1 00:00:02,520 --> 00:00:10,440 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is a breaking 2 00:00:10,520 --> 00:00:15,440 Speaker 1: news update from Bloomberg, instant reaction and analysis from our 3 00:00:15,480 --> 00:00:18,439 Speaker 1: three thousand journalists and analysts around the world. 4 00:00:19,120 --> 00:00:22,400 Speaker 2: The news is sparse, no change in rates, nine in favor, 5 00:00:22,800 --> 00:00:27,720 Speaker 2: three decent slogan, Hammock and Cashkari. Other than that, there 6 00:00:27,800 --> 00:00:30,640 Speaker 2: is not a word of difference between the June statement 7 00:00:30,800 --> 00:00:35,160 Speaker 2: and this one. Economic activity is expanding at a solid pace. 8 00:00:35,200 --> 00:00:35,600 Speaker 3: It says. 9 00:00:35,720 --> 00:00:40,280 Speaker 2: Uncertainty is elevated in part because of the Middle East. Productivity, 10 00:00:40,320 --> 00:00:43,960 Speaker 2: growth and capital investment are strong. Job gains have kept 11 00:00:44,000 --> 00:00:48,320 Speaker 2: pace with the workforce, and unemployment has changed little. Inflation 12 00:00:48,520 --> 00:00:52,160 Speaker 2: remains elevated relative to the two percent goal, in part 13 00:00:52,240 --> 00:00:56,320 Speaker 2: reflecting supply shocks that have driven price shocks. The statement 14 00:00:56,440 --> 00:01:01,000 Speaker 2: again concludes by saying the Committee will deliver price stability. 15 00:01:01,480 --> 00:01:04,200 Speaker 2: I think this is the shortest summary I have ever 16 00:01:04,280 --> 00:01:06,600 Speaker 2: given you, and I've padded it out a little bit 17 00:01:06,720 --> 00:01:08,600 Speaker 2: just to make it a little longer and feel like 18 00:01:08,640 --> 00:01:11,240 Speaker 2: I've done something. There's no real surprise in here. You 19 00:01:11,280 --> 00:01:14,640 Speaker 2: could point to the dissenters, but they've all said something 20 00:01:14,640 --> 00:01:16,840 Speaker 2: about inflation and the fact that we might have to 21 00:01:16,920 --> 00:01:19,760 Speaker 2: raise interest rates in the future, so it doesn't really 22 00:01:19,760 --> 00:01:22,000 Speaker 2: give you a clue about what's going on, and there's 23 00:01:22,000 --> 00:01:24,920 Speaker 2: no hint in the statement about what might happen in 24 00:01:25,080 --> 00:01:28,720 Speaker 2: the future. So if Kevin Warsh wants a spotlight definitely 25 00:01:28,720 --> 00:01:29,480 Speaker 2: on him today. 26 00:01:29,360 --> 00:01:30,840 Speaker 4: And Michael come back to you in just a second. 27 00:01:30,920 --> 00:01:34,640 Speaker 4: Let's whip through the price action. So as expected, widely expected, 28 00:01:34,800 --> 00:01:38,119 Speaker 4: no change on this decision, some descent not one, not two, 29 00:01:38,200 --> 00:01:41,399 Speaker 4: but three dissenting voices from regional Fed presidents from the 30 00:01:41,760 --> 00:01:44,080 Speaker 4: obvious places. The move in the market is interesting, though. 31 00:01:44,200 --> 00:01:46,640 Speaker 4: Equity's off the lows on the S and P five hundred, 32 00:01:46,680 --> 00:01:48,800 Speaker 4: just to raising some of the losses. So farther southternoon 33 00:01:48,840 --> 00:01:51,160 Speaker 4: on the S and P five hundred, still negative, but 34 00:01:51,240 --> 00:01:53,000 Speaker 4: not as low as we once were with the SMP 35 00:01:53,360 --> 00:01:55,920 Speaker 4: negative just zero point three percent, and we're gaining some 36 00:01:55,960 --> 00:01:58,600 Speaker 4: confidence in the tech trait. The nasdack down by point two. 37 00:01:58,800 --> 00:02:00,560 Speaker 4: In the bond market, let's just the front end of 38 00:02:00,600 --> 00:02:02,760 Speaker 4: the yield curve. Two yr yields were hired by basis 39 00:02:02,760 --> 00:02:06,040 Speaker 4: point of two, now down four to four twenty five. 40 00:02:06,280 --> 00:02:08,919 Speaker 4: So often talk about this Bramo, the difference between economist 41 00:02:09,000 --> 00:02:12,000 Speaker 4: expectations and the risk that the market was pricing gain 42 00:02:12,280 --> 00:02:13,919 Speaker 4: and clearly just a little bit of a gap there 43 00:02:14,000 --> 00:02:16,400 Speaker 4: even with that descent, some relief at the front end 44 00:02:16,400 --> 00:02:17,839 Speaker 4: of the curve a rally on two. 45 00:02:17,919 --> 00:02:20,320 Speaker 5: So there truly was about a thirty percent chance of 46 00:02:20,320 --> 00:02:22,680 Speaker 5: a FED rate hike at this meeting, and that chance 47 00:02:22,880 --> 00:02:25,560 Speaker 5: was not necessarily fulfilled. It is notable, though, that there 48 00:02:25,560 --> 00:02:27,760 Speaker 5: were three descents, and that I think is the news 49 00:02:27,760 --> 00:02:31,119 Speaker 5: from this particular statement, given the fact that Neil Koshkari 50 00:02:31,200 --> 00:02:34,600 Speaker 5: also joined Laurie Logan and Beth Hammick. I was on 51 00:02:34,639 --> 00:02:36,520 Speaker 5: a panel with him and he was talking about this 52 00:02:36,560 --> 00:02:38,920 Speaker 5: with a bunch of CEOs and saying this is a 53 00:02:38,960 --> 00:02:41,800 Speaker 5: problem and it is more pernicious for the average consumer 54 00:02:41,840 --> 00:02:43,880 Speaker 5: in this country right now that inflation is so high, 55 00:02:44,120 --> 00:02:47,000 Speaker 5: the potentially the labor market is oftening because it's not 56 00:02:47,160 --> 00:02:49,239 Speaker 5: and I think that is something that you are hearing 57 00:02:49,520 --> 00:02:50,639 Speaker 5: in the minority. 58 00:02:50,200 --> 00:02:50,520 Speaker 3: On the fair. 59 00:02:50,639 --> 00:02:52,720 Speaker 4: The good news here for the leadership of Kevin Walsh 60 00:02:52,960 --> 00:02:55,920 Speaker 4: early days quick reaction the descent came from the regional 61 00:02:56,240 --> 00:02:58,480 Speaker 4: presidents and not from the board. Because it it came 62 00:02:58,520 --> 00:03:00,640 Speaker 4: from one of the board members this afternoon, I think 63 00:03:00,680 --> 00:03:03,760 Speaker 4: we'd be having a very different conversation tk to the 64 00:03:03,840 --> 00:03:04,600 Speaker 4: one we're about to have. 65 00:03:04,800 --> 00:03:07,440 Speaker 3: It's a market voting Apple five point zero five to 66 00:03:07,520 --> 00:03:10,080 Speaker 3: three trillion dollars just out to a new record high 67 00:03:10,080 --> 00:03:13,080 Speaker 3: three forty four. Is a market voting here on. 68 00:03:13,080 --> 00:03:15,560 Speaker 4: Their new I think Apple's voting on a lack of CAPEX, 69 00:03:15,560 --> 00:03:17,079 Speaker 4: and I think that's been a story on I hope, yeah, 70 00:03:17,080 --> 00:03:17,320 Speaker 4: I know. 71 00:03:17,320 --> 00:03:19,720 Speaker 3: That I get that run. But I mean, right here 72 00:03:19,720 --> 00:03:23,760 Speaker 3: within the minutes after this announcement, with the SPX popping 73 00:03:23,840 --> 00:03:26,959 Speaker 3: up as well, I mean, they certainly like what they saw. 74 00:03:27,080 --> 00:03:28,720 Speaker 4: Well, let's take a step back and think about what's 75 00:03:28,720 --> 00:03:31,679 Speaker 4: been happening in asset classes. We've had this massive move 76 00:03:31,760 --> 00:03:34,480 Speaker 4: higher in energy and lots of volity in between, volatility 77 00:03:34,520 --> 00:03:37,640 Speaker 4: in between. Over the previous five months. You've seen that 78 00:03:37,760 --> 00:03:40,480 Speaker 4: ripple through interest rates. We've priced out cuts and in 79 00:03:40,520 --> 00:03:43,280 Speaker 4: many places priced in hikes and in some places actually 80 00:03:43,720 --> 00:03:46,920 Speaker 4: engineered rate hikes. What we haven't seen is a growth scare. 