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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Patiently waiting is Francis Donald really can't say enough about

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Speaker 2: her contribution to the measurement of American GDP.

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Speaker 3: The first thing I did this morning.

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Speaker 2: Francis, after the shock of the airplane crash, is I

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Speaker 2: went to the Francis Donald page, which is Atlanta GDP now,

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Speaker 2: and it's there at three point seven percent, etc. And

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Speaker 2: I just say to myself, it doesn't feel like a

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Speaker 2: three point seven percent economy. This is your wheelhouse. What

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Speaker 2: kind of GDP growth are we in now and into

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Speaker 2: the next two three quarters.

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Speaker 4: So maybe there's two questions there. There's what's our forecasted

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Speaker 4: number and then what is actually the trend growth underlying?

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Speaker 4: And we are still very much in heavy distortions from tariffs.

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Speaker 4: This is the number one issue facing all forecasters is

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Speaker 4: that we've had massive front loading of activity into Q

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Speaker 4: one and you might remember that created distortions that led

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Speaker 4: us to the downside, and now we have some offsets

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Speaker 4: coming through from that, and yet underlying the surface, we're

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Speaker 4: probably growing around one and a half to two percent.

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Speaker 4: This is not a recession type of environment. It's a

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Speaker 4: sub trend type of environment that'll be enough to inch

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Speaker 4: that unemployment rate a little bit higher. But I've said

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Speaker 4: this on the show before, Tom there are two Americas

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Speaker 4: happening right now. Two American economies. There's the economy for

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Speaker 4: the wealthy Americans and then there's one for low and

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Speaker 4: middle income Americans. They're very different.

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Speaker 2: Paul's looked at me, said, tell you're rude. Maybe I

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Speaker 2: should properly introduce you, ladies and gentlemen. Francis Donald, she

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Speaker 2: is chief economist at RBC.

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Speaker 3: Was that okay, Paul? That was good? Thank you.

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Speaker 5: We saved ourselves. CPI yesterday came in a little bit benign.

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Speaker 5: I think it was the term I heard most used yesterday.

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Speaker 5: What are you looking for at the producer level today

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Speaker 5: in terms of inflation?

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Speaker 4: Well, thank you for asking that question, because yesterday was

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Speaker 4: all about why isn't tariffs in the CPI data yet?

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Speaker 4: We were not expecting the tariffs to be in the

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Speaker 4: CPI data yet? Might remember back in twenty eighteen with

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Speaker 4: washing machines, took three to five months before we saw

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Speaker 4: it show up. We talked a little bit about that

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Speaker 4: front loading lots of inventory builds over the past few months.

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Speaker 4: Those inventories have to be depleted before we start seeing

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Speaker 4: that show up in CPI data. But the question is,

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Speaker 4: and I'm sure you've asked it to many guests, how

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Speaker 4: much of this is going to get transferred from producers

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Speaker 4: and importers into consumers. And those metrics are very different.

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Speaker 4: So CPI is one measurement of price pressures that will

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Speaker 4: grow in the US economy, but we have to use

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Speaker 4: a dashboard, We have to use a basket to understand

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Speaker 4: which sectors are being most impacted and which consumers. Again,

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Speaker 4: consumers very differently operating right now, are going to actually

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Speaker 4: see those pressures come through?

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Speaker 5: When then, do you think we'll see it? If we'll

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Speaker 5: see it in some of the numbers.

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Speaker 4: In terms of inflation, we get a couple more months,

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Speaker 4: so later this summer we might see that flow through.

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Speaker 4: But here's the thing. When I look at inflation, yes,

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Speaker 4: we care about tariffs. Tariffs could be as much as

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Speaker 4: half a percentage point on top of CPI. But I'm

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Speaker 4: worried about inflation anyways. I'm not worried about growth in

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Speaker 4: twenty twenty five. I'm concerned about some of the structural

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Speaker 4: pressures that will mechanically push up inflation. I'm concerned that

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Speaker 4: that oeer that's shelter based on some of our models,

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Speaker 4: is going to stop falling. We had goods deflation and disinflation.

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Speaker 4: We're not going to get that anymore. So there's upward

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Speaker 4: pressure on inflation heading into the later part of this year.

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Speaker 4: Tariffs or nor tariffs, and as we talked about before

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Speaker 4: on this show, I'm worried about some of these bigger

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Speaker 4: structural issues in play. A very tight labor market that's

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Speaker 4: not because the economy is booming, but because America needs workers,

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Speaker 4: not jobs, very big government spending inside this pipeline in play,

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Speaker 4: and that wealthy consumer. So I get to high twos

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Speaker 4: even without and play. And if we just focus on tariffs,

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Speaker 4: we're going to miss some of the story underneath.

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Speaker 5: What's that do to economic growth for the US here

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Speaker 5: going forward? I mean that it seems like the recession

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Speaker 5: talk is off the table. I haven't heard that too

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Speaker 5: much in the last month or so, but still should

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Speaker 5: we be concerned about slowing economic growth in the US.

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Speaker 4: Well, maybe this is blasphemy for an economist, but I'm

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Speaker 4: totally opposed to the recession no recession call being the

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Speaker 4: defining element of your outlook, because you could have negative

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Speaker 4: point one GDP and it be a recession and plus

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Speaker 4: point one and it not be. The truth is this

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Speaker 4: is not a great environment for most companies and households. So, yes,

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Speaker 4: you'll have a job, you don't have to worry about

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Speaker 4: losing your job. You've got to worry about your grocery bill.

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Speaker 4: You got to worry about rent prices that are coming up.

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Speaker 4: Those savings are not as high as they were before.

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Speaker 4: And even though there is wage growth, it's decelerating. So

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Speaker 4: this is a muddle through type of environment, and that's

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Speaker 4: going to be more problematic then. Actually, sometimes I would

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Speaker 4: prefer a short, quick reset recession and a reacceleration. This

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Speaker 4: is not what this is.

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Speaker 3: Francis Donald with us with RBC, and we will continue.

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Speaker 2: We welcome all of you. On a very sober Thursday.

