WEBVTT - Instant Reaction: Jay Powell on the Fed Decision 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.200 --> 0:00:13.840 This is a breaking news update from Bloomberg instant reaction 0:00:14.120 --> 0:00:17.959 and analysis from our three thousand journalists and analysts around 0:00:18.000 --> 0:00:18.480 the world. 0:00:19.200 --> 0:00:21.159 The Chairman of the Federal Reserve, if there was a 0:00:21.160 --> 0:00:23.919 good meeting to scrap the forecast, then this one was 0:00:24.000 --> 0:00:28.160 probably it. The Chairman, de emphasizing the projections, re emphasizing 0:00:28.400 --> 0:00:30.760 the uncertainty, focused on the shock in the Middle East. 0:00:30.760 --> 0:00:33.400 We had one question, how would they respond to it? 0:00:33.479 --> 0:00:37.360 Would they look through it? The answer, it's not that simple. 0:00:37.600 --> 0:00:40.680 Equities in response negative. This session loads right now down 0:00:40.720 --> 0:00:43.200 one percent on the S and P five hundred. Likewise 0:00:43.320 --> 0:00:45.960 on the NASDAK. In the bond market, twos, tens, and thirties, 0:00:46.240 --> 0:00:48.760 yields higher, particularly at the front end of the yield curve, 0:00:48.840 --> 0:00:51.560 up by seven basis points on a two year three 0:00:51.920 --> 0:00:54.840 seventy five. If you, like me, thought this would be boring, 0:00:54.880 --> 0:00:57.400 this was not a snooze. The Federal Reserve chair asked 0:00:57.400 --> 0:00:59.880 about succession. Take a listen to what he had. 0:01:01.160 --> 0:01:03.880 If my successor is not confirmed by the end of 0:01:03.920 --> 0:01:06.440 my term as chair, I would serve as chair pro 0:01:06.560 --> 0:01:09.959 tem until he is confirmed. I have no intention of 0:01:10.040 --> 0:01:13.240 leaving the board until the investigation is well and truly over, 0:01:13.560 --> 0:01:16.679 with transparency and finality. On the question of whether I 0:01:16.680 --> 0:01:19.120 will then continue to serve as a governor after my 0:01:19.240 --> 0:01:22.200 term ends and after the investigation is over, I have 0:01:22.360 --> 0:01:23.680 not made that decision yet. 0:01:24.360 --> 0:01:26.800 Three points from the chairman of the Federal Reserve. Let's 0:01:26.840 --> 0:01:29.520 go through them individually. Point one, I will stay on 0:01:29.560 --> 0:01:33.080 his chair until a successor is confirmed. Point two, I 0:01:33.120 --> 0:01:35.360 have no intention of leaving the FED while the DOJ 0:01:35.520 --> 0:01:39.520 investigation is ongoing. And point three, even after that is complete, 0:01:39.800 --> 0:01:42.800 I haven't made a decision on how long I'll stay. 0:01:42.800 --> 0:01:45.280 On a big headline in that news conference. 0:01:45.000 --> 0:01:47.680 He actually engaged with the question. We all were wondering 0:01:47.760 --> 0:01:49.720 whether he would give some sort of clarity, and we've 0:01:49.720 --> 0:01:52.000 got it. He is going to be the FED chair 0:01:52.120 --> 0:01:55.280 until Kevin worsh is in the seat. There's this question 0:01:55.400 --> 0:01:58.240 of what as well and truly over in terms of 0:01:58.240 --> 0:02:00.680 the investigation actually mean of people are going to be 0:02:00.720 --> 0:02:02.800 wondering that and the fact that he hasn't made a 0:02:02.800 --> 0:02:05.560 decision yet, what is going to tip the scales for 0:02:05.640 --> 0:02:09.560 him to understand when he can make the decision either way. 0:02:09.760 --> 0:02:12.120 This wasn't a boring news conference in any way shape or. 0:02:12.120 --> 0:02:13.840 For if we can bring up just an inter day 0:02:13.919 --> 0:02:15.760 chart the front end of the yield curve, So bring 0:02:15.840 --> 0:02:17.720 up the two year inter day and just have a 0:02:17.720 --> 0:02:20.359 look where things started to pick up. The Fed chat 0:02:20.360 --> 0:02:23.760 throughout this news conference was leaning into anchoring inflation expectations. 