1 00:00:04,840 --> 00:00:08,799 Speaker 1: This is Bloomberg Surveillance with Tom Keane, Jonathan Ferrow, and 2 00:00:08,840 --> 00:00:13,080 Speaker 1: Lisa Bramowitz on Bloomberg Radio. They raise rates. 3 00:00:13,200 --> 00:00:15,360 Speaker 2: That's about it. Federal funds now at a range of 4 00:00:15,400 --> 00:00:17,200 Speaker 2: five and a quarter to five and a half percent, 5 00:00:17,400 --> 00:00:20,920 Speaker 2: that is the highest in twenty two years. In their statement, 6 00:00:20,960 --> 00:00:24,479 Speaker 2: FED officials drop the phrase about pausing to assess the 7 00:00:24,520 --> 00:00:28,000 Speaker 2: state of the economy, replacing it with the Committee will 8 00:00:28,000 --> 00:00:32,599 Speaker 2: continue to assess additional information and its implications for monetary policy. 9 00:00:33,159 --> 00:00:36,920 Speaker 2: Future guidance was identical to June, leaving the door open 10 00:00:37,000 --> 00:00:40,600 Speaker 2: to another rate move in the future. In determining the 11 00:00:40,640 --> 00:00:43,680 Speaker 2: extent of additional policy firming that may be appropriate to 12 00:00:43,720 --> 00:00:47,639 Speaker 2: return inflation to two percent over time, the statement repeats 13 00:00:47,920 --> 00:00:50,600 Speaker 2: the Committee will take into account the cumulative tightening of 14 00:00:50,640 --> 00:00:55,240 Speaker 2: monetary policy, the lags with which monetary policy affects economic 15 00:00:55,280 --> 00:01:01,120 Speaker 2: activity and inflation, and economic and financial developments. Economic assessment 16 00:01:01,320 --> 00:01:05,520 Speaker 2: is little changed. Activity has been expanding at a moderate pace, 17 00:01:05,600 --> 00:01:09,679 Speaker 2: perhaps a little faster than the modest pace seen in June. 18 00:01:09,880 --> 00:01:16,200 Speaker 2: Job gains remain robust, unemployment remains low, and inflation remains elevated. 19 00:01:16,480 --> 00:01:20,479 Speaker 2: Tighter credit conditions are likely to weigh on economic activity, hiring, 20 00:01:20,560 --> 00:01:25,000 Speaker 2: and inflation, but the extent of these effects remains uncertain, 21 00:01:25,040 --> 00:01:28,160 Speaker 2: the statement says, and the committee remains highly attentive to 22 00:01:28,319 --> 00:01:33,440 Speaker 2: inflation risks no change to QT. The decision was unanimous conclusion. 23 00:01:34,000 --> 00:01:34,960 Speaker 2: See you in September. 24 00:01:35,040 --> 00:01:38,040 Speaker 3: Mi mckaye get on vacation. Seems to be the message 25 00:01:38,040 --> 00:01:39,880 Speaker 3: from Chairman Pound and the team. Chairman Pound's got to 26 00:01:39,920 --> 00:01:41,959 Speaker 3: speak in about twenty eight minutes time the news conference 27 00:01:42,000 --> 00:01:44,280 Speaker 3: coming up. That statement a bit of a snooze. So 28 00:01:44,360 --> 00:01:46,160 Speaker 3: let's check out the price action off the back of it. 29 00:01:46,160 --> 00:01:49,080 Speaker 3: It's one, Are they done? That was your rate high 30 00:01:49,080 --> 00:01:51,160 Speaker 3: from the Federal Reserve. Your equity market just a little 31 00:01:51,160 --> 00:01:53,560 Speaker 3: bit soft, distilled, trying to recover. We're down by about 32 00:01:53,600 --> 00:01:55,440 Speaker 3: two tenths of one percent on the S and P 33 00:01:55,560 --> 00:01:58,040 Speaker 3: five hundred on the Nasdaq. We're negative by zero point 34 00:01:58,080 --> 00:02:00,160 Speaker 3: four percent. The fate of the nastak of course, the 35 00:02:00,160 --> 00:02:02,639 Speaker 3: next week in the hands of earnings from Meta Apple 36 00:02:02,760 --> 00:02:05,160 Speaker 3: Amazon over the next seven or eight days or so. 37 00:02:05,400 --> 00:02:07,640 Speaker 3: Outside of that, into the bond market, your two year 38 00:02:07,680 --> 00:02:09,880 Speaker 3: yield coming in just a touch, just a little bit 39 00:02:09,960 --> 00:02:13,160 Speaker 3: fading after that decision, now just about unchanged on the 40 00:02:13,240 --> 00:02:15,960 Speaker 3: day with a two year at four eighty eight, and 41 00:02:16,000 --> 00:02:18,079 Speaker 3: if you turn to the FX market off the back 42 00:02:18,120 --> 00:02:21,000 Speaker 3: of that, with yields just about unchanged the dollar showing 43 00:02:21,080 --> 00:02:23,120 Speaker 3: just to touch a witness against the euro in response 44 00:02:23,160 --> 00:02:26,840 Speaker 3: to this decision, euro dollar at about one ten seventy 45 00:02:27,160 --> 00:02:29,760 Speaker 3: four a tk A rate hike from the Federal Reserve. 46 00:02:29,880 --> 00:02:32,480 Speaker 3: It's about what's next. It always was twenty. 47 00:02:32,240 --> 00:02:34,360 Speaker 1: Two years out, you go back. I believe the math 48 00:02:34,520 --> 00:02:37,359 Speaker 1: is to two thousand and one. Joining us Dan Swank, 49 00:02:37,400 --> 00:02:40,800 Speaker 1: chief Economist, keep BMG BYB. Michael Continuing with us with 50 00:02:40,919 --> 00:02:43,840 Speaker 1: JP Morgan, Dan, I'm going to just argue this, and 51 00:02:43,880 --> 00:02:46,360 Speaker 1: I did this two days ago on a YouTube short 52 00:02:46,560 --> 00:02:49,880 Speaker 1: showing the Nasdaq one hundred decline of March of two 53 00:02:49,960 --> 00:02:53,760 Speaker 1: thousand and one. Things unraveled the last time we were 54 00:02:53,800 --> 00:02:57,160 Speaker 1: at interest rates of this level? Do we have an 55 00:02:57,240 --> 00:03:00,360 Speaker 1: analog here to the collapse of the market in March 56 00:03:00,400 --> 00:03:04,200 Speaker 1: of two thousand and one? Can a FED policy affect 57 00:03:04,560 --> 00:03:06,560 Speaker 1: a present stock market collapse? 58 00:03:09,360 --> 00:03:12,200 Speaker 4: We certainly can if they go far enough, and so 59 00:03:12,360 --> 00:03:15,239 Speaker 4: far it's been remarkably resilient. I would argue that we're 60 00:03:15,240 --> 00:03:18,520 Speaker 4: also seeing this against the backdrop of what looks to 61 00:03:18,560 --> 00:03:22,519 Speaker 4: be a bubble emerging in Jenai, which is a little 62 00:03:22,560 --> 00:03:25,839 Speaker 4: reminiscent of two thousand and one but not quite there. 63 00:03:25,880 --> 00:03:28,680 Speaker 4: But I think that's important to remember as well. I 64 00:03:28,680 --> 00:03:30,880 Speaker 4: think the larger issue for the FED at this point 65 00:03:30,880 --> 00:03:34,359 Speaker 4: in time is that financial conditions are fighting them a bit, 66 00:03:34,440 --> 00:03:38,760 Speaker 4: and even though they've got additional quantitative tightening, they've continued that. 67 00:03:38,760 --> 00:03:40,320 Speaker 5: That's why they're still going forward. 68 00:03:40,320 --> 00:03:43,000 Speaker 4: And I would argue one step further in that the 69 00:03:43,040 --> 00:03:46,800 Speaker 4: good news we've gotten on inflation recently further emboldens the 70 00:03:46,840 --> 00:03:48,640 Speaker 4: FED to actually. 71 00:03:48,240 --> 00:03:50,040 Speaker 5: Get to that two percent target. 72 00:03:50,280 --> 00:03:52,960 Speaker 4: There was sort of this sense among people around the 73 00:03:52,960 --> 00:03:56,119 Speaker 4: FED and some within the FED that you know, they'll 74 00:03:56,200 --> 00:03:58,680 Speaker 4: get close to two percent and then feel they've kind 75 00:03:58,720 --> 00:04:01,240 Speaker 4: of done enough because of what they thought would be 76 00:04:01,280 --> 00:04:03,960 Speaker 4: the pain needed and the trade off needed. 