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Speaker 1: Bloomberg Audio Studios.

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Speaker 2: Podcasts.

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Speaker 3: Radio.

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Speaker 4: News.

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Speaker 2: This is a breaking news update from Bloomberg. Instant reaction

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Speaker 2: and analysis from our 3,000 journalists and analysts around the world.

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Speaker 3: Today's action starts to show we're serious about this. And

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Speaker 3: we will deliver on the price stability objectives. And as

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Speaker 3: the statement said, we'll do it on a timelier basis.

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Speaker 2: Fed Chair Kevin Walsh wrapping up the news conference in Washington, D.C.,

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Speaker 2: a 25 basis point interest rate hike. The forecast implying

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Speaker 2: there's one more to come later this year and a

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Speaker 2: lean to perhaps even more in 2027. Live from New

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Speaker 2: York City this afternoon. Good afternoon to you all. This

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Speaker 2: is the price action. A hawkish opening statement from a

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Speaker 2: Fed chairman happened to drive equities lower down on the

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Speaker 2: session by 0.4 percent in the bond market. Two's 10s, 30s,

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Speaker 2: just sit on the front end of the curve. Yields

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Speaker 2: up six basis points on twos. We breach 470 on

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Speaker 2: a two-year. We're higher for a seventh consecutive session, the

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Speaker 2: highest yield at the front end of the curve since

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Speaker 2: July 2024. As for the hawkish speak, take a listen

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Speaker 2: to the chairman of the Federal Reserve.

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Speaker 3: Inflation remains elevated. Today's policy action will support a timelier

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Speaker 3: return to the committee's 2% goal. I would be hard-pressed

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Speaker 3: to describe broad financial conditions as restrictive. This view was

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Speaker 3: widely shared by the committee. So we removed a dose

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Speaker 3: of accommodation.

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Speaker 2: We removed a dose of accommodation. Just a subtle sign

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Speaker 2: that maybe you'll have to do just a little bit

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Speaker 2: more of that. This line from the Fed chairman. Today's

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Speaker 2: action starts to show that we're serious about this. It

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Speaker 2: starts to show that we're serious about this. This market

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Speaker 2: believing there's more action to come from this Fed chair.

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Speaker 1: It isn't just a statement of economic projections.

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Speaker 5: And Michael McKee asked a great question of how do

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Speaker 5: you reconcile a statement of economic projections that doesn't see

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Speaker 5: inflation increasing? at 2% until 2029. This Fed chair said,

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Speaker 5: those are not my projections. We will deliver price stability.

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Speaker 1: Today's action, to your point, starts to show we're serious

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Speaker 1: about this.

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Speaker 5: And that is where you saw the inflection lower when

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Speaker 5: it comes to stock valuations and where you saw that

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Speaker 5: inflection higher in the front end of the yield curve.

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Speaker 2: So, Stephanie Rotherwold's research standing by. We'll get to her

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Speaker 2: in just a moment. We'll speak to Neil Dutra as well.

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Speaker 2: He's going to jump on for us too. Before we

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Speaker 2: get into all of this, I just want to sit

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Speaker 2: on the tone of the news conference. Sitting at home

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Speaker 2: watching this, you might have noticed a subtle difference here.

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Speaker 2: felt tighter. Q & A, the cadence was different. Mike McKee,

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Speaker 2: before going into this, told us that they weren't allowed

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Speaker 2: to ask follow-up questions to the Fed chair. That's why

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Speaker 2: this lasted only 30 minutes. Everything was tighter. He was

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Speaker 2: far more selective about what he answered. There were a

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Speaker 2: few questions wasted on the president because he was never

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Speaker 2: going to engage in any of that. But a different

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Speaker 2: cadence to this news conference, certainly compared to what we

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Speaker 2: heard last time around back in July.

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Speaker 5: Arguably, he was speaking to somebody else as well, because

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Speaker 5: the number of press members from a wider range of

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Speaker 5: press were also called on.

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Speaker 1: That was notable.

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Speaker 5: To me, it was also interesting that he was trying

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Speaker 5: to retrain people, saying, if you ask two-part questions, I'll

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Speaker 5: pick which part I want to answer. So essentially, that

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Speaker 5: was also a very different tone of tighter with a

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Speaker 5: much clearer message, which is.

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Speaker 1: We need to do more.

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Speaker 5: And right now, these financial conditions are not restrictive in

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Speaker 5: any way, shape, or form.

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Speaker 6: I'm going to keep my opinion out of it because

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Speaker 6: we've got wonderful guests coming up. I will editorialize that

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Speaker 6: was a disaster. And as Lisa's noticed, it moved like

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Speaker 6: a hockey stick move, which is what Ben Bernanke would

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Speaker 6: call it. there was a hockey stick move, and I

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Speaker 6: heard a single sentence, and this is the heart of

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Speaker 6: the matter, and that he said, we're looking at discipline,

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Speaker 6: not a decision. He's running an MBA course out at Stanford,

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Speaker 6: and the rest of the economists are trying to do macroeconomics.

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Speaker 1: I'm not sure I would agree.

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Speaker 5: I don't know that he would think that this was

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Speaker 5: actually a disaster, because ultimately what you saw is a

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Speaker 5: flattening in the yield curve, and you saw a capping

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Speaker 5: at the long end of yields.

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Speaker 6: I got the 30-year real yield at three basis points

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Speaker 6: to a new record high. I got 2.8 standard deviations.

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Speaker 6: on DXY. Those are huge moves.

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Speaker 5: If this FOMC committee is truly concerned about inflation, they

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Speaker 5: should not be concerned about the idea that there is

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Speaker 5: a little bit more restrictiveness being baked into financial conditions,

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Speaker 5: which count as lower stock prices and higher bond yields

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Speaker 5: at the front end.

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Speaker 1: Ultimately, isn't that exactly what he's calling for?

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Speaker 2: A lot of people who criticize this Fed chair for

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Speaker 2: not articulating a reaction function. I think he's given us

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Speaker 2: something here, and he gave us something in Jackson Hole, too.

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Speaker 2: The number of inflation categories that are trading above or

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Speaker 2: printing above 3%. He referenced that once again. That's going

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Speaker 2: to be a key metric for this market every time

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Speaker 2: we get the inflation report. How many inflation categories are

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Speaker 2: still rising more than 3%? Are you seeing an increased

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Speaker 2: decline remain the same? And is that going to be

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Speaker 2: your steer for how hawkish or dovish this Fed chair

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Speaker 2: might be at the upcoming meetings?

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Speaker 5: Especially as it pertains to geopolitics. He talked about geopolitics.

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Speaker 5: They can't control oil prices. they can control second-order effects.

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Speaker 5: Where does that come through? In the broadening out of

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Speaker 5: inflation metrics. He also said, I'm not waiting breathlessly on

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Speaker 5: any particular data point. What he is doing is looking

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Speaker 5: at the trend lines, and that broadening out is a

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Speaker 5: key one.

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Speaker 2: You know that meme? Sure, Jan. We discuss it often.

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Speaker 1: Yes.

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Speaker 2: I have to say, come on, that was a ridiculous

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Speaker 2: statement to make.

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Speaker 1: It was.

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Speaker 2: Because for the first time in a long time, there

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Speaker 2: was a feeling that the only thing that mattered with

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Speaker 2: regards to this decision was the inflation print just in

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Speaker 2: the last week. And the difference between being a 0.2

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Speaker 2: and a 0.3 was a market that was either going

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Speaker 2: to price a hike or price a hold.

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Speaker 5: Maybe Kevin Warsh wasn't waiting breathlessly, but everybody in the

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Speaker 5: market was. And ultimately, they traded on that. And ultimately,

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Speaker 5: the Fed came through with what the market was deciding.

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Speaker 2: Mike McKee was in the news conference. We've all got

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Speaker 2: a home bias, of course. Mike McKee always asks the

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Speaker 2: best question in the news conference. Mike, you nailed it.

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Speaker 2: Before we get to that, I want to talk about

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Speaker 2: the difference in the cadence. This was a different performance.

