August 27, 2024 • 26 mins
At Jackson Hole, Fed Chairman Jerome Powell gave a clear signal that the rate cut cycle is likely to start in September. But of course that just opens more questions. Will it be a 25bps cut? Will it be 50? Could it be two 50s in a row? When does it stop? On today's episode, we speak with Peter Williams, a macro strategist at 22V Research. He walks us through his interpretation of Powell's speech and what to look for as the rate cut cycle begins.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:19):
Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 3 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, we're here in Jackson Hole.
Speaker 3 (00:27):
It's nice to be back.
Speaker 2 (00:28):
It's really nice to be back. So this is the
second year we've come to the Big Kansas City FED
Economic Policy Symposium, and I think it's fair to say,
you know, we heard Powell this morning, there's a certain
era of like victory.
Speaker 3 (00:43):
Right, Yeah, the vibe has shifted. I think last year
there was a little bit more I guess comfort with
the idea of inflation coming down, at least compared to
the year before. So remember two years ago was the
famous Powell speech here in Jackson Hole where he stood
up and he basically said there's no way we're going
to get inflation down without a degree of economic pain,
(01:06):
i e. A pickup in the unemployment rate, job losses,
that sort of thing. And now fast forward two years
and he basically announced that it's time for rate cuts.
And it wasn't a victory lap necessarily, but he sort
of walked through how and why he thinks inflation has
come down without those job losses.
Speaker 2 (01:26):
That's right, and of course we've seen that tick up
in the unemployment rate, not through big layoffs however, so
there's not been a major degree of cuts. But the
other aspect of that is, like, you know, there was
some expectation that to balance the economy achieve the inflation mandate,
there would have to be some loosening of the labor market.
But what he said, and I think it was the
(01:46):
second line of the whole speech, is we don't want
to see anymore we're good ones at this point. The
risks to the labor market are what we're primarily concerned with,
and we do not need to see any more weakness
to be confident that inflation is no longer a major risk.
Speaker 3 (02:01):
Yeah, so the focus has certainly shifted from upside inflation
risk to downside labor market risk. But this opens up
a whole new set of issues and things that we
need to discuss, and I guess everyone's going to be
focused on a slightly different set of economic indicators going forward.
Speaker 2 (02:21):
Right, So now the question is like, okay, if you
accept that the primary risk for the FED and Paul
s edit, so it is is now protecting against further
weakness in the labor market. What does that look like?
Because yes, we know now basically for certain data rate
cut is coming in September, but there are still all
types of questions about the size of the cut, how
many cuts, the sequencing, et cetera. And from a market
(02:43):
perspective in particular, I would say this is actually still
a very live and open question.
Speaker 3 (02:48):
No, absolutely, and the other thing that's happening, and we
should get into this. But the FED has said so
many times that it's data dependent now, and so if
you say you're data dependent and you're really focused on
what's going on in the labor market, then that's like
a combination for everyone to be watching that next jobs
report as an indicator of whether or not we get
(03:09):
twenty five or fifty BIPs, or if it comes in
better than expected, maybe you don't get a rate cut
at all. I don't know.
Speaker 2 (03:14):
I guess nothing is locked in stone.
Speaker 3 (03:16):
Everything is possible.
Speaker 2 (03:17):
Anyway, I'm very excited. We have the perfect guest today,
someone that we have had on odd lots several years
ago talking about similar stuff, including I think it was
a discussion about how you even ascertained the neutral rate
of interest. But we're going to be talking about the
question of what will this rate cut cycle look like
that we're all expecting. So we were speaking with Peter Williams.
(03:39):
He is the managing director of macro Research and Central
Bank Policy at twenty two V Research. Previously he had
been at the IMF, he was at Evercore. He lives
in Bozeman, Montana. He just sort of drove down here
to meet with us, do some fly fishing here in
Jackson Hole, and also meet with us. She was not
in the room, but Tracy and I weren in the
(04:00):
room either. So we're all reading this speech. So Peter,
thank you so much for coming on out locked. It's
nice to meet you here. It's nice to see you here.
Speaker 4 (04:06):
Nice to meet you guys. Nice to be down and.
Speaker 2 (04:07):
We an intermitted person right before it was the first.
Speaker 4 (04:10):
Time we got We had to meet on a fishing
boat ramp.
Speaker 2 (04:12):
Not so bad, Yeah, not too bad. So you've been
writing even prior to the speech this morning, talking about like, okay,
the rate cut cycle is clearly coming into view. How
do you begin to think about the question? You know,
twenty five fifty both seem kind of live at this point.
How do you start trying to ascertain like what this
looks like.
Speaker 4 (04:32):
Yeah, so I think you know the starting point is,
you know, Powell says, obviously we're getting some cuts. They're
starting soon. I would say, while Tracy wants to keep
every possibility open, they're going to cut in September, and realistically,
in the vast majority of cases, they're also probably cutting
in November and December two. I think just penciling in
some degree of front loading, because when you're in a
risk management mode usually you move a little bit more
(04:52):
aggressively than when you're in just kind of minding the
base case. We were minding the base case in like
twenty seventeen, twenty eighteen, policy was slow gradual the last
three and a half years, right since COVID hit in
different ways, you've been minding the extreme tales in both directions,
and now we're starting to worry more about the downside.
So you know, maybe base case from listening to thegitality
of FED speak besides just Powell kind of still sounds
(05:14):
like a fit a twenty five, but especially if the
labor market data comes in a little bit softer than expected.
All eyes on this sort of August payroll print for sure,
but also the job was claims data as well, sort
of cumulating over time. Yeah, I think it's a fifty
certainly seems very possible and maybe even prudent. But I'm
also not the guy in the room making the decisions.
Speaker 3 (05:33):
Well, just on that note, are there pros and cons
to twenty five BIPs versus fifty BIPs? So, for instance,
maybe you want to be early and proactive, so you
cut by fifty bases points. But on the other hand,
I might imagine that there would be some investors or
some people in the market who think, oh, the Fed's
really worried about the labor market and that's why they're
(05:55):
cutting so dramatically in September. It seems like there are
benefits and all so downsides for each of those moves.
