Instant Reaction: The Fed Cuts Rates 50-Basis-Points

Bloomberg Audio Studios, Podcasts, Radio News, You. 0:00:07.440 --> 0:00:08.960 Fed Decision with Mi McKay. 0:00:10.480 --> 0:00:13.280 It's fifty and the promise of another fifty basis points 0:00:13.320 --> 0:00:15.840 and cuts by the end of the year, and another 0:00:15.960 --> 0:00:19.480 one hundred basis points in twenty twenty five, which would 0:00:19.520 --> 0:00:22.840 put the nation's benchmark rate at three point four percent. 0:00:23.200 --> 0:00:27.280 It's projected to fall another fifty basis points in twenty 0:00:27.400 --> 0:00:30.240 twenty six, which would put the rate at two point 0:00:30.360 --> 0:00:33.760 nine percent, which is now the Fed's median forecast for 0:00:34.080 --> 0:00:37.320 the neutral rate. That is up a tenth from June. 0:00:37.680 --> 0:00:40.600 The consensus is GDP will rise two percent this year, 0:00:40.680 --> 0:00:43.159 down a tenth from the June forecast. Growth will be 0:00:43.200 --> 0:00:46.639 the same in twenty five and twenty six. Unemployment will 0:00:46.680 --> 0:00:49.720 hit four point four percent this year, that's an increase 0:00:50.000 --> 0:00:53.160 from the June figure. It will fall to four point 0:00:53.240 --> 0:00:57.000 three percent in twenty twenty six. PCEE inflation of two 0:00:57.040 --> 0:00:59.440 point three percent this year falls to two point one 0:00:59.520 --> 0:01:02.560 next year and hits the two percent target in twenty 0:01:02.880 --> 0:01:07.800 twenty six. Though inflation remains quote somewhat elevated. The statement 0:01:07.840 --> 0:01:11.240 says they cut because they now have greater confidence inflation 0:01:11.400 --> 0:01:14.800 is moving sustainably toward their two percent target, and the 0:01:14.880 --> 0:01:18.320 risks to inflation and the labor market are roughly balanced. 0:01:18.720 --> 0:01:21.800 While they do not explain why they decided on a 0:01:21.840 --> 0:01:25.480 half point reduction, the statement says the Committee is strongly 0:01:25.520 --> 0:01:29.760 committed to supporting maximum employment and remember in Jackson Hole, 0:01:29.920 --> 0:01:33.199 Chairman Poll said any deterioration in the labor market would 0:01:33.240 --> 0:01:37.520 be unwelcome. There was one descent from Governor Mickey Bowman. 0:01:37.560 --> 0:01:40.320 It's the first descent by a FED governor since two 0:01:41.080 --> 0:01:44.280 and five. It is the first ascent by any member 0:01:44.319 --> 0:01:48.880 of the Committee since twenty twenty two. The statement adjusted 0:01:48.920 --> 0:01:53.000 to say the Committee will as always carefully assess incoming data. 0:01:53.240 --> 0:01:58.400 Quote in considering additional adjustments. There's no changes guys to 0:01:58.680 --> 0:02:01.000 the QT portion over Fed's pause. 0:02:01.360 --> 0:02:03.400 My McKee stay closed, will come back to you. Here's 0:02:03.400 --> 0:02:05.960 the price sanction in response to it. Knee jerk reaction 0:02:06.120 --> 0:02:08.160 is the first move might not stick, but this is 0:02:08.160 --> 0:02:10.560 the move so far. By eight tens of one percent 0:02:10.560 --> 0:02:12.720 on the S and P five hundred, the overwhelming out 0:02:12.720 --> 0:02:15.240 performance on a russell the small caps now up by 0:02:15.280 --> 0:02:18.040 one point seven percent in the bond market, just bear 0:02:18.080 --> 0:02:20.760 in mind we've come a long long way and we've 0:02:20.800 --> 0:02:23.320 priced in a lot to this yield curve. The two 0:02:23.360 --> 0:02:25.840 year just climbing just a little bit to one change 0:02:25.840 --> 0:02:27.839 the three point sixty at the moment at the front 0:02:27.880 --> 0:02:29.799 end of the yield curve and in the FX market, 0:02:30.000 --> 0:02:32.320 dolly and dropping back by about point seven percent. So 0:02:32.360 --> 0:02:35.440 that's a weaker dollar, a stronger japanesey and Lisa forty 0:02:35.480 --> 0:02:36.720 one on that currency pair. 0:02:36.800 --> 0:02:38.520 Yeah, now over the Bank of Japan. And if they 0:02:38.600 --> 0:02:40.880 hike how much does that divergence continue. I also want 0:02:40.919 --> 0:02:43.520 to point out gold. You're seeing a bid into gold 0:02:43.600 --> 0:02:45.040 right now we start to look for some of the 0:02:45.080 --> 0:02:47.960 inflation proxies, So will this sort of feed into that idea? 0:02:48.000 --> 0:02:49.639 I thought it was interesting the long end of the 0:02:49.680 --> 0:02:52.760 yeld curve, just on the margins not significantly yields to 0:02:52.840 --> 0:02:54.799 slightly up on this idea that they're going to go 0:02:54.880 --> 0:02:57.519 bigger and potentially even more down the line. 0:02:57.560 --> 0:03:00.320 So the media and dock can master some disagreement beneath 0:03:00.320 --> 0:03:02.120 the surface. So let's talk about the range and not 0:03:02.200 --> 0:03:04.679 just the median at the f WEBC the median dot 0:03:04.720 --> 0:03:07.120 for twenty twenty five in the projection materials that were 0:03:07.160 --> 0:03:10.600 just published is three point four percent. The range for 0:03:10.639 --> 0:03:13.040 twenty twenty five is anywhere from two point nine to 0:03:13.080 --> 0:03:15.840 four point one. Two point nine to four point one. 0:03:15.960 --> 0:03:18.040 That's quite a range on this f WEBC. And I 0:03:18.040 --> 0:03:19.960 think for the first time at a long time, we 0:03:20.040 --> 0:03:22.960 have some descent playing gap publicly as well, the first 0:03:22.960 --> 0:03:25.800 descent from a sitting governor on the f WEBC since 0:03:25.840 --> 0:03:27.120 two thousand and five. 0:03:27.600 --> 0:03:29.720 This was not a unanimous decision, and it. 0:03:29.639 --> 0:03:33.480 Really highlights why this actually became such a knife edge 0:03:33.840 --> 0:03:36.240 kind of decision. Just to add to that, ten officials 0:03:36.240 --> 0:03:38.440 penciled in one hundred basis points or more of cuts 0:03:38.440 --> 0:03:41.680 for this year. Nine officials penciled in seventy five basis 0:03:41.680 --> 0:03:44.640 points or less for this year. It actually matters quite 0:03:44.680 --> 0:03:47.520 a bit for market