WEBVTT - Fed Leaves Main Rate Unchanged, Saying Policy Is Appropriate 0:00:00.440 --> 0:00:02.960 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.040 --> 0:00:05.480 Jason Kelly. We're here every day bringing you the latest 0:00:05.519 --> 0:00:09.800 news from the world's of business and finance, plus technology, politics, economics, 0:00:09.880 --> 0:00:13.480 all harnessing the power of Bloomberg Business Week reporters and editors, 0:00:13.480 --> 0:00:16.639 not to mention our hundred journalists and analysts more than 0:00:16.680 --> 0:00:19.280 a hundred and twenty countries. You can download Bloomberg Business 0:00:19.320 --> 0:00:22.200 Week on iTunes, SoundCloud, or Bloomberg dot Com. You can 0:00:22.200 --> 0:00:24.520 also listen to our radio show weekdays at two pm 0:00:24.520 --> 0:00:30.120 Eastern only on Bloomberg Radio. Bloomberg Jersenys Week with Carol 0:00:30.160 --> 0:00:37.599 Masser and Jason Kelly on Bloomberg Radio Live from the 0:00:37.760 --> 0:00:40.880 Miami Convention Center. We are live on Radio Row Carol 0:00:40.880 --> 0:00:42.760 Master along with my co host Jason Kelly on this 0:00:42.880 --> 0:00:47.000 FED decision day and of course awaiting that latest FED decision. 0:00:47.080 --> 0:00:50.240 And the FED decision is out as expected, though leaving 0:00:50.240 --> 0:00:55.760 the benchmark rate unchanged, says policy is appropriate. They are 0:00:55.800 --> 0:01:00.720 lifting the ioe er rate five basis points and we'll 0:01:00.760 --> 0:01:05.080 be looking at that reverse repo to one point five percent. 0:01:05.280 --> 0:01:08.920 The FED extending REPO operations at least through April. That 0:01:09.000 --> 0:01:11.200 is one thing that Wall Street has been very closely watching, 0:01:11.280 --> 0:01:12.720 all right, and I'm just taking a quick look in 0:01:12.800 --> 0:01:16.440 terms of market reaction. Looks like equities are certainly pretty 0:01:16.520 --> 0:01:19.240 much so far staying pat uh in terms of where 0:01:19.240 --> 0:01:21.760 they were prior to the release of that information. And 0:01:21.800 --> 0:01:24.000 I'm just checking on that tenure uh it two is 0:01:24.040 --> 0:01:26.039 pretty much staying where it is, so we're not seeing 0:01:26.080 --> 0:01:28.760 too much reaction. I think widely expected what we were 0:01:28.800 --> 0:01:31.600 going to get from the Fed today in this first 0:01:31.640 --> 0:01:34.560 meeting of twenty but nonetheless at press conference will be 0:01:34.640 --> 0:01:36.760 very key in terms of predicting a little bit of 0:01:36.760 --> 0:01:38.880 outlook and what he has to say about some of 0:01:38.880 --> 0:01:41.800 the big factors are out there, including the virus. Absolutely, 0:01:41.840 --> 0:01:44.440 we're going to break that down what the statement has 0:01:44.480 --> 0:01:47.160 We're gonna hear from j Poll in just about half 0:01:47.200 --> 0:01:49.240 an hour. But before we get to that end to 0:01:49.320 --> 0:01:51.640 our team's analysis, let's get to Charlie Pett back into 0:01:51.680 --> 0:01:53.920 your k Charlie, thank you very much, and good afternoon, 0:01:54.000 --> 0:01:56.480 Happy FED Wednesday. With the DAL, the SMP and NED 0:01:56.560 --> 0:01:59.800 stack all higher. Right now, we are seeing the tenure 0:01:59.880 --> 0:02:03.440 up thirteen thirty seconds yield there one point six o percent. 0:02:03.760 --> 0:02:06.000 We've got the SMP higher by eleven again. There are 0:02:06.120 --> 0:02:08.679 four tenths of one percent thirty two eighties seven right now. 0:02:08.880 --> 0:02:11.320 The down pushing higher by a hundred and thirty one points, 0:02:11.360 --> 0:02:14.239 up five tenths and one percent. Navstak is up thirty 0:02:14.240 --> 0:02:16.600 eight points again. There are four tenths of one percent. 