WEBVTT - Instant Reaction: Jay Powell on the Fed Decision 0:00:02.480 --> 0:00:07.000 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.080 --> 0:00:10.600 The Chairman of the Federal Reserve his words, this was 0:00:10.640 --> 0:00:12.280 one of the better meetings that I can recall. 0:00:12.360 --> 0:00:13.560 Maybe you had to be there. 0:00:13.760 --> 0:00:17.080 In the equity market, we look like this equity's shaping up, 0:00:17.079 --> 0:00:19.040 as follows, down by about two tens of one percent 0:00:19.079 --> 0:00:21.000 on the S and P five hundred on the Nasdaq, 0:00:21.000 --> 0:00:22.680 positive by zero point zero four. 0:00:22.720 --> 0:00:23.680 The game's fading. 0:00:23.880 --> 0:00:26.040 If you check out the bond market two year, ten year, 0:00:26.079 --> 0:00:28.760 thirty year, and locking this move right here yields up 0:00:28.760 --> 0:00:30.840 at the front end of the curve by six basis 0:00:30.840 --> 0:00:33.600 points the two year three ninety three, and when you 0:00:33.640 --> 0:00:36.879 push that through foreign exchange, you get some real dollar strength. 0:00:37.120 --> 0:00:38.559 Euro dollar down to. 0:00:38.600 --> 0:00:42.199 One fourteen this afternoon and down by one four percentage point. Now, 0:00:42.200 --> 0:00:45.040 perhaps these market moves to have you more about positioning 0:00:45.080 --> 0:00:47.519 than it does about the Fed meeting itself. But there 0:00:47.640 --> 0:00:49.879 is one point attention that I think is very much 0:00:49.920 --> 0:00:52.840 worth exploring, and it's on the labor market. Governor Wallaer 0:00:52.920 --> 0:00:54.960 is making the point that this labor market is on 0:00:55.000 --> 0:00:57.920 the edge. Chairman Powell has a different view of things. 0:00:58.040 --> 0:00:58.680 Take a listen. 0:01:00.040 --> 0:01:02.600 If you look at the labor market what you see is, 0:01:03.240 --> 0:01:05.520 by many, many statistics, the labor market is kind of 0:01:05.520 --> 0:01:10.640 still in balance. It's things like quit's, you know, job 0:01:10.720 --> 0:01:14.760 openings and let alone the unemployment rate. They're all very 0:01:15.000 --> 0:01:17.200 by many measures, very similar to where they were a 0:01:17.280 --> 0:01:19.440 year ago. So you do not see weakening in the 0:01:19.520 --> 0:01:20.240 labor market. 0:01:20.520 --> 0:01:23.039 Two headlines crossing in the last forty five minutes. I 0:01:23.040 --> 0:01:26.720 think articulating the Federal Reserve chairs bias a clear bias 0:01:26.720 --> 0:01:29.520 to wait. One, the totality of the data show you've 0:01:29.560 --> 0:01:33.440 got a solid labor market, and two, inflation is further 0:01:33.480 --> 0:01:35.280 from our goal than employment. 0:01:35.440 --> 0:01:36.920 That's a chairman. It wants to wait. 0:01:36.959 --> 0:01:39.160 And that's the reason maybe why on the margins you 0:01:39.200 --> 0:01:42.320 saw yields rise as he spoke, and you saw stocks 0:01:42.400 --> 0:01:45.559 roll over. A very confusing statement, I want to say, 0:01:45.920 --> 0:01:49.400 I was trying to purse through exactly what he was saying. 0:01:49.600 --> 0:01:52.000 You don't see weakening in the labor market, but you 0:01:52.080 --> 0:01:55.840 do have downside risks. What are the downside risks? When 0:01:55.880 --> 0:01:57.800 do you start to see the materializing and what is 0:01:57.840 --> 0:02:02.720 the difference between growing downside risk and a market that 0:02:02.760 --> 0:02:04.640 clearly isn't weakening. In his view, Jah and I. 0:02:04.680 --> 0:02:07.400 Agree on the labor front. There's two Americas out there. 0:02:07.400 --> 0:02:10.760 One's Donald Trump's America, and you know, there's Jerome Powell's America. 0:02:10.840 --> 0:02:13.800 While he was warbling gaily, I went into the Bloomberg 0:02:13.840 --> 0:02:18.239 and looked at weeks unemployed back to nineteen sixty seven, 0:02:18.800 --> 0:02:22.800 past COVID passed a great financial crisis. Weeks unemployed in 0:02:22.840 --> 0:02:25.600 this country are back to a level of two thousand 0:02:25.639 --> 0:02:29.200 and nine, and that kind of pre crisis agony. There's 0:02:29.240 --> 0:02:32.200 two Americas out there, and these two people are talking 0:02:32.240 --> 0:02:34.359 to one part here and one part there. 