Moody's Talks - Inside Economics - Growth Under Strain

Episode Date: July 31, 2026

Michael Strain of the American Enterprise Institute and colleague Matt Colyar join the Inside Economics crew to unpack a blockbuster week for the U.S. economy. A bizarre FOMC meeting, fresh GDP and inflation data, new readings on consumers, and financial market gyrations offered plenty to discuss. The group debates what it all means, where the economy is likely to head from here, and of course, play the numbers game. Guest: Michael Strain, Director of Economic Policy Studies, American Enterprise Institute Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s Analytics Follow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by one of my trusty co-host, Chris DeRees. Hey, Chris. Hey, Mark. Good to see you. Good to see you as well. Where's our other trusty co-host?

Marissa. She's dealing with power artage. She may make an appearance if she can, but she ran out of juice, as they say, huh? Yeah, I don't think it was her over-consumption, but she ran out of power. Power from the power. She ran out of power. Okay. Well, hopefully she'll, are they going to get power?

What's going on? Do you know? Yeah, yeah. They're working on. Tentative to our, you know, time frame here. But we'll see. Okay. Okay.

Well, hopefully she'll join in a bit. We'll miss her. But we've got Matt Collier. Hey, Matt. Good to have you. Hey, Mark. Great to be here. You're becoming a regular on Inside Economics.

Good to have you. Yeah. Trusty regular, because that's how Chris and Mercer are referred to, right? Trusty co-host. They're trusty co-host. You're a trustee regular, yeah. And we've got a lot of data out this week and we want to go through that. And to help us digest all of that and then more, we've got Michael Strain.

Hey, Mike. How are you? I'm great. Great to be with you. And where are you, are you hailing from your office at AEI? I am indeed. I am indeed here deep in the heart of the swamp. Doesn't look too swampy to me.

I like the books back there. Yes, yes. It needs to be better organized. That's an amazing. That's a makeshift bookshelf. Well, it's very, what's the right word? Bibliotech-like, you know? Luddite, perhaps, could be a way to describe it.

Yeah, well, good to have you on board. We were just going over this year. This is your fourth time on Inside Economics. Yes, it's one of my favorite podcast to go on. You say that to all the podcasts, I'm sure. I don't. I told somebody earlier today that when you go on with, with Mark. You know, Mark knows facts. You got to talk about facts. I got the facts, all right. Yeah, for sure. Not much more than that, but the facts. But it's good to have you on. And you're the Director of Economic Policy Studies at the American Enterprise Institute. Hey, can I ask how do you describe AEI? What's your kind of your pat line for describing AEI?

I describe AEI as a public policy research institute because, well, that's our legal name, the American Enterprise Institute for Public Policy. research also because I think the term think tank has been adopted by so many different types of institutions that it's it's no longer precise enough to communicate anything about a particular institution. So we do lots and lots of research about a wide variety of policy areas, economics, of course, also education, foreign affairs, constitutional and legal issues and a whole bunch of stuff. Yeah, you guys do great research. How many folks are in the economic policy group with you? It depends a little bit on how you count it because we have people for whom, where their secondary affiliation, people who are varying degrees of part-time. But, you know, a few dozen.

Oh, oh, that's larger than I thought. That's great. Yeah. Yeah. You do a lot of great work. I've noticed recently you've been writing a lot about economic data and kind of this, this issues around statistics. Yes, yes. That's something that I've been working on off and on for 10 or 15 years now, and it's becoming, I think, more important, given some of the changes the Trump administration has made to the statistical agencies, and also just given how rapidly the economy is evolving

and the need for our statistical architecture to keep all. with economic developments. Hey, you know, I've been asking everyone this question and curious what your answer would be, what is your least favorite or most disliked economic statistic? Like, for example, Chris really hates the New York Fed data on consumer credit. You know, it's just, right, Chris? Am I making that up? Hate is a loaded term, but yeah.

Oh, okay. Oh, did I say hate? You did. Dislike. Dislike. Yeah. Hate you hate writing. That's too strong.

Yeah. I am struggling to think of, I kind of like all data, you know? Yeah, yeah. And so I'm struggling to think of a particular data source that I think just doesn't tell us anything. There's a lot that I would like to see that isn't included in current statistics. Maybe if I think about it some more, I'll think. I'll think about something that I just disregard every time, every time I see it. Very diplomatic answer.

Go ahead, Chris. I'm going to say, how about consumer sentiment? I, you know, I actually think consumer sentiment is super interesting right now. And, you know, I obviously agree with all the analysis, including your guys' analysis, that the historical relationship between economic variables like the unemployment rate and income growth and these sorts of things, and consumer sentiment seems to have broken down.

I also think it's interesting that we are experiencing inflation for the first time in 40 years. And so if you estimate a bunch of statistical relationships on data in a low inflation environment, maybe those relationships all break down in a high inflation environment, and maybe that explains the puzzle in a statistical sense.

And so even the much dismissed consumer sentiment data, I still find at least intellectually interesting, even though I don't think it is helpful in forecasting future consumer spending in the way that it used to be. Well, I'm gearing up to write a piece on my five most, I shouldn't use the word hated, dislike series. So I'm embarrassing people.

So if you come up with you think of something, let me know. Yeah, yeah. I look forward to reading this. Yeah, yeah. I've got a few. Matt, I've never asked you that question. Do you have a data series that you would point to that you dislike? You find misleading or not useful? I was going to say, if sentiment measures, we can hold them separately. I discount those. But we'll talk about one in a couple minutes, probably.

What's that? The savings rates to me can be more explosive than I discussed. It's more signal than they are oftentimes. It gets revised an awful lot. And it gets revised in a similar direction when it matters. So there's always more income to be found. Okay, yeah, let's talk about that. And Chris, I just put it, I put words in your mouth about the New York Fed.

What series would you, what data series would you point to? Consumer sentiment. Oh, really? I think it's interesting. We should all make clear. You're meaning the University of Michigan survey. In particular, but across the board, I'm just. I just don't think we can measure it well.

I think there's a lot of survey by who actually answers a survey these days is a unique population. So I don't know. I think we put too much weight on it. I agree. The partisan split is is, is, is, is, is, is, is, uh, worrying in the, in the consumer sentiment data. Yeah.

Right. Right. Right. Well, I, I, I'm with you, Mike, um, all data are my children. So it's not like, you know, I give it and I don't. stop any of it, keep giving me all of it. I'll make the decision whether I put weight on it or not. I would have told you probably a year ago that I really don't like prediction market data.

