Instant Reaction: The Fed Decides

Bloomberg Audio Studios, podcasts, radio news. 0:00:11.720 --> 0:00:13.640 With your Fed decision is Mike McCaig. 0:00:14.920 --> 0:00:17.159 There is no change to interest rate. There are a 0:00:17.320 --> 0:00:20.200 number of small changes to the statement, but this is 0:00:20.320 --> 0:00:24.840 not a CU in September announcement, the FEDS forward guidance 0:00:25.040 --> 0:00:28.800 remains unchanged. Quote the Committee does not expect it will 0:00:28.840 --> 0:00:31.960 be appropriate to reduce the target range until it has 0:00:32.040 --> 0:00:36.560 gained greater confidence that inflation is moving sustainably toward two percent. 0:00:36.880 --> 0:00:40.760 There's also no change in the overall assessment that economic 0:00:40.840 --> 0:00:44.760 activity has continued to expand at a solid pace. All 0:00:44.800 --> 0:00:49.240 of the adjustments are basically to adjectives. Job gains have moderated, 0:00:49.280 --> 0:00:53.760 the statement says, instead of remains strong, Unemployment has moved 0:00:53.840 --> 0:00:58.200 up but remains low. Inflation has eased over the past 0:00:58.280 --> 0:01:02.040 year but remains somewhat element and in recent months there 0:01:02.080 --> 0:01:06.240 has been some further progress toward the two percent inflation goal. 0:01:06.720 --> 0:01:09.440 If there is a hint about the future, it's this. 0:01:10.080 --> 0:01:13.360 Instead of saying risks to employment and inflation have moved 0:01:13.400 --> 0:01:17.280 into better balance, the statement now says the Committee is 0:01:17.400 --> 0:01:20.679 attentive to the risks on both sides of its dual mandate. 0:01:21.120 --> 0:01:24.800 The decision was unanimous, and that's basically it. If there 0:01:24.840 --> 0:01:26.800 is going to be a hint about a September move, 0:01:26.800 --> 0:01:28.559 it's going to be up to Chairman Power. 0:01:28.720 --> 0:01:31.080 The two part story, Mike McKay, This was the first part. 0:01:31.120 --> 0:01:33.399 The second part starts at about twenty nine minutes with 0:01:33.440 --> 0:01:35.640 that news conference in Chairman Powell. Let's get to the 0:01:35.640 --> 0:01:37.480 equity market. We stay positive on the S and P 0:01:37.600 --> 0:01:40.080 five hundred up by about one point five percent on 0:01:40.080 --> 0:01:42.360 then that's that one hundred up by two point five 0:01:42.680 --> 0:01:44.640 in the bond market yield to look a little something 0:01:44.720 --> 0:01:46.399 like this, we've done about two basis points on a 0:01:46.440 --> 0:01:48.480 ten year the move at the front end of the curve. 0:01:48.480 --> 0:01:50.640 It's a small one, but notable, up by about two 0:01:50.640 --> 0:01:53.000 basis points on a two year at four thirty eight 0:01:53.080 --> 0:01:55.000 thirty two. I just want to get to those changes 0:01:55.000 --> 0:01:57.080 that might McKee identified. If you go back to the 0:01:57.200 --> 0:02:01.000 second paragraph of the June statement, line of that paragraph 0:02:01.040 --> 0:02:03.480 read as follows, the economic outlook is uncertain and the 0:02:03.520 --> 0:02:06.800 Committee remains highly attentive to inflation risk. If you go 0:02:06.840 --> 0:02:09.120 to the second paragraph and the last line of the 0:02:09.160 --> 0:02:12.480 statement that just dropped, the economic outlook is uncertain and 0:02:12.520 --> 0:02:15.280 the Committee is attentive to the risk to both sides 0:02:15.600 --> 0:02:18.240 of its dual mandate, and Lisa, this is the story 0:02:18.560 --> 0:02:20.679 of the dual mandate and the risks around it coming 0:02:20.720 --> 0:02:23.639 into balance. That looks like the way they formalized it 0:02:23.760 --> 0:02:25.440 this time around in the statement, and I just wonder 0:02:25.440 --> 0:02:27.440 how much the Shairman builds on that in the news 0:02:27.480 --> 0:02:28.600 conference in twenty eight minutes. 0:02:28.639 --> 0:02:30.000 I want to pick up on your point that the 0:02:30.000 --> 0:02:32.280 bond market isn't moving that much. There's only an increase 0:02:32.320 --> 0:02:34.400 of about two basis points on the front end. And 0:02:34.440 --> 0:02:38.360 that is why exactly that they recognize the risk that 0:02:38.440 --> 0:02:40.000 the labor market is one that they. 0:02:39.919 --> 0:02:40.760 Have to care about. 0:02:41.160 --> 0:02:44.040 This sets up Jackson Hole for him to come out 0:02:44.080 --> 0:02:46.960 and change the framework, and then for September to be 0:02:47.040 --> 0:02:49.800 that first rate cut. No one's changing that view based 0:02:49.840 --> 0:02:51.040 on this particular statement. 0:02:51.120 --> 0:02:53.440 The balance of risks has shifted, and you start to 0:02:53.480 --> 0:02:56.400 appear see it appear just a little bit incrementally in 0:02:56.440 --> 0:02:59.799 the statement. The decision rates unchanged. We're looking for a 0:02:59.800 --> 0:03:02.200 move still in September. To Leasa's point, we still have 0:03:02.200 --> 0:03:04.480 a news conference in front of us and Jackson holl 0:03:04.600 --> 0:03:06.639 the ann you'll get together at Jackson holl Well, I 0:03:06.720 --> 0:03:08.840 mean about a month away with us around a type 0:03:08.960 --> 0:03:10.560 on place to say. The film of fed Vice Chair, 0:03:10.560 --> 0:03:12.280 which a clamorat is with us, still with us, is 0:03:12.320 --> 0:03:14.120 about Michael jpmulgan, Asset Management. 0:03:14.160 --> 0:03:14.280 Rich. 0:03:14.280 --> 0:03:16.239 It's good to see you, sir. Let's start with you. You 0:03:16.240 --> 0:03:18.160 listen to Mike. You saw the changes in the statement. 0:03:18.320 --> 0:03:19.480 What do you make of what we just heard? 0:03:20.000 --> 0:03:22.280 Well, I'm a bit surprised, actually, I mean not with 0:03:22.320 --> 0:03:24.720 the adjectives. They needed to change some adjectives up, but 0:03:24.760 --> 0:03:27.200 I was a bit surprised about the reference to the 0:03:27.760 --> 0:03:31.040 the attuned and attentive to the balanced outlook. 0:03:31.080 --> 0:03:32.160 I mean, that's certainly correct. 0:03:32.200 --> 0:03:34.880 The chair has been making that that point, but I 0:03:34.920 --> 0:03:37.840 think it is relevant that they included it in the statement. 