0:02:34.440 --> 0:02:35.200 You mentioned the President. 0:02:35.280 --> 0:02:38.000 I think that's the second part attention, one within the Fed, 0:02:38.080 --> 0:02:40.680 the other outside of the Fed. There was a note 0:02:40.760 --> 0:02:43.080 from the Chairman of the Federal Reserve on government boring 0:02:43.120 --> 0:02:45.720 costs and how the Federal Reserve doesn't take notes of 0:02:45.760 --> 0:02:48.040 what it costs the government given where interest rates aund 0:02:48.120 --> 0:02:50.480 right now, that's one of the core arguments coming out 0:02:50.480 --> 0:02:52.240 of the White House to cut of interest rights. 0:02:52.320 --> 0:02:54.600 Yeah, and it's one that is falling on deaf years 0:02:54.720 --> 0:02:57.239 as it doesn't necessarily want to be seen as monetizing 0:02:57.240 --> 0:03:01.080 the debt, right that would cause some sort of inflation surge. Theoretically, 0:03:01.320 --> 0:03:04.520 in economics, there is this idea, if you have a 0:03:04.560 --> 0:03:07.560 central bank that essentially is printing money by lowering rates 0:03:07.600 --> 0:03:10.320 or artificially suppressing the cost of borrowing in order to 0:03:10.360 --> 0:03:13.359 foster more spending by the government, that that can lead 0:03:13.360 --> 0:03:15.799 to longer term inflation. He's pushing back against that. Does 0:03:15.840 --> 0:03:17.480 that raise the ire of the president? 0:03:17.560 --> 0:03:19.200 My mckaye was in the room. McKay is going to 0:03:19.200 --> 0:03:21.360 be with us in about five minutes time, so stemp 0:03:21.400 --> 0:03:22.919 by for that. I want to bring in the former 0:03:22.960 --> 0:03:25.800 New York Fed President Bill Duntley to join the conversation. 0:03:25.960 --> 0:03:28.799 Bill welcome to the programs. Is this a federal reserve 0:03:28.800 --> 0:03:30.560 that has the luxury of waiting? 0:03:31.760 --> 0:03:33.600 I think they have to wait because they're not really 0:03:33.639 --> 0:03:37.080 sure what's going to happen to the economy, both on 0:03:37.200 --> 0:03:40.120 the inflation side and the liver market side. And I 0:03:40.160 --> 0:03:42.720 think they have a reason to wait because, as Paul said, 0:03:42.760 --> 0:03:45.760 the unemployment rate hasn't changed. So essentially what's happened over 0:03:45.800 --> 0:03:49.600 the last six months is labor demand has slowed, but 0:03:49.760 --> 0:03:52.760 labor supply is also slowed because of immigration policy. And 0:03:52.920 --> 0:03:55.840 he was very explicit about that. He really said, focus 0:03:55.920 --> 0:03:58.080 on the unemployment rate. It's basically in the same place 0:03:58.120 --> 0:04:01.800 as less summer. So I think, you know, the message 0:04:01.800 --> 0:04:06.240 from this, you know press conference was very clear, we're 0:04:06.240 --> 0:04:10.240 not in a rush. He also mentioned multiple times it's 0:04:10.240 --> 0:04:13.040 going to take time to figure out what the effects 0:04:13.080 --> 0:04:15.280 of the terrorists are going to be. And he also 0:04:15.360 --> 0:04:17.560 made it very clear that what he's focused on is 0:04:17.600 --> 0:04:21.480 making sure that any rise in inflation doesn't become persistent. 0:04:21.680 --> 0:04:24.760 He really wants to keep inflation expectations in check, and 0:04:24.839 --> 0:04:27.000 one of the ways you do that is by being patient. 