What the Fed *JUST* Said [ECB Forum & Jerome Powell Summary].

well we just had four Central Bankers

give us their thoughts on hopes and

concerns and issues for the market rates

inflation including Jerome Powell here's

a breakdown of everything that we just

learned uh first of all a drone Powell

made one of the biggest hit comments of

the entire event in my opinion when he

made it clear that his goal isn't to

specifically Target one sector like the

stock market and say we've got to drive

the stock market down Sarah Eisen tried

to Corner him into that maybe two or

three different times and he reacted

multiple times and said no I don't see

it that way he says our job is inflation

that's our job and we look at many

different variables it's interest rates

it's the banking crisis it's other Banks

it's credit spreads it's the bond market

yeah to some extent stocks are involved

in that but they're just part of a

bigger picture of everything that goes

in it's commercial real estate it's ever

everything together in a bucket the

entire economy and if they can get the

entire economy to just slow down the

rate of inflation while maintaining

at least some equilibrium in the jobs

Market are getting to an equilibrium in

the jobs market then that's a good thing

that actually led the stock market to

start rallying after Jerome Powell said

that because it was clear that Jerome

Powell's comments back in the Jackson

Hole days of September of 2022 that

we're going to experience pain and this

is gonna suck uh basically are not to be

interpreted as the only goal of the FED

is to destroy the stock market in fact

the feds basically in response to Jerome

Powell or in response to Sarah eyes and

say hey but markets are going up she

specifically said the msci world index

is is rallying is in this

counterintuitive to what the FED is

trying to do or central banks are trying

to do and the broad answer was no in

other words let markets rally let them

do what they want in fact markets have

generally been very good at

pre-anticipating fed actions and if you

actually think back this is kind of

interesting think back to November of

2021 that was roughly the peak which

means we had a red December January

February March we had four months of red

in the stock market before the FED

actually started hiking rates in March

of 2022. so there's this pre-work

markets like to do much like what I

expect now that markets are pre-pricing

in in the future that the FED will have

inflation under the appropriate level of

control that they're looking for and the

FED will eventually along with other

Central Bankers eventually start cutting

rates this is where Sarah Eisen also

suggested hey so you're probably going

to you know keep rates restrictive for a

while because after all you don't think

inflation will come down to two percent

until 2025 Jerome Powell and Jerome said

well no and he essentially without

reiterating and re-explaining the

formula he reiterated the formula which

is if inflation expectations fall you

could actually start loosening fed

policy lowering rates and still

technically be at a restrictive level as

you're cutting rates

so I think people think that being at

five percent means we're at restrictive

but that's not how it works being at

five percent is the combination of a

restrictive level of rates two percent

and inflation expectations say three

percent add that together you get five

percent well if inflation expectations

go down to two you could have a

restrictive level of two percent and

then have top rates be four percent and

this is what j-pal reiterated here which

is great because he gave us two really

big pieces of info as inflation

expectations come down we'll cut rates

and do we care if the stock market

rallies no what we care about is

inflation trending down now one of the

those are the two positive things that

we got from jpal some of the negative

things that we got from j-pal were that

he does expect the pain in commercial

real estate to be persistent this is not

good because real estate is a very slow

moving Goliath and it's weird because we

know there's this pain coming for

commercial real estate Beyond what's

already been felt you've got three

trillion dollars of real estate

refinancing coming up in over the next

three years A lot of it for offices and

Commercial Real Estate which is going to

be a big problem you don't have the the

privilege or the luxury of these 30-year

fixed rate mortgages so you're probably

going to have some reevaluation of of

basically property prices

for the next few years and we're not

sure how that's going to trickle over to

residential like single family or

smaller apartment buildings nobody knows

everybody's expecting inventory to go up

but it's just not yet so while we're not

clear what's going to happen to

residential real estate drum Powell does

expect persistent pain for commercial

real estate the good news is he doesn't

expect that we will have as his base

case a kind of hard Landing that will

have to have the kind of joblessness

that we've had in previous down Cycles

this time around because we have so many

excess job openings so in other words we

can afford to lose jobs because people

can go get the other jobs that are

available and actually not end up

unemployed permanently this is a good

thing so Jerome Powell gave us a mix of

optimism and some pessimism now one

thing that I thought was very

interesting was he specifically

addressed

what is happening as a result of the

inflation reduction act in the chips act

and all of this spending I call it

stimulus checks going into the chips

industry it's one of the reasons I

started investing in chips after the

chips act inflation reduction act got

passed late last year so this is

basically stimulus money for these

sectors so Sarah Eisen rightfully so

asked hey isn't that going to show up as

inflation and Jerome Powell said well

certainly you're seeing more

construction as a result of this but

we're not seeing that as a broad

contributor to where we're seeing

inflation right now which is really core

Services driven by labor and part driven

by labor or mostly driven by labor so

while construction is up we're not

actually seeing this fiscal impulse as

an inflationary impulse if anything it's

actually potentially a slight negative I

thought that was pretty incredible as

well as well as of course drum Powell's

thought that we're not going back to two

percent inflation probably until 2025.

