Wells Fargo's Michael Schumacher says Fed minutes making him 'a bit less confident' about September
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Bloomberg
5 minutes ago
- Bloomberg
Tom Keene Digi
Live on Bloomberg TV CC-Transcript 00:00Oh, it's hanging over. It's the exact correct language. There's no question about it. You still have the normal cadence of Jackson Hole, for example, there's six, seven, eight papers that come out. Michael McKee prints them out perfectly, and he reads every page of the academic papers. Guess what? I don't do that. I'm talking to the reporters here gathered, and you're right at the top of the pile of topics. Here is Lisa Cook. So what's what's she I spoke to Mike earlier. He said she's expected to arrive. She hasn't arrived yet. Does it does it take away from Fed Chair Powell's message tomorrow? Does it distract from what he says about this economy and what he indicates or not about September? It's a really fair question. I don't think so. I think Michael McHugh is better at this than I am. I would say exactly the same thing. What is different here in our Simon Flynn in Singapore absolutely nails it in an essay today. What's different here is the hard facts of the moment are catching up with the chairman. I don't know if they're rewriting the speech tonight with the stars out above the Tetons or maybe they're writing it on the airplane. But what is very clear here is the hard facts, as Mr. Flint says, have caught up. You have the economic data today. You've got concern about inflation. And, Tim, the number one thing I'm watching off the Bloomberg here is the 30 year bond. Once again, we're making a dash up near 5%. That's the kind of inflation whispers that have to change the speech. Tom, of course, you mentioned the chairman will speak tomorrow at Jackson Hole. Can you just tell us a bit more about what intend attendees are really looking to hear from him? It varies. Every year. There was one year here, I'm going to say three years ago, I can't remember where we were prepared for a 15 minute, 20 minute speech. And I believe he he spoke for 8 minutes. So every year is different. I think the pageantry will be here. There'll be an international audience here. Christine Lagarde or Mr. Nagel of Germany is here, Bailey of the Bank of England, scheduled as well. But what's interesting is within the pageantry, what do you expect from a speech? And the answer is they'll be looking for certain nuances and certain single sentences that will be different. What you're not going to get a lot of is what's he going to do in September. That would be rude. He's not going to do that here. You mentioned a lot of those international voices. I mean, the ECB, we've got Bank of Japan emerging markets. How are they playing a part of the conversation this year in particular? Norah, You know my theme, you're already stealing my theme as we go to tomorrow with Lisa Abramowitz. To me, the international angle here is the importance point. William Rhodes, Bill Rhodes of Citigroup, iconic. It's Citibank. It was called Citibank. Back then. I had this great phrase central banker to the world. He took it from academics. This is a Jackson Hole where Jerome Powell is the central banker to the world, is he defends delicately the way we've done banking for years, pushing against President Trump. The theme internationally here of central bank independence will be key, I think also the theme of labor time. And it's something that we've spent a lot of time talking about in recent weeks, especially since that shocking report came out earlier this month about those numbers for the month of July. And it's really shifted the conversation about what employment in the United States and what healthy employment numbers look like in the United States where borders are closed. Immigration, legal and illegal, is down, and growth among American families is not what it was a couple generations ago. What does that picture look like in terms of reshaping the American workforce? Well, in reshaping the speech as well, it's a moveable feast right now, Tim. The number one thing, as we've seen a trend in the data, the conceit is labor data always lags. Okay, fine. And we've seen this trend, including continuing claims today Paramo put out on Twitter. I was, you know, stuck in an airport somewhere Paramo and put out on Twitter that great continuing claims chart which shows this explosion up in the weekly data. That's the kind of tealeaves that gets a fed to shift. President Trump wants them to shift quicker. And let's remember, we've got that jobs report early September before Mike McKay's in that press conference, September 17th. Well, I want to just talk about the energy. I mean, you've been to so many of these symposiums. What's the energy like on the ground this year in particular? Quiet. First thing I noticed when I walked in, there's a whole new quiet tone to that. Mike McCann I remember I remember August of oh seven, which was, I think I'll say seven days after LIBOR OAS went out for standard deviations. This place was chaos. My guess is a lot of people are coming in tomorrow morning and tomorrow morning here at the Jackson Lake Lodge will not be quiet. There'll be a real turnout for the speech. With that said, it's one party academic, but it is one part about this attack on the central bank by President Trump.
