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Speaker 1: Joining US is Chris Campbell, Chief Policy Strategistic Crawl. He's

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Speaker 1: also former US Assistant Treasury Secretary for Financial Institutions. Here

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Speaker 1: to play the game, what is the FED really trying

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Speaker 1: to say? We've just had the f O m C minutes.

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Speaker 1: Of course, the FIT committed to raising rights into restrictive territory,

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Speaker 1: but we had a number of members as well stressing

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Speaker 1: the need to calibrate the pace. So what does that

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Speaker 1: mean in practical terms? I always uh, like I learned

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Speaker 1: from working with J. Pow while I was a Treasury

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Speaker 1: I learned to listen to him and believe him. I

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Speaker 1: believe that he's going to keep a study pace. I

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Speaker 1: believe that there will be a significant rate hike coming

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Speaker 1: up again. I'll be seven BIPs um, and they're going

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Speaker 1: to keep a pace. Uh, there's And I do believe

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Speaker 1: him when he says the Federal Reserve is prioritizing getting

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Speaker 1: inflation under control, and with today's PPI members, it looks

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Speaker 1: like that's not happening. Um. And so you know, I

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Speaker 1: think that they're going to keep a pace, keep steady.

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Speaker 1: And I also believe when he says that they expect pain.

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Speaker 1: I believe that there's pain coming, um, not only for

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Speaker 1: the investors and for the investing class, but for the

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Speaker 1: average every day hardworking Americans as well, who I am

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Speaker 1: urging that they start saving because I think we're likely

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Speaker 1: gonna see a recession. Recession at times ahead. It maybe

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Speaker 1: a little bit more than a slight sunburning more maybe

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Speaker 1: like sticking your hand into an open flame here. I mean,

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Speaker 1: we could see a significant disruption in the financial system

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Speaker 1: if we're not careful. Are you seeing any evidence when

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Speaker 1: you look at markets, Chris stress developing in corporate credit

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Speaker 1: or or high yield anything that could point to kind

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Speaker 1: of a fracture of the system. We's certainly been a

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Speaker 1: significant slowdown and deal flow significance slow down from not

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Speaker 1: only for venture and private equity, but also you know

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Speaker 1: in the private markets as well. So you know, there's

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Speaker 1: a lot there. Again, there's a lot of dry powder

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Speaker 1: out there waiting in the wings. What we're finding now

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Speaker 1: is that a lot of that dry powder has been

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Speaker 1: used now to continue to prop up valuations so that

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Speaker 1: there's not in certainly the private markets, so there's not

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Speaker 1: a significant um, you know, reevaluation on the downside, UM,

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Speaker 1: And so I it's here's what we're seeing. We're seeing

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Speaker 1: that there's gonna be a and forecasting there's gonna be

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Speaker 1: recession coming. Um, it could be quite long, quite deep. Um.

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Speaker 1: And the Federal Reserve is going to prioritize on top

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Speaker 1: jobs and on top of anything else, getting inflation to control.

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Speaker 1: Because I wouldn't think I do know that j. Pale

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Speaker 1: does not want to have happened under his watch, is

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Speaker 1: to have the nineteen seven repeated nineteen seventies, or Paul

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Speaker 1: for Volker, how to really weigh in and really cause

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Speaker 1: some significant harm the economy to get us that a staflation.

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Speaker 1: You know, let's talk worst case scenarios, staflation being among them.

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Speaker 1: What is the risk that inflation doesn't come out to

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Speaker 1: control and growth contracts. Look, we're we're coming out of

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Speaker 1: two quarters of negative growth, if you believe the numbers. Uh,

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Speaker 1: and we're seeing inflation continue to rise. Uh, you know,

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Speaker 1: not as a significant pace as it was several quarters ago,

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Speaker 1: but certainly still is rising. Um. You know, it's not good.

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Speaker 1: It's not that's not good news. Um. That can be

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Speaker 1: quite sticky, and when it happens, it can it can

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Speaker 1: really be extremely devastating, especially for for you know, the again,

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Speaker 1: for folks who have paycheck to paycheck, which six of

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Speaker 1: our country now does. So there is a significant challenge ahead. Um,

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Speaker 1: the Federal Reserve has a very as to land a

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Speaker 1: very large ship uh and on a very very small

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Speaker 1: parcel of land. Uh. And then you know, I one

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Speaker 1: thing I continue to say is I'm really happy I

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Speaker 1: don't have J. Pale's job at the moment um. But

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Speaker 1: it's you know, it's a very difficult job he has

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Speaker 1: ahead of ahead of him. And um, it's you know,

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Speaker 1: I look, I don't think I think now we're we're

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Speaker 1: past the point of a soft landing. Now it's just

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Speaker 1: about how long and how deep this is gonna and

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Speaker 1: how and how real the pain is gonna be uh

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Speaker 1: for for not only for the investor class, but for

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Speaker 1: the folks on main Street. So away from the magnitude

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Speaker 1: of rate hikes. And maybe they reduced that somewhat. Maybe

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Speaker 1: it's no longer seventy five after the November meeting, Maybe

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Speaker 1: they dial it back to something in the vicinity of

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Speaker 1: fifty or even twenty five. But I'm wanting to get

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Speaker 1: your take on the balance sheet issue. Right now, we're

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Speaker 1: rolling off about ninety five billion dollars a month that

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Speaker 1: that is leaving the financial system. That's a lot of

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Speaker 1: money when you look at it on an annual basis.

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Speaker 1: And I'm wondering whether or not there could be a

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Speaker 1: shift in in the FEDS thinking on balance sheet reduction.

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Speaker 1: I don't think so. I mean, it's one of the

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Speaker 1: one of the very one of the very few, one

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Speaker 1: of the effective tools they have that's not um interest

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Speaker 1: rates that can that can really significantly move the needle

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Speaker 1: on the economy. So quantine tightening, I think is here

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Speaker 1: to stay. I think, you know, I candidly, if if

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Speaker 1: I were still a treasure I would I would advise

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Speaker 1: the Fed reserved to move for move quicker on on

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Speaker 1: tightening UM. But you know, we are here now and

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Speaker 1: so UM the reality is reality, and so we have

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Speaker 1: I would expect tightening to continue UM and for balance

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Speaker 1: heats to to continue to UM to continue tipening UM

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Speaker 1: as they, as the fetters, are trying to find some

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Speaker 1: way of getting off this inflationary challenge, which again it

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Speaker 1: doesn't appear that we're even moving UM in the right direction.

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Speaker 1: Yet We're gonna have to let you go, Chris. We

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Speaker 1: didn't even get to talk about the problems with the dollar.

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Speaker 1: I mean, yes, maybe it's helping to keep US inflation

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Speaker 1: under control relatively, but I mean it's creating a lot

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Speaker 1: of problems for other countries, particularly in emerging markets. Chris,

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Speaker 1: thanks how much for being with us. Chris Campbell is

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Speaker 1: chief policy strategist at Kroll. He's also a former US

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Speaker 1: Assistant Treasury Secretary for Financial Institutions. Joining us here on

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Speaker 1: the program