WEBVTT - Instant Reaction: The Fed Decides 0:00:02.440 --> 0:00:07.160 Bloomberg Audio Studios, podcasts, radio news. 0:00:12.800 --> 0:00:16.279 With your fet decision, He's Mike mckag two dots, no 0:00:16.560 --> 0:00:17.079 rate move. 0:00:17.160 --> 0:00:20.880 The median of the nineteen Fed officials projection for rate 0:00:20.920 --> 0:00:24.520 cuts this year moves to two from three in March. 0:00:24.840 --> 0:00:28.560 Policymakers are quite divided, however, eight members seat just two 0:00:28.600 --> 0:00:33.400 cuts this year, seven set only one for vote no change. 0:00:33.520 --> 0:00:36.840 They now have four penciled in for twenty twenty five, 0:00:37.520 --> 0:00:41.960 although the range is so wide it's almost meaningless. The 0:00:42.000 --> 0:00:45.320 neutral rate also moves up the media, now two point 0:00:45.360 --> 0:00:48.440 eight percent from two point six percent, although they don't 0:00:48.479 --> 0:00:52.680 get there until after twenty twenty six. Nine members see 0:00:52.720 --> 0:00:56.319 neutral as three percent or higher, one as high as 0:00:56.400 --> 0:01:00.440 three point seven five percent. The fedce target range stays 0:01:00.440 --> 0:01:03.040 in the range of five and a quarter to five 0:01:03.080 --> 0:01:05.960 and a half percent. No change in the two point 0:01:06.040 --> 0:01:10.240 one percent GDP projection for twenty twenty four, two percent 0:01:10.319 --> 0:01:13.800 for next year. No change in the four percent unemployment 0:01:13.840 --> 0:01:16.840 forecast for this year, though twenty twenty six moves up 0:01:16.880 --> 0:01:20.039 a tick from March to four point two percent. It's 0:01:20.120 --> 0:01:22.880 PCEE inflation where we see the biggest change in the 0:01:23.080 --> 0:01:26.320 forecasts headline of two point six this year, up from 0:01:26.360 --> 0:01:29.800 two point four percent in the March. Projections next year 0:01:29.880 --> 0:01:34.280 to three from two two. Corps PCEE is forecast at 0:01:34.280 --> 0:01:37.200 two point eight percent this year, up from two point 0:01:37.280 --> 0:01:40.520 six percent next year, also two point three from two 0:01:40.520 --> 0:01:44.399 point two. Inflation was the only significant change in the 0:01:44.520 --> 0:01:48.760 statement following today's better than expected CPI. The statement now 0:01:48.800 --> 0:01:52.360 says in recent months there has been modest further progress 0:01:52.400 --> 0:01:55.280 toward the committee's two percent inflation target. 0:01:55.800 --> 0:01:58.480 The decision was unanimous. Mi McKay. 0:01:58.520 --> 0:02:00.280 Thank you, sir. If you were looking for five works 0:02:00.280 --> 0:02:02.640 in financial markets, you missed it all. It happened about 0:02:02.640 --> 0:02:05.040 six hours ago at eight thirty Eastern time, and the 0:02:05.080 --> 0:02:07.200 equity market. Some of these, most stick on the S 0:02:07.240 --> 0:02:10.000 and P five hundreds, still positive by about zero point 0:02:10.080 --> 0:02:12.600 nine percent on the Nasna Cup by Malvin one four 0:02:12.639 --> 0:02:15.480 percentage point to Yale to Lisa, just off the loads 0:02:15.520 --> 0:02:17.880 of the session, but still down twelve or thirteen basis 0:02:17.919 --> 0:02:20.519 points to four seventy on a two year. 0:02:20.440 --> 0:02:22.800 There's nothing that would really shake up what we saw earlier. 0:02:22.840 --> 0:02:25.560 It is interesting, though, that they did increase their expectation 0:02:25.720 --> 0:02:28.600 for crow PCE inflation to two point eight percent versus 0:02:28.600 --> 0:02:31.200 two point six percent, and it raises a question about 0:02:31.240 --> 0:02:34.280 the idea of are they tacitly allowing inflation to go 0:02:34.639 --> 0:02:38.399 be two point something to Muhammadalarian's point, rather than exactly 0:02:38.440 --> 0:02:41.320 two percent as they allow this to happen even with 0:02:41.760 --> 0:02:44.760 two potential rate cuts baked in TK what's your takeaway? 