September 17, 2025 • 17 mins
On Wednesday, the US Federal Reserve cut interest rates by 25 basis points, a move intended to address concerns about cracks in the labor market. It was a highly anticipated, modest decision from an agency that has been under increasing political pressure from President Trump to do a bigger rate cut.
On today’s Big Take podcast, Fed and US economy reporter Amara Omeokwe and host David Gura discuss what the rate cut says about the state of the US job market, the broader economy and the central bank’s independence.
Read more:
- After Rate Cut Powell Says Jobs Market No Longer Very Solid
- Bessent, Like Fed Governor, Made Contradictory Mortgage Pledges
Further listening: Why Trump Is Trying to Fire Lisa Cook
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. The Federal Reserve voted
to cut interest rates by twenty five basis points. That's
a quarter percentage point after holding them steady this year.
This is a pretty boring outcome for a meeting that's
had a lot of drama around it. By boring, I
mean well telegraphed, expected, no surprises, just how the FED
(00:26):
likes to operate. Here's how Fed Chair Jerome Powell explained
the decision to reduce rates.
Speaker 2 (00:32):
At today's meeting. The committee decided to lower the target
range for the Federal friends rate by a quarter percentage
point to four to four and a quarter percent, and
to continue reducing the size of our balance sheet.
Speaker 1 (00:45):
The drama around this meeting was more about politics than
monetary policy. President Trump has been pressuring policymakers to lower
interest rates. On Sunday, he called for a big cut.
Speaker 2 (00:56):
I think you have a big cut because I really
don't think he can help with cutting.
Speaker 1 (01:01):
It's perfect for cutting, and Trump has been trying to
reshape the Federal Reserve to make it more responsive to
his wishes. In fact, the FED meeting started on Tuesday,
but it wasn't until Monday that we knew who would
actually vote on the committee. That's when the US Senate
confirmed the president's pick to fill a vacancy on the
Fed's board, one of his chief economic advisors, Stephen Myron.
(01:23):
It's also when a federal appeals court ruled that FED
Governor Lisa Cook, who President Trump has tried to fire,
could hold on to her seat at least for now.
So this boring rate cut, it shows the FED seems
to be resisting political meddling for now. Amara Mokway covers
the FED for Bloomberg, and she says it also signals
(01:43):
growing unease about US employment.
Speaker 3 (01:46):
So there's just growing concern among some FED officials and
economists that the labor market could be at a tipping point.
And the problem with that is once the labor market weekends,
once we really start to have unemployment rise, it can
happen very quickly and severely.
Speaker 1 (02:03):
There was a very lackluster jobs report for the month
of August and a big revision of jobs data for
a twelve month period that ended in March. That report
showed the US economy added about nine hundred eleven thousand
fewer jobs than first estimated. But the FED also has
to keep an eye on inflation, and Amer says that
means the FED needs to strike a delicate balance.
Speaker 3 (02:25):
There are concerns about the potential for tariffs to drive
inflationary pressures in a way that is persistent, and so
that is part of the Fed's challenge right now.
Speaker 1 (02:36):
Powell acknowledged this tension in his post meeting news conference.
Speaker 2 (02:39):
Our obligation is to ensure that a one time increase
in the price level does not become an ongoing inflation problem.
In the near term, risks to inflation are tilted to
the upside and risks to employment to the downside. A
challenging situation.
Speaker 1 (02:56):
I'm David Durat and this is the big take from
Bloomberg News Today, and the sh show what the Federal
Reserve's rate cut says about the state of the US
job market, the broader economy, and the central banks independence.
The Federal Reserves interest rate cut of twenty five basis
(03:16):
points was very much in line with what Wall Streets expected.
I asked Bloomberg Fed reporter Ameramokway, what a quarter point
cut tells us about how the FED is thinking about
the economy.
Speaker 3 (03:27):
What it signals is that concerns about the labor arget
have grown, and the FED wants to respond to that.
