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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: The Chairman of the Federal Reserve.

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Speaker 3: That news conference ended almost as soon as it started.

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Speaker 3: The FED chair thinks we're restrictive. Here are the scores

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Speaker 3: for you in the equity market on the SMP five

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Speaker 3: hundred boom vertical, almost straight away as soon as he

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Speaker 3: started speaking. The equity market positive by one percent on

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Speaker 3: the SMP on'm announcedack cup by one point one percent.

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Speaker 3: The small caps bouncing back from a very very bad

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Speaker 3: April here in May up by almost two percent. If

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Speaker 3: you switch at the board once again, if it's a

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Speaker 3: FED decision day, apparently it's a rally for the two

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Speaker 3: year yield to lower by seven basis points four ninety

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Speaker 3: six twenty two, and I think it's about four to

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Speaker 3: twenty am in Tokyo. Dolly En looks a little something

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Speaker 3: like this. I match and the Ministry of Finance is

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Speaker 3: a little bit happier. It could have been a whole

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Speaker 3: lot worse, Dolly n one fifty seven forty nine. Take

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Speaker 3: a listen to what the Chairman of the Federal Reserve

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Speaker 3: had to say.

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Speaker 4: I do think the evidence shows, you know pretty clearly

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Speaker 4: that policy is restrictive and his wing on demand, and

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Speaker 4: there are a few places I would point to for that.

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Speaker 4: You can start with the labor market. So demand is

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Speaker 4: still strong, the demand side of the labor market in particular,

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Speaker 4: but it's cooled from its extremely high level of a

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Speaker 4: couple of years ago, and you see that in job openings.

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Speaker 4: You saw more evidence of that today in the Jolts report.

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Speaker 4: As you'll know, it's still higher than pre pandemic, but

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Speaker 4: it has been coming down both in the Indeed Report

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Speaker 4: and in the Jolts Report. That's demand cooling.

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Speaker 2: No doubt.

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Speaker 3: So for Nisson's macro, with this line, the statement retains

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Speaker 3: its easing bias power beliefs that policy is restrictive. Look

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Speaker 3: at the price sanction off the back of this, Bramo.

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Speaker 3: The next sixty minutes of that news conference, next fifty

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Speaker 3: minutes hardly worth your time.

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Speaker 5: Well, especially because the next question was the question that

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Speaker 5: was the key one popping the question that Julian Emmanuel

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Speaker 5: was talking about, which is have you considered a hike?

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Speaker 5: How big is the threshold? Not likely, We're not going

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Speaker 5: to do that. So it was a one two punch.

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Speaker 5: First policy was restrictive dubbish. Then hikes are not on

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Speaker 5: the table, even a bigger rally, and frankly, that's what's

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Speaker 5: feeling basically hawkish, isn't is sex.

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Speaker 6: In their note Hatziism Company and their note started with

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Speaker 6: the tapering action. I think it was the tanem. I

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Speaker 6: agree with everything you've said. And it was over Johnny

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Speaker 6: after not forty seconds. I think it was over after

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Speaker 6: thirty three seconds. But with dat said, he delivered a

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Speaker 6: lot of what people wanted as an adjustment. You saw

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Speaker 6: it in the real yield. Let's come back a little bit.

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Speaker 6: But you wonder what the follow is? The follow on

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Speaker 6: is the first set of FED speakers out of the block.

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Speaker 6: I mean, I mean, are they gonna are they gonna

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Speaker 6: go with this tone?

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Speaker 3: It's been a fantastic lineup of guests over the last

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Speaker 3: couple of hours. Just to shout out to Bob Michael

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Speaker 3: at JP Morgan and Mohammed al Arian asked about stack flation.

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Speaker 3: To remember Buff's response to that. I think the Chairman's

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Speaker 3: gonna laugh at that. Reflect on what happened to the

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Speaker 3: folky is. I think he's gonna laugh. He said this

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Speaker 3: no snack, this very little flation. Ultimately this no stack flation.

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Speaker 1: Basically he laughed. He said you know, give me a break.

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Speaker 1: This is not what we're talking about.

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Speaker 5: Honestly, this is a FED show that came out much

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Speaker 5: more dubbish than anyone had expected. And honestly, this raises

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Speaker 5: a question about whether he is entertaining some.

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Speaker 1: Of the key debates.

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Speaker 5: He was asked by Michael McKee about long term neutral rates,

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Speaker 5: not going to engage it, asked about long and variable

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Speaker 5: lags stick in a script.

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Speaker 1: There was no sense that he had entertained a lot of.

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Speaker 5: The fundamental debates that are dividing Wall Street in a

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Speaker 5: really serious way.

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Speaker 1: I'm not sure where that leaves people.

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Speaker 6: I noticed that off the GDP, where we've got a

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Speaker 6: one point six percent statistic, what we heard interview after

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Speaker 6: interview was domestic final sales was actually pretty buoyant. And

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Speaker 6: that's what he alluded to when he went after the stagflation.

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Speaker 3: Let's be clear, they're not going to count anytime soon.

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Speaker 3: Based on what we just heard, the easing bias remains.

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Speaker 3: It's just the amount of price action we've seen over

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Speaker 3: the last couple of months. When we talked about the

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Speaker 3: Fed champ being hawkish, it was hawkish relative to what

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Speaker 3: we've had. This conversation all day relative to the previous meeting,

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Speaker 3: maybe relative to the price action where we're price four

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Speaker 3: right now.

