WEBVTT - Instant Reaction: Fed Chair Kevin Warsh's News Conference 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.160 --> 0:00:13.800 This is a breaking news update from Bloomberg instant reaction 0:00:14.080 --> 0:00:17.919 and analysis from our three thousand journalists and analysts around 0:00:17.960 --> 0:00:18.439 the world. 0:00:20.000 --> 0:00:21.680 I'm going to start with a quote from a lay 0:00:21.720 --> 0:00:24.600 fed chair This one from Anna Greenspan. 0:00:25.079 --> 0:00:27.080 I know you think you understand. 0:00:26.560 --> 0:00:28.240 What you thought I said, but I'm not sure you 0:00:28.320 --> 0:00:31.080 realize that what you heard is not what I meant. 0:00:31.160 --> 0:00:33.600 I don't think anyone really understood much the last forty 0:00:33.600 --> 0:00:35.600 five minutes in the market right now, still trying to 0:00:35.600 --> 0:00:38.400 figure it out. The chairman talked about this market move 0:00:38.440 --> 0:00:41.680 we've seen in between meetings. This market is playing the 0:00:41.760 --> 0:00:44.080 ball and not the referee. Take a listen. 0:00:45.720 --> 0:00:50.720 Nominal and real yields are materially higher across the treasury curve. 0:00:51.800 --> 0:00:54.960 In fact, some of the increases in market interest rates 0:00:55.480 --> 0:00:59.720 between FMC meetings are among the most significant in the 0:00:59.800 --> 0:01:03.440 last last two decades. In the inter meeting period, market 0:01:03.480 --> 0:01:09.440 attention centered on real data and real economic developments. Prices 0:01:09.520 --> 0:01:14.720 reacted in real time to incoming information, and the reduction 0:01:15.000 --> 0:01:19.720 in forward guidance may have been a factor. Market participants 0:01:19.720 --> 0:01:23.360 are learning to play the ball, not the referee, and 0:01:23.480 --> 0:01:27.800 market prices will continue to respond in the direction and 0:01:27.920 --> 0:01:29.440 magnitude they see fit. 0:01:30.440 --> 0:01:33.400 So it's the FED chair outsourcing monetment policy to the market. 0:01:33.800 --> 0:01:36.160 And if it is, is this market starting to wonder 0:01:36.160 --> 0:01:39.080 whether this FED will actually follow through the most important 0:01:39.080 --> 0:01:41.840 part of this move today in this market, crossessor is 0:01:41.880 --> 0:01:42.760 in the bond market. 0:01:42.880 --> 0:01:43.360 Check this out. 0:01:43.440 --> 0:01:46.880 Look at the yield curve two year yields questioning whether 0:01:46.920 --> 0:01:49.760 this FED will actually follow through on an interest rate 0:01:49.800 --> 0:01:52.520 high yields dropping at the front end by six basis points, 0:01:52.560 --> 0:01:56.560 and with that questioning the conviction to actually do something 0:01:56.880 --> 0:02:00.240 about the inflation that the chairman is telling you they 0:02:00.280 --> 0:02:02.720 will do something about. Look at the longer end of 0:02:02.760 --> 0:02:06.640 the yield curve, thirties untethered yields up by seven basis 0:02:06.640 --> 0:02:10.600 points five p. Sixteen on thirties, Lisa, that's an interesting 0:02:10.680 --> 0:02:13.520 market reaction to a FED share that for many was 0:02:13.560 --> 0:02:15.560 confusing over the past forty five minutes. 0:02:15.840 --> 0:02:19.440 Frankly, he came out said that he was really happy 0:02:19.440 --> 0:02:21.679 to have the input of the market, but he wasn't 0:02:21.760 --> 0:02:24.880 outsourcing the Fed's decision to the market. He talked about 0:02:24.880 --> 0:02:27.720 these four goals, these deep questions that we talk about 0:02:27.760 --> 0:02:30.960 every single day, but gave no conclusion as to direction. 