1 00:00:04,840 --> 00:00:08,799 Speaker 1: This is Bloomberg Surveillance with Tom Keane, Jonathan Perrow, and 2 00:00:08,840 --> 00:00:11,319 Speaker 1: Lisa Abramowitz on Bloomberg Radio. 3 00:00:11,840 --> 00:00:14,880 Speaker 2: This was operation Say Nothing, where you basically repeat data 4 00:00:14,960 --> 00:00:17,520 Speaker 2: dependent over and over again but didn't say which data, 5 00:00:17,600 --> 00:00:20,040 Speaker 2: and then you basically had a little bit for everybody 6 00:00:20,079 --> 00:00:24,240 Speaker 2: basically saying they are concerned about inflation, but recognizing that 7 00:00:24,320 --> 00:00:27,760 Speaker 2: inflation has come in somewhat. This was operation do no 8 00:00:27,880 --> 00:00:30,000 Speaker 2: harm and say nothing and get out of there as 9 00:00:30,040 --> 00:00:31,440 Speaker 2: quickly as possible, which she just did. 10 00:00:31,520 --> 00:00:34,800 Speaker 3: Highly repetitive, sometimes tedious in a bond market, be able 11 00:00:34,800 --> 00:00:38,320 Speaker 3: to well hire going into this decision lower following get 12 00:00:38,320 --> 00:00:40,120 Speaker 3: the two ye yield is down Tom by about three 13 00:00:40,200 --> 00:00:42,120 Speaker 3: or four basis points in a bond market right now 14 00:00:42,200 --> 00:00:44,360 Speaker 3: TK four eighty three natty one. 15 00:00:44,320 --> 00:00:46,080 Speaker 1: Some yield was as good as a Gini smile like 16 00:00:46,159 --> 00:00:48,199 Speaker 1: the New York Times pulling the Barbie movie here to 17 00:00:48,240 --> 00:00:52,000 Speaker 1: give us the spirit of the American economy. January thirty one, 18 00:00:52,159 --> 00:00:55,640 Speaker 1: two thousand and twenty four. Is he going to have 19 00:00:55,680 --> 00:01:00,200 Speaker 1: a leguard like press conference first of the year the 20 00:01:00,240 --> 00:01:04,680 Speaker 1: Fed like tomorrow's laguard press conference if he gets a 21 00:01:04,720 --> 00:01:07,839 Speaker 1: GDP slow down, as we heard Bob Michael and Andrew 22 00:01:07,840 --> 00:01:12,400 Speaker 1: Hollenhorst talk about I'm fascinated about the luxury he has 23 00:01:12,520 --> 00:01:16,080 Speaker 1: right now of a buoyant American economy and if that 24 00:01:16,200 --> 00:01:20,080 Speaker 1: drifts away, I'm not predicting that. But if that drifts away, John, 25 00:01:20,600 --> 00:01:22,440 Speaker 1: is it laguard like in January? 26 00:01:22,520 --> 00:01:24,000 Speaker 4: He is predicting it won't drift away. 27 00:01:24,200 --> 00:01:25,240 Speaker 1: Yes, very much. 28 00:01:25,280 --> 00:01:28,960 Speaker 3: The Fed staff is saying no recession in their forecast. 29 00:01:29,000 --> 00:01:31,880 Speaker 3: Germany is living one currently. On the balance of risk 30 00:01:31,920 --> 00:01:33,440 Speaker 3: around the economy, take a listen to what the Fed 31 00:01:33,520 --> 00:01:34,640 Speaker 3: chairman had to say. 32 00:01:35,560 --> 00:01:37,280 Speaker 5: It's really a question of how do you balance the 33 00:01:37,280 --> 00:01:39,280 Speaker 5: two risks, the risk of doing too much or doing 34 00:01:39,319 --> 00:01:43,000 Speaker 5: too little? And you know, I would say that, you know, 35 00:01:43,040 --> 00:01:45,240 Speaker 5: we're coming to a place where where there really are 36 00:01:45,360 --> 00:01:47,880 Speaker 5: risks on both sides. It's hard to say exactly whether 37 00:01:47,960 --> 00:01:51,160 Speaker 5: whether they're in balance or not. But as our stances 38 00:01:51,200 --> 00:01:54,880 Speaker 5: become more restrictive and inflation moderates, we do increasingly face 39 00:01:54,920 --> 00:01:55,360 Speaker 5: that risk. 40 00:01:56,400 --> 00:01:59,160 Speaker 3: If you ask that question twelve months ago, the answer 41 00:01:59,200 --> 00:02:01,600 Speaker 3: was obvious. What's the biggest risk right now? Doing too much? 42 00:02:01,640 --> 00:02:03,320 Speaker 3: Doing too little? They would have told you straight off 43 00:02:03,320 --> 00:02:05,640 Speaker 3: the bat, The biggest risk right now is doing too little. 44 00:02:05,680 --> 00:02:07,880 Speaker 3: We need to hike, hike fifty, go even more than 45 00:02:07,960 --> 00:02:11,200 Speaker 3: that TK. The further along you get into this journey 46 00:02:11,240 --> 00:02:14,200 Speaker 3: of Chairman Powll and co. The less obvious the answer 47 00:02:14,240 --> 00:02:17,400 Speaker 3: to that he comes. And we're at that point right now. 48 00:02:17,480 --> 00:02:20,280 Speaker 1: We're post pandemic without a theory. And if you're at 49 00:02:20,320 --> 00:02:23,000 Speaker 1: Berkeley taking your PhD, maybe you can figure out a 50 00:02:23,040 --> 00:02:26,920 Speaker 1: theory post pandemic. But I don't see it. William Dudley 51 00:02:27,000 --> 00:02:29,359 Speaker 1: joins us now. He's a former New York Fed president, 52 00:02:29,720 --> 00:02:32,920 Speaker 1: has the immense advantages of years with Ed McKelvey doing 53 00:02:33,040 --> 00:02:36,760 Speaker 1: market economics at Golden Seachs. We're thrilled that doctor Dudley 54 00:02:36,760 --> 00:02:39,040 Speaker 1: could join us this morning. Bill, we got to wake 55 00:02:39,080 --> 00:02:44,000 Speaker 1: everybody up after a summer press conference. You ancient pass Bill, 56 00:02:44,080 --> 00:02:48,000 Speaker 1: This is twenty thirty days ago. The great US Treasury 57 00:02:48,120 --> 00:02:51,839 Speaker 1: bound route is far from over. What I have not 58 00:02:52,040 --> 00:02:55,880 Speaker 1: heard today is a discussion about higher interest rates. What 59 00:02:56,000 --> 00:02:59,359 Speaker 1: is your belief that we could see higher interest rates? 60 00:03:00,880 --> 00:03:02,840 Speaker 6: Well, I think the chair Pole made a very clear 61 00:03:02,919 --> 00:03:05,679 Speaker 6: in the press conference that he doesn't see the need 62 00:03:05,720 --> 00:03:06,919 Speaker 6: to go that much further. 63 00:03:08,080 --> 00:03:09,880 Speaker 7: You know, the very fact that it's sort of meaning 64 00:03:09,919 --> 00:03:12,000 Speaker 7: by meeting now tells you that he. 65 00:03:12,000 --> 00:03:14,000 Speaker 6: Thinks that, you know, maybe there's one more rate hike, 66 00:03:14,040 --> 00:03:16,799 Speaker 6: maybe there's no more rate hikes as we go forward. 