♪ >> THE PANDEMIC RECESSION AND NOW THE SPEEDY RECOVERY FROM IT IS JOLTING THE REOPENING ECONOMY.

MORE THAN HALF AMERICANS ARE VACCINATED.

CONSUMERS ARE BACK IN THE MARKETPLACE, YET THERE IS A WORKER SHORTAGE, PRODUCTS ARE SCARCE AND INCREASINGLY MORE ENGINES PENSIVE.

WE'LL TALK ABOUT THE PRICE MEASURES CREATE ANDON WEST MICHIGA WEEK.

♪ >> THANK YOU FOR JOINING US ON WEST MICHIGAN WEEK.

PRICE PRESSURES ARE DRIVING UP COSTS THAT WOULD SEEM ACROSS THE BOARD FROM GASOLINE TO HOME CONSTRUCTION AND AUTOMOTIVE MANUFACTURING PRICES.

THEY'RE ALSO RISING, IT COMES AT A TIME WHEN JOBS ARE READILY AVAILABLE AND EMPLOYER ARE WILLING TO INCREASE WAGES.

IT HAS BEEN CALLED TRANSITORY.

HERE TO BREAK IT DOWN, .

THANK YOU BOTH FOR BEING HERE.

IT SEEMS AS THOUGH THE CONDITIONS CONTINUE TO CHANGE.

PAUL, WE'VE SPOKEN ABOUT THIS.

TAKE US BACK TO THE PANDEMIC AND WHERE IT SETS US UP NOW AND WHERE HAPPENS WE'RE HEADED.

>> OKAY, AS WE WENT INTO THE PANDEMIC, WE HAD TO SHUT DOWN THE ECONOMY REALLY, REALLY HARD.

OR AT LEAST REDID.

AND ACROSS THE UNITED STATES THAT RESULTED WITH LOTS AND LOTS OF PEOPLE BEING PUT OUT OF WORK LAST APRIL.

WE'RE COMPARING TO LAST APRIL, WHICH IS ALWAYS PROBLEMATIC TO BEGIN WITH.

AND THEN AS WE WENT THROUGH MAY WE STARTED TO OPEN UP PARTS OF THE ECONOMY.

WE WENT FROM THE NATION BEING DOWN 15% AND MICHIGAN BEING DOWN AROUND 30% OF EMPLOYMENT IN APRIL TO SLOWLY MAKING IT BACK TO BETWEEN BEING DOWN BETWEEN 5% AND 10%, DEPENDING WHERE YOU ARE IN THE U.S. AS WE'VE GONE THROUGH THE YEAR WE'VE HAD UPS AND DOWNS WITH THE AMOUNT OF COVID.

WE'VE SHUT DOWN AREAS, OPENED THEM UP.

SHUT DOWN AREAS, OPENED THEM UP.

NOW WE'RE GETTING MORE AND MORE PEOPLE WHO ARE OPTIMISTIC ABOUT THIS COMING SUMMER.

WELL, WE'RE IN THE SUMMER NOW, BUT AS THE SUMMER CONTINUES.

THAT OPTIMISM IS FUELING PEOPLE WANTED TO PURCHASE THINGS, AND THEY CAN DO THAT BECAUSE THE U.S. GOVERNMENT PUT A LOT OF STIMULUS MONEY OUT.

A LOT OF STIMULUS MONEY OUT.

EVEN TODAY PEOPLE'S INCOMES, THE TOTAL AMOUNT OF INCOMES FOR PEOPLE IN THE UNITED STATES IS HIGHER THAN IT WAS BEFORE THE RECESSION.

THIS IS HIGHER TIME.

EVEN WHEN WE HAD 15% FEWER JOBS IN THE UNITED STATES, WE HAD AN INCREASE IN DISPOSAL INCOME BECAUSE OF THE AMOUNT OF STIMULUS.

THAT STIMULUS HAS RESULTED IN FOUR TIMES AS MUCH SAVINGS THAN WE NORMALLY HAVE, AND THAT SAVINGS HAS CAUSED PEOPLE TO GO OUT AND BUY THINGS.

>> HOWEVER, THERE IS THAT QUESTION, IS THERE TOO MUCH STIMULUS?

