1 00:00:02,680 --> 00:00:07,200 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:08,920 --> 00:00:13,040 Speaker 2: Good afternoon. My colleagues and I remain squarely focused on 3 00:00:13,119 --> 00:00:16,640 Speaker 2: achieving our dual mandate goals of maximum employment and stable 4 00:00:16,680 --> 00:00:18,800 Speaker 2: prices for the benefit of the American people. 5 00:00:19,520 --> 00:00:22,240 Speaker 3: The FED Reserve announced this afternoon it would keep interest 6 00:00:22,320 --> 00:00:22,959 Speaker 3: rates steady. 7 00:00:23,280 --> 00:00:26,880 Speaker 2: Today, the FMC decided to leave our policy rate unchanged. 8 00:00:27,160 --> 00:00:30,120 Speaker 3: That's in spite of spiking oil prices and new market 9 00:00:30,200 --> 00:00:33,520 Speaker 3: uncertainty driven by the Iran war. FED chair Jerome Powell 10 00:00:33,560 --> 00:00:36,839 Speaker 3: took the podium to explain the rationale behind today's decision. 11 00:00:37,120 --> 00:00:39,239 Speaker 2: The implications of events in the Middle East for the 12 00:00:39,320 --> 00:00:42,920 Speaker 2: US economy are uncertain. In the near term, higher energy 13 00:00:42,920 --> 00:00:46,240 Speaker 2: prices will push up overall inflation, but it is too 14 00:00:46,280 --> 00:00:49,479 Speaker 2: soon to know the scope and duration of the potential 15 00:00:49,479 --> 00:00:50,720 Speaker 2: effects on the economy. 16 00:00:51,360 --> 00:00:54,360 Speaker 3: Bloomberg Fed reporter Amera Amokway says that the FED is 17 00:00:54,440 --> 00:00:57,080 Speaker 3: essentially in weight and see mode when it comes to 18 00:00:57,120 --> 00:01:00,000 Speaker 3: the conflict and the impacts that could have on the economy. 19 00:01:00,320 --> 00:01:04,080 Speaker 4: Obviously, energy, oil, those are all inputs that matter for 20 00:01:04,200 --> 00:01:08,199 Speaker 4: production for service producing businesses, and so if you start 21 00:01:08,240 --> 00:01:12,200 Speaker 4: to see inflationary pressures sort of broadened beyond the energy sector, 22 00:01:12,240 --> 00:01:15,080 Speaker 4: itself into other parts of the economy that I think 23 00:01:15,120 --> 00:01:18,200 Speaker 4: would be of concern to FED policy makers, But they 24 00:01:18,200 --> 00:01:20,679 Speaker 4: will also then be watching the real side of the economy. 25 00:01:21,040 --> 00:01:24,080 Speaker 4: Does the spike and oil prices then have negative implications 26 00:01:24,080 --> 00:01:27,000 Speaker 4: for growth, which then trickles over to the labor market? 27 00:01:27,120 --> 00:01:28,880 Speaker 4: Do we start to see job losses? Do we start 28 00:01:28,920 --> 00:01:30,720 Speaker 4: to see consumers pull back? Do we start to see 29 00:01:30,760 --> 00:01:31,640 Speaker 4: businesses pull back? 30 00:01:31,920 --> 00:01:34,720 Speaker 3: If we start to answer yes to those questions, the 31 00:01:34,760 --> 00:01:38,360 Speaker 3: Fed's dual mandate of keeping prices stable and promoting maximum 32 00:01:38,400 --> 00:01:41,720 Speaker 3: employment gets a lot trickier the tools it has to 33 00:01:41,760 --> 00:01:45,199 Speaker 3: address inflation, like raising interest rates could make the labor 34 00:01:45,240 --> 00:01:49,120 Speaker 3: market worse, and lowering rates to address unemployment could lead 35 00:01:49,200 --> 00:01:53,520 Speaker 3: to higher inflation. Warton Associate Professor Peter Conti Brown puts 36 00:01:53,520 --> 00:01:54,560 Speaker 3: it more simply. 37 00:01:54,880 --> 00:01:57,800 Speaker 1: In so many respects, this is the Fed's worst nightmare. 38 00:02:00,880 --> 00:02:02,680 Speaker 3: I'm David Gera, and this is the big take from 39 00:02:02,680 --> 00:02:05,400 Speaker 3: Bloomberg News today on the show, how the FED is 40 00:02:05,440 --> 00:02:08,480 Speaker 3: thinking about the Iran War, why it held rate steady, 41 00:02:08,800 --> 00:02:11,320 Speaker 3: and what could shift its calculus in the months ahead. 