WEBVTT - Instant Reaction: Jay Powell on the Fed Decision 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.200 --> 0:00:12.080 This is a breaking news update from Bloomberg. 0:00:12.880 --> 0:00:16.880 Instant reaction and analysis from our three thousand journalists and 0:00:16.920 --> 0:00:18.919 analysts around the world. 0:00:19.320 --> 0:00:21.520 The Chairman of the Federal Reserve wrapping up the main 0:00:21.520 --> 0:00:24.160 news conference, depressed, doing their best to make that interesting. 0:00:24.520 --> 0:00:26.560 The Chairman doing his best to make it boring, and 0:00:26.600 --> 0:00:29.200 I think he was fairly successful. Your equity market this 0:00:29.240 --> 0:00:31.720 afternoon looks like this equity is positive by just a 0:00:31.800 --> 0:00:33.680 tenth of one percent on the S and P five 0:00:33.760 --> 0:00:36.199 hundred in the bond market on a two year, ten year, 0:00:36.240 --> 0:00:38.000 thirty year we look like this on a ten year 0:00:38.040 --> 0:00:40.640 maturity yield to lower by a single basis point four 0:00:40.720 --> 0:00:43.600 twenty seven ninety one. The risks have risen, the risks 0:00:43.600 --> 0:00:46.519 have not materialized. The feted chair Jaypouse, says, we're well 0:00:46.560 --> 0:00:47.720 positioned to wait. 0:00:49.680 --> 0:00:51.160 We don't think we need to be in a hurry. 0:00:51.200 --> 0:00:52.839 We think we can be patient. We're in a good 0:00:52.840 --> 0:00:54.880 position to wait and see is the thing. We don't 0:00:54.920 --> 0:00:57.200 have to be in a hurry. The economy has been 0:00:57.240 --> 0:01:00.440 resilient and is doing fairly well. Our policies wills the 0:01:00.480 --> 0:01:04.839 costs of waiting to see further are fairly low. 0:01:05.120 --> 0:01:07.280 So they aren't going to wait, wait to see the 0:01:07.319 --> 0:01:10.000 outcome of trade talks between the United States and China, 0:01:10.080 --> 0:01:13.039 wait to see if this economy breaks one way or 0:01:13.040 --> 0:01:13.319 the other. 0:01:13.440 --> 0:01:15.080 Why don't you just read moby Dick for an hour 0:01:15.080 --> 0:01:16.480 and a half. I mean, honestly, if you want to 0:01:16.480 --> 0:01:18.319 know if the how the Fed looks when they fil abuster, 0:01:18.520 --> 0:01:21.640 this was it. Ultimately, I thought that line was interesting 0:01:21.880 --> 0:01:25.280 that the cost of waiting didn't seem that great. Some 0:01:25.319 --> 0:01:28.679 people Neil data might disagree with that, but this right 0:01:28.720 --> 0:01:30.639 now is their stance. It is in a good place, 0:01:30.720 --> 0:01:33.080 and they did not give any sense of exactly what 0:01:33.120 --> 0:01:35.840 it would do to tip their hand away from that. 0:01:35.959 --> 0:01:38.720 His speech at the Economic Club of Chicago, repeated in 0:01:38.760 --> 0:01:41.440 the news conference this time around. If current trade policy 0:01:41.480 --> 0:01:44.160 is sustained, it could mean high inflation. It could also 0:01:44.240 --> 0:01:47.720 mean lower growth. Our job. We have an obligation Tom 0:01:47.760 --> 0:01:49.960 to anchor inflation expectations. 0:01:50.080 --> 0:01:52.240 The obligation is there, and of course the reach out 0:01:52.320 --> 0:01:54.040 is to when will they do something. There's a lot 0:01:54.080 --> 0:01:55.760 of heat to debate, and Neil Dudda sent me a 0:01:55.800 --> 0:02:00.000 note here from Renaissance Macro. He's scathing is the only 0:02:00.160 --> 0:02:03.440 word I could come up with scathing about their delay here, 0:02:03.600 --> 0:02:05.800 as you mentioned Andrew Hollenhorst, with a view and then 0:02:05.800 --> 0:02:08.400 you go all the way out. Dare I say in 0:02:08.520 --> 0:02:12.080 the next year the dispersion here is right. I just 0:02:12.120 --> 0:02:13.680 want to point out that if you had read the 0:02:13.680 --> 0:02:15.200 cliff notes of Moby. 0:02:14.919 --> 0:02:17.160 Dick, I did a knowledge. 