Instant Reaction: The Fed Decides

Bloomberg Audio Studios, podcasts, radio news. 0:00:13.600 --> 0:00:15.920 The Federal Reserve decision we're looking for is an interest 0:00:16.000 --> 0:00:19.120 rate cut on the FMC of about twenty five basis points. 0:00:19.120 --> 0:00:21.959 With that decision is Mike mckayth you. 0:00:22.000 --> 0:00:24.599 Got it, John, A quarter point cut in the Fed 0:00:24.640 --> 0:00:28.000 spencemark interest rate. A few changes to this statement, and 0:00:28.040 --> 0:00:30.600 that's about it from the Fed. The target range now 0:00:30.640 --> 0:00:33.040 four and a half to four and three quarters percent. 0:00:33.400 --> 0:00:36.919 There is no change to balance sheet policy. The decision 0:00:36.960 --> 0:00:41.480 this time unanimous, as September dissenter Mickey Bowman voted for 0:00:41.600 --> 0:00:45.920 this rate cut. Inflation, the statement says, has made progress, 0:00:46.080 --> 0:00:49.440 dropping the word further toward the two percent target, but 0:00:49.560 --> 0:00:54.440 remains somewhat elevated. No longer included the assertion that the 0:00:54.440 --> 0:00:58.360 Committee has gained greater confidence that inflation is moving sustainably 0:00:58.680 --> 0:01:03.240 toward two percent. The economic assessment suggests a slightly weaker 0:01:03.440 --> 0:01:07.920 labor market, noting that since earlier this year, labor market 0:01:07.959 --> 0:01:11.640 conditions have generally eased and the unemployment rate has moved 0:01:11.760 --> 0:01:15.920 up but remains low still. The statement repeats September's view 0:01:15.920 --> 0:01:20.000 that risks to achieving its employment and inflation goals are 0:01:20.080 --> 0:01:24.000 roughly in balance. The rate cut today is in support 0:01:24.040 --> 0:01:27.399 of its goals instead of September's in light of the 0:01:27.440 --> 0:01:32.200 progress on inflation and the balance of risks. Policymakers note 0:01:32.240 --> 0:01:36.400 again they will consider additional adjustments to their benchmark rate, 0:01:36.640 --> 0:01:40.000 but offer no further guidance beyond that. There is no 0:01:40.120 --> 0:01:43.320 mention of politics in the statement. That will be up 0:01:43.360 --> 0:01:45.640 to Chairman Powell in about a half hour. 0:01:45.520 --> 0:01:47.360 Am I McKay. It'll be up to you, sir, to 0:01:47.360 --> 0:01:49.560 ask the questions. How many questions do you expect are 0:01:49.600 --> 0:01:51.240 going to be leading with the events of this week 0:01:51.280 --> 0:01:53.400 and not this decision? How much of this is going 0:01:53.400 --> 0:01:56.520 to be about the politics at two thirty, Mic, I. 0:01:56.440 --> 0:01:59.280 Would imagine quite a bit would be, and maybe we 0:01:59.320 --> 0:02:01.600 want to check the law vegas over underline for that. 0:02:02.040 --> 0:02:04.400 But he's not going to say anything. He's not going 0:02:04.440 --> 0:02:06.680 to respond. So the question is how many different ways 0:02:06.680 --> 0:02:08.880 can we ask and how many different ways will he 0:02:09.160 --> 0:02:10.000 parry the question? 0:02:10.240 --> 0:02:12.440 Sixty minutes of that looking forward to it, Michael McKee, 0:02:12.440 --> 0:02:14.400 you've got to run. I know that news conference begins 0:02:14.400 --> 0:02:16.840 in about twenty eight minutes time, So no big changes 0:02:16.880 --> 0:02:19.680 to the statement. Twenty five basis point Raika as expected, 0:02:19.880 --> 0:02:21.560 and when you see something like that, you're not looking 0:02:21.560 --> 0:02:23.480 for a big change in the market either. We stay 0:02:23.560 --> 0:02:26.120 higher on a SMP five hundred by about six tens 0:02:26.120 --> 0:02:28.800 of one percent, yields are still a little bit lower. 0:02:28.840 --> 0:02:30.680 On a ten year, we're still down by eight basis 0:02:30.680 --> 0:02:33.280 points four thirty five. And in foreign exchange, the euro 0:02:33.400 --> 0:02:35.160 gives up a little bit of the move, but still 0:02:35.160 --> 0:02:37.000 positive on the session at least, so one oh seven 0:02:37.080 --> 0:02:38.680 eighty four on euro dollar. 0:02:38.760 --> 0:02:41.200 I think it's interesting that he that the Federal Reserve 0:02:41.360 --> 0:02:44.680 moved a reference to gaining confidence in inflation and saying 0:02:44.720 --> 0:02:48.120 that labor market conditions have generally eased. Honestly, to me, 0:02:48.240 --> 0:02:51.160 you're looking at this and on the margins, just setting 0:02:51.160 --> 0:02:55.079 the stage to potentially feel a little less dubvish. And 0:02:55.120 --> 0:02:57.119 that is a tone that I really curious to hear 0:02:57.280 --> 0:02:58.440 in the press conference. 0:02:58.120 --> 0:03:00.280 With a surround the table by Michael of JPMUL and 0:03:00.320 --> 0:03:01.919 a man who's seen it oh before, the former Fed 0:03:01.960 --> 0:03:04.519 Vice chair Rich clouder Rich. Want to start with you 0:03:04.560 --> 0:03:06.440 and not on the twenty five basis point right cut, 0:03:06.919 --> 0:03:09.840 you lift the tariff, You lift the tariffs of Trump. 0:03:09.880 --> 0:03:13.080 In Volume one on the Federal Reserve, how did you 0:03:13.120 --> 0:03:15.680 handle it then? How much scenario analysis do you did 0:03:15.720 --> 0:03:17.760 you do ahead of time? How do you think this 0:03:17.880 --> 0:03:19.720 chairman's going to handle it in a months to come. 0:03:20.639 --> 0:03:22.560 Well, the staff did good work, and some of that's 0:03:22.560 --> 0:03:25.680 in the public domain now comes out every five years. 0:03:26.160 --> 0:03:28.919 The reality is in during my time at the FED, 0:03:29.680 --> 0:03:32.160 inflation was running a little bit below target. The tariffs 0:03:32.160 --> 0:03:34.160 that were put in place made the headlines, but they 0:03:34.160 --> 0:03:37.600 didn't really push up inflation very much. You know, the 0:03:37.640 --> 0:03:39.560 devil will be in the details, I think, both on 0:03:39.600 --> 0:03:43.080 trade policy and physical policy, and I don't think they 0:03:43.080 --> 0:03:45.160 need to make any big decisions at this meeting or 0:03:45.200 --> 0:03:48.120 the next meeting about how they'll strategize for twenty twenty five. 0:03:48.800 --> 0:03:50.920 Vice Chairman, I want to go to the politics of 0:03:50.960 --> 0:03:52.720 the moment. We're not going to get an answer from 0:03:52.800 --> 0:03:54.840 Jerome Powell, so we're going to get it from you 0:03:55.520 --> 0:04:00.400 right now. Harry Truman nineteen fifty before William McChesney Martin 0:04:01.040 --> 0:04:05.240 saved the day. I quote the President President Truman, I 0:04:05.240 --> 0:04:07.600 hope the board will not allow the bottom to drop 0:04:07.640 --> 0:04:11.560 out from under securities. If that happens, that is exactly 0:04:11.800 --> 0:04:15.680 what mister Stalin wants. We've had this pressure before, and 0:04:15.760 --> 0:04:18.159 you and your brethren you have the pressure this time 0:04:18.279 --> 0:04:21.160 from President elect Trump. How does a FED deal with it? 0:04:21.839 --> 0:04:23.640 I think they deal with it, Tom, the way that 0:04:23.960 --> 0:04:26.279 they did the last time is just stick your you know, 0:04:26.880 --> 0:04:29.520 keep your focus on the goals of policy, price stability, 0:04:29.560 --> 0:04:32.920 maximum employment, and do what you think can best achieve 0:04:32.960 --> 0:04:37.359 those goals. You know, as you point out, opinions on 0:04:37.400 --> 0:04:40.359 the FED from including from presidents or not unheard of 0:04:40.480 --> 0:04:42.080 and so we could see more of that, but I 0:04:42.080 --> 0:04:44.280 think the power Fed will just keep doing what they're doing. 0:04:44.480 --> 0:04:47.080 How much is the market, though, speaking, louder than any 0:04:47.120 --> 0:04:49.000 policy that's going to come down the pike. The fact 0:04:49.040 --> 0:04:51.560 that we've seen this massive rally in stocks and a 0:04:51.640 --> 0:04:54.200 sell off from bonds that hasn't really hit risk assets, 0:04:54.200 --> 0:04:56.360 how much does that have to really cause the FED 0:04:56.360 --> 0:04:58.320 to pause and even reconsider whether it cut rates to 0:04:58.320 --> 0:04:59.040 get in December? 0:05:00.560 --> 0:05:03.360 Good point, you know, I do think financial conditions are 0:05:03.400 --> 0:05:06.080 obviously an input to policy, but I would hope the 0:05:06.120 --> 0:05:09.480 FED does not convey the impression that they're too sensitive 0:05:09.520 --> 0:05:11.880 to financial conditions because they can rise and fall for 0:05:11.880 --> 0:05:14.200 a number of reasons. My own sense of what we're 0:05:14.200 --> 0:05:17.320 seeing this week is some of it is not so 0:05:17.440 --> 0:05:20.800 much more stimulus down the road as more certainty that 0:05:20.839 --> 0:05:23.760 the existing twenty seventeen tax bill is going to be extended, right, 0:05:23.760 --> 0:05:25.920 So it's the absence of a tax hike as opposed 0:05:25.960 --> 0:05:29.400 to necessarily a tax cut. And I do think the 0:05:29.440 --> 0:05:32.400 deregulation piece of this is also important. So we've certainly 0:05:32.400 --> 0:05:36.000 seen a level set. I wouldn't necessarily extrapolate this from here. 0:05:36.040 --> 0:05:39.400 We'll just have to see how this plays out either way. 0:05:39.720 --> 0:05:42.479 What we've heard is just the deficit is likely to expand, 0:05:42.800 --> 0:05:46.720 and one of the main stories and consistency throughout all 0:05:46.760 --> 0:05:49.840 of the analysis, does the FED deal with that at 0:05:49.880 --> 0:05:52.000 all by signaling what they plan to do with their 0:05:52.040 --> 0:05:56.040 balance sheet. There is some speculation that they could potentially 0:05:56.040 --> 0:05:59.320 monetize the debt to keep even keel economic conditions. 0:06:00.200 --> 0:06:02.920 Well, certainly there would be that pressure, but I have 0:06:03.160 --> 0:06:06.080 high confidence that they would resist that. Look, the FED 0:06:06.160 --> 0:06:08.839 is judged on primarily and whether or not it achieves 0:06:08.839 --> 0:06:12.400 the inflation target, and when inflation is getting to two percent, 0:06:12.520 --> 0:06:15.520 that's really the focus. I think monetizing the debt is 0:06:15.560 --> 0:06:19.000 something that I've done on a sustained basis, is inconsistent 0:06:19.040 --> 0:06:22.559 with the inflation target. You do raise another point, though, 0:06:22.800 --> 0:06:25.000 which is a good one, Lisa, which is the fact 0:06:25.000 --> 0:06:27.160 that they are doing QT right now. You know, during 0:06:27.200 --> 0:06:29.839 my time there, the FED stop QT about the time 0:06:29.880 --> 0:06:32.320 that it cut rates in twenty nineteen. So the Paler 0:06:32.320 --> 0:06:35.400 Fed's continuing to shrink the balance sheet. They've given some 0:06:35.480 --> 0:06:38.040 indication about when they'll stop, but that I think will 0:06:38.040 --> 0:06:40.400 be a decision they'll need to make next year, and 0:06:40.480 --> 0:06:44.760 that could be in the context of pretty depressing budget numbers. 0:06:44.880 --> 0:06:47.400 But mikel all of this seems very predictable. You get 0:06:47.400 --> 0:06:50.800 this from a former FED official Columbia professor as well. 0:06:51.240 --> 0:06:54.480 What is the surprise you're worried about into Q one 0:06:55.000 --> 0:06:55.479 Q two? 0:06:56.240 --> 0:06:59.400 Well, I guess my question for Rich is what are 0:06:59.440 --> 0:07:04.520 they model? Are they modeling all the probabilities that fiscal 0:07:04.600 --> 0:07:08.120 stimulus could look like? Are they modeling the extension of 0:07:08.160 --> 0:07:11.960 the tax cuts? Are they just modeling the existing economy? 0:07:12.360 --> 0:07:14.600 Well, I guess the short answer is, I don't know. 0:07:14.680 --> 0:07:17.119 We'll find out in five years. My sense, though, certainly 0:07:17.120 --> 0:07:19.000 if I were there, what I would be focused on 0:07:19.560 --> 0:07:22.160 is a scenario where you may get a tariff, and 0:07:22.200 --> 0:07:25.720 then the question is is that inflation area, or is 0:07:25.760 --> 0:07:28.280 it a price level effect? Or in the wonking noition 0:07:28.320 --> 0:07:31.640 of central bankers are their second round of facts. Chris Waller, 0:07:31.640 --> 0:07:34.000 who have enormous regard for work with Chris, gave a 0:07:34.080 --> 0:07:36.920 speech several months ago in which or Q and a 0:07:37.000 --> 0:07:39.840 Maybe on Bloomberg in which he said, look, a tariff 0:07:39.880 --> 0:07:41.720 is a one time increase in the price level. It's 0:07:41.760 --> 0:07:44.600 not necessarily inflationary. So I think if I were there, 0:07:44.600 --> 0:07:46.880 I'd be wanting to see will that play out in 0:07:47.000 --> 0:07:51.120 various scenarios, But beyond that the details will matter. 