WEBVTT - Surveillance: Secular Forces Keeping Inflation Low, Mai Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.040 Bloomberg dot Com, and of course, on the Bloomberg. I 0:00:27.080 --> 0:00:28.960 want to bring in Peter Hoop at Deutsche Bank Securities 0:00:28.960 --> 0:00:32.720 Global head of Economic Research. Here's its tape from Morgan Stanley. 0:00:32.960 --> 0:00:37.720 The Fetes reaction function means riskskew asymmetrically to rate cuts 0:00:38.040 --> 0:00:40.880 over rate hikes in the next couple of years. Peter 0:00:41.000 --> 0:00:45.400 is that the Deutsche Bank take too absolutely. My My, 0:00:45.400 --> 0:00:47.680 my colleague Mattelzettie put a very nice report over the 0:00:47.720 --> 0:00:51.040 weekend um the we we expect the FED to be 0:00:51.120 --> 0:00:55.600 on hold for the year ahead. We expect a key 0:00:55.680 --> 0:00:59.520 change mid year. J Palisman telling us expect us to 0:00:59.560 --> 0:01:02.040 give us give you the result of our year of 0:01:02.360 --> 0:01:07.039 policy review here. The major factor in that report will 0:01:07.080 --> 0:01:14.640 be a strengthening of the symmetric inflation target, recognizing that 0:01:14.680 --> 0:01:17.640 they've been below two percent for the last decade, that 0:01:17.680 --> 0:01:19.920 we're gonna be above two percent. We're gonna aim to 0:01:20.040 --> 0:01:22.760 overshoot a bit on inflation. We're gonna have a makeup strategy. 0:01:22.800 --> 0:01:26.280 We're gonna have some inflation averaging here. The problem is 0:01:26.440 --> 0:01:28.880 inflation is not going to be cooperating yet. We see 0:01:28.880 --> 0:01:32.160 inflation remaining below two percent over the year ahead. Um, 0:01:32.280 --> 0:01:34.720 many in the FED do as well. Uh, and certainly 0:01:34.720 --> 0:01:37.600 that seems to be the consensus. Phillips curve is still 0:01:37.680 --> 0:01:40.759 very flat. FED has some work to do. We think 0:01:40.959 --> 0:01:44.399 with the announcement in June, they will, they will bring 0:01:44.440 --> 0:01:48.040 down the dots right now. They're expecting rate increases in 0:01:48.080 --> 0:01:51.520 twenty two. Those will come down. They're not going to 0:01:51.600 --> 0:01:54.760 cut rates this year. They we think they'll be patient. 0:01:54.840 --> 0:01:57.960 They'll they'll they'll let the things play out a while, 0:01:58.480 --> 0:02:02.080 get after they get past the election, get past the politics, etcetera. 0:02:02.360 --> 0:02:06.520 Early first half of one, we're expecting a fifty basis 0:02:06.560 --> 0:02:10.400 point rate cut in order to get inflation finally above 0:02:10.520 --> 0:02:12.720 two percent, just to jump in pizza. Why White, until 0:02:12.760 --> 0:02:14.840 the month your policy review is complete. Don't you get 0:02:14.840 --> 0:02:18.000 the sense that even as this monity policy review is ongoing, 0:02:18.240 --> 0:02:20.920 that it's already become a part of the decision making 0:02:20.960 --> 0:02:24.280 process on the f MC. Well, you know, so, why 0:02:24.280 --> 0:02:27.240 did why did we get a set of dots in 0:02:27.280 --> 0:02:30.960 the December meeting that had rate increases in twenty two. 0:02:31.000 --> 0:02:34.280 So it's not there yet. Okay, Pal has said very 0:02:34.280 --> 0:02:36.959 clearly we'll give you the results middle of next year. 0:02:37.000 --> 0:02:40.400 We're not there yet. We're still assessing. So, yes, it 0:02:40.520 --> 0:02:43.200 may be working its way in and you are hearing 0:02:43.240 --> 0:02:46.440 people you are here increasingly various FED members say I 0:02:46.480 --> 0:02:49.120 wouldn't be surprised as the inflation go above two percent, 0:02:49.320 --> 0:02:52.280 you know, So you're you're hearing it, but it's not 0:02:52.360 --> 0:02:54.720 there yet in the policy setting. I don't I don't 0:02:54.720 --> 0:02:57.520 think they want to cut rates this year. Eight years, 0:02:57.600 --> 0:03:01.640 nine years ago, Dr Hooper Olivia Olivier Blanchard's leadership at 0:03:01.680 --> 0:03:03.560 the i m F. This is March of two thousand 0:03:03.560 --> 0:03:08.119 and eleven conference. Uh, there's a conference on jump starting inflation. 