0:02

Bloomberg Audio Studios, podcasts,

0:05

radio news.

0:07

The Chairman of the Federal Reserve.

0:08

That news conference ended almost as soon

0:11

as it started. The FED chair thinks

0:14

we're restrictive. Here are the scores for you in

0:16

the equity market on the SMP five hundred

0:18

boom vertical, almost straight

0:20

away as soon as he started speaking. The equity market

0:22

positive by one percent on the SMP on'm

0:24

announcedack cup by one point one percent. The

0:26

small caps bouncing back from a very very

0:29

bad April here in May up by almost two

0:31

percent. If you switch at the board once again, if

0:33

it's a FED decision day, apparently it's a rally

0:35

for the two year yield to lower by seven

0:37

basis points four ninety six twenty two,

0:39

and I think it's about four to twenty am

0:42

in Tokyo. Dolly En looks a little

0:44

something like this. I match and the Ministry of Finance

0:46

is a little bit happier. It could have been a whole lot worse,

0:48

Dolly n one fifty seven forty nine.

0:51

Take a listen to what the Chairman of the Federal Reserve

0:53

had to say.

0:55

I do think the evidence shows, you know pretty

0:57

clearly that policy is restrictive and his wing

0:59

on demand, and there

1:02

are a few places I would point to for that. You

1:04

can start with the labor market. So

1:07

demand is still strong, the

1:09

demand side of the labor market in particular, but

1:11

it's cooled from its extremely high level of a

1:13

couple of years ago, and you see that in job

1:15

openings. You saw more evidence of that today

1:18

in the Jolts report. As you'll know, it's

1:20

still higher than pre pandemic, but it has been

1:22

coming down both in the Indeed Report and

1:24

in the Jolts Report. That's demand

1:27

cooling.

1:28

No doubt.

1:28

So for Nisson's macro, with this line, the

1:30

statement retains its easing bias power

1:32

beliefs that policy is restrictive. Look

1:35

at the price sanction off the back of this, Bramo. The

1:37

next sixty minutes of that news conference, next

1:39

fifty minutes hardly worth your time.

1:40

Well, especially because the next question was the question

1:43

that was the key one popping the

1:45

question that Julian Emmanuel was talking about, which

1:47

is have you considered a hike? How

1:49

big is the threshold? Not likely,

1:52

We're not going to do that. So it was a one two punch.

1:54

First policy was restrictive dubbish.

1:56

Then hikes are not on the table, even a

1:58

bigger rally, and frankly, that's what's feeling basically

2:01

hawkish, isn't is sex.

2:03

In their note Hatziism Company and their note

2:05

started with the tapering action. I think it

2:07

was the tanem. I agree with everything you've said. And

2:09

it was over Johnny after not

2:11

forty seconds. I think it was over after thirty three

2:14

seconds. But with dat said, he delivered

2:17

a lot of what people wanted as an adjustment.

2:20

You saw it in the real yield. Let's come back a little

2:22

bit. But you wonder what the follow

2:24

is? The follow on is the first set

2:26

of FED speakers out of the block. I

2:28

mean, I mean, are they gonna are they gonna go with

2:31

this tone?

2:31

It's been a fantastic lineup of guests over the last couple

2:33

of hours. Just to shout out to Bob Michael at JP Morgan

2:36

and Mohammed al Arian asked about stack flation.

2:38

To remember Buff's response to that. I think the Chairman's

2:40

gonna laugh at that. Reflect on what happened to the folky

2:43

is. I think he's gonna laugh. He said this no snack, this very

2:45

little flation. Ultimately this no stack

2:47

flation.

2:48

Basically he laughed. He said you know, give

2:50

me a break. This is not what we're talking about.

2:52

Honestly, this is a FED show that came out

2:54

much more dubbish than anyone had expected. And honestly,

2:56

this raises a question about whether

2:58

he is entertaining some.

2:59

Of the key debates.

