Former Kansas City Fed President Esther George Talks Federal Reserve

Summary

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Podcast Summary: Bloomberg Talks

Episode: Former Kansas City Fed President Esther George Talks Federal Reserve
Date: November 6, 2025
Host: Bloomberg (Jonathan & Lisa)
Guest: Esther George (Former President, Kansas City Federal Reserve)

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Episode Overview

In this episode, former Kansas City Federal Reserve President Esther George joins Bloomberg hosts Jonathan and Lisa to discuss the Federal Reserve's current challenges amid economic uncertainty and dissent within the committee. The conversation covers the “data drought,” the Fed’s dual mandate, the interaction between monetary and fiscal policy, the outlook for interest rates, and external pressures such as potential tariff changes and deficit concerns.

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Key Discussion Points & Insights

1. Challenges Facing the Federal Reserve

• Structural issues with interest rates:
  Esther George affirms the Fed is tackling a deep, structural problem, particularly with “something going on in the labor market” that current data fails to capture cleanly.
  • Quote:
    • “There’s something going on in the labor market... and yet you can’t really put your finger on is this change happening in real time?”
      — Esther George (00:50)
• Data Drought:
  Limited and unclear economic data complicates the FOMC’s decisions.
  • “Those cross currents of information and data are making it a tough job for the FOMC.”
    — Esther George (01:23)

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2. Lack of Consensus & Unclear Reaction Function

• FOMC Divisions:
  • Lisa highlights evident dissents and fissures within the committee, making it hard for investors to predict how the Fed will respond.
• Weighting of Labor vs. Inflation:
  • Esther points out that the committee’s focus has recently shifted toward labor market conditions as the trigger for policy changes.
  • Quote:
    • “In September, the committee came out very clearly and said, we’re putting our weight on the labor market... And this meeting, of course, we got the question mark, I think, of whether that narrative would continue.”
      — Esther George (02:04)

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3. Is the Fed’s Dual Mandate Evolving?

• Pressure from National Debt:
  • Lisa questions whether the Fed is juggling unofficial mandates, given the high deficit and calls for lower rates to ease government debt.
  • Quote:
    • “The idea that the Fed needs to keep rates low to assist the federal government’s debt position is certainly not one of its mandates.”
      — Esther George (03:14)
• Risk of Fiscal Influence:
  • George warns that growing government debt complicates the Fed’s job, intersecting monetary policy with fiscal pressures and potentially keeping rates higher.

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4. The Path Ahead for Rates and Policy

• Outlook for December and Beyond:
  • Jonathan and George agree that it’s unlikely clarity will be achieved by the December meeting due to persistent uncertainty.
  • Quote:
    • “That uncertainty looks like it is going to persist for some time.”
      — Esther George (04:16)
• Interest Rates on Hold or Cut?
  • The committee could leave rates unchanged, especially if uncertainty remains, but labor market weakness could prompt a cut.
  • Quote:
    • “If the data, however informal, however pieced together it might be, does not change that narrative, they could be inclined to continue that cutting cycle.”
      — Esther George (04:51)

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5. Tariffs, Revenue, and Fed Incentives

• Possible Supreme Court Tariff Ruling:
  • Lisa asks whether overturning tariffs, leading to revenue loss, would push the Fed to cut rates.
  • George responds it likely adds to uncertainty rather than giving clear incentive for the Fed to act.
  • Quote:
    • “If the federal government has to do something different with those tariffs... it is another, I think, reminder of why it is so important for policymakers... to be more forward looking.”
      — Esther George (05:40)

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Notable Quotes & Memorable Moments

• “There’s something going on in the labor market... and yet you can’t really put your finger on is this change happening in real time?”
  — Esther George (00:50)
• “The idea that the Fed needs to keep rates low to assist the federal government’s debt position is certainly not one of its mandates.”
  — Esther George (03:14)
• “That uncertainty looks like it is going to persist for some time.”
  — Esther George (04:16)
• “If the data, however informal, however pieced together it might be, does not change that narrative, they could be inclined to continue that cutting cycle.”
  — Esther George (04:51)

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Timeline / Timestamps for Important Segments

• 00:29: Introduction of Esther George & framing of Fed’s current challenges
• 00:50: George discusses labor market uncertainty and structural issues
• 02:04: Unclear Fed reaction function and focus on labor vs. inflation
• 03:14: Debate on dual mandate vs. fiscal pressures on the Fed
• 04:16: Persistent policy uncertainty through December and risk of shocks
• 04:51: Scenarios for rate holds or cuts in coming months
• 05:40: Discussion of tariffs, budget, and lack of fiscal foundation

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Tone and Takeaways

Esther George provides candid, pragmatic insights with a cautious tone, emphasizing uncertainty and the complex web of labor data, fiscal pressures, and policy ambiguity. She warns against over-reliance on incomplete data and underscores the challenges that fiscal issues (like deficit spending and trade policy) pose to the Fed’s traditional mandate. Listeners come away with a sense of national and Fed-level unease—persistent uncertainty in both data and direction.

