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Instant Reaction: Jay Powell Speaks · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
• 0:07
  Speaker 2: Jerome Powell speaking with Marketplace host ky Risdahl at the
• 0:11
  Speaker 2: Macroeconomics and Monetary Policy Conference hosted by the Federal Reserve
• 0:16
  Speaker 2: Bank of San Francisco and that Bank's president Mary Daily.
• 0:20
  Speaker 2: A very interesting discussion with Chairman Powell there, talking particularly
• 0:25
  Speaker 2: about the economic data that we got today, saying that
• 0:28
  Speaker 2: the core PCEE was pretty much in line with expectations,
• 0:33
  Speaker 2: and reiterating the message that we have heard for months
• 0:36
  Speaker 2: from this Federal Reserve. A direct quote from Chairman Powell
• 0:39
  Speaker 2: at the event, we don't need to be in a
• 0:42
  Speaker 2: hurry to cut so once again reiterating that message that
• 0:45
  Speaker 2: the FED can remain patient in the midst of this
• 0:49
  Speaker 2: bumpy road that we are seeing in disinflation. And for
• 0:54
  Speaker 2: more analysis. We are joined once again by Bloomberg's International
• 0:58
  Speaker 2: Economics and Policy correspond that Michael McKee, Mike, thanks again
• 1:02
  Speaker 2: for being with us so slow and steady wins the
• 1:06
  Speaker 2: inflation race. Is that the message you heard from Chairman
• 1:09
  Speaker 2: Palette this discussion.
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  Speaker 1: That's what you've got. He didn't say anything new, but
• 1:15
  Speaker 1: he reiterated the position that the FED has taken for
• 1:18
  Speaker 1: quite some time. That they needs to see continue towards
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  Speaker 1: a two percent inflation goal, and he finished up just
• 1:25
  Speaker 1: a moment ago by saying, we're not going to take
• 1:27
  Speaker 1: that step of cutting rates until we are confident that
• 1:31
  Speaker 1: we are headed there. That's been the message from the
• 1:34
  Speaker 1: FED for quite some time. He said that I thought
• 1:37
  Speaker 1: one of the most fun questions that kay Risdahl asked
• 1:42
  Speaker 1: was what's wrong with saying you just don't know what's
• 1:46
  Speaker 1: going on? And how are people supposed to take it
• 1:48
  Speaker 1: if you say the same things all over again? And
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  Speaker 1: he said basically that we are trying to be humble,
• 1:56
  Speaker 1: and we're trying to be humble about our ability to
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  Speaker 1: see the future, and we want to be thoughtful, careful
• 2:03
  Speaker 1: and steady hands in making monetary policy. So they don't
• 2:07
  Speaker 1: want to rattle the markets, and that's going to be
• 2:11
  Speaker 1: the message until they do see the progress they want.
• 2:15
  Speaker 1: He was asked about obviously today's PCE numbers and said
• 2:19
  Speaker 1: they're in line with kind of what they expected, but
• 2:21
  Speaker 1: it's still a bumpy progress and that they weren't good
• 2:24
  Speaker 1: enough to lead the FED to cut rates right now.
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  Speaker 2: And maybe this is part of the answer, this idea
• 2:30
  Speaker 2: that the FED has to be humble and not say
• 2:33
  Speaker 2: that they know what they don't know about the economy,
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  Speaker 2: but how much more data do they need? We've seen
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  Speaker 2: months and months of data that have you know, over
• 2:45
  Speaker 2: the last couple of months have come in a little
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  Speaker 2: bit bumpier than they have in months prior. But when
• 2:51
  Speaker 2: the Fed says that they need more data, it does
• 2:55
  Speaker 2: raise a question of how much more data they need
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  Speaker 2: before they can make that decision to pivot, doesn't it?