0:02:16.919 --> 0:02:18.040 They could have pulled it off. 0:02:19.120 --> 0:02:21.280 How much in the transitory this time around? Short lived 0:02:21.440 --> 0:02:23.560 or short lived? Yes, it's the new term for the 0:02:23.639 --> 0:02:24.639 chairman of the feder Reserve. 0:02:24.720 --> 0:02:26.400 Yeah, in the sense that they will get clarity as 0:02:26.480 --> 0:02:28.680 time goes on, and right now they have none, but 0:02:28.800 --> 0:02:31.480 it will be made apparent to them as things settle 0:02:31.600 --> 0:02:34.920 into place. This idea, though, that right now the economy 0:02:35.000 --> 0:02:37.960 is still relatively healthy, is one aspect that I think 0:02:38.320 --> 0:02:41.079 maybe is going to become challenging in a month's time. 0:02:41.200 --> 0:02:43.320 Let's get to the conversation joining us now they former 0:02:43.360 --> 0:02:46.040 New York Fed President Bill Duntley, Bill, thank you for 0:02:46.160 --> 0:02:49.120 joining us. They clearly face a range of risks, risks which, 0:02:49.120 --> 0:02:51.320 as the chairman says, have not yet materialized. Can you 0:02:51.360 --> 0:02:53.959 walk us through how you think they've responded to the 0:02:54.040 --> 0:02:55.680 risk they face and what you make of that news 0:02:55.680 --> 0:02:58.639 conference from Sham and Powell, I. 0:02:58.560 --> 0:03:01.440 Don't think the news chre surprising at all. I mean, 0:03:01.760 --> 0:03:03.920 the FED is not really sure where Terrists are going 0:03:03.960 --> 0:03:06.600 to land, which is important, and when they land, they're 0:03:06.600 --> 0:03:08.600 not really sure what the consequences are going to be 0:03:08.639 --> 0:03:11.920 on growth versus inflation, on which side they're going to 0:03:11.919 --> 0:03:15.720 miss their mandate by a greater degree. So I think 0:03:16.240 --> 0:03:18.600 I was expecting him to say something pretty similar to this, 0:03:19.080 --> 0:03:20.639 and if I was in issues, I would have done 0:03:20.720 --> 0:03:21.679 exactly the same thing. 0:03:22.000 --> 0:03:22.520 I thought the. 0:03:22.480 --> 0:03:25.240 Most notable line was the cost of waiting to see 0:03:25.560 --> 0:03:28.000 further data seem fairly low. 0:03:28.320 --> 0:03:29.280 Do you agree with that? 0:03:29.440 --> 0:03:32.160 Do you think that the cost is fairly low of 0:03:32.200 --> 0:03:34.560 simply being parked on the sidelines at a time where 0:03:34.560 --> 0:03:37.320 a lot of people think that there are signs of 0:03:37.360 --> 0:03:39.000 a rapidly slowing economy. 0:03:40.200 --> 0:03:42.600 Well, I think the costs are low relative to the 0:03:42.720 --> 0:03:44.880 risk of making a mistake. You know, Let's imagine that 0:03:44.880 --> 0:03:47.119 the FED cutting rates dramatically because they were worried about 0:03:47.160 --> 0:03:49.600 the labor market, and then it turned out that inflation 0:03:49.760 --> 0:03:53.080 expectations got unanchored and the labor market held up pretty well. 0:03:53.280 --> 0:03:55.880 That'd be a big mistake. And so the FED really 0:03:55.880 --> 0:03:58.320 wants to make sure that they don't go down that path. 0:03:58.360 --> 0:04:01.800 This is not just about the central scenario. It's also 0:04:01.800 --> 0:04:04.800 about risk management. Try not to do the wrong thing 0:04:05.480 --> 0:04:09.000 so that you can respond effectively as things actually unfold. 0:04:09.280 --> 0:04:11.600 So I think the fact that the ter policy is 0:04:11.640 --> 0:04:14.800 not set is important, and the fact that we don't 0:04:14.840 --> 0:04:17.400 have any experience with the tariffs shock of this magnitude 0:04:17.480 --> 0:04:20.320 is also important. So in that environment, it's sort of like, 0:04:20.400 --> 0:04:22.560 you know, the hippocrat, Oh, do no harm to your patient. 0:04:22.960 --> 0:04:25.480 Bill Dudley, part of your charm is you had a 0:04:25.560 --> 0:04:28.520 day job before the FED, job of actually trying to 0:04:28.680 --> 0:04:32.320 forecast out the economy. How would you frame that? Now 0:04:32.360 --> 0:04:34.880 you've got the luxury of not being at golden sacks. 