Amherst's Stanley on FOMC Minutes: 'Angry Birds' at Fed (Audio)

in alternative dispute resolution around the world. I see d R dot org. Stocks of paired gains, the dollar extending an advance after minutes from the federal reserves. Last meeting showed most officials set an interest rate increase would be

appropriate in June if the economy continued to improve. Oil now trading lower, giving up earlier gains, down three tenths of one percent, down fifteen cents seventeen on West Texas Intermediate Gold now down twelve dollars an ounce to twelve sixty four, a drop of nine tenths of one percent. Tenure down thirty seconds that yield one eight four percent. SMP down four a drop of two tenths of one percent down. Industrials down forty three, a drop of three

tenths of one percent. I'm Charlie Pellett and that's a bloom Bred business flash. The FED Hour on taking Stock is brought to by Commonwealth Financial Network. When it's time to change the conversation, talk with a broker dealer r I A that's ready to listen call eight six six four six two three six three eight or visit Commonwealth dot com to learn more. This is taking stock the FED in focus on bloom Word Radio. FED releases the

minutes of its April meeting market. It takes it as a sign given the wording, participants judging that of incoming data would be consistent with growth picking up and labor market conditions continuing to get better and inflation even just making progress to the Fed's target could be time to raise rates. Well, let's find out how. A man who's been writing a lot about the FED this week. In fact, you talked about angry birds at the FED recently. Stephen Stanley,

chief economists at Amherst Pierpont Security, joins us. Now, So, first of all, Stephen, what is your immediate response to the minutes? Well, Hi, Kathleen, I think the most important thing for me is that it it um corroborates what I thought, which is that at the time of the April meeting, what the FED wanted is they wanted the markets to move closer to a fifty fifty assessment of the odds of a June move, so that a June

move would be open to them. And at the time, the odds of a June move were probably as low as and I think the Fed was probably quite surprised and maybe a bit perturbed that the odds actually went down almost all the way to zero by the end of last week, and that's why you've seen maybe some of the more strident rhetoric over the last week or two.

A three legged stool. Stephen Stanley, Economic growth, labor market condition, and inflation tell us your thoughts on each three well, I think the minutes reiterate that the Fed did not put a lot of stock in the low Q one GDP number. Um we know from the statement that they were weighing the strength and labor market conditions as more important than the UH low GDP number. So I think that's and that's certainly fleshed out quite well in the minutes. I think on inflation. There's still a bit of a

division of opinion. They're they're a number of folks on the committee who are starting to become concerned that the tightness of labor markets and the fact that we've already begun to see a little bit of of gradual uptick in wages and in core inflation means that they need to get moving in there. Others who were still in addition to Esther, George of the Kansas City Fed, well, yeah, I mean, I think she's certainly one that wants to move.

In the minutes said that there were a few people who wanted to move, So I think you can infer there were at least a couple of of non voters who would also have sinned off in an April move if they had a chance to vote on it. So Steven, just to follow up on the expectations. Now, probability of June rad hike up to not not more than fifty, but still it was down around four percent earlier this week.

Your piece just from a couple of days ago, angry birds at the FED talking about hawks and doves at the Fed often failing to see eye to eye, but either the consensus is shifting at the FED or the Hawks are gearing up to challenge the ruler of the ruse. Uh. Cheer Yelling. I think you're making a very interesting, important argument. Maybe a lot of the comments that have been made publicly are to you know, help lead the FED in a direction and start laying down the gauntlet before the

next meeting. Yeah. I think that's right, And I think for me, the most important thing is the fact that Cherry Ellen did schedule a speech for June six, because you know, I think from the market perspective, if they don't hear it from her, they're not going to believe it. Because there have been a number of times over the last year or so when Hawks has kind of started to get all agitated and then Cherry Yelling or one of the other problem that does in the committee kind

of you know, pushed back hard. Uh. Most recently at the end of March, when Yelling gave her last public speech. There had been some pretty intense hawk Is rhetoric coming out of certain quarters of the FED after that March meeting, and she kind of slapped that down. I think, so, um, you know, this June six speech I think is going to be pretty pivotal in shaping expectations around the June meeting,

which comes a little over week after that. Stephen Stanley, are we going to see more bonds sell offs right now? Looking at the thirty year were down more than more than a full point, down more than one percent, and the tenure were down more than seven tents. The two year PM is now up to point nine zero. On that there's having a huge move, a big sell off

at the short end as well. Yeah. Well, I mean, you know, the markets really weren't pricing in very much at all for the I mean less than a full hike for all of two thousand and sixteen, and less than a full hike for all two thousand and seventeen up until a couple of days ago. So if if the markets are convinced the Fed's going to get serious about raising rights here, then yeah, obviously um interest rates are going to have to adjust up and down the curve.

So what are you what odds would you put on them June inter strate increase the meeting again just to three weeks away, there's a July meeting. Do you think they wait till then? Stephen? Well, I think they could wait if if Brexit proves to be a disruptive force in the lead up to the June meeting. But but I actually still think that June is the most likely scenario. I put the odds of a of a June move at something like two out of three. UM. I think

that you know, where there's smoke, there's fire. And there's been a lot of talk amongst people to fed and not just the Hawks recently, but but even some of the Doves. UM. And the fact that Cherry Yellen scheduled the speech for June six, to me is that maybe I'm reading a little too much here, but I think that that's a pretty strong influence that she wants to

uh to say something. And and obviously she wouldn't really have had to schedule that speech if all she wanted to say was that we're not ready to move, because it wasn't priced in at all a couple of days ago. Thank you very much for spending time with us. Stephen Stanley is the chief economist for Amherst pure Pont Securities. They're based in Stanford, Connecticut, giving his thoughts about the

Federal Open Market Committee policy meeting in April. The minutes just released most Federal Reserve policymakers said an interest rate increase would be appropriate in June and the economy continued to improve. That they're divided over whether those conditions will be net June interest rate increase. That odd odds of that move seems to be somewhat higher. After LESA mint Is today, our next guest is going to explain to us why maybe the Fed should not be on the

move yet. This is Bloomberg Radio.