Recession in early 2024 is 'a reasonable possibility', says Roger Ferguson

WILL START TO RUN OUT AROUND YEAR END MAYBE IT'S AN EARLY 2024 EVENT >> JOINING US NOW TO TALK MORE ABOUT THE NEXT SET OF DECISIONS FACING THE FED, ROGER FERGUSON IS HERE, FORMER VICE CHAIRMAN OF THE FEDERAL RESERVE, CNBC CONTRIBUTOR. IT'S GREAT TOSEE YOU IN PERSON HERE IN ASPEN. >> THANK YOU IT'S NICE TO BE WITH YOU >> I'M CURIOUS, HE SAYS EARLY 2024 DO

YOU THINK WE'RE GOING TO RUN OUT OF CASH? >> FOR EXACTLY THE REASONS HE SUGGESTED, THE FED IS FIGHTING AN ENTRENCHED INFLATION. I THINK THE POSSIBILITY OF A RECESSION AND EARLY 2024 SEEMS LIKE A REASONABLE POSSIBILITY. >> TLES HERE'S A LOT OF DEBATE T THIS PIECE OF IT AND ACTUALLY WHETHER JAY POWELL WILL GO FURTHER. I THINK -- ARE YOU IN THE CAMP OF THERE'S MORE

IN COMMON EVEN BEYOND THAT? >> I'M CERTAINLY IN THAT CAMP. THE REASON IS INFLATION IS QUITE INTRACTABLE AND THEY'VE BEEN CLEAR OF GETTING IT DOWN TO THE 2% I THINK FACING THAT KIND OF INFLATIONARY PRESSURE FORCES THEM TO KEEP GOING UNTIL THEY ARE CLEARLY CONVINCED THAT INFLATION IS ON A DOWNWARD TRAJECTORY AND THAT MIGHT TAKE THEM TO THREE RATE HIKES, POSSIBLY MORE, IF THE DATA CALL

FOR IT >> YOU THINK IT'S THREE RATE HIKES IN THIS CALENDARI YEAR? >> THIS CALENDAR YEAR OR EARLY NEXT WE'RE TRYING TO CALL WHERE THE TERMINAL RATES ARE GOING TO BE I THINK THE MARKET IS OFF JUST A BIT. >> HERE'S A SOMEWHAT POLICE DEPARTMENT -- POLITICAL QUESTION ARE YOU OF THE VIEW THAT WHAT'S HAPPENING IN TERMS OF THE INFLATIONARY STORY IN THIS COUNTRY HAS BEEN

A FUNCTION OF THE IF FEDERAL RESERVE BEING FRANKLY BEHIND THE CURVE OR ARE YOU OF THE VIEW OR HOW MUCH ARE YOU OF THE VIEW THAT THE INFLATION THAT WE HAVE SEEN, AT LEAST EVEN ON THE MARGINS, WAS A FUNCTION OF SOME OF THE OTHER STIMULUS AND INDUSTRIAL PROGRAMS THAT THIS ADMINISTRATION PUT FORTH? >> I THINK IT'S FAIR TO SAY IT'S GLOBAL SO THE BIDEN ADMINISTRATION

IS RIGHT THERE. SOME OF IT HAD TO DO WITH GEO POLITICS, ENERGY, FOOD, ET CETERA AND, YES, I THINK IT WAS A LITTLE BIT BEHIND AS IT GOT INTO THE TRANSITORY DEBATE AND CERTAINLY THE MODELLING WOULD SAY THE AMOUNT OF STIMULUS PUT IN WAS DEEPER THAT THE HOLE THAT WAS LEFT BECAUSE OF COVID. >> WE WERE TALKING ABOUT THIS PIECE IN THE "JOURNAL" THIS MORNING. HOW

MUCH DO YOU THINK OF THE INFLATION WE SAW WAS A FUNCTION OF WHAT THE ADMINISTRATION PUT FORTH IN TERMS OF THE STIMULUS AND IS IT JUST -- BECAUSE THAT'S PART OF THE PLOLITICAL ARGUMENT AROUND THE COUNTRY YOU CAN LOOK AT A LOT OF NUMBERS THAT ARE GOOD, THE JOBS AND WHAT NOT. BUT IF YOU'RE NOT FEELING IT IN YOUR POCKET IN TERMS OF WAGES, YOU SAY

