Latest / Bloomberg Intelligence / Instant Reaction: Jay Powell on Fed Policy

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Instant Reaction: Jay Powell on Fed Policy · Bloomberg Intelligence

0:06
Speaker 1: This is a Bloomberg Savannah special. The FED decides, I
0:09
Speaker 1: think we all need to lie down after the last
0:11
Speaker 1: one hour or so. There is three steps to this.
0:13
Speaker 1: Step one except you're finished, Chairman Pale saying the policy
0:16
Speaker 1: rate is likely at its peak. Step two acknowledge the
0:19
Speaker 1: next step it's appropriate to dial back at some point
0:22
Speaker 1: this year. And step three attempt to explain the threshold
0:25
Speaker 1: to do so. Take a listen.
0:27
Speaker 2: What do we want to see? We want to see
0:29
Speaker 2: more good data. It's not that we're looking for better data.
0:33
Speaker 2: We're looking at continuation of the good data that we've
0:35
Speaker 2: been seeing, and a good example is inflation. So we
0:38
Speaker 2: have six months of good inflation data. The question really
0:41
Speaker 2: is that six months of good inflation data is it's
0:43
Speaker 2: sending us a true signal that we are in fact
0:46
Speaker 2: on a path, sustainable path down to two percent inflation.
0:51
Speaker 1: That's not good enough for this market. It wants to
0:53
Speaker 1: know about March March rate cuts. This is what the
0:56
Speaker 1: Chairman had to say.
0:58
Speaker 2: Based on the meeting today, I would tell you that
1:02
Speaker 2: I don't think it's likely that the Committee will reach
1:05
Speaker 2: a level of confidence by the time of the March meeting.
1:08
Speaker 2: To identifying March as the time to do that. But
1:10
Speaker 2: that's that's to be seen.
1:12
Speaker 1: And this is what you get in this market off
1:14
Speaker 1: the back of it all and equity market this sous
1:16
Speaker 1: off on the S and P five hundred session lows
1:18
Speaker 1: down one point two percent on the Nastak down one
1:21
Speaker 1: point five In the bond market, we had a big rally,
1:23
Speaker 1: still got a decent rally, but yields are off the
1:25
Speaker 1: loads at a session we're down seven or eight basis
1:27
Speaker 1: points on a two year, four to twenty six on
1:29
Speaker 1: a ten year down five Lisa three ninety seven eighty five.
1:33
Speaker 1: We're talking about cuts kinda. We're just not talking about March.
1:36
Speaker 3: We were supposed to hear him hug the statement, and
1:39
Speaker 3: he did. He gave this ambiguous answer to pidful necessarily
1:42
Speaker 3: anything at all. We didn't learn anything, and that was
1:44
Speaker 3: exactly what he was hoping for. And then he said
1:47
Speaker 3: the m word March, and he actually answered the question,
1:49
Speaker 3: and the market responded to that. You know, whether it's six,
1:52
Speaker 3: we shall see. But that's clearly was a signal that
1:55
Speaker 3: was not necessarily in the.
1:57
Speaker 4: Statement a TK.
1:57
Speaker 1: They just did not sound comfortable, or at least chairman
2:00
Speaker 1: does not sound comfortable suggesting we're cutting at a time.
2:03
Speaker 4: See yeah, Bazarre.
2:04
Speaker 5: I mean the clarity there was the March idea, Claudia
2:06
Speaker 5: Sawmo on Twitter saying that was the bombshell is clearly
2:09
Speaker 5: they've moved March out of the way. What an odd
2:13
Speaker 5: press conference they got one word, John Timid. The timidity here,
2:18
Speaker 5: the carefulness is extraordinary. I felt like I was looking
2:22
Speaker 5: at a Bank of Japan meeting from twenty five years ago.
2:25
Speaker 5: The point there they had a data thing is sounded
2:28
Speaker 5: like one of our famous sad strings, data to data data,
2:32
Speaker 5: and it's just framing out the fear they have and
2:35
Speaker 5: the delay that they're going to cause.
2:37
Speaker 1: There was something that didn't come up in this needs conference.
2:39
Speaker 1: I was surprised there weren't more questions about what happened
2:41
Speaker 1: in a banking system today, what happened with one particular bank,
2:44
Speaker 1: New York Community Bank, because LISTA, that's what we were
2:46
Speaker 1: talking about in anticipation of the decision for much of today.
2:50
Speaker 3: It was such an easy question, but I guess it
2:52
Speaker 3: didn't sound very sophisticated. How much do you account that
2:54
Speaker 3: is that worried about? After in when does that become
2:56
Speaker 3: an issue that actually ends up causing you to coverrate
3:00
Speaker 3: more quickly.
