Scarlett (2:52)

All right, let's turn now to the Federal Reserve. Rich, President Trump saying of course that he has finished interviewing candidates to serve as the next Fed chair. And earlier London business school lecturer Rebecca Hamkes appeared on Bloomberg Surveillance where she gave her take on who Trump may choose. Take a listen. We've really had different styles of leadership over the past decade or so. You know, Chairman Greenspan ran a very centralized, he was a much different leader. Ben Bernanke went much for consensus. We didn't have Janet Yellen in for very long. We're learning a lot over what Chairman Powell is doing. You know, and we can handle that. You know, the Fed is an independent body. Different leadership styles are to be expected and we've seen success from different ones. You know, I'm not quite sure what President Trump is looking for in the new one, but we do know that he very much values loyalty, probably part of the decision. Rich, how do you size up the remaining front running candidates and how do you think President Trump is going to size them up?

Rich Clarida (3:46)

Well, of course, only President Trump knows where he's going to land. What I would say is I know all of them well. It does appear as though Kevin Hassett and the President have decided that perhaps his best role is to stay as the National Economic Council director. So that leaves Governor Waller, Kevin Warsh and Rick Reeder. I know each of them well. I think each of them would an effective Fed chair. But they bring different strengths and backgrounds to the, to the role. Chris Waller is a world class macro economist. He's also a good forecaster and good communicator in the case of, of Kevin Warsh. Kevin Warsh was a Fed governor. He's had very thoughtful and, and interesting things to say about changing the Fed as an institution and in particular thoughts on the balance sheet. And then finally Rick Reeder is a very respected legendary investor in financial and obviously would bring a lot of connectivity to, to the bond market. So all three bring something a lot to the table. It's really going to be the call of President Trump and we'll see where he ends up.

Scarlett (4:54)

At this point when any of those picks surprise the bond market.

Rich Clarida (4:58)

I think right now it's pretty even in the betting odds, I guess right now what would be a surprise? Would there be two surprises? One would be if, if Kevin Hassett decides and the President decide they do want him at after a week ago saying no, then of course there is some probability that Scott Besant does it. He would obviously be an excellent and very effective choice. But again, they've indicated that they the president wants Secretary Bussen to stay at the Treasury. But I think among the other three, probably right now the odds of Waller are a bit lower simply because he doesn't seem to have that connectivity to either the President or the treasury secretary.

Scarlett (5:42)

And of course, personnel is policy when it comes to the Federal Reserve, which is why the president is so intent on changing the folks there. The Supreme Court this week heard arguments in the Lisa Cook case for the governor. They gave no ruling, but the justices do appear to be wary of President Trump's effort to fire her. What would I mean, do you expect any kind of change in the board of the Fed based on the Lisa Cook hearing, or is it safe to, to say that should be in place through the first half of the year?

Rich Clarida (6:12)

Oh, I, again, not a legal expert. I just do economics. But I talk to them. And, and my sense from all the reporting, including by Bloomberg, is that the justices, both, you know, the more liberal and more conservative justices seem skeptical of the White House argument that, that, that it had met the standard of a four cause removal. And so I think there's a very high likelihood that Lisa Cook will continue in this role, you know, throughout certainly much if not all of this year. I mean, legal scholars seem to think that one likely scenario is that the Supreme Court merely rules narrowly that she cannot be removed and bump it back down to the lower courts to finally and indeed many justices indicated that they thought that the process was a bit rushed, indicating they would have preferred it to work through the lower courts before reaching them for final judgment.

Scarlett (7:13)

Do you feel more or less confident in Federal Reserve independence this week?

Rich Clarida (7:20)

I'm confident in Federal Reserve independence. That's clearly what Congress intended in terms of the way the Fed, the Fed is set up. And I've also said, including when I've done shows on Bloomberg, that I think an important factor that supports Fed independence is the financial markets and the bond market. And in particular, politicians who want low interest rates would not be getting low interest rates if the markets lost confidence in the Fed's inflation credibility. So, so I am, I am confident that that Fed independence will continue and, and be robust.

Scarlett (7:57)

And that is something that Jay Powell is extremely concerned about. Clearly, given the DOJ's subpoenas investigation into his remarks. How does the Fed chair address the subpoenas in the post decision Q and A on Wednesday because I feel like it threatens to take over the entire proceedings.

Rich Clarida (8:19)

He will be asked that. I think he will have a crisp answer when he's asked it initially and I think he'll stick to that answer. Probably not really wander too far away from what he said in that two minute video that was released a couple of of weeks ago. I don't expect him to belabor it. I think he'll have a crisp answer and he'll he'll try to move on would be my guess.

Scarlett (8:42)

All right, Good stuff, Rich. Always appreciate your joining us, Rich Claire as the economic adviser pimco, and of course a former vice chairman at the Federal Reserve as well.

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