1
00:00:02,440 --> 00:00:06,800
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:13,600 --> 00:00:15,920
Speaker 2: The Federal Reserve decision we're looking for is an interest

3
00:00:16,000 --> 00:00:19,120
Speaker 2: rate cut on the FMC of about twenty five basis points.

4
00:00:19,120 --> 00:00:21,959
Speaker 2: With that decision is Mike mckayth you.

5
00:00:22,000 --> 00:00:24,599
Speaker 3: Got it, John, A quarter point cut in the Fed

6
00:00:24,640 --> 00:00:28,000
Speaker 3: spencemark interest rate. A few changes to this statement, and

7
00:00:28,040 --> 00:00:30,600
Speaker 3: that's about it from the Fed. The target range now

8
00:00:30,640 --> 00:00:33,040
Speaker 3: four and a half to four and three quarters percent.

9
00:00:33,400 --> 00:00:36,919
Speaker 3: There is no change to balance sheet policy. The decision

10
00:00:36,960 --> 00:00:41,480
Speaker 3: this time unanimous, as September dissenter Mickey Bowman voted for

11
00:00:41,600 --> 00:00:45,920
Speaker 3: this rate cut. Inflation, the statement says, has made progress,

12
00:00:46,080 --> 00:00:49,440
Speaker 3: dropping the word further toward the two percent target, but

13
00:00:49,560 --> 00:00:54,440
Speaker 3: remains somewhat elevated. No longer included the assertion that the

14
00:00:54,440 --> 00:00:58,360
Speaker 3: Committee has gained greater confidence that inflation is moving sustainably

15
00:00:58,680 --> 00:01:03,240
Speaker 3: toward two percent. The economic assessment suggests a slightly weaker

16
00:01:03,440 --> 00:01:07,920
Speaker 3: labor market, noting that since earlier this year, labor market

17
00:01:07,959 --> 00:01:11,640
Speaker 3: conditions have generally eased and the unemployment rate has moved

18
00:01:11,760 --> 00:01:15,920
Speaker 3: up but remains low still. The statement repeats September's view

19
00:01:15,920 --> 00:01:20,000
Speaker 3: that risks to achieving its employment and inflation goals are

20
00:01:20,080 --> 00:01:24,000
Speaker 3: roughly in balance. The rate cut today is in support

21
00:01:24,040 --> 00:01:27,399
Speaker 3: of its goals instead of September's in light of the

22
00:01:27,440 --> 00:01:32,200
Speaker 3: progress on inflation and the balance of risks. Policymakers note

23
00:01:32,240 --> 00:01:36,400
Speaker 3: again they will consider additional adjustments to their benchmark rate,

24
00:01:36,640 --> 00:01:40,000
Speaker 3: but offer no further guidance beyond that. There is no

25
00:01:40,120 --> 00:01:43,320
Speaker 3: mention of politics in the statement. That will be up

26
00:01:43,360 --> 00:01:45,640
Speaker 3: to Chairman Powell in about a half hour.

27
00:01:45,520 --> 00:01:47,360
Speaker 2: Am I McKay. It'll be up to you, sir, to

28
00:01:47,360 --> 00:01:49,560
Speaker 2: ask the questions. How many questions do you expect are

29
00:01:49,600 --> 00:01:51,240
Speaker 2: going to be leading with the events of this week

30
00:01:51,280 --> 00:01:53,400
Speaker 2: and not this decision? How much of this is going

31
00:01:53,400 --> 00:01:56,520
Speaker 2: to be about the politics at two thirty, Mic, I.

32
00:01:56,440 --> 00:01:59,280
Speaker 3: Would imagine quite a bit would be, and maybe we

33
00:01:59,320 --> 00:02:01,600
Speaker 3: want to check the law vegas over underline for that.

34
00:02:02,040 --> 00:02:04,400
Speaker 3: But he's not going to say anything. He's not going

35
00:02:04,440 --> 00:02:06,680
Speaker 3: to respond. So the question is how many different ways

36
00:02:06,680 --> 00:02:08,880
Speaker 3: can we ask and how many different ways will he

37
00:02:09,160 --> 00:02:10,000
Speaker 3: parry the question?

38
00:02:10,240 --> 00:02:12,440
Speaker 2: Sixty minutes of that looking forward to it, Michael McKee,

39
00:02:12,440 --> 00:02:14,400
Speaker 2: you've got to run. I know that news conference begins

40
00:02:14,400 --> 00:02:16,840
Speaker 2: in about twenty eight minutes time, So no big changes

41
00:02:16,880 --> 00:02:19,680
Speaker 2: to the statement. Twenty five basis point Raika as expected,

42
00:02:19,880 --> 00:02:21,560
Speaker 2: and when you see something like that, you're not looking

43
00:02:21,560 --> 00:02:23,480
Speaker 2: for a big change in the market either. We stay

44
00:02:23,560 --> 00:02:26,120
Speaker 2: higher on a SMP five hundred by about six tens

45
00:02:26,120 --> 00:02:28,800
Speaker 2: of one percent, yields are still a little bit lower.

46
00:02:28,840 --> 00:02:30,680
Speaker 2: On a ten year, we're still down by eight basis

47
00:02:30,680 --> 00:02:33,280
Speaker 2: points four thirty five. And in foreign exchange, the euro

48
00:02:33,400 --> 00:02:35,160
Speaker 2: gives up a little bit of the move, but still

49
00:02:35,160 --> 00:02:37,000
Speaker 2: positive on the session at least, so one oh seven

50
00:02:37,080 --> 00:02:38,680
Speaker 2: eighty four on euro dollar.

51
00:02:38,760 --> 00:02:41,200
Speaker 1: I think it's interesting that he that the Federal Reserve

52
00:02:41,360 --> 00:02:44,680
Speaker 1: moved a reference to gaining confidence in inflation and saying

53
00:02:44,720 --> 00:02:48,120
Speaker 1: that labor market conditions have generally eased. Honestly, to me,

54
00:02:48,240 --> 00:02:51,160
Speaker 1: you're looking at this and on the margins, just setting

55
00:02:51,160 --> 00:02:55,079
Speaker 1: the stage to potentially feel a little less dubvish. And

56
00:02:55,120 --> 00:02:57,119
Speaker 1: that is a tone that I really curious to hear

57
00:02:57,280 --> 00:02:58,440
Speaker 1: in the press conference.

58
00:02:58,120 --> 00:03:00,280
Speaker 2: With a surround the table by Michael of JPMUL and

59
00:03:00,320 --> 00:03:01,919
Speaker 2: a man who's seen it oh before, the former Fed

60
00:03:01,960 --> 00:03:04,519
Speaker 2: Vice chair Rich clouder Rich. Want to start with you

61
00:03:04,560 --> 00:03:06,440
Speaker 2: and not on the twenty five basis point right cut,

62
00:03:06,919 --> 00:03:09,840
Speaker 2: you lift the tariff, You lift the tariffs of Trump.

63
00:03:09,880 --> 00:03:13,080
Speaker 2: In Volume one on the Federal Reserve, how did you

64
00:03:13,120 --> 00:03:15,680
Speaker 2: handle it then? How much scenario analysis do you did

65
00:03:15,720 --> 00:03:17,760
Speaker 2: you do ahead of time? How do you think this

66
00:03:17,880 --> 00:03:19,720
Speaker 2: chairman's going to handle it in a months to come.

67
00:03:20,639 --> 00:03:22,560
Speaker 4: Well, the staff did good work, and some of that's

68
00:03:22,560 --> 00:03:25,680
Speaker 4: in the public domain now comes out every five years.

69
00:03:26,160 --> 00:03:28,919
Speaker 4: The reality is in during my time at the FED,

70
00:03:29,680 --> 00:03:32,160
Speaker 4: inflation was running a little bit below target. The tariffs

71
00:03:32,160 --> 00:03:34,160
Speaker 4: that were put in place made the headlines, but they

72
00:03:34,160 --> 00:03:37,600
Speaker 4: didn't really push up inflation very much. You know, the

73
00:03:37,640 --> 00:03:39,560
Speaker 4: devil will be in the details, I think, both on

74
00:03:39,600 --> 00:03:43,080
Speaker 4: trade policy and physical policy, and I don't think they

75
00:03:43,080 --> 00:03:45,160
Speaker 4: need to make any big decisions at this meeting or

76
00:03:45,200 --> 00:03:48,120
Speaker 4: the next meeting about how they'll strategize for twenty twenty five.

77
00:03:48,800 --> 00:03:50,920
Speaker 5: Vice Chairman, I want to go to the politics of

78
00:03:50,960 --> 00:03:52,720
Speaker 5: the moment. We're not going to get an answer from

79
00:03:52,800 --> 00:03:54,840
Speaker 5: Jerome Powell, so we're going to get it from you

80
00:03:55,520 --> 00:04:00,400
Speaker 5: right now. Harry Truman nineteen fifty before William McChesney Martin

81
00:04:01,040 --> 00:04:05,240
Speaker 5: saved the day. I quote the President President Truman, I

82
00:04:05,240 --> 00:04:07,600
Speaker 5: hope the board will not allow the bottom to drop

83
00:04:07,640 --> 00:04:11,560
Speaker 5: out from under securities. If that happens, that is exactly

84
00:04:11,800 --> 00:04:15,680
Speaker 5: what mister Stalin wants. We've had this pressure before, and

85
00:04:15,760 --> 00:04:18,159
Speaker 5: you and your brethren you have the pressure this time

86
00:04:18,279 --> 00:04:21,160
Speaker 5: from President elect Trump. How does a FED deal with it?