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Speaker 2: It was a different setup. It was a very different

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Speaker 2: news conference compared to what we heard at the end

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Speaker 2: of July. Mike, you were in it. What changed? Well,

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Speaker 2: a lot changed.

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Speaker 7: They changed the seating chart for one thing and moved

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Speaker 7: reporters all around by alphabetical order, an effort, they say,

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Speaker 7: to give more fairness. And they certainly called on a

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Speaker 7: lot of different reporters this time. But you notice that

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Speaker 7: Kevin Warsh was much more direct, and he spoke in

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Speaker 7: very short sound bites. He did not give us long

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Speaker 7: answers about what they thought or what they think the

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Speaker 7: economy is doing.

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Speaker 2: He was just very direct.

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Speaker 7: Also, I think that he is trying very hard not

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Speaker 7: to give us anything to hang on, although he did

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Speaker 7: in his statement, which is a little more direct than

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Speaker 7: he did in July, say, as you mentioned, that he

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Speaker 7: is worried about the breadth of inflation.

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Speaker 2: So a different style.

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Speaker 7: It was much shorter, only 30 minutes, and a different

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Speaker 7: kind of questioning was sort of brought forth.

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Speaker 2: Mike, that word timelier. to get inflation back to target

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Speaker 2: in a timelier manner. You indicated, you pointed out, you

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Speaker 2: highlighted it immediately. You don't see it in the forecast.

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Speaker 2: Were you satisfied with his response to your question?

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Speaker 8: No, I wasn't.

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Speaker 7: And unfortunately, they don't allow follow-up questions because I would

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Speaker 7: have followed up on that point. It's not a question

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Speaker 7: of whether he submitted a forecast or not. And it

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Speaker 7: may be the other 18 people who did, who put

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Speaker 7: that at 2029 to reach 2%, but he's still the

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Speaker 7: chairman and he's still responsible for the statement, which said

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Speaker 7: they're going to bring inflation down in a timelier manner.

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Speaker 7: And then they say they're not. So how they square that,

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Speaker 7: I don't know. I would have also liked to ask

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Speaker 7: him where they see inflation that the Fed can affect,

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Speaker 7: because obviously they can't affect the price of oil and

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Speaker 7: other commodities.

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Speaker 3: Mike.

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Speaker 2: Thank you, buddy. Stay close. We'll come back to you

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Speaker 2: in the next 30 minutes or so. Mike McKee breaking

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Speaker 2: it down. Last point is a really important point. How

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Speaker 2: much influence do they have over the dominant sources of

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Speaker 2: inflation right now? I think of one, which is oil

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Speaker 2: and energy, and they don't have much influence over that

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Speaker 2: at all.

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Speaker 5: Which is the reason why they're looking at the broadening

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Speaker 5: out the second, the third order affairs. I will say

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Speaker 5: we didn't hear from Kevin Warsh how he squares that circle.

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Speaker 5: We will hear from all the other Fed officials as they.

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Speaker 1: Speak in the upcoming weeks.

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Speaker 5: And ultimately, this is a great question to ask them.

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Speaker 5: And we will get their sense of what timeliness really means.

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Speaker 2: I think we've got Governor Mickey Bowman coming up on Friday,

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Speaker 2: don't we?

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Speaker 1: I think she'll have words.

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Speaker 2: Friday morning, going into the weekend, she'll have some things

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Speaker 2: to say. We've got Stephanie Rothawolf Research with us around

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Speaker 2: the table. Let's start there. Stephanie, good afternoon. Hello. What

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Speaker 2: was your takeaway from this decision this afternoon? It was

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Speaker 2: a hawkish one.

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Speaker 4: And it was consistent with his comments at Jackson Hole.

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Speaker 4: There was a question about whether he really believed them

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Speaker 4: or to what extent that was just fixing prior communications.

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Speaker 4: But he kept coming back to financial conditions and talking about,

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Speaker 4: you know, alluding that they're not really restrictive at this point.

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Speaker 4: And it was a very believable delivery of a relatively

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Speaker 4: hawkish hike.

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Speaker 5: What did you make of the commentary about how removing

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Speaker 5: some of the accommodation was is how he views today's

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Speaker 5: move and the idea that this is the start of

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Speaker 5: an ongoing deliberate effort to get serious about price stability.

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Speaker 4: Yeah, I think that was one of the single most

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Speaker 4: important lines in what we heard today and one of

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Speaker 4: the reasons why you're seeing markets react the way they

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Speaker 4: are that this is certainly not a one and done,

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Speaker 4: so that's over. I think the data will ultimately look

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Speaker 4: a little bit better such that they can probably just

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Speaker 4: end up hiking twice, but it certainly suggests that there's

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Speaker 4: a lot more, or considerable more accommodation to be removed.

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Speaker 6: I got eight ways to go here, but I've got

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Speaker 6: to go right now to what the markets are voting

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Speaker 6: on as we speak. These are seismic moves. I have

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Speaker 6: a hockey stick move on the 10-year real yield at

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Speaker 6: the new highs, the 30-year real yield at three basis points,

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Speaker 6: and the DXY is popping 2.8 standard deviation strong dollar.

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Speaker 6: What's the market voting on right now based off what

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Speaker 6: they heard?

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Speaker 4: The market's expecting they're going to do a string of

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Speaker 4: hikes more than certainly the- Or is.

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Speaker 6: It a lack of confidence in the chairman's tone where

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Speaker 6: he's looking at process and not decision?

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Speaker 2: I think it's more of the former.

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Speaker 4: I think the market is just expecting that he sounded

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Speaker 4: a lot more hawkish than they expected. Now we have

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Speaker 4: to price in a greater string of hikes. I don't

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Speaker 4: think it's necessarily a lack of credibility comment here. I

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Speaker 4: think it's more about they're going to do more than

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Speaker 4: certainly many expected before the meeting.

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Speaker 2: Let's just unpack inflation. So he's given us a metric now.

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Speaker 2: there's a target to focus on. It's the amount of

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Speaker 2: inflation categories above and more than 3%. So we'll all

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Speaker 2: look at that. What's influencing that? What are the dominant

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Speaker 2: causes of inflation right now? Let's just start there. What

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Speaker 2: are they?

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Speaker 4: I mean, I would say there's three main categories of

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Speaker 4: inflation that's driving above-trend inflation. It's been The Rand War,

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Speaker 4: which you talked about in terms of geopolitics driving yields higher.

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Speaker 4: It's been the chip shortage, which I would argue is

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Speaker 4: the most important one to keep an eye on because

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Speaker 4: that's something that hasn't gone away. And then the combination

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Speaker 4: of the tariffs that have went into place. Now, those

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Speaker 4: are going to be very much rolling off, right? So

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Speaker 4: when we're thinking about what's the inflation and the percentage

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Speaker 4: of inflation categories that are going to be above 3%

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Speaker 4: in a couple months' time, when we forecast that out,

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Speaker 4: those metrics are going to look a lot lower in

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Speaker 4: a couple months' time. He's been talking about the 6-

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Speaker 4: and 12-month trend of that.

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Speaker 1: If you look at the 3-month, it's down a lot.

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Speaker 4: The 6- and 12-month are going to follow. So because

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Speaker 4: of those three categories, you're going to see it look

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Speaker 4: a lot better now.

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Speaker 1: In a couple months time.

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Speaker 2: It's obvious why I just asked that question. You identified

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Speaker 2: three things that have absolutely nothing to do with rate

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Speaker 2: policy at the Federal Reserve. All three of them. What

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Speaker 2: influence do they have over any of those things?

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Speaker 1: Not that much, realistically.

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Speaker 2: So why are we doing this this afternoon for anything

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Speaker 2: other than just a credibility hike at this institution? What

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Speaker 2: is it really about? What does it achieve?

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Speaker 4: I mean, to some extent, it is a credibility hike.

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Speaker 4: But if you talk about what we were discussing a

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Speaker 4: couple days ago, it was, you know, are they going

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Speaker 4: to hike?

