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Speaker 1: Publican Congressman French Hill of Arkansas Rock and a green
Speaker 1: tie with lots of dogs are on it. Joining us now. Congressman,
Speaker 1: I want to start with this question of how available
Speaker 1: congress members are going to be to implement some of
Speaker 1: these proclamations on truth social I know that you are
Speaker 1: up for leading the House Services Financial Services Committee. What
Speaker 1: would your priorities on day one?
Speaker 3: Well, first, Lisa A Marie, great to be with you. First,
Speaker 3: I think we have to coordinate with the Income and
Speaker 3: Trump administration about their regulatory priorities.
Speaker 4: That's number one.
Speaker 3: Number two, we want to roll back the most egregious
Speaker 3: burdensome part of the Biden Harris regulatory agenda, whether that's
Speaker 3: at the CFPB or the SEC or through the bank regulators,
Speaker 3: we want more clarity, more transparency, less cost in the
Speaker 3: system while preserving safety and soundness. Next, we need to
Speaker 3: pursue something that's unfinished business in this Congress, which is
Speaker 3: to create a market structure for digital assets and bring
Speaker 3: up that clarity for innovators, for coders, for venture capitalists
Speaker 3: who are engaged in the next next range of investment
Speaker 3: in the web Web three, which has got blockchain as
Speaker 3: a critical feature of it. So I'd say those are
Speaker 3: some of the top priorities among many, but those are
Speaker 3: some of the top priorities.
Speaker 5: So those would be your priorities if you were to
Speaker 5: get the gavel. I'm told that this is been very
Speaker 5: competitive to lead this committee. We're going to see this
Speaker 5: vote take place in the next twenty four to forty
Speaker 5: eight hours. How close do you think you are to
Speaker 5: leading the committee and getting the nod?
Speaker 3: Well, I've worked very hard over the last few months
Speaker 3: to talk about my vision for the committee, my ability
Speaker 3: to be ready day one to implement President Trump and
Speaker 3: House Republicans' Financial Services priorities and regulatory rollback using budget reconciliation,
Speaker 3: making community banking great again by both legislative and regulatory
Speaker 3: changes countering China. So I've talked about my experience. I
Speaker 3: was a private sector bank CEO, I've been a Denovo
Speaker 3: Bank founder and CEO. I've been a public company director,
Speaker 3: and of course worked in the both the executive branch
Speaker 3: and the legislative branch, specifically on economic and financial services policy.
Speaker 3: So I've talked about why I believe I'm the best
Speaker 3: candidate based on that management experience, that ready to go
Speaker 3: vision I have for the Committee, and the work I've
Speaker 3: done here in the House.
Speaker 5: When it comes to the first one hundred days of
Speaker 5: the Republican sweep through the House and the Senate and
Speaker 5: the White House, there's a debate now and incoming Senate
Speaker 5: Majority Leader John Fuhn is talking about but he wants
Speaker 5: to do two bills, border and energy in one and
Speaker 5: tax cuts in another. But your colleague in the House,
Speaker 5: Jason Smith, wants one large package with immigration, energy as
Speaker 5: well as those tax cuts. What do you think is
Speaker 5: the best path forward?
Speaker 3: Well, and Marie, what I think we have to do
Speaker 3: is be on the same page I think Senate leadership,
Speaker 3: led by incoming Majority Leader John Thune, our great Speaker
Speaker 3: Mike Johnson, and the incoming leadership in the Trump administration
Speaker 3: need to have their own view and have it be
Speaker 3: a consistent and combined view for both the House and Senate.
Speaker 3: I think that maximizes the leverage we have for using
Speaker 3: bucket budget reconciliation. You have to navigate the parliamentarian and
Speaker 3: the Senate. You have to make sure you have a
Speaker 3: clear plan, but most importantly, in a narrow majority in
Speaker 3: the House, we got to make sure we have republic
Speaker 3: can only votes for that. So that's why I think
Speaker 3: all three parties, the executive branch, the House, and Senate
Speaker 3: Republicans all need to be on the same page.
