1 00:00:05,960 --> 00:00:09,200 Speaker 1: This is the very definition of a unanimous hawkish pause. 2 00:00:09,440 --> 00:00:11,959 Speaker 1: The Fed leaves rates today in the range of five 3 00:00:11,960 --> 00:00:14,360 Speaker 1: and a quarter to five and a half percent, while 4 00:00:14,400 --> 00:00:19,400 Speaker 1: saying growth is solid and inflation elevated, so higher for longer. 5 00:00:19,760 --> 00:00:22,880 Speaker 1: Policymakers leave another rate move on the table for this 6 00:00:23,079 --> 00:00:26,480 Speaker 1: year and take two reductions off the table for the 7 00:00:26,520 --> 00:00:30,480 Speaker 1: next two years. The statement once again discusses quote the 8 00:00:30,560 --> 00:00:34,159 Speaker 1: extent of additional policy firming that may be appropriate, and 9 00:00:34,240 --> 00:00:36,480 Speaker 1: the dot plot shows that twelve members of the Open 10 00:00:36,479 --> 00:00:39,720 Speaker 1: Market Committee still believes they will raise rates by another 11 00:00:39,760 --> 00:00:42,960 Speaker 1: twenty five basis points this year. The high dot at 12 00:00:43,040 --> 00:00:45,600 Speaker 1: six and a quarter percent, comes out of the dot 13 00:00:45,640 --> 00:00:49,840 Speaker 1: plot with Saint Louis fed's Jim Bullard's retirement. For twenty 14 00:00:49,920 --> 00:00:53,160 Speaker 1: twenty four, the committee now sees a median effective FED 15 00:00:53,200 --> 00:00:57,000 Speaker 1: funds rate five point one percent of fifty basis points 16 00:00:57,160 --> 00:01:00,600 Speaker 1: from their June projection, and for twenty twenty five three 17 00:01:00,640 --> 00:01:04,280 Speaker 1: point nine percent, up from three point four percent in June. 18 00:01:04,600 --> 00:01:07,400 Speaker 1: The long run neutral rate is unchanged at two and 19 00:01:07,400 --> 00:01:10,840 Speaker 1: a half percent, although the central tendency range moves up 20 00:01:10,880 --> 00:01:13,520 Speaker 1: to three point three percent from two point eight, and 21 00:01:13,560 --> 00:01:17,640 Speaker 1: the dots show seven members think that neutral is higher 22 00:01:17,680 --> 00:01:20,080 Speaker 1: than two and a half. All this because the FED 23 00:01:20,120 --> 00:01:24,720 Speaker 1: sis stronger growth, lower unemployment, and lower core inflation. Ahead, 24 00:01:25,000 --> 00:01:27,720 Speaker 1: the economy should grow two point one percent this year. 25 00:01:27,760 --> 00:01:28,280 Speaker 2: They say. 26 00:01:28,560 --> 00:01:32,080 Speaker 1: That is up from one percent their June forecast, more 27 00:01:32,120 --> 00:01:35,319 Speaker 1: than doubling. They say next year growth will be one 28 00:01:35,360 --> 00:01:38,240 Speaker 1: and a half percent, up from one point one percent. 29 00:01:38,600 --> 00:01:41,800 Speaker 1: Unemployment we'll finish this year at three point eight percent, 30 00:01:41,959 --> 00:01:44,880 Speaker 1: down from their June forecast of four point one percent, 31 00:01:45,120 --> 00:01:47,440 Speaker 1: and in the next two years end at four point 32 00:01:47,440 --> 00:01:52,080 Speaker 1: one down from four point five. Pce headline inflation will 33 00:01:52,080 --> 00:01:54,639 Speaker 1: be three point three percent this year, up a tenth 34 00:01:54,880 --> 00:01:59,440 Speaker 1: basically on energy concerns, but their core PCEE forecast falls 35 00:01:59,440 --> 00:02:02,560 Speaker 1: to three point seven percent from three point nine percent. 36 00:02:02,960 --> 00:02:06,680 Speaker 1: Next year it falls to two point six percent. One 37 00:02:06,720 --> 00:02:09,760 Speaker 1: final note, no change in QT, no change in the 38 00:02:09,760 --> 00:02:11,600 Speaker 1: ior or REBO rates. 39 00:02:12,960 --> 00:02:14,720 Speaker 3: Mike, stay closed. I'm just going to work through the 40 00:02:14,760 --> 00:02:16,880 Speaker 3: price section. So off the back of this decision, we're 41 00:02:16,919 --> 00:02:19,680 Speaker 3: negative by let's call it zero point two percent on 42 00:02:19,720 --> 00:02:21,560 Speaker 3: the S and P five hundred. As you might expect, 43 00:02:21,600 --> 00:02:24,560 Speaker 3: the NASDAG underperforming. If you turn to the bond market, 44 00:02:24,639 --> 00:02:26,720 Speaker 3: yields to a lower almost across the curve at the 45 00:02:26,720 --> 00:02:28,960 Speaker 3: front end as well. They're now hired by three basis 46 00:02:28,960 --> 00:02:31,880 Speaker 3: points looking at staring in the face off the potential 47 00:02:31,919 --> 00:02:34,160 Speaker 3: of closing out new cycle highs on the front end. 48 00:02:34,560 --> 00:02:39,040 Speaker 3: Fouve twelve eighty seven turns to five thirteen on a 49 00:02:39,120 --> 00:02:41,920 Speaker 3: US two year, so yields up new cycle highs at 50 00:02:41,960 --> 00:02:43,760 Speaker 3: the front end of the curve, and the dollar off 51 00:02:43,800 --> 00:02:46,040 Speaker 3: the back of it a whole lot stronger. The euro 52 00:02:46,120 --> 00:02:48,080 Speaker 3: against the dollar one oh six point eighty nine on 53 00:02:48,120 --> 00:02:51,079 Speaker 3: the session positive, still by about zero zero point one percent, 54 00:02:51,120 --> 00:02:53,680 Speaker 3: but certainly off the back of that decision, a stronger 55 00:02:53,760 --> 00:02:55,720 Speaker 3: US dollar. Mi mckeir, I want to come to you 56 00:02:55,760 --> 00:02:58,280 Speaker 3: on that medium dot for twenty twenty four. Are you 57 00:02:58,360 --> 00:03:01,840 Speaker 3: basically telling me the I took back half the cuts 58 00:03:01,880 --> 00:03:04,560 Speaker 3: that were priced for twenty four in that previous projection. 59 00:03:06,000 --> 00:03:07,760 Speaker 1: That's basically what I'm telling you. 60 00:03:07,840 --> 00:03:08,240 Speaker 2: John. 61 00:03:08,639 --> 00:03:11,040 Speaker 1: They were looking at four point six percent and now 62 00:03:11,040 --> 00:03:13,639 Speaker 1: they've gone up to five point one. Clearly they think 63 00:03:13,680 --> 00:03:16,360 Speaker 1: the economy is strong enough that they may need to 64 00:03:16,360 --> 00:03:18,200 Speaker 1: do more. At least that's the message they want to 65 00:03:18,200 --> 00:03:19,040 Speaker 1: send to the markets. 66 00:03:20,440 --> 00:03:22,600 Speaker 4: Mike McKee I look at the growth forecast. You went 67 00:03:22,680 --> 00:03:24,920 Speaker 4: through them quickly, maybe they don't make the headlines. I 68 00:03:24,960 --> 00:03:25,519 Speaker 4: think they. 69 00:03:25,400 --> 00:03:27,239 Speaker 5: Should frame out again. 