Federal Reserve Holds Rates Steady — Press Conference

[00:00:00] Speaker 1: Betsy Stevenson, professor of public policy and economics at the University of Michigan. We appreciate your time. And of course, we're covering just one aspect of the way in which Trump administration policy will have to potentially influence the decision-making of the Federal Reserve. Knowing they have to keep in mind both inflation and the labor market, there's also massive questions around what the deportation effort already underway will do to labor and the U.S. economy. [00:00:22] Speaker 2: Unquantifiable right now. Betsy, never one to mince words. No. Fascinating conversation as we set up for our special coverage. I wonder how many questions in this news conference today will include the name Trump? [00:00:33] Speaker 1: Probably a lot. [00:00:34] Speaker 2: All of them? [00:00:35] Speaker 1: How many times will we have to say we focus on monetary policy, not fiscal policy? [00:00:39] Speaker 2: We'll distill all of this. Michael McKee is going to be with us on the late edition of Balance of Power. He's in Washington. Of course, he'll be the one posing the questions as we'll be watching and listening live here on Bloomberg TV and radio. Straight ahead, a special edition of Bloomberg Surveillance, The Fed Decides. Stay with us on Bloomberg TV and radio. [00:00:56] Speaker 3: Earnings season is here. [00:00:57] Speaker 4: The earnings palooza right here. [00:00:59] Speaker 5: They're going to come in hot and heavy. [00:01:01] Speaker 4: Bloomberg is first to break the numbers. Microsoft earnings now crossing the wire. [00:01:05] Speaker 5: Lamb research in the semiconductor space. AMD, Alphabet, we've got a lot to digest today. [00:01:10] Speaker 6: With the smartest insights. If the economy's strong, shouldn't that be good for earnings? [00:01:15] Speaker 7: Consensus estimates are around 12% growth for the quarter. [00:01:18] Speaker 4: Stick with us, a lot more coverage of all those earnings. [00:01:20] Speaker 3: Continuing coverage on Bloomberg. [00:01:21] Speaker 8: Live from New York City for our audience worldwide. Bloomberg's The Fed Decide starts right now. [00:01:33] Speaker 3: This is a special edition of Bloomberg Surveillance with Jonathan Farrell, Lisa Abramowitz and Tom Keene. Bloomberg Surveillance. [00:01:43] Speaker 8: The Fed Decides. The first Fed decision of 2025. That decision is just 27 minutes away. 30 minutes after that, a news conference with Chairman Powell alongside Lisa Abramowitz and Tom Keene. I'm Jonathan Farrell. Live on Bloomberg TV and on Bloomberg Radio. Skip and pause. Seems to be the debate right now. No one thinks this Federal Reserve does anything in about 28 minutes' time. [00:02:05] Speaker 9: And they'll try to say even less. The most controversial part might be about quantitative tightening, which tells you exactly where we are. Big question will be the political element of this. And Kathy Jones, who's coming up, is really highlighting how that really will be the fireworks. The response from President Trump and how Jay Powell tries to get ahead of it. [00:02:22] Speaker 8: TK, are we expecting the live blog to come from the White House a little bit later on this afternoon? [00:02:27] Speaker 10: Well, it's coming out here on Nvidia, what, 20 minutes ago? And maybe we'll see more from the White House. But when is it that this president demands lower rates? Do we see that within the hour? Or does it take a week or two? [00:02:38] Speaker 8: I'm not sure. March 19th is the decision after this decision. Yeah. That's where things get harder. Because at the next decision, you get some forecasts. And it seemed like they found it tricky to put out some forecasts back in December, didn't it? [00:02:50] Speaker 9: Especially at a time where there's a lot of debate, even among Fed members, about whether tariffs are inflationary, whether they're disinflationary, how much you have to even take them into account. You have the likes of Chris Waller, who might be or might not be a candidate to replace Jay Powell when his term is up, to become Fed chair, coming out and saying, essentially, this doesn't really interrupt the disinflationary process. Are there people who disagree? And does that disagreement have to be reflected? [00:03:13] Speaker 10: It's an economic debate. But on this, the Fed decides. It's about the political Fed here as well. It'll be fascinating in the press conference. [00:03:20] Speaker 8: Let's kick it off with the equity market this afternoon. Good afternoon to you all. The political equity market on the S&P 500 looks like this. We're positive by 0.4% or rather negative by 0.4%. Off the lows, though, a bit of a shaky 30 minutes or so. Some headlines coming out about restrictions around NVIDIA. NVIDIA initially dropping and staying near the lows. We're down by about 5% or 6%. That's part of the story. Go into this news conference a little bit later this afternoon. [00:03:45] Speaker 9: The restrictions that might be inevitable as the U.S. looks to chip dominance as a national security issue. This is Howard Lutnick coming out and basically accusing DeepSeq of stealing some of the U.S.'s technology due to NVIDIA's chips that were sent over there saying he favors substantially tighter regulations. [00:04:05] Speaker 10: We're going to overlay the tech earnings today. I'm not going to make small of Microsoft and Facebook this weekend. [00:04:10] Speaker 9: Meanwhile, coming up, aside from earnings, J.P. Morgan's Bob Michael is going to be joining us leading up to the decision, including Cathy Jones of Charles Schwab and Bank of America's Aditya Bahave. They'll be taking us right up there. We're going to get the decision. We'll get immediate reaction from former Fed Vice Chair Richard Clarida along with Diane Swank of KPMG and Deutsche Bank's Matt Lizetti. And then we're going to listen to the press conference. And we're going to listen to the hemming and the hawing in response to all sorts of politics. Chair Powell will be speaking. And then we will be speaking with Stephanie Roth of Wolf's Research and BlackRock's Jeff Rosenberg. The goal, evidently, is to be boring. We're going to hope that it is maybe a bit more interesting. [00:04:48] Speaker 8: Let's see how boring this thing is. Joining us now is Mohamed El-Erin of Queens College, Cambridge. Never boring. Mohamed, just want to confirm that this is Jets green and not Eagles green. I know you wanted me to confirm that for our audience, so I'm doing that right now. Jets green and not Eagles green. Mohamed, you wrote for Bloomberg Opinion this week, the Fed will duck and weave, but not for long. Mohamed, when do things get harder? [00:05:08] Speaker 11: They got harder in March. They got harder for two reasons. I think the politics will heat up. And then, as you said, John, they're going to have to publish forecasts for the economy, forecasts for rates. So their hope is that this, in fact, is a boring meeting. It's not guaranteed because of the press conference, but that is their hope. And then come March, they have a consequential get-together at that stage. [00:05:34] Speaker 9: Mohamed, I love your take on this because you say that there is a liability in taking this reprieve from the controversy and just offering no guidance, that a guidance-free Fed is one that can come across a stop-and-go and rudderless. Do you think that the market could be responding or is already responding to that, even if the Fed achieves boringness? [00:05:57] Speaker 11: So then the market has responded to one thing and is yet to respond to a second thing. It has responded to an overly reactive Fed that became excessively data-dependent after its mistake of 2021. If you think about it, we've had very little strategic guidance from the Fed since then. And the result of that has been significant volatility in the bond market. The Fed became a fuel for volatility, a source of volatility, rather than a counter to volatility. The second thing I don't think the market quite realizes is we are slipping back to the 1970s stop-go monetary policy. Interesting. There's a reason why it was discredited in the 70s. And if you continue with stop-go, you will harm the economy. So there's two very distinct issues that are coming together. And that's why what happens after this meeting is going to be important. [00:06:55] Speaker 10: I totally agree with that, Mohamed, the idea of after the meeting and onto the dot plots. Ben Steele and Elizabeth Harding at the Council on Foreign Relations published today in Barron's a blistering critique, they dragged Torsten Schlock into it, from Apollo, on forward guidance. What is our world like if we get rid of the dot plot? [00:07:17] Speaker 11: Well, I think the dot plot is excessive and forward guidance. And it's not real forward guidance because the Fed chair is at pain at saying this is the individual projections. They could do a Bank of England much more meaningful forward guidance is where you get the guidance of the staff. And that has a way of anchoring. Right now, the dispersion in dots, Tom, as you know, is huge. If you look at the terminal point, it's incredible how much the Fed officials differ. So we've lost credible forward guidance in the U.S. And I think if we weren't able to go back, we wouldn't do the dot plots. I think that was a step too far in transparency. [00:08:00] Speaker 8: Mohamed, one thing you've said repeatedly is that this Federal Reserve has failed to take a strategic view, that they continue to be too data dependent, hypersensitive to incoming information. There's another wrinkle now. Some officials in the Federal Reserve are anticipating policy changes. How much weight do you think they're putting on one versus the other? [00:08:18] Speaker 11: So it depends which policymaker he's talking about. And that's a problem for the marketplace, is that there are different degrees to which they are willing to incorporate what they think is going to happen. And you're talking about energy, regulation, trade, immigration. You're talking about some key areas that impact the economy. And, of course, fiscal, we must not forget fiscal, these are the big five. And then even those who incorporate their view have increasingly, we're starting to see among some, John, a political sensitivity that wasn't there before. [00:09:01] Speaker 9: That was delicate. Are you saying that one of the members might be considering a potential seat at the head of the table come 2026? [00:09:09] Speaker 11: I'd say we're seeing very surprising changes in the way certain policymakers are assessing data and looking forward. [00:09:19] Speaker 10: What is the unexpected for it? Let's go to Mohamed Alary in Game Theory. Everybody's complacent now. We've all got a theme I put out today. Maybe it's a snooze fest today and we'll be surprised in the press conference. What's the unknown unknown for you right now? [00:09:36] Speaker 11: The Fed being forced to hike. And if we get some hot data prints, and if the Fed still truly is committed to 2%, then it will have no choice but to hike. And that will cause significant market volatility and significant political volatility. So, you know, if you ask me what is one of the things that really would make this market very, very volatile, it is the recognition that a hike may be in our future. I don't think it is, but to answer your question, that's what we'll do with Tom. [00:10:16] Speaker 8: Mohamed, how confident are you that the next move is a cut and not a hike? [00:10:21] Speaker 11: It's more likely to be a cut than a hike. But it wouldn't surprise me if the Fed is tempted to stay on hold until the summer. [00:10:32] Speaker 8: Interesting. Mohamed, thank you, sir. TK let you off the hook there. I saw us going towards Governor Waller and his recent comments, and we're out of time now. Mohamed, also Queen's College, Cambridge, green too. Mohamed Alaryan from Queen's College, Cambridge. [00:10:43] Speaker 10: Is it Celtic, Celtic, green too as they play Aston Villa today? [00:10:48] Speaker 8: Celtic, green. I'm not sure it is. We can double check. Celtic? There's a little bit more. Not Celtic. Yeah, Celtic. Maybe it's Notre Dame. Not Celtic. Hikes versus cuts. [00:10:56] Speaker 9: Yeah, well. [00:10:57] Speaker 8: That conversation's changed quickly. [00:10:58] Speaker 9: It has. At the same time, you get three people in a room, you get four decisions on exactly how the potential risk is. And so, ultimately, this is my key question. We've been asking, are tariffs inflationary? And people say, look back to 2017, 2018. They weren't that inflationary. Is this time a different regime in terms of where inflation is now? [00:11:19] Speaker 10: Well, Diane Swarnock was brilliant today off of Jason Furman at Harvard, and it's just simple. There's a whole theory out there off the 1930s that they would be disinflationary or outright deflationary. No one's anticipating that. [00:11:31] Speaker 8: Diane joins us a little bit later, Tom, in about 30 minutes' time. So, look out for that. We're counting it down to a Federal Reserve decision. That drops in about 18 minutes' time. Then, 30 minutes after that, we'll get a news conference with Chairman Powell. The first one of 2025. Coming up next, we'll catch up with JP Morgan's Bob Michael, Kathy Jones of Charles Schwab, and Bank of America's Aditya Bhave. Live from New York, this is Bloomberg. [00:11:52] Speaker 12: U.S. tech is influencing global markets. [00:12:14] Speaker 13: Technology is driving business across Europe. [00:12:19] Speaker 14: Companies in Asia are betting on tech. [00:12:26] Speaker 3: Day CFOs are reshaping the C-suite. Bloomberg's chief future officer shines a spotlight on these dynamic leaders. Prudential's reputation as an insurance giant is rock solid, but it's not resting on tradition. CFO Janela Frias is playing a key role as the company resets its strategic priorities. [00:12:46] Speaker 15: We've been on a journey to be higher growth, more nimble, and more capital efficient. Watch chief future officer Wednesday on Bloomberg. [00:12:56] Speaker 16: In case you missed it, on Balance of Power. [00:12:59] Speaker 2: This great show, by the way. Melania coin helped to delegitimize serious crypto coins. [00:13:05] Speaker 17: Look, meme coins, they have another handle for them, another four-letter word. [00:13:09] Speaker 1: I can't say it on the air. [00:13:10] Speaker 17: All these meme coins really undermine what is digital properties that can make a huge difference over the long term. But people buy it. People are interested in it. And I wasn't into Beanie Babies, but perhaps this is digital Beanie Babies. [00:13:22] Speaker 16: Don't miss Balance of Power, live every weekday. [00:13:26] Speaker 13: What is your typical day as a governor? The Naval Academy is down the street from here, so I work out with them every morning. So you keep up with them? Oh, yes. There is no way. As an Army guy, there's no way I'm letting the Navy smoke. No way. [00:13:52] Speaker 18: I'm not expecting much from this meeting. They're going to stay on hold. [00:14:07] Speaker 19: They'll hold, and then President Trump will disparage them. [00:14:10] Speaker 20: I expect to learn nothing from this press conference. It's Chair Powell's express goal heading into this meeting to say as little as possible. [00:14:20] Speaker 21: He'd love to make it just as boring as he can. [00:14:22] Speaker 6: We think it's skip, not pause. Skip is the right way to think about it. [00:14:27] Speaker 22: The Fed might actually be on hold for the foreseeable future. It's going to be a year where the Fed can, you know, reduce interest rates twice, maybe once, maybe twice. [00:14:36] Speaker 1: What we think is likely to happen is two cuts. The Fed is sitting on a perfect Goldilocks moment, and it's probably not going to last. [00:14:42] Speaker 23: There's so much uncertainty. The Fed's kind of in a bind because they don't really know what the administration's going to roll out. [00:14:48] Speaker 1: The Fed Reserve wants to wait and see. [00:14:50] Speaker 24: Sit back and wait. It's going to be a long road ahead. [00:14:54] Speaker 8: Who said you're going to learn nothing? Who put that in there? This box office stuff kicks off in about 15 minutes' time. [00:15:01] Speaker 9: You're doing a great job. [00:15:02] Speaker 8: This is really impressive. It's a big decision. [00:15:04] Speaker 9: It's huge. [00:15:05] Speaker 8: We've had a huge news conference with Chairman Powell later on. Huge. So big, 30 minutes into this, we'll be turning on the football and doing a two-screen situation. [00:15:12] Speaker 9: You're going to open it up early so you can see the people in their uniforms parading down the field. [00:15:17] Speaker 8: Tom's ready to watch Man City Club Rouge. [00:15:18] Speaker 10: Remember when you and I were put in a tag team timeout chair because one of us said it was a snooze fest? [00:15:23] Speaker 8: That was the ECB. Yeah. We upset some people. [00:15:26] Speaker 10: And I said this morning, I'm sorry. I'm looking for a surprise here because no one's expecting anything as we just heard from Greg Peters and others. [00:15:33] Speaker 9: I will just say that if the Fed heard you say it was a snooze fest, they would feel flattered because that is exactly what they're looking for. [00:15:39] Speaker 8: That's the objective. Equity markets right now look like this on the S&P 500, negative by 0.5%, down by 0.6% on the NASDAQ. Just check out the bond market briefly, the two-year, 10-year, and 30-year. The two-year opened the last time the Fed met back on December 18th at 4.24. And we are there right now at about 4.22. Similar move on a 10-year, Rudy Lisa. Lots of volatility in between meetings. But the last time the Fed met, we closed that day at just above 4.50. And we're just above 4.50 right now. [00:16:07] Speaker 9: What's interesting is how much of this is driven by people less worried about the deficit, by some sort of policy shift versus NVIDIA. And what happened with DeepSeq on Monday and the idea that there was sort of a flight to quality that led to a big rally in the bond market. Did this give some breathing space on some level to the Federal Reserve heading into this meeting? [00:16:24] Speaker 8: Bob Michaler, J.P. Morgan Asset Management, joins us around the table. Bob, good afternoon. It's good to see you. Happy to be here. How would you characterize things right now, pause or skip? [00:16:33] Speaker 25: Feels like they're definitely going to pause. They haven't set us up for anything other than that. And see how good we are in the bond market. We read what they said last quarter and we kept yields almost exactly where they were for a couple months. [00:16:46] Speaker 9: All right. Come on. Give me a break. We saw a lot of volatility. I'm trying to liven things up. Yeah, really? Is that the way that we're livening things up? I mean, there's a real question here about whether, as you just heard Mohamed El-Erian talk about, the volatility that we have seen in between now and then, it might not be that obvious, is it really demonstrates how the Fed is losing control over rates, over the message. And there are other factors at play that are going to kind of force their hand. [00:17:10] Speaker 25: I think there's a lot of money sloshing around in the system. We're going back to a business-as-usual environment that existed pre-financial crisis, where there's a demand for capital, there's a cost for capital, there's a productive use for it. And market participants will move rates around according to that. I think that's what we're seeing and that's what we have to get used to. [00:17:31] Speaker 10: Off the core equation, there's net exports, and nobody can guess what they're going to be. But maybe more than any other time, Bob Michael, what you're hearing and interpreting from Bruce Kassman, Michael Ferroli, and others in J.P. Morgan Economics, what are they saying about the shock of this sustained growth that we've received? Does it continue, or do we ebb away? [00:17:52] Speaker 25: We look for pretty steady growth. We're looking