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Speaker 2: Are they not going to hike?

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Speaker 1: It's going to depend on a.

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Speaker 4: Couple basis points at CorePCE. And then, of course, today

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Speaker 4: they deliver a much more hawkish hike. The data didn't act.

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Speaker 4: CorePCE was tracking about 0.23% based on our numbers today.

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Speaker 4: for the month of August, which is kind of in

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Speaker 4: line with what Waller said was an area where they

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Speaker 4: could sit back and hold reliably. But the market took

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Speaker 4: them there. The market wanted them to hike, and they

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Speaker 4: had to deliver it.

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Speaker 5: Earlier this year, it seemed like the majority of the

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Speaker 5: Federal Reserve Committee was saying that rates were moderately restrictive.

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Speaker 5: That changed too. We're not sure. Let's check it out.

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Speaker 5: And then quickly, that they are accommodative and that ultimately

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Speaker 5: the implication is they need to take back those 75

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Speaker 5: basis points of insurance cuts from last year. One thing

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Speaker 5: that Fed Chair Kevin Walsh said that I thought was

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Speaker 5: really important was my suspicion coming into the committee was

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Speaker 5: that the U.S. economy was strengthening. The underlying growth was

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Speaker 5: higher than people think. Do people have to start thinking

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Speaker 5: about a higher neutral rate and the persistence of this,

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Speaker 5: not only as a new normal, but potentially significantly higher

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Speaker 5: in the foreseeable future?

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Speaker 4: I mean, I think that is what markets and to

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Speaker 4: some extent that the Fed was telling you today because

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Speaker 4: they shifted up their long run. I don't think that's

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Speaker 4: ultimately going to be how this plays out. I mean,

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Speaker 4: you consistently hear people talking about 6.5% nominal GDP growth

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Speaker 4: and concerned about is 5% actually the right level of

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Speaker 4: the 10-year given where nominal GDP growth is going to be.

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Speaker 4: If you fast forward a couple of quarters, that's going

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Speaker 4: to be a lot slower than where we are today.

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Speaker 6: Drew Mattis emailing in from MetLife with all of his

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Speaker 6: work at UBS, John, over the years. Long end rates

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Speaker 6: rose equals failure. And where the markets are placing right now,

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Speaker 6: particularly the correlated markets away from the basic five things

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Speaker 6: we look at, Some of these are shocking moves that

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Speaker 6: we're seeing. I have real trouble believing it's just about

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Speaker 6: the data. To the restrictive point, it's about this booming

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Speaker 6: nominal GDP economy. He did allude to that to give

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Speaker 6: him credit.

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Speaker 2: If you want some tough moves in a market today,

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Speaker 2: check out the equity market, lift the lid on things,

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Speaker 2: and look at the banks. Banks are getting knocked about

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Speaker 2: off the back of this decision. They've had some difficult

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Speaker 2: guidance from the likes of Bank of America more recently, too.

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Speaker 2: But I just noticed Goldman. on the Bloomberg drop in

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Speaker 2: some four or five percentage points this afternoon, Brammo, going

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Speaker 2: into the close in the next 45 minutes or so.

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Speaker 2: Banks have held up really well through the year so far.

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Speaker 2: In fact, they've traded really well because nominal GDP is

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Speaker 2: so strong. Off the back of that hawkish Fed speed,

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Speaker 2: just started to see those banks slide in response to

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Speaker 2: that move.

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Speaker 5: I want to go to something Brian Moynihan said recently,

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Speaker 5: which is that as rates and rate volatility increased, a

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Speaker 5: lot of issuers have held back in some of the

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Speaker 5: deals they were planning to transact in. And that slowed

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Speaker 5: some of the capital markets activity. At what point is

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Speaker 5: that the one channel? that the FOMC can actually affect,

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Speaker 5: which is the financial conditions as expressed in all of

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Speaker 5: the issuance that we have seen so far this year.

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Speaker 1: Ultimately, how much are the banks an expression of that?

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Speaker 2: Check out the yield curve. Just bring up the bonds board. Twos, tens, thirties.

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Speaker 2: We'll just take a sneak peek at things right now.

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Speaker 2: Yields down at the long end, up at the front end.

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Speaker 2: That's a flatter curve. Up by six or seven basis

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Speaker 2: points on twos. So that's the highest yield at the

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Speaker 2: front end of the curve going back to July 24.

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Speaker 2: Seven days of this now, Brammo, at the front end

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Speaker 2: of the curve. Something we've seen just a little hint of,

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Speaker 2: a flatter curve, starting to see it even more so

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Speaker 2: this afternoon. I wonder if that's the start of a

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Speaker 2: bigger trend here for this market, that flatter curve driven

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Speaker 2: not just by the front end, but also at the

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Speaker 2: long end as well.

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Speaker 1: There is an expression that this is the new neutral, right?

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Speaker 5: That rates are not going to come down materially, even

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Speaker 5: if the Fed does hike rates by three more times

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Speaker 5: this year.

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Speaker 1: And ultimately... How much do you see.

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Speaker 5: That as the expression of 5 percent 10-year yields, even

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Speaker 5: with potentially a pretty hawkish tone?

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Speaker 6: We had Lucas before, Charles Goodhart, Hugh von Steenis writing

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Speaker 6: up on Goodhart in the FT, I believe it was. Today,

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Speaker 6: our historic moment today was Newt Vixell, 1898, where he

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Speaker 6: trotted it out as some form of academics of the

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Speaker 6: real rate. I would love to know what John Williams

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Speaker 6: thought about this press conference. When I was with Waller—

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Speaker 6: A number of months ago, my question that stopped him was,

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Speaker 6: are there two real rates for America? The haves have

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Speaker 6: a real rate, and the have-nots have a real rate.

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Speaker 6: John Williams basically codified the real rate, and this guy's

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Speaker 6: quoting Newt Vixell. The only one I know that can

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Speaker 6: quote 1898 intelligently is John Writing. That's it. I mean,

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Speaker 6: this ability for him to trot out, who's going to

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Speaker 6: be the next historic moment he's going to trot out?

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Speaker 6: I'll let you pick, John.

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Speaker 2: Mike McKee. Mike, bring us some history right now. He

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Speaker 2: wants to add into this conversation. Mike, welcome back in.

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Speaker 2: What have you got to add?

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Speaker 7: Well, I want to point out what you were just

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Speaker 7: talking about in terms of there being a higher neutral rate.

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Speaker 7: They did forecast that in the median dot. They raised

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Speaker 7: it to 3.2% from 3.1%. And it was 3% last year.

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Speaker 7: So they have been moving up the neutral rate. And

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Speaker 7: that may be one reason that they felt they wanted

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Speaker 7: to increase rates this time because neutral is higher. And

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Speaker 7: we've seen that reflected in real rates. You look at

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Speaker 7: the 10-year Treasury real rate, and it's basically at an

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Speaker 7: 18-year high. So at this point, it may not be

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Speaker 7: as much inflation as it is just a reordering of

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Speaker 7: the economy.

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Speaker 6: Stay with us. More from Bloomberg Surveillance coming up after this.

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Speaker 2: Just to reset, if you're just joining us, welcome to

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Speaker 2: the program live on TV and radio. This, of course,

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Speaker 2: is Bloomberg's Surveillance of Fed special. Tuning in after a

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Speaker 2: 25 basis point interest rate hike from the Federal Reserve,

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Speaker 2: implied by their own forecast, maybe one 25 basis point

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Speaker 2: interest rate hike still to come before year end and

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Speaker 2: the possibility, the potential there is more to come in 2027.

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Speaker 2: Off the back of that and a rather hawkish opening

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Speaker 2: statement from the Federal Reserve chair in the news conference,

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Speaker 2: equities declining Going into the close, we're down by about

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Speaker 2: three quarters of 1% now on the S & P

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Speaker 2: 500 rolling over. You'll see in the bond market, two-year

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Speaker 2: yields are elevated off the back of this as well.

