Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: With your fet decision, He's Mike mckag two dots, no
Speaker 2: rate move.
Speaker 3: The median of the nineteen Fed officials projection for rate
Speaker 3: cuts this year moves to two from three in March.
Speaker 3: Policymakers are quite divided, however, eight members seat just two
Speaker 3: cuts this year, seven set only one for vote no change.
Speaker 3: They now have four penciled in for twenty twenty five,
Speaker 3: although the range is so wide it's almost meaningless. The
Speaker 3: neutral rate also moves up the media, now two point
Speaker 3: eight percent from two point six percent, although they don't
Speaker 3: get there until after twenty twenty six. Nine members see
Speaker 3: neutral as three percent or higher, one as high as
Speaker 3: three point seven five percent. The fedce target range stays
Speaker 3: in the range of five and a quarter to five
Speaker 3: and a half percent. No change in the two point
Speaker 3: one percent GDP projection for twenty twenty four, two percent
Speaker 3: for next year. No change in the four percent unemployment
Speaker 3: forecast for this year, though twenty twenty six moves up
Speaker 3: a tick from March to four point two percent. It's
Speaker 3: PCEE inflation where we see the biggest change in the
Speaker 3: forecasts headline of two point six this year, up from
Speaker 3: two point four percent in the March. Projections next year
Speaker 3: to three from two two. Corps PCEE is forecast at
Speaker 3: two point eight percent this year, up from two point
Speaker 3: six percent next year, also two point three from two
Speaker 3: point two. Inflation was the only significant change in the
Speaker 3: statement following today's better than expected CPI. The statement now
Speaker 3: says in recent months there has been modest further progress
Speaker 3: toward the committee's two percent inflation target.
Speaker 4: The decision was unanimous. Mi McKay.
Speaker 2: Thank you, sir. If you were looking for five works
Speaker 2: in financial markets, you missed it all. It happened about
Speaker 2: six hours ago at eight thirty Eastern time, and the
Speaker 2: equity market. Some of these, most stick on the S
Speaker 2: and P five hundreds, still positive by about zero point
Speaker 2: nine percent on the Nasna Cup by Malvin one four
Speaker 2: percentage point to Yale to Lisa, just off the loads
Speaker 2: of the session, but still down twelve or thirteen basis
Speaker 2: points to four seventy on a two year.
Speaker 5: There's nothing that would really shake up what we saw earlier.
Speaker 5: It is interesting, though, that they did increase their expectation
Speaker 5: for crow PCE inflation to two point eight percent versus
Speaker 5: two point six percent, and it raises a question about
Speaker 5: the idea of are they tacitly allowing inflation to go
Speaker 5: be two point something to Muhammadalarian's point, rather than exactly
Speaker 5: two percent as they allow this to happen even with
Speaker 5: two potential rate cuts baked in TK what's your takeaway?
Speaker 6: My takeaway here is at eight thirty was really really important,
Speaker 6: and it moves us right onto all the other economic data,
Speaker 6: and I go back to economic growth and there is
Speaker 6: a surprise this year that we get more buoyant economic
Speaker 6: growth than a lot of the gloomen grews talking about.
Speaker 2: Want to get back over to my MAAC might just
Speaker 2: briefly just work through that again for us, Explain to
Speaker 2: us where that median dot is. We were looking for
Speaker 2: three cuts in the median dot last time around. Where's
Speaker 2: that median doll for twenty four?
Speaker 3: Now the median dot is at two cuts for twenty
Speaker 3: twenty four for twenty twenty five, but the range has
Speaker 3: narrowed considerably but still broad because there are at this
Speaker 3: point eight members seeing two cuts this year, so that
Speaker 3: makes it the median seven saw only one and four
Speaker 3: voted for no change, so they seem quite divided, which
Speaker 3: would suggest that at this point there is no consensus
Speaker 3: on the committee about what's going to happen the rest
Speaker 3: of this year.
Speaker 2: Mike McKay, Thank you, sir. Mike mcke will be in
Speaker 2: that news conference in about twenty seven minutes time when
Speaker 2: it kicks off with Sham and poal from any any
Speaker 2: questions for Cham and Powell in this press are based
Speaker 2: on that.
