WEBVTT - Instant Reaction: Jay Powell Speaks

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>Jerome Powell speaking with Marketplace host ky Risdahl at the

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<v Speaker 2>Macroeconomics and Monetary Policy Conference hosted by the Federal Reserve

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<v Speaker 2>Bank of San Francisco and that Bank's president Mary Daily.

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<v Speaker 2>A very interesting discussion with Chairman Powell there, talking particularly

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<v Speaker 2>about the economic data that we got today, saying that

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<v Speaker 2>the core PCEE was pretty much in line with expectations,

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<v Speaker 2>and reiterating the message that we have heard for months

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<v Speaker 2>from this Federal Reserve. A direct quote from Chairman Powell

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<v Speaker 2>at the event, we don't need to be in a

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<v Speaker 2>hurry to cut so once again reiterating that message that

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<v Speaker 2>the FED can remain patient in the midst of this

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<v Speaker 2>bumpy road that we are seeing in disinflation. And for

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<v Speaker 2>more analysis. We are joined once again by Bloomberg's International

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<v Speaker 2>Economics and Policy correspond that Michael McKee, Mike, thanks again

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<v Speaker 2>for being with us so slow and steady wins the

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<v Speaker 2>inflation race. Is that the message you heard from Chairman

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<v Speaker 2>Palette this discussion.

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

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<v Speaker 1>he reiterated the position that the FED has taken for

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<v Speaker 1>quite some time. That they needs to see continue towards

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<v Speaker 1>a two percent inflation goal, and he finished up just

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<v Speaker 1>a moment ago by saying, we're not going to take

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<v Speaker 1>that step of cutting rates until we are confident that

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<v Speaker 1>we are headed there. That's been the message from the

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<v Speaker 1>FED for quite some time. He said that I thought

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<v Speaker 1>one of the most fun questions that kay Risdahl asked

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<v Speaker 1>was what's wrong with saying you just don't know what's

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<v Speaker 1>going on? And how are people supposed to take it

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<v Speaker 1>if you say the same things all over again? And

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<v Speaker 1>he said basically that we are trying to be humble,

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<v Speaker 1>and we're trying to be humble about our ability to

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<v Speaker 1>see the future, and we want to be thoughtful, careful

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<v Speaker 1>and steady hands in making monetary policy. So they don't

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<v Speaker 1>want to rattle the markets, and that's going to be

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<v Speaker 1>the message until they do see the progress they want.

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<v Speaker 1>He was asked about obviously today's PCE numbers and said

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<v Speaker 1>they're in line with kind of what they expected, but

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<v Speaker 1>it's still a bumpy progress and that they weren't good

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<v Speaker 1>enough to lead the FED to cut rates right now.

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<v Speaker 2>And maybe this is part of the answer, this idea

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<v Speaker 2>that the FED has to be humble and not say

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<v Speaker 2>that they know what they don't know about the economy,

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<v Speaker 2>but how much more data do they need? We've seen

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<v Speaker 2>months and months of data that have you know, over

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<v Speaker 2>the last couple of months have come in a little

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<v Speaker 2>bit bumpier than they have in months prior. But when

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<v Speaker 2>the Fed says that they need more data, it does

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<v Speaker 2>raise a question of how much more data they need

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

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<v Speaker 1>Yes, That's the big question on Wall Street is when

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<v Speaker 1>did they make that pivot? When do they start suggesting

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<v Speaker 1>they're going to be cutting in the near future. Powell

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<v Speaker 1>did not discuss that today, did not put a timeframe

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<v Speaker 1>on it, but on Wednesday night, the governor, in fact,

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<v Speaker 1>Governor Chris Waller, said he's going to need several more

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<v Speaker 1>months of data to tell him that they're going in

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<v Speaker 1>the right direction, which would seem to suggest May's off

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<v Speaker 1>the table because they'll only get one more months worth

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<v Speaker 1>of data. The question then is with two months, can

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<v Speaker 1>they do it in June or do they look to July.