0:02:31.040 --> 0:02:33.600 You talked about a divided committee as not divided but 0:02:33.760 --> 0:02:36.280 united in a determination to bring down inflation, and this 0:02:36.360 --> 0:02:39.079 market said, you know what, we're going to call bs 0:02:39.080 --> 0:02:40.840 on this, and you're not going to hike rates and 0:02:40.840 --> 0:02:42.360 you're going to try to job on us, and you 0:02:42.400 --> 0:02:43.840 think that we're going to do the job for you, 0:02:44.040 --> 0:02:45.280 and so they're calling the bluff. 0:02:45.360 --> 0:02:48.880 I would like us to extend the show to five PM. Frankly, John, 0:02:48.960 --> 0:02:52.799 I know you got early hours tomorrow morning, but that 0:02:52.960 --> 0:02:55.920 was in historic press conference. There was all sorts of 0:02:55.960 --> 0:02:58.799 little tidbits there, and we've got wonderful guests to talk 0:02:58.840 --> 0:03:03.080 to about this, but every sense of that was radically 0:03:03.080 --> 0:03:05.320 different than anything we've seen in recent. 0:03:05.200 --> 0:03:07.320 And allow me to quote another central banker, and this 0:03:07.520 --> 0:03:10.560 is the FED governor on the board right now, Chris Waller, 0:03:11.040 --> 0:03:14.640 going into the quiet period, he made this statement, Stanley's 0:03:14.639 --> 0:03:17.640 staring at inflation until it mounts before our withering gaze 0:03:18.160 --> 0:03:21.400 is not an option, Bramo, Is it an option? 0:03:21.919 --> 0:03:25.400 So what I love from Renaissance and Macro from Neil 0:03:25.440 --> 0:03:28.800 Duddy came over and he said, worsh judgment is this 0:03:28.840 --> 0:03:31.239 is a period of watchful thinking. So I guess the 0:03:31.280 --> 0:03:35.040 withering gaze is an option. Because ultimately, Kevin worsh could 0:03:35.080 --> 0:03:37.520 not answer the question, if you still believe that inflation 0:03:37.640 --> 0:03:39.960 is a problem, why did you not hike today? He 0:03:40.000 --> 0:03:42.600 could not answer that question, what would make you hike? 0:03:42.920 --> 0:03:43.800 Reaction function? 0:03:44.080 --> 0:03:47.480 Reaction function is just guidance, is just a prediction hidden 0:03:47.520 --> 0:03:47.760 in that? 0:03:47.920 --> 0:03:48.560 Is that true? 0:03:48.680 --> 0:03:50.840 No, it's an understanding of which data and what can 0:03:50.880 --> 0:03:53.680 potentially make you pull the trigger. What I also think 0:03:53.800 --> 0:03:56.520 was interesting he kept saying that the market is a 0:03:56.520 --> 0:03:59.840 pure input into what the market believes, that the data 0:04:00.120 --> 0:04:03.080 showing us no. And Neildta points this out too. It 0:04:03.120 --> 0:04:05.680 was a reaction to Fed speeches. They were indicating they 0:04:05.720 --> 0:04:08.720 were moving any more hawkish direction. This is very difficult 0:04:08.720 --> 0:04:10.480 to say that this market is just playing the ball 0:04:10.480 --> 0:04:11.280 and not the referee. 0:04:11.360 --> 0:04:12.040 Three descents. 0:04:12.200 --> 0:04:15.360 At this Federal Reserve meeting, Race kept unchanged the confusing 0:04:15.400 --> 0:04:18.200 news conference for the past forty five minutes. Bramo, did 0:04:18.200 --> 0:04:18.680 you nail it? 0:04:19.040 --> 0:04:22.920 I missed and missed by twenty seconds. I believe no, no, no, 0:04:23.000 --> 0:04:24.560 by by seventeenth. 0:04:24.720 --> 0:04:26.560 On how much this news conference would last, I came 0:04:26.600 --> 0:04:27.360 pretty close. 0:04:27.320 --> 0:04:28.400 Forty five thirty two. 0:04:28.440 --> 0:04:31.120 It was a forty five play the Ball from Caddyshack. 0:04:32.320 --> 0:04:34.920 You're not sure where that quote is from? Play the Ball, 0:04:35.000 --> 0:04:37.680 not the referee? Wow, Like, well, no, I think so, 0:04:38.040 --> 0:04:39.600 from the world. Yeah, I think so. 0:04:39.600 --> 0:04:40.360 It was from the rural. 0:04:40.880 --> 0:04:41.640 Okay, all right? 0:04:41.640 --> 0:04:41.760 Two? 0:04:41.800 --> 0:04:44.000 Your yearlds down by seven basis points. Stopped to running 0:04:44.040 --> 0:04:46.520 the program Towston's Slock of Apolo where it's around the 0:04:46.520 --> 0:04:49.640 table Tilston, Good afternoon, for a big challenge for you, buddy. 