What does the trend look like when it comes to inflation?

The trend is not your friend, to use the old cliche.

They target, of course, the Personal Consumption Expenditure Index, PCE index for inflation.

Their 2% target is the headline number for that.

Everybody also looks at the core because obviously we know what's going on with gasoline and energy prices, and that's not something the Fed can fix.

But if you look at the core, one of the arguments was that they were making progress because on a three- and six-month basis, the annualized rate of inflation was dropping.

But this month, economists have already figured out what the PCE is going to show.

Is the trend moving in that direction because of energy prices, or are there other factors at

What does the trend look like when it comes to inflation? The

trend is not your friend, to use the old cliche.

They target, of course, the Personal Consumption Expenditure Index, PCE index for inflation.

Their 2% target is the headline number for that.

Everybody also looks at the core because obviously we know what's going on with gasoline and energy prices, and that's not something the Fed can fix.

But if you look at the core, one of the arguments was that they were making progress because on a three- and six-month basis, the annualized rate of inflation was dropping.

But this month, economists have already figured out what the PCE is going to show.

Is the trend moving in that direction because of energy prices or are there other

What are the, what are the sides of the debate that you're looking at?

Well, the biggest one is transportation because the cost of diesel is obviously through the roof.

And we're seeing more and more and more stories about how truckers are having to pass on their price increases.

They can't make a living at these levels of diesel unless they raise prices.

And then if they're raising prices to their customers, their customers are gonna raise prices to you.

And it takes a while for all of this to happen, but it should start showing up soon because the prices have been elevated for some time.

So a lot of people are watching to see what we get in a lot of different categories of stuff that's trucked a lot.

Do we expect that to change anytime soon?

What are the, what are the sides of the debate that you're looking at?

Well, the biggest one is transportation, because the cost of diesel is obviously through the roof, and we're seeing more and more and more stories about how truckers are having to pass on their price increases.

They can't make a living at these levels of diesel unless they raise prices.

And then if they're raising prices to their customers, their customers are gonna raise prices to you.

And it takes a while for all of this to happen, but it should start showing up soon because the prices have been elevated for some time.

So a lot of people are watching to see what we get in a lot of different categories of stuff that's trucked a lot.

Do vegetables go up? Does clothing go up? Uh, those kinds of things because of transportation costs.

Do we expect that to change anytime soon?

I think at this point, uh-

uh-He would be just still writing it because he told us on, uh, July twenty-ninth that he hadn't started writing it yet, so maybe it's in the first draft or second draft stage.

But no, uh, you know, the problem here is the same thing, the same problem we have all the time with this administration in place is the news changes so quickly that trying to keep up with it is very difficult.

So I suspect that he would be speaking more in general terms rather than in specific terms.

Now, we did have, uh, last week the Treasury Department announcing its plan to double the buybacks, uh, increase liquidity basically, uh, to try to keep people able to, uh, buy treasuries.

Uh, the yields obviously worrying the Treasury Secretary.

And that could have an impact on the Fed.

B-given that the chairman has said he doesn't wanna give forward guidance to the market necessarily, could he give a little bit more clarity when it comes to whether the Fed and the Treasury are gonna be working a little more closely together going forward?

Okay.

Whatever this was, it ran down into those cattails.

Well, we decided to go in after it.

So we go into the cattails.

You can't see.

You're pushing the cattails.

And right there, If the pond got too full, Grandpa had like a little creek he had cut off of it where it would drain back down into the bigger pond.

I'm like,

What does that tell us about where the lean could be?

That's an interesting question because there's sort of two camps at the Fed right now.

Uh, well, three if you put Kevin Warsh by himself because he says he's not participating in the forward guidance stuff.

But, uh, there's the camp that is okay with raising interest rates if they think the inflation danger is growing, uh, and that's a very large group of people.

And then there are people like Beth Hammack of Cleveland, Lorie Logan, uh, of Dallas, uh, Jeff Schmidt of Kansas City, who think that the Fed has been behind the curve on inflation in terms of their target of 2% for five years now, and it's about time that they get that done, and that the, the longer they wait, the, the harder it just gets, and then people start to anticipate that inflation will be higher.