70 00:03:27,400 --> 00:03:31,360 Speaker 4: Their growth vision is Neil Dunna says they're wish casting 71 00:03:31,440 --> 00:03:32,839 Speaker 4: for twenty twenty four. 72 00:03:34,360 --> 00:03:38,120 Speaker 1: Well, the biggest change is twenty twenty three. This year, obviously, 73 00:03:38,200 --> 00:03:40,080 Speaker 1: the way things have been going, they need to mark 74 00:03:40,160 --> 00:03:42,560 Speaker 1: up growth for this year. They call it solid. Two 75 00:03:42,560 --> 00:03:46,720 Speaker 1: point one percent is their final growth. But growth next 76 00:03:46,800 --> 00:03:49,400 Speaker 1: year is one and a half percent. That's up from 77 00:03:49,440 --> 00:03:52,400 Speaker 1: one point one percent. That's a fairly strong change. So 78 00:03:52,480 --> 00:03:55,840 Speaker 1: they do see perhaps the wish casting that Neil is 79 00:03:55,880 --> 00:03:59,160 Speaker 1: talking about the idea that growth can be stronger into 80 00:03:59,200 --> 00:04:02,560 Speaker 1: next year and certainly suggests the idea of a soft landing. 81 00:04:03,960 --> 00:04:06,240 Speaker 4: I look, Michael McKee at where we are in this 82 00:04:06,400 --> 00:04:08,880 Speaker 4: and it gets to November and December. I know your 83 00:04:08,920 --> 00:04:12,480 Speaker 4: first question to the chairman will be tell me about November, 84 00:04:12,640 --> 00:04:15,440 Speaker 4: Mike McKee, tell us about what this translates in new 85 00:04:15,760 --> 00:04:16,680 Speaker 4: for the next meeting. 86 00:04:18,160 --> 00:04:20,520 Speaker 1: Well, it's definitely going to put the markets on guard 87 00:04:20,640 --> 00:04:23,520 Speaker 1: depending on what kind of data we see, especially in 88 00:04:23,600 --> 00:04:26,560 Speaker 1: the inflation numbers. The Fed's acknowledging that we're going to 89 00:04:26,560 --> 00:04:29,159 Speaker 1: see a little bit higher headline, a little bit lower 90 00:04:29,240 --> 00:04:32,239 Speaker 1: on the core and If that's what we get, then 91 00:04:32,440 --> 00:04:36,880 Speaker 1: the FED could decide to raise rates. It's hard to 92 00:04:36,920 --> 00:04:40,239 Speaker 1: know exactly because of the energy components that are coming 93 00:04:40,240 --> 00:04:42,480 Speaker 1: into this, but that's what to watch for when we 94 00:04:42,520 --> 00:04:45,799 Speaker 1: get the CPI and PCE numbers. The other, of course, 95 00:04:45,920 --> 00:04:48,320 Speaker 1: joker in the pack is if the government does shut 96 00:04:48,360 --> 00:04:50,800 Speaker 1: down and there is no data, the FED will have 97 00:04:50,800 --> 00:04:54,080 Speaker 1: to use its own kind of methods to figure out 98 00:04:54,080 --> 00:04:55,680 Speaker 1: where it thinks inflation. 99 00:04:55,400 --> 00:04:58,479 Speaker 3: Is my McKay, Thank you, sir. We know you've got 100 00:04:58,520 --> 00:05:00,480 Speaker 3: to run and getst that news conference. M key is 101 00:05:00,480 --> 00:05:02,279 Speaker 3: going to sprint to that. It begins in about twenty 102 00:05:02,279 --> 00:05:05,279 Speaker 3: five minutes time. Just to go through the forecasts again, 103 00:05:05,560 --> 00:05:09,360 Speaker 3: that is a monster Upwood revision to GDP, but their 104 00:05:09,400 --> 00:05:11,839 Speaker 3: market to market at the Federal Reserve, so they go 105 00:05:11,880 --> 00:05:14,560 Speaker 3: from one percent to two point one for twenty twenty three. 106 00:05:14,880 --> 00:05:15,120 Speaker 2: Tom. 107 00:05:15,160 --> 00:05:18,320 Speaker 3: The story for me is out in twenty twenty six. 108 00:05:19,360 --> 00:05:22,320 Speaker 3: The story for me on unemployment. They've got it at 109 00:05:22,360 --> 00:05:27,000 Speaker 3: four percent and PCE back down to two all the 110 00:05:27,040 --> 00:05:27,760 Speaker 3: way out there. 111 00:05:27,920 --> 00:05:29,279 Speaker 2: Yeah, several years away. 112 00:05:29,600 --> 00:05:32,800 Speaker 3: And this is the aspirational, fanciful stuff that this is 113 00:05:32,800 --> 00:05:35,160 Speaker 3: how it's going to happen. Unemployment for this year by 114 00:05:35,160 --> 00:05:37,720 Speaker 3: the way. Three point eight percent is the forecast now 115 00:05:37,760 --> 00:05:40,039 Speaker 3: and it only climbs to four point one percent next year. 116 00:05:40,240 --> 00:05:42,760 Speaker 3: Bruce Casman talked about this a little bit early this 117 00:05:42,800 --> 00:05:45,560 Speaker 3: morning at JP Morgan Tom, How how does unemployment need 118 00:05:45,560 --> 00:05:47,400 Speaker 3: to go to get inflation lower? That's going to be 119 00:05:47,440 --> 00:05:49,080 Speaker 3: a question we could explore in the next twenty five 120 00:05:49,120 --> 00:05:51,240 Speaker 3: minutes or so. But the Federal Reserve is telling you 121 00:05:51,560 --> 00:05:54,400 Speaker 3: that they can get back to target two percent in 122 00:05:54,480 --> 00:05:56,839 Speaker 3: several years time, and unemployment is going to be in 123 00:05:56,880 --> 00:05:58,320 Speaker 3: and around four percent. 124 00:05:58,400 --> 00:06:00,200 Speaker 4: I'm going to go with Doddy here in combine it 125 00:06:00,200 --> 00:06:02,440 Speaker 4: into what Mattlazetti said. I got lucky in that I 126 00:06:02,560 --> 00:06:05,440 Speaker 4: picked out of Mattlazetti's note his first look at twenty 127 00:06:05,520 --> 00:06:07,719 Speaker 4: twenty six. I don't even know if there's a first 128 00:06:07,720 --> 00:06:11,240 Speaker 4: look to first quarter twenty twenty four, and certainty hear 129 00:06:11,440 --> 00:06:15,400 Speaker 4: off the pandemic off the shift from a supply analysis 130 00:06:15,400 --> 00:06:18,480 Speaker 4: to a demand analysis of the economy, and that's a 131 00:06:18,520 --> 00:06:22,560 Speaker 4: pretty clumsy move. John looking out to twenty six. Now, 132 00:06:22,600 --> 00:06:24,719 Speaker 4: maybe they're forced to do that, but boy, that's a 133 00:06:24,760 --> 00:06:27,960 Speaker 4: tough tough thing. Let's do this, and we're very lucky 134 00:06:28,000 --> 00:06:30,400 Speaker 4: today to do this because we can fold in what 135 00:06:30,520 --> 00:06:35,280 Speaker 4: you're all reading and feeling about the strike in America. 136 00:06:35,440 --> 00:06:39,799 Speaker 4: Diane Swank is steep steeped, I should say in Midwest 137 00:06:39,800 --> 00:06:42,600 Speaker 4: economics or tenure at Bank one, and of course are 138 00:06:42,640 --> 00:06:44,440 Speaker 4: academics at ann Arbor. 139 00:06:44,480 --> 00:06:46,960 Speaker 5: Andrew hollandhorse with us as well. 140 00:06:47,240 --> 00:06:50,120 Speaker 4: Diane Swank, I guess the chairman has to mention the 141 00:06:50,200 --> 00:06:55,040 Speaker 4: strike today. How do you fold strike analysis into the 142 00:06:55,160 --> 00:06:56,520 Speaker 4: chemistry the FED has? 143 00:06:56,839 --> 00:06:57,679 Speaker 5: It's really tough. 144 00:06:57,720 --> 00:07:00,960 Speaker 6: I don't think. First of all, the strike is very targeted. 