1 00:00:02,400 --> 00:00:07,120 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:11,720 --> 00:00:13,640 Speaker 2: With your Fed decision is Mike McCaig. 3 00:00:14,920 --> 00:00:17,159 Speaker 3: There is no change to interest rate. There are a 4 00:00:17,320 --> 00:00:20,200 Speaker 3: number of small changes to the statement, but this is 5 00:00:20,320 --> 00:00:24,840 Speaker 3: not a CU in September announcement, the FEDS forward guidance 6 00:00:25,040 --> 00:00:28,800 Speaker 3: remains unchanged. Quote the Committee does not expect it will 7 00:00:28,840 --> 00:00:31,960 Speaker 3: be appropriate to reduce the target range until it has 8 00:00:32,040 --> 00:00:36,560 Speaker 3: gained greater confidence that inflation is moving sustainably toward two percent. 9 00:00:36,880 --> 00:00:40,760 Speaker 3: There's also no change in the overall assessment that economic 10 00:00:40,840 --> 00:00:44,760 Speaker 3: activity has continued to expand at a solid pace. All 11 00:00:44,800 --> 00:00:49,240 Speaker 3: of the adjustments are basically to adjectives. Job gains have moderated, 12 00:00:49,280 --> 00:00:53,760 Speaker 3: the statement says, instead of remains strong, Unemployment has moved 13 00:00:53,840 --> 00:00:58,200 Speaker 3: up but remains low. Inflation has eased over the past 14 00:00:58,280 --> 00:01:02,040 Speaker 3: year but remains somewhat element and in recent months there 15 00:01:02,080 --> 00:01:06,240 Speaker 3: has been some further progress toward the two percent inflation goal. 16 00:01:06,720 --> 00:01:09,440 Speaker 3: If there is a hint about the future, it's this. 17 00:01:10,080 --> 00:01:13,360 Speaker 3: Instead of saying risks to employment and inflation have moved 18 00:01:13,400 --> 00:01:17,280 Speaker 3: into better balance, the statement now says the Committee is 19 00:01:17,400 --> 00:01:20,679 Speaker 3: attentive to the risks on both sides of its dual mandate. 20 00:01:21,120 --> 00:01:24,800 Speaker 3: The decision was unanimous, and that's basically it. If there 21 00:01:24,840 --> 00:01:26,800 Speaker 3: is going to be a hint about a September move, 22 00:01:26,800 --> 00:01:28,559 Speaker 3: it's going to be up to Chairman Power. 23 00:01:28,720 --> 00:01:31,080 Speaker 2: The two part story, Mike McKay, This was the first part. 24 00:01:31,120 --> 00:01:33,399 Speaker 4: The second part starts at about twenty nine minutes with 25 00:01:33,440 --> 00:01:35,640 Speaker 4: that news conference in Chairman Powell. Let's get to the 26 00:01:35,640 --> 00:01:37,480 Speaker 4: equity market. We stay positive on the S and P 27 00:01:37,600 --> 00:01:40,080 Speaker 4: five hundred up by about one point five percent on 28 00:01:40,080 --> 00:01:42,360 Speaker 4: then that's that one hundred up by two point five 29 00:01:42,680 --> 00:01:44,640 Speaker 4: in the bond market yield to look a little something 30 00:01:44,720 --> 00:01:46,399 Speaker 4: like this, we've done about two basis points on a 31 00:01:46,440 --> 00:01:48,480 Speaker 4: ten year the move at the front end of the curve. 32 00:01:48,480 --> 00:01:50,640 Speaker 4: It's a small one, but notable, up by about two 33 00:01:50,640 --> 00:01:53,000 Speaker 4: basis points on a two year at four thirty eight 34 00:01:53,080 --> 00:01:55,000 Speaker 4: thirty two. I just want to get to those changes 35 00:01:55,000 --> 00:01:57,080 Speaker 4: that might McKee identified. If you go back to the 36 00:01:57,200 --> 00:02:01,000 Speaker 4: second paragraph of the June statement, line of that paragraph 37 00:02:01,040 --> 00:02:03,480 Speaker 4: read as follows, the economic outlook is uncertain and the 38 00:02:03,520 --> 00:02:06,800 Speaker 4: Committee remains highly attentive to inflation risk. If you go 39 00:02:06,840 --> 00:02:09,120 Speaker 4: to the second paragraph and the last line of the 40 00:02:09,160 --> 00:02:12,480 Speaker 4: statement that just dropped, the economic outlook is uncertain and 41 00:02:12,520 --> 00:02:15,280 Speaker 4: the Committee is attentive to the risk to both sides 42 00:02:15,600 --> 00:02:18,240 Speaker 4: of its dual mandate, and Lisa, this is the story 43 00:02:18,560 --> 00:02:20,679 Speaker 4: of the dual mandate and the risks around it coming 44 00:02:20,720 --> 00:02:23,639 Speaker 4: into balance. That looks like the way they formalized it 45 00:02:23,760 --> 00:02:25,440 Speaker 4: this time around in the statement, and I just wonder 46 00:02:25,440 --> 00:02:27,440 Speaker 4: how much the Shairman builds on that in the news 47 00:02:27,480 --> 00:02:28,600 Speaker 4: conference in twenty eight minutes. 48 00:02:28,639 --> 00:02:30,000 Speaker 1: I want to pick up on your point that the 49 00:02:30,000 --> 00:02:32,280 Speaker 1: bond market isn't moving that much. There's only an increase 50 00:02:32,320 --> 00:02:34,400 Speaker 1: of about two basis points on the front end. And 51 00:02:34,440 --> 00:02:38,360 Speaker 1: that is why exactly that they recognize the risk that 52 00:02:38,440 --> 00:02:40,000 Speaker 1: the labor market is one that they. 53 00:02:39,919 --> 00:02:40,760 Speaker 5: Have to care about. 54 00:02:41,160 --> 00:02:44,040 Speaker 1: This sets up Jackson Hole for him to come out 55 00:02:44,080 --> 00:02:46,960 Speaker 1: and change the framework, and then for September to be 56 00:02:47,040 --> 00:02:49,800 Speaker 1: that first rate cut. No one's changing that view based 57 00:02:49,840 --> 00:02:51,040 Speaker 1: on this particular statement. 58 00:02:51,120 --> 00:02:53,440 Speaker 4: The balance of risks has shifted, and you start to 59 00:02:53,480 --> 00:02:56,400 Speaker 4: appear see it appear just a little bit incrementally in 60 00:02:56,440 --> 00:02:59,799 Speaker 4: the statement. The decision rates unchanged. We're looking for a 61 00:02:59,800 --> 00:03:02,200 Speaker 4: move still in September. To Leasa's point, we still have 62 00:03:02,200 --> 00:03:04,480 Speaker 4: a news conference in front of us and Jackson holl 63 00:03:04,600 --> 00:03:06,639 Speaker 4: the ann you'll get together at Jackson holl Well, I 64 00:03:06,720 --> 00:03:08,840 Speaker 4: mean about a month away with us around a type 65 00:03:08,960 --> 00:03:10,560 Speaker 4: on place to say. The film of fed Vice Chair, 66 00:03:10,560 --> 00:03:12,280 Speaker 4: which a clamorat is with us, still with us, is 67 00:03:12,320 --> 00:03:14,120 Speaker 4: about Michael jpmulgan, Asset Management. 68 00:03:14,160 --> 00:03:14,280 Speaker 6: Rich. 69 00:03:14,280 --> 00:03:16,239 Speaker 4: It's good to see you, sir. Let's start with you. You 70 00:03:16,240 --> 00:03:18,160 Speaker 4: listen to Mike. You saw the changes in the statement. 71 00:03:18,320 --> 00:03:19,480 Speaker 4: What do you make of what we just heard? 72 00:03:20,000 --> 00:03:22,280 Speaker 7: Well, I'm a bit surprised, actually, I mean not with 73 00:03:22,320 --> 00:03:24,720 Speaker 7: the adjectives. They needed to change some adjectives up, but 74 00:03:24,760 --> 00:03:27,200 Speaker 7: I was a bit surprised about the reference to the 75 00:03:27,760 --> 00:03:31,040 Speaker 7: the attuned and attentive to the balanced outlook. 76 00:03:31,080 --> 00:03:32,160 Speaker 5: I mean, that's certainly correct. 77 00:03:32,200 --> 00:03:34,880 Speaker 7: The chair has been making that that point, but I 78 00:03:34,920 --> 00:03:37,840 Speaker 7: think it is relevant that they included it in the statement. 