WEBVTT - Instant Reaction: Jay Powell on the Fed Decision 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.200 --> 0:00:13.840 This is a breaking news update from Bloomberg, Instant reaction 0:00:14.120 --> 0:00:17.959 and analysis from our three thousand journalists and analysts around 0:00:17.960 --> 0:00:22.840 the world. Welcome to the program. Equities recovering. There was 0:00:22.840 --> 0:00:25.400 a drop off as soon as Chairman Power started to speak. 0:00:25.520 --> 0:00:27.960 We're back to about negative zero point two percent on 0:00:28.000 --> 0:00:29.880 the S and P, the bigger losses on the Russell, 0:00:29.920 --> 0:00:32.159 the small camps down by zero point eight in the 0:00:32.159 --> 0:00:34.080 bond market off the back of these comments from Chairman 0:00:34.159 --> 0:00:36.360 pow Bonyota at the front end of the curve by 0:00:36.680 --> 0:00:39.680 nine to ten basis points, a twenty five basis point 0:00:39.680 --> 0:00:43.080 reduction from the Federal Reserve two way descent, the limited 0:00:43.120 --> 0:00:46.000 ability to guide from here and these comments from the 0:00:46.080 --> 0:00:48.520 Chairman of the Federal Reserve take a listen. 0:00:49.840 --> 0:00:52.360 A further reduction to policy. Read of December meeting is 0:00:52.400 --> 0:00:54.720 not a foregone conclusion yet a time when we have 0:00:54.880 --> 0:00:59.080 tension between our two goals. We have, you know, strong 0:00:59.200 --> 0:01:02.240 views across us the committee, and as I mentioned, there 0:01:02.240 --> 0:01:05.640 were strongly different views today and the takeaway from that 0:01:05.800 --> 0:01:08.640 is that we haven't made a decision about December, and 0:01:08.720 --> 0:01:10.080 you know we're going to be looking at the data 0:01:10.120 --> 0:01:12.760 that we have how that affects the outlook and the 0:01:12.760 --> 0:01:15.600 balance of risks. And I'll just say. 0:01:15.400 --> 0:01:18.720 That a December rite cut is far from a folk 0:01:18.800 --> 0:01:22.479 on conclusion. That was a prepared remark. It was scripted TK. 0:01:22.680 --> 0:01:23.959 It was heavy with intense. 0:01:24.040 --> 0:01:25.920 I love when they looked down at the script. I 0:01:25.920 --> 0:01:28.320 mean you wonder what percentage of the press conferences. 0:01:28.520 --> 0:01:31.840 Thanks, It gave you extra menic that would be intent 0:01:31.959 --> 0:01:34.720 to come into this room and sound everybody, including wool Street. 0:01:35.040 --> 0:01:36.480 We're not making a cool come down. 0:01:36.640 --> 0:01:38.680 We're way down. And when we get the tourists this lock, 0:01:38.760 --> 0:01:40.840 I want to really dive into that. I need to 0:01:40.840 --> 0:01:44.240 frame this, Johnathan. It's so important. We've had this spectacular 0:01:44.360 --> 0:01:46.880 move lower in the ten year yield down to three 0:01:46.920 --> 0:01:50.280 point nine whatever. Oh mg, we've come back four point 0:01:50.400 --> 0:01:53.480 zero five percent at seven eight beeps move. It's only 0:01:53.640 --> 0:02:00.920 center tendency on two standard deviations were by no means price. Rather, 0:02:01.200 --> 0:02:03.960 price has not cratered in the last twenty minutes. 0:02:04.040 --> 0:02:06.800 Low endered arrange for years still type with you. Bond 0:02:06.840 --> 0:02:09.680 market's been super well behaved. When the FED last mat 0:02:09.840 --> 0:02:12.519 back in September twos we're near three fifty tens to 0:02:12.520 --> 0:02:15.240 were near four percent right now, TK twos near three 0:02:15.360 --> 0:02:16.960 sixty tens near four percent. 0:02:17.040 --> 0:02:19.320 There's gonna be a lot of hyperventilation about this tomorrow. 