WEBVTT - Instant Reaction: The Fed Decides 0:00:02.520 --> 0:00:10.440 Bloomberg Audio Studios, Podcasts, radio news. This is a breaking 0:00:10.520 --> 0:00:15.440 news update from Bloomberg, instant reaction and analysis from our 0:00:15.480 --> 0:00:18.439 three thousand journalists and analysts around the world. 0:00:19.120 --> 0:00:22.400 The news is sparse, no change in rates, nine in favor, 0:00:22.800 --> 0:00:27.720 three decent slogan, Hammock and Cashkari. Other than that, there 0:00:27.800 --> 0:00:30.640 is not a word of difference between the June statement 0:00:30.800 --> 0:00:35.160 and this one. Economic activity is expanding at a solid pace. 0:00:35.200 --> 0:00:35.600 It says. 0:00:35.720 --> 0:00:40.280 Uncertainty is elevated in part because of the Middle East. Productivity, 0:00:40.320 --> 0:00:43.960 growth and capital investment are strong. Job gains have kept 0:00:44.000 --> 0:00:48.320 pace with the workforce, and unemployment has changed little. Inflation 0:00:48.520 --> 0:00:52.160 remains elevated relative to the two percent goal, in part 0:00:52.240 --> 0:00:56.320 reflecting supply shocks that have driven price shocks. The statement 0:00:56.440 --> 0:01:01.000 again concludes by saying the Committee will deliver price stability. 0:01:01.480 --> 0:01:04.200 I think this is the shortest summary I have ever 0:01:04.280 --> 0:01:06.600 given you, and I've padded it out a little bit 0:01:06.720 --> 0:01:08.600 just to make it a little longer and feel like 0:01:08.640 --> 0:01:11.240 I've done something. There's no real surprise in here. You 0:01:11.280 --> 0:01:14.640 could point to the dissenters, but they've all said something 0:01:14.640 --> 0:01:16.840 about inflation and the fact that we might have to 0:01:16.920 --> 0:01:19.760 raise interest rates in the future, so it doesn't really 0:01:19.760 --> 0:01:22.000 give you a clue about what's going on, and there's 0:01:22.000 --> 0:01:24.920 no hint in the statement about what might happen in 0:01:25.080 --> 0:01:28.720 the future. So if Kevin Warsh wants a spotlight definitely 0:01:28.720 --> 0:01:29.480 on him today. 0:01:29.360 --> 0:01:30.840 And Michael come back to you in just a second. 0:01:30.920 --> 0:01:34.640 Let's whip through the price action. So as expected, widely expected, 0:01:34.800 --> 0:01:38.119 no change on this decision, some descent not one, not two, 0:01:38.200 --> 0:01:41.399 but three dissenting voices from regional Fed presidents from the 0:01:41.760 --> 0:01:44.080 obvious places. The move in the market is interesting, though. 0:01:44.200 --> 0:01:46.640 Equity's off the lows on the S and P five hundred, 0:01:46.680 --> 0:01:48.800 just to raising some of the losses. So farther southternoon 0:01:48.840 --> 0:01:51.160 on the S and P five hundred, still negative, but 0:01:51.240 --> 0:01:53.000 not as low as we once were with the SMP 0:01:53.360 --> 0:01:55.920 negative just zero point three percent, and we're gaining some 0:01:55.960 --> 0:01:58.600 confidence in the tech trait. The nasdack down by point two. 0:01:58.800 --> 0:02:00.560 In the bond market, let's just the front end of 0:02:00.600 --> 0:02:02.760 the yield curve. Two yr yields were hired by basis 0:02:02.760 --> 0:02:06.040 point of two, now down four to four twenty five. 0:02:06.280 --> 0:02:08.919 So often talk about this Bramo, the difference between economist 0:02:09.000 --> 0:02:12.000 expectations and the risk that the market was pricing gain 0:02:12.280 --> 0:02:13.919 and clearly just a little bit of a gap there 0:02:14.000 --> 0:02:16.400 even with that descent, some relief at the front end 0:02:16.400 --> 0:02:17.839 of the curve a rally on two. 0:02:17.919 --> 0:02:20.320 So there truly was about a thirty percent chance of 0:02:20.320 --> 0:02:22.680 a FED rate hike at this meeting, and that chance 0:02:22.880 --> 0:02:25.560 was not necessarily fulfilled. It is notable, though, that there 0:02:25.560 --> 0:02:27.760 were three descents, and that I think