WEBVTT - Instant Reaction: Fed Stands Pat, Says More Data Will Help Next Decision 0:00:02.520 --> 0:00:04.220 Bloomberg Audio Studios. 0:00:04.690 --> 0:00:05.390 Podcasts. 0:00:05.690 --> 0:00:06.230 Radio. 0:00:06.650 --> 0:00:07.070 News. 0:00:09.170 --> 0:00:12.030 This is a breaking news update from Bloomberg. 0:00:12.930 --> 0:00:17.340 Instant reaction and analysis from our 3,000 journalists and analysts 0:00:17.540 --> 0:00:18.440 around the world. 0:00:20.239 --> 0:00:23.759 The FOMC decided to maintain the target rate for the 0:00:23.800 --> 0:00:28.140 federal funds rate at 3.75% to 4% in support of 0:00:28.180 --> 0:00:32.360 the Federal Reserve's dual mandate. The committee believes that the 0:00:32.400 --> 0:00:36.820 accumulation of more information will help it determine the policy 0:00:36.900 --> 0:00:42.030 stance appropriate to ensure a timely return of inflation to 0:00:42.070 --> 0:00:46.010 the 2% goal. The committee will deliver price stability. 0:00:46.590 --> 0:00:49.190 I'm going to speak on behalf of a lot of 0:00:49.210 --> 0:00:50.750 people on trading desks around the world. I think at 0:00:50.830 --> 0:00:52.850 one point in that news conference, everybody started looking out 0:00:52.870 --> 0:00:55.410 the window to see what was happening elsewhere. Because there 0:00:55.430 --> 0:00:56.970 was a moment in that news conference where we stopped 0:00:56.990 --> 0:01:00.660 learning anything about anything. Equity markets this afternoon shaping up 0:01:00.720 --> 0:01:02.900 as follows. On the S & P 500, up a 0:01:02.960 --> 0:01:06.080 third of 1%. On the Nasdaq, up by 0.4%. In 0:01:06.100 --> 0:01:09.090 the bond market, twos, tens, and thirties. Yields shaping up 0:01:09.150 --> 0:01:12.950 as follows this afternoon. Twos down three basis points at 470. 0:01:12.950 --> 0:01:15.729 Tens up four. Thirties up five. There appears to be 0:01:15.750 --> 0:01:18.590 a disconnect between the rhetoric and the policy from the 0:01:18.630 --> 0:01:19.589 Fed chair, Kevin Walsh. 0:01:21.010 --> 0:01:26.000 Domestic spending has been resilient. Productivity growth is strong. In 0:01:26.060 --> 0:01:31.089 capital investment, robust. Job gains have kept pace with the workforce, 0:01:31.750 --> 0:01:37.060 and the unemployment rate has changed little, but inflation remains elevated. 0:01:37.840 --> 0:01:40.000 Inflation is too high. The economy is strong. 0:01:40.300 --> 0:01:43.300 Yet the Fed decided to hold the opening statement more 0:01:43.340 --> 0:01:45.920 consistent with a Fed chair that just hiked interest rates, 0:01:46.220 --> 0:01:47.360 never mind keeping them unchanged. 0:01:47.460 --> 0:01:49.660 So what had changed? And the one thing that he 0:01:49.700 --> 0:01:52.720 did open the door to was the potential that market 0:01:52.760 --> 0:01:56.630 volatility started to give the sense that maybe something else 0:01:56.650 --> 0:01:58.550 was going on that they needed to monitor. He said 0:01:58.590 --> 0:02:02.090 that this interval of time is information rich information. He 0:02:02.130 --> 0:02:04.530 also said that, you know, you might be worried about 0:02:04.570 --> 0:02:07.390 the same old things, but this is actually a new regime. 0:02:07.450 --> 0:02:08.389 It may look like. 0:02:08.290 --> 0:02:10.370 It's just one rate hike that they've executed since he 0:02:10.389 --> 0:02:13.609 started there, but it's actually monetary medicine, a package that 0:02:13.630 --> 0:02:15.350 the Fed started five months ago. 0:02:15.550 --> 0:02:18.169 He came really, really close, stopped just short, but came 0:02:18.230 --> 0:02:20.090 really close to saying the market's doing some of the 0:02:20.130 --> 0:02:20.670 work for us. 0:02:21.680 --> 0:02:22.120 Disclose. 