for 2.8% in the fourth quarter. Next year, we're looking for low to mid 2%. We're looking for inflation to come down around the Fed's 2% target. We're looking for unemployment to hang around in the low fours, call it four and a quarter on average. That's a pretty good environment. The Fed has done a good job guiding us to this point, and we think there will be some capacity for them to come back in and cut rates. Is that a good environment for bonds? It's an awesome environment for bonds, and that's what we saw Monday. It's what we've been waiting for. You don't have a bond market that's yielding zero. You've got some yield in the market. It can be that anchor in the storm. It can be that flight to quality, that safe haven. We see investors in every channel of investor coming to us looking to get into the bond market. They can get out of cash at 4.25%, go into an aggregate bond fund at over 5%. You throw a little alpha on that, you're closer to 6%. [00:18:54] Speaker 9: So what do you say to people who might be worried about things like some of the policy proposals, whether tariffs are inflationary, whether the immigration restrictions will lead to a sort of supply-demand imbalance that causes wages to rise? How do you tell them, you know what, we're not getting any more rate hikes, and actually the Fed's going to cut at least once, if not twice, if not more for the remainder of this year? [00:19:15] Speaker 25: Because interestingly, this time you have two Feds. You've got the Fed that's watching full employment and inflation and constantly looking at those things, and you have an administration that's looking at exactly those two things. They've promised jobs and full employment, and they've promised stable prices. And I think you'll see that balance in policies. And I think tariffs are a two-edged sword. It is true there is that initial ratchet-up in prices, but that ratchet-up in prices will also dampen demand. And I think it's the same thing with immigration policy. Yes, you may lose some of that supply of a lower-cost workforce, but also that workforce is a consumer and is consuming, so you'll lose some of that. I think we have to be more open to it could be balanced. [00:20:09] Speaker 8: Hey, Bob, I just want to clarify, Eagles green for the men of Philadelphia. Absolutely, go birds. I don't know what you might have heard earlier, but Eagles green, clearly. It was garbled. [00:20:16] Speaker 10: So if the Irish show up, it's Irish green for the next guest? [00:20:19] Speaker 8: Yes. And then if the Scots, if one half of Scotland turns up, it's Celtics green. [00:20:24] Speaker 9: Yeah, it's Mets green. All right? [00:20:25] Speaker 8: Yeah, obviously, it's only above. The green of your choice. They're the green, do they? No, absolutely not. Joining us now is Cathy Jones, Charles Schwab. Bank of America's Aditya Bhavai joining us, too. Bob Michael alongside us. Cathy, I want to come to you first of all. This was called the recalibration phase. They moved 50 in September. They followed that up with 25, went again with 25. And now it feels like they've stopped. I don't know if this is a prolonged pause or a skip. I wonder how you would characterize this current holding pattern. What would you call it? [00:20:50] Speaker 21: I'd say it's a prolonged pause. We do still have canceled in one, maybe two rate cuts by the end of the year. But that proposition is less than 50-50 at this stage of the game. So, yeah, I think they're on pause. And they have to try to assess the impact of all the risks that were talked about at the last meeting. You know, if you read the minutes of the last meeting, you see they did discuss things like immigration, trade policy, regulation, fiscal policy. So, you know that that's front and center. And there's not much the Fed can do until they have some information about how that's going to play out. So, we think they're on hold at least through the first half of the year. And then it's really a wait-and-see game to see how these various policies work out. [00:21:39] Speaker 9: I love this, because we're going to be talking to people all day long, including all of us, about how this is important to pay attention to, but it's going to be incredibly boring. Kathy, you talk about how, in the news conference, some of the political questions might end up being the biggest fireworks. What, in particular, are you curious about having answered? [00:22:00] Speaker 21: Well, I don't think that Powell will take the bait, but I do think that there is going to be press to talk about how the president has talked about demanding interest rate cuts, how the Treasury Secretary has talked about having a shadow Fed. He'll probably be asked about the relationship now between the Fed and the administration. Again, I don't think he's going to give us anything particularly noteworthy on that. But it will be interesting to see, you know, if you have a drinking game, how often does Trump's name come up? You know, how drunk will people be by the end of that press conference? [00:22:41] Speaker 8: My guess is that in about 20 minutes' time, we'll be pretty drunk, basically halfway through the press conference. [00:22:47] Speaker 25: But why wouldn't we expect the president to be on social media live at that time? He's going to sit there at 2 o'clock and watch no rate cut. Then at 2.30, he's going to hear a complete dismissal by the Fed of all the policies he's talking about, that we just ignore them. Nobody thinks he's going to be on social media commenting. We all think he will be at some point. I mean, we brought this up, and it's like the win of it. That's all it is. I think real time during the press conference, he will be after commenting. I don't disagree. [00:23:19] Speaker 10: Again, I don't think it's a snooze fest, and it starts at 1600 Pennsylvania Avenue. [00:23:23] Speaker 25: This will be electric at 2.30. [00:23:25] Speaker 8: We're all looking for the commentary from the lead strategist at the White House and his view on the Federal Reserve. Let's get Aditya Bhave's view on the Federal Reserve. Aditya, coming into this meeting, we just heard from Mohamed Al-Erin. He said this week this could be a pause through to summer. You see it potentially for a whole lot longer. Where did you get the confidence that there won't be any cuts potentially in 25? [00:23:46] Speaker 26: So it's a few things, right? The labor market has stabilized from our perspective, and it's stabilized around full employment. If you look at a variety of labor market indicators, you look at where they are now versus what the Fed knew in September, basically everything has stayed flat, and some variables have actually improved. So that's good news for the Fed. Meanwhile, inflation has kind of gotten stuck. We think the trend is around 2.5, and we think that's where we'll be after we get the helpful base effects in the first quarter. But that path from 2.5 to 2% from our perspective is going to be difficult because underlying activity is just really strong. So if you put all of that together, we don't see the Fed really needing to cut. And I think the one thing that's being ignored right now is the news article that we got yesterday published by Nick Tameros. So we know that he is a prominent Fed watcher. He has a history of forecasting Fed surprises, particularly around the blackout period. And he talks about how the Fed is concerned about inflation expectations. So perhaps they are spooked by the U-Mish data that we saw. And that's just another reason for them to stay on pause. [00:24:56] Speaker 9: You said that it's likely that the Fed will maintain full optionality for the March meeting. And then you talk about why they could potentially cut rates. Does full optionality mean the potential to hike rates? Is that going to be something that he could potentially even introduce, not necessarily in March, but later this year, as this idea of their concern with respect to inflation stickiness? [00:25:19] Speaker 26: We're some ways away from that. I agree with Mohamed, what he said earlier, that that is one of the key risks, and that is what could really cause another spike involved in markets. But I think we're some ways away from that. So we kind of roughly laid out a couple criteria for the Fed to hike. One of them would be that the core PCE gets back to 3%, which, again, is a difficult path when you're down to 2.5 after March. So 3% on the core PCE and not just because of tariffs, right? So if it's because of tariffs, sure, you could get there, but you assume it doesn't have long-term implications. So 3% with an unanchoring of inflation expectations, that gets you a lot more concerned, and that could be enough for the Fed to hike again. [00:25:58] Speaker 10: Kathy Jones, Aditya is known for Bank of America, talks about an optionality to march. What's the options, the optionality that Chairman Powell has in his press conference? [00:26:10] Speaker 21: Yeah, I think the options he has is to signal that there would be a rate cut if the data proved to be consistent with that. I think he would have the option also to signal that the Fed believes it's done and that it may be thinking about hiking rates down the road. I don't think, though, that decision will be made either way in March. We do think the Fed stays on hold through the first half of the year because all of these policies that are potentially inflationary also potentially slow growth. So they've got to really parse the mix of how this is going to go. And so leaving all options open for the next couple of meetings seems like the prudent way to go at this stage of the game. [00:26:56] Speaker 9: Bob, you're trying to make this sound scintillating. And I will tell you, we miss the most scintillating part of the whole conversation, quantitative tightening. Could they make a decision and actually stop shrinking their balance sheet? And could that actually have some effect that would not be necessarily like watching paint dry? [00:27:12] Speaker 25: It would be nice if they said something about it. We doubt they will. You're going to have to live with the Bank of Canada stop quantitative tightening today. So that's all we're going to get there. [00:27:23] Speaker 9: That's the fireworks. [00:27:24] Speaker 25: You're trying to make this happen, aren't you? [00:27:25] Speaker 9: Well, you know, honestly, Bank of Canada was fascinating. They cut rates. And then they also talked about how they have no forward guidance because tariffs could potentially really slow growth. This was a real statement. [00:27:36] Speaker 8: You mentioned GM earlier on this morning, and I'm pleased you did. General Motors came out earlier this week with decent numbers, decent outlook. And hardly anyone had any confidence in that outlook because that outlook is so dependent on what may or may not happen at the White House with trade this weekend and maybe beyond. [00:27:52] Speaker 9: Yeah, and why wouldn't Fed Chair Jay Powell come out and say, how can we have any guidance whatsoever, given the fact that there is a great deal of uncertainty? And we'll be monitoring that, but we don't have forward guidance at a time where nobody has forward guidance except for maybe one person in the Oval Office. [00:28:05] Speaker 25: How much confidence can you have in forward guidance at this point? Well, we don't really like our central bank to say that they're rudderless. I think they'll stick to the data as they see it. We already know from the last meeting that they're paying some attention to what could come down the road. Some are. The question, well, yeah, that's enough. The questions to be asked are, how are they modeling that? And with the Fed funds rate at four and three-eighths, do they still categorize that as meaningfully restrictive? I think you'll get that question in about 31 minutes' time. [00:28:37] Speaker 9: I think you'll get a lot of questions, but I think that would be a really interesting one. How do you model some of these policies at a time where some are looking at tariffs, some are looking at inflation, and some are looking at the open Fed chair seat? [00:28:48] Speaker 8: Some assume, some speculate, and some guess, and some have got some real ambition about their career on the FOMC. It takes a village. Yeah, that's for sure. Special thanks to Kathy and to Aditya as well. That Fed decision is about 25 seconds away. The scores go into it look a little something like this. On the S&P 500, still down by a half of 1%. On the Nasdaq 100, down by 0.56%. Check out the bond market. Here's the whole curve for you. Two-year, 10-year, 30-year. Yields up just a touch, up a basis point or two. On a 10-year, 454.86. On a two-year, 421.76, up two basis points. And finally, just to round it out, your 30-year, 478.87. With the Fed decision, here's Mike McKee. [00:29:29] Speaker 27: A nothing burger from the Fed. No change in rates, no change in balance sheet policy, and only small changes in the economic assessment. Recent indicators suggest that economic activity has continued to expand at a solid pace, the first sentence says. A carryover from December. Then a significantly shortened summary. Quote, the unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated. Recognizing reality, the Fed did remove a reference to the, quote, inflation has made progress towards the committee's 2% objective. If you want to read a future policy clue, perhaps, into the statement. But that's it. The rest of the statement, other than the committee maintaining the target range at four and a quarter to four and a half percent, is unchanged. The central bankers say again that, quote, in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the balance sheet at four and a half percent, and the end point. The committee continues QT, reducing the balance sheet at current levels, and does not mention any end point. And while four new members joined the rotation this year, Collins, Schoolsby, Musallam, and Schmid, the decision was unanimous. The rather anodyne statement puts the focus on Chair Jay Powell, who will be speaking to us in about half an hour. Other than acknowledging inflation hasn't made progress, there isn't much in here that will lead you to speculate on what they'll do next. [00:31:09] Speaker 8: Mike, just stay right there. I just want to share the price action with you, then follow up with the question on the labor market. So equities have backed off just a touch, not a whole lot, but just a little bit more. We're down six-tenths of one percent on the S&P. Yields have kicked higher as well by a couple of extra basis points. So the front end by five, on a 10-year now up by four. The line on the labor market, Mike, it feels like they've buried the scare of the summer and that they're now satisfied, almost comfortable, that unemployment can stabilize at these levels. And, Mike, I'd wonder what you'd say about that. [00:31:41] Speaker 27: At this point, it doesn't look like they're thinking that the labor market is going to rapidly decompose. There are some signs that things are getting a little bit slower. We're not seeing people get jobs as fast as they did before. But right now, unemployment is still low, and it moved down in the last month. So as long as that's the case, they're going to call it solid and not particularly worry about it. [00:32:05] Speaker 8: A real deterioration might lead them to cut, but they're not seeing that now. Mike, looking forward to your questions in that news conference. It kicks off in about 27 minutes' time. Brown, I don't know about you, but that jumped out for me. What led to this recalibration phase, if there was any urgency, it was off the back of the labor market data. That really set up that Jackson Hole speech for Chairman Powell. And it feels like they've put that to the back burner in the past. [00:32:28] Speaker 9: Yeah, talking about labor market remaining solid and the unemployment has stabilized, you pair that with the other headline, which I think is important, which is removing the reference to inflation-making progress toward the goal. You put those two things together on the margins, a bit hawkish, which is the reason why you're seeing the reaction in markets that you are. [00:32:47] Speaker 8: A holding pattern for now, at least. Joining us, some of the best, the former Fed Vice Chair, Richard Clarida, alongside us, Bob Michael of JPMorgan. Rich, great to see you, as always. Your thoughts on this decision? [00:32:58] Speaker 28: Well, as expected, you know, the Chair wanted to buy some time in December. He accomplished that. As I think you indicated before, probably the interesting part of this will be the press conference and to maybe count the number of questions that don't involve the president or politicization. But I think the decision was well understood and I think justifiable, given the data that you mentioned on the labor market and inflation. What question, Rich, and I'm going to put you on the spot here. Please do. [00:33:24] Speaker 9: What would you ask, not related to Donald Trump, that you think he would actually answer in a press conference? [00:33:31] Speaker 28: I'd like to get a sense from them on what it would take for them to start thinking seriously about doing a rate hike. You know, he's gotten a question along those lines at prior press conferences and he's more or less said, that's not on the radar now, we're not thinking about that. Give him a chance to answer it again. [00:33:47] Speaker 10: October 10, 1971. I remember it well. You remember that well. [00:33:52] Speaker 28: Yeah. [00:33:52] Speaker 10: Nixon and Arthur Burns, and we had the Nixon tapes, so we know what happened. Yeah. There was a lot of political pressure on Chairman Burns. Burns at the time. In what way will Mr. Trump express his displeasure and how should the Fed respond? [00:34:09] Speaker 28: Well, I think the president will have opinions, as he's indicated, on policy. He'll share those. It's not going to have any effect on the decisions. You know, I was there for round one on that. And, you know, Jay Powell is not Arthur Burns. Bob? [00:34:23] Speaker 25: Yeah. You know, I took away the same thing that the market took away. Where was the dovish bias in this? And I think that's what the market was looking for. And they took out the labor market conditions had generally eased and put in solid. This does not sound like a Fed that's looking for the next opportunity to cut rates. [00:34:44] Speaker 28: But if I could jump in, I think appropriate, given the data flow. Remember, the SOM rule had been triggered in September. It's now we've had good employment reports. Progress on inflation, which looked very encouraging in October, has now, we've had several challenging months. And so I think this changes make sense. [00:35:01] Speaker 25: Well, we talked about 71. Does this remind you of 95, when they only cut 75 basis points and everything was fine? And then they came back and hiked 25. [00:35:11] Speaker 28: Well, and, of course, in 2019 as well, the Powell Fed did 75 basis points and I think would have stayed there for the pandemic. [00:35:19] Speaker 9: Well, it's fascinating to see these headlines that largely were expected, but on the margins, a bit of a hawkish tilt, which is the reason why you're seeing a commensurate move in markets with yields marginally higher and stocks marginally selling off. I do wonder, though, Bob, you said earlier the idea that you don't want a rudderless central bank. How is this anything other than a rudderless central bank that's looking at the data in real time and susceptible to any shift? [00:35:45] Speaker 25: They've acknowledged that they've done a good job. They've brought the economy to a reasonable soft landing. I think one of the questions that we have to hear Powell answer is, do they still view this level of rates as meaningfully restrictive? I don't think it is anymore. I don't think you can look at this data and call it meaningfully restrictive. [00:36:06] Speaker 10: One of the joys of Columbia Economics is a gentleman with a bright sport coat, Xavier Salah E. Martin. He's an expert on growth economics, international