0:02:16.880 --> 0:02:19.800 Gold up three tenths now fifteen seventy one the ounce 0:02:20.000 --> 0:02:22.679 crude oil West Texas Intermedia down thirty five cents to 0:02:22.720 --> 0:02:25.240 barrel Trump. There of seven tenths of one percent in 0:02:25.320 --> 0:02:27.880 addition to the FED. The other big story today has 0:02:27.919 --> 0:02:31.520 to be earnings and earnings reactions. Lots coming out after 0:02:31.560 --> 0:02:34.440 the bell. Facebook will be among them, along with Tesla 0:02:34.520 --> 0:02:37.560 and Microsoft. Apple shares climbing to a record after last 0:02:37.600 --> 0:02:39.960 night's report up by three percent. A m D the 0:02:39.960 --> 0:02:43.640 other direction down by seven percent. General Electric the major 0:02:43.720 --> 0:02:46.800 standout today up by ten percent. Recapping. We've got the 0:02:46.800 --> 0:02:49.960 tenure up twelve thirty seconds yield one point six one percent. 0:02:50.320 --> 0:02:52.919 SMP up eleven again, there are four tenths of one percent. 0:02:53.000 --> 0:02:56.640 I'm Charlie Pellett's that is a Bloomberg Business Flash. You're 0:02:56.680 --> 0:03:00.440 listening to Bloomberg Business Week with Carol Messer and Jason 0:03:00.520 --> 0:03:03.400 Kelly on Bloomberg Radio. Do you want to get more 0:03:03.400 --> 0:03:05.839 reaction to today's FED decision? This is a big deal, 0:03:05.919 --> 0:03:10.399 first meeting of the year on while it was pretty predicted, um, 0:03:10.440 --> 0:03:15.200 fairly well, really well by economists and folks watching this decision. 0:03:15.480 --> 0:03:17.440 We still have to wait for that live press conference 0:03:17.440 --> 0:03:18.960 that's gonna happen at the bottom of the hour with 0:03:19.200 --> 0:03:21.200 j Pell c s Yankees with US back with US 0:03:21.280 --> 0:03:25.760 Chief Economic Advisory UM kill Point. He is a former 0:03:25.880 --> 0:03:28.400 US Treasuring and White House National Security Council staff member 0:03:28.440 --> 0:03:31.840 based in Washington. He's in our Bloomberg Interactive Broker studio 0:03:31.880 --> 0:03:34.160 back in New York. Also with US is Frances Donald, 0:03:34.520 --> 0:03:37.400 chief economist, head of macro economic strategy at Manual Life 0:03:37.400 --> 0:03:39.920 Asset Management. On the phone from Toronto. Steve, let's start 0:03:39.960 --> 0:03:42.360 with you, so nice to have you back with US. UM. 0:03:42.400 --> 0:03:45.240 You know, we all pretty much called this one fairly well. 0:03:45.360 --> 0:03:48.600 What's important about this, this meeting, this decision so far, 0:03:48.760 --> 0:03:52.640 and what's to potentially come from j Powell? Well, the 0:03:52.640 --> 0:03:56.440 meeting came off as expected, as you said, no big surprises. 0:03:57.080 --> 0:04:02.840 Everything was anticipated. H think that the biggest challenges they 0:04:02.840 --> 0:04:07.080 see the FED right now, are this uh um quantitative 0:04:07.120 --> 0:04:10.680 easy which they don't describe as quantitative easy, adding to 0:04:10.720 --> 0:04:14.200 their balance sheet to deal with the refail market problem. Uh. 0:04:14.240 --> 0:04:19.320 They've telegraphed that that'll end after tax season in April. 0:04:19.960 --> 0:04:23.440 But I think the challenge is going to be while 0:04:23.480 --> 0:04:25.560 they don't see it as quantitative easy, and they can 0:04:25.600 --> 0:04:30.640 explain why the market season is quantitative easy, and when 0:04:30.680 --> 0:04:33.800 it stops, how they explain it. It's gonna be very, 0:04:33.880 --> 0:04:38.120 very important so as not to leave markets spook the 0:04:38.120 --> 0:04:41.599 way we saw at the end of two thousand and 0:04:41.640 --> 0:04:46.279 eighteen right well, and for instance down we remember that 0:04:46.400 --> 0:04:49.919 all too well. That really for that first period in 0:04:50.440 --> 0:04:53.599 Chipell's tenure, it felt like the market was cool with 0:04:53.680 --> 0:04:57.520 the statement, and then he opened his mouth and investors started, 0:04:57.920 --> 0:05:00.720 uh selling off. He's learned a lot about communication. I 0:05:00.800 --> 0:05:03.400 think it's fair to say, but what do you read 0:05:03.640 --> 0:05:05.840 in the statement and what do you need to hear 0:05:06.320 --> 0:05:09.240 when we do hear from chair Powle it a bit well, 0:05:09.279 --> 0:05:11.120 I think in terms of what do you analysis today, 0:05:11.400 --> 0:05:15.240 I'm sorry, I was going to go ahead, Francis from 0:05:15.279 --> 0:05:18.039 the statement. The message from the statement is pretty clear, 0:05:18.120 --> 0:05:21.680 which is that cheer Powell isn't blinking. He's not blinking 0:05:21.800 --> 0:05:26.240 over coronavirus. He's not vocal blinking on market based in place. 