0:02:45.240 --> 0:02:48.440 My takeaway here is at eight thirty was really really important, 0:02:48.440 --> 0:02:51.080 and it moves us right onto all the other economic data, 0:02:51.120 --> 0:02:53.840 and I go back to economic growth and there is 0:02:53.880 --> 0:02:56.840 a surprise this year that we get more buoyant economic 0:02:56.880 --> 0:02:58.800 growth than a lot of the gloomen grews talking about. 0:02:58.840 --> 0:03:00.680 Want to get back over to my MAAC might just 0:03:00.720 --> 0:03:03.320 briefly just work through that again for us, Explain to 0:03:03.400 --> 0:03:05.280 us where that median dot is. We were looking for 0:03:05.360 --> 0:03:08.200 three cuts in the median dot last time around. Where's 0:03:08.200 --> 0:03:09.400 that median doll for twenty four? 0:03:09.480 --> 0:03:14.000 Now the median dot is at two cuts for twenty 0:03:14.080 --> 0:03:19.359 twenty four for twenty twenty five, but the range has 0:03:19.560 --> 0:03:24.640 narrowed considerably but still broad because there are at this 0:03:24.800 --> 0:03:27.640 point eight members seeing two cuts this year, so that 0:03:27.960 --> 0:03:31.440 makes it the median seven saw only one and four 0:03:31.600 --> 0:03:35.560 voted for no change, so they seem quite divided, which 0:03:35.560 --> 0:03:38.960 would suggest that at this point there is no consensus 0:03:38.960 --> 0:03:41.119 on the committee about what's going to happen the rest 0:03:41.120 --> 0:03:41.640 of this year. 0:03:41.920 --> 0:03:44.080 Mike McKay, Thank you, sir. Mike mcke will be in 0:03:44.080 --> 0:03:46.200 that news conference in about twenty seven minutes time when 0:03:46.240 --> 0:03:48.760 it kicks off with Sham and poal from any any 0:03:48.840 --> 0:03:50.800 questions for Cham and Powell in this press are based 0:03:50.840 --> 0:03:51.040 on that. 0:03:51.520 --> 0:03:52.880 Uh yeah, I do. 0:03:53.160 --> 0:03:56.080 Number one, how long will you tolerate inflation above two percent? 0:03:56.200 --> 0:03:58.560 How quickly is an okay pace to move to get 0:03:58.560 --> 0:04:01.280 inflation down? And the second thing I'm still thinking about this. 0:04:01.440 --> 0:04:05.280 One participant had a new neutral rate proposal of three 0:04:05.320 --> 0:04:06.800 point seventy five percent. 0:04:07.200 --> 0:04:07.960 That's pretty bold. 0:04:08.000 --> 0:04:09.720 I mean it's pretty much in line with my marketsar 0:04:09.800 --> 0:04:13.080 for three and a half percent. Nonetheless, that resets a 0:04:13.120 --> 0:04:16.719 lot of questions about market valuations that maybe on the margins, 0:04:16.760 --> 0:04:19.160 could really change investment pieces. 0:04:19.400 --> 0:04:21.400 Joining us now to discuss is Mohammad al Aaron of 0:04:21.440 --> 0:04:24.560 Queen's College, Cambridge, Bob Michael, JP Morgan still around the 0:04:24.560 --> 0:04:26.160 table with us. Mohammed, I want to come to you 0:04:26.200 --> 0:04:28.640 first if you want these forecasts based on what we 0:04:28.720 --> 0:04:30.920 learned early this morning at eight thirty Eastern time. 0:04:32.560 --> 0:04:36.719 So I wonder John whether those forecasts fully reflect this 0:04:36.880 --> 0:04:40.440 morning or whether were they were finalized before this morning. 0:04:41.320 --> 0:04:44.320 I was surprised to hear that four voted for no cuts, 0:04:45.440 --> 0:04:48.560 and I was surprised to see the inflation numbers go 0:04:48.760 --> 0:04:53.840 up both for the PC, both at headline and core. 0:04:54.360 --> 0:04:56.440 So only the one question I would have. 0:04:56.400 --> 0:05:01.120 For Chairman Powell is do those numbers and the expectations 0:05:01.160 --> 0:05:04.840 that four people had of Norway shots reflect this morning's 0:05:04.839 --> 0:05:06.440 inflation data or not. 0:05:07.440 --> 0:05:10.159 Mohammed timekeen good morning and a good afternoon. I should 0:05:10.200 --> 0:05:14.280 say good late afternoon and evening to you somebody today, 0:05:14.560 --> 0:05:17.840 echoed Peter or Zeg A long time ago of LS 0:05:18.440 --> 0:05:23.000 at a school. Mohammadself west of Cambridge, and Peter Orzeg 0:05:23.200 --> 0:05:24.480 talked about glide pass. 0:05:24.680 --> 0:05:27.320 Is our great underestimation. 