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Speaker 2: A horrific plane crash in India. We just heard from

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Speaker 2: Danny Lee and Bangkok. It seems to be now no

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Speaker 2: survivors will have to get more details on that, but

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Speaker 2: we'll have more coverage. John Tucker leading our coverage here

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Speaker 2: out on YouTube and Bloomberg Podcasts, and of course Lisa

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Speaker 2: Matteo working on this as well, and Michael Barr always

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Speaker 2: on the news. We welcome you on your commute across

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Speaker 2: the nation. We welcome you on YouTube. Subscribe to Bloomberg

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Speaker 2: podcast growing each day. In Francis Donald's Canada, Good Morning,

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Speaker 2: Serious XM Channel one T one that older technology hugely popular. Francis,

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Speaker 2: I want to synthesize this Thursday away from this terrible

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Speaker 2: plane crash. The fact is the dollar is on the precipice. Now,

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Speaker 2: I don't want to overplay it with dollar gloom, but

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Speaker 2: the fact is I'm looking at the Bloomberg launch pad

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Speaker 2: and there's ten there. The Wall Street Journal out bed

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Speaker 2: this morning on the trade sorry that Anne Marie Horden

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Speaker 2: covered in London. This gets to the larger problem with

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Speaker 2: mister Trump's teariff strategy strategy, that is, he doesn't have

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Speaker 2: one calculate the uncertainties of all these things that are

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Speaker 2: bouncing off of into the math and the certitude of

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Speaker 2: our economy.

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Speaker 3: Can you get.

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Speaker 4: There well, there's all sorts of measures of uncertainty, and

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Speaker 4: no surprising, whatever measure you're using is at an all

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Speaker 4: time high. And what that means for forecasters but also

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Speaker 4: for businesses. My clients, the CEOs that I.

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Speaker 3: Talk do you hear from them?

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Speaker 4: What I hear is we have to risk manage around

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Speaker 4: downside and upside. We can't have one scenario that we

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Speaker 4: base our business operations on. We have to plan and

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Speaker 4: prepare for a wide range. But this uncertainty, it is

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Speaker 4: not actual policy that is problematic here, although yes, there

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Speaker 4: are some elements of it that are problematic. It's what

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Speaker 4: is the game that we're playing. We cannot write the

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Speaker 4: playbook until we know what the game is itself. And

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Speaker 4: so forecasters and businesses are actually operating with much ward

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Speaker 4: wider set of scenarios available to them.

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Speaker 2: So you go into two forty five Ulette Avenue.

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Speaker 3: I'm pronouncing that correctly.

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Speaker 4: I'm not.

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Speaker 3: Windsor, Ontario.

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Speaker 4: Windsor Ontario.

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Speaker 2: Yeah, I think it's it's sort of like edge of French,

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Speaker 2: but it's in Ontario.

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Speaker 3: I don't know.

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Speaker 2: I'm lost, RBC branch in let in Windsor, Ontario. What's

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Speaker 2: the confidence there to invest I.

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Speaker 3: Don't see it.

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Speaker 6: Well.

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Speaker 4: Interesting, you chose windsor Windsor has one of the highest

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Speaker 4: unemployment rates in the entire country candidates at unemployment rate,

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Speaker 4: but then if you were to head to the beautiful

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Speaker 4: island of Victoria, BC, you would find that the unemployment

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Speaker 4: rate is three percent. What is this? This is what

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Speaker 4: tariffs do and it's happening in America as well, which

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Speaker 4: is that you're going to have sectors within the global economy,

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Speaker 4: the US economy, the Canadian economy that are operating in

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Speaker 4: very real I'll go back on my recession. No recession common,

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Speaker 4: very real recessions. So this is going to make policymakers'

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Speaker 4: lives very, very difficult because you can't ease rates for

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Speaker 4: one place that's at eleven percent unemployment and high rates

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Speaker 4: for another place where it's at three. So what we're

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Speaker 4: trying to look for in a lot of the economic

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Speaker 4: data right now in the United States and elsewhere, is

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Speaker 4: do we see any evidence that there's bleeding outside of

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Speaker 4: those specific trade sectors into the broader economy. We don't

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Speaker 4: see that now, and we don't anticipate that that's going

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Speaker 4: to happen.

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Speaker 7: Interesting, but it could.

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Speaker 4: So when we look at a lot of this data,

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Speaker 4: from inflation to growth to jobs. There's two types of diagnosis.

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Speaker 4: There is this sort of toxic cancer contained or has

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Speaker 4: it mustasticized. That's going to be the defining element between

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Speaker 4: does the United States end up in a much worse

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Speaker 4: situation this year or can it be relatively well contained? Transitory, temporary,

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Speaker 4: all those words we're not supposed to use.

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Speaker 3: Francis, Thank you so much.

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Speaker 2: French stunted with US chief economists at RBC to gets

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Speaker 2: started in the morning here in the American economy makers

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Speaker 2: lots of economic data, that important CPI data. Yesterday it

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Speaker 2: was a PPI this morning the business a set of

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Speaker 2: data onto retail sales.

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Speaker 3: I think is tuesday.

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Speaker 2: I'm guessing, yeah, Tuesday. Francis is looking at me, dummy.

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Speaker 2: You should know that. Thank you Francis for that.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 3: This is an honor.

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Speaker 2: My book of the Summer Within the Game is Kenneth

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Speaker 2: Rogoff of Harvard University, our dollar, your problem. And what's

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Speaker 2: so great is the academics of rogue off is so

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Speaker 2: much the same but at the same time different from

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Speaker 2: the prodigious abilities of Richard Claret of Columbia University at PIMCO,

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Speaker 2: the former vice chairman of the FED.

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Speaker 3: We're honored that he could join us here this morning.

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Speaker 3: The dollar is weaker.

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Speaker 2: Our audience just simply sees euro one sixteen into one

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Speaker 2: forty three. There's a crisis of confidence. The Wall Street

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Speaker 2: Journal in an editorial today, skewers, that's the right word, folks.

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Speaker 3: Skewer is the.

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Speaker 2: President on his trade policy. If it's our dollar, your problem,

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Speaker 2: whose problem is it?

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Speaker 3: This morning? To see the dollar at the precipice.