CNBC
6 minutes ago
- CNBC
Fed Chair Powell set to deliver big Jackson Hole speech Friday. Here's what Wall Street expects
Federal Reserve Chair Jerome Powell is set to deliver what almost certainly will be his last keynote address at the central bank's annual conclave during one of the most tumultuous times in its history. What's at stake is the near-term sentiment for financial markets, the longer-term path of the Fed's policy trajectory, and a not insignificant dose of trying to preserve vestiges of independence at a time when the normally sacrosanct institution is facing enormous political pressure. If Friday's speech at Jackson Hole, Wyoming, goes at all like Powell's first seven-plus years in office, it will feature a calm and collected veneer even if masking the weight that he and his colleagues have been under all year. "He's done a good job in terms of keeping the Fed's independence, ignoring the noise and some of the questions he gets, and keeping it focused on the data dependency and the Fed's dual mandate," said Michael Arone, chief investment strategist at State Street Global Advisors. "He's taken the high road as it relates to the Fed's independence and some of the pressure he's clearly getting from the Trump administration. So I think that he'll continue to kind of walk that line." Indeed, President Donald Trump has kept up a near constant drumbeat against Powell and his colleagues. As he did during much of his first term, Trump has badgered Powell to lower interest rate cuts. But in recent days the president's attacks on the Fed have gone past mere monetary policy. Earlier this summer, the White House lashed out at the Fed for a major reconstruction project at its Washington, D.C. headquarters. That coincided with a period when Trump toyed with removing Powell, though he later backed off the idea. Then this week the administration trained its focus on Fed Governor Lisa Cook, accusing her of mortgage fraud regarding two federally backed loans she took. Amid the controversies, Powell could use the speech to at least take a swipe at the political distractions, even if he holds to past practice of not taking direct aim. "He's going to take a jab and talk about fed independence, because what does he have to lose really at this point?" said Dan North, senior economist at Allianz Trade North America. "It seems pretty clear that Trump can't legally fire him. He can certainly put all kinds of tremendous pressure on him. And I think it's an opportunity for Powell to say the central bank's got to stay independent, and that's what we're going to do." Beyond the politics there's policy, and that also will be challenge. The speech is billed as an "Economic Outlook and Framework Review," indicating Powell will take time to provide his views on broad conditions as well as discuss the Fed's long-term policy goals, a review that occurs every five years. Markets are expecting Powell to tee up a September rate cut. At each of his previous Jackson Hole speeches, starting in 2018, he indicated significant policy shifts. From pushing for quarterly cuts in that first speech to a pivotal switch in how it would view inflation in 2020 to last year's nod towards an aggressive September move, markets have taken their cues from the chair's keynote. Wall Street commentary reflects similar expectations this time around, if in somewhat subtler terms. "We do not expect Powell to decisively signal a September cut, but the speech should make it clear to markets that he is likely to support one," Goldman Sachs economist David Mericle said in a note. Kansas City Fed President Jeffrey Schmid, whose district hosts the Jackson Hole event, told CNBC on Wednesday that he isn't sold yet on a September cut and will need to see more data. In fact, only Governors Christopher Waller and Michelle Bowman have overtly signaled they favor a move next month. "We suspect that most FOMC participants who have expressed mixed feelings about cutting in September will be willing to support a cut if Powell pushes for one, but that he will think it more reasonable to make that case to them closer to the meeting with more data in hand," Mericle said. Key points to watch will be how Powell characterizes the labor market and his view on the inflation pass-through from Trump's tariffs. Shortly after the July Fed meeting, the Bureau of Labor Statistics announced meager job growth for July and even weaker gains for May and June. However, multiple policymakers have used the word "solid" to describe the labor market, indicating they see less urgency for rate cuts. Minutes from the July meeting indicated most FOMC members see a greater worry over inflation. Regional presidents Beth Hammack from Cleveland, Atlanta's Raphael Bostic and Schmid in Kansas City have expressed skepticism about the need for a September cut, a position that could rile Trump and upset the market. Powell "is likely to remain careful and not pre-commit in advance to a September cut, which could disappoint some investors," wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI. "Much of his speech may try to provide a steady medium- to longer-term framing for policy strategy and inflation control." That framing could be critical as well, and is getting little attention from Wall Street so far. Five years ago, against a backdrop of the Covid pandemic and protests over police brutality, the Fed adopted what it called "flexible average inflation targeting." Essentially, the framework change would allow the Fed to let inflation run hot if unemployment was higher, particularly for underrepresented groups. Over the next couple years, the Fed stood pat while inflation hit its highest level in more than 40 years. While most officials say the inflation targeting change did not play a role in the widely-held view that inflation was "transitory," the policy is likely to get a retooling, with the Fed returning to its previous inflation stance that included preemptive action if inflation appeared to be rising. "While the adoption of the new framework in 2020 was not the primary factor behind the Fed's delay and the substantial inflation overshoot, it contributed to this outcome," Matthew Luzzetti, Deutsche Bank chief U.S. economist, said in a note. "For this reason, we expect Powell's speech in Jackson Hole to highlight changes to the Fed's statement on longer-run goals that will reflect this reality. Specifically, we expect the speech to call for rolling back the 2020 modifications and restoring a primary role for preemption." Luzzetti added that the Friday speech "could arguably not come at a more important time" and he expects Powell to change his tone on the labor market. Powell's speech will be presented at 10 a.m. ET. The conference wraps up Saturday.
