YouSaid · the spoken record

Roger Hirst

lines on the record: 86
first: 2023-02-02
most recent: 2023-02-02
sittings or episodes: 1
sources: podcast

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“Right, and they're sort of set up to be too late to hike into a recession and to cut into a boom because they're looking at very backward-looking economic data. However, what are they supposed to do? Say, oh, well, if a reporter says, why are you hiking as unemployment is at 10%? And they're saying because some guy on Twitter said that the bond market is telling you to do it. What else are we expecting?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Who would want to be a central banker? I mean, theirs is a hiding to hell. I mean, the easiest thing in this game is to knock central bankers. But the hardest thing for a central banker to ever do is the right thing because markets always think they're right and they've not done enough. They've done too much. That's the lot of the central bank. A central banker, they can't create a recession when there's no recession to prevent inflation. They have to wait for inflation, then go, oh, we'll do it. What is it? Someone said they're the humpty dumpty thing. They let the market break and they put it back together. They don't smash it first in anticipation. So yeah, they've always got the bad lot.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“It's absolutely that fear. And, you know, this is the part of that we all have. Central bankers have it. I have it. And remember that big battle is this transitory or not? Well, if in two years time we look back and it went up to 9.1% in the US and back down to two, it was transitory. But when you're living it for the two years, it's not transitory because that's how it feels. So the central bankers and the Fed will be aware of that. And this is where I guess the risk is, is that they're the zookeeper that left the inflation tiger out. It mauled a few people. But because it was a zoo animal, it went back to its cage overnight. But have the zookeeper lock the cage or is the door still flapping open for the tiger to come out and maul some more people? So is the feat the zookeeper that has locked the cage? Do they think it's locked? Or is it a case of they got to look at and that means eventually they might need to drive those financial conditions higher? At the moment they said we're fine. Is that because they feel that labor doesn't have the wage power that it's had before? And that could be the case.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“A lot of the bullish cases on equities are because the expected recession would drive yields down, pushing equities up. But actually what we're seeing now is that the bull case for equities, because we don't get a recession, which means bond yields probably don't go anywhere, but you get growth, pushing equities up. Those are kind of, the end result in equities was the same, but they're mutually kind of exclusive arguments. And that's where I think a lot of the problems come through is a lot of people who have been right have been right for reasons they didn't expect. And that's where it's the struggle in terms of how we position ourselves. But I feel that we haven't avoided a recession. What I think is we transition from a price shock to a growth shock. And there's that window in between, which I think we're in now, where it could feel like things are actually quite good, but it might mean that therefore people push prices back up and the Fed has to go, oh no, sorry, we're going to go again and we're going to go again.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Case for a lot of people, but it's been marching from being a deepish recession to a shallow recession to a lot more people now saying no recession. So basically moving towards Juliet de Klerk's view, which is she was back in last year saying, I think there could be a surprise here, soft landing, and we don't get the bust that people think. People have moved to that. And you heard it from Jamie Diamond. He went, it's going to be a nightmare. Oh, it's going to be a soft recession. More and more people now saying soft landing. And this is what I mean. These are all plausible outcomes. And you can make a very, very good case for the bearish view and the bullish view. And I think, unfortunately, we all have to be prepared for both materializing. I mean, it's so sitting on the fence, but, you know, I felt confident last year, but this year coming into it, I can see some very good cases. But, and this is where it becomes difficult.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“And interest rates have gone up, so we repriced discount rates, equities, equities saw multiple compression. And that's what we got, a price shock that nearly looked like a recession because we got real growth did drop for a couple of quarters. I think the true growth shock is still ahead of us. And I think we have to be prepared for that. So it kind of goes into what's your timeframe short term. I don't want to be too bearish right here. And back end of last year is going, I think this is the sort of recession which might need the Fed to push us into recession by surprising people with higher rates, which is why maybe it's a little bit surprising to hear JPAL not bothered about the loosening of financial conditions. But maybe if the Phillips curve is dead and there is no pricing power from wages or from labor, then actually that buys yet more time as well. So it feels like what we've seen is we've gone from recession being the base case and it's still the base.