Transcripts For CSPAN Federal Reserve Bank Of St. Louis President On Monetary Policy The Economy 20240714

[indistinct conversations] ladies and gentlemen, welcome to the press club and welcome to the National Economists club 2019 summer signature event. I am cliff waldman, this years president of the National Economist club. I am happy to say that we are , our weeklyter year Lunch Program is enjoying great attendance, we have a rich diversity of speakers that reflect the wonderful intellectual diversity in our field. Today, we come to one of our two major events of the year, our Summer Signature Program and i need to think two friends, to bank sponsors who have made todays rate event worthwhile. Inforof all my friends in um. A researching and Consulting Firm that has been open for 52 years and embodies the great tradition of innovative Economic Research at the university of maryland. Secondly, our friends at the National Association of realtors. Since 1908, they have been the voice of the Real Estate Community in washington and provided some invaluable economic data, Economic Research and in that critical sector of the economy. With that in mind, with those support organizations supporting us and this large and distinguished audience behind us, we have come to a moment. I have to tell you, i cannot imagine a better marriage of a moment and a speaker than what we have today. Is a man who embodies the best of our field. One of the joys of doing this and it is a hassle putting together an event like this, one of the joys of doing this is not just to introduce the speaker but to think about what makes a person unique. Theory,used economic highlevel economic theory to powerfully propel the thinking of the Federal Reserve forward in a way that will then if it all americans, that is benefiting allamericans. At the same time he is very much and tech grow and a man of the people who are affected by his policies. He is of course the president and ceo of the st. Louis Federal Reserve. He also oversees the Federal Reserves a district including activities at st. Louis headquarters and branches in little rock, arkansas, louisville, kentucky, and memphis, set memphis, tennessee. He is a noted economist and scholar. Every time he publishes a paper, i think the thinking on the fomc moves forward. Early in his tenure, the lord talked about the possibility of deflation in ae paper. He argued strongly for something that may seem like common sense but i have not heard before. We buyliberations should the data, by the need. During the financial crisis he advocated for inflation targeting, something that may have saved a lot of us. He is an active member in his community. He sits on the board of trustees of the united way, the board of directors of the st. Louis regional chamber, and the board concurrence of the academy and leadership and a list of other things we dont have time to get into. He is a native of lake forest, minnesota and received his doctorate in economics at the university of indiana at bloomington and holds a bachelor of science degree in quantitative message methods and Information Systems from st. Cloud university. Let me tell you how our program is going to work today. President bullard will speak. After that my colleague will do an interview with him. Ed is a noted economic correspondent, a longtime Federal Reserve expert, and a past president of the National Economy economists club. We will spend some time taking audience questions. We ask respectfully because president bullards time is limited that you keep your questions concise and we will do our best to address them respectfully. Bullard, wesident are grateful for your time. Waitingery aware of the us of the moment and we look forward to your insights. Ladies and gentlemen, jim bullard. [applause] gosh, what a great introduction. I think i will just a down because it can only be downhill from here. I do appreciate the opportunity to be here at the National Press club and in front of the nec and i amg forward to looking forward to hearing your comments on current Monetary Policy or whatever you want to talk about about the u. S. Economy. I called this a sea change in u. S. Monetary policy so hopefully, i can convince you of the dramatic changes that have withdy occurred in 2019 respect to u. S. Monetary policy above and far beyond the rate cut that we had just last week. If you dont want to listen to the whole talk you can read the slides. We made significant changes in Monetary Policy which many of you are aware, beginning in january of this year. Those changes were made in anticipation of Slower Growth in the u. S. Economy during 2019, which is materializing. I will talk about that during the talk here. But also in anticipation of heightened uncertainty with respect to trade policy, so i think we anticipated the idea that trade policy was going to be volatile, currently, and Going Forward across the forecast horizon. I think we could do more at this point, but we have already done a lot so what i would like to do is take some stock of what we have already done and see how that impacts the economy and then make decisions Going Forward. That is my main point here. The third bullet point. We will talk about that in detail. May be too much detail as i go through this talk. Placementntime, pressures are muted in the u. S. Economy. I will talk about that. We have yield curve issues that i think are still with us. Were looking for those two get better let me just talk about this argument about a seachange in u. S. Monetary policy and review what has happened since late 2018 when the story begins. In 2018, the Interest Rate environment was much different than it is now. That is my point, i guess, to the extent of what i have, and i do have one. I want you to focus on just the two year yield, two year treasury yield, because the two year treasury yield embodies both the current level of the policy rate, but also the immediate outlook for the policy rate. If you look at the two year yield as of november, early november last year, it was almost 3 . November last year, it was almost 3 . The the 10 year treasury was trading to yield about 3. 