Transcription
changed. Aggregate demand, however, is also boosted by reduced taxes on seniors and lower wage workers, balanced somewhat by cuts to entitlement spending and student lending.
Relative to a pre-tax law baseline, CA calculations using Congressional Budget Office estimates found a static $80 billion or so reduction in revenue and $130 billion or so reduction annual spending over a decade. Despite a greater reduction in spending than taxes, the literature consistently finds the tax multiplier to be larger than the spending multiplier. This implies an increase of actual output over potential of approximately $50 billion in the short run, or an increase in the output cap of nearly 0.2% of GDP.
This translates into an increase in the appropriate federal funds rate of around 0.1 percentage point under the standard approach to the Taylor rule. The balanced approach rule, which doubles the weight on the output gap and was favored by former Chairwoman Janet Yellen, would imply a 0.2 percentage point increase.
Returning to regulatory and energy policies, typically when a regulatory barrier is removed, there is an immediate increase in potential output, but it takes time for actual output to catch up. I expect recent policies to have this effect. Using the same estimates for TFP that I used earlier, this suggests a 0.2 to 0.6 6 percentage point of downward pressure on the output gap over the next couple of years. This translates to a policy rate that is 0.1 to 0.3 0.1 to 0.3 points lower under a standard tailor rule or doubly as strong under the balanced approach rule.
So I just threw a lot of numbers at everyone. To sum it all up, we have to first adjust our star relative to a baseline of factors relative to a baseline based on the factors I described. A variety of models reviewed by Jeanluca Beninu and others arrive at a median real estate for RSTAR of 1.3% in a range of around 1 to two 1 to 2%. Applying Oaken's law with a natural unemployment rate of 4% and PCE inflation at 2.6% the standard Taylor rule approach implies the appropriate nominal Fed funds rate prior to the forces considered today should be around 3.9%. A balanced approach suggests 3.6%. These are not all that far from where the FOMC has said interest rates.
Including the shocks I've I've considered, I get a new real RSAR that is 1 to 1.2 percentage points lower or near zero. That sounds low, but I think it's important to take these models seriously, not literally. And as I've said, I think these models sometimes don't do a great job incorporating policy changes of the type I've discussed at the frequency I need. Instead, I suspect existing backward-looking estimates are too high because they insufficiently account for recent changes to fiscal and border policies that are depressing ourstar.
We can also look to financial markets. My preferred market implied measure of RSTAR is the 5-year 5-year forward rate on US Treasury inflation protected securities. That's around 2.3%. Meaning the new real RSTAR would be 1.1% when applying new policy pressures. Including the inflation and output channels along with the median model implied RSTAR, the Fed funds rate should be around 2 to 2 and a/4% under the standard tailor rule. The balanced approach implies a rate of around 1 and a half to 2%. If we instead use the market implied RSTAR, these numbers would all be one full point higher.
To help correct for the risk that the model implied rate is too low, I weight its likelihood at 2/3 and give the market implied RSTAR a 1/3 waiting. I've given market pricing just 1/3 partially because I believe it is incorporating a policy premium to reflect uncertainty around trade policy. Using these weights results in an all-in appropriate Fed funds rate of approximately 2% under the balanced approach and 2.5% under the standard rule, although a simple summation of all these effects ignores issues of timing.
To be clear, I don't want to imply more precision than I think is possible in economics. Assumptions and approximations abound. Nevertheless, I must take out a position, and this is my best ballpark estimation. The upshot is that monetary policies well into restrictive territory. Leaving short-term interest rates roughly two percentage points too tight risks unnecessary layoffs and higher unemployment.
Thank you for this opportunity to share how I think about monetary policy at the moment. I'd be happy to take some questions. There's also, I guess we're not projecting it, but in the version of the speech online, there's a table that uh includes all of these things that you can probably access on digital media if you want. Thank you.
Well, it's lovely to be here, Governor Myron, for your very first public speech as a member of the uh Fed board in Washington. It occurs to me that the last time that you and I were in a setting something like this, you had quite recently been confirmed as the uh head of the Council of Economic Adviserss at the White House, but you had an unexpected moment in August. Can you share with the audience uh the day that you were offered the nomination to join your uh to join the Fed?
