Instant Reaction: Jay Powell Speaks

Bloomberg Audio Studios, Podcasts, radio news. 0:00:07.640 --> 0:00:11.640 Jerome Powell speaking with Marketplace host ky Risdahl at the 0:00:11.800 --> 0:00:16.640 Macroeconomics and Monetary Policy Conference hosted by the Federal Reserve 0:00:16.680 --> 0:00:20.160 Bank of San Francisco and that Bank's president Mary Daily. 0:00:20.680 --> 0:00:25.400 A very interesting discussion with Chairman Powell there, talking particularly 0:00:25.440 --> 0:00:28.760 about the economic data that we got today, saying that 0:00:28.840 --> 0:00:32.920 the core PCEE was pretty much in line with expectations, 0:00:33.080 --> 0:00:36.360 and reiterating the message that we have heard for months 0:00:36.479 --> 0:00:39.800 from this Federal Reserve. A direct quote from Chairman Powell 0:00:39.880 --> 0:00:42.199 at the event, we don't need to be in a 0:00:42.280 --> 0:00:45.720 hurry to cut so once again reiterating that message that 0:00:45.720 --> 0:00:49.320 the FED can remain patient in the midst of this 0:00:49.800 --> 0:00:54.080 bumpy road that we are seeing in disinflation. And for 0:00:54.160 --> 0:00:58.160 more analysis. We are joined once again by Bloomberg's International 0:00:58.200 --> 0:01:02.520 Economics and Policy correspond that Michael McKee, Mike, thanks again 0:01:02.680 --> 0:01:06.520 for being with us so slow and steady wins the 0:01:06.560 --> 0:01:09.320 inflation race. Is that the message you heard from Chairman 0:01:09.360 --> 0:01:10.880 Palette this discussion. 0:01:12.560 --> 0:01:15.080 That's what you've got. He didn't say anything new, but 0:01:15.160 --> 0:01:17.959 he reiterated the position that the FED has taken for 0:01:18.040 --> 0:01:21.600 quite some time. That they needs to see continue towards 0:01:21.800 --> 0:01:25.440 a two percent inflation goal, and he finished up just 0:01:25.440 --> 0:01:27.480 a moment ago by saying, we're not going to take 0:01:27.520 --> 0:01:30.920 that step of cutting rates until we are confident that 0:01:31.000 --> 0:01:34.120 we are headed there. That's been the message from the 0:01:34.160 --> 0:01:37.760 FED for quite some time. He said that I thought 0:01:37.800 --> 0:01:42.360 one of the most fun questions that kay Risdahl asked 0:01:42.800 --> 0:01:46.120 was what's wrong with saying you just don't know what's 0:01:46.160 --> 0:01:48.600 going on? And how are people supposed to take it 0:01:48.880 --> 0:01:51.840 if you say the same things all over again? And 0:01:51.880 --> 0:01:56.120 he said basically that we are trying to be humble, 0:01:56.600 --> 0:01:59.440 and we're trying to be humble about our ability to 0:01:59.480 --> 0:02:03.000 see the future, and we want to be thoughtful, careful 0:02:03.120 --> 0:02:07.200 and steady hands in making monetary policy. So they don't 0:02:07.280 --> 0:02:11.600 want to rattle the markets, and that's going to be 0:02:11.680 --> 0:02:15.360 the message until they do see the progress they want. 0:02:15.639 --> 0:02:19.400 He was asked about obviously today's PCE numbers and said 0:02:19.600 --> 0:02:21.760 they're in line with kind of what they expected, but 0:02:21.800 --> 0:02:24.519 it's still a bumpy progress and that they weren't good 0:02:24.600 --> 0:02:27.280 enough to lead the FED to cut rates right now. 0:02:27.639 --> 0:02:29.960 And maybe this is part of the answer, this idea 0:02:30.120 --> 0:02:33.280 that the FED has to be humble and not say 0:02:33.320 --> 0:02:36.160 that they know what they don't know about the economy, 0:02:36.240 --> 0:02:42.040 but how much more data do they need? We've seen 0:02:42.240 --> 0:02:44.959 months and months of data that have you know, over 