0:04:27.400 --> 0:04:30.080 Bill, how did you understand you don't see a weakening 0:04:30.120 --> 0:04:33.160 in the labor market, but you do have downside risks 0:04:33.279 --> 0:04:35.719 and those downside risks are growing. Can you put that 0:04:35.839 --> 0:04:38.240 together and translate it well? 0:04:38.279 --> 0:04:40.640 The way I would think about it is the payroll 0:04:40.680 --> 0:04:44.000 employment growth rate has slowed, okay, and so the keep 0:04:44.040 --> 0:04:46.880 slowing that eventually is going to be a problem. But 0:04:46.920 --> 0:04:49.480 what it hasn't happened is that labor market hasn't actually 0:04:49.480 --> 0:04:52.240 loosened up because the unplaying rates exactly where it was. 0:04:52.279 --> 0:04:54.800 So two things that have been happening together. Labor supply 0:04:54.880 --> 0:04:57.600 growth is coming down, labor demand growth is coming down. 0:04:57.880 --> 0:04:59.880 I think they're worried about the downside risk because they 0:04:59.880 --> 0:05:02.839 do see this decline in labor demand. But it's not 0:05:02.920 --> 0:05:06.120 a problem right now because the unemployment rate hasn't moved 0:05:06.320 --> 0:05:06.640 at all. 0:05:07.279 --> 0:05:10.120 Bill Dudley, Bob Michael go was on with JP Morgan 0:05:10.200 --> 0:05:13.240 and he floored me with an eighteen percent even twenty 0:05:13.279 --> 0:05:18.520 percent modeled tariff rate. The people that aren't that sophisticated, 0:05:18.520 --> 0:05:22.560 they're listening, they're watching, and they're going back the nineteen 0:05:23.040 --> 0:05:26.760 thirties with those kind of rates. Are we leading to 0:05:26.839 --> 0:05:29.600 an economy that has the kind of tensions we knew 0:05:29.960 --> 0:05:33.160 and the nineteen thirties where the have nots struggle even 0:05:33.200 --> 0:05:37.159 more with they're all in nineteen percent terriff. 0:05:36.920 --> 0:05:40.440 Right, Well, there's a big difference. In nineteen thirties. You 0:05:40.440 --> 0:05:43.040 have a depression and then you have the tariff wars. Right, 0:05:43.440 --> 0:05:46.960 this is the tariff wars, and the economy is actually doing okay. 0:05:47.360 --> 0:05:49.279 So I think you have to think of the depression 0:05:49.320 --> 0:05:52.520 as quite different because the exwood Holiac was a reaction 0:05:52.880 --> 0:05:55.520 to what was happening in the economy. I think it's 0:05:55.520 --> 0:05:57.600 actually a little bit worse in terms of the magnitude 0:05:57.600 --> 0:05:59.760 of the terror shock compared to the nineteen thirties because 0:05:59.800 --> 0:06:03.160 the share of imports of GDP was much lower than 0:06:03.200 --> 0:06:04.720 than it is now, so this is actually a more 0:06:04.760 --> 0:06:06.120 sizable shock. 0:06:06.480 --> 0:06:09.719 I'm fascinating to Bill, with your study of history, how 0:06:09.920 --> 0:06:15.279 our central bank should adapt to a blended nineteen percent tariff? 0:06:15.640 --> 0:06:18.880 Is there any template for where we're heading in twenty six? 0:06:19.240 --> 0:06:20.400 In twenty seven. 0:06:20.800 --> 0:06:23.920 You're explaining exactly why the Fed's being quite patient. We 0:06:24.160 --> 0:06:26.599 don't have a template for this kind of shock. We 0:06:26.640 --> 0:06:29.000 don't know how quickly it's going to pass through into inflation. 0:06:29.440 --> 0:06:32.000 We don't know how that's going to affect inflation expectations. 0:06:32.200 --> 0:06:35.000 We don't know how the uncertainty about the trade policy 0:06:35.040 --> 0:06:38.159 is going to affect a business fixed investment. So we're 0:06:38.200 --> 0:06:41.520 in sort of uncharted territories. And when you're in uncharted territories, 0:06:41.560 --> 0:06:43.400 you want to be very cautious, and I think that's 0:06:43.400 --> 0:06:44.680 what the FED is being at this point. 0:06:44.880 --> 0:06:47.479 Governor Waller is making a different point Bill, as you know, 0:06:47.680 --> 0:06:49.479 in a recent speech, he said a large share of 0:06:49.520 --> 0:06:52.200 tariff increases won't be passed through to consumers. He went 0:06:52.240 --> 0:06:54.640 on to say the increase would fade over the next 0:06:54.720 --> 0:06:57.039 year or so. What is it about his argument that 0:06:57.080 --> 0:06:58.680 you don't find that convincing? 