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🚨FOMC LIVE #FinanceDaily
Recorded: March 19, 2025 Duration: 1:32:00Space Recording
Short Summary
The discussion highlights potential trends in the crypto market, such as the impact of economic conditions on Bitcoin, as well as recent growth indicators like net inflows into Bitcoin ETFs. However, it also notes the broader decline in growth and risk-on markets, reflecting a challenging environment for investments.
Full Transcription
Hey folks.
Good afternoon.
Good to be with you on this FOMC announcement and press conference day.
Always a pleasure.
And we'll get to discussing our speculation about what J. Powell will say.
how concerned he will be regarding market pullback, probably not at all,
probably won't comment on that, but certainly regarding economic slowdown,
maybe regarding global choppiness due to tariffs and other stuff.
But let's first get to...
Let's first get to some news around O, Invidia, Musk, B-YD.
Yeah, let's get around to stuff like that.
So...
BYD, soaring to all-time highs after launching a charging system that works nearly as fast as filling up a tank of gas.
Flash chargers, about five to eight minutes.
I don't think that's how long it takes me at the gas station.
But, okay, maybe double that time.
And there's a plan to build 4,000 new charging stations across China.
It seems like, you know, the space between Tesla and BYD is growing a bit.
NVIDIA is teaming up with GM to develop self-driving vehicles.
Sorry about that.
We've got announcements out.
about how many Blackwell chips are on order,
says that we're 3.6 million Blackwell GPUs on order.
That excludes meta.
And Jensen Wang, the CEO, you know, is telling the industry to go ahead and stop worrying about
you know, any dark clouds around the stock.
And, you know, I think generally for CEOs of companies whose stock has done incredibly well
and then may be facing a pullback, I mean, there is no reason to immediately rush to defending
the stock.
The stock will do what it'll do.
His important job is to go ahead and continue to support growth of the company.
His feeling is that they're well positioned for the shift in AI.
And that's really what he's supposed to be focused on, not necessarily the share price,
although we all, all public company CEOs eventually answered to shareholders.
Yeah.
Some other stuff that has come out, you know, over the last day or so.
Elon Musk has been buying stock in X.
So Musk doesn't own 100% of the equity.
He owned roughly three quarters of the equity.
And...
It has come out that he has invested $150 million to go ahead and buy last year he invested $150 million to buy additional stock at the valuation price at which he purchased the company.
So if that's not a vote of confidence...
in the valuation that he paid for it. I don't know what is. Essentially, he's, you know,
accumulating additional shares. Too bad he didn't acquire their shares when they were probably
for sale much lower than he bought it out. But nevertheless, you know, at the $44 billion valuation
at which he bought it, you know, that's where it seems to be right about now. And he's
been buying back, as we spoke about, by the way, and as we mentioned, you know, the loans that are
tied to the buyout have also been selling and been selling at close to par, even with, you know,
pretty healthy coupons on it. So, Musk doing well, it seems, in terms of his investment in X,
at least relative to the lows that it's been at,
Tesla, not so much in the current market environment, but maybe that's just a matter of time also in terms of things turning around.
Do you know who he bought the ex-stock from?
No, it didn't say. It did not. It didn't say...
It didn't say in the story that I read about it, and it's just been reported, but you may be able to look at where it was reported and find that out.
I'll see if I could find more.
I'll let you know, Simon.
On the tariff front.
Costco and Walmart are pushing really hard on suppliers to go ahead and reduce their prices,
suppliers in China to go ahead and reduce their prices.
So I guess the pain can be shared all around because, you know, we as consumers will certainly bear a fair amount of it.
But I guess Walmart and Costco doing a little bit fighting for the U.S. consumer.
so that they can go ahead and not necessarily pass the whole thing off to their consumers or eat a little bit themselves.
Warby Parker, stock was off 12.5% yesterday because of tariffs.
I think the stock market may be getting a little bit more used to all of the herky-jurkey of the tariffs or the tariff wars.
But businesses certainly...
you know, don't know what the outcome is going to be and don't know, you know, how to properly plan for it.
I think they have to go ahead and continue to plan as if it's going to be a reality.
But nevertheless, you know, have the expectation that it could not come to reality.
And I think that was kind of it in terms of what I had.
for overnight news.
Oh, I mean, there's been a bunch of action in the courts
and the judiciary regarding Trump's activity
and Doge's activity and, you know, we're going to, and then, you know,
essentially the executive branch telling the courts they can go to hell,
they're going to do whatever they want,
whether that relates to folks being deported,
or whether that's the dismantling of USAID.
It seems to me, you know, look, lawyers are going to make a lot of money here,
certainly in terms of the hours being billed.
People are certainly, if this is near and dear to their heart
and it is personal matters that are being, you know, attacked,
then, you know, people are going to get apoplectic about it.
I don't, you know, I certainly don't expect everyone to take this lying down or, you know,
with a sigh, you know, certainly there will be people that are going to get exercised about this.
And, but nevertheless, you know, as as the majority of us are just bystanders in all this, it's really an interesting environment.
For someone, for someone like myself who is a lawyer and therefore the rule of law.
I don't know, is not just for losers.
It's actually important to, you know, establishing the basis for our republic, you know,
not necessarily regarding the rule of law or what a judge says,
regardless of how outlandish you think that judge is or how activists that judge is,
you know, it does bring a big question mark to the whole system.
and unfortunately, it just is what it is at this point.
That's the environment that we're in,
and there's going to be a lot of resources expended on this.
I don't expect this to be the end of it.
It'll continue.
Courts will be filled.
with not only trials and motions for summary judgment and motions for
dismissed, but there'll be appeals and appeals and appeals.
So again, kudos to the lawyers.
Oh, and by the way, law firms, you know,
getting blacklisted is also a pretty rough deal.
um you know and um you know i i i i never expected uh that the practice of law would be such a partisan
activity but you know clearly uh it is and um you know those law firms certainly you know need to be
aware of it um just one last thing before getting to elateo you know about um i don't know
how many associates but a lot of associates meaning not partners
at 200 of the largest law firms in the United States have now written a letter to their firms, to the heads of their firms to go ahead and stand up against the White House, you know, blacklisting law firms.
These associates, I don't think they know what they're getting in the middle of.
I mean, with all due respect to their idealism,
if you get blacklisted by the White House and you're an idiot
for going at and attaching yourself voluntarily to something
that's going to go ahead and argue on behalf of the blacklisted companies,
I mean, and you're just an associate, you're not a partner,
and you're putting the entire partnership enterprise at risk,
by going ahead and doing this.
I think that's a real risky thing,
and that's not what you're paid to do.
Shut up, do your work, you know, take your paycheck and go home.
If you don't like the firm or what it's standing for
or what it's doing or not doing,
go find the job elsewhere,
but don't go ahead and put, you know,
the firm's reputation at risk
by going ahead and signing on to some clandestine effort,
you know, to fight the White House on this.
I think it's crazy.
Eladio, go ahead.
Good afternoon to you, sir.
Well, obviously, the importance of this space is what's going to happen here.
But I can not agree anymore with you.
I know Joe Kalazari is here.
He's obviously an attorney.
I am not.
But I just think that there are powers of the presidency on Article 2 of the Constitution that are pretty clear.
Everything, especially powers that are deliberately given to Congress or the president by the U.S. Constitution is the law of the land.
The excuse that the left has been using with the 1798 law is that it's an all archaic 18th century law.
No, it isn't because the Constitution is an archaic.
18th century law that was actually created in 1787, that is the law of the land.
And so I do think that Judge Roberts, and this is all I'm going to say about this, I think Judge Roberts did exactly what he needed to do.