0:03:37.840 --> 0:03:41.920 He will certainly, I think, reinforce it in the press conference, 0:03:41.960 --> 0:03:43.800 and I think I do think it does tee up 0:03:43.880 --> 0:03:44.520 Jackson Hole. 0:03:44.760 --> 0:03:46.520 There'll be some more information before then. 0:03:46.920 --> 0:03:48.440 I look at it, and this show is the best 0:03:48.440 --> 0:03:50.600 one we've ever done. We've got Dudley with his important 0:03:50.640 --> 0:03:54.240 Bloomberg opinion piece a couple number of days ago, and 0:03:54.360 --> 0:03:55.800 I want to go to you on what you own, 0:03:55.840 --> 0:03:57.960 which is the high ground on the x anty x 0:03:58.000 --> 0:04:01.360 post debate. You've got the Economist magazine article you did 0:04:01.640 --> 0:04:04.720 a year whatever ago. You've got your January twenty twenty 0:04:04.720 --> 0:04:08.760 two context and consequence of speech. You want an ex 0:04:08.840 --> 0:04:10.960 anti aspirational FED. 0:04:11.360 --> 0:04:12.320 I don't hear that here. 0:04:12.520 --> 0:04:13.120 They're waiting. 0:04:13.200 --> 0:04:16.280 They're waiting, They're waiting, they are waiting. 0:04:16.320 --> 0:04:18.640 I think they are. They are getting greater confidence. But 0:04:18.680 --> 0:04:20.880 I think the key point not to toot my own 0:04:20.920 --> 0:04:25.240 horn is my view all on it's okay along and 0:04:25.279 --> 0:04:27.200 I think I've said so on this show, is that 0:04:27.279 --> 0:04:29.320 the pal FED really the goal is to get inflation 0:04:29.400 --> 0:04:32.000 to two points something and then they would start thinking 0:04:32.040 --> 0:04:34.880 about the next step, which would be easy, not running 0:04:34.880 --> 0:04:37.640 an easy policy, but removing restriction. So I do think 0:04:37.680 --> 0:04:39.920 this is what we're seeing, and if we do get 0:04:39.920 --> 0:04:42.680 the cut in Septembers, I think we and markets expect 0:04:42.720 --> 0:04:46.159 it will be because they expect inflation x antes to 0:04:46.200 --> 0:04:47.000 continue to fall. 0:04:47.120 --> 0:04:49.320 What are we anywhere near that? I'm sorry, this is 0:04:49.360 --> 0:04:51.720 an ex post FED. Going back to Arthur Burns, there 0:04:51.760 --> 0:04:53.599 is data dependent as I've ever seen. 0:04:53.720 --> 0:04:56.560 Yeah, they are data dependent, but I think that they 0:04:56.720 --> 0:05:00.520 attenuated and focused on the statement today emphasize there's both 0:05:00.560 --> 0:05:03.200 sides of the mandate. So I do think they're looking 0:05:03.240 --> 0:05:05.800 at just the labor market as well as the inflation data. 0:05:06.040 --> 0:05:07.080 Bob, what's your take on this. 0:05:07.200 --> 0:05:09.960 It seems like it's less dubbish, a little bit more 0:05:09.960 --> 0:05:12.520 balanced than you initially thought. Do you think this just 0:05:12.640 --> 0:05:15.080 is trying to move as incrementally as possible. 0:05:15.600 --> 0:05:19.360 I think they preserve full optionality heading into Jackson Hole. 0:05:19.760 --> 0:05:23.000 I also think that central bankers are mindful of what 0:05:23.160 --> 0:05:26.080 happened to the ECB earlier this year, where you could 0:05:26.080 --> 0:05:28.200 have made the same argument, if you're going to go 0:05:28.279 --> 0:05:30.159 next month, why not go this month? And then of 0:05:30.200 --> 0:05:34.160 course you saw what happened. So I don't see too 0:05:34.279 --> 0:05:37.120 much different than what we expected, other than they just 0:05:37.240 --> 0:05:41.039 decided to maintain the full optionality. We'll see what happens 0:05:41.040 --> 0:05:44.120 as we roll into September. We're still very much expecting 0:05:44.120 --> 0:05:45.760 twenty five basis points in September. 0:05:45.920 --> 0:05:48.800 No, doctor, if Runmack just writes in publishes with language 0:05:48.839 --> 0:05:50.360 like this, it means the Fed will have to make 0:05:50.400 --> 0:05:53.560 a more pronounced shift in language in September. I'm surprised 0:05:53.560 --> 0:05:56.039 stocks are holding up well on this statement. Perhaps equities 0:05:56.040 --> 0:05:58.080 of looking ahead to the news conference, the news conference 0:05:58.120 --> 0:06:01.040 starts in about twenty four minutes to because I to say, 0:06:01.360 --> 0:06:04.640 the FETTI is waiting for additional data. Can they even 0:06:04.760 --> 0:06:08.160 articulate why inflation might reaccelerate from here? Can we pick 0:06:08.200 --> 0:06:10.400 up on that question, Bob? Can you articulate the risk 0:06:10.400 --> 0:06:13.040 surround inflation? Why might it reaccelerate from here? 0:06:13.720 --> 0:06:17.159 Corporate profitability still looks great. We talked about S and 0:06:17.160 --> 0:06:20.600 P five hundred earnings. They're coming in ahead of expectations. 0:06:21.000 --> 0:06:24.360 You look at the guidance companies are giving you. They're 0:06:24.480 --> 0:06:28.960 up twelve percent next quarter. So we're not in a recession. 0:06:29.360 --> 0:06:32.080 We're slowing down in some parts of it. 0:06:33.040 --> 0:06:33.680 We'll see. 0:06:34.120 --> 0:06:37.599 You know, I can't find really the argument what's going 0:06:37.640 --> 0:06:39.800 to cause inflation to reaccelerate, To be. 0:06:39.760 --> 0:06:42.599 Honest, Rich, we were talking about how this was definitely 0:06:42.640 --> 0:06:45.160 going to be unanimous, and I wonder how much of 0:06:45.360 --> 0:06:47.720 wrangling of cats there is in the room and whether 0:06:47.720 --> 0:06:50.680 this is basically a representation of that that there's some 0:06:50.880 --> 0:06:54.279 members who believe that inflation has been killed, it is 0:06:54.360 --> 0:06:56.680 nowhere in sight that labor is important. And then you 0:06:56.720 --> 0:06:59.320 have others who say, well, you know, wait for the 0:06:59.400 --> 0:07:02.000 year over year, cops. Is that kind of what we're 0:07:02.040 --> 0:07:02.679 seeing here. 0:07:03.200 --> 0:07:04.400 I think it could be an element. 