0:07:51.440 --> 0:07:53.120 My chart of the day is Jim Biarco had a 0:07:53.160 --> 0:07:56.600 fabulous chart showing the inflation Bob Michael coming out of 0:07:56.600 --> 0:07:59.360 twenty twenty one, twenty two, and yeah, it's a noodle 0:07:59.400 --> 0:08:02.200 in along right now. The economists like Claire and are 0:08:02.240 --> 0:08:04.280 looking at the noodle in a lawn right now, and 0:08:04.320 --> 0:08:06.800 the public that just voted for Donald Trump is looking 0:08:06.800 --> 0:08:09.840 at the jump condition and inflation on a level change. 0:08:09.880 --> 0:08:11.760 Where are we going to be in twenty twenty five? 0:08:11.880 --> 0:08:13.480 Are we going to be looking at level change in 0:08:13.520 --> 0:08:15.120 the memory of it or are we going to be 0:08:15.160 --> 0:08:16.679 noodling along feeling happy. 0:08:17.320 --> 0:08:20.200 Well, we're not going to feel happy because there's no deflation. 0:08:20.960 --> 0:08:23.440 We're not going to feel happy because by the end 0:08:23.480 --> 0:08:26.160 of twenty twenty five there will be tariffs and some 0:08:26.240 --> 0:08:29.120 of that will be passed along to the consumer. We're 0:08:29.160 --> 0:08:31.960 not going to be happy because I don't think there 0:08:31.960 --> 0:08:35.880 will be additional tax cuts maybe on tips and overtime 0:08:36.320 --> 0:08:39.800 and corporate tax cuts in twenty twenty five. I think 0:08:39.840 --> 0:08:42.679 that's a twenty twenty six issue. So we're not going 0:08:42.720 --> 0:08:47.160 to be real happy with further improvement and inflation. To me, 0:08:47.360 --> 0:08:50.520 I took the same thing Lisa took away. They drop 0:08:50.640 --> 0:08:54.560 gaining confidence in inflation out of the statement. To me, 0:08:54.679 --> 0:08:59.000 that was an acknowledgement of a change in potential fiscal policy. 0:08:59.200 --> 0:09:01.199 Do you think that that means potentially they won't cut 0:09:01.480 --> 0:09:02.320 even in December? 0:09:03.200 --> 0:09:05.640 No, I think there is how do you get from 0:09:05.679 --> 0:09:09.160 here to there? It could be a number of quarters. 0:09:09.400 --> 0:09:12.320 You've got to preserve the economy in some sort of 0:09:12.400 --> 0:09:15.079 steady state. We're too high right now. 0:09:15.160 --> 0:09:17.240 If I could jump off preserve I think j Powell 0:09:17.280 --> 0:09:20.480 will want to preserve optionality. For twenty twenty five, A 0:09:20.520 --> 0:09:23.200 lot can happen. It'll be more tricky in December because 0:09:23.200 --> 0:09:25.880 there's the dots and so whatever the dots show, there'll 0:09:25.920 --> 0:09:28.760 be questions about how confident the FED is on that path. 0:09:28.800 --> 0:09:30.960 And I would suspect today he will begin to lay 0:09:31.000 --> 0:09:33.920 out a path to give themselves a lot of optionality 0:09:34.120 --> 0:09:35.120 in December as well. 0:09:35.320 --> 0:09:38.040 Rich, This is important. You think they begin to communicate 0:09:38.120 --> 0:09:39.839 at least open the door to have the option to 0:09:39.880 --> 0:09:42.280 pause in December, and that starts today. 0:09:42.440 --> 0:09:43.840 I do. 0:09:44.760 --> 0:09:47.240 It may be subtle, but I do. 0:09:47.360 --> 0:09:49.960 Help me understand what that sounds like at two thirty 0:09:50.120 --> 0:09:52.680 what's SAP today? 0:09:52.679 --> 0:09:56.080 I would imagine, Well, again, hypotheticals will know hypothetical would 0:09:56.080 --> 0:09:58.600 be a question about next year, and the chairit will 0:09:58.600 --> 0:10:00.640 say something along the lines of it too soon to 0:10:00.640 --> 0:10:03.239 make a judgment, and we'll be looking at the incoming assessment. 0:10:03.280 --> 0:10:05.920 And he'll remind folks that the rate path in the 0:10:06.000 --> 0:10:09.679 SEP is conditional on inflation continuing to come down. If 0:10:09.679 --> 0:10:11.720 there is a risk that it doesn't, that would factor 0:10:11.720 --> 0:10:14.040 into the rate path. So it's more not so much 0:10:14.080 --> 0:10:16.640 about getting into scenario details as it is. Look, the 0:10:16.720 --> 0:10:20.199 rate path depends on continued progress on inflation or disinflation. 0:10:20.280 --> 0:10:22.240 If you are just joining us, welcome to the program. 0:10:22.240 --> 0:10:24.439 At twenty five basis point, reduction of the Federal Reserve 0:10:24.480 --> 0:10:26.680 and news conference with Cham and pal in about twenty 0:10:26.720 --> 0:10:29.719 minutes time, joining us nas Dyne Swunk of KPMG down 0:10:29.760 --> 0:10:32.520 a twenty five basis point reduction and welcome to the program. 0:10:32.640 --> 0:10:34.200 At a time, whether it's eights are still holding up 0:10:34.280 --> 0:10:36.880 jobs claims are still quite low? Do they have the 0:10:36.960 --> 0:10:40.240 luxury of waiting of setting up a pause in December? 0:10:42.720 --> 0:10:44.760 Well, I do think they're going to be as exactly 0:10:44.760 --> 0:10:47.320 as everyone has said that they want optionality. I think 0:10:47.320 --> 0:10:50.640 they're still going to cut again in December. That said, 0:10:51.200 --> 0:10:54.839 the good wants to start talking about calibrating rate cuts 0:10:54.920 --> 0:10:57.440 to the economy and they're not going to be wanting 0:10:57.480 --> 0:11:01.760 to pull rate cuts do as cuts sequentially. I think 0:11:02.040 --> 0:11:05.440 in twenty twenty five, and optionality, as Rich said, is 0:11:05.480 --> 0:11:08.280 going to be number one issue because they don't know 0:11:08.640 --> 0:11:11.880 exactly what the policy will be, when policy will change, 0:11:12.160 --> 0:11:15.000 how it will affect the economy, and that is going 0:11:15.040 --> 0:11:19.040 to matter exactly as Rick stated that the certainty on 0:11:19.160 --> 0:11:22.800 the dot plot in December is going to be really uncertainty. 0:11:22.840 --> 0:11:25.600 And I think one of the greatest challenges that the 0:11:25.640 --> 0:11:29.240 Fed now faces is communication. This is not a period 0:11:29.240 --> 0:11:32.120 where you can give a lot of forward guidance because 0:11:32.200 --> 0:11:35.360 of the uncertainty on the course of policy going forward. 0:11:35.679 --> 0:11:39.120 Dan swank I was thunderstruck by the shift across the 0:11:39.160 --> 0:11:42.440 Blue Wall towards mister Trump. We all saw it, frankly, 0:11:42.440 --> 0:11:44.440 we saw it out in Long Island. Here in New 0:11:44.520 --> 0:11:47.000 York as well. There seemed to be a halves and 0:11:47.040 --> 0:11:50.319 a have nots here within the election. How does mister 0:11:50.440 --> 0:11:55.240 Powell address both groups into twenty twenty five, How does 0:11:55.280 --> 0:11:59.600 he aggregate and make a constructive policy for the people 0:12:00.000 --> 0:12:02.560 a lot on their back that voted for Donald Trump. 