WEBVTT - The Fed Decides to Remain Near Zero 0:00:00.720 --> 0:00:03.720 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.800 --> 0:00:06.320 Jason Kelly. We're right here every day bringing you the 0:00:06.400 --> 0:00:11.160 latest news from the world's of business and finance, plus technology, politics, economics, 0:00:11.240 --> 0:00:14.280 all harnessing the power of Business Week reporters and editors, 0:00:14.440 --> 0:00:16.439 and of course Carol that's part of a team of 0:00:16.520 --> 0:00:20.439 twenty seven hundred journalists and analysts more than a hundred 0:00:20.480 --> 0:00:23.240 and twenty countries and Jason. You can download Bloomberg Business 0:00:23.280 --> 0:00:26.239 Week on iTunes, SoundCloud, bl Bloomberg dot com. You can 0:00:26.280 --> 0:00:28.640 also listen to our radio show at two pm Eastern 0:00:28.680 --> 0:00:31.560 on Bloomberg Radio every weekday, or watch us on YouTube 0:00:31.600 --> 0:00:36.880 by searching Bloomberg Global News. Let's get into it even 0:00:36.920 --> 0:00:39.760 deeper with Kathleen Hayes, global Economics and Policy editor for 0:00:39.840 --> 0:00:43.120 Bloomberg in our Bloomberg Interactive Broker Studio. All right, k 0:00:43.400 --> 0:00:47.200 h you saw the headlines break You're continuing to look 0:00:47.240 --> 0:00:50.839 at them. What jumps out at you? The Federal Reserve, 0:00:51.040 --> 0:00:54.040 led by j. Powell, has made one thing perfectly clear. 0:00:54.240 --> 0:00:58.040 They're providing lots of stimulus, and they intend to continue 0:00:58.080 --> 0:01:01.880 to provide lots of stimulus. Uh, They're going to buy treasuries. 0:01:01.920 --> 0:01:04.600 As you read the headline of mortgage backed securities at 0:01:04.680 --> 0:01:08.760 least at the current pace through two UH. In a 0:01:08.760 --> 0:01:12.080 related statement, that means about eighty billion dollars a month 0:01:12.120 --> 0:01:15.720 for purchases of treasuries and about forty billion of mortgage 0:01:15.760 --> 0:01:19.160 backed securities. This is something that bond investors, bond traders 0:01:19.319 --> 0:01:22.200 really wanted more clarity on. I think it's also important. 0:01:22.360 --> 0:01:24.800 People were talking about the Fed's guidance and how it's 0:01:24.800 --> 0:01:27.840 been kind of fuzzy and wondering if they might make 0:01:27.880 --> 0:01:30.200 it a little more specific. Well, they're going to hold 0:01:30.280 --> 0:01:33.479 rates near zero UM, and they're going to do this 0:01:33.920 --> 0:01:38.640 through twenty twenty two. Okay, we're going to then we've 0:01:38.640 --> 0:01:42.080 got two. I think that's that's making their their UM, 0:01:42.840 --> 0:01:46.560 their guidance, their forward guidance more definite. I think that's 0:01:46.640 --> 0:01:50.360 very important to investors, to the markets as well, UH, 0:01:50.560 --> 0:01:53.040 and generally speaking, I think it's also interesting when you 0:01:53.080 --> 0:01:57.240 look at their projections. UH. The Summary of Economic Projections 0:01:57.920 --> 0:02:00.640 shows that the FED expects GDP for six and a 0:02:00.680 --> 0:02:04.200 half percent this year and rising five percent next year. 0:02:04.280 --> 0:02:06.800 Unemployment down to nine point three percent in the fourth 0:02:06.840 --> 0:02:09.280 quarter twenty that's about four percentage points from where we 0:02:09.320 --> 0:02:11.720 are now. Uh, and it would be a little bit 0:02:11.760 --> 0:02:14.480 below the worst unemployment rate in the Great Recession six 0:02:14.520 --> 0:02:17.240 and a half percent by next year. Okay, maybe not 0:02:17.360 --> 0:02:20.560 so bad. Inflation in their key measure at zero point 0:02:20.639 --> 0:02:24.239 eight percent in twenty that's the long way from the 0:02:24.280 --> 0:02:26.480 two percent target, but they're getting, i think, kind of 0:02:26.520 --> 0:02:28.840 optimistic seeing it back up to one point six percent 0:02:28.880 --> 0:02:31.880 by one So, you know, it will be interesting to 0:02:31.880 --> 0:02:34.040 see what J. Paul says about this at the press conference. 