00:00 Speaker A
So we are looking for this rate reduction. Um, but probably more importantly, we’re looking at the guidance and we’re also looking at the dissents. So what will you be watching most closely on Wednesday?
00:13 Speaker B
Yes, so I think on the guide, two things. I would say the first is the statement. Do we see a change in forward guidance only explicitly there? Write something like the extent and time of any additional rate cuts, or say any additional rate cuts, so leave out that limit and time. Any would probably be a little more hawkish, uh because it implies that maybe they won’t cut it anymore. the range and time still imply some reduction at some point.
00:46 Speaker B
Uh but I mean look for that, right? And that would be more about the kind of Powell that gets an agreement among the Hawks because there are a number of Hawks on the committee now that are not super supportive of kind of further reduction rates. That dissent we got uh in October from Schmid, uh the regional president of Kansas City.
01:05 Speaker B
He will probably redistribute for another cut uh this meeting as well. Then on the downside, I’d say you get Myron’s dissent again, obviously in the dovish direction because he wants to cut faster. That’s what he’s done since he joined the FOMC.
01:18 Speaker B
And Schmid again, of course, will probably dissent in the hawkish direction, but I wouldn’t be surprised if you see another president of the regional vote uh join Schmid this time because of the voters right now, Ghoulsby, Collins, uh Musalem, they’re all somewhat on the hawkish side now.
01:38 Speaker B
So it’s going to be kind of a balancing act for Powell to convince these people that it’s okay to kind of keep cutting rates in this environment.
01:47 Speaker A
Stephen, obviously, um, they’re having a hard time coming to an agreement here. Um, and I think that people in your profession might be having a hard time grappling with both sides of the dual mandate as well. Um, is it an unusually difficult time to figure out whether inflation or the labor market is more acute right now?
02:08 Speaker B
It is. It’s incredibly difficult because the economy, they’re both basically shocked by supply shocks, right? And the Fed typically looks through supply shocks. So from the labor side, we are going through these changes in the immigration policy. This is leading to less growth in labor supply. And maybe we think at least that is a big reason why we are seeing the decline in recruitment. Now, of course, the unemployment rate has gone higher. There’s AI in there too to consider.
02:34 Speaker B
So there’s a lot of kind of these supply-side shocks going on. Then on the inflation front, you have tariffs, another type of supply shock. So you’re trying to examine this data and see, well, yes, one, I
02:44 Speaker B
I don’t have real time data to begin with due to the shutdown. I am working with September data. But two of the data that I have in hand, how much of this is demand-driven, how much of this is supply-driven, and then which one do I emphasize more, right? So it’s a very challenging time because when you have these kind of supply shocks, well, the risk is that you end up in a stagflation scenario.
03:08 Speaker B
And with the dual mandate of the Fed, a scenario of stagflation, it’s just very difficult to kind of figure out which of the two mandates you put more weight on, you know. So that’s where it’s a challenging time uh to get consensus. So it’s no surprise, I’d say we’re going to see more dissent. We will probably see more disagreements in the coming year.
03:26 Speaker B
uh since politics is still very difficult to navigate and figure out what the right focus is uh for the Fed these days.