67 00:03:17,200 --> 00:03:19,400 Speaker 6: But that's a very different story than what does that 68 00:03:19,480 --> 00:03:22,720 Speaker 6: mean for the bond market. Because bonnios are low relative 69 00:03:22,760 --> 00:03:24,960 Speaker 6: to short term interest rates, I think there's a number 70 00:03:24,960 --> 00:03:27,720 Speaker 6: of reasons why bonios could move higher. Number one, inflation 71 00:03:27,800 --> 00:03:29,560 Speaker 6: is probably not going to average two percent over the 72 00:03:29,560 --> 00:03:31,160 Speaker 6: next ten years. It's probably going to average a bit 73 00:03:31,200 --> 00:03:34,960 Speaker 6: higher because the Fed has an asymmetric regime where when 74 00:03:35,000 --> 00:03:37,480 Speaker 6: they miss inflation to the downside, they try to offset 75 00:03:37,480 --> 00:03:39,360 Speaker 6: that with missions of the upside, but not the. 76 00:03:39,320 --> 00:03:40,080 Speaker 7: Other way around. 77 00:03:40,720 --> 00:03:43,040 Speaker 6: Also, if you look at the savings investment balance, it's 78 00:03:43,080 --> 00:03:46,200 Speaker 6: not as favorable now as it was before because we 79 00:03:46,280 --> 00:03:50,680 Speaker 6: have a lot more investment programs motivated by Biden administration policies, 80 00:03:51,120 --> 00:03:54,800 Speaker 6: and the savings is also affected by the very large 81 00:03:54,800 --> 00:03:57,880 Speaker 6: fiscal imbalances that the US is likely to run for many, 82 00:03:57,920 --> 00:04:01,600 Speaker 6: many many years. So that implies that perhaps the neutral 83 00:04:01,960 --> 00:04:04,920 Speaker 6: Fenel fund rate consistent with neutral montrepoles a little bit 84 00:04:05,000 --> 00:04:07,360 Speaker 6: higher than in the past. And then lastly, the risks 85 00:04:07,360 --> 00:04:09,080 Speaker 6: are two sided now for the bomb mark. Before it's 86 00:04:09,120 --> 00:04:11,760 Speaker 6: all about I could homeole Pole bonds and if we 87 00:04:11,920 --> 00:04:14,320 Speaker 6: ended up in a recession and the fat got stuck 88 00:04:14,320 --> 00:04:16,960 Speaker 6: at the zero lore bound, the bond marker would protect me. 89 00:04:17,520 --> 00:04:19,880 Speaker 6: But now we're a long way from the lower bound. 90 00:04:20,160 --> 00:04:22,480 Speaker 6: So the risk of getting stuck at the zero lower 91 00:04:22,520 --> 00:04:25,000 Speaker 6: bound seemed very diminished at this point, and the rest 92 00:04:25,040 --> 00:04:27,800 Speaker 6: of inflation being sticky, I think is you know, remains 93 00:04:27,839 --> 00:04:29,400 Speaker 6: a very relevant to the botmb linker. 94 00:04:29,520 --> 00:04:29,719 Speaker 7: Bill. 95 00:04:29,760 --> 00:04:32,440 Speaker 1: We had an article at Bloomberg this week, folks, John 96 00:04:32,560 --> 00:04:37,320 Speaker 1: Authors and Isabelle Lee reported on the Strategy World and 97 00:04:37,360 --> 00:04:41,520 Speaker 1: how absolutely it's brutal has been for Wall Street strategist 98 00:04:41,520 --> 00:04:45,040 Speaker 1: Bill Dudley lived this at gulb and six years ago. 99 00:04:45,440 --> 00:04:48,839 Speaker 1: How clear is the Dudley crystal ball right now? Bill? 100 00:04:49,080 --> 00:04:52,280 Speaker 1: How how what's the vision you've got? Are you making 101 00:04:52,279 --> 00:04:53,120 Speaker 1: it up as you go? 102 00:04:53,960 --> 00:04:55,840 Speaker 6: Well, I'm a lot less clear now than I was, 103 00:04:55,920 --> 00:04:57,280 Speaker 6: say a year or a year and a half ago. 104 00:04:57,320 --> 00:04:58,719 Speaker 6: I mean, at that point, it is very clear that 105 00:04:58,720 --> 00:05:00,760 Speaker 6: the said was way behind it in terms of the 106 00:05:00,839 --> 00:05:03,200 Speaker 6: need to type monitary policy. They were going to have 107 00:05:03,240 --> 00:05:04,760 Speaker 6: to go to restrictive and they're going to have to 108 00:05:04,800 --> 00:05:07,719 Speaker 6: move fast to get there to keep inflation from getting 109 00:05:08,000 --> 00:05:11,040 Speaker 6: control totally out of control. Now they're at a restrictive setting, 110 00:05:11,040 --> 00:05:13,600 Speaker 6: and so the question is, you know, how how high 111 00:05:13,640 --> 00:05:16,039 Speaker 6: do they have to go to be sufficiently restrictive and 112 00:05:16,080 --> 00:05:16,840 Speaker 6: how long do they. 113 00:05:16,760 --> 00:05:17,480 Speaker 7: Have to stay there? 114 00:05:17,839 --> 00:05:20,200 Speaker 6: And I think, you know, they've been the kind of 115 00:05:20,279 --> 00:05:22,440 Speaker 6: news has been breaking in a favorable direction in the 116 00:05:22,480 --> 00:05:26,280 Speaker 6: sense that they're getting quite a bit of disinflation without 117 00:05:26,400 --> 00:05:30,040 Speaker 6: actually affecting the growth rate very much or without actually 118 00:05:30,080 --> 00:05:31,480 Speaker 6: putting a lot of people out of work. I mean, 119 00:05:31,520 --> 00:05:33,799 Speaker 6: the fact that inflation has come down and the uniplying 120 00:05:33,880 --> 00:05:36,880 Speaker 6: rates still three point six percent is really good news 121 00:05:36,920 --> 00:05:38,000 Speaker 6: from the face perspective. 122 00:05:38,360 --> 00:05:40,400 Speaker 7: But my own view is, you know, I'm still where 123 00:05:40,400 --> 00:05:40,960 Speaker 7: I was before. 124 00:05:40,960 --> 00:05:42,479 Speaker 6: I think the Fed's going to have to be you know, 125 00:05:42,800 --> 00:05:45,280 Speaker 6: tighter for longer, and I think they're going to probably 126 00:05:45,279 --> 00:05:48,360 Speaker 6: emphasize the longer piece. If you look at their you know, 127 00:05:48,440 --> 00:05:50,800 Speaker 6: their forecast, they don't see inflation getting back to two 128 00:05:50,800 --> 00:05:53,800 Speaker 6: percent until twenty twenty five, so they think the process 129 00:05:53,800 --> 00:05:54,760 Speaker 6: still has a long way to go. 130 00:05:54,960 --> 00:05:56,080 Speaker 7: And I agree with them. 131 00:05:56,120 --> 00:05:58,680 Speaker 2: Bill, How important do you think it is that essentially 132 00:05:58,720 --> 00:06:01,320 Speaker 2: this is a FED no longer are giving forward guidance. 133 00:06:03,040 --> 00:06:05,359 Speaker 6: Well, I think that's sort of appropriate, you know, if 134 00:06:05,400 --> 00:06:07,520 Speaker 6: you've gotten in the vicinity of where you think you 135 00:06:07,640 --> 00:06:12,760 Speaker 6: need to be and you're uncertain about what's next because. 136 00:06:12,440 --> 00:06:14,080 Speaker 7: You don't know if you've done enough. 137 00:06:14,120 --> 00:06:16,440 Speaker 6: You don't know much about the long and variable lags 138 00:06:16,480 --> 00:06:19,040 Speaker 6: of Audrey policy, you don't know how financial conditions are 139 00:06:19,080 --> 00:06:20,680 Speaker 6: to react, are going to react. 