3:00

He was asked by Michael McKee about

3:03

long term neutral rates, not going to engage

3:05

it, asked about long and variable lags

3:07

stick in a script.

3:08

There was no sense that he had entertained

3:10

a lot of.

3:10

The fundamental debates that are dividing Wall Street

3:13

in a really serious way.

3:14

I'm not sure where that leaves people.

3:16

I noticed that off the GDP, where

3:18

we've got a one point six percent statistic,

3:21

what we heard interview after interview was domestic

3:23

final sales was actually pretty buoyant. And

3:25

that's what he alluded to when he went after the

3:27

stagflation.

3:28

Let's be clear, they're not going to count anytime soon. Based

3:30

on what we just heard, the easing bias remains.

3:32

It's just the amount of price action we've seen over

3:35

the last couple of months. When we talked about the Fed champ

3:37

being hawkish, it was hawkish relative

3:39

to what we've had. This conversation all day relative

3:41

to the previous meeting, maybe relative

3:44

to the price action where we're price four right now.

3:46

Very difficult to do.

3:47

The bar for that was so high given the fact that this

3:49

market is only price for one cut

3:52

in twenty twenty four.

3:53

Yeah, this didn't push against that.

3:54

I mean, this could very much be consistent with only

3:56

one rate cut, and that's why you're seeing a bigger move,

3:58

arguably in stocks. Basically

4:01

this is the perfect mix for stocks.

4:03

Where people said you just need the tail risk of a hike

4:05

off the table.

4:06

He did that, and then you can really go to the races.

4:08

When we get to Dudley, I'm going to talk about what wasn't

4:10

talked about too much, which is a labor economy.

4:12

What evidence do they need to see

4:15

in the labor economy to really

4:17

become accommodative, And

4:19

to me, that's still really unanswered.

4:21

I don't think it's claims. Maybe it's

4:23

wages coming down all the time Forcelly and

4:25

others, But I just really

4:27

wonder what the labor dialogue

4:29

is here rather than the parlor game.

4:31

Of what is tak You're right, I would pad that with

4:33

inflation. I think oh they got called it with

4:36

these hot inflation prints temper their ability

4:38

to respond to one first shocks the sub called fed

4:40

put. Based on what we just heard in the last sixty

4:42

minutes, the fed put is alive and well.

4:45

Basically cyflation's not on the table.

4:46

Stop it already. And that's basically what we heard.

4:49

Can you set up a course where we have

4:51

Frankfurt in London question

4:53

quality brought over to Washington.

4:56

Can you arrange that?

4:57

Would you want me to offend everyone? No, I'm

4:59

gonna come say it right now.

5:00

There are too many questions that are off

5:02

topic of the dual mandate of

5:05

price change. Ethan Harris on fire

5:07

and LinkedIn on this and on the labor

5:09

economy. I didn't earn enough about the labor economy.

5:11

I have to be I disagree with you.

5:16

I felt like after the first two

5:18

questions, people tried every which angle

5:20

to get something more.

5:22

It wasn't happening, period.

5:24

Full stop.

5:25

He was going to say what he was going to say, which is essentially,

5:27

we haven't shifted our stance that much.

5:28

We're not going to hike rates. Goodbye, see

5:30

you next time.

5:31

Let's speak to a man who's been on the other end

5:33

to some of these questions. Bill Dentley former

5:35

New York Fed President and Balloompag economic

5:37

senior advisa, Bill, what did you make

5:39

of that performance in that news conference?

5:43

Thank your interpretation is exactly right.

5:45

It was quite dubbish. And he basically said that despite

5:47

the news that's come in economy, stronger than

5:49

expected, inflation that's so good

5:52

in the first three months of the year, the whole

5:54

game plan is basically unchanged.

5:56

We're going to keep rates here until

5:58

we're highly confident that we're going get inflation down

6:00

in two percent. No hint whatsoever

6:03

of a rate hike, no

6:05

hint that it's not going to work. So

6:08

mark reaction I think was pretty appropriate given what

6:10

he said. You know, he basically said, we've

6:12

got it.

