00:00Yes I'm not sure about the long term as you mentioned there was a lot of divide on the FOMC today most of it relating to or I should say at the last meeting most of it relating to tariffs and how that's going to pass through to inflation and how soon and how persistent. So I think that's going to really determine the evolution of policy between September and next year. I think July is off the table after last Friday but it's really that divide that I think is going to determine and the realization of the inflation readings over the next the remainder of the summer that's really going to play out.
00:28So I believe December is your call for when we're going to get a cut but come May when there is someone new. Do you think it's just down down and away or do you think that's more nuanced as well. I think that is more nuanced. Look the chair normally has the committee on the side but normally the chair leads from the center. So I think a new chair that comes in and pushes an agenda that is at odds with what the economic data would dictate is going to find himself with 11 people opposing that.
00:56So I think it's a little more nuanced than just coming in and pushing hard against a committee that may be united in opposition particularly if it's not a close call.
01:05Well that's what I'm curious about. I mean we've heard a lot of anecdotal evidence from former Fed members about that process. People would talk about how Greenspan would get on the phone with every single person individually.
01:14I'll talk to them before the meeting apparently Yellen Bernanke and even Powell apparently didn't do the same thing. But there is now some concern that as you start to get more of an ideological divide on some of these issues that that's going to make the challenge much harder for whoever the next Fed chair is.
01:30So I don't sense there's that much ideological divide in the current FOMC. Right. You have had two governors who recently came out quite a bit more dovish than anticipated and some feel like that's posturing for potentially getting the job.
01:44Right. But I think when you look at the presidents of the 12 regional reserve banks there's really no ideology there. I think it's just how they read the data and how they weigh the evidence on the outlook.
01:54I know the narrative coming from Powell and the rest of the FOMC members are that we are an independent organization and we go by the data and not by the political pressure.
02:05I am curious though if political pressure is a risk that you are starting to think about given the personality of the president and his very stated desire to push interest rates down.
02:16You know I think at the margin one could make the argument that if it's a close call one might either.
02:21Now there's two camps. One says you lean against that to show your independence. The other is you just give a little bit to just smooth things over.
02:28But I think it really has to be a close call for that to really be a feature of any decision they make.
02:33Just going back to the here and now and the fact that we're expecting yet further tariff clarity maybe.
02:39Maybe. Well how do you factor that in? How ultimately are you seeing the inflation resilience going into a December call for you or longer term even?
02:48Yeah I think the longer we draw out this process the longer it takes to get resolution right.
02:52So after April 2nd and even April 9th and 12th or whatever it was we were thinking all right we'll get some resolution by now and then we'll know what's in the data by you know maybe the fall.
03:04And the longer we draw this out the more it's going to I think embolden those on the committee who say wait a minute we can't be cutting into an environment which we still have big inflation risks.
03:13So it does make things trickier both for ourselves as forecasters on Wall Street but as well as the Federal Reserve.
03:20And that's why you're paid the big bucks. Michael I'm interested about the jobs data.
03:25And I'm coming from a tech show where we think about day in day out the impact of AI and the jobs cuts that we see in Microsoft and how many savings they're able to make on the day.
03:32How are you trying to track jobs data and whether or not we will start to see some sort of weakness whether it be fundamentally from what's happening with tariffs or inflation pressures or what's actually happening more from a from a technological perspective.
03:45Yeah. So so far we haven't seen any evidence or strong evidence that AI is what's behind what we're seeing in the composition of the jobs data.
03:53Now we're probably early in the AI cycle here so I wouldn't want to say that's going to continue going forward.
03:59But I think a lot of what we're seeing recently has just been a more symptoms of the maturation of this business cycle where you're seeing much less exuberance for hiring.
04:09And it's also kind of hard to say yet that we're seeing evidence of tariffs as a big driver.
04:14But you know these things don't turn on a dime right. We just have data through June.
04:19Well with regards to the AI and maybe the upside in AI do you are you seeing yet or do you anticipate that we will see some meaningful uptick in productivity writ large.
04:29So I mean certainly one thing we have seen is AI affecting the CapEx numbers and we see that in spending on structures on data centers and that's in the hard data and that's you know starting to get pretty significant.
04:40So far as I mentioned we don't see it yet in the productivity numbers.
04:43We do think eventually it will add. I think we'd probably be in the middle of the range of there are some people who are quite optimistic on what this means and others who are not.
04:53I think we're probably falling in the middle of that range.
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