140 00:06:20,400 --> 00:06:22,160 Speaker 7: To what you say and what you do. 141 00:06:22,960 --> 00:06:24,360 Speaker 6: I think at that point you don't really want to 142 00:06:24,360 --> 00:06:26,560 Speaker 6: get for guys, because the Ford guidance is probably going 143 00:06:26,640 --> 00:06:30,920 Speaker 6: to be misleading as opposed to illuminating. So I think 144 00:06:30,960 --> 00:06:33,280 Speaker 6: it makes sense for them to talk about, you know, 145 00:06:33,560 --> 00:06:35,400 Speaker 6: going meeting to meeting. One thing I was a little 146 00:06:35,440 --> 00:06:37,719 Speaker 6: surprised today was that there wasn't much talk about the 147 00:06:37,720 --> 00:06:40,000 Speaker 6: long and variable lags of Madre policy and the need 148 00:06:40,040 --> 00:06:43,560 Speaker 6: to slow down the tightening the rate of the tightening process. 149 00:06:43,880 --> 00:06:47,000 Speaker 6: Paul very clearly puts the September meeting back on the table, 150 00:06:47,400 --> 00:06:49,359 Speaker 6: and I was a little surprised by that because the 151 00:06:49,440 --> 00:06:52,400 Speaker 6: last meeting was all about the need to slow down 152 00:06:52,600 --> 00:06:55,200 Speaker 6: and go at a slower pace, and now I find 153 00:06:55,200 --> 00:06:57,960 Speaker 6: out today that male September is a lot of meeting. 154 00:06:57,839 --> 00:07:01,119 Speaker 2: Well, and he was actually pretty blunt that someone asked 155 00:07:01,200 --> 00:07:04,359 Speaker 2: him specifically, how does this job with what you said 156 00:07:04,480 --> 00:07:07,480 Speaker 2: at the previous meeting, and he basically was like, that's 157 00:07:07,480 --> 00:07:08,680 Speaker 2: all I'm going to say about that. I'm not going 158 00:07:08,720 --> 00:07:11,080 Speaker 2: to continue. I'm wondering whether you think it's actually more 159 00:07:11,160 --> 00:07:14,600 Speaker 2: confusing that there wasn't dissent at a time where there 160 00:07:14,600 --> 00:07:16,960 Speaker 2: clearly is a range of opinions and we have a 161 00:07:17,000 --> 00:07:19,640 Speaker 2: feed schair just reading the same thing over and over 162 00:07:19,640 --> 00:07:21,440 Speaker 2: again in response to everyone's questions. 163 00:07:22,120 --> 00:07:24,000 Speaker 6: Well, the lack of dissent just means that people are 164 00:07:24,000 --> 00:07:26,960 Speaker 6: pretty comfortable with the general trajectory of where Mantre policy 165 00:07:27,080 --> 00:07:29,200 Speaker 6: is today, and they're happy about the fact that inflation's 166 00:07:29,240 --> 00:07:31,320 Speaker 6: coming down, and they're happy about the fact that's coming 167 00:07:31,320 --> 00:07:34,680 Speaker 6: down without actually having to really, you know, push up 168 00:07:34,680 --> 00:07:37,440 Speaker 6: the unemployer rail a lot. At least at this point. 169 00:07:37,720 --> 00:07:39,720 Speaker 6: I think what's the problem that Paul is great for 170 00:07:39,760 --> 00:07:42,000 Speaker 6: themselves is what do you actually do in September? 171 00:07:42,440 --> 00:07:44,120 Speaker 7: So in September you're going to have a coup couple 172 00:07:44,160 --> 00:07:44,440 Speaker 7: of things. 173 00:07:44,600 --> 00:07:46,720 Speaker 6: If you decide not to hike, what are you going 174 00:07:46,760 --> 00:07:48,520 Speaker 6: to show in the summary of economic projection? Are you 175 00:07:48,560 --> 00:07:51,240 Speaker 6: going to sh show further rate hikes? And if you 176 00:07:51,280 --> 00:07:52,920 Speaker 6: do show fur the rate hikes it's going to raise 177 00:07:52,920 --> 00:07:55,760 Speaker 6: the question why did you do it in September, just 178 00:07:55,800 --> 00:07:57,920 Speaker 6: like what we saw at the last meeting, And if 179 00:07:57,960 --> 00:08:01,680 Speaker 6: you do hike, then the question is, okay, well, why 180 00:08:01,720 --> 00:08:04,400 Speaker 6: are you going so much quicker now? And do you 181 00:08:04,440 --> 00:08:07,280 Speaker 6: show further rate hes in the economic productions after a 182 00:08:07,320 --> 00:08:09,920 Speaker 6: September rate egg. So I think he's made it very 183 00:08:09,960 --> 00:08:14,000 Speaker 6: awkward for himself in terms of tying the projections of 184 00:08:14,040 --> 00:08:15,480 Speaker 6: what's going to have in the future to what they 185 00:08:15,480 --> 00:08:18,400 Speaker 6: actually decided to do in September or decide not to 186 00:08:18,440 --> 00:08:21,720 Speaker 6: do in September. In terms of keeping rates unchange, I 187 00:08:21,760 --> 00:08:23,760 Speaker 6: think they've created a bit of confusion. I think it 188 00:08:23,800 --> 00:08:26,760 Speaker 6: would be better to stick to the story of Madre 189 00:08:26,800 --> 00:08:29,080 Speaker 6: policy long and verable legs. At this point, we're close 190 00:08:29,120 --> 00:08:30,560 Speaker 6: to where we think we need to be. Therefore we're 191 00:08:30,560 --> 00:08:33,200 Speaker 6: going to go most more slowly. But he definitely puts 192 00:08:33,200 --> 00:08:35,400 Speaker 6: September back on the table. I mean, he basically talked 193 00:08:35,400 --> 00:08:37,439 Speaker 6: about the fact that we have two more and Plomber 194 00:08:37,520 --> 00:08:40,360 Speaker 6: reports by until September. We have two more CBI reports 195 00:08:40,360 --> 00:08:43,760 Speaker 6: before September. So he put the September meeting back on 196 00:08:43,760 --> 00:08:45,840 Speaker 6: the table more than I would have thought he would 197 00:08:45,920 --> 00:08:49,160 Speaker 6: have done. Given that he talked about the need to 198 00:08:49,200 --> 00:08:51,600 Speaker 6: go more slowly because of long and variable legs. 199 00:08:51,640 --> 00:08:52,840 Speaker 7: So I found that a little bit confused. 200 00:08:53,080 --> 00:08:56,600 Speaker 3: Some people frustrated about this September conversation. Bill I tried 201 00:08:56,600 --> 00:08:58,080 Speaker 3: to jump in to end it, but we can carry 202 00:08:58,160 --> 00:09:00,439 Speaker 3: on if you want. Barry that wrote it, and he 203 00:09:00,520 --> 00:09:04,320 Speaker 3: said this. Questions about whether they high in September were 204 00:09:04,320 --> 00:09:06,760 Speaker 3: in name. He went on to say, the press conference 205 00:09:06,800 --> 00:09:10,000 Speaker 3: went poorly given no questions about fiscal policy working at 206 00:09:10,000 --> 00:09:13,240 Speaker 3: cross purposes with monetary policy, nor any questions about the 207 00:09:13,240 --> 00:09:15,480 Speaker 3: deep curve inversion of impact on small banks and the 208 00:09:15,480 --> 00:09:17,320 Speaker 3: supply of credit. Bill, can we pick up on the 209 00:09:17,320 --> 00:09:20,280 Speaker 3: first piece just briefly, Where the fiscal policy right now 210 00:09:20,320 --> 00:09:22,959 Speaker 3: is working at cross purposes with monetary policy? 