0:05:26.279 --> 0:05:31.440 He's guys falling, falling every little in the statement, he's 0:05:31.440 --> 0:05:34.400 only made two slow changes to the language. If we're 0:05:34.400 --> 0:05:37.600 gonna get any form of debbish or pocket plant, it's 0:05:37.640 --> 0:05:40.000 going to come in the press conference. But my sense 0:05:40.080 --> 0:05:42.240 is if they wanted to send a message that the 0:05:42.240 --> 0:05:44.520 power put us back on, there would have been more 0:05:44.560 --> 0:05:46.880 to digest for the statement, and there just isn't. So 0:05:47.200 --> 0:05:49.400 if we head into that press conference and we don't think, 0:05:49.760 --> 0:05:53.159 not my senses, that equity markets, they might be a 0:05:53.200 --> 0:05:57.360 little spirits for lack of a better term. Steve, come 0:05:57.360 --> 0:06:02.080 on in honest, Well, I've Ruth Francis. Uh uh. They're 0:06:02.200 --> 0:06:04.240 very careful in the statement. There was really nothing that 0:06:04.320 --> 0:06:06.800 they needed to say. The you know, the the slight 0:06:07.200 --> 0:06:12.200 tick up and interest on access reserves was expected not 0:06:12.279 --> 0:06:15.320 to have done. It would have probably just cause some 0:06:15.400 --> 0:06:19.960 head scratching because everything is working so well right now. 0:06:20.560 --> 0:06:23.919 Probably the only irritant out there is is some recent 0:06:25.200 --> 0:06:28.039 comments by the President about why the Fed doesn't do 0:06:28.120 --> 0:06:32.320 more to to cut interest rates. But they're just going 0:06:32.400 --> 0:06:34.280 to be steady about that. They don't have to do 0:06:34.320 --> 0:06:39.600 anything about that. What they do need to be thinking about, though, is, um, 0:06:40.240 --> 0:06:45.360 what are some additional recession fighting tools that they need 0:06:45.400 --> 0:06:49.880 to be developing internally and thinking about so that when 0:06:49.920 --> 0:06:52.360 we come on down the line and then they haven't 0:06:52.360 --> 0:06:54.680 cut rates, or even if they have cut them a 0:06:54.720 --> 0:06:57.880 little bit more than they have so far, what's going 0:06:57.920 --> 0:07:00.520 to be in their tool kit to deal with that? 0:07:02.000 --> 0:07:03.599 You know, you know, I'm Steve. I want to ask you. 0:07:03.600 --> 0:07:06.279 I I'm looking at our FED live blog and everybody 0:07:06.360 --> 0:07:08.560 from the you know, our Bloomberg news team and economics 0:07:08.600 --> 0:07:11.480 team kind of weighing in, and um, they pointed out 0:07:11.480 --> 0:07:14.160 one of our individuals, UH, the FED as marked consumers 0:07:14.200 --> 0:07:16.600 spending to market as the only real change in the statement. 0:07:17.120 --> 0:07:19.680 And here's why it's maybe worth keeping a watch on it. 0:07:19.760 --> 0:07:22.119 The annual growth in the national paychecks that we're talking about, 0:07:22.120 --> 0:07:25.320 the twelve month change an average weekly hours average weekly 0:07:25.360 --> 0:07:28.280 pay payrolls has decelerated to three point a percent, its 0:07:28.320 --> 0:07:32.720 slowest rate of growth since January. UM. Consumer, we talk 0:07:32.800 --> 0:07:35.360 about it, you know, at nauseum about how important it 0:07:35.400 --> 0:07:39.320 is to the economy obviously, UH, and keeping things going. 0:07:40.080 --> 0:07:41.920 What are you keeping an eye on for the consumer? 