Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot
Episode publishedPodcast: Forward GuidanceForward Guidance
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Yeah. For sure. Thanks so much for having me. Congrats, on on taking this over and, and I think given a new, a new flavor, of, of the pod. And so I'm happy to be here, for my first time and probably couldn't be a, a more consequential after a more consequential couple of days than, than the last few days.
Yeah. Yeah. There's no shortage of things to talk about. That's for sure. We're gonna sell this out pretty quick here. Well, let's let's start off with, from the top line from the FOMC. We'll start with FOMC, then we'll get into auction and and impacts from that, etcetera, etcetera. So, obviously, we got the 25 bps, Scott, that was, entirely expected by the markets. But just wanna get your high level view of some of the main takeaways, at least from the initial statement and the rate change decision, and then we can get into some of the specifics on the press conference after.
Yeah. I think mostly the the statement and the and the 25 basis point guide was largely in line. I think, you know, I read the statement. There's some tweaks here and there, and you could maybe try and infer, like, a little bit more hawkishness from the statement than, you know, the the statement, 6 weeks prior. But the big picture story is that it was basically a confirmation of the Fed continuing down the path that they laid out, and particularly chairman Powell laid out, 6 weeks ago in terms of a shift in in policy, and and that was a continuation of what when he said the direction of trave
Yeah. Really seen that way. So, you know, it feels like one of the main points of contention right now on this rate cutting path is whether you believe we are in restrictive territory or not. Something he mentioned in the press conference was that he still felt like they were restrictive by the the way at least he perceives it. But I know, yourself and and many others potentially see it in different ways, and I feel like that has a lot of implications on how much into this rate cutting path that they get and also what are the impacts from it. So, know, it sounds like, as I said, he he really r
you when you think about a neutral, interest rate, I think there's there's basically 2 different ways that you can approach it. You can approach it from a theoretical model based perspective, which is mostly how the Fed approaches this problem, when they're thinking about what our star is. And, or you can look at it from an empirical perspective, which is, I think, basically the way that most, macro, investors look at this. And, when you look at it from an empirical perspective, here's the basic picture, which is that we've had interest rates at roughly this level or higher for the course of t
I feel like one of the big debates is looking at, like, whether you do believe to look at interest rates from a nominal or real perspective. And so, like, a lot of the idea of restrictiveness is hung up on this idea that, oh, if you look at, like, real Fed funds, right, it's highly elevated from a cyclical per
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