0:07:04.440 --> 0:07:06.479 You know, we've had some members of the committee, and 0:07:06.560 --> 0:07:08.400 I know most of these folks, but it's a different 0:07:08.400 --> 0:07:10.320 committee than the one I was on, and many of 0:07:10.360 --> 0:07:13.960 them do emphasize both sides of the duel mandate. So 0:07:14.520 --> 0:07:17.760 I'm sure that reflects a number of folks views. I 0:07:17.840 --> 0:07:21.400 do think though, this is a committee that certainly got 0:07:21.440 --> 0:07:24.600 burned earlier in this year because the inflation data went 0:07:24.640 --> 0:07:26.960 the wrong way, and to their credit, they became very 0:07:27.080 --> 0:07:31.680 data dependent, as Tom indicated. I think that they put 0:07:31.680 --> 0:07:33.400 it this way. I think they think they're going to 0:07:33.400 --> 0:07:36.320 go in September. There is a range of data where 0:07:36.320 --> 0:07:38.880 they wouldn't, but I think it's a pretty small range, 0:07:38.920 --> 0:07:41.040 and I think that's really the balance of trying to strike. 0:07:41.080 --> 0:07:42.840 And I think we'll hear that in the press conference. 0:07:42.840 --> 0:07:47.000 We were speaking earlier with James Bullard formally Saint Louis 0:07:47.040 --> 0:07:49.679 fed and he was talking about how he always raised 0:07:49.680 --> 0:07:52.600 the question at meetings that if you wanted to cut rates, 0:07:52.760 --> 0:07:55.200 most certainly at the next meeting, why not cut him now. 0:07:55.240 --> 0:07:57.960 Bob was sort of discussing that earlier, and it sets 0:07:58.040 --> 0:08:01.560 up the sort of difficult period of time where every 0:08:01.680 --> 0:08:04.800 data point could potentially upset the apple cart if it 0:08:04.840 --> 0:08:07.640 doesn't comply. Do you think that they're in that zone 0:08:07.680 --> 0:08:08.080 right now? 0:08:10.080 --> 0:08:10.760 I don't really. 0:08:10.800 --> 0:08:12.760 I mean I've certainly during my time on the committee 0:08:12.800 --> 0:08:15.160 we found ourselves there a couple of times, so it 0:08:15.200 --> 0:08:19.120 can happen. I think the data we have gotten, you know, 0:08:19.200 --> 0:08:22.640 the chair did a lot of communication before blackout, and 0:08:22.680 --> 0:08:25.960 the data since then has reinforced that view. So I 0:08:25.960 --> 0:08:28.080 think there's a pretty wide range of data where they'll 0:08:28.080 --> 0:08:31.040 feel comfortable going in September. 0:08:31.080 --> 0:08:32.520 So I don't think they're in that danger zone. 0:08:32.559 --> 0:08:34.360 Can you confind that Jim actually set those things to 0:08:34.440 --> 0:08:35.199 the fmcs? 0:08:35.280 --> 0:08:37.520 Well, of course I would never reveal what was said 0:08:37.559 --> 0:08:40.120 in an fm C me except what I say, all 0:08:40.160 --> 0:08:41.560 the brilliant things I said. 0:08:41.600 --> 0:08:45.200 So Don Swage joins us now from KPMG, alongside form 0:08:45.200 --> 0:08:48.520 of FET vice chair Rich Cloud above Michael F JP 0:08:48.679 --> 0:08:50.959 Morgan done. I want to get into this statement that 0:08:51.040 --> 0:08:53.080 came out about eight minutes ago. What do you make 0:08:53.120 --> 0:08:55.000 of it? The incremental changes and when you're looking for 0:08:55.040 --> 0:08:58.720 something bigger, I wasn't. 0:08:58.480 --> 0:09:00.319 Looking for anything bigger, and I think one of the 0:09:00.360 --> 0:09:03.600 key issues here is we saw Powell talk about in 0:09:03.640 --> 0:09:07.280 his congressional testimony when pushed on the Jewel mandate. He said, listen, 0:09:07.440 --> 0:09:09.920 this is the thing that keeps me up awake at night. 0:09:10.200 --> 0:09:12.320 The number one thing that keeps me awake at night 0:09:12.640 --> 0:09:16.040 is that overshooting, the overtightening. So that is in there, 0:09:16.360 --> 0:09:19.200 and that is what opens the door a crack, not 0:09:19.320 --> 0:09:22.160 wide open, which is what we expected for September. And 0:09:22.200 --> 0:09:23.880 I do think they do think they're going to move 0:09:23.880 --> 0:09:27.240 in September, and I agree wholeheartedly with rich on this. 0:09:27.480 --> 0:09:29.280 I think the other issue is there's sort of this 0:09:29.400 --> 0:09:31.959 tale of two economies we're seeing and merge out there, 0:09:32.120 --> 0:09:35.160 the one that's in the household survey that's close to 0:09:35.360 --> 0:09:38.840 but not yet triggered the PSALM rule, which is what 0:09:38.960 --> 0:09:42.479 got Bill Dudley up in arms, and how weak employment 0:09:42.520 --> 0:09:45.600 has been in the household survey and the establishment survey, 0:09:45.720 --> 0:09:49.720 the GDP data, other jobs data that suggests the economy 0:09:49.840 --> 0:09:53.080 is still on solid footing. And right now the Fed 0:09:53.160 --> 0:09:56.480 has been opting into more of that establishment survey, where 0:09:56.520 --> 0:09:59.559 payrolls have held up, although that they're not quite as 0:09:59.600 --> 0:10:02.360 strong as they've been. We're going to get probably some 0:10:02.480 --> 0:10:06.640 good public sector hiring in the jobs numbers on Friday again, 0:10:06.679 --> 0:10:10.000 which will help boy those overall numbers adding to some 0:10:10.080 --> 0:10:13.200 weakness in the private sector. But I think that's important 0:10:13.400 --> 0:10:15.760 is that the FED is looking at this and their 0:10:15.800 --> 0:10:17.800 wane which is the right stuff. 0:10:17.840 --> 0:10:19.199 And you really getting. 0:10:18.880 --> 0:10:21.360 To Rich's point too. There isn't just one piece of 0:10:21.440 --> 0:10:24.000 data that the market keeps looking for that could tip 0:10:24.040 --> 0:10:27.160 the apple cart. The FED is looking at the totality 0:10:27.480 --> 0:10:30.960 of the data, and that last line really gets to 0:10:31.360 --> 0:10:35.280 that point. The totality of the data will allow them 0:10:35.320 --> 0:10:39.040 to go in September, and they don't want to make 0:10:39.080 --> 0:10:42.160 the same mistake the ECB made move and then have 0:10:42.200 --> 0:10:45.360 to freeze and be in a purgatory. Their credibility is 0:10:45.400 --> 0:10:48.440 at stake. They want to make sure inflation is coming down. 0:10:48.520 --> 0:10:49.480 But I agree with Rich. 0:10:49.640 --> 0:10:53.760 They'll still cut before inflation reaches it's two percent target, 0:10:54.160 --> 0:10:58.640 anticipating that the economy by lifting off that restriction, the 0:10:58.679 --> 0:11:00.360 economy will get there. 