WEBVTT - Instant Reaction: Jay Powell on the Fed Decision 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:14.480 --> 0:00:15.120 This is a FED. 0:00:15.520 --> 0:00:18.960 He's a lot more certainty ahead, but not yet enough 0:00:19.239 --> 0:00:21.960 to make any moves. While Powell said that peak uncertainty 0:00:21.960 --> 0:00:24.480 happened in April and we are getting some clarity, there's 0:00:24.480 --> 0:00:26.599 still a lot to learn until the data becomes clear. 0:00:27.040 --> 0:00:28.639 They're on hold and are in a good place. 0:00:28.640 --> 0:00:29.200 Take a listen. 0:00:30.560 --> 0:00:33.279 We feel like the right thing to do is to 0:00:33.280 --> 0:00:35.800 be where we are, where our policy stance is, and 0:00:35.920 --> 0:00:38.479 just learn more. In particular, we feel like we're going 0:00:38.520 --> 0:00:41.640 to learn a great deal more over the summer on tariffs. 0:00:42.120 --> 0:00:45.239 We hadn't expected them to show up much by now, 0:00:45.280 --> 0:00:47.800 and they haven't. And we will see whether to the 0:00:47.840 --> 0:00:50.519 extent to which they do overcoming months, and I think 0:00:50.560 --> 0:00:52.479 that's going to inform our thinking. 0:00:53.000 --> 0:00:56.800 Trompewell also asked about the situation in the White House, 0:00:56.840 --> 0:01:00.720 dismissing questions around the future for him on FED to reserve. 0:01:02.360 --> 0:01:05.559 I need to ask, assuming you are not reappointed, would 0:01:05.600 --> 0:01:08.120 you stay on as governor when you're term as chair? 0:01:08.160 --> 0:01:10.399 And I'm not thinking about that. I'm thinking about this. 0:01:12.440 --> 0:01:14.920 Is a retlacement of some of the earlier moves we 0:01:15.000 --> 0:01:18.920 are seeing. Bond yields actually climbed back to basically where 0:01:18.920 --> 0:01:21.800 they were, and then some from before the press conference 0:01:21.880 --> 0:01:24.400 tom It seemed like this was a FED chair saying 0:01:24.400 --> 0:01:27.680 that we are past peak uncertainty, but we probably will 0:01:27.680 --> 0:01:29.800 get more information leaders to stop at It's. 0:01:29.640 --> 0:01:33.720 Sure the press conference looking at the correlation of equities, bonds, currencies, commodities, so. 0:01:33.840 --> 0:01:35.640 Sort of up and downy and up and downy. 0:01:36.160 --> 0:01:40.000 I didn't get any real conviction out of it. The 0:01:40.040 --> 0:01:42.640 one tone I saw from him that I hear in 0:01:42.680 --> 0:01:47.840 some conversations is what if we're underestimating the power of 0:01:47.880 --> 0:01:52.080 this American economy. There's a gloomy call that GDP numbers 0:01:52.120 --> 0:01:56.600 come down, inflation's up, Woe is me? But and that 0:01:56.760 --> 0:01:59.640 butt was just there for a bit where he said, 0:02:00.080 --> 0:02:02.840 on what it is a resilient economy? 0:02:03.000 --> 0:02:05.000 You have said the phrase that I think about all 0:02:05.040 --> 0:02:07.560 the time, which is that companies adapt and adjust. And 0:02:07.600 --> 0:02:09.919 we hear that from so many companies that are doubling 0:02:09.960 --> 0:02:13.600 down on some of their forecasts. Your own tariffs, yes, exactly, 0:02:13.639 --> 0:02:15.359 because they have to look past that and they can 0:02:15.400 --> 0:02:17.600 handle some of these tariffs. What I thought was interesting 0:02:17.720 --> 0:02:20.160 was that this was a FED chair that actually said 0:02:20.160 --> 0:02:22.640 if we were backward looking at the data, we probably 0:02:22.639 --> 0:02:25.200 would be cutting more quickly. But because of the tariffs 0:02:25.200 --> 0:02:29.000 and the forward expectation for more inflation, it does create 0:02:29.040 --> 0:02:31.359 a greater degree of uncertainty, which is the reason why 0:02:31.639 --> 0:02:33.520 we still are happy to stand tight. 