0:02:34.080 --> 0:02:36.520 For example, if a really strong employment report that we 0:02:36.560 --> 0:02:38.760 got on Friday showing the jobs of two and a 0:02:38.760 --> 0:02:41.040 half million, if that influences at all. But it's it's 0:02:41.080 --> 0:02:43.840 it's I think it's seems like a realistic, maybe slightly 0:02:43.880 --> 0:02:46.079 tilted toward we're going to get through this and it's 0:02:46.120 --> 0:02:48.960 not going to take forever, kind of bent. What's key 0:02:48.960 --> 0:02:52.280 about this report, right, it's our first quarterly forecast since December. 0:02:52.360 --> 0:02:54.720 We've got the dot plot of projections, Kathleen, so we 0:02:54.760 --> 0:02:57.440 really are getting an idea of how the board thinks, 0:02:57.480 --> 0:03:00.800 the policy setting board at the FED thinks about where 0:03:00.800 --> 0:03:03.799 we are and more importantly, what the outlook is at 0:03:03.840 --> 0:03:09.120 this point very important because you know we again, I 0:03:09.120 --> 0:03:10.639 think we're going to hear from J. Powell at the 0:03:10.639 --> 0:03:12.840 press conference. Really, someone's going to ask him, well, how 0:03:12.880 --> 0:03:14.680 are how do you think the reopenings are going? And 0:03:14.840 --> 0:03:17.320 what about if we get a resurgence in in virus 0:03:17.400 --> 0:03:19.760 cases in the fall, as some people project we will. 0:03:20.360 --> 0:03:23.320 Is that something you've factored into the forecast? Right? Are 0:03:23.320 --> 0:03:25.000 you expecting that because a lot of people do, and 0:03:25.040 --> 0:03:28.280 still seeing you know, again growth that's going to be 0:03:29.080 --> 0:03:33.240 back on track by next year, unemployment down considerably by 0:03:33.280 --> 0:03:36.880 next year. Again, I considering how how much we've gone 0:03:36.880 --> 0:03:39.600 through already, this strikes to me. This strikes me as 0:03:39.640 --> 0:03:41.480 if I had to classify it as one, I'd say 0:03:41.520 --> 0:03:45.320 more optimistic than pessimistic, because well, because they see growth 0:03:45.360 --> 0:03:47.520 picking up next year, because they see unemployment coming down. 0:03:47.600 --> 0:03:49.440 We're not going to be stuck here forever, you know, 0:03:49.600 --> 0:03:52.280 and so so V shaped you shaped, you know, we've 0:03:52.320 --> 0:03:55.640 all kicked around these doesn't give you better? I would say, 0:03:55.640 --> 0:03:57.640 if you want to call it a V, it's a 0:03:57.760 --> 0:04:01.720 V that's really got wide, aren't you know? It looks 0:04:01.720 --> 0:04:04.040 more like half of a W than a V standing alone? 0:04:04.120 --> 0:04:05.320 You know what I mean? You we went way down 0:04:05.520 --> 0:04:07.320 and we're starting to come up. It's almost like a 0:04:07.400 --> 0:04:09.960 cheerleader doing sort of like the why there you go. 0:04:10.120 --> 0:04:12.720 But it's not going to be a quick v up. 0:04:12.720 --> 0:04:15.200 But it's not going to go from zero to sixty. 0:04:15.440 --> 0:04:18.240 Maybe it goes from zero to you know, you get 0:04:18.279 --> 0:04:20.880 you get to sixty, but it takes you longer. I 0:04:20.920 --> 0:04:22.880 just want to point out market reaction, right because we're 0:04:22.880 --> 0:04:25.120 all about, you know, what's going on in the markets, 0:04:25.160 --> 0:04:27.440 and equity is seeing this, I guess as a bit 0:04:27.440 --> 0:04:30.000 of a doublish report, and you know they are going 0:04:30.040 --> 0:04:31.880 to their highs of the session. I mean, we're only 0:04:31.960 --> 0:04:34.719 up about eleven on the SMP, we're up about sixty 0:04:34.839 --> 0:04:37.119 on the Dow, and we're now up about a hundred 0:04:37.120 --> 0:04:40.880 and five on the NASTIC. We were actually down on 0:04:40.920 --> 0:04:44.000 the SMP and the DAB. The Nazek was higher. But yeah, 0:04:44.040 --> 0:04:46.039 we're you know, that's how the equity markets are surely 0:04:46.080 --> 0:04:47.640 reading it. But that's because money is going to remain 0:04:47.720 --> 0:04:50.480 cheap for a long time exactly. And I think because 0:04:50.600 --> 0:04:54.599 the Job's report showed that strong gain in payrolls. As 0:04:54.839 --> 0:04:56.960 I was