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Speaker 2: The two-year at the front end of the curve up

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Speaker 2: by six basis points to about 472. The long end

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Speaker 2: coming in, we're starting to see that curve flatter. Again,

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Speaker 2: we're down by about two basis points on 30s at

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Speaker 2: about 535. The chairman of the Federal Reserve with a

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Speaker 2: few things to say about where monetary policy is and

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Speaker 2: isn't right now. Take a listen to what he had

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Speaker 2: to say about the start potentially of a process.

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Speaker 3: My commitment in June was to reaffirm to the American people,

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Speaker 3: to anyone listening, that we will deliver price stability. My

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Speaker 3: commitment in July was to say we want to buy

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Speaker 3: a little bit of time. We want to evaluate what's

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Speaker 3: happening across a range of dimensions. And what I said

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Speaker 3: in Jackson Hole in August is we're committed to a discipline,

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Speaker 3: not to a decision. Today's action starts to show we're

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Speaker 3: serious about this and we will deliver on the price

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Speaker 3: stability objective.

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Speaker 2: This chairman was direct and intentional throughout this news conference.

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Speaker 2: His responses were tight. They were tailored for certain audiences

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Speaker 2: at certain times. This line jumped out to me. Today's

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Speaker 2: action starts to show, starts to show we are serious

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Speaker 2: about this and we will deliver on the price stability objective.

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Speaker 2: Neil Dutter of Renmac joins us now for more. Neil,

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Speaker 2: good afternoon, buddy. Good to see you. 25 basis points.

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Speaker 2: I assume if you think there's more to go.

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Speaker 8: Yeah, I do. I mean, I think there's certainly more

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Speaker 8: to go. I'm a little skeptical that it's just going

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Speaker 8: to be one more. I think the Fed will end

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Speaker 8: up delivering more than that. But if you look at

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Speaker 8: their forecast revisions, I mean, what do people really expect?

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Speaker 8: I mean, the unemployment rate was revised down, core inflation

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Speaker 8: was revised up. I mean, to the extent that they

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Speaker 8: raised their longer-run estimate, that means they're kind of moving

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Speaker 8: the policy rate in tandem with that. So the overall

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Speaker 8: level of the policy stance, restrictive, accommodative, doesn't really change.

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Speaker 8: And I think the bigger question that markets need to

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Speaker 8: deal with here is, Do you actually need to cool

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Speaker 8: the economy down to get inflation to 2%? There's a

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Speaker 8: lot of people that don't seem to think that. And

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Speaker 8: I don't know. And so that's kind of where I'm

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Speaker 8: at right now. I mean, I think a lot of

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Speaker 8: the sort of one and done kind of, discussion that

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Speaker 8: we saw going into this is really just it's sort

438
00:19:53,100 --> 00:19:54,540
Speaker 8: of like the nature of the sell side.

439
00:19:54,580 --> 00:19:54,740
Speaker 4: Right.

440
00:19:54,780 --> 00:19:56,389
Speaker 8: Like a few weeks ago, no one even thought that

441
00:19:56,410 --> 00:19:59,150
Speaker 8: they would hike in September. Some people thought the next

442
00:19:59,190 --> 00:20:00,010
Speaker 8: move would be a cut.

443
00:20:00,490 --> 00:20:00,730
Speaker 5: Right.

444
00:20:00,810 --> 00:20:03,260
Speaker 8: So. You kind of have to mark to market your forecast,

445
00:20:03,320 --> 00:20:04,820
Speaker 8: and now you have to start to think a little

446
00:20:04,840 --> 00:20:06,800
Speaker 8: bit about where we're going to go over the next

447
00:20:06,840 --> 00:20:12,490
Speaker 8: three to six months. And my general sense is we

448
00:20:12,530 --> 00:20:15,650
Speaker 8: know that labor market conditions have stabilized at the margin.

449
00:20:15,850 --> 00:20:19,430
Speaker 8: The fact that employment is running above break-even implies that

450
00:20:19,450 --> 00:20:21,409
Speaker 8: the bias for the unemployment rate, at least over the

451
00:20:21,450 --> 00:20:24,889
Speaker 8: next couple of months, is lower. And they're still passed

452
00:20:24,930 --> 00:20:27,389
Speaker 8: through from all the things the Fed has highlighted in

453
00:20:27,430 --> 00:20:33,870
Speaker 8: the minutes, right? AI is putting upward pressure on, you know,

454
00:20:34,109 --> 00:20:40,480
Speaker 8: prices for computer electronics, consumer electronics. Obviously, oil and gas

455
00:20:40,540 --> 00:20:43,220
Speaker 8: prices rising at a time they normally go down. Food

456
00:20:43,260 --> 00:20:46,399
Speaker 8: prices likely to accelerate. So there's a lot to be

457
00:20:46,440 --> 00:20:49,060
Speaker 8: concerned about, I think, at least over the next few months.

458
00:20:49,080 --> 00:20:51,330
Speaker 8: And that's one of the reasons why I think hikes

459
00:20:51,369 --> 00:20:52,370
Speaker 8: are more likely than not.

460
00:20:52,790 --> 00:20:54,850
Speaker 5: Neil, do you think that this is going to torpedo

461
00:20:55,150 --> 00:20:57,050
Speaker 5: the momentum that we've seen in equities? Or do you

462
00:20:57,109 --> 00:20:58,710
Speaker 5: think that people will be able to take this in

463
00:20:58,730 --> 00:21:01,770
Speaker 5: stride as the market has been, frankly, over the past.

464
00:21:01,570 --> 00:21:02,210
Speaker 1: Couple of months?

465
00:21:03,580 --> 00:21:04,600
Speaker 2: No, I mean, I'm concerned.

466
00:21:04,640 --> 00:21:07,160
Speaker 8: I mean, I think there's reasons to expect the consumer

467
00:21:07,240 --> 00:21:10,439
Speaker 8: to slow from here. We probably hit the high watermark already.

468
00:21:10,740 --> 00:21:12,720
Speaker 8: There's reasons to think the Fed's going to keep hiking.

469
00:21:13,480 --> 00:21:15,100
Speaker 8: I don't know why that's a good setup for equities.

470
00:21:15,800 --> 00:21:19,030
Speaker 6: Neil, I got a new Fed. I got a new tone, certainly,

471
00:21:19,130 --> 00:21:21,130
Speaker 6: out of him now after what, John, helping your three

472
00:21:21,190 --> 00:21:21,970
Speaker 6: press conferences?

473
00:21:23,040 --> 00:21:26,180
Speaker 2: I think that's three and counting.

474
00:21:26,240 --> 00:21:28,060
Speaker 6: Help me here with the tone that we're getting from

475
00:21:28,100 --> 00:21:31,160
Speaker 6: this guy. It's radically different to me than what we've

476
00:21:31,180 --> 00:21:34,459
Speaker 6: heard from previous chairmen of the Federal Reserve System.

477
00:21:34,480 --> 00:21:38,800
Speaker 8: I don't know. I heard Kevin Walsh somewhat more hawkish

478
00:21:38,820 --> 00:21:41,600
Speaker 8: than his colleagues. How is that especially surprising?

479
00:21:42,830 --> 00:21:45,609
Speaker 6: I mean, the sequence here, no follow-up questions, move the

480
00:21:45,650 --> 00:21:48,530
Speaker 6: seats around, we're worried about this, that, and that. Claudia,

481
00:21:48,570 --> 00:21:50,790
Speaker 6: so I'm screaming about tell us what you really think.

482
00:21:50,890 --> 00:21:52,030
Speaker 6: I didn't hear much about what he.

483
00:21:51,990 --> 00:21:53,580
Speaker 2: Really thinks today, John. Let's get into what Neil really thinks.

484
00:21:53,859 --> 00:21:56,380
Speaker 2: I'm thinking back to something that Neil said when this

485
00:21:56,420 --> 00:21:59,120
Speaker 2: Fed chair was appointed. Neil, do you think this Fed

486
00:21:59,140 --> 00:22:00,040
Speaker 2: chair duped the president?