WE TALK ABOUT THAT FEDERAL UNEMPLOYMENT BENEFIT OUT THERE.

IT'S EXPIRING IN DIFFERENT STATES AT DIFFERENT TIMES.

BUT HOW IS THAT IMPACTING THE WORKER SHORTAGE THAT WE ARE SEEING?

>> WELL, THE PART OF IT, IT'S PART OF THE STORY.

IT MEANS THAT IT MAKES IT EASIER FOR SOMEONE TO SAY, I'M EITHER CONCERNED ABOUT THE PANDEMIC OR MAYBE I HAVE LOTS OF CHILD CARE ISSUES, OR MAYBE I DIDN'T NEED THAT MUCH MONEY TO BEGIN WITH, SO THAT LITTLE BIT OF EXTRA MONEY DOES CONVINCE PEOPLE NOT TO GO BACK TO WORK.

IT'S NOT THE ONLY PART OF THE SORRY.

BUT IT IS PART OF THAT STORY.

IT IS PARTICULARLY TRUE AMONG THE LOWER INCOME SET.

NOW THE PROBLEM IS THAT THERE ARE GROUPS OF PEOPLE WHO COULD GO BACK TO WORK.

THERE ARE ALSO GROUPS OF PEOPLE WHOSE JOBS THAT THEY LEFT IN MARCH OF LAST YEAR ARE JUST STARTING TO PEAK BACK.

WHEN YOU THINK ABOUT WEDDING VENUES, SHOWS, THINGS LIKE THAT, WE'RE JUST NOW STARTING TO SEE THOSE JOBS START TO COME BACK.

IT WON'T BE UNTIL FALL THAT YOU START TO SEE AN INCREASE IN THE NUMBER OF NATIONAL--THAT WILL ALLOW PEOPLE TO COME BACK TO WORK.

MANY OF PEOPLE ARE WAITING FOR THOSE JOBS OPPOSED TO WORKING AT A FAST-FOOD RESTAURANT.

>> YOUR VISITING US FROM INDIA TODAY.

THIS IS THE BEAUTY OF MODERN TECHNOLOGY.

I KNOW YOU'RE DOING RESEARCH BACK HOME, BUT WHAT ARE YOU SEEING?

WHAT IS THE GLOBAL TAKE OF WHERE YOU SIT TODAY OF WHAT IS HAPPENING, AND HOW THAT IMPACTS THE GLOBAL ECONOMY?

>> YOU KNOW, WHEN WE TALK ABOUT GLOBAL, WE HAVE DEFINITELY HAVE TO DISTINGUISH THE DEVELOPED ECONOMIES AND THE EMERGING MARKETS.

WE DO SEE INFLATION.

BUT LET ME TALK A LITTLE BIT ABOUT THE INFLATION IN THE UNITED STATES AND ESPECIALLY WHERE IT COMES TO THE POLICY AND FEDERAL RESERVES.

THE NEXT MEETING IS JUNE 15TH, JUNE 15TH, BUT BASED ON WHERE THE FED COMES, THE FEDERAL RESERVES RESPONSE TO THIS CRISIS IS GUIDED BY THE MANDATE OF DUAL UNEMPLOYMENT AND STABILITY.

WHICH IS 2% INFLATION ON AVERAGE, AND LONG-TERM INFLATIONARYINFLATION INFLATION.

BUT AS YOU CORRECTLY MENTIONED THAT THE FEDS THAT IS TRANSITORY, AND WHICH A PART OF WHICH THE IMPLANTATION GOES BACK TO WHAT PAUL JUST EXPLAINS, WIDESPRED VACCINATION, AND REDUCTION AND DISTANCING NORMS IN THE UNITED STATES, AND WITH THE FISCAL STIMULUS AND HIGHLY ACCOMATATIVE RELATIONS WE SEE THE DEMAND, PEOPLE JUST STARTING TO GET BACK TO CONSUMERISM.

WE SEE THAT HUGE--ESPECIALLY IF YOU LOOK AT THE ROBUST GAINS AND CONSUMPTION IN THIS PAST COUPLE OF MONTHS.

WE SEE A HUGE INCREASE IN CONSUMPTION, BUT THERE IS NOT ENOUGH SUPPLY TO MATCH UP TO THIS DEMAND.

