1 00:00:02,440 --> 00:00:07,160 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:12,800 --> 00:00:16,279 Speaker 2: With your fet decision, He's Mike mckag two dots, no 3 00:00:16,560 --> 00:00:17,079 Speaker 2: rate move. 4 00:00:17,160 --> 00:00:20,880 Speaker 3: The median of the nineteen Fed officials projection for rate 5 00:00:20,920 --> 00:00:24,520 Speaker 3: cuts this year moves to two from three in March. 6 00:00:24,840 --> 00:00:28,560 Speaker 3: Policymakers are quite divided, however, eight members seat just two 7 00:00:28,600 --> 00:00:33,400 Speaker 3: cuts this year, seven set only one for vote no change. 8 00:00:33,520 --> 00:00:36,840 Speaker 3: They now have four penciled in for twenty twenty five, 9 00:00:37,520 --> 00:00:41,960 Speaker 3: although the range is so wide it's almost meaningless. The 10 00:00:42,000 --> 00:00:45,320 Speaker 3: neutral rate also moves up the media, now two point 11 00:00:45,360 --> 00:00:48,440 Speaker 3: eight percent from two point six percent, although they don't 12 00:00:48,479 --> 00:00:52,680 Speaker 3: get there until after twenty twenty six. Nine members see 13 00:00:52,720 --> 00:00:56,319 Speaker 3: neutral as three percent or higher, one as high as 14 00:00:56,400 --> 00:01:00,440 Speaker 3: three point seven five percent. The fedce target range stays 15 00:01:00,440 --> 00:01:03,040 Speaker 3: in the range of five and a quarter to five 16 00:01:03,080 --> 00:01:05,960 Speaker 3: and a half percent. No change in the two point 17 00:01:06,040 --> 00:01:10,240 Speaker 3: one percent GDP projection for twenty twenty four, two percent 18 00:01:10,319 --> 00:01:13,800 Speaker 3: for next year. No change in the four percent unemployment 19 00:01:13,840 --> 00:01:16,840 Speaker 3: forecast for this year, though twenty twenty six moves up 20 00:01:16,880 --> 00:01:20,039 Speaker 3: a tick from March to four point two percent. It's 21 00:01:20,120 --> 00:01:22,880 Speaker 3: PCEE inflation where we see the biggest change in the 22 00:01:23,080 --> 00:01:26,320 Speaker 3: forecasts headline of two point six this year, up from 23 00:01:26,360 --> 00:01:29,800 Speaker 3: two point four percent in the March. Projections next year 24 00:01:29,880 --> 00:01:34,280 Speaker 3: to three from two two. Corps PCEE is forecast at 25 00:01:34,280 --> 00:01:37,200 Speaker 3: two point eight percent this year, up from two point 26 00:01:37,280 --> 00:01:40,520 Speaker 3: six percent next year, also two point three from two 27 00:01:40,520 --> 00:01:44,399 Speaker 3: point two. Inflation was the only significant change in the 28 00:01:44,520 --> 00:01:48,760 Speaker 3: statement following today's better than expected CPI. The statement now 29 00:01:48,800 --> 00:01:52,360 Speaker 3: says in recent months there has been modest further progress 30 00:01:52,400 --> 00:01:55,280 Speaker 3: toward the committee's two percent inflation target. 31 00:01:55,800 --> 00:01:58,480 Speaker 4: The decision was unanimous. Mi McKay. 32 00:01:58,520 --> 00:02:00,280 Speaker 2: Thank you, sir. If you were looking for five works 33 00:02:00,280 --> 00:02:02,640 Speaker 2: in financial markets, you missed it all. It happened about 34 00:02:02,640 --> 00:02:05,040 Speaker 2: six hours ago at eight thirty Eastern time, and the 35 00:02:05,080 --> 00:02:07,200 Speaker 2: equity market. Some of these, most stick on the S 36 00:02:07,240 --> 00:02:10,000 Speaker 2: and P five hundreds, still positive by about zero point 37 00:02:10,080 --> 00:02:12,600 Speaker 2: nine percent on the Nasna Cup by Malvin one four 38 00:02:12,639 --> 00:02:15,480 Speaker 2: percentage point to Yale to Lisa, just off the loads 39 00:02:15,520 --> 00:02:17,880 Speaker 2: of the session, but still down twelve or thirteen basis 40 00:02:17,919 --> 00:02:20,519 Speaker 2: points to four seventy on a two year. 41 00:02:20,440 --> 00:02:22,800 Speaker 5: There's nothing that would really shake up what we saw earlier. 42 00:02:22,840 --> 00:02:25,560 Speaker 5: It is interesting, though, that they did increase their expectation 43 00:02:25,720 --> 00:02:28,600 Speaker 5: for crow PCE inflation to two point eight percent versus 44 00:02:28,600 --> 00:02:31,200 Speaker 5: two point six percent, and it raises a question about 45 00:02:31,240 --> 00:02:34,280 Speaker 5: the idea of are they tacitly allowing inflation to go 46 00:02:34,639 --> 00:02:38,399 Speaker 5: be two point something to Muhammadalarian's point, rather than exactly 47 00:02:38,440 --> 00:02:41,320 Speaker 5: two percent as they allow this to happen even with 48 00:02:41,760 --> 00:02:44,760 Speaker 5: two potential rate cuts baked in TK what's your takeaway? 49 00:02:45,240 --> 00:02:48,440 Speaker 6: My takeaway here is at eight thirty was really really important, 50 00:02:48,440 --> 00:02:51,080 Speaker 6: and it moves us right onto all the other economic data, 51 00:02:51,120 --> 00:02:53,840 Speaker 6: and I go back to economic growth and there is 52 00:02:53,880 --> 00:02:56,840 Speaker 6: a surprise this year that we get more buoyant economic 53 00:02:56,880 --> 00:02:58,800 Speaker 6: growth than a lot of the gloomen grews talking about. 54 00:02:58,840 --> 00:03:00,680 Speaker 2: Want to get back over to my MAAC might just 55 00:03:00,720 --> 00:03:03,320 Speaker 2: briefly just work through that again for us, Explain to 56 00:03:03,400 --> 00:03:05,280 Speaker 2: us where that median dot is. We were looking for 57 00:03:05,360 --> 00:03:08,200 Speaker 2: three cuts in the median dot last time around. Where's 58 00:03:08,200 --> 00:03:09,400 Speaker 2: that median doll for twenty four? 59 00:03:09,480 --> 00:03:14,000 Speaker 3: Now the median dot is at two cuts for twenty 60 00:03:14,080 --> 00:03:19,359 Speaker 3: twenty four for twenty twenty five, but the range has 61 00:03:19,560 --> 00:03:24,640 Speaker 3: narrowed considerably but still broad because there are at this 62 00:03:24,800 --> 00:03:27,640 Speaker 3: point eight members seeing two cuts this year, so that 63 00:03:27,960 --> 00:03:31,440 Speaker 3: makes it the median seven saw only one and four 64 00:03:31,600 --> 00:03:35,560 Speaker 3: voted for no change, so they seem quite divided, which 65 00:03:35,560 --> 00:03:38,960 Speaker 3: would suggest that at this point there is no consensus 66 00:03:38,960 --> 00:03:41,119 Speaker 3: on the committee about what's going to happen the rest 67 00:03:41,120 --> 00:03:41,640 Speaker 3: of this year. 68 00:03:41,920 --> 00:03:44,080 Speaker 2: Mike McKay, Thank you, sir. Mike mcke will be in 69 00:03:44,080 --> 00:03:46,200 Speaker 2: that news conference in about twenty seven minutes time when 70 00:03:46,240 --> 00:03:48,760 Speaker 2: it kicks off with Sham and poal from any any 71 00:03:48,840 --> 00:03:50,800 Speaker 2: questions for Cham and Powell in this press are based 72 00:03:50,840 --> 00:03:51,040 Speaker 2: on that. 73 00:03:51,520 --> 00:03:52,880 Speaker 1: Uh yeah, I do. 74 00:03:53,160 --> 00:03:56,080 Speaker 5: Number one, how long will you tolerate inflation above two percent? 