00:00 Speaker A
So we’re looking at this rate cut. Well, but probably more importantly, we’re looking at guidance and we’re looking at objections. So what are you focused on on Wednesday?
00:13 Speaker B
Yeah, so I think there are two things about mentoring. The first thing I want to say is a statement. Do we see a clear change to forward guidance? Did they write something like the scope and timing of any additional rate cuts, or did they say any additional rate cuts, so that scope and timing was ignored. Anyone would probably be more hawkish, uh, because that means they might not cut spending further. The extent and timing still means some cuts will be made at some point.
00:46 Speaker B
Uh, but I would say look for that, right? This is more about Powell finding agreement among the hawks, as there are many hawks on the committee now who are not very supportive of further easing rates. In October, we received objections from Schmid, the Kansas City regional president.
01:05 Speaker B
He may also challenge another cut again at this meeting. And then on the downswing, I would say Myron would be demurring again, obviously in a dovish direction, because he wants to cut faster. That’s what he’s done since he’s been on the FOMC.
01:18 Speaker B
Of course, Schmid may again go against the hawkish direction, but I wouldn’t be surprised if you see another uh regional voting president join Schmid this time because the voters right now, Goolsby, Collins, uh Musalim, they’re all kind of on the hawkish side right now.
01:38 Speaker B
So it would be a balancing act for Powell to convince these people that continuing to cut rates is the right thing to do in this environment.
01:47 Speaker A
Stephen, obviously, um, they’re having a hard time reaching a deal here. Well, I think those of you in the industry might also have a hard time dealing with both sides of double duty. Well, isn’t this an unusually difficult time to judge whether inflation or the job market is worse right now?
02:08 Speaker B
This is. It’s very difficult because the economy is basically hit by supply shocks, right? The Fed typically looks at supply shocks. So, on the labor side, we’re experiencing these changes in immigration policy. This has led to slower labor supply growth. Maybe we think that’s at least a big reason for the hiring slowdown. Now, of course, unemployment has risen. Artificial intelligence is also worth considering.
02:34 Speaker B
Therefore, there are many types of supply-side shocks. And then on the inflation side, you also have tariffs, which is another supply shock. So you’re trying to parse this data and find out, um, yeah, one, I
02:44 Speaker B
Due to the shutdown, I didn’t have live data to begin with. I’m working with September data. But I have two data on hand, how much of it is demand-driven and how much of it is supply-driven, so which one do I emphasize more, right? So this is a very challenging period because when such a supply shock does occur, the risk is that we end up in a stagflation scenario.
03:08 Speaker B
Given the Fed’s dual mandate, the stagflation scenario, it’s hard to figure out which of the two mandates you value more, you know. Therefore, reaching consensus is a challenging time. So I would say it’s not surprising that we’re going to see more dissent. We may see more dissent in the coming year.
03:26 Speaker B
Well, because it’s still hard to guide policy and figure out the right priorities for the Fed right now.