speaking to Ellen Sentner from Morgan Stanley, she's 0:04:56.960 --> 0:05:00.200 going to be with us tonight on Dave Breacasia, and 0:05:00.720 --> 0:05:03.960 she said that it's as though the jobs gains, for example, 0:05:04.040 --> 0:05:06.880 that her team thought would come in June, came quicker 0:05:06.920 --> 0:05:09.040 they came in May. And I think there's a lot 0:05:09.080 --> 0:05:11.559 of investors because stocks have run so far, so faster, 0:05:11.680 --> 0:05:14.360 they need more AMMO to keep going. And the fear 0:05:14.839 --> 0:05:17.479 that maybe the FED would say come out, oh my gosh, 0:05:17.480 --> 0:05:19.559 we've got a good jobs report. We can start pulling back. 0:05:20.120 --> 0:05:22.159 But I think most FED watchers say that wasn't going 0:05:22.200 --> 0:05:24.159 to happen. It ain't gonna happen, and that's not what 0:05:24.680 --> 0:05:27.240 is going to express. Why are I mean? We were 0:05:27.240 --> 0:05:29.040 also seeing yields tick up a little bit. I mean 0:05:29.120 --> 0:05:31.320 the ten year was at point seventy seven, it's not 0:05:31.440 --> 0:05:33.120 point seventy nine. If I look at the short end, 0:05:33.160 --> 0:05:36.520 two year was at point one four six. It hasn't 0:05:36.560 --> 0:05:38.800 changed too much, but you know, a little bit of 0:05:38.839 --> 0:05:42.240 an uptick um but not really worth noting. I guess, well, 0:05:42.600 --> 0:05:44.280 maybe they were really hoping that FED was going to 0:05:44.320 --> 0:05:46.919 announce yield curve control or something like that. And again 0:05:46.960 --> 0:05:48.920 I think people think it's too early. Do you really 0:05:48.960 --> 0:05:52.120 need yield curve control if your forward guidance is so definite, right, 0:05:52.160 --> 0:05:53.960 if you're going to now say you're going to keep 0:05:53.960 --> 0:05:57.720 the raids near zero through two, got a good year 0:05:57.839 --> 0:06:01.400 about that, Kathleen, Because I mean, just at first, that's 0:06:01.400 --> 0:06:05.120 a long time away, right, isn't it. I know, now, 0:06:05.160 --> 0:06:07.920 remember the Fed can can change that. Let's say they're 0:06:07.960 --> 0:06:10.120 surprised by the data, but it's a very long time. 0:06:10.200 --> 0:06:11.720 That's a year and a half to keep the key 0:06:11.760 --> 0:06:15.960 read at zero. Uh. And they're they're buying bonds and 0:06:16.040 --> 0:06:19.400 they just said how many They're gonna buy eighty million 0:06:19.440 --> 0:06:24.160 of the treasuries and then forty mbs. So they're gonna 0:06:24.560 --> 0:06:27.360 keep doing that indefinitely. You've got a lot of liquidity 0:06:27.400 --> 0:06:30.280 coming into the system. Uh. They So they've they've kind 0:06:30.279 --> 0:06:32.240 of put a floor under that they're going to keep 0:06:32.240 --> 0:06:34.440 the key right there. And I guess maybe what they're 0:06:34.440 --> 0:06:36.359 trying to tell us to is, this isn't now. It 0:06:36.400 --> 0:06:38.400 isn't just we're gonna try to keep the you know, 0:06:38.440 --> 0:06:42.160 the virus crisis from becoming a financial crisis. Maybe they're 0:06:42.200 --> 0:06:45.839 they're they're leaning toward now is someday things maybe will 0:06:45.880 --> 0:06:48.799 be improved enough enough businesses open people back to work 0:06:49.040 --> 0:06:52.200 that this low rate uh A near zero, and all 0:06:52.240 --> 0:06:55.560 the bomb purchases will become stimulative, right, because so far 0:06:55.680 --> 0:06:58.600 this is to event crisis and and you know, demolished 0:06:58.600 --> 0:07:01.359 economy at some point. Though maybe that's the idea. We 0:07:01.440 --> 0:07:04.279 keep it in place and it starts getting economy growing again. 0:07:04.360 --> 0:07:05.880 But for those of us who have not bought our 0:07:05.960 --> 0:07:07.920 yield curve control T shirts yet, I mean, that's the 0:07:07.960 --> 0:07:12.200 whole idea of the FED buying longer term rate securities. Correct. 