Speaker 1: Uh yeah, I do.
Speaker 5: Number one, how long will you tolerate inflation above two percent?
Speaker 5: How quickly is an okay pace to move to get
Speaker 5: inflation down? And the second thing I'm still thinking about this.
Speaker 5: One participant had a new neutral rate proposal of three
Speaker 5: point seventy five percent.
Speaker 1: That's pretty bold.
Speaker 5: I mean it's pretty much in line with my marketsar
Speaker 5: for three and a half percent. Nonetheless, that resets a
Speaker 5: lot of questions about market valuations that maybe on the margins,
Speaker 5: could really change investment pieces.
Speaker 2: Joining us now to discuss is Mohammad al Aaron of
Speaker 2: Queen's College, Cambridge, Bob Michael, JP Morgan still around the
Speaker 2: table with us. Mohammed, I want to come to you
Speaker 2: first if you want these forecasts based on what we
Speaker 2: learned early this morning at eight thirty Eastern time.
Speaker 7: So I wonder John whether those forecasts fully reflect this
Speaker 7: morning or whether were they were finalized before this morning.
Speaker 7: I was surprised to hear that four voted for no cuts,
Speaker 7: and I was surprised to see the inflation numbers go
Speaker 7: up both for the PC, both at headline and core.
Speaker 4: So only the one question I would have.
Speaker 7: For Chairman Powell is do those numbers and the expectations
Speaker 7: that four people had of Norway shots reflect this morning's
Speaker 7: inflation data or not.
Speaker 6: Mohammed timekeen good morning and a good afternoon. I should
Speaker 6: say good late afternoon and evening to you somebody today,
Speaker 6: echoed Peter or Zeg A long time ago of LS
Speaker 6: at a school. Mohammadself west of Cambridge, and Peter Orzeg
Speaker 6: talked about glide pass.
Speaker 4: Is our great underestimation.
Speaker 6: That the glide pass to get out of the pandemic
Speaker 6: with all this monetary policy is a much longer timeframe
Speaker 6: than we think. We're modeling FED meeting, the FED meeting,
Speaker 6: the silliness of September and December, where we should be
Speaker 6: modeling twenty twenty seven.
Speaker 7: We shot Tom and I've been urging to combine data
Speaker 7: dependency with more of a forward looking view of the economy.
Speaker 7: But that's not where the FED is, and as a result,
Speaker 7: that's not where the markets are. The markets are reacting
Speaker 7: to every single data point in the last month, just
Speaker 7: the last month, teny yields went up thirty basis points,
Speaker 7: came back down forty basis points, went back up twenty
Speaker 7: basis points, and came back down forty basis points. And
Speaker 7: what you realize is that there's no anchor. There's no
Speaker 7: longer term anchor to markets, and there's no longer term
Speaker 7: anchor to policies. We should be talking about the big
Speaker 7: secular changes and how that's going to impact the next
Speaker 7: twelve months, but that's not where the FED is, and
Speaker 7: therefore that's not where the markets are right now.
Speaker 5: I wonder how significant it is to Muhammad that we
Speaker 5: did see at least one participant materially mark up their
Speaker 5: long term neutral rate. As people try to understand what
Speaker 5: this means longer term.
Speaker 1: For what a FED rate cutting path could look.
Speaker 4: Like, it's about time.
Speaker 7: I mean, you know, there is a very active discussion
Speaker 7: of what's happening in the structure of the economy and
Speaker 7: why it is that the neutral weight is well above three,
Speaker 7: nearer to four. But the FED is moving very slowly
Speaker 7: on this, and FED chair Pale has refused to engage
Speaker 7: in discussions, either saying I don't care about it or
Speaker 7: I don't have a view about it. So yeah, it's
Speaker 7: about time they're going to have to really think about this.
Speaker 7: But again, Lisa, that is a forward looking parameter, and
Speaker 7: this is a FED that focuses excessively on the past
Speaker 7: and doesn't want to signal much about what's ahead.