145 00:07:01,000 --> 00:07:04,279 Speaker 6: We'll see over this weekend how far the strike gets. 146 00:07:04,480 --> 00:07:07,159 Speaker 6: I think many people are worried about how long the 147 00:07:07,200 --> 00:07:10,720 Speaker 6: strike will last, and that is important. It both suppresses 148 00:07:10,760 --> 00:07:16,320 Speaker 6: economic activity, of course constrains inventories, but it's constraining inventories 149 00:07:16,360 --> 00:07:18,640 Speaker 6: in a different way than the chip shortages did. So 150 00:07:18,840 --> 00:07:22,600 Speaker 6: I'm not as worried about vehicle prices being the push 151 00:07:22,640 --> 00:07:25,960 Speaker 6: on inflation that they were. That some people are given 152 00:07:26,000 --> 00:07:28,800 Speaker 6: that this is a more limited kind of production hit, 153 00:07:29,040 --> 00:07:32,320 Speaker 6: and it actually gives market share to other producers out there. 154 00:07:32,520 --> 00:07:36,200 Speaker 6: At the same time, demand has fallen quite dramatically for 155 00:07:36,320 --> 00:07:40,160 Speaker 6: new vehicles because financiing rates have gone so high. I 156 00:07:40,160 --> 00:07:43,400 Speaker 6: think what's really important in What the FEDGIS did was 157 00:07:43,640 --> 00:07:47,080 Speaker 6: the whole concept of higher for longer, much higher for longer, 158 00:07:47,160 --> 00:07:50,840 Speaker 6: and potentially a higher neutral rate on the other side 159 00:07:50,840 --> 00:07:52,960 Speaker 6: of this. This is what the theme was coming out 160 00:07:53,000 --> 00:07:57,840 Speaker 6: of Jackson Hole Symposium was how synchronous the idea of 161 00:07:57,920 --> 00:08:03,000 Speaker 6: higher for longer, longer montre is across the developed economies 162 00:08:03,240 --> 00:08:06,320 Speaker 6: that even as we approach this peak in interest rates, 163 00:08:06,560 --> 00:08:10,280 Speaker 6: that the central banks are emboldened because of the resilience 164 00:08:10,280 --> 00:08:13,360 Speaker 6: that we've seen, even in those economies that have suffered 165 00:08:13,400 --> 00:08:16,560 Speaker 6: recessions have not as been as bad as they expected, 166 00:08:16,800 --> 00:08:19,720 Speaker 6: that they are emboldened to hold rates higher for longer. 167 00:08:19,960 --> 00:08:22,880 Speaker 6: And there is a concern on the other side of 168 00:08:22,920 --> 00:08:25,960 Speaker 6: this that they're going to need a higher neutral rate. 169 00:08:26,240 --> 00:08:28,720 Speaker 6: This is a different world than the world that we 170 00:08:28,880 --> 00:08:30,320 Speaker 6: left in twenty. 171 00:08:30,080 --> 00:08:33,200 Speaker 3: Nineteen, far different, far different. Andrew, the start of this 172 00:08:33,280 --> 00:08:36,760 Speaker 3: hiking cycle, we asked a pretty important question, can we 173 00:08:36,800 --> 00:08:40,439 Speaker 3: get inflation down to target without doing too much damage 174 00:08:40,480 --> 00:08:44,040 Speaker 3: to the labor market. Overwhelmingly people said we couldn't. We've 175 00:08:44,040 --> 00:08:46,920 Speaker 3: made some progress without killing off the labor market. The 176 00:08:46,920 --> 00:08:51,800 Speaker 3: Federal Reserve today Andrew is extrapolating that out. How hopeful 177 00:08:51,840 --> 00:08:53,479 Speaker 3: Andrew is that forecast. 178 00:08:54,200 --> 00:08:56,679 Speaker 7: I think that's the big question that these forecasts raise. 179 00:08:56,760 --> 00:09:00,680 Speaker 7: You have twenty twenty three growth revised materially high. You 180 00:09:00,760 --> 00:09:03,959 Speaker 7: have that strong growth continuing into twenty twenty four now 181 00:09:04,000 --> 00:09:06,360 Speaker 7: in their forecast. So you have an economy that's running 182 00:09:06,400 --> 00:09:09,720 Speaker 7: head or above potential, you have an unemployment rate that's 183 00:09:09,840 --> 00:09:14,679 Speaker 7: historically low, and yet we're meant to believe that wages 184 00:09:14,720 --> 00:09:18,640 Speaker 7: and prices will cool in this economy. This just contradicts 185 00:09:18,720 --> 00:09:23,280 Speaker 7: basic macroeconomic theory. So this is a forecast that does 186 00:09:23,320 --> 00:09:27,400 Speaker 7: not line up with traditional ways of forecasting the economy, 187 00:09:27,880 --> 00:09:33,600 Speaker 7: with the relatively intuitive idea that when labor markets are 188 00:09:33,679 --> 00:09:36,920 Speaker 7: very tight, that pushes up wages. When labor costs arising, 189 00:09:36,920 --> 00:09:39,800 Speaker 7: that pushes up prices. So I think this is a 190 00:09:39,960 --> 00:09:44,640 Speaker 7: difficult forecast to square with the reality of how economy 191 00:09:44,720 --> 00:09:48,000 Speaker 7: us behave. That's to be addressed at a later point. 192 00:09:48,080 --> 00:09:50,200 Speaker 7: I think what the Fed did today makes sense in 193 00:09:50,240 --> 00:09:53,079 Speaker 7: the sense that we're running strong growth, we're running inflation 194 00:09:53,120 --> 00:09:55,920 Speaker 7: that's above target, so it makes sense to guide towards 195 00:09:56,000 --> 00:09:59,559 Speaker 7: higher for longer. So they achieved the hawkish skip. If 196 00:09:59,559 --> 00:10:02,240 Speaker 7: that was the intent that's achieved. I think in terms 197 00:10:02,240 --> 00:10:04,520 Speaker 7: of the forecast, there are some real questions that need 198 00:10:04,559 --> 00:10:05,559 Speaker 7: to be answered. 199 00:10:05,920 --> 00:10:08,480 Speaker 3: The hopes and dreams of these forecasts. Then let's sit 200 00:10:08,520 --> 00:10:11,040 Speaker 3: on it. I remember a word that you used, maybe 201 00:10:11,040 --> 00:10:13,480 Speaker 3: more than a year ago. You refer to the forecast 202 00:10:13,520 --> 00:10:17,280 Speaker 3: from the feder Reserve as fanciful. Aspirational was a word 203 00:10:17,280 --> 00:10:20,199 Speaker 3: we heard again this morning, repeated through this afternoon. And 204 00:10:20,360 --> 00:10:23,000 Speaker 3: when you look at these forecasts further out, do you 205 00:10:23,080 --> 00:10:27,240 Speaker 3: think it's the right approach to extrapolate out current dynamics, 206 00:10:27,440 --> 00:10:30,959 Speaker 3: which essentially is the following inflation can come down, can 207 00:10:31,000 --> 00:10:34,520 Speaker 3: come in further without doing real damage to the labor market. 208 00:10:34,800 --> 00:10:37,200 Speaker 6: I think it's a great idea, and I hope they're right. 