economics. There's a certitude here of tariffs. I don't buy it for a moment. I think there's huge ambiguity. Could our big surprise be a growth slowdown from any form, any magnitude of tariffs? [00:36:27] Speaker 28: Oh, I think so. I think the scenario, I'm not hoping for, but what we saw in 2019 was the trade policy uncertainty was a headwind to the economy. Growth slowed, inflation fell, not only in the U.S., but globally. So you could see a scenario where in the end we don't get a lot of tariffs. We don't actually get a lot of immigration, or at least relative to some of the concerns, but there's a lot of uncertainty about what the resolution is, and that can be a headwind of the economy. In theory, I'm not predicting it, but that's a scenario. [00:36:59] Speaker 10: The run rate here on the economy, to me, is the key attribute right now. When you go back to Casmin and Farroli at J.P. Morgan, how do we get out to June? I mean, you've got to view first half, second half, like anyone appropriately should. But to me, there's this massive ambiguity slotting in in April, May. How do you handle that? [00:37:18] Speaker 25: Well, I think you have to look at what hiring looks like, and the quits rate has moderated quite a bit. You see employers out there hiring again. You also hear from our research analysts that businesses are investing more in CapEx. So it feels as though businesses have certainly absorbed the higher rates. It's also starting to feel like consumers have absorbed the higher rate regime. I think housing will be critical there. We'll see how housing does in the spring, but our expectation is it actually picks up from here. [00:37:53] Speaker 8: Some aggressive pushback from Neil Dutta of Renmark, who writes in and says the following, hawkish and complacent. Goes on to say, the press statement makes clear that the dominating risk is a passive tightening of monetary policy. The Fed is remarkably complacent. I don't agree with their economic outlook. Housing is a mess. Wage growth is slowing. Core inflation is likely to ease in the months ahead as rental disinflation comes more into focus. Why do you disagree with that? [00:38:16] Speaker 25: Well, I don't really disagree with any of that. All he's talking about is the economy continuing to glide to a soft landing. We've got inflation. We'll get core PCE in the next few days. That year over year is 2.8%. You could take the three in the six months. It's at 2.3%, but it's not 2%. And Rich talked about tariffs in 2019. That was a much lower inflation regime. We were sub 2%. Now we're over 2%. So I think the Fed would like to keep rates here until they see inflation actually down at 2%. [00:38:50] Speaker 28: Let me put something on the table. We could get some good news on inflation for three or four months. The year-over-year comps will actually be favorable to those calculations. We could be looking in April at inflation running in the low twos. And then the question will be, why aren't you cutting? So again, three or four months of data can change sentiment and potentially the Fed's outlook pretty notably, I think. [00:39:11] Speaker 9: You both asked great questions or gave journalists good questions to ask. You were asking what would it take to hike rates, put that back on the table. And Bob, you asked, are rates meaningfully restrictive? Because you don't think that the evidence points to them being so rich. Would you agree that based on the economic data, it is hard to say that rates are meaningfully restrictive despite what you're seeing in the housing market and despite the normalizing that you can see in some pockets as potentially weakness? [00:39:38] Speaker 28: Well, certainly rates are less restrictive than they were. I judge that they still are restrictive. What I would say, however, is part of the reason financial conditions appear pretty supportive is markets continue to price in rate cuts. In a scenario where the Fred Crowley says, we are really done, financial conditions won't look as accommodative as they do now. So part of the financial conditions story is continued cutting and, as Bob said, the soft landing. And you could have a power Fed saying, we want the soft landing but no more rate cuts. That would change financial conditions. [00:40:07] Speaker 8: I'm going to say something that might be somewhat unpopular around this table. I would sense, and I think a lot of people watching might feel the same and listening too, that this is convenient framing to insulate themselves from political criticism. That back in December, Chairman Powell made such a hash of it in the news conference and invited criticism about whether they were anticipating policy changes and whether it was the incoming Trump administration that changed their stance. And now they get to put out a statement that says, no, this is about elevated inflation and a solid labor market. How much has changed in the last five, six weeks? Has that much changed in the last five, six weeks? Why didn't they make this argument back in December? Is this about policy or is it about the data? [00:40:47] Speaker 9: Well, maybe we will find out in the press conference when someone asks Fed Chair Jay Powell just that. I will say it seems like it's going to be an increasingly politically delicate situation for Jay Powell. I'm curious to see whether he just answers what I'm saying. [00:41:03] Speaker 8: This is one way of insulating the committee from that criticism. You can just point to the statement and say it's about inflation, it's about the data, and we're not talking about policy. [00:41:10] Speaker 9: Well, and at some levels, some of the members probably feel that way. The question is who, right? Are there people who are factoring certain things into their views? I will say that the flipping and the flopping, there should be at some point an anatomy of what happened at all of these times to really understand exactly what the deliberative process is at the Federal Reserve. [00:41:30] Speaker 8: Rich can tell us what he really thinks in a commercial break that starts in about an hour's time after that news conference is finished. Do you want to share it now? [00:41:38] Speaker 28: Well, as I said, they made the judgment in September. The labor market was softening. The SOM rule had been triggered. They had good inflation numbers. I actually think it's no more complex than it is data dependent. And in particular, they were disappointed that there was not more progress in inflation. You are completely right, Lisa, that the comments on is there a placeholder, is the staff forecasting, what do people factor in? We now know from the minutes that, in fact, the placeholder was in the staff forecast and in many of the participants. And so, you know, that's another consideration as well. [00:42:09] Speaker 8: I'm sure he'll be asked that. If you are just joining us, welcome to the program. Equities declining by 0.8% of 1%. This was meant to be a non-event, turning out to be somewhat of an event. Rates unchanged, but with a hawkish bias in the statement. Bond yields are a little bit higher off the back of it as well. If you check out the 2-year, 10-year, and 30-year going into this decision and the release of the statement, yields were higher by a couple of basis points, now up by 5 on a 10-year to 458. Diane Swonk of KPMG joins us now for more. Diane, welcome to the program. Your early reaction to that statement, please. [00:42:41] Speaker 14: Well, it is a little bit hawkish, and I do think it's well expected. I agree with Rich that this is in response to the data. We got a better employment report than expected at the end of the year. That is factored into the statement with the solid. We've also seen thin inflation. The path down is much slower than the path up in the last mile. It's looked a little sticky. I also agree with Rich, though, that we could get some very good inflation data in the first three months of the year, January, February, and March. And that will be interesting because not only is it the year-on-year comps, but they're changing the seasonal adjustment to the personal consumption expenditure index, which the Fed targets. That's important. What the Fed can't do is they can't front-run policy. There are policies that people fear are inflationary, tariffs, mass deportations, and tax cuts. On the flip side, there's policies they see as disinflationary, deregulation, and cuts in government spending. And until we know the sequence of policy, the magnitude of policy, the Fed can't front-run that, even though they're doing simulations on it. And the magnitude is different today than it was in 2018 or 2019. I think the other important issue is that the embers of inflation are still burning. This is not a situation where they've already defeated inflation. So it makes sense, again, behind the data. I think they'd like to be more forecast-oriented in their policy setting, but I don't know how they can be. Because, one, we don't know the sequence of those policies. And, two, it's important that the U.S. economy has humbled the Fed more than once. [00:44:16] Speaker 10: Jason, or rather, Diane, you stopped me cold today with the Jason Furman chart going back to the 30s, the analog back to Smoot-Hawley as well. And there are a lot of other noise going on as well. But the answer is, the unspoken here is disinflation, and not the fear of outright deflation, but just the slowing of the economy, which gets you, frankly, to a Bob Michael lower-yield environment. Discuss the analog you have back to the 30s in tariffs, as you showed in the Furman chart today. [00:44:47] Speaker 14: Well, you know, Jason had put that out there a long time ago. It was really important, was that we had a major tax hike in the form of tariffs. The Smoot-Hawley Tariff Act of 1930, after we were into the Great Depression, which tipped off a trade war with 25 countries and a 67 percent collapse in global trade. And that was important, because it added insult to injury and pushed us further into the depths of the Great Depression globally, and helped to sow the seeds of World War II. So, that was very important. It was already in the context of an environment where disinflation and deflation was occurring. That is not the case today, and that's why -- but we don't know. There's still a lot of uncertainty, as Rich pointed out, about which policies happen first, which is more weakening, which is more inflationary, or what is -- the one thing we've not talked about, what's stagflationary out there? That is a possibility, and I think that's important, too. And the Fed is looking at this saying, "Listen, we're looking at the data. We've got the data in the last five weeks. We've gotten data that justify that statement. And that's it." Rich period, full stop, wait and see. [00:45:54] Speaker 9: I want to bring you into this, because there is a question around scenario analysis, and how this Federal Reserve is going to analyze the ramifications of tariffs at a time that otherwise is somewhat inflationary. What would you say to that? Do you have a sense of what that scenario analysis looks like? [00:46:11] Speaker 28: Well, they're probably looking at more than one, and they have to factor in retaliation, no retaliation. They have to factor in how much does the dollar adjust. They have to factor in how much do U.S. companies piggyback off the tariff for domestic companies to hike. So if I were there, I'd probably say they might be looking at four or five different scenarios, and then in the end, you sort of put a weight on them to give you your forecast. I don't think they're at that -- my sense is they're probably not at that point yet, in terms of detailed probabilities on each, but they're starting to go down that road, I think. [00:46:42] Speaker 25: The Fed is in the best position it's been for 20 years. Think of it this way. If something goes wrong with policy, either rates are too restrictive for too long, or something comes out of the administration that causes the downside, and unemployment goes up a lot, they can cut rates a couple hundred basis points from here. They've got plenty of room to do that. If the other happens, and actually there's a reacceleration in growth, we're in too much of a pro-growth mode, the golden age of America, and inflation starts to tick up, they can hike rates a hundred basis points or so. It's been a long time since the Fed has had that capability to react in either direction. [00:47:27] Speaker 8: Dan Swank, I want to give you the final word just on that conversation. Bob Michaels says it's the best position this Fed's been in 20 years. Do you agree? [00:47:36] Speaker 14: No. That's an easy answer. But this is a very hard situation for the Fed because they can't be preemptive. They can't forecast it because they've got to wait for policy and react to it. And then they've got to figure out the one scenario that's not in there is a stagflationary scenario, which I don't think we get to unless we have a really big policy mistake until 26, 27. And one would hope that we'd see a course correction before then. But that is one of the scenarios you have to put into this equation. And that other issue on the expectation of inflation, both in terms of consumers expecting it now with a muscle memory that they didn't have before, the willingness to buy ahead of tariffs once they see tariffs out there. That is a different situation that we had in the 2010s. And the fact that companies have already raised prices through this cycle where we didn't have that in the 2010s. No one even thought of raising prices except for the things that were tariffed, which were passed down or bought with them like dryers with washing machines. So I think we really have to look at this as a very different scenario. And to me, it doesn't feel like the easiest place at all for the Fed. It's one of the harder positions for the Federal Reserve to be in. [00:48:47] Speaker 8: Diane, I think that's probably the difference between economists and market participants right now, explaining that one. Diane Swonk there of KPMG. Matt Lizetti at Deutsche Bank is an economist. And Matt Lizetti joins us now for more. Matt, you came out last year, one of the first to do so, and said no rate cuts in 2025. Do you think the statement today, this afternoon, sets us up for that? [00:49:07] Speaker 29: Matt Lizetti: Well, I think the statement moves in that direction. It's a marked market of the data that we've seen since the December FOMC meeting. And I think it acknowledges that the Fed is feeling a bit better about the labor market, the downside risk that they were worried about there last year. They're not completely gone, but they've diminished. And that we've seen kind of a lack of progress on inflation over the past several months. But the reality, and as part of this discussion, we're going to see big changes in data flow over Q1 and over the coming quarters. And we have a lot of policy risks that are out there, especially from the Trump administration. So while it does lean in that direction, reduces the probability of near-term rate cuts, you know, I think the Fed will have to see how these policies shake out to really know how policy is going to adjust over the course of the year. [00:49:45] Speaker 10: Matt Lizetti: This is wonderful. The Fed decides. Matt Lizetti, Bob Michael, and Professor Clarida. Professor, I'm going to go to you on this. Matt Lizetti: Yes, sir. Matt Lizetti: This afternoon, maybe more important than the economics, is Microsoft and Facebook with a combined $110 billion of free cash flow in the last 24 months. We have a part of America absolutely booming. Technology, productivity, you know the drill. And we got another part of the country, as Craig Torres writes about for Bloomberg, flat on their back. How does Powell handle that with this new president, this bipolar America? [00:50:19] Speaker 28: Paul Clarida: Well, I think it's been an emerging fact of life in the U.S. economy for decades. You know, the numbers I like to look at are, you know, two thirds of Americans own their own home. That means a third don't. More than half of Americans own stocks mean the other half don't. So if you own your house, you have stocks, you've had a really good run. If you don't, it seems like a very, very tough time. And so the Fed can only really impact our good employment and output. And so I don't think there's a lot the Fed can do about it. But it, you know, creates a challenge in terms of navigating sentiment for sure. [00:50:49] Speaker 9: Peggy O' Well, Matt, just to go to you on this, we were talking about whether the Fed is in a really good position, as Bob Michael was saying, or whether, as Dayan Swank said, a really uncomfortable position, because they're stuck between a rock and a hard place in terms of what their effect, to Rich's point, is on the overall economy versus markets, and how much they really are potentially facing off risks that they can't counter. Do you think that the risks are skewed higher to them missing an inflationary boom and not getting ahead of it, or to allowing the economy to deteriorate more rapidly by not cutting rates sooner? [00:51:23] Speaker 29: Michael Michael: Yeah, look, I think that they're well-positioned at the moment. They did their 100 basis point recalibration. I think that was the appropriate step to take over the past year. At the same time, growth is strong, the labor market's resilient, and there's really no need for them to cut rates further from here. So I do think that they are well-positioned. I would agree with Bob that, you know, it's a good place to be in, because they have a lot of scope to cut rates if they need to. They can also re-hike rates if they have to at some point, although that will be, I think, highly disruptive to markets. At the same time, the policy risks that they're facing from tariffs and immigration and fiscal policies are immense here. And so I think specifically for today, probably March, and maybe even a little bit further, it makes sense for them to take a step back. There's no real need to take a policy action in either direction at this point in time, and to see how those uncertainties kind of get resolved over the coming months. The only thing that I would also mention, you know, as we look ahead, even if inflation comes down to two and a quarter percent or so, what is the reason to be cutting rates if the labor market is strong and growth is resilient and financial conditions are easy? So that's part of our view for why, you know, we see the Fed on hold this year. Matt, for people who aren't familiar [00:52:27] Speaker 8: with your complete outlook for 25 and beyond, can you share with us your view for real GDP, for unemployment, and your work and assumptions around policy from the Trump administration and how they influence or not your outlook? Yeah, so for this year, we expect a continuation of sturdy growth. We [00:52:42] Speaker 29: have two and a half percent real GDP growth for this year, basically a continuation of what we are likely to have seen in 2024. The labor market, we expect to retighten just a modest amount from here to 3.9 or 4 percent on the unemployment rate by the end of the year. You know, that looked optimistic a few months ago, but I think it's much more in line with the data. And we also expect that core PC inflation remains at two and a half percent or above this year, which is also what the Fed anticipates. Now, we do have tariff effects built in there. Tariffs add 0.2 percent to our core PC inflation forecast this year, but we don't have a universal baseline tariff and we don't have 25 percent tariffs on Canada or Mexico built in. You know, we're going to learn a bit more of that over the course of this weekend. And those are upside risks to our inflation forecast. That's just how much the outlook could [00:53:24] Speaker 8: change after the weekend. Matt, appreciate it, sir. Matt Lazzetti there of Deutsche Bank going into this news conference with Chairman Powell. Again, if you are just joining us on Bloomberg TV and on Bloomberg Radio, the decision coming from the Federal Reserve just 