487
00:22:00,060 --> 00:22:08,260
Speaker 8: No. I mean, I think, look, in my professional career,

488
00:22:08,600 --> 00:22:13,409
Speaker 8: Kevin Warsh has always been most comfortable making the hawkish case.

489
00:22:14,650 --> 00:22:17,390
Speaker 8: Generally speaking, he seems to be, based on the tone

490
00:22:17,410 --> 00:22:20,350
Speaker 8: of his press conference, somewhat more hawkish on rates. And

491
00:22:20,770 --> 00:22:22,950
Speaker 8: I think it makes sense because he's more bullish on

492
00:22:22,970 --> 00:22:25,330
Speaker 8: the economy. So it makes sense. But he's more hawkish

493
00:22:25,390 --> 00:22:25,730
Speaker 8: on rates.

494
00:22:26,310 --> 00:22:26,669
Speaker 2: Yeah.

495
00:22:27,630 --> 00:22:29,290
Speaker 8: So that's kind of where I'm at with it. I

496
00:22:29,310 --> 00:22:31,470
Speaker 8: wouldn't say hooped or whatever. I mean, he's always been hawkish.

497
00:22:31,570 --> 00:22:33,830
Speaker 2: He was the wrong guy to sell the WTA. He

498
00:22:33,890 --> 00:22:36,750
Speaker 2: refuses to engage in the conversation on whether we are

499
00:22:36,810 --> 00:22:39,510
Speaker 2: restrictive or not. Now, whenever he's asked about it, he

500
00:22:39,530 --> 00:22:41,970
Speaker 2: always points to financial conditions and says the same thing.

501
00:22:42,010 --> 00:22:44,790
Speaker 2: That's not the same thing. He's asked about the interest

502
00:22:44,830 --> 00:22:47,590
Speaker 2: rate and whether he believes we are sufficiently restrictive. If

503
00:22:47,609 --> 00:22:49,649
Speaker 2: he is as hawkish as you believe he is, why

504
00:22:49,670 --> 00:22:51,170
Speaker 2: do you think he won't engage that question?

505
00:22:52,430 --> 00:22:55,210
Speaker 8: I mean, you kind of have to, like, he's talking

506
00:22:55,270 --> 00:22:58,970
Speaker 8: about removing a dose of accommodations. So presumably that means

507
00:22:59,880 --> 00:23:03,660
Speaker 8: the economy's, that the sense of policy is still accommodative, right?

508
00:23:03,720 --> 00:23:05,379
Speaker 8: I mean, so I kind of look at it that way.

509
00:23:05,420 --> 00:23:08,480
Speaker 8: He's very bullish on the economy. If he's bullish on

510
00:23:08,520 --> 00:23:13,270
Speaker 8: the economy, how can policy be restrictive? So, I mean,

511
00:23:13,310 --> 00:23:16,090
Speaker 8: I appreciate that, you know, it's sort of, we're kind

512
00:23:16,130 --> 00:23:17,770
Speaker 8: of back to, it's like trying to game out what

513
00:23:17,790 --> 00:23:20,629
Speaker 8: he's really thinking with these sort of secret, you know,

514
00:23:20,810 --> 00:23:23,389
Speaker 8: second order signals. But that was my take on it.

515
00:23:24,109 --> 00:23:25,630
Speaker 1: You can't expect a straight answer.

516
00:23:25,650 --> 00:23:27,800
Speaker 8: You kind of have to think about just focus on

517
00:23:27,840 --> 00:23:30,280
Speaker 8: what he's doing, right? I mean, he's hiking rates.

518
00:23:30,460 --> 00:23:32,540
Speaker 5: Neil, you made a pretty bold comment that you don't

519
00:23:32,560 --> 00:23:34,040
Speaker 5: think this is going to be good for equities and

520
00:23:34,060 --> 00:23:36,280
Speaker 5: you don't think this is going to be good for

521
00:23:36,560 --> 00:23:38,420
Speaker 5: the economy and the growth that we've seen.

522
00:23:38,800 --> 00:23:40,600
Speaker 1: Stephanie Roth's still with us. Do you agree with that?

523
00:23:40,660 --> 00:23:43,920
Speaker 5: Do you think that this economy could potentially not roll

524
00:23:44,020 --> 00:23:45,940
Speaker 5: over but slow to a crawl.

525
00:23:45,800 --> 00:23:46,820
Speaker 1: In the face of three rate hikes?

526
00:23:47,880 --> 00:23:48,500
Speaker 3: I don't know if.

527
00:23:49,670 --> 00:23:51,310
Speaker 4: I don't think the rate hikes will do it. There's

528
00:23:51,330 --> 00:23:53,310
Speaker 4: so much going on that's not really so rate sensitive,

529
00:23:53,330 --> 00:23:55,390
Speaker 4: especially on the AI side. Of course, there are parts

530
00:23:55,440 --> 00:23:58,540
Speaker 4: of the economy like housing market, which has been struggling

531
00:23:58,560 --> 00:24:01,780
Speaker 4: and will continue to be challenged by this. I think

532
00:24:01,800 --> 00:24:04,090
Speaker 4: what's going to end up happening, though, is the inflation

533
00:24:04,109 --> 00:24:06,190
Speaker 4: data will come in softer and they're not going to

534
00:24:06,210 --> 00:24:07,770
Speaker 4: have to deliver quite as many hikes as what's in

535
00:24:07,790 --> 00:24:08,230
Speaker 4: the price now.

536
00:24:09,160 --> 00:24:11,620
Speaker 5: Were you surprised at all, Neil, when we heard from

537
00:24:11,660 --> 00:24:15,240
Speaker 5: Fed Chair Kevin Warsh that when he came into the job,

538
00:24:15,700 --> 00:24:19,900
Speaker 5: his underlying feeling was that ultimately the U.S. economy was

539
00:24:19,960 --> 00:24:22,740
Speaker 5: accelerating and that it was a lot stronger than people

540
00:24:22,859 --> 00:24:23,850
Speaker 5: previously thought?

541
00:24:24,090 --> 00:24:24,960
Speaker 1: Did that surprise you?

542
00:24:24,980 --> 00:24:30,230
Speaker 8: I mean, I don't know. I mean, he's been bullish

543
00:24:30,290 --> 00:24:33,110
Speaker 8: on the economy. I would say that the bullishness isn't

544
00:24:33,150 --> 00:24:35,290
Speaker 8: a function of the stuff that he's generally talked about,

545
00:24:35,330 --> 00:24:38,880
Speaker 8: which is this sort of AI-driven productivity golden age. There's

546
00:24:38,920 --> 00:24:41,860
Speaker 8: not really much evidence. I mean, the statement talks about

547
00:24:41,880 --> 00:24:43,810
Speaker 8: how productivity is strong. I must tell you, I don't

548
00:24:43,850 --> 00:24:45,630
Speaker 8: really see that, at least not for the first couple

549
00:24:45,650 --> 00:24:50,510
Speaker 8: of quarters for which we have data. But yeah, I mean,

550
00:24:50,530 --> 00:24:55,389
Speaker 8: he's an economic optimist. But the reasons for optimism is

551
00:24:55,450 --> 00:24:59,540
Speaker 8: not really about the kind of supply-driven, positive supply shock

552
00:24:59,560 --> 00:25:02,820
Speaker 8: story that he's been touting through his nominating process and

553
00:25:03,160 --> 00:25:04,720
Speaker 8: up to pretty recently.

554
00:25:04,980 --> 00:25:07,760
Speaker 2: Just a headline to back up. That statement by Neil Dutta,

555
00:25:07,780 --> 00:25:10,480
Speaker 2: this line from the Fed chair, the American economy appears

556
00:25:10,500 --> 00:25:13,619
Speaker 2: to be strengthening. Not that it's strong. It appears to

557
00:25:13,660 --> 00:25:17,000
Speaker 2: be strengthening. That's an interesting line. In the face of

558
00:25:17,060 --> 00:25:19,659
Speaker 2: yields that are picking up, not stalling out, yields have

559
00:25:19,700 --> 00:25:22,960
Speaker 2: risen by a big amount over the last year or so,

560
00:25:22,960 --> 00:25:24,760
Speaker 2: 100 basis points at the front end of the curve

561
00:25:25,119 --> 00:25:27,820
Speaker 2: year to date. In the face of much higher crude prices, too.