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Speaker 2: Very difficult to do.

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Speaker 3: The bar for that was so high given the fact

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Speaker 3: that this market is only price for one cut in

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Speaker 3: twenty twenty four.

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Speaker 1: Yeah, this didn't push against that.

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Speaker 5: I mean, this could very much be consistent with only

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Speaker 5: one rate cut, and that's why you're seeing a bigger move,

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Speaker 5: arguably in stocks. Basically this is the perfect mix for stocks.

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Speaker 5: Where people said you just need the tail risk of

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Speaker 5: a hike off the table.

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Speaker 1: He did that, and then you can really go to

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Speaker 1: the races.

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Speaker 6: When we get to Dudley, I'm going to talk about

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Speaker 6: what wasn't talked about too much, which is a labor economy.

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Speaker 6: What evidence do they need to see in the labor

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Speaker 6: economy to really become accommodative, And to me, that's still

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Speaker 6: really unanswered. I don't think it's claims. Maybe it's wages

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Speaker 6: coming down all the time Forcelly and others, But I

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Speaker 6: just really wonder what the labor dialogue is here rather

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Speaker 6: than the parlor game.

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Speaker 3: Of what is tak You're right, I would pad that

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Speaker 3: with inflation. I think oh they got called it with

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Speaker 3: these hot inflation prints temper their ability to respond to

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Speaker 3: one first shocks the sub called fed put. Based on

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Speaker 3: what we just heard in the last sixty minutes, the

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Speaker 3: fed put is alive and well.

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Speaker 5: Basically cyflation's not on the table.

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Speaker 1: Stop it already. And that's basically what we heard.

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Speaker 6: Can you set up a course where we have Frankfurt

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Speaker 6: in London question quality brought over to Washington. Can you

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Speaker 6: arrange that?

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Speaker 2: Would you want me to offend everyone? No, I'm gonna

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Speaker 2: come say it right now.

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Speaker 6: There are too many questions that are off topic of

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Speaker 6: the dual mandate of price change. Ethan Harris on fire

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Speaker 6: and LinkedIn on this and on the labor economy. I

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Speaker 6: didn't earn enough about the labor economy.

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Speaker 7: I have to be I disagree with you. I felt

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Speaker 7: like after the first two questions, people tried every which

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Speaker 7: angle to get something more.

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Speaker 1: It wasn't happening, period.

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Speaker 2: Full stop.

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Speaker 5: He was going to say what he was going to say,

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Speaker 5: which is essentially, we haven't shifted our stance that much.

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Speaker 1: We're not going to hike rates. Goodbye, see you next time.

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Speaker 3: Let's speak to a man who's been on the other

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Speaker 3: end to some of these questions. Bill Dentley former New

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Speaker 3: York Fed President and Balloompag economic senior advisa, Bill, what

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Speaker 3: did you make of that performance in that news conference?

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Speaker 8: Thank your interpretation is exactly right. It was quite dubbish.

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Speaker 8: And he basically said that despite the news that's come

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Speaker 8: in economy, stronger than expected, inflation that's so good in

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Speaker 8: the first three months of the year, the whole game

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Speaker 8: plan is basically unchanged. We're going to keep rates here

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Speaker 8: until we're highly confident that we're going get inflation down

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Speaker 8: in two percent. No hint whatsoever of a rate hike,

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Speaker 8: no hint that it's not going to work. So mark

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Speaker 8: reaction I think was pretty appropriate given what he said.

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Speaker 8: You know, he basically said, we've got it.

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Speaker 6: Back to Dudley McKelvey of a few years ago. Bill, Dudley,

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Speaker 6: you're in the trenches at gold and sex gaming the

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Speaker 6: labor economy. What data in the labor economy is important

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Speaker 6: to Chairman Powell to really become accommodative.

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Speaker 8: I think it's the notion that the labor market is

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Speaker 8: really starting to somehow fall apart and the unemployent rate

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Speaker 8: is starting to rise significantly. He was asked pretty explicitly

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Speaker 8: about that, and he basically said, one or two ten

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Speaker 8: percent rise in the unemployer rate wouldn't really disturb him,

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Speaker 8: you know, I think the interesting question is if the

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Speaker 8: labor market really starts to deteriorate, the problem is that

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Speaker 8: the next stop, partypically is a recession. We've never had

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Speaker 8: half a percent rise in the unemployment rate without having

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Speaker 8: a recession.

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Speaker 9: I think it's done player and goes up a couple tens.

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Speaker 8: I don't think it really bothers him. But if it

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Speaker 8: feels like the labor market is really giving way, then

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Speaker 8: the Fed will put a lot of weight on that,

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Speaker 8: almost regardless of what inflation's doing.

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Speaker 5: Bill, you said something, he basically said, we got it.

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Speaker 5: The playbook hasn't changed.

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Speaker 1: Was that the right move.

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Speaker 8: Time will tell if the playbook is it will actually

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Speaker 8: work with as well as he thinks. I mean, my

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Speaker 8: own personal view is that the legs and launtry policy

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Speaker 8: probably are not as long and very blessed he thinks.