42 00:02:18,760 --> 00:02:20,960 Speaker 3: The part of the Federal Reserve that sets interest rates 43 00:02:21,080 --> 00:02:24,760 Speaker 3: is called the Federal Open Market Committee. Those policymakers have 44 00:02:24,840 --> 00:02:28,079 Speaker 3: a tough job. Under normal economic conditions, they have to 45 00:02:28,120 --> 00:02:30,639 Speaker 3: predict where they think the economy is going by looking 46 00:02:30,720 --> 00:02:33,640 Speaker 3: largely at data the show where it's been. And in 47 00:02:33,639 --> 00:02:35,839 Speaker 3: the last few weeks, with the start of the Iran War, 48 00:02:36,280 --> 00:02:39,960 Speaker 3: predicting where the economy is heading has gotten much much harder. 49 00:02:40,600 --> 00:02:43,040 Speaker 3: To understand how the FED is approaching this challenging time, 50 00:02:43,200 --> 00:02:46,480 Speaker 3: I talked to Bloomberg Fed reporter Emera Amoquay and Wharton 51 00:02:46,520 --> 00:02:50,440 Speaker 3: professor Peter Conti Brown, who's a FED historian. For starters, 52 00:02:50,520 --> 00:02:53,920 Speaker 3: I asked Emera what factors the policymakers considered as they 53 00:02:53,960 --> 00:02:56,040 Speaker 3: decided where interest rates should be right. 54 00:02:55,880 --> 00:03:00,920 Speaker 4: Now, there was a pre Iran war perspective, and the 55 00:03:00,960 --> 00:03:04,720 Speaker 4: situation has obviously shifted dramatically now that we have the 56 00:03:04,760 --> 00:03:08,399 Speaker 4: conflict in Iran. So after the last meeting in January, 57 00:03:08,639 --> 00:03:11,320 Speaker 4: you got the sense that FED officials broadly agreed that 58 00:03:11,400 --> 00:03:13,679 Speaker 4: they had policy in a good place. They cut three 59 00:03:13,720 --> 00:03:16,640 Speaker 4: times towards the end of twenty twenty five. The labor 60 00:03:16,680 --> 00:03:21,040 Speaker 4: market appeared to be steadying after jitters earlier in twenty 61 00:03:21,080 --> 00:03:23,679 Speaker 4: twenty five, and they didn't cut in January, and you 62 00:03:23,760 --> 00:03:27,400 Speaker 4: heard Chair Jerome Poue and several other policymakers saying they 63 00:03:27,400 --> 00:03:30,480 Speaker 4: thought policy wasn't a good place, and some of them 64 00:03:30,560 --> 00:03:34,120 Speaker 4: were really expressing concerns about the fact that inflation remains 65 00:03:34,400 --> 00:03:36,320 Speaker 4: above the fed's target, and that it has been above 66 00:03:36,360 --> 00:03:39,880 Speaker 4: target for five years now. Then the US and Israel 67 00:03:39,960 --> 00:03:43,720 Speaker 4: launched this war on Iran, and that has really kind 68 00:03:43,720 --> 00:03:46,920 Speaker 4: of scrambled the outlook and raises a lot of questions 69 00:03:46,920 --> 00:03:49,840 Speaker 4: about how the FED will proceed in months ahead if 70 00:03:50,200 --> 00:03:53,800 Speaker 4: we start to see their policy goals promoting maximum employment 71 00:03:53,840 --> 00:03:57,080 Speaker 4: and bringing inflation back down start to come into conflict 72 00:03:57,120 --> 00:04:01,040 Speaker 4: because we have seen oil prices shoot sharply higher. That 73 00:04:01,080 --> 00:04:05,200 Speaker 4: has potential implications for inflation. It also has potential implications 74 00:04:05,200 --> 00:04:08,040 Speaker 4: for economic growth and the labor market. And so the 75 00:04:08,120 --> 00:04:10,960 Speaker 4: question now for the FED is if this energy shock 76 00:04:11,000 --> 00:04:13,920 Speaker 4: that we're seeing now persist, how might they approach that. 77 00:04:14,880 --> 00:04:17,840 Speaker 3: Peter, the policymakers are looking at this famous dashboard. Look 78 00:04:17,880 --> 00:04:21,120 Speaker 3: at all of these economic data points, and so many 79 00:04:21,160 --> 00:04:24,719 Speaker 3: of them came before Israel in the US launched that war. 80 00:04:25,440 --> 00:04:28,080 Speaker 3: How does that complicate what a marriage is talking about 81 00:04:28,120 --> 00:04:30,040 Speaker 3: their ability to kind of figure out where the economy 82 00:04:30,080 --> 00:04:30,880 Speaker 3: is and where it's. 83 00:04:30,760 --> 00:04:34,719 Speaker 5: Going Should the Iran war be temporary, should the strait 84 00:04:34,760 --> 00:04:37,679 Speaker 5: of horm Us and the rapid deterioration of vessel flow 85 00:04:37,720 --> 00:04:41,680 Speaker 5: through that straight and be relatively short lived, then this 86 00:04:41,800 --> 00:04:45,960 Speaker 5: presents a very challenging dynamic for the FED to navigate, 87 00:04:45,960 --> 00:04:48,600 Speaker 5: but it knows how to do this. Should that be prolonged, 88 00:04:48,680 --> 00:04:53,120 Speaker 5: it's not just very challenging. This becomes the impossibility theorem. 