He kept Trump in check.
The fact is they pushed the envelope on the planes.
The hearing did start before the while the hearing was taking place, but that's okay.
But I believe it's going to, I don't think it's going to be as bad as you think, David.
I think the Supreme Court is going to come up with a major ruling similar to the immunity ruling that they came up.
And it's going to be a blanket ruling, and they're going to get rid of half of these nuisance cases, which are all without status.
Because one of the big problems we have in the court system is that status should matter.
You don't have the right to sue somebody that hurt your neighbor.
The neighbor has the right to sue that person that hurt him.
And the judicial activism that has been taken place on both sides, probably, more so on the left.
is abhorrent. That's all I have to say about that. All fair commentary from a non-lawyer.
Absolutely. I will take all of that and the opinion matters, even though you're not a lawyer.
By the way, Mickle, Josh Young, you're welcome to join us on stage.
Joe Carlos Seri, of course.
Welcome to join us if you can.
And we're here to talk about what the Fed's going to do today.
And so let's go around the horn and see people's thoughts, A, first about decisions.
I don't think there we're going to have any sort of dispute.
But then in terms of commentary...
You know, where do you think Powell's going to, you know, press and where do you think he's going to pull and where do you think he's going to remain silent?
And obviously, you know, how is the market can go ahead and react to all that?
Oh, and by the way, you know, how intently is Trump and Besson and everybody else in the cabinet, you know, listening to what's going on?
So let's, I'll start with Simon. Simon, any thoughts, sir?
And then on to Robert.
Sorry, David, do you want to go to someone else?
I just got to...
Oh, absolutely.
Oh, Infra.
My man, what do you think is going to happen today?
Yeah, I don't think the rate decision will be anything notable.
I'm not sure if he tilts hawkish or dovish.
I don't know if he, I think like the most interesting thing, I'd be curious if Joe agrees with us, but the most interesting commentary will be like which side are they more worried about inflation or growth.
And also I'd be curious to see how he answers questions like.
how disengaged he is about the equity market
and the decline that we're seeing there.
Those are kind of the main things.
Also the dot plot, I think we get a new dot plot today.
So that'll be interesting, see if, you know,
what the median dot is showing.
But yeah, I don't think the rate decision on its own
is gonna be notable.
Yeah, you know, we were, the market was pretty hot this morning. It's easing a little bit now. I expect it to continue to ease going into the decision and then into the presser and then depending on how that goes, we can end the day.
higher than where we are right now, or, you know, possibly we go to red.
So, you know, we'll have to wait and see.
Oh, and by the way, surprise, surprise, folks, look what's having a great day.
Boeing is having a great day in the markets.
Dave Nukoski, are we turning around?
Is the aircraft making a turn?
I'm going to take that as a no.
David Nikovsky, are you with us?
Yeah, I'm trying to get up.
Sorry.
No problem, man.
Yeah, I mean, B reversals are hard to call.
I mean, you possibly have a major double bottom.
Right.
And I turned bullish on it.
You know, I said, don't own it.
And I said it a couple of months ago, it's inflecting bullishly.
But, you know, that's a roller coaster.
I mean, it's been a roller coaster, right?
Yeah.
I mean, between.
And, you know, if you look at Embraer, you know,
Much better company. I'm going to tell you hands down, right? Without all of the twists and turns and roller coaster and, you know, it just, it's been a lot better stock. Performance wise. Like I said, Boeing to me is more of a trading stock. You know, if you go back and look at relative strength.
on this thing going back 20 years.
Do you know that you lost money in the last 20 years instead of being invested in the S&P 500?
As a matter of fact, over the last 25 years, you've lost 38% versus the S&P.
So I would look for the turns.
Thankfully, it hasn't been in my portfolio that long.
But I wanted to go ahead and ask you your thoughts about today.
Are you listening for anything in particular expectations, so on?
You know, I think the Fed has to decide, you know, really, you know,
The recovery has been K-shaped for the most part.
And you know, you're seeing that the week are getting weaker.
As I pointed to XRT, now you're seeing transports.
breaking down most transport stocks other than the airlines.
Most truckers are, you know, at five to 10 year relative strength lows.
Rails are the same, which is one of the most efficient ways to transport.
So you certainly, you know, if you're not seeing, you know, product on the rails,
that concerns me about really what the internals of the economy are.
When you see chemical stocks, you know, many of them at 10 year relative strength lows,
chemicals go into everything from food to clothing to industrial.
You know, that's another concern of mine.
I think the economy and what the index says are two different things.
You had the XLK on a relative strength basis.
This is the second largest move in
you know, that particular sector in history, probably going back to the 29 period.
And most people don't realize in 29, it was record players that were technology.
You know, I think there's there's a decision here that he's got to, you know, say, hey, look, there's
dramatic weakness.
The FHA is paying a town a million loan, you know, a million homebuyers loans.
without any, you know, retribution of them non-paying, right?
Like, this is taxpayer money.
You know, and I don't want to stick to the negatives.
There's some positives out there.
But they're, you know, from a technician standpoint, you know,
the one thing I see clearly across the board, when you look at tech,
You know, industrials actually are close to a 16-month relative strength high versus the XLK.
Infra sent me a post on that yesterday.
I have been watching, you know, energy versus XLK.
That's inflecting bullishly.
You don't have it on the S&P yet.
But copper, aluminum, zinc, you go down all the commodities.
They're all inflecting bullishly versus the S&P in terms of relative strength.
So that's something I'm keeping my eyes open for.
You know, if we do, you know, reinvigorate the economy to become, you know,
an industrialization center of manufacturing like it was years ago,
it's going to take a lot of this basic materials to get us to that point.
You know, they're talking about, you know, being a shipbuilder again.
You know, it's going to take a lot of steel to build a ship.
So those are the things that I think a bigger picture, macro picture that I'm looking at.
Yeah, in terms of the, you know, big shift to talk about, you know, the big shift that you talked about with regard to manufacturing in the United States.
And if that pans out, you know, under Trump, clearly it's a priority.
You know, the housing market is really something that is, you know, I don't think getting as much attention.
and the change that's going to go on there.
You know, what's going to happen with Fannie Mae and Freddie Mac is anyone's guess.
But it seems clear that the agenda is certainly to go ahead and fundamentally alter how those GSEs are run.
You know, Trump coming out and saying he wants to go ahead and build housing on federally owned land.
you know, lots of it out in, in the far west, like Nevada and Arizona, in California.
And then at the same time, you know, Aladio will say, I think Aladio said this.
Forgive me, Ladiou, if I'm wrong, but that, you know, Trump and Besson are, you know,
purposefully trying to go ahead and drive the 10-year down or try to drive,
trying to drive rates down.
And then on top of that, you've got a housing market that despite, you know,
things getting better on a relative basis, at least with respect to interest rates,
and at least with respect to inventory, you know, mortgage applications were down 7% on a year-over-year basis.
for the month of February.
So whatever we got going on in this country,
and I'm sure info,
whatever we got going on is not helping.
The status quo is not working for housing.
And prices for raw materials going up
and deporting, you know, illegal immigrants
who may be working in the industry
on a blue-collar basis, you know, isn't helping
you know, property insurance costs going to the moon in certain areas is not helping.
And so you got all this together, you know, there does need to be a radical change in housing.
And I do think that it's happening and it's going to happen.
You know, the remaking of Fannie Mae Freddie Mac is a very...
tough undertaking because of the legal nature of those entities and what you have to do vis-a-vis
the stakeholders, the investors, equity, debt, and so on in order to go ahead and remake those entities.