is the news 0:02:27.760 --> 0:02:31.119 from this particular statement, given the fact that Neil Koshkari 0:02:31.200 --> 0:02:34.600 also joined Laurie Logan and Beth Hammick. I was on 0:02:34.639 --> 0:02:36.520 a panel with him and he was talking about this 0:02:36.560 --> 0:02:38.920 with a bunch of CEOs and saying this is a 0:02:38.960 --> 0:02:41.800 problem and it is more pernicious for the average consumer 0:02:41.840 --> 0:02:43.880 in this country right now that inflation is so high, 0:02:44.120 --> 0:02:47.000 the potentially the labor market is oftening because it's not 0:02:47.160 --> 0:02:49.239 and I think that is something that you are hearing 0:02:49.520 --> 0:02:50.639 in the minority. 0:02:50.200 --> 0:02:50.520 On the fair. 0:02:50.639 --> 0:02:52.720 The good news here for the leadership of Kevin Walsh 0:02:52.960 --> 0:02:55.920 early days quick reaction the descent came from the regional 0:02:56.240 --> 0:02:58.480 presidents and not from the board. Because it it came 0:02:58.520 --> 0:03:00.640 from one of the board members this afternoon, I think 0:03:00.680 --> 0:03:03.760 we'd be having a very different conversation tk to the 0:03:03.840 --> 0:03:04.600 one we're about to have. 0:03:04.800 --> 0:03:07.440 It's a market voting Apple five point zero five to 0:03:07.520 --> 0:03:10.080 three trillion dollars just out to a new record high 0:03:10.080 --> 0:03:13.080 three forty four. Is a market voting here on. 0:03:13.080 --> 0:03:15.560 Their new I think Apple's voting on a lack of CAPEX, 0:03:15.560 --> 0:03:17.079 and I think that's been a story on I hope, yeah, 0:03:17.080 --> 0:03:17.320 I know. 0:03:17.320 --> 0:03:19.720 That I get that run. But I mean, right here 0:03:19.720 --> 0:03:23.760 within the minutes after this announcement, with the SPX popping 0:03:23.840 --> 0:03:26.959 up as well, I mean, they certainly like what they saw. 0:03:27.080 --> 0:03:28.720 Well, let's take a step back and think about what's 0:03:28.720 --> 0:03:31.679 been happening in asset classes. We've had this massive move 0:03:31.760 --> 0:03:34.480 higher in energy and lots of volity in between, volatility 0:03:34.520 --> 0:03:37.640 in between. Over the previous five months. You've seen that 0:03:37.760 --> 0:03:40.480 ripple through interest rates. We've priced out cuts and in 0:03:40.520 --> 0:03:43.280 many places priced in hikes and in some places actually 0:03:43.720 --> 0:03:46.920 engineered rate hikes. What we haven't seen is a growth scare. 0:03:47.040 --> 0:03:49.160 The backdrop for growth is still pretty good consensus for 0:03:49.240 --> 0:03:52.160 GDPs that around two unemployment's been falling closer to four 0:03:52.200 --> 0:03:54.600 and away from five. That's good news. Now you've got 0:03:54.600 --> 0:03:57.520 a feeder reserve that doesn't still see a reason even 0:03:57.520 --> 0:03:59.920 with that as your backdrop. They don't see a reason 0:04:00.080 --> 0:04:02.200 high interest rates right now today. Some do, but not 0:04:02.200 --> 0:04:04.280 the committee as a whole. If you're looking at that 0:04:04.320 --> 0:04:06.720 from a risk asset standpoint on, that's risk positive without 0:04:06.720 --> 0:04:07.800 a doubt it is. 0:04:07.920 --> 0:04:11.360 I mean, I mean, they're moving forward, and to me, 0:04:11.480 --> 0:04:15.240 the key thing after Jackson All is to get to 0:04:15.560 --> 0:04:17.800 that next meeting. All of a sudden, Jackson Hole may 0:04:17.839 --> 0:04:18.440 be interesting. 