But I think I'm starting to like prediction market data. So I can't say that anymore. Right, right. I'm becoming more and more convinced of its value. Yeah, totally, totally. Well, let's dive into the data. And Matt, maybe you can give us a rundown because it was a, data-heavy week. We got

spending data, incomes. You mentioned the saving rate. We got PCE inflation, consumer expenditure deflator. I noticed this morning we got the employment cost index. That's the measure of wage growth, the compensation growth. The University of Michigan survey came out this morning. There's a lot of

stuff. So where do you want to start? I think it's a very economist answer, but GDP is probably the best place to start. I was just testing it. Right, right. And I I have a bias towards inflationary data, so I'm downshifting that. But, so GDP, first estimate of second quarter output growth for the U.S. economy, 1.5% annualized pace.

That's, I got to give Justin Begley, our colleague, credit. That was right where we were. We were a touch lower than that. Yeah, it was really nice. And consensus was a little bit higher. So 1.5% growth in a given quarter that's traditionally, you step back, that's weak for a U.S. economy that's estimated. to be growing or the potential growth for the economy about two and a half percent, I think

is a pretty consensus view. So on the surface, not a great print. I think details matter here. Details always matter, but particularly so today with the first estimate. And what I looked to first is consumer spending. Consumer spending was pretty solid after weak spending in the first quarter of the year. So 2.1 percentage points added to growth from consumer spending, 3.2% annualized pace. What does that mean? It's a pickup in the right direction. This is happening as gas prices are really high, but it was also happening as higher tax

refunds were hitting people's accounts and juicing spending to a degree. I think there's a lot of concerns there moving forward, but in general the consumer looked okay. Can I just throw in the World Cup probably juice things? Sure. I don't have a great. articulation of where that shows up, service spending, none of that really jumped out, but it certainly points in that direction.

Right. So that's the positive story elsewhere, where than if I'm saying two percentage points added from consumer spending. You mentioned CAPX though. What about CAPX? Yeah, CAPX. I mean, I think I'd lump the next in just more of reinforcing how big the AI story is. So the CAPX build out is non-residential investment.

again continues to add a ton to real GDP growth as the infrastructure buildout for, you know, everything required to enable the AI revolution that we're undergoing is driving GDP growth. At the same time, so much of that buildout is being imported. So we look at net X. So trade is calculated exports minus imports. That difference is what gets applied to GDP. So when imports rise, that's going to be a drag. It's going to decline from, take away from real GDP.

And because so many of these semiconductors and related computer equipment is being imported in the U.S. for these data centers, we have trade taking a full percentage point off of real GDP growth. So that 1.5 annualized top line growth is being weighed down by a lot of the imported parts for the AI buildout. The last part that was big and I think a little surprising, but it's also very difficult to forecast in real time. the inventory drawdown. So 0.7, so almost a percentage point taken off of real GDP growth

from the inventory drawdown. What's happening there? You know, higher prices. There's, you know, hoarding's probably a 2025 story primarily, but there's less incentive for businesses right now to continue building up and instead draw down the inventory that they have. Elsewhere, residential investment, so housing for the first time since 2024, we have a slight positive, contribution from the housing market, not a ton. So just 0.05 added to top line GDP. Government minor negative drag in that that's concentrated entirely in federal government. Okay, so bottom line, you're saying the top line number, kind of on the softish side, 1.5% annualized growth. But if you look under the hood, a little bit of strength, some strength related to consumer spending and

capax, all of which, big part of which could be traced probably of fact, AI in one form or another. Is that fair? Yeah, for sure. Yeah, that's a fair characterization. Okay. Hey, Mike, given the focus on GDP here, how do you characterize the economy's performance right now, certainly, particularly in terms of growth, you know, how are you thinking about it at this

point? It's looking surprisingly strong to me. You know, I agree with Matt about the importance of focusing on. consumer spending, and I would obviously add in CAP-X spending as well. If you look at that on a year ago basis, quarterly real final sales to private domestic purchasers, that had been trending down over the last couple of years.

In Q2, that trend kind of reversed, and starting the trend back up again. And so, you know, before the Q2 report, I would have said that the economy is softening in an orderly, gradual manner that is what you would expect to see, given an erosion of the purchasing power of income due to high inflation, what you would expect to see, kind of still coming off of the white-hot economy of 2021. I'm thinking maybe if this Q2 result holds up, maybe the economy is stabilized, kind of roughly at potential, maybe even a bit higher than potential.

I think it's also possible that the economy is, that underlying economic growth is starting to accelerate. That acceleration, I think, would be consistent with what we're seeing in the inflation data, but it would be inconsistent with what we're saying, I think, in the labor market data. That sounds pretty upbeat. Let me just throw in another data point.

I think I'm more upbeat than you. You are. I'm going to try to convince you that you're too upbeat. Let me just throw in another data point we got this week and kind of round things out and get your reaction to it because it bothers me in the context. of, you know, how strong the economy is, is if you look at the income data,

the real disposable income, so after inflation, after tax, income, and so this includes the tax cuts that were part of the OBBB, you know, earlier this year, that's actually flat to down on a year-over-year basis. And if you take a step back

and just take a look at the level, go to Fred and do a graph and take a look, it's really gone nowhere for almost certainly 12 months, almost 18 months. And of course, in my thinking, that's the fodder for consumer or consumer spending. That's consumers driving the chain.

CapEx is important, but consumers really driving the train. And the saving rate is also now way down. Again, it might be revised to Matt's earlier point upward, but it's still with revision, probably pretty low. So you take those two data points in the context of the consumer

and the consumers kind of driving the train, how do you think about, does that, how does that influence your thinking? Yeah, it is way down, you know, kind of relative to where it was a year ago, what you would,

what you would expect for sure. It did, it did pop back up in the data we got this week. And so that's, I think, consistent with a stabilization story. You know, if that pop-up turns out not to be a blip, you know, may be consistent with,

with an acceleration story. But I think of it, I think of the anemic growth in real disposable income as a potential problem in the future didn't seem to be holding consumers back from spending, at least according to the Q2 GDP report. And as you say, a lot of that spending was apparently financed by a lower savings rate. So there's a limit. You know, there's a limit to how much this savings can happen. There is a limit to how long the consumer can keep going with anemic, real disposable income growth. I have thought for years that consumers were, you know, two months away from hitting that limit.

