WEBVTT - Fed Signals One More Hike This Year 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.239 --> 0:00:23.000 So this is the sixth meeting of the FOMC. 0:00:23.720 --> 0:00:26.320 It's done, it is done, and we just wrapped up 0:00:26.320 --> 0:00:28.920 listening to Fedshair J. Powell talking about the decision and 0:00:29.000 --> 0:00:33.400 the economy and what's to come. Well, you know what, Carol, 0:00:33.680 --> 0:00:36.040 the Fed leaves rates unchanged, signals one more rate hike 0:00:36.120 --> 0:00:38.519 this year. Powell says, Central Bank to proceed carefully on 0:00:38.520 --> 0:00:40.240 a rate path, carefully how many? 0:00:40.440 --> 0:00:42.040 It was like a drinking game. Every time you said 0:00:42.080 --> 0:00:42.800 careful or careful. 0:00:42.880 --> 0:00:45.200 Hope you weren't drinking during that Wow, maybe some water 0:00:45.280 --> 0:00:47.159 you had been you would be drinking a lot. And 0:00:47.200 --> 0:00:49.440 then to your treasury yields, they went flat after that 0:00:49.479 --> 0:00:50.559 initial surge. 0:00:50.760 --> 0:00:53.800 Unbelievable. All right, So let's get to it. I will say, 0:00:53.840 --> 0:00:56.680 the FED chief saying that there's so much uncertainty around 0:00:56.720 --> 0:00:58.280 the timing of rate cuts, and that was something I 0:00:58.280 --> 0:01:00.800 felt like in the press conference that reporters we're trying 0:01:00.800 --> 0:01:03.000 to pin him down to and he would not be pinned, 0:01:03.440 --> 0:01:06.000 although it does feel like higher for longer, all right, 0:01:06.040 --> 0:01:08.080 So let's get to it. Let's get some analysis, because 0:01:08.080 --> 0:01:10.720 we did get an upbeat and upbeat I should say, 0:01:10.720 --> 0:01:13.720 an update on those economic projections from the Federal Reserve, 0:01:13.760 --> 0:01:15.759 and that was certainly something we were all focused on. 0:01:16.440 --> 0:01:19.440 What we have with us or who we have with us. 0:01:19.440 --> 0:01:22.920 A former Bloomberg colleague, Ylana Shalaeva, senior US economist at 0:01:22.920 --> 0:01:24.960 BnB party about on Zoom in New York City and 0:01:24.959 --> 0:01:29.320 in Bloomberg Economics US economist Stuart Paul. He's here in 0:01:29.319 --> 0:01:32.120 our Bloomberg Interactive Broker studio, Stuart, I do want to 0:01:32.160 --> 0:01:35.759 start with you, what are or were the key points 0:01:35.760 --> 0:01:38.640 of today's decision and what Jay Powell chose to stress 0:01:38.680 --> 0:01:39.760 in that press conference. 0:01:40.160 --> 0:01:42.200 So Powell is definitely stressing that he's going to be 0:01:42.200 --> 0:01:44.600 maintaining a higher for longer posture. I think that some 0:01:44.640 --> 0:01:47.080 of the confusion that came from the price conferences that 0:01:47.160 --> 0:01:50.720 this is just a generally hawkish summary of economic projections. 0:01:50.760 --> 0:01:54.960 That's really the content of today's F one C decision 0:01:55.040 --> 0:01:58.960 is the summary of economic projections showing far fewer cuts 0:01:58.960 --> 0:02:02.440 in twenty twenty four, more optimistic GDP growth path. But 0:02:02.560 --> 0:02:05.400 for some reason, Powell, when he took to the podium 0:02:05.480 --> 0:02:08.160 said that a soft lending is not his base case. 0:02:08.520 --> 0:02:10.840 It's almost as I was very surprised. 0:02:10.960 --> 0:02:14.000 See what does that mean? That means things are better? 0:02:14.880 --> 0:02:17.919 It's timp I mean I took it as bad news. 0:02:18.200 --> 0:02:19.839 I took it as you know, things aren't as good 0:02:19.840 --> 0:02:20.840 as people think. 