3:00
Speaker 5: The thing to be here, John, is the behavioral aspect
3:04
Speaker 5: of this meeting. These are smart people. They put it
3:07
Speaker 5: on their pants, one leg at a time, et cetera.
3:10
Speaker 5: And the answer is the timidity I heard today was
3:13
Speaker 5: just I've never heard that timidity question.
3:17
Speaker 1: QT. Let's get the folder out, get to the right page.
3:20
Speaker 1: So far it's gone very well. We had some discussion
3:22
Speaker 1: of the balance sheet. We're planning to have an in
3:24
Speaker 1: depth discussion in March. At the beginning of that process.
3:27
Speaker 1: We see rates and a balance sheet as independent tools.
3:30
Speaker 1: They're not there yet, and I think that's the frustration
3:31
Speaker 1: with Marcus today. Chairman Power is deeply pragmatic. He's trying
3:34
Speaker 1: to go through this step by step, have a clear
3:37
Speaker 1: sequence of things. The market wants it right now, wants
3:40
Speaker 1: to talk about March rate cuts. Wants to move Bramo
3:43
Speaker 1: and that's not what you heard in today's news conference.
3:45
Speaker 3: Wants to know even what the criteria are. The criteria
3:48
Speaker 3: is when we decide what the criteria will be, and
3:50
Speaker 3: depending on which member I mean, the idea of the
3:52
Speaker 3: data just needs to continue to be good and then
3:55
Speaker 3: how long does it need to be good six seven.
3:57
Speaker 6: Eight months.
3:57
Speaker 3: I don't know. Well, she'll see And that seemed to
3:59
Speaker 3: be sort of this feeling, maybe because each member has
4:02
Speaker 3: a slightly different view as they try to gauge a
4:05
Speaker 3: really uncertain economy.
4:06
Speaker 5: Thank you for joining us on television radio. And what
4:08
Speaker 5: we're going to do is talk to people with historical
4:11
Speaker 5: perspective about this moment as we all stagger into twenty
4:15
Speaker 5: twenty four. William Dudley out of Berkeley. I'm tenured at
4:18
Speaker 5: Goldin Sachs for years, and of course a former New
4:20
Speaker 5: York Federal Reserve President, Bloomberg Economic senior advisor. You know, Bill,
4:26
Speaker 5: I feel like I want to go and talk to
4:28
Speaker 5: Eiken Green or Brad DeLong right now out in the
4:30
Speaker 5: hallways at Berkeley. The timidity I see here, the carefulness.
4:36
Speaker 5: Let's start with the why of the moment. Why are
4:40
Speaker 5: they so turned data dependent and careful here to begin
4:46
Speaker 5: a measured trend of lower rates.
4:48
Speaker 6: I think they're so careful because things are actually going
4:51
Speaker 6: very well. If n Kyle wasn't as strong as it was,
4:55
Speaker 6: they would be much more inclined to cut rates. But
4:58
Speaker 6: since we've seen very strong growth in the fourth quarter,
5:00
Speaker 6: the Fed's aware of the fact that if they started
5:04
Speaker 6: a little bit later, it's probably not.
5:06
Speaker 7: Going to have much consequence for the economic outlook.
5:09
Speaker 6: The fact that financial conditions have eased over the last
5:11
Speaker 6: few months also allows the FED to be a little
5:13
Speaker 6: bit more cautious.
5:14
Speaker 7: So I think it's really the strength of the economy.
5:17
Speaker 7: The easing of financial conditions means the Federal reserves of
5:20
Speaker 7: the view that they can be a little bit more patient.
5:24
Speaker 6: I thought that with very interesting press conference, because up
5:26
Speaker 6: until the points that cheer Paul talked about the March
5:29
Speaker 6: meeting specifically, the market was actually taking it as March
5:32
Speaker 6: was in play, and then he explicitly took it off
5:35
Speaker 6: the table, and the Federal Fund futures contracts went from
5:39
Speaker 6: pricing in more than fifty percent probability of a rate
5:43
Speaker 6: cut in March two significantly less. So I think that
5:47
Speaker 6: was the big surprise at the meeting for me. I
5:49
Speaker 6: thought the other interesting aspect of the meeting was with
5:52
Speaker 6: the discussion about the quantitative the tightening, so it's clearly
5:55
Speaker 6: being put on the table.
5:57
Speaker 7: They talked about it today. They're going to have an
5:58
Speaker 7: in depth staff in March, so I think we.
6:02
Speaker 6: Could expect quantity of tightening deeper and to happen sometimes,
6:05
Speaker 6: you know, probably around the first half of this year.
6:07
Speaker 1: Bill lets unpack some of that. I gets to QT
6:09
Speaker 1: in a moment. I just want to talk about these
6:11
Speaker 1: strategic ambiguity. So in the statement, this is what they said.