Oh, sure. Um so uh so that morning I had been for I don't know an hour and a half or something in um in a secure uh facility that you go in to discuss classified information. And then I came out of it and uh my phone had like I don't know like five or six missed calls uh from people whose calls I usually answer immediately. And uh um I thought, what's what's going on? Uh you know, something something must be up. Um and then I'd gotten wind of a potential personnel action happening involving me. Uh that it wasn't bad. And so my initial thought was that I was going to be given uh I was going to be asked to run the Bureau of Labor Statistics as a second job. Uh that's what I initially expected when I walked into the Oval Office that day. Um but uh yeah, that's that's not how it turned out.
Yeah, they couldn't find you. personnel decision could be firing or uh would you like to be a Fed governor? Yes. So that's that's what it turned out to be. Yeah. Yeah.
So you're on leave from working for President Trump where in your job you provided economic analysis for the White House. Uh Trump says and the White House says that the US economy is doing great. They recently put a post up on the website that talks about how Americans are spending like never before. They are earning more and the industrial renaissance is here. Yet, as a Fed governor, last week you wrote down a forecast for a total of 150 basis point cuts in three meetings, which is usually panic territory. How can both points be true at the same time that the economy is doing great, but a rapid interest rate reduction is necessary?
Yeah. So look, I mean, as I said a few moments ago, I I I expect the second half of the year and into next year to be better than the first half of this year. Um, in large part because a lot of the effects of of the tax bill are going to be kicking in and, you know, trade uncertainty is dissipating. But I view a lot of that as also expanding the supply side at the same time as the as the demand side. And so, as I said, if actual output and potential output are moving out at the same time, it doesn't imply a necessarily hawkish or much tighter policy because the outlook cap isn't expanding. if they're both moving at the same time. Instead, my view is that policy is is is roughly two points too restrictive, which is considerably restrictive. And uh even though I am expecting growth to be a little better in the future, that could get derailed uh unnecessarily so and create an output gap where one need not exist uh if we don't get policy closer to neutral.
Now that said, because of the distance to neutral, my view is it's better to move there more quickly than less quickly. It's not a panic, you know, I think a panicky move would be something like 75 basis points or even more. Uh I don't I'm not I'm not panicked. I just see that the risks grow the longer you remain significantly above neutral.
You're you have company among your new colleagues at the Fed in your neutral rate forecast, but nobody wants to move quite as quickly as you do. What is it that concerns you about the labor market?
Well, we learned that the first half of the year was not as strong as we would have liked it to have been. uh we learned that the labor market continued to lose momentum throughout last year and and into the first half of this year. And that to me means that even though I think that growth is going to pick up for various reasons, there are concerns that hey, things had been moving in the wrong direction and if you keep policy this degree of restrictive for too long, you're not going to allow things to move in the other direction. And so you're going to create a situation when Apple cap expands. And so in my opinion, it's imperative that we get closer to neutral quickly. And so I thought three, you know, sort of a series of 50s to recalibrate interest rates was the appropriate policy.
And you don't see that as panic? No, I don't see that as panic. I mean, if I were panicking, I would tell people I were panicking. Um, all right.
A lot of businesses say that you you talk in your speech and just now about how rates are too restrictive, but a lot of businesses that I've been uh hearing from reading different reports and analyses show that some of the pullback in investments is not due to uh the restrictive rate environment but has to do with policy related uncertainty. How do you counter that?
Well, I mean, I think that uh you know, there's a lot of different interest rates in the economy and a lot of different types of investment and so for sure there are parts of the economy that have been affected by that and as I said before, I do think that that that type of uncertainty is not totally gone, but I think it's certainly less than it was a few months ago. However, if you look at other sectors like housing, you know, I think it's very clear that rates are that rates are the, you know, that rates are the primary impediment to to investing in in housing and and building more uh at the moment. Um, certainty, I'm sure everyone's going to go back and look at the speech and the table.