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Speaker 8: And I put a lot more weight on financial conditions

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Speaker 8: I think than he is currently. The fact that people

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Speaker 8: are taking his comments in a very positive way from

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Speaker 8: financial market perspective means that we're having an easy of

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Speaker 8: financial conditions, which will support the economy, So I think

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Speaker 8: it just reinforces the higher for longer story over the

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Speaker 8: medium term.

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Speaker 5: He doesn't seem perturbed about that, And he also didn't

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Speaker 5: really deal with a lot of the fundamental questions as

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Speaker 5: we were just saying that have been dividing Wall Street.

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Speaker 5: Didn't address the higher terminal rate. He didn't address this

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Speaker 5: question of what would make him really a second guest

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Speaker 5: idea of restrictiveness or long and variable lags. Do you

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Speaker 5: think that means he's not thinking about it, or that

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Speaker 5: he has rejected it, or do you think he just

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Speaker 5: doesn't want to deal with it in the public right now.

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Speaker 8: I think he's certainly thinking about it, But I think

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Speaker 8: he's basically saying, from his perspective, the evidence hasn't convinced

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Speaker 8: them that they're on the wrong track. So he thinks

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Speaker 8: policy is restrictive, sufficiently restrictive to do the job. So

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Speaker 8: maybe our starting and maybe the neutral rate is.

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Speaker 9: A little bit higher, but it's not as high as

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Speaker 9: where they are today.

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Speaker 8: So yes, could our star be revised up at the

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Speaker 8: next June Summary of Economic projections? Probably will be up

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Speaker 8: revised up a bit, but policy in his mind is

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Speaker 8: still sufficiently tight that he's not worried about that particular variable.

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Speaker 6: Bill Dudley Ethan Harris has been on fire retired from

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Speaker 6: Bank of America, almost daily on LinkedIn with really intelligent

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Speaker 6: work on trim inflation means which inflation statistic is most

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Speaker 6: informative now to our audience.

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Speaker 8: To focus on services x housing for two reasons. Number one,

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Speaker 8: this is the problem where the wage inflation drives the

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Speaker 8: actual outcome in terms of services inflation. And number two,

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Speaker 8: you know it's not being bounced around by the supply

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Speaker 8: chain normalization process, which is pulling down as good prices.

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Speaker 8: I think one of the things that's probably destorying the

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Speaker 8: inflation news recently is the fact that goods prices came

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Speaker 8: down a lot because of the normalization of supply chains.

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Speaker 8: But we ignored the transmittory inflation on the way up.

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Speaker 8: We also have to ignore it on the way down.

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Speaker 8: So we don't want we don't want to overstate that

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Speaker 8: goods price inflation weakness. So I think services sector x

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Speaker 8: X housing is probably a really important thing to focus on.

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Speaker 8: And you know, that's the so called last mile of inflation,

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Speaker 8: and that's the part that's turning out to be more difficult.

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Speaker 3: But we need to talk to you about the balance

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Speaker 3: sheet as well. So the Federal Reserve announcing today they'll

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Speaker 3: slow the pace of balance sheet runoff starting in June.

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Speaker 3: The Central Bank to lower the treasury runoff cap to

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Speaker 3: twenty five billion from sixty billion. Build market participants right

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Speaker 3: now trying to work out, Okay, if QT wasn't bearish,

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Speaker 3: is tapering QT bullish? But can you help me understand

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Speaker 3: because we were told it's like watching paint dry. It

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Speaker 3: has been when they start to undo it, unwind some

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Speaker 3: of it. What does it all mean?

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Speaker 8: I think it is like watching pink right. You can

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Speaker 8: see that in the press conference there are originally no

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Speaker 8: questions about the balance sheet, and he made it very

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Speaker 8: clear that the balance sheet decisions are not part of

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Speaker 8: the monetary policy process of making policy either either easier

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Speaker 8: or tighter. I don't think it has much effect the

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Speaker 8: taper because the destination is the same, the Feds going

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Speaker 8: to a balance sheet size that generates reserves that are

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Speaker 8: ample but not abundant like they are today. So we

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Speaker 8: may get there slightly over a longer period of time

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Speaker 8: because we're now running off securities at someone's slow place,

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Speaker 8: but we're going to the same place, and so it

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Speaker 8: really has virtually no market implications.

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Speaker 5: If you were on the Fedstelle, Bill, would you have

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Speaker 5: voted for this type of thing, or would you have

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Speaker 5: aired a little bit more as you were talking about before,

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Speaker 5: about financial conditions easing too much to allow inflation to

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Speaker 5: stay sticky for too long.

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Speaker 8: I don't think we're at this stage where you know,

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Speaker 8: great hikes are warranted, and so I would have agreed

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Speaker 8: with the decision today. I think where I would have

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Speaker 8: maybe a bit different from cheer Paul a little bit.

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Speaker 8: I would just be a little bit more cautious about

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Speaker 8: the confidence that he's got it.

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Speaker 2: Bill Dudley, thank you, sir.

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Speaker 3: The former Fed New York President Bill Fantastic has always

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Speaker 3: recority market fades a little bit. We're up by three

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Speaker 3: quarters of one percent. Make so I appreciated the question

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Speaker 3: at the end of the news conference. I'm not sure

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Speaker 3: about the answer, because effectively, what the journalist in that

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Speaker 3: news conference was asking is whether the lack of descent

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Speaker 3: spoke to a lack of diversity of thought on the FMC.