0:02:22.360 --> 0:02:25.989 That was the only explanation from what he said that 0:02:26.150 --> 0:02:29.970 actually gives any justification whatsoever for why with that rhetoric 0:02:30.310 --> 0:02:32.490 and that assessment of the economy, they did not hike. 0:02:32.570 --> 0:02:35.470 I am fascinated what we'll learn in the next year 0:02:35.690 --> 0:02:39.299 and 10 years about some of these really qualified people 0:02:39.360 --> 0:02:42.209 around the table at the Eccles building. what they think 0:02:42.250 --> 0:02:44.669 of this approach. I think that's what we haven't heard yet. 0:02:44.810 --> 0:02:48.960 It's only been five months, John. But I think conventional 0:02:49.060 --> 0:02:53.700 analysis fails, given what we heard there on protocol and 0:02:53.780 --> 0:02:55.180 on new monetary medicine. 0:02:55.200 --> 0:02:57.660 Tom, the issue and the risk this Fed chair always ran. 0:02:58.260 --> 0:03:00.919 If you're on board with ending forward guidance and the 0:03:01.200 --> 0:03:03.520 hyper-communication that we were getting from the institution over the 0:03:03.540 --> 0:03:05.820 last 10 years, that's one thing. Getting the rest of 0:03:05.840 --> 0:03:07.570 the committee to come with you is another. 0:03:08.030 --> 0:03:09.670 The outcome of this meeting this afternoon. 0:03:10.340 --> 0:03:12.310 is that they've reinforced the guidance we're going to get 0:03:12.350 --> 0:03:15.090 from select individuals over the next several weeks. In fact, 0:03:15.110 --> 0:03:16.910 the first thing I've done as this news conference wraps 0:03:16.990 --> 0:03:19.330 up is find out when Williams speaks next, November 6th, 0:03:19.350 --> 0:03:21.580 for anyone who's interested. It's going to be participating on 0:03:21.600 --> 0:03:25.620 a moderated discussion. All that's happened here is that we've 0:03:25.660 --> 0:03:28.750 just found out that when you hear from Williams and Jefferson... 0:03:28.730 --> 0:03:31.070 when that guidance about October or whatever the month might 0:03:31.130 --> 0:03:33.730 be comes in, even if it predates the data, that's 0:03:33.750 --> 0:03:36.250 what the policy is going to be. Because a lot 0:03:36.280 --> 0:03:38.560 of people on Wall Street concluded the data said go. 0:03:39.040 --> 0:03:41.660 The data said hike. The rhetoric from the Fed chair 0:03:41.840 --> 0:03:42.420 said the same thing. 0:03:42.440 --> 0:03:43.020 He's miles from that. 0:03:43.780 --> 0:03:45.500 And what you hear from Williams and Jefferson is that 0:03:45.540 --> 0:03:47.840 we can take a month to skip. And everything you 0:03:47.860 --> 0:03:52.270 heard in that news conference about having a time-rich conversation, Brammo, 0:03:52.330 --> 0:03:54.720 about the next month or so. Was everything Jefferson and 0:03:54.740 --> 0:03:57.060 Williams told you before the data even came out a 0:03:57.100 --> 0:03:57.640 few weeks ago? 0:03:57.820 --> 0:04:00.600 Yeah, the reaction function is even less clear right now, 0:04:00.820 --> 0:04:03.320 I think. If this is a data-dependent Fed, what data 0:04:03.380 --> 0:04:05.910 are they looking for? This is an informational-rich Fed. 0:04:06.430 --> 0:04:08.570 Era, interval. Is it the election? 0:04:08.770 --> 0:04:09.990 Is it oil prices? 0:04:10.050 --> 0:04:11.730 Is it CPI, which we just got? 0:04:11.810 --> 0:04:14.050 Is it GDP? Is it finger in the wind, let's 0:04:14.090 --> 0:04:14.790 look out the window? 0:04:14.890 --> 0:04:16.029 Ultimately, we're not sure. 0:04:16.450 --> 0:04:18.550 This is part of the issue that I think a 0:04:18.589 --> 0:04:20.830 lot of people are having. And frankly, I think almost 0:04:20.890 --> 0:04:22.570 at this point, people would welcome the fact that we 0:04:22.610 --> 0:04:26.000 might get one or two fewer rate deciding decisions. Because 0:04:26.320 --> 0:04:27.940 if this is what it's going to be, it doesn't 0:04:28.060 --> 0:04:29.119 add clarity. 0:04:29.260 --> 0:04:32.380 John, I think conventional analysis here doesn't work. This guy 0:04:32.800 --> 0:04:36.040 is on another planet. From modern monetary theory. 