0:11:00.559 --> 0:11:03.000 We have swank and clarity with us. Bob Michael, maybe 0:11:03.000 --> 0:11:05.480 a question for you on the economics of the moment. 0:11:05.880 --> 0:11:09.480 Are we slaves to measure we have measured for decades. 0:11:09.520 --> 0:11:12.520 We're being very measured, where maybe other central banks aren't. 0:11:13.120 --> 0:11:16.920 Are we just just so afraid to move and we're 0:11:17.000 --> 0:11:20.840 over careful, over cautious, because once we move, we've got 0:11:20.840 --> 0:11:22.280 to move in a measured vector. 0:11:22.800 --> 0:11:25.199 I feel like we're back to the green span FED, 0:11:25.559 --> 0:11:29.600 where every word is so carefully thought out it makes 0:11:29.640 --> 0:11:33.000 you want to overanalyze it and no one can give 0:11:33.000 --> 0:11:35.400 an inch. If the wrong word is in there, then 0:11:35.440 --> 0:11:39.480 the FOMA gets concerned about the market pricing and hundreds 0:11:39.480 --> 0:11:42.520 of basis points of rate cuts and risk assets being 0:11:42.559 --> 0:11:47.240 up tentskers. Okay, please, but we're talking about and rich 0:11:47.360 --> 0:11:51.400 touched on it. We're in I think, very restrictive range 0:11:51.440 --> 0:11:54.720 twenty five basis points. You're not in a loose monetary 0:11:54.760 --> 0:11:58.600 world with money flooding all over the place. You're still restrictive. 0:11:58.880 --> 0:12:00.840 You've got to start that journey somehore. 0:12:00.960 --> 0:12:03.800 This is too important, Lawrence Meyer, Washington University. Is some 0:12:03.920 --> 0:12:06.160 monograph a term at the FED to our green span 0:12:06.240 --> 0:12:09.360 apart that it was a dictatorship? Are we getting to 0:12:09.400 --> 0:12:12.400 the point now no one can dissent and everyone's measured 0:12:12.400 --> 0:12:13.920 because we're measured and appropriate. 0:12:14.880 --> 0:12:17.080 No, I think no one has descended because two years 0:12:17.080 --> 0:12:19.280 ago inflation was too damn high and they all agree 0:12:19.280 --> 0:12:21.240 they wanted to get it lower. It'll get more interesting 0:12:21.240 --> 0:12:22.800 as we get close. But what I want to say 0:12:22.800 --> 0:12:26.200 to invoke the Olympics, now, this is a FED that 0:12:26.280 --> 0:12:28.679 really wants to stick the landing. You know, they won't 0:12:28.679 --> 0:12:32.120 say this word, but their projection and what we're seeing 0:12:32.160 --> 0:12:35.600 in Bloomberg Consensus and elsewhere is a soft landing and 0:12:35.640 --> 0:12:38.439 they want to stick it. And you know, the data 0:12:38.520 --> 0:12:41.280 is now solid, is moving in the right direction, and 0:12:41.320 --> 0:12:43.640 so you know, getting back to the Green Span FED, 0:12:43.679 --> 0:12:46.080 there was a soft landing or so in those years, 0:12:46.400 --> 0:12:49.640 Alan Blinder is written. They're not common, but we do 0:12:49.720 --> 0:12:51.880 see them. I think towards in twenty nineteen. I think 0:12:51.960 --> 0:12:54.600 the Palfed got a soft landing. We don't see it 0:12:54.600 --> 0:12:56.640 in the data because we got the pandemic. The Ecomomie 0:12:56.679 --> 0:12:58.479 looked pretty good in January. 0:12:58.120 --> 0:13:00.480 Of twenty twenty. So they're trying to stick the soft landing. 0:13:00.640 --> 0:13:03.680 Forget about sticking the landing, Let's just throw them in 0:13:03.760 --> 0:13:05.200 the seine the waters. 0:13:05.320 --> 0:13:11.960 Thought there's another there's another analogy. Matt Hornback puts this 0:13:12.040 --> 0:13:15.040 out earlier, and I'd love your thoughts on this, Diane. Basically, 0:13:15.120 --> 0:13:17.920 the Olympic motto to carry on with this reads faster, higher, 0:13:17.960 --> 0:13:20.600 stronger together could have been used to talk about central 0:13:20.640 --> 0:13:25.559 banks globally altogether. Now it might be at more opper, boat, slower, lower, 0:13:25.720 --> 0:13:29.920 weaker together. Diane, how much is that looming over this 0:13:30.000 --> 0:13:33.800 FED meeting? The idea not of synchronized swimming or synchronized 0:13:33.880 --> 0:13:36.720 rate cuts, but this idea of trying to sort of 0:13:37.440 --> 0:13:39.200 take an edge off for the rest of the world. 0:13:39.200 --> 0:13:41.360 That really does seem to be dealing a little bit 0:13:41.360 --> 0:13:42.960 more with some negative growth. 0:13:45.480 --> 0:13:47.840 I don't think that's the fed's main concern, and I'm 0:13:47.880 --> 0:13:49.880 sure rich will backed me up on that. I remember 0:13:50.000 --> 0:13:53.720 seeing Ben Bernaki actually go after another central banker said 0:13:53.920 --> 0:13:55.960 you guys need to change your policy to help us out, 0:13:55.960 --> 0:13:58.400 and he said that's not our problem, basically at a 0:13:58.480 --> 0:14:02.040 Jackson Hole meetings. So that is not the fed's primary concern. 0:14:02.160 --> 0:14:05.360 That said, a strong galer helps us out down the 0:14:05.440 --> 0:14:08.560 road and keeping goods prices lower, so that helps the 0:14:08.600 --> 0:14:11.360 FED out. I think what's more important here in terms 0:14:11.400 --> 0:14:14.600 of the Olympic analogies, is that the road to gold 0:14:14.679 --> 0:14:18.200 is often paved with tears and obstacles, and I think 0:14:18.400 --> 0:14:23.080 people forget that. I'm thinking of Simone Biles here. 0:14:23.120 --> 0:14:23.600 I'm sorry. 0:14:23.640 --> 0:14:26.040 She's my hero and heroin at this point in time. 0:14:26.360 --> 0:14:29.480 But I'm thinking about, you know, soft landings. People forget 0:14:30.240 --> 0:14:32.960 the nineteen ninety four ninety five situation. It looks great 0:14:33.040 --> 0:14:34.640 on paper. I lived it. 0:14:34.760 --> 0:14:36.440 I remember it rich. You lived it too. 0:14:36.760 --> 0:14:41.480 It was ugly at the time. Chairman Greenspan's reappointment as 0:14:41.560 --> 0:14:43.760 his third term as FED chair was held up for 0:14:43.840 --> 0:14:47.520 four months in nineteen ninety six because he nearly crashed 0:14:47.560 --> 0:14:50.240 the economy in nineteen ninety five and people were so 0:14:50.480 --> 0:14:54.000 angry at him for not easying sooner. And it was 0:14:54.040 --> 0:14:57.240 his own colleagues, including Jennet Yellentt on the FED that 0:14:57.360 --> 0:15:01.880 got him to experiment with pro activity, growth and intense 0:15:01.920 --> 0:15:05.960 form competition that bringing down inflation and allowing the unemployment 0:15:06.040 --> 0:15:09.240 rate to fall instead of using monetary policy. 