77 00:04:03,920 --> 00:04:05,120 Speaker 5: To get to two percent. 78 00:04:05,280 --> 00:04:07,320 Speaker 4: I think they're going to feel a little more emboldened 79 00:04:07,360 --> 00:04:11,680 Speaker 4: now to actually get there, which means tighter policy for 80 00:04:11,840 --> 00:04:15,000 Speaker 4: longer than many expect. And I think that's something that 81 00:04:15,360 --> 00:04:17,920 Speaker 4: we've sort of not really come to terms with yet. 82 00:04:18,000 --> 00:04:21,279 Speaker 4: Is sort of the unspoken side of what the FED 83 00:04:21,279 --> 00:04:23,840 Speaker 4: had been saying, is that people were expecting the FED 84 00:04:23,880 --> 00:04:26,240 Speaker 4: to kind of stop short of two percent. 85 00:04:26,560 --> 00:04:29,760 Speaker 6: It seems like this is operation don't make waves. It 86 00:04:29,760 --> 00:04:32,200 Speaker 6: seems like this was not a FED looking to job 87 00:04:32,279 --> 00:04:34,640 Speaker 6: on the markets into anything. This is a FED trying 88 00:04:34,680 --> 00:04:37,520 Speaker 6: to back into the shrubs and disappear. Diane, would you 89 00:04:37,520 --> 00:04:40,039 Speaker 6: agree with that characterization? Is that sort of the goal 90 00:04:40,320 --> 00:04:40,680 Speaker 6: for FED? 91 00:04:40,720 --> 00:04:41,240 Speaker 5: Shair J. 92 00:04:41,440 --> 00:04:44,440 Speaker 6: Powell as he takes the helm of that press conference 93 00:04:44,480 --> 00:04:46,160 Speaker 6: meeting in about twenty five minutes. 94 00:04:48,200 --> 00:04:50,440 Speaker 4: Well, certainly they didn't want to change their message, whether 95 00:04:50,560 --> 00:04:52,760 Speaker 4: or not that's fading into the background. I mean, given 96 00:04:52,839 --> 00:04:56,440 Speaker 4: the easing and financial conditions that we've seen, particularly in 97 00:04:56,560 --> 00:04:59,960 Speaker 4: recent months and in recent weeks, that's something that FED 98 00:05:00,160 --> 00:05:03,520 Speaker 4: that has to sort of be a bit concerning to 99 00:05:03,600 --> 00:05:06,960 Speaker 4: the FED. What they're worried about is not what the 100 00:05:07,000 --> 00:05:09,559 Speaker 4: inflation data is going to be by September. They're worried 101 00:05:09,560 --> 00:05:13,240 Speaker 4: about the end of the year seeing a potential acceleration 102 00:05:13,520 --> 00:05:16,560 Speaker 4: and that it's a bumpy sort of ride down to 103 00:05:16,560 --> 00:05:19,040 Speaker 4: two percent, and that we go and fits and starts 104 00:05:19,360 --> 00:05:22,680 Speaker 4: and some of those mean an acceleration back up again, and. 105 00:05:22,600 --> 00:05:24,080 Speaker 5: That's what they're worried about. 106 00:05:24,160 --> 00:05:26,240 Speaker 4: And anything that we see that's too much of an 107 00:05:26,240 --> 00:05:30,480 Speaker 4: easy in financial markets that's going to feed into that remember, 108 00:05:30,560 --> 00:05:32,800 Speaker 4: bank credit is only about a third of all credit 109 00:05:32,839 --> 00:05:35,400 Speaker 4: in the US economy, although there are a lot of 110 00:05:35,480 --> 00:05:40,200 Speaker 4: spillover effects even in shadow banking industry for consumers from 111 00:05:40,320 --> 00:05:42,520 Speaker 4: the tightening that we're seeing in the banking sector. 112 00:05:42,560 --> 00:05:44,240 Speaker 3: If you are just tuning in, welcome to the program. 113 00:05:44,360 --> 00:05:46,840 Speaker 3: Fantastic lineup. Going into the news conference with Cham and 114 00:05:46,880 --> 00:05:49,479 Speaker 3: Pound in about twenty five minutes time, we're talking to 115 00:05:49,800 --> 00:05:51,800 Speaker 3: Dian Swamp and Bob Michael as well. Bob Michael of 116 00:05:51,880 --> 00:05:54,560 Speaker 3: JP Morgan Asset Management with us around the table in 117 00:05:54,600 --> 00:05:57,560 Speaker 3: a studio. Bob, just initially, your reaction to that decision 118 00:05:57,600 --> 00:05:58,279 Speaker 3: five minutes ago. 119 00:05:59,240 --> 00:06:03,400 Speaker 7: I think it is exactly on expectations. They wanted to 120 00:06:03,400 --> 00:06:06,960 Speaker 7: get the twenty five basis points done. They didn't want 121 00:06:07,000 --> 00:06:13,640 Speaker 7: to convey accidentally anything dubvish. They reinforce that additional affirming 122 00:06:13,720 --> 00:06:18,400 Speaker 7: may be necessary, that inflation's elevated. They're trying to do 123 00:06:18,920 --> 00:06:23,080 Speaker 7: exactly what Diane talked about, not give financial conditions a 124 00:06:23,200 --> 00:06:24,400 Speaker 7: chance to ease further. 125 00:06:24,640 --> 00:06:27,760 Speaker 1: But they are the Bloomberg Financial Conditions Index. I believe 126 00:06:27,800 --> 00:06:30,960 Speaker 1: it's eleven ratios. Michael Rosenberg invented it with his team. 127 00:06:31,520 --> 00:06:36,200 Speaker 1: It still shows an accommodation it screens. I'm thinking of Hollenhorst, 128 00:06:36,480 --> 00:06:39,159 Speaker 1: it's City Group, and others go the other way, including Ellen. 129 00:06:40,000 --> 00:06:42,919 Speaker 1: The idea, where's the AMMO for the next meeting to 130 00:06:43,000 --> 00:06:45,880 Speaker 1: raise twenty five beeps? What's the data that we'll drive that. 131 00:06:47,680 --> 00:06:50,960 Speaker 7: I think they would need to see inflation start to 132 00:06:51,040 --> 00:06:55,120 Speaker 7: tick up, not stay stable or continue to decline like 133 00:06:55,400 --> 00:06:58,599 Speaker 7: it's doing. That's the only reason I would think they 134 00:06:58,640 --> 00:07:01,000 Speaker 7: would hike at the next meeting. I think by the 135 00:07:01,120 --> 00:07:04,800 Speaker 7: time we get to the September meeting, inflation will have 136 00:07:05,080 --> 00:07:08,160 Speaker 7: improved to a degree, and I think you'll see more 137 00:07:08,279 --> 00:07:11,760 Speaker 7: labor markets lack that they'll sit there and go We've. 138 00:07:11,600 --> 00:07:15,520 Speaker 6: Done plenty Dian, what's your concern for the press conference, 139 00:07:15,720 --> 00:07:18,680 Speaker 6: given the fact that Jay Powell has a penchant for 140 00:07:18,960 --> 00:07:21,560 Speaker 6: being a bit more revealing than he'd like, eliciting the 141 00:07:22,040 --> 00:07:25,800 Speaker 6: reaction that perhaps they were avoiding in the statement. 142 00:07:28,560 --> 00:07:30,840 Speaker 4: Well, I do think that they want I think Ja 143 00:07:30,960 --> 00:07:32,960 Speaker 4: Powell is going to go into this press conference being 144 00:07:33,040 --> 00:07:36,160 Speaker 4: a little more defensive in terms of not wanting to 145 00:07:36,160 --> 00:07:38,680 Speaker 4: ease financial conditions more and not wanting to have a 146 00:07:38,680 --> 00:07:41,200 Speaker 4: confirmation bias on that. So I think he's going to 147 00:07:41,240 --> 00:07:44,040 Speaker 4: be much more astute to that in this particular meeting. 148 00:07:44,320 --> 00:07:46,160 Speaker 4: I do think it's hard for them to raise rates 149 00:07:46,200 --> 00:07:49,920 Speaker 4: in September. However, we know that in October the medical 150 00:07:50,240 --> 00:07:54,320 Speaker 4: component of the CPI at least reverses after twenty five percent. 