0:04:36.060 --> 0:04:38.060 TK, don't wait two years. If we have to do 0:04:38.100 --> 0:04:40.570 this every single meeting, what's the point? Just bring it 0:04:40.610 --> 0:04:42.969 down to six now. To your point, Lisa, I think 0:04:43.010 --> 0:04:44.250 most people would be on board with that. 0:04:44.490 --> 0:04:47.230 Do it tomorrow. Wait two years. Make it happen tomorrow. 0:04:48.029 --> 0:04:50.210 The market reaction, I think, is notable. And you are 0:04:50.270 --> 0:04:52.330 seeing a steepening in the yield curve and the dollar 0:04:52.350 --> 0:04:54.890 getting weaker. And you start to wonder, OK, well, what's 0:04:54.910 --> 0:04:58.680 the market saying? Maybe, A, that regardless of how firm 0:04:58.700 --> 0:05:00.520 their 2 percent target is, this is a Fed that's 0:05:00.560 --> 0:05:02.900 going to wait a little bit longer. And a real 0:05:02.960 --> 0:05:05.700 question around the opportunities for them to actually make a 0:05:05.740 --> 0:05:08.260 move if they have fewer meetings to possibly move in. 0:05:08.260 --> 0:05:10.770 There's a critical distinction here. There's a lot of people 0:05:10.810 --> 0:05:12.710 that agree with him that, you know, John, I call 0:05:12.750 --> 0:05:14.950 it the parlor game. I hate it. He wants to 0:05:14.970 --> 0:05:16.750 get away from the parlor game. He wants to get 0:05:16.790 --> 0:05:20.020 away from the dots, fewer meetings. Who had ham and 0:05:20.060 --> 0:05:23.260 cheese sandwiches at the day one meeting? The usual thing. 0:05:23.279 --> 0:05:24.080 Sure. Fine. 0:05:24.260 --> 0:05:27.870 Okay, that's great. But he wants to walk away from 0:05:27.990 --> 0:05:32.320 modern culture. monetary analysis and the foundation of that. A 0:05:32.360 --> 0:05:35.200 guy like Michael Ferroli at JP Morgan, I don't know 0:05:35.240 --> 0:05:39.870 what he does with new monetary medicine and protocol from 0:05:39.900 --> 0:05:40.030 the 50s. 0:05:40.120 --> 0:05:42.770 I'm thinking about who might be happy with this decision. 0:05:42.950 --> 0:05:45.570 If I'm Dario at Anthropic, I'm probably pretty happy with 0:05:45.610 --> 0:05:47.870 this decision and that news conference. I'd be pretty thrilled 0:05:47.890 --> 0:05:50.330 with how that went. Essentially, an IPO coming up in 0:05:50.350 --> 0:05:51.180 a few weeks. Yeah. 0:05:51.210 --> 0:05:53.540 I mean, essentially, if you have someone who is concerned 0:05:53.600 --> 0:05:57.200 about any kind of market disruption in credit spreads. 0:05:56.880 --> 0:05:57.660 Tied to AI. 0:05:57.980 --> 0:05:58.740 Probably feeling pretty good. 0:05:58.820 --> 0:06:00.180 That probably is a positive. 0:06:00.360 --> 0:06:02.260 Got Priya Misra at J.P. Morgan with us around the table. 0:06:02.300 --> 0:06:03.560 Priya sat through that. Priya, well done. 0:06:03.940 --> 0:06:05.690 It's good to see you. That was fun. It was 0:06:05.710 --> 0:06:07.560 a difficult one, wasn't it? What did you learn? 0:06:07.680 --> 0:06:10.440 You know, I think Chair Warsh was trying to walk 0:06:10.500 --> 0:06:13.780 this fine line of saying that they're already committed to 0:06:13.839 --> 0:06:17.080 inflation and yet they didn't hike. I think he was 0:06:17.100 --> 0:06:20.000 trying to communicate this hawkish hold, but it's hard. But 0:06:20.180 --> 0:06:22.430 I would take a step back. There's the policy and 0:06:22.440 --> 0:06:24.890 then there's the communication. The policy, you saw the market 0:06:24.930 --> 0:06:27.330 reaction right after. I don't think the market was saying 0:06:27.350 --> 0:06:29.310 that the Fed's behind the curve on inflation. 0:06:29.570 --> 0:06:30.170 They've hiked. 0:06:30.390 --> 0:06:32.350 They're likely to hike some more. I think the market 0:06:32.390 --> 0:06:34.890 was okay with policy. What I was hoping to get 0:06:34.930 --> 0:06:37.739 from Chairwash, which we didn't really get, was explain the decision. 