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  Speaker 1: Yes, That's the big question on Wall Street is when
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  Speaker 1: did they make that pivot? When do they start suggesting
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  Speaker 1: they're going to be cutting in the near future. Powell
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  Speaker 1: did not discuss that today, did not put a timeframe
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  Speaker 1: on it, but on Wednesday night, the governor, in fact,
• 3:20
  Speaker 1: Governor Chris Waller, said he's going to need several more
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  Speaker 1: months of data to tell him that they're going in
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  Speaker 1: the right direction, which would seem to suggest May's off
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  Speaker 1: the table because they'll only get one more months worth
• 3:33
  Speaker 1: of data. The question then is with two months, can
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  Speaker 1: they do it in June or do they look to July.
• 3:41
  Speaker 1: Those are going to be the kind of things that
• 3:42
  Speaker 1: are going to have traders on edge as the inflation
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  Speaker 1: data comes out over the next couple of months.
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  Speaker 2: So we do have that possibility still that we will
• 3:53
  Speaker 2: get a cut, perhaps in the second quarter, maybe into
• 3:57
  Speaker 2: the third. Let's bring in Sarah House for some more analysis.
• 4:00
  Speaker 2: She's back with us as well. Sarah's the senior economist
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  Speaker 2: at Wells Fargo. Sarah, good to have you back with us.
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  Speaker 2: After we've gotten this data on the core PCE just
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  Speaker 2: this morning. We've heard the comments in this moderated discussion
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  Speaker 2: from Chairman Palell what's your view on where the Fed
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  Speaker 2: goes with rates at this point?
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  Speaker 3: Yeah, I think ultimately we heard that right now, Chair
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  Speaker 3: pal doesn't feel like they need to be in a
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  Speaker 3: hurry with cutting rates. It is a big decision, as
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  Speaker 3: he espoused multiple times throughout the conversation. But what we
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  Speaker 3: heard time and again was that he viewsed the economy
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  Speaker 3: as strong right now, and particularly the labor market being
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  Speaker 3: in a good place, which does seem to afford them
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  Speaker 3: some time to see if inflation can come down a
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  Speaker 3: bit further in the months ahead.
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  Speaker 2: And to that point, Powell said that the Fed can
• 4:47
  Speaker 2: hold rates steady if inflation doesn't come down. It seems
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  Speaker 2: to take at least a little bit off the table.
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  Speaker 2: The idea that we'd see a rate increase at any point.
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  Speaker 2: But is the FED trying to give the market a
• 5:00
  Speaker 2: message that maybe rates are going to stay elevated for
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  Speaker 2: even longer than they might have priced in at this
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  Speaker 2: point that the that the market needs to kind of
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  Speaker 2: get ready for a new normal in terms of where
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  Speaker 2: rates go.
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  Speaker 3: I think right now it's more just about they need
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  Speaker 3: to see more that it's I don't think they're unhappy
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  Speaker 3: with with where markets are priced for cuts right now.
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  Speaker 3: If you look at what the warp function on the
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  Speaker 3: terminal and the most recent SEP they're in pretty close alignment,
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  Speaker 3: you know, somewhere close to three cuts when when you
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  Speaker 3: round roughly the media in there. So I don't think
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  Speaker 3: that this is about really trying to guide the markets
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  Speaker 3: in a major way, But it's more about the fact
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  Speaker 3: that the data has come and still pretty strong and
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  Speaker 3: allse EQL that does point to bringing to reducing the
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  Speaker 3: level of restrictiveness a little bit later.
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  Speaker 2: And just to bring it back to the data that
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  Speaker 2: we saw this morning, is there anything that's in the
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  Speaker 2: core PCE it indicates to you that we could see
• 6:02
  Speaker 2: even more bumps along the way.
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  Speaker 3: Well, I think just given the degree of the slowdown
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  Speaker 3: we saw on services well welcome. I wouldn't expect that
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  Speaker 3: to necessarily repeat month in, month out over over the
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  Speaker 3: next few months. And at the same time, I think
• 6:16
  Speaker 3: some of the goods inflation that we saw, some of
• 6:19
  Speaker 3: that might have been helped by I might have been
• 6:23
  Speaker 3: gotten a little boost from seasonal So I think we're
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  Speaker 3: still likely to see some bumps here over the next
• 6:30
  Speaker 3: over the next few months.
