WEBVTT - Previewing the Fed's Decision, Apple Rises on Hope AI Will Fuel Upgrades 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.560 --> 0:00:12.920 This is Bloomberg Business Wait inside from the reporters and 0:00:13.080 --> 0:00:16.640 editors who bring you America's most trusted business magazine, plus 0:00:16.720 --> 0:00:20.880 global business, finance and tech news. The Bloomberg Business Week 0:00:20.920 --> 0:00:26.200 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:28.360 --> 0:00:30.480 As we've talked about, though, bond traders who have come 0:00:30.520 --> 0:00:33.040 to terms with the prospect of higher for longer interest 0:00:33.080 --> 0:00:36.760 rates through this year are looking toward tomorrow's FED meeting 0:00:36.920 --> 0:00:39.960 for really clues on how to game it out twenty 0:00:40.040 --> 0:00:42.279 twenty five and beyond. That's kind of where we're looking 0:00:42.360 --> 0:00:44.080 at this point. To be fair, though, we have to 0:00:44.080 --> 0:00:47.360 get through tomorrow's FOMC meeting and the dot plot and 0:00:47.400 --> 0:00:51.960 before that another inflation print at that eight thirty am 0:00:51.960 --> 0:00:54.279 Wall Street time, so we'll all be focusing on that 0:00:54.360 --> 0:00:55.520 before we get to the decision. 0:00:55.800 --> 0:00:57.720 Honestly, it sounds like the best day effort for us 0:00:57.720 --> 0:01:01.320 here at you're just seeing It's like, what's great at 0:01:01.360 --> 0:01:03.320 the FED? You got CPI, What more in life is 0:01:03.360 --> 0:01:04.240 there to ask for Kelly. 0:01:04.360 --> 0:01:06.720 It'll create a new narrative, no doubt about it, or 0:01:06.760 --> 0:01:09.440 potentially just reinforce the existing one. Let's get to it 0:01:09.440 --> 0:01:12.280 with Bloomberg News Economics Molly Smith. She's here in studio 0:01:12.319 --> 0:01:15.280 along with Bloomberg News Economics reporter Steve Matthews. He's out 0:01:15.319 --> 0:01:17.840 there in our Atlanta bureau. Molly, I want to start 0:01:17.880 --> 0:01:21.319 with you first, up eight three to am tomorrow CPI report. 0:01:21.600 --> 0:01:22.400 What's expected? 0:01:22.440 --> 0:01:24.840 How might that shape thinking by the Fed and traders 0:01:24.840 --> 0:01:27.280 and economists about the US inflation print. 0:01:27.360 --> 0:01:28.800 Yeah, it's going to be a real super bowl of 0:01:28.840 --> 0:01:31.520 a day for everybody here, for on both sides of 0:01:31.840 --> 0:01:34.520 the buildings, So it's going to be really busy. So yeah, 0:01:34.560 --> 0:01:37.280 starting off with CPI at eight thirty in the morning, 0:01:38.240 --> 0:01:40.119 I mean, I think you're probably going to call this 0:01:40.200 --> 0:01:43.800 maybe moving sideways at best, is still probably the story 0:01:43.800 --> 0:01:49.320 of inflation or graduated or gradually modestly slowing. So it's really, 0:01:49.360 --> 0:01:52.120 you know, this is still nowhere near the disinflation that 0:01:52.160 --> 0:01:53.880 we saw at the end of last year that really 0:01:54.000 --> 0:01:56.840 was starting the fuel the rate cut narrative, and now 0:01:56.880 --> 0:02:00.040 it's really just more like treading kind of laterally and 0:02:00.120 --> 0:02:02.919 not so much you know, those bigger, you know, step 0:02:03.000 --> 0:02:04.880 downs that we had seen toward the end of the year. 0:02:05.240 --> 0:02:07.520 But you know, gas prices came down in the month, 0:02:07.600 --> 0:02:10.679 so that'll be helpful. It really just depends though, how 0:02:10.800 --> 0:02:14.000 much broader beyond that the story is, because that's something 0:02:14.000 --> 0:02:16.120 that FED officials have been looking for. That it's not 0:02:16.240 --> 0:02:19.600 just coming from energy and from goods categories. We need 0:02:19.639 --> 0:02:21.280 to see services moderate as well. 0:02:21.560 --> 0:02:22.200 That's a good point. 0:02:22.200 --> 0:02:23.919 We are a service led economy. Let's remind it. 0:02:24.840 --> 0:02:30.040 Especially having said that, a higher print, a lower print, 0:02:30.120 --> 0:02:34.520 will it just be kind of you know, disregarded, because 0:02:34.520 --> 0:02:36.720 what we keep talking about is we need to see 0:02:36.760 --> 0:02:39.840 like at least three reports to show an existent, you know, 0:02:39.960 --> 0:02:41.799 kind of a really strong trend here when it comes 0:02:41.840 --> 0:02:42.320 to inflation. 0:02:42.600 --> 0:02:44.520 Right, Yeah, and that's exactly the thing. 