0:06:38.140 --> 0:06:40.460 He could have talked about inflation breadth. He could have said, 0:06:40.640 --> 0:06:43.560 we're not data point dependent. You know, the inflation trend 0:06:43.620 --> 0:06:46.740 is heading lower. He really didn't talk about the data. 0:06:46.980 --> 0:06:49.020 So we didn't get much on the decision. I was 0:06:49.040 --> 0:06:51.870 hoping to hear something more on, is this risk management, 0:06:52.029 --> 0:06:54.670 removal of the risk management cuts, or is this risk 0:06:54.710 --> 0:06:58.410 management hikes, or are we recalibrating the neutral rate? We 0:06:58.490 --> 0:07:01.950 didn't really get that. And then something on financial conditions. 0:07:02.170 --> 0:07:03.770 I think we got a little bit on that. I 0:07:03.810 --> 0:07:06.270 think the Fed did get a little spooked with the 0:07:06.360 --> 0:07:09.320 move in interest rates. I mean, we talk about Halloween costumes. 0:07:09.920 --> 0:07:12.700 My point a month ago was the tenure should be 0:07:12.720 --> 0:07:15.780 the Halloween costume. My kids refused to even walk with me. 0:07:15.800 --> 0:07:17.300 Now it's not the tenure. 0:07:17.340 --> 0:07:20.050 It's my latest as AI, Dr. Jekyll and Mr. 0:07:20.080 --> 0:07:20.320 Hyde. 0:07:21.110 --> 0:07:22.990 But, you know, it's not the Fed. So at least 0:07:23.030 --> 0:07:24.890 I think today is not like July. I think it 0:07:24.930 --> 0:07:29.350 wasn't a complete miscommunication. He did leave a lot more questions. 0:07:29.370 --> 0:07:31.430 We're going to have to listen to every other Fed official, 0:07:31.890 --> 0:07:35.120 wait for meetings. I personally like more meetings because I 0:07:35.130 --> 0:07:37.560 think the decision speaks more than what he's going to 0:07:37.580 --> 0:07:39.800 tell us at the press conference. But we'll have. 0:07:39.840 --> 0:07:43.000 Not to be too snarky, you want more of those meetings? So, 0:07:43.020 --> 0:07:44.260 you know... They're the meetings you get it. 0:07:44.580 --> 0:07:47.560 The policy decision was useful. The dots are useful. We 0:07:47.600 --> 0:07:49.550 might go, you know, the dots might go away. 0:07:49.620 --> 0:07:49.960 But the. 0:07:50.560 --> 0:07:52.760 Yes, his communication, I think, did not tell us much 0:07:52.810 --> 0:07:53.690 about the reaction function. 0:07:53.730 --> 0:07:55.410 If you want to dress like the 10-year, I'll walk 0:07:55.450 --> 0:07:57.770 with you, because I think that that's actually quite scary 0:07:57.810 --> 0:08:00.250 for a lot of different officials right now. What do 0:08:00.270 --> 0:08:03.540 you make of this commentary that he made about what 0:08:03.560 --> 0:08:06.480 happened in markets, that financial conditions seem to have tightened? 0:08:06.640 --> 0:08:08.920 And This sort of nod to that as the one 0:08:09.060 --> 0:08:11.540 thing that could have justified remaining on hold. 0:08:11.860 --> 0:08:12.080 Right. 0:08:12.120 --> 0:08:15.220 I think so monetary policy works into the economy through 0:08:15.240 --> 0:08:19.120 financial conditions. So the fact that he said the financial 0:08:19.140 --> 0:08:21.730 conditions have tightened and that's kind of what they expected. 0:08:22.140 --> 0:08:25.200 I think it's telling you that that's how monetary policy works. 0:08:25.220 --> 0:08:28.000 So all this idea that the AI trade is not 0:08:28.060 --> 0:08:31.140 interest sensitive, I think he's pushing back against it. That's 0:08:31.180 --> 0:08:33.420 the area he was a little explicit in. And so 0:08:33.440 --> 0:08:36.140 when we talk about he's buying time for what, it's 0:08:36.200 --> 0:08:38.719 not just the labor market and inflation. It's going to 0:08:38.760 --> 0:08:41.739 be financial conditions. If the air is coming out of 0:08:41.780 --> 0:08:43.920 the AI trade, well, interest rates might come down, but 0:08:43.960 --> 0:08:46.859 financial conditions might tighten. And then the market's doing the 0:08:46.940 --> 0:08:48.720 work for the Fed. I don't think he wanted to 0:08:48.800 --> 0:08:51.100 say it because when he said it in July, that 0:08:51.120 --> 0:08:53.020 was a problem. It looked like the market might bully 0:08:53.070 --> 0:08:56.830 the Fed. But I do think that this Fed chair looks, 0:08:57.010 --> 0:08:58.530 and it's not just chairwash. 