6:15
Speaker 1: The Committee does not expect it will be appropriate to
6:17
Speaker 1: reduce the target range until it has grained greater confidence
6:20
Speaker 1: that inflation is moving sustainably towards two percent. So obviously,
6:24
Speaker 1: our former colleague, good friend Jidis Smilek of the New
6:27
Speaker 1: York Times, first question out of the gate wants to
6:29
Speaker 1: know what greater confidence actually means. We want to see
6:31
Speaker 1: more data. We're not looking for better data, just more
6:35
Speaker 1: good data. So Bill darro ask what does it mean.
6:39
Speaker 6: I think what he wants to see is more of
6:41
Speaker 6: the same. I think that's basically what he said. I
6:43
Speaker 6: think they're a little bit of concern that maybe the
6:46
Speaker 6: really good inflation news that we're seeing is a little
6:49
Speaker 6: bit about goods price weakness and that that may ultimately
6:53
Speaker 6: fade away, so that there might be a little bit
6:56
Speaker 6: more work to do on the services side. So I
6:58
Speaker 6: think that's their I mean, if the inflation is continues
7:02
Speaker 6: along the same course for a few more months than
7:04
Speaker 6: the FEDERI serve is certainly going to start to cut rates.
7:07
Speaker 6: They're just not absolutely confident that that's where we're going
7:10
Speaker 6: to be three or four months from now.
7:11
Speaker 3: Bill, do you think that it was a mistake for
7:13
Speaker 3: freed Shair Powell to say that March was not on
7:16
Speaker 3: the table.
7:18
Speaker 7: I don't think it's off completely off the table.
7:20
Speaker 6: All he said was, we don't think I don't think
7:22
Speaker 6: at the current point that will be confident enough in March.
7:25
Speaker 7: But you know, we economic data better inflation is than.
7:29
Speaker 6: He made evident by the time we get to March,
7:31
Speaker 6: and March meeting is still a ways off, so you know,
7:33
Speaker 6: his degree of confidence could change between.
7:35
Speaker 7: Now and then.
7:37
Speaker 5: Bill Dudley, I look at some of the criticisms here
7:39
Speaker 5: that they're on trend of disinflation. Jason Firman up at
7:43
Speaker 5: Harvard has a wonderful blending of annualized vectors and such.
7:48
Speaker 5: Which vector do you use if they're on the vector,
7:52
Speaker 5: when do they start? What's the Dudley vector where you
7:55
Speaker 5: measure our disinflation?
7:58
Speaker 6: Well, I think that I think we're still in a
8:00
Speaker 6: very tricky period because we had lots of good inslation
8:04
Speaker 6: during the pandemic, then we opened up the economy that
8:07
Speaker 6: goods of inflation went away. In fact, we're actually getting
8:10
Speaker 6: goods deflation now. And the cual question is how long
8:13
Speaker 6: will that good goods deflation last? Because if it ends,
8:17
Speaker 6: then inflation pressures could actually start to be more evident.
8:21
Speaker 7: Again, I was saying that as the fact.
8:23
Speaker 6: That services inflation should also come down as wage games
8:27
Speaker 6: become less more modest, and I think the Employment Cost
8:32
Speaker 6: Index report today was a positive reading that wage trends
8:35
Speaker 6: are becoming more consistent with two percent underlying inflation.
8:39
Speaker 1: Bill you mentioned QT, can we just finish that with you.
8:42
Speaker 1: Did you get the sense from the chairman that he
8:44
Speaker 1: wants to end QT before he starts to reduce interest rights,
8:47
Speaker 1: or that we can see those two things play out independently.
8:51
Speaker 7: I think they're completely independent. Ending QT is not about,
8:54
Speaker 7: you know, loosening monetary policy.
8:56
Speaker 6: It's about basically getting the level of reserves and banking
9:00
Speaker 6: system down to a level that's low as low as
9:03
Speaker 6: possible without the reserve level actually affecting interest rates. So
9:08
Speaker 6: this is totally independent of the decision about whether you
9:11
Speaker 6: want to make Montet policy more accommodative.
9:13
Speaker 7: This is based on the bank's demand.
9:15
Speaker 6: For reserves, and the Fed's trying to estimate what that
9:18
Speaker 6: demand is, and they want to make sure that there's
9:20
Speaker 6: enough reserves in the banking system, but not too much.
9:23
Speaker 6: So they want to have a cushion over the banks
9:25
Speaker 6: underlying demand for reserves, and they're going to try to
9:28
Speaker 6: make you know, they're going to do the taper to
9:30
Speaker 6: make sure that they approach approach that place very very carefully.
9:34
Speaker 6: They recall what happened in September twenty nineteen, where we
9:37
Speaker 6: crashed through the level of reserves that banks demanded and
9:40
Speaker 6: we got an upward spike in repro rates and quite
9:43
Speaker 6: a bit of turmoil and the money market, and the
9:45
Speaker 6: FED wants to avoid that this time.