79 00:03:37,840 --> 00:03:41,920 Speaker 7: He will certainly, I think, reinforce it in the press conference, 80 00:03:41,960 --> 00:03:43,800 Speaker 7: and I think I do think it does tee up 81 00:03:43,880 --> 00:03:44,520 Speaker 7: Jackson Hole. 82 00:03:44,760 --> 00:03:46,520 Speaker 5: There'll be some more information before then. 83 00:03:46,920 --> 00:03:48,440 Speaker 6: I look at it, and this show is the best 84 00:03:48,440 --> 00:03:50,600 Speaker 6: one we've ever done. We've got Dudley with his important 85 00:03:50,640 --> 00:03:54,240 Speaker 6: Bloomberg opinion piece a couple number of days ago, and 86 00:03:54,360 --> 00:03:55,800 Speaker 6: I want to go to you on what you own, 87 00:03:55,840 --> 00:03:57,960 Speaker 6: which is the high ground on the x anty x 88 00:03:58,000 --> 00:04:01,360 Speaker 6: post debate. You've got the Economist magazine article you did 89 00:04:01,640 --> 00:04:04,720 Speaker 6: a year whatever ago. You've got your January twenty twenty 90 00:04:04,720 --> 00:04:08,760 Speaker 6: two context and consequence of speech. You want an ex 91 00:04:08,840 --> 00:04:10,960 Speaker 6: anti aspirational FED. 92 00:04:11,360 --> 00:04:12,320 Speaker 5: I don't hear that here. 93 00:04:12,520 --> 00:04:13,120 Speaker 6: They're waiting. 94 00:04:13,200 --> 00:04:16,280 Speaker 5: They're waiting, They're waiting, they are waiting. 95 00:04:16,320 --> 00:04:18,640 Speaker 7: I think they are. They are getting greater confidence. But 96 00:04:18,680 --> 00:04:20,880 Speaker 7: I think the key point not to toot my own 97 00:04:20,920 --> 00:04:25,240 Speaker 7: horn is my view all on it's okay along and 98 00:04:25,279 --> 00:04:27,200 Speaker 7: I think I've said so on this show, is that 99 00:04:27,279 --> 00:04:29,320 Speaker 7: the pal FED really the goal is to get inflation 100 00:04:29,400 --> 00:04:32,000 Speaker 7: to two points something and then they would start thinking 101 00:04:32,040 --> 00:04:34,880 Speaker 7: about the next step, which would be easy, not running 102 00:04:34,880 --> 00:04:37,640 Speaker 7: an easy policy, but removing restriction. So I do think 103 00:04:37,680 --> 00:04:39,920 Speaker 7: this is what we're seeing, and if we do get 104 00:04:39,920 --> 00:04:42,680 Speaker 7: the cut in Septembers, I think we and markets expect 105 00:04:42,720 --> 00:04:46,159 Speaker 7: it will be because they expect inflation x antes to 106 00:04:46,200 --> 00:04:47,000 Speaker 7: continue to fall. 107 00:04:47,120 --> 00:04:49,320 Speaker 6: What are we anywhere near that? I'm sorry, this is 108 00:04:49,360 --> 00:04:51,720 Speaker 6: an ex post FED. Going back to Arthur Burns, there 109 00:04:51,760 --> 00:04:53,599 Speaker 6: is data dependent as I've ever seen. 110 00:04:53,720 --> 00:04:56,560 Speaker 7: Yeah, they are data dependent, but I think that they 111 00:04:56,720 --> 00:05:00,520 Speaker 7: attenuated and focused on the statement today emphasize there's both 112 00:05:00,560 --> 00:05:03,200 Speaker 7: sides of the mandate. So I do think they're looking 113 00:05:03,240 --> 00:05:05,800 Speaker 7: at just the labor market as well as the inflation data. 114 00:05:06,040 --> 00:05:07,080 Speaker 5: Bob, what's your take on this. 115 00:05:07,200 --> 00:05:09,960 Speaker 1: It seems like it's less dubbish, a little bit more 116 00:05:09,960 --> 00:05:12,520 Speaker 1: balanced than you initially thought. Do you think this just 117 00:05:12,640 --> 00:05:15,080 Speaker 1: is trying to move as incrementally as possible. 118 00:05:15,600 --> 00:05:19,360 Speaker 8: I think they preserve full optionality heading into Jackson Hole. 119 00:05:19,760 --> 00:05:23,000 Speaker 8: I also think that central bankers are mindful of what 120 00:05:23,160 --> 00:05:26,080 Speaker 8: happened to the ECB earlier this year, where you could 121 00:05:26,080 --> 00:05:28,200 Speaker 8: have made the same argument, if you're going to go 122 00:05:28,279 --> 00:05:30,159 Speaker 8: next month, why not go this month? And then of 123 00:05:30,200 --> 00:05:34,160 Speaker 8: course you saw what happened. So I don't see too 124 00:05:34,279 --> 00:05:37,120 Speaker 8: much different than what we expected, other than they just 125 00:05:37,240 --> 00:05:41,039 Speaker 8: decided to maintain the full optionality. We'll see what happens 126 00:05:41,040 --> 00:05:44,120 Speaker 8: as we roll into September. We're still very much expecting 127 00:05:44,120 --> 00:05:45,760 Speaker 8: twenty five basis points in September. 128 00:05:45,920 --> 00:05:48,800 Speaker 4: No, doctor, if Runmack just writes in publishes with language 129 00:05:48,839 --> 00:05:50,360 Speaker 4: like this, it means the Fed will have to make 130 00:05:50,400 --> 00:05:53,560 Speaker 4: a more pronounced shift in language in September. I'm surprised 131 00:05:53,560 --> 00:05:56,039 Speaker 4: stocks are holding up well on this statement. Perhaps equities 132 00:05:56,040 --> 00:05:58,080 Speaker 4: of looking ahead to the news conference, the news conference 133 00:05:58,120 --> 00:06:01,040 Speaker 4: starts in about twenty four minutes to because I to say, 134 00:06:01,360 --> 00:06:04,640 Speaker 4: the FETTI is waiting for additional data. Can they even 135 00:06:04,760 --> 00:06:08,160 Speaker 4: articulate why inflation might reaccelerate from here? Can we pick 136 00:06:08,200 --> 00:06:10,400 Speaker 4: up on that question, Bob? Can you articulate the risk 137 00:06:10,400 --> 00:06:13,040 Speaker 4: surround inflation? Why might it reaccelerate from here? 138 00:06:13,720 --> 00:06:17,159 Speaker 8: Corporate profitability still looks great. We talked about S and 139 00:06:17,160 --> 00:06:20,600 Speaker 8: P five hundred earnings. They're coming in ahead of expectations. 140 00:06:21,000 --> 00:06:24,360 Speaker 8: You look at the guidance companies are giving you. They're 141 00:06:24,480 --> 00:06:28,960 Speaker 8: up twelve percent next quarter. So we're not in a recession. 142 00:06:29,360 --> 00:06:32,080 Speaker 8: We're slowing down in some parts of it. 143 00:06:33,040 --> 00:06:33,680 Speaker 5: We'll see. 144 00:06:34,120 --> 00:06:37,599 Speaker 8: You know, I can't find really the argument what's going 145 00:06:37,640 --> 00:06:39,800 Speaker 8: to cause inflation to reaccelerate, To be. 146 00:06:39,760 --> 00:06:42,599 Speaker 1: Honest, Rich, we were talking about how this was definitely 147 00:06:42,640 --> 00:06:45,160 Speaker 1: going to be unanimous, and I wonder how much of 148 00:06:45,360 --> 00:06:47,720 Speaker 1: wrangling of cats there is in the room and whether 149 00:06:47,720 --> 00:06:50,680 Speaker 1: this is basically a representation of that that there's some 150 00:06:50,880 --> 00:06:54,279 Speaker 1: members who believe that inflation has been killed, it is 151 00:06:54,360 --> 00:06:56,680 Speaker 1: nowhere in sight that labor is important. And then you 152 00:06:56,720 --> 00:06:59,320 Speaker 1: have others who say, well, you know, wait for the 153 00:06:59,400 --> 00:07:02,000 Speaker 1: year over year, cops. Is that kind of what we're 154 00:07:02,040 --> 00:07:02,679 Speaker 1: seeing here. 155 00:07:03,200 --> 00:07:04,400 Speaker 5: I think it could be an element. 