1 00:00:02,520 --> 00:00:07,000 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,200 --> 00:00:13,840 Speaker 2: This is a breaking news update from Bloomberg instant reaction 3 00:00:14,120 --> 00:00:17,959 Speaker 2: and analysis from our three thousand journalists and analysts around 4 00:00:17,960 --> 00:00:21,520 Speaker 2: the world. But that FED decision is mimachay. 5 00:00:23,320 --> 00:00:26,920 Speaker 3: No change in rates, no change in dots, one descent, 6 00:00:27,040 --> 00:00:31,040 Speaker 3: but some big changes in inflation expectations. FED official see 7 00:00:31,080 --> 00:00:34,320 Speaker 3: one cut still in two thousand and six. At some point, 8 00:00:34,600 --> 00:00:38,080 Speaker 3: even though their statement notes that uncertainty about the economic 9 00:00:38,200 --> 00:00:42,720 Speaker 3: outlook remains elevated, three members who favored no cuts in 10 00:00:43,000 --> 00:00:46,360 Speaker 3: this year moved their dots down to one. The statement 11 00:00:46,400 --> 00:00:49,360 Speaker 3: goes on to say the implication of developments in the 12 00:00:49,360 --> 00:00:52,720 Speaker 3: Middle East for the US economy are uncertain, and the 13 00:00:52,720 --> 00:00:56,640 Speaker 3: committee remains attentive to risks to both sides of their mandate. 14 00:00:57,040 --> 00:00:59,960 Speaker 3: They still see one more cut in twenty twenty seven. 15 00:01:00,440 --> 00:01:03,480 Speaker 3: Stephen Myyron the only dissenter. He wanted a quarter point 16 00:01:03,520 --> 00:01:06,120 Speaker 3: cut this time, and from the dots we discerned that 17 00:01:06,160 --> 00:01:08,440 Speaker 3: he still wants one hundred basis points at some point 18 00:01:08,440 --> 00:01:12,360 Speaker 3: this year. The language about future moves remains the same. 19 00:01:12,440 --> 00:01:15,520 Speaker 3: They still talk about the extent and timing of additional 20 00:01:15,520 --> 00:01:20,080 Speaker 3: adjustments to the target range. It's the Summary of Economic Projections, 21 00:01:20,120 --> 00:01:21,920 Speaker 3: in which we see a lot of changes. 22 00:01:22,240 --> 00:01:23,640 Speaker 2: PCEE inflation this. 23 00:01:23,600 --> 00:01:27,040 Speaker 3: Year is forecast at two point seven percent, up from 24 00:01:27,080 --> 00:01:31,199 Speaker 3: two point four percent in December. Core is also seen 25 00:01:31,360 --> 00:01:34,320 Speaker 3: at two point seven percent, up from two point five. 26 00:01:34,800 --> 00:01:37,720 Speaker 3: Both dropped to two point two percent next year, up 27 00:01:37,760 --> 00:01:41,280 Speaker 3: from two point four percent in the December SEP. Core 28 00:01:41,440 --> 00:01:45,839 Speaker 3: is seen at two point seven percent this year. Both 29 00:01:45,920 --> 00:01:49,280 Speaker 3: drop back, as I mentioned next year, to two percent 30 00:01:49,560 --> 00:01:53,000 Speaker 3: in twenty and twenty eight. GDP marked up a tenth 31 00:01:53,400 --> 00:01:55,720 Speaker 3: in both years both of the next two years to 32 00:01:55,760 --> 00:01:58,320 Speaker 3: two point four percent this year and two point three 33 00:01:58,400 --> 00:02:02,280 Speaker 3: percent next year. The ployment forecast remains four point four 34 00:02:02,320 --> 00:02:05,440 Speaker 3: percent in twenty twenty six, dropping to four point three 35 00:02:05,480 --> 00:02:08,840 Speaker 3: percent next year. That's up from four point two percent 36 00:02:08,960 --> 00:02:12,240 Speaker 3: in December, and the longer run estimate for FED fund 37 00:02:12,320 --> 00:02:15,440 Speaker 3: seen as the proxy for the neutral rate, rises a 38 00:02:15,560 --> 00:02:17,520 Speaker 3: tick to three point one percent. 39 00:02:17,600 --> 00:02:19,840 Speaker 2: Guys, Ma, Mick Key, thank you sir. We'll catch up 40 00:02:19,840 --> 00:02:21,239 Speaker 2: with you a little bit later. Let's start with the 41 00:02:21,280 --> 00:02:23,919 Speaker 2: price section. We'll got equities, then bonds. We'll have a 42 00:02:23,960 --> 00:02:25,920 Speaker 2: sneak peak of what's happening in the commodity market because 43 00:02:25,919 --> 00:02:29,160 Speaker 2: we're tracking that throughout the day here at Bloomberg Equity Markets, 44 00:02:29,240 --> 00:02:31,280 Speaker 2: looking at the S and P five hundred off session 45 00:02:31,280 --> 00:02:33,800 Speaker 2: lows were still negative by point five percent. In the 46 00:02:33,800 --> 00:02:35,960 Speaker 2: bond market, yields slightly higher on a two year by 47 00:02:35,960 --> 00:02:39,120 Speaker 2: two basis points, basically as you were at three seventy 48 00:02:39,280 --> 00:02:42,079 Speaker 2: on twos on ten to about four to twenty one, 49 00:02:42,320 --> 00:02:45,040 Speaker 2: which is basically where we were going into this decision. 50 00:02:45,120 --> 00:02:47,320 Speaker 2: So this is what we're doing. You go into the projections. 51 00:02:47,480 --> 00:02:49,280 Speaker 2: We'll ignore the statement just for a while. We'll go 52 00:02:49,320 --> 00:02:51,760 Speaker 2: into the statement and we'll look at the projections and 53 00:02:51,800 --> 00:02:54,560 Speaker 2: compare what they were projecting back in December and have 54 00:02:54,600 --> 00:02:56,359 Speaker 2: a look at what they're projecting now. So let's just 55 00:02:56,440 --> 00:03:00,720 Speaker 2: go through twenty twenty six. For GDP revise slightly. That's 56 00:03:00,720 --> 00:03:02,760 Speaker 2: some good news. Twenty seven as well, same thing, by 57 00:03:02,800 --> 00:03:06,520 Speaker 2: the way, So the revised GENP higher, that revise, inflation higher, 58 00:03:06,760 --> 00:03:09,959 Speaker 2: and they've kept the projection implied projection for interest rates 59 00:03:10,200 --> 00:03:13,720 Speaker 2: exactly where it was for December. Those kind of moves 60 00:03:14,000 --> 00:03:17,160 Speaker 2: should be music to the ears of bullish market participants. 61 00:03:17,240 --> 00:03:20,320 Speaker 4: This is an incredibly dubvish hold, just by virtue of 62 00:03:20,320 --> 00:03:22,440 Speaker 4: the fact that only one person dissented and it was 63 00:03:22,480 --> 00:03:26,840 Speaker 4: Governor Myron that alone. But these projections highlighting a tolerance 64 00:03:26,880 --> 00:03:29,280 Speaker 4: for higher inflation and still the belief that it will 65 00:03:29,320 --> 00:03:32,160 Speaker 4: come down by twenty twenty seven to that two percent 66 00:03:32,240 --> 00:03:36,520 Speaker 4: level without hiking rates and continuing with rate cuts gives 67 00:03:36,560 --> 00:03:38,720 Speaker 4: you a sense of where this spreed's mind is at. 68 00:03:38,840 --> 00:03:41,120 Speaker 4: This seems like more of a consensus than I expected, 69 00:03:41,200 --> 00:03:43,120 Speaker 4: than a lot of people expected, and it is more 70 00:03:43,160 --> 00:03:45,480 Speaker 4: to looking through any kind of oil price shop. 71 00:03:45,560 --> 00:03:48,320 Speaker 5: In honor of Allen Greenspan's hundredth birthday, it was a 72 00:03:48,360 --> 00:03:51,240 Speaker 5: green Span decision. Everybody got on board with the chairman. 