Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
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Speaker 2: Terminal and the Bloomberg Business App. Some FED watchers looking
Speaker 2: for two governors to descend for the first time since
Speaker 2: nineteen ninety three, the former Send Lewis FED President Jim
Speaker 2: Bullard telling us previously, I think that the Fed could
Speaker 2: resume its normalization process. September would be a natural focal
Speaker 2: point for that. Jim joined us now for more. Jim,
Speaker 2: welcome back, sir. Just how compelling is the case for
Speaker 2: lower interest rates today?
Speaker 3: I think the policy rates a little bit high for
Speaker 3: the current environment, and so I do think that the
Speaker 3: Committee could set up a September rate cut at this meaning,
Speaker 3: I think the risk for the chair is probably that
Speaker 3: that gets priced in even more than it already is,
Speaker 3: and he can't preserve enough optionality going into September. But
Speaker 3: I'm sure he'll do a good job on that part.
Speaker 3: So I think the committee's in pretty good shape here.
Speaker 4: Do you think that it's good to see descent? That
Speaker 4: that's actually healthy and important right now?
Speaker 3: I've always felt that sents show in some circumstances, they
Speaker 3: just show that there's a lively debate and that various
Speaker 3: points of view of being heard, and that can be
Speaker 3: helpful to the chair.
Speaker 5: I think sometimes you get this, we get if that
Speaker 5: gets criticized for all sides.
Speaker 3: And sometimes when it's always unanimous, you get criticized for
Speaker 3: that as well. Too much group think, So I think
Speaker 3: dessense can be valuable.
Speaker 4: A lot of people are watching today's meeting and press
Speaker 4: conference for any clues of what type of pressure President
Speaker 4: Trump seems to be exerting, at least psychologically.
Speaker 5: On the FED.
Speaker 4: I wonder how much of a cloud you think that is.
Speaker 4: As a former FED member, I know you're probably going
Speaker 4: to say it doesn't factor into their mentality, et cetera,
Speaker 4: et cetera.
Speaker 1: At the same time, the rest.
Speaker 4: Of the market is perceiving it that way and is
Speaker 4: taking everything that happens on the FMC as Oh, this
Speaker 4: person is running to be the next FED chair. Oh
Speaker 4: this person is just trying to show their defiance to
Speaker 4: the President's discussion.
Speaker 5: Yeah, I don't know.
Speaker 3: I don't think the committee pays too much attention. There's
Speaker 3: a lot of data, a lot of analysis. That's the
Speaker 3: way the meeting works. It's a big formal meeting, and
Speaker 3: you know, I think every member takes their role extremely seriously,
Speaker 3: and if they feel like the data is pointing up
Speaker 3: in one direction or another, they make the callumn that's that.
Speaker 3: So I don't really think the theater effects that part
Speaker 3: of the discussion.
Speaker 2: So, Jim, let's talk about the data and where we are.
Speaker 2: By the time we get to September seventeenth, two more
Speaker 2: CPI reports, two more payrolls reports. And there's an assumption
Speaker 2: right now from some that they've got to wait, and
Speaker 2: they've got to wait because they need to see the
Speaker 2: tariff pass through to consumers. How much will we see
Speaker 2: and once they've seen it, to what degree will it
Speaker 2: hang around, to what degree will it actually be transitory
Speaker 2: or will it be sticky? Jim's two CPI reports enough
Speaker 2: to drain any conclusions on that.
Speaker 3: They're going to want to see that data going into September,
Speaker 3: and that'll be the that'll carry the day here today.
Speaker 3: I think they'll, you know, who knows, you can always
Speaker 3: get surprised by the day. You've also got jobs reports
Speaker 3: in there, so they'll want to see that before they
Speaker 3: make a decision, and that'll be the basic idea. But
Speaker 3: I think the notion is that they've already put the.
Speaker 5: Recalibration policy on pause.
Speaker 3: For the first six months of twenty twenty five, waiting
Speaker 3: to see what the policy would be and whether it
Speaker 3: we'd feed through to inflation.
Speaker 5: They don't really get anything out.
Speaker 3: Of that, and that's why the policy rate's sitting a
Speaker 3: little bit high compared to inflation readings and unemployment readings
Speaker 3: right now.