9:46
Speaker 3: Bill, are you surprised that nobody asked about New York
9:49
Speaker 3: Community Bank? And how would you have responded to a
9:51
Speaker 3: question about how that factors into the FED decision making
9:54
Speaker 3: process in the next few months.
9:57
Speaker 7: I think the FED is not that worried about some
9:59
Speaker 7: of the banking issues.
10:01
Speaker 6: Because I think that they're really banked by bank now,
10:05
Speaker 6: and I think this is all happening.
10:06
Speaker 7: In plain sight. This is not like the Great Financial crisis.
10:09
Speaker 6: Where you really couldn't evaluate the situation for individual banks.
10:14
Speaker 7: Right now you can sort of see what's happening to
10:16
Speaker 7: banks and that interest margin.
10:17
Speaker 6: You can see what's happening to the losses on their
10:21
Speaker 6: securities portfolio. You can see what kind of earns pressure
10:24
Speaker 6: they're under. So I don't think the FED views the
10:27
Speaker 6: banking system issue as very important right now. Now that
10:32
Speaker 6: could that change, could something great. And I think the
10:34
Speaker 6: other thing that makes them a little bit more confident
10:36
Speaker 6: about this is long term interest rates.
10:38
Speaker 7: Have come down.
10:39
Speaker 6: We peaked ten year treasure you'll peaked around five percent,
10:42
Speaker 6: now around four percent, and so that pressure on banks
10:45
Speaker 6: that took a lot of interest rate risks, they're still
10:48
Speaker 6: under pressure, but that pressure is less than it was
10:51
Speaker 6: a year.
10:51
Speaker 3: Ago going forward. I am curious about J. Powell and
10:55
Speaker 3: the March discussion. He didn't hug the statement precisely the
10:58
Speaker 3: way that Rich Clarida suggested that maybe he ought to.
11:02
Speaker 6: Do.
11:02
Speaker 3: You think that this is actually a sign of how
11:04
Speaker 3: there is J. Powell the man and J Powell the
11:07
Speaker 3: herder of cats that is the FED Committee. I mean,
11:09
Speaker 3: is how much is that basically what we're seeing.
11:13
Speaker 6: I don't think he really parted from the statement in
11:15
Speaker 6: any meaningful way. I think he just gave a little
11:17
Speaker 6: bit more nuanced to what the Fed, how the FED
11:19
Speaker 6: thinking is evolving. Obviously, the statement is pretty short and
11:24
Speaker 6: pretty concise, and the Fed is very careful about the
11:26
Speaker 6: changes that they make in the statement, and obviously in
11:29
Speaker 6: the press conference you can't be quite the precise.
11:33
Speaker 7: So I thought he tracked the statement quite well.
11:35
Speaker 1: But what you're thinking, June Coup, what's you feel now?
11:38
Speaker 6: I've been thinking May and I don't see any reason
11:41
Speaker 6: to James that.
11:42
Speaker 1: May Bill Dubby, thank you, sir, forming New York Fed President.
11:45
Speaker 4: Take care.
11:45
Speaker 1: We've got an answer. He's thinking, Mike, you got to
11:48
Speaker 1: the answer.
11:48
Speaker 5: You on the answer for mister poul in March too.
11:50
Speaker 7: The market move on March.
11:52
Speaker 1: Let's get to that market, Maye right now? Could he's
11:54
Speaker 1: put him back by one point four percent on the
11:55
Speaker 1: S and P five hundred. The Nastack is lower as well.
11:58
Speaker 1: Tech earnings were let's say, under yesterday after the close.
12:01
Speaker 1: More tech earnings to come tomorrow, Amazon, Meta, Apple still
12:04
Speaker 1: to come Thursday after the close. The Nasdaq is down
12:07
Speaker 1: by one point seven percent. I've missed you small CAFs
12:11
Speaker 1: lower by one point seven percent. Let's turn to the
12:13
Speaker 1: bond market two year tenure thirty year, the tenure year
12:17
Speaker 1: of down four basis points three ninety nine down six
12:20
Speaker 1: on a two year. So the fellow reserve stepped away
12:22
Speaker 1: from this tightening bias Bramo. But ultimately, when it starts
12:26
Speaker 1: to engage the rate cut conversation, just not in the
12:28
Speaker 1: way that this market wanted to see it do it.
12:30
Speaker 1: It wanted more than just Okay, things are going well,
12:34
Speaker 1: we need to see a little bit more. But ultimately
12:36
Speaker 1: the next move might be a cut, and it might
12:37
Speaker 1: be this year, just probably not March. Not likely.