81 00:03:47,040 --> 00:03:49,160 Speaker 4: The backdrop for growth is still pretty good consensus for 82 00:03:49,240 --> 00:03:52,160 Speaker 4: GDPs that around two unemployment's been falling closer to four 83 00:03:52,200 --> 00:03:54,600 Speaker 4: and away from five. That's good news. Now you've got 84 00:03:54,600 --> 00:03:57,520 Speaker 4: a feeder reserve that doesn't still see a reason even 85 00:03:57,520 --> 00:03:59,920 Speaker 4: with that as your backdrop. They don't see a reason 86 00:04:00,080 --> 00:04:02,200 Speaker 4: high interest rates right now today. Some do, but not 87 00:04:02,200 --> 00:04:04,280 Speaker 4: the committee as a whole. If you're looking at that 88 00:04:04,320 --> 00:04:06,720 Speaker 4: from a risk asset standpoint on, that's risk positive without 89 00:04:06,720 --> 00:04:07,800 Speaker 4: a doubt it is. 90 00:04:07,920 --> 00:04:11,360 Speaker 3: I mean, I mean, they're moving forward, and to me, 91 00:04:11,480 --> 00:04:15,240 Speaker 3: the key thing after Jackson All is to get to 92 00:04:15,560 --> 00:04:17,800 Speaker 3: that next meeting. All of a sudden, Jackson Hole may 93 00:04:17,839 --> 00:04:18,440 Speaker 3: be interesting. 94 00:04:18,480 --> 00:04:20,040 Speaker 5: Oh, I definitely think it's gonna be interesting. We need 95 00:04:20,040 --> 00:04:23,640 Speaker 5: to hear about insights from task forces. That said, right now, 96 00:04:24,080 --> 00:04:26,159 Speaker 5: I do think you know how I think that they're 97 00:04:26,160 --> 00:04:28,440 Speaker 5: going to be important to me. This is actually a 98 00:04:28,480 --> 00:04:32,040 Speaker 5: fascinating statement. Does he set up a September rate hike 99 00:04:32,320 --> 00:04:34,920 Speaker 5: with the idea that there are three descents and potentially 100 00:04:34,960 --> 00:04:37,839 Speaker 5: there is another CTI and PPI print that will be 101 00:04:37,880 --> 00:04:38,960 Speaker 5: potentially hotter than next. 102 00:04:39,080 --> 00:04:41,720 Speaker 4: Dot to run back always early to publish. He says 103 00:04:41,760 --> 00:04:44,200 Speaker 4: the following, I think the descents tell you the direction 104 00:04:44,279 --> 00:04:46,680 Speaker 4: of travel. It will be very tough for WASH to 105 00:04:46,720 --> 00:04:49,599 Speaker 4: hold the line into September. I hope Mike mc key's 106 00:04:49,600 --> 00:04:51,599 Speaker 4: holding the line. Just before he goes into that news 107 00:04:51,600 --> 00:04:54,280 Speaker 4: conference in about twenty five minutes time, Mike given the 108 00:04:54,360 --> 00:04:57,440 Speaker 4: lack of new information here beyond just a descent. What's 109 00:04:57,480 --> 00:05:00,320 Speaker 4: your approach to the news conference at two thirty Easton time? 110 00:05:01,320 --> 00:05:03,320 Speaker 2: Well, I think we have to ask very direct questions 111 00:05:03,360 --> 00:05:05,680 Speaker 2: of the chair. We can't ask him broad questions like 112 00:05:05,960 --> 00:05:09,080 Speaker 2: what is your reaction function or something like that, because 113 00:05:09,120 --> 00:05:12,400 Speaker 2: then he's going to just lead those questions and we 114 00:05:12,480 --> 00:05:15,080 Speaker 2: won't get good answers. So we'll have to pick out 115 00:05:15,120 --> 00:05:18,320 Speaker 2: some things like where we are with rates, are those 116 00:05:18,839 --> 00:05:21,680 Speaker 2: sufficient at this point? Something to try to get him 117 00:05:21,720 --> 00:05:24,919 Speaker 2: to give us some specifics on how he's thinking. But 118 00:05:25,000 --> 00:05:27,599 Speaker 2: I think what you guys have just gone through is 119 00:05:27,680 --> 00:05:31,080 Speaker 2: what he's looking for. He'd rather have you speculating markets 120 00:05:31,120 --> 00:05:35,800 Speaker 2: speculating than give you a hint. And nature abhors a vacuum, 121 00:05:35,839 --> 00:05:37,760 Speaker 2: so the markets are going to fill it with what 122 00:05:37,800 --> 00:05:40,000 Speaker 2: they think might happen. But it's going to be hard 123 00:05:40,080 --> 00:05:43,200 Speaker 2: for anybody to really know unless Worsh wants to start 124 00:05:43,240 --> 00:05:46,159 Speaker 2: tipping his hand, which it'll be a battle between us 125 00:05:46,200 --> 00:05:46,480 Speaker 2: and him. 126 00:05:46,520 --> 00:05:48,520 Speaker 4: I guess looking forward to it. Mike, thank you, buddy. 127 00:05:48,560 --> 00:05:51,320 Speaker 4: Can't start that news conference. Mi McKay will come into 128 00:05:51,360 --> 00:05:53,080 Speaker 4: that news conference for us. It will begin at about 129 00:05:53,080 --> 00:05:55,000 Speaker 4: twenty five minutes time. If you're just joined the program, 130 00:05:55,040 --> 00:05:57,239 Speaker 4: welcome to the program. So unchanged to the Federal Reserve. 131 00:05:57,240 --> 00:05:59,320 Speaker 4: But the vote is different. It's nine to three and 132 00:05:59,360 --> 00:06:02,040 Speaker 4: the assenting voices are as follows bottom of the statement. 133 00:06:02,080 --> 00:06:05,599 Speaker 4: Beth Hammock, Noil Kashgari, Lori logan descent coming from the 134 00:06:05,839 --> 00:06:08,840 Speaker 4: obvious places, all three of those voting for an interest 135 00:06:08,880 --> 00:06:11,200 Speaker 4: rate hike. At the bottom of the statement. That line 136 00:06:11,240 --> 00:06:15,760 Speaker 4: sticks the committee will deliver price stability. We've got Bob 137 00:06:15,760 --> 00:06:18,680 Speaker 4: Michael a JP Morgan Act Management alongside us. Bob, is 138 00:06:18,720 --> 00:06:21,839 Speaker 4: that line in the statement enough for US not to 139 00:06:21,960 --> 00:06:25,320 Speaker 4: question their commitment to price stability? With inflation running above 140 00:06:25,320 --> 00:06:27,880 Speaker 4: target for as long as it has been running above target. 141 00:06:28,920 --> 00:06:32,000 Speaker 1: I think the three descents are more important than that 142 00:06:32,080 --> 00:06:35,679 Speaker 1: last statement. I think that it shows that they're starting 143 00:06:35,720 --> 00:06:41,239 Speaker 1: to migrate towards tightening policy. You know, there's still seventy 144 00:06:41,320 --> 00:06:44,479 Speaker 1: five percent of the voting members that were in favor 145 00:06:44,520 --> 00:06:47,520 Speaker 1: of no change, so you're only a twenty five percent, 146 00:06:47,560 --> 00:06:49,719 Speaker 1: But I think it's important. If I were at the 147 00:06:49,720 --> 00:06:54,159 Speaker 1: press conference, I'd ask about quantitative tightening. Are they talking 148 00:06:54,200 --> 00:06:57,000 Speaker 1: about that? Is that something they could start up again 149 00:06:57,520 --> 00:07:00,640 Speaker 1: and help snug the liquidity that in the system. 150 00:07:00,720 --> 00:07:04,440 Speaker 4: Best guess for September. Limited additional information, but best guess 151 00:07:04,720 --> 00:07:06,560 Speaker 4: for September. What would you call now. 152 00:07:06,960 --> 00:07:10,080 Speaker 1: They do nothing? But maybe there are four descents. 153 00:07:10,280 --> 00:07:12,400 Speaker 4: Well, Michael is going to stick with us going into 154 00:07:12,400 --> 00:07:14,480 Speaker 4: that news conference. Twenty five minutes away. Joining us now 155 00:07:14,520 --> 00:07:17,520 Speaker 4: is Jim Bianco of Pianco Research. Jim, welcome to the program. 156 00:07:17,520 --> 00:07:19,440 Speaker 4: It's a whole new world, a new era for this 157 00:07:19,520 --> 00:07:22,000 Speaker 4: central bank. You've been writing about it extensively. Just first 158 00:07:22,000 --> 00:07:25,000 Speaker 4: of all, your reaction to this decision this afternoon. 