tv Bloomberg Markets Balance of Power Bloomberg June 25, 2019 12:00pm-1:00pm EDT
today on a special edition of balance of power, we will hear from k bailey hutchinson, u.s. ambassador nato, and fed president -- and st. louis fed president james bullard. president trump yesterday signed an executive order he said would bring down the cost of health care all across the country. with this order, hospitals will be required to publish prices that reflect what people pay for services in a way that is straightforward and accessible to all. you will be able to price it among many different potential providers. you will get great pricing. prices will come down by numbers you will not believe. david: to take us to the president's order, we welcome back the secretary of hhs, alex a czar. -- alex azar. bring down prices like we will not believe.
explain the president's order and how it will bring down prices. sec. azar: i think we will look back at this executive order as one of the major fundamental ships in american health care reform that we will have ever experienced. for your viewers and folks like us who understand markets and customers, you cannot have a market without price and quality information. ist the president is doing ordering us to have hospitals disclose information based on their negotiated rates they have been consumer friendly, machine-readable format. the is making us put out requirements so insurance companies give you the patient information on the list price, the negotiated price, and your expected out-of-pocket before you go to the doctor and before you go to the hospital so you can make an informed choice. david: that sounds good. with marketsal believe in markets based on the
transparency of information. as a practical matter, these things can get complicated. how are we going to make sure the information gets provided in a way people understand it. you and i both know it can get put out in a way that is confusing. sec. azar: you noticed i use the words machine-readable. we are going to be putting out whether it is the hospital data, the insurance company data or the broader claims data, one other aspect that will be revolutionary about what the president has required is that the v.a. and the defense department and labor department put out claims data for all of that can be care identified and protect patient information and privacy and security but makes that available. so many entities are so much better at analyzing big data, coming up with trends, identifying efficiencies, but also making it consumer accessible. we in the government are not expert at that, but there are a
lot of companies that are who can figure this out for consumers. if we just make the data available. one of the early issues you had was the pharmacy benefit managers that applied to the federal component of health care management. the this apply to the only federal part or does it apply to private providers and is that enforceable? to. azar: this would apply all hospitals as well as all insurance companies. we have authority under the public health service act as well as other statutes to mandate this type of disclosure of consumer information. we think we are on all fours there. david: who is supporting this and who is opposing it. some people are saying it is too much information, and some employers say it is a pretty good idea. haveazar: the employers been thirsting for this information for years, their own insurance companies conceal this
information and they try to analyze trends and see if they're getting a good enough deal. it was against this? the special interest. special interest entities that have a good gig. this nontransparent system they have, they are profiting and they do not want to disrupt it. for decades republicans and democrats have said we need greater transparency to build an actual market in health care, bring market forces to bear to increase quality and decrease price. those special interests do not want to see that happen because this will disrupt the good gig they have going. you saidell: -- david: you have a plan. put aside whether you have obamacare or do not have obamacare. what is next? sec. azar: what you are seeing from us is an approach that
articulates an overarching philosophy. the president believes the people's should have affordable, patient centered health care that puts them in control, that treats them like a person and not like a number. part of that is guaranteeing medicare for individuals. that is 60 million americans. take what we have and make it better but protect what they are forgot. the 180 million who are private insurance. protect them. take what we have and make it better as we are doing with this transparency executive order. that is 240 million americans who are happy with what they've got. protect it and make it better. individuals other that obamacare promised to install access to health care and affordability but failed to do so, come up with various options there, affordable options for individuals, for those were left behind but also those who are currently in insurance but they might worry they might be in that uninsured
or individual market and want to make sure their options there. makeis why they want to sure they are driving all of these affordable options. you see the president picking apart the health care world to make health care more affordable with higher quality, and then with the transparency executive order, a massive underlying structural change to benefit 350 million americans. david: let's talk about the pharmaceutical companies. you are a senior official for a pharmaceutical company. today the announcement has been a $63 million acquisition by abbvie to allergan. that is not subject to your approval. some people are saying the reason there has been consolidation in the industry is for fear of possible price regulation or prices being driven down. does that make sense to you? sec. azar: i am not sure you see that kind of aggregation and acquisition a simply on regulatory change.