73 00:03:51,440 --> 00:03:52,400 Speaker 5: That's all there is to it. 74 00:03:52,440 --> 00:03:54,960 Speaker 2: And the out years the good news on the inflation front, 75 00:03:55,280 --> 00:03:58,640 Speaker 2: you decide whether this is good. The Fedishville basically forecasting 76 00:03:58,680 --> 00:04:01,480 Speaker 2: the same inflation glide path as they were before, even 77 00:04:01,480 --> 00:04:03,360 Speaker 2: with this lift to twenty twenty six. 78 00:04:03,520 --> 00:04:05,680 Speaker 4: How do you say transitory without saying transitatory. 79 00:04:05,760 --> 00:04:07,160 Speaker 2: It's in there in the forecast, and that's. 80 00:04:07,000 --> 00:04:08,880 Speaker 4: The reason why you're seeing the yield curve steep in 81 00:04:08,920 --> 00:04:11,120 Speaker 4: and on the margins you're seeing tenure yields higher on 82 00:04:11,160 --> 00:04:13,280 Speaker 4: this because ultimately this is a bed that is willing 83 00:04:13,320 --> 00:04:16,359 Speaker 4: to stay on hold and look through an oil price shock, 84 00:04:16,480 --> 00:04:18,800 Speaker 4: look through the fact that even core PC has been 85 00:04:18,839 --> 00:04:21,080 Speaker 4: higher than expected and is expected to stay that way. 86 00:04:21,320 --> 00:04:24,760 Speaker 4: Because ultimately, they do think the labor market is showing 87 00:04:24,800 --> 00:04:27,520 Speaker 4: signs of cracks, even though they don't necessarily see unemployment 88 00:04:27,600 --> 00:04:30,160 Speaker 4: rate ticking up, and they do want to air on 89 00:04:30,200 --> 00:04:32,640 Speaker 4: the side of being more accommodated. 90 00:04:32,200 --> 00:04:34,080 Speaker 2: Especial I'd like to speak to you, just briefly. Get 91 00:04:34,120 --> 00:04:36,520 Speaker 2: him on the phone, Governor Waller. I was about to say, Chris, 92 00:04:36,920 --> 00:04:38,800 Speaker 2: no dissent. He said it was a coin flip. Who 93 00:04:38,800 --> 00:04:40,440 Speaker 2: would come down to the labor market report, and that 94 00:04:40,520 --> 00:04:43,240 Speaker 2: labor market report was overwhelmingly soft. So what does he 95 00:04:43,279 --> 00:04:45,400 Speaker 2: see in the ALEC for inflation that's kept him on 96 00:04:45,440 --> 00:04:46,000 Speaker 2: the sidelines? 97 00:04:46,080 --> 00:04:48,080 Speaker 4: Severn Or Waller, please join us if you want to call, 98 00:04:48,160 --> 00:04:50,640 Speaker 4: it will take you. I mean, ultimately, that is one 99 00:04:50,640 --> 00:04:52,719 Speaker 4: of the key players because he is a pillar of 100 00:04:52,720 --> 00:04:54,160 Speaker 4: the swing vote, if you will, and a lot of 101 00:04:54,200 --> 00:04:56,880 Speaker 4: people are looking to him for some sort of guidance 102 00:04:56,880 --> 00:04:58,240 Speaker 4: about what exactly is driving us to do. 103 00:04:58,400 --> 00:05:01,080 Speaker 5: But at Washington State he was expert and game theory, 104 00:05:01,160 --> 00:05:03,400 Speaker 5: and when there's a war, there's a different game theory. 105 00:05:03,480 --> 00:05:05,800 Speaker 2: This is a major shock. We're working through Bob Michael 106 00:05:05,800 --> 00:05:08,159 Speaker 2: at Jpmorkan Asset Management, still with us around the table. 107 00:05:08,320 --> 00:05:10,320 Speaker 2: Bob's already thoughts off the back of this one. 108 00:05:10,640 --> 00:05:14,360 Speaker 6: I do. They're telling us, don't worry about it. There's 109 00:05:14,560 --> 00:05:17,359 Speaker 6: a little bit of a year term inflation shot. They 110 00:05:17,440 --> 00:05:21,120 Speaker 6: added a tenth more than we did, but it's fine. 111 00:05:21,240 --> 00:05:24,720 Speaker 6: The economy is going to use that to accelerate. So 112 00:05:25,200 --> 00:05:29,320 Speaker 6: they increase GDP that I don't get, and they left 113 00:05:29,400 --> 00:05:32,599 Speaker 6: unemployment where it is. And it also doesn't sync with 114 00:05:32,720 --> 00:05:37,800 Speaker 6: the dots. I heard Mike McKee say that three members 115 00:05:37,880 --> 00:05:44,560 Speaker 6: who previously voted for no cut changed their view so 116 00:05:45,000 --> 00:05:46,760 Speaker 6: and went to a cut. 117 00:05:46,880 --> 00:05:50,080 Speaker 2: The median dot three four December projection the median dot 118 00:05:50,400 --> 00:05:52,599 Speaker 2: three point four joining us now to discuss as the 119 00:05:52,640 --> 00:05:55,719 Speaker 2: former FEDVIZ chair Richard Clarendon now, rich I know the 120 00:05:55,720 --> 00:05:58,120 Speaker 2: word transitory is banned and they can't use it anymore, 121 00:05:58,120 --> 00:06:03,080 Speaker 2: particularly in the news conference. But is this screen transitory, Well, it. 122 00:06:03,160 --> 00:06:07,760 Speaker 7: Certainly screams we need a synonym for it, temporary not 123 00:06:07,880 --> 00:06:10,160 Speaker 7: long lived. You know, they could justify it, perhaps by 124 00:06:10,200 --> 00:06:13,200 Speaker 7: looking at the oil futures, which still show this as 125 00:06:13,200 --> 00:06:16,520 Speaker 7: dissipating over time. But the short answer is nobody, including 126 00:06:16,520 --> 00:06:20,200 Speaker 7: the FED, knows this is very elevated geopolitical risk, and 127 00:06:20,560 --> 00:06:22,760 Speaker 7: there are risk on both sides. But the baseline, I 128 00:06:22,800 --> 00:06:26,520 Speaker 7: agree with your panel is dubvish constructive. 129 00:06:28,240 --> 00:06:30,799 Speaker 4: Rich. I'm just wondering how much this is just AI 130 00:06:30,920 --> 00:06:33,200 Speaker 4: written all over it. How much this is a FED 131 00:06:33,560 --> 00:06:36,880 Speaker 4: that is basing their entire assumption on a productivity boom 132 00:06:37,240 --> 00:06:40,080 Speaker 4: tied to artificial intelligence and the deployment of it through 133 00:06:40,400 --> 00:06:44,280 Speaker 4: the economy and frankly disinflation on its heels. 134 00:06:45,800 --> 00:06:48,359 Speaker 7: I think there's an element of that, perhaps more so 135 00:06:48,520 --> 00:06:52,360 Speaker 7: with the incoming share than some other members. I think 136 00:06:52,400 --> 00:06:55,880 Speaker 7: it's also a statement, however, that AI is a support 137 00:06:55,920 --> 00:06:59,200 Speaker 7: to demand in the economy that to some extent, along 138 00:06:59,240 --> 00:07:01,960 Speaker 7: with those big beauty full bill tax cuts, is probably 139 00:07:02,040 --> 00:07:04,560 Speaker 7: going to offset some of what the drag would be 140 00:07:04,600 --> 00:07:08,640 Speaker 7: from the oil price increases. But again, this is a 141 00:07:08,680 --> 00:07:12,600 Speaker 7: modal or a baseline, and I think certainly internally we'll 142 00:07:12,640 --> 00:07:15,080 Speaker 7: hear that there was a discussion of the risk cases 143 00:07:15,360 --> 00:07:15,880 Speaker 7: as well. 144 00:07:16,160 --> 00:07:19,280 Speaker 5: Professor Clarina, when you were at Columbia herding cats, Xavier 145 00:07:19,360 --> 00:07:23,560 Speaker 5: Salah Martin taught the acclaimed Principles of Economics, talk to 146 00:07:23,640 --> 00:07:27,880 Speaker 5: us about the risk of a demand destruction here. To me, 147 00:07:27,960 --> 00:07:31,800 Speaker 5: it's extraordinary. Whether it's war short term or a more 148 00:07:31,840 --> 00:07:35,800 Speaker 5: permanent demand destruction, should that be a legitimate concern of 149 00:07:35,840 --> 00:07:36,239 Speaker 5: the Fed. 150 00:07:37,720 --> 00:07:38,080 Speaker 2: Well. 151 00:07:38,240 --> 00:07:41,080 Speaker 7: The demand destruction comes simply from the fact that not 152 00:07:41,160 --> 00:07:44,400 Speaker 7: only oil prices, but energy prices and goods that are 153 00:07:44,440 --> 00:07:47,600 Speaker 7: intensive in oil and energy will go up, and that 154 00:07:47,680 --> 00:07:51,400 Speaker 7: will tend to reduce the real incomes for millions and 155 00:07:51,440 --> 00:07:54,680 Speaker 7: tens of millions of households. Now, on the other side 156 00:07:54,720 --> 00:07:57,360 Speaker 7: of that you have the AI boon, but there is 157 00:07:57,440 --> 00:07:59,880 Speaker 7: no doubt that this is going to squeeze real act 158 00:08:00,120 --> 00:08:03,720 Speaker 7: or get a demand the longer the oil shock persists. 