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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: Jerome Powell speaking with Marketplace host ky Risdahl at the

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Speaker 2: Macroeconomics and Monetary Policy Conference hosted by the Federal Reserve

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Speaker 2: Bank of San Francisco and that Bank's president Mary Daily.

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Speaker 2: A very interesting discussion with Chairman Powell there, talking particularly

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Speaker 2: about the economic data that we got today, saying that

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Speaker 2: the core PCEE was pretty much in line with expectations,

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Speaker 2: and reiterating the message that we have heard for months

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Speaker 2: from this Federal Reserve. A direct quote from Chairman Powell

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Speaker 2: at the event, we don't need to be in a

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Speaker 2: hurry to cut so once again reiterating that message that

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Speaker 2: the FED can remain patient in the midst of this

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Speaker 2: bumpy road that we are seeing in disinflation. And for

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Speaker 2: more analysis. We are joined once again by Bloomberg's International

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Speaker 2: Economics and Policy correspond that Michael McKee, Mike, thanks again

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Speaker 2: for being with us so slow and steady wins the

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Speaker 2: inflation race. Is that the message you heard from Chairman

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Speaker 2: Palette this discussion.

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Speaker 1: That's what you've got. He didn't say anything new, but

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Speaker 1: he reiterated the position that the FED has taken for

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Speaker 1: quite some time. That they needs to see continue towards

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Speaker 1: a two percent inflation goal, and he finished up just

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Speaker 1: a moment ago by saying, we're not going to take

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Speaker 1: that step of cutting rates until we are confident that

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Speaker 1: we are headed there. That's been the message from the

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Speaker 1: FED for quite some time. He said that I thought

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Speaker 1: one of the most fun questions that kay Risdahl asked

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Speaker 1: was what's wrong with saying you just don't know what's

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Speaker 1: going on? And how are people supposed to take it

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Speaker 1: if you say the same things all over again? And

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Speaker 1: he said basically that we are trying to be humble,

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Speaker 1: and we're trying to be humble about our ability to

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Speaker 1: see the future, and we want to be thoughtful, careful

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Speaker 1: and steady hands in making monetary policy. So they don't

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Speaker 1: want to rattle the markets, and that's going to be

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Speaker 1: the message until they do see the progress they want.

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Speaker 1: He was asked about obviously today's PCE numbers and said

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Speaker 1: they're in line with kind of what they expected, but

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Speaker 1: it's still a bumpy progress and that they weren't good

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Speaker 1: enough to lead the FED to cut rates right now.

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Speaker 2: And maybe this is part of the answer, this idea

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Speaker 2: that the FED has to be humble and not say

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Speaker 2: that they know what they don't know about the economy,

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Speaker 2: but how much more data do they need? We've seen

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Speaker 2: months and months of data that have you know, over

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Speaker 2: the last couple of months have come in a little

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Speaker 2: bit bumpier than they have in months prior. But when

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Speaker 2: the Fed says that they need more data, it does

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Speaker 2: raise a question of how much more data they need

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Speaker 2: before they can make that decision to pivot, doesn't it?

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Speaker 1: Yes, That's the big question on Wall Street is when

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Speaker 1: did they make that pivot? When do they start suggesting

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Speaker 1: they're going to be cutting in the near future. Powell

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Speaker 1: did not discuss that today, did not put a timeframe

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Speaker 1: on it, but on Wednesday night, the governor, in fact,

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Speaker 1: Governor Chris Waller, said he's going to need several more

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Speaker 1: months of data to tell him that they're going in

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Speaker 1: the right direction, which would seem to suggest May's off

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Speaker 1: the table because they'll only get one more months worth

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Speaker 1: of data. The question then is with two months, can

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Speaker 1: they do it in June or do they look to July.

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Speaker 1: Those are going to be the kind of things that

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Speaker 1: are going to have traders on edge as the inflation

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Speaker 1: data comes out over the next couple of months.

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Speaker 2: So we do have that possibility still that we will

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Speaker 2: get a cut, perhaps in the second quarter, maybe into

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Speaker 2: the third. Let's bring in Sarah House for some more analysis.

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Speaker 2: She's back with us as well. Sarah's the senior economist

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Speaker 2: at Wells Fargo. Sarah, good to have you back with us.

