A Fed Chair & Treasury Secretary: Janet Yellen 8/8/25

0:16Janet Yellen, the only person to have served as both Treasury Secretary and Federal Reserve Chair in Colorado with a gathering of economists and former secretaries to tackle the biggest issues of our time, like tariffs. We're likely to end up with average tariff levels somewhere in the 15 to 20 percent range, which is really going back to Switoli since the 1930s. The first female Fed chair's extended interview with Andrew Ross Sorkin on the future of America's interest rate policy. Some adjustments of the funds rate are more likely in light of the data. So you think this year? Yeah, I think it's more likely, but it hinges on what else we see about the economy and the months ahead.

1:02And the pressure the White House is putting on offices that have long been celebrated for their political neutrality. By making the choice so political, I think President Trump is creating a problem for whoever is tapped to fill this job. I'm CNBC producer Katie Kramer. Squawk Pod reports from the Aspen Economic Strategy Group Forum with Janet Yellen begins right now.

1:37In the past two weeks, President Trump has heightened his pressure on Federal Reserve Chair Jerome Powell, who has yet to cut interest rates this year, celebrated the resignation of Federal Reserve Governor Adriana Kugler, and outright fired the Commissioner of the Bureau of Labor Statistics, Erica McIntyre. Jay Powell is highly political, and I think, you know, I call him too late. Jerome, too late. Powell, he's too late. He's too late always. I think when somebody says the commissioner is not involved, I don't want to get into any arguments with anybody. Why should I? She's a very nice woman.

2:12But when they say that nobody was involved, that it wasn't political, give me a break. We have somebody that left early, which was a pleasant surprise. We have a woman that left early. She announced two days ago that she's leaving, and I'm going to be announcing that very shortly, too. President Donald Trump dialed in to our TV broadcast and said all of those things and more. You can hear the whole conversation in another Squawk Pod episode if you scroll down in your feed.

2:44Today, we're bringing you an extended conversation from the Aspen Economic Strategy Group Forum, where Treasury secretaries dating back to before the financial crisis joined investors and sitting Federal Reserve governors to discuss the major issues facing the American economy. Sitting down in beautiful Colorado, Andrew Ross Sorkin was joined by Janet Yellen, immediate predecessor to sitting Treasury Secretary Scott Besant and the Federal Reserve chair appointed by Barack Obama. I'm going to start here with you. So I want to know what you thought when the head of the Bureau of Labor Statistics was fired.

3:19Well, I was appalled. You know, our statistical agencies have set the gold standard globally for the quality of our statistics. They're universally trusted and have never, to the best of my knowledge, been subject to political manipulation. it's all but impossible that there could be given the controls in this system political manipulation and to me this was a temper tantrum being thrown by a president who doesn't like what the statistics say about the performance of the economy and a very dangerous thing to do to politicize our basic information that households, businesses, and investors worldwide rely on.

4:18So if you're right, why do you think the market did not react to that? Meaning, if you think that this is something you'd point to as something that's undermining confidence in the system, right? Some of you probably go so far as to say it undermines confidence in the democracy. If that's true, why do you think the market didn't react? I am a little bit surprised that the market didn't react. Maybe they thought that there really would not be a meaningful change in the quality of our statistics and understanding of all the controls built into the system and how hard it would be to actually politicize the numbers.

4:59But if there is politicization of the numbers, I think you will see a very significant market reaction. Oh, so there's two issues here. One is the president said that the numbers are rigged and that's a political statement. There's another complaint that he's made that I think some people in the world that you inhabit are in more agreement with him about, which is that when you look at the number of revisions over the last however many years and you look at, you know, how hard it seems to be for the BLS to get information in a timely way, that there's something wrong that needs to be fixed. modernized or otherwise changed?

5:40Well, so with respect to the revisions, there's a trade-off here. If we wait longer to put out any information on a topic like an monthly employment change, we can get more reliable data that'll be subject to fewer revisions. but it is valuable to get an early read. And so the way we do our statistics reflects a trade-off that people have made. Let's get some advanced preliminary sense of the data, understanding that there will be several months and then even years. Is there a better way to get the numbers even more quickly? I mean, a lot of this is being done still by postal, you know, by mail.

6:25You know, we need evolution of our statistical system. And these statistical agencies have been underfunded. And economists have been arguing, especially given the changes that are taking place in the economy and how people use and provide information, we need to invest more and change the methods that we use to collect data. But there's, well, there are private sector data sources that are worthwhile. There's nothing that has the rigor, the national sample, the controls that are built into the government data. It's irreplaceable. We should be investing in it. You've been a critic of the tariffs since the very beginning.

