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Roundup: Fed Cut Fallout and Bank of England Holds · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: Welcome to the Marin Talks Money Weeky round up debrief
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  Speaker 2: on the biggest stories in markets and economics. I'm Marin
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  Speaker 2: Sunset Web senior opinion columnist.
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  Speaker 1: And I'm joined Stepic, author of the Money Distilled newsletter.
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  Speaker 2: Okay, you were there's always a beat, there isn't it. John,
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  Speaker 2: You forget you have to introduce yourself on this.
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  Speaker 1: But I'm not just going to.
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  Speaker 2: Do it all for you.
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  Speaker 1: I just had to weak up, all right.
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  Speaker 2: Now, Listen, we say we're going to talk about the
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  Speaker 2: biggest stories of markets and economics, and this week that's
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  Speaker 2: kind of only one story. One story interest rates. And
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  Speaker 2: it's one of those stories that you know, interest rates
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  Speaker 2: matter for everything, but I have one. I'm finding my
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  Speaker 2: quite difficult to get excited about interest rates this week.
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  Speaker 2: But you, on the other hand, you're pretty excited.
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  Speaker 1: I am positively beseived myself because, well, part from it
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  Speaker 1: something else. I mean, obviously this was just lock, but
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  Speaker 1: I said that the FED was going to cut by
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  Speaker 1: half a point. That was my gut feeling.
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  Speaker 2: Yeah. The reason why I wasn't as excited as John
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  Speaker 2: about this was because I didn't make the same correct prediction.
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  Speaker 1: I think I do is obsessively about central banks on
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  Speaker 1: a daily basis. So possibly one of us is the
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  Speaker 1: healthier approach to this than the other.
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  Speaker 2: Maybe maybe anyway, listen, the thing they got you wrote
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  Speaker 2: you wrote in your money distilled a new letter this
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  Speaker 2: week when you were writing about this decision. One of
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  Speaker 2: the things you said was the FED doesn't know something
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  Speaker 2: you don't know. And I have to have found that
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  Speaker 2: really disappointing because one of the things that I secretly
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  Speaker 2: hope is that central banks do know more than we know,
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  Speaker 2: that they do have special expertise, that when they make decisions,
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  Speaker 2: they're doing it on the basis of information that the
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  Speaker 2: rest of us don't necessarily have, which is why sometimes
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  Speaker 2: their decisions are unexpected. But you say, no, they don't
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  Speaker 2: know something we don't know. Things aren't worse in the US,
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  Speaker 2: in the US economy than people believe everything's fine.
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  Speaker 1: Well, it's not to watch the things aren't whilst it's
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  Speaker 1: just that the Fed's not information that we don't have.
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  Speaker 1: I mean, also, I say, maybe it does. Maybe the
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  Speaker 1: federally is like the Vatican, and like you know, when
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  Speaker 1: you become you know, Pope or kind of you know,
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  Speaker 1: the head of the FED they take into a wee
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  Speaker 1: room where there's a secret recession monitor, and don't you
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  Speaker 1: don't tell anyone else about it?
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  Speaker 2: What is it you think the Vatican now? Is that
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  Speaker 2: we are now? I think we'll come back to that
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  Speaker 2: after this cacast.
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  Speaker 1: Else the Vatican secrets that only the Pope gets to
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  Speaker 1: look at it. It's all about Atlantis and stuff like that. No, sorry,
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  Speaker 1: I think that maybe teneny of that too far, But yes, not,
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  Speaker 1: I know, I mean, I don't think the FED does
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  Speaker 1: know anything that we don't. Or rather, you can certainly
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  Speaker 1: explain why they went for a half point without referring
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  Speaker 1: to that, because basically, now inflation is not the most
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  Speaker 1: salient thing for them. Whether or not that's a mistake
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  Speaker 1: is another matter, but inflation is not the thing that's
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  Speaker 1: scaring them anymore. Now they're a bit scared that or
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  Speaker 1: maybe the economy is slowing down faster than we hoped
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  Speaker 1: it would. The job's date is not very inclusive either way,
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  Speaker 1: so why not cut by a half point now just
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  Speaker 1: in case, and then at the end of the days
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  Speaker 1: things don't look that bad and not a couple of
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  Speaker 1: months time we don't have to cut any further, or
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  Speaker 1: we can slope down the cut and if things really
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  Speaker 1: get you know, boomy again, then we can always put
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  Speaker 1: rates back up. So I think it's more like a
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  Speaker 1: precautionary half point cut.
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  Speaker 2: And important to remember, by the way, for UK listeners
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  Speaker 2: that the FED has a dual mandate of employment and inflation,
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  Speaker 2: whereas the Bank of England really is only focus on inflation.
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  Speaker 2: So it's a slightly different approach, right.
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  Speaker 1: Yeah, and that's true. I think that's I mean, I
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  Speaker 1: don't hare's the place that much stock in the different
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  Speaker 1: mind dates, because they all kind of boil down to
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  Speaker 1: the same thing. But that said, yes, it probably does
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  Speaker 1: make the FED sort of focus a bit more on
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  Speaker 1: that side of things. And actually, right before this inflation
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  Speaker 1: took off, I think it's easy to forget this. The
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  Speaker 1: FED actually very briefly semi abandoned it's inflation mindate in
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  Speaker 1: favor of the employment side of things. I've certainly said
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  Speaker 1: it was going to care more about employment than about inflation,
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  Speaker 1: and then, of cause, inflation took off and suddenly it
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  Speaker 1: was inflation's the only thing that matters again. But so
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  Speaker 1: this might just be going back to that that previously,
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  Speaker 1: you know, described the approach. Okay, what is it?
