FOX INTERVIEW WITH AUSTAN GOOLSBEE, PRESIDENT, FEDERAL RESERVE BANK OF CHICAGO

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                           TRANSCRIPT

                         March 08, 2024

                           NEWS EVENT

                                

   AUSTAN GOOLSBEE, PRESIDENT, FEDERAL RESERVE BANK OF CHICAGO

                                

                                

                                

  FOX INTERVIEW WITH AUSTAN GOOLSBEE, PRESIDENT, FEDERAL RESERVE
                           BANK OF CHICAGO

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     FOX INTERVIEW WITH AUSTAN GOOLSBEE, PRESIDENT, FEDERAL RESERVE
     BANK OF CHICAGO

     MARCH 8, 2024

     SPEAKERS:
     AUSTAN GOOLSBEE, PRESIDENT, FEDERAL RESERVE BANK OF CHICAGO

     SANDRA SMITH, FOX NEWS ANCHOR

SANDRA SMITH, FOX NEWS ANCHOR: Let's bring in Austan Goolsbee now, president of the Federal Reserve Bank of Chicago.

Austan, it's great to have you back. Good to see you.

AUSTAN GOOLSBEE, PRESIDENT, FEDERAL RESERVE BANK OF CHICAGO: Yes, it's great to see you again, Sandra.

SMITH: All right, so let's dig into some of this, because this was Biden last night.

And he announced a lot of new spending. Listen here.

(BEGIN VIDEO CLIP)

JOE BIDEN, PRESIDENT OF THE UNITED STATES: And this funding is part of a larger $5 billion investment led by the Department of Transportation for 37 major projects.

In total, my administration has canceled $127 billion in student debts for nearly 3.6 million Americans.

We're investing nearly $2 billion to help more farmers adopt practices to fight climate change.

One billion dollars to fix aging critical rural infrastructure.

During the pandemic, we invested $350 billion in the American Rescue Plan.

(END VIDEO CLIP)

SMITH: All right, obviously it's a montage of all the spending that Biden has talked about over the past several months.

Is that a good idea, when we're still seeing sky-high prices, Austan?

GOOLSBEE: Well, look, Sandra, you know that, a year ago, I moved over to the Fed. And once you're a Fed man, you're not in the fiscal policy business.

So Congress has tasked the Fed with what they call the dual mandate. The Fed's got to stabilize prices and maximize employment. So we have to just take whatever the conditions are. Whatever Congress decides with the president about taxes, about spending, we just take that as the conditions.

And that's the -- I say it's the -- the Midwest motto is, there's no bad weather; there is only bad clothing. And we will respond to whatever they decide.

SMITH: Amen to that.

On election night, when we were parsing through the data, we certainly put up on the screen some of the good numbers that this administration can tout. The unemployment rate is at historic lows, although it did tick back up, as we saw in that report today, jobs added, wages up 15 percent. The Dow's up 24 percent. We got it.

But those numbers that people are asking when they go to the ballot box, are you better off than you were three years ago, I mean, overall, costs are still up. You have got a major problem when it comes to gas prices, up 40 percent since Biden took office. Real wages are actually down, Austan.

And this is a number I highlighted as well. Credit card debt is soaring. It's up 47 percent over three years since President Biden took office. How do you look at that?

GOOLSBEE: I mean, the thing about the conditions, I like that you're taking a longer view. And, in a way, the Fed has to take a longer view as well. You don't want to be determining each interest rate decision based on just what happened in the last month.

The thing to remember is, our dual mandate is about the inflation rate. And the inflation rate is how much the prices went up from last year, not what's the level of prices and are they higher than they were four years ago or eight years ago or two years ago?

We lost control of inflation, as everyone knows. That was by far the worst part of the economy, and that was where the Fed was not doing its job. We're now -- we have gotten the inflation rate down not all the way to where we want it to be, but we have gotten it down.

It's not realistic to expect that we would get the price level back to what it was pre-COVID, because, to do that, you would have to have deflation, and you would really have to have a massive recession in the economy to try to drive the prices down.

SMITH: All right, so, I'm trying to read into what you're saying, Austan, and I'm trying to understand what this means to people at home.

GOOLSBEE: OK. Yes.

SMITH: Well, the reality of everyday life, when you talk inflation, you're talking about the inflation, the growth rate, right?

GOOLSBEE: The growth rate, exactly.

SMITH: This -- the number we have on our screen right now, these are prices under Joe Biden. They're up 18 percent since January 2021.

GOOLSBEE: Exactly.

SMITH: We understand the difference. And you're really looking at that inflation growth rate. That's key. The target, is it still 2 percent? Should it be?

GOOLSBEE: Yes, the target is 2 percent, and it should be.

The thing is, as I say, you have got to do your job before you can talk about how you want a different job. The Fed said they would get inflation to 2 percent, and so we have got to get inflation down to 2 percent.

SMITH: Got it.

So -- OK. So, I'm throwing a lot at you because I love having you on, Austan.

So, like, we're looking at monthly mortgage payments. We looked at this with Gerry Baker at the top of the 1:00 hour. And this is fascinating to so many of us who see an administration touting economic success. And for most people, their home is their largest asset they will ever own.

Monthly mortgage payments on a $400,000 home, this is incredible. Over three years, under this presidency, they have soared 60 percent. And you're still looking at an interest rate environment that might not be coming down any time soon.

You know Larry Kudlow has been writing about the affordability crisis. There's young Americans walking around saying, I will never be able to afford a home, Austan.

To that, you say what?

GOOLSBEE: Well, we have got to get the inflation rate back to 2 percent. Congress gave us that as a job. So --

SMITH: But now you're back to where I started.

GOOLSBEE: -- part of that has been us raising interest rates.

(LAUGHTER)

SMITH: Now --

GOOLSBEE: We, the Fed, have raised interest rates, and that's contributed to the unaffordability. I'm not disputing that in any way.

SMITH: Yes.

GOOLSBEE: The one thing is, if you already had the mortgage and you had a fixed rate, that difference between what a new mortgage would be and what your existing mortgage is, that has contributed to a little bit of the lock-in, I would say, on the negative side of the housing market --

SMITH: All right.

GOOLSBEE: -- that people aren't selling their houses because they don't want to leave the low mortgage rate that they have locked in already.

SMITH: I have got to leave it there.

I could talk to you all day, but let me just finish with this. Are you seeing an economy that could weather an interest rate cut this year?

GOOLSBEE: I think so.

I have been saying -- last year, many people thought there has never been a precedent of getting the inflation rate down to 2, 3, plus percentage points in a year without a big recession. And I have been saying, I thought we could do it, because the COVID times were kind of a weird -- it was a weird reason why we got inflation.

In '23, we largely did that. And you see, with the jobs numbers, we do have some robustness in the economy, that it doesn't feel like we're on the edge of recession. So I kind of think the -- as inflation comes down, we would be moving toward less restrictiveness over the course of the year.

SMITH: Yes.

Well, I love if you would come back. We will continue the conversation, because we kind of went full circle to my first question, is, if we keep spending like this, and if the president falls through on that big government spending, how is inflation ever going to come down? And, therefore, how are interest rates ever coming down?

Austan, great to have you on. Hope you come back soon.

GOOLSBEE: Sandra, any time. It's great to see you again.

SMITH: OK. You too.

END

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