–Excerpts Of Gaggle with Reporters Prior to NABE Speech
WASHINGTON (MaceNews) – The following are excerpts from a Mace News rush transcript of the answers to reporters’ questions from TIAA chief and ex-Federal Reserve Vice Chairman Roger Ferguson Monday at the NABE Economic Policy Conference:
“What’s my advice to the Fed? My advice to the Fed is to continue to focus on their dual mandate and you know, as you well know they’re monitoring. You know, all the developments – they put out a report recently – on the risk that they’re observing and I’d say just stay focused on the job at hand, which I think they’ve done quite well.”
—
“I think they will decide over time whether or not the coronavirus is actually having, you know, a major impact on either the U.S. economy or a spillover from the global economy back to the U.S. So at this stage I’d say they should do what they’re most likely are doing which is continuing to monitor the situation closely and then decide whether or not it actually is something for which monetary policy is a tool. I think it’s too early to have a strong point of view about that just yet.”
—
“I think this is one of those things that they’ll have to monitor from month to month. It would not be helpful for me to try, to you know, lay out a time frame for them. In part because I think you know, as you well know, the daily headlines swing from day to day and I think people are probably surprised with today’s headline versus the headlines … last week. So, I think it’s really monitoring closely and then you know using a judgement of the whole committee decide … the efficacy of a rate cut.”
—
“So here we are confronting, you know, a health issue that may well have a spillover into macroeconomics, but it is not 100% clear that having interest rates, you know, 25 basis points lower, is likely to have a direct impact on the ability to manufacture goods or to get people back to work. And that’s clearly one of the questions that the Fed has to think about. And so, you know, I would continue to suggest the kind of, you know, cautious observation and analysis that they’re doing because it’s not 100% clear that a move by any central bank in the U.S. or in Europe is going to have the desired impact of getting people back to work more quickly or helping to move, you know, the supply chains in different ways.”
—
Market reaction? Well, that’s the thing that should be measuring which is our financial conditions themselves changing because of you know coronavirus or the, you know, reaction of markets to the virus. That seems like the kind of thing that a central bank should be thinking about.”
—
“And so stayinng focused on the mandate I think is central and recognizing that indeed uncertainties in health can lead to changes in in financial conditions and maybe at that point monetary policy comes into play – but emphasize that maybe because it’s not 100% clear at this stage that’s the right answer is it better to wait and actually see the data.”
—
“I think it’s hard to figure out how to be preemptive and you know, a set of issues that have to do with health issues that then may go into supply chain may go into the ability to make. Manufacturing your goods that have to be traded around the world, I think this one feels to me more like watch closely and then decide if your tool is the right tool.”
—
“One is a clear desire to, as often occurs, to go to safe haven assets and the Treasury market is a deep liquid market brings in or capable of absorbing capital from around the world and I think that’s exactly what we’re seeing with interest rates being you know, so very, very low. It’s a reflection of supply and demand dynamics as investors look for safe haven assets. And so as we’ve seen risk-on assets, if you will have taken a bit of a hit and so, you know investors are looking for a good safe place to park their money, and that is one of the roles that the US Treasury market is best for both here in the U.S. and globally.”
—
At TIAA? “I suspect that across our portfolio managers, we have some that are looking to see if they’re are buying opportunities. There are a number that are probably monitoring closely to figure out whether or not they like the prices of companies that they’ve been thinking about for a long period of time. And so, it wouldn’t surprise me if across all the portfolio managers that we have and the you know, hundreds of billions of dollars of equities every manager (handles), they’re probably some of my colleagues who are thinking this is a buying opportunity. They may be others that are waiting to see if there’s another leg down. And so, you know, we give our portfolio managers a great deal of flexibility, so there’s not a top down and I suspect each one of them is trying to assess you know, how he or she wants to react to the incoming news and the dramatic changes and prices of assets.
—
“I think the action we’re seeing lately is mainly about flows and it’s mainly about safe haven. There’s no doubt that the level of fixed income securities, treasuries has been low for quite a period of time. I believe that’s reflecting a number of things. One is inflation itself is very low. Two, most central banks are indicating that they are probably going to be on hold at these relatively low levels that they’ve already reached and the third, obviously, is the point I just made about you know, ample liquidity and market so you put all that together and one should not be totally surprised.”
—
“That we have in general a low level of interest rate and then I think the most recent step down to historical levels is a reflection of safe haven flows into the … treasury markets.”
—
“I think the Fed was pretty clear that it is, you know, skeptical of negative interest rate policy. You know, others have tried it. Europeans will decide for themselves, whether they’re happy or not happy with it, but my read and understanding the Federal Reserve is I think they have generally decided that negative rates seems like it’s the least likely outcome here in the U.S. Broadly speaking by definition, you know, a low and flat yield curve does indeed have a big impact on the ability of fixed income investors, including banks and others that depend on interest margin to generate margin. And answer to that is they have broadly diversified approaches to how one you know, generates revenue. So looking at fixed income, looking at equities, looking at fee revenue as well as spread revenue and you know, one can observe that the banks who’ve finished reporting generally speaking. I think reported really good earnings. Because they have broader diversification than may have been true, you know, 50 or 60 years ago.”
—
“Look at the kind of investors that we are dealing with and the kind of investors that are saving money for retirement For those investors … watch the market closely recognize that you know, if you’re broadly diversified you’ll probably have some asset classes that are protected from the ups and downs, you know, and every once in a while let’s say annually take a look at your portfolio individual risk appetite.”
—
“For long-term investors certainly on days when the market is as roiled as it is today, this would not be a good time to take precipitous action. And so, I think it’s a hang tough thing about your own risk appetite and make sure you’re brought diversification across all the asset classes.
—
“We in my own company at TIAA have done a number of acquisitions in the asset management space that gives us a broad diversification. We are not actively engaged in the kind of. broker-dealer activity that others are and so we observe what they’re doing. We tend to be a widely diversified investor that is dealing with retirement money and so we are much more focused on sort of long-term trends and opportunities to get good returns.”
—
Fed framework review? “I don’t think it’s going to be helpful for me to start to speculate and what the review might be. And so we’ll watch and see, you know, the obvious things to think about or have to do with inflation target. … you know, what did they learn from you know, the use of both regular interest rates and then alternative methodology, so to speak newer tools. So I think it’s going to be very, very interesting review and look forward to seeing that when it comes out next year, but I’m not going to try to front-run the reviews (since) I’m not actively participating in it.”
-0-