00:00Rob, great to catch up with you. I want to start just by asking you your take on the economy
00:05and whether you were surprised by the relatively weak labor market report
00:09and then the very much inline yet confusing CPI report.
00:14What I've seen in the economy, if it's associated with the AI infrastructure build or AI adoption,
00:22then it's strong. What I hear from a number of companies who are more tied to housing,
00:30autos, the strength of the low moderate income consumer, I would say they describe the economy
00:37as okay, not great, somewhat sluggish. And so in that regard, the job market report kind of was in
00:47line with that. You don't see aggressive hiring, but you don't see aggressive firing. And I still
00:53think we're several months or a year away from companies having enough confidence in the AI use
01:00cases to more aggressively use AI to replace people, but that is likely to happen. I think
01:09there'll be new jobs created also. But the point is unit labor costs are very well behaved. And I
01:15think you and I have talked about this. The share of GDP going to profit is increasing. The share
01:22going to labor is more muted. What's the Fed's role given this backdrop right now?
01:28So you've got a lot of cross currents. And in fairness, if we didn't have the war in Iran
01:37and the spike in oil prices, which I think has raised headline inflation and bleeds into other
01:43items, my guess is we might not even be talking about the prospect of a rate increase. And I think
01:50the Fed's role here should be to try to understand these cross currents. The AI infrastructure build
01:57is probably inflationary. And you've got tariffs, labor constraints, oil spike that exacerbate that.
02:05On the other hand, AI adoption should ultimately be disinflationary. Chinese overcapacity should be
02:14disinflationary. And so it's not surprising to me that there's a lot of debate and they're trying to
02:18weave through this. I think what I would be doing in my former seat is I would not have raised
02:23rates in
02:24July. I think they made absolutely the right decision. I probably wouldn't have cut in December either,
02:29by the way, that last cut I would not have done. And I would be keeping an open mind between
02:34now and
02:35September. If I see meaningful improvement, I might be willing to kick the can and do nothing. But I want
02:41to take every bit of time between now and September before I make a judgment and avoid being rigid or
02:47predetermined in assessing this.
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