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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App. Some FED watchers looking

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Speaker 2: for two governors to descend for the first time since

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Speaker 2: nineteen ninety three, the former Send Lewis FED President Jim

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Speaker 2: Bullard telling us previously, I think that the Fed could

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Speaker 2: resume its normalization process. September would be a natural focal

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Speaker 2: point for that. Jim joined us now for more. Jim,

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Speaker 2: welcome back, sir. Just how compelling is the case for

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Speaker 2: lower interest rates today?

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Speaker 3: I think the policy rates a little bit high for

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Speaker 3: the current environment, and so I do think that the

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Speaker 3: Committee could set up a September rate cut at this meaning,

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Speaker 3: I think the risk for the chair is probably that

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Speaker 3: that gets priced in even more than it already is,

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Speaker 3: and he can't preserve enough optionality going into September. But

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Speaker 3: I'm sure he'll do a good job on that part.

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Speaker 3: So I think the committee's in pretty good shape here.

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Speaker 4: Do you think that it's good to see descent? That

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Speaker 4: that's actually healthy and important right now?

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Speaker 3: I've always felt that sents show in some circumstances, they

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Speaker 3: just show that there's a lively debate and that various

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Speaker 3: points of view of being heard, and that can be

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Speaker 3: helpful to the chair.

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Speaker 5: I think sometimes you get this, we get if that

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Speaker 5: gets criticized for all sides.

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Speaker 3: And sometimes when it's always unanimous, you get criticized for

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Speaker 3: that as well. Too much group think, So I think

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Speaker 3: dessense can be valuable.

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Speaker 4: A lot of people are watching today's meeting and press

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Speaker 4: conference for any clues of what type of pressure President

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Speaker 4: Trump seems to be exerting, at least psychologically.

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Speaker 5: On the FED.

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Speaker 4: I wonder how much of a cloud you think that is.

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Speaker 4: As a former FED member, I know you're probably going

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Speaker 4: to say it doesn't factor into their mentality, et cetera,

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Speaker 4: et cetera.

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Speaker 1: At the same time, the rest.

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Speaker 4: Of the market is perceiving it that way and is

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Speaker 4: taking everything that happens on the FMC as Oh, this

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Speaker 4: person is running to be the next FED chair. Oh

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Speaker 4: this person is just trying to show their defiance to

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Speaker 4: the President's discussion.

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Speaker 5: Yeah, I don't know.

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Speaker 3: I don't think the committee pays too much attention. There's

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Speaker 3: a lot of data, a lot of analysis. That's the

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Speaker 3: way the meeting works. It's a big formal meeting, and

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Speaker 3: you know, I think every member takes their role extremely seriously,

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Speaker 3: and if they feel like the data is pointing up

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Speaker 3: in one direction or another, they make the callumn that's that.

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Speaker 3: So I don't really think the theater effects that part

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Speaker 3: of the discussion.

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Speaker 2: So, Jim, let's talk about the data and where we are.

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Speaker 2: By the time we get to September seventeenth, two more

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Speaker 2: CPI reports, two more payrolls reports. And there's an assumption

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Speaker 2: right now from some that they've got to wait, and

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Speaker 2: they've got to wait because they need to see the

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Speaker 2: tariff pass through to consumers. How much will we see

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Speaker 2: and once they've seen it, to what degree will it

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Speaker 2: hang around, to what degree will it actually be transitory

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Speaker 2: or will it be sticky? Jim's two CPI reports enough

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Speaker 2: to drain any conclusions on that.

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Speaker 3: They're going to want to see that data going into September,

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Speaker 3: and that'll be the that'll carry the day here today.

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Speaker 3: I think they'll, you know, who knows, you can always

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Speaker 3: get surprised by the day. You've also got jobs reports

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Speaker 3: in there, so they'll want to see that before they

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Speaker 3: make a decision, and that'll be the basic idea. But

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Speaker 3: I think the notion is that they've already put the.

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Speaker 5: Recalibration policy on pause.

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Speaker 3: For the first six months of twenty twenty five, waiting

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Speaker 3: to see what the policy would be and whether it

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Speaker 3: we'd feed through to inflation.

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Speaker 5: They don't really get anything out.

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Speaker 3: Of that, and that's why the policy rate's sitting a

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Speaker 3: little bit high compared to inflation readings and unemployment readings

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Speaker 3: right now.

