Bloomberg Talks
PIMCO Global Economic Advisor Richard Clarida Talks US Economy, Monetary Policy
09 Feb 2026
Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
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Unfortunately, he's been dreading this all week, Richard Clarke, with us now. His work at Columbia University, definitive on fancy economics called Dynamic Stochastic General Equilibrium Theory, holding court at the Fed as vice chairman. I'm not going to mince words, and frankly, Professor Claret, are you still at Columbia? I am.
You get a piece of chalk out every... See, the problem is Xavier Sally Martin wouldn't allow AI in the class. You would allow AI in a freshman class to make the kids smarter, right?
I don't teach freshmen anymore, but... Would you let AI in the class? Well...
not in the classroom but when i teach i assume the students are making reference to it which is why i've actually put a focus on having in-class presentations there you go there you go old-fashioned socratic dialogue i'm going to cut to the chase socratic dialogue you saved jerome powell folks i'm not going to mince words about it it's called a dual engine leadership mod uh model and it was clara's vice chairman and a guy from wall street's chairman
And when he came in, you allowed him to relax and grow with your prodigious academic abilities. Does Chairman Warsh need a Clarida?
Well, that'll be his decision. I enjoyed my four years, that's for sure. But there are a lot of good people at the Fed, and I think that's a decision he'll make. He's got a very good vice chair right now at Phil Jefferson. But at some point, there will be a vice chair.
vacancy is that something that the committee when he goes in front of these tough guys in the hill they can demand he have a vice chair of the academic skills well it's not clear that that's what would be on their wish list but possibility I suppose I mean they could request that certainly
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Chapter 2: How does Richard Clarida describe his experience at the Fed?
So I think that's an entirely... But I think we're a long way away from any formal accord.
So what do you expect this Federal Reserve to do in calendar year 26?
Well, first, we have to get the chair confirmed. And that's not a foregone conclusion, right? I think once he has a hearing, he will get confirmed because he's very well qualified. But it may be a while before he has a hearing.
I think it's important to note that the PALFED in December, when they released those dots, those famous or infamous dots, the PALFED or at least a majority of the Fed in December thought at least one rate cut this year would be appropriate. And I think eight folks thought maybe two rate cuts would be appropriate.
So I do think that when Warsh gets in, if the economic data play out the way that I and others expect, I think he'll be able to persuade the committee to continue to cut rates down to around 3%.
Richard Clareter with us, folks, a former vice chairman of the Fed, hugely visible, does a great job helping us on the Fed Day. The Fed decides, thrilled he could be in studio with us for you across the nation and around the world. Thank you for your attendance on YouTube. Subscribe to Bloomberg podcasts. I look at all this, I look at the parlor game.
And just what it comes down to is staggering from meeting from meeting. When Mr. Walsh joins, do we have a theory of monetary policy? Or is it every president and governor for themselves?
Tom, fantastic question because I do think that based upon what Kevin has said with his very voluminous paper trail over the last 15 years, I think that will be a discussion. I think Kevin has expressed some skepticism for reliance on what he believes are flawed models, too much of a backward-looking approach. What I would point out, at least during my four years,
is the PALFED and certainly the declarative vice chair was not handcuffed to the models, even though I developed many of them.
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Chapter 3: What does Kevin Warsh mean by a new accord with the Treasury Department?
Well, okay. I think at a 30,000-foot level in 30 seconds, all macro models, or almost all macro models, really are best thought of as approximations, typically linear in a neighborhood of where you want to be. And the real world can be a lot messier and very nonlinear, a term that I know pops up on this show.
And I think what, as I'm just beginning to read his book, what he's been highlighting is we could be in a prolonged period of very nonlinear market and economic development.
And geopolitical developments as well. So if you're halfway through the book, he sold the movie, right? Yeah, exactly. DiCaprio's playing. I mean, it's a gloomy book. It's shockingly gloomy.
Yeah, yeah. Again, I have not worked through it, but certainly a must-read for me. So I'll wait until I finish it before I weigh in on that.
Okay, fair, fair. Hey, Richard, work. We're 13 months into this whole tariff thing. I'm going to look back on and say, boy, this was nothing. It didn't seem to be that big of an issue. And that's not what I heard early on. I heard a lot of folks saying, boy, this is going to be inflationary and so on and so forth. We just haven't seen it. So with a little bit of hindsight, what's happened?
So let me reinforce what you said. Eventually, when we get the data for 2025, it may show GDP growth the same as it was in 2024, maybe down to 10th. It will likely show inflation unchanged from 2024. And so a future historian may well say what you just said, Paul, which is what was the big deal? GDP growth didn't move. Inflation didn't move. I think a couple of things.
One is that the ultimate tariffs put in place were a lot lower than the Liberation Day levels. And as Besson has emphasized, that was part of the negotiating strategy. Secondly, there's a saying in baseball, sometimes you'd rather be lucky than good.
I think the other thing that happened is whatever headwind there might've been from tariffs counterfactually was offset by the buoyant CapEx spending, especially by the tech companies. And the fact that the stock market is very optimistic on this story. So that generates a wealth effect and an investment effect. And then thirdly, US companies
uh absorbed more of the tariff hit in somewhat reduced margins and you know in the aggregate they did have that room profit margins have been very healthy and and they didn't pass it through the to the consumer and again of course we have the iepa decision the supreme court is about to uh release and that may further uh lead to lower adjust
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