0:02:21.120 --> 0:02:24.040 Well, we hear Bloomberg Economics think that there is some 0:02:24.120 --> 0:02:27.120 softness underneath the surface. I think that if we're trying 0:02:27.160 --> 0:02:29.480 to analyze the intent of the FED chairman here, we 0:02:29.600 --> 0:02:32.720 have to think that he's trying to invoke some sort 0:02:32.760 --> 0:02:36.160 of a memory of vulgar which is that he's willing 0:02:36.200 --> 0:02:39.280 to do what's necessary to break the back of inflation. Yes, 0:02:39.400 --> 0:02:43.560 he's optimistic about growth. That's why we or the median 0:02:43.639 --> 0:02:46.240 member of the FMC at least is optimistic about growth. 0:02:46.600 --> 0:02:49.160 That's what helps to explain the median projection for the 0:02:49.280 --> 0:02:52.880 FED funds rate maintaining that higher for longer posture ending 0:02:52.880 --> 0:02:55.920 twenty twenty four at five point one percent, five to 0:02:55.960 --> 0:02:58.600 five in a quarter range. And if the Fed is 0:02:58.600 --> 0:03:01.440 ever going to have to rain and inflame. Maybe something 0:03:01.520 --> 0:03:04.040 might have to crack. That's what I think that he 0:03:04.120 --> 0:03:06.760 was alluding to when he says that soft landing isn't 0:03:06.840 --> 0:03:08.160 necessarily his base case. 0:03:08.200 --> 0:03:11.440 And Bloomberger Economic Sana Wong writing officials also completely scrapped 0:03:11.440 --> 0:03:14.640 a recession forecast for this year, so definitely taking that 0:03:14.720 --> 0:03:15.359 off the table. 0:03:15.480 --> 0:03:18.000 Hey'll initially Eteva come on in here a senior US 0:03:18.040 --> 0:03:20.680 economist at BNP Para, but also our former colleague here 0:03:20.919 --> 0:03:24.200 at Bloomberg Lane, How did you read into that comment 0:03:24.240 --> 0:03:24.840 from FED chair J. 0:03:25.000 --> 0:03:25.280 Powell? 0:03:25.680 --> 0:03:28.240 He would not call this soft landing a baseline expectation. 0:03:28.320 --> 0:03:29.440 What's your interpretation of that? 0:03:30.120 --> 0:03:34.160 I think I think, you know, the chair is alluding 0:03:34.240 --> 0:03:38.680 to some event risk here, and I think there is 0:03:38.760 --> 0:03:42.400 a lot of things that could go wrong from now on. Yes, 0:03:42.720 --> 0:03:46.000 the you know, economic growth looks really strong if you 0:03:46.040 --> 0:03:49.560 look at the recent data, but we have a confluence 0:03:50.120 --> 0:03:54.560 of significant negative risks coming all at the same time 0:03:55.400 --> 0:03:57.600 in the in the fourth quarter of this year, you 0:03:57.680 --> 0:04:01.800 have student loan repayments restart, you have a possible shutdown, 0:04:03.080 --> 0:04:07.520 Excess savings are depleting. So there are significant risks to 0:04:07.680 --> 0:04:12.280 the soft lending scenario that is reflected in the summer 0:04:12.320 --> 0:04:17.760 of economic projections, they're really seeing a stronger growth, lower 0:04:17.839 --> 0:04:22.279 unemployment rate, and at the same time much lower inflation. 0:04:22.720 --> 0:04:27.560 I think the event risks that will make them be 0:04:27.800 --> 0:04:29.479 cautious at the following meeting. 0:04:30.720 --> 0:04:33.000 If you could have asked a question to the FED 0:04:33.120 --> 0:04:35.080 chair Yelena, what would it have been? 0:04:36.680 --> 0:04:41.920 I think I wanted to hear a much clearer explanation 0:04:42.200 --> 0:04:46.120 of what he thinks about policy legs. He alluded to 0:04:46.240 --> 0:04:50.000 that a little bit in the opening remarks, but you know, 0:04:50.320 --> 0:04:56.960 the extent of how much policy previous policy tightening impacted 0:04:57.000 --> 0:05:01.080 economic growth would I would like to get a better 0:05:01.160 --> 0:05:05.800 sense of that. It seems like Chair himself believes that 0:05:06.279 --> 0:05:09.880 policy liks have not fully percolated through the economy and 0:05:10.000 --> 0:05:13.760 more impact is coming. 