Speaker 4: And James, do you think that, Jim, do you think
Speaker 4: that it's fair to think that next year you're going
Speaker 4: to see some pretty significant rate cuts, not just because
Speaker 4: of the new FED chair, but because you think it
Speaker 4: could be appropriate based on potentially ongoing disinflation.
Speaker 5: I think it is going to be appropriate.
Speaker 3: And I think if they make two rate cuts this
Speaker 3: year September and December, and then they follow that up
Speaker 3: in the first half of twenty twenty six, they would
Speaker 3: start to get to the neutral rate. What the Committee
Speaker 3: thinks the neutral rate is maybe three percent or three
Speaker 3: in a quarter or somewhere in there, and that would
Speaker 3: be the exact rate that you should be at if
Speaker 3: inflation continues to decline toward two SAM and unemployment continues
Speaker 3: to be in the low four percent range.
Speaker 2: Hey, Jim, I appreciate you as always, Sair the former
Speaker 2: San Lewis FED President Jim pull that wank in on
Speaker 2: the decision. Later on the soufternoon, Jeb Amata of Newberger Berman,
Speaker 2: writing macroeconomic policy supports a self lending scenario as inflationary
Speaker 2: pressures continue to selfen, we believe the FED has more
Speaker 2: flexibility to ease policy. Jude John just now for more
Speaker 2: Chack and Mornic goodcrding how much flexibility does a shaman have?
Speaker 2: Later on the southnoon, Well, he's got a couple of
Speaker 2: his team members who are dissenting, so that that puts
Speaker 2: I think him in a little bit more of an
Speaker 2: awkward spot. But I think the FED has been in
Speaker 2: a process to normalize rates over the course of the
Speaker 2: last period of time, and it got derailed a bit by,
Speaker 2: of course, the tariff announcement, So I think there's still
Speaker 2: a movement toward toward that normalization process, which we think
Speaker 2: they're going to be back on track on. We think
Speaker 2: think there'll probably be a couple of cuts this year,
Speaker 2: not today, of course, but probably in September and later
Speaker 2: in the year, reflecting the fact that inflation, while edging
Speaker 2: up a bit, has still been under control, and the
Speaker 2: labor market, while again solid, still showing some signs of weakening.
Speaker 2: The number coming in Friday is going to be one
Speaker 2: of the lower numbers we've had over the course of
Speaker 2: the last number of months.
Speaker 4: How much just a bullishness in risk asset's predicated on
Speaker 4: this idea that there will be two rate cuts from
Speaker 4: the Federal Reserve in twenty twenty five.
Speaker 6: I don't know that broad market bullishness has got to
Speaker 6: be driven by ray cuts. I think you have within
Speaker 6: the internals if you think about small caps, So small
Speaker 6: caps I think do need to see a movement toward
Speaker 6: lower rates and rate cuts, and that historically has been
Speaker 6: sort of a catalyst for small caps to rally. But
Speaker 6: I think what we've seen over the last number of
Speaker 6: months is the hard data has held up well broadly.
Speaker 6: We've gotten some good news on taris off, of course
Speaker 6: the panicky early April announcements, and I think the markets
Speaker 6: reacted to that, and many businesses are are responding quite
Speaker 6: dynamically to this issue of tariffs in maintaining margins. We're
Speaker 6: going to see a little bit of margin pressure in
Speaker 6: this second quarter.
Speaker 7: The margins are still at pretty high.
Speaker 6: Levels, remarkably because tariff's been in place for a number
Speaker 6: of months now.
Speaker 4: So it raises the question about earlier this year, how
Speaker 4: so many people wrote off the United States as being
Speaker 4: the biggest loser from some of these tariffs, and suddenly
Speaker 4: people are coming around to this idea that maybe that
Speaker 4: was too fast. Do you think that sort of the
Speaker 4: FED is a side show to really the crux of
Speaker 4: who is going to bear the brunt of it? In
Speaker 4: our US company is showing in all of these earnings
Speaker 4: reports time and again they're doing just fine, better in
Speaker 4: fact than those in Europe.
Speaker 6: I don't think the Fed's ever a side show, but
Speaker 6: as it relates to it might be today the notion
Speaker 6: of tariffs.
Speaker 7: You have three ways again go right.