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Speaker 2: After we've gotten this data on the core PCE just

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Speaker 2: this morning. We've heard the comments in this moderated discussion

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Speaker 2: from Chairman Palell what's your view on where the Fed

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Speaker 2: goes with rates at this point?

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Speaker 3: Yeah, I think ultimately we heard that right now, Chair

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Speaker 3: pal doesn't feel like they need to be in a

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Speaker 3: hurry with cutting rates. It is a big decision, as

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Speaker 3: he espoused multiple times throughout the conversation. But what we

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Speaker 3: heard time and again was that he viewsed the economy

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Speaker 3: as strong right now, and particularly the labor market being

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Speaker 3: in a good place, which does seem to afford them

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Speaker 3: some time to see if inflation can come down a

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Speaker 3: bit further in the months ahead.

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Speaker 2: And to that point, Powell said that the Fed can

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Speaker 2: hold rates steady if inflation doesn't come down. It seems

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Speaker 2: to take at least a little bit off the table.

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Speaker 2: The idea that we'd see a rate increase at any point.

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Speaker 2: But is the FED trying to give the market a

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Speaker 2: message that maybe rates are going to stay elevated for

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Speaker 2: even longer than they might have priced in at this

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Speaker 2: point that the that the market needs to kind of

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Speaker 2: get ready for a new normal in terms of where

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Speaker 2: rates go.

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Speaker 3: I think right now it's more just about they need

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Speaker 3: to see more that it's I don't think they're unhappy

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Speaker 3: with with where markets are priced for cuts right now.

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Speaker 3: If you look at what the warp function on the

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Speaker 3: terminal and the most recent SEP they're in pretty close alignment,

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Speaker 3: you know, somewhere close to three cuts when when you

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Speaker 3: round roughly the media in there. So I don't think

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Speaker 3: that this is about really trying to guide the markets

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Speaker 3: in a major way, But it's more about the fact

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Speaker 3: that the data has come and still pretty strong and

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Speaker 3: allse EQL that does point to bringing to reducing the

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Speaker 3: level of restrictiveness a little bit later.

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Speaker 2: And just to bring it back to the data that

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Speaker 2: we saw this morning, is there anything that's in the

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Speaker 2: core PCE it indicates to you that we could see

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Speaker 2: even more bumps along the way.

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Speaker 3: Well, I think just given the degree of the slowdown

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Speaker 3: we saw on services well welcome. I wouldn't expect that

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Speaker 3: to necessarily repeat month in, month out over over the

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Speaker 3: next few months. And at the same time, I think

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Speaker 3: some of the goods inflation that we saw, some of

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Speaker 3: that might have been helped by I might have been

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Speaker 3: gotten a little boost from seasonal So I think we're

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Speaker 3: still likely to see some bumps here over the next

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Speaker 3: over the next few months.

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Speaker 1: One of the questions Sarah Spike McKee that got some

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Speaker 1: attention on x and other social media platforms was when

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Speaker 1: Kyritzol asked him does the FED get too much attention to?

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Speaker 1: People pay too much attention? And he said, I think

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Speaker 1: they do pay too much attention to Fed monetary policy,

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Speaker 1: because policies that raise productivity and living standards are far

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Speaker 1: more important over the longer term. Do you agree that

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Speaker 1: maybe the media and the markets put too much tension

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Speaker 1: on every word beed official say?

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Speaker 3: I think there is certainly quite a bit of focus

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Speaker 3: and sometimes miss other other aspects that you may move

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Speaker 3: the needle quite a bit on economic growth, so areas

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Speaker 3: like fiscal policy, as well as I think some of

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Speaker 3: the other policies that do support labor supply overall, overall

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Speaker 3: supply side things that can all can boost that that

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Speaker 3: productivity as well. So in some ways it's, you know,

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Speaker 3: it's it's Tom Kane's parlor game in terms of what

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Speaker 3: the Fed's going to do, what the Fed's going to

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Speaker 3: do next, that does get so much attention, But I think,

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Speaker 3: but I think to Repel's right in that there are

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Speaker 3: so many other things that need to be considered when

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Speaker 3: we're thinking about, you know, what's what's GDP growth going

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Speaker 3: to be a year from now, two years from now,

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Speaker 3: that can play into.