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it buys time. I mean, I think this is the issue is that, you know, I talked about last year was the year of bonds behaving badly. We had the worst bond sell of since the late 1700s. But for a lot of people, if you are just turn pensioner, you've just retired, it's a nightmare. Potentially a lot of the people who came out of the workforce through COVID might feel that they now no longer have the right sort of pension pot. But for me, I've still got, hopefully a few years retirement yet, it's kind of that it's like, oh God, I know my pension pot has taken a hit, but it takes a hit for when I retire in a number of years time. It's not impacting me right here, right now. So that bond market move for a lot of people is a future cost. And the rise in interest rates for a lot of people is a future cost. What we had last year was a price shock and was a price shock for financial markets which have to kind of price everything off the forward curve.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Recently, I forget which one. And 90% of their rates of their borrowings was fixed rate debt. And so much of it was past 2025. Going out to 2040, 2050, 2062. So if everyone borrowed money at 3% because interest rate was zero and you pay 300 basis point spread, if people borrowed at 3% doing 2062, the bondholders who lent them the money, they're screwed because interest rates are rising. But the borrowers are doing pretty well. So what does that, we know what the refinance crisis looks like when everyone has to refinance and rates are higher. We know what that looks like. What does it look like when perhaps if you're right, and I think definitely it's a phenomenon, everyone has borrowed at ultra low rates. They don't have to pay it back for a long time.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Yes, and because we have so much debt, I frequently encounter the argument that corporations have so much debt they can't possibly handle higher rates. Governments have so much debt they can't possibly handle higher rates. If I'm a company and I've borrowed a billion dollars that I have to pay back in 2023 this year, in June, and I borrowed when the risk-free rate was at zero, and now it's at 5.25%, that's a tough pill for me to swallow. And it's a tough pill for the US government to swallow. However, I feel like the transpirings of last year, the rapid rise of interest rates is at least for a short-term, proves that that argument that you can rates can be high for a while. And I also want to ask you about if people can refinance at such low rate and the duration is so long, I was looking at a company's balance.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So maybe they bought time, maybe this is why it's delayed, but it's still going to hit home. The rate of change was quite dramatic. And I think that that recession was still here. But I think there's this window where we could be surprised. And, you know, we've had a couple of days now with the equity market surprising with its breakout. I think that could continue. We could get some more reflationary elements in the same way that we did at the beginning of 2022. But something I've said before is that this is inflation rather than reflation. This is not organic growth. We haven't been in an economy or organic true growth for the best part of 20 years since dot com. It's either been leverage or it's been cheap month funding from the Fed post great financial crash. Take that away. There is no organic self-sustaining growth in this economy. It needs the juice. So reflation to me would be a risk of higher rates because the underlying system is still relatively”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“floating mortgages are already impacted. So a third, roughly, of UK mortgages are floating. So they've been impacted. So it's hurting those people. A third are two-year fixed. So halfway through, probably more now. They're starting to hurt. But in the last third, a five-year fixed. So it's not really going to impact them for a while. So it impacts with the leg. In the US, as you know better than me, if I don't move house and I was on my mortgage two years ago, no problem. But if I want to move because of the better job in Texas than in New York, then I'm kind of thinking could be a hit to my higher pay could get a hit to my costs from the mortgage. So there is that slowdown element that could come through. And then overall funding, I think what we saw was a very successful effort from in some ways from the central bankers is that did they give by delaying and everyone goes that way? Too late, did they just give everyone?