WEBVTT - Instant Reaction: Jay Powell on Fed Policy 0:00:02.400 --> 0:00:07.120 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.200 --> 0:00:08.799 The Chairman of the Federal Reserve. 0:00:08.960 --> 0:00:12.520 That news conference ended almost as soon as it started. 0:00:12.720 --> 0:00:15.600 The FED chair thinks we're restrictive. Here are the scores 0:00:15.640 --> 0:00:17.759 for you in the equity market on the SMP five 0:00:17.880 --> 0:00:21.119 hundred boom vertical, almost straight away as soon as he 0:00:21.160 --> 0:00:23.759 started speaking. The equity market positive by one percent on 0:00:23.800 --> 0:00:26.599 the SMP on'm announcedack cup by one point one percent. 0:00:26.640 --> 0:00:29.440 The small caps bouncing back from a very very bad 0:00:29.480 --> 0:00:31.760 April here in May up by almost two percent. If 0:00:31.800 --> 0:00:33.680 you switch at the board once again, if it's a 0:00:33.720 --> 0:00:35.880 FED decision day, apparently it's a rally for the two 0:00:35.920 --> 0:00:38.920 year yield to lower by seven basis points four ninety 0:00:38.920 --> 0:00:41.080 six twenty two, and I think it's about four to 0:00:41.159 --> 0:00:44.920 twenty am in Tokyo. Dolly En looks a little something 0:00:44.960 --> 0:00:46.880 like this. I match and the Ministry of Finance is 0:00:46.920 --> 0:00:48.480 a little bit happier. It could have been a whole 0:00:48.520 --> 0:00:51.440 lot worse, Dolly n one fifty seven forty nine. Take 0:00:51.440 --> 0:00:53.519 a listen to what the Chairman of the Federal Reserve 0:00:53.720 --> 0:00:54.280 had to say. 0:00:55.400 --> 0:00:57.920 I do think the evidence shows, you know pretty clearly 0:00:57.960 --> 0:01:01.279 that policy is restrictive and his wing on demand, and 0:01:01.880 --> 0:01:03.880 there are a few places I would point to for that. 0:01:04.319 --> 0:01:07.800 You can start with the labor market. So demand is 0:01:07.920 --> 0:01:10.920 still strong, the demand side of the labor market in particular, 0:01:11.360 --> 0:01:13.520 but it's cooled from its extremely high level of a 0:01:13.520 --> 0:01:16.200 couple of years ago, and you see that in job openings. 0:01:16.240 --> 0:01:18.880 You saw more evidence of that today in the Jolts report. 0:01:18.959 --> 0:01:21.960 As you'll know, it's still higher than pre pandemic, but 0:01:22.040 --> 0:01:24.479 it has been coming down both in the Indeed Report 0:01:24.480 --> 0:01:27.880 and in the Jolts Report. That's demand cooling. 0:01:28.200 --> 0:01:28.600 No doubt. 0:01:28.640 --> 0:01:31.480 So for Nisson's macro, with this line, the statement retains 0:01:31.480 --> 0:01:34.959 its easing bias power beliefs that policy is restrictive. Look 0:01:35.000 --> 0:01:36.759 at the price sanction off the back of this, Bramo. 0:01:37.040 --> 0:01:39.600 The next sixty minutes of that news conference, next fifty 0:01:39.640 --> 0:01:41.120 minutes hardly worth your time. 0:01:40.959 --> 0:01:43.480 Well, especially because the next question was the question that 0:01:43.680 --> 0:01:46.679 was the key one popping the question that Julian Emmanuel 0:01:46.760 --> 0:01:49.240 was talking about, which is have you considered a hike? 0:01:49.600 --> 0:01:52.520 How big is the threshold? Not likely, We're not going 0:01:52.560 --> 0:01:54.200 to do that. So it was a one two punch. 0:01:54.280 --> 0:01:57.720 First policy was restrictive dubbish. Then hikes are not on 0:01:57.760 --> 0:02:00.000 the table, even a bigger rally, and frankly, that's what's 0:02:00.080 --> 0:02:03.320 feeling basically hawkish, isn't is sex. 0:02:03.120 --> 0:02:06.080 In their note Hatziism Company and their note started with 0:02:06.160 --> 0:02:08.240 the tapering action. I think it was the tanem. I 0:02:08.240 --> 0:02:10.640 agree with everything you've said. And it was over Johnny 0:02:10.639 --> 0:02:13.480 after not forty seconds. I think it was over after 0:02:13.520 --> 0:02:18.040 thirty three seconds. But with dat said, he delivered a 0:02:18.080 --> 0:02:20.399 lot of what people wanted as an adjustment. You saw 0:02:20.440 --> 0:02:22.320 it in the real yield. Let's come back a little bit. 0:02:22.720 --> 0:02:25.320 But you wonder what the follow is? The follow on 0:02:25.520 --> 0:02:28.080 is the first set of FED speakers out of the block. 