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Speaker 2: Speaking with Sarah House, senior economists at Wells Fargo, along

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Speaker 2: with Bloomberg International Economics and Policy correspondent Michael McKee, getting

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Speaker 2: some real action to what we've heard in just the

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Speaker 2: last few minutes from FED Chair Jerome Palett the Macroeconomics

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Speaker 2: and Monetary Policy Conference at the FED Bank in San Francisco.

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Speaker 2: The Chairman, Sarah does put a lot of emphasis on transparency,

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Speaker 2: not rattling the markets with the words that we hear

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Speaker 2: from the Federal Reserve. In the context of the economic

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Speaker 2: data that even we've gotten just today, Do you think

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Speaker 2: that the FED is transparent enough? Does it say too

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Speaker 2: much to the markets, So.

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Speaker 3: I think they are certainly very transparent. I think sometimes

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Speaker 3: that's still maybe not even good enough for markets in

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Speaker 3: terms of what exactly you know, are are the specific

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Speaker 3: data points they're looking at. When I think, like a

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Speaker 3: lot of us and thinking about the economy, they're taking

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Speaker 3: a lot of different data points into consideration. And I

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Speaker 3: think at times too, given the degree of transparency, it

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Speaker 3: can be difficult to parse through all the different points

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Speaker 3: of views and where that might lead to in terms

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Speaker 3: of the consensus. But I think it certainly beats the

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Speaker 3: alternative where we didn't know what the FED was thinking

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Speaker 3: in years past.

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Speaker 2: It was interesting as well to hear Chairman Powell bring

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Speaker 2: up politicization of the Federal Reserve as we get closer

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Speaker 2: to an election year, even more into the election cycle,

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Speaker 2: and this idea that the FED could become more politicized

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Speaker 2: as we get closer to that election time. Do you

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Speaker 2: think that, notwithstanding what Chairman Powell had to say about

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Speaker 2: how the FED can't be politicized, that it would go

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Speaker 2: against the fed zone mandate to bring politics into its

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Speaker 2: decision making. Having said that, does the timing of the

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Speaker 2: election cycle play at all into rate decisions? From your perspective,

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Speaker 2: So I.

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Speaker 3: Think it can make the timing of when they're maybe

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Speaker 3: pivoting on policy little bit trickier, if nothing else, just

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Speaker 3: because they want to avoid that look of politicis a politicilation.

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Speaker 3: And so what we did hear from pal today is

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Speaker 3: he said that these decisions, though, are not on a

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Speaker 3: political calendar. And I think just given that it still

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Speaker 3: isn't an easy decision for when they may cut rates

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Speaker 3: this year if they do it all, just based on

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Speaker 3: the risks to both side of the mandates that you know,

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Speaker 3: perhaps the best thing is just to not worry about

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Speaker 3: it at all and just look through, put their heads

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Speaker 3: down and make the best decision they think for the

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Speaker 3: US economy.

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Speaker 2: Really appreciate this. Sarah, thanks again for coming on with

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Speaker 2: us to analyze Chairman Palace comments and of course coming

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Speaker 2: on earlier as well when we got that core PCE

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Speaker 2: data on this good Friday, Sarah House with us there,

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Speaker 2: senior economist at Wells Fargo and Bloomberg's Mike McKee is

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Speaker 2: still on with us for the next few minutes while

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Speaker 2: we sort of dive in a little bit more into

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Speaker 2: what Chairman Powell had to say in this moderated discussion.

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Speaker 2: It did seem Mike, as though, you know, this idea

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Speaker 2: that the FED doesn't want to rattle markets, even on

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Speaker 2: a day when you know we've all got the day

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Speaker 2: off from trading, that that really does seem to be

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Speaker 2: a lot of what drives Chairman Powell in terms of

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Speaker 2: what he has to say that he really doesn't want

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Speaker 2: to surprise markets.

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Speaker 1: If he can get out of a public appearance without

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Speaker 1: markets moving, he considers that a victory. But this is

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Speaker 1: what the Fed's policy has become. It used to be

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Speaker 1: back in the sixties, seventies, eighties, when the FED didn't

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Speaker 1: tell you what it was doing. It used to be

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Speaker 1: that they thought that surprising the markets would be good

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Speaker 1: because it would keep them off balance and they wouldn't

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Speaker 1: necessarily be rushing into to push rates one way or

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Speaker 1: another when the FED didn't want them to do that.