0:02:19.360 --> 0:02:21.679 I'm also looking at the currency market, which I think 0:02:21.800 --> 0:02:25.520 is extraordinary into the Trump g meeting, and you know, 0:02:25.680 --> 0:02:27.520 it's a side story. I get it. It's not the 0:02:27.560 --> 0:02:31.200 Fed decides, it's maybe the president's decides on trade. But 0:02:31.280 --> 0:02:33.639 it's a backstory to this. It will be interesting in 0:02:33.680 --> 0:02:34.600 the next couple days. 0:02:34.600 --> 0:02:38.080 Got a strength this afternoon euro dollar one fifteen eighty two, 0:02:38.160 --> 0:02:41.400 euro dollar down by zero point six percent. TK mentioned 0:02:41.440 --> 0:02:43.800 it Tilston's block of Apollo with us around the table, Tilston, 0:02:43.840 --> 0:02:46.040 good afternoon, going to see you. What's the big takeaway 0:02:46.120 --> 0:02:47.480 for you from that, Well. 0:02:47.360 --> 0:02:49.480 That they do have clarity on the CPI on the 0:02:49.480 --> 0:02:52.240 infliction side, but there was a lot of questions about 0:02:52.240 --> 0:02:54.520 the level market. And it was very clear that he 0:02:54.560 --> 0:02:58.600 came into this saying the legal market is still chugging along, 0:02:58.720 --> 0:03:02.560 moving sideways, slightly cooling, and he didn't mention any of 0:03:02.560 --> 0:03:06.760 the private sector indicators. So he did basically say, we 0:03:06.840 --> 0:03:09.320 don't quite know exactly what's happening in label market, but 0:03:09.360 --> 0:03:11.400 we still feel quite good about it. So that's why 0:03:11.480 --> 0:03:13.680 he came to the conclusion inflation is too high. The 0:03:13.760 --> 0:03:16.480 label market is still okay. Therefore, there is no foregone 0:03:16.480 --> 0:03:17.640 conclusion about December. 0:03:17.720 --> 0:03:20.240 How difficult is it to carry on kind of interest rates? 0:03:20.600 --> 0:03:21.480 It is very. 0:03:21.280 --> 0:03:23.639 Difficult because the label market does have a number of 0:03:23.680 --> 0:03:26.200 indicators that are very important for this discussion. There is 0:03:26.240 --> 0:03:29.320 of course ADP, which we just got and thankfully now 0:03:29.320 --> 0:03:32.079 it's weekly. If you just think about the number fourteen 0:03:32.120 --> 0:03:35.200 thousand was the average weekly number for the last four weeks. 0:03:35.360 --> 0:03:37.720 If you multiply that by FOAR, you get some estimate 0:03:37.800 --> 0:03:39.880 of what that means on a monthly basis. That means 0:03:39.880 --> 0:03:41.800 that monthly job growth at the moment is in round 0:03:41.880 --> 0:03:44.680 numbers around fifty thousand. We just got a FED paper 0:03:44.720 --> 0:03:46.960 a few weeks ago saying that the new equilibrium rate 0:03:47.000 --> 0:03:49.960 for nonfound pay roads is thirty thousand. So by that measure, 0:03:50.240 --> 0:03:52.880 the label market is actually strong. You know, the words 0:03:52.960 --> 0:03:55.680 job growth is stronger than what the FED itself thinks 0:03:55.680 --> 0:03:57.640 that it should be in the long run, because fifty 0:03:57.920 --> 0:04:00.600 is higher than thirty. And the conclusion therefore, now you 0:04:00.680 --> 0:04:02.880 suddenly have that both the label marget is actually doing 0:04:03.040 --> 0:04:05.400 a little bit better than expected, and inflation is still 0:04:05.400 --> 0:04:07.800 a three, which of course makes it very difficult for 0:04:07.840 --> 0:04:09.920 them to begin cutting again in December. 0:04:09.960 --> 0:04:11.800 You let me follow up on that though. Is that 0:04:11.840 --> 0:04:16.479 politically acceptable to have a mid one hundred thousand number 0:04:16.560 --> 0:04:20.640 thirty forty fifty thousand. There's no way that plays in Washington. 0:04:21.200 --> 0:04:23.560 Well, at least the Dallas Fed who produced the number 0:04:23.720 --> 0:04:25.440 had some very good arguments for that. There were two 0:04:25.480 --> 0:04:28.080 reasons why they Equilibri and RADA gone down from two 0:04:28.120 --> 0:04:31.120 hundred thousand last year to only thirty thousand today, which 0:04:31.279 --> 0:04:34.360 was immigration has been slowing down significantly and the demographic 0:04:34.440 --> 0:04:36.440 hit wins also weighing on the road. 0:04:36.520 --> 0:04:38.720 This is so important with your heritage. I think it 0:04:38.760 --> 0:04:41.520 really works out. What is the level or the new 0:04:41.640 --> 