Speaker 1: Congressman, we talk a lot with different investment managers about
Speaker 1: the sequencing next year and how things are going to
Speaker 1: get through from President Trump's agenda. People talking that probably
Speaker 1: we're going to get tariffs first. We see a great
Speaker 1: willingness to do that. Do you understand the mechanism by
Speaker 1: which tariffs bring revenues into the country in a way
Speaker 1: that could actually offset the deficit.
Speaker 3: Well, that's a big, big step to make the assertion
Speaker 3: that tariffs are somehow going to offset a two trillion
Speaker 3: dollar death sit that is projected to be at that
Speaker 3: level for the next ten years. I think this is
Speaker 3: much more about setting long term spending reform and spending priorities,
Speaker 3: as opposed to that you're going to balance the budget
Speaker 3: through some revenue mechanism. We need to get serious about
Speaker 3: prioritizing discretionary spending, but that's only a third of the budget,
Speaker 3: and we really need a bipartisan by cameral process to
Speaker 3: make long term spending reforms in what we think can
Speaker 3: call the mandatory spending programs, which is eighty percent.
Speaker 4: Of the budget.
Speaker 3: If we do that, we'll put America's financing on a
Speaker 3: much more sustainable course, and that will be the ticket,
Speaker 3: in my view, to countering China, meeting all of our
Speaker 3: domestic priorities, and having a long term future that doesn't
Speaker 3: continue to indebt the next generation.
Speaker 5: So what do you think the end goal President Electroump
Speaker 5: has when it comes to the tariffs he's discussed on
Speaker 5: the campaign trail.
Speaker 4: Well.
Speaker 3: I think he wants to use tariffs as a major
Speaker 3: cudgel in bringing people to the negotiating table, and I
Speaker 3: believe one of the priorities will be make sure that
Speaker 3: the USMCA, which he negotiated as president and replaced the
Speaker 3: North American Free Trade Agreement, is working just as American policymakers.
Speaker 4: Believed it should.
Speaker 3: Maybe we could strengthen it, make sure that people can't
Speaker 3: take advantage.
Speaker 4: Of it inappropriately.
Speaker 3: Perhaps we could even add countries to it, which I
Speaker 3: think is an exciting prospect to use that as a
Speaker 3: real inducement to get more partners trading partners for the
Speaker 3: United States, Canada, and Mexico. And I think that would
Speaker 3: be a real ticket to bring FDI that the President
Speaker 3: talked about yesterday, foreign direct investment coming into the United States.
Speaker 6: Congressman Hill, just to be clear, then, is it your
Speaker 6: expectation that we will not see sweeping tariffs, that it
Speaker 6: is simply a negotiating employee.
Speaker 3: I think it's a principal cudgel that the President has
Speaker 3: in bringing people to the table to get better open
Speaker 3: access for American products and be treating our services and
Speaker 3: merchandise fairly and make sure that we can get into
Speaker 3: other countries on a fair and equitable basis. And over
Speaker 3: the years that's really deteriorated, and I think that's the
Speaker 3: purpose of using tariffs is to say you're not going
Speaker 3: to dump your products into our country at subsidized, cheap prices,
Speaker 3: and we want access to your markets.
Speaker 1: Congressman, before we let you go, one other big question
Speaker 1: that we keep hearing about has been how much of
Speaker 1: the Doege Committee can really push through some of the
Speaker 1: efficiencies that can help offset a number of the expenditures.
Speaker 1: How willing do you think congress members are going to
Speaker 1: be to sign off on some of the proposals to
Speaker 1: cut staff dramatically across the board.
Speaker 3: Well, look, I think the Doze exercise led by Elon
Speaker 3: Musk and Vivek Ramashwami is a good one. I think
Speaker 3: having outside voices take a look at the calcification of
Speaker 3: the barnacles that have been built up on the whole
Speaker 3: of state for decades is really important. And I think
Speaker 3: they'll have ideas that can be done by executive management
Speaker 3: on being more efficient and procurement, or policies about employment.
Speaker 3: But a lot of the tough changes will come that
Speaker 3: they'll recommend, it will have to be vetted by Congress
Speaker 3: and approved by Congress. And I can say on the
Speaker 3: House Republican side, tremendous enthusiasm to see these two successful
Speaker 3: business guys brainstorm work with the cabinet secretaries and make
Speaker 3: constructive recommendations for making the government better, more efficient, and
Speaker 3: of course less costly to the American people.