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Speaker 7: I think there are a couple of things here.

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Speaker 8: First in agreement, Canada is remarkable and it's a fantastic

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Speaker 8: book that the dollar is a reserve currency. People hold

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Speaker 8: it because it's a store of value. It's useful in

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Speaker 8: trade and financial markets. It delivers privileges to the US

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Speaker 8: lower borrowing costs. Me more importantly, the ability to borrow

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Speaker 8: a lot more. Tom, I do think we want to

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Speaker 8: put this in context. I don't see and I don't

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Speaker 8: think Ken does based on what he's written, I don't

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Speaker 8: see the dollar losing that status in the next say,

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Speaker 8: five or ten years, simply because there's no viable alternative.

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Speaker 8: But that doesn't mean the dollar is ever higher and

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Speaker 8: ever stronger. So even a dominant reserve currency can have

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Speaker 8: higher and lower bye and we may be in a

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Speaker 8: period in which the dollar is trending down, not just

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Speaker 8: against the year, a lot of currencies.

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Speaker 2: When you were at Columbia, did you work with Hyman Minsky?

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Speaker 2: Was he before you?

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Speaker 7: Yes, Hymon Minsky was before he was before you.

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Speaker 8: You were the im Mondel Mendel, and I was with

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Speaker 8: Professor Mundel, but not Mince.

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Speaker 3: I know this is this is sacrilege.

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Speaker 2: But how does Richard Clarida link every central bank wants

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Speaker 2: gold into our dollar confidence? And frankly over to a

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Speaker 2: June eighteenth meeting, Claire, I've never said this Clarida on gold.

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Speaker 7: Well, let me say this.

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Speaker 8: This is I'm following this pretty closely because the purchases

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Speaker 8: in the official data, the purchases of gold are large,

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Speaker 8: and they've been they've been picking up. I'll share an

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Speaker 8: anecdote with you. I was in Asia ten years ago

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Speaker 8: seeing a very sophisticated official investor, official institution.

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Speaker 7: And we were talking about gold even then.

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Speaker 8: This is like twenty fourteen, twenty fifteen, and that was

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Speaker 8: in the context of Kiwi Infinity. And I said to him, well,

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Speaker 8: why invest in gold. You can buy an inflation indexed security.

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Speaker 8: It gives you a hashid against inflation. And he looked

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Speaker 8: at me and he said, gold doesn't default. And so

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Speaker 8: I don't think the US is going to default either,

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Speaker 8: but certainly we have seen that allocation. And again talk

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Speaker 8: about back to the future. I mean central banks have

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Speaker 8: been holding gold as a reserve for hundreds of years,

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Speaker 8: and so we're sort of getting back into that mindset.

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Speaker 2: So, Paul, if gold doesn't default like a gold wedding

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Speaker 2: ring and a divorce, is that?

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Speaker 3: Do you want to comment? No, thank you Rich.

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Speaker 5: As a professor of economics at Club, you when you

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Speaker 5: have your class or your module on teriffs, how do

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Speaker 5: you present tariffs to your students?

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Speaker 3: Great question.

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Speaker 8: Well, in the throughout most of my career, which dates

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Speaker 8: back to the nineteen eighties, tariffs have really not been

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Speaker 8: front and center. So I have I actually typically did

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Speaker 8: not teach on tariffs. I have I have brushed off

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Speaker 8: on if I were to teach it, how I would

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Speaker 8: teach it. And what's interesting if you look at MPER

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Speaker 8: working papers, there's probably been a half dozen working papers

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Speaker 8: in the last six months on tariffs, and in the

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Speaker 8: previous forty years there were.

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Speaker 7: One or two zero.

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Speaker 8: So it isn't interest to picking up. But the short

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Speaker 8: answer is, tariffs of the scale and scope that we're

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Speaker 8: talking about now in the US are something we haven't

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Speaker 8: seen in decades, and they have implications for the economy

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Speaker 8: across the board. They generate revenue for the government, they

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Speaker 8: divert some trade into the US, they onshore some investment,

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Speaker 8: and so to actually take tariffs at the level that

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Speaker 8: we're seeing now, say ten percent, seriously, is a pretty

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Speaker 8: complex modeling exercise with a lot of moving parts.

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Speaker 7: So I'll leave it at that.

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Speaker 5: So as we think about it here, we haven't seen

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Speaker 5: rising inflation. No, we haven't seen materially slower economic growth.

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Speaker 5: We see a lot of the surveys at the University

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Speaker 5: of Michigan and so on. Yeah, cite some concerns, but

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Speaker 5: we haven't seen in the hard numbers. How do you

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Speaker 5: think about the hard data versus the soft data, which

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Speaker 5: is something that we've now been introduced.

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Speaker 8: To great question, and let me just say up front,

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Speaker 8: you have to acknowledge that in the last four prints,

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Speaker 8: the January print was more ugly, but February through May

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Speaker 8: in the CPI have been coming in much better than expected.

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Speaker 8: A lot of folks, including me, thought we would begin

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Speaker 8: to see some of the tariff show up in the

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Speaker 8: CPI report we got yesterday because it's for the month

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Speaker 8: of May, and in the month of May, the government

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Speaker 8: was collecting a lot of tariff revenue and it did not.

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Speaker 8: And as you mentioned, the economy seems to be holding

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Speaker 8: in at roughly trend growth, the labor market holding in

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Speaker 8: so so far so good. What it does tell me is,

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Speaker 8: at minimum, we're not seeing in the data that US

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Speaker 8: companies are using the tariffs as a reason or excuse

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Speaker 8: to raise prices preemptively. We may see that once tariff's

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Speaker 8: going to go to in fact more broadly, but yeah,

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Speaker 8: so far, I think you have to acknowledge the US

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Speaker 8: economies holding up quite well.