At the same time, there was some talk about whether
they should do a bigger cut a half point cut,
and by them not doing that, I think that is
also an acknowledgment that there are still concerns about the
inflation responsibility that they have and they don't want to
(03:49):
go too fast or too big, right, so they really
are trying to balance concern for the labor market and
concern for inflation.
Speaker 1 (03:58):
This is what's known as the FED dual mandate. Its
two main goals are to keep inflation in check and
to promote maximum employment.
Speaker 3 (04:06):
Sometimes the goals kind of align where they can kind
of address both at the same time.
Speaker 4 (04:12):
Right, So, last September.
Speaker 3 (04:14):
They did a half point cut, and they did that
because there were warning signs of the labor market at
that point.
Speaker 4 (04:21):
But at the same time, inflation was kind of moving
in the direction that.
Speaker 3 (04:24):
They wanted it to move, so they could lower rates
in a way that they felt comfortable with because they
weren't necessarily worried about inflation. The problem here is that
we're kind of in the opposite scenario where there are
growing concerns about the labor market and at the same
time there are concerns about the potential for tariffs to
(04:45):
drive inflationary pressures in a way that is persistent, and
so that is part of the feeds challenge right now.
Their mandates are kind of intention and unlike last year
when they were like, well, labor market is a little iffy,
inflation is moving in the right way, so we can
make this very clear cut to stay vision here. It
is not as clear cut of a decision. That is
why they have been on hold all year, and that
(05:05):
is why we are seeing among FED officials themselves growing
disagreement about what the FED should actually be.
Speaker 4 (05:12):
Doing right now.
Speaker 1 (05:14):
Not all the FED governors were on board with this decision.
Notably the newest member of the committee, Stephen Myron, who's
been the chair of President Trump's Council of Economic Advisors, dissented.
I asked Amara about the argument both Myron and the
President have been making for going bigger, for cutting rates
by a half percentage point, as Myron advocated for at
this meeting, or more so.
Speaker 3 (05:34):
I think people who were talking about a big cut,
there are a couple of reasons. Right if you are
in the camp that, okay, the FED has been on
hold this whole year, and they were wrong to be
on hold. Then you say, look, they need to kind
of fix that by going bigger here, right, kind of
making up for lost time or making up for lost grounds.
So they need to go bigger here. The President's argument
(05:55):
is a little different. He is calling for very large
moves because he has a couple of different economic policy
goals that he essentially wants the FED to support. Namely,
he wants barring costs for the US government to come down,
and he feels that by the FED cutting more aggressively
that will help him in this effort that he has
(06:17):
to bring down the government's baring costs strength the deficit.
And so the President, I think, is speaking more in
favor of his own economic agenda, whereas those who are
concerned that maybe the Fed's policy is having too much
of a restraint on the economy right now, especially as
we have these growing labor market concerns, have said, perhaps
(06:37):
it makes sense for the FED to do a bigger
move to kind of take some of that restraint off.
Speaker 1 (06:42):
You look at FED Chair J. Powell's tenure, and for
so long he was so good at fostering unanimity among
members of the Fed's Rates setting Committee. That started to
change at recent meetings. We've seen more descents, We're seeing
members of this committee different positions. Ahead of this meeting,
there was some uncertaint about who'd actually be there. Lisa
(07:04):
cooka FED governor, was allowed to sit for this meeting
an appeals court rule that she could participate. President wants
to fire her from the committee. There was a new
committee member, Stephen Myra, and a Trump economic advisor who
was confirmed by the Senate on Monday, really at the
eleventh hour here just in time for the start of
this meeting. How much has Fed churchier own palaced job changed,
kind of managing all of these different perspectives now that
we're here in September of twenty twenty five.