Speaker 4 (06:02):
Yeah, I think at this point, with Powis saying that
we're no longer really worried about inflation on the inflation
expectation side or labor market driven inflation, the case for
sort of not fifty to some extent, like not pretty
aggressively front loading, you know, largely boils down to sort
of institutional inertia. They tend to move relatively slowly unless
you're in the midst of a very deep financial crisis
or something like COVID. You know, these mid cycle adjustments,
(06:24):
at least hopefully that's what this is that we've had
before have tended to be relatively gradual and small in nature,
so like you don't often get these very large drops
and rates in relatively stable times. But against that is,
we know rates are very high, we know interest rate
sensitive parts of the economy have been struggling for a
year and a half or two years now, and so
the case sort of against fifty feels more of like
(06:46):
an institutional one and sort of a desire not to
spook market participants. But like we all kind of see
the same data. If it is a little bit of
private data we don't see, but we see the big data.
We all see the employment report, we all see claims,
we all see inflation. And if you're just looking at
that data, it's sort of harder to make a case
that you shouldn't just front load, you know, the initial
part of the rate cutting cycle, and then from there
(07:06):
you can kind of move into like weight and see
mode or just pause, see what happens in twenty twenty five,
But at least early on payback, some of the hawkish
insurance they took out in late twenty two and over
the course of twenty twenty three, and you can be
a bit more level set.
Speaker 2 (07:19):
You know, every cycle is different, But what do past
rate cut cycles generally say about the way the Fed
approaches it. I mean, it's different because the economy more
or less seems fine. There is not, certainly not a
consensus that we're in a recession currently. We're not in
a financial crisis currently. But what does history say about
(07:40):
how rate cut cycles work?
Speaker 4 (07:42):
So you basically get two versions. There's a sort of
mid cycle correction which ninety five, ninety six, ninety seven,
ninety eight around LTCM and then arguably although people might
have different views, instead of twenty eighteen nineteen yeah as well,
and those tend to be relatively moderate in sort of
cumulative size, like seventy five maybe one hundred basis points.
And then on the other hand, you ever sessions, and
(08:04):
these are basically the two varieties of rate cutting cycles
we've had in the sort of modern, kind of post
vulgar era of FED central banking. And so I think
even now it feels a little bit different because compared
to those prior periods. You know, the assumptions about where
interest rate should be in the long run, especially from
the Fed's perspective. I think market participants probably thin they're
a little bit higher, but from most people the Fed,
you know, the comedian still says two eight, and we're
(08:26):
sort of looking at a pretty large gap to that
compared to a lot of those other prior mid cycle corrections.
So you're, you know, you're seeing a somewhat different sort
of base rate on how far you might normally expect
to cut. So the sample size of history is in
a somewhat structurally different world.
Speaker 3 (08:39):
Yes, So the other thing I've been sort of thinking about,
and it's kind of remarkable about the current cycle, But
you know, just a week or so ago, I think
on August thirteenth, Bostic for instance, was talking about how
the FED needs to see a little bit more data
before it decides on rate cuts. And then fast forward.
Speaker 2 (08:57):
To literally ten days later, yeah.
Speaker 3 (09:00):
Exactly, he was talking about the potential for a fifty
basis point cut. And then today at Jackson Hole we
see Pow come out with an extremely ubbish speech where
he puts the emphasis on the labor market and says
we don't want to see further weakening. What happened in
this sort of like two week period, Well, I.
Speaker 4 (09:18):
Think part of it is for a lot of the
more hawkish committee members, you've seen better inflation data. You know,
the Q one shock looks a little bit farther in
the rear of your mirror. Now you have relatively more confidence.
And while we haven't gotten that much more marginal labor
market data, none of it looks dramatically better, Like jobless
claims have been pretty well behaved. The last couple of weeks,
maybe had these very large downside revisions to sort of
(09:39):
trend NFP growth from April twenty three to sort of
March of twenty twenty four, and it just makes the
economy look a little bit more like it's been enough
funk for longer. And so that probably helps you reassess,
like what your view on the medium tournament is, and
if you're a little bit less optimistic about the steady
state of where the thing should be headed, maybe you
should be a little bit more proactive and trying to
cut off some downside risks there because you've a bit
less buffer in that sort of a world.
Speaker 2 (10:01):
Does the first move tell us something about what the
second move will be.
Speaker 4 (10:06):
Yes, more so if it's a fifty, I think because
either if you'd to fifty, I would say realistically, either
the August employment report was pretty bad, so the direction
of the economy walks worse. If you're still trying to
head off something really bad from happening, you'll be more
aggressive with it. Or if the August employment report was
fine and they still go fifty, then that tells you
something about the reaction function and their desire just to
(10:27):
be a little bit more proactively cautious in trying to
get rates down. So I think there if you see
a fifty in September, realistically you should expect that, like
the reaction function at least through early twenty five is
going to be relatively more duffish than otherwise, whether that's
pusis the data itself, or just the way they're seeing
the world.
Speaker 3 (10:44):
The other thing I've been thinking about the last time,
or the first time we had you on all Blots,
it was to talk about our star or the neutral rate,
and since then, certainly this year, our star has kind
of fallen out of favor. So I think the Bank
for International Settlements came out and they were talking about
it's better to base policy on observable inputs, like the
(11:06):
actual data, rather than unobservable models. And I'm trying to
figure out, like there's so much talk about data dependency.
Our star is kind of out of fashion, but is
it still alive and well and sort of in the
background of Jackson Hole And we're just not talking about
it because it's no longer fashionable.
Speaker 4 (11:26):
It's certainly not the operative concern for policy, right, Like,
you know, if the primary motivating force at this point
is like we don't want to see the labor market
fall apart, powerful this stuff this morning, this is what's
driving it, And you know our star maybe helps you
inform like how restrictive your current policy stance is, but
on like a quarter by quarter or meeting by meeting basis,
you just know that rates are substantially higher than they
(11:47):
were a few years ago. Looking at rates in ceative
parts of the economy, you know they've growing up, been
doing great. Overall economic activity has done surprisingly the wall
over the last couple of years, and suggests that our
star has probably moved up some post COVID for sure.
But you don't really want to base Paul, you have
like a very uncertain structural variable and say like, oh,
we should only cut you know, fifty basis points because
we're going to do a much higher our star because
(12:08):
you can only solve those sort of longer run problems
a little bit in the future. But like if you
accidentally create a recession, that's a very persistent problem you
have to deal with four years after the fact. So
it's sort of like different horizons for risk management, siness,
the kind of.
Speaker 2 (12:36):
So we know that the sort of our star is
this sort of in economics that you can't directly observe it,
but we believe theoretically exists that there is some rate
that brings the economy into balance. What is the sort
of economic explanation for why that changes over time? And
just to add on to that, like why in twenty
twenty four do economists believe it's higher than say it
(12:58):
was in twenty eighteen.
