Instant Reaction: Jay Powell on Fed Policy

This is a Bloomberg Savannah special. The FED decides, I 0:00:09.119 --> 0:00:11.080 think we all need to lie down after the last 0:00:11.080 --> 0:00:13.039 one hour or so. There is three steps to this. 0:00:13.480 --> 0:00:16.720 Step one except you're finished, Chairman Pale saying the policy 0:00:16.800 --> 0:00:19.720 rate is likely at its peak. Step two acknowledge the 0:00:19.760 --> 0:00:22.320 next step it's appropriate to dial back at some point 0:00:22.360 --> 0:00:25.520 this year. And step three attempt to explain the threshold 0:00:25.520 --> 0:00:27.160 to do so. Take a listen. 0:00:27.320 --> 0:00:28.800 What do we want to see? We want to see 0:00:29.120 --> 0:00:32.560 more good data. It's not that we're looking for better data. 0:00:33.120 --> 0:00:35.559 We're looking at continuation of the good data that we've 0:00:35.560 --> 0:00:37.960 been seeing, and a good example is inflation. So we 0:00:38.000 --> 0:00:41.000 have six months of good inflation data. The question really 0:00:41.080 --> 0:00:43.519 is that six months of good inflation data is it's 0:00:43.560 --> 0:00:46.240 sending us a true signal that we are in fact 0:00:46.360 --> 0:00:50.720 on a path, sustainable path down to two percent inflation. 0:00:51.159 --> 0:00:53.199 That's not good enough for this market. It wants to 0:00:53.240 --> 0:00:55.920 know about March March rate cuts. This is what the 0:00:56.000 --> 0:00:57.160 Chairman had to say. 0:00:58.280 --> 0:01:01.040 Based on the meeting today, I would tell you that 0:01:02.280 --> 0:01:05.160 I don't think it's likely that the Committee will reach 0:01:05.200 --> 0:01:07.560 a level of confidence by the time of the March meeting. 0:01:08.000 --> 0:01:10.640 To identifying March as the time to do that. But 0:01:10.760 --> 0:01:12.360 that's that's to be seen. 0:01:12.920 --> 0:01:14.479 And this is what you get in this market off 0:01:14.480 --> 0:01:16.400 the back of it all and equity market this sous 0:01:16.440 --> 0:01:18.800 off on the S and P five hundred session lows 0:01:18.840 --> 0:01:21.240 down one point two percent on the Nastak down one 0:01:21.240 --> 0:01:23.520 point five In the bond market, we had a big rally, 0:01:23.640 --> 0:01:25.440 still got a decent rally, but yields are off the 0:01:25.440 --> 0:01:27.360 loads at a session we're down seven or eight basis 0:01:27.360 --> 0:01:29.399 points on a two year, four to twenty six on 0:01:29.440 --> 0:01:33.000 a ten year down five Lisa three ninety seven eighty five. 0:01:33.240 --> 0:01:36.280 We're talking about cuts kinda. We're just not talking about March. 0:01:36.640 --> 0:01:39.000 We were supposed to hear him hug the statement, and 0:01:39.040 --> 0:01:42.200 he did. He gave this ambiguous answer to pidful necessarily 0:01:42.520 --> 0:01:44.480 anything at all. We didn't learn anything, and that was 0:01:44.480 --> 0:01:47.160 exactly what he was hoping for. And then he said 0:01:47.160 --> 0:01:49.639 the m word March, and he actually answered the question, 0:01:49.720 --> 0:01:52.200 and the market responded to that. You know, whether it's six, 0:01:52.240 --> 0:01:55.480 we shall see. But that's clearly was a signal that 0:01:55.600 --> 0:01:57.080 was not necessarily in the. 0:01:57.000 --> 0:01:57.720 Statement a TK. 0:01:57.840 --> 0:01:59.920 They just did not sound comfortable, or at least chairman 0:02:00.320 --> 0:02:03.280 does not sound comfortable suggesting we're cutting at a time. 0:02:03.360 --> 0:02:04.080 See yeah, Bazarre. 0:02:04.120 --> 0:02:06.840 I mean the clarity there was the March idea, Claudia 0:02:06.920 --> 0:02:09.799 Sawmo on Twitter saying that was the bombshell is clearly 0:02:09.880 --> 0:02:13.440 they've moved March out of the way. What an odd 0:02:13.680 --> 0:02:17.880 press conference they got one word, John Timid. The timidity here, 0:02:18.639 --> 0:02:22.480 the carefulness is extraordinary. I felt like I was looking 0:02:22.520 --> 0:02:25.440 at a Bank of Japan meeting from twenty five years ago. 0:02:25.800 --> 0:02:28.560 The point there they had a data thing is sounded 0:02:28.600 --> 0:02:31.680 like one of our famous sad strings, data to data data, 0:02:32.040 --> 0:02:35.600 and it's just framing out the fear they have and 0:02:35.639 --> 0:02:37.119 the delay that they're going to cause. 0:02:37.160 --> 0:02:39.080 There was something that didn't come up in this needs conference. 0:02:39.120 --> 0:02:41.480 I was surprised there weren't more questions about what happened 0:02:41.760 --> 0:02:44.560 in a banking system today, what happened with one particular bank, 0:02:44.680 --> 0:02:46.640 New York Community Bank, because LISTA, that's what we were 0:02:46.639 --> 0:02:49.720 talking about in anticipation of the decision for much of today. 0:02:50.120 --> 0:02:51.959 It was such an easy question, but I guess it 0:02:52.000 --> 0:02:54.200 didn't sound very sophisticated. How much do you account that 0:02:54.360 --> 0:02:56.520 is that worried about? After in when does that become 0:02:56.520 --> 0:02:59.920 an issue that actually ends up causing you to coverrate 0:03:00.120 --> 0:03:00.680 more quickly. 0:03:00.800 --> 0:03:04.560 The thing to be here, John, is the behavioral aspect 0:03:04.720 --> 0:03:07.960 of this meeting. These are smart people. They put it 0:03:07.960 --> 0:03:10.480 on their pants, one leg at a time, et cetera. 