25 . It was a different Interest Rate environment. The 3 on the twoyear reflected the fact that the policy rate had been increasing through 2017 and 2018, and that the committee was projecting further increases in 2019 and 2020. Spread between the two year and 10 year. That was the situation at the beginning of the story. We raised the policy rate at the december meeting and projected further increases in 2019. Then the story began to change with chair powells comments at the American Economic Association Meetings in atlanta on january 4. Gradually, through the First Six Months of 2019, the committee started to project less and less in the way of policy rate increases. We also put together a plan to cease the runoff of the balance sheet, which is fully being implemented as of our last meetings decision. We did not change the policy rate at the june 19 meeting, but we strongly suggested that we would that a rate reduction was forthcoming. At the meeting, that we had last week, we went ahead and followed through on that rate reduction. So, the main point here is that the whole Interest Rate structure is dramatically lower, given the seachange. If you look at the twoyear treasury, it was trading to yield at about 1. 25 percent. That would be a decline of almost 125 basis points from the early november reading. Im pushing back against people, maybe some of you, who said oh, the 25 basis points, that is not enough in this environment, and boy, that is a small chain and that will not move anything. No, that is not the way to read this. There has been a seachange in Monetary Policy. A very large movement which i would characterize by this change in the twoyear, because not only is the level of the policy rate changed, the outlook for the policy rate has changed and that is what the twoyear is telling you. It is combining those two things together. 125 basis points lower. Things are moving quickly here. Even today, the twoyear, 10 year spread is still positive. Thats because markets are probably expected more action from the committee. The point is that the structure of shortterm rates dropped by about 125 basis points due to fomc action. The longerterm rates fell in tandem. Most of the time when we are describing this to clients and customers, we would say that is more important for investment decisions, but this is a case where the longerterm rate came down in tandem with a short rate. Here we are providing more Monetary Policy accommodation than we did late last year. Bottom line, u. S. Monetary policy, quite a bit more accommodative than it was. Furthermore, lets channel our inner Milton Friedman here. There are long and variable lags in the effective Monetary Policy on the economy. These are developments that just happened over the last six months or so. You would not expect them to show up in the macroeconomic data. But i would expect them to begin to show up in the second half of 2019, about where we are now or later this year. In the first half of 2020. That is when i with think the maximum impact of the seachange in Monetary Policy would occur. Here is a picture that shows this whole sequence of events. You guys have this picture etched in your mind anyway, so you know this. It goes to november 8, 2018. The first vertical line, all the way to the june 19 decision, and again, the june 19 decision, we did not actually lower the policy rate at it sent a strong signal that we would lower the policy rate at the next meeting which we followed through with on july 31. I would not necessarily say that the right things do not happen after the july 31 meeting. That decision was effectively made more or less of june 19 meeting. Anyway, no matter how you want to look at this, this is a big change in u. S. Monetary policy. Let me talk about some of the conditions that drove this. I think the biggest one is probably just that as we have been anticipating for a long time, the u. S. Economy would probably slow down to its potential growth rate. We are talking about an economy that is growing at an above potential rate of growth. I am sure you are all predicting it, that it will slow down to the potential growth rate Going Forward. The revised figures on gdp have the economy growing at 2. 5 in 2018. 2019 growth has been expected to be slower, although i will hold out a little bit of idea that maybe 2019 will not be worse than 2018 as far as growth. I think there is some potential. It is not my base case, but a potential for growth to be 2. 