Bloomberg Audio Studios, podcasts, radio news.

Bloomberg Audio Studios, podcasts, radio news.

With your fet decision, He's Mike mckag two dots, no rate move.

With your fet decision, He's Mike mckag two dots, no rate move.

The median of the nineteen Fed officials projection for rate cuts this year moves to two from three in March. Policymakers are quite divided, however, eight members seat just two cuts this year, seven set only one for vote no change. They now have four penciled in for twenty twenty five, although the range is so wide it's almost meaningless. The neutral rate also moves up the media, now two point eight percent from two point six percent, although they don't get there until after twenty twenty six. Nine members see neutral as three percent or higher, one as high as three point seven five percent. The fedce target range stays in the range of five and a quarter to five and a half percent. No change in the two point one percent GDP projection for twenty twenty four, two percent for next year. No change in the four percent unemployment forecast for this year, though twenty twenty six moves up a tick from March to four point two percent. It's PCEE inflation where we see the biggest change in the forecasts headline of two point six this year, up from two point four percent in the March. Projections next year to three from two two. Corps PCEE is forecast at two point eight percent this year, up from two point six percent next year, also two point three from two point two. Inflation was the only significant change in the statement following today's better than expected CPI. The statement now says in recent months there has been modest further progress toward the committee's two percent inflation target.

The median of the nineteen Fed officials projection for rate cuts this year moves to two from three in March. Policymakers are quite divided, however, eight members seat just two cuts this year, seven set only one for vote no change. They now have four penciled in for twenty twenty five, although the range is so wide it's almost meaningless. The neutral rate also moves up the media, now two point eight percent from two point six percent, although they don't get there until after twenty twenty six. Nine members see neutral as three percent or higher, one as high as three point seven five percent. The fedce target range stays in the range of five and a quarter to five and a half percent. No change in the two point one percent GDP projection for twenty twenty four, two percent for next year. No change in the four percent unemployment forecast for this year, though twenty twenty six moves up a tick from March to four point two percent. It's PCEE inflation where we see the biggest change in the forecasts headline of two point six this year, up from two point four percent in the March. Projections next year to three from two two. Corps PCEE is forecast at two point eight percent this year, up from two point six percent next year, also two point three from two point two. Inflation was the only significant change in the statement following today's better than expected CPI. The statement now says in recent months there has been modest further progress toward the committee's two percent inflation target.

The decision was unanimous. Mi McKay.

The decision was unanimous. Mi McKay.

Thank you, sir. If you were looking for five works in financial markets, you missed it all. It happened about six hours ago at eight thirty Eastern time, and the equity market. Some of these, most stick on the S and P five hundreds, still positive by about zero point nine percent on the Nasna Cup by Malvin one four percentage point to Yale to Lisa, just off the loads of the session, but still down twelve or thirteen basis points to four seventy on a two year.

Thank you, sir. If you were looking for five works in financial markets, you missed it all. It happened about six hours ago at eight thirty Eastern time, and the equity market. Some of these, most stick on the S and P five hundreds, still positive by about zero point nine percent on the Nasna Cup by Malvin one four percentage point to Yale to Lisa, just off the loads of the session, but still down twelve or thirteen basis points to four seventy on a two year.

There's nothing that would really shake up what we saw earlier. It is interesting, though, that they did increase their expectation for crow PCE inflation to two point eight percent versus two point six percent, and it raises a question about the idea of are they tacitly allowing inflation to go be two point something to Muhammadalarian's point, rather than exactly two percent as they allow this to happen even with two potential rate cuts baked in TK what's your takeaway?

There's nothing that would really shake up what we saw earlier. It is interesting, though, that they did increase their expectation for crow PCE inflation to two point eight percent versus two point six percent, and it raises a question about the idea of are they tacitly allowing inflation to go be two point something to Muhammadalarian's point, rather than exactly two percent as they allow this to happen even with two potential rate cuts baked in TK what's your takeaway?

My takeaway here is at eight thirty was really really important, and it moves us right onto all the other economic data, and I go back to economic growth and there is a surprise this year that we get more buoyant economic growth than a lot of the gloomen grews talking about.

My takeaway here is at eight thirty was really really important, and it moves us right onto all the other economic data, and I go back to economic growth and there is a surprise this year that we get more buoyant economic growth than a lot of the gloomen grews talking about.

Want to get back over to my MAAC might just briefly just work through that again for us, Explain to us where that median dot is. We were looking for three cuts in the median dot last time around. Where's that median doll for twenty four?

Want to get back over to my MAAC might just briefly just work through that again for us, Explain to us where that median dot is. We were looking for three cuts in the median dot last time around. Where's that median doll for twenty four?

Now the median dot is at two cuts for twenty twenty four for twenty twenty five, but the range has narrowed considerably but still broad because there are at this point eight members seeing two cuts this year, so that makes it the median seven saw only one and four voted for no change, so they seem quite divided, which would suggest that at this point there is no consensus on the committee about what's going to happen the rest of this year.

Now the median dot is at two cuts for twenty twenty four for twenty twenty five, but the range has narrowed considerably but still broad because there are at this point eight members seeing two cuts this year, so that makes it the median seven saw only one and four voted for no change, so they seem quite divided, which would suggest that at this point there is no consensus on the committee about what's going to happen the rest of this year.

Mike McKay, Thank you, sir. Mike mcke will be in that news conference in about twenty seven minutes time when it kicks off with Sham and poal from any any questions for Cham and Powell in this press are based on that.