0:05:14.320 --> 0:05:14.520 You know. 0:05:14.640 --> 0:05:16.200 And Stuart, I want to ask you, you know, process 0:05:16.240 --> 0:05:18.400 of getting inflation to two percent has a long way 0:05:18.440 --> 0:05:20.600 to go. So do I read that as yep, we're 0:05:20.600 --> 0:05:22.880 not at two percent yet, so we get that, Chair 0:05:22.960 --> 0:05:25.600 palal or is it that that also means you guys 0:05:25.600 --> 0:05:29.880 still have work to do, and so cooleer jets everybody 0:05:29.880 --> 0:05:32.159 who's thinking of FED cuts. 0:05:32.680 --> 0:05:36.680 You know, the projected path for the FED funds rate 0:05:36.720 --> 0:05:39.120 target range, at least for the median voter on the 0:05:39.200 --> 0:05:43.839 FMC seems to be almost separate apart from the economic 0:05:43.880 --> 0:05:46.599 fundamentals that they're showing in their projections. We're not getting 0:05:46.680 --> 0:05:50.359 to the two percent core PC target until twenty twenty six. 0:05:52.360 --> 0:05:57.440 So yes, the core PC forecast was modestly revised down 0:05:57.480 --> 0:05:59.400 for twenty twenty three. But we also see growth being 0:05:59.440 --> 0:06:02.640 revised up, we see unemployment being revised down, labor markets 0:06:02.640 --> 0:06:06.479 staying tighter for us, staying tighter for longer. That's not 0:06:06.680 --> 0:06:09.320 the higher for longer, the tighter for longer that the 0:06:09.440 --> 0:06:13.240 Fed had been looking for. Right, So to those fundamental 0:06:13.279 --> 0:06:18.000 economic projections, those forecasts scream one more rate hike to you. 0:06:18.200 --> 0:06:21.240 I mean, it seems as though, to Elena's point that 0:06:21.680 --> 0:06:25.479 maybe these optimistic projections are just that, maybe they're just 0:06:25.520 --> 0:06:27.360 a little bit of a wish and something will crack 0:06:27.400 --> 0:06:30.359 in the background. Maybe it's something fundamental like Elena was 0:06:30.520 --> 0:06:33.520 talking about that we've written about extensively. Maybe it's something 0:06:33.600 --> 0:06:36.920 like liquidity and we haven't heard anything about QT in 0:06:37.160 --> 0:06:38.200 multiple press conferences. 0:06:38.240 --> 0:06:40.120 Well, Jelena store rais is a really good point. I mean, 0:06:40.120 --> 0:06:43.040 how seriously can you take the dot plot out two years. 0:06:43.080 --> 0:06:45.400 It's one thing to, you know, take the dot plot 0:06:45.400 --> 0:06:47.720 projections out for the remainder of the year, but it's 0:06:47.720 --> 0:06:49.920 an entirely different thing to look at it for the 0:06:50.040 --> 0:06:52.440 end of twenty twenty five. How do you look at 0:06:52.440 --> 0:06:55.000 different times there versus what they're saying. 0:06:56.240 --> 0:06:59.160 I think, I think you really have to take it 0:06:59.160 --> 0:07:02.480 with a grain of even going into the next year. 0:07:02.920 --> 0:07:06.840 You know, we did notice that the range of projections 0:07:06.839 --> 0:07:10.240 for twenty twenty four narrowed, but it's still a very 0:07:10.280 --> 0:07:16.840 wide range of totally different projections. And even this year, 0:07:17.240 --> 0:07:22.520 I think the fact that the Fed downgraded inflation projections, 0:07:22.840 --> 0:07:26.240 but they still, I think, in our of you are 0:07:26.600 --> 0:07:31.160 very high relative to what will likely happen. So in 0:07:31.200 --> 0:07:34.880 this sense, you know, if inflation surprises to the downside 0:07:35.000 --> 0:07:37.800 closer to the end of the year, that will give 0:07:38.480 --> 0:07:44.720 them a way out of the last projected hike of 0:07:44.720 --> 0:07:48.480 the cycle. We think that they will they have reached 0:07:48.600 --> 0:07:49.400 the terminal rate. 0:07:49.720 --> 0:07:52.640 Is there a word that you see zon in terms 0:07:52.640 --> 0:07:53.680 of what came out of j. 0:07:53.800 --> 0:07:56.040 Powell's mouth today, Elena. 0:07:57.280 --> 0:08:00.080 In a sense, there were just you know you, so 0:08:00.160 --> 0:08:01.640 sometimes he uses a word over and over. 0:08:01.760 --> 0:08:03.000 Sometimes there's a phrase and we. 0:08:02.960 --> 0:08:05.640 All kind of you know, that's to be transitory. 