I mean, I, you know, in, in, in, in, in, in, in, in, in, in, in 2020, consumers just came back with a vengeance after the, the, the, the, the, the, the, the, the, that did not end up the, you know, that did not stop consumers. We had a 5% federal funds rate in 2020. I thought, okay, that's it. You know, that that did not stop consumers. We had a 5% federal funds rate in 2022. I thought, okay. You know, that's going to, that's going to pump the brakes on this. That didn't stop consumers in 2023. And, okay, things are starting to get back to normal. Consumers are going to start getting back to normal. They didn't. We had President Trump's trade war in 2025. We had the war in Iran, which pushed gasoline prices way up.

You know, these have not stopped consumers. And so I am entertaining the possibility that the American consumer post-pandemic is different in structural ways than the American consumer pre-pandemic. More specifically, that the post-pandemic consumer is just willing to spend money and power through headwinds

in a way the pre-pandemic consumer wasn't. And I am interpreting the data we got for Q2, which are going to be revised and could tell a different story after the revisions. But I'm interpreting those data as further evidence. I'm interpreting the spending data that we have got over the last six months

as evidence. Consumers are facing these higher gasoline prices, and they're not saying, okay, I'm going to pay for gasoline by cutting back elsewhere. They're saying, I'm going to pay for gasoline by saving less. And so I think that dynamic has influenced my thinking. But ultimately, Mark, I think you're right. If we, you know, if we have zero percent growth in real disposable income, which we had prior to this week's data, I think now we're at 0.5 or something like that.

But, you know, close to 0% growth in real disposable income is going to lead to a slowdown in consumer spending at some point. Hey, Chris, what do you think of what Mike just said, particularly in the context of the consumer, I mean, making the case the consumer might be structurally different post-pandemic versus pre-pandemic. What do you think? Yeah, I think there's something to that. I would point to wealth as the differentiator, right? Housing wealth, stock market wealth. I think that does change the calculus, right?

Makes you a little bit more willing to or makes you more resilient to these types of shocks. So as long as you've had those double-digit gains or, you know, strong single-digit gains. that that can continue, I worry about going forward here, right? The point I'd make is that this data is great, but we're looking at the rearview mirror, right? When we look at Q2, we know that we have higher oil prices, lots of uncertainty ahead of us, and I'm not seeing certainly house prices continuing to grow here.

And on the stock market side, I'm also worried about things flattening out, if not correct things. So I think that consumer is a bit different, but maybe in the long run, maybe not so different, right? If wealth actually starts to flatten out or even decline. Yeah, I, you know, it just feels like a very classic case of the wealth effect, right? I mean.

And the question is whether the marginal propensity to consume out of wealth has gone up, that would be the way to try and look at it, which it seems to me that it has. But I agree with Chris that that that that that that that that that that that that that that that, the stock of wealth has gone up. Right. And so even with the constant marginal propensity to consume, you're going to see the effect in the consumer spending data.

Right. And one way I's thinking about it is the way Chris and you have articulated that this goes to the resilience of the consumer. The other way he's thinking about it is it goes to the vulnerability of the consumer. Sure, sure, sure. Because the stock market got skyward here.

And it feels like it's overvalued, frothy, bordering on speculative and, you know, at risk of a significant correction. Yeah. I would add also, though, that the savings rate has gone down a lot. Yeah. And in short-term movements in the savings rate, you know, we see the price of gas go up in the same month that the savings rate goes down. That's not the consumer consuming out of stock market wealth or housing wealth.

That's the consumer just spending more money out of his or her paycheck that month. Yeah, my kind of silenced characterization of that is there's two factors driving the saving rate lower. One is that wealth effect. I mean, the high-end wealthy, well-to-do is they're probably spending more out of income because they can. They could feel like they're wealthy and they're able to do it. And then there's the lower middle-income households that are just responding to shifts in their cash flow and income. And when gas prices go up, they got no choice. Either you dip into your saving or you cut your back on your spending.

Yeah. But, hey, Matt, you were saying the saving rate is one of your least liked statistic, and it goes to revision. Why is it, historically what happens is you get these down to revisions? I mean, I can remember at one point in the historical data, the saving rate was negative back, you know, in the housing bubble in that period. It's still very low by historical standards, maybe the lowest on record going back to World War II, but it's still positive. revised up? Why does it get revised up generally? Do you know? Talking with our consumer former consumer economist, guru, Scott Hoyt, it was always the ability that the government had to find more income, whether it's not just wages and salaries, but it's from,

you know, asset appreciation and, you know, the other other opportunities or ways that households have to bring in income is harder to track in real time than expenditures or inflation. But to the consumer resilience point, too, I think it's worth how, at least for the latest shock, the $330, $350 per tax return increase that households saw coincided. And I think in a way that was able to blunt some of the higher gas price effect in a way that gas prices are still high and those returns have stopped. So I think that's a vulnerability too. And if we're seeing depressed savings rates, it was even with this higher. you know, in contact return we're seeing depressed savings rate for, you know, what that measure is, I think it's worth noting. Right, right. Yeah. Yeah, Mike, you're right. I'm just, I look at the same data and I just have a more disquieting feeling about things. I mean, I'm, abstracting from the ups and downs and all arounds in the day in the consumer spending data. It's, it's kind of two percentish, real, you know, maybe a little bit north of that, times a little bit below that.

remarkably stable. You know, that's for sure over the last 12, 18 months, but, you know, it's still about 2%. And it feels like that more recently has been driven by factors that are more one-off. Matt mentioned the tax refunds. I mentioned the World Cup. And then at the same time, you're getting real incomes coming to a standstill saving rates very low. interest rates are now rising. The stock market feels like it's wobbling. It just feels like all these things are coming together that, you know, we were going to see some real weakness in spending and the economy in the second half of the year. I'll make a prediction and they'll be on the record. And that is that the second half of the year is going to be a pretty tough, you know, for the economy. I think we'll navigate through, I'm not saying recession. Certainly, assuming the war doesn't go off the rails here, but, you know, assuming goes in a reasonably sanguine, down a reasonably

sanguine path, whatever that means, I think we'll be able to avoid recession, but I think the second half of the year is going to be pretty, pretty difficult. Yeah, I definitely think that's reasonable. I think one, one reason why I'm a little rosier that I think you are that we haven't discussed is the labor market where we've had an unemployment I think the unemployment rate for June was 4.2%. The unemployment rate for June of 2025

was I think 4.1%. The unemployment rate for June of 2024 was I think 4.1%. And so we have had we have had a couple of years now of very low and not rising unemployment. We're starting to see a little bit of an uptick in job openings.