in other words everything's just going

to take a lot longer and that's

reasonable the good news is

between now and then you can be sure if

you join those programs on building your

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lectures between now and 2025. so for

the next three years and Beyond I expect

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bundles at staff meet kevin.com so then

we get to the European Central Bank the

European Central Bank definitely sees uh

Christine Lagarde definitely sees their

economy as somewhat stagnant but they

actually think they'll be able to avoid

a recession and they also don't think

we're probably going to get to that two

percent level until about 2025. ECB was

probably the only one that really

doubled down on the idea of a central

bank digital currency

uh despite the fact that all of the

central Bankers are working on a central

bank digital currency she seemed really

excited about it the bank of Japan Won

comedy here for sure there were multiple

cases where the bank of Japan just got

the room to bust out laughing one of

them which I thought was really

brilliant but went over most people's

heads and under most people's knees was

this joke he made he says look everybody

else is talking about digital currencies

what we decided to do instead was just

issue more paper money because printing

money is going to instill more

confidence in the Bank of Japan it took

a while for people to actually like

capture what he was saying but he's

basically saying hey we're trying to get

inflation up everybody else is trying to

get inflation down we're trying to get

inflation up so to increase confidence

people have and the bank of Japan's

ability to get it up we're just gonna

print more money and forget digital

currency we're just gonna print straight

up more money that's essentially what

they're actually doing it's kind of

weird to have a panel of three people

like cutting and fighting inflation and

the bank of Japan like no we want we're

just trying to get it up man come on

come on man like help us out over here

uh some pretty good jokes anyway the

bank of England Andrew Bailey you know

he kind of sits there the whole time

he's like well let me rate which glass

of wine I prefer uh right after I finish

my caviar you know he's kind of got that

whole like demeanor about him uh

Christine Lagarde is very much like your

aunt you will drink your tea and drum

Pals very much like the well you know I

think we'll get to two percent by 2025

but I don't know can't can't be

committed to it Andrew Bailey on the

other hand

there are signs of persistent inflation

and uh yeah we need to make sure that uh

uh to practice price stability because

markets don't think we're done and now

the question is how long are we going to

sustain the peak when we get there and

then when he talks about Central Bank

digital currencies he gets into like

this Arcane language of like well we

have implemented the wiring for the

wholesale Payment Systems okay

in like plain English basically Andrew

Bailey said yo man I just copy what

shape how does and when he gets to Peak

that's probably when we're gonna get to

Peak okay we talk all the time but uh I

I just want to get back to the wine and

cheese that's what I came here for uh

and uh regarding uh these uh essential

Bank digital currencies yeah uh so we

got Banks we got big Banks bigly Banks I

don't know why we're changing the accent

so much here but let's go with it we get

bigly Banks and bigly Banks send big

amounts of money

sometimes uh very small amounts of times

but they send bigly amounts of money and

we think digital currencies will help us

with that uh for those bigly

transactions that happen very

infrequently that's basically what the

wholesale payment system is it's big

transactions that happen very rarely uh

anyway so uh that's your your Andrew

Bailey quite frankly he didn't tell us

virtually anything useful uh other than

making us think he's really good at

weight rating wine and he didn't even

mention wine once but if if you watched

it you'd probably have a similar

impression uh the dude from the bank of

Japan's like

I didn't think I'd have to travel this

much for this job and uh then Christine

Lagarde is like trying to explain what a

catch-22 is but didn't do a great job so

really bottom line out of the whole

thing is it was about 90 minutes of 30

comedy UH 60

boring kind of reiteration of the same

crap and 10 of oh okay that's pretty

interesting and that's what I'm trying

to provide as the bottom line here so

basically bottom line out of all of it

hey all this crap's gonna take a lot

longer than everybody expected the

transitoriness is going to take a whole

lot longer to get through

but that doesn't mean we're not going to

cut rates we just need to confirm that

inflation isn't going to spike up again

like it did in England and actually even

though we were looking for a sign of

patience from drum Powell

he made it clear that time is not our

friend

that's because he specifically said

Diamond's not our friend because

inflation expectations could de-anchor

and they don't want that to happen so

that said uh oh and be cautious about

commercial real estate so uh that said

uh oh yeah and then of course the

argument that like stocks don't

necessarily have to go down which was

quite useful so uh all of that together

I think adds some decent Insight uh into

what we can expect from this uh these

these Central Bankers going forward it

is some reasonable degree of patience is

what I would call it uh I don't think

it's uh you know unrestrained patients

they still have a job to do they're

going to continue with that uh but

otherwise uh overall sounded optimistic

nobody felt like they had lost control

nobody was freaking out at the meeting

uh so this is by no means a Jackson Hole

if anything was very much the opposite

of it very calm very relaxed very it is

what it is let's just get through it and

I think that's why markets are

recovering the way they are so uh there

you have it thank you so very much for

watching and we'll see you in the next

one goodbye and good luck now I want you

to know this when it comes to AI time is

what's going to make you money and if

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you'll always be able to be employed so

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