0:07:12.880 --> 0:07:16.080 I want to yield curve control T shirts. I work. 0:07:16.120 --> 0:07:17.960 I got to make some and we'll wear them here 0:07:18.000 --> 0:07:20.920 in studio. Why do we want the Fed to do that? 0:07:20.960 --> 0:07:23.000 Because we have to be careful we threw out these phrases, 0:07:23.080 --> 0:07:24.720 and because we use it all the time. But why 0:07:24.720 --> 0:07:27.240 do we want the Fed to do that? Kathleen Well, 0:07:27.720 --> 0:07:30.320 I guess if you are a bondable, you want to 0:07:30.440 --> 0:07:31.960 sort of you want to you want the FED to 0:07:32.120 --> 0:07:34.280 make sure it's going to keep buying bonds and prevent 0:07:34.400 --> 0:07:36.800 yields from rising very much. That's the idea. The other 0:07:36.840 --> 0:07:39.000 side of the coin, though, I guess if you're not 0:07:39.120 --> 0:07:41.400 so much in favors that the Fed's idea presumably is 0:07:41.400 --> 0:07:42.760 that we don't need to do that if we can. 0:07:43.640 --> 0:07:47.360 You know, the market is, the bond market is maybe 0:07:47.400 --> 0:07:49.800 still enough in step with us and our forward guidance 0:07:49.960 --> 0:07:52.280 that they're not going to really expect us to remove stimus. 0:07:52.320 --> 0:07:54.760 They're not going to start pushing yields higher. Uh. And 0:07:54.800 --> 0:07:56.680 then there's still a lot of people out there, take 0:07:56.680 --> 0:07:58.800 the jim Biuncles of the world who say this is 0:07:58.880 --> 0:08:01.360 very bad. It's destroying the on market, and you don't 0:08:01.400 --> 0:08:04.200 get any kind of signal as from a market that 0:08:04.240 --> 0:08:07.800 you used to get. All right, Well, Kathleen Hayes, great 0:08:07.880 --> 0:08:10.440 immediate insight. We really appreciate it. There's a lot to 0:08:10.480 --> 0:08:13.400 digest there, and you really walked us through it very 0:08:13.440 --> 0:08:16.280 cleanly and enthusiastically. We love you, Thank you so much. 0:08:16.840 --> 0:08:20.800 Curtie shirt though it's on my list before Christmas. Well, 0:08:20.840 --> 0:08:24.840 we also like lending into the lending and spending Tourwell, 0:08:25.600 --> 0:08:28.000 we could say control, we could say your Kirk control 0:08:28.040 --> 0:08:29.360 on the front and on the back of what would 0:08:29.360 --> 0:08:34.000 it say, like the lending and spending lending not spending. Okay, 0:08:34.320 --> 0:08:36.360 I've got my name is on the list. We got 0:08:36.440 --> 0:08:38.680 a plan and we had a plaque. You're listening to 0:08:38.800 --> 0:08:42.720 Bloomberg Business Week with Carol Messer and Jason Kelly on 0:08:42.880 --> 0:08:46.319 Bloomberg Radio. We gotta talk a little bit more about 0:08:46.320 --> 0:08:48.960 that FED decision. Yeah, let's do it. Let's get into it, 0:08:49.080 --> 0:08:51.360 understand why the markets are doing what they're doing, and 0:08:51.480 --> 0:08:54.120 what it may set the table for for the FED 0:08:54.200 --> 0:08:56.360 going forward. We've talked a lot about the FED in 0:08:56.360 --> 0:08:59.680 this crisis, and rightly so. For instance, downward with US 0:09:00.000 --> 0:09:03.160 Global chief Economist head of macro economic Strategy for Menu 0:09:03.240 --> 0:09:07.760 Life Investment Management on the phone from Toronto, and Lewis Alexander, 0:09:07.880 --> 0:09:10.760 chief el Economists for No Mura on the phone from 0:09:10.920 --> 0:09:13.760 New York City. Francis, I want to start with you. 0:09:14.440 --> 0:09:17.560 Most important thing that jumps out as you read the 0:09:17.640 --> 0:09:22.920 statement and look ahead to j. Powell's comments. Most important 0:09:22.960 --> 0:09:25.760 change is that there is very little change here. They've 0:09:25.760 --> 0:09:29.600 only need three actually relevant changes to their statement, a 0:09:29.640 --> 0:09:33.559 lot of which is marked to market the projections. No surprises, 0:09:33.640 --> 0:09:36.720 no yield curve control comments, no change in the forward guidance. 