12:39
Speaker 3: Basically, what you're seeing is the market is now pricing
12:42
Speaker 3: in a thirty eight percent chance of a March rate cut,
12:45
Speaker 3: down from almost a sixty percent chance of a rate
12:48
Speaker 3: cut come just before this press conference. The market adjusted
12:51
Speaker 3: will at last we shall see tomorrow shall be a
12:53
Speaker 3: whole news story. It seems like the feathers being somewhat
12:57
Speaker 3: consistent toward that may kind of timeline, which is the
13:00
Speaker 3: reason why I've got ninety one percent chance currently price.
13:02
Speaker 1: What was interesting, and we haven't talked about it yet,
13:04
Speaker 1: it's just how comfortable he would be with decent growth,
13:06
Speaker 1: strong growth. I think it's a change. You go back
13:08
Speaker 1: to the Jackson Hole Symposium of what was it twenty
13:12
Speaker 1: twenty two in August, pain pain, pain, pain, and now
13:16
Speaker 1: we say basically, strength is okay, we something we have
13:18
Speaker 1: to work against.
13:19
Speaker 3: This is basically the FED not necessarily saying victory, but
13:22
Speaker 3: saying we could get victory and we're not going to
13:25
Speaker 3: get in the way of it.
13:26
Speaker 5: Right.
13:26
Speaker 3: I mean, how much is this a sort of acceptance
13:28
Speaker 3: of this concept that disinflation is good, regardless of whether
13:32
Speaker 3: the strength might suggest that, you know, it could be
13:35
Speaker 3: a problem.
13:35
Speaker 5: I'll be quicker. I know you want to get to
13:37
Speaker 5: Mike McHugh was in the press conference to me, the
13:39
Speaker 5: huge overlay here is got fear by monitorist monetary economics
13:45
Speaker 5: people about getting this wrong. Were Willie Pessick and Forbes
13:48
Speaker 5: used to righte now Denberg nailed it. Willie Pessick wrote
13:52
Speaker 5: it on the Bankageapan and I'm sorry. They are scared
13:56
Speaker 5: stiff of getting this wrong.
13:58
Speaker 1: They want to see more day at home. I'm totally
14:00
Speaker 1: with you. You can see they're uncomfortable. Chairman, how ultimately
14:04
Speaker 1: is still concerned that inflation stabilizes above tar Kit for him,
14:09
Speaker 1: that still seems to be a risk.
14:10
Speaker 3: It's a risk for all the people who we speak
14:12
Speaker 3: to as well, especially with that strength. What's the bigger fear, though,
14:15
Speaker 3: and this I think is different. Is it that inflation
14:17
Speaker 3: reaccelerates or is it that they do serious damage to
14:20
Speaker 3: a labor market that seems to be in a good place,
14:23
Speaker 3: And that to me seems definitely more balanced.
14:25
Speaker 1: Mike McKay with us now he was in the news conference,
14:28
Speaker 1: Mike McKay, fantastic work as always, sir. What was your
14:30
Speaker 1: big takeaway Mike from that presser?
14:33
Speaker 8: Well, basically, the Fed has gone to where the market
14:36
Speaker 8: wanted it to be, but they didn't go farther. As
14:38
Speaker 8: you were talking about, they're not giving us a timetable
14:42
Speaker 8: yet but leaving enough ambiguity that you can try to
14:44
Speaker 8: figure it out on your own. Basically, may comes into
14:48
Speaker 8: the equation then, because by that time they'll have three
14:51
Speaker 8: more PCE inflation data releases and they'll have a pretty
14:56
Speaker 8: good idea of whether or not we're going to be
14:59
Speaker 8: able to maintain this in the two percent range inflation level.
15:04
Speaker 8: So I think Powell was just trying to tell people,
15:07
Speaker 8: we've heard you, we see what you see, but we
15:10
Speaker 8: want to make sure that we're not going to be
15:13
Speaker 8: seeing inflation go up again. To what you were just saying,
15:16
Speaker 8: I think they still think inflation is a greater danger.
15:18
Speaker 8: Growth is not a problem at this point, of course.
15:21
Speaker 8: That was my question to him. They're happy with the
15:24
Speaker 8: way the economy is going, they're happy with the way
15:26
Speaker 8: unemployment is going, and they don't seem to think it's
15:29
Speaker 8: going to get any worse. But there's still an issue
15:32
Speaker 8: about will inflation continue to come down?
15:35
Speaker 1: Mike, he were in the room, so you've got a
15:36
Speaker 1: better sense of this than us. I found guarded at
15:39
Speaker 1: times very scripted. At least it talked about that form
15:42
Speaker 1: of FED Vice chair Richard Kntra talked about that as
15:44
Speaker 1: well in anticipation of the news conference. But did you
15:46
Speaker 1: get the sense that March comment was unscripted, that was
15:49
Speaker 1: off the cuff, that was from the chairman directly.