0:04:18.480 --> 0:04:20.040 Oh, I definitely think it's gonna be interesting. We need 0:04:20.040 --> 0:04:23.640 to hear about insights from task forces. That said, right now, 0:04:24.080 --> 0:04:26.159 I do think you know how I think that they're 0:04:26.160 --> 0:04:28.440 going to be important to me. This is actually a 0:04:28.480 --> 0:04:32.040 fascinating statement. Does he set up a September rate hike 0:04:32.320 --> 0:04:34.920 with the idea that there are three descents and potentially 0:04:34.960 --> 0:04:37.839 there is another CTI and PPI print that will be 0:04:37.880 --> 0:04:38.960 potentially hotter than next. 0:04:39.080 --> 0:04:41.720 Dot to run back always early to publish. He says 0:04:41.760 --> 0:04:44.200 the following, I think the descents tell you the direction 0:04:44.279 --> 0:04:46.680 of travel. It will be very tough for WASH to 0:04:46.720 --> 0:04:49.599 hold the line into September. I hope Mike mc key's 0:04:49.600 --> 0:04:51.599 holding the line. Just before he goes into that news 0:04:51.600 --> 0:04:54.280 conference in about twenty five minutes time, Mike given the 0:04:54.360 --> 0:04:57.440 lack of new information here beyond just a descent. What's 0:04:57.480 --> 0:05:00.320 your approach to the news conference at two thirty Easton time? 0:05:01.320 --> 0:05:03.320 Well, I think we have to ask very direct questions 0:05:03.360 --> 0:05:05.680 of the chair. We can't ask him broad questions like 0:05:05.960 --> 0:05:09.080 what is your reaction function or something like that, because 0:05:09.120 --> 0:05:12.400 then he's going to just lead those questions and we 0:05:12.480 --> 0:05:15.080 won't get good answers. So we'll have to pick out 0:05:15.120 --> 0:05:18.320 some things like where we are with rates, are those 0:05:18.839 --> 0:05:21.680 sufficient at this point? Something to try to get him 0:05:21.720 --> 0:05:24.919 to give us some specifics on how he's thinking. But 0:05:25.000 --> 0:05:27.599 I think what you guys have just gone through is 0:05:27.680 --> 0:05:31.080 what he's looking for. He'd rather have you speculating markets 0:05:31.120 --> 0:05:35.800 speculating than give you a hint. And nature abhors a vacuum, 0:05:35.839 --> 0:05:37.760 so the markets are going to fill it with what 0:05:37.800 --> 0:05:40.000 they think might happen. But it's going to be hard 0:05:40.080 --> 0:05:43.200 for anybody to really know unless Worsh wants to start 0:05:43.240 --> 0:05:46.159 tipping his hand, which it'll be a battle between us 0:05:46.200 --> 0:05:46.480 and him. 0:05:46.520 --> 0:05:48.520 I guess looking forward to it. Mike, thank you, buddy. 0:05:48.560 --> 0:05:51.320 Can't start that news conference. Mi McKay will come into 0:05:51.360 --> 0:05:53.080 that news conference for us. It will begin at about 0:05:53.080 --> 0:05:55.000 twenty five minutes time. If you're just joined the program, 0:05:55.040 --> 0:05:57.239 welcome to the program. So unchanged to the Federal Reserve. 0:05:57.240 --> 0:05:59.320 But the vote is different. It's nine to three and 0:05:59.360 --> 0:06:02.040 the assenting voices are as follows bottom of the statement. 0:06:02.080 --> 0:06:05.599 Beth Hammock, Noil Kashgari, Lori logan descent coming from the 0:06:05.839 --> 0:06:08.840 obvious places, all three of those voting for an interest 0:06:08.880 --> 0:06:11.200 rate hike. At the bottom of the statement. That line 0:06:11.240 --> 0:06:15.760 sticks the committee will deliver price stability. We've got Bob 0:06:15.760 --> 0:06:18.680 Michael a JP Morgan Act Management alongside us. Bob, is 0:06:18.720 --> 0:06:21.839 that line in the statement enough for US not to 0:06:21.960 --> 0:06:25.320 question their commitment to price stability? With inflation running above 0:06:25.320 --> 0:06:27.880 target for as long as it has been running above target. 0:06:28.920 --> 0:06:32.000 I think the three descents are more important than that 0:06:32.080 --> 0:06:35.679 last statement. I think that it shows that they're starting 0:06:35.720 --> 0:06:41.239 to migrate towards tightening policy. You know, there's still seventy 0:06:41.320 --> 0:06:44.479 five percent of the voting members that were in favor 0:06:44.520 --> 0:06:47.520 of no change, so you're only a twenty five percent, 0:06:47.560 --> 0:06:49.719 But I think it's important. If I were at the 0:06:49.720 --> 0:06:54.159 press conference, I'd ask about quantitative tightening. Are they talking 0:06:54.200 --> 0:06:57.000 about that? Is that something they could start up again 0:06:57.520 --> 0:07:00.640 and help snug the liquidity that in the system. 