0:02:45.000 --> 0:02:47.079 the last couple of months have come in a little 0:02:47.120 --> 0:02:51.320 bit bumpier than they have in months prior. But when 0:02:51.400 --> 0:02:54.919 the Fed says that they need more data, it does 0:02:55.000 --> 0:02:57.840 raise a question of how much more data they need 0:02:57.919 --> 0:03:00.440 before they can make that decision to pivot, doesn't it? 0:03:02.160 --> 0:03:05.520 Yes, That's the big question on Wall Street is when 0:03:05.600 --> 0:03:08.840 did they make that pivot? When do they start suggesting 0:03:08.840 --> 0:03:12.800 they're going to be cutting in the near future. Powell 0:03:12.800 --> 0:03:15.560 did not discuss that today, did not put a timeframe 0:03:15.600 --> 0:03:20.520 on it, but on Wednesday night, the governor, in fact, 0:03:20.560 --> 0:03:23.120 Governor Chris Waller, said he's going to need several more 0:03:23.160 --> 0:03:27.280 months of data to tell him that they're going in 0:03:27.320 --> 0:03:30.680 the right direction, which would seem to suggest May's off 0:03:30.680 --> 0:03:33.080 the table because they'll only get one more months worth 0:03:33.080 --> 0:03:37.520 of data. The question then is with two months, can 0:03:37.560 --> 0:03:39.600 they do it in June or do they look to July. 0:03:41.160 --> 0:03:42.480 Those are going to be the kind of things that 0:03:42.680 --> 0:03:46.040 are going to have traders on edge as the inflation 0:03:46.600 --> 0:03:49.480 data comes out over the next couple of months. 0:03:49.440 --> 0:03:53.040 So we do have that possibility still that we will 0:03:53.080 --> 0:03:56.960 get a cut, perhaps in the second quarter, maybe into 0:03:57.040 --> 0:04:00.680 the third. Let's bring in Sarah House for some more analysis. 0:04:00.680 --> 0:04:03.560 She's back with us as well. Sarah's the senior economist 0:04:03.920 --> 0:04:07.160 at Wells Fargo. Sarah, good to have you back with us. 0:04:07.280 --> 0:04:10.600 After we've gotten this data on the core PCE just 0:04:10.680 --> 0:04:14.320 this morning. We've heard the comments in this moderated discussion 0:04:14.400 --> 0:04:17.680 from Chairman Palell what's your view on where the Fed 0:04:17.720 --> 0:04:19.320 goes with rates at this point? 0:04:19.560 --> 0:04:22.039 Yeah, I think ultimately we heard that right now, Chair 0:04:22.120 --> 0:04:23.960 pal doesn't feel like they need to be in a 0:04:24.000 --> 0:04:27.520 hurry with cutting rates. It is a big decision, as 0:04:27.560 --> 0:04:31.400 he espoused multiple times throughout the conversation. But what we 0:04:31.480 --> 0:04:34.000 heard time and again was that he viewsed the economy 0:04:34.040 --> 0:04:37.000 as strong right now, and particularly the labor market being 0:04:37.040 --> 0:04:40.000 in a good place, which does seem to afford them 0:04:40.040 --> 0:04:43.159 some time to see if inflation can come down a 0:04:43.200 --> 0:04:44.400 bit further in the months ahead. 0:04:44.640 --> 0:04:47.520 And to that point, Powell said that the Fed can 0:04:47.720 --> 0:04:51.840 hold rates steady if inflation doesn't come down. It seems 0:04:51.880 --> 0:04:53.960 to take at least a little bit off the table. 0:04:54.000 --> 0:04:56.760 The idea that we'd see a rate increase at any point. 