89 00:04:53,240 --> 00:04:54,280 Speaker 1: This is stagflation. 90 00:04:54,480 --> 00:04:57,239 Speaker 5: This is you don't know which lever to pull because 91 00:04:57,240 --> 00:05:00,200 Speaker 5: you exacerbate either one of your two new endates. When 92 00:05:00,240 --> 00:05:04,880 Speaker 5: you have all of the dashboard lights flashing rainbow colors 93 00:05:04,920 --> 00:05:08,039 Speaker 5: because you don't know exactly where we will be four 94 00:05:08,080 --> 00:05:10,680 Speaker 5: weeks from now, let alone four months from now, then 95 00:05:10,680 --> 00:05:16,000 Speaker 5: this creates an unbelievably difficult trajectory. Add to that, what 96 00:05:16,040 --> 00:05:19,840 Speaker 5: America's saying is that we have not reached disinflation to 97 00:05:19,920 --> 00:05:24,680 Speaker 5: target right. So this level of uncertainty makes policy making 98 00:05:25,120 --> 00:05:29,520 Speaker 5: in any given FMC meeting playing darts with a blindfold, 99 00:05:29,800 --> 00:05:33,039 Speaker 5: the FED is going to be exceedingly unlikely to sprint. 100 00:05:32,760 --> 00:05:35,839 Speaker 1: Into the breach to wave off a recession. 101 00:05:36,320 --> 00:05:40,159 Speaker 5: If inflation is moving up even incrementally, if it's moving 102 00:05:40,240 --> 00:05:42,839 Speaker 5: up quickly, then I think it's inconceivable for the FED 103 00:05:42,880 --> 00:05:46,480 Speaker 5: to prioritize unemployment over an inflationary spiral. 104 00:05:46,800 --> 00:05:49,600 Speaker 3: Peter, you're a FED historian, and I'm curious what analogs 105 00:05:49,600 --> 00:05:52,040 Speaker 3: you're looking to at this moment. So there is all 106 00:05:52,040 --> 00:05:54,760 Speaker 3: of this uncertainty over what the FED is doing right now, 107 00:05:54,839 --> 00:05:57,240 Speaker 3: what it's going to be doing at subsequent meetings. Is 108 00:05:57,279 --> 00:05:59,720 Speaker 3: there a parallel that you reach for to this. 109 00:05:59,640 --> 00:06:02,000 Speaker 1: Moment, Yeah, there are too. There was the oil shock 110 00:06:02,040 --> 00:06:03,040 Speaker 1: of nineteen seventy three. 111 00:06:03,520 --> 00:06:06,200 Speaker 5: It's important to remember that the context there, So we 112 00:06:06,279 --> 00:06:08,800 Speaker 5: had an oil embargo announced by OPEK led. 113 00:06:08,680 --> 00:06:09,560 Speaker 1: By Saudi Arabia. 114 00:06:10,000 --> 00:06:12,479 Speaker 5: Inflation was already about nine percent of the time, so 115 00:06:12,520 --> 00:06:14,880 Speaker 5: it was a different inflationary environment than we have today. 116 00:06:15,400 --> 00:06:16,520 Speaker 1: But that oil. 117 00:06:16,240 --> 00:06:21,680 Speaker 5: Embargo had unbelievable effects, and so it exacerbated the inflationary context. Well, 118 00:06:22,000 --> 00:06:25,479 Speaker 5: recessionary consequences were also ticking up. This leads into just 119 00:06:25,520 --> 00:06:31,680 Speaker 5: an unbelievably bruising decade of FED policy wherein to finally 120 00:06:31,760 --> 00:06:35,440 Speaker 5: slay the dragon of inflation, Paul Volker's FMC had to 121 00:06:35,440 --> 00:06:38,919 Speaker 5: trigger a recession so profound it was getting close to 122 00:06:38,960 --> 00:06:42,039 Speaker 5: Great Depression territory, and indeed, until the Great recession. It 123 00:06:42,080 --> 00:06:45,360 Speaker 5: was the most acute recession that we had experienced since 124 00:06:45,400 --> 00:06:49,640 Speaker 5: the nineteen thirties. So that's the bad historical analog. The 125 00:06:49,680 --> 00:06:52,240 Speaker 5: better one would be the late forties and early fifties. 