75 00:03:56,200 --> 00:03:58,560 Speaker 5: How quickly is an okay pace to move to get 76 00:03:58,560 --> 00:04:01,280 Speaker 5: inflation down? And the second thing I'm still thinking about this. 77 00:04:01,440 --> 00:04:05,280 Speaker 5: One participant had a new neutral rate proposal of three 78 00:04:05,320 --> 00:04:06,800 Speaker 5: point seventy five percent. 79 00:04:07,200 --> 00:04:07,960 Speaker 1: That's pretty bold. 80 00:04:08,000 --> 00:04:09,720 Speaker 5: I mean it's pretty much in line with my marketsar 81 00:04:09,800 --> 00:04:13,080 Speaker 5: for three and a half percent. Nonetheless, that resets a 82 00:04:13,120 --> 00:04:16,719 Speaker 5: lot of questions about market valuations that maybe on the margins, 83 00:04:16,760 --> 00:04:19,160 Speaker 5: could really change investment pieces. 84 00:04:19,400 --> 00:04:21,400 Speaker 2: Joining us now to discuss is Mohammad al Aaron of 85 00:04:21,440 --> 00:04:24,560 Speaker 2: Queen's College, Cambridge, Bob Michael, JP Morgan still around the 86 00:04:24,560 --> 00:04:26,160 Speaker 2: table with us. Mohammed, I want to come to you 87 00:04:26,200 --> 00:04:28,640 Speaker 2: first if you want these forecasts based on what we 88 00:04:28,720 --> 00:04:30,920 Speaker 2: learned early this morning at eight thirty Eastern time. 89 00:04:32,560 --> 00:04:36,719 Speaker 7: So I wonder John whether those forecasts fully reflect this 90 00:04:36,880 --> 00:04:40,440 Speaker 7: morning or whether were they were finalized before this morning. 91 00:04:41,320 --> 00:04:44,320 Speaker 7: I was surprised to hear that four voted for no cuts, 92 00:04:45,440 --> 00:04:48,560 Speaker 7: and I was surprised to see the inflation numbers go 93 00:04:48,760 --> 00:04:53,840 Speaker 7: up both for the PC, both at headline and core. 94 00:04:54,360 --> 00:04:56,440 Speaker 4: So only the one question I would have. 95 00:04:56,400 --> 00:05:01,120 Speaker 7: For Chairman Powell is do those numbers and the expectations 96 00:05:01,160 --> 00:05:04,840 Speaker 7: that four people had of Norway shots reflect this morning's 97 00:05:04,839 --> 00:05:06,440 Speaker 7: inflation data or not. 98 00:05:07,440 --> 00:05:10,159 Speaker 6: Mohammed timekeen good morning and a good afternoon. I should 99 00:05:10,200 --> 00:05:14,280 Speaker 6: say good late afternoon and evening to you somebody today, 100 00:05:14,560 --> 00:05:17,840 Speaker 6: echoed Peter or Zeg A long time ago of LS 101 00:05:18,440 --> 00:05:23,000 Speaker 6: at a school. Mohammadself west of Cambridge, and Peter Orzeg 102 00:05:23,200 --> 00:05:24,480 Speaker 6: talked about glide pass. 103 00:05:24,680 --> 00:05:27,320 Speaker 4: Is our great underestimation. 104 00:05:27,120 --> 00:05:29,560 Speaker 6: That the glide pass to get out of the pandemic 105 00:05:29,680 --> 00:05:33,479 Speaker 6: with all this monetary policy is a much longer timeframe 106 00:05:33,560 --> 00:05:36,800 Speaker 6: than we think. We're modeling FED meeting, the FED meeting, 107 00:05:37,279 --> 00:05:40,480 Speaker 6: the silliness of September and December, where we should be 108 00:05:40,520 --> 00:05:42,400 Speaker 6: modeling twenty twenty seven. 109 00:05:44,240 --> 00:05:47,920 Speaker 7: We shot Tom and I've been urging to combine data 110 00:05:48,000 --> 00:05:52,680 Speaker 7: dependency with more of a forward looking view of the economy. 111 00:05:53,120 --> 00:05:55,880 Speaker 7: But that's not where the FED is, and as a result, 112 00:05:56,320 --> 00:06:00,080 Speaker 7: that's not where the markets are. The markets are reacting 113 00:06:00,160 --> 00:06:03,000 Speaker 7: to every single data point in the last month, just 114 00:06:03,000 --> 00:06:06,120 Speaker 7: the last month, teny yields went up thirty basis points, 115 00:06:06,200 --> 00:06:08,680 Speaker 7: came back down forty basis points, went back up twenty 116 00:06:08,720 --> 00:06:12,200 Speaker 7: basis points, and came back down forty basis points. And 117 00:06:12,279 --> 00:06:15,240 Speaker 7: what you realize is that there's no anchor. There's no 118 00:06:15,279 --> 00:06:18,000 Speaker 7: longer term anchor to markets, and there's no longer term 119 00:06:18,040 --> 00:06:22,800 Speaker 7: anchor to policies. We should be talking about the big 120 00:06:22,960 --> 00:06:26,440 Speaker 7: secular changes and how that's going to impact the next 121 00:06:26,480 --> 00:06:29,479 Speaker 7: twelve months, but that's not where the FED is, and 122 00:06:29,520 --> 00:06:32,320 Speaker 7: therefore that's not where the markets are right now. 123 00:06:32,520 --> 00:06:35,560 Speaker 5: I wonder how significant it is to Muhammad that we 124 00:06:35,600 --> 00:06:38,400 Speaker 5: did see at least one participant materially mark up their 125 00:06:38,440 --> 00:06:42,280 Speaker 5: long term neutral rate. As people try to understand what 126 00:06:42,320 --> 00:06:43,880 Speaker 5: this means longer term. 127 00:06:43,880 --> 00:06:45,760 Speaker 1: For what a FED rate cutting path could look. 128 00:06:45,640 --> 00:06:48,080 Speaker 4: Like, it's about time. 129 00:06:48,960 --> 00:06:52,280 Speaker 7: I mean, you know, there is a very active discussion 130 00:06:52,560 --> 00:06:55,840 Speaker 7: of what's happening in the structure of the economy and 131 00:06:55,920 --> 00:06:59,760 Speaker 7: why it is that the neutral weight is well above three, 132 00:07:00,120 --> 00:07:04,440 Speaker 7: nearer to four. But the FED is moving very slowly 133 00:07:04,480 --> 00:07:08,440 Speaker 7: on this, and FED chair Pale has refused to engage 134 00:07:08,480 --> 00:07:12,440 Speaker 7: in discussions, either saying I don't care about it or 135 00:07:12,480 --> 00:07:15,520 Speaker 7: I don't have a view about it. So yeah, it's 136 00:07:15,560 --> 00:07:17,480 Speaker 7: about time they're going to have to really think about this. 137 00:07:17,560 --> 00:07:21,040 Speaker 7: But again, Lisa, that is a forward looking parameter, and 138 00:07:21,040 --> 00:07:26,160 Speaker 7: this is a FED that focuses excessively on the past 139 00:07:26,680 --> 00:07:29,800 Speaker 7: and doesn't want to signal much about what's ahead. 