0:15:08.880 --> 0:15:09.360 To do it. 0:15:09.880 --> 0:15:13.760 That is really important to remember is that soft landings 0:15:14.160 --> 0:15:18.400 are not easy. They look good on paper, but getting 0:15:18.440 --> 0:15:20.640 there can be a hard path. 0:15:20.880 --> 0:15:23.600 Dan, Where does the confidence come? Where does it come from? 0:15:23.640 --> 0:15:27.640 The unemployment stabilizes at these levels and doesn't carry on 0:15:27.680 --> 0:15:29.440 shifting higher into year end? 0:15:29.760 --> 0:15:30.720 What underpends that? 0:15:33.280 --> 0:15:35.840 Well? I think I don't know if unemployment is going 0:15:35.880 --> 0:15:37.960 to stay there or not. It often moves up slowly 0:15:38.040 --> 0:15:40.880 and then moves up rapidly. Alls I know is that 0:15:41.280 --> 0:15:45.040 even Claudia sam who wants to FED to cut right now, 0:15:45.440 --> 0:15:49.120 has argue to her own rule might not be applicable 0:15:49.440 --> 0:15:53.120 in the post pandemic economy because of all the changes 0:15:53.160 --> 0:15:55.960 we've seen. We've seen much of the rise in unemployment 0:15:56.000 --> 0:15:58.800 has come from more people seeking jobs, an increase in 0:15:58.840 --> 0:16:03.800 the participation rately among primate workers. We've seen an influx 0:16:03.880 --> 0:16:07.200 of foreign workers, foreign born workers accounting for over seventy 0:16:07.240 --> 0:16:10.480 percent of the growth and civilian labor force since Februar 0:16:10.520 --> 0:16:13.960 of twenty twenty. That's helped to buoy the unemployment rate 0:16:14.280 --> 0:16:17.240 as opposed to a surge in layoffs. That doesn't mean 0:16:17.280 --> 0:16:20.560 there aren't stresses in the labor market. That doesn't mean 0:16:20.680 --> 0:16:23.360 there aren't still problems. But at the end of the day, 0:16:23.480 --> 0:16:26.040 what is it that people complain most about. They can 0:16:26.280 --> 0:16:30.000 complain most about the high level of prices still, and 0:16:30.040 --> 0:16:33.040 that's something that the FED also has to keep in 0:16:33.080 --> 0:16:35.400 front of its mind. And I think that's where we're 0:16:35.440 --> 0:16:38.040 at at the end of the day. We don't want 0:16:38.080 --> 0:16:41.520 to lose this and not hit that soft landing, but 0:16:41.600 --> 0:16:43.960 it's a rocky road to get there. I think we're 0:16:44.040 --> 0:16:46.680 still going to make it, given the fact that we 0:16:46.760 --> 0:16:51.800 saw the positive of consumers pushed back in the second 0:16:51.880 --> 0:16:56.680 quarter on price hikes, and retailers and producers capitulated. 0:16:57.000 --> 0:16:58.000 They rolled back. 0:16:57.840 --> 0:17:01.280 Prices on goods, and we saw a rebound in growth, 0:17:01.480 --> 0:17:04.800 doubling the pace of the first quarter, driven in large 0:17:04.840 --> 0:17:09.000 part by a rebound in consumer spending. That's the Goldilock 0:17:09.119 --> 0:17:11.879 scenario towards a soft landing. 0:17:12.200 --> 0:17:15.080 There's this issue, Bob. We're looking at market pricing, and 0:17:15.160 --> 0:17:17.639 right now it seems like this is consensus that they 0:17:17.640 --> 0:17:20.120 are going to land the soft landing, even though it 0:17:20.240 --> 0:17:24.080 is sort of a rarity or a white elephant. Do 0:17:24.119 --> 0:17:26.399 you think that the market has overpriced that soft landing 0:17:26.680 --> 0:17:30.919 or even underpriced it because the internal skepticism just keeps. 0:17:30.680 --> 0:17:33.639 On roaring Now, I think the markets are right on 0:17:33.760 --> 0:17:37.440 track with the soft landing, and if it in fact happens, 0:17:37.480 --> 0:17:40.159 the FED can bring down rates a fair amount and 0:17:40.200 --> 0:17:44.840 the markets will continue to appreciate. I think what's different 0:17:44.920 --> 0:17:49.080 this time is the FED and investors have a lot 0:17:49.160 --> 0:17:52.240 more real time information. I was around in ninety four 0:17:52.359 --> 0:17:55.919 ninety five. I was around in eighty one and you 0:17:56.000 --> 0:17:59.760 didn't have that information, and now you have it. It's 0:17:59.800 --> 0:18:02.440 real time, it's live. You can see what's going on. 0:18:02.880 --> 0:18:06.639 Businesses have it, households have it. And maybe it gives 0:18:07.280 --> 0:18:10.800 policymakers a false sense of comfort, but they have that 0:18:10.960 --> 0:18:12.520 sense of comfort, which. 0:18:12.320 --> 0:18:14.600 Really kind of leaves the market kind of in the way, 0:18:15.400 --> 0:18:17.240 sort of in the same boat that the FED is in. 0:18:17.280 --> 0:18:19.480 And I wonder, rich you know, if you were still 0:18:19.520 --> 0:18:21.679 on the Fed, how much the FED looks at the 0:18:21.720 --> 0:18:24.959 market to kind of gauge progress sort of follows them, 0:18:25.000 --> 0:18:27.560 if you will, because they are gauging real time data. 0:18:27.600 --> 0:18:29.439 And if anything, this is the collective will. And I 0:18:29.560 --> 0:18:32.600 love the war stories from the mid nineteen fifties for everybody, 0:18:32.600 --> 0:18:34.359 but I wonder if you know, if that's something that 0:18:34.359 --> 0:18:36.520 they could really kind of sink their teeth into. 0:18:36.840 --> 0:18:39.600 Oh sure, well, I mean, I'll just speak for myself. 0:18:39.680 --> 0:18:43.119 But you're looking at the market hopefully to try to 0:18:43.160 --> 0:18:43.919 extract signal. 0:18:43.960 --> 0:18:44.800 There's always noise. 0:18:44.840 --> 0:18:48.160 You have to be honest with yourself, but it's particularly 0:18:48.160 --> 0:18:52.280 irrelevant for things like the growth outlook and the inflation outlook. 0:18:53.000 --> 0:18:55.000 You need to know what is being expected. 