87
00:04:21,839 --> 00:04:23,640
Speaker 4: I think they deal with it, Tom, the way that

88
00:04:23,960 --> 00:04:26,279
Speaker 4: they did the last time is just stick your you know,

89
00:04:26,880 --> 00:04:29,520
Speaker 4: keep your focus on the goals of policy, price stability,

90
00:04:29,560 --> 00:04:32,920
Speaker 4: maximum employment, and do what you think can best achieve

91
00:04:32,960 --> 00:04:37,359
Speaker 4: those goals. You know, as you point out, opinions on

92
00:04:37,400 --> 00:04:40,359
Speaker 4: the FED from including from presidents or not unheard of

93
00:04:40,480 --> 00:04:42,080
Speaker 4: and so we could see more of that, but I

94
00:04:42,080 --> 00:04:44,280
Speaker 4: think the power Fed will just keep doing what they're doing.

95
00:04:44,480 --> 00:04:47,080
Speaker 1: How much is the market, though, speaking, louder than any

96
00:04:47,120 --> 00:04:49,000
Speaker 1: policy that's going to come down the pike. The fact

97
00:04:49,040 --> 00:04:51,560
Speaker 1: that we've seen this massive rally in stocks and a

98
00:04:51,640 --> 00:04:54,200
Speaker 1: sell off from bonds that hasn't really hit risk assets,

99
00:04:54,200 --> 00:04:56,360
Speaker 1: how much does that have to really cause the FED

100
00:04:56,360 --> 00:04:58,320
Speaker 1: to pause and even reconsider whether it cut rates to

101
00:04:58,320 --> 00:04:59,040
Speaker 1: get in December?

102
00:05:00,560 --> 00:05:03,360
Speaker 4: Good point, you know, I do think financial conditions are

103
00:05:03,400 --> 00:05:06,080
Speaker 4: obviously an input to policy, but I would hope the

104
00:05:06,120 --> 00:05:09,480
Speaker 4: FED does not convey the impression that they're too sensitive

105
00:05:09,520 --> 00:05:11,880
Speaker 4: to financial conditions because they can rise and fall for

106
00:05:11,880 --> 00:05:14,200
Speaker 4: a number of reasons. My own sense of what we're

107
00:05:14,200 --> 00:05:17,320
Speaker 4: seeing this week is some of it is not so

108
00:05:17,440 --> 00:05:20,800
Speaker 4: much more stimulus down the road as more certainty that

109
00:05:20,839 --> 00:05:23,760
Speaker 4: the existing twenty seventeen tax bill is going to be extended, right,

110
00:05:23,760 --> 00:05:25,920
Speaker 4: So it's the absence of a tax hike as opposed

111
00:05:25,960 --> 00:05:29,400
Speaker 4: to necessarily a tax cut. And I do think the

112
00:05:29,440 --> 00:05:32,400
Speaker 4: deregulation piece of this is also important. So we've certainly

113
00:05:32,400 --> 00:05:36,000
Speaker 4: seen a level set. I wouldn't necessarily extrapolate this from here.

114
00:05:36,040 --> 00:05:39,400
Speaker 4: We'll just have to see how this plays out either way.

115
00:05:39,720 --> 00:05:42,479
Speaker 1: What we've heard is just the deficit is likely to expand,

116
00:05:42,800 --> 00:05:46,720
Speaker 1: and one of the main stories and consistency throughout all

117
00:05:46,760 --> 00:05:49,840
Speaker 1: of the analysis, does the FED deal with that at

118
00:05:49,880 --> 00:05:52,000
Speaker 1: all by signaling what they plan to do with their

119
00:05:52,040 --> 00:05:56,040
Speaker 1: balance sheet. There is some speculation that they could potentially

120
00:05:56,040 --> 00:05:59,320
Speaker 1: monetize the debt to keep even keel economic conditions.

121
00:06:00,200 --> 00:06:02,920
Speaker 4: Well, certainly there would be that pressure, but I have

122
00:06:03,160 --> 00:06:06,080
Speaker 4: high confidence that they would resist that. Look, the FED

123
00:06:06,160 --> 00:06:08,839
Speaker 4: is judged on primarily and whether or not it achieves

124
00:06:08,839 --> 00:06:12,400
Speaker 4: the inflation target, and when inflation is getting to two percent,

125
00:06:12,520 --> 00:06:15,520
Speaker 4: that's really the focus. I think monetizing the debt is

126
00:06:15,560 --> 00:06:19,000
Speaker 4: something that I've done on a sustained basis, is inconsistent

127
00:06:19,040 --> 00:06:22,559
Speaker 4: with the inflation target. You do raise another point, though,

128
00:06:22,800 --> 00:06:25,000
Speaker 4: which is a good one, Lisa, which is the fact

129
00:06:25,000 --> 00:06:27,160
Speaker 4: that they are doing QT right now. You know, during

130
00:06:27,200 --> 00:06:29,839
Speaker 4: my time there, the FED stop QT about the time

131
00:06:29,880 --> 00:06:32,320
Speaker 4: that it cut rates in twenty nineteen. So the Paler

132
00:06:32,320 --> 00:06:35,400
Speaker 4: Fed's continuing to shrink the balance sheet. They've given some

133
00:06:35,480 --> 00:06:38,040
Speaker 4: indication about when they'll stop, but that I think will

134
00:06:38,040 --> 00:06:40,400
Speaker 4: be a decision they'll need to make next year, and

135
00:06:40,480 --> 00:06:44,760
Speaker 4: that could be in the context of pretty depressing budget numbers.

136
00:06:44,880 --> 00:06:47,400
Speaker 5: But mikel all of this seems very predictable. You get

137
00:06:47,400 --> 00:06:50,800
Speaker 5: this from a former FED official Columbia professor as well.

138
00:06:51,240 --> 00:06:54,480
Speaker 5: What is the surprise you're worried about into Q one

139
00:06:55,000 --> 00:06:55,479
Speaker 5: Q two?

140
00:06:56,240 --> 00:06:59,400
Speaker 6: Well, I guess my question for Rich is what are

141
00:06:59,440 --> 00:07:04,520
Speaker 6: they model? Are they modeling all the probabilities that fiscal

142
00:07:04,600 --> 00:07:08,120
Speaker 6: stimulus could look like? Are they modeling the extension of

143
00:07:08,160 --> 00:07:11,960
Speaker 6: the tax cuts? Are they just modeling the existing economy?

144
00:07:12,360 --> 00:07:14,600
Speaker 4: Well, I guess the short answer is, I don't know.

145
00:07:14,680 --> 00:07:17,119
Speaker 4: We'll find out in five years. My sense, though, certainly

146
00:07:17,120 --> 00:07:19,000
Speaker 4: if I were there, what I would be focused on

147
00:07:19,560 --> 00:07:22,160
Speaker 4: is a scenario where you may get a tariff, and

148
00:07:22,200 --> 00:07:25,720
Speaker 4: then the question is is that inflation area, or is

149
00:07:25,760 --> 00:07:28,280
Speaker 4: it a price level effect? Or in the wonking noition

150
00:07:28,320 --> 00:07:31,640
Speaker 4: of central bankers are their second round of facts. Chris Waller,

151
00:07:31,640 --> 00:07:34,000
Speaker 4: who have enormous regard for work with Chris, gave a

152
00:07:34,080 --> 00:07:36,920
Speaker 4: speech several months ago in which or Q and a

153
00:07:37,000 --> 00:07:39,840
Speaker 4: Maybe on Bloomberg in which he said, look, a tariff

154
00:07:39,880 --> 00:07:41,720
Speaker 4: is a one time increase in the price level. It's

155
00:07:41,760 --> 00:07:44,600
Speaker 4: not necessarily inflationary. So I think if I were there,

156
00:07:44,600 --> 00:07:46,880
Speaker 4: I'd be wanting to see will that play out in

157
00:07:47,000 --> 00:07:51,120
Speaker 4: various scenarios, But beyond that the details will matter.

158
00:07:51,440 --> 00:07:53,120
Speaker 5: My chart of the day is Jim Biarco had a

159
00:07:53,160 --> 00:07:56,600
Speaker 5: fabulous chart showing the inflation Bob Michael coming out of

160
00:07:56,600 --> 00:07:59,360
Speaker 5: twenty twenty one, twenty two, and yeah, it's a noodle

161
00:07:59,400 --> 00:08:02,200
Speaker 5: in along right now. The economists like Claire and are

162
00:08:02,240 --> 00:08:04,280
Speaker 5: looking at the noodle in a lawn right now, and

163
00:08:04,320 --> 00:08:06,800
Speaker 5: the public that just voted for Donald Trump is looking

164
00:08:06,800 --> 00:08:09,840
Speaker 5: at the jump condition and inflation on a level change.

