WEBVTT - Single Best Idea with Tom Keene: Lindsey Piegza & Neil Dutta

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Single best idea. Holidays shortens single best idea. Usually we

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<v Speaker 2>keep it six minutes. We're going to try to do

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<v Speaker 2>this in five minutes so you can get on with

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<v Speaker 2>your Fourth of July weekend, and all of you worldwide,

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<v Speaker 2>particularly in France and the United Kingdom, you just must

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<v Speaker 2>be exhausted by the political debate. I can't imagine, of course,

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<v Speaker 2>everything that we had in Washington today. Thank you to

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<v Speaker 2>Joe Matthew Balance of Power with Robert Costa of CBS.

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<v Speaker 2>It was great to have Robert Costa and Joe Matthew

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<v Speaker 2>together on all going on in Washington and many many

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<v Speaker 2>other good guests today. When we invented surveillance in Bloomberg

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<v Speaker 2>on the economy just a few years ago, don't look

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<v Speaker 2>at me like that, Eric, just a few years ago.

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<v Speaker 2>The basic idea was to engender a constructive debate where

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<v Speaker 2>really smart people agree to disagree. We had that in

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<v Speaker 2>Spade yesterday in a strong thirty minutes with Lindsay Pegs

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<v Speaker 2>of Stifel and Neil Dutta of Renaissance Macro. Lindsay Pegs

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<v Speaker 2>of believes inflation is more persistent if declining a bit.

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<v Speaker 2>She suggests the FED will take its time even into

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<v Speaker 2>twenty twenty five.

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<v Speaker 3>I think the FEDS on the sideline through the end

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<v Speaker 3>of the year. I think there's no motivation for the

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<v Speaker 3>FED to rush, given the fact that we saw an

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<v Speaker 3>extreme amount of head bakes at the start of the year,

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<v Speaker 3>with three months of acceleration, and even when we strip

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<v Speaker 3>out a lot of that noise and we look at

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<v Speaker 3>core services excluding housing, so a measure the FED calls

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<v Speaker 3>the supercore. We're talking double that two percent intended target.

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<v Speaker 3>So a number of key metrics are still saying there's

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<v Speaker 3>not enough indications that we're on a sustainable path two percent.

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<v Speaker 3>So we need that ongoing message of patients reinforced by

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<v Speaker 3>FED officials so we don't see them get ahead of

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<v Speaker 3>themselves as they did at the start of the year.

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<v Speaker 2>I'm going to editorialized Lindsay pigs as Stifel. That's a

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<v Speaker 2>lonely outpost. I'm sure there's people that agree with They're

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<v Speaker 2>out there and I don't have them in front of

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<v Speaker 2>me right now, but boy, is that against a consensus call.

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<v Speaker 2>Consensus call has been some form of vector of disinflation.

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<v Speaker 2>Allen Zettner and her team published an hour ago at

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<v Speaker 2>Morgan Stanley and say disinflation is in place, and there'll

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<v Speaker 2>be many other people. I think you're going to see

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<v Speaker 2>a ton of publications over this fourth of July weekend

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<v Speaker 2>with all that's going on in Washington and of course

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<v Speaker 2>the French results. I should say look to Alan Katz

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<v Speaker 2>and our Paris Newsboro, Carolyn Conan and others for very,

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<v Speaker 2>very good coverage of the French election. We will do

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<v Speaker 2>that on Bloomberg on Sunday. But within the turmoil and

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<v Speaker 2>all this, there is this sense and it is consensus

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<v Speaker 2>that we're getting there and maybe, as the cliche as

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<v Speaker 2>the last mile, it may be hard to get to

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<v Speaker 2>two point zero percent. Neil Dutta has been an optimist,

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<v Speaker 2>but when the facts change, Neil Doutta changes. And it's

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<v Speaker 2>not that he's calling for disinflation. He said, there's just

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<v Speaker 2>been a shift out there where the Fed has to

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<v Speaker 2>get out in front of the data. Here's Neil Dutta,

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<v Speaker 2>Renaissance Macro.

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<v Speaker 4>The story for the year is that the trade offs

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<v Speaker 4>are shifting. You know, last year it was all about

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<v Speaker 4>inflationary boom like dynamics. There's just simply no way the

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<v Speaker 4>FED should or could even think about cutting in that environment.

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<v Speaker 4>But this year things have changed. You know, ultimately the

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<v Speaker 4>economy is growing, you know, maybe two percent for the

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<v Speaker 4>first half of the year. If you look at total

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<v Speaker 4>hours worked over the last six months, it rose about

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<v Speaker 4>one percent. So if you assume around one percent productivity

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<v Speaker 4>growth you're talking about, you're looking at about a two

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<v Speaker 4>percent economy. And I think what's important is that the

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<v Speaker 4>unemployment rate is rising. So even though we've been growing

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<v Speaker 4>two percent, it hasn't been enough to keep the unemployment

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<v Speaker 4>rate from going up. And you're basically growing below potential.

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<v Speaker 4>And at the same time, the momentum for inflation is lower, right,

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<v Speaker 4>I mean, we're seeing that come out in the data.

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<v Speaker 4>It's really about it's about balance of risk. Tell me

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<v Speaker 4>what is the right tail for GDP growth. It's really

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<v Speaker 4>hard to come up with. The unemployment has already been rising.

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<v Speaker 4>That means the risk is that it keeps right right.

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<v Speaker 2>Going back to economic growth, I really can't say this enough.

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<v Speaker 2>Most economists looking at inflation adjusted growth the US calculates

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<v Speaker 2>it in a different way than they do in Europe.

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<v Speaker 2>It gets very confusing. But this whole debate about two

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<v Speaker 2>percent real GDP growth being below that, which is sort

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<v Speaker 2>of where everybody is now, including Atlanta. GDP is a

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<v Speaker 2>guestimate or does it surprise once again to a more

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<v Speaker 2>robust economic growth is maybe part of the debate in

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<v Speaker 2>the Q three of this year. It is an extraordinary weekend,

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<v Speaker 2>looked our Washington News Bureau Balance of Power, Joe Matthew

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<v Speaker 2>and Kaylee Lines and others, a vast team here looking

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<v Speaker 2>at all that's going on with the Biden administration. Mister

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<v Speaker 2>Trump is a presumptive Republican candidate, and others in Washington.

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<v Speaker 2>Again in London the pageantry. Thank you to Tom McKenzie

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<v Speaker 2>for being outside ten Downing Street today as we minted

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<v Speaker 2>a new prime minister, his greeting with the King of England.

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<v Speaker 2>And I don't think I've said this yet Prime Minister Starmer.

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<v Speaker 2>I've got to get used to that. But that's where

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<v Speaker 2>we are. And then we go to the French elections

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<v Speaker 2>this weekend to try to stagger into a holiday normal

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<v Speaker 2>work week next week. We are on YouTube. Search and

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<v Speaker 2>find Bloomberg podcasts on YouTube. You go YouTube Bloomberg Podcasts.

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<v Speaker 2>It's out there on Google, Apple, car Play with twenty nations.

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<v Speaker 2>Good Morning to the United Kingdom. Just have Apple car plate,

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<v Speaker 2>This is single best idea