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Speaker 1: Were joined now by Lindsay PEGSA chief Economist. That's stifle

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Speaker 1: to our recap what we saw on Friday with the

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Speaker 1: US jobs reports, and Lindsay, that's those numbers coming in

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Speaker 1: somewhat stronger than anticipated, wages pression growing at the fastest

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Speaker 1: basins January. What's this mean for the FIT in terms

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Speaker 1: of its inflation fight? Well, I think the latest round

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Speaker 1: of data that we saw, not only with the non

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Speaker 1: farm payroll report, but the stronger upward revision to third

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Speaker 1: quarter GDP reinforces the FEDS assessment of a relatively solid economy,

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Speaker 1: a somewhat stable consumer, but most importantly a tight labor

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Speaker 1: market as really an indication that the economy then can

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Speaker 1: withstand more aggressive policy action all the name of taping inflation,

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Speaker 1: which at this point still remains well above the FEDS

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Speaker 1: longer run target range. Yeah, but we're seeing cracks emerge

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Speaker 1: in other parts of the economy. I don't need to

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Speaker 1: tell you, Lindsay. I mean, if you look at housing,

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Speaker 1: if you look at some of the sentiment indications p

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Speaker 1: M I S, even consumer confidence. Right, things are beginning

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Speaker 1: to get a little complicated here, and it seems like

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Speaker 1: there's a higher probability now of a policy error. Well,

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Speaker 1: I think it's going to be a difficult argument to

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Speaker 1: make that the FED should begin to slow the pace

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Speaker 1: of rate hikes or remove some of this hyper focus

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Speaker 1: on raining and inflation given a softening of the economy,

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Speaker 1: because arguably that simply means that the earlier rate increases

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Speaker 1: are having the intended effect. Remember, the FED is trying

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Speaker 1: to destroy demand, the FETE is trying to slow the economy.

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Speaker 1: So I don't think that this is going to be

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Speaker 1: evidence that the FETE is on the wrong pathway, but

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Speaker 1: in fact evidence that the FETE is on the right

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Speaker 1: pathway to be able to tackle inflation and get us

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Speaker 1: back to a more lasting position of price stability. We're

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Speaker 1: trying to sit on demand. Does that mean the recession

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Speaker 1: is inevitable? With from Bank of America CEO Brian Monn

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Speaker 1: and saying he sees a mild recission in three, what

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Speaker 1: are you looking for? Well, I do think that we

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Speaker 1: see a return to negative growth in three. But whether

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Speaker 1: or not we fall into a technical recession, of course,

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Speaker 1: we had this discussion earlier. It's somewhat of an academic discussion,

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Speaker 1: and I would argue largely inconsequential for the average American

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Speaker 1: or average small business struggling under the weight of rapidly

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Speaker 1: rising prices. Whether we call it a downturn, a recession,

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Speaker 1: or is Alan Greenspan once said accumulative unwinding of economic activity.

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Speaker 1: Hardship is hardship. The economy is slowing, prices are still elevated. Yes,

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Speaker 1: I think the word Powell used was pain a while back.

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Speaker 1: Everyone is going to feel some of it. It's relative,

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Speaker 1: some more than others. Right, But in terms of what

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Speaker 1: we're focusing on in markets, let's assume for the moment

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Speaker 1: that the market is right and we get a fifty

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Speaker 1: basis point hike later this month, are you potentially looking

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Speaker 1: at a higher terminal rate, which is to say, where

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Speaker 1: the Fed takes us the as to nation point? Oh? Absolutely.

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Speaker 1: The Fed is consistently revised higher its forecast by a

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Speaker 1: hundred basis points that each summary of Economic projections, meaning

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Speaker 1: the quarterly update of where the Fed anticipates policy to go,

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Speaker 1: and in the final step released at the December meeting,

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Speaker 1: I do expect a meaningful upward revision to where the

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Speaker 1: Fed expects policy will need to go to be sufficiently

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Speaker 1: restrictive to restrain inflation, which has consistently surprised to the upside,

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Speaker 1: well above what the FED forecasted earlier in terms of

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Speaker 1: end of the year price pressures, and even further above,

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Speaker 1: of course, that two percent utopic target range. And so

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Speaker 1: I do think that policymakers are trying to appeal to

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Speaker 1: the market and slow the pace of rate increases by

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Speaker 1: allowing somewhat of a backwards look assessment of earlier policy initiatives.

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Speaker 1: But they're also communicating to the marketplace that inflation. Tackling

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Speaker 1: inflation is going to be a longer and more difficult

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Speaker 1: pathway than they had anticipated, with of course some FED

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Speaker 1: officials coming out and saying the ideal target range is

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Speaker 1: going to be somewhere between five and seven percent. Yeah,

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Speaker 1: something with a five handle does seem to be the

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Speaker 1: consensus at the moment. We're going to get a little

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Speaker 1: bit more data this week, of course, with the jobless

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Speaker 1: claims numbers, what are you expecting to hear? Well? The

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Speaker 1: jobless claims numbers certainly are part of the labor market equation,

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Speaker 1: and while we have seemed to have arrested that steep

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Speaker 1: downward trend, we are seeing more volatility in a tight range.

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Speaker 1: I don't think that's going to be much of a

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Speaker 1: market moving indicator. We do, however, have on Friday the

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Speaker 1: p p I, which is going to be I think

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Speaker 1: the key report that the Fed will look at that

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Speaker 1: last piece of data before their rate decision, and if

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Speaker 1: inflation continues to remain elevated again, this is another feather

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Speaker 1: in the Fed's cap that they do need to remain

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Speaker 1: hyper focused on reining in inflation, slaying that inflation dragon,

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Speaker 1: regardless of the emerging signs of pain or weakness in

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Speaker 1: the broader economy. All right, Lindsay Pigs Chief Economists that

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Speaker 1: stephle thanks so much for joining us on Bloomberg Daybreak

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Speaker 1: Asia with your insights