151 00:07:54,040 --> 00:07:56,960 Speaker 5: Decline and insurance from a year ago in the June. 152 00:07:56,800 --> 00:08:00,400 Speaker 4: Number on CPI that reverses both month to month and 153 00:08:00,800 --> 00:08:04,720 Speaker 4: on an underlying level year over year in October, and 154 00:08:04,800 --> 00:08:07,760 Speaker 4: once you get to November you could see a bump 155 00:08:07,840 --> 00:08:11,520 Speaker 4: up and inflation again. That does worry the FED more, 156 00:08:11,800 --> 00:08:14,240 Speaker 4: along with some other issues that we've got coming in 157 00:08:14,280 --> 00:08:18,520 Speaker 4: the pipeline with supply chain disruptions, everything from what's going 158 00:08:18,560 --> 00:08:21,480 Speaker 4: to happen with grain prices to the fact that energy 159 00:08:21,480 --> 00:08:24,000 Speaker 4: prices have come back up. All of those things coming 160 00:08:24,040 --> 00:08:29,120 Speaker 4: back in with persistent demand. Further complicating September are strikes. 161 00:08:29,560 --> 00:08:32,840 Speaker 4: We've got UAW maybe on strike by September. We have 162 00:08:32,960 --> 00:08:35,920 Speaker 4: avoided the Teamster strike, but the SAG strike has a 163 00:08:35,960 --> 00:08:39,240 Speaker 4: lot of spillover effects, which has the potential of giving 164 00:08:39,320 --> 00:08:44,560 Speaker 4: us a very strange August employment number that could even 165 00:08:44,640 --> 00:08:47,720 Speaker 4: move to zero or into the red just because of 166 00:08:47,760 --> 00:08:49,360 Speaker 4: the fallout effects. 167 00:08:48,880 --> 00:08:49,720 Speaker 5: On the industry. 168 00:08:50,000 --> 00:08:51,760 Speaker 4: And I think those things are going to make it 169 00:08:51,880 --> 00:08:54,000 Speaker 4: very difficult for the FED to move in September. But 170 00:08:54,080 --> 00:08:57,800 Speaker 4: September they lay out their forecast again and we'll get 171 00:08:58,000 --> 00:09:01,120 Speaker 4: the view from there in terms of higher for longer 172 00:09:01,320 --> 00:09:03,880 Speaker 4: and do they expect one more hike. I think they're 173 00:09:03,880 --> 00:09:07,200 Speaker 4: going to want to keep that in their pocket to 174 00:09:07,280 --> 00:09:09,480 Speaker 4: be able to do it if they need to later 175 00:09:09,520 --> 00:09:09,920 Speaker 4: in the year. 176 00:09:10,160 --> 00:09:13,720 Speaker 6: Bob Dan just laid out basically sticky inflation or stickier 177 00:09:13,800 --> 00:09:17,000 Speaker 6: inflation things that come back, whether it's the labor strikes 178 00:09:17,040 --> 00:09:19,000 Speaker 6: or whether it's some of these year over year comps is, 179 00:09:19,640 --> 00:09:23,320 Speaker 6: supply chain issues get rear their heads again, as well 180 00:09:23,320 --> 00:09:25,199 Speaker 6: as a whole host of other issues, including gasoline. We 181 00:09:25,240 --> 00:09:28,160 Speaker 6: mentioned that earlier surging. What's your pushback to that, to 182 00:09:28,240 --> 00:09:30,480 Speaker 6: all of these base effects that start to. 183 00:09:30,720 --> 00:09:32,840 Speaker 7: Lose Not what I heard, or say what I heard, 184 00:09:32,920 --> 00:09:36,280 Speaker 7: or say it's business as usual. Nothing's quite black and white. 185 00:09:36,679 --> 00:09:40,840 Speaker 7: Everything's mixed. We look at a lot of things in here, 186 00:09:41,320 --> 00:09:47,400 Speaker 7: and what you're betting on is if wages still remain elevated, 187 00:09:47,720 --> 00:09:50,959 Speaker 7: that companies will be able to pass along those price 188 00:09:51,040 --> 00:09:54,720 Speaker 7: increases to consumers. We're seeing that they're not able to 189 00:09:54,880 --> 00:09:58,040 Speaker 7: do that to the degree they were able to consumers 190 00:09:58,080 --> 00:10:01,760 Speaker 7: are pushing back their going down brand. We've also looked 191 00:10:01,800 --> 00:10:04,240 Speaker 7: at wages quite a bit, and we looked at a 192 00:10:04,240 --> 00:10:07,400 Speaker 7: lot of them. We looked at unit labor costs, we 193 00:10:07,440 --> 00:10:10,840 Speaker 7: look at the employment cost index, we looked at average 194 00:10:10,840 --> 00:10:13,960 Speaker 7: hourly earnings. We took six of them, we weighted them, 195 00:10:14,280 --> 00:10:16,920 Speaker 7: and we came up with the peak and wage gains 196 00:10:16,960 --> 00:10:20,839 Speaker 7: was last year it was just about six percent. Today 197 00:10:21,200 --> 00:10:24,440 Speaker 7: it's just under four percent. Three and a half percent 198 00:10:24,520 --> 00:10:27,800 Speaker 7: wage gains is what the Fed and share pal have 199 00:10:28,000 --> 00:10:32,520 Speaker 7: indicated to us is fairly neutral. They're not that far off. 200 00:10:32,600 --> 00:10:36,080 Speaker 7: It's going in that direction. Prices may go up for 201 00:10:36,200 --> 00:10:39,400 Speaker 7: certain things, but what we're seeing from the consumer is 202 00:10:39,440 --> 00:10:42,120 Speaker 7: they'll just cut back spending somewhere else. 203 00:10:42,240 --> 00:10:44,439 Speaker 3: Let's talk about this cumulative tightening and pull out a 204 00:10:44,559 --> 00:10:46,560 Speaker 3: quote from the statement from the Federal Reserve, which, on 205 00:10:46,600 --> 00:10:49,600 Speaker 3: the surface of things sounds pretty boring. It reads, life follows. 206 00:10:50,040 --> 00:10:53,200 Speaker 3: In determining the extent of additional policy firming that may 207 00:10:53,240 --> 00:10:55,560 Speaker 3: be appropriate to return inflation to two percent over time, 208 00:10:55,760 --> 00:10:58,000 Speaker 3: the Committee will take into account the cumulative tightening of 209 00:10:58,000 --> 00:11:00,760 Speaker 3: monetary policy. The lags the key word to want to 210 00:11:00,760 --> 00:11:03,840 Speaker 3: fix in on the lags with which monetary policy affects 211 00:11:03,920 --> 00:11:07,720 Speaker 3: economic activity and inflation. Nil Dutta, one of my favorites 212 00:11:07,760 --> 00:11:09,839 Speaker 3: out there over at Runmax, saying this, the FED is 213 00:11:09,880 --> 00:11:13,760 Speaker 3: wedded to the long and veriable legs hypothesis. After eighteen months, 214 00:11:14,040 --> 00:11:18,160 Speaker 3: we have seen home prices accelerate, stock prices accelerate, auto 215 00:11:18,240 --> 00:11:21,680 Speaker 3: sales accelerate, and lay off sync. Long and veriable lags 216 00:11:21,679 --> 00:11:25,120 Speaker 3: is the concept that might be outliving its usefulness. That swank, 217 00:11:25,120 --> 00:11:26,679 Speaker 3: I know you've got a run, but i'd love your 218 00:11:26,679 --> 00:11:28,520 Speaker 3: input on this debate. What are your thoughts on that? 219 00:11:31,080 --> 00:11:34,320 Speaker 4: You know, I think actually the legs are much longer 220 00:11:34,320 --> 00:11:37,040 Speaker 4: than the FED actually thought. The FED really had gone 221 00:11:37,120 --> 00:11:40,160 Speaker 4: into this tightening cycle thinking that there was almost a 222 00:11:40,200 --> 00:11:43,920 Speaker 4: real time reaction function that the legs had shortened, and 223 00:11:43,960 --> 00:11:46,520 Speaker 4: they were wrong. And in fact what we saw is 224 00:11:46,520 --> 00:11:49,960 Speaker 4: this mortgage winter where people won't move out of selling 225 00:11:50,000 --> 00:11:53,640 Speaker 4: their three percent mortgage home or listing it, or they've 226 00:11:53,640 --> 00:11:55,960 Speaker 4: already paid off their mortgage and they can't afford to 227 00:11:56,240 --> 00:11:56,880 Speaker 4: go into. 228 00:11:56,679 --> 