Why the Fed left rates unchanged despite a strengthened economy

Why the Fed left rates unchanged despite a strengthened economy

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00:00
is there anything in what you've seen or heard that that is subtextually or subtly different than what you expected you know look i think the fed made it clear that they were not they knew if they would they started talking about changing their stance either on tapering assets or on the fed funds rate that would create a ripple through the markets i don't think that was their objective today they clearly don't want to be front and center in the news just yet but they can't get around or they couldn't get around acknowledging that the economy has strengthened we've seen it in
00:30
in areas like retail sales like the earnings figures we're seeing um gdp growth will come out tomorrow unemployment the jobs report have all been pretty phenomenal now we heard from them last time that they don't want to make any decisions based on forecasts they really want to see it in the data well now we're starting to see it in the data so you know while this meeting is probably quiet we're not sure if that can last too much longer we might start hearing a little bit more about tapering in their summer meetings so something to think about as we go
01:01
forward i do think if this data trend continues if the economy continues at this pace they really do have to start thinking about removing crisis level accommodation so jim let me just and i'll come back to you david in just a sec jim is the typical pattern and we're looking down the road here the typical pattern is that when the or is it that when the fed begins to pull back on the asset purchases that is a precursor to a higher interest rate yeah so sequencing does matter and the
01:33
fed's credibility is at stake they knew the data was going to be very strong like everyone else did in in the second quarter so for them to change anything right now it's probably premature even probably in june so typically what their mo is is at the jackson hole symposium which is around the third week of august they typically issue a lot of white papers that signal a possible change and then at the september meeting they change you know they typically change policy which might be enacted this could be tapering that could be in december or it could be in the beginning of 2022.
02:04
so yeah i i really do think that as soon as the fed starts to talk about tapering the market's going to say okay so the next move is a rate hike when is that coming the sooner they talk about tapering the sooner they have to talk about it about a rate hike and that's what they want to postpone and push david final question i get kelly into the conversation here too uh the fed used that word that you cited transitory inflation uh you have said that you know there are obviously some symptoms and signs of inflation a rising commodity prices supply chain
02:36
uh snafus and the like do you think that the inflation that we're likely to see is transitory or potentially more sticky i think i think it's a little stickier than they think because i think you're going to see a lot of put a lot of wage growth here over the next year these labor markets are tightening very fast here and i think that's going to push up wages uh so that's a little you know more than just transitory but i think the other issue here is asset prices because we've seen stock prices go up six percent just since the last fed meeting six weeks ago and the problem is that this
03:08
very uh these very low level of interest rates is really feeding asset bubbles too and i think the fed really needs to think about that it shouldn't just be about uh inflation goods and services there are other downsides to having uh money this easy when the economy is doing this well shepard smith here thanks for watching cnbc on youtube

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