0:05:27.120 --> 0:05:29.560 That the glide pass to get out of the pandemic 0:05:29.680 --> 0:05:33.479 with all this monetary policy is a much longer timeframe 0:05:33.560 --> 0:05:36.800 than we think. We're modeling FED meeting, the FED meeting, 0:05:37.279 --> 0:05:40.480 the silliness of September and December, where we should be 0:05:40.520 --> 0:05:42.400 modeling twenty twenty seven. 0:05:44.240 --> 0:05:47.920 We shot Tom and I've been urging to combine data 0:05:48.000 --> 0:05:52.680 dependency with more of a forward looking view of the economy. 0:05:53.120 --> 0:05:55.880 But that's not where the FED is, and as a result, 0:05:56.320 --> 0:06:00.080 that's not where the markets are. The markets are reacting 0:06:00.160 --> 0:06:03.000 to every single data point in the last month, just 0:06:03.000 --> 0:06:06.120 the last month, teny yields went up thirty basis points, 0:06:06.200 --> 0:06:08.680 came back down forty basis points, went back up twenty 0:06:08.720 --> 0:06:12.200 basis points, and came back down forty basis points. And 0:06:12.279 --> 0:06:15.240 what you realize is that there's no anchor. There's no 0:06:15.279 --> 0:06:18.000 longer term anchor to markets, and there's no longer term 0:06:18.040 --> 0:06:22.800 anchor to policies. We should be talking about the big 0:06:22.960 --> 0:06:26.440 secular changes and how that's going to impact the next 0:06:26.480 --> 0:06:29.479 twelve months, but that's not where the FED is, and 0:06:29.520 --> 0:06:32.320 therefore that's not where the markets are right now. 0:06:32.520 --> 0:06:35.560 I wonder how significant it is to Muhammad that we 0:06:35.600 --> 0:06:38.400 did see at least one participant materially mark up their 0:06:38.440 --> 0:06:42.280 long term neutral rate. As people try to understand what 0:06:42.320 --> 0:06:43.880 this means longer term. 0:06:43.880 --> 0:06:45.760 For what a FED rate cutting path could look. 0:06:45.640 --> 0:06:48.080 Like, it's about time. 0:06:48.960 --> 0:06:52.280 I mean, you know, there is a very active discussion 0:06:52.560 --> 0:06:55.840 of what's happening in the structure of the economy and 0:06:55.920 --> 0:06:59.760 why it is that the neutral weight is well above three, 0:07:00.120 --> 0:07:04.440 nearer to four. But the FED is moving very slowly 0:07:04.480 --> 0:07:08.440 on this, and FED chair Pale has refused to engage 0:07:08.480 --> 0:07:12.440 in discussions, either saying I don't care about it or 0:07:12.480 --> 0:07:15.520 I don't have a view about it. So yeah, it's 0:07:15.560 --> 0:07:17.480 about time they're going to have to really think about this. 0:07:17.560 --> 0:07:21.040 But again, Lisa, that is a forward looking parameter, and 0:07:21.040 --> 0:07:26.160 this is a FED that focuses excessively on the past 0:07:26.680 --> 0:07:29.800 and doesn't want to signal much about what's ahead. 0:07:30.240 --> 0:07:32.560 So if you are just joining us, welcome to the program. Equally, 0:07:32.600 --> 0:07:34.680 is still firmer by zero point nine percent on the 0:07:34.760 --> 0:07:36.600 S and P five hundred, we were hired by more 0:07:36.600 --> 0:07:38.880 than one four percentage point. Just ondoing some of the 0:07:38.880 --> 0:07:40.800 moves in the bond market. On a two year yield, 0:07:41.160 --> 0:07:43.520 yields are lower still by twelve basis points. They were 0:07:43.560 --> 0:07:45.320 lower by a little bit more than that earlier on. 0:07:45.520 --> 0:07:47.040 There was a lot of interest in the medium dot 0:07:47.080 --> 0:07:49.200 for twenty twenty four. Just want to clarify something that 0:07:49.240 --> 0:07:51.680 Mike was saying, they're now signaling they expect to cut 0:07:51.760 --> 0:07:55.000 rates only once this year, compared to the reduction of 0:07:55.080 --> 0:07:57.960 three which was kind of signaled back in March Bromo. 