But, you know, it seems like there is a fundamental shift that is going to go on in housing, you know,
over the course of the administration.
I mean, we're only...
you know two months in at this point folks so you know we can't expect to see
you know the the effects of it but I think over you know over some period of time
we're gonna get that similar by the way to go back to the Mnikoski's point
in terms of the shift in manufacturing to bring that stuff back home Aladio go ahead
I completely agree with what you said. And David, just like Grant Cardone is a commercial real estate guy, that's what Trump has always been. And it's not a complex subject to realize that the 10-year control is almost of the lending. It is a market-driven market-driven.
somewhat influenced by quantitative tightening and easing because they could choose what part of the
curve they roll or buy.
So by doing that, they do control the long end of the curve.
But as you will know, that the Fed has been consistently now for almost a year doing some methodical
quantitative tightening, letting things roll off.
I agree with Infra, 100%.
The two o'clock announcement is meaningless.
All that matters is whether we're going to get a dovish tone.
Every time we hear the word trait from Colin Powell's mouth in the press conference...
I think the market will rally because it means that they're more concerned about the slowing effect of the economy than they are inflation at this point.
And I think that if you look at from a strategic standpoint, presidents do things in order to make sure that by the time the midterms or the main election arrived, things look good and rosy.
Take the hit.
now. The fact is the stock market is overvalued and was overvalued because of the
debasement of the currency and the reckless policies. We need to correct the balance sheet of the
United States of America. There's no freaking way we're going to refi $9 trillion. That's the number
I'm taking from infra that we have to refi in how long infra? The $9 trillion? What time
do we have? I think it's the next year, the next 12 months.
That's an exorbitant amount.
When Barack Obama ended his presidency, we were talking about crossing the $10 trillion mark.
Imagine having to refy 90% of what we had in debt in 2016.
and have to do it at these rates.
It's not complicated.
You slow the economy down.
You take the stock market hit.
The market shouldn't have rallied as much as it did because of all this easy monetary policy.
And the only prayer I have, David, I really pray for our country's sake and for the sake of the reserve currency status of the United States of America.
that Deutsche at least gets to $500 billion of savings.
And the only way they're going to do that is to hit Medicare and Obamacare
through the pocket, through the money, by stopping the funding.
And I think they could get close to that $500 billion number without touching Social Security and Medicare.
And last thing, we're never going back to 2019 spending levels.
Every time I hear Republicans say that, I know they're clueless.
The reason where we are at in spending levels is because of the 25% inflation rate on average that we got over the last five years.
That's made healthcare and Medicare the fastest rising, along with the interest under debt, the fastest to growing areas of the federal budget.
If we continue the spending at the rate that we're going, at the rate that we're going by 2050, half of every dollar of the federal budget will go to paying interest.
That's insolvency in my book.
I get to Dwayne in a second.
Simon, just for your knowledge.
It just came out that X has raised a billion dollars of fresh equity capital.
at 32 billion, which is, in my opinion, a far ways off from the 44 billion buyout price.
Musk participated in that raise of a billion.
So did one of the debt, the buyers of the debt on the secondary market, a fund called Darsana capital.
They also participated in that billion raise.
And the...
It sounds like the idea behind the raise is to use the proceeds to go ahead and pay down more debt.
So obviously feeling that, you know, the interest rate is wildly high.
They probably can't refinance the debt.
So instead, go ahead and raise equity to loot by a little bit,
but go ahead and knock off some pretty big interest payments off of the company's income statement.
Dwayne, go ahead.
Oh, thanks. Good afternoon. So there's some interesting commentary here that I heard from our friend Robert and Aladio as well in regards to growth versus inflation. And I think that'll be an interesting topic for Powell to cover because it could be that there's an implication here that he implies that concerns about a decline in growth.
Wait, Duane, I got to cut it.
I got it. Sorry, I got to cut in.
We held rates, the FOMC, held rates steady at four and a quarter to four and a half,
a slower balance sheet reduction amid economic uncertainty.
The median dot only.
Go ahead.
The median dot only shows 50 basis points of cuts in 2025.
So two more cuts is what the median dot shows.
Okay, back to Dwayne. Go for it.
Oh, yeah, sure. So, yeah, so like I was saying, I, yeah, I think that there could be a lot of common, some commentary around growth because that seems like a growing concern here.
If we look at all of the forecasts coming out, there's going to be a significant declining growth over the next couple of years.
If the tariff policies go through and we have a, you know, consistent tariff policy.
or even a tariff war here.
And I think there could be some commentary about tariffs.
Of course, he's going to be asked about tariffs in the questioning period.
And it will be interesting to see what he has to say about monetary policy.
Because looking at some of the other, you know,
some of the other nations around here.
There may be a bit of a change in monetary policy
in regards to tariffs because we really don't know
exactly what's going to happen,
but we have a lot of industries that are going to be effective,
you know, whether that's computers and electronics,
so, you know,
Be careful.
When you see the next PlayStation price, it's going to be astronomical, electric vehicles, and the like.
So I think we don't really know what that's going to mean.
But for now, obviously, the Fed is going to stay quit in regards to the policies.
Pardon me in regards to the rates.
But I think that growth might overcome inflation at least for the interim, even though, like David was saying, we have a lot of the basements, especially copper, showing us that we're going to have some industrialization here on shoring, which should mean some inflation within the next three to six months as well as that progresses. So we'll have to see what happens when it comes to those particular issues.
Yeah, in the release by the Fed, there is a line about uncertainty around economic outlook having increased.
And so there you go, you know, Powell going ahead or the Fed going ahead and sowing the seeds for potentially, you know, cutting rates if the economic environment gets worse. I think, but I agree with Dwayne, some of the most.
interesting comments that Powell can offer, if any, about it at the presser will be around tariffs
because there he is locking horns.
There's no way to avoid locking horns with the executive branch with the president.
If he's going to go ahead and answer that question, depends on how much he lays into it.
or how much he just simply says, you know, we as the Fed have to go ahead and deal with it.
It's really not.
you know, our area of, you know, jurisdiction to get involved.
But I definitely look forward to that and how much of the uncertainty, by the way,
that they just stated comes from tariffs or comes from other policies coming out of the White House
or comes from not necessarily policies coming out of the White House,
but, you know, an environment that Trump inherited.
So we'll have to see, you know, how much of this gets laid at the president's feet and how much doesn't.
By the way, separate and apart from this, the head of digital assets of BlackRock, you know, has said that a recession would be a huge catalyst for Bitcoin, which academically I agree with.
whether it would in fact come to pass that that's how Bitcoin would react.
I have my doubts, and this is coming from, you know, somebody who is tremendously bullish.
I wish that would certainly be the case, but I can't say without a doubt that that would be the case.
I mean, a full-blown recession, maybe.
Something short of a full-blown recession, you know, it will probably act more like tech stocks and the way that it's been acting than as a safe haven asset.
Infra, go ahead on the point.
Yeah, I think in the short term, it would do pretty poorly.
But I think, like, medium to longer term, it would do pretty well,
just given we know the response to a recession,
especially if the deficit ends up widening.
you know, like it normally does, and we end up with a deficit that is, you know, 10, 11, 12, 15% of GDP.
Yeah, short term, it would probably sell off pretty sharply because we've never really seen like an actual recession.
But, yeah.
But yeah, I think like medium to longer term is probably what they're talking about,
just due to the kind of inevitable monetary and fiscal response to the recession, if that makes sense.
Yeah, no, again, I think academically it makes sense.
The argument is there.
I just...
I don't know if it will get there.
I don't know if it'll survive to the point where people realize that it is a safe haven asset.