0:03:10.680 --> 0:03:13.680 And the answer is the timidity I heard today was 0:03:13.919 --> 0:03:16.799 just I've never heard that timidity question. 0:03:17.160 --> 0:03:20.160 QT. Let's get the folder out, get to the right page. 0:03:20.639 --> 0:03:22.840 So far it's gone very well. We had some discussion 0:03:22.840 --> 0:03:24.320 of the balance sheet. We're planning to have an in 0:03:24.360 --> 0:03:26.840 depth discussion in March. At the beginning of that process. 0:03:27.160 --> 0:03:29.919 We see rates and a balance sheet as independent tools. 0:03:30.000 --> 0:03:31.600 They're not there yet, and I think that's the frustration 0:03:31.680 --> 0:03:34.960 with Marcus today. Chairman Power is deeply pragmatic. He's trying 0:03:34.960 --> 0:03:37.320 to go through this step by step, have a clear 0:03:37.360 --> 0:03:40.440 sequence of things. The market wants it right now, wants 0:03:40.440 --> 0:03:43.440 to talk about March rate cuts. Wants to move Bramo 0:03:43.600 --> 0:03:45.720 and that's not what you heard in today's news conference. 0:03:45.760 --> 0:03:48.120 Wants to know even what the criteria are. The criteria 0:03:48.280 --> 0:03:50.240 is when we decide what the criteria will be, and 0:03:50.280 --> 0:03:52.640 depending on which member I mean, the idea of the 0:03:52.720 --> 0:03:55.120 data just needs to continue to be good and then 0:03:55.160 --> 0:03:57.320 how long does it need to be good six seven. 0:03:57.160 --> 0:03:57.760 Eight months. 0:03:57.920 --> 0:03:59.800 I don't know. Well, she'll see And that seemed to 0:03:59.840 --> 0:04:02.160 be sort of this feeling, maybe because each member has 0:04:02.160 --> 0:04:05.200 a slightly different view as they try to gauge a 0:04:05.200 --> 0:04:06.240 really uncertain economy. 0:04:06.240 --> 0:04:08.120 Thank you for joining us on television radio. And what 0:04:08.160 --> 0:04:10.880 we're going to do is talk to people with historical 0:04:11.000 --> 0:04:15.000 perspective about this moment as we all stagger into twenty 0:04:15.080 --> 0:04:18.359 twenty four. William Dudley out of Berkeley. I'm tenured at 0:04:18.400 --> 0:04:20.800 Goldin Sachs for years, and of course a former New 0:04:20.880 --> 0:04:26.640 York Federal Reserve President, Bloomberg Economic senior advisor. You know, Bill, 0:04:26.920 --> 0:04:28.320 I feel like I want to go and talk to 0:04:28.400 --> 0:04:30.880 Eiken Green or Brad DeLong right now out in the 0:04:30.920 --> 0:04:36.440 hallways at Berkeley. The timidity I see here, the carefulness. 0:04:36.800 --> 0:04:40.920 Let's start with the why of the moment. Why are 0:04:40.960 --> 0:04:46.200 they so turned data dependent and careful here to begin 0:04:46.240 --> 0:04:48.120 a measured trend of lower rates. 0:04:48.600 --> 0:04:51.000 I think they're so careful because things are actually going 0:04:51.160 --> 0:04:54.520 very well. If n Kyle wasn't as strong as it was, 0:04:55.040 --> 0:04:58.279 they would be much more inclined to cut rates. But 0:04:58.360 --> 0:05:00.760 since we've seen very strong growth in the fourth quarter, 0:05:00.880 --> 0:05:04.320 the Fed's aware of the fact that if they started 0:05:04.360 --> 0:05:06.120 a little bit later, it's probably not. 0:05:06.040 --> 0:05:09.040 Going to have much consequence for the economic outlook. 0:05:09.440 --> 0:05:11.640 The fact that financial conditions have eased over the last 0:05:11.640 --> 0:05:13.520 few months also allows the FED to be a little 0:05:13.560 --> 0:05:14.520 bit more cautious. 0:05:14.800 --> 0:05:16.960 So I think it's really the strength of the economy. 0:05:17.240 --> 0:05:20.880 The easing of financial conditions means the Federal reserves of 0:05:20.920 --> 0:05:23.239 the view that they can be a little bit more patient. 0:05:24.120 --> 0:05:26.520 I thought that with very interesting press conference, because up 0:05:26.640 --> 0:05:29.320 until the points that cheer Paul talked about the March 0:05:29.400 --> 0:05:32.520 meeting specifically, the market was actually taking it as March 0:05:32.640 --> 0:05:35.839 was in play, and then he explicitly took it off 0:05:35.839 --> 0:05:39.279 the table, and the Federal Fund futures contracts went from 0:05:39.600 --> 0:05:43.880 pricing in more than fifty percent probability of a rate 0:05:43.920 --> 0:05:47.080 cut in March two significantly less. So I think that 0:05:47.240 --> 0:05:49.440 was the big surprise at the meeting for me. I 0:05:49.440 --> 0:05:51.920 thought the other interesting aspect of the meeting was with 0:05:52.279 --> 0:05:55.440 the discussion about the quantitative the tightening, so it's clearly 0:05:55.600 --> 0:05:56.680 being put on the table. 