1 00:00:02,560 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,200 --> 00:00:13,840 Speaker 2: This is a breaking news update from Bloomberg instant reaction 3 00:00:14,120 --> 00:00:17,959 Speaker 2: and analysis from our three thousand journalists and analysts around 4 00:00:18,000 --> 00:00:18,480 Speaker 2: the world. 5 00:00:19,280 --> 00:00:22,640 Speaker 3: The warsh FED holds the benchmark rate to three and 6 00:00:22,720 --> 00:00:26,639 Speaker 3: a half to three point seven five percent, significantly changes 7 00:00:26,680 --> 00:00:29,280 Speaker 3: the statement and splits evenly over whether there will be 8 00:00:29,320 --> 00:00:32,240 Speaker 3: a rate cut this year. They see a rate increase 9 00:00:32,320 --> 00:00:35,080 Speaker 3: this year, they see one cut each. In twenty twenty 10 00:00:35,080 --> 00:00:38,640 Speaker 3: seven and twenty twenty eight. Nine members see at least 11 00:00:38,720 --> 00:00:42,440 Speaker 3: one increase this year, with six of them seeing two moves, 12 00:00:42,840 --> 00:00:46,080 Speaker 3: but nine see no moves or a cut. The median 13 00:00:46,120 --> 00:00:48,440 Speaker 3: dot this year does move to three point seventy five 14 00:00:48,520 --> 00:00:52,800 Speaker 3: percent from three point three seven five percent. However, for 15 00:00:52,920 --> 00:00:56,400 Speaker 3: twenty twenty six there are only eighteen dots, suggesting the 16 00:00:56,440 --> 00:00:59,840 Speaker 3: Fed chairman did not enter one. He said he doesn't 17 00:01:00,120 --> 00:01:03,560 Speaker 3: leave in the dot plot. Two members did not submit 18 00:01:03,640 --> 00:01:06,920 Speaker 3: a dot. For twenty twenty eight, the statement was cut 19 00:01:06,959 --> 00:01:11,200 Speaker 3: to four paragraphs, the first the vote unanimous, then the decision, 20 00:01:11,319 --> 00:01:14,360 Speaker 3: along with the statement that the Committee reaffirmed its policy 21 00:01:14,360 --> 00:01:18,360 Speaker 3: of maintaining ample reserves in the banking system. The second 22 00:01:18,360 --> 00:01:22,200 Speaker 3: and third graphs are the economic assessment activity is expanding 23 00:01:22,240 --> 00:01:26,039 Speaker 3: at a solid pace, despite elevated uncertainty that owes in 24 00:01:26,080 --> 00:01:29,440 Speaker 3: part to conflict of the Middle East. Productivity growth and 25 00:01:29,600 --> 00:01:33,080 Speaker 3: capital investment are strong. Job gains have kept pace with 26 00:01:33,160 --> 00:01:37,240 Speaker 3: the workforce, and the unemployment rate has changed little. Inflation 27 00:01:37,360 --> 00:01:41,160 Speaker 3: remains elevated relative to the committee's two percent goal, in 28 00:01:41,200 --> 00:01:45,280 Speaker 3: part reflecting supply shocks that have driven price increases in 29 00:01:45,360 --> 00:01:50,160 Speaker 3: certain sectors, including energy. There is no balance of risks anymore. 30 00:01:50,440 --> 00:01:54,960 Speaker 3: The statement concludes, the Committee will deliver price stability. All 31 00:01:55,040 --> 00:01:59,720 Speaker 3: nineteen members of the Committee did submit economic forecasts GDP 32 00:02:00,120 --> 00:02:03,400 Speaker 3: this year two point two percent, down two tenths from March. 33 00:02:03,640 --> 00:02:06,880 Speaker 3: Unemployment will be four point three percent, up a tenth. 34 00:02:07,320 --> 00:02:11,080 Speaker 3: PCEE headline inflation will come in at three point six percent, 35 00:02:11,400 --> 00:02:15,079 Speaker 3: significantly increased from two point seven percent in their March projection. 36 00:02:15,680 --> 00:02:18,960 Speaker 3: Core similarly moves much higher to three point three percent 37 00:02:19,000 --> 00:02:23,000 Speaker 3: from two point seven percent. Growth and unemployment for twenty 38 00:02:23,040 --> 00:02:27,200 Speaker 3: twenty seven are unchanged from March, while PCEE inflation falls 39 00:02:27,240 --> 00:02:30,480 Speaker 3: back to two point three percent and CORE two and 40 00:02:30,520 --> 00:02:34,400 Speaker 3: a half. So some significant changes already under the warsh Fed. 41 00:02:34,840 --> 00:02:37,359 Speaker 3: We'll see what the Chair has to say, coming up 42 00:02:37,520 --> 00:02:38,760 Speaker 3: in about a half an hour. 43 00:02:38,560 --> 00:02:41,880 Speaker 4: Michael McKay stay close, definitely putting his mark on this 44 00:02:41,960 --> 00:02:44,560 Speaker 4: federal reserve. Just to underscore what Mike was just saying, 45 00:02:44,880 --> 00:02:48,280 Speaker 4: it looks like potentially FED share. Kevin worsh did not 46 00:02:48,400 --> 00:02:51,440 Speaker 4: put a dot. That is speculation. There were only eighteen dots. 47 00:02:51,480 --> 00:02:55,480 Speaker 4: There are nineteen members and mean mile. You're looking at 48 00:02:55,880 --> 00:02:59,840 Speaker 4: nine of eighteen FMC participants penciling in a twenty twenty 49 00:02:59,880 --> 00:03:02,320 Speaker 4: six rate hike. When you take a look at what 50 00:03:02,400 --> 00:03:05,520 Speaker 4: that is in markets, you can see a huge shift 51 00:03:05,600 --> 00:03:07,960 Speaker 4: up in the two year yield, a market shift of 52 00:03:08,080 --> 00:03:11,960 Speaker 4: about seven basis points to four point one three percent. 53 00:03:12,280 --> 00:03:15,840 Speaker 4: You could see stocks rolling over as this continues, people 54 00:03:15,840 --> 00:03:17,280 Speaker 4: bleeding in the idea of a. 55 00:03:17,200 --> 00:03:18,760 Speaker 5: More hawkish central bank. 56 00:03:18,960 --> 00:03:22,160 Speaker 4: Given that an increasing number of FED participants are looking 57 00:03:22,200 --> 00:03:22,520 Speaker 4: at a. 58 00:03:22,520 --> 00:03:23,680 Speaker 5: Rate hike this year. 59 00:03:23,919 --> 00:03:26,240 Speaker 4: When you take a look at the Nasdaq that is 60 00:03:26,360 --> 00:03:29,040 Speaker 4: continuing to decline, the S and P five hundred down 61 00:03:29,160 --> 00:03:32,480 Speaker 4: about half of a percent, Bob, what's your initial reaction, 62 00:03:32,560 --> 00:03:34,400 Speaker 4: And given the fact this does seem to be a 63 00:03:34,400 --> 00:03:37,440 Speaker 4: hawkish tilt on the committee and a very different statement, 64 00:03:38,520 --> 00:03:38,960 Speaker 4: it is. 65 00:03:38,880 --> 00:03:41,640 Speaker 1: A hawkish tilt from the committee. Half of the Committee 66 00:03:42,000 --> 00:03:46,440 Speaker 1: is expecting rate hikes this year, which is I think 67 00:03:46,960 --> 00:03:50,560 Speaker 1: a real shot across the bow to the market. We 68 00:03:50,560 --> 00:03:53,560 Speaker 1: were thinking two, maybe three to be decorative. We didn't 69 00:03:53,560 --> 00:03:58,000 Speaker 1: think half the committee. So you know, it's something quite 70 00:03:58,080 --> 00:04:03,000 Speaker 1: different when you look at the inflation projections. You know, 71 00:04:03,080 --> 00:04:07,440 Speaker 1: we were thinking up a couple tenths. You're up six tenths, 72 00:04:07,720 --> 00:04:12,280 Speaker 1: nine tenths for this year. So nobody at the FOMC 73 00:04:12,600 --> 00:04:16,800 Speaker 1: is thinking that this inflation will be transitory enough and 74 00:04:16,839 --> 00:04:20,200 Speaker 1: we'll see disinflation between now and the end of the year. 75 00:04:20,320 --> 00:04:24,000 Speaker 1: So yeah, I think this is a FED that is 76 00:04:24,040 --> 00:04:26,960 Speaker 1: sending a hawkish message. I think you have a FED 77 00:04:27,040 --> 00:04:30,360 Speaker 1: chair telling us he can't be bothered with the dots. 78 00:04:30,680 --> 00:04:34,760 Speaker 1: I think that's a slap across the face. We'll see 79 00:04:34,800 --> 00:04:37,680 Speaker 1: how he deals with that and the FED going forward. 