0:04:35.400 --> 0:04:38.080 Can you look out one month? Can you look out 0:04:38.080 --> 0:04:42.560 two quarters? Can you model out a fancy McKelvey Dudley 0:04:43.320 --> 0:04:46.279 jewel out a year right now? I don't think you can. 0:04:47.240 --> 0:04:47.920 No, no way. 0:04:48.200 --> 0:04:49.520 I mean, I think the only thing we can say 0:04:49.600 --> 0:04:52.239 is that the economy, like Teerpaul said, is the economy 0:04:52.320 --> 0:04:54.200 right now it seems to still be in good shape. 0:04:54.240 --> 0:04:56.680 I think the most important thing I took away from 0:04:56.680 --> 0:04:58.800 the press conference that people should take on board is 0:04:58.800 --> 0:05:02.160 the fact that don't take the first quarter GDP at 0:05:02.160 --> 0:05:05.279 face value. The minus point three reading is all because 0:05:05.320 --> 0:05:09.719 of mismeasurements. It's basically, they counted imports a lot better 0:05:09.760 --> 0:05:12.800 than they counted inventories, so there was a big drag 0:05:12.839 --> 0:05:15.560 from imports that was not upset by a big accumulation 0:05:15.640 --> 0:05:19.040 of inventories and domestic private final sales, which he brought 0:05:19.080 --> 0:05:21.520 up repeatedly in the press conference, is really a much 0:05:21.560 --> 0:05:24.200 more representative measure of how the economy is doing, and 0:05:24.200 --> 0:05:25.839 it's doing just fine, rising. 0:05:25.600 --> 0:05:27.800 Three percent, So I think he can put the weight 0:05:27.800 --> 0:05:28.560 on the right things. 0:05:28.760 --> 0:05:30.839 I'd point out you on Olssius with a two percent 0:05:30.880 --> 0:05:35.360 statistic for this present quarter published I believe last weekend, 0:05:35.720 --> 0:05:39.800 Bill Dudley. How does a FED communicate given this mess 0:05:40.040 --> 0:05:43.840 that has been wrought? What do they do in speeches 0:05:43.880 --> 0:05:46.440 coming up? John and I were talking here as we 0:05:46.480 --> 0:05:50.760 are looking at psg Arsenal about Jackson Hole. How do 0:05:50.839 --> 0:05:54.240 they get to Jackson Hole and communicate to the nation. 0:05:55.680 --> 0:05:57.680 Well, you can only communicate to the extens that you 0:05:57.720 --> 0:06:00.960 actually know what's actually going on. So I think it's 0:06:01.120 --> 0:06:04.760 appropriate for the FED not to overpromise or imply that 0:06:04.800 --> 0:06:07.640 they have some crystal magic ball that allows them to 0:06:07.640 --> 0:06:11.440 see in the future when the future is actually ring cloudy. 0:06:11.760 --> 0:06:14.280 What I'm expecting at Jackson Hole, frankly, is the FED 0:06:14.320 --> 0:06:17.640 to talk about their Monitary Policy Framework review and wheel 0:06:17.720 --> 0:06:20.320 that out. And I thought some of the questions at 0:06:20.320 --> 0:06:23.160 the press combs and that were interesting were Paul admitted 0:06:23.200 --> 0:06:26.000 that maybe Quey could have been wrapped up a bit sooner. 0:06:27.360 --> 0:06:30.240 So I think they understand that there are some things 0:06:30.240 --> 0:06:32.280 that they can improve in the monetary Policy framework, and 0:06:32.320 --> 0:06:33.920 so I think that's going to be the most interesting 0:06:33.960 --> 0:06:35.240 outcome of Jackson Hall. 0:06:35.440 --> 0:06:35.680 Bill. 0:06:35.720 --> 0:06:37.559 We've spent a lot of time speaking of FED watches 0:06:37.600 --> 0:06:39.320 on Wall Street, and they've also had a similar thing 0:06:39.680 --> 0:06:42.320 that this time, because of the constraints they might have 0:06:42.400 --> 0:06:44.840 to wag late, they won't be able to act preemptively. 