5 or even better in 2019. We will see if that holds up or not. Part of that might come from more accommodative Monetary Policy as i have described it. We have had this key risk on the horizon, and all of you have been coping with this too, that trade uncertainties might cause the natural slowdown to be sharper than anticipated. And you would get something skirting around 1 growth or Something Like that. Here is a picture, i love this picture, so i will dwell on it for a while. This is a picture, starting in march 2017 and continuing out over the forecast horizon. This is the u. S. Real gdp growth rate. It is measured from one year earlier. It has moved out a bit compared to the way we usually look at it. The blue line is the actual data. The dotted line on the lefthand side is the march 27 2017 fomc projection for gdp growth. What did the fomc think in the first half of 2017 . Oh, the economy will grow at 2 as far as the eye can see. And on the righthand side, the dots, the dotted line is the current projections from where we are today. He can see the blue line obviously ratcheted up quite a bit during 2017 and 2018. The yearoveryear growth rate did reach 3 middle of last year and Third Quarter of last year. Yearoveryear growth rate has been declining since then as predicted, and as we would have all expected, that growth would come back to the potential growth rate and the dotted line on the right says it is expected to continue to decline back to the potential growth rate. Look at the upside surprise compared to march 2017 about how much more growth we got in the u. S. Economy than what was expected as of that time. That was the upside surprise. On the righthand side is the expected slowdown. The risk here is that the blue line goes down more than you would think. And possibly because of trade uncertainty, and that is why i think the fed has taken out some insurance against that possibility by providing a more accommodative Monetary Policy over the last six months. It certainly seems, based on recent of elements, that it will be hard to get a stable trade regime and environment over the nearterm. Or over the forecast horizon, which i would describe as two to three years. I think there is no question that this is chilling Global Investment and slowing the Global Growth rate. That seems to be factored into almost everyones forecast. If you feed trade restrictions into a model, you will get out that the trade restrictions direct effects are probably small. But, there can be other knock on effects, mostly coming through Financial Markets and other sources that can be much larger. There is some risk and uncertainty here about what the effects of this increased trade uncertainty will be. I would stress this, we are in a titfortat trade war, and it is not in any titfortat trade war, each side is going to make threats and counter threats at any point in time. These might be daily, might be weekly, might be monthly. The nature of a titfortat trade war is that there are threats and counter threats occurring all the time. Some of these might be implemented. At some of these might not get implemented. The nature of the war is that you have titfortat going on all the time. It is not reasonable for Monetary Policy to respond to all of these threats and counter threats. If you did that, you would get a very volatile Monetary Policy and you would be contributing to the volatility being caused by the trade war. I dont think that is the right way to think about how Monetary Policy can take the situation into account. I want to think instead of trade regime uncertainty as simply being high. It is just high and it will be high for the foreseeable future, because it is going to be very hard for the various sides to repair trust and to get back to a stable trade regime over the forecast horizon. We have already taken that into account. Trade regime uncertainty is high. And we are putting that into the Monetary Policy calculus. We have used Monetary Policy in reaction to that, through the accommodation that i have described earlier. Particular threats on counter threats are not news because that is part of the way the and certainty plays out over time in a titfortat trade war. Im not expecting the uncertainty to go away but we have tried it to take out insurance of the possible damage the trade war could do to the u. S. Economy. Here is a picture, this uses the baker bloom and davis measure of policy uncertainty with respect to trade. It was low, low, low, low, low, high. That is how i read this picture. It was low all through the 2000s or even before that. I would describe it as the u. S. Leaving the drive to trade drive to trade liberalization. The culmination in the entry of china into the wto in 2001. And since then, a fairly stable trade regime with reasonable certainty about what the trading arrangements were going to be and what the tariff arrangements were going to be. But that has exploded since trade has become much bigger political issue. I would say not just in the u. S. , not just in the Republican Party or this administration, both Political Parties in the u. S. And politics all around the world now questioning global trade arrangements. That is why i do not think this will go away. You have opened pandoras box. These are difficult issues. You will not be able to put them back in the box. We are going to have trade regime uncertainty as described on the righthand side of this charge for as far as the eye can see. Like i say, that is from our point of view as Monetary Policymakers, we have to take that into account. We have about insurance against the effects this may have on economic growth. We have other concerns meanwhile that are bubbling in the background. One of them is muted inflation. We measure this as pce inflation. Headline inflation. A lot of times, we will look at core inflation to get an idea of some sort of underlying gauge of inflation pressure. Both inflation and Inflation Expectations are below target. I think this is surprising because this is occurring despite the upside surprise in the economy that i described earlier, which has been ongoing from 2017, 2018, and even the first half of 2019. All of that has been above potential growth in the u. S. Economy, stellar performance of labor markets in the u. S. Economy, and nevertheless, our core pce inflation measure from one year ago is only 1. 