So they say we're not tight enough because inflation's not going down to 2% and, uh, we think we should raise rates right now.

So if there's enough of a concern in the first group about th- those who are worried about if inflation picks up we could hike, then you could see a movement to, uh, to do that.

What could the impact be in terms of economic growth? What could the market impact be?

We hope that you enjoy today's speaker.

[on-hold music] Hello, Montana.

[crowd murmuring] My name is Michael McKee, and I'm a recovered alcoholic.

[crowd murmuring] And these people have scorecards over here.

[laughing] Recovered, uh, from a seemingly hopeless state of mind and body, and I need to thank you for that possibility in my life.

Uh, Doc was telling the truth there about he and I being on different sides of the fence, and it was, oh, twenty to thirty years ago, and, uh, he didn't like my type, and I really didn't like his type.

And it turns out that I came to realize after some time in Alcoholics Anonymous that his type was the better.

[laughing]

I mean, how much pressure is Warsh facing? Is he under pressure right now?

Uh, yes.

Uh, he's under pressure, uh, uh, maybe a little bit different than people anticipated when the president was, uh, first nominating him.

Uh, there was a feeling that, of course, uh, Trump would be on his case immediately to start lowering interest rates.

The president said at one point, "I'm not gonna pick anybody who won't cut interest rates." But since then, we've seen inflation flare up quite a bit because of the war that Donald Trump started.

So Trump seems to be willing to give him the benefit of the doubt.

Still, there's a cloud hanging over Warsh and his nomination, uh, and his ascension to the, uh, chair.

How does the Fed react to that in this meeting?

What made you conclude that a completely different approach was needed here?

Well, the simple answer is, as you say, most marketing focuses on getting leads.

But in reality, a few big customers drive most of the revenue of major e-mobility organizations.

So chasing volume doesn't necessarily help you win the deals that actually matter.

So we saw this as a mismatch.

So nanomarketing was introduced.

Typically, marketing strategies are optimized for volume, not for outcomes.

really.

Have you got a different perspective on things?

Yes, I think I do.

I was listening to what Jim said.

I don't think Jay Powell is staying because he's trying to stand in the way of progress at the Fed.

I think Jay Powell is staying because he doesn't trust the Department of Justice.

He noted at the top that the Justice Department had said that they were dropping the probe, but he referenced back to Jeanine Pirro's comment about we could file another criminal complaint.

And he doesn't know what the Justice Department will do, whether or not there would be validity in what the Justice Department might do.

What is the policy environment for the Fed right now, given all the uncertainties around what's happening in the war in the Middle East, what that could mean for inflation, what it could mean for the labor market as well?

They will always tell you under any circumstance that their monetary policy is well positioned to handle whatever happens.

That's sort of a standard line.

But in this case, it's true.

There does seem to be a general consensus that there is still, uh, tight monetary policy.

Uh, may not be very tight, and there's disagreement over how tight, but if you're going to have inflation, where they are now is not a bad place to be to try to, uh, cut off as much as you can.

You can't do anything about oil prices, but, uh, getting into other parts of the economy.

And given this is the last official policy decision under Chairman Powell, how would you sum up the Powell legacy? After all the fights with the president, the fights with inflation after the pandemic, and after tariffs, how do you sum up a Powell Fed?

Can you make any expectations for March?

Well, you can't have a whole lot of confidence, but this is going to be released on time, and all the data will be included, and we won't have any lingering problems from the government shutdown that we can really anticipate.

So I think at this point, it will get attention as a realistic view of where the labor market was in the month of March.

The issue is... what does that really mean to the Fed at this point? And I go back to Jay Powell at the last Fed meeting at the news conference where he said that we don't know what's going to happen and we don't know exactly why we saw the big drop in February jobs and why we might see it reversed because we've seen a big change in the number of people who are in the labor force.

And we may not need so many jobs.