0:08:05.720 --> 0:08:08.040 It used to be transitory data dependent, right. How many 0:08:08.080 --> 0:08:09.640 times have we said that? Is there anything that came 0:08:09.680 --> 0:08:12.080 out of his mouth that you thought, okay, this is 0:08:12.160 --> 0:08:14.320 kind of where the sake a dependency? 0:08:14.440 --> 0:08:17.800 But that has been the mantra for quite some time. 0:08:18.240 --> 0:08:21.480 I think that they just want to be cautious with those, 0:08:22.320 --> 0:08:23.800 you know, sticky words. 0:08:24.080 --> 0:08:26.119 How about for you, Stewart, was there something there? 0:08:26.400 --> 0:08:28.520 No, The thing that really stood out to me was 0:08:28.560 --> 0:08:32.040 that there that Jpewell didn't seem to strike, at least 0:08:32.080 --> 0:08:37.160 not to me, a single hawkish or dubbish tone. Usually, 0:08:37.720 --> 0:08:40.680 at least over the past few years, when the FOMC 0:08:40.840 --> 0:08:43.440 makes a decision, so in this case, the hold rate steady, 0:08:44.800 --> 0:08:48.000 he'll end up striking a more hawkish tone to compensate 0:08:48.000 --> 0:08:50.080 for the pause and raids, or if they were to hike, 0:08:50.400 --> 0:08:52.720 he ends up coming out a little bit dubvish during 0:08:52.720 --> 0:08:55.439 the press conference to sort of tone down any sort 0:08:55.440 --> 0:08:58.320 of market reaction to the actual decision itself. That was 0:08:58.360 --> 0:09:01.240 not the case today during the press conference, at least 0:09:01.320 --> 0:09:02.000 not to my ear. 0:09:02.120 --> 0:09:04.640 What did you hear? To my ear? He sounded a. 0:09:04.600 --> 0:09:08.840 Little bit cautious. He used the word cautious multiple times, 0:09:09.320 --> 0:09:13.120 and they were just the same way that we see 0:09:13.160 --> 0:09:18.280 this sort of break between the fmc's medium forecast for 0:09:18.280 --> 0:09:21.760 the fund rate itself and it's forecast for the economic projections. 0:09:22.200 --> 0:09:24.439 It seems that there wasn't a cohesive narrative, at least 0:09:24.520 --> 0:09:26.640 not to me when I was listening to the press conference. 0:09:26.760 --> 0:09:27.760 It's interesting, right. 0:09:27.600 --> 0:09:30.800 Okay, to Stewart's point, if I mean, yes, there's a 0:09:30.840 --> 0:09:34.480 lot of risk management approach in what they are doing 0:09:34.559 --> 0:09:37.720 right now, not that they have achieved the goal, but 0:09:37.840 --> 0:09:42.800 they're very cautiously moving along. It's risk management that is 0:09:42.880 --> 0:09:44.360 driving the decision at the point. 0:09:44.960 --> 0:09:47.680 All right, So okay, where do we go from here? 0:09:47.880 --> 0:09:50.240 And I guess it's you know, Elena, what are the 0:09:50.240 --> 0:09:52.000 next kind of focal points for you? Is it just 0:09:52.000 --> 0:09:53.880 be going to go from data point to data point? 0:09:53.920 --> 0:09:56.839 I mean, how do you think about November? 0:09:58.400 --> 0:10:02.040 So we only get one with CPI CPI report and 0:10:02.080 --> 0:10:06.000 one more payrolls report before the November meeting. So I 0:10:06.000 --> 0:10:09.080 mean they're saying they're data dependent, but there's really not 0:10:09.200 --> 0:10:11.920 that much data that they're gonna get. I think what 0:10:12.080 --> 0:10:15.840 will keep them on hold at the next meeting is 0:10:15.920 --> 0:10:18.960 really the event risk. So again I mentioned a lot 0:10:19.000 --> 0:10:25.000 of things that are coming that could influence their decision 0:10:25.080 --> 0:10:28.400 to be even more cautious in the medium in the 0:10:28.600 --> 0:10:31.720 near term, but I think by the time they get 0:10:31.760 --> 0:10:34.320 to the end of the year to the December meeting, 0:10:34.440 --> 0:10:38.160 they will we will probably get a lot of data 0:10:38.440 --> 0:10:42.760 showing a significant slow down in economic roles in UH 0:10:42.840 --> 0:10:46.280 and even further slow down in the labor market, and 0:10:46.520 --> 0:10:52.240 eventually that would stop them from going another time as 0:10:52.280 --> 0:10:54.959 they are projecting in the Summary of Economic projections. 