0:05:57.040 --> 0:05:58.839 They talked about it today. They're going to have an 0:05:58.880 --> 0:06:02.400 in depth staff in March, so I think we. 0:06:02.400 --> 0:06:05.680 Could expect quantity of tightening deeper and to happen sometimes, 0:06:05.880 --> 0:06:07.640 you know, probably around the first half of this year. 0:06:07.800 --> 0:06:09.440 Bill lets unpack some of that. I gets to QT 0:06:09.720 --> 0:06:11.240 in a moment. I just want to talk about these 0:06:11.279 --> 0:06:15.200 strategic ambiguity. So in the statement, this is what they said. 0:06:15.240 --> 0:06:17.359 The Committee does not expect it will be appropriate to 0:06:17.360 --> 0:06:20.600 reduce the target range until it has grained greater confidence 0:06:20.839 --> 0:06:24.600 that inflation is moving sustainably towards two percent. So obviously, 0:06:24.880 --> 0:06:27.040 our former colleague, good friend Jidis Smilek of the New 0:06:27.080 --> 0:06:29.279 York Times, first question out of the gate wants to 0:06:29.320 --> 0:06:31.960 know what greater confidence actually means. We want to see 0:06:31.960 --> 0:06:34.800 more data. We're not looking for better data, just more 0:06:35.120 --> 0:06:38.159 good data. So Bill darro ask what does it mean. 0:06:39.560 --> 0:06:41.039 I think what he wants to see is more of 0:06:41.080 --> 0:06:43.520 the same. I think that's basically what he said. I 0:06:43.560 --> 0:06:45.880 think they're a little bit of concern that maybe the 0:06:46.040 --> 0:06:49.000 really good inflation news that we're seeing is a little 0:06:49.000 --> 0:06:53.920 bit about goods price weakness and that that may ultimately 0:06:53.960 --> 0:06:56.400 fade away, so that there might be a little bit 0:06:56.440 --> 0:06:58.800 more work to do on the services side. So I 0:06:58.839 --> 0:07:02.440 think that's their I mean, if the inflation is continues 0:07:02.480 --> 0:07:04.800 along the same course for a few more months than 0:07:04.800 --> 0:07:07.159 the FEDERI serve is certainly going to start to cut rates. 0:07:07.320 --> 0:07:10.120 They're just not absolutely confident that that's where we're going 0:07:10.160 --> 0:07:11.640 to be three or four months from now. 0:07:11.840 --> 0:07:13.720 Bill, do you think that it was a mistake for 0:07:13.840 --> 0:07:16.680 freed Shair Powell to say that March was not on 0:07:16.720 --> 0:07:17.120 the table. 0:07:18.200 --> 0:07:20.600 I don't think it's off completely off the table. 0:07:20.640 --> 0:07:22.680 All he said was, we don't think I don't think 0:07:22.720 --> 0:07:25.320 at the current point that will be confident enough in March. 0:07:25.680 --> 0:07:29.720 But you know, we economic data better inflation is than. 0:07:29.640 --> 0:07:31.600 He made evident by the time we get to March, 0:07:31.640 --> 0:07:33.800 and March meeting is still a ways off, so you know, 0:07:33.960 --> 0:07:36.000 his degree of confidence could change between. 0:07:35.720 --> 0:07:36.240 Now and then. 0:07:37.080 --> 0:07:39.880 Bill Dudley, I look at some of the criticisms here 0:07:39.960 --> 0:07:43.480 that they're on trend of disinflation. Jason Firman up at 0:07:43.960 --> 0:07:48.160 Harvard has a wonderful blending of annualized vectors and such. 0:07:48.800 --> 0:07:52.080 Which vector do you use if they're on the vector, 0:07:52.560 --> 0:07:55.480 when do they start? What's the Dudley vector where you 0:07:55.560 --> 0:07:56.920 measure our disinflation? 0:07:58.760 --> 0:08:00.720 Well, I think that I think we're still in a 0:08:00.800 --> 0:08:04.120 very tricky period because we had lots of good inslation 0:08:04.400 --> 0:08:07.040 during the pandemic, then we opened up the economy that 0:08:07.080 --> 0:08:10.000 goods of inflation went away. In fact, we're actually getting 0:08:10.000 --> 0:08:13.320 goods deflation now. And the cual question is how long 0:08:13.360 --> 0:08:17.280 will that good goods deflation last? Because if it ends, 0:08:17.520 --> 0:08:21.000 then inflation pressures could actually start to be more evident. 0:08:21.040 --> 0:08:23.480 Again, I was saying that as the fact. 0:08:23.280 --> 0:08:27.360 That services inflation should also come down as wage games 0:08:27.400 --> 0:08:31.920 become less more modest, and I think the Employment Cost 0:08:32.000 --> 0:08:35.880 Index report today was a positive reading that wage trends 0:08:35.920 --> 0:08:39.240 are becoming more consistent with two percent underlying inflation. 0:08:39.720 --> 0:08:41.960 Bill you mentioned QT, can we just finish that with you. 0:08:42.360 --> 0:08:44.120 Did you get the sense from the chairman that he 0:08:44.200 --> 0:08:47.680 wants to end QT before he starts to reduce interest rights, 0:08:47.920 --> 0:08:49.960 or that we can see those two things play out independently. 0:08:51.000 --> 0:08:54.760 I think they're completely independent. Ending QT is not about, 0:08:54.880 --> 0:08:56.800 you know, loosening monetary policy. 0:08:56.840 --> 0:09:00.440 It's about basically getting the level of reserves and banking 0:09:00.480 --> 0:09:03.800 system down to a level that's low as low as 0:09:03.840 --> 0:09:08.320 possible without the reserve level actually affecting interest rates. So 0:09:08.400 --> 0:09:11.320 this is totally independent of the decision about whether you 0:09:11.320 --> 0:09:13.400 want to make Montet policy more accommodative. 0:09:13.920 --> 0:09:15.760 This is based on the bank's demand. 0:09:15.480 --> 0:09:18.080 For reserves, and the Fed's trying to estimate what that 0:09:18.160 --> 0:09:20.520 demand is, and they want to make sure that there's 0:09:20.600 --> 0:09:23.520 enough reserves in the banking system, but not too much. 0:09:23.840 --> 0:09:25.800 So they want to have a cushion over the banks 0:09:25.880 --> 0:09:28.400 underlying demand for reserves, and they're going to try to 0:09:28.480 --> 0:09:30.040 make you know, they're going to do the taper to 0:09:30.040 --> 0:09:34.199 make sure that they approach approach that place very very carefully. 