209 00:10:37,840 --> 00:10:41,080 Speaker 6: I do think it is still fanciful. One of the 210 00:10:41,080 --> 00:10:43,160 Speaker 6: things that I think that the FED is betting on 211 00:10:43,480 --> 00:10:46,360 Speaker 6: is that we are seeing the high frequency data as 212 00:10:46,480 --> 00:10:48,480 Speaker 6: the labor markets have cooled. This has been one of 213 00:10:48,559 --> 00:10:52,320 Speaker 6: the most dramatic frenzied pace of a labor market and 214 00:10:52,360 --> 00:10:56,079 Speaker 6: then cooling that we've ever seen, with unemployment still very low. 215 00:10:56,480 --> 00:10:58,880 Speaker 6: And what they're counting on is the high frequency data 216 00:10:58,960 --> 00:11:02,679 Speaker 6: on job posting shows that wages are slowing even more 217 00:11:02,760 --> 00:11:05,920 Speaker 6: rapidly as we go into fall so they're betting on 218 00:11:06,080 --> 00:11:09,920 Speaker 6: those things helping them. At the same time, we've never 219 00:11:10,000 --> 00:11:14,160 Speaker 6: seen we haven't seen in decades as many strike actions 220 00:11:14,200 --> 00:11:17,080 Speaker 6: as we're seeing right now. And that's where things like 221 00:11:17,280 --> 00:11:20,040 Speaker 6: the current strike with the UAW, the strike that we're 222 00:11:20,080 --> 00:11:23,800 Speaker 6: seeing in healthcare, the strikes that we're seeing ongoing with 223 00:11:23,880 --> 00:11:26,840 Speaker 6: the actors and the Writers' Union, those things will have 224 00:11:26,880 --> 00:11:30,480 Speaker 6: an impact. And how much we see the cost of 225 00:11:30,559 --> 00:11:34,160 Speaker 6: living adjustments baked into contracts going forward is going to 226 00:11:34,160 --> 00:11:38,359 Speaker 6: be very important. Remember, with the pop and energy prices, 227 00:11:38,559 --> 00:11:42,640 Speaker 6: we're going to see an increase to September. CPI is 228 00:11:42,880 --> 00:11:48,280 Speaker 6: what sets the numbers for Social Security bump in January. 229 00:11:48,600 --> 00:11:50,800 Speaker 6: That's one of the reasons its going to be higher bumped. 230 00:11:50,840 --> 00:11:51,040 Speaker 8: Now. 231 00:11:51,160 --> 00:11:54,240 Speaker 6: That's one of the reasons we had stickier inflation at 232 00:11:54,240 --> 00:11:56,880 Speaker 6: the start of this year, and so that could be 233 00:11:56,920 --> 00:12:00,719 Speaker 6: a sticking point and be harder for the Federal Reserve and. 234 00:12:00,840 --> 00:12:02,680 Speaker 5: Hall and hors. You need a victory lap right now. 235 00:12:02,720 --> 00:12:04,679 Speaker 4: I've got a five point one to three percent two 236 00:12:04,760 --> 00:12:05,320 Speaker 4: year yield. 237 00:12:05,360 --> 00:12:06,720 Speaker 5: I've got a ten year real yield. 238 00:12:06,800 --> 00:12:10,120 Speaker 4: Any moment to pop through two percent one point nine 239 00:12:10,160 --> 00:12:13,480 Speaker 4: to nine percent right now, how does our economy, how 240 00:12:13,520 --> 00:12:17,040 Speaker 4: does our business society. How does it adapt to a 241 00:12:17,160 --> 00:12:20,880 Speaker 4: two percent real yield? Is that a signal of buoyancy 242 00:12:20,960 --> 00:12:24,000 Speaker 4: and resilience or is that a signal of trouble to come. 243 00:12:25,160 --> 00:12:27,640 Speaker 7: You know, we've seen the economy a lot more resilient 244 00:12:27,720 --> 00:12:30,960 Speaker 7: to higher interest rates than I think many people expected 245 00:12:31,000 --> 00:12:33,520 Speaker 7: at the beginning of this rate height cycle. And part 246 00:12:33,559 --> 00:12:35,680 Speaker 7: of that is that a lot of the debt that's 247 00:12:35,679 --> 00:12:38,720 Speaker 7: out there is fixed rate debt that doesn't mature for 248 00:12:38,800 --> 00:12:41,800 Speaker 7: many years. You think about thirty year fixed rate mortgages, 249 00:12:42,160 --> 00:12:44,760 Speaker 7: many of those are still at lower rates. You think 250 00:12:44,760 --> 00:12:46,920 Speaker 7: about some of the corporate borrowing that's taking place, and 251 00:12:46,960 --> 00:12:50,320 Speaker 7: that also hasn't all been refinanced yet. So as that 252 00:12:50,400 --> 00:12:54,920 Speaker 7: debt is refinanced, you start to have people, individuals and 253 00:12:55,000 --> 00:12:58,440 Speaker 7: firms experiencing higher rates that should slow the economy. You 254 00:12:58,520 --> 00:13:01,400 Speaker 7: see credit that's tied up, so there is a sense 255 00:13:01,440 --> 00:13:03,680 Speaker 7: that this is slowing the economy, but it has to 256 00:13:03,720 --> 00:13:05,719 Speaker 7: be sustained. I think that's the message in the dot 257 00:13:05,760 --> 00:13:06,839 Speaker 7: plot for. 258 00:13:06,800 --> 00:13:08,239 Speaker 5: Bloomer Radio Worldwide. 259 00:13:08,280 --> 00:13:10,480 Speaker 4: Bring up the chart again on television here that we 260 00:13:10,559 --> 00:13:12,360 Speaker 4: just put up with a two year yield back to 261 00:13:12,440 --> 00:13:15,600 Speaker 4: before the pandemic, and this is an arch call by 262 00:13:15,640 --> 00:13:16,280 Speaker 4: Holland Ors. 263 00:13:16,280 --> 00:13:18,120 Speaker 5: So Swank was very good at this as well. 264 00:13:18,480 --> 00:13:21,959 Speaker 4: Andrew Holland Orse, we're back to yields that I remember, 265 00:13:22,400 --> 00:13:27,520 Speaker 4: and Diane Swank doesn't remember. The consensus belief out there 266 00:13:27,760 --> 00:13:31,520 Speaker 4: is OMG, We're all going to die with his yield structure. 267 00:13:31,760 --> 00:13:36,240 Speaker 4: We're going to a six percent two year hollan Orse yield. 268 00:13:36,600 --> 00:13:37,600 Speaker 5: Are we all going to die? 269 00:13:39,679 --> 00:13:39,880 Speaker 6: Well? 270 00:13:40,000 --> 00:13:42,079 Speaker 7: Remember the two thousand and five to two thousand and 271 00:13:42,120 --> 00:13:45,080 Speaker 7: seven period. This was an extended period of time when 272 00:13:45,440 --> 00:13:50,680 Speaker 7: the economy performed relatively well and we sustained higher yield levels. 273 00:13:50,679 --> 00:13:54,559 Speaker 7: And it wasn't that long ago, but it just feels 274 00:13:54,600 --> 00:13:56,959 Speaker 7: like a long time ago, and many people haven't experienced 275 00:13:56,960 --> 00:13:59,920 Speaker 7: that yield environment. So I think this is kind of 276 00:14:00,400 --> 00:14:05,040 Speaker 7: rediscovering that economies can continue to grow, continue to produce 277 00:14:05,080 --> 00:14:09,720 Speaker 7: inflation at higher yield levels. Eventually, these levels may be 278 00:14:10,040 --> 00:14:12,880 Speaker 7: restrictive enough, sufficiently restrictive in the words of the Fed, 279 00:14:13,200 --> 00:14:15,240 Speaker 7: to cool the economy, but that's a process that can 280 00:14:15,240 --> 00:14:15,600 Speaker 7: take time. 281 00:14:17,040 --> 00:14:18,640 Speaker 3: Van you want of the best of this, give Mike 282 00:14:18,720 --> 00:14:21,120 Speaker 3: McKay a little bit more help. What's the question for 283 00:14:21,240 --> 00:14:23,600 Speaker 3: Mike for this chairman in this news conference? The starts 284 00:14:23,640 --> 00:14:24,800 Speaker 3: in about fifteen minutes time. 285 00:14:25,720 --> 00:14:29,280 Speaker 6: I really want to know about how they're so optimistic 286 00:14:29,320 --> 00:14:31,920 Speaker 6: about growth for next year given some of the headwinds 287 00:14:31,960 --> 00:14:35,000 Speaker 6: that we face going into next year, everything from higher 288 00:14:35,000 --> 00:14:39,160 Speaker 6: oil prices to student loan repayments and the additional tightening 289 00:14:39,200 --> 00:14:41,400 Speaker 6: that they expect in the pipeline, not only in the 290 00:14:41,400 --> 00:14:44,640 Speaker 6: banking sector but more broadly. So you know that one 291 00:14:44,640 --> 00:14:48,560 Speaker 6: and a half percent is really pretty stunning. With a 292 00:14:48,600 --> 00:14:53,280 Speaker 6: half percent higher on short term interest rates, that's remarkable 293 00:14:53,360 --> 00:14:57,480 Speaker 6: resilience with a cooling of inflation. And I'm just trying 294 00:14:57,520 --> 00:14:59,560 Speaker 6: to square all that all comes together. 