Well. Minneapolis Faded president Neil Kashgary said he was actually happy to see how chair J. Pale's Jackson the whole speech was received by markets. Of course, Micuts received that speech by selling off pretty heavily on Friday afternoon, joining us to discuss. Now we have Jonathan levin Bloomberg's market columnists, so Cash Gary happy that he saw global shares fall. It does sound brutal, but he does. He have a point when it comes to markets doubting the foods commitment.
They're good to be with you, Paul. What I thought was interesting about this is just, you know, to to see a central bank or actually saying the quiet part out loud. You know, I think that in reality, this is just how monetary policy works, and we all kind of understand this. This is where the this don't fight the Fed mantra comes from. And central Marcus talk a lot about the importance of financial conditions. It's essentially a euphemism for we need to raise borrowing costs and make
you feel poor in order to rein in him. For Asian, it's just rare to to see an active central banker say so as bluntly as as Cash Carry did. In this interview with odd Lots, Is it something that we want to hear? Do we want, you know, twelve people in a room telling our markets what they should be doing.
I know that sounds, you know, like it's criticize criticizing him, but you you often don't hear FED officials talking actively about the level of the dollar or the level of markets, and and that, Yeah, I I think it's sort of just reflects where we are, at least in US markets. Right. So over the summer, coming off of the July the July lows, there was this sort of I've called it, sort of a vapid summer rally that wasn't really based based on much of anything but a lack of real
fundamental news. And that summer rally ended up achieving the opposite of what the FED is trying to do. Right. It loosened up, Uh, it loosened up financial can editions a little bit. We're going to see if that has any consequences actual inflation numbers going forward. But as j Pal, the FECh chair made clear in Jackson Hole on Friday, you know, they are committed to this, to this fight. And I think that j Pal's message in a slightly
more opaque, opaque fashion than what kash Gary just told us. Uh, you know, j Pale was coming out guns ablazing and saying, listen, we're doing this, We're serious about this. And I think that that he chose that format specifically because he perceived that that markets weren't getting the picture. Yeah, the famous saying is don't fight the fit. But to some degree did the FIT bring this upon itself? Because we've seen in the past a reaction to type of tantrums, more
recently the FIT cold inflation transitory. The market doubted that the market was proven right. So can we pack some of the blame for this at the FIDGS door. Yeah, I mean, obviously this is a this is a different FED, but but uh, you know, a long time FED watchers
grew up sort of reading the tea leaves. This, you know, for a long time, this was one of the most opaque institutions in the world, one of the most opaque and one of the most powerful, and a lot of people earned a living just you know, trying to read read the tea leaves. And it's kind of shocking, maybe even hard to understand that with this particular FED, at least in my humble opinion, there are no tea he
leaves to read. They're they're sort of telling it as it is, and it has taken the market some adjusting to say, hey, maybe they aren't playing three dimensional chess. Maybe they're just telling us what they're gonna do and we should listen. Yeah, I mean, I absolutely get that, and you know, just trying to explain more than thinking behind the first question is that you know, there's millions
of Asians distilled down into what markets are doing. If if the market thinks that companies can handle one cost input interest rates or one cost input, right, If if companies can handle that and their earnings are not, let's say, hit hard, then who's to say that the market at any given time is right or wrong. Market is what it is. Yeah, that's exactly right. I mean, obviously, an element of this is is p S and an element of this, at least in the stock market, is what
people's earnings expectations are going to be. You know, I've been I've been of the opinion that p is we're a little rich for an extras rate environment that that looks like this anyway. But the broader picture is that there is significant earnings risk going forward. I don't think that that earnings risk is going to manifest itself right away, you know. I think a lot of people took heart in the in the fact that the latest quarters numbers out of the out of US, we're actually fairly strong.
You might call them resilient or whatever. But this this is a process that takes time. People typically talk about a monetary policy lag of eighteen to twenty four months for the FEDS sort of wrecking ball to to do its thing, if you will. And uh so, you know, there's there's significant risk there. What is happening now in US markets is that, uh, you know, the job market remains remains strong, people are starting to spend down those
pandemic savings. They're starting to turn to the credit cards and so forth, and that, you know, that creates a bit of a runway for consumption in the in the US, And that that being the case, it could really take you know, several quarters, well into three until we can really assess the earning situation and say the FED did its thing and it didn't do too much damage. Yeah, it shapes up as really interesting next six months, for sure. Jonathan,
thanks very much for being with us. Jonathan Levin new is Bloomberg Market columnist,