Welcome back to another Fomc meeting! It is March 22nd expiration of coupon day and of course the day my daddy gets to talk on National Television Yes, that's Jerome Powell and we've got a lot of Divergence in expectations. In fact, we have 75 bips of Divergence between the high and low right now of what the hell we're gonna get, That's because we actually have no more research that thinks we're going to get a cut of 25 bips, we have about a 10 Wall Street Economists interviewed by Bloomberg Expecting a uh, a pause and then we've got about 89 sitting at a 25 BP You actually have some people thinking oh no, we're going to get 50. So you've got this massive spread. In terms of what people think we're going to get, the vast majority of people, including myself are can convinced we are going to get a 25 basis point hike.

Reasons are simple: Number one: the Federal Reserve does not want to signal that there is more financial or banking stress than there really is. They have other tools on their tool belt to handle that. Number two: they don't want to go back to the start stop policies of the 70s. They've made that very clear to us that they want to stay away from pausing and then re-hiking and pausing and re-hiking So we're likely to get 25 basis points.

now. Whether or not this will be the last hike that we get from the Federal Reserve we'll determine whether or not what we're experiencing now is a Federal Reserve U-turn or will we eventually be having a Federal Reserve. pivot? That's actually a big deal and we'll see in the Summary of Economic Projections where we end up going directionally. The Summary of Economic Projections is this document that will be released within the next few minutes here.

and what we're going to find is the Federal Reserve's expectations for the Fourth Quarter of 2023. We're going to compare those to their December projections. They last told us that we would be in. We would end up expecting data that was higher than this December data.

However, that was before the banking crisis. So now that we have a banking crisis, folks think there's a possibility that the Summary of Economic Projections could actually come in with lower projections. Now a lot of people debate uh, what the FED pivot or the FED U-turn ultimately ends up meaning and I have a simplified definition for us here in terms of what that means. So hopefully this can help us.

and I want you to look for hints throughout Jerome Powell's presser on exactly these topics because I think they're actually quite useful. So uh, here we go. This chart right here shows you fed pivots in very short sort of 60 second simplified information on the left you have when the Federal Reserve started cutting rates back uh, before we actually were comfortable with the idea of Fiat right? All of the inflation. The problems we had uh of 73 and 81 the Volca Recession were all related to leaving the gold standard Fiat uh, uh, inflation, price caps, and all the crazy policies of the 70s.

It was really only the pivots of 2000, 2007 and 19 that we had post a Fiat or or introduction of Fiat so to speak versus gold uh concerns. And in those eras, we've noticed that in 2000 and 2007, the FED cut rates and that actually LED stocks to fall more. But interestingly, the FED u-turned nearly at the bottoms of the markets in March of 2000, in February of 2009, and in March of 2020, and in December of 2018. those all ended up actually proving to be pretty decent with a little bit of volatility.

Pretty dang decent for stocks. And so in my opinion, a U-turn is when you have an official pausing of policy, a change in direction of policy, and a bailout because they broke something. That's what we had in 09. That's what we had in O3 that's different from just oh.

We're going to reduce rates because, well, we have to because things are starting to slow down in the economy, right? Reducing rates in 2000, 2007, 2018. Those were all responses to the market. Whereas what's happening now is the Fed is responding to something else. The FED is causing this recession.

The FED is in theory, the problem they printed too much money. Now they're trying to solve their own problem. It's kind of interesting. Uh, anyway.

so the first thing that we're going to do is we are going to make sure we get the uh, lower uh bound and upper bound right off to you right away. Then we're going going to go through the Fed's policy statement. All of this is expected to come out in roughly about 20 or so seconds. So we'll be covering this.

Keep in mind that we're looking for 4.75 4.75 is what we're looking for to get, Uh, a 25 basis point hike. I Highly expect it to be 4.75 Here we go. And it is 4.75 We got the 25 BP right along expectations. Not a surprise at all.

Shouldn't see much movement off that. Now we got to get the summary of Economic projections. That's the next big deal. Summary of Economic Projections: The statement is out.

Uh. implementation's out. Okay, 75 BP Tighter conditions of credit for households and businesses and expect them to weigh on economic activity, hiring, and inflation. That's actually a big deal.

Uh, that they're They're referencing tighter economic conditions that amplifies the Federal Reserve's hikes, right? I'm trying to get the summary of Economic projections, but that has not been posted yet. So let's just go ahead and go through their press release alone here. Uh, they say the U.S Economic system remains on resilient ground. We've got Uh forecasts Here we go: Median forecast: 5.1 They're keeping it stable at 5.1 on the SCP.

They didn't go up and they didn't They didn't go: down I Actually think that's bullish. Uh, they're keeping the same pace for reducing treasuries holding on mortgage-backed Securities So no change there. That's interesting. 5.1 I Really want to see that? Dot Plot Waiting for it to post on the website here.

This is all coming through the wire right now in terms of these, uh, these updates that we're getting so waiting for? Oh, there we go. projections are out and the projections, in my opinion, are the most important. And then we'll go through the policy implementation statement as well. So uh, here the summary of economic projections.

Wow. I'm surprised. Look at that folks. They kept the projection the same.

They actually think they're gonna, there's their higher for longer. Oh okay, that's the hire for longer going up to 4.3 instead of 4-1 Okay, oh look at that. They actually moved this slightly closer to recession in 2023. Usually they do not go under uh 0.5 That's interesting.

Then, they. they're actually keeping us out of a recession in 24 and 25 Unemployment rate Four Six Pce inflation. and you can see the previous estimates here. They did reduce Uh GDP.

both for 23 and 24 were reduced so lower GDP and 23 by a tenth of a percent lower GDP And 24 by uh, uh, four tenths of a percent. That's 400 basis points Unemployment rate. They are refusing to Signal Any kind of increasing pain in the unemployment rate. Uh Stocks By the way, seem to be liking that This: This is.

uh, this is kind of what we wanted. This was my best case Scenario was 25 and dovishness. Uh, now I Thought this might be a little bit more dovish right here, but that 5-1 on the median is a little higher than I Thought: Look at this folks. They're keeping inflation expectations for Pce stable slightly higher for 2023, stable into next year Core slightly higher, but mostly stable here.

