Adam Posen Thinks Things Could Get Very 'Messy' for the Fed

**Joe Weisenthal** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News. Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

**Tracy Alloway** (0:23)
And I'm Tracy Alloway.

**Joe Weisenthal** (0:24)
Tracy, another Jackson Hole episode. Jackson Hole, another Jackson Hole episode. You know, I think like with central banking and some of these topics, people are pretty polite, you know. It's like sometimes you talk to people, it's a little bit hard to know like what they're really thinking about all these topics, what they feel. It's hard to, sometimes I do perceive a certain lack of, I don't want to be a candor.

**Tracy Alloway** (0:48)
Let's say people are very diplomatic.

**Joe Weisenthal** (0:50)
People are very diplomatic. Thank you for finding the word.

**Tracy Alloway** (0:52)
That's a diplomatic answer to the point that you're making about diplomacy at an official Fed function.

**Joe Weisenthal** (0:57)
People are very diplomatic and I'm pro diplomacy, but sometimes it's nice to just check in with like, someone just like, all right, let's give it to us straight.

**Tracy Alloway** (1:05)
I'm waiting for you to describe our next guest.

**Joe Weisenthal** (1:07)
No, I'm saying, all right, I'm just going to jump right into it. No, a guest who I believe when we talk to him, I feel like, here's someone who's giving it to us straight, who's not as concerned perhaps with being overly diplomatic.

**Tracy Alloway** (1:19)
Someone who's not afraid to utter the words fiscal dominance.

**Joe Weisenthal** (1:22)
Yeah, someone who's just afraid, someone who just tells it like it is. Anyway, very excited to say here in Jackson Hole, back with the perfect guest, someone we've had on the podcast multiple times before, Peterson Institute President Adam Posen, also formerly a member of the Bank of England's Monetary Policy Committee. So Adam, thank you so much for coming back on Odd Lots.

**Adam Posen** (1:42)
After that intro, thank you so much.

**Joe Weisenthal** (1:44)
You have to really like throw some fastballs.

**Adam Posen** (1:46)
I don't know whether it's hype or warning.

**Joe Weisenthal** (1:48)
No, you have to throw some fastballs first. But what do you think of, this is the first interview we've done since the speech.

**Adam Posen** (1:54)
Yeah.

**Joe Weisenthal** (1:55)
So what do you think of Chairman Warsh's speech? There we go.

**Adam Posen** (2:02)
No, no, no, even though I knew that was the question, it was coming.
If you were grading it, it's a B minus speech. It's a B minus speech by normal standards. It's much more positive because of the situation we were in. He, the chair, let's be blonde, as you said. The chair had created a huge amount of not just confusion, but in central banking circles, in the sophisticated observers like you, about what he really thinks. And this was both short-term, does he want to raise rates? Does he not want to raise rates? But also medium long-term, what is behind all this task forces and the rhetoric? And then he obviously at the July press conference totally messed things up.
Now to be fair, three of his four predecessors' chair had major stumbles in one of their early press conferences, Greenspan, Yellen, Powell. So in a sense, if we are able six months from now, to look back and say this was a pivot point. And so the stuff that Kevin, excuse me, the chair was saying for the first few months was just growing pains and then he got smacked by reality. All good. Then this speech gets upgraded to a B plus and we're all happy. And I think there are a number of people now who hope that's true with some confidence more than before. Because the big thing, and Tracy and I talked briefly about this before coming on, is how different this was than last year. Because last year was all about the attacks on the Fed, and the fears for the independents, and the standing ovation for Jay Powell was his last thing. Well, last Jackson Holl is chair. This year, I think deliberately, the chair and the team wanted to make it much more normal, and it passed much more normal. The second thing is, as a European Central Banker said to me at breakfast this morning, but I think is widely shared sentiment, for all the anti-forward guidance, he basically set up, they have to hike. Now, as you know, and we talked about a few months ago, I've been urging them to hike for a while. I think inflation is real. So again, I'm glad if they're making that call. But yeah, at this point, they really guided.
Because if you read, there were four sections to the speech. In the fourth section, you basically does the litany of the reasons you would think inflation is not going to stay stable or it's going to persist and maybe go up from here, even if it goes down for a month or two for oil.