Speaker 2: So if you are just joining us, welcome to the program. Equally,
Speaker 2: is still firmer by zero point nine percent on the
Speaker 2: S and P five hundred, we were hired by more
Speaker 2: than one four percentage point. Just ondoing some of the
Speaker 2: moves in the bond market. On a two year yield,
Speaker 2: yields are lower still by twelve basis points. They were
Speaker 2: lower by a little bit more than that earlier on.
Speaker 2: There was a lot of interest in the medium dot
Speaker 2: for twenty twenty four. Just want to clarify something that
Speaker 2: Mike was saying, they're now signaling they expect to cut
Speaker 2: rates only once this year, compared to the reduction of
Speaker 2: three which was kind of signaled back in March Bromo.
Speaker 2: So that's the change we were looking for. Would we
Speaker 2: come down for two, Well, it's a one. It looks
Speaker 2: like we've come down to one. But twenty twenty five
Speaker 2: kind of makes up for some of that in some way.
Speaker 5: Which is what some people were saying, is that you
Speaker 5: just basically push it out the following year, which is
Speaker 5: why it might not have been a massive deal. There
Speaker 5: was a big question before this whether or not it
Speaker 5: would matter to markets on the margins. Maybe you take
Speaker 5: back some of the gains in certain bonds right now,
Speaker 5: nonetheless not.
Speaker 1: A huge shift when you look at the overall cutting cycle.
Speaker 6: Well, Michael, I've got the ten year yield just touching
Speaker 6: two standard deviation move it's not a big deal. Four
Speaker 6: point two eight percent and gyrating around. What level of
Speaker 6: ten year yield do you need to really signal, to
Speaker 6: use Bullet's word, a new regime.
Speaker 8: It's not so much the ten year yield as the
Speaker 8: front end of the curve. I think the front end
Speaker 8: of the curve, you've got to see the Fed start
Speaker 8: cutting rates and then the front end start coming down
Speaker 8: towards four percent. I think that will pull the ten
Speaker 8: year down as well a little bit, but there's an
Speaker 8: awful lot into ten year part of the year.
Speaker 4: It's an unfair question.
Speaker 6: I'm going to ask you to speak for Michael Ferolian
Speaker 6: Kasman and the other economists at JP Morgan. Do they
Speaker 6: do harm to the American economy by being expost and delaying?
Speaker 6: What would your economists say?
Speaker 8: They do no harm to anyone? That I'm pretty sure of. Look,
Speaker 8: I think when you look at market movements, you have
Speaker 8: to understand that there are different constituencies that are involved.
Speaker 8: We talk to a lot of very large plans that
Speaker 8: are waiting for the Yeald curve to disinvert because based
Speaker 8: on their investment analytics, it doesn't make sense for them
Speaker 8: to come out of cash into the longer end of
Speaker 8: the curve. There are other buyers out there that are
Speaker 8: looking to part cash into safe dollar assets. So they're
Speaker 8: big dollar buyers. They want to own the dollar, and
Speaker 8: treasuries are the largest, most liquid way to do that.
Speaker 5: I have to say, I'm right now, I'm parsing through
Speaker 5: the statement and all the details, and it's a confusing one,
Speaker 5: so let's just go over it.
Speaker 1: Four FED officials see no rate cuts this year.
Speaker 5: That is up from two officials in the March production,
Speaker 5: so that is a more hawkish tilt. Seven C one cut, well,
Speaker 5: eight C two cuts. Honestly, we're looking at right now
Speaker 5: a narrow majority seeing no more than one cut this
Speaker 5: year is a base case this according to the statement.
Speaker 5: I'm looking at this and I'm wondering, John, all the
Speaker 5: people who said this would be some kind of massive shift.
Speaker 1: It isn't being taken.
Speaker 5: That way by the market as people pass through the
Speaker 5: longer term expectations for what the Fed hopes to accomplish
Speaker 5: and where the balance of risk is.
Speaker 2: Because we had a soothing number eight thirty Eastern time,
Speaker 2: I think that's kind of the takeaway, Is that, right, Boff?
Speaker 8: Yeah, I think so. It's what I started with. This
Speaker 8: is what you look for in the numbers. If there
Speaker 8: are a lot of people clustered around one dot, then
Speaker 8: they don't change their projections after the number they've submitted them.