No Paul Volcker. No runaway inflation. What were the ranges that we got for GDP Uh oh oh. Look at that central tendency right here.

Somebody's actually knocking on the door of recession. Look at that range right there. Change in Real GDP 0 to 0.8 That's a little bit of a red flag. That's a recessionary red flag right here.

Look at that range. There's your recession there. it is. Uh, but uh.

we also had that range projected last time as well. so one of them is actually getting us a little bit closer to out of recession. Whereas previously they also thought thought we might see that recession. The range is sort of the low versus the high.

right. Uh, the the median is is a type of average, right? It's supposed to represent the middle. Let's look at the Dot Plot What do we got for the Dot Plot Wow. They're actually a whole lot higher than my thought.

They're all consistent here for 2023. Q4 pretty much all staying above that five percent line now. I Want to compare that to what we had in the last Dot Plot So let's go to the last stop plot which was right here and let's go here. Kevin's estimates were wrong.

Uh, so I'm gonna erase these so that looks pretty similar. Uh, you've got I Mean you had two dots below for 2023? all of them above with two dots as high as about 5.675 going over here? Yeah, you've You've really just Consolidated around that five one level. So they're sending a signal here that we still have uh, one or two hikes left in us. So this is really telling us that, uh, we're gonna get our March 25.

We're not going to go down. We're not going to pause, yet. we have to deal with what's remaining to be elevated inflation. Uh, I would say this is this is, uh, no signal of stress in banking really.

We are probably setting up for a May 25 as well. This will take us to Uh five percent right on the lower bound and a five on the lower bound is probably in line with that tendency of Uh 4.1 percent. So the Federal Funds rate being at 4 or 5.1 Rather, it sits right there in the middle of one more hike in May and then done. That's about where we sit.

So one more. Before Dawn I Think it's too soon to call for a pause? I Expect Jerome will tell us he's being data dependent. Uh, that's not going to be much of a surprise at all. Uh, looking at uh, yep, the dots moved up a little little bit.

The FED Let me see really quick what we what else we have here. What are the suits saying? Like most economists, the FED does think that banking turmoil will affect the economic. Outlook Recent developments are likely to result in tighter credit conditions for households. Yep, we expected that.

You got Tesla popping off a little bit right now. Uh, jumping up about one percent. Looks like most stocks are trying to pump a little bit. Let's fix this here.

Actually, let me try this. I have a new button here. Let me see if I break something by doing this. Oh, that looks good.

look at that so we could keep that up while talking. Uh, although I should. whatever. Okay, anyway, so let's a little more adjustments to do.

But anyway, I'm playing with this new board. sorry about that you. You'll get to experience it a whole lot more if you want. If you join the courses linked down below, you get all those private live streams.

All right. Fed remains highly attentive to inflation risk, using interest rate tools to deal with inflation, using balance sheet to address Financial stability issues. That's exactly what I thought they would say that. Look, we're gonna keep going 25 BP because we got to deal with inflation.

But guess what? We got a whole tool belt baby. Oh, you got some inflation. We got some pepper spray for you. Oh, Balance Sheet problems.

We got some handcuffs for you. We got a whole tool belt. You want to keep trying us I Think that's what we're gonna get from J-pal here. Initial take on this per Wall Street seems to be slightly dovish.

uh does look like uh, risk assets are moving up a little bit. usually what happens by the way and I just want you to prepare for this. Usually what happens is we get a W Okay so often and not in this case because so far we're going up. but often we actually, uh, go down a little bit.

I mean maybe I Guess we still have 23 minutes. but oftentimes we go down. Going into the the press conference as soon as the Press event begins. Right here, stocks hit a little Peak then as he's talking, they tend to go down and then and this is an average over the last seven instances.

What the stock market the S P 500 has done. and then towards the end of the day, they end up back up. So this is usually the kind of volatility pattern that you get per the average of the last seven meetings from the FED. But anyway, what do they say here? Inflation remains elevated.

modest growth. They did take us a little bit closer to recession. Recent developments are likely to result in tighter conditions for households and businesses and way on economic activity, hiring, and inflation. Hey, well, this is kind of what they want.

A little bit of a Slowdown in hiring. Because of the uncertainties, the yield curve has steepened Uh markets. Definitely see this as dovish. The committee seeks to achieve maximum employment and inflation at a rate of two percent over long term And support of these goals, the committee has decided to raise the target range for the FED funds rate to 4.375 to 5.

The committee will closely monitor incoming information and assess implications for monetary policy. The committee anticipates that's some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive enough to return to two percent over time. Yeah, well, if you refer back to the 80s, over time was 20 years. in determining the extent of future Uh increases increases in the Target rate, the committee will take into account the cumulative tightening.

The lags of which we've already seen Future increases is very interesting because so far they're really only pricing for another 25 BP. So uh, we'll see what happens there. In addition, the committee will continue reducing its Holdings of Treasury so no change over here and second page. Uh, nothing.

really. It looks like this was unanimous. Voting for monetary policy actions were all everyone and the committee's assessment will take into account a wide range of information, including readings on labor market inflation pressures blah blah blah blah. Okay, Fantastic.

So we got the 25 that we were expecting. Markets taking this as dovish though usually right into the press. or we have, you know, a little bit of a Slowdown so that's not uncommon. Stock market seems to do that in a row.

Uh, 89 out of 100 economists were looking for 25, so this is really no surprise. A pause would have sent the wrong signal. I Think overall this SCP is not as dovish as the best case scenario, but it's decently dovish. I Was looking for a little bit of a drop on that uh, that Fed funds rate projection.

So unfortunately, it does look like they're hitting us with probably another one to two raid hikes. Uh, if you look at their statement and you hear them say, uh, increases and implies lies, two more. And if you look at these projections here, it implies one more so one one to two more 25 Bpers. Uh, they are acknowledging the tighter Financial conditions, which that's what's leading to that softening in Real GDP and uh, the central tendency For real GDP Uh, Fed's message is clear here.