Speaker 1: Congressman, thank you so much. You are very generous with
Speaker 1: your time, and we look forward to speaking to you
Speaker 1: after that Thursday vote. Congressman French Hell on everything else.
Speaker 1: David Kelly of JP Morgan with a reaction to what
Speaker 1: we just got basically bang in line with expectations. I
Speaker 1: imagine you're going to sort of talk about how this
Speaker 1: is exactly as expected, the disinflationary trend intact.
Speaker 4: What's your take?
Speaker 7: Well, I think it's pretty interesting because when you dig
Speaker 7: into the data, what we have is rich American inflation.
Speaker 7: We've got poor world deflation. So if you actually look
Speaker 7: at the you know, where do we see inflation? In
Speaker 7: November we saw another four tenths. In airline affairs we
Speaker 7: saw another five tenths. And hotel rates we saw another
Speaker 7: six tenths. And new vehicle prices, so the stuff that
Speaker 7: the rich buy because they got money is going up.
Speaker 7: But if you look at you know, energy in recent
Speaker 7: months has come down a lot and then as Michael
Speaker 7: was pointing out to the things that have been holding
Speaker 7: inflation up, which are shelter costs and auto insurance, we're
Speaker 7: both very mild in this report. So what that tells
Speaker 7: me is if borrowing some shock, the CPI numbers will
Speaker 7: trend down next year, and you know, the next few
Speaker 7: months are going to show some high year of year numbers.
Speaker 7: But by next spring, I think we're going to be
Speaker 7: below two percent a year of year CPI. But it's
Speaker 7: really going to be.
Speaker 4: Because of a lot.
Speaker 7: Of ordinary goods and services, both by ordinary people seeing
Speaker 7: some deflation pressure. Even while things that the playthings and
Speaker 7: play activities and the rich get more expensive.
Speaker 1: We are seeing right now, to your yells, take a
Speaker 1: leg lower as people. I'll look through this and get
Speaker 1: on board with what you're talking about, David, in terms
Speaker 1: of inflation coming in.
Speaker 4: How do you.
Speaker 1: Dismiss this idea that some of the drivers of inflation
Speaker 1: I'm thinking about airplane costs, I'm thinking of cars, I'm
Speaker 1: thinking about other sectors are likely starting to see another
Speaker 1: revival of inflation. How do you discount some of those
Speaker 1: anecdotes at a time where the cycle has been so confusing.
Speaker 7: Yeah, I don't think that's likely to happen barring policies,
Speaker 7: some policy change, right. You know, what I focus on
Speaker 7: a lot is things like labor costs, and we see
Speaker 7: no evidence that American workers are getting the kinds of
Speaker 7: wage increases which would ultimately generate inflation from below. So
Speaker 7: I don't think that's what's going to happen. But I
Speaker 7: do think that when the Federal Reserve looks at it,
Speaker 7: they're going to have to look with one eye on
Speaker 7: what's really going on the economy right now and one
Speaker 7: eye of what might be coming in terms of policy
Speaker 7: going forward. So I do expect that the dot plot
Speaker 7: next week will be a little bit more cautious than
Speaker 7: the one in September. I think they'll try and take
Speaker 7: some rat cuts off the table here in the host years,
Speaker 7: even though I expect they'll cut in December. So right now,
Speaker 7: how I'd say, the inflation story is still benign. It's cooling,
Speaker 7: It's cooling very slowly, but it's still cooling. But the
Speaker 7: question is what are we going to do to that
Speaker 7: when we attack this with policy changes next year?
Speaker 6: And of course, David, the Fed is not political, but
Speaker 6: how do they avoid a potential political firestorm if they
Speaker 6: start to take cuts off the table for twenty twenty
Speaker 6: five in what will be the first year of Trump's
Speaker 6: second term as president.
Speaker 4: That seems like something.
Speaker 6: That would absolutely invoke a truth social tweet opposed. So
Speaker 6: whatever you call it on next now, well, I.