Speaker 4 (13:00):
Out of that, I think in the sort of post
GFC decade, you had, you know, a banking system that
was having to sort of you know, re solidify its
balance sheets. There was a lot of new regulation about
the banks making them kind of de risk. You had
fiscal policy that after sort of the Obama Ryan deal
was in much more restrictive territory given where the sort
of business cycle was, and you had, you know, sentiment
(13:20):
generally speaking, like on a corporate perspective, was just quite
subdued for a long time. Afterwards, you'd had this massive shock,
and I think a lot of these very persistent but
not necessarily permanent forces were dragging it down. You used
to have like longer run forces like productivity and demographics
that are sort of weighing on our star. But all
of this sort of persistent but not permanent stuff has
now sort of faded out, especially because the post COVID
experience was the exact opposite of all those things. It
(13:42):
was massive, fiscal policy was very loose. Financial conditions, it
was an absence of spending restraint on the part of
households and the government were large.
Speaker 3 (13:49):
So the other noteworthy change between this year's Jackson Hole
and last year is last year, even though the trajectory
or the momentum overall on inflation was good, it was
coming down. There was a lot of talk about the
idea that, well, there's always the possibility that it comes
rearing back, and this could be the nineteen seventies all
(14:10):
over again where it comes down dramatically and then it
spikes a little bit later on. This year, it feels
like there's not much talk about that. There isn't even
that much talk about inflation expectations being embedded, like all
of that seems to have gone in the rear view
mirror and it's all about the labor market. Do you
think consideration of the return of inflation is warranted here?
(14:34):
Should there be more discussion about the potential for inflation
to come back.
Speaker 4 (14:39):
Over the medium term? I think, you know, post COVID
and especially you know during the contrast with the sort
of like post GFC era, you know, inflation, that trend
in inflation seems like it has moved somewhat higher. Trying
to pin it down seems like kind of a fraud endeavor,
but it certainly moved higher. There it was it was
sort of substantially too low after the GFC. Now it's
preps a little bit too high, but it's not so
high that it's obviously a problem for the FED, because
(15:00):
I don't think most people notice if core PCE is
two and are quarter percent or two percent or one
point nine. Realistically, as long as like the labor market
is okay, and that's sort of a world It like
adds a little bit of a bias towards policy over
the medium term. And they've definitely been you know, some
structural shifts post COVID that seems somewhat inflationary, but in general,
at the moment, it's not really the operative concern as
we had into like twenty five or twenty six. If
the economy really reheats, that could be a problem down
(15:22):
the road, but that's a problem for a very optimistic
view of the world two plus years from now, not today.
Speaker 2 (15:28):
So in Q one of this year, we did get
warmer than expected data. You know, one point that we
was talking about there are a lot of people thought
the rate cutting cycle was going to start in March,
and then we got that warmer than expected data to
start the year, and then they had to push that back. So, okay,
what if we have like another period just to you know,
(15:49):
for whatever reason, some component or something, you know, let's
say Q four does run on the warm side, and
they feel, you know, there's some let's say, questions emerge
about whether they should continue the rate cut cycle in
the face of this data. You know, let's say the
job's coming strong and suddenly things look warmer in the
short term, not twenty twenty five, twenty twenty six. What
are the costs for the FED if the rate cut
(16:12):
cycle is you know, sort of aborted so to speak,
I mean, or if they feel, you know, it's like
you're like, you know what, actually, we don't want to
be cutting rates as fast for whatever because the data
does not come into way they expect.
Speaker 4 (16:23):
Well, if you get surprised by the data, you should
respond to it. And I think fundamentally the issue that
I've had with a lot of some of the FED
speakers recently is that they're sort of premising this notion
on doing the appropriate thing now about something that eventually
down the future could maybe be a surprise. Yeah, and like,
you know, some part of policy needs to be consistent
over time, but you know a lot of shocks happen
in the economy. It's always evolving. And I think the
(16:43):
notion that like, you can't do something today for the
most predominant risk because you might get a little bit
of a surprise direction a year, for an hour, six
months from now.
Speaker 2 (16:50):
People really do talk about this. They like there's like, oh,
the Oh, the worst thing that would happen is they
have to backtrack or something. And I'm trying to understand, like, okay,
if that's so bad, what exacts is so bad about it?
Speaker 4 (17:01):
I think there's a fear that by changing your mind,
maybe you you know, elevate risk premium, you make markets
a little bit less certain.
Speaker 3 (17:08):
But I mean we did just see massive drama in
the market. Yeah, because of like a reconsideration what the
FED was doing.
Speaker 4 (17:16):
Yeah. True, It's just I think, you know, the worst
thing rather than not respond, you know, if you're worried
that like you might have to change your mind, but
it's much worse to not respond, I think, you know, fundamentally,
Like yes, maybe it shifts you in a little bit
on the margin of like well we should do a
little bit less because of the medium the inflation story
or something. But the softening in the labor market, you see,
power was very clear, Like that's in the data. You
(17:38):
can interpret it in different ways, but like the labor
market is back to normal, maybe even a little bit soft.
And if you're worried about that as the sort of
dominant kind of breaking things risk because you know, presumably
once recessions start, they get going pretty darn quick. That's
something you really have to sort of trunkate away pretty quickly, like, okay,
it didn't happen, Well, okay, that's fine. You can sort
of move on. It's like, you know, you buy a
bunch of insurance for your house and then like the
(18:01):
wildfire doesn't come. There are worse fates.
Speaker 3 (18:04):
I mean, I still think it's a pretty big shift.
Post financial crisis, it was very much about forward guidance
and sort of trying to pin yields to where you
wanted them, and then I think it was twenty twenty
two it moved to the data dependency very very short term.
It does feel to me that there's a downside here
to saying that we're going to react to every data point,
(18:27):
especially when there's still big question marks over the quality
of the data. And we just had that BLS revision
that everyone was talking about.
Speaker 4 (18:35):
So the way you sort of robustify against that is
you still have to have some sort of forward looking
view on a policy relevant horizon. Six or twelve months
out is typically when you thing like monetary policy can
really impact the sort of top line kind of macro data, right,
So you have that sort of view, but you're updating
it relatively robustly as the new data comes in. But
the problem, especially over the last year and a half,
(18:56):
is that different parts of the data have been telling
you relatively different things, so you sort of have to
average between them. And the more you get into like
a sort of risk management driven mode, maybe you'll pay
a bit more attention to the most pessimistic parts of
the data right now, the unemployment rate perhaps, or you know,
if everything else holds up, well, you might shift the
signals you're paying attention to. If that theory you had
about the unemployment rates sort of spiraling doesn't come to pass,
(19:19):
then you'll pay me put one more weight on the
activity data or the NFP data. Despite the revisions that
just had still looks okay, if not fantastic.
