>> YOU KNOW. >> THIS WILL WAKE UP THE KIDS. >> COME ON, KIDS. >> THANK YOU. >> STEVE. >> WHERE ARE WE GOING? >> LET'S START WITH YOUR FIRST CHART, FED PAUSES THE HIKES, SIGNALS MORE WHAT? >> THERE'S A LOT OF RED SQUIGGLES, THERE'S BLUE SQUIGGLES, OH, YEAH, RIGHT. OKAY, ANYWAY, SO THE FED INCREASED INTEREST RATES, TENTH CONSECUTIVE MEETING IT'S DONE THAT. I DON'T THINK IT EVER DID THAT BEFORE, AND YOU CAN SEE THE PACE OF INCREASES COMPARED TO ALL THE OTHER PREVIOUS TIGHTENING CYCLES FOR THE LAST 40 YEARS, THIS HAS BEEN THE STEEPEST, THE FASTEST BECAUSE WE OBVIOUSLY KNOW THAT WE HAVE AN INFLATION PROBLEM AND WE HAVE TO DEAL WITH IT. AS YOU SAID, MIKA YOU USED BOTH THE WORDS SKIP AND AND IT WAS INTERESTING BECAUSE JAY POWELL ALSO USED THE WORDS SKIP BUT SAID PAUSE BECAUSE HE DID NOT WANT TO COMMIT HIMSELF TO ANOTHER INTEREST RATE INCREASE BUT DID GO FROM 5% TO 5.5% END OF THE YEAR IMPLYING TWO MORE INCREASE THIS IS YEAR. THE FED ALSO SAID THE ECONOMY HAS BEEN A BIT STRONGER THAN WE THOUGHT. THEY RAISED THEIR FORECAST FOR ECONOMIC GROWTH TO 1% THIS YEAR. NOT A HUGE NUMBER, BUT A POSITIVE NUMBER, AND THEY RAISED THEIR UNEMPLOYMENT -- LOWERED THEIR UNEMPLOYMENT RATE AND SLIGHTLY RAISED THEIR INFLATION RATE. GOING OUT YOU CAN SEE THEY RAISED THEIR INTEREST RATE FORECAST THE REST OF THE YEAR. THIS IS THE MARKET. THE MARKET IS SLIGHTLY MORE OPTIMISTIC THAN THE FED AND THINKS THE FED WILL DECLINE FROM THERE. THAT'S THE OUTLOOK AT THE MOMENT. >> LET'S TALK ABOUT WHAT'S BEEN HAPPENING. IT HAS BEEN EASING BUT, AGAIN, EVERYBODY EXTRAORDINARILY CAUTIOUS, EVEN YOU WITH YOUR CHART. WILLIE, WHAT DID YOU CALL THAT WALL? >> THAT'S THE GREEN MONSTER OF CABLE NEWS. >> YES. >> IT'S AN ICONIC WALL. YES. >> EXACTLY. >> THE NEXT TIME HE COMES, I'M SERIOUS, YOU CAN PITCH OR I CAN PITCH, BUT BEFORE HE COMES OUT, WE HAVE TO PLAY SOME WHIFFLE BALL. THE GREEN MONSTER, YOU TALK ABOUT IT'S SLOWLY EASING. NOBODY IS READY TO SAY INFLATION IS OVER, ARE THEY? >> NOBODY IS READY TO SAY THAT. I THINK THIS HAS TO BE THE BIGGEST WALL IN THE BUSINESS, RIGHT? >> YOU'VE GOT IT. IT'S ALL YOURS. YOU OWN IT. >> MY FRIENDS AT CNBC MUST BE VERY, VERY JEALOUS. >> I BET THEY ARE. >> SO, YEAH, INFLATION IS THE KEY TO THIS. THE FED DOES NOT WANT TO RAISE INTEREST RATES MORE THAN IT HAS TO AND IT'S WASHING INFLATION VERY CAREFULLY. WE DID HAVE DECENT NEWS ON INFLATION A COUPLE OF DAYS AGO WHICH SHOWED INFLATION CONTINUING TO COME DOWN THIS IS WHAT WE CALL HEADLINE, THE OVERALL INFLATION RATE. WE WENT UP THE MOUNTAIN AND WE'RE COMING BACK DOWN THE MOUNTAIN. WE'RE BACK TO WHERE WE WERE IN EARLY 2000. CORE SERVICES, MEANING THE REAL HEART OF THE ECONOMY WHEN YOU TAKE OUT FOOD, YOU TAKE OUT ENERGY, YOU TAKE OUT A LOT OF STUFF THAT MOVES AROUND. WHAT IS THE CORE DOING? AND THAT'S BECAUSE IT'S DRIVEN BY LABOR COSTS AND CORE THE NEWS ISN'T QUITE AS GOOD. IT'S A LITTLE BIT SQUIGGLIER. WE'VE GONE UP AND COME DOWN. WE'RE SITTING ABOVE 4% AND THAT IS A GOOD WAYS AWAY FROM THE FED'S 2% TARGET AND SO THE FED STILL HAS A FAIR AMOUNT OF WORK TO DO. >> AND OBVIOUSLY THIS ECONOMY HAS JUST BEEN EXTRAORDINARILY RESILIENT WHEN IT COMES TO JOBS, TO WAGES, WHAT'S THAT LOOKING LIKE? >> THE ECONOMY REALLY HAS LOADED ON IN A WAY I DON'T THINK MANY OF US EXPECTED IT WOULD CONTINUE TO DO. WHAT THE FED IS WATCHING AND WHAT WILL DRIVE THIS INFLATION ARE REALLY TWO THINGS. ONE WILL BE WAGES. NORMALLY WE WANT WAGES TO GO UP. WE WANT WORKERS TO EARN MORE. WE WANT THEM TO HAVE BETTER LIVES. IF IT CREATES INFLATION, IT'S COUNTERPRODUCTIVE BECAUSE THEN THEIR PURCHASING POWER GOES AWAY. SO WAGES ARE SITTING BACK DOWN HERE THROUGH MOST OF 2015 AND SO ON AT A VERY APPROPRIATE LEVEL FOR 2% INFLATION BUT THEN, OF COURSE, DURING COVID, POST COVID WITH THE EMPLOYMENT SURGE, WITH ALL THE SPENDING AND WITH THE INFLATION, WAGE RATES JUMPED UP TO OVER 5.5%. THEY'VE STARTED TO COME DOWN, BUT THEY'RE STILL ABOVE 5% AND THEY REALLY NEED TO GET BACK DOWN HERE IN ORDER FOR US TO HAVE THAT 2% INFLATION THAT THE FED IS SO TARGETED ON. THE OTHER THING THAT'S BEEN KEEPING INFLATION REASONABLY HIGH IS COMPANIES PRICING. COMPANIES IN THIS STRONG ECONOMY HAVE A LOT OF PRICING POWER. THEY'RE ABLE TO PASS THESE COSTS THROUGH WHICH ALSO CONTRIBUTES TO PRICES. AND SO YOU SEE WHAT'S HAPPENED TO CORPORATE PROFITS. RPORATE PROFITS TOOK OFF POST THE PANDEMIC, INTERESTINGLY ENOUGH, $3 TRILLION IN CORPORATE PROFITS. EVEN IF UP ADJUST FOR INFLATION, CORPORATE PROFITS ARE STILL BOUNCING AROUND A RECORD LEVEL AND BECAUSE OF, AGAIN, THE STRENGTH OF THE ECONOMY, COMPANIES HAVE THE ABILITY TO PASS THE COSTS THROUGH AND T