0:02:33.760 --> 0:02:36.480 You don't see this, folks, but Lisa during the press conference, 0:02:36.520 --> 0:02:38.160 she's got one of those little clicker things like in 0:02:38.200 --> 0:02:41.079 a movie theater, and every time they say uncertainty, you're 0:02:41.120 --> 0:02:42.320 moving your thumb around, and it. 0:02:42.400 --> 0:02:44.320 Was drinking one hundred and fifty. 0:02:44.440 --> 0:02:50.280 Well, it's surveying on his beverage time. The issue here, Lisa, 0:02:50.760 --> 0:02:55.120 is the uncertainty issue was given to them. They didn't 0:02:55.160 --> 0:02:59.560 invent it. The president's comments today outrageous comments. Do you 0:02:59.560 --> 0:03:03.079 see what he did to McKee? He slammed Michael McKee 0:03:03.120 --> 0:03:07.800 after those rude McKee like questions tarriffs, Bob Michael saying 0:03:07.960 --> 0:03:11.200 do we know what tariffs will raise? We have no 0:03:11.320 --> 0:03:13.280 clue what they will raise, which. 0:03:13.200 --> 0:03:15.760 Is the reason why they aren't necessarily going to make 0:03:15.840 --> 0:03:18.440 any big moves right now. Joining us now is Stephanie 0:03:18.520 --> 0:03:21.720 Roth of Wolf Research. So pleased to say that you're 0:03:21.760 --> 0:03:23.880 here in studio. Stephanie, what was your take on a 0:03:23.880 --> 0:03:26.040 press conference with this FED chair so that he had 0:03:26.080 --> 0:03:26.760 more certainty. 0:03:27.200 --> 0:03:28.799 But there'll be more later on. 0:03:29.200 --> 0:03:31.440 I think the single most important line that he said 0:03:31.480 --> 0:03:34.320 is rates aren't very high, and when we're thinking about 0:03:34.320 --> 0:03:36.400 the next couple of months, what we're going to learn 0:03:36.480 --> 0:03:38.880 is more information about the reconciliation bill, So then they're 0:03:38.880 --> 0:03:41.480 going to incorporate that fully into SEP, in which case 0:03:41.480 --> 0:03:41.840 that's going. 0:03:41.800 --> 0:03:43.120 To look a lot more hawkish. 0:03:43.440 --> 0:03:45.480 So our base case is this year they're not cutting, 0:03:46.200 --> 0:03:48.240 and the two cuts are going to eventually get get 0:03:48.280 --> 0:03:50.160 sort of rolled away. At this point, they were very 0:03:50.160 --> 0:03:52.200 close on the edge of between one and two, and 0:03:52.240 --> 0:03:54.280 they're probably going to eventually not end up cutting this 0:03:54.360 --> 0:03:56.600 year because the economy will be resilient and fine and 0:03:56.640 --> 0:03:57.600 inflation's elevated. 0:03:57.720 --> 0:04:01.360 On the core GDP equation is there, where's your Do 0:04:01.400 --> 0:04:05.120 you have any conviction at all? And c IG or NX, 0:04:05.240 --> 0:04:06.800 I mean, I don't know how you do it. I 0:04:06.800 --> 0:04:08.920 don't know how you come up with a real GDP statistic. 0:04:09.160 --> 0:04:11.839 Yeah, we're looking for one point four percent GDP this year, 0:04:11.880 --> 0:04:13.920 so not that different from the FED. But I think 0:04:13.960 --> 0:04:16.200 the important thing to focus on is for twenty twenty six, 0:04:16.720 --> 0:04:18.800 we're my forecasts are a lot higher than what the 0:04:18.839 --> 0:04:20.880 FED has. I'm looking for something that's close to two percent, 0:04:20.960 --> 0:04:24.400 if not a bit above our forecast. Is that reconciliation 0:04:24.480 --> 0:04:27.159 bill could boost the economy by but forty basis points, 0:04:27.160 --> 0:04:29.800 So that could be a notable acceleration versus where we 0:04:29.839 --> 0:04:31.800 are today. And that's what the market's going to start 0:04:31.800 --> 0:04:32.240 focusing on. 0:04:32.279 --> 0:04:34.960 Is Lisa helped me. Is a reconciliation build a big, 0:04:35.000 --> 0:04:35.719 beautiful thing. 0:04:35.880 --> 0:04:39.000 It's one basic, beautiful bee, It's one big. 0:04:38.839 --> 0:04:41.960 One three B. Yes, we can cary gotten more uncertainty. Well, 0:04:41.960 --> 0:04:42.599 that's the problem. 