562
00:25:28,240 --> 00:25:31,040
Speaker 2: The chairman's talking about going into year end strengthening, not

563
00:25:31,060 --> 00:25:33,340
Speaker 2: with strength, but strengthening. I think that's quite a statement

564
00:25:33,359 --> 00:25:35,119
Speaker 2: from the Fed chair. And we shouldn't gloss over that.

565
00:25:35,320 --> 00:25:35,760
Speaker 2: Not at all.

566
00:25:35,880 --> 00:25:38,230
Speaker 5: And that's the reason why it's all the more pertinent

567
00:25:38,250 --> 00:25:40,850
Speaker 5: that he talked about removing accommodation with rate hikes and

568
00:25:40,869 --> 00:25:44,129
Speaker 5: that potentially more rate hikes are necessary to remove accommodation.

569
00:25:44,190 --> 00:25:46,580
Speaker 5: I will say that is supported by earnings, which have

570
00:25:46,600 --> 00:25:50,120
Speaker 5: accelerated beyond the most bullish expectations of everybody out there.

571
00:25:50,140 --> 00:25:50,600
Speaker 1: At what point?

572
00:25:50,900 --> 00:25:53,560
Speaker 5: Do the earnings of corporate America reflect the underlying economy

573
00:25:53,820 --> 00:25:57,550
Speaker 5: versus reflect something different that's happening in corporate America that's

574
00:25:57,590 --> 00:25:58,430
Speaker 5: tied to capital markets?

575
00:25:58,450 --> 00:26:02,490
Speaker 6: And away from the animal spirit and nominal, real inflation-adjusted GDP,

576
00:26:02,530 --> 00:26:05,859
Speaker 6: I think of Michael Ferroli at J.P. Morgan, who lifted

577
00:26:06,020 --> 00:26:07,760
Speaker 6: his Q3 ending September 30th.

578
00:26:08,930 --> 00:26:09,950
Speaker 1: Real GDP.

579
00:26:10,150 --> 00:26:13,070
Speaker 6: And you go, well, can we carry that over into Q4?

580
00:26:13,530 --> 00:26:15,970
Speaker 6: And certainly the tone of the meeting and everything about

581
00:26:15,990 --> 00:26:16,510
Speaker 6: it is yes.

582
00:26:16,850 --> 00:26:19,090
Speaker 2: Equity is going into the close, 35 minutes away, by

583
00:26:19,109 --> 00:26:22,330
Speaker 2: the way, down in this session. We're negative by 0.9

584
00:26:22,330 --> 00:26:25,149
Speaker 2: percent on the S & P 500, still elevated at

585
00:26:25,170 --> 00:26:26,790
Speaker 2: the front end of the yield curve up by seven

586
00:26:26,830 --> 00:26:30,590
Speaker 2: basis points, now 473 on twos. Mike McHugh is still

587
00:26:30,609 --> 00:26:32,570
Speaker 2: standing by. Mike, you were in the news conference. You

588
00:26:32,590 --> 00:26:34,949
Speaker 2: heard that line as he characterized the U.S. economy, not

589
00:26:34,990 --> 00:26:37,280
Speaker 2: just as strong, but strengthening. What were you thinking at

590
00:26:37,320 --> 00:26:37,670
Speaker 2: that point?

591
00:26:39,440 --> 00:26:40,730
Speaker 7: Well, you take a look at what the summary of

592
00:26:40,790 --> 00:26:43,740
Speaker 7: economic projections shows, and it shows that inflation is going

593
00:26:43,760 --> 00:26:46,970
Speaker 7: to be faster. and that the economy is growing, but

594
00:26:47,030 --> 00:26:50,419
Speaker 7: not at the particular speed that the president would want.

595
00:26:50,580 --> 00:26:52,720
Speaker 7: And so I think he's maybe making a little bit

596
00:26:52,740 --> 00:26:55,180
Speaker 7: of a political statement to balance it out a little bit,

597
00:26:55,200 --> 00:26:58,560
Speaker 7: because if you go into the midterm elections with the

598
00:26:58,619 --> 00:27:02,460
Speaker 7: central bank saying inflation is going to keep rising, that's

599
00:27:02,880 --> 00:27:06,109
Speaker 7: something that could be used by the opposition party against him.

600
00:27:06,570 --> 00:27:08,970
Speaker 7: So he may be trying to balance that out a

601
00:27:09,010 --> 00:27:13,109
Speaker 7: little bit by saying the economy is strengthening, because otherwise

602
00:27:13,490 --> 00:27:15,510
Speaker 7: He might be put he might be lumped into the

603
00:27:15,550 --> 00:27:18,010
Speaker 7: political category and they certainly don't want to do that.

604
00:27:18,270 --> 00:27:20,910
Speaker 2: No, Mike McKee will get some rest. Fantastic job today, buddy.

605
00:27:21,230 --> 00:27:24,480
Speaker 2: As always, Mike McKee down the nation's capital in Washington, D.C.

606
00:27:24,760 --> 00:27:27,420
Speaker 2: The Fed chair was also asked about the elevated long

607
00:27:27,440 --> 00:27:29,619
Speaker 2: gain yields, too. And he gave the same reasons a

608
00:27:29,640 --> 00:27:31,860
Speaker 2: lot of our guests give as well. Yields are high

609
00:27:31,880 --> 00:27:35,140
Speaker 2: for multiple reasons, including a stronger economy. They're also high

610
00:27:35,160 --> 00:27:40,010
Speaker 2: due to competition for capital. They're also higher due to geopolitics. Brammo,

611
00:27:40,030 --> 00:27:42,139
Speaker 2: just a string of reasons as to why yields are up.

612
00:27:42,619 --> 00:27:43,300
Speaker 2: at these levels?

613
00:27:43,520 --> 00:27:45,959
Speaker 5: I was writing down the three reasons and thinking to myself,

614
00:27:46,040 --> 00:27:47,940
Speaker 5: it was as if he was listening to all of

615
00:27:47,980 --> 00:27:50,090
Speaker 5: the different analysts that come on every single day that

616
00:27:50,130 --> 00:27:52,910
Speaker 5: say the same thing. What's notable is if you end

617
00:27:53,030 --> 00:27:55,330
Speaker 5: up hiking rates and you do believe it is just

618
00:27:55,369 --> 00:27:58,850
Speaker 5: removing accommodation, that allows the economy to still be strong,

619
00:27:59,010 --> 00:28:02,030
Speaker 5: which is ultimately maybe what we're seeing reflected.

620
00:28:01,609 --> 00:28:03,930
Speaker 1: In long-term yields. They're not materially dropping.

621
00:28:03,970 --> 00:28:06,640
Speaker 5: The flat yield curve, as you're talking about, Because this

622
00:28:06,700 --> 00:28:07,639
Speaker 5: is just the new neutral.

623
00:28:07,700 --> 00:28:09,560
Speaker 1: Again, the data is going to have to bear it out.

624
00:28:09,720 --> 00:28:11,859
Speaker 5: We don't have a clear sense of exactly whether this

625
00:28:11,900 --> 00:28:12,940
Speaker 5: is the actuality or not.

626
00:28:13,359 --> 00:28:15,600
Speaker 1: I think we got a lot of clarity on his worldview.

627
00:28:15,700 --> 00:28:18,500
Speaker 6: I love this. This is from somebody very informed coming

628
00:28:18,520 --> 00:28:21,190
Speaker 6: in who needs to be private. Unfortunately, he called it

629
00:28:21,390 --> 00:28:22,390
Speaker 6: a nonsense.

630
00:28:23,530 --> 00:28:24,530
Speaker 2: Oh, reveal your source.