expectations, especially given some of the 0:03:47.520 --> 0:03:48.840 policy uncertainty next year. 0:03:48.880 --> 0:03:51.280 So TK we get fifty, we get fifty, and now 0:03:51.320 --> 0:03:53.160 we're waiting for the next act as a news conference 0:03:53.320 --> 0:03:54.480 in twenty six minutes time. 0:03:54.560 --> 0:03:56.880 I think it's a surprise within the zeitgeist. This is 0:03:56.920 --> 0:03:59.240 to the edge of surprise. I think Powell maybe alluded 0:03:59.280 --> 0:04:03.280 to this with this enthusiasms at Jackson. Oh, you touched 0:04:03.280 --> 0:04:06.600 on something. Jason Furman touched on this morning, which is, 0:04:06.680 --> 0:04:09.760 don't forget the dollar, and Muhammad Larian, I'm going to 0:04:09.840 --> 0:04:12.440 be as direct as I can. It's the great unknown 0:04:12.520 --> 0:04:16.320 unknown here, a dollar weakness that anybody with our great 0:04:16.320 --> 0:04:17.120 hair doesn't know. 0:04:18.839 --> 0:04:21.280 That we may not know. I think we've seen it before. 0:04:21.360 --> 0:04:24.320 I remember, I remember periods of dollar weakness. But it 0:04:24.400 --> 0:04:27.120 is dollar weakness. This is not just a fifty basis 0:04:27.120 --> 0:04:31.240 point cut. This is the Duvish fifty bass point cut. Well, 0:04:31.520 --> 0:04:35.680 I mean, if now I agree with you John that 0:04:35.680 --> 0:04:38.160 the Duvish pot comes from the median dots. But if 0:04:38.160 --> 0:04:40.799 you look at the range, it doesn't look at douvies. 0:04:40.880 --> 0:04:42.080 But that's not what the mark is going to hit. 0:04:42.120 --> 0:04:43.560 The mark is going to look at the median dot, 0:04:43.680 --> 0:04:47.360 and we'll interpret this as a Douvish fifty basis points scut. 0:04:47.520 --> 0:04:50.560 And the first reaction was actually steepening of both two 0:04:50.600 --> 0:04:55.880 stands and twos thirties, which tells you something about what 0:04:55.920 --> 0:04:56.960 people are worried about. 0:04:57.160 --> 0:04:59.800 To some extent, this median dot validates market pricing and 0:04:59.800 --> 0:05:00.960 cut again to this decision. 0:05:01.440 --> 0:05:02.280 Is that sufficient? 0:05:02.480 --> 0:05:04.640 I'm looking at equity market reaction right now, we're up 0:05:04.640 --> 0:05:07.200 by half of one percent. We've still got a news conference, 0:05:07.200 --> 0:05:09.400 a question we've asked for the last several weeks into this. 0:05:10.080 --> 0:05:12.159 Are we going to end up with disappointment on the 0:05:12.160 --> 0:05:14.240 other side of this news conference with Chairman Powell? 0:05:14.320 --> 0:05:15.560 What would your question be now? 0:05:16.160 --> 0:05:19.440 So, first of all, normally he's more dubvish than the statement, 0:05:19.960 --> 0:05:22.640 so that's going to be pretty hard to do this time. 0:05:22.880 --> 0:05:23.919 But let's wait. 0:05:24.920 --> 0:05:28.400 You know, my question will be what has changed since 0:05:28.480 --> 0:05:31.760 July when you decided not to cut weights and now 0:05:31.800 --> 0:05:35.000 there's this very aggressive cut and aggressive signaling. 0:05:35.200 --> 0:05:37.880 What has changed The speech in CenTra Portugal at the 0:05:37.880 --> 0:05:40.240 start of summer very different to what we're hearing from 0:05:40.279 --> 0:05:42.960 the FMC just several months later. Joining us now to 0:05:42.960 --> 0:05:45.280 discuss is Bob Michael, a JP Morgan Asset Management. He 0:05:45.360 --> 0:05:47.640 joins us out of London this afternoon. Bob, we just 0:05:47.640 --> 0:05:49.919 won your first impression to the decision. What do you 0:05:49.960 --> 0:05:51.920 make of it? 0:05:51.920 --> 0:05:54.880 It hit on pretty much everything we were looking for, 0:05:55.279 --> 0:05:59.040 probably a little less dubvish than we thought. In two instances, 0:05:59.080 --> 0:06:01.280 one there was a just so it was in a 0:06:01.360 --> 0:06:03.799 slam dunk and we would have liked to have seen 0:06:04.240 --> 0:06:07.360 the median dot for the end of next year somewhere 0:06:07.360 --> 0:06:10.240 around two and three quarters to three percent. But otherwise, 0:06:10.360 --> 0:06:12.800 as we had been guided over the last week, nothing 0:06:12.839 --> 0:06:13.839 to quibble about. 0:06:14.040 --> 0:06:18.760 Bob, which bond series or individual bond provides the most 0:06:18.800 --> 0:06:20.040 information right now? 0:06:20.080 --> 0:06:21.040 Is it a real yield? 0:06:21.520 --> 0:06:24.200 Is it the nominal full faith and credit? What's the 0:06:24.240 --> 0:06:26.160 most valued, Abob Michael? Right now? 0:06:27.480 --> 0:06:33.040 Credit spreads? Credit spreads will tell us whether investors believe 0:06:33.160 --> 0:06:35.640 the economy is in die or shape and this was 0:06:35.680 --> 0:06:39.039 an emergency fifty basis point cut, or whether this is 0:06:39.200 --> 0:06:42.360 just a fed a long way from neutral, perhaps as 0:06:42.440 --> 0:06:45.440 Muhammad hit it a meeting or two away from where 0:06:45.480 --> 0:06:48.200 they should have started the cycle, so they're starting to 0:06:48.279 --> 0:06:49.640 get towards neutral. 0:06:50.000 --> 0:06:53.159 All is well, okay, all as well? And yet we 0:06:53.200 --> 0:06:56.560 saw earlier this morning was an increase in mortgage applications. 0:06:56.560 --> 0:06:59.480 What we've seen is already the bond market pricing in 0:06:59.640 --> 0:07:01.960 all of this and then some. And basically the statement 0:07:02.040 --> 0:07:05.719 only encourages that even more. Do not see a risk 0:07:05.920 --> 0:07:09.560 of potentially reignited inflation Moob, that we could potentially see 0:07:09.600 --> 0:07:12.120 expressed in the long end, as Muhammad is mentioning, we 0:07:12.200 --> 0:07:14.880 are seeing that yield curve steepening in a way that 0:07:15.280 --> 0:07:17.800 hints that something else is amiss, especially impaired with gold. 0:07:19.120 --> 0:07:23.160 WHOA, We're a long way away from that. We're looking 0:07:23.320 --> 0:07:28.280 at the three month annualized rate of core PCE running 0:07:28.440 --> 0:07:32.760 at one point seven percent, so that's not inflationary. There's 0:07:32.800 --> 0:07:36.440 signs of disinflation everywhere. When you look at the labor market. 