159 00:08:04,080 --> 00:08:06,680 Speaker 2: Check out the price action. Let's go to equities. We're 160 00:08:06,720 --> 00:08:09,920 Speaker 2: still down by zero point six percent, unmoved by one. 161 00:08:10,000 --> 00:08:12,800 Speaker 2: The surface of things looks like a duvish decision from 162 00:08:12,840 --> 00:08:15,559 Speaker 2: the central bank. Check out the bond market. Similar story. 163 00:08:15,600 --> 00:08:17,560 Speaker 2: No big moves off the back of this. The only 164 00:08:17,600 --> 00:08:20,080 Speaker 2: takeaway this can change. But the only takeaway for me 165 00:08:20,800 --> 00:08:24,160 Speaker 2: is there is nothing this institution can do to drive 166 00:08:24,200 --> 00:08:26,679 Speaker 2: this market in the face of the shock housewhere Jeff 167 00:08:26,680 --> 00:08:29,240 Speaker 2: Curry of Carlisle said it really well early this morning 168 00:08:29,360 --> 00:08:32,000 Speaker 2: on Bloombog TV when Jeff turned around and said, there's 169 00:08:32,040 --> 00:08:34,080 Speaker 2: nothing the Central Bank can do about this. You cannot 170 00:08:34,160 --> 00:08:37,760 Speaker 2: print barrels. This market is still at the mercy of 171 00:08:37,800 --> 00:08:40,120 Speaker 2: what happens in the commodity market, and the FED is 172 00:08:40,120 --> 00:08:43,240 Speaker 2: not the circuit breaker anymore. Because this FED decision, I 173 00:08:43,240 --> 00:08:45,680 Speaker 2: would sit here and argue is fairly duvish, with the 174 00:08:45,720 --> 00:08:48,120 Speaker 2: exception of the absence of a descent coming from Governor Waller, 175 00:08:48,440 --> 00:08:50,200 Speaker 2: is fairly duvish to come out and say the outlook 176 00:08:50,240 --> 00:08:53,040 Speaker 2: for growth is better, We've revised higher, the outlook for 177 00:08:53,040 --> 00:08:57,040 Speaker 2: inflation and the median dot is exactly the same. Screams dubvish. 178 00:08:57,080 --> 00:08:59,800 Speaker 2: And yet here we are no big moves in financial markets. 179 00:09:00,040 --> 00:09:00,960 Speaker 2: I think that's noticeable. 180 00:09:01,240 --> 00:09:04,400 Speaker 4: The FED is playing dodgeball without the ball. They're not 181 00:09:04,440 --> 00:09:06,840 Speaker 4: the pitcher in a game. And right now what they're 182 00:09:06,880 --> 00:09:11,120 Speaker 4: dealing with is shock after shock without necessarily historic precedent, yes, 183 00:09:11,200 --> 00:09:13,360 Speaker 4: or historic precedents for oil shocks, but not for the 184 00:09:13,360 --> 00:09:16,400 Speaker 4: AI shock and what that does to the overall economy. 185 00:09:16,520 --> 00:09:20,120 Speaker 4: So they might remain on hold, and that might be bullish, 186 00:09:20,240 --> 00:09:22,760 Speaker 4: but not in this moment, because right now, if another 187 00:09:22,960 --> 00:09:25,840 Speaker 4: oil or natural gas plant gets bombed, people are gonna 188 00:09:25,840 --> 00:09:27,840 Speaker 4: be watching that much more than anything coming out of J. 189 00:09:27,920 --> 00:09:28,160 Speaker 2: Powell. 190 00:09:29,000 --> 00:09:31,400 Speaker 5: Vice Chairman CLARIEDA The thing I would point out here, 191 00:09:31,520 --> 00:09:35,800 Speaker 5: Damien Sasawer at Bloomberg is very cautious on EM suddenly 192 00:09:35,840 --> 00:09:39,040 Speaker 5: here in this meeting and in this press conference more 193 00:09:39,080 --> 00:09:41,640 Speaker 5: than ever. Is this the central banker to the world. 194 00:09:43,880 --> 00:09:47,200 Speaker 7: Well, sure it is, and I think that the Fed 195 00:09:47,280 --> 00:09:49,719 Speaker 7: FED is aware of that. And I think one thing 196 00:09:49,800 --> 00:09:52,920 Speaker 7: this episode is reminding of folks. We've seen it in 197 00:09:53,200 --> 00:09:57,160 Speaker 7: the in the dollar obviously, is you know, since the 198 00:09:57,720 --> 00:10:00,280 Speaker 7: Iran hostilities commenced, you know, the price of go old 199 00:10:00,320 --> 00:10:02,240 Speaker 7: is down, the price of the dollar is up. So 200 00:10:02,480 --> 00:10:07,240 Speaker 7: I think there is that element as well. But you know, broadly, 201 00:10:07,800 --> 00:10:10,960 Speaker 7: the FED is reacting to events. I think Lisa said 202 00:10:11,040 --> 00:10:13,400 Speaker 7: said it well first and foremost, this is a major 203 00:10:13,480 --> 00:10:18,439 Speaker 7: geopolitical and economic shock. The Dodgeball analogy, I think is 204 00:10:18,480 --> 00:10:20,400 Speaker 7: a good one. So I think, yes, the FED is 205 00:10:20,440 --> 00:10:22,720 Speaker 7: the central banker to the world, but it's not the 206 00:10:22,760 --> 00:10:24,240 Speaker 7: main attraction right now. 207 00:10:24,200 --> 00:10:26,400 Speaker 5: About Michael with us, with JP Morgan And so what 208 00:10:26,520 --> 00:10:29,880 Speaker 5: is the with the tentacles of JP Morgan around the world. 209 00:10:29,960 --> 00:10:33,040 Speaker 5: How is EM doing? I see Philippine pay so almost 210 00:10:33,040 --> 00:10:35,920 Speaker 5: at the sixties saw Australia raising rates and. 211 00:10:36,240 --> 00:10:39,000 Speaker 2: Oh well, well, well we called in Australia. Am no, 212 00:10:39,000 --> 00:10:42,120 Speaker 2: I'm not calling Australia, get you in trouble tating. 213 00:10:41,720 --> 00:10:42,839 Speaker 5: You know. 214 00:10:43,240 --> 00:10:45,880 Speaker 2: I am watching oz EM though, which is of its 215 00:10:45,920 --> 00:10:50,800 Speaker 2: own Sydney watching. Well yeah, early morning, deeply, deeply unhappy 216 00:10:50,800 --> 00:10:51,040 Speaker 2: with that. 217 00:10:51,080 --> 00:10:53,480 Speaker 5: But I read all the level shoot in town Like Alice, 218 00:10:53,640 --> 00:10:56,840 Speaker 5: I want to know h as a central banker of 219 00:10:56,880 --> 00:11:00,000 Speaker 5: the world, the sensitivities he faces, what is jp more 220 00:11:00,040 --> 00:11:03,120 Speaker 5: we're going to see, and the reaction in the currency markets, 221 00:11:03,160 --> 00:11:07,040 Speaker 5: the reaction and fixed income of EM is the chairman speaks. 