00:00:02 · Lisa Abramowicz, S1, S2, Jon Ferro, Jeff Rosenberg
[00:00:02] S0: Bloomberg Audio Studios. [00:00:04] S1: Podcasts. [00:00:05] S2: Radio. [00:00:06] S3: News. [00:00:09] S1: This is a breaking news update from Bloomberg. [00:00:12] S4: Instant reaction and analysis from our 3,000 journalists and analysts around the world. [00:00:20] S2: The FOMC decided to maintain the target rate for the federal funds rate at 3.75% to 4% in support of the Federal Reserve's dual mandate. The committee believes that the accumulation of more information will help it determine the policy stance appropriate to ensure a timely return of inflation to the 2% goal. The committee will deliver price stability. [00:00:46] S3: I'm going to speak on behalf of a lot of people on trading desks around the world. I think at one point in that news conference, everybody started looking out the window to see what was happening elsewhere. Because there was a moment in that news conference where we stopped learning anything about anything. Equity markets this afternoon shaping up as follows. On the S & P 500, up a third of 1%. On the Nasdaq, up by 0.4%. In the bond market, twos, tens, and thirties. Yields shaping up as follows this afternoon. Twos down three basis points at 470. Tens up four. Thirties up five. There appears to be a disconnect between the rhetoric and the policy from the Fed chair, Kevin Warsh. [00:01:21] S2: Domestic spending has been resilient. Productivity growth is strong. In capital investment, robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little, but inflation remains elevated.
00:01:21 · S2, S1, Jon Ferro, Lisa Abramowicz
[00:01:21] S2: Domestic spending has been resilient. Productivity growth is strong. In capital investment, robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little, but inflation remains elevated. [00:01:37] S1: Inflation is too high. The economy is strong. [00:01:40] S3: Yet the Fed decided to hold the opening statement more consistent with a Fed chair that just hiked interest rates, never mind keeping them unchanged. [00:01:47] S0: So what had changed? And the one thing that he did open the door to was the potential that market volatility started to give the sense that maybe something else was going on that they needed to monitor. He said that this interval of time is information rich information. He also said that, you know, you might be worried about the same old things, but this is actually a new regime. [00:02:07] S1: It may look like. [00:02:08] S0: It's just one rate hike that they've executed since he started there, but it's actually monetary medicine, a package that the Fed started five months ago. [00:02:15] S3: He came really, really close, stopped just short, but came really close to saying the market's doing some of the work for us. [00:02:21] S1: Disclose. [00:02:22] S0: That was the only explanation from what he said that actually gives any justification whatsoever for why with that rhetoric and that assessment of the economy, they did not hike.
00:02:22 · Lisa Abramowicz, Tom Keene, S1, Jon Ferro
[00:02:22] S0: That was the only explanation from what he said that actually gives any justification whatsoever for why with that rhetoric and that assessment of the economy, they did not hike. [00:02:32] S5: I am fascinated what we'll learn in the next year and 10 years about some of these really qualified people around the table at the Eccles building. what they think of this approach. I think that's what we haven't heard yet. It's only been five months, Jon. But I think conventional analysis fails, given what we heard there on protocol and on new monetary medicine. [00:02:55] S1: Tom, the issue and the risk this Fed chair always ran. [00:02:58] S3: If you're on board with ending forward guidance and the hyper-communication that we were getting from the institution over the last 10 years, that's one thing. Getting the rest of the committee to come with you is another. [00:03:08] S1: The outcome of this meeting this afternoon.
