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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: On Friday morning, some of the most powerful people in

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Speaker 2: the financial world crowded into a lodge in Jackson Hole,

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Speaker 2: Wyoming to hear the latest announcement from Federal Reserve chair

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Speaker 2: to Rome Powell. Bloomberg's Mike McKee was in the room.

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Speaker 3: The FED meeting takes place at an unadorned meeting room

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Speaker 3: with deer antler lights hanging from the ceiling and just

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Speaker 3: long flat tables with folding chairs we sit on. It

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Speaker 3: isn't glamorous at all, but it is a beautiful location

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Speaker 3: at least.

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Speaker 2: What's the energy in the room, like when everyone's waiting

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Speaker 2: for Powell to take the dais.

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Speaker 3: You know, people in this business and here are pretty

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Speaker 3: used to this sort of thing, so it's not like

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Speaker 3: you're at a rock concert waiting for somebody to show up.

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Speaker 3: But people are interested, very interested in what he has

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Speaker 3: to say, particularly where they're anticipating a rake cut announcement

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Speaker 3: of some.

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Speaker 2: Sort a rate cut. The Federal Reserve has been holding

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Speaker 2: interest rates high around five and a half percent for

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Speaker 2: a year, but with unemployment creeping up and inflation coming down,

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Speaker 2: pressure has been building for the Fed to cut interest rates,

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Speaker 2: and when Powell entered the room and took the podium,

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Speaker 2: it sounded like he agreed.

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Speaker 4: The time has come for policy to adjust. The direction

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Speaker 4: of travel is clear, and the timing and pace of

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Speaker 4: rate cuts will depend on incoming data, the evolving outlook,

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Speaker 4: and the balance of risks.

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Speaker 2: Usually Powell's speeches are a little cryptic, there's not a

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Speaker 2: lot of direct talk, but not this time.

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Speaker 1: Interestrates are coming down. That's the bottom line.

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Speaker 3: The FED has decided that the battle against inflation is

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Speaker 3: almost one. They're more confident now that they are bringing

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Speaker 3: down inflation to their two percent target, and they're starting

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Speaker 3: to worry about rising unemployment. So the balance of risks,

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Speaker 3: as they call it, has changed, and it is time

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Speaker 3: to cut interest rates. So everybody is going to expect

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Speaker 3: a rate cut at the September eighteenth meeting.

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Speaker 2: Today on the show, FED Chair Jerome Powell's announcement from

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Speaker 2: Jackson Hole, Why the FED is signaling that September is

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Speaker 2: finally the time for a rate cut, what that rate

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Speaker 2: cut could look like, and what it would mean for

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Speaker 2: the US economy, the presidential election and beyond. I'm Sarah Holder,

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Speaker 2: and this is the big take from Bloomberg News. Bloomberg's

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Speaker 2: Mike McKee talked to us from a mobile studio in

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Speaker 2: the Tetons as equipment was being broken down around him.

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Speaker 2: I asked Mike for a little background on the Jackson

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Speaker 2: Hole Conference.

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Speaker 3: That's an academic conference designed to present economic theories, papers

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Speaker 3: on ideas for doing monetary policy to the policy bakers.

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Speaker 2: It's officially called the Jackson Hole Economic Policy Symposium, and

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Speaker 2: it's put on by the Federal Reserve Bank of Kansas City.

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Speaker 3: It's been going on for forty seven years now, but

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Speaker 3: it only really became as big a deal as it

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Speaker 3: is now in twenty ten when Ben bernank came out

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Speaker 3: and announced here that they would start quantitative easing. And

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Speaker 3: since that time BERNANKI and Janet Yellen who followed him,

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Speaker 3: and now j Powell have used this occasion to make

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Speaker 3: announcements that could really change the direction of the economy, like.

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Speaker 2: Twenty twenty two, for example, when Jay Powell came out

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Speaker 2: and told the financial world that the fight against inflation

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Speaker 2: would mean tough times in the year ahead.

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Speaker 4: While higher interest rates, slower growth, and software labor market

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Speaker 4: conditions will bring down inflation, they will also bring some

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Speaker 4: pain to households and businesses.

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Speaker 2: People like Mike who cover the FED are used to

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Speaker 2: reading between the lines. That's because FED chairs like Jay

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Speaker 2: Powell are very careful with what they say in public.

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Speaker 2: A single word from their mouth this can have a

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Speaker 2: huge impact on the global economy. The mention of some

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Speaker 2: pain a couple of years ago was taken as a

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Speaker 2: stroke warning sign and the markets took a dive. But

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Speaker 2: Mike says Powell's message this year had a much brighter tone.