0:02:28.760 --> 0:02:30.680 I mean, I mean, are they gonna are they gonna 0:02:30.720 --> 0:02:31.400 go with this tone? 0:02:31.400 --> 0:02:33.359 It's been a fantastic lineup of guests over the last 0:02:33.400 --> 0:02:35.120 couple of hours. Just to shout out to Bob Michael 0:02:35.120 --> 0:02:38.320 at JP Morgan and Mohammed al Arian asked about stack flation. 0:02:38.480 --> 0:02:40.800 To remember Buff's response to that. I think the Chairman's 0:02:40.800 --> 0:02:42.760 gonna laugh at that. Reflect on what happened to the 0:02:42.800 --> 0:02:44.560 folky is. I think he's gonna laugh. He said this 0:02:44.639 --> 0:02:47.880 no snack, this very little flation. Ultimately this no stack flation. 0:02:48.120 --> 0:02:50.640 Basically he laughed. He said you know, give me a break. 0:02:50.680 --> 0:02:52.000 This is not what we're talking about. 0:02:52.040 --> 0:02:54.280 Honestly, this is a FED show that came out much 0:02:54.320 --> 0:02:57.040 more dubbish than anyone had expected. And honestly, this raises 0:02:57.080 --> 0:02:59.919 a question about whether he is entertaining some. 0:02:59.880 --> 0:03:00.800 Of the key debates. 0:03:00.840 --> 0:03:04.400 He was asked by Michael McKee about long term neutral rates, 0:03:04.560 --> 0:03:07.000 not going to engage it, asked about long and variable 0:03:07.080 --> 0:03:08.360 lags stick in a script. 0:03:08.480 --> 0:03:10.960 There was no sense that he had entertained a lot of. 0:03:10.880 --> 0:03:13.440 The fundamental debates that are dividing Wall Street in a 0:03:13.480 --> 0:03:14.440 really serious way. 0:03:14.760 --> 0:03:16.239 I'm not sure where that leaves people. 0:03:16.600 --> 0:03:19.280 I noticed that off the GDP, where we've got a 0:03:19.320 --> 0:03:22.240 one point six percent statistic, what we heard interview after 0:03:22.320 --> 0:03:25.520 interview was domestic final sales was actually pretty buoyant. And 0:03:25.560 --> 0:03:28.239 that's what he alluded to when he went after the stagflation. 0:03:28.440 --> 0:03:30.240 Let's be clear, they're not going to count anytime soon. 0:03:30.280 --> 0:03:32.520 Based on what we just heard, the easing bias remains. 0:03:32.919 --> 0:03:34.960 It's just the amount of price action we've seen over 0:03:35.000 --> 0:03:36.760 the last couple of months. When we talked about the 0:03:36.760 --> 0:03:39.640 Fed champ being hawkish, it was hawkish relative to what 0:03:39.840 --> 0:03:42.800 we've had. This conversation all day relative to the previous meeting, 0:03:42.880 --> 0:03:45.720 maybe relative to the price action where we're price four 0:03:45.800 --> 0:03:46.280 right now. 0:03:46.560 --> 0:03:47.440 Very difficult to do. 0:03:47.520 --> 0:03:49.400 The bar for that was so high given the fact 0:03:49.400 --> 0:03:52.120 that this market is only price for one cut in 0:03:52.200 --> 0:03:52.960 twenty twenty four. 0:03:53.040 --> 0:03:54.280 Yeah, this didn't push against that. 0:03:54.360 --> 0:03:56.360 I mean, this could very much be consistent with only 0:03:56.400 --> 0:03:58.440 one rate cut, and that's why you're seeing a bigger move, 0:03:58.520 --> 0:04:03.360 arguably in stocks. Basically this is the perfect mix for stocks. 0:04:03.400 --> 0:04:05.120 Where people said you just need the tail risk of 0:04:05.200 --> 0:04:06.280 a hike off the table. 0:04:06.480 --> 0:04:08.120 He did that, and then you can really go to 0:04:08.160 --> 0:04:08.520 the races. 0:04:08.560 --> 0:04:10.120 When we get to Dudley, I'm going to talk about 0:04:10.160 --> 0:04:12.840 what wasn't talked about too much, which is a labor economy. 