data is great, but you need a story. hearing the stories people tell does help me assess what is going on. david r: as chairman of the federal reserve, obviously an important job, how do you reduce the stress level you have? you cannot be watching economic numbers all the time. what do you do to relieve the stress other than interviews like this? chair powell: [laughter] the usual things, i read light fiction. exercise as much as i can. i like to ride my bike. i play guitar. david r: is that safe riding a bike? chair powell: it is safe if you stay on the bike. david r: you still play the guitar? chair powell: i do. david r: your hair is short for think the guitar. chair powell: it is too gray, too.

david r: let me ask you about the issue of what it is like to be chairman of the fed. you cannot have regular friendship dinners or meetings with people. people treat you differently than they used to, i assume? when you go to a restaurant, our people listening to what you are saying? chair powell: i have always thought my jokes were funny, david. [laughter] i have never been a public figure like this before and it is different. it is a great honor to serve. if you go to public places, you have to be very careful. david r: does the president of the united states ever call you with advice? did president trump ever call you or president biden? chair powell: i think it is a matter of public record that president trump did used to call me. david r: what did he call you? [laughter] chair powell: i have not gotten

any calls from president biden. david r: the biggest challenge you have now is being able to keep a straight face, not telling people what you are going to do in the future and look at the data and come up with the right solution, right? chair powell: the biggest challenge we face at the fed is completing the process of getting information down to 2%. what i want to point out is we are seeing disinflation in the goods sector. we expect to see it in the housing services sector. these are the three parts of the core pce inflation index. 56% of the economy the rest of the services sector. we are not seeing disinflation in there. that is going to take some time. we need to be patient and we think we are going to need to keep rates at every forgive level for a period of time. david r: when you made your speech, you talked about the

discount rate, you used the phrase disinflation 11 times. you were saying disinflation is beginning to appear. will do use that phrase 11 times again today at the jobs report? where will you be less inclined to use that were so much? chair powell: i will certainly use the term disinflation which means declining inflation. david r: what about the total debt of the u.s. which produces some inflation? are you worried about the total indebtedness of the u.s. producing inflation? chair powell: it is not the level of debt. the thing i would say about the level of debt is it is not the fed's job. we are on an unsustainable path at the government level. that has been the case for some time and it is something we will have to deal with. david r: many of your

predecessors were economists. you were trained as a voyeur. -- as a lawyer. they spoke in fed speak which is encumbrance little -- which is incomprehensible language. you speak in english. is that a split -- is that a plus, when you are speaking with members of congress, they know what you are saying? chair powell: i think so. our accountability is to the legislature, descendant, the house, and the oversight committees -- the senate, the house, and the oversight committees. it is important we listen to their concerns and share with them how we are thinking. i think they appreciate that. we have this precious independence, we cannot be removed from office, we have these long terms. the other side of that has to be

accountability. we have to be as transparent as possible and reach the people through their elected representatives. this is a high-priority. david r: when you testify in front of congress, how long does it take to prepare for that? is that a one hour session or a one week session? chair powell: these are supposed to be monetary policy hearings. they are on any political issue. it is quite extensive. you have to prepare for everything the fed is involved in and make things the fed is not involved in. it is a lot of preparation. david r: when you get questions from some members, you have to bite your tom and essay why are you asking questions like that? chair powell: that never happens. [laughter] david r: good. as you look at the country's economy, what is the biggest where you have about inflation? is it that fiscal policy is not under control?

what is your biggest worry about inflation today? chair powell: we are just at the beginning of this process. we need that process to continue. inflation began with people not being able to buy services, eyeing goods and global supply chains collapsing. you could not get goods at the prices of goods went up. that is turned to get better -- that is starting to get better as a supply chains are moving -- are improving and people rotating back into services. we are noticing it in housing. but we expect to see that. that is another big part of the economy. it should come in the second half of this year. the biggest piece is when are we going to see disinflation or declining inflation in core services ex-housing.

