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Speaker 1: Risks to the economy are now balanced, Defense says, and

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Speaker 1: they're no longer talking about raising rates, but do not

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Speaker 1: expect cuts soon. No change in rates today, and the

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Speaker 1: statement drops the reference to additional policy firming, now saying quote,

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Speaker 1: in considering any adjustments to the target range, the Committee

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Speaker 1: will carefully assess incoming data, the evolving outlook, and the

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Speaker 1: balance of risks. But before you buy March futures. The

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Speaker 1: statement goes on to say the Committee does not expect

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Speaker 1: it will be appropriate to reduce the target range until

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Speaker 1: it has gained greater confidence that inflation is moving sustainably

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Speaker 1: toward two percent. Official say the economy is solid, job

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Speaker 1: gains remain strong, and the Committee judges that risks to

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Speaker 1: achieving its employment and inflation goals are moving into better balance. Inflation, however,

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Speaker 1: has eased over the past year, but remains abated. This

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Speaker 1: statement says the economic outlook is uncertain and the Committee

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Speaker 1: remains highly attentive to inflation risks. There is no change

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Speaker 1: to balance sheet policy, nor does the statement suggest any

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Speaker 1: changes are imminent. The Fed will keep the sixty billion

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Speaker 1: dollar cap on treasury roll offs and the thirty five

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Speaker 1: billion dollar cap on mortgage bonds. The decision today unanimous.

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Speaker 1: And one other bit of business, the Fed has extended

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Speaker 1: its tight its tighter policies on investment in trading to

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Speaker 1: senior staff and any staff with access to confidential information.

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Speaker 2: My McKeith, thank you, sir. Let's get to the price

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Speaker 2: sanction immediately, look at equities. Equities on the s and

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Speaker 2: P five hundred just to touch lower by almost one

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Speaker 2: percent on the SMP. On the NASTAG we're down by

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Speaker 2: one point four if you just turn to the bond

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Speaker 2: market briefly, yield to a lower by about ten basis

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Speaker 2: points at the front end now four twenty five sixty one.

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Speaker 2: That may face just a little bit so least. So

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Speaker 2: let's go through what we got here. We've dropped the

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Speaker 2: tightening bias, but on a full embrace of the right

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Speaker 2: cut conversation taking place on Wall Street.

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Speaker 3: And then a little bit of appointment clearly that you

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Speaker 3: can see on the front end with people maybe thinking

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Speaker 3: they would lean into a march rate cut, saying not

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Speaker 3: thinking ninety times soon, highly attentive to inflation risks. That

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Speaker 3: focus may be casting a bit of cold water on

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Speaker 3: some of the hopes and dreams.

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Speaker 2: C K down five basis points on the tenure just

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Speaker 2: showed a four percent here at about three ninety eight.

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Speaker 4: Come in a little move here, John and I still

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Speaker 4: say we're radically different from when we were earlier this morning,

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Speaker 4: or even days and days ago. Yes, we've pulled back

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Speaker 4: a little bit. It'll be interesting to see the press conference,

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Speaker 4: to say the least, this is well timed. Joining us

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Speaker 4: now is Richard Clarida. He is with Pimpco, our global

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Speaker 4: economic advisor. He's the former vice chair of the FED

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Speaker 4: and far more associated forever with his Columbia University Richard Clarida.

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Speaker 4: Ethan Harris, student of Columbia ex Bank of America wrote

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Speaker 4: a brilliant piece off his hero at Columbia, Phil Kagan,

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Speaker 4: the other day, and he said, we've blown it on

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Speaker 4: our inflation studies. We've got to get on trend. And

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Speaker 4: for him, the trend is the Dallas trim mean, the

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Speaker 4: Cleveland media and the rest of it. What is a

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Speaker 4: trend right now, Professor Clarita in inflation, Well.

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Speaker 5: Thank you for having me on.

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Speaker 6: Tom a good friend of Ethan, and Phil Kagan was

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Speaker 6: a colleague and a friend for many years. I look

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Speaker 6: at Dallas Fed trimmed mean too. It's running somewhere in

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Speaker 6: the mid twos on an inflation that's down a lot

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Speaker 6: from a couple of years ago, but it's still obviously

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Speaker 6: somewhat above the Fed's long run goal of two percent.

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Speaker 5: But I think that's a good reading right now.

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Speaker 2: Rich when you look at the pushback, and it's such

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Speaker 2: a pushback in this statement, why do you think this

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Speaker 2: Federal Reserve is not quite prepared to fully embrace that

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Speaker 2: ray cut conversation taking place on more straight.

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Speaker 6: Well on this one, John, I I actually agree with him.

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Speaker 6: I myself, looking at the data they're looking at, would

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Speaker 6: have thought March would be too soon. We don't get

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Speaker 6: a lot more data in March than we have today. Moreover,

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Speaker 6: as you've pointed out on airon I've been watching, you know,

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Speaker 6: there is still some upside risk on the inflation picture.

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Speaker 6: So I just think good policy of prudence would call

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Speaker 6: for getting more information. And I applaud what they did

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Speaker 6: in the statement today they did.

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Speaker 5: I don't have it in front of me.

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Speaker 6: I read Mike's account. Looks like there's a lot of

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Speaker 6: red ink in it, and I think that made sense today.

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Speaker 3: Yeah, especially with that particular comment. The committee does not

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Speaker 3: expect it will be appropriate to reduce the target rate

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Speaker 3: until it has gained greater confidence that inflation is moving

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Speaker 3: sustainably toward two percent. I'm wondering, which do you think

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Speaker 3: that the New York Community Bank ORP issue changes the

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Speaker 3: equation even on the margins for the FED? And if

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Speaker 3: you are on the FED, for you.

