1 00:00:02,480 --> 00:00:11,320 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:12,440 --> 00:00:15,239 Speaker 2: It's a special coverage of the Federal Reserve meeting. Let's 3 00:00:15,240 --> 00:00:17,880 Speaker 2: start with the scores, all time highs on the S 4 00:00:17,920 --> 00:00:20,600 Speaker 2: and P five hundred positive by zero zero point eight 5 00:00:20,600 --> 00:00:23,439 Speaker 2: percent on the Nasdaq, at one percent on the Russell, 6 00:00:23,640 --> 00:00:26,040 Speaker 2: at one point six in the bond market, a rally 7 00:00:26,239 --> 00:00:28,520 Speaker 2: for most of that news conference on a two year 8 00:00:28,760 --> 00:00:31,320 Speaker 2: yield to lower by six basis points to four sixty 9 00:00:31,360 --> 00:00:32,120 Speaker 2: one ninety three. 10 00:00:32,360 --> 00:00:33,560 Speaker 3: So let's talk about the why. 11 00:00:33,840 --> 00:00:36,000 Speaker 2: The why is in the outlook the projections from the 12 00:00:36,000 --> 00:00:41,920 Speaker 2: Federal Reserve. Growth revised higher, unemployment revised down, inflation revised up, 13 00:00:42,159 --> 00:00:46,120 Speaker 2: all my maintaining the same medium dot implying three cuts 14 00:00:46,159 --> 00:00:48,159 Speaker 2: in twenty twenty four. So there was a clear and 15 00:00:48,159 --> 00:00:50,680 Speaker 2: obvious contradiction in the outlook and a clear and obvious 16 00:00:50,720 --> 00:00:52,400 Speaker 2: question to ask in this press conference. 17 00:00:52,880 --> 00:00:55,400 Speaker 3: What gives this? Is what the chairman had to say, 18 00:00:56,360 --> 00:00:57,000 Speaker 3: It doesn't mean. 19 00:00:57,400 --> 00:01:00,840 Speaker 4: What it means is that you know, we we've seen incoming. 20 00:01:01,520 --> 00:01:04,720 Speaker 4: As I pointed out in my opening remarks, we did 21 00:01:04,720 --> 00:01:08,760 Speaker 4: mark up our growth forecast, and so have many other forecasters. 22 00:01:08,800 --> 00:01:13,559 Speaker 4: So the economy is performing well, and the inflation data 23 00:01:13,600 --> 00:01:15,319 Speaker 4: came in a little bit higher as a separate matter, 24 00:01:15,400 --> 00:01:18,399 Speaker 4: and I think that caused people to write up their inflation. 25 00:01:19,400 --> 00:01:22,400 Speaker 4: But nonetheless we continue to make good progress on bringing 26 00:01:22,400 --> 00:01:23,200 Speaker 4: inflation down. 27 00:01:23,720 --> 00:01:25,959 Speaker 2: There's two ways to interpret this, the unkind way and 28 00:01:26,000 --> 00:01:28,560 Speaker 2: the kind way. The unkind way, if you're a FED Basha, 29 00:01:28,640 --> 00:01:30,840 Speaker 2: you would say he wasn't prepared for that question. The 30 00:01:30,920 --> 00:01:33,399 Speaker 2: kind way would be to assume that he was, and 31 00:01:33,440 --> 00:01:36,280 Speaker 2: there was a message, a signal in that non onset Bramo, 32 00:01:36,360 --> 00:01:38,520 Speaker 2: I have to say, I'm in the natsakamp and not 33 00:01:38,600 --> 00:01:39,160 Speaker 2: the full mat. 34 00:01:39,280 --> 00:01:40,000 Speaker 3: I would agree. 35 00:01:40,080 --> 00:01:41,920 Speaker 1: I actually think that there was a message in this, 36 00:01:41,959 --> 00:01:44,960 Speaker 1: because honestly, he didn't really push back on financial conditions either, 37 00:01:45,319 --> 00:01:47,800 Speaker 1: and didn't really have any concrete answer. I heard a 38 00:01:47,840 --> 00:01:49,840 Speaker 1: lot of words. I didn't hear some sort of answer 39 00:01:49,880 --> 00:01:54,040 Speaker 1: to our financial conditions moving the economy in the wrong direction, 40 00:01:54,320 --> 00:01:56,760 Speaker 1: which makes me think he's comfortable with it. He's not 41 00:01:56,840 --> 00:01:58,800 Speaker 1: going to push back. This is a FED that wants 42 00:01:58,840 --> 00:02:01,720 Speaker 1: to cut rates. They still want cut rates. And when 43 00:02:01,760 --> 00:02:05,160 Speaker 1: he talked about inflation coming down over time, I'll stress 44 00:02:05,160 --> 00:02:09,080 Speaker 1: the overtime. This is higher inflation for a longer period 45 00:02:09,120 --> 00:02:10,919 Speaker 1: of time that will be tolerated by. 46 00:02:10,760 --> 00:02:11,520 Speaker 3: This Federal reserve. 47 00:02:11,639 --> 00:02:14,480 Speaker 2: Strong growth isn't a problem. Equity markets at all time 48 00:02:14,560 --> 00:02:17,040 Speaker 2: highs not a problem the feed chair. I think this 49 00:02:17,080 --> 00:02:20,400 Speaker 2: is important how they've set up the perceived asymmetric policy 50 00:02:20,440 --> 00:02:22,040 Speaker 2: stance of the federal reserve in the minds of so 51 00:02:22,120 --> 00:02:24,280 Speaker 2: many in this market. Right now, the FET chair is 52 00:02:24,320 --> 00:02:27,120 Speaker 2: signaling repeatedly he is more willing to respond to weaker 53 00:02:27,160 --> 00:02:30,600 Speaker 2: growth than he is stronger growth. So even if you 54 00:02:30,680 --> 00:02:34,000 Speaker 2: project stronger growth, Bramo, it doesn't matter. He doesn't mean 55 00:02:34,360 --> 00:02:36,480 Speaker 2: he's going to raise interest rates anytime off the back 56 00:02:36,520 --> 00:02:36,720 Speaker 2: of that. 57 00:02:36,760 --> 00:02:38,520 Speaker 3: But week of growth, they're ready to go. 58 00:02:38,800 --> 00:02:41,960 Speaker 1: And you pointed this out. He distinguished the idea of 59 00:02:42,080 --> 00:02:45,120 Speaker 1: growth that was horder from inflation as though those stories 60 00:02:45,160 --> 00:02:47,680 Speaker 1: were independent of one another. And it raises this question, 61 00:02:48,240 --> 00:02:50,760 Speaker 1: are they still looking at this as a supply side 62 00:02:50,840 --> 00:02:54,200 Speaker 1: driven kind of issue that caused the inflation kind of 63 00:02:54,200 --> 00:02:57,720 Speaker 1: the pandemic effects and the ripple throughs that will naturally subside, 64 00:02:57,840 --> 00:03:00,800 Speaker 1: which raises the question have they really done anything to 65 00:03:00,880 --> 00:03:03,880 Speaker 1: inflation or is this just some sort of other type 66 00:03:03,919 --> 00:03:06,560 Speaker 1: of influence that they're kind of riding and trying to 67 00:03:06,600 --> 00:03:07,040 Speaker 1: give out. 68 00:03:07,120 --> 00:03:08,480 Speaker 2: You know what stood out to me as well, the 69 00:03:08,520 --> 00:03:11,880 Speaker 2: story hasn't changed. When he says the story hasn't changed, 70 00:03:12,000 --> 00:03:14,160 Speaker 2: yet the data has, I think the meaning of what 71 00:03:14,200 --> 00:03:15,680 Speaker 2: he's saying has changed. 72 00:03:15,800 --> 00:03:16,880 Speaker 3: The meaning is different. 