Why today's Fed meeting is actually interesting

It's Fed Day. It is Fed Day. At long last, the long-awaited Fed meeting that we have been talking about. And today, obviously this Fed meeting itself is not going to be that interesting, but today is the day when Fed meets oil and we continue this conversation about what effect these higher oil prices will have, whether the Fed will look through, as the parlance goes, look through this oil price increase and not do anything about rates, not just today but for the next few meetings. We get a new dot plot, a summary of economic projections, although there's some debate about how much credence we should give to that. There's always a debate about how much credence we should give to that. It's even more today. So there's a lot of different things to sort of parse through, but it feels like we're not going to see a change, but we're still going to keep talking about whether there's going to be a change going forward. We know the Fed's not going to cut rates today, and we know, I think, the Fed's not going to cut rates in May because Jay Powell is not going to be cutting rates so long as he is the Fed chair, and it is expected that this is his second to last meeting. But I think the reason why this Fed meeting is particularly interesting is because it's, you know, in May it'll be processional if we have some clarity from the Senate, Kevin Walsh's appointment, you know, confirmation, et cetera. But so in some ways, this kind of feels like the actual last Powell press conference. This, to me, feels like it's going to mark the end of the era because technically he's not lamed up yet. There's been a nomination, but there's been no movement on confirmation hearings for Kevin Walsh. Now we expect that will be the case, but I feel like this is it for Powell. So why is that interesting? Like, so, okay, so connect the dots for me. Okay, so I take your argument. That's fine. We can call this Powell's last real meeting where he could say something that would... But what's he going to say that's going to be interesting? I mean, he'll talk about how he's thinking about and how the committee is thinking about these oil prices, obviously. He'll probably get some more questions about the subpoenas that the Federal Reserve received that were thrown out, to which he will say, I'm not going to comment on that. So, you know, what do you, what are your candidates for interesting commentary today? Well, Powell has, you know, by far in the last decade, well, I shouldn't say decade, since Paul Volcker, Powell has had the most dynamic inflation environment to navigate as a Fed chair. So not only will his comments on today's inflation report, yet another surprise in the Powell era be notable, but I think where inflation kind of, what the sendoff is for inflation economy wide, as Powell exits the chair, it's, that's the end of his, of the markets receiving and kind of contemplating most closely his view on how he interprets that inflation, which has been largely a willingness to look through. And then it became a very quick willingness to not look through inflation. And he's, you know, I think the market, a lot of people in the market would argue that he's been late on in both directions. I would argue that he's kind of just been consistently timed in both directions, whether that's late or not, it was, it was a similar kind of patterning. And as we enter a new era of the Fed where the inflation problem, as it were, does not appear to be fully solved, I think it's just worth noting, like one for the road, hey, here's how, here's what the consensus was. If you really care about the Fed on how you want to be right, you want to be wrong, do you want to be in agreement with disagreement with the Fed? Like this is the last time really that we're going to get that view from Powell. And now we've got to kind of warm up to an entirely different way of communication, an entirely different worldview, I think, from Kevin Warsh, which will take some time for the markets to kind of get into. I mean, it's been eight years. It's been a very long time that we've had Powell in that seat dealing with these dynamics. And there's an, there's a way that you can anticipate how he's going to approach some of these things that, you know, will take some learning with Warsh. You're not sold. Not entirely convinced. Listen, it'll be, it'll be interesting because we're always interested in the Fed. I don't know that it'll be any, I don't know. I'm not convinced on that. I mean, you know, and when you say like the market feels, I was, I sent this study to you from 22V Research where they asked survey respondents. They didn't ask whether they were interested in the Fed and what he's going to say. They asked what the market reaction would be to the Fed. And the majority of them, 79% said the market reaction to today's FOMC will be mixed or negligible. In other words, there won't be much reaction. Sure. So that's kind of it. So you're kind of adopting my worldview in some ways, which is the only thing that matters is what moves the market. And so if it doesn't move the market, ergo, it matters because we like to talk about it. Sure. But it matters more. Yes. Yeah. If it moves the market. Sure. That's all right. A couple of cleanups, a couple of cleanup items on the Fed before we move on here. Let's bring up Claudia Psalm's tweet, her suggestion around how the Fed should or should not view their economic projections, which to be clear, are expected to come out today. And Claudia expects them to come out today. But drawing the parallel to March of 2020, when the Fed suspended their economic projections right at the height of the pandemic and kind of looked at the current economic environment and suggested that they consider doing the same. Now, again, Claudia followed up and said, they are definitely going to release these today. But it is a thought experiment around, is this the kind of environment in which the Fed might consider changing its communication? Well, and I mean, you know, there has been sort of the knock on the SEP for a while, the dot plot for a while, that like, we should take the thing with a grain of salt. I mean, Jay Powell himself has said, like, don't pay too much attention to this thing. And the market doesn't pay attention to him and instead invest too much meaning in it. So is it time? I mean, you know, you can make an argument, get rid of the thing entirely, as some people have. There was another, there was an opinion piece in The Wall Street Journal, which made all kinds of suggestions for Kevin Warsh to depoliticize, what they said was depoliticize the Fed. They said, get rid of the press conferences, let's go back in time. I can't be, I can't get on board with that. But I do wonder about the actual utility of the SEP at this point. Is it, you know, is there such a thing as too much communication? It being too granular and then us obsessing over, you know, each dot, whereas we're not, that doesn't really, is it useful to us? And I'm not convinced that it is that useful. Well, selfishly, I think it's very useful. I think it's great. I don't want to go back to a time when there were only four press conferences per year. Right. And I've always, I've always enjoyed the SEP. I think it, I think in theory, not having to show your hand, as it were, would give you flexibility to, you know, change your mind on the fly. I actually sort of think in practice, having the SEP as a benchmark to either lean into or steer away from gives the Fed and various Fed officials and market participants, folks like us talking about it, a lot more guidance and a lot more latitude, frankly, I think to change your mind. Like, I think if you are a Fed official who is not publishing a dot plot four times a year, it's just going to be harder, I think, for both yourself and people listening to you to be like, OK, can you benchmark this for me? Where do we start from again? So you see, you don't like just rely on Fed speak for speeches that they make. Like, I understand the idea of, you know, when you benchmark yourself to, I mean, people say it's like, OK, don't make a conservative goal because then that's going to be your ceiling. All these kinds of like, I don't know, life advice ways that you shouldn't give yourself benchmarks. And so that's the idea that I think is appealing to policymakers in some ways. But I think that in practice, it just sort of leaves everyone, including the Fed themselves, those officials themselves and their teams, kind of just unmoored and out in space and not have a place to- Where was my dot again? Oh, yeah. Let me look at the dot plot to remember what I think about the monetary policy. That's my view on it. Maybe. I don't know.