80 00:04:37,880 --> 00:04:40,080 Speaker 4: Skarli, it seems like this is a real change, both 81 00:04:40,120 --> 00:04:43,440 Speaker 4: in tone, both in substance, and frankly points to a 82 00:04:43,480 --> 00:04:46,479 Speaker 4: hawkish committee and as Bob said, a FED chair that 83 00:04:46,560 --> 00:04:47,720 Speaker 4: is doing away with the dots. 84 00:04:47,880 --> 00:04:50,279 Speaker 6: So it'd be really interesting to see how Kevin worsh 85 00:04:50,279 --> 00:04:53,080 Speaker 6: comes out and frames everything when he does begin speaking, 86 00:04:53,120 --> 00:04:56,080 Speaker 6: because if he leans dubbish it'll certainly be a case 87 00:04:56,120 --> 00:04:57,280 Speaker 6: where he doesn't appear. 88 00:04:57,040 --> 00:04:58,520 Speaker 5: To be speaking on behalf of the committee. 89 00:04:58,520 --> 00:05:00,279 Speaker 6: He's kind of speaking out there on his own own, 90 00:05:00,520 --> 00:05:04,600 Speaker 6: expressing his own views. It's fascinating because again he has 91 00:05:04,640 --> 00:05:06,760 Speaker 6: not said a whole lot about his take on the 92 00:05:06,760 --> 00:05:10,880 Speaker 6: economy aside from his confirmation hearing before the Senate. So 93 00:05:11,279 --> 00:05:13,599 Speaker 6: all this raises a lot of questions. As you mentioned, 94 00:05:13,640 --> 00:05:16,080 Speaker 6: stocks have extended their losses, and now we now see 95 00:05:16,080 --> 00:05:18,400 Speaker 6: the S and P and the NASAC losing two thirds 96 00:05:18,440 --> 00:05:21,839 Speaker 6: of one percent. Yields again have continued to stay higher, 97 00:05:21,960 --> 00:05:24,600 Speaker 6: the two year yield up nine basis points, the ten 98 00:05:24,680 --> 00:05:26,960 Speaker 6: year yield about two basis points. 99 00:05:27,000 --> 00:05:30,320 Speaker 4: Right now, joining us now to extend the conversation. Former 100 00:05:30,320 --> 00:05:33,599 Speaker 4: of Advice chair Rich Clarita Rich. Are you surprised that 101 00:05:33,640 --> 00:05:35,880 Speaker 4: it appears that one member of the Fed did not 102 00:05:35,920 --> 00:05:36,800 Speaker 4: submit a dot? 103 00:05:38,560 --> 00:05:42,000 Speaker 2: Well, Lisa, thanks for having me on. I'm actually not surprised. 104 00:05:42,000 --> 00:05:44,279 Speaker 2: I actually was inclined to think that Walsh would not 105 00:05:44,400 --> 00:05:49,360 Speaker 2: submit a DOT. But certainly the news that Mike McKee 106 00:05:49,400 --> 00:05:52,560 Speaker 2: just shared with us that you had nine participants right 107 00:05:52,560 --> 00:05:55,120 Speaker 2: down at ray Hike was certainly above what I've been 108 00:05:55,160 --> 00:05:57,400 Speaker 2: thinking going into this meeting for sure. 109 00:05:58,720 --> 00:05:59,640 Speaker 5: Why do you think that is? 110 00:05:59,720 --> 00:06:02,240 Speaker 6: What is is that that the nine members see that 111 00:06:02,440 --> 00:06:03,800 Speaker 6: has taken the market by surprise. 112 00:06:03,839 --> 00:06:07,880 Speaker 2: Certainly, Well, there was a big markup in core inflation 113 00:06:08,520 --> 00:06:12,800 Speaker 2: projected relative to the March SEP And I think the 114 00:06:12,839 --> 00:06:17,039 Speaker 2: reality is that the pressure and core inflation that we've 115 00:06:17,040 --> 00:06:19,400 Speaker 2: been seeing in recent data is not just to pass 116 00:06:19,480 --> 00:06:22,719 Speaker 2: through from from energy prices, but it does appear to 117 00:06:22,760 --> 00:06:25,000 Speaker 2: be more broadly based, and I think that's probably a 118 00:06:25,040 --> 00:06:28,960 Speaker 2: factor in these in this reassessment. 119 00:06:29,680 --> 00:06:32,800 Speaker 1: Rich The last line of the statement is the committee 120 00:06:32,839 --> 00:06:38,120 Speaker 1: will deliver price stability, nothing about full employment. How do 121 00:06:38,200 --> 00:06:39,000 Speaker 1: you interpret that? 122 00:06:41,400 --> 00:06:43,480 Speaker 2: Well, it's not in front of me here because I'm 123 00:06:43,480 --> 00:06:46,440 Speaker 2: doing your doing your show. But that is an important 124 00:06:46,800 --> 00:06:49,240 Speaker 2: change to the statement. You know, by statute, the FED 125 00:06:49,320 --> 00:06:53,760 Speaker 2: does have a dual mandate and that's also highlighted in 126 00:06:53,880 --> 00:06:59,279 Speaker 2: the firm's policy framework, and I'm sure I hope Kevin 127 00:06:59,320 --> 00:07:04,320 Speaker 2: will be asked to elaborate on that at the press conference. 128 00:07:04,440 --> 00:07:06,800 Speaker 2: We're at a point where we're at full employment, or 129 00:07:06,839 --> 00:07:10,200 Speaker 2: at least close to the FED assessment of maximum employment, 130 00:07:10,280 --> 00:07:12,800 Speaker 2: so I wouldn't read into this that they're abandoning the 131 00:07:12,840 --> 00:07:18,440 Speaker 2: employment on mandate, but clearly some important change in the language, 132 00:07:18,480 --> 00:07:19,160 Speaker 2: for sure. 133 00:07:19,160 --> 00:07:20,240 Speaker 5: Bob, what's your take on that. 134 00:07:21,880 --> 00:07:25,800 Speaker 1: I think they are concerned by the level of inflation. 135 00:07:26,000 --> 00:07:29,360 Speaker 1: They are concerned about what they see in the Kapac cycle. 136 00:07:29,680 --> 00:07:32,600 Speaker 1: They are somewhat scarred for twenty twenty two, and they 137 00:07:32,680 --> 00:07:35,640 Speaker 1: don't want to repeat that mistake again. And they're watching 138 00:07:35,800 --> 00:07:39,680 Speaker 1: other central banks coming out and lifting rates and their 139 00:07:39,720 --> 00:07:43,920 Speaker 1: bond markets responding well to that. So I think they're reconsidering, 140 00:07:44,120 --> 00:07:47,480 Speaker 1: certainly where they were last meeting, and they're getting us 141 00:07:47,520 --> 00:07:48,480 Speaker 1: ready for rate hikes. 