0:04:45.760 new of their ex post right now? To me, they're 0:04:45.800 --> 0:04:49.719 almost redefining away. Did you hear forward guidance in the 0:04:49.760 --> 0:04:52.440 press conference? I don't think what, God, I'll take that. 0:04:53.560 --> 0:04:57.400 Maybe backward guidance is the new phrase. Paint the character 0:04:57.880 --> 0:05:01.919 doctor slock of our X post nature now. 0:05:01.920 --> 0:05:03.919 Well, the challenge also is not only did they not 0:05:03.960 --> 0:05:06.159 only mention forward guidance, but also he didn't talk about 0:05:06.240 --> 0:05:08.840 data dependent because there is not much data. And if 0:05:08.880 --> 0:05:10.600 you say data dependent, that means that they're putting a 0:05:10.600 --> 0:05:12.760 lot of data on the private sector data. And he 0:05:12.800 --> 0:05:15.159 didn't mention some of the private sector data. That asking 0:05:15.279 --> 0:05:17.279 is very important for the label market, not only ADP. 0:05:17.800 --> 0:05:20.000 That's also the of course challenge are great and Christmas 0:05:20.080 --> 0:05:22.880 job cut announcements. There's also a new data from macro 0:05:23.000 --> 0:05:23.960 itch that also. 0:05:23.800 --> 0:05:25.760 Looks like you love ism. 0:05:26.080 --> 0:05:28.200 There is also the ism data that it still says 0:05:28.240 --> 0:05:30.440 that the label market is okay. There's also link up 0:05:30.560 --> 0:05:34.080 job openings. There's also indeed job openings. There's also paychecks 0:05:34.120 --> 0:05:37.280 which is also looking at employment. All these indicators combined 0:05:37.560 --> 0:05:39.760 still tell a story of the label market actually still 0:05:39.800 --> 0:05:41.840 hanging in there. So it's not the case that the 0:05:41.920 --> 0:05:44.520 label market is falling out of bed. It's still the 0:05:44.560 --> 0:05:46.919 case that the label market is okay. And combined with 0:05:47.000 --> 0:05:50.440 inflation at three, remember the FETs target is two, so 0:05:50.520 --> 0:05:53.440 inflation is still way above the FET target, there is 0:05:53.560 --> 0:05:55.720 just not room to cut rates more. In particular, not 0:05:55.839 --> 0:05:57.800 as he also talked about, if you begin to worry 0:05:57.800 --> 0:06:00.600 about if inflation expectations begin to become interan. 0:06:00.440 --> 0:06:02.520 Tell us them what you're saying, begs an obvious question. 0:06:02.839 --> 0:06:04.719 What I'm hearing from you is we've seen a step 0:06:04.760 --> 0:06:07.560 down in payrolls growth. We haven't seen an increase in 0:06:07.640 --> 0:06:11.440 labor market slack. Inflation is running at three unemployment still 0:06:11.480 --> 0:06:14.359 close to four GDPs tracking around three percent at the 0:06:14.360 --> 0:06:17.160 moment in this country. If that's the case, why did 0:06:17.160 --> 0:06:18.400 they just cut interest rates? 0:06:18.760 --> 0:06:22.160 Well, his argument was also very very carefully articulated, namely 0:06:22.240 --> 0:06:24.200 that we are trying to get closer to our star. 0:06:24.600 --> 0:06:28.360 So it's back to this excuse me, peculiar interest in 0:06:28.520 --> 0:06:30.919 that there is some very academic calman field that you 0:06:30.960 --> 0:06:33.040 can do and figure out whereas the level of interest 0:06:33.120 --> 0:06:35.960 rates where we should be, and say this was recalibrating 0:06:36.000 --> 0:06:38.520 monetary policy to that level. It really is a very 0:06:38.640 --> 0:06:42.240 excuse me, unwaving academic discussion relative to what the actual 0:06:42.320 --> 0:06:44.080 data that you just listed. And if you add also 0:06:44.120 --> 0:06:47.719 the Elena FLGDP now almost four percent for the last quarter, 0:06:48.040 --> 0:06:50.120 where are we in terms of thinking about this slowdown? 