Speaker 8: They let them go. The fact that there were four
Speaker 8: with no change, seven withth one dot, and only eight
Speaker 8: with two dots two rate cuts tells me that they
Speaker 8: submit them, they don't do anything. The statement's completely different.
Speaker 8: This statement talks about modest progress, continue to continues to
Speaker 8: be made on inflation.
Speaker 2: Let's get Mi McKay back into the conversation before Mike goes.
Speaker 2: Since that news conference, Mike, just to clarify some of
Speaker 2: the comments you had earlier.
Speaker 4: Your thoughts, well, I misspoke.
Speaker 3: One cut is themedian dot this year for this year,
Speaker 3: but it is, as you say, come somewhat confusing because
Speaker 3: of the way they do it. But looking out over
Speaker 3: the course of the year, the question is when do
Speaker 3: they do it because their PCE projection is basically for
Speaker 3: the year where PCE is now, So that's going to
Speaker 3: be a question for j Powell in his news conference.
Speaker 2: Mike, you get into the pressor thanks for your time, sir,
Speaker 2: happens to all of us, looking forward to your conference.
Speaker 2: In that news conference with Chairman Powell. A little bit later,
Speaker 2: Don Swunk is with us from KPMG. I want to
Speaker 2: bring her into the conversation. Mohammed's still with us, Bob,
Speaker 2: Michael as well. Dan, You've had about fifty minutes, ten
Speaker 2: minutes soside to go out of these numbers. What jumps
Speaker 2: out for you, Well.
Speaker 9: Certainly the upward rise in inflation. I was surprised at
Speaker 9: I expected them to mark down inflation a little bit
Speaker 9: so that is one that I think Mohammad also flagged.
Speaker 9: But I think what's important is we know that they've
Speaker 9: delayed the putting marking down of their dots on the
Speaker 9: dot plot, and that has become more of an iterative
Speaker 9: process to reflect more of a consensus of what they
Speaker 9: do talk about at the meeting. So I'm not sure
Speaker 9: that there's the dissonance there that we'd like to some
Speaker 9: would like to see in those numbers between today's data.
Speaker 10: And those actual dots.
Speaker 9: I think what it probably did was took out of
Speaker 9: play some people who might have had hikes in their
Speaker 9: interest rate scenario for twenty twenty four that then moved
Speaker 9: them to the zero portion those four people who voted
Speaker 9: for no change in rates. But I think that's very
Speaker 9: important is that the FED has also been very careful
Speaker 9: not to declare victory, as Julia said at the beginning
Speaker 9: at the end of the last show, and I think
Speaker 9: that's really important. They don't go out and say mission accomplished.
Speaker 9: They are very deliberative right now in terms of not
Speaker 9: getting too far ahead of themselves until the data comes
Speaker 9: to them.
Speaker 2: Now.
Speaker 9: I disagree that that's sort of neutral and doesn't cause
Speaker 9: any harm data dependence. The data are lagged, and so
Speaker 9: by the time the data comes to you, even if
Speaker 9: you're willing to settle in to a higher rate, ultimately
Speaker 9: it's still lagged, and it could be after the fact.
Speaker 9: And I think that's what you see in terms of
Speaker 9: the nervousness with j.
Speaker 10: Powell, because he worries much.
Speaker 9: More than some of his colleagues about overtightening.
Speaker 6: Dan swank I look at where we are and what
Speaker 6: the key thing is is, Bob Michael said, is we're
Speaker 6: beyond the first quarter of this year, the lethargy, the
Speaker 6: slow down, maybe some of the fear of the first quarter.
Speaker 6: What does your take on the state of the American
Speaker 6: economy is they stagger to September and December.
Speaker 9: Well, we're still in an economy that's generating a lot
Speaker 9: of jobs. You know, the household survey and the establishment
Speaker 9: survey aren't quite syncd up. They haven't been synced up
Speaker 9: for a long time, in part because we're undercounting the
Speaker 9: number of immigrants in the country and that's not fully
Speaker 9: showing up in the.
Speaker 10: Household survey as well.