142 00:07:48,760 --> 00:07:51,400 Speaker 4: Rich is there anything at all dubvish in any way, 143 00:07:51,440 --> 00:07:54,320 Speaker 4: shape or form of any part of this four paragraph statement, 144 00:07:58,000 --> 00:07:58,400 Speaker 4: Not at. 145 00:07:58,320 --> 00:08:02,520 Speaker 2: First glance or at first listen. Again, at least for 146 00:08:02,640 --> 00:08:06,760 Speaker 2: this meeting, Cher Walsh will have the bully pulpit, and 147 00:08:06,800 --> 00:08:09,400 Speaker 2: I very much will be looking forward to seeing how 148 00:08:09,400 --> 00:08:13,120 Speaker 2: he frames this and provides his own perspective. But certainly 149 00:08:13,160 --> 00:08:16,120 Speaker 2: I think we have an indication here, especially with that sentence, 150 00:08:17,040 --> 00:08:20,480 Speaker 2: the committee will deliver price stability. That sounds like where 151 00:08:20,480 --> 00:08:22,360 Speaker 2: he's going to land, for sure. 152 00:08:23,720 --> 00:08:26,880 Speaker 6: So there's a comment here from Joseph Richter, he's one 153 00:08:26,880 --> 00:08:29,840 Speaker 6: of our editors at Bloomberg Intelligence. On our live blog, 154 00:08:29,960 --> 00:08:31,760 Speaker 6: and he says that those who look for a quiet 155 00:08:31,760 --> 00:08:36,560 Speaker 6: first wash FMC meeting must be disappointed. Rich, what will 156 00:08:36,600 --> 00:08:39,480 Speaker 6: you be listening for, in particular from Kevin Walsh when 157 00:08:39,520 --> 00:08:41,600 Speaker 6: he speaks today. I know you said it'll be interesting 158 00:08:41,720 --> 00:08:43,320 Speaker 6: to see how he frames his thinking. 159 00:08:43,400 --> 00:08:44,720 Speaker 5: But what will be the one. 160 00:08:44,600 --> 00:08:46,360 Speaker 6: Thing that you want to hear from him? 161 00:08:47,360 --> 00:08:50,480 Speaker 2: Well, let me give you more than one. Certainly I 162 00:08:50,480 --> 00:08:53,360 Speaker 2: would like to have him flesh out how the dual 163 00:08:53,440 --> 00:08:57,320 Speaker 2: mandate fits into this at this at this point. Also importantly, 164 00:08:57,400 --> 00:09:00,720 Speaker 2: you know he's spent the last fifteen years criticizing the 165 00:09:00,720 --> 00:09:03,760 Speaker 2: Fed's big balance sheet. The Fed's growing or expanding its 166 00:09:03,800 --> 00:09:07,439 Speaker 2: balance sheet now, and so perhaps moving beyond this meeting 167 00:09:07,520 --> 00:09:09,880 Speaker 2: to the rest of the year and the next year, 168 00:09:10,400 --> 00:09:12,520 Speaker 2: how he's going to try to change minds on the 169 00:09:12,559 --> 00:09:15,640 Speaker 2: committee about the balance sheet size as well. 170 00:09:16,160 --> 00:09:20,200 Speaker 3: Mike McKee jump in here, Well, I think Rich raises 171 00:09:20,240 --> 00:09:23,160 Speaker 3: an important point. The only reference to the balance sheet 172 00:09:23,280 --> 00:09:27,840 Speaker 3: is the FED reaffirming its commitment to the ample reserves policy, 173 00:09:28,320 --> 00:09:33,920 Speaker 3: which is generic enough to encompass both Warsh's desire for 174 00:09:33,960 --> 00:09:37,600 Speaker 3: a smaller balance sheet and others desire to maintain the 175 00:09:37,679 --> 00:09:40,480 Speaker 3: quarter system that we have now. But the question is 176 00:09:41,120 --> 00:09:43,320 Speaker 3: do they go to that later? Is it just too 177 00:09:43,360 --> 00:09:46,800 Speaker 3: much of a bridge to cross right now? Other points 178 00:09:46,840 --> 00:09:49,720 Speaker 3: that I think are worth making is that while the 179 00:09:49,760 --> 00:09:53,760 Speaker 3: committee dropped the bias statement and doesn't give any quote 180 00:09:53,800 --> 00:09:58,000 Speaker 3: unquote forward guidance in the statement itself, the dot plot 181 00:09:58,040 --> 00:10:00,480 Speaker 3: is forward guidance because all you're talking a about right 182 00:10:00,480 --> 00:10:02,400 Speaker 3: now is the nine people who think that we're going 183 00:10:02,440 --> 00:10:04,640 Speaker 3: to get a rate increase, and that this tells you 184 00:10:04,679 --> 00:10:08,880 Speaker 3: that the Fed is hawkish. So if Kevin worsh wants 185 00:10:08,920 --> 00:10:10,640 Speaker 3: to walk that back, he's going to have to do 186 00:10:10,679 --> 00:10:13,200 Speaker 3: that in the press conference. Otherwise the markets are going 187 00:10:13,240 --> 00:10:16,640 Speaker 3: to be tilting in that direction. It's also interesting that 188 00:10:16,720 --> 00:10:20,240 Speaker 3: they did say they're committed to price stability. What it 189 00:10:20,280 --> 00:10:23,520 Speaker 3: seems like is that the people who were worried about inflation, 190 00:10:23,640 --> 00:10:27,720 Speaker 3: that worry has spread, and as Rich noted, the core 191 00:10:27,840 --> 00:10:31,800 Speaker 3: inflation has broadened out some. And so they are sending 192 00:10:31,800 --> 00:10:33,600 Speaker 3: a message to the markets that we're not going to 193 00:10:33,679 --> 00:10:35,920 Speaker 3: let this get out of control. We're not going to 194 00:10:35,960 --> 00:10:39,320 Speaker 3: repeat what happened in twenty twenty one twenty two. We 195 00:10:39,400 --> 00:10:42,200 Speaker 3: are going to focus on price stability right now. The 196 00:10:42,280 --> 00:10:46,280 Speaker 3: unsaid thing is that we're basically at full employment, so 197 00:10:46,360 --> 00:10:47,960 Speaker 3: we don't have to worry about that for the moment. 198 00:10:48,280 --> 00:10:50,280 Speaker 1: Mike. The other thing that jumped out at me is 199 00:10:50,360 --> 00:10:53,119 Speaker 1: you said that we went from eighteen dots to seventeen 200 00:10:53,200 --> 00:10:57,319 Speaker 1: dots for twenty twenty eight. Is there an undercover supporter 201 00:10:57,600 --> 00:11:00,480 Speaker 1: of Worsh policy in the FOMCS now? 202 00:11:01,720 --> 00:11:04,199 Speaker 3: It does seem like there might be at least someone 203 00:11:04,200 --> 00:11:06,320 Speaker 3: who supports the idea that the dot plot is not 204 00:11:06,440 --> 00:11:09,840 Speaker 3: worth considering. It could also be that one member decided 205 00:11:09,880 --> 00:11:12,920 Speaker 3: that there's just too much uncertainty for twenty twenty eight, 206 00:11:12,920 --> 00:11:16,800 Speaker 3: and why bother to add to that by just guessing 207 00:11:16,840 --> 00:11:18,559 Speaker 3: it where rates are going to be. We've had a 208 00:11:18,600 --> 00:11:20,640 Speaker 3: lot of FED officials over the years tell us that 209 00:11:20,679 --> 00:11:23,400 Speaker 3: they just kind of throw something in for the third 210 00:11:23,480 --> 00:11:26,640 Speaker 3: year out because it's just too hard to project anything 211 00:11:26,720 --> 00:11:29,000 Speaker 3: that far out. I wouldn't read too much into that, 212 00:11:29,080 --> 00:11:31,720 Speaker 3: but the idea that Kevin Worsh did not submitted dot 213 00:11:32,040 --> 00:11:33,800 Speaker 3: kind of tells you that he's going to maybe push 214 00:11:34,080 --> 00:11:36,720 Speaker 3: to do some change to the dot plot going forward. 