0:09:37.040 --> 0:09:38.920 This is a fuederal reserve that does not want to 0:09:39.000 --> 0:09:41.360 rock the boat. And I'm guessing share Powell is sitting 0:09:41.360 --> 0:09:44.880 watching markets feeling pretty pleased with himself The problem is 0:09:44.920 --> 0:09:47.840 in the communications mine field that we're walking into in 0:09:47.880 --> 0:09:50.440 fifteen minutes. Share Powell has to get through a lot 0:09:50.480 --> 0:09:53.040 of time in which he needs to say absolutely nothing 0:09:53.080 --> 0:09:55.319 at all. This is going to be pretty challenging when 0:09:55.320 --> 0:09:57.800 he's gonna get a whole flew of complicated questions. I 0:09:57.800 --> 0:09:59.680 gotta say, we have a top live blog and it's 0:09:59.720 --> 0:10:02.200 really wonderful. It's our whole team, are FED team, our 0:10:02.240 --> 0:10:04.040 markets team, and they said the press conference will be 0:10:04.120 --> 0:10:06.640 interesting and Powell might face some testy questions about the 0:10:06.679 --> 0:10:09.480 advance of risky assets in the last few weeks, and 0:10:09.520 --> 0:10:11.800 I'm gonna get I'm going to guess a lot of testing, 0:10:12.040 --> 0:10:15.800 testing questions about some other subject as well. Um Lewis, Alexander, 0:10:15.840 --> 0:10:18.600 come on in our conversation. How do you see the 0:10:18.640 --> 0:10:21.880 latest FED decision? I guess I'd take it a little 0:10:21.880 --> 0:10:24.240 bit differently. I think there was one important change, and 0:10:24.280 --> 0:10:26.400 that is the FED indicating that it's not going to 0:10:26.480 --> 0:10:31.040 continue to reduce the pace of its asset purchases. Really, 0:10:31.120 --> 0:10:34.839 since they increase our asset purchases dramatically in March is 0:10:34.920 --> 0:10:38.880 COVID as the COVID crisis broke, they've been slowing them 0:10:38.920 --> 0:10:42.080 really steadily since April, and they did indicate in the 0:10:42.120 --> 0:10:45.240 States and today that that processes it is at an end, 0:10:45.679 --> 0:10:48.080 and I think that that is important. It's certainly true 0:10:48.120 --> 0:10:49.960 that they didn't go all the way to YO curve control, 0:10:50.040 --> 0:10:53.120 but essentially, I think it's a response to the way 0:10:54.000 --> 0:10:57.440 long term interest rates have risen in recent days, UH 0:10:57.480 --> 0:11:01.040 in in response to a stronger economy. So I think 0:11:02.559 --> 0:11:05.319 I think we are. I think there was at least 0:11:05.320 --> 0:11:08.240 one important change and what they did in what they 0:11:08.240 --> 0:11:12.080 did today, look, I agree that it's largely UM what 0:11:12.160 --> 0:11:15.880 was expected UM there it wasn't anything else big, and 0:11:16.000 --> 0:11:19.320 there are the bigger issues like EO curve control are 0:11:19.360 --> 0:11:23.480 things that they're going to put off for a later day. UM. 0:11:23.600 --> 0:11:27.920 The press conference, obviously, UH will be interesting. UM. I 0:11:27.960 --> 0:11:30.200 think one of the places he's going to get questions 0:11:30.280 --> 0:11:32.880 is why haven't they made more progress on their thirteen 0:11:32.960 --> 0:11:38.920 three programs, which is what UM. These are the broader 0:11:38.960 --> 0:11:43.120 programs they have to support corporate bond market UH, commercial paper, 0:11:43.400 --> 0:11:49.880 mainstream blending. Those programs which were launched UH in late March, frankly, 0:11:50.600 --> 0:11:54.280 frankly not done very much UH, and so that's gonna 0:11:54.320 --> 0:11:56.920 be I think one of the things they'll be asked about, 0:11:57.800 --> 0:12:00.280 so forces. You know, one of the interesting things to 0:12:00.360 --> 0:12:04.320 think about at this moment, you know, June tenth, uh 0:12:04.360 --> 0:12:07.839 and several months into this crisis and another crisis piled 0:12:07.880 --> 0:12:09.719 on top of it, is that, you know, the FED 0:12:09.800 --> 0:12:13.720 and J. Powell has you know, gotten pretty good reviews. 0:12:14.160 --> 0:12:18.040 It feels like, so far, what do you make of it, 0:12:18.320 --> 0:12:20.400 uh in terms of what they've done and what they 0:12:20.440 --> 0:12:23.960 haven't done by way of programs and relief and um, 0:12:23.960 --> 0:12:27.560 you know, whatever stimulants they can provide. Well, they've certainly 0:12:27.559 --> 0:12:29.880 throw on a lot of the problem. But it's an 0:12:29.880 --> 0:12:32.080 excellent point that a lot of the tools that have 0:12:32.240 --> 0:12:35.319 been engaged have not been fully engaged or fully utilized. 