0:07:58.080 --> 0:07:59.720 So that's the change we were looking for. Would we 0:07:59.720 --> 0:08:01.640 come down for two, Well, it's a one. It looks 0:08:01.680 --> 0:08:03.600 like we've come down to one. But twenty twenty five 0:08:03.720 --> 0:08:05.880 kind of makes up for some of that in some way. 0:08:05.680 --> 0:08:07.120 Which is what some people were saying, is that you 0:08:07.240 --> 0:08:09.320 just basically push it out the following year, which is 0:08:09.360 --> 0:08:11.760 why it might not have been a massive deal. There 0:08:11.800 --> 0:08:14.000 was a big question before this whether or not it 0:08:14.040 --> 0:08:16.760 would matter to markets on the margins. Maybe you take 0:08:16.800 --> 0:08:19.520 back some of the gains in certain bonds right now, 0:08:19.640 --> 0:08:20.880 nonetheless not. 0:08:20.760 --> 0:08:23.040 A huge shift when you look at the overall cutting cycle. 0:08:23.200 --> 0:08:25.520 Well, Michael, I've got the ten year yield just touching 0:08:25.520 --> 0:08:28.360 two standard deviation move it's not a big deal. Four 0:08:28.400 --> 0:08:33.280 point two eight percent and gyrating around. What level of 0:08:33.360 --> 0:08:36.160 ten year yield do you need to really signal, to 0:08:36.280 --> 0:08:40.000 use Bullet's word, a new regime. 0:08:40.360 --> 0:08:42.840 It's not so much the ten year yield as the 0:08:42.880 --> 0:08:45.760 front end of the curve. I think the front end 0:08:45.840 --> 0:08:48.760 of the curve, you've got to see the Fed start 0:08:48.800 --> 0:08:51.800 cutting rates and then the front end start coming down 0:08:52.240 --> 0:08:55.400 towards four percent. I think that will pull the ten 0:08:55.480 --> 0:08:58.839 year down as well a little bit, but there's an 0:08:58.920 --> 0:09:02.000 awful lot into ten year part of the year. 0:09:02.040 --> 0:09:02.959 It's an unfair question. 0:09:03.040 --> 0:09:05.520 I'm going to ask you to speak for Michael Ferolian 0:09:05.640 --> 0:09:09.320 Kasman and the other economists at JP Morgan. Do they 0:09:09.600 --> 0:09:14.880 do harm to the American economy by being expost and delaying? 0:09:15.160 --> 0:09:16.640 What would your economists say? 0:09:17.559 --> 0:09:22.000 They do no harm to anyone? That I'm pretty sure of. Look, 0:09:22.280 --> 0:09:26.040 I think when you look at market movements, you have 0:09:26.120 --> 0:09:30.679 to understand that there are different constituencies that are involved. 0:09:31.120 --> 0:09:34.080 We talk to a lot of very large plans that 0:09:34.200 --> 0:09:38.200 are waiting for the Yeald curve to disinvert because based 0:09:38.240 --> 0:09:41.760 on their investment analytics, it doesn't make sense for them 0:09:41.800 --> 0:09:44.320 to come out of cash into the longer end of 0:09:44.320 --> 0:09:47.400 the curve. There are other buyers out there that are 0:09:47.400 --> 0:09:52.560 looking to part cash into safe dollar assets. So they're 0:09:52.600 --> 0:09:55.920 big dollar buyers. They want to own the dollar, and 0:09:56.040 --> 0:09:59.680 treasuries are the largest, most liquid way to do that. 0:10:00.000 --> 0:10:01.720 I have to say, I'm right now, I'm parsing through 0:10:01.760 --> 0:10:04.560 the statement and all the details, and it's a confusing one, 0:10:04.640 --> 0:10:05.679 so let's just go over it. 0:10:05.920 --> 0:10:08.160 Four FED officials see no rate cuts this year. 0:10:08.400 --> 0:10:10.480 That is up from two officials in the March production, 0:10:10.559 --> 0:10:14.000 so that is a more hawkish tilt. Seven C one cut, well, 0:10:14.040 --> 0:10:17.160 eight C two cuts. Honestly, we're looking at right now 0:10:17.200 --> 0:10:19.560 a narrow majority seeing no more than one cut this 0:10:19.640 --> 0:10:23.320 year is a base case this according to the statement. 