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Speaker 1: Correct.

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Speaker 5: They weren't asking about you know what gender and precisely

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Speaker 5: you know racial composition is on the FED. They were

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Speaker 5: asking about pushback intellectual discourse, and this question about whether

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Speaker 5: anyone was saying, hey, wait a second, maybe we shouldn't

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Speaker 5: be so sure that long and variable lags have the

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Speaker 5: same kind of effect as they have in the past.

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Speaker 1: That I think is a legitimate question. He didn't address

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Speaker 1: a bunch of questions.

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Speaker 6: Oh here alluded to and I think Bob Michael's been

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Speaker 6: leading on this, And I mentioned to you and Lingoln earlier,

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Speaker 6: what if we get friendly data, what if we revert

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Speaker 6: to a disinflationary vector. John, I'm doing some research here,

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Speaker 6: and I mean, you know, I look at the G

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Speaker 6: seven meeting in Pulia, trying.

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Speaker 2: To make that here in June.

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Speaker 6: And I'm sorry, I got a plane ticket of three

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Speaker 6: thousand and six dollars, not even close to seven thousand

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Speaker 6: dollars eight nine, ten months ago. I'm sorry. You get

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Speaker 6: whispers a service sector disinflation, and you're right back to

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Speaker 6: the boom economy DOW at five hundred what it was

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Speaker 6: ten minutes.

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Speaker 3: I'll repeat the question I asked a little bit earlier

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Speaker 3: before the news conference started. I'll ignore the reference of

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Speaker 3: the doll The three month average on payrolls is two

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Speaker 3: seventy six. The Federal Reserve chair is just established, conveyed

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Speaker 3: quite clearly that the Fed put is alive and well,

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Speaker 3: they're willing to respond to adverse shocks, downside surprises, particularly

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Speaker 3: if they emerge in the labor market. Now I'm trying

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Speaker 3: to wonder, Lisa, what it would take to reintroduce the

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Speaker 3: rate cut conversation. Clearly they still have a bias to

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Speaker 3: ease to cut interest rates. Would it be a downside

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Speaker 3: surprise on Friday? With that be sufficient? What would we

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Speaker 3: need to see to get people talking about a different thing,

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Speaker 3: not about hiking, about be sufficiently restrictive? After what we've

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Speaker 3: just witnessed in that news conference, what would it take

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Speaker 3: to have a series of guests to start talking about

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Speaker 3: July at the Federal Reserve?

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Speaker 5: And j Powell himself might have said, well, it would

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Speaker 5: take a substantial weakening in the labor market. Does this

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Speaker 5: market believe him that it really would or do they

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Speaker 5: think that just the idea that yes, quits rates are increasing,

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Speaker 5: see a slight increase in the labor market. And then

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Speaker 5: to Mohammed's point, if you already see the weakness, it's

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Speaker 5: too late. How much does that haunt him at a

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Speaker 5: time where he's really embracing the recovery that we continue

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Speaker 5: to see in the economy.

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Speaker 3: Mike McKee was in that news conference. Mike McKee has

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Speaker 3: run out of that news conference. He's with us right now.

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Speaker 3: Mike great exchange with the Federal Reserve chairman in the

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Speaker 3: last Now, what stood out for you?

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Speaker 10: Well, I think the biggest thing is that there are

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Speaker 10: two audiences here, or two people that are two things

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Speaker 10: that the FED is trying to address. One is the

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Speaker 10: markets and their perception of what the Fed is doing,

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Speaker 10: and the other is the economy and what they need

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Speaker 10: to do to bring down inflation. And the two things

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Speaker 10: are not always compatible, and that's maybe what you have

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Speaker 10: right now. The Fed is less concerned about how the

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Speaker 10: market feels about all this than they are with setting

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Speaker 10: their own parameters within their meeting of what they think

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Speaker 10: they need to do, and at this point they don't

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Speaker 10: think they need to do anything. The economy seems to

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Speaker 10: be in good shape. We've seen a little bit of

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Speaker 10: slow down, but we're supposed to see a slow down

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Speaker 10: when they raise rates. We have seen inflation stall out.

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Speaker 10: Maybe that means they haven't got policy tight enough. But

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Speaker 10: now financial conditions have tightened, and so maybe that's going

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Speaker 10: to start to work. Bottom line, they don't know what

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Speaker 10: they're going to do, so they can't then give the

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Speaker 10: markets a good clue.

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Speaker 6: Mike, and the fan distributions of all this data, the probabilities,

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Speaker 6: the outcomes of all this data, is there in place

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Speaker 6: into the jobs report on Friday an ability to get

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Speaker 6: back to a disinflation or a vector quickly.

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Speaker 10: Probably not in the sense that we don't have any

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Speaker 10: indication that hiring is going to significantly slow meeting any

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Speaker 10: of the conditions that Jay Powell was talking about for

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Speaker 10: a rate cut, and wages from all the other measures

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Speaker 10: we've seen have still been running above inflation. So at

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Speaker 10: this point one indicator isn't going to do it. It

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Speaker 10: would take much more than that. If we got a

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Speaker 10: significant rise in unemployment for some reason, then that would

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Speaker 10: set some antenna up, but it wouldn't push anybody to

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Speaker 10: do anything at this point.