Speaker 3 (07:27):
Yeah, I think he has a much harder time right now,
right because let's compare where we are now to where
we were when inflation took off in the wake of
the pandemic. Then policy decisions weren't that hard, Right, Inflation
is at multi decade high. What should the FED be
doing in that situation? It should be hiking, it should
(07:48):
be tightening, right, And so there there was a little disagreement,
but not to the extent that we are seeing now, right,
because the economic outlook is just so uncertain and there
are a range of views about just how weak the
labor market is, what factors are driving the weak labor market,
(08:09):
data that we've seen, what the impact of tariffs will be, right,
So there's just so much more uncertainty now that just
makes it harder to have consensus. At the same time,
this growing lack of consensus, I think it's just like
such a poignant representation of the fact that change at
the FED is at hand. It is happening, these changes
(08:32):
with Stephen Meyern joining the board, President Trump trying to
outsles a cook like this is just the beginning, right,
President Trump is going to pick a new chair, and
that chair is likely going to be very different from
chair power. And so all these changes, the descents, the
new people, people leaving people, President Trump trying to fire people,
(08:55):
it's just the clearest sign that this time next year
we're probably going to be looking at a very different
FED than what we.
Speaker 1 (09:04):
Have now coming up inflation, employment, and revisions. What FED
policymakers see when they dig into the data in setting
(09:26):
interest rates. The Federal Reserve is famously data dependent. That's
their way of saying, there's no gut feelings, no vibes.
They stick to the numbers. Fed policymakers look at all
kinds of data, but they pay extra close attention to
employment and inflation. Bloomberg's amera A mok Way says inflation
is still higher than they'd like.
Speaker 3 (09:46):
So inflation is still above the Fed's two percent target.
And the impacts of President Trump's tariffs, the policies have
obviously changed a lot since you know, he first announced them,
have started to show go up. But the feeling is
that the inflation data suggesting that for now companies appear
to be absorbing most of the costs of these terraffs
(10:09):
and not passing them on to consumers. And so people
who are in supportive rate cuts are taking the inflation
data and saying, see, tariffs aren't really showing up in
any kind of meaningful way so far, therefore the Fed
can cut.
Speaker 4 (10:24):
Therefore they don't.
Speaker 3 (10:25):
Need to be on hyper guard about tariff induced inflation.
But then you've had Chair Powell and others say, look like, yeah,
it is possible that these terroriffs will result in like
a inflation bump that quickly passes but we can't take
that for granted, especially with the fact that inflation is
not yet back at our.
Speaker 4 (10:43):
Target, so we have to be a little careful. So
that's where we are.
Speaker 1 (10:47):
How Will addressed that challenge at his press conference on Wednesday.
Speaker 2 (10:51):
Higher tariffs have begun to push up prices in some
categories of goods, but their overall effects on economic activity
and inflation remain to be seen. A reasonable base case
is that the effects on inflation will be relatively short lived,
a one time shift in the price level. But it
is also possible that the inflationary effects could instead be
(11:12):
more persistent, and that is a risk to be assessed
and managed.
Speaker 1 (11:16):
Let's shift from that side of the dual mandate, the
inflation side, to the employment side. How healthy is this
labor market today? What are the things that are raising
the concern of policymakers.
Speaker 3 (11:27):
So the labor market is really tricky right now, right
because it is very clear that demand from employers for
workers has slowed. At the same time, though the Trump
administration has implemented stricter immigration policies, stricter immigration enforcement, and
so that is also economist think weighing on the supply
(11:50):
of labor. So you have both labor demand and labor
supply falling at the same time, and so that kind
of obscure the picture, right. Chirpowell has called this like
a curious kind of balance.
Speaker 1 (12:04):
Here's what Powell said about that on Wednesday.
Speaker 2 (12:06):
You know, typically when we say things are in balance,
that sounds good. But in this case, the balance is
because both supply and demand have come down quite sharply,
now demand coming down a little more sharply because we
now see the unemployment rate edging up.
Speaker 3 (12:20):
Because both of these things are happening in tandem, it's
kind of hard to know like is the labor market
really weak or are we having a demand issue? Are
we having a supply issue? Like what is really happening?
