저자: Kevin · 외국인
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Fed는 노동시장 약화 우려로 7월부터 선제적 금리인하 필요. 2021년 선제인하 사례(인하 후에도 바닥은 2002~2003년에 형성)를 언급하며 실업 상승 사이클은 보통 경기침체로 리셋된다고 봄. 관세 인플레는 일회성 레벨효과로 봐야 한다는 Waller 주장에 공감하면서도 연준 신뢰도 훼손 위험을 우려. 장기적으로 2032년 전후 미국·유럽·영국 제로/마이너스 금리 복귀를 예상하며 부동산 투자 포지셔닝 중이라고 밝힘. 채널은 1~3개월 단기 매수·매도 추천을 명시하지 않음.
다듬은 글
today suggested the potential in this interview we're about to play for cuts starting as soon as July. Now, this actually has some historical precedent and it's worth just briefly talking about some of this historical precedent because even Nick Te's talked about it. But in environments where the Federal Reserve starts to become concerned that the labor market is going to weaken, yes, the Federal Reserve can not only look forward, but they can act forward.
This is why I've been in this confusing, conflicted place personally where I've said, "Look, if I were in the Fed, I'd already be cutting because I'm worried about the labor market collapsing later in the year, especially over the next 3 to four months." Nick T wrote a fantastic post and it's worth paying attention to exactly what he said.
Uh Nick T told us, "Hey, back in 2021, it was actually normal for the Fed to work ahead of policy." Take a look at this. The Fed was cutting ahead of the contraction in payrolls in January of 2021. They did 150 basis points of cuts, 350 basis point cuts before they got a negative payroll print. In other words, they saw the pain coming in the labor market and they moved ahead of the pain.
This is critical because if you move ahead of the pain, you could soften some of the pain. Don't get me wrong, though. Markets didn't bottom in January of 2021. Markets bottom at the end of 2022 and March of 2003. And rate cuts and why markets bottom. The Federal Reserve began cutting January 3rd. They cut 50 basis points.
Unemployment numbers about 105,000. What's our average right now? About 130,000. Fed cuts again Jan 31st minus 50 basis points. The Jan 3rd cut was actually intermediating. Payrolls in February come in high 268 uh with uh uh to for for January with a revision in December to uh uh up 19,000. So very strong job numbers over here.
Payrolls come in at 135 roughly the average we have here in March. They end up still cutting 50 basis points March 20th. Then we get our first negative payroll print April 6th86,000. As soon as you go under a h 100,000, you usually get nervous because that's when you can actually revise down. So we get our negative payrolls print April 6, 2001.
What happens? Boom. Every single meeting, there are eight meetings a year. They do 50 basis point cuts plus another 50 basis point cut after 9/11. Now rates started higher then than roughly where they are today. But the problem is or or I think the indicator here is a the Fed has been willing to cut preemptively in the past.
The problem was the bottom didn't coincide with the Fed starting to cut. The bottom of the market actually coincided with the Federal Reserve saying, "Okay, it's time to basically, you know, institute the Fed put." And the Fed put wasn't instituted until March of 2003. So, you basically had a year and a half of that dot bubble blowing uh before you really got uh a bottom that consistently you could grow out of.
It was approximately you kind of had a double bottom October of 2002 to the beginning about March of 2003 and then you were able to really grow all the way through about 2007. A nice four-year rally before you got the dot crisis. But the Waller interview was really the first of of any kind of interviews where we're starting to see some potential interest in preemptive cuts.
JPOW talked about how they have to use data that they're getting now and concerns for tariff inflation uh over the next three months as a reason why they need to wait. The problem is JPA isn't factoring in that you can have tariffs uh show up in margin compression at corporations and margin compression may lead to layoffs which is why you would want to cut ahead of time.
Margin compression isn't inflationary. It is a negative to employment. Uh so let's listen to El interview and see what we can glean from Steve. You know, as I've been saying for probably a year, I think the important thing for central banks to do is to look through tariff effects on inflation. This is a longstanding view going back 40, 50 years.