73 00:03:17,080 --> 00:03:19,359 Speaker 2: If you say the story hasn't changed even though inflation 74 00:03:19,440 --> 00:03:22,320 Speaker 2: comes in hotter than expected, you're changing. You're sending a 75 00:03:22,440 --> 00:03:24,600 Speaker 2: very different signal to the one that you were sending 76 00:03:24,639 --> 00:03:26,000 Speaker 2: even a month two months ago. 77 00:03:26,120 --> 00:03:28,000 Speaker 1: And you can see that just frankly in the data 78 00:03:28,000 --> 00:03:30,480 Speaker 1: that they should put out there. Their forecasts exactly are 79 00:03:30,520 --> 00:03:33,640 Speaker 1: not the same. When they talk about core PCEE coming 80 00:03:33,680 --> 00:03:35,240 Speaker 1: to two point six percent at the end of this 81 00:03:35,320 --> 00:03:38,800 Speaker 1: year versus the expected two point four percent previously. When 82 00:03:38,800 --> 00:03:42,720 Speaker 1: you talk about the growth projection increasing materially, this is 83 00:03:42,840 --> 00:03:46,160 Speaker 1: a shifted kind of landscape with higher inflation and a 84 00:03:46,240 --> 00:03:50,040 Speaker 1: higher rate for longer. But they're saying the story hasn't changed, 85 00:03:50,320 --> 00:03:52,680 Speaker 1: which again talks about a green light to stocks, which 86 00:03:52,680 --> 00:03:53,560 Speaker 1: is exactly what we're seeing. 87 00:03:53,640 --> 00:03:55,720 Speaker 2: Let's bring in the guests with equities at old time highs. 88 00:03:55,720 --> 00:03:57,280 Speaker 2: We can catch up with Bill Downley, the former New 89 00:03:57,360 --> 00:04:01,280 Speaker 2: York Fed President and Bloomberg Economic senior advisor. Bill the 90 00:04:01,280 --> 00:04:03,440 Speaker 2: feed Chess said, we're committed to getting inflation back to 91 00:04:03,480 --> 00:04:06,560 Speaker 2: two percent. How committed did he sound in that news conference. 92 00:04:07,600 --> 00:04:09,160 Speaker 5: I think he's changed the story at all. 93 00:04:09,200 --> 00:04:11,440 Speaker 6: I think what people are a little bit flummoxed by 94 00:04:11,520 --> 00:04:14,400 Speaker 6: is the fact that fedsi's stronger growth, a little bit 95 00:04:14,480 --> 00:04:17,279 Speaker 6: higher inflation, yet the same number of indust rate cuts 96 00:04:17,600 --> 00:04:21,080 Speaker 6: penciled in for twenty twenty four. I think the reality 97 00:04:21,200 --> 00:04:23,880 Speaker 6: is it almost flipped. I mean, one more person had 98 00:04:23,920 --> 00:04:26,280 Speaker 6: moved their interest rate forecast up, it would have been 99 00:04:26,320 --> 00:04:28,400 Speaker 6: two rate cuts since the media and rather than three, 100 00:04:28,440 --> 00:04:31,240 Speaker 6: and people probably would be interpreting this in a much 101 00:04:31,279 --> 00:04:34,360 Speaker 6: more different manner. I think, you know, Paul's confident about 102 00:04:34,400 --> 00:04:36,720 Speaker 6: a couple of things. Number one, that inflation is coming down. 103 00:04:37,520 --> 00:04:40,720 Speaker 6: Number two that there that the liver supply is increasing 104 00:04:40,760 --> 00:04:44,360 Speaker 6: and that's creating slacking the labor market. And three ben 105 00:04:44,440 --> 00:04:47,400 Speaker 6: mantary policies tight, and that's why he's confident that eventually 106 00:04:47,400 --> 00:04:48,160 Speaker 6: he is going to cut rates. 107 00:04:48,279 --> 00:04:48,920 Speaker 5: Just a question of. 108 00:04:48,880 --> 00:04:51,760 Speaker 1: Timing, Bill, do you think that there's something incompatible about 109 00:04:52,000 --> 00:04:56,599 Speaker 1: shifting upward a growth target, shifting upward targeted PCE for 110 00:04:56,640 --> 00:04:58,960 Speaker 1: the end of the year, and even shifting up just 111 00:04:59,000 --> 00:05:00,960 Speaker 1: slightly where rates are going to be, and saying the 112 00:05:01,040 --> 00:05:04,880 Speaker 1: story hasn't changed. That the inflation target is still the same, 113 00:05:04,960 --> 00:05:06,359 Speaker 1: it just might take a lot longer. 114 00:05:07,839 --> 00:05:10,359 Speaker 6: I think what people I think misinterpret is the Summer 115 00:05:10,400 --> 00:05:13,600 Speaker 6: of Economic Projections is not a Federal Reserve forecast. It's 116 00:05:13,600 --> 00:05:17,080 Speaker 6: not Powell's forecast. It's a collection of individual forecasts. And 117 00:05:17,120 --> 00:05:19,359 Speaker 6: the Fed doesn't coordinate the s B. They're not trying 118 00:05:19,360 --> 00:05:22,520 Speaker 6: to go out and ask people to write down certain 119 00:05:22,600 --> 00:05:24,080 Speaker 6: numbers to tell a certain story. 120 00:05:24,279 --> 00:05:26,240 Speaker 5: It's just a collection of individual forecasts. 121 00:05:26,360 --> 00:05:28,280 Speaker 6: And as we see in this case, you know, one 122 00:05:28,320 --> 00:05:31,320 Speaker 6: dot moves, you have a slightly different story. So I 123 00:05:31,360 --> 00:05:34,320 Speaker 6: think that Powell's basic message is that the underlying story 124 00:05:34,400 --> 00:05:37,760 Speaker 6: hasn't changed. We didn't completely buy into how good the 125 00:05:37,800 --> 00:05:40,320 Speaker 6: inflation numbers were in the second half of the next year. 126 00:05:40,560 --> 00:05:43,160 Speaker 6: We're not completely put off by the bad inflation readings 127 00:05:43,160 --> 00:05:44,240 Speaker 6: in January and February. 128 00:05:44,440 --> 00:05:47,120 Speaker 5: We still think minetary policy is tight. We still think 129 00:05:47,160 --> 00:05:47,520 Speaker 5: we're going. 130 00:05:47,440 --> 00:05:50,120 Speaker 6: To get more confident about getting inflation down to two percent, 131 00:05:50,440 --> 00:05:51,960 Speaker 6: and so we still think we're going to cut rates 132 00:05:51,960 --> 00:05:53,920 Speaker 6: this year time. He's uncertain, and you know he said 133 00:05:53,920 --> 00:05:56,159 Speaker 6: over and over again it depends on the data, but. 134 00:05:56,320 --> 00:05:57,640 Speaker 3: Not all dots are created equally. 135 00:05:58,080 --> 00:06:00,320 Speaker 2: Where do you think Chairman Powell is on this story 136 00:06:00,400 --> 00:06:02,359 Speaker 2: right now, because it just seems to me there is 137 00:06:02,360 --> 00:06:04,599 Speaker 2: a bias to cut interest rate. Steve Raschudov and Zuhi 138 00:06:04,680 --> 00:06:06,800 Speaker 2: came on this program in the last week or so 139 00:06:06,880 --> 00:06:09,200 Speaker 2: and he said, this Federal Reserve wants to cut interest rates. 140 00:06:09,240 --> 00:06:12,040 Speaker 2: Shaman Pale wants to cut interest rates. Is the bias 141 00:06:12,080 --> 00:06:14,400 Speaker 2: to cut regardless of what the data looks like. 142 00:06:15,839 --> 00:06:17,520 Speaker 6: I wouldn't go as far as to say the bias 143 00:06:17,600 --> 00:06:19,560 Speaker 6: is cut no matter what the data looks like. I mean, 144 00:06:19,600 --> 00:06:21,760 Speaker 6: the Fed's still committed to trying to get inflation down 145 00:06:21,800 --> 00:06:24,840 Speaker 6: to two percent. But I think what's driving Pal is 146 00:06:24,880 --> 00:06:27,680 Speaker 6: the fact that he thinks that monetary policy is restricted. 