0:10:55.000 --> 0:10:57.480 Stuet I like the way that Yolena described event risk. 0:10:57.600 --> 0:10:59.600 These things that we talk about that the FED absolutely 0:10:59.640 --> 0:11:02.120 has no control over. Something that j. Powell said, you know, 0:11:02.200 --> 0:11:06.320 higher oil prices, UAW strikes, student loan payments starting up. 0:11:06.320 --> 0:11:09.200 Once again, what's the biggest event risk on your radar 0:11:09.320 --> 0:11:09.720 right now? 0:11:11.440 --> 0:11:14.760 Well, I'm not sure this is entirely an event itself. 0:11:14.800 --> 0:11:17.840 It is a catalyst that's starting, but it's well signaled. 0:11:17.920 --> 0:11:19.600 Right we know that student loan repayments are going to 0:11:19.600 --> 0:11:23.320 be starting. In fact, student borrowers have started those repayments 0:11:23.360 --> 0:11:27.640 already and flows into the Department of Education's coffers within 0:11:27.679 --> 0:11:31.160 the Treasury have already reached pre pandemic flows, so that 0:11:31.240 --> 0:11:35.319 typically shaved that should based on typical flows into the 0:11:35.320 --> 0:11:38.120 Department of Education, shave off something like fifty basis points 0:11:38.120 --> 0:11:40.840 from PC spending on a monthly basis. I think that 0:11:40.840 --> 0:11:43.800 that's probably I think that that's what's biggest to me. 0:11:44.679 --> 0:11:49.240 Other things like the UAW strike. Imagine that that's temporary 0:11:49.640 --> 0:11:52.680 shave something like one percentage point off of industrial production. 0:11:53.200 --> 0:11:54.800 That's the sort of thing that you get back though 0:11:54.800 --> 0:11:57.520 when they fire up the assembly lines again. Same thing 0:11:57.600 --> 0:12:01.400 goes with the government shutdown. We would not even see 0:12:01.480 --> 0:12:06.319 that show up in the establishment survey if any sort 0:12:06.360 --> 0:12:09.920 of federal agency still keeps workers on its payrolls, at 0:12:10.000 --> 0:12:13.200 least in so far as those workers will receive back 0:12:13.280 --> 0:12:15.599 pay when they are brought back to work at the 0:12:15.679 --> 0:12:19.960 end of a shutdown. Even a government shutdown wouldn't hurt 0:12:20.120 --> 0:12:24.080 non farm payroll growth that much. But the extent to 0:12:24.400 --> 0:12:28.120 look the Board of Governors is sitting there on Constitution Avenue. 0:12:28.160 --> 0:12:29.960 It's the sort of thing that they would see firsthand 0:12:30.000 --> 0:12:34.240 when economic activity within the district slows to a halt 0:12:34.280 --> 0:12:36.480 during a government shutdown. So it's the sort of thing 0:12:36.520 --> 0:12:38.880 they can feel very scary to policymakers, right. 0:12:39.240 --> 0:12:41.240 I always think about with these kind of things, it's 0:12:41.280 --> 0:12:43.480 either kind of a one off if it ends quickly. 0:12:44.480 --> 0:12:47.880 The longer these things lag on, I assume the economic 0:12:47.920 --> 0:12:51.280 impact is so much greater Elan. It was kind of fun, 0:12:51.320 --> 0:12:53.640 I guess to kind of watch J Powell deal with, 0:12:53.720 --> 0:12:55.320 you know, trying to be pressured into like when do 0:12:55.360 --> 0:12:56.120 we cut rates? 0:12:56.120 --> 0:12:57.000 Like when does it come? 0:12:57.600 --> 0:12:59.559 He says, going into twenty twenty four, the time will 0:12:59.559 --> 0:13:02.640 come it So I'm not saying when to cut interest rates, 0:13:03.160 --> 0:13:05.960 So he's very careful about that. How do you think 0:13:06.000 --> 0:13:09.720 about when we will start to cut rates? 0:13:11.240 --> 0:13:16.040 So in our view, you know, we will slip into 0:13:16.120 --> 0:13:21.080 a recession, and that will be a modest recession in 0:13:21.160 --> 0:13:26.800 our view, but still that should push the Fed to 0:13:26.840 --> 0:13:31.600 start cutting rates. Another consideration is something that came up 0:13:31.880 --> 0:13:35.120 during the press conference is the level of real rates. 