0:12:04.920 --> 0:12:07.160 Well, at the end of the day, Riches made this 0:12:07.280 --> 0:12:09.480 point and I agree with them. At the end of 0:12:09.520 --> 0:12:13.040 the day, the Fed's job is price stability. There is 0:12:13.120 --> 0:12:16.640 deflation in some goods prices, so some goods prices are 0:12:16.679 --> 0:12:19.960 coming down, they're still elevated from where they were. I 0:12:20.080 --> 0:12:23.320 do worry about shelter costs and whether or not those 0:12:23.360 --> 0:12:26.880 can really come down like many would like, and that 0:12:27.040 --> 0:12:29.520 is a problem, and also insurance costs. Those are more 0:12:29.559 --> 0:12:32.240 structural in nature. But at the end of the day, 0:12:32.240 --> 0:12:34.800 it's the Fed's job, one way or the other to 0:12:34.840 --> 0:12:38.240 get enough prices to fall to get to that price stability, 0:12:38.440 --> 0:12:42.040 but to get inflation to no longer be number one issue, 0:12:42.120 --> 0:12:44.600 I think that's going to be more challenging as we 0:12:44.679 --> 0:12:48.040 get into twenty twenty six. I agree wholeheartedly that the 0:12:48.040 --> 0:12:51.520 bulk of the policy shifts that we see, especially in 0:12:51.640 --> 0:12:54.560 terms of fiscal policy, are not likely to hit till 0:12:54.559 --> 0:12:57.760 twenty twenty six, and I don't expect a lot more 0:12:58.120 --> 0:13:01.200 than the extension of the tax cuts that we had, 0:13:01.240 --> 0:13:05.160 with maybe some additional corporate text cuts. But we will see, 0:13:05.280 --> 0:13:06.880 and I think it will take some time. I don't 0:13:06.920 --> 0:13:08.240 think it's all going to be done in the first 0:13:08.320 --> 0:13:12.280 hundred days. The tariffs, as Rich said, are issues that 0:13:12.360 --> 0:13:14.640 can be a level change, but if you combine them 0:13:14.679 --> 0:13:18.319 with curbs and immigration at this time and actually have 0:13:18.440 --> 0:13:22.200 any kind of deportations along with that, that tends to 0:13:22.240 --> 0:13:26.600 both stem growth and stoke inflation. In this environment, we 0:13:26.679 --> 0:13:29.800 are not where we were a pre pandemic, and certainly 0:13:29.920 --> 0:13:35.000 tariffs in sequential order along with retaliatory tariffs, that kind 0:13:35.040 --> 0:13:37.840 of a situation would be much harder for the Photo 0:13:37.880 --> 0:13:40.640 Reserve to deal with, and the pressure on the FED 0:13:40.840 --> 0:13:43.360 is going to intensify if that occurs. 0:13:43.480 --> 0:13:45.560 There's a lot of nodding around the table. I find 0:13:45.559 --> 0:13:49.040 it fascinating how little we understand inflation and exactly what's 0:13:49.120 --> 0:13:51.320 going to cause a real surge in it. And I 0:13:51.360 --> 0:13:53.160 do have to wonder and Bobb, I'll throw this to you, 0:13:53.200 --> 0:13:54.800 because I know you think that the Fed should keep 0:13:54.840 --> 0:13:58.720 cutting and that there is weakness to be addressing. I 0:13:58.720 --> 0:14:01.400 am struck by the fact that there hasn't been a 0:14:01.480 --> 0:14:04.360 more market slowdown in any of the economic data, with 0:14:04.440 --> 0:14:07.480 high yields, with rates at the long end as high 0:14:07.520 --> 0:14:11.000 as they've gotten, doesn't that tell us something about how 0:14:11.040 --> 0:14:15.040 restrictive or not that restrictive policy actually is at this level. 0:14:16.040 --> 0:14:19.240 Well, I think it's unfair to say there are no 0:14:19.400 --> 0:14:22.680 signs of a slowdown. As I said, you look at 0:14:22.720 --> 0:14:26.240 new and existing home sales, those are purely dependent on 0:14:26.920 --> 0:14:30.160 the level of rates currently because we know home prices 0:14:30.200 --> 0:14:33.320 aren't going to come back and they're quite high, and 0:14:33.360 --> 0:14:35.880 so new and existing home sales are down. They're going 0:14:35.920 --> 0:14:39.480 to decline further with this pop up in rates. And 0:14:39.560 --> 0:14:42.160 as I said, in corporate America, you look at the 0:14:42.240 --> 0:14:45.520 amount of amended and extent and pick there is a 0:14:45.560 --> 0:14:49.080 lot of corporate America that's struggling with the higher cost 0:14:49.120 --> 0:14:51.280 of funding, and a lot of that is floating rate. 0:14:51.720 --> 0:14:54.240 So for me, if you're at the FED, you've got 0:14:54.240 --> 0:14:57.600 to step back and say, okay, we're also looking at 0:14:57.720 --> 0:15:01.320 performance of credit cards and audit loans and other things. 0:15:01.760 --> 0:15:04.440 We do continue to need to take some of the 0:15:04.480 --> 0:15:07.400 pressure off to ensure we have a soft lining. I'm 0:15:07.440 --> 0:15:10.320 not talking about going to zero, two or three percent, 0:15:10.760 --> 0:15:13.680 just saying where we are currently around five percent is 0:15:13.680 --> 0:15:15.120 still a little bit too high. 0:15:15.280 --> 0:15:17.120 I'm going to be the rude one today. The former 0:15:17.200 --> 0:15:19.520 vice chairman of the Fuller Reserve System. This is Kylo 0:15:19.600 --> 0:15:21.920 tash Over at C and N. Michael McKee passes it's 0:15:21.920 --> 0:15:24.920 on to us. McKee insists that I'm as rude as 0:15:24.920 --> 0:15:28.920 I can be. To Richard Clarita, there's speculation here after 0:15:28.960 --> 0:15:32.120 the Powell term, your name is not mentioned. That's I 0:15:32.160 --> 0:15:35.880 guess the good news. There's Kevin Hassett and Kevin Walsh 0:15:35.960 --> 0:15:38.840 as well. Those are two very different people. What kind 0:15:38.880 --> 0:15:41.360 of person do we need to run the FED into 0:15:41.440 --> 0:15:44.760 the Trump administration? Do we need a monetary expert like 0:15:44.800 --> 0:15:47.880 you on DSGE or can we use someone like worsh 0:15:47.920 --> 0:15:51.800 who's more a part of the regulatory and wall street system. 0:15:51.640 --> 0:15:54.080 Well, and also I would also throw on Chris Waller's 0:15:54.160 --> 0:16:00.520 name as well as certainly beyond my life throwing rich. Look, 0:16:01.320 --> 0:16:06.000 I think that there is no one cookie cutter job description. 0:16:06.200 --> 0:16:09.400 I think that Jay Pal's been an incredibly successful FED chair, 0:16:09.760 --> 0:16:12.400 Ben Burnankee Janet Yellen, so you can certainly come from 0:16:12.400 --> 0:16:14.880 a background. What I would say about it is that 0:16:14.960 --> 0:16:18.520 in the world today, it's not just hiking and lowering rates. 