156 00:07:04,440 --> 00:07:06,479 Speaker 7: You know, we've had some members of the committee, and 157 00:07:06,560 --> 00:07:08,400 Speaker 7: I know most of these folks, but it's a different 158 00:07:08,400 --> 00:07:10,320 Speaker 7: committee than the one I was on, and many of 159 00:07:10,360 --> 00:07:13,960 Speaker 7: them do emphasize both sides of the duel mandate. So 160 00:07:14,520 --> 00:07:17,760 Speaker 7: I'm sure that reflects a number of folks views. I 161 00:07:17,840 --> 00:07:21,400 Speaker 7: do think though, this is a committee that certainly got 162 00:07:21,440 --> 00:07:24,600 Speaker 7: burned earlier in this year because the inflation data went 163 00:07:24,640 --> 00:07:26,960 Speaker 7: the wrong way, and to their credit, they became very 164 00:07:27,080 --> 00:07:31,680 Speaker 7: data dependent, as Tom indicated. I think that they put 165 00:07:31,680 --> 00:07:33,400 Speaker 7: it this way. I think they think they're going to 166 00:07:33,400 --> 00:07:36,320 Speaker 7: go in September. There is a range of data where 167 00:07:36,320 --> 00:07:38,880 Speaker 7: they wouldn't, but I think it's a pretty small range, 168 00:07:38,920 --> 00:07:41,040 Speaker 7: and I think that's really the balance of trying to strike. 169 00:07:41,080 --> 00:07:42,840 Speaker 7: And I think we'll hear that in the press conference. 170 00:07:42,840 --> 00:07:47,000 Speaker 1: We were speaking earlier with James Bullard formally Saint Louis 171 00:07:47,040 --> 00:07:49,679 Speaker 1: fed and he was talking about how he always raised 172 00:07:49,680 --> 00:07:52,600 Speaker 1: the question at meetings that if you wanted to cut rates, 173 00:07:52,760 --> 00:07:55,200 Speaker 1: most certainly at the next meeting, why not cut him now. 174 00:07:55,240 --> 00:07:57,960 Speaker 1: Bob was sort of discussing that earlier, and it sets 175 00:07:58,040 --> 00:08:01,560 Speaker 1: up the sort of difficult period of time where every 176 00:08:01,680 --> 00:08:04,800 Speaker 1: data point could potentially upset the apple cart if it 177 00:08:04,840 --> 00:08:07,640 Speaker 1: doesn't comply. Do you think that they're in that zone 178 00:08:07,680 --> 00:08:08,080 Speaker 1: right now? 179 00:08:10,080 --> 00:08:10,760 Speaker 5: I don't really. 180 00:08:10,800 --> 00:08:12,760 Speaker 7: I mean I've certainly during my time on the committee 181 00:08:12,800 --> 00:08:15,160 Speaker 7: we found ourselves there a couple of times, so it 182 00:08:15,200 --> 00:08:19,120 Speaker 7: can happen. I think the data we have gotten, you know, 183 00:08:19,200 --> 00:08:22,640 Speaker 7: the chair did a lot of communication before blackout, and 184 00:08:22,680 --> 00:08:25,960 Speaker 7: the data since then has reinforced that view. So I 185 00:08:25,960 --> 00:08:28,080 Speaker 7: think there's a pretty wide range of data where they'll 186 00:08:28,080 --> 00:08:31,040 Speaker 7: feel comfortable going in September. 187 00:08:31,080 --> 00:08:32,520 Speaker 5: So I don't think they're in that danger zone. 188 00:08:32,559 --> 00:08:34,360 Speaker 4: Can you confind that Jim actually set those things to 189 00:08:34,440 --> 00:08:35,199 Speaker 4: the fmcs? 190 00:08:35,280 --> 00:08:37,520 Speaker 7: Well, of course I would never reveal what was said 191 00:08:37,559 --> 00:08:40,120 Speaker 7: in an fm C me except what I say, all 192 00:08:40,160 --> 00:08:41,560 Speaker 7: the brilliant things I said. 193 00:08:41,600 --> 00:08:45,200 Speaker 4: So Don Swage joins us now from KPMG, alongside form 194 00:08:45,200 --> 00:08:48,520 Speaker 4: of FET vice chair Rich Cloud above Michael F JP 195 00:08:48,679 --> 00:08:50,959 Speaker 4: Morgan done. I want to get into this statement that 196 00:08:51,040 --> 00:08:53,080 Speaker 4: came out about eight minutes ago. What do you make 197 00:08:53,120 --> 00:08:55,000 Speaker 4: of it? The incremental changes and when you're looking for 198 00:08:55,040 --> 00:08:58,720 Speaker 4: something bigger, I wasn't. 199 00:08:58,480 --> 00:09:00,319 Speaker 9: Looking for anything bigger, and I think one of the 200 00:09:00,360 --> 00:09:03,600 Speaker 9: key issues here is we saw Powell talk about in 201 00:09:03,640 --> 00:09:07,280 Speaker 9: his congressional testimony when pushed on the Jewel mandate. He said, listen, 202 00:09:07,440 --> 00:09:09,920 Speaker 9: this is the thing that keeps me up awake at night. 203 00:09:10,200 --> 00:09:12,320 Speaker 9: The number one thing that keeps me awake at night 204 00:09:12,640 --> 00:09:16,040 Speaker 9: is that overshooting, the overtightening. So that is in there, 205 00:09:16,360 --> 00:09:19,200 Speaker 9: and that is what opens the door a crack, not 206 00:09:19,320 --> 00:09:22,160 Speaker 9: wide open, which is what we expected for September. And 207 00:09:22,200 --> 00:09:23,880 Speaker 9: I do think they do think they're going to move 208 00:09:23,880 --> 00:09:27,240 Speaker 9: in September, and I agree wholeheartedly with rich on this. 209 00:09:27,480 --> 00:09:29,280 Speaker 9: I think the other issue is there's sort of this 210 00:09:29,400 --> 00:09:31,959 Speaker 9: tale of two economies we're seeing and merge out there, 211 00:09:32,120 --> 00:09:35,160 Speaker 9: the one that's in the household survey that's close to 212 00:09:35,360 --> 00:09:38,840 Speaker 9: but not yet triggered the PSALM rule, which is what 213 00:09:38,960 --> 00:09:42,479 Speaker 9: got Bill Dudley up in arms, and how weak employment 214 00:09:42,520 --> 00:09:45,600 Speaker 9: has been in the household survey and the establishment survey, 215 00:09:45,720 --> 00:09:49,720 Speaker 9: the GDP data, other jobs data that suggests the economy 216 00:09:49,840 --> 00:09:53,080 Speaker 9: is still on solid footing. And right now the Fed 217 00:09:53,160 --> 00:09:56,480 Speaker 9: has been opting into more of that establishment survey, where 218 00:09:56,520 --> 00:09:59,559 Speaker 9: payrolls have held up, although that they're not quite as 219 00:09:59,600 --> 00:10:02,360 Speaker 9: strong as they've been. We're going to get probably some 220 00:10:02,480 --> 00:10:06,640 Speaker 9: good public sector hiring in the jobs numbers on Friday again, 221 00:10:06,679 --> 00:10:10,000 Speaker 9: which will help boy those overall numbers adding to some 222 00:10:10,080 --> 00:10:13,200 Speaker 9: weakness in the private sector. But I think that's important 223 00:10:13,400 --> 00:10:15,760 Speaker 9: is that the FED is looking at this and their 224 00:10:15,800 --> 00:10:17,800 Speaker 9: wane which is the right stuff. 225 00:10:17,840 --> 00:10:19,199 Speaker 5: And you really getting. 226 00:10:18,880 --> 00:10:21,360 Speaker 9: To Rich's point too. There isn't just one piece of 227 00:10:21,440 --> 00:10:24,000 Speaker 9: data that the market keeps looking for that could tip 228 00:10:24,040 --> 00:10:27,160 Speaker 9: the apple cart. The FED is looking at the totality 229 00:10:27,480 --> 00:10:30,960 Speaker 9: of the data, and that last line really gets to 230 00:10:31,360 --> 00:10:35,280 Speaker 9: that point. The totality of the data will allow them 231 00:10:35,320 --> 00:10:39,040 Speaker 9: to go in September, and they don't want to make 232 00:10:39,080 --> 00:10:42,160 Speaker 9: the same mistake the ECB made move and then have 233 00:10:42,200 --> 00:10:45,360 Speaker 9: to freeze and be in a purgatory. Their credibility is 234 00:10:45,400 --> 00:10:48,440 Speaker 9: at stake. They want to make sure inflation is coming down. 235 00:10:48,520 --> 00:10:49,480 Speaker 5: But I agree with Rich. 236 00:10:49,640 --> 00:10:53,760 Speaker 9: They'll still cut before inflation reaches it's two percent target, 237 00:10:54,160 --> 00:10:58,640 Speaker 9: anticipating that the economy by lifting off that restriction, the 238 00:10:58,679 --> 00:11:00,360 Speaker 9: economy will get there. 