0:07:00.160 --> 0:07:03.040 Putting too much weight on what's happened so far as 0:07:03.040 --> 0:07:06.520 opposed to what will ultimately happen. Most of commons believe 0:07:06.520 --> 0:07:09.600 that most terrorists get passed through to the consumer in 0:07:09.640 --> 0:07:12.240 the end. That may not happen instantaneously, but that's what 0:07:12.720 --> 0:07:17.680 has happened historically, So I'm expecting a pass through. Every 0:07:17.680 --> 0:07:20.160 one percent increase in terrorists is a percent of imports 0:07:20.280 --> 0:07:22.920 is worth about a tenthuve a percent on the price level. 0:07:23.080 --> 0:07:24.520 So if we're going from two and a half percent 0:07:24.640 --> 0:07:28.040 tariffts of imports to seventeen eighteen percent, that's about one 0:07:28.040 --> 0:07:30.120 and a half percent on the level of prices. 0:07:30.840 --> 0:07:33.120 Right now, the market's expecting that next year you're going 0:07:33.120 --> 0:07:35.960 to see a pretty big rate cutting cycle, regardless of 0:07:36.000 --> 0:07:39.160 the economic data, almost just simply because of there being 0:07:39.200 --> 0:07:42.160 a new FED chair who has a particular mandate. You 0:07:42.200 --> 0:07:44.600 can put aside the idea of whether or not you 0:07:44.600 --> 0:07:47.280 think that that's good or bad. Do you think that 0:07:47.280 --> 0:07:51.440 that will lead to higher inflation? Given the fact that 0:07:51.680 --> 0:07:53.640 right now, even if the FED remains on hold, we're 0:07:53.640 --> 0:07:55.880 talking about fifty basis points and then pushing it into 0:07:55.920 --> 0:07:57.640 next year, I. 0:07:57.600 --> 0:08:01.080 Think we should be careful not to overste date the 0:08:01.080 --> 0:08:03.880 fact that the chairman is going to change because there's 0:08:03.880 --> 0:08:06.720 twelve people on the Federal Open Market Committee, and those 0:08:06.760 --> 0:08:08.720 people aren't going to do what they think is inappropriate, 0:08:08.760 --> 0:08:10.720 so the chairman has to sort of bring along the 0:08:10.760 --> 0:08:13.160 rest of the committee. The second thing I would say is, 0:08:13.200 --> 0:08:16.040 you know, the disagreement among them in the committee isn't 0:08:16.120 --> 0:08:17.960 quite as large as people are making it to be. 0:08:18.160 --> 0:08:20.240 Pretty much everybody expects rates are going to fall over 0:08:20.240 --> 0:08:21.960 the next couple of years. It's just a question of 0:08:22.000 --> 0:08:23.320 timing and magnitude. 0:08:23.840 --> 0:08:25.480 You've been in the committee, You've been in the room 0:08:25.680 --> 0:08:28.880 for some of these FED meetings. We heard that this 0:08:29.120 --> 0:08:30.960 was one of the better meetings. That was what FED 0:08:31.000 --> 0:08:33.000 chair J Powell said, And then he thought that it 0:08:33.000 --> 0:08:35.920 was a really robust discussion. Can you translate what that means? 0:08:37.000 --> 0:08:39.600 I think what he's saying is that we're all still friends, 0:08:39.600 --> 0:08:41.559 and we're all still getting on and we respect each 0:08:41.559 --> 0:08:45.319 other's points of view, you know. So he started he 0:08:45.400 --> 0:08:48.360 started downplaying the importance of what the descents mean, and 0:08:48.400 --> 0:08:49.960 I think that's right. I don't think the des sense 0:08:50.920 --> 0:08:53.800 our big schism in terms of the monetary policy outlook. 0:08:54.040 --> 0:08:55.400 The fact is if you look at the summary of 0:08:55.440 --> 0:08:59.120 economic projections, every single respondent expects interest rates to be 0:08:59.200 --> 0:09:01.000 lower at the end of next year. 0:09:01.480 --> 0:09:03.199 You know, we've gotten through the last hour and a 0:09:03.240 --> 0:09:05.480 half here, Bill, I have to say we haven't mentioned 0:09:05.520 --> 0:09:08.640 the dots. That's a good and beautiful thing. What are 0:09:09.080 --> 0:09:13.559 the dots do forward? Given this exceptional terriff uncertainty? I 0:09:13.559 --> 0:09:17.360 don't know how, John, how do you create a dot. 0:09:16.400 --> 0:09:18.360 Got away into September? Getting around? 