165
00:08:09,880 --> 00:08:11,760
Speaker 5: Where are we going to be in twenty twenty five?

166
00:08:11,880 --> 00:08:13,480
Speaker 5: Are we going to be looking at level change in

167
00:08:13,520 --> 00:08:15,120
Speaker 5: the memory of it or are we going to be

168
00:08:15,160 --> 00:08:16,679
Speaker 5: noodling along feeling happy.

169
00:08:17,320 --> 00:08:20,200
Speaker 6: Well, we're not going to feel happy because there's no deflation.

170
00:08:20,960 --> 00:08:23,440
Speaker 6: We're not going to feel happy because by the end

171
00:08:23,480 --> 00:08:26,160
Speaker 6: of twenty twenty five there will be tariffs and some

172
00:08:26,240 --> 00:08:29,120
Speaker 6: of that will be passed along to the consumer. We're

173
00:08:29,160 --> 00:08:31,960
Speaker 6: not going to be happy because I don't think there

174
00:08:31,960 --> 00:08:35,880
Speaker 6: will be additional tax cuts maybe on tips and overtime

175
00:08:36,320 --> 00:08:39,800
Speaker 6: and corporate tax cuts in twenty twenty five. I think

176
00:08:39,840 --> 00:08:42,679
Speaker 6: that's a twenty twenty six issue. So we're not going

177
00:08:42,720 --> 00:08:47,160
Speaker 6: to be real happy with further improvement and inflation. To me,

178
00:08:47,360 --> 00:08:50,520
Speaker 6: I took the same thing Lisa took away. They drop

179
00:08:50,640 --> 00:08:54,560
Speaker 6: gaining confidence in inflation out of the statement. To me,

180
00:08:54,679 --> 00:08:59,000
Speaker 6: that was an acknowledgement of a change in potential fiscal policy.

181
00:08:59,200 --> 00:09:01,199
Speaker 1: Do you think that that means potentially they won't cut

182
00:09:01,480 --> 00:09:02,320
Speaker 1: even in December?

183
00:09:03,200 --> 00:09:05,640
Speaker 6: No, I think there is how do you get from

184
00:09:05,679 --> 00:09:09,160
Speaker 6: here to there? It could be a number of quarters.

185
00:09:09,400 --> 00:09:12,320
Speaker 6: You've got to preserve the economy in some sort of

186
00:09:12,400 --> 00:09:15,079
Speaker 6: steady state. We're too high right now.

187
00:09:15,160 --> 00:09:17,240
Speaker 4: If I could jump off preserve I think j Powell

188
00:09:17,280 --> 00:09:20,480
Speaker 4: will want to preserve optionality. For twenty twenty five, A

189
00:09:20,520 --> 00:09:23,200
Speaker 4: lot can happen. It'll be more tricky in December because

190
00:09:23,200 --> 00:09:25,880
Speaker 4: there's the dots and so whatever the dots show, there'll

191
00:09:25,920 --> 00:09:28,760
Speaker 4: be questions about how confident the FED is on that path.

192
00:09:28,800 --> 00:09:30,960
Speaker 4: And I would suspect today he will begin to lay

193
00:09:31,000 --> 00:09:33,920
Speaker 4: out a path to give themselves a lot of optionality

194
00:09:34,120 --> 00:09:35,120
Speaker 4: in December as well.

195
00:09:35,320 --> 00:09:38,040
Speaker 2: Rich, This is important. You think they begin to communicate

196
00:09:38,120 --> 00:09:39,839
Speaker 2: at least open the door to have the option to

197
00:09:39,880 --> 00:09:42,280
Speaker 2: pause in December, and that starts today.

198
00:09:42,440 --> 00:09:43,840
Speaker 6: I do.

199
00:09:44,760 --> 00:09:47,240
Speaker 4: It may be subtle, but I do.

200
00:09:47,360 --> 00:09:49,960
Speaker 2: Help me understand what that sounds like at two thirty

201
00:09:50,120 --> 00:09:52,680
Speaker 2: what's SAP today?

202
00:09:52,679 --> 00:09:56,080
Speaker 4: I would imagine, Well, again, hypotheticals will know hypothetical would

203
00:09:56,080 --> 00:09:58,600
Speaker 4: be a question about next year, and the chairit will

204
00:09:58,600 --> 00:10:00,640
Speaker 4: say something along the lines of it too soon to

205
00:10:00,640 --> 00:10:03,239
Speaker 4: make a judgment, and we'll be looking at the incoming assessment.

206
00:10:03,280 --> 00:10:05,920
Speaker 4: And he'll remind folks that the rate path in the

207
00:10:06,000 --> 00:10:09,679
Speaker 4: SEP is conditional on inflation continuing to come down. If

208
00:10:09,679 --> 00:10:11,720
Speaker 4: there is a risk that it doesn't, that would factor

209
00:10:11,720 --> 00:10:14,040
Speaker 4: into the rate path. So it's more not so much

210
00:10:14,080 --> 00:10:16,640
Speaker 4: about getting into scenario details as it is. Look, the

211
00:10:16,720 --> 00:10:20,199
Speaker 4: rate path depends on continued progress on inflation or disinflation.

212
00:10:20,280 --> 00:10:22,240
Speaker 2: If you are just joining us, welcome to the program.

213
00:10:22,240 --> 00:10:24,439
Speaker 2: At twenty five basis point, reduction of the Federal Reserve

214
00:10:24,480 --> 00:10:26,680
Speaker 2: and news conference with Cham and pal in about twenty

215
00:10:26,720 --> 00:10:29,719
Speaker 2: minutes time, joining us nas Dyne Swunk of KPMG down

216
00:10:29,760 --> 00:10:32,520
Speaker 2: a twenty five basis point reduction and welcome to the program.

217
00:10:32,640 --> 00:10:34,200
Speaker 2: At a time, whether it's eights are still holding up

218
00:10:34,280 --> 00:10:36,880
Speaker 2: jobs claims are still quite low? Do they have the

219
00:10:36,960 --> 00:10:40,240
Speaker 2: luxury of waiting of setting up a pause in December?

220
00:10:42,720 --> 00:10:44,760
Speaker 7: Well, I do think they're going to be as exactly

221
00:10:44,760 --> 00:10:47,320
Speaker 7: as everyone has said that they want optionality. I think

222
00:10:47,320 --> 00:10:50,640
Speaker 7: they're still going to cut again in December. That said,

223
00:10:51,200 --> 00:10:54,839
Speaker 7: the good wants to start talking about calibrating rate cuts

224
00:10:54,920 --> 00:10:57,440
Speaker 7: to the economy and they're not going to be wanting

225
00:10:57,480 --> 00:11:01,760
Speaker 7: to pull rate cuts do as cuts sequentially. I think

226
00:11:02,040 --> 00:11:05,440
Speaker 7: in twenty twenty five, and optionality, as Rich said, is

227
00:11:05,480 --> 00:11:08,280
Speaker 7: going to be number one issue because they don't know

228
00:11:08,640 --> 00:11:11,880
Speaker 7: exactly what the policy will be, when policy will change,

229
00:11:12,160 --> 00:11:15,000
Speaker 7: how it will affect the economy, and that is going

230
00:11:15,040 --> 00:11:19,040
Speaker 7: to matter exactly as Rick stated that the certainty on

231
00:11:19,160 --> 00:11:22,800
Speaker 7: the dot plot in December is going to be really uncertainty.

232
00:11:22,840 --> 00:11:25,600
Speaker 7: And I think one of the greatest challenges that the

233
00:11:25,640 --> 00:11:29,240
Speaker 7: Fed now faces is communication. This is not a period

234
00:11:29,240 --> 00:11:32,120
Speaker 7: where you can give a lot of forward guidance because

235
00:11:32,200 --> 00:11:35,360
Speaker 7: of the uncertainty on the course of policy going forward.

236
00:11:35,679 --> 00:11:39,120
Speaker 5: Dan swank I was thunderstruck by the shift across the

237
00:11:39,160 --> 00:11:42,440
Speaker 5: Blue Wall towards mister Trump. We all saw it, frankly,

238
00:11:42,440 --> 00:11:44,440
Speaker 5: we saw it out in Long Island. Here in New

239
00:11:44,520 --> 00:11:47,000
Speaker 5: York as well. There seemed to be a halves and

240
00:11:47,040 --> 00:11:50,319
Speaker 5: a have nots here within the election. How does mister

241
00:11:50,440 --> 00:11:55,240
Speaker 5: Powell address both groups into twenty twenty five, How does

242
00:11:55,280 --> 00:11:59,600
Speaker 5: he aggregate and make a constructive policy for the people

243
00:12:00,000 --> 00:12:02,560
Speaker 5: a lot on their back that voted for Donald Trump.

