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Welcome to foxbusiness.com.
As we continue our discussion now with president.
Lester George of the Kansas City Federal Reserve on monetary policy and the economy.
President George -- gets picked up here on.
-- some of the conversation.
And within within the Fed on the course of quantitative easing.
If you have read analysts and read reporters.
Sounded that he was.
Fairly hawkish if you will in May and June on on winding down -- the asset purchases on tapering.
And then when we were all in Boston last week.
Some analysts said that his comments sounded.
A little more dovish that he seemed to be.
Backing away perhaps from his from his previous comments what what did you make of his comments in Boston.
Around these issues of that you're going to be challenging because these are unconventional policies our experience with those big markets experience with aids.
Is is new territory so as.
The communication unfolds and we seek to continue to clarify.
I think the message is clear which shows the economy continues to recover.
We are seeing improvement in the labor markets.
And given the very extraordinary and aggressive nature of monetary policy now is a good time to talk about.
How the future mindful to prepare the markets prepare the markets and I think the markets have they have begun to take -- -- into.
Anticipate -- some of their colleagues have felt that with the recent rise in spin longer term interest rates is that the markets over reacted.
Some of your other colleagues specifically president lakers' hopes that have said no no you -- -- that this has been an appropriate response by the markets what what's your view on that.
Well I think it's to be expected that when the tone or policy changes.
There is an adjustment process and the markets reacted those rates have settle down a little bit.
And so again I think that was -- necessary communication.
And I think as we go forward the markets now we'll have.
Do you feel though that that the chairman.
Is committed to this path you said in years -- in a speech in June.
That adjustments today can take a measured pace says the economy's progress unfolds it would be.
They import it it would importantly to.
It would importantly begin to lay the ground work for a period when markets can prepare to function in a way -- is far less dependent on Central Bank actions.
-- are you are you.
Do you feel that the chairman is to this helping to prepare.
The way forward do you have any doubts about his commitment to that.
Chairman and made his comments in the press conference the committee.
Will be meeting again and a couple of weeks to talk about the data we've seen to talk about the next steps to policy and so.
That is a decision that is made.
By the committee and you can expect that.
As we talk about it there will be diversity of views at that table but.
The outcomes I think will continue to be data driven continue to be supported by what we see unfolding in the economy.
-- about the other piece of this month of monetary policy the other tool in the tool box that you have which is the short term federal funds rate.
If -- -- a lot of conversation about the timing of tightening of starting to raise the federal funds rate down the road.
Where do you stand on that -- that we could have an inside joke about which blue dot you are there have frozen for a video forecast but.
Where and when do you think that it would -- of the appropriate to start to raise the Fed Funds rate.
Well I have over the past year expressed some of my concerns about being at zero interest rates for a long time and the potential for distortions.
The committee has been clear I think and it's communication with its thresholds.
That it will be waiting to see and unemployment rate in the neighborhood of six and a half percent assuming that inflation.
Doesn't get beyond two and a half percent before it makes judgments about -- short term interest rates.
So when you look at forecast for that that again will be a function of how quickly the economy response but.
That could be some time after.
The end of asset purchases do you agree with that.
What that you know what I -- where does that.
Until the economy.
Continues it's recovery process it's -- that process policy will have to be accommodated that I think it's appropriate.
What I have expressed concerns about is really the extraordinary nature of this and some of the distortions that can arise.
When you are at zero interest rates so again my goal is to be gradual to let the economy move through this but not to stay too long.
And too -- with the kind of policies and -- So what are your concerns.
What kind of disruptions are you concerned about potentially in all of this and in particular -- Do you have any concerns about inflation and inflation expectations you've talked about that as well.
Right we look at inflation readings today for example.
Those look to be.
Moderate and I look at -- inflation expectations those seem to be.
In a good place.
But that does not remove the risk that exist in the longer term given the amount of accommodation and we'll have to be watchful for.
The future of inflation the other distortions that I worry about -- when the Fed is heavily buying in the markets when.
The incentives are around moving into riskier assets.
That we watch carefully what's happening with distortions in the market -- pricing of risk.
And other things that it could affect long term stability in the economy.
Just a couple other quick questions we have some new data points on the economy yesterday and today.
Retail sales ex autos look a little soft business inventories slipped a little soft.
The industrial production number today.
Looked and mixed and that's so so wording -- -- economy right now and what -- hasn't changed you're forecast.
If it is not change my views and one of the things I've observed during this recovery and this is true -- really any recovery.
You will get mixed data and so you have to be particularly careful that you don't get too focused on.
Near term data points which began to look past those and I think.
Currently in my own forecast as you look out over the next couple of years.
I think we're on the right path to continue.
-- -- We we have so much more we could talk about but let's let's just -- we wrap up on the outlook for Jackson Hole out of the conference is coming up found end of August.
What's the agenda and number one number two.
For the first time then.
22 years the chairman of the Federal Reserve is not going to be there making the opening statement make making a major speech.
Well -- Program is well underway and our objective for the Jackson Hole symposium every year.
-- to think carefully about.
Issues that are timely to central bankers to policy makers to make sure that we convene.
Policy makers to engage in those issues to shed light.
-- on those issues so I think this year we are.
Well positioned to continue that tradition.
With the symposium.
The chairman will not be there and it we will miss him.
And I'm sure others on the program will miss him to.
We're looking forward to.
You're not you're not concerned that you're that the Kansas City fed has been.
Vocal many time inspectors you know an African descent.
In policy that sermon as supported -- -- worried that this is.
Personal or if he's taking against the Kansas City better paid back you know I'm not gonna come and.
-- -- The diversity of views is really part and parcel of how the -- -- operate so.
The chairman's absence there we will continue to be candid and honest.
And welcome him back at any point.
Will he be back next year do you think I don't know I don't know what the chairman's slams -- -- I.
Well president -- to Georgia the Kansas City fed thank you -- we have -- Being generous with your time today and and look forward to seeing in Jackson -- aren't seeing there thanks thank you.
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