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00:00Changing in the environment frankly with the potential for is Steven Marine to be in at the Fed also the financial for the next Fed governor to be governor for the next Fed chair to be Christopher Waller. Has that changed anything in your outlook? Yes, I think most notable outside the chair nominations, the change in Fed governor is really the jobs that we recently had. And I know we've spoken about this perhaps ad nauseum, but I think that number is very pivotal in changing the narrative that the economy is very strong and the economy is resilient. Right. The strength of that labor market. Terrible. I think regardless of where we end up with the Fed chair, the governor nomination, we're already starting to see this shift where this puts the Fed probably in a more of a spot to start to get ready to cut. Now, you know, I think recently, just in a snippet before Kaplan had mentioned if there's one more game in August that is weaker and you see possibly further revisions for that July's number to the downside. I mean, this to me cements a September rate cut and really something that the Fed maybe wants to start accelerating if we start seeing further cracks in the labor market. And then one thing as we constantly talk about, we still haven't seen kind of, you know, where tariffs land, what impact that has to inflation. And again, that's where I think we're also thinking that the the Fed is going to be in a tough spot here. They could start the Fed cutting cycle. I think just the momentum of that is really going to depend how much of the tariff impact we start to see in inflation. And the CPI number next week is going to be a big one. Yeah, for sure, George. I mean, you know, we're kind of past that. We jobs data right now and you know, it was weak, but nevertheless, the economy is still creating jobs. And we saw some better jobs data this week, for example, and initial claims. So is it for sure that the Fed will feel that need to cut, especially if we get a hot CPI print next week? Well, that's part of the problem. The economy that the Fed thought they were looking at on Wednesday in their meeting was very different at Friday. And then we looked at 14,000 ads in June, 19,000 ads in May. And that strength came from health care. And I don't think that's a healthy segment if you actually want to grow the economy. And if you back that out, it's actually a negative print. So well said. We're going to now look immediately at inflation. That's why the market is kind of going sideways in between. And the Fed is going have to decide which side of the mandate is more important right now and if labor is actually weakening. And then the three month trend lines around 35,000 jobs, what do you do if inflation actually starts re accelerating because of tariffs? You've seen it in toys, you've seen it in furniture, you've seen it in bananas. That's on the good side. Right. But services has actually been coming down and shelter has been a large component of that. I think that's why Powell had sort of a tough press conference. He's trying to balance both sides.

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Patel and Catrambone’s Outlook for the Fed

Parametric SMA Fixed Income Portfolio Manager Nisha Patel and DWS Group Head of Fixed Income and Trading George Catrambone potential shake at the Fed and outlook for jobs. (Source: Bloomberg)

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