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Speaker 2: The former vice Chairman of the Federal Reserve System, and

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Speaker 2: a good conversation here with Richard Clarida this morning, always

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Speaker 2: with Columbia University, and of course Pimco as well. Trotting

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Speaker 2: out yesterday, I'll give the ft credit. I can't remember

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Speaker 2: quite where I saw it is the John Edwards chart

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Speaker 2: of two Americas. It is breathtaking on consumption seventy sixty

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Speaker 2: nine percent of GDP whatever fifty x percent I believe

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Speaker 2: is that forer de style. It is shocking what upper

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Speaker 2: quintile is. It is shocking what the bottom third is

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Speaker 2: not consuming in America? Does Clarita economics work in the

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Speaker 2: polarity of the American consumer?

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Speaker 3: Are we so bipolar?

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Speaker 2: By Barbell if you will, Yeah, the normal fed talk

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Speaker 2: doesn't work.

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Speaker 7: Tom, It does work, but you have to recognize that.

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Speaker 8: As I think I've said on this show before, I

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Speaker 8: think the simplest way to think about it is that

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Speaker 8: two thirds of Americans live in a home that they own,

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Speaker 8: and around that percentage directly or indirectly owned stock. So

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Speaker 8: if you own your house and you own stock, you've

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Speaker 8: had a great run for five, you know, fifteen, twenty

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Speaker 8: thirty years. But if you don't own your own house,

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Speaker 8: you don't own stock, you've been falling further and further behind.

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Speaker 8: And that's at least a third, maybe more of the

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Speaker 8: country that is a factor in terms of the nuts

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Speaker 8: and bolts of how the economy functions, how monetary policy

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Speaker 8: is transmitted. So yes, Claria economics works in this world,

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Speaker 8: but it only works if you acknowledge the divergence in

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Speaker 8: those two parts of the economy.

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Speaker 5: Rich, if I'm your Federal Reserve, I'm taking this summer off.

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Speaker 5: I'm going to the beach. I'm not doing anything because

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Speaker 5: that data doesn't mean I have to do anything. Is

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Speaker 5: that a fair strategy here?

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Speaker 8: Well, I certainly don't think they're going to do anything

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Speaker 8: next week.

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Speaker 3: Come I'm going to talk it up.

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Speaker 8: The FED sides comets do anything next week, but there

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Speaker 8: will be a press conference, and I think the Chair

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Speaker 8: may use that as an opportunity to signal the direction

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Speaker 8: of trouble. You know, one thing I've picked up on

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Speaker 8: in the last week or so is FED speak not

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Speaker 8: only from Chris Waller, but also President Bostic and President Goulesby.

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Speaker 8: That does indicate at least to me that the Committee

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Speaker 8: may be open to what some have called a good

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Speaker 8: news rate cut. So I've been in this camp, which

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Speaker 8: is the Fed's only going to cut rates if something

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Speaker 8: breaks the unemployment rate goes up. GDP contracts again simply

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Speaker 8: because it looked like with the initial tariff announcement the

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Speaker 8: inflation hit would be so substantial. But given the better

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Speaker 8: inflation data, and as I would point out, basically Clarida

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Speaker 8: Galley Gertler monetary policy rule right now would have the

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Speaker 8: FED cutting rate already, And so I think there is

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Speaker 8: a case for them to begin to consider that. But

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Speaker 8: I think the inclination probably will be to take the

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Speaker 8: summer off and the time we got left.

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Speaker 2: And I won't turn this into a Columbia dissertation, but

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Speaker 2: let's go nineteen fifty one McChesney Martin. We basically yanked

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Speaker 2: the Federal Reserve.

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Speaker 3: System away from the Department of Treasury.

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Speaker 2: We have a president who wants to yank it back.

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Speaker 2: What stops President Trump from putting in FED leadership? Fed

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Speaker 2: governors that understand the buck stops at the Treasury Building

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Speaker 2: and not at the Eagles Building.

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Speaker 8: Great question, one that I thought about and lived through

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Speaker 8: to some extent. I'll make a couple points.

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Speaker 3: One.

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Speaker 8: The President does nominate FED officials, but to be confirmed

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Speaker 8: requires a Senate confirmation process. The Senate is not a

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Speaker 8: rubber stamp for FED nominees, and so I think that's

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Speaker 8: important also to candid I think the market will have

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Speaker 8: a say, and particularly for for FED chair and I

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Speaker 8: don't think this will happen. But where the president to

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Speaker 8: nominate someone who the markets believe would not be committed

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Speaker 8: to price stability and would not be a primarily independent

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Speaker 8: I think you'd see stocks down, rates out.

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Speaker 7: Okay, but now I want to have I got cut.

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Speaker 2: I gotta cut you off. This is too important to clari.

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Speaker 2: Are you going to get a twenty five basis point,

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Speaker 2: pop Y Honor if we end up with a Trump chairman,

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Speaker 2: or are you talking about a stick where we get

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Speaker 2: out over five percent? Rogue offf even hinted towards six

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Speaker 2: percent given selected events.

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Speaker 8: Not a twenty five basis point, you, Honor, A tangible

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Speaker 8: a lift, yes, yes, and weaker.

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Speaker 7: Risk assets stocks, credit spreads, higher.

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Speaker 8: Yields, higher get I just don't think it would stick

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Speaker 8: because I wouldn't want to be a nominee coming into

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Speaker 8: my hearing with that market reaction to my to my

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Speaker 8: The other thing, I'll say, tomm And it's a little

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Speaker 8: bit wonkish, but look I'm on this show so I

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Speaker 8: can be a little bit of a warm is Congress

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Speaker 8: occasionally Congress knows what it's doing. And back in the

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Speaker 8: thirties when the Federal Reserve Act was modified and amended,

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Speaker 8: it was amended to disperse the authority for raising and

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Speaker 8: lowering rates away from the chair towards a committee. So

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Speaker 8: it's the green span FED, it's the paler Fat, it's

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Speaker 8: the Bernanke Fed. But by statute, rate decisions are made

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Speaker 8: by a majority vote of a committee. Five of the

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Speaker 8: twelve members of that committee are reserve bank presidents who

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Speaker 8: are not appointed by the White House. Seven of them

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Speaker 8: are obviously upper fullstering governors. And so I do think

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Speaker 8: that the system has an intelligent design, and so I'm

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Speaker 8: not that concerned about that outcome.

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Speaker 7: But if it were to happen, I think Ken is right.