And yes, that the recession is not just due to economic slowdown,
but it is due to the enormous debt burden that the U.S. has to go ahead and shoulder
and seemingly can't get out of.
The market is softening a little bit off of the back.
of the decision and the release.
We're about 20 minutes or so away from the press conference.
Paul, good afternoon to you, sir.
Thanks for joining.
Anything top of mind today?
Yeah, we're just looking at the, in terms of what may come out in the press conference.
Like, obviously, they're going to talk about inflation.
They're going to talk about the path to 2%.
with inflation, you know, slowly going down CPI 2.8.
One thing I was looking at was the U6 number, the U6 job number,
is up about 0.7 from a year ago versus the U4,
the traditional quoted unemployment rate is up about 0.4.
Yeah, it's like 4.1 to 4.4.
That's also 0.3 versus...
7.3 to 8.
So you're definitely seeing, you know,
a longer, you know, people are staying out of work longer
and, you know, going into this long-term unemployment,
even though you're not seeing it in the unemployment rate,
the headline.
And so I think, I don't know if they're going to talk about that,
but I think that's something that just is an interesting point
that kind of people should focus on in terms of,
you know mortgage rates you know like obviously 10 year coming down a little bit has been helpful
it's kind of in line with the spring selling season uh so i think you know it's going to be
well appreciated by you know buyers out there and i'm just kind of pulling up where we were so back
in january were 704 on the 30 year fixed rate mortgage
This is out of the Fred database.
We're at 6.65 as of March 13th.
So, you know, it's positive.
So for those big, you know, for those big mortgages that people have,
every base point's going to matter.
The lowest we were recent days was September.
the 26, we were at 608. So, you know, I think people are going to be really hoping that we get to
something more of the low sixes, but, you know, it's, it's not, certain parts of the country there
is not a lot of, not a lot for sale. Other parts there is, is inventories at 2019 levels now.
The Northeast is just one of those areas in parts of California. We're not seeing a lot of
inventory because people are still locked in at these low rates. So I think that's something that
the real estate, we'll tell you, the real estate industry is going to be focused on.
But I'd say kind of look at that new six number when it comes out again in another month.
Definitely will.
Thank you for pointing us to that or highlighting that for us.
Caleb, see you in the audience.
If you want to join us up on stage, please do.
I want to go ahead and point out, by the way,
To understand what kind of drought we've had in crypto today and yesterday were the first two days that we've been able to string together net inflows in Bitcoin ETFs since February 4th.
We have not been able to get a consecutive two days of bit net inflows into Bitcoin ETFs.
So, you know, you don't need to know much about price action if you know just that statistic.
It's been a pretty awful, you know,
I'd say, you know, close to six weeks in crypto land.
And it's generally been a tough time, you know, in stock markets.
And certainly when it comes to growth and risk on markets.
Caleb, thanks for joining.
Well, let me wait until you're up.
Oh, David, how you doing this afternoon?
Thanks for joining us.
Give us your thoughts on, you know, what you think is going to come out of this afternoon's press conference, you know, after having seen the press release out of the Fed this afternoon.
Yeah, so I think largely Infra had hit the nail on the mark there, especially with
Jerome Powell's potential quarries within the current environment.
Honestly, like, I think the Fed and the interest rate environment is slightly less volatile
as it was in prior years before.
Long story, short, big picture now is the tariffs.
I'm actually curious, way you found tariffs specifically.
typically the employment backdrop.
I think that's largely going to be the crux of the conversation.
On the long term, I think the employment backdrop is looking slightly negative,
especially with the potential of coming tariffs.
And if we're looking at margin compressions from institutions, U.S. institutions'
primarily by virtue that's going to create a slight layoff because essentially in order to
harbor that margin compression, it's not going to be via increased sales or increased production
output. It's going to be via the actual cutbacks that they're going to see with employment.
So in the months coming forth, I think that we might actually see the Fed actually posit to
be more hawkish than anticipated. And specifically, like, there is a probability. I know the current
rate cut projections are predicting roughly three rate cuts throughout the year.
I think that might be cut down again.
We're now at two.
Yeah, two.
So I think that would be coming down over that environment.
Employment is the big picture.
It's no longer about inflationary pressures, right?
It's not even forward guidance towards inflationary pressures, nor is it about price stability
to say, right?
I think it's mainly around employment.
And that's where I think the Jerome Powell is going to be really contrited on.
Thank you for that.
By the way, risk markets are generally powering a little bit higher here.
The NASDAQ is now up a bit more than a percent.
So it seems that, you know, it ticked up a bit from the little cool off right after the announcement.
Obviously, we will see, you know, how things go throughout the press conference.
Caleb, good afternoon to you.
Thank you for joining us.
Appreciate it.
Any thoughts on the announcement, any anticipation regarding the press conference?
I think the only big surprise, first of all, thanks for having me.
The only real big surprise for me was the fact that they actually went ahead with tapering QT.
I wasn't really expecting that from this particular meeting, but I definitely expected it in the coming meeting.
So I think the fact that QT tapering is going to begin on April 1st is a good sign for markets and liquidity conditions on net.
I still want to be very clear.
This does mean that the Fed is still going to be going out and selling treasuries and mortgage-backed securities into the market.
So this is still tightening.
It's just less tightening, right?
And what markets like is this kind of on-the-margin adjustment.
And so I think given the fact that they're going to continue to remain paused here, likely for probably the next meeting we'll see in June.
But this is kind of their way of saying, okay, we're not going to cut interest rates right here right now, but we can provide some less tightening on the margins by reducing QT.
Right. And so I think that's kind of the big takeaway here for me.
Obviously, I think the markets are generally reacting quite positively.
I was a little bit surprised to see the initial jump higher and then basically five minutes of selling pressure.
And now, you know, things are making some new highs here, at least over the past hour.
on a relative basis. So that's good news. But yeah, I mean, like I said, no major surprises
here. It'll be really interesting to see how Powell continues to navigate this press conference.
I think he's a master at doing this in terms of towing a very thin line and optimizing
the Fed's optionality in the months ahead, right? The one thing that Powell is super amazing at is not
backing himself and the Fed into a corner.
And so what he continues to kind of pound the table on is that they'll be data dependent, that they're not committed to one thing or the other. And this is what I think gives the market some degree of ease here because the market then recognizes that it's going to be the data that matters and that the Fed isn't on some predetermined path here. Right. And so.
So in my general opinion, the Fed is going to continue to cut interest rates later this year.
That's no surprise.
I personally think they'll probably do three interest rate cuts, even though the SEC only shows two.
Bomb markets are looking at that two to three number as well.
So we're getting a lot of good science here, right?
We're just going to need to see continued evidence of disinflation.
Maybe the last point here that I'll make on this is, you know, Powell has been saying this for a long time now that they do not want to do undue harm to the economy or the labor market.
And so when we're looking at the summary of economic projections, right?
And they've essentially lowered their real GDP growth forecast for 2025 and raised their
unemployment rate projection for 2025.
You know, this is a sign here, again, that, you know, we should have a lot of confidence
here that the Fed is going to cut this year.
And it's just a matter of how much.
Yeah.
You know, I know what the, I know what the data says and what futures imply.
By the way, futures, you know, implied 57%.
of a cut in June, and it's now up to 62% after today's decision and statement,
I really don't think we're going to get 50 basis points of rate cuts this year.
I think we may end the year with zero, and that's not because Powell wouldn't cut.
I don't think he's going to have to cut.
Um, that, that's just my opinion. I think it'll change over time as we've seen, you know,
these opinions change, you know, in previous years when we thought we were going to come out
with so many cuts. I think the, the economy is in a good place. I think the only real outlier for me
is tariffs. Um, how strong they come in, how, you know, damaging they may be. Um, but if, you know,
with, as with most things, Trump, uh, we don't know.