244
00:12:04,920 --> 00:12:07,160
Speaker 7: Well, at the end of the day, Riches made this

245
00:12:07,280 --> 00:12:09,480
Speaker 7: point and I agree with them. At the end of

246
00:12:09,520 --> 00:12:13,040
Speaker 7: the day, the Fed's job is price stability. There is

247
00:12:13,120 --> 00:12:16,640
Speaker 7: deflation in some goods prices, so some goods prices are

248
00:12:16,679 --> 00:12:19,960
Speaker 7: coming down, they're still elevated from where they were. I

249
00:12:20,080 --> 00:12:23,320
Speaker 7: do worry about shelter costs and whether or not those

250
00:12:23,360 --> 00:12:26,880
Speaker 7: can really come down like many would like, and that

251
00:12:27,040 --> 00:12:29,520
Speaker 7: is a problem, and also insurance costs. Those are more

252
00:12:29,559 --> 00:12:32,240
Speaker 7: structural in nature. But at the end of the day,

253
00:12:32,240 --> 00:12:34,800
Speaker 7: it's the Fed's job, one way or the other to

254
00:12:34,840 --> 00:12:38,240
Speaker 7: get enough prices to fall to get to that price stability,

255
00:12:38,440 --> 00:12:42,040
Speaker 7: but to get inflation to no longer be number one issue,

256
00:12:42,120 --> 00:12:44,600
Speaker 7: I think that's going to be more challenging as we

257
00:12:44,679 --> 00:12:48,040
Speaker 7: get into twenty twenty six. I agree wholeheartedly that the

258
00:12:48,040 --> 00:12:51,520
Speaker 7: bulk of the policy shifts that we see, especially in

259
00:12:51,640 --> 00:12:54,560
Speaker 7: terms of fiscal policy, are not likely to hit till

260
00:12:54,559 --> 00:12:57,760
Speaker 7: twenty twenty six, and I don't expect a lot more

261
00:12:58,120 --> 00:13:01,200
Speaker 7: than the extension of the tax cuts that we had,

262
00:13:01,240 --> 00:13:05,160
Speaker 7: with maybe some additional corporate text cuts. But we will see,

263
00:13:05,280 --> 00:13:06,880
Speaker 7: and I think it will take some time. I don't

264
00:13:06,920 --> 00:13:08,240
Speaker 7: think it's all going to be done in the first

265
00:13:08,320 --> 00:13:12,280
Speaker 7: hundred days. The tariffs, as Rich said, are issues that

266
00:13:12,360 --> 00:13:14,640
Speaker 7: can be a level change, but if you combine them

267
00:13:14,679 --> 00:13:18,319
Speaker 7: with curbs and immigration at this time and actually have

268
00:13:18,440 --> 00:13:22,200
Speaker 7: any kind of deportations along with that, that tends to

269
00:13:22,240 --> 00:13:26,600
Speaker 7: both stem growth and stoke inflation. In this environment, we

270
00:13:26,679 --> 00:13:29,800
Speaker 7: are not where we were a pre pandemic, and certainly

271
00:13:29,920 --> 00:13:35,000
Speaker 7: tariffs in sequential order along with retaliatory tariffs, that kind

272
00:13:35,040 --> 00:13:37,840
Speaker 7: of a situation would be much harder for the Photo

273
00:13:37,880 --> 00:13:40,640
Speaker 7: Reserve to deal with, and the pressure on the FED

274
00:13:40,840 --> 00:13:43,360
Speaker 7: is going to intensify if that occurs.

275
00:13:43,480 --> 00:13:45,560
Speaker 1: There's a lot of nodding around the table. I find

276
00:13:45,559 --> 00:13:49,040
Speaker 1: it fascinating how little we understand inflation and exactly what's

277
00:13:49,120 --> 00:13:51,320
Speaker 1: going to cause a real surge in it. And I

278
00:13:51,360 --> 00:13:53,160
Speaker 1: do have to wonder and Bobb, I'll throw this to you,

279
00:13:53,200 --> 00:13:54,800
Speaker 1: because I know you think that the Fed should keep

280
00:13:54,840 --> 00:13:58,720
Speaker 1: cutting and that there is weakness to be addressing. I

281
00:13:58,720 --> 00:14:01,400
Speaker 1: am struck by the fact that there hasn't been a

282
00:14:01,480 --> 00:14:04,360
Speaker 1: more market slowdown in any of the economic data, with

283
00:14:04,440 --> 00:14:07,480
Speaker 1: high yields, with rates at the long end as high

284
00:14:07,520 --> 00:14:11,000
Speaker 1: as they've gotten, doesn't that tell us something about how

285
00:14:11,040 --> 00:14:15,040
Speaker 1: restrictive or not that restrictive policy actually is at this level.

286
00:14:16,040 --> 00:14:19,240
Speaker 6: Well, I think it's unfair to say there are no

287
00:14:19,400 --> 00:14:22,680
Speaker 6: signs of a slowdown. As I said, you look at

288
00:14:22,720 --> 00:14:26,240
Speaker 6: new and existing home sales, those are purely dependent on

289
00:14:26,920 --> 00:14:30,160
Speaker 6: the level of rates currently because we know home prices

290
00:14:30,200 --> 00:14:33,320
Speaker 6: aren't going to come back and they're quite high, and

291
00:14:33,360 --> 00:14:35,880
Speaker 6: so new and existing home sales are down. They're going

292
00:14:35,920 --> 00:14:39,480
Speaker 6: to decline further with this pop up in rates. And

293
00:14:39,560 --> 00:14:42,160
Speaker 6: as I said, in corporate America, you look at the

294
00:14:42,240 --> 00:14:45,520
Speaker 6: amount of amended and extent and pick there is a

295
00:14:45,560 --> 00:14:49,080
Speaker 6: lot of corporate America that's struggling with the higher cost

296
00:14:49,120 --> 00:14:51,280
Speaker 6: of funding, and a lot of that is floating rate.

297
00:14:51,720 --> 00:14:54,240
Speaker 6: So for me, if you're at the FED, you've got

298
00:14:54,240 --> 00:14:57,600
Speaker 6: to step back and say, okay, we're also looking at

299
00:14:57,720 --> 00:15:01,320
Speaker 6: performance of credit cards and audit loans and other things.

300
00:15:01,760 --> 00:15:04,440
Speaker 6: We do continue to need to take some of the

301
00:15:04,480 --> 00:15:07,400
Speaker 6: pressure off to ensure we have a soft lining. I'm

302
00:15:07,440 --> 00:15:10,320
Speaker 6: not talking about going to zero, two or three percent,

303
00:15:10,760 --> 00:15:13,680
Speaker 6: just saying where we are currently around five percent is

304
00:15:13,680 --> 00:15:15,120
Speaker 6: still a little bit too high.

305
00:15:15,280 --> 00:15:17,120
Speaker 5: I'm going to be the rude one today. The former

306
00:15:17,200 --> 00:15:19,520
Speaker 5: vice chairman of the Fuller Reserve System. This is Kylo

307
00:15:19,600 --> 00:15:21,920
Speaker 5: tash Over at C and N. Michael McKee passes it's

308
00:15:21,920 --> 00:15:24,920
Speaker 5: on to us. McKee insists that I'm as rude as

309
00:15:24,920 --> 00:15:28,920
Speaker 5: I can be. To Richard Clarita, there's speculation here after

310
00:15:28,960 --> 00:15:32,120
Speaker 5: the Powell term, your name is not mentioned. That's I

311
00:15:32,160 --> 00:15:35,880
Speaker 5: guess the good news. There's Kevin Hassett and Kevin Walsh

312
00:15:35,960 --> 00:15:38,840
Speaker 5: as well. Those are two very different people. What kind

313
00:15:38,880 --> 00:15:41,360
Speaker 5: of person do we need to run the FED into

314
00:15:41,440 --> 00:15:44,760
Speaker 5: the Trump administration? Do we need a monetary expert like

315
00:15:44,800 --> 00:15:47,880
Speaker 5: you on DSGE or can we use someone like worsh

316
00:15:47,920 --> 00:15:51,800
Speaker 5: who's more a part of the regulatory and wall street system.

317
00:15:51,640 --> 00:15:54,080
Speaker 4: Well, and also I would also throw on Chris Waller's

318
00:15:54,160 --> 00:16:00,520
Speaker 4: name as well as certainly beyond my life throwing rich. Look,

319
00:16:01,320 --> 00:16:06,000
Speaker 4: I think that there is no one cookie cutter job description.

320
00:16:06,200 --> 00:16:09,400
Speaker 4: I think that Jay Pal's been an incredibly successful FED chair,

321
00:16:09,760 --> 00:16:12,400
Speaker 4: Ben Burnankee Janet Yellen, so you can certainly come from

322
00:16:12,400 --> 00:16:14,880
Speaker 4: a background. What I would say about it is that

323
00:16:14,960 --> 00:16:18,520
Speaker 4: in the world today, it's not just hiking and lowering rates.