0:09:34.640 --> 0:09:37.599 They recall what happened in September twenty nineteen, where we 0:09:37.760 --> 0:09:40.760 crashed through the level of reserves that banks demanded and 0:09:40.760 --> 0:09:43.520 we got an upward spike in repro rates and quite 0:09:43.520 --> 0:09:45.000 a bit of turmoil and the money market, and the 0:09:45.040 --> 0:09:46.480 FED wants to avoid that this time. 0:09:46.800 --> 0:09:49.199 Bill, are you surprised that nobody asked about New York 0:09:49.200 --> 0:09:51.440 Community Bank? And how would you have responded to a 0:09:51.520 --> 0:09:54.760 question about how that factors into the FED decision making 0:09:54.800 --> 0:09:56.120 process in the next few months. 0:09:57.520 --> 0:09:59.640 I think the FED is not that worried about some 0:09:59.679 --> 0:10:01.920 of the banking issues. 0:10:01.520 --> 0:10:04.680 Because I think that they're really banked by bank now, 0:10:05.080 --> 0:10:07.080 and I think this is all happening. 0:10:06.960 --> 0:10:10.120 In plain sight. This is not like the Great Financial crisis. 0:10:09.720 --> 0:10:14.120 Where you really couldn't evaluate the situation for individual banks. 0:10:14.440 --> 0:10:16.040 Right now you can sort of see what's happening to 0:10:16.120 --> 0:10:17.360 banks and that interest margin. 0:10:17.440 --> 0:10:20.800 You can see what's happening to the losses on their 0:10:21.120 --> 0:10:24.400 securities portfolio. You can see what kind of earns pressure 0:10:24.440 --> 0:10:27.320 they're under. So I don't think the FED views the 0:10:27.400 --> 0:10:32.480 banking system issue as very important right now. Now that 0:10:32.640 --> 0:10:34.719 could that change, could something great. And I think the 0:10:34.760 --> 0:10:36.840 other thing that makes them a little bit more confident 0:10:36.840 --> 0:10:39.000 about this is long term interest rates. 0:10:38.800 --> 0:10:39.360 Have come down. 0:10:39.880 --> 0:10:42.600 We peaked ten year treasure you'll peaked around five percent, 0:10:42.679 --> 0:10:45.800 now around four percent, and so that pressure on banks 0:10:45.800 --> 0:10:47.920 that took a lot of interest rate risks, they're still 0:10:48.000 --> 0:10:51.160 under pressure, but that pressure is less than it was 0:10:51.480 --> 0:10:51.920 a year. 0:10:51.800 --> 0:10:55.200 Ago going forward. I am curious about J. Powell and 0:10:55.240 --> 0:10:58.760 the March discussion. He didn't hug the statement precisely the 0:10:58.800 --> 0:11:01.760 way that Rich Clarida suggested that maybe he ought to. 0:11:02.400 --> 0:11:02.480 Do. 0:11:02.520 --> 0:11:04.520 You think that this is actually a sign of how 0:11:04.720 --> 0:11:07.480 there is J. Powell the man and J Powell the 0:11:07.520 --> 0:11:09.720 herder of cats that is the FED Committee. I mean, 0:11:09.800 --> 0:11:11.880 is how much is that basically what we're seeing. 0:11:13.080 --> 0:11:15.280 I don't think he really parted from the statement in 0:11:15.320 --> 0:11:17.240 any meaningful way. I think he just gave a little 0:11:17.280 --> 0:11:19.800 bit more nuanced to what the Fed, how the FED 0:11:19.960 --> 0:11:24.160 thinking is evolving. Obviously, the statement is pretty short and 0:11:24.200 --> 0:11:26.880 pretty concise, and the Fed is very careful about the 0:11:26.960 --> 0:11:29.760 changes that they make in the statement, and obviously in 0:11:29.760 --> 0:11:32.920 the press conference you can't be quite the precise. 0:11:33.120 --> 0:11:35.280 So I thought he tracked the statement quite well. 0:11:35.400 --> 0:11:38.320 But what you're thinking, June Coup, what's you feel now? 0:11:38.960 --> 0:11:41.319 I've been thinking May and I don't see any reason 0:11:41.360 --> 0:11:41.840 to James that. 0:11:42.679 --> 0:11:45.520 May Bill Dubby, thank you, sir, forming New York Fed President. 0:11:45.600 --> 0:11:45.880 Take care. 0:11:45.920 --> 0:11:48.040 We've got an answer. He's thinking, Mike, you got to 0:11:48.040 --> 0:11:48.360 the answer. 0:11:48.360 --> 0:11:50.120 You on the answer for mister poul in March too. 0:11:50.520 --> 0:11:51.720 The market move on March. 0:11:52.040 --> 0:11:54.040 Let's get to that market, Maye right now? Could he's 0:11:54.040 --> 0:11:55.840 put him back by one point four percent on the 0:11:55.920 --> 0:11:58.400 S and P five hundred. The Nastack is lower as well. 0:11:58.480 --> 0:12:01.680 Tech earnings were let's say, under yesterday after the close. 0:12:01.760 --> 0:12:04.720 More tech earnings to come tomorrow, Amazon, Meta, Apple still 0:12:04.760 --> 0:12:07.920 to come Thursday after the close. The Nasdaq is down 0:12:07.960 --> 0:12:11.040 by one point seven percent. I've missed you small CAFs 0:12:11.080 --> 0:12:13.520 lower by one point seven percent. Let's turn to the 0:12:13.559 --> 0:12:17.200 bond market two year tenure thirty year, the tenure year 0:12:17.240 --> 0:12:19.920 of down four basis points three ninety nine down six 0:12:20.320 --> 0:12:22.640 on a two year. So the fellow reserve stepped away 0:12:22.640 --> 0:12:26.040 from this tightening bias Bramo. But ultimately, when it starts 0:12:26.080 --> 0:12:28.319 to engage the rate cut conversation, just not in the 0:12:28.360 --> 0:12:30.520 way that this market wanted to see it do it. 0:12:30.520 --> 0:12:33.920 It wanted more than just Okay, things are going well, 0:12:34.120 --> 0:12:36.120 we need to see a little bit more. But ultimately 0:12:36.160 --> 0:12:37.600 the next move might be a cut, and it might 0:12:37.640 --> 0:12:39.640 be this year, just probably not March. Not likely. 