Can you break down just a little bit what your economic growth forecast is for 2026? Where do you see the economy ending the year?
So conditional upon economy, sorry, conditional upon uh on on getting rates closer to neutral. Uh as I had in the SE, I think growth is going to be in the you know, sort of in the mid 2 area.
And where do you see the federal funds rate? Uh again, in the mid in the in the mid-2 area. So if your forecasts are right, it might be time for rates to go up at that time.
Uh no because some of the so so there's a difference between so in the speech I said two to two and a half% was the correct rate but my dots actually have a slight divergence from that because some of the effects kick in differentially over time and so there are some effects that you know I think will be kicking in immediately but then sort of the rent disinflation accelerates over time and the output gaps kind of ameliate over time as potential sorry as actual catches up to potential and so there's a so so it's not the case that you would sort of just collapse down immediately to two to 2 and a half% % and then gradually raise back up over time. Um because of that there's actually there there's you know my view is get relatively close to neutral quickly and then there's a little bit more cutting next year and then a little bit more cutting the year after that and then sort of back up to neutral thereafter.
So I want to talk to you about uh a paper that you co-wrote for the Manhattan Institute last year. It came out in March of 2024. you name Leil Brainard specifically uh criticizing her for being among the central bank officials who have rotated between the White House and the Federal Reserve. Of course, that officials are most of them are nominated by the president and so there's a natural uh link there. You named that Brainard specifically took one single weekend between a political role at the White House and a role as an independent member of the Federal Reserve. A quote that jumps out from the paper is to pretend that no one to pretend that one can easily shift between highly political and allegedly non-political roles without letting political bias inform policy is at best naive and at worst sinister. Governor Mein, how is your being on leave from working directly from President Trump different?
Yeah, so first let me let me address let me let me go backwards with that. Right. So, so, so first the on leave is just because it's just a 4-month job and if it were a longer than four-month job, I would of course resign, you know, immediately. If there was some reason that I would think that I would be in this seat past January, I'd resign now. Um, at the moment, I don't have such a reason. Um, you know, and and it the I think that there's no question that the Fed had previously uh gotten over its skis in terms of politics. And I think my my analysis is borne out by the history. The Fed decided that it was going to be the organization to take on climate change and to join various international networks for greening the financial system. Um the Fed decided that it was going to get involved in credit allocation deciding that this sector of the economy is worthy of credit and this sector that we don't politically favor is not worthy of credit. the Fed decided that it was going to intervene in heavily heavily political issues of uh of of racism and police. Um and Fed officials started giving speeches about police brutality uh and arguing that we were over incarcerated. Um the you know the Fed decided uh that it was going to become more and more political along these lines and I viewed that as a significant problem. That's the context in which I in which I in which I wrote that. Um the proposals in that p in that paper are a package deal, a system of checks and balances and everything that I wrote in there requires the entire system of checks and balances to be effective. If you just took one check and you ignored all the others, all you do is empower the one that you're protecting. Um so it's a it's a all has to be viewed in the context of a total system as opposed to sort of in isolation.
Now I was asked to uh take this role by the president of the United States. Um I took the role. I will do the best at it that I possibly can. That means forming my forming my own views independently based on what I think is appropriate economics, based on what I think is appropriate analysis and because of exactly the things that you're discussing are why I want to be so transparent and as transparent as I possibly can be. I didn't just make the numbers up for the SE, right? I just read everyone the analysis and I know I probably bored people to death with with this many numbers, but the reason why I did so is that people know these numbers aren't just made up. There's a reason every single line there has a number on it. And every single line has an elasticity, a size of the change, and then the policy outcome, which is basically the two multiplied to each other. And if you're going to disagree with me, I invite you to disagree with me. Tell me, do you think the elasticity is wrong, or do you think that the size of the the size of the the changing um the changing parameter is wrong, the changing variable is wrong, right? Because you may think that, you know, that there's other estimates of the effects of immigrants on rental prices, on rents, right? That you know, are higher or lower, and I should be using a higher or lower realisticity, right? like please have the conversation, right? But I am being as transparent as I possibly can precisely because of the concerns that you just listed and I invite everyone to do so.