it is a risky world out there with the war in ukraine and the reopening of china. those are things that can affect our economy and the path of inflation. david r: the balloon was not your worry? you don't care about people and? chair powell: it is not within our ambit. david r: the federal reserve data from all over the country. are you convinced you get the best data? would you think it is not as modern as what wall street gets -- or do you think it is not as modern as what wall street gets? chair powell: we don't collect data on employment or most things. a lot of that is government data and it is very high-quality. what we get which i think is better and different is what i mentioned and that is the reserve banks putting together

the beige book and coming in and sharing anecdotes, what they're hearing. each district is different. you have agricultural districts and energy districts. just the hall of information -- haul of information we get through that network, i don't think anyone else has that. david r: you consult with your predecessors? one is the secretary of the treasurer now, but ben bernanke? chair powell: i talked to ben bernanke and secretary janet yellen. david r: when you are chilling with your colleagues on the fed board and you disagree, do you say i am the chairman of the fed, i am the person who has to make the final decision and this is what we have to do? or you don't quite do it that way? chair powell: it is a process of

reaching agreement. i hear what people have to say, i tell them what i think, and i am the one who has to bring a proposal in front of the full committee. it works. we have to reach an agreement. i think you can tell today we are blessed with a diversity of perspectives on the fomc. you have one thing that unites all of us and that is a strong commitment to getting inflation down. david r: in some parts of washington, people say if you give me this, i will give you that. you never do that at the fed when you are coming up with the decision? chair powell: not really. like a better office or something? david r: i will say what you want me to say if you say what i want you to say. that doesn't happen? chair powell: it doesn't happen. david r: when you talk to members of the federal reserve

board, do you go to their office or do they come to your office? chair powell: i like to do both. i don't like to sit in my office all day and have people come see me. i think it is better to walk around and see people. david r: the fed has been good about avoiding leaks of their decisions. how do you do that? most people in washington are not good at that. chair powell: we have strict rules about confidentially. we publish these things internally for the fomc. the other thing to remember is we are not trying to hide our decisions from the public. in modern monetary policy, we want the public to understand how we think, how we are thinking. if markets really understand how you are thinking and a new piece of data comes in, the new markets say they are going to do this. that happened all last year. as we were talking about raising

rates, the market priced in raised -- priced and rate increases before us. david r: from the time you make your decision on the fomc, your press conference is at 2:00 or something? chair powell: 2:30. david r: your decision is made by 2:00 or whatever it is. you have a half hour you have to avoid leaks. how do you make sure no one is calling their spouse and saying guess what we are going to do? chair powell: people take this very seriously. none of this happens. you are taking a professional life in your hands if you do that. people have a sense of self-preservation. people are careful about this information. there is a period of a couple of hours after the meeting. we announce at the 2:00, the press conference is that 2:30. there is a small group of staffers who know what is going

to happen and i think everyone understands you just have to be careful with that. david r: go back to the job description. next month, if you had another 519,000 jobs created, would that be good or bad from your point of view? we have a lot of people working, but producing more inflation. chair powell: we don't have the luxury of thinking about good or bad, it just is what it is. most analysts would say to get information down -- get inflation down, there is some softening that -- softening in the labor market that goes with that. that is possible here. however, this cycle is different from other cycles because of where it came from. it has confounded all attempts to predict what it is going to do. it is good that we have seen

strong labor markets, but we have seen which is moderated. wage increases are high but wage increases have come down to a level closer to what would be sustainable. same thing with inflation. inflation is trying to come down the labor market hasn't softened. we expect it will soften. it will do what it will do. our job is to get inflation down to 2% and preserve maximum employment. david r: when the fomc minutes -- fomc meets, you know how the decision is going to come out before you get together because you have been talking? fortis the meeting change minds in ways you may not have expected before it started? chair powell: it depends on the meeting. i talked to each of the participants at least once and we go through everything. what is your analysis of the economy, monetary policy, the

path forward, all of that. in some meetings, i will say some of the time you get into a discussion that suggests you should communicate differently and then we will think about that. we might take a break in the meeting and go off with a smaller group. sometimes, everything plays out as expected. david r: when you are having these meetings, i am assuming someone sweeps the room to make sure there are no bugs? chair powell: all of that. david r: no leaks. chair powell: no. david r: as you look forward for the remainder of this year, your view would be you would be happy if inflation would get down by the end of the year? 2% might be unrealistic, but core inflation is about 4.5%? chair powell: it is in that range.