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Speaker 6: Given what I know right now, Lisa, I would say not.

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Speaker 6: But I do think that the reality is is that

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Speaker 6: you know, we have a number of regional banks in

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Speaker 6: the US, you know, above one hundred billion, but not

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Speaker 6: in that mega category. And the FED FED did what

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Speaker 6: it needed to do last spring, and I have no

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Speaker 6: doubt that they will be there if further is needed.

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Speaker 6: So I'd say right now, this doesn't appear to me

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Speaker 6: to be a stemic. But whenever banking is involved and

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Speaker 6: you see an unexpected loss, it certainly is on their radar,

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Speaker 6: and I'm sure.

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Speaker 2: It is rich as you know, As we know, a

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Speaker 2: lot of thought goes into the language that gets put

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Speaker 2: in this statement that line greater confidence. A lot of

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Speaker 2: people are going to stress test that line greater confidence

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Speaker 2: for the next one month or so. Neil datsra good

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Speaker 2: friend over renaissance, Macro writes in what exactly does greater

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Speaker 2: confidence mean? Can you talk to us about that? Rich?

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Speaker 2: What do you think greater confidence means? And I'm going

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Speaker 2: to ask this question just to wind up TK.

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Speaker 5: Is it one?

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Speaker 2: CPI print? Is it two?

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Speaker 5: Is it three?

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Speaker 7: Rich?

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Speaker 2: What is it?

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Speaker 5: Well?

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Speaker 6: I think you know, at the risk of exaggeration, you

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Speaker 6: might have nineteen opinions on that on the committee.

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Speaker 5: I think the center of gravity though.

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Speaker 6: Look, the price inflation numbers have been moving in a

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Speaker 6: very good direction six months now. Core inflation or Dallas

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Speaker 6: FED measures are definitely close to to percent. But we

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Speaker 6: do have an economy in which wage inflation is running

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Speaker 6: about a point hotter than probably they think would be

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Speaker 6: consistent with the long run goal. So I think implicitly

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Speaker 6: they'll be looking at a number of indicators from the

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Speaker 6: labor market. We got some good news today on ECI,

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Speaker 6: but even with that, ECI is still probably about a

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Speaker 6: point hotter than they would ultimately like to see.

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Speaker 4: Rich Clarida measured, I'm going to associate it with Allan Greenspan.

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Speaker 8: You.

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Speaker 4: Yeah, I got to take it back further, but I'm sorry.

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Speaker 4: We are slaves to measured in our great fear of

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Speaker 4: becoming unanchored. We have regret. We're worried about the Bank

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Speaker 4: of Japan. I believe it was back in the early

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Speaker 4: two thousands. We need to be measured.

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Speaker 7: How do we be.

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Speaker 4: Measured after this pandemic and after this original economics?

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Speaker 6: Not surprisingly good question there, because a measured was used

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Speaker 6: by the Maestro in four to talk about a measured

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Speaker 6: pace of rate increases. But certainly now it may enter

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Speaker 6: the conversation once they start to cut, and I think

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Speaker 6: here you do see the tug of war.

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Speaker 5: Folks look at past history.

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Speaker 6: They see that when the FED starts to cut, it

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Speaker 6: cuts very fast and in big chunks.

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Speaker 5: Oftentimes.

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Speaker 6: Typically if you go back and look Tom in soft

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Speaker 6: landings and what turned out to be soft landings, it

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Speaker 6: looks a lot different, more like two or three cuts

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Speaker 6: seventy five bases points there. So so I think a

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Speaker 6: lot of the measured in this cycle on the down

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Speaker 6: direction is going to depend upon how soft the landing is.

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Speaker 4: You J.

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Speaker 6: Powell thinks the runway for a soft landings in sight,

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Speaker 6: but right now that's a forecast, so it will be

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Speaker 6: data dependent. Sorry that's a cop out, but I do

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Speaker 6: think that it will be data dependent.

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Speaker 3: Can the FED afford to be measured well, I mean,

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Speaker 3: can the FED afford to be measured and start later

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Speaker 3: if we're also bumping up against a political silly season.

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Speaker 3: As Tom would say, this has become something that more

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Speaker 3: and more economists are looking at. Why not start earlier,

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Speaker 3: go more slowly, and be less susceptible to becoming a

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Speaker 3: political football.

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Speaker 5: Great, great point. It is an election year.

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Speaker 6: I noticed historically and you can confirm this on your

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Speaker 6: Bloomberg terminal the FED. Historically, the FAT has moved in

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Speaker 6: election years in both up and down. So I think

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Speaker 6: the Paler FED will do what it needs to do

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Speaker 6: this year in terms of adjusting rates, presumably downward.

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Speaker 5: But I do agree with you Lisa.

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Speaker 6: You know, if you think you're going to cut three times, say,

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Speaker 6: which was what the December SEP was, certainly it would

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Speaker 6: make sense to get that process going, you know, perhaps

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Speaker 6: in the summer and not wait till November.

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Speaker 4: Shall we say to dovetable the academics of Richard Clara

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Speaker 4: joining us now from the Midwest, Diane Swack of Michigan

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Speaker 4: chief economist KPMG, really please to have you here with Diane,

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Speaker 4: let me get away from the monetary mumbo jumbo. Diane,

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Speaker 4: you are expert on the pulse of corporate America on

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Speaker 4: this technology overlay we've witnessed look at the profits of

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Speaker 4: Microsoft yesterday and also on this new change in productivity.

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Speaker 4: Does this Federal Reserve have any understanding of the new

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Speaker 4: productive America?

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Speaker 8: I think they do. I think they're watching it very

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Speaker 8: carefully with the question is is it something that's sustainable?