SO REALLY, THE ANSWER DEPENDS ON HOW MUCH THE PRODUCTION--HOW LONG IT WILL TAKE THE PRODUCTION BOTTLENECK AND SUPPLIES CON TRAINS AND BOTTLENECKS TO EASE AND MATCH UP TO THIS DEMAND.

THE REASON WHY IT SEEMS TRANSITORY IS BECAUSE--IT IS TOO EARLY TO GAIN RIGHT NOW.

WE SEE THIS IN THESE COUPLE OF MONTHS, THERE HAS ALSO BEEN AN INCREASE IN ENERGY PRICES.

IF YOU COMPARE TO OUT MONTHS CHANGES, YOU SEE THE CPI HEADLINE IS HIGHER THAN THE CPI CORES.

SO THE ENERGY PRICES IS WITH THE CONSUMER PRICES, THAT'S A GLOBAL EFFECT THAT IS HAPPENING.

AS I SAID, THE ANSWER REALLY DEPENDS ON HOW EASILY OR HOW FASTER PRODUCTION IS GOING TO RESPOND TO THIS RECENT DEMAND.

>> A LITTLE CHICKEN AND EGG HERE?

IF YOU DON'T HAVE THE WORKFORCE TO CATCH UP ON DEMAND, THERE'S THAT, AND THEN THERE IS JUST THE RAW MATERIALS THAT ARE OUT THERE AS WELL.

AND THE BOTTLENECK THAT YOU BOTH HAVE MENTIONED JUST ANECDOTALLY.

I HAD TO TAKE MY CAR IN FOR SERVICE, AND IT WAS AT THE DEALERSHIP.

THE NEW CAR INVENTORY IS--I MEAN, THERE IS HARDLY ANYTHING OUT IN THE LOT.

YOU DO HAVE THOSE VISUALS THAT YOU SEE AND YOU'RE VERY MUCH AWARE OF WHAT IS TAKING PLACE, THEN THERE ARE THOSE HIDDEN COSTS THAT WE WILL BEGIN TO SEE, I MENTIONED HOME BUILDING RECENTLY WITH LUMBER, COPPER AND STEEL.

ALL THOSE PRICES ARE GOING UP.

WHEN THINGS SHUT DOWN, TAKE LUMBER.

WELL, WE'RE NOT CUTTING DOWN TREES.

WE'RE NOT PROPRODUCE ING LUMBER, A THEN THERE IS THIS LAG TIME TO CATCH UP.

AND IT IS IN INDUSTRIES ACROSS THE BOARD.

>> CERTAINLY THAT IS PART OF IT.

THAT IS CERTAINLY PART OF IT.

BUT THERE IS ANOTHER PART OF IT.

WE STILL IS HAVE BORDERS CLOSED.

WE STILL HAVE CONSTRAINTS FROM PORTS.

AT LONG BEACH THERE IS A WAITING LINE OF BOATS TRYING TO GET IN THE PORT FOR MONTHS.

OVER THE LAST SIX MONTHS WE SAW MORE THAN 20 BOATS PARKED, WAITING TO GET IN TO THE PORT.

THAT INCREASES THOSE COSTS.

AND BECAUSE OF THAT, WHAT WE'RE SEEING IS BUSINESSES ARE DECIDING TO BUY MORE.

SO THEY'RE WORRIED THEY'RE NOT GOING TO HAVE ENOUGH, SO THEY BUY MORE THAN THEY NEED SO THEY HAVE ENOUGH.

SO THIS FEAR OF NOT HAVING IT IS INDUCE ING IT FOR PEOPLE TO GO OUT AND BUY MORE, WHICH IS LEADING TO EVEN LESS BEING AVAILABLE.

A THIRD OF THE INFLATION, A THIRD OF THE INFLATION THAT WE'VE SEEN OVER THE LAST FEW MONTHS HAS BEEN THAT AUTOMOTIVE INFLATION BECAUSE OF THAT LACK OF CHIPS.

