00:00 Speaker A
Fed is on deck, John. What do you expect to see and hear this week, John? Walk us through it.
00:04 John
Well, I think the meeting, uh the overall tone of the meeting is going to be somewhat hawkish. Uh and the message is going to be that the the Fed isn’t doing anything for a while.
00:15 John
Uh you know, the Fed has had an easing bias. The market has been expecting the Fed to cut rates another one or two times this year and in the inflation numbers have already not been cooperating and now we have an oil price shock on top of that.
00:30 John
I think there’s a decent chance that the medium dot, the inflation projections, I’m sorry, the interest rate projections that they put out could indicate that uh the critical mass of officials is leaning towards no cuts this year.
00:46 John
And I think that I’m listening for in the press conference when Jay Powell is asked, is anyone talking about raising rates this year? He dismissed the question in January.
00:58 John
I don’t think he can dismiss it anymore. I think that one of the conversations going on inside the Fed this week is going to be
01:04 John
should we accept the possibility, you know, in light of stubborn inflation, that the next move might have to be rates going higher and not lower.
01:10 Speaker A
Colin, what do you think? You broadly agree with how uh John’s laying it out there?
01:14 Colin
Yeah, we broadly agree. If we look at where we are right now and what we were expecting for the Fed coming into the year, there was no rush to do anything mainly because of sticky inflation.
01:21 Colin
And and now it it looks like that that could get even worse. I mean we already saw uh kind of a negative number with PCE last week and and this is just raising inflation expectations already. So there’s a handful of officials who are already pretty nervous about that
01:31 Colin
and they might get a few more officials on board about, hey, we we need to make sure inflation um doesn’t get out of control and that that expectations remain anchored. In terms of updated projections, I mean it seems pretty likely that we’ll see a little tick up in inflation by the end of the year.
01:41 Colin
But but this is still so uncertain right now. We don’t know how this is going to play out over the next few weeks. In terms of the dots, ah who knows?
01:48 Colin
You know, we we had a really wide range if you go back to that December meeting. I think we’ll see another wide range, but I wonder if we see maybe a few of the dots move up a little bit just because of all that uncertainty.
02:00 Colin
But our main take right now is is no, no reason for the Fed to do anything over the next handful of meetings.