is many other it reasons morganlander to the portfolios and expected revenue streams and how they match up. i'm not sure anything from a regulatory front would drive that strange. -- that change. antitrust review is one of the areas not within my jurisdiction. my message any pharmaceutical company would be to build your business plans on prices coming down, not going up. david: fair enough. let me turn one other important subject. that is what is happening to those for children who are trying to come across the border . i saw an amazing statistic that something like 56,000 unaccompanied minors had come across since the month of october. you have said we are running out of money to take care of those kids. what are we going to do? sec. azar: it is a humanitarian crisis. we have more kids come across the border, these are kids on a company. they are not coming with their
parents, they are not family units. more are coming across this year than in the last year. as a result, we are running out of money. by the getting to the middle of july, we will be out of money to care for them. we'll be writing ious to be of care for our program. take care of the kids referred to us by the department of homeland security that come into the country on a company. our goal is to take care of them in a safe and secure environment and replace them with family members, sponsors, or otherwise as quickly as possible. there is a narrative that tries to suggest we hold on to the kids. we do not try to hold onto to the kids one day longer than necessary to ensure we are placing them in a safe child welfare appropriate environment. now what is happening is so many kids are coming in from you see what is going on department of homeland security and customs and border patrol. builte resourcing is not
to get 11,000 kids in the month of may and process them through. with us being full at hhs, you get a backlog. this is not good. these facilities were not built with taking care of unaccompanied kids in mind and congress has to act to give them and us the money we need to expand our program and for them to modify their program to fit these different dynamics of 80,000 family unit members coming across. 11,000 kids in the month of may. this is a grave humanitarian crisis. it is time to act on a bipartisan basis, get the funding, do not politicize this, just get the job done. david: powerful, makes a lot of sense. thank you very much, mr. secretary. that is health and human services secretary alex azar. coming up, we will talk with united states ambassador to nato as nato defense ministers gather in brussels. here is what top military
leaders have been telling us about the situation in iran. >> the iranians do not want to go to war with us and we do not want to go to war with iran. >> what iranians are trying to do is provoke us into an unnecessary response, and over response. >> our forces are up against one another. we have tens of thousands of forces in the gulf. it only takes a few minutes for something to develop quickly. >> we are picking sides. we are picking the sunni arabs and the saudi's over a long-term future with iran. i do not see how that will go well. >> iran will have a role, whether they are a nuclear power or not. we have to figure out what we think their role should be and understand they are not going to take dictation from us and execute that. ♪
david: this is balance of power on bloomberg television. we turn now to mark crumpton for first word news. mark: the federal government has removed most children from a remote order patrol station near el paso, texas, following associated dress reports that more than 300 children were being detained there and caring for each other with inadequate food, water, and sanitation. the office of refugee resettlement says the infants, toddlers, and teens are being transferred today. they will be moved to shelters and other facilities run by a separate federal agency. mike pompeo made an unannounced visit to afghanistan. he discussed the progress being made and talks between the u.s. and the taliban. he says the sides are close to finishing a draft that will
combine the taliban's commitments on preventing afghanistan from becoming a terrorist safe haven. there is pompeo added not yet a timeline for u.s. troop removal. the u.s. is downplaying expectations for this week's meeting between president trump and china's president xi jinping. they insist the administration is not willing to compromise on demands for meaningful chinese economic reforms. the meetings raised hopes the leaders could put trade talks back on track. sayse u.k., boris johnson he now believes parliament would support a no deal brexit. the favorite to succeed theresa may spoke to the bbc about leaving the european union without an agreement. senior figures in johnson's conservative party worn they have the numbers to stop him if he tries. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg.