Speaker 9: But we do know that we continue to generate jobs,
Speaker 9: we continue to generate paychecks, and if the last month's
Speaker 9: report is to be believed, and we have to be
Speaker 9: careful on that that we actually saw on acceleration in wages,
Speaker 9: that's something to sort of, I think, take with a
Speaker 9: grain of salt. But at the end of the day,
Speaker 9: this is an economy that for the moment is still
Speaker 9: hanging in there, although slowing from what was a stunning
Speaker 9: pace in twenty twenty three.
Speaker 5: Mohammed, I'd love to bring you back in here. I'm
Speaker 5: just going through all the different statements and this is
Speaker 5: a mess. I mean, in terms of all the different views.
Speaker 5: This is not a consensus that you could see that
Speaker 5: was easily reached.
Speaker 1: Maybe there it is for right now, but later.
Speaker 10: In this year.
Speaker 5: What the balance of risks here really is all over
Speaker 5: the map when it comes to the different Fed officials.
Speaker 5: Do you think that there is too much hawkish talk
Speaker 5: right now and too much hawkish projections at a time
Speaker 5: when it seems like the Fed is saying we still
Speaker 5: haven't done enough. We want to get to two percent
Speaker 5: a little bit sooner, even as we acknowledge this is
Speaker 5: going to.
Speaker 1: Be a battle.
Speaker 7: Yeah, I think if you were to take the SEP
Speaker 7: and the statement on face fully, on face value, this
Speaker 7: would be an overly hawkish policy.
Speaker 4: Stand for this economy.
Speaker 7: Among the other things, the fact that we are now
Speaker 7: at one cut means that given that the FED will
Speaker 7: not want to stop go stop go cycle, that means
Speaker 7: that cut comes late in the year, very late in
Speaker 7: the year. And I agree with Diane, it does matter
Speaker 7: when you start the cutting cycle. It really does matter.
Speaker 7: It matters for small businesses, it matters for low income households,
Speaker 7: and it matters for the economy. So if you were
Speaker 7: to take this at face value, then this the market
Speaker 7: would be selling off right now.
Speaker 4: But it's not for good reason.
Speaker 7: And that's what I said earlier and Bob mentioned it
Speaker 7: as well, is I don't think this fully reflects the
Speaker 7: latest set of data. And given that this is data
Speaker 7: the dependent FED. If this had if the data had
Speaker 7: happened yesterday or the day before, the S and P
Speaker 7: would look very different than it is today. And that's
Speaker 7: why the press conference is going to be so critical.
Speaker 7: And that's why Chap Pak can I'll do what Bob
Speaker 7: wanted him to do half an hour ago, because he's
Speaker 7: really going to have to explain things now.
Speaker 2: There's a mammad based on this, based on the guardnance
Speaker 2: we've got in our hands. At the moment, it sounds
Speaker 2: like December. Are you telling me, by the time this
Speaker 2: news conference had finishes, it will sound like September. I
Speaker 2: suspect so, John, Bob, you agree with that, don't you?
Speaker 8: Yeah, I completely agree with that. And I think Diane
Speaker 8: and Muhammad point out a very important thing, which are
Speaker 8: the long and variable lags are real when we look
Speaker 8: at lower and middle income households, when we look at
Speaker 8: small business is they're struggling with the high cost of everything.
Speaker 8: They're struggling with the much higher cost of financing those
Speaker 8: higher prices, and you're seeing it in delinquencies. You're seeing
Speaker 8: it in charge offs and write downs and losses.
Speaker 5: Right now, I'm looking at some of the commentary, some
Speaker 5: people saying that the reason why there was a hawkish
Speaker 5: tilt was because of PTSD from the first quarter. Diane,
Speaker 5: I'd love to think your take on this, you think,
Speaker 5: and not to be all conspiracy theorists, but do you
Speaker 5: think that any FED officials thought to themselves, you know,
Speaker 5: we should probably be hawkish just to offset the inevitably
Speaker 5: dubvish message that we're going to get from FED chair
Speaker 5: Powell later today and we can frankly offset that later
Speaker 5: in this year if the data comes in such.
Speaker 9: Well, I know, I don't think that's the case, just
Speaker 9: because I just don't think they think that far ahead
Speaker 9: on this, and I think that's important.