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So I still think that we'll get a recession, but I think it's more H two. And I'm increasingly now going to be 2024. Now, I don't want to be in that camp of the person who goes, it's coming, it's coming, it's coming. But I am in the camp that if it doesn't come, then the risks of a rebound in some of the inflationary numbers increases. And yes, tight labor will eventually become strong labor, and that will force the Fed. But that's why I think that the Fed continues hiking to 5%, maybe 5.25%, but plateaus. So I think the pivot is unlikely unless we get a very rapid deterioration in unemployment. But I still think we get that recession because of the lag effect. And you can see this in pretty much everything, in that you take the UK, where obviously interest rates, mortgages are tied to spot interest rates. And so as those interest rates have gone up and they went up 50 basis points, 4%.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Happening right here, right now, to your point, recessions nearly always happen when unemployment is at its lowest point. So 3.3, I think in the 1950s it got to 2.2 and we went into recession with a two-handle. And we went into a recession there. But remember, these guys, they always say recession started there a year later. So MB and ER will tell us sometime in 2024 the recession started, which is why we now need to sort of go, okay, we're using unemployment, which is the literally liable most lagging, hardest to interpret, most prone to revision data point to try and work out whether this is now a true recession. And again, that's something which in 12 months time we might look back and go, oh, unemployment was way through 4% in the first half of Q1, but we didn't know it at the time.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“The Fed always wanted to get rates off the zero bound or at least raise them higher so that when the recession eventually came, they had something to cut. Why would they now go, okay, unless we get a really deep recession, why would they now go, we're going to cut rates if we're not going to have a recession? And if we're not going to have a recession, then bond yields aren't going to fall that much further. Again, why would they? Because if we don't have a recession, we have growth. If we have growth, then you have upward pressure on prices in terms of inflation, potentially downward pressure on bonds and higher yields. So again, it goes to, is the labor market going to deteriorate quickly enough in the next few months, particularly the next quarter, to be able to justify the pivot that's currently priced into the funding market? And we could have these revisions because we don't really know about COVID and those revisions coming through. But it has to start.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Last year was a price shock. It was a very, very shallow decline in GDP, but unemployment stayed robust throughout that. So it wasn't diffuse. And I think this is potentially where the risk lies. And also we have this window now and something that I felt was potential is that the lag from interest rate hikes is probably 12 months plus. So it's H2 of this year. And if that's the case, then we might have this rebound window right now where we get a bit of reflation. And in the here and now, we want that trade. And that creates a false sense of security, but it also might force the Fed to act again. And something that I've said throughout last year is that each time the market bounces because we think the Fed's going to pivot, the Fed is less likely to pivot. The more that things look good, the more the Fed can come in and hike rates. And you may recall that in the last decade, particularly from 2015 to 2015,”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“And one other was starting with D, and I've forgotten it. But basically deep, long and hitting everything, deep duration, something like that. Anyway, so we had a lot of those things coming in. But if it hits households first and then they get to recover because they adjust and they've got time and the savings were coming through, small businesses and then they adjust, you get recessions in pockets, but you don't get recessions altogether. And we have been so used to over the last 20 years, particularly over the last 10, of everything happening in quick time. COVID, banged in, banged out. 2018, yes, it wasn't a recession, but it happened very, very quickly. In twenty fifteen, we had a couple of sudden shocks in the equity market around a global profits recession and even thousand eight was a slow burning recession that then suddenly everything imploded around Lehman in Q3 and Q4 two thousand eight, but it was again very, very rapid.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“I mean, there are all those things. It's like there's the absolute certainty of recession based on all that. And we saw consumer sentiment at the lowest level it's ever been. You have never had consumer sentiment that low since 1954 without a recession. That was last year. We saw the optimism outlook for small businesses, NFIB small business optimism outlook, the lowest level it's ever been. You've never been that low without a recession. This is something that Liz Anne Saunders, who's regular on Twitter was saying, is that, and this might be something that helps us, which is, is this a rolling recession? So I argued last year, I said, oh, it feels like a recession. This was quite early last year. And then I'm saying, but it's not a recession because, and here's my plagiarism coming to the fore. I've forgotten who it was who said it, but at the NBER, they want a recession is duration. So it's got to be quite long. It's got to be diffuse, hits all parts of the economy. And it's got to be duration, diffusion.