159 00:07:26,080 --> 00:07:28,760 Speaker 6: Not surprised by the decision that the Fed did not 160 00:07:29,360 --> 00:07:33,040 Speaker 6: raise rates. I still would defer with Bob and think 161 00:07:33,080 --> 00:07:35,960 Speaker 6: that they are going to raise rates in September. I 162 00:07:36,000 --> 00:07:39,520 Speaker 6: think the descents are the most important thing because one 163 00:07:39,560 --> 00:07:43,000 Speaker 6: of the things I've been emphasizing is after Trump attacking 164 00:07:43,000 --> 00:07:45,760 Speaker 6: this FED for two years, they want to be independent, 165 00:07:46,160 --> 00:07:50,960 Speaker 6: and they've decided that independence is twelve independent voters. So 166 00:07:51,000 --> 00:07:52,840 Speaker 6: what we're going to get at the press conference is 167 00:07:52,920 --> 00:07:56,320 Speaker 6: one twelfth of the opinion of the Fed is we're 168 00:07:56,360 --> 00:07:58,200 Speaker 6: going to get washed, or maybe we won't get it 169 00:07:58,240 --> 00:08:00,520 Speaker 6: at all. If he doesn't express it. He's got a 170 00:08:00,560 --> 00:08:04,320 Speaker 6: lot of power he could probably, you know, twist some 171 00:08:04,440 --> 00:08:06,560 Speaker 6: arms to get them over the line whichever way he 172 00:08:06,600 --> 00:08:09,040 Speaker 6: wants to go. I suspect that if they were all 173 00:08:09,160 --> 00:08:11,040 Speaker 6: voting their true conscious, we might have had a few 174 00:08:11,080 --> 00:08:13,720 Speaker 6: more descents, maybe not enough to raise raids, but a 175 00:08:13,720 --> 00:08:16,080 Speaker 6: few deferred because he didn't want to do it. 176 00:08:16,120 --> 00:08:18,880 Speaker 5: Would be my guest, Jim, do you think it's significant 177 00:08:18,880 --> 00:08:22,280 Speaker 5: that none of the governors joined with the dissenters, even 178 00:08:22,320 --> 00:08:25,440 Speaker 5: though there were some reports of some pretty interesting family 179 00:08:25,480 --> 00:08:27,520 Speaker 5: fights over dinner last month. 180 00:08:29,120 --> 00:08:32,760 Speaker 6: I'm mildly I was expecting that maybe Chris Waller was 181 00:08:32,800 --> 00:08:35,199 Speaker 6: going to be a dissenter. He still might be a 182 00:08:35,280 --> 00:08:38,959 Speaker 6: voter for a rate hike in September, maybe a couple 183 00:08:39,000 --> 00:08:42,440 Speaker 6: of others. But I do want to emphasize again, we're 184 00:08:42,480 --> 00:08:44,760 Speaker 6: going to parse every word that Warsh wants to say. 185 00:08:44,800 --> 00:08:46,240 Speaker 6: I think that the FED is more of a vote 186 00:08:46,240 --> 00:08:48,880 Speaker 6: tailing our exercise right now. You know, you got to 187 00:08:48,880 --> 00:08:51,240 Speaker 6: look at all twelve people and say which columns are 188 00:08:51,240 --> 00:08:54,360 Speaker 6: they in high colder cut and seven is a majority? 189 00:08:54,400 --> 00:08:56,559 Speaker 6: And which column has seven? And that's what the Fed's 190 00:08:56,600 --> 00:08:57,960 Speaker 6: going to do. That's how they work now. 191 00:08:58,360 --> 00:09:01,240 Speaker 3: But Michael, the young Ripersentagim Bianco a couple of years ago, 192 00:09:01,360 --> 00:09:04,120 Speaker 3: had an arch call calling for higher interest rates when 193 00:09:04,160 --> 00:09:06,560 Speaker 3: no one was looking for it. The other day, Edyard 194 00:09:06,559 --> 00:09:09,640 Speaker 3: Denny said, these are normal rates. We have to get 195 00:09:09,760 --> 00:09:13,040 Speaker 3: used to rates being here again, is doctor Yardnny and 196 00:09:13,120 --> 00:09:15,560 Speaker 3: Jim Bianco correct? We just got to get used to 197 00:09:15,559 --> 00:09:16,440 Speaker 3: these higher rates. 198 00:09:16,720 --> 00:09:16,960 Speaker 7: Yeah. 199 00:09:17,040 --> 00:09:19,960 Speaker 1: I think what we're seeing more broadly across the economy 200 00:09:20,559 --> 00:09:24,160 Speaker 1: is a need for capex. There's demand for capital, there's 201 00:09:24,200 --> 00:09:26,800 Speaker 1: a productive use of it. There's going to be competition 202 00:09:27,080 --> 00:09:30,400 Speaker 1: and a cost of it. That's pre GFC kind of 203 00:09:30,559 --> 00:09:33,719 Speaker 1: macro environment. You're not going back to zero to two 204 00:09:33,800 --> 00:09:34,640 Speaker 1: percent rates. 205 00:09:34,800 --> 00:09:34,839 Speaker 6: No. 206 00:09:35,000 --> 00:09:37,640 Speaker 1: I think there's enough cause for them to hike in 207 00:09:37,679 --> 00:09:40,760 Speaker 1: September as opposed to next year. I don't think inflation 208 00:09:40,920 --> 00:09:42,040 Speaker 1: is going to change that much. 209 00:09:42,080 --> 00:09:43,960 Speaker 3: I can't remember, Jennifer, you're on or off here, but 210 00:09:44,040 --> 00:09:46,959 Speaker 3: you said this twenty minutes ago. What percentage of people 211 00:09:46,960 --> 00:09:49,760 Speaker 3: in the street actually remember pre GFC. 212 00:09:50,080 --> 00:09:52,200 Speaker 4: We were very live, and I remember what I said. 213 00:09:52,280 --> 00:09:54,080 Speaker 4: I talked about the average engine on the trading floor, 214 00:09:54,360 --> 00:09:56,840 Speaker 4: which is probably mid thirties right now. So the world 215 00:09:56,880 --> 00:09:58,480 Speaker 4: that they used to is not the world that Kevin 216 00:09:58,520 --> 00:10:00,640 Speaker 4: Walsh wants to take us. Back to it's also not 217 00:10:00,679 --> 00:10:02,679 Speaker 4: the world that we've experienced in financial markets. Side it 218 00:10:02,760 --> 00:10:06,160 Speaker 4: to your point, we had these anchors across fixed income 219 00:10:06,400 --> 00:10:08,600 Speaker 4: for the last ten to fifteen years at least, and 220 00:10:08,640 --> 00:10:12,080 Speaker 4: I have talked about them daily, how they're disappearing. Germany 221 00:10:12,080 --> 00:10:17,439 Speaker 4: had fiscal prudence for decades, it's disappearing. Japan had disinflation 222 00:10:17,840 --> 00:10:22,000 Speaker 4: deflation for decades. It's changed. And in America, the biggest 223 00:10:22,040 --> 00:10:24,680 Speaker 4: companies in the planet were buying themselves, not issue in stock, 224 00:10:25,080 --> 00:10:28,000 Speaker 4: not issuing debt. That's changed as well, the price of that. 225 00:10:28,080 --> 00:10:29,880 Speaker 4: But what is the price of that and what part 226 00:10:29,880 --> 00:10:32,880 Speaker 4: of this market is most vulnerable to that competition for capital? 227 00:10:34,080 --> 00:10:36,560 Speaker 1: It feels like it's the sovereign market. I don't know 228 00:10:36,640 --> 00:10:41,480 Speaker 1: a sovereign which isn't interested in investing in energy, security, 229 00:10:41,840 --> 00:10:45,239 Speaker 1: in investing in the defense of its borders, in investing 230 00:10:45,400 --> 00:10:48,960 Speaker 1: in AI and technology. More broadly, they don't have the 231 00:10:48,960 --> 00:10:51,080 Speaker 1: budgets to do it. They're going to have to go 232 00:10:51,120 --> 00:10:54,320 Speaker 1: out and borrow. That's going to create more competition for 233 00:10:54,400 --> 00:11:00,720 Speaker 1: the capital. That's okay, that's a normal capitalist environ We're 234 00:11:00,720 --> 00:11:03,760 Speaker 1: okay with that. But it doesn't mean zero to two 235 00:11:03,840 --> 00:11:08,839 Speaker 1: percent central bank rates and treasury government bond yields is 236 00:11:08,920 --> 00:11:12,160 Speaker 1: the right level. It means probably neutral rates for the 237 00:11:12,200 --> 00:11:15,120 Speaker 1: FED are around three to five percent, and you're looking 238 00:11:15,160 --> 00:11:17,840 Speaker 1: at a ten year treasury that who knows could be 239 00:11:17,880 --> 00:11:19,199 Speaker 1: four to six percent. 240 00:11:19,120 --> 00:11:21,280 Speaker 5: In this world where suddenly you have to battle for 241 00:11:21,360 --> 00:11:23,800 Speaker 5: capital and Jim, I'd love your take on this. Is 242 00:11:23,840 --> 00:11:26,840 Speaker 5: it a policy error if a FED share Kevin worsh 243 00:11:26,960 --> 00:11:29,280 Speaker 5: allows the move to stick that we're seeing right now 244 00:11:29,320 --> 00:11:31,560 Speaker 5: in markets. Now there is not a full rate hike 245 00:11:31,640 --> 00:11:35,000 Speaker 5: being baked into September, and frankly, the initial move has 246 00:11:35,040 --> 00:11:36,599 Speaker 5: given back at least at the long end of the 247 00:11:36,640 --> 00:11:38,720 Speaker 5: yield curve. Do you think that it is important for 248 00:11:38,800 --> 00:11:41,920 Speaker 5: this FED, whether it intends to hike or not, to 249 00:11:42,000 --> 00:11:44,040 Speaker 5: keep the message that they are prepared to do so 250 00:11:44,120 --> 00:11:45,000 Speaker 5: to tame inflation. 