6:14

Back to Dudley McKelvey of a

6:16

few years ago. Bill, Dudley, you're in

6:18

the trenches at gold and sex gaming the

6:20

labor economy. What data

6:23

in the labor economy is

6:25

important to Chairman Powell to

6:27

really become accommodative.

6:31

I think it's the notion that the labor market

6:33

is really starting to somehow fall apart

6:35

and the unemployent rate is starting to rise

6:38

significantly. He was asked pretty explicitly about

6:40

that, and he basically said, one or two

6:43

ten percent rise in the unemployer rate wouldn't

6:45

really disturb him, you know, I think the interesting

6:47

question is if the labor market really starts to

6:49

deteriorate, the problem is that the next

6:51

stop, partypically is a recession.

6:55

We've never had half a percent rise in

6:57

the unemployment rate without having a recession.

6:59

I think it's done player and goes up a couple

7:01

tens.

7:02

I don't think it really bothers him. But if it feels like the

7:04

labor market is really giving way, then

7:06

the Fed will put a lot of weight on that, almost regardless

7:09

of what inflation's doing.

7:10

Bill, you said something, he basically said, we

7:12

got it. The playbook hasn't changed.

7:14

Was that the right move.

7:17

Time will tell if the playbook

7:19

is it will actually work with as well as he

7:21

thinks. I mean, my own personal view is that the

7:24

legs and launtry policy probably are not as

7:26

long and very blessed he thinks. And I

7:28

put a lot more weight on financial conditions I think

7:30

than he is currently. The fact that

7:32

people are taking his comments in a very

7:34

positive way from financial

7:37

market perspective means that we're having an easy

7:39

of financial conditions, which will support

7:41

the economy, So I think it just

7:43

reinforces the higher for longer story

7:45

over the medium term.

7:46

He doesn't seem perturbed about that, And he also

7:48

didn't really deal with a lot of the fundamental questions

7:51

as we were just saying that have been dividing Wall Street.

7:53

Didn't address the higher terminal rate. He didn't

7:55

address this question of what would make

7:57

him really a second guest

8:00

idea of restrictiveness or long and variable lags.

8:03

Do you think that means he's not thinking about it, or that

8:05

he has rejected it, or do you think he just doesn't

8:07

want to deal with it in the public right now.

8:10

I think he's certainly thinking about it, But I think

8:12

he's basically saying, from his perspective,

8:14

the evidence hasn't convinced them that

8:16

they're on the wrong track. So he

8:19

thinks policy is restrictive, sufficiently

8:21

restrictive to do the job. So maybe our

8:24

starting and maybe the neutral rate is.

8:25

A little bit higher, but it's not as high as where they are today.

8:28

So yes, could our star be revised

8:30

up at the next June Summary of Economic

8:33

projections? Probably will be up revised up a

8:35

bit, but policy in his mind

8:37

is still sufficiently tight that he's

8:39

not worried about that particular variable.

8:42

Bill Dudley Ethan Harris has been on

8:44

fire retired from Bank of America,

8:46

almost daily on LinkedIn with really

8:49

intelligent work on trim

8:51

inflation means which

8:53

inflation statistic is most informative

8:56

now to our audience.

9:00

To focus on services x housing

9:03

for two reasons. Number one, this

9:05

is the problem where the wage inflation drives

9:07

the actual outcome in terms of services

9:09

inflation. And number two,

9:12

you know it's not being bounced around

9:14

by the supply chain normalization process,

9:16

which is pulling down as good prices. I think

9:18

one of the things that's probably destorying the inflation

9:21

news recently is the fact that goods

9:23

prices came down a lot because

9:26

of the normalization of supply chains. But we

9:28

ignored the transmittory inflation on

9:30

the way up. We also have to ignore it on the way

9:32

down. So we don't want we don't want to overstate that

9:34

goods price inflation weakness.

