WEBVTT - Steve Matthews on Mester (Audio)

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<v Speaker 1>Just a couple of points, and then we'll bring in

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<v Speaker 1>Bloomberg Steve Matthews for some quick analysis again Semester, saying

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<v Speaker 1>that the FED hasn't seen any progress on inflation and

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<v Speaker 1>that the central bank is still too accommodative. He said,

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<v Speaker 1>there's always a risk when you're tighten to weigh up

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<v Speaker 1>whether or not you're tightening too much or too little,

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<v Speaker 1>But at this point, she said, the larger risk comes

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<v Speaker 1>from tightening too little and allowing very high inflation to persist.

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<v Speaker 1>The big fear is it becomes embedded. She shrugged off

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<v Speaker 1>a question about about slowing down quantitative tightening, saying the

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<v Speaker 1>FED should stick to its balance. She she run off,

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<v Speaker 1>let's get to Bloomberg Steve Matthews. Steve, your main takeaway

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<v Speaker 1>from that interview, Well, there are a couple of things.

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<v Speaker 1>She was asked about the meeting in November, and while

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<v Speaker 1>she would not commit to fifty or seventy five basis

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<v Speaker 1>points as the hYP for November market car pricing, and

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<v Speaker 1>obviously seventy, the overall tone of her remarks was very

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<v Speaker 1>supportive of seventy five basis points. I mean, it was

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<v Speaker 1>pretty clear from her comments that she viewed not saying

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<v Speaker 1>one way or the other. It's kind of a perfunctory

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<v Speaker 1>thing because well, I want to go into the meeting

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<v Speaker 1>and hear what other people are saying, and so it's

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<v Speaker 1>like it's kind of a diplomatic way of some of

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<v Speaker 1>the MC will refuse to commit in advance because they're

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<v Speaker 1>listening at the meeting and want to hear what others

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<v Speaker 1>have to say. But but the reality is the tone

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<v Speaker 1>of her remarks was very much that we need to

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<v Speaker 1>do more, we needed more now, and it was very

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<v Speaker 1>supportively seventy five. The other thing that really jumped out

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<v Speaker 1>was the Laurento Smester is a long time Hawks. She

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<v Speaker 1>worked for the Philadelphia Said before becoming president in Cleveland

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<v Speaker 1>and was worked for very hawkish president. But she said

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<v Speaker 1>that we are all well aligned on policy, meaning the

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<v Speaker 1>entire POEMC And it's like, you know, she's not speaking

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<v Speaker 1>for everyone else, but she's saying, basically, there are no hawks,

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<v Speaker 1>there are no dubs right now. Everybody is pretty much

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<v Speaker 1>on board. And that was interesting. Yeah, we have seen

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<v Speaker 1>some few cracks here as well, But I just want

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<v Speaker 1>to get to what else she was talking about, because

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<v Speaker 1>she did say that they were monitoring financial markets and

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<v Speaker 1>saying that financial markets were functioning. Well, you know, how

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<v Speaker 1>was she How does the FED interpret market action? Is

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<v Speaker 1>the key point I'm trying to do with a quick question.

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<v Speaker 1>I'm trying to ask, Yeah, that was interesting because you know,

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<v Speaker 1>she was saying markets are fine right now. We don't

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<v Speaker 1>see problems. We don't see any reason that with market

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<v Speaker 1>turmoil that would cause us to stop. And I guess

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<v Speaker 1>the one takeaway from that is one of the levers

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<v Speaker 1>the FED poles is by raising rates, they want financial

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<v Speaker 1>markets to react. I mean they want financial conditions to tighten,

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<v Speaker 1>and that that means you know, a higher dollar and

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<v Speaker 1>higher mortgage rates, and you know, presumably lower bond and

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<v Speaker 1>stock prices, and there's a wealth effect through which, you know,

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<v Speaker 1>the the economy is slowed. And so I think up

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<v Speaker 1>until now they have seen these financial market changes and

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<v Speaker 1>if anything, are placed by it, because that's part of

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<v Speaker 1>their goal is to slow the economy, and they haven't

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<v Speaker 1>seen anything disruptive. The most disruptive thing obviously has been

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<v Speaker 1>recently out of the Bank of England and what's happening

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<v Speaker 1>in the in the UK. But that is not alarming enough.

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<v Speaker 1>Right now, I have to say that Jenny Yellen said

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<v Speaker 1>pretty much the same thing in a CNBC interview just

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<v Speaker 1>a couple of hours ago. At the time, I felt

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<v Speaker 1>like some in the market might think that they're asleep

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<v Speaker 1>at the wheel, that they're not seeing that some of

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<v Speaker 1>these things could be visiting US shores. But it seems

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<v Speaker 1>at least at the moment, they feel comfortable. Uh. And

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<v Speaker 1>actually they're not really being very successful in in bringing

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<v Speaker 1>unemployment up, are they. No. No, you have unemployment at

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<v Speaker 1>three and a half percent, and you just had, you know,

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<v Speaker 1>another fairly big jobs report, meaning that job creation ordinarily

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<v Speaker 1>should be uh, to just account for the trend growth

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<v Speaker 1>in the labor market would be around a hundred thousand,

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<v Speaker 1>and they're going more than twice that. So job growth

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<v Speaker 1>is too high in their view, and economy is too strong.

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<v Speaker 1>So alright, Steve, you have a lot more work to

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<v Speaker 1>be done. That that's the key message. A lot more

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<v Speaker 1>work to be done, and we are all on the

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<v Speaker 1>same page. That's what she's been saying. Bloomberg Steve Matthews

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<v Speaker 1>with us and again our chat with Cleveland President Lauretta

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<v Speaker 1>Mester here live on Bloomberg Radio and Television.