Latest / Bloomberg Intelligence / Stifel's Piegza Sees June Hike Likely If Data Supports (Audio)

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Stifel's Piegza Sees June Hike Likely If Data Supports (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleventh Rio to Washington,
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  Speaker 1: This is taking stock. I'm Kathleen Hayes. Along with pim Fox.
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  Speaker 1: We see a sell off in the US Treasury market
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  Speaker 1: after the Feder Reserve makes it pretty clear that they
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  Speaker 1: are watching the data and looking to see if they
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  Speaker 1: will warrant the next interest rate increase that they're meeting
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  Speaker 1: in June PM. I think that significant. Is not like
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  Speaker 1: the Fed is looking for reasons to slow down. It
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  Speaker 1: looks like a number of members are ready to make
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  Speaker 1: the move if the data supported and Lindsay pexa chief
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  Speaker 1: Economists to stifle fixed income from Chicago, Will Pete joining
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  Speaker 1: us coming up right now, Let's go to Charlie Pellett
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  Speaker 1: and the Bloomberg news room for a Bloomberg business flag
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  Speaker 1: and I thank you him, I thank you Kathleen. Since
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  Speaker 1: our last duct optate, we now have Neztack turning Laura
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  Speaker 1: so Badal the SMP nastac all trading down. This update
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  Speaker 1: dot com or call one six sector e t F
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  Speaker 1: if you're just joining us. We got minutes from the
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  Speaker 1: Federal Reserve today, just about thirty one minutes ago, policy
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  Speaker 1: makers signaling a willingness to raise borrowing costs in June.
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  Speaker 1: The SMP five hundred index now lower after advancing seven
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  Speaker 1: tenths of one percent. Stocks favored for high dividend payouts
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  Speaker 1: fell as treasury yields spiked, banks rallying on the potential
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  Speaker 1: for higher rates to boost profits. The tenure down twenty
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  Speaker 1: six thirty seconds. Zeal one point eight six percent, most
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  Speaker 1: Federal Reserve policy makers set in April, and interest rate
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  Speaker 1: increase would be appropriate in June if the economy continued
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  Speaker 1: to improve. Matt Bosler covers the Federal Reserve for Bloomberg
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  Speaker 1: News sentence that ms out at me here is Several
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  Speaker 1: participants were concerned that the incoming information might not provide
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  Speaker 1: sufficiently clear signals to determine by mid June whether an
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  Speaker 1: increase in the target range for the federal funds rate
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  Speaker 1: would be warranted. So yes, they did say it was
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  Speaker 1: likely if the economy did what they wanted, but it
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  Speaker 1: sounds like several were concerned that they might not get
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  Speaker 1: the info they needed. He was interviewed right here on
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  Speaker 1: taking stock Gold downtounce now a drop there of one
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  Speaker 1: point one percent to twelve sixty three. Crude oil giving
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  Speaker 1: up earlier gains, down twenty cents the barrel now for
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  Speaker 1: ten on West Texas Intermediate, a drop there of point
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  Speaker 1: four percent. SMP again down eleven, a drop of six
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  Speaker 1: tenths of one percent to thirty two on Wall Street.
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  Speaker 1: Now a look at other news. Charlie, thank you from
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  Speaker 1: the Bloomberg news room. I'm Mark Crumpton. This news update
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  Speaker 1: by Mark Crumpton. Charlie, and we thank you. The losses
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  Speaker 1: on Wall Street intensifying now the Dow down one hundred
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  Speaker 1: one points, to drop there of six tenths of one percent.
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  Speaker 1: The SMP five hundred indecks also declining six tenths of
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  Speaker 1: one percent. Law now by eleven points, Tenure down thirty seconds,
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  Speaker 1: l there one eight six percent. I'm Charlie Pellett, and
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  Speaker 1: that's a Bloomberg Business flash. You're listening to Taking Stock
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  Speaker 1: with Kathleen Hayes and Pim Fox on Bloomberg Radio. A
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  Speaker 1: majority of Federal Reserve officials are they prepared to raise
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  Speaker 1: the Central Banks benchmark interest rate in June as long
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  Speaker 1: as the recovery remains on track. Let's find out more
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  Speaker 1: from Lindsay Pieza, Chief Economists Defill Fixed Income, joining us
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  Speaker 1: from Chicago. You can follow Lindsay at Lindsay PEXA on Twitter. Lindsay,
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  Speaker 1: all right, so give us your thoughts on these uh
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  Speaker 1: these results. These the release of the minutes and the
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  Speaker 1: takeaway about June and potential rate increase, Yeah, they were
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  Speaker 1: pretty exciting f o MC minutes. Now we know the
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  Speaker 1: market has continuously discounted the possibility of an additional rate
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  Speaker 1: increase until the end of the year. But as we
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  Speaker 1: see in these April minutes, SET officials are increasingly optimistic
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  Speaker 1: regarding not only the state of the U S economy
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  Speaker 1: but their ability to continue to remove accommodation under these conditions.
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  Speaker 1: So really a hawk ish stilt in the April minute
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  Speaker 1: uh hawfice silt that has been affirmed by more decent
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  Speaker 1: comments from individual BEETE officials talking about not only a
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  Speaker 1: near term rate increase, but the possibility of many rate increases,
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  Speaker 1: maybe two, maybe three, still within the bounds of twenties sixteen.
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  Speaker 1: So certainly SET officials are well positioned at this point
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  Speaker 1: to vote in favor of a near term rate increase,
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  Speaker 1: potentially at the June meeting. But it all depends on
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  Speaker 1: the underlying data. Now the set is set. We don't
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  Speaker 1: need the economy to get back to strong. We don't
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  Speaker 1: need solid or robust. We need modest or moderate growth.