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Speaker 4: And James, do you think that, Jim, do you think

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Speaker 4: that it's fair to think that next year you're going

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Speaker 4: to see some pretty significant rate cuts, not just because

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Speaker 4: of the new FED chair, but because you think it

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Speaker 4: could be appropriate based on potentially ongoing disinflation.

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Speaker 5: I think it is going to be appropriate.

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Speaker 3: And I think if they make two rate cuts this

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Speaker 3: year September and December, and then they follow that up

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Speaker 3: in the first half of twenty twenty six, they would

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Speaker 3: start to get to the neutral rate. What the Committee

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Speaker 3: thinks the neutral rate is maybe three percent or three

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Speaker 3: in a quarter or somewhere in there, and that would

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Speaker 3: be the exact rate that you should be at if

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Speaker 3: inflation continues to decline toward two SAM and unemployment continues

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Speaker 3: to be in the low four percent range.

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Speaker 2: Hey, Jim, I appreciate you as always, Sair the former

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Speaker 2: San Lewis FED President Jim pull that wank in on

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Speaker 2: the decision. Later on the soufternoon, Jeb Amata of Newberger Berman,

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Speaker 2: writing macroeconomic policy supports a self lending scenario as inflationary

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Speaker 2: pressures continue to selfen, we believe the FED has more

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Speaker 2: flexibility to ease policy. Jude John just now for more

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Speaker 2: Chack and Mornic goodcrding how much flexibility does a shaman have?

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Speaker 2: Later on the southnoon, Well, he's got a couple of

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Speaker 2: his team members who are dissenting, so that that puts

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Speaker 2: I think him in a little bit more of an

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Speaker 2: awkward spot. But I think the FED has been in

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Speaker 2: a process to normalize rates over the course of the

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Speaker 2: last period of time, and it got derailed a bit by,

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Speaker 2: of course, the tariff announcement, So I think there's still

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Speaker 2: a movement toward toward that normalization process, which we think

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Speaker 2: they're going to be back on track on. We think

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Speaker 2: think there'll probably be a couple of cuts this year,

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Speaker 2: not today, of course, but probably in September and later

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Speaker 2: in the year, reflecting the fact that inflation, while edging

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Speaker 2: up a bit, has still been under control, and the

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Speaker 2: labor market, while again solid, still showing some signs of weakening.

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Speaker 2: The number coming in Friday is going to be one

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Speaker 2: of the lower numbers we've had over the course of

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Speaker 2: the last number of months.

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Speaker 4: How much just a bullishness in risk asset's predicated on

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Speaker 4: this idea that there will be two rate cuts from

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Speaker 4: the Federal Reserve in twenty twenty five.

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Speaker 6: I don't know that broad market bullishness has got to

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Speaker 6: be driven by ray cuts. I think you have within

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Speaker 6: the internals if you think about small caps, So small

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Speaker 6: caps I think do need to see a movement toward

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Speaker 6: lower rates and rate cuts, and that historically has been

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Speaker 6: sort of a catalyst for small caps to rally. But

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Speaker 6: I think what we've seen over the last number of

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Speaker 6: months is the hard data has held up well broadly.

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Speaker 6: We've gotten some good news on taris off, of course

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Speaker 6: the panicky early April announcements, and I think the markets

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Speaker 6: reacted to that, and many businesses are are responding quite

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Speaker 6: dynamically to this issue of tariffs in maintaining margins. We're

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Speaker 6: going to see a little bit of margin pressure in

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Speaker 6: this second quarter.

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Speaker 7: The margins are still at pretty high.

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Speaker 6: Levels, remarkably because tariff's been in place for a number

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Speaker 6: of months now.

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Speaker 4: So it raises the question about earlier this year, how

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Speaker 4: so many people wrote off the United States as being

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Speaker 4: the biggest loser from some of these tariffs, and suddenly

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Speaker 4: people are coming around to this idea that maybe that

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Speaker 4: was too fast. Do you think that sort of the

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Speaker 4: FED is a side show to really the crux of

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Speaker 4: who is going to bear the brunt of it? In

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Speaker 4: our US company is showing in all of these earnings

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Speaker 4: reports time and again they're doing just fine, better in

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Speaker 4: fact than those in Europe.

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Speaker 6: I don't think the Fed's ever a side show, but

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Speaker 6: as it relates to it might be today the notion

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Speaker 6: of tariffs.

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Speaker 7: You have three ways again go right.

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Speaker 6: You either put price increases to customers and they eat it.