00:11:57,440 Speaker 5: A higher rate. 229 00:11:58,000 --> 00:12:03,040 Speaker 4: That the transmission mechanism on monetary policy was blunted. That 230 00:12:03,120 --> 00:12:07,520 Speaker 4: doesn't mean it doesn't eventually hit, but it has elongated 231 00:12:08,040 --> 00:12:11,040 Speaker 4: the lags, and I think the FED is worried about that, 232 00:12:11,040 --> 00:12:13,640 Speaker 4: that the lags are still out there. And that's again 233 00:12:13,760 --> 00:12:16,839 Speaker 4: why you don't move in September, because you could see 234 00:12:17,120 --> 00:12:19,640 Speaker 4: more headwinds as we talked about earlier, in terms of 235 00:12:19,920 --> 00:12:23,600 Speaker 4: you know, credit market tightening, what consumers face, rejection rates 236 00:12:23,640 --> 00:12:27,599 Speaker 4: on everything from consumer credit cards, mortgage rates and mortgages 237 00:12:27,720 --> 00:12:31,800 Speaker 4: and vehicle loans have all soared now they've soared over 238 00:12:31,800 --> 00:12:35,160 Speaker 4: a period since twenty thirteen to on vehicle side to 239 00:12:35,200 --> 00:12:37,920 Speaker 4: record high levels. But you know, we don't know historically 240 00:12:37,920 --> 00:12:40,160 Speaker 4: if that's really where we're at. But I do think 241 00:12:40,200 --> 00:12:42,840 Speaker 4: it is important to note that there is some things 242 00:12:42,840 --> 00:12:44,800 Speaker 4: the FED is going to be watching for to see 243 00:12:44,920 --> 00:12:48,080 Speaker 4: how much does this slow down the economy going forward. 244 00:12:48,240 --> 00:12:51,640 Speaker 3: Don swamp O KPMG Dan, thank you as always wonderful 245 00:12:51,960 --> 00:12:53,480 Speaker 3: to get you to weigh in on a FED decision 246 00:12:53,480 --> 00:12:56,000 Speaker 3: which came out about swave or thirteen minutes ago twenty 247 00:12:56,000 --> 00:12:58,480 Speaker 3: five faces point rate high. Bob, you were listening to 248 00:12:58,520 --> 00:13:01,480 Speaker 3: that conversation. Can you make the argument just as easily 249 00:13:01,840 --> 00:13:04,199 Speaker 3: as saying policy lacks of really long by also just 250 00:13:04,200 --> 00:13:05,360 Speaker 3: saying they're also really. 251 00:13:05,200 --> 00:13:12,240 Speaker 7: Short, they're long and variable is what they are. They are, 252 00:13:12,520 --> 00:13:15,400 Speaker 7: I'm going to quit the fact. And also when I 253 00:13:15,440 --> 00:13:21,520 Speaker 7: hear the conversation about supplies and pricing, we're also looking 254 00:13:21,720 --> 00:13:28,080 Speaker 7: at green SPAN's favorite indicator, vendor deliveries, and that's shown 255 00:13:28,160 --> 00:13:32,600 Speaker 7: the greatest improvement going way back before the financial crisis. 256 00:13:32,920 --> 00:13:36,240 Speaker 7: So the thought that there was pricing power because your 257 00:13:36,240 --> 00:13:39,000 Speaker 7: goods were stuck on a container ship in the Pacific, 258 00:13:39,200 --> 00:13:42,320 Speaker 7: forget about it. They're here. They're actually piled up in 259 00:13:42,400 --> 00:13:45,640 Speaker 7: warehouses and on shelves, and when you look at inventory 260 00:13:45,640 --> 00:13:49,600 Speaker 7: to sales, they're off the charts high. The only way 261 00:13:49,600 --> 00:13:53,280 Speaker 7: to clear them in an environment where the consumers clearly 262 00:13:53,360 --> 00:13:56,240 Speaker 7: cutting back, going down brand and is stretched is to 263 00:13:56,280 --> 00:13:56,920 Speaker 7: cut prices. 264 00:13:57,000 --> 00:13:59,040 Speaker 3: That's good. Can you say the same thing about services? 265 00:14:00,760 --> 00:14:01,960 Speaker 7: We'll see I think so. 266 00:14:02,240 --> 00:14:03,160 Speaker 3: Isn't that the big question? 267 00:14:03,200 --> 00:14:03,360 Speaker 7: Though? 268 00:14:03,480 --> 00:14:04,520 Speaker 3: Forget the goods argument. 269 00:14:05,840 --> 00:14:11,720 Speaker 7: I think so. I think just the cost to finance, travel, leisure, 270 00:14:12,200 --> 00:14:14,600 Speaker 7: all of those things on your credit card, which is 271 00:14:14,640 --> 00:14:18,040 Speaker 7: what is happening. That's why we're evolving. Credit usage has 272 00:14:18,080 --> 00:14:21,520 Speaker 7: gone up so much it becomes punitive after a while. 273 00:14:21,600 --> 00:14:23,040 Speaker 7: It's just not sustainable. 274 00:14:23,080 --> 00:14:25,520 Speaker 3: But Michael JP. Morgan asse to management alongside us, some 275 00:14:25,600 --> 00:14:28,400 Speaker 3: FED decision day, the twenty five basis point hike behind us. 276 00:14:28,400 --> 00:14:30,760 Speaker 3: No big changes to the statement. The news conference with 277 00:14:30,840 --> 00:14:33,560 Speaker 3: Chairman Power begins in about sixteen minutes time. Joining us 278 00:14:33,560 --> 00:14:37,720 Speaker 3: now is City Andrew Hollendholst alongside Jim Bianco of Bianco Research. Andrew, 279 00:14:37,720 --> 00:14:40,280 Speaker 3: You've had the benefit of extra time to go through this. 280 00:14:40,400 --> 00:14:42,520 Speaker 3: Your take on what we learned fifteen minutes ago. 281 00:14:43,440 --> 00:14:46,480 Speaker 8: You know, it's interesting. It's interesting because of what did 282 00:14:46,480 --> 00:14:49,840 Speaker 8: not change. This seems to have been very carefully put 283 00:14:49,880 --> 00:14:52,840 Speaker 8: together so as not to send a dubvish message like 284 00:14:52,920 --> 00:14:56,440 Speaker 8: Diane was talking about. Really notable. I think that the 285 00:14:56,800 --> 00:15:00,440 Speaker 8: BED could have taken the opportunity to say headline, inflation 286 00:15:00,520 --> 00:15:03,360 Speaker 8: has come down. Core measures are still elevated, but they 287 00:15:03,440 --> 00:15:07,160 Speaker 8: left that statement unchanged. It still just says inflation is elevated. 288 00:15:07,760 --> 00:15:10,960 Speaker 8: On the growth side, what was oddest growth is now 289 00:15:11,040 --> 00:15:15,600 Speaker 8: characterized as moderate growth. So just the tiniest inkling of 290 00:15:15,720 --> 00:15:18,560 Speaker 8: a little bit hawkishness that's creeping into this statement, at 291 00:15:18,640 --> 00:15:20,240 Speaker 8: least relative to expectations. 292 00:15:20,360 --> 00:15:22,320 Speaker 1: Some of that little bit of hawkishness, and the street 293 00:15:22,360 --> 00:15:24,960 Speaker 1: folks came from Jim Bianco, who joins us right now 294 00:15:25,000 --> 00:15:27,600 Speaker 1: in Chicago. Jim Bianco you know, I look at where 295 00:15:27,640 --> 00:15:29,520 Speaker 1: you are in the bombshell. You had a number of 296 00:15:29,520 --> 00:15:32,080 Speaker 1: weeks ago saying maybe we're a little more sticky than 297 00:15:32,120 --> 00:15:36,960 Speaker 1: we actually think we are. Where is Jerome Powells presumed 298 00:15:37,120 --> 00:15:41,640 Speaker 1: our starred path at this press conference the Zeitgeisters, he's 299 00:15:41,680 --> 00:15:44,080 Speaker 1: down to two percent. Things are normal, We're going to 300 00:15:44,120 --> 00:15:46,760 Speaker 1: get back to normal. I'm going to suggest you disagree 301 00:15:46,800 --> 00:15:47,000 Speaker 1: with that. 302 00:15:48,200 --> 00:15:48,800 Speaker 8: Yeah, I do. 303 00:15:48,920 --> 00:15:50,960 Speaker 9: I do think that we might be on a year 304 00:15:51,000 --> 00:15:53,400 Speaker 9: over year basis looking at the lows of the