WEBVTT - Instant Reaction: Jay Powell on the Fed Decision 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.200 --> 0:00:13.840 This is a breaking news update from Bloomberg. Instant reaction 0:00:14.120 --> 0:00:17.959 and analysis from our three thousand journalists and analysts around 0:00:17.960 --> 0:00:18.880 the world. 0:00:19.040 --> 0:00:21.720 This is the FED decides on Bloomberg Television and radio 0:00:21.760 --> 0:00:24.920 fetcher J Powell wrapping up his news conference, the last 0:00:24.920 --> 0:00:28.400 news conference of twenty twenty five. A FED that's divided, 0:00:28.720 --> 0:00:30.280 but not as divided as it could have been. In 0:00:30.320 --> 0:00:32.400 a chair Powel that was trying to be somewhat hawkish, 0:00:32.680 --> 0:00:34.880 but wasn't as hawkish as he could have been. In fact, 0:00:35.080 --> 0:00:37.080 the market is taking this as more of a dubvish 0:00:37.120 --> 0:00:39.680 tilt than expected. You could see the markets take off 0:00:40.000 --> 0:00:43.880 around two forty four pm when he talked about productivity. 0:00:43.920 --> 0:00:46.680 You could see the Russell two thousand up almost two 0:00:46.720 --> 0:00:49.599 percent on the heels of his comments, NASDAC up six 0:00:49.640 --> 0:00:52.800 tens of percent, s and P up eight tens of percent. 0:00:52.880 --> 0:00:53.840 In the bond space. 0:00:53.960 --> 0:00:57.400 A huge bid into the front end, A disproportionate bid, 0:00:57.520 --> 0:00:59.920 especially because this is a federal reserve that's going to 0:01:00.240 --> 0:01:02.880 forty billion dollars of T bills on Friday. 0:01:03.000 --> 0:01:04.560 This is earlier than people expected. 0:01:04.600 --> 0:01:07.640 It's a seven seven basis point drop at the front 0:01:07.760 --> 0:01:08.920 end to three point five to. 0:01:08.959 --> 0:01:10.720 Four, much more muted at the long end. 0:01:10.760 --> 0:01:13.240 Bigger questions here with a thirty year at four point 0:01:13.480 --> 0:01:15.360 seven eight percent, and when you bleed it through the 0:01:15.400 --> 0:01:18.720 currency space, it is a weaker dollar marketly so with 0:01:18.800 --> 0:01:22.840 the euro almost breaking one seventeen one sixteen ninety two, 0:01:22.959 --> 0:01:26.720 up about half a percent on those comments, take a listen, 0:01:26.800 --> 0:01:29.759 fed chair speaking just a moment ago in particular about 0:01:29.840 --> 0:01:32.600 productivity and its effect on the economy, Take a listen. 0:01:33.120 --> 0:01:37.720 The implication is obviously higher productivity, and some of that 0:01:37.760 --> 0:01:40.840 may be ai. It just also, I think productivity has 0:01:40.959 --> 0:01:44.399 just been almost structurally higher for several years now, So 0:01:44.440 --> 0:01:46.720 if you start thinking of it as two percent per year, 0:01:47.160 --> 0:01:51.120 you can sustain higher growth without more without more job creation. 0:01:51.760 --> 0:01:54.360 Of course, higher productivity is also what enables incomes to 0:01:54.480 --> 0:01:56.440 rise over long periods of time, so it's basically a 0:01:56.440 --> 0:01:59.280 good thing. But that may be. That's certainly the implication. 0:01:59.520 --> 0:02:02.840 The idea of productivity underpitting the ability for goldilocks to 0:02:02.880 --> 0:02:05.720 take hold, where essentially inflation can remain in check while 0:02:05.760 --> 0:02:08.600 the GDP continues to expand at the level that we've. 0:02:08.480 --> 0:02:09.040 Seen so far. 0:02:09.080 --> 0:02:10.960 We brought it up earlier, and it came up twice 0:02:10.960 --> 0:02:13.440 in the press conference. I'm looking at the data and 0:02:13.440 --> 0:02:16.160 it tells me the bond vigilanties are out this afternoon. 0:02:16.400 --> 0:02:17.720 There's no question about that. 0:02:18.080 --> 0:02:21.120 So where's the happy happy and the happy is? 0:02:21.120 --> 0:02:22.560 Is this American. 