215 00:11:37,120 --> 00:11:38,960 Speaker 5: If you are just joining us right now. 216 00:11:39,000 --> 00:11:42,280 Speaker 4: We did get a statement that's for paragraphs long, much 217 00:11:42,320 --> 00:11:47,000 Speaker 4: shorter than usual, with no reference to the employment mandate, 218 00:11:47,280 --> 00:11:51,160 Speaker 4: with nine of the eighteen members opting to support some 219 00:11:51,200 --> 00:11:54,679 Speaker 4: sort of rate hike this year, leaving the others either 220 00:11:54,880 --> 00:11:57,480 Speaker 4: in support of just keeping things where they are or 221 00:11:57,520 --> 00:12:01,360 Speaker 4: potentially cutting rates being taken. It's incredibly hawkish. You could 222 00:12:01,360 --> 00:12:04,040 Speaker 4: see the selloff in treasuries extending. You could see two 223 00:12:04,120 --> 00:12:06,960 Speaker 4: year yields now up eight basis points. 224 00:12:06,679 --> 00:12:08,959 Speaker 5: Across the curve, all rising. 225 00:12:09,040 --> 00:12:12,160 Speaker 4: Although this is yield curves flattening this idea that potentially 226 00:12:12,440 --> 00:12:16,400 Speaker 4: there will be some sort of tightening in policy. 227 00:12:16,559 --> 00:12:20,160 Speaker 5: Former Vice Chair Rich Clarita, final for word from you. 228 00:12:20,360 --> 00:12:23,080 Speaker 4: What's your question right now going to be for a 229 00:12:23,120 --> 00:12:27,040 Speaker 4: FED chair Kevin Walsh. 230 00:12:27,200 --> 00:12:31,840 Speaker 2: Kevin, you did not submit a DOT today. There's no 231 00:12:31,960 --> 00:12:35,640 Speaker 2: forward guidance in the statement. The markets are taking the 232 00:12:35,679 --> 00:12:39,360 Speaker 2: information today as hawkish. Would you be prepared to comment? 233 00:12:40,160 --> 00:12:42,640 Speaker 4: Former FED Vice Chair Rich Clarita, who might make a 234 00:12:42,640 --> 00:12:45,720 Speaker 4: sneak appearance because that was pretty good. Thank you so 235 00:12:45,800 --> 00:12:48,520 Speaker 4: much joining us now. Diane Schwalk of KPMG. Diana, what's 236 00:12:48,520 --> 00:12:49,280 Speaker 4: your first take in this? 237 00:12:51,080 --> 00:12:53,920 Speaker 7: Well, I'm actually not all the surprise. We saw a 238 00:12:54,000 --> 00:12:56,840 Speaker 7: major move in the minutes to the last meeting where 239 00:12:56,880 --> 00:12:59,760 Speaker 7: a lot of people were moving towards the hawks Jan 240 00:13:00,120 --> 00:13:02,800 Speaker 7: and saying we may need to consider rate hikes later 241 00:13:02,880 --> 00:13:05,839 Speaker 7: this year and in the interim period. We have seen 242 00:13:06,160 --> 00:13:09,679 Speaker 7: even FED governors, which usually hold their cards a little 243 00:13:09,720 --> 00:13:12,080 Speaker 7: closer to the vest, some of them who have never 244 00:13:12,200 --> 00:13:16,200 Speaker 7: seen actually take a firm stand, talk about how the 245 00:13:16,240 --> 00:13:19,520 Speaker 7: price stability side of the mandate is more important now 246 00:13:19,840 --> 00:13:23,320 Speaker 7: than the employment side of the mandate. And that's exactly 247 00:13:23,320 --> 00:13:26,360 Speaker 7: what you saw with that last sentence in the statement. 248 00:13:26,559 --> 00:13:30,320 Speaker 7: Was not that one was that we were not having 249 00:13:30,480 --> 00:13:33,600 Speaker 7: a dual mandate. It's that the focus is on price 250 00:13:33,640 --> 00:13:37,240 Speaker 7: stability given the stability we've seen in the unemployment rate. 251 00:13:37,480 --> 00:13:40,080 Speaker 7: And I think that's very important what the FED is saying, 252 00:13:40,240 --> 00:13:43,680 Speaker 7: we're not going to take the inflation as transitory. What 253 00:13:44,120 --> 00:13:48,040 Speaker 7: concerned so many at the FED meeting in March when 254 00:13:48,080 --> 00:13:51,360 Speaker 7: we saw sort of the initial forecast and there was 255 00:13:51,400 --> 00:13:54,240 Speaker 7: a lot of uncertainty, but the minutes from that meeting 256 00:13:54,280 --> 00:13:58,560 Speaker 7: really revealed how many people but we're already concerned about 257 00:13:58,640 --> 00:14:02,199 Speaker 7: the data that was coming out that suggested that underlying 258 00:14:02,240 --> 00:14:06,240 Speaker 7: core inflation was not only sticky, but maybe reaccelerating again. 259 00:14:06,559 --> 00:14:09,600 Speaker 7: And I think that is where we're seeing this come from. 260 00:14:09,720 --> 00:14:13,120 Speaker 7: It is beyond the energy shock. It is beyond terror 261 00:14:13,120 --> 00:14:18,080 Speaker 7: of shocks. It's in that core super services component of 262 00:14:18,080 --> 00:14:22,520 Speaker 7: inflation that we're seeing get sticky and hot and accelerate 263 00:14:22,840 --> 00:14:27,040 Speaker 7: and not consistent with anything that resembles price stability. 264 00:14:27,400 --> 00:14:29,360 Speaker 6: I want to go back to that idea, Diane, that 265 00:14:29,760 --> 00:14:32,520 Speaker 6: the statement ends with the committee will deliver price stability 266 00:14:33,480 --> 00:14:36,280 Speaker 6: From where you sit. What are the most reliable inflation 267 00:14:36,520 --> 00:14:39,800 Speaker 6: indicators that the committee will then focus on. If it's, 268 00:14:40,280 --> 00:14:42,360 Speaker 6: of course the reported numbers, But when it comes to 269 00:14:42,360 --> 00:14:45,320 Speaker 6: inflation expectations, you've got Marcus based measures, You've got survey 270 00:14:45,360 --> 00:14:48,200 Speaker 6: based measures, you know, and. 271 00:14:48,800 --> 00:14:51,560 Speaker 7: None of these measures they have At times, none of 272 00:14:51,560 --> 00:14:55,200 Speaker 7: the FED will never say inflation expectations are unanchored, and 273 00:14:55,240 --> 00:14:57,440 Speaker 7: I think that's important, and a lot of these inflation 274 00:14:57,560 --> 00:15:01,840 Speaker 7: measures on expectations do not look on anchored. Although consumer 275 00:15:01,920 --> 00:15:05,000 Speaker 7: sentiment certainly is not high at the moment, and I 276 00:15:05,000 --> 00:15:08,880 Speaker 7: think the decoupling we've seen between consumer attitudes and their 277 00:15:08,920 --> 00:15:13,440 Speaker 7: actual spending reflects the burn of inflation, and they're seeing 278 00:15:13,480 --> 00:15:15,760 Speaker 7: that out there. They're also seeing in surveys like the 279 00:15:15,800 --> 00:15:20,920 Speaker 7: Ism survey and the Purchasing Managers surveys, things where manufacturers 280 00:15:21,000 --> 00:15:25,440 Speaker 7: are front running future price hikes. That's the exact behavior 281 00:15:25,800 --> 00:15:29,720 Speaker 7: the Federal Reserve is tasked to prevent because that kind 282 00:15:29,720 --> 00:15:34,480 Speaker 7: of hoarding behavior reinforces its own inflation cycle. So I 283 00:15:34,520 --> 00:15:37,720 Speaker 7: think those kinds of behavioral shifts they're seeing out there, 284 00:15:37,880 --> 00:15:41,240 Speaker 7: they're worried about the muscle memory of inflation. We're five 285 00:15:41,360 --> 00:15:45,320 Speaker 7: years in and inflation is still a problem, whether or 286 00:15:45,360 --> 00:15:48,200 Speaker 7: not it's all the Fed's fault or not. It's only 287 00:15:48,280 --> 00:15:53,120 Speaker 7: one institution's responsibility to derail inflation, and that is the 288 00:15:53,120 --> 00:15:55,960 Speaker 7: Federal Reserve, and that's what you're seeing them sort of 289 00:15:55,960 --> 00:15:59,400 Speaker 7: put their foot down now that the labor market situation, 290 00:15:59,640 --> 00:16:03,360 Speaker 7: although not perfect, is not in the precarious situation it 291 00:16:03,400 --> 00:16:05,120 Speaker 7: appeared to be last fall. 292 00:16:05,880 --> 00:16:08,080 Speaker 6: You've noted, Diane, that one of the largest near term 293 00:16:08,160 --> 00:16:10,960 Speaker 6: hurdles for the Central Bank is the persistence of service 294 00:16:11,080 --> 00:16:13,800 Speaker 6: sector inflation. What has proven to be the most effective 295 00:16:13,800 --> 00:16:16,640 Speaker 6: way to bring down inflation in the services. 