7:18Yes. There was obviously a moment after Liberation Day, if you will, where the markets did react. Yes. But since then, they really haven't. I'm curious why you think they haven't. So I think some of the worst fears that people had about the tariffs, especially when we had this huge escalation with China to 145 % tariffs, I think people came to the conclusion that what actually happened would be more moderate. And they did see Trump react to the market reaction and decided that this was in part a bargaining tool that he wanted to use for negotiating purposes. At this point, though, it looks like he is serious about putting in place significant tariffs.

8:16And, you know, we're likely to end up with average tariff levels somewhere in the 15 to 20 percent range, which is really going back to we haven't seen anything like that since what, Ollie, since the 1930s. And these are very meaningful. And, Stanley, the markets don't reflect this yet.

8:39Well, you know, the other side of it is imports in the United States are relatively low as a share of GDP. There are sectors of the economy that are doing very well. AI firms, the Mag-7, really are not that exposed to these tariffs. and these impressive gains that we're seeing in the tech sector continue to power the economy. But I believe we will see meaningful impacts from the tariffs that we will see price increases, and they'll be very significant. This is really a tax increase. Look what's happened to tariff revenue. We're now approaching$30 billion a month of tariff revenue. this is not all going to be born by corporations.

9:35Americans are going to see it. So what percentage do you think will be born by the consumer? What will be born by American corporations? What will be born by the foreign country or the people in that country or wherever that company is based or where that good comes from? So I think most of the research we have on tariffs suggests that foreign countries and companies are not going to bear any significant price effect from the tariffs. They'll do less business and sell less, but they're not going to cut their prices in order to absorb the tariffs. And while there's a lot of uncertainty still about what tariff levels are going to be, I think American corporations haven't wanted to change prices until they had greater certainty.

10:28I don't think American businesses will bear this either. One of the things that's interesting, during the pandemic, companies took up price almost immediately. In fact, some of them were taking a price in advance because they thought that they needed to outpace the inflation that they were about to feel. Why do you think that hasn't happened this time? It's a good question. You know, I think there's been so much uncertainty about what the tariff regime was going to be. And there remain a lot of uncertainties that we have court cases that may decide that some of the tariffs are not actually legal now.

11:11There are other routes that President Trump can follow, but they will take longer. I think companies have not wanted to antagonize consumers, especially when they built up inventories. They were able to buy goods before the tariffs went into effect at lower cost. But as those inventories are depleted, I think we'll see prices go up. Also, the data suggests that there was quite a bit of diversion of goods out of China and through third countries. But I think we will see the price increases. When we spoke to the president, one of the things that he spoke about was just how so many of these trade partners, and we're seeing the headlines now, are planning to make these massive investments, hundreds of billions of dollars in the United States.

12:04And we asked him about what kind of teeth those deals have. We made the greatest trade deals in the history of our country. We had to because we were being ripped off by the world. It's not like we had a choice. If we would have gotten these trade deals, if you would have had a normal president that would have just continued to allow every country in the world to rip you off, we would not have a country anymore. Your show would be off the air. There'd be nothing to look at. It would be a disaster. What do you think of those deals? And if we're having a conversation about this two or three years from now, Do you think we will have seen those deals manifest themselves in reality?

12:40No, I think firms will choose to do whatever is profitable. If you take the EU as an example, I'm not aware of any regulations or laws that could be put in place or being contemplated that are in place that would change behavior. and such investments would take years. And probably the view is this is an agreement in principle that really doesn't have any teeth. You know, one of the other things we talked to the president about, which I'm curious about now, given the role that you used to have, he's planning to sign an executive order around the idea that he believes that the banks, and he specifically pointed to Bank of America and J.P.

13:28Morgan, had discriminated against conservatives. Specifically, he said that they had discriminated against him personally and that he had tried to place his money at Bank of America and some of these other banks and was rejected. They did discriminate. I had J.P. Morgan chase. I had hundreds of millions of dollars in cash. I could see if they want to do something bad because you don't have any money and you defaulted. They took people out, but I'll give you me as an example. I had hundreds of millions. I had many, many accounts loaded up with cash. I was loaded up with cash, and they told me, I'm sorry, sir, we can't have you.

14:11You have 20 days to get out. I said, you've got to be kidding. And then what happens is I call a Bank of America routinely because when I was president, this was after I got out, by the way, I call a Bank of America routinely. And I speak to him and I speak to a couple of people and they have zero interest. Brian was kissing my ass when I was president. And when I called him after I was president to deposit a billion dollars plus and a lot of other things, more importantly, to open accounts, which banks always like. They like accounts because they get interest free, you know, the overnight some things, a lot of reasons for it.