Um, we don't know.
A, if they'll come to pass, and B, even if they do, how long they'll stay in place.
And in absent the tariffs, I don't necessarily see a real reason to go ahead and cut rates, except, and this is another except to the except for the fact that
Maybe Trump and Pell and Besson will go ahead and maybe Paul Atkins too, maybe try to go ahead and pressure Powell into cutting rates.
But again, their focus is on the 10 year, as they've said explicitly.
And maybe that means that they can go ahead and leave Powell and company.
alone and focus elsewhere.
I know I've said a couple of contradictory things and all that, but, you know, I think there's a
possibility that we exit the year with no cuts, and I don't think we should be necessarily
surprised or frightened that we may exit the year with no cuts.
We may not need any cuts.
but we'll have to we as as I will we will have to go ahead and wait and see
We've got about 10 minutes
Until the press conference. I don't have much else by way of
News to go ahead and discuss anybody want to go ahead and you know does discuss anything in particular
You know any any particular companies goings on
any earnings, although they've been quite thin since we're at the end of earning season, not a lot going.
I don't know, by the way, I was out, I think, earlier this week.
Over the weekend, we got confirmation, Dwayne, that Hudson's Bay is liquidating entirely.
So they're going to go ahead and sell all their real estate.
as a result of this in Canada.
As I highlighted, the company that owns Hudson's Bay Department Stores in Canada also owns Sax and Neiman Marcus in the United States.
I think a lot of brands, luxury brands, are holding their breath.
They can't take the one-two punch of not getting paid from Hudson's Bay and then not getting paid again from Saxon, Mnemus, even if it is the middle of the year.
A lot of them still have holiday payables that are due and owed or receivables that are due an ode to them.
A lot of brands are not in a good place right now.
Luxury brands, you know, a la Gucci is in Never, Never Land.
You know, there has been almost in the luxury space.
They've had to change leadership a couple times.
And so...
We've got some serious problems there.
And then it was also confirmed over the weekend that Forever 21, which is no glorious chain, but nevertheless has a couple hundred stores, is going to go ahead and liquidate as well in the United States.
Forever 21 is owned by Authentic Brands Group.
They're a bottom fisher for, I'd say, higher-end brands, you know, the likes of Brooks Brothers and Reebok, a bunch of others. I'm sure if you go to their website, you'd identify a whole host of them, you know, how they went ahead and got into...
you know, operating a chain store, you know, maybe a little bit of a strategy drift.
They also own JCPenney, which is still around as well.
The amount of retail real estate on the market is really astounding between the liquidation of Party City and
Big Lots, Joanne Stores, Forever 21, and whoever the hell else is going to come along this year,
it's pretty unbelievable how much difficulty there is out there.
And we know we've talked about the earnings from Coles and Macy's and, you know,
them closing stores are downsizing to a smaller footprint.
I mean, it's pretty unbelievable.
Yes.
Definitely, you know, real estate is a regional game, but, you know, these stores are are nationwide. Go ahead, Aladio.
All right. The biggest news, and I think you know where I'm going with this, David, the biggest news of the day is, and I've been saying this for a while, their first chess move.
is to hit the long end of the curve.
By tapering quantitative tightening,
they are essentially now in line with the president's,
or in this case, Bessett.
If you think Trump is clueless,
at least acknowledge that Bessett knows what he's doing.
So now they're working together.
at lowering those 10-year yields. I haven't looked at 10 years unchanged at this point,
but that is the biggest news, and that is bullish when you look at any probability analysis
and take proportionality into account and the fact that for two years we've gone straight up
almost, and now we're at a point where we were most vulnerable for any news that isn't
exactly perfect to create a downturn.
I believe that the tariffs have achieved their goal.
If they want to take the hit on the stock market now, take it now.
And that also is a slowing effect on the economy.
Nobody talks about the effect that the market wealth creation or not has an impact on psychology, spending habits, etc.
And that too, having a correction that you maybe sort of nudge...
is also a slowing mechanism from from the point of psychology because when people lose money,
what does it translate into?
They stop, they slow their spending.
So that's the biggest headline.
The end, that QT is being tapered.
Yeah, definitely appreciate the discussion around that.
And, you know,
happy to have you and Caleb go ahead and raise the issue and we'll see, you know,
how that goes ahead and affects markets, not just today, but over, you know, the forthcoming days.
Hey, Joe Carlis-Serre. How are you doing, man?
Hi, everybody. Doing well.
Excellent. Any thoughts on today?
Um, well, I think it's, it's clear now, uh, that the Fed is being cautious with respect to growth expectations. You know, you got almost everyone revising down on the SEP, their, uh, projections of growth and, uh,
also revising down their projections for inflation.
So they think that for whatever reason, we are potentially not necessarily recessionary,
but we are headed for a period with lower than expected growth relative to where we were three months ago.
And the same goes for the inflation picture.
So take from that what you will.
But I think in terms of the balance of risk, which is what Paul is, you know, constantly weighing the risk between, you know, the consumer, the strength of the American economy, the labor market and inflation.
Right now, top of his mind, are moving to the closer to the top of his mind is the labor market in overall economic conditions.
Yeah.
Thank you for that, Joe.
Certainly.
Yeah.
Yeah, we will, I think, you know, there certainly was a lot of spending going on in the Biden White House and money being, you know, thrown out into the system.
And that always, you know, gooses the economy.
And I am thankful that we have a more prudent leadership, seemingly more prudent leadership now in place.
that's going to go ahead and in every way can figure out how to clamp down on the spending of the government,
figure out how to go ahead and make, I don't know, I guess every dollar count,
although I've heard that Donald Trump wants to go ahead and redecorate the White House,
which I'm sure will come at a considerable amount of cost.
But nevertheless, I assume the cutting will be greater than the spending.
So hopefully we get out ahead, you know, on a net basis from this.
Eladio, go ahead.
Eladio to you.
Can you hear me?
I can't hear Aladio.
Neither can I.
Aladio, you want to drop and come back up?
So, you know, I don't have much else to say before...
before the presser.
Oh, I will say to go back to Boeing, by the way, David O'Cosky.
Yeah.
so no the see the reason stocks up by the way is because the CFO came out and said the cash
burn of the company is nowhere near what it was expected it's been slowing down and uh maybe
that indicates uh that they're at the point of of a turn and by the way Dave you know I don't
mean to pick on you about Boeing I just need to go ahead and engage somebody um and you know
you're the only guy on the panel who
who's ever discussed Boeing with me.
But in any event, you know, we'll see.
It'll be a bunch of time.
I think, you know, obviously, if tariffs come into play,
Boeing is going to be hurt by those tariffs.
And then, you know, the additional oversight...
that I think is a bipartisan issue with respect to safety concerns around Boeing manufacturing
is certainly going to go ahead and affect their bottom line.
But that being said, I think that they're one of the only games in town.
They've hit rock bottom in terms of production numbers and in terms of sentiment.
And so they are in for a turnaround on their story and on their stock price.
And you'll hear me continue to go ahead and bring up any positives.
or negatives on that front.
And certainly, by the way, at some point, I expect that Elon Musk is going to walk into Boeing,
just like he goes ahead and commandeers Tesla and says, hey, guys, this is not being done the right way.
You know, there should be a lot better being done.
Oh, and by the way, whatever price you're charging for Air Force One, you know, that's got to be cut in half.
because we're not going to pay for whatever cost overruns are going on with the building of that aircraft.
So I expect Boeing to come in and out of the spotlight for good and for bad.
