Jay Powell, FED, Michael Mckee discussed on Balance of Power


Are in Washington anticipating one week from today those midterm elections. But before that, we have the Federal Reserve meeting today and tomorrow with a decision on rates coming out tomorrow. And he gives a preview that we turn down to Michael McKee. He's Bloomberg international economics and policy correspondent. So Mike, what are we looking for? Well, David, a lot of people are going to be looking at the political impact of the fed's moves, but really the focus for Wall Street of the November fed meeting is the December fed meeting. The fed is basically told us they're going to raise rates 75 basis points three quarters of a percentage point to 4% at their meeting tomorrow. But what do they do after that? Pressure is building on them in two directions. First of all, there are people who think they need to keep raising 75 basis points because the labor market is so strong. We got some data today on that and then we got some price data that's encouraging. The ISM numbers come out today and this is not the headline. These are the underlying numbers, very good numbers because new orders are up a little bit, telling us that the economy is not rolling over, but order backlog or deliveries are down. So the supply chain problems are starting to really go away, and that's reflected in the prices paid index, which fell to a level that capital economic says is much more consistent with 1% inflation than 8% inflation. But at the same time, we got those jolts data today that show the fed has a labor market issue still. They've been making the case that they need to keep raising rates because the labor market is so strong. The job openings numbers are so strong and the job openings numbers come out today higher than they were last month. That's a problem and of course Friday we get the hiring numbers and we'll see if there's any kind of drop in that. So the other problem for Jay Powell is what the markets think is going to happen and how that affects them. Stock market's going up is not good news because it's looser data. And here's Jay Powell's favorite yield curve. It's the three month bill with a three month with an 18 month look ahead. So you see what the markets are thinking the three month rate will be in 18 months and they see almost at this point and inversion. And when Jay Powell was asked about that last march, he said, that's the most important yield curve to us because it shows what the markets think is going to happen. Now, and when that happens, it means there's going to be a recession and the fed has to cut rates. So we'll see if he follows up on that. And of course, the thing that's just come over the transom today, again, more Democrats criticizing Jay Powell and the fed, telling him to watch what they're doing because they don't want to hurt employment for millions of Americans or 1% rise in the unemployment rate is about a million and a half jobs. The fed's going to ignore that. It's not what they do. They want to just stick to monetary policy. And they've, well, Jay poll at least has made a very firm case that he is going to do as Paul Volcker did, no matter what the consequences. Thank you so much to Bloomberg's Michael McKee. Well, whatever the fed says, we know the council economic advisers over at the white as we were looking at it very, very carefully. And we welcome now here in our Washington bureau, Jared Bernstein. A member of that council. Thank you so much for coming over. My pleasure, great to see you IRL in real life. Pleasure to take a walk from The White House over to Bloomberg today. It's great to have you. So let's start with where it might just left off. You have been very careful. As your colleagues have been saying, you do not try to influence the Federal Reserve. They are independent. They make their own decisions. Some of the Democrats up on Capitol Hill don't share in that view. We've just had senators Warren and Sanders earlier, we had hickenlooper earlier, we had sherrod Brown saying something, would you rather some Democrats actually hold their powder on this because you could have ironically the fed try to prove they are independent by keeping the rates high. I'm not going to comment on where various members of Congress or senators feel they need to be on this position. I'm here as a representative of president Joe Biden who has consistently done something. I think really important and historically impressive, which is that he has said, I am going to stay out of the fed's knitting when it comes to this rate hiking cycle. Now, history is littered, including the previous administration with presidents who took a different position and gotten the fed's grill anytime they were raising rates. The president has in fact endorsed their pivot and argued that they are the first and foremost inflation fighter and that's where we're going to stick it. So one thing that you are doing at The White House is advocating a windfall profit tax on oil. We heard from President Biden just yesterday, we'll play just a little bit of what President Biden had to say. You know, at a time of war, and he come to receiving historic one trial profits like this as a responsibility to act beyond their narrow self interest of its executive shareholders. I think they have responsibility to act in the interest of their consumers, their community and their country. To invest in America by increasing production and refining capacity. So, Jed, we all are concerned about the price of gas. And the price of oil for that matter. At the same time, as an economist, when does it make sense to tax something in order to encourage more production? Doesn't economics teach you exactly the reverse when you tax it, you get less of it? Not if you get under the hood of what the specific mechanism we're talking about here is first of all, this won't surprise you, but I thought the words from the president were extremely resonant and trenchant. You've got the 6 tops companies over the past 6 months making over a $100 billion. Now we're doing all weekend. We've talked about this before to try to get consumers

Coming up next