Speaker 7: Think they should try and sneak it into the Summary
Speaker 7: of Economic projections right now rather than disappoint with not
Speaker 7: cutting rates when people expect them to next year. And
Speaker 7: so I think we'll see a bit of that. I
Speaker 7: don't think, you know, I think that they won't assume,
Speaker 7: as Ja Palace point out, they don't speculate, they don't assume,
Speaker 7: they don't guess, they're I'm going to assume the impact
Speaker 7: of all of the potential immigration and tariff policies or
Speaker 7: deed fiscal stimus in twenty twenty six on inflation. They
Speaker 7: won't assume that. But I think that the individual bank
Speaker 7: presidents will probably take a rate cutter two off the
Speaker 7: table for twenty twenty five twenty twenty six. I'm put
Speaker 7: in the Summary of economic projections and see if you know,
Speaker 7: because the danger of a big political firestorm over a
Speaker 7: dot plot when people, you know, when Americans faure I'm
Speaker 7: paying that much attention to the dot plot. I don't
Speaker 7: think there's that great danger. I think it's better for
Speaker 7: them to set up expectations for less easy and going forward.
Speaker 7: Set that up now so they don't have to they
Speaker 7: don't have to defend not cutting when people expected them
Speaker 7: to in the middle of next year.
Speaker 6: In the meantime, there's just been this huge surge in
Speaker 6: optimism as all these soft surveys really follow the politics
Speaker 6: pretty clearly. There's ones from CEOs from the Business Roundtable
Speaker 6: saying that they plan to spend more on capex, they
Speaker 6: plan to hire more small business Optimism is off the
Speaker 6: charts too, David. At what point does that go from
Speaker 6: soft data to hard data. Is there a potential for
Speaker 6: some of that to act as an inflationary force.
Speaker 7: I don't think so, but I mean there is I
Speaker 7: think people are happy to have the election behind us.
Speaker 7: I think there is optimism on deregulation, but I think
Speaker 7: there is also a fair amount of concern about, you know,
Speaker 7: how far we're going to push things in terms of
Speaker 7: tariffs or in terms of deportations, and I think so.
Speaker 7: I think there's a little bit of caution still out there,
Speaker 7: and I don't think that the amount of spending that's
Speaker 7: going to go into the economy is in twenty twenty
Speaker 7: five is going to cause more inflation, particularly because we've
Speaker 7: now got a stronger dollar, which is going to reduce
Speaker 7: import prices go weak global oil prices. We've got a
Speaker 7: kind of mediocre global economies. There's nothing external that's generating inflation.
Speaker 7: I don't see wages in the US generating internal inflation.
Speaker 7: So right now, I think we're still on a you know,
Speaker 7: there's a very good track. It's it's steady growth, a
Speaker 7: little bit above trend growth, with inflation gradually easing down.
Speaker 4: At the question.
Speaker 7: You know, this is a really good economy for financial markets.
Speaker 7: The question is can we sustain it in twenty twenty five.
Speaker 5: Constrictor immigration flows though, could that be a cause for
Speaker 5: potentially higher wages and wage inflation.
Speaker 7: Oh yes, yeah. I mean if we do mass deportations
Speaker 7: of people who are currently working, whether they're legal or not,
Speaker 7: If they're currently working and we deport them. The problem
Speaker 7: is the native born working hit population in the United
Speaker 7: States is declining. So if we don't, if we slam
Speaker 7: the door on both legal and illegal immigration, then we'll
Speaker 7: have a problem. But I really don't think that's what's
Speaker 7: going to happen. I think we'll have to see how
Speaker 7: it plays out. I think we will see some greater deportation,
Speaker 7: but I think American business is very anxious that we
Speaker 7: continue to have skilled workers from around the world come
Speaker 7: to the United States and help our economy grow, and
Speaker 7: I think that probably will be sustained.
Speaker 1: David Kelly of JP Morgan, thank you as always for
Speaker 1: your insight. Joining us now is jap Brice and of
Speaker 1: Wells Fargo. Jay, your initial reaction to a hugely surprising
Speaker 1: print of exactly online what everybody was expecting.
Speaker 4: Well, so you'll use a phrase. I'm sure, Danny you're
Speaker 4: familiar with this. It's kind of a damp squib, right,
Speaker 4: there's nothing to see here.
Speaker 7: Yeah.