14:48But they like accounts. I had hundreds of accounts. And he said, we can't do it. No, we can't do it. Given the seat that you sat in, do you believe that that happened? He may have. I don't know what his personal circumstances were with these banks, but banks worry about reputational risk. They have Bank Secrecy Act, anti-money laundering requirements that they're subject to. He has had suits that he has lost about misinformation that he's provided about his financial status. They may well have had very good reasons to deny him. But this has been a concern for some time that groups are being denied access to banking services.

15:45We've had this also with, for example, marijuana that even in states where selling marijuana is legal, banks have not wanted to do business. And the banking regulators have really been very careful to ensure that they are not in any way illegally discouraging banks from doing business with customers that are legitimate. But these banks are subject to federal regulations. And in the case, for example, of marijuana, where they've been very reluctant to do business, it's still federally illegal to sell marijuana. Put your Fed hat on for a second, because one of the things I think we're all trying to figure out is where the economy really is.

16:35You mentioned the tariff piece. We're now getting some of these revisions on jobs. The president has been jawboning for lower rates for a very long time. Is there any part of you that says maybe he was right? Well, I think that perhaps the most recent data strengthens the case for some rate cut going forward. Of course, the markets have long expected there to be some rate cuts. It's, of course, contingent on the data continuing to show that inflation's under control and based on perhaps seeing some weakening in the labor market. But the recent data suggested both a meaningful slowing of growth and kind of a stalling out in the labor market.

17:26It's a little bit complicated because immigration has also declined so much that, well, there's been a decline in labor demand. There's also been a decline in labor supply. But I think likely some adjustments of the funds rate are more likely in light of the data. So you think this year? Yeah, I think it's more likely, but it hinges on what else we see about the economy in the months ahead. We've not yet seen much impact of the tariffs on prices. We had Brian Moynihan on earlier, and he mentioned the idea that he's seeing even more spending. Actually, spending is going up by the American consumer.

18:11You look at different segments, the median income, twice median income consumer gets a little more stretched. and you can see them move around a little bit more. You can look at Gen Z spending a little bit less growth over last year, all growing, but you can see older cohorts spending more probably because they're cash flowing. So all the issues are out there, all the hearings. But I always say don't listen to what people say they're going to do. Listen to what they do and what they're doing is still spending money, which bodes well for the, even with the tariffs, that this thing keeps working through the system.

18:42Does that surprise you? Well, some of the data suggests somewhat weaker consumption rather than stronger consumption. But clearly, overall, household financial conditions are pretty solid. And we've had substantial gain in wealth in the stock market. The stock market has done well. And some measures, in spite of the level of short-term rates, there are measures of financial conditions that suggest that because of the depreciation in the dollar and the movements in the stock market, the financial conditions are somewhat easier. Do you think that the market already is assuming that there's a different Fed chair come next May who's planning to lower rates in a meaningful way and that that's having any impact, meaning that we have a shadow Fed chair without a name yet?

19:34Well, I think President Trump has made very clear that he wants to appoint somebody who will be inclined to lower rates. And now the rationale that he's given and the magnitude of rate cuts that he has suggested he regards as appropriate, I think should be frightening to markets because he said that the reason he thinks we should cut rates is that America should have the strongest credit rating in the world We're a significant borrower and he wants to see the cost of U.S. debt come down. And so he's suggesting tying monetary policy to helping the Treasury pay interest on the debt, which is an argument that is really out of bounds in terms of what independent central banks with inflation mandates focus on.

20:34And when he talks about rates coming down at least 300 basis points, I really don't think that short of a significant recession, which could happen, but it's not certainly a mainline forecast. That's not what most market participants or economists are anticipating. He told us that it's basically he didn't say it was down to four people, but really talked about Kevin and Kevin, Kevin Warsh and Kevin Hassett. If you were to choose. So I'm not going to get involved in commenting on individual candidates for Fed chair. Do you think they both had experience? Do you think they would act independently?

21:22You know, I don't know that I've heard Kevin Hassett opine on that. Kevin Warsh has certainly talked about the importance of the independence of the Fed, and it's something he's been strongly in favor of. But by making the choice so political, I think President Trump is creating a problem for whoever is tapped to fill this job. That person will have to both convince the members of the FOMC and also convince the markets that, like past Fed chairs, they're trying to independently assess the data and make policy to achieve the dual mandate of price stability and full employment. Thank you for this.

22:16This was great. My pleasure. Really appreciate it.

22:29Thank you for listening to this special Squawk Pod Reports. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Squawk Pod, this podcast, is produced by me, Katie Kramer, and Cameron Costa. John Lazration is our editor. Have a great day.