And so the companies may not be hiring so many people.

So whether it's a sign that the economy is falling off if the numbers are low or a sign that the economy is hanging in there if they're high, we're going to have to kind of guess at that for this moment.

In terms of what this could mean, though, for the Fed's planning going forward, since we do have that uncertainty that you mentioned that Chairman Powell talked about, I mean, how do we gauge what the Fed could be considering here?

Can you make any expectations for March?

Well, you can't have a whole lot of confidence, but this is going to be released on time, and all the data will be included, and we won't have any lingering problems from the government shutdown that we can really anticipate.

So I think at this point, it will get attention as a realistic view of where the labor market was in the month of March.

The issue is... what does that really mean to the Fed at this point? And I go back to Jay Powell at the last Fed meeting at the news conference where he said that we don't know what's going to happen and we don't know exactly why we saw the big drop in February jobs and why we might see it reversed because we've seen a big change in the number of people who are in the labor force.

And we may not need so many jobs.

And so the companies may not be hiring so many people.

So whether it's a sign that the economy is falling off if the numbers are low or a sign that the economy is hanging in there if they're high, we're going to have to kind of guess at that for this moment.

In terms of what this could mean, though, for the Fed's planning going forward, since we do have that uncertainty that you mentioned that Chairman Powell talked about, I mean, how do we gauge what the Fed could be considering here?

Um, can you make any expectations [chuckles] for March?

Well, you can't have a whole lot of confidence, but this is going to be released on time, and all the data will be included, and we won't have any lingering problems from the government shutdown, uh, that w-we can really anticipate.

So I think at this point, um, it will get attention as a realistic view of where the labor market was in the month of March.

The issue is w-what does that really mean to the Fed at this point? And, and I go back to, uh, Jay Powell at the last Fed meeting at the news conference, where, uh, he said that, um, we don't know what's going to happen, and we don't know exactly why we saw the big drop in February jobs and why we might see it reverse, because we've seen a big change in the number of people who are in the labor force.

And we may not need so many jobs, and so the, uh, companies may not be hiring so many people.

So whether it's a sign that the economy is falling off if the numbers are low or a sign that the economy is hanging in there if they're high, uh, we're gonna have to kinda guess at that for this moment.

I mean, how do we gauge what the Fed could be considering here?

Well, uh, the thing to keep in mind is that at this point, the next meeting for the Fed is at the end of April.

So he's, you know, because remember, he made that video after the subpoenas and was was unheard of to see a Fed chair come out and do something like that.

Well, he's not rejoicing.

I'm sure he's happy with the ruling.

And the Fed had always taken the position there was no crime here.

And they pointed to the senators who all said there was no crime here, which Judge Boasberg notes in his decision.

And the administration has just continued to pursue this.

So the Fed has had to sit back.

And when it comes to this specifically, we know he'll be asked.

it was unheard of to see a Fed Chair come out and do something like that.

Well, he's not rejoicing.

I'm sure he's, uh, happy with the ruling, and the Fed had always taken the position there was no crime here, and they pointed to the senators who all said there was no crime here, which Judge Boasberg notes in his decision.

And, uh, the a- administration has just continued to pursue this, so the Fed has had to s- sit back.

This was sort of the Fed's longer shot strategy-

Mm.

And they won on that.

So now they don't even have to go farther unless she wins her appeal.

... v- uh, was unheard of to see a Fed Chair come out and do something like that.

Well, he's not rejoicing.

I'm sure he's, uh, happy with the ruling, and the Fed had always taken the position there was no crime here, and they pointed to the senators who all said there was no crime here, which Judge Boasberg notes in his decision.

And, uh, the a-administration has just continued to pursue this, so the Fed has had to s-sit back [chuckles].

This was sort of the Fed's longer shot strategy-

Mm.

And they won on that.

So now they don't even have to go farther unless she wins her appeal.

it was unheard of to see a Fed chair come out and do something like that.

Well, he's not rejoicing.

