Andrew Ross Sorkin (Co-anchor of Squawk Box) 00:00.110
when i would get over to steve liesman he's got a very special guest this morning a special interview with new york fed president john williams steve
Steve Liesman (Senior Economics Reporter) 00:09.270
andrew thank you yes i am here at the new york fed where i've been we don't know how many years in a row now but several with president john williams for a traditional december holiday interview
John Williams (President) 00:18.590
well welcome back steve
Steve Liesman (Senior Economics Reporter) 00:19.870
thanks and and john i was just remarking about how great our teams are who scheduled this months in advance knew there would be a shutdown knew when the BLS would open and and knew that yesterday they would release the inflation report which they of course did not know but we're
Steve Liesman (Senior Economics Reporter) 00:32.830
lucky here to have you to comment on it yesterday that inflation report came in lower than expected but it was a little controversial give us your take away from that report
John Williams (President) 00:41.790
well a couple things i think that you know the the some of the data that we're seeing is actually pretty encouraging in the sense in the on the CPI news and i think it represents a continuation of the disinflationary process we've seen and i feel like it's a you know consistent
John Williams (President) 00:56.910
with what we were or i was expecting now on the headline though there were some special factors some technical factors that really are related to the fact that they weren't able to collect data in october and not in the first half of november and because of that i think the data
John Williams (President) 01:11.790
were distorted in some of the categories and that pushed down the CPI reading probably by a tenth or so it's hard to know we'll get some we'll get some when we get the december date i think we'll get a better reading of how much that distortion had how big the effect was but i
John Williams (President) 01:27.670
do think that that was pushed down a bit by these technical
Steve Liesman (Senior Economics Reporter) 01:30.390
factors grew up john because this is a big issue right now did your army of economists already crunch the data and figure it was pushed down by a tenth is that running estimate
John Williams (President) 01:40.470
you have well that's just a rough estimate i'm saying but yes it is because a couple of the the technical factors one is the only collected data in the second half of november when when all the sales are on and that's going to give you a bit of a downward bias also there was
John Williams (President) 01:53.830
some you know issues about the the rent data and things like that so it's it's hard to know but definitely i'm you know i took some positive signs from some of the categories that weren't as affected by that but i think that really this is just a continuation of of the data
John Williams (President) 02:09.430
we've we've been seeing and i'm going to wait and collect some more data in the next month or two to get a better reading of that
Steve Liesman (Senior Economics Reporter) 02:15.280
also from the department of being lucky rather than good and we're two days after the jobs report and give us your sense of what's happening in the jobs report and your level of concern with with with the level of payroll growth
John Williams (President) 02:26.710
well i think rise the unemployment rate right and again i think we have a similar story as with the CPI i think the the basic signs from the employment report again they didn't have the data all the data for october but they did have data for november i think what we're seeing
John Williams (President) 02:39.870
is you know we're seeing steady job gains in the in especially in the private sector so that's good news a continuation of moderate growth in the unemployment rate i think that due to some technical factors again because they weren't able to collect the date in october it
John Williams (President) 02:52.990
probably boosted the unemployment rate in november maybe by a tenth so i think that if you think about that the unemployment rate has edged up to around four and a half percent pretty consistent with kind of what i was expecting again we'll get more data in the next few months
John Williams (President) 03:07.110
to see you know those technical factors from the government effects of the government shutdown those will fade away from the data but my my conclusion is is the labor reports have been pretty consistent with what we've been seeing especially with this gradual cooling of the
John Williams (President) 03:22.230
labor market no signs of a sharp deterioration at all
Steve Liesman (Senior Economics Reporter) 03:25.670
so put A and B together the inflation point where did any of it change your outlook for where interest rates need
John Williams (President) 03:31.950
to be well it really you know so far that's just a few data releases fortunately we'll get a lot more data before our next meeting and of course
Steve Liesman (Senior Economics Reporter) 03:39.150
we'll get a lot of data for the record you're the one that put out the data dependent t-shirts yes i did if so it's a fair question
John Williams (President) 03:44.830
yeah yeah so i do you know obviously i i see the data is is broadly consistent with the patterns that you know i've been seeing and i think we're consistent with the decision we made to cut interest rates at our last meeting so i think that again it's not none of this data is
John Williams (President) 03:59.310
changing my view of the outlook i would take some you know positive sign from a little bit lower inflation data that's what we've been looking for but not nothing that's a game changer yet but we'll collect more data and and i think monetary policy is really well positioned
John Williams (President) 04:12.830
right now to gather more information see what what that's telling us about the economy the outlook and the risk to achieving our goals so
Steve Liesman (Senior Economics Reporter) 04:20.790
you use that phrase well positioned which is a new operative phrase at least it's taken by the market which means you're probably going to take a pause in january am i reading that correctly is the market reading correctly that's the way the market is priced right
John Williams (President) 04:33.790
now well i never take a pause in my job i'm always hard at work and collecting the data analyzing it looking for all the signs of what's it mean for achieving our employment goal and our price stability goal so there's no i don't think of this as a pause or anything like that i
John Williams (President) 04:48.030
do think the data are telling us that you know really we're seeing gradual movement of i think underlying inflation back to two percent but we have to watch all of the data as it comes in see what it what it tells us i don't personally sense it have sense of urgency to to need
John Williams (President) 05:03.710
to act further on monetary policy right now because i think they cuts we've made have positioned us really well and to really try to you know i think one goal here is to stabilize the labor market i don't want to see the labor market cool too far i want to see inflation come
John Williams (President) 05:18.470
down to two percent with again outdoor without doing undue harm to the labor market it's a balancing act but again in that i feel like we've got this in a pretty good place
Steve Liesman (Senior Economics Reporter) 05:27.470
john i don't know that the extent to which our viewers know that you're one of the world 's experts when it comes to understanding this concept of the neutral rate the rate the fed would set to not grow the economy and stimulate the economy or not cause it to contract in your
Steve Liesman (Senior Economics Reporter) 05:43.430
view where are we relative to the neutral rate
John Williams (President) 05:45.990
well if the way i think of the neutral rate is in terms of the real or inflation adjusted interest rate and so today based on a forecast of inflation of a little under two and a half percent for next year that puts the real interest rate somewhere around one to one and a quarter
John Williams (President) 05:59.950
percent so that's in the kind of the i would say in the range of estimates of neutral that are out there so i think we have moved toward closer to to neutral my personal view speaking for myself is that the neutral rate is probably a little bit below one percent so we're still
John Williams (President) 06:16.070
mildly restrictive in terms of the stance of monetary policy we still have some room to go ultimately to get back to neutral but that's not guiding my you know my views on what should we do at a specific meeting that's more of a conceptual framework to think about it but clearly
John Williams (President) 06:31.990
i do think that we've gotten closer to neutral i still think we're a little bit a little bit