00:00If any administration finds a way to remove Fed officials over policy differences,
00:05then future administrations will do so as well.
00:08The public would lose faith that the central bank will make decisions based only on what's best for all Americans.
00:16The Fed's credibility would be lost.
00:19Credibility has been built and sustained over many decades,
00:22and we have a duty to safeguard that priceless asset for our fellow citizens and for generations to come.
00:34Let's bring in Blueberg M Live strategist Mark Cranfield now for more.
00:38In the flesh here with us in London. Welcome, Mark.
00:41I wonder how much do we care about what Powell says anymore?
00:44I saw a note this morning saying, yes, there was no market reaction now,
00:48but if the credibility of the Fed keeps being challenged and there's a leadership crisis at the Fed,
00:54maybe then we'll care a bit more.
00:56We're quite a long way from a leadership crisis at the Fed.
00:58The new chairman has barely had anything to say yet.
01:01And really what investors care about is how Walsh is going to manage this situation between short-term expectations,
01:08that inflation is relatively high, might stay high for a long time,
01:11but then eventually the risk to the US economy that things start to slow down as people rein in spending.
01:17So it's balancing those things.
01:18And how is he going to deal with the dissent within the Fed?
01:21We actually were seeing a pretty rare case at the previous meeting where we had almost as many dissenters
01:25as we're used to having in the Bank of England.
01:27We've never seen that in the Fed before.
01:29So Walsh has got a pretty tricky job here.
01:31The things that Powell is saying is things that he said before, talking about independence, credibility,
01:35those issues which he stands for.
01:36They're certainly important.
01:38They're not going to move the needle in the markets in the very short term.
01:41Investors want to know how is Walsh going to deal with the dissent within the Fed
01:45and how is he going to get everybody on board to make the right decision going forward from here?
01:49So we've got various bits of data coming out from the US this week.
01:53The highlight will be the jobs report on Friday.
01:56Expected to show more resilience in the labour market in May.
01:59What would we need to see for traders to price in a more aggressive shift hiring rates from the Fed?
02:04Well, the unemployment rate is 4.3.
02:07It's expected to stay pretty much the same.
02:09If there was a surprise drop, say it went to 4.1, for example,
02:13we saw it one time last year where it suddenly dropped like that.
02:16Traders will go, oh, the employment situation is much stronger than we were anticipating.
02:19And you would probably see the yield curve shift up quite a bit on the back of that
02:24because it would bring the urgency forward that not only have you got inflation numbers going up,
02:28now you've got the jobs market even stronger.
02:30So at the moment, traders are not expecting the Fed to change rates this year,
02:34but they are in the first quarter.
02:35They're looking for a potential hike in the beginning of next year.
02:37They could well bring that forward maybe to the fourth quarter of this year.
02:41But it would need to be quite a big change in the unemployment rate.
02:44Otherwise, people are going to immediately start moving on to when's the next inflation report.
02:48What does that mean?
02:49So, yes, it's a big number, but it needs to move quite a lot to really get traders excited.
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