211 00:09:23,000 --> 00:09:23,640 Speaker 4: Do you think it is? 212 00:09:24,800 --> 00:09:25,000 Speaker 7: Well? 213 00:09:25,040 --> 00:09:27,920 Speaker 6: I don't think fiscal policy is stimulative right now in 214 00:09:27,960 --> 00:09:30,920 Speaker 6: the sense of the fiscal impulse. But we have very 215 00:09:31,040 --> 00:09:33,760 Speaker 6: large chronic budget deviicits and those budget deviaits that are 216 00:09:33,760 --> 00:09:36,240 Speaker 6: going to continue as far as the eye can see. 217 00:09:36,559 --> 00:09:39,040 Speaker 6: So the way that plays out is it means that 218 00:09:39,080 --> 00:09:42,440 Speaker 6: the demand and the pool savings is higher because the 219 00:09:42,440 --> 00:09:45,679 Speaker 6: government's taking down so much of the supply of savings. 220 00:09:46,120 --> 00:09:47,520 Speaker 6: Over the next year, we're going to see a lot 221 00:09:47,559 --> 00:09:48,480 Speaker 6: more treasury supply. 222 00:09:48,800 --> 00:09:51,840 Speaker 7: Right now that the debt limit prices behind us. 223 00:09:51,720 --> 00:09:55,400 Speaker 6: The treasures can be ramping up their borrowing needs very substantially, 224 00:09:56,000 --> 00:09:58,640 Speaker 6: and the Federal reserves is going to continue to sell. 225 00:10:00,120 --> 00:10:03,000 Speaker 6: Can can continue at nine hundred billion a year of 226 00:10:03,040 --> 00:10:06,560 Speaker 6: treasuries and Morgan securities throughout. So they've made tremendous amount supply, 227 00:10:06,640 --> 00:10:08,520 Speaker 6: and I think that's weigh on the bond market. 228 00:10:09,000 --> 00:10:09,240 Speaker 7: Bill. 229 00:10:09,360 --> 00:10:13,280 Speaker 1: The hallmark of your work at Gulben secs Ages ago 230 00:10:13,720 --> 00:10:18,480 Speaker 1: was an optimism about the American economics experiment. The most 231 00:10:18,520 --> 00:10:21,520 Speaker 1: memorable moment today was Jennie Smilek of The New York 232 00:10:21,559 --> 00:10:25,880 Speaker 1: Times folding in the Barbie movie into a discussion with 233 00:10:25,960 --> 00:10:29,720 Speaker 1: the Chairman of the Federal Reserve about the resiliency of 234 00:10:29,760 --> 00:10:34,440 Speaker 1: the American economy. The smart guys like you, everybody assembled 235 00:10:34,480 --> 00:10:37,760 Speaker 1: in the room, everybody in the economics racket. Do we 236 00:10:38,040 --> 00:10:41,439 Speaker 1: just get wrong the resiliency of America? 237 00:10:42,960 --> 00:10:45,760 Speaker 6: Well, I think that we have gotten wrong the resiliency 238 00:10:45,840 --> 00:10:50,200 Speaker 6: of the US consernaert. I think what's driving it as 239 00:10:50,280 --> 00:10:53,319 Speaker 6: the fact that during the pandemic there were large fiscal 240 00:10:53,360 --> 00:10:56,679 Speaker 6: transfers from the federal government to the household sector, and 241 00:10:56,800 --> 00:10:58,679 Speaker 6: household sector basically did three. 242 00:10:58,520 --> 00:11:00,040 Speaker 7: Things of it. 243 00:11:00,240 --> 00:11:02,560 Speaker 6: About a third of that was spent, about a third 244 00:11:02,600 --> 00:11:04,920 Speaker 6: of it was used to paid on debt, and about. 245 00:11:04,640 --> 00:11:05,800 Speaker 7: A third of it was saved. 246 00:11:06,320 --> 00:11:09,200 Speaker 6: And so coming out of the pandemic, the household balance 247 00:11:09,240 --> 00:11:11,400 Speaker 6: sheets were in much better shape than they typically are 248 00:11:11,480 --> 00:11:13,520 Speaker 6: late in the cycle, and I think that's why the 249 00:11:13,800 --> 00:11:16,200 Speaker 6: US consumer has been pre resilient. I think the point 250 00:11:16,200 --> 00:11:18,680 Speaker 6: that Gino was making was just that, you know, going 251 00:11:18,720 --> 00:11:23,400 Speaker 6: to Barbie uh in a in a theater is perfect 252 00:11:23,440 --> 00:11:27,480 Speaker 6: example of discretionary mess of you know, discretionary consumption. People 253 00:11:27,520 --> 00:11:29,400 Speaker 6: can decide to do that or not that decided to 254 00:11:29,400 --> 00:11:31,480 Speaker 6: do It's not sort of core necessity. 255 00:11:31,760 --> 00:11:33,760 Speaker 7: And so the fact that the box office. 256 00:11:33,440 --> 00:11:36,160 Speaker 6: For Barbie and Openhearmer were so good was was was 257 00:11:36,320 --> 00:11:38,839 Speaker 6: sort of evidence from from her perspective that the consumers 258 00:11:38,840 --> 00:11:41,000 Speaker 6: still got some life life in them. 259 00:11:41,240 --> 00:11:44,800 Speaker 1: It's a surveillance movie. Ask did he go? 260 00:11:45,040 --> 00:11:47,839 Speaker 3: You gotta ask again, Bill Dentley and I'm bomping. So 261 00:11:48,000 --> 00:11:49,400 Speaker 3: if you want to know, you can find out Bill, 262 00:11:49,440 --> 00:11:50,880 Speaker 3: did you did you watch it over the weekend? 263 00:11:51,840 --> 00:11:51,880 Speaker 1: No? 264 00:11:52,160 --> 00:11:54,040 Speaker 6: I went to the mission possible. I haven't gone to 265 00:11:54,160 --> 00:11:57,360 Speaker 6: Barbie or Openham. That's not the that's on my plans. 266 00:11:57,040 --> 00:12:03,760 Speaker 4: Though one're there that we're doings conference in the next week. 267 00:12:03,800 --> 00:12:07,280 Speaker 3: Kem Bill, Thank you, sir as always both incredibly insightful, 268 00:12:07,360 --> 00:12:09,920 Speaker 3: lived it at the Federal Reserve as the New York 269 00:12:09,960 --> 00:12:11,960 Speaker 3: Fed President. If you are just chuning in, welcome to 270 00:12:11,960 --> 00:12:14,200 Speaker 3: the program this afternoon. Good afternoon to you all. The 271 00:12:14,200 --> 00:12:17,640 Speaker 3: Federal Reserve. Hikin interest rates twenty five basis points the 272 00:12:17,679 --> 00:12:21,839 Speaker 3: Federal Reserve chair saying that he believes monetary policy is restrictive. 