0:02:22.080 --> 0:02:27.120 Economy different than we used to know and even different 0:02:27.200 --> 0:02:30.400 than what we perceive right now that the gloom is 0:02:30.520 --> 0:02:34.639 just unfounded. Is we bet on this productivity down the road? 0:02:34.880 --> 0:02:36.560 This is the reason why this is a fad that 0:02:36.600 --> 0:02:41.200 can increase its GDP expectation. There's some cover unemployment rates 0:02:41.480 --> 0:02:45.200 relatively low and still cut. Maybe once more next year, 0:02:45.240 --> 0:02:48.560 maybe once more in twenty twenty seven. Also talking about 0:02:48.600 --> 0:02:53.120 the potential for some sort of ongoing easing even though 0:02:53.120 --> 0:02:55.720 they're in the neutral range because of the softness that 0:02:55.760 --> 0:02:57.760 they see in the labor market. The other aspect of 0:02:57.760 --> 0:02:59.920 this press conference, and I do want to highlight that 0:03:00.400 --> 0:03:02.240 is qi and no one's going to call it QE, 0:03:02.480 --> 0:03:04.680 certainly not the federal Reserve, but they are going to 0:03:04.720 --> 0:03:07.680 start buying bills sooner than they expected. Take a listen 0:03:07.680 --> 0:03:09.360 to what he had to say about that. 0:03:10.240 --> 0:03:13.920 Reserve management purchases will amount to forty billion dollars in 0:03:13.960 --> 0:03:16.760 the first month and may remain elevated for a few 0:03:17.000 --> 0:03:21.440 months to alleviate expected near term pressures in money markets. Thereafter, 0:03:21.480 --> 0:03:25.000 we expect the size of reserve management purchases to decline, 0:03:25.320 --> 0:03:27.760 though the actual pace will depend on market conditions. 0:03:28.200 --> 0:03:30.000 Joining in us now to talk about all of this 0:03:30.080 --> 0:03:32.000 is Stephanie Roth of Wolf Research. 0:03:32.080 --> 0:03:33.200 Stephanie would love. 0:03:33.040 --> 0:03:35.040 Your take on what the most important part of this 0:03:35.080 --> 0:03:37.920 news conference was. Was it the emphasis on productivity or 0:03:37.960 --> 0:03:40.120 is it the emphasis on quey light. 0:03:41.440 --> 0:03:42.960 I mean the combination of the two. I think the 0:03:42.960 --> 0:03:46.040 productivity thing is important. We saw GDP get revised up. 0:03:46.040 --> 0:03:47.800 Of course, some of that had to do with government shutdown, 0:03:47.880 --> 0:03:50.360 but even taking that out, the twenty basis points out 0:03:50.360 --> 0:03:55.040 for twenty six that stills higher GDP numbers, the median 0:03:55.320 --> 0:03:58.920 dot looking the same for FED funds, and unemployment rate 0:04:00.800 --> 0:04:04.320 remaining where it is, in which case we're talking about 0:04:04.360 --> 0:04:08.360 a productivity boom to some extent, I think he was 0:04:08.360 --> 0:04:10.320 trying to say that perhaps we're going to get a 0:04:11.640 --> 0:04:14.680 job less pick up and growth next year, which could 0:04:14.680 --> 0:04:16.200 at the margin be a little bit more dumbast And 0:04:16.200 --> 0:04:18.880 then of course the market is reacting to the surprise 0:04:18.960 --> 0:04:21.840 in terms of the FED buying bills, which was a 0:04:22.760 --> 0:04:25.080 notable in terms of timing, and then notable in terms 0:04:25.120 --> 0:04:27.640 of email. So it was overall, even though it was 0:04:27.640 --> 0:04:30.080 supposed to be a hawkist cut base in many expectations, 0:04:30.080 --> 0:04:32.000 but it ended up being fairly Dovas. 0:04:32.080 --> 0:04:34.640 Cross currents here of a non snooze fest. And I 0:04:34.640 --> 0:04:38.240 think the summary here for everyone, including the President of 0:04:38.240 --> 0:04:39.960 the United States is. 0:04:39.920 --> 0:04:42.920 The mandate is two percent. This goes back ages. 0:04:43.320 --> 0:04:45.400 Are we really jaw boning our way to a new 0:04:45.440 --> 0:04:47.400 mandate which is two point x percent? 