0:07:36.760 --> 0:07:41.120 They talked about full employment, well the low and unemployment 0:07:41.160 --> 0:07:43.480 was three point four percent. A couple months ago was 0:07:43.520 --> 0:07:46.440 four point three percent. That's up nine tenths of a percent. 0:07:46.800 --> 0:07:50.520 You only see that when there's threat of recession. That's 0:07:50.600 --> 0:07:54.720 characteristic of that. They've highlighted to us that the neutral 0:07:54.760 --> 0:07:57.960 Fed funds rate is somewhere around three percent. That's a 0:07:58.040 --> 0:08:00.600 debate we could have for a long time, but it's 0:08:00.680 --> 0:08:03.600 nowhere near five and a quarter five and a half percent, 0:08:03.920 --> 0:08:06.680 so they can start taking pressure off of businesses and 0:08:06.760 --> 0:08:09.240 households without reigniting inflation. 0:08:10.280 --> 0:08:12.400 Bob, I know they call you Bob Michael, but you 0:08:12.440 --> 0:08:14.280 told me earlier was Bob Michelle's I'm going to stick 0:08:14.320 --> 0:08:17.720 to Bob Michelle. Bob Smith. 0:08:18.200 --> 0:08:20.400 I came to London because I thought we were going 0:08:20.480 --> 0:08:24.080 to QPR Millwall on Saturday. Now you're in New York 0:08:24.120 --> 0:08:24.360 on me. 0:08:24.760 --> 0:08:25.080 I am. 0:08:25.320 --> 0:08:29.880 I'll be in London tomorrow, So Bob speak a little 0:08:29.920 --> 0:08:33.240 bit to the revisions and their projections and particularly unemployment. 0:08:33.280 --> 0:08:33.920 What do you make of that? 0:08:35.960 --> 0:08:36.920 I didn't catch them. 0:08:36.920 --> 0:08:39.600 What did they do? They pushed it up? 0:08:41.000 --> 0:08:45.319 Yeah, I think they have to. I think they have 0:08:45.440 --> 0:08:50.880 to acknowledge that we're at a challenging time, that there 0:08:50.880 --> 0:08:54.280 are new entrants to the labor market, but those are 0:08:54.360 --> 0:08:59.200 still unemployed US workers, and they have to acknowledge that 0:08:59.280 --> 0:09:02.520 we're not below four percent anymore. We're heading a little 0:09:02.559 --> 0:09:06.600 bit higher. And that's why you need the policy response 0:09:06.679 --> 0:09:09.400 to start with fifty basis points. I'm okay with that. 0:09:09.520 --> 0:09:10.720 Yeah, but Bob, but I think we've got to talk 0:09:10.760 --> 0:09:12.240 about this a little bit more. And I'm pleased we 0:09:12.280 --> 0:09:15.360 went to unemployment. Unemployment right now in America is at 0:09:15.360 --> 0:09:18.240 four point two percent. These are the FETs projections out 0:09:18.280 --> 0:09:20.640 in twenty twenty four year end out to twenty five 0:09:20.679 --> 0:09:23.600 and beyond, they've got projections of four point four percent. 0:09:23.679 --> 0:09:26.840 The medium projection for unemployment this year. Next year, they've 0:09:26.880 --> 0:09:29.920 got it at four point four percent. Given the move 0:09:29.960 --> 0:09:32.920 we've seen over the last twelve months, Bob, how aspirational 0:09:33.000 --> 0:09:33.240 is that? 0:09:33.440 --> 0:09:34.239 How realistic? 0:09:34.320 --> 0:09:36.080 Is it that we just kind of pause around these 0:09:36.160 --> 0:09:38.160 levels for the next eighteen months. 0:09:40.120 --> 0:09:44.480 Well, we very well could. I if we get two 0:09:44.640 --> 0:09:47.840 twenty five's over the next two meetings and we bring 0:09:47.920 --> 0:09:51.200 rates down one hundred basis points. What we know is 0:09:51.360 --> 0:09:54.600 there's still a shortage of housing. There are first time 0:09:54.880 --> 0:09:59.200 home buyers queued up to buy homes, so bringing rates 0:09:59.240 --> 0:10:02.800 down could bring those buyers into the market. We also 0:10:02.880 --> 0:10:06.480 know that a lot of businesses don't fund themselves in 0:10:06.520 --> 0:10:10.040 the public bond market. They fund themselves through bank loans, 0:10:10.080 --> 0:10:14.079 through private credit. Those are floating rate loans. Those are 0:10:14.200 --> 0:10:17.400 anywhere starting with SOFA at five and three eighty percent. 0:10:17.440 --> 0:10:20.520 You take one hundred basis points off of that. That 0:10:20.559 --> 0:10:24.360 could help to stabilize things as well. Just because unemployment 0:10:24.400 --> 0:10:27.719 has headed up over the last year doesn't mean it 0:10:27.760 --> 0:10:30.600 has to keep going. It can certainly flatten out here 0:10:31.000 --> 0:10:32.480 if the Fed does its job. 0:10:32.679 --> 0:10:35.240 Hey, Bob, appreciate catching up as always, Bob Michael There 0:10:35.240 --> 0:10:37.560 of JP Morganes and management, there's a couple of moves 0:10:37.559 --> 0:10:39.520 in this market that I think are very very interesting. 0:10:39.760 --> 0:10:42.080 We've just gone fifty and in some ways the dot 0:10:42.080 --> 0:10:44.680 plot is validating what we were pricing in this market 0:10:44.720 --> 0:10:46.640 ahead of time as well. And what you're saying at 0:10:46.679 --> 0:10:48.360 the long end is the long bond sell off and 0:10:48.440 --> 0:10:51.240 yields climb by two basis points. It's not a big move, 0:10:51.480 --> 0:10:54.240 but it's notable by two on tens, on thirties, we're 0:10:54.320 --> 0:10:56.120 up by three. And at the same time we've got 0:10:56.160 --> 0:11:01.200 gold at all time highs. What is this market sniffing out, Well. 0:11:01.080 --> 0:11:04.120 It's sniffing out on the margins a greater inflationary risks 0:11:04.160 --> 0:11:06.240 than otherwise priced in. Look, I can make an argument 0:11:06.280 --> 0:11:07.880 about how it might mean that we're going to suddenly 0:11:07.880 --> 0:11:09.880 get run away into somebody style inflation. That's not what 0:11:09.920 --> 0:11:11.680 it's saying. But what it is saying is that on 0:11:11.760 --> 0:11:14.480 the margins, the idea of a bigger and frankly a 0:11:14.520 --> 0:11:18.960 Dubvish fifty basis point rate cut really highlights how inflation 0:11:19.080 --> 0:11:21.120 is still back on the table, at least on the margins. 