Yahoo
an hour ago
- Yahoo
Fed officials lukewarm on September rate cut as markets await Powell speech
By Michael S. Derby and Howard Schneider NEW YORK (Reuters) -Three Federal Reserve officials appeared lukewarm on Thursday to the idea of an interest rate cut next month, as investors geared up for U.S. central bank chief Jerome Powell's speech to the annual Jackson Hole conference in Wyoming. "I walk into every meeting with an open mind," Cleveland Fed President Beth Hammack said in an interview with Yahoo Finance on the sidelines of the three-day symposium, which is hosted by the Kansas City Fed. "But with the data I have right now and with the information I have, if the meeting was tomorrow, I would not see a case for reducing interest rates," Hammack said. Speaking on CNBC, Kansas City Fed President Jeffrey Schmid said, "I think we're in a really good spot and I think we really have to have very definitive data to be moving that policy right now." In a separate public appearance, Atlanta Fed President Raphael Bostic said he still has a rate cut penciled in for this year, but added that any forecast is surrounded by uncertainty and "I'm not stuck on anything." The three Fed officials spoke ahead of Powell's highly anticipated keynote address on Friday, which investors hope will offer firm clues on whether the central bank plans to cut rates at its September 16-17 meeting. Financial markets are betting that the Fed will lower its benchmark interest rate by a quarter of a percentage point at the meeting next month, and it's possible that Powell will in fact send such a signal. Unexpectedly weak July hiring data coupled with big downward revisions to hiring in May and June bolstered hopes of a coming reduction in borrowing costs. Futures markets currently put a 70% probability on a quarter-percentage cut next month in the Fed's policy rate, currently set in the 4.25%-4.50% range, Goldman Sachs researchers said they did not expect Powell's remarks on Friday "to decisively signal a September cut, but the speech should make it clear to markets that he is likely to support one." TWO-SIDED RISKS The challenge for Fed policymakers is that even as there have been signs of labor market weakening, which on its own would call for lower rates, inflation remains above the central bank's 2% target and could well go higher due to the Trump administration's aggressive hiking of tariffs on imports. Although the tariffs are widely expected to increase prices, that effect is only starting to be seen in the data. There's an active debate within the Fed as to whether any jump in inflation will be a one-off hit that can be ignored by policymakers, or the making of something more persistent. "My biggest concern is that inflation has been too high for the past four years, and right now it's been trending in the wrong direction," Hammack said. She added that firms have been trying to hold off on tariff-related price hikes, but that trend can only go on for so long. Hammack added that the full impact of the tariffs won't be known until next year. Some Fed policymakers, including Governor Christopher Waller, have argued that everything the economics profession knows about tariffs suggests the hit will be a one-time adjustment. But Hammack noted in her interview that "theory and practice can be quite different," underscoring her caution about a rate cut now. Atlanta Fed economists said in a report released on Thursday that "we find evidence for the potential of tariffs to touch off another bout of high inflation," in part because even firms that are not exposed to tariff costs are expecting stronger price pressures. Schmid noted in his interview that with inflation well above the Fed's target, officials would need to take into account how reducing rates now might influence public expectations. "I think we've got to be careful about what lowering short-term rates would do to the inflation mentality," he said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