Mike McKay, Thank you, sir. Mike mcke will be in that news conference in about twenty seven minutes time when it kicks off with Sham and poal from any any questions for Cham and Powell in this press are based on that.

Uh yeah, I do.

Uh yeah, I do.

Number one, how long will you tolerate inflation above two percent? How quickly is an okay pace to move to get inflation down? And the second thing I'm still thinking about this. One participant had a new neutral rate proposal of three point seventy five percent.

Number one, how long will you tolerate inflation above two percent? How quickly is an okay pace to move to get inflation down? And the second thing I'm still thinking about this. One participant had a new neutral rate proposal of three point seventy five percent.

That's pretty bold.

That's pretty bold.

I mean it's pretty much in line with my marketsar for three and a half percent. Nonetheless, that resets a lot of questions about market valuations that maybe on the margins, could really change investment pieces.

I mean it's pretty much in line with my marketsar for three and a half percent. Nonetheless, that resets a lot of questions about market valuations that maybe on the margins, could really change investment pieces.

Joining us now to discuss is Mohammad al Aaron of Queen's College, Cambridge, Bob Michael, JP Morgan still around the table with us. Mohammed, I want to come to you first if you want these forecasts based on what we learned early this morning at eight thirty Eastern time.

Joining us now to discuss is Mohammad al Aaron of Queen's College, Cambridge, Bob Michael, JP Morgan still around the table with us. Mohammed, I want to come to you first if you want these forecasts based on what we learned early this morning at eight thirty Eastern time.

So I wonder John whether those forecasts fully reflect this morning or whether were they were finalized before this morning. I was surprised to hear that four voted for no cuts, and I was surprised to see the inflation numbers go up both for the PC, both at headline and core.

So I wonder John whether those forecasts fully reflect this morning or whether were they were finalized before this morning. I was surprised to hear that four voted for no cuts, and I was surprised to see the inflation numbers go up both for the PC, both at headline and core.

So only the one question I would have.

So only the one question I would have.

For Chairman Powell is do those numbers and the expectations that four people had of Norway shots reflect this morning's inflation data or not.

For Chairman Powell is do those numbers and the expectations that four people had of Norway shots reflect this morning's inflation data or not.

Mohammed timekeen good morning and a good afternoon. I should say good late afternoon and evening to you somebody today, echoed Peter or Zeg A long time ago of LS at a school. Mohammadself west of Cambridge, and Peter Orzeg talked about glide pass.

Mohammed timekeen good morning and a good afternoon. I should say good late afternoon and evening to you somebody today, echoed Peter or Zeg A long time ago of LS at a school. Mohammadself west of Cambridge, and Peter Orzeg talked about glide pass.

Is our great underestimation.

Is our great underestimation.

That the glide pass to get out of the pandemic with all this monetary policy is a much longer timeframe than we think. We're modeling FED meeting, the FED meeting, the silliness of September and December, where we should be modeling twenty twenty seven.

That the glide pass to get out of the pandemic with all this monetary policy is a much longer timeframe than we think. We're modeling FED meeting, the FED meeting, the silliness of September and December, where we should be modeling twenty twenty seven.

We shot Tom and I've been urging to combine data dependency with more of a forward looking view of the economy. But that's not where the FED is, and as a result, that's not where the markets are. The markets are reacting to every single data point in the last month, just the last month, teny yields went up thirty basis points, came back down forty basis points, went back up twenty basis points, and came back down forty basis points. And what you realize is that there's no anchor. There's no longer term anchor to markets, and there's no longer term anchor to policies. We should be talking about the big secular changes and how that's going to impact the next twelve months, but that's not where the FED is, and therefore that's not where the markets are right now.

We shot Tom and I've been urging to combine data dependency with more of a forward looking view of the economy. But that's not where the FED is, and as a result, that's not where the markets are. The markets are reacting to every single data point in the last month, just the last month, teny yields went up thirty basis points, came back down forty basis points, went back up twenty basis points, and came back down forty basis points. And what you realize is that there's no anchor. There's no longer term anchor to markets, and there's no longer term anchor to policies. We should be talking about the big secular changes and how that's going to impact the next twelve months, but that's not where the FED is, and therefore that's not where the markets are right now.

I wonder how significant it is to Muhammad that we did see at least one participant materially mark up their long term neutral rate. As people try to understand what this means longer term.

I wonder how significant it is to Muhammad that we did see at least one participant materially mark up their long term neutral rate. As people try to understand what this means longer term.

For what a FED rate cutting path could look.

For what a FED rate cutting path could look.

Like, it's about time.

Like, it's about time.

I mean, you know, there is a very active discussion of what's happening in the structure of the economy and why it is that the neutral weight is well above three, nearer to four. But the FED is moving very slowly on this, and FED chair Pale has refused to engage in discussions, either saying I don't care about it or I don't have a view about it. So yeah, it's about time they're going to have to really think about this. But again, Lisa, that is a forward looking parameter, and this is a FED that focuses excessively on the past and doesn't want to signal much about what's ahead.

I mean, you know, there is a very active discussion of what's happening in the structure of the economy and why it is that the neutral weight is well above three, nearer to four. But the FED is moving very slowly on this, and FED chair Pale has refused to engage in discussions, either saying I don't care about it or I don't have a view about it. So yeah, it's about time they're going to have to really think about this. But again, Lisa, that is a forward looking parameter, and this is a FED that focuses excessively on the past and doesn't want to signal much about what's ahead.