147 00:06:27,760 --> 00:06:30,360 Speaker 6: So if you stay at the current setting, the connie 148 00:06:30,400 --> 00:06:33,200 Speaker 6: will gradually slow, and that will set the stage for 149 00:06:33,560 --> 00:06:36,040 Speaker 6: less strength in the labor market, which will then motivate 150 00:06:36,440 --> 00:06:39,200 Speaker 6: cutting interest rates. That's what he's highly confident about. When 151 00:06:39,240 --> 00:06:41,440 Speaker 6: he got the question to day about financial conditions, he 152 00:06:41,560 --> 00:06:45,760 Speaker 6: showed no concern at all about easing and making the 153 00:06:45,760 --> 00:06:49,400 Speaker 6: economy too strong. I thought that was noteworthy because in 154 00:06:49,440 --> 00:06:51,600 Speaker 6: the past he's talked about financial conditions a lot. It's 155 00:06:51,600 --> 00:06:55,560 Speaker 6: an important way that monetary policy gets transmitted to the 156 00:06:55,600 --> 00:06:56,280 Speaker 6: real economy. 157 00:06:56,279 --> 00:06:58,520 Speaker 5: But this time he did not take the bit on 158 00:06:58,560 --> 00:07:00,760 Speaker 5: financial conditions easing. And of course when he doesn't take 159 00:07:00,760 --> 00:07:03,280 Speaker 5: debate on financial conditions easy, what does it do. Because 160 00:07:03,560 --> 00:07:05,320 Speaker 5: financial conditions to ease more. 161 00:07:05,279 --> 00:07:07,280 Speaker 2: It's a green light to buy stocks. That's exactly what's 162 00:07:07,279 --> 00:07:09,200 Speaker 2: happened in the S and P five hundred at all 163 00:07:09,240 --> 00:07:11,920 Speaker 2: time highs and up another zero point eight percent. But 164 00:07:12,040 --> 00:07:14,600 Speaker 2: we often hear that we're restrictive, and there are some 165 00:07:14,600 --> 00:07:16,560 Speaker 2: people to come on the program and push back against that. 166 00:07:16,920 --> 00:07:20,000 Speaker 2: Exactly because stocks at all time highs, credit spreads are 167 00:07:20,040 --> 00:07:23,200 Speaker 2: very tight, and unemployment is still below four percent. What 168 00:07:23,240 --> 00:07:25,320 Speaker 2: do you point to if you were back on the FMC, 169 00:07:25,880 --> 00:07:28,560 Speaker 2: just to demonstrate more clearly to people as to why 170 00:07:28,600 --> 00:07:31,840 Speaker 2: this FMC believes we are sufficiently restrictive. 171 00:07:33,480 --> 00:07:35,840 Speaker 5: Well, first of all, the economy does seem like it's slowing. 172 00:07:35,880 --> 00:07:38,240 Speaker 6: I mean, we grew four percent in the third quarter, 173 00:07:38,320 --> 00:07:40,200 Speaker 6: three something set in the fourth quarter. 174 00:07:40,240 --> 00:07:41,920 Speaker 5: It looks like we're gonna get something like two percent 175 00:07:41,960 --> 00:07:44,400 Speaker 5: in the first quarter, and there are signs of weakness. 176 00:07:44,440 --> 00:07:46,680 Speaker 6: And if you look at industrial production over the last year, 177 00:07:46,720 --> 00:07:47,600 Speaker 6: it's actually been down. 178 00:07:47,880 --> 00:07:49,840 Speaker 5: If you look at ours work they've been soft. So 179 00:07:50,120 --> 00:07:50,920 Speaker 5: I think the economy. 180 00:07:51,080 --> 00:07:53,040 Speaker 6: I think the FED is getting enough evidence that the 181 00:07:53,040 --> 00:07:56,680 Speaker 6: economy is slowing that gives them confidence that monetary policy 182 00:07:56,760 --> 00:08:00,680 Speaker 6: is actually restrictive. And of course, you know, as loans mature, 183 00:08:00,800 --> 00:08:03,720 Speaker 6: they get repriced at higher interest rates, and so you know, as. 184 00:08:03,640 --> 00:08:05,960 Speaker 5: Time passes, you stay at the current level of interst. 185 00:08:05,720 --> 00:08:07,680 Speaker 6: Rates, that's going to exert more restraint because it's going 186 00:08:07,720 --> 00:08:09,960 Speaker 6: to drive up financing costs for a lot of smaller 187 00:08:10,000 --> 00:08:11,720 Speaker 6: businesses and for consumers. 188 00:08:11,840 --> 00:08:13,480 Speaker 1: I guess I want to just sit on the whole idea, 189 00:08:13,480 --> 00:08:15,640 Speaker 1: that of financial conditions and the idea that he didn't 190 00:08:15,640 --> 00:08:17,360 Speaker 1: push back and that's why it's a green light to 191 00:08:17,360 --> 00:08:20,960 Speaker 1: buy stocks. Is that correct in your view that this 192 00:08:21,160 --> 00:08:23,920 Speaker 1: isn't something that's going to move against them in terms 193 00:08:24,000 --> 00:08:28,040 Speaker 1: of allowing capital markets to really foster a lot faster 194 00:08:28,200 --> 00:08:31,120 Speaker 1: growth and potentially even more inflation, like we hear from 195 00:08:31,240 --> 00:08:35,000 Speaker 1: lenders themselves, even to middle market companies day after day. 196 00:08:36,160 --> 00:08:38,200 Speaker 6: I don't think it's a green light to buy stocks 197 00:08:38,240 --> 00:08:41,680 Speaker 6: because it could be the wrong decision. Maybe financial conditions 198 00:08:41,720 --> 00:08:43,920 Speaker 6: are making the economy too strong, and maybe they will 199 00:08:44,000 --> 00:08:46,400 Speaker 6: keep inflation too high, and in that case, then the Federaliser 200 00:08:46,440 --> 00:08:48,000 Speaker 6: won't cut rates, and. 201 00:08:47,600 --> 00:08:49,559 Speaker 5: Then financial conditions will will tighten. 202 00:08:49,679 --> 00:08:52,160 Speaker 6: I mean, one reason why financial conditions are as easy 203 00:08:52,200 --> 00:08:54,280 Speaker 6: as they are is because the market is highly confident 204 00:08:54,320 --> 00:08:55,800 Speaker 6: that the Fed's going to cut rates, not just in 205 00:08:55,840 --> 00:08:58,280 Speaker 6: twenty twenty four, but also in twenty twenty five. You 206 00:08:58,280 --> 00:09:01,200 Speaker 6: look at the so for a few market they have 207 00:09:01,280 --> 00:09:02,800 Speaker 6: rates coming down to about three and a half percent 208 00:09:02,840 --> 00:09:03,360 Speaker 6: over the next. 209 00:09:03,240 --> 00:09:05,600 Speaker 5: Couple of years. So it's that prospect of. 210 00:09:05,640 --> 00:09:09,520 Speaker 6: Rate cuts that's really providing support to the stock market 211 00:09:09,559 --> 00:09:13,360 Speaker 6: and to credit spreads. You know, the market basically sees 212 00:09:13,400 --> 00:09:15,600 Speaker 6: the Fed is having their back. If the e commedy weakens, 213 00:09:15,679 --> 00:09:17,240 Speaker 6: the Federal cut rates. I mean, that's the other thing 214 00:09:17,280 --> 00:09:19,960 Speaker 6: that came through in his remarks today. If the labor 215 00:09:20,000 --> 00:09:22,760 Speaker 6: market were to weaken, the Federal Reserve would take that 216 00:09:22,840 --> 00:09:25,520 Speaker 6: into account in terms of the timing of interest rate cuts. 217 00:09:25,800 --> 00:09:28,160 Speaker 6: So we don't really have to worry about the economy 218 00:09:28,160 --> 00:09:31,400 Speaker 6: collapsing because of it starts to weaken significantly, the Federal 219 00:09:31,400 --> 00:09:33,640 Speaker 6: Reserve will ride to the rescue with rate cuts. 220 00:09:34,559 --> 00:09:36,640 Speaker 1: I'm looking right now at FED Fund's futures and it 221 00:09:36,720 --> 00:09:39,720 Speaker 1: points to yesterday a fifty seven percent chance of a 222 00:09:39,840 --> 00:09:42,640 Speaker 1: June rate cut and right now it's something around sixty 223 00:09:42,679 --> 00:09:46,520 Speaker 1: eight sixty nine percent chance, so increasing the expectation for 224 00:09:46,640 --> 00:09:48,720 Speaker 1: a rate cut in June