0:06:44.920 --> 0:06:47.200 And I guess it's important to understand his definition of 0:06:47.240 --> 0:06:49.760 being late, because there was this really interesting moment in 0:06:49.760 --> 0:06:51.480 the news conference, and I'd love your thoughts on it. 0:06:51.880 --> 0:06:54.719 He looked at the cutting that they did last year, 0:06:54.800 --> 0:06:57.839 one hundred basis points of rate reductions and said the 0:06:57.880 --> 0:07:00.599 FED was a little late to start cutting last year. 0:07:00.720 --> 0:07:03.080 Just what is the definition of late on the FMC. 0:07:05.040 --> 0:07:08.120 I think late is when you realize that the risk 0:07:08.240 --> 0:07:11.520 on one side of the mandate have become you have 0:07:11.600 --> 0:07:15.200 become very predominant. So if the fact is you're only 0:07:15.240 --> 0:07:18.720 cutting at that moment means that you're probably late because 0:07:18.880 --> 0:07:21.520 the risk have really accumulated on the employment side of 0:07:21.560 --> 0:07:23.280 the ledger. And that's what happened last summer, and the 0:07:23.360 --> 0:07:26.560 uneplayer went up pretty quickly, and the risk of the 0:07:26.600 --> 0:07:28.760 layer markets are of unwinding. 0:07:28.360 --> 0:07:30.720 In a bad way increased, and the Federal Reserve was 0:07:30.760 --> 0:07:33.480 pretty slow to get off the mark, and that's why 0:07:33.520 --> 0:07:37.120 they ultimately cut rates more quickly than they delayed, and 0:07:37.120 --> 0:07:39.040 then they cut more rates quickly than expected. 0:07:39.160 --> 0:07:41.360 I think that that caught John has did attention, and 0:07:41.360 --> 0:07:43.800 a caught mine as well, because some people disagreed and 0:07:43.800 --> 0:07:46.280 said maybe it was proactive in a way that led 0:07:46.360 --> 0:07:49.520 to the increase in longer term benchmark yields this idea 0:07:49.560 --> 0:07:52.800 that maybe actually there was more strength and expected in 0:07:52.920 --> 0:07:55.720 the underlying economy. I just wonder what that means going 0:07:55.760 --> 0:07:59.360 forward about that two percent inflation target. If we're still 0:07:59.400 --> 0:08:03.160 not back, if we did see something of affirming up 0:08:03.200 --> 0:08:05.360 of the labor market, and yet that still is the 0:08:05.400 --> 0:08:06.720 assessment from last year. 0:08:08.360 --> 0:08:10.560 Well, I think there's two things there's are irrelevant going on. 0:08:10.680 --> 0:08:13.480 Number One, the monitor policy may still not be as 0:08:13.520 --> 0:08:15.040 restrictive as the FED thinks. That is, I mean, the 0:08:15.080 --> 0:08:18.600 fact that the Commune's still doing okay with a resupposedly 0:08:18.800 --> 0:08:21.320 restrictive monitary policy in place, I think sort of. 0:08:21.640 --> 0:08:22.840 Is meaningful to at least to me. 0:08:24.560 --> 0:08:26.040 And the second thing I think is going on it's 0:08:26.120 --> 0:08:28.160 really important that people aren't putting up weight on is 0:08:28.640 --> 0:08:31.360 the labor force is going to grow much slower in 0:08:31.440 --> 0:08:33.640 twenty twenty five than it did in twenty twenty three 0:08:33.640 --> 0:08:36.280 and twenty twenty four. So the kind of payroll gains 0:08:36.320 --> 0:08:38.800 you need to keep the unemployed rates stable are much 0:08:38.880 --> 0:08:40.880 dramatically lower this year than last year. 0:08:41.000 --> 0:08:42.920 There is this question going forward of what kind of 0:08:42.920 --> 0:08:45.839 pain tolerance would this FED be willing to accept before 0:08:45.960 --> 0:08:47.920 they start to have the clarity that they need to 0:08:47.960 --> 0:08:50.760 actually make a move. We were talking with Rich Clarita 0:08:51.080 --> 0:08:53.160 just before the press conference, and he said, maybe a 0:08:53.200 --> 0:08:56.079 half a percent increase in the unemployment rate, something material 0:08:56.720 --> 0:08:59.760 that they could point to, what's your assessment that would 0:08:59.760 --> 0:09:02.760 act actually provide clarity at a very unclear moment. 0:09:03.960 --> 0:09:06.560 Well, I think I think Rich Clarida is broadly correct. 