0:07:41.920 --> 0:07:44.240 Anything out there that makes you a little bit nervous 0:07:44.240 --> 0:07:45.680 about whether or not the consumer is going to be 0:07:45.720 --> 0:07:48.360 able to keep up spending well. I pay a lot 0:07:48.360 --> 0:07:52.080 of attention to consumer sentiment to the University of Michigan 0:07:52.120 --> 0:07:56.080 study and the Conference Board Consumer Confidence and UH. And 0:07:56.200 --> 0:08:00.000 right now consumer confidence and consumer sentiment is high UH 0:08:00.040 --> 0:08:02.640 and it seems to be staying there. The only the 0:08:02.720 --> 0:08:06.640 only slight ding in that is that the release in 0:08:06.720 --> 0:08:11.200 January from my University of Michigan showed that the forward 0:08:11.240 --> 0:08:16.600 looking outlook in terms of consumer sentiment is off a 0:08:16.640 --> 0:08:22.000 little bit. So long as they remain confident and feel safe, 0:08:22.080 --> 0:08:26.440 they will continue to spend. What we're also hoping for 0:08:26.560 --> 0:08:29.720 is that we're going to see some return of business investment, 0:08:29.960 --> 0:08:34.400 and there are signs that that's starting to appear. I 0:08:34.400 --> 0:08:38.160 do want to bring some headlines to our audience about LIFT. 0:08:38.440 --> 0:08:40.400 There have been some reports earlier from The New York 0:08:40.440 --> 0:08:42.839 Times that LIFT was planning some job cuts as part 0:08:42.840 --> 0:08:46.880 of a broader restructuring, announcing this ahead of earnings. Bloomberg 0:08:46.920 --> 0:08:50.720 now reporting that LIFT is going to cut about ninety employees, 0:08:50.760 --> 0:08:54.439 representing about one point six percent of its staff. It 0:08:54.559 --> 0:08:57.640 says it's cutting staff also at the same time planning 0:08:57.679 --> 0:09:01.600 to hire more than a thousand people in the stock 0:09:02.120 --> 0:09:05.320 had been down almost four percent earlier in the session, 0:09:05.800 --> 0:09:11.120 now still down, but a little less than sure dipping, 0:09:11.120 --> 0:09:13.600 I would say on those headlines, yeah, for sure. And uh, 0:09:13.600 --> 0:09:16.559 you know, this is a company like it's chief rival, 0:09:17.360 --> 0:09:21.760 rival rival Uber Uber. Can't say rival or Uber, Uh, 0:09:21.840 --> 0:09:25.000 it's chief rival Uber that's trying to figure out, you know, 0:09:25.040 --> 0:09:27.599 how to make money essentially. That seems to be the 0:09:27.760 --> 0:09:30.160 big question. Yeah. And I think what's interesting to Steve 0:09:30.240 --> 0:09:32.360 and and you know, this is something that we've been 0:09:32.360 --> 0:09:34.200 talking a lot about. You know, whether it's a FED 0:09:34.240 --> 0:09:38.320 decision day, whether it's trade tensions. Uh, you know, companies 0:09:38.360 --> 0:09:41.120 are making decisions, whether it's to cut workers spend money differently. 0:09:41.320 --> 0:09:44.200 I mean, do you feel like companies there's enough out 0:09:44.240 --> 0:09:47.120 for the out there for them to increase cap spending, 0:09:47.160 --> 0:09:50.760 to be more confident about the outlook. I think that 0:09:50.800 --> 0:09:54.640 there is a in many of the sectors. Interestingly, what 0:09:54.760 --> 0:09:59.120 we haven't seen much in the headlines uh lately is 0:09:59.400 --> 0:10:03.480 all of the tail um businesses that are closing up 0:10:03.480 --> 0:10:07.960 stores and laying off thousands and employees. Um, you know, 0:10:08.120 --> 0:10:14.360 it's it's headlines of job cuts that the ding consumer 0:10:14.440 --> 0:10:18.079 confidence directly, it's a phenomenon if someone else is losing 0:10:18.120 --> 0:10:22.160 their job, how safe is my job? And of course, 0:10:22.200 --> 0:10:25.040 I mean it's understandable. In the retail space, there's there's 0:10:25.080 --> 0:10:29.760 been a shift from in store consumer spending to online 0:10:29.800 --> 0:10:34.320 consumer spending, and we've watched that evolve. Uh, But but 0:10:34.400 --> 0:10:38.440 there is that vulnerability in two consumer confidence in in 0:10:38.520 --> 0:10:42.120 these job shifts, as the new jobs are not telegraphed 0:10:42.120 --> 0:10:45.080 as much as uh, the jobs that are lost when 0:10:45.360 --> 0:10:51.400 when these stores and shops close up. And so for instance, 0:10:51.440 --> 0:10:54.760 Donald chief economists over at Manual Life Investment Management come 0:10:54.800 --> 0:10:56.880 on back in. I do want to ask, you know, 0:10:56.960 --> 0:10:59.240 sort of given what we've been talking about with the FED, 0:10:59.280 --> 0:11:01.440 given what we've talked about, what we know so far 0:11:01.600 --> 0:11:06.240 about the coronavirus, what's an investor to do in this 0:11:06.280 --> 0:11:08.800 type of market? How