This is, uh, these are now the Wall Street suits. So let's say what they have to say here: Wall Street suits. The Fed's work isn't done. However, the median projection as to where rates will be year-end does show that officials are paying attention to stability concerns.

yes, in the fact that they haven't lowered it. or it's optimism on inflation. Either way, dovish overall here. Bond yield steepening.

Looking for a little bit Here the language on ongoing increases implies some ongoing uh tightening. Yep, no kidding. Fed will continue. and we read through that already.

Okay So this gives you an update on what we got in terms of the 25 BP my pay takeaways from this All is normal. Okay, big bottom line takeaways before the FED processor Big bottom Line: takeaways for the average: American The average investor Whomever: Okay, big bottom line takeaways here. What do we got? We got number one: No. Paul Volcker.

There's no Paul Volcker. So if you're still sitting around really thinking the stock market's gonna plummet on a pivot, you haven't listened to my explanation on a pivot. We've explained that many times before. I Really don't want to go through it again? Uh, basically there's a pivot and then there's the FED U-turn Generally, we want to invest where the FED U-turn is and U-turns usually coincide with not only a big mix in policy, but also uh, of bailouts which we've started seeing some of those bailouts.

So are we getting closer to a U-turn I Don't know, but we haven't seen any kind of Fed pivot yet. Uh, and honestly, I hate saying the phrase. but remember folks, this pivot will occur when inflation ends. The market is worried about inflation not going away.

Well, as soon as the FED u-turns and changes directions, it it means they have accomplished killing inflation to their satisfaction. The FED is their problem in the cycle. In 2000, 2007, 2018, the FED wasn't the problem. it was Tech it was real estate and it was a lack of inflation.

Those were the market problems. Before now, the Fed's actually having to respond to too high inflation. So the Fed's creating its own problem. When the FED stops fighting its own problem.

that's a great signal. That means they've accomplished their goals. Uh, at least to some extent. So anyway, I'm pretty happy about that.

Uh. Overall: I Think this is, uh, this is, uh, kind of a long expectations. You know we're not going to get a super Dove here. We still got work to do I Was hoping it to be a little bit more dovish, but it's dovish enough.

I Think to uh to be satisfying to markets, it should give you confidence that we're not looking at Paul Volcker. So that's number one. Number one. No.

Paul Volcker number two. Closer to potentially that that accomplishing the mission right? Uh, number three. We did get the Federal Reserve Acknowledging that yes, there are going to be issues because of the banking crisis. Those issues because of the banking crisis are specifically going to relate to tighter credit conditions.

We've been covering those regularly. Those are likely to lower earnings per share for companies in the future. Specifically, in my opinion, spy companies S P 500 companies your Consumer Staples your your Industrials wouldn't surprise me. so uh Jerome Powell speaks obviously soon, but uh, for me, average person here? No.

Paul Volcker is bullish. Uh. overall relatively dovish statement: Yes, still potentially looking at one to two hikes. Uh, and uh.

we'll see what Jay Powell has to say. Now keep in mind how the market moves going into J-pow talking. I'm going to make this very, very clear: out of the last seven times that we've had these meetings, the average: the way that the market has moved is initially up. Then you get a Down and then you get an up again.

right when Jerome Powell speaks. Then you get a down during a speech and you end the day up. That's usually how the pattern goes. That doesn't mean this time can't be different, but that's typically what you see.

Uh, so I think this is fantastic now. I Know that some people say oh, rate hikes are not bullish I I mean I I The fact that some people were actually thinking there would be a pause here blows my mind. That would be more concerning. That would be concerning that something serious is actually wrong.

Rate hikes at 25 are, in my opinion, very bullish because they mean nothing broke to an extreme level and we're not visiting Paul Volcker. If we were getting rate hikes to the tune of one to two percent 75, BPS maybe over and over again or 100 BPS that would be bearish. A pause in this case that would have been bearish. I mean like I Don't know how you could say that a 25 BP is not a fun is not a fantastic uh result.

So far again, Jay Powell will be talking soon. Uh, but this gives us a little bit of a heads up here in terms of uh, a summary of so far what the statements show. again trending a little bit closer to uh to recession. but uh, the FED refusing to really, at least in aggregate, believe uh, that we are knocking on the door.

Recession: Remember those estimates are an aggregate estimate of everyone. It's not like they collude on those, although they they might anyway. Uh, and uh. The other thing to remember is today's coupon expiration day.

so get the best price ever. Link down below: Prices go up over time and you get a price match guarantee. Uh, in the event they were lower for some reason in the future. All right, let's uh.

now listen into CNBC what do we got over here? I Guess my final observation here is I Think the yield curve is telling us that you know going forward. You know, a few meetings, even a few quarters. You know there is: a disinflationary process underway. Uh, you know that's likely to be accelerated by the tighter Financial conditions from the credit crunch? Um, it's a matter of time.

before that, you know it's really apparent and kind of taking hold and the FED acknowledges it. But I think that's what the yield curve is telling us is that this inflationary process is underway. It's a matter of time. Um, and that's why yields are lower in the future.

at least price in markets. All right, that's down 10 points right now. S P is still positive. We'll leave it right there.

We know the real drama is often, at least for the markets in the press conference. Thank you all so much for your time today. We appreciate it and we'll hear from Sharon Powell himself at 2 30 just about 13 minutes from now. We'll take you there live as soon as it begins.

But first we'll bring back. Let's go to Bloomberg see if they're away. Uh, flip around over here. You buy a tenth of one percent on the NASA I Can't buy about a half of one percent if you check out the bond market that most sticks down.

10 11 basis points to the front end on a two-year right now. 4.05 8 on a 10-year down. Eight or nine basis points at three fifty two dollar weakness Euro Strength Euro's been gaining now for the best part of a week. Euro Dollar: 108 43 Positive By about seven tenths of one percent.