0:04:56.800 --> 0:05:00.839 But is the FED trying to give the market a 0:05:00.920 --> 0:05:06.080 message that maybe rates are going to stay elevated for 0:05:06.360 --> 0:05:09.080 even longer than they might have priced in at this 0:05:09.160 --> 0:05:12.240 point that the that the market needs to kind of 0:05:13.279 --> 0:05:16.039 get ready for a new normal in terms of where 0:05:16.160 --> 0:05:16.560 rates go. 0:05:17.720 --> 0:05:20.240 I think right now it's more just about they need 0:05:20.279 --> 0:05:22.880 to see more that it's I don't think they're unhappy 0:05:22.920 --> 0:05:26.240 with with where markets are priced for cuts right now. 0:05:26.600 --> 0:05:28.960 If you look at what the warp function on the 0:05:29.040 --> 0:05:33.120 terminal and the most recent SEP they're in pretty close alignment, 0:05:33.200 --> 0:05:36.240 you know, somewhere close to three cuts when when you 0:05:36.360 --> 0:05:38.520 round roughly the media in there. So I don't think 0:05:38.520 --> 0:05:41.359 that this is about really trying to guide the markets 0:05:41.400 --> 0:05:44.280 in a major way, But it's more about the fact 0:05:44.360 --> 0:05:46.839 that the data has come and still pretty strong and 0:05:46.960 --> 0:05:50.560 allse EQL that does point to bringing to reducing the 0:05:50.640 --> 0:05:53.240 level of restrictiveness a little bit later. 0:05:54.000 --> 0:05:55.640 And just to bring it back to the data that 0:05:55.680 --> 0:05:58.600 we saw this morning, is there anything that's in the 0:05:59.040 --> 0:06:02.760 core PCE it indicates to you that we could see 0:06:02.800 --> 0:06:04.120 even more bumps along the way. 0:06:05.360 --> 0:06:07.719 Well, I think just given the degree of the slowdown 0:06:07.760 --> 0:06:10.560 we saw on services well welcome. I wouldn't expect that 0:06:10.680 --> 0:06:14.000 to necessarily repeat month in, month out over over the 0:06:14.000 --> 0:06:16.599 next few months. And at the same time, I think 0:06:16.640 --> 0:06:19.279 some of the goods inflation that we saw, some of 0:06:19.320 --> 0:06:23.599 that might have been helped by I might have been 0:06:23.880 --> 0:06:26.480 gotten a little boost from seasonal So I think we're 0:06:26.480 --> 0:06:30.200 still likely to see some bumps here over the next 0:06:30.400 --> 0:06:31.880 over the next few months. 0:06:33.600 --> 0:06:37.080 One of the questions Sarah Spike McKee that got some 0:06:37.160 --> 0:06:41.760 attention on x and other social media platforms was when 0:06:42.120 --> 0:06:45.839 Kyritzol asked him does the FED get too much attention to? 0:06:45.880 --> 0:06:48.880 People pay too much attention? And he said, I think 0:06:48.920 --> 0:06:51.760 they do pay too much attention to Fed monetary policy, 0:06:51.800 --> 0:06:56.320 because policies that raise productivity and living standards are far 0:06:56.320 --> 0:06:58.840 more important over the longer term. Do you agree that 0:06:58.880 --> 0:07:03.080 maybe the media and the markets put too much tension 0:07:03.160 --> 0:07:04.839 on every word beed official say? 0:07:05.680 --> 0:07:08.600 I think there is certainly quite a bit of focus 0:07:08.680 --> 0:07:12.560 and sometimes miss other other aspects that you may move 0:07:12.640 --> 0:07:15.560 the needle quite a bit on economic growth, so areas 0:07:15.680 --> 0:07:19.120 like fiscal policy, as well as I think some of 0:07:19.120 --> 0:07:25.200 the other policies that do support labor supply overall, overall 0:07:25.520 --> 0:07:28.400 supply side things that can all can boost that that 0:07:28.400 --> 0:07:31.400 productivity as well. So in some ways it's, you know, 0:07:31.440 --> 0:07:33.760 it's it's Tom Kane's parlor game in terms of what 0:07:33.800 --> 0:07:36.320 the Fed's going to do, what the Fed's going to 0:07:36.360 --> 0:07:39.160 do next, that does get so much attention, But I think, 0:07:39.440 --> 0:07:41.320 but I think to Repel's right in that there are 0:07:41.400 --> 0:07:44.360 so many other things that need to be considered when 0:07:44.360 --> 0:07:47.000 we're thinking about, you know, what's what's GDP