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Speaker 8: And you know, this is why I agree one hundred

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Speaker 8: percent with rich the measured concept, because I think the

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Speaker 8: markets really want to see much more aggressive rate cuts

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Speaker 8: and the FED. I think they start in May, but

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Speaker 8: I think what's important about it is they start before

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Speaker 8: the second half of the year, before we really get

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Speaker 8: into the summer. And I think that's going to be justifiable.

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Speaker 8: But I really think it's important to understand what's going

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Speaker 8: on in terms of productivity. Growth picked up in part

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Speaker 8: because people are not quitting jobs as much, they're learning

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Speaker 8: the jobs they had. We're also finally leveraging all that

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Speaker 8: technology that we took on as we pivoted online.

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Speaker 5: That's all good news.

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Speaker 8: The question is how sustainable is it? And I think

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Speaker 8: that's something the FED still hasn't figured out. And that's

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Speaker 8: what we're going to see in the minutes. I mean,

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Speaker 8: it's really interesting to me that the December meeting, when

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Speaker 8: Powell came out and had a much more dubbish tone

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Speaker 8: and was pretty excited, and markets got pretty excited off

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Speaker 8: of his comments. The actual minutes to the meeting were that,

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Speaker 8: you know, hey, we're worried inflation rist search of the upside,

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Speaker 8: and so it'll be really interesting to see the minutes

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Speaker 8: off this meeting in terms of how they see the

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Speaker 8: productivity growth continuing in twenty twenty four.

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Speaker 5: And you know, it's a cop o.

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Speaker 8: The FED gets to be able to react and be

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Speaker 8: data dependent, and Rich is absolutely right about that.

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Speaker 5: But that's what they're going to do.

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Speaker 8: They're looking at a meetium ma Beetian basis, and I think,

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Speaker 8: you know, we'll have enough information by May and June

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Speaker 8: to begin those cuts. But I think that measured side

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Speaker 8: of it is also really important, because the markets really

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Speaker 8: want to take off and put a lot more cuts

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Speaker 8: in than the FED is really.

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Speaker 5: Willing to do.

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Speaker 2: It was a really bizarre sequence to have the chairman

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Speaker 2: engage in a conversation about interest rate cuts.

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Speaker 5: Then New York Fed President.

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Speaker 2: John Williams come out and say, not really talking about

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Speaker 2: rate cuts, and then the minute seem to back up

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Speaker 2: Williams and not power down. We'll let it go. Let's

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Speaker 2: see if they repeat it again. I think today there's

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Speaker 2: a feeling they are going to engage in a conversation

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Speaker 2: a little bit more openly about the timing of interest

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Speaker 2: rate reductions. Do you think they need to draw a

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Speaker 2: clear distinction between adjusting rates and easing policy.

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Speaker 8: Yes, absolutely, and I'm sure Rich would agree with me.

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Speaker 8: I mean, this is removing the restriction, but not trying

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Speaker 8: to stimulate the economy, and I think that's very important.

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Speaker 8: They're trying to normalize rates, They're not trying to stimulate

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Speaker 8: a moribund economy, and that's a very different scenario as

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Speaker 8: when you pointed out from a soft landing and what

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Speaker 8: may be at the moment and extremely soft landing. We

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Speaker 8: also know that, you know, we're kind of coming in

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Speaker 8: really strong in the first quarter on consumer spending, even

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Speaker 8: with January and some weather disruptions. You don't mean much

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Speaker 8: consumer spending for it to be very robust in the

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Speaker 8: first quarter, and that's something that Fed's very attentive to

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Speaker 8: right now as well.

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Speaker 3: So in the press conference, most certainly rich. There's going

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Speaker 3: to be someone who comes up and asks fed Shaw

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Speaker 3: J Powell, so how much did you guys talk about

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Speaker 3: rate cuts?

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Speaker 5: Did you throw out dates?

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Speaker 3: Did you throw out what your criteria are? If you

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Speaker 3: were on the FED, what would you hope he would say?

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Speaker 3: How granular should they be? Given the fact that people

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Speaker 3: know they're talking about it, they have to be talking

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Speaker 3: about it. Everybody else is talking about it. How much

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Speaker 3: do they really telegraph.

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Speaker 5: To the market. I'ms Lisa when the press conference is.

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Speaker 6: Moving beyond what was in the statement, sometimes because the

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Speaker 6: chair wants to move in that direction, or because you've

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Speaker 6: got a dividing committee. I think today, and of course

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Speaker 6: we'll find out to thirty, I think today is a

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Speaker 6: day when the chair on that question in particular, will

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Speaker 6: hug the FOMC statement pretty closely, because it was a

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Speaker 6: big change from December. Some of it was expected, some

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Speaker 6: of it was a little bit more hawkish, and so

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Speaker 6: knowing J. Powell, I think today will be a day

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Speaker 6: when he gets a question like that, he will hug

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Speaker 6: the FMC statement language pretty tightly.

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Speaker 2: That's what you do with Bramo questions, just hold on

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Speaker 2: to the statement, trying to cap All the question. I

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Speaker 2: just wonder how many times they shared the love letter

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Speaker 2: from Senate Banking Committee chairs share a brown and the

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Speaker 2: letter from Senator Elizabeth Warren had a Democratic colleagues, Rich,

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Speaker 2: you've got experience of this under the Trump administration. It's

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Speaker 2: often and I'll say it for you. It was inappropriate,

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Speaker 2: then it's inappropriate. Now how did you deal with it?

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Speaker 7: Then?

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Speaker 2: How do you suspect this FMC will deal with it now?

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Speaker 2: As you see lines like this from senators down in Washington,

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Speaker 2: d C. That I urged the Federal Reserve to ease

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Speaker 2: monetary policy early this year.