david? david: thanks so much. ministers meet in brussels tomorrow to address the key security challenges facing the alliance, including the cost they share for their common collective defense. ahead of the summit, the nato secretary-general announced initial figures for allied defense spending for the year. contributions from europe and canada cup 3.9% and increased for the fifth consecutive year. here with the latest insight is the u.s. ambassador to nato, kay bailey hutchinson who joins us from brussels. thank you for being with us. i will say there is an increase which i'm sure is good news, but if you look at the goal, all but a handful of countries still fall short of their committed goal. i think we are going in the right direction, david, but we are not where we need to be. we have a big adversary in
russia and they are menacing right now, as we all know, having just taken over ukraine , and takingof them their sailors to moscow to prison. we need to be able to have a deterrent effect on russia's influence. ist will cost money and that why we are asking our allies to step up and meet their commitments that everyone pledged to do in the wales summit several years ago, 2014. we are working on that, going in the right direction, but not where we need to the. david: let's talk about pacific countries -- specific countries. there are a rash of countries the need to get up to those goals. let's start with germany. i saw the german yesterday had an increase in defense spending,
is only something like 1.5% over the next few years. it is still not what they are projecting. amb. hutchison: that is correct. germany needs to do more. for the most economically viable country in all of europe is not enough. they know that, they have said they know they have to do more. angela merkel has said she will meet the goal of 2%. it may take longer than 2024, she says. we are encouraging them to make it before 2024. we are looking at airplanes that need to be bought, we are looking at submarines, we are looking at the newest warships. these are expensive but we must do it because we see russia and more activity from china all through europe and into north america. we must be vigilant and that is
why we are talking so much about the capabilities. it is not just a number out there, 2%, it is the capabilities to deter a very well-financed defense operation in russia and a very interesting increase in activity by china in their belt and road initiative where they are taking over many of the ports throughout europe. david: you've mentioned russia a couple of times. i want to make a point. if you look at the countries that are close to 2%, they include several countries closer to russia than some other nato members, places like estonia, romania, poland, is that a coincidence, or are they more aware of the threat? what is nato's position with respect to russia? amb. hutchison: absolutely.
it is because those countries do -- excuse me -- they the menace of russia. they have lived under russia and next to russia. it is very important to them that they be well defended and that is why we have a european defense initiative that does help the baltics as well as poland and romania and bulgaria. it is very important to them. also for our alliance. relationshiptense with russia right now. david: let me interrupt because i'm worried about your voice. you will need that. what we take a break and see if
david: you are watching "bounds power." "balance of we will turn from kay bailey hutchinson. .e were talking about russia i want to talk about another nato member, that was turkey. turkey was in between the united states and russia with respect to the s 400 missiles we say we do not want you deploying. explain to us the u.s. position on that and why is so important to the united states. first of all,: our relations with russia are very tense right now because of what i mentioned earlier, capturing ukrainian ships and
sending the sailors to moscow prisons and not releasing them. we are worried about that. do have a russian missile defense system in one of our allied countries like turkey is very problematic for the ,nteroperability of our systems especially the f-35, which is our newest generation of fighter aircraft. becannot allow our f-35 to in a country where the russian system, which is a computer, which is programmed to shoot down f-35's, we cannot do that. we are trying to work with understandelp them that we want their partnership in the f-35 program, we rely on them a strong allies in nato, but this is a disconnect and we
are hoping very much they will find a way not to take an s 400 into this very important ally of nato. that thehave read turkish government has said we will buy the patriot missile system instead, but you have to let us assemble it in turkey. is that a possible third way? amb. hutchison: absolutely. we would like to provide the patriot. it is a great system. we have also said to turkey if , there is abuy european system that is also a good missile defense system for ankara where they are looking for a defense after the coup attempt, also there is a norwegian system. we are not trying to just sell the patriot, although we think it is the best.
we are seeing take an interoperable missile-defense system and we will be fine with that. we will offer the patriot and we have offered so much in the f-35 and i'm sure we would offer, in the patriot as well, some of our technology transfer. we have done that in the f-35, which is why we would have to withhold that if they take this s 400 that is a very sophisticated russian defense system. david: give us a sense of the timetable. i am red that the turks are very -- i have read that the turks are very close to taking shipment on the s 400. amb. hutchison: that is the problem. time is running out. they are looking at taking delivery of the system, it could be as early as the end of this month or in july. we are encouraging them not to do this because it would be so
haveul to the alliance to a system and one of our major alliance countries that is not operable with our nato systems. we have air bases in turkey, we airplanes, wep of have been training the turkish pilots in that airplane. it is our most patriot -- it is our most sophisticated. we hope turkey will not do this. david: thank you so much. ambassador kay bailey hutchinson, u.s. ambassador to nato, joining us from brussels where she is hosting the foreign ministers from nato. this is bloomberg. ♪ we're the slowskys.
this is "balance of power" on bloomberg television. i'm david westin. coming up tomorrow, coverage of the first democratic presidential debate. 91 features elizabeth warren, amy klobuchar, cory booker and others. tomorrow, a preview of that debate with former clinton labor secretary robert rush. the economy will be debated tomorrow night. in the meantime, we hear from james bullard who is with kathleen hays in st. louis.