222 00:11:08,240 --> 00:11:10,160 Speaker 6: I think there are a couple of things. One we 223 00:11:10,240 --> 00:11:13,520 Speaker 6: felt going through this that the dollar would be the 224 00:11:13,559 --> 00:11:16,600 Speaker 6: safe haven bid, and we're seeing a lot of that. 225 00:11:16,880 --> 00:11:20,040 Speaker 6: We also felt, for those who wanted to diversify away 226 00:11:20,400 --> 00:11:23,800 Speaker 6: from dollar, emerging market FX was the place to go. 227 00:11:23,960 --> 00:11:26,720 Speaker 6: The central banks in those regions seem to be on 228 00:11:26,760 --> 00:11:30,240 Speaker 6: top of things, and you had a split between those 229 00:11:30,280 --> 00:11:34,120 Speaker 6: who are energy importers and those are energy exporters, those 230 00:11:34,280 --> 00:11:37,319 Speaker 6: that are sitting on rare earth minerals and other minerals, 231 00:11:37,360 --> 00:11:39,600 Speaker 6: and those who aren't. And I think we're seeing all 232 00:11:39,640 --> 00:11:41,760 Speaker 6: of that play out. But I will tell you our 233 00:11:41,760 --> 00:11:46,040 Speaker 6: client base still feels under allocated to emerging markets, both 234 00:11:46,280 --> 00:11:50,760 Speaker 6: equity and fixed income. We're seeing those allocations continue to 235 00:11:50,800 --> 00:11:53,360 Speaker 6: come in. I think there's a good tal in there. 236 00:11:53,520 --> 00:11:54,680 Speaker 5: We just went along Australia. 237 00:11:54,760 --> 00:11:56,679 Speaker 2: They you go back to back high cudy imagine markets, 238 00:11:56,679 --> 00:12:00,560 Speaker 2: Central Bank cover the BA. See that. Honestly some offending 239 00:12:00,640 --> 00:12:01,760 Speaker 2: people down under right now. 240 00:12:02,880 --> 00:12:05,040 Speaker 4: I'm not wearing it on this one, but I will 241 00:12:05,040 --> 00:12:06,800 Speaker 4: say I will say that tomorrow will be really interesting 242 00:12:06,800 --> 00:12:07,800 Speaker 4: at the BOE and the ECB. 243 00:12:08,000 --> 00:12:09,880 Speaker 2: There you go, you tellon Bromo. All right, Rich Cloud 244 00:12:09,920 --> 00:12:11,120 Speaker 2: is still with us. Rich, I want to come to 245 00:12:11,160 --> 00:12:13,440 Speaker 2: you on an important topic to wrap things up, a 246 00:12:13,480 --> 00:12:17,880 Speaker 2: really serious one, the future for Chairman Powell. This is 247 00:12:17,920 --> 00:12:21,040 Speaker 2: not how usually these things play out. Typically, how this 248 00:12:21,080 --> 00:12:24,240 Speaker 2: plays out, the chairman knows when his term finishes, he 249 00:12:24,280 --> 00:12:26,480 Speaker 2: gets a great send off, he walks away and he 250 00:12:26,520 --> 00:12:28,560 Speaker 2: does a one million dollar speech in about twelve months 251 00:12:28,640 --> 00:12:32,120 Speaker 2: time and has a happy retirement. This feels so different, Rich, 252 00:12:32,679 --> 00:12:35,840 Speaker 2: Kevin Walsh is ultimately being nominated. We have no idea 253 00:12:35,880 --> 00:12:39,120 Speaker 2: when the confirmation hearing is going to be. Bob Michael 254 00:12:39,200 --> 00:12:41,240 Speaker 2: sat here a little bit earlier and said he thinks 255 00:12:41,240 --> 00:12:44,240 Speaker 2: the Chairman J. Powell is still going to be there 256 00:12:44,520 --> 00:12:47,079 Speaker 2: by the time you get to the midterms, Rich, how 257 00:12:47,080 --> 00:12:49,199 Speaker 2: do you think this process is going to play out 258 00:12:49,360 --> 00:12:50,440 Speaker 2: in the next several months. 259 00:12:51,640 --> 00:12:57,600 Speaker 7: Well, you're absolutely correct. This is unprecedented, unusual that the 260 00:12:57,640 --> 00:13:02,520 Speaker 7: handoff is usually pretty smooth and very well telegraphed. And 261 00:13:02,760 --> 00:13:07,040 Speaker 7: the difference, of course now is several fold. One of course, 262 00:13:07,360 --> 00:13:10,920 Speaker 7: is the you know, the d o J investigation of 263 00:13:10,960 --> 00:13:14,040 Speaker 7: Pal that the FED is pushing back on. In addition, 264 00:13:14,120 --> 00:13:17,040 Speaker 7: of course, the even worsh getting a hearing is now 265 00:13:17,200 --> 00:13:20,520 Speaker 7: up up in the air. You know, I certainly do 266 00:13:20,559 --> 00:13:24,160 Speaker 7: expect J. J. Powell will will will stay on and 267 00:13:24,240 --> 00:13:27,920 Speaker 7: perhaps a meeting or two after Warsh finally arrives. You know, 268 00:13:27,960 --> 00:13:30,320 Speaker 7: whether or not that's after the mid terms, I'm not sure. 269 00:13:30,520 --> 00:13:32,760 Speaker 7: I think Jay Powell will move on once Warsh is 270 00:13:32,760 --> 00:13:38,200 Speaker 7: in place, uh to to his his future life. But 271 00:13:38,240 --> 00:13:41,800 Speaker 7: his real focus is on maintaining the the independence of 272 00:13:41,880 --> 00:13:45,000 Speaker 7: the of the Institution, and I think he will be 273 00:13:45,000 --> 00:13:47,920 Speaker 7: in place until Warsh is confirmed and perhaps the meeting 274 00:13:48,080 --> 00:13:49,640 Speaker 7: or two thereafter. 275 00:13:50,280 --> 00:13:53,200 Speaker 2: Rich, appreciate you're insight on the topic. Thank you, sir, 276 00:13:53,320 --> 00:13:55,840 Speaker 2: Rich Cloud of that the former FED Vice chair on 277 00:13:55,840 --> 00:13:58,440 Speaker 2: this FED decision and the chairman's future. If you are 278 00:13:58,520 --> 00:14:01,040 Speaker 2: just joining us on the program, welcome to the show. 279 00:14:01,280 --> 00:14:03,839 Speaker 2: So unchanged the policy rate of the Federal Reserve about 280 00:14:03,840 --> 00:14:06,800 Speaker 2: fifteen minutes ago, some descent eleven to one. That descent 281 00:14:06,840 --> 00:14:09,480 Speaker 2: came from an obvious place, Governor Meyron voting for an 282 00:14:09,520 --> 00:14:12,720 Speaker 2: interest rate reduction. For the projections, big focus on what 283 00:14:12,760 --> 00:14:15,880 Speaker 2: was happening with inflation. They've lifted their outlook for inflation 284 00:14:16,040 --> 00:14:18,840 Speaker 2: for this year at least, but left the median dot 285 00:14:18,960 --> 00:14:22,240 Speaker 2: ultimately uncased, implying one rate cup from this feeder reserve 286 00:14:22,480 --> 00:14:23,480 Speaker 2: for twenty twenty six. 287 00:14:23,640 --> 00:14:25,640 Speaker 4: To me, the most interesting takeaway is what you said, 288 00:14:25,720 --> 00:14:27,720 Speaker 4: which is this market doesn't seem to care. Even though 289 00:14:27,720 --> 00:14:30,400 Speaker 4: this is very much a Dubvish hold, this actually is 290 00:14:30,560 --> 00:14:33,320 Speaker 4: news in Fedland, and yet the market doesn't pay attention 291 00:14:33,400 --> 00:14:36,120 Speaker 4: because there's another game in town and it's everything else 292 00:14:36,160 --> 00:14:38,160 Speaker 4: in the world. And some people might say, oh no, 293 00:14:38,440 --> 00:14:40,680 Speaker 4: the adults can't control this, they can't step in and 294 00:14:40,680 --> 00:14:42,600 Speaker 4: save us, and the other people will say, we haven't 295 00:14:42,640 --> 00:14:44,480 Speaker 4: had a free market in a long time, and this 296 00:14:44,520 --> 00:14:46,560 Speaker 4: is what it looks like, and guess what it's a welcome, 297 00:14:47,080 --> 00:14:49,440 Speaker 4: welcome exercise. And so those two sides of the debate 298 00:14:49,480 --> 00:14:50,120 Speaker 4: are playing. 299 00:14:49,880 --> 00:14:51,400 Speaker 2: Out market and we've got a free market. 300 00:14:51,760 --> 00:14:52,800 Speaker 4: Well, I mean that's the whole thing. 301 00:14:52,960 --> 00:14:54,400 Speaker 2: Ultimately, it's too exciting. 302 00:14:54,800 --> 00:14:56,720 Speaker 4: I'm kind of excited about this. I mean, that's kind 303 00:14:56,760 --> 00:14:58,280 Speaker 4: of a nice thing. Not to have the thumb on 304 00:14:58,280 --> 00:15:00,560 Speaker 4: the scale all the time and same story right over again. 