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Speaker 5: How'd you deal with that? Rich?

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Speaker 6: Obviously we had to deal with it in a different contact.

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Speaker 6: But it goes way way back, and I think FED

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Speaker 6: institutionally and Jay Powell individually understands the stakes and I

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Speaker 6: think he just thinks this is just part part.

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Speaker 5: Of the job, and the FED will, FED will look

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Speaker 5: through it.

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Speaker 6: And of course the data is breaking in a direction

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Speaker 6: where that completely reinforces it.

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Speaker 4: Richie Clarido, though, this is a good time to mention,

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Speaker 4: of course, this is your public service to the nation

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Speaker 4: is with John Snow and Treasury Paul O'Neil. Your work

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Speaker 4: of course, is vice chair recently annoyed by the Museum

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Speaker 4: of American Financial the Whitehead Award, and I'm going to

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Speaker 4: go back there to Paul Voker and others. I'm sorry,

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Speaker 4: Richard Claire. At the end of the day, you were

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Speaker 4: teaching politics one on one at Columbia. This FED has

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Speaker 4: to go into an election cycle.

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Speaker 5: No one watching or listening.

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Speaker 4: Has ever seen how political does the FED get, say,

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Speaker 4: Labor Day.

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Speaker 6: I think the pal FED will not be political, but

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Speaker 6: it's inevitable monetary policy will be pulled into the political

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Speaker 6: presidential discussion. I think they're prepared for it, and I

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Speaker 6: think they have decided or they're deciding what they think

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Speaker 6: they need to do based on the economics, and when

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Speaker 6: they're ready to go, they'll communicate it. I'm confident they'll succeed,

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Speaker 6: but I don't disagree that there is going to be

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Speaker 6: an enhanced emphasis and focus and a political element to

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Speaker 6: the focus on this.

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Speaker 3: In the meantime, there's a real question, Diane about what

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Speaker 3: exactly greater confidence means. As John was talking about earlier,

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Speaker 3: what metrics are you looking at? I was struck by

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Speaker 3: doom spending, which of course caught my eye, but some

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Speaker 3: of these areas that might be distorted because of changes

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Speaker 3: post pandemic. What gives you the clearest read.

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Speaker 8: Oh, I think you're just going to have to continue

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Speaker 8: on the labor market and inflation. Those are the two

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Speaker 8: most important things. Those are the two most important data

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Speaker 8: points to the Federal Reserve, and that's what they're going

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Speaker 8: to be watching. I want to just echo something that

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Speaker 8: you know, Rich said. You know, we've seen Powell go

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Speaker 8: through some pretty hard political times already, and he's proven

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Speaker 8: himself to be an institutionalist with the FED on that

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Speaker 8: and I think that's a positive thing. The FED doesn't

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Speaker 8: have a horse in this race. That said, they will

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Speaker 8: be blamed for no matter what they do, no matter what,

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Speaker 8: and they know that. And I think that's what Rich

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Speaker 8: is telling you, and that's you know, that doesn't mean

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Speaker 8: their decisions are going to be influenced by it. It

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Speaker 8: just means that they know how to go through the

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Speaker 8: hailstorm that's about to hit them. That said, they're looking

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Speaker 8: for continued improvement in inflation and continued improvement in services inflation.

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Speaker 8: I think they're going to get it, and I think

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Speaker 8: they will be moving by May. But the bottom line

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Speaker 8: is they want to see that continued. And they're also

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Speaker 8: watching the consumer out there pretty closely, because this has

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Speaker 8: been a remarkable not only resilient consumer, a defiant consumer,

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Speaker 8: showing just how strong they really are.

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Speaker 2: Diane my McKee is still listening before he goes into

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Speaker 2: that news conference. Questions for Chairman Powell, what are they now?

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Speaker 8: The biggest questions are, you know, how do you talk about?

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Speaker 8: What is that exact issue is? What does this mean

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Speaker 8: when you guys feel confident enough to cut rates? What

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Speaker 8: is going to be the criteria? That's what all the

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Speaker 8: focus is going to be on. And my guess is

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Speaker 8: he's going to talk about it vaguely. And that's the

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Speaker 8: problem for financial markets because they want something corincrete. And

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Speaker 8: this is when you get as rich about it, but

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Speaker 8: you get to the hard part between monetary policy as

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Speaker 8: a science or an art.

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Speaker 2: This is the art at the moment, Dane. Thank you

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Speaker 2: Van swamp there on the latest Let's reset here if

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Speaker 2: you are just joining us live on TV and radio.

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Speaker 2: It is a special edition of Bloomberg Surveillance. The FED decides,

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Speaker 2: the news conference is in about thirteen minutes time. We

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Speaker 2: had the decision about seventeen minutes ago. No change on

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Speaker 2: interest rates. They drop this bias towards further tightening. There's

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Speaker 2: this new line we need to talk about. The Committee

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Speaker 2: does not expect it will be appropriate to reduce the

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Speaker 2: target range until it has gained greater confidence that inflation

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Speaker 2: is moving sustainably towards two percent. So listen to the

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Speaker 2: market response to all of this. The rectory market this

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Speaker 2: afternoon looks like this. On the S and P five hundred,

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Speaker 2: down by zero point nine percent. We're down one point

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Speaker 2: three on the net stack LISA in the bond market

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Speaker 2: by eight or nine basis points, not session lows on

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Speaker 2: bond yields. I have to say this move faded just

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Speaker 2: to touch. So the market is looking at the Federal

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Speaker 2: Reserve hoping the inch towards interest rate cards. They're kind

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Speaker 2: of taking a baby step today, but not fully embracing

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Speaker 2: the idea just yet.