126 00:06:52,480 --> 00:06:55,640 Speaker 5: This is the time when the FED separated itself from 127 00:06:55,760 --> 00:07:00,200 Speaker 5: under the Treasury's domain to a shirt for itself, more 128 00:07:00,279 --> 00:07:03,839 Speaker 5: independence and setting industrate trajectories at a time when inflation 129 00:07:04,000 --> 00:07:06,080 Speaker 5: looked like it was going to have a post war 130 00:07:06,160 --> 00:07:08,680 Speaker 5: pop that would be very hard to eradicate. 131 00:07:09,040 --> 00:07:10,000 Speaker 1: But that never happened. 132 00:07:10,000 --> 00:07:12,400 Speaker 5: It never took root, and as a result, we had 133 00:07:12,880 --> 00:07:16,520 Speaker 5: just extraordinary economic growth with relatively mild inflation. So we 134 00:07:16,600 --> 00:07:19,320 Speaker 5: want things to look like the fifties, We fear the 135 00:07:19,360 --> 00:07:20,840 Speaker 5: things are looking like the seventies. 136 00:07:21,280 --> 00:07:23,880 Speaker 3: Amara, As you listened to FED policymakers in the run 137 00:07:23,920 --> 00:07:26,920 Speaker 3: up to this meeting, how much was that history coloring 138 00:07:26,960 --> 00:07:29,160 Speaker 3: their sense of this moment. How evident was it that 139 00:07:29,160 --> 00:07:31,440 Speaker 3: they were thinking back about those two instances that Peter 140 00:07:31,560 --> 00:07:32,040 Speaker 3: just mentioned. 141 00:07:32,200 --> 00:07:35,680 Speaker 4: So we didn't hear from many FED policy makers after 142 00:07:35,760 --> 00:07:38,040 Speaker 4: the launch of the war. We heard from a few, 143 00:07:38,160 --> 00:07:41,560 Speaker 4: like a handful, talking about sort of this textbook approach 144 00:07:42,120 --> 00:07:45,840 Speaker 4: to oil shocks, to energy shocks, which would say that 145 00:07:46,280 --> 00:07:48,200 Speaker 4: if the shock is a short term thing, the FED 146 00:07:48,240 --> 00:07:50,120 Speaker 4: should look through it. In other words, the FED doesn't 147 00:07:50,160 --> 00:07:53,360 Speaker 4: necessarily need to raise rates because the FED is thinking 148 00:07:53,360 --> 00:07:57,480 Speaker 4: about policy on a medium to long term outlook, and 149 00:07:57,520 --> 00:08:00,720 Speaker 4: so if something is going to be short lived, you 150 00:08:00,760 --> 00:08:03,280 Speaker 4: don't want to overreact to that and set policy according 151 00:08:03,280 --> 00:08:03,560 Speaker 4: to that. 152 00:08:03,680 --> 00:08:06,200 Speaker 3: What does it mean for the FED to look through something? 153 00:08:06,400 --> 00:08:08,360 Speaker 5: When we use the metaphor of looking through, and it 154 00:08:08,400 --> 00:08:10,360 Speaker 5: is a metaphor you're saying because you're saying there's some 155 00:08:10,400 --> 00:08:11,880 Speaker 5: sort of tumult in front of you that you can 156 00:08:11,920 --> 00:08:14,160 Speaker 5: see the end of, you can see the other side of, 157 00:08:14,200 --> 00:08:16,360 Speaker 5: and the other side looks more like where we were 158 00:08:16,400 --> 00:08:19,200 Speaker 5: before the tunnel than it does in the tunnel. Because 159 00:08:19,200 --> 00:08:21,000 Speaker 5: if the tumult is the new normal, then there's no 160 00:08:21,040 --> 00:08:22,880 Speaker 5: looking through. You have to adjust to the new normal. 161 00:08:23,440 --> 00:08:25,400 Speaker 5: And that's what the FED doesn't have the luxury of doing. 162 00:08:26,000 --> 00:08:28,360 Speaker 5: Are we going to see as a result of whatever 163 00:08:28,480 --> 00:08:31,360 Speaker 5: is happening in the Middle East today, a fundamental reordering 164 00:08:31,920 --> 00:08:37,040 Speaker 5: of the way that we do geopolitics, energy policy, macroconomic 165 00:08:37,120 --> 00:08:39,199 Speaker 5: growth alliances? And if the answer to that is yes, 166 00:08:39,240 --> 00:08:42,360 Speaker 5: there's no looking through, the tumult is us and that's 167 00:08:42,400 --> 00:08:43,480 Speaker 5: what the FED has to adapt to. 168 00:08:43,760 --> 00:08:46,840 Speaker 3: Peter, I'm curious how the FED is trying to encourage 