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Speaker 5: Mike, we talked a lot about how the key question

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Speaker 5: was going to be whether they were entertaining the idea

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Speaker 5: of rate hikes. Were you surprised, and he completely dismissed

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Speaker 5: that out right.

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Speaker 10: No, I wasn't surprised because Lisa, you just have to

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Speaker 10: play game theory and ask what would have happened if

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Speaker 10: he didn't dismiss it. Then all of a sudden, you've

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Speaker 10: got people really moving the markets around trying to price

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Speaker 10: for something like that. At this point, the FED doesn't

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Speaker 10: see a reason to raise rates because they think that

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Speaker 10: overall the economy is slowing a little bit as they

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Speaker 10: want it to, and it is doing so without rising unemployment.

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Speaker 10: So things are kind of working out the way they

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Speaker 10: had planned.

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Speaker 3: Mi mackay, great work has a waste, buddy, Well, can't

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Speaker 3: chat with you tomorrow morning.

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Speaker 2: Mi McKay.

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Speaker 3: That breaking it down for you down in Washington, DC.

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Speaker 3: That pop in the equity market get in sold just

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Speaker 3: a little bit. We're still positive. But Tomney by zero

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Speaker 3: point four percent?

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Speaker 6: Can I go to November seven? November seven is two

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Speaker 6: days after a modest election. I'm sorry, but that's the

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Speaker 6: meeting I'm focused on. November seven could be wild.

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Speaker 3: Hey, Eve's real He directs about it in the news conference.

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Speaker 3: They do not want to talk about politics at all,

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Speaker 3: not part of the conversation, and.

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Speaker 5: They want to give the sense that they truly are

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Speaker 5: independent at a time where they're actually being challenged in

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Speaker 5: terms of their independence.

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Speaker 1: The more people start talking about.

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Speaker 5: When people, i mean the former president Trump comes out

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Speaker 5: and starts talking about the potential for you know, taking

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Speaker 5: ownership over fed decision making, they're going to be much

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Speaker 5: more adamant about being.

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Speaker 3: I'm waiting for him to address that story that came

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Speaker 3: out from the Journal in the last week, still anonymous

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Speaker 3: sources around the president talking about these issues.

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Speaker 5: These are big issues, so you feel like people are

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Speaker 5: kind of like spitballing out there and seeing how the

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Speaker 5: people react to it before they yeah, yeah, before they

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Speaker 5: really kind of put any emphasis behind it.

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Speaker 3: Jeff Rosenbersts got things to say about this, joins us

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Speaker 3: now from Black Rock. He really doesn't that take with us, Jeff,

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Speaker 3: I'm not going there.

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Speaker 2: Don't worry.

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Speaker 3: Jeff is great to catch up with you as always, sir.

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Speaker 3: After what you just heard, does it make you incrementally

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Speaker 3: more bullish in any way, shape or form.

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Speaker 11: Well, let's just say that going into this meeting, there

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Speaker 11: was a lot of bearishness and fear that he would

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Speaker 11: come out more hawkish. If you even look at you know,

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Speaker 11: Bloomberg Economics put out their kind of preview, it was overwhelmingly.

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Speaker 9: Expecting a very hawkish message.

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Speaker 11: So I think there's a lot of relief here that

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Speaker 11: the chairman stayed true to what we've seen from this chairman.

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Speaker 11: He's been very much on the other side, has been

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Speaker 11: one sided, looking at the glass half four and reiterating,

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Speaker 11: you know, kind of the key point around an asymmetric

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Speaker 11: response function. If inflation is higher and it has been

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Speaker 11: higher over the last three months, okay, we won't cut

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Speaker 11: as soon as we were anticipating. But the questions and

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Speaker 11: people who tried to pigeonhole them on are you going

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Speaker 11: to hike? Did you talk about hikes? You know, just

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Speaker 11: deflected all of that, and.

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Speaker 9: That was that was a relief.

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Speaker 11: So the reiteration on the asymmetry as a result of

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Speaker 11: the reiteration on they believe that policy is sufficiently restrictive.

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Speaker 11: Those are two key things here that keeps a more

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Speaker 11: dubvish orientation in the face of some challenging economic data.

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Speaker 6: And Jeff Rozenberg on Planet Blackrock, is the economy doing okay?

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Speaker 6: Is the real misestimation here? A one point six percent

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Speaker 6: GDP which made a lot of news, but domestic final

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Speaker 6: sales were much much better. Is it better out there

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Speaker 6: than we actually think and that's why we're heard at

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Speaker 6: Dubvish poll today.

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Speaker 11: Well, I think you have a mixture there and you've

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Speaker 11: heard it, you know, as part of the exchange during

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Speaker 11: the Q and A. You know the aggregate data, Yes,

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Speaker 11: one point six understates it because as you rightly point out,

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Speaker 11: if we look at domestic demand, it's running at a

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Speaker 11: stronger level.

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Speaker 9: So the economy in aggregate terms is stronger.

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Speaker 11: But what Bob Michelle talked about in the earlier or Michael,

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Speaker 11: I'm not sure which way you pronounce it talk about

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Speaker 11: is you know there are pockets that.

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Speaker 2: Was I can confirm it's Michael, carry on, Jeff.

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Speaker 9: Thank you.