0:18:55.000 --> 0:18:58.800 That's a key input to monetary policy, our expectations. I 0:18:58.840 --> 0:19:00.639 gave one of my speeches at the FED was on 0:19:00.680 --> 0:19:03.400 this point avoiding the hall of mirror problems by looking 0:19:03.400 --> 0:19:05.800 at market prices. So I'm not saying it it's easy, 0:19:05.800 --> 0:19:07.359 but I don't think there's an alternative. 0:19:07.400 --> 0:19:09.159 I want to cross back over Todayne Dan, I know 0:19:09.200 --> 0:19:10.440 you've got to go in a second. Just a quick 0:19:10.440 --> 0:19:13.480 final word a question for Chairman Powell in this news conference, Dan, 0:19:13.560 --> 0:19:14.040 what will it be? 0:19:16.400 --> 0:19:18.399 Well, this is on communication, so I think it's going 0:19:18.440 --> 0:19:20.320 to be very hard for the FED to communicate. We're 0:19:20.320 --> 0:19:23.000 already seen financial markets are trying to front run the 0:19:23.040 --> 0:19:26.719 FED on a larger cut in September. How do they 0:19:26.800 --> 0:19:30.120 calibrate their communications to deal with what may be more 0:19:30.160 --> 0:19:31.480 measured cuts? 0:19:31.480 --> 0:19:31.920 Interesting? 0:19:32.040 --> 0:19:35.000 Dan, Thank you as always, Dan Swamklair of KPMG. If 0:19:35.040 --> 0:19:36.840 you are just joining us, welcome to the program. The 0:19:36.880 --> 0:19:40.320 FED decision came out about twenty minutes ago, unchanged on 0:19:40.400 --> 0:19:43.639 interest rates and the statement largely unchanged as well, just 0:19:43.680 --> 0:19:46.600 some incremental changes. So the focus on the news conference now, 0:19:46.680 --> 0:19:49.200 which starts at about ten minutes time with us joining 0:19:49.280 --> 0:19:50.960 us now, and please to say as Mike Capen of 0:19:51.000 --> 0:19:54.040 Bank for America, Michael, going into this news conference, very 0:19:54.040 --> 0:19:57.439 incremental changes in that statement. Were you expecting more than 0:19:57.480 --> 0:19:58.240 what they delivered? 0:20:00.320 --> 0:20:03.959 No, I wasn't. I think with the strong growth numbers 0:20:04.000 --> 0:20:06.600 we receive, the right place for them to make adjustments 0:20:06.680 --> 0:20:09.720 is exactly where they did. Reflect it a little bit 0:20:09.760 --> 0:20:13.680 in cooling labor market conditions, reflect a little bit more 0:20:13.720 --> 0:20:17.200 progress on inflation, kind of pin down and nail down 0:20:17.240 --> 0:20:19.920 that balance of risks argument, because that's what the share 0:20:20.000 --> 0:20:22.760 had said in front of Congress. So I think this 0:20:22.920 --> 0:20:26.200 was the right incremental move. I think the Fed feels 0:20:26.240 --> 0:20:28.720 that it's in a sweet spot right now that the 0:20:28.800 --> 0:20:32.160 data is moving in its direction, so it's getting closer. 0:20:32.560 --> 0:20:36.040 It just needs a little bit more and then that confidence, 0:20:36.119 --> 0:20:38.639 that nebulous confidence may be there. So this is what 0:20:38.640 --> 0:20:41.520 we were expecting. We weren't expecting a big lean in 0:20:41.560 --> 0:20:43.120 either direction from the statement. 0:20:43.240 --> 0:20:44.919 The market, as you know, Mike, has been looking for 0:20:44.960 --> 0:20:47.639 September at a baby step towards that you and a 0:20:47.640 --> 0:20:50.919 team have been looking for December. What separates you at 0:20:50.920 --> 0:20:53.360 the moment, Michael, the data that backs up your view. 0:20:53.359 --> 0:20:55.199 What separates you from the rest of the street at 0:20:55.200 --> 0:20:55.560 the moment. 0:20:57.560 --> 0:21:01.200 Well, I'd say we have less concern about downside risk 0:21:01.280 --> 0:21:04.439 to the economy. We certainly are watching for it and 0:21:04.480 --> 0:21:07.600 looking out for that. We may be wrong on this view, 0:21:07.640 --> 0:21:10.600 but the economy grew at a pretty solid pace in 0:21:10.640 --> 0:21:13.960 the second quarter, and yes, things are moderating and cooling, 0:21:14.000 --> 0:21:16.040 but I still think that there's a lot of resilience 0:21:16.560 --> 0:21:20.240 to both the economy and labor markets. And we'll see. 0:21:20.240 --> 0:21:23.840 Maybe there's a little unevenness in this inflation story, but 0:21:23.880 --> 0:21:27.240 certainly September, a September cut has moved a lot closer 0:21:27.359 --> 0:21:30.679 to our baseline. So, yeah, we're still in December, but 0:21:31.000 --> 0:21:34.680 we've got two employment reports and two inflation reports between 0:21:34.720 --> 0:21:38.439 now and now, and then you know, further progress in 0:21:38.480 --> 0:21:41.560 those two variables, a little bit weaker employment, kind of 0:21:41.600 --> 0:21:44.760 repeats of what we just saw in June inflation that 0:21:44.840 --> 0:21:48.600 could easily put a cut on the table in September. 0:21:48.680 --> 0:21:51.639 So September can happen, but it may not. So I 0:21:51.640 --> 0:21:53.560 think that's how i'd frame it right now, Michael. 0:21:53.359 --> 0:21:56.080 Let's just put a bow on this. What does further 0:21:56.200 --> 0:21:59.360 progress look like to you? In the two labor market reports, 0:21:59.400 --> 0:22:02.520 the toy flation reads that we get until the next meeting. 0:22:04.440 --> 0:22:07.680 Well, I think the labor market report is maybe a 0:22:07.720 --> 0:22:10.760 little more asymmetric. You know, a strong report's probably not 0:22:10.920 --> 0:22:14.600 going to prevent them from cutting, but obviously a week 0:22:14.680 --> 0:22:18.000 one could. So if they feel the labor market is 0:22:18.040 --> 0:22:22.320 softening more than they expect, they could go in that regard. Otherwise, 0:22:22.359 --> 0:22:25.080 I think to your earlier question of what's going to 0:22:25.119 --> 0:22:27.960 cause inflation to rise, I can't see it, I agree, 0:22:28.040 --> 0:22:30.600 But I don't think what they can rule out right 0:22:30.640 --> 0:22:33.800 now is that inflation settles in at a level that 0:22:33.880 --> 0:22:36.119 feels a little uncomfortable for them. So I think, on 0:22:36.160 --> 0:22:38.320 the margin, a little more evidence that no, we're not 0:22:38.359 --> 0:22:41.480 going to get stuck with say core PCE in the 0:22:41.560 --> 0:22:44.679 high twos. It does look like it's moving lower. So 0:22:44.840 --> 0:22:48.280 one or two more reports that give them confidence about that, 0:22:48.560 --> 0:22:49.760 then I think is probably enough. 