And, you know, as an investor, I'm prepared to take the lumps along with the successes.
It just happens to be that today, you know, is a general update for the stock.
And so I remain, thankfully, in the green on it, not like the last 20 years for anyone
who's held it that long.
So with that, we'll go ahead.
Oh, Joe, go ahead.
Yeah, just real quick.
I expect that this to be really positive in terms of interpretation from the market.
And the reason is very simple.
They're reducing their growth expectations while also acknowledging, excuse me, they're reducing their growth expectations while keeping their rate forward expectations of two cuts stable, right?
And that's different from prior freds.
In the past, when the growth expectations had started to decline, the Fed would preemptively be pricing in effectively through their summer economic projections, lower cuts.
Okay, Morcauts, excuse me.
So the reason why I think that's significant is that they're basically saying we're going to look through these tariffs and the short-term inflationary aspects of them to a...
Here we go.
Here we go.
Maximum employment and stable prices for the benefit of the American people.
The economy is strong overall and has made significant progress towards over the past two years.
labor market conditions are solid and inflation has moved closer to our 2% longer run goal but it remains somewhat elevated in support of our goals today the federal open market committee decided to leave our policy interest rate unchanged we also made the technical decision to slow the pace of decline in the size of our balance sheet i'll have more to say about these decisions after briefly reviewing economic developments
Economic activity continued to expand at a solid pace in the fourth quarter of last year,
with GDP rising at 2.3%.
Recent indications, however, point to a moderation in consumer spending following the rapid growth seen over the second half of 2024.
Surveys of households and businesses point to heightened uncertainty about the economic outlook.
It remains to be seen how these developments might affect future spending and investment.
In our summary of economic projections, the median participant projects GDP to rise 1.7% this year,
somewhat lower than projected in December, and to rise a bit below 2% over the next two years.
In the labor market, conditions remain solid.
Payroll job gains averaged to 200,000 per month over the past three months.
The unemployment rate at 4.1% remains low and is held in a narrow range for the past year.
The jobs to workers gap has held steady for several months.
Wages are growing faster than inflation and at a more sustainable pace than earlier in the pandemic recovery.
Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance.
The labor market is not a source of significant inflationary pressures.
The median projection for the unemployment rate in the SEC is 4.4% at the end of this year and 4.3% over the next two years.
Inflation has eased significantly over the past two years, but remains somewhat elevated relative to our 2% longer-run goal.
Estimates based on the Consumer Price Index and other data indicate that total PCE prices rose 2.5% over the 12 months ending in February,
and that excluding the volatile food and energy categories, core PCE prices rose 2.8%.
Some near-term measures of inflation expectations have recently moved up.
We see this in both market and survey-based measures, and survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor.
Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2% inflation goal.
The median projection in the SEC for total PCE inflation is 2.7% this year and 2.2% next year, a little higher than projected in December.
In 2007, the median projection is at our 2% objective.
Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people.
At today's meeting, the committee decided to maintain the target range for the federal funds rate at 4.5%
Looking ahead, the new administration is in the process of implementing significant policy changes in four distinct areas.
Trade, immigration, fiscal policy, and regulation.
It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy.
While there have been recent developments in some of these areas, especially trade policy,
uncertainty around the changes and their effects on the economic outlook is high.
As we parse the incoming information, we're focused on separating the signal from the noise as the outlook evolves.
As we say in our statement, 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 do not need to be in a hurry to adjust our policy stance, and we are well positioned to wait for greater clarity.
In our SECP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward.
an admittedly challenging exercise at this time in light of considerable uncertainty.
The median participant projects that the appropriate level of the federal funds rate will be 3.9% at the end of this year and 3.4% at the end of next year,
unchanged from December.
While these individual forecasts are always subject to uncertainty, as I noted, uncertainty today is unusually elevated.
And of course, these projections are not a committee plan or a decision.
Policy is not on a 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%, we can maintain policy restraint for longer.
If the labor market were to weaken unexpectedly, where inflation were to fall more quickly than anticipated, we can ease policy accordingly.
Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.
At today's meeting, we also decided to slow the pace of decline in our balance sheet.
Since we began balance sheet runoff, our securities holdings have declined by more than $2 trillion.
While market indicators continue to suggest that the quantity of reserves remains abundant,
we have seen some signs of increased tightness in money markets.
Beginning in April, the monthly cap on Treasury redemptions will be lowered from $25 billion to $5 billion.
Consistent with the Committee's intention to hold primarily Treasury securities in the long run,
we are leaving the cap on agency securities unchanged.
This action has no implications for our intended stance of monetary policy and should not affect the size of our balance sheet over the medium term.
The Committee also continued its discussions as part of our five-year review of our monetary policy framework.
At this meeting, we focused on labor market dynamics and our maximum employment goal.
As we have indicated, our review will include outreach and public events involving a wide range of parties,
including Fed lessons 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.
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% goal,
and keeping longer-term 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 will look forward to your questions.
Howard Schneider with Reuters, thanks for your time.
So two things on sort of the real side here, inflation and then GDP.
How much of the higher inflation forecast for this year is due to tariffs?
And since the policy path remains the same, are you effectively reading this as a one-time price level shock?
Okay, so how much of it is tariff?
So let me say that it is...
going to be very difficult to have a precise assessment of how much of inflation is coming from tariffs and from
other and that's already the case you may have seen that goods inflation moved up pretty significantly in the first two months of the year
trying to track that back to actual tariff increases given what was tariff and what was not very very challenging so
some of it the answer is clearly some of it a good part of it
is coming from tariffs.
But we'll be working, and so will other forecasts to try to find the best possible way to separate non-tariff inflation from tariff inflation.
In terms of your sort of looking through question, too soon to say about that, as I've mentioned,
it can be the case that it's appropriate sometimes to look through inflation if it's going to go away quickly without action by us,
if it's transitory. And that can be the case in the case of tariff inflation.
I think that would depend on...
the tariff inflation moving through fairly quickly and would depend critically as well on inflation expectations being well anchored
longer term inflation expectations being well anchored well I guess I'm looking at the out years here the fact that the policy path doesn't change at all
And inflation is unchanged in the out years also.
Doesn't that imply you all have basically decided that there is no signal here and that it's
just going to go back to transitory again?
So I think that's kind of the base case.
But as I said, we really can't know that.
we're going to have to see how things actually work out.
And the fact that there wasn't much change, I think that's partly because, you know, you see weaker growth, but higher inflation, they kind of offset.
And also, frankly, a little bit of inertia.
When it comes to changing something in this highly uncertain environment, you know, I think there's a level of inertia where you just say, maybe I'll stay where I am.
I'll be.
Thank you, Colby Smith at the New York Times.
You just described inflation expectations as well anchored,
but has your confidence in that assessment changed at all,
given the increase in certain measures
and the high degree of uncertainty expressed
by businesses, households, and forecasters?
So when inflation expectations, of course,
we do monitor inflation expectations very, very carefully.
Basically, every source we can find in, you know,
short-term, long-term households, businesses,
forecasters, market-based.
And I think the picture broadly is this.
You do see increases widely in short-term inflation expectations.
And people who fill out surveys and answer, you know,
questionnaires are pointing to tear off about that.
If you look in the survey world, if you look a little further out,
You really don't see much in the way of an increase.
Longer term inflation expectations are mostly well anchored.
If you look at the New York, for example, then you have market-based.
And it's the same pattern.
People in markets are pricing in in break-evens.
Some higher inflation over the next year must be related to tariffs.
We know from the surveys, but if you look out five years or five year, five year forward,
you'll see that break-evence are either flat or actually slightly down in the case of a longer-term one.