Speaker 2 (19:26):
What do you think about like the efficacy of cuts,
because okay, for a while, there was questions about, well,
what are the efficacy of rate hikes because they didn't
seem to be doing much for a while, and they
certainly didn't impact the labor market as people had anticipated,
and various stories everyone has their mortgages locked in or yes,
it affected the economy, but only in like real estate
(19:46):
and like auto loans or you know, much of the
economy is not rate sensitive and how long are the lags,
et cetera. So it feels like, to some extent, we
need to have that version again for the cutting cycle
and what we expected to do. So from your perspective,
like let's just say the FED goes fifty or twenty
five or whatever. In your view, how does that transmit
to putting that floor under activity and how quickly?
Speaker 4 (20:09):
Yeah, I mean, some of it is just ratifying what's
already priced in markets. You know, they have pretty strong
assumptions about cuts over the next year and a half
or so, So to some extent, you still have to
do the thing that's priced in, even though like yep,
you know, long term rates to people borrow it may
not change that much. But I think a lot of
it also has to do with a sentiment shift on
the part of what call them like wes, financially sensitive
firms and households. We're just seeing headlines about FED rate
(20:30):
cuts sort of changes the tenor of your business and
maybe changes some decision making because this comes through in
a lot of surveys. You know, to an extent that
often kind of surprises you when you're reading them, but
there's a pretty large amount of attention paid to just
the headlines. Yeah. The headline is the Fed's going to
get your back starting in September.
Speaker 2 (20:44):
Yeah, Tracy. Speaking of the surveys, there were a lot
of specific comments the last couple of months, I think,
in like the Dallas FED Manufacturing survey of business owners
specifically saying like rate cuts please, or we expect things
to be good assuming they're rate cuts. So people are
paying attention.
Speaker 3 (21:02):
Yeah, although they were kind of saying the same thing
a year ago as we I mean, we were talking
about the VIBE session and some of the stuff you
read was like, it's an absolute disaster the FED cut.
Right now, Peter, what's the most interesting thing that you're
watching now when it comes to the Fed and monetary policy?
We've had the shift that some people were expecting, the
(21:22):
emphasis moving from inflation to the labor market. What should
we be on the lookout for now?
Speaker 4 (21:28):
I hang in the short run, it's sort of rate
sensitive spending because if you're perhaps a little bit worried
about the labor market and how activity data is going
to shake up with rates having been so high for
so long and like maybe things just tip over on there.
In accord, you need to see that sort of rate
sensitive spending in the economy start to kind of recover
and rebound there. You know, the housing data has been
relatively soft so far to start the summer since market
(21:48):
rates started coming down, but as you sort of get
through into like later this year and into early next year,
you really need to see that rate sensitive spending part
of the economy start to rebound because if that doesn't happen,
to Joe's point a bit ago, the efficacy of police
on the downside, in addition to the upside, becomes a
bit more of a concern, and you worry that the
Fed might not have the economies back in the way
we all kind of assume right now.
Speaker 2 (22:07):
Peter, so great to meet you in person and run
into each other here. And Jackson Hall, so thank you
so much for coming back on outlaws.
Speaker 4 (22:15):
Thanks so much.
Speaker 5 (22:16):
Great to be back again, Tracy.
Speaker 2 (22:30):
I thought that was very helpful. You know, they're obviously
going to be a number of questions here, but one
thing that is in particular I thought was interesting was
this idea that like whether they go twenty five or
fifty will tell us something more generally about like the
reaction function and their sensitivity to weakness, what twenty twenty
(22:51):
five might look like, and so forth.
Speaker 3 (22:52):
Yeah, it does feel like it's a new regime, and
we're going to learn a lot to your question, which
I thought was excellent about out the transmission mechanism of
the interest rate hikes. That's going to be something interesting
to watch in reverse as well, right, like, okay, well,
now we're cutting to boost the labor market. Is it
actually going to work as intended? Or are we going
(23:14):
to get all these existential questions as we did when
inflation was high, and you know, there were lots of
hikes and we were wondering whether or not they worked totally.
Speaker 2 (23:23):
You know, there was a really interesting paragraph in Powell's
speech where he's like, why did inflation come down? And
the thing is he said there were essentially transitory factors
that took longer than expected, and there was the rate
hikes that depressed demand, But he didn't assign like a
percentage to either one, So we don't really know, and
so you have to figure on the way down, we
(23:46):
really are going to be having all of these same conversations,
except in reverse.
Speaker 3 (23:51):
We should just record all the or rerun all the
au thoughts episodes in that verse backwards.
Speaker 2 (23:57):
No, you know, it's like if the story was like, oh,
the households and the lack of thing and that's why
it's not working, well, then what's what are the lower
rates going to do to put that floor underneath activity?
Speaker 4 (24:06):
Well?
Speaker 3 (24:06):
I did notice also he didn't mention it by name,
but there was this idea of the beverage curve in
there as well, and so you know, job openings have
come down without having mass layoffs. But he didn't really
explain why that had happened. It was just like, you know,
we thought that this might be a possibility, and if
it happened, then that would be the key to a
soft landing. And now it's happened. But he didn't really
(24:30):
go into why. So I suspect there are still a
lot of unknowns in how the economy is functioning.
Speaker 2 (24:35):
And he said that too, which is that people will
be debating these questions until long after we're gone, which
is like how extraordinary the last four years have been
will be you know, in the same way they're still
writing papers about why the Great Depression happened. They're going
to be writing about what happened from twenty twenty to twenty.
Speaker 3 (24:52):
Four, so something to look forward to.
Speaker 2 (24:54):
Yeah, all right, covering it?
Speaker 3 (24:56):
Shall we leave it there?
Speaker 2 (24:56):
Let's leave it there.
Speaker 3 (24:57):
This has been another episode of the All Thoughts. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (25:03):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our guest Peter Williams. He's at Peter D. Williams.
Follow our producers Carman Rodriguez at Kerman Arman Dashel Bennett
at Dashbot and Kelbrooks at Kelbrooks. Thank you to our
producer Moses Ondem. For more Odd Laws content, go to
Bloomberg dot com slash odd Lots, where we post transcripts,
a blog and a weekly newsletter and you can chat
(25:25):
about all of these topics as they're doing right this
second twenty four to seven in our discord Discord dot
gg slash oud lots.