251 00:11:46,720 --> 00:11:48,760 Speaker 6: I think so. If you want to back up, go 252 00:11:48,840 --> 00:11:51,160 Speaker 6: back to September of twenty four, that's when the FED 253 00:11:51,240 --> 00:11:54,400 Speaker 6: first started cutting rates. The thirty year yield was four percent, 254 00:11:54,520 --> 00:11:57,079 Speaker 6: was exactly four percent. Right now it's five to ten. 255 00:11:57,520 --> 00:12:00,560 Speaker 6: It's going up one hundred and ten basis points. While 256 00:12:00,559 --> 00:12:03,679 Speaker 6: the FED has been cutting rates. By my measures, I 257 00:12:03,720 --> 00:12:06,320 Speaker 6: can't find another example of a rate cutting cycle that 258 00:12:06,400 --> 00:12:09,800 Speaker 6: produced that big a rate a yield increase in the 259 00:12:09,800 --> 00:12:12,600 Speaker 6: long end since the nineteen eighties. But then again, we 260 00:12:12,640 --> 00:12:15,400 Speaker 6: also had fourteen percent interest rates then and without that 261 00:12:15,720 --> 00:12:19,320 Speaker 6: never in anything back to the nineteen fifties. So really, 262 00:12:19,360 --> 00:12:21,480 Speaker 6: the market is trying to tell you that I think 263 00:12:21,520 --> 00:12:23,920 Speaker 6: the direction of travel is going to be higher. It's 264 00:12:24,000 --> 00:12:27,760 Speaker 6: more worried about inflation. And if the you know, go 265 00:12:27,880 --> 00:12:30,440 Speaker 6: back to that last sentence, if the Fed wants to 266 00:12:30,480 --> 00:12:33,559 Speaker 6: deliver price stability, I'll throw one another into you. Kevin 267 00:12:33,600 --> 00:12:36,200 Speaker 6: Walsh said that inflation is a choice. They might have 268 00:12:36,280 --> 00:12:38,800 Speaker 6: to choose to do something about it fairly soon and 269 00:12:38,840 --> 00:12:40,480 Speaker 6: maybe as early as the September meeting. 270 00:12:40,800 --> 00:12:41,000 Speaker 5: Jim. 271 00:12:41,040 --> 00:12:43,600 Speaker 3: If they do something about it, do we continue with 272 00:12:43,640 --> 00:12:46,000 Speaker 3: this robust nominal GDP we've seen. 273 00:12:47,280 --> 00:12:49,160 Speaker 6: I think we can, and I also think if the 274 00:12:49,160 --> 00:12:51,960 Speaker 6: Fed were to raise rates that that might put the 275 00:12:52,040 --> 00:12:54,440 Speaker 6: high end yields for the year. I think part of 276 00:12:54,480 --> 00:12:57,320 Speaker 6: the problem has been that now that we don't have 277 00:12:57,400 --> 00:13:00,320 Speaker 6: forward guidance, the market is pricing what it thinks, and 278 00:13:00,360 --> 00:13:03,600 Speaker 6: I think it thinks that's there's an inflation, let's say 279 00:13:03,760 --> 00:13:06,280 Speaker 6: issue or worry. I don't want to go full blown 280 00:13:06,320 --> 00:13:09,800 Speaker 6: problem or crisis it's not that bad. Yeah, and that's 281 00:13:09,840 --> 00:13:12,240 Speaker 6: why yields keep going up. And I think you would 282 00:13:12,320 --> 00:13:14,640 Speaker 6: like to see the old line, the old adage on 283 00:13:14,679 --> 00:13:17,840 Speaker 6: Wall Street I've been using is that bond traders can 284 00:13:17,920 --> 00:13:22,040 Speaker 6: relax or stop panicking won the FED starts panicking, and 285 00:13:22,120 --> 00:13:24,720 Speaker 6: maybe a little bit of panic from the Fed might 286 00:13:24,760 --> 00:13:27,120 Speaker 6: go a long way to helping the bond market stop 287 00:13:27,160 --> 00:13:28,640 Speaker 6: with this yield rise on the long end. 288 00:13:28,720 --> 00:13:30,720 Speaker 4: As about a point, Jim, I appreciate your time, buddy, 289 00:13:30,720 --> 00:13:33,679 Speaker 4: as always, Jim Pianco there of Bianco Research, if you're 290 00:13:33,720 --> 00:13:36,240 Speaker 4: just shown in the program, welcome a news conference with 291 00:13:36,679 --> 00:13:40,280 Speaker 4: Chair Wash in about seventeen minutes time. The decision thirteen 292 00:13:40,360 --> 00:13:43,640 Speaker 4: minutes ago, leaving rates unchanged to vote of nine to three, 293 00:13:43,760 --> 00:13:48,599 Speaker 4: three dissenting voices, three regional FED presidents Hammock of Cleveland, 294 00:13:48,840 --> 00:13:52,440 Speaker 4: Kashgari of Minneapolis, and Logan of Dallas, three voices who 295 00:13:52,800 --> 00:13:55,040 Speaker 4: have given us a decent step that this might be 296 00:13:55,240 --> 00:13:57,760 Speaker 4: the outcome of this meeting, at least for them. Next 297 00:13:57,800 --> 00:13:59,520 Speaker 4: two weeks might be interesting. I think we're all going 298 00:13:59,559 --> 00:14:02,200 Speaker 4: to look for that schedule, aren't we. Those speeches what 299 00:14:02,280 --> 00:14:04,280 Speaker 4: everyone thinks, and this was always the problem for this 300 00:14:04,320 --> 00:14:07,400 Speaker 4: fed chair looking to put communication back in the box, 301 00:14:07,480 --> 00:14:09,400 Speaker 4: back in the bottle, and throw it away and bury it. 302 00:14:09,800 --> 00:14:12,920 Speaker 4: Everybody else still wants to talk. And if you speak less, 303 00:14:13,240 --> 00:14:15,400 Speaker 4: we just put more weight on the people that do speak. 304 00:14:15,640 --> 00:14:17,120 Speaker 4: And that's what we'll be doing in the coming weeks. 305 00:14:17,160 --> 00:14:18,920 Speaker 5: It's going to be a vote telling exercise over the 306 00:14:19,000 --> 00:14:22,080 Speaker 5: next two weeks, with people watching every single press conference, 307 00:14:22,120 --> 00:14:25,040 Speaker 5: every single speech and wondering who is going to be 308 00:14:25,080 --> 00:14:27,080 Speaker 5: the additional voice to vote for a rate hike and 309 00:14:27,120 --> 00:14:29,680 Speaker 5: how close are they And that is ultimately the calculus 310 00:14:29,920 --> 00:14:31,840 Speaker 5: that we're going to see. Kevin Warsh could potentially put 311 00:14:31,840 --> 00:14:33,360 Speaker 5: that back in the bottle if he gives us some 312 00:14:33,400 --> 00:14:37,200 Speaker 5: sort of quantification or characterization of what the reaction function is. 313 00:14:37,440 --> 00:14:39,400 Speaker 5: But barring that, we're going to be doing vote telling 314 00:14:39,440 --> 00:14:40,680 Speaker 5: and we're going to have a bingo card and it's 315 00:14:40,680 --> 00:14:41,040 Speaker 5: going to be a. 316 00:14:41,040 --> 00:14:41,400 Speaker 1: Lot of fun. 317 00:14:41,440 --> 00:14:43,680 Speaker 4: Can we go from three to four, to five, to six, etc. 318 00:14:43,960 --> 00:14:46,840 Speaker 4: To seven? Dance swamk of KPMG joined just now for more. Dan, 319 00:14:47,120 --> 00:14:49,240 Speaker 4: Welcome to the program. Do you believe this is the 320 00:14:49,320 --> 00:14:52,160 Speaker 4: direction of travel? This is the first of many votes 321 00:14:52,360 --> 00:14:53,760 Speaker 4: that will look for higher interest rates? 322 00:14:55,800 --> 00:14:59,760 Speaker 7: Absolutely. I think the three percents from the president is 323 00:15:00,200 --> 00:15:03,520 Speaker 7: exactly we should expect right now, and those descents were 324 00:15:03,520 --> 00:15:06,280 Speaker 7: not done in a vacuum. They also are representing presidents 325 00:15:06,320 --> 00:15:09,400 Speaker 7: who could not vote at this meeting. That is often 326 00:15:09,440 --> 00:15:11,920 Speaker 7: what is done. And I also think many people on 327 00:15:11,960 --> 00:15:14,880 Speaker 7: the board are leaning towards a rate hike as well. 328 00:15:14,880 --> 00:15:17,840 Speaker 7: We've already gotten a lot of indication of that, and 329 00:15:17,920 --> 00:15:20,440 Speaker 7: so I do think we do get rate hikes in September. 330 00:15:20,480 --> 00:15:23,520 Speaker 7: I actually think today would have been better, but I 331 00:15:23,640 --> 00:15:26,240 Speaker 7: expected them to skip today even though there was a 332 00:15:26,280 --> 00:15:28,720 Speaker 7: thirty percent chance out there that they would do it today, 333 00:15:29,200 --> 00:15:32,360 Speaker 7: because we're starting to get This is something that Kevin 334 00:15:32,360 --> 00:15:34,840 Speaker 7: Warsh has said himself. We've had five years of inflation. 