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Speaker 11: So there are pockets of hurt going on here, but

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Speaker 11: there are also pockets of strength. So you have a

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Speaker 11: distributional aspect in terms of what's going on in terms

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Speaker 11: of the economic growth side. But clearly the amount of

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Speaker 11: slowing it was a question in the Q and A,

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Speaker 11: didn't you need to have more pain to get the disinflation.

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Speaker 9: Good news is we're still on the.

442
00:19:54,920 --> 00:19:58,320
Speaker 11: Path of the immaculate disinflation and the growth side is

443
00:19:58,640 --> 00:20:01,600
Speaker 11: holding up. So I think that's quite supportive here to

444
00:20:01,680 --> 00:20:03,360
Speaker 11: the risky asset perspective, it.

445
00:20:03,320 --> 00:20:05,879
Speaker 5: Seems like this is more supportive to the risky ascids

446
00:20:05,920 --> 00:20:08,159
Speaker 5: than it is to government bonds, right, I mean, this

447
00:20:08,200 --> 00:20:11,920
Speaker 5: basically raises the specter of taking a rate hike off

448
00:20:11,920 --> 00:20:15,080
Speaker 5: the table, which will benefit stocks of companies that have

449
00:20:15,160 --> 00:20:18,520
Speaker 5: done really well with respect to earnings, but doesn't necessarily

450
00:20:18,600 --> 00:20:21,320
Speaker 5: give that much of a boost to government bonds that

451
00:20:21,359 --> 00:20:24,320
Speaker 5: are still subject to hire for longer. Is that kind

452
00:20:24,359 --> 00:20:27,080
Speaker 5: of your view in terms of positioning on the heels

453
00:20:27,080 --> 00:20:30,480
Speaker 5: of this on the margin, Yeah, And you know.

454
00:20:30,400 --> 00:20:32,600
Speaker 11: I think we have to segment between the front end

455
00:20:32,680 --> 00:20:34,320
Speaker 11: of the curve and the back end of the curve.

456
00:20:35,320 --> 00:20:37,399
Speaker 11: When you know, I think this is challenging for the

457
00:20:37,440 --> 00:20:39,080
Speaker 11: long run in the back end of the curve. Right,

458
00:20:39,080 --> 00:20:42,359
Speaker 11: The FED is from the most part dismissive of the

459
00:20:42,400 --> 00:20:46,320
Speaker 11: inflation increase. They're not really taking it in too much

460
00:20:46,320 --> 00:20:50,479
Speaker 11: into account. The characterization of it was bumpy, what me worry.

461
00:20:50,640 --> 00:20:53,000
Speaker 11: So that's fine, But if you're holding thirty years of

462
00:20:53,040 --> 00:20:56,360
Speaker 11: debt at interest rates that you know may not sufficiently

463
00:20:56,440 --> 00:20:59,439
Speaker 11: compensate you, if you are at a longer period of

464
00:20:59,440 --> 00:21:02,879
Speaker 11: a three percent inflationary period, that's a bit challenging and

465
00:21:02,920 --> 00:21:04,040
Speaker 11: a little bit problematic.

466
00:21:04,080 --> 00:21:05,119
Speaker 9: I think for the front end.

467
00:21:04,960 --> 00:21:08,320
Speaker 11: Of the curve, you know, it's a little bit easier

468
00:21:08,359 --> 00:21:11,360
Speaker 11: story because you have less exposure because of the maturity

469
00:21:11,400 --> 00:21:14,240
Speaker 11: and roll down that you benefit from there. But I

470
00:21:14,280 --> 00:21:16,359
Speaker 11: think you have to be a little bit concerned about

471
00:21:16,359 --> 00:21:20,240
Speaker 11: the longer run trajectory here, both from what we heard

472
00:21:20,240 --> 00:21:23,080
Speaker 11: today in terms of monetary policy, but the other side

473
00:21:23,119 --> 00:21:25,040
Speaker 11: of this, which we were a little bit this morning

474
00:21:25,040 --> 00:21:27,920
Speaker 11: in terms of treasury refunding on the fiscal side, that's

475
00:21:27,960 --> 00:21:30,760
Speaker 11: a bit more of a challenging environment for back end duration.

476
00:21:31,040 --> 00:21:31,200
Speaker 9: JEF.

477
00:21:31,280 --> 00:21:32,600
Speaker 2: I want to build on that just a little bit.

478
00:21:32,640 --> 00:21:34,800
Speaker 3: Given how estamplished the reaction function is now at the

479
00:21:34,800 --> 00:21:38,040
Speaker 3: Federal Reserve, highlighted again by the chairman in this news conference,

480
00:21:38,240 --> 00:21:40,159
Speaker 3: how do you think HEELDS will respond to the longer

481
00:21:40,280 --> 00:21:44,080
Speaker 3: end to incoming information the data on Friday an upside

482
00:21:44,119 --> 00:21:46,440
Speaker 3: surprise versus say, a downside surprise.

483
00:21:48,320 --> 00:21:51,120
Speaker 11: Yeah, you know, we're gonna pivot right to Friday and

484
00:21:51,720 --> 00:21:53,400
Speaker 11: we'll be back and we'll talk to you guys then.