0:02:23.919 --> 0:02:27.079 That was notable, But we started to really bounce out 0:02:27.120 --> 0:02:29.560 to session highs when he started to lean into that 0:02:29.680 --> 0:02:32.120 question about his future. And I just wonder, Bremo, we 0:02:32.120 --> 0:02:34.280 can have that conversation with guests over the next fifteen 0:02:34.320 --> 0:02:37.600 minutes or so whether those two things are connected to 0:02:37.639 --> 0:02:38.440 some extent on. 0:02:38.880 --> 0:02:41.680 The margins, this market seems to be treating a Kevin 0:02:41.760 --> 0:02:45.200 WORSHFED as being more dubbish simply because we have President 0:02:45.240 --> 0:02:47.960 Trump tweeting or truth social lying every single day saying 0:02:48.560 --> 0:02:51.200 two late Powell needs to lower rates right now. You see, 0:02:51.480 --> 0:02:54.079 there is no full recut getting priced into the FED 0:02:54.120 --> 0:02:57.240 Fund's futures until June of next year. So that's how 0:02:57.280 --> 0:02:59.400 far we've pushed it on. There was a one two 0:02:59.520 --> 0:03:03.280 punch fredschir J. Powell also said it's too so soon 0:03:03.360 --> 0:03:06.440 to know the full economic effects from Middle East, and 0:03:06.480 --> 0:03:08.240 then he said he would stay on, and we have 0:03:08.400 --> 0:03:10.920 known this is a pretty balanced fed. They're weighing the 0:03:11.000 --> 0:03:14.560 risks and clearly the specter of twenty twenty two hangs over. 0:03:14.919 --> 0:03:15.320 He's fed. 0:03:15.400 --> 0:03:17.760 Chair, Okay, you go, you'll go out to the specter 0:03:17.880 --> 0:03:19.920 of it. In the view Ford, I like what Lizayne Saunders. 0:03:19.960 --> 0:03:23.919 That's retreating Claudia Sam. Finally Powell throws the SEP under 0:03:23.919 --> 0:03:27.680 the bus skipet. Thank you doctor sum for that. My observation, 0:03:27.800 --> 0:03:31.320 John is it's ten twenty one pm and Doha, and 0:03:31.400 --> 0:03:34.800 I'm looking at the headlines while the chairman speaking, and 0:03:34.840 --> 0:03:37.160 I get the worst view forward in the crystal ball 0:03:37.200 --> 0:03:39.880 gazing six months. I think we got to gaze out 0:03:39.920 --> 0:03:43.200 twenty four hours right now. That's the tension I see 0:03:43.240 --> 0:03:45.760 in the Iran the Iran headlines that we get out 0:03:45.760 --> 0:03:47.960 of Tel Aviv, and we're getting out of Dubai right 0:03:47.960 --> 0:03:48.640 now from Bloomberg. 0:03:48.680 --> 0:03:50.080 And this is why it makes it so difficult to 0:03:50.080 --> 0:03:52.600 provide four casts in a moment like this one. I'm 0:03:52.600 --> 0:03:55.120 a chairman. Qui Roby talked about the need for humility 0:03:55.440 --> 0:03:58.560 the duration of this show. Yes, energy assets are in 0:03:58.640 --> 0:04:00.760 play in the minds of some people now after the strikes, 0:04:00.760 --> 0:04:04.080 we saw on Iranian energy assets just earlier this morning, 0:04:04.400 --> 0:04:06.200 crewed at the moment of one O nine on Brent 0:04:06.320 --> 0:04:09.480 WTI around ninety eight. The Chairman is well aware that 0:04:09.520 --> 0:04:12.680 they've missed their inflation target for the previous five years, 0:04:12.880 --> 0:04:16.040 overwhelmed by a series of shocks, and this is another one. 0:04:16.120 --> 0:04:16.280 Now. 0:04:16.320 --> 0:04:18.880 You may still believe ultimately this Federal Reserve will look 0:04:18.920 --> 0:04:21.120 through this shock. But that wasn't a chairman that wanted 0:04:21.160 --> 0:04:23.480 to make that point in this specific news conference. 