295 00:14:59,640 --> 00:15:02,240 Speaker 3: Yeah, oh, Diane, we all are. We're trying to figure 296 00:15:02,240 --> 00:15:04,880 Speaker 3: this out. Dana Swank there and Andrew Hollenholst, two of 297 00:15:04,960 --> 00:15:06,960 Speaker 3: the very best on a federal reserve. That news conference 298 00:15:06,960 --> 00:15:09,600 Speaker 3: starts in fifteen minutes. If you're just joining us, welcome 299 00:15:09,680 --> 00:15:12,600 Speaker 3: special coverage of the September Federal Reserve decision life on 300 00:15:12,640 --> 00:15:15,840 Speaker 3: TV and radio at Bloomberg Surveillant Special alongside Tom Kean, 301 00:15:15,840 --> 00:15:19,760 Speaker 3: I'm Jonathan Ferrow. The decision unchanged, no change on rates 302 00:15:19,800 --> 00:15:22,560 Speaker 3: of the Federal Reserve, the focus on the projections of 303 00:15:22,600 --> 00:15:25,440 Speaker 3: this FED, a monster upgrade to GDP for this year 304 00:15:25,680 --> 00:15:27,400 Speaker 3: in many ways marking to market. 305 00:15:27,560 --> 00:15:28,320 Speaker 2: No news there. 306 00:15:28,440 --> 00:15:30,800 Speaker 3: We understood that growth was better than expected through much 307 00:15:30,840 --> 00:15:33,280 Speaker 3: of this year. They understand that now the new projection 308 00:15:33,360 --> 00:15:36,160 Speaker 3: is two point one percent. The old projection was just 309 00:15:36,240 --> 00:15:39,120 Speaker 3: one percent. An upgrade to the GDP forecast as well 310 00:15:39,200 --> 00:15:41,400 Speaker 3: for next year two for twenty twenty four that goes 311 00:15:41,400 --> 00:15:44,200 Speaker 3: from one point one percent to one point five Some 312 00:15:44,240 --> 00:15:47,040 Speaker 3: of the projections elsewhere pretty fascinating. Twelve of the nineteen 313 00:15:47,080 --> 00:15:50,640 Speaker 3: officials on the f webc still forecasting, plotting an extra 314 00:15:50,720 --> 00:15:52,720 Speaker 3: hike this year in twenty twenty three. 315 00:15:52,920 --> 00:15:54,640 Speaker 2: In twenty twenty four, the medium. 316 00:15:54,360 --> 00:15:57,160 Speaker 3: Dot we priced out half the cuts they had projected 317 00:15:57,320 --> 00:16:00,280 Speaker 3: in the previous set of forecasts. But ultimately it's the 318 00:16:00,320 --> 00:16:04,080 Speaker 3: self landing hope and dream. The decision tom today is 319 00:16:04,160 --> 00:16:07,480 Speaker 3: to extrapolate out current conditions, the idea that we can 320 00:16:07,520 --> 00:16:10,000 Speaker 3: get back to target all the way back to two 321 00:16:10,040 --> 00:16:13,520 Speaker 3: percent without seeing gunemployment climb much higher than four percent. 322 00:16:13,680 --> 00:16:15,840 Speaker 4: We had a banner up moments ago on television here 323 00:16:15,840 --> 00:16:18,000 Speaker 4: and I did the quick nominal GDP math and this 324 00:16:18,120 --> 00:16:21,200 Speaker 4: is basically out twenty four months, our thirty six months 325 00:16:21,520 --> 00:16:23,280 Speaker 4: you know, out to when we turned into a pumpkin 326 00:16:23,360 --> 00:16:27,280 Speaker 4: Giant's simple. They're looking at four percent nominal GDP or lower. 327 00:16:27,880 --> 00:16:30,200 Speaker 4: And there's a lot of people looking at the spirit 328 00:16:30,240 --> 00:16:34,440 Speaker 4: of this economy saying that with this inflation, that that 329 00:16:34,920 --> 00:16:38,360 Speaker 4: maybe strengthens the economy. And it's a you know, to 330 00:16:38,440 --> 00:16:40,520 Speaker 4: bust Bramo's chops, it's a toxic brew. 331 00:16:40,600 --> 00:16:42,400 Speaker 3: It is a toxic bru I mean, but for them 332 00:16:42,480 --> 00:16:44,479 Speaker 3: right now, there's nothing toxic about those projections. 333 00:16:44,520 --> 00:16:46,800 Speaker 5: I can't get out to Max. 334 00:16:46,680 --> 00:16:49,560 Speaker 3: Katona, We said Max Catton at HSBC. He started talking 335 00:16:49,600 --> 00:16:52,480 Speaker 3: and we said that sounds like Goldie looks forever. Yes, 336 00:16:52,600 --> 00:16:54,800 Speaker 3: on those projections, Goldie looks for the next twelve months. 337 00:16:55,080 --> 00:16:56,840 Speaker 2: Yeah, I would, I would the rest of the cycle. 338 00:16:57,200 --> 00:16:59,400 Speaker 4: And what's interesting here, folks we're coming here from London, 339 00:16:59,480 --> 00:17:01,200 Speaker 4: is you know those of you in TV Counto, the 340 00:17:01,240 --> 00:17:04,480 Speaker 4: sunset is spectacular tonight. I went out on the sidewalk 341 00:17:04,480 --> 00:17:06,760 Speaker 4: in the rain here, the lovely afternoon rain. Out of 342 00:17:06,800 --> 00:17:10,240 Speaker 4: that workoff for London, practicing for Bank of England tomorrow 343 00:17:10,560 --> 00:17:14,480 Speaker 4: in this jumble that we're seeing right now in America, Yeah, 344 00:17:14,640 --> 00:17:17,160 Speaker 4: is the same exact theoretical jumble we're going to see 345 00:17:17,160 --> 00:17:18,359 Speaker 4: tomorrow with the Bank of England. 346 00:17:18,480 --> 00:17:20,000 Speaker 5: These people are making it up as they go. 347 00:17:20,160 --> 00:17:21,840 Speaker 3: Let's turn to the price section and see how much 348 00:17:21,880 --> 00:17:24,080 Speaker 3: Chairman Powell has to sign the news conference it starts 349 00:17:24,359 --> 00:17:27,119 Speaker 3: in about thirteen minutes. Your equity market totally unchanged on 350 00:17:27,160 --> 00:17:29,600 Speaker 3: the S and P, slightly negative on the Nasdaq. But 351 00:17:29,640 --> 00:17:31,439 Speaker 3: this move in the bond market, Tom, let's sit on 352 00:17:31,480 --> 00:17:34,760 Speaker 3: that the two year cycle highst yeah, four through five 353 00:17:34,760 --> 00:17:37,280 Speaker 3: point one percent, just like that, up by three basis 354 00:17:37,280 --> 00:17:39,800 Speaker 3: points on the session Tom yield only ten year, not 355 00:17:39,880 --> 00:17:42,520 Speaker 3: much price section there, four thirty, four, thirty year, let's 356 00:17:42,560 --> 00:17:44,560 Speaker 3: call it four forty TK on the long bond. 357 00:17:44,800 --> 00:17:46,880 Speaker 5: Let's bring it in right now. This is very important. 