So we have seen the pace of job creation really
slow in the final months of the summer, and we
also got revisions that suggested that the amount of job
(12:41):
creation in twenty twenty four and early twenty twenty five
was much weaker than originally estimated. So the numbers don't
look great, But it's kind of hard, given all the
policy changes that we've had, for policy makers to figure out, Okay,
what is actually the root cause of this weakening that
we're seeing, and so that's what's making it a little
(13:03):
tricky here.
Speaker 1 (13:05):
You mentioned those revisions and the numbers seem huge. I
know that it's common for these numbers to be revised,
but it strikes me this has to compound the difficulty
for the FED. They're relying on jobs numbers that are
inherently backward looking, and then you have these giant revisions.
Could you talk a bit more about how what we're seeing,
(13:27):
or what we have seen in recent weeks is normal
or isn't.
Speaker 4 (13:31):
I think what you said is exactly right.
Speaker 3 (13:32):
So you talk to any economists, they're like, oh, like, yeah, revisions,
they happen all the time. These annual revisions happen annually, Right,
they happen all the time. I think the magnitude of
the revisions is what is giving people a little heartburn, right,
And it's interesting.
Speaker 4 (13:47):
Lisa Cook talked about how when.
Speaker 3 (13:49):
You are seeing large revisions like this, it usually is
because the economy is at an inflection point and things
are changing in a way that you have to pay
attention to. And so I think it does make the
fed's job really tricky because the data is changing, and
(14:11):
because so much of their calculation this year about holding
rates study was because they felt like the labor market
was giving them almost.
Speaker 4 (14:19):
The luxury to do so.
Speaker 3 (14:20):
Right, we are scared about tariff inflation, but we have
a good labor market, so we can afford to keep
interest rates a little high here. But now that narrative
is really being challenged by the recent reports and the revisions,
and so it kind of in a way compels them
to move. But then they're still dealing with the inflation question.
(14:43):
So it's all very tricky. Also to mention that President
Trump has sort of zeroed in on these numbers and
these revisions and made it a political question, kind of
accusing people of rigging the numbers to make him look bad,
as if the FED needs like another political issue to
deal with. They are making these very complicated decisions on
(15:04):
numbers that are now the subject of political scrutiny by
President Trump and his allies.
Speaker 1 (15:11):
So the FED has made this decision. How long does
it take for the Fed to see how effective a
rate cut a rate decision is?
Speaker 3 (15:20):
Yeah, I mean, the one thing that Fed policy makers
often will say is that monetary policy works with long
and variable lags, right, famous famous ques, And so there's
not like a clear cut answer to that, right, Like,
it's not the case that the FED cuts rates and
we start to.
Speaker 4 (15:37):
See, you know, the economy opening up the next day.
Speaker 3 (15:40):
And in some ways it's even a bigger question now
because the economy has performed in ways that have been
so surprising after the pandemic, Like even with interest rates
being in a place that most economists see us like
at least somewhat restrictive, we're still seeing consumer spending hold
up pretty well.
Speaker 4 (15:58):
And so it's not an easy question to.
Speaker 3 (16:01):
Answer because you just don't know how monetary policy changes
are going to filter through the economy and how quickly.
Speaker 1 (16:07):
On Wednesday, FED policymakers projected there will be an additional
twenty five basis point cut by the end of the year.
Speaker 2 (16:14):
The median participant projects at the appropriate level of the
federal funds rate will be three point six percent at
the end of this year, three point four percent at
the end of twenty twenty six, and three point one
percent at the end of twenty twenty seven. This path
is one quarter percentage point lower than projected in June.
As is always the case, these individual forecasts are subject
(16:36):
to uncertainty, and they're not a committee plan or decision.
Policy is not on a preseid course.
Speaker 3 (16:43):
I think Powell and many of the policy makers don't
like to be boxed in, and so I think you
can expect them to continue to try to preserve their optionality.
Speaker 4 (16:55):
Right.
Speaker 3 (16:56):
Even Governor Waller, who has been pretty clear that he
wants to see rate cuts, has said, we an'll have
to be on like a predetermined sequence. We can begin
cutting and then kind of see where things go, see
how things evolve. And so I would expect Powell and
other policymakers to continue to do that, especially given this
(17:17):
very complicated backdrop that we've been talking about, both economically
and politically.