Speaker 6: You either put price increases to customers and they eat it.
Speaker 6: You put a little you know, you eat it as
Speaker 6: a company, and pressure of margins or suppliers eat it.
Speaker 6: So it probably ends up being in combination that we've
Speaker 6: seen inflation tick up a little bit. Signs of that
Speaker 6: right in the last inflation report, particularly around things like
Speaker 6: apparel and home furnishings. You see the margin pressure I referenced,
Speaker 6: and then you know, we don't really have transparency to
Speaker 6: supplier income statements per se, but you know there's probably
Speaker 6: some pressure going on there as well. And remember goods
Speaker 6: are only a portion of the inflation CPI number, it's
Speaker 6: not the full number. And like you referenced just before,
Speaker 6: our right services have been softer than expected.
Speaker 2: I think Lisa was attempting to get you to defend
Speaker 2: your rowight in European ecquencies. So let's be more direct
Speaker 2: the broadening defendquacy exact.
Speaker 7: We've moved.
Speaker 6: We've moved early in the year to a theme of
Speaker 6: broadening out. Right US certainly had you know, it was
Speaker 6: the major driver of markets over the course the last
Speaker 6: number of years, but we did think there'd be a
Speaker 6: broadening out, and that broadening out would include small caps
Speaker 6: value non US right we're very bullish on Japan.
Speaker 7: Europe.
Speaker 6: We think with fiscal stimulus, particularly out of Germany, I
Speaker 6: think is going to show improvement and the relative valuations
Speaker 6: we're attractive. So we we upgraded our developed markets outside
Speaker 6: the US, which would include of course Europe in.
Speaker 7: Japan, so we're sticking with that. We didn't.
Speaker 6: We're not underweight US because US still has so many
Speaker 6: competitive strengths, particularly the tech sector.
Speaker 7: If you look at this.
Speaker 6: Second quarter earnings S and P five hundred earnings, X
Speaker 6: tech will be flat text up seventeen percent. Yeah, but
Speaker 6: what's zup blends to up seven whatever the number.
Speaker 4: Well, what's Europe's tech? It's not weight loss drugs anymore. Artist.
Speaker 7: Europe is a more cyclical economy.
Speaker 6: So if you get higher nominal growth rate spurred by
Speaker 6: they have lower rates, you get some fiscal stimulus, the
Speaker 6: cyclical nature of Europe's economy will improve, and you have
Speaker 6: the relative value differential from evaluation to the point to me,
Speaker 6: it's not necessarily a long term, secular or strategic allocation
Speaker 6: per se. It was more of I don't want to
Speaker 6: call it a trade, but it was more intermediate term.
Speaker 4: Opportunity, which is one thing that we've seen with respect
Speaker 4: to the dollar, and sudden strengthening on the back of
Speaker 4: some of the announcement that we've heard with the EU
Speaker 4: and European Union and how the teriff agreement kind of
Speaker 4: got tied, and suddenly this realization maybe there'll be a
Speaker 4: little pain in Europe. And I just wonder if you
Speaker 4: see a cheapening in European assets at this point, is
Speaker 4: that a buying opportunity or is that a sign that
Speaker 4: this trade is over?
Speaker 6: Well, I think I think it represents a buying opportunity.
Speaker 6: You know, we're not we're not looking for opportunities that
Speaker 6: last a month or two right in the context of
Speaker 6: allocating into clients, so we're looking for something that has
Speaker 6: some legs to it.
Speaker 7: We still we think there.
Speaker 6: I mean, the amount of fiscal stimulus that's going to
Speaker 6: go into the ground in Germany is massive relative to
Speaker 6: the size of that economy, in the European economy, we
Speaker 6: haven't seen that in a long long time, So I
Speaker 6: think that does have some legs to it in terms
Speaker 6: of the opportunity. The dollar took a very significant pullback,
Speaker 6: so that's rare to see that that, you know, move
Speaker 6: that fast, that that much We still think the dollar
Speaker 6: will grind lower over time, but because US hard data
Speaker 6: is held up and rates have probably stayed up higher
Speaker 6: a little longer than expected, the dollar has come back.
Speaker 2: Are you expending any any adverse developments in bone markets
Speaker 2: in Europe that might hold back that I could story?
Speaker 5: We do?