239 00:11:00,559 --> 00:11:03,000 Speaker 6: We have swank and clarity with us. Bob Michael, maybe 240 00:11:03,000 --> 00:11:05,480 Speaker 6: a question for you on the economics of the moment. 241 00:11:05,880 --> 00:11:09,480 Speaker 6: Are we slaves to measure we have measured for decades. 242 00:11:09,520 --> 00:11:12,520 Speaker 6: We're being very measured, where maybe other central banks aren't. 243 00:11:13,120 --> 00:11:16,920 Speaker 6: Are we just just so afraid to move and we're 244 00:11:17,000 --> 00:11:20,840 Speaker 6: over careful, over cautious, because once we move, we've got 245 00:11:20,840 --> 00:11:22,280 Speaker 6: to move in a measured vector. 246 00:11:22,800 --> 00:11:25,199 Speaker 8: I feel like we're back to the green span FED, 247 00:11:25,559 --> 00:11:29,600 Speaker 8: where every word is so carefully thought out it makes 248 00:11:29,640 --> 00:11:33,000 Speaker 8: you want to overanalyze it and no one can give 249 00:11:33,000 --> 00:11:35,400 Speaker 8: an inch. If the wrong word is in there, then 250 00:11:35,440 --> 00:11:39,480 Speaker 8: the FOMA gets concerned about the market pricing and hundreds 251 00:11:39,480 --> 00:11:42,520 Speaker 8: of basis points of rate cuts and risk assets being 252 00:11:42,559 --> 00:11:47,240 Speaker 8: up tentskers. Okay, please, but we're talking about and rich 253 00:11:47,360 --> 00:11:51,400 Speaker 8: touched on it. We're in I think, very restrictive range 254 00:11:51,440 --> 00:11:54,720 Speaker 8: twenty five basis points. You're not in a loose monetary 255 00:11:54,760 --> 00:11:58,600 Speaker 8: world with money flooding all over the place. You're still restrictive. 256 00:11:58,880 --> 00:12:00,840 Speaker 8: You've got to start that journey somehore. 257 00:12:00,960 --> 00:12:03,800 Speaker 6: This is too important, Lawrence Meyer, Washington University. Is some 258 00:12:03,920 --> 00:12:06,160 Speaker 6: monograph a term at the FED to our green span 259 00:12:06,240 --> 00:12:09,360 Speaker 6: apart that it was a dictatorship? Are we getting to 260 00:12:09,400 --> 00:12:12,400 Speaker 6: the point now no one can dissent and everyone's measured 261 00:12:12,400 --> 00:12:13,920 Speaker 6: because we're measured and appropriate. 262 00:12:14,880 --> 00:12:17,080 Speaker 7: No, I think no one has descended because two years 263 00:12:17,080 --> 00:12:19,280 Speaker 7: ago inflation was too damn high and they all agree 264 00:12:19,280 --> 00:12:21,240 Speaker 7: they wanted to get it lower. It'll get more interesting 265 00:12:21,240 --> 00:12:22,800 Speaker 7: as we get close. But what I want to say 266 00:12:22,800 --> 00:12:26,200 Speaker 7: to invoke the Olympics, now, this is a FED that 267 00:12:26,280 --> 00:12:28,679 Speaker 7: really wants to stick the landing. You know, they won't 268 00:12:28,679 --> 00:12:32,120 Speaker 7: say this word, but their projection and what we're seeing 269 00:12:32,160 --> 00:12:35,600 Speaker 7: in Bloomberg Consensus and elsewhere is a soft landing and 270 00:12:35,640 --> 00:12:38,439 Speaker 7: they want to stick it. And you know, the data 271 00:12:38,520 --> 00:12:41,280 Speaker 7: is now solid, is moving in the right direction, and 272 00:12:41,320 --> 00:12:43,640 Speaker 7: so you know, getting back to the Green Span FED, 273 00:12:43,679 --> 00:12:46,080 Speaker 7: there was a soft landing or so in those years, 274 00:12:46,400 --> 00:12:49,640 Speaker 7: Alan Blinder is written. They're not common, but we do 275 00:12:49,720 --> 00:12:51,880 Speaker 7: see them. I think towards in twenty nineteen. I think 276 00:12:51,960 --> 00:12:54,600 Speaker 7: the Palfed got a soft landing. We don't see it 277 00:12:54,600 --> 00:12:56,640 Speaker 7: in the data because we got the pandemic. The Ecomomie 278 00:12:56,679 --> 00:12:58,479 Speaker 7: looked pretty good in January. 279 00:12:58,120 --> 00:13:00,480 Speaker 5: Of twenty twenty. So they're trying to stick the soft landing. 280 00:13:00,640 --> 00:13:03,680 Speaker 8: Forget about sticking the landing, Let's just throw them in 281 00:13:03,760 --> 00:13:05,200 Speaker 8: the seine the waters. 282 00:13:05,320 --> 00:13:11,960 Speaker 1: Thought there's another there's another analogy. Matt Hornback puts this 283 00:13:12,040 --> 00:13:15,040 Speaker 1: out earlier, and I'd love your thoughts on this, Diane. Basically, 284 00:13:15,120 --> 00:13:17,920 Speaker 1: the Olympic motto to carry on with this reads faster, higher, 285 00:13:17,960 --> 00:13:20,600 Speaker 1: stronger together could have been used to talk about central 286 00:13:20,640 --> 00:13:25,559 Speaker 1: banks globally altogether. Now it might be at more opper, boat, slower, lower, 287 00:13:25,720 --> 00:13:29,920 Speaker 1: weaker together. Diane, how much is that looming over this 288 00:13:30,000 --> 00:13:33,800 Speaker 1: FED meeting? The idea not of synchronized swimming or synchronized 289 00:13:33,880 --> 00:13:36,720 Speaker 1: rate cuts, but this idea of trying to sort of 290 00:13:37,440 --> 00:13:39,200 Speaker 1: take an edge off for the rest of the world. 291 00:13:39,200 --> 00:13:41,360 Speaker 1: That really does seem to be dealing a little bit 292 00:13:41,360 --> 00:13:42,960 Speaker 1: more with some negative growth. 293 00:13:45,480 --> 00:13:47,840 Speaker 9: I don't think that's the fed's main concern, and I'm 294 00:13:47,880 --> 00:13:49,880 Speaker 9: sure rich will backed me up on that. I remember 295 00:13:50,000 --> 00:13:53,720 Speaker 9: seeing Ben Bernaki actually go after another central banker said 296 00:13:53,920 --> 00:13:55,960 Speaker 9: you guys need to change your policy to help us out, 297 00:13:55,960 --> 00:13:58,400 Speaker 9: and he said that's not our problem, basically at a 298 00:13:58,480 --> 00:14:02,040 Speaker 9: Jackson Hole meetings. So that is not the fed's primary concern. 299 00:14:02,160 --> 00:14:05,360 Speaker 9: That said, a strong galer helps us out down the 300 00:14:05,440 --> 00:14:08,560 Speaker 9: road and keeping goods prices lower, so that helps the 301 00:14:08,600 --> 00:14:11,360 Speaker 9: FED out. I think what's more important here in terms 302 00:14:11,400 --> 00:14:14,600 Speaker 9: of the Olympic analogies, is that the road to gold 303 00:14:14,679 --> 00:14:18,200 Speaker 9: is often paved with tears and obstacles, and I think 304 00:14:18,400 --> 00:14:23,080 Speaker 9: people forget that. I'm thinking of Simone Biles here. 305 00:14:23,120 --> 00:14:23,600 Speaker 5: I'm sorry. 306 00:14:23,640 --> 00:14:26,040 Speaker 9: She's my hero and heroin at this point in time. 307 00:14:26,360 --> 00:14:29,480 Speaker 9: But I'm thinking about, you know, soft landings. People forget 308 00:14:30,240 --> 00:14:32,960 Speaker 9: the nineteen ninety four ninety five situation. It looks great 309 00:14:33,040 --> 00:14:34,640 Speaker 9: on paper. I lived it. 310 00:14:34,760 --> 00:14:36,440 Speaker 5: I remember it rich. You lived it too. 311 00:14:36,760 --> 00:14:41,480 Speaker 9: It was ugly at the time. Chairman Greenspan's reappointment as 312 00:14:41,560 --> 00:14:43,760 Speaker 9: his third term as FED chair was held up for 313 00:14:43,840 --> 00:14:47,520 Speaker 9: four months in nineteen ninety six because he nearly crashed 314 00:14:47,560 --> 00:14:50,240 Speaker 9: the economy in nineteen ninety five and people were so 315 00:14:50,480 --> 00:14:54,000 Speaker 9: angry at him for not easying sooner. And it was 316 00:14:54,040 --> 00:14:57,240 Speaker 9: his own colleagues, including Jennet Yellentt on the FED that 317 00:14:57,360 --> 00:15:01,880 Speaker 9: got him to experiment with pro activity, growth and intense 318 00:15:01,920 --> 00:15:05,960 Speaker 9: form competition that bringing down inflation and allowing the unemployment 319 00:15:06,040 --> 00:15:09,240 Speaker 9: rate to fall instead of using monetary policy. 