WEBVTT - Powell Reiterates Fed Needs More Confidence on Inflation to Cut 0:00:02.920 --> 0:00:11.360 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:11.360 --> 0:00:14.600 Wait inside from the reporters and editors who bring you 0:00:14.640 --> 0:00:19.000 America's most trusted business magazine, plus global business, finance and 0:00:19.040 --> 0:00:23.520 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.680 --> 0:00:26.480 and Tim Stenebeck from Bloomberg Radio. 0:00:28.200 --> 0:00:31.240 Carol Master along with Tim Steneek live here in our 0:00:31.240 --> 0:00:35.000 Bloomberg studio at Bloomberg Headquarters. Obviously, the main event is 0:00:35.080 --> 0:00:37.479 what we just heard from Fed Chair JP Howell up 0:00:37.520 --> 0:00:39.720 on Capitol Hill. Charlie breaking down some of those key 0:00:39.800 --> 0:00:42.879 points the Fed Chair reiterated to lawmakers at the US 0:00:42.880 --> 0:00:45.519 Central Bank, no rush to cut interest rates. Feel like Tim, 0:00:45.560 --> 0:00:48.400 we got a little bit of everything, and the Fed 0:00:48.520 --> 0:00:51.520 Chair really pointing out the importance of not going too 0:00:51.560 --> 0:00:53.760 soon and also not going too late in terms of 0:00:53.800 --> 0:00:55.040 making moves to cut rates. 0:00:55.120 --> 0:00:56.720 Yeah, here's what he said. We believe that our policy 0:00:56.800 --> 0:00:59.160 rate is likely at its peak for this tightening cycle. 0:01:00.000 --> 0:01:02.440 Repeated language you said his last press conference just at 0:01:02.440 --> 0:01:04.520 the end of January. He also repeated his claim from 0:01:04.520 --> 0:01:06.480 the January press conference that rate cuts are likely to 0:01:06.480 --> 0:01:09.600 be appropriate at some point this year. And you know, 0:01:09.640 --> 0:01:11.240 I think the market's reacting accordingly. 0:01:11.280 --> 0:01:12.920 All right, So let's get to it with more on 0:01:12.959 --> 0:01:16.600 Shair Powell's comments and US financial market reaction. Delighted to 0:01:16.600 --> 0:01:19.959 have with us Bloomberg News International Economics and Policy correspondent 0:01:20.440 --> 0:01:23.119 Michael McKee. He's there in our DC bureau. He's been 0:01:23.160 --> 0:01:26.679 listening all morning, so too has Bloomberg News Markets reporter 0:01:26.720 --> 0:01:29.640 Abigail Doolittle. She's here in our studio, and Mike, I 0:01:29.680 --> 0:01:32.280 want to start with you. It does feel like we 0:01:32.360 --> 0:01:35.000 understood the message at the last FOMC meeting, and I 0:01:35.000 --> 0:01:37.240 feel like we got a lot of that as well. 0:01:37.280 --> 0:01:42.080 But what for you? Was there anything that was new, nuanced, 0:01:42.200 --> 0:01:44.760 a little bit different from the FOMC meeting? What is 0:01:44.800 --> 0:01:47.360 it that was so important in terms of what we 0:01:47.400 --> 0:01:48.680 got from the FED chair today? 0:01:50.240 --> 0:01:57.360 I appreciate your asking, but this was the functional equivalent 0:01:57.360 --> 0:01:59.240 of Wall Street hoping for a new suit and getting 0:01:59.240 --> 0:02:02.200 hand me down with the same old, same mold from 0:02:02.280 --> 0:02:06.160 the FED chair. You know, he really can't say anything 0:02:06.160 --> 0:02:09.800 else at this point. It was more explanatory than anything else. 0:02:09.840 --> 0:02:13.079 And it's a story that traders have heard now for 0:02:13.240 --> 0:02:16.880 some weeks from Chair Powell and many other members of 0:02:16.919 --> 0:02:19.639 the Open Market Committee. But what did stand out today, 0:02:19.680 --> 0:02:22.000 and what was maybe a little bit of a surprise, 0:02:22.520 --> 0:02:27.280 was how much bipartisan anger there was at the Basel 0:02:27.440 --> 0:02:31.600 three end Game bank regulations that the FED is looking 0:02:31.680 --> 0:02:35.799 at right now. These grow out of an international effort 0:02:35.840 --> 0:02:41.280 to raise capital levels and regulation standards in banks around 0:02:41.280 --> 0:02:45.079 