Speaker 3 (25:33):
And if you enjoy odd Lots, if you like it
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and central banks are talking about, then please leave us
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(25:54):
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Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:19):
Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 3 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, we're here in Jackson Hole.
Speaker 3 (00:27):
It's nice to be back.
Speaker 2 (00:28):
It's really nice to be back. So this is the
second year we've come to the Big Kansas City FED
Economic Policy Symposium, and I think it's fair to say,
you know, we heard Powell this morning, there's a certain
era of like victory.
Speaker 3 (00:43):
Right, Yeah, the vibe has shifted. I think last year
there was a little bit more I guess comfort with
the idea of inflation coming down, at least compared to
the year before. So remember two years ago was the
famous Powell speech here in Jackson Hole where he stood
up and he basically said there's no way we're going
to get inflation down without a degree of economic pain,
(01:06):
i e. A pickup in the unemployment rate, job losses,
that sort of thing. And now fast forward two years
and he basically announced that it's time for rate cuts.
And it wasn't a victory lap necessarily, but he sort
of walked through how and why he thinks inflation has
come down without those job losses.
Speaker 2 (01:26):
That's right, and of course we've seen that tick up
in the unemployment rate, not through big layoffs however, so
there's not been a major degree of cuts. But the
other aspect of that is, like, you know, there was
some expectation that to balance the economy achieve the inflation mandate,
there would have to be some loosening of the labor market.
But what he said, and I think it was the
(01:46):
second line of the whole speech, is we don't want
to see anymore we're good ones at this point. The
risks to the labor market are what we're primarily concerned with,
and we do not need to see any more weakness
to be confident that inflation is no longer a major risk.
Speaker 3 (02:01):
Yeah, so the focus has certainly shifted from upside inflation
risk to downside labor market risk. But this opens up
a whole new set of issues and things that we
need to discuss, and I guess everyone's going to be
focused on a slightly different set of economic indicators going forward.
Speaker 2 (02:21):
Right, So now the question is like, okay, if you
accept that the primary risk for the FED and Paul
s edit, so it is is now protecting against further
weakness in the labor market. What does that look like?
Because yes, we know now basically for certain data rate
cut is coming in September, but there are still all
types of questions about the size of the cut, how
many cuts, the sequencing, et cetera. And from a market
(02:43):
perspective in particular, I would say this is actually still
a very live and open question.
Speaker 3 (02:48):
No, absolutely, and the other thing that's happening, and we
should get into this. But the FED has said so
many times that it's data dependent now, and so if
you say you're data dependent and you're really focused on
what's going on in the labor market, then that's like
a combination for everyone to be watching that next jobs
report as an indicator of whether or not we get
(03:09):
twenty five or fifty BIPs, or if it comes in
better than expected, maybe you don't get a rate cut
at all. I don't know.
Speaker 2 (03:14):
I guess nothing is locked in stone.
Speaker 3 (03:16):
Everything is possible.
Speaker 2 (03:17):
Anyway, I'm very excited. We have the perfect guest today,
someone that we have had on odd lots several years
ago talking about similar stuff, including I think it was
a discussion about how you even ascertained the neutral rate
of interest. But we're going to be talking about the
question of what will this rate cut cycle look like
that we're all expecting. So we were speaking with Peter Williams.
(03:39):
He is the managing director of macro Research and Central
Bank Policy at twenty two V Research. Previously he had
been at the IMF, he was at Evercore. He lives
in Bozeman, Montana. He just sort of drove down here
to meet with us, do some fly fishing here in
Jackson Hole, and also meet with us. She was not
in the room, but Tracy and I weren in the
(04:00):
room either. So we're all reading this speech. So Peter,
thank you so much for coming on out locked. It's
nice to meet you here. It's nice to see you here.
Speaker 4 (04:06):
Nice to meet you guys. Nice to be down and.
Speaker 2 (04:07):
We an intermitted person right before it was the first.
Speaker 4 (04:10):
Time we got We had to meet on a fishing
boat ramp.
Speaker 2 (04:12):
Not so bad, Yeah, not too bad. So you've been
writing even prior to the speech this morning, talking about like, okay,
the rate cut cycle is clearly coming into view. How
do you begin to think about the question? You know,
twenty five fifty both seem kind of live at this point.
How do you start trying to ascertain like what this
looks like.
Speaker 4 (04:32):
Yeah, so I think you know the starting point is,
you know, Powell says, obviously we're getting some cuts. They're
starting soon. I would say, while Tracy wants to keep
every possibility open, they're going to cut in September, and realistically,
in the vast majority of cases, they're also probably cutting
in November and December two. I think just penciling in
some degree of front loading, because when you're in a
risk management mode usually you move a little bit more
(04:52):
aggressively than when you're in just kind of minding the
base case. We were minding the base case in like
twenty seventeen, twenty eighteen, policy was slow gradual the last
three and a half years, right since COVID hit in
different ways, you've been minding the extreme tales in both directions,
and now we're starting to worry more about the downside.
So you know, maybe base case from listening to thegitality
of FED speak besides just Powell kind of still sounds
(05:14):
like a fit a twenty five, but especially if the
labor market data comes in a little bit softer than expected.
All eyes on this sort of August payroll print for sure,
but also the job was claims data as well, sort
of cumulating over time. Yeah, I think it's a fifty
certainly seems very possible and maybe even prudent. But I'm
also not the guy in the room making the decisions.
Speaker 3 (05:33):
Well, just on that note, are there pros and cons
to twenty five BIPs versus fifty BIPs? So, for instance,
maybe you want to be early and proactive, so you
cut by fifty bases points. But on the other hand,
I might imagine that there would be some investors or
some people in the market who think, oh, the Fed's
really worried about the labor market and that's why they're
(05:55):
cutting so dramatically in September. It seems like there are
benefits and all so downsides for each of those moves.
Speaker 4 (06:02):
Yeah, I think at this point, with Powis saying that
we're no longer really worried about inflation on the inflation
expectation side or labor market driven inflation, the case for
sort of not fifty to some extent, like not pretty
aggressively front loading, you know, largely boils down to sort
of institutional inertia. They tend to move relatively slowly unless
you're in the midst of a very deep financial crisis
or something like COVID. You know, these mid cycle adjustments,
(06:24):
at least hopefully that's what this is that we've had
before have tended to be relatively gradual and small in nature,
so like you don't often get these very large drops
and rates in relatively stable times. But against that is,
we know rates are very high, we know interest rate
sensitive parts of the economy have been struggling for a
year and a half or two years now, and so
the case sort of against fifty feels more of like
(06:46):
an institutional one and sort of a desire not to
spook market participants. But like we all kind of see
the same data. If it is a little bit of
private data we don't see, but we see the big data.