0:03:08.200 --> 0:03:10.120 I'm looking for the title of it right now. You 0:03:10.200 --> 0:03:12.480 were probably at the conference. I wish i'd been there, 0:03:12.800 --> 0:03:15.400 A conference on macro and growth policies in the wake 0:03:15.440 --> 0:03:19.320 of the crisis. We're still talking now what Olivia Blanchard 0:03:19.440 --> 0:03:22.080 was leading on in two thousand eleven. Is there any 0:03:22.240 --> 0:03:28.959 evidence institutions can jump start reflation? You know? Uh, the 0:03:29.040 --> 0:03:31.280 Phillips curve is not totally dead. We did a lot 0:03:31.320 --> 0:03:34.440 of research earlier this year. Come on, you got the embalming. 0:03:35.600 --> 0:03:37.080 Is the cremation or are we going to go with 0:03:37.160 --> 0:03:39.240 a full beak? It's it's dead at the national level 0:03:39.280 --> 0:03:41.560 because the FETE is basically killed it The FETE has 0:03:41.680 --> 0:03:45.760 over The FETE has been over emphasizing any time we 0:03:45.840 --> 0:03:47.960 get toward a tight labor market, it doesn't allow us 0:03:48.040 --> 0:03:52.400 to go there. Prior to nineteen eighty, the average unemployment 0:03:52.520 --> 0:03:57.640 rate was was well below NEHRU. The average the labor 0:03:57.720 --> 0:04:01.000 market was tight. Since nineteen eighty ridge unemployment rate, it's 0:04:01.040 --> 0:04:04.000 been a close to one. It's been a loose, loose 0:04:04.080 --> 0:04:07.120 labor market situation. I think we need to get the 0:04:07.240 --> 0:04:10.840 unemployer rates significantly below the natural rate. And the natural 0:04:10.920 --> 0:04:13.440 rate the NEHRU has been climbing down. It's it's four 0:04:13.520 --> 0:04:15.680 percent or less. Now we need to get into something. 0:04:16.160 --> 0:04:18.360 We need to get into a two handle of unemployment 0:04:18.440 --> 0:04:20.280 before we're going to see inflation. Do we have a 0:04:20.360 --> 0:04:24.960 negative unemployment rate, Well, this is a negative negative unemployer. 0:04:25.160 --> 0:04:28.840 I think that this academic discussion of is inflation dead 0:04:29.480 --> 0:04:33.120 has a very real underpinning of the existential crisis right 0:04:33.160 --> 0:04:36.600 now markets and guess I use the word existential this morning. Uh. 0:04:36.880 --> 0:04:40.000 And this is that is this sort of low inflation rate, 0:04:40.120 --> 0:04:45.679 the low growth rate, fundamentally inconsistent with the risk price asset. 0:04:46.200 --> 0:04:48.520 That the sort of risk rally that we have seen 0:04:48.680 --> 0:04:51.680 over the past few years. How much further can it 0:04:51.839 --> 0:04:56.240 go on the heels of low inflation, low rates if 0:04:56.320 --> 0:05:00.600 there is something fundamentally broken with the inflation and the 0:05:00.680 --> 0:05:04.560 wage growth kind of bleed through, well, that is the 0:05:04.600 --> 0:05:07.160 one risk in this in this this picture and a 0:05:07.320 --> 0:05:11.280 very interesting uh talk that Eric Rosen grand Bossom PET 0:05:11.400 --> 0:05:14.560 president gave in New York yesterday where he said, look, 0:05:15.480 --> 0:05:17.960 this this is a risk we need we need to 0:05:18.000 --> 0:05:23.320 do some counter some uh, we need to control things 0:05:23.320 --> 0:05:27.600 a little bit. Let's raise uh the countercyclically capital buffers 0:05:27.640 --> 0:05:30.040 of the banking system. Okay, there are some things we 0:05:30.160 --> 0:05:33.240 could be doing to reduce some of this risk, this 0:05:33.400 --> 0:05:37.040 financial risk. Yes, evaluations are looking a little high. Yes, 0:05:37.160 --> 0:05:41.279 corporate credit growth has been a little lofty. We're nowhere 0:05:41.360 --> 0:05:43.880 near the level of financial risk we had in the 0:05:43.960 --> 0:05:49.080 late nineties, for example, that we're not there. I think 0:05:49.120 --> 0:05:51.600 we can push push further to get the unemployee right 0:05:51.640 --> 0:05:53.560 down further to begin to get inflation up. But we 0:05:53.720 --> 0:05:55.280 have to be a little bit of cost, a little 0:05:55.279 --> 0:05:57.440 bit cautious