358 00:17:46,880 --> 00:17:49,000 Speaker 4: P James Greg Peters with US on yield and Jim 359 00:17:49,040 --> 00:17:51,280 Speaker 4: Bianco with US with Bianco Research. Jim, let me go 360 00:17:51,320 --> 00:17:53,040 Speaker 4: to you right away. I just think this is so 361 00:17:53,040 --> 00:17:56,840 Speaker 4: so important. There's a sense of longer. I see a 362 00:17:56,920 --> 00:18:00,800 Speaker 4: nominal GDP call out twenty four months, which is not longer. 363 00:18:00,840 --> 00:18:02,919 Speaker 5: It's it finally rates come in. Do you buy it? 364 00:18:05,080 --> 00:18:05,240 Speaker 7: Well? 365 00:18:05,280 --> 00:18:06,840 Speaker 8: I buy the idea that you want to be looking 366 00:18:06,920 --> 00:18:10,680 Speaker 8: at GDP nominal GDP as being a benchmark for long 367 00:18:10,760 --> 00:18:13,800 Speaker 8: term interest rates. But I'm not buying this idea that 368 00:18:14,160 --> 00:18:16,720 Speaker 8: nominal GDP is going to fall to the levels that 369 00:18:16,800 --> 00:18:20,040 Speaker 8: they think. If I was to describe, you know, this 370 00:18:20,040 --> 00:18:23,800 Speaker 8: this confusion that we seem to have about this FED policy, 371 00:18:23,840 --> 00:18:27,080 Speaker 8: it's they're almost arguing that nothing of significance happened in 372 00:18:27,119 --> 00:18:30,280 Speaker 8: twenty twenty and that we're going to return back to 373 00:18:30,520 --> 00:18:33,800 Speaker 8: normalization in the word we like to use, that's replaced transitory, 374 00:18:34,080 --> 00:18:36,240 Speaker 8: and go back to something between twenty ten and twenty 375 00:18:36,359 --> 00:18:39,760 Speaker 8: nineteen where we can have you know, two and a 376 00:18:39,800 --> 00:18:43,400 Speaker 8: half percent real growth, one percent to two percent inflation, 377 00:18:43,640 --> 00:18:47,440 Speaker 8: four percent nominal growth, and that would bring everything down 378 00:18:47,480 --> 00:18:50,159 Speaker 8: and you'd have Goldie locks forever. But I'm not so 379 00:18:50,240 --> 00:18:52,600 Speaker 8: sure that that's the case. I think that the economy 380 00:18:52,680 --> 00:18:56,800 Speaker 8: has changed since the shutdown restart in twenty twenty, and 381 00:18:57,280 --> 00:19:01,080 Speaker 8: the Federal Reserve is still struggling to come to and 382 00:19:01,119 --> 00:19:03,199 Speaker 8: they're still thinking we're still in the last cycle. 383 00:19:04,119 --> 00:19:06,560 Speaker 4: Greg, you've got to work with real money here. The 384 00:19:06,640 --> 00:19:09,560 Speaker 4: decision to extend duration, to find a belly of the curve, 385 00:19:09,640 --> 00:19:11,600 Speaker 4: all the other professional stuff you. 386 00:19:11,640 --> 00:19:12,480 Speaker 5: Do with PGM. 387 00:19:12,960 --> 00:19:15,760 Speaker 4: Does the language and the nuance of the forecast and 388 00:19:15,800 --> 00:19:17,080 Speaker 4: the dots, does. 389 00:19:16,920 --> 00:19:21,800 Speaker 5: That change your conviction and what you're doing with your portfolios. 390 00:19:22,960 --> 00:19:25,440 Speaker 9: Well, I would say that we're finally getting what we've 391 00:19:25,440 --> 00:19:28,720 Speaker 9: been thinking for quite some time, and that is higher 392 00:19:28,720 --> 00:19:31,359 Speaker 9: for longer. Right, the markets have been raging against this 393 00:19:31,520 --> 00:19:35,359 Speaker 9: notion that rates will remain high. All the forward curves 394 00:19:35,359 --> 00:19:37,920 Speaker 9: are pointing down, the dot plot pointing down. So I 395 00:19:38,000 --> 00:19:41,000 Speaker 9: think this really throws cold water on that. And so 396 00:19:41,119 --> 00:19:44,160 Speaker 9: for us at PGIM, you know, we really think it's 397 00:19:44,160 --> 00:19:47,960 Speaker 9: a higher for longer. We never felt the need to 398 00:19:48,280 --> 00:19:52,520 Speaker 9: jump into duration. You know, maybe it's closer to that now, 399 00:19:53,080 --> 00:19:55,840 Speaker 9: but more in the back end the curve. So look, 400 00:19:55,920 --> 00:19:58,200 Speaker 9: I mean, I think the Fed delivered exactly what they 401 00:19:58,280 --> 00:20:03,120 Speaker 9: wanted to by it a hawkish SAP that allows them 402 00:20:03,160 --> 00:20:06,320 Speaker 9: to speak more dubbishly and perhaps not move rates higher. 403 00:20:06,359 --> 00:20:09,560 Speaker 3: Here, Greg, it's not just the high for longer message 404 00:20:09,560 --> 00:20:12,480 Speaker 3: that jumps off the page of the SCP. It's the 405 00:20:12,520 --> 00:20:16,080 Speaker 3: growth inflation mix looking out a year two years, so 406 00:20:16,200 --> 00:20:18,920 Speaker 3: they believe you can give back to target two percent, 407 00:20:19,240 --> 00:20:21,640 Speaker 3: an unemployment is going to drift higher, maybe to four 408 00:20:21,680 --> 00:20:23,200 Speaker 3: percent and basically stop there. 409 00:20:23,600 --> 00:20:23,879 Speaker 2: Greg. 410 00:20:23,960 --> 00:20:27,280 Speaker 3: That has big implications for how you invest elsewhere beyond rates, 411 00:20:27,280 --> 00:20:31,159 Speaker 3: bonds and to credit. Is that your outlook that basically 412 00:20:31,240 --> 00:20:35,199 Speaker 3: we can achieve back to target inflation barely shaking up 413 00:20:35,200 --> 00:20:38,360 Speaker 3: the labor market in any way, shape or form. 414 00:20:38,560 --> 00:20:41,240 Speaker 9: Well, it is very aspirational, There's no doubt about it. 415 00:20:41,280 --> 00:20:44,640 Speaker 9: I mean, that is a Goldie Loocks type of outlook. 416 00:20:44,680 --> 00:20:50,000 Speaker 9: If you have an environment where rates remain higher but 417 00:20:50,160 --> 00:20:53,320 Speaker 9: growth is quite robust and inflation's coming down, I think 418 00:20:53,359 --> 00:20:57,600 Speaker 9: that is a fantastic investing backdrop. I do think we're 419 00:20:57,720 --> 00:21:00,240 Speaker 9: pretty close to it. The challenge, of course, on the 420 00:21:00,280 --> 00:21:03,080 Speaker 9: table is all these different uncertainties and cross currents, and 421 00:21:03,119 --> 00:21:06,359 Speaker 9: that has not gone away by any stretch of the imagination. 422 00:21:06,560 --> 00:21:09,800 Speaker 9: So you know, we need to take these these forecasts 423 00:21:09,840 --> 00:21:12,040 Speaker 9: with the grain and salt. There's no different than our 424 00:21:12,080 --> 00:21:17,399 Speaker 9: own forecasts, right, They're rife with uncertainties. But you know, 425 00:21:17,520 --> 00:21:21,120 Speaker 9: I do think there's a distinct possibility here, at least directionally. 426 00:21:21,320 --> 00:21:24,320 Speaker 9: And you know, I feel pretty good about the outlook. 427 00:21:25,160 --> 00:21:27,920 Speaker 3: And Jim Bianco, do you feel pretty good about the outlook? 