do you synthesize all of this 0:11:08.960 --> 0:11:12.200 into a strategy at this moment, Well, you have no 0:11:12.320 --> 0:11:15.520 choice but to accept that there's more uncertainty that if 0:11:15.520 --> 0:11:18.679 you were counting on a China rebound, it might be delayed, 0:11:18.760 --> 0:11:21.640 and you have to widen your confidence intervals, and this 0:11:21.679 --> 0:11:23.280 is exactly what the FET is going to have to 0:11:23.320 --> 0:11:25.320 do and all central banks will have to do, is say, 0:11:25.520 --> 0:11:27.760 we just need to be a little bit more cautious 0:11:27.960 --> 0:11:30.320 as we assess the damage as it heads out. But 0:11:30.440 --> 0:11:32.719 most pandemics have showed us to turn out to be 0:11:32.760 --> 0:11:35.000 a buying opportunity. We just have to get a sense 0:11:35.000 --> 0:11:37.480 of when that might be. My bigger concern is that 0:11:37.520 --> 0:11:40.000 this is landing in a period where I suspect we're 0:11:40.040 --> 0:11:42.480 still going to have weak group growth to one being 0:11:42.480 --> 0:11:45.840 a problematic a quarter for growth, it might compound some 0:11:45.880 --> 0:11:48.320 of that weakness and make it difficult to differentiate between 0:11:48.559 --> 0:11:51.200 what is true cyclical weakness and what is this virus 0:11:51.200 --> 0:11:55.800 compounding on top of it. All Right, so of course, 0:11:55.880 --> 0:11:57.520 let's just remind everybody at the bottom of the how 0:11:57.520 --> 0:12:00.120 are we will hear from FIT Chairman J Powell is 0:12:00.160 --> 0:12:03.079 regular press conference coming after the meeting. We will take 0:12:03.120 --> 0:12:06.640 you live there to the FED in Washington to listen 0:12:06.679 --> 0:12:09.160 to that. So, Steve, I think I ask you this 0:12:09.480 --> 0:12:11.320 every time we're together, But what would you want to 0:12:11.320 --> 0:12:15.520 ask J Powell right now? I really want to ask 0:12:15.600 --> 0:12:19.120 him what his biggest concern is in going forward? And 0:12:19.160 --> 0:12:22.160 developing new tools and having to address the day of 0:12:22.200 --> 0:12:27.040 reckoning with shutting off the money spikett that they've had 0:12:27.040 --> 0:12:30.559 on since September. You know, four hundred four hundred billion 0:12:30.600 --> 0:12:33.520 dollars in uh in new liquidity is a lot of 0:12:33.559 --> 0:12:36.960 money in the markets have come accustomed to it. And 0:12:37.679 --> 0:12:41.520 how would he help us understand how that's going to 0:12:41.640 --> 0:12:44.960 get tapered in a way that doesn't really change the 0:12:44.960 --> 0:12:48.920 way things work in the markets. And Francis, let's put 0:12:48.960 --> 0:12:50.600 that question to you. What would you want to ask 0:12:50.679 --> 0:12:54.040 J Powell today? I'd like to know how Chair Powell 0:12:54.120 --> 0:12:56.960 is thinking about inflationary pressure. As we've had a pullback 0:12:56.960 --> 0:13:00.960 in oil market based inflation expectations are lower, um, you know, 0:13:01.000 --> 0:13:04.440 average hourly earnings have pulled back. These are all deflationary pressures, 0:13:04.440 --> 0:13:06.680 and yet the Fed doesn't seem to be too worried 0:13:06.679 --> 0:13:08.640 about them. In the statement, I'd like to get a 0:13:08.640 --> 0:13:10.959 sense of how much their view on that outlook has 0:13:11.040 --> 0:13:13.720 changed and what they're gonna do if these problems worsened 0:13:16.360 --> 0:13:22.120 and and those problems worsening again, like what I guess, 0:13:22.160 --> 0:13:24.600 for instance, I'm trying to understand and we've talked about 0:13:24.640 --> 0:13:27.160 this a little bit, but this virus, we're still trying 0:13:27.160 --> 0:13:29.440 to get our our hands around it and our arms 0:13:29.440 --> 0:13:33.120 around it. Especially from an investors perspective, when do you 0:13:33.240 --> 0:13:38.360 act on the fear or the worry? At this point, 0:13:39.240 --> 0:13:41.559 I think markets have already acted on the fear and 0:13:41.600 --> 0:13:44.200 the worry. They've already placed in a probability of the 0:13:44.240 --> 0:13:46.679 worst outcome. That's what markets do, they say. I think 0:13:46.679 --> 0:13:49.120 there's an ex percentage chance that this turns into something 0:13:49.160 --> 0:13:51.640 worse than it is now. We've seen that in the market. 