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Took me by surprise. But Roger, as you know, recessions can start when the unemployment rate is low and sometimes very low. Sometimes three and a half percent. There have been recessions that started with unemployment lower than where it is now. So we've got an inverted yield curve. We've got unemployment low. We've got unemployment low, but tons of announcements of layoffs. We've got corporate profits rolling over, financial conditions really easy for some reason. I want to hear what you think about that. Oh, and by the way, those interest rate hikes, they act with long and variable lag. So they likely won't take effect into the few months. So I created an immense sort of doomsday scenario. I want to hear what you think about it. To what degree do you agree with it? And then what's your pushback on this all this reflation?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Right, okay, so consumer spending in the US and probably elsewhere fell off a cliff as inflation was so high last year because you say, oh my God, these items that I used to buy now cost so much more, but inflation has fallen. So as you say, now people's incomes are worth more relative to what they were, let's say, six months ago. And in yesterday's Fed meeting, JPAL said exactly that. He actually said pretty much exact quote, that he expects consumer sentiment to pick up. Also, you referenced job openings. That was a key feature that JPAL had chair focused on last year. And even as he said, oh, yes, the rate of inflation is falling, but job openings is still over 10 million. So this indicates immense slack in the labor market. So that was a non-inflation feature that if it remained high, would cause the Fed to be.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“To wait and see what's going to go on and take a look and then things come and go, right, we're going to go 25, we're going to go 25. That, I think, is probably the right way to go about it. But at the moment, this is still a tight labor market. And historically, these are the sorts of levels of low unemployment where you would worry about wage inflation. But it's not been a wage inflation spiral. This is not the 1970s. This is not institutionalized, embedded unionized labor that can go out there and punch their employers. At the moment, employers are still more powerful than employees. And I think that might buy the Fed some time and certainly could surprise. But so we've got to look for revisions in the unemployment data. There are some figures that look like they're starting to turn, but it's got to turn pretty quickly for this to become a recession right here, right now.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Height, but it's not strong because we're not seeing labour coming out and going We're getting inflation beating wage increases. Some parts of the public sector are and we're starting to see this happening particularly in the UK but overall it's not been you know we've not seen inflation busting wage increases yet and if we do see unemployment picking up then that probably won't happen but the thing that would probably be the surprise for me is that let's say we got unemployment staying relatively tight, but wage inflation not picking up and CPI rolling over will get a reflationary impulse particularly because as CPI drops and wages stay relatively constant you start to get positive real wages positive spending But that would be a scenario which would suggest that central bankers could be making a policy error in pausing and plattering too soon or at least pivoting as the market expects a platter”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So the principal one is COVID distortions took a lot of older people out of the market. They retired early. So that participation rate fell dramatically and is still currently one percentage points below where it was prior to COVID. So you had a lot of people left the market. So although I think a lot of people lost jobs last year because so many people left the labor market, there were these openings. And even today, you still see job openings just popped back up again. Now, it's a bit of an abomination of a number because I can basically put my job advert in 10 papers. That probably counts as 10 job openings, but it's just one. But nonetheless, those job openings are still historically relatively high versus the total number of people who would like to have a job so the unemployed. So there is that tightness. But at the same time, whilst wages have been going up, real wages have been relatively subdued. So this is why I say labor or the jobs market looks.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Right, the Federal Reserve cares about the labor market, they care about unemployment, and the PMI, the ISM, they could be at 42, but if the unemployment rate is still 3.5%, they're not cutting rates. What are the arguments that you encounter about why the labor market is so tight in the US? And which of them do you agree with? Which of them do you disagree with and why?