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Speaker 1: Who nailed this the very far of it was William Dudley,

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Speaker 1: out of Berkeley for years of course at Golden Sachs

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Speaker 1: and the former New York Federal Reserve President, a huge

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Speaker 1: value at Bloomberg Economics and a senior advisor in economics

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Speaker 1: for all of Bloomberg. Bill Dudley, you and I were

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Speaker 1: in the lofty, cool climbs of Marrakesh a few weeks ago.

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Speaker 1: Is the international community confronted a unique American experiment, a

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Speaker 1: dynamic fiscal inducement, a fiscal stimulus to where we are now?

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Speaker 1: Your essay in the last two hours for Bloomberg makes

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Speaker 1: clear you have immense concern that the FED, given the

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Speaker 1: cards dealt, could get this wrong. What did the chairman

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Speaker 1: not address in this press conference.

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Speaker 2: I think that he's quite confident that policy is restrictive

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Speaker 2: enough to slow the comedy down, and I think the

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Speaker 2: fact that we just had a growth quarter about nearly

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Speaker 2: five percent calls that a little bit into question.

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Speaker 3: Also to the notion that financial conditions are.

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Speaker 4: Truly tight to slow enough to slow the eccomy down,

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Speaker 4: I think is also pretty questionable, because if you look

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Speaker 4: at most financial conditions indexes, the CHIAP, the biggest impulse

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Speaker 4: towards restraint really happened last year, not right now. So

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Speaker 4: I think that, you know, maybe they have done enough,

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Speaker 4: maybe they haven't. But I think what the reason why

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Speaker 4: markets are hearing this so confidently is he feels very

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Speaker 4: confident that Fed has done a lot.

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Speaker 3: He feels policy is.

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Speaker 4: Restrictive, and so I think, you know, the market is

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Speaker 4: taking away the notion that he thinks he's done. And obviously,

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Speaker 4: you know that depends on how the economy evolves, what

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Speaker 4: happens to inflation, what happens to the labor market. And

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Speaker 4: another thing that the market is taking a lot of

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Speaker 4: a positive signal from is he talked about how all

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Speaker 4: these pandemic effects are.

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Speaker 3: Washing out now in a good way.

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Speaker 4: So labor market is becoming much more in balance, labor

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Speaker 4: force growth has picked up. It's a very benign story

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Speaker 4: about how this stall plays out. It's basically a story

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Speaker 4: where the FED really hasn't had to do that much

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Speaker 4: to bring inflation down, and the FED basically saying we

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Speaker 4: don't think we're gonna have to do much more from here.

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Speaker 5: Chur Powell also didn't seem to think that there was

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Speaker 5: any casualty in pausing letting time go on and then

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Speaker 5: restarting rate hikes. He said that wasn't problematic at all.

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Speaker 5: Do you disagree.

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Speaker 4: Obviously, if it turns out that they need to do more,

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Speaker 4: they're probably going to have to do more than just

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Speaker 4: one quarter point moved. And if you've taken a break

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Speaker 4: for let's say six months, and the evidence accumulates that

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Speaker 4: Madre policy is not as tight as you think it is,

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Speaker 4: and inflation expectations are starting to become unanchored, labor markets

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Speaker 4: not loosening, wages are stuck at you know, four and

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Speaker 4: a half percent, then it's unlikely that one quarter point

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Speaker 4: move is this going to be sufficient to do the job.

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Speaker 3: So I think it's either zero or.

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Speaker 5: Multiple rate hikes, which is the reason why I probably

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Speaker 5: some people are looking at this like yourself and saying

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Speaker 5: they could be on the brink of an error. There

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Speaker 5: was a question about how financial conditions really played into

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Speaker 5: the Fed's decision whether higher yields were doing their work.

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Speaker 5: He had some nuance around this, talking about a sustained

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Speaker 5: move higher. Take a listen to Chair Powell speaking on

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Speaker 5: the issue.

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Speaker 6: Persistent changes in broader financial conditions can have implications for

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Speaker 6: the path of monetary policy. In this case the title

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Speaker 6: financial conditions we're seeing from higher long term rates, but

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Speaker 6: also from other sources like the stronger dollar and lower

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Speaker 6: equity prices could matter for future rate decisions. With financial conditions,

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Speaker 6: we're looking for persistent changes that are material.

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Speaker 5: Bill Dudley, from your vantage point, does this give any

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Speaker 5: clarity as to how the Fed is counting yields in

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Speaker 5: their picture of what restrictive really looks like?