We have not seen what I would call a rapper troubling deceleration and wage growth. We are seeing kind of a gradual orderly deceleration in wage growth, but nothing, nothing that looks alarming. And so if you're kind of, you know, basic model of how the consumer side of the economy works is, low unemployment leads to, at least nominal incomes, nominal incomes support consumer spending, consumer spending supports labor demand,

labor demand supports low unemployment. You know, we've got that. What's throwing a wrench in it is inflation. and that's, I think, eroding real incomes. And I fully agree with you that that's a risk. But, you know, until it looks to me like labor supply and labor demand are pretty much imbalance, until we start to see an imbalance open up, until we start to see some upward drift in the unemployment rate,

I'm still feeling basically okay about the fundamentals of the consumer side, again, apart from consumer price inflation. And then, you know, on the business investment side, I fully agree with you that the more we rely on AI related spending to power business investment, like the inherent risk of that slowing down. grows, do I see that turning around in the next quarter or two? Doesn't seem like it is. And so I think inflation is definitely a risk. I fully agree that the tax refunds help support consumer spending. I fully agree that anemic growth in real disposable income is a threat. But I think there's a lot of other stuff that's kind of supporting

the structure of the consumer and business side of the economy, sides of the economy. Chris, anything to push back on there? Do you want to agree or where do you land on that? The labor market in particular? Yeah, I guess good that the unemployment rate is down. But if you look behind the below the surface, the composition bothers me, right? It's been leisure hospitality and health care that have driven the bus. Leisure hospitality is driven by this wealth effects spending. So that that continues until it doesn't. And then healthcare, good, good solid base, but outside of that, we've had job losses. So that, that worries me that you don't have a really strong foundation here. I could certainly, well, I've been wrong, though. I've been,

I've expected to see a weaker job prints. So that's still my forecast, but, yeah, I take that with a grain of salt. Before I let you react to that, Mike, let me throw one more thing in. I'm just curious about Do you discount the decline in participation, labor force participation? I mean, because if you do a simple calculation and assume that the labor force participation rate was unchanged over the past year, the unemployment rate would be over 5%. And I think we'd be talking about things differently if, you know, we were 5 and 4. And I'm, you know, I don't want to talk about data and not liking data. The household survey data has a lot to be desired, and it's all over the map. I, you know, so I'm not. I don't want to talk about data and not. I, I don't want to talk about data and not. I, I don't. take it at face value. I'm just saying directionally. And you can kind of see it in the flows data. So if you look at the people becoming unemployed where they're going, a lot of them are just leaving the workforce altogether.

And, you know, it does suggest that, you know, maybe that's some of that structural, you know, older workers saying, I'm out of here, or maybe some of it is more cyclical. I can't get hired. So I'm just, I'm not going to even look at least for a while because hiring rates are so low. And then there might be more slack in the labor market. given that and consistent with that is the slowing in wage growth i mean wage growth is slowing and that is consistent with the labor market that's not quite you know full employment you know

it feels like it's a little bit softer than that but i'll stop throw all that back at you and see see what you say see what you say yeah i i i am i am discounting labor for participation more than i normally would because prime age labor force participation really is holding up um uh prime age 25 to 54, folks who are generally speaking too old to be in school, generally speaking too young to be retired, you know, their participation is holding up quite strongly. And I think you're right that for the demographic groups that are driving down participation, it is a mix of structural and cyclical factors. I do think the hiring freeze is, which we always to say is also matched with a layoff freeze,

but the hiring freeze, I think, is discouraging people from staying in the workforce to at least some degree. It looks like maybe that's starting to thaw a bit. You know, that's, that's, that's, that's, that's, that's, that's, that's, that's, that's,

speculative. It could, could end up not being true, but, you know, I think, um, I think a lot of, uh, businesses, you know, we're kind of rolling into 2025 and, saying, whoa, we've got this trade war. We have no idea what our costs are going to be. You know, whoa, all these folks in Silicon Valley and all these economists are saying that, like, we're five years away from a 30% unemployment rate. You know, whoa, you know, we really need to keep cash on hand to invest in this new technology. So we're not competed out of the market by our competitors.

You know, whoa, we have this more and around. What on earth this happened with that? And I think a lot of businesses responded to that, not by laying off workers, which was, of course, the great fear, but by just saying, you know, we've got the workforce we need. And we're just going to batten down the hatches. We're not going to fire people. We're not going to hire anybody. We're going to batten down the hatches and ride this out. And my sense, which, you know, again, this is, this is speculative is that, you know, kind of the AI panic.

is starting to fade. You know, people are kind of getting, you know, I don't think anybody really knows where the Iran war is headed, but the range of outcomes, you know, the bounds on the range of outcomes seem to be shrinking. You know, the Supreme Court threw out the tariffs, but the president put them back in and the effective tariff rate is the same.

That actually provides some continuity about costs. And so it looks to me like maybe we're starting to see a little bit of a thaw on the hiring side. that could lead to a bounce back in in in in in participation um but i do you know i i i i do agree with with chris that that that that that over i would say over the course of the last year or so the composition of payroll games has not been diffuse now it's starting to look more diffuse i think across sectors. But, but, you know, they're, you know,

particularly in, you know, kind of late 2025 or so is looking, looking a little worrying. You know, that being said, like any expansion is powered by some sectors more than other sectors. And so you've got to be careful, I think, with, you know, how much weight you put on on those sorts of concentration arguments. But I do, you know, I do agree that that's a potential risk.

Well, let's do this. I can't believe a half hour just went zip, zip, zip, zip by. So we've got to speed things up. Matt, you're talking too much, man. Come on. I know. Give me the mic. Let's do this.

Let's play the stats game, the statistics game first. And then let's come back and talk about, you know, what all this means for the Fed. because a lot of this past week we had an FOMC meeting and it was pretty interesting. I rarely get a chance to watch the chair's press conference. I got to see it. It feels like there's something we should talk about there. So let's come back to that. But before we do that, let's talk about the stats game.

Let's do the stats game. And that, of course, is we all put forward a stat. The rest of the group tries to figure that out with clues, questions, deductive reasoning. The best stat is one that's not so easy. We get it right away. One that's not so hard that we never get it. And if it's apropos to the topic at hand, which we've got a gazillion topics at hand. So all the better.

Hey, Matt, you want to go first? What's your stat? Sure. 3.8%. 3.8%. In the GDP numbers? No. A government statistic that came out this week?

Yeah. Inflation related? Yes. I knew it. Has to be inflation rate of its map. Oh, PCE inflation. It's PCE inflation, isn't it? That's 3-7.