the debate will be about the economy. president trump has had a strong economy in general but has led the markets to price in a 100% chance of rate cuts because of uncertainties. now let's go back to kathleen hays who is with mr. bullard. want to welcome our tv audience to our bloomberg radio audience as i sit down with my exclusive interview with jim bullard, president of the federal reserve bank of st. louis. a very special show, interview on a day when the st. louis fed has a special event, the annual memorial lecture. thank you for having us back. james: thanks for coming out. looking for a great event. kathleen: carmen reinhart will be the featured speaker. we will have her on later today. quickly, congratulations. st. louis blues, way to go. victory, great
moment for st. louis. kathleen: a great moment for jim bullard last week. you dissented on a fed policy decision, the first dissent in the era of jay powell. a lot of people are wondering why now? on june 3, you said a rate cut might be warranted, inflation expectations continue to fall, and it looks like the weakness could be bigger from the trade war than originally thought. why now? why did you have to draw a line in the sand and say we cannot wait, have to cut 25 basis points today. james: inflation is running below target, which is surprising, given the economy has surprised to the upside the last two years, growth has been higher than most people expected. labor markets have been strong. unemployment at a 50-year low. still we are looking at inflation running above our target.
ok lookingl backward, but looking forward, looks like a slow done with some downside risk. you have an inverted yield curve. seemed to me it was a good chance to make an insurance rate cut and try to reset inflation and inflation expectations back to the 2% target. kathleen: in the immediate term, a lot of people are saying, you have a meeting at the end of july, g20 this weekend in osaka. president trump and president xi will be talking. good you have just waited, see what happens there? what if there is a positive surprise? would that have changed your view, would it have been more prudent to say we will wait? make a point but not dissent and say go now. of reset during inflation and inflation expectations is not all dependent on what happens in osaka. most are downplaying what will
come out of that anyway. embroilednd china are for the long-term here in trade disputes. you should not look to any one event as putting an end to this. i think it will be an ongoing uncertainty. you could even say a regime of high uncertainty about future trade arrangements because the two parties are disputing how partnerships should be arranged. with expectations running low, the economy looking to slow down, possibly more sharply than we thought, seems like you better get inflation back up to target where you can. that is why i thought we should cut here. cutting -- i love my fellow committee members -- but now by not cutting we are putting high probability on the july meeting. generally, i don't like that as a tactic. we will not do something this
time but don't worry, we will do it x time. if you think the conditions are right today, you should go today. kathleen: do you like the element of surprise? james: you are putting high probability on the next meeting. not now, maybe next time. what kind ofclear data the committee would be expecting to get during the intervening period that would be the decision to go one way or the other. i grant, a lot of people are waiting for g20. kathleen: a lot of people now are talking about a 50 basis point cut, all the latter now, and at the july meeting. are you on board with that? sitting here today, i think 50 basis points would be overdone. i don't think the situation calls for that. i hate to prejudge meetings. things can change by the time you get there.
if i was just going today, that is what i would do. kathleen: why is 50 basis point kathleen: why is 50 basis point overdone? is that a bad strategy, does that set of certain kinds of risks? james: the economy is expected to slow down to something below 2% in the second half of the year. that is not the end of the world. inflation is running low. inflation expectations are running low. we want to push him back up to 2%. i don't think we need to take huge action to get there. this is more in the realm of insurance, ordinary adjustments to monetary policy that you should be making to be sensitive to market developments. kathleen: in terms of this dissent, last week, a little bit harder to make this dissent? did you ponder at all the president has been publicly criticizing the fed, he has been publicly criticizing the fed chair. was that a concern, didn't make it more difficult to think maybe
this would be an issue for the fed? i don't know. politicians commenting on central banks, that goes back centuries. there is really nothing new in that. we try to make the best decisions we can based on the data we have. this is my judgment. kathleen: so you are not concerned that this dissent would raise -- james: i don't really care how it plays in those terms. if i'm going to be a part of the monetary policy process, i want to make the best call i can in those situations. kathleen: let me ask you about something else that is out there right now. read a story, watch an interview ,ith a traitor, strategist bonds have rallied. some people are pricing in three rate cuts. the fed is following the markets, capitulating, caving in. how do you respond to that? is the fed capitulating? james: i don't think so.
