic was really good. And I don't, I think, you know, it's possible that we're going to have even more growth, like AI is coming or whatever, but I think we had some policy, like coming out of the pandemic, fiscal and monetary policy really supporting a rapid recovery. There were also aspects of the pandemic itself that did that. There was also a period we had very low unemployment, probably, I mean, frankly, probably too low in terms of there were labor shortages. There was quite a bit of automation that was done in that period. So labor productivity came up. The dynamism in the US economy coming out of the pandemic also involved a lot of people switching jobs and moving around. So I think we really did a good job of reallocating, like getting people in a place where they're more productive. So that had effects, and you know, now we're in the last really two years have been a pretty remarkable capital expenditure boom. It's not just AI, but AI is definitely important in that. And business investment is like the gift that keeps on giving, right? Like it shows up in growth in GDP when the investment happens, but that business investment turns it, like it's giving, it's like more tools and equipment and like capacity. So then it can actually help boost productivity going forward. So I think there has been a real, the US economy came out of the pandemic much stronger even than it went into it, and it was in a pretty good place. So then to me it's like if the economy is stronger, well, interest rates rising, that's a good thing, right? Like we don't have to be afraid of higher interest rates if the economy is strong. Now I don't want to say that that's the only reason interest rates have gone up, and I do think like debt sustainability is an issue, and like there are definitely aspects of the higher interest rates that are a problem in the US. But yeah, I think that the neutral rate has come up, and that is such a blessing. Like we are not talking about the zero lower bound anymore. We are not talking about like an economy just kind of scraping the bottom. We're talking about inflation we can't quite get back down to target. That isn't, you know, there's always going to be a problem, but I think it's really remarkable how much the US economy has recovered from, say, like this does not look like the US economy after the global financial crisis. This is a much better place.

I agree with the Fed when they talk about the labor market being relatively balanced, so that, you know, job creation is keeping up with the inflow of workers into the labor force. So for as far as the Fed is concerned, I think the labor market is about as good as it gets for the Fed. So in a cyclical sense, aggregate cyclical sense, labor market looks pretty good. Now the US labor market, if you think more structurally, has gone through some really big changes. And, you know, let's set AI aside, like it has not had the effect, whatever effect it's going to have, had very little effect at this point. But the piece that has just been massive have been the shifts in immigration. There was a period coming out of the pandemic where immigration in the United States was very high, and we had a lot of job creation. It made it hard to read the cyclical indicators, like the unemployment rate was rising for good reasons. The Sahm rule triggered, and it was not about the economy heading into a recession. It was just that we've got like this big inflow of workers, and it takes time to catch up because then eventually the unemployment rate went down. But then even before President Trump took office, but especially once he was in office, immigration has plummeted. And so we have, and immigrants for some time have kind of been on the margin the growth of the US labor force, right? That's been kind of a feature. And so right now the labor force in the United States is hardly growing at all. So that means on jobs day, well, like the labor force isn't growing. Job creation that's needed to balance it, the break-even rate is really close to zero. So we end up with this what feels a little like whiplash of like we'll get a negative, you know, jobs will actually contract and everyone's all worried, and it's like it's not a problem like the Fed would solve in terms of the economy is going to a recession. It's just we have so little labor force growth that our month-to-month it kind of bounces around between some negative number and some positive number, and that is so unusual for the US. So like I don't think the Fed need, like they always need to keep an eye on the labor force. I agree with them that the problem right now for the Fed is inflation and not the labor market. But there's really big stuff going on under the hood in terms of the US labor market.

I wouldn't say that the Fed is a structurally different mix in the economy. I think, you know, anytime you see a shift in policy, right, and we saw the Fed had been on hold all year, you know, with only a few dissents towards a hike, and when they met in December, all 12 voting members voted for a hike. Right. And so that means you ought to see if we've been on hold and it's been a pretty big majority to be on hold and it has been for months and months, then when that September summary of economic projection comes out, it better look different, right? Because otherwise it's going to be like, why did you change policy? So there, and the SEP can be... So I think the summary of economic projections, to me, I'm not sure it's the best communication tool. I'm not sure what's better, right? Like I think it has a real place and a usefulness, but I think it is an incredibly good internal tool. Like people do this individually, maybe with their staffs, like, you know, if they were at a reserve bank, they're kind of thinking through like what do you think is happening in the economy, and that path that gets written down for the funds rate, that's like in the dot plot. It's not a forecast of like what that Fed official thinks the funds rate is going to be in a year. It's what do they think is appropriate, right? Like what is it that like it's kind of them being Fed chair for the day as if the Fed chair like, you know, decided it all. So I think it's a good exercise in like what will it take to get inflation down but still keep unemployment relatively low and do you know what else is moving in terms of the growth rates. And so it's, and they do this at every other meeting so you can kind of track your story and how it's changing over time. So I think it's a really good exercise for the individuals to do before they meet. But it's a little, but in the end like it's a committee decision and people can have, you know, show views in their dot plot and then go to the meeting, hear all the different views, you know, arguments and change and vote differently. Like it's not a, the SEP, we don't see it until after the decision, but it really is more of like an input into the process. And so it can be a little hard to parse. So like I spend time with it. Like I think there's a lot of information. It's pretty rich, but when it gets confusing, I just set it down because like it's too, like I, and then I'll be like, I just want to hear some people talk about their messages. So I wouldn't, so you're absolutely picking up on there was a definite shift. The growth story, which actually I was a little surprised. I mean, I had, I actually do a shadow SEP. Duke University puts together one that John Cochrane runs. So I've been doing those for the last couple of years, but it's just kind of interesting to see how the officials, but yeah, I wouldn't say things have fundamentally changed. It's just they're reacting to some, you know, some differences and maybe it is the growth story and maybe it is just the R-star. So I have to see. I'd be surprised if that's everyone's explanation, but it is, you can see it, you could make that story, sell that from the SEP. Like it does kind of look like that.