the world. The US hasn't implemented it yet. They've put 0:02:45.120 --> 0:02:50.280 together a pro process for putting it in place, and 0:02:50.320 --> 0:02:52.560 they put it out for comment, and they've gotten a 0:02:52.680 --> 0:02:55.560 lot of negative comment from the banking industry who have 0:02:55.720 --> 0:03:01.000 also sent comments, apparently to their local representatives. Republicans didn't 0:03:01.080 --> 0:03:03.720 like it, but today we really got an earful from 0:03:03.760 --> 0:03:06.840 some Democratic representatives as well. They think it's going to 0:03:07.440 --> 0:03:11.639 result in less lending to the banks from the banks 0:03:11.639 --> 0:03:14.240 in their districts. Their banks will be less profitable. In 0:03:14.280 --> 0:03:18.240 other words, the message from the representatives is this is 0:03:18.360 --> 0:03:21.320 bad for business, so it's bad for the economy. J. 0:03:21.520 --> 0:03:24.640 Paul was receptive. He was one of four FED members 0:03:24.680 --> 0:03:27.800 who originally said they had problems with the issue. He 0:03:27.880 --> 0:03:30.480 made that clear. He said that they are looking at it, 0:03:30.520 --> 0:03:33.600 they're still digesting all the comments. But as he said, 0:03:33.840 --> 0:03:40.360 what we could see is broad and deep changes in 0:03:41.000 --> 0:03:43.920 the regulations before they come out, and he went so 0:03:44.000 --> 0:03:46.960 far as to say that it is possible they would 0:03:47.040 --> 0:03:52.120 withdraw the proposal altogether. So the congressmen were heard today 0:03:52.320 --> 0:03:53.480 at least on that issue. 0:03:53.520 --> 0:03:55.680 Well, thank you very much, Thank you very much, Mike, 0:03:55.720 --> 0:03:57.240 because you kind of open the door to where we 0:03:57.280 --> 0:03:59.160 need to go with Abigail, because yep, we want to 0:03:59.160 --> 0:04:02.160 talk about more markets generally, but most importantly what's going 0:04:02.200 --> 0:04:04.040 on with New York Community Bank or if we may 0:04:04.400 --> 0:04:07.680 abigail because as the Fed Chair j. Powell was getting 0:04:07.720 --> 0:04:10.320 lots of detailed questions, as Mike said, on banking regulation, 0:04:10.440 --> 0:04:14.360 how to prevent another crisis? Developing news on New York 0:04:14.360 --> 0:04:16.760 Community Bank card which is halted as we speak, but 0:04:16.800 --> 0:04:19.080 it was down as much as forty seven percent before 0:04:19.080 --> 0:04:19.520 that halt. 0:04:19.600 --> 0:04:23.080 Yeah, it's pretty incredible here, this beleaguered regional bank. The 0:04:23.120 --> 0:04:25.279 news just can't get worse. It just keeps getting worse 0:04:25.320 --> 0:04:28.440 and worse, it seems. And to your point, they did. 0:04:28.760 --> 0:04:31.120 They are saying that they're trying to raise equity capital. 0:04:31.160 --> 0:04:33.039 That's been the big question with all the headlines that 0:04:33.080 --> 0:04:36.000 have come out recently in terms of they're talking about 0:04:36.000 --> 0:04:38.279 the poor oversight of loans, and then we had a 0:04:38.279 --> 0:04:40.440 couple of downgrades. One of the downgrades was key because 0:04:40.440 --> 0:04:44.599 it was a downgrade of basically a certain poor portion 0:04:44.680 --> 0:04:47.520 of their business to junk and they suggested that if 0:04:47.520 --> 0:04:50.240 that happen that they could see outflows. One thing they 0:04:50.240 --> 0:04:52.880 have not updated investors on through all of this are 0:04:52.880 --> 0:04:56.120 their deposits. So in February deposits and liquidity was very 0:04:56.160 --> 0:05:00.680 helpful or healthy. But to not make that update through 0:05:00.720 --> 0:05:02.320 all of this, you know, you could take it one 0:05:02.320 --> 0:05:04.160 way or the other that it's either really bad they 0:05:04.200 --> 0:05:05.840 don't want to share that, or they want to pull 0:05:05.880 --> 0:05:07.240 a rabbit out of the hat. So it's can to 0:05:07.279 --> 0:05:09.000 be interesting to see what comes on the other side 0:05:09.040 --> 0:05:09.200 of this. 0:05:09.560 --> 0:05:11.919 Hey, Abigail, I want to broaden this out a little 0:05:11.920 --> 0:05:14.960 bit and just talk about the equity market reaction in 0:05:15.000 --> 0:05:17.760 a general to what we heard from J. Powell earlier. 