9:37

So I think services sector x X

9:39

housing is probably a really important thing to

9:41

focus on. And you know, that's the so called

9:43

last mile of inflation, and that's the part

9:45

that's turning out to be more difficult.

9:48

But we need to talk to you about the balance sheet as well. So the Federal

9:50

Reserve announcing today they'll slow the pace of

9:52

balance sheet runoff starting in June.

9:54

The Central Bank to lower the treasury runoff

9:57

cap to twenty five billion from sixty

9:59

billion. Build market participants right now

10:01

trying to work out, Okay, if QT

10:04

wasn't bearish, is tapering QT bullish?

10:06

But can you help me understand because we were

10:08

told it's like watching paint dry. It has been

10:11

when they start to undo it, unwind some of

10:13

it. What does it all mean?

10:15

I think it is like watching pink right. You can see that

10:17

in the press conference there are originally no questions about

10:20

the balance sheet, and he made it very clear

10:22

that the balance sheet decisions are not

10:25

part of the monetary policy process

10:27

of making policy either either easier or

10:30

tighter. I don't think it has much effect

10:32

the taper because the destination is

10:34

the same, the Feds going to a balance sheet

10:37

size that generates reserves

10:39

that are ample but not abundant

10:41

like they are today. So we

10:43

may get there slightly over a longer

10:45

period of time because we're now running off securities

10:47

at someone's slow place, but we're going to the

10:49

same place, and so it really has virtually no

10:52

market implications.

10:53

If you were on the Fedstelle, Bill, would you

10:55

have voted for this type of thing, or would you have

10:57

aired a little bit more as you were talking about before,

11:00

about financial conditions easing too much

11:02

to allow inflation to stay sticky for too long.

11:06

I don't think we're at this stage where you know, great

11:08

hikes are warranted, and so I would have

11:11

agreed with the decision today. I think where

11:13

I would have maybe a bit different

11:15

from cheer Paul a little bit. I would just be

11:17

a little bit more cautious about the confidence

11:19

that he's got it.

11:21

Bill Dudley, thank you, sir.

11:22

The former Fed New York President

11:25

Bill Fantastic has always recority market

11:27

fades a little bit. We're up by three quarters of one

11:29

percent. Make so I appreciated the question at the end

11:31

of the news conference. I'm not sure about the answer, because

11:34

effectively, what the journalist in that news conference

11:36

was asking is whether the lack of descent spoke

11:38

to a lack of diversity of thought

11:41

on the FMC.

11:42

Correct.

11:43

They weren't asking about you

11:45

know what gender and precisely

11:47

you know racial composition is on the FED.

11:49

They were asking about pushback intellectual

11:51

discourse, and this question about whether anyone

11:53

was saying, hey, wait a second, maybe we shouldn't

11:56

be so sure that long and variable lags

11:58

have the same kind of effect as they have in the past.

12:00

That I think is a legitimate question. He

12:02

didn't address a bunch of questions.

12:03

Oh here alluded to and I think Bob Michael's been

12:06

leading on this, And I mentioned to you and Lingoln earlier,

12:08

what if we get friendly data, what

12:10

if we revert to a disinflationary

12:13

vector. John, I'm doing some research here, and I

12:15

mean, you know, I look at the G seven meeting in

12:17

Pulia, trying.

12:18

To make that here in June.

12:19

And I'm sorry, I got a plane ticket of three

12:21

thousand and six dollars, not even

12:24

close to seven thousand dollars eight

12:26

nine, ten months ago. I'm sorry. You get whispers

12:28

a service sector disinflation,

12:31

and you're right back to the boom economy

12:34

DOW at five hundred what it was ten minutes.

12:35

I'll repeat the question I asked a little bit earlier

12:37

before the news conference started. I'll ignore the

12:40

reference of the doll The three month average

12:42

on payrolls is two seventy six. The Federal Reserve

12:44

chair is just established, conveyed quite clearly

12:46

that the Fed put is alive and well, they're willing to

12:48

respond to adverse shocks, downside surprises,

12:50

particularly if they emerge in the labor market.