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Speaker 3: The fact that they sort of said there's still a

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Speaker 3: prolonged period of time before we reach our inflation targets

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Speaker 3: to cast some cold water. There's store people out there.

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Speaker 3: We thought maybe we'd get a cut at this meeting.

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Speaker 3: Right that it was a live meeting. We heard some

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Speaker 3: people saying that's what they should do right. This casts

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Speaker 3: some serious cold water on it. I love the idea

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Speaker 3: of what we're going to hear from j Power. Absolutely nothing.

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Speaker 3: You will hug that statement. He will say as little

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Speaker 3: as possible. He will be as ambiguous as possible. Just

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Speaker 3: wait for it.

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Speaker 5: We could get a.

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Speaker 4: Surprise at last time. And I think Dan Swark was

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Speaker 4: absolutely right about the science and the art. John. We're

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Speaker 4: coming out of a pandemic. The great miss call last

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Speaker 4: year was economic growth. Where were we twelve months ago?

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Speaker 5: Doom?

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Speaker 2: Gloom totally now total, just total bloom.

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Speaker 4: Everybody was wrong playing I was wrong, everybody else was?

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Speaker 2: He just taking this personally right now, down right in

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Speaker 2: the new studio.

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Speaker 5: The brim up him looks beautiful. But the point here, John,

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Speaker 5: is it is in art.

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Speaker 4: They're making it up as they go after this massive

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Speaker 4: pandemic and massive stimulus. So I think today is less

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Speaker 4: predictable because I was humbled, less.

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Speaker 5: Present, Tom.

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Speaker 2: It's important to pause here, and I'm pleased you've brought

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Speaker 2: it up. It's important to pause and go over where

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Speaker 2: we were, where we thought we'd be, and where we

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Speaker 2: actually are. Where we are right now, it's unemployment, sat

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Speaker 2: the four percent, inflation's doing better core PC. Last week

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Speaker 2: we were talking about a two hand or not a three,

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Speaker 2: which is a massive change as well. And GDP Tom

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Speaker 2: gross how up in the face of interest rights climbate aggressively. Now,

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Speaker 2: this is not a judgment about where we going. This

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Speaker 2: is just an observation about where we are, and where

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Speaker 2: we are is so much better than where we thought

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Speaker 2: we'd be twelve months.

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Speaker 4: There, he's been one on one.

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Speaker 5: I mean, forget about measured.

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Speaker 4: We have a stock market which is voting every day,

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Speaker 4: every tick, and I believe since October has been on

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Speaker 4: a tear.

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Speaker 5: They have to fold that.

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Speaker 2: Into the just putting back from old time highs. Robert

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Speaker 2: Tip is with US of PGM sixth income alongside the

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Speaker 2: former Fed Vice chair Richard Klouda. Robert Tip, You've had

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Speaker 2: about twenty minutes to go over this one. Your reaction

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Speaker 2: to it?

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Speaker 7: Sure, Yeah, you know where we are versus where we expected.

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Speaker 7: I mean, we did not have a backdrop for a recession.

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Speaker 7: Interest rates were raised for a reason. The system had

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Speaker 7: a clean backdrop. It was not one of these backdrops

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Speaker 7: that was going to crumble when interest rates were raised.

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Speaker 7: It continued right through SVD. The economy has plowed through

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Speaker 7: and the Fed is fine tuning the policy at this point. Now.

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Speaker 7: They started off with the first notion of cutting rates,

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Speaker 7: I mean arguably back in July, Palell talked about how

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Speaker 7: they would not wait for two percent inflation. They'll be

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Speaker 7: cutting way ahead of that.

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Speaker 8: Now.

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Speaker 7: September saw a huge U turn, so they were fine

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Speaker 7: tuning with maybe like a chainsaw at that point. December,

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Speaker 7: you know, they came in and we had a U

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Speaker 7: turn and a U turn frankly before that in October

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Speaker 7: they called an audible as rates went up to five

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Speaker 7: percent and they started to talk down their own higher

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Speaker 7: for longer. At this point, they're really balanced. The market

442
00:20:30,600 --> 00:20:33,080
Speaker 7: wants to get two hundred basis points ahead of them,

443
00:20:33,440 --> 00:20:36,640
Speaker 7: which is actually kind of understandable. The five point three

444
00:20:36,680 --> 00:20:39,159
Speaker 7: percent Fed funds rate they're running right now is a

445
00:20:39,160 --> 00:20:41,520
Speaker 7: long way from the two and a half percent that

446
00:20:41,520 --> 00:20:44,960
Speaker 7: they're putting forward as neutral. And inflation is hundreds of

447
00:20:44,960 --> 00:20:50,399
Speaker 7: basis points off its highs and pretty sustainably, you know,

448
00:20:50,600 --> 00:20:53,800
Speaker 7: is down in the threes, if not down at target

449
00:20:53,920 --> 00:20:57,280
Speaker 7: right now for about six months. So their comments, you know,

450
00:20:57,359 --> 00:20:59,760
Speaker 7: suggest they want to see a few more months or

451
00:20:59,800 --> 00:21:03,080
Speaker 7: maybe be a big team of them want to see

452
00:21:03,119 --> 00:21:04,960
Speaker 7: another six months before they go.

453
00:21:05,080 --> 00:21:06,400
Speaker 5: Robert from the parlor game.

454
00:21:06,560 --> 00:21:09,080
Speaker 4: Let's go to what you and Greg Peters do every day,

455
00:21:09,200 --> 00:21:10,400
Speaker 4: which you've got to.

456
00:21:10,200 --> 00:21:11,520
Speaker 5: Be in the market.