So any tariff inflation we should see and I've given various estimates that I don't think it's going to be that big. And we should just look through it in terms of setting policy and look at the kind of underlying trend of inflation. And right now the data the last few months has been showing that trend inflation is looking pretty good even on this guy is a dove in fairness.
But I agree with him like we are going back to the great moderation. And again consumer prices are still way higher than 2019. But you should know if you're looking at Fed policy, there's a difference between what prices are today and inflation. Remember this cup of coffee in 2019 was a dollar. Okay, I'm making it up.
The same cup of coffee today costs you $10. Okay, I'm making up the numbers. Okay, as long as the next cup of coffee isn't more than roughly a dollar, $10.20, 20 cents were good. It's still way more than it was in 2019, right? But that's not what the Fed cares about on a 12-month basis. So, uh, I labeled these good news rate cuts.
When if inflation comes down to target, we can actually bring rates down. I've been saying this since about November of 23. So, I think we're in that position that we could do this in as early as July. Woo. Do you think you could cut rates as early as July? By the way, that would be very bullish for me.
Like one of the things that makes me a little like fussy is I think JPA's he's he Okay, I don't want to sound like Trump, but he is a little too late. Okay, like I I'm not saying that because of Trump. I'm saying that because I understand what JPAL's doing. He doesn't want to repeat the 1970s. He's really concerned if you if you lose the very little credibility that they have left by repeating the 1970s, you could truly destroy the economy and it becomes almost impossible for the Fed to ever gain respect again.
If they repeat the 1970s, the Fed will close down. They will shut down the Fed and you will have no central banks. Honestly, you know, maybe there's maybe there's a case for that. I'm just saying it it would create massive economic upheaval in in the short term. it would be very very very bad. Uh and it would hurt a lot of people.
And that's what JPAL's trying to prevent because he's more worried about preventing inflation than he is about job loss. At least for now. Once they realize we're back on the trend of the great moderation, it's not going to worry. Cut, cut, cut, baby. Well, I remember also I think in by 2032, we will be back at negative interest rates.
You might not remember this, but before COVID in Germany, we actually had negative interest rates where if you put $1,000 into a bank, one year later, you'd have like $990. They would charge you for not spending your damn money. I think I that would be my view whether the committee would go along with it or not, but I think we Sorry to keep interrupting.
Somebody in the chat says, "Can you please explain the double cut before election?" Yes, the labor market, the labor, you should look at the labor data. Not only were six-month unemployed numbers skyrocketing, which have since leveled out, but we were also getting some pretty ugly and low reads that were close to potentially being revised towards the negative territory.
The labor market was freaking out. Labor market had a gorgeous rebound under Trump's uh sort of election, you know, before he was even in office. It's unclear if that Trump bump lasts. That's what people were worried about, right? Are in the position that the data is good. GDP growth is going to be near target, our long run target in the first half of this year.
Unemployment's at our long run target. Inflation's running very close to target. Yet, we're 125 to 150 basis points above where the median uh long run neutral policy rate is. So, I think we've got room to bring it down. And then we can kind of see what happens with inflation. If it got at really bad and people got very nervous, you could just pause.
But I think we're in a good spot right now for talking about bringing the rate down. Would you want to begin a process of bringing rates down by 125 or 150 basis points now? No, I think you'd want to start slow and bring them down just to make sure that there's no big surprises, but start the pro. that that would be a fair I mean frankly like what's 25 basis points really going to do if and this is why I mean to me they're going to be too late.
It's going to be September or November before they decide and it'll be based on jobs data. Uh and they'll probably end up going 50 or 75 if the jobs data rolls over. They might even go a full point fast because remember JPAL's mindset. JPAL doesn't think like Waller. Waller's thinking, hey, let's just slowly start ratcheting down 25 25.
JPEL is more of like, no, let's just wait to see what happens with inflation, and if over the next four meetings we realize we need to bring rates down, we'll just drop rates 1%. We could always rapidly drop rates. And in fairness, I see both sides of that argument. I do. Oh, by the way, this is why, and I I'm promise I'm not trying to like shill this, okay?