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Speaker 6: You put a little you know, you eat it as

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Speaker 6: a company, and pressure of margins or suppliers eat it.

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Speaker 6: So it probably ends up being in combination that we've

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Speaker 6: seen inflation tick up a little bit. Signs of that

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Speaker 6: right in the last inflation report, particularly around things like

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Speaker 6: apparel and home furnishings. You see the margin pressure I referenced,

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Speaker 6: and then you know, we don't really have transparency to

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Speaker 6: supplier income statements per se, but you know there's probably

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Speaker 6: some pressure going on there as well. And remember goods

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Speaker 6: are only a portion of the inflation CPI number, it's

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Speaker 6: not the full number. And like you referenced just before,

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Speaker 6: our right services have been softer than expected.

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Speaker 2: I think Lisa was attempting to get you to defend

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Speaker 2: your rowight in European ecquencies. So let's be more direct

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Speaker 2: the broadening defendquacy exact.

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Speaker 7: We've moved.

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Speaker 6: We've moved early in the year to a theme of

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Speaker 6: broadening out. Right US certainly had you know, it was

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Speaker 6: the major driver of markets over the course the last

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Speaker 6: number of years, but we did think there'd be a

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Speaker 6: broadening out, and that broadening out would include small caps

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Speaker 6: value non US right we're very bullish on Japan.

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Speaker 7: Europe.

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Speaker 6: We think with fiscal stimulus, particularly out of Germany, I

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Speaker 6: think is going to show improvement and the relative valuations

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Speaker 6: we're attractive. So we we upgraded our developed markets outside

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Speaker 6: the US, which would include of course Europe in.

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Speaker 7: Japan, so we're sticking with that. We didn't.

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Speaker 6: We're not underweight US because US still has so many

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Speaker 6: competitive strengths, particularly the tech sector.

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Speaker 7: If you look at this.

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Speaker 6: Second quarter earnings S and P five hundred earnings, X

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Speaker 6: tech will be flat text up seventeen percent. Yeah, but

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Speaker 6: what's zup blends to up seven whatever the number.

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Speaker 4: Well, what's Europe's tech? It's not weight loss drugs anymore. Artist.

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Speaker 7: Europe is a more cyclical economy.

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Speaker 6: So if you get higher nominal growth rate spurred by

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Speaker 6: they have lower rates, you get some fiscal stimulus, the

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Speaker 6: cyclical nature of Europe's economy will improve, and you have

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Speaker 6: the relative value differential from evaluation to the point to me,

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Speaker 6: it's not necessarily a long term, secular or strategic allocation

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Speaker 6: per se. It was more of I don't want to

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Speaker 6: call it a trade, but it was more intermediate term.

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Speaker 4: Opportunity, which is one thing that we've seen with respect

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Speaker 4: to the dollar, and sudden strengthening on the back of

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Speaker 4: some of the announcement that we've heard with the EU

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Speaker 4: and European Union and how the teriff agreement kind of

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Speaker 4: got tied, and suddenly this realization maybe there'll be a

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Speaker 4: little pain in Europe. And I just wonder if you

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Speaker 4: see a cheapening in European assets at this point, is

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Speaker 4: that a buying opportunity or is that a sign that

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Speaker 4: this trade is over?

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Speaker 6: Well, I think I think it represents a buying opportunity.

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Speaker 6: You know, we're not we're not looking for opportunities that

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Speaker 6: last a month or two right in the context of

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Speaker 6: allocating into clients, so we're looking for something that has

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Speaker 6: some legs to it.

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Speaker 7: We still we think there.

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Speaker 6: I mean, the amount of fiscal stimulus that's going to

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Speaker 6: go into the ground in Germany is massive relative to

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Speaker 6: the size of that economy, in the European economy, we

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Speaker 6: haven't seen that in a long long time, So I

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Speaker 6: think that does have some legs to it in terms

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Speaker 6: of the opportunity. The dollar took a very significant pullback,

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Speaker 6: so that's rare to see that that, you know, move

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Speaker 6: that fast, that that much We still think the dollar

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Speaker 6: will grind lower over time, but because US hard data

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Speaker 6: is held up and rates have probably stayed up higher

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Speaker 6: a little longer than expected, the dollar has come back.

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Speaker 2: Are you expending any any adverse developments in bone markets

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Speaker 2: in Europe that might hold back that I could story?

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Speaker 5: We do?

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Speaker 7: You worry a bit about that? Right?

