TWO-YEAR TREASURY AT 4.906 A LOOK HOW THIS MORNING'S CORE PCE COULD IMPACT THE FED AND BRING IN FORMER FED VICE CHAIRMAN ROGER FERGUSON NOW VICE CHAIRMAN OF THE COUNCIL AND CNBC CONTRADICTER I SAID AT THE START, RIGHT ACROSS THE BORDER PRETTY MUCH WHAT THE FED WOULD DO. ASK YOU THE QUESTION THE FED READS THIS NEW DATA AND WHAT WILL THE FED DO >> LOOK I THINK THEY'RE LOOKING TO SAY FORTUNATELY NOT BAD NEWS, AS IN INFLATION DIDN'T TICK UP AGAIN. BUT ON THE OTHER SIDE IT HASN'T REALLY MOVED DOWN DRAMATICALLY EITHER I THINK THIS IS A STATUS QUO KIND OF READ THEY'VE BEEN SAYING FOR A PERIOD OF TIME THAT THEY WANT TO SEE, YOU KNOW, SEVERAL MONTHS SOME SAID MANY MONTHS OF DATA MOVING IN THE RIGHT DIRECTION. THIS IS THE WAY THEY LOOK AT IT. WELL, IT'S NOT WORSE BUT NOT NECESSARILY GOING TO CHANGE THE PERSPECTIVE WE NEED TO WAIT TO SEE MORE DATA COMING IN TO GIVE US THAT INFLATION IS COMING DOWN CLOSER TO 2%. >> WHAT HAVE YOU THOUGHT ABOUT COMMENTS FROM NEEL KASHKARI IN THE LAST WEEK WITH THIS IDEA RATE HIKES ARE ON THE TABLE? >> I DON'T THINK RATE HIKES ARE ON THE TABLE AS IN, THE NEXT COUPLE MEETING HE'S GOING TO BE TALKING ABOUT THAT I THINK WHAT HE'S SUGGESTING IS APPROPRIATE. WHICH IS, LET'S SEE EXACTLY HOW RESTRICTIVE WE ARE IF, IN FACT, INFLATION STAYS AT 2.7. MAYBE GETS TO 2.7%, MAYBE GETS TO 2.6%, BUT DOESN'T SEEM TO BE COMING DOWN, MAYBE IT WILL BE TIME TO THINK ABOUT RAISING RATES YET AGAIN. THIS IS AGAINST A BACKDROP OF ECONOMY IN WHICH THE LABOR FORCE AND MARKET IS SHOWING GOOD STRENGTH, GIVEN HOW MUCH THE FED HAS DONE SO I DON'T THINK IT'S FAIR TO SAY IT'S AN ACTIVE DISCUSSION. BUT I THINK WHAT HE MIGHT BE INDICATING IS AS THIS UNFOLDS, IF WE DON'T SEE FURTHER PROCESS, THEY SHOULD BE ABLE TO MAKE ANOTHER HIKE MOVE IF NEED BE TO REALLY GET INFLATION DOWN TOWARD THE 2% >> WHEN YOU LOOK OUT FOR THE REST OF THE YEAR, WHAT DO YOU SEE HAPPENING? >> LOOK, I THINK INFLATION PROBABLY MOVING SIDEWAYS, MAYBE IF WE'RE LUCKY, DOWN A LITTLE BIT. I'VE BEEN IN A POSITION THAT THINKS IT'S 50/50 AS TO WHETHER WE'LL SEE ANY CUTS AT ALL THIS YEAR I DON'T THINK A HIKE IS LIKELY, BUT IT'S NOT IMPOSSIBLE. SO, UNFORTUNATELY, WHAT WE HAVE RIGHT NOW MAY BE WHAT WE GET FOR A PERIOD OF TIME. >> THE MARKET, OBVIOUSLY, THINKS THERE'S TWO CUTS, I THINK THAT'S THE CURRENT VIEW DO YOU UNDERSTAND WHY THEY HAVE THAT VIEW? AND THE VIEW IS PARTIALLY THEY THINK THAT JAY POWELL IS PREDISPOSED TO CUTTING, THAT HE'S DESPERATE TO CUT IF HE COULD. >> I DO THINK THE MARKET HAS THAT VIEW. I THINK THE FED HAS SUGGESTED THAT THEIR NEXT MOVE IS LIKELY TO BE DOWN OBVIOUSLY, ALSO, THE MARKET, GENERALLY SPEAKING, FEELS BETTER IF INFLATION IS UNDER CONTROL, ALSO IF INTEREST RATES ARE LOWER. TO SOME DEGREE, IT'S A BIT OF OPTIMISM