0:04:23.560 --> 0:04:25.560 He didn't want to say the T word, even though 0:04:25.680 --> 0:04:29.720 essentially this forecast would suggest transitory. He tried to play 0:04:29.720 --> 0:04:31.560 the part of an oil expert. He tried to play 0:04:31.560 --> 0:04:34.200 the part of a generative AI expert. But nonetheless he 0:04:34.240 --> 0:04:36.839 said it is too soon to say so many times 0:04:36.880 --> 0:04:39.800 over again that we lost count. They are facing off 0:04:39.800 --> 0:04:42.839 with a series of shocks. With the backward view of 0:04:42.880 --> 0:04:45.599 what happened in the post pandemic era, you had inflation 0:04:45.680 --> 0:04:47.880 that creeped up to nine percent. He will not want 0:04:47.920 --> 0:04:50.800 to continue that, especially with core PCE creeping higher in 0:04:50.839 --> 0:04:53.400 the wrong direction. Before even getting this out, well, the. 0:04:53.400 --> 0:04:54.720 Headline to me, John, I know we got to get 0:04:54.720 --> 0:04:57.120 to doctor Slark, but the headline to me was a 0:04:57.200 --> 0:04:59.880 lack of descent. I mean, this was very green SPAN 0:05:00.160 --> 0:05:03.200 and everybody on the same page supporting this journ. 0:05:03.080 --> 0:05:05.280 We stand out here TK and for our listeners and 0:05:05.320 --> 0:05:08.520 our audience worldwide. Just Chune again. The decision dropped about 0:05:08.640 --> 0:05:11.640 an hour and a half ago. The interest rate remained unchanged. 0:05:11.640 --> 0:05:14.240 The medium dot still implied one cut for this year. 0:05:14.360 --> 0:05:17.320 Lots of noise though beneath those headlines, the outlook for 0:05:17.320 --> 0:05:20.000 growth was better, the outlook for inflation was higher. But 0:05:20.080 --> 0:05:23.320 that single descent was Governor Myron and Governor Waller was 0:05:23.360 --> 0:05:26.440 expected to descend. He sat around this table only a 0:05:26.480 --> 0:05:28.760 week two weeks ago and said it depends on the 0:05:28.760 --> 0:05:31.480 next job's report. An hour later, the job's report came 0:05:31.520 --> 0:05:34.000 in way weaker than expected, and we all thought, we 0:05:34.080 --> 0:05:35.880 know what the governor's going to do. He's going to 0:05:35.960 --> 0:05:38.600 vote for an interest rate reduction. And then he didn't. 0:05:38.760 --> 0:05:40.040 And that's off the back of the shock of the 0:05:40.040 --> 0:05:41.440 Middle East. And that's more than notable. 0:05:41.520 --> 0:05:44.200 Governor Chris Waller, I think is arguably the most interesting 0:05:44.600 --> 0:05:46.680 person on the FED right now in terms of what 0:05:46.800 --> 0:05:49.440 his decision actually was driven by. I'm curious if he 0:05:49.520 --> 0:05:51.800 comes out and says he is getting spooked by the 0:05:51.800 --> 0:05:55.080 direction of core PCEE. He's getting spooked by the component 0:05:55.360 --> 0:05:57.240 of what oil prices do. Do that, and we talk 0:05:57.279 --> 0:06:01.040 about wage inflation. Wage inflation is still above where it 0:06:01.200 --> 0:06:03.280 was in the pre pandemic period. 0:06:03.480 --> 0:06:05.760 John, I was looking at F one in Japan here, 0:06:05.800 --> 0:06:07.880 and you said, do something serious. So I looked at 0:06:07.880 --> 0:06:11.320 the price of oil here. As you mentioned earlier, Brent 0:06:11.440 --> 0:06:14.599 crude up eighty one percent from whatever the bottom was, 0:06:15.200 --> 0:06:17.840 Saudi Light, Persian golf. 0:06:17.920 --> 0:06:20.000 The physical mind hundred and. 0:06:19.760 --> 0:06:24.680 Forty five percent, same number, this is eighty one and 0:06:24.680 --> 0:06:25.120 forty five. 0:06:25.160 --> 0:06:27.039 It's the point that Jeff Carry of Carlisle was making 0:06:27.120 --> 0:06:28.880 a little bit earlier on this morning. There's a big 0:06:28.920 --> 0:06:31.920 gap right now between the physical market where Spot is trading, 0:06:32.279 --> 0:06:34.360 and the paper market, and he thinks it needs to close. 0:06:34.800 --> 0:06:36.520 He thinks the paper market needs to wake up to 0:06:36.560 --> 0:06:38.839 the real risk emerging in the Middle East. That's one opinion, 0:06:38.880 --> 0:06:41.839 one view. Other people aren't as concerned, but ultimately that's 0:06:41.880 --> 0:06:42.360 his opinion. 