0:11:21.200 --> 0:11:24.600 They're talking about a dual mandate imbalance. Mohammed, your impression 0:11:24.640 --> 0:11:26.480 is that it's a single man date central bank now, 0:11:27.040 --> 0:11:28.520 and you don't think we should take our eyes off 0:11:28.559 --> 0:11:30.600 the other side of the mandate in the market. Speaking 0:11:30.600 --> 0:11:32.479 to that, just on the margin, this afternoon. 0:11:33.000 --> 0:11:35.319 I think at the margin, yes, but I do think 0:11:35.400 --> 0:11:37.560 that this is the reaction of a single mandate FED 0:11:37.640 --> 0:11:40.840 right now, especially if you believe two percent is your 0:11:40.840 --> 0:11:41.600 inflation target. 0:11:42.040 --> 0:11:44.120 Let's cross Ouf it's a Diian swamp and bring her 0:11:44.160 --> 0:11:46.280 in a KPMG. Dan, we'd love your thoughts on the 0:11:46.320 --> 0:11:48.120 decision and that we can get into the nuances. What 0:11:48.120 --> 0:11:50.440 do you make of the fifty instead of the twenty five. 0:11:52.679 --> 0:11:55.240 This was a huge victory for j Powell, who really 0:11:55.320 --> 0:11:58.120 laid out at his Jackson Hall speech that he was 0:11:58.120 --> 0:12:01.440 worried about employment and that is what this is about. 0:12:01.880 --> 0:12:05.559 And Mickey Bowman doing a discent. Powell willing to take 0:12:05.600 --> 0:12:08.800 a descent among the board members as opposed to among 0:12:08.840 --> 0:12:12.720 a president. That is how much he wanted this half 0:12:12.760 --> 0:12:15.560 percent rate cut. And I think that's very important. I 0:12:15.559 --> 0:12:18.280 think you're going to see it. Couch and explained within 0:12:18.320 --> 0:12:21.520 the context of several participants at the July meeting thought 0:12:21.600 --> 0:12:23.839 they were ready to go ahead and cut. So this 0:12:23.880 --> 0:12:25.720 is a bit of a catch up to that, and 0:12:25.760 --> 0:12:28.480 so that should help temper a little bit this Duvish 0:12:28.600 --> 0:12:31.120 read on it. I was surprised that they kept the 0:12:31.200 --> 0:12:35.640 risk balanced, although clearly the focus is now unemployment and 0:12:35.679 --> 0:12:40.600 not allowing the situation and employment to become much worse. Remember, 0:12:40.640 --> 0:12:44.280 we're at one hundred and sixteen thousand payroll gains three 0:12:44.320 --> 0:12:47.880 month moving average as of August. That's not statistically different 0:12:47.880 --> 0:12:51.040 from zero. Combined with the downward revisions we saw on 0:12:51.160 --> 0:12:54.840 August twenty first, the day before Powell gave his remarks 0:12:54.880 --> 0:12:59.040 at Jackson Hole, those downward revisions record downward revisions. Even 0:12:59.120 --> 0:13:01.720 if they're not as as large as they appeared because 0:13:01.760 --> 0:13:05.000 of some immigration that we're not capturing, they're still large. 0:13:05.080 --> 0:13:07.640 And it means the birth and death rate, the death 0:13:07.720 --> 0:13:11.160 rate of firms has picked up and their small businesses 0:13:11.240 --> 0:13:14.640 aren't hiring as much as well, which could mean actually 0:13:15.040 --> 0:13:18.600 the payroll data for this year also gets revised down. 0:13:18.920 --> 0:13:20.360 And that's what they're worried about. 0:13:20.600 --> 0:13:24.040 Dan, your workout on LinkedIn has been just hugely beneficial, 0:13:24.040 --> 0:13:27.160 a really holistic view of the US economy. I have 0:13:27.200 --> 0:13:30.240 a Dow Jones industrial leavage, bottom of the pandemic up 0:13:30.280 --> 0:13:33.800 one hundred and twenty eight percent twenty one percent per year. 0:13:34.160 --> 0:13:37.079 I've got debt and deficit that hal Bronner and Bernstein 0:13:37.120 --> 0:13:40.440 never dreamed of. Diane Swank Is this a FED just 0:13:40.559 --> 0:13:44.040 dealing with our stimuli? Is this a FED just dealing 0:13:44.120 --> 0:13:46.280 with debt and deficit to the sky. 0:13:49.080 --> 0:13:52.560 You know, we've had everything you could possibly imagine pushed 0:13:52.600 --> 0:13:55.680 up inflation, and now we're seeing it come down despite 0:13:55.720 --> 0:13:57.840 the fact that we still have a lot of debt. 0:13:58.080 --> 0:14:01.000 So you know that on the margin, yes, we do 0:14:01.080 --> 0:14:03.080 have high debts, and I do believe we need to 0:14:03.120 --> 0:14:05.160 deal with that at some point in time, and I 0:14:05.200 --> 0:14:07.480 don't think we have anyone who's willing to talk about 0:14:07.520 --> 0:14:10.040 it on either side of the aisle, which is another issue. 0:14:10.120 --> 0:14:12.840 We can talk about that at a later date. But 0:14:13.000 --> 0:14:15.400 right now we've got a federal reserve that's no longer 0:14:15.520 --> 0:14:18.920 buying that debt, and you've got a federal reserve that 0:14:19.200 --> 0:14:22.800 is seeing inflation come down despite the fact that we 0:14:22.960 --> 0:14:26.640 have high debt. And that's because on the margin, after 0:14:26.680 --> 0:14:28.840 we get past the sort of six months that we 0:14:28.920 --> 0:14:33.280 put a whole year budget into from March into October, first, 0:14:33.800 --> 0:14:37.520 you get a continuing resolution at best through your end, 0:14:37.880 --> 0:14:41.080 and you're going to get more constraints on spending. I 0:14:41.080 --> 0:14:43.920 think as we get into twenty twenty five, Diane. 0:14:44.000 --> 0:14:47.080 One reason why this comes as a surprise this decision. 0:14:47.560 --> 0:14:49.760 One reason why is because they could have telegraphed this 0:14:49.880 --> 0:14:52.520 more carefully. There was no data that really moved the 0:14:52.560 --> 0:14:56.160 needle between the time when the quiet period began and 0:14:56.200 --> 0:14:58.760 now that would chip us toward fifty Why do you 0:14:58.800 --> 0:15:01.360 think there wasn't more clue communication that this was a 0:15:01.360 --> 0:15:04.480 Federal Reserve ready to cut rates by fifty basis points. 