1 00:00:02,480 --> 00:00:11,520 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:12,240 --> 00:00:14,840 Speaker 2: With your Federo SEF decision This afternoon, we can cross 3 00:00:14,880 --> 00:00:16,320 Speaker 2: the DC with Mi mckath. 4 00:00:18,000 --> 00:00:23,320 Speaker 3: The fancies higher growth, stronger inflation, and slightly lower unemployment 5 00:00:23,480 --> 00:00:27,400 Speaker 3: for twenty twenty four, but officials still barely see a 6 00:00:27,440 --> 00:00:31,120 Speaker 3: median of three rate cuts for twenty twenty four. Nine 7 00:00:31,160 --> 00:00:34,320 Speaker 3: of the nineteen members, however, said they thought two or 8 00:00:34,400 --> 00:00:38,960 Speaker 3: fewer rate cuts would be appropriate, ten saw three or more. 9 00:00:39,479 --> 00:00:42,800 Speaker 3: They did not change rates today. The dots move up 10 00:00:42,840 --> 00:00:45,800 Speaker 3: a little bit next year. The median sees two cuts 11 00:00:45,840 --> 00:00:48,479 Speaker 3: to three point nine percent in twenty twenty five instead 12 00:00:48,479 --> 00:00:51,600 Speaker 3: of three cuts three more to three point one percent 13 00:00:51,880 --> 00:00:56,000 Speaker 3: in twenty twenty six, a slightly shallower path the committee's 14 00:00:56,120 --> 00:00:59,440 Speaker 3: media long run. The natural rate also moves up to 15 00:00:59,440 --> 00:01:03,320 Speaker 3: two point zero six percent. GDP is projected to increase 16 00:01:03,360 --> 00:01:06,880 Speaker 3: two point one percent this year, significant upgrade from the 17 00:01:06,920 --> 00:01:10,520 Speaker 3: one point four percent in the December forecast. Growth is 18 00:01:10,520 --> 00:01:13,960 Speaker 3: also higher in twenty twenty five and twenty twenty six. 19 00:01:14,319 --> 00:01:17,600 Speaker 3: Unemployment will end this year at four percent, FED officials 20 00:01:17,640 --> 00:01:21,119 Speaker 3: now say instead of four point one percent, and core 21 00:01:21,160 --> 00:01:24,720 Speaker 3: PCEE inflation will fall, but only to two point six 22 00:01:24,800 --> 00:01:28,160 Speaker 3: percent instead of the two point four percent seen in December. 23 00:01:28,360 --> 00:01:32,760 Speaker 3: Headline inflation unchanged at two point four percent. The only 24 00:01:33,000 --> 00:01:36,399 Speaker 3: change to the statement is job growth is no longer 25 00:01:36,520 --> 00:01:41,319 Speaker 3: characterized as moderating language about considering any adjustment to the 26 00:01:41,360 --> 00:01:45,280 Speaker 3: target rate. Commitment to the two percent inflation target is 27 00:01:45,440 --> 00:01:49,360 Speaker 3: the same. The decision was unanimous, and finally, there was 28 00:01:49,720 --> 00:01:52,680 Speaker 3: no mention of the balance sheet in the statement, beyond 29 00:01:52,840 --> 00:01:56,280 Speaker 3: keeping the ninety five billion dollars in treasury and mortgage 30 00:01:56,320 --> 00:01:57,840 Speaker 3: rate caps each month. 31 00:01:58,160 --> 00:01:59,920 Speaker 2: Mi McKay, I'm going to turn to the price sanction 32 00:02:00,080 --> 00:02:02,080 Speaker 2: the moment, but I've got one question I need to 33 00:02:02,080 --> 00:02:04,200 Speaker 2: ask you right now. Let's go through what you just 34 00:02:04,280 --> 00:02:09,040 Speaker 2: said again. So faster growth, lower unemployment, higher core inflation. 35 00:02:09,480 --> 00:02:12,520 Speaker 2: Then something jumps off the page. It's exactly the same 36 00:02:12,600 --> 00:02:15,480 Speaker 2: median dot with some changes around the surface. I know, 37 00:02:16,000 --> 00:02:18,320 Speaker 2: in and around it's more nuanced than that, but ultimately 38 00:02:18,360 --> 00:02:21,560 Speaker 2: the exact same median dot than December as December. 39 00:02:21,600 --> 00:02:21,760 Speaker 4: Mike. 40 00:02:21,800 --> 00:02:23,360 Speaker 2: Can you make sense of that? How have we just 41 00:02:24,000 --> 00:02:29,440 Speaker 2: revised growth higher, revised unemployment lower, and core inflation up 42 00:02:29,520 --> 00:02:32,200 Speaker 2: for twenty four and left the median dot unchanged. 43 00:02:34,000 --> 00:02:36,200 Speaker 3: Well, you have to look at it as the median dot, 44 00:02:36,280 --> 00:02:39,640 Speaker 3: because others did change their views around that dot, but 45 00:02:39,720 --> 00:02:44,600 Speaker 3: nobody moved significantly higher to push rates up. One person did. 46 00:02:44,880 --> 00:02:47,200 Speaker 3: They needed two to move it up to move the 47 00:02:47,240 --> 00:02:50,520 Speaker 3: median rate up. But as I noted, nine of the 48 00:02:50,639 --> 00:02:53,840 Speaker 3: ten now say two cuts or less. So it is 49 00:02:53,880 --> 00:02:59,440 Speaker 3: certainly possible if we see similar inflation and jobs numbers 50 00:02:59,480 --> 00:03:02,239 Speaker 3: going forward, that this could change again. And at the 51 00:03:02,280 --> 00:03:04,960 Speaker 3: next meeting in June, when they put out a new forecast, 52 00:03:05,200 --> 00:03:06,079 Speaker 3: they could go to two. 53 00:03:06,360 --> 00:03:08,280 Speaker 2: I guess I wonder people at barn stocks right now 54 00:03:08,360 --> 00:03:09,640 Speaker 2: might will come back to you in just a moment. 55 00:03:09,680 --> 00:03:11,680 Speaker 2: On the S and P five hundred positive by a 56 00:03:11,680 --> 00:03:13,760 Speaker 2: third of one percent. Here's the price action four your 57 00:03:13,760 --> 00:03:16,600 Speaker 2: stocks higher on the NASDA cup by zero point four percent. 58 00:03:16,840 --> 00:03:18,680 Speaker 2: In the bond market rally at the front end, we're 59 00:03:18,680 --> 00:03:22,000 Speaker 2: down about four basis points to four sixty four on 60 00:03:22,080 --> 00:03:24,040 Speaker 2: a US two year yield, and the dollar a little 61 00:03:24,040 --> 00:03:26,440 Speaker 2: bit weaker here the euro at one away eighty five. 62 00:03:26,520 --> 00:03:26,600 Speaker 5: Bro. 63 00:03:26,720 --> 00:03:29,040 Speaker 2: My first reaction to this just to see faster growth 64 00:03:29,360 --> 00:03:32,800 Speaker 2: for twenty twenty four, lower unemployment and higher core inflation 65 00:03:32,880 --> 00:03:34,200 Speaker 2: and a median dot, and we can get into the 66 00:03:34,280 --> 00:03:36,800 Speaker 2: changes beneath the service. I know, but a median dot 67 00:03:36,800 --> 00:03:39,120 Speaker 2: that's unchanged in the face of all of that. If 68 00:03:39,120 --> 00:03:41,560 Speaker 2: your inequities at the moment, that sounds pretty bullish to me, 69 00:03:41,880 --> 00:03:42,360 Speaker 2: doesn't it. 70 00:03:42,560 --> 00:03:45,960 Speaker 1: This is a federal reserve that suddenly, under the hood 71 00:03:46,240 --> 00:03:49,560 Speaker 1: seems to be accepting higher than expected inflation for a 72 00:03:49,600 --> 00:03:52,480 Speaker 1: longer period of time, taking longer to get down to 73 00:03:52,480 --> 00:03:55,080 Speaker 1: that neutral rate, because there is no other way to 74 00:03:55,160 --> 00:03:57,800 Speaker 1: interpret all the numbers that you just laid out. Harder 75 00:03:57,800 --> 00:04:01,200 Speaker 1: inflation than expected for the next couple of years, faster growth, 76 00:04:01,400 --> 00:04:03,320 Speaker 1: and the fact that they're still planning for similar types 77 00:04:03,360 --> 00:04:06,160 Speaker 1: of cuts highlights where the bias is right now for 78 00:04:06,200 --> 00:04:08,600 Speaker 1: a federal reserve that still does want to cut rates. 