335 00:15:34,960 --> 00:15:36,920 Speaker 7: It's not all the Fed's fault, but at the end 336 00:15:36,960 --> 00:15:39,000 Speaker 7: of the day, it is the fed's choice, as Jim 337 00:15:39,040 --> 00:15:42,040 Speaker 7: pointed out, to do something about it, and we need 338 00:15:42,080 --> 00:15:44,520 Speaker 7: to do something about this inflation and has been around 339 00:15:44,560 --> 00:15:47,560 Speaker 7: for too long and created a muscle memory. It's becoming 340 00:15:47,880 --> 00:15:50,560 Speaker 7: the norm instead of the anomaly. And tomorrow we're going 341 00:15:50,640 --> 00:15:53,960 Speaker 7: to get that PCE data, which the reason why Beth 342 00:15:53,960 --> 00:15:56,400 Speaker 7: Hammock sort of threw down the Gauntlin and wrote the 343 00:15:56,440 --> 00:15:59,960 Speaker 7: LinkedIn post hours befoard the fed's blackout period, letting us 344 00:16:00,160 --> 00:16:03,440 Speaker 7: know exactly how she felt about race was because they 345 00:16:03,440 --> 00:16:05,960 Speaker 7: were tracking the inputs on that number, and it will 346 00:16:05,960 --> 00:16:08,160 Speaker 7: be three point three percent on the core and on 347 00:16:08,240 --> 00:16:12,040 Speaker 7: the supercore I think three point seven percent supercore services. 348 00:16:12,120 --> 00:16:14,560 Speaker 7: That is sticky and hot and hotter than it was 349 00:16:14,720 --> 00:16:15,840 Speaker 7: at the beginning of the year. 350 00:16:16,000 --> 00:16:18,360 Speaker 5: Well, Michael had a really good point earlier and she said, 351 00:16:18,360 --> 00:16:20,480 Speaker 5: it kind of depends why they hike. Is it going 352 00:16:20,520 --> 00:16:22,440 Speaker 5: to be that the data shows a reacceleration or is 353 00:16:22,440 --> 00:16:24,360 Speaker 5: it just that they're running out of patients. And if 354 00:16:24,360 --> 00:16:26,920 Speaker 5: they're running out of patients and tolerance of high inflation 355 00:16:26,960 --> 00:16:29,520 Speaker 5: after more than five years, that typically isn't a great 356 00:16:29,520 --> 00:16:31,320 Speaker 5: place for a central banker to be. And would you 357 00:16:31,360 --> 00:16:31,920 Speaker 5: agree with that? 358 00:16:34,360 --> 00:16:36,560 Speaker 7: I do agree with that to some extent, although I 359 00:16:36,600 --> 00:16:38,640 Speaker 7: think we still got a little more inflation out there 360 00:16:38,680 --> 00:16:40,920 Speaker 7: as well. But the problem is that it's just been 361 00:16:40,960 --> 00:16:43,920 Speaker 7: too persistent. This is too long, for too much, for 362 00:16:43,960 --> 00:16:47,080 Speaker 7: too long, and it's compounded much like I've argued, you know, 363 00:16:47,200 --> 00:16:50,720 Speaker 7: compounding stock returns have raised the level of wealth, compounding 364 00:16:50,760 --> 00:16:53,240 Speaker 7: inflation has risen the level of prices to be too 365 00:16:53,280 --> 00:16:56,120 Speaker 7: high for too many, and that being front and center 366 00:16:56,680 --> 00:16:59,840 Speaker 7: is not the definition of price stability. And that is 367 00:17:00,120 --> 00:17:02,480 Speaker 7: what the Federal Reserve is charged to do. And with 368 00:17:02,520 --> 00:17:05,600 Speaker 7: the labor market in a stronger position, there's no reason 369 00:17:05,720 --> 00:17:06,439 Speaker 7: not to do it. 370 00:17:06,800 --> 00:17:09,119 Speaker 3: Now. Well, Michael, I'm not going to go to the 371 00:17:09,160 --> 00:17:12,199 Speaker 3: one with Sterling academics at Michigan and economics. I'm going 372 00:17:12,240 --> 00:17:15,159 Speaker 3: to go to the classics major from Pennsylvania. Is it 373 00:17:15,240 --> 00:17:17,960 Speaker 3: a small matter that the three des centers are an 374 00:17:18,000 --> 00:17:24,359 Speaker 3: aerospace engineer educated, a public policy Lori Logan educated, and 375 00:17:24,400 --> 00:17:26,920 Speaker 3: Beth Hammock of twenty one was on the desk at 376 00:17:26,920 --> 00:17:31,520 Speaker 3: Golden Sex. Is this almost a dissent rebellion against traditional 377 00:17:31,600 --> 00:17:33,200 Speaker 3: monetary economics? 378 00:17:34,000 --> 00:17:38,200 Speaker 1: It may be more common sense than anything else. I think, 379 00:17:38,320 --> 00:17:41,639 Speaker 1: as Diane pointed out, you've been a long way away 380 00:17:41,640 --> 00:17:44,920 Speaker 1: from the two percent target for a long period of time. 381 00:17:45,359 --> 00:17:48,360 Speaker 1: There could be a little bit of disinflation the system. 382 00:17:48,440 --> 00:17:51,879 Speaker 1: I wonder what happens if the next couple prints on 383 00:17:52,080 --> 00:17:55,000 Speaker 1: core PCEE you go from three to four to three, 384 00:17:55,080 --> 00:17:57,879 Speaker 1: three to three one, and you see you're still above 385 00:17:57,920 --> 00:18:01,320 Speaker 1: two percent. But what about in core CPI you go 386 00:18:01,480 --> 00:18:04,840 Speaker 1: from two six to two five to two three, you're 387 00:18:04,880 --> 00:18:09,480 Speaker 1: still above two percent. I think the sense reflect that, hey, 388 00:18:09,480 --> 00:18:12,840 Speaker 1: we're not at our target. If this swings around the 389 00:18:12,880 --> 00:18:16,240 Speaker 1: other way, we're poised to move, but you don't move yet. 390 00:18:16,640 --> 00:18:18,840 Speaker 1: If you're starting to see some disinflat when. 391 00:18:18,760 --> 00:18:20,840 Speaker 4: You talk about Goldman the death star in front of 392 00:18:20,920 --> 00:18:26,000 Speaker 4: JP Morgan, can we do that on the desk? 393 00:18:26,080 --> 00:18:30,399 Speaker 3: And I just nobody, nobody dissenting. John did the usual 394 00:18:30,520 --> 00:18:31,400 Speaker 3: economic path. 395 00:18:31,560 --> 00:18:34,720 Speaker 4: Let's go to that. Let's go to the quote of 396 00:18:34,760 --> 00:18:37,439 Speaker 4: hers in the LinkedIn statement going into the quiet period, 397 00:18:38,119 --> 00:18:40,840 Speaker 4: the lead up to this descent, there is no conflict 398 00:18:40,840 --> 00:18:44,080 Speaker 4: in our mandate. Inflation is too high, the labor market 399 00:18:44,119 --> 00:18:46,399 Speaker 4: is run around my level of maximum employment. For the 400 00:18:46,440 --> 00:18:49,320 Speaker 4: first time in my tenure, I'm hearing from businesses who 401 00:18:49,400 --> 00:18:52,879 Speaker 4: say they think we need to take action to curb inflation. 402 00:18:53,320 --> 00:18:56,199 Speaker 4: And that's pretty punchy stuff. And when you said that 403 00:18:56,280 --> 00:18:58,600 Speaker 4: dissent might be on the behalf of others on the 404 00:18:58,600 --> 00:19:01,720 Speaker 4: committee who don't get a vote. How many regional FED 405 00:19:01,760 --> 00:19:04,720 Speaker 4: presidents are hearing the same thing from that districts across 406 00:19:04,760 --> 00:19:05,360 Speaker 4: this country. 407 00:19:07,240 --> 00:19:09,040 Speaker 7: I think they all are, And I think that's the 408 00:19:09,080 --> 00:19:11,880 Speaker 7: important you know, sort of what we're seeing out there. 409 00:19:11,880 --> 00:19:15,440 Speaker 7: We are seeing many people across the country showing up 410 00:19:15,440 --> 00:19:17,960 Speaker 7: in the Beige book as well. It's showing up out 411 00:19:17,960 --> 00:19:21,520 Speaker 7: there that firms still have some pipeline even on last 412 00:19:21,600 --> 00:19:24,800 Speaker 7: year's tariffs. So the new tariffs, they're reinstating old tariffs 413 00:19:24,800 --> 00:19:26,880 Speaker 7: that won't add a lot of extra tariffs out there. 