Speaker 7: You worry a bit about that? Right?
Speaker 6: You know, if you look at the fiscal situations of
Speaker 6: different countries in Europe, While Germany has lots of room
Speaker 6: to stimulate, there are other countries in the region that
Speaker 6: don't you know, from in terms of what their local
Speaker 6: bond markets are. So we're watching that closely in terms
Speaker 6: of the spreads in whether it's you know, Italian bonds
Speaker 6: versus buns or versus treasuries.
Speaker 7: Or what have you. But I think they have enough
Speaker 7: room right now to stimulate.
Speaker 2: So how do you play the European story? At the moment,
Speaker 2: someone might look at this situation and say, okay, up
Speaker 2: on etf this tracks the eurostocks fifty. Is that the
Speaker 2: way to do it? Or is there a better way
Speaker 2: to do this?
Speaker 6: Well, you were an active manager, so we have strategies
Speaker 6: that manage you know, European stocks or what have you.
Speaker 6: So we're looking at high quality global companies that happen
Speaker 6: to be domiciled in Europe, that have flexibility. We'll get
Speaker 6: some benefit from a local economy being stimulated, but you know,
Speaker 6: we're still looking for quality companies that have global.
Speaker 2: Reach away of course Japan and Europe. Not on India.
Speaker 2: This just dropping from the President of the United States
Speaker 2: just moments ago. India will be paying a tariff of
Speaker 2: twenty five percent. This just dropping from the President just
Speaker 2: moments ago.
Speaker 4: A huge disappointment from Narentromodi, given the fact that they
Speaker 4: were looking for something closer to that nineteen percent that
Speaker 4: we saw from Thailand.
Speaker 1: It raises this issue.
Speaker 4: That we were talking about earlier. What were the main
Speaker 4: sticking points that ended up with a tariff agreement that
Speaker 4: was substantially higher than the region expected And frankly something
Speaker 4: that a lot of retailers in particular are going to
Speaker 4: have to factor in if they move their manufacturing there
Speaker 4: and produced a lot of textiles in particular.
Speaker 2: This from the President, the statement just dropping just moments ago. Remember,
Speaker 2: while India is our friend, we have over the years
Speaker 2: done relatively little business with them because their tariffs are
Speaker 2: far too high. The President goes on to say, among
Speaker 2: the highest in the world, and they have the most
Speaker 2: strenuous and obnoxious non monetary trade barriers of any country.
Speaker 2: A twenty five percent tariff for India.
Speaker 1: Yeah.
Speaker 4: He also went on to mention Russia and saying that
Speaker 4: India has always bought a vast majority of their military
Speaker 4: equipment from Russia. They also are some big energy buyers
Speaker 4: from Russia. Suddenly, this goes back to what we were
Speaker 4: talking about earlier. This is a key negotiating tool, the
Speaker 4: geopolitical positioning, what the relationship is with different countries in Russia,
Speaker 4: how much they are going to connect with China. That
Speaker 4: is all part of the tariff negotiation in a very different.
Speaker 2: Way than it but then previous years. That's the leasis
Speaker 2: on trade. This morning, Joey's got to see you. Thanks
Speaker 2: for dropping by. Thank you, Sir Joe Marta of Newberger, Burma.
Speaker 2: To extend the conversation, Haidi Krebo Redika of the Council
Speaker 2: on FIGN Relations, Heidi, welcome to the program. I just
Speaker 2: want to pick up on two lines that came from
Speaker 2: the Treasury Secretary scombson we don't want to decouple, we
Speaker 2: just need to d risk. Is that the more diplomatic
Speaker 2: way of saying, we want to decouple, but we're not
Speaker 2: in a position too until we d risk.
Speaker 1: I think you hit the nail on the head. I
Speaker 1: mean decoupling is actually I'm not so sure that that's
Speaker 1: the best final objective anyway. I mean, the de risking
Speaker 1: is really because we have vulnerabilities where we have put
Speaker 1: all our eggs in one basket, particularly when it comes
Speaker 1: to Rare Earth's Rare Earth magnets and the related technology
Speaker 1: and some critical minerals, some other products as well, But
Speaker 1: China really dominates that space. And we're trying to de
Speaker 1: risk in the US, but it's in our allies as well,
Speaker 1: but it's very, very very difficult. China has the choke
Speaker 1: hold on those particular commodities, and I think they're going
Speaker 1: to continue to use them whether or not USTR Career
Speaker 1: ever wants to talk about them ever again or not.