0:06:42.400 --> 0:06:44.719 Every oil strategist that comes on says, why is everybody 0:06:44.720 --> 0:06:47.400 else too complacent? What we're seeing is really a different 0:06:47.440 --> 0:06:49.560 scenario than we've ever seen before, and a lot of 0:06:49.600 --> 0:06:51.880 people say yeah, yeah, yeah, you guys always get it wrong, 0:06:51.880 --> 0:06:54.360 and so ultimately this debate will continue to be it. 0:06:54.240 --> 0:06:55.960 Was a few weeks ago. If you want to make 0:06:56.000 --> 0:06:58.320 a fall of someone on Wall Street, US recruit forecast. 0:06:58.680 --> 0:07:01.400 That's always been the way. Is the hardest thing to forecast. 0:07:01.440 --> 0:07:03.480 Torston slock is not a full He joined us from 0:07:03.480 --> 0:07:05.880 a pilot. Tolston, good afternoon, Good to see you. I've 0:07:05.880 --> 0:07:07.400 had some time to go through this one. A big 0:07:07.400 --> 0:07:08.040 reaction place. 0:07:08.120 --> 0:07:10.320 Well, I think one interesting thing here is that if 0:07:10.320 --> 0:07:14.240 we begin to describe everything as another shock, there's another shock, 0:07:14.280 --> 0:07:17.000 there's another shock, and we're looking through that, it almost 0:07:17.000 --> 0:07:18.520 makes it sound like, well, I don't really have to 0:07:18.560 --> 0:07:21.160 react to anything because I've identified well, now there's just 0:07:21.200 --> 0:07:23.280 another shock coming along on all the prices. There was 0:07:23.320 --> 0:07:26.000 another shock from trade Wall, that was another shock from COVID. 0:07:26.280 --> 0:07:27.960 It makes it sound like that you should never do 0:07:28.000 --> 0:07:30.040 anything as a central banker. So now we have a 0:07:30.040 --> 0:07:32.400 shock that is very serious, and it's very very clear 0:07:32.640 --> 0:07:35.320 that they decided to just basically completely ignore the Middle 0:07:35.360 --> 0:07:37.920 Eastern shock that we're facing here. So from that perspective, 0:07:38.200 --> 0:07:40.760 it is quite interesting. As Lisa is saying, why was 0:07:40.800 --> 0:07:43.320 it that Waller suddenly changed his mind, because it must 0:07:43.320 --> 0:07:45.560 be that he did put more weight on the Middle 0:07:45.560 --> 0:07:48.040 Eastern and the Iranian shock than what the average committee 0:07:48.040 --> 0:07:48.400 member did. 0:07:48.400 --> 0:07:50.560 Here, do you think that you can infer anything from 0:07:50.560 --> 0:07:52.840 the price action? As John was laying out the idea 0:07:52.880 --> 0:07:55.720 that two year yields and ten year yields inflected upward 0:07:56.200 --> 0:07:59.240 as FED Shair J. Powell said that he planned to 0:07:59.400 --> 0:08:03.400 stay on should there not be another FED chair nominated 0:08:03.440 --> 0:08:05.920 and in the seat by the time his term expired. 0:08:06.040 --> 0:08:08.200 Absolutely, let's just talk about it the way it is. 0:08:08.360 --> 0:08:10.800 At the last meeting there were ten people voting for 0:08:10.920 --> 0:08:13.360 interstration to stay unchanged. At this meeting, that are now 0:08:13.360 --> 0:08:16.080 eleven people voting for interstrations to stay unchanged. It's very 0:08:16.120 --> 0:08:18.880 clear Stevie ran at both meetings voted for race being lower. 0:08:19.120 --> 0:08:21.840 But at this instance what he certainly now says, I 0:08:21.920 --> 0:08:24.520 may be staying on until this is well and truly 0:08:24.640 --> 0:08:27.920 investigated and complete. The risk is beginning to rise that well, 0:08:27.960 --> 0:08:30.760 maybe we'll have another hawkish member sitting for a longer period, 0:08:31.040 --> 0:08:33.439 and assuming therefore that Trump will appoint a more dubbish 0:08:33.440 --> 0:08:36.240 member that does of course lean more towards that we 0:08:36.280 --> 0:08:38.280 will have a more hawkish fit if he does stay 0:08:38.280 --> 0:08:39.080 on for longer period. 0:08:39.160 --> 0:08:39.840 He's got hawkish. 0:08:40.040 --> 0:08:41.559 Why is he considered hawkish? 0:08:41.600 --> 0:08:43.800 Well, his hawkish relative to the alternative of a more 0:08:43.880 --> 0:08:45.000 dubbish member coming along. 