despite the fact that the 225 00:09:48,800 --> 00:09:52,920 Speaker 1: data didn't give j. Powell any extra confidence. Some people 226 00:09:52,960 --> 00:09:55,520 Speaker 1: would look at this and say, Okay, maybe they see 227 00:09:55,559 --> 00:09:57,800 Speaker 1: signs of restrictiveness, although what he pointed to was the 228 00:09:57,840 --> 00:10:00,520 Speaker 1: quits rate, which is the common sort of the thing 229 00:10:00,559 --> 00:10:03,240 Speaker 1: that people point to as signs of weakness. Other people 230 00:10:03,280 --> 00:10:06,360 Speaker 1: would say, why the urgency is as politically motivated to 231 00:10:06,400 --> 00:10:08,720 Speaker 1: get going before the election takes off, because then they 232 00:10:08,720 --> 00:10:11,720 Speaker 1: could potentially be influenced even more. There is there something 233 00:10:11,800 --> 00:10:17,120 Speaker 1: else weighing on the decision making process that's pushing the 234 00:10:17,120 --> 00:10:19,280 Speaker 1: FED to air on the side of being a bit 235 00:10:19,320 --> 00:10:22,000 Speaker 1: more dubvish and allowing this economy to run hot. 236 00:10:23,280 --> 00:10:26,280 Speaker 6: Well, I think, as he said, as inflation comes down, 237 00:10:26,800 --> 00:10:28,760 Speaker 6: then the FED can focus on both sides of their 238 00:10:28,840 --> 00:10:30,800 Speaker 6: dual man and not just the inflation side, but also 239 00:10:30,920 --> 00:10:32,880 Speaker 6: the growth side. And so I think he Fed more 240 00:10:32,920 --> 00:10:35,960 Speaker 6: and more is conscious of the fact that they they 241 00:10:36,040 --> 00:10:38,160 Speaker 6: want to do enough to bring inflation down to two percent, 242 00:10:38,200 --> 00:10:41,160 Speaker 6: but they don't want to overdo it inadvertently cause or recession. 243 00:10:41,480 --> 00:10:42,880 Speaker 5: So in some ways, the Fed is trying to have 244 00:10:42,960 --> 00:10:44,040 Speaker 5: their taken hit it too right. 245 00:10:44,600 --> 00:10:47,440 Speaker 6: They want to ease, but not so soon that they 246 00:10:47,840 --> 00:10:50,840 Speaker 6: that they run the risk of easing prematurely. 247 00:10:50,440 --> 00:10:52,040 Speaker 2: Just to go through these full costs. It's a big 248 00:10:52,120 --> 00:10:54,880 Speaker 2: up with revision to GDP. December projection was one point 249 00:10:54,880 --> 00:10:58,480 Speaker 2: four percent. New projection is two point one col pc eight. 250 00:10:58,600 --> 00:11:00,400 Speaker 2: It goes up from two point four to two point 251 00:11:00,400 --> 00:11:02,360 Speaker 2: six And I just want to get into the details 252 00:11:02,360 --> 00:11:02,840 Speaker 2: of that with you. 253 00:11:02,840 --> 00:11:03,040 Speaker 3: Bill. 254 00:11:03,120 --> 00:11:05,480 Speaker 2: Constant Hunter just wrote in said why is the equity 255 00:11:05,480 --> 00:11:07,920 Speaker 2: market up so much with a basically unchanged dot plot? 256 00:11:08,120 --> 00:11:11,440 Speaker 2: Because productivity is expected to continue, which will allow stronger 257 00:11:11,480 --> 00:11:15,400 Speaker 2: growth with little additional inflationary pressure. This scenario is good 258 00:11:15,440 --> 00:11:17,280 Speaker 2: for risk. Can you talk to us about that, Bill, 259 00:11:17,320 --> 00:11:21,120 Speaker 2: the relationship between stronger growth and maybe muted inflation. Inflation 260 00:11:21,160 --> 00:11:23,640 Speaker 2: that doesn't climb that much off the back of a 261 00:11:23,640 --> 00:11:26,679 Speaker 2: whole economy. How important is that missing ingredient that has 262 00:11:26,720 --> 00:11:29,600 Speaker 2: been missing over the previous ten years, Say that productivity 263 00:11:29,840 --> 00:11:31,880 Speaker 2: that maybe we're starting to see come back through in 264 00:11:31,920 --> 00:11:34,480 Speaker 2: a stronger way, I mean. 265 00:11:34,400 --> 00:11:35,640 Speaker 5: Protin It could be part of that. 266 00:11:35,679 --> 00:11:37,240 Speaker 6: We don't really know what the pro to A trend 267 00:11:37,240 --> 00:11:38,880 Speaker 6: has been it was very weak during the pandemic, and 268 00:11:38,880 --> 00:11:40,560 Speaker 6: that it's been very strong over the last year. I 269 00:11:40,559 --> 00:11:43,200 Speaker 6: think the big thing where the FEDS taking some comfort 270 00:11:43,200 --> 00:11:45,120 Speaker 6: from is the fact that the liver force growth has 271 00:11:45,120 --> 00:11:50,200 Speaker 6: picked up dramatically, both because of participation rates among working 272 00:11:50,200 --> 00:11:53,439 Speaker 6: age population has increased quite a bit and also immigration. 273 00:11:53,960 --> 00:11:56,280 Speaker 6: So you know, the real question is how long is 274 00:11:56,320 --> 00:11:58,680 Speaker 6: that strong labor force growth going to last. If it 275 00:11:58,800 --> 00:12:00,959 Speaker 6: lasts all the way through twenty twenty four, that allows 276 00:12:01,000 --> 00:12:03,480 Speaker 6: the economy to grow, you know, more quickly without it 277 00:12:03,800 --> 00:12:06,280 Speaker 6: generating a tighter labor market. So the growth rate of 278 00:12:06,280 --> 00:12:07,959 Speaker 6: the layer force is can be a very very important 279 00:12:08,000 --> 00:12:11,720 Speaker 6: factor determining exactly when the Fed can cut rates in 280 00:12:11,760 --> 00:12:12,559 Speaker 6: at what growth rate. 281 00:12:12,920 --> 00:12:15,360 Speaker 1: And Bill he did mention immigration, and I really that 282 00:12:15,440 --> 00:12:17,400 Speaker 1: was notable to me because we heard from Morgan Stanley's 283 00:12:17,400 --> 00:12:19,800 Speaker 1: Ellen Sentner, and we also heard from Jon Hatsias at 284 00:12:19,800 --> 00:12:22,800 Speaker 1: Goldman Sachs in his reports where he's talking about immigration 285 00:12:22,920 --> 00:12:24,760 Speaker 1: is one of the big wild cards for why you 286 00:12:24,840 --> 00:12:28,000 Speaker 1: have seen some of the wage pressure come off and 287 00:12:28,080 --> 00:12:30,280 Speaker 1: participation go up, and even some of the unemployment data 288 00:12:30,320 --> 00:12:32,160 Speaker 1: take a little bit higher just because some of the 289 00:12:32,559 --> 00:12:37,400 Speaker 1: new members, new new migrants to this country are filing 290 00:12:37,840 --> 00:12:41,079 Speaker 1: for claims. How much is that changing the dynamic in 291 00:12:41,160 --> 00:12:42,520 Speaker 1: ways that is unappreciated. 292 00:12:44,200 --> 00:12:46,040 Speaker 6: Well, I think you know what's happened is we had 293 00:12:46,040 --> 00:12:50,640 Speaker 6: a very sharp restraint on labor supply during the pandemic 294 00:12:51,200 --> 00:12:53,720 Speaker 6: because we weren't letting letting anybody into this country except 295 00:12:53,760 --> 00:12:54,440 Speaker 6: people who are. 296 00:12:54,320 --> 00:12:55,280 Speaker 5: Coming over illegally. 