0:04:42.600 --> 0:04:44.880 And I really was struck by the idea that Fetcher 0:04:44.920 --> 0:04:48.200 Powell brought to the four, which is in response to 0:04:48.279 --> 0:04:51.400 Nick tim moros As the Wallstreet Journal's question, why aren't 0:04:51.440 --> 0:04:53.240 you looking at some of the weakening trend that we're 0:04:53.279 --> 0:04:56.440 seeing in inflation and say, you know what, we're actually 0:04:56.560 --> 0:04:59.159 quite restrictive. Why are you saying that this is actually 0:04:59.200 --> 0:05:02.159 an appropriate n And the FED chair said, well, the 0:05:02.200 --> 0:05:04.480 reason why is because we have to look forward and 0:05:04.520 --> 0:05:07.159 we have to say this could potentially be inflationary. We 0:05:07.200 --> 0:05:09.400 don't know, and we will learn more in the next 0:05:09.400 --> 0:05:11.040 couple of months. But we're not sure how much we're 0:05:11.040 --> 0:05:13.480 going to learn. Is that good enough for you? Does 0:05:13.520 --> 0:05:16.360 that ring true to you that that is an appropriate 0:05:16.400 --> 0:05:17.280 stance for this FED. 0:05:17.720 --> 0:05:19.080 I think it's fair for them to be in wait 0:05:19.120 --> 0:05:21.599 and see. They know that the tariffs will be inflationary. 0:05:21.640 --> 0:05:23.440 He very much emphasize someone's going to be paying the 0:05:23.480 --> 0:05:24.880 cost and eventually they're going to try to get it 0:05:24.880 --> 0:05:26.760 to the consumer, and I think that's the right way 0:05:26.760 --> 0:05:29.039 to think about it. It's going to eventually flow through 0:05:29.200 --> 0:05:31.440 some portion of it to the consumer. Our numbers are 0:05:31.440 --> 0:05:33.680 similar to the fed's forecast that inflation should be close 0:05:33.720 --> 0:05:36.320 to three percent at the end of this year, and 0:05:36.360 --> 0:05:38.039 at this point we don't know how much. It's hard 0:05:38.040 --> 0:05:40.600 to forecast these things, but I think the main takeaway 0:05:40.680 --> 0:05:43.599 is inflation will be elevated this year, but growth should 0:05:43.600 --> 0:05:44.360 probably hold up. 0:05:44.400 --> 0:05:47.440 Just fine, which is essentially what they were saying, albeit 0:05:47.520 --> 0:05:48.440 at a slower pace. 0:05:48.520 --> 0:05:49.160 Right now, we're so. 0:05:49.120 --> 0:05:51.799 Lucky to have Torston's Slock of Apollo joining us. Tourston, 0:05:52.120 --> 0:05:54.160 thank you so much for being here. What was your 0:05:54.200 --> 0:05:56.960 take on the press conference on the FED stance and frankly, 0:05:57.279 --> 0:06:00.640 the market taking this based in stride saying that they're 0:06:00.640 --> 0:06:02.040 getting much new information here. 0:06:03.120 --> 0:06:06.120 I think the banner hanging over this entire press conference 0:06:06.160 --> 0:06:10.120 and the forecast is stackflation. They've revised down GDP growth 0:06:10.160 --> 0:06:12.800 to one point four and they revised up inflation to 0:06:12.920 --> 0:06:15.160 three percent. That's telling you that they are beginning to 0:06:15.240 --> 0:06:17.120 worry about the things that are hitting the US economy. 0:06:17.120 --> 0:06:20.440 And is no longer just trade and teriffs. That's stackflationary. 0:06:20.760 --> 0:06:25.120 All prices are also stackflationary, meaning higher inflation, lower GDP growth, 0:06:25.160 --> 0:06:28.720 and restrictions and immigration is also stackflationary. We already saw 0:06:28.760 --> 0:06:31.680 in the last mpotant report upward pressure on wages, and 0:06:31.720 --> 0:06:34.719 of course that ultimately means downward pressure unemployment if we're 0:06:34.720 --> 0:06:37.640 going to do, in particular deportations at the current pace. 0:06:37.800 --> 0:06:38.880 So the conclusion is. 0:06:39.000 --> 0:06:41.160 It is not surprising that the fittest beginning to worry 0:06:41.200 --> 0:06:44.800 about their mandate being torn in the opposite direction because 0:06:44.800 --> 0:06:47.880 inflation higher says that you'd be hiking GDP growth lower 0:06:47.920 --> 0:06:48.960 says that should be cutting. 