Speaker 10: I do think that part of what we're seeing here is.
Speaker 9: Yes, they did go in to this meeting with a
Speaker 9: hawkish tilt and then in the data surprise, but we
Speaker 9: know that, you know, Chair Paul has really changed the
Speaker 9: dynamics of the SEP and I'm just surprised that given
Speaker 9: the timing of when they write this down, and you know,
Speaker 9: the FED had this data. A lot of the FED
Speaker 9: had this data last night, so they've been looking over it,
Speaker 9: you know, and came in strong with how they're going
Speaker 9: to talk about it in the morning. And I think
Speaker 9: they still have members of the board itself that would
Speaker 9: have gotten the data that would have said, you know, hey,
Speaker 9: we're still on the sidelines here or one cut and
Speaker 9: that's it. So I think that's an important way to
Speaker 9: be thinking about where they're at about what they think
Speaker 9: they need to be convinced on inflation coming down, not
Speaker 9: to get to two percent, to cut before they get there,
Speaker 9: but how much they need to be convinced.
Speaker 10: That's a lot, and I think they've set.
Speaker 9: That bar pretty high, and it's because they have been
Speaker 9: headfaked in the past. That doesn't mean we couldn't see
Speaker 9: some big improvement and get to a September cut. But
Speaker 9: I think we need a lot of improvement from here
Speaker 9: for the FED to feel convinced to do a September cut.
Speaker 2: Suddenly, this news conference in twelve minutes got a lot
Speaker 2: more interesting. Dan Swank of KPMG Dan, thank you as
Speaker 2: always if you are just tuning in and you miss
Speaker 2: the FED decision took place about eighteen minutes ago. Rates
Speaker 2: unchanged as expected. Be focused on the median dot. Basically,
Speaker 2: all the FED officials get together, they plot where they
Speaker 2: think rates should be will be for twenty four to
Speaker 2: twenty five and beyond. You take the median dot and
Speaker 2: a lot of people on Wall Street see that as
Speaker 2: a signal of how many times they get a cut
Speaker 2: in any given year. That median dot was at three
Speaker 2: cuts for this year, it's come all the way down
Speaker 2: to one. Worth noting though, that they now see four
Speaker 2: cuts in twenty twenty five, more than the three that
Speaker 2: they previously outlined. So they've pushed some of that into
Speaker 2: next year. But the range of views, I think the
Speaker 2: median marks are very, very divide. FED and Lisa did
Speaker 2: a fantastic job with that a little bit earlier, really
Speaker 2: explaining at least so that four policymakers see no cuts
Speaker 2: this year, seven anticipate just one reduction, eight are looking
Speaker 2: for two. That's a federal reserve that's all over the place,
Speaker 2: and that really.
Speaker 5: Does have at least half of it a really hawkish
Speaker 5: tilt right now at a time when other people are saying, you.
Speaker 1: Know, we'll do it for the FED. Mission accomplished.
Speaker 5: So it raises this question at this point, what is
Speaker 5: keeping them from really going all in on the immaculate disinflation?
Speaker 5: Is it just PTSD from Q one and we'll all
Speaker 5: of the sort of questions that people have around the
Speaker 5: hawkishness just disappear in the wake of the bomb that
Speaker 5: Jap Pwett tends to bring us.
Speaker 2: Mike Cape and a Bank of America is with us
Speaker 2: now for more. Mike Gape and I was sharing your
Speaker 2: words a little bit earlier, that quote from you, one
Speaker 2: giant leap for the FED. Then I explained that you
Speaker 2: still don't think they can't until December, so it's not
Speaker 2: that big a lead. What do you make of what
Speaker 2: you've heard in the last twenty minutes or so, Well, if.
Speaker 11: We thought it was a September or sooner cut, maybe
Speaker 11: it'd be one giant leap from mankind instead of the FED.
Speaker 11: Like I think what Bob and Muhammad have been saying here,
Speaker 11: I think I would I would share, which is I
Speaker 11: think that data is probably more important than the dots
Speaker 11: in this case because it is such a data dependent FED.