24 minutes ago, rates unchanged. But in the statement, most economists and most strategists look at that statement and assume there's a bit of a hawkish tilt, a hawkish bias in that relative to what that statement looked like last time around. So off the back of that, equities lower near session lows on the S&P. We're down by eight tenths of one percent. Similar move on the Nasdaq in the bond market. Lisa yields are up about two basis points going into this [00:53:57] Speaker 9: decision. Coming out the other side, we're up about five. So not a massive move. Still, people taking note that this is a labor market that is, quote, solid, not necessarily weakening to some sort of degree. And that inflation risks still are present, that there's not as much progress made in the press conference. I really am actually curious about the two questions we heard from our panel. I think that they are very important questions. Number one, what would it take to hike rates at a time where potentially you could end up with that really disrupting markets. And then are rates meaningfully restrictive at a time when the economy is really [00:54:31] Speaker 25: doing quite well? Bob, do you think they are meaningfully restrictive? I think they're slightly restrictive, and that's why inflation will continue to come down. But meaningfully, no chance. Are they all on [00:54:43] Speaker 10: the same page? Is there a dissent there that's non-recorded in a Greenspan-like way? Well, we'll find out in [00:54:50] Speaker 28: five years when the transcripts come out. My sense is that there probably is a very wide range of views right now on the committee, probably more about the scenarios than the current position. I don't think anybody was secretly wanting to do anything today other than hold. But I do think of a committee with different backgrounds and perspectives. And I think as they start to drill down, as Lisa said, on specific scenarios, as opposed to placeholders, it could be a very lively set of internal discussions. This goes back to [00:55:22] Speaker 10: the Ben Steele essay today in Barron's. I mean, the scenarios, as you mentioned to begin with, the data [00:55:27] Speaker 25: dependency is everything. Tom, why can't you find out in the next couple weeks? Invite them on. Ask them these [00:55:34] Speaker 10: and ask them if they model. I had Krugman on it. And he was heated about the dynamics of tariffs and the ambiguity, the uncertainty that's out there in the dynamics of tariffs. What are we going to do with a 25% tariff? Name a country, John. Canada. Canada. And Gurra talked to Christia Friedland, right? What does that mean at Columbia with a piece of chalk in your hand to see that, 25%? [00:56:03] Speaker 28: Well, yes, you would notice it. I think the challenge for markets, I really have this sense that part of the financial condition story right now is that the more outrageous is the headline number, the least likely it is to actually stay in place for very long. I think most people think of this tariffs as being more of a bargaining chip than a battering ram. But again, uncertainty, you can, you know, that, but I think that's my take on it right now. [00:56:28] Speaker 9: Is there an economic drag, Bob, from the policy uncertainty? Is that something that you already [00:56:33] Speaker 25: can take into account? It doesn't feel like it. It feels like there's no obstacle to accessing capital. We see businesses out there acquiring capital and doing things with it. You just look at the size of the private credit market. We've gone an hour. We haven't mentioned that. There you go. It's closing in on $2 trillion. There is an underlying vibrancy to the economy, which I think will surface over the next couple of quarters. [00:57:04] Speaker 9: One of the confidence aspects that people keep coming back to is that Markets Act is the ultimate check on this president, on the ultimate check of this Fed, because they're looking at a lot of the data, and an ultimate check on exactly what is permissible and what isn't. How much, Rich, do you think that, frankly, the Fed is comforted by the strength and the resilience in equity markets and with the bond market where it is to basically give no guidance and outsource? [00:57:30] Speaker 28: Well, I do think the interplay between financial conditions and policy is an important one. And I'm sympathetic with where you are right now. I do think that, to the extent that you do view the S&P as being a check on bad policy or the bond market vigilantes being a check on irresponsible fiscal policy, that's a plus if you're at the Fed versus a minus, I think. One of the biggest economies [00:57:52] Speaker 8: has got to rebuild over the next several months and maybe the next several years. And in the last 60 minutes, we've hardly talked about it. California, Los Angeles. I think that's going to be a piece of this news conference through the next hour. The rebuild effort we need to see in the southeast of this country. Hurricane hit towards the end of last year. North Carolina as well, yeah. Absolutely. And in the west of this country, on the west coast in California, in Los Angeles County, that's a lot of rebuilding that needs to be done. And I'd love to see, to hear from them today, how much disruption they expect, how much disruption they expect and distortion to the economic data that we're going to get in the next several months and the inflationary impact that we could see off the back of that [00:58:25] Speaker 9: rebuild effort as well over the next few quarters. Essentially, when people have to rebuild and they have to hire and they have to spend a lot, that can on the backside end up to some sort of boom that can be distorted as well. This goes to the point of how do you take data seriously, but maybe not literally [00:58:41] Speaker 8: every single time. Then you've got the policy changes expected on top of all of that as well. I think for them, they get a free pass today. No forecast. March 19th gets harder. Mohamed said it earlier. When they have to produce the forecast, that's where things get trickier for this Federal Reserve and for the news conference with Chairman Powell. You know, every time we say he wants to make no [00:58:57] Speaker 9: news. And every time he manages to make some news. So let's see what happens when he answers some of the questions, the very good questions that we got from both Bob and Rich. A special thanks to [00:59:08] Speaker 8: Richard Clarida and to Bob Michael as well. You can see the scene if you're watching this on Bloomberg TV. Any moment now, Chairman Powell is going to walk through that door. That news conference will begin in about 10 seconds time. Coming into it, equity prices look like this on the S&P 500 near session lows. We're down by 0.9% on the S&P bond yields creeping higher across the curve on a two year, 10 year and 30 year. Just a little bit more hawkish than we expected, Lisa, in that statement. At a time when [00:59:34] Speaker 9: they had at one point been concerned about a labor market that was supposedly weakening. Now, evidently, it is solid. That is not the concern. Inflation on the margins, still a preeminent concern. How does he dovetail that in terms of what could tie the difference between possibly a cut or a hike? [00:59:50] Speaker 8: The first news conference of 2025. Here's the chairman of the Federal Reserve. [00:59:55] Speaker 19: My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. The economy is strong, pardon me, is strong overall and has made significant progress toward our goals over the past two years. Labor market conditions have cooled from their formerly overheated state and remain solid. Inflation has moved much closer to our 2% longer run goal, though it remains somewhat elevated. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. I'll have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has continued to expand at a solid pace. For 2024 as a whole, GDP looks to have risen above 2%, bolstered by resilient consumer spending. Investment in equipment and intangibles appears to have slowed in the fourth quarter, but was strong for the year overall. Following weakness in the middle of last year, activity in the housing sector seems to have stabilized. In the labor market, conditions remain solid. Payroll job gains averaged 170,000 per month over the past three months. Following earlier increases, the unemployment rate has stabilized since the middle of last year, and at 4.1 percent in December remains low. Nominal wage growth has eased over the past year, and the jobs to workers gap has narrowed. Overall, a wide set of indicators suggest that conditions in the labor market are broadly in balance. The labor market is not a source of significant inflationary pressures. Inflation has eased significantly over the past two years, but remains somewhat elevated relative to our 2 percent longer-run goal. Estimates based on the Consumer Price Index and other data indicate that total PCE prices rose 2.6 percent over the 12 months ending in December, and that, excluding the volatile food and energy categories, core PCE prices rose 2.8 percent. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. We see the risks to achieving our employment and inflation goals as being roughly in balance, and we are attentive to the risks on both sides of our mandate. Over the course of our three previous meetings, we lowered our policy rate by a full percentage point from its peak. That recalibration of our policy stance was appropriate in light of the progress on inflation and the rebalancing in the labor market. With our policy stance significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. At today's meeting, the Committee decided to maintain the target range for the federal funds rate at 4.25 to 4.5 percent. We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook, and the balance of risks. We're not on any preset course. As the economy evolves, we will adjust our policy stance in a manner that best promotes our maximum employment and price stability goals. If the economy remains strong and inflation does not continue to move sustainably toward 2 percent, we can maintain policy restraint for longer. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. As we previously announced, our five-year review of our monetary policy framework is taking place this year. At this meeting, the Committee began its discussions by reviewing the context and outcomes of our previous review that concluded in 2020, as well as the experiences of other central banks in conducting reviews. Our review will again include outreach and public events involving a wide range of parties, including Fed Listens events around the country, and a research conference in May. Throughout this process, we will be open to new ideas and critical feedback, and we will take on board lessons of the last five years in determining our findings. We intend to wrap up the review by late summer. I would note that the Committee's 2 percent longer-run inflation goal will be a focus of the review. The Fed has been assigned two goals for monetary policy: maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-run inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions. [01:05:57] Speaker 30: Mr. Chairman, Steve Leesman from CNBC. Mr. Chairman, at an event in Davos- or from- to Davos, anyway, the president said he'll demand that interest rates drop immediately. So I guess I have a three-part question: has the president done this to you? Has he made that demand? Secondly, what is your response to that? And third, what effect, if any, does a president making these counter-marks have on policy? Thank you. [01:06:27] Speaker 19: Three questions. I'm seeing it really as one question, though. So I'm not going to have- I'm not going to have any response or comment whatsoever on what the president said. It's not appropriate for me to do so. The public should be confident that we will continue to do our work, as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work. And that's how we best serve the public. [01:06:52] Speaker 30: Can you just comment on whether he's physically communicated his demand to you? [01:06:57] Speaker 19: I've had no contact. Thanks. Nick. [01:07:04] Speaker 31: Nick Timmeros, The Wall Street Journal. Chair Powell, you and several of your colleagues said around the time of the last meeting that your policy stance was meaningfully restrictive. Given economic and financial market development since then, how has your confidence changed in an assessment that says interest rates are meaningfully restrictive? [01:07:23] Speaker 19: I don't think that my assessment really has changed. I mean, a couple of things have happened. We've gotten more strong data, but we've also seen rates move up at the long end, which could represent a tightening in financial conditions. I think if we look back over the past year or so, we can see that policy is restrictive if you look at the effect of high rates on interest-sensitive spending, for example, in housing. And if you look at the achievement of our goal variables, we're seeing the economy move toward 2 percent inflation and has moved largely to maximum employment. So we really look at the movement toward the goal variables to make that assessment. Now, policy is meaningfully less restrictive than it was before we began to cut. It's 100 basis points less restrictive. And for that reason, you know, we're going to be focusing on seeing real progress on inflation or alternatively some weakness in the labor market before we consider making adjustments. If I could follow up, does the economy here warrant meaningfully [01:08:24] Speaker 31: restrictive interest rates? And would you judge interest rates to still be meaningfully restrictive if you were to [01:08:30] Speaker 19: lower them by another quarter point? CHAIR POWELL. So I think our policy stance is very well calibrated, as I mentioned, to balance the achievement of our two goals. We want policy to be restrictive enough to continue to foster further progress toward a 2 percent inflation goal. At the same time, we don't need to see further weakening in the labor market to achieve that goal. And that's kind of what we've been getting. The labor market has really been broadly stable. The unemployment rate has been broadly stable now for six months. Conditions seem to be broadly in balance. And I would say, look at the last couple of inflation readings, and you see we don't-we don't-we have overreacted to two good readings or two bad readings. But nonetheless, the last couple of readings have suggested, you know, more positive readings. So I think we're-I think policy is well-well positioned. [01:09:21] Speaker 32: I think policy is a good idea. It's a good idea. And I think policy is a good idea. [01:09:26] Speaker 33: Thank you. Colby, from the New York Times. Colby Smith with the New York Times. Chair Powell, how should we interpret the removal of the line from the statement that inflation has made progress towards the 2 percent goal? Is that no longer the case? [01:09:35] Speaker 19: CHAIR POWELL. No. So let me look-if you just look at the first paragraph, we did a little bit of language clean up there. We took out a reference to "since" earlier in the year as it related to the labor market. And we just chose to-to shorten that sentence. Again, I-I mean, if you look at the sort of intermeeting data, it was good. And-and there was-there was another inflation reading, I guess, just before the December meeting. So we've got two-two good readings in a row that are consistent with 2 percent inflation. Again, we're not going to over-interpret two good or two bad readings. But this was not meant to send a signal. Other than this, you know, you-you can take away from all of this that we remain committed to achieving our 2 percent inflation goals sustainably. [01:10:16] Speaker 33: And just to follow up, we've seen inflation expectations across a number of measures rise sharply, which has in part been linked to tariff concerns. But there's also been this encouraging data that you mentioned in terms of CPI and rent indices. So how would you characterize concerns about upside risks to inflation across the committee, especially those tied to policies related to the [01:10:37] Speaker 19: Trump administration? Well, I-I'd say you-you see expectations moving up a little bit at the short end, but not at the longer end, which-where it really matters. And those could be related to- could be related to what you mentioned, some of the new policies. Um, I think where the committee is very much in the mode of waiting to see what policies are enacted. And we-we don't know what will happen with-with tariffs, with immigration, with fiscal policy, and with regulatory policy. Uh, we're only just beginning to see-and actually are not really beginning to see much. And I think we need to-we need to let those policies be articulated before we can even begin to make a-a plausible assessment of what their implications for the economy will be. So we're going to be watching carefully. And-and as we always do, this is no different than any other set of policy changes at the beginning of-of an administration. We'll patiently watch and understand and-and, uh, you know, kind of not be in a hurry to-to-to get to a place of understanding what our policy response should be, until we see how it plays out. Michael McKee. [01:11:45] Speaker 27: Michael McKee from Bloomberg Television and Radio. You and your colleagues normally condition future policy moves with the phrase, "If the economy develops as we anticipate." Is it fair to say that, since there's a lot unknown about what this administration's fiscal policies are actually going to be, that you don't have a medium-to-long-term economic forecast that you can have confidence in? Or, if that's not true, can you lay out what, uh, you think is going to happen in the economy, [01:12:15] Speaker 19: how you see it developing? Michael McKee: Well, at all times-at all times, forecasts are conditional, at a minimum, on just a set of expectations. And, uh, and they're highly uncertain in both directions. We-we know that economic forecasting is-is really difficult, uh, beyond just a month or two out. So, um, uh, in the current situation, there's probably some elevated, uh, uh, uncertainty because of-of-of, you know, significant policy shifts in those four areas that I mentioned. Tariffs, the tariffs, immigration, fiscal policy, and, uh, and regulatory policy. So, there's probably some additional uncertainty, but that should be passing. We should go through that. And then we'll be back to the regular amount of uncertainty. So, you know, what-what forecasters are doing, not just us, but everybody's doing, is they've got, uh, sort of just a set of assumptions about what might happen. But they're really kind of in the nature of a placeholder. And meaning, you know, plausible could be, but honestly, you wouldn't stand behind it because you just don't know. And so you're just-you're just on hold waiting to see what comes down. Um, you know, it's-it's a very large economy, and policy's affected at the margin. But we'll-you know, [01:13:25] Speaker 27: we're going to wait and see. Well, if I can follow up the, um, idea that, uh, you feel the economy- that, uh, policy is restrictive suggests that the Fed, in general, wants to continue to lower interest rates. So when you look at the data that you are dependent on, are you looking for data that tell you that you can cut, or data that will tell you you should hold? [01:13:50] Speaker 19: You know, we're-we're looking-it's more the other-the way-the way it works is, we are looking at the data to guide us in what we should do. And, uh, you know, that-that's what we do. And, uh, right now, we feel like we're in a very good place. Policy's well-positioned, the economy's in-in quite a good place, actually, as well. And, um, what-what we do expect is to see further progress on inflation. And, uh, you know, as I mentioned, uh, as we see that, or if we were to see weakening in the labor market, that could foster-we could then