Listen: Fed, Jay Powell And Peter Coy discussed on Bloomberg Businessweek
"The predatory lending industry. It's the blockbuster. I'm gonna love about it. Jason is that investigators have really kicked into action because of their reporting and their stories, and the story isn't over. Also, I love one of the most read stories on the Bloomberg this week about Wall Street's role for the metoo era. And it's basically void women at all costs. Some really great details. A little bit of a chilling effect for sure plus it's the Bloomberg fifty those who made an impact in two thousand eighteen from variety of industries. So we'll have the highlights from that group. But I I'm Jason Carroll every day. On a radio show. I feel like we're doing tea leaf reading around the Federal Reserve Jay Powell feels like sometimes still finding his way. Yeah. This job, especially the precision of language that you might expect a little better from a fed chair with all the experience he has one of our favourite watchers of all this one of our favorite tea leaf readers. Shaw. Peter coy is here with us. So Peter neutral neutral, I'm good at just use air quotes every time. I say the word neutral. Neutrals a term of art in monetary policy. You know in common language, just means Switzerland. But when it comes to monetary policy. It means a very specific thing, which is the topic of enormous debate within monetary policy circles and November twenty eighth that debate really came to the surface because Powell Jay Powell, the chairman of the fed gave a speech in New York economic club. Love New York in which he said, the interest rates were just below neutral. And the stock market took off Dow Jones went up more than six hundred points, which is like two and a half percent gain. And the reason was everybody said, oh, maybe the fed is turning dovish. Maybe there'll be fewer hikes and the interest rate than we expected, which of course is good for stocks and basically good economy. So. So. Everybody saying did he really mean what he said? Or we over interpreting it markets tend to do that they tend to write overreact parsing, everything that the seven particularly the fed chairman, but the immediate reaction before you have time to parse is just a hit the trade trade trade, and that's what they did. But it does seem there was something to that speech. Because one of the things you point out in your story, which is so dead on is if the fed is doing its job, right? It doesn't surprise anyone. Right. And the markets don't react, wildly one way or another. So by that measure fail. Yeah. Unless you unless you subscribe to the theory that the tau wanted to send a message market and the in October, he gave a speech that was very different thing. Atmos- he said that we're kind of well below the the lower range of the neutral funds. Right. So that actually hurt the stock market stocks went down like ten percent over the following month and a half. So there is a theory that he said, okay, we got a slap market face. You guys are overly pessimistic. That's not what I meant. All right. Professor koi. Let's do a class here. Because the neutral rate is an interesting it's not an exact number it can move around. But the whole ideas, and you put it, and we hear this with our guests about kind of the Goldilocks economy that perfect spot where everything's just kind of moving along. It's just kind of where you have relation is low and stable right right around the Fed's target of two percent, and he comes full employment. Everybody who wants a job. Has one and right now, we're kind of at Goldilocks economy. So you're thinking, why do we need stimulus anymore for monetary policy? And that's the Fed's going through right now if they raise rates to abruptly though, they could actually not growth out inflation would start to fall back down could trigger a recession. What's so interesting to write coming off, the financial crisis and the great recession. They didn't need to really worry about this. Right. 'cause it was let's just stimulate the economy things neutral was an ear relevant concept. Right. You. They knew the riot on sorry. Ryan to be neutral at that time. They were putting their finger on the scale trying to stimulate the economy as they succeeded. They found themselves in this issue where now they're forced to confront a number because it kind of unknowable, but to make their best guess aware that number as we now versus if we have this conversation, which we did three months six months ago. It was a pretty clear path into twenty nineteen of consistent rate hikes. That was what the dots and all of that showed that that's where the feds mind was. But it feels like in the last few weeks all the sudden December feels like a lock going into twenty nineteen continually raising interest rates is not necessarily a given. And there's a wide dispersion of views about this. Goldman Sachs is predicting for increases in twenty nine thousand nine lockstep once every quarter. But you're hearing other people talk about two one. I mean, they're even some people are saying zero that's. Extreme end of the spectrum which would make the president of the United States. Very happy. Yeah. And that's just yet another element of his whole thing. You can no longer look at just the economics. When you talk about interest rates, you have to look at the politics. States actively saying he thinks he made a mistake appointing Jay Powell, chairman of the fed that he really worries that the interest rate increases are going to kill the recovering. What happy not Peter coy always love talking to you. Learn something in the Goldilocks world, but he is our Papa there. Thank thank you. You're listening to Bloomberg BusinessWeek coming up and get an inside look at a secretive robotics."