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Speaker 2: If Catherine Man of Brandai's holding court at the Bank

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Speaker 2: of England, does the Bank of England get it right?

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Speaker 2: In a more fractured and spread out debate versus green

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Speaker 2: Spanning and certitude in Washington.

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Speaker 8: A various stute comment because not all central banks have

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Speaker 8: similar cultures. In fact, I remember a conversation with a

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Speaker 8: senior back of England officials said that he actually viewed

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Speaker 8: it as a as a feature, not a bug that

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Speaker 8: in their system the governor occasionally is on the losing

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Speaker 8: side of an interest rate vote. The descent, the culture

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Speaker 8: of descent there is much more accepted than at the FED.

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Speaker 7: There are descents at the FED.

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Speaker 8: We've actually had some from some governors recently, but that

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Speaker 8: is a difference.

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Speaker 3: Yeah, brilliant Richard Claire to thank you so much.

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Speaker 2: Thanks for making jimco and of course always with Colombia economics.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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00:21:35,840 --> 00:21:39,160
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

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Speaker 2: I don't think Richard Clarita would be offended the giant

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Speaker 2: of DSGE at Columbia Academics if I said this is

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Speaker 2: the most important conversation of the day for Global Wall Street.

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Speaker 2: Very difficult morning here with the plane crash, and Ian

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00:22:04,440 --> 00:22:07,600
Speaker 2: Lincoln joins us with the Bank of Montreal. They are

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Speaker 2: the definitive Canadian bank, essentially the Bank of England, the

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Speaker 2: Central Bank of Canada. Going back one hundred and fifty

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Speaker 2: one hundred and seventy years Demo capital Markets. Ian Lincoln,

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Speaker 2: you have a shockingly dense eight paragraphs this morning, unfixed income.

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Speaker 2: Do you reaffirm here with a cacophony of the moment

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Speaker 2: a disinflationary vector? Can we drive the ten year yield

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Speaker 2: under four percent? Price up, yield down?

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Speaker 6: I actually certainly think at this stage lower rates below

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Speaker 6: four percent tenure yields will emerge as the path of

440
00:22:45,240 --> 00:22:48,760
Speaker 6: lease resistance. Look at CPI yesterday, and as long as

441
00:22:48,840 --> 00:22:53,120
Speaker 6: we don't see a material regime shift higher in realized

442
00:22:53,160 --> 00:22:55,600
Speaker 6: inflation over the summer months, then by the end of

443
00:22:55,600 --> 00:22:58,960
Speaker 6: the year we're going to see that disinflationary trend re

444
00:22:59,119 --> 00:23:02,440
Speaker 6: established and presumably the FED back on the path of normalization.

445
00:23:02,760 --> 00:23:05,639
Speaker 2: My question of the morning, including to Professor Clareda. Let

446
00:23:05,680 --> 00:23:08,840
Speaker 2: me go to professor Lingen. How does a week dollar

447
00:23:09,040 --> 00:23:14,119
Speaker 2: fold into this? I have BBDXY folks, the Bloomberg Dollar Index,

448
00:23:14,160 --> 00:23:17,880
Speaker 2: which is wicked good math. Good morning ninety nine FM

449
00:23:17,960 --> 00:23:18,560
Speaker 2: in Boston.

450
00:23:18,880 --> 00:23:21,520
Speaker 3: It's a wicked good series. Em Lincoln and I have

451
00:23:21,720 --> 00:23:22,560
Speaker 3: weak dollar.

452
00:23:23,560 --> 00:23:27,720
Speaker 2: But does that correlate with the Lincoln call of lower yields?

453
00:23:29,400 --> 00:23:34,040
Speaker 6: Well, I'm not redicating my call on a return of

454
00:23:34,200 --> 00:23:36,920
Speaker 6: the dollar to prior strength. But if we do take

455
00:23:36,960 --> 00:23:40,160
Speaker 6: another let's say, three five percent lower in the value

456
00:23:40,200 --> 00:23:42,120
Speaker 6: of the dollar, that means we're going to be importing

457
00:23:42,200 --> 00:23:45,359
Speaker 6: more inflation, and so that means the core inflation series

458
00:23:45,440 --> 00:23:48,560
Speaker 6: could be stickier than we're expecting. So it's a challenge

459
00:23:48,800 --> 00:23:50,920
Speaker 6: to lower rates, but I don't think that it will

460
00:23:51,000 --> 00:23:54,639
Speaker 6: definitively drive that story given the trajectory of inflation at

461
00:23:54,680 --> 00:23:55,000
Speaker 6: the moment.

462
00:23:55,840 --> 00:23:58,920
Speaker 5: Ian what's your view of the consumer? Heres Again, seventy

463
00:23:58,920 --> 00:24:01,840
Speaker 5: percent of the US ECON comes from the consumer as

464
00:24:01,880 --> 00:24:04,520
Speaker 5: opposed to manufacturing. What's your view of the consumer?

465
00:24:04,560 --> 00:24:04,679
Speaker 3: Here?

466
00:24:06,560 --> 00:24:10,080
Speaker 6: At the moment, the consumer appears to be on surprisingly

467
00:24:10,200 --> 00:24:13,919
Speaker 6: strong footing. We know what happened during the pandemic. Anyone

468
00:24:14,000 --> 00:24:17,000
Speaker 6: who could locked in a super low thirty year mortgage

469
00:24:17,080 --> 00:24:20,680
Speaker 6: rate a fair amount, and so there was a fair

470
00:24:20,680 --> 00:24:24,520
Speaker 6: amount of capacity to consume. Now we're up against a

471
00:24:24,760 --> 00:24:29,560
Speaker 6: rare moment for consumers where the dollar amount spent on

472
00:24:29,800 --> 00:24:33,040
Speaker 6: mortgage interest is equal to the dollar amount spent on

473
00:24:33,240 --> 00:24:35,760
Speaker 6: non mortgage interest. So that means that a lot of

474
00:24:35,880 --> 00:24:40,280
Speaker 6: net borrowers are starting to feel the pinch of higher rates.