0:15:07.120 --> 0:15:09.160 Well, Frankly, I don't think that Jay Powell, by the 0:15:09.200 --> 0:15:11.720 time the blackout period hit had the votes in his 0:15:11.840 --> 0:15:14.280 pocket to be able to do that, and I think 0:15:14.440 --> 0:15:17.160 we saw that in some of the mixed messages. Even 0:15:17.200 --> 0:15:20.440 the day of the blackout period, Chris Waller, governor on 0:15:20.480 --> 0:15:22.360 the Federal Reserve, had said, you know, you'd be open 0:15:22.400 --> 0:15:24.720 to a more aggressive rate cut, but he didn't seem 0:15:24.760 --> 0:15:27.480 to be really ready to do it. In September, we 0:15:27.560 --> 0:15:30.440 saw John Williams come out that same day and sort 0:15:30.480 --> 0:15:33.200 of talking about more cautious rate cuts, more of a 0:15:33.320 --> 0:15:36.560 quarter point kind of rate cuts. So they didn't telegraph 0:15:36.640 --> 0:15:40.120 it because he hadn't crowded the cats. But this really 0:15:40.200 --> 0:15:42.080 does speak to the fact that he does have an 0:15:42.120 --> 0:15:45.160 extraordinary ability to actually do just that. 0:15:45.520 --> 0:15:47.640 Let's get to this quote from no data of Runmack 0:15:48.000 --> 0:15:49.160 just down at the moment. 0:15:49.240 --> 0:15:50.080 Here's the issue. 0:15:50.240 --> 0:15:52.280 The balance of risks have changed and June most saret 0:15:52.320 --> 0:15:54.800 balanced risk to un employment. Right now this is completely 0:15:54.840 --> 0:15:57.920 flipped mostly risk to one employed skews to the upside. 0:15:57.920 --> 0:15:59.640 This will not be the last time we see a 0:15:59.640 --> 0:16:02.440 fifty in our opinion, Lacy, your thoughts. 0:16:02.760 --> 0:16:05.320 This is basically being priced into this year. I mean, 0:16:05.360 --> 0:16:07.040 how else do they get to more than one hundred 0:16:07.080 --> 0:16:09.840 basis points potentially by the end of this year. And 0:16:09.920 --> 0:16:12.520 if you think about it, it raises a lot of 0:16:12.600 --> 0:16:15.640 questions about what they are seeing that suddenly makes that 0:16:16.000 --> 0:16:18.360 such a consensus. Given that we've gotten a lot of 0:16:18.440 --> 0:16:19.600 mixed messaging. 0:16:19.360 --> 0:16:21.040 Let's head back to London and catch up with Bob 0:16:21.080 --> 0:16:24.600 Michael at JPMorgan Asset Management. Bob, I'm sitting there in cash. 0:16:24.720 --> 0:16:26.520 I've been sat here for a long time. You've been 0:16:26.560 --> 0:16:28.760 wanting me for a long time that I face real 0:16:28.800 --> 0:16:31.440 reinvestment risk. The fence just cut fifty and I'm freaking out. 0:16:31.480 --> 0:16:32.160 I give you a call. 0:16:32.480 --> 0:16:35.240 I'm now worried about another fifty and maybe another fifty 0:16:35.240 --> 0:16:37.320 after that. What are you buying on my behalf? 0:16:39.040 --> 0:16:43.400 We're telling clients just get into the bond market. Just 0:16:43.480 --> 0:16:46.440 get into a general bond fund. It could be an 0:16:46.480 --> 0:16:49.920 aggregate investment grade bond fund, could be a core plus 0:16:49.960 --> 0:16:52.520 bond fund. If you're in a high tax bracket, get 0:16:52.520 --> 0:16:56.560 into a general municipal bond fund. Yields are coming down. 0:16:56.720 --> 0:17:00.600 Yields are at this level with six point three trillion 0:17:00.680 --> 0:17:04.120 dollars in cash building up and most people not liking 0:17:04.160 --> 0:17:07.760 the bond market. Some buying has brought it down here, 0:17:08.119 --> 0:17:11.159 and this money will come in because they're going to 0:17:11.200 --> 0:17:14.600 watch the return on cash go down like power windows. 0:17:15.359 --> 0:17:17.600 I got to say, Muhammad, this goes to the point 0:17:17.600 --> 0:17:19.640 that you were making. I love your comments on this, 0:17:19.640 --> 0:17:23.399 this idea that the Fed was seeing something that ndeim 0:17:23.400 --> 0:17:26.040 shifts his view, and what we're seeing right now is 0:17:26.040 --> 0:17:27.639 that maybe he just didn't have the votes. I'm just 0:17:27.640 --> 0:17:30.560 trying to wrap my head around what that means going forward, 0:17:30.840 --> 0:17:33.399 that maybe they're going to be even more aggressive than 0:17:33.440 --> 0:17:36.119 the market previously thought, and that maybe it is appropriate 0:17:36.400 --> 0:17:40.479 to price in even more spread compression, even more yields 0:17:40.480 --> 0:17:41.040 going lower. 0:17:41.520 --> 0:17:43.399 So it would not surprise me if that is the 0:17:43.440 --> 0:17:46.400 market reaction. It would not surprise me at all, because 0:17:46.720 --> 0:17:50.439 the market has been conditioned to ask for more and 0:17:50.520 --> 0:17:53.080 more and gets more and more. So when't surprise me 0:17:53.080 --> 0:17:56.080 if that, If that is what happens, I will go 0:17:56.240 --> 0:18:02.720 back to the significant dispersion in people in FMC members 0:18:02.800 --> 0:18:06.080 view as to what the destination looks like, and that 0:18:06.160 --> 0:18:08.720 discussion has got to be reconciled over time. So I 0:18:08.720 --> 0:18:12.720 don't think it is as clear cut as the market 0:18:12.760 --> 0:18:13.560 will make it seem. 0:18:14.560 --> 0:18:17.200 Diane Swarck, I got eight ways to go here. Let's 0:18:17.240 --> 0:18:21.280 try this. You've got a wonderful reading of America away 0:18:21.280 --> 0:18:25.359 from three zip codes in Manhattan, the quadrants of Washington, DC. 0:18:26.200 --> 0:18:29.880 This rate cut, how does it affect America that are 0:18:29.920 --> 0:18:33.440 not the elites, not the people enjoying Nvidia to the moon. 0:18:36.080 --> 0:18:39.199 Well, this is really important because the rate cuts, the 0:18:39.240 --> 0:18:42.480 short term rate cuts, are what comes through on loans 0:18:42.920 --> 0:18:46.640 that consumers take out. This is beyond the mortgage rate situation. 