00:13:25 · Priya Misra
[00:13:25] S6: So not revolt, but I would say we're paying attention to every dot and every voter, non-voter, because that's important. Now, this is coming down to counting votes, a little bit like the Supreme Court, where, you know, it's not a concern. And I will say the Fed came into the new chairworshes regime divided. So there was already this question of is this a supply shock? Is it leaking into demand? Is it just AI or is it broadening out? I think there are big questions there. So we're going to be listening to really every Fed official getting a sense of what do they think about how much the market's doing the work for them, even if they're not explicitly saying it. How much of that was behind what Williams and Jefferson said? But I'll go back to we think this is still a supply shock. There were questions on whether they should have hiked in September. If this is a supply shock, normal conventional economic theory would say, Look through it. I think this was risk management. They're worried that it'll spread through. It's just not clear from Warsh that the committee broadly is there. I think that's where Jefferson and Williams and I would say Waller are there. So just watching, not just what they say about the next meeting, and, you know, it's the totality of whether they hiked this meeting or not actually doesn't matter unless if you're trading October Fed Fund futures, but it's the totality of hikes. We're still pricing in three hikes, which is more than... the most hawkish Fed official has been till now.
00:14:45 · S1, Jon Ferro, Mike McKee, S2
[00:14:45] S1: Do you know why I'm so upset? Mike McKee didn't get to speak at the news conference. What was that about? [00:14:49] S3: Mike McKee joins us now for more. Mike, what happened in there? What happened in the press, sir? [00:14:55] S7: Well, I didn't get called on. That's one thing that happened, and I don't have any explanation for that other than they put us in the very back row. [00:15:02] S1: I think, Jon, that you said it best. [00:15:03] S7: You've said it very, very well about what's going on with Chairman Warsh and this Fed. He wants to change the communication style. But he doesn't know how and he's leaving people with a vague impression of what the Fed is thinking and it's not helping anybody on Wall Street figure out what to do. When you listen to what he said today, they want more time to look out the window. [00:15:26] S1: What are they going to see out the window? [00:15:28] S7: There is one more CPI between this meeting and the December meeting. They get PCE tomorrow. They know what that number is already. But that's the only inflation measure, that one CPI. So if you're worried about inflation and you get one more number and you know oil prices are going up and you know that the war is still going on, I don't think you're going to learn a whole lot by looking out the window. And so it leaves open the question of Where does the Fed think it needs to intervene and why? [00:15:55] S2: And that's a question that he did not answer.
00:15:55 · S2, Mike McKee, Jon Ferro, Jeff Rosenberg, S1
[00:15:55] S2: And that's a question that he did not answer. [00:15:58] S7: Good question on whether we've migrated from supply shock to demand shock. If it's a demand shock, and certainly he was at pains to say the economy is really picking up. then obviously the Fed has more work to do in a different way. And we didn't get anything on that right now. One thing I would add is I've gotten several messages from people on Wall Street about this change in the meeting frequency. If it starts next fall, what meeting are they going to skip? It would seem logical to skip the October meeting because you've got SEPs if they still have those in September and December. But how does the market know? How do they know how to price futures at this point if they don't know when one of those meetings won't produce anything? So a lot of questions come out of this that he didn't even come close to answering. [00:16:44] S3: Very few answers. Mike McKee, wonderful job as always down in Washington. Mike, appreciate it, sir. Jeff Rosenberg of BlackRock joins us now for more. Jeff, you sat through that too. For someone in this market, what was material to you? [00:16:57] S4: Yeah, Jonathan, listening to the conversation, I'll highlight three things in kind of reverse order. [00:17:02] S1: I think we've talked about a lot of them. [00:17:04] S4: You know, the answer for why they didn't do anything this meeting, he got the question a couple of times and he kind of answered it. They're waiting for more data. [00:17:12] S3: Fine.
00:17:12 · Jon Ferro, Jeff Rosenberg
[00:17:12] S3: Fine. [00:17:13] S4: A lot less discussion on oil than I would have thought of for the second point. But he did say oil's up and we need to take note of that. And I think that's also, to Mike McKee's comments a minute ago, that's also what they're going to be looking for. They talked a lot about it in prior meetings, again, less this time. But the third point I'd highlight is I think the most important thing that we took out of this discussion and the Q & A was a lot more discussion on financial conditions. He kind of opened with the financial conditions, unwilling and unable. to call them tight, but noticing the tightening and linking it back to AI with this really important marker that AI, interest rates matter to AI. He talked about the rollover and the correlation between oil and interest rates. He never sort of finished the conversation because he said he's not a Wall Street newsletter. But if he were to finish it, what happened was that the rates stopped looking at oil and they started looking at the AI trade, and he paid attention to that. So we're going to pay more attention to that, and I think that's probably the most important takeaway. And a little bit of the steepening of the curve that you see there in the market, I think that's a little bit of a dovish hint because they're going to be really focused on whether they're overly tightening financial conditions if there is indeed this much of a reaction to an increase in interest rates to the AI pricing in financial markets.
00:17:13 · Jeff Rosenberg, Lisa Abramowicz
[00:17:13] S4: A lot less discussion on oil than I would have thought of for the second point. But he did say oil's up and we need to take note of that. And I think that's also, to Mike McKee's comments a minute ago, that's also what they're going to be looking for. They talked a lot about it in prior meetings, again, less this time. But the third point I'd highlight is I think the most important thing that we took out of this discussion and the Q & A was a lot more discussion on financial conditions. He kind of opened with the financial conditions, unwilling and unable. to call them tight, but noticing the tightening and linking it back to AI with this really important marker that AI, interest rates matter to AI. He talked about the rollover and the correlation between oil and interest rates. He never sort of finished the conversation because he said he's not a Wall Street newsletter. But if he were to finish it, what happened was that the rates stopped looking at oil and they started looking at the AI trade, and he paid attention to that. So we're going to pay more attention to that, and I think that's probably the most important takeaway. And a little bit of the steepening of the curve that you see there in the market, I think that's a little bit of a dovish hint because they're going to be really focused on whether they're overly tightening financial conditions if there is indeed this much of a reaction to an increase in interest rates to the AI pricing in financial markets. [00:18:34] S0: So, Jeff, is the Fed put alive and well right now for risk assets?
00:18:34 · Lisa Abramowicz, Jeff Rosenberg, S1, Tom Keene
[00:18:34] S0: So, Jeff, is the Fed put alive and well right now for risk assets? [00:18:39] S4: Oh, our favorite topic. You know, I don't know if I could say it's alive and well. I mean, I think what we got a hint of and what I was just answering and a little bit what you see in the steepening is he's sensitive to it. [00:18:53] S1: He's sensitive to looking at AI. [00:18:56] S4: You know, we also got another piece of information that we hadn't maybe heard before when he answered the Korean reporter. with, I'm really more focused on your markets than you may imagine me to be. That's really important because he understands just how important the AI driver is to growth. Even though he's talking about it broadening out, this is really an important piece. So if you see some wobbles there, I think maybe not the Fed put in that it can work, but certainly what we saw this month was the market sort of sniffing out that AI is a macro event as much as it is a micro event. And if there is a undermining of it, it's going to be a macro event that is primarily disinflationary. It's supporting growth on the consumption side. It's supporting it on the investment side. He made that point. So he well aware of it. So that's where you get the interest rate sensitivity. And it's really a validation we saw in the last couple of weeks. [00:19:57] S5: Jeff Rosenberg, for all of us in the game, you were at Carnegie Mellon. You had the privilege of Allan Meltzer. his 1,400-page history of the Federal Reserve. What would Allan Meltzer think of what we observed this afternoon?