A cast of hawkish central bankers
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What is the main topic discussed in this episode?
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Well, ladies and gentlemen, let me just say it is going to be a week. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Monday today. This one is the 14th day of September, if you can believe it. Good as always to have you along, everybody. All right, well, let's see. Shall we where things stand as we roll toward the last quarter of this year? Borrowing costs are up. Energy costs are up and related, as we learned last week. Inflation is still up. The stock market is a little bit dyspeptic. Consumers, the same. So as we tee up what is going to be a big week in this economy, we've called Wendy Edelberg for some insight. She's a senior fellow at the Brookings Institution.
Hey, Wendy.
Hey there, Kai.
So let's get a little ground truth here just as a way to get going. Your general thoughts on the state of this economy as we sit here in mid-September.
I mean, policy is doing its best to derail it. That's for sure. But it has remained resilient.
You say resilient like it's a dirty word.
I mean, I think markets have been, you know, and businesses have been assuming that surely President Trump will be disciplined by, you know, what he knows would be the economic effects if he was too irresponsible with the war in Iran, if he was too irresponsible with tariffs.
Why are central bankers around the world adopting a hawkish stance this week?
And I think you're seeing some Some glitches in market prices as like that theory is being tested. And so resilient, yes, but I think the trade war with Canada, I think the stepped up hostilities with Iran – with no sense of how that ends. Yeah, I think he's testing the resilience.
I hate to be hung up on your vocabulary here, but your use of the word disciplined is interesting in regards to the president, because you and I have literally had the conversation before about how the bond market was going to discipline the president and keep him sort of within the lines, as it were, of a productive and functioning economy. And clearly that's not the case. We've got the 10-year this morning topping 5 percent. The 30-year was at like 5.3 or something. So the bond market is having none of it.
I mean, I think they are paying – I know they are paying very close attention. The Trump administration is paying very close attention to to the level of interest rates. I think that explains why Besant is trying so hard just to get them down. It's a game of basis points that he's playing.
Right. Hundreds of a percentage point for lay people.
Yes. Hundreds of a percentage points. Yes. Sorry. You know, so they are paying close attention, which suggests that it's affecting their decisions in some way. But... I don't think that actions by the Trump administration or by Congress are the sole reason that interest rates are where they are. I think that there's a whole lot of borrowing going on by tech
firms. Yeah, yeah. So we're going to get to that a little later in the program. Do me a favor, would you? And with an eye toward the calendar, which is to say that the Federal Reserve meets tomorrow and Wednesday, channel your inner Kevin Warsh for me. And as he heads into this meeting where he's either going to have to disappoint the market – if he doesn't raise rates, and he has the choice of disappointing the president who appointed him if he does raise rates, what do you suppose is going through his mind right now?
I mean, yes, he's in a tough spot. His Jackson Hole speech was quite hawkish. But my guess is that he would like to avoid a hike. I mean, he talked about my sense before he got the job is that he was talking about how he thought interest rates generally should be lower given structural things happen in the economy. Right. And he said he wanted tighter financial conditions and he's gotten them.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–2:13
2
Why are central bankers around the world adopting a hawkish stance this week?
2:13–8:55
3
What is the Fed’s dilemma heading into the FOMC meeting – hike or hold?
8:55–16:56
4
How are European, Japanese and British rate decisions influencing the global rate‑setters?
16:56–25:07
5
Why is the U.S. dollar strengthening ahead of the expected rate hike?
25:07–27:06