0:10:23.360 --> 0:10:25.400 I'm looking at this and I'm wondering, John, all the 0:10:25.440 --> 0:10:28.160 people who said this would be some kind of massive shift. 0:10:28.320 --> 0:10:29.760 It isn't being taken. 0:10:29.480 --> 0:10:32.040 That way by the market as people pass through the 0:10:32.120 --> 0:10:35.320 longer term expectations for what the Fed hopes to accomplish 0:10:35.360 --> 0:10:36.400 and where the balance of risk is. 0:10:36.440 --> 0:10:38.800 Because we had a soothing number eight thirty Eastern time, 0:10:39.160 --> 0:10:41.520 I think that's kind of the takeaway, Is that, right, Boff? 0:10:41.640 --> 0:10:44.480 Yeah, I think so. It's what I started with. This 0:10:44.600 --> 0:10:46.600 is what you look for in the numbers. If there 0:10:46.600 --> 0:10:49.600 are a lot of people clustered around one dot, then 0:10:49.800 --> 0:10:53.280 they don't change their projections after the number they've submitted them. 0:10:53.559 --> 0:10:56.400 They let them go. The fact that there were four 0:10:56.480 --> 0:10:59.280 with no change, seven withth one dot, and only eight 0:11:00.160 --> 0:11:03.959 with two dots two rate cuts tells me that they 0:11:03.960 --> 0:11:06.920 submit them, they don't do anything. The statement's completely different. 0:11:07.240 --> 0:11:11.840 This statement talks about modest progress, continue to continues to 0:11:11.840 --> 0:11:12.880 be made on inflation. 0:11:13.000 --> 0:11:15.520 Let's get Mi McKay back into the conversation before Mike goes. 0:11:15.520 --> 0:11:17.520 Since that news conference, Mike, just to clarify some of 0:11:17.520 --> 0:11:18.440 the comments you had earlier. 0:11:18.480 --> 0:11:21.800 Your thoughts, well, I misspoke. 0:11:23.520 --> 0:11:27.440 One cut is themedian dot this year for this year, 0:11:27.960 --> 0:11:31.439 but it is, as you say, come somewhat confusing because 0:11:31.440 --> 0:11:34.040 of the way they do it. But looking out over 0:11:34.080 --> 0:11:36.720 the course of the year, the question is when do 0:11:36.840 --> 0:11:40.240 they do it because their PCE projection is basically for 0:11:40.280 --> 0:11:43.600 the year where PCE is now, So that's going to 0:11:43.600 --> 0:11:46.600 be a question for j Powell in his news conference. 0:11:46.640 --> 0:11:48.880 Mike, you get into the pressor thanks for your time, sir, 0:11:49.000 --> 0:11:50.760 happens to all of us, looking forward to your conference. 0:11:50.800 --> 0:11:53.280 In that news conference with Chairman Powell. A little bit later, 0:11:53.559 --> 0:11:55.719 Don Swunk is with us from KPMG. I want to 0:11:55.720 --> 0:11:57.960 bring her into the conversation. Mohammed's still with us, Bob, 0:11:58.000 --> 0:12:00.600 Michael as well. Dan, You've had about fifty minutes, ten 0:12:00.600 --> 0:12:02.440 minutes soside to go out of these numbers. What jumps 0:12:02.440 --> 0:12:05.480 out for you, Well. 0:12:05.360 --> 0:12:08.679 Certainly the upward rise in inflation. I was surprised at 0:12:08.840 --> 0:12:11.560 I expected them to mark down inflation a little bit 0:12:11.640 --> 0:12:14.880 so that is one that I think Mohammad also flagged. 