year 305 00:15:53,440 --> 00:15:56,760 Speaker 9: in inflation, you know, in June, and that we're going 306 00:15:56,840 --> 00:15:58,120 Speaker 9: to see if there's going to be a big base 307 00:15:58,120 --> 00:15:59,840 Speaker 9: effect for the rest of the summer, and it's going 308 00:15:59,840 --> 00:16:02,440 Speaker 9: to start to drift towards four and we'll be lucky 309 00:16:02,440 --> 00:16:04,360 Speaker 9: to be back even close to three by the end 310 00:16:04,360 --> 00:16:06,720 Speaker 9: of the year. And that will bring up the big 311 00:16:06,800 --> 00:16:09,520 Speaker 9: question is is the long run you know, rate of 312 00:16:09,560 --> 00:16:11,960 Speaker 9: inflation is it two or is it two and a 313 00:16:12,000 --> 00:16:14,720 Speaker 9: half or three? And remember the Fed has already told 314 00:16:14,760 --> 00:16:17,960 Speaker 9: us that neutral rate is fifty basis points above the 315 00:16:18,280 --> 00:16:20,400 Speaker 9: long run inflation rate. So if it's two and a half, 316 00:16:20,440 --> 00:16:23,000 Speaker 9: then neutral is three. And if the yield curve goes 317 00:16:23,040 --> 00:16:25,400 Speaker 9: back to some normal level, which is around one hundred 318 00:16:25,400 --> 00:16:28,080 Speaker 9: and fifty basis points. You're talking about a fair value 319 00:16:28,120 --> 00:16:29,880 Speaker 9: for the ten year at four and a half and 320 00:16:29,920 --> 00:16:32,560 Speaker 9: we're at three ninety right now, so we're a little 321 00:16:32,560 --> 00:16:35,560 Speaker 9: bit low. And so it all comes back to this 322 00:16:35,680 --> 00:16:39,040 Speaker 9: whole argument about inflation and where's inflation going to go? 323 00:16:39,640 --> 00:16:42,240 Speaker 9: And I've been arguing, you know, the big fancy word, 324 00:16:42,240 --> 00:16:44,040 Speaker 9: that this is a post pandemic economy. 325 00:16:44,480 --> 00:16:45,400 Speaker 4: That means that. 326 00:16:45,360 --> 00:16:47,760 Speaker 9: All the models on how inflation are going to work 327 00:16:48,200 --> 00:16:50,800 Speaker 9: have it worked since twenty twenty, and we have to 328 00:16:50,840 --> 00:16:52,960 Speaker 9: write some new models on how it's going to work. 329 00:16:53,160 --> 00:16:55,720 Speaker 9: Work from home being one big thing, about how major 330 00:16:55,760 --> 00:16:58,040 Speaker 9: that the labor market has changed, and a lot of 331 00:16:58,080 --> 00:17:00,480 Speaker 9: other things too, like with the supply chain, and I 332 00:17:00,520 --> 00:17:03,160 Speaker 9: think we're gonna wind up with stick your inflation and LISTA. 333 00:17:03,200 --> 00:17:05,960 Speaker 1: This is critical because this is what our booking team. 334 00:17:05,960 --> 00:17:08,000 Speaker 1: We've got the morning crew in the afternoon crew that 335 00:17:08,080 --> 00:17:10,119 Speaker 1: do it twenty four to seven for us. And to 336 00:17:10,160 --> 00:17:14,159 Speaker 1: see the setup here of Hollendhorst, Michael and Bianco in 337 00:17:14,200 --> 00:17:17,479 Speaker 1: the collegial disagreements they have is the heart of the 338 00:17:17,520 --> 00:17:20,200 Speaker 1: matter and how it rolls back over into whatever we're 339 00:17:20,240 --> 00:17:21,679 Speaker 1: to make or lose in the stock. 340 00:17:21,440 --> 00:17:23,479 Speaker 6: Market, which is the reason why I'm kind of shocked 341 00:17:23,520 --> 00:17:25,800 Speaker 6: that this was an eleven zero decision there was. 342 00:17:26,000 --> 00:17:27,679 Speaker 10: I agree with that strongly. 343 00:17:27,760 --> 00:17:30,160 Speaker 6: In fact, that there are such divergent. 344 00:17:29,880 --> 00:17:34,919 Speaker 10: This delusion, this delusion of unanimity is just it's I 345 00:17:34,920 --> 00:17:36,600 Speaker 10: don't know the British to do this better than. 346 00:17:36,480 --> 00:17:37,200 Speaker 5: We do well. 347 00:17:37,240 --> 00:17:39,480 Speaker 6: I guess that That's what I would ask you, Andrew. 348 00:17:39,680 --> 00:17:41,920 Speaker 6: Do you think that it undermines the FED to have 349 00:17:42,040 --> 00:17:45,240 Speaker 6: unanimity at a time where they're clearly is not unanimity 350 00:17:45,440 --> 00:17:46,680 Speaker 6: in markets or on the FED. 351 00:17:47,560 --> 00:17:49,639 Speaker 8: Look, I share with you the surprise that we would 352 00:17:49,640 --> 00:17:52,719 Speaker 8: have no differences of opinion at this point. I think 353 00:17:52,800 --> 00:17:55,200 Speaker 8: Powell has been somewhat masterful in terms of getting these 354 00:17:55,240 --> 00:17:59,200 Speaker 8: decisions to be unanimous, but we saw that sometimes coming 355 00:17:59,200 --> 00:18:01,200 Speaker 8: at the cost of Clay. I think that's what happened 356 00:18:01,240 --> 00:18:04,639 Speaker 8: in June, where we had this strange decision not to 357 00:18:04,720 --> 00:18:07,680 Speaker 8: raise raids, but to signal that it would be appropriate 358 00:18:07,720 --> 00:18:11,080 Speaker 8: to raise raids another fifty bait basis points. So as 359 00:18:11,080 --> 00:18:14,360 Speaker 8: you try to keep that committee together and get unanimity, 360 00:18:15,040 --> 00:18:19,080 Speaker 8: it's a little bit troubling in terms of getting clarity 361 00:18:19,119 --> 00:18:20,159 Speaker 8: in terms of the communication. 362 00:18:20,880 --> 00:18:22,960 Speaker 6: Bob, your take on this in terms of whether it's 363 00:18:23,000 --> 00:18:26,520 Speaker 6: helpful or harmful to have unanimity at a junction that 364 00:18:26,640 --> 00:18:29,600 Speaker 6: is clearly so fraught with disagreement on the street and 365 00:18:29,720 --> 00:18:30,240 Speaker 6: at the FED. 366 00:18:30,960 --> 00:18:35,399 Speaker 7: I don't think the unanimity is the accurate portrayal of 367 00:18:35,440 --> 00:18:38,240 Speaker 7: what actually occurred in the meeting. And I'm dying for 368 00:18:38,400 --> 00:18:42,320 Speaker 7: Bullard to go into public life, so that into private life, 369 00:18:42,359 --> 00:18:45,200 Speaker 7: so that we can ask them these questions. I think 370 00:18:45,240 --> 00:18:48,639 Speaker 7: what they did is they locked arms. As Diane's pointed 371 00:18:48,680 --> 00:18:52,679 Speaker 7: out many times, they are concerned about financial conditions easing. 372 00:18:53,119 --> 00:18:56,800 Speaker 7: This is another way to try to stop that from happening. 373 00:18:58,400 --> 00:18:59,879 Speaker 1: I look back with this, I can just see you 374 00:19:00,080 --> 00:19:02,199 Speaker 1: with a speech with Buller down at Purdue. What a 375 00:19:02,240 --> 00:19:04,159 Speaker 1: debate that would be right now as he moves from 376 00:19:04,160 --> 00:19:07,239 Speaker 1: the Saint Louis Fed to Purdue, that goes to the 377 00:19:07,280 --> 00:19:08,720 Speaker 1: dots in the dispersion. 378 00:19:08,800 --> 00:19:09,520 Speaker 10: This was a FED. 379 00:19:09,640 --> 00:19:11,440 Speaker 1: Let's speak for those that don't keep score on this, 380 00:19:11,600 --> 00:19:13,800 Speaker 1: like I don't keep score on this. This is a 381 00:19:13,840 --> 00:19:16,840 Speaker 1: dot free meeting. How important is the set up to 382 00:19:16,880 --> 00:19:20,960 Speaker 1: the next dispersion? The next theater of dots? Are we 383 00:19:21,080 --> 00:19:21,600 Speaker 1: beyond that? 384 00:19:22,040 --> 00:19:24,840 Speaker 7: We're living in an ai world. Now, what are we 385 00:19:24,880 --> 00:19:29,400 Speaker 7: doing not doing dots and summary of economic projections at 386 00:19:29,400 --> 00:19:33,520 Speaker 7: every meeting? Let's do it and indicate more about what 387 00:19:33,560 --> 00:19:34,399 Speaker 7: the FED is thinking. 