140 00:07:30,240 --> 00:07:32,560 Speaker 2: So if you are just joining us, welcome to the program. Equally, 141 00:07:32,600 --> 00:07:34,680 Speaker 2: is still firmer by zero point nine percent on the 142 00:07:34,760 --> 00:07:36,600 Speaker 2: S and P five hundred, we were hired by more 143 00:07:36,600 --> 00:07:38,880 Speaker 2: than one four percentage point. Just ondoing some of the 144 00:07:38,880 --> 00:07:40,800 Speaker 2: moves in the bond market. On a two year yield, 145 00:07:41,160 --> 00:07:43,520 Speaker 2: yields are lower still by twelve basis points. They were 146 00:07:43,560 --> 00:07:45,320 Speaker 2: lower by a little bit more than that earlier on. 147 00:07:45,520 --> 00:07:47,040 Speaker 2: There was a lot of interest in the medium dot 148 00:07:47,080 --> 00:07:49,200 Speaker 2: for twenty twenty four. Just want to clarify something that 149 00:07:49,240 --> 00:07:51,680 Speaker 2: Mike was saying, they're now signaling they expect to cut 150 00:07:51,760 --> 00:07:55,000 Speaker 2: rates only once this year, compared to the reduction of 151 00:07:55,080 --> 00:07:57,960 Speaker 2: three which was kind of signaled back in March Bromo. 152 00:07:58,080 --> 00:07:59,720 Speaker 2: So that's the change we were looking for. Would we 153 00:07:59,720 --> 00:08:01,640 Speaker 2: come down for two, Well, it's a one. It looks 154 00:08:01,680 --> 00:08:03,600 Speaker 2: like we've come down to one. But twenty twenty five 155 00:08:03,720 --> 00:08:05,880 Speaker 2: kind of makes up for some of that in some way. 156 00:08:05,680 --> 00:08:07,120 Speaker 5: Which is what some people were saying, is that you 157 00:08:07,240 --> 00:08:09,320 Speaker 5: just basically push it out the following year, which is 158 00:08:09,360 --> 00:08:11,760 Speaker 5: why it might not have been a massive deal. There 159 00:08:11,800 --> 00:08:14,000 Speaker 5: was a big question before this whether or not it 160 00:08:14,040 --> 00:08:16,760 Speaker 5: would matter to markets on the margins. Maybe you take 161 00:08:16,800 --> 00:08:19,520 Speaker 5: back some of the gains in certain bonds right now, 162 00:08:19,640 --> 00:08:20,880 Speaker 5: nonetheless not. 163 00:08:20,760 --> 00:08:23,040 Speaker 1: A huge shift when you look at the overall cutting cycle. 164 00:08:23,200 --> 00:08:25,520 Speaker 6: Well, Michael, I've got the ten year yield just touching 165 00:08:25,520 --> 00:08:28,360 Speaker 6: two standard deviation move it's not a big deal. Four 166 00:08:28,400 --> 00:08:33,280 Speaker 6: point two eight percent and gyrating around. What level of 167 00:08:33,360 --> 00:08:36,160 Speaker 6: ten year yield do you need to really signal, to 168 00:08:36,280 --> 00:08:40,000 Speaker 6: use Bullet's word, a new regime. 169 00:08:40,360 --> 00:08:42,840 Speaker 8: It's not so much the ten year yield as the 170 00:08:42,880 --> 00:08:45,760 Speaker 8: front end of the curve. I think the front end 171 00:08:45,840 --> 00:08:48,760 Speaker 8: of the curve, you've got to see the Fed start 172 00:08:48,800 --> 00:08:51,800 Speaker 8: cutting rates and then the front end start coming down 173 00:08:52,240 --> 00:08:55,400 Speaker 8: towards four percent. I think that will pull the ten 174 00:08:55,480 --> 00:08:58,839 Speaker 8: year down as well a little bit, but there's an 175 00:08:58,920 --> 00:09:02,000 Speaker 8: awful lot into ten year part of the year. 176 00:09:02,040 --> 00:09:02,959 Speaker 4: It's an unfair question. 177 00:09:03,040 --> 00:09:05,520 Speaker 6: I'm going to ask you to speak for Michael Ferolian 178 00:09:05,640 --> 00:09:09,320 Speaker 6: Kasman and the other economists at JP Morgan. Do they 179 00:09:09,600 --> 00:09:14,880 Speaker 6: do harm to the American economy by being expost and delaying? 180 00:09:15,160 --> 00:09:16,640 Speaker 6: What would your economists say? 181 00:09:17,559 --> 00:09:22,000 Speaker 8: They do no harm to anyone? That I'm pretty sure of. Look, 182 00:09:22,280 --> 00:09:26,040 Speaker 8: I think when you look at market movements, you have 183 00:09:26,120 --> 00:09:30,679 Speaker 8: to understand that there are different constituencies that are involved. 184 00:09:31,120 --> 00:09:34,080 Speaker 8: We talk to a lot of very large plans that 185 00:09:34,200 --> 00:09:38,200 Speaker 8: are waiting for the Yeald curve to disinvert because based 186 00:09:38,240 --> 00:09:41,760 Speaker 8: on their investment analytics, it doesn't make sense for them 187 00:09:41,800 --> 00:09:44,320 Speaker 8: to come out of cash into the longer end of 188 00:09:44,320 --> 00:09:47,400 Speaker 8: the curve. There are other buyers out there that are 189 00:09:47,400 --> 00:09:52,560 Speaker 8: looking to part cash into safe dollar assets. So they're 190 00:09:52,600 --> 00:09:55,920 Speaker 8: big dollar buyers. They want to own the dollar, and 191 00:09:56,040 --> 00:09:59,680 Speaker 8: treasuries are the largest, most liquid way to do that. 192 00:10:00,000 --> 00:10:01,720 Speaker 5: I have to say, I'm right now, I'm parsing through 193 00:10:01,760 --> 00:10:04,560 Speaker 5: the statement and all the details, and it's a confusing one, 194 00:10:04,640 --> 00:10:05,679 Speaker 5: so let's just go over it. 195 00:10:05,920 --> 00:10:08,160 Speaker 1: Four FED officials see no rate cuts this year. 196 00:10:08,400 --> 00:10:10,480 Speaker 5: That is up from two officials in the March production, 197 00:10:10,559 --> 00:10:14,000 Speaker 5: so that is a more hawkish tilt. Seven C one cut, well, 198 00:10:14,040 --> 00:10:17,160 Speaker 5: eight C two cuts. Honestly, we're looking at right now 199 00:10:17,200 --> 00:10:19,560 Speaker 5: a narrow majority seeing no more than one cut this 200 00:10:19,640 --> 00:10:23,320 Speaker 5: year is a base case this according to the statement. 201 00:10:23,360 --> 00:10:25,400 Speaker 5: I'm looking at this and I'm wondering, John, all the 202 00:10:25,440 --> 00:10:28,160 Speaker 5: people who said this would be some kind of massive shift. 203 00:10:28,320 --> 00:10:29,760 Speaker 1: It isn't being taken. 204 00:10:29,480 --> 00:10:32,040 Speaker 5: That way by the market as people pass through the 205 00:10:32,120 --> 00:10:35,320 Speaker 5: longer term expectations for what the Fed hopes to accomplish 206 00:10:35,360 --> 00:10:36,400 Speaker 5: and where the balance of risk is. 207 00:10:36,440 --> 00:10:38,800 Speaker 2: Because we had a soothing number eight thirty Eastern time, 208 00:10:39,160 --> 00:10:41,520 Speaker 2: I think that's kind of the takeaway, Is that, right, Boff? 209 00:10:41,640 --> 00:10:44,480 Speaker 8: Yeah, I think so. It's what I started with. This 210 00:10:44,600 --> 00:10:46,600 Speaker 8: is what you look for in the numbers. If there 211 00:10:46,600 --> 00:10:49,600 Speaker 8: are a lot of people clustered around one dot, then 212 00:10:49,800 --> 00:10:53,280 Speaker 8: they don't change their projections after the number they've submitted them. 213 00:10:53,559 --> 00:10:56,400 Speaker 8: They let them go. The fact that there were four 214 00:10:56,480 --> 00:10:59,280 Speaker 8: with no change, seven withth one dot, and only eight 215 00:11:00,160 --> 00:11:03,959 Speaker 8: with two dots two rate cuts tells me that they 216 00:11:03,960 --> 00:11:06,920 Speaker 8: submit them, they don't do anything. The statement's completely different. 