Well, there's nothing boring about what's coming out of the Federal Reserve these days, I assure you. The president, let's talk about the context. You shared the context uh against which you wrote the March 2024 paper for the Manhattan Institute. The context right now is that the president has said many times that there he will have a majority soon at the Fed. more of his appointees than anyone else. A lot of academic studies show that a loss of central bank independence is often associated with higher borrowing costs. Do you think that there is a risk to the president being so directly involved in selecting governors who have a certain view on rates? Let's set aside DEI and climate risks, but we're talking monetary policy where the rate path should be.
Uh, you know, again, the president is entitled to his views on monetary policy. I think everyone's entitled to their views on monetary policy and I'm delighted to hear views from all sort I think it's very important to avoid group think. That means hearing all views from all perspectives and I'm very happy to hear the president's views but at the end of the day I make my analysis based on my own understanding of economics and how the economy works and I just read it all out loud to everybody. Uh and I would and I would hope that everyone else who is appointed to the Federal Reserve does the same. uh you know it presidents have have always appointed people to the Federal Reserve who thought about uh policy in a way that they wanted to appoint people to the to the Fed.
You did say on Friday uh on live TV that you had spoken to the president the day that you were confirmed. That was just a congratulatory call. You said yes. He called me to congratulate me after I'd been sworn in. If I'm curious what you would do if in a phone call the president directly asked you to vive for a specific decision at the Fed.
I would respectfully listen to his view and his analysis of why interest rates should be wherever they think that they should be. And he has been very forthright in his view, right? Which is not exactly the same as the numbers that I put out there. There is a difference, right? Um I would respectfully listen to his view. I would consider his arguments, consider whether they had any merit and then I would make up my own mind based on my own analysis. And I would do that whether it's the president or anyone or any other pol you know uh political actor.
Would you share publicly if that conversation were to take place? Um well you know as you can imagine I've had a number of conversations with the president about the economy about economic policy over the last you know nine months about the economy economic policy. A number of those conversations have touched on the Fed also. He's never asked me to set policy in a specific way. So in your He's never asked me. It's never happened.
From my understanding, uh, on the day that you were nominated, you were interviewed, I believe, by Scott Besson, the Treasury Secretary, Susie Wilds, the White House chief of staff, and the president. Did the rate path come up in those conversations?
No, he never asked me. He never asked me to set policy in a specific way. He shared his view about monetary policy. It's the same view he says on TV several times a week. You know, there's nothing about his view about monetary policy that I know that you don't know. Um but he never asked me to set policy in a specific way. So in nine months. In nine months.
So last Monday night you're confirmed by the Senate. Tuesday morning you had a phone call from the president and then you walk into your very first FOMC meeting. Can you share just a little bit about what it is like to walk in? It was a historic meeting on Monday. We didn't know who was going to be in the room. Would you be confirmed? Would Lisa Cook still be able to to participate? What was that like?
It was uh it was cordial. It was collegial, it was friendly, it was respectful and I was very appreciative of that. Everybody was very welcoming. Uh, you know, and it was a good discussion and you know the way that it works is the staff make their presentation, participants are allowed to ask the staff questions, participants read their views of the economy and about appropriate monetary policy and there was a forthright exchange of views and you know lots of a diversity of views and I appreciated that conversation. Everybody was just very kind and uh you know that a lot to me and uh you know thing which uh which is that the way the they have their view and they try and convince other people of their view. Now, I don't think that persuasion actually tends to happen at the meeting because let's face it, with 19 people in just a few hours, you're never going to really reach a consensus on on a lot of issues in that short amount of time conversation. It happens in between, right? And that's what I'm trying to do today, right? Is I'm trying to tell people there's a reason why policy rates are too high. It's because there's been substantial changes in immigration. There's been substantial changes in tariff revenue. And these need to be incorporated into our economic models because they're relevant for how monetary policy is set. And that's how I'm going to approach my time at the Federal Reserve, uh, is to lay out my economic arguments as clearly and transparently as I can and hope to persuade people by the force of the economics. I don't think that the idea that population growth affects neutral interest rates is a controversial view. This was a universally held accepted fact. Sorry, probably nearly there's always an exception. Probably a nearly universally held accepted fact five or six years ago. Everyone would have almost everybody would have agreed. Sure, population growth affects neutral interest rates. Countries with high population growth have high neutral interest rates. Countries with low population growth have low neutral interest rates. Well, we just had a major swing in population growth because of the changes in border policy. And in my mind, it's incumbent upon us as policy makers to think about that when we think about where appropriate monetary policy should be.