0:04:12.880 --> 0:04:16.200 What evidence do they need to see in the labor 0:04:16.320 --> 0:04:20.599 economy to really become accommodative, And to me, that's still 0:04:20.760 --> 0:04:24.080 really unanswered. I don't think it's claims. Maybe it's wages 0:04:24.120 --> 0:04:27.080 coming down all the time Forcelly and others, But I 0:04:27.240 --> 0:04:30.600 just really wonder what the labor dialogue is here rather 0:04:30.640 --> 0:04:31.679 than the parlor game. 0:04:31.520 --> 0:04:33.400 Of what is tak You're right, I would pad that 0:04:33.440 --> 0:04:36.040 with inflation. I think oh they got called it with 0:04:36.080 --> 0:04:39.039 these hot inflation prints temper their ability to respond to 0:04:39.040 --> 0:04:41.440 one first shocks the sub called fed put. Based on 0:04:41.480 --> 0:04:43.240 what we just heard in the last sixty minutes, the 0:04:43.240 --> 0:04:45.080 fed put is alive and well. 0:04:45.120 --> 0:04:46.880 Basically cyflation's not on the table. 0:04:46.920 --> 0:04:49.120 Stop it already. And that's basically what we heard. 0:04:49.320 --> 0:04:52.320 Can you set up a course where we have Frankfurt 0:04:52.440 --> 0:04:56.479 in London question quality brought over to Washington. Can you 0:04:56.640 --> 0:04:57.080 arrange that? 0:04:57.200 --> 0:04:59.839 Would you want me to offend everyone? No, I'm gonna 0:04:59.839 --> 0:05:00.720 come say it right now. 0:05:00.760 --> 0:05:03.320 There are too many questions that are off topic of 0:05:03.360 --> 0:05:07.159 the dual mandate of price change. Ethan Harris on fire 0:05:07.240 --> 0:05:10.120 and LinkedIn on this and on the labor economy. I 0:05:10.160 --> 0:05:11.880 didn't earn enough about the labor economy. 0:05:11.920 --> 0:05:17.080 I have to be I disagree with you. I felt 0:05:17.120 --> 0:05:20.360 like after the first two questions, people tried every which 0:05:20.400 --> 0:05:22.159 angle to get something more. 0:05:22.680 --> 0:05:24.720 It wasn't happening, period. 0:05:24.360 --> 0:05:24.880 Full stop. 0:05:25.120 --> 0:05:26.520 He was going to say what he was going to say, 0:05:26.520 --> 0:05:28.760 which is essentially, we haven't shifted our stance that much. 0:05:28.800 --> 0:05:31.360 We're not going to hike rates. Goodbye, see you next time. 0:05:31.520 --> 0:05:33.360 Let's speak to a man who's been on the other 0:05:33.480 --> 0:05:35.760 end to some of these questions. Bill Dentley former New 0:05:35.839 --> 0:05:39.520 York Fed President and Balloompag economic senior advisa, Bill, what 0:05:39.520 --> 0:05:41.720 did you make of that performance in that news conference? 0:05:43.040 --> 0:05:46.040 Thank your interpretation is exactly right. It was quite dubbish. 0:05:46.080 --> 0:05:48.320 And he basically said that despite the news that's come 0:05:48.400 --> 0:05:52.240 in economy, stronger than expected, inflation that's so good in 0:05:52.279 --> 0:05:54.520 the first three months of the year, the whole game 0:05:54.560 --> 0:05:57.520 plan is basically unchanged. We're going to keep rates here 0:05:58.040 --> 0:06:00.760 until we're highly confident that we're going get inflation down 0:06:00.800 --> 0:06:03.960 in two percent. No hint whatsoever of a rate hike, 0:06:05.080 --> 0:06:08.520 no hint that it's not going to work. So mark 0:06:08.600 --> 0:06:10.880 reaction I think was pretty appropriate given what he said. 0:06:11.480 --> 0:06:13.440 You know, he basically said, we've got it. 0:06:14.360 --> 0:06:18.240 Back to Dudley McKelvey of a few years ago. Bill, Dudley, 0:06:18.279 --> 0:06:20.520 you're in the trenches at gold and sex gaming the 0:06:20.560 --> 0:06:25.960 labor economy. What data in the labor economy is important 0:06:26.000 --> 0:06:29.560 to Chairman Powell to really become accommodative. 