we expect significant progress on inflation this year. it is our job to produce it. we threw these numbers around, but the reality is we are going to react to the data. if we continue to get a strong labor market reports or higher inflation reports, it may well be the case we have to do more and rate hikes more than is priced in. david r: if i wanted to get a mortgage on a house, he would say i am not better off waiting until next year than now because rates aren't going to come down that much the beginning of next year? so i might as well get the house now? chair powell: surprisingly enough i get a lot of advice on things like this. i really can't respond. [laughter] david r: on the whole, to summarize where you are, you are saying the job stated that came out was a little bit surprising but in the end you have taken it

into account and you are comfortable with the guidance you gave last time and you are not repairing anything that is completely different guidance than last week? chair powell: this is a world in which we have the labor market report. it underscores the message i was sending in the press conference and the meeting that we have a significant road ahead to get inflation down to 2%. there is an expectation it will go away quickly and painlessly. i don't think that is guaranteed. the base case for me is it will take some time. we will have to do more rate increases and look around to see if we have done enough. david r: 2% is the rate had the last years, but prior than that in u.s. history, we were above 2%. we are use to 2% after 25 years

of it that you think that is the appropriate level? chair powell: we went through this long period where inflation was anchored around 2%. economists think that is because people start to expect 2% inflation. in a way, if everyone expects prices and wages are going to go up committee, then it will. that is what will happen. having price stability, real price stability for an extended period of time is enormously beneficial to the public. on the back of that, you can build a strong labor market. we had a labor market with 3.5% unemployment in 2018 and 2019. we had inflation really getting to 2%. wages were running up for people at the lower end of the spectrum.

we all want to get back to that place. the bedrock is to get inflation under control. david r: the unemployment rate has not gone up as much as we thought. some say it is because we don't have as many illegal immigrants coming into the country. do you think immigration is an issue in regards to giving us more labor workers? what you think that is not a factor? chair powell: it was a factor because there was little migration across borders during the pandemic. that was part of what was happening, particularly in sectors like agriculture and food sectors where there were not people. just recently, the immigration data has turned up again. i think that may be part of what people are feeling somewhat less pressure in a labor markets to find workers. this is any issue not for the fed, immigration is a political issue. we do not seek to be a player on this.

it is a fact that right now the u.s. has fewer available workers and has jobs and job openings. david r: you increase interest rates, the effect is to increase the value of the dollar versus other currencies. do you have any concern about the value of the dollar going up or is that not something to comment on? chair powell: the responsibility for the exchange rate rests with the treasury department and administration, not with us. that is another variable that goes into the economic model but we don't look at it as something we are working on. david r: i haven't been able to get you to say anything you didn't want to say. i would say, i have known you a long time and i think you have done a great job in a difficult situation. i appreciate your service to the country at $180,000 a year. thank you so much for being here and thank you for your service. chair powell: thank you david. good to see you.

>> we were listening to chairman powell speak with david rubenstein at the economic club in washington. it is fascinating to hear what is moving the markets. we know they were on edge going into the meeting, but you see the markets right. the s&p 500 is as high as 1% on the day. what really changed the game for the markets is the idea that chairman powell expects 2023 to be a year of significant inflation decline. that seems to be worth the markets wanted to hear. he did caveat that saying it will take 2024 to get down to 2% inflation, something he calls the global standard. that is important when we talk about whether or not there is a sustainability to this to present standard, especially when rates are expected to be above 5% when the terminal rate does end. let's get some immediate reaction. abigail doolittle is here.