So we look at that, and we will be watching all of it very, very carefully.
We do not take anything for granted.
It's at the very heart of our framework, angered inflation expectations,
but that's what you see right now.
And how much weight do you put on the deterioration in consumer confidence surveys?
You said recently that this is perhaps not the best indication of future spending.
But I'm curious, you know, what you think is behind this deterioration.
And to what at a extent, it could be a leading indicator for hard data.
So let's start with the hard data.
You know, we do see pretty solid, hard data still.
So growth looks like it's maybe moderating a bit, consumer spending moderating a bit, but still at a solid pace.
Unemployment's 4.1% job creation most recently has been at a healthy level.
Inflation has started to move up now.
We think partly in response to tariffs, and there may be...
a delay in further progress over the course of this year.
So that's the hard data.
Overall, it's a solid picture.
The survey data, both household and businesses, show significant rise in uncertainty and significant concerns about downside risks.
So how do we think about that?
And that is the question.
As I mentioned, the other day, as you pointed out,
The relationship between survey data and actual economic activity hasn't been very tight.
There have been plenty of times where people are saying very downbeat things about the economy and then going out and buying a new car.
But we don't know that that will be the case here.
We will be watching very carefully for signs of weakness in the real data.
Of course we will.
But, you know, given where we are, we think our policy is in a good place to react to what comes,
and we think that the right thing to do is to wait here for greater clarity about what the economy is doing.
Thanks.
Yes.
Nick Timmeros, the Wall Street Journal.
Chair Powell, Chair Greenspan wants to find price stability as an environment in which inflation is low and stable over time that it doesn't materially enter into the decisions of households and firms.
Can you think that today that we have that price to billion,
the households and businesses that are going to like price for a
when you see buy in advance of psychology, big changes,
and the stories that show consumers at least in the short run expect higher inflation.
So I do like that definition a lot.
In fact, I used it at the recent conference where I spoke.
So I think a world where people can make their daily economic decisions and businesses
and they're not having to think about the possibility of significantly high inflation,
we know inflation will bounce around.
That is price stability.
You know, I think we were getting closer and closer to that.
I wouldn't say we were at that.
Inflation was running around 2.5% for some time.
I do think with the arrival of the tariff inflation, further progress may be delayed.
The SEC doesn't really show further downward progress on inflation this year, and that's
really due to the tariffs coming in.
So delayed, but if you look at our forecasts, we do see ourselves getting back into the low
two in 26 and then down to 2 by 27, of course, highly uncertain.
progress having been made toward that and then progress in the future,
I think that progress is probably delayed for the time being.
If that's the case, why are there cuts in the SEP for 2025?
So, again, people wrote down two cuts the last time, and they look at the, you know, the, they wrote down, you know, meaningful decline in growth from 2.1 to 1.7 in 2025, a tick up in the unemployment rate, so not much there.
But core inflation up by three-tenths. And so those two kind of, those kind of balance each other out.
So people, not everybody, but on balance.
Yeah.
people wrote down similar numbers. The changes aren't that big. The other factor, though, as I mentioned, is just really high uncertainty.
What would you write down? I mean, it's just it's really hard to know how this is going to work out.
And again, we think our policy is in a good place. We think it's a good place where we can move in the direction where we need to.
But in the meantime, it's it's really appropriate to wait for further clarity. And of course,
you know, the costs of doing that, given that the economy is still solid, are very low.
Edward.
Thank you, Mr. Chairman. Edward Lawrence with Fox Business.
So with near 4% unemployment rate, that should be low enough to bring people in from the sidelines in terms of hiring.
But we're seeing the hiring rates have been stuck at 2023, 2024 levels.
So what's going on there?
Yeah, so that's a feature of the, has been for some time a feature of this labor market.
You have pretty high participation, accounting for aging.
You've got wages that are consistent with 2% inflation, assuming that we're going to keep getting, you know, relatively high productivity.
We've got unemployment, you know, pretty close to its natural level.
But job...
The hiring rate is quite low, but so is the layoff rate.
So you look at initial claims or layoffs.
So you're not seeing people losing their jobs, but you're seeing that people who don't have a job having to wait longer and longer.
And, you know, the question is which way does that break?
If we were to see a meaningful increase in layoffs, then that would probably translate fairly quickly into unemployment because people are, you know, it's not a big hiring market.
We've been watching that, and it's just not in the data.
It hasn't happened.
What we've had is a low firing, low hiring situation,
and it seems to be in balance now for the last six, seven, eight months.
That's where we are.
There's healthy levels of job creation, too.
So overall, it's the labor market that's in balance,
and we watch it very carefully.
So then, have we seen the administration,
the new administration's policies in the economic numbers yet?
And when do you anticipate that happening?
In labor or in other?
In labor and inflation just across the economy,
have we started to see the new policies take effect in the numbers?
I, you know, in a kind of an early way, I mean, it's only been a few months, right?
You know, for example, the layoffs that are happening here are, you know, they're certainly
meaningful to the people involved and they may be meaningful to a particular neighborhood or
region or area, but at the national level, they're not significant yet, but we don't know.
We don't know what, where that, how far that will go.
We'll find out much more.
I mentioned that you, you saw, we've had two, um,
two very strong goods inflation readings in the last two months,
which is very unexpected.
I think hard to trace it to specific tariffs,
but it must have something to do with
It's either noise and it will come back and that's very possible too.
But if it is persistent, then it must be to do with people buying ahead of tariffs
or raising prices ahead of tariffs and things like that.
Those kinds of things happen.
They're very, very hard to capture because so much of it is indirect.
A great example is their washing machines were tariffed in the last round of tariffs
and prices went up, but prices also went up on dryers.
which were not tariffed.
So the manufacturers just, you know, they just kind of followed the crowd and raised it.
So things happen very indirectly.
So there'll be a lot of work done in coming months to try to trace all that through.
But ultimately though, it's too soon to be seeing significant effects in economic data.
Craig Torres from Bloomberg News.
Thanks, Chair Powell.
You said transitory price increases from tariffs are the base case.
Transitory is the base case.
Wasn't it the base case last time?
And didn't the FOMC forecast lower inflation ahead last time?
And wasn't the lesson that it quickly got into services,
haircuts, daycare, everything else?
And so I'm just wondering why the nine aren't taking that on board and are cutting twice this year.
When you say last time, are you talking about the last?
Pandemic, yes.
You could have been talking about the last time there were tariffs, in which case the inflation was transitory.
Yeah, no, of course, we're well aware of that.
And, you know, it's still the truth.
If there's an inflationary impulse that's going to go away on its own, it's not the right
policy to tighten policy because by the time you have your effect, you know, you're
in effect that by design, you are lowering economic activity and employment.
And if that's not necessary, you don't want to do it.
In real time, as we know, it's hard to make that judgment.
it. So, and we're well aware, you know, of what happened, obviously, with, with, with, with, uh,
pandemic inflation. But I mean, we have to look at this as, as, as, as a different situation. There's
there differences in similarities. I mean, it's a different time. You know, we haven't had real
price stability fully reestablished yet. And we have to keep that in mind. And, um,
You know, we also have, we hear that people are very reluctant to take on,
to, you know, to allow prices to go up at the same time,
we hear that businesses are intending to pass many of these prices through.
So it's hard to say how this is going to work out.
Steve.
Steve Leasman, CNBC, thanks for taking my question, Mr. Chairman.
The Bank of Canada in its last policy statement said,
monetary policy cannot offset the impacts of a trade war.
What it can and must do is ensure that higher prices do not lead to ongoing inflation.