So if you are just joining us, welcome to the program. Equally, is still firmer by zero point nine percent on the S and P five hundred, we were hired by more than one four percentage point. Just ondoing some of the moves in the bond market. On a two year yield, yields are lower still by twelve basis points. They were lower by a little bit more than that earlier on. There was a lot of interest in the medium dot for twenty twenty four. Just want to clarify something that Mike was saying, they're now signaling they expect to cut rates only once this year, compared to the reduction of three which was kind of signaled back in March Bromo. So that's the change we were looking for. Would we come down for two, Well, it's a one. It looks like we've come down to one. But twenty twenty five kind of makes up for some of that in some way.

So if you are just joining us, welcome to the program. Equally, is still firmer by zero point nine percent on the S and P five hundred, we were hired by more than one four percentage point. Just ondoing some of the moves in the bond market. On a two year yield, yields are lower still by twelve basis points. They were lower by a little bit more than that earlier on. There was a lot of interest in the medium dot for twenty twenty four. Just want to clarify something that Mike was saying, they're now signaling they expect to cut rates only once this year, compared to the reduction of three which was kind of signaled back in March Bromo. So that's the change we were looking for. Would we come down for two, Well, it's a one. It looks like we've come down to one. But twenty twenty five kind of makes up for some of that in some way.

Which is what some people were saying, is that you just basically push it out the following year, which is why it might not have been a massive deal. There was a big question before this whether or not it would matter to markets on the margins. Maybe you take back some of the gains in certain bonds right now, nonetheless not.

Which is what some people were saying, is that you just basically push it out the following year, which is why it might not have been a massive deal. There was a big question before this whether or not it would matter to markets on the margins. Maybe you take back some of the gains in certain bonds right now, nonetheless not.

A huge shift when you look at the overall cutting cycle.

A huge shift when you look at the overall cutting cycle.

Well, Michael, I've got the ten year yield just touching two standard deviation move it's not a big deal. Four point two eight percent and gyrating around. What level of ten year yield do you need to really signal, to use Bullet's word, a new regime.

Well, Michael, I've got the ten year yield just touching two standard deviation move it's not a big deal. Four point two eight percent and gyrating around. What level of ten year yield do you need to really signal, to use Bullet's word, a new regime.

It's not so much the ten year yield as the front end of the curve. I think the front end of the curve, you've got to see the Fed start cutting rates and then the front end start coming down towards four percent. I think that will pull the ten year down as well a little bit, but there's an awful lot into ten year part of the year.

It's not so much the ten year yield as the front end of the curve. I think the front end of the curve, you've got to see the Fed start cutting rates and then the front end start coming down towards four percent. I think that will pull the ten year down as well a little bit, but there's an awful lot into ten year part of the year.

It's an unfair question.

It's an unfair question.

I'm going to ask you to speak for Michael Ferolian Kasman and the other economists at JP Morgan. Do they do harm to the American economy by being expost and delaying? What would your economists say?

I'm going to ask you to speak for Michael Ferolian Kasman and the other economists at JP Morgan. Do they do harm to the American economy by being expost and delaying? What would your economists say?

They do no harm to anyone? That I'm pretty sure of. Look, I think when you look at market movements, you have to understand that there are different constituencies that are involved. We talk to a lot of very large plans that are waiting for the Yeald curve to disinvert because based on their investment analytics, it doesn't make sense for them to come out of cash into the longer end of the curve. There are other buyers out there that are looking to part cash into safe dollar assets. So they're big dollar buyers. They want to own the dollar, and treasuries are the largest, most liquid way to do that.

They do no harm to anyone? That I'm pretty sure of. Look, I think when you look at market movements, you have to understand that there are different constituencies that are involved. We talk to a lot of very large plans that are waiting for the Yeald curve to disinvert because based on their investment analytics, it doesn't make sense for them to come out of cash into the longer end of the curve. There are other buyers out there that are looking to part cash into safe dollar assets. So they're big dollar buyers. They want to own the dollar, and treasuries are the largest, most liquid way to do that.

I have to say, I'm right now, I'm parsing through the statement and all the details, and it's a confusing one, so let's just go over it.

I have to say, I'm right now, I'm parsing through the statement and all the details, and it's a confusing one, so let's just go over it.

Four FED officials see no rate cuts this year.

Four FED officials see no rate cuts this year.

That is up from two officials in the March production, so that is a more hawkish tilt. Seven C one cut, well, eight C two cuts. Honestly, we're looking at right now a narrow majority seeing no more than one cut this year is a base case this according to the statement. I'm looking at this and I'm wondering, John, all the people who said this would be some kind of massive shift.

That is up from two officials in the March production, so that is a more hawkish tilt. Seven C one cut, well, eight C two cuts. Honestly, we're looking at right now a narrow majority seeing no more than one cut this year is a base case this according to the statement. I'm looking at this and I'm wondering, John, all the people who said this would be some kind of massive shift.

It isn't being taken.

It isn't being taken.

That way by the market as people pass through the longer term expectations for what the Fed hopes to accomplish and where the balance of risk is.

That way by the market as people pass through the longer term expectations for what the Fed hopes to accomplish and where the balance of risk is.

Because we had a soothing number eight thirty Eastern time, I think that's kind of the takeaway, Is that, right, Boff?

Because we had a soothing number eight thirty Eastern time, I think that's kind of the takeaway, Is that, right, Boff?