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Speaker 6: You know, if you look at the fiscal situations of

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Speaker 6: different countries in Europe, While Germany has lots of room

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Speaker 6: to stimulate, there are other countries in the region that

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Speaker 6: don't you know, from in terms of what their local

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Speaker 6: bond markets are. So we're watching that closely in terms

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Speaker 6: of the spreads in whether it's you know, Italian bonds

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Speaker 6: versus buns or versus treasuries.

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Speaker 7: Or what have you. But I think they have enough

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Speaker 7: room right now to stimulate.

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Speaker 2: So how do you play the European story? At the moment,

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Speaker 2: someone might look at this situation and say, okay, up

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Speaker 2: on etf this tracks the eurostocks fifty. Is that the

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Speaker 2: way to do it? Or is there a better way

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Speaker 2: to do this?

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Speaker 6: Well, you were an active manager, so we have strategies

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Speaker 6: that manage you know, European stocks or what have you.

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Speaker 6: So we're looking at high quality global companies that happen

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Speaker 6: to be domiciled in Europe, that have flexibility. We'll get

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Speaker 6: some benefit from a local economy being stimulated, but you know,

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Speaker 6: we're still looking for quality companies that have global.

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Speaker 2: Reach away of course Japan and Europe. Not on India.

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Speaker 2: This just dropping from the President of the United States

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Speaker 2: just moments ago. India will be paying a tariff of

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Speaker 2: twenty five percent. This just dropping from the President just

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Speaker 2: moments ago.

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Speaker 4: A huge disappointment from Narentromodi, given the fact that they

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Speaker 4: were looking for something closer to that nineteen percent that

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Speaker 4: we saw from Thailand.

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Speaker 1: It raises this issue.

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Speaker 4: That we were talking about earlier. What were the main

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Speaker 4: sticking points that ended up with a tariff agreement that

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Speaker 4: was substantially higher than the region expected And frankly something

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Speaker 4: that a lot of retailers in particular are going to

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Speaker 4: have to factor in if they move their manufacturing there

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Speaker 4: and produced a lot of textiles in particular.

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Speaker 2: This from the President, the statement just dropping just moments ago. Remember,

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Speaker 2: while India is our friend, we have over the years

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Speaker 2: done relatively little business with them because their tariffs are

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Speaker 2: far too high. The President goes on to say, among

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Speaker 2: the highest in the world, and they have the most

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Speaker 2: strenuous and obnoxious non monetary trade barriers of any country.

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Speaker 2: A twenty five percent tariff for India.

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Speaker 1: Yeah.

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Speaker 4: He also went on to mention Russia and saying that

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Speaker 4: India has always bought a vast majority of their military

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Speaker 4: equipment from Russia. They also are some big energy buyers

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Speaker 4: from Russia. Suddenly, this goes back to what we were

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Speaker 4: talking about earlier. This is a key negotiating tool, the

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Speaker 4: geopolitical positioning, what the relationship is with different countries in Russia,

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Speaker 4: how much they are going to connect with China. That

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Speaker 4: is all part of the tariff negotiation in a very different.

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Speaker 2: Way than it but then previous years. That's the leasis

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Speaker 2: on trade. This morning, Joey's got to see you. Thanks

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Speaker 2: for dropping by. Thank you, Sir Joe Marta of Newberger, Burma.

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Speaker 2: To extend the conversation, Haidi Krebo Redika of the Council

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Speaker 2: on FIGN Relations, Heidi, welcome to the program. I just

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Speaker 2: want to pick up on two lines that came from

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Speaker 2: the Treasury Secretary scombson we don't want to decouple, we

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Speaker 2: just need to d risk. Is that the more diplomatic

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Speaker 2: way of saying, we want to decouple, but we're not

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Speaker 2: in a position too until we d risk.

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Speaker 1: I think you hit the nail on the head. I

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Speaker 1: mean decoupling is actually I'm not so sure that that's

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Speaker 1: the best final objective anyway. I mean, the de risking

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Speaker 1: is really because we have vulnerabilities where we have put

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Speaker 1: all our eggs in one basket, particularly when it comes

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Speaker 1: to Rare Earth's Rare Earth magnets and the related technology

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Speaker 1: and some critical minerals, some other products as well, But

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Speaker 1: China really dominates that space. And we're trying to de

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Speaker 1: risk in the US, but it's in our allies as well,

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Speaker 1: but it's very, very very difficult. China has the choke

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Speaker 1: hold on those particular commodities, and I think they're going

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Speaker 1: to continue to use them whether or not USTR Career

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Speaker 1: ever wants to talk about them ever again or not.