0:08:45.679 --> 0:08:48.400 You were weaned de Deutsche Bank under Focus land out 0:08:48.400 --> 0:08:51.320 with Adam Saminsky and Paul Senki. Their back of the 0:08:51.760 --> 0:08:56.720 report Excel spreadsheet was absolutely definitive about the supply and 0:08:56.760 --> 0:09:00.320 demand of hydrocarbons. Take that experience now, and how do 0:09:00.360 --> 0:09:03.559 you apply that apollo when you look at the American economy. 0:09:03.600 --> 0:09:04.320 Well, it's very. 0:09:04.160 --> 0:09:06.040 Clear when you think about demand and supply and on 0:09:06.280 --> 0:09:08.960 that the supply equation just changed quite dramatically. Now that 0:09:09.000 --> 0:09:11.160 we certainly have much less supply because of the strait 0:09:11.160 --> 0:09:14.160 of Homeost being closed, and because all the cascade of 0:09:14.200 --> 0:09:16.320 effects that are likely to come along. If this does 0:09:16.520 --> 0:09:19.120 continue for a longer period, so on the supply side, 0:09:19.200 --> 0:09:22.160 we will likely continue to have the very important question, namely, 0:09:22.200 --> 0:09:24.319 how long time is going to last before we get 0:09:24.360 --> 0:09:26.679 supply up to the levels where demand is. And if 0:09:26.679 --> 0:09:28.720 that's going to take a longer time, then the risk 0:09:28.840 --> 0:09:31.040 is that energy prices and oil prices are going to 0:09:31.040 --> 0:09:33.960 stay more elevated it's also fuel prices of course that 0:09:34.200 --> 0:09:36.440 of course going to jet fuel. It's also of course 0:09:36.480 --> 0:09:38.960 fuel prices that are marine fuel. All these parts of 0:09:39.120 --> 0:09:42.080 energy complex are absolutely seeing some upward lift. And the 0:09:42.120 --> 0:09:44.800 longer the shot lasts, the more we will see energy 0:09:44.800 --> 0:09:45.840 prices stay more elevated. 0:09:45.880 --> 0:09:48.240 When does this get real for you? At the start 0:09:48.280 --> 0:09:50.520 of this crisis, and we can call it that, people 0:09:50.600 --> 0:09:54.000 came on Bloomberg Surveillance on Bloomberg TV and made the 0:09:54.000 --> 0:09:56.400 point that if its days not weeks, it's okay. And 0:09:56.440 --> 0:09:58.000 here we are more than two weeks into this, and 0:09:58.000 --> 0:10:00.480 now we hear if it's weeks and not months, it's okay. 0:10:00.679 --> 0:10:01.600 When is it not okay? 0:10:01.720 --> 0:10:03.600 Well, the next one will probably people saying this is months, 0:10:03.600 --> 0:10:05.480 it's not quarters. Then we will also have a change. 0:10:05.480 --> 0:10:07.720 So you're absolutely right. The fear is, of course, that 0:10:07.760 --> 0:10:10.240 it does continue at the FED level. If you put 0:10:10.240 --> 0:10:12.679 this into Fergus the Feed's model of ER's economy, it 0:10:12.720 --> 0:10:14.239 has to last at least. 0:10:14.000 --> 0:10:15.800 One quarter, because that's the only. 0:10:15.679 --> 0:10:17.440 Way you can get a real serious shock to begin 0:10:17.480 --> 0:10:19.400 to feed through. If it begins to last, of course 0:10:19.440 --> 0:10:22.000 several quarters, then it's a much more serious effect. But 0:10:22.080 --> 0:10:24.839 it is ultimately about that duration question, and that's what 0:10:24.840 --> 0:10:26.360 the market is trying to figure out. And the fit 0:10:26.520 --> 0:10:28.840 very clearly told you today that they do not think 0:10:28.840 --> 0:10:30.480 that this is going to last a long time. 0:10:30.640 --> 0:10:32.960 Mi McKay in the news conference is run back half 0:10:32.960 --> 0:10:35.000 for us might welcome back to the program. Some key 0:10:35.080 --> 0:10:37.559 headlines in that news conference. What jumped out for you? 0:10:38.640 --> 0:10:40.960 I think two things, John. One, there was a sort 0:10:40.960 --> 0:10:43.600 of more humble aspect to what Jay Powell was saying 0:10:43.840 --> 0:10:46.440 when it came to tariff price inflation. Ne was a 0:10:46.520 --> 0:10:49.120 conceding that it wasn't doing what they thought it would do, 0:10:49.480 --> 0:10:53.920 lasting longer than they had anticipated, and now layer on 