Yeah, I think so. It's what I started with. This is what you look for in the numbers. If there are a lot of people clustered around one dot, then they don't change their projections after the number they've submitted them. They let them go. The fact that there were four with no change, seven withth one dot, and only eight with two dots two rate cuts tells me that they submit them, they don't do anything. The statement's completely different. This statement talks about modest progress, continue to continues to be made on inflation.

Yeah, I think so. It's what I started with. This is what you look for in the numbers. If there are a lot of people clustered around one dot, then they don't change their projections after the number they've submitted them. They let them go. The fact that there were four with no change, seven withth one dot, and only eight with two dots two rate cuts tells me that they submit them, they don't do anything. The statement's completely different. This statement talks about modest progress, continue to continues to be made on inflation.

Let's get Mi McKay back into the conversation before Mike goes. Since that news conference, Mike, just to clarify some of the comments you had earlier.

Let's get Mi McKay back into the conversation before Mike goes. Since that news conference, Mike, just to clarify some of the comments you had earlier.

Your thoughts, well, I misspoke.

Your thoughts, well, I misspoke.

One cut is themedian dot this year for this year, but it is, as you say, come somewhat confusing because of the way they do it. But looking out over the course of the year, the question is when do they do it because their PCE projection is basically for the year where PCE is now, So that's going to be a question for j Powell in his news conference.

One cut is themedian dot this year for this year, but it is, as you say, come somewhat confusing because of the way they do it. But looking out over the course of the year, the question is when do they do it because their PCE projection is basically for the year where PCE is now, So that's going to be a question for j Powell in his news conference.

Mike, you get into the pressor thanks for your time, sir, happens to all of us, looking forward to your conference. In that news conference with Chairman Powell. A little bit later, Don Swunk is with us from KPMG. I want to bring her into the conversation. Mohammed's still with us, Bob, Michael as well. Dan, You've had about fifty minutes, ten minutes soside to go out of these numbers. What jumps out for you, Well.

Mike, you get into the pressor thanks for your time, sir, happens to all of us, looking forward to your conference. In that news conference with Chairman Powell. A little bit later, Don Swunk is with us from KPMG. I want to bring her into the conversation. Mohammed's still with us, Bob, Michael as well. Dan, You've had about fifty minutes, ten minutes soside to go out of these numbers. What jumps out for you, Well.

Certainly the upward rise in inflation. I was surprised at I expected them to mark down inflation a little bit so that is one that I think Mohammad also flagged. But I think what's important is we know that they've delayed the putting marking down of their dots on the dot plot, and that has become more of an iterative process to reflect more of a consensus of what they do talk about at the meeting. So I'm not sure that there's the dissonance there that we'd like to some would like to see in those numbers between today's data.

Certainly the upward rise in inflation. I was surprised at I expected them to mark down inflation a little bit so that is one that I think Mohammad also flagged. But I think what's important is we know that they've delayed the putting marking down of their dots on the dot plot, and that has become more of an iterative process to reflect more of a consensus of what they do talk about at the meeting. So I'm not sure that there's the dissonance there that we'd like to some would like to see in those numbers between today's data.

And those actual dots.

And those actual dots.

I think what it probably did was took out of play some people who might have had hikes in their interest rate scenario for twenty twenty four that then moved them to the zero portion those four people who voted for no change in rates. But I think that's very important is that the FED has also been very careful not to declare victory, as Julia said at the beginning at the end of the last show, and I think that's really important. They don't go out and say mission accomplished. They are very deliberative right now in terms of not getting too far ahead of themselves until the data comes to them.

I think what it probably did was took out of play some people who might have had hikes in their interest rate scenario for twenty twenty four that then moved them to the zero portion those four people who voted for no change in rates. But I think that's very important is that the FED has also been very careful not to declare victory, as Julia said at the beginning at the end of the last show, and I think that's really important. They don't go out and say mission accomplished. They are very deliberative right now in terms of not getting too far ahead of themselves until the data comes to them.

Now.

Now.

I disagree that that's sort of neutral and doesn't cause any harm data dependence. The data are lagged, and so by the time the data comes to you, even if you're willing to settle in to a higher rate, ultimately it's still lagged, and it could be after the fact. And I think that's what you see in terms of the nervousness with j.

I disagree that that's sort of neutral and doesn't cause any harm data dependence. The data are lagged, and so by the time the data comes to you, even if you're willing to settle in to a higher rate, ultimately it's still lagged, and it could be after the fact. And I think that's what you see in terms of the nervousness with j.

Powell, because he worries much.

Powell, because he worries much.

More than some of his colleagues about overtightening.

More than some of his colleagues about overtightening.

Dan swank I look at where we are and what the key thing is is, Bob Michael said, is we're beyond the first quarter of this year, the lethargy, the slow down, maybe some of the fear of the first quarter. What does your take on the state of the American economy is they stagger to September and December.

Dan swank I look at where we are and what the key thing is is, Bob Michael said, is we're beyond the first quarter of this year, the lethargy, the slow down, maybe some of the fear of the first quarter. What does your take on the state of the American economy is they stagger to September and December.

Well, we're still in an economy that's generating a lot of jobs. You know, the household survey and the establishment survey aren't quite syncd up. They haven't been synced up for a long time, in part because we're undercounting the number of immigrants in the country and that's not fully showing up in the.

Well, we're still in an economy that's generating a lot of jobs. You know, the household survey and the establishment survey aren't quite syncd up. They haven't been synced up for a long time, in part because we're undercounting the number of immigrants in the country and that's not fully showing up in the.

Household survey as well.

Household survey as well.