475
00:24:40,320 --> 00:24:42,399
Speaker 6: In a way that we haven't seen in history, and

476
00:24:42,520 --> 00:24:44,399
Speaker 6: that's a key index that we've been watching.

477
00:24:44,680 --> 00:24:47,159
Speaker 5: If rates are higher, what happens. I mean, again, a

478
00:24:47,200 --> 00:24:48,679
Speaker 5: lot of folks have a lot of credit card debt,

479
00:24:48,720 --> 00:24:50,360
Speaker 5: they have a lot of mortgage debt.

480
00:24:50,760 --> 00:24:53,880
Speaker 6: I think that that's precisely the issue. Rates are higher.

481
00:24:53,960 --> 00:24:57,000
Speaker 6: People need to make choices in terms of what they consume.

482
00:24:57,400 --> 00:25:00,920
Speaker 6: If we find ourselves faced with the another leg higher

483
00:25:01,040 --> 00:25:05,040
Speaker 6: of inflation, that means in real terms that the consumer

484
00:25:05,240 --> 00:25:07,560
Speaker 6: is going to be able to contribute less to growth

485
00:25:08,000 --> 00:25:10,520
Speaker 6: still for the same nominal amount of growth. If prices

486
00:25:10,520 --> 00:25:13,800
Speaker 6: are higher, you have negative or a drag on real growth.

487
00:25:14,080 --> 00:25:15,400
Speaker 6: Cloth that's going to be the biggest risk.

488
00:25:15,840 --> 00:25:17,840
Speaker 2: And to close the loop here, I've got twenty seconds

489
00:25:17,880 --> 00:25:21,200
Speaker 2: to get into important economic data. So you're just suggesting

490
00:25:21,280 --> 00:25:24,159
Speaker 2: a lower real yield. I mean, the basic idea is

491
00:25:24,720 --> 00:25:27,679
Speaker 2: the fear of a higher real yield is unfounded.

492
00:25:28,640 --> 00:25:31,359
Speaker 6: Sustainably. I think that that's right. I think real rates

493
00:25:31,400 --> 00:25:33,960
Speaker 6: are going to move lower between now in the end

494
00:25:34,000 --> 00:25:37,000
Speaker 6: of the year, certainly in twenty twenty six and beyond.

495
00:25:36,960 --> 00:25:41,200
Speaker 2: And across the board. I have a disinflationary and a

496
00:25:41,400 --> 00:25:46,520
Speaker 2: worse labor market tendency in this thirty this Thursday data.

497
00:25:46,920 --> 00:25:48,359
Speaker 3: Does it shift the FED?

498
00:25:50,600 --> 00:25:52,800
Speaker 6: I think that what it does is it keeps the

499
00:25:52,920 --> 00:25:56,840
Speaker 6: FED from signaling fewer cuts in twenty twenty five. If

500
00:25:56,880 --> 00:26:00,160
Speaker 6: there was a case to only suggest it between tenty

501
00:26:00,200 --> 00:26:02,879
Speaker 6: five basis points worth of great cuts this year, I

502
00:26:02,960 --> 00:26:06,920
Speaker 6: think this solidifies fifty basis points. So on net, it

503
00:26:07,080 --> 00:26:10,359
Speaker 6: doesn't shift the FED, but it does leave them somewhat

504
00:26:10,440 --> 00:26:13,000
Speaker 6: nervous and for the summer summer months for sure.

505
00:26:14,200 --> 00:26:17,119
Speaker 5: Yeah, what's the greatest headwind to this US economy? Here?

506
00:26:17,200 --> 00:26:19,240
Speaker 5: It seems like I'm looking at the inflation data today,

507
00:26:19,280 --> 00:26:22,200
Speaker 5: it doesn't seem to be at least now inflation.

508
00:26:24,000 --> 00:26:27,000
Speaker 6: I agree, it's non inflation. Frankly, I think that the

509
00:26:27,240 --> 00:26:33,040
Speaker 6: one major uncertain one major headwind is the uncertainty introduced

510
00:26:33,200 --> 00:26:36,200
Speaker 6: by the trade war. The rules keep changing, and as

511
00:26:36,240 --> 00:26:40,000
Speaker 6: the rules keep changing, business leaders are struggling to know

512
00:26:40,119 --> 00:26:43,560
Speaker 6: where to invest capital, struggling to know where and when

513
00:26:43,640 --> 00:26:46,679
Speaker 6: to hire, and so they're simply staying on the sidelines,

514
00:26:46,800 --> 00:26:51,840
Speaker 6: and that uncertainty can compound. And that's the biggest headwind

515
00:26:51,920 --> 00:26:53,280
Speaker 6: and fear that I have at the moment.

516
00:26:53,440 --> 00:26:56,119
Speaker 2: Dan Lingham, thank you so much, greatly, greatly appreciate that

517
00:26:56,240 --> 00:26:59,440
Speaker 2: this one of the demon capital markets. He reaffirms a

518
00:26:59,560 --> 00:27:02,000
Speaker 2: lower interest rate called price up yield down.

519
00:27:07,720 --> 00:27:11,600
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

520
00:27:11,640 --> 00:27:14,680
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

521
00:27:14,720 --> 00:27:17,680
Speaker 1: Auto with the Bloomberg Business app. You can also watch

522
00:27:17,800 --> 00:27:20,680
Speaker 1: us live every weekday on YouTube and always on the

523
00:27:20,760 --> 00:27:21,760
Speaker 1: Bloomberg Terminal.

524
00:27:21,960 --> 00:27:22,640
Speaker 3: Join us now.

525
00:27:22,840 --> 00:27:27,320
Speaker 2: Incredibly well timed with the uncertainties out there, particularly on

526
00:27:27,520 --> 00:27:30,880
Speaker 2: moving steel around and stuff like that. He's with Mercury

527
00:27:31,280 --> 00:27:35,359
Speaker 2: at Resources antime. Posner is with us in the studio

528
00:27:35,560 --> 00:27:37,240
Speaker 2: every time he's on. I wish it was longer.

529
00:27:37,359 --> 00:27:39,520
Speaker 3: Longer. Let's squeeze us in right now.