• 6:33
  Speaker 1: One of the questions Sarah Spike McKee that got some
• 6:37
  Speaker 1: attention on x and other social media platforms was when
• 6:42
  Speaker 1: Kyritzol asked him does the FED get too much attention to?
• 6:45
  Speaker 1: People pay too much attention? And he said, I think
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  Speaker 1: they do pay too much attention to Fed monetary policy,
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  Speaker 1: because policies that raise productivity and living standards are far
• 6:56
  Speaker 1: more important over the longer term. Do you agree that
• 6:58
  Speaker 1: maybe the media and the markets put too much tension
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  Speaker 1: on every word beed official say?
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  Speaker 3: I think there is certainly quite a bit of focus
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  Speaker 3: and sometimes miss other other aspects that you may move
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  Speaker 3: the needle quite a bit on economic growth, so areas
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  Speaker 3: like fiscal policy, as well as I think some of
• 7:19
  Speaker 3: the other policies that do support labor supply overall, overall
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  Speaker 3: supply side things that can all can boost that that
• 7:28
  Speaker 3: productivity as well. So in some ways it's, you know,
• 7:31
  Speaker 3: it's it's Tom Kane's parlor game in terms of what
• 7:33
  Speaker 3: the Fed's going to do, what the Fed's going to
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  Speaker 3: do next, that does get so much attention, But I think,
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  Speaker 3: but I think to Repel's right in that there are
• 7:41
  Speaker 3: so many other things that need to be considered when
• 7:44
  Speaker 3: we're thinking about, you know, what's what's GDP growth going
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  Speaker 3: to be a year from now, two years from now,
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  Speaker 3: that can play into.
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  Speaker 2: Speaking with Sarah House, senior economists at Wells Fargo, along
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  Speaker 2: with Bloomberg International Economics and Policy correspondent Michael McKee, getting
• 7:59
  Speaker 2: some real action to what we've heard in just the
• 8:01
  Speaker 2: last few minutes from FED Chair Jerome Palett the Macroeconomics
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  Speaker 2: and Monetary Policy Conference at the FED Bank in San Francisco.
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  Speaker 2: The Chairman, Sarah does put a lot of emphasis on transparency,
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  Speaker 2: not rattling the markets with the words that we hear
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  Speaker 2: from the Federal Reserve. In the context of the economic
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  Speaker 2: data that even we've gotten just today, Do you think
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  Speaker 2: that the FED is transparent enough? Does it say too
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  Speaker 2: much to the markets, So.
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  Speaker 3: I think they are certainly very transparent. I think sometimes
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  Speaker 3: that's still maybe not even good enough for markets in
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  Speaker 3: terms of what exactly you know, are are the specific
• 8:45
  Speaker 3: data points they're looking at. When I think, like a
• 8:47
  Speaker 3: lot of us and thinking about the economy, they're taking
• 8:50
  Speaker 3: a lot of different data points into consideration. And I
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  Speaker 3: think at times too, given the degree of transparency, it
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  Speaker 3: can be difficult to parse through all the different points
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  Speaker 3: of views and where that might lead to in terms
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  Speaker 3: of the consensus. But I think it certainly beats the
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  Speaker 3: alternative where we didn't know what the FED was thinking
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  Speaker 3: in years past.
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  Speaker 2: It was interesting as well to hear Chairman Powell bring
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  Speaker 2: up politicization of the Federal Reserve as we get closer
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  Speaker 2: to an election year, even more into the election cycle,
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  Speaker 2: and this idea that the FED could become more politicized
• 9:28
  Speaker 2: as we get closer to that election time. Do you
• 9:30
  Speaker 2: think that, notwithstanding what Chairman Powell had to say about
• 9:34
  Speaker 2: how the FED can't be politicized, that it would go
• 9:38
  Speaker 2: against the fed zone mandate to bring politics into its
• 9:42
  Speaker 2: decision making. Having said that, does the timing of the
• 9:48
  Speaker 2: election cycle play at all into rate decisions? From your perspective,
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  Speaker 2: So I.