But we do know that we continue to generate jobs, we continue to generate paychecks, and if the last month's report is to be believed, and we have to be careful on that that we actually saw on acceleration in wages, that's something to sort of, I think, take with a grain of salt. But at the end of the day, this is an economy that for the moment is still hanging in there, although slowing from what was a stunning pace in twenty twenty three.

But we do know that we continue to generate jobs, we continue to generate paychecks, and if the last month's report is to be believed, and we have to be careful on that that we actually saw on acceleration in wages, that's something to sort of, I think, take with a grain of salt. But at the end of the day, this is an economy that for the moment is still hanging in there, although slowing from what was a stunning pace in twenty twenty three.

Mohammed, I'd love to bring you back in here. I'm just going through all the different statements and this is a mess. I mean, in terms of all the different views. This is not a consensus that you could see that was easily reached.

Mohammed, I'd love to bring you back in here. I'm just going through all the different statements and this is a mess. I mean, in terms of all the different views. This is not a consensus that you could see that was easily reached.

Maybe there it is for right now, but later.

Maybe there it is for right now, but later.

In this year.

In this year.

What the balance of risks here really is all over the map when it comes to the different Fed officials. Do you think that there is too much hawkish talk right now and too much hawkish projections at a time when it seems like the Fed is saying we still haven't done enough. We want to get to two percent a little bit sooner, even as we acknowledge this is going to.

What the balance of risks here really is all over the map when it comes to the different Fed officials. Do you think that there is too much hawkish talk right now and too much hawkish projections at a time when it seems like the Fed is saying we still haven't done enough. We want to get to two percent a little bit sooner, even as we acknowledge this is going to.

Be a battle.

Be a battle.

Yeah, I think if you were to take the SEP and the statement on face fully, on face value, this would be an overly hawkish policy.

Yeah, I think if you were to take the SEP and the statement on face fully, on face value, this would be an overly hawkish policy.

Stand for this economy.

Stand for this economy.

Among the other things, the fact that we are now at one cut means that given that the FED will not want to stop go stop go cycle, that means that cut comes late in the year, very late in the year. And I agree with Diane, it does matter when you start the cutting cycle. It really does matter. It matters for small businesses, it matters for low income households, and it matters for the economy. So if you were to take this at face value, then this the market would be selling off right now.

Among the other things, the fact that we are now at one cut means that given that the FED will not want to stop go stop go cycle, that means that cut comes late in the year, very late in the year. And I agree with Diane, it does matter when you start the cutting cycle. It really does matter. It matters for small businesses, it matters for low income households, and it matters for the economy. So if you were to take this at face value, then this the market would be selling off right now.

But it's not for good reason.

But it's not for good reason.

And that's what I said earlier and Bob mentioned it as well, is I don't think this fully reflects the latest set of data. And given that this is data the dependent FED. If this had if the data had happened yesterday or the day before, the S and P would look very different than it is today. And that's why the press conference is going to be so critical. And that's why Chap Pak can I'll do what Bob wanted him to do half an hour ago, because he's really going to have to explain things now.

And that's what I said earlier and Bob mentioned it as well, is I don't think this fully reflects the latest set of data. And given that this is data the dependent FED. If this had if the data had happened yesterday or the day before, the S and P would look very different than it is today. And that's why the press conference is going to be so critical. And that's why Chap Pak can I'll do what Bob wanted him to do half an hour ago, because he's really going to have to explain things now.

There's a mammad based on this, based on the guardnance we've got in our hands. At the moment, it sounds like December. Are you telling me, by the time this news conference had finishes, it will sound like September. I suspect so, John, Bob, you agree with that, don't you?

There's a mammad based on this, based on the guardnance we've got in our hands. At the moment, it sounds like December. Are you telling me, by the time this news conference had finishes, it will sound like September. I suspect so, John, Bob, you agree with that, don't you?

Yeah, I completely agree with that. And I think Diane and Muhammad point out a very important thing, which are the long and variable lags are real when we look at lower and middle income households, when we look at small business is they're struggling with the high cost of everything. They're struggling with the much higher cost of financing those higher prices, and you're seeing it in delinquencies. You're seeing it in charge offs and write downs and losses.

Yeah, I completely agree with that. And I think Diane and Muhammad point out a very important thing, which are the long and variable lags are real when we look at lower and middle income households, when we look at small business is they're struggling with the high cost of everything. They're struggling with the much higher cost of financing those higher prices, and you're seeing it in delinquencies. You're seeing it in charge offs and write downs and losses.

Right now, I'm looking at some of the commentary, some people saying that the reason why there was a hawkish tilt was because of PTSD from the first quarter. Diane, I'd love to think your take on this, you think, and not to be all conspiracy theorists, but do you think that any FED officials thought to themselves, you know, we should probably be hawkish just to offset the inevitably dubvish message that we're going to get from FED chair Powell later today and we can frankly offset that later in this year if the data comes in such.

Right now, I'm looking at some of the commentary, some people saying that the reason why there was a hawkish tilt was because of PTSD from the first quarter. Diane, I'd love to think your take on this, you think, and not to be all conspiracy theorists, but do you think that any FED officials thought to themselves, you know, we should probably be hawkish just to offset the inevitably dubvish message that we're going to get from FED chair Powell later today and we can frankly offset that later in this year if the data comes in such.

Well, I know, I don't think that's the case, just because I just don't think they think that far ahead on this, and I think that's important.

Well, I know, I don't think that's the case, just because I just don't think they think that far ahead on this, and I think that's important.