Speaker 4 (17:21):
Why would they box themselves in?
Speaker 1 (17:26):
This is the Big Take from Bloomberg News. I'm David Gerra.
To get more from The Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com slash podcast offer. If you liked this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio news. The Federal Reserve voted
to cut interest rates by twenty five basis points. That's
a quarter percentage point after holding them steady this year.
This is a pretty boring outcome for a meeting that's
had a lot of drama around it. By boring, I
mean well telegraphed, expected, no surprises, just how the FED
(00:26):
likes to operate. Here's how Fed Chair Jerome Powell explained
the decision to reduce rates.
Speaker 2 (00:32):
At today's meeting. The committee decided to lower the target
range for the Federal friends rate by a quarter percentage
point to four to four and a quarter percent, and
to continue reducing the size of our balance sheet.
Speaker 1 (00:45):
The drama around this meeting was more about politics than
monetary policy. President Trump has been pressuring policymakers to lower
interest rates. On Sunday, he called for a big cut.
Speaker 2 (00:56):
I think you have a big cut because I really
don't think he can help with cutting.
Speaker 1 (01:01):
It's perfect for cutting, and Trump has been trying to
reshape the Federal Reserve to make it more responsive to
his wishes. In fact, the FED meeting started on Tuesday,
but it wasn't until Monday that we knew who would
actually vote on the committee. That's when the US Senate
confirmed the president's pick to fill a vacancy on the
Fed's board, one of his chief economic advisors, Stephen Myron.
(01:23):
It's also when a federal appeals court ruled that FED
Governor Lisa Cook, who President Trump has tried to fire,
could hold on to her seat at least for now.
So this boring rate cut, it shows the FED seems
to be resisting political meddling for now. Amara Mokway covers
the FED for Bloomberg, and she says it also signals
(01:43):
growing unease about US employment.
Speaker 3 (01:46):
So there's just growing concern among some FED officials and
economists that the labor market could be at a tipping point.
And the problem with that is once the labor market weekends,
once we really start to have unemployment rise, it can
happen very quickly and severely.
Speaker 1 (02:03):
There was a very lackluster jobs report for the month
of August and a big revision of jobs data for
a twelve month period that ended in March. That report
showed the US economy added about nine hundred eleven thousand
fewer jobs than first estimated. But the FED also has
to keep an eye on inflation, and Amer says that
means the FED needs to strike a delicate balance.
Speaker 3 (02:25):
There are concerns about the potential for tariffs to drive
inflationary pressures in a way that is persistent, and so
that is part of the Fed's challenge right now.
Speaker 1 (02:36):
Powell acknowledged this tension in his post meeting news conference.
Speaker 2 (02:39):
Our obligation is to ensure that a one time increase
in the price level does not become an ongoing inflation problem.
In the near term, risks to inflation are tilted to
the upside and risks to employment to the downside. A
challenging situation.
Speaker 1 (02:56):
I'm David Durat and this is the big take from
Bloomberg News Today, and the sh show what the Federal
Reserve's rate cut says about the state of the US
job market, the broader economy, and the central banks independence.
The Federal Reserves interest rate cut of twenty five basis
(03:16):
points was very much in line with what Wall Streets expected.
I asked Bloomberg Fed reporter Ameramokway, what a quarter point
cut tells us about how the FED is thinking about
the economy.
Speaker 3 (03:27):
What it signals is that concerns about the labor arget
have grown, and the FED wants to respond to that.
At the same time, there was some talk about whether
they should do a bigger cut a half point cut,
and by them not doing that, I think that is
also an acknowledgment that there are still concerns about the
inflation responsibility that they have and they don't want to
(03:49):
go too fast or too big, right, so they really
are trying to balance concern for the labor market and
concern for inflation.
Speaker 1 (03:58):
This is what's known as the FED dual mandate. Its
two main goals are to keep inflation in check and
to promote maximum employment.