273 00:12:21,880 --> 00:12:24,280 Speaker 3: There was a moment in this news conference when Mike McKee, 274 00:12:24,280 --> 00:12:27,200 Speaker 3: our good friend and colleague down in Washington, DC, asked 275 00:12:27,240 --> 00:12:29,400 Speaker 3: about that and pleased to say that Mike McKey joined 276 00:12:29,440 --> 00:12:32,640 Speaker 3: just now, Mike, the evidence that policy is restrictive, can 277 00:12:32,679 --> 00:12:33,319 Speaker 3: you point to it? 278 00:12:34,800 --> 00:12:37,360 Speaker 8: Well, he's point of the fact that inflation has come down, 279 00:12:37,400 --> 00:12:40,000 Speaker 8: in that the Fed funds rate is now above the 280 00:12:40,679 --> 00:12:44,760 Speaker 8: CPI in all cases, in both core and headline, and 281 00:12:44,800 --> 00:12:49,000 Speaker 8: that real interest rates are starting to rise above zero. 282 00:12:49,160 --> 00:12:51,720 Speaker 8: So they do see some restriction on the economy. But 283 00:12:52,040 --> 00:12:54,040 Speaker 8: I think one of the key things he said was 284 00:12:54,080 --> 00:12:56,480 Speaker 8: in his answer to me when he said policy has 285 00:12:56,480 --> 00:13:00,760 Speaker 8: not been restrictive enough long enough. He doesn't want to 286 00:13:00,760 --> 00:13:04,920 Speaker 8: put a time frame or a actual number on what 287 00:13:05,080 --> 00:13:09,080 Speaker 8: restrictive is, but clearly they could be there. They just 288 00:13:09,160 --> 00:13:11,839 Speaker 8: have to leave it there longer. This was a man 289 00:13:11,880 --> 00:13:15,120 Speaker 8: who wanted to basically keep his options open and not 290 00:13:15,200 --> 00:13:18,079 Speaker 8: get tied down to anything at this point. 291 00:13:18,240 --> 00:13:21,480 Speaker 1: Mike, what does this twenty five basis point move due 292 00:13:21,880 --> 00:13:25,160 Speaker 1: to our listeners and viewers I get and what this 293 00:13:25,280 --> 00:13:27,559 Speaker 1: was alluded to by a number of our guests, big 294 00:13:27,559 --> 00:13:31,079 Speaker 1: impact a year ago, two years ago. What's the impact 295 00:13:31,160 --> 00:13:35,760 Speaker 1: today of this lift for housing, for food, for the 296 00:13:35,880 --> 00:13:37,199 Speaker 1: day to day life that we have. 297 00:13:38,720 --> 00:13:40,880 Speaker 8: Well, it's probably not going to have much of an 298 00:13:40,920 --> 00:13:44,480 Speaker 8: impact overall in a twenty five basis point, since it's 299 00:13:44,520 --> 00:13:48,200 Speaker 8: the cumulative amount of tightening that's been done. That's what 300 00:13:48,320 --> 00:13:51,560 Speaker 8: Jay Powell has been referring to over the last year 301 00:13:51,559 --> 00:13:54,080 Speaker 8: and a half, where they've gone five hundred and fifty 302 00:13:54,120 --> 00:13:54,800 Speaker 8: basis points. 303 00:13:54,840 --> 00:13:56,600 Speaker 4: Now, what you're. 304 00:13:56,400 --> 00:14:00,320 Speaker 8: Looking at is decisions made on interest rates for a 305 00:14:00,360 --> 00:14:02,199 Speaker 8: period of time. You don't buy a house every day, 306 00:14:02,200 --> 00:14:04,480 Speaker 8: you don't buy a car every day, you don't spend 307 00:14:04,960 --> 00:14:07,400 Speaker 8: money investing in a new factory every day, So it 308 00:14:07,440 --> 00:14:09,520 Speaker 8: does take time for that to work its way into 309 00:14:09,559 --> 00:14:14,120 Speaker 8: the economy. They don't know how restrictive they have to be. Clearly, 310 00:14:14,400 --> 00:14:18,520 Speaker 8: they haven't been restrictive enough in the housing sense because 311 00:14:18,880 --> 00:14:23,880 Speaker 8: home prices have still been rising. But overall they're getting 312 00:14:23,920 --> 00:14:25,080 Speaker 8: close to that area. 313 00:14:25,160 --> 00:14:26,000 Speaker 1: And I don't think that. 314 00:14:26,040 --> 00:14:29,400 Speaker 8: The average American is going to notice really anything different 315 00:14:29,920 --> 00:14:32,760 Speaker 8: about this twenty five basis point move Mike. 316 00:14:32,880 --> 00:14:35,200 Speaker 2: Every time the FED has a meeting, you sit there, 317 00:14:35,240 --> 00:14:38,520 Speaker 2: you listen to the tenor the potential staffoos, the way 318 00:14:38,520 --> 00:14:41,680 Speaker 2: that people ask questions. Today you heard a very repetitive, 319 00:14:42,200 --> 00:14:44,880 Speaker 2: very stick to the script J Powell. There was no 320 00:14:45,000 --> 00:14:48,000 Speaker 2: forward guidance. When was the last time this Federal Reserve 321 00:14:48,360 --> 00:14:51,320 Speaker 2: gave no forward guidance about what they were planning to 322 00:14:51,360 --> 00:14:53,440 Speaker 2: do or how they even more thinking about the data 323 00:14:53,480 --> 00:14:54,240 Speaker 2: that's coming in. 324 00:14:55,360 --> 00:14:59,000 Speaker 8: Well, it's been quite some time. The idea today, and 325 00:14:59,080 --> 00:15:01,400 Speaker 8: I said this before the meeting, was that come in, 326 00:15:01,520 --> 00:15:04,600 Speaker 8: do make as little news as possible. They were locked 327 00:15:04,640 --> 00:15:07,400 Speaker 8: into raising rates because the market had decided that's what 328 00:15:07,440 --> 00:15:09,720 Speaker 8: they were going to do, and so the Fed went 329 00:15:09,760 --> 00:15:13,360 Speaker 8: ahead and did that, and beyond that, they tried basically 330 00:15:13,400 --> 00:15:16,480 Speaker 8: to leave their options open. Jay Powell was very scripted 331 00:15:16,520 --> 00:15:19,480 Speaker 8: as you heard he did sound more relaxed than he 332 00:15:19,560 --> 00:15:23,000 Speaker 8: did at the last meeting or the last couple of meetings. 333 00:15:23,360 --> 00:15:26,640 Speaker 8: So from that sendpoint, Lisa, you could say maybe the 334 00:15:26,720 --> 00:15:30,240 Speaker 8: vibe was they're getting close to the end, and I'm 335 00:15:30,280 --> 00:15:32,720 Speaker 8: not sure at this point that they would raise rates again, 336 00:15:33,120 --> 00:15:36,080 Speaker 8: but they don't want the markets to walk away from 337 00:15:36,080 --> 00:15:38,760 Speaker 8: this thinking that they're going to do one thing or another, 338 00:15:38,840 --> 00:15:41,240 Speaker 8: so they tried not to really give any guidance. 339 00:15:41,360 --> 00:15:44,640 Speaker 3: We're covering vibes of news conferences now with Mike McKay. Mike, 340 00:15:44,680 --> 00:15:47,200 Speaker 3: Thank you, Sir Dan in Washington, d C. Appreciate it 341 00:15:47,240 --> 00:15:51,280 Speaker 3: as always. Here's the runway the Canada for you. September twentieth, 342 00:15:51,520 --> 00:15:54,360 Speaker 3: the next Federal Reserve decision Jackson Holl of course, in 343 00:15:54,400 --> 00:15:57,160 Speaker 3: between this meeting and the next mating for the data 344 00:15:57,640 --> 00:16:03,440 Speaker 3: August fourth for Payrowsugust tenth for CPI, September first for payrolls, 345 00:16:03,680 --> 00:16:08,760 Speaker 3: September thirteenth for CPI. So TK two of each CPI 346 00:16:08,880 --> 00:16:12,400 Speaker 3: and payrolls. It's fed meeting and you can take away 347 00:16:12,480 --> 00:16:15,640 Speaker 3: from this meeting, this news conference whatever you want. That 348 00:16:15,760 --> 00:16:18,400 Speaker 3: conversation can change very quickly based on two prints of 349 00:16:18,480 --> 00:16:20,920 Speaker 3: CPI and two prints from payroll. 