growth going 0:07:47.040 --> 0:07:48.960 to be a year from now, two years from now, 0:07:49.600 --> 0:07:51.320 that can play into. 0:07:51.920 --> 0:07:55.080 Speaking with Sarah House, senior economists at Wells Fargo, along 0:07:55.080 --> 0:07:59.679 with Bloomberg International Economics and Policy correspondent Michael McKee, getting 0:07:59.720 --> 0:08:01.800 some real action to what we've heard in just the 0:08:01.880 --> 0:08:05.840 last few minutes from FED Chair Jerome Palett the Macroeconomics 0:08:05.840 --> 0:08:10.240 and Monetary Policy Conference at the FED Bank in San Francisco. 0:08:10.840 --> 0:08:16.280 The Chairman, Sarah does put a lot of emphasis on transparency, 0:08:16.520 --> 0:08:20.960 not rattling the markets with the words that we hear 0:08:21.720 --> 0:08:24.720 from the Federal Reserve. In the context of the economic 0:08:24.800 --> 0:08:27.040 data that even we've gotten just today, Do you think 0:08:27.040 --> 0:08:31.120 that the FED is transparent enough? Does it say too 0:08:31.240 --> 0:08:34.280 much to the markets, So. 0:08:34.360 --> 0:08:38.880 I think they are certainly very transparent. I think sometimes 0:08:38.960 --> 0:08:41.839 that's still maybe not even good enough for markets in 0:08:41.920 --> 0:08:45.360 terms of what exactly you know, are are the specific 0:08:45.440 --> 0:08:47.520 data points they're looking at. When I think, like a 0:08:47.520 --> 0:08:50.240 lot of us and thinking about the economy, they're taking 0:08:50.240 --> 0:08:53.079 a lot of different data points into consideration. And I 0:08:53.120 --> 0:08:56.760 think at times too, given the degree of transparency, it 0:08:56.800 --> 0:09:01.200 can be difficult to parse through all the different points 0:09:01.240 --> 0:09:04.000 of views and where that might lead to in terms 0:09:04.000 --> 0:09:06.559 of the consensus. But I think it certainly beats the 0:09:06.600 --> 0:09:09.640 alternative where we didn't know what the FED was thinking 0:09:09.920 --> 0:09:11.480 in years past. 0:09:11.880 --> 0:09:15.480 It was interesting as well to hear Chairman Powell bring 0:09:15.559 --> 0:09:19.240 up politicization of the Federal Reserve as we get closer 0:09:19.800 --> 0:09:23.440 to an election year, even more into the election cycle, 0:09:23.480 --> 0:09:27.720 and this idea that the FED could become more politicized 0:09:28.120 --> 0:09:30.560 as we get closer to that election time. Do you 0:09:30.600 --> 0:09:34.480 think that, notwithstanding what Chairman Powell had to say about 0:09:34.520 --> 0:09:38.080 how the FED can't be politicized, that it would go 0:09:38.120 --> 0:09:42.880 against the fed zone mandate to bring politics into its 0:09:42.880 --> 0:09:48.440 decision making. Having said that, does the timing of the 0:09:48.480 --> 0:09:53.319 election cycle play at all into rate decisions? From your perspective, 0:09:54.360 --> 0:09:54.960 So I. 0:09:54.880 --> 0:09:58.440 Think it can make the timing of when they're maybe 0:09:58.480 --> 0:10:02.320 pivoting on policy little bit trickier, if nothing else, just 0:10:02.320 --> 0:10:06.839 because they want to avoid that look of politicis a politicilation. 0:10:07.559 --> 0:10:09.640 And so what we did hear from pal today is 0:10:09.920 --> 0:10:11.959 he said that these decisions, though, are not on a 0:10:12.000 --> 0:10:15.240 political calendar. And I think just given that it still 0:10:15.360 --> 0:10:20.000 isn't an easy decision for when they may cut rates 0:10:20.000 --> 0:10:21.960 this year if they do it all, just based on 0:10:22.640 --> 0:10:25.679 the risks to both side of the mandates that you know, 0:10:25.720 --> 0:10:28.839 perhaps the best thing is just to not worry about 0:10:28.880 --> 0:10:31.680 it at all and just look through, put their heads 0:10:31.720 --> 0:10:34.400 down and make the best decision they think for the 0:10:34.480 --> 0:10:35.200 US economy. 