0:08:58.950 --> 0:08:59.690 I think the rest of. 0:08:59.670 --> 0:09:02.010 The Fed, I mean, we heard from Williams and Jefferson. 0:09:02.309 --> 0:09:03.830 I think they looked at the market and said, this 0:09:03.929 --> 0:09:06.550 is doing the work. So we can actually then, the 0:09:06.670 --> 0:09:08.270 urgency goes down for us to hike. 0:09:08.320 --> 0:09:12.000 He talked about protocol. And he's written before about McChesney Martin, 0:09:12.000 --> 0:09:16.380 1951 and the accord. To me, he's almost wistful to 0:09:16.420 --> 0:09:18.500 go back to another time. I felt like I was 0:09:18.540 --> 0:09:22.280 watching Tobey Maguire and Reese Witherspoon in Pleasantville. We're back 0:09:22.330 --> 0:09:26.330 to the 50s, like back before Burns, back before the 60s, 0:09:26.710 --> 0:09:30.230 back to a simpler time. He's yearning to go back there. 0:09:30.670 --> 0:09:35.210 How does that dovetail with a cacophony of responsibilities we 0:09:35.270 --> 0:09:38.930 have in monetary policy linked into fiscal policy? 0:09:39.550 --> 0:09:42.210 It's very hard. Now, I see the point about going back, 0:09:42.330 --> 0:09:44.829 because if you look at big productivity increases, we might. 0:09:44.710 --> 0:09:46.860 Be— But we're not the same economy we were in 0:09:46.880 --> 0:09:50.880 the 50s. Our news flow alone— I mean, John has personally 0:09:50.940 --> 0:09:54.730 moved British pound at least six times on this show. 0:09:54.780 --> 0:09:58.750 I mean, the speed of news flow today, he's not 0:09:58.809 --> 0:10:00.910 allowed to go back to that. wistful thinking. 0:10:01.480 --> 0:10:03.839 I think which is where I wish we could get 0:10:03.860 --> 0:10:05.840 a better sense of the reaction function because then the 0:10:05.880 --> 0:10:08.800 market will react to data points. And it doesn't just 0:10:08.840 --> 0:10:11.540 have to be inflation and the labor market. It could 0:10:11.610 --> 0:10:15.090 be the earnings of some large hyperscale or it could 0:10:15.130 --> 0:10:17.750 be to the issue equity or debt. But let the 0:10:17.770 --> 0:10:20.709 market react to all this information if we have a 0:10:20.750 --> 0:10:23.000 sense of the reaction function. We are getting a better 0:10:23.050 --> 0:10:25.480 sense today than we were, I'd say, in July. 0:10:25.500 --> 0:10:27.020 I'll give you that. 0:10:27.080 --> 0:10:28.760 I'll give you it better than July. 0:10:28.780 --> 0:10:31.720 We're just piecing it together and we're realizing there's not 0:10:31.760 --> 0:10:34.760 just the chair wash reaction function. There's every other of 0:10:34.800 --> 0:10:37.900 the 19 members reaction function that we need to. So 0:10:37.920 --> 0:10:39.640 maybe AI can help us get some. 0:10:39.740 --> 0:10:42.060 I got a question to fit into John Farrow here. John, 0:10:42.100 --> 0:10:44.120 you've stood on the lawn of the ECB. I talk 0:10:44.160 --> 0:10:47.200 about this stuff. You've actually done it. How does the 0:10:47.240 --> 0:10:50.900 Bank of England, the ECB, how do they react to 0:10:50.960 --> 0:10:52.040 what I just witnessed? 0:10:53.120 --> 0:10:56.110 The lack of guidance? The lack of analysis? 0:10:56.210 --> 0:10:58.930 Some people would say the MBA happy talk speak I 0:10:58.970 --> 0:10:59.429 just heard. 0:10:59.610 --> 0:11:02.670 Tom, without criticizing too many people, I think people have 0:11:02.690 --> 0:11:04.449 had experience of that at the ECB for the last 0:11:04.470 --> 0:11:05.030 several years. 