217 00:11:07,240 --> 00:11:11,840 Speaker 8: This statement talks about modest progress, continue to continues to 218 00:11:11,840 --> 00:11:12,880 Speaker 8: be made on inflation. 219 00:11:13,000 --> 00:11:15,520 Speaker 2: Let's get Mi McKay back into the conversation before Mike goes. 220 00:11:15,520 --> 00:11:17,520 Speaker 2: Since that news conference, Mike, just to clarify some of 221 00:11:17,520 --> 00:11:18,440 Speaker 2: the comments you had earlier. 222 00:11:18,480 --> 00:11:21,800 Speaker 4: Your thoughts, well, I misspoke. 223 00:11:23,520 --> 00:11:27,440 Speaker 3: One cut is themedian dot this year for this year, 224 00:11:27,960 --> 00:11:31,439 Speaker 3: but it is, as you say, come somewhat confusing because 225 00:11:31,440 --> 00:11:34,040 Speaker 3: of the way they do it. But looking out over 226 00:11:34,080 --> 00:11:36,720 Speaker 3: the course of the year, the question is when do 227 00:11:36,840 --> 00:11:40,240 Speaker 3: they do it because their PCE projection is basically for 228 00:11:40,280 --> 00:11:43,600 Speaker 3: the year where PCE is now, So that's going to 229 00:11:43,600 --> 00:11:46,600 Speaker 3: be a question for j Powell in his news conference. 230 00:11:46,640 --> 00:11:48,880 Speaker 2: Mike, you get into the pressor thanks for your time, sir, 231 00:11:49,000 --> 00:11:50,760 Speaker 2: happens to all of us, looking forward to your conference. 232 00:11:50,800 --> 00:11:53,280 Speaker 2: In that news conference with Chairman Powell. A little bit later, 233 00:11:53,559 --> 00:11:55,719 Speaker 2: Don Swunk is with us from KPMG. I want to 234 00:11:55,720 --> 00:11:57,960 Speaker 2: bring her into the conversation. Mohammed's still with us, Bob, 235 00:11:58,000 --> 00:12:00,600 Speaker 2: Michael as well. Dan, You've had about fifty minutes, ten 236 00:12:00,600 --> 00:12:02,440 Speaker 2: minutes soside to go out of these numbers. What jumps 237 00:12:02,440 --> 00:12:05,480 Speaker 2: out for you, Well. 238 00:12:05,360 --> 00:12:08,679 Speaker 9: Certainly the upward rise in inflation. I was surprised at 239 00:12:08,840 --> 00:12:11,560 Speaker 9: I expected them to mark down inflation a little bit 240 00:12:11,640 --> 00:12:14,880 Speaker 9: so that is one that I think Mohammad also flagged. 241 00:12:14,920 --> 00:12:17,640 Speaker 9: But I think what's important is we know that they've 242 00:12:17,720 --> 00:12:21,720 Speaker 9: delayed the putting marking down of their dots on the 243 00:12:21,760 --> 00:12:24,679 Speaker 9: dot plot, and that has become more of an iterative 244 00:12:24,720 --> 00:12:28,160 Speaker 9: process to reflect more of a consensus of what they 245 00:12:28,200 --> 00:12:30,440 Speaker 9: do talk about at the meeting. So I'm not sure 246 00:12:30,679 --> 00:12:33,240 Speaker 9: that there's the dissonance there that we'd like to some 247 00:12:33,320 --> 00:12:36,959 Speaker 9: would like to see in those numbers between today's data. 248 00:12:37,120 --> 00:12:38,680 Speaker 10: And those actual dots. 249 00:12:38,760 --> 00:12:41,360 Speaker 9: I think what it probably did was took out of 250 00:12:41,480 --> 00:12:44,600 Speaker 9: play some people who might have had hikes in their 251 00:12:44,679 --> 00:12:48,560 Speaker 9: interest rate scenario for twenty twenty four that then moved 252 00:12:48,559 --> 00:12:52,200 Speaker 9: them to the zero portion those four people who voted 253 00:12:52,240 --> 00:12:54,439 Speaker 9: for no change in rates. But I think that's very 254 00:12:54,480 --> 00:12:57,240 Speaker 9: important is that the FED has also been very careful 255 00:12:57,360 --> 00:13:00,000 Speaker 9: not to declare victory, as Julia said at the beginning 256 00:13:00,080 --> 00:13:02,719 Speaker 9: at the end of the last show, and I think 257 00:13:02,760 --> 00:13:05,719 Speaker 9: that's really important. They don't go out and say mission accomplished. 258 00:13:06,040 --> 00:13:09,559 Speaker 9: They are very deliberative right now in terms of not 259 00:13:09,600 --> 00:13:12,920 Speaker 9: getting too far ahead of themselves until the data comes 260 00:13:12,920 --> 00:13:13,280 Speaker 9: to them. 261 00:13:13,400 --> 00:13:13,679 Speaker 2: Now. 262 00:13:13,840 --> 00:13:17,240 Speaker 9: I disagree that that's sort of neutral and doesn't cause 263 00:13:17,240 --> 00:13:21,080 Speaker 9: any harm data dependence. The data are lagged, and so 264 00:13:21,120 --> 00:13:23,280 Speaker 9: by the time the data comes to you, even if 265 00:13:23,320 --> 00:13:26,680 Speaker 9: you're willing to settle in to a higher rate, ultimately 266 00:13:27,080 --> 00:13:29,679 Speaker 9: it's still lagged, and it could be after the fact. 267 00:13:29,760 --> 00:13:31,960 Speaker 9: And I think that's what you see in terms of 268 00:13:32,000 --> 00:13:33,520 Speaker 9: the nervousness with j. 269 00:13:33,720 --> 00:13:35,560 Speaker 10: Powell, because he worries much. 270 00:13:35,360 --> 00:13:38,199 Speaker 9: More than some of his colleagues about overtightening. 271 00:13:38,440 --> 00:13:40,760 Speaker 6: Dan swank I look at where we are and what 272 00:13:40,880 --> 00:13:42,880 Speaker 6: the key thing is is, Bob Michael said, is we're 273 00:13:42,880 --> 00:13:46,160 Speaker 6: beyond the first quarter of this year, the lethargy, the 274 00:13:46,200 --> 00:13:49,200 Speaker 6: slow down, maybe some of the fear of the first quarter. 275 00:13:49,320 --> 00:13:51,520 Speaker 6: What does your take on the state of the American 276 00:13:51,600 --> 00:13:55,160 Speaker 6: economy is they stagger to September and December. 