0:13:51.880 --> 0:13:54.160 The bigger question for me is when do I buy again? 0:13:54.400 --> 0:13:56.680 And if Powell comes out in this press conference and says, 0:13:56.880 --> 0:13:59.240 you know what, the door is open. If this produces 0:13:59.280 --> 0:14:01.680 more damage, then you know we will pull the trigger, 0:14:01.960 --> 0:14:04.240 that to me will be an important buying opportunity, just 0:14:04.280 --> 0:14:08.079 like it was in the other thing. I want to 0:14:08.080 --> 0:14:10.800 ask you guys, because I feel like this is another thing. Um. 0:14:10.800 --> 0:14:13.160 When we're hitting the tenure anniversary this past summer of 0:14:13.200 --> 0:14:16.600 the longest economic expansion on record, I think we're like, Okay, 0:14:16.600 --> 0:14:19.280 that's it. It's gotta you know, something's got to happen. Steve. 0:14:19.320 --> 0:14:21.560 When you look at this economy, is there more momentum 0:14:21.560 --> 0:14:24.160 to kind of keep it going like we have seen 0:14:24.200 --> 0:14:28.240 the last few years. Well, the momentum seems to be growing, 0:14:28.920 --> 0:14:32.800 and there's an expectation that could be even better than 0:14:34.680 --> 0:14:36.800 obviously there's a lot of things that can affect that 0:14:36.840 --> 0:14:42.800 along the way, but very you know, you look just 0:14:42.840 --> 0:14:46.600 across the sectors and economic growth has been robust. Employment 0:14:46.600 --> 0:14:52.400 continues to grow, housing starts in December year over year, 0:14:53.080 --> 0:14:57.120 and another six percent in building permits. Uh uh that 0:14:57.120 --> 0:15:01.520 that continues to be strong, consumer confident, consumer sentiment continues 0:15:01.560 --> 0:15:05.600 to be strong, Small business optimism off a little bit, 0:15:05.640 --> 0:15:09.560 but continues to be strong. And so when we see 0:15:09.600 --> 0:15:12.680 what happens with business fixed investment, I think that will 0:15:12.720 --> 0:15:15.560 tell us a lot. But if but if that starts 0:15:15.560 --> 0:15:18.760 to move forward, that that would be a very good 0:15:18.760 --> 0:15:21.960 indicator as to where we might end up with a 0:15:22.080 --> 0:15:24.840 level of economic growth, probably somewhere in the range of 0:15:25.160 --> 0:15:29.760 two to two and a quarter percent in right, Just 0:15:29.960 --> 0:15:31.480 kind of does that make it more of the same. 0:15:31.480 --> 0:15:34.200 Francis you agree with what Steve is Steve's assessment that 0:15:34.200 --> 0:15:38.160 we could keep this economic expansion still moving along. Yeah, 0:15:38.200 --> 0:15:41.280 my senses, we've actually had three almost recessions in the 0:15:41.360 --> 0:15:44.040 cycle already and had we not seen fed cuts Q 0:15:44.320 --> 0:15:46.720 four this year. In Q one could have been something 0:15:46.720 --> 0:15:49.200 that looked much more like a recession. So now what 0:15:49.240 --> 0:15:51.320 we're seeing in a re acceleration, that sort of V 0:15:51.440 --> 0:15:55.000 shaped recovery that we see after these weak economic times, 0:15:55.080 --> 0:15:57.840 and that can persist in the second half of But 0:15:57.880 --> 0:16:01.240 there are still some missing ingredients that that a robust recovery. 0:16:01.480 --> 0:16:04.560 And the biggest one is where is China stimulus. It's 0:16:04.640 --> 0:16:07.560 not as powerful, it's not as national as it used 0:16:07.600 --> 0:16:10.520 to be. Um, you know, we're still looking at some 0:16:10.600 --> 0:16:13.880 elevated global debt levels that are relevant to this. I'd 0:16:13.920 --> 0:16:16.440 like to see a weaker US dollar help contribute to 0:16:16.480 --> 0:16:19.320 that rebound. Uh. You know, there's some components here. They 0:16:19.320 --> 0:16:21.800 are not quite like those past recoveries. So can we 0:16:21.840 --> 0:16:24.880 moddle through, absolutely, but we've still got to get through 0:16:24.920 --> 0:16:27.160 a rough Q one. Let's not discount the fact that 0:16:27.200 --> 0:16:31.360 global growth hasn't yet turned. Global trade still falling, world 0:16:31.360 --> 0:16:35.040 industrial productions still falling, real car loadings still falling. We're 0:16:35.040 --> 0:16:38.440 not out of the woods yet. Alright, Gonna leave it 0:16:38.480 --> 0:16:41.160 on that note. Thank you so much. I really appreciate 0:16:41.160 --> 0:16:44.680 both of yours insights and analysis. Steve Skanky, chief economic 0:16:44.720 --> 0:16:47.800 advisor at Keel Point. Back in our Bloomberg Interactive Broker studio. 