0:04:49.960 --> 0:04:52.480 First up, translate the last forty five minutes. What did 0:04:52.480 --> 0:04:52.839 your land? 0:04:52.960 --> 0:04:55.360 Well, the first observation is that pol action you also 0:04:55.440 --> 0:04:57.240 had three descents in April, and you also have three 0:04:57.240 --> 0:05:00.360 descents in December, so having descents is not unusual. That's 0:05:00.400 --> 0:05:02.240 not a watsht thing. We also had that on the Powell. 0:05:02.640 --> 0:05:05.640 But that being said, there's very little to hang your 0:05:05.680 --> 0:05:08.400 hat on in the market. We didn't get any guidance 0:05:08.400 --> 0:05:10.200 in any direction, and it was also a little bit 0:05:10.240 --> 0:05:12.919 complicated to figure out what was the basis for the 0:05:12.960 --> 0:05:16.560 decision today, in the sense of when Mike McKee asked, well, 0:05:16.720 --> 0:05:18.880 what are we waiting for? We didn't get a clear 0:05:18.920 --> 0:05:20.800 answer for what exactly are we waiting for? Which was 0:05:20.800 --> 0:05:22.480 of course, was a subtle way to try to get 0:05:22.560 --> 0:05:23.520 some forward guidance. 0:05:23.760 --> 0:05:25.560 But this is the part of the challenge. 0:05:25.600 --> 0:05:28.480 We're not delivering forward guidance that when Mike and others 0:05:28.520 --> 0:05:31.320 ask about what is it that you're watching, what exactly 0:05:31.360 --> 0:05:34.280 should we be watching, then the answer is that we're 0:05:34.279 --> 0:05:36.240 not really giving any guidance and the market can figure 0:05:36.279 --> 0:05:36.840 it out on their own. 0:05:36.960 --> 0:05:38.760 The price for that is volatility, and you could see 0:05:38.800 --> 0:05:40.840 that in the swing in the market over the last 0:05:40.880 --> 0:05:43.680 hour or so. Equities were positive, if they turned negative again, 0:05:43.880 --> 0:05:45.760 bring up the bondboard if we can, and just look 0:05:45.800 --> 0:05:48.440 at twos, tens, and thirties. This move in the yield 0:05:48.480 --> 0:05:50.320 curve toss And I'd love to get your reaction to this, 0:05:50.360 --> 0:05:53.239 because you were watching this closely throughout the news conference, 0:05:53.279 --> 0:05:55.480 this move of the front end and how it informs 0:05:55.480 --> 0:05:57.400 this move at the long end of the curve. 0:05:57.800 --> 0:06:00.200 Well, what was interesting was that tenure rates really went 0:06:00.279 --> 0:06:02.400 up and down like a yo yo better part of 0:06:02.400 --> 0:06:02.960 the conference. 0:06:03.200 --> 0:06:04.279 That's a little bit unusual. 0:06:04.320 --> 0:06:06.600 Normally ten ure rates take a step either up or 0:06:06.600 --> 0:06:09.120 down as we move forward in the press conference. But 0:06:09.200 --> 0:06:11.160 the fact that there was such a swing it is 0:06:11.200 --> 0:06:13.400 also telling you that markets are trying to figure out 0:06:13.760 --> 0:06:15.840 are they hiking at the next meeting. So yes, from 0:06:15.920 --> 0:06:17.840 Futures are saying now there's a seventy percent chance that 0:06:17.839 --> 0:06:19.520 they will hike at the next meeting. But what was 0:06:19.520 --> 0:06:23.120 also the interesting question is when he was asked about, well, 0:06:23.200 --> 0:06:25.880 if markets are not predicting, say eighty percent ninety percent 0:06:25.920 --> 0:06:27.440 chance of a hike going into a meeting, are you 0:06:27.480 --> 0:06:29.640 going to deliver on that, And the answer was no, 0:06:29.680 --> 0:06:31.440 we're not going to deliver on that. It will all 0:06:31.480 --> 0:06:33.760 be contingent on the debate that we're having, and markets 0:06:33.800 --> 0:06:36.080 may be pricing what they're pricing, but we're still going 0:06:36.120 --> 0:06:37.680 to go with just what the committee is thinking. So 0:06:37.680 --> 0:06:40.760 in that sense, the market pricing in some sense is helpful. 