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<v Speaker 1>Those are going to be the kind of things that

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<v Speaker 1>are going to have traders on edge as the inflation

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<v Speaker 1>data comes out over the next couple of months.

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<v Speaker 2>So we do have that possibility still that we will

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<v Speaker 2>get a cut, perhaps in the second quarter, maybe into

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

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<v Speaker 2>She's back with us as well. Sarah's the senior economist

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<v Speaker 2>at Wells Fargo. Sarah, good to have you back with us.

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<v Speaker 2>After we've gotten this data on the core PCE just

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<v Speaker 2>this morning. We've heard the comments in this moderated discussion

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<v Speaker 2>from Chairman Palell what's your view on where the Fed

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<v Speaker 2>goes with rates at this point?

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<v Speaker 3>Yeah, I think ultimately we heard that right now, Chair

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<v Speaker 3>pal doesn't feel like they need to be in a

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<v Speaker 3>hurry with cutting rates. It is a big decision, as

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<v Speaker 3>he espoused multiple times throughout the conversation. But what we

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<v Speaker 3>heard time and again was that he viewsed the economy

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<v Speaker 3>as strong right now, and particularly the labor market being

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<v Speaker 3>in a good place, which does seem to afford them

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<v Speaker 3>some time to see if inflation can come down a

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<v Speaker 3>bit further in the months ahead.

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<v Speaker 2>And to that point, Powell said that the Fed can

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<v Speaker 2>hold rates steady if inflation doesn't come down. It seems

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<v Speaker 2>to take at least a little bit off the table.

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

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<v Speaker 2>But is the FED trying to give the market a

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<v Speaker 2>message that maybe rates are going to stay elevated for

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<v Speaker 2>even longer than they might have priced in at this

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<v Speaker 2>point that the that the market needs to kind of

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<v Speaker 2>get ready for a new normal in terms of where

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<v Speaker 2>rates go.

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<v Speaker 3>I think right now it's more just about they need

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

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<v Speaker 3>with with where markets are priced for cuts right now.

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<v Speaker 3>If you look at what the warp function on the

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

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<v Speaker 3>you know, somewhere close to three cuts when when you

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<v Speaker 3>round roughly the media in there. So I don't think

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<v Speaker 3>that this is about really trying to guide the markets

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<v Speaker 3>in a major way, But it's more about the fact

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<v Speaker 3>that the data has come and still pretty strong and

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<v Speaker 3>allse EQL that does point to bringing to reducing the

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<v Speaker 3>level of restrictiveness a little bit later.

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<v Speaker 2>And just to bring it back to the data that

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<v Speaker 2>we saw this morning, is there anything that's in the

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<v Speaker 2>core PCE it indicates to you that we could see

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<v Speaker 2>even more bumps along the way.

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<v Speaker 3>Well, I think just given the degree of the slowdown

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<v Speaker 3>we saw on services well welcome. I wouldn't expect that

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<v Speaker 3>to necessarily repeat month in, month out over over the

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<v Speaker 3>next few months. And at the same time, I think

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<v Speaker 3>some of the goods inflation that we saw, some of

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<v Speaker 3>that might have been helped by I might have been

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<v Speaker 3>gotten a little boost from seasonal So I think we're

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<v Speaker 3>still likely to see some bumps here over the next

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<v Speaker 3>over the next few months.

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<v Speaker 1>One of the questions Sarah Spike McKee that got some

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<v Speaker 1>attention on x and other social media platforms was when

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<v Speaker 1>Kyritzol asked him does the FED get too much attention to?

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<v Speaker 1>People pay too much attention? And he said, I think

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<v Speaker 1>they do pay too much attention to Fed monetary policy,

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<v Speaker 1>because policies that raise productivity and living standards are far

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<v Speaker 1>more important over the longer term. Do you agree that

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<v Speaker 1>maybe the media and the markets put too much tension

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<v Speaker 1>on every word beed official say?