0:09:18.440 --> 0:09:18.520 Well? 0:09:18.720 --> 0:09:20.400 I know, but that's that's one of the problems with 0:09:20.440 --> 0:09:23.600 the summer of econmic economic projection. It's a modal forecast, 0:09:23.640 --> 0:09:26.439 but it doesn't really tell you that much about uncertainty 0:09:26.440 --> 0:09:29.440 around that forecus and the round that forecast. It's quite large. 0:09:29.480 --> 0:09:32.000 Right now, I want to interrupt the show. John, you 0:09:32.040 --> 0:09:34.360 mentioned to me megdand Decie has died in London, the 0:09:34.440 --> 0:09:38.960 giant of London School of Economics. Bill Dudley Megnum. Decide's 0:09:39.040 --> 0:09:43.920 strength was humility. What's the humility we need right now? 0:09:44.440 --> 0:09:48.120 In two Americas a boom economy and a lot of 0:09:48.160 --> 0:09:52.120 people really struggling. What's the humility our Central Bank needs? 0:09:53.760 --> 0:09:56.600 Well? I think I think Chairman Paul does have humility. 0:09:56.720 --> 0:09:59.200 I mean that precisely why he's not cutting rates today 0:09:59.280 --> 0:10:01.160 is because he's un sure and about what the economic 0:10:01.200 --> 0:10:03.600 outlook is. So he's not pre judging what's going to 0:10:03.600 --> 0:10:05.560 happen because he doesn't want to make a mistake. So 0:10:05.640 --> 0:10:08.079 I think he's showing appropriate humility as the chair of 0:10:08.120 --> 0:10:09.280 the Fed Reserve at this point. 0:10:09.440 --> 0:10:11.520 Oh, I appreciate your time. Bill Dudley, the former New 0:10:11.600 --> 0:10:15.439 York Fed president. You mentioned DESI remember that word Hubris, Yeah, 0:10:15.520 --> 0:10:16.800 And that was the name of the book, right. 0:10:16.720 --> 0:10:20.760 A fabrious book, a short, thin monograph, and what he 0:10:20.840 --> 0:10:23.880 did with general equilibrium theory does we don't need to 0:10:23.880 --> 0:10:26.600 do it now, we're too tired from the warning shows. 0:10:26.640 --> 0:10:31.480 But the answer here is humilities in order the Alarian's 0:10:31.559 --> 0:10:33.920 unknown unknowns. That's where we are right now. 0:10:33.920 --> 0:10:35.800 We've all been humboard coming out of the pandemic. 0:10:35.880 --> 0:10:37.719 A lot of consensus calls turned out to be very, 0:10:37.800 --> 0:10:40.920 very wrong, including the Federal Reserves when it came to transitory. 0:10:41.280 --> 0:10:43.760 Have they been scarred by the transitory tory? Do you 0:10:43.800 --> 0:10:45.720 think that's why they're waiting that a little bit longer 0:10:45.840 --> 0:10:47.040 this time around to move again. 0:10:47.120 --> 0:10:48.800 If you believe that they should be cutting you could 0:10:48.800 --> 0:10:50.640 make the argument that they're not. They're waiting to see 0:10:50.679 --> 0:10:53.880 more data because they got it wrong, and that is 0:10:54.400 --> 0:10:56.679 very much what we're hearing from people like Neil Data, 0:10:56.679 --> 0:10:59.880 et cetera. At the same time, the argument that inflation 0:11:00.120 --> 0:11:03.960 has remained above two percent for so many years at 0:11:03.960 --> 0:11:06.120 this point and you haven't seen it fall. If anything, 0:11:06.120 --> 0:11:09.320 it's actually firmed up, points out why this is still 0:11:09.320 --> 0:11:11.400 such a risk for the FED chair and why this 0:11:11.440 --> 0:11:12.440 is such a compelling artist. 0:11:12.480 --> 0:11:14.520 Just quickly here, you know, we've got to get to Mike. 0:11:14.960 --> 0:11:18.520 I can't say enough how I disagree with Oh, if 0:11:18.520 --> 0:11:21.840 we cut rates, it's a path to wherever. Just cut 0:11:21.840 --> 0:11:24.920 the rates once and see what happens. They can break 0:11:24.960 --> 0:11:25.720 the green spin. 0:11:27.080 --> 0:11:29.319 This is. 0:11:31.400 --> 0:11:34.120 Just to have a rate cut. Oh my god, I 0:11:34.280 --> 0:11:38.440 just in this uncertain time, just change your rules because 0:11:38.480 --> 0:11:40.240 half of America is flat on her back. 0:11:40.280 --> 0:11:42.160 I'm happy to give the Chamman some credit on one 0:11:42.160 --> 0:11:44.880 particular point. I think he navigates the descend pretty well 0:11:45.160 --> 0:11:47.640 in that news conference over the last sixty minutes. 