0:05:18.440 --> 0:05:20.599 We do see stocks hire by eight tens of one percent, 0:05:20.600 --> 0:05:23.200 the nasdak can posit up by one percent, the Dow 0:05:23.279 --> 0:05:26.400 up by half a percentage point. Any surprising moves from 0:05:26.400 --> 0:05:29.680 you after yesterday's sell off given what we heard from Powell. 0:05:29.279 --> 0:05:31.599 Not really, I mean the biggest surprise is actually Apple 0:05:31.640 --> 0:05:33.960 it's down ever so slightly. I mean, it's not down 0:05:34.000 --> 0:05:35.440 a lot, but you would think that we'd start to 0:05:35.440 --> 0:05:37.200 have a snap back for that stock at some point, 0:05:37.200 --> 0:05:39.599 and some of them more mental indicators suggested that given 0:05:39.600 --> 0:05:42.440 the fact that it is down about fourteen percent from 0:05:42.520 --> 0:05:44.880 its peak, you would think that it would also be 0:05:44.920 --> 0:05:47.279 participating in this rally. But this rally is a nice 0:05:47.279 --> 0:05:49.720 snap back from yesterday selloff. To your point, the S 0:05:49.800 --> 0:05:52.200 and P five hundred of about nine tens of one percent, 0:05:52.240 --> 0:05:55.720 chips doing really well, up three point two percent, So 0:05:55.760 --> 0:05:58.000 a big rally there, I think very interesting to take 0:05:58.000 --> 0:06:00.279 a look at his bonds, we have yields down just 0:06:00.360 --> 0:06:02.640 a little bit, so this tells you. I mean, my 0:06:02.800 --> 0:06:06.760 take on this on FED chair Powell's testimony so far, 0:06:06.839 --> 0:06:09.200 to Mike's point, you know, nothing new here, but I 0:06:09.240 --> 0:06:10.960 think that there was probably a little bit of fear 0:06:11.240 --> 0:06:14.040 was would Powell suggest that there would be no cuts 0:06:14.040 --> 0:06:15.480 this year? Now, if that had happened, I think we 0:06:15.520 --> 0:06:19.880 would have seen, you know, yields spike sharply higher and 0:06:20.040 --> 0:06:23.360 stocks tumble. The fact that the worst case scenario didn't happen, 0:06:23.560 --> 0:06:25.680 we seem to have this relief rally doesn't mean it's 0:06:25.720 --> 0:06:27.640 going to continue, not really because you actually put a 0:06:27.640 --> 0:06:30.920 little bit of near term technical damage for stocks, but 0:06:30.960 --> 0:06:33.200 investors feel a little bit more sure of themselves today. 0:06:33.279 --> 0:06:35.640 You know, our New York team also reporting that treasury 0:06:35.720 --> 0:06:38.440 yields hit a new session low after that initial Wall 0:06:38.480 --> 0:06:41.000 Street Journal report about New York Community Bank Orp looking 0:06:41.000 --> 0:06:43.960 to raise equity capital. We've also reported this story out. 0:06:44.000 --> 0:06:46.440 And I was looking at kind of the KRE Regional 0:06:46.480 --> 0:06:49.400 bank ETF. It's down about two percent, and it looked 0:06:49.440 --> 0:06:52.000 like it took a dip as well on concerns, And 0:06:52.120 --> 0:06:53.960 I do wonder, you know, when we think about the 0:06:54.000 --> 0:06:56.680 broader market, we always, Abigail talk with you about the 0:06:56.680 --> 0:06:59.520 importance of the megacap tech names in terms of momentum, 0:06:59.560 --> 0:07:01.320 whether it's Apple or some of the others. And you 0:07:01.440 --> 0:07:03.200 laid out some of the move to the upside that 0:07:03.240 --> 0:07:05.840 we've seen. How important is it to what we see 0:07:06.040 --> 0:07:08.680 in the financial sector, broadly in the regional bank sector, 0:07:08.680 --> 0:07:09.960 to the overall market trade. 