6 . I think this is a concern. We would like to see inflation at or above target in this environment. Here is a picture. Im experimenting here with the cleveland feds twoyear expected inflation measure. 30 basis points because that inflation expected inflation measure is on cpi inflation, so it translated over to pce inflation, subtracted 30 basis points. Theory tells you the expected inflation over a short horizon like that should correspond to actual inflation pretty tightly. That does appear to correspond pretty tightly in this picture. They are both below target. Both expected inflation and actual inflation are below target at 1. 5 , 1. 6, 1. 6 percent, 1. 4 range. Why arent we seeing more inflation pressure . Thats a great question for the committee. This is something i would like to csb able to move back toward target more quickly and hopefully our accommodation is helping us do that. Let me just touch on yield curve issues, then i will conclude and we will start our, i guess i get a grilled twice here. I first get grilled by ed and then by all of you. Yield curve does contain Important Information for policy marketing majors. I have talked about yield curve inversion. It has tended to predict the onset of recession. However, there is a big lag between the inversion and whatever else might actually happen. That is something to keep in mind on this. You do have some inversion today because the 10 year is treating 10year is trading below the threemonth yield or the federal funds rate. That is concerning. The twoyear, 10 year is not inverted at this point because the twoyear is taking into account likely future actions of the committee. I would say that is mitigating factor in my mind. We are not seeing an intensification of yield curve inversion so far, based partly on anticipated future policy from the fed. I dont think this has gotten any worse here. Heres a picture, various spreads. We have the tenure, twoyear there which i have labeled as still positive. The others i have inverted, but only slightly. Some of that has gotten worse on the last day or so. I am concerned about this issue, i would like to see a healthier upward sloping yield curve. If you look at the second half of the 1990s, where the fed made policy adjustments in the 1995, 9096 timeframe to find the right level of the policy rate, the yield curve was upward sloping all through the second half of the 1990s. One of the best periods of Economic Performance in the postwar era. The slope averaged 50 basis points, 100 basis points during that period. I would like to get back to that. This is too flat for my taste. With the accommodation coming on board, if we see inflation starting to pick up and Inflation Expectations start to pick up, you may get a natural slope to the yield curve and we would be in better shape if that happened. Let me conclude, the fomc continues to face a slowing economy, a naturally slowing economy i would say, with some risk from trade regime uncertainty. We have an inflation rate that continues to fall short, both in actual inflation and expected inflation, continues to fall short of our 2 target. On the other hand, we also have a lot of accommodation that is just now coming on board from the first half of the sea change in Monetary Policy during the first half of 2019. That should push inflation back to target faster or maybe even above target. It is possible that we could take additional action, but i do want to see how the effects of our previous actions play out in the economy Going Forward before we make those decisions. Thanks very much. You guys have been very kind to have me today. Im looking forward to your questions. So thank you. [applause] ed can everybody hear me ok . Ok. Thanks, jim, for doing this. We really appreciate it. Im going to first start off by talking about some of the trade issues you highlighted. Since the Interest Rate decision last week, we have seen some reintensification of some of the trade tensions that have gone on throughout the year. Does this affect how you are seeing the Economic Outlook . Are you walking down your forecast settle as a result forecast at all as a result of the announcement of additional tariffs, and the Financial Market reaction to that announcement . Pres. Bullard well, i do think the trade regime uncertainty, it became clear earlier this year i think especially, it became clear that trade regime uncertainty was just going to be high. You say intensification, i would say a manifestation of trade regime uncertainty in the last few days. You would certainly expect, if you are going to be in a titfortat trade war, but the two sides are going to be trading barbs and threats and trying to get the other side to come to the table and do all kinds of things. That is may be natural in a negotiating setting. But i would not describe that as intensification. That is just ongoing trade war. That is the nature of the trade war. In my mind, anyway, we have already adjusted for the fact that this is going to be trade regime uncertainty will be high, we have put in a more accommodative policy, now it is time to see if we bought enough insurance against possible negative effects of this policy. Ed one of the other aspects of the announcement last week was the next round of tariffs, imports from china, a lot of this will apply to consumer goods, whereas until now, a lot of this has been the tariffs, a lot of this have been applied against intermediate goods. Do you think about the likely effects of this on the economy . Pres. Bullard well, like i said, if you put tariffs into a Macro Economic model and change them, what you will get is relatively small effects, microeconomic effects. To