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<v Speaker 3>I think there is certainly quite a bit of focus

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<v Speaker 3>and sometimes miss other other aspects that you may move

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<v Speaker 3>the needle quite a bit on economic growth, so areas

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<v Speaker 3>like fiscal policy, as well as I think some of

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<v Speaker 3>the other policies that do support labor supply overall, overall

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<v Speaker 3>supply side things that can all can boost that that

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

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<v Speaker 3>it's it's Tom Kane's parlor game in terms of what

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<v Speaker 3>the Fed's going to do, what the Fed's going to

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<v Speaker 3>do next, that does get so much attention, But I think,

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<v Speaker 3>but I think to Repel's right in that there are

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<v Speaker 3>so many other things that need to be considered when

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<v Speaker 3>we're thinking about, you know, what's what's GDP growth going

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<v Speaker 3>to be a year from now, two years from now,

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<v Speaker 3>that can play into.

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<v Speaker 2>Speaking with Sarah House, senior economists at Wells Fargo, along

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<v Speaker 2>with Bloomberg International Economics and Policy correspondent Michael McKee, getting

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<v Speaker 2>some real action to what we've heard in just the

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<v Speaker 2>last few minutes from FED Chair Jerome Palett the Macroeconomics

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<v Speaker 2>and Monetary Policy Conference at the FED Bank in San Francisco.

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<v Speaker 2>The Chairman, Sarah does put a lot of emphasis on transparency,

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<v Speaker 2>not rattling the markets with the words that we hear

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<v Speaker 2>from the Federal Reserve. In the context of the economic

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<v Speaker 2>data that even we've gotten just today, Do you think

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<v Speaker 2>that the FED is transparent enough? Does it say too

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<v Speaker 2>much to the markets, So.

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<v Speaker 3>I think they are certainly very transparent. I think sometimes

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<v Speaker 3>that's still maybe not even good enough for markets in

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<v Speaker 3>terms of what exactly you know, are are the specific

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

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<v Speaker 3>lot of us and thinking about the economy, they're taking

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<v Speaker 3>a lot of different data points into consideration. And I

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<v Speaker 3>think at times too, given the degree of transparency, it

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<v Speaker 3>can be difficult to parse through all the different points

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<v Speaker 3>of views and where that might lead to in terms

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<v Speaker 3>of the consensus. But I think it certainly beats the

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<v Speaker 3>alternative where we didn't know what the FED was thinking

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<v Speaker 3>in years past.

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<v Speaker 2>It was interesting as well to hear Chairman Powell bring

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<v Speaker 2>up politicization of the Federal Reserve as we get closer

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<v Speaker 2>to an election year, even more into the election cycle,

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<v Speaker 2>and this idea that the FED could become more politicized

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<v Speaker 2>as we get closer to that election time. Do you

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<v Speaker 2>think that, notwithstanding what Chairman Powell had to say about

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<v Speaker 2>how the FED can't be politicized, that it would go

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<v Speaker 2>against the fed zone mandate to bring politics into its

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<v Speaker 2>decision making. Having said that, does the timing of the

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<v Speaker 2>election cycle play at all into rate decisions? From your perspective,

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<v Speaker 2>So I.

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<v Speaker 3>Think it can make the timing of when they're maybe

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<v Speaker 3>pivoting on policy little bit trickier, if nothing else, just

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<v Speaker 3>because they want to avoid that look of politicis a politicilation.

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<v Speaker 3>And so what we did hear from pal today is

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<v Speaker 3>he said that these decisions, though, are not on a

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<v Speaker 3>political calendar. And I think just given that it still

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<v Speaker 3>isn't an easy decision for when they may cut rates

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<v Speaker 3>this year if they do it all, just based on

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<v Speaker 3>the risks to both side of the mandates that you know,

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<v Speaker 3>perhaps the best thing is just to not worry about

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<v Speaker 3>it at all and just look through, put their heads

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<v Speaker 3>down and make the best decision they think for the

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<v Speaker 3>US economy.