I do think that part of what we're seeing here is.

I do think that part of what we're seeing here is.

Yes, they did go in to this meeting with a hawkish tilt and then in the data surprise, but we know that, you know, Chair Paul has really changed the dynamics of the SEP and I'm just surprised that given the timing of when they write this down, and you know, the FED had this data. A lot of the FED had this data last night, so they've been looking over it, you know, and came in strong with how they're going to talk about it in the morning. And I think they still have members of the board itself that would have gotten the data that would have said, you know, hey, we're still on the sidelines here or one cut and that's it. So I think that's an important way to be thinking about where they're at about what they think they need to be convinced on inflation coming down, not to get to two percent, to cut before they get there, but how much they need to be convinced.

Yes, they did go in to this meeting with a hawkish tilt and then in the data surprise, but we know that, you know, Chair Paul has really changed the dynamics of the SEP and I'm just surprised that given the timing of when they write this down, and you know, the FED had this data. A lot of the FED had this data last night, so they've been looking over it, you know, and came in strong with how they're going to talk about it in the morning. And I think they still have members of the board itself that would have gotten the data that would have said, you know, hey, we're still on the sidelines here or one cut and that's it. So I think that's an important way to be thinking about where they're at about what they think they need to be convinced on inflation coming down, not to get to two percent, to cut before they get there, but how much they need to be convinced.

That's a lot, and I think they've set.

That's a lot, and I think they've set.

That bar pretty high, and it's because they have been headfaked in the past. That doesn't mean we couldn't see some big improvement and get to a September cut. But I think we need a lot of improvement from here for the FED to feel convinced to do a September cut.

That bar pretty high, and it's because they have been headfaked in the past. That doesn't mean we couldn't see some big improvement and get to a September cut. But I think we need a lot of improvement from here for the FED to feel convinced to do a September cut.

Suddenly, this news conference in twelve minutes got a lot more interesting. Dan Swank of KPMG Dan, thank you as always if you are just tuning in and you miss the FED decision took place about eighteen minutes ago. Rates unchanged as expected. Be focused on the median dot. Basically, all the FED officials get together, they plot where they think rates should be will be for twenty four to twenty five and beyond. You take the median dot and a lot of people on Wall Street see that as a signal of how many times they get a cut in any given year. That median dot was at three cuts for this year, it's come all the way down to one. Worth noting though, that they now see four cuts in twenty twenty five, more than the three that they previously outlined. So they've pushed some of that into next year. But the range of views, I think the median marks are very, very divide. FED and Lisa did a fantastic job with that a little bit earlier, really explaining at least so that four policymakers see no cuts this year, seven anticipate just one reduction, eight are looking for two. That's a federal reserve that's all over the place, and that really.

Suddenly, this news conference in twelve minutes got a lot more interesting. Dan Swank of KPMG Dan, thank you as always if you are just tuning in and you miss the FED decision took place about eighteen minutes ago. Rates unchanged as expected. Be focused on the median dot. Basically, all the FED officials get together, they plot where they think rates should be will be for twenty four to twenty five and beyond. You take the median dot and a lot of people on Wall Street see that as a signal of how many times they get a cut in any given year. That median dot was at three cuts for this year, it's come all the way down to one. Worth noting though, that they now see four cuts in twenty twenty five, more than the three that they previously outlined. So they've pushed some of that into next year. But the range of views, I think the median marks are very, very divide. FED and Lisa did a fantastic job with that a little bit earlier, really explaining at least so that four policymakers see no cuts this year, seven anticipate just one reduction, eight are looking for two. That's a federal reserve that's all over the place, and that really.

Does have at least half of it a really hawkish tilt right now at a time when other people are saying, you.

Does have at least half of it a really hawkish tilt right now at a time when other people are saying, you.

Know, we'll do it for the FED. Mission accomplished.

Know, we'll do it for the FED. Mission accomplished.

So it raises this question at this point, what is keeping them from really going all in on the immaculate disinflation? Is it just PTSD from Q one and we'll all of the sort of questions that people have around the hawkishness just disappear in the wake of the bomb that Jap Pwett tends to bring us.

So it raises this question at this point, what is keeping them from really going all in on the immaculate disinflation? Is it just PTSD from Q one and we'll all of the sort of questions that people have around the hawkishness just disappear in the wake of the bomb that Jap Pwett tends to bring us.

Mike Cape and a Bank of America is with us now for more. Mike Gape and I was sharing your words a little bit earlier, that quote from you, one giant leap for the FED. Then I explained that you still don't think they can't until December, so it's not that big a lead. What do you make of what you've heard in the last twenty minutes or so, Well, if.

Mike Cape and a Bank of America is with us now for more. Mike Gape and I was sharing your words a little bit earlier, that quote from you, one giant leap for the FED. Then I explained that you still don't think they can't until December, so it's not that big a lead. What do you make of what you've heard in the last twenty minutes or so, Well, if.

We thought it was a September or sooner cut, maybe it'd be one giant leap from mankind instead of the FED. Like I think what Bob and Muhammad have been saying here, I think I would I would share, which is I think that data is probably more important than the dots in this case because it is such a data dependent FED. They don't want to take these structural, longer term views, so they'll be reactionary. So maybe that the dots kind of lag what's happening on the ground. Look, I would just characterize all this as an incremental shift and FED, thinking that they were trying to target us to the middle of the air inflation didn't cooperate, so they shifted things back. I would encourage them, like Mohammed is saying, to take some stands on longer term structural views. But I just this is not the FED that we have.