0:10:54.000 --> 0:10:56.480 top of that inflation that will come into the energy 0:10:56.480 --> 0:11:00.520 markets and perhaps others because of oil, and so he 0:11:00.520 --> 0:11:03.720 he was less saying the idea that, well, we're prepared 0:11:03.720 --> 0:11:06.079 to go either way depending on what happens with the economy, 0:11:06.440 --> 0:11:09.360 as he was saying, we've been fooled and we're not 0:11:09.520 --> 0:11:11.880 going to put ourselves in that position. We're going to 0:11:11.880 --> 0:11:15.640 sit back and wait so that we don't react wrong 0:11:15.840 --> 0:11:18.599 because we've been wrong. The other thing, of course, was 0:11:18.640 --> 0:11:22.120 what Paul said about whether he's staying on or not 0:11:22.360 --> 0:11:25.920 because he's refused to talk about that so far. He 0:11:25.960 --> 0:11:29.400 did acknowledge what his lawyers told the Department of Justice 0:11:29.520 --> 0:11:32.480 in their deposition. But the most interesting thing was he 0:11:32.520 --> 0:11:36.880 said he's staying as chairman pro tem and that's the law. Well, 0:11:36.920 --> 0:11:41.160 there's a Presidential Council's Office memorandum that says no, it's 0:11:41.200 --> 0:11:45.280 the president who can appoint somebody as the chair pro tem. 0:11:45.559 --> 0:11:48.360 So we could be looking at another big legal fight 0:11:48.440 --> 0:11:50.800 down the road if they don't get Kevin warsh in 0:11:50.840 --> 0:11:51.840 there by May fifteenth. 0:11:51.960 --> 0:11:54.720 Yeah, Mike, this is why the problems arise. With the 0:11:54.840 --> 0:11:58.640 chairman really engaging in this topic this afternoon. Does it 0:11:58.679 --> 0:12:03.240 provide consistency or just introduce even more controversy. 0:12:05.040 --> 0:12:08.080 Well, he's trying to provide consistency, I suppose by saying 0:12:08.120 --> 0:12:10.680 not much is going to change until my successor gets here. 0:12:11.160 --> 0:12:14.080 But whether or not that's a shot at the President 0:12:14.800 --> 0:12:17.440 or some sort of way to push back on the 0:12:17.440 --> 0:12:20.880 pressure he's been getting, we don't really know. But at 0:12:20.880 --> 0:12:23.920 this point you have to think the White House is 0:12:23.960 --> 0:12:27.959 going to disagree with that interpretation of whose chairman pro tem. 0:12:28.040 --> 0:12:30.240 Now it's important to realize too that the chairman pro 0:12:30.400 --> 0:12:33.520 tem of the Board of governors is largely irrelevant for 0:12:33.559 --> 0:12:37.679 a short period of time until they get Kevin Worshk confirmed. 0:12:38.000 --> 0:12:40.599 It's staying as chair of the Open Market Committee. That 0:12:40.600 --> 0:12:44.120 would really bother the president because as Torston was just saying, 0:12:44.400 --> 0:12:47.120 leaves somebody who's more hawkish more likely to vote for 0:12:47.160 --> 0:12:48.559 a hold on the board. 0:12:48.960 --> 0:12:51.280 Ma McKay with the lightst thank you, sir, appreciate it. 0:12:51.320 --> 0:12:53.720 Great job as always might there are the Federal Reserve 0:12:53.760 --> 0:12:56.240 down in Washington, D C. Tolson, can you answer that question. 0:12:56.320 --> 0:12:58.760 We've touched on it briefly with you just expand on it. 0:12:58.760 --> 0:13:02.199 Does it provide consistent and see or introduce controversy? 0:13:02.400 --> 0:13:03.319 Well, it would. 0:13:03.040 --> 0:13:04.920 Definitely be a lot cleaner if you have a fit 0:13:05.000 --> 0:13:07.160 chair and then that fitchair walks out and a new 0:13:07.160 --> 0:13:09.320 fittchure sits down and then we continue with a new 0:13:09.320 --> 0:13:09.679 fit chair. 0:13:09.720 --> 0:13:10.760 But now it usually works. 0:13:10.800 --> 0:13:12.439 That's how normally is that's how we want a green 0:13:12.480 --> 0:13:14.440 span Yellen on the Penanke. 0:13:14.800 --> 0:13:16.320 But now that you shuttaenly have this. 0:13:16.320 --> 0:13:19.240 Issue that the existing fit chair either he may stay 0:13:19.360 --> 0:13:21.680 on the committee, which is also a huge issue, or 0:13:21.720 --> 0:13:23.720 we may not have Kevin wash in the seat. 0:13:23.760 --> 0:13:25.600 And as Mike was just saying. 