0:07:00.720 --> 0:07:04.440 Best guess for September. Limited additional information, but best guess 0:07:04.720 --> 0:07:06.560 for September. What would you call now. 0:07:06.960 --> 0:07:10.080 They do nothing? But maybe there are four descents. 0:07:10.280 --> 0:07:12.400 Well, Michael is going to stick with us going into 0:07:12.400 --> 0:07:14.480 that news conference. Twenty five minutes away. Joining us now 0:07:14.520 --> 0:07:17.520 is Jim Bianco of Pianco Research. Jim, welcome to the program. 0:07:17.520 --> 0:07:19.440 It's a whole new world, a new era for this 0:07:19.520 --> 0:07:22.000 central bank. You've been writing about it extensively. Just first 0:07:22.000 --> 0:07:25.000 of all, your reaction to this decision this afternoon. 0:07:26.080 --> 0:07:28.760 Not surprised by the decision that the Fed did not 0:07:29.360 --> 0:07:33.040 raise rates. I still would defer with Bob and think 0:07:33.080 --> 0:07:35.960 that they are going to raise rates in September. I 0:07:36.000 --> 0:07:39.520 think the descents are the most important thing because one 0:07:39.560 --> 0:07:43.000 of the things I've been emphasizing is after Trump attacking 0:07:43.000 --> 0:07:45.760 this FED for two years, they want to be independent, 0:07:46.160 --> 0:07:50.960 and they've decided that independence is twelve independent voters. So 0:07:51.000 --> 0:07:52.840 what we're going to get at the press conference is 0:07:52.920 --> 0:07:56.320 one twelfth of the opinion of the Fed is we're 0:07:56.360 --> 0:07:58.200 going to get washed, or maybe we won't get it 0:07:58.240 --> 0:08:00.520 at all. If he doesn't express it. He's got a 0:08:00.560 --> 0:08:04.320 lot of power he could probably, you know, twist some 0:08:04.440 --> 0:08:06.560 arms to get them over the line whichever way he 0:08:06.600 --> 0:08:09.040 wants to go. I suspect that if they were all 0:08:09.160 --> 0:08:11.040 voting their true conscious, we might have had a few 0:08:11.080 --> 0:08:13.720 more descents, maybe not enough to raise raids, but a 0:08:13.720 --> 0:08:16.080 few deferred because he didn't want to do it. 0:08:16.120 --> 0:08:18.880 Would be my guest, Jim, do you think it's significant 0:08:18.880 --> 0:08:22.280 that none of the governors joined with the dissenters, even 0:08:22.320 --> 0:08:25.440 though there were some reports of some pretty interesting family 0:08:25.480 --> 0:08:27.520 fights over dinner last month. 0:08:29.120 --> 0:08:32.760 I'm mildly I was expecting that maybe Chris Waller was 0:08:32.800 --> 0:08:35.199 going to be a dissenter. He still might be a 0:08:35.280 --> 0:08:38.959 voter for a rate hike in September, maybe a couple 0:08:39.000 --> 0:08:42.440 of others. But I do want to emphasize again, we're 0:08:42.480 --> 0:08:44.760 going to parse every word that Warsh wants to say. 0:08:44.800 --> 0:08:46.240 I think that the FED is more of a vote 0:08:46.240 --> 0:08:48.880 tailing our exercise right now. You know, you got to 0:08:48.880 --> 0:08:51.240 look at all twelve people and say which columns are 0:08:51.240 --> 0:08:54.360 they in high colder cut and seven is a majority? 0:08:54.400 --> 0:08:56.559 And which column has seven? And that's what the Fed's 0:08:56.600 --> 0:08:57.960 going to do. That's how they work now. 0:08:58.360 --> 0:09:01.240 But Michael, the young Ripersentagim Bianco a couple of years ago, 0:09:01.360 --> 0:09:04.120 had an arch call calling for higher interest rates when 0:09:04.160 --> 0:09:06.560 no one was looking for it. The other day, Edyard 0:09:06.559 --> 0:09:09.640 Denny said, these are normal rates. We have to get 0:09:09.760 --> 0:09:13.040 used to rates being here again, is doctor Yardnny and 0:09:13.120 --> 0:09:15.560 Jim Bianco correct? We just got to get used to 0:09:15.559 --> 0:09:16.440 these higher rates. 