00:00I kind of blame Kevin Worsh for that.
00:02The idea that you should be terse in your statements
00:04and that you should limit the amount of communication and guidance.
00:08Well, what did you expect?
00:10If that is how you want to operate, you're going to see a lot of opinions out there
00:14because people are not going to be basing what they think on your words.
00:18They'll be basing everything on their interpretation of the future,
00:21including the short-term future.
00:23Look, the people who think that there are no rate hikes coming
00:25and that he will stay flat are probably the people who think
00:28the stock market is going to sell off and oil is going to sell off
00:30over the next six months.
00:31And that's a perfectly valid view to take.
00:35But Dr. Weisman, what's so important here,
00:38and I'm sure you studied this across your effort at Harvard,
00:41the basic thing to me is, is this a hearkening to the past
00:47or can he not get away with that because of modern technology,
00:51the speed of information?
00:53Alan Greenspan didn't have to worry about social media.
00:56Yeah, I think he's not going to be able to get away with it
00:58not because of technology, but because he's going to be pressed
01:00to give information when he appears before Congress,
01:04when he's in the presser, and of course you're going to have
01:06a bunch of other senior Fed staff say what they want to say
01:10at their appearances, when they're asked to give commentary.
01:14So it's going to be difficult to keep a lid on what the FOMC says,
01:19regardless of what Kevin Horch wants to do.
01:21Paul, I don't think Paul will remember this,
01:22but you and I are old enough.
01:24I mean, Waller was on the edge of Wayne Angel yesterday.
01:28Exactly.
01:29So I'm looking at the warp function here, Terry, on the Bloomberg Terminal.
01:32Almost two rate hikes kind of priced in here.
01:36I did not know that.
01:36Yeah, we're up there.
01:37It's 43 basis points by the end of the year.
01:39I don't know.
01:40Does that seem reasonable to you?
01:42It seems a little bit too hawkish,
01:44but I do believe they're going to be raising rates.
01:46I believe it's going to happen at the latest in October.
01:49There's a tail there to maybe moving it into September.
01:51The only reason I am entertaining October is because
01:55the Personal Consumption Price Index revisions are coming out in late September,
01:59and maybe Kevin Horch might be able to convince the committee
02:02to wait until that data is out before making a decision on raising rates.
02:06But if oil stays high, if the stock market stays robust,
02:11if there is no decline in inflation,
02:13yes, I could easily see September, that is the meeting,
02:15after tomorrow when they raise rates.
02:19We also have the Bank of Japan.
02:21What do you expect to happen there?
02:22Because I'm looking at the yen.
02:23I mean, Tom and I, we're kind of on a 165 watch here.
02:27I don't know.
02:27Yeah, so the Bank of Japan has been very deliberate
02:32in their rate hiking or rate normalization process.
02:37They tend to raise the policy rate by about 25 basis points every six months,
02:42and that's been going on since 2024.
02:44If they continue to follow that pattern,
02:46you should not expect another rate hike until December.
02:49However, there were leaks last week about the prospect that the BOJ would accelerate the hike,
02:54so maybe they're going to do it in October as well.
02:56Having said that, up until now,
02:59their rate hikes have not done anything to curtail speculation against the yen.
03:03I don't think that's a reason to not hike.
03:05There are other reasons to hike,
03:07including the fact that real rates are negative in Japan.
03:10But if they sound too dovish at the meeting this week
03:14and dollar-yen rises overnight as a result,
03:17I would fade that move because if that happens,
03:20I think they would conclude that they did not convey the right message,
03:24and then there was a risk of intervention in the market,
03:27either rhetorically or with actual FX intervention on Friday.
03:30Terry Weissman with us with Global Strategy,
03:33Macquarie, of course, all of Australia and here in New York as well.
03:37Terry, to bring it back to the Fed here,
03:40the elephant in the room to me is an elevated real rate.
03:44Ed Yardeni told me a couple days ago, he said,
03:47hey, rates are back to normal.
03:48Do you agree that we just got to get used to rates at this level
03:52because this is what it was like decades ago?
03:55Yes, prospectively, but I would not say that the elephant in the room is real rates.
03:59I would say the elephant in the room is the fact that
04:01personal consumption expenditure price index on a core basis
04:05has been above 3% or roughly around 3% forever.
04:09That is the elephant in the room.
04:10And I would highlight that, you know,
04:11for those of us who think that Kevin Walsh is unwilling
04:14or has a pension to offer no information,
04:16I would push back against that too.
04:18In his testimony before Congress a few days ago,
04:21he said something to the effect that would,
04:23that divulge or betrayed his own tightening bias.
04:26He said that over the next few meetings,
04:27the committee would be examining the tools
04:29that it needs to roll out to control inflation.
04:33Given that, as I mentioned, inflation's been running,
04:35core inflation's been running at 3%,
04:37you would think that that implies a tightening bias.
04:39I think the question is when.
04:41Today, no, not today.
04:42September, possibly, more likely October
04:45when we get those full revisions.
04:47I'm looking at the DXY index, 101 spot 61 here.
04:51I mean, is there any reason to fade the U.S. dollar here?
04:54That was a call coming into the year until we...
04:57Yeah, I mean, the reason to fade the U.S. dollar
04:59is that oil prices might come down
05:00if you get another memorandum of understanding
05:03between the U.S. and Iran.
05:05That, I think, would be the important driver
05:06because one of the things that's been holding up the dollar
05:08all year has been high oil prices,
05:10and there's a very strong and valid fundamental reason for that.
05:13The U.S. economy actually benefits from high oil prices.
05:16We are a net exporter.
05:18And when the price of what you export...
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