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“And we might end up seeing unemployment levels stay relatively low, yet we don't see that wage inflation coming through, i.e. that Phillips curve, the inverse relationship between low unemployment and high inflation, like it was pre-COVID, is it still dead? It feels that way.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“When you've got unemployment picking up. It's been to 47 on many other occasions since nineteen sixty. Only once did it get to 47 with unemployment at a high level without going into recession. That was 2003. So it was the aftermath of a recession. We've been to 47 before, but unemployment had stayed low. You've not had a recession. The one factor that you get in all the recessions since the war is that unemployment was going up quite dramatically. And unemployment is prone to revisions. Unemployment is notoriously difficult to analyze because it's so backward looking and with the monumental discrepancies, not discrepancies, but distortions caused by COVID, which will take years to work through the system. It's incredibly hard to decide whether we've already started to see a big pickup in unemployment. Or actually, this is a tight labour market, but without being a strong labour market.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“I think basically forward rates are too low because it expects the cut to come very, very soon, which either means we're going to get a big recession right here, right now, very, very soon, or it's a case that the market expects the Fed to do something they've never done before, which is see a little bit of a growth wobble and suddenly switch from worrying about price to then going, we are going to support growth back at any cost, which is what they did for the previous decade prior to the end of 2021. It feels like I actually call that optimistic. People might say it's pessimistic. That rate cut is pricing quite a severe recession. I think it's actually pricing in a reversal and a pivot in anticipation of slowing growth from the Fed. At the moment, when you look at a lot of the data, yes, we see things like ISM 47 towards recessionary level, but something to point out on things like ISM. ISM at 47 is historically at a”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“I'm going to use the Fed funds curve, which is sort of implied interest rates, implied Fed funds. ninety six seventy five so you know you get about you know 3.75 3% somewhere around there so 200 basis points of cuts priced in over the next 18 months now obviously that's nowhere near where we were before which was one percent zero bound etc so when you actually think about it in that context yes these are cuts but they're cuts to three percent which is significantly higher than where we were at the end of the previous cutting cycles but it's still quite an impressive move and it feels or that's an impressive expectation and if we don't rapidly roll off into a reasonably severe recession when i see severe with quite a lot of unemployment picking up then that rate cutting cycle looks a little bit optimistic in the short run and this is why it keeps on that pivot point keeps on getting pushed out after”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So if we look at that curve and we can put it on screen, that's about 50 points of cuts are priced till the end of December. But how wide is the band of distributions? I mean, we can look at the options prices, which I don't understand at all. But I want to hear your view. Is it sort of 50 basis points of cuts being priced because they think there's one possibility that they will cut by two times to a quarter point hikes? And that's 100%? Or is it 50% of cuts being priced because they're pricing in 150 of hikes and then 200 of cuts? And then you merge those together and that's minus 50.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“The funding market has been wrong with this pivot, and we can actually see that in that the rates market itself started off with the pivot in when you go back to September, that pivot was in February, March. And what's happened is that the pivot has just moved out, moved out. It's now in June, July. But we've kept the pivot. But it's been wrong. The timing-wise has been wrong. So the timing keeps on shifting. And I think that is an element that is that uncertainty. We went from complete certainty last year of we're going to get a recession to this now view where is it recession delayed or is it no recession do we avoid a recession because actually inflation is coming down unemployment is still tight might not be strong and if inflation drops quickly enough and wage inflation doesn't pick up could we avoid a recession”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Is being overly pessimistic about growth and therefore it thinks the cuts come because we get recession, which has sort of been the base case. Or is it that the market's been overly optimistic that the Fed will react to any wobbling growth by cutting rates immediately and therefore ward off the worst of the recession? But the problem is that then when you look in the bond market, now bond yields have fallen, but positioning in bond markets is super, super short. It's one of the shortest it's ever been, particularly in the two year space even adjusted for open interest. So it feels like there is, the Fed says we're raising and then we're plateauing, which probably justifies this short in the bond market because it feels like if you do plateau, then yields at 4.2% may have to creep back up towards that 5% if we lock ourselves at 5. But then there's this belief that the Fed will be reactive. And I think this is this optimistic view where I think the rates market at least.