0:06:41.000 --> 0:06:43.000 But at the same time, we in markets can't really 0:06:43.040 --> 0:06:45.640 even rely on that if pictations are saying we're getting 0:06:45.640 --> 0:06:47.480 a hike at the next meeting, that we are actually 0:06:47.480 --> 0:06:48.000 getting a hike. 0:06:48.279 --> 0:06:50.920 What this market is saying right now is that he's bluffing, 0:06:51.040 --> 0:06:52.440 because if you take a look at it, it was 0:06:52.520 --> 0:06:54.840 seventy percent chance of a September rate hike. Now it's 0:06:54.880 --> 0:06:57.760 fifty percent chance of a September rate hike, and dropping 0:06:57.800 --> 0:06:59.839 in real time. How much do you view the thirty 0:07:00.200 --> 0:07:02.640 is the real tell in terms of what the market 0:07:02.680 --> 0:07:05.080 is taking from this fad, which is potentially you're not 0:07:05.120 --> 0:07:06.440 going to hike rates and you're going to hope that 0:07:06.480 --> 0:07:07.440 job owning is just going to. 0:07:07.400 --> 0:07:07.720 Do the job. 0:07:07.800 --> 0:07:10.080 Yeah, because thirty r rates are basically saying, if you're 0:07:10.080 --> 0:07:12.560 not hiding rates, then we are hiking rates. And that's 0:07:12.600 --> 0:07:14.280 why thirty hour rates have just made it much more 0:07:14.280 --> 0:07:16.400 expensive to borrow to buy a house. And as a 0:07:16.440 --> 0:07:19.400 result of that, financial conditions are tightening. And he didn't 0:07:19.400 --> 0:07:21.720 tighten financial conditions, but the market decided to say, well, 0:07:21.760 --> 0:07:23.280 then we think it's time to tighten financial And. 0:07:23.320 --> 0:07:24.920 John, I know you've got a question. The key thing 0:07:25.080 --> 0:07:27.320 to meet John is thirty yr rates. Five twenty is 0:07:27.360 --> 0:07:30.480 a key print. We're at five seventeen. Five twenty is 0:07:30.480 --> 0:07:31.520 an OMG print. 0:07:31.680 --> 0:07:34.480 The price of volatility is that what we're learning, the 0:07:34.520 --> 0:07:40.800 price of reducing guidance, reducing communication, being very very unclear 0:07:40.840 --> 0:07:42.760 about what on earth they're going to do with policy, 0:07:42.760 --> 0:07:44.640 and we pin the price this morning, in this afternoon. 0:07:44.960 --> 0:07:47.480 But that's why the task forces will be very very 0:07:47.480 --> 0:07:50.480 interesting because they will certainly also on their communication task force. 0:07:50.520 --> 0:07:53.120 They will have to discuss what is the best approach. 0:07:53.440 --> 0:07:55.560 Is it the best approach to have no forward guidance? 0:07:55.600 --> 0:07:57.480 Is it a better approach to have forward guidance. If 0:07:57.560 --> 0:07:59.760 you do not have forward guidance, you do have more volatility. 0:08:00.040 --> 0:08:03.680 But in fairness to Kevin Watsh's point, it did say that, well, 0:08:03.720 --> 0:08:06.560 when we don't say anything, Margat's reacting to the data 0:08:06.560 --> 0:08:08.880 as we go along. But the risk, of course is 0:08:08.920 --> 0:08:11.600 that if de marget is only reacting to some data, 0:08:11.680 --> 0:08:13.760 that then also needs to be resolved in the task 0:08:13.800 --> 0:08:16.280 force on communication, namely, is that the right way to 0:08:16.280 --> 0:08:18.280 do it because it runs the risk, as you're saying, John, 0:08:18.400 --> 0:08:19.440 that you will get had mobile. 0:08:19.480 --> 0:08:21.240 It's Citizy Turist's thrilled. 0:08:20.960 --> 0:08:23.760 To have you here with this really odd press conference. 