0:07:10.040 --> 0:07:12.400 Well, you know, it's interesting to see the simply that 0:07:13.080 --> 0:07:15.400 we do see in the KRE. So the biggest decliner, 0:07:15.480 --> 0:07:18.480 not surprisingly was NYCBB four. It was halted. I'm looking 0:07:18.560 --> 0:07:22.680 right now only three members are up out of one 0:07:22.760 --> 0:07:24.360 hundred and forty, so we have one hundred and thirty 0:07:24.360 --> 0:07:26.800 seven banks down. But what's so interesting is as I've 0:07:26.880 --> 0:07:29.080 dug into the commercial reel and it is trading again 0:07:29.120 --> 0:07:32.640 now KR or excuse me, and yet it's not. Sorry, 0:07:32.640 --> 0:07:35.560 I was looking at KRI, got a little bit excited 0:07:35.560 --> 0:07:36.160 to see we have a. 0:07:36.160 --> 0:07:37.160 Lot of screens up right now. 0:07:37.200 --> 0:07:39.080 Yeah, we have a lot a lot of screens here. 0:07:39.760 --> 0:07:42.200 But as I've been digging into this, so of the 0:07:42.400 --> 0:07:46.080 twenty five top regional banks, they have maybe thirteen fourteen 0:07:46.120 --> 0:07:49.160 percent exposure to commercial real estate, and apparently they are 0:07:49.200 --> 0:07:51.560 well funded enough that there shouldn't be an issue. The 0:07:51.640 --> 0:07:54.840 smaller regional banks they have roughly forty four percent. So 0:07:54.880 --> 0:07:56.560 there could be some other blow ups. But I was 0:07:56.560 --> 0:07:58.360 talking to an expert yesterday and he was saying, it's 0:07:58.400 --> 0:08:00.720 not going to be the saving and loans crisis back 0:08:00.760 --> 0:08:03.440 in the nineteen nineties. It's not going to be you know, 0:08:03.560 --> 0:08:05.520 hundreds of banks. If anything, it's not even going to 0:08:05.560 --> 0:08:07.160 be dozens he said it. He said, maybe it would 0:08:07.160 --> 0:08:09.360 be a dozen. So the fact that you have this 0:08:09.440 --> 0:08:12.120 contagion trade here right now in terms of stocks down, 0:08:12.240 --> 0:08:14.640 now that even though the bulk of them are down. 0:08:16.120 --> 0:08:19.800 The next biggest one to NYCB is down five point 0:08:19.880 --> 0:08:23.320 nine percent, which is a sizeable decline. That's South Side 0:08:23.360 --> 0:08:24.920 Bank Shares. But I guess what I'm saying is that 0:08:24.960 --> 0:08:28.680 the contagion may not be. It's headline contagion as opposed 0:08:28.720 --> 0:08:31.320 to actual fundamentals. A lot of folks don't think it's. 0:08:31.160 --> 0:08:31.400 Going to be. 0:08:31.400 --> 0:08:33.720 It's important to understand the fundamentals of each of these names. 0:08:33.760 --> 0:08:34.640 I want to go bactly. 0:08:34.720 --> 0:08:36.040 Yeah, I want to go back to Mike McKee on 0:08:36.120 --> 0:08:38.199 this and stay on New York Community Bank because there 0:08:38.240 --> 0:08:40.600 are there are some parts of this that are tied 0:08:40.640 --> 0:08:42.960 to the FED and two regulators might just weigh in 0:08:43.000 --> 0:08:44.400 on this with your observations. 0:08:45.840 --> 0:08:48.400 Well, it's interesting. J. Powel was certainly asked about banks 0:08:48.400 --> 0:08:50.320 and commercial real estate, and he said it's going to 0:08:50.360 --> 0:08:52.760 be a problem that can be worked out. They're not 0:08:52.840 --> 0:08:54.920 particularly worried about it, but it's going to take years 0:08:55.000 --> 0:08:57.120 for all this to go through the system, and there 0:08:57.160 --> 0:09:00.800 will be losses. But he was not direct directly asked 0:09:00.800 --> 0:09:05.000 about NYCB, either because members of Congress didn't know what 0:09:05.080 --> 0:09:07.840 was happening today or because they realized that the FED 0:09:07.920 --> 0:09:11.360 does not regulate NYCB. It's the Officer of the Controller 0:09:11.400 --> 0:09:15.320 of the Currency that is NYCB's regulator. And one of 0:09:15.320 --> 0:09:20.520 the interesting things Abby was talking about the deposit base. 0:09:21.600 --> 0:09:24.679 Most of their deposit base is insured, so it's not 0:09:24.800 --> 0:09:28.240 like SVB was where people felt like they were going 0:09:28.280 --> 0:09:30.360 to lose their money. And the other thing about their 0:09:30.360 --> 0:09:33.319 deposit base is about a year ago they bought Flagstar Bank. 0:09:33.520 --> 0:09:35.760 They moved all their deposits into it, and apparently the 0:09:35.840 --> 0:09:38.720 deposits from Signature Bank when they took that over also 0:09:38.760 --> 0:09:42.000 went into Flagstar. Now who knows that Flagstar is owned 0:09:42.040 --> 0:09:45.439 by NYCB, So the average person isn't rushing to pull 0:09:45.480 --> 0:09:48.280 their money out of Flagstar because they don't know the 0:09:48.360 --> 0:09:49.920 connection there greatly. 