JACK: OFFICIALS ARE READY TO at LongLiveDogs.com
JACK: OFFICIALS ARE READY TO
SHRINK ASSETS AND MOVE FAST ON
INTEREST RATES BUT WILL THEIR
PLAN DO ENOUGH TO COOL RED-HOT
INFLATION.
JOINING ME IS PATRICK PARKER.
THANKS FOR COMING ON THE SHOW.
APPRECIATE IT.
YOU AND MANY OF YOUR COLLEAGUES
ACKNOWLEDGE THE FED GOT CAUGHT
BEHIND THE CURVE ON INFLATION.
NOW YOU ARE TAKING SERIOUS
ACTION.
IS IT POSSIBLE TO HANDICAP FOR
THE AUDIENCE HOW HIGH RATES
HAVE TO GO AND CAN YOU RAISE
RATES, THE AGE-OLD QUESTION,
WITHOUT CAUSING A RECESSION.
THE HISTORICAL PRECEDENT IS NOT
GREAT ON THAT SCORE?
>> WHERE I AM, WE NEED TO RAISE
RATES METHODICALLY, TO GET US
TO NEUTRAL.
WE ARE RAISING THE FED FUNDS
RATE BUT I’M SUPPORTIVE OF
STARTING SOONER RATHER THAN
LATER THE NORMALIZATION OF THE
BALANCE SHEET.
IT ALSO REMOVES ACCOMMODATION
FROM THE MARKET.
RAISING RATES BY SHRINKING THE
BALANCE SHEET.
WE CAN GET INFLATION UNDER
CONTROL.
WE MAY NOT HAVE A SOFT LANDING
WITH CHINA OPENING AND CLOSING
BECAUSE OF THE TRAGEDY OF THE
CORONAVIRUS AND THE INCREDIBLE
TRAGEDY OF UKRAINE BUT IT WILL
BE TURBULENT.
IBLY15
JACK: LET ME TALK ABOUT THE
BALANCE SHEET.
THIS IS AN AREA PLUS HISTORICAL
PRECEDENT.
YOU HAVEN’T BEEN IN THE
SITUATION AT ALL.
IS THERE ANY EQUIVALENCY
BETWEEN QT BY X AMOUNT EQUALS A
HALF POINT RATE HIKE AND HOW
WILL THE ECONOMY RESPOND TO
THAT?
>> WE HAVEN’T DONE IT VERY
OFTEN.
ROUGH ESTIMATES, HARD TO MAP.
HARD TO PINPOINT THE EXACT
NUMBER AND THAT WILL REMOVE
ACCOMMODATION.
WE TALK ABOUT REDUCING THE
BALANCE SHEET.
AND THEY ARE DOING IT. WE VERY POLICY BY ACCELERATING
WE VERY POLICY BY ACCELERATING
OR SLOWING DOWN THE RISE.
JACK: MONETARY POLICY, FISCAL
POLICY, BUT ON THAT ACCOUNT
PART OF THE EFFORT IS TO REDUCE
DEMAND BUT SUPPLY CHAIN IS
MAKING STUFF SCARCE FOR LACK OF
A BETTER ECONOMIC TERM DO YOU
RAISE RATES HIGHER BECAUSE
THERE’S NOT AS MUCH TO BUY?
>> WE HAVE TO BE CAREFUL ABOUT
THAT.
WE ARE STARTING TO SEE SOME
SIGNS OF HEALING IN THE SUPPLY
CHAIN SO WE NEED TO MOVE UP TO
NEUTRAL WITH A REDUCTION IN THE
BALANCE SHEET, WE WILL BE ABOVE
NEUTRAL.
HOW MUCH WE DON’T KNOW.
WE ARE SEEING IT WITH THE 30
YEAR MORTGAGE RATES, HOUSING
STARTING TO SLOW DOWN BUT WE
DON’T WANT TO GO INTO RECESSION
AND THAT’S NOT MY FORECAST THAT
WE WOULD ENTER RECESSION.
>> WE ARE SEEING PRESSURE ON
WAGES, RESTAURANTS, WALMART
SAYING TREKKERS GOING UP TO
$110,000, SEEING SIGNS OF LIFE
IN THE UNION MOVEMENT.
HOW DO YOU LOOK AT WAGES?
>> THEY ARE INCREASING BUT NOT
KEEPING UP WITH INFLATION.
FOLKS WHO ARE WORKING, ANY
INCREASE, AND I DON’T EXPECT WE WILL GO INTO A MAJOR WAGE PRICE
WILL GO INTO A MAJOR WAGE PRICE
SPIRAL.
WE ARE SEEING AN INCREASE IN
PRODUCTIVITY.
THIS NEEDS TO PLAY OUT.
I CAN’T SAY WHERE THIS WILL
LAND.
WE NEED TO TAKE SOME ACTION BUT
NOT OVERLY AGGRESSIVE.
WE NEED TO READ THE DATA MONTH
BY MONTH.
JACK: AN INTERESTING OP-ED YOU
HAVE WRITTEN FOR BARRON’S, YOU
SUGGEST THE FEDERAL HOUSING
AUTHORITY OUT TO EXTEND LOAN
MODIFICATIONS, 40 YEARS TO 30,
IT SOUNDS TECHNICAL BUT COULD
HELP THE SITUATION.
>> WE WANT PEOPLE TO STAY IN
THEIR HOMES AND HAVE A PLACE TO
LIVE, AND THE FINANCIAL SYSTEM,
THE BANKS, TO NOT LOSE THAT
MUCH MONEY IN THE PROCESS.
THERE ARE WAYS OF THINKING
ABOUT IT. THERE IS ONE SUCH WAY WHICH HAD
THERE IS ONE SUCH WAY WHICH HAD
HAS PROPOSED.
FOR A 60 DAY COMMENT PERIOD,
THAT DOES PROPOSE A 40 YEAR
MORTGAGE MODIFICATION.
THAT HAS BENEFIT TO THE WORK WE
HAVE BEEN DOING.
A MILLION MORTGAGES ARE
SERIOUSLY DELINQUENT, HALF OUR
LOAN MODIFICATION AND HALF ARE
NOT AND THOSE WHO ARE NOT IN
LOAN MODIFICATION NEED SOME
HELP.
THERE IS A WIN/WIN FOR THE
BANKING SYSTEM WHO CAN STAY IN
THEIR HOMES.
JACK: WE’VE GOT FEWER PEOPLE
UNDERWATER.
>> $10 TRILLION ON EQUITY RIGHT