be in a position of-of making further adjustments. But right now, we, uh, we don't see that, and we see things as-in a really good place for policy and for the economy. And so we feel like we don't need to be in a hurry to-to make any adjustments. Howard? [01:14:38] Speaker 34: Howard Schneider with, uh, Reuters. Uh, thank you very much. Um, in 2021 at a central bank conference, you said, quote, "uh, throughout my career in both public and private sectors, I've seen that the best and most successful organizations are often the ones that have a strong and persistent commitment to diversity and inclusion. These organizations consistently attract the best talent by investing in and retaining a world-class workforce." Question, uh, first question is, do you still believe that? And if so, how do you intend to put that belief into practice while remaining consistent with the recent executive order, uh, prohibiting diversity and inclusion efforts? [01:15:15] Speaker 19: So, let me say, um, yes, in answer to your first question. But, um, uh, to the second question, I want to say this. We are, like others, we're reviewing the orders and the associated details as they're made available. And as has been our practice over many administrations, we are working to align our policies with the executive orders as appropriate and consistent with applicable law. And I want to add that I'm not going to have anything more specific for you today on this whole set of issues. Well, if I could, uh, just follow quickly on that. I'm [01:15:46] Speaker 34: wondering how you're getting that to be consistent with the Dodd-Frank laws, uh, stipulations about maintaining, uh, an office of minority and women's inclusion. So I did, I did mention consistent with [01:15:58] Speaker 19: applicable law. All right. Which is governing. Elizabeth. Thanks so much. Elizabeth Schulze with [01:16:09] Speaker 7: ABC News. Just to follow up on, uh, Steve's question, what reassurance can you give the American public that the Fed will continue to operate independent of politics under this administration? [01:16:22] Speaker 19: You know, I've, as I've said countless times over the years, this is, this is who we are. This is what we do. We study the data. We, we analyze how it will affect, uh, the outlook and the balance of risks. And we use our tools to try to, given our best understanding, our best thinking, try to achieve our goals. That's what we do. That's always what we do. Don't look for us to do anything else. And that's, you know, lots of research shows that's the, that's the best way for a central bank to operate. That'll give us the best possible chance to achieve these goals for the benefit of the American people. That's always what we're going to do. And people should have confidence in that, as I, as I said a [01:16:57] Speaker 7: few minutes ago. You've said that the Fed is in wait and see mode based on the policies that come out of this administration. Has the Fed started to model what policies like mass deportations, changes in immigration policies specifically would look like for the workforce and for inflation? [01:17:13] Speaker 19: So one of the things our staff does is they, they look at a range of possible outcomes and, and they, they tend to be go from really good to really bad. And that, you know, that it's, it's one of the best things that they do. And in each teal book, you can look at the five-year-old teal books and see their alternative simulation. So that's what they do. They, you know, it'll be a baseline, and then they'll show six or seven alternative scenarios, including really good ones and not so good ones. And what those do is they spark, you know, the, the policymakers to sort of think and understand about the, uh, you know, the, the uncertainties that surround us. So yes, we, we, the staff does that and we, we're all well aware that there are, that the range of possibilities is always broad. Uh, and, uh, not, not just now, but always, and you have to, it's hard to be open to just how, how, uh, how broad the possibilities are for an economy. You know, no one saw the pandemic coming and it was, you know, it changed everything. Uh, so things happen. And, uh, but yes, we do, we do do that, but it's, it's, it's, it's, it's different. It's one thing to do that, to make assessments about what might happen and begin to think about what you might do in that case, but you don't act until you, until you see much more than we see now. [01:18:27] Speaker 35: Katerina. Uh, Katerina Sarajevo, Bloomberg News. Um, you know, last month you talked about, um, a future rate cut as being pretty, you know, significantly, um, predicated on more progress and inflation. With the characterization of the labor market in the statement today, would you say that that's [01:18:52] Speaker 19: even more so the case now? I'd say it's the same. You know, we, we want to see, you know, further progress on inflation. And, um, you know, the story's there. It's, it's, uh, uh, we're just going to have to see the data. At the end of the day, it, it, it comes down to 12-month inflation because that takes out the seasonality issues that may exist. And, um, you know, we're just going to need to see that. We think that we think we see the pathway for that to happen. One, one example, a key example is that you now do see, um, uh, owner's equivalent rent and, uh, you know, uh, housing services, the way it's calculated for PCE. You see that coming down pretty steadily now. And that's the, that's the place where the most of the remaining gap is. In addition, a big part of the overrun, as you will know, was from non-market services, which don't tend to send much signal. So, you can look through all that and, and think, okay, that then we seem to be set up for further progress, but being seemed to set up for it is one thing, having it is another. So we, we're going to want to see further, further progress on inflation. Remember, we're not, you know, we're, we're under 2%, but our goal is 2%, and we do mean to get back sustainably to 2%. And, and in terms of the labor [01:20:03] Speaker 35: market, I mean, how is that broadly, you know, you said a broad set of indicators show that it's in pretty solid place. Was there broad agreement on that? There's been a few underlying indicators that are showing perhaps some weakness, a low hiring rate, you know, workers reporting that it's increasingly difficult to find a job. Is that of concern to the committee? So you're right. I mean, [01:20:27] Speaker 19: we look at, of course, a very broad range. And so it starts with unemployment, sorry, with, yeah, with the unemployment rate, employment participation, wages, job quits, are people quitting, that kind of thing. The ratio of vacancies to unemployed, we look at all those things. And you, you, you, you put your finger though on, it's a low, it's a low hiring environment. So if you have a job, it's all, it's all good. But if you, if you have to find a job, the job finding rate, the hiring rates have come down. And that's, that's more typical of a, you know, let's say, let's say that the unemployment, that the, that the labor market is at a sustainable level. It's not overheated anymore. We don't think we need it to cool off anymore. We do watch it extremely carefully. It's one of our two goal variables. But, yeah, I'd say we watch those things quite carefully. But nonetheless, overall, look at the aggregate data in the labor market. It does seem to, the labor market does seem to be pretty stable and broadly in balance, when you've got an unemployment rate that is, that has been pretty stable now for, for a full half a year. [01:21:35] Speaker 36: Thank you. Thank you, Mr. Chairman. Edward Lawrence of the Fox Business. On employment, now you said there's a broad range of possibilities. But last September, you said, quote, we understand that there's been quite an influx across the borders. And that has actually been one of the things that's allowed unemployment rate to rise. Now that the flow of the border has slowed, and we're seeing deportations, how do you expect the unemployment rate to react? [01:21:56] Speaker 19: You know, so what's happening is that the, the flows across the border have decreased very significantly. And there's every reason to expect that to continue. And so, but job creation has come down a bit too. So, you know, if those two things come down together, that, that, that, that sort of can be a reason for the unemployment rate to stabilize. In other words, the break-even rate as, as population growth slows, the break-even rate that you need in new jobs to make, to, to, to make jobs for, for workers declines as well. So that seems to be something about what's happening. You, you do see a very, a very flat, uh, unemployment rate at a time when you've seen significant declines. [01:22:39] Speaker 36: I'm going to ask you about Fed employment. Um, I know that tax money is not used here, but Elon Musk alleges that the Fed is, quote, absurdly overstaffed. Um, we've seen the executive branch push to reduce the federal workforce. I just want to get your reaction. [01:22:52] Speaker 19: Uh, we, we, we run a very careful budget process. We're, we're fully aware that we, that, you know, we owe the, uh, we owe that to the public and we believe we do that. Uh, I've got no further comment than that. Thanks, Chris. [01:23:05] Speaker 18: Uh, Chris Rugeber at Associated Press. Uh, President Trump has said he will lower inflation by reducing, uh, gas and energy costs. Do you see such costs, uh, as a particular driver of inflation and with [01:23:21] Speaker 19: lowering them have a dramatic effect? Chris, I'm not going to, I'm not going to react or discuss anything that, that, uh, any elected politician might say. So I'll give you a mulligan. [01:23:29] Speaker 18: Okay. Thank you. Well, uh, nearly two weeks ago, the Fed said it was withdrawing from the network for greening the financial system, even as, you know, even as we have significant wildfires in Los Angeles doing billions of dollars in damage. And of course, the NGFS, as you know, is a group to talk about, uh, how the financial system could address climate change. Many commentators did see the timing as political. Why did you leave that organization? Can you explain that decision? [01:23:54] Speaker 19: Sure. I'd be glad to. So we considered this, you know, really at length and we did decide to withdraw from the NGFS. And really the reason is that the, the, the work that the NGFS does has broadened very significantly. You think about nature related risks and biodiversity and things like that. In addition, um, the, the work of the NGFS is, is in, in significant part intended to, and this is a quote, mobilize mainstream finance to support the transition toward a sustainable economy. So we joined to get the benefit of understanding what other central banks were doing and, and seeing research and things like that. I think, uh, this is just way beyond any plausible mandate that you could attribute to the Fed. And so we have a quite narrow role, as I've, as I said many times. And I think that, that the activities of the NGFS are not a good fit for the Fed, given our current mandate and authority. So, uh, you know, and I just think it was time to acknowledge that, you know, the, the process, this process dates back, thinking about it dates back a couple of years. I made the decision to bring this to the board, you know, some months ago. It just, it just, the process just took time to get here. And, and this is when, this is when we, we got it and voted on it. So, and I'm aware of how it can look, but it was really not driven by politics. It was driven by kind of the disconnect between the work of the NGFS and our mandate. Other central banks have different mandates and belong to the NGFS. We have no, no criticism of them, but it just isn't, it's not right for the Fed. Andrew. [01:25:32] Speaker 37: Thanks. Andrew Ackerman with the Washington Post. Um, I'm wondering if you could talk more about what further progress would look like for consumers? [01:25:38] Speaker 19: Andrew Ackerman: Well, um, 2%, inflation down to, inflation down to 2% sustainably is look what we're trying to achieve. You know, we're, we're somewhat above that, as you know, uh, and you know, we, we want to see, you know, serial readings that suggest that we're making further progress on inflation. That's what we want to see. And consumers will, will, will pick that up, of course, in the things that they buy at the grocery store or at the store. [01:26:07] Speaker 37: The other thing I wanted to ask was just how far away you think, um, you are from neutral. [01:26:12] Speaker 19: Andrew Ackerman: Yeah. Um, you can't know with any precision, of course, um, as I like to say that, you know that, you know, the neutral rate by its works. So I think, you know, at 4.3%, we're, we're above pretty much everyone on the committee's, uh, estimates of the longer run neutral. Um, I think our eyes are telling us that our policy is having the effects on the economy. That's really the question we ask. You know, you can consult models, empirical models, theoretical models. You really have to just look out the window and see how your, how your policy rate is affecting the economy. And I think we see that it's having meaningful effects in bringing inflation under control. It has helped bring the labor market, uh, into balance as well. So that's what we think. I, I would say we're meaningfully above it. I, I am, uh, I, I have no illusion that, that anyone knows precisely how much that is. And, but, you know, not knowing that and having cut a hundred basis points means that it's appropriate that we, that we not be in a hurry [01:27:16] Speaker 20: to make further adjustments. Victoria. Um, Victoria Guido with Politico. So as a general matter, uh, when it comes to executive orders and OMB memos, do those always apply to the feds sometimes, never, or do you just often voluntarily comply? What is, what is the legality there? [01:27:39] Speaker 19: So it's been, it's been our practice, as I mentioned, to work, to align our policies to those that are mentioned in the, in the executive orders. And that's, I'm just going to leave it at that. As I mentioned, I'm not going to, I'm not going to go any deeper than that or, or get into, [01:27:53] Speaker 38: any deeper into this set of issues today. Claire. Um, Claire Jones from the Financial Times. Um, two questions, if I may, on tariffs. Um, well, first of all, we've seen global trade wars before, notably in 2019, last time around, but then we were in a very different place on both inflation and growth. If we see tariffs of the same sort of magnitude that we got then, which I know is big if, um, what do you think might be different this time around? And secondly, Tiff Macklem said there was no doubt that the threat of tariffs was a big driver of the cut by the Bank of Canada today. What sort of information would the fed need to see on tariffs before it was willing to take such a preemptive move? Yeah, thank you. Sorry. What sort of information would you need to see on tariffs? Would you need to see a strategy, actual implementation, actual movement of inflation expectations before you're actually willing to change the path of monetary policy on the basis of it? Yeah, so we just, [01:29:06] Speaker 19: so first of all, things, things are a little different now. We've just come through a high inflation period. Um, and you can argue that both ways. You can, you can say that companies have figured out that they do like to raise prices, but, but we also hear a lot from companies these days that consumers have really had it with price increases. And so I don't know how that shakes out. Nonetheless, you're coming through a situation where we're not quite back to 2% and that, that's just different. In addition, you know, the trade, the kind of footprint of trade is, has changed a lot as trade is now spread around the, you know, it's not as concentrated in China as it was. There's a lot more manufacturing, it moved to Mexico and other places. So, so there are differences. And I just think the possible, the range of possibilities is, is very, very wide. We just don't know. And I, I don't want to start speculating as tempting as it is, uh, because we really don't know. Uh, and we didn't know by the way, in 2000 and I guess, uh, 18, yeah, we didn't really know. And, uh, it, you know, the, the, again, the range of possibilities, very, very wide. Uh, we don't know what's going to be tariff. We don't know for how long or how much, what countries. We don't know about retaliation. We don't know how it's going to transmit through the economy to consumers. That's, that really doesn't remain to be seen. You know, there are lots of places where that, where that, where that price increase from the tariff can show up between the manufacturer and the consumer. Uh, just so many variables. So, we're just going to have to wait and see. And, you know, the best we can do is what we've done, which is study up on this and, you know, look at historical experience, read the literature, and think about the factors that might matter. And then we'll just have to see, have to see how it, [01:30:52] Speaker 39: how it goes. Um, Courtney. Uh, thank you. Courtney Brown, uh, from Axios. Two unrelated questions. The first is whether or not there was any discussion about QT in the timeline for ending QT at this meeting. And then the second question is just, I wonder if the AI prompted sell-off in the stock market this week signaled anything to you about the state of financial conditions? [01:31:22] Speaker 19: MR. So, um, on QT, on, let's, let's talk about runoff. So, um, the most recent data do suggest that reserves are still abundant. Reserves remain roughly as high as they were when runoff began, and the federal funds rate has been very steady within the target range. We track a, a bunch of metrics, and they do tend to point to, to reserves being abundant. Uh, we do intend to reduce the size of our balance sheet to a level that's consistent with implementing monetary policy efficiently and effectively in our ample reserves regime. We're closely monitoring a range of indicators to assess conditions, and that should provide signals whether reserves are approaching a level that could be judged as, quote, somewhat above ample. Um, I, I don't have anything to say to you about particular dates. It's just, that's the process. And what we see is, is that, but the rates do appear to be abundant. Um, as always, we stand ready to take appropriate action to support that smooth transition of monetary policy, including to adjust the details of our approach for reducing the size of the balance sheet in light of economic and financial developments. On, um, on AI, it's a big event in, in the stock market and in particular parts of the stock market. I mean, what, what really matters for, for us is macro developments, and that means substantial changes in financial conditions that are persistent for a period of time. So, I wouldn't put that label on, on these events, although of course we're all watching it with interest. [01:32:53] Speaker 40: Simon. [01:32:55] Speaker 41: Simon Rubinovich with The Economist. Uh, thank you. Um, you mentioned in your remarks that activity in the housing sector seems to have stabilized. Uh, at the same time, since your first rate cut in September, uh, long-term mortgage rates have gone up by a full percentage point, back above seven percent. I'm wondering, kind of looking forward, do you think, are you confident that activity will remain stable, given how elevated mortgage rates are? Uh, how does it fit into your broader thinking about the economy? [01:33:21] Speaker 19: So, as you know, as we've reduced our, our policy rate at a hundred basis points, uh, longer rates have gone up, not because of, uh, uh, uh, expectations, not principally because of expectations about our policy or about inflation. It's more a term premium story. So, and, you know, it's long rates that matter for, for housing. So, um, I, I, I don't think, uh, I think these higher rates are