0:11:47.640 --> 0:11:50.280 So so I love the interpretation. We're still friends and 0:11:50.320 --> 0:11:52.720 so you know, we can discuss and disagree, but everyone 0:11:52.840 --> 0:11:56.760 had well argued points of view. Look, he did navigate 0:11:56.800 --> 0:11:59.080 that well well by saying this is a time of 0:11:59.160 --> 0:12:01.840 uncertainty and certainty calls for robust debate, and that is 0:12:01.840 --> 0:12:02.480 what we had on this. 0:12:02.679 --> 0:12:04.839 Well we see that at Jackson Hole. I think we will. 0:12:05.040 --> 0:12:05.640 I think it will. 0:12:05.920 --> 0:12:07.920 It's going to be maybe one of the most interesting 0:12:08.240 --> 0:12:09.640 Jackson Holes. 0:12:09.280 --> 0:12:11.240 Out there, with a focus on the labor market, how 0:12:11.320 --> 0:12:13.040 much is changing and how you measure it in a 0:12:13.120 --> 0:12:16.120 very new world, not only with the immigration but also. 0:12:15.880 --> 0:12:19.240 With your it's going to be amazing. 0:12:18.960 --> 0:12:21.920 Woman you go around singing around Jackson Hole on a 0:12:22.000 --> 0:12:29.760 late night fish yeah, canoe save those stories for another day. 0:12:29.880 --> 0:12:31.360 It's that what's your canoeing impression? 0:12:31.360 --> 0:12:33.160 What was that? That nice? 0:12:33.200 --> 0:12:35.600 But that's he has never done. 0:12:35.640 --> 0:12:38.080 Oh you did like the water? Impret nice? I like 0:12:38.120 --> 0:12:38.520 that too. 0:12:38.679 --> 0:12:41.760 This comes from wilst Fargo just moments ago. Optionality maintained. 0:12:41.840 --> 0:12:43.720 I think that's the conclusion of a lot of people 0:12:43.760 --> 0:12:47.480 optionality maintaining going into the September meeting. Mike McKee was 0:12:47.480 --> 0:12:49.240 just in the room. It joins us right now for more. Mike, 0:12:49.360 --> 0:12:50.920 Welcome back to the show, sir. What was your big 0:12:50.960 --> 0:12:52.520 takeaway from the news conference? 0:12:54.040 --> 0:12:59.079 Optionality maintained. I mean, it's basically j Powell's goal. He 0:12:59.320 --> 0:13:02.079 maybe has disappointed the markets those who were leaning into 0:13:02.160 --> 0:13:05.920 a September cut just because we had the two descents 0:13:06.280 --> 0:13:10.080 for July and because it's going to provide more data 0:13:10.120 --> 0:13:12.200 between now and then. But Pole tried to make it 0:13:12.240 --> 0:13:15.200 clear that the data could go either way, and that's 0:13:15.240 --> 0:13:18.000 I think something that maybe people in the markets had 0:13:18.160 --> 0:13:22.000 sort of forgotten. The biggest issue for the FED is 0:13:22.040 --> 0:13:22.360 that the. 0:13:25.240 --> 0:13:26.040 Tariffs have not. 0:13:26.080 --> 0:13:29.360 Taken effect yet in large measure. We just got copper 0:13:29.400 --> 0:13:33.400 tariffs during this news conference. More are coming, so it's 0:13:33.440 --> 0:13:34.880 going to be very hard for the FED to know 0:13:34.960 --> 0:13:37.600 by September necessarily whether we're going to have a large 0:13:37.679 --> 0:13:41.560 inflation increase or not. Poll seems to think not, and 0:13:41.600 --> 0:13:44.240 he's still in the camp of those who are looking 0:13:44.240 --> 0:13:47.319 at it as a one time move. But he does 0:13:47.400 --> 0:13:50.240 seem to accept a little bit of the Waller and 0:13:50.360 --> 0:13:54.600 Bowman argument that we could see inflation rise more if 0:13:54.800 --> 0:13:58.560 people lose if they lose control of inflation expectations, and 0:13:58.760 --> 0:14:01.240 certainly the anecdotals or as we get it that companies 0:14:01.280 --> 0:14:04.320 are raising prices and consumers are noticing it and they're 0:14:04.320 --> 0:14:05.240 not happy about it. 0:14:05.440 --> 0:14:09.320 Maybe this was a meeting and operation optionality maintained, and 0:14:09.360 --> 0:14:11.959 it was a successful one. It really through the emphasis 0:14:11.960 --> 0:14:14.760 on Friday's data on the jobs report, not just necessarily 0:14:14.760 --> 0:14:18.200 the headline number, but the unemployment rate. Suddenly that becomes 0:14:18.200 --> 0:14:22.040 the most important number of the week, potentially, Mike, how 0:14:22.120 --> 0:14:25.560 much did you see a spotlight thrown on exactly that composition. 