0:04:47.720 --> 0:04:49.760 Or dare I say three point zero percent? 0:04:50.600 --> 0:04:51.520 I don't think so. 0:04:51.839 --> 0:04:55.359 I mean in their projections they have lower inflation numbers. 0:04:55.400 --> 0:04:56.200 I think that's right. 0:04:56.520 --> 0:04:57.920 I think we're going to be in an environment where 0:04:57.920 --> 0:05:01.599 inflation is gradually moving lower. If you were to ask 0:05:01.600 --> 0:05:05.760 most forecasters by this point, would inflation actually be running 0:05:06.120 --> 0:05:07.159 just around three percent? 0:05:07.200 --> 0:05:07.560 I think no. 0:05:07.640 --> 0:05:10.640 I think the pass through on inflation has been a 0:05:10.640 --> 0:05:13.960 lot less than many had anticipated. Marges have been kind 0:05:13.960 --> 0:05:16.840 of okay, It's gone a lot better than most part 0:05:16.960 --> 0:05:17.640 we had have saw it. 0:05:17.680 --> 0:05:19.719 One of my interviews of the year was Nancy Lazar. 0:05:19.800 --> 0:05:22.000 We had Nancy Lazarre at the beginning of the show, 0:05:22.080 --> 0:05:24.400 and she nailed it when she said, there's all this 0:05:24.520 --> 0:05:28.320 FED mumbo jumble, but it's just a cyclical slow down. 0:05:28.720 --> 0:05:32.120 Do you bet at Wolf Research in a cyclical recovery? 0:05:32.200 --> 0:05:34.600 Here is Ana Wong alluded to today. 0:05:34.960 --> 0:05:36.640 Yeah, I think that's right, and I think we're starting 0:05:36.640 --> 0:05:38.640 to see signs of it. Of course, it's mixed at 0:05:38.640 --> 0:05:41.520 this jolts opening starting to pick up, You're seeing temp 0:05:41.560 --> 0:05:44.680 hiring start to look a little bit better. It seems 0:05:44.720 --> 0:05:47.000 to be just a cyclical slowdown apart driven by tariff 0:05:47.000 --> 0:05:50.000 related uncertainty. As that uncertainty starts to fade, you're likely 0:05:50.040 --> 0:05:52.280 to see an improvement and growth. The Fed's probably not 0:05:52.320 --> 0:05:54.080 going to cut through the first half of next year, 0:05:54.680 --> 0:05:56.799 and it's going to be an environment where the Emmy's 0:05:56.839 --> 0:05:57.680 running fairly firm. 0:05:58.160 --> 0:05:59.920 Something that you noted is that this had a sort 0:05:59.920 --> 0:06:00.960 of dubvish tilt to it. 0:06:01.040 --> 0:06:03.080 I think it's really important to note that that's certainly 0:06:03.120 --> 0:06:05.359 the response that we're seeing in markets across the board. 0:06:05.920 --> 0:06:08.440 They talked about weakness in the labor market. J Powell 0:06:08.560 --> 0:06:11.480 was talking about forty thousand jobs getting created each month. 0:06:11.560 --> 0:06:14.040 Say you can downgrade that by about sixty thousand Yeah, 0:06:14.680 --> 0:06:16.640 looking back, thank you for bringing this all of a sudden. 0:06:16.680 --> 0:06:19.760 You're looking at implied weakness that they're sort of bringing 0:06:19.839 --> 0:06:22.120 forward from the report that we're going to get next week. 0:06:22.520 --> 0:06:24.880 How credible do you see that, especially given the guidance 0:06:24.920 --> 0:06:27.040 that he kept emphasizing that they hear from the regional 0:06:27.120 --> 0:06:28.160 fed districts. 0:06:28.480 --> 0:06:31.240 I mean, I was surprised by his estimates on QCW, 0:06:31.520 --> 0:06:33.480 the assumptions that it's going to be a sixty thousand 0:06:33.520 --> 0:06:35.679 downard revision. My estimate is about. 0:06:35.520 --> 0:06:35.840 Half of that. 0:06:36.720 --> 0:06:38.640 So that was a that was a pretty duvish statement. 0:06:38.680 --> 0:06:40.000 That was the sort of the higher end of what 0:06:40.120 --> 0:06:42.840 it could have been, suggesting that at least his view 0:06:42.880 --> 0:06:45.360 on the labor market is we've been running minus twenty 0:06:45.440 --> 0:06:47.720 thousand non farm payrolls for quite some time. 0:06:47.760 --> 0:06:48.560 That's pretty dubbish. 