Then Swan's still with us with us as well. Now it's Matt Hornback Global Head of Macro strategy at Morgan Stanley Matt You've had about 16 17 minutes to digest it. What stands out for you? Well, John thanks for having me on and yeah, thanks for giving me some time to digest this. I I Think when I look at the message from the FED via the SCP and their decision to hike rates, What What strikes me is how they have balanced Financial Stability concerns against concerns about stickier inflation and the way they've done it is they've told us they're going to hike less but cut later, hike less, cut later.

That's the way they've decided to balance these two concerns and that seems like a pretty rational decision. So I I Think the market should feel comfortable with this. Uh, you know, the Bond market of course, is now going to have a very difficult time taking out these rate cuts that are priced in through the balance of this year. I Would not expect the market to take those rate cuts out in the near term and it could very well price in more.

Cuts If the data deteriorate from here, well, Matt Let's talk about that. We're data dependent I Hear it all the time at the start of the year. What happened was exactly what we're talking about. The spread between what the Fed was, signaling how the market was.

Pricing Market was saying rate Cuts Recession's coming. Then the data just pushed the market to reprice encouraged by the communication from the Federal Reserve Give them what's developed in the last couple of weeks. It's a new risk. It's Financial instability Matt With that in mind, how sensitive will we be to traditional indicators CPI Payrolls when it comes to revising those rate cuts? Yeah, I mean I I Think that investors are going to Discount data that looks fine and overweight data that doesn't look fine.

Um, and so you know. Ultimately, if you have a you know, uh, not an unemployment claims number that prints two hundred thousand, uh, pretty much in line with the recent Trends people. Will you know Think you know what? that just hasn't felt the impact of what's going to come versus if unemployment claims surprises to the upside by 50 000. All of a sudden, investors are likely to read that as recession is at our doorstep.

so you know that will be the bias of how I think people see data for the next couple of months. And there's also this question of the terminal rate and where it ends up. The fact that it doesn't come down as quickly as people previously thought Diane raises this issue of whether the market is wrong and thinking that the last two weeks created an environment for even tighter Financial conditions that would drag down growth the way that Priya Misra and Rich Clarita seem to be thinking much more than people thought as well as where the FED can cut rates to eventually. Well, I do think that it is an issue I Think the FED does risk at this point in time, even though all the data to date has been hot and strong.

we also know all the seasonal factors that have contributed to that are going to reverse at some course point in time. As we get into Spring, we've got another hot Pce number coming out that the FED is searing down and so they don't want to look weak in front of that. That said, I do agree that we're going to see some weakening and we're actually going to see like I'm worried about that. the employment situation is going to deteriorate.

Not a cliff event like we saw in 2008, but a slow erosion. And that's what the FED is starting to look at is they're sort of looking at eroding inflation slowly. I Think that's a very nice way of thinking about it. It's not clear that that's exactly how it works in reality.

We're now talking about a much more of a straw that breaks the camel's back kind of moment that we could see out there. not a cliff event, but a much deeper recession than the FED would actually desire. And I think that's the challenge for the FED is how does it sort of say that it's allowing for that tightening of financial conditions, but also in allowing for it? Is it going to be too much? Now on the other side of it and we don't, We want to cool the economy. The Fed's goal is not to send the economy into a deep freeze.

Listening today and speak, it feels like the balance of Risks has shifted. Matt I'd Love you to weigh in on how the balance of risks has shifted. how significantly remember drone pile is in about nine minutes? Well, I mean I I Think the balance of Rick Yeah, Come on. Bloomberg Get it together.

Sorry. Go ahead. Matt Go ahead. yeah.

So I I mean the way. I I see the the balance of risk. They've clearly shifted to a weaker outlook for the economy. I Think the FED is acknowledged that and in not so many words.

but uh, you know the press conference will be an opportunity for uh for Powell to uh to give us a different spin. But nevertheless I think the balance of risks have shifted to the downside. Oh man. I mean how many times have I explained this one? Okay, somebody here writes: how do you define a bailout I Feel like liquidity support isn't a bailout.

A bailout is when investors are back. That's what politicians are trying to make you think. Listen, a bailout is when the Federal Reserve comes in and backstops lending and backstops people's losses. I Don't care if that's people who have car debt, home loan debts Bank Deposits investors I Don't care who it is if somebody gets a big injection of capital to shore up their business I Call it a bailout.

And the reason Politicians today If you listen to Too Much CNN and this is what you'll think. The reason you think politicians are telling you this Bank liquidity facility is not a bailout is because they say, well, today, taxpayers aren't on the hook. Well, guess who backstops the bank term funding facility? The Treasury Department The Treasury Department has a facility that backstops this And guess how that facility is funded through Appropriations Where do Appropriations come from taxpayers? So in other words, taxpayers took money, threw it into a bucket. The Fed's like, okay, well, you'll We'll use that bucket as our guarantee for bailing out these toxic Banks So if they default on our loans, well, then taxpayers will pay for it.

So yeah, it's technically true. the taxpayers aren't on the hook. But let's be clear: it's a bailout. and quite frankly, it is taxpayers bailing out the rich in Silicon Valley Now, yes, to some extent, maybe it won't cost any money.

Maybe the temporary sort of borrowing of taxpayer money for bailing out. Uh, the depositors is a way of saying hey, if we could short people up with some extra confidence, now, well, then maybe taxpayers won't end up having to pay anything. That's entirely possible. That's totally possible.

But uh. but to make an argument that somehow you know these liquidity facilities aren't the The: FED Uh, swooping in and and bailing out troubled assets is a joke. Capitalism 101 If Bank fail depositors, lose money. Central Bank comes in with bailout to prevent people from losing money.

They don't care if it's shareholders or depositors. You being a depositor is you voting for The the institution that you're trusting. That's the way it works. Now, our government has sort of rigged the way This works a little bit by introducing FDIC insurance, right? that is.

That is basically like a social safety net, right? But uh, you know that's really a topic for a different discussion. Oh, I keep going here while we wait for Powell if he thinks the financial instability of them, but you assume everybody, depositors or experts in choosing Banks Dude, that's the stupidest thing ever. That's like saying that everyone who buys a stock every what you're saying is if you're trying to tell me Bank depositors are too stupid to pick a bank, you're telling me they should never buy a stock in their life because they're too stupid to pick companies. And you know what? They may be too stupid to pick companies.