169 00:08:46,880 --> 00:08:49,280 Speaker 3: stability in the bond market at this moment. Mean, there's 170 00:08:49,320 --> 00:08:51,400 Speaker 3: been so much volatility as the result of this war 171 00:08:51,880 --> 00:08:55,160 Speaker 3: getting underway. What are policymakers trying to do to kind 172 00:08:55,160 --> 00:08:56,720 Speaker 3: of calm things down so much as they can. 173 00:08:57,320 --> 00:08:58,800 Speaker 5: I think this is one of the reasons why this 174 00:08:58,840 --> 00:09:02,079 Speaker 5: is kind of a Nimer scenario. The Fed's primary tools 175 00:09:02,120 --> 00:09:05,440 Speaker 5: for calmon bond markets is to assure the markets of 176 00:09:05,480 --> 00:09:08,480 Speaker 5: its medium and long term credibility that no matter what 177 00:09:08,520 --> 00:09:11,040 Speaker 5: happens in the world, whether we have to look through 178 00:09:11,280 --> 00:09:15,360 Speaker 5: these episodic supply shocks or whether we incorporate them into 179 00:09:15,800 --> 00:09:20,120 Speaker 5: our diagnosis and prognosis, the FED will be grown ups 180 00:09:20,120 --> 00:09:21,920 Speaker 5: in the room to do the right thing for the 181 00:09:21,920 --> 00:09:25,520 Speaker 5: long term stability of the US dollar. And those are 182 00:09:25,600 --> 00:09:28,000 Speaker 5: assurances that are very difficult to make when what we're 183 00:09:28,000 --> 00:09:30,240 Speaker 5: trying to predict is whether this is going to be 184 00:09:30,320 --> 00:09:33,400 Speaker 5: an inflationary environment, not just because of the Iron War, 185 00:09:33,480 --> 00:09:36,800 Speaker 5: but because the deterioration of norms of FED independence, or 186 00:09:36,840 --> 00:09:40,600 Speaker 5: this is going to be a recessionary environment. We haven't 187 00:09:40,640 --> 00:09:43,520 Speaker 5: talked about the other elephant in the room, which is 188 00:09:43,679 --> 00:09:48,000 Speaker 5: whether AI will be writing us the economy on a 189 00:09:48,080 --> 00:09:53,199 Speaker 5: rocket toward greater productivity and rate compression, or the white 190 00:09:53,200 --> 00:09:56,400 Speaker 5: collar recession that will send unemployment rates into double digits. 191 00:09:56,559 --> 00:09:59,000 Speaker 5: And given that amount of uncertainty, the only thing that 192 00:09:59,000 --> 00:10:02,000 Speaker 5: the FED can do reassure bond markets is to continue 193 00:10:02,040 --> 00:10:04,480 Speaker 5: to say we don't know what the right policy is, 194 00:10:04,600 --> 00:10:06,280 Speaker 5: except we do know that we will find it. 195 00:10:07,480 --> 00:10:10,080 Speaker 3: Coming up the challenges facing the Federal Reserve as it 196 00:10:10,120 --> 00:10:12,120 Speaker 3: tries to find the right policy in the face of 197 00:10:12,160 --> 00:10:15,839 Speaker 3: attacks on its independence and dissent among policymakers, and the 198 00:10:15,920 --> 00:10:18,400 Speaker 3: latest developments as Jerome Powell reaches the end of his 199 00:10:18,520 --> 00:10:21,240 Speaker 3: term as chair in the midst of a DOJ investigation 200 00:10:21,559 --> 00:10:31,400 Speaker 3: into him and the FED, Peter looking at the crucible 201 00:10:31,440 --> 00:10:35,440 Speaker 3: of the FOMC and thinking about history, do moments like 202 00:10:35,520 --> 00:10:38,839 Speaker 3: this tend to lead to more unanimity among policymakers or 203 00:10:38,920 --> 00:10:41,520 Speaker 3: more division. We went through this period where it seemed 204 00:10:41,559 --> 00:10:44,120 Speaker 3: like FED Chair Jerome Powell had a lot of success 205 00:10:44,120 --> 00:10:46,480 Speaker 3: in getting members of that committee to come on board 206 00:10:46,559 --> 00:10:48,960 Speaker 3: with what he hoped the committee would do. We've seen 207 00:10:48,960 --> 00:10:52,400 Speaker 3: that eroad a bit in recent meetings. Is this historically 208 00:10:52,440 --> 00:10:55,040 Speaker 3: a time when the FED is more unified, when there 209 00:10:55,080 --> 00:10:56,840 Speaker 3: is a large geopolitical risk like this one. 210 00:10:57,360 --> 00:10:59,559 Speaker 