0:06:31.320 --> 0:06:33.599 I think it's the notion that the labor market is 0:06:33.600 --> 0:06:37.400 really starting to somehow fall apart and the unemployent rate 0:06:37.440 --> 0:06:39.839 is starting to rise significantly. He was asked pretty explicitly 0:06:39.880 --> 0:06:43.120 about that, and he basically said, one or two ten 0:06:43.440 --> 0:06:46.080 percent rise in the unemployer rate wouldn't really disturb him, 0:06:46.560 --> 0:06:48.520 you know, I think the interesting question is if the 0:06:48.600 --> 0:06:51.520 labor market really starts to deteriorate, the problem is that 0:06:51.560 --> 0:06:56.000 the next stop, partypically is a recession. We've never had 0:06:56.360 --> 0:06:58.839 half a percent rise in the unemployment rate without having 0:06:58.880 --> 0:06:59.520 a recession. 0:06:59.800 --> 0:07:02.120 I think it's done player and goes up a couple tens. 0:07:02.120 --> 0:07:03.560 I don't think it really bothers him. But if it 0:07:03.560 --> 0:07:06.600 feels like the labor market is really giving way, then 0:07:06.839 --> 0:07:08.359 the Fed will put a lot of weight on that, 0:07:08.400 --> 0:07:10.200 almost regardless of what inflation's doing. 0:07:10.400 --> 0:07:12.800 Bill, you said something, he basically said, we got it. 0:07:12.800 --> 0:07:14.160 The playbook hasn't changed. 0:07:14.520 --> 0:07:15.320 Was that the right move. 0:07:17.000 --> 0:07:20.240 Time will tell if the playbook is it will actually 0:07:20.240 --> 0:07:22.480 work with as well as he thinks. I mean, my 0:07:22.520 --> 0:07:25.080 own personal view is that the legs and launtry policy 0:07:25.120 --> 0:07:28.080 probably are not as long and very blessed he thinks. 0:07:28.080 --> 0:07:30.280 And I put a lot more weight on financial conditions 0:07:30.280 --> 0:07:32.800 I think than he is currently. The fact that people 0:07:32.840 --> 0:07:36.240 are taking his comments in a very positive way from 0:07:36.640 --> 0:07:39.160 financial market perspective means that we're having an easy of 0:07:39.200 --> 0:07:42.840 financial conditions, which will support the economy, So I think 0:07:42.840 --> 0:07:45.600 it just reinforces the higher for longer story over the 0:07:46.040 --> 0:07:46.600 medium term. 0:07:46.720 --> 0:07:49.040 He doesn't seem perturbed about that, And he also didn't 0:07:49.040 --> 0:07:51.200 really deal with a lot of the fundamental questions as 0:07:51.240 --> 0:07:53.240 we were just saying that have been dividing Wall Street. 0:07:53.360 --> 0:07:56.040 Didn't address the higher terminal rate. He didn't address this 0:07:56.160 --> 0:07:59.840 question of what would make him really a second guest 0:08:00.160 --> 0:08:03.200 idea of restrictiveness or long and variable lags. Do you 0:08:03.200 --> 0:08:05.040 think that means he's not thinking about it, or that 0:08:05.080 --> 0:08:06.880 he has rejected it, or do you think he just 0:08:06.920 --> 0:08:08.760 doesn't want to deal with it in the public right now. 0:08:10.160 --> 0:08:12.160 I think he's certainly thinking about it, But I think 0:08:12.320 --> 0:08:16.239 he's basically saying, from his perspective, the evidence hasn't convinced 0:08:16.280 --> 0:08:19.680 them that they're on the wrong track. So he thinks 0:08:19.720 --> 0:08:23.600 policy is restrictive, sufficiently restrictive to do the job. So 0:08:23.680 --> 0:08:25.720 maybe our starting and maybe the neutral rate is. 0:08:25.680 --> 0:08:27.120 A little bit higher, but it's not as high as 0:08:27.120 --> 0:08:27.920 where they are today. 0:08:28.240 --> 0:08:30.960 So yes, could our star be revised up at the 0:08:30.960 --> 0:08:34.320 next June Summary of Economic projections? Probably will be up 0:08:34.360 --> 0:08:37.280 revised up a bit, but policy in his mind is 0:08:37.320 --> 0:08:41.520 still sufficiently tight that he's not worried about that particular variable. 