0:12:39.960 --> 0:12:42.200 Basically, what you're seeing is the market is now pricing 0:12:42.200 --> 0:12:45.080 in a thirty eight percent chance of a March rate cut, 0:12:45.160 --> 0:12:47.960 down from almost a sixty percent chance of a rate 0:12:48.040 --> 0:12:51.840 cut come just before this press conference. The market adjusted 0:12:51.920 --> 0:12:53.800 will at last we shall see tomorrow shall be a 0:12:53.800 --> 0:12:57.520 whole news story. It seems like the feathers being somewhat 0:12:57.559 --> 0:13:00.360 consistent toward that may kind of timeline, which is the 0:13:00.360 --> 0:13:02.440 reason why I've got ninety one percent chance currently price. 0:13:02.600 --> 0:13:04.160 What was interesting, and we haven't talked about it yet, 0:13:04.160 --> 0:13:06.199 it's just how comfortable he would be with decent growth, 0:13:06.400 --> 0:13:08.880 strong growth. I think it's a change. You go back 0:13:08.920 --> 0:13:12.280 to the Jackson Hole Symposium of what was it twenty 0:13:12.280 --> 0:13:16.199 twenty two in August, pain pain, pain, pain, and now 0:13:16.200 --> 0:13:18.440 we say basically, strength is okay, we something we have 0:13:18.480 --> 0:13:19.120 to work against. 0:13:19.280 --> 0:13:22.800 This is basically the FED not necessarily saying victory, but 0:13:22.920 --> 0:13:25.120 saying we could get victory and we're not going to 0:13:25.120 --> 0:13:25.880 get in the way of it. 0:13:26.000 --> 0:13:26.080 Right. 0:13:26.160 --> 0:13:28.480 I mean, how much is this a sort of acceptance 0:13:28.520 --> 0:13:32.600 of this concept that disinflation is good, regardless of whether 0:13:32.600 --> 0:13:35.400 the strength might suggest that, you know, it could be 0:13:35.480 --> 0:13:35.800 a problem. 0:13:35.840 --> 0:13:37.040 I'll be quicker. I know you want to get to 0:13:37.120 --> 0:13:39.760 Mike McHugh was in the press conference to me, the 0:13:39.960 --> 0:13:44.960 huge overlay here is got fear by monitorist monetary economics 0:13:45.000 --> 0:13:48.760 people about getting this wrong. Were Willie Pessick and Forbes 0:13:48.840 --> 0:13:52.480 used to righte now Denberg nailed it. Willie Pessick wrote 0:13:52.520 --> 0:13:56.120 it on the Bankageapan and I'm sorry. They are scared 0:13:56.720 --> 0:13:58.560 stiff of getting this wrong. 0:13:58.760 --> 0:14:00.680 They want to see more day at home. I'm totally 0:14:00.679 --> 0:14:04.680 with you. You can see they're uncomfortable. Chairman, how ultimately 0:14:04.720 --> 0:14:09.160 is still concerned that inflation stabilizes above tar Kit for him, 0:14:09.200 --> 0:14:10.360 that still seems to be a risk. 0:14:10.559 --> 0:14:12.199 It's a risk for all the people who we speak 0:14:12.240 --> 0:14:15.360 to as well, especially with that strength. What's the bigger fear, though, 0:14:15.480 --> 0:14:17.840 and this I think is different. Is it that inflation 0:14:17.960 --> 0:14:20.800 reaccelerates or is it that they do serious damage to 0:14:20.840 --> 0:14:23.120 a labor market that seems to be in a good place, 0:14:23.520 --> 0:14:25.880 And that to me seems definitely more balanced. 0:14:25.920 --> 0:14:28.160 Mike McKay with us now he was in the news conference, 0:14:28.200 --> 0:14:30.840 Mike McKay, fantastic work as always, sir. What was your 0:14:30.840 --> 0:14:32.480 big takeaway Mike from that presser? 0:14:33.800 --> 0:14:36.120 Well, basically, the Fed has gone to where the market 0:14:36.160 --> 0:14:38.480 wanted it to be, but they didn't go farther. As 0:14:38.520 --> 0:14:41.960 you were talking about, they're not giving us a timetable 0:14:42.040 --> 0:14:44.840 yet but leaving enough ambiguity that you can try to 0:14:44.840 --> 0:14:48.080 figure it out on your own. Basically, may comes into 0:14:48.240 --> 0:14:51.280 the equation then, because by that time they'll have three 0:14:51.360 --> 0:14:56.200 more PCE inflation data releases and they'll have a pretty 0:14:56.240 --> 0:14:59.120 good idea of whether or not we're going to be 0:14:59.160 --> 0:15:04.040 able to maintain this in the two percent range inflation level. 0:15:04.400 --> 0:15:07.120 So I think Powell was just trying to tell people, 0:15:07.560 --> 0:15:10.400 we've heard you, we see what you see, but we 0:15:10.440 --> 0:15:12.840 want to make sure that we're not going to be 0:15:13.160 --> 0:15:15.800 seeing inflation go up again. To what you were just saying, 0:15:16.200 --> 0:15:18.800 I think they still think inflation is a greater danger. 0:15:18.960 --> 0:15:21.160 Growth is not a problem at this point, of course. 0:15:21.160 --> 0:15:24.080 That was my question to him. They're happy with the 0:15:24.120 --> 0:15:26.680 way the economy is going, they're happy with the way 0:15:26.840 --> 0:15:29.760 unemployment is going, and they don't seem to think it's 0:15:29.800 --> 0:15:32.320 going to get any worse. But there's still an issue 0:15:32.400 --> 0:15:34.880 about will inflation continue to come down? 0:15:35.120 --> 0:15:36.440 Mike, he were in the room, so you've got a 0:15:36.480 --> 0:15:39.280 better sense of this than us. I found guarded at 0:15:39.280 --> 0:15:42.440 times very scripted. At least it talked about that form 0:15:42.440 --> 0:15:44.440 of FED Vice chair Richard Kntra talked about that as 0:15:44.440 --> 0:15:46.720 well in anticipation of the news conference. But did you 0:15:46.720 --> 0:15:49.480 get the sense that March comment was unscripted, that was 0:15:49.480 --> 0:15:51.440 off the cuff, that was from the chairman directly. 