0:13:25.480 --> 0:13:27.680 That will raise all these other legal issues around will 0:13:27.760 --> 0:13:29.520 is this something that you can do or not do? 0:13:29.640 --> 0:13:31.480 And that of course begins to just raise a lot 0:13:31.520 --> 0:13:34.720 more certainly about FED independence and what is the institution 0:13:34.840 --> 0:13:35.920 making of decisions. 0:13:36.000 --> 0:13:39.400 Do you think that it's leading market participants to not 0:13:39.520 --> 0:13:42.320 take into account some of the forward guidance or some 0:13:42.400 --> 0:13:44.920 of the discussions on the FED that there is less 0:13:44.960 --> 0:13:48.600 credibility as a result of some of the increasing political 0:13:48.679 --> 0:13:50.280 rhetoric around this institution. 0:13:50.440 --> 0:13:52.360 Well, I think that we're moving towards a FED where 0:13:52.400 --> 0:13:53.600 the focus will be at. 0:13:53.440 --> 0:13:54.800 The extreme on dissence. 0:13:55.160 --> 0:13:57.679 Today we had eleven versus one that was very clear, 0:13:57.880 --> 0:14:00.720 but going forward we are likely going to especially over 0:14:00.800 --> 0:14:03.480 the next level quotas as although IFMC members might be leaving, 0:14:03.720 --> 0:14:06.000 we will have much more scrutiny of what are the 0:14:06.040 --> 0:14:08.880 existing members saying. What's the difference is the speeches, what's 0:14:08.880 --> 0:14:10.840 the difference is in footnotes between someone. 0:14:10.679 --> 0:14:12.240 Who was dubbished someone was hawkish. 0:14:12.400 --> 0:14:14.719 We are entering an era of fit watching where things 0:14:14.760 --> 0:14:17.480 are getting much more complicated because it has this political 0:14:17.520 --> 0:14:19.960 dimension of why is this person saying this? Is this 0:14:20.000 --> 0:14:22.480 person staying on the committee for political reasons? It just 0:14:22.560 --> 0:14:25.360 opens up a whole different dimension to fit watching than 0:14:25.400 --> 0:14:26.680 what we've been used to for a long time. 0:14:26.880 --> 0:14:29.800 Parlor game. But in your expert at this on a 0:14:29.840 --> 0:14:33.200 global basis, this central banker to the world to borrow 0:14:33.240 --> 0:14:36.640 from Bill Rhodes, Jerome Powell has to look at the 0:14:36.720 --> 0:14:40.960 varying energy intensities. With Brent crude at nearly one hundred 0:14:40.960 --> 0:14:43.120 and ten a gallon, we've gone one oh six to 0:14:43.200 --> 0:14:46.800 one oh nine here right now off headlines of the Bloomberg. 0:14:47.280 --> 0:14:50.440 When you look at the way em is crushed by 0:14:50.480 --> 0:14:55.360 these prices food, energy and the rest that you're expert at, touristen, 0:14:55.560 --> 0:14:59.520 does the dialogue just shift from the conventional parlor game. 0:15:00.080 --> 0:15:02.720 Has been discussionate about the swap lines. There's been discussion 0:15:02.760 --> 0:15:05.040 about in the broader context of things, what is the 0:15:05.080 --> 0:15:07.480 feeds mandate, And is the feeds mandate to take care 0:15:07.520 --> 0:15:09.560 of the US economy and the people who live within 0:15:09.600 --> 0:15:12.480 the US fifty states, or is this someone who is 0:15:12.480 --> 0:15:14.600 supposed to take care of the global economy. And it's 0:15:14.720 --> 0:15:16.960 very clear that the trend of travel here is certain 0:15:17.000 --> 0:15:19.440 received to be that we're moving towards that the FEDS 0:15:19.440 --> 0:15:21.040 should really be caring mainly about. 0:15:20.800 --> 0:15:22.200 The US economic outlook. 