What to expect from the next Fed meeting amid economic strains of Iran war

[00:00:06]All right, that's the opening bell on Wall Street. The president of CNBC gets the honor today. The company is celebrating the renewal of its more than 30-year partnership with the stock exchange. Let's take a live look at the big board. Start of the day's trading very flat for the start of the day. Dow is It's literally flat, which is lovely when that happens.

[00:00:27]>> [laughter] >> Uh joining us this morning is Ann Berry.

[00:00:30]She is the CEO of Threadneedle Ventures.

[00:00:33]Good to see you.

[00:00:33]>> Thanks for having me on this morning.

[00:00:34]>> Yeah, it's great to have you on. So, let's talk about what's been happening as it relates to the war with Iran.

[00:00:40]We've seen 11 straight nights of attacks between the United States and Tehran. Uh and it's not really surprising that we're seeing gas prices and oil prices tick back up. We're not yet at the level that we were a couple of months ago, but the Secretary of State, Marco Rubio, just a few hours ago indicated that he doesn't think that Iran is serious about negotiating. So, my question is is this already baked into the market?

[00:01:03]In other words, we haven't seen the market is performing incredibly strong uh this quarter. Um it feels as if traders have said, "We know this is going to be like this for the next couple of weeks, maybe even the next year or so. We already know that.

[00:01:16]Fundamentals in companies are strong.

[00:01:18]Let's keep trading."

[00:01:18]>> Yeah, the market is eerily comfortable with political volatility these days.

[00:01:22]>> Got used to it.

[00:01:23]>> Got used to it. And actually, it sort of got trained to feel like this round about tariffs cuz we saw these big announcements, we saw these huge spikes, and then recoveries, dips, and recoveries. We've seen a similar pattern here when it's come to oil prices, commodity prices, and then the impact when it comes to Iran. So, yeah, I think there's an acceptance it's the new normal. That said, the session just opened, it is flat. I do expect to see some volatility over the course of today's trading.

[00:01:47]>> So, we'll be watching that. We also have a Federal Reserve meeting next week on the 29th. It's going to be the second for Chair Kevin Warsh. What do you think is going to happen with interest rates given what is happening in Iran, inflation, and then the relatively strong labor market.

[00:02:00]>> So, Kevin Warsh was summoned to the Hill. I'm in that, so I watched all of that. Two days of testifying, and he was very clear that 2% inflation target is absolutely the thing that he's focused on. And he seems to think that the labor market is robust enough for him to maybe get a little bit more aggressive to go get that target hit.

[00:02:21]So, for this meeting, it's one next week, I think that interest rates stay where they are. But if this Iran situation continues, if gas at the tank continues to get more expensive, if inflation doesn't move meaningfully, I think we're looking at a September where the unthinkable may happen.

[00:02:37]>> A high potential, a high potential, which a year ago none of us would have said that was on the cards. Now, actually, parts of the market thinks it could be possible.

[00:02:45]>> Mhm. And as far as And Julian, you can weigh in on this as well. As far as both of you understand, Kevin Warsh, he's made a big point of during his confirmation hearings, and even subsequent to that, telling members of Congress that the Fed is going to remain independent, even though we know that the president removed Jerome Powell because he felt that Powell wasn't acceding to his demands to lower interest rates. We expect that that's going to continue.

[00:03:08]>> Well, Powell timed out.

[00:03:10]>> Yeah, timed out, but >> But Kevin Warsh is absolutely still on the board. He still serves on the board, isn't it?

[00:03:18]>> That's correct. That's correct.

[00:03:20]>> Yeah, but Kevin Warsh is very much his own his own person.

[00:03:24]He has sufficient independent wealth to be able to, you know, take his own position without worrying about longer-term repercussions. He's very focused on his reputation. He's known for being his own thinker, and yes, he's been very clear saying the Fed independence is critical for us to be able to achieve the things that ultimately accommodate economic growth.

[00:03:42]I don't think he's going to feel the pressure to not raise hikes.

[00:03:46]That being said, he's not in the in the in the line of sight of criticism yet. We'll see what's happening 6 months from now.

[00:03:53]>> Yeah. I'm curious to know when we were at the Federal Reserve a month ago, I was sitting in that press conference asking him questions, and one of the big flagship initiatives he put out is all of these task forces to reform and to evaluate the performance of the Federal Reserve. He's since announced who may be serving on those task forces. What do you make of that?

[00:04:12]>> It's a fascinating lineup. I mean, these are real luminaries. These are big founders. These are people who've been very successful in finance. And the thing that really caught my eye, he's very focused on data. One of the big criticisms of Jerome Powell, back to Vlad's point, was that the Fed was looking at data that was historical. Every time you're looking at data subject to a lot of revisions often. Think about how many times these labor numbers come out and then there's revisions all the time.

[00:04:40]Very, you know, real spikes in volatility. And Kevin Warsh said, "Look, we have data, Wall Street uses data that's much more up-to-date. We, the Fed, should be using it, too." I thought that's fascinating.

[00:04:50]>> I think we'll see how it all plays out in the coming months. And Barry, thank you so much for >> Thanks for having me, both.