Speaker 4: How much Heidi, has the US gotten more leverage when
Speaker 4: it comes to getting some sort of coalition of willing
Speaker 4: coalition of trade partners to work on tamping down on
Speaker 4: the threats that some of the perceive is coming from
Speaker 4: China right now? Do you think that they are in
Speaker 4: a stronger position if there is yet another ninety day delay.
Speaker 1: So first I think as to the ninety day delay,
Speaker 1: if it if it is what happens, I think that
Speaker 1: is the very best option right now. And the coalition
Speaker 1: of the willing is, you know, to look at both
Speaker 1: the offense and defense. The offense meaning you want to
Speaker 1: be able to to make the investments in, you know,
Speaker 1: in all of the areas collectively that protect economic security
Speaker 1: from weaponization from China, the you know, the the You
Speaker 1: also want to make sure that if you're going to
Speaker 1: rattle the saber of Russian secondary tariffs or secondary sanctions,
Speaker 1: however you want to categorize them, you know that you
Speaker 1: have to be prepared if you impose those on China
Speaker 1: that they're probably going to, you know, reinstate some of
Speaker 1: those export control restrictions because that is literally their chow
Speaker 1: point right now.
Speaker 4: How much do you get a sense that that has
Speaker 4: been the crux of a lot of the discussions, particularly
Speaker 4: with the European Union, but also Japan and certainly is
Speaker 4: Southeast Asia, which has been a conduit for a lot
Speaker 4: of Chinese goods into the United States through those nations.
Speaker 4: How much has that been one of the main discussion
Speaker 4: points and part of the negotiations versus just sort of
Speaker 4: an ancillary part oh.
Speaker 1: I think critical minerals and mirrors have been key the
Speaker 1: all the other issues that that Secretary besn't mentioned on
Speaker 1: over capacity that affects everybody. You know, you have both
Speaker 1: developed and developing countries that are feeling the brunt of
Speaker 1: the the auto you know, the the you know, excuse
Speaker 1: the use of tsunami on a daylight today, but the
Speaker 1: sumant tsunami of of of Chinese auto exports, flooding, flooding
Speaker 1: markets everywhere from the EU to UH to Brazil. But
Speaker 1: I think, you know, the one caveat is that because
Speaker 1: we have proven ourselves, unfortunately to be the most trustworthy
Speaker 1: trading partner, and one of Trump's big objectives is really
Speaker 1: to upend both the trading and the security system the architecture.
Speaker 1: I think there's not a lot of trust out there,
Speaker 1: and one thing that you really need when you're dealing
Speaker 1: with the coalition and building a coalition is you need
Speaker 1: trusted partners. So we need to make sure that we
Speaker 1: don't lose that trust along the way in order to
Speaker 1: be able to implement collectively some of the things that
Speaker 1: we want to do on economic coercion, Hadi.
Speaker 2: It makes me think of Canada, supposedly a North American
Speaker 2: friend of the United States of America, left out in
Speaker 2: the cold. And I've been surprised. I know you are too,
Speaker 2: that the two key issues really that are left on
Speaker 2: the table put China to one side. It's Mexico and
Speaker 2: it's Canada, and we're not hearing enough. I don't think
Speaker 2: about what's about to happen. What do you think is
Speaker 2: about to happen?
Speaker 1: So you know, you know, President Trump has been very
Speaker 1: dismissive of any deal being reached with Canada, and we
Speaker 1: traded more than nine billion in goods and services last
Speaker 1: year with Canada. They are the country to our north.
Speaker 1: It's not a small player. There are closest partner in
Speaker 1: addressing many things, including our critical mineral challenge. We've you know,
Speaker 1: a lot of the investments that have been really for
Speaker 1: shared economic security have been together with Canada because we
Speaker 1: are so complementary in terms of what we can both
Speaker 1: extract and refine and produce together for on the critical
Speaker 1: minerals front. So I think, you know, I'm very worried
Speaker 1: about the fact that the Canada has not been more
Speaker 1: front and center in particular, Mexico has. I think it
Speaker 1: comes with a different set of issues. They're connected, But
Speaker 1: you know, I think Canada in particular is one that
Speaker 1: I am truly worried about.