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Speaker 3: Well, I think I agree with them that persistence is

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Speaker 3: what matters. I mean, binials go up for a week

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Speaker 3: or two and then come right back down. That's not

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Speaker 3: going to consider much restraint on the economy.

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Speaker 4: You know, one problem I think the Chairman has at

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Speaker 4: this point is by talking to the markets in a

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Speaker 4: sort of supportive way, stocks rally, finials fall, that's loosening

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Speaker 4: financial conditions, and so that's removing some of the restraint

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Speaker 4: that was creating some impetus for not tightening mandric policy further.

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Speaker 1: The hard of the matter to me, Bill, and I

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Speaker 1: don't want to turn this into Dale Jorgenson's through three

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Speaker 1: ratio course, and Juliet Coronado has been brilliant on this

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Speaker 1: as well. So let's listen to doctor Coronado and doctor Dudley, folks,

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Speaker 1: and Bill Dudley said, barring unexpectedly fast productivity growth, there

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Speaker 1: seems to be almost a hope and prayer Bill Dudley,

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Speaker 1: that this time is different and instantly we have a

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Speaker 1: new elevated productivity. Do you see any signal of this

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Speaker 1: in post pandemic America.

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Speaker 4: I think it's really too soon to make any decisions

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Speaker 4: about productivity at all. Productivity growth took a real hit

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Speaker 4: during the pandemic, and then it picked up as we reopened.

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Speaker 3: What the trend is at this point is very, very uncertain.

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Speaker 4: And he noticed that Charpaul did not talk about protein

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Speaker 4: growth at that trend chain. What he talked about was

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Speaker 4: the labor force growth had picked up a lot, because

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Speaker 4: labor force participation among adult workers has climbed a lot,

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Speaker 4: and immigration had picked up.

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Speaker 3: He saw that as a positive supply side surprise.

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Speaker 4: But I don't think that the FED, or or I

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Speaker 4: for that matter, think that there's a pro two dy

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Speaker 4: growth miracle right around the corner.

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Speaker 1: Bill Dudley's Wednesday, We're going to a job to report

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Speaker 1: on Friday. Let's go back to Dudley and mckelvy at

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Speaker 1: Golden Sechs a few years ago. What's an appropriate non

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Speaker 1: farm payroll statistic? Not on Friday, but say three month

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Speaker 1: moving average out where you can say all clear, and

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Speaker 1: finally we have a labor economy settling down? Is it

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Speaker 1: sub one hundred thousand?

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Speaker 3: Yeah, it's probably in that ballpark.

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Speaker 4: I mean, as peer Paul said, we are getting a

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Speaker 4: surgeon labor force this year, but I think he also

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Speaker 4: expects that that will peter out over time, and then

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Speaker 4: you're just stuck with the growth rate of the working

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Speaker 4: age population, which is probably only growing in about a

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Speaker 4: half a percent a year, and so that's consistent with

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Speaker 4: paywell gains of maybe one hundred thousand a.

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Speaker 3: Month or even a little bit less.

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Speaker 4: So I think that eventually the Fed needs to bring

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Speaker 4: palal growth below one hundred thousand if they're going to

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Speaker 4: generate enough slack in the labor market to bring wage

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Speaker 4: inflation down to levels consistent with two percent inflation.

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Speaker 5: Given the volatility that we've seen in the bond market, bill,

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Speaker 5: how concerned are you about a real blowback on Friday?

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Speaker 5: Should we get a job's report that comes in materially

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Speaker 5: hotter than expected and we continue to see those upside

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Speaker 5: surprises that you say may pose the biggest risk.

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Speaker 4: Well, I personally would not put too much attention on

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Speaker 4: any one given economic release.

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Speaker 3: At this point because the FED is basically.

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Speaker 4: Said we are patient now, and so one economic report

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Speaker 4: is not going to change their thinking. It's only accumulation

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Speaker 4: of evidence to suggest that policy is not sufficiently restricted

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Speaker 4: to do the job, which will cause the FED to

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Speaker 4: start to tighten monitary pulsey again. So I think we

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Speaker 4: need to maybe downplay any single report at this point.

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Speaker 4: It's going to take an accumulation of evidence for the

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Speaker 4: FED to decide that they need to do more on

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Speaker 4: monetary pols.

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Speaker 1: Till Dudley, thank you so much