0:09:06.640 --> 0:09:09.000 If the unemployer rate starts going up rapidly, like we 0:09:09.280 --> 0:09:11.160 go from four to two to say four to six, 0:09:11.720 --> 0:09:13.600 then the Federal Reserve is going to be thinking, boy, the. 0:09:13.640 --> 0:09:16.560 Layer market really is weakening in a big way. 0:09:16.679 --> 0:09:20.720 We are moving meaningfully away from full employment, and the 0:09:20.760 --> 0:09:23.240 risk in that environment is that we're about to have 0:09:23.240 --> 0:09:26.000 a full blown recession. The SAM role didn't work well 0:09:26.040 --> 0:09:28.120 last year, right, the SAM role. We triggered the sum 0:09:28.200 --> 0:09:31.120 roll and there was no recession. But that happened because 0:09:31.160 --> 0:09:33.600 the labor force was growing very rapidly, and so the 0:09:33.720 --> 0:09:36.040 rise in the uniployer rate was driven by rapid labor 0:09:36.040 --> 0:09:38.599 force growth rather than by layoffs. This year, if the 0:09:38.679 --> 0:09:41.560 unemployer rate rises rapidly, will be driven by laos. 0:09:41.840 --> 0:09:42.679 Bill Doublon, let me. 0:09:42.640 --> 0:09:45.679 Throw in an audible then on that, given a trade war, 0:09:45.840 --> 0:09:48.880 given the ballet in Switzerland here in the coming days, 0:09:49.440 --> 0:09:53.520 are we at risk of damaging the productivity that seems 0:09:53.520 --> 0:09:56.600 so successful over the last twenty four months. 0:09:57.760 --> 0:10:01.560 Absolutely, I mean this is putting investments, spending plans on hold. 0:10:01.880 --> 0:10:03.160 We are almost certainly. 0:10:02.880 --> 0:10:04.959 Going to have supply chain disruptions even if we were 0:10:05.000 --> 0:10:07.720 to resolve this tomorrow, because a lot of ships from 0:10:07.760 --> 0:10:11.520 China aren't landing here at coming to port here, and 0:10:11.559 --> 0:10:13.760 then that means there's going to be a lot less 0:10:13.800 --> 0:10:18.800 time to replenish stores for Christmas. So supply chain disruptions 0:10:18.840 --> 0:10:21.160 to some degree are almost inevitable. And that's assuming that 0:10:21.200 --> 0:10:24.120 you switch things back. You've turned the whole tariff thing 0:10:24.200 --> 0:10:25.640 off almost immediately. 0:10:25.960 --> 0:10:28.160 Hey, Bill, I appreciate your thoughts. As always, built don't 0:10:28.160 --> 0:10:31.040 be the former New York Fed President. The Federal Reserve 0:10:31.080 --> 0:10:33.760 see it like this, the risks of risen to hire, unemployment, 0:10:33.880 --> 0:10:37.040 to hire, inflation, to lower growth. But the risks haven't materialized, 0:10:37.440 --> 0:10:40.040 and the risks are around trade talks as well. The 0:10:40.040 --> 0:10:41.920 President of the United States. In the last two hours 0:10:41.960 --> 0:10:43.240 or so, we've had a load of headlines from the 0:10:43.240 --> 0:10:45.319 Federal Reserve, but maybe the most important headline came from 0:10:45.320 --> 0:10:47.640 the President. The President said, where I'm willing to lower 0:10:47.640 --> 0:10:49.880 tariffs to get China to the table. Now, the US 0:10:49.960 --> 0:10:52.160 is in negotiation mode at the moment, going into talks 0:10:52.160 --> 0:10:54.559 for the weekend, or already talks about talks between the 0:10:54.679 --> 0:10:57.400 United States and China and they can dial up and 0:10:57.400 --> 0:11:00.600 down the tariff by policy whenever they like. You can't 0:11:00.640 --> 0:11:03.240 set policy in a moment like this because you don't 0:11:03.280 --> 0:11:05.199 know what policy is going to be on the other 0:11:05.200 --> 0:11:05.959 side of Washington. 