0:08:24.000 --> 0:08:26.000 There was a bombshell in there where he went back 0:08:26.080 --> 0:08:29.080 to twenty fourteen and a paper he did on the 0:08:29.160 --> 0:08:32.000 Lucas critique. It's just slipped in there for a second, 0:08:32.480 --> 0:08:37.280 but to academic economists that is a bombshell. What he said, 0:08:37.559 --> 0:08:41.360 and what he's basically saying is the distrust that Robert Lucas, 0:08:41.400 --> 0:08:44.880 the laureate had of models. Are we you know, I 0:08:44.920 --> 0:08:47.880 think I Claudia, Sam Lisa, you mentioned this earlier, the 0:08:48.040 --> 0:08:52.360 idea of reaction functions. Is this a new almost model 0:08:52.640 --> 0:08:56.920 free federal reserve away to Lucas and even away from 0:08:56.960 --> 0:08:58.360 the giant Olivia Blanchard. 0:08:58.640 --> 0:09:01.120 It does lean into the Chicago stand for a school 0:09:01.160 --> 0:09:04.280 of thinking Nami that when you have a policy that 0:09:04.360 --> 0:09:07.600 you're changing, you should not run regressions and look historically 0:09:07.640 --> 0:09:09.319 at the data up to where we are now, because 0:09:09.360 --> 0:09:11.440 the change in the policy is going to change how 0:09:11.480 --> 0:09:12.720 people say a new model. 0:09:12.800 --> 0:09:15.000 Then is there a new fresh Worsh model we need 0:09:15.080 --> 0:09:15.560 to discover? 0:09:15.840 --> 0:09:18.000 Yeah, because I think he's saying that you can't just 0:09:18.080 --> 0:09:20.280 look at all the models that look back, because when 0:09:20.320 --> 0:09:23.360 we are now changing policy, then forward looking people are 0:09:23.360 --> 0:09:24.200 going to change behavior. 0:09:24.200 --> 0:09:26.360 And how do you determine an inflation rate? A process? 0:09:26.480 --> 0:09:30.120 If you take dsge Richard Claire to Girdler Brown, if 0:09:30.160 --> 0:09:32.439 you take the mathematics of that, throw it out the 0:09:32.480 --> 0:09:35.480 window for this show. But the bottom line is inflation 0:09:35.679 --> 0:09:38.680 is the measurement we use. How will we measure inflation 0:09:39.240 --> 0:09:41.240 with a new Worsh Lucas model? 0:09:41.320 --> 0:09:42.400 But that's exactly right, Tom. 0:09:42.440 --> 0:09:44.760 That's why if you don't have the models that look 0:09:44.800 --> 0:09:47.480 at the latest data, then what are you then looking at? 0:09:47.600 --> 0:09:50.320 What are you then relying on for forecasting what inflation 0:09:50.360 --> 0:09:52.160 will do going forward? So in other ways, if I'm 0:09:52.160 --> 0:09:54.199 not allowed to look backwards and say this is where 0:09:54.240 --> 0:09:56.400 the data is coming from, and the trend is whatever, 0:09:56.480 --> 0:09:58.600 this or that, well, then what am I then. 0:09:58.880 --> 0:09:59.920 Using as the guidepost? 0:10:00.000 --> 0:10:02.120 I was thinking about what inflation will do going forward? 0:10:02.760 --> 0:10:06.240 Basis point move on thirties there it is well most 0:10:06.320 --> 0:10:09.840 time by eleven basis points and closing in on five nineteen. 0:10:10.200 --> 0:10:12.160 I'm thinking of all the people that would be unhappy 0:10:12.240 --> 0:10:14.640 with this news conference in the last sixty minutes. Forget 0:10:14.760 --> 0:10:18.079 market participants. Imagine being at the Treasury right now and 0:10:18.160 --> 0:10:21.120 you're Scott Besson and you're seeing yields go higher on tens, 0:10:21.480 --> 0:10:24.719 materially higher on thirties. And then I'm thinking about the 0:10:24.800 --> 0:10:28.240 others on the committee. I'm not an establishment guy. I'm 0:10:28.360 --> 0:10:30.400 very very happy to blow things up and have a 0:10:30.480 --> 0:10:32.959 new era. I've got no problem with that. I'm open 0:10:33.000 --> 0:10:36.199 to new ideas. But I just wonder how offended some 0:10:36.360 --> 0:10:40.000 of the sitting officials might be by how patronizing much 0:10:40.040 --> 0:10:42.920 of that news conference was over the last sixty minutes. 0:10:43.320 --> 0:10:45.679 Well, it's clear that the sitting committee that he came 0:10:45.720 --> 0:10:48.559 into had already thought about basically all areas of the 0:10:48.640 --> 0:10:49.600 task forces before. 