Hello my friends. Today is April 29th

and this is my April FOMC debrief. All

right, so I just finished watching the

final J. Powell press conference and

honestly it's a little bit sad. I've

been watching Powell for for years and

years and at the end of the day I think

Powell was someone that is very smart

and did what he believed to be best for

this country. At the end of the day I

think Powell was a good Fed chair. Next

time we'll have Kevin and you know we'll

see what happens then. Now before we

continue, let's level set a little bit

as to what happened in the intermedating

period. The elephant in the room over

the past few weeks of course has been

the war in Iran. No one knew how long it

would take or what it would do to oil

prices. I think the president did his

best to jawbone oil prices, but at the

end of the day, I think the war lasted

longer than many expected and oil prices

continued to march higher. The market

has been looking at this and been very

volatile in pricing its expectations of

Fed policy. Now in the beginning

earlier in the year the market was

pricing in a few cuts but since the

commencement of the war the market took

those cuts out and even priced in some

probability of a rate hike really

fluctuating along with oil prices. Now

not withstanding that looking at the

labor market labor market data has been

stronger than expected and consumer

spending data has been resilient as

well. So overall during the

intermedating period although we did

have a lot of volatility in oil prices

the economy the US economy seems fine.

So heading into this meeting this was

widely expected to be a very boring

meeting. The market uh did not price in

basically any probability of the Fed

doing anything. Um, what I was focusing

on heading into this meeting is to learn

more about what Chair Powell would do

after his chairmanship ends. After all,

it is customary for a Fed chair to

resign from the board and allow the

president to appoint someone to replace

him. But last meeting, Cher Pow hinted

at that uh maybe he would just kind of

stay on. And so I was looking for more

clarity to that today.

Uh, but actually the meeting began with

kind of a bang. So, first at 2:00 when

we got the uh the FOMC statement, we saw

not one descent, but four. Now, everyone

is expecting one descent from Governor

Moran, who customarily would like to

have more rate cuts, which he did again.

But what was special this time was that

we actually had three other people form

a hawkish dissenting block. Now, these

are well-known uh Fed presidents that

are hawkish. It's uh President Logan

Hammock and Qashqari. And what these

people desented on again was not the

rate decision. They were totally okay

with keeping rates where they were. They

were dissenting upon the language in the

statement which suggested that the next

move the next move would be a Fed cut.

Now looking at the sentence itself, you

will see that you know on its face it

doesn't seem like there's much bias in

in it. Uh but if you are a Fed watcher

and looking at the Fed history, this

statement, this language was basically

initially rolled out in the past when

the Fed was strongly hinting at uh to

the market that the next l the next move

will be a cut and how many cuts is going

to be up to the data. So by keeping this

sentence in in the um statement the Fed

presidents who who obviously have been

working at the Fed for a number of years

knew that this is an easing bias and

disagreed with it. What they wanted it

seemed

was to have language that says hey the

next move could potentially be a hike.

So basically more two-sided risk which

is actually totally reasonable. After

all, if you look at what's happening

with oil prices, with gasoline prices,

there is a possibility that we could

have a wave of inflation depending on

what happens in the Middle East. So,

that was kind of the exciting thing

there and that's not going to be

resolved for for some time. When Kevin

comes in as chairman, uh that hawkish

block will still be there and I'm

guessing that Kevin will probably want

to have great cuts and who knows, he may

be the first Fed chair to actually

descent against his own committee.

Now, the second thing that I thought

super interesting about this time was,

of course, Cherpo being crystal clear

about his path forward. Let's listen to

what he says. I welcomed the

announcement last Friday by the US

attorney for the District of Columbia

that she had closed the criminal

investigation. She also noted, however,

that she would not hesitate to restart

the investigation.

Over the weekend, the Department of

Justice provided assurances that they

will not reopen the investigation unless

there's a criminal referral from the

Fed's inspector general. And absent such

a referral, if they do appeal the recent

court decision, they would not seek, as

part of that appeal to restart the

investigation or send new subpoenas.

I've said that I will not leave the

board until this investigation is well

and truly over with transparency and

finality and I stand by that. I'm

encouraged by recent developments and

I'm watching the remaining steps in this

process carefully.

My decisions on these matters will

continue to be guided entirely by what I

believe is in the best interest of the

institution and the people we serve.

After my term as chair ends on May 15, I

will continue to serve as a governor for

a period of time. To be determined, I

plan to keep a low profile as a

governor. There's only ever one chair of

the Federal Reserve Board. When Kevin

Worsh is confirmed and sworn in, he will

be that chair. So, like he mentioned, he

is going to stay on as Fed governor

after his chairmanship ends largely

because he doesn't like what happened

with um with the criminal investigation

into the Fed and into him. Uh in his own

words, he was not really bothered by uh

the president being vocal, being mean,

and saying things about him. He was

really, really bothered by the criminal

action, the criminal pro the criminal

proceedings against him and the Fed.

that in his mind was a red line that was

crossed. And so because of that, my

sense is that he feels that the Fed

independence is threatened and he's

going to stay on the Fed until he feels

comfortable that um until he feels

comfortable. And that could potentially

be, let's say, all the way through

midterms. Let's say that the Republicans

lose the Senate so that a future

position, future Trump governor could

never be confirmed or very difficult to

be confirmed and maybe he would leave

then. Uh nobody knows, only Cher Powell

knows and we'll see how things unfold.

Uh but the implication of course is that

if President Trump had not been so

aggressive in his uh treatment towards

uh of Powell and of the Fed, maybe he

might have had an extra Fed position to

fill. So that strategy did not seem to

work.

Now, one other thing that I note

in this press conference that I thought

was interesting was that, you know, Cher

Pal himself didn't seem very hawkish. uh

in a sense that he was noting that even

though high gas prices of course would

have an upward pressure on inflation, he

also repeatedly emphasized that well if

people have to pay higher gas prices

that means they have less money to spend

on other things as well. So that has a

negative growth impact that could impact

in part moderate the inflationary

impulse of high oil prices and of course

it also raises concerns about uh the

Fed's employment mandate. So even if we

do have extended period of um oil price

high oil prices there is a point certain

point I don't know where it is it could

be 120 it could be 130 it could be 140

where the market will not price in

additional Fed hikes in response to this

but actually price in Fed cuts because

the growth impact of higher oil prices

will overwwayigh the inflationary

impacts. So, we did see that a little

bit earlier a few weeks ago, but it's

it's not it's not it's we're not seeing

it today at least, and oil prices are

surging. So um at the end of the day it

seems what will happen is that there is

some kind of u

sweet spot where you could have oh well

I wouldn't say sweet spot there is some

level of oil prices where you would

actually get hikes and beyond which you

would actually get cuts and I guess the

market will feel that as the data goes

on.

All right so that's all I prepared

for today. Um looks like uh we we'll

hear soon from what the new fetcher uh

will be at the next meeting. It's going

to be his first. It's going to be very

interesting. There are some hints that

maybe uh Kevin Warish actually doesn't

want to do conferences or at least not

as many. So, uh everything is up in the

air. We'll find out soon. Talk to you

all this weekend.