0:16:47.800 --> 0:16:50.840 Francis Donald, chief economists and head of macro economic Strategy 0:16:51.120 --> 0:16:55.880 at Manulife Facet Management on the phone from Toronto. You're 0:16:55.920 --> 0:16:59.640 listening to Bloomberg Business Week with Carol Messer and Jason 0:16:59.720 --> 0:17:03.120 Kelly on Bloomberg Radio. Let's break it down with our 0:17:03.160 --> 0:17:05.920 team back in New York. Bloomberg News Bounder reporter Alex 0:17:05.960 --> 0:17:09.720 Harris is there and Josh Wright, chief economists at I Simms. 0:17:09.880 --> 0:17:12.480 They're gonna help us recap it all. Josh, I want 0:17:12.520 --> 0:17:16.280 to start with you. What jumped out at you, if anything, 0:17:16.520 --> 0:17:19.160 from what you heard from j Pow. This is really 0:17:19.400 --> 0:17:21.760 a press conference for the nerds, and I think of 0:17:21.800 --> 0:17:24.440 it as this is the education of a fed him. 0:17:25.640 --> 0:17:28.679 This ones for the nerds. What a journey this has been. 0:17:28.720 --> 0:17:30.640 What a journey? Huh? It used to be? These are 0:17:30.640 --> 0:17:33.199 really short press conferences, and he was really candid and 0:17:33.320 --> 0:17:35.520 somewhat off the cuff, and this time it was longer, 0:17:35.560 --> 0:17:38.439 it was much more scripted. It was very disciplined. He 0:17:38.560 --> 0:17:41.000 was on message, and you can see very clearly that 0:17:41.119 --> 0:17:43.600 he's prepared to talk about the process for unwinding what 0:17:43.600 --> 0:17:45.520 they've been doing with the balance sheet. But he was 0:17:45.560 --> 0:17:49.680 not going to be taken off course, not for one minute. Yeah, 0:17:49.720 --> 0:17:51.280 it doesn't feel like very much like he had a 0:17:51.280 --> 0:17:54.280 fail a plan and really did stick to it. I agree, Alex. 0:17:54.280 --> 0:17:56.359 What do you think besides I know you laughed big 0:17:56.359 --> 0:18:02.040 time there a h Josh, and we prefer front end wonks, 0:18:02.359 --> 0:18:08.280 not nerds. But now there there was really it was 0:18:08.600 --> 0:18:11.439 there was a feast of information, I think, on on 0:18:11.520 --> 0:18:13.760 the front end and their plan. And you know, there 0:18:13.840 --> 0:18:16.840 was a bit in the implementation note, which is you know, 0:18:16.960 --> 0:18:19.359 the FED issues their statement at two o'clock and then 0:18:19.400 --> 0:18:22.040 they put in a note with all their processes and 0:18:22.400 --> 0:18:24.479 none of this was really in there except for the 0:18:24.520 --> 0:18:29.000 fact that we're extending the repo operations, you know, into April. 0:18:29.400 --> 0:18:31.440 And so for him to come out and say, well, 0:18:31.440 --> 0:18:33.800 we're going to continue these repo operations, but you're going 0:18:33.840 --> 0:18:36.439 to see us adjust the quantity and adjust the price. 0:18:36.760 --> 0:18:39.119 You know, that was new and that was more for 0:18:39.200 --> 0:18:40.879 the market. And I think it takes a lot of 0:18:41.080 --> 0:18:43.600 surprise out of the next few months when we get 0:18:43.640 --> 0:18:47.040 these repo schedules. You know, every ninth business day of 0:18:47.080 --> 0:18:49.280 the month. And then the other thing is his his 0:18:49.320 --> 0:18:51.600 comments on the bill purchases and the fact that they're 0:18:51.600 --> 0:18:54.679 going to taper those before outright ending them. You know, 0:18:54.760 --> 0:18:57.159 that was another surprise, you know, I think it was 0:18:57.160 --> 0:18:59.560 funny and we were laughing here in the studio about 0:18:59.840 --> 0:19:02.760 the number of times people ask variation on the question 0:19:02.760 --> 0:19:05.719 of what is your definition of ample? And like Joshua 0:19:05.840 --> 0:19:08.760 pointed out, they did not waver from that. He was saying, 0:19:08.800 --> 0:19:12.119 the minimum is one and a half trillion dollars of reserves. 