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00:00I'm sure read over that speech as well as listen to it from Chairman Powell on Friday. What was your major takeaway? Well, I would say that he has opened the door for a rate cut in September. He's still referring to the policy rate right now as restrictive. That may be debated, but the fact is that's what he's saying. There's increasing concern about employment, especially with the with the changes in immigration and so forth, that they're focusing now on the possibility that the unemployment rate now, if it went up, if people began to be laid off, the unemployment rate would go higher. That has them nervous. So that's why I think he opened it up. It's almost just unemployment. Could you give us your impression of how things are developing? The chairman called it curious and it is curious what's happening here. We've had a step down in both supply and demand. How much weight should you put on one versus the other? Well, I think the I think he's got a point. And I think part of the reason at the conference that they had the conference was about Labour. And one of the things that's going on is not just this immigration policy, but the fact that the demographics globally are changing. We're having a slowdown in fertility rates that is changing the market. And then talking to some of the labour economist at that conference, they're saying that, you know, the real increase on a monthly rate, if it were to be 40 or 50,000, that wouldn't necessarily be a particularly bad outcome given the changes in the dynamics in that labour market. So it's a yes, it is curious, but it's also reflected real change going on globally and the structural population trends going forward from here. Or the last Labour report and revisions were not great and that's clearly why you're seeing the Fed chair open up this door to September. But they continuously missed their inflation target. Why is the bias to the labour market? Well, that's my question as well, because inflation's 3% in my opinion at least, and that's that's well above the 2% target and well above price stability. So I was I was a little taken aback by the fact that I emphasized the employment side. When we have this dynamic going on in employment and ignoring, I think, not ignoring, but downplaying the very, I think, significant inflation and referring to policies as modestly restrictive when in fact there's an argument that the real rates at one and a half percent are fairly neutral at least. Well, Thomas, then that led me to my next question, which is, was the chairman's speech political? Well, everyone thinks not. I would know only. Only he would know inside. But I mean, there's a strong support. The fact that he's staying independent, that he made very clear they're going to keep price stability as a as an important goal. But I think it does raise questions in people's minds, of course. And and that's the circumstances we're in, number one. And number two, the bias in his speech that gave people a little bit of a setback. So. Well, we'll just have to wait and see how it plays out. Jonathan, I were talking earlier in the program how basically this is Chris Waller's view of the world. It was almost like Governor Walker wrote this speech. Do you think this is actually how Powell feels or do you think that he is forming consensus amongst his colleagues? Well, there's probably a combination of that. I think he is trying to build consensus. We clearly know that there is different views within the committee, not seen for quite some time. So he needs to build consensus. But I still would think that in those circumstances, even he would he would want to play it more neutral on his speech. But I think there is a lot of pressure coming from both Chris Waller and Mickey Boardman on that. And he has to he's aware of that. So he's has to walk this tightrope, as you will, as he goes, as he approaches September. And I think I think he'll be looking very carefully and I think other members of the committee will be looking very carefully at the inflation numbers that come out next and watching the employment numbers very carefully, because that that will, I think, tip it one way or the other if they are out of line with expectations. So at the end of the day, Thomas, once again, is this just a Fed that's data dependent? We have this Friday one more jobs report and obviously one more CPI report before they meet. Right. It's it's it's data dependent, number one. And there is like, look, let's face it, there's an enormous amount of pressure on the Fed from the administration right now that cannot be ignored. In fact, even the presidents are, you know, talking about being put at risk right now because their reappointment is up next year. If you do get a takeover of the board, how will that play out? So there's an enormous amount of pressure on the Fed right now that cannot be ignored. And I think the I think the public has to be aware of that. And certainly policymakers have to be aware of that right now. Thomas, are you yourself worried about Fed independence? I am. I think, Oh, we haven't seen pressure like this since Johnson and Nixon. It's very significant. And it's more it's more direct, it's more public. It puts the Fed in play in a lot of ways, both on the market and the public's eyes. So, yeah, I'm very worried about it, to be honest with you. Yes.

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Tremendous Political Pressure on Fed Can't Be Ignored, Says Hoenig

Former Kansas City Fed President Thomas Hoenig says Fed Chair Jerome Powell has opened the door to cutting rates in September following the symposium in Jackson Hole. Hoenig says tremendous political pressure on the Fed can't be ignored and he is worried about the independence of the central bank. He speaks on "Bloomberg Surveillance." (Source: Bloomberg)

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