Top-line? What? Oh, is 3-7? Oh, okay. A little bit of a cute transformations here, but we're basically there. We're basically there. Core PC over the past six months, so 2026, core PC is running at 3.8% even with a pretty soft reading in June of 0.1% increase.

I think it just speaks to, no, we're not seeing a lot of these energy effects, bleed through into core PC or core CPI. But services inflation is a touch higher than where it would be to be commensurate with. Hold it, Matt. Can I just stop you for a second? Just so I understand. You're saying the consumer expenditure deflator, that's the measure of inflation, the Fed, that's the basis for their 2% target.

In the last six months annualized, the core PCE deflator, X food, and energy, is up 3.8%? It's running at 3.8%. Yes. Oh, I didn't realize it was that high. And so, okay, I stopped you. So you're saying a lot of that is related to service price inflation. Services inflation and things that you can't immediately track to the temporary effect of higher gas prices.

So it's more of a cyclical force. I think tariffs play a role there, too. But I think that story is mostly behind us. but it's still a force that matters when we're talking about where inflation is today and where it's likely to head in the next six months, 12 months. So, yeah, I think that often gets lost just given how dramatic the spike in gas prices and energy prices has been, that that's the only source of inflation. But broadly, it's still not a situation where the Fed would be at their target.

Could it be immigration related, possibly, the heavy-handed immigration and the effect that's having on certain industries and costs? If you look at something like healthcare, which is famously dependent on a lot of foreign-born labor, healthcare prices have been higher, but is that also just the slow digestion of pandemic cost increases that happen between insurers and hospitals that takes a lot longer to move its way through to consumer prices?

You could convince me that that is happening. It doesn't jump off the page as the primary reason, but certainly consistent with what we're seeing at a labor force. What about core CPI? What is that six-month annualized? Do you know? A little bit lower, but I don't have that off the top of my head. It's measurably lower, isn't it? I mean, maybe we'll come back to you. Maybe you can go take a look. My mind's eye, it's closer to the three, but I'd be very curious to see what that is. But that's a good statistic. Yeah, very good. Hey, Mike, you want to go next?

Sure. Can I say something about, about, about, match, though. Oh, yeah, sure. Absolutely. Feel free. So I, you know, a measure of inflation I've been tracking very closely is market-based core PCE services X housing. Okay. Whoa, whoa. Say that again?

Slowly. Market-based core PCE services excluding housing services. Got it. Got it. Yeah. And that's been accelerating. Ooh. And that's, you know, kind of in the three and a half to four percent range.

And I like that measure because. you know, housing, I'm not, I'm not totally sure what's going on there. Obviously, the war is affecting energy prices, the trade war is affecting goods prices. And, you know, that's telling me that inflation is coming from the kind of, you know, core part of the economy. And, you know, that's another, that's another data point that makes me feel like the economy is, is a bit stronger than some of the headline headline numbers suggest.

And market-based, that means that only... They're just not imputing. Yeah, because a lot of the prices are imputed. A lot of components. Is that CPI... PCE. PCE. Yeah.

And what was the number? How strong is it? Oh, I would have to... You're just saying it's strong, it's accelerating. It's super strong. It's accelerating. Okay. It's, I can't read it here.

It's about three and a half, three point six, maybe something like that. Yeah. Up from three, about two years ago. It's climbed about 60 basis points in the last two years. Interesting. I need to take a look at that. Yeah. Do you want to give a stat?

Yes, 3.3%. In the GDP number? Nope. That's core PCE, right? Nope. Well, maybe, but not at that. That's not what you had in mind. Coincidence.

Is it a government statistic? No. Oh, it's not a government statistic. Oh. Did it come out? Is it something that came out recently or is it? Came out this very day. University of Michigan survey?

It is. Inflation expectation. Oh, that's what it is. Inflation expectations over the next five years. I picked what I thought you wouldn't like. Yeah. Right, right. Is that up or down?

I think that's down, isn't it? Down. It's flat over the month. It's flat over the month. It's way up relative to where it was prior to the trade war and down a bit over the near turn. Do you put much weight on that? I mean, when you, because this is my dovetail into the conversation around the Fed. Yeah.

I tell you, I tell you, you know, what I do put weight on is the gap in the Michigan survey between the five year and the one year. And if you look at 2021, you see a big spike in year ahead inflation expectations and basically no movement in five year ahead inflation expectations, which is exactly what you want to see if you're the Fed. If you look at the kind of Liberation Day spring of 2025 movements, you see a big spike in year ahead inflation and you see a big spike in five year ahead inflation. And so it's that spread that I think does have some important information content that makes me a bit worried. Do you put more or less equal weight on these kinds of consumer-based surveys relative to the bond market measures of inflation expectations? Is one more useful than the other in your mind? I, you know, if you had asked me that when we weren't in a high inflationary environment, I would have said the bond market for sure.

I'm not sure how to think about that question. You know, we, this relates a little bit to what we were talking about earlier. I mean, we had, you know, inflation in the 70s, and then we had four decades without inflation, and now we have inflation again. And I think a lot of the inflation-related. macro variables and relationships, I'm, you know, I think we should be more agnostic about, about how those work than, um, uh, than, than we are. I mean, that's, that's not necessarily, like, for instance, you got to do, you got to do forecasts with the data that you have. I'm,

I'm just saying, I think, I think there's more forecast uncertainty than, um, than, then, then they normally, normally would be. I guess one that's, the, the, they obviously just done on me was, is that the bond market inflation expectations do embed, embeds, some expectation about what the Fed's going to do or not do. Whereas consumers definitely don't have that in mind when they're... Yeah, that's right. Yeah. So, yeah, interesting.

Let's do one more. Chris, what's your stat? 2.84 percentage points. Is the third significant digit relevant? Are you just... Is that a head fake? Sounds like a yield. 2.84.

It's yield related. Sprite. Did you say spread? I said spread, but I did not specify what spread. Yeah, which spread would it be? Is it 30 year minus two year? Nope. No.

It's not a corporate spread? What kind of corporate spread? High yield. Yes. High yield corporate spread? High yield option adjusted corporate spread. Oh, option adjusted. From ice.

Is it from ice? Where's it from? American America. Ice Bank of America. Ice Bank of America. Yeah. Yeah. I thought you'd like this one, Mark.

This is... Well, it's up a lot. That's up a lot. It's narrow by historical seniors, but that's up from where it was, right? No? Yeah. It's like 2.6 before...