0:16:18.560 --> 0:16:21.640 There's the communication piece we talked about. There is the 0:16:21.680 --> 0:16:25.440 supervision and regulatory piece that is not just only about banks. 0:16:25.440 --> 0:16:29.480 It's about how the economy functions and so and so. 0:16:29.560 --> 0:16:32.240 It requires a special skill set and a special person. 0:16:32.280 --> 0:16:34.400 But all the names you mean I think mentioned would 0:16:34.400 --> 0:16:35.120 be good choices. 0:16:35.280 --> 0:16:36.880 I just wanted to cross side of today and Swunk 0:16:36.920 --> 0:16:39.040 just to fit in a final question before you run Awhite, Diane, 0:16:39.040 --> 0:16:41.080 we always answer this question. If you had a question 0:16:41.120 --> 0:16:43.320 for the chairman today in the news conference, Dan, what 0:16:43.360 --> 0:16:43.760 would it be? 0:16:46.680 --> 0:16:50.000 It would be how much discussion was there about the 0:16:50.160 --> 0:16:53.960 labor market and the recent inflation numbers. I mean, that 0:16:54.120 --> 0:16:57.280 is where the tire meets the road in terms of 0:16:57.320 --> 0:16:59.600 where the next rate cut is going to be and 0:16:59.640 --> 0:17:03.240 how much much are they secure in the labor market 0:17:03.320 --> 0:17:07.200 weakness that we saw being transitory with regard to hurricanes 0:17:07.200 --> 0:17:10.120 and strikes. We know that part is transitory, but there 0:17:10.200 --> 0:17:12.959 is some signs that the labor market is slowing and 0:17:13.000 --> 0:17:15.399 how concerned are they on that. The other issue I 0:17:15.400 --> 0:17:17.679 think is really important one that we talk about all 0:17:17.720 --> 0:17:21.840 the time. That word that's out there, nonlinearity, what the 0:17:21.840 --> 0:17:24.199 FED always worries about. And this gets to the issue 0:17:24.200 --> 0:17:27.720 of you know, when do rates have a bigger impact 0:17:27.760 --> 0:17:31.680 on the economy? Is the nonlinear effects I think in 0:17:31.960 --> 0:17:36.760 both delinquencies but also particularly in the business sector where 0:17:36.800 --> 0:17:39.040 we do see some floating rates out there. There is 0:17:39.080 --> 0:17:42.119 some stress now starting to show in the business sector, 0:17:42.160 --> 0:17:44.200 and I think that's a very important issue. 0:17:44.400 --> 0:17:46.080 Dan, you're one of the best. It is always greats get 0:17:46.119 --> 0:17:48.280 some time with the Dan Swunk the of KPMG if 0:17:48.320 --> 0:17:51.000 you want, just joining us about twelve thirteen minutes away 0:17:51.160 --> 0:17:53.920 from a news conference with Chairman Powell. Equities at the moment, 0:17:54.160 --> 0:17:56.240 Stone ass session highs at all time highs on the 0:17:56.359 --> 0:17:58.600 S and P five hundred one point four percent on 0:17:58.640 --> 0:18:00.200 the mat snack that is south as of rerec called 0:18:00.240 --> 0:18:02.720 as well following a twenty five basis point reduction of 0:18:02.800 --> 0:18:05.640 the Federal Reserve equity stay elevated. Not much price section 0:18:05.720 --> 0:18:08.160 off the back of this decision this afternoon though, Joining 0:18:08.200 --> 0:18:10.400 us now is Matt Lazeti over at Deutsche Bank. Matt, 0:18:10.400 --> 0:18:12.840 I want your thoughts on the outlook and Matt, welcome 0:18:12.880 --> 0:18:15.480 to the program. Have you made any changes since the 0:18:15.480 --> 0:18:17.680 election this week, and if so, how many? 0:18:19.000 --> 0:18:21.000 Yeah, thanks for having me. So we haven't really made 0:18:21.040 --> 0:18:23.640 any official changes to the OUTLOK at this point. I think, 0:18:23.680 --> 0:18:25.240 you know, we need to get in clarity on a 0:18:25.280 --> 0:18:28.320 number of things. You know, how we're thinking about tax policy, 0:18:28.359 --> 0:18:31.080 the sequencing of that between trade and tariffs will be 0:18:31.119 --> 0:18:33.840 really important. But we did publish a note just given 0:18:34.080 --> 0:18:36.000 kind of a guidepost to where we think the economy 0:18:36.400 --> 0:18:38.600 may be moving and where the FED outlook may be 0:18:38.640 --> 0:18:40.919 moving for next year, and in particular, you know, we 0:18:40.960 --> 0:18:42.639 do think that we could upgrade our growth forecast for 0:18:42.680 --> 0:18:44.760 next year, probably into the two and a half percent range, 0:18:45.080 --> 0:18:47.440 give or take, or so. A labor market that is 0:18:47.440 --> 0:18:49.199 probably going to look a little bit tighter on the 0:18:49.200 --> 0:18:53.280 back of tax cuts that were likely to see easier 0:18:53.280 --> 0:18:55.639 financial conditions that were likely to have but also a 0:18:55.720 --> 0:18:58.560 FED that is likely cutting rates less next year than 0:18:58.560 --> 0:19:01.560 we previously thought, and so yeah, we are kind of 0:19:01.560 --> 0:19:04.680 outlined a scenario in which the FED stops cutting rates 0:19:04.680 --> 0:19:06.040 above four percent next year. 0:19:06.240 --> 0:19:09.200 Yeah, this is one comment from the recent note that 0:19:09.240 --> 0:19:11.440 you put out that if it truly is a red 0:19:11.440 --> 0:19:13.800 sweet and the likelihood is the FED funds rate remains 0:19:14.080 --> 0:19:17.800 above four percent by the end of next year, with 0:19:17.840 --> 0:19:20.119 growth and inflation revised upward. Matt, what would you have 0:19:20.160 --> 0:19:22.399 to see to make that your base case? 0:19:23.760 --> 0:19:26.200 Look, I think we're close to that. I think it's 0:19:26.200 --> 0:19:28.560 just getting clarity on how we think the policy outlook 0:19:28.640 --> 0:19:30.560 is likely to like it to evolve. You know, I 0:19:30.560 --> 0:19:33.480 think we know a few things since the September meeting. One, 0:19:33.680 --> 0:19:35.760 labor market data, I think, on balance have come in 0:19:35.840 --> 0:19:38.040 better and have diminished some of the downside risks that 0:19:38.080 --> 0:19:41.119 we've been worried about. Two, inflation data have come in 0:19:41.160 --> 0:19:43.320 hotter than anticipated, and so I think if the Fed 0:19:43.320 --> 0:19:46.440 were to have revised their forecast today, it's inflation higher, 0:19:46.440 --> 0:19:49.919 a labor market that is tighter. Three financial conditions have 0:19:49.960 --> 0:19:53.000 eased considerably since the September meeting, and so I think 0:19:53.280 --> 0:19:56.119 as you look at all of that and just ignore 0:19:56.160 --> 0:19:59.040 the election for the time being. You've actually had an 0:19:59.040 --> 0:20:01.600 evolution in the data financial conditions, which would be hawkers 0:20:01.600 --> 0:20:03.840 for the FED. Now we overlay on top of that, 0:20:04.560 --> 0:20:06.679 you know, fiscal stiveness that may come via tax cuts, 0:20:07.000 --> 0:20:09.680 trade policy that could lift inflation next year, and I think, 0:20:09.720 --> 0:20:12.440 undeniably together these are just hawkersh developments for the VED. 0:20:12.960 --> 0:20:15.640 That was Odie George Saravella's talk to them the other day. 0:20:15.800 --> 0:20:18.560 He's a little occupied with the collapse of the German government. 