00:00 Speaker A
What happens if the labor market does start to roll over? We continue to hear people say, well, that’s just pre-tariff data. We need to see the post-tariff data. If we do see the labor market roll over, do you think the Fed would potentially look at that part of their dual mandate more than the inflation part?
00:21 Speaker B
So, Fed Chair Powell’s April 16th speech, I think, I would point to as a very informative in that view. Uh, the first Chair Powell said, we can’t have a strong, sustained, um, labor market without price stability first. That kind of gives you a hint on on what their focus is. Right. The second thing, the Fed Chair Powell would say, we’d look at how far away we are from our employment and from our, uh, inflation goals and over what time frame we could get back to those. And that’s how we’d set policy appropriately. In theory, you’re going to be significantly further away from your inflation goals, uh, by let’s call it the middle of the summer of this year, if if tariffs go into effect as expected, and the employment goal that remains to be seen. If there’s a sharp, uh, decline in the in the labor market, you know, three, two to three months of of large negative prints with corroborating data and jobless claims and, you know, rising unemployment rates, sure, they’re going to they’re going to cut. They’re not going to be immune to it. But relative to the 2018, 2019 period, where the Fed could be preemptive in addressing downside risks to the economy, they can’t do that this time because of the inflation backdrop and where inflation expectation, where inflation is expected to be going. So, you know, they’re skating they’re skating toward the puck on inflation and not necessarily skating toward the puck when it comes to the labor market at this point.
04:26 Speaker A
Mhm.
04:47 Speaker B
Yeah.