the extent that there are large effects, and there may be, i think they will come in for instance, Global Manufacturing, and the Global Manufacturing pmi has declined into negative territory. U. S. Manufacturers are scrambling to reorient their supply chain. , it iss to me that chilling Global Investment because investors arent sure where they will invest that will give them shelter from the ongoing trade war. Those effects might be bigger than the effects directly on consumers. Consumers certainly arent going to sit idly by and pay higher prices they will probably shift, that to substitute goods, that is what happens in the model and mitigates some of these effects. There will be some effects depending on the goods, but i am not sure i would go from the idea that they are being applied to consumer goods to automatically assume that that is a very large effect on the u. S. Economy. Ed ok. So last week, chair powell described the Interest Rate cut as an adjustment and then went on to suggest that the fed was not currently anticipating a long series of rate cuts. And yet, Financial Markets still appear to be anticipating considerable further easing. When i looked this morning, the was looking for another percentage point of cuts. How does that expectation square off with your over all Economic Outlook, and what kind of outcomes would you need to see to get that kind of using . Bullard i will give you my take of the idea of a midcourse correction. If you look at the 1995 experience. In 1994, we raised the policy rate. In early 1995, we raised the policy rate 300 basis points in a single year. It was the worst year for bond markets in the postwar era. Later in 1995 and early 1996, the committee struggled to find the right level for a policy rate. It looked like the economy was slowing down a lot in the first half of 1995 based on realtime data. The committee ended up adjusting down slightly, got to the right rate, and set up the economy for a great second half of the 1990s. I hope we can pull that off here. We raised policy rate in 2017 and 2018 not 300 basis points, but maybe 225 basis points. A similar normalization. The level of rate obviously is way lower but that is global trend in Interest Rates. Now what you would like to do now that you have finished normalization is see if you can find the right level of policy rate. That is how i would think of this, as a midcycle correction. Like i said, we have are to put a lot of the outlook for Monetary Policy has changed dramatically in the last six months. So you have got a lot of implicit accommodation coming back to the economy. It should affect us in the second half of 2019 and the first half of 2020. It is not clear that you want to pile on necessarily at this juncture you want to see how those previous moves are affecting the economy. But it wouldnt rule out more changes ahead. Itt is how am thinking about. I dont predict recession on the horizon here. I dont think were in a situation where you are not in recession mode here, you are in midcycle. That is why i like the midcycle language, but you still want to find the right level of Interest Rates for this environment. Hopefully, it will set us up to continue expansion for many more years to come. Ed one other question on the policy outlook. In the runup to this last meeting, there was a fair bit of debate as to whether the cuts should be a quarterpoint cut or a half point cut. You suggested going to a half point cut would be somewhat overdone. Think about the size of any cuts, to do a halfpoint cut, which tends to be pretty aggressive, what would you need to see to do Something Like that . When i look at the Financial Market pricing, there is still some element of risk perceived from a halfpoint cut. Pres. Bullard you can look historically at episodes where the committee has made that kind of a move. I dont really see us in being in a situation where that was true. One that i can think of off the top of my head is late 2007, early 2008. , the financial crisis had started in earnest on august 9, 2007. The committee had done a lot of things during the fall. We got some worse data around that period. The committee met out of cycle and that lowered the policy rate dramatically. Were not in that situation. I mean, come on. The economy is growing above the potential rate and has been for the last 2. 5 years. The labor markets are super, unemployment at a near 50year low. A lot of good things happening in the economy, even the have risk out there, as you always do, but i dont think we are in a situation where we have to be quite as dramatic as a cut like that would suggest. Ed ok. In your speech, you touched upon the inflation being below target. This has affected other Central Banks as well. Where notwithstanding strong growth, and tight labor markets, inflation has been below 2 . Do you see structural factors in place that are likely to keep inflation suppressed, and if so, does that limit the ability of the fed and other Central Banks to try and get this back to the target . Pres. Bullard this is an interesting hypothesis, i certainly read about it a lot. Not sure i have a really solid theory in my head about this. It does seem Like Technology has become a lot more important as a fraction of the economy. What do we know about technology prices . They tend to drop over time. That is somehow feeding into the inflation process. I think it is not unusual if you disaggregate Inflation Numbers to see prices, relative trends in all different types of prices. Medical prices, technology prices, housing rents are a good example. So it seems like the overall price level is going up at a constant rate but that does not