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- [00:00]
Stephen Myron
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- [00:20]
Interviewer 1
Audio Studios Podcasts Radio News Cleveland Fed President Beth Hammack among those preferring to hold rates higher for longer. While our next guest is taking the other side, voting for a fifth basis point cut at the Fed's last meeting. Joining us now is Federal Reserve Governor Stephen Myron. Very good morning to you, Stephen. Thank you so much for joining us.
- [00:39]
Stephen Myron
Good morning. Thanks for having me back.
- [00:41]
Interviewer 1
So let's start with Beth Hammock. She came out over the weekend. Then we heard for Williams as well on Friday, saying that potentially where we are right now, rates should be steady and they're looking at what's going on. Inflation. Even the Fed chair was talking about maybe you need to look at inflation, the data we had with some grain of salt because of the government shutdown. How are you viewing that side of the Fed's mandate right now?
- [01:02]
Stephen Myron
Yeah, so I give a speech on the inflation inflation outlook last week and you know, and I still believe everything I said last week in light of this week's print. Last week's print. I mean, look, there were a couple of anomalies in last week's print related to consequences of the government shutdown which have distorted and delayed economic data that we need to make policy. But you know, those consequences I think are not huge there. When you sort of get to, when you get to sort of the ultimate PC print, which is what the Fed, which is what the Fed targets, it's probably ultimately going to be in the neighborhood of two, ten of a point. Maybe a tenth of that is going to be shelter and tenth of the other stuff is going to be, you know, calendar stuff like prices like data were collected in the second half of the month around Black Friday stuff. But we'll have to sort of see when we get the PC data. But it is true that the shelter stuff was somewhat distorted by some of the quirks of the of recovering from the shutdown. But it's also true that the shelter data were distorted for most of the year because of really long lags with which shelter inflation is calculated. If you look at market rents, they've been running at about a 1% rate for about two years now. Right. That's not indicative of any price pressures in housing whatsoever. But it takes a really long time for measured shelter inflation to catch up to that just because of various quirks of the statistical measurement process that I got into my speech last week. So I do think there was maybe some downward bias in last week's print. But at the same time, there's been tons of upward bias in data for the entire year. And it's inappropriate to say, okay, well we have to adjust for the downward bias, but we're going to accept the upward bias. That itself is a deeply biased position. We've got to be clear, right, about both.
- [02:31]
Interviewer 1
Well, do you feel like, yourself included, but do you feel like members of the Fed are cherry picking, what about inflation they like or dislike?
- [02:39]
Stephen Myron
Well, I mean, you know, I think that for the last few months we've had data come out in accordance with, I think my view of the world. The inflation data have steadily come in cooler than expectations. The unemployment rate has, has poked up potentially above where people thought it was going to go. And so we've had data that should push people into a dovish direction. And I think it's somewhat problematic. If you see those data coming out and you don't adjust your policy prescriptions in a dovish direction, what does that say, the reactiveness of policy to the economy? You know, I think it looks very, it reflects very poorly upon the institution.
- [03:08]
Interviewer 2
At the end of that speech at Columbia, you nodded to the fact that recessions are inevitable. Fed's job, it's kind of forestall them as much as they can. Policymakers jobs are that. I'm very curious. When you look at the labor market in particular, the rise that we've seen in the unemployment rate, that's kind of rise we've seen customarily before recessions, how do you assess the risk of there being a recession here in the near term? When you look at the labor market, for instance.
- [03:30]
Stephen Myron
So I don't see a recession in the near term in part because we are adjusting our policy rate by lowering it, which is appropriate. You know, my view as I've, as I've described, is that a variety of shocks that hit the economy, you know, including changes to the population growth rate due to changes in the border policy, have pushed what we call the neutral rate down. And that policy needs to adjust downward to reflect that downward shift in neutral. If we don't adjust policy down, then I think that we do run risks of rising recession, of rising recessions. I don't think it's too late to prevent that. And so I think it's important, important that we keep on adjusting our policy rate down. But at the moment it's not my base case, in part because I Think that we ultimately will end up adjust, continuing to adjust interest rates down.
- [04:10]
Interviewer 2
What asks you about the utility of the Myron dissent? So we had the Fed chair asked that press conference about the increasing fractured nature of the Fed committed. We've talked about quiet dissents as well. What are you achieving or. So what's the reaction, Ben, to you dissenting as you have been kind of in the conversation among the committee?
- [04:27]
Stephen Myron
Yeah, so look, I mean there's not really any strategy here. I'm just transparent and say what I think and always have and that gets me in a lot of trouble. Trouble.
- [04:34]
Interviewer 2
And does it or is it a constructive. So when you, when you descend in the way in which you do, is it a constructive dissent, do you find that others are willing to engage with you and your perspective on inflation, for instance?