0:09:16.720 --> 0:09:16.960 Yeah. 0:09:17.040 --> 0:09:19.960 I think what we're seeing more broadly across the economy 0:09:20.559 --> 0:09:24.160 is a need for capex. There's demand for capital, there's 0:09:24.200 --> 0:09:26.800 a productive use of it. There's going to be competition 0:09:27.080 --> 0:09:30.400 and a cost of it. That's pre GFC kind of 0:09:30.559 --> 0:09:33.719 macro environment. You're not going back to zero to two 0:09:33.800 --> 0:09:34.640 percent rates. 0:09:34.800 --> 0:09:34.839 No. 0:09:35.000 --> 0:09:37.640 I think there's enough cause for them to hike in 0:09:37.679 --> 0:09:40.760 September as opposed to next year. I don't think inflation 0:09:40.920 --> 0:09:42.040 is going to change that much. 0:09:42.080 --> 0:09:43.960 I can't remember, Jennifer, you're on or off here, but 0:09:44.040 --> 0:09:46.959 you said this twenty minutes ago. What percentage of people 0:09:46.960 --> 0:09:49.760 in the street actually remember pre GFC. 0:09:50.080 --> 0:09:52.200 We were very live, and I remember what I said. 0:09:52.280 --> 0:09:54.080 I talked about the average engine on the trading floor, 0:09:54.360 --> 0:09:56.840 which is probably mid thirties right now. So the world 0:09:56.880 --> 0:09:58.480 that they used to is not the world that Kevin 0:09:58.520 --> 0:10:00.640 Walsh wants to take us. Back to it's also not 0:10:00.679 --> 0:10:02.679 the world that we've experienced in financial markets. Side it 0:10:02.760 --> 0:10:06.160 to your point, we had these anchors across fixed income 0:10:06.400 --> 0:10:08.600 for the last ten to fifteen years at least, and 0:10:08.640 --> 0:10:12.080 I have talked about them daily, how they're disappearing. Germany 0:10:12.080 --> 0:10:17.439 had fiscal prudence for decades, it's disappearing. Japan had disinflation 0:10:17.840 --> 0:10:22.000 deflation for decades. It's changed. And in America, the biggest 0:10:22.040 --> 0:10:24.680 companies in the planet were buying themselves, not issue in stock, 0:10:25.080 --> 0:10:28.000 not issuing debt. That's changed as well, the price of that. 0:10:28.080 --> 0:10:29.880 But what is the price of that and what part 0:10:29.880 --> 0:10:32.880 of this market is most vulnerable to that competition for capital? 0:10:34.080 --> 0:10:36.560 It feels like it's the sovereign market. I don't know 0:10:36.640 --> 0:10:41.480 a sovereign which isn't interested in investing in energy, security, 0:10:41.840 --> 0:10:45.239 in investing in the defense of its borders, in investing 0:10:45.400 --> 0:10:48.960 in AI and technology. More broadly, they don't have the 0:10:48.960 --> 0:10:51.080 budgets to do it. They're going to have to go 0:10:51.120 --> 0:10:54.320 out and borrow. That's going to create more competition for 0:10:54.400 --> 0:11:00.720 the capital. That's okay, that's a normal capitalist environ We're 0:11:00.720 --> 0:11:03.760 okay with that. But it doesn't mean zero to two 0:11:03.840 --> 0:11:08.839 percent central bank rates and treasury government bond yields is 0:11:08.920 --> 0:11:12.160 the right level. It means probably neutral rates for the 0:11:12.200 --> 0:11:15.120 FED are around three to five percent, and you're looking 0:11:15.160 --> 0:11:17.840 at a ten year treasury that who knows could be 0:11:17.880 --> 0:11:19.199 four to six percent. 0:11:19.120 --> 0:11:21.280 In this world where suddenly you have to battle for 0:11:21.360 --> 0:11:23.800 capital and Jim, I'd love your take on this. Is 0:11:23.840 --> 0:11:26.840 it a policy error if a FED share Kevin worsh 0:11:26.960 --> 0:11:29.280 allows the move to stick that we're seeing right now 0:11:29.320 --> 0:11:31.560 in markets. Now there is not a full rate hike 0:11:31.640 --> 0:11:35.000 being baked into September, and frankly, the initial move has 0:11:35.040 --> 0:11:36.599 given back at least at the long end of the 0:11:36.640 --> 0:11:38.720 yield curve. Do you think that it is important for 0:11:38.800 --> 0:11:41.920 this FED, whether it intends to hike or not, to 0:11:42.000 --> 0:11:44.040 keep the message that they are prepared to do so 0:11:44.120 --> 0:11:45.000 to tame inflation. 