324
00:16:18,560 --> 00:16:21,640
Speaker 4: There's the communication piece we talked about. There is the

325
00:16:21,680 --> 00:16:25,440
Speaker 4: supervision and regulatory piece that is not just only about banks.

326
00:16:25,440 --> 00:16:29,480
Speaker 4: It's about how the economy functions and so and so.

327
00:16:29,560 --> 00:16:32,240
Speaker 4: It requires a special skill set and a special person.

328
00:16:32,280 --> 00:16:34,400
Speaker 4: But all the names you mean I think mentioned would

329
00:16:34,400 --> 00:16:35,120
Speaker 4: be good choices.

330
00:16:35,280 --> 00:16:36,880
Speaker 2: I just wanted to cross side of today and Swunk

331
00:16:36,920 --> 00:16:39,040
Speaker 2: just to fit in a final question before you run Awhite, Diane,

332
00:16:39,040 --> 00:16:41,080
Speaker 2: we always answer this question. If you had a question

333
00:16:41,120 --> 00:16:43,320
Speaker 2: for the chairman today in the news conference, Dan, what

334
00:16:43,360 --> 00:16:43,760
Speaker 2: would it be?

335
00:16:46,680 --> 00:16:50,000
Speaker 7: It would be how much discussion was there about the

336
00:16:50,160 --> 00:16:53,960
Speaker 7: labor market and the recent inflation numbers. I mean, that

337
00:16:54,120 --> 00:16:57,280
Speaker 7: is where the tire meets the road in terms of

338
00:16:57,320 --> 00:16:59,600
Speaker 7: where the next rate cut is going to be and

339
00:16:59,640 --> 00:17:03,240
Speaker 7: how much much are they secure in the labor market

340
00:17:03,320 --> 00:17:07,200
Speaker 7: weakness that we saw being transitory with regard to hurricanes

341
00:17:07,200 --> 00:17:10,120
Speaker 7: and strikes. We know that part is transitory, but there

342
00:17:10,200 --> 00:17:12,959
Speaker 7: is some signs that the labor market is slowing and

343
00:17:13,000 --> 00:17:15,399
Speaker 7: how concerned are they on that. The other issue I

344
00:17:15,400 --> 00:17:17,679
Speaker 7: think is really important one that we talk about all

345
00:17:17,720 --> 00:17:21,840
Speaker 7: the time. That word that's out there, nonlinearity, what the

346
00:17:21,840 --> 00:17:24,199
Speaker 7: FED always worries about. And this gets to the issue

347
00:17:24,200 --> 00:17:27,720
Speaker 7: of you know, when do rates have a bigger impact

348
00:17:27,760 --> 00:17:31,680
Speaker 7: on the economy? Is the nonlinear effects I think in

349
00:17:31,960 --> 00:17:36,760
Speaker 7: both delinquencies but also particularly in the business sector where

350
00:17:36,800 --> 00:17:39,040
Speaker 7: we do see some floating rates out there. There is

351
00:17:39,080 --> 00:17:42,119
Speaker 7: some stress now starting to show in the business sector,

352
00:17:42,160 --> 00:17:44,200
Speaker 7: and I think that's a very important issue.

353
00:17:44,400 --> 00:17:46,080
Speaker 2: Dan, you're one of the best. It is always greats get

354
00:17:46,119 --> 00:17:48,280
Speaker 2: some time with the Dan Swunk the of KPMG if

355
00:17:48,320 --> 00:17:51,000
Speaker 2: you want, just joining us about twelve thirteen minutes away

356
00:17:51,160 --> 00:17:53,920
Speaker 2: from a news conference with Chairman Powell. Equities at the moment,

357
00:17:54,160 --> 00:17:56,240
Speaker 2: Stone ass session highs at all time highs on the

358
00:17:56,359 --> 00:17:58,600
Speaker 2: S and P five hundred one point four percent on

359
00:17:58,640 --> 00:18:00,200
Speaker 2: the mat snack that is south as of rerec called

360
00:18:00,240 --> 00:18:02,720
Speaker 2: as well following a twenty five basis point reduction of

361
00:18:02,800 --> 00:18:05,640
Speaker 2: the Federal Reserve equity stay elevated. Not much price section

362
00:18:05,720 --> 00:18:08,160
Speaker 2: off the back of this decision this afternoon though, Joining

363
00:18:08,200 --> 00:18:10,400
Speaker 2: us now is Matt Lazeti over at Deutsche Bank. Matt,

364
00:18:10,400 --> 00:18:12,840
Speaker 2: I want your thoughts on the outlook and Matt, welcome

365
00:18:12,880 --> 00:18:15,480
Speaker 2: to the program. Have you made any changes since the

366
00:18:15,480 --> 00:18:17,680
Speaker 2: election this week, and if so, how many?

367
00:18:19,000 --> 00:18:21,000
Speaker 8: Yeah, thanks for having me. So we haven't really made

368
00:18:21,040 --> 00:18:23,640
Speaker 8: any official changes to the OUTLOK at this point. I think,

369
00:18:23,680 --> 00:18:25,240
Speaker 8: you know, we need to get in clarity on a

370
00:18:25,280 --> 00:18:28,320
Speaker 8: number of things. You know, how we're thinking about tax policy,

371
00:18:28,359 --> 00:18:31,080
Speaker 8: the sequencing of that between trade and tariffs will be

372
00:18:31,119 --> 00:18:33,840
Speaker 8: really important. But we did publish a note just given

373
00:18:34,080 --> 00:18:36,000
Speaker 8: kind of a guidepost to where we think the economy

374
00:18:36,400 --> 00:18:38,600
Speaker 8: may be moving and where the FED outlook may be

375
00:18:38,640 --> 00:18:40,919
Speaker 8: moving for next year, and in particular, you know, we

376
00:18:40,960 --> 00:18:42,639
Speaker 8: do think that we could upgrade our growth forecast for

377
00:18:42,680 --> 00:18:44,760
Speaker 8: next year, probably into the two and a half percent range,

378
00:18:45,080 --> 00:18:47,440
Speaker 8: give or take, or so. A labor market that is

379
00:18:47,440 --> 00:18:49,199
Speaker 8: probably going to look a little bit tighter on the

380
00:18:49,200 --> 00:18:53,280
Speaker 8: back of tax cuts that were likely to see easier

381
00:18:53,280 --> 00:18:55,639
Speaker 8: financial conditions that were likely to have but also a

382
00:18:55,720 --> 00:18:58,560
Speaker 8: FED that is likely cutting rates less next year than

383
00:18:58,560 --> 00:19:01,560
Speaker 8: we previously thought, and so yeah, we are kind of

384
00:19:01,560 --> 00:19:04,680
Speaker 8: outlined a scenario in which the FED stops cutting rates

385
00:19:04,680 --> 00:19:06,040
Speaker 8: above four percent next year.

386
00:19:06,240 --> 00:19:09,200
Speaker 1: Yeah, this is one comment from the recent note that

387
00:19:09,240 --> 00:19:11,440
Speaker 1: you put out that if it truly is a red

388
00:19:11,440 --> 00:19:13,800
Speaker 1: sweet and the likelihood is the FED funds rate remains

389
00:19:14,080 --> 00:19:17,800
Speaker 1: above four percent by the end of next year, with

390
00:19:17,840 --> 00:19:20,119
Speaker 1: growth and inflation revised upward. Matt, what would you have

391
00:19:20,160 --> 00:19:22,399
Speaker 1: to see to make that your base case?

392
00:19:23,760 --> 00:19:26,200
Speaker 8: Look, I think we're close to that. I think it's

393
00:19:26,200 --> 00:19:28,560
Speaker 8: just getting clarity on how we think the policy outlook

394
00:19:28,640 --> 00:19:30,560
Speaker 8: is likely to like it to evolve. You know, I

395
00:19:30,560 --> 00:19:33,480
Speaker 8: think we know a few things since the September meeting. One,

396
00:19:33,680 --> 00:19:35,760
Speaker 8: labor market data, I think, on balance have come in

397
00:19:35,840 --> 00:19:38,040
Speaker 8: better and have diminished some of the downside risks that

398
00:19:38,080 --> 00:19:41,119
Speaker 8: we've been worried about. Two, inflation data have come in

399
00:19:41,160 --> 00:19:43,320
Speaker 8: hotter than anticipated, and so I think if the Fed

400
00:19:43,320 --> 00:19:46,440
Speaker 8: were to have revised their forecast today, it's inflation higher,

401
00:19:46,440 --> 00:19:49,919
Speaker 8: a labor market that is tighter. Three financial conditions have

402
00:19:49,960 --> 00:19:53,000
Speaker 8: eased considerably since the September meeting, and so I think

403
00:19:53,280 --> 00:19:56,119
Speaker 8: as you look at all of that and just ignore

404
00:19:56,160 --> 00:19:59,040
Speaker 8: the election for the time being. You've actually had an

405
00:19:59,040 --> 00:20:01,600
Speaker 8: evolution in the data financial conditions, which would be hawkers

406
00:20:01,600 --> 00:20:03,840
Speaker 8: for the FED. Now we overlay on top of that,

407
00:20:04,560 --> 00:20:06,679
Speaker 8: you know, fiscal stiveness that may come via tax cuts,

408
00:20:07,000 --> 00:20:09,680
Speaker 8: trade policy that could lift inflation next year, and I think,

409
00:20:09,720 --> 00:20:12,440
Speaker 8: undeniably together these are just hawkersh developments for the VED.