0:15:52.880 --> 0:15:52.960 No. 0:15:53.120 --> 0:15:56.880 I think that basically he went in ready to say that, 0:15:57.200 --> 0:16:01.240 probably didn't want to unless he had to, because they 0:16:01.320 --> 0:16:04.480 never like to put a time frame on anything. But 0:16:04.760 --> 0:16:09.120 you'll get just one more PCE report before that time, 0:16:09.480 --> 0:16:11.920 and that's probably not going to be enough for them. 0:16:12.040 --> 0:16:15.720 So it was It wasn't that he couldn't say it. 0:16:15.720 --> 0:16:18.280 It's I think he didn't want to, but was asked 0:16:18.280 --> 0:16:19.120 directly about it. 0:16:19.160 --> 0:16:23.240 So did Mike with leguard in the ECB, we parse 0:16:23.360 --> 0:16:26.480 the hawks, We know who the hawks are. Who are 0:16:26.480 --> 0:16:31.120 the hawks pushing against Powell's dubbishness? Who are who are 0:16:31.160 --> 0:16:34.080 the people out there Bush Caffidy? Who are those guys 0:16:34.080 --> 0:16:36.040 out there that are hawks right now? 0:16:37.320 --> 0:16:39.600 Well, we know that Mickey Bowman has been a hawk 0:16:39.640 --> 0:16:42.080 and Lorettamester have been a hawk. But they both have 0:16:42.280 --> 0:16:45.320 said that they don't necessarily think we're going to need 0:16:45.480 --> 0:16:48.560 interest rates to rise anymore. So they've at least come 0:16:48.600 --> 0:16:52.320 to the neutral zone. The question is will they accept 0:16:52.320 --> 0:16:55.560 the idea of rake cuts, And I suspect that's going to. 0:16:55.520 --> 0:16:57.240 Depend on the data between. 0:16:56.960 --> 0:16:59.480 Now and the March meeting, now and the and the 0:16:59.480 --> 0:17:02.880 May meeting. At some point you have to go with 0:17:03.560 --> 0:17:06.040 what the data are telling you, even if you were 0:17:06.080 --> 0:17:08.360 afraid that you were going to have to raise rates earlier. 0:17:08.520 --> 0:17:10.320 Are you surprised, Mike that no one asked about the 0:17:10.320 --> 0:17:12.720 New York Community Bank issue and how much they do 0:17:12.920 --> 0:17:16.760 have confidence the regional banks truly are in a good spot. 0:17:17.760 --> 0:17:20.080 Well, I think the fact that they took the strength 0:17:20.080 --> 0:17:22.600 of the banking system part out of the statement was 0:17:22.600 --> 0:17:25.720 a mere coincidence because the statement would have been drafted 0:17:25.800 --> 0:17:29.320 yesterday and circulated among them, and of course they didn't 0:17:29.320 --> 0:17:31.760 know anything about your community Bank at that point. But 0:17:31.800 --> 0:17:34.479 I think the reason that didn't really come up is 0:17:34.560 --> 0:17:37.520 because think about what happened to New York Community Bank. 0:17:37.760 --> 0:17:42.359 They lost money in a quarter, and stock investors jumped 0:17:42.359 --> 0:17:45.199 on that because they don't like to lose money. This 0:17:45.359 --> 0:17:47.480 wasn't a question of a bank going out of business 0:17:47.920 --> 0:17:51.120 like SVB, which New York Community Bank bought their loans, 0:17:51.760 --> 0:17:54.040 and that's one of the reasons they had problems. So 0:17:54.200 --> 0:17:57.080 it doesn't suggest that there's any kind of systemic problem 0:17:57.200 --> 0:18:00.760 in the banking system like we were worried about last March. 0:18:00.960 --> 0:18:03.359 I might thanks for the update. Great work Mi McKay 0:18:03.840 --> 0:18:06.040 out there down in Washington, d C. Just coming down 0:18:06.080 --> 0:18:08.080 down these conference with Sham and Powell. E could he 0:18:08.119 --> 0:18:09.840 say K in this session? I was down about one 0:18:09.880 --> 0:18:11.480 point five percent on S and. 0:18:11.520 --> 0:18:15.399 P got greater confidence that Microsoft hit a yearly high yesterday. 0:18:16.000 --> 0:18:18.320 You know, the market's off and I really don't know 0:18:18.320 --> 0:18:20.440 what to think about it. The real yield came back nicely, 0:18:20.560 --> 0:18:24.040 gyrating off the nominal ten year yields three point nine 0:18:24.160 --> 0:18:26.160 nine percent. To me and Lista, this goes to your 0:18:26.160 --> 0:18:29.199 concern over the banking system and other properties in New 0:18:29.280 --> 0:18:32.800 York City. They're really coming under you know, individual properties 0:18:32.840 --> 0:18:35.560 coming under pressure. The fact is that ten year yields 0:18:35.640 --> 0:18:38.920 under four percent. That's a real adjustment here, and it's 0:18:38.960 --> 0:18:41.879 the uncertainty that's out there, and maybe that's what in 0:18:41.920 --> 0:18:45.280 the equesibiliting meeting. Maybe that's what they were concerned about 0:18:45.280 --> 0:18:46.159 the timidity of it. 0:18:46.240 --> 0:18:48.560 Although to me it seems like he wasn't that concerned 0:18:48.600 --> 0:18:51.040 about that much. To be completely honest, it's just that 0:18:51.080 --> 0:18:52.720 he didn't want to get it wrong, and he didn't 0:18:52.720 --> 0:18:54.720 want to get it wrong on either side, but certainly 0:18:54.800 --> 0:18:57.080 with the strength also, as you pointed out, the fact 0:18:57.119 --> 0:18:59.119 that he did indicate that March was off the table 0:18:59.480 --> 0:19:02.439 despite some of the signs that people were using to 0:19:02.600 --> 0:19:05.280 justify it was significant for the market and is the 0:19:05.320 --> 0:19:06.280 reason why we're seeing. 