457
00:21:11,760 --> 00:21:14,639
Speaker 4: Are you being in the market clipping the coupon or

458
00:21:14,680 --> 00:21:18,359
Speaker 4: can you actually still pop a good total return this year?

459
00:21:19,960 --> 00:21:20,200
Speaker 3: Yeah?

460
00:21:20,240 --> 00:21:23,240
Speaker 7: I think big picture, the market is going to clip

461
00:21:23,320 --> 00:21:26,800
Speaker 7: a good return. I think that your spread products, you know,

462
00:21:26,880 --> 00:21:30,239
Speaker 7: as we've said, starting off, put out a piece at

463
00:21:30,240 --> 00:21:33,239
Speaker 7: the end of twenty twenty two yield his destiny. You

464
00:21:33,320 --> 00:21:35,879
Speaker 7: are going to clip that coupon. But we've seen the

465
00:21:35,880 --> 00:21:40,080
Speaker 7: market seventy five one hundred basis points on either side

466
00:21:41,280 --> 00:21:45,119
Speaker 7: of four percent roughly, and I think we're going to

467
00:21:45,160 --> 00:21:47,600
Speaker 7: continue to see these big swings. Right now, the market

468
00:21:47,640 --> 00:21:50,920
Speaker 7: wants to go in the dutish direction. But this powle

469
00:21:51,040 --> 00:21:54,840
Speaker 7: fed is aware that the second big woop move higher

470
00:21:54,880 --> 00:22:00,880
Speaker 7: in inflation in the seventies came with hostility in the Mideast,

471
00:22:01,119 --> 00:22:03,439
Speaker 7: with volatility in the Middle East and a big increase

472
00:22:03,440 --> 00:22:06,760
Speaker 7: in oil prices. And we have full employment around the world.

473
00:22:07,400 --> 00:22:10,760
Speaker 7: We've seen very high inflation that brought about higher wages.

474
00:22:11,760 --> 00:22:14,000
Speaker 7: All of that is in retrograde right now. They're going

475
00:22:14,080 --> 00:22:17,680
Speaker 7: to want to make sure they have that really under

476
00:22:17,680 --> 00:22:20,120
Speaker 7: control before they turn aggressively here.

477
00:22:20,240 --> 00:22:21,960
Speaker 3: It's a good point, Robert, and I expect that we

478
00:22:22,000 --> 00:22:24,280
Speaker 3: will hear from Fetcher J. Powell. They are watching the

479
00:22:25,160 --> 00:22:28,680
Speaker 3: issues and the conflict in the Middle East carefully, Rich Clarita,

480
00:22:28,920 --> 00:22:31,640
Speaker 3: one thing that was really notable about the December press

481
00:22:31,680 --> 00:22:34,879
Speaker 3: conference was that Fetcher J. Powell had an opportunity to

482
00:22:34,920 --> 00:22:38,400
Speaker 3: push back against that rosy outlook, the sort of flooding

483
00:22:38,440 --> 00:22:41,280
Speaker 3: into risk assets that Robert Tip was talking about and

484
00:22:41,280 --> 00:22:42,720
Speaker 3: that so many people have embraced.

485
00:22:43,000 --> 00:22:44,159
Speaker 5: He didn't push back.

486
00:22:44,400 --> 00:22:45,959
Speaker 3: Do you think it's going to be the same at

487
00:22:46,000 --> 00:22:48,959
Speaker 3: this press conference that he will just say ultimately, the

488
00:22:48,960 --> 00:22:50,919
Speaker 3: markets will do what we want, what they want to do,

489
00:22:51,200 --> 00:22:53,800
Speaker 3: we're watching something else and we're on a good glide path.

490
00:22:55,440 --> 00:22:55,760
Speaker 5: Again.

491
00:22:55,840 --> 00:22:57,720
Speaker 6: I think this is going to be a press conference

492
00:22:57,760 --> 00:23:00,560
Speaker 6: where it will make sense for the chair to to

493
00:23:00,640 --> 00:23:02,359
Speaker 6: really hug that FMC statement.

494
00:23:02,400 --> 00:23:03,440
Speaker 5: There was a lot of red ink.

495
00:23:03,480 --> 00:23:07,159
Speaker 6: It was therefore a reason it gave the message that

496
00:23:07,480 --> 00:23:10,280
Speaker 6: you know, basically trying to dissuade folks from pricing in

497
00:23:10,320 --> 00:23:13,040
Speaker 6: that March adjustment and talk about they want to see

498
00:23:13,040 --> 00:23:16,200
Speaker 6: the considerable and additional evidence and so I think that's

499
00:23:16,200 --> 00:23:18,520
Speaker 6: a pretty good place for him to spend most of

500
00:23:18,560 --> 00:23:21,800
Speaker 6: the day, at least on those sorts of questions.

501
00:23:21,840 --> 00:23:23,280
Speaker 2: I have to say, Rich, you're not hyping up this

502
00:23:23,320 --> 00:23:27,359
Speaker 2: news conference until it sounds like I can't repeat. I

503
00:23:27,400 --> 00:23:30,080
Speaker 2: appreciate the honesty, though, Robert Tip. Just finally, I'm getting

504
00:23:30,080 --> 00:23:31,920
Speaker 2: a load of people right in to say, what's the trade?

505
00:23:31,920 --> 00:23:34,120
Speaker 2: What's your favorite trade right now? Robert, after what you've

506
00:23:34,160 --> 00:23:34,520
Speaker 2: just heard.

507
00:23:35,800 --> 00:23:39,320
Speaker 7: Yeah, I think that it's not the whether the cuts

508
00:23:39,400 --> 00:23:41,280
Speaker 7: price in are correct or not. I think it's the

509
00:23:41,359 --> 00:23:44,360
Speaker 7: timing and the shape of the curve, the ends.