277 00:13:57,360 --> 00:13:59,840 Speaker 9: Well, we're still in an economy that's generating a lot 278 00:13:59,840 --> 00:14:03,160 Speaker 9: of jobs. You know, the household survey and the establishment 279 00:14:03,200 --> 00:14:05,800 Speaker 9: survey aren't quite syncd up. They haven't been synced up 280 00:14:06,080 --> 00:14:09,240 Speaker 9: for a long time, in part because we're undercounting the 281 00:14:09,320 --> 00:14:12,480 Speaker 9: number of immigrants in the country and that's not fully 282 00:14:12,559 --> 00:14:13,319 Speaker 9: showing up in the. 283 00:14:13,280 --> 00:14:14,880 Speaker 10: Household survey as well. 284 00:14:15,200 --> 00:14:18,240 Speaker 9: But we do know that we continue to generate jobs, 285 00:14:18,400 --> 00:14:21,840 Speaker 9: we continue to generate paychecks, and if the last month's 286 00:14:21,960 --> 00:14:24,280 Speaker 9: report is to be believed, and we have to be 287 00:14:24,320 --> 00:14:27,720 Speaker 9: careful on that that we actually saw on acceleration in wages, 288 00:14:27,800 --> 00:14:30,440 Speaker 9: that's something to sort of, I think, take with a 289 00:14:30,440 --> 00:14:32,400 Speaker 9: grain of salt. But at the end of the day, 290 00:14:32,440 --> 00:14:35,200 Speaker 9: this is an economy that for the moment is still 291 00:14:35,520 --> 00:14:39,600 Speaker 9: hanging in there, although slowing from what was a stunning 292 00:14:39,720 --> 00:14:41,960 Speaker 9: pace in twenty twenty three. 293 00:14:42,200 --> 00:14:44,320 Speaker 5: Mohammed, I'd love to bring you back in here. I'm 294 00:14:44,360 --> 00:14:46,920 Speaker 5: just going through all the different statements and this is 295 00:14:46,960 --> 00:14:49,600 Speaker 5: a mess. I mean, in terms of all the different views. 296 00:14:49,600 --> 00:14:51,680 Speaker 5: This is not a consensus that you could see that 297 00:14:51,760 --> 00:14:52,600 Speaker 5: was easily reached. 298 00:14:52,840 --> 00:14:54,880 Speaker 1: Maybe there it is for right now, but later. 299 00:14:54,680 --> 00:14:55,200 Speaker 10: In this year. 300 00:14:55,640 --> 00:14:58,200 Speaker 5: What the balance of risks here really is all over 301 00:14:58,240 --> 00:15:01,160 Speaker 5: the map when it comes to the different Fed officials. 302 00:15:01,560 --> 00:15:04,160 Speaker 5: Do you think that there is too much hawkish talk 303 00:15:04,280 --> 00:15:07,120 Speaker 5: right now and too much hawkish projections at a time 304 00:15:07,440 --> 00:15:09,240 Speaker 5: when it seems like the Fed is saying we still 305 00:15:09,240 --> 00:15:11,080 Speaker 5: haven't done enough. We want to get to two percent 306 00:15:11,120 --> 00:15:13,640 Speaker 5: a little bit sooner, even as we acknowledge this is 307 00:15:13,640 --> 00:15:13,920 Speaker 5: going to. 308 00:15:13,920 --> 00:15:14,400 Speaker 1: Be a battle. 309 00:15:15,600 --> 00:15:18,400 Speaker 7: Yeah, I think if you were to take the SEP 310 00:15:18,840 --> 00:15:22,680 Speaker 7: and the statement on face fully, on face value, this 311 00:15:22,800 --> 00:15:25,520 Speaker 7: would be an overly hawkish policy. 312 00:15:25,120 --> 00:15:27,080 Speaker 4: Stand for this economy. 313 00:15:28,440 --> 00:15:32,240 Speaker 7: Among the other things, the fact that we are now 314 00:15:32,280 --> 00:15:36,280 Speaker 7: at one cut means that given that the FED will 315 00:15:36,320 --> 00:15:41,400 Speaker 7: not want to stop go stop go cycle, that means 316 00:15:41,440 --> 00:15:43,880 Speaker 7: that cut comes late in the year, very late in 317 00:15:43,880 --> 00:15:46,440 Speaker 7: the year. And I agree with Diane, it does matter 318 00:15:46,520 --> 00:15:50,480 Speaker 7: when you start the cutting cycle. It really does matter. 319 00:15:50,600 --> 00:15:55,320 Speaker 7: It matters for small businesses, it matters for low income households, 320 00:15:55,720 --> 00:15:58,280 Speaker 7: and it matters for the economy. So if you were 321 00:15:58,360 --> 00:16:02,080 Speaker 7: to take this at face value, then this the market 322 00:16:02,120 --> 00:16:03,520 Speaker 7: would be selling off right now. 323 00:16:03,560 --> 00:16:05,040 Speaker 4: But it's not for good reason. 324 00:16:05,120 --> 00:16:08,800 Speaker 7: And that's what I said earlier and Bob mentioned it 325 00:16:08,840 --> 00:16:11,400 Speaker 7: as well, is I don't think this fully reflects the 326 00:16:11,520 --> 00:16:14,080 Speaker 7: latest set of data. And given that this is data 327 00:16:14,160 --> 00:16:17,680 Speaker 7: the dependent FED. If this had if the data had 328 00:16:17,720 --> 00:16:20,440 Speaker 7: happened yesterday or the day before, the S and P 329 00:16:20,480 --> 00:16:23,000 Speaker 7: would look very different than it is today. And that's 330 00:16:23,000 --> 00:16:25,360 Speaker 7: why the press conference is going to be so critical. 331 00:16:25,760 --> 00:16:28,680 Speaker 7: And that's why Chap Pak can I'll do what Bob 332 00:16:28,720 --> 00:16:31,520 Speaker 7: wanted him to do half an hour ago, because he's 333 00:16:31,520 --> 00:16:33,040 Speaker 7: really going to have to explain things now. 334 00:16:33,200 --> 00:16:35,360 Speaker 2: There's a mammad based on this, based on the guardnance 335 00:16:35,360 --> 00:16:37,080 Speaker 2: we've got in our hands. At the moment, it sounds 336 00:16:37,120 --> 00:16:39,240 Speaker 2: like December. Are you telling me, by the time this 337 00:16:39,320 --> 00:16:43,320 Speaker 2: news conference had finishes, it will sound like September. I 338 00:16:43,360 --> 00:16:45,840 Speaker 2: suspect so, John, Bob, you agree with that, don't you? 339 00:16:46,000 --> 00:16:49,160 Speaker 8: Yeah, I completely agree with that. And I think Diane 340 00:16:49,200 --> 00:16:52,600 Speaker 8: and Muhammad point out a very important thing, which are 341 00:16:52,680 --> 00:16:55,680 Speaker 8: the long and variable lags are real when we look 342 00:16:55,760 --> 00:16:59,280 Speaker 8: at lower and middle income households, when we look at 343 00:16:59,320 --> 00:17:03,440 Speaker 8: small business is they're struggling with the high cost of everything. 344 00:17:03,760 --> 00:17:07,600 Speaker 8: They're struggling with the much higher cost of financing those 345 00:17:07,720 --> 00:17:11,879 Speaker 8: higher prices, and you're seeing it in delinquencies. You're seeing 346 00:17:11,920 --> 00:17:16,360 Speaker 8: it in charge offs and write downs and losses. 347 00:17:17,040 --> 00:17:18,960 Speaker 5: Right now, I'm looking at some of the commentary, some 348 00:17:19,000 --> 00:17:20,679 Speaker 5: people saying that the reason why there was a hawkish 349 00:17:20,680 --> 00:17:23,960 Speaker 5: tilt was because of PTSD from the first quarter. Diane, 350 00:17:24,040 --> 00:17:26,399 Speaker 5: I'd love to think your take on this, you think, 351 00:17:26,760 --> 00:17:28,879 Speaker 5: and not to be all conspiracy theorists, but do you 352 00:17:28,880 --> 00:17:31,040 Speaker 5: think that any FED officials thought to themselves, you know, 353 00:17:31,400 --> 00:17:34,399 Speaker 5: we should probably be hawkish just to offset the inevitably 354 00:17:34,480 --> 00:17:36,320 Speaker 5: dubvish message that we're going to get from FED chair 355 00:17:36,400 --> 00:17:38,720 Speaker 5: Powell later today and we can frankly offset that later 356 00:17:38,800 --> 00:17:41,040 Speaker 5: in this year if the data comes in such. 357 00:17:42,840 --> 00:17:45,639 Speaker 9: Well, I know, I don't think that's the case, just 358 00:17:45,680 --> 00:17:47,760 Speaker 9: because I just don't think they think that far ahead 359 00:17:47,800 --> 00:17:49,879 Speaker 9: on this, and I think that's important. 