0:12:35.679 --> 0:12:37.920 I think the challenge for the SAID is actually the 0:12:38.040 --> 0:12:40.760 next chapter, how is the SAID going to be viewed 0:12:40.760 --> 0:12:44.520 when actually the economy starts to show more signs of reaccelerations, 0:12:44.880 --> 0:12:48.120 more gangbuster numbers that surprise us to that side, And 0:12:48.160 --> 0:12:51.360 how does the SAID respond if fiscal policy momentum starts 0:12:51.360 --> 0:12:54.480 to slow. That's going to be a more difficult chapter 0:12:54.640 --> 0:12:56.920 for the SAID. They're going to have to avoid any 0:12:56.960 --> 0:13:00.320 type of miscommunication where they acknowledge too much upside risk 0:13:00.360 --> 0:13:03.120 and and risk a paper tantrum that probably keeps her 0:13:03.200 --> 0:13:06.000 Powell awake at night. And how is he going to 0:13:06.040 --> 0:13:09.040 continue to emphasize that the real problem here is solvency, 0:13:09.080 --> 0:13:11.800 not liquidity, and the fiscal weaver has to be the 0:13:11.800 --> 0:13:14.240 one that comes into play. So up until now, it 0:13:14.280 --> 0:13:16.000 is very easy to give the FED, you know, a 0:13:16.120 --> 0:13:19.120 raise reviews. You know, they closed spreads, they avoided a 0:13:19.120 --> 0:13:22.400 credit crisis. But the challenging next act, I think is 0:13:22.400 --> 0:13:24.880 the one where a lot of central bankers are going 0:13:24.920 --> 0:13:27.160 to be a at night. So, Louis, what would be 0:13:27.160 --> 0:13:32.400 the question you'd want to ask J Powell right now? Um? 0:13:32.440 --> 0:13:34.880 I would want to ask him what is he doing 0:13:34.920 --> 0:13:38.400 with those what does he expect to do with US 0:13:38.400 --> 0:13:41.880 thirteen three programs? I think that's to me, that's the 0:13:41.880 --> 0:13:44.960 most immediate question. Another one, though, which I think would 0:13:44.960 --> 0:13:48.920 be important, is they are completing their strategy review. We've 0:13:49.000 --> 0:13:51.040 kind of forgotten about that a little bit in the 0:13:51.040 --> 0:13:54.760 wake of uh COVID nineteen, but that is something they're 0:13:54.760 --> 0:13:57.480 going to be completing in and over the next meeting 0:13:57.559 --> 0:14:00.000 or two. And how does that play into the decision 0:14:00.160 --> 0:14:02.800 is going forward? I agree very much with the way 0:14:02.840 --> 0:14:07.360 the previous speaker characterized the challenge and conning months um 0:14:07.480 --> 0:14:11.199 and to a certain extent, how that strategy review plays out. 0:14:11.240 --> 0:14:13.720 What does that imply about forward guidance? What does that 0:14:13.800 --> 0:14:17.200 imply about how they're going to apply their asset purchases, 0:14:17.600 --> 0:14:22.040 particularly as fiscal policy starts to contribute less in an 0:14:22.160 --> 0:14:24.480 environment where the economy is still a very long way 0:14:24.520 --> 0:14:26.880 from full employment. Uh, those are going to be big 0:14:26.920 --> 0:14:29.760 challenges for the FED. Be interesting to see what they're 0:14:29.800 --> 0:14:34.800 thinking about that at this point. And so, yeah, Francis, 0:14:34.880 --> 0:14:37.240 I mean, this whole question of unemployment, I feel like 0:14:37.320 --> 0:14:40.480 has been so much on our mind me jobs obviously, 0:14:40.640 --> 0:14:44.320 just given the eye poppy numbers that we've seen. And also, 0:14:44.480 --> 0:14:46.240 you know, you're starting to see a little bit more 0:14:46.280 --> 0:14:50.000 of a movement to ask the FED to be, if 0:14:50.040 --> 0:14:52.440 not more diligent, maybe a little bit more transparent about 0:14:52.480 --> 0:14:56.360 what they're doing with this unemployment gap, especially when it 0:14:56.400 --> 0:15:01.120 comes to white Americans versus Black Americans and doing a 0:15:01.120 --> 0:15:03.280 little bit more work or at least showing that they're 0:15:03.320 --> 0:15:05.440 doing a little bit more work. How much do you 0:15:05.560 --> 0:15:09.200 think that the fetcher will hear about that in questions 0:15:09.240 --> 0:15:11.240 and how much do you think he is is thinking 0:15:11.280 --> 0:15:14.520 and talking about that with colleagues. I'll be shocked if 0:15:14.560 --> 0:15:17.880 he doesn't get some questions on the topic as inequality. 