0:06:49.120 --> 0:06:52.120 So that's why at the moment the stay put and. 0:06:52.040 --> 0:06:54.880 The conclusion therefore is that he didn't really give much 0:06:54.920 --> 0:06:57.600 other than say we will likely be cutting. And that's 0:06:57.640 --> 0:07:00.400 what's in the dot plot but the conclusion is this 0:07:00.480 --> 0:07:02.840 is a very difficult situation for them when there's both, 0:07:02.880 --> 0:07:06.279 as he said, meaningful expectations of upward pressure on inflation 0:07:06.520 --> 0:07:09.119 and at the same time ever vision down on GDP growth. 0:07:09.320 --> 0:07:14.000 Turstan he alluded to their data capture which is perhaps 0:07:14.080 --> 0:07:19.600 showing a more resilient GDP, a better stronger America. Steve 0:07:19.760 --> 0:07:24.040 Shuta Mizuo is heated about this that we could see 0:07:24.080 --> 0:07:27.760 GDP better. Is that in any probability for you? 0:07:29.200 --> 0:07:32.240 Well, I think that when it comes to a particular trait. 0:07:32.960 --> 0:07:34.880 Forgive the picture here, but the pig is coming through 0:07:34.960 --> 0:07:37.880 the python. Someone needs to pay for the tax increase 0:07:37.960 --> 0:07:41.240 on impulse. Tariffs have gone up, and if companies are 0:07:41.280 --> 0:07:43.040 not passing this on to consumers. 0:07:43.160 --> 0:07:45.240 Let's say that inflation does not go off as much 0:07:45.400 --> 0:07:47.040 as we would have expected. 0:07:46.760 --> 0:07:49.120 Then the conclusion is, well, then earnings will simply be 0:07:49.160 --> 0:07:52.680 going down more because this tax increase beats because that 0:07:52.760 --> 0:07:55.280 it will begin to see some downward pressure on GDP 0:07:55.560 --> 0:07:57.679 and potentially some more downward pressure on earnings. 0:07:57.720 --> 0:07:58.920 So that's another way of saying. 0:07:59.120 --> 0:08:01.480 We saw effective tarry frates go up from three percent 0:08:01.520 --> 0:08:04.760 in January to now eighteen percent today and that effect 0:08:04.880 --> 0:08:07.080 will still be playing out, and he said very clearly 0:08:07.320 --> 0:08:10.400 he does expect a meaningful increase in inflation over the 0:08:10.400 --> 0:08:13.040 coming months. So combining that with he said, we could 0:08:13.040 --> 0:08:15.120 also see you cooling down on the label market. It 0:08:15.120 --> 0:08:17.160 does mean that just maybe inflation will not go up 0:08:17.200 --> 0:08:19.160 so much, but the consequence of that will be well, 0:08:19.160 --> 0:08:22.280 then we will instead see Terry's coming through instead through 0:08:22.560 --> 0:08:25.240 lower GDP growth and a bigger hit to earnings. 0:08:25.120 --> 0:08:27.559 And he expects to see some data on that front 0:08:27.600 --> 0:08:29.920 in the upcoming months. Right now, let's bring back in 0:08:30.080 --> 0:08:32.760 Bloomberg's Michael McKee, if you are just joining us. We 0:08:32.800 --> 0:08:35.760 did just conclude the FEDS press conference for Mike. You 0:08:35.840 --> 0:08:37.840 put him on the spot there with the political question. 0:08:37.960 --> 0:08:39.720 I don't know that he loved answering it. We were 0:08:39.720 --> 0:08:42.280 all glad that you asked it. What was your takeaway 0:08:42.720 --> 0:08:45.280 from the press conference in terms of what you felt 0:08:45.679 --> 0:08:48.080 was the most new information that we gleaned. 0:08:49.160 --> 0:08:53.040 Well, I think the takeaway is fairly obvious here, and 0:08:53.200 --> 0:08:55.920 I'm not sure that my economist's friends all agree with me, 0:08:56.360 --> 0:08:58.760 But I think the line that you want to look 0:08:58.800 --> 0:09:02.040 at is how many time Jay Powell said nobody on 0:09:02.080 --> 0:09:05.239 the committee has a lot of conviction about these forecasts. 