79 00:04:08,600 --> 00:04:10,400 Speaker 2: If you're just change again, joining us around the table, 80 00:04:10,520 --> 00:04:13,120 Speaker 2: Muhammad el Are, and it is alongside us together with 81 00:04:13,240 --> 00:04:17,159 Speaker 2: Prayer Misra, fixed income portfolio manager at JP Morgan Asset Management. Prayer, 82 00:04:17,160 --> 00:04:18,880 Speaker 2: I want to cross cyber to you just your first 83 00:04:18,880 --> 00:04:20,760 Speaker 2: thoughts on the projections in the statement that we got 84 00:04:20,880 --> 00:04:21,640 Speaker 2: just moments ago. 85 00:04:22,400 --> 00:04:24,080 Speaker 6: I think this is a feed that really wants that 86 00:04:24,160 --> 00:04:26,800 Speaker 6: soft landing to continue. They saw a path or that 87 00:04:27,960 --> 00:04:30,960 Speaker 6: for that soft landing. Now we have had better, better 88 00:04:31,000 --> 00:04:33,800 Speaker 6: inflation data, higher inflation data than the Fed would have liked, 89 00:04:34,000 --> 00:04:36,200 Speaker 6: I think the last two months, but it's two months, 90 00:04:36,360 --> 00:04:38,240 Speaker 6: you know, you just go back four months. We had 91 00:04:38,279 --> 00:04:41,640 Speaker 6: really weak inflation data November. In December, jan infeb came 92 00:04:41,680 --> 00:04:43,480 Speaker 6: in a little higher. I mean, it was never going 93 00:04:43,480 --> 00:04:45,120 Speaker 6: to be a straight line down to two percent. I 94 00:04:45,120 --> 00:04:46,960 Speaker 6: think the Fed is saying we're going to be patient. 95 00:04:47,240 --> 00:04:49,840 Speaker 6: There's a long time between now and December those projections 96 00:04:49,839 --> 00:04:53,240 Speaker 6: and December projections that growth getting higher. I wonder if 97 00:04:53,240 --> 00:04:56,839 Speaker 6: they're telling you the supply side's working, whether it's population growth, 98 00:04:56,880 --> 00:05:00,160 Speaker 6: whether it's supply chains coming back, that's allowing growth to 99 00:05:00,200 --> 00:05:02,360 Speaker 6: be strong, that's allowing the label market to be okay, 100 00:05:02,800 --> 00:05:04,920 Speaker 6: and the fighter saying be patient, we're going to get 101 00:05:04,960 --> 00:05:07,880 Speaker 6: close to that two percent might take a little bit longer. 102 00:05:08,200 --> 00:05:09,600 Speaker 7: We can start normalizing. 103 00:05:09,760 --> 00:05:11,599 Speaker 2: Well, it's feeling a rally, and gold God is up 104 00:05:11,600 --> 00:05:13,440 Speaker 2: by zero point six percent of the back of some 105 00:05:13,520 --> 00:05:15,560 Speaker 2: of this, Mohammed your thoughts on what we've just heard 106 00:05:15,560 --> 00:05:16,480 Speaker 2: from this Federal Reserve. 107 00:05:16,839 --> 00:05:19,960 Speaker 8: So I would have agreed with everything that she said, 108 00:05:20,000 --> 00:05:22,839 Speaker 8: with one exception, which is a revision up in the 109 00:05:22,880 --> 00:05:26,359 Speaker 8: PCEE core to two point six So that puts me 110 00:05:26,440 --> 00:05:28,960 Speaker 8: more in Lisa's camp. I think this is a signal 111 00:05:29,000 --> 00:05:31,520 Speaker 8: and the market is taking it as that that there 112 00:05:31,520 --> 00:05:34,160 Speaker 8: will tolerate slightly higher inflation for longer. 113 00:05:35,320 --> 00:05:38,000 Speaker 1: This is a reason why maybe if you look incrementally 114 00:05:38,080 --> 00:05:40,520 Speaker 1: under the hood, you're seeing some inflation expectations of the 115 00:05:40,560 --> 00:05:43,159 Speaker 1: longer term start to pick up just a little bit. Priya, 116 00:05:43,279 --> 00:05:45,960 Speaker 1: from that point of view, does this kind of call, 117 00:05:46,080 --> 00:05:49,719 Speaker 1: all things being equal, make you less enthusiastic about longer 118 00:05:49,800 --> 00:05:52,040 Speaker 1: term treasuries if it seems like this is a FED 119 00:05:52,440 --> 00:05:55,880 Speaker 1: that wants to stick the soft landing, regardless of what 120 00:05:55,960 --> 00:05:58,680 Speaker 1: the data might be suggesting and even their own projections. 121 00:05:58,880 --> 00:06:01,240 Speaker 6: I would say the leave of the curve is still 122 00:06:01,240 --> 00:06:03,719 Speaker 6: the most attractive because you know whether they start, whether 123 00:06:03,760 --> 00:06:05,560 Speaker 6: they cut two times or three times. Let's look at 124 00:06:05,560 --> 00:06:08,159 Speaker 6: the total amount of cuts that's priced in. The neutral 125 00:06:08,240 --> 00:06:10,719 Speaker 6: rate that the market is expecting on the end point 126 00:06:10,960 --> 00:06:13,600 Speaker 6: is three seventy five. I mean, the FEDS neutral late 127 00:06:13,640 --> 00:06:16,400 Speaker 6: is two and a half. The market is well north 128 00:06:16,400 --> 00:06:18,160 Speaker 6: of that. So the part of the curve that's the 129 00:06:18,200 --> 00:06:22,039 Speaker 6: most i'd say sensitive to the totality of rate cuts 130 00:06:22,080 --> 00:06:23,440 Speaker 6: is that five to ten year part. 131 00:06:23,600 --> 00:06:24,560 Speaker 7: You're right going. 132 00:06:24,360 --> 00:06:27,680 Speaker 6: Out into the thirty year, there's still premium that's supply demand. 133 00:06:27,960 --> 00:06:30,080 Speaker 6: But I will say if the soft landing continues, that 134 00:06:30,240 --> 00:06:33,159 Speaker 6: six trillions sitting in money market funds starts to go 135 00:06:33,200 --> 00:06:36,520 Speaker 6: into bond funds equity funds, that's a positive for duration 136 00:06:36,600 --> 00:06:37,000 Speaker 6: as well. 137 00:06:37,160 --> 00:06:40,640 Speaker 1: Mohammed, I have to say this idea of potentially inflation 138 00:06:40,800 --> 00:06:43,960 Speaker 1: being higher for longer one, is it kind of a 139 00:06:44,040 --> 00:06:47,280 Speaker 1: sort of tacit acceptance of two points something something you've 140 00:06:47,320 --> 00:06:49,760 Speaker 1: talked a lot about, rather than looking for two percent 141 00:06:49,880 --> 00:06:51,600 Speaker 1: is even a goal if it takes ten years, are 142 00:06:51,600 --> 00:06:54,040 Speaker 1: we talking about two percent as the target anymore? 143 00:06:54,600 --> 00:06:56,200 Speaker 8: No, if it takes ten years, then we're not talking 144 00:06:56,240 --> 00:07:00,440 Speaker 8: about two percent anymore. I think you're cutting that ascid 145 00:07:00,600 --> 00:07:04,839 Speaker 8: agreement that in order to achieve the soft landing, we 146 00:07:04,920 --> 00:07:07,440 Speaker 8: have to redefine what we think is the inflation rate 147 00:07:07,440 --> 00:07:09,479 Speaker 8: that goes with that soft landing. It is not two. 148 00:07:09,720 --> 00:07:11,400 Speaker 8: I think it is nearer to three than it is 149 00:07:11,440 --> 00:07:13,520 Speaker 8: to two, And I think that this is a first 150 00:07:13,520 --> 00:07:14,640 Speaker 8: step in this process. 151 00:07:14,880 --> 00:07:16,920 Speaker 2: I wish that these forecasts came out before the semi 152 00:07:16,920 --> 00:07:19,640 Speaker 2: annual testimony, because I do wonder how different the questions 153 00:07:19,680 --> 00:07:22,520 Speaker 2: would have been. There would be serious questions now about 154 00:07:22,520 --> 00:07:26,440 Speaker 2: how serious they are about getting inflation back down to target. Lisa, 155 00:07:26,640 --> 00:07:28,000 Speaker 2: I think we have to go through these numbers. If 156 00:07:28,000 --> 00:07:29,640 Speaker 2: you're just joining us here, they are. So I give 157 00:07:29,640 --> 00:07:32,040 Speaker 2: you the number now, the forecast for twenty four, and 158 00:07:32,080 --> 00:07:34,600 Speaker 2: you can compare it to December. As Mike McKee explained 159 00:07:34,680 --> 00:07:37,960 Speaker 2: quite clearly, these are the median projections two point one 160 00:07:38,000 --> 00:07:41,080 Speaker 2: percent for GDP for twenty four. In December it was 161 00:07:41,120 --> 00:07:44,600 Speaker 2: one point four. The unemployment rate for twenty four four 162 00:07:44,600 --> 00:07:48,400 Speaker 2: percent in December it was four point one PCE two 163 00:07:48,480 --> 00:07:51,800 Speaker 2: point four December two point four, core PCE two point 164 00:07:51,800 --> 00:07:55,760 Speaker 2: six December two point four. The medium DOT for this 165 00:07:55,920 --> 00:08:01,360 Speaker 2: year unchanged at four point six, implying three recuts. Now, Bramo, 166 00:08:01,600 --> 00:08:04,200 Speaker 2: if you put that in front of any committee, any 167 00:08:04,200 --> 00:08:07,840 Speaker 2: press conference, the obvious question for any journalist today this 168 00:08:07,960 --> 00:08:11,360 Speaker 2: afternoon is how serious you are taking it to get 169 00:08:11,360 --> 00:08:13,480 Speaker 2: it back to two percent? Because based on that, I mean, 170 00:08:14,040 --> 00:08:16,239 Speaker 2: what are you taking seriously? And I think you absolutely 171 00:08:16,280 --> 00:08:19,920 Speaker 2: nailed it. Are they beginning to tolerate something a bit above. 