with what's happening on the financial side. No 0:05:57.600 --> 0:05:59.600 question paid a funnal question for you, just to tap 0:05:59.680 --> 0:06:01.000 in some of the research. I know you in the 0:06:01.000 --> 0:06:03.000 team have been working on a lot of people looking 0:06:03.040 --> 0:06:06.680 at the data worldwide in Q fourto Q one twenty, 0:06:07.120 --> 0:06:09.880 looking for stabilization in the global economy. I don't know 0:06:09.920 --> 0:06:11.880 if the recovery is you shaped. I have no idea 0:06:11.920 --> 0:06:13.960 if it's l shaped. I'm trying to work out whether, 0:06:14.279 --> 0:06:16.960 to your point, is it green shoots or a false dawn? 0:06:17.279 --> 0:06:22.000 Which one is it? That was record cliche. You eight 0:06:22.040 --> 0:06:27.160 cliches in there. It's the front page of them. He's 0:06:27.200 --> 0:06:33.920 trying to trying to banks special growth green shoots, So 0:06:34.040 --> 0:06:37.719 false dawn, false dawn. Let's let's think green shoots. Okay, 0:06:38.279 --> 0:06:40.760 maybe there's a little bit of false dawn still in Europe, 0:06:40.800 --> 0:06:43.760 there's some question marks there. But we think China is 0:06:43.800 --> 0:06:46.120 going to be looking a little stronger than people expecting. 0:06:46.200 --> 0:06:49.000 There's a there is there is a consumer cycle in China. 0:06:49.520 --> 0:06:51.400 I mean, as we go from four D to five D, 0:06:51.520 --> 0:06:53.880 there're gonna be a lot more purchases of cell phones 0:06:53.960 --> 0:06:57.040 coming up. They're also in the middle of an auto cycle, 0:06:57.160 --> 0:07:01.720 so we're sinking China's gross above six percent next year, 0:07:02.240 --> 0:07:05.680 um all at six percent, least US is looking better 0:07:05.760 --> 0:07:11.000 to certainly certainly fed. Being in in accommodative territory is 0:07:11.800 --> 0:07:15.360 helpful and with on the whole, on the whole, the 0:07:15.760 --> 0:07:20.440 risk situation improving a bit on balance. Remember v shaped bottom. 0:07:21.320 --> 0:07:26.640 You can have apologized to from Matlozetti. I mean we've 0:07:26.760 --> 0:07:29.720 we've staggered since August of two thousand and seven, from 0:07:29.760 --> 0:07:32.720 cliche to cliche to cliche, and we're just I think 0:07:32.800 --> 0:07:36.760 you nailed it, frankly with this whole thing of Candy's institutions. 0:07:36.800 --> 0:07:40.040 Reflect it's a huge Yeah, I'll give you distract and 0:07:40.280 --> 0:07:46.320 thank you Pa, Thank you Bank Security Static head of 0:07:46.440 --> 0:08:02.720 economic research John bringing the col of my And this 0:08:02.920 --> 0:08:05.240 is on the Pimco view which I think a lot 0:08:05.320 --> 0:08:09.200 of our listeners viscerally feel a more conservative. You going 0:08:09.240 --> 0:08:13.160 into Nicola might joining us now. Pimco portfolio manager, suffering 0:08:13.200 --> 0:08:17.000 credit analyst, Nicola, what me through what you see global growth, 0:08:17.160 --> 0:08:19.960 global inflation, US growth, US inflation, the kind of numbers 0:08:19.960 --> 0:08:23.720 you're looking for sure. Um, well, I would say that, 0:08:23.920 --> 0:08:27.400 you know, concerns about recession in twenty have definitely been 0:08:27.480 --> 0:08:30.560 temperate because of a few positive developments. I mean, we 0:08:30.680 --> 0:08:32.800 have a trade deal between the U S and China. 0:08:32.960 --> 0:08:35.640 It's a limited one, but still you know, not for 0:08:35.920 --> 0:08:38.800 further escalation for now in terms of the trade war. 0:08:38.920 --> 0:08:40.839 We have monetary policy in the U S which is 0:08:40.880 --> 0:08:44.840 getting some traction, especially in the housing market. Worksit risks 0:08:44.880 --> 0:08:47.040 have been reduced, and you know, there are some tentative 0:08:47.160 --> 0:08:50.400 signs of spottoming out in the manufacturing sector. So what 0:08:50.520 --> 0:08:54.480 we expect essentially is a gradual reacceleration and growth um 0:08:54.720 --> 0:08:57.880 the global economy the skirts the recession. I mean, the 0:08:57.920 --> 0:09:00.120 only thing I would say is that, you know, even 