Speaker 1: As we have been discussing this morning, three regional FED
Speaker 1: presidents have reiterated and separate remarks today that curving inflation
Speaker 1: is their top priority. Joining us now more bigger pattern.
Speaker 1: To discuss this more, we have Steve Matthews, Bloomberg Economics reporter.
Speaker 1: So Steve, just to set the scene, summarize the tone
Speaker 1: for us from John Williams, Thomas Back, and Raphaelbustic. Well,
Speaker 1: the tone, as you suggest, is very much, you know,
Speaker 1: the same from all of them. They're basically echoing what
Speaker 1: FED share, the FED shared Jerome Powell said on Friday
Speaker 1: at the Jacks and the whole conference, which is that
Speaker 1: they're going to do whatever it takes to to reduce inflation,
Speaker 1: and if it causes some pain, they're okay with that.
Speaker 1: And if it causes, you know, a period of below
Speaker 1: trend economic growth, they're okay with that. And then you know,
Speaker 1: while you sometimes here FED presidents talk and you know,
Speaker 1: there's a lot of discussion from bed watchers about Okay,
Speaker 1: there's a doublish wing that's worried about employment, and there's
Speaker 1: a hawkish wing that's worried more about inflation. Right now,
Speaker 1: it's really hard to separate the hawks from the doves,
Speaker 1: because everybody is pretty hawkish, and everybody is pretty united
Speaker 1: and behind the chairman, and so you know, we continue
Speaker 1: to raise rights and and that kind of sets the
Speaker 1: states for September. Yeah, and it's it seems tempting to
Speaker 1: think that the Bears are going to win this battle
Speaker 1: in the equity market. And the reason is is that
Speaker 1: you know, the fit is is kind of defending its
Speaker 1: manhood here and and really is going to stay higher
Speaker 1: for longer. They've told us that, and they've rammed it home,
Speaker 1: but they've also admitted that there's a lag effect to
Speaker 1: raising interest rates, and so really this process puts us
Speaker 1: in a position of just giving up on any hope
Speaker 1: of threading the knee. They're not going to be nuanced.
Speaker 1: They're not going to be able to be nuanced about
Speaker 1: this and try to achieve a soft landing. It's going
Speaker 1: to go. It's going to be a hard landing. So
Speaker 1: be it. Well. I think I think that tried. Although
Speaker 1: I think Neil cash Cars comments yesterday in the podcast
Speaker 1: with with the the Odd Lots Crew was really interesting,
Speaker 1: but perhaps you misinterpreted. I think that, you know, I
Speaker 1: don't think that the FED is definitely trying to lower
Speaker 1: stock prices. What they're trying to do is to have
Speaker 1: the investment community aligned with their view of what's going
Speaker 1: to happen with rights. And what they saw in July was,
Speaker 1: you know, the the investment community was saying, the FED
Speaker 1: is pivoting, the Fed's gonna cut rights and in early
Speaker 1: next year or something. Some folks were saying as early
Speaker 1: as the first half of next year. And there's still
Speaker 1: rate touch that the markets are pricing in for next year,
Speaker 1: and they're pushing back against that. I take that point,
Speaker 1: and Steve, I take that point completely. I don't think
Speaker 1: that it really addresses what I said, which is basically
Speaker 1: that you know, we're going to we're going to have
Speaker 1: to go through a lot of pain here because the
Speaker 1: FED is telling you it can't afford to be nuanced
Speaker 1: that that is correct, and they are willing to take
Speaker 1: some pain. Uh, you know, at least publicly. Uh. For example,
Speaker 1: the Richmond FED president was saying, was was asked about
Speaker 1: recession and you know the risk of recession. He said, yeah,
Speaker 1: there's a risk of recession, he said, but that's we're
Speaker 1: not focused on that. We're focused on inflation and you know,
Speaker 1: we're not trying to raise the unemployment, right, We're just
Speaker 1: trying to lower the inflation, right. And he may be, uh,
Speaker 1: you know, perhaps being diplomatic, but that's kind of the
Speaker 1: view from a lot of the Fed folks is that
Speaker 1: the goal is not really to raise the unemployment, right,
Speaker 1: it's deuced inflation um and they're not necessarily the same thing.
Speaker 1: Maybe it will be required that that unemployment has to
Speaker 1: go up, but they're not willing to concede that that's
Speaker 1: the only way it's going to happen. And nuance a
Speaker 1: side though, the market is still going to try and
Speaker 1: play the usual game of guessing what the next move
Speaker 1: is going to be fifty or seventy five at the
Speaker 1: next meeting in September twenty What are the odds saying
Speaker 1: at the moment, what the odds of the markets are
Speaker 1: saying seventy five is the is the high likelihood? It
Speaker 1: was interesting, you know, if you're looking for some good
Speaker 1: news out of the Fed talk today, Raphael Boston was
Speaker 1: that if we get good inflation news, maybe we'll go
Speaker 1: less than seventy five. So you know, and for that matter,
Speaker 1: the Richmond Fed President Barkin was saying uh, you know,
Speaker 1: he's not going to pre judge the meeting. It's all
Speaker 1: dependent on the data. We'll get employment report, uh in
Speaker 1: on Friday. In two weeks we get CPI. Those are
Speaker 1: the two reports that are royally gonna matter. Yeah, it
Speaker 1: is really interesting, Steve. I think we probably can sneak
Speaker 1: this in. Do we need three prints in a row?
Speaker 1: Is that what we need from the Fed in terms
Speaker 1: of slowing growth? I think that, you know, you'll definitely
Speaker 1: need several good inflation reports in a row before they're
Speaker 1: going to start to you know, at least often the
Speaker 1: language or something yeah, yeah, to blink a little um,
Speaker 1: and who knows how they'll present that does Steve, great stuff.
Speaker 1: Thank you very much for joining. Steve Matthews, Bloomberg Economics Reporter,