0:15:22.320 --> 0:15:24.560 Is an expressive currency or is that what we're not 0:15:24.680 --> 0:15:26.000 seeing in the Q two. 0:15:26.240 --> 0:15:29.040 Well, given that foreigners own roughly around twenty percent of 0:15:29.040 --> 0:15:32.160 treasuries and twenty percent of credit and roughly a third, 0:15:32.200 --> 0:15:34.600 of course also of equities, we still have in a 0:15:34.680 --> 0:15:37.800 situation where foreigners do play a very important role in 0:15:37.960 --> 0:15:41.320 US financial markets, So that key issue of what is 0:15:41.400 --> 0:15:43.720 the goal of the FED becomes very very important. 0:15:43.920 --> 0:15:46.600 I'm just struck by how historic this is. The last 0:15:46.640 --> 0:15:50.440 person to stay on at the at the Federal Reserve 0:15:50.640 --> 0:15:54.000 as FED chair after his term was Mariner Accles. This 0:15:54.200 --> 0:15:56.080 was in nineteen forty eight when his term was up, 0:15:56.200 --> 0:15:58.160 and he stayed on because he was concerned about the 0:15:58.160 --> 0:16:01.560 post Bretton Wood's order and an economy that was torn 0:16:01.640 --> 0:16:03.520 from the war that we had just seen, and he 0:16:03.560 --> 0:16:06.320 wanted that consistency. That was the last time this happened. 0:16:06.400 --> 0:16:09.280 And I'm obstruct by the historical parallel at a time 0:16:09.280 --> 0:16:13.040 when we are questioning geopolitical alliances, when we're questioning how 0:16:13.080 --> 0:16:16.200 exactly is some of these monetary policies are going to 0:16:16.240 --> 0:16:18.600 work in an inflationary world at a time of increased 0:16:18.600 --> 0:16:20.760 government debt, it is interesting that we're dealing with the 0:16:20.760 --> 0:16:23.520 same discussions, and I think it can't be forgotten these 0:16:23.560 --> 0:16:25.520 sort of echoes that we feel from nineteen forty eight. 0:16:25.640 --> 0:16:28.320 I think it's easy to introduce one's opinion into this situation, 0:16:28.480 --> 0:16:31.400 So I'll just allow the market to guide us. Clearly, 0:16:31.400 --> 0:16:35.240 the chairman is concerned about a threat to independence, is 0:16:35.280 --> 0:16:38.600 he right to be? Look at inflation expectations right now. 0:16:38.680 --> 0:16:43.160 Market based inflation expectations have remained really well anchored throughout 0:16:43.200 --> 0:16:46.280 all of this. So whether you're concerned about the chairman's 0:16:46.280 --> 0:16:48.640 attack on the institution or not, let's just focus on 0:16:48.680 --> 0:16:52.120 the markets. Markets have decided it's not a credible threat. 0:16:52.920 --> 0:16:54.800 So does the chairman actually have a role here that 0:16:54.840 --> 0:16:57.560 he needs to play? Is this a card he needs 0:16:57.560 --> 0:17:00.600 to hand to hold? I don't really understand that. I'm 0:17:00.600 --> 0:17:03.720 struggling with that. That's something I'm wrestling with. My opinion 0:17:03.720 --> 0:17:06.040 doesn't really matter. The market's telling me there isn't a 0:17:06.080 --> 0:17:09.080 concern with central bank independence. The market is telling me 0:17:09.600 --> 0:17:12.520 there isn't a concern with inflation expectations, and the data 0:17:12.600 --> 0:17:14.480 is telling me that the rest of the world's not 0:17:14.520 --> 0:17:17.080 worried either. Because when I look at foreign ownership of 0:17:17.200 --> 0:17:20.879 US assets, they are rock solid. And for treasuries, I 0:17:20.920 --> 0:17:23.040 think there are all time heights at the last data 0:17:23.080 --> 0:17:25.240 point I saw tourced And so is there a problem 0:17:25.240 --> 0:17:27.320 here that the chairman even needs to address? 0:17:27.400 --> 0:17:30.480 Well, that's why the key question becomes what does confidence mean? 0:17:30.600 --> 0:17:33.960 Is a confidence by J Paul? Is it confidence by foreigners? 0:17:34.040 --> 0:17:36.399 Is it confidence by markets? It does become a very 0:17:36.400 --> 0:17:39.000 important debate. That's why this discussion around who will be 0:17:39.040 --> 0:17:40.879 the next fairture now we know it's Kevin Wash that 0:17:41.000 --> 0:17:43.080 wasn't around that time also got a lot of discussion 0:17:43.080 --> 0:17:45.399 around it could have been someone else who might not 0:17:45.440 --> 0:17:48.040