0:10:49.920 --> 0:10:51.439 So it's clear that the market. 0:10:51.200 --> 0:10:54.120 Here is saying, well, if we now are getting a 0:10:54.240 --> 0:10:56.560 day with a no hike, well then the long end 0:10:56.600 --> 0:10:59.040 of course is moving, basically telling you that, well, this 0:10:59.160 --> 0:11:01.640 is all about credibilite. Are you really going to follow 0:11:01.679 --> 0:11:03.719 through on inflation? And that's of course the thing that 0:11:03.760 --> 0:11:06.000 THEFMC needs to go home and think about. Now. The 0:11:06.120 --> 0:11:08.559 market reaction speaks very clearly that now we need to 0:11:08.559 --> 0:11:11.080 talk about what is the credibility of the committee because 0:11:11.240 --> 0:11:12.240 it cannot only be talk. 0:11:12.520 --> 0:11:14.079 You will eventually have to follow through. 0:11:14.120 --> 0:11:16.800 And that's why the probability, given this market reaction now 0:11:17.160 --> 0:11:19.199 has gone up quite significantly that they will have to 0:11:19.320 --> 0:11:20.320 move at the next meeting. 0:11:20.440 --> 0:11:21.640 But this is really important. 0:11:21.679 --> 0:11:23.800 In other words, you're saying that the reaction the long 0:11:23.840 --> 0:11:25.840 en of the yield curve has a challenge the credibility 0:11:25.880 --> 0:11:27.800 of this federal reserve and will force their hand that 0:11:27.880 --> 0:11:30.280 if they do not hike grate since September, you will 0:11:30.320 --> 0:11:33.440 see some sort of unmooring of long term yields. 0:11:33.559 --> 0:11:35.800 Yeah, because The risk is if you keep on just 0:11:35.880 --> 0:11:39.000 talking tough, tough, tough, and therefore markets end up saying, well, 0:11:39.000 --> 0:11:40.600 this is just a lot of talk and you don't 0:11:40.640 --> 0:11:43.120 deliver on that tough talk. The risk is of course 0:11:43.160 --> 0:11:44.959 that the long end will say, well, if you don't deliver, 0:11:45.240 --> 0:11:47.560 we worry that you implicity allow inflation to be higher 0:11:47.640 --> 0:11:50.160 despite the talk about not allowing inflations to be higher, 0:11:50.320 --> 0:11:53.040 and that is indeed a question about the ultimate credibility. 0:11:53.400 --> 0:11:55.439 Is the committee ready to vote next time? 0:11:55.520 --> 0:11:58.040 This was not only Kevin wash This was nine members 0:11:58.200 --> 0:12:00.920 who voted to keep interest rates at this meeting. So 0:12:01.040 --> 0:12:03.120 at the next meeting many of them must look at 0:12:03.160 --> 0:12:05.319 the reactions today and come to the conclusion, if we 0:12:05.440 --> 0:12:08.240 want to keep our curitybigency, we do have to move 0:12:08.440 --> 0:12:11.079 to make sure that inflation comes down and therefore ultimately 0:12:11.160 --> 0:12:12.480 long rates also begin to go down. 0:12:12.559 --> 0:12:14.680 Michael McKay was in the room. Our colleague joins us 0:12:14.679 --> 0:12:17.160 snap for more from Washington, d C. Michael McKay, we'd 0:12:17.200 --> 0:12:19.079 love your review of the last sixty minutes. What's the 0:12:19.120 --> 0:12:19.440 big tank? 0:12:19.520 --> 0:12:19.760 Kawai? 0:12:20.640 --> 0:12:22.560 I think it's very similar to yours. A lot of words, 0:12:22.880 --> 0:12:26.480 not much information, and the FED chair leaves with markets 0:12:26.720 --> 0:12:29.280 probably going the wrong way from what he would like 0:12:29.400 --> 0:12:32.880 to see at this point. The thing he wouldn't answer 0:12:33.200 --> 0:12:35.959 is what they actually did today. He talked a lot 0:12:36.000 --> 0:12:39.280 about talking, but when are they actually going to do something, 0:12:39.760 --> 0:12:43.320 whether it is acknowledging that the three and a half 0:12:43.400 --> 0:12:47.679 to three seven five rate range is adequate for the 0:12:47.840 --> 0:12:50.719 job they want, or it's not and they need to 0:12:51.000 --> 0:12:54.199 raise interest rates, And there was no acknowledgment of what 0:12:54.360 --> 0:12:56.760 the case was really on either side. It was a 0:12:56.800 --> 0:13:00.240 lot of talk about while we're talking, and that don't 0:13:00.280 --> 0:13:02.280 get the markets anywhere, and people aren't going to be 0:13:02.440 --> 0:13:03.680 very happy with what they heard. 