172 00:08:19,640 --> 00:08:23,040 Speaker 1: Target because ultimately they want to prioritize the labor market 173 00:08:23,120 --> 00:08:26,160 Speaker 1: over inflation data that is noisy, and they've talked about 174 00:08:26,160 --> 00:08:27,840 Speaker 1: that and higher than expected. It will just say if 175 00:08:27,840 --> 00:08:30,560 Speaker 1: it came up for semi annual testimony, I wonder if 176 00:08:30,600 --> 00:08:32,720 Speaker 1: they'll ask about bitcoin, because they probably wouldn't read it 177 00:08:32,720 --> 00:08:34,640 Speaker 1: and then ask that question. But I'm glad that we 178 00:08:34,679 --> 00:08:36,559 Speaker 1: have a good journalist who are going to be asking 179 00:08:36,559 --> 00:08:37,520 Speaker 1: that question in the press. 180 00:08:37,320 --> 00:08:39,640 Speaker 2: Comp I think Senator Warren also sent another lesson recently 181 00:08:39,640 --> 00:08:41,440 Speaker 2: saying you should cut rates, like right. 182 00:08:41,320 --> 00:08:42,200 Speaker 7: Now, maybe they're listening. 183 00:08:42,320 --> 00:08:44,200 Speaker 2: Yeah, I'm sure that won't come up in the news 184 00:08:44,200 --> 00:08:46,480 Speaker 2: conference a little bit later. Joining us to discuss this 185 00:08:46,480 --> 00:08:49,319 Speaker 2: one is Dan Swart, the chief economist the KPMG, alongside 186 00:08:49,320 --> 00:08:51,720 Speaker 2: Bank of America's Michael Gape. And Dan, i'd love your 187 00:08:51,760 --> 00:08:53,640 Speaker 2: reaction just to these projections and what you've heard so 188 00:08:53,760 --> 00:08:55,040 Speaker 2: far from this Federal Reserve. 189 00:08:56,400 --> 00:08:58,840 Speaker 9: Well, I think a couple of things are really important. 190 00:08:58,880 --> 00:09:02,079 Speaker 9: First of all, the throw to cut rates is a 191 00:09:02,120 --> 00:09:05,360 Speaker 9: little higher than many people thought. But also they're not 192 00:09:05,400 --> 00:09:08,240 Speaker 9: talking about raising rates even though they've had this higher inflation. 193 00:09:08,679 --> 00:09:11,440 Speaker 9: And I do think remember they're going through their process 194 00:09:11,480 --> 00:09:16,880 Speaker 9: of reevaluating rates. What is the optimal inflation rate and 195 00:09:17,080 --> 00:09:19,840 Speaker 9: what is the optimal policy path? And I think on 196 00:09:20,000 --> 00:09:22,559 Speaker 9: hedging what they're doing right now as they're saying, we're 197 00:09:22,600 --> 00:09:24,840 Speaker 9: willing to hold it higher for longer to get there. 198 00:09:25,160 --> 00:09:28,000 Speaker 9: And Jay Paul really made this point that market sort 199 00:09:28,000 --> 00:09:31,440 Speaker 9: of ran off on in December, is that we don't 200 00:09:31,440 --> 00:09:33,680 Speaker 9: think we need a recession anymore to get back to 201 00:09:33,720 --> 00:09:36,760 Speaker 9: our inflation target. They're willing to be patient to get 202 00:09:36,760 --> 00:09:39,600 Speaker 9: down there. I do think over time there is going 203 00:09:39,640 --> 00:09:42,320 Speaker 9: to be a debate of what is the optimal inflation rate? 204 00:09:42,679 --> 00:09:44,520 Speaker 9: Is it two and a half percent? I don't think 205 00:09:44,520 --> 00:09:47,120 Speaker 9: it's closer to three. But I do think that there 206 00:09:47,200 --> 00:09:49,760 Speaker 9: is something to the fact that they're willing to tolerate 207 00:09:49,840 --> 00:09:52,640 Speaker 9: a little higher inflation for a little bit longer rather 208 00:09:52,679 --> 00:09:56,440 Speaker 9: than higher unemployment. But they also are not willing to 209 00:09:57,160 --> 00:10:00,480 Speaker 9: raise rates again, and I think that's important too. But 210 00:10:00,520 --> 00:10:03,240 Speaker 9: the threshold to cut is a little higher than it 211 00:10:03,360 --> 00:10:04,880 Speaker 9: was prior to this meeting. Dan. 212 00:10:05,000 --> 00:10:06,880 Speaker 2: Before I get Mike Apen's thoughts, I just want to 213 00:10:06,880 --> 00:10:09,280 Speaker 2: come back to on something you said, we don't need 214 00:10:09,440 --> 00:10:11,880 Speaker 2: a recession is very different so we don't want one. 215 00:10:12,440 --> 00:10:14,880 Speaker 2: Do you think that is the difference this afternoon, is 216 00:10:14,880 --> 00:10:17,360 Speaker 2: this we don't need a recession to get inflation back 217 00:10:17,400 --> 00:10:19,120 Speaker 2: to target, or we don't want one. 218 00:10:19,360 --> 00:10:22,200 Speaker 9: Oh, I think it's that they don't need a recession. 219 00:10:22,240 --> 00:10:24,640 Speaker 9: They don't believe they need a recession, and they don't 220 00:10:24,679 --> 00:10:27,040 Speaker 9: want one if they don't need it. So I think 221 00:10:27,120 --> 00:10:32,080 Speaker 9: that's really the important two pieces to this equation is 222 00:10:32,120 --> 00:10:34,760 Speaker 9: that if they had to take a recession, you know, 223 00:10:34,880 --> 00:10:37,800 Speaker 9: August twenty twenty two, bucket of cold ice on us 224 00:10:37,840 --> 00:10:41,520 Speaker 9: at Jackson Hole, we'll take a recession if we need 225 00:10:41,559 --> 00:10:45,079 Speaker 9: it to get inflation down. They're wrong. We didn't need it. 226 00:10:45,240 --> 00:10:48,840 Speaker 9: They got pretty far. We've made enough progress now that 227 00:10:49,040 --> 00:10:51,560 Speaker 9: to take a recession to make it the last of 228 00:10:51,640 --> 00:10:55,160 Speaker 9: the last mile on this road on inflation, it's not 229 00:10:55,400 --> 00:10:58,120 Speaker 9: worth it. And I think that's the hedge that you're 230 00:10:58,120 --> 00:10:59,080 Speaker 9: seeing played. 231 00:10:58,760 --> 00:10:59,560 Speaker 7: Out right now. 232 00:11:00,040 --> 00:11:01,679 Speaker 1: Also has a bit of a shifting in the goalposts, 233 00:11:01,720 --> 00:11:05,000 Speaker 1: given the fact that we're looking at inflation that's coming 234 00:11:05,040 --> 00:11:07,080 Speaker 1: down but not coming down to two percent and then 235 00:11:07,160 --> 00:11:10,280 Speaker 1: that's okay, that is considered success. How much is this 236 00:11:10,360 --> 00:11:14,199 Speaker 1: statement and these projections really signaling an acceptance of higher 237 00:11:14,200 --> 00:11:15,400 Speaker 1: inflation for longer to you? 238 00:11:17,160 --> 00:11:19,920 Speaker 4: So to me, it's not. I mean, I think they're 239 00:11:19,960 --> 00:11:23,040 Speaker 4: looking at changing policy today or setting policy today and 240 00:11:23,080 --> 00:11:26,400 Speaker 4: trying to get to their macro objectives over the three 241 00:11:26,520 --> 00:11:29,280 Speaker 4: or forecast horizon. They're still saying we'll get there in 242 00:11:29,400 --> 00:11:32,199 Speaker 4: twenty twenty six, which is the same story that they've 243 00:11:32,679 --> 00:11:35,000 Speaker 4: given in the past. So, yes, they have to tolerate 244 00:11:35,360 --> 00:11:38,240 Speaker 4: a little higher inflation in the near term this year 245 00:11:38,480 --> 00:11:41,520 Speaker 4: and next year, but I don't think they're giving up 246 00:11:41,559 --> 00:11:44,480 Speaker 4: on that two percent goal. I think the flavor to 247 00:11:44,600 --> 00:11:49,080 Speaker 4: the revisions to me, says the media and member is 248 00:11:49,200 --> 00:11:53,360 Speaker 4: fully embracing this supply side story and the economy can 249 00:11:53,480 --> 00:11:59,320 Speaker 4: run faster at least temporarily without generating significant overheating pressures. 