we are part of the equilibrium. longer-term rates have come down dramatically over the last nine months. year would have been at 3.25, but now we are around 2. there has been a sea change in u.s. monetary policy. i just want to play this as much as we can to keep the expansion going. i know there's been criticism of the fed, but it is odd. our mandate is to keep inflation low and stable, keep labor markets humming. you have a 50-year low on the unemployment rate, inflation is a little bit low, but still not far from our 2% target. the committee as a whole has made some awfully good calls here in the last couple of years. kathleen: does the bond market have it right in another sense, that the fed has dropped rate hikes from the output -- outlook pretty much, and the consensus
seems to be saying how much we cut, and when, and according to those in the middle, probably looking in that direction as well but not ready to go there. does the bond market have it right, are you glad to see them responding like this? get theou cannot precision so great that it is on a daily basis. everymmittee would meet six to eight weeks. if you can be in the right never heard, that is probably as close as you can get. in the big picture, it may not mean that much if we move in one meeting versus the other. i appreciate that, but it is a world of hairsplitting. if it was my judgment, i would have made the move earlier rather than later. kathleen: let's look at people on the other side. one argument is that the is a bad idea because it could create financial imbalances, asset bubbles, we have heard about the
reach for yield, highly leveraged corporate debt, and that this would just feed into that. james: the fed does an assessment of financial stability. right now the risks are moderate. we do keep track of this, and i'm sensitive to it, but i don't see it right now. kathleen: do you think the totals are strong enough to deal with this? james: macro prudential tools are not as strong as i would like to see them here in the u.s. very little we can do directly, we can talk to our cisco routers -- sister regulators, we can flag things when we see them. right now i don't see anything of the magnitude of the mid to thousands or late 1990's in terms of a bubble and asset pricing. another thing about this argument is europe has had low interest rates for a long time. japan has had low interest rates for a long time. people don't talk about asset bubbles there.
i think you have to be careful about this argument. kathleen: how about another question that was raised -- the fed sending the message that we are going to guard the economic expansion, don't let it be in jeopardy. that this sends a message that by fed can offset any policy any foreign government, taking responsibility for the slow down. the problem may not be theirs and they cannot necessarily cure all slowdowns. in the end, it undermines fed credibility. james: we can have some affect on the economy, but some things are too big. someday that may happen and we will go into recession. to the extent we can, we want to maneuver the best we can and provide stability for the u.s. economy. this is a 10-year expansion, one of the longest on record, maybe the longest on record here in june.
you have other countries like australia have not had a recession in a couple decades. you would very much like to get to that situation where you can manage the situation over longer periods of time without having recession. recessions are very damaging because labor markets get upset. there is a lot of job disruption. that takes a long time to settle down afterwards. we want to stay out of that situation, for sure. kathleen: what is your view on the economy right now? many people have gdp forecasts above 2% this year. on implement report, which is often followed by a strong one. consumer spending was weak, but one reading now is looking better. what is your view of the economy , especially against this backdrop of saying we need to have this rate cut now? it is not unusual to see
mixed reports on the economy as the economy slows down. i think that is what we are seeing. certainly manufacturing being affected by the global trade war. agriculture as well being affected by the global trade war, increment weather in the u.s. agriculturethose are two areas'l get lower than expected for this most likely. wellmers are doing very with the good labor market. have things going on on both sides. the issue is the year-over-year growth rate going through the first quarter of this year was over 3%. great. well above most people's estimate potential for the u.s. but the second quarter looks slower and the second half looks slower still. the question is, are you going to glide down to a nice or are wegrowth rate, going to get hit harder than we thought and have a sharper than expected slowdown, and possibly something more dangerous than that? kathleen: if the trade war
continues, if the two wr presidents, trump and xi leave a soccer this weekend seemingly no closer than where they are now, bloombergled on, today copperheads of analysis of companies that would have more tariffs put on them. instant came out and said that they would have to raise the price of their product by $38. supply chains being disrupted. is that your biggest concern over a possible worse second have slowdown? to ceos, global players, manufacturing, that is what they talk about. how do you design a supply chain in his regime of higher uncertainty? in this regime, you are never sure what will pop up next with tariff threats, counter threats, countries are wondering whether they were pursuing the right
policy in going for tariff reduction. in that environment, i think they will want to diversify their risk, will want to have more areas where they can get supplies from, more suppliers. if one of their suppliers gets hit with a trade, tariff, then they are able to switch to somewhere else. this is not easy and probably higher cost than if we did not have those uncertainties, but that is the new reality. to remindi just want everyone, on bloomberg radio, we are here with james bullard in an exclusive interview. that disruption, potentially higher cost, potentially not even being able to get the parts they need because no supply chain do not adjust in a month. of a risk to a sharp slowdown in the second half is that? james: i think it is a risk.