WHAT WE KNOW TALKING TO FIRMS IS THAT THEY DON'T WANT TO EXTEND CAPACITY TO MEET THIS DEMAND BECAUSE THEY WORRY THAT IT IS A TEMPORARY SHOCK, AND THAT PEOPLE WILL GO BACK TO SPENDING LESS.

IF THEY SPEND MONEY TO ADD MORE MACHINERY, THAT WILL THEN BECOME A STRANDED ASSET, AND THEY WON'T BE ABLE TO PAY FOR IT.

IT IS GOING TO GO ON FOR A LITTLE WHILE.

>> IT IS ALMOST A PRECAUTIONARY DEMAND SHOT.

IT ACTS LIKE PRECAUTIONARY DEMAND, AND THE OTHER THING IS THAT YOU KNOW, THE INFLATION, IN FEBRUARY, IT WAS BELOW 13%.

WE DO SEE A SUDDEN SURGE IN INFLATION IN THE 12-MONTH PERSONAL CONSUMPTION EXPENDITURES IN APRIL, MAY, AND IT'S LIKELY TO CONTINUE AT LEAST UNTIL THE END OF THE YEAR BECAUSE ALL THESE SUPPLIES CONSTRAINTS TO SORT OF EASE OUT AND MATCH UP TO DEMAND.

AND WE MUST ALSO UNDERSTAND THE UNCERTAINTY AND RISK OF THE PANDEMIC CONTINUE TO REMAIN, WHICH MIGHT ALSO BE THE REASON FOR MANY WORKERS NOT TO GO BACK TO THEIR JOBS, EVEN THOUGH WE SEE A DECLINE IN UNEMPLOYMENT.

BUT IT IS STILL WELL THE FEDERAL RESERVES MANDATE OF 4.5%.

IT IS STILL 6% NATIONALLY.

THE ECONOMY HAS JUST STARTED TO REBOUND, AND IT'S GOING TO TAKE A WHILE, BUT WE HAVE TO MONITOR IN COMING INFORMATION AT THIS POINT TO BE ABLE TO USE ANY POLICY TOOL TO BASICALLY TAKE ANY ACTION.

>> THERE HAS BEEN A LOT OF TALK ABOUT MOTIVATING WORKERS TO RETURN TO THE WORKPLACE.

CLEARLY WE'VE ALL ADAPTED OVER THE PAST YEAR WORKING EITHER REMOTELY OR A MIX OF REMOTELY AND COMING IN TO THE OFFICE.

SO WHAT ARE THE MOTIVATIONS NOW TO GET PEOPLE IN?

CLEARLY THERE IS A PORTION OF THE POPULATION THAT STILL HAS A FEAR OF THE CORONAVIRUS AND COVID-19, BUT THERE IS ALSO THAT NEED FOR WORKERS IN CERTAIN SECTORS, AND YOU DON'T WANT TO OVERHEAT CERTAIN THINGS, AS YOU MENTIONED, ADDING THAT EXTRA SHIFT BECAUSE YOU DON'T WANT TO OVER CORRECT.

SO MUCH LIKE WAGE INCREASES, WHICH IS ALWAYS A MOTIVATING FACTOR, WHILE YOU OFFER A BONUS UP FRONT, OR ARE THERE SOME COMPANIES WILLING TO SPEND EXTRA TO BRING IN WORKERS AT A FIXED HIGHER WAGE?

WHAT ARE WE SEEING OUT THERE?

WHAT ARE THE MOTIVATIONS, AND WHAT WILL KICK START GETTING MORE PEOPLE BACK INTO THE WORK FLOW?

>> WELL, PART OF IT IS GOING TO BE WAGES.

IF WE LOOK AT LEISURE AND HOSPITALITY.

ON AVERAGE OVER THE LAST THREE YEARS HAS BEEN 2% OR 3% OF THE YEAR OR ABOUT A LITTLE BIT MORE THAN THAT, TWO YEARS.

IF WE COMPARED LEISURE AND HOSPITALITY TO 2019, WE WENT THROUGH THE LAST YEAR UP ONLY 2% COMPARED TO 2019.

OVER THE LAST FIVE MONTHS WE'RE NOW UP NEARLY 9% OVER 2019.

SO WE'RE SEEING THIS ACCELERATION.

THEY'RE THE LAST ONES REOPENING.