297 00:12:56,040 --> 00:12:58,920 Speaker 6: And then all of a sudden, you have a ketchup 298 00:12:58,920 --> 00:13:01,040 Speaker 6: for all those people that wanted to get come into 299 00:13:01,040 --> 00:13:03,959 Speaker 6: the country, you know, in twenty twenty and twenty twenty one, 300 00:13:04,040 --> 00:13:06,720 Speaker 6: twenty twenty two, now coming in twenty twenty three. So 301 00:13:06,760 --> 00:13:09,040 Speaker 6: the real question is that just a temporary period of 302 00:13:09,120 --> 00:13:11,880 Speaker 6: ketchup or do we have a sustained growth of faster 303 00:13:12,440 --> 00:13:15,800 Speaker 6: labor force growth. So I think that's that's that's a 304 00:13:15,800 --> 00:13:16,920 Speaker 6: wildcard for the outlook. 305 00:13:16,960 --> 00:13:19,480 Speaker 2: Frankly, hey, Bill enjoyed this fantastic catch out with this 306 00:13:20,000 --> 00:13:22,520 Speaker 2: Bill Anty there, the former New York Fed President, reacting 307 00:13:22,559 --> 00:13:25,320 Speaker 2: to that news conference with Chairman Powell. This afternoon, old 308 00:13:25,320 --> 00:13:27,480 Speaker 2: time highs on the S and P five hundred zero 309 00:13:27,559 --> 00:13:30,360 Speaker 2: point nine percent, up more than one four percentage point 310 00:13:30,559 --> 00:13:33,360 Speaker 2: on the NASNAK Right now, the small CAPSNA performing positive 311 00:13:33,559 --> 00:13:36,480 Speaker 2: by two point two percent on the Russell two thousand. 312 00:13:36,640 --> 00:13:39,640 Speaker 2: In that news conference, Mike McKee asking a couple of questions. 313 00:13:39,679 --> 00:13:41,839 Speaker 2: He's back out of that news conference for us now, Mike, 314 00:13:41,920 --> 00:13:43,679 Speaker 2: your reaction to that one, please. 315 00:13:45,120 --> 00:13:47,160 Speaker 7: Well, basically, I think Bill Dudley has it right. The 316 00:13:47,280 --> 00:13:50,079 Speaker 7: chairman was trying to tell people that the situation hasn't changed, 317 00:13:50,120 --> 00:13:53,040 Speaker 7: even if the FED is being more realistic, shall we 318 00:13:53,120 --> 00:13:55,439 Speaker 7: say about growth and inflation? 319 00:13:55,679 --> 00:13:55,880 Speaker 2: Now? 320 00:13:56,120 --> 00:13:59,040 Speaker 7: The thing he left out is that a significant number 321 00:13:59,160 --> 00:14:03,600 Speaker 7: of members of the committee did raise their inflation forecasts, 322 00:14:04,600 --> 00:14:08,080 Speaker 7: and that has some implications down the road in that 323 00:14:08,559 --> 00:14:12,040 Speaker 7: with only one dot needing to switch, we aren't guaranteed 324 00:14:12,120 --> 00:14:14,560 Speaker 7: three this year. We could see if we get another 325 00:14:14,600 --> 00:14:18,480 Speaker 7: bad inflation report. This easily flipped two dots instead of 326 00:14:18,520 --> 00:14:21,800 Speaker 7: three dots. But for right now, he's saying there isn't 327 00:14:22,040 --> 00:14:23,040 Speaker 7: really a change. 328 00:14:23,200 --> 00:14:25,280 Speaker 1: Bill Dudley pointed to the fact that there was no 329 00:14:25,360 --> 00:14:28,560 Speaker 1: pushback to the financial conditions point, and this was notable 330 00:14:28,600 --> 00:14:30,600 Speaker 1: because this is a second press conference in a row 331 00:14:30,640 --> 00:14:33,920 Speaker 1: that people asked about financial conditions easing and he didn't 332 00:14:33,960 --> 00:14:36,760 Speaker 1: take the bait. How much signal is there in this 333 00:14:36,920 --> 00:14:39,160 Speaker 1: that essentially he is not bothered by the fact that 334 00:14:39,200 --> 00:14:40,840 Speaker 1: we're seeing stocks at all time highs. 335 00:14:42,640 --> 00:14:45,840 Speaker 7: Well, the FED doesn't really worry about stock hitting all 336 00:14:45,880 --> 00:14:48,560 Speaker 7: time highs, except for if there's some sort of bubble 337 00:14:49,280 --> 00:14:52,040 Speaker 7: bursts that they have to deal with. They view it 338 00:14:52,080 --> 00:14:56,120 Speaker 7: as just another way that people are collecting income. Now, 339 00:14:56,200 --> 00:14:58,800 Speaker 7: it could be a bubble, but they're looking at the 340 00:14:58,920 --> 00:15:01,720 Speaker 7: cost of doing this business. And right now what we're 341 00:15:01,760 --> 00:15:05,120 Speaker 7: seeing is the prime rate is unchanged. Mortgage rates have 342 00:15:05,160 --> 00:15:07,880 Speaker 7: come down, but only a little bit. Credit card rates 343 00:15:07,920 --> 00:15:12,640 Speaker 7: have actually gone up on average. Companies are still borrowing, 344 00:15:12,880 --> 00:15:16,480 Speaker 7: and credit spreads have come down, but they're not borrowing 345 00:15:16,520 --> 00:15:19,600 Speaker 7: as much as they were. So at this point, is 346 00:15:19,640 --> 00:15:24,160 Speaker 7: it restrictive? Is it not restrictive? Financial conditions reflect what's 347 00:15:24,160 --> 00:15:26,600 Speaker 7: happening in the stock market and to a lesser extent, 348 00:15:26,600 --> 00:15:29,120 Speaker 7: the bond market, but not necessarily what's happening in the 349 00:15:29,160 --> 00:15:29,920 Speaker 7: real economy. 350 00:15:30,120 --> 00:15:31,720 Speaker 1: Do you get the sense, Mike, that there's a bit 351 00:15:31,720 --> 00:15:33,640 Speaker 1: of hurting cats here? I mean, as Bill was talking 352 00:15:33,640 --> 00:15:35,720 Speaker 1: about Bill dud Layton and former New York FED president, 353 00:15:35,800 --> 00:15:38,320 Speaker 1: that there is a sense it's not a collective view 354 00:15:38,480 --> 00:15:41,400 Speaker 1: of what's going to happen. It's each FED member coming 355 00:15:41,440 --> 00:15:43,960 Speaker 1: out with their projections and him having to cobble together 356 00:15:44,000 --> 00:15:47,480 Speaker 1: a narrative about that. Is that essentially what we saw, 357 00:15:47,640 --> 00:15:49,960 Speaker 1: in particular with the first answer to this question of 358 00:15:50,000 --> 00:15:52,400 Speaker 1: trying to pull together all of these new pieces. 359 00:15:53,760 --> 00:15:55,680 Speaker 7: Yeah, I think the first question was one that any 360 00:15:55,720 --> 00:15:58,040 Speaker 7: one of us would have asked because it was so 361 00:15:58,240 --> 00:16:02,360 Speaker 7: obvious the Fed is raising its inflation forecast, it's growth forecast, 362 00:16:02,400 --> 00:16:04,320 Speaker 7: and not changing. The fact that it wants to cut 363 00:16:04,360 --> 00:16:08,400 Speaker 7: three times makes sense of that. I'm not sure he 364 00:16:08,560 --> 00:16:11,520 Speaker 7: completely made sense of it, except for the fact, as 365 00:16:11,520 --> 00:16:14,880 Speaker 7: Bill Dudley put it out, that not everybody switched their vote. 366 00:16:14,920 --> 00:16:17,160 Speaker 7: We needed one more dot to move, and we could 367 00:16:17,200 --> 00:16:20,760 Speaker 7: have seen that. But they do have a problem with 368 00:16:20,840 --> 00:16:23,000 Speaker 7: the dot plot in that Wall Street tends to see 369 00:16:23,000 --> 00:16:26,479 Speaker 7: it as a collective forecast rather than as a collection 370 00:16:27,080 --> 00:16:30,760 Speaker 7: of nineteen individual forecasts. And if you break that down, 371 00:16:30,840 --> 00:16:32,760 Speaker 7: you do see what I was talking about earlier, that 372 00:16:33,280 --> 00:16:36,040 Speaker 7: a significant number raised their inflation forecast, and so it 373 00:16:36,040 --> 00:16:39,280 Speaker 7: probably wouldn't take much to tip us into two if 374 00:16:39,480 --> 00:16:43,200 Speaker 7: we continue to see this kind of inflation data. It 375 00:16:43,440 --> 00:16:47,240 Speaker 7: was interesting though, that he gave us the Fed's core 376 00:16:47,320 --> 00:16:52,880 Speaker 7: PCE reading basically thirty basis points for the month of February. 