15:52
Speaker 5: No.
15:53
Speaker 8: I think that basically he went in ready to say that,
15:57
Speaker 8: probably didn't want to unless he had to, because they
16:01
Speaker 8: never like to put a time frame on anything. But
16:04
Speaker 8: you'll get just one more PCE report before that time,
16:09
Speaker 8: and that's probably not going to be enough for them.
16:12
Speaker 8: So it was It wasn't that he couldn't say it.
16:15
Speaker 8: It's I think he didn't want to, but was asked
16:18
Speaker 8: directly about it.
16:19
Speaker 5: So did Mike with leguard in the ECB, we parse
16:23
Speaker 5: the hawks, We know who the hawks are. Who are
16:26
Speaker 5: the hawks pushing against Powell's dubbishness? Who are who are
16:31
Speaker 5: the people out there Bush Caffidy? Who are those guys
16:34
Speaker 5: out there that are hawks right now?
16:37
Speaker 8: Well, we know that Mickey Bowman has been a hawk
16:39
Speaker 8: and Lorettamester have been a hawk. But they both have
16:42
Speaker 8: said that they don't necessarily think we're going to need
16:45
Speaker 8: interest rates to rise anymore. So they've at least come
16:48
Speaker 8: to the neutral zone. The question is will they accept
16:52
Speaker 8: the idea of rake cuts, And I suspect that's going to.
16:55
Speaker 4: Depend on the data between.
16:56
Speaker 8: Now and the March meeting, now and the and the
16:59
Speaker 8: May meeting. At some point you have to go with
17:03
Speaker 8: what the data are telling you, even if you were
17:06
Speaker 8: afraid that you were going to have to raise rates earlier.
17:08
Speaker 3: Are you surprised, Mike that no one asked about the
17:10
Speaker 3: New York Community Bank issue and how much they do
17:12
Speaker 3: have confidence the regional banks truly are in a good spot.
17:17
Speaker 8: Well, I think the fact that they took the strength
17:20
Speaker 8: of the banking system part out of the statement was
17:22
Speaker 8: a mere coincidence because the statement would have been drafted
17:25
Speaker 8: yesterday and circulated among them, and of course they didn't
17:29
Speaker 8: know anything about your community Bank at that point. But
17:31
Speaker 8: I think the reason that didn't really come up is
17:34
Speaker 8: because think about what happened to New York Community Bank.
17:37
Speaker 8: They lost money in a quarter, and stock investors jumped
17:42
Speaker 8: on that because they don't like to lose money. This
17:45
Speaker 8: wasn't a question of a bank going out of business
17:47
Speaker 8: like SVB, which New York Community Bank bought their loans,
17:51
Speaker 8: and that's one of the reasons they had problems. So
17:54
Speaker 8: it doesn't suggest that there's any kind of systemic problem
17:57
Speaker 8: in the banking system like we were worried about last March.
18:00
Speaker 1: I might thanks for the update. Great work Mi McKay
18:03
Speaker 1: out there down in Washington, d C. Just coming down
18:06
Speaker 1: down these conference with Sham and Powell. E could he
18:08
Speaker 1: say K in this session? I was down about one
18:09
Speaker 1: point five percent on S and.
18:11
Speaker 5: P got greater confidence that Microsoft hit a yearly high yesterday.
18:16
Speaker 5: You know, the market's off and I really don't know
18:18
Speaker 5: what to think about it. The real yield came back nicely,
18:20
Speaker 5: gyrating off the nominal ten year yields three point nine
18:24
Speaker 5: nine percent. To me and Lista, this goes to your
18:26
Speaker 5: concern over the banking system and other properties in New
18:29
Speaker 5: York City. They're really coming under you know, individual properties
18:32
Speaker 5: coming under pressure. The fact is that ten year yields
18:35
Speaker 5: under four percent. That's a real adjustment here, and it's
18:38
Speaker 5: the uncertainty that's out there, and maybe that's what in
18:41
Speaker 5: the equesibiliting meeting. Maybe that's what they were concerned about
18:45
Speaker 5: the timidity of it.
18:46
Speaker 3: Although to me it seems like he wasn't that concerned
18:48
Speaker 3: about that much. To be completely honest, it's just that
18:51
Speaker 3: he didn't want to get it wrong, and he didn't
18:52
Speaker 3: want to get it wrong on either side, but certainly
18:54
Speaker 3: with the strength also, as you pointed out, the fact
18:57
Speaker 3: that he did indicate that March was off the table
18:59
Speaker 3: despite some of the signs that people were using to
19:02
Speaker 3: justify it was significant for the market and is the
19:05
Speaker 3: reason why we're seeing.