All right. They ran conflict and now it's 2. Oh, okay. Up a little bit. It's up a little bit. But it's nowhere near the levels. Yeah. Why do you think I like that?

Why are you saying I like the spread? Why? You've got to you. I feel like I am a... long-time consumer mark of your of your work because when Chris said this is a statistic you should like that resonated with me really it did yes that's a frequent chart floating around yes when I think about corporate bond spreads I do think about boodies yeah yeah yeah okay actually good point it's in the marks Andy well it's kind of

it's kind of us sort of yeah that's a good point it's a great point but you've also got this new recession indicator, right? I do, I do. I wasn't quite ready to tell everyone about it, but no, no, no, that's okay. We won't. Good, no, no, no. This is my coding, Mike, you know. Okay.

Let's play around with Claude. I've got a new way of thinking about yield curves and spreads as a leading indicator of recession. You know, the shape of the yield curve, long rates versus short rates, has historically been very good at predicting recession. So back when you were saying recession in 2022, that that was large, I think I'm guessing the curve was inverted and historically it always inverted prior to recession. So this is a good, good indicator. And it failed in that particular period. So because of that, I've been experimenting with, you know, how to use the yield curve as a leading indicator to capture that false positive. And it comes down to using three different methods.

measures, and for it to trigger recession, all three of these measures have to be triggered. One is the shape of the yield curve as measured by the 10-year versus the three-month Treasury bill on an EBI basis. I won't go into what that means, but it's, you know, the equivalent bond basis. It has to invert. Second, the corporate bond spread is measured by the BAA versus the AA has to fall below a certain threshold. And then third, the term premium can't be.

too small because if the term premium is small, that means the Fed is QEing in that period. And it's messing with the signaling in the yield curve. And that's one of the reasons why it failed in that period. And if you do that, of course, you know, it may be overfitting. And Chris pushed me to talk about it earlier than I really would want to. But, you know, here I am doing it. Sticking a claim. It nailed every recession and there's no false pocket.

So I'll send that around. Yeah, yeah. That's super interesting. Yeah. Well, thank you for that, Chris. I was, I'm glad you pushed me to talk about it. I appreciate that. Thank you.

And that's not, I'm not being sarcastic. That's a, that's a real thank you. Oh. That's surprising. Oh, but back to your, back to the high yield spread. Is that, are we nervous about that or that's a signal that things are okay? Yeah, it's seeing, seeing, bond investors don't seem overly. concern about the current situation. They're not seeing recession on the horizon here.

But I'll tell you, the more they're, the less they're concerned, the more I'm concerned. It's like the stock market. The more investors buy stocks, the more worried I get because, I mean, if you look at any kind of spread in the bond market, it's like two standard deviations away from anything that's historically we've ever been seen, how narrow the spreads are across the board. I mean, that doesn't feel like if you believe in any kind of mean reversion in the in the in the in this in the financial markets that would suggest we're going to have some whopper of a mean reversion at some point. No? Yeah, that's the that's the pessimistic view. That's that's a pessimistic view, right? Right, right. Yeah, that's my want. Okay, let's let's move. Let's move on. And let's go to the Fed. Like it sounds like you're pretty hawkish, Mike. If you were on the Fed, it's.

It sounds like you'd be angling for higher rates. Am I wrong? No, no, you're right. I mean, I wouldn't, it's even worse than that. I wouldn't have cut in 25. You would not have, though. Yeah. And I'm on the record as saying that the September cut was a mistake.

September 2025. At the time it happened. Yeah, yeah, yeah. And I have, I have not revised my view of that. And it goes to your, what, this is a little kind of a half joke. What's your reaction function, Mike? You know, I think a big part of the reason that I got, you know, so I thought we were going to hit recession in 2022. Mark, you didn't.

You were right. And I was wrong. Part of the reason. And so that prompted a lot of soul searching on my part. And I think part of the reason I was wrong was because I got the neutral rate wrong. And I think the neutral rate's gone up. I think it's gone up by quite a bit. And if you look at the economy in 2025 prior to the cuts, we had financial conditions easing.

We did not have a big increase in the unemployment rate. We did not have a big slowdown in kind of core spending by businesses and households. And so, you know, I think the Fed eased into that environment. And we are seeing, we were talking about inflation earlier. We're seeing this measure of inflation I'm looking at. I think that indicates that underlying inflation, is too high. Underlying inflation is accelerating.

It's not just about tariffs. It's not just about energy prices. I think Matt's come to a similar conclusion, look at the kind of plain vanilla court PCE. I agree with that as well. And certainly, financial conditions don't appear to be restrictive over the last year.

And so I think the feds, the feds, it was a kind of textbook case of the Fed being being a bit too loose. So just for the listener, I think he called it the equilibrium yield. That's the interest rate, the federal funds rate target in this case that is neither restraining or supporting economic growth. And the Fed has in recent history pegged that at around 3%.

And just for context, the current funds rate's 3 and a half to 3 and 3 quarters. And you're saying, well, what they got wrong here is that the equilibrium rate's not 3. it's something meaningfully higher than that. Yeah. And what do you think it is? Do you have a sense of that? I think it's north of four. North of four, right?

Yeah. And you're basing that on the fact that the economy continues to do fine, you know, grow, you know, at the higher funds rate target. And you're saying financial conditions, well, I mean, the stock market's roaring, those credit spreads are paper thin, bank lending standards seem to be kind of, reasonably okay. And that, so that does not suggest that, you know, that three and a half percent or something four percent are higher is, you know, that that's consistent, those financial conditions are consistent with that higher equilibrium yield. Yes.

Yeah. Anything else that you would point to? I'd point to the labor market, I think. Labor market. I would point to, you know, some real variables, consumer spending, business spending. Right. Right. So if you're on the FMC, you would be out there.

You'd be one of the three dissenters that with this recent FMC meeting dissented saying they want to raise rates. You'd be with that. Yeah, for sure. Yeah. Chris, you were going to say something? No, I think that was Matt. I was just wondering how much of a structural increase is that, or is that just a response to insatiable CAPEX because of AI and interest rates could be whatever, could be 5%. and then you're still going to have this huge buildout,

which is powering so much of the economy? Yeah, it's a great question. I mean, I used to think that the neutral rate was more stable than I think it is. And I think it was pretty stable following the O8 crisis, for example. But I think a lot of things in the economy changed during the pandemic. A lot of things in the economy changed in 2021 and 2022. A lot of things of the economy changed after Chad GPT burst onto the scene. And a lot of things in the economy have changed in President Trump's second term.