0:20:18.680 --> 0:20:21.760 But what does Deutsche Bank feel about the ability to 0:20:21.800 --> 0:20:25.240 steer to a weaker dollar or something President Trump would like? 0:20:26.600 --> 0:20:29.359 Yeah, you know, I'm not sure that that's actually something 0:20:29.400 --> 0:20:31.560 that's going to be a key policy objective of the 0:20:31.560 --> 0:20:34.680 Trump administration. I think some of their tone has changed 0:20:34.720 --> 0:20:36.399 on that. I think that they have emphasized that the 0:20:36.400 --> 0:20:39.280 reserve currency is a really important part. That they're making 0:20:39.400 --> 0:20:42.120 the US economy a place for investment is a really 0:20:42.160 --> 0:20:45.600 important part from a policy perspective. Now, certainly, you know, 0:20:45.600 --> 0:20:47.879 a weeker dollar could help on some of the trade objectives, 0:20:47.880 --> 0:20:50.320 but I don't anticipate kind of talking down the dollar 0:20:50.359 --> 0:20:52.240 is going to be a big part of the next administration. 0:20:52.480 --> 0:20:54.440 Matt, We've been told so many times by so many 0:20:54.440 --> 0:20:57.080 people that the decision today was an easy one and 0:20:57.119 --> 0:20:59.720 then maybe descend but will be an easy one when 0:20:59.720 --> 0:21:01.240 do they decisions start to get hot? 0:21:03.200 --> 0:21:04.959 So today was easy, I'm not sure December is going 0:21:04.960 --> 0:21:07.679 to be as easy. If the incoming data continue to 0:21:07.720 --> 0:21:10.919 point to a labor market that looks resilient and downside 0:21:10.960 --> 0:21:12.840 risks have diminished, and if we get inflation data that 0:21:12.880 --> 0:21:16.359 continue to come in a little bit hotter, along with 0:21:16.440 --> 0:21:19.119 financial conditions that are easy, you know, we are beginning 0:21:19.119 --> 0:21:21.159 to approach a range of kind of reasonable estimates of 0:21:21.200 --> 0:21:24.439 neutral from our perspective. You know, we think neutral from 0:21:24.480 --> 0:21:27.040 a nominal rate perspective could be anywhere probably between three 0:21:27.040 --> 0:21:29.440 and a half and four percent. So after this cut, 0:21:29.520 --> 0:21:32.040 you know, perhaps the December one can come and they 0:21:32.040 --> 0:21:34.159 can still feel comfortable with that. But I really do 0:21:34.240 --> 0:21:36.320 think that the December meeting is the first one where 0:21:36.520 --> 0:21:38.639 we probably have a little bit more contentiousness around it 0:21:39.200 --> 0:21:42.639 because they're approaching neutral. The data look fine, and you 0:21:42.680 --> 0:21:44.440 do have risks to the outlook where just from a 0:21:44.520 --> 0:21:47.280 risk management perspective, it could make some sense to slow 0:21:47.280 --> 0:21:48.040 the pace of cuts. 0:21:48.080 --> 0:21:49.960 Which do you agree with that, especially with the fact 0:21:50.000 --> 0:21:51.240 that they have to come out with a statement of 0:21:51.240 --> 0:21:55.080 economic projections. How that makes them forces them to really 0:21:55.520 --> 0:21:58.280 write down, codify this idea of a neutral rate north 0:21:58.280 --> 0:21:59.000 to four percent. 0:21:59.240 --> 0:22:02.920 Yes, I think that scenario is certainly a plausible one. 0:22:03.400 --> 0:22:05.560 The nuance I would offer is I could see a 0:22:05.600 --> 0:22:07.320 scenario where they get the funds rate down to a 0:22:07.359 --> 0:22:10.119 round four and stay there, not as neutrals four, but 0:22:10.200 --> 0:22:12.040 just inflation stuck at two and a half. I don't 0:22:12.040 --> 0:22:14.520 see the power Fed breaking a lot of China to 0:22:14.520 --> 0:22:16.360 get inflation down from two and a half to two 0:22:16.359 --> 0:22:18.679 with raid hikes, but they may just pause at a 0:22:18.720 --> 0:22:21.160 funds rate in the low force because inflation stuck it 0:22:21.480 --> 0:22:23.919 at two and a half. So that's another way that 0:22:24.000 --> 0:22:25.920 delivers Math's scenario. 0:22:26.119 --> 0:22:28.800 Matt, what do you think of the idea of tariffs 0:22:28.800 --> 0:22:30.240 being inflationary versus not? 0:22:30.440 --> 0:22:30.600 Right? 0:22:30.600 --> 0:22:31.959 I mean, what are you sort of looking at as 0:22:31.960 --> 0:22:35.840 the most inflationary aspects of policy? That would be maybe 0:22:35.880 --> 0:22:38.199 a warning side signed for the Federal Reserve. 0:22:39.440 --> 0:22:39.640 Yeah. 0:22:39.720 --> 0:22:42.760 I think the complications for the Fed next year could 0:22:42.760 --> 0:22:45.119 be that we have demand side policy in terms of 0:22:45.160 --> 0:22:47.959 tax cuts happening with an economy that is already strong, 0:22:48.359 --> 0:22:51.960 being coupled with supply side policy via tariffs that would 0:22:52.000 --> 0:22:54.600 lift inflation, and both of those things being kind of 0:22:54.600 --> 0:22:56.720 giving an inflationary outcome where it makes it difficult to 0:22:56.760 --> 0:23:00.240 disentangle what's happening from a demand side versus a supply 0:23:00.359 --> 0:23:02.480 side story. You know, certainly if the VED was able 0:23:02.520 --> 0:23:05.840 to identify, they could potentially look through the tariff effects 0:23:05.920 --> 0:23:08.480 on inflation. But I think that they are probably just 0:23:08.560 --> 0:23:10.840 less prone to do so for a few reasons. One, 0:23:10.880 --> 0:23:13.560 inflation is already above their target and is continuing to 0:23:13.560 --> 0:23:17.399 do so. Two, inflation expectations could be at risk of 0:23:17.440 --> 0:23:20.880 moving higher, and I think that this is primarily or 0:23:20.920 --> 0:23:24.200 even more so an issue if those tariffs are phased 0:23:24.200 --> 0:23:26.880 in over time. It makes it more difficult and complicated, 0:23:27.119 --> 0:23:29.240 I think, to identify the price level shock and makes 0:23:29.280 --> 0:23:31.160 you a little bit more worried about it factoring into 0:23:31.160 --> 0:23:32.320 inflation expectations. 