350 00:16:20,760 --> 00:16:23,400 Speaker 1: At Lisa Naillen. She said, it's this completely data dependent. 351 00:16:23,440 --> 00:16:25,240 Speaker 1: I'm going back to I don't think there's any theory 352 00:16:25,280 --> 00:16:28,200 Speaker 1: involved here. I don't think there's any textbooks. That conversation 353 00:16:28,360 --> 00:16:31,360 Speaker 1: we had before the press conference was just absolutely brilliant 354 00:16:31,760 --> 00:16:35,320 Speaker 1: on the ambiguities of the moment right now with clarity. 355 00:16:35,360 --> 00:16:39,240 Speaker 1: Because he has to manage money, Jeffrey Rosenberg joins this 356 00:16:39,360 --> 00:16:44,760 Speaker 1: portfolio manager of black Rocks Systematic Multi Strategy Fund. Jeff, 357 00:16:44,800 --> 00:16:49,240 Speaker 1: my deepest sympathies. You have to have a conviction, a 358 00:16:49,360 --> 00:16:54,800 Speaker 1: belief forward. What is your conviction now? Given the ambiguities 359 00:16:54,840 --> 00:16:58,080 Speaker 1: we witness today, I think we have a little bit 360 00:16:58,080 --> 00:16:59,720 Speaker 1: of silence here. 361 00:17:00,000 --> 00:17:03,880 Speaker 4: A tennis takes there. I don't you know, Jeff put 362 00:17:03,880 --> 00:17:05,399 Speaker 4: it on me. 363 00:17:06,520 --> 00:17:10,360 Speaker 1: But the ambiguities here, you know, the the ambiguities here 364 00:17:10,520 --> 00:17:11,320 Speaker 1: are important. 365 00:17:11,480 --> 00:17:13,600 Speaker 3: And John, I know that you're in the team meeting 366 00:17:13,640 --> 00:17:16,000 Speaker 3: and Lisa starts throwing stuff at the screen. It's like Brown, 367 00:17:16,280 --> 00:17:24,080 Speaker 3: You're I'm going away to. 368 00:17:22,080 --> 00:17:25,680 Speaker 1: I'm going away tomorrow, and you guys are running the show. 369 00:17:25,760 --> 00:17:28,159 Speaker 1: I'm going I'm going deep to the Northeast. I'm just 370 00:17:28,240 --> 00:17:30,760 Speaker 1: going it's just going to be I'm going away for months. 371 00:17:30,760 --> 00:17:31,840 Speaker 1: It's going to be like a Sabbatan. 372 00:17:31,840 --> 00:17:33,080 Speaker 4: You're taking a month off. 373 00:17:32,960 --> 00:17:36,879 Speaker 1: Taking a month off, and and you guys have the 374 00:17:36,920 --> 00:17:40,440 Speaker 1: former vice chairman of the FED and the arch question 375 00:17:40,680 --> 00:17:44,600 Speaker 1: to Vice Chairman Claid I believe scheduled tomorrow in Bloomberg 376 00:17:44,600 --> 00:17:47,800 Speaker 1: Savants in the morning. Check it out, folks, And I'm John, John, 377 00:17:47,840 --> 00:17:51,359 Speaker 1: I'm sorry. The arch question here is Claire To saying 378 00:17:51,480 --> 00:17:54,720 Speaker 1: we're not going back to We're not going back to 379 00:17:54,760 --> 00:17:58,040 Speaker 1: two percent. Nobody Powell's not talking about. I don't think 380 00:17:58,080 --> 00:18:00,720 Speaker 1: anybody else really is Claire To out front of. 381 00:18:00,760 --> 00:18:01,159 Speaker 4: I'm with you. 382 00:18:01,160 --> 00:18:04,040 Speaker 3: The standout call from former Vice chair Rich Clarider, together 383 00:18:04,080 --> 00:18:06,560 Speaker 3: with Pimco, came out in the Secular Outlook a couple 384 00:18:06,600 --> 00:18:09,320 Speaker 3: of months ago, and ultimately it's this underlying belief that 385 00:18:09,320 --> 00:18:13,080 Speaker 3: they will tolerate higher above target inflation of two points something. 386 00:18:13,440 --> 00:18:15,919 Speaker 3: You've got some indication of that, just a hint of it. 387 00:18:16,160 --> 00:18:17,800 Speaker 3: When he talks about we're not going to hike until 388 00:18:17,800 --> 00:18:20,240 Speaker 3: we get to two percent, that's ridiculous. And also, by 389 00:18:20,280 --> 00:18:21,720 Speaker 3: the way, we don't think we're going to get to 390 00:18:21,760 --> 00:18:24,960 Speaker 3: two percent until twenty twenty five. And within that I 391 00:18:24,960 --> 00:18:27,280 Speaker 3: think there is a message ramo that they are willing 392 00:18:27,280 --> 00:18:30,359 Speaker 3: to tolerate two points something because they're willing to tolerate above 393 00:18:30,400 --> 00:18:33,119 Speaker 3: target inflation from here all the way out to twenty 394 00:18:33,160 --> 00:18:33,640 Speaker 3: twenty five. 395 00:18:33,680 --> 00:18:35,520 Speaker 4: If the Fed chairs correct. 396 00:18:35,400 --> 00:18:37,560 Speaker 2: You know, you pick up a really interesting point because 397 00:18:37,560 --> 00:18:40,960 Speaker 2: it highlights the uncertainty around long and variable lags. He's 398 00:18:40,960 --> 00:18:43,359 Speaker 2: saying that if we wait until inflation gets down to 399 00:18:43,400 --> 00:18:46,399 Speaker 2: two percent, we will have necessarily gone too far. Okay, well, 400 00:18:46,440 --> 00:18:48,240 Speaker 2: then how long do you have to wait before you 401 00:18:48,359 --> 00:18:51,080 Speaker 2: understand what the ramifications of what you height? Is this 402 00:18:51,200 --> 00:18:53,159 Speaker 2: a concession that you're willing to go to two and 403 00:18:53,160 --> 00:18:53,880 Speaker 2: a half percent? 404 00:18:54,280 --> 00:18:55,000 Speaker 4: And that is. 405 00:18:55,000 --> 00:18:57,160 Speaker 2: Really what people are trying to purs you. Basically people 406 00:18:57,160 --> 00:18:59,480 Speaker 2: are shrugging off, viewing this as a non meeting. 407 00:18:59,520 --> 00:19:01,480 Speaker 3: That's my view. We haven't talked about this enough though, 408 00:19:01,480 --> 00:19:04,800 Speaker 3: and I think Jean Balvan of Blackrock congratulations by the way, 409 00:19:04,800 --> 00:19:08,280 Speaker 3: for bringing this up repeatedly. What's the appropriate time horizon, 410 00:19:08,560 --> 00:19:12,760 Speaker 3: the appropriate period to bring inflation back towards two percent? 411 00:19:13,320 --> 00:19:13,840 Speaker 4: What is it? 412 00:19:14,119 --> 00:19:17,280 Speaker 3: So one man's tolerance of above target inflation is another 413 00:19:17,280 --> 00:19:19,960 Speaker 3: man saying, well, actually, we just need longer. And if 414 00:19:20,000 --> 00:19:23,040 Speaker 3: he says twenty twenty five. Isn't that just him saying like, 415 00:19:23,200 --> 00:19:24,840 Speaker 3: this is going to take a while, and I don't 416 00:19:24,840 --> 00:19:26,760 Speaker 3: want to crush the economy to get there sooner. 