Speaker 11: They don't want to take these structural, longer term views,
Speaker 11: so they'll be reactionary. So maybe that the dots kind
Speaker 11: of lag what's happening on the ground. Look, I would
Speaker 11: just characterize all this as an incremental shift and FED,
Speaker 11: thinking that they were trying to target us to the
Speaker 11: middle of the air inflation didn't cooperate, so they shifted
Speaker 11: things back. I would encourage them, like Mohammed is saying,
Speaker 11: to take some stands on longer term structural views. But
Speaker 11: I just this is not the FED that we have.
Speaker 6: Michael, howex post are they? I go back to the
Speaker 6: Bank of America worker, They're very retired. Ethan Harris's wonderful
Speaker 6: book Ben Bernanke's fed. Okay, great.
Speaker 4: Are we still back at.
Speaker 6: Ben Bernanki or Alan Greenspans fed where they are exceptionally
Speaker 6: ex post.
Speaker 11: I don't think so. I think I just think it's
Speaker 11: a they believe. I think, as you're noting in the dots,
Speaker 11: there's a wide disparity of views, and sometimes pulling the
Speaker 11: view out of the median is a fool's air in
Speaker 11: so it may just be that there's not a lot
Speaker 11: of structural or agreement about these longer term structural issues,
Speaker 11: so it's hard for them to be forecast based, and
Speaker 11: so you just get a plethora of views, and so
Speaker 11: they throw their arms up and say, fine, there's a
Speaker 11: lot of uncertainty. The only thing we can trust is
Speaker 11: the data under our feet. So that's what we'll focus on,
Speaker 11: for better or worse.
Speaker 5: Michael, what would be your question to feed share Powell
Speaker 5: this afternoon?
Speaker 11: How much was the data this morning reflected in the
Speaker 11: projections and the dots. If the answers yes, it sounds
Speaker 11: a little hawkish. If the answers no, then you can
Speaker 11: make a case for September still being on the board.
Speaker 11: I think the data could make a September cut viable
Speaker 11: we just think it all comes together in December. So
Speaker 11: the dots and the forecast are kind of a mic
Speaker 11: forecast right now. So I'm pretty pleased with those.
Speaker 2: Mohammed and Bob, I've got the same thoughts. Let me
Speaker 2: tell you, Mike Ape at a Bank for America. Thank you, sir, Mohammed.
Speaker 2: I wanted to come across to you on the forecast,
Speaker 2: but not on the dots. I wanted to talk about
Speaker 2: unemployment when they reflect on what we learned on Friday
Speaker 2: and you were with us working through that payrolls report.
Speaker 2: Just a difference between the two surveys. How do you
Speaker 2: think this FMC is navigating that at the moment.
Speaker 7: I think it's navigating like everybody else, trying to maintain optionality,
Speaker 7: trying to understand what's going on. And it's not just
Speaker 7: the employment data. We've had a lot of competing macro data,
Speaker 7: so you know they're just waiting. I do think there's
Speaker 7: two things going on. Certainly, the uncertainty is making them
Speaker 7: data dependent, but there's something else that's making them data dependent.
Speaker 7: Is what happened in twenty twenty one when they did
Speaker 7: take a view on inflation. They took a strategic view
Speaker 7: on inflation and it turned out to be really wrong,
Speaker 7: and I think they've been burnt and they don't want
Speaker 7: to go back to that fire anytime soon.
Speaker 4: So they will not be reconciled trying to reconcile the data.
Speaker 7: They will not be taking trying to anchor markets and
Speaker 7: their own thinking with a forward looking view. They're going
Speaker 7: to continuously react to the latest set of data.
Speaker 4: And that's what I think you're going to see, which.
Speaker 1: Could be good and it could be bad.
Speaker 5: According to you, Mohammed Bab, I'd love to bring you
Speaker 5: back in at a time when it seems like this
Speaker 5: is a FED wrestling with itself.
Speaker 1: The consensus on the top is a mirage.
Speaker 5: Sure there's consensus not to cut rates at this meeting,
Speaker 5: but that's pretty much it. What does that signal for
Speaker 5: you in terms of the clarity of purpose of their
Speaker 5: policy going forward and how to really navigate around it?