0:11:46.720 --> 0:11:48.760 I think so. If you want to back up, go 0:11:48.840 --> 0:11:51.160 back to September of twenty four, that's when the FED 0:11:51.240 --> 0:11:54.400 first started cutting rates. The thirty year yield was four percent, 0:11:54.520 --> 0:11:57.079 was exactly four percent. Right now it's five to ten. 0:11:57.520 --> 0:12:00.560 It's going up one hundred and ten basis points. While 0:12:00.559 --> 0:12:03.679 the FED has been cutting rates. By my measures, I 0:12:03.720 --> 0:12:06.320 can't find another example of a rate cutting cycle that 0:12:06.400 --> 0:12:09.800 produced that big a rate a yield increase in the 0:12:09.800 --> 0:12:12.600 long end since the nineteen eighties. But then again, we 0:12:12.640 --> 0:12:15.400 also had fourteen percent interest rates then and without that 0:12:15.720 --> 0:12:19.320 never in anything back to the nineteen fifties. So really, 0:12:19.360 --> 0:12:21.480 the market is trying to tell you that I think 0:12:21.520 --> 0:12:23.920 the direction of travel is going to be higher. It's 0:12:24.000 --> 0:12:27.760 more worried about inflation. And if the you know, go 0:12:27.880 --> 0:12:30.440 back to that last sentence, if the Fed wants to 0:12:30.480 --> 0:12:33.559 deliver price stability, I'll throw one another into you. Kevin 0:12:33.600 --> 0:12:36.200 Walsh said that inflation is a choice. They might have 0:12:36.280 --> 0:12:38.800 to choose to do something about it fairly soon and 0:12:38.840 --> 0:12:40.480 maybe as early as the September meeting. 0:12:40.800 --> 0:12:41.000 Jim. 0:12:41.040 --> 0:12:43.600 If they do something about it, do we continue with 0:12:43.640 --> 0:12:46.000 this robust nominal GDP we've seen. 0:12:47.280 --> 0:12:49.160 I think we can, and I also think if the 0:12:49.160 --> 0:12:51.960 Fed were to raise rates that that might put the 0:12:52.040 --> 0:12:54.440 high end yields for the year. I think part of 0:12:54.480 --> 0:12:57.320 the problem has been that now that we don't have 0:12:57.400 --> 0:13:00.320 forward guidance, the market is pricing what it thinks, and 0:13:00.360 --> 0:13:03.600 I think it thinks that's there's an inflation, let's say 0:13:03.760 --> 0:13:06.280 issue or worry. I don't want to go full blown 0:13:06.320 --> 0:13:09.800 problem or crisis it's not that bad. Yeah, and that's 0:13:09.840 --> 0:13:12.240 why yields keep going up. And I think you would 0:13:12.320 --> 0:13:14.640 like to see the old line, the old adage on 0:13:14.679 --> 0:13:17.840 Wall Street I've been using is that bond traders can 0:13:17.920 --> 0:13:22.040 relax or stop panicking won the FED starts panicking, and 0:13:22.120 --> 0:13:24.720 maybe a little bit of panic from the Fed might 0:13:24.760 --> 0:13:27.120 go a long way to helping the bond market stop 0:13:27.160 --> 0:13:28.640 with this yield rise on the long end. 0:13:28.720 --> 0:13:30.720 As about a point, Jim, I appreciate your time, buddy, 0:13:30.720 --> 0:13:33.679 as always, Jim Pianco there of Bianco Research, if you're 0:13:33.720 --> 0:13:36.240 just shown in the program, welcome a news conference with 0:13:36.679 --> 0:13:40.280 Chair Wash in about seventeen minutes time. The decision thirteen 0:13:40.360 --> 0:13:43.640 minutes ago, leaving rates unchanged to vote of nine to three, 0:13:43.760 --> 0:13:48.599 three dissenting voices, three regional FED presidents Hammock of Cleveland, 0:13:48.840 --> 0:13:52.440 Kashgari of Minneapolis, and Logan of Dallas, three voices who 0:13:52.800 --> 0:13:55.040 have given us a decent step that this might be 0:13:55.240 --> 0:13:57.760 the outcome of this meeting, at least for them. Next 0:13:57.800 --> 0:13:59.520 two weeks might be interesting. I think we're all going 0:13:59.559 --> 0:14:02.200 to look for that schedule, aren't we. Those speeches what 0:14:02.280 --> 0:14:04.280 everyone thinks, and this was always the problem for this 0:14:04.320 --> 0:14:07.400 fed chair looking to put communication back in the box, 0:14:07.480 --> 0:14:09.400 back in the bottle, and throw it away and bury it. 0:14:09.800 --> 0:14:12.920 Everybody else still wants to talk. And if you speak less, 0:14:13.240 --> 0:14:15.400 we just put more weight on the people that do speak. 