510
00:23:44,119 --> 00:23:44,639
Speaker 4: Of the curve.

511
00:23:45,200 --> 00:23:47,480
Speaker 7: You know, whether you're looking at the next six months

512
00:23:47,560 --> 00:23:49,840
Speaker 7: or whether you're looking at the tenure or the third

513
00:23:49,920 --> 00:23:54,840
Speaker 7: year point, those look more reasonably priced than some of

514
00:23:54,920 --> 00:23:59,440
Speaker 7: your two year out interest rates that are really banking

515
00:23:59,560 --> 00:24:03,639
Speaker 7: on two hundred basis points of interest rate cuts in

516
00:24:03,680 --> 00:24:07,200
Speaker 7: the next eighteen months. And I think if you can

517
00:24:07,359 --> 00:24:10,760
Speaker 7: stay in the market and clip that coupon, avoid rolling

518
00:24:10,840 --> 00:24:13,359
Speaker 7: up the yield curved, and also make some money on

519
00:24:13,400 --> 00:24:16,440
Speaker 7: the tactics of trading this wide range on rates, I

520
00:24:16,440 --> 00:24:18,120
Speaker 7: think it's gonna be a very good year for bonds.

521
00:24:18,200 --> 00:24:20,480
Speaker 2: Robert Hip, thank you. Sir, from Pajim on the latest

522
00:24:20,520 --> 00:24:22,720
Speaker 2: from the Fed for reserve for more his Bank for

523
00:24:22,720 --> 00:24:25,400
Speaker 2: America's Mike Gape and the chief economist, Mike, you've got

524
00:24:25,400 --> 00:24:27,720
Speaker 2: the Fed going in March. Do you like what you

525
00:24:27,800 --> 00:24:30,320
Speaker 2: hear today? We make in that closest step, another baby

526
00:24:30,320 --> 00:24:31,520
Speaker 2: step towards you'll cool.

527
00:24:33,200 --> 00:24:33,560
Speaker 7: We are.

528
00:24:33,760 --> 00:24:37,560
Speaker 9: I think you can interpret the statement as saying risk

529
00:24:37,600 --> 00:24:40,680
Speaker 9: to the outlook our balance, therefore, our guidance should be balanced.

530
00:24:40,760 --> 00:24:43,680
Speaker 9: And then did we debate a rate cut today? Yes,

531
00:24:43,720 --> 00:24:46,560
Speaker 9: we did, just not for very long. What we need

532
00:24:46,640 --> 00:24:49,920
Speaker 9: is more confidence before we cut rates. And I do

533
00:24:49,960 --> 00:24:54,720
Speaker 9: think that involves seeing more progress on services inflation and

534
00:24:54,800 --> 00:24:57,880
Speaker 9: more progress on wages, because as you know, a lot

535
00:24:57,880 --> 00:25:00,960
Speaker 9: of the disinflation has come from goods price. Those declines

536
00:25:01,000 --> 00:25:04,000
Speaker 9: may not persist. So the Fed we'll see more of

537
00:25:04,040 --> 00:25:06,280
Speaker 9: that data. I think they can get there by March.

538
00:25:06,320 --> 00:25:08,879
Speaker 9: So I'd say the statement was broadly in line with

539
00:25:08,920 --> 00:25:09,280
Speaker 9: our thinking.

540
00:25:09,680 --> 00:25:14,040
Speaker 4: Michael Gape And how aggregated are we or disaggregated are there?

541
00:25:14,080 --> 00:25:17,399
Speaker 4: To America's out there in America flat on its back?

542
00:25:17,920 --> 00:25:23,080
Speaker 4: And then the prosperous America is witnessed by Microsoft's profit yesterday.

543
00:25:23,840 --> 00:25:27,280
Speaker 9: Yeah, there is you know, the economy is bifurgate, bifurcated.

544
00:25:27,320 --> 00:25:29,080
Speaker 9: I think more broadly you could just say, you know,

545
00:25:29,160 --> 00:25:33,280
Speaker 9: industrials and goods versus services. The industrial side of the

546
00:25:33,320 --> 00:25:37,120
Speaker 9: economy has been suffering. Regional banks, obviously with news headlines

547
00:25:37,160 --> 00:25:40,960
Speaker 9: this morning, still continue to struggle, but the consumers in

548
00:25:41,000 --> 00:25:43,680
Speaker 9: good shape. The services side of the economy is doing well.

549
00:25:43,880 --> 00:25:46,600
Speaker 9: Tech earnings are doing well. It has been kind of

550
00:25:46,800 --> 00:25:51,400
Speaker 9: a rolling recessionary story where certain segments of the economy

551
00:25:51,440 --> 00:25:53,760
Speaker 9: have had problems at different points in time, but the

552
00:25:53,800 --> 00:25:57,560
Speaker 9: economy overalls has powered through. So thinking about it in

553
00:25:57,600 --> 00:25:59,920
Speaker 9: that way, Tom, I think makes a lot of sense.

554
00:26:00,240 --> 00:26:02,720
Speaker 3: Michael, I love hearing the bustle and the hustle behind you,

555
00:26:02,760 --> 00:26:05,280
Speaker 3: and I imagine everybody's saying, the balance of risks, how

556
00:26:05,280 --> 00:26:07,720
Speaker 3: do we get the greater confidence in equation is coming down?

557
00:26:07,800 --> 00:26:09,600
Speaker 3: What does that mean? So what do you think that

558
00:26:09,680 --> 00:26:13,200
Speaker 3: means in terms of how much you've got to get

559
00:26:13,200 --> 00:26:14,879
Speaker 3: in terms of data underbelt?