414 00:19:26,960 --> 00:19:30,040 Speaker 7: But we also have Russia sanctions which allow up to 415 00:19:30,080 --> 00:19:32,720 Speaker 7: one hundred percent tariffs on some of our trading partners 416 00:19:32,760 --> 00:19:36,119 Speaker 7: at the discretion of the President. So those are coming 417 00:19:36,680 --> 00:19:40,200 Speaker 7: going through Congress right now. All of that is more 418 00:19:40,280 --> 00:19:44,479 Speaker 7: chook points, more shocks at the same time that we 419 00:19:44,520 --> 00:19:48,520 Speaker 7: still have this persistent underlying inflation that's just not going away. 420 00:19:48,960 --> 00:19:50,359 Speaker 7: And to think that it's going to go away on 421 00:19:50,520 --> 00:19:53,320 Speaker 7: ZWN when we're seeing things like in the wages in 422 00:19:53,359 --> 00:19:56,680 Speaker 7: the leisure and hospitality sector, which shed jobs last month, 423 00:19:56,880 --> 00:20:00,280 Speaker 7: wages actually accelerated, that's something to watch. That's it's the 424 00:20:00,280 --> 00:20:03,760 Speaker 7: service sector that is where we're seeing that booing sort 425 00:20:03,760 --> 00:20:08,400 Speaker 7: of effect of wages. Also the cost holding up that inflation. 426 00:20:08,680 --> 00:20:11,400 Speaker 7: That is something the Federal Reserve is very concerned about. 427 00:20:11,480 --> 00:20:13,760 Speaker 7: You want low wage workers to get more pay, but 428 00:20:13,880 --> 00:20:16,440 Speaker 7: only if they get more paid that's above and beyond 429 00:20:16,800 --> 00:20:17,880 Speaker 7: the level of inflation. 430 00:20:18,400 --> 00:20:20,000 Speaker 1: Bob, I'm struck by the neutral rate. 431 00:20:20,040 --> 00:20:22,720 Speaker 5: We haven't talked about it once, but given the sort 432 00:20:22,720 --> 00:20:25,400 Speaker 5: of competition for capital that seems to be going on globally, 433 00:20:25,840 --> 00:20:28,480 Speaker 5: is it possible just that the real rate has to 434 00:20:28,520 --> 00:20:31,880 Speaker 5: be a whole lot higher than people previously expected. And frankly, 435 00:20:32,080 --> 00:20:34,000 Speaker 5: we're seeing that in the lack of any kind of 436 00:20:34,040 --> 00:20:35,120 Speaker 5: erosion from demand. 437 00:20:35,680 --> 00:20:38,320 Speaker 1: Remember when the Fed first started doing the dots in 438 00:20:38,400 --> 00:20:42,240 Speaker 1: twenty twelve because they didn't think we in the markets 439 00:20:42,240 --> 00:20:45,040 Speaker 1: were smart enough to know what normal look like. Again, 440 00:20:45,400 --> 00:20:47,600 Speaker 1: so they were going to help us out. And you 441 00:20:47,720 --> 00:20:52,320 Speaker 1: go to that long term median dot, which was perfect textbook. 442 00:20:52,680 --> 00:20:55,320 Speaker 1: It was four and a quarter percent. How did they 443 00:20:55,359 --> 00:20:58,200 Speaker 1: get there? Over the one hundred odd year history of 444 00:20:58,240 --> 00:21:01,520 Speaker 1: the FED, the real Fed funds rate had been two 445 00:21:01,520 --> 00:21:04,680 Speaker 1: and a quarter percent? What were they targeting two percent? 446 00:21:04,960 --> 00:21:08,119 Speaker 1: You put the two together. There's your fancy algorithm for 447 00:21:08,280 --> 00:21:11,680 Speaker 1: and a quarter percent. Wouldn't it be funny if that 448 00:21:11,760 --> 00:21:14,200 Speaker 1: proves to be correct over the next decade. 449 00:21:15,080 --> 00:21:17,560 Speaker 3: I look, John, where we are with this, and I 450 00:21:17,640 --> 00:21:19,440 Speaker 3: just again, we got to get to the next meeting, 451 00:21:19,480 --> 00:21:22,520 Speaker 3: this press conference. To me, I mean to Bob, it's 452 00:21:22,560 --> 00:21:25,119 Speaker 3: gone out on Twitter. What Bob said about what are 453 00:21:25,160 --> 00:21:27,400 Speaker 3: we going to see? We have no clue what we're 454 00:21:27,440 --> 00:21:28,120 Speaker 3: going to see. 455 00:21:27,920 --> 00:21:30,719 Speaker 4: Here zero zero, It's totally up to him. 456 00:21:30,760 --> 00:21:31,720 Speaker 3: Will he be on time? 457 00:21:31,800 --> 00:21:33,720 Speaker 4: I mentioned to Mike, I hope he will be. I 458 00:21:33,760 --> 00:21:35,800 Speaker 4: mentioned to Mike earlier on this morning when we're on 459 00:21:35,800 --> 00:21:38,680 Speaker 4: Bloomberg's surveillance, and I said to Mike, as a journalist, 460 00:21:38,680 --> 00:21:40,560 Speaker 4: you have to change your questions because no one wants 461 00:21:40,560 --> 00:21:42,240 Speaker 4: to be the journalist in the news conference that gets 462 00:21:42,240 --> 00:21:44,800 Speaker 4: a two word response and it involves task force. No 463 00:21:44,880 --> 00:21:46,399 Speaker 4: one wants to be that guy. So what the kind 464 00:21:46,400 --> 00:21:48,880 Speaker 4: of questions you need to ask Kevin Walsh that maybe 465 00:21:48,920 --> 00:21:51,399 Speaker 4: wouldn't have thought of asking cham and Powell? 466 00:21:51,480 --> 00:21:53,520 Speaker 5: Yeah, well what? And what Mike said was you've got 467 00:21:53,560 --> 00:21:56,080 Speaker 5: to be very specific. And I liked his question about specifically, 468 00:21:56,080 --> 00:21:58,320 Speaker 5: how are you thinking about oil because right now you 469 00:21:58,359 --> 00:22:00,560 Speaker 5: could say a lot of the inputs to inflation or 470 00:22:00,600 --> 00:22:02,919 Speaker 5: supply shocks. How do you consider supply shocks when they 471 00:22:02,920 --> 00:22:05,760 Speaker 5: are repeated supply shocks again and again and aren't likely 472 00:22:05,800 --> 00:22:08,119 Speaker 5: to stop being shocks considering the fact that this conflict 473 00:22:08,119 --> 00:22:09,240 Speaker 5: isn't going away anytime soon. 474 00:22:09,320 --> 00:22:11,560 Speaker 4: Dan, You're great at this final question what's your question 475 00:22:11,880 --> 00:22:13,800 Speaker 4: for the FED share You've talked about a new chair, 476 00:22:13,840 --> 00:22:16,120 Speaker 4: an old guard. What's your question for this guy. 477 00:22:17,960 --> 00:22:20,400 Speaker 7: I guess my question is really on that neutral rate, 478 00:22:20,560 --> 00:22:23,760 Speaker 7: exactly as Bob outlined. I think we're actually lower than 479 00:22:23,800 --> 00:22:25,720 Speaker 7: the neutral rate right now, and I think many on 480 00:22:25,840 --> 00:22:28,000 Speaker 7: the FED believe that we're lower than the neutral rate, 481 00:22:28,080 --> 00:22:30,320 Speaker 7: or at least at the neutral rate, which is not 482 00:22:30,359 --> 00:22:32,919 Speaker 7: where we should be if inflation is at this level. 483 00:22:33,000 --> 00:22:36,000 Speaker 4: Dan appreciate it. Dan swunk there at KPMG is such 484 00:22:36,000 --> 00:22:37,960 Speaker 4: a good point. There's a phrase that you heard a lot, 485 00:22:38,000 --> 00:22:40,600 Speaker 4: I think over the previous year or two when there 486 00:22:40,640 --> 00:22:44,440 Speaker 4: were cunning rates. They talk about being sufficiently restrictive. How 487 00:22:44,440 --> 00:22:46,720 Speaker 4: many times have you heard that in the last six months, 488 00:22:46,760 --> 00:22:49,520 Speaker 4: being sufficiently restrictive. I haven't heard it at all from 489 00:22:49,560 --> 00:22:50,760 Speaker 4: a single FED member. 490 00:22:50,640 --> 00:22:52,760 Speaker 5: Because, guess what, the evidence doesn't back that up, that 491 00:22:52,760 --> 00:22:55,359 Speaker 5: they're sufficially restrictive, because inflation moved in the wrong direction, 492 00:22:55,400 --> 00:22:57,840 Speaker 5: and increasingly people are saying that the three insurance cuts 493 00:22:57,880 --> 00:23:00,040 Speaker 5: you last year were a mistake, and that act we 494 00:23:00,040 --> 00:23:01,879 Speaker 5: old some of the incredible run up and some of 495 00:23:01,880 --> 00:23:03,240 Speaker 5: the memory chip names. 