We all see the employment report, we all see claims,
we all see inflation. And if you're just looking at
that data, it's sort of harder to make a case
that you shouldn't just front load, you know, the initial
part of the rate cutting cycle, and then from there
(07:06):
you can kind of move into like weight and see
mode or just pause, see what happens in twenty twenty five,
But at least early on payback, some of the hawkish
insurance they took out in late twenty two and over
the course of twenty twenty three, and you can be
a bit more level set.
Speaker 2 (07:19):
You know, every cycle is different, But what do past
rate cut cycles generally say about the way the Fed
approaches it. I mean, it's different because the economy more
or less seems fine. There is not, certainly not a
consensus that we're in a recession currently. We're not in
a financial crisis currently. But what does history say about
(07:40):
how rate cut cycles work?
Speaker 4 (07:42):
So you basically get two versions. There's a sort of
mid cycle correction which ninety five, ninety six, ninety seven,
ninety eight around LTCM and then arguably although people might
have different views, instead of twenty eighteen nineteen yeah as well,
and those tend to be relatively moderate in sort of
cumulative size, like seventy five maybe one hundred basis points.
And then on the other hand, you ever sessions, and
(08:04):
these are basically the two varieties of rate cutting cycles
we've had in the sort of modern, kind of post
vulgar era of FED central banking. And so I think
even now it feels a little bit different because compared
to those prior periods. You know, the assumptions about where
interest rate should be in the long run, especially from
the Fed's perspective. I think market participants probably thin they're
a little bit higher, but from most people the Fed,
you know, the comedian still says two eight, and we're
(08:26):
sort of looking at a pretty large gap to that
compared to a lot of those other prior mid cycle corrections.
So you're, you know, you're seeing a somewhat different sort
of base rate on how far you might normally expect
to cut. So the sample size of history is in
a somewhat structurally different world.
Speaker 3 (08:39):
Yes, So the other thing I've been sort of thinking about,
and it's kind of remarkable about the current cycle, But
you know, just a week or so ago, I think
on August thirteenth, Bostic for instance, was talking about how
the FED needs to see a little bit more data
before it decides on rate cuts. And then fast forward.
Speaker 2 (08:57):
To literally ten days later, yeah.
Speaker 3 (09:00):
Exactly, he was talking about the potential for a fifty
basis point cut. And then today at Jackson Hole we
see Pow come out with an extremely ubbish speech where
he puts the emphasis on the labor market and says
we don't want to see further weakening. What happened in
this sort of like two week period, Well, I.
Speaker 4 (09:18):
Think part of it is for a lot of the
more hawkish committee members, you've seen better inflation data. You know,
the Q one shock looks a little bit farther in
the rear of your mirror. Now you have relatively more confidence.
And while we haven't gotten that much more marginal labor
market data, none of it looks dramatically better, Like jobless
claims have been pretty well behaved. The last couple of weeks,
maybe had these very large downside revisions to sort of
(09:39):
trend NFP growth from April twenty three to sort of
March of twenty twenty four, and it just makes the
economy look a little bit more like it's been enough
funk for longer. And so that probably helps you reassess,
like what your view on the medium tournament is, and
if you're a little bit less optimistic about the steady
state of where the thing should be headed, maybe you
should be a little bit more proactive and trying to
cut off some downside risks there because you've a bit
less buffer in that sort of a world.
Speaker 2 (10:01):
Does the first move tell us something about what the
second move will be.
Speaker 4 (10:06):
Yes, more so if it's a fifty, I think because
either if you'd to fifty, I would say realistically, either
the August employment report was pretty bad, so the direction
of the economy walks worse. If you're still trying to
head off something really bad from happening, you'll be more
aggressive with it. Or if the August employment report was
fine and they still go fifty, then that tells you
something about the reaction function and their desire just to
(10:27):
be a little bit more proactively cautious in trying to
get rates down. So I think there if you see
a fifty in September, realistically you should expect that, like
the reaction function at least through early twenty five is
going to be relatively more duffish than otherwise, whether that's
pusis the data itself, or just the way they're seeing
the world.
Speaker 3 (10:44):
The other thing I've been thinking about the last time,
or the first time we had you on all Blots,
it was to talk about our star or the neutral rate,
and since then, certainly this year, our star has kind
of fallen out of favor. So I think the Bank
for International Settlements came out and they were talking about
it's better to base policy on observable inputs, like the
(11:06):
actual data, rather than unobservable models. And I'm trying to
figure out, like there's so much talk about data dependency.
Our star is kind of out of fashion, but is
it still alive and well and sort of in the
background of Jackson Hole And we're just not talking about
it because it's no longer fashionable.
Speaker 4 (11:26):
It's certainly not the operative concern for policy, right, Like,
you know, if the primary motivating force at this point
is like we don't want to see the labor market
fall apart, powerful this stuff this morning, this is what's
driving it, And you know our star maybe helps you
inform like how restrictive your current policy stance is, but
on like a quarter by quarter or meeting by meeting basis,
you just know that rates are substantially higher than they
(11:47):
were a few years ago. Looking at rates in ceative
parts of the economy, you know they've growing up, been
doing great. Overall economic activity has done surprisingly the wall
over the last couple of years, and suggests that our
star has probably moved up some post COVID for sure.
But you don't really want to base Paul, you have
like a very uncertain structural variable and say like, oh,
we should only cut you know, fifty basis points because
we're going to do a much higher our star because
(12:08):
you can only solve those sort of longer run problems
a little bit in the future. But like if you
accidentally create a recession, that's a very persistent problem you
have to deal with four years after the fact. So
it's sort of like different horizons for risk management, siness,
the kind of.
Speaker 2 (12:36):
So we know that the sort of our star is
this sort of in economics that you can't directly observe it,
but we believe theoretically exists that there is some rate
that brings the economy into balance. What is the sort
of economic explanation for why that changes over time? And
just to add on to that, like why in twenty
twenty four do economists believe it's higher than say it
(12:58):
was in twenty eighteen.