0:11:05.450 --> 0:11:05.770 Okay. 0:11:06.050 --> 0:11:06.829 Same situation. 0:11:07.490 --> 0:11:09.230 There are some people in this market who don't believe 0:11:09.250 --> 0:11:11.370 the person leading that institution was cut out for that 0:11:11.410 --> 0:11:13.069 job to begin with and haven't received the kind of 0:11:13.090 --> 0:11:15.530 guidance they want from that institution either. So I think 0:11:15.550 --> 0:11:17.670 the ECB might have a little bit in common with 0:11:17.710 --> 0:11:20.170 what we've seen from the Federal Reserve under this leadership. 0:11:20.570 --> 0:11:22.929 The problem with this leadership right now is that he 0:11:22.970 --> 0:11:24.610 wants to make a change at the top of this 0:11:24.650 --> 0:11:28.130 institution into how they communicate, but he's trapped in the 0:11:28.170 --> 0:11:32.280 post-GFC communication architecture. So he has to deliver a news conference. 0:11:33.000 --> 0:11:35.280 Clearly he doesn't want to. Clearly he doesn't have much 0:11:35.320 --> 0:11:38.250 to say. And I think he's trying to be collegial. 0:11:38.970 --> 0:11:41.170 It's difficult to be that way when others aren't on 0:11:41.210 --> 0:11:43.819 board with what you're trying to do. And the speeches 0:11:43.880 --> 0:11:46.780 over the last few weeks from Williams and Jefferson, I think, 0:11:46.820 --> 0:11:49.360 are probably the most important development of the. 0:11:49.320 --> 0:11:52.120 Last month, aside from what happened with financial markets. 0:11:52.940 --> 0:11:55.340 It doesn't matter what the Fed chair says about anything 0:11:55.380 --> 0:11:57.950 in this news conference. It doesn't matter that he doesn't 0:11:57.990 --> 0:12:00.970 provide guidance. Because the only guidance you need is from 0:12:01.010 --> 0:12:02.330 the core of the committee. And the core of the 0:12:02.350 --> 0:12:04.890 committee told you precisely what would happen at this meeting. 0:12:05.610 --> 0:12:06.609 They kept rates unchanged. 0:12:07.030 --> 0:12:10.070 The core of this committee told you precisely what the 0:12:10.090 --> 0:12:12.230 chair ended up saying, which is we have time. We 0:12:12.270 --> 0:12:14.070 want to take more time to find out and get 0:12:14.130 --> 0:12:16.770 more information about what's happening here. So for a Fed 0:12:16.790 --> 0:12:18.780 chair that's trying to move away from the old Fed, 0:12:19.260 --> 0:12:22.480 my conclusion watching this play out this afternoon is that 0:12:22.500 --> 0:12:25.260 this new Fed sounds a whole lot like the old Fed. 0:12:25.620 --> 0:12:27.439 They're talking a good game about inflation. 0:12:27.559 --> 0:12:30.300 They obviously want to anchor inflation expectations, but they're willing 0:12:30.340 --> 0:12:32.880 to tolerate above target and messy prints like the one 0:12:32.900 --> 0:12:34.929 we just got because they're not willing to act. 0:12:35.270 --> 0:12:37.130 That's the only conclusion you can have. 0:12:37.770 --> 0:12:40.410 Colby tried. We used to work with Colby. She's fantastic. 0:12:40.670 --> 0:12:42.870 It's the first question out of the gate. Why aren't 0:12:42.890 --> 0:12:46.089 you hiking today? The economy's strong. Why aren't you doing anything? 0:12:46.110 --> 0:12:48.170 That question was asked 50 different ways. He didn't answer 0:12:48.210 --> 0:12:50.609 it once. And if they're not going to make a 0:12:50.630 --> 0:12:52.800 move after the data we just got, And I'm not 0:12:52.860 --> 0:12:54.710 advocating for a move from the institution, by the way. 0:12:54.740 --> 0:12:56.710 That's not what I'm doing here. I'm basing this on 0:12:56.730 --> 0:12:59.910 their own rhetoric. There is a massive spread between how 0:12:59.950 --> 0:13:04.040 the Fed chair is speaking and what they're doing. And 0:13:04.110 --> 0:13:06.130 this just sounded like a typical Fed chair trying to 0:13:06.170 --> 0:13:09.010 wanker inflation