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Speaker 1: But now the Fed's decided that trends, parrency and forward

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Speaker 1: guidance are what really helps them, and it helps get

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Speaker 1: monetary policy into the markets by letting markets know roughly

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Speaker 1: what's going to happen, so that they front run, they

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Speaker 1: anticipate whether rates are going to go up or down.

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Speaker 1: And that's basically what Powell, and he's followed the others

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Speaker 1: since Sally and Greenspan in doing that as chair is

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Speaker 1: trying to tell people what's going to happen, but not

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Speaker 1: give too much detail. As we've been saying this morning.

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Speaker 1: He didn't say much new.

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Speaker 2: Today, absolutely and interesting as well to hear Chairman Powell

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Speaker 2: say that the inflation data, the preferred gauge came in

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Speaker 2: pretty much in line with their expectations. Walk us a

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Speaker 2: little bit through what was some of the most important

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Speaker 2: aspects of that core PCEE data that we got this morning,

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Speaker 2: and do you think that that's going to be more

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Speaker 2: important the economic data or Chairman Powell's words today in

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Speaker 2: terms of how the market reacts when and things come

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Speaker 2: back open on Monday, Well.

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Speaker 1: There was a little bit of debate in the among

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Speaker 1: market participants that I saw after the pce numbers came

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Speaker 1: out about whether they were good or whether they were

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Speaker 1: bad for the idea of a rake cut, and I

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Speaker 1: think Powell comes down on the side of there isn't

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Speaker 1: much different here, so it will probably limit the reaction

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Speaker 1: on Monday to anybody who is offsides and thinking the

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Speaker 1: Fed might be cutting earlier will have to refigure their portfolio,

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Speaker 1: but for most people it's not going to really matter

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Speaker 1: all that much. The inflation numbers showed some little progress.

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Speaker 1: Services prices inflation came down some, which is something the

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Speaker 1: FED has wanted to see. Goods prices were up a

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Speaker 1: little bit. A lot of that was energy, so it's

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Speaker 1: not as big a deal, but all at all, it

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Speaker 1: was incremental progress towards the Fed's goal, which means that

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Speaker 1: those who think we might see a rag cut in

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Speaker 1: Jue and are probably on the right hand side of

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Speaker 1: the left hand side rather of the tail, and those

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Speaker 1: who think we could go to September or later it

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Speaker 1: would be on the right hand side, and so somewhere

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Speaker 1: in that middle is what's most likely at this point

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Speaker 1: until we get some other data that convinces this one

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Speaker 1: way or another.

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Speaker 2: Which implies July perhaps, but we'll have to wait and

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Speaker 2: see what that market reaction is as we continue to

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Speaker 2: parse through the core PCEE data, as well as Chairman

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Speaker 2: Powell's remarks that we just heard moments ago from the

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Speaker 2: Federal Reserve Bank of San Francisco. Bloomberg International Economics and

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Speaker 2: Policy correspondent Michael McKee, thanks for coming in on a

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Speaker 2: trading holiday to help us with some of the analysis

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Speaker 2: of what we heard from Chairman Pal as well as

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Speaker 2: that economic data, and our thanks as well to Sarah House,

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Speaker 2: the senior economist at Wells Fargo, giving us some of

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Speaker 2: her analysis of the data that we got this morning,

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Speaker 2: as well as Chairman POW's remarks repeating that the Central Bank,

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Speaker 2: the Federal Reserve can stay in no hurry to cut

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Speaker 2: interest rates after the core PCE data. The PCE deflator

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Speaker 2: came in, in Powell's words, pretty much in line with expectations,

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Speaker 2: but again reiterating that it's not going to be appropriate

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Speaker 2: to lower rates until officials are confident that inflation is

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Speaker 2: on track toward that two percent target, which again Chairman

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Speaker 2: Powell reiterated just this morning that that is the target,

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Speaker 2: and we are going to get more PCE data before

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Speaker 2: the Fed's next decision coming up on May first. I'm

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Speaker 2: Nathan Hager in New York, and you have been listening

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Speaker 2: to live coverage from Bloomberg Radio.