360 00:17:50,640 --> 00:17:53,240 Speaker 10: I do think that part of what we're seeing here is. 361 00:17:53,560 --> 00:17:56,159 Speaker 9: Yes, they did go in to this meeting with a 362 00:17:56,200 --> 00:17:59,520 Speaker 9: hawkish tilt and then in the data surprise, but we 363 00:17:59,600 --> 00:18:02,280 Speaker 9: know that, you know, Chair Paul has really changed the 364 00:18:02,359 --> 00:18:06,119 Speaker 9: dynamics of the SEP and I'm just surprised that given 365 00:18:06,200 --> 00:18:08,560 Speaker 9: the timing of when they write this down, and you know, 366 00:18:08,560 --> 00:18:10,640 Speaker 9: the FED had this data. A lot of the FED 367 00:18:10,680 --> 00:18:13,240 Speaker 9: had this data last night, so they've been looking over it, 368 00:18:13,359 --> 00:18:16,159 Speaker 9: you know, and came in strong with how they're going 369 00:18:16,240 --> 00:18:18,040 Speaker 9: to talk about it in the morning. And I think 370 00:18:18,040 --> 00:18:21,240 Speaker 9: they still have members of the board itself that would 371 00:18:21,280 --> 00:18:24,040 Speaker 9: have gotten the data that would have said, you know, hey, 372 00:18:24,040 --> 00:18:27,199 Speaker 9: we're still on the sidelines here or one cut and 373 00:18:27,240 --> 00:18:29,840 Speaker 9: that's it. So I think that's an important way to 374 00:18:29,880 --> 00:18:32,040 Speaker 9: be thinking about where they're at about what they think 375 00:18:32,440 --> 00:18:36,720 Speaker 9: they need to be convinced on inflation coming down, not 376 00:18:36,840 --> 00:18:39,400 Speaker 9: to get to two percent, to cut before they get there, 377 00:18:39,480 --> 00:18:41,439 Speaker 9: but how much they need to be convinced. 378 00:18:41,920 --> 00:18:44,040 Speaker 10: That's a lot, and I think they've set. 379 00:18:43,880 --> 00:18:46,800 Speaker 9: That bar pretty high, and it's because they have been 380 00:18:46,840 --> 00:18:49,960 Speaker 9: headfaked in the past. That doesn't mean we couldn't see 381 00:18:49,960 --> 00:18:52,760 Speaker 9: some big improvement and get to a September cut. But 382 00:18:52,840 --> 00:18:55,000 Speaker 9: I think we need a lot of improvement from here 383 00:18:55,240 --> 00:18:57,720 Speaker 9: for the FED to feel convinced to do a September cut. 384 00:18:57,840 --> 00:19:00,159 Speaker 2: Suddenly, this news conference in twelve minutes got a lot 385 00:19:00,200 --> 00:19:03,399 Speaker 2: more interesting. Dan Swank of KPMG Dan, thank you as 386 00:19:03,480 --> 00:19:05,360 Speaker 2: always if you are just tuning in and you miss 387 00:19:05,400 --> 00:19:08,320 Speaker 2: the FED decision took place about eighteen minutes ago. Rates 388 00:19:08,400 --> 00:19:12,000 Speaker 2: unchanged as expected. Be focused on the median dot. Basically, 389 00:19:12,000 --> 00:19:14,399 Speaker 2: all the FED officials get together, they plot where they 390 00:19:14,400 --> 00:19:16,560 Speaker 2: think rates should be will be for twenty four to 391 00:19:16,600 --> 00:19:18,760 Speaker 2: twenty five and beyond. You take the median dot and 392 00:19:18,760 --> 00:19:20,399 Speaker 2: a lot of people on Wall Street see that as 393 00:19:20,400 --> 00:19:22,480 Speaker 2: a signal of how many times they get a cut 394 00:19:22,640 --> 00:19:25,000 Speaker 2: in any given year. That median dot was at three 395 00:19:25,080 --> 00:19:27,400 Speaker 2: cuts for this year, it's come all the way down 396 00:19:27,680 --> 00:19:30,560 Speaker 2: to one. Worth noting though, that they now see four 397 00:19:30,600 --> 00:19:33,040 Speaker 2: cuts in twenty twenty five, more than the three that 398 00:19:33,080 --> 00:19:35,720 Speaker 2: they previously outlined. So they've pushed some of that into 399 00:19:35,800 --> 00:19:38,439 Speaker 2: next year. But the range of views, I think the 400 00:19:38,520 --> 00:19:41,879 Speaker 2: median marks are very, very divide. FED and Lisa did 401 00:19:41,880 --> 00:19:44,000 Speaker 2: a fantastic job with that a little bit earlier, really 402 00:19:44,040 --> 00:19:47,359 Speaker 2: explaining at least so that four policymakers see no cuts 403 00:19:47,359 --> 00:19:50,880 Speaker 2: this year, seven anticipate just one reduction, eight are looking 404 00:19:50,920 --> 00:19:53,560 Speaker 2: for two. That's a federal reserve that's all over the place, 405 00:19:53,760 --> 00:19:54,840 Speaker 2: and that really. 406 00:19:54,560 --> 00:19:57,600 Speaker 5: Does have at least half of it a really hawkish 407 00:19:57,640 --> 00:20:00,159 Speaker 5: tilt right now at a time when other people are saying, you. 408 00:20:00,160 --> 00:20:02,240 Speaker 1: Know, we'll do it for the FED. Mission accomplished. 409 00:20:02,240 --> 00:20:05,040 Speaker 5: So it raises this question at this point, what is 410 00:20:05,119 --> 00:20:08,000 Speaker 5: keeping them from really going all in on the immaculate disinflation? 411 00:20:08,119 --> 00:20:10,600 Speaker 5: Is it just PTSD from Q one and we'll all 412 00:20:10,640 --> 00:20:12,480 Speaker 5: of the sort of questions that people have around the 413 00:20:12,520 --> 00:20:16,399 Speaker 5: hawkishness just disappear in the wake of the bomb that 414 00:20:16,480 --> 00:20:17,719 Speaker 5: Jap Pwett tends to bring us. 415 00:20:17,840 --> 00:20:19,719 Speaker 2: Mike Cape and a Bank of America is with us 416 00:20:19,720 --> 00:20:21,639 Speaker 2: now for more. Mike Gape and I was sharing your 417 00:20:21,680 --> 00:20:24,120 Speaker 2: words a little bit earlier, that quote from you, one 418 00:20:24,160 --> 00:20:26,600 Speaker 2: giant leap for the FED. Then I explained that you 419 00:20:26,640 --> 00:20:28,919 Speaker 2: still don't think they can't until December, so it's not 420 00:20:28,920 --> 00:20:30,240 Speaker 2: that big a lead. What do you make of what 421 00:20:30,240 --> 00:20:34,000 Speaker 2: you've heard in the last twenty minutes or so, Well, if. 422 00:20:33,840 --> 00:20:36,880 Speaker 11: We thought it was a September or sooner cut, maybe 423 00:20:36,920 --> 00:20:40,159 Speaker 11: it'd be one giant leap from mankind instead of the FED. 424 00:20:40,240 --> 00:20:43,280 Speaker 11: Like I think what Bob and Muhammad have been saying here, 425 00:20:43,320 --> 00:20:45,399 Speaker 11: I think I would I would share, which is I 426 00:20:45,400 --> 00:20:48,399 Speaker 