0:13:03.720 --> 0:13:06.120 I think, Mike, there was an interesting exchange and you 0:13:06.240 --> 0:13:08.600 were part of it too when he was asked why 0:13:08.640 --> 0:13:10.880 didn't you raise interest rates and he basically said, well, 0:13:11.480 --> 0:13:13.760 I think rates did rise, and he talked about the 0:13:13.840 --> 0:13:16.240 move in the last forty two days, and Mike, rates 0:13:16.360 --> 0:13:19.240 rose because for many people they thought this FED might 0:13:19.320 --> 0:13:22.480 follow through on the data that we've been seeing over 0:13:22.559 --> 0:13:26.199 the subsequent few weeks, follow through on some of the 0:13:26.280 --> 0:13:28.520 FED speak that we'd seen from the likes of Walla, 0:13:28.600 --> 0:13:30.800 the likes of Hammack and others too, and Mike and 0:13:30.880 --> 0:13:32.920 then it got to this moment where I just thought, Okay, 0:13:33.440 --> 0:13:35.840 is the FED share outsource in monetary policy to the market, 0:13:36.360 --> 0:13:38.120 And if he is, but I don't think he's going 0:13:38.160 --> 0:13:40.640 to hike interest rates. We'll take all that back and Mike, 0:13:40.720 --> 0:13:42.160 then we see this move in the bond market, and 0:13:42.200 --> 0:13:43.360 I don't want to have made too much of a 0:13:43.400 --> 0:13:44.840 big deal of this move. We can take it back 0:13:44.880 --> 0:13:47.760 tomorrow and the next week or so, but it's material. 0:13:47.880 --> 0:13:49.679 You're up eleven basis points at the long end of 0:13:49.679 --> 0:13:51.880 the curve on thirties. And Mike, the conversation we're having 0:13:51.880 --> 0:13:55.080 around the table, do you believe that is a market 0:13:55.160 --> 0:13:58.080 beginning to question the credibility of this institution. 0:14:00.000 --> 0:14:02.040 I don't know if that's necessarily true because it's still 0:14:02.160 --> 0:14:07.079 so early in his chairmanship, but it is an indication 0:14:07.520 --> 0:14:10.080 that the market disagrees with what the FED is doing. 0:14:10.200 --> 0:14:12.920 The market thinks at this point that interest rates should 0:14:12.960 --> 0:14:16.839 be higher. And whether or not you believe it's because 0:14:16.880 --> 0:14:21.120 they're only looking at the data, it is telling the 0:14:21.200 --> 0:14:22.480 market something that data. 0:14:22.960 --> 0:14:25.200 I suspect that the markets are still. 0:14:25.000 --> 0:14:28.000 Looking at the data and putting it in context of, well, 0:14:28.040 --> 0:14:29.040 what's the FED going to do? 0:14:29.120 --> 0:14:29.440 About it. 0:14:29.520 --> 0:14:33.320 Because the FED controls the benchmark lending rate for the country. 0:14:33.440 --> 0:14:36.480 The markets don't. The markets react, the markets move around, 0:14:36.960 --> 0:14:38.480 but the benchmark rate is going to be set by 0:14:38.480 --> 0:14:40.640 the Fed, and the Fed is going to be reacting 0:14:40.760 --> 0:14:43.400 to the conditions in the economy. And we got nothing 0:14:43.480 --> 0:14:46.040 on what he thought the conditions in the economy are 0:14:46.320 --> 0:14:50.080 or would be. And we got nothing basically on why 0:14:50.200 --> 0:14:53.480 the markets might be right or wrong and whether that's 0:14:53.720 --> 0:14:59.080 an adequate response, an adequate measure to keep inflation under control. 0:14:59.440 --> 0:14:59.920 Thank you about it. 0:15:00.040 --> 0:15:02.640 These comments from the president certainly want how so, we've 0:15:02.680 --> 0:15:04.760 got the White House review of things they've just published. 