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Speaker 3: This was one hundred and eighty degrees different the last

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Speaker 3: two years. Powell had a very strict, severe message that

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Speaker 3: the Fed was going to do what it takes. They

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Speaker 3: were not going to waiver. Inflation was going to go

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Speaker 3: away no matter what it took. This year, inflation has

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Speaker 3: come way down and it's headed towards their target. So

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Speaker 3: the FED will never take a victory lap, they'll never

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Speaker 3: say the word soft landing. But they are feeling much

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Speaker 3: better about where the economy is, and I think Powell

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Speaker 3: felt more relaxed in talking to people. He said at

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Speaker 3: one point, these are my.

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Speaker 4: Views, that is my assessment of events.

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Speaker 1: Your mileage may vary.

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Speaker 4: Your mileage may differ.

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Speaker 3: I'm not sure what he meant by that, but it

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Speaker 3: did get a laugh in the room.

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Speaker 2: Inscrutable Dad jokes aside. Mike says, the fact that Jay

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Speaker 2: Powell's throwing in a laugh line or two means that

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Speaker 2: the Fed must be feeling pretty good about where the

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Speaker 2: economy is headed after two years of severity high interest

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Speaker 2: rates and historic levels of inflation. I asked Mike how

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Speaker 2: the Fed landed on now as the moment to say

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Speaker 2: it's finally time to cut rates.

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Speaker 3: They've been following the inflation numbers, of course, very closely.

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Speaker 3: Their official measure is the Personal Consumption Expenditures Index, which

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Speaker 3: comes out as a part of the GDP numbers. That

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Speaker 3: tells them where they think inflation is in terms of

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Speaker 3: their two percent target. But of course everybody follows the

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Speaker 3: Consumer Price Index. It's the most widely known price index,

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Speaker 3: and a lot of civilian people watch that. Americans watch that,

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Speaker 3: so they're also very attuned to that, and putting those

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Speaker 3: two together, they get a sense of where inflation is going.

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Speaker 3: And they've also been watching the employment numbers very closely,

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Speaker 3: and for a long time we had very, very high

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Speaker 3: job creation and that worried them because if you're looking

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Speaker 3: for workers and you can't find them, you're going to

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Speaker 3: have to pay more, which could lead to inflation. And

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Speaker 3: now what they're saying is that's come down. There's not

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Speaker 3: the wage pressure that there was, so we can start

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Speaker 3: thinking about cutting rates because both sides of our measures

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Speaker 3: have started to come down.

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Speaker 2: Of course, the FED doesn't make its decisions in an

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Speaker 2: economic vacuum. The fact that we're about seventy days out

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Speaker 2: from a US presidential election is impossible to ignore. Powell

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Speaker 2: has often talked about how important he feels it is

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Speaker 2: for the FED to remain independent.

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Speaker 4: It's a very special American institution and it's one that

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Speaker 4: works to serve all Americans, and absolutely critical to that

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Speaker 4: is staying in our lanes, sticking to our knitting, not

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Speaker 4: running to reach out to the big hot political issues

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Speaker 4: of the day.

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Speaker 2: The Central Bank is meant to be a political Powell

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Speaker 2: said he takes that duty so seriously that he's led

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Speaker 2: an increasingly private life to ward against any perception that

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Speaker 2: politics is involved in the Fed's decision making. Powell's spoke

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Speaker 2: about this last month in an interview with Bloomberg host

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Speaker 2: and Carlisle co founder and co chairman David Rubinstein.

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Speaker 4: When you want to go out to let you have

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Speaker 4: a dinner and restaurant, do you worry that people are

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Speaker 4: listening to what you're saying?

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Speaker 1: They're eavestrapping, so.

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Speaker 4: That that is exactly what I worried about. I've I

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Speaker 4: have found that I get recognized now and people at

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Speaker 4: the next table are always listening. So we don't really

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Speaker 4: go to restaurants. So what do you do? You just

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Speaker 4: go in a private room, or you don't go to restaurants.

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Speaker 4: If if you're at a restaurant, you need to be in

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Speaker 4: a private room. And if, by the way, if someone

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Speaker 4: at your table were to be well served and start

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Speaker 4: to speak loudly, everyone's hearing that too, So so you

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Speaker 4: got to be We just don't do that for now.

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Speaker 4: We go to you know, we need at home, a

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Speaker 4: lot at we need a friend's house.

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Speaker 2: So why would j Powell, someone who's taken such great

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Speaker 2: pains to keep the FED out of the political spotlight,

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Speaker 2: announce a rate cut so close to an election? I

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Speaker 2: put that question to Mike. Do politics impact the way

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Speaker 2: the FED makes these decisions? Is there a perception that

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Speaker 2: the FED is going to cut rates for political reasons?