320 00:15:08,880 --> 00:15:09,360 Speaker 5: To do it. 321 00:15:09,880 --> 00:15:13,760 Speaker 9: That is really important to remember is that soft landings 322 00:15:14,160 --> 00:15:18,400 Speaker 9: are not easy. They look good on paper, but getting 323 00:15:18,440 --> 00:15:20,640 Speaker 9: there can be a hard path. 324 00:15:20,880 --> 00:15:23,600 Speaker 4: Dan, Where does the confidence come? Where does it come from? 325 00:15:23,640 --> 00:15:27,640 Speaker 4: The unemployment stabilizes at these levels and doesn't carry on 326 00:15:27,680 --> 00:15:29,440 Speaker 4: shifting higher into year end? 327 00:15:29,760 --> 00:15:30,720 Speaker 2: What underpends that? 328 00:15:33,280 --> 00:15:35,840 Speaker 9: Well? I think I don't know if unemployment is going 329 00:15:35,880 --> 00:15:37,960 Speaker 9: to stay there or not. It often moves up slowly 330 00:15:38,040 --> 00:15:40,880 Speaker 9: and then moves up rapidly. Alls I know is that 331 00:15:41,280 --> 00:15:45,040 Speaker 9: even Claudia sam who wants to FED to cut right now, 332 00:15:45,440 --> 00:15:49,120 Speaker 9: has argue to her own rule might not be applicable 333 00:15:49,440 --> 00:15:53,120 Speaker 9: in the post pandemic economy because of all the changes 334 00:15:53,160 --> 00:15:55,960 Speaker 9: we've seen. We've seen much of the rise in unemployment 335 00:15:56,000 --> 00:15:58,800 Speaker 9: has come from more people seeking jobs, an increase in 336 00:15:58,840 --> 00:16:03,800 Speaker 9: the participation rately among primate workers. We've seen an influx 337 00:16:03,880 --> 00:16:07,200 Speaker 9: of foreign workers, foreign born workers accounting for over seventy 338 00:16:07,240 --> 00:16:10,480 Speaker 9: percent of the growth and civilian labor force since Februar 339 00:16:10,520 --> 00:16:13,960 Speaker 9: of twenty twenty. That's helped to buoy the unemployment rate 340 00:16:14,280 --> 00:16:17,240 Speaker 9: as opposed to a surge in layoffs. That doesn't mean 341 00:16:17,280 --> 00:16:20,560 Speaker 9: there aren't stresses in the labor market. That doesn't mean 342 00:16:20,680 --> 00:16:23,360 Speaker 9: there aren't still problems. But at the end of the day, 343 00:16:23,480 --> 00:16:26,040 Speaker 9: what is it that people complain most about. They can 344 00:16:26,280 --> 00:16:30,000 Speaker 9: complain most about the high level of prices still, and 345 00:16:30,040 --> 00:16:33,040 Speaker 9: that's something that the FED also has to keep in 346 00:16:33,080 --> 00:16:35,400 Speaker 9: front of its mind. And I think that's where we're 347 00:16:35,440 --> 00:16:38,040 Speaker 9: at at the end of the day. We don't want 348 00:16:38,080 --> 00:16:41,520 Speaker 9: to lose this and not hit that soft landing, but 349 00:16:41,600 --> 00:16:43,960 Speaker 9: it's a rocky road to get there. I think we're 350 00:16:44,040 --> 00:16:46,680 Speaker 9: still going to make it, given the fact that we 351 00:16:46,760 --> 00:16:51,800 Speaker 9: saw the positive of consumers pushed back in the second 352 00:16:51,880 --> 00:16:56,680 Speaker 9: quarter on price hikes, and retailers and producers capitulated. 353 00:16:57,000 --> 00:16:58,000 Speaker 5: They rolled back. 354 00:16:57,840 --> 00:17:01,280 Speaker 9: Prices on goods, and we saw a rebound in growth, 355 00:17:01,480 --> 00:17:04,800 Speaker 9: doubling the pace of the first quarter, driven in large 356 00:17:04,840 --> 00:17:09,000 Speaker 9: part by a rebound in consumer spending. That's the Goldilock 357 00:17:09,119 --> 00:17:11,879 Speaker 9: scenario towards a soft landing. 358 00:17:12,200 --> 00:17:15,080 Speaker 1: There's this issue, Bob. We're looking at market pricing, and 359 00:17:15,160 --> 00:17:17,639 Speaker 1: right now it seems like this is consensus that they 360 00:17:17,640 --> 00:17:20,120 Speaker 1: are going to land the soft landing, even though it 361 00:17:20,240 --> 00:17:24,080 Speaker 1: is sort of a rarity or a white elephant. Do 362 00:17:24,119 --> 00:17:26,399 Speaker 1: you think that the market has overpriced that soft landing 363 00:17:26,680 --> 00:17:30,919 Speaker 1: or even underpriced it because the internal skepticism just keeps. 364 00:17:30,680 --> 00:17:33,639 Speaker 8: On roaring Now, I think the markets are right on 365 00:17:33,760 --> 00:17:37,440 Speaker 8: track with the soft landing, and if it in fact happens, 366 00:17:37,480 --> 00:17:40,159 Speaker 8: the FED can bring down rates a fair amount and 367 00:17:40,200 --> 00:17:44,840 Speaker 8: the markets will continue to appreciate. I think what's different 368 00:17:44,920 --> 00:17:49,080 Speaker 8: this time is the FED and investors have a lot 369 00:17:49,160 --> 00:17:52,240 Speaker 8: more real time information. I was around in ninety four 370 00:17:52,359 --> 00:17:55,919 Speaker 8: ninety five. I was around in eighty one and you 371 00:17:56,000 --> 00:17:59,760 Speaker 8: didn't have that information, and now you have it. It's 372 00:17:59,800 --> 00:18:02,440 Speaker 8: real time, it's live. You can see what's going on. 373 00:18:02,880 --> 00:18:06,639 Speaker 8: Businesses have it, households have it. And maybe it gives 374 00:18:07,280 --> 00:18:10,800 Speaker 8: policymakers a false sense of comfort, but they have that 375 00:18:10,960 --> 00:18:12,520 Speaker 8: sense of comfort, which. 376 00:18:12,320 --> 00:18:14,600 Speaker 1: Really kind of leaves the market kind of in the way, 377 00:18:15,400 --> 00:18:17,240 Speaker 1: sort of in the same boat that the FED is in. 378 00:18:17,280 --> 00:18:19,480 Speaker 1: And I wonder, rich you know, if you were still 379 00:18:19,520 --> 00:18:21,679 Speaker 1: on the Fed, how much the FED looks at the 380 00:18:21,720 --> 00:18:24,959 Speaker 1: market to kind of gauge progress sort of follows them, 381 00:18:25,000 --> 00:18:27,560 Speaker 1: if you will, because they are gauging real time data. 382 00:18:27,600 --> 00:18:29,439 Speaker 1: And if anything, this is the collective will. And I 383 00:18:29,560 --> 00:18:32,600 Speaker 1: love the war stories from the mid nineteen fifties for everybody, 384 00:18:32,600 --> 00:18:34,359 Speaker 1: but I wonder if you know, if that's something that 385 00:18:34,359 --> 00:18:36,520 Speaker 1: they could really kind of sink their teeth into. 386 00:18:36,840 --> 00:18:39,600 Speaker 7: Oh sure, well, I mean, I'll just speak for myself. 387 00:18:39,680 --> 00:18:43,119 Speaker 7: But you're looking at the market hopefully to try to 388 00:18:43,160 --> 00:18:43,919 Speaker 7: extract signal. 389 00:18:43,960 --> 00:18:44,800 Speaker 5: There's always noise. 390 00:18:44,840 --> 00:18:48,160 Speaker 7: You have to be honest with yourself, but it's particularly 391 00:18:48,160 --> 00:18:52,280 Speaker 7: irrelevant for things like the growth outlook and the inflation outlook. 392 00:18:53,000 --> 00:18:55,000 Speaker 5: You need to know what is being expected. 