19:06
Speaker 5: The market move on that we talk he manages money
19:08
Speaker 5: joining us now. Jeffrey Rosenberg from Blackrack really really interesting
19:13
Speaker 5: here on whither and forward? How does your view adjust. Jeff,
19:18
Speaker 5: I was thunderstruck by the timidity, the massive almost comedy
19:24
Speaker 5: on the word data. You got to go out and
19:26
Speaker 5: run a portfolio. How do you do that given what
19:28
Speaker 5: we observe today?
19:31
Speaker 9: So, Tom, you're talking about the timidity, and it's in
19:33
Speaker 9: the context where the last two meetings was the opposite
19:36
Speaker 9: from the chairman.
19:37
Speaker 4: There was a lot of confidence.
19:39
Speaker 9: Yeah, I characterize it as a little bit of a
19:41
Speaker 9: victory lap. He leaned into the positivity, he leaned into
19:47
Speaker 9: the good news. And here I think it began with
19:50
Speaker 9: the statement. The inclusion of the of the new language
19:54
Speaker 9: around needing to have greater confidence was the sign that
19:57
Speaker 9: they're going to push back a bit against market expectations,
20:00
Speaker 9: and it carried over into the press conference.
20:04
Speaker 4: Wasn't clear whether that would happen.
20:05
Speaker 9: It clearly did happen, and it's capped off with his
20:09
Speaker 9: headline that is absolutely the headline takeaway, which is the pushback,
20:13
Speaker 9: hard pushback against the march expectations. And I chalk this
20:16
Speaker 9: timidity up, Tom to the concern around financial conditions doing
20:22
Speaker 9: too much easing for them and putting at risk the
20:26
Speaker 9: good story that they're having in terms of inflation getting
20:29
Speaker 9: back down to target and growth holding up and not
20:33
Speaker 9: having to have that big decline that Lisa was mentioning
20:37
Speaker 9: that they were warning of that we thought was.
20:39
Speaker 4: Going to be necessary to get that inflation down.
20:41
Speaker 9: So it's the risk of losing financial conditions and markets
20:45
Speaker 9: are just primed for the big green light to go
20:48
Speaker 9: out and back up the truck, and obviously they're disappointed
20:50
Speaker 9: on that today.
20:51
Speaker 4: I think that's a little bit purposeful and.
20:53
Speaker 5: Jeff Rozenberg Jason Furman up at Harvard Teaching X ten
20:56
Speaker 5: with my tweet of the day. I love his single
20:58
Speaker 5: sentence observation. I feel like I could be confident enough
21:02
Speaker 5: after two more jobs CPI prints, may I suggest that
21:07
Speaker 5: Friday at eight thirty we and the chairman will readjust.
21:12
Speaker 4: Yeah.
21:12
Speaker 9: I mean, look, he wants to delay here, and there
21:16
Speaker 9: was something that he said that I think hasn't been
21:18
Speaker 9: picked up on, which is the decision to begin cutting
21:23
Speaker 9: is of great consequence. And then he also said earlier
21:27
Speaker 9: because of that or because of that concern, there's no
21:30
Speaker 9: need to rush. So waiting for more data and kind
21:34
Speaker 9: of the pushback on what more data do you need
21:37
Speaker 9: isn't really the story here. I don't think they need
21:40
Speaker 9: more data He kind of said that we have confidence.
21:42
Speaker 4: We just want even more confidence.
21:44
Speaker 9: I really think it's they don't want to rush into it.
21:47
Speaker 9: Jonathan Vero, you asked me after the last payrolls, you
21:50
Speaker 9: know what is my expectation? I said, you know, June,
21:53
Speaker 9: mainly because I don't see the rush here. And I
21:55
Speaker 9: think that's the stories. It may is a June, it's
21:57
Speaker 9: not March. It's pushing back. Is they don't want to
22:00
Speaker 9: rush into a cutting cycle.
22:02
Speaker 3: You said something really interesting there, Jeff, This idea of
22:05
Speaker 3: financial conditions being a concern that they see the sort
22:08
Speaker 3: of golden pathway and they want to get there so
22:11
Speaker 3: bad that they don't want to disrupt it by giving
22:13
Speaker 3: any more fuel to this market. Do you get that
22:16
Speaker 3: sense just in general that if things sort of say
22:19
Speaker 3: subdued for a bit longer, that'll actually make it easier
22:22
Speaker 3: for the FED to cut sooner.
22:25
Speaker 9: Well, the thing that will make it easier for the
22:27
Speaker 9: Fed to cut sooner, and I think Bill Dudley highlighted
22:30
Speaker 9: this is is that the problem is that there's a
22:32
Speaker 9: little bit too much good news on the on the
22:35
Speaker 9: economic growth side and the labor market side. If they
22:38
Speaker 9: had some weakening that would make it much easier to
22:42
Speaker 9: say now we need to cut. It's hard to say
22:44
Speaker 9: you need to cut, and we'll talk about this on
22:46
Speaker 9: Friday morning. You know, the expectations around you know, two
22:49
Speaker 9: sixty five to eighty that's a pretty gangbuster payroll print.