0:14:27.120 --> 0:14:27.520 Well, it's the. 0:14:27.560 --> 0:14:29.560 Unemployment rate the FED has been looking at for some 0:14:29.680 --> 0:14:32.160 time because if companies are letting people go, then you 0:14:32.240 --> 0:14:35.680 have a problem because you lose their salaries their wages, 0:14:36.080 --> 0:14:39.680 and people stop spending, and then people get afraid that 0:14:39.760 --> 0:14:42.840 they might lose their jobs too and pull back. But 0:14:43.040 --> 0:14:44.600 the thing that the FED is looking at is not 0:14:44.640 --> 0:14:48.560 so much the unemployment rate level, it's how fast it moves. 0:14:49.520 --> 0:14:51.440 A number of them have said that if we got 0:14:51.480 --> 0:14:54.320 to four and a half percent fairly quickly, which in 0:14:54.400 --> 0:14:57.320 theory could happen by September or maybe the October meeting, 0:14:57.720 --> 0:15:00.000 then they would be really concerned because that would again 0:15:00.120 --> 0:15:02.160 that a lot of companies are moving at the same time. 0:15:02.440 --> 0:15:04.640 If it inches up to four point two percent on 0:15:04.720 --> 0:15:07.520 Friday as forecast, not going to be a big concern. 0:15:07.600 --> 0:15:10.720 We'll look at the size of the labor market of 0:15:10.760 --> 0:15:14.120 the workforce, and if it inches up to four point 0:15:14.120 --> 0:15:16.880 three percent and then by September, they're not going to 0:15:16.880 --> 0:15:21.080 be overly concerned. So watch the rate of change much 0:15:21.080 --> 0:15:22.560 more than the change itself. 0:15:22.720 --> 0:15:25.040 My great work has always Thanks for dropping back again. 0:15:25.080 --> 0:15:27.760 Michael McKee there of Bloomberg with the Latest. Just got 0:15:27.760 --> 0:15:30.600 this note from a Bloomberg subscriber. I read it to you. 0:15:30.840 --> 0:15:32.960 We want to remain open to different points of views. 0:15:33.000 --> 0:15:35.560 Here the Fed likely has it wrong. High rates of 0:15:35.600 --> 0:15:40.160 feeding inflation expectations, high rates of feeding inflation expectations. People 0:15:40.200 --> 0:15:42.680 look at the cost of housing, rents and mortgages. If 0:15:42.760 --> 0:15:45.920 rates come down, so will inflation expectations, because it will 0:15:46.000 --> 0:15:49.960 unlock housing, and the housing market is most important. 0:15:50.080 --> 0:15:52.600 Well, this seems to be in tantem with what President 0:15:52.600 --> 0:15:56.320 Trump is arguing that if people feel like they could 0:15:56.360 --> 0:15:59.240 borrow more cheaply, could unlock the housing market. I'm not 0:15:59.280 --> 0:16:01.480 sure I'm totally following that aspect of it. I do 0:16:01.520 --> 0:16:04.560 think though, there is this belief that because of where 0:16:04.600 --> 0:16:07.920 bond yields are, people in particular savers, which make up 0:16:07.960 --> 0:16:10.800 an increasing proportion of the population, are getting a lot 0:16:10.840 --> 0:16:13.680 of income, and that income can go directly back into 0:16:13.720 --> 0:16:17.800 the economy. So there could be an argument there unique arguments. 0:16:17.880 --> 0:16:20.840 This is the hope potentially that maybe would unlock some supply, 0:16:21.200 --> 0:16:24.000 some supply for certain people around this table sitting on 0:16:24.040 --> 0:16:26.680 mortgages and paying two to three percent interest rates, and 0:16:26.720 --> 0:16:30.560 that certain person might be choking as week about house. 0:16:30.640 --> 0:16:33.880 I'm something of my wife. I couldn't quite keep it together. 