Speaker 4: I agree with Mike, and I think this will I
Speaker 4: think the FOMC will go ahead now and cut by
Speaker 4: twenty five basis points next week. It'd be interesting really
Speaker 4: going forward because we're not at two percent yet. You know,
Speaker 4: if you take this number and you annualize it, you're
Speaker 4: at the core number. You're still running at three and
Speaker 4: a quarter percent. That's still well above where the FOMC
Speaker 4: wants to see it now. Tomorrow we'll get you know,
Speaker 4: we'll get PPI and that will help us to true
Speaker 4: up our PCE numbers, which is the more important number
Speaker 4: for the Fed. But you know, this is this right here.
Speaker 4: There's nothing here that would say the Fed doesn't hike
Speaker 4: cut rates next week.
Speaker 1: Which especially comes after the unemployment rate ticked up just
Speaker 1: a little bit in the prior NFP that we got
Speaker 1: last Friday. I just wonder what data is really going
Speaker 1: to become incredibly important going forward, or essentially if the
Speaker 1: Fed is going to really open up a blank check
Speaker 1: to do whatever it wants next year because of the
Speaker 1: policy uncertainty on the table.
Speaker 4: Yeah. So, I mean the two big numbers are always
Speaker 4: going to continue to be, at least for the foreseeable future.
Speaker 4: It's going to be continued to be the labor market
Speaker 4: report in the CPI slash PCE sort of numbers. But
Speaker 4: they will look at the totality of the numbers. We'll
Speaker 4: get retail spending the day before the FOMC meets. You know,
Speaker 4: that's still an important number. It's not a list like
Speaker 4: those two, but those I think will be the real
Speaker 4: key numbers as we continue to move forward.
Speaker 6: First of all, Jay, Thank you for using the phrase
Speaker 6: damp squid. Not enough people say it in this country,
Speaker 6: and it's perfect for a moment like this. What do
Speaker 6: you expect then, now that you know we're missing maybe
Speaker 6: like that tiny piece of the puzzle, But we have
Speaker 6: labor figures, we have CPI. When it comes to what
Speaker 6: they project forward for twenty twenty five, what are we
Speaker 6: likely to hear from the Fed? Is this an FOMC
Speaker 6: that wants to give themselves more optionality to pause at
Speaker 6: this moment?
Speaker 4: Well, so, I don't expect Chair palan his press conference
Speaker 4: to be real specific about policy assumptions. I think we'll
Speaker 4: be interesting is when you look at the dot plot
Speaker 4: for twenty twenty five, I think that you're probably going
Speaker 4: to see a lot of dispersion there depending on what
Speaker 4: policy assumptions different FOMC members are making. So you know,
Speaker 4: if you're the president of a FED somewhere and you
Speaker 4: think there's going to be lots of tariffs next year,
Speaker 4: you're probably going to have a higher dot than otherwise.
Speaker 4: And so we won't know what those assumptions are. I'm
Speaker 4: going to assume that during the FOMC meeting there will
Speaker 4: be a robust discussion about that, but we're not going
Speaker 4: to actually know what they discuss until five years from
Speaker 4: now when the actual transcripts come out, right.
Speaker 5: But putting this all together, what's your base case for
Speaker 5: twenty twenty five? It feels like with this inflation data,
Speaker 5: basically Defense given this green light to cut next week,
Speaker 5: but what about for twenty twenty five?
Speaker 4: So what we're assuming is what we've baked into our
Speaker 4: forecast is not the whole ten percent across the board
Speaker 4: tariff sixty percent on China. We've kind of taken half
Speaker 4: of that and we've said, Okay, we think it's probably
Speaker 4: going to come maybe in the second half of the year.
Speaker 4: So our base case is in the second half of
Speaker 4: next year you see a big slowdown in the US
Speaker 4: economy because of these tariffs, draining purchasing power and then
Speaker 4: inflation coming up. And so you know, we have the
Speaker 4: Fed stopping in the summer of next year with their rad.
Speaker 1: Cuts, and that means that the terminal rate.
Speaker 4: Is three and a half to four, somewhere in that
Speaker 4: sort of vicinity.
Speaker 1: So it'll be interesting to see whether they actually do
Speaker 1: revise their statement of economic projections next week. Jae Brice
Speaker 1: and Falls Fargot, Thank you. Wonderful to see you in person.
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