i am looking at the stock market and the yields, it seemed the market was waiting for those inflationary comments. abigail: i thought that was a brilliant conversation. there was a lot of cat and mouse between david rubenstein and jay powell with david rubenstein trying to get jay powell to say something new, to commit to stop -- to commit to something new. he threw softball at the beginning. we had a strong jobs report, would you like to add something? would that have changed policy? jay powell laughed and sorted the audience and said it doesn't work that way. steady as she goes. we had a strong response with stocks, the s&p 500 going up as much as 1.2%. david rubenstein kept trying to get more information. at one point he did get him to concede a little bit on something. one thing he got him to concede

was on the 2% inflation question. is that something you are expecting toward? jay powell conceded. at the end, there was also the idea where jay powell gave the idea that they are steady as she goes, they're going to be tightening, but that is not new. some market participants want to your something different but that is not new. i would say we did not learn anything new. a great conversation, lots of humor. we have the s&p 500 off of its lows but also off of its highs. i would suggest this year's rally is in place. kriti: i want to bring in michael mckee who is on the ground at the washington economic club. to add to the point of what abigail was talking about, that 2% global standard, if you are sticking with that, doesn't that mean cuts already given at some

point -- cuts are a given at some point? michael: in a long enough time, everyone is dead. the thing is that the fed is using 2% as a target. that is what their target is. they may revisit this when they do a review of monetary policy. that is their goal. it looks like inflation is moving in the right direction. a strong economy according to the models should push inflation up, especially a labor market as strong as it is. the fed is wary about declaring victory and say we are on the way down. the bottom line of powell's appearance is not so much what he said. as applicant noted, he did not say anything new. it is what the markets heard. did the markets get the message she was trying to sent last wednesday? the fed is going to keep going.

if inflation doesn't come down and the inflation market stays too high, the fed will raise rates higher than they plan to. for right now, they will sit back and watch because they think they have got enough tightening in the pipeline to keep inflation going in the right direction. kriti: you made it clear if you start to see more signs of inflation coming back, they're going to be more aggressive when it comes to rate hikes. there are a few things he did not mention, perhaps a reprisal in commodity markets -- a relaxing entry -- market just baked into the idea that inflation is going to accelerate more quickly this year. did he miss a couple of points? michael: he wasn't attractively out what is going to happen with inflation so much, although he did touch on service price inflation and that goods price inflation has started to come down. service price inflation is still elevated and housing is part of

that. what he did say is that his focus was on wages and the fact that they are above the level that is sustainable with 2% inflation. he did not mention it, but the fed's research shows 3.5% and right now we are running at 4.5%. the fed does think housing prices are going to start coming down in the next few months in the inflation indicators because enterprises have started to come down. it takes a long time to get into the official government data. kriti: stick with us, we will be back with you shortly. i want to bring in lisa abramowicz, the bloomberg fed specialist. i want to get your take. we have a market side with mark and abby -- with mike and abby, but we look at the two-year yield, it is shrugging. 4.42 on the two-year yield. lisa: the round-trip is notable.

he said his inflation, oh my goodness, buy. that was across the board all asset classes. when he became clear that was one side of the story, there is the disinflationary process of the goods sector. look at the service sector, you are noticing that. he talked about how his base case is not as painless as the rest of the markets. he saw more rate hikes ahead. if we get labor market data similar to what we saw friday, there would be potentially a higher terminal rate required. he is not particularly dovish. if the bond market is shrugging, stocks are feeding the rally. he is telling more about positioning and people are hearing what they want to hear than it does about any shift in message. it was consistent. kriti: i have to ask about the labor markets because you heard david rubenstein ask over and

over again what exactly you make of this 517,000 payrolls report. this round-trip, it has to come to a positioning at the end of the day. is chairman powell at the risk of changing his message as we wait for inflation to be bumpy? as he said time and time again, that is a no-brainer. this is not a one shot down. lisa: this is a difficult moment for chair powell and he is navigating it by not using the market as a tool to manipulate into a place. that is a shift in tone. he could have come out and said the market has got it wrong, they were not listening. the fact that he didn't was viewed as dovish. ecb a report on for brewery 14, a very important report to give a sense of inflation, people understand how much is good inflation at how much you are starting to see services. we saw the services pmi's that

came in much stronger than people expected, rebounding in the prior month's reading. i don't know if we are going to necessarily see that. he could have pushed back and that is a takeaway. the labor market is clearly tight. kriti: i have to ask specifically about what he is not talking about. he mentioned the commodity pressures as something a lot of people are saying is going to come back down because the supply chain issues that drove it higher are not as intense as they were in 2021. is he missing the picture here? should he be worried about $100 oil? lisa: maybe he is watching that, i am sure he is. i think people are looking at pcu and core, stripping out energy and food to understand what the path of inflation is, how long this disinflationary process will last.