I wonder if that kind of reflects your own sense of prioritization faced with higher prices
and weaker growth that the idea is you have to take care of inflation.
So we have two goals, right?
We have maximum employment and price stability.
We have to balance those.
And there can be situations in which they're in tension, right?
And we actually have a provision in our consensus statement that says what we should do in that case.
That's a very challenging situation for any central bank and certainly for us.
So what we say that we'll do is we'll look how far each of those two goals is, each of those two measures is from its goal.
And then we'll ask how long we think it might take to get back to the goal for each of them,
and we'll make a judgment because our tools work in one direction.
We're either tightening or loosening.
So it's a very challenging situation.
Let me say we don't have that situation right now.
That's not where the economy is at all.
It's also not where the forecast is.
I don't know any mainstream forecasts that really show significant problems like that.
So...
Well, just to follow up yesterday, the UCLA Anderson forecast said their high probability
of a recession.
Where do you stand on whether or not the slowdown you're seeing creates a higher probability
or concern that you may have on recession?
Thank you.
You know, there's always an unconditional probability possibility of a recession.
It might be broadly in the range of one in four at any time.
If you look back through the years, it could be within 12 months, a one in four chance of a recession.
So the question is whether this current situation, those possibilities are elevated.
I will say this.
We don't make such a forecast.
If you look at outside forecasts,
forecasters have generally raised,
a number of them have raised their possibility
of a recession somewhat,
but still at relatively moderate levels,
still in the region of the traditional,
because they were extremely low.
If you go back two months,
people were saying that the likelihood of a recession
was extremely low.
So has moved up, but it's not high.
Chris.
Hi, thank you, Chris Ruegaabro at Associated Press.
As you know, I guess last night the President Trump fired two members of the Federal Trade
Commission, an independent agency, and this could cause the kind of legal fight about the
administration's power to fire independent people.
If those firing stand, is that a threat to the Fed's independence?
Could he do the same thing to the Fed board?
So I think I did answer that question in this very room some time ago,
and I have no desire to change that answer and have nothing new for you on that today.
Well, I just, okay, wow, maybe I have another mulligan.
Okay.
As you know, I wanted to go back to the consumer sentiment,
particularly the inflation expectations in the University of Michigan survey.
In the summer of 2022, you cited the rise in the long term inflation expectations in that index
as the reason that you went big with a three-quarter point hike.
So I know you've talked about all the different measures now,
but you seem to not be placing the same weight on that.
And so I'm just wondering, are you dismissing that what we saw last week from the University of Michigan?
Does that carry the same weight as it did in the past?
So I mentioned it back then, but in no way did I place a huge weight on it.
I think that was an ex post story.
But it wasn't the case.
That was a preliminary reading, and so is this.
And it's also, this is that Michigan, the one you're referring to, the longer term thing.
You know, we look at it, we don't dismiss data that we don't like, we force ourselves to look at it,
but it is an outlier compared to market-based and compared to other survey-based assessments of longer-run inflation expectations.
So we got to keep that in mind.
And again, I would just say we look at all of them, and that one's kind of an outlier.
But, you know, nonetheless, we take notice of it.
Thank you.
Michael McKee from Bloomberg Radio and television.
There is a worry on Wall Street that when you say you want to study the net effect of the fiscal policies we may see on the economy,
that you would end up waiting too long and be behind the curve in responding to any downturn.
How can you reassure people that you can spot a problem early enough unless you decide to be preemptive?
Yeah, look, we're aware of the, we're well aware of how things that are going to evolve in the timeframes and all that.
And, you know, we will, we will use our tools to foster achievement of our goals to the best we can.
And, of course, we're going to try to be timely with that.
For right now, the hard data are pretty solid.
We are obviously aware of the soft sentiment data and high uncertainty.
Yeah.
And we're watching that carefully.
And we think it's a good time for us to wait for further clarity
before we consider adjusting our policy stance.
Do you think it's going to be hard to get clarity in a government by tweet?
I mean, do you have a feeling that at some point you actually will have a forecast you can trust?
Yes, I think we will.
I just, it's hard to say when that will be.
Yeah.
you know, where these decisions are going to be made and they're going to be implemented and then we'll know.
At that, we'll know what the decisions are and we'll have to make assessments then about their implications for the economy.
Those things will happen. A lot of them will happen over the course of, you know, in coming months, certainly over the course of this year.
And we'll be adapting as we go.
Thank you.
Hi Chair Powell, Rachel Siegel from Washington Post. Thank you for taking our questions.
At the beginning you were talking about separating the signal from the noise and
tariff inflation from non-tariff inflation. Can you walk us through what that looked like
over the last couple of months if there were specifics from the January meeting to now that
helped you make those distinctions? So when we say separating the signal from the noise,
that's just a way of saying that things are highly uncertain and that
you know, you're reading about developments, the news is full of developments of tariffs being put on and taken off and things like that.
That's some of that is noise in the sense that it's not really telling you anything.
You're trying to extract a signal from that.
And the signal is what's going to be the effect on economic activity, on inflation, on employment and all those things.
So that's really when we say signal and noise.
Sorry, the second thing was...
Or similarly for tariff inflation, non-tariff inflation, ways that you're making the decision.
That's sort of a special case of that.
You know, the idea being, and I think do think that the first two months of this year are a great example.
You've got high readings for goods inflation after a string of readings at average close to zero.
You have to ask if it's coming during tariffs.
But, you know, it's very hard to actually...
scientifically go back and match up those increases and say yes i can prove that that's from tariffs
but it kind of has to be to some extent plus noise there can be idiosyncratic readings in
various categories which will shortly reverse and that that happens to and that could be a big
piece of it you know i think we'll know in a couple of months we'll know whether those were
you know where that really was from but that's another case where i think it's going to be very
very challenging to unpack
the inflation that we see over the course of this year
and be able to say with confidence how much of that came from inflation
and how much of it, sorry, from tariffs and how much of it didn't,
but that's what we're doing. We'll be doing that and so will everybody else
and we'll all be trying very hard to make that assessment.
And I'm sure we will make a lot of progress on that and we already have,
but it's going to be a challenge.
Do you have a sense yet as to what in your mind would make something cross from
noise to a signal, what that threshold would look like?
You know, it would depend on what we're talking about.
I mean, obviously, you're looking for direct evidence that particular pieces of inflation are or clearly not caused by tariffs.
For example, if something that was, you know, in the service sector that was far away from anything that's tariffed, you might think, okay, well, that is, like, frankly, housing services, inflation, which, by the way, has been behaving well, which for some time was...
kind of our problem. Now it's been it's slow but it's definitely you know moving down in a very good way.
It's more now with goods and to some extent with with non-housing services inflation.
Yeah.
Thanks for taking our questions, Chair Powell.
Kelly O'Grady, CBS News.
So consumer sentiment has dipped dramatically, but you say the economy and the hard data is still solid.
What is your message to consumers that clearly disagree and don't feel that strength?
Because the hard data they're looking at is their grocery bill.
Okay, so a couple things. The grocery bill is about past inflation, really. And there was inflation in 21, two, and three, when prices went up. The current level, it's not the change in prices. It's they're unhappy and they're not wrong to be unhappy that prices went up quite a bit and they're paying a lot for those things.
Folks, I have to drop.
I do not get paid to do this,
and I have to go back to a paying gig.
I have a conference call to get on.
I just posted the link on X.
So if anyone wants to continue to listen, please do.
I'm sorry to have to cut off.
I will see you tomorrow morning at 8 a.m. to discuss.
Lots to say, lots to talk about.
Thank you, and I am genuinely sorry that I have to cut this short.
Have a good day, everybody.
