00:00Well, no surprise, the Iran war and tariffs were central to the discussion among Fed officials at their March meeting.
00:05The full effect of tariffs had not yet moved through the economy, officials said.
00:10A resilient economy, they called it.
00:13And the war, then only a few weeks old, raised the threat of inflation increasing and hiring slowing.
00:20Some participants judged there was a strong case for a two-sided description of the committee's future interest rate decisions
00:27in their post-meeting statement, reflecting the possibility that higher inflation might call for rates to be increased,
00:35although no member called for a rate move at that meeting.
00:38Most participants raised the concern that a protracted war could lead to further softening of labor markets,
00:44which would warrant additional rate cuts.
00:46But many participants pointed to the risk of inflation remaining elevated for longer than expected,
00:52which, quote, could call for rate increases.
00:55The vast majority of participants noted that progress toward the committee's 2% objective
01:00could be slower than previously expected, the Minutes say.
01:05Labor market conditions appeared vulnerable to adverse shock.
01:09They say most participants, highlighting the risk that a protracted conflict in the Middle East
01:14could weigh on business sentiment and further reduce hiring.
01:18As for policy, most participants felt it was too early to judge how the war would affect the economy.
01:23Many participants judging that in time, it would likely become appropriate
01:28to lower the target range for the federal funds rate if inflation were to decline in line with their expectations.
01:35A couple highlighted, though, that they had pushed their assessment of the most likely timing of rate cuts
01:41further into the future.
01:43Stephen Myron, though not named, was the only dissenter.
01:46The Minutes do note that one participant argued rates were still restrictive,
01:50and that was increasing risks to the labor market.
01:53Guys?
01:54Mike, this is the moment where we sort of parse language here,
01:58and we ask you to translate what different words means when it comes to these minutes.
02:02The word protracted, you know, that has to do with a period of time, a longer period of time.
02:07I go to that word because the Fed said most said that protracted war could hit jobs, warrant cuts.
02:13How long is protracted?
02:16You know, they do have a guide to Federal Reserve terminology in terms of some, many, few, etc.,
02:23but they don't have a definition of what protracted means.
02:27Obviously, it would have suggested that the war could last for several months or longer.
02:32We're kind of in a middle period now.
02:34Hard to know whether this fits that model or not.
02:37All right, Mike, we're going to come back to you in just a moment.
02:40Our Mike McKee there at the Federal Reserve.
02:42We're going to continue with Mike in just a moment.
02:44Do you want to check on the markets in terms of what we've seen in terms of reaction?
02:49Because, listen, folks, we saw a reset happening late last night into this morning
02:53because of what is going on, easing tensions, or so it seems, when it comes to the U.S. war
02:58in Iran.
02:58Having said that, as for the S&P 500, pretty much where we were prior to the release of these
03:05Fed minutes.
03:06Same story for the NASDAQ 100, just a little bit of a move to the upside.
03:11Probably more importantly is what's going on in the Treasury market,
03:13and I'm just taking a look all along the curve in terms of what we're seeing,
03:17and we're pretty much where we were prior to the release of those Fed minutes.
03:22So, you know, maybe investors, of course, a little bit of, I don't know,
03:28I think they're just focusing on the war at this point,
03:30and maybe just kind of happy in terms of that happening at this point,
03:35although there are a lot of questions about that.
03:37Mike, I want to go back to you.
03:39I mean, can we, will the Fed start to look through the war based on what we got,
03:45or, you know, we still have a lot of questions about what happens next?
03:49Too early to reach a judgment on that yet, because the war has maybe not ended.
03:55We don't know for sure.
03:56We've had conflicting headlines all day.
03:59Most Fed officials who've spoken in the run-up to their next meetings since the last meeting so far
04:04have basically said the same thing that the minutes suggest,
04:08that there are increased risks to inflation that could come starting with oil prices
04:13and then working their way through the economy.
04:15They also note that tariffs had still yet to work their way through the economy,
04:19and we might get more.
04:21So there's a lot they don't know at this point,
04:23and I think the minutes really don't give us any more clarity since they were three weeks ago,
04:28and nothing has happened that gives us more clarity into the future direction of interest rates
04:35and oil prices and everything else at the moment.
04:38The next move from the Fed, Mike, not whether it's going to, you know,
04:43the Fed's going to just not change rates,
04:45but are people still thinking the next move could actually be higher rather than lower?
04:53No, it doesn't appear that way.
04:55Right now, we don't have a good measure of inflation since the war started.
04:59Friday, we get CPI.
05:00That'll be our first real clue.
05:02And then we'll watch PPI the following week.
05:05We do get PCE inflation tomorrow, but that's for February,
05:08so it's not going to tell us anything.
05:10But the other two inflation measures will give us an idea of what the initial shock is.
05:17Now, we're already into April at the highs of gasoline prices,
05:21so we'll have to see if they stay elevated throughout the month,
05:26what that's going to mean for inflation.
05:29The word we get from oil companies and shipping companies is that this is going to take a while
05:35to work its way out of the economy, even if the war ended today.
05:39So they're likely going to be faced with uncertainty for quite some time,
05:43and I would imagine that we'll get a very similar meeting and minutes when they meet on the 29th of
05:51this month
05:51because they're basically going to have to say the same things.
05:55Inflation could rise, it could become longer lasting, the labor market could weaken, but we just don't know yet.
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