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Speaker 4: How much Heidi, has the US gotten more leverage when

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Speaker 4: it comes to getting some sort of coalition of willing

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Speaker 4: coalition of trade partners to work on tamping down on

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Speaker 4: the threats that some of the perceive is coming from

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Speaker 4: China right now? Do you think that they are in

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Speaker 4: a stronger position if there is yet another ninety day delay.

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Speaker 1: So first I think as to the ninety day delay,

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Speaker 1: if it if it is what happens, I think that

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Speaker 1: is the very best option right now. And the coalition

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Speaker 1: of the willing is, you know, to look at both

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Speaker 1: the offense and defense. The offense meaning you want to

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Speaker 1: be able to to make the investments in, you know,

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Speaker 1: in all of the areas collectively that protect economic security

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Speaker 1: from weaponization from China, the you know, the the You

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Speaker 1: also want to make sure that if you're going to

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Speaker 1: rattle the saber of Russian secondary tariffs or secondary sanctions,

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Speaker 1: however you want to categorize them, you know that you

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Speaker 1: have to be prepared if you impose those on China

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Speaker 1: that they're probably going to, you know, reinstate some of

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Speaker 1: those export control restrictions because that is literally their chow

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Speaker 1: point right now.

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Speaker 4: How much do you get a sense that that has

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Speaker 4: been the crux of a lot of the discussions, particularly

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Speaker 4: with the European Union, but also Japan and certainly is

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Speaker 4: Southeast Asia, which has been a conduit for a lot

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Speaker 4: of Chinese goods into the United States through those nations.

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Speaker 4: How much has that been one of the main discussion

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Speaker 4: points and part of the negotiations versus just sort of

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Speaker 4: an ancillary part oh.

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Speaker 1: I think critical minerals and mirrors have been key the

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Speaker 1: all the other issues that that Secretary besn't mentioned on

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Speaker 1: over capacity that affects everybody. You know, you have both

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Speaker 1: developed and developing countries that are feeling the brunt of

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Speaker 1: the the auto you know, the the you know, excuse

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Speaker 1: the use of tsunami on a daylight today, but the

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Speaker 1: sumant tsunami of of of Chinese auto exports, flooding, flooding

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Speaker 1: markets everywhere from the EU to UH to Brazil. But

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Speaker 1: I think, you know, the one caveat is that because

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Speaker 1: we have proven ourselves, unfortunately to be the most trustworthy

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Speaker 1: trading partner, and one of Trump's big objectives is really

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Speaker 1: to upend both the trading and the security system the architecture.

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Speaker 1: I think there's not a lot of trust out there,

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Speaker 1: and one thing that you really need when you're dealing

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Speaker 1: with the coalition and building a coalition is you need

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Speaker 1: trusted partners. So we need to make sure that we

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Speaker 1: don't lose that trust along the way in order to

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Speaker 1: be able to implement collectively some of the things that

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Speaker 1: we want to do on economic coercion, Hadi.

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Speaker 2: It makes me think of Canada, supposedly a North American

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Speaker 2: friend of the United States of America, left out in

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Speaker 2: the cold. And I've been surprised. I know you are too,

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Speaker 2: that the two key issues really that are left on

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Speaker 2: the table put China to one side. It's Mexico and

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Speaker 2: it's Canada, and we're not hearing enough. I don't think

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Speaker 2: about what's about to happen. What do you think is

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Speaker 2: about to happen?

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Speaker 1: So you know, you know, President Trump has been very

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Speaker 1: dismissive of any deal being reached with Canada, and we

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Speaker 1: traded more than nine billion in goods and services last

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Speaker 1: year with Canada. They are the country to our north.

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Speaker 1: It's not a small player. There are closest partner in

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Speaker 1: addressing many things, including our critical mineral challenge. We've you know,

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Speaker 1: a lot of the investments that have been really for

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Speaker 1: shared economic security have been together with Canada because we

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Speaker 1: are so complementary in terms of what we can both

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Speaker 1: extract and refine and produce together for on the critical

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Speaker 1: minerals front. So I think, you know, I'm very worried

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Speaker 1: about the fact that the Canada has not been more

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Speaker 1: front and center in particular, Mexico has. I think it

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Speaker 1: comes with a different set of issues. They're connected, But

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Speaker 1: you know, I think Canada in particular is one that

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Speaker 1: I am truly worried about.

