00:00Joining me now is Mark Oswald, Chief Economist and Global Strategist at ADM Investor Services International.
00:06What's your take on this address by Walsh?
00:09I mean, he spoke before the world's central bankers.
00:11Do you think he inspired confidence?
00:14Yes, or rather he restored confidence, I think is probably a better term.
00:19The important thing he did was establish a framework within which this new Fed,
00:26if one wants to call it, that is going to operate.
00:29He made it clear that inflation isn't coming down as they would like it to.
00:34What we need or markets need is an analysis from the Fed of how they view the current economic performance.
00:42That was important.
00:44Also important was the fact that he characterized the labor market as basically quite strong,
00:50quite dismissive of payrolls, which has been quite often at the forefront of labor market analysis,
00:55instead pointing to jobless claims, low unemployment rate, full employment, as he called it,
01:03and also giving some clues about what it is in the inflation data he doesn't like
01:09by highlighting that nearly half of all the inflation sub-indices are running at 3% or above.
01:18That basically is something which markets can really get a hold of.
01:21Yeah, and he really doesn't like the fact that inflation has missed its target,
01:25and he's did it himself for 65 months straight, signaling that he is considering a hike.
01:32Do you think that's going to allay some fears that he's too close to President Trump,
01:36who famously does not want interest rates increased?
01:40In fact, he wants them lowered.
01:44Well, Mr. Trump has said what he says afterwards, of course,
01:50that he won't interfere in Fed policy, but he does feel free to comment.
01:55Yes, they are running a little bit at loggerheads.
01:58I think really more important was with the U.S. Treasury focusing much more of its funding
02:08for its huge budget, 6% budget deficit,
02:11the rise at the front end of the U.S. Treasury yield curve
02:16is going to create some additional debt servicing costs.
02:19Meanwhile, at the long end, the fact that the term premium has barely moved today,
02:25while the short end has risen by 10 basis points,
02:28shows that markets have a lot more confidence in this new Fed
02:32than they had in the weeks following the last FOMC meeting,
02:38which was, shall we say, a bit of a communications faux pas.
02:44Did you pick up any tension from Kevin Walsh during the speech
02:49over Treasury Secretary Scott Besson's recent intervention in the bond market,
02:54the buyback, and I think another is scheduled in September?
03:00I think he's basically tried to avoid any comment on that.
03:04Whatever tensions there may be are going to be discussions
03:08which are held behind closed doors,
03:11and I think that's the way that Mr. Walsh wants to operate.
03:14He doesn't want the White House or the Treasury to criticise him,
03:20and as a quid pro quo,
03:23he won't make any comments on what they're doing or the efficacy of it.
03:28All right. Thank you so much for your views, Mark Oswald,
03:31Chief Economist and Global Strategist at ADM Investor Services International.