mean all of these subsectors are going up at the same rate. Because relative prices are changing over long trends over time. If one of those trends becomes more important, it could have a deflationary impact. I would hesitate to say that i have been able to nail that down in a way that is convincing, so i will stop there with that. Ed following up on the question about inflation, the fed is undergoing now a strategy review. There have been suggestions made on how to enhance the credibility inflation target. There has been talk of moving to average inflation targeting, price targeting, other ideas. What are your thoughts on those . Pres. Bullard those that are interested, you might check out the chicago conference that we had. Fun framework issues, think it is available online. You also might check out the conference that occurred a month before that at stanford university. I actually gave one of the many presentations back and you can check out what i said about nominal gdp targeting as a possible framework Going Forward. I think you should look at evolution rather than revolution in the feds policy framework. There are a lot of ideas related ,o price level targeting because in a lot of different models, it turns out to be the best thing that you can do. So i think those ideas about trying to make up for past misses on the inflation rate if you miss on the low side for a while, you might miss the right side in the future it tends to work well at least inside models so, that kind of thinking is becoming more prevalent across Central Banks across the world and i think will eventually carry the day. But i think it is more evolution then all of a sudden you wake up one day and the fed has radically changed its framework. I dont think that is going to happen. It is very hard to get these things to move. There will maybe be some movement in that direction implicitly. Ed one more question before we turn to the audience. This relates to the question of the feds independence. Former federal4 reserve chairs wrote an article on the wall street journal on fed independence. We have seen a situation where the executive branch has been at least more clinical than on a number ofl than years i can remember. Is there any concern on your part that the public buses confidence in the independence of the fed is at risk from what is happening here . Pres. Bullard i appreciated the former chairs coming out with the oped. Even so we quit paying them, they are still working. I appreciate that. [laughter] my reading of the editorial was that it was just reiterating why american Monetary Policy is set of the ladies because there were all these Lessons Learned from earlier era where it didnt work out very well such as the 1970s. It worked out very well. You have this very large technocratic committee, a lot of viewpoints expressed. You have to get the committee to center. I think the Committee Makes better decisions as a committee than anyone individual member would. So there is wisdom in having the committee structure. I think we are just making the decisions the decisions that way we always have, we look at data in the economy and make a judgment, and go ahead. So it is true that there is maybe more buzz around this than there was, but my experience with the fed is there is always debate going on, always people talking about what the fomc should do. I am used to it, i like getting input from all different angles and all different directions. But then the Committee Sits down and goes ahead and makes a decision. I think it is working pretty well. Ed ok. We will open it up for questions. Ok. Why dont we go over here, and then over here next . If you can state your name, affiliation, and ask your question in the form of a question. No speeches. Lawrence National Association , of realtors. The component of the cpi where it is accelerating, it is on the housing component, that is due to the housing shortage. Homebuilders, especially smallsize builders who have been reliant on Construction Loans from local Community Banks, that has dried up. I am not sure if it is loosening up any bit, but the lack of Housing Starts is causing housing shortages as well accelerate of housing rents. Is there anything that regional president s can do to stimulate the lending of construction . Oans for small time builders pres. Bullard i think the market obviously was shaken by the crisis. We are 10 years past that now. I think the reaction to it seemed, to be that you can tell theore probably, but reaction seems to build more multi family and less singlefamily. Some of the numbers i see said just plenty of multifamily. Also, tastes seem to have changed to some degree, as newly formed households may be arent as eager to get into a house as he would have been historically, and because of that builders , have pulled back a little bit. We are not trying to i am certainly not trying to limit Community Bank exposure housing. But i think this has been somewhat of a market response as policy response. I have a question. Price seriesated you are talking about, what about asset prices, asset inflation . There seems to be stocks, bonds, that are driving market activity, but that does not seem to factor into this conversation about whether or not we have inflation. Would you speak to that . Pres. Bullard yes, there is long standing debate as to whether or not you should include asset prices in the measure of standard of living, or the cost of living. I think the answer to that is no. I think asset prices are something else, but you can certainly make the case, and it economists have made that case over time. As a general rule, i dont think it behooves us to try and react to