the focus will probably be more on the labor market and the oil market. that matters year-over-year, division street coming out on friday. but really this will come down to the labor market. and comments jay powell said about the 5 million additional jobs, demand for five-minute workers and a lack of those workers that are available. the structural imbalance in the labor market that causes a more persistently low unemployment rate and potentially more wage pressure. people are going to look for more understanding of that from the economic privation and from the federal reserve and what that means. kriti: lisa, stick with us. the s&p 500 is higher by .2%. the nasdaq higher by .5%. this is important when we talk about what the bond market is doing. it is all about positioning here, the two-year yield at 4.43.

it is paring back the original movie are sing. the five-year yield as well. his ipod markets to and is now trying to reverse slower and slower. this is important as we bring in our international audience in a few seconds. we are going to be joined by a crucial member of our program. we welcome you to our audience. we are just coming out of washington, david rubenstein is speaking to chairman powell. jon erlichman, my cohost joining the program. it is interesting to watch this market move. we are seeing the s&p 500 flat on the day. >> while the market chose to lean in our fault that jay powell is leaning into disinflation, there is a road ahead.

the idea that -- then the fight against inflation continues with higher interest rates and the story of getting back to a target inflation level of 2% and the fed chair made it clear it is a long way ahead. kriti: we have an all-star line up here to break it down. we were to -- speaking to lisa abramovitz. i want to bring you back to the conversation and ask about some of the other exogenous factors that were referenced. david rubenstein asked about the debt ceiling and how that factors into the fed policy and chairman powell said there is no way out of these outside of congress saying they have to increase the debt ceiling. is this something the market should be wary of? lisa: absolutely, people are thinking about the debt ceiling debate.

perhaps we will see the same kind of reaction this time around and it is not fed chair jay powell's results ability. he made that very clear from the press conference. it is the credibility of this country, do it. they are watching this but it is in their purview. it is a potential risk but it has been happening so frequently. . kriti: we will keep an eye on it and lisa, stake just because we have a lot more of your brain to pick. lisa abramovitz -- i want to get sound from what jay powell said. >> 2% is the global standard and that is our objective 2% piece as measured by the pce index. that is not something that we

are looking at changing. my guess it will take certainly into, not just this year but next year to get to 2%. taylor: mike mckee --kriti: mike mckee, i want to bring you to the conversation. we are talking about the market reaction and lisa highlighted that this is a positioning story. what do markets need to be aware of now going into the economic data in the next week weeks -- few weeks? mike: the economic data will be critical. they got a strong jobs report but they don't meet until march 22 and they have another jobs report, the february jobs report at the beginning of march and two cpi numbers and another pce inflation number so they will have inflation and jobs data to make decisions on and they will see if the strong jobs report in january was an aberration or a

rebound that will continue and the fed has to no more because that is maybe one reason why fed officials are being cautious about how they present all of this. you look at swaps trading, and inflation swaps investors think we could get to 2.4% by the end of the year so that is the economy here -- dichotomy here. you think inflation will go quickly or slowly as jay powell does? if lisa is there, i wanted to ask her a question because, lisa, you are a bond market participant who is giving me the same kind of notes i am getting from other analysts saying jay powell did not push back hard enough. what should he have said? lisa: [laughter] well, i will say this. i am not trading bond so i am not bond market participant but i am a bond watcher and watching

every day different moves. what he did say and two mike's point, he said markets are more aligned with very defense -- financial conditions. the market is more aligned in terms of where financial conditions have tied into -- tightened to. you could have said, i don't understand why the market viewed my words as dovish. he could have been clear. he could have used the word disinflation. everyone went to the races. algorithms positioning, say whatever you want to say. people are looking for a bit more of an aggressive take on the message and the fact that he didn't, i think gay people some sense that the balance and risks weren't as cute as inflation running away -- skewed as

