Introduces Jim Bianco and asks for his first reaction to the Fed's decision, framing it as 'not as bad as it could have been' and a potential victory for Powell.
speaker1
Jim Bianco
Disagrees; says it's not as good as it could have been. Wanted more dissents (a 75 vote) to signal Fed independence and send a message to the administration against political pressure for future cuts.
Questions the rush to cut rates today given the SCP's projection of strong growth, lower unemployment, and significantly lower inflation next year.
speaker5
Asks Bianco if the Fed accepting a prolonged period above its inflation target adds to inflationary pressure.
speaker1
Jim Bianco
Agrees the Fed should be worried. Affordability is a crisis with CPI up 27% since COVID. To fix it, inflation needs to run below 2% so wages can catch up.
Asks if the Fed is now in a 'wait and see', data-dependent mode, and if Powell signaling 'one and done' would change the market's view.
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Jim Bianco
If Powell says 'one and done', it shows the chairman is running the show. The risk is a Trump-appointed successor in May will want lower rates, and the current FOMC didn't signal strong enough independence to resist.
Asks about the Fed restarting bond purchases due to reserve issues, and whether this indicates structural debt problems and forced debt monetization.
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Jim Bianco
The Fed is acknowledging 'fiscal dominance'. The repo market funding the $38T Treasury market is too small due to QT.
Acknowledges Bianco's point but notes the market is responding to the current reality. Both hawks and doves got something they wanted from the meeting.
speaker5
Presents the counter-argument: debt monetization and fiscal spending support markets without runaway inflation, so 'what's the problem?'
speaker1
Jim Bianco
The problem is the incoming Fed chairman, who will be perceived as having a political agenda. The current FOMC missed a chance to signal it would act as an independent brake.