12:53

Now I'm trying to wonder, Lisa, what it would take

12:55

to reintroduce the rate cut conversation.

12:58

Clearly they still have a bias to ease to

13:00

cut interest rates. Would it be a downside

13:02

surprise on Friday? With that be sufficient? What

13:04

would we need to see to get people talking

13:07

about a different thing, not about hiking, about be sufficiently

13:09

restrictive? After what we've just witnessed in that news

13:11

conference, what would it take to have a series of guests

13:14

to start talking about July at

13:16

the Federal Reserve?

13:16

And j Powell himself might have said, well,

13:19

it would take a substantial weakening in the labor market.

13:21

Does this market believe him that it really

13:24

would or do they think that just the idea

13:26

that yes, quits rates are increasing, see a slight

13:28

increase in the labor market. And then to Mohammed's

13:30

point, if you already see

13:33

the weakness, it's too late. How much does that

13:35

haunt him at a time where he's really

13:37

embracing the recovery that we continue to see in the economy.

13:40

Mike McKee was in that news conference. Mike McKee

13:42

has run out of that news conference. He's with us right

13:44

now. Mike great exchange with the Federal Reserve

13:46

chairman in the last Now, what stood out for you?

13:50

Well, I think the biggest thing is that there

13:52

are two audiences here, or two

13:54

people that are two things that the FED

13:57

is trying to address. One is

13:59

the markets and their perception of what the Fed

14:01

is doing, and the other is the economy and

14:03

what they need to do to bring down

14:06

inflation. And the two things are not always compatible,

14:08

and that's maybe what you have right now.

14:11

The Fed is less concerned about how

14:13

the market feels about all this than

14:15

they are with setting their own parameters

14:17

within their meeting of what they think they need to

14:19

do, and at this point they don't think

14:21

they need to do anything. The economy seems

14:24

to be in good shape. We've

14:26

seen a little bit of slow down, but we're supposed

14:28

to see a slow down when they raise rates.

14:31

We have seen inflation stall out.

14:33

Maybe that means they haven't got

14:35

policy tight enough. But now financial

14:38

conditions have tightened, and so maybe that's

14:40

going to start to work. Bottom line,

14:43

they don't know what they're going to do, so

14:45

they can't then give the markets

14:47

a good clue.

14:48

Mike, and the fan distributions of all this

14:51

data, the probabilities, the outcomes

14:53

of all this data, is there in

14:55

place into the jobs report on Friday

14:58

an ability to get back to a disinflation

15:01

or a vector quickly.

15:05

Probably not in the sense that we

15:07

don't have any indication that hiring is

15:09

going to significantly slow meeting

15:12

any of the conditions that Jay Powell was talking

15:14

about for a rate cut, and wages

15:17

from all the other measures we've seen

15:19

have still been running above inflation.

15:21

So at this point one indicator

15:24

isn't going to do it. It would take much more than

15:26

that. If we got a significant rise in

15:28

unemployment for some reason, then

15:31

that would set some antenna up, but

15:33

it wouldn't push anybody to do

15:36

anything at this point.

15:38

Mike, we talked a lot about how the key question

15:40

was going to be whether they were entertaining

15:42

the idea of rate hikes. Were you surprised, and he completely

15:45

dismissed that out right.

15:48

No, I wasn't surprised because Lisa,

15:50

you just have to play game theory and ask what would

15:52

have happened if he didn't dismiss it. Then

15:54

all of a sudden, you've got people really moving

15:57

the markets around trying to price for

15:59

something like that. At this

16:01

point, the FED doesn't see a reason

16:04

to raise rates because they think that overall

16:06

the economy is slowing a little

16:08

bit as they want it to, and

16:11

it is doing so without rising

16:14

unemployment. So things are kind of working

16:16

out the way they had planned.

16:18

Mi mackay, great work has a waste, buddy, Well, can't chat

16:20

with you tomorrow morning.

16:21

Mi McKay.