Speaker 3 (04:06):
Sometimes the goals kind of align where they can kind
of address both at the same time.
Speaker 4 (04:12):
Right, So, last September.
Speaker 3 (04:14):
They did a half point cut, and they did that
because there were warning signs of the labor market at
that point.
Speaker 4 (04:21):
But at the same time, inflation was kind of moving
in the direction that.
Speaker 3 (04:24):
They wanted it to move, so they could lower rates
in a way that they felt comfortable with because they
weren't necessarily worried about inflation. The problem here is that
we're kind of in the opposite scenario where there are
growing concerns about the labor market and at the same
time there are concerns about the potential for tariffs to
(04:45):
drive inflationary pressures in a way that is persistent, and
so that is part of the feeds challenge right now.
Their mandates are kind of intention and unlike last year
when they were like, well, labor market is a little iffy,
inflation is moving in the right way, so we can
make this very clear cut to stay vision here. It
is not as clear cut of a decision. That is
why they have been on hold all year, and that
(05:05):
is why we are seeing among FED officials themselves growing
disagreement about what the FED should actually be.
Speaker 4 (05:12):
Doing right now.
Speaker 1 (05:14):
Not all the FED governors were on board with this decision.
Notably the newest member of the committee, Stephen Myron, who's
been the chair of President Trump's Council of Economic Advisors, dissented.
I asked Amara about the argument both Myron and the
President have been making for going bigger, for cutting rates
by a half percentage point, as Myron advocated for at
this meeting, or more so.
Speaker 3 (05:34):
I think people who were talking about a big cut,
there are a couple of reasons. Right if you are
in the camp that, okay, the FED has been on
hold this whole year, and they were wrong to be
on hold. Then you say, look, they need to kind
of fix that by going bigger here, right, kind of
making up for lost time or making up for lost grounds.
So they need to go bigger here. The President's argument
(05:55):
is a little different. He is calling for very large
moves because he has a couple of different economic policy
goals that he essentially wants the FED to support. Namely,
he wants barring costs for the US government to come down,
and he feels that by the FED cutting more aggressively
that will help him in this effort that he has
(06:17):
to bring down the government's baring costs strength the deficit.
And so the President, I think, is speaking more in
favor of his own economic agenda, whereas those who are
concerned that maybe the Fed's policy is having too much
of a restraint on the economy right now, especially as
we have these growing labor market concerns, have said, perhaps
(06:37):
it makes sense for the FED to do a bigger
move to kind of take some of that restraint off.
Speaker 1 (06:42):
You look at FED Chair J. Powell's tenure, and for
so long he was so good at fostering unanimity among
members of the Fed's Rates setting Committee. That started to
change at recent meetings. We've seen more descents, We're seeing
members of this committee different positions. Ahead of this meeting,
there was some uncertaint about who'd actually be there. Lisa
(07:04):
cooka FED governor, was allowed to sit for this meeting
an appeals court rule that she could participate. President wants
to fire her from the committee. There was a new
committee member, Stephen Myra, and a Trump economic advisor who
was confirmed by the Senate on Monday, really at the
eleventh hour here just in time for the start of
this meeting. How much has Fed churchier own palaced job changed,
kind of managing all of these different perspectives now that
we're here in September of twenty twenty five.
Speaker 3 (07:27):
Yeah, I think he has a much harder time right now,
right because let's compare where we are now to where
we were when inflation took off in the wake of
the pandemic. Then policy decisions weren't that hard, Right, Inflation
is at multi decade high. What should the FED be
doing in that situation? It should be hiking, it should
(07:48):
be tightening, right, And so there there was a little disagreement,
but not to the extent that we are seeing now, right,
because the economic outlook is just so uncertain and there
are a range of views about just how weak the
labor market is, what factors are driving the weak labor market,
(08:09):
data that we've seen, what the impact of tariffs will be, right,
So there's just so much more uncertainty now that just
makes it harder to have consensus. At the same time,
this growing lack of consensus, I think it's just like
such a poignant representation of the fact that change at
the FED is at hand. It is happening, these changes
(08:32):
with Stephen Meyern joining the board, President Trump trying to
outsles a cook like this is just the beginning, right,
President Trump is going to pick a new chair, and
that chair is likely going to be very different from
chair power. And so all these changes, the descents, the
new people, people leaving people, President Trump trying to fire people,
(08:55):
it's just the clearest sign that this time next year
we're probably going to be looking at a very different
FED than what we.