Governor Martin, you're talking about your approach uh while you're at the Fed. you have a few short months and uh it seems like a little bit of a caretaker role that should be taken seriously. It you you've also come out of the gate quite strong. You had your descent last week. Um we saw you on the airwaves on Friday and now you've laid out in detail your views to be transparent as you said. What should we make of your approach? Are you hoping to spend these few short months persuading on a board that is run by a chair whose ultimate job is to forge consensus?
Yeah, I mean, look, you know, I'm I think at the end of the day, you know, I just try and think things through myself and ask questions uh to try and figure out where consensus might be complacent and wrong. And I've always done that. And I think you sort of see that on, you know, some of my previous writing on tariffs, for instance, right? um you know the idea that you would be able to implement these things without significant retaliation was once very out of consensus and now I think a lot of folks are coming along to that direct you know sort of to that view. Um, the same is true of this. I will be as independent as I can in thinking through monetary policy. And that means not only in a political sense, but in an intellectual sense as well on the FOMC. And I view my job as trying to provoke an interesting discussion uh that will help uh that will help the FOMC arrive at uh arrive at arrive at clear clear understandings of the way the economy works and where monetary policy should be set. Um, it's a few short months, but uh, you know, I've got, uh, I think a lot of a lot of content to work through in those months.
You shared that you're using CE data right now, but you're looking forward to working with Fed staff as well as you move forward. Uh, you other data points that you're looking a little bit yours on the power of a disscent. We saw governor's dissent against Powell or the board. Uh a few months prior, Governor Waller was on Bloomberg TV actually talking about how he views disscent as you you do it once and then you've made your point and maybe you back off and and see how the economy develops and how the discussion goes. First, I'm curious your views on that and then I'm curious about how you're going to view the October meeting.
Yeah, I mean look, you know, I I arrive at a view. I I do a lot of careful thinking. I arrive at a view and then I will sort of continue, you know, until my view changes. I will continue arguing for that view. And if that means continuing to send that means to I don't uh you know look I will but I voting with the consens even if I disagree with it uh to to be more important than trying to argue for what I consider to be the correct policy. Um, and if that means that I keep on being, I think, you know, sort of sticking out from the crowd, uh, and sort of being more individual in my views and more idiosyncratic in my views, then I think than maybe the rest of the FOMO, then that's the way it's going to be. I'm I'm not going to I'm not going to vote for something I don't believe in just for the sake of creating an illusion of consensus where where there is none.
So depending on how the economy unfolds and what data we see between now and the end of October, you are willing to be the lone descent again in October with 50 basis point uh dot on the plot or are you hoping that more people join you?
Yeah, unless something unless something changes to that would that would lead me to change my economic view, right? I mean something could change that would make me that would make me change my economic view. You know, there's any number of things that could that could lead that. But as long as my current view remains my my operative view, I don't see why I would vote for anything that's not my view.
you have a way of getting the attention of the world of finance and economics with the words and phrases that you use. A few months ago, it was the notion of a Mara Lago accord that had a lot of people buzzing uh especially in the Bloomberg world that I live in. And now it's this concept of a third mandate which or is a word or phrase that you did not actually use. Uh let's talk about this. In your testimony, you brought up the uh a piece of the Fed legislative mandate. you noted the moderate long-term interest rates that comes right after the duel that everyone looks at. Do you see the Fed using securities purchases to reduce long-term rates?