0:06:48.640 --> 0:06:51.280 I think what will surprise most folks is in the 0:06:51.320 --> 0:06:53.000 next couple of months you'll probably see a bit of 0:06:53.040 --> 0:06:53.640 a bounce back. 0:06:53.520 --> 0:06:56.160 Into You were on the phone talking to your children 0:06:56.160 --> 0:06:58.680 about Alonzo from the Mets to the Orioles, and you 0:06:58.839 --> 0:07:01.400 missed when he talked about the job adjustment. 0:07:01.720 --> 0:07:02.559 The market moved. 0:07:02.800 --> 0:07:05.840 Yeah, I mean, the fact is the market, the bond vigilant. 0:07:05.880 --> 0:07:08.200 He's walked away, and they got to price up yield 0:07:08.279 --> 0:07:09.080 down at that moment. 0:07:09.240 --> 0:07:11.200 Yeah. I mean my son actually messaged me, could I 0:07:11.200 --> 0:07:13.520 please have money for more food to cope with Alonzo 0:07:13.640 --> 0:07:15.080 signing with the Orioles, And I. 0:07:15.080 --> 0:07:16.400 Gave them two dollars because. 0:07:16.160 --> 0:07:18.440 In true o big spender, two dollars is. 0:07:18.400 --> 0:07:19.320 All that that's worth to me. 0:07:19.480 --> 0:07:22.720 So anyway, we're looking though, at essentially a message from 0:07:22.720 --> 0:07:24.920 the Fed that you can have your cake and eat 0:07:24.960 --> 0:07:27.760 it too. That this inflation from the most part was 0:07:27.840 --> 0:07:30.520 driven maybe by the tariffs, but that is transitory, for 0:07:30.640 --> 0:07:32.560 lack of a better word, and going forward there is 0:07:32.640 --> 0:07:34.640 going to be this productivity boom that's going to help 0:07:34.680 --> 0:07:37.800 support things. How much does this really line up with 0:07:37.960 --> 0:07:41.680 two more rate cuts in twenty twenty six twenty twenty seven, 0:07:42.040 --> 0:07:43.840 and how much does this line up to either more 0:07:43.920 --> 0:07:45.720 rate cuts or potentially a rate hike. 0:07:46.440 --> 0:07:48.040 I certainly don't think there'll be a hike, and it 0:07:48.080 --> 0:07:50.800 seems like Powell dismiss that too. I think you could 0:07:50.800 --> 0:07:52.640 see some more rate cuts in the back part of 0:07:52.680 --> 0:07:54.480 next year, because what you'll likely see is the first 0:07:54.560 --> 0:07:56.800 part you might elevate. Inflation should still be a little 0:07:56.800 --> 0:07:58.640 bit elevated. You're going to see that sickle goal pickup. 0:07:58.880 --> 0:08:00.880 In the back part of next year, you might start 0:08:00.880 --> 0:08:02.440 to see the economy cool down a little bit, and 0:08:02.440 --> 0:08:04.680 then inflation's likely to slow back down because that's where 0:08:04.680 --> 0:08:08.760 you're passing that peak of teriff related inflation. And that 0:08:08.800 --> 0:08:10.560 could be an environment where they could cut a couple 0:08:10.680 --> 0:08:15.200 more times, albeit slowly. And that's because you're going to 0:08:15.240 --> 0:08:17.480 see this sort of a fairly sluggish job trajectory, and 0:08:17.560 --> 0:08:20.080 if they're chopping off an extra sixty thousand off fat, 0:08:20.120 --> 0:08:21.760 they're going to be even more cautious on the labor 0:08:21.800 --> 0:08:23.559 market than the payroll's number would suggest. 0:08:23.960 --> 0:08:26.640 As we speak, Lee, so the two ten vanilla spread 0:08:26.760 --> 0:08:29.160 goes out to a new steeper yield curve. 0:08:29.320 --> 0:08:31.720 Yeah, the bond market's speaking. 