0:10:36.120 --> 0:10:38.800 Really appreciate this. Sarah, thanks again for coming on with 0:10:38.880 --> 0:10:42.560 us to analyze Chairman Palace comments and of course coming 0:10:42.559 --> 0:10:45.240 on earlier as well when we got that core PCE 0:10:45.679 --> 0:10:48.920 data on this good Friday, Sarah House with us there, 0:10:49.679 --> 0:10:54.760 senior economist at Wells Fargo and Bloomberg's Mike McKee is 0:10:54.800 --> 0:10:57.240 still on with us for the next few minutes while 0:10:57.240 --> 0:11:00.280 we sort of dive in a little bit more into 0:11:00.280 --> 0:11:03.960 what Chairman Powell had to say in this moderated discussion. 0:11:04.280 --> 0:11:07.920 It did seem Mike, as though, you know, this idea 0:11:08.240 --> 0:11:11.360 that the FED doesn't want to rattle markets, even on 0:11:11.440 --> 0:11:13.480 a day when you know we've all got the day 0:11:13.520 --> 0:11:16.360 off from trading, that that really does seem to be 0:11:16.840 --> 0:11:20.360 a lot of what drives Chairman Powell in terms of 0:11:20.360 --> 0:11:22.840 what he has to say that he really doesn't want 0:11:22.920 --> 0:11:25.560 to surprise markets. 0:11:26.760 --> 0:11:29.280 If he can get out of a public appearance without 0:11:29.320 --> 0:11:32.960 markets moving, he considers that a victory. But this is 0:11:33.360 --> 0:11:35.760 what the Fed's policy has become. It used to be 0:11:36.360 --> 0:11:41.079 back in the sixties, seventies, eighties, when the FED didn't 0:11:41.120 --> 0:11:43.520 tell you what it was doing. It used to be 0:11:43.640 --> 0:11:47.080 that they thought that surprising the markets would be good 0:11:47.120 --> 0:11:50.080 because it would keep them off balance and they wouldn't 0:11:50.120 --> 0:11:54.880 necessarily be rushing into to push rates one way or 0:11:54.880 --> 0:11:56.760 another when the FED didn't want them to do that. 0:11:57.320 --> 0:12:01.959 But now the Fed's decided that trends, parrency and forward 0:12:01.960 --> 0:12:05.080 guidance are what really helps them, and it helps get 0:12:05.160 --> 0:12:09.640 monetary policy into the markets by letting markets know roughly 0:12:09.679 --> 0:12:12.720 what's going to happen, so that they front run, they 0:12:12.800 --> 0:12:15.600 anticipate whether rates are going to go up or down. 0:12:15.640 --> 0:12:20.960 And that's basically what Powell, and he's followed the others 0:12:20.960 --> 0:12:24.520 since Sally and Greenspan in doing that as chair is 0:12:24.559 --> 0:12:27.880 trying to tell people what's going to happen, but not 0:12:28.000 --> 0:12:30.840 give too much detail. As we've been saying this morning. 0:12:31.040 --> 0:12:32.040 He didn't say much new. 0:12:31.960 --> 0:12:35.880 Today, absolutely and interesting as well to hear Chairman Powell 0:12:35.920 --> 0:12:40.640 say that the inflation data, the preferred gauge came in 0:12:40.720 --> 0:12:44.439 pretty much in line with their expectations. Walk us a 0:12:44.440 --> 0:12:46.760 little bit through what was some of the most important 0:12:46.760 --> 0:12:50.800 aspects of that core PCEE data that we got this morning, 0:12:51.000 --> 0:12:53.280 and do you think that that's going to be more 0:12:53.320 --> 0:12:57.800 important the economic data or Chairman Powell's words today in 0:12:57.920 --> 0:13:01.200 terms of how the market reacts when and things come 0:13:01.240 --> 0:13:04.160 back open on Monday, Well. 0:13:04.080 --> 0:13:06.400 There was