Speaker 8: Great question. If I were Mike McKee, I'd ask the
Speaker 8: FED have the Summary of Economic Projections outlive their usefulness?
Speaker 8: Do they do more harm than good? And if the
Speaker 8: answer is no, then I'm sitting here. We're told to
Speaker 8: look at the Summary of Economic Projections and it's reflecting
Speaker 8: a FED that's confused. And you know what, even if
Speaker 8: they submitted the projections before the CPI data, one bit
Speaker 8: of data shouldn't create that much of a change. So
Speaker 8: this is a can fused FED. What that tells me
Speaker 8: is the bond market is in the hands of people
Speaker 8: like me. I don't know what the Fed's thinking. I
Speaker 8: don't know what they're looking at. I don't know what
Speaker 8: they're going to do. All I know is current levels.
Speaker 8: I know are projections of where growth and inflation are
Speaker 8: headed to. I know the amount of buying that's going
Speaker 8: on now, I know who's waiting on the sidelines. I
Speaker 8: look at this, it tells me I certainly don't want
Speaker 8: to be short duration or underweight relative to benchmarks. I
Speaker 8: want to be somewhere around neutral. I want to be
Speaker 8: concentrated in the front end of the curve. And I
Speaker 8: like credit because everything's telling me we're gliding into a
Speaker 8: soft landing, and that's good for corporate America. It's also
Speaker 8: good for corporate Europe.
Speaker 6: Doctor Olarian, help me translate this, and you can do
Speaker 6: this out of the Peeps library at Cambridge. What in
Speaker 6: God's name is modest further progress?
Speaker 7: It is changing a phrase that used to be somewhat
Speaker 7: more halkish to something that is less hawkish but not dubbish.
Speaker 4: That is what that is.
Speaker 2: Mohammach, You've said for a while that maybe they're making
Speaker 2: a mistake, that they haven't taken this strategic view, and
Speaker 2: you were hoping that goes sooner rather than later. Can
Speaker 2: you help us understand the difference between not going three
Speaker 2: but going once, and the difference between doing that one
Speaker 2: cut at the end of the year as opposed to
Speaker 2: doing it in July. What difference does four or five
Speaker 2: months make?
Speaker 7: So I love listening to Bob Michael's or is it
Speaker 7: Bob Michelle John as you.
Speaker 4: Told me last time. Anyway, I love listening.
Speaker 7: To Bob Michael's soft landing scenario because it's very soothing,
Speaker 7: but analytically, based on how I assess the economy, I
Speaker 7: give it a fifty percent probability. It is the dominant scenario,
Speaker 7: but it is not dominant with high probability, so I
Speaker 7: have to have a risk mitigation mindset. And then when
Speaker 7: I look at the tails, I see details of recession
Speaker 7: being larger than the tail of bigger but not hotter economy.
Speaker 7: But Michael so When I look at that distribution and
Speaker 7: I look at the asymmetrical tails, I start asking what
Speaker 7: are the buffers in the economy.
Speaker 4: And that's why I start getting worried.
Speaker 7: And that's where the lay of of the weight cut
Speaker 7: means that those buffers that are already quite limited among
Speaker 7: small businesses, among low income household get eroded really quickly.
Speaker 8: Muhammad, you been around as long as I have. You're right,
Speaker 8: We've only seen one soft landing in our investment career,
Speaker 8: and this is forty plus years and that was in
Speaker 8: ninety five. So soft landings are incredibly hard to engineer.
Speaker 8: In fact, just the probabilities are way against you. But
Speaker 8: what worked in ninety five is I think what you're
Speaker 8: alluding to. The FED came in and started cutting rates.
Speaker 8: They cut rates seventy five basis points in ninety five.
Speaker 8: It was just enough to take the pressure off of
Speaker 8: businesses and households and thus we had, I believe, the
Speaker 8: only soft landing in our careers.
Speaker 2: Mohammed, we've got enough time to give you the final word.
Speaker 4: I love what Bob Jos said. Thank you, Bob.
Speaker 2: Myhammad A Laran of Queen's College, Cambridge, Muhammed, thank you