TO YOURSELF MAYBE IT ISN'T WORKING. >> THE ANSWER UNFORTUNATELY IS BOTH ARE TRUE. I SAW EARLIER ON YOUR SHOW THE DISCUSSION ABOUT A BIG FACTORY GOING UP IN I THINK NEW YORK, CLEARLY A SIGN THAT THIS IS AN INVESTMENT-DRIVEN KIND OF SPIN THAT THEY'RE DOING THAT'S GOING TO TAKE YEARS TO PLAY OUT THE CHALLENGE FOR THE ADMINISTRATION IS THEY ARE LOOKING AT THE SUPPLY SIDE, SAYING

WE NEED MORE CHIPS HERE, WE NEED BETTER INFRASTRUCTURE. ALL OF THAT TAKES YEARS TO UNFOLD IT DOES NOT FEEL TO THE CONSUMER AS THOUGH THEIR ACTUAL REAL WAGES ARE GOING UP BECAUSE INFLATION IS HIGH. IT'S A REALLY TRICKY DILEMMA FOR THEM TO ANSWER YOUR EARLIER QUESTION, I WOULD ARGUE INFLATION TENDS TO BE FIRST AND FOREMOST A MONETARY PHENOMENON, I.E., THE FED BEING LATE, PUTTING A FAIR

ABOUT OF THE BLAME THERE, GLOBAL PRESSURES THAT GOT OUT OF THERE AND FOR ME IN THIRD PLACE WOULD BE THE STIMULUS PACKAGE. NOW THAT IT WAS IRRELEVANT AND I WOULD SAY WHAT THEY'RE TRYING TO DO IS DRIVE SUPPLY, WHICH OVER THE LONGER TERM WILL REALLY PAY OFF I THINK THEY'LL HAVE A PRETTY STRONG ARGUMENT TO FIGHT WHAT THEY'RE DOING WILL MAKE AMERICA BETTER OVER TIME, NOT

NECESSARILY QUARTER TO QUARTER >> I HAVE A CEO OPERATIONAL QUESTION FOR YOU, WHICH IS THE OTHER CONVERSATION THAT'S HAPPENED A LOT THESE DAYS, WHICH IS ESG PEOPLE WOULD TALK ABOUT ESG VERY ACTIVELY AND VERY POSITIVELY AND I WOULD SAY YOU'VE SEEN A REAL SWITCH IN THE PAST YEAR AND LAYRRY FINK, A REAL PIONEER ON THIS ISSUE -- I DON'T WANT TO SAY STEPPING BACK BY TAKING

IT OUT OF THE VERNACULAR, IF YOU WILL >> PEOPLE ARE SEEING WHAT'S HAPPENED IN OTHER STATES, FLORIDA AND TEXAS, OTHERS, WHERE THE GOVERNMENT IS GOING AFTER THOSE WITH AN ESG LENS ESG ARE DIFFERENT KIND OF RISK FACTORS. I THINK INVESTMENT MANAGERS, CEOs, ET CETERA, SHOULD PUT THAT ON THEIR PORTFOLIO OF RISK THAT THEY'RE ANALYZING. THEY MAY WANT TO STEP BACK FROM IT POLITICALLY WHEN IT COMES

TO THINKING ABOUT WHERE YOU PUT YOUR MONEY, ESG FACTOR SHOULD PLAY IN. >> I WAS TALKING TO A HEDGE FUND MANAGEMENT ABOUT THIS AND HE SAID IN EUROPE, WHAT ARE THE ESG FACTORS YOU'RE USING AND WE HAVE TO TELL THEM THIS, THIS, THIS, AND THIS AND HERE IN THE US WE'RE MEETING WITH PENSION FOLKS AND YOU LOOK AT ESG AND WE HAVE TO PRETEND AS IF

WE DON'T DO THAT AND SAY SOMETHING ELSE WE'RE CREATING THIS VERY UNIQUE SORT OF MOMENT >> ABSOLUTELY. I THINK THE JOB IS TO, ONE, BE AS HONEST AS YOU CAN TWO, FOR THOSE WHO ARE SKEPTICAL, YOU HAVE TO SAY IT IS PART OF OUR RISK PORTFOLIO WE WANT TO GET PAID IF WE'RE TAKING ESG RISK. AND THERE'S PROBABLY SOME RISK THAT WE DON'T WANT TO TAKE