Speaker 4 (13:00):
Out of that, I think in the sort of post
GFC decade, you had, you know, a banking system that
was having to sort of you know, re solidify its
balance sheets. There was a lot of new regulation about
the banks making them kind of de risk. You had
fiscal policy that after sort of the Obama Ryan deal
was in much more restrictive territory given where the sort
of business cycle was, and you had, you know, sentiment
(13:20):
generally speaking, like on a corporate perspective, was just quite
subdued for a long time. Afterwards, you'd had this massive shock,
and I think a lot of these very persistent but
not necessarily permanent forces were dragging it down. You used
to have like longer run forces like productivity and demographics
that are sort of weighing on our star. But all
of this sort of persistent but not permanent stuff has
now sort of faded out, especially because the post COVID
experience was the exact opposite of all those things. It
(13:42):
was massive, fiscal policy was very loose. Financial conditions, it
was an absence of spending restraint on the part of
households and the government were large.
Speaker 3 (13:49):
So the other noteworthy change between this year's Jackson Hole
and last year is last year, even though the trajectory
or the momentum overall on inflation was good, it was
coming down. There was a lot of talk about the
idea that, well, there's always the possibility that it comes
rearing back, and this could be the nineteen seventies all
(14:10):
over again where it comes down dramatically and then it
spikes a little bit later on. This year, it feels
like there's not much talk about that. There isn't even
that much talk about inflation expectations being embedded, like all
of that seems to have gone in the rear view
mirror and it's all about the labor market. Do you
think consideration of the return of inflation is warranted here?
(14:34):
Should there be more discussion about the potential for inflation
to come back.
Speaker 4 (14:39):
Over the medium term? I think, you know, post COVID
and especially you know during the contrast with the sort
of like post GFC era, you know, inflation, that trend
in inflation seems like it has moved somewhat higher. Trying
to pin it down seems like kind of a fraud endeavor,
but it certainly moved higher. There it was it was
sort of substantially too low after the GFC. Now it's
preps a little bit too high, but it's not so
high that it's obviously a problem for the FED, because
(15:00):
I don't think most people notice if core PCE is
two and are quarter percent or two percent or one
point nine. Realistically, as long as like the labor market
is okay, and that's sort of a world It like
adds a little bit of a bias towards policy over
the medium term. And they've definitely been you know, some
structural shifts post COVID that seems somewhat inflationary, but in general,
at the moment, it's not really the operative concern as
we had into like twenty five or twenty six. If
the economy really reheats, that could be a problem down
(15:22):
the road, but that's a problem for a very optimistic
view of the world two plus years from now, not today.
Speaker 2 (15:28):
So in Q one of this year, we did get
warmer than expected data. You know, one point that we
was talking about there are a lot of people thought
the rate cutting cycle was going to start in March,
and then we got that warmer than expected data to
start the year, and then they had to push that back. So, okay,
what if we have like another period just to you know,
(15:49):
for whatever reason, some component or something, you know, let's
say Q four does run on the warm side, and
they feel, you know, there's some let's say, questions emerge
about whether they should continue the rate cut cycle in
the face of this data. You know, let's say the
job's coming strong and suddenly things look warmer in the
short term, not twenty twenty five, twenty twenty six. What
are the costs for the FED if the rate cut
(16:12):
cycle is you know, sort of aborted so to speak,
I mean, or if they feel, you know, it's like
you're like, you know what, actually, we don't want to
be cutting rates as fast for whatever because the data
does not come into way they expect.
Speaker 4 (16:23):
Well, if you get surprised by the data, you should
respond to it. And I think fundamentally the issue that
I've had with a lot of some of the FED
speakers recently is that they're sort of premising this notion
on doing the appropriate thing now about something that eventually
down the future could maybe be a surprise. Yeah, and like,
you know, some part of policy needs to be consistent
over time, but you know a lot of shocks happen
in the economy. It's always evolving. And I think the
(16:43):
notion that like, you can't do something today for the
most predominant risk because you might get a little bit
of a surprise direction a year, for an hour, six
months from now.
Speaker 2 (16:50):
People really do talk about this. They like there's like, oh,
the Oh, the worst thing that would happen is they
have to backtrack or something. And I'm trying to understand, like, okay,
if that's so bad, what exacts is so bad about it?
Speaker 4 (17:01):
I think there's a fear that by changing your mind,
maybe you you know, elevate risk premium, you make markets
a little bit less certain.
Speaker 3 (17:08):
But I mean we did just see massive drama in
the market. Yeah, because of like a reconsideration what the
FED was doing.
Speaker 4 (17:16):
Yeah. True, It's just I think, you know, the worst
thing rather than not respond, you know, if you're worried
that like you might have to change your mind, but
it's much worse to not respond, I think, you know, fundamentally,
Like yes, maybe it shifts you in a little bit
on the margin of like well we should do a
little bit less because of the medium the inflation story
or something. But the softening in the labor market, you see,
power was very clear, Like that's in the data. You
(17:38):
can interpret it in different ways, but like the labor
market is back to normal, maybe even a little bit soft.
And if you're worried about that as the sort of
dominant kind of breaking things risk because you know, presumably
once recessions start, they get going pretty darn quick. That's
something you really have to sort of trunkate away pretty quickly, like, okay,
it didn't happen, Well, okay, that's fine. You can sort
of move on. It's like, you know, you buy a
bunch of insurance for your house and then like the
(18:01):
wildfire doesn't come. There are worse fates.
Speaker 3 (18:04):
I mean, I still think it's a pretty big shift.
Post financial crisis, it was very much about forward guidance
and sort of trying to pin yields to where you
wanted them, and then I think it was twenty twenty
two it moved to the data dependency very very short term.
It does feel to me that there's a downside here
to saying that we're going to react to every data point,
(18:27):
especially when there's still big question marks over the quality
of the data. And we just had that BLS revision
that everyone was talking about.
Speaker 4 (18:35):
So the way you sort of robustify against that is
you still have to have some sort of forward looking
view on a policy relevant horizon. Six or twelve months
out is typically when you thing like monetary policy can
really impact the sort of top line kind of macro data, right,
So you have that sort of view, but you're updating
it relatively robustly as the new data comes in. But
the problem, especially over the last year and a half,
(18:56):
is that different parts of the data have been telling
you relatively different things, so you sort of have to
average between them. And the more you get into like
a sort of risk management driven mode, maybe you'll pay
a bit more attention to the most pessimistic parts of
the data right now, the unemployment rate perhaps, or you know,
if everything else holds up, well, you might shift the
signals you're paying attention to. If that theory you had
about the unemployment rates sort of spiraling doesn't come to pass,
(19:19):
then you'll pay me put one more weight on the
activity data or the NFP data. Despite the revisions that
just had still looks okay, if not fantastic.