417 00:19:27,640 --> 00:19:29,120 Speaker 2: Well, I think that that's a great point. I think 418 00:19:29,119 --> 00:19:32,280 Speaker 2: the Fed said that that they're willing to be patient 419 00:19:32,320 --> 00:19:36,199 Speaker 2: but persistent at that point at what the issue is. 420 00:19:36,440 --> 00:19:38,600 Speaker 2: Will it become a self fulfilling prophecy at some point 421 00:19:38,720 --> 00:19:39,680 Speaker 2: exact inflation. 422 00:19:39,440 --> 00:19:41,239 Speaker 4: Becomes Is there a window that's what you're getting out? 423 00:19:41,359 --> 00:19:43,159 Speaker 2: Yes, thank you, I appreciate that. That's helpful. 424 00:19:43,160 --> 00:19:44,280 Speaker 4: Well, it's a long day, I feel the way. 425 00:19:44,320 --> 00:19:46,480 Speaker 3: You know, you can film my sensitors, you can film 426 00:19:46,480 --> 00:19:48,720 Speaker 3: my sentences as well. I need it sometimes too, Bramar, 427 00:19:49,240 --> 00:19:50,960 Speaker 3: Is there a window where they need to address this 428 00:19:51,040 --> 00:19:53,800 Speaker 3: before it becomes embedded? Right, You've seen what happened with 429 00:19:53,960 --> 00:19:56,520 Speaker 3: ups and what almost happened with teamsters and the strikes. 430 00:19:56,640 --> 00:19:59,040 Speaker 3: What are we talking about here? Five percent wage shikes? 431 00:19:59,200 --> 00:20:00,000 Speaker 3: They're not going to be alone. 432 00:20:00,560 --> 00:20:02,720 Speaker 2: No, And we're already seeing that pretty much across the board. 433 00:20:02,720 --> 00:20:04,679 Speaker 2: And people talk about the tight labor market. But that 434 00:20:04,800 --> 00:20:07,919 Speaker 2: changes the scenario in this profound way. This is the 435 00:20:08,000 --> 00:20:10,320 Speaker 2: issue that a lot of people are looking at, and 436 00:20:10,400 --> 00:20:13,399 Speaker 2: yet you're seeing that divide, whether it's Bob Michael or 437 00:20:13,440 --> 00:20:15,720 Speaker 2: whether it's Jimbianco. 438 00:20:15,480 --> 00:20:18,280 Speaker 1: You see the divide and the wage thing is critical 439 00:20:18,359 --> 00:20:20,720 Speaker 1: because a lot of people they don't parse out unemployment, right, 440 00:20:20,720 --> 00:20:22,400 Speaker 1: they don't parse out this, that and the other thing. 441 00:20:22,440 --> 00:20:25,480 Speaker 1: They are only in singularly looking at wage inflation. Through 442 00:20:25,480 --> 00:20:27,600 Speaker 1: all this debate of if folks say, what's this meeting 443 00:20:27,680 --> 00:20:30,880 Speaker 1: like versus the other ten meetings we had, and I'm 444 00:20:30,880 --> 00:20:33,000 Speaker 1: going to go to the great observation of Neil Datta 445 00:20:33,440 --> 00:20:36,880 Speaker 1: that we finally have a legitimate real wage in this country, 446 00:20:36,960 --> 00:20:41,000 Speaker 1: and that changes the emotion the behavior of people, like 447 00:20:41,080 --> 00:20:44,640 Speaker 1: the bombshell from Drew Matis earlier this week, really pushing 448 00:20:44,680 --> 00:20:47,400 Speaker 1: against the gloom we heard from our guests where he says, 449 00:20:47,440 --> 00:20:50,560 Speaker 1: you got a legitimate real GDP forward. Part of that, 450 00:20:50,680 --> 00:20:54,480 Speaker 1: John is a legitimate wage growth, which I don't think 451 00:20:54,560 --> 00:20:56,600 Speaker 1: is within the debate right now. Inflation worry. 452 00:20:56,680 --> 00:20:58,040 Speaker 4: We're worried inflation worry. 453 00:20:58,160 --> 00:21:01,000 Speaker 3: Read, I'm not worried of I'm getting a payridet. 454 00:21:01,200 --> 00:21:02,040 Speaker 4: No, we worry about that. 455 00:21:02,119 --> 00:21:04,119 Speaker 3: I think you know, I've always find it weird when 456 00:21:04,119 --> 00:21:07,879 Speaker 3: the economists say, you know, this is uncomfortable, wages are 457 00:21:07,920 --> 00:21:09,680 Speaker 3: too high, and like everyone else is just like, there's 458 00:21:09,680 --> 00:21:10,600 Speaker 3: nothing uncomfortable about this. 459 00:21:10,720 --> 00:21:12,239 Speaker 4: You know, that's what I want to happen a year end. 460 00:21:12,240 --> 00:21:13,560 Speaker 4: I want to pay rice. 461 00:21:13,640 --> 00:21:17,040 Speaker 2: And we heard JJ Powell really speak to that. He 462 00:21:17,080 --> 00:21:19,200 Speaker 2: basically said, you know, we want this. It's a good 463 00:21:19,240 --> 00:21:21,600 Speaker 2: thing that wages are going up faster than inflation. And 464 00:21:21,720 --> 00:21:24,000 Speaker 2: yet is it if that's the goal to get down 465 00:21:24,040 --> 00:21:26,040 Speaker 2: to two percent? This is the conundrum. And he tried 466 00:21:26,080 --> 00:21:27,640 Speaker 2: to parse it through by actually saying nothing. 467 00:21:27,680 --> 00:21:30,160 Speaker 3: At least you and I will try and say something tomorrow, Monic, 468 00:21:30,720 --> 00:21:33,320 Speaker 3: we'll be here alone with our TK. I think tomorrow 469 00:21:33,359 --> 00:21:35,359 Speaker 3: there's going to be a conversation about something. Might the 470 00:21:35,440 --> 00:21:38,600 Speaker 3: key talked about in the news conference. What's restrictive and 471 00:21:38,600 --> 00:21:40,960 Speaker 3: what evidence is there that we are restrictive right now? 472 00:21:41,280 --> 00:21:44,160 Speaker 3: This is what the chairman said. The FMC believes monetary 473 00:21:44,160 --> 00:21:47,480 Speaker 3: policy is restrictive. He did acknowledge that it's not restrictive 474 00:21:47,560 --> 00:21:49,000 Speaker 3: enough for long enough, so they need to hold it 475 00:21:49,040 --> 00:21:50,600 Speaker 3: here for some time. But ultimately, if you look at 476 00:21:50,600 --> 00:21:55,119 Speaker 3: the real Fed funds rate, it's at a meaningfully positive level. Okay, well, 477 00:21:55,160 --> 00:21:57,240 Speaker 3: let's look around what evidence is there off that right now? 478 00:21:57,240 --> 00:21:59,600 Speaker 3: And I would go one step further. What evidence is 479 00:21:59,640 --> 00:22:03,280 Speaker 3: there that disinflation we have seen so far is a 480 00:22:03,320 --> 00:22:05,679 Speaker 3: consequence of the tightening they've delivered if they believe there 481 00:22:05,680 --> 00:22:08,560 Speaker 3: are these exceptionally long and veriable lags. And I would 482 00:22:08,560 --> 00:22:10,840 Speaker 3: go to what Neil Data said at Renmac during this 483 00:22:10,880 --> 00:22:13,320 Speaker 3: news conference, and I'll redoubt what he sent to me 484 00:22:13,600 --> 00:22:15,479 Speaker 3: private Lybert He's happy for me to share it with 485 00:22:15,520 --> 00:22:17,679 Speaker 3: you all. He said, the FED remains wedded to the 486 00:22:17,680 --> 00:22:22,040 Speaker 3: long and verlable lags hypothesis. After eighteen months, we've seen 487 00:22:22,040 --> 00:22:27,040 Speaker 3: home prices accelerate, stock prices accelerate, auto sales accelerate, and 488 00:22:27,160 --> 00:22:29,880 Speaker 3: lay off sync. Long and vailable lags is a concept 489 00:22:29,880 --> 00:22:32,960 Speaker 3: that might be outliving its usefulness now for the same 490 00:22:33,240 --> 00:22:35,480 Speaker 3: people looking at the same evidence. You can have one 491 00:22:35,480 --> 00:22:38,239 Speaker 3: individual brander that turns around to you and says, I 492 00:22:38,280 --> 00:22:40,520 Speaker 3: think the long and vailable lags are a whole lot longer. 