we are going to kick things off by chatting with brendan peterson, he is a financial services reporter for punch bowl news. good morning. guest: good morning. host: thank you for joining us. we know that federal reserve is meeting today and tomorrow. what are analysts expecting from the meeting? guest: we are expecting a 25 basis point hike. this is pretty much in line with how things have been going for the past 16 months or so. the federal reserve has been

embarking on a historic interest rate raising campaign to bring down inflation. we paused last time, economists expect the fed to hike again. the real question looking forward is what the fed does after this. officials have projected they want to hold interest rates higher, rather than raising them every time. the question will become how long do we hold interest rates as high as they are? if the fed hikes tomorrow, we are looking at an interest rate between 5.2 5% and 5.5% of the federal level. host: we hear a lot about this softly ending the federal reserve is trying to create or accomplish. what does that mean, and how does that impact rate hikes? guest: something you might hear folks say on business cable and in general is the phrase

immaculate disinflation. what that means is the fed successfully raising rates and ringing down inflation at the same time without seeing a significant increase in unemployment or other metrics of economic pain. raising rates usually has a cost. it has been correlated with lost jobs and higher levels of unemployment historically. that has not happened at this time around in large part because the labor market has been so tight for so long. if we achieve a soft landing, that means we get lower inflation without losing a whole bunch of jobs. i think we are a little ways away from declaring victory on that. inflation is a long process to bring down and the real friction of the fed interest rate in the economy is going to take place over the next several months, if not years, as we keep rates

elevated. host: speaking of the elevated rates, what is the impact on consumers if the fed does move forward with hiking interest rates today and tomorrow? guest: in the short term, i do not think consumers will feel that much difference. we are kind of in matter of degree territory. a lot of fed officials have said we are feeling comfortable with where we are at, some fed officials want to push us past the 5.5 percentage point and get us closer to 6%. in general, a lot of the effects of higher interest rates have been moving their way through the economy over the last several months. consumers will probably see higher interest rates on various types of loans, like mortgages and credit card payments. you might already be experiencing that. other ways will be harder for

regular consumers to gauge. for example, big companies will probably be borrowing less money as interest rates get higher. that might translate down the line to fewer opportunities or smaller pools of investment. in general, with rates already being so elevated, i think today's hike would just be a little on top, rather than a significant event. host: testing your historical knowledge, i am curious -- he said between five point 25% and 5.5% could be the interest rate after this week. people like me who are not experts, we do not know how that compares. ? ? is that really high historically is this kind of normal? is it hard to compare? that is my question. guest: it is not that hard to

compare. part of the issue is consumer expectations. for the last decade or so, interest rates have been really low, especially coming out of the financial crisis. we are talking about interest rates that were at or below zero , which is free money. because inflation has been so stubbornly low over the past decade up until after the pandemic, rates stayed pretty low. my adult lifetime, i am not used to seeing interest rates this high. that said, we saw much higher interest rates in the 70's and 80's. famously, paul volker, the previous chair of the federal reserve really had to campaign against inflation. had to crank up interest rates to stamp it out after inflation was stubbornly high for much of

the 70's and 80's. interest rates were in the teens, i want to say. i do not know the exact number off the top of my head. people paying out for 15% mortgages, which we are getting there in the housing market, but we are not anywhere near that level any meaningful sense. it has definitely been worse in the past, but expectations are everything and interest rates have gotten higher in a short period of time. host: let us talk about the political impact on president joe biden. he has been talking up the economy, painting a pretty positive picture. but one of the political stakes for president biden as we know consumers are still worried about inflation? guest: it is a tricky dance, running for reelection as the

president when you had an economy where voters pretty widely agreed it is not the most comfortable thing in the world right now, but everything is getting better. when you are talking about the president and economy, it is everything right now. until the economy craters out or unemployment starts to go up, stock market, any of the little metrics we like to talk about -- republicans do not actually have all that much to run against biden on. they have made a big stink about inflation and the economy for good reason, because republicans know people care about that, because they do. as long as things are getting better, those attacks will carry less water. that is part of the reason why we are seeing so many republicans leaning into cultural war fights over lgbtq issues, what is happening in schools, things like that.

without the economy, republicans do not have as much to fall back on and that could be a defining characteristic of the 2024 presidential race. host: before i let you go, the million-dollar question. just in your analysis, are we still at risk of inflation? you said it is too early to claim victory for a soft landing. what indicators are you looking for? guest: unemployment, certainly, is the big question on everyone's mind. i do not think anyone would be surprised if unemployment goes up a little bit over the next several months. the fed itself has projections on the books saying by the end of the year, they expect it to go up enough that potentially millions of people could be out of work in this country. we are a big country, one million is not the largest number. it is significant. losing a job in the u.s. is one

of the most disastrous things that could happen to you as a personal-finance matter. the other thing is wages. people want to know that their wages are keeping up or exceeding what we are seeing in inflation. under the biden economy, low and middle income workers have seen income rise as historically fast rates. they are closing the inequality gap with the upper thresholds of our economy. upper to upper middle-class americans have certainly seen their income go up. they have not seen it go up as fast as low and middle income folks, so they are feeling the economy in a different way than the lower end middle-class, which is always been the case. but the shoe is on the other foot this time, so that is what we are tracking in terms of quality of life as well as with the macro unemployment rate. host: that has been great information you shared with us this morning.

again, plentiful news financial services

and infrastructure investments. good afternoon. welcome to csis.