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Speaker 7: Honey.

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Speaker 2: Do you think that's because they just haven't focused on

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Speaker 2: it or do you think that's just the natural consequence

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Speaker 2: of the fact that we have USMCA and we can

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Speaker 2: renego shad it next year. Which one do you think

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Speaker 2: it is?

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Speaker 1: So, I mean, it's a good question. The you know,

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Speaker 1: we do have the ability and obviously are going to

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Speaker 1: renegotiate U s m c A. But at the same time,

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Speaker 1: you know, the the feeling that that President Trump really

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Speaker 1: likes to have the the like all the cards to play,

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Speaker 1: and feels like Canada has very few cards to play

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Speaker 1: because they haven't diversified. They're they're so tied to the

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Speaker 1: US economy and they're really trying to figure out how

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Speaker 1: quickly they can diversify their energy exports, their critical mineral exports.

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Speaker 1: They have very you know, a very comprehensive political backing

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Speaker 1: for d risking from the United States right now. I

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Speaker 1: think that's unhealthy. But I do also think that that

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Speaker 1: the that the President is going to use whatever leverage

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Speaker 1: he has to strike the best deal he can. And

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Speaker 1: but I do, I do, I do worry that he

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Speaker 1: is probably more likely to be conducive to working with

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Speaker 1: Mexico than he will be with Canada, and I just

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Speaker 1: I'm worried about that.

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Speaker 2: Interesting, Heidi, thank you, appreciate your time. As always, Heidi

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Speaker 2: Krebi Redica of the Council on Farm Relations for the

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Speaker 2: Asum of New Century Advisor is writing, the possibility of

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Speaker 2: two descents from Governess Waller and Bowman is notable in

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Speaker 2: terms of Fed history, But policy moves on agreement. Claudia

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Speaker 2: joints us Nophimore, Claudia, welcome to the program. What kind

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Speaker 2: of agreement can we make today at the Federal Reserve?

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Speaker 2: What can we agree on?

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Speaker 8: I think it'll be really interesting to see if the

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Speaker 8: Committee is getting more comfortable having more conviction in their

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Speaker 8: forecast that inflation may rise this year, but then you know,

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Speaker 8: come back down. So I think a lot of this

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Speaker 8: discussion on what are the risks of the persistently high inflation.

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Speaker 8: We know from Governor Chris Waller that he sees those

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Speaker 8: risks as very low, and that's why he's in favor

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Speaker 8: of a cut, But is the committee moving in that

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Speaker 8: direction of, you know, moderating those risks or is it

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Speaker 8: real still? Are they still very much demanding more data

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Speaker 8: to get comfortable with the idea of rate cut.

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Speaker 7: Claudia, what do you think?

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Speaker 4: And it matters a lot what you think because the

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Speaker 4: som roll is often pointed to. It is we certainly

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Speaker 4: up pointed too at the end of last year for

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Speaker 4: the hundred basis points of rate cuts in the second half.

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Speaker 4: Do you see the same cracks that Chris Waller as seeing.

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Speaker 8: I don't see this like I can see the cracks

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Speaker 8: that he's pointing to. Maybe don't draw as strong an

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Speaker 8: imference as he does. I do think it's time for

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Speaker 8: the Fed to really be pivoting to why are you waiting?

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Speaker 8: You know, what are you looking for? And what do

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Speaker 8: you need to see with inflation?

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Speaker 5: Right?

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Speaker 9: Like?

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Speaker 8: Focus on that as opposed to the well we can wait.

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Speaker 8: We saw a lot of discussion at the last press

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Speaker 8: conference about well, the economy is solid, the labor market

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Speaker 8: is solid, so we can wait and get more data.

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Speaker 8: And I think there are sufficient signs of weakening and

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Speaker 8: some of the softening the risk and the labor market.