305 00:15:00,560 --> 00:15:03,880 Speaker 2: It's a change. It's a change, definitely, Roth of Wolf Research. 306 00:15:03,920 --> 00:15:05,400 Speaker 2: I can see how excited you are. You're not alive. 307 00:15:05,520 --> 00:15:07,320 Speaker 2: I've been waiting for that moment for a long long time. 308 00:15:07,480 --> 00:15:10,120 Speaker 2: Agent moves five percent away from old time highs. 309 00:15:09,880 --> 00:15:10,880 Speaker 4: Even a Japanese market. 310 00:15:10,960 --> 00:15:13,280 Speaker 2: It's how exciting know they're actually tried to the bench. 311 00:15:14,280 --> 00:15:15,040 Speaker 4: There's actually traders. 312 00:15:15,120 --> 00:15:17,560 Speaker 2: Definitely, I'm sorry, so definitely. Roth of Wolf Research joins 313 00:15:17,600 --> 00:15:19,760 Speaker 2: us now for more. Definitely, we need your reaction to 314 00:15:19,880 --> 00:15:22,160 Speaker 2: the decision and why you expect the emphasis to be 315 00:15:22,520 --> 00:15:23,560 Speaker 2: in this news conference? 316 00:15:24,520 --> 00:15:26,320 Speaker 8: Yeah, I mean the emphasis is going to be on 317 00:15:26,480 --> 00:15:29,760 Speaker 8: the reaction function provided that energy prices end up staying 318 00:15:29,760 --> 00:15:31,640 Speaker 8: long or the question is are they going to end 319 00:15:31,720 --> 00:15:34,200 Speaker 8: up looking through this or do they ultimately end up 320 00:15:34,200 --> 00:15:36,720 Speaker 8: having to be dubvish as a result, because growth will 321 00:15:36,760 --> 00:15:39,400 Speaker 8: end up slowing. And our own view is that because 322 00:15:39,440 --> 00:15:41,800 Speaker 8: the economy is so different today versus twenty twenty two, 323 00:15:42,040 --> 00:15:44,200 Speaker 8: they'll ultimately have to be more Dubvish as a result 324 00:15:44,640 --> 00:15:48,120 Speaker 8: of the war and Iran, rather than the opposite. Otherwise, 325 00:15:48,120 --> 00:15:50,920 Speaker 8: it tells you a story of productivity and that growth 326 00:15:50,960 --> 00:15:52,840 Speaker 8: is actually going to be higher in the future years, 327 00:15:52,880 --> 00:15:55,200 Speaker 8: but then you know, nothing else changes. And the one 328 00:15:55,200 --> 00:15:57,440 Speaker 8: thing that we didn't talk about, that wasn't talked about 329 00:15:57,520 --> 00:16:00,600 Speaker 8: yet was was the longer run dot shipping a little bit. 330 00:16:01,080 --> 00:16:03,480 Speaker 4: Well, this to me is Sephanie, that I'm really wondering 331 00:16:03,480 --> 00:16:07,320 Speaker 4: about is how much does a more duvish fed enable 332 00:16:07,400 --> 00:16:09,960 Speaker 4: something that looks more like nineteen seventies or more like 333 00:16:10,000 --> 00:16:13,360 Speaker 4: twenty twenty two. And what we saw with inflation and 334 00:16:13,400 --> 00:16:18,360 Speaker 4: the read through, is that something of a concern for you. 335 00:16:16,840 --> 00:16:19,680 Speaker 8: No, because the backdrop is so different today versus twenty 336 00:16:19,720 --> 00:16:21,200 Speaker 8: twenty two. If you look at twenty twenty two, the 337 00:16:21,280 --> 00:16:24,360 Speaker 8: unemployment rate was three seven heading to three five today 338 00:16:24,360 --> 00:16:27,360 Speaker 8: it's four to four. Hero Games was growing at six 339 00:16:27,440 --> 00:16:30,240 Speaker 8: hundred thousand today they're somewhere between zero and fifty thousand 340 00:16:30,280 --> 00:16:33,920 Speaker 8: on average. The inflation backdrop was different and core inflation 341 00:16:34,040 --> 00:16:36,440 Speaker 8: was five and a half today it's three. So the 342 00:16:36,520 --> 00:16:38,440 Speaker 8: idea that we're going to have a repeat of twenty 343 00:16:38,480 --> 00:16:41,000 Speaker 8: twenty two seems like a very low likelihood event, and 344 00:16:41,080 --> 00:16:43,560 Speaker 8: therefore that's not something I would expect the FED to 345 00:16:43,600 --> 00:16:46,720 Speaker 8: react in that way because the data probably won't support 346 00:16:47,120 --> 00:16:48,800 Speaker 8: a reflationary type of environment. 347 00:16:48,960 --> 00:16:52,080 Speaker 5: The seventy given a war, given what oil's doing. John 348 00:16:52,160 --> 00:16:56,480 Speaker 5: mentions it's sixty to basically sixty two hundred or even higher. 349 00:16:56,640 --> 00:16:59,520 Speaker 5: We're still slaves to the job market. And the answer 350 00:16:59,520 --> 00:17:03,280 Speaker 5: is the un deployment rate hasn't broken with the war, 351 00:17:03,440 --> 00:17:07,840 Speaker 5: with the distractions. How ex post is this fed into 352 00:17:07,840 --> 00:17:08,359 Speaker 5: the summer? 353 00:17:09,880 --> 00:17:11,320 Speaker 8: Yeah, I mean, I think they're going to be in 354 00:17:11,359 --> 00:17:15,640 Speaker 8: an environment over the summer where base cases the unemployment 355 00:17:15,680 --> 00:17:17,919 Speaker 8: rate is probably steady, but they're going to be looking 356 00:17:17,920 --> 00:17:19,640 Speaker 8: at this most cools. That's going to be the deciding 357 00:17:19,640 --> 00:17:22,800 Speaker 8: factor between whether they're able to cut Probably not at 358 00:17:22,920 --> 00:17:25,879 Speaker 8: Worsh's first meeting, maybe in September or December, right, and 359 00:17:25,960 --> 00:17:27,680 Speaker 8: it's going to all go down to the unemployment rate. 360 00:17:27,720 --> 00:17:30,160 Speaker 8: Is it notably above four or five, in which case 361 00:17:30,200 --> 00:17:31,640 Speaker 8: they have a window to be able. 362 00:17:31,400 --> 00:17:33,520 Speaker 4: To ease and if not. 363 00:17:33,600 --> 00:17:35,120 Speaker 8: Then it's going to be tough for worse to get 364 00:17:35,119 --> 00:17:36,240 Speaker 8: the rest of the members on board. 365 00:17:36,359 --> 00:17:39,800 Speaker 5: Bob synthesized Michael Feruli's work on this. Then the fact 366 00:17:39,840 --> 00:17:43,200 Speaker 5: is the labor market has encrect yet they have to wait, 367 00:17:43,359 --> 00:17:43,800 Speaker 5: don't they. 368 00:17:45,480 --> 00:17:47,920 Speaker 6: I think that's part of it. I'm still gop smacked 369 00:17:48,000 --> 00:17:51,359 Speaker 6: by the Fed's decision. They're basically saying all of this 370 00:17:51,520 --> 00:17:55,040 Speaker 6: going on in the Middle East is a speed bump 371 00:17:55,119 --> 00:17:58,800 Speaker 6: that yeah, inflation will tick up, you know, three tenths 372 00:17:59,440 --> 00:18:03,760 Speaker 6: and two here and there, but the economy will accelerate, 373 00:18:03,920 --> 00:18:07,960 Speaker 6: unemployment will stay stable, and it's off to the races. 374 00:18:08,000 --> 00:18:10,439 Speaker 6: I just don't see that. I think there is a 375 00:18:10,560 --> 00:18:15,000 Speaker 6: real impact to inflation then ultimately to the economy and 376 00:18:15,000 --> 00:18:15,520 Speaker 6: the laborook. 377 00:18:15,560 --> 00:18:17,119 Speaker 5: This is the heart of the matter, John, This is 378 00:18:17,119 --> 00:18:19,080 Speaker 5: the absolute heart of the matter, and everybody has to 379 00:18:19,160 --> 00:18:22,199 Speaker 5: recalibrate their access to how long is this going to 380 00:18:22,200 --> 00:18:24,320 Speaker 5: go on? And then you get to demand destruction. 