Yeah. Okay. So first let's do the interest rate moves and that, you know, doing the work is an important question to go through as well. So the, and I'll even just focus in like what was the 10-year doing on Fed day, right, as we were getting the announcement. So we'll just kind of zoom into this really small moment in time and definitely during, from the time the Fed made their announcement and particularly once the press conference started and then Kevin Walsh started talking, the 10-year moved up. Like in that period also you saw the federal funds rate futures and, you know, so it wasn't just about the 10-year, also at the short end things were moving as well. So the 10-year moved up, so it was definitely responding to, you know, the Fed raised rates. I think any, I was actually kind of impressed Walsh pulled it off, but I think he ended up being even more hawkish in his remarks than the SEP. I'm not sure he intended to be, but he definitely was. So rates are moving up, but this is where like kind of thinking about what are markets reacting to here. At the same time, the break-evens, the 10-year break-evens were falling. So in terms of like, there's a lot of people that say, oh, you know, the break-evens have been, inflation compensation's been pretty stable. So, you know, the higher rates are not about inflation. They're not about energy. I mean, you watch like oil moves up and the 10-year moves up. So I mean, there's clearly some relation, but I think what has been happening, and, you know, the kind of hawkish Fed reinforces this, is well, if you think the Fed or other central banks, but we'll stick to the Fed. If the Fed is going to really fight the inflation, well, energy prices go up, that does push up inflation, but you put that in real yields because you've got the market saying, well, the Fed's going to raise the rates, right? It's not showing up in inflation compensation. Like the energy prices really are, I think, an important driver of what's happening with the Fed or other central banks. But it's like if the Fed act, if the markets think the Fed is going to step in and respond to those higher rates or respond to whatever is causing the higher inflation, then the interest rates go up and it's the real yields that go up, not the inflation compensation. So it is kind of interesting to watch that. So I do think that there's an important aspect, and I'm not going to, like I don't know, so I'm not going to pretend to parse out exactly like the 10-year rise since the beginning of the year, what comes from the central banks and what comes from the Fed and what comes from other factors, but it is certainly in the mix. And I think any, I mean, I think for a lot of these big questions, we have to go back to the drivers of the inflation. So yeah, what's happening with energy prices is such an important, like it's going to, energy prices shift around, it's going to shift Fed behavior and it's also going to get reflected very quickly in terms of market interest rates. Now that doesn't mean that this is the only thing that is going on. I do think there have been growing concerns about fiscal sustainability, the 30-year, like longer out, I think there are some concerns. So there's a, in the mix. And I don't think all the reasons rates are going up are kind of the happy story of like growth is stronger and, you know, the real yields. There's other pieces in the mix. So that's a very rough thumbnail of what I think is happening with the interest rates. Back to this question of can the bond market do the Fed's job for it? No. The Fed, you know, the monetary policy works through financial markets. Like the Fed's tool is an interest rate, a very short-term interest rate like between banks, right? So anything the Fed is trying to accomplish, it is going to do it together with financial markets, right? So the Fed can't, like if markets think, you know, the Fed talks and it's like, oh, we're going to be tough on inflation. We're going to be tough on inflation. And so then markets like, okay, all right. So like, you know, two-year yields already start to come up. So like in anticipation of a Fed that's going to raise rates. Well, then if the Fed shows up, and this was kind of a really, this was like some of the tension at the July Fed meeting, right? It's like you've been talking tough about inflation and then you held again. Yeah. What do you... And Walsh kind of went to the like, well, you know, we didn't really hold because, you know, financial market interest rates are up. And you're like, whoa, this is not like, this is not something you should be saying. It's not correct. And of course then markets are like, oh, well, if you're not really serious about raising rates, we're not going to put bets on that you're going to raise rates. Like there actually has to be like, you can do the communication. You can set up the expectations, the Fed can set up the expectations, but at some point if they don't walk the talk, the markets are going to like ignore them on this.

Right, and they're so like you can't like do it for you. But at the longer end, interest rates, which frankly are very, I mean, the more impactful for economic activity, the Fed has an influence on longer rates, but it is not determining longer rates, at least in normal times. So there's a lot of other factors. So, so in some sense, if if interest rates are higher for these other reasons, yes, that can slow down economic activity and maybe the Fed doesn't need to do as much, but you can't like let the markets do the work.

Yeah, it's reputation risk and it's also like the Fed actually has to do its job. Like financial markets are not trying to figure out what is appropriate monetary policy. They're trying to figure out like what the Fed is likely to do and then and then they have to in other settings think about what's the right cost of capital, right? Like isn't just that isn't just about the Fed, but I mean like there is a more complicated decision, but at no point is there someone in financial markets that's like what is appropriate monetary policy? What what is accountable to Congress? Like that's not the market's job. That's actually the Fed's job. And so they have to do their job and but we're all, you know, you want to be like working together and pointed in the right direction, but the idea that you just like offload the stuff to financial markets is like that's not how policy is done.