0:15:17.920 --> 0:15:20.920 COVID nineteen shining a very bright light on this issue, 0:15:20.960 --> 0:15:24.240 along of course and civil unrest. There's unemployment rate, if 0:15:24.280 --> 0:15:28.400 you look at their projections, actually remains verily stufforingly high. 0:15:28.400 --> 0:15:30.600 Through one they still have a six and a half 0:15:30.640 --> 0:15:33.800 percent unemployment rate, which means they're aware people are going 0:15:33.840 --> 0:15:37.280 to be get going to be left behind, is still 0:15:37.320 --> 0:15:40.160 at nine point unemployment rate. There are going to be 0:15:40.200 --> 0:15:42.920 a lot of conversations that kind of come on the 0:15:43.000 --> 0:15:45.280 ends of what Janet Yellen talked about for years, which 0:15:45.320 --> 0:15:47.640 is that we have to let the economy run hot 0:15:47.920 --> 0:15:50.240 to soak up this excess labor and those have been 0:15:50.280 --> 0:15:52.960 most disadvantaged on the sidelines. We know that it is 0:15:53.000 --> 0:15:55.560 our most vulnerable workers who are most at risk of 0:15:55.600 --> 0:15:59.520 prolonged unemployment. So there's gonna be additional motivation here that 0:15:59.600 --> 0:16:03.400 aren't us about getting your inflation target sustainably and symmetrically 0:16:03.600 --> 0:16:06.320 at two percent, but also how do we rectify some 0:16:06.400 --> 0:16:09.160 of this inequality? And from the central Bank that basically 0:16:09.160 --> 0:16:12.720 has one very blunt tool monetary policy, it means lower 0:16:12.760 --> 0:16:16.280 for longer, Yeah, which is exactly what. That's really interesting 0:16:17.000 --> 0:16:19.960 observation because I feel like it feathers right into something 0:16:20.000 --> 0:16:21.920 we've been talking about with c e O s all 0:16:21.960 --> 0:16:24.000 the time, which is, you know, you have a lot 0:16:24.080 --> 0:16:26.200 of different things that that you can do and a 0:16:26.280 --> 0:16:28.960 lot of different things you have to think about, um, 0:16:29.200 --> 0:16:30.920 and you can't just think about all right, well I 0:16:30.920 --> 0:16:33.240 got it in the case of the CEO, just think 0:16:33.240 --> 0:16:35.600 about my shareholders. Like, this is more complicated. And I 0:16:35.640 --> 0:16:38.480 think if there's one thing we've learned over the past 0:16:38.480 --> 0:16:41.240 couple of weeks that this is an economic crisis as 0:16:41.320 --> 0:16:43.720 much as anything when it comes to inequality. Well, and 0:16:43.760 --> 0:16:45.120 I do think you know, we're going to come up 0:16:45.120 --> 0:16:47.560 on one year, right anniversary, you have the business roundtable 0:16:47.600 --> 0:16:49.880 saying we're people stakeholders, and we're gonna, you know, do 0:16:50.480 --> 0:16:53.040 a scorecard or report card in terms of what we've 0:16:53.040 --> 0:16:55.440 done in that first year. And this has been a 0:16:55.560 --> 0:16:58.360 rough yere. Let's remind everybody the headline that had met 0:16:58.800 --> 0:17:00.520 uh it was the fifth meeting of the year. We've 0:17:00.560 --> 0:17:04.320 had two emergency meetings, the FED pledging to maintain asset 0:17:04.320 --> 0:17:07.040 purchases at at least the current pace and projected interest 0:17:07.119 --> 0:17:11.639 rates will remain near zero through two is policymakers, I 0:17:11.680 --> 0:17:15.280 really look to support the economy's recovery from the virus 0:17:15.359 --> 0:17:19.920 and the subsequent recession. We're talking to Francis Donald at Manulife, 0:17:19.960 --> 0:17:23.000 Lewis Alexandra at Nomura. You know, I asked this of 0:17:23.119 --> 0:17:26.359 Louis Francis, what's the question you want to ask J Powell? 