428 00:21:30,440 --> 00:21:33,200 Speaker 8: You know, if we're talking about the outlook about the FED, 429 00:21:34,920 --> 00:21:36,680 Speaker 8: you know, I have my issues with it. 430 00:21:36,640 --> 00:21:37,560 Speaker 5: Like everybody else. 431 00:21:37,640 --> 00:21:40,920 Speaker 8: But to eat on something that Greg just said, let's 432 00:21:40,960 --> 00:21:44,200 Speaker 8: be real. We all have forecasts and most likely they're 433 00:21:44,200 --> 00:21:47,960 Speaker 8: all wrong. But that's okay because we're not getting expected 434 00:21:47,960 --> 00:21:48,760 Speaker 8: to predict the future. 435 00:21:48,800 --> 00:21:52,040 Speaker 5: The key is whether or not we can adjust. 436 00:21:52,160 --> 00:21:54,359 Speaker 8: We can see that, okay, the data is coming in 437 00:21:54,480 --> 00:21:57,880 Speaker 8: not as we expected, and we need to adjust these forecasts. 438 00:21:58,240 --> 00:21:59,639 Speaker 8: And I fed a reserve in the last couple of 439 00:21:59,680 --> 00:22:01,600 Speaker 8: years not had a good track record on that. We 440 00:22:01,600 --> 00:22:04,439 Speaker 8: can all remember transitory. And what I'm afraid of with 441 00:22:04,520 --> 00:22:09,560 Speaker 8: this Goldilock's forecast is when the situation comes in that 442 00:22:09,680 --> 00:22:12,199 Speaker 8: it's not panning out, they're going to dig in their 443 00:22:12,200 --> 00:22:15,200 Speaker 8: heels and continue to say it will and they might 444 00:22:15,240 --> 00:22:18,240 Speaker 8: wind up making another transitory type of mistake in twenty 445 00:22:18,280 --> 00:22:21,760 Speaker 8: twenty four. I'd like to see Chairman Polly, you know, 446 00:22:21,840 --> 00:22:24,520 Speaker 8: show some flexibility with these forecasts, to say, look this 447 00:22:24,600 --> 00:22:27,840 Speaker 8: one you think now, but if the circumstances and data 448 00:22:27,880 --> 00:22:30,159 Speaker 8: comes in soon, that's out the window and we're going 449 00:22:30,240 --> 00:22:32,359 Speaker 8: to adjust. And that, like I said, that is okay. 450 00:22:32,440 --> 00:22:34,800 Speaker 8: That is what you should do with a forecast, not 451 00:22:35,040 --> 00:22:37,719 Speaker 8: just keep at it because you're afraid of some embarrassment 452 00:22:38,000 --> 00:22:38,959 Speaker 8: of having to change it. 453 00:22:40,080 --> 00:22:42,680 Speaker 4: And Jimmy uncle the Lauriate Paul Kruman with a wonderful 454 00:22:42,760 --> 00:22:46,240 Speaker 4: essay on disinflation, and he really emphasized what the FED 455 00:22:46,320 --> 00:22:50,840 Speaker 4: doesn't look at, which is plain vanilla inflation. Are they 456 00:22:50,920 --> 00:22:53,560 Speaker 4: just miss in the fog of London, in the fag 457 00:22:53,600 --> 00:22:57,119 Speaker 4: of Washington, the fag of cross America? Are they missing 458 00:22:57,160 --> 00:22:59,719 Speaker 4: a disinflationary tendency in place? 459 00:23:02,480 --> 00:23:06,160 Speaker 8: I don't necessarily think they are missing a disinflationary tendency. 460 00:23:06,240 --> 00:23:09,720 Speaker 8: I happen to be in the camp that inflation on 461 00:23:09,760 --> 00:23:11,760 Speaker 8: a year over your basis, I'm talking about headline CPI 462 00:23:11,880 --> 00:23:14,560 Speaker 8: has bottom for the year, it's going to drift towards 463 00:23:14,640 --> 00:23:18,600 Speaker 8: four percent, not much higher than that. Energy prices are 464 00:23:18,640 --> 00:23:21,320 Speaker 8: going to be a big factor in that drift higher, 465 00:23:21,600 --> 00:23:23,959 Speaker 8: and that will be enough maybe to give us that 466 00:23:24,000 --> 00:23:26,359 Speaker 8: one more rate hike that they're looking for and to 467 00:23:26,440 --> 00:23:29,200 Speaker 8: at least justify going from two from four to two 468 00:23:29,240 --> 00:23:32,560 Speaker 8: cuts next year. And I think that if that continues 469 00:23:32,640 --> 00:23:35,960 Speaker 8: that the December update of this plot will probably take 470 00:23:36,000 --> 00:23:38,680 Speaker 8: those two cuts away as well. So I'm in that 471 00:23:38,720 --> 00:23:41,680 Speaker 8: inflation is sticky camp, and that the FED is going 472 00:23:41,720 --> 00:23:43,919 Speaker 8: to have to come to the realization that they're not 473 00:23:44,000 --> 00:23:47,360 Speaker 8: going to get close to three percent, so the disinflation 474 00:23:47,480 --> 00:23:51,400 Speaker 8: that they're hoping for, that inflation comes down, the unemployment 475 00:23:51,440 --> 00:23:55,080 Speaker 8: rate can stay at four. It's been described here as fanciful, 476 00:23:55,080 --> 00:23:56,800 Speaker 8: and I would also be in that camp too, That 477 00:23:57,080 --> 00:23:59,240 Speaker 8: is fanciful, and we'll have to see whether or not 478 00:23:59,640 --> 00:24:01,280 Speaker 8: that situation on faults. 479 00:24:01,960 --> 00:24:04,440 Speaker 4: John moments ago rounded up the ten year real yield 480 00:24:04,480 --> 00:24:06,359 Speaker 4: to two percent. This is what the most the dominic 481 00:24:06,440 --> 00:24:09,960 Speaker 4: constant at Mizuo's idea of we are restrictive. 482 00:24:10,080 --> 00:24:12,200 Speaker 3: Forgive me for thinking out loud, gents, there's a very 483 00:24:12,480 --> 00:24:16,719 Speaker 3: very simplistic approach to markets. You get economic information data, 484 00:24:17,040 --> 00:24:19,080 Speaker 3: you think about what it means for the FED, and 485 00:24:19,119 --> 00:24:21,760 Speaker 3: you trade accordingly. Now, Greg, I wonder if that's just 486 00:24:21,840 --> 00:24:24,240 Speaker 3: changed off the back of these forecasts from the Federal Reserve. 487 00:24:24,280 --> 00:24:26,040 Speaker 3: And let me go one step further and explain why 488 00:24:26,640 --> 00:24:29,080 Speaker 3: the first Friday of the month we'll get a payrolls report, 489 00:24:29,200 --> 00:24:32,000 Speaker 3: and if that payrolls report is hot, typically we sit 490 00:24:32,040 --> 00:24:34,800 Speaker 3: there and say, well, labor market pressure higher inflation. 491 00:24:35,080 --> 00:24:36,359 Speaker 2: FED has to do more work. 492 00:24:36,520 --> 00:24:38,440 Speaker 3: But Greg, hasn't the FED just told us ho, don't 493 00:24:38,480 --> 00:24:41,520 Speaker 3: they just de emphasized the importance of the labor market 494 00:24:41,880 --> 00:24:43,160 Speaker 3: to the inflation conversation? 