250 00:11:59,400 --> 00:12:02,560 Speaker 4: So to me, that's the main message from the statement. 251 00:12:03,080 --> 00:12:06,800 Speaker 4: Although I acknowledge with revising up the inflation path two 252 00:12:06,840 --> 00:12:09,440 Speaker 4: tenths this year one tenth next year does say we 253 00:12:09,520 --> 00:12:12,679 Speaker 4: may have to have a little higher inflation in the meantime, 254 00:12:12,720 --> 00:12:14,240 Speaker 4: But I don't think they're giving up on that two 255 00:12:14,280 --> 00:12:15,000 Speaker 4: percent target. 256 00:12:15,120 --> 00:12:17,240 Speaker 1: Prier I see vigorously nodding you agree. 257 00:12:17,360 --> 00:12:19,880 Speaker 7: I completely agree. I think it's the supply side that's 258 00:12:19,920 --> 00:12:20,320 Speaker 7: the key. 259 00:12:20,840 --> 00:12:23,560 Speaker 6: I think the entire soft landing was predicated on the 260 00:12:23,600 --> 00:12:26,800 Speaker 6: FED starting to ease. What they're telling us is that 261 00:12:26,840 --> 00:12:29,000 Speaker 6: the starting point. I think the starting point matters. We're 262 00:12:29,040 --> 00:12:31,480 Speaker 6: at five and a half on FED funds. Daniel real 263 00:12:31,559 --> 00:12:35,360 Speaker 6: rates at two percent, this is restrictive policy. Can they 264 00:12:35,400 --> 00:12:38,240 Speaker 6: start to normalize, Start to cut a little bit, not 265 00:12:38,360 --> 00:12:40,920 Speaker 6: the entire cycle. They don't have to cut consecutively all 266 00:12:40,960 --> 00:12:43,200 Speaker 6: the way down to two and a half percent. Start 267 00:12:43,240 --> 00:12:46,440 Speaker 6: that process of normalization. If that means inflation's a little 268 00:12:46,480 --> 00:12:48,960 Speaker 6: higher than their target this year, so be it. 269 00:12:49,080 --> 00:12:50,480 Speaker 7: We'll get there in the next couple of years. 270 00:12:50,520 --> 00:12:53,120 Speaker 6: If the supply side is working, it allows growth to 271 00:12:53,160 --> 00:12:56,480 Speaker 6: be strong without creating inflation. Maybe the target is two 272 00:12:56,559 --> 00:12:58,439 Speaker 6: to three percent. I don't think they can politically say 273 00:12:58,480 --> 00:13:01,040 Speaker 6: it or have much credit. It's like me saying I 274 00:13:01,040 --> 00:13:03,240 Speaker 6: can't run a marathon and I can't run one hundred 275 00:13:03,280 --> 00:13:04,680 Speaker 6: miles meters. 276 00:13:05,080 --> 00:13:06,559 Speaker 7: But essentially, you. 277 00:13:06,480 --> 00:13:08,520 Speaker 6: Know, when you can't reach your target, you should not 278 00:13:08,880 --> 00:13:12,000 Speaker 6: change the target. But can they act as if you'll 279 00:13:12,040 --> 00:13:14,880 Speaker 6: get there, we just push out that two percent a 280 00:13:15,000 --> 00:13:17,200 Speaker 6: year out or two years out. I think that's what 281 00:13:17,240 --> 00:13:20,559 Speaker 6: they're telling us. They're telling us, let's start. We're not committing. 282 00:13:20,600 --> 00:13:23,120 Speaker 6: This is a data dependent FED. We can decide twenty 283 00:13:23,120 --> 00:13:25,640 Speaker 6: five and twenty six cuts. We have a lot of 284 00:13:25,679 --> 00:13:27,679 Speaker 6: time to do that. Let's just start the process now, 285 00:13:27,679 --> 00:13:29,400 Speaker 6: because we're in restrictive territory prayer? 286 00:13:29,400 --> 00:13:31,840 Speaker 2: Is that a reason to buy the tenure treasury or salad. 287 00:13:32,480 --> 00:13:35,280 Speaker 7: Ah the ten years harder? It's a reason why the 288 00:13:35,320 --> 00:13:35,920 Speaker 7: five year. 289 00:13:37,320 --> 00:13:40,440 Speaker 6: For now, I would say buy it because I think 290 00:13:40,480 --> 00:13:43,400 Speaker 6: this keeps demand coming into fixed income. I think the 291 00:13:43,480 --> 00:13:46,720 Speaker 6: raids market was actually slightly hawkishly positioned into this meeting 292 00:13:46,920 --> 00:13:50,319 Speaker 6: because of this debate between two and three cuts. The 293 00:13:50,320 --> 00:13:53,400 Speaker 6: EU risk assets have been on a tear. I mean, 294 00:13:53,440 --> 00:13:55,839 Speaker 6: there's been nothing stopping that. I don't think now anything 295 00:13:55,880 --> 00:13:59,440 Speaker 6: stops it because unless the growth data weakens, the Fed's 296 00:13:59,440 --> 00:14:01,840 Speaker 6: telling you they're willing to let this run. They're willing 297 00:14:01,880 --> 00:14:04,720 Speaker 6: to ease, to allow that soft landing to continue. 298 00:14:04,840 --> 00:14:06,760 Speaker 2: Dan, I'd love your thoughts on how to navigate this 299 00:14:06,800 --> 00:14:08,680 Speaker 2: news conference when there is such a clear and obvious 300 00:14:08,679 --> 00:14:12,280 Speaker 2: contradiction in the medium projections for twenty twenty four. How 301 00:14:12,280 --> 00:14:14,480 Speaker 2: do you think Chairman Power will explore this one in 302 00:14:14,559 --> 00:14:15,480 Speaker 2: sixteen minutes time. 303 00:14:16,920 --> 00:14:19,680 Speaker 9: He's going to be straight in and full on and 304 00:14:19,680 --> 00:14:22,080 Speaker 9: we're still committed to getting to two percent. He will 305 00:14:22,080 --> 00:14:25,720 Speaker 9: not back off that kind of rhetoric, and I think 306 00:14:25,720 --> 00:14:29,040 Speaker 9: that's important. He's saying, we're just willing to We've not 307 00:14:29,200 --> 00:14:31,320 Speaker 9: changed the time frame, it's just going to come down 308 00:14:31,360 --> 00:14:34,400 Speaker 9: a little slower than we thought. But also there's a tradeoff. 309 00:14:34,560 --> 00:14:37,920 Speaker 9: You know, are we willing to create unnecessary pain which 310 00:14:37,960 --> 00:14:42,560 Speaker 9: is the Fed's word for euphanism, euphanism for unemployment for 311 00:14:42,680 --> 00:14:45,560 Speaker 9: no reason? Do we really need that at this point 312 00:14:45,560 --> 00:14:47,440 Speaker 9: in time? And I think what they're saying is no. 313 00:14:47,680 --> 00:14:50,800 Speaker 9: We see even in the labor market, we've seen a 314 00:14:50,880 --> 00:14:55,560 Speaker 9: surgeon immigration, We've seen rebalancing in the labor market that's continuing. 315 00:14:56,040 --> 00:14:59,760 Speaker 9: If the labor market were to get significantly softer, they 316 00:15:00,160 --> 00:15:02,760 Speaker 9: cut more rapidly. I think that's the other side of 317 00:15:02,800 --> 00:15:05,400 Speaker 9: this that is interesting, is that we were seeing that 318 00:15:05,480 --> 00:15:07,720 Speaker 9: we saw are starting to see sort of a division 319 00:15:07,840 --> 00:15:10,680 Speaker 9: within the FED on what are the balance of risks. 320 00:15:10,920 --> 00:15:12,720 Speaker 9: But at the end of the day, the FED is 321 00:15:12,720 --> 00:15:15,960 Speaker 9: looking at this saying, we've had a pretty resilient economy 322 00:15:16,160 --> 00:15:19,280 Speaker 9: and there's no reason to derail a resilient economy. As 323 00:15:19,280 --> 00:15:22,200 Speaker 9: long as we're moving in the right direction. How fast 324 00:15:22,320 --> 00:15:26,080 Speaker 9: we get there doesn't matter given the progress we've made. 325 00:15:26,560 --> 00:15:28,360 Speaker 9: And I think, you know, it does matter if it's 326 00:15:28,400 --> 00:15:31,480 Speaker 9: ten years, like Mohammad said, yes, then it's not. But 327 00:15:31,880 --> 00:15:34,680 Speaker 9: I think in the context of where we've been and 328 00:15:34,720 --> 00:15:38,240 Speaker 9: what we're doing. This is sort of the more the 329 00:15:38,320 --> 00:15:41,200 Speaker 9: way to think about it as a way to not 330 00:15:41,480 --> 00:15:44,080 Speaker 9: cause undue pain in the economy for no reason. 331 00:15:44,440 --> 00:15:46,760 Speaker 8: So then I agree with you, and I think it's 332 00:15:46,800 --> 00:15:51,440 Speaker 8: important that we're redefining patients going into this meeting. Patients 333 00:15:51,440 --> 00:15:54,960 Speaker 8: meant there's no rush to cut rates now. Patients means 334 00:15:55,480 --> 00:15:58,080 Speaker 8: we may have to wait a little bit longer to 335 00:15:58,080 --> 00:16:01,640 Speaker 8: get to two percent or to paff will be slightly different. 