530
00:27:40,280 --> 00:27:43,399
Speaker 2: What are we missing in the steel debate besides the

531
00:27:43,520 --> 00:27:46,040
Speaker 2: romance of the nineteen sixty two steel.

532
00:27:45,800 --> 00:27:50,640
Speaker 3: Strike or that and the actual doing of steel? Where

533
00:27:50,720 --> 00:27:52,680
Speaker 3: does America fit in right now? Yeah?

534
00:27:52,920 --> 00:27:54,480
Speaker 9: Do we have a couple of hours at this point

535
00:27:54,480 --> 00:27:56,760
Speaker 9: in time? Good morning, So going to be back and well,

536
00:27:56,920 --> 00:27:59,480
Speaker 9: we saw recently a couple of weeks ago, the announcement

537
00:28:00,080 --> 00:28:04,240
Speaker 9: of the partnership quote unquote partnership between nip On Steel

538
00:28:04,280 --> 00:28:06,760
Speaker 9: and US Steel. So that's the big news in the

539
00:28:06,800 --> 00:28:11,040
Speaker 9: steel industry. And at that same announcement that President Trump

540
00:28:12,280 --> 00:28:16,960
Speaker 9: held during at his visit to US Steel, he announced

541
00:28:17,320 --> 00:28:20,720
Speaker 9: new tariffs to go into effect, moving it up to

542
00:28:20,840 --> 00:28:25,080
Speaker 9: fifty percent on import steel and aluminum, which was a

543
00:28:25,600 --> 00:28:30,159
Speaker 9: bombshell for the industry off the cuff, and that was

544
00:28:30,200 --> 00:28:31,760
Speaker 9: going to go in ef fact, that was a Friday

545
00:28:32,160 --> 00:28:34,800
Speaker 9: when he was at US Steel announcing that new partnership

546
00:28:35,200 --> 00:28:37,880
Speaker 9: and investment that we don't have any details on yet,

547
00:28:37,960 --> 00:28:41,440
Speaker 9: by the way, but it was told that we were

548
00:28:41,480 --> 00:28:44,280
Speaker 9: going to start seeing import steel and aluminum tariffs moved

549
00:28:44,360 --> 00:28:48,880
Speaker 9: up to fifty percent the following Wednesday, so we sprung

550
00:28:48,920 --> 00:28:54,320
Speaker 9: into action. The workload between that Friday announcement and the

551
00:28:54,640 --> 00:28:58,400
Speaker 9: Wednesday and acting of the tariffs was pretty frantic on

552
00:28:58,520 --> 00:29:02,800
Speaker 9: our front, working in dealing with our domestic steel business

553
00:29:03,080 --> 00:29:06,040
Speaker 9: UH logistics and supply chain business and the import steel

554
00:29:06,080 --> 00:29:10,040
Speaker 9: business that we do to rush steel imports off ships

555
00:29:10,080 --> 00:29:12,320
Speaker 9: that were already on the water and import to clear

556
00:29:12,480 --> 00:29:16,400
Speaker 9: them before the new fifty percent tariffs went into effects.

557
00:29:16,400 --> 00:29:21,440
Speaker 9: So we oversaw the move the deployment of import steel

558
00:29:21,960 --> 00:29:24,400
Speaker 9: at ports that where it was not supposed to be

559
00:29:24,520 --> 00:29:27,720
Speaker 9: coming off of just to customs clear ahead of the

560
00:29:28,080 --> 00:29:30,200
Speaker 9: new fifty percent tariffs, So we have steel out of

561
00:29:30,240 --> 00:29:31,640
Speaker 9: place in a bunch of places.

562
00:29:31,720 --> 00:29:33,920
Speaker 3: Fifty is a big number.

563
00:29:34,040 --> 00:29:34,840
Speaker 9: It's a big number.

564
00:29:35,000 --> 00:29:37,000
Speaker 5: What do we import a lot of steel?

565
00:29:37,240 --> 00:29:38,160
Speaker 7: Is this going to impact?

566
00:29:38,920 --> 00:29:40,480
Speaker 5: Who's going to impact? How's it going to impact.

567
00:29:40,520 --> 00:29:41,520
Speaker 3: It's a big number.

568
00:29:41,680 --> 00:29:46,080
Speaker 9: Yeah, it's going to impact you, me, Tom, Yeah, exactly,

569
00:29:46,240 --> 00:29:47,600
Speaker 9: everybody and everybody else.

570
00:29:47,640 --> 00:29:47,920
Speaker 3: Steel.

571
00:29:47,920 --> 00:29:49,080
Speaker 7: Do we import a lot of steels?

572
00:29:49,520 --> 00:29:51,200
Speaker 9: We import a lot of steel? Is not enough?

573
00:29:51,720 --> 00:29:54,440
Speaker 5: Import it because it's better for us too import it

574
00:29:54,520 --> 00:29:56,200
Speaker 5: versus to make it here, or we just can't make

575
00:29:56,240 --> 00:29:56,560
Speaker 5: it here.

576
00:29:56,720 --> 00:29:59,520
Speaker 9: Yeah, I'd say that's a more philosophical question. Of course,

577
00:29:59,520 --> 00:30:01,720
Speaker 9: we want to have steel making capacity in the States

578
00:30:01,760 --> 00:30:04,080
Speaker 9: for national security reasons, So I don't think there's anyone

579
00:30:04,200 --> 00:30:07,000
Speaker 9: that would that would say that that's not a good idea.

580
00:30:07,880 --> 00:30:11,080
Speaker 9: The fact of the matter is, as soon as those

581
00:30:11,640 --> 00:30:15,360
Speaker 9: import tariffs were announced first twenty five percent, the domestic

582
00:30:15,400 --> 00:30:20,000
Speaker 9: steel mills raised their prices sufficiently to take advantage of that,

583
00:30:20,560 --> 00:30:23,680
Speaker 9: so that that hits us all in terms of inflation

584
00:30:23,800 --> 00:30:27,320
Speaker 9: and consumer spending and so forth right, and import steel

585
00:30:28,000 --> 00:30:30,640
Speaker 9: was still able to make sense even with the twenty

586
00:30:30,720 --> 00:30:33,360
Speaker 9: five percent because of the domestic race.

