00:00So the real action is going to be, this will be the first time we get to hear from the
00:03Fed, John, in terms of their response to the Iran war and the oil shock.
00:07As you mentioned, no change to policy expected, but they're going to put out new forecasts that are expected to
00:12show an increase in their outlook for inflation.
00:14That will be interesting. And at the same time, they're going to nudge down or expected to nudge down their
00:18outlook for growth.
00:20So then when you consider the fact that we're at that point where hawks are really in control of the
00:25FOMC committee at the moment, those ones who are more worried about inflation than anything else,
00:29when you consider that weak February employment number and the fact that there are those warning $100 a barrel of
00:36oil will eventually, once you look through it,
00:38become a tax on consumers and business and will impact growth.
00:42Then I think what we could see on Wednesday is the start or the beginning of the Fed debate around
00:47how will they respond to that Iran oil shock
00:49and will it ultimately result in rate cuts and will they, of course, start to use the word transitory again.
00:55And do we have an appreciation for where inflation is right now?
00:58And the reason I raise that question is because many people in the economics industry were looking at the PCE
01:03data on Friday into the weekend
01:05and were focused on the methodology that was used for certain indicators, certain readings on things like legal fees.
01:10What's your takeaway of what's going on at the moment?
01:13I think, look, inflation remains above the Fed's target.
01:16It's certainly a core PCE. Their own preferred gauge is still beyond their comfort zone.
01:22But, John, it's broadly, what I'll say, stable, perhaps.
01:26By component, there are certainly different signals being given off.
01:30For example, the goods sector we saw in those numbers last week, the inflation story there is still somewhat mixed.
01:35But the surface side of things, you look at the insurance sector, you look at periodically costing to education, tuition,
01:42health care and the like.
01:43There's clearly parts of the economy where inflation is real, sticky and persistent.
01:47And that's why the hawks on the FMC are in control at the moment.
01:51And that's why we had several at the last Fed meeting warning that at some point they may need to
01:55start talking about hikes.
01:56Now, I think this Iran shock might put a different hue on the debate at the Fed.
02:01I'm not necessarily sure if the Fed would be talking about hikes near term.
02:04It's probably going to be more of a story of looking through that.
02:07But there's no doubt about it in terms of the Fed getting back to its inflation target.
02:10I mean, that remains a long way off for now.
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