393 00:18:55,000 --> 00:18:58,800 Speaker 7: That's a key input to monetary policy, our expectations. I 394 00:18:58,840 --> 00:19:00,639 Speaker 7: gave one of my speeches at the FED was on 395 00:19:00,680 --> 00:19:03,400 Speaker 7: this point avoiding the hall of mirror problems by looking 396 00:19:03,400 --> 00:19:05,800 Speaker 7: at market prices. So I'm not saying it it's easy, 397 00:19:05,800 --> 00:19:07,359 Speaker 7: but I don't think there's an alternative. 398 00:19:07,400 --> 00:19:09,159 Speaker 4: I want to cross back over Todayne Dan, I know 399 00:19:09,200 --> 00:19:10,440 Speaker 4: you've got to go in a second. Just a quick 400 00:19:10,440 --> 00:19:13,480 Speaker 4: final word a question for Chairman Powell in this news conference, Dan, 401 00:19:13,560 --> 00:19:14,040 Speaker 4: what will it be? 402 00:19:16,400 --> 00:19:18,399 Speaker 9: Well, this is on communication, so I think it's going 403 00:19:18,440 --> 00:19:20,320 Speaker 9: to be very hard for the FED to communicate. We're 404 00:19:20,320 --> 00:19:23,000 Speaker 9: already seen financial markets are trying to front run the 405 00:19:23,040 --> 00:19:26,719 Speaker 9: FED on a larger cut in September. How do they 406 00:19:26,800 --> 00:19:30,120 Speaker 9: calibrate their communications to deal with what may be more 407 00:19:30,160 --> 00:19:31,480 Speaker 9: measured cuts? 408 00:19:31,480 --> 00:19:31,920 Speaker 2: Interesting? 409 00:19:32,040 --> 00:19:35,000 Speaker 4: Dan, Thank you as always, Dan Swamklair of KPMG. If 410 00:19:35,040 --> 00:19:36,840 Speaker 4: you are just joining us, welcome to the program. The 411 00:19:36,880 --> 00:19:40,320 Speaker 4: FED decision came out about twenty minutes ago, unchanged on 412 00:19:40,400 --> 00:19:43,639 Speaker 4: interest rates and the statement largely unchanged as well, just 413 00:19:43,680 --> 00:19:46,600 Speaker 4: some incremental changes. So the focus on the news conference now, 414 00:19:46,680 --> 00:19:49,200 Speaker 4: which starts at about ten minutes time with us joining 415 00:19:49,280 --> 00:19:50,960 Speaker 4: us now, and please to say as Mike Capen of 416 00:19:51,000 --> 00:19:54,040 Speaker 4: Bank for America, Michael, going into this news conference, very 417 00:19:54,040 --> 00:19:57,439 Speaker 4: incremental changes in that statement. Were you expecting more than 418 00:19:57,480 --> 00:19:58,240 Speaker 4: what they delivered? 419 00:20:00,320 --> 00:20:03,959 Speaker 10: No, I wasn't. I think with the strong growth numbers 420 00:20:04,000 --> 00:20:06,600 Speaker 10: we receive, the right place for them to make adjustments 421 00:20:06,680 --> 00:20:09,720 Speaker 10: is exactly where they did. Reflect it a little bit 422 00:20:09,760 --> 00:20:13,680 Speaker 10: in cooling labor market conditions, reflect a little bit more 423 00:20:13,720 --> 00:20:17,200 Speaker 10: progress on inflation, kind of pin down and nail down 424 00:20:17,240 --> 00:20:19,920 Speaker 10: that balance of risks argument, because that's what the share 425 00:20:20,000 --> 00:20:22,760 Speaker 10: had said in front of Congress. So I think this 426 00:20:22,920 --> 00:20:26,200 Speaker 10: was the right incremental move. I think the Fed feels 427 00:20:26,240 --> 00:20:28,720 Speaker 10: that it's in a sweet spot right now that the 428 00:20:28,800 --> 00:20:32,160 Speaker 10: data is moving in its direction, so it's getting closer. 429 00:20:32,560 --> 00:20:36,040 Speaker 10: It just needs a little bit more and then that confidence, 430 00:20:36,119 --> 00:20:38,639 Speaker 10: that nebulous confidence may be there. So this is what 431 00:20:38,640 --> 00:20:41,520 Speaker 10: we were expecting. We weren't expecting a big lean in 432 00:20:41,560 --> 00:20:43,120 Speaker 10: either direction from the statement. 433 00:20:43,240 --> 00:20:44,919 Speaker 4: The market, as you know, Mike, has been looking for 434 00:20:44,960 --> 00:20:47,639 Speaker 4: September at a baby step towards that you and a 435 00:20:47,640 --> 00:20:50,919 Speaker 4: team have been looking for December. What separates you at 436 00:20:50,920 --> 00:20:53,360 Speaker 4: the moment, Michael, the data that backs up your view. 437 00:20:53,359 --> 00:20:55,199 Speaker 4: What separates you from the rest of the street at 438 00:20:55,200 --> 00:20:55,560 Speaker 4: the moment. 439 00:20:57,560 --> 00:21:01,200 Speaker 10: Well, I'd say we have less concern about downside risk 440 00:21:01,280 --> 00:21:04,439 Speaker 10: to the economy. We certainly are watching for it and 441 00:21:04,480 --> 00:21:07,600 Speaker 10: looking out for that. We may be wrong on this view, 442 00:21:07,640 --> 00:21:10,600 Speaker 10: but the economy grew at a pretty solid pace in 443 00:21:10,640 --> 00:21:13,960 Speaker 10: the second quarter, and yes, things are moderating and cooling, 444 00:21:14,000 --> 00:21:16,040 Speaker 10: but I still think that there's a lot of resilience 445 00:21:16,560 --> 00:21:20,240 Speaker 10: to both the economy and labor markets. And we'll see. 446 00:21:20,240 --> 00:21:23,840 Speaker 10: Maybe there's a little unevenness in this inflation story, but 447 00:21:23,880 --> 00:21:27,240 Speaker 10: certainly September, a September cut has moved a lot closer 448 00:21:27,359 --> 00:21:30,679 Speaker 10: to our baseline. So, yeah, we're still in December, but 449 00:21:31,000 --> 00:21:34,680 Speaker 10: we've got two employment reports and two inflation reports between 450 00:21:34,720 --> 00:21:38,439 Speaker 10: now and now, and then you know, further progress in 451 00:21:38,480 --> 00:21:41,560 Speaker 10: those two variables, a little bit weaker employment, kind of 452 00:21:41,600 --> 00:21:44,760 Speaker 10: repeats of what we just saw in June inflation that 453 00:21:44,840 --> 00:21:48,600 Speaker 10: could easily put a cut on the table in September. 454 00:21:48,680 --> 00:21:51,639 Speaker 10: So September can happen, but it may not. So I 455 00:21:51,640 --> 00:21:53,560 Speaker 10: think that's how i'd frame it right now, Michael. 456 00:21:53,359 --> 00:21:56,080 Speaker 1: Let's just put a bow on this. What does further 457 00:21:56,200 --> 00:21:59,360 Speaker 1: progress look like to you? In the two labor market reports, 458 00:21:59,400 --> 00:22:02,520 Speaker 1: the toy flation reads that we get until the next meeting. 459 00:22:04,440 --> 00:22:07,680 Speaker 10: Well, I think the labor market report is maybe a 460 00:22:07,720 --> 00:22:10,760 Speaker 10: little more asymmetric. You know, a strong report's probably not 461 00:22:10,920 --> 00:22:14,600 Speaker 10: going to prevent them from cutting, but obviously a week 462 00:22:14,680 --> 00:22:18,000 Speaker 10: one could. So if they feel the labor market is 463 00:22:18,040 --> 00:22:22,320 Speaker 10: softening more than they expect, they could go in that regard. Otherwise, 464 00:22:22,359 --> 00:22:25,080 Speaker 10: I think to your earlier question of what's going to 465 00:22:25,119 --> 00:22:27,960 Speaker 10: cause inflation to rise, I can't see it, I agree, 466 00:22:28,040 --> 00:22:30,600 Speaker 10: But I don't think what they can rule out right 467 00:22:30,640 --> 00:22:33,800 Speaker 10: now is that inflation settles in at a level that 468 00:22:33,880 --> 00:22:36,119 Speaker 10: feels a little uncomfortable for them. So I think, on 469 00:22:36,160 --> 00:22:38,320 Speaker 10: the margin, a little more evidence that no, we're not 470 00:22:38,359 --> 00:22:41,480 Speaker 10: going to get stuck with say core PCE in the 471 00:22:41,560 --> 00:22:44,679 Speaker 10: high twos. It does look like it's moving lower. So 472 00:22:44,840 --> 00:22:48,280 Speaker 10: one or two more reports that give them confidence about that, 473 00:22:48,560 --> 00:22:49,760 Speaker 10: then I think is probably enough. 