0:06:50.200 --> 0:06:52.240 There is just not much sign of a slowdown when 0:06:52.240 --> 0:06:53.240 it comes to the real. 0:06:53.120 --> 0:06:55.320 Please forgive the snark, but the way they talk about 0:06:55.320 --> 0:06:57.840 things like neutral in our star, do these lights start 0:06:57.880 --> 0:07:00.480 flashing off in the FMC room and the order him 0:07:00.480 --> 0:07:02.400 at the federal surf. You've hit it. Well done, guys, 0:07:02.440 --> 0:07:04.719 stop right there. What are they actually looking at to 0:07:04.760 --> 0:07:05.600 guide that decision? 0:07:05.640 --> 0:07:09.240 Well, I do think that there is an intellectual camaraderie 0:07:09.320 --> 0:07:11.520 around our styles saying yeah, I know what you mean 0:07:11.560 --> 0:07:13.160 when you talk about our style, and of course we've 0:07:13.160 --> 0:07:15.080 got to get down to our style. But the interesting 0:07:15.080 --> 0:07:16.880 thing of bottles with also this is that if you 0:07:17.000 --> 0:07:19.520 really are saying at the Dallas fit that there is 0:07:19.560 --> 0:07:22.200 now a thirty thousand non found payroll level, that actually 0:07:22.280 --> 0:07:23.520 means that USTA it's actually low. 0:07:23.560 --> 0:07:27.800 One j Greg Hip has been wonderful about this. We're 0:07:27.840 --> 0:07:30.840 in God's name. Is the output gap right now with 0:07:31.120 --> 0:07:34.640 meta here in twenty five thirty five minutes at Google? 0:07:35.680 --> 0:07:40.400 What we see tomorrow with Apple? Microsoft? The speech that 0:07:40.480 --> 0:07:42.640 in video gave the other day, Are you kidding me? 0:07:42.720 --> 0:07:45.800 We have no clue for the American output gap? 0:07:45.960 --> 0:07:48.160 Well, and that's why from a monetary policy perspective, it 0:07:48.240 --> 0:07:51.000 is really interesting because if you look at the Magnificent seven, 0:07:51.280 --> 0:07:53.760 they all finance by equity prices being high. They're not 0:07:53.800 --> 0:07:56.040 sensitive to the fitfunds rate, whereas the S and P 0:07:56.120 --> 0:07:59.120 four ninety three is very sensitive to the fitfunds rate 0:07:59.200 --> 0:07:59.520 is a. 0:07:59.400 --> 0:08:02.240 Poll of globle management. Part of the magnificence of it. 0:08:02.760 --> 0:08:05.280 They should be, they should be. Mike McKay was in 0:08:05.320 --> 0:08:07.800 the room. He was in the news conference, and Mike McKay, 0:08:07.840 --> 0:08:11.400 thank you for asking about financial conditions and financial markets. 0:08:11.400 --> 0:08:13.480 Mike McKay, what was the takeaway for you? Set? 0:08:14.600 --> 0:08:16.560 I think the absolute takeaway is that the FED is 0:08:16.560 --> 0:08:19.080 probably going to pause in December unless there's some data 0:08:19.120 --> 0:08:23.520 that forces them to do another cut. There was a 0:08:23.600 --> 0:08:27.640 sort of almost Freudian slipped by the chairman close to 0:08:27.680 --> 0:08:30.480 the end of the news conference when he said if 0:08:30.520 --> 0:08:33.320 we cut again, and then he quickly. 0:08:33.000 --> 0:08:35.240 Backcrapped and said we will at some point. 0:08:35.320 --> 0:08:37.959 But I think that the mood of the committee now 0:08:38.040 --> 0:08:40.760 is we've done enough. Let's sit back and see what happens, 0:08:40.840 --> 0:08:43.960 especially without any data, and given the fact that inflation 0:08:44.160 --> 0:08:47.040 is still rising. You know that at the beginning when 0:08:47.080 --> 0:08:50.280 he was giving us the rundown of the economy, he said, 0:08:50.480 --> 0:08:54.760 extrapolating the CPI into PCEE suggests that it rose at 0:08:54.760 --> 0:08:57.320 two point eight percent. Well, it was two point seven 0:08:57.360 --> 0:09:00.320 percent in the prior reading, so it just showed you 0:09:00.360 --> 0:09:03.720 that inflation is still rising at a time when he 0:09:03.800 --> 0:09:06.520 had a hard time making a case that unemployment is 0:09:06.559 --> 0:09:10.400 a real problem. So I think the takeaway is don't 0:09:10.440 --> 0:09:13.800 expect much from the Fed in December unless the government 0:09:13.840 --> 0:09:15.640 gets back to work and we get some data that 0:09:15.760 --> 0:09:16.440 changed their mind. 0:09:16.559 --> 0:09:20.120 Michael McKay, you have covered the Federals for decades. Volka 0:09:20.200 --> 0:09:24.640 through green Span, Bananke, Yellen, the likes of Cham and 0:09:24.679 --> 0:09:29.400 Pow Mike is the era of almighty Fed, Chad dominance 0:09:29.400 --> 0:09:31.480 and power on the committze. Has it come to a close? 