THEY'RE TRYING TO FIND WORKERS WHO AREN'T THERE ANY MORE BECAUSE OTHER FIRMS HAVE ALREADY GRABBED THEM.

THIS IS ONE OF THE TWO THINGS THAT WE'RE LOOKING AT--TWO THINGS THAT I'M LOOKING AT CLOSELY TO SEE WHETHER THIS WILL BE A CONTINUING TREND OR NOT.

IF WE START TO SEE INCREASES IN WAGES THOSE INCREASES IN WAGES PERPETUATE TO INCREASES IN PRICES.

WHICH THEN LEAD TO INCREASES IN WAGES.

SO WE NEED TO PAY ATTENTION TO THAT.

THAT'S ONE OF THE THINGS THAT WE'RE LOOKING AT RIGHT NOW.

WE'RE NOT THERE YET, BUT WE'RE STARTING TO SEE MORE AND MORE WAGE PRESSURES PARTICULARLY ON THE BOTTOM SIDE OF THE MARKET, WHICH WILL BE HARD TO UNWIND, AND THAT COULD LEAD TO MORE INFLATION NEXT YEAR THAN WE WOULD HAVE EXPECTED OTHERWISE.

THE SECOND THING I LOOK AT ARE EXPECTATIONS.

IF PEOPLE ARE EXPECTING AN INCREASE IN PRICE, PEOPLE EXPECT IT ANY WAYS.

ONE OF THE THINGS THAT WE'VE HAD OVER THE LAST 20 YEARS IS PEOPLE DON'T EXPECT AN INCREASE IN PRICE.

ANY TIME THERE IS AN BREEZE IN PRICE THERE IS PUSH BACK.

THEY END UP EITHER HAVING TO TAKE IT BACK OR MAKE IS A SMALLER INCREASE.

RIGHT NOW PEOPLE INCREASE THE PRICE CHANGE AND THAT WILL MAKE IT EASIER TO FIND ITS WAY BACK IN THE ECONOMY.

>> THAT'S EXACTLY WHERE THE FEDS JOB IS TO MAKE SURE THAT INFLATIONARY EXPECTATIONS ARE ANCHORED AROUND THE 2% OBJECTIVE.

IT HAS BEEN AS PAUL SAID, PRETTY MUCH WITHIN THE 2% RANGE.

OBVIOUSLY WE HAVE TO MONITOR IN COMING INFORMATION, BUT THERE HAS THE ENERGY CRISIS AND ONE- ONE-TIME SURGE IN DEMAND.

IF SUPPLY IS ABLE TO MATCH THE DEMAND, THAT COULD BE ONE OF THE WAYS TO CONTROL INFLATION, AND IF THERE IS A NEED WHERE INFLATION GOES UP TO THE EXTENT THAT IT HITS INFLATIONARY EXPECTATIONS, THEN I'M SURE THAT THE FEDERAL RESERVE WILL BE READY WITH ITS TOOLS TO CURVE THAT.

BUT I DO THAT THINK THAT THIS WILL PROBABLY EVENTUALLY COME DOWN.

BUT THEN YOU STILL HAVE TO MONITOR AS PAUL SAID, THE EXPECTATIONS ABOUT PRICES AND WAGES AND THIS SPIRAL.

THE OTHER THING--THE OTHER THING IS YOU KNOW, MONITORING THIS SPREAD OF THE VIRUS, AND HOW HOW--THERE IS A COHORT OF PEOPLE WHO ARE WORKING WITH VACCINATION VACCINATION, AND LEARNING BY DOING ESPECIALLY FROM THIS DEVASTATING SURGE OF SECOND WAVE IN INDIA.

BY ONLY OBSERVING WHAT IS GOING ON AND PROCESSING THIS IN COMING SITUATION THAT PEOPLE WILL FEEL COMFORTABE GOING BACK DEPENDING ON THE NATURE OF THE INDUSTRY THEY'RE IN.

PROGRESS AND VACCINATIONS AND MONITORING THE SPREAD OF THE VIRUS IS EXTREMELY IMPORTANT IN BRINGING THE LABOR FORCE BACK TO THE FULL EMPLOYMENT.

