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Fed language is consistent with our base case for 50 bps rate hike, says BofA's Bhave - YouTube
Channel: CNBC Television
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aditya welcome good to have you with us
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uh you heard steve's recap of what the
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feds said
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they discussed at their most recent
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meeting and in light of what they did
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how do you interpret the language there
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thanks for having me yeah i think the
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language is consistent with our base
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case for a 50 basis point rate hike one
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thing to note is that the minutes are a
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touch scale because after the minutes
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we've gotten you know the very strong
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jobs report
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the very strong retail sales report this
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morning and the softer than expected
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july cpi inflation print so if the fed
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looks at that you can say okay well
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inflation slowed down just a touch not
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just on the headline but also in terms
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of the core and we are seeing uh the
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housing and capex data suggests that the
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interest rate sensitive parts of the
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economy are being affected by fed
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heights so if they really do want to be
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data dependent going forward then i
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think there is a pretty good case to
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slow down just a little bit so so if
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they're if they're true to their word
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and going to be data dependent the data
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steve says aditya
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tells him at least that they may not do
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another three-quarter point that they
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might come back to a half point we just
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heard from diana olek who who used the
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word housing is in recession
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the fed acknowledged that quite a bit
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the housing being in recession uh the
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house the fed did not say that sorry the
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fed talked about the housing slowdown
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right and also tyler they brought up
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this idea which i thought was
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interesting that because of the fed's
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communications which as you know is
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quite extensive um that uh the market
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the economy may be responding more
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rapidly to these rate increases than it
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has in the past i just take a step back
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from this tyler you know next week we're
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going to be in jacksonville we'll be
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talking to a lot of fed officials i'm
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kind of realizing reading these minutes
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i have my work cut out for me there are
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some differences of opinion on this uh
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committee that maybe i wasn't quite as
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aware until i read these these notes
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there is definitely a hawkish wing and a
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dovish wing that has emerged and i think
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that may have come out after the 75
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basis point hike that now there's a real
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maybe a more intense debate on the
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federal reserve about where they go from
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here with many saying that there's a
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concern about tightening too much i'm
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not sure how well that maybe may have
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been appreciated and some are at this
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maintain uh reach a higher level and and
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stay there for a while there are some
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differences out there we have to do some
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more reporting on this and thankfully
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we're going to get a big uh chunk of
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that next week at jackson hole who would
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you say has the balance of power and
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what does the fed chair represent in
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terms of those wings steve you know i
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think i think the fed chair is more
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likely to be a little bit more hawkish
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here he wants to stamp out inflation and
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not have it be part of his record as
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being fed chair of a long and lasting
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inflation and one that uh he's for
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example moved to combat and then took
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his eye off the ball have it come back
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my best guess is that's the way powell
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feels about it i will say this following
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jim bullard has been an interesting
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exercise where he says things that feel
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like they're extreme then they end up
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being the center of the committee in
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other words people scoffed at the idea
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of 75 basis points when he first said it
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well guess what they've done it twice
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now absolutely adio what would you add
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to that where do you think the
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kind of center of gravity is and where
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do you think it's going
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yeah i think the dubs the hawks sorry
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still carry the day um i did say we
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expect 50 in september but that doesn't
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mean that we necessarily expect a lower
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terminal rate if anything the risks from
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a potential soft landing with better
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consumer spending data are that the
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terminal rate goes higher because the
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chain of reasoning for me here is lower
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inflation on the one hand means less
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urgency to hike in the near term but on
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the other hand it means that consumer
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spending and the broader economy holds
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up a little bit better which means
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there's less conflict between the fed's
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two mandates and so they can keep hiking
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so the risks are that we could
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potentially see a terminal rate of four
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percent maybe even higher
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