0:18:46.800 --> 0:18:51.280 This also helps the mortgage rate situation obviously, but the 0:18:51.320 --> 0:18:55.240 real issue for consumers are short term interest rates and 0:18:55.280 --> 0:18:57.359 how they are priced on their debt. Now, on the 0:18:57.440 --> 0:18:59.800 credit cards, the average credit card rate is about twenty 0:18:59.800 --> 0:19:02.280 five percent. This is a rounding era on that. It's 0:19:02.280 --> 0:19:04.240 not going to help a lot on that. That's just 0:19:04.480 --> 0:19:07.800 incredible how high those rates are. But when you get 0:19:07.800 --> 0:19:10.919 into auto loans, when you get into other kinds of 0:19:10.960 --> 0:19:15.680 loans that consumers take in businesses, middle market through small businesses, 0:19:15.800 --> 0:19:18.600 it affects all those loans. And right now you can 0:19:18.640 --> 0:19:21.040 imagine a lot of people are going to get some 0:19:21.400 --> 0:19:23.760 relief in terms of that. Now, the good news is 0:19:24.000 --> 0:19:26.960 there's not a lot of overhang of debt for consumers 0:19:27.280 --> 0:19:30.399 and they can service the debt they've got. But for 0:19:30.520 --> 0:19:33.560 those lower income households that have already exhausted all of 0:19:33.560 --> 0:19:37.200 their savings and then some this is good news. They 0:19:37.240 --> 0:19:40.080 rely on lower rates to buy used vehicles. They can't 0:19:40.119 --> 0:19:43.000 even afford to buy new vehicles anymore. That goes right 0:19:43.080 --> 0:19:46.040 up into middle income households. So that's where we'll see 0:19:46.080 --> 0:19:48.800 some movement, but it's not immediate. You're not going to 0:19:48.840 --> 0:19:52.200 see that. Also understands there's legs and I think Muhammad 0:19:52.680 --> 0:19:57.000 Muhammad is right about the issue of the market front running. 0:19:57.119 --> 0:20:00.320 When the real message here is that this was not 0:20:01.080 --> 0:20:04.240 signaling that we're ready to cut cut, cut, cut, This 0:20:04.440 --> 0:20:08.200 is a window of opportunity to cut now catch up 0:20:08.240 --> 0:20:11.959 on July, that's important, But this isn't a signal that 0:20:12.000 --> 0:20:14.760 they're ready to go half percent, half percent, half percent 0:20:15.840 --> 0:20:19.840 sort of continuously. And the election is an uncertainty that 0:20:19.960 --> 0:20:23.399 is not factoring into the decision today, but it is 0:20:23.440 --> 0:20:26.560 an uncertainty in terms of policy for twenty twenty five 0:20:26.640 --> 0:20:30.280 and twenty twenty six, and that could change the trajectory 0:20:30.560 --> 0:20:34.360 for the Federal Reserve once that cloud of uncertainty regarding 0:20:34.400 --> 0:20:36.560 the election outcome in you as is lifted. 0:20:36.640 --> 0:20:37.600 I could not agree more. 0:20:37.720 --> 0:20:39.520 Dan, just one of the best, as always a clinic 0:20:39.560 --> 0:20:42.719 Dane swamp there of KPMG November seventh could be a 0:20:42.840 --> 0:20:45.919 very very different meeting if you are just joining us, 0:20:45.920 --> 0:20:48.600 Welcome to the program. Twenty five or fifty. We got 0:20:48.600 --> 0:20:52.000 fifty from this Federal Reserve. The outlook unclear. Ten out 0:20:52.040 --> 0:20:55.120 of nineteen officials favoring learning interest rates by at least 0:20:55.119 --> 0:20:57.919 an additional half point over the remaining two meetings of 0:20:57.960 --> 0:21:00.840 twenty twenty four, and the next meeting in twenty twenty 0:21:00.880 --> 0:21:03.679 four could be very interesting if we do indeed have 0:21:03.760 --> 0:21:07.119 in hand the outcome of the presidential election. Mattas eerdiodoutsche 0:21:07.160 --> 0:21:09.439 Bank joins us now for more. Matt, your first reaction 0:21:09.520 --> 0:21:12.720 to this one place, sir, we get fifty. 0:21:12.800 --> 0:21:14.679 Yeah, I think it's all about the messaging that we 0:21:14.720 --> 0:21:16.679 hear from Chair Powell about the reaction function as we 0:21:16.680 --> 0:21:19.000 look ahead, you know, as we were thinking through. If 0:21:19.040 --> 0:21:21.040 they go by fifty basis points, what does the communications 0:21:21.119 --> 0:21:23.400 challenge for them? I think it's two things. One, they 0:21:23.400 --> 0:21:26.960 have to project confidence in the economy, positivity in the economy, 0:21:27.160 --> 0:21:30.680 so they avoid a negative confidence signal. And then two, 0:21:31.200 --> 0:21:33.439 I think that they want to send a signal that 0:21:33.480 --> 0:21:35.320 this is not the new norm, that they're going to 0:21:35.320 --> 0:21:38.240 be ratcheting down at twenty five basis point increments. And 0:21:38.280 --> 0:21:40.359 as I look at that dot plot and the skew 0:21:40.760 --> 0:21:42.960 for this year, it does seem that there's a pretty 0:21:43.000 --> 0:21:45.800 strong kind of consensus around going twenty five basis points 0:21:45.800 --> 0:21:48.479 from here. I think eighteen out of nineteen dots showed 0:21:49.119 --> 0:21:51.560 only an expectation of two more twenty five basis point 0:21:51.880 --> 0:21:54.160 rate cuts are less, and so I think Powell can 0:21:54.200 --> 0:21:56.240 paint this as a one off. It was meant to 0:21:56.320 --> 0:21:59.520 right size monetary policy to a lower inflation environment, ensure 0:21:59.560 --> 0:22:02.359 that the real rate deprize too much, and to really 0:22:02.520 --> 0:22:04.840 show that kind of actions speak louder than words in 0:22:04.880 --> 0:22:06.880 providing confidence on the soft lanning, Matt. 0:22:06.720 --> 0:22:09.800 Lozzetti, The ten year real yield just printed below one 0:22:09.840 --> 0:22:13.240 point five zero to mean, that's a huge signal coming 0:22:13.280 --> 0:22:17.119 out of the pandemic. What does a diminished real yield 0:22:17.200 --> 0:22:21.320 do for American business, American finance and investment. 0:22:22.680 --> 0:22:25.800 Look, I think we should expect that the goal of 0:22:25.840 --> 0:22:28.760 this is to keep financial conditions easy, to ensure that 0:22:28.800 --> 0:22:32.320 financial conditions don't overtighten and put a soft landing in jeopardy. 0:22:32.600 --> 0:22:34.639 That is ultimately the legacy of chair Pal and I 0:22:34.640 --> 0:22:36.639 think that he took out some insurance against that. Today. 0:22:36.960 --> 0:22:39.600 I think that's a good outcome for the economy. Hopefully 0:22:39.600 --> 0:22:41.639 he can message it in that way, which is they 0:22:41.640 --> 0:22:43.960 have a positive outlook. This is not the starting of 0:22:43.960 --> 0:22:46.320 a fifty basis point cutting cycle. And I think if 0:22:46.320 --> 0:22:49.320 you get that soft lanning, prospects improve financial conditions ease, 0:22:49.359 --> 0:22:51.240 and we have a very good outcome for the economy. 