0:19:12.160 --> 0:19:14.440 But I think it also tells you that there's still 0:19:14.480 --> 0:19:17.320 a long waves from even hitting that level and feeling 0:19:17.359 --> 0:19:21.160 really comfortable because there's so much variation and those number 0:19:21.359 --> 0:19:24.240 the level reserves can vacillate so much, especially in April 0:19:24.280 --> 0:19:27.960 with the taxiason upon us speaking of not being happy 0:19:28.400 --> 0:19:31.800 the FED chairman saying not comfortable with inflation persistently below 0:19:31.840 --> 0:19:34.320 two percent, expect inflation to move closer to two percent. 0:19:34.800 --> 0:19:37.200 Josh if I had a nickel for every time I 0:19:37.480 --> 0:19:38.879 heard someone say we're going to get there, were going 0:19:38.920 --> 0:19:41.240 to get there. Um, I don't know. You could be 0:19:41.240 --> 0:19:43.320 in the repo market. I could be in the reput market. 0:19:43.680 --> 0:19:55.360 I could own an NFL team playing. But I mean, 0:19:55.520 --> 0:19:58.000 what about inflation? I mean, I don't know. It does 0:19:58.000 --> 0:20:00.760 feel like something is different, U. I think we might 0:20:00.800 --> 0:20:02.960 say that we're at the desperation point here. You know, 0:20:03.040 --> 0:20:05.639 the FED does not change its inflation framework words policy 0:20:05.680 --> 0:20:07.840 framework lately, and as you can see, even once they've 0:20:07.840 --> 0:20:10.639 announced this process however many months ago, it's still going 0:20:10.680 --> 0:20:12.560 to be another six months and they're not ready to 0:20:12.560 --> 0:20:15.560 talk about it or give any overt hints, although there 0:20:15.600 --> 0:20:18.320 are some signs based on some of the informal comments 0:20:18.320 --> 0:20:21.040 and some interviews you've heard recently, Basically the FED is 0:20:21.080 --> 0:20:23.800 saying we're not getting there. We don't The tools that 0:20:23.840 --> 0:20:26.440 we've been trying to apply before don't seem to be enough. 0:20:26.920 --> 0:20:29.000 Although they don't want to say that explicitly, the fact 0:20:29.040 --> 0:20:30.479 that they want to roll out a new kind of 0:20:30.480 --> 0:20:32.760 tool for a new kind of approach suggests that they 0:20:32.760 --> 0:20:34.680 see a lack and they want to close that down. 0:20:37.640 --> 0:20:40.000 And so, Alex, let's chalk a little bit about the 0:20:40.560 --> 0:20:45.199 REPO mention and everything that's been going on. We know 0:20:45.280 --> 0:20:47.359 you love to talk about it. So what does it 0:20:47.400 --> 0:20:49.600 mean for the bond market going forward? That this is 0:20:49.600 --> 0:20:51.639 a friend of mine? Oh, this is going to be 0:20:51.720 --> 0:20:54.320 a very boring repo market for the time being, and 0:20:54.359 --> 0:20:57.000 you've seen it already. They've really kind of held rates 0:20:57.080 --> 0:20:59.200 well but in a good way, right. I mean that's 0:20:59.320 --> 0:21:01.520 that you kind of want a boring repo market, right. 0:21:02.440 --> 0:21:04.280 And this is where this is where it sort of 0:21:04.320 --> 0:21:07.159 disagree with with Jerome Powell saying on behalf of the 0:21:07.160 --> 0:21:10.200 Fed where we want volatility, like volatility in this market 0:21:10.280 --> 0:21:14.080 is normal. Well, if volatilities normal, start rolling back those 0:21:14.080 --> 0:21:17.320 repo operations sooner rather than later. What are you afraid of? 0:21:17.520 --> 0:21:21.240 Because the other issue is this is remember the the 0:21:21.280 --> 0:21:24.879 benchmark of choice to replace libor as as directed by 0:21:24.920 --> 0:21:29.400 the official sector, is the secured overnight financing rate that's 0:21:29.400 --> 0:21:34.240 repot back so first, and if that remains steady and 0:21:34.280 --> 0:21:38.240 there's no volatility there, if you're an investor, like a 0:21:38.280 --> 0:21:40.840