0:22:49.880 --> 0:22:52.520 Speaking of discomfort, we know a topic they're uncomfortable with, 0:22:52.600 --> 0:22:54.840 and that's politics, and it comes up in this news conference. 0:22:54.880 --> 0:22:56.760 We know what Chairman Power is going to do. He's 0:22:56.800 --> 0:22:57.600 going to ignore it. 0:22:57.680 --> 0:22:59.679 But there was a less sent to him by Senator 0:22:59.680 --> 0:23:02.080 Warren Company and TK there's a quote in this let's 0:23:02.080 --> 0:23:05.639 say the immediate press release read as follows, the failure 0:23:05.800 --> 0:23:07.920 to cut rates would indicate that the FED is giving 0:23:07.960 --> 0:23:11.199 into bullying and it's putting political considerations ahead of its 0:23:11.240 --> 0:23:15.200 jull mandate to promote maximum employment and stable prices. So 0:23:15.240 --> 0:23:17.560 you've got the Republicans saying, if you cut rights, it's political, 0:23:17.880 --> 0:23:20.080 and you've got the Democrats saying, if you don't cut rights, 0:23:20.119 --> 0:23:22.280 it's political. Sort of stuck in a rock and hard 0:23:22.320 --> 0:23:23.360 place between the boat. 0:23:23.359 --> 0:23:26.080 And what's important here, John, it's so so important is 0:23:26.119 --> 0:23:28.359 that Richard Claret is one of the people that bought 0:23:28.400 --> 0:23:31.800 history back to economics with his work at Columbia. I 0:23:31.920 --> 0:23:34.840 sat at the FED with you in that magnificent library 0:23:35.280 --> 0:23:38.960 of first editions, and Elizabeth Warren reached down and said, 0:23:39.000 --> 0:23:41.640 take the book off the shelf. And I took Torsten 0:23:41.680 --> 0:23:44.520 Veblin The Theory of the Leisure Class off the shelf, 0:23:44.560 --> 0:23:46.520 and you and I were talking about it. This is 0:23:46.560 --> 0:23:50.240 a few years back. That's what Senator Warren's talking about 0:23:50.600 --> 0:23:53.040 is the Gilded Age. Are we in a gilded age 0:23:53.119 --> 0:23:56.080 where the elites are talking only to the fancy people 0:23:56.480 --> 0:24:00.600 and indirectly doing monetary policy only for the fans see people? 0:24:01.680 --> 0:24:05.159 Well, no, And in one word, I think you know 0:24:05.200 --> 0:24:07.560 the FED has the dual mandate, inflation was too high. 0:24:07.600 --> 0:24:09.040 They're focused on both sides. 0:24:09.119 --> 0:24:12.240 I think the economies in a place where it can 0:24:12.240 --> 0:24:16.959 certainly adjust and wait another two months until the cuts command. 0:24:17.040 --> 0:24:19.280 So I would push back on that. 0:24:19.480 --> 0:24:21.600 Mike Cap, you push back, just how relevant is the 0:24:21.680 --> 0:24:23.480 US selection and US politics? 0:24:25.480 --> 0:24:27.640 Well, the way I would frame this, and I think 0:24:27.760 --> 0:24:31.560 Rich would agree. I was formerly on staff at the board, 0:24:31.600 --> 0:24:34.560 and I learned quickly that no matter what you do 0:24:34.800 --> 0:24:37.919 or don't do, somebody is going to be upset, and 0:24:37.960 --> 0:24:40.840 one side will complain or the other will complain. So 0:24:40.880 --> 0:24:43.320 I think you learned quickly the best thing to do 0:24:44.000 --> 0:24:46.560 is to do what you think is right. So I 0:24:47.400 --> 0:24:50.440 would put it at that. So they have competing opinions here, 0:24:50.800 --> 0:24:52.199 the right thing to do is to do what they 0:24:52.200 --> 0:24:52.720 feels right. 0:24:52.800 --> 0:24:54.960 Michael finished with the same question I finished with Diane 0:24:54.960 --> 0:24:58.000 Swamp questions for the chairman. If Michael McKay's listening going 0:24:58.040 --> 0:25:00.000 into this news conference, what's the number one question for you? 0:25:02.000 --> 0:25:03.959 Well, the chair is said that they could ease if 0:25:03.960 --> 0:25:07.120 there's unexpected weakness in the labor market, which is actual 0:25:07.200 --> 0:25:10.240 data that comes in below their expectation. But what about 0:25:10.240 --> 0:25:14.960 preemptive using on the risk of labor market weakening. I 0:25:14.960 --> 0:25:17.680 think that might get the gap between market pricing and 0:25:17.760 --> 0:25:19.359 what the Fed thinks that will deliver. 0:25:19.560 --> 0:25:22.359 Mike Gapin, Thank you, sir, Michael Gapin there Bank for America. 0:25:22.480 --> 0:25:24.520 The news conference about five minutes away. 0:25:24.800 --> 0:25:25.320 But there is a. 0:25:25.359 --> 0:25:27.400 Question here about what kind of interest rate it would 0:25:27.440 --> 0:25:30.119 be when we get one, if we get one in September. 0:25:30.280 --> 0:25:32.680 Is it a risk management decision? Is it a mid 0:25:32.760 --> 0:25:36.040 cycle adjustment the beginning of something much bigger than that? 0:25:36.080 --> 0:25:37.920 Do you think they have to frame it at this point? 0:25:37.960 --> 0:25:40.159 Do they think they have to characterize what it might be? 0:25:41.280 --> 0:25:43.760 I think they do, and I think they'd like it 0:25:43.800 --> 0:25:48.320 to be part of the normalization process. That they've achieved 0:25:48.440 --> 0:25:51.879 their targets on both sides of their dual mandate, and 0:25:51.960 --> 0:25:55.160 they could start to bring down what is a restrictive policy. 0:25:55.800 --> 0:26:00.760 Michael Gabin echoed your speech of January two twenty two. 0:26:00.840 --> 0:26:04.600 It's about ex ante aspiration. I don't want you to 0:26:04.680 --> 0:26:07.480 voice for the chairman. I know that's inappropriate, but how 0:26:07.520 --> 0:26:11.720 does he voice the aspiration of getting out front here 0:26:11.760 --> 0:26:13.159 in six seven minutes? 