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  Speaker 2: Sorry you carry on, John.
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  Speaker 1: Yeah, No, you're right, Yeah, cutting to the chase, cut
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  Speaker 1: of the chase.
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  Speaker 2: What does it mean for our investments? What does it
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  Speaker 2: mean for you s equities? What does it mean for
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  Speaker 2: equities around the rest of the world. And we've been
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  Speaker 2: talking over the last few months about all the sectors
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  Speaker 2: that should benefit as interest rates get cuts a small caps,
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  Speaker 2: mid gaps, value stocks, infrastructure, et cetera, all these things
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  Speaker 2: that should get a boost, as as Redzy Cup. Because
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  Speaker 2: the immediate reaction from the market was slightly confused.
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  Speaker 1: I mean, the immediate reaction, like in the minutes after
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  Speaker 1: it happened, was confused, and I think people have made
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  Speaker 1: a bit more of that than is actually necessarily the case.
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  Speaker 1: I think with this you can probably just be relatively
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  Speaker 1: uncomplicated and even daft about it. You know, interest rates
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  Speaker 1: have gone down by a lot. That's probably a good
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  Speaker 1: sign for stocks. And today that's what's happened. You know,
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  Speaker 1: in the immediate aftermath of the cut, everyone so everything
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  Speaker 1: went up briefly and then everything went back down. But
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  Speaker 1: that's probably just because of the way people were not
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  Speaker 1: using marketing terms, but you know, the short term people
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  Speaker 1: were positioned like that. But today everything that is kind
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  Speaker 1: of going in roughly the direction you'd expect, like gold's up,
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  Speaker 1: Silver's up an awful lots sort of playing catch up
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  Speaker 1: with gold all of a sudden.
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  Speaker 2: That'll make you happy. You've been talking about silver for
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  Speaker 2: a while.
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  Speaker 1: I don't own any silver. This is I don't know
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  Speaker 1: why I do this to myself, but.
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  Speaker 2: Everybody, he's been doing this for decades. He makes great calls.
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  Speaker 2: He never has any exposure himself. There's a miserable old
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  Speaker 2: age waiting for you, John, if you don't get a
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  Speaker 2: rep and start acting on your brilliant ideas.
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  Speaker 1: It's true, but I can always pretend rather than being
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  Speaker 1: very bored with ADMIN, I was just being highly having
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  Speaker 1: a high level of integrity as a financial tunnel.
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  Speaker 2: Quite right, Quite right too. Now that it's in the
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  Speaker 2: Bank of England, they haven't had to do any ADMIN
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  Speaker 2: because they decided not to move right. Yes, got the right.
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  Speaker 1: Choice, and I mean, yeah, but it makes sense. I
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  Speaker 1: remember that obviously the Bank England wouldn't and the one
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  Speaker 1: what the FED was going to do when they made
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  Speaker 1: the decision. I mean with that, I made a difference.
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  Speaker 1: I mean, I do tend to think that central banks
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  Speaker 1: are like it and else they kind of flock together.
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  Speaker 1: And yeah, absolutely, and social permission, you know, the FED
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  Speaker 1: goes back all of a sudden, it's like, oh, well,
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  Speaker 1: it's okay for us to do the same sort of thing.
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  Speaker 1: But also, I mean, the the Bank England cut last
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  Speaker 1: month because they saw the opportunity, because the other issue
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  Speaker 1: the Bank of England's going to have, certainly in the
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  Speaker 1: next couple of months, is that inflation is going to
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  Speaker 1: go back up as much because of base effects as
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  Speaker 1: anything else, and they might even hit three percent again,
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  Speaker 1: so they kind of need to take their chances to
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  Speaker 1: cut while it doesn't look contradictory in terms I think,
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  Speaker 1: so maybe in November they'll cut again.
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  Speaker 2: What does that mean for investors and savers in the UK? John,
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  Speaker 2: I mean, I suppose if you're a saver and you've
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  Speaker 2: got cash in a DEPOSITI account, now's the time to
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  Speaker 2: try and lock in a reasonable savings rate, because we
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  Speaker 2: do look like we're on a glide path to another
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  Speaker 2: cut in say November.
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  Speaker 1: Yeah, I think that if anytime in the last year
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  Speaker 1: or so, you should have probably been looking to lock
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  Speaker 1: in the best savings that you could and if you
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  Speaker 1: haven't done it yet, then maybe do it now. As
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  Speaker 1: far as mortgages go, I do think that's a little
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  Speaker 1: bit more complicated because obviously the mortgage market is kind
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  Speaker 1: of very forward looking compared to the savings market, and
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  Speaker 1: they're all ready reduced. But you know, you can get
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  Speaker 1: five year fixes quite easily for an undred four percent
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  Speaker 1: of the moment. I mean, maybe that'll take down a
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  Speaker 1: bit further. That's that's quite possible, But I don't know.
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  Speaker 1: It depends on how much further rates actually fall. And
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  Speaker 1: I don't see any reason for rates to fall, you know, dramatically.
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  Speaker 1: I certainly the same reason for the Bank England to
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  Speaker 1: be cutting by half a point in the near future,
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  Speaker 1: particularly with inflation where it is. But we will see.
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  Speaker 1: But definitely mean locking in savings account makes sense and we'll.
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  Speaker 2: Wait and see what all that does to the housing
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  Speaker 2: market mortgage mortgage rates coming down a little bit, John,
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  Speaker 2: thank you thanks for listening to this week's Maren Talks
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  Speaker 2: John Underscore sed Epic. This episode was produced by Semasadi.
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