560
00:26:16,880 --> 00:26:18,720
Speaker 9: So I think they can get there by March in

561
00:26:18,760 --> 00:26:21,840
Speaker 9: the following way, and that they'll get February PCE and

562
00:26:21,880 --> 00:26:26,320
Speaker 9: they'll get the CPI and the PPI for that next

563
00:26:26,320 --> 00:26:28,800
Speaker 9: pc I'm sorry the January PCE. But then they'll get

564
00:26:28,920 --> 00:26:32,159
Speaker 9: CPI and PPI for that February PCE print during the

565
00:26:32,200 --> 00:26:35,760
Speaker 9: blackout period, so they'll have two more inflation reports. They'll

566
00:26:35,800 --> 00:26:40,000
Speaker 9: get more information on where is services inflation, where is sheltered,

567
00:26:40,000 --> 00:26:42,920
Speaker 9: They'll get more wage data in the next two employment reports.

568
00:26:43,200 --> 00:26:45,600
Speaker 9: I really think it's about that side of the ledger.

569
00:26:45,680 --> 00:26:48,200
Speaker 9: For some on the committee for Governor Waller, he says

570
00:26:48,240 --> 00:26:50,800
Speaker 9: the components don't matter. I just look at inflation, so

571
00:26:50,880 --> 00:26:53,840
Speaker 9: his bar may may be lower, but others are really

572
00:26:53,920 --> 00:26:56,359
Speaker 9: kind of concerned about that good services trade off and

573
00:26:56,440 --> 00:26:58,199
Speaker 9: worry that services are too sticky.

574
00:26:58,400 --> 00:27:01,600
Speaker 2: And it would optionality written this way because it can

575
00:27:01,640 --> 00:27:04,000
Speaker 2: mean whatever they want it to mean, Lisa at any

576
00:27:04,040 --> 00:27:06,160
Speaker 2: time over the next few months, which.

577
00:27:06,000 --> 00:27:07,880
Speaker 3: Is the reason why he's going to hug that statement

578
00:27:07,960 --> 00:27:10,399
Speaker 3: so close and everyone's going to be happy. And then you.

579
00:27:10,640 --> 00:27:13,280
Speaker 4: Really, so I'm going to read a statement or read

580
00:27:13,320 --> 00:27:15,080
Speaker 4: the minutes, and it's going to say in there it

581
00:27:15,200 --> 00:27:17,679
Speaker 4: is written, it's gonna it's going to actually say it.

582
00:27:18,320 --> 00:27:20,320
Speaker 2: Richard Clarity, let's come to you and just wind things

583
00:27:20,400 --> 00:27:21,960
Speaker 2: up and put a bow on it if we can.

584
00:27:22,280 --> 00:27:24,480
Speaker 2: This has been a single mandate Central Bank for the

585
00:27:24,520 --> 00:27:26,639
Speaker 2: last couple of years where they focus on inflation and

586
00:27:26,680 --> 00:27:29,080
Speaker 2: getting it back down towards two percent. Can we talk

587
00:27:29,080 --> 00:27:31,199
Speaker 2: about the other side of the Jewel mandate? Is there

588
00:27:31,280 --> 00:27:33,560
Speaker 2: anything to worry about in the labor market?

589
00:27:33,600 --> 00:27:38,200
Speaker 6: From your perspective, the labor market is in a very

590
00:27:38,200 --> 00:27:41,679
Speaker 6: good place. If anything, it's it's running a little hot. Uh,

591
00:27:42,400 --> 00:27:44,159
Speaker 6: But I do think there's a path for that to

592
00:27:44,280 --> 00:27:48,440
Speaker 6: adjust under the under the outlook. So yeah, the labor

593
00:27:48,480 --> 00:27:50,800
Speaker 6: market is, you know, that's what we want maximum employment.

594
00:27:50,840 --> 00:27:53,600
Speaker 6: We're at perhaps a little bit more than maximum employment.

595
00:27:53,640 --> 00:27:56,520
Speaker 6: But but wage inflation is decelerating. We saw on the

596
00:27:56,560 --> 00:27:59,040
Speaker 6: e CI, and I think that that's what they're factoring

597
00:27:59,080 --> 00:27:59,760
Speaker 6: in for this year.

598
00:28:00,040 --> 00:28:02,679
Speaker 2: Continuing there, Michael Gape, And do you agree?

599
00:28:03,720 --> 00:28:04,040
Speaker 7: I do.

600
00:28:04,119 --> 00:28:07,199
Speaker 9: I would say if concerns would be about the dispersion

601
00:28:07,240 --> 00:28:10,520
Speaker 9: of employment growth, which is pretty narrow focused in leisure

602
00:28:10,520 --> 00:28:14,080
Speaker 9: and hospitality and education and health, and then remaining growth

603
00:28:14,080 --> 00:28:16,560
Speaker 9: in the private sector is basically flat. But I agree

604
00:28:16,600 --> 00:28:19,520
Speaker 9: with Rich the labor market's in a good place and

605
00:28:19,560 --> 00:28:21,160
Speaker 9: it's helping to drive the outlook.

606
00:28:21,240 --> 00:28:22,120
Speaker 5: Mike can I You've got to run.

607
00:28:22,119 --> 00:28:23,639
Speaker 2: It's great to get you cool. Michael Gape In there

608
00:28:23,640 --> 00:28:26,040
Speaker 2: of Banks for America looking for a March interest rate reduction.

609
00:28:26,200 --> 00:28:29,560
Speaker 2: Richard Clarida, Thank you, sir, and congratulations on that Whitehead Award.

610
00:28:29,720 --> 00:28:31,800
Speaker 2: Truly prestigious, Sir. We appreciate your time.