stock prices, equity prices, with Monetary Policy. I think it is a losing game to get involved in that. The market moves around very reprices thre every day. The wisdom has been, as market is trying to assess the future of the u. S. Economy and the Global Economy, but the fed is also trying to assess the future of the u. S. Economy and the Global Economy. If they start trying to assess each other, you get into a circular movement. So i think it is better to think about the goods and Services Prices that consumers actually pay. Ed gentleman in the back . Stanley colbert. One of the things that puzzles me is that low inflation is global. Central bankers around the world have been spiking the punch bowl with everything they can get their hands on and nobody is getting even the slightest bit tipsy. One of the things ive begun seeing explaining this is that low low for too long too for too long is affecting the solvency of lending institutions and they are cutting back. Be enough for nation, and in that case, at what point does the situation turn from too low, being stimulative, to being restrictive . Pres. Bullard that is a very provocative point. Global inflation is low. If you added up all the Central Banks in the world and made them into just one central bank, that central bank is targeting a very lowInterest Rate, which is an opposite of the 1970s. In the 1970s, inflation got to doubledigit levels in the u. S. , but also globally, it was very high. Bank of thecentral world had too high of an inflation target. To put together models of exactly how that works, taking into account Exchange Rates and many other features of the Global Environment is beyond what i think we can do. You do have a big player, china, which is managing to the u. S. Dollar. Typically what you would think is that china is importing u. S. Monetary policy, keeping inflation low in china, whereas in other circumstances, you would think of a big developing economy like that would be continuing to global inflation. Instead, inflation is pretty low in china. So. There are many things to consider here. I am not sure we have great models for how this all works. U. S. Bureau of labor statistics. Some economists argue that the issues the fed is facing in Monetary Policy have to do with a change in framework in the sense that the fed funds is no forer the main driver Monetary Policy decisions, but rather the interest paid on excess reserves, and the change from the corollary system of Monetary Policy to a florida system of Monetary Policy. Can you maybe address that . Pres. Bullard one thing you might check out, we have a series of blogs at the st. Louis fed that have talked about a repo facility to complement the facility we have. It might have some benefits to how we operate Monetary Policy. This is something that may be gaining some traction at the fed. I think it could serve as well Going Forward. But as far as the impact of rates, ipolicy on think it is pretty clear that we are still influencing the short end of the curve very dramatically, and some would say, too off the curve. There is no question that the very shortterm yields that are marketbased are very closely tied to actual policy. I think that is working the same as it always has. Elliott. What are your feelings about student debt right now, which seems to be out of control, and how that might impact the economy in the future . I have a son that is going to be starting Indiana University in two weeks. Pres. Bullard go hoosiers. [laughter] so, student debt continues to grow. How do you factor that in down the road . The rates on student debt are ridiculous too, 11 or 12 . Res. Bullard yeah i would like to see a reform of the student debt situation. I think it is getting out of control. I do not like the idea of lending to a Prospective Student who really shouldnt be taking the money based on the degree that they might be getting and will not be able to repay it, because they are still going to be stuck with this for a long time. I think there should be some process around that initial disbursement. I did all about you guys, when i got my student loan, there was hardly any questions asked at all because it was a guaranteed student loan. There was no questions asked. I could have been a good student, i could have been a crappy student. They didnt really check. So i think this has become a more concerning situation that is ripe for reform. Also, i dont see why these cant be just marketdetermined rates. So i would like to see some movement on this. It has been going on too long. [indiscernible] pres. Bullard when i talk to people on capitol hill, they talk about the issue but i dont see anything happening. So. Here. [indiscernible] susan irving from the Government Accountability office. We seem to be in almost a worldwide negative Interest Rate regime. Or we are heading that way. At some point, there will be another recession. What does that imply for the ability of Monetary Policy to be a useful tool in that situation . Pres. Bullard i think it is a great point. One of the successes of Monetary Policy during the paul ebert is is we haveell era been to normalize rates as much as you have. I know it is not as much as people have been looking for, but we have been able to get the somewhat. E up a thing that will help us if we do get into a recessionary situation, we will have some ability to react to that. Other countries have not been able to do that, notably, japan and europe. So when they go back into recession, they will have less of a possibility to react to that. They will have to use unconventional policies which are more tenuous in their effects on the economy. Pat. Notwithstanding