485
00:21:53,480 --> 00:21:55,320
Speaker 11: But you know, I think that will very much be

486
00:21:55,520 --> 00:21:59,000
Speaker 11: more about the front end reaction, because that's gonna be

487
00:21:59,359 --> 00:22:02,320
Speaker 11: about is the FED really getting the slowdown in the

488
00:22:02,359 --> 00:22:06,919
Speaker 11: labor markets, the normalization in the labor markets that they

489
00:22:07,000 --> 00:22:10,560
Speaker 11: keep talking about, but the data isn't really supportive. Nonfarm

490
00:22:10,560 --> 00:22:13,080
Speaker 11: payroll is not supportive, wage is not supportive.

491
00:22:13,200 --> 00:22:13,840
Speaker 9: I'm a little.

492
00:22:13,640 --> 00:22:17,359
Speaker 11: Surprised you to get more pushback on ECI, their favorite measure.

493
00:22:17,440 --> 00:22:19,879
Speaker 9: Everybody expected it to go down. It went up.

494
00:22:19,960 --> 00:22:22,760
Speaker 11: Yes, we can dismiss it and add special factors. It

495
00:22:22,800 --> 00:22:24,200
Speaker 11: was a bit more state and local, it was a

496
00:22:24,240 --> 00:22:27,159
Speaker 11: little bit more union than private. But it didn't go

497
00:22:27,280 --> 00:22:29,960
Speaker 11: down as fast as the normalization would say. And there

498
00:22:30,160 --> 00:22:33,359
Speaker 11: is that kind of lurking question, Mike McKee, you asked it,

499
00:22:33,680 --> 00:22:35,520
Speaker 11: you know, are you not as restrictive as you think

500
00:22:35,560 --> 00:22:38,399
Speaker 11: you are? And they'll continue to believe that they are restrictive.

501
00:22:38,880 --> 00:22:43,480
Speaker 11: That's kind of the fundamental belief at this point. The

502
00:22:43,600 --> 00:22:47,360
Speaker 11: question is if the data keeps pushing against that, then

503
00:22:47,440 --> 00:22:49,359
Speaker 11: does the FED have to make a bigger pivot.

504
00:22:49,400 --> 00:22:50,880
Speaker 9: Today was not that day.

505
00:22:51,240 --> 00:22:53,920
Speaker 11: Way too soon to get there, and that's why Powell

506
00:22:54,040 --> 00:22:58,160
Speaker 11: purposefully came out very dubvish. But inside the statement, one

507
00:22:58,160 --> 00:23:01,119
Speaker 11: thing people one questioner picked up on. There are a

508
00:23:01,160 --> 00:23:04,320
Speaker 11: little bit of hints here of moving around the removal

509
00:23:04,440 --> 00:23:07,320
Speaker 11: of the kind of the implicit forward guidance on the

510
00:23:07,320 --> 00:23:10,480
Speaker 11: peak policy rate, the implicit promise that the next move

511
00:23:10,480 --> 00:23:12,400
Speaker 11: would be a cut in the introductory statement.

512
00:23:13,080 --> 00:23:14,240
Speaker 9: I think that's notable.

513
00:23:14,280 --> 00:23:16,199
Speaker 11: We'll see that in the minutes in terms of the

514
00:23:16,200 --> 00:23:19,359
Speaker 11: debate and what the Chairman obviously couldn't talk about here,

515
00:23:19,400 --> 00:23:21,960
Speaker 11: but next month we will talk about is the shifting

516
00:23:22,000 --> 00:23:24,919
Speaker 11: in the distribution of the voting members with respect to

517
00:23:24,960 --> 00:23:28,639
Speaker 11: their forecasts of economic policy that you didn't get this meeting,

518
00:23:28,680 --> 00:23:31,400
Speaker 11: but obviously that's what the markets wants to see. And

519
00:23:31,520 --> 00:23:33,960
Speaker 11: you can kind of read into the statement and the

520
00:23:34,160 --> 00:23:36,840
Speaker 11: and the press conference that there is a shift going

521
00:23:36,880 --> 00:23:39,960
Speaker 11: on there. It was underplayed, not really many people picked

522
00:23:40,040 --> 00:23:42,119
Speaker 11: up on it. He wasn't going to highlight it, but

523
00:23:42,200 --> 00:23:43,480
Speaker 11: you can see that is going on.

524
00:23:43,760 --> 00:23:46,560
Speaker 3: Like ros Jeff Rosenberg right to catch up with you, sir.

525
00:23:46,600 --> 00:23:49,320
Speaker 3: The shade at JP Morgan from Black Crost stop you

526
00:23:49,359 --> 00:23:50,720
Speaker 3: think they kill Rick Rick Ryder?

527
00:23:51,600 --> 00:23:53,080
Speaker 2: You know, Jpmurlgan.

528
00:23:53,280 --> 00:23:56,280
Speaker 5: It's a fair mischaracterization. You think that was intentional? That

529
00:23:56,400 --> 00:23:57,320
Speaker 5: was your takeaway from the.

530
00:24:00,400 --> 00:24:02,880
Speaker 2: Jo of course it was I don't know who bub

531
00:24:02,920 --> 00:24:05,480
Speaker 2: Michael is. Give me two great this s and P.