inflation running away. the highlight, what do people want from this? he is coming here to represent the economic school of thought and to put out there his views. he is not going to play the market. that is that. at what point does the market has to realize the fed is not holding their hands anymore? the fed will not push them away from a particular corner to get sued the -- the economy to a place that the market should get to? >> let's get some perspective from the market side. we have our chief at bloomberg intelligence, interest rate strategists and to dig into what you think the market is interpreting, what would you say? >> i agree with lisa and jay

powell mentioning disinflation so many times, even when asked about that word from david rubenstein was taken as dovish and the market rally, particular in the front end, the three and five your sector is interesting because i didn't hear him say much of anything new. i wonder how much of this is algorithmic traders seeing headlines about the -- disinflation idea and i think we haven't defined a word in the market correctly, disinflation. disinflation, which jay powell tried to say, means that inflation is not running as fast as it was but it does not mean it is flowing -- slowing. there has been misconception there. this is one of the reasons why the market is rallying, this is an opportunity for jay powell to push back against the idea of rate cuts this year and he barely touched on that.

relative to the expectation that he would be more hawkish, he wasn't. even though hugh was little of the road and said the same stuff he said last wednesday, that wasn't what the market wanted to hear and i think that is why you are hearing -- seeing this. in of the yield curve. -- this bold steepening of the yield curve. kriti: what caused that additional -- initial depth and was a justified given we are seeing the retracement to your point? ira: i don't think so and i think a lot of times people are trying to position for moves based on things they hear and they don't take everything that is being said in context and that is the one -- that is one of the dangers like algorithmic trading. we have our own model that parses all the fed words and

part of the problem is that does not pass the smell test so if you wind up seeing a word, and you think it is dovish, is it dovish in context? that is something we have to get these models to tune in on. looking at the market, we have retraced on the front end but we are -- two year yield being four basis points slower on the day, and it is suggesting that the market thinks that the fed is going to be cutting later this year and into next year. we are still probably 40 basis points lower than where we should be at the fed were to be on hold for the left -- for the next 12 months. mike: i have a question to push to you on this model idea. do the markets listen to fed speak too much and not pay enough attention to the data? the data are what the fed is making decisions on social -- so

they should be telling the markets the same thing the fed is. i don't disagree --ira: i don't disagree and in a way we have gone to too much speech. you remember the days when you listen to alan bring -- alan greenspan and no one else mattered. now we have too much fed speak. we had it many fed speakers. we have four more that speakers. we could have had information overload and the markets can't necessarily parse out the signal from the noise and jay powell is going to be the biggest single. he is the chair of the fed. he even said to mr. rubenstein, he talks to everybody and those going and what everyone is -- going in what everyone is

thinking so he is the spokesperson for the federal reserve and the only perceived need to listen to. at the same time, he has tried to be so balanced that i think it has confused the markets and he probably needed to be more forceful if you wanted to get financial conditions lower and if he is worried about inflation not falling as quickly as he wants, he needed to be more hawkish and he was not. kriti: bloomberg's ira jersey, we thank you as always. bloomberg's michael mckee, he will stick with us but i want to get back to comments from fed chair powell. >> this process is likely to take quite a bit of time and it is not going to be smooth. it will probably be be. we think we will need to do further rate increases and we think we need to hold policy at a restrictive level for a period

of time. kriti: let's bring in alan blinder, former vice chair of the federal reserve under alan greenspan. he is a professor of economics at princeton university. always a pleasure to have you on the show and let's pick up where ira jersey left off. you lived at the greenspan era, one of the most aggressive tightening regimes in history. it's the fed over community -- is the fed over communicating? abby: i think it is -- >> it is oxymoronic. i don't think they can over communicate. orchids are looking at every little nuance and over interpreting what fed people say but i don't think the problem is communicating. the inflation picture is changing.