We thought it was a September or sooner cut, maybe it'd be one giant leap from mankind instead of the FED. Like I think what Bob and Muhammad have been saying here, I think I would I would share, which is I think that data is probably more important than the dots in this case because it is such a data dependent FED. They don't want to take these structural, longer term views, so they'll be reactionary. So maybe that the dots kind of lag what's happening on the ground. Look, I would just characterize all this as an incremental shift and FED, thinking that they were trying to target us to the middle of the air inflation didn't cooperate, so they shifted things back. I would encourage them, like Mohammed is saying, to take some stands on longer term structural views. But I just this is not the FED that we have.

Michael, howex post are they? I go back to the Bank of America worker, They're very retired. Ethan Harris's wonderful book Ben Bernanke's fed. Okay, great.

Michael, howex post are they? I go back to the Bank of America worker, They're very retired. Ethan Harris's wonderful book Ben Bernanke's fed. Okay, great.

Are we still back at.

Are we still back at.

Ben Bernanki or Alan Greenspans fed where they are exceptionally ex post.

Ben Bernanki or Alan Greenspans fed where they are exceptionally ex post.

I don't think so. I think I just think it's a they believe. I think, as you're noting in the dots, there's a wide disparity of views, and sometimes pulling the view out of the median is a fool's air in so it may just be that there's not a lot of structural or agreement about these longer term structural issues, so it's hard for them to be forecast based, and so you just get a plethora of views, and so they throw their arms up and say, fine, there's a lot of uncertainty. The only thing we can trust is the data under our feet. So that's what we'll focus on, for better or worse.

I don't think so. I think I just think it's a they believe. I think, as you're noting in the dots, there's a wide disparity of views, and sometimes pulling the view out of the median is a fool's air in so it may just be that there's not a lot of structural or agreement about these longer term structural issues, so it's hard for them to be forecast based, and so you just get a plethora of views, and so they throw their arms up and say, fine, there's a lot of uncertainty. The only thing we can trust is the data under our feet. So that's what we'll focus on, for better or worse.

Michael, what would be your question to feed share Powell this afternoon?

Michael, what would be your question to feed share Powell this afternoon?

How much was the data this morning reflected in the projections and the dots. If the answers yes, it sounds a little hawkish. If the answers no, then you can make a case for September still being on the board. I think the data could make a September cut viable we just think it all comes together in December. So the dots and the forecast are kind of a mic forecast right now. So I'm pretty pleased with those.

How much was the data this morning reflected in the projections and the dots. If the answers yes, it sounds a little hawkish. If the answers no, then you can make a case for September still being on the board. I think the data could make a September cut viable we just think it all comes together in December. So the dots and the forecast are kind of a mic forecast right now. So I'm pretty pleased with those.

Mohammed and Bob, I've got the same thoughts. Let me tell you, Mike Ape at a Bank for America. Thank you, sir, Mohammed. I wanted to come across to you on the forecast, but not on the dots. I wanted to talk about unemployment when they reflect on what we learned on Friday and you were with us working through that payrolls report. Just a difference between the two surveys. How do you think this FMC is navigating that at the moment.

Mohammed and Bob, I've got the same thoughts. Let me tell you, Mike Ape at a Bank for America. Thank you, sir, Mohammed. I wanted to come across to you on the forecast, but not on the dots. I wanted to talk about unemployment when they reflect on what we learned on Friday and you were with us working through that payrolls report. Just a difference between the two surveys. How do you think this FMC is navigating that at the moment.

I think it's navigating like everybody else, trying to maintain optionality, trying to understand what's going on. And it's not just the employment data. We've had a lot of competing macro data, so you know they're just waiting. I do think there's two things going on. Certainly, the uncertainty is making them data dependent, but there's something else that's making them data dependent. Is what happened in twenty twenty one when they did take a view on inflation. They took a strategic view on inflation and it turned out to be really wrong, and I think they've been burnt and they don't want to go back to that fire anytime soon.

I think it's navigating like everybody else, trying to maintain optionality, trying to understand what's going on. And it's not just the employment data. We've had a lot of competing macro data, so you know they're just waiting. I do think there's two things going on. Certainly, the uncertainty is making them data dependent, but there's something else that's making them data dependent. Is what happened in twenty twenty one when they did take a view on inflation. They took a strategic view on inflation and it turned out to be really wrong, and I think they've been burnt and they don't want to go back to that fire anytime soon.

So they will not be reconciled trying to reconcile the data.

So they will not be reconciled trying to reconcile the data.

They will not be taking trying to anchor markets and their own thinking with a forward looking view. They're going to continuously react to the latest set of data.

They will not be taking trying to anchor markets and their own thinking with a forward looking view. They're going to continuously react to the latest set of data.

And that's what I think you're going to see, which.

And that's what I think you're going to see, which.

Could be good and it could be bad.

Could be good and it could be bad.

According to you, Mohammed Bab, I'd love to bring you back in at a time when it seems like this is a FED wrestling with itself.

According to you, Mohammed Bab, I'd love to bring you back in at a time when it seems like this is a FED wrestling with itself.

The consensus on the top is a mirage.

The consensus on the top is a mirage.

Sure there's consensus not to cut rates at this meeting, but that's pretty much it. What does that signal for you in terms of the clarity of purpose of their policy going forward and how to really navigate around it?

Sure there's consensus not to cut rates at this meeting, but that's pretty much it. What does that signal for you in terms of the clarity of purpose of their policy going forward and how to really navigate around it?