5: You know, in the cycles of history of division and 211 00:10:59,600 --> 00:11:04,200 Speaker 5: union and consensus. On the political side, we have enough 212 00:11:04,360 --> 00:11:07,440 Speaker 5: data points to really see cycles, but at the FED 213 00:11:07,440 --> 00:11:10,240 Speaker 5: we don't, and the reason is because we simply don't 214 00:11:10,240 --> 00:11:14,920 Speaker 5: have the tradition of a lot of dissensus at the FOMC, 215 00:11:15,080 --> 00:11:18,440 Speaker 5: at least formally as tallied by votes. And in that sense, 216 00:11:18,480 --> 00:11:23,280 Speaker 5: this is another factor that makes the current FOMC extraordinarily 217 00:11:23,280 --> 00:11:27,520 Speaker 5: difficult to predict. And that's not because we have ten 218 00:11:27,640 --> 00:11:30,240 Speaker 5: central bankers who see it one way and two who 219 00:11:30,240 --> 00:11:33,280 Speaker 5: see it another. That's pretty consistent over time. It's that 220 00:11:33,360 --> 00:11:36,280 Speaker 5: we have the famous double descents that we have not 221 00:11:36,360 --> 00:11:39,720 Speaker 5: seen for many years. That means, for those who are 222 00:11:39,800 --> 00:11:41,920 Speaker 5: kind of outside that FED speak universes, that we have 223 00:11:42,000 --> 00:11:44,199 Speaker 5: the consensus view, that's the policy view that commands the 224 00:11:44,280 --> 00:11:46,320 Speaker 5: majority of the FMC, and then we have dissents going 225 00:11:46,360 --> 00:11:50,439 Speaker 5: in both other directions. So saying you're being too restrictive, 226 00:11:50,480 --> 00:11:52,880 Speaker 5: say one group, and you're being too accommodative says another. 227 00:11:53,200 --> 00:11:54,839 Speaker 5: And that's what we have right now, although not in 228 00:11:54,880 --> 00:11:57,199 Speaker 5: the January meeting, But in the meetings prior we had 229 00:11:57,400 --> 00:12:00,800 Speaker 5: double descents, and that makes it really hard to predict 230 00:12:00,800 --> 00:12:04,720 Speaker 5: what the Iran policy will mean for the FMC. Unlike 231 00:12:04,720 --> 00:12:07,679 Speaker 5: in a political context, for sometimes we have these external 232 00:12:07,720 --> 00:12:10,760 Speaker 5: wars creating a rally around the flag moment, there's not 233 00:12:10,800 --> 00:12:13,360 Speaker 5: that same ethos because the questions are fundamentally different. 234 00:12:14,240 --> 00:12:16,880 Speaker 3: Amara. We started off with you talking about how much 235 00:12:16,920 --> 00:12:18,720 Speaker 3: has changed here over these last few weeks, and I 236 00:12:18,720 --> 00:12:20,480 Speaker 3: look at this note, a recent note from Deutsche Bank, 237 00:12:20,960 --> 00:12:23,240 Speaker 3: and that economics team rights a question that was almost 238 00:12:23,280 --> 00:12:25,920 Speaker 3: unthinkable two weeks ago is now being more heavily debated. 239 00:12:26,280 --> 00:12:29,560 Speaker 3: Could the FED raise rates in twenty twenty six? You 240 00:12:29,600 --> 00:12:31,800 Speaker 3: talked about how the economy has shifted, the forecast for 241 00:12:31,840 --> 00:12:34,360 Speaker 3: the economy have changed. How about just in terms of 242 00:12:34,400 --> 00:12:37,360 Speaker 3: what market participants are expecting the Fed to do in 243 00:12:37,600 --> 00:12:39,000 Speaker 3: the week's end, the weeks and months ahead. 244 00:12:39,320 --> 00:12:43,000 Speaker 4: I think people are not really expecting another cut under 245 00:12:43,080 --> 00:12:46,319 Speaker 4: chair Pale, whose term ends in May. But I think 246 00:12:46,360 --> 00:12:48,480 Speaker 4: it's interesting because even if you look at the minutes 247 00:12:48,480 --> 00:12:51,520 Speaker 4: from the January meeting, there were some officials who were 248 00:12:51,520 --> 00:12:55,320 Speaker 4: already talking about hikes then, who were saying, look, inflation 249 00:12:55,440 --> 00:12:58,240 Speaker 4: has been too high for too long, and we actually 250 00:12:58,240 --> 00:13:01,480 Speaker 4: need to adjust what we're saying about the situation to 251 00:13:01,679 --> 