00:08:59 · Priya Misra, Tom Keene, S1
[00:08:59] S6: The Fed, I mean, we heard from Williams and Jefferson. I think they looked at the market and said, this is doing the work. So we can actually then, the urgency goes down for us to hike. [00:09:08] S5: He talked about protocol. And he's written before about McChesney Martin, 1951 and the accord. To me, he's almost wistful to go back to another time. I felt like I was watching Tobey Maguire and Reese Witherspoon in Pleasantville. We're back to the 50s, like back before Burns, back before the 60s, back to a simpler time. He's yearning to go back there. How does that dovetail with a cacophony of responsibilities we have in monetary policy linked into fiscal policy? [00:09:39] S6: It's very hard. Now, I see the point about going back, because if you look at big productivity increases, we might. [00:09:44] S5: Be— But we're not the same economy we were in the 50s. Our news flow alone— I mean, Jon has personally moved British pound at least six times on this show. I mean, the speed of news flow today, he's not allowed to go back to that. wistful thinking. [00:10:01] S6: I think which is where I wish we could get a better sense of the reaction function because then the market will react to data points. And it doesn't just have to be inflation and the labor market. It could be the earnings of some large hyperscale or it could be to the issue equity or debt. But let the market react to all this information if we have a sense of the reaction function. We are getting a better sense today than we were, I'd say, in July. [00:10:25] S1: I'll give you that.
00:10:25 · S1, Tom Keene, Priya Misra, Jon Ferro
[00:10:25] S1: I'll give you that. [00:10:27] S5: I'll give you it better than July. [00:10:28] S6: We're just piecing it together and we're realizing there's not just the chair wash reaction function. There's every other of the 19 members reaction function that we need to. So maybe AI can help us get some. [00:10:39] S5: I got a question to fit into Jon Ferro here. Jon, you've stood on the lawn of the ECB. I talk about this stuff. You've actually done it. How does the Bank of England, the ECB, how do they react to what I just witnessed? [00:10:53] S1: The lack of guidance? The lack of analysis? [00:10:56] S5: Some people would say the MBA happy talk speak I just heard. [00:10:59] S3: Tom, without criticizing too many people, I think people have had experience of that at the ECB for the last several years. [00:11:05] S5: Okay. [00:11:06] S1: Same situation.
00:11:06 · S1, Jon Ferro
[00:11:06] S1: Same situation. [00:11:07] S3: There are some people in this market who don't believe the person leading that institution was cut out for that job to begin with and haven't received the kind of guidance they want from that institution either. So I think the ECB might have a little bit in common with what we've seen from the Federal Reserve under this leadership. The problem with this leadership right now is that he wants to make a change at the top of this institution into how they communicate, but he's trapped in the post-GFC communication architecture. So he has to deliver a news conference. Clearly he doesn't want to. Clearly he doesn't have much to say. And I think he's trying to be collegial. It's difficult to be that way when others aren't on board with what you're trying to do. And the speeches over the last few weeks from Williams and Jefferson, I think, are probably the most important development of the. [00:11:49] S1: Last month, aside from what happened with financial markets. [00:11:52] S3: It doesn't matter what the Fed chair says about anything in this news conference. It doesn't matter that he doesn't provide guidance. Because the only guidance you need is from the core of the committee. And the core of the committee told you precisely what would happen at this meeting. [00:12:05] S1: They kept rates unchanged.
00:12:05 · S1, Jon Ferro
[00:12:05] S1: They kept rates unchanged. [00:12:07] S3: The core of this committee told you precisely what the chair ended up saying, which is we have time. We want to take more time to find out and get more information about what's happening here. So for a Fed chair that's trying to move away from the old Fed, my conclusion watching this play out this afternoon is that this new Fed sounds a whole lot like the old Fed. [00:12:25] S1: They're talking a good game about inflation. [00:12:27] S3: They obviously want to anchor inflation expectations, but they're willing to tolerate above target and messy prints like the one we just got because they're not willing to act. [00:12:35] S1: That's the only conclusion you can have. [00:12:37] S3: Colby tried. We used to work with Colby. She's fantastic. It's the first question out of the gate. Why aren't you hiking today? The economy's strong. Why aren't you doing anything? That question was asked 50 different ways. He didn't answer it once. And if they're not going to make a move after the data we just got, And I'm not advocating for a move from the institution, by the way. That's not what I'm doing here. I'm basing this on their own rhetoric. There is a massive spread between how the Fed chair is speaking and what they're doing. And this just sounded like a typical Fed chair trying to wanker inflation expectations with above target inflation and not willing to do anything about it.
00:12:37 · Jon Ferro, Tom Keene
[00:12:37] S3: Colby tried. We used to work with Colby. She's fantastic. It's the first question out of the gate. Why aren't you hiking today? The economy's strong. Why aren't you doing anything? That question was asked 50 different ways. He didn't answer it once. And if they're not going to make a move after the data we just got, And I'm not advocating for a move from the institution, by the way. That's not what I'm doing here. I'm basing this on their own rhetoric. There is a massive spread between how the Fed chair is speaking and what they're doing. And this just sounded like a typical Fed chair trying to wanker inflation expectations with above target inflation and not willing to do anything about it. [00:13:09] S5: But Priya, within the mix, at least to jump in here because you're reading different stuff than I am. Within the mix, is there any talk about where these presidents and these governors will revolt against this chairman? Is that discussed or analyzed in any way?
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.