0:09:05.440 --> 0:09:08.240 In other words, this is all going to change and 0:09:08.480 --> 0:09:11.240 we had to write down something, so we did. So 0:09:12.000 --> 0:09:14.480 don't take us seriously in terms of the number of 0:09:14.600 --> 0:09:17.479 rate cuts. Don't take us seriously in terms of the forecast. 0:09:17.840 --> 0:09:19.720 It's the best we can do at the moment. But 0:09:19.800 --> 0:09:22.080 we know this is all going to be different, so 0:09:22.160 --> 0:09:26.320 don't I would translate that into don't invest on the 0:09:26.360 --> 0:09:27.880 idea that the Fed is going to be doing two 0:09:27.960 --> 0:09:29.280 rate cuts by the end of the year. 0:09:29.559 --> 0:09:31.640 Michael McKee, thank you so much for being with us, 0:09:31.640 --> 0:09:33.559 and Stephanie. We were kind of laughing around the table 0:09:33.600 --> 0:09:35.400 when he said We just kind of turned to each 0:09:35.400 --> 0:09:36.680 other and say, what did you write down? 0:09:36.760 --> 0:09:39.120 You know, I don't know. I'm kind of throwing a 0:09:39.200 --> 0:09:40.080 dart at the dartboard. 0:09:40.160 --> 0:09:42.840 But it does feel like they are trying to message 0:09:42.920 --> 0:09:46.719 something to markets. And do you think that this is saying, ultimately, 0:09:46.760 --> 0:09:49.680 we understand our dual mandate and we are going to 0:09:49.720 --> 0:09:52.320 respond potentially to a weaker jobs picture. 0:09:53.080 --> 0:09:55.600 I think it's saying there are risks to both sides 0:09:55.600 --> 0:09:57.240 of our mandate. We don't know if it's going to 0:09:57.240 --> 0:10:01.040 be on the inflation or the growth side. We're in 0:10:01.080 --> 0:10:03.800 wait and see mode. I think the ultimate destination will 0:10:03.840 --> 0:10:06.640 be that the economy holds up. Okay, inflation does pick up. 0:10:07.080 --> 0:10:09.120 I totally agree with Torson's comments. If it doesn't pick up, 0:10:09.120 --> 0:10:10.680 that's almost a bad sign because that's going to come 0:10:10.720 --> 0:10:12.959 from company margins. But at the end of the day, 0:10:13.000 --> 0:10:14.880 we'll come through this okay, and then the focus will 0:10:14.880 --> 0:10:17.000 be on twenty twenty six for markets, which is an 0:10:17.040 --> 0:10:18.040 economy that's just fine. 0:10:18.160 --> 0:10:21.280 Your core ability is the math and the dynamics of 0:10:21.320 --> 0:10:26.000 our math. The toughest math is productivity. Is productivity still 0:10:26.040 --> 0:10:29.600 in play? Is there a total factor productivity right now 0:10:29.640 --> 0:10:30.720 that we underestimate? 0:10:31.160 --> 0:10:31.360 Yeah. 0:10:31.400 --> 0:10:34.800 I think that's certainly the case, and hopefully it's the case, 0:10:34.880 --> 0:10:37.760 especially given that our labor supply is shrinking, so we 0:10:38.240 --> 0:10:40.600 kind of need that to some extent. And our base 0:10:40.679 --> 0:10:43.559 case is that the productivity should be fairly solid throughout 0:10:43.559 --> 0:10:45.560 the course of this year into next year. It is 0:10:45.559 --> 0:10:47.840 hard to estimate, but I do think AI is going 0:10:47.880 --> 0:10:50.720 to slowly have that impact over the course of the 0:10:50.720 --> 0:10:51.760 next couple of years. 0:10:51.480 --> 0:10:52.559 With productivity gains. 0:10:52.559 --> 0:10:54.200 Tors And I'd love you to wait on this because 0:10:54.240 --> 0:10:56.400 you've been really good on this, We're not necessarily going 0:10:56.400 --> 0:10:58.200 to get recession. A lot of people say that's not 0:10:58.240 --> 0:11:00.400 their base case, but we are going to get slow 0:11:00.480 --> 0:11:02.840 down at a time of increasing inflation. 0:11:03.160 --> 0:11:04.160 People seem to think. 