474 00:22:49,880 --> 00:22:52,520 Speaker 4: Speaking of discomfort, we know a topic they're uncomfortable with, 475 00:22:52,600 --> 00:22:54,840 Speaker 4: and that's politics, and it comes up in this news conference. 476 00:22:54,880 --> 00:22:56,760 Speaker 2: We know what Chairman Power is going to do. He's 477 00:22:56,800 --> 00:22:57,600 Speaker 2: going to ignore it. 478 00:22:57,680 --> 00:22:59,679 Speaker 4: But there was a less sent to him by Senator 479 00:22:59,680 --> 00:23:02,080 Speaker 4: Warren Company and TK there's a quote in this let's 480 00:23:02,080 --> 00:23:05,639 Speaker 4: say the immediate press release read as follows, the failure 481 00:23:05,800 --> 00:23:07,920 Speaker 4: to cut rates would indicate that the FED is giving 482 00:23:07,960 --> 00:23:11,199 Speaker 4: into bullying and it's putting political considerations ahead of its 483 00:23:11,240 --> 00:23:15,200 Speaker 4: jull mandate to promote maximum employment and stable prices. So 484 00:23:15,240 --> 00:23:17,560 Speaker 4: you've got the Republicans saying, if you cut rights, it's political, 485 00:23:17,880 --> 00:23:20,080 Speaker 4: and you've got the Democrats saying, if you don't cut rights, 486 00:23:20,119 --> 00:23:22,280 Speaker 4: it's political. Sort of stuck in a rock and hard 487 00:23:22,320 --> 00:23:23,360 Speaker 4: place between the boat. 488 00:23:23,359 --> 00:23:26,080 Speaker 6: And what's important here, John, it's so so important is 489 00:23:26,119 --> 00:23:28,359 Speaker 6: that Richard Claret is one of the people that bought 490 00:23:28,400 --> 00:23:31,800 Speaker 6: history back to economics with his work at Columbia. I 491 00:23:31,920 --> 00:23:34,840 Speaker 6: sat at the FED with you in that magnificent library 492 00:23:35,280 --> 00:23:38,960 Speaker 6: of first editions, and Elizabeth Warren reached down and said, 493 00:23:39,000 --> 00:23:41,640 Speaker 6: take the book off the shelf. And I took Torsten 494 00:23:41,680 --> 00:23:44,520 Speaker 6: Veblin The Theory of the Leisure Class off the shelf, 495 00:23:44,560 --> 00:23:46,520 Speaker 6: and you and I were talking about it. This is 496 00:23:46,560 --> 00:23:50,240 Speaker 6: a few years back. That's what Senator Warren's talking about 497 00:23:50,600 --> 00:23:53,040 Speaker 6: is the Gilded Age. Are we in a gilded age 498 00:23:53,119 --> 00:23:56,080 Speaker 6: where the elites are talking only to the fancy people 499 00:23:56,480 --> 00:24:00,600 Speaker 6: and indirectly doing monetary policy only for the fans see people? 500 00:24:01,680 --> 00:24:05,159 Speaker 7: Well, no, And in one word, I think you know 501 00:24:05,200 --> 00:24:07,560 Speaker 7: the FED has the dual mandate, inflation was too high. 502 00:24:07,600 --> 00:24:09,040 Speaker 5: They're focused on both sides. 503 00:24:09,119 --> 00:24:12,240 Speaker 7: I think the economies in a place where it can 504 00:24:12,240 --> 00:24:16,959 Speaker 7: certainly adjust and wait another two months until the cuts command. 505 00:24:17,040 --> 00:24:19,280 Speaker 5: So I would push back on that. 506 00:24:19,480 --> 00:24:21,600 Speaker 4: Mike Cap, you push back, just how relevant is the 507 00:24:21,680 --> 00:24:23,480 Speaker 4: US selection and US politics? 508 00:24:25,480 --> 00:24:27,640 Speaker 10: Well, the way I would frame this, and I think 509 00:24:27,760 --> 00:24:31,560 Speaker 10: Rich would agree. I was formerly on staff at the board, 510 00:24:31,600 --> 00:24:34,560 Speaker 10: and I learned quickly that no matter what you do 511 00:24:34,800 --> 00:24:37,919 Speaker 10: or don't do, somebody is going to be upset, and 512 00:24:37,960 --> 00:24:40,840 Speaker 10: one side will complain or the other will complain. So 513 00:24:40,880 --> 00:24:43,320 Speaker 10: I think you learned quickly the best thing to do 514 00:24:44,000 --> 00:24:46,560 Speaker 10: is to do what you think is right. So I 515 00:24:47,400 --> 00:24:50,440 Speaker 10: would put it at that. So they have competing opinions here, 516 00:24:50,800 --> 00:24:52,199 Speaker 10: the right thing to do is to do what they 517 00:24:52,200 --> 00:24:52,720 Speaker 10: feels right. 518 00:24:52,800 --> 00:24:54,960 Speaker 4: Michael finished with the same question I finished with Diane 519 00:24:54,960 --> 00:24:58,000 Speaker 4: Swamp questions for the chairman. If Michael McKay's listening going 520 00:24:58,040 --> 00:25:00,000 Speaker 4: into this news conference, what's the number one question for you? 521 00:25:02,000 --> 00:25:03,959 Speaker 10: Well, the chair is said that they could ease if 522 00:25:03,960 --> 00:25:07,120 Speaker 10: there's unexpected weakness in the labor market, which is actual 523 00:25:07,200 --> 00:25:10,240 Speaker 10: data that comes in below their expectation. But what about 524 00:25:10,240 --> 00:25:14,960 Speaker 10: preemptive using on the risk of labor market weakening. I 525 00:25:14,960 --> 00:25:17,680 Speaker 10: think that might get the gap between market pricing and 526 00:25:17,760 --> 00:25:19,359 Speaker 10: what the Fed thinks that will deliver. 527 00:25:19,560 --> 00:25:22,359 Speaker 4: Mike Gapin, Thank you, sir, Michael Gapin there Bank for America. 528 00:25:22,480 --> 00:25:24,520 Speaker 4: The news conference about five minutes away. 529 00:25:24,800 --> 00:25:25,320 Speaker 2: But there is a. 530 00:25:25,359 --> 00:25:27,400 Speaker 4: Question here about what kind of interest rate it would 531 00:25:27,440 --> 00:25:30,119 Speaker 4: be when we get one, if we get one in September. 532 00:25:30,280 --> 00:25:32,680 Speaker 4: Is it a risk management decision? Is it a mid 533 00:25:32,760 --> 00:25:36,040 Speaker 4: cycle adjustment the beginning of something much bigger than that? 534 00:25:36,080 --> 00:25:37,920 Speaker 4: Do you think they have to frame it at this point? 535 00:25:37,960 --> 00:25:40,159 Speaker 4: Do they think they have to characterize what it might be? 536 00:25:41,280 --> 00:25:43,760 Speaker 8: I think they do, and I think they'd like it 537 00:25:43,800 --> 00:25:48,320 Speaker 8: to be part of the normalization process. That they've achieved 538 00:25:48,440 --> 00:25:51,879 Speaker 8: their targets on both sides of their dual mandate, and 539 00:25:51,960 --> 00:25:55,160 Speaker 8: they could start to bring down what is a restrictive policy. 540 00:25:55,800 --> 00:26:00,760 Speaker 6: Michael Gabin echoed your speech of January two twenty two. 541 00:26:00,840 --> 00:26:04,600 Speaker 6: It's about ex ante aspiration. I don't want you to 542 00:26:04,680 --> 00:26:07,480 Speaker 6: voice for the chairman. I know that's inappropriate, but how 543 00:26:07,520 --> 00:26:11,720 Speaker 6: does he voice the aspiration of getting out front here 544 00:26:11,760 --> 00:26:13,159 Speaker 6: in six seven minutes? 