0:15:04.800 --> 0:15:08.040 This is from the president. Kevin Walsh is fantastic. Wash 0:15:08.120 --> 0:15:11.000 has a board. It's a political one. Wassh would love 0:15:11.080 --> 0:15:14.760 to see lower interest rates. Given the move we're seeing 0:15:14.800 --> 0:15:17.680 on the screen right now, thirty yields up by eleven 0:15:17.760 --> 0:15:21.560 basis points. Those comments from the President this afternoon will 0:15:21.640 --> 0:15:22.000 not help. 0:15:22.280 --> 0:15:24.440 Thirty year yields have just broken through the highest levels 0:15:24.480 --> 0:15:26.440 going back to two thousand and seven. Just to give 0:15:26.440 --> 0:15:28.760 you a sense right now of the bond vigilanteism that 0:15:28.800 --> 0:15:31.440 you're seeing in bond markets, because they are seeing a 0:15:31.560 --> 0:15:36.160 more potentially politically motivated, not necessarily that being the case, 0:15:36.560 --> 0:15:40.280 but given the lack of clarity, a lot of circular talk, 0:15:40.960 --> 0:15:43.880 the lack of any kind of straight answers about reaction function, 0:15:44.000 --> 0:15:46.360 are exactly why they remained on hold. And then the 0:15:46.640 --> 0:15:49.400 president's comments are not a good brew. 0:15:49.320 --> 0:15:51.400 For this particular lime Attol and Bremo to your point, 0:15:51.440 --> 0:15:53.080 I think we're both on the same page about this. 0:15:53.680 --> 0:15:56.160 I don't believe that Kevin Wassh is doing the president's 0:15:56.160 --> 0:15:59.960 bidding right now. He's widely backed by several establishment figures 0:16:00.000 --> 0:16:01.640 when he got the nomination for this job. 0:16:01.920 --> 0:16:02.680 I'm thinking of one. 0:16:02.720 --> 0:16:05.360 I can't think of anyone more establishment than Mark Calmy, 0:16:05.800 --> 0:16:09.120 the Canadian Prime minister, who gave him a pretty fantastic 0:16:09.280 --> 0:16:11.880 endorsement when he got selected for the position. I don't 0:16:11.880 --> 0:16:14.000 think he's doing the president's bidding, but the optics of 0:16:14.040 --> 0:16:17.600 it absolutely stink. When you have a problem with inflation 0:16:17.720 --> 0:16:19.920 and you're saying you're committed to doing something about it, 0:16:20.000 --> 0:16:22.120 but don't follow through and then highlight the market that's 0:16:22.160 --> 0:16:24.240 doing the work for you, and now the market is 0:16:24.280 --> 0:16:25.880 beginning to push back, and at the same time, the 0:16:25.960 --> 0:16:28.840 President's putting out words saying that this is actually what 0:16:29.000 --> 0:16:29.880 Kevin Wassh wants. 0:16:29.960 --> 0:16:32.680 The optics of that, the backdrop for it not. 0:16:32.760 --> 0:16:35.080 A good one, and conflicting the idea of a FED 0:16:35.160 --> 0:16:38.280 funds rate with the market rate, and saying that there 0:16:38.360 --> 0:16:40.600 was something that happened and that we have done something 0:16:40.680 --> 0:16:43.920 because that moved the market, saying we're not that silly, 0:16:44.080 --> 0:16:45.480 we're not that ignorant. 0:16:45.680 --> 0:16:46.680 We know how this is done. 0:16:46.720 --> 0:16:50.320 It was an anticipatory It was an anticipatory market and 0:16:50.360 --> 0:16:51.880 if you're not going to make good on that, we're 0:16:51.920 --> 0:16:52.800 going to call your bluff. 0:16:53.320 --> 0:16:55.840 Jen, this is an historic more. But the charts I'm 0:16:55.880 --> 0:16:57.920 seeing on the screen right now, John, I've never seen 0:16:58.000 --> 0:17:01.320 this is basically was called a rever vers operation twist 0:17:01.480 --> 0:17:04.640 in real time. We've never seen it in what's key here? 0:17:05.040 --> 0:17:07.680 Which tourist and I know you've got Stephanie Roth and Deeck. 0:17:08.119 --> 0:17:11.119 The first and second derivatives of this move have to 0:17:11.200 --> 0:17:15.920 be digested by a huge body of the American economy. 0:17:16.119 --> 0:17:19.400