0:11:04.000 --> 0:11:06.080 If there's a recession, that's really bad. If there's not 0:11:06.120 --> 0:11:09.720 a recession, that's really good. What is that breaking point 0:11:09.800 --> 0:11:13.880 where you have growth slowing enough that it becomes really 0:11:14.000 --> 0:11:17.720 terrible for companies in terms of where inflation is and 0:11:17.800 --> 0:11:19.400 growth just not keeping up. 0:11:21.120 --> 0:11:23.520 The chocol world is at the moment, Namy, we do 0:11:23.600 --> 0:11:25.520 have a number of things that are weighing on growth, 0:11:25.520 --> 0:11:27.840 as we're talking about here in naming higher oil prices, 0:11:28.120 --> 0:11:31.080 higher terriffs were now also have restrictions on immigration, meaning 0:11:31.120 --> 0:11:34.320 removing labor. All those things would argue for GDP growth 0:11:34.320 --> 0:11:37.600 slowing down as the consensus expects over the coming quarters. 0:11:37.760 --> 0:11:39.040 But at the other end of the robe, in this 0:11:39.120 --> 0:11:42.000 talk of wall, we have definitely the productivity increases that 0:11:42.040 --> 0:11:44.920 we potentially could seem. It did respond to the question 0:11:45.040 --> 0:11:49.440 around whether this be labor replacing or labor augmenting, and 0:11:49.520 --> 0:11:52.600 we still just really don't know the answers to that question. Yes, 0:11:52.760 --> 0:11:55.679 it is the case in the census surveys when businesses 0:11:55.720 --> 0:11:59.520 are asked have you adopted AI in the last two 0:11:59.559 --> 0:12:02.320 weeks that about ten percent of companies and a rising 0:12:02.360 --> 0:12:05.520 share is saying, yes, we are new using today's AI 0:12:05.679 --> 0:12:09.160 tools to improve our productivity. But this speed with with 0:12:09.280 --> 0:12:12.360 productivity gains and to Tom's point, total fatster productivity naming 0:12:12.400 --> 0:12:15.320 how well laiban capital work together, the speed with which 0:12:15.320 --> 0:12:17.280 we'll see that in the data is probably going to 0:12:17.320 --> 0:12:19.920 take quite a bit longer. So I worry more about 0:12:19.960 --> 0:12:22.920 the cyclical downward pull on GDP growth. I do think 0:12:22.920 --> 0:12:24.840 that at what time we will see the AI gains, 0:12:24.920 --> 0:12:26.840 but it's just not probably not going to come quick 0:12:26.920 --> 0:12:29.439 enough relative to some of the downward pull coming from 0:12:29.480 --> 0:12:32.720 the cyclical forces of tariff's higher oil prices, and at 0:12:32.720 --> 0:12:35.560 the same time also the restrictions on immigrations we're. 0:12:35.400 --> 0:12:38.200 Seeing given that backdrop towurstin, do you think that, based 0:12:38.240 --> 0:12:41.160 on what this FED said, they are just moderately restrictive. 0:12:41.200 --> 0:12:43.040 Do you think they're more restrictive than that, or do 0:12:43.080 --> 0:12:44.920 you think that this really is closer to neutral than 0:12:44.920 --> 0:12:45.600 many people think. 0:12:46.520 --> 0:12:48.920 Well, that's why this discussion, Lisa around, as we have 0:12:49.080 --> 0:12:51.240 all talked about for so many years now, our style 0:12:51.320 --> 0:12:53.600 and where are we related to that? Note how he 0:12:53.679 --> 0:12:56.600 didn't bring that up today. This conversation about where are 0:12:56.600 --> 0:12:59.200 we related to neutral has almost become a back seat 0:12:59.280 --> 0:13:02.000 issue us now there are some cyclical issues that are 0:13:02.040 --> 0:13:05.880 overwhelming the structural discussion around where neutral rates are. So, 0:13:05.960 --> 0:13:07.719 but I do think that the fed's on framework and 0:13:07.760 --> 0:13:10.400 the New York FEDS estimates would certainly say that neutral 0:13:10.480 --> 0:13:12.360 is lower, and as it did, hint a little bit 0:13:12.400 --> 0:13:14.800 that we are in slightly restrictive territory. 0:13:14.960 --> 0:13:17.400 But the issue is still here is they are battling. 