496 00:23:03,480 --> 00:23:05,840 Speaker 4: Victori Fana as a crossmok joins us now for more Victoria, 497 00:23:05,880 --> 00:23:08,160 Speaker 4: welcome to the program. Is it time to take back 498 00:23:08,240 --> 00:23:10,359 Speaker 4: some of the insurance we took out last year with 499 00:23:10,400 --> 00:23:13,200 Speaker 4: three cuts and the year before with interest rate cuts 500 00:23:13,240 --> 00:23:15,240 Speaker 4: then too, Yeah. 501 00:23:15,119 --> 00:23:17,680 Speaker 8: Jonathan, I actually thought that's why we might actually see 502 00:23:17,680 --> 00:23:19,879 Speaker 8: a rate hike today, and that was going to be 503 00:23:19,960 --> 00:23:22,840 Speaker 8: the explanation for it. Not that they were concerned about 504 00:23:23,280 --> 00:23:25,800 Speaker 8: longer term inflation. They were going to be looking through 505 00:23:25,800 --> 00:23:28,520 Speaker 8: the Middle East, through oil, all of that. I think 506 00:23:28,560 --> 00:23:31,520 Speaker 8: that the concern was going to say, or the explanation 507 00:23:31,640 --> 00:23:33,480 Speaker 8: was going to be, we're just taking off some of 508 00:23:33,520 --> 00:23:36,639 Speaker 8: that accommodation from last year that wasn't really necessary. I 509 00:23:36,640 --> 00:23:39,919 Speaker 8: wouldn't be surprised if that's part of the explanation they 510 00:23:40,040 --> 00:23:42,800 Speaker 8: use at the September meeting, if they decide to hike then, 511 00:23:43,119 --> 00:23:45,280 Speaker 8: but I definitely think it's part of that story. It's 512 00:23:45,320 --> 00:23:48,040 Speaker 8: part of where is neutral rate. It's part of the 513 00:23:48,440 --> 00:23:50,879 Speaker 8: concept that maybe we are not as restrictive as a 514 00:23:50,920 --> 00:23:53,040 Speaker 8: lot of people think we are. All of that goes 515 00:23:53,040 --> 00:23:55,120 Speaker 8: together to tell us we probably have a rate hike coming. 516 00:23:55,440 --> 00:23:57,720 Speaker 5: Victoria. Or you're in the heart of oil land in 517 00:23:57,720 --> 00:24:00,440 Speaker 5: the United States, you're in Houston and it's a huge 518 00:24:00,440 --> 00:24:02,520 Speaker 5: boon going on, and I'm looking at the earnings coming 519 00:24:02,520 --> 00:24:05,240 Speaker 5: from the oil sector and they're doing wonderfully. It's been 520 00:24:05,720 --> 00:24:09,320 Speaker 5: both yes, penalization for some consumers, but on the flip side, 521 00:24:09,359 --> 00:24:11,520 Speaker 5: it's only adding to some of the robustness that oil 522 00:24:11,520 --> 00:24:13,800 Speaker 5: prices have gone up to such degree. How much do 523 00:24:13,840 --> 00:24:17,240 Speaker 5: you agree with what we've heard from some regional FED presidents, 524 00:24:17,280 --> 00:24:19,959 Speaker 5: which is that companies are asking for action as they 525 00:24:20,000 --> 00:24:23,080 Speaker 5: see both the momentum increase in tandem with prices. 526 00:24:25,480 --> 00:24:25,680 Speaker 6: Yeah. 527 00:24:25,720 --> 00:24:29,159 Speaker 8: You know, Lisa, it's an interesting topic because you always 528 00:24:29,200 --> 00:24:32,080 Speaker 8: have people when oil prices come down, they want to 529 00:24:32,119 --> 00:24:34,680 Speaker 8: know why they're not, you know, moving fast enough to 530 00:24:35,160 --> 00:24:37,240 Speaker 8: bring oil prices down. And yet at the same time 531 00:24:37,280 --> 00:24:40,040 Speaker 8: they want to know why these oil companies aren't investing 532 00:24:40,080 --> 00:24:42,320 Speaker 8: more cash, Why aren't they drilling more, Why aren't they 533 00:24:42,320 --> 00:24:45,160 Speaker 8: doing more things? And they have to have the free 534 00:24:45,200 --> 00:24:46,920 Speaker 8: cash flow to do that, and I know their balance 535 00:24:46,960 --> 00:24:49,680 Speaker 8: sheets are really strong right now. Energy is the best 536 00:24:49,680 --> 00:24:52,959 Speaker 8: performing sector that we've seen so far this year, So 537 00:24:53,720 --> 00:24:56,920 Speaker 8: I think there's an element here that the energy companies 538 00:24:56,960 --> 00:24:59,160 Speaker 8: are really kind of sitting on their hands a little 539 00:24:59,160 --> 00:25:02,480 Speaker 8: bit because they know that when the Middle East conflict 540 00:25:02,800 --> 00:25:05,560 Speaker 8: is resolved, they're going to see that drop in prices. 541 00:25:05,600 --> 00:25:08,639 Speaker 8: Look how quickly we saw prices come down almost what 542 00:25:08,760 --> 00:25:10,919 Speaker 8: twenty five to thirty dollars a barrel for Brent and 543 00:25:11,160 --> 00:25:14,480 Speaker 8: WTI when we had the memorandum of understanding, and we've 544 00:25:14,480 --> 00:25:16,359 Speaker 8: seen it go back up in the last few days. 545 00:25:16,600 --> 00:25:17,800 Speaker 8: I do think there's going to be a lot of 546 00:25:17,880 --> 00:25:22,399 Speaker 8: volatility here. Earnings are actually expected to come down the 547 00:25:22,440 --> 00:25:24,639 Speaker 8: rest of the year when you're looking at the energy sector, 548 00:25:24,800 --> 00:25:27,520 Speaker 8: So I would be careful here. They're doing really well 549 00:25:27,600 --> 00:25:29,760 Speaker 8: right now. I think it's a great long term holding 550 00:25:29,760 --> 00:25:32,000 Speaker 8: to have in your portfolio, but I do think the 551 00:25:32,119 --> 00:25:35,440 Speaker 8: energy companies are going to be a little bit cautious here, Victoria. 552 00:25:35,480 --> 00:25:37,840 Speaker 4: Look how limited the runny was in bonds when we 553 00:25:37,920 --> 00:25:41,440 Speaker 4: had that correction. Include It tells me that the outlook 554 00:25:41,440 --> 00:25:44,720 Speaker 4: for rates is not that dependent on the path for royal. 555 00:25:45,119 --> 00:25:46,920 Speaker 4: Is that a fair assumption of fact conclusion? 556 00:25:48,359 --> 00:25:51,080 Speaker 8: I think it's a pretty fair assumption, Jonathan, because actually 557 00:25:51,119 --> 00:25:53,280 Speaker 8: I think what the bond market is looking at is saying, 558 00:25:53,280 --> 00:25:57,520 Speaker 8: wait a minute, yes we have this oil component, and 559 00:25:57,560 --> 00:26:00,960 Speaker 8: it's making the headline numbers come down quite negatively. When 560 00:26:00,960 --> 00:26:03,760 Speaker 8: we're looking at inflation reports, but the core and the 561 00:26:03,840 --> 00:26:07,600 Speaker 8: super core where it's not included, we're actually seeing some 562 00:26:07,640 --> 00:26:11,320 Speaker 8: still moves higher in those elements. So to me, that's 563 00:26:11,359 --> 00:26:14,000 Speaker 8: the key question to this FED. How are we going 564 00:26:14,080 --> 00:26:16,560 Speaker 8: to measure how much some of these shocks that you 565 00:26:16,640 --> 00:26:20,439 Speaker 8: want to look through are actually seeping down into the 566 00:26:20,480 --> 00:26:22,880 Speaker 8: economy as a whole. They say, the economy is expanding 567 00:26:22,880 --> 00:26:25,520 Speaker 8: at a solid pace, but how long if we keep 568 00:26:25,520 --> 00:26:27,920 Speaker 8: seeing pressures come in at that point? So I think 569 00:26:27,960 --> 00:26:30,639 Speaker 8: the bond market is more concerned around that, more concerned 570 00:26:30,680 --> 00:26:34,679 Speaker 8: around deficit spending, around money supply, not so much around 571 00:26:34,920 --> 00:26:36,399 Speaker 8: oil price changes. 572 00:26:36,520 --> 00:26:38,280 Speaker 4: Victoria, it's going to see you. I appreciate your time 573 00:26:38,280 --> 00:26:41,000 Speaker 4: as always, Victoria Fernandez. There of crossmud going in on 574 00:26:41,000 --> 00:26:44,040 Speaker 4: this FED decision. Equities this afternoon still negative by zero 575 00:26:44,119 --> 00:26:45,960 Speaker 4: point five on the S and P five hundred in 576 00:26:46,000 --> 00:26:48,040 Speaker 4: the bond market, twos, tens and thirty shaping up as 577 00:26:48,040 --> 00:26:51,600 Speaker 4: follows twos yields down just a single basis point right now, 578 00:26:51,640 --> 00:26:56,359 Speaker 4: twos around four twenty eight. Framing matters these three descents, 579 00:26:56,440 --> 00:26:58,560 Speaker 4: What are the character what is the character of each 580 00:26:58,600 --> 00:27:01,520 Speaker 4: individual descent? What will they say in the coming weeks 581 00:27:01,520 --> 00:27:04,320 Speaker 4: in their statements? Is this about taking back the insurance 582 00:27:04,359 --> 00:27:06,520 Speaker 4: they took out last year and the year before, or 583 00:27:06,560 --> 00:27:07,680 Speaker 4: is it more than just that. 584 00:27:07,880 --> 00:27:10,920 Speaker 5: Well, they were all indicated about taking back the insurance 585 00:27:10,920 --> 00:27:13,120 Speaker 5: from last year, and they've all talked about the price 586 00:27:13,160 --> 00:27:15,360 Speaker 5: pressure that consumers are feeling and that they're hearing, even 587 00:27:15,359 --> 00:27:18,959 Speaker 5: from companies that said, my question is about the others 588 00:27:19,040 --> 00:27:21,160 Speaker 5: and who's going to potentially join them at a time 589 00:27:21,200 --> 00:27:24,520 Speaker 5: of incredibly volatile inflation, And is the volatility and inflation 590 00:27:24,760 --> 00:27:27,480 Speaker 5: enough to actually get them more concerned that they need 591 00:27:27,480 --> 00:27:28,840 Speaker 5: to make a move and take a step there. 