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  Speaker 3: Think it can make the timing of when they're maybe
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  Speaker 3: pivoting on policy little bit trickier, if nothing else, just
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  Speaker 3: because they want to avoid that look of politicis a politicilation.
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  Speaker 3: And so what we did hear from pal today is
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  Speaker 3: he said that these decisions, though, are not on a
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  Speaker 3: political calendar. And I think just given that it still
• 10:15
  Speaker 3: isn't an easy decision for when they may cut rates
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  Speaker 3: this year if they do it all, just based on
• 10:22
  Speaker 3: the risks to both side of the mandates that you know,
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  Speaker 3: perhaps the best thing is just to not worry about
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  Speaker 3: it at all and just look through, put their heads
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  Speaker 3: down and make the best decision they think for the
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  Speaker 3: US economy.
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  Speaker 2: Really appreciate this. Sarah, thanks again for coming on with
• 10:38
  Speaker 2: us to analyze Chairman Palace comments and of course coming
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  Speaker 2: on earlier as well when we got that core PCE
• 10:45
  Speaker 2: data on this good Friday, Sarah House with us there,
• 10:49
  Speaker 2: senior economist at Wells Fargo and Bloomberg's Mike McKee is
• 10:54
  Speaker 2: still on with us for the next few minutes while
• 10:57
  Speaker 2: we sort of dive in a little bit more into
• 11:00
  Speaker 2: what Chairman Powell had to say in this moderated discussion.
• 11:04
  Speaker 2: It did seem Mike, as though, you know, this idea
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  Speaker 2: that the FED doesn't want to rattle markets, even on
• 11:11
  Speaker 2: a day when you know we've all got the day
• 11:13
  Speaker 2: off from trading, that that really does seem to be
• 11:16
  Speaker 2: a lot of what drives Chairman Powell in terms of
• 11:20
  Speaker 2: what he has to say that he really doesn't want
• 11:22
  Speaker 2: to surprise markets.
• 11:26
  Speaker 1: If he can get out of a public appearance without
• 11:29
  Speaker 1: markets moving, he considers that a victory. But this is
• 11:33
  Speaker 1: what the Fed's policy has become. It used to be
• 11:36
  Speaker 1: back in the sixties, seventies, eighties, when the FED didn't
• 11:41
  Speaker 1: tell you what it was doing. It used to be
• 11:43
  Speaker 1: that they thought that surprising the markets would be good
• 11:47
  Speaker 1: because it would keep them off balance and they wouldn't
• 11:50
  Speaker 1: necessarily be rushing into to push rates one way or
• 11:54
  Speaker 1: another when the FED didn't want them to do that.
• 11:57
  Speaker 1: But now the Fed's decided that trends, parrency and forward
• 12:01
  Speaker 1: guidance are what really helps them, and it helps get
• 12:05
  Speaker 1: monetary policy into the markets by letting markets know roughly
• 12:09
  Speaker 1: what's going to happen, so that they front run, they
• 12:12
  Speaker 1: anticipate whether rates are going to go up or down.
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  Speaker 1: And that's basically what Powell, and he's followed the others
• 12:20
  Speaker 1: since Sally and Greenspan in doing that as chair is
• 12:24
  Speaker 1: trying to tell people what's going to happen, but not
• 12:28
  Speaker 1: give too much detail. As we've been saying this morning.
• 12:31
  Speaker 1: He didn't say much new.