- [04:44]
Stephen Myron
Yeah, well, my perspective on inflation is, you know, look at my first speech. I talked about inflation a little bit, but I mostly was focused on neutral. My speech last week, I really drew out a lot about my outlook for inflation that was sort of implicit in the first speech and sort of just personally cursively cursorily treated and I really drew that out. So my views on inflation haven't been out there fully fleshed out for the committee for so long and now running into holiday season. But I have found that people are, that people are constructive. They want to discuss these things and I think that's important. And you know, look, one positive benefit of me potentially dissenting like this is that it introduces a more, a wider variety of views. I think it's really, really important to avoid groupthink. I think if you, if you fall into groupthink, you stop questioning where you could be wrong and then it just becomes much easier to be a complacent consensus that is in error. I think we've seen that over and over this year.
- [05:32]
Interviewer 1
For example, on tariffs, let's talk potentially about tariffs. The President is pushing for this $2,000 tariff dividend. The Treasury Secretary is talking about these tax refunds start of 2026. Is there potential that more money in consumers pockets could goose inflation?
- [05:48]
Stephen Myron
Yes. So there is potential for some of these factors to boost economic growth. With respect to sort of tax refunds, you know, I think that. Sorry, with respect to tariff refunds, I think we need to sort of wait and see what the policy looks like before getting into analyzing its consequences. If there does end up being a policy with respect to tax refunds that results of the already legislated tax bill, the one big beautiful bill act from last year. Those are already baked into the forecast and they will provide a little bit of demand stimulus. But there's so much other stuff going on as a result of policy in O, triple B, in deregulation, in other things that are going on, economic policy that ultimately push out the supply side of the economy too. And my view is that if you push out the demand side while you're putting the brakes in the supply side, you get inflation. If you push out supply and demand at the same time, it doesn't really have an effect on prices.
- [06:34]
Interviewer 1
But do you think it was a mistake that when we had under the Biden administration, the American rescue plan, Inflation Reduction act, sending out checks to American consumers, was that an error?
- [06:42]
Stephen Myron
Well, it's not appropriate for, you know, for a member of the Federal Reserve. Do you think it describes an error or not? But I do think that if you, if you hit, if you hit the gas on demand while you're hitting the brakes on supply, at the same time, it will result in higher prices. That is, that is, that is an economic.
- [06:56]
Interviewer 1
With $2,000 checks do a similar reaction as we saw in by the other checks during the American rescue plan.
- [07:03]
Stephen Myron
Well, it depends on what's happening on the supply. So two things matter. One is the state of the demand, state of aggregate demand outside of those checks. And if you go back several years, the economy was recovering on its own from, From COVID Right? It was. Covid was not like, you know, the financial crisis, which had lingering deleveraging effects for a decade plus, which meant that demand was perpetual, was persistently depressed after Covid. You know, we started getting vaccines, we started getting antivirals. Places started opening back up. The economy started returning to normal on its own. And so demand was growing quite healthily and jobs numbers were beating every month. And so throwing more economic support on top of that wound up sort of pushing an already expanding demand side to expand even further. Right now, you see the unemployment rate is tilting up on its own, right? So demand is in a separate, is in a very different place than it was in 2021. But so is supply. Right? And I think that if you're taking policy steps that are going to push out supply, or supply is moving out for reasons other than policy, for instance, AI, which I find difficult to quantify. But a lot of people put a lot of, put a lot of faith in if supply is moving out for whatever reasons, it can accommodate increasing demand. And so the effect on prices could.
- [08:08]
Interviewer 2
Be very different on higher goods inflation. There is a prevailing narrative that the terrorist policy has a lot to do with what's been pushing that up and you kind of push back against that. You did that in the speech that you delivered at Columbia as well. At the same time, you talk a lot about humility, how much uncertainty there is. I think you nodded to Mervyn King in that speech and what he's written about uncertainty. What's it going to take for.
- [08:27]
Interviewer 1
Do you.
- [08:28]
Interviewer 2
Do you feel like you have a grasp of the effect of the tariffs policy thus far? Are you still waiting to figure out sort of what that's going to mean for the economy broadly and yes, when it comes to goods inflation?
- [08:36]
Stephen Myron
Yeah. So look, in the speech I did discuss how there's this consensus has emerged that tariffs are a significant driver of inflation. In the same way a consensus emerged earlier in the year that tariffs are going to drive some sort of crazy recession. You know, that was, that was there. And I think that consensus is wrong. And I think, and I think it's complacent. I described counterfactuals, right. If you're ascribing a result in prices to tariffs, you need to say what the world would have been like without tariffs. Now, what most people do is they look at what we call the pre trends. What were the trends of various items before tariffs? Right. And most people select pre trends from the two decades before the pandemic. Right. When the world was very, very different. I don't think that that's really appropriate. Instead, the counterfactuals that I want to look at that I describe in the speech and I include pictures for them, are two things. One, what are imported, imported core goods in the PC index doing relative to overall core goods. And two, what are, what's happening on international basis? And in both of those cases, I don't see anything that would indicate to me that tariffs are the, are the driver of core goods inflation. When you look at imported goods versus overall core goods, they're inflating at similar rates. Imported goods don't stick out. When you look at US core goods versus other countries, again, US core goods are in the middle of the pack and there hasn't been a change that would indicate to me that there's some sort of very significant tariff shock. So I think it's actually quite complacent for people to ascribe all this inflation to tariffs. And indeed, if you look at CPI core goods and CPI bottomed out in the middle of last year. Right. Seven or eight months before tariffs were implemented.