296 00:16:16,200 --> 00:16:21,680 Speaker 7: Sector well, sector that has been sort of impervious to 297 00:16:21,760 --> 00:16:25,160 Speaker 7: some of the increases in interest rates we saw. We 298 00:16:25,280 --> 00:16:27,880 Speaker 7: did see wages cool, but they've not cold enough to 299 00:16:27,920 --> 00:16:29,960 Speaker 7: bring it down. And I think part of the problem 300 00:16:30,040 --> 00:16:33,280 Speaker 7: we're finding in the service sector is one demographic and 301 00:16:33,320 --> 00:16:37,360 Speaker 7: the aging demographics and upward pressure on some healthcare costs. 302 00:16:37,520 --> 00:16:41,160 Speaker 7: But we also have other factors pushing up service sector inflation, 303 00:16:41,280 --> 00:16:44,560 Speaker 7: and that is inequality and the ability of very high 304 00:16:44,680 --> 00:16:47,680 Speaker 7: end consumers to spend up, to buy at the front 305 00:16:47,720 --> 00:16:50,960 Speaker 7: of the airplane and buy first class tickets, to spend 306 00:16:50,960 --> 00:16:55,040 Speaker 7: at high end hotels. All that is blowing inflation at 307 00:16:55,080 --> 00:16:58,600 Speaker 7: a time when many who are on the lower end 308 00:16:58,720 --> 00:17:01,200 Speaker 7: or even in the middle part of the income strata 309 00:17:01,360 --> 00:17:05,400 Speaker 7: are seeing their wages eroded relative to inflation, where we 310 00:17:05,440 --> 00:17:08,600 Speaker 7: know at the highest end of the income strata that 311 00:17:09,080 --> 00:17:13,040 Speaker 7: wages are actually going up more rapidly than inflation. And 312 00:17:13,119 --> 00:17:16,480 Speaker 7: so that's one of the challenges that FED faces is 313 00:17:16,520 --> 00:17:19,760 Speaker 7: they've got a manage to the economic aggregates when the 314 00:17:19,800 --> 00:17:23,159 Speaker 7: devil is in the details underneath those aggregates. 315 00:17:23,280 --> 00:17:25,000 Speaker 4: Bob, you know what strikes me is that if you 316 00:17:25,000 --> 00:17:27,399 Speaker 4: look at some of the economic projections here, a lot 317 00:17:27,480 --> 00:17:30,240 Speaker 4: of people do seem clearly much more concerned about inflation. 318 00:17:30,520 --> 00:17:34,160 Speaker 4: They revised up their core PCEE between three point two 319 00:17:34,240 --> 00:17:36,080 Speaker 4: and three and a half percent for the entirety of 320 00:17:36,119 --> 00:17:37,680 Speaker 4: this year from two and a half to two point 321 00:17:37,720 --> 00:17:40,160 Speaker 4: eight in the previous one. Throughout all of these, even 322 00:17:40,200 --> 00:17:43,240 Speaker 4: the FED Fund's rate central tendency was moved up between 323 00:17:43,280 --> 00:17:46,960 Speaker 4: three point six and four point one. At this point, 324 00:17:47,520 --> 00:17:49,520 Speaker 4: can we say we're at neutral? And can you say 325 00:17:49,560 --> 00:17:52,680 Speaker 4: that right now? This is a FED committee purely trained 326 00:17:52,760 --> 00:17:56,920 Speaker 4: on inflation. Just as Kevin worsh reflected in that statement. 327 00:17:58,320 --> 00:18:01,879 Speaker 1: They're telling us that we're not at neutral, even though 328 00:18:01,920 --> 00:18:07,720 Speaker 1: the median dot there's enough dispersion for higher inflation and 329 00:18:07,840 --> 00:18:11,560 Speaker 1: higher rates. It's telling us that maybe the market was 330 00:18:11,680 --> 00:18:14,520 Speaker 1: right before the meeting, the market was pricing in one 331 00:18:14,640 --> 00:18:17,960 Speaker 1: rate hike over year end into next year. It looks 332 00:18:18,040 --> 00:18:20,480 Speaker 1: like they looked at the market and say, hey, it's 333 00:18:20,520 --> 00:18:22,920 Speaker 1: giving us a rate hike. Inflation's not going to be 334 00:18:22,960 --> 00:18:25,720 Speaker 1: at our target for five years going on to six. 335 00:18:26,160 --> 00:18:29,040 Speaker 1: Maybe this is the opportunity for us to step in 336 00:18:29,400 --> 00:18:32,040 Speaker 1: like every other central bank and high rates. I thought 337 00:18:32,040 --> 00:18:33,720 Speaker 1: we would get there. I didn't think we would get 338 00:18:33,720 --> 00:18:36,560 Speaker 1: there at this meeting. The long end of the market 339 00:18:36,720 --> 00:18:39,320 Speaker 1: likes it. Look at that the front ends up six seven, 340 00:18:39,359 --> 00:18:42,440 Speaker 1: eight basis points, the long ends down a basis point. 341 00:18:42,680 --> 00:18:45,680 Speaker 1: A FED that's vigilant again creates support for the long 342 00:18:45,800 --> 00:18:46,439 Speaker 1: end of the market. 343 00:18:46,480 --> 00:18:48,960 Speaker 4: Well, and actually, Diane do you think that in some ways, 344 00:18:49,200 --> 00:18:51,680 Speaker 4: just to conclude this is actually a way to get 345 00:18:51,680 --> 00:18:54,320 Speaker 4: the ultimate goal of recuts down the road by job 346 00:18:54,359 --> 00:18:57,000 Speaker 4: vowning the market into seeing this as a hawkish fedule reserve. 347 00:18:59,000 --> 00:19:01,000 Speaker 7: I think it is important, and I think it's also 348 00:19:01,040 --> 00:19:03,880 Speaker 7: an acknowledgment, though, I mean the context is important here. 349 00:19:04,000 --> 00:19:07,680 Speaker 7: Five years without hitting its inflation target and five years 350 00:19:07,680 --> 00:19:11,320 Speaker 7: of compounding inflation is a problem for the US economy, 351 00:19:11,720 --> 00:19:14,600 Speaker 7: and they now have more flexibility with the labor market 352 00:19:14,680 --> 00:19:18,960 Speaker 7: showing some signs of finally generating jobs, stable unemployment rate 353 00:19:19,119 --> 00:19:22,160 Speaker 7: for a while now, with the exception of the six 354 00:19:22,200 --> 00:19:24,760 Speaker 7: week government shutdown and the weakness we saw at the 355 00:19:24,840 --> 00:19:28,000 Speaker 7: end of twenty twenty five, And they're squarely focused on 356 00:19:28,040 --> 00:19:30,680 Speaker 7: what they should be focused on. And I agree that 357 00:19:30,760 --> 00:19:33,560 Speaker 7: the neutral rate is actually likely higher than what they 358 00:19:33,600 --> 00:19:35,720 Speaker 7: thought it was. There were some that were moving there 359 00:19:35,960 --> 00:19:39,280 Speaker 7: prior to this meeting as well, which means that in 360 00:19:39,320 --> 00:19:42,040 Speaker 7: and of itself suggests they should have a higher short 361 00:19:42,119 --> 00:19:45,240 Speaker 7: term rate. And on top of that we may need 362 00:19:45,320 --> 00:19:49,080 Speaker 7: another hike as well. I still expect two hikes by 363 00:19:49,160 --> 00:19:49,600 Speaker 7: year end. 364 00:19:49,840 --> 00:19:52,919 Speaker 5: Wow, Diane Swank, thank you so much. Two rate hikes 365 00:19:52,920 --> 00:19:54,439 Speaker 5: by year end. Can you imagine what that would do 366 00:19:54,440 --> 00:19:54,760 Speaker 5: to market. 