377 00:16:53,000 --> 00:16:56,880 Speaker 7: We haven't got that yet, but that would suggest that 378 00:16:56,960 --> 00:17:00,800 Speaker 7: inflation on a PCE basis is not excelting the same 379 00:17:00,840 --> 00:17:02,840 Speaker 7: way we saw CPI and PPI. 380 00:17:02,560 --> 00:17:05,159 Speaker 2: Did and Mi niquay, thank you, sir. I appreciate it. 381 00:17:05,200 --> 00:17:07,520 Speaker 2: Trying to explain what's going on that news conference. Let's 382 00:17:07,520 --> 00:17:10,360 Speaker 2: just put it this way. The optic's not great when 383 00:17:10,400 --> 00:17:12,120 Speaker 2: you look at the medians and the shift we've seen 384 00:17:12,480 --> 00:17:13,880 Speaker 2: now relative to December. 385 00:17:14,000 --> 00:17:16,680 Speaker 1: I do like this explanation that basically it's not the 386 00:17:16,800 --> 00:17:19,560 Speaker 1: sort of cabal coming up with some thesis that he 387 00:17:19,600 --> 00:17:21,320 Speaker 1: can then put out there. It's him trying to pull 388 00:17:21,359 --> 00:17:23,320 Speaker 1: together the different narratives. It is an interesting point that 389 00:17:23,359 --> 00:17:26,600 Speaker 1: they basically leaked the core PCEE. They leaked this course 390 00:17:26,680 --> 00:17:29,320 Speaker 1: sort of key metric as reason to not be more 391 00:17:29,359 --> 00:17:31,320 Speaker 1: hawkish and push back against the market. 392 00:17:31,480 --> 00:17:33,760 Speaker 2: So Pittchit had this to say, the medium didn't change 393 00:17:33,760 --> 00:17:36,439 Speaker 2: for twenty four but the average change by eleven basis points, 394 00:17:36,640 --> 00:17:38,560 Speaker 2: and at four point eight one percent, it's closer to 395 00:17:38,600 --> 00:17:41,440 Speaker 2: two cuts than it is to three. That's a kind 396 00:17:41,440 --> 00:17:43,399 Speaker 2: of way of shaping things up if he wanted to 397 00:17:43,400 --> 00:17:44,960 Speaker 2: frame things at a federal reserve. In fact, that it 398 00:17:45,040 --> 00:17:47,119 Speaker 2: might have been a better response for the fetcham and 399 00:17:47,440 --> 00:17:49,760 Speaker 2: in the news conference to explain what's going on. 400 00:17:49,880 --> 00:17:52,240 Speaker 1: Yeah, on the margins, This does shift people to have 401 00:17:52,280 --> 00:17:55,600 Speaker 1: slightly less confidence, which is the reason why we're looking 402 00:17:55,640 --> 00:17:58,680 Speaker 1: to potentially cut rates fewer times. We'll have more time 403 00:17:58,760 --> 00:18:00,920 Speaker 1: to sift through everything and under stand whether we actually 404 00:18:00,920 --> 00:18:03,160 Speaker 1: are making progress. And then everybody would have said, Okay, 405 00:18:03,160 --> 00:18:04,240 Speaker 1: we've heard absolutely nothing. 406 00:18:04,320 --> 00:18:05,960 Speaker 2: The fact of the matter is he didn't go with 407 00:18:06,000 --> 00:18:08,879 Speaker 2: that option, though, did heme with a different option? Excuse 408 00:18:08,960 --> 00:18:11,359 Speaker 2: it away? Focused on other things, and the fact of 409 00:18:11,400 --> 00:18:12,760 Speaker 2: matter is lead. So we go back to something we've 410 00:18:12,760 --> 00:18:15,000 Speaker 2: talked about a million times on this program. Will the 411 00:18:15,040 --> 00:18:18,280 Speaker 2: FED have the ability to respond to adverse shocks? The 412 00:18:18,320 --> 00:18:21,000 Speaker 2: answer is yes, based on the communication we've had. Do 413 00:18:21,080 --> 00:18:23,240 Speaker 2: they see strong growth as a problem per se? The 414 00:18:23,280 --> 00:18:25,960 Speaker 2: answer is no, based on the communication we've had. So 415 00:18:26,040 --> 00:18:29,040 Speaker 2: what do you do today this afternoon? New by Stocks 416 00:18:29,160 --> 00:18:30,640 Speaker 2: and you buy the front end of the curve because 417 00:18:30,640 --> 00:18:32,760 Speaker 2: in the minds of Catholic economics this afternoon, based on 418 00:18:32,800 --> 00:18:35,280 Speaker 2: their note, still on track for a rake cut in. 419 00:18:35,280 --> 00:18:37,520 Speaker 1: June, which is really the market's view too. You're seeing 420 00:18:37,520 --> 00:18:42,320 Speaker 1: that probability increase, constance Hunter's point is well taken that 421 00:18:42,359 --> 00:18:45,080 Speaker 1: what they're looking at is the hope of productivity and 422 00:18:45,119 --> 00:18:47,679 Speaker 1: the hope of supply side demand for the labor market 423 00:18:47,720 --> 00:18:51,200 Speaker 1: to offset some of the growth that would have come 424 00:18:51,200 --> 00:18:54,720 Speaker 1: with inflation, in sort of disinflationary nirvana. We'll see if 425 00:18:54,760 --> 00:18:55,080 Speaker 1: we get it. 426 00:18:55,160 --> 00:18:58,359 Speaker 2: Let's continue this conversation, Jeff Rosenberger, Black Rock is joining 427 00:18:58,400 --> 00:18:59,840 Speaker 2: us now. Jeff, I just want to know what you've 428 00:18:59,840 --> 00:19:01,600 Speaker 2: been in the last how you're running around the trading 429 00:19:01,600 --> 00:19:03,240 Speaker 2: floor at Black Ross scream and buy stocks. 430 00:19:03,480 --> 00:19:04,760 Speaker 3: How did you respond to this one? 431 00:19:06,600 --> 00:19:09,600 Speaker 8: No, I think the main reaction is what you've been 432 00:19:09,600 --> 00:19:12,280 Speaker 8: talking about in terms of the two cuts versus the 433 00:19:12,320 --> 00:19:15,359 Speaker 8: three cuts. I mean, I think that's the headline for 434 00:19:15,400 --> 00:19:17,840 Speaker 8: the bond market and why you're seeing such a big steepening. 435 00:19:17,880 --> 00:19:19,920 Speaker 8: And as you point out, you know, it was really 436 00:19:20,000 --> 00:19:24,320 Speaker 8: much closer to a two cut scenario, but they didn't 437 00:19:24,359 --> 00:19:26,440 Speaker 8: go with that at all, and neither did the neither 438 00:19:26,480 --> 00:19:28,800 Speaker 8: did the market narrative, and most of what you got 439 00:19:28,800 --> 00:19:31,720 Speaker 8: from Chair Powell was kind of dismissive in terms of 440 00:19:31,760 --> 00:19:35,440 Speaker 8: the uptick in the inflation forecast for twenty twenty four. 441 00:19:35,560 --> 00:19:39,000 Speaker 8: He didn't even mention it in the opening statement when 442 00:19:39,040 --> 00:19:41,080 Speaker 8: he got the question on it, it was just a 443 00:19:41,080 --> 00:19:43,840 Speaker 8: mark to market issue, so really trying to kind of 444 00:19:43,880 --> 00:19:48,760 Speaker 8: handwave around the dissonance between stronger growth, higher inflation, and 445 00:19:48,840 --> 00:19:51,960 Speaker 8: no changes to cuts. But I think that issue is 446 00:19:52,000 --> 00:19:54,040 Speaker 8: going to be in front of us as we watched 447 00:19:54,119 --> 00:19:56,639 Speaker 8: the data, you know, play out. They gave the forecast 448 00:19:56,840 --> 00:19:59,480 Speaker 8: for the inflation. They don't see any changes, but he 449 00:19:59,520 --> 00:20:02,600 Speaker 8: also said we don't really know, and so I think 450 00:20:02,640 --> 00:20:04,639 Speaker 8: that'll be a little bit of longer term issue. But 451 00:20:04,680 --> 00:20:07,000 Speaker 8: why you're having such a big reaction on the equity 452 00:20:07,040 --> 00:20:09,560 Speaker 8: side is because the bond market is quite happy with it, 453 00:20:09,640 --> 00:20:13,720 Speaker 8: and that interchange about the FED put is back will 454 00:20:13,760 --> 00:20:17,320 Speaker 8: cut rates if there's any weakness in the employment picture, 455 00:20:17,520 --> 00:20:19,200 Speaker 8: and risky assets love that story. 