00:00Joining us now, Ira Jersey, Chief U.S. Interest Rate Strategist for Bloomberg Intelligence.
00:04All right, this has been a long time coming, but what are you expecting to hear from Warsh
00:09on Wednesday? And is he in a bit of a no-win situation, at least for now?
00:14I do think that he's in a little bit of a no-win situation because it's going to be very
00:18difficult
00:18for the Federal Reserve to produce interest rates, which, of course, President Trump has
00:22said that he wants Kevin Warsh to do and what he said he thinks Kevin Warsh will do.
00:27But firstly, Kevin Warsh can't do it because he's only one member of the committee, and
00:32that's one of the big things. So what I'm looking forward to hearing from him is, one, how his
00:38relationship is with his fellow FOMC members, and then secondly, his outlook and the outlook
00:45of the committee for the future of interest rates. If we do actually have a conclusion to
00:50the Iran war, you could see maybe a further reduction in oil prices, and maybe that gives
00:56a little less chance of an interest rate increase later in the year. And you have seen some of that
01:01price out of the market on Friday, certainly. And then secondly, if there is any movement or what
01:07movement he expects to have on communications policy, which was another thing that he had
01:11mentioned that he'd like to see changed.
01:14So, Irwin, they sit around the big table in the Eccles building this week. They're going to look at all
01:19of the economic data points that they've gotten. Indeed, we're going to get a few more here before that
01:22meeting kicks off. But I think of the major price pressures. I think of that better than expected
01:27job support. I think of the inflation read that we got for May. And I'm curious of how you think
01:32the calculus looks like for them, again, having a new chair there, trying to both introduce himself
01:38to all the other policymakers, but also assert some control over them going forward here.
01:42How does he begin to, how does the committee begin to think through the data that we've gotten in
01:46recent days? Yeah. So, you do have certainly kind of three camps in the Federal Reserve right now.
01:53You do have this group of hawks, right, the Lori Logans of the world, the Dallas Fed president who
01:59is worried about inflation and does think that the economy is very good and would maybe increase
02:05interest rates later this year if inflation and the job market stays where it is. And then you have
02:11another group that's really worried that higher energy prices act more as a tax on the consumer
02:16and will eventually slow real consumption and kind of create a stagflationary environment which could
02:23affect the jobs market. You know, the Fed, unlike the European Central Bank, which raised interest rates
02:28this past week, does have the dual mandate. It does worry about both the job market and inflation,
02:34whereas the ECB, when they see inflation go up, they have to raise interest rates. That's their
02:38only mandate. So, I think for Kevin Walsh, it's going to be, hey, how do I get more of those
02:46people
02:46who are more on the hawkish side of things to be more neutral or even a little bit dovish to
02:52be able
02:53to lower interest rates? Now, historically, people have said, oh, Kevin Walsh isn't a dove. Kevin Walsh
02:59is, I think, relatively neutral. He's a relatively middle of the road type of economic thinker. So,
03:05I suspect that when he looks at a preponderance of the data in a vacuum without having the political
03:11pressure of being appointed by President Trump, he would probably say, hey, let's just sit on our
03:15hands here because if inflation does come down because the war ends and, you know, the job market
03:21is very focused only on a couple of sectors that are doing well. It's not very broad strength in the
03:27job market. It's all very concentrated in basically two sectors right now. You know, maybe we do a little
03:33bit of nothing here until we get some clarity on both the inflation and the jobs front.
03:38I want to go back to something you just said, which is I think there's this perception of
03:42who Kevin Walsh is. And we really haven't gotten a whole lot of concrete information from him in
03:46recent weeks about sort of his perspective on the economy and the Federal Reserve. Yes,
03:50there's this kind of corpus of work that he's done when he's at the Hoover Institution
03:53as a private investor. But during his testimony, he really didn't get into great detail about sort of
03:58what he would prioritize, the path that he would intend to take at the Fed. Bearing that in mind,
04:03how critical is that first press conference going to be? What are you going to be listening for to
04:06kind of get a sense of the direction of a Kevin Walsh Fed? Yeah. So, you know, I think there's
04:12going
04:12to be two pieces that he's going to have to express. One is the overall committee, right? Because the chair
04:17has to speak for the whole committee. And then secondly, he will say, look, my personal view might be,
04:22I suspect that we'll hear that in some kind of speech or statement afterward. Keep in mind,
04:28Kevin Walsh really wants less communication out of the Federal Reserve rather than more.
04:33So he has expressed this idea that he wants, you know, the chair to speak for the Fed and not
04:38to
04:39have so many speeches about monetary policy and economic thought. I think in a way, the cat's out
04:44of the bag in that regard. You know, the market certainly wants more. And keeping a lid, you know,
04:49certainly on the presidents of the regional Fed banks is going to be exceptionally difficult for
04:55Kevin Walsh to do. But that being said, you know, we'll hear what we'll have to hear what he says
05:00on Wednesday, because there was a doubt like you had in your lead in. You know, we didn't know if
05:06maybe he would just say, hey, I'm not going to do a press conference. And certainly he could go back.
05:11And one of the things that Kevin Walsh could do is go back to saying, hey, instead of doing a
05:15press
05:15conference after every meeting, we're only going to do a quarterly like we did when we started this
05:19whole project of having post-meeting press conferences. So that's not out of the question
05:23either. We will get the summary of economic projections at this meeting. So maybe he'll
05:29give us a hint as to which dot is his on the dot plot. Or he might not even post
05:35a dot, right? He
05:35doesn't have to. There is actually precedent for some members of the Federal Reserve not actually
05:41presenting where they think interest rates are going to be at the end of this year and the next
05:44couple of years. Ira, before we let you go, reliable sources, somewhat reliable sources,
05:49and by that I mean David Gurra, tells me that you are a fanatical soccer fan. And I do see
05:55some
05:55things behind you that might indicate that. Listen, the World Cup has started. It's a little
06:02bit controversial for a lot of reasons. One of them is that FIFA took over the ticketing system for the
06:07first time. And there's a lot of these games that so far have unsold seats. How are you looking at
06:12this
06:12World Cup? Do you think eventually people will get on board and those will get filled? And anything
06:16you see that you love or that really worries you? Are you asking if he's going? Maybe that's the
06:20question. Well, okay. Are you going? I'm attending at least one match and hopefully another couple.
06:27And I also own a minor league soccer team. So we actually had a game last night so I couldn't
06:31watch the Brazil game. But I think that the ticketing was all mucked up. I think FIFA did a really
06:38bad
06:38job with ticketing. They were trying to kind of maximize their own profits. But in doing so,
06:43they created a lot of uncertainty around when tickets were going to be released and at what
06:48price. Also, you know, given that this is an expanded World Cup with 48 teams for the first time,
06:54they really should have thought about some of the smaller teams going into somewhat smaller venues.
06:59You don't need a 65,000 seat stadium for a Coruscant that only has 250,000 people or something like
07:06that,
07:06right? Like, it's going to be hard for a quarter of the country to go to that game.
07:12So I think they could have done things a little bit differently. And, you know, they really did
07:18price out a lot of countries because, you know, not everyone is like the US in terms of wealth and
07:24prosperity. So you have a lot of people from countries in Africa and Asia in particular, who
07:30just can't afford to attend some of these games. Now, some will, and I think the atmosphere so far
07:35have been really good. But at the same time, I think it could have been even better if they just
07:40thought about it a little bit more.
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