388 00:19:34,440 --> 00:19:36,200 Speaker 3: I think transparency. 389 00:19:36,800 --> 00:19:38,760 Speaker 7: If you're gonna no one, I think. 390 00:19:38,600 --> 00:19:38,960 Speaker 11: What is that? 391 00:19:39,640 --> 00:19:44,440 Speaker 7: Particularly? Not usually? But after the last meeting, we've all 392 00:19:44,480 --> 00:19:47,119 Speaker 7: talked about what were they doing. They didn't hike in June, 393 00:19:47,119 --> 00:19:51,560 Speaker 7: but they indicated another fifty. If I were Mike McKee, 394 00:19:51,600 --> 00:19:55,480 Speaker 7: I would ask Chair Pale, what about the dots and 395 00:19:55,520 --> 00:19:58,199 Speaker 7: the summary of economic projections from the last meeting? Do 396 00:19:58,240 --> 00:20:02,280 Speaker 7: you still stand by those or would have anything changed? 397 00:20:02,320 --> 00:20:05,560 Speaker 3: Well, it's unclear which dot belongs to which policymaker Bostick 398 00:20:05,640 --> 00:20:07,480 Speaker 3: might have been one of those that would dissent today. 399 00:20:07,520 --> 00:20:10,000 Speaker 3: Bostic doesn't have a vote on the committee at the moment, 400 00:20:10,040 --> 00:20:12,879 Speaker 3: but that doesn't have a vote on the committee either. 401 00:20:13,280 --> 00:20:15,639 Speaker 3: The border governors. That would be where my issue is, 402 00:20:15,680 --> 00:20:17,879 Speaker 3: because the border governors, even if they believe that they 403 00:20:17,880 --> 00:20:19,760 Speaker 3: shouldn't be doing one thing, they all vote as a 404 00:20:19,760 --> 00:20:22,560 Speaker 3: committee as one. So I just wonder Andrew how much 405 00:20:22,560 --> 00:20:25,320 Speaker 3: we should read into the lack of descent at today's 406 00:20:25,320 --> 00:20:27,320 Speaker 3: meeting that maybe the September one is the one where 407 00:20:27,320 --> 00:20:28,479 Speaker 3: it gets a little bit more fiery. 408 00:20:29,440 --> 00:20:31,600 Speaker 8: Yeah, I think it's definitely the case that there's a 409 00:20:31,600 --> 00:20:33,840 Speaker 8: lot more going up behind the scenes here in terms 410 00:20:33,880 --> 00:20:35,560 Speaker 8: of some disagreement. We saw some of that in the 411 00:20:35,560 --> 00:20:38,720 Speaker 8: minutes to the June meeting, So there are real differences 412 00:20:38,760 --> 00:20:41,800 Speaker 8: of opinion, and I think, like Diane, like the others 413 00:20:41,800 --> 00:20:45,560 Speaker 8: were talking about earlier, this could really get interesting in September. 414 00:20:45,600 --> 00:20:48,280 Speaker 8: In September, they'll have to make a decision first whether 415 00:20:48,400 --> 00:20:50,800 Speaker 8: to hike rates. I think they probably won't because the 416 00:20:50,800 --> 00:20:53,520 Speaker 8: inflation did has been softer. But then what do you 417 00:20:53,640 --> 00:20:55,560 Speaker 8: do with those dots? Are you still showing that you're 418 00:20:55,600 --> 00:20:58,200 Speaker 8: going to hike again this year that would imply a 419 00:20:58,280 --> 00:21:02,720 Speaker 8: hike in November. Are you then indicating that that's the 420 00:21:02,800 --> 00:21:05,680 Speaker 8: last tyke of the cycle if we see inflation picking 421 00:21:05,800 --> 00:21:07,520 Speaker 8: up further, And I think that the risks are that 422 00:21:07,800 --> 00:21:09,560 Speaker 8: it will as we get towards the end of the year. 423 00:21:09,640 --> 00:21:11,760 Speaker 8: So it gets really tricky as they get to that 424 00:21:11,800 --> 00:21:15,400 Speaker 8: September meeting and then December dots again, Are you showing 425 00:21:15,600 --> 00:21:18,199 Speaker 8: no further hikes? Are you showing cuts? What do financial 426 00:21:18,240 --> 00:21:19,280 Speaker 8: conditions do with that? 427 00:21:19,920 --> 00:21:21,840 Speaker 6: Jim come back in here, because you were talking about 428 00:21:21,920 --> 00:21:25,920 Speaker 6: how models are broken and they're not really forecasting inflation 429 00:21:26,040 --> 00:21:27,639 Speaker 6: in any kind of accurate way. 430 00:21:28,119 --> 00:21:30,000 Speaker 5: What is the compass for the FED? 431 00:21:30,119 --> 00:21:32,800 Speaker 6: Do we have a clear sense of what data dependency 432 00:21:32,880 --> 00:21:36,639 Speaker 6: means in the post pandemic era where suddenly the data 433 00:21:36,920 --> 00:21:39,480 Speaker 6: is not irreliable forward looking indicator. 434 00:21:40,600 --> 00:21:42,840 Speaker 9: To be frank, No, we don't. And that has been 435 00:21:42,880 --> 00:21:45,080 Speaker 9: one of the bigger problems is that in a data 436 00:21:45,119 --> 00:21:47,600 Speaker 9: dependent world, what the FED is trying to do is 437 00:21:47,640 --> 00:21:51,199 Speaker 9: they're trying to divorce themselves from any theory that of 438 00:21:51,440 --> 00:21:54,080 Speaker 9: how the economy and inflation is supposed to work, and 439 00:21:54,080 --> 00:21:56,480 Speaker 9: they're supposed to react to the data, and then we 440 00:21:56,560 --> 00:21:58,760 Speaker 9: get what we've had in the last two months. They 441 00:21:58,800 --> 00:22:01,800 Speaker 9: paused in June, we got a big miss on in 442 00:22:01,800 --> 00:22:04,800 Speaker 9: the inflation report, your over year one from four to three, 443 00:22:05,040 --> 00:22:07,680 Speaker 9: and then they hiked. And so I'm not exactly sure 444 00:22:07,720 --> 00:22:10,520 Speaker 9: why they paused and why they hiked and what they're 445 00:22:10,520 --> 00:22:13,440 Speaker 9: going to do next based on their recent action, which 446 00:22:13,480 --> 00:22:17,080 Speaker 9: is why I would underscore what Bob said that you know, 447 00:22:17,240 --> 00:22:20,440 Speaker 9: Mike McKee's got to ask what are you doing and 448 00:22:20,040 --> 00:22:22,080 Speaker 9: what is driving these decisions? 449 00:22:22,160 --> 00:22:22,320 Speaker 1: Right? 450 00:22:22,440 --> 00:22:25,280 Speaker 9: Pause and then we get good inflation data and then 451 00:22:25,320 --> 00:22:28,400 Speaker 9: you hike. So there's a big confusion going on out 452 00:22:28,440 --> 00:22:30,639 Speaker 9: there right now, and it's all part of the modeling 453 00:22:30,800 --> 00:22:32,840 Speaker 9: that we've seen in the market. It's been very difficult 454 00:22:32,840 --> 00:22:33,359 Speaker 9: to figure it out. 455 00:22:33,480 --> 00:22:34,879 Speaker 1: I want to set up one question here and give 456 00:22:34,920 --> 00:22:36,520 Speaker 1: it back to John to get to the press conference 457 00:22:36,560 --> 00:22:39,080 Speaker 1: in six minutes. I want to go to Bianco, and 458 00:22:39,119 --> 00:22:41,359 Speaker 1: then Holland Horst and then Michael here. 459 00:22:41,680 --> 00:22:42,359 Speaker 10: I want to know you. 460 00:22:42,480 --> 00:22:46,879 Speaker 1: Twelve months forward real GDP? Is you also violently disagree 461 00:22:46,920 --> 00:22:50,880 Speaker 1: on inflation? Jim Biyonco twelve months forward real GDP? What's 462 00:22:50,880 --> 00:22:53,879 Speaker 1: the statistic about one in a quarter or so? 463 00:22:54,200 --> 00:22:58,119 Speaker 8: Okay, Hollenhurst, I think we will have seen a decline. 