0:13:35.400 --> 0:13:40.480 So if inflation continues to slow down and it you know, 0:13:40.600 --> 0:13:45.320 falls rapidly, that would push real rates much higher from 0:13:45.360 --> 0:13:48.760 where they are right now. They're already in a restrictive territory, 0:13:48.800 --> 0:13:53.200 and the FED will just not want to keep pushing 0:13:53.240 --> 0:13:57.160 real rates even higher into the restrictive policy stands, so 0:13:57.520 --> 0:14:01.200 at some point the FED will have to cut nominal 0:14:01.280 --> 0:14:05.079 rates just to keep real rates from rising further. So, 0:14:05.320 --> 0:14:08.880 and we think that that time will come sometime in 0:14:08.920 --> 0:14:10.079 the middle of next year. 0:14:11.760 --> 0:14:13.560 You have any thoughts of that, No, I think that 0:14:13.559 --> 0:14:15.599 that's generally right. I think it's in the middle of 0:14:15.600 --> 0:14:18.440 the next year. I wouldn't be surprised to see something 0:14:18.520 --> 0:14:21.920 like twenty five bases points of meetings starting from June July. 0:14:23.280 --> 0:14:26.000 And it's exactly that. It's to maintain that constant spread 0:14:26.000 --> 0:14:30.240 between printed inflation and nominal policy rates, so that monetary 0:14:30.280 --> 0:14:34.680 policy stays sufficiently restricted but not excessively restrictive. I think 0:14:34.720 --> 0:14:38.400 that just tim to your question earlier, thinking about any 0:14:38.480 --> 0:14:40.880 sort of catalyst that could be shocking that could materially 0:14:40.960 --> 0:14:43.320 change policy decisions. 0:14:44.920 --> 0:14:45.760 It seems as though. 0:14:45.640 --> 0:14:49.720 People have entirely stopped discussing liquidity, and they've entirely stopped 0:14:49.760 --> 0:14:53.840 discussing the consequences of QT. But the bank term funding 0:14:53.880 --> 0:14:57.480 program has maintained essentially a constant balance. Banks are still 0:14:57.480 --> 0:15:00.480 continuing to borrow from the federal home loan banks, and 0:15:00.880 --> 0:15:05.840 we're still seeing we're still seeing deposits leaving the banking 0:15:05.880 --> 0:15:08.840 system because rates are materially higher if. 0:15:08.680 --> 0:15:12.440 You're talking about the out the fallout from the regional 0:15:12.480 --> 0:15:13.720 bank crisis. 0:15:13.440 --> 0:15:16.280 Well even preceding the regional bank crisis as a consequence 0:15:16.320 --> 0:15:20.320 of quantitative tightening, the other aspect of monetary policy that's 0:15:20.400 --> 0:15:24.720 operating just sort of in the background, there is an 0:15:24.760 --> 0:15:28.240 attempt to soak up liquidity of the FED. And though 0:15:28.320 --> 0:15:31.440 we always focus on the Fed's dual mandate price stability 0:15:31.520 --> 0:15:34.680 in full employment or maximum employment, the sort of thing 0:15:34.720 --> 0:15:37.520 that could pop up in the background is a liquidity event, 0:15:38.000 --> 0:15:40.600 and those sort of events tend to be pretty convex. 0:15:41.120 --> 0:15:43.720 We don't really have the foresight of saying, you know, 0:15:43.800 --> 0:15:46.720 student loan payments are starting in October. Again, they happen 0:15:46.760 --> 0:15:49.520 when they happen, and I'm surprised that it's the sort 0:15:49.520 --> 0:15:51.720 of thing that doesn't come up in press conferences anymore. 