0:09:32.760 --> 0:09:34.520 Well, I think that's another way of saying that I'm 0:09:34.559 --> 0:09:38.480 old John, But I don't think it's come to a close. 0:09:38.600 --> 0:09:41.360 It's just changed a lot. When you had Paul Vulker, 0:09:41.400 --> 0:09:43.640 he was very firm in what he wanted to do, 0:09:43.880 --> 0:09:45.880 but he came in during a crisis, so he was 0:09:45.960 --> 0:09:48.719 able to marshal the troops to do that, and then 0:09:48.720 --> 0:09:51.560 they rebelled against him. Green Span did it differently. 0:09:51.720 --> 0:09:53.400 He ran the FED as. 0:09:53.240 --> 0:09:56.160 If it were his own and they did what basically 0:09:56.520 --> 0:09:59.280 he wanted them to do. But starting with Ben Bernanki 0:09:59.320 --> 0:10:01.760 and following with Jennet Yell and j Pollo, it's become 0:10:01.840 --> 0:10:05.280 much more collegial, and the chair now is more in 0:10:05.360 --> 0:10:08.440 a situation where they are taking the temperature of everyone 0:10:08.520 --> 0:10:11.479 there and trying to figure out what the best consensus 0:10:11.520 --> 0:10:16.200 move would be. And I suspect that that's what members 0:10:16.240 --> 0:10:18.600 of the Board and the Open Market Committee would like 0:10:18.679 --> 0:10:22.320 to see happen going forward. Don't know, given the names 0:10:22.320 --> 0:10:25.800 of various people who are among the finalists to replace J. Powell, 0:10:26.080 --> 0:10:28.360 whether we would have an attempt to go back to 0:10:28.480 --> 0:10:32.439 this strong chairman view or whether we would still continue 0:10:32.480 --> 0:10:33.360 with consensus. 0:10:33.600 --> 0:10:36.439 Can they wrestle control from that committee? Thank you so 0:10:36.640 --> 0:10:39.319 fantastic work. You know. Oh you're brilliant, Mike McKay that 0:10:39.640 --> 0:10:42.320 in Washington, d C appreciate it. You're brilliant too. 0:10:42.400 --> 0:10:42.679 TK. 0:10:42.760 --> 0:10:44.280 You know this love come on, this is far enough 0:10:44.320 --> 0:10:46.480 love to go. But yes, it might be a little 0:10:46.480 --> 0:10:49.200 bit more than me. Tilston, you're still with us Tauson's 0:10:49.280 --> 0:10:50.800 luck of Apollo. By the way, if you're just joining 0:10:50.800 --> 0:10:53.080 guest Tustin, Bob Michael of JP. Malcolm is on the 0:10:53.080 --> 0:10:55.800 program with me and TK earlier on this Southternoon and 0:10:55.880 --> 0:10:58.160 he made the case after this decision dropped and we 0:10:58.200 --> 0:11:01.120 saw the two way descent that the Chairlesing Grip of 0:11:01.160 --> 0:11:03.719 this committee. What's your tak on that, Well, it. 0:11:03.760 --> 0:11:06.320 Is a very unusual situation to have someone in the 0:11:06.320 --> 0:11:08.439 committee the things that raids should have been on hold, 0:11:08.480 --> 0:11:11.280 meaning that could other direction than other members here in 0:11:11.280 --> 0:11:13.280 this case Deve Miran who thought that she should have 0:11:13.280 --> 0:11:16.120 been cutting. So it is a very challenging environment. Of course, 0:11:16.120 --> 0:11:18.200 Well whoever is the FET chair and whoever walks in 0:11:18.360 --> 0:11:20.559 to be the next FET chair to try to get 0:11:20.720 --> 0:11:23.679 a consensus on the committee. There is so much work 0:11:23.800 --> 0:11:26.400 that goes into from the chair whoever it is, to 0:11:26.440 --> 0:11:29.440 try to get a decision that is unanimous and that 0:11:29.559 --> 0:11:32.000 is a common ground and saying this is the way 0:11:32.000 --> 0:11:34.839 we're walking, and this is the direction we're traveling. Now 0:11:34.880 --> 0:11:37.600 that there's more uncertainty about this. One reason why raids 0:11:37.600 --> 0:11:40.440 are going up is also because well maybe now Smith 0:11:40.559 --> 0:11:42.080 is not the only dest and maybe there are others 0:11:42.080 --> 0:11:43.720 that come around next time and say, well maybe we 0:11:43.720 --> 0:11:45.920 shouldn't be cutting, or maybe there might maybe someone said 0:11:45.920 --> 0:11:47.760 maybe we should be hiking. So that's why I do 0:11:47.840 --> 0:11:49.600 think there was already a dot in the dot pat 0:11:49.679 --> 0:11:51.360 last time that said that Rich should be going higher 0:11:51.360 --> 0:11:53.800 in December. I think that now We know that that 0:11:53.960 --> 0:11:55.800 was Smid from the Kansas City Fed. So yes, it 0:11:55.840 --> 0:11:59.000 is getting becoming a much more challenging exercise. Normally we 0:11:59.120 --> 0:12:01.959 just talk about inflation unemployment, but this is no longer 0:12:02.040 --> 0:12:02.800 just about invasions. 0:12:03.000 --> 0:12:04.640 The heart of this we're gonna get the Rosenberg. But 0:12:04.679 --> 0:12:07.360 the heart of this, John is he's lane duck. That's 0:12:07.440 --> 0:12:11.920 all there is to it. Great, it's it's October. He's 0:12:11.960 --> 0:12:13.719 supposed to begin to be lame duck. 0:12:13.840 --> 0:12:16.520 So let's fast forward to December. Just think about for 0:12:16.559 --> 0:12:19.840 a moment, how much honey message put out forecasts probably 0:12:19.880 --> 0:12:22.200 know who the new FED chair is? How much past 0:12:22.280 --> 0:12:24.480 chair and power? Can I have a December meeting knowing 0:12:24.520 --> 0:12:27.679 who is replacement is potentially once we come around to May, 0:12:28.080 --> 0:12:28.640 I agree. 0:12:28.679 --> 0:12:31.120 And of course, as we've said three or four times today, 0:12:32.040 --> 0:12:34.440 you know, not me, but others are saying the Secretary 0:12:34.480 --> 0:12:36.160 of Treasury could be involved as well. 0:12:36.240 --> 0:12:39.280 Jeff Rosenberg of Black Rocks Running, Jeff, welcome to the program. 0:12:39.320 --> 0:12:41.559 I won't mention Rick, We'll leave that to one side. 0:12:41.559 --> 0:12:44.000 We'll keep you in you know a company. Why not 0:12:44.200 --> 0:12:46.520 keep you out of trouble? What about it? No, Jeff, seriously, 0:12:46.760 --> 0:12:49.400 Jeff Rosenberg number one take away from that decision this 0:12:49.480 --> 0:12:51.000 afternoon and that news conference too. 0:12:52.480 --> 0:12:55.320 Yeah, I mean the number one takeaway is the is 0:12:55.360 --> 0:12:58.520 the comments on December, the comment on slow down when 0:12:58.520 --> 0:13:00.920 you're driving in the fog. You know, you know, it's 0:13:00.920 --> 0:13:02.920 interesting you guys were picking up on him reading in 0:13:02.960 --> 0:13:06.520 the notes and whether that was very much pre planned. 0:13:06.559 --> 0:13:10.760 I think what you see here is a repricing of 0:13:11.040 --> 0:13:13.959 market pricing to December. You know, going into this meeting, 0:13:14.000 --> 0:13:16.760 it was basically a foregone conclusion. It was one hundred percent. 0:13:17.000 --> 0:13:18.560 When you come out of the meeting and you see 0:13:18.559 --> 0:13:21.959 the descents on both sides and you recall the division 0:13:22.160 --> 0:13:25.120 within the committee, you could say that that is an 0:13:25.200 --> 0:13:30.600 appropriate repricing to the really realization that there's more two 0:13:30.600 --> 0:13:33.719 sided risks to the Fed's decision than the market was 0:13:33.760 --> 0:13:37.599 pricing in it. And perhaps that comment was engineered to 0:13:38.200 --> 0:13:40.679 kind of push that forward. Maybe it wasn't, but the 0:13:40.720 --> 0:13:42.959 reality is that's what the market reaction is, and you 0:13:43.000 --> 0:13:45.439 can see that that's, you know, a very reasonable reaction 0:13:45.600 --> 0:13:47.400 to what we saw from the committee today. 0:13:47.480 --> 0:13:49.800 Owned an audible here, we got Tourston Slock and Jeffrey 0:13:49.880 --> 0:13:52.000 Rosenberg with us, and that is good and wonderful with 0:13:52.120 --> 0:13:55.040 their financial and economic Now it's Turston. You have a 0:13:55.160 --> 0:14:00.440 blistering sentence in your note of your concerns over private credit. 