expectations with above target inflation and not willing 0:13:09.030 --> 0:13:09.830 to do anything about it. 0:13:09.929 --> 0:13:11.849 But Priya, within the mix, at least to jump in 0:13:11.890 --> 0:13:14.490 here because you're reading different stuff than I am. Within 0:13:14.530 --> 0:13:17.730 the mix, is there any talk about where these presidents 0:13:17.850 --> 0:13:22.290 and these governors will revolt against this chairman? Is that 0:13:22.610 --> 0:13:24.790 discussed or analyzed in any way? 0:13:25.340 --> 0:13:27.959 So not revolt, but I would say we're paying attention 0:13:28.000 --> 0:13:32.960 to every dot and every voter, non-voter, because that's important. Now, 0:13:33.040 --> 0:13:35.160 this is coming down to counting votes, a little bit 0:13:35.179 --> 0:13:38.059 like the Supreme Court, where, you know, it's not a concern. 0:13:38.179 --> 0:13:40.520 And I will say the Fed came into the new 0:13:40.640 --> 0:13:44.520 chairworshes regime divided. So there was already this question of 0:13:44.580 --> 0:13:47.650 is this a supply shock? Is it leaking into demand? 0:13:47.750 --> 0:13:50.189 Is it just AI or is it broadening out? I 0:13:50.210 --> 0:13:53.449 think there are big questions there. So we're going to 0:13:53.470 --> 0:13:56.689 be listening to really every Fed official getting a sense 0:13:56.770 --> 0:13:59.780 of what do they think about how much the market's 0:13:59.820 --> 0:14:02.140 doing the work for them, even if they're not explicitly 0:14:02.200 --> 0:14:04.860 saying it. How much of that was behind what Williams 0:14:04.900 --> 0:14:07.790 and Jefferson said? But I'll go back to we think 0:14:07.809 --> 0:14:10.020 this is still a supply shock. There were questions on 0:14:10.040 --> 0:14:12.200 whether they should have hiked in September. If this is 0:14:12.240 --> 0:14:16.360 a supply shock, normal conventional economic theory would say, Look 0:14:16.400 --> 0:14:19.640 through it. I think this was risk management. They're worried 0:14:19.680 --> 0:14:22.640 that it'll spread through. It's just not clear from Chair 0:14:22.680 --> 0:14:25.790 Walsh that the committee broadly is there. I think that's 0:14:25.830 --> 0:14:28.430 where Jefferson and Williams and I would say Waller are there. 0:14:28.850 --> 0:14:31.510 So just watching, not just what they say about the 0:14:31.550 --> 0:14:34.490 next meeting, and, you know, it's the totality of whether 0:14:34.510 --> 0:14:37.070 they hiked this meeting or not actually doesn't matter unless 0:14:37.090 --> 0:14:39.370 if you're trading October Fed Fund futures, but it's the 0:14:39.430 --> 0:14:42.890 totality of hikes. We're still pricing in three hikes, which 0:14:42.980 --> 0:14:45.580 is more than... the most hawkish Fed official has been 0:14:45.600 --> 0:14:45.770 till now. 0:14:45.780 --> 0:14:47.560 Do you know why I'm so upset? Mike McKee didn't 0:14:47.580 --> 0:14:49.859 get to speak at the news conference. What was that about? 0:14:49.920 --> 0:14:52.020 Mike McKee joins us now for more. Mike, what happened 0:14:52.080 --> 0:14:53.580 in there? What happened in the press, sir? 0:14:55.080 --> 0:14:57.240 Well, I didn't get called on. That's one thing that happened, 0:14:57.260 --> 0:14:59.560 and I don't have any explanation for that other than 0:14:59.600 --> 0:15:01.280 they put us in the very back row. 0:15:02.140 --> 0:15:03.780 I think, John, that you said it best. 0:15:03.900 --> 0:15:05.920 You've said it very, very well about what's going on 0:15:06.360 --> 0:15:08.920 with Chairman Warsh and this Fed. He wants to change 0:15:08.980 --> 0:15:12.000 the communication style. But he doesn't know how and he's 0:15:12.040 --> 0:15:15.580 leaving people with a vague impression of what the Fed 0:15:15.700 --> 0:15:18.710 is thinking and it's not helping anybody on Wall Street 0:15:19.160 --> 0:15:22.350 figure out what to do. When you listen to what 0:15:22.390 --> 0:15:25.310 he said today, they want more time to look out 0:15:25.350 --> 0:15:25.770 the window. 