Transcript

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[Jonathan]

News Let's turn to the Federal Reserve, recent dissents highlighting the lack of consensus of that institution as the central bank struggles with a data drought. The former Kansas City Fed president Esther George joins us now for more. Esther, we were just tracking that story with Mike McKay. I'm sure you were following along. Do you think this Federal Reserve is attempting to address a structural problem with interest rates?

[Esther George]

Yes, I do, Jonathan, and I think that's what makes this so challenging for the committee. You can't ignore the story you just heard, which is there's some thing going on in the labor market. Things are moving in a way, and yet you can't really put your finger on is this change happening in real time? Is this going to settle out to a more stable view of what's going on with that labor market? Particularly when you are looking at what I would characterize as easy financial conditions and many of the other traditional signs that would go along with this labor market data would lead you to think something different. So it is a, it is a challenging time, and those cross currents of information and data are making it a tough job for the fomc.

[Lisa]

And it's an even tougher job for investors to understand how the FOMC is going to respond to that data because the reaction function doesn't seem clear. You have a lot of dissent. You've got a lot of fissures on the committee, but you also have, frankly, a question of how much they're looking at the unemployment rate versus the actual total number of jobs and how much that's taking priority over inflation. Do you have a greater sense of what that reaction function is?

[Esther George]

Well, I do not, Lisa, and I think you see that in the discussion at the committee level, which is to say, where are we putting our weight? In September, the committee came out very clearly and said, we're putting our weight on the labor market. When we see this softening, we're inclined to bring our policy rate back to something that we are guessing is more normal than where it currently sits. And that narrative is held through to two meetings. And this meeting, of course, we got the question mark, I think, of whether that narrative would continue. So the information coming in and the fact that you don't have official data to back up some of those views is going to make this, I think, difficult for individual members to really reconcile their views and come to terms with that.

[Lisa]

Is this a Fed that has a dual mandate still, or does it have more mandates than that? And I wonder if it's also keeping interest rates within a reasonable level, especially with the deficit where it is, if that's an increasing factor, even if not verbalized in the back of people's heads.

[Esther George]

Well, it is. The idea that the Fed needs to keep rates low to assist the federal government's debt position is certainly not one of its mandates. Notwithstanding the pressure that you see coming from various corners to try to accommodate that, it is going to become, I think, an increasingly difficult issue that will intersect with monetary policy because we know that these higher debt levels, without some plan in place to bring those deficit spendings down, are going to put pressure on the Fed. It will put higher interest rates in front of them. Inflation issues will begin to become more dominant, I think. And so that intersection is a very difficult one for a monetary policy group that is assigned to judge labor markets and price stability in their mandate.

[Jonathan]

As to what do you think will be on December 10th, I've got no idea how much data will have. Do you think we can settle any of these debates by the time we get to the middle of next month?

[Esther George]

Well, it doesn't seem likely. And Jonathan, what you hope is whenever you're in a period of uncertainty and trying to weigh the risk that you don't get an unexpected shock to the economy. And again, I don't see anything out there that says we resolve this uncertainty. But I think that's why it makes it a difficult time for this committee to reconcile views, is because that uncertainty looks like it is going to persist for some time.

[Jonathan]

So, Esther, is that another way of saying that race might remain, might remain on hold for some time, at least until say, spring of next year?

[Esther George]

Well, they could, and you're going to have people argue for that for sure. But I also think the committee will have to wrestle with the narrative of the labor market signs of weakening, and that was the beginning of their rate cut. So the chairman's put the markets on notice not to presume that that cut is coming. On the other hand, if the data, however informal, however pieced together it might be, does not change that narrative, they could be inclined to continue that cutting cycle.

[Lisa]

Esther, if the Supreme Court overturns the president's use of IPA for tariffs, and you don't have that revenue coming in. And that isn't necessarily any kind of discussion on the inflationary pressure. If that money gets refunded, do you think that gives the incentive to the Federal Reserve, the fomc, to cut rates more aggressively?

[Esther George]

Well, not necessarily, Lisa. And the reason I think that is because I think this throws another log of uncertainty onto the fire. If, if the federal government has to do something different with those tariffs that then raised the prospect of where, where do we find that happening? Will it be sectorial? Is it going to be in terms of lowering revenues immediately or in the long term? It is another, I think, reminder of why it is so important for policymakers not at the Fed, but policymakers that are thinking about our fiscal situation to really begin to be more forward looking about what we face as a way to lay a foundation for future economic growth. Because right now we're in a bit of a soup that isn't isn't providing the kind of foundation that I think we need.

[Jonathan]

As the powerful final point. Appreciate an update from you as always, the former Kansas City Fed president Esther George there on the Federal Reserve.

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