0:08:31.440 --> 0:08:34.280 Here in space speaking that frankly, this is a FED 0:08:34.360 --> 0:08:36.040 that's going to lower the front end as much as 0:08:36.080 --> 0:08:39.360 they can, but on the long end yield there is 0:08:39.480 --> 0:08:42.720 less control over that. Let's bring back Bloomberg's Michael McKee, 0:08:42.760 --> 0:08:46.120 who is in that room asking questions, Mike. Potentially the 0:08:46.240 --> 0:08:49.360 last press conference with a rate cut from FED Chair 0:08:49.600 --> 0:08:52.280 J Powell a notable one for its somewhat dubbish tilt. 0:08:54.400 --> 0:08:56.439 Well, I'm not sure it was a dubbish tilt. I 0:08:56.520 --> 0:09:00.760 think the chair tried to keep his option as open 0:09:00.840 --> 0:09:03.800 as possible. You noted that he suggested that there may 0:09:03.880 --> 0:09:08.120 be some data accuracy problems with the numbers for the 0:09:08.240 --> 0:09:10.679 Jobs Report and the CPI that we're going to get 0:09:10.800 --> 0:09:11.360 next week and. 0:09:13.040 --> 0:09:15.520 Into January, the catch up from the. 0:09:15.520 --> 0:09:18.079 Bureau of Labor Statistics and the Bureau of Economic Analysis 0:09:18.360 --> 0:09:20.200 as they get out the data that we missed during 0:09:20.240 --> 0:09:23.360 the government shutdown. And so I think they don't want 0:09:23.440 --> 0:09:26.319 to put themselves in a position of saying that we're 0:09:26.400 --> 0:09:29.880 leaning one way or another. And by doing that, because 0:09:29.920 --> 0:09:32.280 they've cut so many times in a row, it sounds 0:09:33.040 --> 0:09:35.280 a bit like they're still dubbaged. But I don't think 0:09:35.320 --> 0:09:37.880 that's the case anymore. And you do have some people, 0:09:37.960 --> 0:09:40.240 and I noticed what Stephanie just said, but you do 0:09:40.400 --> 0:09:43.600 have some members of the committee, the overall committee, who 0:09:43.679 --> 0:09:46.600 suggested we might see rate increases next year. 0:09:47.440 --> 0:09:48.240 The thing I think. 0:09:48.320 --> 0:09:50.360 Maybe out of all of this that you want to 0:09:50.440 --> 0:09:54.000 pull out is Poal's emphasis when he was answering my 0:09:54.160 --> 0:09:58.800 question about we need to see wage increases, and wage 0:09:58.840 --> 0:10:01.640 increases are going to depend on the status of the 0:10:01.800 --> 0:10:04.280 labor market. If wages are going up, then people are 0:10:04.360 --> 0:10:08.120 less concerned about inflation. If wages are not going up, 0:10:08.160 --> 0:10:12.079 then that's a problem for the American public, and it 0:10:12.160 --> 0:10:14.200 also is a problem for the overall economy. 0:10:14.559 --> 0:10:17.280 Michael McKee, thank you so much, as always for all 0:10:17.360 --> 0:10:20.640 your work at the FED Press conference and before. Right now, 0:10:20.679 --> 0:10:23.160 we are getting comments from President Trump who's speaking at 0:10:23.160 --> 0:10:25.319 a round table in the White House. 0:10:25.400 --> 0:10:26.440 He's talking about his. 0:10:26.520 --> 0:10:30.320 Ongoing criticism of Jerome Powell, saying we should be able 0:10:30.360 --> 0:10:33.640 to do more than three percent or four percent GDP. 0:10:33.920 --> 0:10:36.880 He has said repeatedly too late Powell has talked about 0:10:36.920 --> 0:10:38.920 that guy. He's not doing a very good job, and 0:10:38.960 --> 0:10:41.360 they would have fired him. And ultimately this just sort 0:10:41.360 --> 0:10:44.480 of reiterates the split screen of Jerome Powell on one 0:10:44.559 --> 0:10:47.599 hand and President Trump on the other. Really highlights the 0:10:47.640 --> 0:10:50.080 political pressures coming down the pike in twenty twenty six. 0:10:50.120 --> 0:10:52.280 We've got a great headline team. Here's the headline. 0:10:52.320 --> 0:10:55.400 The President don't see why we can't have twenty percent 0:10:55.520 --> 0:10:58.880 to twenty five percent GDP growth. I think all of 0:10:58.920 --> 0:11:02.760 the adults, whatever their belief descent here descent there are 0:11:02.800 --> 0:11:08.040 dealing with the president, who's got a very vociferous cacophony 0:11:08.120 --> 0:11:11.640 of opinions on the economy. You don't plan on Donald 0:11:11.679 --> 0:11:12.959 Trump's economic vision. 0:11:13.000 --> 0:11:13.920 That's all there is to us. 0:11:13.960 --> 0:11:15.520 He's a dead guy. He's a developer. 