0:19:06.119 --> 0:19:08.760 The market move on that we talk he manages money 0:19:08.840 --> 0:19:13.120 joining us now. Jeffrey Rosenberg from Blackrack really really interesting 0:19:13.800 --> 0:19:18.800 here on whither and forward? How does your view adjust. Jeff, 0:19:18.880 --> 0:19:24.040 I was thunderstruck by the timidity, the massive almost comedy 0:19:24.119 --> 0:19:26.520 on the word data. You got to go out and 0:19:26.560 --> 0:19:28.800 run a portfolio. How do you do that given what 0:19:28.840 --> 0:19:29.760 we observe today? 0:19:31.080 --> 0:19:33.919 So, Tom, you're talking about the timidity, and it's in 0:19:33.960 --> 0:19:36.879 the context where the last two meetings was the opposite 0:19:36.920 --> 0:19:37.639 from the chairman. 0:19:37.680 --> 0:19:39.080 There was a lot of confidence. 0:19:39.200 --> 0:19:41.280 Yeah, I characterize it as a little bit of a 0:19:41.400 --> 0:19:45.959 victory lap. He leaned into the positivity, he leaned into 0:19:47.280 --> 0:19:50.159 the good news. And here I think it began with 0:19:50.240 --> 0:19:54.240 the statement. The inclusion of the of the new language 0:19:54.280 --> 0:19:57.879 around needing to have greater confidence was the sign that 0:19:57.920 --> 0:20:00.920 they're going to push back a bit against market expectations, 0:20:00.960 --> 0:20:04.240 and it carried over into the press conference. 0:20:04.520 --> 0:20:05.920 Wasn't clear whether that would happen. 0:20:05.960 --> 0:20:09.520 It clearly did happen, and it's capped off with his 0:20:09.560 --> 0:20:13.000 headline that is absolutely the headline takeaway, which is the pushback, 0:20:13.680 --> 0:20:16.760 hard pushback against the march expectations. And I chalk this 0:20:16.920 --> 0:20:22.280 timidity up, Tom to the concern around financial conditions doing 0:20:22.359 --> 0:20:25.920 too much easing for them and putting at risk the 0:20:26.359 --> 0:20:29.080 good story that they're having in terms of inflation getting 0:20:29.119 --> 0:20:33.880 back down to target and growth holding up and not 0:20:33.960 --> 0:20:37.560 having to have that big decline that Lisa was mentioning 0:20:37.600 --> 0:20:39.440 that they were warning of that we thought was. 0:20:39.400 --> 0:20:41.560 Going to be necessary to get that inflation down. 0:20:41.640 --> 0:20:45.280 So it's the risk of losing financial conditions and markets 0:20:45.280 --> 0:20:48.119 are just primed for the big green light to go 0:20:48.160 --> 0:20:50.560 out and back up the truck, and obviously they're disappointed 0:20:50.600 --> 0:20:51.200 on that today. 0:20:51.520 --> 0:20:53.040 I think that's a little bit purposeful and. 0:20:53.080 --> 0:20:55.920 Jeff Rozenberg Jason Furman up at Harvard Teaching X ten 0:20:56.200 --> 0:20:58.000 with my tweet of the day. I love his single 0:20:58.080 --> 0:21:02.040 sentence observation. I feel like I could be confident enough 0:21:02.160 --> 0:21:06.879 after two more jobs CPI prints, may I suggest that 0:21:07.080 --> 0:21:11.359 Friday at eight thirty we and the chairman will readjust. 0:21:12.359 --> 0:21:12.600 Yeah. 0:21:12.640 --> 0:21:16.280 I mean, look, he wants to delay here, and there 0:21:16.320 --> 0:21:18.560 was something that he said that I think hasn't been 0:21:18.600 --> 0:21:23.120 picked up on, which is the decision to begin cutting 0:21:23.359 --> 0:21:26.520 is of great consequence. And then he also said earlier 0:21:27.520 --> 0:21:30.880 because of that or because of that concern, there's no 0:21:30.960 --> 0:21:34.680 need to rush. So waiting for more data and kind 0:21:34.720 --> 0:21:37.360 of the pushback on what more data do you need 0:21:37.560 --> 0:21:40.120 isn't really the story here. I don't think they need 0:21:40.160 --> 0:21:43.400 more data He kind of said that we have confidence. 0:21:42.920 --> 0:21:44.360 We just want even more confidence. 0:21:44.560 --> 0:21:46.960 I really think it's they don't want to rush into it. 0:21:47.200 --> 0:21:50.080 Jonathan Vero, you asked me after the last payrolls, you 0:21:50.119 --> 0:21:52.880 know what is my expectation? I said, you know, June, 0:21:53.359 --> 0:21:55.280 mainly because I don't see the rush here. And I 0:21:55.320 --> 0:21:57.880 think that's the stories. It may is a June, it's 0:21:57.960 --> 0:22:00.720 not March. It's pushing back. Is they don't want to 0:22:00.800 --> 0:22:02.800 rush into a cutting cycle. 0:22:02.920 --> 0:22:05.200 You said something really interesting there, Jeff, This idea of 0:22:05.280 --> 0:22:08.680 financial conditions being a concern that they see the sort 0:22:08.720 --> 0:22:11.320 of golden pathway and they want to get there so 0:22:11.520 --> 0:22:13.600 bad that they don't want to disrupt it by giving 0:22:13.640 --> 0:22:16.119 any more fuel to this market. Do you get that 0:22:16.200 --> 0:22:19.040 sense just in general that if things sort of say 0:22:19.080 --> 0:22:22.040 subdued for a bit longer, that'll actually make it easier 0:22:22.119 --> 0:22:23.240 for the FED to cut sooner. 