592 00:27:28,880 --> 00:27:31,720 Speaker 3: In defense of Chairman Warrish, we're all going to be 593 00:27:31,720 --> 00:27:34,199 Speaker 3: waiting on the data now. I mean the data is 594 00:27:34,200 --> 00:27:37,760 Speaker 3: incredibly important. Through Jackson hole under the next week. 595 00:27:37,560 --> 00:27:39,679 Speaker 4: You're curious case of this particular meeting Tacres that we 596 00:27:39,720 --> 00:27:41,760 Speaker 4: looked at the data and it was sefter than expected 597 00:27:41,800 --> 00:27:44,760 Speaker 4: on CPI and PPI and it was a feeling that 598 00:27:44,760 --> 00:27:46,880 Speaker 4: we would move on. And we sat around this table 599 00:27:46,880 --> 00:27:49,000 Speaker 4: at the time when the data dropped on Bluebeck Savants 600 00:27:49,040 --> 00:27:51,560 Speaker 4: on Blueback TV on that very morning, sat there with 601 00:27:51,600 --> 00:27:53,240 Speaker 4: you and we both said the same thing. It removes 602 00:27:53,280 --> 00:27:55,560 Speaker 4: the urgency to hike. It won't kill the story. The 603 00:27:55,640 --> 00:27:58,520 Speaker 4: debate continues, and the debate does continue even this afternoon, 604 00:27:58,560 --> 00:28:01,520 Speaker 4: and now we're talking about September and maybe Septembers the day, 605 00:28:01,560 --> 00:28:03,800 Speaker 4: and this is the direction of travel. Story just won't 606 00:28:03,840 --> 00:28:04,160 Speaker 4: go away. 607 00:28:04,600 --> 00:28:06,879 Speaker 5: Take a look at earnings. Earnings have been on fire. 608 00:28:07,040 --> 00:28:09,320 Speaker 5: And it's not just in the tech sector, it's across 609 00:28:09,359 --> 00:28:11,639 Speaker 5: the board. The equal weights up performing also because of 610 00:28:11,640 --> 00:28:13,520 Speaker 5: a fundamental kind of bleed. 611 00:28:13,320 --> 00:28:14,959 Speaker 4: Up and regional banks in this country. 612 00:28:15,119 --> 00:28:19,320 Speaker 5: I mean, really, it's something that's more significant, so sufficiently restrictive. 613 00:28:19,720 --> 00:28:21,760 Speaker 5: If you're looking at crimp growth in any capacity or 614 00:28:21,800 --> 00:28:23,719 Speaker 5: looking for a slowdown, it's not happening. 615 00:28:23,760 --> 00:28:25,080 Speaker 4: Well, what I was going to say, final word, but 616 00:28:25,119 --> 00:28:26,639 Speaker 4: you might be sticking around. I have no idea how 617 00:28:26,800 --> 00:28:28,879 Speaker 4: this news conference will be, but give us a final 618 00:28:28,920 --> 00:28:31,080 Speaker 4: thought on what you'll be looking for through what is 619 00:28:31,119 --> 00:28:32,159 Speaker 4: not a sleepy summer. 620 00:28:32,800 --> 00:28:35,120 Speaker 1: I think the Fed got it right today so far. 621 00:28:35,200 --> 00:28:37,320 Speaker 1: We'll see if there's a press conference in what gets 622 00:28:37,400 --> 00:28:42,480 Speaker 1: up or not. I'm particularly glad with the fact that 623 00:28:42,520 --> 00:28:47,120 Speaker 1: they've listed the three dissenters. Let's assume that the vote 624 00:28:47,120 --> 00:28:49,920 Speaker 1: had been seven to five in favor of a rate hike. 625 00:28:50,320 --> 00:28:53,480 Speaker 1: By listing the five dissenters, we would know the seven 626 00:28:53,560 --> 00:28:56,000 Speaker 1: people who voted for a rate hike, and we'd sit 627 00:28:56,040 --> 00:28:58,320 Speaker 1: there and go, we got two or three, Where did 628 00:28:58,360 --> 00:29:01,080 Speaker 1: the other four or five come from? What were they 629 00:29:01,160 --> 00:29:04,000 Speaker 1: looking at? They didn't say any of this two weeks ago. 630 00:29:04,360 --> 00:29:07,080 Speaker 1: What changed their mind is at all emotion, and I 631 00:29:07,120 --> 00:29:11,120 Speaker 1: think that's a great regulator to a central bank and 632 00:29:11,200 --> 00:29:13,400 Speaker 1: prevents them from just acting on emotion. 633 00:29:13,640 --> 00:29:16,280 Speaker 4: Well, Michael at JP Morgan Asset Management, Bob, thank you. 634 00:29:16,400 --> 00:29:18,440 Speaker 4: Might be back within five or ten minutes time. This 635 00:29:18,520 --> 00:29:21,160 Speaker 4: news conference is about to begin. In about sixty seconds 636 00:29:21,200 --> 00:29:23,840 Speaker 4: from now, a newly minted FED check Kevin Walsh, will 637 00:29:23,840 --> 00:29:27,200 Speaker 4: appear for his second press conference. Widely criticized last time around, 638 00:29:27,520 --> 00:29:30,360 Speaker 4: not for his refusal to offer forward guidance that's gone, 639 00:29:30,400 --> 00:29:33,160 Speaker 4: We've moved on, but his refusal to articulate his so 640 00:29:33,320 --> 00:29:36,240 Speaker 4: called reaction function. I think three dissenters of the FED 641 00:29:36,280 --> 00:29:38,040 Speaker 4: have been pretty clear about how they think about the 642 00:29:38,040 --> 00:29:40,560 Speaker 4: incoming data and where they think policy should be. 643 00:29:40,800 --> 00:29:43,520 Speaker 5: I think Mike's question earlier is a really important one. 644 00:29:43,560 --> 00:29:46,160 Speaker 5: How do you consider oil and how potentially does the 645 00:29:46,280 --> 00:29:49,440 Speaker 5: increase in prices affect your view? Considering it does tend 646 00:29:49,440 --> 00:29:51,720 Speaker 5: to be a one time shock, but when you have 647 00:29:51,880 --> 00:29:55,400 Speaker 5: rolling shocks, there is another type of dynamic that takes hold, 648 00:29:55,600 --> 00:29:56,560 Speaker 5: and that is what we've seen. 649 00:29:56,600 --> 00:29:58,560 Speaker 4: I'm not a big gambler. In fact, I'm against betting, 650 00:29:58,640 --> 00:30:01,320 Speaker 4: but we'll ask this question, how many trading flows right now? 651 00:30:01,360 --> 00:30:02,880 Speaker 4: Do you think of taking bets about how long this 652 00:30:02,960 --> 00:30:04,960 Speaker 4: news conference will be? Oh with Kevin Walsh. 653 00:30:05,040 --> 00:30:07,080 Speaker 5: I think that's the question. I think we're taking bets 654 00:30:07,160 --> 00:30:09,120 Speaker 5: right now because we're trying to figure out for programming reasons, 655 00:30:09,160 --> 00:30:11,320 Speaker 5: we're gonna have to book out rush number. I think 656 00:30:11,360 --> 00:30:12,960 Speaker 5: it's going to be. I think it's going to be 657 00:30:13,000 --> 00:30:14,400 Speaker 5: forty five minutes and seconds. 658 00:30:14,440 --> 00:30:16,840 Speaker 4: Bramot forty five and how many seconds? 659 00:30:17,120 --> 00:30:18,840 Speaker 5: Forty five and thirty two seconds? 660 00:30:19,240 --> 00:30:19,960 Speaker 4: You planned this game. 661 00:30:20,080 --> 00:30:22,720 Speaker 3: I'm not playing this game. I think you watching Kelsey 662 00:30:22,760 --> 00:30:25,360 Speaker 3: Barrow at JP Morgan with k Here. They're all around 663 00:30:25,560 --> 00:30:27,680 Speaker 3: the terminals, you know, betting here. 664 00:30:27,680 --> 00:30:30,720 Speaker 4: They're probably wants running the book at JP mooret. 665 00:30:30,600 --> 00:30:32,160 Speaker 3: Yeah, I think she's running the book. They're probably in 666 00:30:32,200 --> 00:30:34,520 Speaker 3: a bar over at they're New dis Skyscraper