0:11:15.600 --> 0:11:17.480 Of course, he wants rates to be lower here and 0:11:17.559 --> 0:11:20.400 the met interust rates could have been doubled in terms 0:11:20.480 --> 0:11:23.199 of the amount of cuts. I'm just wondering, as Stephanie, 0:11:23.200 --> 0:11:25.920 from your perspective, if you had gotten fifty basis points 0:11:25.920 --> 0:11:28.320 of rate cuts, how much would that have turbocharge twenty 0:11:28.400 --> 0:11:28.920 twenty six. 0:11:30.440 --> 0:11:32.120 It would have, but then I'd be afraid that the 0:11:32.320 --> 0:11:34.360 long end of the bond market would have backed up 0:11:34.360 --> 0:11:36.320 even more than it has been most recently. That would 0:11:36.360 --> 0:11:39.040 be not a great outcome because that's an environment where 0:11:39.960 --> 0:11:44.560 we're truly turbocharging sort of the economy from rape perspective, 0:11:44.559 --> 0:11:46.559 but then you have long ends backing up. That's not 0:11:46.600 --> 0:11:49.520 good for markets. We're not in an environment where we 0:11:49.559 --> 0:11:52.079 need to be a fifty basis point cuts. It's a 0:11:52.160 --> 0:11:54.120 question whether they should have been cutting twenty five basis 0:11:54.160 --> 0:11:55.960 points today, let alone should they be cutting even more 0:11:56.000 --> 0:11:56.199 than that? 0:11:56.480 --> 0:11:59.679 Joining us now to join the conversation, Aditya Bjave of 0:11:59.720 --> 0:12:02.959 Banks America Aditya just before we get started, kind of 0:12:02.960 --> 0:12:05.480 a dubvish tilt. Certainly, that's the way it's being received 0:12:05.559 --> 0:12:06.240 by markets. 0:12:06.320 --> 0:12:08.400 Do you think that this is the right call? As 0:12:08.559 --> 0:12:09.960 the Fed accelerates the. 0:12:10.000 --> 0:12:13.800 Timeline for Bill's purchases and talks about the ongoing to 0:12:13.880 --> 0:12:15.359 ceration and the labor market. 0:12:16.880 --> 0:12:18.480 Good afternoon, Thanks for having me. 0:12:18.720 --> 0:12:18.760 So. 0:12:18.880 --> 0:12:21.839 We were skeptical going into the meeting about whether Chair 0:12:21.920 --> 0:12:24.760 Powell would really be able to deliver a hawkish cut 0:12:24.920 --> 0:12:28.520 given how much data we're getting between now and the 0:12:28.640 --> 0:12:32.319 January meeting, and indeed he didn't. They kind of nudged 0:12:32.360 --> 0:12:35.160 in the direction of, Okay, we should probably stay on hold, 0:12:35.240 --> 0:12:37.559 or our base case for January is a hold, but 0:12:37.679 --> 0:12:40.040 they can't close the door on January. We thought the 0:12:40.240 --> 0:12:43.960 one arrow in Powell's quiver that he hadn't fired at 0:12:44.000 --> 0:12:46.920 his hawkish press conferences at July and October, which by 0:12:46.920 --> 0:12:49.000 the way, didn't change the policy path at all. The 0:12:49.080 --> 0:12:51.560 one thing he had left to say was policies at neutral, 0:12:51.760 --> 0:12:53.600 and he got very close to saying that. He said, 0:12:53.640 --> 0:12:56.839 we're within the plausible range of estimates of neutral. But 0:12:56.920 --> 0:12:58.559 then when he gave his own opinion. He said we're 0:12:58.559 --> 0:13:00.400 probably at the higher end of that range, so I 0:13:00.440 --> 0:13:02.439 think he still left the door open for January. But 0:13:02.480 --> 0:13:04.280 they really want to tell us that the base case 0:13:04.800 --> 0:13:05.720 is a hold for January. 0:13:05.800 --> 0:13:09.480 Then if we're at that tip point, which will matter 0:13:09.640 --> 0:13:13.520 more an analysis of inflation or an analysis of the 0:13:13.640 --> 0:13:14.240 job market. 