0:12:14.920 --> 0:12:17.640 But I think what's important is we know that they've 0:12:17.720 --> 0:12:21.720 delayed the putting marking down of their dots on the 0:12:21.760 --> 0:12:24.679 dot plot, and that has become more of an iterative 0:12:24.720 --> 0:12:28.160 process to reflect more of a consensus of what they 0:12:28.200 --> 0:12:30.440 do talk about at the meeting. So I'm not sure 0:12:30.679 --> 0:12:33.240 that there's the dissonance there that we'd like to some 0:12:33.320 --> 0:12:36.959 would like to see in those numbers between today's data. 0:12:37.120 --> 0:12:38.680 And those actual dots. 0:12:38.760 --> 0:12:41.360 I think what it probably did was took out of 0:12:41.480 --> 0:12:44.600 play some people who might have had hikes in their 0:12:44.679 --> 0:12:48.560 interest rate scenario for twenty twenty four that then moved 0:12:48.559 --> 0:12:52.200 them to the zero portion those four people who voted 0:12:52.240 --> 0:12:54.439 for no change in rates. But I think that's very 0:12:54.480 --> 0:12:57.240 important is that the FED has also been very careful 0:12:57.360 --> 0:13:00.000 not to declare victory, as Julia said at the beginning 0:13:00.080 --> 0:13:02.719 at the end of the last show, and I think 0:13:02.760 --> 0:13:05.719 that's really important. They don't go out and say mission accomplished. 0:13:06.040 --> 0:13:09.559 They are very deliberative right now in terms of not 0:13:09.600 --> 0:13:12.920 getting too far ahead of themselves until the data comes 0:13:12.920 --> 0:13:13.280 to them. 0:13:13.400 --> 0:13:13.679 Now. 0:13:13.840 --> 0:13:17.240 I disagree that that's sort of neutral and doesn't cause 0:13:17.240 --> 0:13:21.080 any harm data dependence. The data are lagged, and so 0:13:21.120 --> 0:13:23.280 by the time the data comes to you, even if 0:13:23.320 --> 0:13:26.680 you're willing to settle in to a higher rate, ultimately 0:13:27.080 --> 0:13:29.679 it's still lagged, and it could be after the fact. 0:13:29.760 --> 0:13:31.960 And I think that's what you see in terms of 0:13:32.000 --> 0:13:33.520 the nervousness with j. 0:13:33.720 --> 0:13:35.560 Powell, because he worries much. 0:13:35.360 --> 0:13:38.199 More than some of his colleagues about overtightening. 0:13:38.440 --> 0:13:40.760 Dan swank I look at where we are and what 0:13:40.880 --> 0:13:42.880 the key thing is is, Bob Michael said, is we're 0:13:42.880 --> 0:13:46.160 beyond the first quarter of this year, the lethargy, the 0:13:46.200 --> 0:13:49.200 slow down, maybe some of the fear of the first quarter. 0:13:49.320 --> 0:13:51.520 What does your take on the state of the American 0:13:51.600 --> 0:13:55.160 economy is they stagger to September and December. 0:13:57.360 --> 0:13:59.840 Well, we're still in an economy that's generating a lot 0:13:59.840 --> 0:14:03.160 of jobs. You know, the household survey and the establishment 0:14:03.200 --> 0:14:05.800 survey aren't quite syncd up. They haven't been synced up 0:14:06.080 --> 0:14:09.240 for a long time, in part because we're undercounting the 0:14:09.320 --> 0:14:12.480 number of immigrants in the country and that's not fully 0:14:12.559 --> 0:14:13.319 showing up in the. 0:14:13.280 --> 0:14:14.880 Household survey as well. 0:14:15.200 --> 0:14:18.240 But we do know that we continue to generate jobs, 0:14:18.400 --> 0:14:21.840 we continue to generate paychecks, and if the last month's 0:14:21.960 --> 0:14:24.280 report is to be believed, and we have to be 0:14:24.320 --> 0:14:27.720 careful on that that we actually saw on acceleration in wages, 0:14:27.800 --> 0:14:30.440 that's something to sort of, I think, take with a 0:14:30.440 --> 0:14:32.400 grain of salt. But at the end of the day, 0:14:32.440 --> 0:14:35.200 this is an economy that for the moment is still 0:14:35.520 --> 0:14:39.600 hanging in there, although slowing from what was a stunning 0:14:39.720 --> 0:14:41.960 pace in twenty twenty three. 0:14:42.200 --> 0:14:44.320 Mohammed, I'd love to bring you back in here. I'm 0:14:44.360 --> 0:14:46.920 just going through all the different statements and this is 0:14:46.960 --> 0:14:49.600 a mess. I mean, in terms of all the different views. 0:14:49.600 --> 0:14:51.680 This is not a consensus that you could see that 0:14:51.760 --> 0:14:52.600 was easily reached. 0:14:52.840 --> 0:14:54.880 Maybe there it is for right now, but later. 0:14:54.680 --> 0:14:55.200 In this year. 0:14:55.640 --> 0:14:58.200 What the balance of risks here really is all over 0:14:58.240 --> 0:15:01.160 the map when it comes to the different Fed officials. 