00:13:04,400 Speaker 4: acknowledge the facts that moves in the future may need 252 00:13:04,440 --> 00:13:06,880 Speaker 4: to be higher. And so for those as Peter was 253 00:13:06,880 --> 00:13:11,000 Speaker 4: talking about, those policymakers who are more concerned about inflation, 254 00:13:11,320 --> 00:13:13,520 Speaker 4: you could see a world where this Iran situation, if 255 00:13:13,520 --> 00:13:17,360 Speaker 4: it continues, could only heighten their concerns and maybe make 256 00:13:17,400 --> 00:13:20,760 Speaker 4: them have less of an appetite to respond to any 257 00:13:20,960 --> 00:13:23,520 Speaker 4: downside that we see on the real side of the economy, 258 00:13:23,520 --> 00:13:25,959 Speaker 4: you know, for economic growth, for the labor market, because 259 00:13:26,000 --> 00:13:29,280 Speaker 4: there are new inflationary pressures. And so I think what 260 00:13:29,360 --> 00:13:32,120 Speaker 4: markets and investors are going to be listening closely for 261 00:13:32,200 --> 00:13:35,119 Speaker 4: in this meeting and in subsequent meetings if this situation continues, 262 00:13:35,480 --> 00:13:38,080 Speaker 4: is how Chair Poal is sort of characterizing the vibe 263 00:13:38,080 --> 00:13:41,080 Speaker 4: on the committee and how he's really thinking about balancing 264 00:13:41,520 --> 00:13:44,320 Speaker 4: these two risks in the months ahead. And that matters 265 00:13:44,360 --> 00:13:47,800 Speaker 4: also because as it stands now, Chairpow could perhaps still 266 00:13:47,800 --> 00:13:50,440 Speaker 4: be on the board even past his chair term in May, 267 00:13:50,920 --> 00:13:53,400 Speaker 4: and he could still be chairing the FOMC past his 268 00:13:53,520 --> 00:13:55,760 Speaker 4: chair term in May, and so I think people are 269 00:13:55,760 --> 00:13:58,160 Speaker 4: still going to be looking for some signal from Chair 270 00:13:58,200 --> 00:14:01,120 Speaker 4: pow in these final meetings under his chair term. 271 00:14:01,720 --> 00:14:04,920 Speaker 3: Right, So, Peter Jerome Powell's tenure as FED share is 272 00:14:04,960 --> 00:14:07,880 Speaker 3: supposed to end this spring, but he told reporters today 273 00:14:07,880 --> 00:14:10,360 Speaker 3: that if his successor is not confirmed by the end 274 00:14:10,400 --> 00:14:13,240 Speaker 3: of his term, he would serve as Chair pro tem 275 00:14:13,520 --> 00:14:16,480 Speaker 3: until then. Howell also told reporters he wouldn't leave the 276 00:14:16,520 --> 00:14:19,160 Speaker 3: FED Board while a Department of Justice investigation into him 277 00:14:19,360 --> 00:14:22,000 Speaker 3: and the Federal Reserve is ongoing, and all of this 278 00:14:22,120 --> 00:14:25,640 Speaker 3: relates to a renovation project of the Federserve's headquarters and 279 00:14:25,720 --> 00:14:29,360 Speaker 3: testimony that j. Powell gave about that renovation. A few 280 00:14:29,400 --> 00:14:31,600 Speaker 3: days ago, a judge blocked subpoenas that were a part 281 00:14:31,600 --> 00:14:34,280 Speaker 3: of that investigation, and the DOJ has vowed to appeal that. 282 00:14:35,000 --> 00:14:37,640 Speaker 3: How could all of this that legal fight influence the 283 00:14:37,680 --> 00:14:40,600 Speaker 3: way the FED is handling decisions going forward and how 284 00:14:40,600 --> 00:14:43,240 Speaker 3: the confirmation process for Powells successor plays out. 285 00:14:43,480 --> 00:14:46,960 Speaker 5: I think the announcement that the Department of Justice is 286 00:14:46,960 --> 00:14:50,800 Speaker 5: going to appeal the legal decision from the district court 287 00:14:51,800 --> 00:14:54,680 Speaker 5: increased my priors from I think that there was a 288 00:14:54,680 --> 00:14:58,160 Speaker 5: substantial minority probability that Share Powell would continue on as 289 00:14:58,240 --> 00:15:02,240 Speaker 5: governor to now think that is likelier than not that 290 00:15:02,320 --> 00:15:06,480 Speaker 5: Chair Palell is not going anywhere. And because Tom Tillis 291 00:15:06,520 --> 00:15:10,280 Speaker 5: Senator from North Carolina has stayed