the job market is tight which is an amazing conjunction of events, falling inflation what the type job market -- with a tight job market so the data is sending out confusing signals as mike said. jon: there's a conversation taking place and i am here in canada and the central bank chief in this country put a pause on rates after the last decision so they can see how things work through the system, making the case today that monetary policy acts with a lag. we are not having that conversation reaction to j -- chair powell's comments because we are not sure how far the fed will go with higher interest rates. what you -- are you thinking about that issue? alan: i am more or less where maclin is. people are not paying attention

to the fact that in the second half of 2024, the inflation rate was 2%. -- 2022, the inflation rate was 2%. everyone that looks gnosis. -- knows this. it probably won't stay at 2.0 indefinitely because some of that was due to falling oil prices. inflation is way lower than it was and, i hate to disagree with jay powell, if i were running the fed, a fanciful thought, i might think about pausing seriously. not declaring this is it forever. we will not raise interest rates ever again, no. inflation may pop up its ugly head. it would be appropriate to pause and watch the effects of

previous tightening have their effects on the economy. mike: as a former policymaker, how do you know when you are restrictive enough? powell says they need to get to a restrictive level that would bring inflation down. how can you be sure where that could be? alan: you can never be sore. they are re-estimating all the time. we normally think these days, this was not true many years ago, in terms of where is the real interest rate compared to the neutral or equilibrium. the markets have taken -- these days and to do that calculation, you have to decide what inflation rate you have to subtract from the current federal funds rate and inflation is a moving target. as i said a moment ago, let me put numbers to it. pce inflation, which is what the fed is watching, was running at

a percent at the first half of the year and about 2% and eight the second half of the year. what number do you want to use as expected inflation? you can look at the markets' expectations and they have very -- markets' expectation and they have barely moved. if you use that at one half percent real equilibrium r-star, you get to 3% and above three would be restrictive and below three would be expansionary. that is an example of the compilation that gets done over again. kriti: you wrote a piece in the wall street journal and i want to grab a quote from what you said? " peering ahead the bottle -- the bar next won't return and another energy shot cannot be ruled out but it looks unlikely. "

how do you factor in the leg built into fed policy into the economy at the same time, swearing wit with a potential rise in commodity pressures again? alan: other than oil, which i mentioned, i don't worry much about commodity prices. oil is in a class by itself. the recent news on oil has been very good but we are not out of the woods. the things in europe and ukraine and elsewhere could take a turn for the worse and boost inflation. by and large, the best guess about that is oil is not going to be a big problem for us going forward and while it won't keep coming down, one of the reasons we don't expect inflation to stay at 2.0% is oil prices will -- have been in may continue to be vote rather than fall as they did for much of the second half

of last year. those things you mentioned, reading from my wall street journal, these -- part of the reason why i said that before, given the things that stand out, a pause in the fed's rate increase, not in the declaration that is -- that it is over, but a pause will be appropriate. kriti: alan blinder, teaching economics at princeton, we thank you as always, he served as the former vice chair at the federal reserve and a member of the former president clinton's advisors. let's start with your initial reaction and this bond move. >> there wasn't much and what jay powell said, that the market could hang it on. what i think people were hoping

or looking for, some clarification of some miss -- misperception and we had a strong payroll report. the fed is data dependent, does jay powell talks about a higher terminal rate? we had the immediate reaction. i think the fed is data dependent and we are in the last -- i often joke to friends that when you're running that last -- we are in that phase that they are going to go 25. we think they will go two more 25 and i think there should be a case for another 25. if it place -- if inflation falls, i think you'll come down to inflation stop i think jay powell is telling us they are data dependent. that is an uncomfortable position for the market because we are used to forward guidance. our view is that the inflation -- disinflation we have had, 2%,

three month annualized rates, that will peter out. --peeter. you get to four and three, you need rates to come. we don't see how wages would put enough pressure on service inflation so our view is it is going to be sticky that the data has to pan out. that is what the market has to wait for and i think volatility stays high on database. any surprise the market re-prices are -- adds an high court takes in hike out -- hike or takes a hike out. jon: as a conversation continue, you could have interpreted it, some of that as being more hawkish but going back to the initial reaction and the idea that there was an opportunity for the fed chair to push back

on this view of perhaps, soccer messaging, perhaps dovish messaging. is there any justification for not jumping on that to the fullest extent, which has really played out in the markets this year and we have seen it in the equity markets? priya: the market is being driven by two issues. there is a soft landing narrative. if you look at global growth, it is much better today than three months ago. europe is not in recession and -- a recession and china has opened up. the soft landing narrative is stronger. if that is why financial conditions have eased, i will take the data that justifies it. the other aspect that has moved is cross asset. --assets. if inflation is at 2% by year