That's okay. But then you lose money because you made that choice. Don't tell me you didn't walk into a bank and realize that if you deposit, have deposits in excess of 250k, you didn't know there was a risk. You could lose that money that I Don't believe that argument whatsoever.

It is like pure stupidity. Anyway, we'll keep going. Was there just to finish on Euro Dollar 108.50 positive by three quarters of one percent. So that's a stronger Euro a weaker dollar with a still Dan Swanker KPMG Matt Hornback and Morgan Stanley down history.

We're always talking about history and this Fed chair not wanting to be burned, wanting to be Volca I Wonder what history will look like when it comes to this decision today. Whether his biggest risk in this news conference is being burned or being Trisha and Hiking into a much bigger mess. Well, that certainly is a risk out there. I Think what the Chairman is going to do is say how many options they have on the table and how closely they're watching everything, including including the treasury market.

We saw the short selling that pushed the treasury market liquidity way down to March 2020 levels in the wake of recent events and I think that's very important we're going to CNBC Listen to Jay Power Standard Deviation. They're killing us with a commercial. What is this crap? Dang it all right? Well, J-powell should be here any minute. We're about three minutes away from getting Jerome Powell rug pulled and that's either going to be fantastic or it's going to be terrible Technically, based on what we're told.

uh, from uh, from smart people who make averages out of the last seven times that Jay Powell has spoken, the socks temporarily peek at the beginning of the pressure, faltering it, and then rally out of it. Now we'll see what happens, especially with all the zero day trading and options that's going on right now. It should be really entertaining, but anyway, we're about three minutes away, so I'm curious to see how BTC is reacting to all this right now. We've got uh Nvidia of 4.4 and phase up 3.3 percent.

Gme is up 38. you've got BTC USD is 28 550. Wow, that's actually pretty good for BTC right there. Reason for that uh is once you're over that 282 level, you're starting to ride on a Fibonacci And I mean who doesn't want to ride on a fibby? I mean that just sounds awesome.

Uh so uh yeah. anyway. um so um uh yeah. let's get ready for J-pow here now.

Uh, look uh. if if for some reason you haven't been convinced yet to check out the programs on building your wealth, go to. uh. you send an email to Kevin me.

Kevin.com McKay will take care of you and we'll give us a reason why and he'll send you. He'll send you something special. send over an email to him anyway. let's listen in over here.

you know we're back to where we started. What do you think I would say? It's an event. it's largely as expected event. but I think the market reaction at least initially is an acknowledgment that the difference between a pause and leaving open the possibility of a hike down the road or a hike today and then becoming day and independent and more flexible as they did.

not. Tremendous. Not a huge difference in the market had priced it okay I would imagine uh chair Powell might not want to make much news in the next hour. He may not succeed in that effort, but it would seem to me he wouldn't want the market to just race ahead and say the FED is done.

Fed is our friend again and they also wouldn't want the reaction that said uh oh, policy mistake. they're over tightening they're you know, uh, kind of insufficiently attentive to the financial stability risk. So to me how he characterizes the level of alarm about banking stability might be the thing to to look for, right? I What would you be watching Mike as the the press conference begins and then in kind of the days to come as this thing shakes out well. it's interesting the market has in this little uptrend.

we were at 3 800 in the S P at the low a week ago. Monday that was down six or seven percent from the couple days before Svb went down, so we had a little pullback. We've had our comeback. uh, and now it's about, uh, kind of equal footing that we're on right now.

I Do think he might get pressed about the Dot Plot I Don't think the dot plot's terribly important, but there's some inconsistencies there, right? Whoa. Really, it might be a little bit lower than we anticipated, but it's much higher than it is right now. Uh, and yet still. we might be.

uh, hiking and and inflation's coming in a little hotter than we thought. Uh, but still. we're just talking about being data dependent. I Think this is the way you get that muddled message near the end or transition point of a tightening cycle that's transitioning into something else.

Is that what this feels like to you? that we are coming close to the end of this tightening cycle? Yeah. I Think there's a general sense that what the FED really does is get rates up as fast as possible, as fast as the market allows it, to the general Zone that feels right for where we are. uh, and then wait to see if there's some kind of adverse reaction. We got one.

uh, and you know there's some Elegance to doing an exact 12-month tightening cycle. The upper end of the range now is five percent. Maybe you can soon declare some sort of Victory on that. And then and then when you look into uh, the forecast for 2024 and you should be coming out any second now, presters, he's like, never late, So let's go.

Mike Will defer to him right now. Thanks here he is with his papers I Told you he'd come out with papers he always does. Before discussing today's meeting, let me briefly address recent developments in the banking sector. In the past two weeks, serious difficulties at a small number of banks have emerged.

History has shown that isolated banking problems, if left unaddressed, can undermine confidence in healthy Banks and threaten the ability of the banking system as a whole to play its vital role in supporting the savings and Credit needs of households and businesses. That is why, In response to these events, the Federal Reserve working with the Treasury Department and the FDIC took decisive actions to protect the U.S economy and to strengthen public confidence in our banking system. These actions demonstrate that all depositors, savings, and the banking system are safe with the support of the treasury. The Federal Reserve board created the Bank term funding program to ensure that banks that hold safe and liquid assets can, if needed, borrow reserves against those assets at par.

This program, along with our long-standing discount window, is effectively meeting the unusual funding needs that some banks have faced and makes clear that ample liquidity in the system is available. Our banking system is sound and resilient with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe And sound. In addition, we are committed to learning the lessons from this episode and to work to prevent episodes from events like this from happening again.

Turning to the broader economy and monetary policy, inflation remains too high and the labor market continues to be very tight. My colleagues and I understand the hardship that high inflation is causing and we remain strongly committed to Bringing Inflation back down to our two percent goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not work for anyone in particular.