0:17:26.359 --> 0:17:31.639 Then I would really like to know how they're paying 0:17:31.680 --> 0:17:34.960 attention to medical data. Paula has talked at length about 0:17:35.000 --> 0:17:36.840 how they need to pay attention to the medical data. 0:17:36.880 --> 0:17:39.600 How does he look at some of the curves are following, 0:17:39.600 --> 0:17:42.159 some of the curbs have reaccelerated, and what about the 0:17:42.160 --> 0:17:44.440 curb outside of the United States? How did that lay 0:17:44.440 --> 0:17:46.800 on him? I know we've all forgotten, but we're in 0:17:46.840 --> 0:17:50.320 a pandemic that drove massive market moves and the greatest 0:17:50.359 --> 0:17:53.240 policy response we've ever seen. Seems like we're focused on 0:17:53.240 --> 0:17:55.240 other components here a little bit, but we still have 0:17:55.320 --> 0:17:57.359 to combine to back to the crux of the issue, 0:17:57.359 --> 0:18:00.800 which is are we still facing downward curve? And how 0:18:00.800 --> 0:18:03.359 did that medical outlook translate into the way power is 0:18:03.400 --> 0:18:08.639 thinking about monetary policy, and so Louis, you know, I 0:18:08.720 --> 0:18:11.160 go back to one of my initial reactions, and certainly 0:18:11.359 --> 0:18:13.840 the initial reaction from our own Kathleen Hayes, which is 0:18:13.880 --> 0:18:16.919 this whole notion of like, hey guys, we got this 0:18:17.040 --> 0:18:19.680 under control in terms of you know, close to zero 0:18:19.720 --> 0:18:22.439 through two. I know they can change their mind to 0:18:22.480 --> 0:18:25.520 the intimate that does seem like a long time from now. 0:18:27.560 --> 0:18:30.439 So if you look at the inflation forecast they've got, 0:18:30.600 --> 0:18:35.800 they've got core inflation well below two percent even out too, 0:18:36.480 --> 0:18:39.679 as as Francis mentioned, they've got an unemployment rate that 0:18:39.840 --> 0:18:43.040 is well above levels that we would can somewhat consider 0:18:43.119 --> 0:18:47.200 normal out through two. I think that interest rate at 0:18:47.240 --> 0:18:50.760 the effect of lower bound through that period is perfectly 0:18:50.800 --> 0:18:55.720 consistent with our other macroeconomic objectives. So I think there's 0:18:55.800 --> 0:18:59.359 no inconsistency there. And I do think on this broader 0:18:59.440 --> 0:19:03.720 question of of the what can the FIT do about 0:19:04.040 --> 0:19:08.520 um inequality, for instance, was exactly right. They have a 0:19:08.800 --> 0:19:11.680 they don't really have a tool that can address it directly, 0:19:12.280 --> 0:19:14.920 but I do think they can change the way they 0:19:15.000 --> 0:19:19.240 talk about what their employment objective is. Traditionally they've talked 0:19:19.240 --> 0:19:23.000 about essentially getting the unemployment rate to some to some level, 0:19:23.440 --> 0:19:26.800 that's consistent with nehru. You started to see this before 0:19:26.840 --> 0:19:31.359 COVID nineteen of the FED talking about they can it 0:19:31.440 --> 0:19:34.120 isn't clear that there's an unemployment rate that is too 0:19:34.119 --> 0:19:37.119 low for them, um and they can just run this 0:19:37.200 --> 0:19:41.520 economy hot uh and push in some sense labor markets 0:19:41.520 --> 0:19:44.960 a long way without creating inflation risks. And in some ways, 0:19:45.040 --> 0:19:47.520 I think you're going to hear that kind of message 0:19:47.520 --> 0:19:51.359 coming out of their long run review of strategy, because 0:19:51.400 --> 0:19:53.760 I think that's what was the conclusion they were reaching 0:19:53.800 --> 0:19:57.000 before COVID nineteen, and given everything that's happened in the 0:19:57.080 --> 0:19:59.960 last several months, I think they'll just reinforce that mess. 0:20:00.200 --> 0:20:03.520 But all of that is very much about keeping right 0:20:03.560 --> 0:20:06.520 slow for a very long time. Yeah. Well, last question, 0:20:06.560 --> 0:20:08.760 Francis you know, and it goes to something you know 0:20:08.800 --> 0:20:10.960 we were talking about and I think Jason talked about 0:20:10.960 --> 0:20:13.680 with you earlier. You know, this whole idea that Jason 0:20:13.720 --> 0:20:16.280 Powell in terms of how he's at Jason Powell, j 0:20:16.440 --> 0:20:19.720 pal Sorry, just give your promotion. J Powell. I mean 0:20:19.760 --> 0:20:23.359