456 00:20:19,320 --> 00:20:21,359 Speaker 1: But isn't that valid? I mean, at a point where 457 00:20:21,400 --> 00:20:24,520 Speaker 1: we're talking about the potential to answer some of these 458 00:20:24,600 --> 00:20:27,520 Speaker 1: questions about why there's been this shift on the margins, 459 00:20:27,600 --> 00:20:30,199 Speaker 1: could this mean inflation is going to stay around for 460 00:20:30,240 --> 00:20:32,760 Speaker 1: a bit longer. Maybe it's okay because we want to 461 00:20:32,760 --> 00:20:34,719 Speaker 1: make sure we have to stick this soft landing. I mean, 462 00:20:34,720 --> 00:20:36,840 Speaker 1: those would have been clear answers. Isn't the sort of 463 00:20:36,960 --> 00:20:39,280 Speaker 1: non answer signal as John and I have been talking 464 00:20:39,280 --> 00:20:44,080 Speaker 1: about to basically look to that FED put as a likelihood. 465 00:20:46,080 --> 00:20:49,160 Speaker 8: Well it is, but there's a real problem with that, 466 00:20:49,600 --> 00:20:52,199 Speaker 8: and the risk is that the FED has just got 467 00:20:52,240 --> 00:20:56,440 Speaker 8: the read on their degree of restrictiveness fundamentally wrong. Look 468 00:20:56,480 --> 00:20:59,200 Speaker 8: at the answer to the question that he gave on 469 00:20:59,400 --> 00:21:01,440 Speaker 8: you know, how do you know that you're restricted? It's 470 00:21:01,520 --> 00:21:03,879 Speaker 8: all looking at the labor market. How do you know 471 00:21:03,920 --> 00:21:07,280 Speaker 8: that financial conditions don't matter and you cannot look at them? 472 00:21:07,400 --> 00:21:09,399 Speaker 8: He pointed to the labor market. Well, most of the 473 00:21:09,480 --> 00:21:11,840 Speaker 8: repair in the labor market has nothing to do with 474 00:21:11,880 --> 00:21:14,760 Speaker 8: the fed's policy. It's all supply side. And so when 475 00:21:14,800 --> 00:21:17,720 Speaker 8: you look at the implications of the fed's policy and 476 00:21:17,760 --> 00:21:20,639 Speaker 8: financial conditions, and Mike McKee you talked about this a 477 00:21:20,680 --> 00:21:22,720 Speaker 8: little bit, I just want to amplify that it does 478 00:21:22,920 --> 00:21:26,440 Speaker 8: affect the real economy because the transmission mechanism from financial 479 00:21:26,440 --> 00:21:30,520 Speaker 8: conditions is through confidence, and confidence translates into demand, and 480 00:21:30,600 --> 00:21:35,359 Speaker 8: so it's absolutely acting in opposite to what the FED 481 00:21:35,440 --> 00:21:38,160 Speaker 8: is intending here. And that's a tension that the FED 482 00:21:38,240 --> 00:21:40,199 Speaker 8: is ignoring right now, but they ignore it at their 483 00:21:40,240 --> 00:21:43,000 Speaker 8: own peril. The market is following the FED narrative, So 484 00:21:43,080 --> 00:21:46,320 Speaker 8: everybody's happy with it, but the risk is that they're 485 00:21:46,520 --> 00:21:49,640 Speaker 8: off and so that inflation doesn't fall as far as 486 00:21:49,640 --> 00:21:52,600 Speaker 8: everyone's expecting to, and you end up having to do 487 00:21:52,680 --> 00:21:55,440 Speaker 8: the opposite of what we got today, which is, uh oh, 488 00:21:55,760 --> 00:21:58,360 Speaker 8: actually things are stronger. We can't cut as much as 489 00:21:58,359 --> 00:22:01,960 Speaker 8: everybody expects at the opposite reaction. That's a risk for 490 00:22:02,040 --> 00:22:04,280 Speaker 8: the future time. But that's why some of this matters. 491 00:22:04,480 --> 00:22:07,120 Speaker 3: So, Jeff, this is refreshing. Let's put it that way. 492 00:22:07,359 --> 00:22:11,000 Speaker 2: Once you've identified an inconsistency like that, as a market participant, 493 00:22:11,200 --> 00:22:12,600 Speaker 2: how do you position accordingly? 494 00:22:12,960 --> 00:22:14,600 Speaker 3: What do you do? What are you doing differently? 495 00:22:16,280 --> 00:22:20,600 Speaker 8: So the thing that it highlights is just the asymmetry 496 00:22:20,640 --> 00:22:23,000 Speaker 8: in terms of market performance. Now, you're not going to 497 00:22:23,080 --> 00:22:26,800 Speaker 8: see it releve realized until it shows up in the data, 498 00:22:26,840 --> 00:22:30,880 Speaker 8: but it highlights that the fed's actions and its narrative 499 00:22:31,280 --> 00:22:36,080 Speaker 8: kind of conspire to push people into the same types 500 00:22:36,119 --> 00:22:38,840 Speaker 8: of trades, and so when you get the surprise on 501 00:22:39,000 --> 00:22:41,919 Speaker 8: the other side that might be brewing here, I'm not 502 00:22:41,960 --> 00:22:45,440 Speaker 8: saying that it is, but it creates a much larger 503 00:22:45,600 --> 00:22:48,800 Speaker 8: opposite reaction. I don't think you can position for that today, 504 00:22:49,000 --> 00:22:51,440 Speaker 8: because you've got a position with the momentum, which is, hey, 505 00:22:51,920 --> 00:22:56,040 Speaker 8: they're gonna cut three times, they're pretty sanguine and as 506 00:22:56,119 --> 00:22:58,240 Speaker 8: it as you've seen in the equity market today, it's 507 00:22:58,320 --> 00:22:59,440 Speaker 8: everybody back in the pool. 508 00:22:59,560 --> 00:23:01,520 Speaker 1: It seems as though there aren't that many people worried 509 00:23:01,600 --> 00:23:05,160 Speaker 1: about inflation getting unmoored. Everyone seems to say that doesn't 510 00:23:05,200 --> 00:23:07,439 Speaker 1: seem to be the risk that we're currently facing. The 511 00:23:07,440 --> 00:23:11,520 Speaker 1: Fed doesn't seem particularly worried about inflation expectations really getting 512 00:23:11,520 --> 00:23:14,439 Speaker 1: out of their control, all things being equal, does that 513 00:23:14,480 --> 00:23:18,160 Speaker 1: give you enough confidence to buy longer term treasuries ten 514 00:23:18,240 --> 00:23:21,520 Speaker 1: year treasuries, thirty year treasuries with the conviction that the 515 00:23:21,560 --> 00:23:24,800 Speaker 1: Fed will truly get inflation back down to two percent. 