And that's knocking the neutral rate around. Yeah. So, Matt, if you were on the FMC, what would you be angling for? Would you be angling for rate increases or no move? It doesn't feel like anyone's talking about. More communication. More transparency and communication is what I would probably focus on. No, I would probably not have hiked yesterday.

I think it's a reasonable argument, but I still think. think the rush to start hiking interest rates is maybe next meeting or the end of this year. But I am sympathetic to the idea that we could still wait to see what energy markets shake out. Right. And you, Chris, what would you have done if you were on the committee? I also would have held. Held. Yeah.

Yeah. Yeah. Yeah. Obviously, I would have as well. But let's turn to what Matt was alluding to with regard to transparency. I mean, we have a new Fed chair, Kevin Warsh, and I know, Mike, you know Kevin very well. He's been in policy circles in D.C. for decades.

And what do you think of this? There's so much to think about with him on board because he's shaking things up in terms of how he's thinking about how the Fed should conduct policy and how it should communicate his policy. And I'm, did you, were you? You were able to watch the press conferences. You watched that as well?

I was. Yeah. Also unusual for me, but there was so much discussion of it that I carved out 45 minutes and watched it. And I was thinking I was going to go and watch 15 minutes, but I couldn't look away. Yeah. Yeah. I had a similar experience. Yeah.

Right. Right. So how do you think Chair Warsh is doing? And what about kind of an open-ended question, given all the things that he's been talking about, How are you thinking about the way he's addressing his new chairmanship? So I am very sympathetic to the decision to move away from forward guidance. I think that forward guidance was a very good tool to adopt in a very extraordinary situation following the 2008 financial crisis.

but I don't think it makes sense in an economy that's basically normal. And I think that's the economy that we currently have. When I look at the, and Mark, I think you and I differ about this, but I think the 2021 inflation had a really large demand side component to it. And I think a big part of the reason why the Fed waited so long to raise rates was because of forward guidance. So I think forward guidance tripped up the Fed's ability to respond to the inflation that we saw in 2021. Can I just to make that concrete for everyone, what you're saying is in that period, this is coming out of the pandemic, before they started raising rates in early 2020, they had, set expectations that they were going to keep rates

low for a long time. And they were at the zero lower bound. And by so doing, they got kind of bound to that. It was difficult for them to get off of that. And as a result, they were too late. The economy got rip-worn and inflation took off. Yeah, yeah. That's exactly right.

Right. You know, I also think just stepping back more broadly, I think, you know, I think movements toward transparency in the 90s under Chairman Greenspan were very much laudable. I think Chairman Bernanke's movements toward increased transparency prior to the crisis that he was arguing for in the early part of the 2000s. Very, very, very much in agreement with that. But I, you know, I think, I think, you know, the forward guidance and the dot plots and the, you know, track changes on the meeting statements and, you know, 15 people going on TV every week. And, you know, I do think that this has gotten, we're beyond the point where diminishing returns, I think, set in. And so I did a machine returns to transparency, diminishing returns to communication. And so I'm very much in agreement with. with Chairman Warsh about the desire to reserve forward guidance for periods of extraordinary circumstances and try and scale back a lot of the signals that the Fed is sending.

Having said all that, I think that Chairman Warsh needs to tell markets how he thinks the economy works. Yeah. And I think that is distinct from forward guidance. I think that's even distinct from unveiling the reaction function. You know, if you, if you're the Fed chairman and you say, I don't believe in a short-term tradeoff between inflation and unemployment, which the chairman has said on multiple occasions, said very clearly on multiple occasions,

which has been the Fed's understanding of how the economy works in the short-term, decades, I think you've got to tell people how you think it does work. And the fact that he's not doing that, I think, is causing, is causing, kind of perception problems so far, but I think it could, it could end up compounding into, into material problems. I also think that he's, you know, I think, I think, I think, I think, I think, I think, I think, He believes that markets are acting too much like a mirror for the Fed. The Fed looks to markets to understand what's happening in the economy,

and the Fed is just seeing its own reflection. I am sympathetic to that view. But I think he thinks, I think Chairman Warsh thinks that by not saying how he thinks the economy works, much less revealing their reaction function, much less engaging in forward guidance, that he's somehow going to get a clearer signal from markets. And I think he's going to get a noisier signal from markets. I think he's just fundamentally mistaken about that. And those are the two big issues that I would flag that I think he needs to reexamine.

Chris, how do you react to everything that Mike just said? I agree. I'm not a fan of the dot plots. I've said that before. So I think they add confusion. But I certainly agree that, and maybe it's a little bit of semantics, having the chairman explain how he's viewing the economy or how he thinks the economy works. I think that is important.

And I'd say it's forward guidance adjacent. And I think he's lacking in that aspect, right? We need more details here. I guess a point to make here, though, is, of course, that, well, fundamentally do we believe that monetary policies most effectively transmitted through expectations. If that's the case, and there is still quite a role to be played when it comes to the communication point, I don't, this analogy that the Fed is just an umpire on the sidelines or a referee on the sidelines, I think that's invalid, right? The Fed has a very direct role to play in the economy. So perhaps a middle ground here. Can't turn off all the communication as we kind of,

that seems to be the direction we're moving in. But perhaps we were doing a little bit too much, adding confusion, again, with the dot plots and some of the other mechanisms in the past. You know what I fear? And I basically agree with what you guys are saying. And I think it's also very important to spend some time and really think over these, each of these things more carefully.

That's a good thing. These task force you set up have at it. I think there's no downside to that. It might not be a whole lot of upside. You heard Chris Waller, the FOMC member, says, you tell me who's on the commit, on these task forces, I'll tell you what they're going to tell us. But, you know, there's some of that.

But that's okay. That's okay. We should reevaluate these things on a continual basis. and that's a good thing. But I do worry that every meeting, if we take the, if there's no model, you know,

there's this a work in progress, I'm sure, so we don't know exactly how this is all going to play out. But taking kind of a more purist version of what Chair Warsh has been talking about doing around transparency, for guidance,

communication, all those things, feels like, every meeting could be live, meaning, you know, we don't know, you know, what the Fed is, there's going to be 30% of the folks that say they're going to cut 30%, they're going to increase 30% say they're going to do nothing. And if that's the case, that means by definition, somebody's going to be wrong-footed, upset about what happens. And that means volatility. There's going to be a lot of movement in interest rates. And I don't see any upside to that.