336 00:16:02,320 --> 00:16:06,080 Speaker 8: But whenever I say that out, the reaction, the pushback 337 00:16:06,120 --> 00:16:10,040 Speaker 8: I get is but that's going to destabilize inflation expectations. 338 00:16:11,400 --> 00:16:12,240 Speaker 4: I don't think it will. 339 00:16:12,280 --> 00:16:14,360 Speaker 8: Do you agree? Do you agree that you will? 340 00:16:15,920 --> 00:16:18,160 Speaker 9: Yeah, I'm with you, Muhammad on this. I don't think 341 00:16:18,200 --> 00:16:23,400 Speaker 9: it will because we've seen remarkably anchored inflation expectations throughout 342 00:16:23,400 --> 00:16:26,360 Speaker 9: all this. Now, if it did begin to the fact, 343 00:16:26,360 --> 00:16:29,480 Speaker 9: we'd be changing its tune pretty quickly, right, So this 344 00:16:29,520 --> 00:16:32,040 Speaker 9: is something they're looking at. They're looking at that inflation 345 00:16:32,120 --> 00:16:35,720 Speaker 9: expectations have been fail well anchored, and that's a good 346 00:16:35,960 --> 00:16:38,520 Speaker 9: dying for them that this is an okay path to take. 347 00:16:38,560 --> 00:16:41,520 Speaker 9: But you're absolutely right, if we were to see inflation 348 00:16:41,680 --> 00:16:44,800 Speaker 9: expectations shift on the basis of this, they'd have to 349 00:16:44,880 --> 00:16:46,720 Speaker 9: change their tune and their strategy. 350 00:16:46,880 --> 00:16:48,080 Speaker 2: My cape and I want to give you the final 351 00:16:48,080 --> 00:16:50,360 Speaker 2: work against this news conference. What would you look for? 352 00:16:52,480 --> 00:16:55,080 Speaker 4: Well, I think that the balance so what's been discussed 353 00:16:55,080 --> 00:16:58,040 Speaker 4: here is essentially you know, do you really have a 354 00:16:58,120 --> 00:17:01,280 Speaker 4: higher bar to start? Are you less confident about starting? 355 00:17:01,840 --> 00:17:03,640 Speaker 4: We all seem to think that they still have a 356 00:17:03,680 --> 00:17:06,679 Speaker 4: lot of confidence about disinflation remaining in place. So I 357 00:17:06,680 --> 00:17:10,440 Speaker 4: would kind of address those those two confidences, and honestly, 358 00:17:10,720 --> 00:17:13,840 Speaker 4: I would try and tease out any information on the 359 00:17:13,880 --> 00:17:16,560 Speaker 4: balance sheet discussion. The market I think needs to know 360 00:17:17,280 --> 00:17:21,680 Speaker 4: that does taper start when overnight reverse repo balances are 361 00:17:21,760 --> 00:17:23,960 Speaker 4: just low? Or do we have to get to zero? 362 00:17:24,200 --> 00:17:27,399 Speaker 4: On that? I do think some information there would be helpful. 363 00:17:27,440 --> 00:17:29,320 Speaker 2: I think we'll beginning some questions on that, no doubt 364 00:17:29,320 --> 00:17:31,240 Speaker 2: about it. Might GAPE and a Bank for America, the 365 00:17:31,280 --> 00:17:33,359 Speaker 2: brilliant Dan Swamk of KPMG to the two of you. 366 00:17:33,720 --> 00:17:35,760 Speaker 2: Thank you if you are just joining us thirteen minutes 367 00:17:35,800 --> 00:17:39,119 Speaker 2: away from a news conference with Chairjpal of the Federal Reserve. 368 00:17:39,200 --> 00:17:42,399 Speaker 2: No change to interest rates, plenty of changes to the 369 00:17:42,400 --> 00:17:46,680 Speaker 2: outlook for twenty twenty four, faster growth, lower unemployment, higher 370 00:17:46,680 --> 00:17:49,240 Speaker 2: core inflation, and then I guess the news is where 371 00:17:49,240 --> 00:17:52,560 Speaker 2: there is no change, the medium dot still implying three 372 00:17:52,640 --> 00:17:55,680 Speaker 2: cuts for twenty twenty four. Now you're all making me 373 00:17:55,720 --> 00:17:57,680 Speaker 2: feel a little bit uncomfortable because you all agree with 374 00:17:57,720 --> 00:17:58,920 Speaker 2: each other. So I've got to be that guy, and 375 00:17:58,920 --> 00:18:00,800 Speaker 2: I think least's on the same page just me. There's 376 00:18:00,840 --> 00:18:02,240 Speaker 2: going to be a lot of people watching this that 377 00:18:02,359 --> 00:18:04,280 Speaker 2: just think, well, hang on a minute, there's a huge 378 00:18:04,280 --> 00:18:07,400 Speaker 2: contradiction in this. In all of this that you've revised 379 00:18:07,480 --> 00:18:12,440 Speaker 2: higher inflation, revised lower unemployment, you're looking for a faster economy, 380 00:18:12,800 --> 00:18:16,479 Speaker 2: and your projection for rates stays unchanged. That sounds super davish, 381 00:18:16,560 --> 00:18:19,480 Speaker 2: and I would say displays a real tolerance for above 382 00:18:19,560 --> 00:18:23,040 Speaker 2: target inflation with equities at all time highs and credit 383 00:18:23,080 --> 00:18:26,960 Speaker 2: spreads very very tight. Why are we wrong when people 384 00:18:26,960 --> 00:18:29,840 Speaker 2: come on this program and say we are sufficiently restrictive. 385 00:18:30,119 --> 00:18:32,840 Speaker 2: In fact, some people come on this program and say significantly, 386 00:18:32,920 --> 00:18:35,720 Speaker 2: So where is the evidence of that based on what 387 00:18:35,720 --> 00:18:39,000 Speaker 2: we're seeing this afternoon? Where is the evidence? Muhammad? 388 00:18:39,840 --> 00:18:43,679 Speaker 8: So the evidence was given to you earlier by Kathy, 389 00:18:43,800 --> 00:18:47,639 Speaker 8: which is if you just look at one price, which 390 00:18:47,680 --> 00:18:52,360 Speaker 8: is where the policy ad is relative to where core 391 00:18:52,400 --> 00:18:54,960 Speaker 8: PCEE is. That's where you get the restrictive. But I 392 00:18:55,040 --> 00:18:56,800 Speaker 8: agree with you if you look at the financial conditions 393 00:18:56,800 --> 00:19:00,639 Speaker 8: as a whole, these are very loose financial conditions that I'm. 394 00:19:00,520 --> 00:19:02,600 Speaker 1: Looking at in the statement is that the FED took 395 00:19:02,640 --> 00:19:05,600 Speaker 1: out language saying job gains had moderated. It really was 396 00:19:05,640 --> 00:19:09,760 Speaker 1: the only change to the statement prea fewer perspective. Everyone's 397 00:19:09,760 --> 00:19:11,919 Speaker 1: been saying, it's all about the labor market. If we 398 00:19:12,000 --> 00:19:14,920 Speaker 1: don't see moderation in the labor market, and if it's 399 00:19:14,920 --> 00:19:17,919 Speaker 1: actually reigniting, how are we going to get down to 400 00:19:17,960 --> 00:19:22,119 Speaker 1: two percent from here? If maybe people are saying it's restrictive, 401 00:19:22,440 --> 00:19:25,159 Speaker 1: the equity markets and the credit markets didn't get the message. 402 00:19:25,680 --> 00:19:29,240 Speaker 6: So I think the labor market is coming in better balance. 403 00:19:29,440 --> 00:19:31,720 Speaker 6: It is moderating. It may not be moderating in terms 404 00:19:31,760 --> 00:19:34,680 Speaker 6: of NFP numbers every month. It's moderating in terms of 405 00:19:34,720 --> 00:19:37,880 Speaker 6: the quit strate. It's moderating in terms of job vacancies 406 00:19:38,359 --> 00:19:41,359 Speaker 6: or or average our earnings ECI. You look at measures 407 00:19:41,359 --> 00:19:44,199 Speaker 6: of wage inflation, it is moderating. I think that's what 408 00:19:44,280 --> 00:19:46,879 Speaker 6: gives the FED comfort that those inflation expectations will be 409 00:19:46,960 --> 00:19:49,760 Speaker 6: anchored that even if core PC is a little bit higher, 410 00:19:49,760 --> 00:19:53,000 Speaker 6: that's that's largely due to shelter or medical insurance. 411 00:19:53,000 --> 00:19:55,080 Speaker 7: There's lots of little components. 