0:23:32.359 --> 0:23:34.800 So about Michael, if I want to affect the Lazetti 0:23:34.880 --> 0:23:38.080 Claire to move here in bonds, price up, yield down? 0:23:38.480 --> 0:23:41.280 How far out unduration do I want to be into 0:23:41.359 --> 0:23:44.240 twenty twenty five? Do I want to extend duration? 0:23:45.040 --> 0:23:45.320 Yeah? 0:23:45.359 --> 0:23:46.840 I think you do. Here, I think there are a 0:23:46.840 --> 0:23:49.199 lot of things to do. That's kind of interest we're 0:23:49.200 --> 0:23:52.480 seeing from clients to municipal bond market is a large 0:23:52.520 --> 0:23:55.080 part of that. A lot of clients owned municipal bonds 0:23:55.119 --> 0:23:58.520 have ladders. Stuff is rolling off, roll it out to 0:23:58.600 --> 0:24:01.360 ten years. There's a lot going on in credit. Get 0:24:01.400 --> 0:24:04.600 out there and invest. You have to recognize there's been 0:24:04.720 --> 0:24:08.840 a pretty significant backup in yield. We don't know what 0:24:08.880 --> 0:24:11.679 fiscal policy will look like, and it sure looks like 0:24:11.720 --> 0:24:13.920 we're not going to see a lot before a year 0:24:14.000 --> 0:24:14.199 or so. 0:24:14.440 --> 0:24:16.040 You know, there's some people Bob worried about it by 0:24:16.040 --> 0:24:18.160 a strike emerging in the bond market, and I just wonder, 0:24:18.200 --> 0:24:20.159 with yields at these levels, do we just keep sucking 0:24:20.160 --> 0:24:22.159 capital away from the rest of the world here in 0:24:22.160 --> 0:24:24.600 the United States, Because if I'm thinking about the policy 0:24:24.600 --> 0:24:27.160 coming down the pike from my perspective and many others 0:24:27.160 --> 0:24:29.560 as well, if you're investig in America, there's going to 0:24:29.560 --> 0:24:31.960 be policies to reward it. If you're exporting it, that's 0:24:31.960 --> 0:24:34.880 a very very different scenario of trying to export into America. 0:24:34.920 --> 0:24:37.359 But do we just keep sucking capital away from the 0:24:37.400 --> 0:24:38.280 rest of the world. 0:24:38.359 --> 0:24:41.359 Well, yesterday was the perfect evidence of that. There was 0:24:41.480 --> 0:24:45.040 every reason to hide from the bond market. You had 0:24:45.040 --> 0:24:48.320 a thirty year auction and it went flawlessly. 0:24:49.000 --> 0:24:52.240 You see the same thing, Rich, I do, And in particular, look, 0:24:52.280 --> 0:24:54.560 we focus on the US, but it's a global bond market, 0:24:54.640 --> 0:24:56.760 and treasure yields four and a half. We saw a year, 0:24:56.800 --> 0:24:59.200 almost exactly a year ago, treasure yields got to five, 0:24:59.440 --> 0:25:02.320 and there was a voracious appetite to lock in those 0:25:02.480 --> 0:25:04.560 those yields. And so I do think there's a range 0:25:04.600 --> 0:25:06.760 within which the growth and the FED and the fiscal 0:25:06.800 --> 0:25:09.639 pit plays in. But beyond a certain point, it becomes 0:25:09.760 --> 0:25:12.040 very attractive to international investors. 0:25:12.080 --> 0:25:14.680 So we retain the privilege of acting recklessly. Some people 0:25:14.760 --> 0:25:16.560 might say iolutely. 0:25:16.080 --> 0:25:17.520 Kicking that can down the road. 0:25:18.000 --> 0:25:20.760 Yeah, although I do wonder what the consequence is of 0:25:20.840 --> 0:25:23.840 kicking the can down the road and then Germany saying, hey, 0:25:23.840 --> 0:25:26.159 they're doing it, so we want to too. You know, 0:25:26.200 --> 0:25:28.960 this sounds like a good plan France, Hey what about us? 0:25:28.960 --> 0:25:31.040 And all of a sudden you get yields rising higher? 0:25:31.200 --> 0:25:33.199 And how much does the bond market suck in the 0:25:33.240 --> 0:25:35.080 capital away from other risk assets? 0:25:35.119 --> 0:25:35.800 That's the question. 0:25:36.160 --> 0:25:38.040 No, I'm serious That's one of my main questions. 0:25:38.119 --> 0:25:40.240 Some of these European bond markets have learned they're not 0:25:40.280 --> 0:25:43.240 American and that has been a painful lesson which one 0:25:43.600 --> 0:25:45.480 you've seen that In the UK you had a little 0:25:45.480 --> 0:25:47.320 sprinkle of that. In France we still that and the 0:25:47.320 --> 0:25:48.720 periphery a decade ago. 0:25:49.920 --> 0:25:52.320 Well, I'm just saying the challenge for many European countries 0:25:52.600 --> 0:25:55.359 is the countries they'd like to invest on don't have 0:25:55.400 --> 0:25:57.520 a lot of debt out standing, like Germany and Switzerland, 0:25:57.560 --> 0:25:59.720 and the countries that want to borrow have to pay 0:25:59.720 --> 0:26:00.639 a big premium. 0:26:00.680 --> 0:26:02.919 So yeah, I want to cross back out. It's a MATLAZETI matight, 0:26:03.000 --> 0:26:05.200 just before you run, what's the best way of getting 0:26:05.240 --> 0:26:07.440 the chairman to answer a question about the election without 0:26:07.480 --> 0:26:10.000 answering a question about the election, because that's all every 0:26:10.080 --> 0:26:12.320 journalist on the planet right now is thinking, and every 0:26:12.320 --> 0:26:14.720 single journalist in that news conference will be trying to do. 0:26:16.119 --> 0:26:18.200 Yeah, I think it's a really difficult one. I think 0:26:18.240 --> 0:26:20.040 at the moment, you know, chair Pal has really no 0:26:20.080 --> 0:26:23.200 incentive to answer any question about what fiscal policy. 0:26:22.880 --> 0:26:23.359 Is going to look like. 0:26:23.359 --> 0:26:24.960 There's so much uncertainty, you know, I think he's going 0:26:25.000 --> 0:26:27.480 to emphasize data dependence. I guess if you could do 0:26:27.520 --> 0:26:29.919 it through a few avenues, it would be one, you know, 0:26:29.920 --> 0:26:32.199 how they think about risks to the outlook as they 0:26:32.200 --> 0:26:34.639 look ahead, you know, in terms of the policy outlook 0:26:34.680 --> 0:26:37.640 that has to fact earned out to the thinking about things. Two. 0:26:37.840 --> 0:26:40.520 I think it was interesting at the September meeting he 0:26:40.640 --> 0:26:43.480 noted that the neutral rate has risen quote unquote significantly 0:26:43.480 --> 0:26:47.159 relative to the pre COVID levels, And I would you know, 0:26:47.280 --> 0:26:49.919 just kind of think, you know, if we're getting additional 0:26:49.960 --> 0:26:52.240 and fiscal stimulus on that, how would he view the 0:26:52.480 --> 0:26:54.480 outlook for the neutral rate as evolving in that type 0:26:54.480 --> 0:26:56.720 of environment. But to be honest, I think it's difficult 0:26:56.720 --> 0:26:58.720 to get kind of a solid answer for him about 0:26:58.720 --> 0:27:00.600 what the election could mean for the OUTLOK at this meeting. 