Without price stability, we will not achieve a sustained period of long of strong labor market conditions that benefit all the U.S Economy slowed significantly last year, with Real GDP rising at a below Trend pace of 0.9 percent. Consumer spending appears to have picked up this quarter, although some of that strength May reflect the effects of swings in the weather across the turn of the year. In contrast, activity in the housing sector remains weak, largely reflecting higher mortgage rates, higher interest rates, and slower output growth also appear to be weighing on business. Fixed investment Committee participants generally expect subdued growth to continue, As shown in our summary of economic projections.

The median projection for Real GDP growth stands at just 0.4 percent this year and 1.2 percent next year, well below the median estimate of the longer run normal growth rate. And nearly all participants see the risks to GDP growth as weighted to the downside. Yet, the labor market remains extremely tight. Job gains have picked up in recent months with employment Rising by an average of 351 000 jobs per month.

Over the last three months, the unemployment rate remained low in February. at 3.6 percent. The labor force participation rate has edged up in recent months and wage growth has shown shown some signs of easing. However, with job vacancies still very high, labor demand substantially exceeds the supply of available workers.

Fomc participants expect supply and demand conditions in the labor market to come into better balance over time, easing upward pressures on wages and prices. The median unemployment rate projection in the SCP Rises to 4.5 percent at the end of this year and 4.6 percent at the end of next year. Inflation remains well above our longer run goal of two percent over the 12 months ending in January Total Pce Prices rose 5.4 percent, excluding the volatile food and energy categories core PC or excluding excluding those core Pce prices Rose 4.7 percent in February The 12-month change in the CPI came in at six percent. In the change in the core CPI was 5.5 percent.

Inflation has moderated somewhat since the middle of last year, but the strength of these recent readings indicates that inflation pressures continue to run. High The median projection the SCP for total Pce inflation is 3.3 percent for this year, 2.5 percent next year, and 2.1 percent in 2025.. the process of getting inflation back down to two percent has a long way to go and is likely to be bumpy. Despite elevated inflation, longer term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.

The Fed's monetary policy actions are: Guided By our mandate to promote maximum employment and stable prices. For the American people, my colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of Essentials like food, housing, and transportation. We are highly attentive to the risks that high inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our two percent objective. At today's meeting, the committee raised the target range for the Federal Funds rate by a quarter percentage Point bringing the target range to four and three quarters to five percent, and we are continuing the process of significant, significantly reducing our Securities Holdings Since our previous Fomc meeting, economic indicators have generally come in stronger than expected, demonstrating greater momentum in economic activity and inflation.

We Believe However, that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. It is too soon to determine the extent of these effects, and therefore too soon to tell how monetary policy should respond. As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to coil inflation. Instead, we now anticipate that some additional policy firming may be appropriate.

We will closely monitor incoming data and carefully assess the actual and expected effects of tighter credit conditions on economic activity, the labor market and inflation, and our policy decisions will reflect that assessment. In our SCP each Fomc participant wrote down an appropriate path for the Federal Funds rate based on what that participant judges to be the most likely scenario going forward. If the economy evolves as projected, the meeting participant projects that the appropriate level of the Federal Funds rate will be 5.1 percent at the end of this year, 4.3 percent at the end of 2024, and 3.1 percent at the end of 2025.. these are little changed from our December projections reflecting offsetting factors.

These projections are not a committee decision or plan. If the economy does not evolve as projected, the path for policy will adjust as appropriate to Foster our maximum employment and Price Stability goals. We will continue to make our meeting decisions meeting by meeting. Based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, we remain committed to Bringing inflation back down to our two percent goal and to keep longer-term inflation expectations well anchored.

Reducing Inflation. is likely to require a period of below Trend growth and some softening in labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. To conclude, we understand that our actions affect communities, families, and businesses across the country.

Everything we do is in service to our public mission. We at the FED will do everything we can to achieve our maximum employment and price stability goals. Thank you I Look forward to your questions. All right Q A Now I Can't believe he didn't mention the coupon code expiring today.

What is this? Everybody knows You can email me at Kevin Mbkevin.com that the recent stress that we've seen and you've alluded to is contained at this point, and that deposit flight among mid-sized lenders in particular has ceased. Thanks! So I guess our view is that the banking system is sound and it's resilient. It's got strong Capital liquidity. We took powerful actions with Treasury and the FDIC which demonstrate that all depositors savings are safe and that the banking system is safe.

Deposit flows in the banking system have stabilized over the last week. Um, and the last thing I'll say is that we've undertaken, we're undertaking a thorough internal review that will identify where we can strengthen supervision and regulation. Okay, uh, just a quick follow-up I Mean given all of the stress and the uncertainty that you've also alluded to in the statement, how seriously was it was a pause considered for this meeting Zero. We considered.

Um, we did consider that in the Days running up to the meeting and you see the decision that we made which uh, I'll say a couple things about. First, it was supported by a very strong consensus and I'll be happy to explain why. And really it is that the the intermediate data on inflation and the labor market came in stronger than expected. And really, before the recent events, we were clearly on track to continue with ongoing rate hikes.

In fact, as of a couple of weeks ago, it looked like we'd need to raise rates over the course of the year more than we'd expected at the time of the SCP in December the time of the December meeting, we are committed to restoring price stability and all of the evidence says that the public has confidence that we will do so that will bring in inflation down to two percent over time. It is important that we sustain that confidence with our actions as well as our words. So we also assess as I mentioned, that the events of the last two weeks are likely to result in some tightening and credit conditions for households and businesses and thereby way on demand on the labor market and on inflation. Such a tightening and financial conditions would would work in the same direction as rate tightening in Principle.

As a matter of fact, you can think of it as being the equivalent of a rate hike or perhaps more than that. Of course, it's not possible to make that assessment assessment today with any Precision whatsoever. So our decision was to move ahead with a 25 basis point hike. uh and to change our guidance as I mentioned from ongoing hikes to uh, some some additional hikes, maybe some policy firming may be appropriate.