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Speaker 3: Well, there might be among campaigns and average people who

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Speaker 3: read comments about it. But FED officials insist, and the

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Speaker 3: historical record shows that electioneers don't change what they do.

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Speaker 3: They have raised rates and cut rates before in election

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Speaker 3: years and shortly before election day. There's no indication that

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Speaker 3: they have ever been biased, and they take great offense

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Speaker 3: at the idea that.

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Speaker 1: They would be.

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Speaker 3: Their view is, we have one job, which is to

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Speaker 3: keep inflation down and employment up. That's what Congress told

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Speaker 3: us to do, and so we're going to do that

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Speaker 3: no matter what the outside situation is.

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Speaker 2: Even though the FED has no political agenda, its decisions

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Speaker 2: do have a political impact. So what does the announcement

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Speaker 2: of a rate cut mean for the presidential campaign, for

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Speaker 2: American consumers and for global markets. That's after the break

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Speaker 2: under the antlers. As economists, academics, and journalists sat at

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Speaker 2: attention in their folding chairs inside the Jackson Lake Lodge,

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Speaker 2: J Powell did the FED equivalent of skywriting his plans

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Speaker 2: for interest rates above the tetons. He said, the time

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Speaker 2: has come for policy to adjust. Mike McKee, who covers

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Speaker 2: international economics and politics for Bloomberg News, was there, so

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Speaker 2: I asked him what kind of reaction did Powell's remarks get.

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Speaker 3: The reaction in the room was applause, standard applause. I

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Speaker 3: don't think anybody was surprised, because everybody was kind of

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Speaker 3: expecting that it's time, even though they hadn't said they

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Speaker 3: were going to. But what surprised a lot of people

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Speaker 3: here was the fact that the stock market took off.

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Speaker 3: And I had a couple of FED people say, didn't

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Speaker 3: the markets know this was coming? Everybody else seemed to,

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Speaker 3: so they're happy with that, but it was a bit

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Speaker 3: of a surprise that anybody was surprised.

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Speaker 2: Mike says. Part of what markets might have been reacting

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Speaker 2: to is the language Paul used. Paul said his confidence

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Speaker 2: has grown, which is again quite direct, especially for a

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Speaker 2: FED chair. After he said that stock surged.

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Speaker 3: It basically tells them that interest rates are going to

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Speaker 3: go down and keep going down. And stock market, of course,

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Speaker 3: is a forward discounting mechanism, and so if you know

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Speaker 3: that they have started a cycle, and historically they've cut

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Speaker 3: at least three times every time they have started a

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Speaker 3: cutting cycle, then you can start looking out six months,

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Speaker 3: nine months, twelve months and discounting what your future returns

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Speaker 3: might be. So it makes it easier for people to plan.

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Speaker 3: Why they hadn't necessarily planned before or whether they were

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Speaker 3: just waiting for that, we don't know. But if we

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Speaker 3: knew what the stock market would do, we'd all be rich.

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Speaker 2: So Powell speech contained enough foreshadowing to jumpstart the market,

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Speaker 2: even though we still don't know the exact scale and

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Speaker 2: pay of the rate cutting cycle ahead.

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Speaker 4: What do we know.

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Speaker 2: About how a rate cut would affect the US economy?

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Speaker 2: What are some of the industries that would be most affected.

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Speaker 3: Well, the first thing you look at is housing and

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Speaker 3: audibobiles because those are very interest rates sensitive. You have

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Speaker 3: to take out a loan because it's a big, expensive purchase,

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Speaker 3: and so the FED looks at the housing industry and

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Speaker 3: the automobile industry, both of which have suffered. We don't

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Speaker 3: know what the number is the level of interest rates

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Speaker 3: that will bring mortgage rates down enough that will entice

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Speaker 3: people to go out again and start buying cars should

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Speaker 3: start to do better, and then consumer purchases, we hope

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Speaker 3: will increase as credit card rates come down. And we'll

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Speaker 3: also watch for business investment. It's been strong. We have

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Speaker 3: fiscal spending coming as part of the Inflation Reduction Act

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Speaker 3: to build more infrastructure, so there should be some money

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Speaker 3: coming in on that side as well. It takes a

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Speaker 3: lot longer to hit the economy because it takes will

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Speaker 3: to build a big building.

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Speaker 1: But those are the things to watch for my a.

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Speaker 2: Rate cut in the US mean for the rest of

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Speaker 2: the world's economies.

