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Sam Dickie: Fisher Funds expert on Kevin Warsh making debut as Federal Reserve chair · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: Kevin Walsh rather had his first day at the wheel
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  Speaker 2: of the US Central Bank today. The markets didn't like
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  Speaker 2: what they saw. Sam Dickey from Fisher Funds has been
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  Speaker 2: watching and he's with us. Hello Sam, Hello, Hen. Now
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  Speaker 2: he held the rates, which is what everybody expected. So
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  Speaker 2: what's the big deal?
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  Speaker 3: Yeah, no change to rates three point five to three
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  Speaker 3: point seventy five, kind of a bit like saying the
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  Speaker 3: all blacks one at Eden Park scoreline was fully expected,
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  Speaker 3: but the game was something different entirely. So the big
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  Speaker 3: deal was the tone. He completely rewrote the FED statement.
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  Speaker 3: He stripped out all the dents, boring forward guidance, all
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  Speaker 3: the winks and nudges about future cuts, and he boiled
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  Speaker 3: boiled it down to seven words ready, which was the
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  Speaker 3: committee will deliver price stability. They will deliver stable inflation,
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  Speaker 3: full stop. And then he actually went further and said
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  Speaker 3: he all inflation a choice the FED makes, which is
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  Speaker 3: really really blunt language for a central banker. And on
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  Speaker 3: their dot plot so called dot plot or future forecast
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  Speaker 3: for interest rates, half the officials now expect a rate
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  Speaker 3: hype this year, which you know is a huge u turn.
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  Speaker 3: Just three months ago, projections were pointing to cuts.
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  Speaker 2: Now, isn't that what Trump was expecting, that there will
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  Speaker 2: be that he will push the rates lower.
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  Speaker 3: Yeah, yeah, there was some real irony there. So he
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  Speaker 3: sort of nominated Wash hoping he'd push rates down, and
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  Speaker 3: we all know the way he treated the former central
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  Speaker 3: banker Jerome Powell and Wash. So the backdroppers headline inflation
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  Speaker 3: is running at four point two percent of the US
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  Speaker 3: three year high, and we know that's partly been driven
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  Speaker 3: by the energy price spike in a labor market that's
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  Speaker 3: really still quite healthy at four point three percent unemployment,
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  Speaker 3: So you can't really cut rates in that environment. But
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  Speaker 3: he did say that, and this is again quite blunt,
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  Speaker 3: that prices have been elevated for five years and represent
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  Speaker 3: a real burden to ordinary Americans and that that definitely
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  Speaker 3: doesn't sound like a governor is going to be pushed around.
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  Speaker 3: The final thing he did here that was he announced
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  Speaker 3: five task forces to completely overhaul the institution itself in
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  Speaker 3: terms of, you know, tabling ideas about how to measure
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  Speaker 3: productivity in an AI era and how the FED communicates
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  Speaker 3: and manages a balance sheet. So a really eventful day
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  Speaker 3: for the US Federal Reserve.
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  Speaker 2: So what did the market do in response and what
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  Speaker 2: does it mean for rates here?
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  Speaker 3: The market took it on the chin, so US stocks
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  Speaker 3: fell sort of one and a half two percent initially
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  Speaker 3: in bond rates or bond yields jumped US dollar strength
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  Speaker 3: and so sort of the classic market reactions to a
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  Speaker 3: hawkish feed or a FED that sounds like it might
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  Speaker 3: height rather than cut. Closer to home, a stronger US
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  Speaker 3: dollar and high US yields put direct downward pressure on
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  Speaker 3: the Kiwi dollar, and shorter term New Zealand interest rates
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  Speaker 3: jumped about half as much.
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  Speaker 2: Okay, what does it mean for investors here?
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  Speaker 3: It's a pretty interesting picture. Globally for central banks, you
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  Speaker 3: know that they're quite out of sync, which is pretty unusual.
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  Speaker 3: So yesterday we saw the Bank of Japan raise rates,
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  Speaker 3: and they're on a fairly aggressive raising path. Now. The RBA,
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  Speaker 3: which got well ahead of the curve and started raising
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  Speaker 3: rates several months ago, they held rates yesterday and they
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  Speaker 3: hinted that they maybe at the end of the cycle.
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  Speaker 3: But generally speaking, we're in an unwelcome global rate hold
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  Speaker 3: or hike cycle, which the market clearly doesn't like in
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  Speaker 3: it on a short term basis, but medium term, a
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  Speaker 3: credible central banker at the helm of the US Federal
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  Speaker 3: Reserve is absolutely critical for confidence in markets and currencies generally,
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  Speaker 3: so fair play to have them here therefore, standing this
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  Speaker 3: ground and not bowing to political pressure on day one.
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  Speaker 2: Yeahs too, right, Sam, Thank you, appreciate it. We'll talk
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  Speaker 2: to you next week. Sam Dicky for Shafunds.
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