Why This Ex-Trump Economist Says the Fed Needs to Raise Interest Rates
5/31/202633 min
In this week's episode of WSJ’s Take On the Week, co-host Telis Demos is joined by Heard on the Street editor Aaron Back to discuss the economy, inflation, and the appointment of the new Federal Reserve chairman Kevin Warsh. They are joined by Joe Lavorgna, Americas chief economist at SMBC and a former counselor to Treasury Secretary Scott Bessent. Lavorgna argues that the Fed has an inflation problem that is so entrenched that it calls for a hike. Lavorgna breaks down how massive fiscal stimulus and the recent supply shock from the Iran War and the Strait of Hormuz closure have pushed inflation higher, making a disinflationary boom unlikely. He addresses the question of whether AI-induced productivity will be disinflationary, and how we’ll know. This is WSJ’s Take On the Week where co-hosts Telis Demos, Heard on the Street’s banking and money columnist, and Miriam Gottfried, WSJ’s investing and wealth management reporter, cut through the noise and dive into markets, the economy and finance—the big trades, key players and business news ahead. Have an idea for a future guest or episode? How can we better help you take on the week? We’d love to hear from you. Email the show at takeontheweek@wsj.com. To watch the video version of this episode, visit our WSJ Podcasts YouTube channel or the video page of WSJ.com. Further ReadingTrump Picked Warsh for Fed Chair to Cut Rates. Markets Are Bracing for the Opposite. The Fed Keeps Getting Hit With New Shocks in Its Yearslong Inflation Fight For more coverage of the markets and your investments, head to WSJ.com, WSJ’s Heard on The Street Column, and WSJ’s Live Markets blog. Sign up for the WSJ's free Markets A.M. newsletter. Follow Miriam Gottfried here and Telis Demos here. Learn more about your ad choices. Visit megaphone.fm/adchoices
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First 90 secondsSpeaker 10:00
As companies move beyond experimenting with AI and testing proofs of concept, they often struggle with how to effectively scale it. At the break, join Nigel Vaz, CEO of enterprise AI technology company Publicis Sapient, who explains how companies can overcome the common execution challenges of AI to create meaningful business value.
Telis Demos· Host0:18
[upbeat jingle] Hey, everyone. I'm Telis Demos. This week, I'm joined by Aaron Back, editor of Heard on the Street. Welcome, Aaron.
Aaron Back· Host0:27
Hello.
Telis Demos· Host0:28
Today we're gonna have a big conversation about the economy, inflation, the Fed, and we're gonna do that with Joe Lavorgna. He is the America's chief economist at CNBC, and he was also formerly a counselor to Treasury Secretary Scott Bessent. Joe, welcome to the show.
Joe Lavorgna· Guest0:43
Thank you. Glad to be here.
Telis Demos· Host0:44
So like we said, you were recently advising the Trump administration, now you're back on Wall Street. And of course, the big kind of political news in the economy is that, uh, Kevin Warsh is now in his chair as the, uh, Trump administration's chosen Fed chair. Uh, but you recently wrote, uh, in one of your, one of your first notes back, back in the, the sort of the private sector, uh, you wrote that the Fed has an inflation problem. What do you mean by that?
Joe Lavorgna· Guest1:14
I wrote... I've, actually, this is one piece I w- I've written. I've tried to be much more selective, so thank you for reading it. [laughs] And it got a lot of good feedback and- Now it's an event when you write something. It's an event. That's right. Well, a little bit, yeah. You either, you either write all the time and constantly or just do these bespoke one-off pieces. And, uh, obviously I'm very happy to be back