0:15:01.560 --> 0:15:04.160 Do you think that there is too much hawkish talk 0:15:04.280 --> 0:15:07.120 right now and too much hawkish projections at a time 0:15:07.440 --> 0:15:09.240 when it seems like the Fed is saying we still 0:15:09.240 --> 0:15:11.080 haven't done enough. We want to get to two percent 0:15:11.120 --> 0:15:13.640 a little bit sooner, even as we acknowledge this is 0:15:13.640 --> 0:15:13.920 going to. 0:15:13.920 --> 0:15:14.400 Be a battle. 0:15:15.600 --> 0:15:18.400 Yeah, I think if you were to take the SEP 0:15:18.840 --> 0:15:22.680 and the statement on face fully, on face value, this 0:15:22.800 --> 0:15:25.520 would be an overly hawkish policy. 0:15:25.120 --> 0:15:27.080 Stand for this economy. 0:15:28.440 --> 0:15:32.240 Among the other things, the fact that we are now 0:15:32.280 --> 0:15:36.280 at one cut means that given that the FED will 0:15:36.320 --> 0:15:41.400 not want to stop go stop go cycle, that means 0:15:41.440 --> 0:15:43.880 that cut comes late in the year, very late in 0:15:43.880 --> 0:15:46.440 the year. And I agree with Diane, it does matter 0:15:46.520 --> 0:15:50.480 when you start the cutting cycle. It really does matter. 0:15:50.600 --> 0:15:55.320 It matters for small businesses, it matters for low income households, 0:15:55.720 --> 0:15:58.280 and it matters for the economy. So if you were 0:15:58.360 --> 0:16:02.080 to take this at face value, then this the market 0:16:02.120 --> 0:16:03.520 would be selling off right now. 0:16:03.560 --> 0:16:05.040 But it's not for good reason. 0:16:05.120 --> 0:16:08.800 And that's what I said earlier and Bob mentioned it 0:16:08.840 --> 0:16:11.400 as well, is I don't think this fully reflects the 0:16:11.520 --> 0:16:14.080 latest set of data. And given that this is data 0:16:14.160 --> 0:16:17.680 the dependent FED. If this had if the data had 0:16:17.720 --> 0:16:20.440 happened yesterday or the day before, the S and P 0:16:20.480 --> 0:16:23.000 would look very different than it is today. And that's 0:16:23.000 --> 0:16:25.360 why the press conference is going to be so critical. 0:16:25.760 --> 0:16:28.680 And that's why Chap Pak can I'll do what Bob 0:16:28.720 --> 0:16:31.520 wanted him to do half an hour ago, because he's 0:16:31.520 --> 0:16:33.040 really going to have to explain things now. 0:16:33.200 --> 0:16:35.360 There's a mammad based on this, based on the guardnance 0:16:35.360 --> 0:16:37.080 we've got in our hands. At the moment, it sounds 0:16:37.120 --> 0:16:39.240 like December. Are you telling me, by the time this 0:16:39.320 --> 0:16:43.320 news conference had finishes, it will sound like September. I 0:16:43.360 --> 0:16:45.840 suspect so, John, Bob, you agree with that, don't you? 0:16:46.000 --> 0:16:49.160 Yeah, I completely agree with that. And I think Diane 0:16:49.200 --> 0:16:52.600 and Muhammad point out a very important thing, which are 0:16:52.680 --> 0:16:55.680 the long and variable lags are real when we look 0:16:55.760 --> 0:16:59.280 at lower and middle income households, when we look at 0:16:59.320 --> 0:17:03.440 small business is they're struggling with the high cost of everything. 0:17:03.760 --> 0:17:07.600 They're struggling with the much higher cost of financing those 0:17:07.720 --> 0:17:11.879 higher prices, and you're seeing it in delinquencies. You're seeing 0:17:11.920 --> 0:17:16.360 it in charge offs and write downs and losses. 