410
00:20:12,960 --> 00:20:15,640
Speaker 5: That was Odie George Saravella's talk to them the other day.

411
00:20:15,800 --> 00:20:18,560
Speaker 5: He's a little occupied with the collapse of the German government.

412
00:20:18,680 --> 00:20:21,760
Speaker 5: But what does Deutsche Bank feel about the ability to

413
00:20:21,800 --> 00:20:25,240
Speaker 5: steer to a weaker dollar or something President Trump would like?

414
00:20:26,600 --> 00:20:29,359
Speaker 8: Yeah, you know, I'm not sure that that's actually something

415
00:20:29,400 --> 00:20:31,560
Speaker 8: that's going to be a key policy objective of the

416
00:20:31,560 --> 00:20:34,680
Speaker 8: Trump administration. I think some of their tone has changed

417
00:20:34,720 --> 00:20:36,399
Speaker 8: on that. I think that they have emphasized that the

418
00:20:36,400 --> 00:20:39,280
Speaker 8: reserve currency is a really important part. That they're making

419
00:20:39,400 --> 00:20:42,120
Speaker 8: the US economy a place for investment is a really

420
00:20:42,160 --> 00:20:45,600
Speaker 8: important part from a policy perspective. Now, certainly, you know,

421
00:20:45,600 --> 00:20:47,879
Speaker 8: a weeker dollar could help on some of the trade objectives,

422
00:20:47,880 --> 00:20:50,320
Speaker 8: but I don't anticipate kind of talking down the dollar

423
00:20:50,359 --> 00:20:52,240
Speaker 8: is going to be a big part of the next administration.

424
00:20:52,480 --> 00:20:54,440
Speaker 2: Matt, We've been told so many times by so many

425
00:20:54,440 --> 00:20:57,080
Speaker 2: people that the decision today was an easy one and

426
00:20:57,119 --> 00:20:59,720
Speaker 2: then maybe descend but will be an easy one when

427
00:20:59,720 --> 00:21:01,240
Speaker 2: do they decisions start to get hot?

428
00:21:03,200 --> 00:21:04,959
Speaker 8: So today was easy, I'm not sure December is going

429
00:21:04,960 --> 00:21:07,679
Speaker 8: to be as easy. If the incoming data continue to

430
00:21:07,720 --> 00:21:10,919
Speaker 8: point to a labor market that looks resilient and downside

431
00:21:10,960 --> 00:21:12,840
Speaker 8: risks have diminished, and if we get inflation data that

432
00:21:12,880 --> 00:21:16,359
Speaker 8: continue to come in a little bit hotter, along with

433
00:21:16,440 --> 00:21:19,119
Speaker 8: financial conditions that are easy, you know, we are beginning

434
00:21:19,119 --> 00:21:21,159
Speaker 8: to approach a range of kind of reasonable estimates of

435
00:21:21,200 --> 00:21:24,439
Speaker 8: neutral from our perspective. You know, we think neutral from

436
00:21:24,480 --> 00:21:27,040
Speaker 8: a nominal rate perspective could be anywhere probably between three

437
00:21:27,040 --> 00:21:29,440
Speaker 8: and a half and four percent. So after this cut,

438
00:21:29,520 --> 00:21:32,040
Speaker 8: you know, perhaps the December one can come and they

439
00:21:32,040 --> 00:21:34,159
Speaker 8: can still feel comfortable with that. But I really do

440
00:21:34,240 --> 00:21:36,320
Speaker 8: think that the December meeting is the first one where

441
00:21:36,520 --> 00:21:38,639
Speaker 8: we probably have a little bit more contentiousness around it

442
00:21:39,200 --> 00:21:42,639
Speaker 8: because they're approaching neutral. The data look fine, and you

443
00:21:42,680 --> 00:21:44,440
Speaker 8: do have risks to the outlook where just from a

444
00:21:44,520 --> 00:21:47,280
Speaker 8: risk management perspective, it could make some sense to slow

445
00:21:47,280 --> 00:21:48,040
Speaker 8: the pace of cuts.

446
00:21:48,080 --> 00:21:49,960
Speaker 1: Which do you agree with that, especially with the fact

447
00:21:50,000 --> 00:21:51,240
Speaker 1: that they have to come out with a statement of

448
00:21:51,240 --> 00:21:55,080
Speaker 1: economic projections. How that makes them forces them to really

449
00:21:55,520 --> 00:21:58,280
Speaker 1: write down, codify this idea of a neutral rate north

450
00:21:58,280 --> 00:21:59,000
Speaker 1: to four percent.

451
00:21:59,240 --> 00:22:02,920
Speaker 4: Yes, I think that scenario is certainly a plausible one.

452
00:22:03,400 --> 00:22:05,560
Speaker 4: The nuance I would offer is I could see a

453
00:22:05,600 --> 00:22:07,320
Speaker 4: scenario where they get the funds rate down to a

454
00:22:07,359 --> 00:22:10,119
Speaker 4: round four and stay there, not as neutrals four, but

455
00:22:10,200 --> 00:22:12,040
Speaker 4: just inflation stuck at two and a half. I don't

456
00:22:12,040 --> 00:22:14,520
Speaker 4: see the power Fed breaking a lot of China to

457
00:22:14,520 --> 00:22:16,360
Speaker 4: get inflation down from two and a half to two

458
00:22:16,359 --> 00:22:18,679
Speaker 4: with raid hikes, but they may just pause at a

459
00:22:18,720 --> 00:22:21,160
Speaker 4: funds rate in the low force because inflation stuck it

460
00:22:21,480 --> 00:22:23,919
Speaker 4: at two and a half. So that's another way that

461
00:22:24,000 --> 00:22:25,920
Speaker 4: delivers Math's scenario.

462
00:22:26,119 --> 00:22:28,800
Speaker 1: Matt, what do you think of the idea of tariffs

463
00:22:28,800 --> 00:22:30,240
Speaker 1: being inflationary versus not?

464
00:22:30,440 --> 00:22:30,600
Speaker 5: Right?

465
00:22:30,600 --> 00:22:31,959
Speaker 1: I mean, what are you sort of looking at as

466
00:22:31,960 --> 00:22:35,840
Speaker 1: the most inflationary aspects of policy? That would be maybe

467
00:22:35,880 --> 00:22:38,199
Speaker 1: a warning side signed for the Federal Reserve.

468
00:22:39,440 --> 00:22:39,640
Speaker 7: Yeah.

469
00:22:39,720 --> 00:22:42,760
Speaker 8: I think the complications for the Fed next year could

470
00:22:42,760 --> 00:22:45,119
Speaker 8: be that we have demand side policy in terms of

471
00:22:45,160 --> 00:22:47,959
Speaker 8: tax cuts happening with an economy that is already strong,

472
00:22:48,359 --> 00:22:51,960
Speaker 8: being coupled with supply side policy via tariffs that would

473
00:22:52,000 --> 00:22:54,600
Speaker 8: lift inflation, and both of those things being kind of

474
00:22:54,600 --> 00:22:56,720
Speaker 8: giving an inflationary outcome where it makes it difficult to

475
00:22:56,760 --> 00:23:00,240
Speaker 8: disentangle what's happening from a demand side versus a supply

476
00:23:00,359 --> 00:23:02,480
Speaker 8: side story. You know, certainly if the VED was able

477
00:23:02,520 --> 00:23:05,840
Speaker 8: to identify, they could potentially look through the tariff effects

478
00:23:05,920 --> 00:23:08,480
Speaker 8: on inflation. But I think that they are probably just

479
00:23:08,560 --> 00:23:10,840
Speaker 8: less prone to do so for a few reasons. One,

480
00:23:10,880 --> 00:23:13,560
Speaker 8: inflation is already above their target and is continuing to

481
00:23:13,560 --> 00:23:17,399
Speaker 8: do so. Two, inflation expectations could be at risk of

482
00:23:17,440 --> 00:23:20,880
Speaker 8: moving higher, and I think that this is primarily or

483
00:23:20,920 --> 00:23:24,200
Speaker 8: even more so an issue if those tariffs are phased

484
00:23:24,200 --> 00:23:26,880
Speaker 8: in over time. It makes it more difficult and complicated,

485
00:23:27,119 --> 00:23:29,240
Speaker 8: I think, to identify the price level shock and makes

486
00:23:29,280 --> 00:23:31,160
Speaker 8: you a little bit more worried about it factoring into

487
00:23:31,160 --> 00:23:32,320
Speaker 8: inflation expectations.

488
00:23:32,359 --> 00:23:34,800
Speaker 5: So about Michael, if I want to affect the Lazetti

489
00:23:34,880 --> 00:23:38,080
Speaker 5: Claire to move here in bonds, price up, yield down?