This is this is just I want you to know where my head is, okay? Because people always are like, "Oh, Kevin, you know, what stock you buy? You what are you doing with your money? What are you doing?" Okay, I believe you have to understand this this first. I believe that we will go back to negative interest rates in the broader modern uh democratic economies.
So, not China, not the commies, okay, but Europe and the United States, the United Kingdom. We're going back to like negative interest rates, zero interest rate policy by 2032 at the latest. I've been saying that since 2022 when we had 9% inflation. I said, mark the calendar. 10 years from now, we will be back at zer and negative interest rates.
So, what did I do in 2022 to start positioning for 10 years from now? This is this it's like all part of my long-term plan. And my long-term plan could be totally wrong, but what did I do in 2022 to literally align with my 10-year plan? Launched House Hack. Okay, again, not to be a pitch here, but I launched a real estate company.
So, here we are 3 years later, we've got 72, 73ish million, maybe even 74 now, in assets, no bank debt, right? So, we've got a little bit of convertible debt. when that converts in, you know, 27 89, whatever it converts, uh, or we go public or whatever, uh, we have this cash cow. Whether we go public or not, we will at some point.
I I suspect that's my goal. Knock on wood. Whether we convert or not, we have this this cash cow of $70 million. We could go refinance and turn into a quarter of a billion dollars of assets, right? 75ish million down on on a quarter of billion dollars of assets. Now we got a crapload of homes at very very low rates.
1% appreciation every year is $2.5 million for the company, right? So especially in the direction of rates coming down. We kind of think now we're kind of building when it's unpopular to build in real estate and and we're setting up for the return to zero interest rate policy. That's that's just where my head is.
So I want you to know that. Uh any I I think that's useful. Okay. Anyway, here let's keep going. That's the key thing. we can start the process of bringing rates down and then if there's some big shock due to maybe the Middle East uh conflict we can pause you know that's not we paused uh back in January we've been on pause for 6 months to wait and see and so far the data has been fine there hasn't been any reason to in my view I shouldn't speak I don't speak for the committee or the chair but I don't think we need to wait much longer because even if the tariffs come the impacts are still the same.
It should be a one-off level effect and not cause persistent inflation. Okay, fair. So, let's talk about this uh uh I guess difference of opinion with some on the uh committee. Obviously, uh uh the uh SCP showed the forecast showed that seven uh uh members don't want to cut rates at all. Um what is the urgency right now in your mind to cut interest rates?
Why wouldn't you want to just wait and see what the inflation what happens with tariffs and inflation in the coming months before you started cutting interest rates labor right so we've been on pause for 6 months thinking that there was going to be a big tariff shock to inflation we haven't seen it we follow the data that is what we do we look at the data and we should be basing policy based on the data and as I said if you look forward to if you think this inflation is going to hit in August August or September, it doesn't matter.
It's the same impact. It's just a matter of timing. And I've been arguing since a year ago that central banks should be looking through this. This has been debated for 50 years in central banking. And the standard rule of thumb is you look through these types of price shocks. And that's what I think I'm arguing that's what we should do.
And so if that's the case, start moving on cutting the policy rate. How can you be so confident, Governor Waller, that uh a rise in prices from tariffs won't spill over into other prices and cause a broader inflation problem? Correct. And I think this is a valid concern my colleagues often have about persistence increasing from this one-time price effect.
And as I said, if uh if you go back over the last 50 years, this was always the concern that central banks had when there was an exchange rate shock, an oil shock, a shock to I I I think, okay, just add perspective to this. I think what's happening is again, you've got Powell that is worried that even if it's a one-time price increase, Powell's not worried about it historically being a one-time price increase.
He's worried about the potential that that one-time price increase danchors inflation expectations. So Waller is not wrong to say that prices could be a onetime price increase. However, because these tariffs are so much larger, we've never had tariffs like this since the Great Depression. It is entirely possible that as Donald Trump assigns new tariff rates, that this inflation, it reverberates through supply chains for upwards of a year.