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Speaker 8: They've been with us for a while, Like, these are

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00:22:09,560 --> 00:22:12,440
Speaker 8: not new. The low hiring rate paired with the low

442
00:22:12,520 --> 00:22:15,040
Speaker 8: layoff rate, this is not new, and yet we do

443
00:22:15,160 --> 00:22:17,439
Speaker 8: see signs of demand so softening. We saw some of

444
00:22:17,480 --> 00:22:21,480
Speaker 8: this looking at first half GDP numbers and hiring concentrate,

445
00:22:21,600 --> 00:22:23,159
Speaker 8: like there are just a lot of signs that this

446
00:22:23,280 --> 00:22:27,520
Speaker 8: is not a labor market that will hold up, you know, indefinitely,

447
00:22:27,840 --> 00:22:30,200
Speaker 8: and so the FED needs to back off some using

448
00:22:30,240 --> 00:22:32,399
Speaker 8: that as a safety blanket in terms of waiting for

449
00:22:32,480 --> 00:22:35,199
Speaker 8: more data and recognize those risks are out there. We

450
00:22:35,240 --> 00:22:37,080
Speaker 8: hear a lot about the risk to the inflation outlook,

451
00:22:37,080 --> 00:22:39,000
Speaker 8: we should be hearing some more about the risk to

452
00:22:39,040 --> 00:22:40,600
Speaker 8: the labor market outlook as well.

453
00:22:41,040 --> 00:22:43,200
Speaker 4: There have been a number of people who have speculated

454
00:22:43,680 --> 00:22:45,800
Speaker 4: that Fed char Ja Bowell might take an even more

455
00:22:45,840 --> 00:22:50,320
Speaker 4: hawkish approach to policy, might signal that the labor economy

456
00:22:50,359 --> 00:22:52,520
Speaker 4: is in a good place and that they're balanced roughly

457
00:22:52,560 --> 00:22:57,160
Speaker 4: in their mandates in order to avoid accusations of political

458
00:22:57,200 --> 00:23:00,840
Speaker 4: interference that he's getting vulloid by President Trump. Do you

459
00:23:00,880 --> 00:23:03,000
Speaker 4: ascribe to any of those ideas or do you think

460
00:23:03,000 --> 00:23:05,080
Speaker 4: that that's a bit speculative.

461
00:23:07,119 --> 00:23:09,720
Speaker 8: The best way for the FED to stay out of

462
00:23:09,760 --> 00:23:11,640
Speaker 8: the politics as much as it can is to put

463
00:23:11,680 --> 00:23:15,200
Speaker 8: its head down part through the data be transparent, right,

464
00:23:15,200 --> 00:23:17,440
Speaker 8: the data don't speak for themselves. We need to hear

465
00:23:17,520 --> 00:23:21,200
Speaker 8: how is the FMC interpreting the data? What are they

466
00:23:21,240 --> 00:23:24,040
Speaker 8: looking for? Like, that's the message. He needs to stick

467
00:23:24,080 --> 00:23:26,840
Speaker 8: with it. They're not going to win. The FED will

468
00:23:26,880 --> 00:23:28,919
Speaker 8: not win if it plays politics like that's just not

469
00:23:29,040 --> 00:23:31,119
Speaker 8: the game that it is well suited for, nor should

470
00:23:31,119 --> 00:23:33,080
Speaker 8: it be doing it. So I think we should just

471
00:23:33,080 --> 00:23:34,960
Speaker 8: get a lot more of their thinking and just lay

472
00:23:35,000 --> 00:23:37,200
Speaker 8: it out there. That's part of the transparency. That's part

473
00:23:37,240 --> 00:23:39,679
Speaker 8: of the accountability that comes with the FED being the

474
00:23:39,720 --> 00:23:42,040
Speaker 8: ones that make the decisions about interest rates.

475
00:23:42,200 --> 00:23:44,679
Speaker 2: So Clodia, let's found the data. I just wonder if

476
00:23:44,680 --> 00:23:48,240
Speaker 2: two CPI reports is enough between now in September to

477
00:23:48,320 --> 00:23:51,560
Speaker 2: draw conclusions about how much tariff pastory will get and

478
00:23:51,640 --> 00:23:53,240
Speaker 2: how much of that tariff past Thory is going to

479
00:23:53,240 --> 00:23:54,960
Speaker 2: stick around.

480
00:23:56,359 --> 00:23:59,159
Speaker 8: Two more CPI prints could give us information both on

481
00:23:59,200 --> 00:24:01,719
Speaker 8: the tariff past through I mean the terifs working they

482
00:24:01,720 --> 00:24:03,440
Speaker 8: were through the comment. This is going to take time

483
00:24:03,480 --> 00:24:06,760
Speaker 8: and we could see you know, ever rising tariff effects

484
00:24:06,800 --> 00:24:09,040
Speaker 8: as we go into the to the September meetings, So

485
00:24:09,040 --> 00:24:10,639
Speaker 8: I mean they're gonna have to have a real explanation

486
00:24:10,680 --> 00:24:13,480
Speaker 8: of how you would cut into a rising inflation environment.