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<v Speaker 2>Really appreciate this. Sarah, thanks again for coming on with

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<v Speaker 2>us to analyze Chairman Palace comments and of course coming

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<v Speaker 2>on earlier as well when we got that core PCE

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<v Speaker 2>data on this good Friday, Sarah House with us there,

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<v Speaker 2>senior economist at Wells Fargo and Bloomberg's Mike McKee is

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<v Speaker 2>still on with us for the next few minutes while

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<v Speaker 2>we sort of dive in a little bit more into

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<v Speaker 2>what Chairman Powell had to say in this moderated discussion.

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<v Speaker 2>It did seem Mike, as though, you know, this idea

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<v Speaker 2>that the FED doesn't want to rattle markets, even on

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<v Speaker 2>a day when you know we've all got the day

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<v Speaker 2>off from trading, that that really does seem to be

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<v Speaker 2>a lot of what drives Chairman Powell in terms of

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<v Speaker 2>what he has to say that he really doesn't want

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<v Speaker 2>to surprise markets.

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<v Speaker 1>If he can get out of a public appearance without

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<v Speaker 1>markets moving, he considers that a victory. But this is

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<v Speaker 1>what the Fed's policy has become. It used to be

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<v Speaker 1>back in the sixties, seventies, eighties, when the FED didn't

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<v Speaker 1>tell you what it was doing. It used to be

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<v Speaker 1>that they thought that surprising the markets would be good

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<v Speaker 1>because it would keep them off balance and they wouldn't

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<v Speaker 1>necessarily be rushing into to push rates one way or

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<v Speaker 1>another when the FED didn't want them to do that.

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<v Speaker 1>But now the Fed's decided that trends, parrency and forward

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<v Speaker 1>guidance are what really helps them, and it helps get

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<v Speaker 1>monetary policy into the markets by letting markets know roughly

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<v Speaker 1>what's going to happen, so that they front run, they

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<v Speaker 1>anticipate whether rates are going to go up or down.

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<v Speaker 1>And that's basically what Powell, and he's followed the others

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<v Speaker 1>since Sally and Greenspan in doing that as chair is

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<v Speaker 1>trying to tell people what's going to happen, but not

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<v Speaker 1>give too much detail. As we've been saying this morning.

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<v Speaker 1>He didn't say much new.

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<v Speaker 2>Today, absolutely and interesting as well to hear Chairman Powell

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<v Speaker 2>say that the inflation data, the preferred gauge came in

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<v Speaker 2>pretty much in line with their expectations. Walk us a

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<v Speaker 2>little bit through what was some of the most important

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<v Speaker 2>aspects of that core PCEE data that we got this morning,

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<v Speaker 2>and do you think that that's going to be more

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<v Speaker 2>important the economic data or Chairman Powell's words today in

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<v Speaker 2>terms of how the market reacts when and things come

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<v Speaker 2>back open on Monday, Well.

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<v Speaker 1>There was a little bit of debate in the among

0:13:06.480 --> 0:13:10.880
<v Speaker 1>market participants that I saw after the pce numbers came

0:13:10.920 --> 0:13:13.240
<v Speaker 1>out about whether they were good or whether they were

0:13:13.280 --> 0:13:16.520
<v Speaker 1>bad for the idea of a rake cut, and I

0:13:16.520 --> 0:13:19.400
<v Speaker 1>think Powell comes down on the side of there isn't

0:13:19.480 --> 0:13:23.960
<v Speaker 1>much different here, so it will probably limit the reaction

0:13:24.280 --> 0:13:28.640
<v Speaker 1>on Monday to anybody who is offsides and thinking the

0:13:28.679 --> 0:13:33.760
<v Speaker 1>Fed might be cutting earlier will have to refigure their portfolio,

0:13:33.840 --> 0:13:36.080
<v Speaker 1>but for most people it's not going to really matter

0:13:36.160 --> 0:13:39.680
<v Speaker 1>all that much. The inflation numbers showed some little progress.