0:14:15.640 --> 0:14:17.120 And that's what we'll be doing in the coming weeks. 0:14:17.160 --> 0:14:18.920 It's going to be a vote telling exercise over the 0:14:19.000 --> 0:14:22.080 next two weeks, with people watching every single press conference, 0:14:22.120 --> 0:14:25.040 every single speech and wondering who is going to be 0:14:25.080 --> 0:14:27.080 the additional voice to vote for a rate hike and 0:14:27.120 --> 0:14:29.680 how close are they And that is ultimately the calculus 0:14:29.920 --> 0:14:31.840 that we're going to see. Kevin Warsh could potentially put 0:14:31.840 --> 0:14:33.360 that back in the bottle if he gives us some 0:14:33.400 --> 0:14:37.200 sort of quantification or characterization of what the reaction function is. 0:14:37.440 --> 0:14:39.400 But barring that, we're going to be doing vote telling 0:14:39.440 --> 0:14:40.680 and we're going to have a bingo card and it's 0:14:40.680 --> 0:14:41.040 going to be a. 0:14:41.040 --> 0:14:41.400 Lot of fun. 0:14:41.440 --> 0:14:43.680 Can we go from three to four, to five, to six, etc. 0:14:43.960 --> 0:14:46.840 To seven? Dance swamk of KPMG joined just now for more. Dan, 0:14:47.120 --> 0:14:49.240 Welcome to the program. Do you believe this is the 0:14:49.320 --> 0:14:52.160 direction of travel? This is the first of many votes 0:14:52.360 --> 0:14:53.760 that will look for higher interest rates? 0:14:55.800 --> 0:14:59.760 Absolutely. I think the three percents from the president is 0:15:00.200 --> 0:15:03.520 exactly we should expect right now, and those descents were 0:15:03.520 --> 0:15:06.280 not done in a vacuum. They also are representing presidents 0:15:06.320 --> 0:15:09.400 who could not vote at this meeting. That is often 0:15:09.440 --> 0:15:11.920 what is done. And I also think many people on 0:15:11.960 --> 0:15:14.880 the board are leaning towards a rate hike as well. 0:15:14.880 --> 0:15:17.840 We've already gotten a lot of indication of that, and 0:15:17.920 --> 0:15:20.440 so I do think we do get rate hikes in September. 0:15:20.480 --> 0:15:23.520 I actually think today would have been better, but I 0:15:23.640 --> 0:15:26.240 expected them to skip today even though there was a 0:15:26.280 --> 0:15:28.720 thirty percent chance out there that they would do it today, 0:15:29.200 --> 0:15:32.360 because we're starting to get This is something that Kevin 0:15:32.360 --> 0:15:34.840 Warsh has said himself. We've had five years of inflation. 0:15:34.960 --> 0:15:36.920 It's not all the Fed's fault, but at the end 0:15:36.960 --> 0:15:39.000 of the day, it is the fed's choice, as Jim 0:15:39.040 --> 0:15:42.040 pointed out, to do something about it, and we need 0:15:42.080 --> 0:15:44.520 to do something about this inflation and has been around 0:15:44.560 --> 0:15:47.560 for too long and created a muscle memory. It's becoming 0:15:47.880 --> 0:15:50.560 the norm instead of the anomaly. And tomorrow we're going 0:15:50.640 --> 0:15:53.960 to get that PCE data, which the reason why Beth 0:15:53.960 --> 0:15:56.400 Hammock sort of threw down the Gauntlin and wrote the 0:15:56.440 --> 0:15:59.960 LinkedIn post hours befoard the fed's blackout period, letting us 0:16:00.160 --> 0:16:03.440 know exactly how she felt about race was because they 0:16:03.440 --> 0:16:05.960 were tracking the inputs on that number, and it will 0:16:05.960 --> 0:16:08.160 be three point three percent on the core and on 0:16:08.240 --> 0:16:12.040 the supercore I think three point seven percent supercore services. 