0:15:51.960 --> 0:15:54.800 I mean, COVID happened when it happened. March twenty twenty 0:15:54.800 --> 0:15:56.600 happened when it happened. These are things that you know, 0:15:56.600 --> 0:15:58.240 if you go back to twenty nineteen and the summary 0:15:58.280 --> 0:16:01.600 of economic projections, then right, nobody was foreseeing something like this, 0:16:01.680 --> 0:16:03.840 an event risk like this causing the FED to drop 0:16:03.920 --> 0:16:04.560 rates to zero. 0:16:05.320 --> 0:16:07.960 No, exactly exactly. I mean, I don't know. 0:16:08.320 --> 0:16:11.080 I mean, you think about this year, Yalane, and I 0:16:11.120 --> 0:16:12.840 feel like we've been all over the map right when 0:16:12.880 --> 0:16:15.200 it comes to we thought kind of the world was 0:16:15.200 --> 0:16:17.120 coming to an end many end, you know, with the 0:16:17.160 --> 0:16:18.160 regional bank crisis. 0:16:18.160 --> 0:16:20.680 But you know, we've dealt with crypto over the last year. 0:16:20.680 --> 0:16:21.760 I mean, there's been a lot of things that have 0:16:21.800 --> 0:16:24.080 certainly come at this market. But you know, here we 0:16:24.120 --> 0:16:27.440 have an environment where you see certainly equity strategist continuing 0:16:27.480 --> 0:16:30.200 just to kind of ratchet their estimates higher. But at 0:16:30.240 --> 0:16:32.360 the same time, you know, I'm looking at in stocks 0:16:32.520 --> 0:16:34.840 right now or down to their lows of the session, 0:16:34.880 --> 0:16:38.200 but I'm looking at you know, the rate moves today, 0:16:38.440 --> 0:16:41.920 your two year at five point one, four, ten year 0:16:42.120 --> 0:16:44.960 at four point three, I mean, five year at four 0:16:45.000 --> 0:16:48.400 point what five three? I mean, are these the rates 0:16:48.400 --> 0:16:51.320 that we should anticipate we'll continue to see certainly going 0:16:51.360 --> 0:16:52.480 into twenty twenty four. 0:16:53.920 --> 0:16:56.200 Well, at some point the Fed will have to cut 0:16:56.280 --> 0:17:01.280 rates and we will see some move on that front. 0:17:01.880 --> 0:17:04.760 I think one thing I would like to highlight though, 0:17:04.920 --> 0:17:09.480 is all these things that we mentioned in our discussion, 0:17:09.600 --> 0:17:13.199 like such as student loans and strikes and you know, 0:17:13.240 --> 0:17:16.240 the depletion of excess savings. We should not forget about that, 0:17:16.280 --> 0:17:18.600 even though we've been talking about it for a long time. 0:17:19.320 --> 0:17:23.840 Those things make the economy more vulnerable to exogenous shocks, 0:17:24.119 --> 0:17:27.880 so some type of liquidity events and other things that 0:17:27.960 --> 0:17:32.000 Stuart mentioned. So like, I think that the slowdown in 0:17:32.119 --> 0:17:36.080 the economy to the point at which it approaches somewhat 0:17:36.520 --> 0:17:40.720 some stall speed, that makes the economy really vulnerable to 0:17:41.880 --> 0:17:45.520 something that could happen that we cannot anticipate. And that's 0:17:45.520 --> 0:17:48.920 an important point, and this is something that we should 0:17:48.960 --> 0:17:49.439 be watching. 0:17:49.960 --> 0:17:52.040 Yeah, I mean there's a lot on the plate. 0:17:52.080 --> 0:17:54.639 It's certainly a lot covered by j Powell today, but 0:17:54.720 --> 0:17:56.240 a lot for us to kind of continue to moll 0:17:56.280 --> 0:17:59.000 over and we'll see how the financial markets continue to 0:17:59.040 --> 0:18:01.359 read it. Guys, Thank you so much, really appreciate it. 0:18:01.359 --> 0:18:03.040 I know you guys have had a busy afternoon watching 0:18:03.080 --> 0:18:03.480 all of this. 0:18:04.000 --> 0:18:05.840 So great to get you here late last night. I 0:18:05.840 --> 0:18:07.960 saw you on TV late last night. We were getting 0:18:08.000 --> 0:18:11.639 are you doing a preview Australia Daybreak? Oh yeah, Well, 0:18:11.640 --> 0:18:12.679 I mean somebody's got to do it. 0:18:12.720 --> 0:18:15.360 A lot of central banks right now, right making somebody. 0:18:15.040 --> 0:18:17.399 Needs to talk about starts in permit, somebody needs to 0:18:17.400 --> 0:18:20.680 talk about what to anticipate from the FED. So it's 0:18:20.680 --> 0:18:23.800 been a busy day for us. Lena, we miss you 0:18:23.840 --> 0:18:25.919 here at Bloomberg. Eliza says, hello. 