And now all of a sudden you have inflation anchoring at 3 and a half% for a year instead of 2%. Now people anchor their inflation expectations at three and a half%. And then you have to start raising rates again to get the three and a half% inflation down because you started with the 25 basis point cuts.
Then you lose Fed credibility, then you're in the Fed's worst case scenario. This is why yes, what Waller is saying is true. if we have a weaker labor market coming and if tariffs prove to be one time. But Powell is worried about something much worse, the collapse of the Federal Reserve. And there is a worst case scenario where if you do what Waller says, you end up having to hike again, inflation expectations are ruined and you just can't solve it anymore to the value added tax.
And the answer was, well, but the tariff's a one-time thing or the whatever the shock is, but then workers will try to increase their wage demands to make up for the higher prices. And that was always the source of the second round effects. But I just don't see that happening. Now, I gave a speech in uh Korea a couple weeks ago where I laid out why I don't think this persistence will happen.
Mainly, the labor market's okay, but it's not strong like it was in 2022. So if you were to walk in today and you think inflation is going to be 6 or 7%, your employer is going to show you the door. They're not going to give you this. That's that's not what the concern is though. Waller is oversimplifying this.
So huge wage increase to make up for tariffs that aren't even showing up yet. So I don't think that this wage mechanism is going to be around to cause these second round effects. And that's always the standard channel for generating persistence. I just don't think it's going to be there. Okay. Do you have concerns now for the labor market?
We just talked about the Philly Fed being ne negative unemployment. You've had this modest rise in jobless claims and of course something of a step down along with recent revisions downward to the to uh the employment levels. Do you have concerns for the job market? Yeah, I'm watching. I mean, it's solid.
It's it's been kind of amazing. The unemployment rate has stayed right around 42 to 43 for a year. Just hardly moving. Yeah, but we are starting to see things like if you look at the there was a story in the Wall Street Journal earlier this week that the unemployment rate for new graduates is at a 20 or 25 year high.
College graduates are not finding jobs. Their unemployment rate is 7%. In pre- pandemic, it was five. So, it's that kind of data that's starting to make me a little worried. We're seeing job creation coming down. We're seeing a lot of things like you just said with the Philly Fed that are suggesting that maybe there the labor market's starting to soften more than we might want it to.
Yes. And so in my view if you're starting to worry about the downside risk of labor market move now don't wait. People love to talk about long and variable L. He is 100% right. The labor market has been weakening. I mean postco to some extent it's normal. You have to remember though what Goulsby says.
Okay, remember like I I try to study everything the Fed does and just consolidate and keep it simple for you. Goulsby has a really good point and he is historically correct. Okay, I want you to think about this for a moment. So COVID, this is going to be the chart. I'm going to label it UI. I know that's unemployment insurance, but that's just the way I label it.
Uh so unemployment uh goes let's go uh let's go way up and then we start coming down uh on unemployment and then unemployment starts coming up again. This is basically kind of like what you have, right? So, you've got this sort of like, you know, very low unemployment situation to the skyrocketing in unemployment uh during COVID and then that slowly comes down to very very low and depressed levels and then it slowly starts rising again, right?
Usually when the unemployment rate starts rising, it doesn't just magically level off. you know, this this magic level of it like, you know, oh, everything's going to be fine. It's just all going to level off. It usually doesn't happen. It usually takes a recessionary reset to end this cycle. So, to end that pain of that increase, it generally takes a recessionary cycle.
Now, how long is that going to be? Is it 6 months? Is it a year? Is it 2 years? 3 years, four years? Nobody really knows. But this magical idea that it just ends and levels off and and everything normalizes. Yeah, maybe this time is different and this is just a postcoid normalization. Maybe is that historically what happens?
No. Lags. Why do we want to wait until we actually see a crash before we start cutting rates? So should start thinking about cutting the uh policy rate at the next meeting because we don't want to wait till the job market tanks before we start cutting the policy rate. Yeah, exactly. At the same time, what's your forecast for how tariffs affect the inflation rate?