11: think that data is probably more important than the dots 427 00:20:48,440 --> 00:20:51,520 Speaker 11: in this case because it is such a data dependent FED. 428 00:20:51,600 --> 00:20:55,200 Speaker 11: They don't want to take these structural, longer term views, 429 00:20:55,240 --> 00:20:57,959 Speaker 11: so they'll be reactionary. So maybe that the dots kind 430 00:20:57,960 --> 00:21:01,520 Speaker 11: of lag what's happening on the ground. Look, I would 431 00:21:01,520 --> 00:21:05,440 Speaker 11: just characterize all this as an incremental shift and FED, 432 00:21:05,520 --> 00:21:08,439 Speaker 11: thinking that they were trying to target us to the 433 00:21:08,440 --> 00:21:11,080 Speaker 11: middle of the air inflation didn't cooperate, so they shifted 434 00:21:11,080 --> 00:21:14,920 Speaker 11: things back. I would encourage them, like Mohammed is saying, 435 00:21:14,960 --> 00:21:19,119 Speaker 11: to take some stands on longer term structural views. But 436 00:21:19,240 --> 00:21:22,360 Speaker 11: I just this is not the FED that we have. 437 00:21:23,000 --> 00:21:25,560 Speaker 6: Michael, howex post are they? I go back to the 438 00:21:25,560 --> 00:21:29,560 Speaker 6: Bank of America worker, They're very retired. Ethan Harris's wonderful 439 00:21:29,600 --> 00:21:32,600 Speaker 6: book Ben Bernanke's fed. Okay, great. 440 00:21:32,720 --> 00:21:33,840 Speaker 4: Are we still back at. 441 00:21:33,760 --> 00:21:37,919 Speaker 6: Ben Bernanki or Alan Greenspans fed where they are exceptionally 442 00:21:38,080 --> 00:21:39,120 Speaker 6: ex post. 443 00:21:41,119 --> 00:21:43,680 Speaker 11: I don't think so. I think I just think it's 444 00:21:43,720 --> 00:21:46,639 Speaker 11: a they believe. I think, as you're noting in the dots, 445 00:21:46,680 --> 00:21:50,760 Speaker 11: there's a wide disparity of views, and sometimes pulling the 446 00:21:50,880 --> 00:21:53,320 Speaker 11: view out of the median is a fool's air in 447 00:21:53,840 --> 00:21:55,680 Speaker 11: so it may just be that there's not a lot 448 00:21:55,680 --> 00:21:59,320 Speaker 11: of structural or agreement about these longer term structural issues, 449 00:21:59,320 --> 00:22:02,960 Speaker 11: so it's hard for them to be forecast based, and 450 00:22:03,040 --> 00:22:05,720 Speaker 11: so you just get a plethora of views, and so 451 00:22:05,760 --> 00:22:07,760 Speaker 11: they throw their arms up and say, fine, there's a 452 00:22:07,760 --> 00:22:09,840 Speaker 11: lot of uncertainty. The only thing we can trust is 453 00:22:09,880 --> 00:22:12,719 Speaker 11: the data under our feet. So that's what we'll focus on, 454 00:22:12,840 --> 00:22:13,680 Speaker 11: for better or worse. 455 00:22:14,080 --> 00:22:16,560 Speaker 5: Michael, what would be your question to feed share Powell 456 00:22:16,640 --> 00:22:17,280 Speaker 5: this afternoon? 457 00:22:19,640 --> 00:22:22,359 Speaker 11: How much was the data this morning reflected in the 458 00:22:22,400 --> 00:22:26,840 Speaker 11: projections and the dots. If the answers yes, it sounds 459 00:22:27,080 --> 00:22:30,359 Speaker 11: a little hawkish. If the answers no, then you can 460 00:22:30,400 --> 00:22:33,399 Speaker 11: make a case for September still being on the board. 461 00:22:33,440 --> 00:22:35,920 Speaker 11: I think the data could make a September cut viable 462 00:22:36,040 --> 00:22:38,719 Speaker 11: we just think it all comes together in December. So 463 00:22:38,920 --> 00:22:41,800 Speaker 11: the dots and the forecast are kind of a mic 464 00:22:41,880 --> 00:22:44,160 Speaker 11: forecast right now. So I'm pretty pleased with those. 465 00:22:44,320 --> 00:22:46,399 Speaker 2: Mohammed and Bob, I've got the same thoughts. Let me 466 00:22:46,440 --> 00:22:49,720 Speaker 2: tell you, Mike Ape at a Bank for America. Thank you, sir, Mohammed. 467 00:22:49,720 --> 00:22:51,320 Speaker 2: I wanted to come across to you on the forecast, 468 00:22:51,320 --> 00:22:52,760 Speaker 2: but not on the dots. I wanted to talk about 469 00:22:52,800 --> 00:22:55,920 Speaker 2: unemployment when they reflect on what we learned on Friday 470 00:22:56,080 --> 00:22:58,679 Speaker 2: and you were with us working through that payrolls report. 471 00:22:58,920 --> 00:23:00,879 Speaker 2: Just a difference between the two surveys. How do you 472 00:23:00,880 --> 00:23:03,520 Speaker 2: think this FMC is navigating that at the moment. 473 00:23:04,960 --> 00:23:09,880 Speaker 7: I think it's navigating like everybody else, trying to maintain optionality, 474 00:23:10,040 --> 00:23:12,280 Speaker 7: trying to understand what's going on. And it's not just 475 00:23:13,000 --> 00:23:17,840 Speaker 7: the employment data. We've had a lot of competing macro data, 476 00:23:18,520 --> 00:23:22,800 Speaker 7: so you know they're just waiting. I do think there's 477 00:23:22,800 --> 00:23:26,840 Speaker 7: two things going on. Certainly, the uncertainty is making them 478 00:23:27,760 --> 00:23:31,360 Speaker 7: data dependent, but there's something else that's making them data dependent. 479 00:23:31,640 --> 00:23:34,760 Speaker 7: Is what happened in twenty twenty one when they did 480 00:23:34,840 --> 00:23:38,560 Speaker 7: take a view on inflation. They took a strategic view 481 00:23:38,600 --> 00:23:41,560 Speaker 7: on inflation and it turned out to be really wrong, 482 00:23:42,240 --> 00:23:44,680 Speaker 7: and I think they've been burnt and they don't want 483 00:23:44,680 --> 00:23:47,200 Speaker 7: to go back to that fire anytime soon. 484 00:23:47,840 --> 00:23:52,040 Speaker 4: So they will not be reconciled trying to reconcile the data. 485 00:23:52,160 --> 00:23:54,840 Speaker 7: They will not be taking trying to anchor markets and 486 00:23:54,840 --> 00:23:57,479 Speaker 7: their own thinking with a forward looking view. They're going 487 00:23:57,520 --> 00:24:01,920 Speaker 7: to continuously react to the latest set of data. 488 00:24:02,000 --> 00:24:04,320 Speaker 4: And that's what I think you're going to see, which. 489 00:24:04,160 --> 00:24:05,720 Speaker 1: Could be good and it could be bad. 490 00:24:05,840 --> 00:24:07,639 Speaker 5: According to you, Mohammed Bab, I'd love to bring you 491 00:24:07,720 --> 00:24:10,280 Speaker 5: back in at a time when it seems like this 492 00:24:10,320 --> 00:24:11,800 Speaker 5: is a FED wrestling with itself. 493 00:24:11,960 --> 00:24:14,280 Speaker 1: The consensus on the top is a mirage. 