Great question. If I were Mike McKee, I'd ask the FED have the Summary of Economic Projections outlive their usefulness? Do they do more harm than good? And if the answer is no, then I'm sitting here. We're told to look at the Summary of Economic Projections and it's reflecting a FED that's confused. And you know what, even if they submitted the projections before the CPI data, one bit of data shouldn't create that much of a change. So this is a can fused FED. What that tells me is the bond market is in the hands of people like me. I don't know what the Fed's thinking. I don't know what they're looking at. I don't know what they're going to do. All I know is current levels. I know are projections of where growth and inflation are headed to. I know the amount of buying that's going on now, I know who's waiting on the sidelines. I look at this, it tells me I certainly don't want to be short duration or underweight relative to benchmarks. I want to be somewhere around neutral. I want to be concentrated in the front end of the curve. And I like credit because everything's telling me we're gliding into a soft landing, and that's good for corporate America. It's also good for corporate Europe.

Great question. If I were Mike McKee, I'd ask the FED have the Summary of Economic Projections outlive their usefulness? Do they do more harm than good? And if the answer is no, then I'm sitting here. We're told to look at the Summary of Economic Projections and it's reflecting a FED that's confused. And you know what, even if they submitted the projections before the CPI data, one bit of data shouldn't create that much of a change. So this is a can fused FED. What that tells me is the bond market is in the hands of people like me. I don't know what the Fed's thinking. I don't know what they're looking at. I don't know what they're going to do. All I know is current levels. I know are projections of where growth and inflation are headed to. I know the amount of buying that's going on now, I know who's waiting on the sidelines. I look at this, it tells me I certainly don't want to be short duration or underweight relative to benchmarks. I want to be somewhere around neutral. I want to be concentrated in the front end of the curve. And I like credit because everything's telling me we're gliding into a soft landing, and that's good for corporate America. It's also good for corporate Europe.

Doctor Olarian, help me translate this, and you can do this out of the Peeps library at Cambridge. What in God's name is modest further progress?

Doctor Olarian, help me translate this, and you can do this out of the Peeps library at Cambridge. What in God's name is modest further progress?

It is changing a phrase that used to be somewhat more halkish to something that is less hawkish but not dubbish.

It is changing a phrase that used to be somewhat more halkish to something that is less hawkish but not dubbish.

That is what that is.

That is what that is.

Mohammach, You've said for a while that maybe they're making a mistake, that they haven't taken this strategic view, and you were hoping that goes sooner rather than later. Can you help us understand the difference between not going three but going once, and the difference between doing that one cut at the end of the year as opposed to doing it in July. What difference does four or five months make?

Mohammach, You've said for a while that maybe they're making a mistake, that they haven't taken this strategic view, and you were hoping that goes sooner rather than later. Can you help us understand the difference between not going three but going once, and the difference between doing that one cut at the end of the year as opposed to doing it in July. What difference does four or five months make?

So I love listening to Bob Michael's or is it Bob Michelle John as you.

So I love listening to Bob Michael's or is it Bob Michelle John as you.

Told me last time. Anyway, I love listening.

Told me last time. Anyway, I love listening.

To Bob Michael's soft landing scenario because it's very soothing, but analytically, based on how I assess the economy, I give it a fifty percent probability. It is the dominant scenario, but it is not dominant with high probability, so I have to have a risk mitigation mindset. And then when I look at the tails, I see details of recession being larger than the tail of bigger but not hotter economy. But Michael so When I look at that distribution and I look at the asymmetrical tails, I start asking what are the buffers in the economy.

To Bob Michael's soft landing scenario because it's very soothing, but analytically, based on how I assess the economy, I give it a fifty percent probability. It is the dominant scenario, but it is not dominant with high probability, so I have to have a risk mitigation mindset. And then when I look at the tails, I see details of recession being larger than the tail of bigger but not hotter economy. But Michael so When I look at that distribution and I look at the asymmetrical tails, I start asking what are the buffers in the economy.

And that's why I start getting worried.

And that's why I start getting worried.

And that's where the lay of of the weight cut means that those buffers that are already quite limited among small businesses, among low income household get eroded really quickly.

And that's where the lay of of the weight cut means that those buffers that are already quite limited among small businesses, among low income household get eroded really quickly.

Muhammad, you been around as long as I have. You're right, We've only seen one soft landing in our investment career, and this is forty plus years and that was in ninety five. So soft landings are incredibly hard to engineer. In fact, just the probabilities are way against you. But what worked in ninety five is I think what you're alluding to. The FED came in and started cutting rates. They cut rates seventy five basis points in ninety five. It was just enough to take the pressure off of businesses and households and thus we had, I believe, the only soft landing in our careers.

Muhammad, you been around as long as I have. You're right, We've only seen one soft landing in our investment career, and this is forty plus years and that was in ninety five. So soft landings are incredibly hard to engineer. In fact, just the probabilities are way against you. But what worked in ninety five is I think what you're alluding to. The FED came in and started cutting rates. They cut rates seventy five basis points in ninety five. It was just enough to take the pressure off of businesses and households and thus we had, I believe, the only soft landing in our careers.

Mohammed, we've got enough time to give you the final word.

Mohammed, we've got enough time to give you the final word.

I love what Bob Jos said. Thank you, Bob.

I love what Bob Jos said. Thank you, Bob.

Myhammad A Laran of Queen's College, Cambridge, Muhammed, thank you

Myhammad A Laran of Queen's College, Cambridge, Muhammed, thank you