Found the transcript of the interview I was talking about from nightlybusiness.org
PAUL KANGAS: With me now to discuss how a recent report suggesting a slowdowns in the economy might impact Federal Reserve monetary policy is Mark Serlin, economist for BridgeNews. And good to see you again, Mark.
MARK SERLIN, ECONOMIST, BRIDGENEWS: Hi, Paul.
KANGAS: Today came that report of a much larger than expected 5.8 percent drop in April new home sales along with a 1/10 percent decline in leading economic leading indicators and that?s on top of last week?s news that April durable goods orders tumbled 6.4 percent, the biggest drop in 8 « years. Are these figures mounting enough to cause an easing in the Federal Reserve monetary policy?
MARK SERLIN, ECONOMIST, BRIDGENEWS: Oh, no, not at all. On the surface these numbers look weak but underneath they?re very, very strong. Today?s new home sales, sure they were down, but they were down from the second highest level of all time. Durable goods orders, overall they were down but the components of the durable goods report that go into GDP showed exceptional strength that was confirmed in several areas? new orders, unfilled orders, in shipments. So?
KANGAS: You don?t think there?s any possibility that the Fed is overdoing it on tightening the monetary reigns?
SERLIN: No, not at all. I mean their goal is to keep inflation down. The domestic economy has been exceptionally strong. As far as stock investors are concerned, if the Fed, the Fed could tighten all it wants and if all it does is bring down inflation longer-term, that?s great for stocks.
KANGAS: OK, Mark, Friday?s May employment report is looming. What should we look for there which might influence the Fed to stop boosting interest rates?
SERLIN: Well, you?re not going to see anything that?s going to stop the Fed from boosting interest rates but what you should watch anyhow, the main thing is the average hourly earnings.
KANGAS: OK.
SERLIN: Year over year they?re starting to inch upward again and if this is the beginning of a new trend upward, then even more Fed tightenings above 7 1/2, let?s say, in the Fed funds rate are likely. The thing also to watch for is what the aggregate hours do. Those data have implications for industrial production, housing starts. The earnings data have implications for the wage and salary component of personal income.
KANGAS: OK. So 7 1/2 percent Fed funds might be the top?
SERLIN: It?s reasonable at this time.
KANGAS: OK. All right, very good. Mark, thanks very much for being with us.
SERLIN: Thank you.
KANGAS: My guest Mark Serlin, economist for BridgeNews. |
