LARRY: JAY POWELL DIDN'T LIFT A FINGER. INTEREST RATES STAYED UNCHANGED. I THINK THEY WILL FOR THE REST OF THE YEAR. LET'S TALK ABOUT THIS. JOHN CARNEY, "BREITBART" ECONOMICS EDITOR, COAUTHOR OF THE "BREITBART BUSINESS DIGEST, AND OUR OWN TAYLOR RIGGS, CO-HOST OF "THE BIG MONEY SHOW," MY FAVORITE. THANK YOU TO BOTH OF YOU. ON THE MARKET, TAYLOR, THE MARKET WAS UP ALMOST 500 POINTS AT ONE POINT. THEN IT CLOSED I THINK, THE DOW PLUS 97 OR SOMETHING LIKE THAT. THAT IS PRETTY BIG SWING DOWN AT THE CLOSE. DO YOU HAVE ANY IDEA WHY? >> JOHN AND I LIKE TO JOKE ABOUT THIS THE FIRST MOVE IS USUALLY ALWAYS WRONG. DON'T BELIEVE WHAT YOU SEE THE FIRST MOVE. >> I POWELL, GET THROUGH THE STATEMENT, THE CONFERENCE, MARKET DIGEST IT. WHY THE S&P AND NASDAQ ROLLED OVER INTO THE RED. DOW IN THE GREEN SLIGHTLY. THIS IS GREAT HIKES TOTALLY OFF THE TABLE. HE THINKS POLICY IS RESTRICTIVE AND RATE HIKES ARE UNLIKELY BUT FOR THE MOST PART THEY WILL HOLD. IT IS HIGHER FOR LONGER. IF RATES ARE HIGHER FOR LONGER, WE'RE NOT GETTING CUTS ANYTIME SOON, I THINK THAT'S SORT OF THAT OTHER HAWKISHNESS THAT CAME INTO PLAY TODAY. LARRY: HIGHER FOR LONGER, I LIKE THAT. THAT'S A COMPLETE CHANGE. >> YES. LARRY: A COMPLETE FED CHANGE FROM THE FORECASTS IN THE FOURTH QUARTER OF LAST YEAR AND THE BEGINNING OF THIS YEAR. WHY, JOHN? DID THE FED GET SOMETHING WRONG? >> THE FED THOUGHT INFLATION WAS GOING TO KEEP COMING DOWN. IN FACT THEY WERE IGNORING THE EVIDENCE IT HAS NOT BEEN COMING DOWN SINCE LAST JULY. WE'VE BEEN TALKING ABOUT THIS FOR MONTHS AND MONTHS. INFLATION WASN'T COMING DOWN, WHICH CREATED THE RISK. ONCE IT IS NOT GOING DOWN, IT WILL GO BACK UP WHICH IS EXACTLY WHAT HAPPENED. WHAT THE FED DID WAS VERY IMPORTANT IN THE STATEMENT, FORGET ABOUT POWELL'S PRESS CONFERENCE IN THE STATEMENT THEY SAID INFLATION IS GOING THE WRONG WAY. LARRY: THAT IS A VERY BIG DEAL. >> IT'S A BIG DEAL. THEY PUT IN THE STATEMENT THERE HAS BEEN A LACK OF PROGRESS ON INFLATION OVER THE LAST FEW MONTHS. BASICALLY THAT IS FED SPEAK FOR SAYING WE GOT IT TOTALLY WRONG. IT'S GOING THE WRONG WAY. WE'RE NOT GOING TO CUT. POWELL ALSO ADDED IT WILL TAKE LONGER TO CONVINCE THEM. IF YOU THOUGHT IT WOULD TAKE THEM FIVE MONTH A COUPLE MONTHS AGO, IT IS NOW GOING TO TAKE THEM A YEAR. I DON'T THINK YOU ARE LOOKING AT -- YOU SAID NOT THIS YEAR. I DON'T THINK RATE CUTS UNTIL AT LEAST MIDWAY UNTIL NEXT YEAR IF INFLATION GOES DOWN. LARRY: THEY MIGHT HIKE THE RATE BEFORE THE ELECTION. THEY WON'T HIKE IT BEFORE. MAYBE HIKE THE RATE AFTER THE ELECTION. COULD BE NOVEMBER, DECEMBER. IF YOU'RE RUNNING, FOR ARGUMENT SAKE IF YOU'RE RUNNING 4%, TAKE THE CPI AND MELD IT INTO THE PCE AND ALL THE REST OF THESE INDICATORS, MAYBE HAVE A LOOK AT COMMODITIES WHICH HAVE BEEN RISING AND GOLD'S BEEN RISING, BLAH, BLAH, IF YOU'RE RUNNING A 4% INFLATION RATE, THEY ARE GOING TO HAVE TO BE AT SOME POINT MORE RYE STRICT TIFF. NOW AS A TECHNICAL MATTER, VIEWERS HOLD ON, THEIR BALANCE SHEET -- >> OAK, YEAH. LARRY: WHICH THEY HAD BEEN SHRINKING, MEANS SELLING TREASURYS, HE SAID, NO MORE TODAY, OR LESS, OR SOMETHING. HELL AFTER ASSIGNMENT. [LAUGHTER] >> QT IS THE BALANCE SHEET. IT IS THE PACE AT WHICH WE LET BONDS ROLL OFF. LARRY: QT, QUANTITATIVE