00:03:08 · S1, Jon Ferro, Lisa Abramowicz
[00:03:08] S1: The outcome of this meeting this afternoon. [00:03:10] S3: is that they've reinforced the guidance we're going to get from select individuals over the next several weeks. In fact, the first thing I've done as this news conference wraps up is find out when Williams speaks next, November 6th, for anyone who's interested. It's going to be participating on a moderated discussion. All that's happened here is that we've just found out that when you hear from Williams and Jefferson... when that guidance about October or whatever the month might be comes in, even if it predates the data, that's what the policy is going to be. Because a lot of people on Wall Street concluded the data said go. The data said hike. The rhetoric from the Fed chair said the same thing. [00:03:42] S1: He's miles from that. [00:03:43] S3: And what you hear from Williams and Jefferson is that we can take a month to skip. And everything you heard in that news conference about having a time-rich conversation, Brammo, about the next month or so. Was everything Jefferson and Williams told you before the data even came out a few weeks ago? [00:03:57] S0: Yeah, the reaction function is even less clear right now, I think. If this is a data-dependent Fed, what data are they looking for? This is an informational-rich Fed. [00:04:06] S1: Era, interval. Is it the election? [00:04:08] S0: Is it oil prices? [00:04:10] S1: Is it CPI, which we just got? [00:04:11] S0: Is it GDP? Is it finger in the wind, let's look out the window? [00:04:14] S1: Ultimately, we're not sure.
00:04:14 · S1, Lisa Abramowicz, Tom Keene, Jon Ferro
[00:04:14] S1: Ultimately, we're not sure. [00:04:16] S0: This is part of the issue that I think a lot of people are having. And frankly, I think almost at this point, people would welcome the fact that we might get one or two fewer rate deciding decisions. Because if this is what it's going to be, it doesn't add clarity. [00:04:29] S5: Jon, I think conventional analysis here doesn't work. This guy is on another planet. From modern monetary theory. [00:04:36] S3: TK, don't wait two years. If we have to do this every single meeting, what's the point? Just bring it down to six now. To your point, Lisa, I think most people would be on board with that. [00:04:44] S1: Do it tomorrow. Wait two years. Make it happen tomorrow. [00:04:48] S0: The market reaction, I think, is notable. And you are seeing a steepening in the yield curve and the dollar getting weaker. And you start to wonder, OK, well, what's the market saying? Maybe, A, that regardless of how firm their 2 percent target is, this is a Fed that's going to wait a little bit longer. And a real question around the opportunities for them to actually make a move if they have fewer meetings to possibly move in. [00:05:08] S5: There's a critical distinction here. There's a lot of people that agree with him that, you know, Jon, I call it the parlor game. I hate it. He wants to get away from the parlor game. He wants to get away from the dots, fewer meetings. Who had ham and cheese sandwiches at the day one meeting? The usual thing. [00:05:23] S3: Sure. Fine.
00:05:23 · Jon Ferro, Tom Keene, Lisa Abramowicz, Jeff Rosenberg, S1, Priya Misra
[00:05:23] S3: Sure. Fine. [00:05:24] S5: Okay, that's great. But he wants to walk away from modern culture. monetary analysis and the foundation of that. A guy like Michael Feroli at JP Morgan, I don't know what he does with new monetary medicine and protocol from the 50s. [00:05:40] S3: I'm thinking about who might be happy with this decision. If I'm Dario at Anthropic, I'm probably pretty happy with this decision and that news conference. I'd be pretty thrilled with how that went. Essentially, an IPO coming up in a few weeks. Yeah. [00:05:51] S0: I mean, essentially, if you have someone who is concerned about any kind of market disruption in credit spreads. [00:05:56] S4: Tied to AI. [00:05:57] S1: Probably feeling pretty good. [00:05:58] S0: That probably is a positive. [00:06:00] S3: Got Priya Misra at J.P. Morgan with us around the table. Priya sat through that. Priya, well done. [00:06:03] S1: It's good to see you. That was fun. It was a difficult one, wasn't it? What did you learn? [00:06:07] S6: You know, I think Chair Warsh was trying to walk this fine line of saying that they're already committed to inflation and yet they didn't hike. I think he was trying to communicate this hawkish hold, but it's hard. But I would take a step back. There's the policy and then there's the communication. The policy, you saw the market reaction right after. I don't think the market was saying that the Fed's behind the curve on inflation. [00:06:29] S1: They've hiked.