Um it looked like there was some impact from the tariffs in the May report. They were offset by other factors that seem to go negative. H how much do you think uh tariffs will add to the CPI or the PCE which you follow? Yeah. So I mean I think Steve you've said this many times. There's some things that are going to go up because of the tariffs but there's other things that are going to tend to offset it.
That's why you can't just look at one category of goods and say oh that's driving everything. And I think that's what surprised everybody in these last inflation reports. And I think that kind of thing will just continue in terms of it's possible that continues. Remember what we've seen in the last inflation reports uh is that we have actually started seeing a shift where you are getting that core goods inflation coming in being masked by services inflation still coming down and this this rise of core goods inflation that's what Powell is going to be paying attention to is this going to be persistent is it going to break inflation expectations of inflation I've long argued that if you had a if the effective tariff got down through negotiations to like 1% 10% % 10% imports make up 10% of the price index.
So a 10% tariff on 10% of the goods is only a 1% increase in the total price level. And that's if it's completely passed through. Yeah. Yeah. Yeah. Yeah. But but again, first of all, we're probably not dealing with a 10% tariff. And costs of goods sold might not only represent 10% inside of a company.
They could represent as much as 30% inside of a company. So the reality is what if you actually have 20% on 30%. You know, now you're talking about a 6% increase in prices. This idea that it's 10 on 10 is really rosy, bro. I mean, remember, Taco has not made a single deal with anyone that is a deficit nation.
Uh other than like the framework with China of like, okay, we'll take off the most extreme, but we still haven't actually made like a real trade deal, right? we've just like accepted the status quo of 55% tariffs for now and like kick the can down the road. So this means we're actually in a place where we could end up with deals like Vietnam where we get oh we're going to go from the 10% reciprocal baseline during the pause to 20 to 25% tariffs which are being rumored right now.
We've seen articles on this. That's way higher than than what you're referring to Waller. So I could see P like I want you to look like think of me as sort of like if I'm like Powell debating Waller here. This is what that conversation would look like in the meeting and understand the Fed chair has a lot of power to sort of shape where the votes go.
We already know that this is not being completely passed through as chair Paul was talking about actually in his press conference. Everybody has to eat a little bit of the pain from the tariffs and so not all of this is going to get passed through. So you might see the price in level going up 3/10en to half a percent.
But that's it. It's not going to cause persistent inflation. And every model I've seen from private sector forecasters, everything shows by the middle to end of the next year, the inflation rate comes right back down. It's a one-time level effect. Chris, which is what I used to call you when you were the director of senior, but Chris, Governor Waller, Chris.
All right. Whatever. Um, so the president said in a tweet over the weekend that the Fed board is complicit in costing the US government hundreds of billions of dollars by keeping rates too high. I want to know if you want to uh comment on what the president said, but also on this notion of whether the Fed should it take into account the fiscal cost of servicing the debt by by where it sets interest rate policy?
No. Our mandate from Congress tells us to worry about unemployment and price stability and that's what we're doing. It does not tell us to provide cheap financing to the US government. That is really the job of Congress and the Treasury to make sure you have a fiscal situation that's sustainable that will bring the deficits down and that will put downward pressure on interest rates all by itself.
So that's the most important and most effective way to get deficit cost or financing costs down. It's not from what I can do with a short-term overnight interest rate. That's not what's driving the cost uh for the financing the deficit. It does. So, one, it's not our job. Two, there are other mains that you should be worried about getting that done.
And we're a kind of a distant third in terms of having any impact. All right. Whatever. So, okay, that's basically the end of the interview. Uh, okay. Look, obviously that doesn't really matter much here. Point is, yes. Is there some enthusiasm around that idea? Yes. Is it realistic that we're actually going to get what Waller is saying?
No. Uh the bigger deal to me, why is it doing this? The bigger deal to me is actually that Waller is telling you, hey, you know, y'all know how Kevin's been complaining about the labor market potentially causing issues. Y'all should pay attention to that cuz it is weakening. Now, does that mean it collapses tomorrow?
No, of course not. But is it something to pay attention to? Absolutely. So I think that's the bottom line here.
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