0:13:17.480 --> 0:13:20.120 The major issue is that, as you said, they expect 0:13:20.120 --> 0:13:22.960 to see meaningful upside pressure on inflation, and that makes 0:13:22.960 --> 0:13:25.480 sense not only headline inflation because of all the prices, 0:13:25.640 --> 0:13:28.000 but also because of terriffs and again because of the 0:13:28.120 --> 0:13:30.680 emerging pressure we're seeing on wages. So the short answer 0:13:30.720 --> 0:13:33.079 to your question is, I think that this discussion of 0:13:33.160 --> 0:13:35.319 restrictive or not restrictive is taking a little bit of 0:13:35.360 --> 0:13:37.880 a back seat because we now have some cyclical forces 0:13:38.000 --> 0:13:40.080 pushing inflation up over the coming months. 0:13:40.200 --> 0:13:42.760 Torson Slock of Apollo, thank you so much for being 0:13:42.800 --> 0:13:44.559 with us and for those comments. 0:13:44.600 --> 0:13:46.760 Joining us now as Sebadro or Jappa SoC Gen. 0:13:47.480 --> 0:13:49.800 Just curious to Bodra what you make of this idea 0:13:49.840 --> 0:13:54.000 that rates are not very high, that policy is monestily restrictive, 0:13:54.240 --> 0:13:58.120 but not necessarily causing the restraint that many people would expect. 0:13:58.120 --> 0:14:00.040 Do you think that this was an appropriate fat. 0:14:00.040 --> 0:14:04.160 Meeting, You know, let's call a spade a spade. I 0:14:04.240 --> 0:14:06.679 must say I didn't get a lot of new information 0:14:06.840 --> 0:14:10.080 out of this meeting. I think Mike McKey summed it up. 0:14:10.080 --> 0:14:13.680 There's a lot of uncertainty. The first half of the year, 0:14:13.840 --> 0:14:17.640 the economy has been extraordinarily resilient. There's a chance that 0:14:17.679 --> 0:14:19.760 we get higher inflation in the second half. 0:14:19.760 --> 0:14:20.720 There's a chance. 0:14:20.480 --> 0:14:25.280 That the growth could slow down as well. But that 0:14:25.480 --> 0:14:28.240 doesn't really give us a lot of information or exactly 0:14:28.240 --> 0:14:30.600 what they're going to do on the policy front. Yes, 0:14:30.680 --> 0:14:32.600 the dots are showing two cuts for this year, but 0:14:32.600 --> 0:14:36.320 there's a good chance that they don't cut at all 0:14:36.440 --> 0:14:40.040 this year, or they have to cut as early as 0:14:40.040 --> 0:14:42.640 the September meeting is the data deteriorates, So for me, 0:14:42.720 --> 0:14:46.080 the informational value was very little. I think that there's 0:14:46.120 --> 0:14:48.560 a lot of uncertainty, which was highlighted again and again 0:14:49.040 --> 0:14:51.040 during the press conference, and I think that they're going 0:14:51.080 --> 0:14:55.000 to wait till they have enough information to confirm a 0:14:55.120 --> 0:14:55.560 rate cut. 0:14:55.680 --> 0:14:57.360 So for me, this is status quo. 0:14:57.480 --> 0:15:00.960 The market pricing hasn't really changed. The market really has 0:15:01.160 --> 0:15:05.520 reacted much. So it's it's it's we need more information. 0:15:05.760 --> 0:15:06.600 So padre, is the. 0:15:06.560 --> 0:15:09.400 Information going to come in the yield curve? A really 0:15:09.440 --> 0:15:13.120 informed question come in about the vanilla twos ten spread 0:15:13.160 --> 0:15:16.160 or all you pick the spread that matters. Are we 0:15:16.200 --> 0:15:19.520 going to go back to yield curve steepness as we 0:15:19.560 --> 0:15:20.640 saw many years ago? 0:15:22.560 --> 0:15:24.480 Yeah, the five to thirties part of the yell curve 0:15:24.640 --> 0:15:25.720 has been steepening. 