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  Speaker 1: But even getting back to a more moderate pace of
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  Speaker 1: expansion from the current slow activity level will be a
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  Speaker 1: sizeable challenge. Well, lindsay, Uh, you are in the camp
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  Speaker 1: that has been more cautious on the economy, more concerned
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  Speaker 1: about the economy. Are you concerned then that there's a body,
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  Speaker 1: perhaps a majority on the f m C now that
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  Speaker 1: see enough strength and um and not inflation, maybe far
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  Speaker 1: from targ target, but moving in the right direction. And
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  Speaker 1: the other thing they like to talk about. I think
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  Speaker 1: John Williams of the San Francisco Fed stress this when
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  Speaker 1: we spoke to him just a couple of weeks ago
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  Speaker 1: in an interview. It's normalization, it's not tightening. You know.
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  Speaker 1: Ester Georgia said that, does that concern you? It really
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  Speaker 1: does concern me because typically when we talk about the
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  Speaker 1: FED removing accommodation, So you're right, not yet tightening, but
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  Speaker 1: but normalization, removing accommodative policy. The Fed weights until the
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  Speaker 1: economy is on solid footing, strong footing. This time around,
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  Speaker 1: they're raising rates in anticipation of improvement rather than realized improvement. So, yes,
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  Speaker 1: we have seen continued hiring games near seventy consecutive months,
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  Speaker 1: but the pace of hiring remains very modest without upward momentum.
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  Speaker 1: In wages, business investment remains negative, the consumer remains under pressure,
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  Speaker 1: so the state of the US economy is still very fragile. Now,
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  Speaker 1: certainly we can sit down and argue with Set officials
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  Speaker 1: regarding the consistent inaccuracy of their forecast, but I think
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  Speaker 1: it raises a big red flag when we are basing
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  Speaker 1: monetary policy on expectations alone, rather than waiting to see
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  Speaker 1: that improvement filter through into the data. Lindsay. The President
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  Speaker 1: of the Federal Reserve Bank of Minneapolis, Neil kush Kari,
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  Speaker 1: previously has said that investors obsession with interest rates is
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  Speaker 1: misguided and that they should be focused on more important
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  Speaker 1: economic issues. What's your react? I think I think that's
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  Speaker 1: exactly right. But I think the FED has no one
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  Speaker 1: to blame but themselves. Uh. The constant will they won't
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  Speaker 1: pay saga has been drawn out for years with the
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  Speaker 1: market sitting on the edge of their seat, and had
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  Speaker 1: the FED actually begun this normalization process back in two
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  Speaker 1: thousand and eleven when they had a wide open window,
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  Speaker 1: we certainly would be in a very different place this
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  Speaker 1: time around. So I think the feed in good part
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  Speaker 1: can be blamed for all of the hype surrounding even
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  Speaker 1: basis point and great. Of course, as you pointed out,
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  Speaker 1: what's significant here also, it's just not that it's one more.
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  Speaker 1: It's a fact that Dennis Lockhart again told told us
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  Speaker 1: that in an interview about three or four weeks ago
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  Speaker 1: then and John Williams as well from the San Francisco
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  Speaker 1: fat there's not just two interest rate increases. Maybe it's three. Right,
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  Speaker 1: So this is I think what maybe the market starts
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  Speaker 1: getting concerned about the FED is going to start normalizing,
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  Speaker 1: raising rates, whatever you want to talk call it that
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  Speaker 1: they are now on a path. And once the FED
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  Speaker 1: gets on a path, I think there's still that that
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  Speaker 1: idea looking at the past FED moves that the path continues. Now,
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  Speaker 1: I think you're exactly right there walking a very fine line.
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  Speaker 1: They're trying to convince the market that they will continue
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  Speaker 1: along a very slow, tepid or quote gradual removal of accommodation,
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  Speaker 1: but at the same time, by raising rates, each additional
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  Speaker 1: hike makes the market more nervous that we will get
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  Speaker 1: back to a two thousand and four style tightening cycle.
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  Speaker 1: For the FED raised rates basis boids at every meeting.
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  Speaker 1: So on the one hand, the FED is trying to communicate.
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  Speaker 1: It's very a slow, tepid, still very accommodated level of policy,
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  Speaker 1: but also moving closer and closer to a more normal level.
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  Speaker 1: So it is a very delicate line, and the FED
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  Speaker 1: is desperately trying to communicate to the market. And whether
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  Speaker 1: we put the blame on the FED for the lack
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  Speaker 1: of communication or simply on the market for the lack
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  Speaker 1: of listening, I think there's a blame to go around
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  Speaker 1: for both sides. Ten seconds, are you gonna? Are you do?
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  Speaker 1: What is your view today? Hike in June? I think
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  Speaker 1: they certainly are well positioned to go if the data
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  Speaker 1: continues to improve, I think they're going to be hard
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  Speaker 1: pressed to bypass June. However, the data disappoints and the
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  Speaker 1: ongoing volatility surrounding the Brexit begins to wratch it up.
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  Speaker 1: I think they have more than enough excuses to wait
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  Speaker 1: until September. Lync PSA, thanks so much for joining us,
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  Speaker 1: giving us you had another view on the FEDS Minutes
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  Speaker 1: from their April twenty seven meeting. She's chief economist is
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  Speaker 1: Stephen Nicholas and Company. Kathleen Hayes pim Fox taking Stock,
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