resolute in his determination 292 00:15:10,360 --> 00:15:12,840 Speaker 5: that so long as criminal proceedings are open against j Pal, 293 00:15:13,200 --> 00:15:16,000 Speaker 5: there will be no confirmation hearing for his successor. But 294 00:15:16,080 --> 00:15:21,360 Speaker 5: we also heard something that was from the lawyers representing 295 00:15:21,480 --> 00:15:23,640 Speaker 5: in ja Palell which they told the Department of Justice 296 00:15:23,680 --> 00:15:26,760 Speaker 5: that so long as this investigation is pending, jay Pal's 297 00:15:26,800 --> 00:15:30,040 Speaker 5: not going anywhere, he will be staying at the FED. 298 00:15:30,080 --> 00:15:32,000 Speaker 5: And as now, putting on my legal hat, I would 299 00:15:32,080 --> 00:15:34,560 Speaker 5: say that is if I were asked for legal advice 300 00:15:34,720 --> 00:15:36,920 Speaker 5: from the Palateam, that's exactly what I would tell them. 301 00:15:36,960 --> 00:15:39,000 Speaker 1: You go nowhere, you say exactly where you are. 302 00:15:39,120 --> 00:15:41,920 Speaker 5: You put yourself in an expanded legal and criminal peril 303 00:15:41,920 --> 00:15:44,040 Speaker 5: should you leave. And so you stay where you are, 304 00:15:44,120 --> 00:15:46,280 Speaker 5: You continue to be represented by the fed's lawyers, you 305 00:15:46,320 --> 00:15:48,920 Speaker 5: continue to exercise that political coalition that's going to be 306 00:15:48,920 --> 00:15:52,520 Speaker 5: plugged into the FED. And if that's true, that scrambles 307 00:15:52,560 --> 00:15:55,200 Speaker 5: the governance story by a lot, and that means not 308 00:15:55,240 --> 00:15:57,440 Speaker 5: only are we likely to have ja Pal's stag in place, 309 00:15:58,280 --> 00:15:59,800 Speaker 5: we are also likely for the first time in the 310 00:15:59,800 --> 00:16:04,120 Speaker 5: Fed's history to have you know, an Avignon pope, Two 311 00:16:04,200 --> 00:16:07,320 Speaker 5: popes at the FED, two chairs, meaning that as soon 312 00:16:07,320 --> 00:16:09,600 Speaker 5: as his term is up as FED Chair, it is 313 00:16:09,680 --> 00:16:11,960 Speaker 5: likely to be the case that Vice Chair Jefferson will 314 00:16:12,000 --> 00:16:12,600 Speaker 5: take over. 315 00:16:12,920 --> 00:16:14,600 Speaker 1: For those board duties. 316 00:16:15,120 --> 00:16:19,520 Speaker 5: But the FOMC, which elects its chair on an annual basis, 317 00:16:20,080 --> 00:16:24,080 Speaker 5: will keep Powell in place until his successor is named. Indeed, 318 00:16:24,120 --> 00:16:26,080 Speaker 5: that is what they announced in January when they held 319 00:16:26,120 --> 00:16:28,320 Speaker 5: that election. And so we will have a FED Chair 320 00:16:29,120 --> 00:16:31,600 Speaker 5: j Powell have the FOC, and we will have a 321 00:16:31,640 --> 00:16:34,920 Speaker 5: FED Chair Philip Jefferson at the board, and we will 322 00:16:34,920 --> 00:16:36,920 Speaker 5: have a raging president who doesn't like either of them 323 00:16:36,920 --> 00:16:38,200 Speaker 5: and wants to do something. 324 00:16:38,240 --> 00:16:39,080 Speaker 1: A third thing, and. 325 00:16:39,000 --> 00:16:41,920 Speaker 5: My only advice to FED watchers everywhere is grab your 326 00:16:41,960 --> 00:16:45,160 Speaker 5: tissues and grab your bucket of popcorn, because this tragic 327 00:16:45,160 --> 00:16:46,920 Speaker 5: comedy is just you know, beginning. 328 00:16:51,840 --> 00:16:54,080 Speaker 3: This is the Big Take from Bloomberg News. I'm David 329 00:16:54,120 --> 00:16:56,520 Speaker 3: gurat To get more from the Big Take and unlimited 330 00:16:56,560 --> 00:16:59,320 Speaker 3: access to all of Bloomberg dot Com, subscribe today at 331 00:16:59,360 --> 00:17:02,800 Speaker 3: Bloomberg dot dot com slash podcast offer. If you'd liked 332 00:17:02,800 --> 00:17:05,240 Speaker 3: this episode, make sure to follow and review The Big Take. 333 00:17:05,280 --> 00:17:08,000 Speaker 3: Wherever you listen to podcasts, it helps people find the show. 334 00:17:08,440 --> 00:17:10,280 Speaker 3: Thanks for listening. We'll be back tomorrow.