0:16:34.000 --> 0:16:36.320 I want to talk about this equity market. Equities decline 0:16:36.320 --> 0:16:38.200 in by four tens of one percent on the SMP 0:16:38.360 --> 0:16:40.840 following the news conference. Bond yields started to shift higher. 0:16:41.080 --> 0:16:43.040 You push that through foreign exchange, and you started to 0:16:43.040 --> 0:16:45.800 get some dollar strength on the market. Jeff Rosenberg of 0:16:45.840 --> 0:16:48.440 Blackrock joins us now for more. Jeff, Welcome to the show, sir. 0:16:48.480 --> 0:16:50.480 I just want it from your perspective whether these moves 0:16:50.480 --> 0:16:53.000 tell you more about positioning than it does anything that 0:16:53.120 --> 0:16:54.480 was said in the news conference. 0:16:56.160 --> 0:16:58.320 Yeah, Jonathan, you say it often. You know, the first 0:16:58.320 --> 0:17:00.720 move is not necessarily the last move on the data. 0:17:00.800 --> 0:17:03.360 I mean, I think they're pretty consistent with the headline 0:17:03.400 --> 0:17:05.639 you talked about just a minute ago in terms of 0:17:05.640 --> 0:17:09.399 optionality preserved. I think when you look at what Powell 0:17:09.480 --> 0:17:12.679 came back to many many times was this balance of 0:17:12.840 --> 0:17:16.280 risk focus and how unique the challenges are that you 0:17:16.280 --> 0:17:19.479 have an inflation challenge and you have a labor market's 0:17:19.560 --> 0:17:21.960 challenge and the focus and we'll be back on Friday 0:17:22.000 --> 0:17:24.960 to talk about it. The focus on the unemployment rate. Remember, 0:17:25.000 --> 0:17:27.640 he also said that there's a risk inside of that 0:17:27.640 --> 0:17:30.000 that the balance that you're getting is because you're getting 0:17:30.040 --> 0:17:33.280 the offset on the supply side, but that the demand 0:17:33.440 --> 0:17:36.720 side decline was indicative of downside risk, and that to 0:17:36.800 --> 0:17:39.720 me was a little bit of a tell of if 0:17:39.800 --> 0:17:43.639 you see that scenario where the labor market balance of 0:17:43.760 --> 0:17:46.679 risk starts to move more in favor of cutting, that 0:17:46.760 --> 0:17:51.439 they'll be responsive to that. Otherwise it is this overshoot 0:17:51.480 --> 0:17:54.200 in terms of inflation. He said, at many times they're 0:17:54.240 --> 0:17:57.600 at target on the unemployment rate perspective, So the labor 0:17:57.600 --> 0:18:00.720 market's at target and you're off targeted terms of inflation, 0:18:00.800 --> 0:18:04.720 and that's what justifies the slightly modestly restrictive. But if 0:18:04.720 --> 0:18:08.680 the inflation piece moves in their favor, meaning it is transitory, 0:18:08.800 --> 0:18:12.480 the tariff impact moves through, they'll move to cut rates 0:18:12.520 --> 0:18:13.760 off of restrictiveness. 0:18:13.760 --> 0:18:15.960 Well, Jeff Pus, how long are they going to have 0:18:16.040 --> 0:18:18.600 to wait before they can make that cool because what 0:18:18.640 --> 0:18:20.359 you just said doesn't sound like September. 0:18:22.040 --> 0:18:24.600 Yeah, you know, that is the interesting part when we 0:18:24.680 --> 0:18:28.399 talk about this, you know, inflation passed through and transitory. 0:18:28.520 --> 0:18:30.560 You know, we're just starting to see in the chairman, 0:18:30.800 --> 0:18:32.960 you know, address this in the in the press conference 0:18:33.000 --> 0:18:35.840 that we're just starting to see some of the incidents 0:18:35.880 --> 0:18:39.720 in terms of tariff impacts. Now that's not broad based inflation, 0:18:39.840 --> 0:18:41.760 that's in goods inflation, and so they're going to care 0:18:41.800 --> 0:18:44.879 about the impact and the balance between services and goods, 0:18:44.880 --> 0:18:46.600 and he talked about a little bit of that of 0:18:46.640 --> 0:18:49.600 that trade off. But to your question, it is going 0:18:49.680 --> 0:18:52.880 to be a tricky environment. If if the unemployment rate 0:18:53.000 --> 0:18:57.040