- [10:10]
Interviewer 1
I just want to get a sense before, before you leave us, how Are you thinking about the next meeting? Because it could potentially be your last. Do you plan on dissenting in favor of 50 basis point cut again?
- [10:18]
Stephen Myron
Look, I plan on, I plan on pushing for the policy that I think is appropriate at the time. I will say when I got to the Fed, we hadn't cut rates at all this year. And so it was very important for us to move rates down quickly. Since then, we've pushed rates down three times. 75 basis points of cuts to the, to the policy rate. So the need for me to dissent for 50 becomes a little bit less as we come down. I haven't yet decided whether I'm going to push for 25 or 50 next meeting. I think it depends on a variety of factors. So I could see voting for 25, but I do think it's important that we continue steadily reducing the policy rate.
- [10:52]
Interviewer 1
So basically you'll vote for 25 at the rest of the committees there. If they're not going to push through 25, you may alert everyone of your dissatisfaction with them by going for 50.
- [11:03]
Stephen Myron
Well, no, it depends. I think I want to see the data. You know, we're still, we're still waiting on a lot of data because the shutdown. Right. So I want to see what the data do to my forecast going forward and how they, and how they change my forecast going forward. But the truth is that I think that it was really important to vote, sorry, to cut in bigger clips when policy was very high. As we continue reducing policy, I think you sort of get into, into territory where you can start micromanaging instead of big, instead of big cuts. And I don't know whether we're here yet or it would sort of still take a couple more cuts to get there. But at some point you sort of start to become okay with sort of steady 25 basis point cuts instead of 50 basis point cuts.
- [11:37]
Interviewer 1
Do you think it's going to be your last meeting? Has the White House reached out about whether or not you're going to stay on at the Fed?
- [11:42]
Stephen Myron
I have no idea. I mean, look, you know, if nobody is confirmed in my seat by January 31st, I assume that I will stay, I will stay in my seat. You know, you can stay in a seat until, until a successor is confirmed. And then beyond beyond that, you know, it'll all depend on who the President ultimately nominates to be the, the, the next chairman of the Fed because it'll depend on, you know, what seats are available and who the President wants to fill them.
- [12:05]
Interviewer 1
When it comes to the next chairman of The Federal Reserve. There are two individuals that you've worked closely with just this year alone. Kevin Hassett, of course, when you were at the White House, and also Christopher Waller. Waller of course with you at the Fed. Can you just give us your evaluation of both those individuals given the fact that you have a very good, I imagine, relationship with both of them?
- [12:23]
Stephen Myron
Yeah, look, they're both supremely talented economists and extremely effective individuals that I have the utmost respect for and I think the country would be very lucky to have either of them.
- [12:32]
Interviewer 2
A quick question just about what you've witnessed in terms of the Chairman's role at the Fed. You've been there for a few months. Is there anything that surprised you about the way that Fed Chair Powell is able to kind of go to get people to galvanize themselves around any kind of unanimity the way that he runs the committee? I think we think about the Fed chairs this kind of principal position. The President kind of makes a us think that way, that this is going to be a highly, a person, have a lot of determinism himself. But the Fed chair's responsibility is to try to get everybody on board with, with decisions. What have you witnessed about Fed Chair powers ability to do that? What would you say to the President about that facet a Fed chair has to have to be effective.
- [13:04]
Stephen Myron
Look, you know, I think that there's obviously a lot of people on the committee who are not comfortable with, with rate cuts and I think that's the wrong economic position at the moment given the data that we have available to us and the forecast that we have available to us and the very well known, very well understood upward biases that are, that are affecting inflation measurement at this moment in time. I think that's the wrong, the wrong view, no question about it. Nevertheless, I think you have to give Chairman Powell, you know, a credit for having wrangled, you know, wrangled three cuts out of these guys in succession. And, and it's a, it's a, it's a, it's a, it's a cat herding task. And you know, I think we have to, you know, we got to give a little credit for that.
- [13:43]
Interviewer 1
Well, it definitely is a cat herding task. We look forward to the next meeting and see where you come up whether 50 or 25 basis points. Governor Stephen Myron, thank you so much for your time this morning.
- [13:51]
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