516 00:23:26,320 --> 00:23:29,080 Speaker 8: So, just a clarification, we're not talking about inflation going 517 00:23:29,119 --> 00:23:31,840 Speaker 8: back up. We're talking about the failure of inflation to 518 00:23:31,880 --> 00:23:35,399 Speaker 8: go down to two percent as fast as the FED 519 00:23:35,560 --> 00:23:38,919 Speaker 8: expects it to, and therefore they can cut interest rates 520 00:23:39,240 --> 00:23:42,200 Speaker 8: as fast as they need to because they are more 521 00:23:42,200 --> 00:23:45,000 Speaker 8: worried about being too restrictive. So it's more about not 522 00:23:45,080 --> 00:23:47,560 Speaker 8: getting as much as what the market expects than some 523 00:23:47,680 --> 00:23:50,280 Speaker 8: kind of big change in terms of the inflation trajectory. 524 00:23:50,280 --> 00:23:53,120 Speaker 8: On the second part of your question, Lisa, super interesting 525 00:23:53,160 --> 00:23:55,919 Speaker 8: development here, kind of more minor in terms of the 526 00:23:55,920 --> 00:23:59,080 Speaker 8: headlines here, but that change to the longer run dot 527 00:23:59,200 --> 00:24:02,560 Speaker 8: and what you saw on curve reaction is an attempt 528 00:24:02,600 --> 00:24:05,840 Speaker 8: to try to steepen the curve. Most of the reaction 529 00:24:05,960 --> 00:24:07,399 Speaker 8: is just in the front end, but you look at 530 00:24:07,400 --> 00:24:09,560 Speaker 8: the back end and it was flirting with higher rates, 531 00:24:09,880 --> 00:24:13,040 Speaker 8: positive yield movements to the back end. And it is 532 00:24:13,080 --> 00:24:17,520 Speaker 8: this longer run story that perhaps the landing point isn't 533 00:24:17,560 --> 00:24:20,520 Speaker 8: as low as what we think it is today, isn't 534 00:24:20,560 --> 00:24:23,520 Speaker 8: as low as what it was pre COVID, that the 535 00:24:23,560 --> 00:24:25,800 Speaker 8: neutral rate ends up being much higher, and that the 536 00:24:25,880 --> 00:24:29,119 Speaker 8: path of aggregate cuts as much lower. And then you 537 00:24:29,160 --> 00:24:30,960 Speaker 8: add on top of that a lot of the fiscal 538 00:24:31,000 --> 00:24:33,560 Speaker 8: considerations in terms of the amount of debt that's being 539 00:24:33,560 --> 00:24:36,280 Speaker 8: pushed into the private side and the QT that he 540 00:24:36,320 --> 00:24:40,720 Speaker 8: talked about the balance sheet slowing, less support for absorbing 541 00:24:40,760 --> 00:24:43,879 Speaker 8: that that challenges the back end of the curve. So 542 00:24:43,880 --> 00:24:46,800 Speaker 8: I think it's still a much more challenging environment for 543 00:24:47,080 --> 00:24:50,000 Speaker 8: longer dated maturity interest rates coming out of this meeting. 544 00:24:50,119 --> 00:24:52,440 Speaker 1: You put this all together, Jeff, do you feel as 545 00:24:52,440 --> 00:24:56,280 Speaker 1: though this federal reserve is tacitly acknowledging that they will 546 00:24:56,359 --> 00:24:59,320 Speaker 1: tolerate a higher inflation rate for a longer period of 547 00:24:59,359 --> 00:25:03,399 Speaker 1: time if it's going down even very gradually to that 548 00:25:03,440 --> 00:25:04,320 Speaker 1: two percent level. 549 00:25:05,640 --> 00:25:07,439 Speaker 8: Yeah, you know, I think he got he got that 550 00:25:07,520 --> 00:25:11,000 Speaker 8: question explicitly, and he said it explicitly as explicit as 551 00:25:11,000 --> 00:25:14,040 Speaker 8: the FED is going to be within the ambiguity of language. 552 00:25:14,280 --> 00:25:17,919 Speaker 8: He said over time. He's stressed over time, And I 553 00:25:17,960 --> 00:25:20,639 Speaker 8: think the interpretation of that is they're not going to 554 00:25:20,640 --> 00:25:24,760 Speaker 8: be so worried about hitting two percent immediately. Now, there's 555 00:25:24,800 --> 00:25:27,800 Speaker 8: a lot of gap and room for interpretation about what 556 00:25:27,880 --> 00:25:32,240 Speaker 8: is the difference in calendar dates and time between immediate 557 00:25:32,520 --> 00:25:34,600 Speaker 8: and overtime. But I think it's pretty clear that the 558 00:25:34,640 --> 00:25:39,359 Speaker 8: FED is not going to press on economic growth and 559 00:25:39,880 --> 00:25:43,000 Speaker 8: recession for the benefit of going from three to two percent. 560 00:25:43,040 --> 00:25:45,040 Speaker 8: And I think that's pretty clear where this bet is leaning. 561 00:25:45,280 --> 00:25:48,000 Speaker 2: Chef, this was awesome, ready thoughtful stuff. Thank you, sir, 562 00:25:48,040 --> 00:25:50,680 Speaker 2: Jeff Rosenberg there over at black Rock. You want two 563 00:25:50,680 --> 00:25:53,200 Speaker 2: moves in this equity market right now? Stocks, old time 564 00:25:53,280 --> 00:25:57,119 Speaker 2: highs take another. Guess what hit a record high just 565 00:25:57,160 --> 00:26:01,160 Speaker 2: months ago? A fresh old time high goat not just stocks, 566 00:26:01,400 --> 00:26:04,480 Speaker 2: but gold as well. Bramo breaking out and getting back 567 00:26:04,560 --> 00:26:04,920 Speaker 2: up there. 568 00:26:05,119 --> 00:26:07,400 Speaker 1: So there's one way to interpret this, which is potentially 569 00:26:07,440 --> 00:26:09,320 Speaker 1: fear of inflation and then you go into gold. And 570 00:26:09,320 --> 00:26:12,680 Speaker 1: then there's another version of this, which is if interest 571 00:26:12,720 --> 00:26:17,040 Speaker 1: rates go down, intersparing assets are not as attractive and 572 00:26:17,080 --> 00:26:19,640 Speaker 1: you can go into a hard asset. So these are 573 00:26:19,680 --> 00:26:22,439 Speaker 1: two of the potential explanations people might have for gold 574 00:26:22,720 --> 00:26:25,160 Speaker 1: either way, both of them taking effect exactly. 575 00:26:25,240 --> 00:26:27,560 Speaker 2: So how about both the fact of the matter is 576 00:26:27,600 --> 00:26:30,680 Speaker 2: they're still entertaining interest rate cauns and maybe even inflation 577 00:26:31,160 --> 00:26:33,159 Speaker 2: isn't going to reaccelerate in a profound way. That's not 578 00:26:33,160 --> 00:26:35,520 Speaker 2: what Jeff Rosenberger is sent over at black Rock. Perhaps 579 00:26:35,560 --> 00:26:38,440 Speaker 2: it hangs around above target Sticky. 580 00:26:38,320 --> 00:26:41,560 Speaker 1: Tomorrow special from Jonathan Farrow and being a Goldbug, the new, 581 00:26:41,760 --> 00:26:42,480 Speaker 1: the one and only. 582 00:26:42,680 --> 00:26:44,400 Speaker 2: I think it's some gold bugs out there are quite 583 00:26:44,400 --> 00:26:45,520 Speaker 2: happy with that news conference. 584 00:26:45,600 --> 00:26:47,600 Speaker 1: Let's put it out there, and it's been an incredible rally, 585 00:26:47,640 --> 00:26:49,320 Speaker 1: and so maybe they've got it just turbocharged. 586 00:26:49,480 --> 00:26:52,640 Speaker 2: We'll continue this conversation tomorrow morning. Thank you very much 587 00:26:52,840 --> 00:26:55,960 Speaker 2: for tuning into Bloomberg TV and Bloomberg Radio for our 588 00:26:56,000 --> 00:27:00,240 Speaker 2: audience worldwide. What a fed news conference a green like 589 00:27:00,320 --> 00:27:02,800 Speaker 2: for so many of you to carry on buying equities, 590 00:27:02,800 --> 00:27:06,440 Speaker 2: your stock market at all time highs from New York. 591 00:27:06,800 --> 00:27:07,600 Speaker 3: This is Bloomberg