Speaker 2 (19:26):
What do you think about like the efficacy of cuts,
because okay, for a while, there was questions about, well,
what are the efficacy of rate hikes because they didn't
seem to be doing much for a while, and they
certainly didn't impact the labor market as people had anticipated,
and various stories everyone has their mortgages locked in or yes,
it affected the economy, but only in like real estate
(19:46):
and like auto loans or you know, much of the
economy is not rate sensitive and how long are the lags,
et cetera. So it feels like, to some extent, we
need to have that version again for the cutting cycle
and what we expected to do. So from your perspective,
like let's just say the FED goes fifty or twenty
five or whatever. In your view, how does that transmit
to putting that floor under activity and how quickly?
Speaker 4 (20:09):
Yeah, I mean, some of it is just ratifying what's
already priced in markets. You know, they have pretty strong
assumptions about cuts over the next year and a half
or so, So to some extent, you still have to
do the thing that's priced in, even though like yep,
you know, long term rates to people borrow it may
not change that much. But I think a lot of
it also has to do with a sentiment shift on
the part of what call them like wes, financially sensitive
firms and households. We're just seeing headlines about FED rate
(20:30):
cuts sort of changes the tenor of your business and
maybe changes some decision making because this comes through in
a lot of surveys. You know, to an extent that
often kind of surprises you when you're reading them, but
there's a pretty large amount of attention paid to just
the headlines. Yeah. The headline is the Fed's going to
get your back starting in September.
Speaker 2 (20:44):
Yeah, Tracy. Speaking of the surveys, there were a lot
of specific comments the last couple of months, I think,
in like the Dallas FED Manufacturing survey of business owners
specifically saying like rate cuts please, or we expect things
to be good assuming they're rate cuts. So people are
paying attention.
Speaker 3 (21:02):
Yeah, although they were kind of saying the same thing
a year ago as we I mean, we were talking
about the VIBE session and some of the stuff you
read was like, it's an absolute disaster the FED cut.
Right now, Peter, what's the most interesting thing that you're
watching now when it comes to the Fed and monetary policy?
We've had the shift that some people were expecting, the
(21:22):
emphasis moving from inflation to the labor market. What should
we be on the lookout for now?
Speaker 4 (21:28):
I hang in the short run, it's sort of rate
sensitive spending because if you're perhaps a little bit worried
about the labor market and how activity data is going
to shake up with rates having been so high for
so long and like maybe things just tip over on there.
In accord, you need to see that sort of rate
sensitive spending in the economy start to kind of recover
and rebound there. You know, the housing data has been
relatively soft so far to start the summer since market
(21:48):
rates started coming down, but as you sort of get
through into like later this year and into early next year,
you really need to see that rate sensitive spending part
of the economy start to rebound because if that doesn't happen,
to Joe's point a bit ago, the efficacy of police
on the downside, in addition to the upside, becomes a
bit more of a concern, and you worry that the
Fed might not have the economies back in the way
we all kind of assume right now.
Speaker 2 (22:07):
Peter, so great to meet you in person and run
into each other here. And Jackson Hall, so thank you
so much for coming back on outlaws.
Speaker 4 (22:15):
Thanks so much.
Speaker 5 (22:16):
Great to be back again, Tracy.
Speaker 2 (22:30):
I thought that was very helpful. You know, they're obviously
going to be a number of questions here, but one
thing that is in particular I thought was interesting was
this idea that like whether they go twenty five or
fifty will tell us something more generally about like the
reaction function and their sensitivity to weakness, what twenty twenty
(22:51):
five might look like, and so forth.
Speaker 3 (22:52):
Yeah, it does feel like it's a new regime, and
we're going to learn a lot to your question, which
I thought was excellent about out the transmission mechanism of
the interest rate hikes. That's going to be something interesting
to watch in reverse as well, right, like, okay, well,
now we're cutting to boost the labor market. Is it
actually going to work as intended? Or are we going
(23:14):
to get all these existential questions as we did when
inflation was high, and you know, there were lots of
hikes and we were wondering whether or not they worked totally.
Speaker 2 (23:23):
You know, there was a really interesting paragraph in Powell's
speech where he's like, why did inflation come down? And
the thing is he said there were essentially transitory factors
that took longer than expected, and there was the rate
hikes that depressed demand, But he didn't assign like a
percentage to either one, So we don't really know, and
so you have to figure on the way down, we
(23:46):
really are going to be having all of these same conversations,
except in reverse.
Speaker 3 (23:51):
We should just record all the or rerun all the
au thoughts episodes in that verse backwards.
Speaker 2 (23:57):
No, you know, it's like if the story was like, oh,
the households and the lack of thing and that's why
it's not working, well, then what's what are the lower
rates going to do to put that floor underneath activity?
Speaker 4 (24:06):
Well?
Speaker 3 (24:06):
I did notice also he didn't mention it by name,
but there was this idea of the beverage curve in
there as well, and so you know, job openings have
come down without having mass layoffs. But he didn't really
explain why that had happened. It was just like, you know,
we thought that this might be a possibility, and if
it happened, then that would be the key to a
soft landing. And now it's happened. But he didn't really
(24:30):
go into why. So I suspect there are still a
lot of unknowns in how the economy is functioning.
Speaker 2 (24:35):
And he said that too, which is that people will
be debating these questions until long after we're gone, which
is like how extraordinary the last four years have been
will be you know, in the same way they're still
writing papers about why the Great Depression happened. They're going
to be writing about what happened from twenty twenty to twenty.
Speaker 3 (24:52):
Four, so something to look forward to.
Speaker 2 (24:54):
Yeah, all right, covering it?
Speaker 3 (24:56):
Shall we leave it there?
Speaker 2 (24:56):
Let's leave it there.
Speaker 3 (24:57):
This has been another episode of the All Thoughts. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (25:03):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our guest Peter Williams. He's at Peter D. Williams.
Follow our producers Carman Rodriguez at Kerman Arman Dashel Bennett
at Dashbot and Kelbrooks at Kelbrooks. Thank you to our
producer Moses Ondem. For more Odd Laws content, go to
Bloomberg dot com slash odd Lots, where we post transcripts,
a blog and a weekly newsletter and you can chat
(25:25):
about all of these topics as they're doing right this
second twenty four to seven in our discord Discord dot
gg slash oud lots.
Speaker 3 (25:33):
And if you enjoy odd Lots, if you like it
when we go to Jackson Hole to cover what policymakers
and central banks are talking about, then please leave us
a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
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(25:54):
In order to do that, just find the Bloomberg channel
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Hosts And Creators
Joe Weisenthal
Tracy Alloway
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