>> SO I'M JUST--I'M TRYING TO PROCESS THIS ALL IN MY HEAD.

AND I'M JUST LOOKING AT IF WE'RE GOING TO HAVE ALL OF THESE NEW PRESSURES, AND IF YOU CAN BUILD IN HIGHER PRICES, DOES THAT THEN NEGATE FEDERAL STIMULUS?

I'M PLAYING THIS OUT IN MY HEAD RIGHT NOW.

>> PRICES ARE LIKE A TAX.

INFLATION IS LIKE A TAX.

IN SOME WAYS.

SO WHAT WE DO KNOW IS THAT THE INCREASE IN INFLATION THAT WE EXPECT OVER THIS YEAR AND NEXT YEAR, JUST BECAUSE OF THE THINGS THAT ARE ALREADY BAKED IN WILL ALMOST WIPE OUT THE AMOUNT THAT WAS GIVEN IN THE LAST STIMULUS PACKAGE TO INDIVIDUAL PEOPLE.

WHAT'S INTERESTING TO ME IS THAT WE HAD TO BORROW A LOT TO GET THERE.

THAT BORROWING WAS MOSTLY MONDAY ADVERTISED BY THE FEDERAL RESERVE, WHICH MEANS THAT THE FEDERAL RESERVE BOUGHT THE U.S. DEBT AND PUT MONEY INTO THE SYSTEM.

INSTEAD OF SELLING THAT DEBT ON THE MARKET, THE FEDERAL RESERVE BOUGHT THAT DEBT.

AND THERE IS LESS DEBT FLOATING AROUND.

NOW WHEN WE LOOK AT STIMULUS SPENDING.

>> SO THE QUESTION IS SINCE YOU'RE THE FEDERAL RESERVE EXPERT, AND PAUL MENTIONED THERE ARE ONLY SO MANY TOOLS IN THAT TOOL KIT, ARE WE GOING TO SEE INTEREST RATES START TO CREEP UP?

IS THAT SOMETHING THAT IS GOING TO HAPPEN?

>> NOT UNTIL SOME TIME.

THE FEDERAL FUND RATE IS NEAR ZERO PERIOD "P" ZERO TO ONE-FOURTH PERCENT.

THE FEDERAL RESERVE RESPONSE IS GUIDED OF 4.5%, WHICH IS 4.5% UNEMPLOYMENT, AND 2.5% INFLATION.

LARGELY WHAT WE SEE IT IS TOO EARLY TO COMMENT WHETHER IT IS TRANSITORY OR PERMANENT.

IT LOOKS MORE TRANSITORY, BUT THE RISKS STILL REMAIN.

THE ECONOMY HAS JUST STARTED RECOVERY.

WE STILL NOT BACK TO PRE-PANDEMIC LEVELS.

EVEN FOR CONSUMPTION WE DO SEE AN ONE TIME INCREASE IN CONSUMPTION.

ALSO, IF YOU LOOK AT THE BUSINESS INVESTMENT, MANUFACTURING WE HAVE RECOVERED, AND RECORDED IN THE PAST COUPLE OF MONTHS, BUT IT IS JUST AFTER THIS WINTER.

>> IT IS HIGHLY UNLIKELY THAT THE FED IS GOING TO INTRODUCE INTEREST RATE AT SOME TIME.

AT SOME POINT IN TIME IT IS GOING TO NORMALIZE.

IF IT DOES NOT NORMALIZE AT 3% THERE IS MORE ROOM TO SLASH IT BACK SHOULD WE SEE ANOTHER RECESSION.

BUT THIS IS TOO EARLY.

YOU KNOW, IT IS--THE FED IS GOING TO GAUGE THE PROGRESS OF THE ECONOMY SLOWLY, STEADILY, TRY TO GET BACK THE LABOR MARKET MARKET--STRENGTHEN THE LABOR MARKET AND MONITOR ALL OTHER RISKS.

AND THE VIRUS IS NOT GONE YET.

YOU NEVER KNOW, IT IS TOO UNPREDICTABLE.

THEREFORE, THE SHORT ANSWER IS PROBABLY NOT ANY TIME SOON.

>> TONIGHT BE AN ALARMIST IN THIS CASE.