0:27:00.760 --> 0:27:03.080 Matt, I appreciate your time, Sir Matta SETI if Deutsche 0:27:03.160 --> 0:27:05.719 Bank about three minutes ago until this news conference starts, 0:27:06.040 --> 0:27:08.320 Rich'll perfectly placed to answer that question. What would you 0:27:08.440 --> 0:27:10.480 lead into in this news conference if you will on 0:27:10.520 --> 0:27:13.280 the side asking the questions, what would you lean on? 0:27:14.560 --> 0:27:18.600 I think I'd ask the chair about financial conditions broadly 0:27:18.720 --> 0:27:21.080 versus the real funds right, because it does seem over 0:27:21.119 --> 0:27:24.480 the last year the Committee at some points emphasizes tighter 0:27:24.520 --> 0:27:27.760 financial conditions. We saw that explicitly in the statement in 0:27:27.800 --> 0:27:31.920 both November and December of last year. More recently they've emphasized, well, look, 0:27:31.960 --> 0:27:34.520 the funds rates well above the rate of inflation. But 0:27:35.040 --> 0:27:37.680 at the same time, financial conditions have been getting easier. 0:27:38.400 --> 0:27:40.640 And it's not necessarily have to pick one or the other, 0:27:40.760 --> 0:27:42.800 but get a sense of how he and the Committee 0:27:42.800 --> 0:27:45.880 are thinking about that right right now in a global 0:27:45.920 --> 0:27:48.280 market and in the US market in which it's definitely 0:27:48.400 --> 0:27:51.879 risk gone in the last several days and really for 0:27:52.320 --> 0:27:53.120 some time now. 0:27:53.680 --> 0:27:55.879 I've asked this before, but I think it's so important. 0:27:55.960 --> 0:28:00.000 Where's the animal spirit into twenty twenty five? President Trump's 0:28:00.119 --> 0:28:02.879 going to go, go, go, go go. He's going to 0:28:02.920 --> 0:28:07.240 do that before January whatever the inauguration. How goosed is 0:28:07.280 --> 0:28:09.840 the economy economy going to be under Trump? 0:28:10.560 --> 0:28:13.240 Well, I think there is that element at minimum, because 0:28:13.359 --> 0:28:16.320 we did resolve some uncertainty. I think about the extension 0:28:16.359 --> 0:28:18.560 of the existing I would again remind you if we 0:28:18.640 --> 0:28:21.879 extend the existing tax cuts, it's very expensive in terms 0:28:21.880 --> 0:28:23.679 of the way it's scored by the CBO, but it 0:28:23.680 --> 0:28:27.240 doesn't change anybody's you know, tax rates relative to what 0:28:27.240 --> 0:28:30.760 they're paying paying now. I think the regulation in particular 0:28:30.880 --> 0:28:34.480 certain sectors energy and perhaps financial services is sort of 0:28:34.480 --> 0:28:38.160 a one time reassessment. I don't think you can keep 0:28:38.160 --> 0:28:40.480 that going. I think we are seeing more or less rational, 0:28:40.600 --> 0:28:45.080 least directionality wise reaction to markets. And to point on 0:28:45.120 --> 0:28:48.120 the dollar, strong, strong dollar. I know someone like a weaker, 0:28:48.160 --> 0:28:50.080 but this is the dollar is the sum. 0:28:50.280 --> 0:28:54.960 Yeah, So, Bob, final question, we're about a minute ninety 0:28:55.000 --> 0:28:57.480 seconds away from this press conference. How would you get 0:28:57.520 --> 0:29:00.760 him to answer something about his new risks? 0:29:00.880 --> 0:29:03.120 You know, I'd ask the question we had gone back 0:29:03.200 --> 0:29:06.560 and forth on, ask him, what is your staff modeling now? 0:29:06.920 --> 0:29:10.680 Because there's the current and expect set of data, and 0:29:10.760 --> 0:29:16.320 there's the majority probability that there's enormous fiscal stimulus coming 0:29:16.360 --> 0:29:19.160 down the pike a year from now, what do you model? 0:29:19.560 --> 0:29:22.680 This has been a fantastic conversation, gents, Bob Michael and 0:29:22.720 --> 0:29:24.840 a former FED Vice chair Richard Cloda, to the two 0:29:24.840 --> 0:29:27.120 of you, just absolutely brilliant. Just some takeaway from the 0:29:27.200 --> 0:29:29.680 last thirty minutes if you're just joining us, Richard Cloud, 0:29:29.720 --> 0:29:32.200 are talking about maybe finding some space to generate some 0:29:32.280 --> 0:29:35.240 optionality going into twenty twenty five, and if it's a 0:29:35.240 --> 0:29:38.320 consensus around this table as well, that the decision gets 0:29:38.320 --> 0:29:40.520 harder once you get to December, and that this one 0:29:40.560 --> 0:29:43.160 was an easy one and maybe December is a tricky one. 0:29:43.200 --> 0:29:45.880 My big takeaway is that the FED removed the reference 0:29:45.920 --> 0:29:48.720 and their statement to gaining confidence on inflation at the 0:29:48.720 --> 0:29:51.760 same time that our panelists, our Steam panelists, are talking 0:29:51.760 --> 0:29:54.480 about opening the door in December to either not cutting 0:29:54.520 --> 0:29:58.760 rates or potentially going forward and maybe not cutting next year. 0:29:58.800 --> 0:30:00.720 Are you ready for a forty five minute clinic on 0:30:00.760 --> 0:30:03.400 how to not answer questions? Are you ready for this ex. 0:30:03.520 --> 0:30:04.360 I'm so excited. 0:30:04.480 --> 0:30:05.960 Is this a certified snooze first? 0:30:06.200 --> 0:30:09.560 No, absolutely, not touch It is going to be pretty well. 0:30:09.680 --> 0:30:10.960 I think it's going to be one of those news 0:30:10.960 --> 0:30:13.680 conferences and mister Clarenden knows this well, where you have 0:30:13.720 --> 0:30:15.520 a sheet of paper in front of you, You've got 0:30:15.520 --> 0:30:17.640 your notes written down, and every time you get that question, 0:30:18.080 --> 0:30:19.040 different versions off it. 0:30:19.440 --> 0:30:19.960 That sheet of. 0:30:19.960 --> 0:30:22.800 Paper comes up and you read it verbatim and hope 0:30:22.840 --> 0:30:23.800 they get bored of asking. 0:30:24.000 --> 0:30:26.280 My favorite is when they have multiple sheets when Jay 0:30:26.320 --> 0:30:28.440 Pall has multiple sheets, and someone asks a question, you 0:30:28.480 --> 0:30:31.600 see him going through the papers. Wait, where's okay, there's 0:30:31.640 --> 0:30:32.080 the answer. 0:30:32.440 --> 0:30:34.840 Have you ever written one of those questions the answer 0:30:34.920 --> 0:30:36.040 sheets for the chairman. 0:30:37.320 --> 0:30:40.240 I participated in discussions of press conference briefings. 0:30:40.320 --> 0:30:43.200 Yes, twenty five bases point reduction over the federerser