493 00:22:40,920 --> 00:22:43,240 Speaker 3: And someone else can make the same a different case 494 00:22:43,280 --> 00:22:45,080 Speaker 3: with the same data and say, you know what, I 495 00:22:45,119 --> 00:22:47,199 Speaker 3: think they're a whole lot shorter. They just haven't had 496 00:22:47,200 --> 00:22:48,080 Speaker 3: any effects yet. 497 00:22:48,160 --> 00:22:50,160 Speaker 2: And anyone who's looking to the FED for guidance forget 498 00:22:50,160 --> 00:22:52,000 Speaker 2: about it, because they're not going to give you any 499 00:22:52,080 --> 00:22:54,680 Speaker 2: and you know, basically what I heard was a chair 500 00:22:55,080 --> 00:22:58,359 Speaker 2: moving the goalpost saying, Okay, it might be restrictive, but 501 00:22:58,359 --> 00:23:00,240 Speaker 2: it hasn't been restricted for long enough. So is this 502 00:23:00,280 --> 00:23:02,200 Speaker 2: a new criteria that it has to be long enough 503 00:23:02,200 --> 00:23:04,400 Speaker 2: that you put that X axis long enough and then 504 00:23:04,440 --> 00:23:07,520 Speaker 2: that will take place. They don't know, So how do 505 00:23:07,600 --> 00:23:08,359 Speaker 2: they communicate? 506 00:23:08,600 --> 00:23:09,119 Speaker 8: We don't know. 507 00:23:09,200 --> 00:23:12,880 Speaker 1: We're experiment. I think out of this conversation and this 508 00:23:12,920 --> 00:23:15,280 Speaker 1: is Ed Haim and Evercore is SI and I thought 509 00:23:15,280 --> 00:23:18,520 Speaker 1: Michael Dart of Roth MKM was just brilliant today on this. 510 00:23:19,040 --> 00:23:24,240 Speaker 1: There's an entire monetary or money side to this, including 511 00:23:24,280 --> 00:23:27,360 Speaker 1: something no one talks about it anymore, which is M two. 512 00:23:27,359 --> 00:23:29,920 Speaker 1: I mean, if I was down there with Paull asked 513 00:23:29,920 --> 00:23:33,640 Speaker 1: me a question, I'd say to Chairman, your PhDs tell 514 00:23:33,640 --> 00:23:36,159 Speaker 1: you at the FED that M two doesn't matter anymore. 515 00:23:36,240 --> 00:23:40,640 Speaker 1: Velocity doesn't matter. Europe just announced a crater in loan 516 00:23:40,720 --> 00:23:44,360 Speaker 1: demand with a slowdown. There is well, what's the viscosity 517 00:23:44,480 --> 00:23:47,399 Speaker 1: right now of the American system? Bob Michael's here. I 518 00:23:47,440 --> 00:23:50,320 Speaker 1: saw him. He's on his phone doing commercial real estate 519 00:23:50,359 --> 00:23:53,360 Speaker 1: workouts for Jamie Diamond while he's sitting on setting commercial 520 00:23:55,520 --> 00:23:56,160 Speaker 1: good boardy Bob. 521 00:23:56,200 --> 00:23:57,720 Speaker 4: Thanks for be it was fantastic. 522 00:23:57,800 --> 00:24:00,520 Speaker 3: By the way, You've taed up Europe quite nice because 523 00:24:00,560 --> 00:24:02,120 Speaker 3: I'm trying we shift away. 524 00:24:02,960 --> 00:24:06,640 Speaker 1: Trip to cover the ECSS sabbatical, but Madame Leguard would 525 00:24:06,680 --> 00:24:07,239 Speaker 1: like me to be here. 526 00:24:07,280 --> 00:24:10,120 Speaker 3: The European Central Bank decision is tomorrow, and it's worth 527 00:24:10,160 --> 00:24:14,320 Speaker 3: repeating that Germany is in recession. The data is absolutely dreadful, 528 00:24:14,600 --> 00:24:16,960 Speaker 3: and inflation Lisa is still sticky. 529 00:24:17,280 --> 00:24:20,000 Speaker 2: And this is the fear. What happens if this ends 530 00:24:20,040 --> 00:24:22,440 Speaker 2: up being a similar story in the US, if inflation 531 00:24:22,560 --> 00:24:25,640 Speaker 2: reaccelerates and growth slows down. We didn't hear that from 532 00:24:25,640 --> 00:24:28,119 Speaker 2: Fred jo J. Powell. His base cases we avoid a 533 00:24:28,160 --> 00:24:31,360 Speaker 2: recession and we end up bringing down inflation to two 534 00:24:31,400 --> 00:24:35,200 Speaker 2: percent the goldilocks. He's leaning into that, and yet. 535 00:24:36,440 --> 00:24:39,160 Speaker 1: Yes, I don't think he's I don't think he's leading 536 00:24:39,160 --> 00:24:41,040 Speaker 1: in the goldie locks. I think he's worried about Bill 537 00:24:41,119 --> 00:24:45,280 Speaker 1: Dudley's outlook, right, you know, he's just just they don't 538 00:24:45,280 --> 00:24:47,400 Speaker 1: want to make a mistake on the upside. They do 539 00:24:47,480 --> 00:24:50,200 Speaker 1: not want to cut before they're certain. That's the emotion 540 00:24:50,640 --> 00:24:51,400 Speaker 1: of the discussion. 541 00:24:51,440 --> 00:24:54,040 Speaker 3: I asked the question Tom earlier whether the biggest risk 542 00:24:54,119 --> 00:24:56,520 Speaker 3: right now is cutting too soon or holding too long? 543 00:24:57,200 --> 00:24:59,080 Speaker 4: And I think I'm with you at the biggest risk. 544 00:24:59,040 --> 00:25:01,880 Speaker 1: If I missed the damn golf stream at titoborough never month. 545 00:25:02,119 --> 00:25:05,520 Speaker 4: I thank you for the news comfort. 546 00:25:06,520 --> 00:25:09,880 Speaker 2: I was checking the trade schedule at the same time. 547 00:25:09,720 --> 00:25:11,600 Speaker 4: You want it out to sell. 548 00:25:17,359 --> 00:25:21,120 Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join 549 00:25:21,240 --> 00:25:24,280 Speaker 1: us live weekdays from seven to ten a m. Eastern 550 00:25:24,520 --> 00:25:28,480 Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from 551 00:25:28,640 --> 00:25:33,840 Speaker 1: six to nine am for insight from the best in economics, finance, investment, 552 00:25:34,000 --> 00:25:39,080 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 553 00:25:39,119 --> 00:25:43,680 Speaker 1: Apple Podcastsoundcloud, Bloomberg dot com, and of course on the terminal. 554 00:25:44,280 --> 00:25:47,160 Speaker 1: I'm Tom Keen, and this is Bloomberg