gonna, they're, they're probably hold back housing activities to some extent, if they're persistent. We'll have to see how long they persist. So, um, you know, we, we are, we, we control an overnight rate. Generally, it propagates through the whole, uh, family of asset prices, including interest rates. But in this particular case, it's all happened at a time when, for reasons unrelated to our policy, uh, longer rates have moved up. [01:34:11] Speaker 42: Thank you, Chair Powell. Jennifer Schoenberger with Yahoo Finance. You said you want to see further progress on inflation. Given that households appear to be unhappy with the elevated level of prices, do you believe the Committee should wait until inflation has fallen back to [01:34:33] Speaker 19: target to cut rates again? No, I wouldn't say that. We've never said we need to be all the way at target to reduce rates. At any time, what we're doing is we're looking at the economy and asking whether our policy stance is the right one to achieve maximum employment and price stability. So I think if we would want to see further progress, but we think our-we think our-as I mentioned, we think that our policy stance is restrictive, meaningfully restrictive. Not highly restrictive, but meaningfully restrictive. And so I would think we need to see further progress. I wouldn't say all the way back down to 2 percent on a sustainable basis, although [01:35:10] Speaker 42: we'd love to see that, of course, and we will. And separate question for you on tariffs. Curious whether the threat of tariffs and not knowing whether they could stick or not creates uncertainty for business here in the United States and could cause them to pull back, ultimately weighing on growth. Does the threat of tariffs cause you to ponder your growth forecasts? [01:35:32] Speaker 19: You know, we-I want to avoid commenting even indirectly on the conduct of tariffs. You know, it's not our job, and it's not our job to comment on the moves that people make. So I wouldn't want to criticize anything that's happening or really comment on it one way or another, praise it for that matter. It's just not our job. I do think that, you know, we found in 2018 there was a lot of work done on trade policy uncertainty. Trade policy uncertainty, if it's large and persistent, can start to matter for businesses making investment decisions and things like that. That's not something I'm observing today. It's very early days for this, but that did-I think that did matter in 2018-19. And it's, you know, [01:36:17] Speaker 6: one of many things we'll be watching. Matt Egan: Thank you, Chair Powell. Matt Egan from CNN. Following up on Courtney's question from earlier about the stock market, how concerned are you, if at all, about potential asset bubble brewing in financial markets? How do relatively high market valuations factor into considerations about potentially lowering interest rates further? Is that something [01:36:45] Speaker 19: that's in the back of your mind? Matt Egan: So we look from a financial stability perspective at asset prices generally, along with things like leverage in the household sector, leverage in the banking system, funding risk for banks and things like that. But it's just one of the four things asset prices are. And yeah, I'd say they're elevated by many metrics right now. A good part of that, of course, is this thing around tech and AI. But we look at that. But, you know, we also-we look at how resilient the households and businesses and the financial sector are to those things. So we look at that mainly from our financial stability perspective. And we think that there's a lot of resilience out there. Banks have high capital. And households are actually, overall, not all households, but in the aggregate households are in pretty good shape financially these days. So that's how we think about that. You know, we also-we look at overall financial conditions. And you've got-you can't just take-you can't just take equity prices. You've got to look at rates, too. And that-you know, that represents a tightening in conditions with higher rates. So overall, financial conditions are probably still [01:37:55] Speaker 43: somewhat accommodative. But it's a mixed bag. Hi, Chair Powell. I'm Richard Escobedo with CBS News. One question for you. This month's statement notes that unemployment is stabilized at a low rate and that the labor market is solid. You walked through some of what's driving this. But I wonder what risks [01:38:15] Speaker 19: you see that might challenge your assessment. Well, the things we watched-we discussed earlier. One is-is that there's a low hiring rate. And so that if-if there were to be a spike in layoffs, if companies were to start to reduce headcount, you would see unemployment go up pretty quickly because the hiring rate is quite low. So that-that's one thing we look at. I think it's also-it's worth pointing out that for lower-income households, they are-they're under significant pressure. And in the aggregate, the numbers are good. But we know that people at the lower end of the income spectrum are-are struggling with-with costs. And really, it's-it's high inflation for the basics of life. It's not so much the inflation now, it's the price level, because inflation has raised prices. Inflation is now closer-much closer to target, but people are really feeling that. But, you know, overall, um, this is a good labor market. You're-you're at 4.1 percent unemployment. That's-that's just a really good level. And you've been solidly there now for six, seven months. And job creation is pretty close to a level that will hold the unemployment rate there. Um, given-given that, you know, there'll be much slower population [01:39:29] Speaker 43: growth. Um, one more question. Um, some of the uncertainty around immigration policy, um, is-in your assessment, is that making it harder for businesses and the Fed to plan going forward? [01:39:41] Speaker 19: Yeah. You know, we hear anecdotal reports, but I-I don't see-there's nothing in the data yet on that. But you-you hear-you hear that kind of thing about construction, for example. And-and, you know, businesses that are, uh, dependent on, um, immigrant labor are-are saying that it's-it's, uh, suddenly gotten harder to-to get people. But I-again, I don't-you don't see that in the aggregate data yet, but yes, you-you hear it anecdotally. I-I don't see it. I don't see it. I don't see it. I don't see it. I don't see it. I don't see it. [01:40:11] Speaker 44: Thank you, Chair Powell. Nicholas Draczynski from Barron's. Um, the uncertainty is certainly a theme today. And I'm wondering, are there any periods from your career or-as it relates to markets, the economy, what's going on here in Washington and beyond, or from-lessons from history that may provide some guidance for a central banker operating in uncertain times like today? [01:40:33] Speaker 19: I guess I'd say this, uh, uncertainty is-is with us all the time. It's-it is human nature, apparently, to underestimate the-how fat the tails are in a way that, you know, the-the possibility. We think of things in a normal distribution, and in the economy, it's not a normal distribution. The tails are very fat, meaning things can happen way out of your expectations. It's never not that way. I wouldn't-you know, if you-you think about it, um, think about the first few months of the pandemic. That was uncertainty. Are we going to be able to reopen the economy? If so, when? How much of it? How long will it take? You know, that was uncertainty. What we have now is a good labor market. We have the economy growing at, you know, 2 to 2.5 percent. Inflation's come down to now the-you know, the headline inflation number was 2.6, and that's what the public experience is. We look at-we look at core, because it's a better indicator of future inflation. So, yes, the price level went up a lot, uh, for inflation, and people are feeling that, and-and they're not wrong. But I-you know, so the kind of uncertainty we have is just the-a usual level of uncertainty about the economy, but then policies, which are, you know, not for us to criticize or-or praise, really. Those are-those are policies which people are-have been elected to implement, they're implementing them, with a view to-to making a better economy. And so, uh, I-I-I don't think-I wouldn't call this out as a-as a-as one of those times. I wouldn't compare it to the global financial crisis or anything like that, given that we have [01:42:05] Speaker 23: actually a very good economy right now. Evan. Evan Reiser with Market News International. Uh, Chair Powell, is a March cut still on the table? And then, additionally, are you looking to see better-than-expected data on inflation to cut, or are you looking for inflation data that roughly [01:42:25] Speaker 19: aligns with current forecasts? So, as I mentioned, um, the economy's strong, the labor market's solid, uh, downside risks to the labor market appear to have abated, and we think disinflation continues on a slow and sometimes bumpy path. That tells me, uh, and the other members of the committee-the broad sense of the committee, actually, is that we don't need to be in a hurry to adjust our policy [01:42:47] Speaker 23: stance. Your second question was- Whether or not you need to see better-than-expected inflation data, or just inflation data that roughly aligns with your current forecasts? [01:42:59] Speaker 19: You know, it's one of those things we'll know when we see it. But more-more the-the expectation is that we will make continued progress. And, um, you know, that's what we want. We-we'll know when we see it. When we-it's-it's going to have to be something that isn't just idiosyncratic. You're going to want to see, you know, continued progress with housing services inflation. You're going to want to see inflation behaving in a way that builds confidence that we are really making progress. That's what it's going to be. And, I mean, it-it-it-it-is that better than our expectations? If we expect to see that, it's just a question of when. [01:43:36] Speaker ?: Scott. [01:43:39] Speaker 45: Hi, Chair Powell. Scott Horsley from NPR. In your five-year review, you said the-the 2 percent inflation target won't be on the table. Can you talk a little bit about why? Is that because you think that's the right target, or is it because you don't want to move the goalposts mid-game, [01:43:54] Speaker 19: or what's-what's behind that? I think to-I think that goal has served us well over a long period of time. It's also the sort of global standard. I think that if-if-if central bank wanted to look at changing that, you wouldn't do it at a time when you're not meeting it anyway. I would not look at changing it anyway, but I certainly wouldn't look at it at a time when you're not-when you're not meeting it. I mean, there's just no interest at all in changing it, if-if I'm being at all unclear. We're not-we're not going to change the inflation goal anytime soon. [01:44:29] Speaker 45: And-and five years ago-if I can paraphrase what you all decided, it was you're going to not raise interest rates preemptively to-to head off inflation until you see sort of the whites of the eyes of inflation, because the solid labor market was so beneficial. Have the last few years changed your thinking about that? [01:44:50] Speaker 19: So what we really said was that we wouldn't-we wouldn't look at a-at a strong labor market and raise rates unless we saw some evidence of inflation. So the thought was that we'd seen really low levels of inflation-sorry-of unemployment with no sign of inflation. So why would you preemptively want to-want to put people out of work in the absence of-of any kind of-any evidence that suggested that-that this was not a sustainable level? It was a way of-of acknowledging how much humility we have about-about the starred variables, especially USTAR, the natural rate of unemployment. So that was-that-that was an insight. We'll-we'll discuss that again. That'll be one of the many things that we discussed, but I don't think that insight is wrong. We didn't-you know, we-we said-what we said was that, you know, in-at times when inflation persistently undershot two percent, we-we would likely allow inflation to run moderately above two percent for some time. That's what we said. That was-turned out not to be relevant to what actually happened. There was nothing moderate about the overshoot. It was-it was an exogenous event. It was the pandemic, and it happened. And, you know, our framework permitted us to act quite vigorously, and we did, once we decided that that's what we should do. The framework had really nothing to do with the decision to-we looked at the inflation as-as transitory, and right up to the point where the data turned against that. And when the data turned against that in late '21, we changed our-our view, and we raised rates a lot, and here we are at 4.1 percent unemployment and inflation way down. But the framework was-was more-was more irrelevant than anything else. That part of it-that part of it was irrelevant. The rest of the framework worked just fine as-as we used it-as it supported what we did to bring inflation down. Let's go to Mark for the last question. [01:46:50] Speaker 46: Hello, Chairman Powell. Mark Hamrick with Bankrate. As you know, in the annual report from the Financial Stability Oversight Council, among the risks outlined is cryptocurrency. Could you talk about those risks now? And regarding individuals and households, perhaps distinct from the concern about the financial system, do you worry that speculation in this unregulated asset class could hurt their financial well-being, or do you think it has a place in a household's portfolio? [01:47:21] Speaker 19: You know, so our-our role with Bitcoin really is to look at-with crypto really is to look at the banks. And-and, you know, we-we think it's-you know, banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks, and it's safe-safe and soundness. Many of our-a good number of our banks that we regulate and supervise do that. You know, the threshold has been a little higher for banks engaging in crypto activities, and that's because they're so new and, you know, we don't want to make the mistake you're-if you-if you're making a choice to conduct that activity inside a bank, which is inside the federal safety net with deposit insurance, then you want to be pretty sure that-that-that it's a safe and sound activity. So, you know, we're-we're not against innovation, and we certainly don't want to-to take actions that would cause banks to, you know, to terminate customers who are perfectly legal just because of-of-of excess risk aversion may be related to [01:48:24] Speaker 46: regulation and supervision, so. And with respect to households and their inclusion in the asset [01:48:31] Speaker 19: planning? I-you know, that's-that's kind of a-it's not really our-our bailiwick. You-you want people to be knowledgeable about the financial, um, uh, engagements that they have, and that's why we have, you know, the securities law-the laws that we have. It's why, you know, if you read a mutual fund prospectus or, uh, individual stock prospectus, you-you want households to have the chance to understand the risk that they're taking. And, you know, I-I do think it would be helpful if there were a greater regulatory apparatus around crypto, and I think that's-that's something Congress was working on quite a lot. We've actually spent a lot of time, you know, with members of Congress working together with them on-on various things, and I-I think that would be a very constructive thing for-for Congress to do. Thank you. [01:49:19] Speaker 8: These always go on, maybe one or two questions too long, don't they? That wraps up the first news conference with Chairman Powell for 2025. If you are just joining us, welcome to the program. A two-part story here. One part, the statement. The second part, the news conference. The statement pushed stocks down and bond yields a little bit higher. In the news conference, equities came off the lows and bond yields came off the highs. In the statement, the Federal Reserve repeated that inflation remains somewhat elevated but removed this reference to this line of it having made any progress towards their two percent goal. So that sounded somewhat hawkish, didn't it? So ultimately, inevitably, the Federal Reserve Chair was asked about this, and this is what he had to say in a presser just moments ago. [01:50:00] Speaker 19: If you just look at the first paragraph, we did a little bit of language clean up there. We took out a reference to since earlier in the year as it related to the labor market, and we just chose to to shorten that sentence. Again, I mean, if you look at the sort of intermediate data, it was good, and there was another inflation reading, I guess, just before the December meeting. So we've got two two good readings in a row that are consistent with two percent inflation. Again, we're not going to over-interpret too good or too bad readings, but this was not meant to send a signal other than this. [01:50:32] Speaker 8: So Lisa, we talked about it for the best part of 30 minutes. We thought it was a hawkish tilt in the statement. The chairman came out and said that line was not meant to send any signal. It was just [01:50:41] Speaker 9: language cleanup. If you look at the first sentence, when you take your sharpie, you go like this, and then you go like this. I mean, look, this was someone who talked in circles quite a bit. It was sort of saying something, but what are these? These are words. We don't know anything. I don't want to start speculating because we really don't know. Who's there? And we can't really have any models. So he basically came out and did exactly what he wanted to do, which was say nothing. On the labor [01:51:04] Speaker 8: market, downside risks to the labor market appear to have abated. This is a change from where they were maybe back in September. There was this labor market scare, TK, in the summer, which the Fed responded to with 100 basis points of cuts to insulate the economy from seeing any further weakness, something the chairman said at Jackson Hole. He didn't want to see TK. And it feels like they're a lot more [01:51:24] Speaker 10: comfortable with the situation now. I totally agree. And we heard that from our guests in the previous pre-press conference, pre-statement, as well. And it does get to John, when the claims break out, the basic stuff we cover each and every day. And it goes to get to March, the idea of how many meetings do we have? How many inflation reports do we have? How many jobs reports? I think the most amazing thing about this is you and I could focus here. I mean, we're 20 minutes in with Man City, 23 minutes in with Man City, and they haven't got it done versus Club Bruges. This is still no-no. [01:51:52] Speaker 8: This is just no-no. So you are actually watching it. I was joking about it. You're actually watching it. [01:51:57] Speaker 10: No, it's important. This is, you know, I mean, there's what, 18, 19 champions games going on. That's more exciting than the press conference. Stephanie Roth of Wolf Research is not watching the [01:52:05] Speaker 8: European football right now. She is fixated on that news conference we all just heard in the last 60 minutes. Stephanie, it's good to see you. Good to see you. What did you make of that? [01:52:14] Speaker 47: He didn't say all that much. And then he did a little bit of reversal from the hawkish part of the statement. It was just January cleanup, like you just mentioned. And then some of the key things was meaningfully above long-term neutral. And then he made some conflicting statements about, yes, rates are above neutral, but then financial conditions are a little bit easy. So he kind of [01:52:31] Speaker 9: said a little bit of a lot. That's exactly what I've been trying to wrap my head around. Meaningfully above neutral, but we can move slowly and we don't have to move at all. We can just observe. We are looking at restrictive rates, but also accommodative conditions. Was this