Speaker 7: Honey.
Speaker 2: Do you think that's because they just haven't focused on
Speaker 2: it or do you think that's just the natural consequence
Speaker 2: of the fact that we have USMCA and we can
Speaker 2: renego shad it next year. Which one do you think
Speaker 2: it is?
Speaker 1: So, I mean, it's a good question. The you know,
Speaker 1: we do have the ability and obviously are going to
Speaker 1: renegotiate U s m c A. But at the same time,
Speaker 1: you know, the the feeling that that President Trump really
Speaker 1: likes to have the the like all the cards to play,
Speaker 1: and feels like Canada has very few cards to play
Speaker 1: because they haven't diversified. They're they're so tied to the
Speaker 1: US economy and they're really trying to figure out how
Speaker 1: quickly they can diversify their energy exports, their critical mineral exports.
Speaker 1: They have very you know, a very comprehensive political backing
Speaker 1: for d risking from the United States right now. I
Speaker 1: think that's unhealthy. But I do also think that that
Speaker 1: the that the President is going to use whatever leverage
Speaker 1: he has to strike the best deal he can. And
Speaker 1: but I do, I do, I do worry that he
Speaker 1: is probably more likely to be conducive to working with
Speaker 1: Mexico than he will be with Canada, and I just
Speaker 1: I'm worried about that.
Speaker 2: Interesting, Heidi, thank you, appreciate your time. As always, Heidi
Speaker 2: Krebi Redica of the Council on Farm Relations for the
Speaker 2: Asum of New Century Advisor is writing, the possibility of
Speaker 2: two descents from Governess Waller and Bowman is notable in
Speaker 2: terms of Fed history, But policy moves on agreement. Claudia
Speaker 2: joints us Nophimore, Claudia, welcome to the program. What kind
Speaker 2: of agreement can we make today at the Federal Reserve?
Speaker 2: What can we agree on?
Speaker 8: I think it'll be really interesting to see if the
Speaker 8: Committee is getting more comfortable having more conviction in their
Speaker 8: forecast that inflation may rise this year, but then you know,
Speaker 8: come back down. So I think a lot of this
Speaker 8: discussion on what are the risks of the persistently high inflation.
Speaker 8: We know from Governor Chris Waller that he sees those
Speaker 8: risks as very low, and that's why he's in favor
Speaker 8: of a cut, But is the committee moving in that
Speaker 8: direction of, you know, moderating those risks or is it
Speaker 8: real still? Are they still very much demanding more data
Speaker 8: to get comfortable with the idea of rate cut.
Speaker 7: Claudia, what do you think?
Speaker 4: And it matters a lot what you think because the
Speaker 4: som roll is often pointed to. It is we certainly
Speaker 4: up pointed too at the end of last year for
Speaker 4: the hundred basis points of rate cuts in the second half.
Speaker 4: Do you see the same cracks that Chris Waller as seeing.
Speaker 8: I don't see this like I can see the cracks
Speaker 8: that he's pointing to. Maybe don't draw as strong an
Speaker 8: imference as he does. I do think it's time for
Speaker 8: the Fed to really be pivoting to why are you waiting?
Speaker 8: You know, what are you looking for? And what do
Speaker 8: you need to see with inflation?
Speaker 5: Right?
Speaker 9: Like?
Speaker 8: Focus on that as opposed to the well we can wait.
Speaker 8: We saw a lot of discussion at the last press
Speaker 8: conference about well, the economy is solid, the labor market
Speaker 8: is solid, so we can wait and get more data.
Speaker 8: And I think there are sufficient signs of weakening and
Speaker 8: some of the softening the risk and the labor market.
Speaker 8: They've been with us for a while, Like, these are
Speaker 8: not new. The low hiring rate paired with the low
Speaker 8: layoff rate, this is not new, and yet we do
Speaker 8: see signs of demand so softening. We saw some of
Speaker 8: this looking at first half GDP numbers and hiring concentrate,
Speaker 8: like there are just a lot of signs that this
Speaker 8: is not a labor market that will hold up, you know, indefinitely,
Speaker 8: and so the FED needs to back off some using
Speaker 8: that as a safety blanket in terms of waiting for
Speaker 8: more data and recognize those risks are out there. We
Speaker 8: hear a lot about the risk to the inflation outlook,
Speaker 8: we should be hearing some more about the risk to
Speaker 8: the labor market outlook as well.