YOU NEED TO LET IN ECONOMY RUN FOR A LITTLE WHILE BEFORE WE KNOW FOR SURE.

>> EXACTLY.

>> WHAT IS THAT WINDOW?

IS IT SIX MONTHS?

EIGHT MONTHS?

BEFORE YOU WOULD FEEL COMFORTABLE SAYING OKAY, NOW THIS IS A TIME TO START TO TAKE ANOTHER LOOK AT THIS ECONOMIC?

>> I THINK THAT--YOU KNOW, IT'S VERY HARD FOR ANY PERSON TO FORECAST EVEN IF WE'RE ECONOMISTS, BUT HISTORICALLY AFTER THE 2017 INTERNATIONAL CRISIS IT WILL TAKE A COUPLE OF YEARS, IT WILL TAKE A COUPLE OF YEAR TO GET BACK THE INTEREST RATE BACK TO, MAYBE EVEN LONGER.

THAT'S AN EXCELLENT QUESTION.

THE QUESTION IS TRANSITORY AND WHAT IS PERMANENT, WE HAVE TO SEE ON GOING DEVELOPMENT IN THE ECONOMY FOR AT LEAST THE NEXT YEAR AND THE YEAR AFTER TO START BELIEVING FOR THE NBR TO DECLARE THAT YES, WE'RE OUT OF THIS PANDEMIC AND THE ECONOMY LEFT ON ITS OWN WILL BE FINE.

>> WE HAVE ABOUT THREE MINUTES.

I'M LETTING YOU KNOW THIS BECAUSE YOU'RE HALFWAY AROUND THE WORLD, SO IT'S DIFFICULT TO GIVE YOU TIME.

BUT WHAT SHOULD WE BE AWARE OF?

WHAT ARE BOTH OF YOU FOCUSED ON, EACH OF YOU TAKE ABOUT A MINUTE.

WHAT ARE YOU KEEPING AN EYE ON?

>> I'M KEEPING AN EYE ON EXPECTATIONS, AND THE LONG THERE ARE IS INCREASE IN PRICE FORCE EVEN REASONS THAT HAVE NOTHING TO DO WITH THE CURRENT UNDERLYING ECONOMY, THE MORE LIKELY IT IS THAT THOSE EXPECTATIONS WILL BE SET AT A HIGHER RATE.

AND I'M WATCHING WAGES.

BECAUSE I'M WATCHING TO SEE IF THOSE WAGES INCREASE AT A FASTER RATE.

THEY HAVEN'T BEEN, BUT WE'RE STARTING TO SEE SIGNS PARTICULARLY ON THE BOTTOM OF THE MARKET WHERE THERE ARE PROBLEMS WITH THAT.

SO TWO BIG THINGS THAT I'M WATCHING RIGHT NOW.

AND WE KNOW THE FEDERAL RESERVE HAS SAID THEY'RE WILLING TO HAVE HIGHER PRICES AS A TRADEOFF.

THEY'RE WILLING TO HAVE THOSE PRICES GO EVEN FASTER THAN THEY'VE BEEN WILLING TO DO IN THE PAST.

WE EXPECT THOSE INCREASES WE SEE WILL HAPPEN ON THE PRICE SIDE NOT ON THE INTEREST RATE SIDE IN THE FORESEEABLE FUTURE.

>> I THINK THE EXPECTATIONS ARE EXTREMELY IMPORTANT THING TO LOOK AT.

WAGES EXPECTATIONS AND THE VIRUS ITSELF.

IT IS CRITICAL TO THE ECONOMY.

THESE ARE THE FEW THINGS THAT WE NEED TO LOOK AT, YEAH.

>> BOTH OF YOU ARE DOING GREAT WORK AT THE BODGE OF BUSINESS AT GRAND VALLEY STATE UNIVERSITY.

THANK YOU SO MUCH FOR YOUR INSIGHT.

AND WE'LL SEE YOU BOTH SOON, I'M SURE.

THIS IS NOT A CONVERSATION THAT IS ENDING HERE.

THANK YOU BOTH FOR BEING HERE.

>> THANK YOU FOR HAVING US.

YES.

>> THANK YOU FOR JOINING US.

WE'LL SEE YOU AGAIN SOON.