0:17:17.040 --> 0:17:18.960 Right now, I'm looking at some of the commentary, some 0:17:19.000 --> 0:17:20.679 people saying that the reason why there was a hawkish 0:17:20.680 --> 0:17:23.960 tilt was because of PTSD from the first quarter. Diane, 0:17:24.040 --> 0:17:26.399 I'd love to think your take on this, you think, 0:17:26.760 --> 0:17:28.879 and not to be all conspiracy theorists, but do you 0:17:28.880 --> 0:17:31.040 think that any FED officials thought to themselves, you know, 0:17:31.400 --> 0:17:34.399 we should probably be hawkish just to offset the inevitably 0:17:34.480 --> 0:17:36.320 dubvish message that we're going to get from FED chair 0:17:36.400 --> 0:17:38.720 Powell later today and we can frankly offset that later 0:17:38.800 --> 0:17:41.040 in this year if the data comes in such. 0:17:42.840 --> 0:17:45.639 Well, I know, I don't think that's the case, just 0:17:45.680 --> 0:17:47.760 because I just don't think they think that far ahead 0:17:47.800 --> 0:17:49.879 on this, and I think that's important. 0:17:50.640 --> 0:17:53.240 I do think that part of what we're seeing here is. 0:17:53.560 --> 0:17:56.159 Yes, they did go in to this meeting with a 0:17:56.200 --> 0:17:59.520 hawkish tilt and then in the data surprise, but we 0:17:59.600 --> 0:18:02.280 know that, you know, Chair Paul has really changed the 0:18:02.359 --> 0:18:06.119 dynamics of the SEP and I'm just surprised that given 0:18:06.200 --> 0:18:08.560 the timing of when they write this down, and you know, 0:18:08.560 --> 0:18:10.640 the FED had this data. A lot of the FED 0:18:10.680 --> 0:18:13.240 had this data last night, so they've been looking over it, 0:18:13.359 --> 0:18:16.159 you know, and came in strong with how they're going 0:18:16.240 --> 0:18:18.040 to talk about it in the morning. And I think 0:18:18.040 --> 0:18:21.240 they still have members of the board itself that would 0:18:21.280 --> 0:18:24.040 have gotten the data that would have said, you know, hey, 0:18:24.040 --> 0:18:27.199 we're still on the sidelines here or one cut and 0:18:27.240 --> 0:18:29.840 that's it. So I think that's an important way to 0:18:29.880 --> 0:18:32.040 be thinking about where they're at about what they think 0:18:32.440 --> 0:18:36.720 they need to be convinced on inflation coming down, not 0:18:36.840 --> 0:18:39.400 to get to two percent, to cut before they get there, 0:18:39.480 --> 0:18:41.439 but how much they need to be convinced. 0:18:41.920 --> 0:18:44.040 That's a lot, and I think they've set. 0:18:43.880 --> 0:18:46.800 That bar pretty high, and it's because they have been 0:18:46.840 --> 0:18:49.960 headfaked in the past. That doesn't mean we couldn't see 0:18:49.960 --> 0:18:52.760 some big improvement and get to a September cut. But 0:18:52.840 --> 0:18:55.000 I think we need a lot of improvement from here 0:18:55.240 --> 0:18:57.720 for the FED to feel convinced to do a September cut. 0:18:57.840 --> 0:19:00.159 Suddenly, this news conference in twelve minutes got a lot 0:19:00.200 --> 0:19:03.399 more interesting. Dan Swank of KPMG Dan, thank you as 0:19:03.480 --> 0:19:05.360 always if you are just tuning in and you miss 0:19:05.400 --> 0:19:08.320 the FED decision took place about eighteen minutes ago. Rates 0:19:08.400 --> 0:19:12.000 unchanged as expected. Be focused on the median dot. Basically, 0:19:12.000 --> 0:19:14.399 all the FED officials get together, they plot where they 0:19:14.400 --> 0:19:16.560 think rates should be will be for twenty four to 0:19:16.600 --> 0:19:18.760 twenty five and beyond. You take the median dot and 0:19:18.760 --> 0:19:20.399 a lot of people on Wall Street see that as 0:19:20.400 --> 0:19:22.480 a signal of how many times they get a cut 0:19:22.640 --> 0:19:25.000 in any given year. That median dot was at three 0:19:25.080 --> 0:19:27.400 cuts for this year, it's come all the way down 0:19:27.680 --> 0:19:30.560 to one. Worth noting though, that they now see four 0:19:30.600 --> 0:19:33.040 cuts in twenty twenty five, more than the three that 0:19:33.080 --> 0:19:35.720 they previously outlined. So they've pushed some of that into 0:19:35.800 --> 0:19:38.439 next year. But the range of views, I think the 0:19:38.520 --> 0:19:41.879 median marks are very, very divide. FED and Lisa did 0:19:41.880 --> 0:19:44.000