464 00:22:58,119 --> 00:23:00,320 Speaker 8: I think we'll have seen a recession by then, will 465 00:23:00,359 --> 00:23:02,600 Speaker 8: be some one percent GDP for Rely. 466 00:23:02,480 --> 00:23:04,960 Speaker 7: Kasmin, what do they say folded in I think we'll 467 00:23:05,040 --> 00:23:07,840 Speaker 7: have passed through minus one and a half to minus 468 00:23:07,840 --> 00:23:09,120 Speaker 7: two percent real GDP. 469 00:23:09,400 --> 00:23:12,480 Speaker 1: This is not John in the American zeitgeist right now, 470 00:23:12,520 --> 00:23:15,359 Speaker 1: the combination of those three opinions wrapped around their different 471 00:23:15,400 --> 00:23:16,480 Speaker 1: inflation outlooks. 472 00:23:16,680 --> 00:23:20,439 Speaker 10: This is removed from Meta, removed from Google. 473 00:23:20,480 --> 00:23:22,080 Speaker 3: We can't let them go just yet to there's still 474 00:23:22,080 --> 00:23:23,040 Speaker 3: seven minutes before they. 475 00:23:23,040 --> 00:23:24,600 Speaker 10: No I know but you're gonna know, I got to 476 00:23:24,600 --> 00:23:25,520 Speaker 10: get back to Toddenham. 477 00:23:25,560 --> 00:23:27,560 Speaker 11: I'm trying to see what the future is made us 478 00:23:27,560 --> 00:23:31,080 Speaker 11: say for seven minutes now, as you was talking about 479 00:23:31,080 --> 00:23:33,200 Speaker 11: that was noticing Messides Benz rise that full yet got 480 00:23:33,240 --> 00:23:36,320 Speaker 11: and the thinking hike again fifty basis points. 481 00:23:36,359 --> 00:23:39,840 Speaker 3: Messides still getting it done. Yeah, Jim, let's talk about 482 00:23:39,880 --> 00:23:43,320 Speaker 3: that though, in oh seriousness, who's paying these high rates? 483 00:23:43,440 --> 00:23:44,439 Speaker 3: Where are they bites in? 484 00:23:46,160 --> 00:23:48,960 Speaker 9: That's a good question. I think that they're biting at 485 00:23:48,960 --> 00:23:51,320 Speaker 9: the business level that they're they're wanting up to pay 486 00:23:51,400 --> 00:23:54,800 Speaker 9: higher rates. They're definitely biting at the residential real estate level. 487 00:23:55,119 --> 00:23:57,800 Speaker 9: You've seen a wholesale change in the way that the 488 00:23:57,840 --> 00:24:00,960 Speaker 9: residential real estate market existing homes to don't move, and 489 00:24:01,000 --> 00:24:04,159 Speaker 9: we've been trying to fill the gap with new construction 490 00:24:04,680 --> 00:24:06,919 Speaker 9: because we've got a multi year low and then the 491 00:24:07,000 --> 00:24:10,200 Speaker 9: volume of existing homes. So they've been biting there as well. 492 00:24:10,200 --> 00:24:12,879 Speaker 9: Where they're not biting, by the way, it seems to 493 00:24:12,920 --> 00:24:15,240 Speaker 9: be in the cost of capital in the stock market 494 00:24:15,320 --> 00:24:17,639 Speaker 9: that doesn't seem to be bothered by it at all. 495 00:24:17,720 --> 00:24:21,880 Speaker 9: So it's unclear as to where it is, and that 496 00:24:21,960 --> 00:24:24,640 Speaker 9: might be leading to an idea that maybe all we've 497 00:24:24,680 --> 00:24:27,840 Speaker 9: done with a five hundred basis point plus rise and 498 00:24:27,920 --> 00:24:30,800 Speaker 9: rates is just pretty much trek neutral and we're not 499 00:24:31,000 --> 00:24:34,000 Speaker 9: really that restrictive, which is why we're not seeing these 500 00:24:34,320 --> 00:24:37,000 Speaker 9: high rates hurt the economy as much as we thought about. 501 00:24:37,040 --> 00:24:38,280 Speaker 3: Michael, what would you say banks to that. 502 00:24:39,240 --> 00:24:41,040 Speaker 7: I think it's biting in a lot of places. I 503 00:24:41,119 --> 00:24:43,640 Speaker 7: think it is biting in the corporate world. You look 504 00:24:43,640 --> 00:24:48,040 Speaker 7: at bank loans, defaults are arising pretty sharply. You look at 505 00:24:48,040 --> 00:24:50,840 Speaker 7: the private credit markets. Talk to people and they're there 506 00:24:50,840 --> 00:24:53,919 Speaker 7: are real tremors there about what's happening in terms of 507 00:24:53,960 --> 00:24:58,240 Speaker 7: exchanges and extensions. You start looking at we didn't talk 508 00:24:58,280 --> 00:25:03,359 Speaker 7: about central business district office space that's still out there unoccupied, 509 00:25:03,600 --> 00:25:07,800 Speaker 7: that's owned in places. We saw that in Goldman's earnings 510 00:25:08,000 --> 00:25:10,840 Speaker 7: that has yet to be reconciled. So it's fighting hard. 511 00:25:10,840 --> 00:25:14,199 Speaker 7: We talked a lot about the consumer. They are really struggling. 512 00:25:14,320 --> 00:25:16,359 Speaker 3: Would you like to talk more about Goldman annex? No, 513 00:25:16,640 --> 00:25:24,560 Speaker 3: take a pass on that thought you might, and I've 514 00:25:24,600 --> 00:25:27,640 Speaker 3: said Goman, No, Andrew, I think we need to spend 515 00:25:27,640 --> 00:25:30,040 Speaker 3: a bit more time talking about this. Just how much 516 00:25:30,040 --> 00:25:33,560 Speaker 3: of the disinflation that we've seen recently is a consequence 517 00:25:33,600 --> 00:25:36,320 Speaker 3: of the tightening cycle of the last year. How do 518 00:25:36,359 --> 00:25:39,000 Speaker 3: you know, how do you identify that kind of thing? 519 00:25:40,280 --> 00:25:41,879 Speaker 8: Well, I think that's partly why the Feds in a 520 00:25:41,920 --> 00:25:44,920 Speaker 8: little bit of a different difficult position here, because they've 521 00:25:45,040 --> 00:25:48,480 Speaker 8: taken some credit for some disinflation that they did not 522 00:25:48,680 --> 00:25:50,920 Speaker 8: have a lot to do with, which is the decline 523 00:25:50,960 --> 00:25:54,359 Speaker 8: and energy prices, which is the decline in food prices. 524 00:25:55,080 --> 00:25:57,080 Speaker 8: And then we're seeing as we head into this meeting, 525 00:25:57,160 --> 00:26:01,959 Speaker 8: we're having very large increases in gasoline prices. So it's 526 00:26:01,960 --> 00:26:03,840 Speaker 8: certainly not going to feel to a lot of people 527 00:26:04,200 --> 00:26:06,280 Speaker 8: like inflation really has been conquered. 528 00:26:06,480 --> 00:26:06,680 Speaker 7: Now. 529 00:26:07,040 --> 00:26:09,159 Speaker 8: Somewhere where they do have a direct effect is on 530 00:26:09,280 --> 00:26:13,479 Speaker 8: the housing sector, shelter inflation. And again though I would 531 00:26:13,600 --> 00:26:16,640 Speaker 8: raise a caution there that we're kind of in this 532 00:26:18,840 --> 00:26:21,639 Speaker 8: that shelter prices are slowing, and they are, there's a 533 00:26:21,760 --> 00:26:24,959 Speaker 8: lag that's introduced into the way that the data are 534 00:26:25,000 --> 00:26:28,560 Speaker 8: put together, so those shelter prices will slow in official 535 00:26:28,880 --> 00:26:32,320 Speaker 8: inflation statistics. But look at the reading from Case Shiller. 