631
00:28:24,700 --> 00:28:27,129
Speaker 6: No, no, it doesn't matter. It's just somebody on the

632
00:28:27,170 --> 00:28:29,830
Speaker 6: street who follows us a lot. But I think there's

633
00:28:29,910 --> 00:28:33,410
Speaker 6: more going on here. The markets are speaking right now

634
00:28:33,670 --> 00:28:36,210
Speaker 6: into the close with a correlated vengeance.

635
00:28:36,510 --> 00:28:38,070
Speaker 2: What didn't they like in the news conference?

636
00:28:38,270 --> 00:28:40,950
Speaker 6: I think this is the new Warsh. I mean, to

637
00:28:41,210 --> 00:28:44,850
Speaker 6: give the chairman credit, he said, I'm changing things. Guess what?

638
00:28:44,910 --> 00:28:45,770
Speaker 6: We saw it today.

639
00:28:46,030 --> 00:28:48,969
Speaker 2: I'm not going to elaborate too much on this. I'm

640
00:28:48,990 --> 00:28:50,410
Speaker 2: just going to give you an initial take on what

641
00:28:50,430 --> 00:28:52,840
Speaker 2: I see in the price action right now. I don't

642
00:28:52,860 --> 00:28:54,850
Speaker 2: know if this continues. It's just an early observation.

643
00:28:54,880 --> 00:28:55,370
Speaker 5: Yes, fair.

644
00:28:55,690 --> 00:28:58,430
Speaker 2: Equities are down 1 percent. Banks are getting hammered and

645
00:28:58,450 --> 00:29:01,210
Speaker 2: the yield curve is flattening. This is the first time

646
00:29:01,390 --> 00:29:03,930
Speaker 2: really over the last couple of months or so that

647
00:29:03,950 --> 00:29:07,060
Speaker 2: I'm seeing signs for markets start to price in maybe

648
00:29:07,100 --> 00:29:10,100
Speaker 2: lower growth, just on the margin, just a little bit more.

649
00:29:10,240 --> 00:29:12,080
Speaker 2: We haven't seen much of that through the years so far.

650
00:29:12,100 --> 00:29:14,470
Speaker 2: In fact, as we've described it several times, many times

651
00:29:14,550 --> 00:29:16,990
Speaker 2: in this show. You've had a massive repricing in energy

652
00:29:17,030 --> 00:29:20,280
Speaker 2: and rates. You haven't seen that repricing in growth expectations.

653
00:29:20,320 --> 00:29:22,560
Speaker 2: Growth has been robust. Risk appetite has been buoyant. We

654
00:29:22,580 --> 00:29:24,900
Speaker 2: have not had a growth scare. But for the first time,

655
00:29:25,200 --> 00:29:28,060
Speaker 2: equities are session lows. Yield curve is flattening. It's not steepening.

656
00:29:28,400 --> 00:29:31,220
Speaker 2: You're starting to see banks roll over too. If that continues,

657
00:29:31,240 --> 00:29:33,110
Speaker 2: and it's only, what, an hour into this. So as

658
00:29:33,170 --> 00:29:35,830
Speaker 2: I say, I don't extrapolate this out into year end.

659
00:29:36,210 --> 00:29:37,410
Speaker 2: But that's going to be something to watch in the

660
00:29:37,450 --> 00:29:39,590
Speaker 2: next few sessions, certainly going into the weekend.

661
00:29:39,710 --> 00:29:41,380
Speaker 5: The one word that's going to continue to stand out

662
00:29:41,430 --> 00:29:45,020
Speaker 5: from this entire press conference and statement is timelier. If

663
00:29:45,080 --> 00:29:47,880
Speaker 5: this is a Fed committed to bringing down inflation in

664
00:29:47,900 --> 00:29:50,540
Speaker 5: a timelier manner, it is difficult to see how they

665
00:29:50,580 --> 00:29:54,000
Speaker 5: can do that without injecting a little bit more, not pain,

666
00:29:54,040 --> 00:29:56,740
Speaker 5: but at least softening in the economy, unless there is

667
00:29:56,780 --> 00:29:58,200
Speaker 5: cooperation on the supply side.

668
00:29:58,520 --> 00:30:01,220
Speaker 1: Which they cannot control. And ultimately, that is the message

669
00:30:01,260 --> 00:30:01,820
Speaker 1: loud and clear.

670
00:30:01,880 --> 00:30:03,500
Speaker 2: Neil Dutton standing by. Neil, I want to give you

671
00:30:03,520 --> 00:30:05,460
Speaker 2: a final word before you jump off and speak to clients.

672
00:30:05,480 --> 00:30:06,490
Speaker 2: What's your final word, please?

673
00:30:07,410 --> 00:30:10,070
Speaker 8: Well, my final word is, as much as people want

674
00:30:10,090 --> 00:30:13,050
Speaker 8: to say Warsh is incoherent, the forecasts, which he doesn't

675
00:30:13,090 --> 00:30:15,470
Speaker 8: even say he's a part of, are incoherent. The Fed

676
00:30:15,510 --> 00:30:20,210
Speaker 8: has above-trend growth over the next two years with the

677
00:30:20,250 --> 00:30:25,410
Speaker 8: inflation rate magically declining a percentage point from now until then.

678
00:30:26,050 --> 00:30:29,590
Speaker 8: Tell me what model that makes sense. So, you know, look,

679
00:30:29,690 --> 00:30:31,570
Speaker 8: I mean, at some point you have to kind of

680
00:30:31,590 --> 00:30:36,460
Speaker 8: just bite the bullet and say, you know, is the 2%

681
00:30:36,460 --> 00:30:39,700
Speaker 8: always going to be like three years away? And if

682
00:30:39,740 --> 00:30:42,260
Speaker 8: the Fed's not comfortable with that, that means that they're

683
00:30:42,280 --> 00:30:47,110
Speaker 8: going to have to engineer weaker economic activity. to meet

684
00:30:47,150 --> 00:30:50,650
Speaker 8: their goals. And it's irrelevant whether that affects things that

685
00:30:50,670 --> 00:30:53,330
Speaker 8: are already quite depressed, even more so. I mean, the

686
00:30:53,350 --> 00:30:56,380
Speaker 8: Fed's job is ultimately to balance aggregate supply and aggregate demand.

687
00:30:56,400 --> 00:30:58,670
Speaker 8: They can't be picking winners and losers in terms of

688
00:30:58,710 --> 00:30:59,490
Speaker 8: sectors in the economy.

689
00:30:59,510 --> 00:31:01,090
Speaker 2: It's a rolling three-year target. I think that's something that

690
00:31:01,110 --> 00:31:03,209
Speaker 2: people are missing right now. It's a rolling three-year target.

691
00:31:03,430 --> 00:31:05,630
Speaker 2: You know that. Neil, thank you. Neil Dutta there of

692
00:31:05,650 --> 00:31:07,590
Speaker 2: Ren Mac. It's always a rolling three-year target. It's out

693
00:31:07,610 --> 00:31:09,590
Speaker 2: there somewhere. We're going to achieve it, Bram. We'll get

694
00:31:09,610 --> 00:31:10,070
Speaker 2: there someday.

695
00:31:10,290 --> 00:31:12,650
Speaker 5: And evidently, three years is now more timely than three years,

696
00:31:12,670 --> 00:31:13,530
Speaker 5: three years ago.

697
00:31:14,110 --> 00:31:15,610
Speaker 2: That was the biggest contradiction in all of this.

698
00:31:15,850 --> 00:31:16,110
Speaker 5: Yeah.

699
00:31:16,410 --> 00:31:16,750
Speaker 2: Wasn't it?

700
00:31:16,890 --> 00:31:18,729
Speaker 1: And ultimately, he answered it by saying, well, it's not

701
00:31:18,770 --> 00:31:20,209
Speaker 1: my contradiction. It's other people's.

702
00:31:20,230 --> 00:31:23,470
Speaker 2: So what's he suggesting? What's he saying? What's his inflation forecast?