412 00:19:54,520 --> 00:19:56,479 Speaker 6: Of PC that might be keeping it a little bit 413 00:19:56,560 --> 00:19:59,679 Speaker 6: higher for longer. But as long as the labor markets 414 00:19:59,680 --> 00:20:02,399 Speaker 6: suggest that weages on moderating, I think it gives the 415 00:20:02,400 --> 00:20:05,199 Speaker 6: FED that confidence, and I would say for them to 416 00:20:05,240 --> 00:20:08,080 Speaker 6: start to cut, I think cuts in twenty twenty four 417 00:20:08,119 --> 00:20:11,439 Speaker 6: are about inflation. A PCE is born from five and 418 00:20:11,440 --> 00:20:14,119 Speaker 6: a half percent to three percent. That's the reason for 419 00:20:14,160 --> 00:20:16,800 Speaker 6: them to cut seventy five basis points. Cuts next year 420 00:20:16,840 --> 00:20:18,240 Speaker 6: are about growth and the label market. 421 00:20:18,480 --> 00:20:20,359 Speaker 1: To me, Muhammad, this all goes back to your point, 422 00:20:20,400 --> 00:20:23,320 Speaker 1: which is is this a federal reserve. This is operating 423 00:20:23,320 --> 00:20:27,160 Speaker 1: without an overarching kind of thesis. They're basically just trying 424 00:20:27,160 --> 00:20:30,240 Speaker 1: to cobble together people's different opinions and putting something out there, 425 00:20:30,240 --> 00:20:31,920 Speaker 1: and then it sends us all on a tailspin trying 426 00:20:31,920 --> 00:20:34,200 Speaker 1: to explain some sort of cohesive theory behind it. And 427 00:20:34,240 --> 00:20:36,520 Speaker 1: where we're going is that what this smells like, we're 428 00:20:36,520 --> 00:20:38,159 Speaker 1: trying to sort of rationalize and come up with a 429 00:20:38,240 --> 00:20:40,160 Speaker 1: theory behind this when it's really this person thinks this, 430 00:20:40,160 --> 00:20:41,680 Speaker 1: this person thinks this, this is a good kind. 431 00:20:41,600 --> 00:20:42,400 Speaker 7: Of happy medium. 432 00:20:42,520 --> 00:20:44,080 Speaker 1: Go figure out what's what to do with this. 433 00:20:44,200 --> 00:20:46,400 Speaker 8: So, if you want to be generous, you'd say, this 434 00:20:46,480 --> 00:20:49,160 Speaker 8: is such an uncertain economy, there's so many things changing 435 00:20:49,200 --> 00:20:51,560 Speaker 8: on the structural side that they had no choice but 436 00:20:52,119 --> 00:20:55,320 Speaker 8: to behave like their behaving. If one would be less generous, 437 00:20:55,320 --> 00:20:57,200 Speaker 8: you'll say, this is a FED that actually took a 438 00:20:57,280 --> 00:21:02,680 Speaker 8: view it looks through data one and ended up really 439 00:21:02,760 --> 00:21:06,959 Speaker 8: undermining its credibility, and therefore it is very hesitant to 440 00:21:07,000 --> 00:21:10,560 Speaker 8: do anything more than simply look at past data. So 441 00:21:10,600 --> 00:21:12,040 Speaker 8: it's up to you whether you want to be generous 442 00:21:12,080 --> 00:21:12,760 Speaker 8: or less generous. 443 00:21:13,119 --> 00:21:15,080 Speaker 2: Data decision nine minutes away, we'll find out if Robert T. 444 00:21:15,080 --> 00:21:18,200 Speaker 2: SIPPs fit and generous of pay Jim he joins us. Now, Robert, 445 00:21:18,240 --> 00:21:20,240 Speaker 2: you've had about twenty minutes that you over this one. 446 00:21:20,280 --> 00:21:21,040 Speaker 2: Your thoughts on it. 447 00:21:21,840 --> 00:21:24,800 Speaker 5: Yeah, I mean I think that in terms of supporting 448 00:21:24,960 --> 00:21:28,399 Speaker 5: what they've done, the rate of growth of the economy 449 00:21:28,560 --> 00:21:32,200 Speaker 5: has been firm, the rate of inflation has calm down 450 00:21:32,320 --> 00:21:36,120 Speaker 5: at a headline basis by you know, five six percent, 451 00:21:36,680 --> 00:21:40,200 Speaker 5: by nearly three percent on a core basis. The question 452 00:21:40,280 --> 00:21:42,960 Speaker 5: came up earlier do they want a recession? I think 453 00:21:43,000 --> 00:21:46,919 Speaker 5: they want a soft landing, and they got conditions restrictive 454 00:21:47,000 --> 00:21:50,919 Speaker 5: enough to bring down inflation quite a bit. Wage growth 455 00:21:51,000 --> 00:21:55,320 Speaker 5: is accelerated and they managed to do that keep while 456 00:21:55,600 --> 00:21:59,760 Speaker 5: unemployment has remained low, growth has continued. So I think 457 00:21:59,760 --> 00:22:03,480 Speaker 5: it's it's been a very successful go. Did they start late? 458 00:22:04,240 --> 00:22:08,200 Speaker 5: They did start late, but I think their pandemic practice, 459 00:22:08,440 --> 00:22:10,480 Speaker 5: you know, was a little bit late. I don't think 460 00:22:10,480 --> 00:22:13,919 Speaker 5: we have a lot of active central banker data points 461 00:22:13,920 --> 00:22:15,440 Speaker 5: in terms of how you're supposed to do it. So 462 00:22:15,480 --> 00:22:17,920 Speaker 5: I think so far is so good, and I think 463 00:22:17,920 --> 00:22:21,080 Speaker 5: they're trying to hone the message so far here. 464 00:22:21,600 --> 00:22:23,639 Speaker 1: You said very positive on all of this. Does that 465 00:22:23,680 --> 00:22:25,880 Speaker 1: mean that you're a buyer of bonds of alterations because 466 00:22:25,920 --> 00:22:27,760 Speaker 1: you think that ultimately they will get to the goal 467 00:22:28,040 --> 00:22:31,240 Speaker 1: that they're looking for, along with the soft landing that's 468 00:22:31,240 --> 00:22:34,520 Speaker 1: always been called sort of the unicorn that never arrives. 469 00:22:36,320 --> 00:22:39,320 Speaker 5: Well, I think the unicorn arrived in twenty nineteen. After 470 00:22:39,359 --> 00:22:41,200 Speaker 5: the twenty eighteen cycle. We were on our way to 471 00:22:41,200 --> 00:22:45,320 Speaker 5: a soft landing that was interrupted by pandemics. So maybe 472 00:22:45,359 --> 00:22:48,520 Speaker 5: not the late nineties and other soft landing after the 473 00:22:48,600 --> 00:22:51,760 Speaker 5: ninety four cycles, so I think they are there. I 474 00:22:51,800 --> 00:22:55,359 Speaker 5: think the problem is a lot of people saw the 475 00:22:55,520 --> 00:23:00,159 Speaker 5: dot com bubble burst, they saw the GFC burst. We 476 00:23:00,200 --> 00:23:01,960 Speaker 5: don't have that kind of a backdrop now, and a 477 00:23:01,960 --> 00:23:03,879 Speaker 5: lot of people are used to seeing funds rate up, 478 00:23:04,000 --> 00:23:07,520 Speaker 5: funds rate down, crash, big problems. They're not used to 479 00:23:07,560 --> 00:23:10,639 Speaker 5: seeing it. It doesn't mean it never happened. So it 480 00:23:10,680 --> 00:23:13,520 Speaker 5: has happened and looks like we're on our way. There 481 00:23:13,960 --> 00:23:17,600 Speaker 5: is this a bypoint for fixed income. It is strategically 482 00:23:17,680 --> 00:23:19,960 Speaker 5: when you get to the end of the FED rate 483 00:23:20,040 --> 00:23:22,679 Speaker 5: hiking cycle, that's where you're going to be seeing the 484 00:23:22,680 --> 00:23:24,919 Speaker 5: peak and interest rates. That was probably at the end 485 00:23:24,960 --> 00:23:28,679 Speaker 5: of September last year. We're getting into that bison at 486 00:23:28,680 --> 00:23:31,080 Speaker 5: the end of twenty twenty two we remain there. Now 487 00:23:31,640 --> 00:23:33,800 Speaker 5: we're seeing a lot of support for the market. I 488 00:23:33,840 --> 00:23:36,960 Speaker 5: think that's why the risk premiums in the market are 489 00:23:37,040 --> 00:23:39,720 Speaker 5: so narrow, but they're likely to remain narrow. But I 490 00:23:39,760 --> 00:23:43,360 Speaker 5: think overall they're managing a very successful course here. 491 00:23:43,880 --> 00:23:47,520 Speaker 8: So Robert, clearly a soft landing is your baseline, So 492 00:23:47,600 --> 00:23:50,840 Speaker 8: speak a little bit to your level of confidence in 493 00:23:50,880 --> 00:23:53,080 Speaker 8: that and what do details look like if the FED 494 00:23:53,119 --> 00:23:55,480 Speaker 8: were to end up making a mistake, and we hope 495 00:23:55,960 --> 00:23:57,920 Speaker 8: the FED doesn't make a mistake, but if it were, 496 00:23:58,240 --> 00:23:59,960 Speaker 8: what do you think the most likely mistake would be? 497 00:24:01,800 --> 00:24:02,119 Speaker 9: Right? 