367 00:19:54,880 --> 00:19:56,600 Speaker 6: So there are a couple of dots that point towards 368 00:19:56,640 --> 00:19:58,120 Speaker 6: that direction, but the majority see one. 369 00:19:58,240 --> 00:19:59,960 Speaker 5: Do you see that in any capacity to rate high 370 00:20:00,160 --> 00:20:00,560 Speaker 5: this year? 371 00:20:01,040 --> 00:20:04,880 Speaker 1: I think it's possible, you do, absolutely. There's a lot 372 00:20:04,880 --> 00:20:08,320 Speaker 1: of underlying growth and cap X in the economy, and 373 00:20:08,359 --> 00:20:10,960 Speaker 1: we don't know whether the Middle East will be worked out. 374 00:20:11,200 --> 00:20:13,960 Speaker 1: It's certainly not impossible. 375 00:20:13,480 --> 00:20:14,000 Speaker 5: Joining us now. 376 00:20:14,080 --> 00:20:16,399 Speaker 4: As Mattlazetti of Deutsche Bank, who's had a few minutes 377 00:20:16,440 --> 00:20:18,200 Speaker 4: to look through this statement, what's. 378 00:20:18,040 --> 00:20:18,679 Speaker 5: Your first reaction? 379 00:20:18,760 --> 00:20:22,479 Speaker 8: Matt, Yeah, I think this was towards the hawkish end 380 00:20:22,520 --> 00:20:24,119 Speaker 8: of what we could have expected. The two things that 381 00:20:24,160 --> 00:20:26,920 Speaker 8: I was focused on ahead of the meeting were one, how. 382 00:20:26,800 --> 00:20:28,520 Speaker 9: Many dots we're going to show hikes this year? 383 00:20:28,920 --> 00:20:30,800 Speaker 8: You have half of the dots, nine of them showing 384 00:20:30,840 --> 00:20:33,240 Speaker 8: rate hikes, six of them is showing fifty basis points 385 00:20:33,280 --> 00:20:34,720 Speaker 8: or more of rate hikes. That has to be towards 386 00:20:34,720 --> 00:20:37,439 Speaker 8: the hawkish end of expectations. The second thing, and what 387 00:20:37,560 --> 00:20:40,159 Speaker 8: drives the hawkishness in the dots, is the upper division 388 00:20:40,240 --> 00:20:42,480 Speaker 8: in their core inflation forecast this year they went up 389 00:20:42,520 --> 00:20:44,880 Speaker 8: to three point three percent. I think really critically next 390 00:20:44,960 --> 00:20:47,159 Speaker 8: year they went up to two point five percent. You 391 00:20:47,200 --> 00:20:49,639 Speaker 8: have a median expectation in the committee that more than 392 00:20:49,680 --> 00:20:51,879 Speaker 8: six years into the inflation shock, inflation has still not 393 00:20:51,920 --> 00:20:54,400 Speaker 8: gotten down to two and a half percent and within 394 00:20:54,440 --> 00:20:57,000 Speaker 8: fifty basis points of their target. That is what's driving 395 00:20:57,000 --> 00:20:59,399 Speaker 8: the necessity for potentially higher rates. 396 00:21:00,520 --> 00:21:03,000 Speaker 6: So one of the comments from Ira Jersey, who's our 397 00:21:03,040 --> 00:21:06,000 Speaker 6: interest rate statategist here at Bloomberg Intelligence, says that Warsh's 398 00:21:06,040 --> 00:21:08,760 Speaker 6: stamp on the statement seems fairly evident, with language moving 399 00:21:08,760 --> 00:21:12,280 Speaker 6: closer to the style used before the global financial crisis? 400 00:21:12,760 --> 00:21:14,760 Speaker 5: Is this a move to make the FED less. 401 00:21:14,560 --> 00:21:19,280 Speaker 6: Transparent, Matthew, with the statement really brought down, the word 402 00:21:19,320 --> 00:21:21,800 Speaker 6: count brought down and the length of it reduced to 403 00:21:21,840 --> 00:21:24,280 Speaker 6: the point where this is going to be a FED 404 00:21:24,320 --> 00:21:26,720 Speaker 6: that perhaps well surprise markets going forward as opposed to 405 00:21:27,280 --> 00:21:29,159 Speaker 6: really calming them into submission. 406 00:21:30,480 --> 00:21:30,680 Speaker 2: Yeah. 407 00:21:30,800 --> 00:21:32,359 Speaker 8: I don't think that we learned too much about that 408 00:21:32,400 --> 00:21:34,639 Speaker 8: from the statement today. I think the reality is that 409 00:21:34,640 --> 00:21:36,679 Speaker 8: there was a lot of superfluous content in the statement. 410 00:21:36,680 --> 00:21:38,920 Speaker 8: There was a fourth paragraph that has been in there 411 00:21:39,320 --> 00:21:43,240 Speaker 8: really since the COVID shock and was probably unnecessary from 412 00:21:43,240 --> 00:21:45,919 Speaker 8: that perspective, But it is clear we're just going to 413 00:21:45,920 --> 00:21:48,560 Speaker 8: get less information in the statement. It'll be interesting to 414 00:21:48,560 --> 00:21:50,960 Speaker 8: see how much additional information Wash provides us in the 415 00:21:50,960 --> 00:21:53,560 Speaker 8: press conference. He's been both critical of Ford guidance, so 416 00:21:53,560 --> 00:21:54,959 Speaker 8: I don't think that we get much more of that, 417 00:21:55,240 --> 00:21:57,840 Speaker 8: But he's also been critical of data dependency. So the 418 00:21:57,920 --> 00:22:00,160 Speaker 8: ultimate question is what do we hear from him about 419 00:22:00,200 --> 00:22:01,040 Speaker 8: at the press conference. 420 00:22:01,240 --> 00:22:03,960 Speaker 9: That's still an unknown from the market's perspective, what's the one. 421 00:22:03,800 --> 00:22:06,240 Speaker 6: Thing you want to hear from him? 422 00:22:06,560 --> 00:22:08,639 Speaker 8: So I think I'm going to piggyback on Vice cher 423 00:22:08,720 --> 00:22:12,560 Speaker 8: Clarada's question from earlier, and it's a clear signal from 424 00:22:12,600 --> 00:22:15,120 Speaker 8: the committee that higher rates might be needed to tame inflation. 425 00:22:15,640 --> 00:22:18,320 Speaker 8: The market also believes that higher rates might be needed 426 00:22:18,320 --> 00:22:20,760 Speaker 8: to tame inflation. We know that he didn't submit a 427 00:22:20,800 --> 00:22:23,639 Speaker 8: dot yet today, but does he agree with the skew 428 00:22:23,680 --> 00:22:26,520 Speaker 8: and those expectations that higher rates might be needed, and 429 00:22:26,560 --> 00:22:28,240 Speaker 8: if not, why does he not agree with it? 430 00:22:29,359 --> 00:22:32,000 Speaker 1: Matt, don't you think that the dots give us a 431 00:22:32,040 --> 00:22:34,760 Speaker 1: lot of information? Won't you be sorry to see them go? 432 00:22:35,280 --> 00:22:39,000 Speaker 1: Look how we talked about the dots NonStop. We looked 433 00:22:39,000 --> 00:22:42,760 Speaker 1: at the nine voters that were looking for rate hikes. 