Sure. So uh, let me let me address the the two things you mentioned are related, right? And so, like I just have a personality that I like thoroughess and I like to, you know, sort of explore all the angles and I like to be exhaustive if I can. And uh when I wrote that paper on trade policy uh last year uh before joining any policy role um I was attempting to be exhaustive and list every policy I could possibly imagine as being able to affect the as being able to reduce narrow the national accounts. Um I never advocated for that Marago accord. In fact it wasn't even my idea. I was quoting somebody else's idea uh and gave him due credit in the citations and in the text uh as a result of it. and I underlined that it wasn't a policy proposal. It wasn't sorry it wasn't policy advocacy. Um but I like to be thorough. Um and so I included it. Uh and it was uh you know it continued to haunt me for many months after that. Um despite despite that the this this third mandate stuff is the same thing, right? like, you know, like I take a job seriously and if I get asked to go to the Federal Reserve uh board, I will look up the statutes that and I'm not a lawyer, but you know, I can read. Um, and so I'll look up the statutes that govern the Federal Reserve Board and I see that the Congress assigned to the Fed uh stable prices, maximum employment, and moderate long-term interest rates. So, when I'm testifying in front of the Congress, I will just repeat their own words back to them. Um, there's nothing more to it than than than that. uh you know and I think most people generally leave the third leave the third part out because they think that it's implied by the first two like that if you are going to achieve stable prices and you're going to achieve uh maximum employment then uh moderate long-term interest rates will necessarily fall out of that. Um I think that's what most people typically do. They they leave it unsaid for that reason. But just because I'm a thorough person um and because I was in front of the Congress, I wanted to be respectful of their words and not my interpretation of their words.
There's been a lot of talk about the balance sheet. Uh, Treasury Secretary Scott Bessant has laid out in detail in a a lengthy essay about the Federal Reserve and and his views on it. We've heard about it from Kevin Worsh, a former Fed official who is in the running to possibly be nominated as Fed chair. I'm curious what you make of Besson's criticism of the Fed's large uh balance sheets and mission creep that he points to.
So, um, you know, I've also been very critical of of Mission Creep. uh we talked a little bit about before in the discussion about fed independence. Um the balance sheet I believe the became uh is in particularly necessary. The Fed was still buying uh mortgage securities when housing prices were up double digits or 20% I think 20% year-over-year um in the wake of the pandemic. Um, so I don't think there was a need for the balance sheet to get as large as it has. Um, I think the Fed has been doing a good job of bringing it of of of reducing it. Um, in my mind though, focusing excessively on the size of the balance sheet is more like focusing on on on the the symptom rather than the cause. And like I said a few days ago, um, you know, my view is that the balance sheet size that you ultimately need uh is ultimately falls out of the regulatory framework. um because if the regulatory framework requires a certain amount of reserves in the system, uh the Fed needs to provide that size of a balance sheet in order to um in order to allow the banking system to have the capital it needs under the regulatory framework. And so my view is that sort of focusing on the um on the balance sheet size is focusing on the wrong on the wrong thing and that it's better to focus on the regul and to get the regulatory framework that you want correct and then the right size of the balance sheet will kind of fall out of that.
Do you think that the there should be more done to focus on long-term the way the president says balance sheet perhaps?
Uh no, I mean I think that you know historically the that affects financial a broad array of financial conditions including long-term financial sorry including long-term interest rates. Um and as long as you are, you know, sort of not near the zero lower bound, um you know, I I think that there's no need to sort of move towards trying to capture additional instruments.
So, you agree with the that the Fed has a dual mandate. There's confusion out there after you listed, like you said, read back the law to Congress, that there's now a third mandate policy, espec especially with the president talking about lowering long long-term interest rates.
Yeah. Well, look, Congress gave the Congress gave the Fed those words that I read that I read in front of them and that you quoted before. Now, as I said before, I don't think moderate long-term interest rates are necessarily, you know, action item at the present, right? Like I'm focused on bringing inflation down sustainably to 2%. I'm preventing uh deterior market and an output gap. Um, and just, you know, an item of completeness, but it's not for me to tell Congress they didn't say something they said. Sorry, they didn't enact something they enacted.