0:22:51.520 --> 0:22:51.720 Matt. 0:22:51.760 --> 0:22:54.119 One of the stickiest areas of inflation has been a 0:22:54.119 --> 0:22:57.000 housing market, and what we've seen there has been recently 0:22:57.000 --> 0:23:00.639 an uptick in mortgage applications as well as just in 0:23:00.640 --> 0:23:03.280 general some of the Homelander stocks. How quickly could you 0:23:03.320 --> 0:23:06.639 see a transition from a market that is completely flat 0:23:06.680 --> 0:23:09.080 on its back, not shifting around moving at all, to 0:23:09.119 --> 0:23:12.399 one that is robustly priced, discovering to the upside with 0:23:12.480 --> 0:23:15.879 people given renewed confidence by lower rates. 0:23:17.200 --> 0:23:19.720 Yeah, you know, we got mortgage purchase applications this morning 0:23:19.720 --> 0:23:22.080 and they did show a tick up, more driven by 0:23:22.080 --> 0:23:25.159 refinancing activity than purchase activity. It does seem to be 0:23:25.280 --> 0:23:27.120 lagging a little bit to move in the mortgage rates 0:23:27.119 --> 0:23:29.200 so far. My own view is, I think that's driven 0:23:29.240 --> 0:23:31.359 by when you look at the University of Michigan or 0:23:31.400 --> 0:23:34.480 Conference Board, so many consumers expect rates to come down 0:23:34.480 --> 0:23:36.560 over the next year, and so that has to happen, 0:23:36.760 --> 0:23:39.120 and maybe as rate cuts happen, and as mortgage rates 0:23:39.160 --> 0:23:41.760 fall further, that really does unleash activity in the housing 0:23:41.800 --> 0:23:44.720 market that would present upside risks for the economy. You know, 0:23:44.720 --> 0:23:48.280 I think the reality is Q two growth was three percent. 0:23:48.440 --> 0:23:50.720 Q three growth is tracking near three percent. According to 0:23:50.760 --> 0:23:53.440 the Lanta Fed GDP, we look at consumer spending on 0:23:53.480 --> 0:23:55.440 a three month anualized rate. It's the highest that we've 0:23:55.440 --> 0:23:58.119 had since twenty eleven. We got a robust retail sales 0:23:58.119 --> 0:24:01.200 report this week, so you know, I think Chapell should 0:24:01.200 --> 0:24:03.960 present a picture where the underlying economy and fundamentals are 0:24:03.960 --> 0:24:06.960 resilient and strong here, but they were taking decisive action 0:24:07.040 --> 0:24:09.600 today to ensure that those outcomes continue. 0:24:09.680 --> 0:24:12.040 Hey, Matt, final round before you go. Question for the 0:24:12.119 --> 0:24:14.520 chairman in this news conference? What's your number one question? 0:24:16.040 --> 0:24:18.480 I think it's all about reaction function. So the fact 0:24:18.480 --> 0:24:20.760 that they went by fifty basis points today before seeing 0:24:21.000 --> 0:24:24.320 very weak outcomes for the economy will naturally raise questions 0:24:24.720 --> 0:24:26.440 in the market about what if you get a weaker 0:24:26.640 --> 0:24:28.600 job support, do they go by seventy five basis points 0:24:28.680 --> 0:24:30.480 or not? So I think it's all about the reaction 0:24:30.600 --> 0:24:33.800 function from here, and how does he respond to that? 0:24:33.880 --> 0:24:35.879 Does he kind of set a high bar either for 0:24:35.920 --> 0:24:39.119 another fifty basis point or even higher rate cuts? 0:24:39.160 --> 0:24:41.640 Manas Ddie at Deutsche Bank, Bob Michael JP Morgan assad 0:24:41.640 --> 0:24:44.120 Management still with us. Bob, you love asking this one too, 0:24:44.359 --> 0:24:46.399 so I'll ask it for you. What's your question for 0:24:46.480 --> 0:24:48.639 Mike mccainn this news conference? A little bit likester on 0:24:48.640 --> 0:24:49.760 this soufternoon. 0:24:50.760 --> 0:24:55.600 As the concept of an equal labrim long term neutral 0:24:56.160 --> 0:25:00.280 FED funds rate expire, do we need that any more? 0:25:00.480 --> 0:25:02.960 Shouldn't they be talking more in terms of a real 0:25:03.000 --> 0:25:07.360 Fed funds rate maybe minus one percent to plus three percent. 0:25:07.680 --> 0:25:10.400 I mean, for goodness sakes, in my career, I've seen 0:25:10.440 --> 0:25:14.160 the Fed funds rate at zero and twenty percent, So 0:25:14.520 --> 0:25:17.840 trying to target something like that is nonsensical to me. 0:25:18.040 --> 0:25:20.000 Hi, Bob got to catch up as always, Bob Michael 0:25:20.000 --> 0:25:22.919 at JP Morgan Asset Management, we get fifty from the 0:25:22.920 --> 0:25:25.040 Federal Reserve. The price action looks like this, up a 0:25:25.040 --> 0:25:26.960 half of one percent on the s and P five 0:25:27.040 --> 0:25:30.160 hundred in the last hour, Lisa printing a new old 0:25:30.160 --> 0:25:31.640 time high on the SMP. 0:25:31.680 --> 0:25:34.560 Which really is in line with what some people were expecting, 0:25:34.560 --> 0:25:37.280 although disappointment they did not get. If you want to 0:25:37.320 --> 0:25:38.840 take a look at whether this is a Fed that 0:25:38.840 --> 0:25:41.639 can outdove market expectations, it seems like they did. And 0:25:41.680 --> 0:25:44.960 the projections going forward really highlight how this market likes 0:25:44.960 --> 0:25:48.159 to run ahead of even where Fed pricing is. Just 0:25:48.200 --> 0:25:49.880 look at this. If you take a look at Fed 0:25:49.880 --> 0:25:53.600 fund future pricing, we're actually pricing in a four point 0:25:53.720 --> 0:25:56.439 one percent Fed funds rate to end this year, so 0:25:56.480 --> 0:26:00.280 we're talking about an additional almost one hundred basis of 0:26:00.280 --> 0:26:03.240 additional cuts from here one hundred and fifty basis points 0:26:03.240 --> 0:26:06.400 of cuts, which just again points to why a Dubvish 0:26:06.400 --> 0:26:09.000 fifty basis point cut has made a difference in this market. 0:26:09.119 --> 0:26:11.520 Mohammad, you alluded to this. If they go fifty, the 0:26:11.560 --> 0:26:14.200 pressure will build to go fifty again. Is that what's happening. 