498 00:24:02,960 --> 00:24:07,720 Speaker 5: Well, I think the data has not only bifurcated, it's trifurcated. Right, 499 00:24:07,760 --> 00:24:09,399 Speaker 5: So when you look at the employment I was a 500 00:24:09,440 --> 00:24:12,840 Speaker 5: little surprised that they went, you know, uni dimensional that 501 00:24:12,920 --> 00:24:15,639 Speaker 5: it's you know, a supe employment market. I mean, the 502 00:24:15,680 --> 00:24:19,119 Speaker 5: household survey has been flat for a few months, unemployment 503 00:24:19,200 --> 00:24:22,160 Speaker 5: rate is inched higher. Job as claims at a state 504 00:24:22,280 --> 00:24:26,080 Speaker 5: level have gone higher, triggering some people to wonder about 505 00:24:26,080 --> 00:24:29,119 Speaker 5: whether the Salm rule is kicking and signaling a potential recession. 506 00:24:29,680 --> 00:24:33,919 Speaker 5: And of course recessions are very hard to spot. So 507 00:24:34,000 --> 00:24:35,800 Speaker 5: I think if there was going to be a problem here, 508 00:24:35,840 --> 00:24:37,440 Speaker 5: you're not going to wake up one day and see 509 00:24:37,520 --> 00:24:39,840 Speaker 5: data consistent with a three and a half percent growth. 510 00:24:40,280 --> 00:24:42,520 Speaker 5: But is it possible that we could have downshifted to 511 00:24:42,560 --> 00:24:46,160 Speaker 5: a half percent or a percent, that job growth has 512 00:24:46,240 --> 00:24:49,720 Speaker 5: really dropped off here and you've lost a little bit 513 00:24:49,720 --> 00:24:52,040 Speaker 5: of momentum. I think that's the more likely side that 514 00:24:52,080 --> 00:24:56,040 Speaker 5: things could break on. Having said that, they're at five 515 00:24:56,040 --> 00:24:59,720 Speaker 5: point three percent. They have tightened in real terms, They've 516 00:24:59,720 --> 00:25:02,280 Speaker 5: made the case they didn't really want to do that. 517 00:25:03,840 --> 00:25:06,840 Speaker 5: Now they're making the case they want more information. I 518 00:25:06,840 --> 00:25:09,680 Speaker 5: think if they see slower data, that would you know, 519 00:25:09,720 --> 00:25:12,400 Speaker 5: trigger them to make some cuts, which would end up, 520 00:25:12,800 --> 00:25:16,160 Speaker 5: you know, probably preempting a recession. So the most likely 521 00:25:16,160 --> 00:25:18,360 Speaker 5: restate would be a mistake would be kind of a 522 00:25:18,400 --> 00:25:21,680 Speaker 5: growth recession. I would think that'd be the next most 523 00:25:21,760 --> 00:25:22,399 Speaker 5: likely scenario. 524 00:25:22,520 --> 00:25:26,800 Speaker 1: There is there a downside to keeping inflation hotter for longer, 525 00:25:27,080 --> 00:25:29,560 Speaker 1: in the idea that this is actually really problematic for 526 00:25:29,960 --> 00:25:32,639 Speaker 1: particularly lower income households, as Muhamma and I we were 527 00:25:32,640 --> 00:25:34,600 Speaker 1: talking about before the show, that this is sort of, 528 00:25:34,880 --> 00:25:38,400 Speaker 1: you know, very much attacks on particularly people with lower income, 529 00:25:38,440 --> 00:25:40,199 Speaker 1: specifically for those who are not in the market and 530 00:25:40,240 --> 00:25:42,800 Speaker 1: can't capitalize on some of the gains that we see 531 00:25:42,920 --> 00:25:44,639 Speaker 1: in the equity markets, and could have a drag on 532 00:25:44,680 --> 00:25:45,320 Speaker 1: the economy. 533 00:25:45,560 --> 00:25:47,399 Speaker 6: Sure, I think as long as the job market is 534 00:25:47,960 --> 00:25:50,480 Speaker 6: fine and wages are running above inflation, so you talk 535 00:25:50,520 --> 00:25:53,840 Speaker 6: about that inflation number being high where a wages, If 536 00:25:53,840 --> 00:25:56,480 Speaker 6: wages are running four percent and inflations are two and 537 00:25:56,520 --> 00:25:59,320 Speaker 6: a half, there's still positive real income growth. So I 538 00:25:59,320 --> 00:26:01,440 Speaker 6: think as long as you have positive real income growth, 539 00:26:01,440 --> 00:26:04,200 Speaker 6: that danger that you talk about is less of an issue. 540 00:26:04,280 --> 00:26:06,840 Speaker 6: I do worry about the danger from is the FED 541 00:26:07,000 --> 00:26:09,760 Speaker 6: easy for too long or does it let the market 542 00:26:09,880 --> 00:26:12,640 Speaker 6: run on this narrative of rate cuts. If inflation stay 543 00:26:12,680 --> 00:26:16,080 Speaker 6: is high enough, at some point the Fed's idea of 544 00:26:16,280 --> 00:26:18,320 Speaker 6: continuous rate cuts is going to get questioned. 545 00:26:18,359 --> 00:26:20,560 Speaker 7: And I think that no market is pricing that in 546 00:26:20,840 --> 00:26:21,240 Speaker 7: I think. 547 00:26:21,160 --> 00:26:23,720 Speaker 6: Risk assets are expecting rate cuts this year, rate cuts 548 00:26:23,800 --> 00:26:25,879 Speaker 6: next year. So if that inflation tends to be that 549 00:26:25,960 --> 00:26:29,760 Speaker 6: last mile problem actually exists and we find we're unable 550 00:26:29,760 --> 00:26:32,280 Speaker 6: to get close to two percent, I think then we 551 00:26:32,320 --> 00:26:35,560 Speaker 6: should reprice all those long end rates higher, which is 552 00:26:35,560 --> 00:26:38,439 Speaker 6: a problem for you keep talking about credit spreads. Is 553 00:26:38,440 --> 00:26:41,600 Speaker 6: that a problem for spreads or overall risk assets. I 554 00:26:41,640 --> 00:26:43,760 Speaker 6: think that's the danger I worry about. I don't think 555 00:26:43,760 --> 00:26:47,280 Speaker 6: we're there yet. It's still it's noisy data, but I 556 00:26:47,320 --> 00:26:49,359 Speaker 6: think that is something we should watch as we see 557 00:26:49,440 --> 00:26:51,560 Speaker 6: the totality. And I hope chef al was asked about 558 00:26:51,560 --> 00:26:53,840 Speaker 6: that is a three month moving average? Is it core 559 00:26:54,000 --> 00:26:57,440 Speaker 6: super core shelter? I mean we have so many weariables, 560 00:26:57,480 --> 00:27:01,600 Speaker 6: we look at revisions, wages, so hopefully he's asked exactly 561 00:27:01,600 --> 00:27:03,000 Speaker 6: you know, and I'm sure he's going to give a 562 00:27:03,040 --> 00:27:06,560 Speaker 6: non answer answer, which is everything, but maybe some nuggets 563 00:27:06,640 --> 00:27:09,480 Speaker 6: in there. It's core and super core that we look at. 564 00:27:09,840 --> 00:27:11,600 Speaker 6: I think just a sense of what gives them that 565 00:27:11,680 --> 00:27:13,120 Speaker 6: confidence that overall we're going. 566 00:27:13,040 --> 00:27:13,560 Speaker 7: To get to do this. 567 00:27:13,640 --> 00:27:15,840 Speaker 2: Francis down of Manual Life was on the program earlier 568 00:27:15,880 --> 00:27:17,720 Speaker 2: on this morning. She said exactly the same thing. Just 569 00:27:17,720 --> 00:27:19,840 Speaker 2: tell us what you're looking at. Seems to change from 570 00:27:19,880 --> 00:27:21,520 Speaker 2: meeting to meeting, Robert, I know you've got to go. 571 00:27:21,680 --> 00:27:23,840 Speaker 2: It's going to catch up, sir, Robert tip of pagim 572 00:27:23,880 --> 00:27:25,880 Speaker 2: going against this news conference? How much? What you want 573 00:27:25,880 --> 00:27:27,639 Speaker 2: to hear from the chairman in this news conference? What 574 00:27:27,640 --> 00:27:29,120 Speaker 2: do you want to hear him address? 575 00:27:29,400 --> 00:27:31,680 Speaker 8: Well, I'd like him is to come across as steady, 576 00:27:32,119 --> 00:27:35,760 Speaker 8: to not get the market excited, to not cause undue volatility. 577 00:27:36,040 --> 00:27:37,640 Speaker 2: That's what you want? What do you expect? 578 00:27:38,200 --> 00:27:38,760 Speaker 7: It's hard. 579 00:27:39,119 --> 00:27:41,439 Speaker 8: I would not like to be at I would not 580 00:27:41,760 --> 00:27:43,879 Speaker 8: like to be at that podium after this outcome. I 581 00:27:43,880 --> 00:27:45,000 Speaker 8: really would not like to be there. 