0:09:00.160 --> 0:09:04.199 though recession risks are lower, monetary policy is basically out 0:09:04.240 --> 0:09:06.000 of bullets. So if we do end up having a 0:09:06.080 --> 0:09:09.200 recession at some point, the loss given recession could actually 0:09:09.320 --> 0:09:11.839 be higher. Nicola a lot of people because on the 0:09:11.880 --> 0:09:15.800 Federal Reserve and the ECB. Here at Bloomberg Surveillance, we're 0:09:15.840 --> 0:09:19.319 focus on Sweden's rix ricks Bank, which is going to 0:09:19.400 --> 0:09:24.079 be potentially raising rates out of negative territory tomorrow and 0:09:24.480 --> 0:09:27.960 they're doing it as a quote philosophical rate cut rate hike, 0:09:28.080 --> 0:09:29.920 as one person said, because they just don't think that 0:09:30.040 --> 0:09:35.280 negative yields are working. How closely are you watching that? Well, 0:09:35.520 --> 0:09:37.880 we think the one is interesting. I mean, we've we've 0:09:37.920 --> 0:09:40.640 been writing about this. We think that negative interest rates 0:09:41.400 --> 0:09:44.120 have been kind of working so far in terms of 0:09:44.240 --> 0:09:47.080 like bank bank lending rates falling in terms of credit 0:09:47.160 --> 0:09:50.319 growth act actually accelerating at the margin. But there is 0:09:50.360 --> 0:09:53.400 some significant damage that is being inflicted by the negative 0:09:53.480 --> 0:09:57.280 rates on bank balance sheets, pension fund balance sheets, insurance 0:09:57.320 --> 0:10:00.319 companies balance sheets. So we don't think negative rates have 0:10:00.480 --> 0:10:03.480 much further to run, and actually the longer they persist, 0:10:04.160 --> 0:10:06.920 the more damaging they might become. So in this context, 0:10:07.480 --> 0:10:10.559 I think the Ricks bank is one of those institutions 0:10:10.640 --> 0:10:13.679 that is becoming, you know, particularly worried about it. So 0:10:13.760 --> 0:10:16.719 I think the rate hike should be seen in that context. Yeah, 0:10:16.760 --> 0:10:19.559 And a lot of investors are eerily watching this, and 0:10:19.679 --> 0:10:22.240 certainly banks are excited about this because negative rates has 0:10:22.240 --> 0:10:24.839 certainly hurt their bottom line. How closely is the e 0:10:25.000 --> 0:10:27.040 c B watching though, I mean in order to figure 0:10:27.040 --> 0:10:30.880 out what their exit strategy could potentially be, So I 0:10:31.080 --> 0:10:32.880 I think if you look at the ECB rhetoric, I 0:10:32.960 --> 0:10:35.880 think it's it's become more conscious of the fact of 0:10:35.960 --> 0:10:38.280 the side effects of the negative interest rates. I mean, 0:10:38.320 --> 0:10:41.160 if you think about the tearing, the introduction of tearing, 0:10:41.240 --> 0:10:43.160 it's you know, it's a reflection of that as well. 0:10:43.679 --> 0:10:46.200 I think in terms of actually getting out of negative 0:10:46.280 --> 0:10:48.480 rate policy, I think it's gonna be really hard for 0:10:48.600 --> 0:10:51.880 the ECB for now because if the c B were 0:10:52.000 --> 0:10:54.719 to start to high rate in back to zero, I 0:10:54.800 --> 0:10:58.520 think the implications in terms of the currency could be significant, 0:10:58.600 --> 0:11:00.960 and in turn that would have impl issues for inflation 0:11:01.000 --> 0:11:04.199 and growth. So at the moment, I think there will 0:11:04.360 --> 0:11:07.319 be steady at this level. If they have to do 0:11:07.440 --> 0:11:10.319 more easing, our sences that they will focus more on 0:11:10.480 --> 0:11:15.720 quantitative easing, liquidity operations and forward guidance rather than bringing 0:11:15.800 --> 0:11:18.920 the rates further into negative territory. Nicola, the ECB has 0:11:19.000 --> 0:11:21.240 lost a lot of experience in the last twelve months, 0:11:21.320 --> 0:11:23.640 lost the chief economist Peter Pray, lost the e CP 0:11:23.760 --> 0:11:26.200 president Manua drag and it's about to lose ben Wa 0:11:26.320 --> 0:11:29.679 Kure of the e CP Executive Board as well. He 0:11:29.840 --> 0:11:32.240 had a fairwell speech in the last twenty four hours, 0:11:32.480 --> 0:11:34.800 and the following quote is something that he delivered and 0:11:34.880 --> 0:11:38.360 everyone's jumping on. It was time to dismantle the absurd 0:11:38.480 --> 0:11:43.200 idea of an omnipposent central bank that can mechanically steer inflation. 