0:13:15.920 --> 0:13:18.480 I think there's still more focused on the label market, 0:13:18.720 --> 0:13:21.160 A simple way to think about it, which maybe he 0:13:21.640 --> 0:13:24.040 muddied the waters a little bit by talking about the 0:13:24.120 --> 0:13:27.040 measurement issues with the unemployment rate. But we're going to 0:13:27.120 --> 0:13:30.079 get not only the November unemployment rate but also the 0:13:30.160 --> 0:13:33.960 December unemployment rate before the January meeting. If that December 0:13:34.040 --> 0:13:37.920 unemployment rate is up to four point seven percent, I 0:13:37.960 --> 0:13:40.680 think they're going in January four point five or lore 0:13:41.040 --> 0:13:42.920 they're going to stay on hold, and four point six 0:13:43.040 --> 0:13:44.640 is going to be a close Cain really well said. 0:13:44.679 --> 0:13:47.720 But then what's so important here within this? And let's 0:13:47.760 --> 0:13:51.000 look at the Bank of America now GDP report? I 0:13:51.080 --> 0:13:54.960 got Atlanta at three point five. Where is the economy 0:13:55.080 --> 0:13:58.240 right now? Just say, in terms of nominal GDP it's 0:13:58.280 --> 0:13:59.839 a boom economy. 0:13:59.480 --> 0:14:01.920 Isn't it? Yep? It is. 0:14:02.040 --> 0:14:05.280 We have around five percent nominal GDP growth for next year, 0:14:05.840 --> 0:14:08.439 and that's well above consensus. We were very happy to 0:14:08.520 --> 0:14:10.920 see that the FED is coming very close to our view. 0:14:11.000 --> 0:14:11.120 Now. 0:14:11.440 --> 0:14:14.640 The GDP upgrades were quite significant, but honestly, it's not 0:14:14.760 --> 0:14:16.800 that hard to get into the low to mid twes 0:14:16.880 --> 0:14:19.600 next year. As Powell mentioned, you'll get about two tenths, 0:14:19.680 --> 0:14:22.520 maybe even three tenths just from the shutdown. You're going 0:14:22.600 --> 0:14:24.720 to get another three to four tenths from the big 0:14:24.760 --> 0:14:25.440 beautiful Bill. 0:14:25.880 --> 0:14:29.400 So the hurdle for the rest of GDP growth. 0:14:29.320 --> 0:14:31.280 Is only about one point seven one point nine percent, 0:14:31.320 --> 0:14:33.520 which frankly is what we did this year, even with 0:14:33.640 --> 0:14:35.640 all the trade disruptions. So we should be in the 0:14:35.680 --> 0:14:36.360 twos next year. 0:14:36.400 --> 0:14:38.600 In my view, Stephanie, it strikes me that there's a 0:14:38.720 --> 0:14:41.120 new psychology taking hold of a FED, and it has 0:14:41.160 --> 0:14:42.680 been for the past six months. And it goes to 0:14:42.760 --> 0:14:46.400 Tom's point about productivity, this idea that at times of transition, 0:14:46.960 --> 0:14:50.280 it pays to run the economy hot to avoid some 0:14:50.440 --> 0:14:53.640 of the job's losses that do come into effect in 0:14:53.760 --> 0:14:57.080 these huge technological shifts that take hold. Do you think 0:14:57.120 --> 0:14:58.960 that that is what's going on, That this is a 0:14:59.120 --> 0:15:02.360 FED that is to running the economy hotter than otherwise 0:15:02.400 --> 0:15:04.720 would because there are job losses during times like this, 0:15:05.160 --> 0:15:08.040 and those job losses are hard to replace even as 0:15:08.200 --> 0:15:09.440 productivity comes back. 0:15:09.880 --> 0:15:11.800 Yeah, I think that's exactly what's happening. And that's kind 0:15:11.840 --> 0:15:15.040 of what Powell alluded to today, that this is productivity 0:15:15.120 --> 0:15:19.280 enhancing backdrop that we're seeing. They're certainly coming across, as 0:15:19.520 --> 0:15:23.200 you know, more dubvish than generally expected to, and they're 0:15:23.240 --> 0:15:25.240 going to take a haircut off the job numbers that 0:15:25.280 --> 0:15:27.440 we're getting. And whether or not sixty thousand is the 0:15:27.520 --> 0:15:29.520 right number, so any numbers that we get from a 0:15:29.600 --> 0:15:31.480 job perspective, you have to, in your mind take that 0:15:31.600 --> 0:15:34.760 down even lower, which then is at the margin going 0:15:34.800 --> 0:15:37.520 to make them more dubvish and