00:00Do you think there was some misinterpretation of what Walsh was attempting to do going into the weekend?
00:05I'm not sure there was a misinterpretation. I think he clearly was hawkish.
00:10And I think he shifted the burden of proof on the data,
00:14essentially saying that he hasn't seen enough better news yet over the summer
00:19to extend the hold on rates past September.
00:23What I think this leaves open is the question of how much more good news we would need
00:30for Walsh to be comfortable taking a pass on a hike at the next meeting.
00:34Our sense is that a 0.20 tight print on core PCE might do the job.
00:42And we're optimistic that we could get that. But boy, it's close.
00:46How relevant is payrolls this Friday, Krishna? CPI two Fridays away.
00:50How relevant is the payrolls report?
00:51What? Secondary importance, but not no importance at all.
00:56Look, I think it's pretty clear this is an inflation-first Fed right now.
01:00So the number one indicator, of course, will be where that next inflation print lies.
01:06Also, of course, the distribution, the diffusion index that shows how many components are moving
01:12at different rates. One of the metrics, Walsh, cited at Jackson Hole.
01:16I would say the second most important factor is what's happening to oil.
01:19And of course, with oil bond yields. I would put payrolls in third place, payrolls and
01:25unemployment. In the end, unless you get a very extreme outcome, it's not going to either veto
01:31a hold or veto a hike. But at the margin, if the labor market's stronger, there'll be more comfort
01:37at the Fed raising rates. And if the labor market looks a bit softer, a little bit more reservation
01:44around raising rates so it can fine-tune the test the inflation data has to meet.
Comments