0:11:43.520 --> 0:11:45.480 Do you think those thoughts will be a part of 0:11:45.559 --> 0:11:48.679 the monetary policy the strategic review that the CP and 0:11:48.720 --> 0:11:52.880 Christine Legand is undertaking. Yeah, I mean, it's it's gonna 0:11:53.000 --> 0:11:57.520 definitely gonna be an interesting review. Um. I think monetary uh, 0:11:57.720 --> 0:12:00.280 you know, I think the ECB and several money street 0:12:00.320 --> 0:12:05.160 policy makers are realizing that it's actually very hard to 0:12:05.480 --> 0:12:09.880 lift inflation because of secular forces like globalization and technology 0:12:10.000 --> 0:12:13.079 keeping inflation low. Um. But you know, if I were 0:12:13.160 --> 0:12:15.560 to guess, I think the review, you know, what they 0:12:15.679 --> 0:12:18.840 might do is actually change the target a little bit 0:12:19.120 --> 0:12:21.440 from below but close to percent, to something a bit 0:12:21.480 --> 0:12:24.679 more symmetric, maybe just call it two. I think if 0:12:24.720 --> 0:12:27.280 they were to actually give up on the inflation amandin 0:12:27.440 --> 0:12:30.240 or on the supercent that that would, you know, would 0:12:30.280 --> 0:12:34.800 be quite damaging potentially, especially given how high that levels are. 0:12:34.880 --> 0:12:38.480 So if you give up on inflation, you're you're probably 0:12:38.679 --> 0:12:40.959 going to create quite a bit of trouble. Bank of 0:12:40.960 --> 0:12:44.800 American Marylynch did a recent credit survey of investors in 0:12:44.960 --> 0:12:48.160 Europe and one theme was the sort of Barbel approach 0:12:48.240 --> 0:12:50.000 that people seem to be taking, or they go into 0:12:50.080 --> 0:12:55.120 highlight one bonds but then also going on cash. And 0:12:55.400 --> 0:12:59.160 one of the big fears has been that inflation risks 0:12:59.320 --> 0:13:02.439 are under a appreciated in markets. Do you feel like 0:13:02.559 --> 0:13:06.160 that consensus view heading into next year is accurate and 0:13:06.280 --> 0:13:10.000 and coheres with where PIMCO is at To be honest, 0:13:10.520 --> 0:13:13.640 I'm not too worried about inflation. As I mentioned. I think, 0:13:13.720 --> 0:13:15.960 you know, like there are these secular forces that are 0:13:16.000 --> 0:13:20.079 keeping inflation low. Phillips curves continues to look pretty flat, 0:13:20.320 --> 0:13:23.480 and in the current kind of early weak course environment, 0:13:23.559 --> 0:13:27.240 I don't really see corporate pricing becoming aggressive, and you know, 0:13:27.520 --> 0:13:30.959 I don't see significant increases in inflation. I mean, over 0:13:31.080 --> 0:13:34.559 the long run, there could be forces that lead inflation higher, 0:13:35.080 --> 0:13:40.240 including protectionism, UM and UH and that that could limit 0:13:40.360 --> 0:13:43.080 supply and and eventually raise inflation. But I think these 0:13:43.120 --> 0:13:47.000 are longer term phenomena. NICOLEA, Thank you so much. Nicole. 0:13:47.080 --> 0:14:02.320 Am I with us with pim coke seriously economic data, 0:14:03.040 --> 0:14:05.160 big time economic data. The next two days Thomas for 0:14:05.240 --> 0:14:08.000 Sally with US now with RBC Capital Markets time, have 0:14:08.080 --> 0:14:11.480 you marked down Q one because of the Boeing effect? No, 0:14:11.640 --> 0:14:13.880 we haven't yet. Um. I mean we obviously are as 0:14:14.000 --> 0:14:17.160 most others are fully aware that there is some potential 0:14:17.240 --> 0:14:20.200 hit there. Um. But you know, whatever the hit is 0:14:20.280 --> 0:14:23.120 going to be, I you know, it's just it's so 0:14:23.280 --> 0:14:26.920 ridiculously academic. I mean whatever what you know, whatever they take, 0:14:26.920 --> 0:14:29.720 they're going to give back. Um, So you know, whatever 0:14:29.800 --> 0:14:31.880 it is worth. I think people have to recognize, you know, 0:14:32.040 --> 0:14:34.400 just just to use a you know, fed lingo it 0:14:34.480 --> 0:14:37.240 it's gonna be a transitory effect. Is our is, our 0:14:37.320 --> 0:14:40.120 audience are public. They have to get used to sub 0:14:40.200 --> 0:14:44.080 two percent GDP or near two percent GDP. That's unacceptable, 0:14:44.400 --> 0:14:47.720 it's un American. Well, but the reality is, but that's 0:14:47.840 --> 0:14:50.240 that's what we've been doing, right. Uh. You know, there's 0:14:50.320 --> 0:14:53.040 there there's no escaping from from that reality. I mean, 0:14:53.080 --> 0:14:55.160 it almost doesn't matter how you want to look at it. 0:14:55.240 --> 0:14:56.920 But you know, on a year of a year basis, 0:14:57.280 --> 0:14:59.000 I mean we've been sort of you know, hugging you know, 0:14:59.200 --> 0:15:01.680 over slightly over slightly under the two percent line for 0:15:01.840 --> 0:15:04.280 what the better part of the entire cycle. Um. I mean, 0:15:04.320 --> 0:15:06.000 there's obviously been periods where we've sort of, you know, 0:15:06.320 --> 0:15:09.080 gotten close to four percent, But then there has also 0:15:09.120 --> 0:15:10.560 been periods over the course of the cycle, you know, 0:15:10.560 --> 0:15:12.320 where we've gotten close to one and a half percent. 0:15:12.400 --> 0:15:14.680 But you know that again, we're hugging the two percent line. 0:15:14.680 --> 0:15:17.080 And that's been true for the vast majority of this expansion. 0:15:17.240 --> 0:15:18.720 And Tom, a lot of people would say that's just 0:15:19.040 --> 0:15:21.480 fine as long as nothing goes wrong, and I guess 0:15:21.560 --> 0:15:23.720 the margin of error gets a lot narrower when you 0:15:23.800 --> 0:15:27.200 get closer to that stall speed. I'm just wondering, how 0:15:27.360 --> 0:15:30.880 close are we to a place that is unsustainable for 0:15:31.160 --> 0:15:34.480 an economic expansion? How far away? Yeah, at least I 0:15:34.520 --> 0:15:36.440 think it's it's it's it's a great question. And I 0:15:36.480 --> 0:15:37.880 think the way that you need to think of it is, 0:15:37.960 --> 0:15:39.440 you know, sort of, what is the wherewithal for the 0:15:39.480 --> 0:15:42.280 consumer to continue to propel economic activity? And the reality 0:15:42.400 --> 0:15:44.720 is the U s consumers And I mean, you know, 0:15:44.760 --> 0:15:48.080 I hate to use, you know, sort of very fluffy words, 0:15:48.120 --> 0:15:51.080 but you know they are in utterly fantastic shape. I mean, 0:15:51.120 --> 0:15:53.480 it almost doesn't matter how you want to look at it. Um, 0:15:53.600 --> 0:15:56.240 you know, whether it's the level of savings, whether it's 0:15:56.280 --> 0:15:59.080 you know, sort of their their debt service ratios. I mean, 0:15:59.280 --> 0:16:01.880 by almost any measure, the consumer has the ability to 0:16:02.000 --> 0:16:05.080 continue to propel consumption to around this this you know, 0:16:05.160 --> 0:16:07.360 sort of two percent page. So, you know, this idea 0:16:07.360 --> 0:16:09.160 of recession is funny. We're in the midst of writing 0:16:09.440 --> 0:16:12.200 our year ahead. Uh and and and the one thing 0:16:12.240 --> 0:16:15.240 that we said about the year that was was that, 0:16:15.400 --> 0:16:17.640 you know, despite the fact that it was actually a 0:16:17.680 --> 0:16:22.400 pretty good year, people were overwhelmed by negativity. Right. It 0:16:22.520 --> 0:16:25.440 was like everyone kept on saying, the recession is here, 0:16:25.480 --> 0:16:27.440 their sessions here. Yet here we are at much of 0:16:27.520 --> 0:16:29.800 the conversation, we're having a moment ago chugging along at 0:16:29.840 --> 0:16:32.360 a at a two percent page. So you know, I 0:16:32.600 --> 0:16:34.040 think what people have to do is they have to 0:16:34.160 --> 0:16:36.560 keep their eye on this. You know, a really important idea, 0:16:36.680 --> 0:16:40.080 and that is labor backdrop is really tight. Wage pressures 0:16:40.080 --> 0:16:42.880 are probably going to continue. The consumer as a result, 0:16:42.960 --> 0:16:45.920 will be able to um really support a two percent 0:16:46.040 --> 0:16:47.920 profile from a growth perspective in the coming year. I 0:16:47.960 --> 0:16:49.840 just think it's great that obviously White until the end 0:16:49.840 --> 0:16:51.680 of the years put out the year ahead. You know 0:16:51.680 --> 0:16:54.840 how some people write this thing in October going into November. 