• 12:31
  Speaker 2: Today, absolutely and interesting as well to hear Chairman Powell
• 12:35
  Speaker 2: say that the inflation data, the preferred gauge came in
• 12:40
  Speaker 2: pretty much in line with their expectations. Walk us a
• 12:44
  Speaker 2: little bit through what was some of the most important
• 12:46
  Speaker 2: aspects of that core PCEE data that we got this morning,
• 12:51
  Speaker 2: and do you think that that's going to be more
• 12:53
  Speaker 2: important the economic data or Chairman Powell's words today in
• 12:57
  Speaker 2: terms of how the market reacts when and things come
• 13:01
  Speaker 2: back open on Monday, Well.
• 13:04
  Speaker 1: There was a little bit of debate in the among
• 13:06
  Speaker 1: market participants that I saw after the pce numbers came
• 13:10
  Speaker 1: out about whether they were good or whether they were
• 13:13
  Speaker 1: bad for the idea of a rake cut, and I
• 13:16
  Speaker 1: think Powell comes down on the side of there isn't
• 13:19
  Speaker 1: much different here, so it will probably limit the reaction
• 13:24
  Speaker 1: on Monday to anybody who is offsides and thinking the
• 13:28
  Speaker 1: Fed might be cutting earlier will have to refigure their portfolio,
• 13:33
  Speaker 1: but for most people it's not going to really matter
• 13:36
  Speaker 1: all that much. The inflation numbers showed some little progress.
• 13:39
  Speaker 1: Services prices inflation came down some, which is something the
• 13:43
  Speaker 1: FED has wanted to see. Goods prices were up a
• 13:46
  Speaker 1: little bit. A lot of that was energy, so it's
• 13:48
  Speaker 1: not as big a deal, but all at all, it
• 13:52
  Speaker 1: was incremental progress towards the Fed's goal, which means that
• 13:56
  Speaker 1: those who think we might see a rag cut in
• 13:59
  Speaker 1: Jue and are probably on the right hand side of
• 14:04
  Speaker 1: the left hand side rather of the tail, and those
• 14:06
  Speaker 1: who think we could go to September or later it
• 14:08
  Speaker 1: would be on the right hand side, and so somewhere
• 14:11
  Speaker 1: in that middle is what's most likely at this point
• 14:15
  Speaker 1: until we get some other data that convinces this one
• 14:18
  Speaker 1: way or another.
• 14:19
  Speaker 2: Which implies July perhaps, but we'll have to wait and
• 14:22
  Speaker 2: see what that market reaction is as we continue to
• 14:26
  Speaker 2: parse through the core PCEE data, as well as Chairman
• 14:29
  Speaker 2: Powell's remarks that we just heard moments ago from the
• 14:33
  Speaker 2: Federal Reserve Bank of San Francisco. Bloomberg International Economics and
• 14:37
  Speaker 2: Policy correspondent Michael McKee, thanks for coming in on a
• 14:41
  Speaker 2: trading holiday to help us with some of the analysis
• 14:45
  Speaker 2: of what we heard from Chairman Pal as well as
• 14:47
  Speaker 2: that economic data, and our thanks as well to Sarah House,
• 14:51
  Speaker 2: the senior economist at Wells Fargo, giving us some of
• 14:54
  Speaker 2: her analysis of the data that we got this morning,
• 14:57
  Speaker 2: as well as Chairman POW's remarks repeating that the Central Bank,
• 15:01
  Speaker 2: the Federal Reserve can stay in no hurry to cut
• 15:05
  Speaker 2: interest rates after the core PCE data. The PCE deflator
• 15:10
  Speaker 2: came in, in Powell's words, pretty much in line with expectations,
• 15:15
  Speaker 2: but again reiterating that it's not going to be appropriate
• 15:18
  Speaker 2: to lower rates until officials are confident that inflation is
• 15:22
  Speaker 2: on track toward that two percent target, which again Chairman
• 15:26
  Speaker 2: Powell reiterated just this morning that that is the target,
• 15:30
  Speaker 2: and we are going to get more PCE data before
• 15:33
  Speaker 2: the Fed's next decision coming up on May first. I'm
• 15:37
  Speaker 2: Nathan Hager in New York, and you have been listening
• 15:40
  Speaker 2: to live coverage from Bloomberg Radio.