00:00The Fed Minutes, anything that jumps out for you?
00:02The thing that actually jumps out at me is what's been redheaded on the terminal.
00:06Many see a December rate cut as likely not appropriate.
00:09Now, even before the Minutes were released, markets were already fading the probability of a rate cut.
00:16About 12 basis points of a cut were priced in earlier this morning.
00:20That had fallen down to about 8 basis points of cuts priced in for December.
00:24That was on the back of the Bureau of Labor Statistics deciding not to release the October jobs report.
00:30In advance of this December meeting.
00:32So folks are basically looking out at the Bureau of Labor Statistics and saying what would have been a bad jobs report is not going to be available for the Fed to make its decision.
00:43So there's going to be one fewer data print encouraging a rate cut.
00:47Now we're seeing as early as October, many committee members were ready to take that December cut off the table.
00:54If we were to rewind the clock back to September, it really was a knife edge sort of distribution when we looked at the dot plot for just this year.
01:05It was very close to half of FOMC participants saw fewer than 75 basis points.
01:12So about 50 and fewer cuts this year, 50 and fewer basis points of cuts this year.
01:17So this should not be shocking to see most FOMC members taking that additional rate cut off the table when we look at the Minutes.
01:26Matt, of course, is Bloomberg Economics, U.S. and Canada.
01:28Economist Stuart Paul right here in our New York studio.
01:30Mike, back to you in D.C., you know, is the Fed with the government closed, now reopening, but data, yes, coming, but not coming.
01:42Are they not going to have really a full picture, enough data to really clearly figure out what's going on in the economy?
01:48Or will they kind of have a good idea come December?
01:51Well, they talked about that a little bit in the Minutes.
01:53They suggested that not having the data in October was something of a problem, but they also said we have enough alternative data that we have a pretty good idea of what's going on in the economy.
02:05And I imagine that would hold true through the December 10th meeting, although we just found out we're not getting any jobs data until that's over.
02:12I wanted to note one thing.
02:13Stuart's absolutely correct about the many participants thought that a December move wasn't necessary.
02:19But that's not the end of Fed loosening.
02:22The Minutes go on to say that they think, many participants think that there is reason to keep cutting one or two more times next year and try to get back closer to neutral, but not necessarily in December.
02:38And, of course, Fed officials have always chafed at the idea that we have to figure out how many rate cuts there are going to be before the end of the year.
02:46They don't look at it that way.
02:47It's just an ongoing process.
02:49But, Stuart, on that point about December, if we just focus on December, hasn't a lot changed in terms of the labor market between the end of October and where we are right now?
03:00Not officially, but the alternative data points that could actually cause members of the Fed to say, wait a second, we should do some loosening here?
03:08Well, so it's interesting.
03:09We built a composite index that looks at all of the available alternative data.
03:15So we're not depending on the Fed to gauge how tight or how loose the labor market is right now.
03:20And when we look at that index, the current labor market is about one standard deviation weaker than it has been historically.
03:26That's been just a persistent weakness that's been evident in this alternative data set, just a broad swath of about a few dozen alternative indicators.
03:35And if the Fed is looking at that and is really nervous about how close they are to a neutral rate, then it makes sense that they could decide to stay on hold in December.
03:45There they go. Nothing has really changed materially.
03:47High frequency measures of layoffs are showing pretty close, you know, 220 to 230, 235, 235,000 layoffs on a weekly basis.
03:57When we look at the state level data, not a material change, to the best of our knowledge, but just this persistent drag, this persistent weakness.
04:05And again, you know, Fed members are trying to remind folks that they are devoted to the 2 percent inflation target.
04:13When we when we expect inflation to remain pretty close to 3 percent out through 2026, they need to stay pretty measured and pretty deliberate when they make rate cut decisions.
04:25Right. They stick to that 2 percent target. We're running at 3 percent.
04:28Then inflation is still a problem. Stuart, sit tight for a second.
04:30And Mike, last question to you, though, before we let you go. 30 seconds.
04:34So what is the next thing that you are kind of keeping a watch on that might be important for the Federal Reserve before that December meeting?
04:44Well, we're going to be looking at the September jobs report tomorrow morning.
04:47It's old, but it is maybe the last jobs report that we get before the Fed meeting that has a complete set of data.
04:54So there will be some reason to look at that as Fed officials and economists try to impute what that means for the future.
05:02We're still waiting to see what happens with the inflation numbers, the CPI that hasn't been announced yet.
05:08If they get that in before the Fed meeting, that would be great news for Fed officials.
05:12But then you have to look to the meeting itself. Remember, the blackout period.
05:17This is an earlier Fed meeting. The blackout period starts December 1st.
05:20And we do Thanksgiving week next week. And so there won't be a whole lot of Fed speak.
05:25So we're kind of getting down to it at this point.
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