Previewing Jackson Hole

**SPEAKER_1** (0:02)
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**Paul Sweeney** (0:27)
Global Wall Street Focus is on Jackson Hole, Wyoming, Fed Chairman Warsh.
Kind of disappointed, I would say, the global markets were with some of his comments to date in terms of disclosure or lack thereof. Maybe a little bit of an opportunity to reset here or maybe not. Richard Clarida joins us. He knows what's going on. He is the Global Economic Advisor at Pimco, former Federal Reserve Vice Chair joining us here. Richard, thanks so much for joining us here. If you were advising Fed Chair Warsh as it relates to today's speech, what would you tell him?

**Richard Clarida** (0:59)
Well, thank you for having me on. Obviously, the chairman's first speech at Jackson Hole in that capacity.
At the press conference recently, he said he might talk about some big picture questions. You know, we have five task forces. We have four big picture questions. But I would advise him also to at least spend some time giving the audience and giving markets the sense of the Kevin Warsh framework for thinking about how we're going to get inflation down to 2 percent. You know, he says inflation is a choice, and I agree with him. Right now it is and has been above 2 percent for five years. And so at least some insight into his framework for getting price stability, I think, would be valuable.

**Tom Keene** (1:44)
Rich, I'm so glad you mentioned that line. Inflation is a choice. What did Chairman Warsh mean when he said that? And how do you interpret it? What do you think that means when someone says inflation is a choice? How has the government made the choice of having inflation?

**Richard Clarida** (1:59)
Well, Scarlett, it actually is a version of something Milton Friedman said a half century ago or more, which is, quote, inflation is everywhere and always a monetary phenomenon. And so, you know, Kevin, I think when Chairman Warsh was channeling that idea that ultimately over some period of time, the rate of inflation in a country is determined by its monetary policy. The key element of that statement, though, is over some period of time. And I think the chairman is right that five years is a long time to be above the target. On the other hand, a lot has happened in the last five or six years.

**Paul Sweeney** (2:36)
You know, Anna Wong from Bloomberg Economics is out with a great note today saying what she would like to hear and what she believes the market would like to hear.
Okay, you don't want to provide guidance? Fine. But give us a sense of kind of how the market should react to certain data. Richard Clarida, Global Economic Advisor at Pimco and former Fed vice chair. Richard, one of the things Anna Wong from Bloomberg Economics is out with a wonderful note today and one of her points is, and it's shared by the marketplace, I think, is, okay, you don't want to provide us guidance. You don't want to spoon feed us guidance. But give us a sense of your reaction, how you react to certain data points, how you're going to maybe view data and your ability to get inflation down. So those reaction functions, is that something he should delve into?

**Richard Clarida** (3:23)
Well, right now, I think here's the issue for the Fed. Many of his colleagues on the committee are telling us about their reaction functions. Laurie Logan, Beth Hammett, Neil Kashkar, to name just three of the folks who have dissented. And so even though the committee, speaking as a committee right now, is not offering a lot of guidance, I think the view is that since we're hearing from Hammock and Logan and Kashkari, it would be useful at least to some extent to get the chairman's perspective. So I think that's where we are right now.

**Tom Keene** (3:56)
The backdrop for Kevin Warsh's speech is an interesting one, right? Because you have this decline in Treasury prices, yields have been elevated, and of course that prompted Treasury Secretary Scott Besson to intervene. A lot of people are talking about a revival of the debasement trade, this idea that people want to get out of US dollar denominated assets.
If Chair Warsh doesn't deliver what a lot of investors are looking for, do you see a sharp revival of that debasement trade?

**Richard Clarida** (4:28)
Scarlett, I really don't. Obviously, things can change, but right now we're seeing really a global sell-off in yields. So there are global factors at play, not just the Fed. In fact, if anything, really, since Liberation Day now, 15, 16 months ago, the dollar has been flatter, even in the last several months after hostilities and the Middle East going up. So I'm certainly not in the debasement trade.