Speaker 1 (09:04):
Have now coming up inflation, employment, and revisions. What FED
policymakers see when they dig into the data in setting
(09:26):
interest rates. The Federal Reserve is famously data dependent. That's
their way of saying, there's no gut feelings, no vibes.
They stick to the numbers. Fed policymakers look at all
kinds of data, but they pay extra close attention to
employment and inflation. Bloomberg's amera A mok Way says inflation
is still higher than they'd like.
Speaker 3 (09:46):
So inflation is still above the Fed's two percent target.
And the impacts of President Trump's tariffs, the policies have
obviously changed a lot since you know, he first announced them,
have started to show go up. But the feeling is
that the inflation data suggesting that for now companies appear
to be absorbing most of the costs of these terraffs
(10:09):
and not passing them on to consumers. And so people
who are in supportive rate cuts are taking the inflation
data and saying, see, tariffs aren't really showing up in
any kind of meaningful way so far, therefore the Fed
can cut.
Speaker 4 (10:24):
Therefore they don't.
Speaker 3 (10:25):
Need to be on hyper guard about tariff induced inflation.
But then you've had Chair Powell and others say, look like, yeah,
it is possible that these terroriffs will result in like
a inflation bump that quickly passes but we can't take
that for granted, especially with the fact that inflation is
not yet back at our.
Speaker 4 (10:43):
Target, so we have to be a little careful. So
that's where we are.
Speaker 1 (10:47):
How Will addressed that challenge at his press conference on Wednesday.
Speaker 2 (10:51):
Higher tariffs have begun to push up prices in some
categories of goods, but their overall effects on economic activity
and inflation remain to be seen. A reasonable base case
is that the effects on inflation will be relatively short lived,
a one time shift in the price level. But it
is also possible that the inflationary effects could instead be
(11:12):
more persistent, and that is a risk to be assessed
and managed.
Speaker 1 (11:16):
Let's shift from that side of the dual mandate, the
inflation side, to the employment side. How healthy is this
labor market today? What are the things that are raising
the concern of policymakers.
Speaker 3 (11:27):
So the labor market is really tricky right now, right
because it is very clear that demand from employers for
workers has slowed. At the same time, though the Trump
administration has implemented stricter immigration policies, stricter immigration enforcement, and
so that is also economist think weighing on the supply
(11:50):
of labor. So you have both labor demand and labor
supply falling at the same time, and so that kind
of obscure the picture, right. Chirpowell has called this like
a curious kind of balance.
Speaker 1 (12:04):
Here's what Powell said about that on Wednesday.
Speaker 2 (12:06):
You know, typically when we say things are in balance,
that sounds good. But in this case, the balance is
because both supply and demand have come down quite sharply,
now demand coming down a little more sharply because we
now see the unemployment rate edging up.
Speaker 3 (12:20):
Because both of these things are happening in tandem, it's
kind of hard to know like is the labor market
really weak or are we having a demand issue? Are
we having a supply issue? Like what is really happening?
So we have seen the pace of job creation really
slow in the final months of the summer, and we
also got revisions that suggested that the amount of job
(12:41):
creation in twenty twenty four and early twenty twenty five
was much weaker than originally estimated. So the numbers don't
look great, But it's kind of hard, given all the
policy changes that we've had, for policy makers to figure out, Okay,
what is actually the root cause of this weakening that
we're seeing, and so that's what's making it a little
(13:03):
tricky here.
Speaker 1 (13:05):
You mentioned those revisions and the numbers seem huge. I
know that it's common for these numbers to be revised,
but it strikes me this has to compound the difficulty
for the FED. They're relying on jobs numbers that are
inherently backward looking, and then you have these giant revisions.