0:14:00.480 --> 0:14:03.560 I would suggest for Global Wall Street into the next 0:14:03.600 --> 0:14:07.160 FED meeting and beyond, there's going to be further challenges 0:14:07.200 --> 0:14:11.080 here about the opaqueness in private credit. With you, with 0:14:11.200 --> 0:14:15.319 all of your resources that apollow global management. How blind 0:14:15.320 --> 0:14:17.840 are we to where we're heading in the pricing of 0:14:17.880 --> 0:14:18.560 private credit? 0:14:18.760 --> 0:14:22.320 That discussion is totally misguided. In public markets, I can 0:14:22.360 --> 0:14:24.880 get something that's safe, I can get something that's risky. 0:14:25.120 --> 0:14:27.240 In private markets, I can get something that's safe, I 0:14:27.240 --> 0:14:30.040 can get something that's risky. So there is no difference. 0:14:30.320 --> 0:14:33.040 It really is all about do you want a risky investment? 0:14:33.120 --> 0:14:35.360 Do you want a safe investment? Something in the public 0:14:35.360 --> 0:14:38.400 market is investment grade, something that private market is investment great. 0:14:38.600 --> 0:14:41.520 So this discussion around what's happening in the last few weeks, yes, 0:14:41.600 --> 0:14:44.080 there might be a few cockroaches in the sense that 0:14:44.080 --> 0:14:46.840 there have certainly been some things that have been going on, 0:14:47.040 --> 0:14:50.640 but interestingly enough, those were basically all broad the syndicated loans, 0:14:50.960 --> 0:14:53.040 meaning this were things that we're trading tick by tick, 0:14:53.200 --> 0:14:56.120 minute by minute in the public market. So why is 0:14:56.160 --> 0:14:58.680 the discussion about what's happening in private credit relevant for this? 0:14:59.000 --> 0:15:01.880 These were cockroach in the public market that showed up 0:15:02.080 --> 0:15:03.480 in public maalge Jeff Rosenberg. 0:15:03.520 --> 0:15:05.600 Will this effect the Fed? I mean it's just as 0:15:05.600 --> 0:15:08.160 simple as that. If we have Wall Street instability and 0:15:08.240 --> 0:15:11.080 fear about this with all your work at Carnegie Mellon, 0:15:11.360 --> 0:15:13.520 can they ignore those cockroaches? 0:15:15.560 --> 0:15:17.840 Well, it gets back to some of the earlier comments 0:15:17.840 --> 0:15:21.320 about you know, the questions that he got on financial conditions, 0:15:21.560 --> 0:15:24.160 and you know, to what extent does financial conditions sort 0:15:24.160 --> 0:15:26.440 of factor into the Fed's decision? And I think what 0:15:26.480 --> 0:15:29.600 we see as an asymmetry here that financial conditions aren't 0:15:29.640 --> 0:15:34.359 really factoring into their decisions to cut rates here financial conditions. 0:15:34.560 --> 0:15:38.000 You saw him parry the questions around interest rates and 0:15:38.080 --> 0:15:41.640 AI basically you know, brushing them aside, saying AI financing 0:15:41.680 --> 0:15:43.960 has nothing to do with rates, which is true on 0:15:44.040 --> 0:15:46.160 a first order effect, but not necessarily on the second 0:15:46.240 --> 0:15:49.920 order effect, to the extent that interest rates broadly are 0:15:50.000 --> 0:15:54.280 creating very easy financial conditions, and they're contributing to the 0:15:54.600 --> 0:15:58.840 increase in financial conditions easing especially that we saw since 0:15:58.880 --> 0:16:02.120 the FED. It did you know, to the labor market 0:16:02.200 --> 0:16:05.400 slow down that took us from you know, measurements that 0:16:05.440 --> 0:16:08.640 were sort of more optimistic to measurements that were kind 0:16:08.640 --> 0:16:10.880 of more on the euphoria side. But I think the 0:16:10.880 --> 0:16:14.560 asymmetry here is that the FED will respond to tightening 0:16:14.640 --> 0:16:18.600 financial conditions after they're realized to the earlier you know, 0:16:18.760 --> 0:16:22.080 interchange on you know, X post and data dependence. This 