381 00:18:24,440 --> 00:18:26,320 Speaker 2: We mentioned this earlier and I think it's important to 382 00:18:26,400 --> 00:18:28,960 Speaker 2: keep going over it. We've repriced a lot in this market. 383 00:18:29,080 --> 00:18:31,800 Speaker 2: We've repriced energy, got a big move from the sixties 384 00:18:31,880 --> 00:18:35,280 Speaker 2: out to triple digits. We've repriced interest rates, We've taken 385 00:18:35,320 --> 00:18:37,359 Speaker 2: out a lot of easing for the Federal Reserve, and 386 00:18:37,400 --> 00:18:39,920 Speaker 2: we've priced in hikes in places like the ECB, two 387 00:18:39,920 --> 00:18:42,119 Speaker 2: of them I think for this year now. Yet we 388 00:18:42,160 --> 00:18:45,640 Speaker 2: haven't repriced growth and the Fed hasn't either. And I'm 389 00:18:45,680 --> 00:18:47,639 Speaker 2: not just talking about where Spot is trading or the 390 00:18:47,640 --> 00:18:49,720 Speaker 2: front month on the Future's curve. If you go out 391 00:18:49,760 --> 00:18:52,359 Speaker 2: to December and look at where December is traded right now, 392 00:18:52,440 --> 00:18:54,880 Speaker 2: we're close to eighty. So we got from the sixties 393 00:18:54,920 --> 00:18:57,679 Speaker 2: to close to eighties on the December contract, and the 394 00:18:57,720 --> 00:19:01,560 Speaker 2: Federal Reserve has lifted the outlook the growth. What's driving that? 395 00:19:02,400 --> 00:19:06,439 Speaker 6: I wonder how much momentum they think is in the economy, 396 00:19:06,760 --> 00:19:10,520 Speaker 6: how much AI and data center spending is going on. 397 00:19:11,560 --> 00:19:14,760 Speaker 6: Were they surprised by the delta earnings and that you 398 00:19:14,800 --> 00:19:18,160 Speaker 6: know sales are at a high despite higher energy prices. 399 00:19:18,480 --> 00:19:20,679 Speaker 6: I think the reality is when you've had close to 400 00:19:20,720 --> 00:19:24,560 Speaker 6: a fifty percent hike in energy prices, its attacks on 401 00:19:24,680 --> 00:19:28,960 Speaker 6: businesses and households, and they will respond by cutting back 402 00:19:29,200 --> 00:19:30,400 Speaker 6: some of their consumption. 403 00:19:30,720 --> 00:19:32,399 Speaker 4: We have the smartest viewers, and I just want to 404 00:19:32,400 --> 00:19:34,159 Speaker 4: point that out. A lot of viewers. You wrote in 405 00:19:34,240 --> 00:19:37,800 Speaker 4: we do and pointed out that among the members, the 406 00:19:37,880 --> 00:19:40,560 Speaker 4: actual dots might say one thing, but the risk to 407 00:19:40,640 --> 00:19:44,240 Speaker 4: GDP downside included fourteen members versus eight prior at the 408 00:19:44,240 --> 00:19:47,639 Speaker 4: December meeting, the risk to the upside with sixteen members 409 00:19:47,640 --> 00:19:50,600 Speaker 4: for core PCE as well as the unemployment rate that 410 00:19:50,760 --> 00:19:54,080 Speaker 4: was up from twelve and thirteen members, respectively, So that 411 00:19:54,200 --> 00:19:57,840 Speaker 4: stagflationary outcome still in the back minds of so many 412 00:19:57,920 --> 00:20:00,200 Speaker 4: of these FED members. They just aren't making and it's 413 00:20:00,200 --> 00:20:02,760 Speaker 4: their base case. So I just I don't understand, Bob, 414 00:20:02,800 --> 00:20:04,680 Speaker 4: and I guess that this is my question. Is the 415 00:20:04,720 --> 00:20:09,400 Speaker 4: reaction function essentially they will hold pat even in this scenario, 416 00:20:09,760 --> 00:20:11,359 Speaker 4: or do you have a sense of what the reaction 417 00:20:11,440 --> 00:20:13,480 Speaker 4: function is to true saguflation. 418 00:20:13,960 --> 00:20:17,440 Speaker 6: Well, the bottom line is the market is just looking 419 00:20:17,520 --> 00:20:20,720 Speaker 6: through the FED right here and saying doesn't make sense, 420 00:20:20,840 --> 00:20:23,680 Speaker 6: don't get it, don't know what they were thinking. The 421 00:20:23,760 --> 00:20:26,480 Speaker 6: projections don't make sense to me. But I know where 422 00:20:26,480 --> 00:20:29,000 Speaker 6: we are. There's a lot of tension still in the 423 00:20:29,000 --> 00:20:32,160 Speaker 6: Middle East. It's yet to completely play out. I think 424 00:20:32,160 --> 00:20:34,399 Speaker 6: where we are now is about fair. It can go 425 00:20:34,560 --> 00:20:39,560 Speaker 6: either way from here. So it's completely dismissive of the 426 00:20:38,480 --> 00:20:40,600 Speaker 6: FOMC statement. 427 00:20:40,600 --> 00:20:42,560 Speaker 2: Hey, Stephanie, before you go, what's the number one question 428 00:20:42,680 --> 00:20:44,920 Speaker 2: for Chairman poal into this news conference? 429 00:20:46,080 --> 00:20:47,960 Speaker 8: Yeah, I mean the biggest question is going to be 430 00:20:48,040 --> 00:20:52,520 Speaker 8: provided energy prices are elevated through rough much of the summer, 431 00:20:52,720 --> 00:20:54,720 Speaker 8: how are you going to think about the balance of risk? 432 00:20:54,880 --> 00:20:58,000 Speaker 8: Is it's going to be something that you're going to 433 00:20:58,000 --> 00:20:59,840 Speaker 8: look through and do you expect that growth is going 434 00:20:59,880 --> 00:21:03,040 Speaker 8: to lower as a result, or is this something that 435 00:21:03,080 --> 00:21:05,280 Speaker 8: you're worried about more similar to twenty twenty two? And 436 00:21:05,320 --> 00:21:07,600 Speaker 8: what are the balance of risks in your mind in 437 00:21:07,640 --> 00:21:08,640 Speaker 8: terms of how this could play out. 438 00:21:08,680 --> 00:21:11,199 Speaker 2: Stephanitiely good to see as always, Thanks for jumping on, Stephanie. 439 00:21:11,240 --> 00:21:13,760 Speaker 2: Rolf There of Wolf Research. To build on the conversation, 440 00:21:13,960 --> 00:21:16,480 Speaker 2: Dan SWANMK of KPMG, Dan, I'm going to use a 441 00:21:16,560 --> 00:21:18,680 Speaker 2: quote of yours to ask you the question, a duel 442 00:21:18,680 --> 00:21:21,240 Speaker 2: mandate or a dueling mandate? What have we got? 443 00:21:23,040 --> 00:21:25,720 Speaker 1: A dueling mandate? And I think that's a real problem. 444 00:21:25,920 --> 00:21:29,680 Speaker 1: I think the FED is this dubvish sort of numbers 445 00:21:29,720 --> 00:21:32,399 Speaker 1: don't add up. I think I agree with that completely. 446 00:21:32,560 --> 00:21:36,000 Speaker 1: A duvish pause is not what I would expect. I 447 00:21:36,000 --> 00:21:38,360 Speaker 1: would have expected some people to actually put in rate 448 00:21:38,440 --> 00:21:41,880 Speaker 1: hikes in this meeting, and they didn't. And I think 449 00:21:41,960 --> 00:21:44,720 Speaker 1: there's a real issue about we saw rate cuts in 450 00:21:44,840 --> 00:21:47,640 Speaker 1: late twenty twenty four to shore up the labor market, 451 00:21:47,720 --> 00:21:50,119 Speaker 1: we didn't get any jobs. We saw rate cuts in 452 00:21:50,200 --> 00:21:52,600 Speaker 1: late twenty twenty five to shore up the labor market. 