532
00:24:05,640 --> 00:24:08,200
Speaker 3: Five hundred is fading going into the clothes let's bring

533
00:24:08,280 --> 00:24:10,639
Speaker 3: up the chart briefly. We're up now by only a

534
00:24:10,640 --> 00:24:13,320
Speaker 3: tenth of one percent at the peak. In that news conference,

535
00:24:13,320 --> 00:24:15,200
Speaker 3: the S and P five hundred was positive by one

536
00:24:15,240 --> 00:24:18,679
Speaker 3: point two. Something that sticks, though interestingly herely so it's

537
00:24:18,880 --> 00:24:20,960
Speaker 3: the running bonds. The two are still down by about

538
00:24:20,960 --> 00:24:21,840
Speaker 3: eight basis points.

539
00:24:21,880 --> 00:24:24,479
Speaker 5: It took the prospect of hikes off the table, so

540
00:24:24,520 --> 00:24:27,679
Speaker 5: that potential tail risk not necessarily there. I thought what

541
00:24:27,760 --> 00:24:29,919
Speaker 5: Jeff Rosenberg said though about the long end was interesting

542
00:24:29,920 --> 00:24:31,520
Speaker 5: and we're not seeing it in the price action at all,

543
00:24:31,680 --> 00:24:34,600
Speaker 5: saying but that in the longer run this becomes a

544
00:24:34,680 --> 00:24:37,680
Speaker 5: real problem for the long end. Essentially, if you have

545
00:24:37,760 --> 00:24:41,400
Speaker 5: a FED that is hardwired to cut rates on any weakness,

546
00:24:41,400 --> 00:24:43,840
Speaker 5: but not necessarily the high rates on the sense of

547
00:24:43,880 --> 00:24:46,520
Speaker 5: any kind of durability of inflation, does that mean that

548
00:24:46,520 --> 00:24:48,239
Speaker 5: inflation is going to stay higher for longer and that

549
00:24:48,240 --> 00:24:49,480
Speaker 5: there needs to be a higher risk premium.

550
00:24:49,520 --> 00:24:51,359
Speaker 2: I was pleased she took the conversation there. Lisa.

551
00:24:51,400 --> 00:24:54,520
Speaker 3: This from Mohammad al Arian out on x formally known

552
00:24:54,560 --> 00:24:57,439
Speaker 3: as Twitter, with this to say. The question, now, this

553
00:24:57,520 --> 00:24:59,720
Speaker 3: is an important one which will only be answered in

554
00:24:59,760 --> 00:25:01,840
Speaker 3: a few weeks when the meeting's minutes und released is

555
00:25:01,880 --> 00:25:04,800
Speaker 3: the extent to which his remarks reflect his own biases

556
00:25:04,880 --> 00:25:07,720
Speaker 3: or constitute an accurate summary of what was discussed by

557
00:25:07,840 --> 00:25:10,159
Speaker 3: him and his f OO WEBC colleagues. And the Fed

558
00:25:10,200 --> 00:25:12,800
Speaker 3: speak's going to start pretty immediately, Tom, almost straight after

559
00:25:12,800 --> 00:25:13,679
Speaker 3: this gun into payrolls.

560
00:25:13,720 --> 00:25:15,280
Speaker 2: We're going to hear from Fed officials.

561
00:25:15,359 --> 00:25:17,240
Speaker 6: I agree with the first week's important. If we get

562
00:25:17,240 --> 00:25:19,880
Speaker 6: a two forty on survey on non farm payrolls three

563
00:25:19,920 --> 00:25:24,000
Speaker 6: months trailing two forty three oh three, two seventy, that's

564
00:25:24,000 --> 00:25:25,200
Speaker 6: a fully employed America.

565
00:25:25,280 --> 00:25:28,280
Speaker 5: Well, and you raised a real interesting question, which is essentially,

566
00:25:28,600 --> 00:25:30,800
Speaker 5: is there now a new asymmetry in the market where

567
00:25:30,800 --> 00:25:33,679
Speaker 5: the long end will sell off disproportionately if we do

568
00:25:33,800 --> 00:25:35,280
Speaker 5: get a really big.

569
00:25:35,080 --> 00:25:37,359
Speaker 1: Or hot print in the labor market.

570
00:25:37,440 --> 00:25:39,280
Speaker 5: Essentially, the Fed's not going to look at this as

571
00:25:39,320 --> 00:25:41,240
Speaker 5: a reason to hikered even to keep rates higher for

572
00:25:41,280 --> 00:25:44,480
Speaker 5: longer necessarily, but it could mean longer term there could

573
00:25:44,480 --> 00:25:46,200
Speaker 5: be a much more inflationary pressure.

574
00:25:45,920 --> 00:25:46,440
Speaker 1: Under the hood.

575
00:25:46,640 --> 00:25:49,800
Speaker 3: Really important staff ahead of payrolls on Friday, as Tom mentioned,

576
00:25:49,840 --> 00:25:52,360
Speaker 3: the estimate in our survey two hundred and forty thousand,

577
00:25:52,600 --> 00:25:55,800
Speaker 3: the previous number three hundred and three coming up next

578
00:25:55,840 --> 00:25:57,919
Speaker 3: on the close, canning you into that in about fifteen

579
00:25:57,920 --> 00:26:01,120
Speaker 3: minutes away Seth Compent, a chief Global Economy at Morgan Stanley.

580
00:26:01,160 --> 00:26:03,600
Speaker 3: For the three of us will see you again, same time,

581
00:26:04,160 --> 00:26:07,560
Speaker 3: same place, for the next Federal Reserve decision from New

582
00:26:07,640 --> 00:26:10,440
Speaker 3: York City. This was the Fed Decides