0:11:06.120 --> 0:11:09.160 You don't understand necessarily what the supply chain disruptions are 0:11:09.200 --> 0:11:12.079 going to look like. Let's say they don't lower tariffs 0:11:12.160 --> 0:11:15.320 in anticipation of these types of talks. China has said 0:11:15.360 --> 0:11:17.280 that is the only way to start talks. So does 0:11:17.320 --> 0:11:20.160 that remove the idea of talks from the table entirely, 0:11:20.200 --> 0:11:22.680 even though they might be seeing each other in passing 0:11:22.760 --> 0:11:25.440 in Switzerland. The key question here is how do they 0:11:25.440 --> 0:11:27.800 start to game out whether this is really a pandemic 0:11:28.040 --> 0:11:31.400 like supply side shock, or whether this is something entirely 0:11:31.440 --> 0:11:34.400 different that can get remediated in the near term. That 0:11:34.520 --> 0:11:35.880 is the difficulty that they are grappling. 0:11:35.920 --> 0:11:36.400 It is different. 0:11:36.440 --> 0:11:38.720 We've said it so many times on this program. I've 0:11:38.760 --> 0:11:41.240 heard all these comparisons to COVID. The difference this time 0:11:41.320 --> 0:11:43.000 around is you don't have to wait for the vaccine. 0:11:43.040 --> 0:11:45.720 The president has the vaccine. He can take the tariffs off, 0:11:45.840 --> 0:11:48.800 put the tariffs on whenever he likes. He's in control 0:11:48.840 --> 0:11:50.800 of the virus. If that's a good word to use. 0:11:50.840 --> 0:11:53.160 Probably not, but ultimately he is if you believe there 0:11:53.200 --> 0:11:57.280 are comparisons to COVID. The President is running policy here 0:11:57.080 --> 0:11:59.480 for some runaway virus that we don't have control over. 0:12:00.080 --> 0:12:01.640 Chairman of the Fed right now, I. 0:12:01.559 --> 0:12:03.280 Think he's in charge of what the feder Reserve's about 0:12:03.280 --> 0:12:04.600 to do without it out and this is the problem 0:12:04.679 --> 0:12:06.800 for the feeder reserve. Let's just say in a month, 0:12:06.840 --> 0:12:09.920 these talks are fantastic and the Federal Reserve cut interest 0:12:10.000 --> 0:12:13.360 rates by fifty basis points, seventy five basis points, one 0:12:13.440 --> 0:12:15.560 hundred basis points because they thought these were the new 0:12:15.600 --> 0:12:18.199 rules of the game. All of a sudden, policies offside 0:12:18.320 --> 0:12:20.280 and guess what, we're about to deliver a big tax 0:12:20.320 --> 0:12:22.960 package down in Washington, DC as well. That's why this 0:12:23.040 --> 0:12:23.560 is so hard. 0:12:23.920 --> 0:12:24.640 We vecho J. 0:12:24.760 --> 0:12:26.960 Powell alluded to this, saying there are things that can 0:12:27.000 --> 0:12:28.800 be done. Some things, you know, we haven't seen them 0:12:28.800 --> 0:12:30.280 being done, but there are some things that could be 0:12:30.320 --> 0:12:32.680 done that could actually cause outcomes to be very different. 0:12:32.760 --> 0:12:34.400 Key question, and this is something that comes up in 0:12:34.440 --> 0:12:38.360 a lot of our discussions with analysts and economists. There 0:12:38.400 --> 0:12:41.240 is damage being done. It's not as if this genie 0:12:41.320 --> 0:12:43.640 can go back into the bottle so easily, and there 0:12:43.640 --> 0:12:45.160 are ships that are not going to get here, and 0:12:45.200 --> 0:12:48.440 there are already supply chain disruptions. So at some point 0:12:48.600 --> 0:12:50.200 that is the reason why people are saying the pain 0:12:50.280 --> 0:12:52.439 is already being felt, the damage is being done, it's 0:12:52.480 --> 0:12:54.439 not just a matter of magnitude. 0:12:54.679 --> 0:12:57.319 A number of weeks ago, we had a yeah, but 0:12:57.800 --> 0:13:00.640 where best, and maybe Lutnik had to go the president 0:13:00.679 --> 0:13:04.319 and say you're off side, fix this right now? And 0:13:04.400 --> 0:13:06.920 what in ten minutes they had it fixed. 0:13:06.640 --> 0:13:09.320 And that initiatesd the night day pause we have and 0:13:09.360 --> 0:13:11.800 the negotiations are starting. But if you're the chairman of 0:13:11.840 --> 0:13:14.400 the Federal Reserve, look, it's an industry to go after 0:13:14.400 --> 0:13:15.080 the Federal Reserve. 0:13:15.280 --> 0:13:16.040 We all partake. 