and end -- year end, that is good news. that is the one i struggle with, that if inflation continues, the space of the client, -- jay powell brought that up. we haven't seen that inflation the client and that is the narrative which if the data starts to shut, i am looking at next tuesday. if we see that the client has stalled, i think the market has to question that the fed is done or how quickly they can start to cut because inflation is stalling and i don't see any rate cuts this year. mike: do you see rate cuts share? if the fed gets to 2% and we see unemployment remain in the low fours, which they think is full employment, does the fed need to cut? there may be incentive for them to keep rates higher so if we do

go into recession, they have room to lower rates. priya: that is a fair point but if we get the soft landing and disinflation by the end of the year, at 2% and 2.5% and even 3%, and the unemployment rate is not much higher, i think the fed starts to cut, maybe next -- not this year but next year. i percent is not normal. i think it bring it to 3%. the dot plot has rate cuts. we are looking for a recession. the fed will need to be accommodative and the data doesn't support a recession thesis but even in soft landing, as long as inflation is getting close to 2%, they have to cut and otherwise policy becomes too restrictive and a hard landing looks more likely. >> --jon: thanks so much for your time.

thanks to bloomberg's mike mckee as we watch the market reaction to all things foul related and let's get back to that specific part of the storyline. abigail doolittle has been all over this. do we call this a round-trip reaction over the course of this last hour? abigail: i think we called it much of do about nothing -- much ado about nothing. we have two lawyers up there speaking to each other and they set it up in a weight that the market didn't crash because everett was put into the markets initially when jay powell had a couple soft all question from david rubenstein that he could say something that will be interpreted as hawkish. that did not happen and chris murphy has given me the information, there was a lot of puts and when that information didn't come out, it went up and now it is down. and poorly, the 10-year yield is up and that is what they.

want to see they want to see. --that is what they want to see. i think that -- fed chair powell got what he wanted especially delivering at the end of the conversation, underscoring a significant road ahead, there will be nor -- more rate increases. that is nothing new. kriti: abigail, you are a skilled technical's analyst and let's talk about the technicals. we are talking about the s&p 500 bouncing off the 41 level and a 10 year yield that stays about the trading range. what matters more? abigail: i would argue the technicals are always in charge but if you assume that the market is efficient and taken all -- taking all information early. the uptrend out of the october lows is holding and we have seen often that strong jobs report, nice facilitation but the buyers

are stepping up and if that trend were to bake -- break, it could be a different story. except be a significant pause but today, this information out of fed chair jay powell did not rock the boat and reconfirmed the messaging that we have before and markets are digesting. you had the s&p 500 down 2/10 of 1% and the index slightly higher. i would not surprised if you see markets around where they started and maybe up or down a little bit but so long as this year's uptrend is holding come of the bulls are trying to take control. kriti: bull -- bloomberg's abigail doolittle, the most patient guess in history. the amount of pressure added ahead of this conversation. the markets are, like, we are where we started. jon: the fact that you had that

initial dovish reaction on a day when i investors were gravitating some -- toward at least some tech or ai related stocks, but getting back to where we were. kriti: absolutely. stick with us. this is bloomberg. ♪ three nights, esg... the broker will take your bonds. -diversification, futures, options. fiduciary. leverage. [whispering] -frothy markets. psst. virtual real estate is a lock. ♪ cold hard cash ♪ j.p. morgan wealth management knows the world is full of financial noise. i'm looking at your asset mix and plan. you are right on track. great, thanks. our easy-to-use app and local advisors are here to help you figure out what's right for your investments. j.p. morgan wealth management. i screwed up. to help you figure out what's right for yomhm.nvestments. i got us t-mobile home internet.

now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck.

kriti: we are kick you off to the closing bells and we have two hours left in the trading day. bonnie, it is it exciting and so much momentum ahead of this conversation, speak from chairman powell and it looks like the markets are shrugging off. >> they had a nice john --jaunt. it was interesting and the nasdaq was up 2.5% and we are back down to -.1%.