16:22

That breaking it down for you down in Washington, DC.

16:24

That pop in the equity market get in sold just a little

16:26

bit. We're still positive. But Tomney by zero

16:29

point four percent?

16:29

Can I go to November seven? November

16:32

seven is two days after a modest election.

16:34

I'm sorry, but that's the meeting I'm focused on.

16:37

November seven could be wild.

16:38

Hey, Eve's real He directs about it in the news conference.

16:41

They do not want to talk about politics at

16:43

all, not part of the conversation, and.

16:45

They want to give the sense that they truly are independent

16:47

at a time where they're actually being challenged in terms

16:49

of their independence.

16:50

The more people start talking about.

16:52

When people, i mean the former president Trump

16:54

comes out and starts talking about the potential for

16:57

you know, taking ownership over fed decision making,

16:59

they're going to be much more adamant about being.

17:01

I'm waiting for him to address that story that

17:03

came out from the Journal in the last week, still

17:05

anonymous sources around the president talking

17:07

about these issues.

17:08

These are big issues, so you feel like people are kind of like spitballing

17:11

out there and seeing how the people react to it

17:13

before they yeah, yeah, before they really

17:15

kind of put any emphasis behind

17:17

it.

17:18

Jeff Rosenbersts got things to say about this, joins

17:20

us now from Black Rock. He really doesn't that take with us,

17:22

Jeff, I'm not going there.

17:23

Don't worry.

17:23

Jeff is great to catch up with you as always, sir. After

17:26

what you just heard, does it make you incrementally

17:29

more bullish in any way, shape or form.

17:32

Well, let's just say that going into this meeting,

17:34

there was a lot of bearishness and

17:37

fear that he would come out more hawkish.

17:39

If you even look at you know, Bloomberg Economics

17:41

put out their kind of preview, it

17:43

was overwhelmingly.

17:45

Expecting a very hawkish message.

17:48

So I think there's a lot of relief here that

17:50

the chairman stayed true to what we've

17:52

seen from this chairman. He's been very

17:54

much on the other side, has been one

17:57

sided, looking at the glass half

17:59

four and reiterating,

18:02

you know, kind of the key point around

18:05

an asymmetric response function. If

18:07

inflation is higher and it has been higher

18:09

over the last three months, okay, we

18:12

won't cut as soon as we were anticipating.

18:15

But the questions and people who

18:17

tried to pigeonhole them on are you going to

18:19

hike? Did you talk about hikes? You know, just

18:21

deflected all of that, and.

18:22

That was that was a relief.

18:24

So the reiteration on the asymmetry

18:26

as a result of the reiteration on

18:29

they believe that policy is sufficiently restrictive.

18:31

Those are two key things here that keeps

18:34

a more dubvish orientation in

18:37

the face of some challenging economic

18:39

data.

18:40

And Jeff Rozenberg on Planet Blackrock,

18:43

is the economy doing okay? Is

18:45

the real misestimation here? A

18:47

one point six percent GDP which

18:49

made a lot of news, but domestic final sales

18:51

were much much better. Is it better

18:54

out there than we actually think and

18:56

that's why we're heard at Dubvish poll today.

19:00

Well, I think you have a mixture there

19:02

and you've heard it, you know, as part of the exchange

19:05

during the Q and A. You know the

19:07

aggregate data, Yes, one point six understates

19:09

it because as you rightly point out, if we look at domestic

19:12

demand, it's running at a stronger

19:14

level.

19:14

So the economy in aggregate terms is

19:16

stronger.

19:18

But what Bob Michelle talked about in the earlier

19:20

or Michael, I'm not sure which way you pronounce it talk

19:23

about is you

19:25

know there are pockets

19:27

that.

19:28

Was I can

19:31

confirm it's Michael, carry on, Jeff.

19:33

Thank you.

19:35

So there are pockets of hurt

19:37

going on here, but there are also pockets of strength.