Could you talk a bit more about how what we're seeing,
(13:27):
or what we have seen in recent weeks is normal
or isn't.
Speaker 4 (13:31):
I think what you said is exactly right.
Speaker 3 (13:32):
So you talk to any economists, they're like, oh, like, yeah, revisions,
they happen all the time. These annual revisions happen annually, Right,
they happen all the time. I think the magnitude of
the revisions is what is giving people a little heartburn, right,
And it's interesting.
Speaker 4 (13:47):
Lisa Cook talked about how when.
Speaker 3 (13:49):
You are seeing large revisions like this, it usually is
because the economy is at an inflection point and things
are changing in a way that you have to pay
attention to. And so I think it does make the
fed's job really tricky because the data is changing, and
(14:11):
because so much of their calculation this year about holding
rates study was because they felt like the labor market
was giving them almost.
Speaker 4 (14:19):
The luxury to do so.
Speaker 3 (14:20):
Right, we are scared about tariff inflation, but we have
a good labor market, so we can afford to keep
interest rates a little high here. But now that narrative
is really being challenged by the recent reports and the revisions,
and so it kind of in a way compels them
to move. But then they're still dealing with the inflation question.
(14:43):
So it's all very tricky. Also to mention that President
Trump has sort of zeroed in on these numbers and
these revisions and made it a political question, kind of
accusing people of rigging the numbers to make him look bad,
as if the FED needs like another political issue to
deal with. They are making these very complicated decisions on
(15:04):
numbers that are now the subject of political scrutiny by
President Trump and his allies.
Speaker 1 (15:11):
So the FED has made this decision. How long does
it take for the Fed to see how effective a
rate cut a rate decision is?
Speaker 3 (15:20):
Yeah, I mean, the one thing that Fed policy makers
often will say is that monetary policy works with long
and variable lags, right, famous famous ques, And so there's
not like a clear cut answer to that, right, Like,
it's not the case that the FED cuts rates and
we start to.
Speaker 4 (15:37):
See, you know, the economy opening up the next day.
Speaker 3 (15:40):
And in some ways it's even a bigger question now
because the economy has performed in ways that have been
so surprising after the pandemic, Like even with interest rates
being in a place that most economists see us like
at least somewhat restrictive, we're still seeing consumer spending hold
up pretty well.
Speaker 4 (15:58):
And so it's not an easy question to.
Speaker 3 (16:01):
Answer because you just don't know how monetary policy changes
are going to filter through the economy and how quickly.
Speaker 1 (16:07):
On Wednesday, FED policymakers projected there will be an additional
twenty five basis point cut by the end of the year.
Speaker 2 (16:14):
The median participant projects at the appropriate level of the
federal funds rate will be three point six percent at
the end of this year, three point four percent at
the end of twenty twenty six, and three point one
percent at the end of twenty twenty seven. This path
is one quarter percentage point lower than projected in June.
As is always the case, these individual forecasts are subject
(16:36):
to uncertainty, and they're not a committee plan or decision.
Policy is not on a preseid course.
Speaker 3 (16:43):
I think Powell and many of the policy makers don't
like to be boxed in, and so I think you
can expect them to continue to try to preserve their optionality.
Speaker 4 (16:55):
Right.
Speaker 3 (16:56):
Even Governor Waller, who has been pretty clear that he
wants to see rate cuts, has said, we an'll have
to be on like a predetermined sequence. We can begin
cutting and then kind of see where things go, see
how things evolve. And so I would expect Powell and
other policymakers to continue to do that, especially given this
(17:17):
very complicated backdrop that we've been talking about, both economically
and politically.
Speaker 4 (17:21):
Why would they box themselves in?
Speaker 1 (17:26):
This is the Big Take from Bloomberg News. I'm David Gerra.
To get more from The Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com slash podcast offer. If you liked this episode,
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Thanks for listening. We'll be back tomorrow
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