So going forward as I mentioned in assessing the need for for further hikes will be focused as always on the incoming data and the evolving Outlook and in particular on our assessment of the actual unexpected effects of credit tightening. So let's talk about additional firming is Basically, rather than saying ongoing hikes in this statement, they changed it to additional firming. That's what he's referring to pieces and Firming Um, does firming imply a rate increase per se? Or could policy firm Without You increasing rates Good question, good question I Think it's it's meant to refer to our policy rate. Really I would focus on on the words may and some as opposed to ongoing ongoing.

So we we clearly were what we were doing. There was taking on board the on trying to reflect the uncertainty about what will happen. I Mean it's possible that this will turn out to have very modest effects. These events will turn out to be very very modest effects on the economy in which case and inflation will continue to be strong, In which case the you know the path will look, uh, might look different.

It's also possible that this potential tightening will contribute significant uh. tightening in credit conditions over time and and in principle, if that that that's that means that monetary policy may have less work to do. We simply don't know. Uh, So do you have concerns at the recent that Reiki did today could further exacerbate the problem in the banks? No.

I mean we're with our monetary policy. We're We're really focused on macroeconomic outcomes. In particular, we're focused on on this potential credit tightening and what can that produce in the way of tighter credit conditions. I Think When we think about uh, the situation in the banks, we're focused on our on our financial stability.

Tools In particular, uh, our lending facilities. uh, the the debt. uh, sorry the discount window and also the new facility. The Wall Street Journal uh chair.

Powell In your testimony, two weeks ago, you had indicated you thought the terminal rate would be higher. Obviously, that was before the stress in the banking sector. and I realize there's a lot of uncertainty, but can you? can you explain it all to what extent your forecasts or those of your colleagues or those of the board staff Incorporated Today, a material tightening and credit availability because of the stress in the banking sector. Or are you waiting to see it in the data before you incorporate uh that potential tightening into your forecasts.

So you know we've just come from an Fomc meeting and uh, you know the the people who write the minutes will be very carefully counting. but I'll tell you what I Heard what I heard was significant number of people saying that they anticipated there would be some uh, some tightening or credit conditions and that would really have the same effects as as our policies do and that therefore they were including that in their assessment and that if that did turn out not to be the case, that in principle you'd need more rate hikes. So some people did reflect that Uh in their in their Uh from in their SCP forecasts I think there may also just have been. Remember this is 12 days ago.

You know we're trying to assess something that just is so recent and it's people you know. it's very difficult, there's so much uncertainty so December was a good place to start and we wound up with. We wound up with uh, very similar outcomes for December and it you know in a way the the early the data in in the first part, the first five weeks of the intermediating period pointed to Stronger inflation and stronger labor markets so that pointed to higher rates and then this. this latter part kind of uh, the possibility of of uh, of uh, credit conditions tightening really really offset that Effectively to follow up, have you considered all whether your primary tool the funds rate is going to be enough to sustain the kind of tighter Financial conditions that you believe will be necessary without doing significant damage to the banking sector? Have you, for example, considered changing reserve requirements, selling assets out of the system open market account as a way to better achieve entire Financial conditions that don't, uh, accelerate deposit erosion for example from Banks you know we know that we have other other tools in effect, but no, we think our monetary policy tool works and we think, uh, you know many, many banks uh, our rate hikes were well telegraphed to the market and many banks have managed to to handle them.

They like their rate hikes. hi Victoria Guido with Politico I want to um you you along with the FDIC in the treasury The FED board decided to invoke the systemic risk exception um, to allow uninsured depositors to be protected at these two Banks and I was just wondering if you could speak to why that decision was made. Was it purely a confidence issue or where was there a concern that there would be some sort of economic contagion or financial contagion from the failure of these Banks The issue was really not about those specific Banks but about about the risk of of a contagion to to other Banks and to the financial markets more broadly that was the issue and then can you also just a follow-up? Can you speak to the role that you will be playing in the Fed's internal investigation on its supervision and regulation? So Vice Chair Bar is is of course leading that review and uh, he's responsible for it in his capacity. It's Vice year for supervision.

There's always one. There's always one person who asked these questions I realized uh, you know right away that that there was going to be a need for a review I mean the question we're all asking ourselves over that first weekend was how did this happen and uh, so um, what we did was uh, early Monday morning we sat down and said let's do this and he's he was obviously going to lead it in his capacity, right? So I don't you know my uh, my role was to announce it and uh, I I get briefed on it. but I'm not involved in in the work of it all right? Tara pal uh Howard center from Reuters So um I want to go back to your February press conference? You mentioned the word disinflation I believe, uh, nine or ten times. A process that you felt was uh, uh, uh I forget the word you used but gratefully underway or something like that is disinflation still occurring in the U.S Today Yes, I mean what actually happened Howard was I got the question 12 times.

So it's a maybe it's a feature, not a bug, but uh so. but yeah, absolutely. The Pro: Absolutely the same. The story is is intact so it's really three parts, right? Goods Inflation's been coming down now for six months.

It's proceeding more slowly than we would have liked, but it's certainly proceeding. Um Housing Services is is really a matter of time passing. We continue to see the new leases being signed at much lower levels of inflation. So that's 44 of the of the core Pce index where you've got a story that's ongoing.

Where we didn't have in February and we still don't have now is a sign of progress in the non-housing uh Services sector. and that is, um, it. You know that's just something that we'll have to come through through softening demand and perhaps some softening in labor market conditions. We don't see that yet, and that's that's of course, 56 percent of the index.

So the story is pretty much the same. I Will say that the inflation date that we got to your point really pointed to Stronger Inflation if I could follow up on that. I Was curious why you don't see more coming from the credit crunch because it seems to me that's something that you'd actually, uh, welcome to a degree and uh, expect um, and are you not seeing more coming from that because you don't know or because you just don't want to have another round of wishful thinking. So it's really just a question of not knowing.

at this point. There's a great deal of literature on the connection between tighter credit conditions, economic activity, hiring, and inflation. Very large body of literature. The question is how significant will this credit tightening be and how how sustainable it be.