I really don't. I mean, because that adds to the cost of funding, both in terms of debt financing and mortgage rates are going to be higher because of the value, the prepayment option is going to be higher. It means equity prices are going to be all over the map like they were the day of the FMC meeting. I just don't see any upside to that. So I feel nervous that he's going to take this too far.

Although, having said all of that, you know, he's a smart guy. you know, he knows what he's doing. He's going to learn and respond and react and adjust. So I think it'll all work out, but that's what I worry about. Mike, what do you think about that point about the volatility? I think, I think it's important to ask compared to what. And so I, of course, agree that, that, you know, there's going to be more volatility. And I agree that volatility, you know, is something to be, to be.

avoided when you can. But I also think that, you know, 9% CPI inflation is something to be avoided if you can. And the Fed didn't, the Fed didn't start hiking until I think CPI inflation hit 8%. And I think the Fed, I think CPI inflation. Back in 2020, you're saying. Back in 2020. Yeah, right. I think, I think, I think CPI inflation was well above target for 12 months prior to the fed raising rates, you should check me on that. But I think, I think, I think, I think both of those are true statements. And, you know, if that's, if that's a cost of forward guidance, then I think that's a pretty, pretty big cost, or at least if it's, you know, partially a cost of forward guidance. I think that's a, a pretty big cost as well. I mean, I do think that

there is a, there is a, this is a, there's a middle ground here, right? And so, you know, I think of, I think of forward guidances the Fed almost pre-committing to a path of interest rates or making very clear, you know, what it's going to do going forward. And that I think we can avoid. I think Kevin's right, Chairman Worsh's right to want to avoid it. I think, I think, you know, as I said, I think it played a role in our recent inflationary episode. But you can avoid that while also saying, you know, like, I think when the economy gets hot, the unemployment rate goes down.

But when, you know, the economy gets hot, like, prices start to rise faster. Or if he doesn't believe that's how the economy works, then say how you think it works. You know. I'd love to hear that, by the way. Can you tell me how, what theory is basing my comment on? I'm just curious. I mean, you know, I think, I think, I don't think he believes in the physical theory of the price level, but some people do. Yeah, okay.

They're respectable, there are, there are, there are, there are coherent theories that say that when interest rates go up, inflation accelerates. Right. Right. You know, you can, you know, you could, you can think about how the economy works. We are economists after all, so. We can come up with lots of stuff. I've been known to do that. So, yeah.

And so I think a lot of, I think a lot of the volatility mark that you're rightly worried about can be avoided if markets know how the Fed thinks about the economy. Without the Fed going all the way to where it was under Chairman Powell with forward guidance and dot plots and all this, all this, all this other stuff. stuff. And I completely just say, I completely agree with Chris. The Fed is not an umpire. The Fed is not a neutral force in the economy or in markets. The Fed determines short-term interest rates. And, you know, it doesn't determine everything in the economy, but short-term interest rates are a really important part of the economy. And the Fed is not a neutral or passive force there. So we've taken a fair share of your time, Mike,

and I want to be respectful. But let me just end it with a question about where do you think the fund's rate is headed here? So as I said, we're at three and a half to three and three quarters. Given your sense of the economy, inflation, everything else that goes into that, what do you think the funds rate is going to? How many rate hikes do we have ahead of us?

in your mind. I tell you, this is a, this is a, this is a minority view. And, and so, you know, please, please, please, please feel free to hold my feet to the fire when this turns out not to, not to happen. But I'm not expecting a hike in 2026. Oh, okay. Okay. Okay.

Well, you're, we're on the same page then. We're going to go down together. Oh, good. Okay. All right. We'll go down together. That'll be, that'll be a nice change of pace. You know, and look, you know, if you looked at, you know, if you looked at, you know,

If you looked at movements and yields following the press conference, the two-year went down. Yeah. And, you know, that's, I took some information away from that. Yeah. Matt, Chris, I know we're all, we do our forecast together, but, you know, feel free. Do you have a different perspective? I mean, we have no rate increases in our outlook here through 20, really through 2027. Would you push back on that, Matt?

I think it's more likely now that we get a hike at the end of this year. Right. Yeah. One rate hike? Two rate hikes? One. I mean, I just feel that that movement has to happen because of the tenure at 4.8. And I think that's all signaling a kind of doubt from bond investors that this bed's going to do what they need to.

And I think there could be a signaling or a gesturing that, okay, we will raise rates if inflation remains. Why do you say that? What is it the – why do you think – I mean, if I look at the 10-year treasury yield decompose it into inflation expectations, and I do that with the break-evens, you know, the 10-year break-even, and I've got an estimate of the term premium, you know, that's available, a couple different measures. The 10-year yield is signaling at least two rate increases. That's embedded in the 10-year yield.

So what is it you're looking at when you're saying that – I think the movement of really long. I mean, 20 and 30-year treasuries were bond investors screaming that they, almost a credibility type of argument. Really? I mean, the 30-year is not, is up less than the 10-year, isn't it? No? Mike, got that wrong? Near its highest since 2005, 2006.

Yeah, but the change, the change since the war is about this is actually lower, I think. That's a factual question. I mean, I look at the past three, since the meeting, it's probably up 20 basis points. I mean, it's, you're saying since the meeting, because that's what we're talking about here. Yeah, so you may not, you may not give it to decompose that into, you know, specific inflation expectations as much as it's, to me, a credibility argument. And that's the kind of pressure. Mike talks about, Michael talks about moving towards a middle ground here. Is that the, you know, forcing mechanism? I think some of that's going on. And how do you solve that or answer to that? You, you know, you announce a rate hike some point this year. I agree with, I agree with Matt's diagnosis of the 30-year yield post-post meeting and the credibility concern. Got it. Chris, anything you want to add before we call it a podcast? No, I think that.

I think that summarized it pretty well. Yeah. Okay. Hey, Mike, we got, there was, I put an agenda together for this, quickly, you know, for this conversation and we didn't, we got, I don't know how far, we didn't get very far. So. Would you come back, please? There's a lot to talk about.

I, I would love to. come back. Okay, great. We'll have you on relatively towards the end of the year into early next because it would be really good to catch up on a lot of these other topics. For sure. But thank you. Thank you so much for participating and joining us and really enjoyed the conversation. And again, hope to have you back on soon. It's always great to be with you and you guys do excellent work. And I always learn from our conversation. So I look forward to coming back on again soon. And as I said, you must say that to all the podcasters.

I don't. That's a factual question. I'll take it. There you go. There you go. And with that, dear listener, we are going to call this a podcast. Take care. We'll talk to you next week.