494 00:24:14,520 --> 00:24:17,240 Speaker 5: Sure there's consensus not to cut rates at this meeting, 495 00:24:17,520 --> 00:24:20,439 Speaker 5: but that's pretty much it. What does that signal for 496 00:24:20,520 --> 00:24:23,600 Speaker 5: you in terms of the clarity of purpose of their 497 00:24:23,640 --> 00:24:27,119 Speaker 5: policy going forward and how to really navigate around it? 498 00:24:27,320 --> 00:24:30,199 Speaker 8: Great question. If I were Mike McKee, I'd ask the 499 00:24:30,240 --> 00:24:33,960 Speaker 8: FED have the Summary of Economic Projections outlive their usefulness? 500 00:24:34,200 --> 00:24:37,520 Speaker 8: Do they do more harm than good? And if the 501 00:24:37,560 --> 00:24:40,600 Speaker 8: answer is no, then I'm sitting here. We're told to 502 00:24:40,760 --> 00:24:44,320 Speaker 8: look at the Summary of Economic Projections and it's reflecting 503 00:24:44,359 --> 00:24:48,440 Speaker 8: a FED that's confused. And you know what, even if 504 00:24:48,600 --> 00:24:55,920 Speaker 8: they submitted the projections before the CPI data, one bit 505 00:24:55,960 --> 00:24:58,719 Speaker 8: of data shouldn't create that much of a change. So 506 00:24:59,119 --> 00:25:01,840 Speaker 8: this is a can fused FED. What that tells me 507 00:25:02,520 --> 00:25:05,199 Speaker 8: is the bond market is in the hands of people 508 00:25:05,359 --> 00:25:07,960 Speaker 8: like me. I don't know what the Fed's thinking. I 509 00:25:08,000 --> 00:25:09,959 Speaker 8: don't know what they're looking at. I don't know what 510 00:25:10,000 --> 00:25:12,960 Speaker 8: they're going to do. All I know is current levels. 511 00:25:13,359 --> 00:25:16,400 Speaker 8: I know are projections of where growth and inflation are 512 00:25:16,440 --> 00:25:19,160 Speaker 8: headed to. I know the amount of buying that's going 513 00:25:19,200 --> 00:25:21,840 Speaker 8: on now, I know who's waiting on the sidelines. I 514 00:25:21,880 --> 00:25:24,560 Speaker 8: look at this, it tells me I certainly don't want 515 00:25:24,560 --> 00:25:29,040 Speaker 8: to be short duration or underweight relative to benchmarks. I 516 00:25:29,119 --> 00:25:31,840 Speaker 8: want to be somewhere around neutral. I want to be 517 00:25:31,920 --> 00:25:34,239 Speaker 8: concentrated in the front end of the curve. And I 518 00:25:34,400 --> 00:25:38,399 Speaker 8: like credit because everything's telling me we're gliding into a 519 00:25:38,440 --> 00:25:41,400 Speaker 8: soft landing, and that's good for corporate America. It's also 520 00:25:41,480 --> 00:25:42,639 Speaker 8: good for corporate Europe. 521 00:25:43,000 --> 00:25:46,199 Speaker 6: Doctor Olarian, help me translate this, and you can do 522 00:25:46,280 --> 00:25:49,399 Speaker 6: this out of the Peeps library at Cambridge. What in 523 00:25:49,440 --> 00:25:51,840 Speaker 6: God's name is modest further progress? 524 00:25:54,160 --> 00:25:58,040 Speaker 7: It is changing a phrase that used to be somewhat 525 00:25:58,080 --> 00:26:02,399 Speaker 7: more halkish to something that is less hawkish but not dubbish. 526 00:26:02,560 --> 00:26:03,679 Speaker 4: That is what that is. 527 00:26:04,200 --> 00:26:06,480 Speaker 2: Mohammach, You've said for a while that maybe they're making 528 00:26:06,520 --> 00:26:08,959 Speaker 2: a mistake, that they haven't taken this strategic view, and 529 00:26:09,000 --> 00:26:12,600 Speaker 2: you were hoping that goes sooner rather than later. Can 530 00:26:12,640 --> 00:26:16,040 Speaker 2: you help us understand the difference between not going three 531 00:26:16,359 --> 00:26:19,080 Speaker 2: but going once, and the difference between doing that one 532 00:26:19,119 --> 00:26:21,199 Speaker 2: cut at the end of the year as opposed to 533 00:26:21,200 --> 00:26:24,320 Speaker 2: doing it in July. What difference does four or five 534 00:26:24,400 --> 00:26:24,960 Speaker 2: months make? 535 00:26:26,480 --> 00:26:29,840 Speaker 7: So I love listening to Bob Michael's or is it 536 00:26:29,880 --> 00:26:31,120 Speaker 7: Bob Michelle John as you. 537 00:26:31,080 --> 00:26:33,240 Speaker 4: Told me last time. Anyway, I love listening. 538 00:26:32,920 --> 00:26:37,920 Speaker 7: To Bob Michael's soft landing scenario because it's very soothing, 539 00:26:38,960 --> 00:26:43,200 Speaker 7: but analytically, based on how I assess the economy, I 540 00:26:43,240 --> 00:26:46,720 Speaker 7: give it a fifty percent probability. It is the dominant scenario, 541 00:26:47,160 --> 00:26:50,320 Speaker 7: but it is not dominant with high probability, so I 542 00:26:50,359 --> 00:26:54,320 Speaker 7: have to have a risk mitigation mindset. And then when 543 00:26:54,320 --> 00:26:58,160 Speaker 7: I look at the tails, I see details of recession 544 00:26:59,160 --> 00:27:03,800 Speaker 7: being larger than the tail of bigger but not hotter economy. 545 00:27:04,160 --> 00:27:07,040 Speaker 7: But Michael so When I look at that distribution and 546 00:27:07,080 --> 00:27:10,760 Speaker 7: I look at the asymmetrical tails, I start asking what 547 00:27:10,800 --> 00:27:12,160 Speaker 7: are the buffers in the economy. 548 00:27:12,720 --> 00:27:14,320 Speaker 4: And that's why I start getting worried. 549 00:27:14,880 --> 00:27:18,040 Speaker 7: And that's where the lay of of the weight cut 550 00:27:18,640 --> 00:27:22,960 Speaker 7: means that those buffers that are already quite limited among 551 00:27:23,160 --> 00:27:27,879 Speaker 7: small businesses, among low income household get eroded really quickly. 552 00:27:28,640 --> 00:27:31,720 Speaker 8: Muhammad, you been around as long as I have. You're right, 553 00:27:32,080 --> 00:27:35,760 Speaker 8: We've only seen one soft landing in our investment career, 554 00:27:35,880 --> 00:27:38,439 Speaker 8: and this is forty plus years and that was in 555 00:27:38,560 --> 00:27:43,800 Speaker 8: ninety five. So soft landings are incredibly hard to engineer. 556 00:27:44,440 --> 00:27:49,040 Speaker 8: In fact, just the probabilities are way against you. But 557 00:27:49,359 --> 00:27:52,000 Speaker 8: what worked in ninety five is I think what you're 558 00:27:52,080 --> 00:27:55,679 Speaker 8: alluding to. The FED came in and started cutting rates. 559 00:27:55,960 --> 00:27:58,880 Speaker 8: They cut rates seventy five basis points in ninety five. 560 00:27:59,119 --> 00:28:02,560 Speaker 8: It was just enough to take the pressure off of 561 00:28:02,640 --> 00:28:06,399 Speaker 8: businesses and households and thus we had, I believe, the 562 00:28:06,440 --> 00:28:08,160 Speaker 8: only soft landing in our careers. 563 00:28:08,320 --> 00:28:10,200 Speaker 2: Mohammed, we've got enough time to give you the final word. 564 00:28:10,760 --> 00:28:12,480 Speaker 4: I love what Bob Jos said. Thank you, Bob. 565 00:28:14,080 --> 00:28:19,000 Speaker 2: Myhammad A Laran of Queen's College, Cambridge, Muhammed, thank you