That's that's the issue and we don't really see it yet. It's so so. People are making estimates. You know, people are publishing estimates and it's but it's very kind of rule of thumb.

uh, guesswork almost at this point, but we think it's it's potentially quite real and that argues for you know, being alert as we go forward as we think about further rate hikes for we'll be paying attention to the actual unexpected effects from that. Christina Hi chair Pal Gina Smiley from The New York Times thank you for taking our questions. Um, I wonder if you could talk a little bit I know that you've got your internal review coming. but I wonder if you could talk a little bit about what you think happened with oversight at Silicon Valley Bank and whether this suggests that something about regulation and supervision needs to actually change going forward? And I wonder? you know, how can the American people have confidence that there aren't other weaknesses out there in the banking system given that this one got missed as you noted.

So let me let me say what what I think happened and then I'll come to the questions around supervision. So at a basic level uh Silicon Valley Bank Management failed badly. They grew the bank very quickly, They exposed the bank to significant liquidity risk and interest rate risk didn't hedge that risk. We now know that supervisors uh saw these risks and and intervened.

We know that the public saw all this. Um, we know that Svb experienced an unprecedentedly rapid and massive Bank room. So this is a this is a very large group of connected depositors. Concentrated group of connected depositors in a very, very fast run faster than historical record would suggest.

So Um for as for us. So for our part, we're doing a review of Supervision and regulation. My only interest is that we identify what went wrong here. How did this happen? Is the question? What went wrong? Try to find that we will find that and then make an assessment of what are the right policies to put in place so that it doesn't happen again and then Implement those policies.

It would be inappropriate for me at this stage to offer my views on what the answers might be. You know I simply can't do that. Vice Chair bar is leading this and uh I think he's testifying next week So but that will be up to him. So that's really where it is that you know the um the review is going to be thorough and transparent.

Uh uh, it is clear to your really to your last question. It's clearly we do need to strengthen supervision and regulation. Uh. and I I Assume that uh, you know there will be recommendations coming out of the report and I I plan on supporting them and supporting their implementation right? Just and the final point, you know, can we feel confident that these weaknesses don't? Exist Elsewhere given that they got missed at this Bank these are not weaknesses that are that are at all broadly through the banking system.

This was A this was a bank that was an outlier in terms of both its percentage of of Uh of Um of uninsured deposits and in in terms of its Uh Holdings of duration, risk and again supervisors did get in there and and they were as you know, uh, obviously uh, you know they they were, they were on this issue but nonetheless this this still happened And and so that's really the nature of the interview of sorry of the review is to discover that radio and television you've been very consistent in saying that the FED would be raising interest rates and then holding them there for quite some time. Uh, following today's decision, the markets have now priced in Uh, one more increase in May and then every meeting the rest of this year they're pricing in Great Cuts Uh, are they getting this totally wrong from the Fed? or is there something different about the way uh, you're looking at it given that you're now thinking that moves might be appropriate as opposed to ongoing. So we published an SCP today as you will have seen, and it shows that uh, basically participants expect uh, relatively slow growth, a gradual rebalancing of supply and demand in a labor market, with inflation moving down gradually. In that most likely case, If that happens, participants don't see rate Cuts this year, they just don't I Would just say As always, the path of the economy is uncertain and policy is going to reflect what actually happens rather than write down in the SCP.

But that's not our Baseline expectation. Well, if I could follow up and ask, um, as you look forward, uh, into the rest of the year, Here are you saying that what you see and the 5.1 percent basically, uh, consensus is based on being it will be sufficiently restrictive Or is it leavened by the idea of you don't know what's going to happen? In other words, what should people think about in terms of how the FED thinks about how far it is from the terminal, it's going to depend. Remember, we were looking for purposes of our monetary policy tool. We're looking at what's happening among the banks and asking, is there going to be some tightening and credit conditions And then we're thinking about that as effectively doing the same thing That right Hikes do so in a way that substitutes for rate hikes.

So the the key is we have to have policies need got to be tight enough to bring inflation down to two percent over time. It doesn't all have to come from Radix It can come from uh, you know, from tighter credit conditions so that we're looking at and we're we. It's highly uncertain how long the situation will be sustained or how significant any of those effects would be, so we're just going to have to watch uh in the meantime. Uh, you know, and obviously at the end of the day we will do enough to bring inflation down to two percent.

No one should doubt that Legal Market's turning red on no Cuts Hi Char Powell Rachel Siegel from The Washington Post Thank you for taking our questions I Know we've talked a bit about how Silicon Valley Bank was unique to a certain sector of the economy. but there's also growing concern that there are Financial stability risks from the commercial real estate market and loans that will begin to roll over later this year. And next, yes, and that smaller Regional Banks also disproportionately hold those loans. Is there a risk that could mimic the kind of what we saw with Svb? to banks that disproportionately are focused in commercial real.

estate? So you know we've well aware of the concentrations people have in commercial real estate. I Really don't think it's comparable to this. The bank the banking system is is strong. It is sound.

It is, uh, resilient. it's well capitalized. Um. and uh.

I Really don't see that as at all analogous to this. Another question: would you be open to an independent investigation separate from the Fed's probe? I Welcome. It's It's a hundred percent certainty that there will be independent investigations and outside inventions and all that. So we welcome when a bank fails their investigations.

And of course we welcome that. Thank you. Mr Chairman Uh Edward Lawrence From Fox Business Um. Inflation has been rather sticky.

So do you need help from the fiscal side to get inflation down faster? We don't assume that we don't give advice to the fiscal authorities. And we do. We assume that um, we take fiscal policy as as it comes to our front door. stick it in our model along with a million other things and uh, we have responsibility for Price stability.

The Federal Reserve has a responsibility for that and nothing is going to change that. So we and we will get inflation down to two percent in time. and if I can follow on that. but they're working, the the spending that's happened is working against what you are doing right? So it's prolonging inflation.

You know if you have to look at um, at the impulse from spending because spending was, of course, tremendously High during the pandemic and then as the pandemic programs, uh, rolled off, spending actually came down. So the the sort of fiscal impulse is actually not what's driving inflation right now. it was. It was at the beginning.

perhaps part of what was driving inflation. but that's not really the story. Now it's got a Neil Irwin Hi Tripel Neil Erwin with Axios Um, two questions about aspects