0:26:14.560 --> 0:26:17.080 That is what's happening. And the market loves this, and 0:26:17.119 --> 0:26:20.880 it's been the repeated conditioning of the market. Give it 0:26:21.000 --> 0:26:22.240 something it will want more. 0:26:22.800 --> 0:26:26.000 I look at this late in the press conference John, 0:26:26.040 --> 0:26:28.679 when we get to the political questions, like if I 0:26:28.760 --> 0:26:32.080 was to parachute John into the Alarian Institute of Behavioral 0:26:32.119 --> 0:26:32.960 Economics and. 0:26:32.960 --> 0:26:34.159 Policy, would you behave? 0:26:34.440 --> 0:26:36.800 The first I would behave? And the answer is there's 0:26:36.840 --> 0:26:40.480 two United Kingdoms out there, and there's two Americas out there, 0:26:40.720 --> 0:26:43.960 and he has to address within his neutrality and the 0:26:44.040 --> 0:26:47.760 political debate those two Americas. It's not just about Bob 0:26:47.800 --> 0:26:51.040 Michael and the portfolio and Park Avenue trying to figure 0:26:51.040 --> 0:26:51.880 out what to do next. 0:26:51.920 --> 0:26:53.719 How does he navigate some of those issues? Muhammad? 0:26:53.720 --> 0:26:56.080 How difficult is it to set policy for two very 0:26:56.119 --> 0:26:57.560 different experiences in this economy? 0:26:57.960 --> 0:27:01.200 It's very difficult. It's even more difficult when politicians are shouting, 0:27:01.560 --> 0:27:04.720 go seventy five or seventy five, Now it is really difficult. 0:27:04.800 --> 0:27:07.920 What's not clear to me is if he is actually 0:27:07.960 --> 0:27:10.720 buying insurance, what is the cost of that insurance? What 0:27:10.880 --> 0:27:13.840 is the downside of buying insurance? You know, insurance is 0:27:13.840 --> 0:27:17.040 hardly ever costless. So what is the downside of having 0:27:17.119 --> 0:27:20.000 brought insurance for the economy? And that's something we'll only 0:27:20.000 --> 0:27:20.879 find out over time. 0:27:21.320 --> 0:27:24.600 What's the cost of buying insurance for the economy but 0:27:24.680 --> 0:27:28.119 also for the FED and for its political independence and 0:27:28.160 --> 0:27:31.359 this reputation therein I just wonder if it's more difficult 0:27:31.640 --> 0:27:34.159 to make the decision now in November seventh, now that 0:27:34.200 --> 0:27:36.760 you've had this initial faithacy basis point rate cut and 0:27:36.800 --> 0:27:38.960 you have a market that's now saying, yeah, you could 0:27:38.960 --> 0:27:40.160 do another one in November. 0:27:40.520 --> 0:27:40.760 Yeah. 0:27:40.880 --> 0:27:44.040 And that was the argument all along, start in July. 0:27:44.160 --> 0:27:46.639 Don't get yourself in this situation, but it is what 0:27:46.800 --> 0:27:48.959 it is. And then now going to have to navigate this. 0:27:49.240 --> 0:27:51.040 I think power is going to be very clear. He'll 0:27:51.040 --> 0:27:56.199 say we are not impacted by political issues, just like 0:27:56.240 --> 0:27:58.760 he will say that he is blessed, to use his word, 0:27:59.000 --> 0:28:01.560 by loss of opinions from outside, but ultimately it's what 0:28:01.600 --> 0:28:02.360 they're deciding that. 0:28:02.400 --> 0:28:04.560 Room, and they will get lots of opinions after this one. 0:28:04.640 --> 0:28:06.479 In just a moment two minutes away, Chem and Pal, 0:28:06.800 --> 0:28:08.480 we'll walk into that room and give us a news 0:28:08.480 --> 0:28:10.440 conference for the next sixty minutes or so. We'll take 0:28:10.480 --> 0:28:14.399 that in its entirety on Bloomberg TV and on Bloomberg Radio. Lisa, 0:28:14.440 --> 0:28:17.000 things could be very different. On November seventh, we said 0:28:17.000 --> 0:28:19.880 that repeatedly. I don't think you can overstate it. Things 0:28:19.880 --> 0:28:22.200 could be very different. The outlook for twenty twenty five 0:28:22.440 --> 0:28:25.240 could shape up in a rather different way, dependent on 0:28:25.720 --> 0:28:28.600 what the complexion of Congress looks like, how divided things 0:28:28.600 --> 0:28:30.280 are in the nation's capital, and. 0:28:30.240 --> 0:28:32.239 Whether or not we even know at that point, as 0:28:32.240 --> 0:28:35.520 Amory likes to say, whether we have a decision just 0:28:35.640 --> 0:28:38.200 will be interesting. How much this is the three part act. 0:28:38.240 --> 0:28:40.640 We get the third part of the act coming up 0:28:40.840 --> 0:28:45.120 moments away. How he characterizes what this insurance policy is 0:28:45.160 --> 0:28:48.400 really for. Is this because they are seeing true weakening 0:28:48.440 --> 0:28:51.040 in a labor market that otherwise is kind of hanging 0:28:51.040 --> 0:28:52.160 in there, And that I think is one of the 0:28:52.200 --> 0:28:52.800 key questions. 0:28:52.840 --> 0:28:54.800 How do you expect him to frame it Is this 0:28:54.800 --> 0:28:57.160 a one off mid cycle adjustment, a wait and see, 0:28:57.200 --> 0:29:00.240 we'll regroup in November. Or is this the beginning a 0:29:00.280 --> 0:29:02.840 one way trip back towards what they think is neutral? 0:29:03.080 --> 0:29:05.640 Can it be both? I mean, right, is there basically? 0:29:05.680 --> 0:29:08.000 Can everyone have their cake and then eat it too? 0:29:08.040 --> 0:29:11.520 Because essentially you have inflation coming down and you have 0:29:11.560 --> 0:29:15.000 an economy that is in a trajectory that typically does 0:29:15.120 --> 0:29:18.160 lead to further weakening. Is it history that can actually 0:29:18.160 --> 0:29:19.960 make sense at a time that has defied a lot 0:29:19.960 --> 0:29:23.120 of historical precedence. It's going to be a really difficult 0:29:23.160 --> 0:29:24.640 one for him to really, it's. 0:29:24.480 --> 0:29:26.200 Going to be difficult because they're coming out of a 0:29:26.280 --> 0:29:28.880 pandemic and they're making it up every meeting and every 0:29:28.960 --> 0:29:32.440 day and every speech, gen as they go. They're making 0:29:32.480 --> 0:29:35.440 this up as they go. Today they catch up, maybe 0:29:35.560 --> 0:29:37.560 is the right way to put it. But the then, 0:29:37.640 --> 0:29:40.920 what of November and in the twenty twenty five is real? 0:29:41.040 --> 0:29:42.720 We sent the Oula Gray on that We've said this 0:29:42.760 --> 0:29:45.240 a few times. We've all been humbled for this pandemic 0:29:45.400 --> 0:29:50.720 and coming down the other side