I ACTUALLY THINK THE MARKET HAS BEEN WRONG RELATIVELY CONSISTENTLY, EXPECTING FIVE OR SIX CUTS, THEN FOUR, THREE, FINALLY DOWN TO TWO. I THINK THEY'RE RELUCTANTLY COMING IN LINE WITH THE REAL DATA AND I THINK LISTENING TO POLICYMAKERS THAT SAY THEY WANT TO CUT, BUT THE DATA HAS TO GIVE THEM PERMISSION TO CUT, WHICH IT HASN'T DONE THUS FAR. >> I KNOW YOU'RE A MACRO GUY, NOT NECESSARILY AN EQUITIES PERSON WE'VE WATCHED THE EQUITIES MARKET MOVE MUCH HIGHER AND THEN IN THE PAST WEEK FLIP THAT SCRIPT, IN PART I THINK ON THE BASIS OF THE SHIFTING VIEW WHAT DO YOU MAKE OF THE WAY THE EQUITY MARKETS HAVE MANAGED THROUGH THIS TO THE EXTENT THEY HAVE, AND SORT OF THIS AI PIECE, WHICH I DON'T KNOW IF IT'S IDIOSYNCRATIC OR A SEPARATE THING HAPPENING ON ONE END AND JUST ABOUT EVERYTHING ELSE >> FIRST, YOU'VE OBSERVED THAT THERE ARE A SMALL HANDFUL OF COMPANIES THAT HAVE BEEN DRIVING THE INDICES HIGHER AND THAT'S DRIVEN BY AI I THINK IT'S A NET POSITIVE THING. OVERALL I WOULD SAY THE MARKET IS EXPECTING THE FACT THAT THE ECONOMY IS ACTUALLY IN PRETTY GOOD SHAPE, AND IN FACT THE FED HAS BEEN PRETTY AGGRESSIVE THEY HAVEN'T TANKED THE ECONOMY. WE'RE STILL LOOKING AT UNEMPLOYMENT THAT IS AT RELATIVELY GOOD LEVELS I THINK THE MARKET IS TELLING US TWO THINGS, INTERESTING TECH MOVE IN THE WORLD OF AI, BIG NAMES THAT ARE MOVING INDICES, AND SECONDLY, OVERALL GIVEN HOW MUCH THE FED HAS DONE, THE ECONOMY IS HOLDING UP PRETTY WELL, AND THEREFORE I THINK EQUITY VALUATIONS WILL DRIFT HIGHER, IF ANY DIRECTION AT ALL. >> IF IT WASN'T AN ELECTION YEAR, WOULD THERE BE ANY REASON AT ALL, GIVEN WHERE WE ARE IN THE ECONOMY, TO EVEN BE TALKING ABOUT RATE CUTS? >> TAKE OFF THE ELECTION YEAR COMMENT. I THINK IN GENERAL THERE'S A REASON TO TALK ABOUT RATE CUTS IN PART, BECAUSE THE FED HAS BEEN VERY AGGRESSIVE THEY THINK THEY'RE IN A TIGHTENING MODE OR RESTRICTIVE TERRITORY, AND NORMALLY IF INFLATION IS COMING DOWN, THEY SHOULD BE TALKING ABOUT CUTS BUT I THINK THE ISSUE IS PULLING THE TRIGGER, AND THAT I THINK IS GOING TO BE VERY DATA DEPENDENT. AS I SAID, TO ME 50/50 THAT THE DATA WILL GIVE THEM PERMISSION TO DO A CUT. >> GO AHEAD, SORRY >> I DO THINK IT'S FAIR TO RECOGNIZE WHAT THEY'RE TALKING ABOUT HAS TO DO WITH THE MACRO ENVIRONMENT AS OPPOSED TO SORT OF THE POLITICAL ENVIRONMENT. >> STEVE LIESMAN WAS WITH US A SHORT TIME AGO WHEN PCE CAME OUT, AND HIS POINT IS EUROPE IS LOOKING TO CUT INTEREST RATES, POTENTIALLY NEXT WEEK. AND THAT COULD HAPPEN UNDER A SIMILAR LEVEL OF INFLATION, 2.4% BUT OUR ECONOMY IS PRETTY DIFFERENT. >> I AGREE, OUR ECONOMY IS DIFFERENT. I THINK THINGS ARE MUCH MORE ROBUST HERE THAN THEY ARE IN EUROPE WE'VE GOT THE DYNAMISM SO THIS MAY BE A POINT OF DISCONNECT BETWEEN US AND THE EUROPEANS.