all the other reasons for lowering Interest Rates, you talked a bit about the shape of the yield curve recently. He recognized that the fed has some effect on that, and people may be anticipating future actions. Potentially, one of the dynamics could have to do with the feds change in its portfolio runoff decisions. It was running them off and build up a set of express patience, then took them away, so you have both the announcement of that and then the actual fact of it, or the dawning realization of it. As well as the fact that you have never been in this kind of situation where you have run this stuff off and changed the rules. Do you think that could have had any effect on the changes in the yield curve that we have seen . Pres. Bullard i guess when im thinking about the yield curve on a practical level, there are also a lot of models out there that arent so practical, lets just think about, the fed has a lot of influence on the short end of the curve in the market has a lot of influence on the long end of the curve. That is a traditional Monetary Policy thinking. It is true that there has been a lot of global qe, and because of that, people have said that the longer rates are lower. If you look at the empirical evidence, the magnitude of that effect is not so large, and should be dissipating because various countries around the world have stopped doing the qe. Also, it was all priced in initially, so as it gets unwound, it should be going the other way. Yields should be going up. I am not really seeing that aspect of it. So i think i would like to outward sloping yield curve. It strikes me that the kind of levels on the 10 year that i low,talked about today are certainly at the low end of the trading range over the last five years. So i would expect with a little see anflation, we would more upwardsloping yield curve Going Forward, but we will have to see if that develops or not. What is the impact of current and future Monetary Policy in terms of the chinese devaluation, its potential impact in offsetting price increases in consumer goods, plus the higher savings rate in the u. S. Economy and wages now exceeding the rate of inflation . Pres. Bullard i would say that it looks to me, just looking at the last few days here, that the chinese correct me if i am wrong they did not fix above the 7 level, they fixed below. So it seems to me that their policy has not changed. They do want to contain the Exchange Rate movements the same as they had before. I think it makes sense. Because it is their policy, that was their policy, and i dont think they will change their Exchange Rate policy in reaction to the trade threats coming from the u. S. Because the whole reason they had that policy was to provide stability for the chinese economy. So i am not sure i would expect them to abandon the policy in that situation. We will see. Maybe they would. But it seems to me that the fact that they tried to fix under 7 suggests that they are returning to the policy that they had before, that is how i would interpret current events. Ed i think i will take the moderators prerogative and ask the next question. In your remarks, you have stressed that trade policy uncertainty will remain with us for quite a while. Does that have implications Going Forward to what we should think of equilibrium level for Interest Rates . Pres. Bullard probably, if anything, it would moderate Interest Rate slightly compared to what he would otherwise have. So, you, i would think that would be a factor. How big a factor is compared to Everything Else going on in the Global Economy is a good question. We will have to monitor the situation and keep track of it Going Forward. Ed i will just close things out here a bit. First of all, president , we have a gift for you, an expression of our gratitude to you. [applause] on behalf of me, that my team and our members, thank you for making this a very exciting one. We think it will appreciate 5 to 10 a year. I would like to thank my king, you did a wonderful job. To our members, we will be announcing our big annual dinner soon, our programs for the fall, and other things coming. We will have a new website and we will hear about it soon. For now, ladies and gentlemen, thank you for coming. Have a great afternoon. [applause] [indistinct chatter] heres a look at live coverage wednesday. Cspan at 10 00 eastern, Steve Bullock will speak at the National Press club about the 2020 president ial race and policy issues like gun violence and campaign finance, followed by the chair of the House Oversight Committee Elijah Cummings on the investigations of trump administration. On cspan2 and 9 30 a. M. Eastern, the importance of maintaining military air superiority on a global scale. Afternoon, a discussion about congressional war powers and whether the 2001 authorization for the use of military force can be applied to future conflicts. And a look at japan, south korea trade relations and how it is affecting u. S. Diplomacy at 1 30 eastern. Order. House will be in years, cspan has provided america unfiltered coverage of congress, the white ande, the supreme court, Public Policy events from washington, d. C. Around the country so you can make appear own mind. Created by cable in 19 79, cspan is brought to you by your local cable or satellite provider. Cspan, your unfiltered view of government. On the eve of president trumps planned visit to texas and ohio, Vice President pence spoke about the deadly shootings in those states. This is during an event on religious freedom in virginia. Before we get started, allow me to say a few words. About the horrific Mass Shootings that occurred over this weekend in el paso and dayton