582 00:27:45,080 --> 00:27:47,080 Speaker 2: Why is that? You think the members have put him 583 00:27:47,080 --> 00:27:49,040 Speaker 2: in a little bit of a sticky spot. Yeah, to 584 00:27:49,080 --> 00:27:49,560 Speaker 2: explain this. 585 00:27:49,720 --> 00:27:52,280 Speaker 8: I mean, you've repeated over and over again that the 586 00:27:52,400 --> 00:27:56,720 Speaker 8: data revisions and the projection, the revision to the language 587 00:27:56,760 --> 00:28:01,439 Speaker 8: of productions, the revision to protection are inconsistent with the 588 00:28:01,600 --> 00:28:04,639 Speaker 8: non change to the great cuts. 589 00:28:04,720 --> 00:28:06,200 Speaker 2: How difficult is this going to be? Prayer? 590 00:28:06,359 --> 00:28:08,240 Speaker 7: I think he's pretty good at doing that. 591 00:28:08,280 --> 00:28:11,040 Speaker 6: I think he might, you know, at least try and 592 00:28:11,600 --> 00:28:13,800 Speaker 6: get that delicate balance. I mean, he is going to 593 00:28:13,800 --> 00:28:16,439 Speaker 6: be asked about financial conditions. They've eased a lot. I 594 00:28:16,440 --> 00:28:20,480 Speaker 6: think explaining that's context dependent. Financial conditions by itself, the 595 00:28:20,520 --> 00:28:21,840 Speaker 6: Fed should not have a view on. 596 00:28:22,119 --> 00:28:24,040 Speaker 7: So relative to the economy, we're in. 597 00:28:24,000 --> 00:28:27,600 Speaker 6: A soft landing. Financial conditions should be easier now. All 598 00:28:27,640 --> 00:28:29,760 Speaker 6: they can do. All he can do is explain the 599 00:28:29,840 --> 00:28:33,080 Speaker 6: reaction function. We didn't get any data today. Explain the 600 00:28:33,119 --> 00:28:36,320 Speaker 6: reaction function. They remain data dependent. I'm also looking for 601 00:28:36,359 --> 00:28:38,880 Speaker 6: anything on QT. You know, because we have tax season 602 00:28:38,920 --> 00:28:41,520 Speaker 6: coming up, that overnight reversary pro facility might get to 603 00:28:41,640 --> 00:28:43,880 Speaker 6: zero in the next two months. What are they doing then? 604 00:28:43,920 --> 00:28:46,479 Speaker 6: Are they getting close to tapering? They're going to debate 605 00:28:46,520 --> 00:28:49,080 Speaker 6: this and we get a September nineteen event. That's a 606 00:28:49,080 --> 00:28:51,520 Speaker 6: big shock to the system. I don't think is Priceton. 607 00:28:51,720 --> 00:28:53,960 Speaker 1: You know, John, everyone's been talking about the fact that 608 00:28:54,040 --> 00:28:55,960 Speaker 1: we haven't heard about the balance seet. It wasn't in 609 00:28:56,000 --> 00:28:58,480 Speaker 1: the statement, And to me, this is actually a wild 610 00:28:58,480 --> 00:29:01,000 Speaker 1: card because it's this sort of tascit. They're going to 611 00:29:01,000 --> 00:29:03,920 Speaker 1: allow it to run off for longer than people previously 612 00:29:03,960 --> 00:29:06,960 Speaker 1: expected because this is one tool that they can do 613 00:29:07,000 --> 00:29:08,520 Speaker 1: without getting into the rate cutting dance. 614 00:29:08,640 --> 00:29:10,960 Speaker 2: Does that help him today, considering that he doesn't think 615 00:29:11,040 --> 00:29:13,720 Speaker 2: is passive time and this is just watching paint try, 616 00:29:14,320 --> 00:29:15,640 Speaker 2: does that help him well? 617 00:29:15,680 --> 00:29:17,400 Speaker 1: Based on what Priya was just saying, it sounds like 618 00:29:17,400 --> 00:29:19,120 Speaker 1: this might be watching paint try as well, because she 619 00:29:19,160 --> 00:29:20,959 Speaker 1: was basically like, he's not going to give an answer, 620 00:29:21,160 --> 00:29:23,280 Speaker 1: and what Hammad's like, please don't shake anything up. 621 00:29:23,360 --> 00:29:25,240 Speaker 2: So there's a reason that we're waiting for these comments 622 00:29:25,240 --> 00:29:27,080 Speaker 2: though on the bandited sheet, it's because at the last meeting, 623 00:29:27,120 --> 00:29:28,680 Speaker 2: he sat there in the news conference and told us 624 00:29:28,680 --> 00:29:30,840 Speaker 2: that would be a big meeting for a conversation about 625 00:29:30,840 --> 00:29:32,920 Speaker 2: the banned sheets. So maybe you hear about that upfront 626 00:29:33,240 --> 00:29:34,200 Speaker 2: when these comments begin. 627 00:29:34,400 --> 00:29:36,320 Speaker 1: Maybe that's one way to kill the mood in the room. 628 00:29:36,440 --> 00:29:38,360 Speaker 1: Just talk about the balance sheet roll off and just 629 00:29:38,400 --> 00:29:40,640 Speaker 1: go into exact detail. About what this means. There are 630 00:29:40,640 --> 00:29:42,520 Speaker 1: a lot of questions. I want to hear financial conditions 631 00:29:42,520 --> 00:29:44,880 Speaker 1: first and foremost exactly how your response to that does. 632 00:29:44,920 --> 00:29:46,360 Speaker 1: He brush it off in the same kind of way 633 00:29:46,360 --> 00:29:47,640 Speaker 1: that he did back in December. 634 00:29:47,720 --> 00:29:49,600 Speaker 2: It's not a major deal, but it's the beginning of 635 00:29:49,600 --> 00:29:51,200 Speaker 2: something that could be a big deal. There's just a 636 00:29:51,240 --> 00:29:54,000 Speaker 2: clear and obvious contradiction in the outlook for twenty twenty four. 637 00:29:54,400 --> 00:29:55,880 Speaker 2: I think if you see a repeat of that through 638 00:29:55,880 --> 00:29:57,800 Speaker 2: the year, there's going to be more and more questions 639 00:29:57,800 --> 00:30:01,239 Speaker 2: about how willing and how they are really focused on 640 00:30:01,520 --> 00:30:04,320 Speaker 2: whether they are really focused on getting that inflation number 641 00:30:04,800 --> 00:30:06,280 Speaker 2: back towards two percent exciting. 642 00:30:06,280 --> 00:30:09,080 Speaker 1: It goes back to Priya's analogy, which is your target 643 00:30:09,080 --> 00:30:11,440 Speaker 1: can be to run a marathon, but if you don't 644 00:30:11,480 --> 00:30:13,840 Speaker 1: really run it all, and you just run a mile 645 00:30:13,880 --> 00:30:15,520 Speaker 1: a day and you don't plan to do it until 646 00:30:15,560 --> 00:30:18,280 Speaker 1: twenty forty six, is that really your goal anymore? And 647 00:30:18,320 --> 00:30:20,280 Speaker 1: I think that that's sort of one key question here 648 00:30:20,280 --> 00:30:23,400 Speaker 1: as we talk about what is an inflation target that 649 00:30:23,440 --> 00:30:24,720 Speaker 1: we're looking at that's two percent. 650 00:30:24,760 --> 00:30:27,240 Speaker 2: It's a complicated spot for the chairman. We've got equities 651 00:30:27,320 --> 00:30:29,800 Speaker 2: at all time highs as he's about to open that 652 00:30:29,880 --> 00:30:32,360 Speaker 2: door and sit in front of that lectern and talk 653 00:30:32,400 --> 00:30:35,160 Speaker 2: to us about the outlook for rates equities at all 654 00:30:35,200 --> 00:30:37,640 Speaker 2: time highs, and at the same time they're revising their 655 00:30:37,640 --> 00:30:42,479 Speaker 2: inflation protections higher and also still forecasting the same amount 656 00:30:42,480 --> 00:30:45,120 Speaker 2: of cuts for twenty twenty four. I think that's a 657 00:30:45,160 --> 00:30:48,200 Speaker 2: sticky spot for any FED chair to walk into any 658 00:30:48,280 --> 00:30:50,800 Speaker 2: room and speak for sixty minutes on this subject. 659 00:30:50,480 --> 00:30:52,360 Speaker 1: Which is the reason why he will probably say we're 660 00:30:52,440 --> 00:30:54,320 Speaker 1: data dependent, which also means nothing to a lot of 661 00:30:54,320 --> 00:30:56,080 Speaker 1: people who say, what are you looking at? This is 662 00:30:56,120 --> 00:30:59,480 Speaker 1: a very difficult moment as j. Powell walks to address 663 00:30:59,600 --> 00:31:01,320 Speaker 1: all of the complexities in your face. 664 00:31:05,440 --> 00:31:05,880 Speaker 9: Mhmm.