434 00:22:42,920 --> 00:22:45,720 Speaker 1: I would miss them I don't know what being less 435 00:22:45,960 --> 00:22:51,080 Speaker 1: transparent and more opaque actually does for the markets or 436 00:22:51,119 --> 00:22:51,680 Speaker 1: for the FED. 437 00:22:52,960 --> 00:22:54,520 Speaker 8: Yeah, I don't know that I'll miss the dots. To 438 00:22:54,520 --> 00:22:57,200 Speaker 8: be honest, Bob, I think too much focus is put 439 00:22:57,240 --> 00:22:59,880 Speaker 8: on them. I'm sure cher Wassh is going to mention 440 00:23:00,080 --> 00:23:03,240 Speaker 8: that as well. I think ultimately, over time they will 441 00:23:03,240 --> 00:23:06,120 Speaker 8: go away. I think WASH doesn't think that they serve 442 00:23:06,160 --> 00:23:09,119 Speaker 8: a good purpose of actually providing meaningful forward guidance. I 443 00:23:09,119 --> 00:23:11,720 Speaker 8: think they think that it's too precise, the market focus 444 00:23:11,840 --> 00:23:13,640 Speaker 8: is too much on it and not the uncertainty bands 445 00:23:13,680 --> 00:23:16,159 Speaker 8: around it. So eventually I think that they will go 446 00:23:16,480 --> 00:23:18,440 Speaker 8: I think we'll be left with an SEP that shows 447 00:23:18,480 --> 00:23:21,680 Speaker 8: the central tendency on FED funds rate expectations, shares the 448 00:23:21,760 --> 00:23:24,439 Speaker 8: range on FED funds rate expectations, and that gives us 449 00:23:24,520 --> 00:23:26,679 Speaker 8: the sense of overall where the trajectory of policy is 450 00:23:26,720 --> 00:23:30,280 Speaker 8: going to be without kind of catalyzing us around one 451 00:23:31,000 --> 00:23:33,440 Speaker 8: imprecise estimate from the median Matt. 452 00:23:33,480 --> 00:23:35,240 Speaker 4: Even if Kevin O Worsh doesn't want to talk that much, 453 00:23:35,280 --> 00:23:37,359 Speaker 4: the FED chair can't muzzle everybody else, and there is 454 00:23:37,400 --> 00:23:40,560 Speaker 4: a risk that potentially everybody else will talk a lot 455 00:23:40,600 --> 00:23:42,920 Speaker 4: and give their perspective and set the oxygen away from 456 00:23:43,000 --> 00:23:45,080 Speaker 4: him who's not saying very much. I mean, at what 457 00:23:45,200 --> 00:23:47,680 Speaker 4: point do we end up in that type of scenario 458 00:23:47,920 --> 00:23:50,240 Speaker 4: if the press conference holds true to what we're seeing 459 00:23:50,240 --> 00:23:51,160 Speaker 4: at least in the statement. 460 00:23:52,440 --> 00:23:53,720 Speaker 9: Yeah, I think it could be over the next week. 461 00:23:53,760 --> 00:23:56,320 Speaker 8: I mean, if we don't hear very much from Chair 462 00:23:56,440 --> 00:23:58,600 Speaker 8: Washed today, I would expect that we do hear a 463 00:23:58,600 --> 00:24:01,520 Speaker 8: lot from other committee members over the next week. It's 464 00:24:01,520 --> 00:24:04,480 Speaker 8: a very strong signal from the dot plot and the 465 00:24:04,520 --> 00:24:07,399 Speaker 8: SEP that higher rates might be needed, and so I 466 00:24:07,400 --> 00:24:08,760 Speaker 8: would expect that we hear from a number of those 467 00:24:08,760 --> 00:24:11,480 Speaker 8: committee members. But exactly because of that, I actually don't 468 00:24:11,520 --> 00:24:14,760 Speaker 8: expect thatsh gives up his opportunity to do the press conference. 469 00:24:14,800 --> 00:24:17,399 Speaker 8: There's some questions or speculation that he might not do 470 00:24:17,440 --> 00:24:19,880 Speaker 8: a press conference after every meeting. I think he will 471 00:24:19,920 --> 00:24:22,159 Speaker 8: because it at least gives him the first chance to 472 00:24:22,280 --> 00:24:24,359 Speaker 8: frame the meeting today, gives him the first chance to 473 00:24:24,400 --> 00:24:27,480 Speaker 8: frame that dot plot which kind of clearly skews hawkish 474 00:24:27,560 --> 00:24:29,879 Speaker 8: and potentially pushed back on it if that's in fact. 475 00:24:29,760 --> 00:24:30,200 Speaker 9: What he wants. 476 00:24:30,320 --> 00:24:32,960 Speaker 4: Bob, who would you listen to on the FMC if 477 00:24:33,320 --> 00:24:36,159 Speaker 4: FED Chair worsh takes a backseat to communication. 478 00:24:37,880 --> 00:24:42,680 Speaker 1: Listened to Waller. I think Waller to us was somebody 479 00:24:42,760 --> 00:24:48,160 Speaker 1: who is very reasonable, very rational, is very balanced, looks 480 00:24:48,200 --> 00:24:51,320 Speaker 1: at the full picture. He would have made a very 481 00:24:51,320 --> 00:24:53,879 Speaker 1: good FED chair. It didn't work out that way. Look, 482 00:24:54,080 --> 00:24:58,520 Speaker 1: Kevin Walsh will be fine. He's a very credible, capabable 483 00:24:58,720 --> 00:25:02,719 Speaker 1: FED governor. He didn't go in with the Dubvish bias 484 00:25:02,800 --> 00:25:05,440 Speaker 1: that we all assumed he was sent in with. I'm 485 00:25:05,560 --> 00:25:08,359 Speaker 1: dying to know how the President's going to react to 486 00:25:08,440 --> 00:25:12,320 Speaker 1: this his first meeting. Everybody wants to now start hiking rates. 487 00:25:12,359 --> 00:25:17,160 Speaker 1: That's certainly going against his thinking. But look, Warsh has 488 00:25:17,240 --> 00:25:21,080 Speaker 1: proven that he's his own FED chair. He'll do what 489 00:25:21,119 --> 00:25:23,000 Speaker 1: the data tells him. We're in good. 490 00:25:22,800 --> 00:25:24,920 Speaker 6: Hands with him, as far as I know. We don't 491 00:25:24,920 --> 00:25:27,680 Speaker 6: have any social media posting from the President yet. We'll 492 00:25:27,680 --> 00:25:31,360 Speaker 6: wait to see when new FED Chair Kevin Warsh begins speaking. 493 00:25:31,880 --> 00:25:34,960 Speaker 6: Going to the idea of Ford guidance, I wonder if 494 00:25:35,040 --> 00:25:38,440 Speaker 6: the effectiveness of Ford guidance is asymmetrical, Bob, I asked 495 00:25:38,440 --> 00:25:40,480 Speaker 6: because Rick Reader of Blackrock says that you want to 496 00:25:40,520 --> 00:25:43,760 Speaker 6: over communicate when you are loose, when you're tightening policy, 497 00:25:43,760 --> 00:25:46,040 Speaker 6: but you want a surprise when you loosen, because it's 498 00:25:46,040 --> 00:25:46,720 Speaker 6: more effective. 