0:16:54.960 --> 0:16:58.440 I'm very happy to do that. Tome just quickly, your 0:16:58.480 --> 0:17:01.800 assessment of the labor market, with confusing so many different terms, 0:17:02.080 --> 0:17:05.119 full employment, a cyclical, bacon labor market conditions than the 0:17:05.160 --> 0:17:08.800 Federal Reserve chairman talking about slack, what's your assessment of 0:17:08.840 --> 0:17:12.399 the American labor market. The labor market is tight. I 0:17:12.480 --> 0:17:16.000 mean there that is. That is an inexcapable truth. Um. 0:17:16.080 --> 0:17:19.600 I mean there's countless ways of driving that point home. 0:17:19.920 --> 0:17:21.280 You know. One of the ways that I think you 0:17:21.359 --> 0:17:23.320 can do is look at the number of people that 0:17:23.359 --> 0:17:26.080 are not in the labor force. This economy has done 0:17:26.160 --> 0:17:29.720 a phenomenal job of pulling people that we're not in 0:17:29.760 --> 0:17:31.760 the labor force back into the labor force. I mean 0:17:32.119 --> 0:17:34.880 we are now back down to um sort of previous 0:17:34.960 --> 0:17:38.440 cycle levels from a not in the labor force perspective. 0:17:38.480 --> 0:17:40.640 In fact, we would say that we've probably pulled all 0:17:40.640 --> 0:17:43.960 the people we can um from from the backdrop. And Jonathan, 0:17:44.000 --> 0:17:45.480 you've set me up nicely. Just to make with this 0:17:45.560 --> 0:17:48.360 one really important point, I think people have to get 0:17:48.400 --> 0:17:50.680 comfortable with this idea that job growth is going to 0:17:50.720 --> 0:17:52.640 slow down. Now again, you're hearing this from someone who 0:17:52.720 --> 0:17:54.960 actually has a pretty constructive view in the backdrop. But 0:17:55.040 --> 0:17:57.280 the reality is, we've pulled so many people from the sidelines. 0:17:57.280 --> 0:17:59.720 There's there's there's only so many additional people we can pull. 0:18:00.240 --> 0:18:02.720 Break even from a job growth perspective is about a 0:18:02.840 --> 0:18:05.480 hundred thousand jobs. So even if you slow down to 0:18:05.480 --> 0:18:08.119 a hundred jobs on average per month, which is what 0:18:08.200 --> 0:18:12.520 we expect, you're still above break even. Um, that's still 0:18:12.680 --> 0:18:15.080 enough to keep the unemployment rate at a minimum steady 0:18:15.160 --> 0:18:18.080 and even push pushed down the unemployment rate to some extent. 0:18:18.200 --> 0:18:20.720 So I think we have to reorientate our thinking. We 0:18:20.800 --> 0:18:23.520 got to re orient ourselves to a discussion on wage 0:18:23.560 --> 0:18:26.119 growth with you down the road, Tom PERCELLI, thank you 0:18:26.200 --> 0:18:45.560 so much. With RBC Markets, Paul. We look over at 0:18:45.600 --> 0:18:47.879 our screens here. We got like forty two TV screens 0:18:47.920 --> 0:18:51.360 in the studio to keep us on and we're beginning 0:18:51.440 --> 0:18:53.440 like six hours, which you know is going to be 0:18:53.560 --> 0:18:55.520 seven or eight, right, I mean, it's just gonna go 0:18:56.920 --> 0:18:59.920 of this really historic moment. Whatever your policy, let's trying 0:18:59.920 --> 0:19:01.440 to get the politics out of it right now and 0:19:01.520 --> 0:19:04.320 just talk about the the tenor of the day. We 0:19:04.359 --> 0:19:07.000 can do that with Emily Wilkins joining us now from 0:19:07.040 --> 0:19:11.040 Bloomberg News in Washington. Emily, I speak of the tenor 0:19:11.200 --> 0:19:15.440 of the day. Is there is it like excitement over this? 0:19:15.840 --> 0:19:19.040 Is there a sadness over this? What's the actual mood 0:19:19.560 --> 0:19:24.560 on Capitol Hill? Speaker Nancy Pelosi has said throughout this 0:19:24.720 --> 0:19:28.760 process that this is a somber move. She has, you know, 0:19:29.119 --> 0:19:32.159 