536 00:26:32,359 --> 00:26:34,960 Speaker 8: Look at what we're seeing in the real time housing 537 00:26:35,040 --> 00:26:37,760 Speaker 8: price data. Those house prices are rising quickly now, so 538 00:26:37,880 --> 00:26:40,400 Speaker 8: there's some real upside risks to inflation, which we kind 539 00:26:40,400 --> 00:26:44,440 Speaker 8: of go back to Jim's point that maybe five percent 540 00:26:44,560 --> 00:26:48,439 Speaker 8: five and a half percent policy rates are the amount 541 00:26:48,480 --> 00:26:50,879 Speaker 8: of restraint on the housing sector at least that we 542 00:26:50,880 --> 00:26:51,719 Speaker 8: thought it was going to be. 543 00:26:51,800 --> 00:26:53,280 Speaker 3: So I promise you this ready is to find a 544 00:26:53,320 --> 00:26:55,560 Speaker 3: round of questions for three of you. With the news 545 00:26:55,560 --> 00:26:57,919 Speaker 3: conference about three or four minutes to why we need 546 00:26:57,960 --> 00:26:59,920 Speaker 3: to get your questions for chair and Power. We touched 547 00:27:00,040 --> 00:27:02,200 Speaker 3: on it briefly. You don't get to repeat that twice. Jim, 548 00:27:02,440 --> 00:27:05,360 Speaker 3: what would you ask the chairman today in about four minutes. 549 00:27:06,640 --> 00:27:09,679 Speaker 9: Basically what has been driving the decision making to pause 550 00:27:09,760 --> 00:27:12,320 Speaker 9: into hike? I kind of said that earlier, but it 551 00:27:12,400 --> 00:27:16,320 Speaker 9: does drive at the confusion as to what is really 552 00:27:16,359 --> 00:27:18,159 Speaker 9: on top of mind for the Federal Reserve. 553 00:27:18,400 --> 00:27:19,360 Speaker 3: Andrew, what about you? 554 00:27:23,160 --> 00:27:25,879 Speaker 8: I would ask about the rebound in the housing sector, prices, 555 00:27:26,160 --> 00:27:28,240 Speaker 8: growth upside rest to both well. 556 00:27:28,280 --> 00:27:31,960 Speaker 7: Michael, I'd ask what range of inflation and growth metrics 557 00:27:32,000 --> 00:27:35,080 Speaker 7: are they using and what levels would they look at 558 00:27:35,320 --> 00:27:38,600 Speaker 7: for them to one pause permanently and secondly cut rates. 559 00:27:38,640 --> 00:27:40,720 Speaker 3: What would they tolerate. I've heard that from Pimco that 560 00:27:40,760 --> 00:27:42,920 Speaker 3: maybe two points something they'd be happy with that. They'd 561 00:27:42,960 --> 00:27:44,359 Speaker 3: be okay with that. Does that resonate with you? 562 00:27:44,440 --> 00:27:49,160 Speaker 7: Two points something on headline for sure, as long as 563 00:27:49,160 --> 00:27:50,640 Speaker 7: the trend is headed down. 564 00:27:50,880 --> 00:27:53,160 Speaker 3: Jim Bianco Andrew Hollenhorst, that are two of you. Thank 565 00:27:53,240 --> 00:27:56,120 Speaker 3: you moments away from that news conference with Chairman Pow 566 00:27:56,240 --> 00:27:58,920 Speaker 3: following a twenty five basis point hike from the FED 567 00:27:59,040 --> 00:28:01,959 Speaker 3: Chairman Bramo. So it's almost questioned time and you can 568 00:28:02,000 --> 00:28:04,200 Speaker 3: hear from the panel in the last twenty minutes bit 569 00:28:04,240 --> 00:28:07,679 Speaker 3: of confusion over what they paused last time around, why 570 00:28:07,720 --> 00:28:10,680 Speaker 3: they hike this time around, if they are truly data dependent. 571 00:28:10,600 --> 00:28:13,880 Speaker 6: What data they're looking at, what their model is there 572 00:28:14,040 --> 00:28:17,399 Speaker 6: now to gauge out inflation going forward, what their threshold is, 573 00:28:17,440 --> 00:28:19,719 Speaker 6: as Bob was saying, to hike or to cut. We 574 00:28:19,760 --> 00:28:21,520 Speaker 6: don't have a sense of any of these things. The 575 00:28:21,560 --> 00:28:24,680 Speaker 6: model is, come on, we're looking at it and they're supercore. 576 00:28:24,760 --> 00:28:27,359 Speaker 3: And yeah, everyone was high five in the FED a 577 00:28:27,359 --> 00:28:30,320 Speaker 3: few weeks ago when we got that inflation data. It 578 00:28:30,359 --> 00:28:32,920 Speaker 3: was like victory lap time, Bob, victory lamp. People talking 579 00:28:32,920 --> 00:28:35,919 Speaker 3: about a victory lamp for the chairman at the Federal Reserve. 580 00:28:36,400 --> 00:28:40,560 Speaker 7: If you step back and look at growth and inflationary pressures. 581 00:28:40,720 --> 00:28:44,440 Speaker 7: They are moderating. They should just put it in park 582 00:28:44,560 --> 00:28:46,720 Speaker 7: and come back in January. 583 00:28:46,600 --> 00:28:47,600 Speaker 3: And do a victory lamp. 584 00:28:48,280 --> 00:28:48,840 Speaker 7: I don't know that. 585 00:28:49,040 --> 00:28:51,560 Speaker 3: I feel that feels too premature to me. That really 586 00:28:51,600 --> 00:28:54,200 Speaker 3: does one print TK and start celebrating. 587 00:28:54,280 --> 00:28:57,560 Speaker 1: This has been a fascinating discussion. Thank you so much 588 00:28:57,640 --> 00:29:00,680 Speaker 1: to our team for putting together. That's just brilliant conversation. 589 00:29:00,920 --> 00:29:05,880 Speaker 1: Collegial disagreement. The common theme here from Marquette academics to 590 00:29:06,080 --> 00:29:10,880 Speaker 1: UCLA academics to University of Pennsylvania academics is this is 591 00:29:10,880 --> 00:29:13,520 Speaker 1: a press conference without theory. And I know I'm going 592 00:29:13,560 --> 00:29:16,400 Speaker 1: to get pushedback on that from Mike McKee and others. 593 00:29:16,680 --> 00:29:21,480 Speaker 1: But off the pandemic, they're flying blind, and Bob I 594 00:29:21,480 --> 00:29:23,800 Speaker 1: would say, there is data dependent as we've ever seen. 595 00:29:24,520 --> 00:29:28,240 Speaker 6: Yeah, I think so Ever, well, look, I think that 596 00:29:28,360 --> 00:29:31,520 Speaker 6: you are right that this is perhaps a theory free 597 00:29:31,680 --> 00:29:34,040 Speaker 6: Federal Reserve that's still trying to hue some of the 598 00:29:34,040 --> 00:29:37,640 Speaker 6: theories that underpinned their role in all of this. I 599 00:29:37,640 --> 00:29:40,440 Speaker 6: would argue one of the biggest questions John is whether 600 00:29:40,520 --> 00:29:43,440 Speaker 6: tightening has the same effect on an economy that is 601 00:29:43,480 --> 00:29:46,520 Speaker 6: not showing signs of slowing down to your point, the 602 00:29:46,640 --> 00:29:48,680 Speaker 6: lag the variable long, and variable. 603 00:29:48,400 --> 00:29:51,360 Speaker 5: Lives long but also variable. 604 00:29:52,040 --> 00:29:54,240 Speaker 6: So then how do we then talk about the efficacy 605 00:29:54,280 --> 00:29:54,760 Speaker 6: of what they're doing. 606 00:29:54,920 --> 00:29:56,880 Speaker 3: They said they don't know, which is why they're in 607 00:29:56,880 --> 00:29:58,680 Speaker 3: the risk management business, and they've got to work out 608 00:29:58,680 --> 00:30:01,520 Speaker 3: what is the biggest risk cutting too soon or holding 609 00:30:01,520 --> 00:30:04,200 Speaker 3: too long, And that's really really difficult to do. I 610 00:30:04,200 --> 00:30:06,320 Speaker 3: think it's easier to say we need to cut because 611 00:30:06,320 --> 00:30:09,720 Speaker 3: we've gone too far. It's harder to say, these disinflationory 612 00:30:09,720 --> 00:30:11,760 Speaker 3: trends are on their way back towards taking us to 613 00:30:11,760 --> 00:30:14,160 Speaker 3: a sustainable path to two percent. That's a much much 614 00:30:14,160 --> 00:30:14,640 Speaker 3: bigger call. 615 00:30:14,760 --> 00:30:16,880 Speaker 6: I don't know the answer to what's the biggest fear 616 00:30:17,240 --> 00:30:18,640 Speaker 6: inflation or recession. 617 00:30:18,840 --> 00:30:19,560 Speaker 5: We don't know. 618 00:30:19,800 --> 00:30:22,040 Speaker 6: And what you hear is from everyone on Wall Street 619 00:30:22,080 --> 00:30:22,840 Speaker 6: a different answer.