22:55
Speaker 9: You know, hardly the kind of stuff that says this
22:57
Speaker 9: FED is too tight. And you saw it in Steve
23:00
Speaker 9: Leisman's question. And I think it will emergenly become.
23:05
Speaker 4: A greater focus.
23:08
Speaker 9: Which is which is on the growth side? Like where
23:10
Speaker 9: is the restrictiveness of this policy that you're so confident
23:14
Speaker 9: every time you say policies is restrictive.
23:17
Speaker 4: Is it really is as restrictive as we think?
23:19
Speaker 5: Steve Leison Olways has some smart questions. John Ferrell, let's
23:21
Speaker 5: go to the statistics for Friday. I got one hundred
23:24
Speaker 5: and eighty five thousand on survey non firm payrolls. I
23:27
Speaker 5: got an unemployment rate of three point eight percent. That
23:30
Speaker 5: may have a little bit to do with there, Timid.
23:33
Speaker 1: Yeah, that's ink. That speaks to their nervousness. So Jeff,
23:35
Speaker 1: let's finish on this data. Still looks okay. Payrolls might
23:38
Speaker 1: change that on Friday for you right now in this market,
23:41
Speaker 1: putting money to work. What are you about for counting for.
23:44
Speaker 9: You know, I think there's a lot of hemming and
23:46
Speaker 9: haweing today tomorrow around the timing of when do they go.
23:50
Speaker 9: But I think if you take a step back from
23:52
Speaker 9: this inside baseball story, the broader story is the FED
23:56
Speaker 9: has won the battle on inflation. Not totally certain you
24:00
Speaker 9: know where we settle in there, but certainly they can
24:02
Speaker 9: begin a cutting cycle. And the growth side is much
24:05
Speaker 9: more positive than what we had thought, particularly when we
24:09
Speaker 9: thought that interest rate sensitivity was going to be greater
24:12
Speaker 9: and recession much more likely. So I think this is
24:14
Speaker 9: a backdrop that is unchanged for taking on more risk
24:18
Speaker 9: in portfolios. It's a better outlook the credit markets, you know,
24:22
Speaker 9: despite some of the news today in terms of the
24:24
Speaker 9: banking sector that's particular to commercial real estate, and that is.
24:28
Speaker 4: Something I think we have to keep an eye on.
24:30
Speaker 9: But you look at the corporate side, you look at
24:32
Speaker 9: the consumer side, it's very strong, and the credit markets
24:35
Speaker 9: here I think are strong. There's not a huge price
24:36
Speaker 9: appreciation opportunity, but I think the yield opportunity that you
24:40
Speaker 9: can capture there without the risk of the downside of inflation.
24:43
Speaker 4: Sorry of recession is still the story here.
24:46
Speaker 1: Hey Jeff, thank you sir. I know we're going to
24:48
Speaker 1: do this again late this week, so we see a
24:49
Speaker 1: Friday after payrolls Jeff Roisenberg there at black Rock, thank you, buddy.
24:53
Speaker 1: Equity's in a session. Loves were down one point five
24:55
Speaker 1: percent on ESMP, with Dan Hart on the NATSNAK as
24:58
Speaker 1: well t can the bond market. The move fights just
25:00
Speaker 1: a little bit yield to lower my eight basis points.
25:02
Speaker 1: At the front end of the caf.
25:03
Speaker 5: Use for the tech juggernaut, you mentioned that John got Amazon,
25:06
Speaker 5: I believe in Apple tomorrow, maybe Facebook, And the answer is, uh,
25:10
Speaker 5: you know, we're gonna We're gonna get some tech earning,
25:13
Speaker 5: some tech joy. But Lisa, I'm sorry to Jason Furman's
25:16
Speaker 5: comment here, the jobs report on Friday has a new importance.
25:19
Speaker 3: So maybe if it gets strong enough, then everybody will
25:21
Speaker 3: go back to maybe you know, going to June. And if.
25:26
Speaker 1: I confuse him with Jason Furman as well, yeah, I
25:29
Speaker 1: did see Jeff rosenback.
25:31
Speaker 5: No, I'm talking about Jason jobs matter.
25:34
Speaker 4: I confused.
25:36
Speaker 1: They look the same, look the same.
25:40
Speaker 5: I'm going to suggest John support it is now really important.
25:44
Speaker 3: Not all economists like the same, John, we should do
25:46
Speaker 3: this again.
25:49
Speaker 1: How much you have to wake up earlier, talk to
25:52
Speaker 1: people