0:16:22.120 --> 0:16:24.600 is a FED that will be reactive. And I think 0:16:24.600 --> 0:16:26.920 what's very clear is the Fed's not really paying a 0:16:26.960 --> 0:16:31.080 lot of attentions to financial conditions going into this cycle, 0:16:31.360 --> 0:16:34.440 but they will, as they have been, you know, ever 0:16:34.520 --> 0:16:40.360 since the GSC GF GF GFC, that they'll be very 0:16:40.440 --> 0:16:43.920 responsive financial conditions for things that have nothing to do 0:16:44.040 --> 0:16:47.440 with the FED end up tightening, the FED will react 0:16:47.560 --> 0:16:50.160 into that with with with a massive cut in interest 0:16:50.240 --> 0:16:54.800 rates or restoration of zero interest rates, the forward guidance 0:16:54.840 --> 0:16:57.600 that you just talked about, balance sheet, all the tools 0:16:57.640 --> 0:17:01.000 that you know were once thought as kind of you know, 0:17:01.080 --> 0:17:04.240 not normal are part of the normal playbook. But they'll 0:17:04.280 --> 0:17:08.920 be in reaction to something that is outside the Fed's 0:17:09.440 --> 0:17:11.840 control here in a tightening. 0:17:11.520 --> 0:17:13.560 Of financial condition Jeff, is that still a green light 0:17:13.600 --> 0:17:15.800 then a bright green light just a state lung risk, 0:17:16.040 --> 0:17:17.080 state lung aquacies. 0:17:18.800 --> 0:17:23.280 Well, it's a light that says you can't really predict 0:17:23.359 --> 0:17:26.720 that on a directional basis. The FED is supportive here. 0:17:27.040 --> 0:17:27.800 That's part of. 0:17:27.800 --> 0:17:30.280 Again what we saw and kind of the movement in 0:17:30.359 --> 0:17:35.320 the metrics from optimism to euphoria around August September, and 0:17:35.359 --> 0:17:38.840 the Fed's continuing to send that signal with market pricing 0:17:38.880 --> 0:17:42.159 coming down a bit, but basically pricing to normalization of 0:17:42.760 --> 0:17:47.160 three percent and the expectation that under any circumstance where 0:17:47.160 --> 0:17:50.280 the FED is faced with an outsize and you heard 0:17:50.400 --> 0:17:52.919 in that last question right at the end, you know 0:17:53.000 --> 0:17:57.920 the Fed talking about the impact on consumption. This is understated. 0:17:57.920 --> 0:17:59.560 I mean he said it in a very small way, 0:17:59.600 --> 0:18:04.120 but a large shock downward has a significant effect on consumption. 0:18:04.280 --> 0:18:06.720 And what was a little bit understated here is that 0:18:06.760 --> 0:18:10.560 the large increase in the wealth effect has been the 0:18:10.640 --> 0:18:14.480 support for consumption. It is why we're surprisingly strong in 0:18:14.520 --> 0:18:18.040 addition to the lagged implementation and tariff inflation not being 0:18:18.080 --> 0:18:21.919 as worrisome. It was really the surge in the wealth 0:18:21.920 --> 0:18:25.359 effect and consumption that's leading to the upside surprise. But 0:18:25.440 --> 0:18:29.400 that has a double edged sword. To a larger decline, 0:18:29.440 --> 0:18:32.080 and that's I think the concern around financial conditions tightening. 0:18:32.119 --> 0:18:34.439 Jeff, before you go, I promised I wouldn't mentioned Rick, 0:18:34.480 --> 0:18:36.560 but I think it's worth it. You know, I've known 0:18:36.640 --> 0:18:38.600 Rick a long time, You've worked with him a long time. 0:18:38.760 --> 0:18:41.000 Can we just spend a second or something just how 0:18:41.040 --> 0:18:43.639 cool is it that Rick Reader's name is associated with 0:18:43.680 --> 0:18:44.640 the Fetchamp position. 0:18:47.520 --> 0:18:51.199 It is very good for you to talk about that, 0:18:51.280 --> 0:18:54.240 and I look forward to hearing more from you on 0:18:54.280 --> 0:18:54.840 that subject. 0:18:54.920 --> 0:18:57.879 Jonathan Okay, Jeff Rosenberg of Black Rook, you avoid it, Jeff, 0:18:58.080 --> 0:19:01.000 you avoid it. I think it's fantastic to have someone 0:19:01.160 --> 0:19:05.359 like that. Absolutely just makes the process all the more credible, 0:19:05.400 --> 0:19:07.960