0:08:42.120 --> 0:08:45.280 Bill Dudley Ethan Harris has been on fire retired from 0:08:45.320 --> 0:08:49.679 Bank of America, almost daily on LinkedIn with really intelligent 0:08:49.840 --> 0:08:55.680 work on trim inflation means which inflation statistic is most 0:08:55.720 --> 0:08:58.400 informative now to our audience. 0:09:00.200 --> 0:09:05.080 To focus on services x housing for two reasons. Number one, 0:09:05.280 --> 0:09:07.640 this is the problem where the wage inflation drives the 0:09:07.720 --> 0:09:11.720 actual outcome in terms of services inflation. And number two, 0:09:12.480 --> 0:09:15.520 you know it's not being bounced around by the supply 0:09:15.640 --> 0:09:18.480 chain normalization process, which is pulling down as good prices. 0:09:18.679 --> 0:09:20.760 I think one of the things that's probably destorying the 0:09:20.800 --> 0:09:24.319 inflation news recently is the fact that goods prices came 0:09:24.360 --> 0:09:28.199 down a lot because of the normalization of supply chains. 0:09:28.280 --> 0:09:31.160 But we ignored the transmittory inflation on the way up. 0:09:31.360 --> 0:09:32.959 We also have to ignore it on the way down. 0:09:32.960 --> 0:09:34.880 So we don't want we don't want to overstate that 0:09:34.960 --> 0:09:39.360 goods price inflation weakness. So I think services sector x 0:09:39.559 --> 0:09:42.360 X housing is probably a really important thing to focus on. 0:09:42.760 --> 0:09:44.800 And you know, that's the so called last mile of inflation, 0:09:44.920 --> 0:09:48.199 and that's the part that's turning out to be more difficult. 0:09:48.040 --> 0:09:49.280 But we need to talk to you about the balance 0:09:49.280 --> 0:09:51.720 sheet as well. So the Federal Reserve announcing today they'll 0:09:51.720 --> 0:09:54.520 slow the pace of balance sheet runoff starting in June. 0:09:54.960 --> 0:09:57.440 The Central Bank to lower the treasury runoff cap to 0:09:57.520 --> 0:10:01.400 twenty five billion from sixty billion. Build market participants right 0:10:01.400 --> 0:10:04.720 now trying to work out, Okay, if QT wasn't bearish, 0:10:05.000 --> 0:10:07.920 is tapering QT bullish? But can you help me understand 0:10:08.000 --> 0:10:10.280 because we were told it's like watching paint dry. It 0:10:10.280 --> 0:10:13.000 has been when they start to undo it, unwind some 0:10:13.080 --> 0:10:14.000 of it. What does it all mean? 0:10:15.679 --> 0:10:17.440 I think it is like watching pink right. You can 0:10:17.480 --> 0:10:19.320 see that in the press conference there are originally no 0:10:19.440 --> 0:10:21.920 questions about the balance sheet, and he made it very 0:10:21.920 --> 0:10:25.520 clear that the balance sheet decisions are not part of 0:10:25.559 --> 0:10:29.840 the monetary policy process of making policy either either easier 0:10:29.960 --> 0:10:32.800 or tighter. I don't think it has much effect the 0:10:32.840 --> 0:10:36.200 taper because the destination is the same, the Feds going 0:10:36.200 --> 0:10:39.360 to a balance sheet size that generates reserves that are 0:10:39.480 --> 0:10:43.680 ample but not abundant like they are today. So we 0:10:43.720 --> 0:10:46.319 may get there slightly over a longer period of time 0:10:46.360 --> 0:10:48.760 because we're now running off securities at someone's slow place, 0:10:49.040 --> 0:10:50.840 but we're going to the same place, and so it 0:10:50.840 --> 0:10:53.080 really has virtually no market implications. 