495 00:24:43,960 --> 00:24:47,960 Speaker 9: Johan, I think I'm putting way too much emphasis on 496 00:24:48,000 --> 00:24:50,480 Speaker 9: the step and the forecast. I mean, at the end 497 00:24:50,520 --> 00:24:53,199 Speaker 9: of the day, we're in this data driven world. The 498 00:24:53,240 --> 00:24:55,320 Speaker 9: FED is trying to bounce that out. And I think 499 00:24:55,400 --> 00:24:58,400 Speaker 9: the markets, given the fact that we're in this data 500 00:24:58,480 --> 00:25:02,200 Speaker 9: driven world and we're not getting we're wanting in terms 501 00:25:02,240 --> 00:25:05,200 Speaker 9: of clarity out of the FED, we're relying a little 502 00:25:05,240 --> 00:25:08,440 Speaker 9: too much on this data release. So I don't think 503 00:25:08,480 --> 00:25:11,720 Speaker 9: anything changes. I think it's the data change. I think 504 00:25:11,800 --> 00:25:16,160 Speaker 9: that FED policy changes. And you know, it's also important 505 00:25:16,240 --> 00:25:18,760 Speaker 9: remember two things. One is that you know they don't 506 00:25:18,760 --> 00:25:22,040 Speaker 9: have inflation going down to you know, two percent until 507 00:25:22,080 --> 00:25:25,080 Speaker 9: twenty twenty six, which is you know, quite some time 508 00:25:25,119 --> 00:25:27,760 Speaker 9: from now. And then two, we just had a massive 509 00:25:27,800 --> 00:25:32,160 Speaker 9: revision of GDP in this year, so you know, let's 510 00:25:32,280 --> 00:25:35,680 Speaker 9: use that as kind of a reminder that forecast era 511 00:25:36,200 --> 00:25:37,440 Speaker 9: is really quite high here. 512 00:25:38,240 --> 00:25:39,960 Speaker 2: And Jim, what do you throw us on the same question. 513 00:25:41,640 --> 00:25:43,840 Speaker 8: Yeah, if I could give you a cynical thought, that 514 00:25:44,000 --> 00:25:46,600 Speaker 8: is that let's see if we even get a payroll 515 00:25:46,600 --> 00:25:49,040 Speaker 8: report in October six, because if we have a government shutdown, 516 00:25:49,080 --> 00:25:51,280 Speaker 8: the BLS is closed and Mike McKee's sitting in front 517 00:25:51,320 --> 00:25:54,959 Speaker 8: of an empty building on that morning. So leaving that aside, 518 00:25:55,400 --> 00:25:57,879 Speaker 8: I do think though that if you're talking about the 519 00:25:57,920 --> 00:26:00,720 Speaker 8: payroll report, the consistency about it, it's been it's been 520 00:26:00,800 --> 00:26:03,520 Speaker 8: much stronger than we've been looking at for the last 521 00:26:03,560 --> 00:26:06,880 Speaker 8: fourteen eighteen months or so, all but something like two 522 00:26:06,960 --> 00:26:10,679 Speaker 8: or three of the reports have been above consensus. And 523 00:26:11,200 --> 00:26:13,400 Speaker 8: that seems to be the trend that I would think 524 00:26:13,440 --> 00:26:16,080 Speaker 8: would stay in place. And if we see those kind 525 00:26:16,119 --> 00:26:20,880 Speaker 8: of numbers come in, it's going to push everybody firmly 526 00:26:20,960 --> 00:26:23,280 Speaker 8: into that away from that goldielax and into that higher 527 00:26:23,280 --> 00:26:24,480 Speaker 8: for Lunger camp as well. 528 00:26:25,240 --> 00:26:26,920 Speaker 4: We got to make some money to get home here, 529 00:26:27,000 --> 00:26:29,920 Speaker 4: John Farrell, Ian Lingen, the screaming buy of the ten 530 00:26:30,000 --> 00:26:33,320 Speaker 4: year yield just says, this is a FED doubling. 531 00:26:32,960 --> 00:26:35,480 Speaker 5: Down on soft landing. 532 00:26:35,920 --> 00:26:39,359 Speaker 4: Mister Lincoln, of course, of bemo, thanks Greg, Greg Peters. 533 00:26:39,680 --> 00:26:42,959 Speaker 4: If they're doubling down on soft landing for you at PGIM, 534 00:26:43,440 --> 00:26:45,760 Speaker 4: is the ten year yield a screaming buy? 535 00:26:47,600 --> 00:26:50,960 Speaker 9: No, I don't quite understand that logic, could be honest 536 00:26:51,000 --> 00:26:54,359 Speaker 9: with you. I mean, what that would presuppose is that 537 00:26:54,840 --> 00:26:57,320 Speaker 9: you'd have a healthy dose of cuts. 538 00:26:58,040 --> 00:26:59,639 Speaker 5: In response to that soft landing. 539 00:27:01,000 --> 00:27:05,800 Speaker 9: I think yields are relatively range bound here. I don't 540 00:27:05,840 --> 00:27:09,160 Speaker 9: really see a big move either way. Yeah, it does 541 00:27:09,200 --> 00:27:12,680 Speaker 9: look a little over sold. There's some technical dynamics, but 542 00:27:12,800 --> 00:27:16,720 Speaker 9: ultimately on a medium term basis, it looks pretty fair 543 00:27:16,840 --> 00:27:19,880 Speaker 9: value to us. So I don't think the bond mark. 544 00:27:20,040 --> 00:27:23,400 Speaker 9: Investing in the bond market is not about capital appreciation. 545 00:27:23,960 --> 00:27:27,400 Speaker 9: That is a pre pandemic trade. It is about roll 546 00:27:27,480 --> 00:27:31,320 Speaker 9: and carry, and so no, I don't expect it as 547 00:27:31,359 --> 00:27:32,160 Speaker 9: a screaming buy. 548 00:27:33,320 --> 00:27:35,080 Speaker 3: With that in mind, Greg, if there's a pool of 549 00:27:35,119 --> 00:27:37,359 Speaker 3: money people sitting at home right now, they're sitting on 550 00:27:37,400 --> 00:27:38,840 Speaker 3: the front end. They've been told by a couple of 551 00:27:38,920 --> 00:27:41,520 Speaker 3: people that they should worry about reinvestment risk in the 552 00:27:41,560 --> 00:27:44,240 Speaker 3: next six months and allocate accordingly further down the curve. 553 00:27:44,280 --> 00:27:46,800 Speaker 3: Are you saying, relax, patients, you find where you are. 554 00:27:48,200 --> 00:27:50,879 Speaker 9: Yeah, so I've been saying that the whole time. No 555 00:27:50,920 --> 00:27:53,080 Speaker 9: one wants to listen to it, right. I think there's 556 00:27:53,119 --> 00:27:56,560 Speaker 9: been this tendency that jump back into the pool because 557 00:27:56,640 --> 00:27:59,680 Speaker 9: these higher rates are going to evaporate. What the Fed 558 00:27:59,760 --> 00:28:02,359 Speaker 9: isld you today with the markets are finally starting to 559 00:28:02,440 --> 00:28:05,720 Speaker 9: respond to is that no, these rates are actually around 560 00:28:05,760 --> 00:28:09,120 Speaker 9: here for a while. So yeah, so I don't think 561 00:28:09,119 --> 00:28:12,200 Speaker 9: there's anything reading the rush and so we like duration, 562 00:28:12,480 --> 00:28:14,680 Speaker 9: but we wouldn't go Hell's belts. 563 00:28:15,000 --> 00:28:18,240 Speaker 4: Sorry, let's fold this into Jim Bianco. I mean, John, 564 00:28:18,280 --> 00:28:21,399 Speaker 4: it's just simple. Bianco was way out front with this 565 00:28:21,560 --> 00:28:24,520 Speaker 4: idea of defining what longer looks like with a ten 566 00:28:24,600 --> 00:28:26,440 Speaker 4: year yield, and he's in the camp with Greg Peters. 567 00:28:26,520 --> 00:28:29,080 Speaker 3: Hi, Jim, this was great. Jim Bianca, together with Craig 568 00:28:29,119 --> 00:28:30,399 Speaker 3: paid us. Thank you, guys. 569 00:28:33,800 --> 00:28:37,639 Speaker 4: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 570 00:28:37,760 --> 00:28:41,960 Speaker 4: anywhere else you get your podcasts. Listen live every weekday 571 00:28:42,240 --> 00:28:45,720 Speaker 4: starting at seven am Eastern on Bloomberg dot com, the 572 00:28:45,840 --> 00:28:50,400 Speaker 4: iHeartRadio app, tune In, and the Bloomberg Business app. You 573 00:28:50,440 --> 00:28:54,480 Speaker 4: can watch us live on Bloomberg Television and always. I'm 574 00:28:54,480 --> 00:28:58,480 Speaker 4: the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and 575 00:28:58,600 --> 00:29:00,000 Speaker 4: this is Bloomberg