You're going to be in that room later today.
What are you expecting from Jay Powell?
Hawkish tone. Dovish tone. Also,
we don't get any economic projections from the Fed this
time around.
But in previous meetings, Jay Powell has taken the time
to update and say if those projections are still relevant
or if they're not relevant,
do you expect the same today?
Yeah. So I think it could be a really interesting
meeting because there are a lot of things that Chair
Powell could say that would take us in a slightly
more hawkish direction. You know,
I think it's likely that he is going to come
out and repeat the message that that officials have been
repeating recently,
which is that they have a lot of latitude to
be patient with cutting rates.
You know, they don't have to rush into this.
They can take their time.
It can be a case where we keep these rates
higher for longer.
But I think there are going to be a lot
of questions about is there a possibility that the next
move is actually going to be a rate increase and
not a rate cut. And there's going to be a
lot to,
you know, a lot of people asking him whether those
three rate cuts that were projected earlier this year are
still at all realistic.
And you know, I think we've seen Fed officials kind
of backing away from those.
I imagine that that that is likely at this meeting
as well.
And so there's, I think there are a couple of
places here where you could see a slightly more hawkish
tone.
And the question really is just how hawkish are we
going to go,
You know, are we, are we going to move to
that sort of crossing that Rubicon of suggesting that another
hike is actually possible?
All right. So Jay, you're saying the possibility of a
slightly more hawkish tone.
Steve, I want to come over to you.
You've LED a number of big companies.
If we do hear that slightly more hawkish tone from
Jay Powell as a business leader and someone in the
business community,
what do you expect the reaction to be?
Well, I think what we're hearing from our member
CEO's is that everybody sort of sitting in,
in neutral right now. If if you could think about
it,
just driving the car because they just don't know what's
coming.
Rates are at what, a 24 year high,
it doesn't look like there's going to be a cut
anytime soon.
You know, I I expect that Chair Powell will be
very cautious.
They're they're very metered there.
The market is already down.
The pressure is there. And remember this is a political
year and so you've got a lot of political pressure
from both sides of the aisle,
you know, not to put them in a in a
bad position.
And so you know, they're under a lot of pressure
to make sure that they get the inflation under control.
Consumer confidence from the Conference Board is really not very
strong.
You know, and there's two components to that.
One is the current expectations and then also future expectations.
It was mostly future expectations over the next 6 to
12 months that really worried people.
So people and people are concerned about the cost of
living.
They're concerned about inflation and the cost of debt.
Steve, we're seeing it right now.
We're actually showing a chart with that consumer confidence number
of Lois Reed in the last two years.
You kept mentioning the word pressure.
I want to talk to you about how business leaders
are viewing the Fed right now in this higher for
longer environment.
At the same time, we're seeing rates that are higher
but also wages that are significantly higher.
We got a report yesterday showing over 4%
year over year growth. When it came to wages in
Q1,
the average from 2010 to the start of the pandemic
was just over 2%.
So as a business leader,
how are you weighing these,
these twin forces of pressure on wages and also rates?
Well, you know it, it's,
it's wages, but it's also everything's still up through the
supply chain.
You know the the inflation is coming down in terms
of its increase,
but it's still, you know,
prices are still and costs are still going up and
you try to push as much through to your consumers
and customers as possible,
but there's only so much they can take.
And so margins, the worry here is that margins are
going to get compressed,
earnings will get compressed and you know that's what they're
looking at here.
They're trying to, you know,
they're trying to right the ship here,
but there's only so much cost pressure you can take.
The cost of debt is high
period and they're having you know debt tranches roll off.
You have to refinance that as you go.
There's only in, in short term,
long term it doesn't matter.
So you know, this is,
this is adding to the cost,
you know, in your P&L and and and on your
balance sheet as well.
So you know, business leaders are very cautious here.
All right, very cautious. Gina,
back over to you. You said Jay Powell's going to
probably be cautious,
but possibly just slightly more hawkish than he has been
previously.
So I want to ask you,
I know you don't, you don't have a crystal ball,
you can't read anybody's mind.
But what actually matters when it comes to the Fed
after this meeting,
is it labor? Is it PCE?
Is it, you know, GDP reads,
is it ISM? What actually matters?
And what should the market actually be focused on if
we want to try to get some insight into the
Fed's thinking?
So I think this is actually a great question and
possibly one of the most interesting things Chair Powell can
answer for us today because up to this point,
the Fed has really been ignoring a lot of the
other economic data outside of inflation and saying,
you know, our mandate is inflation,
inflation is coming down. The fact that inflation is coming
down means that we don't need to be particularly worried
about the the fact that GDP growth looks pretty strong
and that job gains are way higher than we had
expected at this point in the cycle.
And that the economy, economic data in general is just
coming in a lot steamier than we would have thought.
And now we're in this very different world where inflation
seems to be sort of flatlining.
There are a couple of reasons that economists are finding
to sort of discount that,
but I think after three straight months of it,
we're really seeing Fed officials get nervous about that.
And in this new world,
I imagine that the Fed is going to have to
pay more attention to sort of the economic indication leaders
that are forward-looking those the job gains,
you know the, the signs of of strength in the
economy.
And I think that that's the message we could look
for from Chair Powell today.
You know are they paying attention to growth data in
a way that they haven't been in recent months and
if so which ones matter?
You know we had a very strong wage wage gain
number yesterday.
We've been seeing pretty strong jobs numbers that we'll obviously
get the report on Friday to see if that's continuing.
Like how much are those feeding into the Fed's reaction
function.
And I don't think we actually have a clear answer.
Answer, yeah, because I think that
since the last time we heard from him,
things have changed.
You know, Gina, one last question.
We got to go after this probably about four Fed
speakers speaking in the next week after Jay Powell.
Should we be really listening to all these Fed speakers
or in your mind,
Jay Powell's press conference today,
should that be the last word into the next Fed
meeting?
Well, I'm interviewing one of the Fed officials who's speaking
in the next couple of days.
So I would say you should talk to listen.
But I think, I think that,
you know, I think that at the end of the
day,
it is a committee decision.
And in this instance, actually,
I think the rest of the committee really matters because
I do think this is going to be a difficult
period where they have to make some pretty contentious choices.
And in those moments, how much they can get everybody
on board is really,
really relevant. And so the range of opinions actually starts
to matter quite a bit like this.