One thing that the president is acutely focused on is h housing costs for the average American. Is there anything more that the Fed could do to influence mortgage rates or just alleviate some of that pressure in the economy?
Yeah. So, as I said a moment ago, you know, the Fed controls the short-term interest rate, the overnight interest rate in the economy, right? and financial conditions more broadly across a range of items including longerterm interest rates, credit spreads, the dollar, mortgage rates, right? They all sort of uh can be responsive to changes in short-term interest rates. And so if the Fed continues to ease policy, uh presumably that will uh bring mortgage rates down to an extent, right? Bringing mortgage rates down will help uh you know unlock additional home building, will help unlock additional investment in housing. Um however uh you know the degree to which mortgage rates come down versus other financial conditions loosening uh you know I don't I don't have a firm a firm sense of exactly which which one is being pulled at this given moment.
Talk to us a little bit about uh the Fed's inflation target. Do you think that the 2% range is the appropriate uh goal?
Sure. So first let me reiterate um my commitment to bringing inflation sustainably down. Um, second, let me say that um any perspective changes to an inflation target should only ever be entertained after a uh after a material period of the Fed achieving its inflation target to avoid any appearance of goal posts. umain that idea uh after after being target uh for time. You know, my view is that uh measuring inflation is incredibly difficult and um you know, when you look at when you when you get into the guts of how inflation is measured um there's all sorts of things that you know are strange, right? So, for instance, you know, probably a lot of people in this room in financial services, right? So when the stock market moves higher, um financial managers, advisers, asset managers, they get more income because the base is higher, right? And it's sort of a constant fee times a higher base, right? Uh the way that inflation is calculated then generates um inflation in the portfolio management section of the personal consumption expenditures index, right? So the fact that the stock market goes up um mechanically leads to higher inflation the way it's measured, right? Um, so you know, obviously if you'd if you'd uh took that literally, the Fed would hike in response to that, right? Um, so my view is that that's sort of like a weird that's a weird thing, right? And I I just think that inflation is very very difficult to measure. And so having a very precise inflation target like that can lead to excessive micromanagement. Um, instead if you look before 2012, uh, the Fed didn't have a formal target at all. They pursued low and stable prices, right? Um, to me, that's an interesting way of doing things. Also um you know the inflation target was really introduced in 2012 as a bullwark against deflationary risk in the wake of the great financial crisis uh when the Fed was was at the zero lower bound and felt the need to further credibly enforce a commitment to positive inflation. Um and so you know I think there's sort of very interesting questions uh about how would you actually want to set monetary policy over the longer term. Um, but I do want to emphasize that these questions should only ever be entertained in terms of changing the framework after the Fed has successfully achieved its target for a sustained period of time to make sure that there's no appearance whatsoever moving goalposts.
Governor Marin, thank you so much for taking my questions. Great. Thank you all very much. Let's start with a round of applause. Uh thank you Steve for your introductory comments uh for um here in the room and online that the remarks that were delivered today will be available on the website and the on the club's website too so you can link directly to them to have a firsthand uh copy of the remarks and also the slides that came with it. So, thank you again for all the time today. We're also pleased to announce on behalf of the club and its leadership that we have a robust lineup of speakers on t for this autumn. If you turn your programs over, those of you in the room, you can see a list of of those that are coming up. And on Zoom, you can see on your screen just a couple to remind you. September 29th, we have Wild Sawa, the CEO of Shell. Uh October 30th, we have Jameson Greer, the US trade rep. He was scheduled early this summer and had to cancel to go off to Switzerland to the discussions with the Chinese trade rep. So, we're glad to have him back on the schedule coming to fill us in on what's going on with trade. And we'll also be updating you on other events as they present throughout the fall. Let me just also take a minute now. We conclude to thank and recnize the 431 members Centennial Society who have been so supportive of the club in the past provides the financial backbone club. Thank you for attending today. Uh we appreciate your attendance and those in the room enjoy your lunch and for those uh joining us on Zoom, thank you very much and we'll see you soon. Thanks.