0:09:50.520 --> 0:09:52.760 It sounds like the members of Congress god gets some 0:09:52.840 --> 0:09:57.839 terminals if they don't know that. During the FED we 0:09:57.920 --> 0:10:01.320 did get where they subscribe to the terminal. 0:10:01.679 --> 0:10:04.400 I did thought I heard a few call outs there, Mike. 0:10:05.960 --> 0:10:09.120 Yes, I mean more than I think any other news 0:10:09.200 --> 0:10:11.160 organization to brag a little bit, but two or three 0:10:11.200 --> 0:10:16.320 times members cited stories from Bloomberg when they were prefacing 0:10:16.360 --> 0:10:17.080 their questions. 0:10:18.400 --> 0:10:20.920 Abigail Let's brought it out a little bit too. I mean, 0:10:21.040 --> 0:10:23.160 as we continue to track the trade after we've been 0:10:23.360 --> 0:10:26.240 concerned a lot. Yesterday there was a lot of conversations about, 0:10:27.080 --> 0:10:30.000 you know, overvaluations and whether or not we were kind 0:10:30.040 --> 0:10:31.559 of maybe a new trend line and so on and 0:10:31.559 --> 0:10:33.559 so forth. You know, we're gonna go back to Mike 0:10:33.600 --> 0:10:35.559 in a moment because we've had a lot of economic 0:10:35.640 --> 0:10:37.880 news and obviously Jay Powell covering a lot of the 0:10:37.960 --> 0:10:42.200 economic backdrop, if you will. Having said that the trade, 0:10:42.200 --> 0:10:44.840 the momentum behind the groups that are moving to the upside, 0:10:45.080 --> 0:10:46.760 is it some momentum behind it. 0:10:47.480 --> 0:10:50.040 So overall the momentum for the markets is down. We've 0:10:50.080 --> 0:10:52.040 been talking about this for a while, the R side, 0:10:52.080 --> 0:10:54.560 the momentum indicator. The last time we saw high it 0:10:54.640 --> 0:10:56.520 was last year. So all of these record highs that 0:10:56.559 --> 0:10:58.760 we've had recently not today, but they've been made on 0:10:58.960 --> 0:11:01.280 less good momentum. And I think some of that does 0:11:01.320 --> 0:11:03.080 have to do with the Apple trade, the fact that 0:11:03.080 --> 0:11:07.640 that stock is in a correction now relative to the breadth. 0:11:07.679 --> 0:11:10.360 Today it's much better because we have most we might 0:11:10.400 --> 0:11:12.160 even at this point we have all eleven s and 0:11:12.200 --> 0:11:15.440 P five hundred sectors higher, So it is broad based 0:11:15.600 --> 0:11:19.520 from a volume standpoint, Let's see how excited investors are 0:11:19.640 --> 0:11:23.120 about this relief from Powell that it's not going to 0:11:23.120 --> 0:11:24.600 be a year of no cut. So it's a little 0:11:24.640 --> 0:11:27.480 bit above a little bit above average, so it is 0:11:27.520 --> 0:11:30.400 somewhat healthy. I would say, though it's the consolidation that 0:11:30.400 --> 0:11:32.439 we saw yesterday for big tech, the worst day at 0:11:32.440 --> 0:11:34.200 one point going back to the last year. 0:11:34.240 --> 0:11:34.760 It's healthy. 