499 00:25:46,720 --> 00:25:49,800 Speaker 5: That way packs more of a punch. What do you think, I. 500 00:25:49,760 --> 00:25:52,800 Speaker 1: Don't think so. It reminds me of the years when 501 00:25:53,880 --> 00:25:58,439 Speaker 1: the European central banks used to ambush the market and 502 00:25:58,520 --> 00:26:00,679 Speaker 1: come in and create a shot one way. It was 503 00:26:00,760 --> 00:26:03,760 Speaker 1: very disruptive to the markets. I don't think it accomplished 504 00:26:03,800 --> 00:26:06,919 Speaker 1: anything other than create losses in some areas, and it 505 00:26:07,000 --> 00:26:10,400 Speaker 1: wasn't sustainable over time. I think we're in a world 506 00:26:10,440 --> 00:26:13,560 Speaker 1: where there's a lot of information, there's a lot going on. 507 00:26:13,920 --> 00:26:16,720 Speaker 1: The complexity of what the Fed has to deal with 508 00:26:17,280 --> 00:26:20,480 Speaker 1: is real. They have a lot of tools at their 509 00:26:20,600 --> 00:26:25,359 Speaker 1: disposal which didn't exist pre COVID or pre GFC. I 510 00:26:25,440 --> 00:26:28,200 Speaker 1: want to know how they're thinking about them. I want 511 00:26:28,240 --> 00:26:32,040 Speaker 1: to see detailed forecasts. I want to know what direction 512 00:26:32,119 --> 00:26:34,399 Speaker 1: they're moving in. Yeah. I may agree, I may not. 513 00:26:35,160 --> 00:26:37,960 Speaker 1: It's not a big deal one way or another other 514 00:26:38,040 --> 00:26:40,439 Speaker 1: than it just gives us more information. 515 00:26:40,840 --> 00:26:44,040 Speaker 4: Matt, do you think that there's plausible deniability? Potentially you 516 00:26:44,119 --> 00:26:46,479 Speaker 4: have a fetcher that says you can't say it's hawkish. 517 00:26:46,480 --> 00:26:47,240 Speaker 5: I just didn't say. 518 00:26:49,720 --> 00:26:52,000 Speaker 8: I think maybe he takes that tack, but I think 519 00:26:52,040 --> 00:26:54,199 Speaker 8: he's going to have to present an alternative case at 520 00:26:54,200 --> 00:26:56,840 Speaker 8: this point because the case that is presented by the 521 00:26:58,320 --> 00:27:01,840 Speaker 8: forecast and the doss at this point is clearly hawkish, 522 00:27:01,960 --> 00:27:04,400 Speaker 8: and so if he's not in line with that view, 523 00:27:04,680 --> 00:27:06,639 Speaker 8: I think he'll have to present an alternative case. 524 00:27:07,160 --> 00:27:07,600 Speaker 9: At this point. 525 00:27:07,640 --> 00:27:10,160 Speaker 8: There's not a kind of a plausible or realistic alternative 526 00:27:10,200 --> 00:27:12,440 Speaker 8: case I think. I think you have an economy where 527 00:27:12,440 --> 00:27:15,199 Speaker 8: the labor market is strengthening, it's at worst stabilizing, at 528 00:27:15,240 --> 00:27:19,359 Speaker 8: best reaccelerating. You have inflation which is entrenched at elevated levels. 529 00:27:19,640 --> 00:27:22,359 Speaker 8: It's broad based. It is not simply about tariff's any longer. 530 00:27:22,520 --> 00:27:25,840 Speaker 8: Your financial conditions at very easy levels. You see growth 531 00:27:25,960 --> 00:27:28,919 Speaker 8: is actually solid, as we saw with today's retail sales report, 532 00:27:29,200 --> 00:27:31,800 Speaker 8: and we've argued in recent research reports that the FED 533 00:27:31,960 --> 00:27:34,560 Speaker 8: very likely could be accommodative at this point in time. 534 00:27:34,800 --> 00:27:36,400 Speaker 8: So I don't actually see the strong case to push 535 00:27:36,480 --> 00:27:39,320 Speaker 8: back against it, but he would have to present that 536 00:27:39,400 --> 00:27:40,879 Speaker 8: case if that's in fact how it feels. 537 00:27:41,000 --> 00:27:43,600 Speaker 4: Matthew Lizzetti of Deutsche Bang, thank you so much and 538 00:27:43,720 --> 00:27:45,679 Speaker 4: look forward to catching you in the weeks after the 539 00:27:45,720 --> 00:27:49,080 Speaker 4: press conference, Bob. Just about two and a half minutes 540 00:27:49,119 --> 00:27:52,720 Speaker 4: to go before we hear from FED share Kevin Warsh, 541 00:27:52,960 --> 00:27:54,959 Speaker 4: What are you expecting as we see two year yields 542 00:27:54,960 --> 00:27:58,320 Speaker 4: now nine basis points high? Are with people really surprised 543 00:27:58,320 --> 00:27:59,160 Speaker 4: by the hawkish tilt? 544 00:27:59,640 --> 00:28:02,600 Speaker 1: Yeah, and again. And I think Diane said it, you know, 545 00:28:02,680 --> 00:28:05,560 Speaker 1: she kind of expected it. Maybe we should have expected it. 546 00:28:05,920 --> 00:28:08,280 Speaker 1: We all thought it was coming in two or three 547 00:28:08,320 --> 00:28:11,320 Speaker 1: meetings from now, not this one. So clearly the market's 548 00:28:11,359 --> 00:28:14,119 Speaker 1: telling you it didn't expect it. For me, the question 549 00:28:14,640 --> 00:28:17,879 Speaker 1: for Warsh is removing the dots. Isn't a regime change 550 00:28:17,920 --> 00:28:20,760 Speaker 1: that's part of it. What is it that he finds 551 00:28:20,800 --> 00:28:24,720 Speaker 1: most outdated about the Fed's framework and how would he 552 00:28:24,840 --> 00:28:28,119 Speaker 1: go about changing it? The dots are just one component 553 00:28:28,440 --> 00:28:29,520 Speaker 1: of what bothers him. 554 00:28:29,680 --> 00:28:33,200 Speaker 4: Yes, also the balance sheet, also when it comes to 555 00:28:33,720 --> 00:28:36,400 Speaker 4: just how liquid some of these instruments have actually been. 556 00:28:36,440 --> 00:28:38,920 Speaker 4: Bob Michael, thank you so much for being with us. 557 00:28:38,920 --> 00:28:41,400 Speaker 4: It is always a pleasure having you in studio. 558 00:28:41,400 --> 00:28:41,880 Speaker 5: Scarlett. 559 00:28:42,160 --> 00:28:45,000 Speaker 4: We are awaiting Fedchair Kevin Warsh to step to the 560 00:28:45,000 --> 00:28:47,800 Speaker 4: podium for the first time as head of the US 561 00:28:47,840 --> 00:28:49,480 Speaker 4: Central Bank, the central bank. 562 00:28:49,240 --> 00:28:49,920 Speaker 5: To the world. 563 00:28:50,320 --> 00:28:54,080 Speaker 4: This is the fifth central banker, the fifth FED Chair 564 00:28:54,360 --> 00:28:57,320 Speaker 4: going back in the past forty years, and clearly he 565 00:28:57,360 --> 00:28:59,400 Speaker 4: is putting a stamp on the institution. 566 00:28:59,040 --> 00:29:01,480 Speaker 6: And a lot of people say he's going back to 567 00:29:01,520 --> 00:29:03,920 Speaker 6: the Alan Greenspan era where you don't say a lot 568 00:29:03,960 --> 00:29:06,000 Speaker 6: and you kind of keep the market guessing, rather than 569 00:29:06,680 --> 00:29:09,400 Speaker 6: what Ben Bernanke ushered him, which is more transparency, and 570 00:29:09,480 --> 00:29:11,920 Speaker 6: Jerome Pale kind of took that to new levels as well. 571 00:29:12,800 --> 00:29:15,240 Speaker 6: It's worth noting here that not only our yields higher, 572 00:29:15,240 --> 00:29:16,960 Speaker 6: stocks are lower. You've got the S and P five 573 00:29:17,040 --> 00:29:19,520 Speaker 6: hun hundred down six tens of one percent, the NAZAC 574 00:29:19,560 --> 00:29:22,400 Speaker 6: as well. The President, of course is in Europe right now, 575 00:29:22,440 --> 00:29:24,440 Speaker 6: has not, as far as we know, given any kind 576 00:29:24,480 --> 00:29:27,200 Speaker 6: of comment. He had just praised the stock market, saying 577 00:29:27,240 --> 00:29:29,920 Speaker 6: it was the most brilliant thing and smarter than anyone else. 578 00:29:29,960 --> 00:29:32,000 Speaker 6: So we'll wait to see how this all plays out 579 00:29:32,040 --> 00:29:33,560 Speaker 6: over the next thirty forty minutes.