0:13:16.120 --> 0:13:18.920 I understand that we've been very critical, but I have 0:13:18.960 --> 0:13:21.080 some sympathy with the institution at the moment, I don't 0:13:21.120 --> 0:13:24.080 understand how you set policy for the medium term in 0:13:24.160 --> 0:13:25.200 a moment like this one. 0:13:25.559 --> 0:13:28.200 I think that's the reason why the policy tool that 0:13:28.280 --> 0:13:32.280 is communication is now filibustering, because ultimately there is no 0:13:32.360 --> 0:13:34.880 communication that can be had at a time where there 0:13:34.920 --> 0:13:38.160 is no information, solid information that can be had and 0:13:38.240 --> 0:13:40.839 so maybe maybe we'll get more to the limits. 0:13:40.880 --> 0:13:41.439 Of course, you know. 0:13:42.920 --> 0:13:46.720 That is co dependent on the president. The president's driving 0:13:46.760 --> 0:13:51.959 the dialogue right now. It's standard psychiatric work. They're codependent 0:13:52.080 --> 0:13:53.000 at the White House. 0:13:53.600 --> 0:13:55.760 The White House is in the drive and seat couldn't 0:13:55.880 --> 0:13:58.040 be more TK. Mi McKay was in the room. He's 0:13:58.040 --> 0:13:59.840 out of the room now. Mi McKay, welcome back to 0:13:59.840 --> 0:14:02.559 the You said it multiple times, Mike can the lead 0:14:02.600 --> 0:14:04.600 up to this. I don't have anything to add on that. 0:14:05.120 --> 0:14:07.680 Chaman Powell and Mike on a number of issues. He 0:14:07.720 --> 0:14:08.920 didn't have much to add. 0:14:10.480 --> 0:14:13.080 No, he didn't. You've been talking about it. The FED 0:14:13.120 --> 0:14:15.520 doesn't know what's going to happen. Nobody knows what's going 0:14:15.520 --> 0:14:18.120 to happen, so you can't make policy. But one thing 0:14:18.160 --> 0:14:20.960 I would add is that you've been talking about this 0:14:21.120 --> 0:14:24.160 as a supply shock, which it very well could be, 0:14:24.160 --> 0:14:26.640 but the FED was also setting the message today that 0:14:26.760 --> 0:14:29.760 it could be a demand shock. And if there's a 0:14:30.000 --> 0:14:34.240 demand shock, it could be reflected in things beyond just 0:14:34.360 --> 0:14:38.680 the unemployment rate and the inflation rate. We could see 0:14:38.680 --> 0:14:43.160 people start to pull back on spending significantly because either 0:14:43.200 --> 0:14:46.160 the shelves are empty or because they think things are 0:14:46.200 --> 0:14:48.880 going to be bad. Maybe they listened to Jay Powell 0:14:48.880 --> 0:14:52.520 today talking about the elevated risks. So there's a lot 0:14:52.600 --> 0:14:55.000 going on, a lot of cross currents going on, and 0:14:55.080 --> 0:14:57.520 it really comes down to how does all this affect 0:14:57.680 --> 0:15:00.840 the consumer? And by that I also mean businesses, because 0:15:01.120 --> 0:15:04.480 as you reported, every day people are pulling guidance. They 0:15:04.520 --> 0:15:06.920 don't know what's going to happen. So at this point 0:15:07.280 --> 0:15:09.680 the economy could go either way. The Fed's stuck in 0:15:09.720 --> 0:15:13.160 the middle. And really there isn't much to say about 0:15:13.200 --> 0:15:16.040 the FED for right now except that they're watching like 0:15:16.080 --> 0:15:16.480 we are. 0:15:16.760 --> 0:15:16.920 Mike. 0:15:16.960 --> 0:15:19.120 You're a student of FED history, and I wonder how 0:15:19.200 --> 0:15:23.360 much this has a parallel in recent history at a 0:15:23.400 --> 0:15:26.000 time when the FED is just going to say uncertainty 0:15:26.040 --> 0:15:28.160 in fifteen different ways and then sometimes the same way 0:15:28.200 --> 0:15:28.960 over and over again. 