successful? [01:52:49] Speaker 47: Yeah. I think he wanted to get in and out without moving markets all that much. And yeah, it was a bit of a ride, but that's kind of what he accomplished. [01:52:55] Speaker 10: I want to note Meta and Microsoft leg up here as we get to those earnings as well. Somewhere in there was some Stephanie Roth language where he talked about a central limit, you know, a Gaussian curve, a bell curve, and that. My basic take is this is not a bell curve society. There's a long normal risk here. What's the risk for you, Stephanie Roth, in terms of the Fed parlor game forward? What's the thing they really need to focus on to stagger to march? The most important thing that we're going [01:53:22] Speaker 47: to be watching for is what happens from a labor supply perspective, because there's going to be three and a half million people potentially losing their visa status over the next two years, and that could tighten the labor market. And it could happen kind of slowly and gradually, and maybe we won't really realize it until the second half of this year, and then you realize, wow, the unemployment rate is low. [01:53:38] Speaker 10: Will the president focus on the labor mandate, or will the president focus on inflation, or is he just going to focus on, I'm a real estate transactional guy and I need low rates? Probably the [01:53:49] Speaker 47: latter. But the other things are going to be important too, right? So if we have the immigration thing slowly happening in the background, we don't really notice it until the labor market's kind of quite a bit tight. So we just changed our Fed call. We were calling for previously for two cuts, now we're calling for one in May. And then I think after that, they're going to be done for a while. They're going to have to wait and see how things play out. Just out of interest, why May? We're going to probably have some bad data for the next couple months from an inflation perspective. We still have the Q1 seasonal problems from inflation, so we're going to have to get through that. And then in May, you can have some better data because you'll start to see a little bit of that [01:54:25] Speaker 32: inflation coming out. Do you feel like there's clarity on meaningful or restrictive? I want [01:54:29] Speaker 9: to go back to that for one second. I'm still trying to wrap my head around this. [01:54:31] Speaker 8: Not letting that go, are you? I'm with you for what it's worth. [01:54:34] Speaker 9: I kind of feel like it's important here because that was one of the key questions. That was what Bob Michael was talking about. And that is the question. How much do you have to reduce it? And then he kind of was like, we're above it and maybe we'll reduce it. Oh, is it a problem? Just going back to this Mohamed Elarian point, is it a problem that this is a Fed that doesn't seem to have a clear message or a clear direction at a time when people view this as one of the biggest potential upsets to the market and to some of the stability that we're seeing in terms of the soft [01:55:05] Speaker 47: landing? I mean, so the challenge is they don't have a firm view on policy and they don't even seem to agree to some extent, nor do they want to come out and say it from a policy in terms of how they're assessing fiscal, right? So it's going to very much depend on inflation expectations. Are they anchored? And Powell mentioned the Teal book from September 2018. And I think that's exactly how they're going to look at it. If we see inflation expectations remain anchored, the Fed could wait for a while. And then next year, we're probably going to see slower growth as a result. And that's when they might have an opportunity to cut again. When you talk about inflation [01:55:38] Speaker 9: expectations in near term and long term, what are we talking about? Are we talking about the University of Michigan sentiment survey that is hugely politically affected? Are we talking about the Consumer Conference Board or are we talking about five year, five year forward break evens, right? What is the gauge that is important to this Federal Reserve? I would say probably U-Mish and [01:55:57] Speaker 47: probably inflation break evens, the combination, even though we all know U-Mish isn't that great of a measure, but we all seem to watch it anyway. I don't know why, but we watch it because they do. [01:56:05] Speaker 8: That's fair. Chairman Powell and this Federal Reserve responded to it. Do you remember that jumbo rate hike back in the day? U-Mish, apparently. Yeah. And it notoriously comes out with [01:56:15] Speaker 47: with the reading and then the final reading ends up getting revised back down from an inflation [01:56:18] Speaker 10: perspective. Where are we in June? I mean, you mentioned March and May in the meetings, but within the conversation we have with four or five worthies today, the question is what real GDP does out to June. I mean, you know, the facts change. Are the facts going to change or are we going to continue with this growth economy helping part of America, not all of America? [01:56:37] Speaker 47: We're probably going to be in this growth economy. The one thing from a sort of lower income perspective is this animal spirits may support the broad-based consumer. We might actually start to see good spending pick up, which could help kind of the bulk of the economy because they're getting [01:56:55] Speaker 10: ahead of tariffs. John, I mean, I got Microsoft legging up here now or it was before the meeting. I mean, we're going into earnings in one part of America, John. They don't give a damn what Jerome Powell says. They're just looking at free cash flow at Microsoft and the rest. I miss working with [01:57:10] Speaker 8: you on a daily basis for a whole host of reasons, but just then I had no idea if you're coming to me because Man City had scored if they'd scored. I wasn't sure what to brace for. Talia's in my ear [01:57:21] Speaker 10: saying, don't you dare. I don't even know how to pronounce it. Zagreb one, AC Milan zero. What is that [01:57:28] Speaker 8: about? Is that true? Has that just happened? Yeah. Are you okay? Okay. Well, I'm not okay now. Let's continue by talking about financial markets and central bank decisions. Lisa mentioned the Bank of Canada a little bit earlier. Luke Howard writes in and said, thank you, by the way. Yeah. Well, [01:57:43] Speaker 9: it's important. Luke, I got your back. Tiff Macklin and the Bank of Canada, [01:57:47] Speaker 8: they did decide to reduce interest rates. They did decide to say, you know what, we can't offer guidance because of tariffs. Why is it any different for Chairman Powell and this [01:57:54] Speaker 47: Federal Reserve? We have an economy that's running well above trend. We're going to see a GDP print that's close to three percent this week. Right. The economy's fine. There's no rush. And that's what he said. There's no, there's, they're not in a hurry. This is the single most important [01:58:06] Speaker 10: observation of the Fed decides today. America's totally different than what I witnessed in Toronto a number of months ago. We are separate in our exceptionalism. And it was in spades when I was [01:58:18] Speaker 8: up in Canada. Is it just because of the strength of the economy, Tom? Or do you think it's because It's a tech overlay to me. This is about the president of the United States and they're worried [01:58:24] Speaker 10: about what he's going to say. It's a little bit. I'll go with that overlay. But it's most about Claire and his colleague, Ned Phelps, and our dynamism is tangible. Again, with Microsoft kicking [01:58:32] Speaker 9: it off here with Meta in a bit. Lisa, you feel the same way? I guess the U.S. has a much more robust economy. It also is a central bank to the world in many different ways. It also is not being subject to a president. It is part of a country with a president. It is very different for say Canada that is facing off with that. I was a little lost in thought there. And the reason why is because You're watching a football team? I'm watching a football team. No, I'm trying to wrap my head around whether it's appropriate for this Fed to be sort of directionless right now or whether it's inappropriate. You know, I don't know whether it is appropriate because it is an uncertain time. And I don't know if it's inappropriate because they have to give some sort of sense of what the reaction function is and the scenario analysis. And they could have a more clear view. I don't have an answer [01:59:27] Speaker 10: on that. Stephanie Roth, how exposed are they? That's all there is to it. To me, they're massively [01:59:32] Speaker 47: exposed waiting for data. Yeah, I think that's been the case over the past couple of years is they've been very much data point dependent, which they say they don't want to be, but they have been. But they are. They are and they have been. And that's going to be the case for much of this year. They're going to react to see how fiscal policy ends up playing out. And they're in a wait and see mode, which is confusing for investors. But at least at this point, the economy is doing just fine. Inflation has [01:59:56] Speaker 8: settled down. So it's not really that big of a problem. This felt like a cleanup for December. That's what it felt like to me, a cleanup for December. This isn't about policy changes. This isn't about expected policy changes. This is about our view on the labor market and inflation. And that's why we've not cut interest rates today. Back in December, Chairman Powell made a hash of that. And I think he made a hash of it. And I do have some sympathy that it was because of what happened with the forecast and how some officials incorporated some policy uncertainty, TK, and ultimately, they changed their inflation forecast on that. This was a cleanup for December. [02:00:28] Speaker 10: Lisa reads a minutes. But when Colby, I think it was her follow on question and you played it there, when Colby Smith at the Times, he's hit some mumbo jumbo about we cleaned up the language. [02:00:38] Speaker 8: What in God's name does that mean? It's hard not to read that. It's hard not to read that. It's hard to read that and just walk away with this idea that, yeah, that doesn't mean anything. I mean, I take signal from that, whether he says there's no signal in it or not. I take signal from that change. [02:00:52] Speaker 9: LISA DESJARDINS: Which is the reason why the market hasn't given back the entirety of the move. You're right, though. Again, how do we interpret the fact that don't see what your eyes see, don't read what your eyes read? There is no meaning in words that are very deliberately crafted to give meaning and to really give some indication to the markets, which is the reason why I'm grappling with the idea of a rudderless market, a rudderless Fed, I should say, and whether that is OK and appropriate, or whether it is potentially inappropriate at a time when a lot of people are worried about [02:01:23] Speaker 8: a potential Fed policy error. Stephanie, it's good to see you, as always. Thanks for dropping by. Stephanie Roth there of Wolf Research. The Nasdaq just moments ago turning positive, slightly negative now on the S&P 500, erasing the losses of this afternoon. Mike McKee was in the news conference. He's back out now. He can share some of his thoughts with us. Mike, share with us how that went from your side, from your perspective in the room. Well, I would disagree with you a little bit, [02:01:47] Speaker 27: John, and say that this wasn't probably an effort to send some sort of signal or even necessarily a cleanup as such. I think the Fed is sort of at sea. They don't know what is going to happen. And since the economy is performing well, unemployment is low, inflation is not going back up. It has stalled out a little bit. They feel they can wait. They don't need to do anything else at this point. I asked him specifically whether they had a forecast they could rely on. And he said no. He was also asked, is March a live meeting? And he said, it's a live meeting, but we don't have any idea. We're going to look to the data, et cetera. So I think right now what you've got is a Fed that's just trying to stay out of the way as long as they can. And they can as long as the data continue to show the economy is [02:02:36] Speaker 9: doing okay. Mike, do you expect that in March it's going to be a more complicated staying out of the way at a time where you have to reflect a number of views that might not be in the same vein as Jay Powell? That seemed to be what the problem was in December, reflecting that some members did think about what policies could be going forward. Well, I think it'll probably be more confusing, [02:02:58] Speaker 27: but how confusing will depend on the president and what is happening. If he has imposed tariffs, if those tariffs invite retaliation, how long the tariffs will last, how high the tariffs will be, will probably present different economic models to the various voters on the open market committee. And there may be some disagreement. I suppose they'll come together on whether they need to cut rates or not to overcome some of the issues that that would raise, but they're going to have to wait and see exactly what this does. Now, by March, you probably won't have much of an economic effect, so they will have to game out what they think will happen from whatever tariff announcements come out. [02:03:41] Speaker 8: As the Defender of Chief of that great institution behind you, Mike, I had no doubt you disagree with me. Michael McKee there, everybody on the Federal Reserve. Mike, thank you. If they're trying to stay out of the way this time, it's because they got in the way back in December. And I think a lot of [02:03:54] Speaker 9: people would take that perspective as well. This was trying to walk back the idea of talking about speculation around policies. It seems as there is a divide and there is a curious question around whether this is something Bill Dudley raised. They're going to start to go toward the staff assumption and really reflect the staff economic forecasts and not necessarily disparate Fed members. It might clear the air a little bit in terms of having some of these awkward moments. [02:04:21] Speaker 10: I go back to just where Stephanie Roth, I think, nailed it on the mandate. It's a job market. You know, guess what? Thursday claims matter. You need a forward moving average. Thursday claims, it hasn't broken yet until the job market breaks. And I feel bad about this because, again, off Craig Torres reporting, a good portion of America, the job market's already broken. [02:04:41] Speaker 8: And so it's tough. I can't believe it's actually one nil and they've got me all wound up about the football. Jeff Rosenberg of BlackRock joins us now to talk about the markets and not the European football. Jeff, welcome to the program, sir. Lots of debate about what was intended and what wasn't intended in that statement throughout that news conference. What was your big takeaway this afternoon? [02:04:59] Speaker 48: So a couple of takeaways. But I think the big takeaway is clearly a reiteration of the end of the December FOMC signaling that this is a Fed that's not in a hurry to take any further actions. And so you kind of bookmark where we are. This is the pause. This is the articulation of the pause. And he outlined those those reasons. And I think that's kind of overriding the main story. It's not a huge story because that was pretty much well in the market. You're not seeing a big market reaction. Second thing I would take away, Lisa, you highlighted it. There's some contradictions here. And they were kind of highlighted in the press conference. We've had those contradictions for a while. Meaningfully restrictive, yet financial conditions are easy. Meaningfully restrictive, yet we're not in a hurry. And I agree with you, Lisa, and have said for a while, this failure to kind of take into account the role of financial conditions in the setting of policy, kind of like moving that more to the background, is a real issue here for the conduct of monetary policy. And it remains. And that kind of came up. And then the third point I'd kind of highlight, and John, this is where you just left off, is, you know, just how is the Fed going to manage through this environment of heightened policy uncertainty? And he kind of addressed it and then didn't want to address it, because there's no real good answers for that, because the policy is being made and the outcomes are not known. So they're going to have to be reactive to that. There's no forecastability. There's a range of outcomes that he talked about. It's not elevated relative to COVID or GFC. So he got that question to kind of, you know, tamp down some of the concerns around it being elevated. But it's a it's an elevated degree of uncertainty centered around policy uncertainty. [02:06:57] Speaker 9: Jeff, I was musing over whether it was appropriate for a Federal Reserve to basically not have a clear message at a time where there are very clear economic conditions and potential policies down the pike. Jeff, I'm going to ask you this in a very slightly different way. As a market participant, does it introduce a greater degree of liability tied to Fed decisions, not having a good understanding of exactly how they are going to proceed given certain potential developments? [02:07:26] Speaker 48: Jeff Roth: Yeah, it's what we call the reaction function. And we're very much focused on thinking a couple of steps ahead of how is the Fed going to react to data? How's the Fed going to react to uncertainty? Because that's how we're going to price in the bond markets. You know, we moved a long way away from forecast dependency and a forecast dependent Fed towards a data dependent Fed, and now a policy dependent Fed. And so that makes it a bit challenging. But again, kind of in the context of putting it in a historical context, not more challenging than it has been in the past. The Fed, you know, gives us some guidance. I think he reiterated that guidance here. You see it in the pricing. The disconnect between market expectations and the Fed rhetoric is actually the lowest it's been. And that kind of narrows the range of outcomes here. So there's a little bit, in some sense, less uncertainty around the disconnect between bond market pricing and what the Fed is signaling. [02:08:28] Speaker 10: Jeff, the technology of America, you're hardwired with it, with your heritage to Carnegie Mellon. We saw the technology bro line up at the inauguration front and center as well. How do you overlay this technology boom that we're in right now? I'm looking at the NASDAQ back 30 years. It's unreal. And the answer, Jeff, is how do you overlay this technology boom into your rate space and into what the Fed will do? It's a bolt on which I just can't get a handle on. Yeah, it's a great question. [02:09:01] Speaker 48: It came up a little bit in the press conference today as well. And so, you know, one way, and it's not the only way, because what we're talking about here and what we talk about, the mega forces of AI, you know, are so profound through so many parts of our economy. But a very simple way of thinking about it in the macro lens is the wealth creation that we've seen in terms of equity market, equity market performance, the way in that -- the way in which that translates into financial conditions, into wealth effects, into confidence effects, and ultimately into consumption. I think it's a big reason for why the disconnect between looking at the degree of policy restrictiveness, meaningfully restrictive, takes the lens of what is the interest rate relative to inflation? How does that look historically? But it ignores the impact of the wealth effect that we're seeing in consumer confidence effects from that, which have a large element of the AI megatrends, the AI boom, the incredible expectations and profits and revenues that we're seeing flow through into people's feelings of wealth. And we know that consumers and consumption is very much driven by that aspect. And