490
00:23:38,480 --> 00:23:41,280
Speaker 5: How far out unduration do I want to be into

491
00:23:41,359 --> 00:23:44,240
Speaker 5: twenty twenty five? Do I want to extend duration?

492
00:23:45,040 --> 00:23:45,320
Speaker 7: Yeah?

493
00:23:45,359 --> 00:23:46,840
Speaker 6: I think you do. Here, I think there are a

494
00:23:46,840 --> 00:23:49,199
Speaker 6: lot of things to do. That's kind of interest we're

495
00:23:49,200 --> 00:23:52,480
Speaker 6: seeing from clients to municipal bond market is a large

496
00:23:52,520 --> 00:23:55,080
Speaker 6: part of that. A lot of clients owned municipal bonds

497
00:23:55,119 --> 00:23:58,520
Speaker 6: have ladders. Stuff is rolling off, roll it out to

498
00:23:58,600 --> 00:24:01,360
Speaker 6: ten years. There's a lot going on in credit. Get

499
00:24:01,400 --> 00:24:04,600
Speaker 6: out there and invest. You have to recognize there's been

500
00:24:04,720 --> 00:24:08,840
Speaker 6: a pretty significant backup in yield. We don't know what

501
00:24:08,880 --> 00:24:11,679
Speaker 6: fiscal policy will look like, and it sure looks like

502
00:24:11,720 --> 00:24:13,920
Speaker 6: we're not going to see a lot before a year

503
00:24:14,000 --> 00:24:14,199
Speaker 6: or so.

504
00:24:14,440 --> 00:24:16,040
Speaker 2: You know, there's some people Bob worried about it by

505
00:24:16,040 --> 00:24:18,160
Speaker 2: a strike emerging in the bond market, and I just wonder,

506
00:24:18,200 --> 00:24:20,159
Speaker 2: with yields at these levels, do we just keep sucking

507
00:24:20,160 --> 00:24:22,159
Speaker 2: capital away from the rest of the world here in

508
00:24:22,160 --> 00:24:24,600
Speaker 2: the United States, Because if I'm thinking about the policy

509
00:24:24,600 --> 00:24:27,160
Speaker 2: coming down the pike from my perspective and many others

510
00:24:27,160 --> 00:24:29,560
Speaker 2: as well, if you're investig in America, there's going to

511
00:24:29,560 --> 00:24:31,960
Speaker 2: be policies to reward it. If you're exporting it, that's

512
00:24:31,960 --> 00:24:34,880
Speaker 2: a very very different scenario of trying to export into America.

513
00:24:34,920 --> 00:24:37,359
Speaker 2: But do we just keep sucking capital away from the

514
00:24:37,400 --> 00:24:38,280
Speaker 2: rest of the world.

515
00:24:38,359 --> 00:24:41,359
Speaker 6: Well, yesterday was the perfect evidence of that. There was

516
00:24:41,480 --> 00:24:45,040
Speaker 6: every reason to hide from the bond market. You had

517
00:24:45,040 --> 00:24:48,320
Speaker 6: a thirty year auction and it went flawlessly.

518
00:24:49,000 --> 00:24:52,240
Speaker 4: You see the same thing, Rich, I do, And in particular, look,

519
00:24:52,280 --> 00:24:54,560
Speaker 4: we focus on the US, but it's a global bond market,

520
00:24:54,640 --> 00:24:56,760
Speaker 4: and treasure yields four and a half. We saw a year,

521
00:24:56,800 --> 00:24:59,200
Speaker 4: almost exactly a year ago, treasure yields got to five,

522
00:24:59,440 --> 00:25:02,320
Speaker 4: and there was a voracious appetite to lock in those

523
00:25:02,480 --> 00:25:04,560
Speaker 4: those yields. And so I do think there's a range

524
00:25:04,600 --> 00:25:06,760
Speaker 4: within which the growth and the FED and the fiscal

525
00:25:06,800 --> 00:25:09,639
Speaker 4: pit plays in. But beyond a certain point, it becomes

526
00:25:09,760 --> 00:25:12,040
Speaker 4: very attractive to international investors.

527
00:25:12,080 --> 00:25:14,680
Speaker 2: So we retain the privilege of acting recklessly. Some people

528
00:25:14,760 --> 00:25:16,560
Speaker 2: might say iolutely.

529
00:25:16,080 --> 00:25:17,520
Speaker 4: Kicking that can down the road.

530
00:25:18,000 --> 00:25:20,760
Speaker 1: Yeah, although I do wonder what the consequence is of

531
00:25:20,840 --> 00:25:23,840
Speaker 1: kicking the can down the road and then Germany saying, hey,

532
00:25:23,840 --> 00:25:26,159
Speaker 1: they're doing it, so we want to too. You know,

533
00:25:26,200 --> 00:25:28,960
Speaker 1: this sounds like a good plan France, Hey what about us?

534
00:25:28,960 --> 00:25:31,040
Speaker 1: And all of a sudden you get yields rising higher?

535
00:25:31,200 --> 00:25:33,199
Speaker 1: And how much does the bond market suck in the

536
00:25:33,240 --> 00:25:35,080
Speaker 1: capital away from other risk assets?

537
00:25:35,119 --> 00:25:35,800
Speaker 8: That's the question.

538
00:25:36,160 --> 00:25:38,040
Speaker 1: No, I'm serious That's one of my main questions.

539
00:25:38,119 --> 00:25:40,240
Speaker 2: Some of these European bond markets have learned they're not

540
00:25:40,280 --> 00:25:43,240
Speaker 2: American and that has been a painful lesson which one

541
00:25:43,600 --> 00:25:45,480
Speaker 2: you've seen that In the UK you had a little

542
00:25:45,480 --> 00:25:47,320
Speaker 2: sprinkle of that. In France we still that and the

543
00:25:47,320 --> 00:25:48,720
Speaker 2: periphery a decade ago.

544
00:25:49,920 --> 00:25:52,320
Speaker 4: Well, I'm just saying the challenge for many European countries

545
00:25:52,600 --> 00:25:55,359
Speaker 4: is the countries they'd like to invest on don't have

546
00:25:55,400 --> 00:25:57,520
Speaker 4: a lot of debt out standing, like Germany and Switzerland,

547
00:25:57,560 --> 00:25:59,720
Speaker 4: and the countries that want to borrow have to pay

548
00:25:59,720 --> 00:26:00,639
Speaker 4: a big premium.

549
00:26:00,680 --> 00:26:02,919
Speaker 2: So yeah, I want to cross back out. It's a MATLAZETI matight,

550
00:26:03,000 --> 00:26:05,200
Speaker 2: just before you run, what's the best way of getting

551
00:26:05,240 --> 00:26:07,440
Speaker 2: the chairman to answer a question about the election without

552
00:26:07,480 --> 00:26:10,000
Speaker 2: answering a question about the election, because that's all every

553
00:26:10,080 --> 00:26:12,320
Speaker 2: journalist on the planet right now is thinking, and every

554
00:26:12,320 --> 00:26:14,720
Speaker 2: single journalist in that news conference will be trying to do.

555
00:26:16,119 --> 00:26:18,200
Speaker 8: Yeah, I think it's a really difficult one. I think

556
00:26:18,240 --> 00:26:20,040
Speaker 8: at the moment, you know, chair Pal has really no

557
00:26:20,080 --> 00:26:23,200
Speaker 8: incentive to answer any question about what fiscal policy.

558
00:26:22,880 --> 00:26:23,359
Speaker 6: Is going to look like.

559
00:26:23,359 --> 00:26:24,960
Speaker 8: There's so much uncertainty, you know, I think he's going

560
00:26:25,000 --> 00:26:27,480
Speaker 8: to emphasize data dependence. I guess if you could do

561
00:26:27,520 --> 00:26:29,919
Speaker 8: it through a few avenues, it would be one, you know,

562
00:26:29,920 --> 00:26:32,199
Speaker 8: how they think about risks to the outlook as they

563
00:26:32,200 --> 00:26:34,639
Speaker 8: look ahead, you know, in terms of the policy outlook

564
00:26:34,680 --> 00:26:37,640
Speaker 8: that has to fact earned out to the thinking about things. Two.

565
00:26:37,840 --> 00:26:40,520
Speaker 8: I think it was interesting at the September meeting he

566
00:26:40,640 --> 00:26:43,480
Speaker 8: noted that the neutral rate has risen quote unquote significantly

567
00:26:43,480 --> 00:26:47,159
Speaker 8: relative to the pre COVID levels, And I would you know,

568
00:26:47,280 --> 00:26:49,919
Speaker 8: just kind of think, you know, if we're getting additional

569
00:26:49,960 --> 00:26:52,240
Speaker 8: and fiscal stimulus on that, how would he view the

570
00:26:52,480 --> 00:26:54,480
Speaker 8: outlook for the neutral rate as evolving in that type

571
00:26:54,480 --> 00:26:56,720
Speaker 8: of environment. But to be honest, I think it's difficult

572
00:26:56,720 --> 00:26:58,720
Speaker 8: to get kind of a solid answer for him about

573
00:26:58,720 --> 00:27:00,600
Speaker 8: what the election could mean for the OUTLOK at this meeting.