0:26:14.359 --> 0:26:16.760 Well, I think he'll stick to the mandate and he'll 0:26:16.800 --> 0:26:21.480 stick to documenting the progress, and again he won't use 0:26:21.520 --> 0:26:24.640 the word soft landing, although that's I think what they're 0:26:24.640 --> 0:26:27.920 trying to, what they're trying to achieve, and I think 0:26:27.960 --> 0:26:31.120 Governor Waller's done a very effective job as many speeches 0:26:31.160 --> 0:26:36.119 in making the point that they have time because the 0:26:36.200 --> 0:26:38.720 data is holding up quite well. You know, it was 0:26:38.760 --> 0:26:40.720 a very bold call a couple of years ago for 0:26:40.800 --> 0:26:43.600 Waller to say we can disinflate without this huge pain 0:26:43.680 --> 0:26:46.000 in the labor market. I think they were prepared to 0:26:46.040 --> 0:26:48.199 take it if it was required. It hasn't happened, So 0:26:48.320 --> 0:26:51.919 now I think they're even more focused on the soft landing, 0:26:51.960 --> 0:26:54.359 and I do think they do want to avoid a 0:26:54.400 --> 0:26:59.440 premature declaration of mission accomplished, because even if underlying inflations 0:26:59.440 --> 0:27:02.000 are going to target, there's always noise in the data, 0:27:02.000 --> 0:27:03.600 and two or three months of noise in the wrong 0:27:03.720 --> 0:27:05.480 side is a bit uncomfortable. 0:27:05.720 --> 0:27:08.600 Rich there's this feeling baked into markets that Vecho J. 0:27:08.720 --> 0:27:11.920 Powell is much more dubvish than the statement might suggest. 0:27:12.240 --> 0:27:14.440 Are you expecting that tone to kind of come out 0:27:14.480 --> 0:27:15.320 in the news conference? 0:27:16.359 --> 0:27:16.800 Interesting? 0:27:16.800 --> 0:27:19.120 You know, we heard a lot from Chair Powell at 0:27:19.119 --> 0:27:22.960 CenTra on Capitol Hill, sitting down at the Economic. 0:27:22.560 --> 0:27:25.120 Club of DC. I've gone through and looked at that. 0:27:25.680 --> 0:27:28.199 I would actually expect him to stick pretty close to 0:27:28.280 --> 0:27:32.000 that which which was very balanced, not declaring victory but 0:27:32.040 --> 0:27:36.639 acknowledging progress, emphasizing, as the statement does today, that they 0:27:36.640 --> 0:27:38.880 are really attuned and attentive to both sides of. 0:27:38.840 --> 0:27:40.480 The duel mandate. You know. 0:27:40.520 --> 0:27:42.320 So there are some times where I think the press 0:27:42.359 --> 0:27:45.040 conference is really the chair using a lot of this 0:27:45.119 --> 0:27:47.040 is what I think. I think we'll hear a lot 0:27:47.040 --> 0:27:50.000 of this is what we think today. The Committee's pretty 0:27:50.040 --> 0:27:52.680 tight tightly aligned on where they are. 0:27:52.840 --> 0:27:54.200 Bob, what are you listening for today? 0:27:56.600 --> 0:27:59.800 I actually think he will come out a bit more dubbish. 0:28:00.040 --> 0:28:03.280 I think that's the way he's rolled the last several meetings. 0:28:03.600 --> 0:28:08.920 He's surprised us by deviating from the script and indicating that, yeah, 0:28:08.960 --> 0:28:12.159 you know, he could see rate cuts on the horizon. 0:28:13.119 --> 0:28:16.000 I can't take my eyes off of the last sentence 0:28:16.080 --> 0:28:20.040 in the second paragraph, where the committee is attentive to 0:28:20.080 --> 0:28:24.000 the risk of both sides of its dual mandate. I 0:28:24.119 --> 0:28:28.000 got what I wanted at least, which is acknowledgement of 0:28:28.160 --> 0:28:31.040 risks in the labor market. The more I look at that, 0:28:31.119 --> 0:28:34.359 the more it's clear to me that they're going in September. 0:28:34.520 --> 0:28:37.160 If I were Mike McKee, a lot of people try 0:28:37.200 --> 0:28:39.640 to press the Fed on what their neutral long term 0:28:39.720 --> 0:28:43.560 rate is, I would ask him, at what level is 0:28:43.600 --> 0:28:46.360 the FED funds rate no longer restrictive? 0:28:46.840 --> 0:28:47.880 Do you think they can answer that? 0:28:47.960 --> 0:28:51.560 Rich Well, I think they won't answer that. 0:28:51.800 --> 0:28:53.840 I think they have, and this is one of their 0:28:53.840 --> 0:28:57.720 probably nineteen different opinions on the committee. One thing I'll 0:28:57.760 --> 0:28:59.800 say a little bit is right now, as I look 0:28:59.840 --> 0:29:02.440 at my Bloomberg screen or I did twenty five minutes ago, 0:29:03.160 --> 0:29:07.040 September was more than one hundred percent priced. And even 0:29:07.080 --> 0:29:10.040 I wouldn't say it's one hundred percent. There are there's 0:29:10.120 --> 0:29:12.120 data we could get between now and then that where 0:29:12.120 --> 0:29:14.240 they might not go. So that's why I skeel a 0:29:14.280 --> 0:29:16.160 little bit to being a little bit more balanced than 0:29:16.160 --> 0:29:16.840 maybe Dubvish. 0:29:16.880 --> 0:29:18.040 But you know, we'll find out. 0:29:18.120 --> 0:29:20.280 I'm pleasing you brought up Central Portugal because I think 0:29:20.320 --> 0:29:22.400 it's really important to reflect on the comments from chem 0:29:22.480 --> 0:29:25.120 and Power back in Central Portugal at the ECPs, and 0:29:25.160 --> 0:29:27.240 you'll get together. Chem and Power was talking about the 0:29:27.280 --> 0:29:29.480 strength of the labor market and the strength of the 0:29:29.560 --> 0:29:32.040 labor market being a reason for them to wait, that 0:29:32.080 --> 0:29:34.640 they have time, they can wait and see a few 0:29:34.640 --> 0:29:35.440 more months of data. 0:29:35.440 --> 0:29:35.920 Maybe. 0:29:36.040 --> 0:29:38.960 And it's his characterization again in this news conference of 0:29:38.960 --> 0:29:40.760 the labor market that I think is matters. Off the 0:29:40.800 --> 0:29:43.240 back of that incremental change in the statement that you're 0:29:43.240 --> 0:29:45.440 all picking up on around the table, that last line 0:29:45.480 --> 0:29:48.240 of the second paragraph. You've seen this incrementally in the 0:29:48.240 --> 0:29:50.080 FED speeches over the last few weeks, lease of the 0:29:50.160 --> 0:29:53.400 last month. They've placing greater emphasis on the other side 0:29:53.400 --> 0:29:55.720 of the mandate in a way that it wasn't even 0:29:55.720 --> 0:29:57.640 part of the conversation a year or so ago. Think 0:29:57.640 --> 0:30:00.680 about where we've come from two years ago. Jackson Hole, 0:30:00.920 --> 0:30:05.360 August twenty twenty two, Pain pain to get inflation down. 0:30:05.440 --> 0:30:08.440 The focus was getting inflation down. You can start to 0:30:08.480 --> 0:30:10.320 hear the focus shifting to the labor market.