19:39

So you have a distributional aspect

19:42

in terms of what's going on in terms

19:44

of the economic growth side. But clearly the amount

19:46

of slowing it was a question in the Q and

19:49

A, didn't you need to have more pain to

19:51

get the disinflation.

19:53

Good news is we're still on the.

19:54

Path of the immaculate disinflation and

19:57

the growth side is holding up. So I think that's

20:00

quite supportive here to the risky asset

20:02

perspective, it.

20:03

Seems like this is more supportive to the risky

20:05

ascids than it is to government bonds,

20:07

right, I mean, this basically raises the specter of taking

20:11

a rate hike off the table, which will

20:13

benefit stocks of companies that have done

20:15

really well with respect to earnings, but

20:17

doesn't necessarily give that much of a boost

20:19

to government bonds that are still subject

20:22

to hire for longer. Is that kind of your view

20:25

in terms of positioning on the heels of this

20:27

on the margin, Yeah,

20:29

And you know.

20:30

I think we have to segment between the front

20:32

end of the curve and the back end of the curve. When

20:35

you know, I think this is challenging for the long run

20:37

in the back end of the curve. Right, The FED is from

20:40

the most part dismissive of the inflation

20:43

increase. They're not really taking it in

20:45

too much into account. The characterization

20:48

of it was bumpy, what me worry.

20:50

So that's fine, But if you're holding thirty years

20:52

of debt at interest rates that you

20:55

know may not sufficiently compensate

20:57

you, if you are at a longer period

20:59

of a three percent inflationary period,

21:01

that's a bit challenging and a little bit problematic.

21:04

I think for the front end.

21:04

Of the curve, you know, it's

21:07

a little bit easier story because you have less

21:09

exposure because of the maturity and

21:11

roll down that you benefit from there. But

21:14

I think you have to be a little bit concerned about

21:16

the longer run trajectory here,

21:18

both from what we heard today in terms

21:20

of monetary policy, but the other side

21:23

of this, which we were a little bit this morning in

21:25

terms of treasury refunding on the fiscal

21:27

side, that's a bit more of a challenging environment

21:29

for back end duration.

21:31

JEF.

21:31

I want to build on that just a little bit.

21:32

Given how estamplished the reaction function is now at

21:34

the Federal Reserve, highlighted again by the chairman

21:37

in this news conference, how do you think HEELDS

21:39

will respond to the longer end to incoming

21:41

information the data on Friday an

21:43

upside surprise versus say, a downside

21:46

surprise.

21:48

Yeah, you know, we're gonna pivot right to Friday

21:50

and we'll be back and we'll talk to you

21:52

guys then. But you know, I think that will very much

21:55

be more about the front end reaction, because

21:58

that's gonna be about is the

22:00

FED really getting the slowdown in the

22:02

labor markets, the normalization

22:05

in the labor markets that they keep talking

22:07

about, but the data isn't really supportive.

22:10

Nonfarm payroll is not supportive, wage

22:12

is not supportive.

22:13

I'm a little.

22:13

Surprised you to get more pushback on

22:15

ECI, their favorite measure.

22:17

Everybody expected it to go down. It

22:19

went up.

22:19

Yes, we can dismiss it and add special

22:22

factors. It was a bit more state and local, it was a little

22:24

bit more union than private. But

22:26

it didn't go down as fast as the normalization

22:29

would say. And there is that kind of lurking

22:31

question, Mike McKee, you asked it, you

22:33

know, are you not as restrictive as you think you are?

22:35

And they'll continue to believe that they are restrictive.

22:38

That's kind of the fundamental belief

22:42

at this point. The question is

22:44

if the data keeps pushing against

22:46

that, then does the FED have to make

22:48

a bigger pivot.

22:49

Today was not that day.

22:51

Way too soon to get there, and that's why

22:53

Powell purposefully came out very

22:56

dubvish. But inside the statement, one thing

22:58

people one questioner picked up on. There

23:00

are a little bit of hints here of moving

23:03

around the removal of the kind

23:05

of the implicit forward guidance on the peak

23:07

policy rate, the implicit promise

23:09

that the next move would be a cut in the introductory

23:12

statement.