0:15:25.880 --> 0:15:26.280 The FED. 0:15:26.520 --> 0:15:28.440 You know, the front end is pegged to policies of 0:15:28.520 --> 0:15:32.160 the two years is kind of stuck between three seventy 0:15:32.160 --> 0:15:35.200 five and four percent, and the five thirties part of 0:15:35.240 --> 0:15:38.160 the yell curve has the potential to steepen. But again, 0:15:38.480 --> 0:15:40.520 a lot depends on what we get out of that 0:15:40.560 --> 0:15:44.680 big beautiful bill. If it is actually more deficit inducing 0:15:44.720 --> 0:15:47.960 than what we are anticipating, then there's a potential that 0:15:48.000 --> 0:15:51.320 we could see a rebuild in term premiere. But you 0:15:51.360 --> 0:15:54.800 know that those negotiations are still ongoing, and really it's 0:15:54.840 --> 0:15:57.360 the fiscal side that determines what the shape of the 0:15:57.400 --> 0:15:59.960 yel curve is, not so much how much the FED 0:16:00.120 --> 0:16:02.680 is going to cut, because cuts between now and the 0:16:02.680 --> 0:16:05.200 middle of nextsuare are quite modest. You're looking at maybe 0:16:05.200 --> 0:16:08.360 seventy five to one hundred basis points of cuts at 0:16:08.360 --> 0:16:08.800 the most. 0:16:08.960 --> 0:16:10.960 Stephanie, where are you on the fiscal space? I mean, 0:16:11.000 --> 0:16:12.760 I think this is about Michael brought it up in 0:16:12.840 --> 0:16:16.080 others before, but this is a huge mystery that's unspoken. 0:16:16.200 --> 0:16:19.560 We don't have a clue where our debt and deficit 0:16:19.800 --> 0:16:21.360 is doing. We have no clue. 0:16:21.800 --> 0:16:24.680 We have one clue, and that's not good. So it's 0:16:24.720 --> 0:16:27.360 not heading in a very good direction. We all know that, 0:16:27.400 --> 0:16:29.880 but I think the bond market has largely internalized it. 0:16:30.320 --> 0:16:31.680 So what we're. 0:16:31.480 --> 0:16:34.080 Talking with clients about is, at this point, once they 0:16:34.120 --> 0:16:37.160 actually passed the reconciliation bill base cases, there's not a 0:16:37.200 --> 0:16:37.960 big sort of. 0:16:38.040 --> 0:16:39.440 Bond market riot as a result. 0:16:39.440 --> 0:16:41.880 It's a risk, but I think maybe over the summer, 0:16:42.320 --> 0:16:44.160 the bigger news is going to be the inflation prints, 0:16:44.160 --> 0:16:48.160 which could be a headwind for equities, and the employment 0:16:48.200 --> 0:16:51.320 data which might seasonally surprise, plus the downward sort of 0:16:51.400 --> 0:16:53.920 projection on immigration that could be sort of the bigger 0:16:53.960 --> 0:16:55.680 news over the summer. I don want to anticipate it's 0:16:55.680 --> 0:16:58.040 going to be surprised on the deficit front, because we 0:16:58.120 --> 0:17:00.360 largely know what's going to be in the and they're 0:17:00.360 --> 0:17:02.560 going to kind of negotiate from here. But I don't 0:17:02.600 --> 0:17:04.480 expect it to be a major surprise at this point. 0:17:04.680 --> 0:17:06.240 All I can say is this feels a little bit. 0:17:06.280 --> 0:17:08.200 I keep saying this like when you put too many 0:17:08.200 --> 0:17:11.000 commands into a computer and it says I'm buffering, I'm buffering, 0:17:11.000 --> 0:17:12.280 and it just kind of we have no idea what 0:17:12.280 --> 0:17:13.520 the headlines they are going to be in a couple 0:17:13.560 --> 0:17:15.680 of months. To baj Or Jappovsacchen, thank you so much 0:17:15.680 --> 0:17:18.800 for joining us and for really being honest, which is 0:17:19.320 --> 0:17:21.680 we didn't really learn all that much joining us now 0:17:21.720 --> 0:17:23.240 is Jeff Rosenberg of Black Rock. 0:17:23.520 --> 0:17:25.480 The one thing that did stand out. 0:17:25.520 --> 0:17:28.040 Was this idea that this is not a FED that 0:17:28.080 --> 0:17:31.359 feels urgency to cut rates, even though you have a 0:17:31.760 --> 0:17:34.760 president basically jaw owning them and you have people in 0:17:34.800 --> 0:17:36.919 the market saying we are seeing cracks. 0:17:36.960 --> 0:17:41.440 What was your take, Jeff from this meeting. Yeah, you know, there's. 0:17:41.280 --> 0:17:43.560 Something we're not talking about which could have been you know, 0:17:43.600 --> 0:17:46.840 the headline, which is this is the first statement of 0:17:46.840 --> 0:17:53.320 economic projections posts the tariff uncertainty, and mostly he got 0:17:53.359 --> 0:17:57.720 away with not really talking about that. Torsten just highlighted 0:17:58.000 --> 0:18:01.840