0:11:34.840 --> 0:11:36.480 So it wouldn't be a bad thing to see a 0:11:36.480 --> 0:11:37.080 little bit more. 0:11:37.120 --> 0:11:38.719 And it was interesting because we saw buying into the 0:11:38.720 --> 0:11:42.120 clothes yesterday, which was really significant. Hey, Mike, back to you. 0:11:42.280 --> 0:11:45.720 In terms of the economic backdrop, it's still I think 0:11:45.760 --> 0:11:48.200 back to the last FOMC meeting where Ja Powell several 0:11:48.240 --> 0:11:50.240 times in the press conference is like, folks, it's good 0:11:50.280 --> 0:11:54.320 out there the US economy. Do we get that message 0:11:54.400 --> 0:11:56.120 very strongly as well? 0:11:57.679 --> 0:12:00.000 Oh, well, you put it that way. We got the message, 0:12:00.160 --> 0:12:02.520 but not very strongly. There wasn't a whole lot of 0:12:02.559 --> 0:12:05.679 focus on it. It was in his opening statement that 0:12:06.000 --> 0:12:09.640 job creation has been strong, inflation's been coming down. Overall, 0:12:09.960 --> 0:12:12.360 things looked pretty good in the US economy. Later in 0:12:12.440 --> 0:12:15.520 the hearing, he was asked about the possibility of recession, 0:12:15.520 --> 0:12:18.359 and he says there doesn't seem to be any indication 0:12:18.480 --> 0:12:21.760 that there's any short term risk of recession in the 0:12:21.880 --> 0:12:24.840 US economy. A couple of the Democrats used their time 0:12:24.880 --> 0:12:27.320 to talk about how good the economy was, maybe from 0:12:27.320 --> 0:12:30.080 a political stance, but the economy was not front and 0:12:30.160 --> 0:12:33.560 center today. Interesting also not front end center was the 0:12:33.600 --> 0:12:36.640 stock market. You would think that maybe he would have 0:12:36.679 --> 0:12:40.280 gotten asked about asset prices being overvalued or something like that, 0:12:40.600 --> 0:12:44.160 and that didn't really come up either. Members were more 0:12:44.200 --> 0:12:47.240 concerned about things like whether the Fed is getting involved 0:12:47.280 --> 0:12:51.360 in climate change. The housing market maybe the closest thing 0:12:51.440 --> 0:12:54.679 to the economic issues that were talked about. And basically 0:12:54.720 --> 0:12:57.880 all Poul could say is, yeah, we raised rates, but 0:12:58.200 --> 0:13:01.079 as rates come down, the housing it should loosen. 0:13:00.880 --> 0:13:02.160 Up, all right. 0:13:02.200 --> 0:13:04.320 So having said that, we do also get a lot 0:13:04.360 --> 0:13:06.520 of economic data points. We have been over the last 0:13:06.520 --> 0:13:09.120 couple of weeks, some data today as well. Jolt's always 0:13:09.120 --> 0:13:11.480 an important number to watch. We're gonna have the Beige 0:13:11.520 --> 0:13:14.760 Book in about forty five minutes or so, give us, 0:13:14.920 --> 0:13:17.640 you know, remind us Mike about the backdrop that we 0:13:17.679 --> 0:13:19.680 continue to get in terms of some of the data points. 0:13:21.120 --> 0:13:23.080 Well, that's the key thing. If FED says it's going 0:13:23.120 --> 0:13:24.600 to be data dependent, they're going to look at all 0:13:24.640 --> 0:13:28.560 broad range of indicators, including jobs, and we get the 0:13:28.640 --> 0:13:32.160 jobs report on Friday. It's expected to show a relatively 0:13:32.200 --> 0:13:36.880 strong job creation continued during the month of February. They'll 0:13:36.880 --> 0:13:39.320 be looking at average hourly earnings, wanting to see if 0:13:39.600 --> 0:13:42.680 there's an inflation problem there. And then next week we 0:13:42.760 --> 0:13:45.680 get another CPI report. Seems like only yesterday, doesn't it. 0:13:46.080 --> 0:13:48.280 We'll get a CPI report. They'll be looking at that 0:13:48.440 --> 0:13:51.880 and then PPI and we'll see where inflation is. The 0:13:52.080 --> 0:13:54.960 FED meetings the week after that on the twentieth, they've 0:13:54.960 --> 0:13:58.480 already said they're not going to move in so then 0:13:58.520 --> 0:14:01.040 the focus turns to the May first meeting and we'll 0:14:01.040 --> 0:14:03.280 see what the numbers add up to by then. But 0:14:03.400 --> 0:14:06.440 right now it looks pretty good. The question is does 0:14:06.480 --> 0:14:10.199 inflation keep going down? That's going to be the one 0:14:10.360 --> 0:14:11.720 major point to trade upon. 0:14:12.000 --> 0:14:14.719 Hey, Mike, how does this set things up for j. 0:14:14.880 --> 0:14:17.880 Powell tomorrow when he's in front of the Senate. Do 0:14:17.920 --> 0:14:21.320 we have any indication that the line of questioning will 0:14:21.360 --> 0:14:25.880 be similar? I hear more about Basel three and questions 0:14:25.880 --> 0:14:26.280 about that. 0:14:27.880 --> 0:14:30.320 I think that's what you'll get. Senate questioning tends to 0:14:30.360 --> 0:14:35.520 be more detailed, more specific, less political, and so probably 0:14:35.640 --> 0:14:38.640 some more questions about when they might cut interest rates. 