0:10:53.280 --> 0:10:55.600 If you were on the Fedstelle, Bill, would you have 0:10:55.679 --> 0:10:57.560 voted for this type of thing, or would you have 0:10:57.600 --> 0:10:59.720 aired a little bit more as you were talking about before, 0:11:00.120 --> 0:11:03.800 about financial conditions easing too much to allow inflation to 0:11:03.800 --> 0:11:04.960 stay sticky for too long. 0:11:06.559 --> 0:11:08.280 I don't think we're at this stage where you know, 0:11:08.480 --> 0:11:11.480 great hikes are warranted, and so I would have agreed 0:11:11.520 --> 0:11:13.640 with the decision today. I think where I would have 0:11:14.520 --> 0:11:16.760 maybe a bit different from cheer Paul a little bit. 0:11:17.000 --> 0:11:18.920 I would just be a little bit more cautious about 0:11:18.960 --> 0:11:20.680 the confidence that he's got it. 0:11:21.679 --> 0:11:22.840 Bill Dudley, thank you, sir. 0:11:22.920 --> 0:11:26.800 The former Fed New York President Bill Fantastic has always 0:11:26.840 --> 0:11:28.880 recority market fades a little bit. We're up by three 0:11:28.960 --> 0:11:31.240 quarters of one percent. Make so I appreciated the question 0:11:31.240 --> 0:11:32.679 at the end of the news conference. I'm not sure 0:11:32.720 --> 0:11:35.600 about the answer, because effectively, what the journalist in that 0:11:35.640 --> 0:11:38.120 news conference was asking is whether the lack of descent 0:11:38.240 --> 0:11:42.280 spoke to a lack of diversity of thought on the FMC. 0:11:42.880 --> 0:11:43.600 Correct. 0:11:43.200 --> 0:11:47.319 They weren't asking about you know what gender and precisely 0:11:47.360 --> 0:11:49.719 you know racial composition is on the FED. They were 0:11:49.760 --> 0:11:53.440 asking about pushback intellectual discourse, and this question about whether 0:11:53.480 --> 0:11:55.960 anyone was saying, hey, wait a second, maybe we shouldn't 0:11:56.000 --> 0:11:58.480 be so sure that long and variable lags have the 0:11:58.480 --> 0:12:00.240 same kind of effect as they have in the past. 0:12:00.440 --> 0:12:03.280 That I think is a legitimate question. He didn't address 0:12:03.320 --> 0:12:03.960 a bunch of questions. 0:12:03.960 --> 0:12:06.040 Oh here alluded to and I think Bob Michael's been 0:12:06.080 --> 0:12:08.400 leading on this, And I mentioned to you and Lingoln earlier, 0:12:08.440 --> 0:12:11.520 what if we get friendly data, what if we revert 0:12:11.600 --> 0:12:15.240 to a disinflationary vector. John, I'm doing some research here, 0:12:15.280 --> 0:12:16.719 and I mean, you know, I look at the G 0:12:16.880 --> 0:12:18.679 seven meeting in Pulia, trying. 0:12:18.480 --> 0:12:19.839 To make that here in June. 0:12:19.760 --> 0:12:21.880 And I'm sorry, I got a plane ticket of three 0:12:21.920 --> 0:12:25.440 thousand and six dollars, not even close to seven thousand 0:12:25.480 --> 0:12:28.360 dollars eight nine, ten months ago. I'm sorry. You get 0:12:28.400 --> 0:12:32.520 whispers a service sector disinflation, and you're right back to 0:12:33.080 --> 0:12:35.360 the boom economy DOW at five hundred what it was 0:12:35.440 --> 0:12:35.880 ten minutes. 0:12:35.960 --> 0:12:37.959 I'll repeat the question I asked a little bit earlier 0:12:37.960 --> 0:12:40.520 before the news conference started. I'll ignore the reference of 0:12:40.520 --> 0:12:43.120 the doll The three month average on payrolls is two 0:12:43.160 --> 0:12:45.960 seventy six. The Federal Reserve chair is just established, conveyed 0:12:46.000 --> 0:12:47.880 quite clearly that the Fed put is alive and well, 0:12:48.040 --> 0:12:51.439 they're willing to respond to adverse shocks, downside surprises, particularly 0:12:51.640 --> 0:12:53.480 if they emerge in the labor market. Now I'm trying 0:12:53.480 --> 0:12:56.240 to wonder, Lisa, what it would take to reintroduce the 0:12:56.320 --> 0:12:59.600 rate cut conversation. Clearly they still have a bias to 0:12:59.640 --> 0:13:02.280 ease to cut interest rates. Would it be a downside 0:13:02.280 --> 0:13:04.960 surprise on Friday? With that be sufficient? What would we 0:13:05.000 --> 0:13:08.040 need to see to get people talking about a different thing, 0:13:08.120 --> 0:13:10.880 not about hiking, about be sufficiently restrictive? After what we've 0:13:10.920 --> 0:13:13.079 just witnessed in that news conference, what would it take 0:13:13.080 --> 0:13:14.960 to have a series of guests to start talking about 0:13:15.280 --> 0:13:16.760 July at the Federal Reserve? 