574
00:27:00,760 --> 00:27:03,080
Speaker 2: Matt, I appreciate your time, Sir Matta SETI if Deutsche

575
00:27:03,160 --> 00:27:05,719
Speaker 2: Bank about three minutes ago until this news conference starts,

576
00:27:06,040 --> 00:27:08,320
Speaker 2: Rich'll perfectly placed to answer that question. What would you

577
00:27:08,440 --> 00:27:10,480
Speaker 2: lead into in this news conference if you will on

578
00:27:10,520 --> 00:27:13,280
Speaker 2: the side asking the questions, what would you lean on?

579
00:27:14,560 --> 00:27:18,600
Speaker 4: I think I'd ask the chair about financial conditions broadly

580
00:27:18,720 --> 00:27:21,080
Speaker 4: versus the real funds right, because it does seem over

581
00:27:21,119 --> 00:27:24,480
Speaker 4: the last year the Committee at some points emphasizes tighter

582
00:27:24,520 --> 00:27:27,760
Speaker 4: financial conditions. We saw that explicitly in the statement in

583
00:27:27,800 --> 00:27:31,920
Speaker 4: both November and December of last year. More recently they've emphasized, well, look,

584
00:27:31,960 --> 00:27:34,520
Speaker 4: the funds rates well above the rate of inflation. But

585
00:27:35,040 --> 00:27:37,680
Speaker 4: at the same time, financial conditions have been getting easier.

586
00:27:38,400 --> 00:27:40,640
Speaker 4: And it's not necessarily have to pick one or the other,

587
00:27:40,760 --> 00:27:42,800
Speaker 4: but get a sense of how he and the Committee

588
00:27:42,800 --> 00:27:45,880
Speaker 4: are thinking about that right right now in a global

589
00:27:45,920 --> 00:27:48,280
Speaker 4: market and in the US market in which it's definitely

590
00:27:48,400 --> 00:27:51,879
Speaker 4: risk gone in the last several days and really for

591
00:27:52,320 --> 00:27:53,120
Speaker 4: some time now.

592
00:27:53,680 --> 00:27:55,879
Speaker 5: I've asked this before, but I think it's so important.

593
00:27:55,960 --> 00:28:00,000
Speaker 5: Where's the animal spirit into twenty twenty five? President Trump's

594
00:28:00,119 --> 00:28:02,879
Speaker 5: going to go, go, go, go go. He's going to

595
00:28:02,920 --> 00:28:07,240
Speaker 5: do that before January whatever the inauguration. How goosed is

596
00:28:07,280 --> 00:28:09,840
Speaker 5: the economy economy going to be under Trump?

597
00:28:10,560 --> 00:28:13,240
Speaker 4: Well, I think there is that element at minimum, because

598
00:28:13,359 --> 00:28:16,320
Speaker 4: we did resolve some uncertainty. I think about the extension

599
00:28:16,359 --> 00:28:18,560
Speaker 4: of the existing I would again remind you if we

600
00:28:18,640 --> 00:28:21,879
Speaker 4: extend the existing tax cuts, it's very expensive in terms

601
00:28:21,880 --> 00:28:23,679
Speaker 4: of the way it's scored by the CBO, but it

602
00:28:23,680 --> 00:28:27,240
Speaker 4: doesn't change anybody's you know, tax rates relative to what

603
00:28:27,240 --> 00:28:30,760
Speaker 4: they're paying paying now. I think the regulation in particular

604
00:28:30,880 --> 00:28:34,480
Speaker 4: certain sectors energy and perhaps financial services is sort of

605
00:28:34,480 --> 00:28:38,160
Speaker 4: a one time reassessment. I don't think you can keep

606
00:28:38,160 --> 00:28:40,480
Speaker 4: that going. I think we are seeing more or less rational,

607
00:28:40,600 --> 00:28:45,080
Speaker 4: least directionality wise reaction to markets. And to point on

608
00:28:45,120 --> 00:28:48,120
Speaker 4: the dollar, strong, strong dollar. I know someone like a weaker,

609
00:28:48,160 --> 00:28:50,080
Speaker 4: but this is the dollar is the sum.

610
00:28:50,280 --> 00:28:54,960
Speaker 1: Yeah, So, Bob, final question, we're about a minute ninety

611
00:28:55,000 --> 00:28:57,480
Speaker 1: seconds away from this press conference. How would you get

612
00:28:57,520 --> 00:29:00,760
Speaker 1: him to answer something about his new risks?

613
00:29:00,880 --> 00:29:03,120
Speaker 6: You know, I'd ask the question we had gone back

614
00:29:03,200 --> 00:29:06,560
Speaker 6: and forth on, ask him, what is your staff modeling now?

615
00:29:06,920 --> 00:29:10,680
Speaker 6: Because there's the current and expect set of data, and

616
00:29:10,760 --> 00:29:16,320
Speaker 6: there's the majority probability that there's enormous fiscal stimulus coming

617
00:29:16,360 --> 00:29:19,160
Speaker 6: down the pike a year from now, what do you model?

618
00:29:19,560 --> 00:29:22,680
Speaker 2: This has been a fantastic conversation, gents, Bob Michael and

619
00:29:22,720 --> 00:29:24,840
Speaker 2: a former FED Vice chair Richard Cloda, to the two

620
00:29:24,840 --> 00:29:27,120
Speaker 2: of you, just absolutely brilliant. Just some takeaway from the

621
00:29:27,200 --> 00:29:29,680
Speaker 2: last thirty minutes if you're just joining us, Richard Cloud,

622
00:29:29,720 --> 00:29:32,200
Speaker 2: are talking about maybe finding some space to generate some

623
00:29:32,280 --> 00:29:35,240
Speaker 2: optionality going into twenty twenty five, and if it's a

624
00:29:35,240 --> 00:29:38,320
Speaker 2: consensus around this table as well, that the decision gets

625
00:29:38,320 --> 00:29:40,520
Speaker 2: harder once you get to December, and that this one

626
00:29:40,560 --> 00:29:43,160
Speaker 2: was an easy one and maybe December is a tricky one.

627
00:29:43,200 --> 00:29:45,880
Speaker 1: My big takeaway is that the FED removed the reference

628
00:29:45,920 --> 00:29:48,720
Speaker 1: and their statement to gaining confidence on inflation at the

629
00:29:48,720 --> 00:29:51,760
Speaker 1: same time that our panelists, our Steam panelists, are talking

630
00:29:51,760 --> 00:29:54,480
Speaker 1: about opening the door in December to either not cutting

631
00:29:54,520 --> 00:29:58,760
Speaker 1: rates or potentially going forward and maybe not cutting next year.

632
00:29:58,800 --> 00:30:00,720
Speaker 2: Are you ready for a forty five minute clinic on

633
00:30:00,760 --> 00:30:03,400
Speaker 2: how to not answer questions? Are you ready for this ex.

634
00:30:03,520 --> 00:30:04,360
Speaker 8: I'm so excited.

635
00:30:04,480 --> 00:30:05,960
Speaker 5: Is this a certified snooze first?

636
00:30:06,200 --> 00:30:09,560
Speaker 1: No, absolutely, not touch It is going to be pretty well.

637
00:30:09,680 --> 00:30:10,960
Speaker 2: I think it's going to be one of those news

638
00:30:10,960 --> 00:30:13,680
Speaker 2: conferences and mister Clarenden knows this well, where you have

639
00:30:13,720 --> 00:30:15,520
Speaker 2: a sheet of paper in front of you, You've got

640
00:30:15,520 --> 00:30:17,640
Speaker 2: your notes written down, and every time you get that question,

641
00:30:18,080 --> 00:30:19,040
Speaker 2: different versions off it.

642
00:30:19,440 --> 00:30:19,960
Speaker 6: That sheet of.

643
00:30:19,960 --> 00:30:22,800
Speaker 2: Paper comes up and you read it verbatim and hope

644
00:30:22,840 --> 00:30:23,800
Speaker 2: they get bored of asking.

645
00:30:24,000 --> 00:30:26,280
Speaker 1: My favorite is when they have multiple sheets when Jay

646
00:30:26,320 --> 00:30:28,440
Speaker 1: Pall has multiple sheets, and someone asks a question, you

647
00:30:28,480 --> 00:30:31,600
Speaker 1: see him going through the papers. Wait, where's okay, there's

648
00:30:31,640 --> 00:30:32,080
Speaker 1: the answer.

649
00:30:32,440 --> 00:30:34,840
Speaker 5: Have you ever written one of those questions the answer

650
00:30:34,920 --> 00:30:36,040
Speaker 5: sheets for the chairman.

651
00:30:37,320 --> 00:30:40,240
Speaker 4: I participated in discussions of press conference briefings.

652
00:30:40,320 --> 00:30:43,200
Speaker 2: Yes, twenty five bases point reduction over the federerser