0:15:26.250 --> 0:15:27.850 What are they going to see out the window? 0:15:28.270 --> 0:15:31.410 There is one more CPI between this meeting and the 0:15:31.450 --> 0:15:34.590 December meeting. They get PCE tomorrow. They know what that 0:15:34.670 --> 0:15:37.590 number is already. But that's the only inflation measure, that 0:15:37.690 --> 0:15:40.050 one CPI. So if you're worried about inflation and you 0:15:40.070 --> 0:15:42.070 get one more number and you know oil prices are 0:15:42.090 --> 0:15:44.610 going up and you know that the war is still 0:15:44.650 --> 0:15:46.660 going on, I don't think you're going to learn a 0:15:46.700 --> 0:15:49.400 whole lot by looking out the window. And so it 0:15:49.520 --> 0:15:53.380 leaves open the question of Where does the Fed think 0:15:53.500 --> 0:15:55.340 it needs to intervene and why? 0:15:55.420 --> 0:15:58.030 And that's a question that he did not answer. 0:15:58.350 --> 0:16:01.550 Good question on whether we've migrated from supply shock to 0:16:01.590 --> 0:16:04.390 demand shock. If it's a demand shock, and certainly he 0:16:04.660 --> 0:16:07.490 was at pains to say the economy is really picking up. 0:16:08.360 --> 0:16:11.780 then obviously the Fed has more work to do in 0:16:11.800 --> 0:16:14.110 a different way. And we didn't get anything on that 0:16:14.190 --> 0:16:17.110 right now. One thing I would add is I've gotten 0:16:17.170 --> 0:16:20.350 several messages from people on Wall Street about this change 0:16:20.410 --> 0:16:24.180 in the meeting frequency. If it starts next fall, what 0:16:24.220 --> 0:16:26.260 meeting are they going to skip? It would seem logical 0:16:26.300 --> 0:16:29.359 to skip the October meeting because you've got SEPs if 0:16:29.400 --> 0:16:33.400 they still have those in September and December. But how 0:16:33.440 --> 0:16:35.060 does the market know? How do they know how to 0:16:35.120 --> 0:16:37.950 price futures at this point if they don't know when 0:16:38.030 --> 0:16:40.810 one of those meetings won't produce anything? So a lot 0:16:40.830 --> 0:16:43.310 of questions come out of this that he didn't even 0:16:43.350 --> 0:16:44.350 come close to answering. 0:16:44.790 --> 0:16:47.410 Very few answers. Mike McKee, wonderful job as always down 0:16:47.450 --> 0:16:50.310 in Washington. Mike, appreciate it, sir. Jeff Rosenberg of BlackRock 0:16:50.330 --> 0:16:52.840 joins us now for more. Jeff, you sat through that too. 0:16:53.170 --> 0:16:55.840 For someone in this market, what was material to you? 0:16:57.350 --> 0:17:01.430 Yeah, Jonathan, listening to the conversation, I'll highlight three things 0:17:01.470 --> 0:17:02.570 in kind of reverse order. 0:17:02.590 --> 0:17:04.350 I think we've talked about a lot of them. 0:17:04.369 --> 0:17:06.830 You know, the answer for why they didn't do anything 0:17:07.290 --> 0:17:09.670 this meeting, he got the question a couple of times 0:17:09.710 --> 0:17:11.910 and he kind of answered it. They're waiting for more data. 0:17:12.100 --> 0:17:12.409 Fine. 0:17:13.380 --> 0:17:15.480 A lot less discussion on oil than I would have 0:17:15.500 --> 0:17:17.420 thought of for the second point. But he did say 0:17:17.859 --> 0:17:19.700 oil's up and we need to take note of that. 0:17:20.070 --> 0:17:22.420 And I think that's also, to Mike McKee's comments a 0:17:22.430 --> 0:17:25.139 minute ago, that's also what they're going to be looking for. 0:17:25.480 --> 0:17:27.600 They talked a lot about it in prior meetings, again, 0:17:27.680 --> 0:17:30.480 less this time. But the third point I'd highlight is 0:17:30.520 --> 0:17:32.939 I think the most important thing that we took out 0:17:32.960 --> 0:17:36.060 of this discussion and the Q & A was a 0:17:36.359 --> 0:17:39.350