0:22:25.400 --> 0:22:27.720 Well, the thing that will make it easier for the 0:22:27.720 --> 0:22:30.680 Fed to cut sooner, and I think Bill Dudley highlighted 0:22:30.720 --> 0:22:32.919 this is is that the problem is that there's a 0:22:32.920 --> 0:22:35.439 little bit too much good news on the on the 0:22:35.480 --> 0:22:38.720 economic growth side and the labor market side. If they 0:22:38.840 --> 0:22:42.359 had some weakening that would make it much easier to 0:22:42.400 --> 0:22:44.480 say now we need to cut. It's hard to say 0:22:44.520 --> 0:22:46.639 you need to cut, and we'll talk about this on 0:22:46.720 --> 0:22:49.560 Friday morning. You know, the expectations around you know, two 0:22:49.640 --> 0:22:55.160 sixty five to eighty that's a pretty gangbuster payroll print. 0:22:55.359 --> 0:22:57.800 You know, hardly the kind of stuff that says this 0:22:57.920 --> 0:23:00.440 FED is too tight. And you saw it in Steve 0:23:00.480 --> 0:23:04.280 Leisman's question. And I think it will emergenly become. 0:23:05.840 --> 0:23:07.440 A greater focus. 0:23:08.160 --> 0:23:10.680 Which is which is on the growth side? Like where 0:23:10.720 --> 0:23:14.120 is the restrictiveness of this policy that you're so confident 0:23:14.200 --> 0:23:17.399 every time you say policies is restrictive. 0:23:17.520 --> 0:23:18.960 Is it really is as restrictive as we think? 0:23:19.119 --> 0:23:21.840 Steve Leison Olways has some smart questions. John Ferrell, let's 0:23:21.880 --> 0:23:24.160 go to the statistics for Friday. I got one hundred 0:23:24.200 --> 0:23:27.399 and eighty five thousand on survey non firm payrolls. I 0:23:27.440 --> 0:23:30.240 got an unemployment rate of three point eight percent. That 0:23:30.320 --> 0:23:32.840 may have a little bit to do with there, Timid. 0:23:33.040 --> 0:23:35.040 Yeah, that's ink. That speaks to their nervousness. So Jeff, 0:23:35.080 --> 0:23:38.040 let's finish on this data. Still looks okay. Payrolls might 0:23:38.119 --> 0:23:41.000 change that on Friday for you right now in this market, 0:23:41.080 --> 0:23:43.199 putting money to work. What are you about for counting for. 0:23:44.880 --> 0:23:46.840 You know, I think there's a lot of hemming and 0:23:46.880 --> 0:23:50.520 haweing today tomorrow around the timing of when do they go. 0:23:50.640 --> 0:23:52.400 But I think if you take a step back from 0:23:52.440 --> 0:23:56.080 this inside baseball story, the broader story is the FED 0:23:56.240 --> 0:24:00.080 has won the battle on inflation. Not totally certain you 0:24:00.119 --> 0:24:02.920 know where we settle in there, but certainly they can 0:24:02.960 --> 0:24:05.720 begin a cutting cycle. And the growth side is much 0:24:05.760 --> 0:24:09.080 more positive than what we had thought, particularly when we 0:24:09.160 --> 0:24:12.159 thought that interest rate sensitivity was going to be greater 0:24:12.400 --> 0:24:14.840 and recession much more likely. So I think this is 0:24:14.880 --> 0:24:18.280 a backdrop that is unchanged for taking on more risk 0:24:18.320 --> 0:24:21.919 in portfolios. It's a better outlook the credit markets, you know, 0:24:22.000 --> 0:24:24.399 despite some of the news today in terms of the 0:24:24.760 --> 0:24:28.920 banking sector that's particular to commercial real estate, and that is. 0:24:28.880 --> 0:24:30.479 Something I think we have to keep an eye on. 0:24:30.640 --> 0:24:32.239 But you look at the corporate side, you look at 0:24:32.240 --> 0:24:34.960 the consumer side, it's very strong, and the credit markets 0:24:35.000 --> 0:24:36.760 here I think are strong. There's not a huge price 0:24:36.760 --> 0:24:39.960 appreciation opportunity, but I think the yield opportunity that you 0:24:40.000 --> 0:24:43.120 can capture there without the risk of the downside of inflation. 0:24:43.440 --> 0:24:46.560 Sorry of recession is still the story here. 0:24:46.560 --> 0:24:48.000 Hey Jeff, thank you sir. I know we're going to 0:24:48.040 --> 0:24:49.600 do this again late this week, so we see a 0:24:49.640 --> 0:24:53.240 Friday after payrolls Jeff Roisenberg there at black Rock, thank you, buddy. 0:24:53.400 --> 0:24:55.400 Equity's in a session. Loves were down one point five 0:24:55.440 --> 0:24:58.080 percent on ESMP, with Dan Hart on the NATSNAK as 0:24:58.080 --> 0:24:59.960 well t can the bond market. The move fights just 0:25:00.040 --> 0:25:02.439 a little bit yield to lower my eight basis points. 0:25:02.480 --> 0:25:03.720 At the front end of the caf. 0:25:03.960 --> 0:25:06.480 Use for the tech juggernaut, you mentioned that John got Amazon, 0:25:06.520 --> 0:25:10.239 I believe in Apple tomorrow, maybe Facebook, And the answer is, uh, 0:25:10.440 --> 0:25:13.000 you know, we're gonna We're gonna get some tech earning, 0:25:13.040 --> 0:25:16.280 some tech joy. But Lisa, I'm sorry to Jason Furman's 0:25:16.280 --> 0:25:19.280 comment here, the jobs report on Friday has a new importance. 0:25:19.480 --> 0:25:21.600 So maybe if it gets strong enough, then everybody will 0:25:21.600 --> 0:25:24.840 go back to maybe you know, going to June. And if. 0:25:26.640 --> 0:25:29.639 I confuse him with Jason Furman as well, yeah, I 0:25:29.720 --> 0:25:31.040 did see Jeff rosenback. 0:25:31.520 --> 0:25:34.720 No, I'm talking about Jason jobs matter. 0:25:34.880 --> 0:25:35.359 I confused. 0:25:36.080 --> 0:25:40.119 They look the same, look the same. 0:25:40.560 --> 0:25:44.480 I'm going to suggest John support it is now really important. 0:25:44.520 --> 0:25:46.840 Not all economists like the same, John, we should do 0:25:46.880 --> 0:25:47.280 this again. 0:25:49.400 --> 0:25:52.320 How much you have to wake up earlier, talk to 0:25:52.520 --> 0:25:52.879 people