hopefully, we have other things going on in the economy to offset that. i think it's a risk. something the global economy will have to adjust to. i will also say this about the trade war. that this is causing inside the u.s., it is causing even more outside of the u.s., smaller economies, they are very concerned about this. this is why you are seeing a slowdown globally. that can feed back to the u.s. do you have fears of a u.s. recession? james: it is up from before. if you look at yield curves, you will see a higher number than in the past. i am hopeful that if the committee will act, we can get the yield curve straightened out and have an upward sloping yield curve again, and then the recession worries will go down. that is one cents where you can see the insurance part of this
in the data. jameskathleen: is that one of te arguments for cutting rates once? if the short and goes up? --james:if you look if you look at the 10 year, three-year, inverted this morning. if we stay there, that may start to predict -- that would predict recession ahead with some probability. 2-year 10-year is not inverted and that is because the markets think we are going to go down. if we follow through and go down , the yield curve will come back to normal and people will point to this as a situation where the 10-year three-year inverted that we did not end up in recession. talking about rate cuts because inflation is below target. the fomc, the consensus view for inflation, have to push their forecast from 1.8 to 1.5,
acknowledging something that you have been worried about. you said this about three weeks ago. it seems to me, jim, that at a time when we have got globalization and technology, the phillips curve is flat or broken -- we are going to raise inflation by cutting interest rates. unemployment at a 50-year low, at a good growth. even this growth from the tax cuts last year, didn't do anything to inflation. why are rate cuts going to boost inflation now? james: it is a great question. it doesn't seem to have as much impact as it once did. that is because inflation expectations are probably the predominate variable, more than the real economy causing future inflation. just because you have great labor markets today does not mean that you are putting all that much upward pressure on inflation.
because of that, we have more leeway to be more dovish than we otherwise would be in order to get inflation back to target. plus, we would get insurance against the idea of a sharper than expected slow down. my logic is, even if a sharper than expected slowdown does not materialize -- let's say we go through the second half of the year and everything is gangbusters. -- that means is returned to is we return to inflation targets faster. the chances of significant overshoot are pretty small. ourost, we would overshoot target by a quarter percent or something like that. scenario, where the economy continues to boom. i don't think we are at that much risk in this situation of the more dovish than we previously thought. kathleen: is this sort of the rate,x approach, cut the you will not put inflation
higher. you may not get the upward increase in inflation that you want, but at the least you are trying to get something done. james: i think there is some of that thinking in here. i don't know if i could expressively put down a probability. [laughter] theleen: in terms of question about inflation, a question for the fed always, but the question of policy framework review underway. you are pretty much a fan of sticking to the 2% inflation target, even though it has barely been met since it was put in place in 2012, even though the japanese are a long way from theirs, and even know the ecb has not met their target. when will central banker start thinking, the 2% target was adopted at the wrong time, helping to bring inflation down. but when you are trying to boost
inflation, inflation targets have very little impact. james: chair powell has said we are going to keep the 2% target. that is not part of the framework review. i would have to say inflation targeting in the big picture as been crazy successful, beyond our wildest dreams. in the this earlier era 1960's, 1980's, high and volatile inflation, number one political issue, brought ronald reagan into office, all these things happened. an inflation target, it's a way to put managements attention on the problem and to assign responsibility to the central bank. just doing that helped him endlessly around the world. not just in the u.s. inflation rates have come down, much more stable. inflation expectations have come down, much more stable. the question now is can we get even better policy going
forward? there are some ideas about this. you have the zero down the problem out there. we just spent years there, other economies seem to be stuck there. i think in the big picture, the inflation targeting approach has been tremendously successful. out, you may i point just mentioned the 1960's, 1970's, 1980's, when inflation was high, but the fed did not have an inflation target. it was price stability. we have to get the monitors at the st. louis fed to fix that one. there was no inflation target, and that was the problem. you are not sure what the central bank wanted to do. you are not sure what the committee was trying to do. that allowed inflation expectations to roam all over the place. what do we get? double-digit inflation,
double-digit unemployment. this is ancient history now, but that's all been brought under control. today, central banking faces new problems about two long low inflation, as if there is too much credibility, and inflation targets are seen as a ceiling, something that charlie evans in chicago has often emphasized. to change our thinking to get more emphasis on the symmetry of the inflation target, instead of just thinking 2% is a ceiling. kathleen: we can talk about inflation target ranges. 1.5% to 2.5%. you can say we are in range now. keen onre not so average inflation, but those are all out there. you have a whole generation of people who have not seen rising prices. here at the fed, you can say this is our new range, but will this really affect inflation
expectations among the general public? rick: my former colleague once gave a speech, comfort zones.schumfort [laughter] if you give a range, it is not clear if you are going to do anything or not, or if that is just a range of an action. most people are going to infer that you are trying to get to the midpoint of the range. it is not clear what this range really helps you -- i'm sympathetic to the idea that there is measurement error, and there is measurement error, but whether the zone is helpful or not, i don't know. kathleen: specifically, what will be helpful? james: what most people are talking about now is some kind of makeup strategy where if you missed in the past, you would make up for it in the future. you hit 1.5 inflation one year, 2.5 the next year.