0:15:30.400 --> 0:15:34.400 Well, I think there isn't an exact comparison, but what 0:15:34.440 --> 0:15:37.200 you might look at is obviously the pandemic, where nobody 0:15:37.240 --> 0:15:39.000 knew what was going to happen, because we hadn't had 0:15:39.080 --> 0:15:41.760 this happen before, and so the FED was stuck in 0:15:41.800 --> 0:15:44.400 a situation where it knew things were bad, it knew 0:15:44.480 --> 0:15:47.120 it had to do something but how long did that 0:15:47.200 --> 0:15:49.240 have to go on and how far did they need 0:15:49.280 --> 0:15:52.160 to go? That was the question that was never really 0:15:52.200 --> 0:15:55.080 decided and we kept talking about for months and months. 0:15:55.320 --> 0:15:59.400 But the idea of we've got stagflation out there, but 0:15:59.440 --> 0:16:01.080 we don't know if it's going to happen, and if 0:16:01.120 --> 0:16:03.000 it does happen, we don't know how bad it's going 0:16:03.040 --> 0:16:06.360 to be or when it's going to happen. That I 0:16:06.400 --> 0:16:08.600 don't see any precedent for Michael. 0:16:08.360 --> 0:16:12.640 McKee for International Audience briefest right now and you and 0:16:12.680 --> 0:16:16.160 I know the shadow FOMC iconic at Carnegie Mellon and 0:16:16.240 --> 0:16:21.600 the rest tell us about the Trumpian shadow FOMC right now? 0:16:22.160 --> 0:16:25.960 Is there coalescing a beast that's going to send signals, 0:16:26.040 --> 0:16:32.560 send messages? Critique Jerown Powell. 0:16:30.640 --> 0:16:33.600 Well, there are a couple of different groups going on. 0:16:33.760 --> 0:16:37.120 You could say the Shadow Open Market Committee doesn't really 0:16:37.120 --> 0:16:39.200 have a lot of critiques at this point other than 0:16:39.440 --> 0:16:41.880 what we were talking about earlier, the Fed's mission creep. 0:16:43.000 --> 0:16:46.000 The question I asked him, there are people who are 0:16:46.120 --> 0:16:50.440 contenders for the FED chairmanship when the President finally makes 0:16:50.440 --> 0:16:52.840 a decision, who could be having things to say. Kevin 0:16:52.880 --> 0:16:57.320 Warsh talked last week a week before about that. But 0:16:57.560 --> 0:16:59.880 really the opposition or the people who are going to 0:17:00.200 --> 0:17:03.200 the questions are in the administration right now. Because the 0:17:03.240 --> 0:17:06.240 President wants to influence the FED. He can't really do it, 0:17:06.280 --> 0:17:07.720 but he wants to. So there are going to be 0:17:07.800 --> 0:17:09.479 other people who are going to pick up on this 0:17:09.560 --> 0:17:13.240 stuff and talk about it. Scott Besson's been asked about it. 0:17:13.320 --> 0:17:16.320 He was asked about it today. They want the FED 0:17:16.359 --> 0:17:19.440 to lower rates, but I think mister Bessett knows even 0:17:19.440 --> 0:17:22.360 if mister Trump doesn't, the FED can't move right now 0:17:22.359 --> 0:17:24.080 because they don't know what mister Trump's going to do. 0:17:24.400 --> 0:17:26.920 My McKay appreciate the reaction we're here from Mike throughout 0:17:26.920 --> 0:17:29.760 today on Blombag TV and on Bloomberg Radio. So we've 0:17:29.760 --> 0:17:32.080 had plenty of sympathy for the institution. It ends right now. 0:17:32.320 --> 0:17:35.359 Here's the criticism. It goes like this. I've heard it 0:17:35.400 --> 0:17:39.000 now from the previous Minneapolis FED president, Saint Louis FED 0:17:39.000 --> 0:17:42.040 President rather Jim Ballad. I've heard it directly from muhammadan 0:17:42.080 --> 0:17:44.760 Aeron as well, that this FEDER reserve is only really 0:17:44.880 --> 0:17:47.440 entertaining one scenario. They hear a lot of people talking 0:17:47.480 --> 0:17:49.760 about a wide range of outcomes, but emphasis matters at 0:17:49.760 --> 0:17:52.080 a news conference, and the emphasis which Sham and Powell 0:17:52.119 --> 0:17:55.880 keeps landing on stackflation without saying stackflation, and Jibilla said 0:17:55.920 --> 0:17:58.720 this Muhamma set it as well. What they don't entertain 0:17:59.040 --> 0:18:01.520 is the prospect of a good outcome, the prospect that 0:18:01.560 --> 0:18:03.840 the Chinese turn around over the next few weeks and say, 0:18:03.880 --> 0:18:05.639