0:13:39.760 --> 0:13:43.520
<v Speaker 1>Services prices inflation came down some, which is something the

0:13:43.559 --> 0:13:46.559
<v Speaker 1>FED has wanted to see. Goods prices were up a

0:13:46.600 --> 0:13:48.400
<v Speaker 1>little bit. A lot of that was energy, so it's

0:13:48.440 --> 0:13:51.920
<v Speaker 1>not as big a deal, but all at all, it

0:13:52.000 --> 0:13:56.160
<v Speaker 1>was incremental progress towards the Fed's goal, which means that

0:13:56.960 --> 0:13:59.760
<v Speaker 1>those who think we might see a rag cut in

0:13:59.840 --> 0:14:03.880
<v Speaker 1>Jue and are probably on the right hand side of

0:14:04.240 --> 0:14:06.160
<v Speaker 1>the left hand side rather of the tail, and those

0:14:06.200 --> 0:14:08.640
<v Speaker 1>who think we could go to September or later it

0:14:08.640 --> 0:14:11.319
<v Speaker 1>would be on the right hand side, and so somewhere

0:14:11.360 --> 0:14:15.400
<v Speaker 1>in that middle is what's most likely at this point

0:14:15.480 --> 0:14:18.160
<v Speaker 1>until we get some other data that convinces this one

0:14:18.160 --> 0:14:19.040
<v Speaker 1>way or another.

0:14:19.000 --> 0:14:22.560
<v Speaker 2>Which implies July perhaps, but we'll have to wait and

0:14:22.600 --> 0:14:26.480
<v Speaker 2>see what that market reaction is as we continue to

0:14:26.520 --> 0:14:29.680
<v Speaker 2>parse through the core PCEE data, as well as Chairman

0:14:29.760 --> 0:14:33.600
<v Speaker 2>Powell's remarks that we just heard moments ago from the

0:14:33.920 --> 0:14:37.840
<v Speaker 2>Federal Reserve Bank of San Francisco. Bloomberg International Economics and

0:14:37.840 --> 0:14:41.840
<v Speaker 2>Policy correspondent Michael McKee, thanks for coming in on a

0:14:41.960 --> 0:14:45.479
<v Speaker 2>trading holiday to help us with some of the analysis

0:14:45.520 --> 0:14:47.560
<v Speaker 2>of what we heard from Chairman Pal as well as

0:14:47.600 --> 0:14:51.200
<v Speaker 2>that economic data, and our thanks as well to Sarah House,

0:14:51.320 --> 0:14:54.200
<v Speaker 2>the senior economist at Wells Fargo, giving us some of

0:14:54.240 --> 0:14:56.680
<v Speaker 2>her analysis of the data that we got this morning,

0:14:57.040 --> 0:15:01.360
<v Speaker 2>as well as Chairman POW's remarks repeating that the Central Bank,

0:15:01.400 --> 0:15:05.680
<v Speaker 2>the Federal Reserve can stay in no hurry to cut

0:15:05.720 --> 0:15:10.200
<v Speaker 2>interest rates after the core PCE data. The PCE deflator

0:15:10.600 --> 0:15:15.080
<v Speaker 2>came in, in Powell's words, pretty much in line with expectations,

0:15:15.960 --> 0:15:18.640
<v Speaker 2>but again reiterating that it's not going to be appropriate

0:15:18.640 --> 0:15:22.800
<v Speaker 2>to lower rates until officials are confident that inflation is

0:15:22.920 --> 0:15:26.560
<v Speaker 2>on track toward that two percent target, which again Chairman

0:15:26.600 --> 0:15:30.000
<v Speaker 2>Powell reiterated just this morning that that is the target,

0:15:30.040 --> 0:15:33.320
<v Speaker 2>and we are going to get more PCE data before

0:15:33.400 --> 0:15:37.640
<v Speaker 2>the Fed's next decision coming up on May first. I'm

0:15:37.680 --> 0:15:40.400
<v Speaker 2>Nathan Hager in New York, and you have been listening

0:15:40.480 --> 0:15:43.120
<v Speaker 2>to live coverage from Bloomberg Radio.