a little bit of debate in the among 0:13:06.480 --> 0:13:10.880 market participants that I saw after the pce numbers came 0:13:10.920 --> 0:13:13.240 out about whether they were good or whether they were 0:13:13.280 --> 0:13:16.520 bad for the idea of a rake cut, and I 0:13:16.520 --> 0:13:19.400 think Powell comes down on the side of there isn't 0:13:19.480 --> 0:13:23.960 much different here, so it will probably limit the reaction 0:13:24.280 --> 0:13:28.640 on Monday to anybody who is offsides and thinking the 0:13:28.679 --> 0:13:33.760 Fed might be cutting earlier will have to refigure their portfolio, 0:13:33.840 --> 0:13:36.080 but for most people it's not going to really matter 0:13:36.160 --> 0:13:39.680 all that much. The inflation numbers showed some little progress. 0:13:39.760 --> 0:13:43.520 Services prices inflation came down some, which is something the 0:13:43.559 --> 0:13:46.559 FED has wanted to see. Goods prices were up a 0:13:46.600 --> 0:13:48.400 little bit. A lot of that was energy, so it's 0:13:48.440 --> 0:13:51.920 not as big a deal, but all at all, it 0:13:52.000 --> 0:13:56.160 was incremental progress towards the Fed's goal, which means that 0:13:56.960 --> 0:13:59.760 those who think we might see a rag cut in 0:13:59.840 --> 0:14:03.880 Jue and are probably on the right hand side of 0:14:04.240 --> 0:14:06.160 the left hand side rather of the tail, and those 0:14:06.200 --> 0:14:08.640 who think we could go to September or later it 0:14:08.640 --> 0:14:11.319 would be on the right hand side, and so somewhere 0:14:11.360 --> 0:14:15.400 in that middle is what's most likely at this point 0:14:15.480 --> 0:14:18.160 until we get some other data that convinces this one 0:14:18.160 --> 0:14:19.040 way or another. 0:14:19.000 --> 0:14:22.560 Which implies July perhaps, but we'll have to wait and 0:14:22.600 --> 0:14:26.480 see what that market reaction is as we continue to 0:14:26.520 --> 0:14:29.680 parse through the core PCEE data, as well as Chairman 0:14:29.760 --> 0:14:33.600 Powell's remarks that we just heard moments ago from the 0:14:33.920 --> 0:14:37.840 Federal Reserve Bank of San Francisco. Bloomberg International Economics and 0:14:37.840 --> 0:14:41.840 Policy correspondent Michael McKee, thanks for coming in on a 0:14:41.960 --> 0:14:45.479 trading holiday to help us with some of the analysis 0:14:45.520 --> 0:14:47.560 of what we heard from Chairman Pal as well as 0:14:47.600 --> 0:14:51.200 that economic data, and our thanks as well to Sarah House, 0:14:51.320 --> 0:14:54.200 the senior economist at Wells Fargo, giving us some of 0:14:54.240 --> 0:14:56.680 her analysis of the data that we got this morning, 0:14:57.040 --> 0:15:01.360 as well as Chairman POW's remarks repeating that the Central Bank, 0:15:01.400 --> 0:15:05.680 the Federal Reserve can stay in no hurry to cut 0:15:05.720 --> 0:15:10.200 interest rates after the core PCE data. The PCE deflator 0:15:10.600 --> 0:15:15.080 came in, in Powell's words, pretty much in line with expectations, 0:15:15.960 --> 0:15:18.640 but again reiterating that it's not going to be appropriate 0:15:18.640 --> 0:15:22.800 to lower rates until officials are confident that inflation is 0:15:22.920 --> 0:15:26.560 on track toward that two percent target, which again Chairman 0:15:26.600 --> 0:15:30.000 Powell reiterated just this morning that that is the target, 0:15:30.040 --> 0:15:33.320 and we are going to get more PCE data before 0:15:33.400 --> 0:15:37.640 the Fed's next decision coming up on May first. I'm 0:15:37.680 --> 0:15:40.400 Nathan Hager in New York, and you have been listening 0:15:40.480 --> 0:15:43.120 to live coverage from Bloomberg Radio.