0:13:16.880 --> 0:13:19.320 And j Powell himself might have said, well, it would 0:13:19.360 --> 0:13:22.160 take a substantial weakening in the labor market. Does this 0:13:22.240 --> 0:13:25.000 market believe him that it really would or do they 0:13:25.040 --> 0:13:27.640 think that just the idea that yes, quits rates are increasing, 0:13:27.720 --> 0:13:30.200 see a slight increase in the labor market. And then 0:13:30.240 --> 0:13:33.839 to Mohammed's point, if you already see the weakness, it's 0:13:33.880 --> 0:13:36.160 too late. How much does that haunt him at a 0:13:36.200 --> 0:13:39.080 time where he's really embracing the recovery that we continue 0:13:39.080 --> 0:13:39.920 to see in the economy. 0:13:40.000 --> 0:13:42.640 Mike McKee was in that news conference. Mike McKee has 0:13:42.720 --> 0:13:44.800 run out of that news conference. He's with us right now. 0:13:45.000 --> 0:13:47.360 Mike great exchange with the Federal Reserve chairman in the 0:13:47.400 --> 0:13:48.719 last Now, what stood out for you? 0:13:50.360 --> 0:13:52.679 Well, I think the biggest thing is that there are 0:13:52.679 --> 0:13:56.240 two audiences here, or two people that are two things 0:13:56.280 --> 0:13:59.240 that the FED is trying to address. One is the 0:13:59.280 --> 0:14:01.680 markets and their perception of what the Fed is doing, 0:14:01.679 --> 0:14:04.520 and the other is the economy and what they need 0:14:04.559 --> 0:14:07.240 to do to bring down inflation. And the two things 0:14:07.240 --> 0:14:10.000 are not always compatible, and that's maybe what you have 0:14:10.160 --> 0:14:13.320 right now. The Fed is less concerned about how the 0:14:13.360 --> 0:14:16.480 market feels about all this than they are with setting 0:14:16.679 --> 0:14:19.080 their own parameters within their meeting of what they think 0:14:19.120 --> 0:14:21.680 they need to do, and at this point they don't 0:14:21.680 --> 0:14:24.320 think they need to do anything. The economy seems to 0:14:24.360 --> 0:14:26.960 be in good shape. We've seen a little bit of 0:14:27.040 --> 0:14:29.560 slow down, but we're supposed to see a slow down 0:14:29.600 --> 0:14:33.360 when they raise rates. We have seen inflation stall out. 0:14:33.440 --> 0:14:37.040 Maybe that means they haven't got policy tight enough. But 0:14:37.120 --> 0:14:40.480 now financial conditions have tightened, and so maybe that's going 0:14:40.520 --> 0:14:43.960 to start to work. Bottom line, they don't know what 0:14:44.000 --> 0:14:47.080 they're going to do, so they can't then give the 0:14:47.120 --> 0:14:48.560 markets a good clue. 0:14:48.800 --> 0:14:52.720 Mike, and the fan distributions of all this data, the probabilities, 0:14:52.760 --> 0:14:56.240 the outcomes of all this data, is there in place 0:14:56.280 --> 0:14:59.960 into the jobs report on Friday an ability to get 0:15:00.080 --> 0:15:03.320 back to a disinflation or a vector quickly. 0:15:05.440 --> 0:15:08.000 Probably not in the sense that we don't have any 0:15:08.040 --> 0:15:12.560 indication that hiring is going to significantly slow meeting any 0:15:12.600 --> 0:15:14.920 of the conditions that Jay Powell was talking about for 0:15:15.000 --> 0:15:18.560 a rate cut, and wages from all the other measures 0:15:18.600 --> 0:15:22.320 we've seen have still been running above inflation. So at 0:15:22.320 --> 0:15:25.400 this point one indicator isn't going to do it. It 0:15:25.400 --> 0:15:27.680 would take much more than that. If we got a 0:15:27.720 --> 0:15:31.720 significant rise in unemployment for some reason, then that would 0:15:31.760 --> 0:15:35.800 set some antenna up, but it wouldn't push anybody to 0:15:35.840 --> 0:15:37.800 do anything at this point. 0:15:38.040 --> 0:15:40.320 Mike, we talked a lot about how the key question 0:15:40.520 --> 0:15:42.880 was going to be whether they were entertaining the idea 0:15:42.880 --> 0:15:45.760 of rate hikes. Were you surprised, and he completely dismissed 0:15:45.800 --> 0:15:46.240 that out right. 