00:00We know, and we've talked about this all this week, that a hike is all but priced in.
00:04What are you going to expect when it comes to the press conference,
00:07especially when we know that Fed Chair Kevin Warsh does not like forward guidance?
00:12Well, we're going to look for him to walk a very narrow line
00:16because he doesn't want to give forward guidance.
00:19But if there isn't some indication that the Fed is still concerned about inflation
00:23and they're leaving their options open,
00:26then you could have a very negative reaction in the markets.
00:29Mark, it's very short treasuries right now, so it does look like we could see an issue.
00:34We did get some good news this morning, at least if you're the Fed and you're wanting to raise rates,
00:39and that is that retail sales were much stronger than anticipated in August.
00:44Now, July was a little weird because Amazon moved its prime day to June,
00:48but we did see a big rebound in sales, and we saw a lot of categories, 13 of the 14,
00:55up during the month.
00:56Gasoline was up, but of course that's always up these days.
00:59But the rest of it showed a strong back-to-school season.
01:02Now, the question is, if the economy is that strong, would 25 basis points make much of a difference?
01:09Certainly not in the short run, which means then the markets are looking at,
01:14are we going to have a series of rate hikes?
01:17The Fed has pretty much always done that once they start, and that's what the markets are pricing.
01:22We go into this with two rate hikes priced for the year, before the year ends,
01:27and then the question will be what would happen next year.
01:31We'll have to see what the dot plot shows.
01:33If the dot plot does show a second rate hike is in the cards, or at least a majority thinking
01:39that,
01:39then the markets probably are going to be okay with where we are.
01:42If we take that out, you could see a big move upwards, and you can see there how the markets
01:49are pricing this.
01:50With the dots go, the yellow line being the Fed's median and the other two lines being the OIS and
01:58Fed Funds Futures,
01:59the markets are betting much more on rate increases than the Fed's previous estimate of what's going to happen.
02:07Thank you very much.
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