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With us today . With age comes wisdom. And I consider you wise. You and I have seen a lot in our careers, and we have both seen much higher interest rates. Yes. So I guess I'll just start by saying that I understand that relatively speaking, when things change from low levels, it's a much larger percentage movement than from higher levels.
But does this really threaten to stop the AI boom at this point because they can't fund projects at current 10-year, 2- year, or 30-year bond rates? Isn't there too much concern about this right now ? I can't believe the Ministry of Finance decided to take this step, it's almost like: " wow." We notice this and are worried about it .
I would ignore it at those levels. First of all, it's nice to see all three of you together again. Thank you. We call it the “wild trio,” and I do n’t mean anything bad by that. But I completely agree. I am not a fan of the " Bessant twist". I didn't think the markets were unmanageable or needed additional liquidity, and I completely agree with you, Joe.
You know, we were already at 4.75% on 10-year bonds, it's not a critical point. Not to mention that it could happen in the future, of course, but to panic about financing— as you said, for many years, 30, 40 years ago we would have said, "Oh my God, how low interest rates are now compared to what we've seen." But I think Friday at 10:00, that's when Wallace's performance is scheduled to take place.
I think this is a very important event. I really think the market wants to see the Fed not make any predictions about the future. They are ready to accept it. But they want to know what criteria you look at? Are you looking at five-year inflation expectations? Are you looking at the federal funds futures market?
What criteria are important to you ? And I believe that this is the proper function of the Fed—to communicate this to the market. And if Warsh does that, I think we'll see significant growth on Friday. For example, on Wednesday we will get the PCE report, and I think it will be good. Actually, I believe that the figures will be at or even below expectations.
So I don't think there will be any significant pressure. Let's be honest, from a political perspective, I don't see Warsh raising the stakes. Is this true? Is this true? Is it true or just an urban legend that the market, by definition, tests every new Fed chairman? If I were the market and had ulterior motives, I would continue to grow to see...is this what we are seeing now?
Is the market testing Kevin Warsh right now, by... gradual growth? I think if Kevin disappoints on Friday and gives an uninformative speech, the market could start a new test. Of course, he will still have a chance to correct himself at the Fed meeting on September 16, which is important because of the SEP forecasts and so on, but if he disappoints on Friday, a small test is possible.
Yes, to some extent, you could even say that there was a small test when the yield on 30-year bonds exceeded 5 %. Therefore, I believe that Friday's performance is worth watching closely. Jeremy, when you say “if he disappoints the market,” what exactly do you mean? I think if he doesn't give any criteria on what he's targeting, but just says, "We're having great discussions, interesting debates, and we're going to let the market..." It's important whether he comments on Bessant and the intervention on 30- year bonds.
As we know, he is a supporter of the principle of "letting the market speak for itself." And now, will we get... there are a lot of questions surrounding this. What was his reaction? What is his real reaction to Scott Bessette? Did they communicate? Was this a surprise? Well, I'm, you know, not sure if he's going to include it.
And, if I remember correctly, there is no question and answer session after the speech in Jackson Hole. So, uh, that would probably be the main question they would ask. respond. I need clean bets. Well, you know, do I get any net bets on the Fed changing its maturity structure at this point? But I think what the market really needs to know is: you're not raising rates.
You voted against this. Good. What criteria are you considering? Professor, there are a number of factors that could justify this, and they would feel more confident. This is a criterion that we pay attention to at NUA. We can also monitor this in the process.
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