I'm sure he's, uh, happy with the ruling, and the Fed had always taken the position there was no crime here, and they pointed to the senators who all said there was no crime here, which Judge Boasberg notes in his decision.

And, uh, the a-administration has just continued to pursue this.

So the Fed has had to s-Sit back.

This was sort of the Fed's longer shot strategy-

Mm

... and they won on that.

Talk a bit about the significance of that in light of the really robust sanctions that have been placed on Russia since the start of the war in Ukraine.

Well, this is a bit of good news for Russia in the sense that they can sell more oil now.

The US and India had just reached a deal where India said it would no longer buy Russian crude, and that would have crimped the Kremlin's ability to fund its Ukraine war.

And now, to keep prices down, the president's going to let India buy more oil.

The other question that follows from that is, will they let China buy more oil? Because they, too, are under the sanctions.

It's a good thing for Russia.

It doesn't really help the U.S. that much because, as Julian said, oil is a globally priced commodity.

And even he was saying, it's not always a good idea.

So what could this mean for the Federal Reserve going forward?

Well, the Fed doesn't know, and that's one of the things that they're going to be looking at.

The whole question that surrounds all of these low numbers, is it because companies don't want to hire right now, or is it because they don't have people to hire? In other words, has the administration's crackdown on immigration and the ejection of people from the economy and scaring people into staying home from work affected Does that mean that there are fewer people to hire? And that's one of the big reasons that we're not seeing the same kind of payroll growth.

And it's going to take a while to figure that out.

We do, however, Nathan, get an update on the population estimates.

This comes once a year in January.

And that will make December and January numbers not quite comparable.

Where's the thinking on that right now?

So what could this mean for the Federal Reserve going forward?

Well, the Fed doesn't know, and that's one of the things that they're going to be looking at.

The whole question that surrounds all of these low numbers, is it because companies don't want to hire right now, or is it because they don't have people to hire? In other words, has the administration's crackdown on immigration and the ejection of people from the economy and scaring people into staying home from work – Does that mean that there are fewer people to hire? And that's one of the big reasons that we're not seeing the same kind of payroll growth.

And it's going to take a while to figure that out.

We do, however, Nathan, get an update on the population estimates.

This comes once a year in January.

And that will make December and January numbers not quite comparable.

Where's the thinking on that right now?

What does that tell you about what the economy looks like going into 2026?

Well, if you're looking at it in terms of the Fed's dual mandate, you do have inflation.

The PCE numbers came out last week looking at 2.8%, which is up from the month prior.

Now, these are November numbers.

The December numbers won't come out yet for a couple of weeks.

And in the December numbers, the expectation is that inflation will rise again to 3%.

And then when you look at the jobs numbers, the unemployment rate went down last month, and jobless claims have stayed extremely low.

Could we be seeing the Fed's focus shift now from the job market to inflation once again?

What does that tell you about what the economy looks like going into 2026?

Well, if you're looking at it in terms of the Fed's dual mandate, you do have inflation.

The PCE numbers came out last week looking at 2.8%, which is up from the month prior.

Now, these are November numbers.

The December numbers won't come out yet for a couple of weeks.

And in the December numbers, the expectation is that inflation will rise again to 3%.

And then when you look at the jobs numbers, the unemployment rate went down last month, and jobless claims have stayed extremely low.

Could we be seeing the Fed's focus shift now from the job market to inflation once again?

Mike, would you go that far?

I don't know if I would go quite that far.

It's impossible to separate yourself from the headlines, of course.

But for Fed officials, this is a worrying situation because of the criminal investigation.

Last week, John Williams of the New York Fed was telling us that He thinks this is a kind of order of magnitude more threat from the administration.

And he, of course, had praise for Powell as a man of impeccable integrity.

I do think that in this case, we're reasonably free from suspicion on January 28th because the numbers are saying don't cut with the PPI inflation that we got last week up high and Retail sales still strong.

Given where that potentially stands, what does that mean when it comes to the question of Fed independence? How much of a threat is Fed independence under from an investigation like this? Well, I think folks at the