545 00:26:14,359 --> 00:26:16,760 Speaker 7: Well, I think he'll stick to the mandate and he'll 546 00:26:16,800 --> 00:26:21,480 Speaker 7: stick to documenting the progress, and again he won't use 547 00:26:21,520 --> 00:26:24,640 Speaker 7: the word soft landing, although that's I think what they're 548 00:26:24,640 --> 00:26:27,920 Speaker 7: trying to, what they're trying to achieve, and I think 549 00:26:27,960 --> 00:26:31,120 Speaker 7: Governor Waller's done a very effective job as many speeches 550 00:26:31,160 --> 00:26:36,119 Speaker 7: in making the point that they have time because the 551 00:26:36,200 --> 00:26:38,720 Speaker 7: data is holding up quite well. You know, it was 552 00:26:38,760 --> 00:26:40,720 Speaker 7: a very bold call a couple of years ago for 553 00:26:40,800 --> 00:26:43,600 Speaker 7: Waller to say we can disinflate without this huge pain 554 00:26:43,680 --> 00:26:46,000 Speaker 7: in the labor market. I think they were prepared to 555 00:26:46,040 --> 00:26:48,199 Speaker 7: take it if it was required. It hasn't happened, So 556 00:26:48,320 --> 00:26:51,919 Speaker 7: now I think they're even more focused on the soft landing, 557 00:26:51,960 --> 00:26:54,359 Speaker 7: and I do think they do want to avoid a 558 00:26:54,400 --> 00:26:59,440 Speaker 7: premature declaration of mission accomplished, because even if underlying inflations 559 00:26:59,440 --> 00:27:02,000 Speaker 7: are going to target, there's always noise in the data, 560 00:27:02,000 --> 00:27:03,600 Speaker 7: and two or three months of noise in the wrong 561 00:27:03,720 --> 00:27:05,480 Speaker 7: side is a bit uncomfortable. 562 00:27:05,720 --> 00:27:08,600 Speaker 1: Rich there's this feeling baked into markets that Vecho J. 563 00:27:08,720 --> 00:27:11,920 Speaker 1: Powell is much more dubvish than the statement might suggest. 564 00:27:12,240 --> 00:27:14,440 Speaker 1: Are you expecting that tone to kind of come out 565 00:27:14,480 --> 00:27:15,320 Speaker 1: in the news conference? 566 00:27:16,359 --> 00:27:16,800 Speaker 5: Interesting? 567 00:27:16,800 --> 00:27:19,120 Speaker 7: You know, we heard a lot from Chair Powell at 568 00:27:19,119 --> 00:27:22,960 Speaker 7: CenTra on Capitol Hill, sitting down at the Economic. 569 00:27:22,560 --> 00:27:25,120 Speaker 5: Club of DC. I've gone through and looked at that. 570 00:27:25,680 --> 00:27:28,199 Speaker 7: I would actually expect him to stick pretty close to 571 00:27:28,280 --> 00:27:32,000 Speaker 7: that which which was very balanced, not declaring victory but 572 00:27:32,040 --> 00:27:36,639 Speaker 7: acknowledging progress, emphasizing, as the statement does today, that they 573 00:27:36,640 --> 00:27:38,880 Speaker 7: are really attuned and attentive to both sides of. 574 00:27:38,840 --> 00:27:40,480 Speaker 5: The duel mandate. You know. 575 00:27:40,520 --> 00:27:42,320 Speaker 7: So there are some times where I think the press 576 00:27:42,359 --> 00:27:45,040 Speaker 7: conference is really the chair using a lot of this 577 00:27:45,119 --> 00:27:47,040 Speaker 7: is what I think. I think we'll hear a lot 578 00:27:47,040 --> 00:27:50,000 Speaker 7: of this is what we think today. The Committee's pretty 579 00:27:50,040 --> 00:27:52,680 Speaker 7: tight tightly aligned on where they are. 580 00:27:52,840 --> 00:27:54,200 Speaker 1: Bob, what are you listening for today? 581 00:27:56,600 --> 00:27:59,800 Speaker 8: I actually think he will come out a bit more dubbish. 582 00:28:00,040 --> 00:28:03,280 Speaker 8: I think that's the way he's rolled the last several meetings. 583 00:28:03,600 --> 00:28:08,920 Speaker 8: He's surprised us by deviating from the script and indicating that, yeah, 584 00:28:08,960 --> 00:28:12,159 Speaker 8: you know, he could see rate cuts on the horizon. 585 00:28:13,119 --> 00:28:16,000 Speaker 8: I can't take my eyes off of the last sentence 586 00:28:16,080 --> 00:28:20,040 Speaker 8: in the second paragraph, where the committee is attentive to 587 00:28:20,080 --> 00:28:24,000 Speaker 8: the risk of both sides of its dual mandate. I 588 00:28:24,119 --> 00:28:28,000 Speaker 8: got what I wanted at least, which is acknowledgement of 589 00:28:28,160 --> 00:28:31,040 Speaker 8: risks in the labor market. The more I look at that, 590 00:28:31,119 --> 00:28:34,359 Speaker 8: the more it's clear to me that they're going in September. 591 00:28:34,520 --> 00:28:37,160 Speaker 8: If I were Mike McKee, a lot of people try 592 00:28:37,200 --> 00:28:39,640 Speaker 8: to press the Fed on what their neutral long term 593 00:28:39,720 --> 00:28:43,560 Speaker 8: rate is, I would ask him, at what level is 594 00:28:43,600 --> 00:28:46,360 Speaker 8: the FED funds rate no longer restrictive? 595 00:28:46,840 --> 00:28:47,880 Speaker 2: Do you think they can answer that? 596 00:28:47,960 --> 00:28:51,560 Speaker 5: Rich Well, I think they won't answer that. 597 00:28:51,800 --> 00:28:53,840 Speaker 7: I think they have, and this is one of their 598 00:28:53,840 --> 00:28:57,720 Speaker 7: probably nineteen different opinions on the committee. One thing I'll 599 00:28:57,760 --> 00:28:59,800 Speaker 7: say a little bit is right now, as I look 600 00:28:59,840 --> 00:29:02,440 Speaker 7: at my Bloomberg screen or I did twenty five minutes ago, 601 00:29:03,160 --> 00:29:07,040 Speaker 7: September was more than one hundred percent priced. And even 602 00:29:07,080 --> 00:29:10,040 Speaker 7: I wouldn't say it's one hundred percent. There are there's 603 00:29:10,120 --> 00:29:12,120 Speaker 7: data we could get between now and then that where 604 00:29:12,120 --> 00:29:14,240 Speaker 7: they might not go. So that's why I skeel a 605 00:29:14,280 --> 00:29:16,160 Speaker 7: little bit to being a little bit more balanced than 606 00:29:16,160 --> 00:29:16,840 Speaker 7: maybe Dubvish. 607 00:29:16,880 --> 00:29:18,040 Speaker 5: But you know, we'll find out. 608 00:29:18,120 --> 00:29:20,280 Speaker 4: I'm pleasing you brought up Central Portugal because I think 609 00:29:20,320 --> 00:29:22,400 Speaker 4: it's really important to reflect on the comments from chem 610 00:29:22,480 --> 00:29:25,120 Speaker 4: and Power back in Central Portugal at the ECPs, and 611 00:29:25,160 --> 00:29:27,240 Speaker 4: you'll get together. Chem and Power was talking about the 612 00:29:27,280 --> 00:29:29,480 Speaker 4: strength of the labor market and the strength of the 613 00:29:29,560 --> 00:29:32,040 Speaker 4: labor market being a reason for them to wait, that 614 00:29:32,080 --> 00:29:34,640 Speaker 4: they have time, they can wait and see a few 615 00:29:34,640 --> 00:29:35,440 Speaker 4: more months of data. 616 00:29:35,440 --> 00:29:35,920 Speaker 2: Maybe. 617 00:29:36,040 --> 00:29:38,960 Speaker 4: And it's his characterization again in this news conference of 618 00:29:38,960 --> 00:29:40,760 Speaker 4: the labor market that I think is matters. Off the 619 00:29:40,800 --> 00:29:43,240 Speaker 4: back of that incremental change in the statement that you're 620 00:29:43,240 --> 00:29:45,440 Speaker 4: all picking up on around the table, that last line 621 00:29:45,480 --> 00:29:48,240 Speaker 4: of the second paragraph. You've seen this incrementally in the 622 00:29:48,240 --> 00:29:50,080 Speaker 4: FED speeches over the last few weeks, lease of the 623 00:29:50,160 --> 00:29:53,400 Speaker 4: last month. They've placing greater emphasis on the other side 624 00:29:53,400 --> 00:29:55,720 Speaker 4: of the mandate in a way that it wasn't even 625 00:29:55,720 --> 00:29:57,640 Speaker 4: part of the conversation a year or so ago. Think 626 00:29:57,640 --> 00:30:00,680 Speaker 4: about where we've come from two years ago. Jackson Hole, 627 00:30:00,920 --> 00:30:05,360 Speaker 4: August twenty twenty two, Pain pain to get inflation down. 628 00:30:05,440 --> 00:30:08,440 Speaker 4: The focus was getting inflation down. You can start to 629 00:30:08,480 --> 00:30:10,320 Speaker 4: hear the focus shifting to the labor market.