0:15:48.000 --> 0:15:50.600 No, I wasn't surprised because Lisa, you just have to 0:15:50.640 --> 0:15:53.080 play game theory and ask what would have happened if 0:15:53.080 --> 0:15:55.880 he didn't dismiss it. Then all of a sudden, you've 0:15:55.880 --> 0:15:59.440 got people really moving the markets around trying to price 0:15:59.520 --> 0:16:03.360 for something like that. At this point, the FED doesn't 0:16:03.400 --> 0:16:05.920 see a reason to raise rates because they think that 0:16:06.120 --> 0:16:09.640 overall the economy is slowing a little bit as they 0:16:09.880 --> 0:16:15.440 want it to, and it is doing so without rising unemployment. 0:16:15.520 --> 0:16:17.680 So things are kind of working out the way they 0:16:17.720 --> 0:16:18.320 had planned. 0:16:18.480 --> 0:16:20.400 Mi mackay, great work has a waste, buddy, Well, can't 0:16:20.480 --> 0:16:21.600 chat with you tomorrow morning. 0:16:21.640 --> 0:16:22.040 Mi McKay. 0:16:22.080 --> 0:16:24.080 That breaking it down for you down in Washington, DC. 0:16:24.640 --> 0:16:26.480 That pop in the equity market get in sold just 0:16:26.520 --> 0:16:28.920 a little bit. We're still positive. But Tomney by zero 0:16:29.040 --> 0:16:29.760 point four percent? 0:16:29.880 --> 0:16:32.800 Can I go to November seven? November seven is two 0:16:32.880 --> 0:16:35.720 days after a modest election. I'm sorry, but that's the 0:16:35.760 --> 0:16:38.800 meeting I'm focused on. November seven could be wild. 0:16:38.920 --> 0:16:41.160 Hey, Eve's real He directs about it in the news conference. 0:16:41.240 --> 0:16:43.880 They do not want to talk about politics at all, 0:16:43.960 --> 0:16:45.400 not part of the conversation, and. 0:16:45.360 --> 0:16:47.120 They want to give the sense that they truly are 0:16:47.160 --> 0:16:49.440 independent at a time where they're actually being challenged in 0:16:49.480 --> 0:16:50.479 terms of their independence. 0:16:50.520 --> 0:16:52.400 The more people start talking about. 0:16:52.440 --> 0:16:55.080 When people, i mean the former president Trump comes out 0:16:55.120 --> 0:16:57.400 and starts talking about the potential for you know, taking 0:16:57.480 --> 0:17:00.360 ownership over fed decision making, they're going to be much 0:17:00.360 --> 0:17:01.520 more adamant about being. 0:17:01.360 --> 0:17:03.680 I'm waiting for him to address that story that came 0:17:03.680 --> 0:17:06.159 out from the Journal in the last week, still anonymous 0:17:06.200 --> 0:17:08.520 sources around the president talking about these issues. 0:17:08.560 --> 0:17:10.159 These are big issues, so you feel like people are 0:17:10.240 --> 0:17:12.240 kind of like spitballing out there and seeing how the 0:17:12.280 --> 0:17:14.960 people react to it before they yeah, yeah, before they 0:17:15.240 --> 0:17:17.879 really kind of put any emphasis behind it. 0:17:18.000 --> 0:17:20.320 Jeff Rosenbersts got things to say about this, joins us 0:17:20.359 --> 0:17:22.480 now from Black Rock. He really doesn't that take with us, Jeff, 0:17:22.480 --> 0:17:23.160 I'm not going there. 0:17:23.359 --> 0:17:23.800 Don't worry. 0:17:23.880 --> 0:17:25.680 Jeff is great to catch up with you as always, sir. 0:17:25.960 --> 0:17:29.000 After what you just heard, does it make you incrementally 0:17:29.040 --> 0:17:31.119 more bullish in any way, shape or form. 0:17:32.680 --> 0:17:34.920 Well, let's just say that going into this meeting, there 0:17:35.040 --> 0:17:37.920 was a lot of bearishness and fear that he would 0:17:37.920 --> 0:17:40.080 come out more hawkish. If you even look at you know, 0:17:40.080 --> 0:17:46.000 Bloomberg Economics put out their kind of preview, it was overwhelmingly. 0:17:45.520 --> 0:17:48.080 Expecting a very hawkish message. 0:17:48.160 --> 0:17:50.560