[CC may contain inaccuracies] I know that you were focused on every single word Adam J. Howell's mouth day at that press conference. He doesn't sound
like somebody who has joined the camp of let's get ready to raise rates in July as soon as that taper ends. Did you come
away with the same impression that he's he might be stuck back in 2023 maybe even 2024 for the first rate hike. Well we don't
know exactly what his views are. And in any event it's going to be the outlook as of mid-year next year not the outlook today
that probably dictates when a rate rise occurs. But I thought he was very very evenhanded. And it was clear he wanted to
communicate that the committee is positioning itself in order to have a lot of options and to be able to respond to whatever do
whatever evolves in the economy. So I thought that message came across very effectively. We don't we want to run something for
you from Scott Minor. He's the chief investment officer for Guggenheim. He is in the camp. And I think you'll find more
people like us or following the bond market cetera who think that maybe the Fed's going to wait too long. Maybe inflation is
going to get out of control maybe there's going to be a policy mistake. Let's listen.
We clearly are setting ourselves up for a policy error. There is no way that we are engaged in the scale of asset
purchases in the pandemic where there is going to be a policy which ultimately is going to be perfect and not cause some sort
of interruption to asset prices or something else that would be destabilizing.
So Dennis how do you respond to that. Well I
know I understand that there are people who are concerned about policy years of policy here. In my mind is something that is
sustained for a long time that is really wrong and and out out of sync with the reality underlying reality for a long period of
time. I think it was clear in the press conference today that the committee and Chairman Powell are ready to move when they
get an indication that their assumptions are wrong. And I doubt that this you're going to see something actually get out of
control or get out of hand. And when people talk about hyper inflation spiraling inflation it does call for an explanation of
what exactly are the drivers of that. And at the same time is it likely the Fed will be sort of in the dark and not pay
attention. And just just stay stay on hold. None of that strikes me as likely. So I'm just not.
I'm not totally in agreement with that gentleman. Well at a time when the labor market it still seems to be constrained by people
afraid of going to work and getting the virus or they've already retired or they've got they saved up enough money and moved to
the country. They don't want to go back to the office. Does that mean that if Jay Powell and his colleagues say they
have to see a much lower unemployment rate before they're going to consider raising rates that they could be they could be stuck
in that you know still worried about inflation not be being high enough. And again maybe wait just a little too long.
Possible I suppose. The employment objectives is not something it's sort of readily
observable it's not a number per say it's not the unemployment rate alone. It's really a compilation of a number of different
pictures of the economy. And as Jay Powell mentioned today it's it's like a synthesis. They look at a variety of things and then
they make a judgment call. They could very well in my mind define maximum employment or full employment at a higher
unemployment rate than existed pre coded and at a lower participation rate. I don't think they're ready to do that quite
yet. They really seem to be oriented to trying to recreate the conditions in January of 2020. But it may be that we're in a
different labor market and they will define it differently. If that's the case it may not take long before they get to a point
where they say we have achieved large largely achieved our maximum employment objective. Let me ask you about the
definition of maximum employment because there are some economists that are talking about the first rate hike to come
when black unemployment is a 6 percent. So how inclusive could that definition get.
Well let me just say that I think this committee and you can read that from the strategy statement that was issued last year
is very much looking at data on the unemployment rate the participation rate in such of
individual cohorts in the economy minorities and women and wanting to create the conditions in which those groups are
actually enjoying the best possible employment conditions. So the inclusion word or inclusive word in their strategy statement
I read a lot into that and I think that is very much on their minds.
How do you read into the Fed's inflation view and how nuance is become when we're talking about transitory.
Well a few months ago I think you could say that they had a pretty simple message that this too will pass that elevated
inflation will come down. And and now they're communicating as you say a more nuanced message that it's a more complicated set
of factors at work and at the same time is likely to take longer. I think they have updated their view and recognized that
perhaps it's not as simple as as the message of a few months ago. But again that they're adapting to.
The evolving circumstances and I think doing that quite well. So if you were on the committee right now how would you be
positioning yourself. What would your argument be. Because we know there are
going in to this point anyway a lot of different views. Some people would have been ready to start hiking very quickly
because they are worried about inflation. And why keep the key rate on zero anyway when employment is down to four point eight
percent and the economy is definitely still growing. Would you be in that more cautious camp with Jay Powell. Would you have
some questions about maybe going to sell yourself. If I were on the committee today I would support the policy
positioning as it exists today or as it was presented today. I would be arguing that we should keep our options open or the
committee should keep its options open. That that the conditions that the committee faces or is confronted with in the spring and
summer of next year are a bit unpredictable. But could call for accelerating rate hike. But at the same time may give enough
space to continue to pursue a more fulsome employment objective. I just don't think you can know now. So I would be one who is
supportive but basically saying let's get ready for any number of different possible scenarios.