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“So this is, you know, I came into this year saying more uncertainty than I've had for a long time because there are three or four completely divergent paths that are all plausible. And a lot of people say, oh, that one's ridiculous or that one's ridiculous. But you could make a super bearish case and a super bullish case. And then you look at the fixed income market. And even that seems inconsistent in that you've got this pivot. So, and I think of a pivot as being a reversal in interest rates. And that pivot is set currently for June or July of 2023, which means interest rates go up and then they get cut very, very dramatically or very, very quickly after that. And I think that a lot of people in the market actually think that we won't get a pivot which sees rates cut, but we'll get a platter. So rates will go up 5, 5.25%, which is where the dot plot currently is. And then they'll stay there. So that seems a little bit strange. The market is, I'm not sure whether the...”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Right, and those curves at least in America, pricing in a fall in interest rates, which is different than what the Federal Reserve indicated it would do in its December dot plot. So there's a disconnect there. Journalists at yesterday's Fed meeting attempted to get Powell to comment on that, resolve the disconnect there, but he seemed very reluctant. He kind of dodged a question. What are your thoughts on the cuts in interest rates that's priced into the market, not only going out to 2023 about two cuts priced in for feds, or seven and eight going out till 2024, very inverted curve, what does that say to you and how does that influence your views about a potential recession?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, the Bank of England had its moment in the sunshine, but it wasn't a good moment. It was sort of a moment of darkness in the sunshine. It was a stability issue, and they came out and fixed the stability, well, the instability they fixed pretty quickly. So they did a good job. You know, it was a little bit touch and go for a while. I mean, what people are thinking here is, or do people follow this? Absolutely. But it's the Fed that really matters. Everything seems to be sort of the US has been leading and everyone's following with a lag, but pretty much everywhere you can see these inflation numbers have been rolling over with base effects because you can see it in the PPI numbers, which in Europe particularly had gone into stratospheric levels. They've been rolling over. Headline CPI is rolling over, core CPIs rolling over, and it seems that the pivots that we've got, for instance, in Europe on the Euroboard curve is about three months behind, so September versus June, July.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“Right, and how quickly I should say do you think the European Central Bank and the Bank of England follow the Federal Reserve? And how closely do well-informed financial people like yourself in Europe and UK following following the Fed? Are people paying more attention to the Fed than they are to the Bank of England? What does it look like?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“That means financial conditions have improved. But it just seemed they were a little bit sort of things may be coming our way. So I guess the question that a lot in the market is saying is, is this like Burns of the 1970s? Is this where they kind of find themselves making a mistake in that the inflation tiger is still out there and prowling and could start mauling us again 12 months down the line?”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT
“The bar was very, very high for the Fed to be super bearish in terms of all my hawkishness. What they delivered was what was anticipated. But I think people wanted them to kind of say, yeah, but we're really still going to go, yeah, we've done, you know, we're down to 25, but we're going to keep with 25 and we're going to keep going until we properly see a cap. And we know that we've got the inflation genie back in the bottle. And that seemed to set the tone for both the ECB and the Bank of England. Who did? What was expected? But also sort of rather than said, this is an absolute certainty. They said, there's a little bit more uncertainty. And I think particularly from the Fed from Powell, he had an opportunity to say, I'm going to nail financial conditions. I want them to tighten still. When he's given that question, he was a little bit sort of, well, you know, he actually argued that they'd been flatlining since December. They have softened a lot and financial conditions have basically made things a lot better with markets rallying and bond yields having fallen.”
2023-02-02 · Forward Guidance · Central Bankers vs. The Bond Market | Roger Hirst · IDENTIFIED FROM THE TRANSCRIPT