0:14:38.680 --> 0:14:40.720 But then I would imagine a lot of people are 0:14:40.760 --> 0:14:43.560 going to be on both sides of the issue tomorrow 0:14:43.760 --> 0:14:46.280 in the Senate on banking, because you can bet Elizabeth 0:14:46.280 --> 0:14:48.520 Warren is going to let the chairman know they should 0:14:48.560 --> 0:14:51.320 be as tough as possible on the banks. That's been 0:14:51.360 --> 0:14:55.000 her position. So we may get some interesting cross arguments 0:14:55.040 --> 0:14:56.400 from members of the committee. 0:14:56.440 --> 0:14:56.800 Tomorrow. 0:14:57.160 --> 0:15:00.800 May get more on climate change. That's also been an issue. 0:15:00.920 --> 0:15:03.240 How far is the FED allowed to go in what 0:15:03.360 --> 0:15:06.640 it's doing on climate change. There was one question today 0:15:06.720 --> 0:15:09.280 about the FED and its balance sheet, but it wasn't 0:15:09.320 --> 0:15:11.240 really about when they're going to start running it down. 0:15:11.520 --> 0:15:14.920 It was more about the Fed's losses, Jay poll saying 0:15:15.000 --> 0:15:18.720 doesn't affect our operations. It's really just a bookkeeping exercise. 0:15:19.040 --> 0:15:22.640 So we might see more of that as well. I 0:15:22.680 --> 0:15:25.400 wonder if we'll see much more political posturing. We really 0:15:25.400 --> 0:15:28.280 didn't today, which is something you usually get from members 0:15:28.280 --> 0:15:28.720 of the House. 0:15:28.800 --> 0:15:31.480 We did see some questions about housing affordability Mike, which 0:15:31.480 --> 0:15:34.560 I found interesting given that things aren't necessarily going the 0:15:34.560 --> 0:15:37.760 way that economists typically think they'll go. When rates go higher, 0:15:38.040 --> 0:15:41.280 home prices should go down because mortgages become more expensive. 0:15:41.000 --> 0:15:43.520 That got thrown out the window over the last couple 0:15:43.600 --> 0:15:45.440 of years. What did you make of the line of 0:15:45.520 --> 0:15:48.520 questioning around housing affordability, because as the point that you've 0:15:48.520 --> 0:15:50.840 made many times before is the idea with the FED 0:15:50.920 --> 0:15:53.240 raising rates is things do get more expensive, so demand 0:15:53.280 --> 0:15:53.680 goes down. 0:15:55.120 --> 0:15:58.280 Well, that's the problem here is we're in a different 0:15:58.360 --> 0:16:02.240 environment with housing than we've been in that anybody could remember. 0:16:02.280 --> 0:16:05.280 Because rates got so low, a lot of people out there, 0:16:05.320 --> 0:16:07.640 I think something like forty to fifty percent have rates 0:16:07.760 --> 0:16:10.960 under four percent, and right now we're over seven percent. 0:16:11.040 --> 0:16:13.240 So nobody wants to sell their house because they don't 0:16:13.240 --> 0:16:16.080 want to have to buy a more expensive mortgage. It 0:16:16.160 --> 0:16:18.920 was different if you were selling a seven percent mortgage 0:16:18.920 --> 0:16:21.600 and you're looking at a six or an eight percent mortgage. 0:16:21.600 --> 0:16:23.880 It's not that much different, But now it would be 0:16:23.960 --> 0:16:27.160 a huge difference in monthly payments. So everybody's just sitting there. 