587
00:30:33,640 --> 00:30:35,840
Speaker 3: Can I continue with dumb questions of the day. Is

588
00:30:36,080 --> 00:30:36,720
Speaker 3: the time to do it?

589
00:30:36,840 --> 00:30:37,440
Speaker 5: This at the time?

590
00:30:37,720 --> 00:30:40,680
Speaker 2: Is steel steel like a steel comes out of the

591
00:30:40,800 --> 00:30:45,200
Speaker 2: romance of the Mangahela River in Pittsburgh or New Core

592
00:30:45,400 --> 00:30:48,200
Speaker 2: on some field in the middle of the Midwest somewhere,

593
00:30:48,280 --> 00:30:49,200
Speaker 2: or Texas.

594
00:30:48,920 --> 00:30:52,760
Speaker 3: Whatever I'm dumb on this is that the same steels

595
00:30:52,840 --> 00:30:53,680
Speaker 3: from South Korea?

596
00:30:53,960 --> 00:30:58,560
Speaker 9: Yes, same basic steel, right, there's different lots of different grades.

597
00:30:58,280 --> 00:30:59,480
Speaker 3: Types, specialties and stuff.

598
00:31:00,160 --> 00:31:03,200
Speaker 9: Raid steal a steel, correct, right, it's made with iron ore,

599
00:31:03,400 --> 00:31:04,920
Speaker 9: It's made with metallurgical coal.

600
00:31:05,560 --> 00:31:07,440
Speaker 3: So you have a betage you're having a coke with

601
00:31:07,520 --> 00:31:13,240
Speaker 3: President Trump? Right now? What's the Anton Posner intelligence steel strategy?

602
00:31:13,680 --> 00:31:18,120
Speaker 9: My strategy? And I guess I'm announcing my candidacy for

603
00:31:18,240 --> 00:31:21,400
Speaker 9: mayor Well no, not today, but anyway the other day, right,

604
00:31:21,480 --> 00:31:24,880
Speaker 9: I know when was here. But anyway, here's the thing.

605
00:31:25,600 --> 00:31:29,280
Speaker 9: We all want more investment in American industry, whether it's steel,

606
00:31:29,400 --> 00:31:31,880
Speaker 9: whether it's aluminum. We could talk about aluminum for another

607
00:31:31,920 --> 00:31:35,360
Speaker 9: two hours also, but it can't investment. It's not going

608
00:31:35,440 --> 00:31:39,000
Speaker 9: to happen based on a tweet or a truth social right,

609
00:31:39,080 --> 00:31:42,360
Speaker 9: how's it gonna happen. It's going to happen by putting legislation.

610
00:31:42,440 --> 00:31:44,360
Speaker 9: In effect, it's going to take rolling up the sleeves

611
00:31:44,400 --> 00:31:45,760
Speaker 9: in hard legislative work.

612
00:31:45,840 --> 00:31:46,440
Speaker 5: So we need a.

613
00:31:46,640 --> 00:31:50,600
Speaker 2: State policy to compete with the state policy of South Korea.

614
00:31:50,880 --> 00:31:55,680
Speaker 9: Right, state policy to incentivize actual investment. You can't have

615
00:31:56,280 --> 00:32:00,400
Speaker 9: LB credits. There's credits, there's support on energy, there's working

616
00:32:00,480 --> 00:32:04,680
Speaker 9: with the unions to make it, there's infrastructure and supply change.

617
00:32:04,920 --> 00:32:08,840
Speaker 9: Can't we do that because we're in a cycle where

618
00:32:09,240 --> 00:32:12,720
Speaker 9: our election cycle is based on sound bites, right, So

619
00:32:12,960 --> 00:32:15,120
Speaker 9: I'm I'm gonna get a little bit get a little

620
00:32:15,120 --> 00:32:19,640
Speaker 9: bit off on that area. But you know, we're competing geopolitically,

621
00:32:19,720 --> 00:32:23,440
Speaker 9: we're competing against countries that don't have elections, right, and

622
00:32:23,560 --> 00:32:28,520
Speaker 9: that can make five, ten, twenty five year strategic plans

623
00:32:28,680 --> 00:32:31,840
Speaker 9: on critical minerals and steeling.

624
00:32:31,960 --> 00:32:35,680
Speaker 2: I went to launches with new Core two lifetimes ago. Yeah,

625
00:32:35,800 --> 00:32:39,520
Speaker 2: and there was a complete panic about steel dumping. Is

626
00:32:39,560 --> 00:32:41,600
Speaker 2: there steel dumping going on right now?

627
00:32:41,840 --> 00:32:42,320
Speaker 7: Sometimes?

628
00:32:42,360 --> 00:32:42,520
Speaker 6: There?

629
00:32:42,840 --> 00:32:46,040
Speaker 9: Sometimes there is in certain types of steel and markets.

630
00:32:46,080 --> 00:32:48,640
Speaker 9: It's very it can be, it's very special. That question

631
00:32:48,800 --> 00:32:51,560
Speaker 9: time is very specialized. You might be talking about rebar,

632
00:32:51,960 --> 00:32:54,400
Speaker 9: might be talking about wirerod coil or hot roll coils,

633
00:32:56,240 --> 00:33:01,280
Speaker 9: bar it's a big baras like tomorrow, you want to

634
00:33:01,360 --> 00:33:01,760
Speaker 9: just get.

635
00:33:03,160 --> 00:33:03,480
Speaker 2: Regular.

636
00:33:03,600 --> 00:33:06,800
Speaker 3: Note tell tell the intern from Duke to wake up

637
00:33:06,840 --> 00:33:09,280
Speaker 3: in there. Maybe we can get in time back here.

638
00:33:09,480 --> 00:33:14,240
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,

639
00:33:14,400 --> 00:33:18,640
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

640
00:33:18,800 --> 00:33:22,200
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

641
00:33:22,360 --> 00:33:26,320
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

642
00:33:26,400 --> 00:33:29,720
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643
00:33:29,960 --> 00:33:31,680
Speaker 1: always on the Bloomberg terminal