Former Fed Vice Chair Alan Blinder: The earlier the Fed Chair announcement, the worse

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The latest Fedminutes show more disagreement inside the Central Bank raising fresh questions about the policy path next year. Joining us now is former Federal Reserve Vice Chair and Princeton Professor Alan Blinder. In a Wall Street Journal op-ed from Monday, he argued that

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dissent at the Fed isn't a red flag but a normal part of the decision-making process. It's good to see you, Alan. Actually, I my takeaway on the Fed is on the minutes yesterday. I mean, I thought this was the money line. Most participants judge that further downward adjustments

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to the target range for the Fed funds rate would be appropriate if inflation declined over time as expected that they're ready to cut more. Maybe they're going to pause for a little bit here, but they're they're in cutting mode still. What do you think?

Alan Blinder (Professor) 00:40.440

Well, remember, most of those remarks were general were directed at the decision that was in front of them right then. Some some of them were thinking ahead, that's for sure. They'll be all thinking ahead, but in terms of talking, the the the the discussion tends to focus on the

Alan Blinder (Professor) 00:57.800

meeting at hand. These are the minutes of the meeting at hand, which they did decide by a 9 to 3 vote to cut 25 basis points. And most participants, as it said, agreed with that decision, but a non-trivial number did not agree with that decision. The vote, you know, it depends

Alan Blinder (Professor) 01:20.440

who has the vote at each meeting, but the vote was a closer to unanimity, I think, than the sentiment on the committee.

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Agree. And now we get a new crop of voters next next year. The regional Fed presidents, right, they change in terms of who votes. So, so how do we game out what happens next year on policy?

Alan Blinder (Professor) 01:38.800

Well, you know, I think it's very early to game out. I think the likelihood is that we're going to have some some modest further cutting, but that likelihood is enshrouded in fog now. We're just coming out of the data fog that the government shutdown put us in. As you noted,

Alan Blinder (Professor) 01:56.600

you'll I'm sure a lot of the numbers that just came out recently, for example, on the CPI had much more than the usual amount of guesswork in them. And we all took notice when Chairman Powell suggested that the jobs numbers would be revised down very significantly. So this we're

Alan Blinder (Professor) 02:17.240

still coming through a data fog. They We should be mostly out of it by the next Fed meeting and uh it'll I think it'll be an easier decision. I think. It depends of course what the new data show.

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Yeah, I guess one of the other I mean obviously the other big question is who's going to be chair and it sounds like what the White House is gearing up for is to announce that person you know before end of January 31st which is when the Stephen Myren governor comes off. How if

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you were inside the Fed how would that go down if if if they knew months in advance who the next chair would be and if that person joined the Fed? I guess they would have to do that for all of them except for Waller who's already a governor.

Alan Blinder (Professor) 02:57.280

Yeah, that's correct. Um That of course depends on whether Myron is going to just vacate the seat or not. I

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think it'll go down very What's bad up for the president, isn't

Alan Blinder (Professor) 03:08.040

it? Oh, yes. I I think so. Yeah, you could say it's up to Myron, but yes, it's up to the president for sure. Uh, absolutely right.

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So what were you saying? You don't think that that's a a good way to do it?

Alan Blinder (Professor) 03:21.600

I think the early so to speak, the earlier the announcement the worse because as soon as you announce the new fed chair, the Fed is now a hydra-headed monster with two heads. And depending on how the new designated head behaves himself, they've all been hymns that have been

Alan Blinder (Professor) 03:41.960

mentioned seriously. Uh, that could re-cavoc in terms of what the markets believe the Fed is going to do. Powell is still chairman, there's no indication he's going to resign early. That would be a shakaru. He's still chairman until May and we should have have one chairman at a

Alan Blinder (Professor) 04:01.000

time, just as we have one president at a time.