0:16:27.240 --> 0:16:30.560 There's no inventory on the market of existing homes. There 0:16:30.600 --> 0:16:33.720 aren't enough new homes being built so the price goes 0:16:33.800 --> 0:16:36.920 up simply supply and demand. They need to get interest 0:16:37.000 --> 0:16:40.520 rates down, mortgage rates down. Then maybe pent up demand 0:16:40.560 --> 0:16:43.680 to move will take over and we'll see some additional 0:16:44.080 --> 0:16:46.240 inventory come on the market. But this may be a 0:16:46.280 --> 0:16:50.920 one time significant jump in home prices that doesn't go away, Hey, Mike. 0:16:51.000 --> 0:16:53.040 Theoretically, at least, the FED is not supposed to be 0:16:53.040 --> 0:16:55.400 looking at the stock market or stock prices. But one 0:16:55.440 --> 0:16:58.600 stock that's really tough to not watch is in Nvidia, 0:16:58.680 --> 0:17:01.240 and of course for that AI play. You know, a 0:17:01.280 --> 0:17:03.160 lot of people are thinking that AI is going to 0:17:03.240 --> 0:17:06.639 juice the economy in a massive, massive way. You know, 0:17:06.680 --> 0:17:09.399 if not this year or a couple of years. How 0:17:09.480 --> 0:17:11.720 much did Fetcher J. Powell speak about AI and the 0:17:11.760 --> 0:17:13.880 possible influence on the economy. 0:17:15.680 --> 0:17:18.280 Not very much. He was starting to get asked about 0:17:18.280 --> 0:17:20.320 it when the questionnaire ran out of time, and they 0:17:20.320 --> 0:17:22.760 really didn't come back to it all that much. The 0:17:22.800 --> 0:17:26.120 fence position is, it seems to be something that will 0:17:26.119 --> 0:17:28.200 add to productivity, but we're going to have to watch 0:17:28.240 --> 0:17:30.920 it and make sure and see where the productivity comes 0:17:30.920 --> 0:17:35.240 from and what downrange impacts that has, who loses jobs, 0:17:35.240 --> 0:17:37.760 who gets jobs, That sort of thing they're not really 0:17:37.880 --> 0:17:40.240 ready to comment on that. There was a big conference 0:17:40.280 --> 0:17:43.320 on Friday of FED officials in New York City and 0:17:43.359 --> 0:17:45.200 that was one of the major topics, but it didn't 0:17:45.240 --> 0:17:47.560 come up as much as you might have thought today 0:17:48.000 --> 0:17:48.840 on Capitol Hill. 0:17:48.920 --> 0:17:49.560 Maybe tomorrow. 0:17:49.600 --> 0:17:52.080 One of the few people who aren't just talking about AI. Hey, Mike, 0:17:52.200 --> 0:17:54.359 just real quickly thirty seconds. One thing that struck me 0:17:54.520 --> 0:17:57.040 is Fetchaer J. Powell saying, the pandemic still writing the 0:17:57.080 --> 0:17:59.600 story of our economy right now, and we should be 0:17:59.640 --> 0:18:03.000 prepared to be surprised with the next chapter. A reminder 0:18:03.000 --> 0:18:04.760 that we still don't know how this all ends. 0:18:06.359 --> 0:18:08.040 We don't, and if you keep up with some of 0:18:08.040 --> 0:18:11.200 the medical literature, the doctors are all warning it's still 0:18:11.200 --> 0:18:14.600 out there. There's still mutations and we have to be careful. 0:18:15.560 --> 0:18:21.840 We've also changed our inventory systems, and the supply chains 0:18:21.880 --> 0:18:25.000 that we have have been modified, but have they been 0:18:25.080 --> 0:18:27.640 modified enough for the next occurrence. Those are the kind 0:18:27.680 --> 0:18:29.120 of things that FED has to worry about. 0:18:29.200 --> 0:18:29.400 YEP. 0:18:29.440 --> 0:18:31.359 It's why we're data dependant and just kind of finding 0:18:31.400 --> 0:18:33.359 our way through. Hey, guys, thank you so much. A 0:18:33.359 --> 0:18:36.920 lot of news obviously on this Wednesday, great breakdown fetcher J. 0:18:37.080 --> 0:18:40.120 Powell his testimony first of two days, and of course 0:18:40.160 --> 0:18:42.520 the market reaction are thanks to our Bloomberg News International 0:18:42.520 --> 0:18:46.040 Economics and Policy correspondent Michael McKee and DC and Bloomberg 0:18:46.119 --> 0:18:49.119 News Markets reporter Abigail Doolittle write in studio, We're coming 0:18:49.160 --> 0:18:50.160 back in just a moment. 0:18:51.359 --> 0:18:54.879 You're listening to the Bloomberg Business Week podcast. Catch us 0:18:54.920 --> 0:18:58.160 Live weekday afternoons from two to five pm Eastern Listen 0:18:58.200 --> 0:19:01.280