running the economy hotter 0:15:37.560 --> 0:15:38.480 than one otherise be the case. 0:15:38.560 --> 0:15:41.200 The sum totally here, Lisa, is what the gentleman from 0:15:41.280 --> 0:15:43.720 Bank of America said. You get a four point seven 0:15:43.840 --> 0:15:48.080 percent unemployment rate. None of the cement analysis matters into 0:15:48.160 --> 0:15:51.640 midterm elections. Four point seven is getting up there, and 0:15:51.800 --> 0:15:54.280 I can't imagine four point nine or five zero. 0:15:54.280 --> 0:15:56.720 Which is the reason why Aditya to bring you back in. 0:15:57.080 --> 0:16:01.640 You're talking about the chance of a potential rate come January, 0:16:01.760 --> 0:16:05.320 should we get that kind of employment stress, what are 0:16:05.400 --> 0:16:07.360 you seeing? Were you surprised, just to pick up the 0:16:07.360 --> 0:16:10.240 conversation we were having with Stephanie, were you surprised at 0:16:10.360 --> 0:16:13.640 how negative Jerome Powell was in his interpretation of the 0:16:13.720 --> 0:16:16.560 labor market and the job losses that we've seen over 0:16:16.600 --> 0:16:17.560 the past few months. 0:16:19.400 --> 0:16:22.360 That was definitely a dubbish surprise to talk about. You know, 0:16:22.920 --> 0:16:25.480 we're going to mock down forty thousand a month by 0:16:25.680 --> 0:16:28.920 sixty thousand per months and now you're looking at negative twenty. 0:16:29.360 --> 0:16:31.120 And then at the same time he says that he 0:16:31.160 --> 0:16:33.360 doesn't expect the unemployment rate to go up a lot 0:16:33.440 --> 0:16:36.440 further from here, So what is his read on break even? 0:16:36.480 --> 0:16:38.560 He had previously told us his read on break even 0:16:38.680 --> 0:16:41.160 was between zero and fifty thousand, So a little bit 0:16:41.200 --> 0:16:43.920 of inconsistency there in our view. If they stick with 0:16:44.040 --> 0:16:46.680 the view that break evens between zero and fifty and 0:16:46.800 --> 0:16:49.880 we're only growing at negative twenty, then either you need 0:16:49.960 --> 0:16:52.280 to see payrolls bounce back or they're going to continue 0:16:52.320 --> 0:16:54.520 to worry about downside risk to the unemployment rate. 0:16:54.760 --> 0:16:55.560 And again it's not. 0:16:55.720 --> 0:16:57.720 Our base case that they're going to keep cutting rates, 0:16:57.800 --> 0:17:00.280 but they might well be inclined to do so. 0:17:00.600 --> 0:17:02.720 Aditi Bijave, thank you so much for being with us 0:17:02.920 --> 0:17:06.400 this morning. Joining us now is Jeff Rosenberg of Blackrock. 0:17:06.600 --> 0:17:07.920 Jeff always great to speak with. 0:17:08.000 --> 0:17:10.240 You want to get your take about whether what we 0:17:10.400 --> 0:17:13.000 have just heard in that press conference makes you incredibly 0:17:13.080 --> 0:17:15.879 more risk on in terms of going out double fisting it. 0:17:16.320 --> 0:17:19.120 QI light is coming back, they're buying bills. They're also 0:17:19.200 --> 0:17:21.560 potentially looking to weakness in the labor market. 0:17:21.920 --> 0:17:22.560 Is this risk on? 0:17:24.359 --> 0:17:27.800 Well, you said one of my three takeaways, which is 0:17:27.960 --> 0:17:31.480 number three of today's meeting, which i'll call QWI confusion. 0:17:31.840 --> 0:17:33.600 I'll come back to that. The first takeaway is the 0:17:33.680 --> 0:17:36.399 pause is in. We kind of knew that. The second one, 0:17:36.400 --> 0:17:39.639 which you've already talked about, is why because we're in 0:17:39.720 --> 0:17:43.720 the realm of neutral. And the third is getting a 0:17:43.760 --> 0:17:46.760 little bit of confused about the QWI confusion. It was 0:17:46.800 --> 0:17:49.040 a little bit more dubbish than maybe expected, as the 0:17:49.080 --> 0:17:52.880 previous commentators talked about, but it's not that far off 0:17:53.000 --> 0:17:56.040