453 00:21:52,840 --> 00:21:54,159 Speaker 1: I don't think we're going to get a lot of 454 00:21:54,240 --> 00:21:57,320 Speaker 1: jobs from those. That brings up the issue is, is 455 00:21:57,359 --> 00:22:01,160 Speaker 1: the problem in the labor market more structure and systemic, 456 00:22:01,600 --> 00:22:05,280 Speaker 1: something that rate cuts alone cannot cure and spur the 457 00:22:05,320 --> 00:22:08,720 Speaker 1: demand for workers on. If that's the case, if you 458 00:22:08,800 --> 00:22:12,320 Speaker 1: cut rates further, you're risking a more persistent bout of 459 00:22:12,320 --> 00:22:16,479 Speaker 1: inflation or worse, a stagflationary scenario. And I think the 460 00:22:16,520 --> 00:22:20,720 Speaker 1: devil in the detail is in that stagflation scenario. Also 461 00:22:20,880 --> 00:22:24,960 Speaker 1: important is that they raise their non inflationary rate. That 462 00:22:25,119 --> 00:22:29,000 Speaker 1: is reflecting yes, productivity growth and the idea that the 463 00:22:29,040 --> 00:22:35,680 Speaker 1: economy can grow more robustly without having without having inflation. 464 00:22:36,160 --> 00:22:40,240 Speaker 1: But that also means higher non inflationary rate, which is 465 00:22:40,280 --> 00:22:44,800 Speaker 1: an important marker to put down before Kevin Warsh takes 466 00:22:44,840 --> 00:22:48,240 Speaker 1: on as FED chair, since he has argued that productivity 467 00:22:48,240 --> 00:22:51,720 Speaker 1: growth should lower that non inflationary rate. That is not 468 00:22:51,840 --> 00:22:54,680 Speaker 1: what the FED is saying, and I think that's very important. 469 00:22:54,720 --> 00:22:59,440 Speaker 1: But I am very concerned about five years in. We've 470 00:22:59,480 --> 00:23:02,919 Speaker 1: got consumer is expecting more inflation than they did in 471 00:23:03,000 --> 00:23:07,399 Speaker 1: late twenty twenty four, and those expectations are going to rise, 472 00:23:07,600 --> 00:23:11,280 Speaker 1: especially with salient prices like prices at the pump going up. 473 00:23:11,680 --> 00:23:15,400 Speaker 1: And there's already a long tail due to the problems 474 00:23:15,440 --> 00:23:19,440 Speaker 1: in the Middle East. Production idled is not easily brought 475 00:23:19,480 --> 00:23:22,960 Speaker 1: back online. It's weeks to months and we're roling supply 476 00:23:23,119 --> 00:23:26,399 Speaker 1: chains the world over. You create scarcities that go below 477 00:23:26,760 --> 00:23:29,920 Speaker 1: the destruction and demand that gives you stagflation. 478 00:23:30,359 --> 00:23:32,960 Speaker 4: Van Is this the FED meeting where Ford guidance just died? 479 00:23:35,520 --> 00:23:37,919 Speaker 1: Absolutely. We didn't have a lot of Ford guidance to 480 00:23:37,920 --> 00:23:42,120 Speaker 1: begin with, but absolutely. And I think what really will 481 00:23:42,160 --> 00:23:46,439 Speaker 1: be interesting in the Chairman's comments is what was the 482 00:23:46,480 --> 00:23:50,600 Speaker 1: debate in terms of growth? What went into these numbers? 483 00:23:50,760 --> 00:23:53,679 Speaker 1: How does the debate fall out? I think the devil 484 00:23:53,680 --> 00:23:55,760 Speaker 1: in the details here is that there is a bit 485 00:23:55,800 --> 00:23:58,880 Speaker 1: of a stag inflationary concern out there, and there should be. 486 00:24:00,200 --> 00:24:03,840 Speaker 5: There's a we suffer from three zip code scenario here 487 00:24:03,880 --> 00:24:07,680 Speaker 5: in New York City you've got a much greater national perspective. 488 00:24:08,040 --> 00:24:10,800 Speaker 5: I take real issue with a narrow part of America 489 00:24:10,880 --> 00:24:15,040 Speaker 5: being affected by five dollars a gallon gas. How much 490 00:24:15,040 --> 00:24:17,280 Speaker 5: of America is going to be flat on their back 491 00:24:17,920 --> 00:24:19,200 Speaker 5: from some of these shocks. 492 00:24:21,359 --> 00:24:25,720 Speaker 1: Well, unfortunately or fortunately, we do have fiscal stimulus right now, 493 00:24:25,800 --> 00:24:28,880 Speaker 1: and that fiscal stimulus will help absorb the shock instead 494 00:24:28,880 --> 00:24:32,280 Speaker 1: of going into other kinds of spending, and that will 495 00:24:32,320 --> 00:24:36,560 Speaker 1: help households. Tax refunds are showing up in consumer bank 496 00:24:36,600 --> 00:24:41,880 Speaker 1: accounts right now. But the combination of fiscal stimulus with remember, 497 00:24:42,000 --> 00:24:46,679 Speaker 1: inflation is accelerating right now. We saw PCEE accelerate. We 498 00:24:46,720 --> 00:24:50,560 Speaker 1: saw the PPI numbers today. The translation of the PPI 499 00:24:50,640 --> 00:24:53,960 Speaker 1: and the CPI for PCE for the month of February hotter, 500 00:24:54,720 --> 00:24:59,040 Speaker 1: especially on course services. That's aside from what's going on 501 00:24:59,400 --> 00:25:03,359 Speaker 1: in terms of tariff based inflation. That is important right now, 502 00:25:03,440 --> 00:25:06,240 Speaker 1: and I think that's getting lost in translation. But it 503 00:25:06,280 --> 00:25:08,480 Speaker 1: does show up in the double and the details of 504 00:25:08,520 --> 00:25:11,280 Speaker 1: those dots and how the forecasts show up. You could 505 00:25:11,280 --> 00:25:16,439 Speaker 1: have had one very strong forecast push up the GDP number. 506 00:25:16,720 --> 00:25:20,600 Speaker 1: Within the group, there are people who believe within the 507 00:25:20,600 --> 00:25:24,040 Speaker 1: administration that will get five to six percent growth this year. 508 00:25:24,280 --> 00:25:27,600 Speaker 1: That was their forecast going in. If Steve Moran wrote 509 00:25:27,640 --> 00:25:30,600 Speaker 1: down a number like that, that would have raised the 510 00:25:30,680 --> 00:25:34,040 Speaker 1: overall growth figure, when in fact the rest of the 511 00:25:34,080 --> 00:25:37,919 Speaker 1: committee is seeing a more stag inflationary scenario. I do 512 00:25:38,040 --> 00:25:42,200 Speaker 1: think it's a dubbsh pause that is a bit disappointing 513 00:25:42,280 --> 00:25:44,960 Speaker 1: right now given where we're at. Even though I'm very 514 00:25:44,960 --> 00:25:47,840 Speaker 1: worried about the labor market, I just don't think the 515 00:25:47,880 --> 00:25:49,719 Speaker 1: Fed can cure what ails it. 516 00:25:50,000 --> 00:25:52,119 Speaker 2: So, Diane, what do you think the emphasis Why do 517 00:25:52,160 --> 00:25:54,880 Speaker 2: you think the emphasis will be in this news conference 518 00:25:54,880 --> 00:25:56,680 Speaker 2: with Chaman Pound in about five minutes time. 519 00:25:58,359 --> 00:26:01,399 Speaker 1: I think the emphasis is going to be uncertainty and 520 00:26:01,520 --> 00:26:04,359 Speaker 1: wait and see, and that will just sort of be 521 00:26:04,560 --> 00:26:07,520 Speaker 1: where they are right now and that they don't know 522 00:26:08,000 --> 00:26:10,280 Speaker 1: where the next rate move is actually going to be. 523 00:26:10,680 --> 00:26:12,439 Speaker 1: And I think that's the right way to play it. 524 00:26:12,680 --> 00:26:14,560 Speaker 2: Van Swank, Dan always going to catch up with you. 525 00:26:14,600 --> 00:26:16,320 Speaker 2: Thanks for being with us, Dan Swank. They're breaking down 526 00:26:16,359 --> 00:26:18,879 Speaker 2: the FED decision. If you are just joining us, welcome 527 00:26:18,880 --> 00:26:21,440 Speaker 2: to the program. The news conference about four minutes away 528 00:26:21,600 --> 00:26:23,920 Speaker 2: with the Chairman of the Federal Reserve down in Washington, DC, 529 00:26:24,680 --> 00:26:27,159 Speaker 2: in any other time, at any other moment, we'd be 530 00:26:27,200 --> 00:26:30,000 Speaker 2: talking about the penultimate meeting of the Federal Reserve Chair. 