0:18:28.000 --> 0:18:31.280 There you guys to well, you know what, we love 0:18:31.320 --> 0:18:33.240 it when you get to join us, Lena, and on 0:18:33.359 --> 0:18:35.320 FED day at any time. So it's awesome to have 0:18:35.400 --> 0:18:36.160 you back with us. 0:18:36.400 --> 0:18:38.480 Totally, totally, all right, be well, Jiolena sholl. 0:18:38.520 --> 0:18:40.640 Let you have a senior US economist at BNP party, 0:18:40.680 --> 0:18:43.480 but as you know, a former Bloomberg colleague and Stuart Paul, 0:18:43.800 --> 0:18:47.000 us economist at Bloomberg Economics, part of the Bloomberg Economics team. 0:18:47.000 --> 0:18:49.479 Elena was previously. 0:18:50.400 --> 0:18:53.959 You're listening to the Bloomberg Business Week podcast. Catch us 0:18:54.000 --> 0:18:57.320 live weekday afternoons from three to six Eastern Listen on 0:18:57.400 --> 0:19:01.360 Bloomberg dot Com, the iHeartRadio app, the Bloomberg Business app, 0:19:01.720 --> 0:19:04.000 or wants us live on YouTube. 0:19:04.720 --> 0:19:06.720 All right, As you know, FedEx just out with earning 0:19:06.760 --> 0:19:08.800 stock rallying in the after hours. It's also been on 0:19:08.840 --> 0:19:11.119 a tear this year, as we talked about earlier, up 0:19:11.160 --> 0:19:13.159 more than I think forty percent this year, put up 0:19:13.160 --> 0:19:15.320 another four percent in the aftermarket. Let's get to it. 0:19:15.400 --> 0:19:17.800 Let's see what our lead class cow has to say. 0:19:17.800 --> 0:19:20.880 He follows this company and the sector. He's Bloomberg Intelligence 0:19:20.920 --> 0:19:23.879 senior Transport, Logistics and Shipping analysts and he joins us 0:19:23.920 --> 0:19:26.640 at BI headquarters in Princeton, New Jersey, and he, like us, 0:19:26.640 --> 0:19:30.840 has just been going over the numbers. Why the optimism 0:19:30.920 --> 0:19:32.879 do you think in the aftermarket? Lead and first of all, 0:19:32.880 --> 0:19:34.040 thanks for being with us. 0:19:34.520 --> 0:19:37.840 Oh my pleasure. You know, they beat expectations, so that's 0:19:37.920 --> 0:19:41.639 obviously in that positive. They be by eighty cents. You know, 0:19:41.760 --> 0:19:44.960 they also increase the low end of the range of 0:19:45.000 --> 0:19:48.680 their guidance by fifty cents, which is another positive. And 0:19:48.760 --> 0:19:50.760 you know, the beat is what what's telling us is 0:19:50.800 --> 0:19:54.040 that management is beginning to execute on its strategy to 0:19:54.240 --> 0:19:59.000 cut around six billion dollars in and expenses. FedEx for 0:19:59.040 --> 0:20:01.600 a long time has been to show me story, and 0:20:01.600 --> 0:20:04.080 they're actually starting to, I guess, not show me, but 0:20:04.160 --> 0:20:07.840 show people that they're able to execute on their plans. So, 0:20:08.760 --> 0:20:12.480 you know, I think that's what's fueling the aftermarket increase 0:20:12.560 --> 0:20:14.440 that we saw. I think it's up like ten bucks 0:20:14.480 --> 0:20:14.800 right now. 0:20:14.880 --> 0:20:17.200 Okay, So that's the good news, because I'm looking through 0:20:17.200 --> 0:20:18.920 this release and I'm seeing a little bit of bad 0:20:18.960 --> 0:20:21.000 news in here, so correct me if I'm wrongly. But 0:20:21.480 --> 0:20:23.919 the improvement in operating results I'm reading this directly from 0:20:23.920 --> 0:20:28.440 FedEx's press release was partially offset by ongoing demand weakness. 0:20:28.880 --> 0:20:30.960 Talk to us about that demand weakness, where they're seeing 0:20:30.960 --> 0:20:33.040 it and how long it's going to last. 0:20:34.200 --> 0:20:36.800 Yeah, I mean that's a great question. I think demand 0:20:36.840 --> 0:20:39.399 expectations are going to be weak because you have to remember, 0:20:39.440 --> 0:20:42.560 demand is really normalizing from you know, some creamy highs 0:20:42.600 --> 0:20:45.560 that we saw during the pandemic when everyone was ordering 0:20:45.600 --> 0:20:48.560