Catherine Rempel

But in this case, you might see prices go up and lower output downstream, right?

Because people are not buying the oil needed to manufacture stuff and transport goods and go to work, etc.

And so if you have this serious risk of rising prices and falling output, we kind of supply shock ourselves into stagflation, which is the hardest problem for the Fed to solve.

One

part of the stagflation problem, the flation thing, the inflation piece would imply that the Fed should raise interest rates.

The other part of stagflation, the stag stagnation piece of things would suggest that they should cut interest rates.

And either way, whatever they do to solve one problem will make the other problem worse.

And all of this really depends on how long things drag on with the war, with the supply chain disruptions and how expectations react and

we don't know really any of that yet.

I wish I were surprised.

Really?

Well, I wish I were surprised that somebody from the administration were weighing in at all on monetary policy.

I guess that's where my starting point is.

In a different administration, I would have been surprised that the treasury secretary would say anything about interest rates.

So that's like, you know, the thing that we've become inured to that we should be shocked by, but we're not.

Then the second piece of this is, yeah, it is a little bit unexpected, I guess, that if they are going to weigh in on interest rates, which they should not, that the way that they weigh in is by saying do nothing or they, Besant in this case, as opposed to saying,

Just cut rates as far as you can, which is what we've been hearing from Donald Trump, but also pretty much everyone else in the administration.

So they are all pointing in one direction.

Besant, I guess, is maybe pushing back a little bit on that.

And we'll see where things go.