531 00:26:30,040 --> 00:26:32,479 Speaker 2: But we have not spoken to a single person today 532 00:26:32,800 --> 00:26:35,800 Speaker 2: who thinks this is the penultimate meeting of the Federal 533 00:26:35,800 --> 00:26:39,879 Speaker 2: Reserve Chair. And most believe Chairman Powell, including the former 534 00:26:39,920 --> 00:26:42,080 Speaker 2: Fed Vice Chair, is going to be sticking around for 535 00:26:42,080 --> 00:26:42,960 Speaker 2: at least a few more months. 536 00:26:43,000 --> 00:26:45,040 Speaker 4: Lightly because we don't know when the confirmation of the 537 00:26:45,040 --> 00:26:47,280 Speaker 4: next FETI chair is going to be, And that ultimately 538 00:26:47,640 --> 00:26:50,600 Speaker 4: lies with the man from North Carolina, Tom Tillis. Ultimately 539 00:26:50,600 --> 00:26:53,480 Speaker 4: that there is this question about credibility for the Fed continuity. 540 00:26:53,760 --> 00:26:55,600 Speaker 4: I just wonder if he gets up there and he 541 00:26:55,600 --> 00:26:57,280 Speaker 4: says what we do doesn't matter right now, as long 542 00:26:57,280 --> 00:26:58,920 Speaker 4: as we don't hike, and as long as we don't 543 00:26:58,920 --> 00:27:01,800 Speaker 4: cut that much. Not in the driver's seat. I mean, ultimately, 544 00:27:01,840 --> 00:27:04,080 Speaker 4: this is their past to say, this is an economy 545 00:27:04,119 --> 00:27:06,440 Speaker 4: that's moved on from us. We are not in control. 546 00:27:06,600 --> 00:27:07,840 Speaker 4: We are watching it just like you. 547 00:27:08,040 --> 00:27:11,480 Speaker 5: Unspoken John will be the idea of the recent election results, 548 00:27:11,520 --> 00:27:14,720 Speaker 5: including yesterday in Illinois. And I also point out a 549 00:27:14,720 --> 00:27:18,520 Speaker 5: set of allies saying no to the President on this war. 550 00:27:18,760 --> 00:27:23,040 Speaker 5: And then mister Powell representing the institution will stay around 551 00:27:23,280 --> 00:27:24,680 Speaker 5: more so than the last meeting. 552 00:27:24,760 --> 00:27:26,640 Speaker 2: A big pace of this bull case for this economy, 553 00:27:26,720 --> 00:27:30,280 Speaker 2: for this market has been tax refunds. We hear that 554 00:27:30,320 --> 00:27:32,800 Speaker 2: phrase get banded around all the time on this program, 555 00:27:32,840 --> 00:27:35,640 Speaker 2: tax refunds, tax refunds. How big are these tax refunds 556 00:27:35,720 --> 00:27:38,119 Speaker 2: actually going to be? And how our attitudes towards the 557 00:27:38,160 --> 00:27:40,120 Speaker 2: economy changing Given the shock of the past few weeks. 558 00:27:40,160 --> 00:27:42,800 Speaker 2: What about that money actually got well? 559 00:27:42,960 --> 00:27:46,240 Speaker 6: We're seeing it now when we look at Chase deposit accounts. 560 00:27:46,280 --> 00:27:51,040 Speaker 6: We're seeing, particularly the bottom couple quintiles of earners, see 561 00:27:51,080 --> 00:27:53,840 Speaker 6: their deposit balances start to go up a bit. But 562 00:27:54,359 --> 00:27:57,560 Speaker 6: the uncomfortable truth is they're now paying that out again 563 00:27:58,040 --> 00:28:01,760 Speaker 6: at the pump. And we can't forget that businesses and 564 00:28:01,800 --> 00:28:06,040 Speaker 6: households were already paying a higher tax because of tariffs 565 00:28:06,200 --> 00:28:09,840 Speaker 6: on prices, and now energy prices are going to create 566 00:28:09,920 --> 00:28:13,080 Speaker 6: yet another tax on their disposable income. 567 00:28:13,119 --> 00:28:15,679 Speaker 2: Brow by the squeeze. Israel, the energy bill is a 568 00:28:15,760 --> 00:28:18,440 Speaker 2: severe and they were high already and now they. 569 00:28:18,440 --> 00:28:22,080 Speaker 4: Get in high delta and American we're perfect examples of 570 00:28:22,119 --> 00:28:24,040 Speaker 4: how the economy is doing pretty well and people are 571 00:28:24,040 --> 00:28:26,440 Speaker 4: still spending. The difference is that the cost are getting 572 00:28:26,440 --> 00:28:28,679 Speaker 4: that much higher, and so the room that people have 573 00:28:28,800 --> 00:28:31,560 Speaker 4: and that companies have to do okay is getting narrower 574 00:28:31,600 --> 00:28:33,560 Speaker 4: and narrower. In the FEDS watching this, and they don't 575 00:28:33,600 --> 00:28:36,600 Speaker 4: have the silver bullet to really make this a better situation. 576 00:28:36,680 --> 00:28:40,760 Speaker 5: I did scientific surveillance research today and we wr to 577 00:28:40,920 --> 00:28:44,440 Speaker 5: Charles de Gaull was popping the two of us. You 578 00:28:44,480 --> 00:28:47,200 Speaker 5: could easily do it for seven thousand dollars, and you're 579 00:28:47,280 --> 00:28:50,360 Speaker 5: enjoying it this morning just under eleven thousand dollars. 580 00:28:50,400 --> 00:28:53,719 Speaker 2: Are you're pretending you don't flap business over three? It's 581 00:28:53,760 --> 00:28:54,200 Speaker 2: that way you did. 582 00:28:54,200 --> 00:28:56,280 Speaker 5: No, it's not premier. We're not doing the first class thing, 583 00:28:56,320 --> 00:28:58,640 Speaker 5: but business class. I'm going to suggest us up at 584 00:28:58,760 --> 00:29:00,440 Speaker 5: least twenty percent doing. 585 00:29:01,280 --> 00:29:03,440 Speaker 2: Is that Polaris? Is that United? Business class? Is that 586 00:29:03,520 --> 00:29:04,240 Speaker 2: the front of the plane? 587 00:29:04,320 --> 00:29:06,720 Speaker 4: I actually don't even know. Yes, that's yes, Actually I do. 588 00:29:06,800 --> 00:29:10,240 Speaker 4: I remember going to something a demonstration about it. Not actually. 589 00:29:13,440 --> 00:29:17,720 Speaker 5: For everybody to know, for everybody out in the world. 590 00:29:17,840 --> 00:29:20,360 Speaker 5: Johan and I are in steerage and you're on the golf. 591 00:29:20,920 --> 00:29:23,960 Speaker 4: That is such a load of nice ones. 592 00:29:24,960 --> 00:29:27,000 Speaker 2: Hey, Bob, before you go just to find a word 593 00:29:27,080 --> 00:29:29,360 Speaker 2: about a minute away from this news conference. What are 594 00:29:29,400 --> 00:29:29,920 Speaker 2: you looking for? 595 00:29:31,600 --> 00:29:34,040 Speaker 6: I'm looking for a couple of things. I want to 596 00:29:34,160 --> 00:29:39,400 Speaker 6: understand how they're thinking about the war and the elevated 597 00:29:39,480 --> 00:29:43,080 Speaker 6: risk to both sides of their mandate. And then secondly, 598 00:29:43,200 --> 00:29:45,920 Speaker 6: I want to know how they got to their forecast numbers. 599 00:29:46,800 --> 00:29:50,320 Speaker 6: I think Diane's right, there needs to be some explanation there, 600 00:29:50,520 --> 00:29:53,640 Speaker 6: and the explanation could be quite simple. Could be, well, 601 00:29:53,760 --> 00:29:57,680 Speaker 6: one member put in a six percent exact growth rate. Okay, 602 00:29:57,920 --> 00:29:59,239 Speaker 6: well let us know that 603 00:30:01,080 --> 00:30:01,200 Speaker 5: Se