if you do something like that, your 2% target has more credibility than we have today. what is happening today is we missed on the low side and markets could be forgiven for thinking that maybe our inflation target is only 1.65%, because that is what core pce inflation has been over the last six years. they start to think the fed does not really want to hit the 2% target, only 1.6%. that is not our intention. our intention is to get the 2% target. that the power of january, take rate hikes off the table. now tilting toward rate cuts. is that the power of that position, that you are trying to convince people that, number one, you are going to hit the inflation target, you have a serious intent, and you are going to do it. know, i leaned against the whole plan to 2018lize rates during
because i felt we didn't need to do this. we were raising rates and by the time we got through december, i thought that we had maybe overreached slightly. again, this is a hairsplitting world. you could've made the call either way at that point. it was just a little bit too far, i think. kathleen: strong dollar, has weakened a bit. can you reach your inflation target if the dollar remains relatively strong? james: other central banks have gotten out in front of the fed now since we changed our policy in january. you have some rate cuts abroad. a lot of those countries are either explicitly or implicitly managing to the dollar, so they are concerned about their exchange rates. in the u.s., we are not as open of an economy.
i think a lot will depend on europe, what europe can do here. has come, mario draghi up with some statements about a more dovish stance from the ecb. i think they have more of a challenge at the ecb. they were hoping for better data in the second half of 2018, first half of 2019, then they have gotten, so they have. just there thinking a little bit. kathleen: as a central banker strong arears, how those tools at this point? making a negative rate more negative, a including the governor of the bank of japan, when i interviewed him a few weeks ago, they said they can keep inflation momentum going if they have to. but for so many people, put more negative rates negative -- what is that going to do?
maybe scare people more. you can buy more bonds, but if buying bonds did not get europe back on its feet, what will? i think the lesson from both japan and europe is you don't want to be in those situations if you don't have to be because it starts to get very questionable exactly what the central bank can do. those tools may well be perfectly powerful but market expectations may not have adjusted yet. it may take a long time to adjust. therefore, it looks like they are not working. many things can be going on. the lesson for us here in the u.s. is that we want to stay out of that situation. i think we've been very successful in many ways being able to normalize rates. some have said the immaculate normalization. ratese able to normalize in a way that did not slow down
geteconomy and was able to us on the zero bound, stop expanding the balance sheet, start shrieking the balance sheet. i think it's been a good moment for the fed. one year from now, where will rates be on the short end, fed funds rate? here today,ng somewhat lower, but i only have 50 basis points by the end of the year. my idea is wait and see from that point. don't try to predict too much about where things will go. we want to be sensitive to the incoming data. kathleen: we will continue the conversation on bloomberg radio. glad that our bloomberg television audience could join us here with this exclusive interview with the jim bullard. >> that is kathleen hays intermune jim bullard. aslds at the front end rise mr. bullard said he did not see
the need for a 50 basis point rate cut. campow that he is in the basis point rate cut would be warranted. right now on the two-year, 1.17%. that is a yield curve, 2/10 spread just under 26 basis points. let's bring in our international policy and economics , as we see chair powell is about to take the stage in new york. some headlines on him. we would get to those in a moment. i want your reaction first two jim bullard talking about the rosiest scenario that he sees. vote, am bullard is one voter this year, but not particularly influential, where jay powell is. the markets will focus on powell. the idea that a rate cut would be coming, bullard has already said