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Speaker 3: Well, it means a lot, especially to smaller economies which

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Speaker 3: are if dependent on the dollar, react to the dollar

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Speaker 3: because if the dollar is strong, then their currency is

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Speaker 3: going to be weak, and the rest of the world

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Speaker 3: their currencies will strengthen. It's just a question of how

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Speaker 3: much they strengthen. It will take a while for that

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Speaker 3: to happen, but we've already seen some adjustment in the

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Speaker 3: foreign exchange markets with the euro and the Japanese yen

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Speaker 3: and the British pound the bigger currencies, and that'll start

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Speaker 3: to filter down to the emerging markets as well.

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Speaker 2: Will Powell speech also have an impact on the looming

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Speaker 2: US election. Mike says that while both candidates would likely

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Speaker 2: welcome lower interest rates when in office, the economic effects

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Speaker 2: on the American consumer might be too small to have

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Speaker 2: a significant impact on the way people vote, especially if

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Speaker 2: interest rates are cut by a quarter percentage point, which

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Speaker 2: is the hoe when the water rate cut many are expecting.

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Speaker 3: Twenty five basis points isn't going to change anybody's monthly

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Speaker 3: payments more than a few cents, if at all. It might,

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Speaker 3: as a psychological thing tell people that things are getting better,

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Speaker 3: and if people feel better about the economy, they might

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Speaker 3: vote one way or another. The Fed's view is it

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Speaker 3: doesn't have a major effect, but it doesn't matter to them.

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Speaker 3: They're going to do it anyway.

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Speaker 2: There's still a lot that can change before November, and

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Speaker 2: a lot more data to be released before September eighteenth.

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Speaker 2: That's when the FED meets next and when they're expected

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Speaker 2: to announce how deep these long awaited rate cuts could be.

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Speaker 3: We will have a number of economic data, including the

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Speaker 3: latest GDP numbers and the latest spending numbers, which will

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Speaker 3: matter to the Fed. Are Americans still spending money? And

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Speaker 3: then we go into the first week of September, which

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Speaker 3: is always first week of the month. There's always a

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Speaker 3: big week because we get numbers on actoring and on

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Speaker 3: employment that matter a lot. And of course we have

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Speaker 3: the jobs report that'll be September sixth, so that's a

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Speaker 3: date to watch. If nothing goes wrong there, then rake

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Speaker 3: cuts are coming.

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Speaker 2: The next few weeks will be busy for j Powell.

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Speaker 2: But before the fedcher had to go back to d C,

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Speaker 2: Mike tried to get him to let loose a little.

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Speaker 2: He invited Powell to the famous Jackson Hole rodeo.

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Speaker 3: He's not going to the rodeo as far as I know.

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Speaker 3: I've invited him, but he is going to yesterday. Yes,

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Speaker 3: he's declined. I think he doesn't feel like hanging out

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Speaker 3: with a bunch of reporters, but.

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Speaker 1: I don't know why. I don't know why.

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Speaker 3: Yeah, but he is going on hikes and he and

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Speaker 3: his wife do quite a bit of that when they're

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Speaker 3: out here, and they might do some canoeing or something

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Speaker 3: like that as well.

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Speaker 2: So the only bulls Powell will see will have to

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Speaker 2: be in the markets. This is the big take from

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Speaker 2: Bloomberg News. I'm Sarah Holder. This episode was produced by

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Speaker 2: David Fox. It was mixed by Alex Sugia. It was

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Speaker 2: fact checked by Adrian A. Tapia. It was edited by

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Speaker 2: Stacy Vennick Smith, Kate Davidson, and Christopher Condon. Special thanks

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Speaker 2: to read Pickert for her rodeo footage. Our senior producers

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Speaker 2: are Naomi Shaven and Kim Gittleson. Our executive producer is

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Speaker 2: Nicole Beemsterboor. Sage Bauman is Bloomberg's head of podcasts. If

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Speaker 2: you liked this episode, make sure to subscribe and review

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Speaker 2: The Big Take wherever you listen to podcasts. It helps

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Speaker 2: people find the show. Thanks for listening. We'll be back tomorrow.

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Speaker 1: Oh yeah, let's go to.

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Speaker 3: Everybody's supposed to dress up in Western Where do you

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Speaker 3: have woots?

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Speaker 1: Oh?

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Speaker 3: I have boots and I have a hat. I mean,

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Speaker 3: I grew up out West, so I dressed for the occasion.

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Speaker 3: But some of the city slickers or some of the

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Speaker 3: people from other countries are going to have to work

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Speaker 3: at it.

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Speaker 2: I think you're gonna have to show them how it's done.

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Speaker 4: It's the reason the team to help out the