00:00Some of Desire Franklin Templeton writing Walsh is arguably the most hawkish and orthodox Fed chair we've had since Volcker.
00:07They will likely hike again.
00:10Sunil joins us now for more. Sunil, good morning.
00:12Good morning.
00:12You were kind of out front on some of this. I want to give you some time just to explain
00:16it.
00:16You thought that people were getting this Federal Reserve chair wrong quite early on.
00:20Can you explain what you saw and what indications you have now about what's going to happen next?
00:24So actually what I saw was instead of filtering everything through the prism of Trump picked him, he seems to
00:34be Trump's man,
00:35to try and separate all of that from what Kevin Walsh has consistently been saying for a very, very long
00:42period of time,
00:43that the Fed should not have been engaged in QE for as long and as heavily as it was.
00:49Orthodoxy, orthodoxy, orthodoxy, that there had been mission creep.
00:52All of those things pointed us in the direction of a Fed chair who was going to drag the committee
00:59back to its roots.
01:00If you go back to the Greenspan era, there were times where there weren't even press conferences, right?
01:05You never knew. You only knew when you came back out.
01:08A lot of what we've seen is post-global financial crisis developments when the market was in periodic crises
01:15and that crisis mentality seems to have extended far too long.
01:19So what I saw was just somebody who seems to be trying to bring us back to what I would
01:23consider a good normal space
01:26where financial markets start pricing and risks.
01:29What's a good normal interest rate right now?
01:31So I actually think that where we are is, you know, so if we talk about 4 to 4.25,
01:35and again, Jonathan, I've been here for a long time talking about the fact that I think neutral Fed funds
01:42is 4 to 4.25, right?
01:43So we're kind of getting there, and why I think that was always based of a zoom big assumption that
01:50the Fed gets back
01:51to its 2.25 inflation target, 2% productivity growth, and you get to a nominal Fed funds upward sloping
02:00yield curve
02:01when the economy isn't in recession, isn't overheating.
02:04You should get 100 to 150 basis points of upward slope.
02:07Now, judge that a little bit with global liquidity being ample, more than ample.
02:14Maybe you don't get much above 5, 5.25 on 10 years, but yeah, this isn't bad.
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