487
00:24:14,320 --> 00:24:18,600
Speaker 8: But we have also seen, you know, months of the

488
00:24:18,640 --> 00:24:21,320
Speaker 8: outside of the tariffs, look at the housing services, look

489
00:24:21,320 --> 00:24:24,720
Speaker 8: at the non housing services. We've had some really encouraging numbers.

490
00:24:25,040 --> 00:24:27,480
Speaker 8: A few more months of that, could you know, really

491
00:24:27,480 --> 00:24:31,119
Speaker 8: strengthen the case that underlying inflation set those tariffs aside,

492
00:24:31,680 --> 00:24:32,919
Speaker 8: underlying inflation.

493
00:24:32,640 --> 00:24:36,000
Speaker 9: Is really moving back down to target and that that

494
00:24:36,160 --> 00:24:38,000
Speaker 9: is a really important piece and two more months of

495
00:24:38,080 --> 00:24:40,960
Speaker 9: data in that direction can can help bolster the case

496
00:24:41,400 --> 00:24:44,639
Speaker 9: for rate cut based on the inflation risks are less.

497
00:24:45,000 --> 00:24:47,400
Speaker 2: Do you think they're in a position today and through

498
00:24:47,440 --> 00:24:49,880
Speaker 2: the summer to keep on saying the labor market is solid,

499
00:24:50,119 --> 00:24:52,280
Speaker 2: so we have the luxury of whiting. Can they write

500
00:24:52,280 --> 00:24:54,520
Speaker 2: that in the statement once again this afternoon?

501
00:24:55,680 --> 00:24:57,679
Speaker 8: They can write whatever they want to write in the statement.

502
00:24:57,760 --> 00:25:00,200
Speaker 8: I think it would be misguided. I mean, we again,

503
00:25:00,280 --> 00:25:03,920
Speaker 8: we have seen various pieces of information about the labor

504
00:25:03,960 --> 00:25:06,840
Speaker 8: market that point to some weakening. And also if you

505
00:25:06,920 --> 00:25:09,760
Speaker 8: are running an economy with below trend growth and that's

506
00:25:10,080 --> 00:25:12,840
Speaker 8: you know, focusing on consumer spending, business, fixed investment kind

507
00:25:12,840 --> 00:25:15,640
Speaker 8: of the core of it. You know, that weakness does

508
00:25:15,680 --> 00:25:18,480
Speaker 8: eventually show up in the labor market and the FED

509
00:25:18,640 --> 00:25:22,520
Speaker 8: itself it's baseline forecast so shows some weakening in the

510
00:25:22,560 --> 00:25:26,439
Speaker 8: labor market this year. So it seems completely appropriate to

511
00:25:26,720 --> 00:25:29,560
Speaker 8: at least be pointing to the risk, pointing to that outlook.

512
00:25:30,400 --> 00:25:33,040
Speaker 8: I mean, that's, you know, a very reasonable thing to

513
00:25:33,040 --> 00:25:34,720
Speaker 8: be pointed out, and I think they'll be a little

514
00:25:34,760 --> 00:25:36,879
Speaker 8: flat footed if they just keep hanging on to the

515
00:25:36,920 --> 00:25:40,840
Speaker 8: labor market is doing just fine, economic activities doing just fine,

516
00:25:41,040 --> 00:25:43,919
Speaker 8: because that's really I think that's a pretty one sided

517
00:25:43,960 --> 00:25:44,560
Speaker 8: reading of the.

518
00:25:44,560 --> 00:25:45,400
Speaker 5: Data right now.

519
00:25:45,560 --> 00:25:46,960
Speaker 2: We'll see if we get that change. It's if you

520
00:25:47,000 --> 00:25:49,320
Speaker 2: have Mason time, Claudia. I appreciate it as olwise, Clodia,

521
00:25:49,320 --> 00:25:53,480
Speaker 2: sound that New Century advises. This is the Bloomberg Seventans podcast,

522
00:25:53,640 --> 00:25:57,520
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00:25:57,560 --> 00:26:00,359
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524
00:26:00,359 --> 00:26:03,280
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525
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Speaker 2: podcast on Apple, Spotify or anywhere else you listen, and

526
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Speaker 2: as always on the Bloomberg Terminal and the Bloomberg Business

527
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Speaker 2: app

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00:26:13,920 --> 00:26:14,360
Speaker 4: Mm hmm