Speaker 4: There have been a number of people who have speculated
Speaker 4: that Fed char Ja Bowell might take an even more
Speaker 4: hawkish approach to policy, might signal that the labor economy
Speaker 4: is in a good place and that they're balanced roughly
Speaker 4: in their mandates in order to avoid accusations of political
Speaker 4: interference that he's getting vulloid by President Trump. Do you
Speaker 4: ascribe to any of those ideas or do you think
Speaker 4: that that's a bit speculative.
Speaker 8: The best way for the FED to stay out of
Speaker 8: the politics as much as it can is to put
Speaker 8: its head down part through the data be transparent, right,
Speaker 8: the data don't speak for themselves. We need to hear
Speaker 8: how is the FMC interpreting the data? What are they
Speaker 8: looking for? Like, that's the message. He needs to stick
Speaker 8: with it. They're not going to win. The FED will
Speaker 8: not win if it plays politics like that's just not
Speaker 8: the game that it is well suited for, nor should
Speaker 8: it be doing it. So I think we should just
Speaker 8: get a lot more of their thinking and just lay
Speaker 8: it out there. That's part of the transparency. That's part
Speaker 8: of the accountability that comes with the FED being the
Speaker 8: ones that make the decisions about interest rates.
Speaker 2: So Clodia, let's found the data. I just wonder if
Speaker 2: two CPI reports is enough between now in September to
Speaker 2: draw conclusions about how much tariff pastory will get and
Speaker 2: how much of that tariff past Thory is going to
Speaker 2: stick around.
Speaker 8: Two more CPI prints could give us information both on
Speaker 8: the tariff past through I mean the terifs working they
Speaker 8: were through the comment. This is going to take time
Speaker 8: and we could see you know, ever rising tariff effects
Speaker 8: as we go into the to the September meetings, So
Speaker 8: I mean they're gonna have to have a real explanation
Speaker 8: of how you would cut into a rising inflation environment.
Speaker 8: But we have also seen, you know, months of the
Speaker 8: outside of the tariffs, look at the housing services, look
Speaker 8: at the non housing services. We've had some really encouraging numbers.
Speaker 8: A few more months of that, could you know, really
Speaker 8: strengthen the case that underlying inflation set those tariffs aside,
Speaker 8: underlying inflation.
Speaker 9: Is really moving back down to target and that that
Speaker 9: is a really important piece and two more months of
Speaker 9: data in that direction can can help bolster the case
Speaker 9: for rate cut based on the inflation risks are less.
Speaker 2: Do you think they're in a position today and through
Speaker 2: the summer to keep on saying the labor market is solid,
Speaker 2: so we have the luxury of whiting. Can they write
Speaker 2: that in the statement once again this afternoon?
Speaker 8: They can write whatever they want to write in the statement.
Speaker 8: I think it would be misguided. I mean, we again,
Speaker 8: we have seen various pieces of information about the labor
Speaker 8: market that point to some weakening. And also if you
Speaker 8: are running an economy with below trend growth and that's
Speaker 8: you know, focusing on consumer spending, business, fixed investment kind
Speaker 8: of the core of it. You know, that weakness does
Speaker 8: eventually show up in the labor market and the FED
Speaker 8: itself it's baseline forecast so shows some weakening in the
Speaker 8: labor market this year. So it seems completely appropriate to
Speaker 8: at least be pointing to the risk, pointing to that outlook.
Speaker 8: I mean, that's, you know, a very reasonable thing to
Speaker 8: be pointed out, and I think they'll be a little
Speaker 8: flat footed if they just keep hanging on to the
Speaker 8: labor market is doing just fine, economic activities doing just fine,
Speaker 8: because that's really I think that's a pretty one sided
Speaker 8: reading of the.
Speaker 5: Data right now.
Speaker 2: We'll see if we get that change. It's if you
Speaker 2: have Mason time, Claudia. I appreciate it as olwise, Clodia,
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Speaker 4: Mm hmm