tried to do this without you know, excitement, without a 0:19:32.240 --> 0:19:34.359 sense of you know, she's not trying to portray this 0:19:34.440 --> 0:19:37.320 as some sort of victory for Democrats to do this. 0:19:37.560 --> 0:19:40.840 She's tried to keep it somber and solemn throughout. Prayerful 0:19:41.000 --> 0:19:43.600 is a word that she's used a lot. But right now, 0:19:43.760 --> 0:19:46.120 I mean, everyone's just sort of gearing up, as you said, 0:19:46.200 --> 0:19:48.320 for what is expected to be a very long day. 0:19:48.800 --> 0:19:50.960 At this point, we're not expecting to see votes on 0:19:51.040 --> 0:19:54.760 engachment until around seven thirty this evening, So Emily, give 0:19:54.840 --> 0:19:57.280 us a sense of what actually is going to happen 0:19:57.359 --> 0:20:00.760 today in the House of Representatives. So the House of 0:20:00.800 --> 0:20:03.320 Representatives are going to spend about the next six hours 0:20:03.440 --> 0:20:07.160 debating the rules for the articles of impeachment, and through 0:20:07.240 --> 0:20:10.240 that we're going to expect to see Republicans try to 0:20:10.320 --> 0:20:13.280 do certain things to delay this process. We've already seen 0:20:13.359 --> 0:20:16.240 this morning them call for a vote on a motion 0:20:16.320 --> 0:20:19.639 to adjourn and everyone leave. Um. Of course, because Republicans 0:20:19.720 --> 0:20:22.719 do not have the majority, none of these attempts are 0:20:22.760 --> 0:20:25.600 expected to actually proceed, but they could slow things down 0:20:25.720 --> 0:20:28.640 a little bit. But because the rule is structured, there 0:20:28.880 --> 0:20:31.359 isn't a lot of little room and so we definitely 0:20:31.359 --> 0:20:34.239 expect to see votes this seavening so emily. Will there 0:20:34.280 --> 0:20:37.240 be any kind of witnesses today? We was just just 0:20:37.680 --> 0:20:40.200 representatives going back and forth against each other, kind of 0:20:40.320 --> 0:20:44.240 pleading their side. This is just this is just the representatives. 0:20:44.280 --> 0:20:46.320 This is to give lawmakers a time to come to 0:20:46.359 --> 0:20:49.159 the floor to speak to make their case. We're going 0:20:49.240 --> 0:20:51.760 to be seen perhaps witnesses over in the Senate. But 0:20:51.840 --> 0:20:54.040 the rules for how the Senate debate is going to 0:20:54.119 --> 0:20:57.480 go are still under discussion. That's going to be in 0:20:57.560 --> 0:21:00.800 in January, and that's something that people are looking to 0:21:01.200 --> 0:21:04.959 uh Majority Leader Mitch McConnell and Minority Leader Chuck Schumer 0:21:05.080 --> 0:21:07.920 to see how they wind up working that out. What 0:21:08.000 --> 0:21:10.879 are you looking for after this vote? I mean to 0:21:11.000 --> 0:21:13.120 be clear here, there's a vote tonight we're done right 0:21:13.280 --> 0:21:18.200 in the House. Okay, then what happens next? What exactly 0:21:18.320 --> 0:21:22.399 happens next? So what happens next is that the House 0:21:22.640 --> 0:21:25.000 is going to take the articles of impeachment and bring 0:21:25.080 --> 0:21:27.439 them over to the Senate. And what they did? They 0:21:27.480 --> 0:21:29.359 do that on a silver platter. I mean, how do 0:21:29.440 --> 0:21:33.000 you actually do this? Does anyone you tweeted over? I 0:21:33.119 --> 0:21:37.760 think you actually have someone physically walk over between um, 0:21:38.920 --> 0:21:41.720 walk over between the chambers and actually go ahead and 0:21:42.040 --> 0:21:44.600 announced to the Senate these articles of impeachment. I know 0:21:44.720 --> 0:21:48.160 that's the way they've done it for previous bolts. Interesting 0:21:48.280 --> 0:21:50.600 and then, Emily, so give us a sense of what 0:21:50.800 --> 0:21:52.439 let me get to the Senate that is actually going 0:21:52.520 --> 0:21:54.119 to be a trial. So I'll go back to my 0:21:54.200 --> 0:21:57.080 previous question. Will I know there's a discussion point between 0:21:57.880 --> 0:22:02.240 Senator Schumer and McConnell about whether there will be witnesses called. 0:22:02.520 --> 0:22:03.960