703
00:31:23,530 --> 00:31:25,050
Speaker 1: I'm not going to give you forward guidance, John.

704
00:31:26,140 --> 00:31:27,780
Speaker 2: You're not going to get it. You're not a newsletter.

705
00:31:28,000 --> 00:31:29,780
Speaker 2: I'm not a newsletter. That was my favorite line, too.

706
00:31:29,800 --> 00:31:31,900
Speaker 2: I actually got a message from a Bloomberg subscriber moments

707
00:31:31,940 --> 00:31:33,790
Speaker 2: ago saying that was their favorite line as well. I'm

708
00:31:33,810 --> 00:31:34,870
Speaker 2: not a Wall Street newsletter.

709
00:31:35,090 --> 00:31:35,590
Speaker 1: Exactly.

710
00:31:35,630 --> 00:31:36,910
Speaker 2: I'm the chairman of the Federal Reserve.

711
00:31:36,970 --> 00:31:38,770
Speaker 1: Yeah, to the Washington Exhibitor. It was really interesting.

712
00:31:38,830 --> 00:31:40,710
Speaker 6: One thing I would say, John, important, and folks, this

713
00:31:40,770 --> 00:31:43,070
Speaker 6: is a pro insight, and that the pros like John

714
00:31:43,150 --> 00:31:47,750
Speaker 6: Farrow go to spread analysis comparing two yields and those dynamics,

715
00:31:47,790 --> 00:31:51,650
Speaker 6: which has four outcomes at any given moment. I wonder, John,

716
00:31:51,670 --> 00:31:53,890
Speaker 6: and I'm not sure as you're not sure after just

717
00:31:53,970 --> 00:31:57,820
Speaker 6: minutes after this moment that we saw, but I'm not

718
00:31:57,920 --> 00:32:02,740
Speaker 6: sure where single-point analysis is more germane. And, you know,

719
00:32:02,760 --> 00:32:06,760
Speaker 6: I'm looking at standard deviation studies just off basic currency moves,

720
00:32:07,160 --> 00:32:11,270
Speaker 6: but also single-point real yields. That's what I will read

721
00:32:11,350 --> 00:32:16,710
Speaker 6: into tomorrow morning in the 30-year long-term forever forecast. Real

722
00:32:16,750 --> 00:32:19,630
Speaker 6: yield is shocking in its move this afternoon.

723
00:32:19,650 --> 00:32:21,390
Speaker 2: Shall we address the elephant in the room? There's one

724
00:32:21,430 --> 00:32:22,930
Speaker 2: man we haven't heard from so far.

725
00:32:23,190 --> 00:32:23,370
Speaker 1: Yeah.

726
00:32:23,530 --> 00:32:26,390
Speaker 2: The extra Fed official, the chairman of the White House,

727
00:32:26,930 --> 00:32:29,380
Speaker 2: the president of the United States. Bloomberg Ballots of Power

728
00:32:29,420 --> 00:32:32,960
Speaker 2: anchor Kelly Lyons standing by. Kelly, you've covered this extensively today.

729
00:32:33,400 --> 00:32:37,040
Speaker 2: The White House reaction to an interest rate hike by

730
00:32:37,060 --> 00:32:39,780
Speaker 2: a Fed chair they chose only a number of months ago.

731
00:32:39,800 --> 00:32:40,000
Speaker 5: Mm-hmm.

732
00:32:41,320 --> 00:32:42,040
Speaker 1: That's exactly right.

733
00:32:42,060 --> 00:32:44,830
Speaker 9: Who didn't deliver the decision that President Trump preferred, which,

734
00:32:44,870 --> 00:32:47,190
Speaker 9: of course, is a rate cut. He's made no secret

735
00:32:47,230 --> 00:32:49,870
Speaker 9: about that, though he hasn't commented on this decision yet today.

736
00:32:49,910 --> 00:32:53,340
Speaker 9: We have heard from his special assistant and deputy press secretary,

737
00:32:53,380 --> 00:32:55,720
Speaker 9: Kush Desai, who spoke on Fox News saying that the

738
00:32:55,780 --> 00:32:58,440
Speaker 9: rate hike was unfortunate, that it isn't going to do

739
00:32:58,500 --> 00:33:00,920
Speaker 9: anything to bring oil prices down, though he also added

740
00:33:00,940 --> 00:33:04,410
Speaker 9: that the president still. respects Fed independence and believes in it.

741
00:33:04,450 --> 00:33:06,870
Speaker 9: Of course, President Trump, when advocating for a rate cut,

742
00:33:06,930 --> 00:33:09,130
Speaker 9: comes at it with the frame of reference.

743
00:33:08,850 --> 00:33:11,010
Speaker 1: Of a real estate developer. He sees the U.S.

744
00:33:11,050 --> 00:33:13,950
Speaker 9: As a very creditworthy borrower and therefore deserving of a

745
00:33:13,970 --> 00:33:17,160
Speaker 9: lower interest rate. Even an economic theory would indicate that's

746
00:33:17,200 --> 00:33:20,380
Speaker 9: not exactly how that works. He also has suggested that

747
00:33:20,420 --> 00:33:22,920
Speaker 9: he is willing to give Kevin Warsh as a new

748
00:33:22,960 --> 00:33:25,920
Speaker 9: chair some room here, blaming instead the other members.

749
00:33:25,600 --> 00:33:26,370
Speaker 1: Of the FOMC.

750
00:33:26,440 --> 00:33:28,550
Speaker 9: He said repeatedly he has another board to deal with,

751
00:33:28,610 --> 00:33:31,430
Speaker 9: and he has encouraged those other FOMC members to get

752
00:33:31,470 --> 00:33:33,990
Speaker 9: more patriotic and get on board with a rate cut.

753
00:33:34,030 --> 00:33:34,630
Speaker 1: The other thing I.

754
00:33:34,630 --> 00:33:36,969
Speaker 9: Will say here is, of course, we're 48 days out

755
00:33:37,630 --> 00:33:40,090
Speaker 9: from the midterm elections, and Trump has made no secret

756
00:33:40,110 --> 00:33:43,190
Speaker 9: of his view that the cutting cycle that began in

757
00:33:43,250 --> 00:33:45,710
Speaker 9: September of 2024, about a month and a half out

758
00:33:46,070 --> 00:33:48,910
Speaker 9: from that election, was politically motivated to help the incumbent

759
00:33:48,990 --> 00:33:53,030
Speaker 9: Democratic Party who had the White House. Now, at the

760
00:33:53,070 --> 00:33:57,320
Speaker 9: September meeting, a hiking cycle for whatever duration I wouldn't

761
00:33:57,380 --> 00:33:59,640
Speaker 9: be surprised to see the president cast that as politically

762
00:33:59,680 --> 00:34:02,060
Speaker 9: motivated as well. One more thing I will say, if

763
00:34:02,100 --> 00:34:04,020
Speaker 9: we haven't heard from him on True Social, he is

764
00:34:04,080 --> 00:34:06,720
Speaker 9: traveling to North Carolina tonight in part to rally for

765
00:34:07,020 --> 00:34:09,000
Speaker 9: the Republican Senate candidate.

766
00:34:08,640 --> 00:34:09,640
Speaker 1: There, Michael Watley.

767
00:34:09,660 --> 00:34:11,640
Speaker 9: So if we haven't gotten anything on social media in

768
00:34:11,680 --> 00:34:14,480
Speaker 9: reaction to this decision, I would imagine, guys, that that's.

769
00:34:14,340 --> 00:34:15,160
Speaker 1: Going to be the opportunity.

770
00:34:15,180 --> 00:34:16,580
Speaker 2: It would be shocking if we didn't hear from him

771
00:34:16,940 --> 00:34:19,029
Speaker 2: on this decision. Katie, looking forward to the program a

772
00:34:19,050 --> 00:34:21,810
Speaker 2: little bit later alongside Joe Matthew. Kelly Lyons there down

773
00:34:21,850 --> 00:34:22,629
Speaker 2: in Washington, D.C.,