so I think that's been kind of an underappreciated element to why, despite a meaningfully restrictive policy, we haven't seen it [02:10:23] Speaker 10: in the data, in the economic performance. This is critical. We had Greenspan read chapter 22 and said, you know what, the stock market matters. I believe we have a president who says the stock market matters. Do you see evidence that this Fed and Chairman Powell care about that wealth effect? [02:10:41] Speaker 48: They most certainly care about the wealth effect, understand it. He answered that question when he got the question about the earlier moves in the stock market on Monday. And he talked about the persistency of the impact on financial conditions. So there is the answer, right? They're not going to worry about one, two days' worth of sell-offs. They're going to look at financial conditions and the wealth component, the stock market component of that. It's not the only thing that goes into financial conditions. He was clear to highlight that the increase in interest rates in the long end has been tightening financial conditions, the impact on housing. But they're well aware of the impact of wealth effect. But it's not a small move. It's not an isolated move in one part of the equity market. It has to be broad-based. It has to be persistent. And that's what we've seen in the past of when you can flip the script on, is the economy driving markets or is the market driving the economy. When the market has a big enough decline and it impacts the wealth and confidence, then it's markets that then lead the economy and the Fed will be having to take that [02:11:47] Speaker 9: into account in their setting of policy. All right, Fed Chair Rosenberg, I want to talk to you about getting several steps ahead then of the Federal Reserve as you figure out how to position. What are you looking at? What is your scenario analysis when the policies come down the pike to understand whether they're going to be potentially inflationary, whether they're going to be disinflationary, whether they could boost [02:12:07] Speaker 48: growth or slow it? Yeah, it's about this kind of reaction function and it's a little bit about the assessment of the asymmetry to the reaction function. Will they tolerate a little bit of missing on the 2% inflation trajectory relative to an outturn in labor market tightening? And so far, I think that we've seen the Fed, given the willingness to cut interest rates, he got the question around, do you have to wait till you hit 2%? No, we already know the answer to that. They started cutting before they got to 2%. So we know that the Fed, at least in the recent experience, has been more concerned about labor market tightening, the concern about over tightening, the classical Fed did it in terms of causing the recession. That creates a little bit of asymmetry of willingness to accept not getting to 2% so that your reaction, the Fed's reaction, my expectation around the Fed's reaction to a weakening in labor markets might be more to cut than the opposite of, let's say, the inflation figures, they start to, you know, instead of sticky, it's sticky and a little bit upward. Is the Fed going to raise interest rates into that? I think it's a much higher bar. That asymmetry is kind of helpful to positioning and fixed income in the Fed-centric kind of maturity spectrum, kind of the short end to the intermediate end of the curve that are going to be more responsive to what the Fed's doing. And I think that's a place where you have a little bit better assessment because of this asymmetry between growth and inflation. [02:13:42] Speaker 8: Hey, Jeff, always great to get your views. Appreciate them this afternoon. Thank you, sir. Jeff Rosenberg there of BlackRock on the latest Fed decision. Of course, it wasn't just about the Fed today. And Tom brought up the tech players. So we're here from Meta, Microsoft and Tesla over the next few hours. And I want to bring you a number from Deutsche Bank. Amazon, Microsoft, Alphabet, Meta, expected to surpass $200 billion in AI capex over the course of the past year. That is real money. We've talked a lot about the Federal Reserve's role in this economy. Those tech players have a huge [02:14:11] Speaker 9: role in this economy. On every level. And arguably, some people could say that ChatGPT single-handedly saved the U.S. from a technical recession, if not an outright recession, based on some of the investments that have been made. You're right to focus on big tech earnings, because what this Fed news conference just showed us is you're not going to learn anything there, but you will learn from what you hear from some of these executives in terms of how much more they're going to keep investing and where they see the gravitational pull. [02:14:38] Speaker 10: Just quickly here, there's a parallel to 1995. I remember the first time I heard the word Google. I was like, really? And I didn't pony it up. But the bottom line is, John, is you're right, this capex overwhelms everything. And we're going to see that here as we begin the tech derby with [02:14:56] Speaker 8: Microsoft. We'll see if they can justify it, given what we found out on Monday, if that is indeed the real deal. Coming up on the close, they'll follow through with the Federal Reserve decision and go into the close and pick up on a tech story, no doubt. We're going to catch up with Betsy Duke, the former Federal Reserve Governor, in just a moment. Live from New York City this afternoon. Good afternoon to you all. Thank you for choosing Bloomberg TV and radio. This was The Fed Decides. [02:15:30] Speaker ?: We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. We'll be right back to you all. [02:16:29] Speaker 3: We'll be right back to you all. Today's CFOs are reshaping the C-suite. Bloomberg's chief future officer shines a spotlight on these dynamic leaders. Prudential's reputation as an insurance giant is rock solid, but it's not resting on tradition. CFO Janela Frias is playing a key role as the company resets its strategic priorities. [02:16:50] Speaker 15: We've been on a journey to be higher growth, more nimble and more capital efficient. Watch chief future officer Wednesday on Bloomberg. [02:17:05] Speaker 49: In 2015, I was not optimistic because nobody was working on the hard problems. The energy R&D budgets had gone down. The venture investing and climate had gone down. It was completely out of fashion. So I don't know what people are optimistic about then. The fact is, we built essentially from scratch, you know, with lots of supporters, a really mind blowing level of innovation against emissions. And, you know, in the last nine years, that's gone better than I would have expected. So only now could you even, you know, plausibly be optimistic about the path of emissions. And someone who said, hey, nobody's ever scaled things up like this, the speed that we knew to before. They're welcome to say, hey, I'll believe this when I see it. You know, in the meantime, some people who care about this issue are really out, you know, trying to think, do we need permitting reform? You know, do we find what new ideas haven't we found yet? You know, how do we fund people with those, those new ideas? How do we get the cost of these things down? How do we collaborate on a global basis? So it's, we're still not at the point where it's guaranteed or even that it'll, it'll be easy, but at least there's a theory of change. [02:18:31] Speaker 16: In case you missed it on Balance of Power. [02:18:34] Speaker 2: This great show, by the way. Melania coin helped to delegitimize serious crypto coins. [02:18:40] Speaker 17: Look, meme coins, they have another handle for them, another four-letter word. [02:18:44] Speaker 1: I can't say it on the air. [02:18:45] Speaker 17: All these meme coins really undermine what is digital properties that can make a huge difference over the long term, but people buy it. Yeah. People are interested in it. And I wasn't into Beanie Babies, but perhaps this is digital Beanie Babies. Don't miss Balance of Power, live every weekday. [02:19:00] Speaker 8: Good morning from our world headquarters in New York, I'm Menace Credit. [02:19:03] Speaker 1: And I'm Dani Berger, let's set your agenda. [02:19:06] Speaker 3: Bloomberg Brief delivers the market news, data, and analysis you need. Live every weekday, only on Bloomberg. Context changes everything. It's a multi-trillion dollar industry. We'll show you what's happening in ETFs like no one else. ETF IQ, Mondays on Bloomberg. The countdown is on. Everything you need to get the edge at the end of the market day. This is The Close. [02:19:39] Speaker 4: Wait and see. After three straight meetings of rate cuts, the Fed hits the pause button. Live from Studio 2 here at Bloomberg World Headquarters in New York, I'm Romain Bostic. [02:19:47] Speaker 5: And I'm Scarlett Fu. We're just about 10 minutes to the closing bell. We had this Fed meeting where it seemed like, as you mentioned, wait and see was like the phrase that he turned to most often along with, I'm just not going to comment on that. [02:19:58] Speaker 4: Yeah, and you see that reflected in the moves, particularly down at the bottom of your screen. 4-5-5-2-6 on a 10-year yield. That's up, Scarlett, two basis points. But we should point out, up two basis points on the day, but that's still lower than where we were just last Friday. So coming into the week, expectations, at least on the moves and rates, now slightly to the downside. [02:20:16] Speaker 5: And of course, we're awaiting earnings after the closing bell. This will be the real driver going forward here, because Chair Powell wasn't able to say very much, given that not a lot has happened on the tariff front. And right now, there's a lot of rhetoric, but not a lot of action. All right, so the big gators here. [02:20:29] Speaker 4: Three of the 10 heaviest. We talk about the gains on screen, though, or the moves, I should say, on the screen, though. We take a look at just how much this is going to actually matter to the markets, much more so than Jay Powell. Microsoft, Meta, Tesla's three of the 10 biggest weightings in the S&P 500. And of course, all three are going to report earnings after the bell, as is IBM. [02:20:46] Speaker 5: You know who the best performer is among that bunch over the past couple of months? [02:20:51] Speaker 4: Yes. Who? [02:20:52] Speaker 5: Meta. [02:20:53] Speaker 4: That's right. [02:20:53] Speaker 5: Up 15% so far this year at a record high. Biggest gain among Mag7 names since the last earnings up about 14%. It's all in on the Lama AI model. And of course, it's because it's open source. It's seen as beneficiary. [02:21:06] Speaker 4: And of course, some of the numbers may matter a little bit less than some of the commentary, of course, around DeepSeek and the future of AI. A lot has changed. A lot has changed over the last 72 hours. When it comes to those names, we'll have full coverage better than anyone else as soon as those earnings cross the wire after the bell. But let's go back to what happened just a couple hours ago at 2:00 p.m. at 2:30. And Fed Chair Jay Powell. [02:21:28] Speaker 19: Inflation has moved much closer to our 2% longer-run goal, though it remains somewhat elevated. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. Longer-term inflation expectations appear to remain well anchored. With our policy stance significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. Policy is well-positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. Right now, we feel like we're in a very good place. Policy is well-positioned. The economy is in quite a good place, actually. [02:22:08] Speaker 4: Jay Powell, of course, a master of oil, kind of saying nothing. Giving the markets, I guess, what they expected to hear. Well, Betsy Duke joins us right now. She is a former Fed governor. She's also the former chair of Wells Fargo. She joins us right now to give us her take, I guess, on what we learned. And, Betsy, did we actually learn anything today? [02:22:27] Speaker 50: No. [02:22:28] Speaker 51: It's really hard to do, I think, a press conference, probably for the chairman and for the reporters in the room, when there's nothing to say. And so reporters keep asking the same questions over and over, trying to get something said, and the chairman kept saying nothing. [02:22:41] Speaker 4: Well, and as far as those reporters asking the same question over and over, it seemed the one theme coming out of those reporters' mouths wasn't about monetary policy directly. It was about White House policy, a question that Jay Powell dodged again and again and again. [02:22:55] Speaker 50: And will continue to dodge. [02:22:57] Speaker 51: I think this is the first of several press conferences where you'll see basically the same thing. It's hard to imagine that there's going to be definitive moves, several readings on inflation that would indicate the Fed should move one way or the other in the next couple of months. And it's going to take that amount of time for the administration policy to first get fully articulated and implemented and then to determine what the effect of it's going to be. So I think it's going to be hard to have anything definitive coming out in terms of what the Fed sees where it's likely to be until sometime around the June meeting. [02:23:40] Speaker 5: One thing that has been definitive, Betsy, is President Trump repeatedly calling for lower rates, saying that he's better than Jay Powell and judging where rates should be. Does this create problems for Jay Powell, for the FOMC? [02:23:52] Speaker 51: I don't think so. I think he's made it pretty clear. And I think that's been true for Chairman before Jay. And I think Jay believes it absolutely, that the independence of the Fed is the key to its effectiveness. And so I think you will continue to see him not comment about it and certainly not be changed by what that commentary is. The second thing is, it's hard for the president to impact the work of the entire committee. So what you see is what Jay Powell says. But Jay is speaking for a committee that's really 19 individuals and 12 voting members. [02:24:32] Speaker 5: Right, right. And of course, there was a change in the slate of voting members for 2025 as well. So while we don't have any clarity on tariffs, we do have clarity in terms of some executive actions, the freezing of billions of dollars of federal loans and grants, increased deportations of immigrants, plans to gut the federal workforce. How do you think about the degree and the ways in which this will show up in the economy, specifically the labor market? [02:24:56] Speaker 51: It's kind of hard to see with some of those executive actions because they're going to have to work their way through the courts as well. So it's really hard to see that. I think we'll begin to see the first policy we'll begin to see impact from is this idea of deportation. And it'll show up not just in who's being deported, but how does that affect immigrants' willingness to show up to [02:25:17] Speaker 50: work to various workplaces? [02:25:19] Speaker 4: Well, this gets to this idea, though, Betsy. And I think it was kind of interesting. During the Fed special that was on right before us, Jeffrey Rosenberg talked about this idea of how we kind of went from a Fed that was kind of forecast dependent to one that was data dependent, and now, at least in his words, one that kind of has to be White House policy dependent. And I know there's really no incentive for Jay Powell to go out on a limb right now and talk about these things. But surely no one inside the FOMC right now is thinking about making policy decisions without a close eye on what's coming out of the White House and maybe potentially Congress. [02:25:52] Speaker 51: I don't think anybody anywhere would argue with the fact that this is going to be a very impactful presidency and it's going to move fast with very dramatic actions. The question is going to be in what direction are they? How much will they be slowed or impeded by either working through the court system or issues related to Congress? And so it's going to take some time to see what the policies are, how they stick, and how quickly they get implemented. But there's no doubt that it's going to be the major factor on the economy for certainly the next year. [02:26:33] Speaker 5: Betsy, very quickly, I have a question for you on banking. With the Fed on pause until at least mid-June, how much should investors reassess the outlook, the impact on bank earnings? As you look at Lending Club, the shares are plunging on disappointment over loan origination guidance. And the CEO talked about how that's because the timeline for rate cuts are being pushed out. Does this extend to the whole sector? [02:26:53] Speaker 51: I don't think so. I think when rates are stable, that that's really good for the banking sector, which is the sector I know best. So I think that's fine. In terms of the mortgage market, I think the mortgage market is going to have to, and it will do so slowly, adjust to where the [02:27:10] Speaker 4: level of mortgage rates are. Betsy Duke, former Fed Governor, former Wells Fargo Chair. We thank her for her time as we count you down to the closing bells. A look back, of course, at the big Fed meeting at the press conference. And now we'll push ahead to a big slate of earnings set to drop in just a few minutes. [02:27:28] Speaker 3: The Closing Bell, Bloomberg's comprehensive cross-platform coverage of the U.S. market close [02:27:34] Speaker 4: starts right now. And right now we are two minutes away from the end of the trading day. Romain Bostic alongside Scarlett Foo taking you to The Closing Bells, a global simulcast. It starts right now. Carol Master and Tim Senevic in the radio booth. And we're joined here in the TV studio by Caroline Hyde, the co-host of Bloomberg Technology. And it is going to be all about technology. Meta, Microsoft, Tesla set to report earnings in just a few moments time. IBM Lamb Research ServiceNow further down the market cap spectrum. The big market moves just up ahead. Carol, what do you keep an eye on? [02:28:10] Speaker 40: Well, how quickly our focus changes from one big thing like that Fed decision and Fed press conference, right? And I feel like, okay, market's kind of in a cool space that they're kind of where they were before the Fed decision. Having said that, you are right, Romain. It's all about what we get from these big tech companies. And in particular, that AI spend, there's going to be a lot of questions on [02:28:26] Speaker 24: that front considering the news this week. Yeah. And look, Bloomberg News reporting earlier today that Trump administration officials are considering expanding those restrictions on Nvidia chip sales. We saw the entire market move as a result of that. And Nvidia fall close to 7% as a result of that. Everybody, this is on everybody's mind right now, especially on those investors who are watching these companies report today. A lot of questions about CapEx, I'm sure. [02:28:48] Speaker 5: Yeah, but I wonder how much a stock like Tesla is really going to move on the results because it's so far divorced the share price action from the number of cars that actually sells these days, right? I mean, it's all about Elon Musk and his political influence at this point. [02:29:00] Speaker 12: Has it become a meme stock trade? And how long has it been the case? Ultimately, I think what's going to be really interesting is what dictates trade, whether it's more of a Microsoft and the heavy market capitalization, whether it's Metra and the ripple effects across other social media related stocks. But remember, he just said 65 billion. He's going to stick to it. [02:29:16] Speaker 4: All right. Tesla down here in the cash session, down about 2%. Apple and Meta, the only two of the mag seven stocks in the green as we await those earnings right across the screen on the headline indices, a Dow down 3/10 of a percent, an S&P down half a percent, the Nasdaq composite down half a percent as well, the Nasdaq 100 down 2%.