TIGHTENING. >> CORRECT. IT IS WAY TO TIGHTEN UP -- LARRY: THE MONEY SUPPLY. >> TRADITIONALLY IN THE PAST WE'RE LETTING BONDS GO OFF AT $60 BILLION A MONTH. THE MARKET THOUGHT WE WOULD SLOW DOWN ON THAT, DO LESS TIGHTENING, EASE UP A LITTLE BIT, ONLY LET $30 BILLION OF BONDS ROLL OFF THE BALANCE SHEET. THEY CAME OUT TODAY, SAID WE'LL ONLY LET 25 BILLION ROLL OFF THE BALANCE SHEET. THAT MEANS THEY'RE NOT BEING AS RESTRICTIVE. THEY'RE KEEPING IT -- LARRY: EASIER. >> EASIER BALANCE SHEET WHICH HELPS SORT OF THE LIQUIDITY AND MONEY MARKETS. I WOULD JUST ALSO NOTE, TELL ME IF YOU DISAGREE -- LARRY: WHY DID THEY DO THAT? >> I THINK THEY'RE WORRIED ABOUT SOMETHING GOING ON IN THE BANKING SYSTEM. LARRY: REALLY? >> THEY ARE REVERSING ON RATE CUTS. THEY REMEMBERED WHAT HAPPENED LAST APRIL WHEN WE HAD SILICON VALLEY BANK COLLAPSE. I THINK THEY'RE WORRIED ABOUT ANOTHER RUN ON THE BANKS. THEY'RE WANTING TO PROVIDE MORE LIQUIDITY. LARRY: THE BALANCE SHEET, WHICH IS THE BASIS OF THE MONEY SUPPLY AND LIQUIDITY, THAT THING WAS FOUR TRILLION DOLLARS PRE-PANDEMIC. IT RAN UP TO NINE TRILLION DOLLARS, OKAY? WE GOT A LOT OF INFLATION FROM THAT. THEY BROUGHT IT DOWN TO ABOUT 7 1/2 TRILLION DOLLARS, BUT THAT'S STILL VERY LIQUID POSITION. I MEAN HOW TIGHT -- >> YES. LARRY: IF INFLATION IS GOING UP, HOW TIGHT CAN THEY BE? >> REMEMBER IT USED TO BE ZERO. THEY USED TO HAVE NO BALANCE SHEET AT ALL AFTER THEY STARTED E EASING. THIS IS ACKNOWLEDGEMENT THEY CAN'T DO IT. LOCKED THEMSELVES INTO PERMANENTLY EXPANDED BALANCE SHEET. LARRY: LIKE WOKE MONETARY POLICY. THEY'RE NOT TIGHT ENOUGH. INTEREST RATE HIKES, PROBABILITY? SERIOUSLY? >> IT IS A NON-ZERO PROBABILITY LIKE YOU SAID. YOU SAID THIS AS WELL, I WOULDN'T RULE IT OUT. I THINK JAY POWELL SAID TODAY, JANUARY INFLATION WAS HIGHER, FEBRUARY INFLATION WAS HIGHER. THOSE ARE ONE-OFF DATA POINT. NOW WE HAD A FULL QUARTER OF INFLATION HIGHER THAN EXPECTED. I DON'T THINK THEY WANT TO COME OUT TO ADMIT RATE HIKES BUT NOT ONE HUNDRED% OFF THE TABLE. LARRY: JOHN, LAST MOMENT WHAT IS JOE BIDEN, JOE BIDEN FORECASTED RATE CUTS. HE DID IT AT LEAST TWICE, MAYBE THREE TIMES. HE IS GOING TO BE VERY DISAPPOINTED. DO YOU THINK HE WILL ATTACK THE FED? >> HE IS VERY DISAPPOINTED. IT WILL TAKE A LOT OF RESTRAINT. FORTUNATELY HE HAS A LOT OF CAMPUS CHAOS TO WORRY ABOUT. WILL TAKE ATTENTION AWAY FROM THE FED. I THINK THE FED WILL HAVE TO START TO PREPARE THE MARKET FOR A HIKE. THEY HAVE SAID, POWELL JUST BEGAN IT TODAY BY SAYING, FED HIKES AREN'T OFF THE TABLE, THEY'RE JUST UNLIKELY. THAT'S A BIG CHANGE. I THINK THEY'RE MOVING STARTING TO PREPARE THE MARKETS FOR A FED HIKE. THEY BETTER START DOING THAT VERY SOON. IF DONALD TRUMP GETS ELECTED AND THE DAY AFTERWARDS THERE IS FED MEETING, DAY AFTER ELECTION DAY, THE DAY AFTER THEY SAY, WE'RE MOVING TO HIKES, THAT IS GOING TO CAUSE A POLITICAL EXPLOSION. BETTER NOT DO THAT. LARRY: HE WON'T MIND THAT IN DECEMBER. HE WON'T MIND IT DECEMBER. HE WILL MIND IT A LOT IN JANUARY, WHEN HE GETS INAUGURATED. >> WHEN MARCH COMES AROUND DO A HIKE -- LARRY: HE WILL HAVE SOMETHING TO SAY ABOUT THAT AS HE HAS IN THE PAST. JOHN CARNEY, TAYLOR RIGGS. YOU MUST CATCH TAYLOR ALONG WITH HER CO-HOSTS BRIAN BRENBERG, JACKIE