0:16:12.120 --> 0:16:14.560 That is sticky and hot and hotter than it was 0:16:14.720 --> 0:16:15.840 at the beginning of the year. 0:16:16.000 --> 0:16:18.360 Well, Michael had a really good point earlier and she said, 0:16:18.360 --> 0:16:20.480 it kind of depends why they hike. Is it going 0:16:20.520 --> 0:16:22.440 to be that the data shows a reacceleration or is 0:16:22.440 --> 0:16:24.360 it just that they're running out of patients. And if 0:16:24.360 --> 0:16:26.920 they're running out of patients and tolerance of high inflation 0:16:26.960 --> 0:16:29.520 after more than five years, that typically isn't a great 0:16:29.520 --> 0:16:31.320 place for a central banker to be. And would you 0:16:31.360 --> 0:16:31.920 agree with that? 0:16:34.360 --> 0:16:36.560 I do agree with that to some extent, although I 0:16:36.600 --> 0:16:38.640 think we still got a little more inflation out there 0:16:38.680 --> 0:16:40.920 as well. But the problem is that it's just been 0:16:40.960 --> 0:16:43.920 too persistent. This is too long, for too much, for 0:16:43.960 --> 0:16:47.080 too long, and it's compounded much like I've argued, you know, 0:16:47.200 --> 0:16:50.720 compounding stock returns have raised the level of wealth, compounding 0:16:50.760 --> 0:16:53.240 inflation has risen the level of prices to be too 0:16:53.280 --> 0:16:56.120 high for too many, and that being front and center 0:16:56.680 --> 0:16:59.840 is not the definition of price stability. And that is 0:17:00.120 --> 0:17:02.480 what the Federal Reserve is charged to do. And with 0:17:02.520 --> 0:17:05.600 the labor market in a stronger position, there's no reason 0:17:05.720 --> 0:17:06.439 not to do it. 0:17:06.800 --> 0:17:09.119 Now. Well, Michael, I'm not going to go to the 0:17:09.160 --> 0:17:12.199 one with Sterling academics at Michigan and economics. I'm going 0:17:12.240 --> 0:17:15.159 to go to the classics major from Pennsylvania. Is it 0:17:15.240 --> 0:17:17.960 a small matter that the three des centers are an 0:17:18.000 --> 0:17:24.359 aerospace engineer educated, a public policy Lori Logan educated, and 0:17:24.400 --> 0:17:26.920 Beth Hammock of twenty one was on the desk at 0:17:26.920 --> 0:17:31.520 Golden Sex. Is this almost a dissent rebellion against traditional 0:17:31.600 --> 0:17:33.200 monetary economics? 0:17:34.000 --> 0:17:38.200 It may be more common sense than anything else. I think, 0:17:38.320 --> 0:17:41.639 as Diane pointed out, you've been a long way away 0:17:41.640 --> 0:17:44.920 from the two percent target for a long period of time. 0:17:45.359 --> 0:17:48.360 There could be a little bit of disinflation the system. 0:17:48.440 --> 0:17:51.879 I wonder what happens if the next couple prints on 0:17:52.080 --> 0:17:55.000 core PCEE you go from three to four to three, 0:17:55.080 --> 0:17:57.879 three to three one, and you see you're still above 0:17:57.920 --> 0:18:01.320 two percent. But what about in core CPI you go 0:18:01.480 --> 0:18:04.840 from two six to two five to two three, you're 0:18:04.880 --> 0:18:09.480 still above two percent. I think the sense reflect that, hey, 0:18:09.480 --> 0:18:12.840 we're not at our target. If this swings around the 0:18:12.880 --> 0:18:16.240 other way, we're poised to move, but you don't move yet. 0:18:16.640 --> 0:18:18.840 If you're starting to see some disinflat when. 0:18:18.760 --> 0:18:20.840 You talk about Goldman the death star in front of 0:18:20.920 --> 0:18:26.000 JP Morgan, can we do that on the desk? 0:18:26.080 --> 0:18:30.399 And I just nobody, nobody dissenting. John did the usual 0:18:30.520 --> 0:18:31.400 economic path. 0:18:31.560 --> 0:18:34.720 Let's go to that. Let's go to the quote of 0:18:34.760 --> 0:18:37.439 hers in the LinkedIn statement going into the quiet period, 0:18:38.119 --> 0:18:40.840 the lead up to this descent, there is no conflict 0:18:40.840 --> 0:18:44.080 in our mandate. Inflation is too high, the labor market 0:18:44.119 --> 0:18:46.399 is run around my level of maximum employment. For the 0:18:46.440 --> 0:18:49.320 first time in my tenure, I'm hearing from businesses who 0:18:49.400 --> 0:18:52.879