23:13

I think that's notable.

23:14

We'll see that in the minutes in terms of the debate

23:16

and what the Chairman obviously couldn't talk

23:18

about here, but next month we will talk about

23:21

is the shifting in the distribution of the voting

23:23

members with respect to their forecasts

23:25

of economic policy that you didn't

23:28

get this meeting, but obviously that's what the markets

23:30

wants to see. And you can kind

23:32

of read into the statement and the and

23:34

the press conference that there is a shift

23:36

going on there. It was underplayed, not

23:38

really many people picked up on it. He

23:40

wasn't going to highlight it, but you can see that is

23:43

going on.

23:43

Like ros Jeff Rosenberg right to

23:45

catch up with you, sir. The shade at JP Morgan from

23:48

Black Crost stop you think they kill Rick Rick

23:50

Ryder?

23:51

You know, Jpmurlgan.

23:53

It's a fair mischaracterization. You think

23:55

that was intentional? That was your takeaway from the.

24:00

Jo of course it was I don't know

24:02

who bub Michael is. Give me two great

24:04

this s and P.

24:05

Five hundred is fading going into the clothes

24:07

let's bring up the chart briefly. We're

24:09

up now by only a tenth of one percent at the peak.

24:12

In that news conference, the S and P five hundred was

24:14

positive by one point two. Something that sticks, though

24:17

interestingly herely so it's the running

24:19

bonds. The two are still down by about eight basis

24:21

points.

24:21

It took the prospect of hikes off the

24:23

table, so that potential tail

24:26

risk not necessarily there. I thought what Jeff Rosenberg

24:28

said though about the long end was interesting and we're not seeing it

24:30

in the price action at all, saying but that in

24:33

the longer run this becomes a real problem

24:35

for the long end. Essentially, if you have a

24:37

FED that is hardwired to

24:40

cut rates on any weakness, but not necessarily

24:42

the high rates on the sense of any kind

24:44

of durability of inflation, does that mean

24:46

that inflation is going to stay higher for longer and that there needs

24:48

to be a higher risk premium.

24:49

I was pleased she took the conversation there. Lisa.

24:51

This from Mohammad al Arian out on x

24:54

formally known as Twitter, with this to say.

24:56

The question, now, this is an important one

24:58

which will only be answered in a few weeks when the meeting's

25:00

minutes und released is the extent to which his remarks

25:03

reflect his own biases or constitute an

25:05

accurate summary of what was discussed

25:07

by him and his f OO WEBC colleagues.

25:09

And the Fed speak's going to start pretty immediately, Tom,

25:12

almost straight after this gun into payrolls.

25:13

We're going to hear from Fed officials.

25:15

I agree with the first week's important. If we get a two

25:17

forty on survey on non farm payrolls

25:19

three months trailing two forty three

25:22

oh three, two seventy, that's a fully

25:24

employed America.

25:25

Well, and you raised a real interesting question, which

25:27

is essentially, is there now a new asymmetry

25:30

in the market where the long end will sell off disproportionately

25:33

if we do get a really big.

25:35

Or hot print in the labor market.

25:37

Essentially, the Fed's not going to look at this as a reason

25:39

to hikered even to keep rates higher for longer necessarily,

25:42

but it could mean longer term there could be a much

25:44

more inflationary pressure.

25:45

Under the hood.

25:46

Really important staff ahead of payrolls on

25:48

Friday, as Tom mentioned, the estimate in our survey

25:50

two hundred and forty thousand, the previous

25:53

number three hundred and three coming

25:55

up next on the close, canning you into that in about

25:57

fifteen minutes away Seth Compent, a chief Global

25:59

Economy at Morgan Stanley. For the three of us

26:01

will see you again, same time, same

26:04

place, for the next Federal Reserve decision

26:07

from New York City. This was

26:09

the Fed Decides