0:02:44.560 --> 0:02:47.120 When you had the princes in January through March that 0:02:47.240 --> 0:02:48.800 all came in above forecast. 0:02:49.160 --> 0:02:50.480 That's that really the trend. 0:02:50.600 --> 0:02:53.280 Yeah, that really reset the clock. Then on our right, 0:02:53.280 --> 0:02:55.480 we're back to zero. We need to now see another 0:02:55.600 --> 0:02:58.840 three pence three prints to establish a trend, and we 0:02:58.880 --> 0:03:01.040 did get a little bit of that with the April print. 0:03:01.120 --> 0:03:04.720 That underlying inflation there, that's the core measure that excludes 0:03:04.760 --> 0:03:07.520 food and energy, that step down month over months for 0:03:07.560 --> 0:03:08.800 the first time in six months. 0:03:08.800 --> 0:03:11.680 That was a huge deal. If that can be repeated 0:03:12.400 --> 0:03:13.360 also a huge deal. 0:03:13.800 --> 0:03:17.120 But if if it can be repeated, that would be important, 0:03:17.200 --> 0:03:19.160 certainly important to keep in mind. He Steve Matthews, come 0:03:19.200 --> 0:03:21.480 on in here and sort of give us an idea 0:03:21.560 --> 0:03:25.640 of how tomorrow's CPI report or Friday's strong jobs report 0:03:26.080 --> 0:03:28.520 and the overall flow of economic data is going to 0:03:28.520 --> 0:03:31.480 be taken into account when we do get that policy decision. 0:03:31.800 --> 0:03:33.440 And perhaps I think more importantly for a lot of 0:03:33.480 --> 0:03:37.000 our viewers than listeners, the updated summary of economic projections. 0:03:37.960 --> 0:03:40.480 You know, these meetings of the FAT have been kind 0:03:40.480 --> 0:03:42.320 of boring the last several days. 0:03:42.360 --> 0:03:44.080 Yeah, I can't say that. 0:03:44.120 --> 0:03:48.040 Sorry, j all right, sorry, Steve says, you can say 0:03:48.040 --> 0:03:49.280 whatever you want, you can. 0:03:49.880 --> 0:03:52.480 But this is going to be a cliffhanger. This is 0:03:52.560 --> 0:03:55.560 going to be have some fireworks because you know, the 0:03:55.720 --> 0:04:00.120 economists that we survey are evenly split on whether the 0:04:00.160 --> 0:04:03.360 Fed's dot plot is going to show two right cuts 0:04:03.400 --> 0:04:06.920 for this year or one cut. I mean, obviously in 0:04:07.240 --> 0:04:10.520 March they had three cuts that were priced in. We 0:04:10.560 --> 0:04:13.200 had bad inflation numbers in the first three months. As 0:04:13.480 --> 0:04:17.960 Molly said, April showed an improvement, and what we get 0:04:17.960 --> 0:04:22.240 tomorrow in the CPI could well set the tone for 0:04:22.320 --> 0:04:25.000 what happens with the dots. If we get a good number, 0:04:25.360 --> 0:04:28.920 you could perhaps stay at two cuts for the year. 0:04:29.279 --> 0:04:32.120 If you have two cuts for the year, that implies 0:04:32.400 --> 0:04:35.840 that the first cut could happen in September, arguably before that. 0:04:36.440 --> 0:04:39.960 So if you get one cut priced in in the dots, 0:04:40.760 --> 0:04:43.000 that would suggest you're not going to get anything until 0:04:43.000 --> 0:04:47.560 after the election. So it's all important. And Jay Powell 0:04:47.600 --> 0:04:51.400 was asked about this at a recent press conference about Okay, 0:04:51.400 --> 0:04:53.080 if you get data in the middle of the meeting, 0:04:53.120 --> 0:04:56.200 do you really change the dots. His answer was, yes, 0:04:56.440 --> 0:04:59.360 we do change the dots. We encourage the f OMC 0:04:59.520 --> 0:05:02.120 members to change their dots in the middle of the 0:05:02.160 --> 0:05:04.960 meeting with based on the latest data up until mid 0:05:05.000 --> 0:05:08.440 morning of the second meeting, so they can change their 0:05:08.440 --> 0:05:09.200 dots tomorrow. 0:05:09.279 --> 0:05:11.320 Well wait a minute, and Tim's just like saying to me, wait, 0:05:11.360 --> 0:05:13.760 even if it's CPI about me, we're not. 0:05:13.720 --> 0:05:16.160 Talking about PCE here, We're not talking about the FEDS preferred. 0:05:16.279 --> 0:05:17.440 There are inflation. 0:05:17.200 --> 0:05:20.440 Measures, there are inflation prints, and then there are inflation prints. 0:05:20.480 --> 0:05:23.239 That's true, it's not the PC which is what they target, 0:05:23.560 --> 0:05:26.520 but it gives a good indication when you combine the 0:05:26.560 --> 0:05:30.200 CPI and the PPI together of what PC is gonna 0:05:30.279 --> 0:05:31.200 end up at. 0:05:31.400 --> 0:05:32.960 It's really fun because I think the three of us 0:05:33.000 --> 0:05:34.920 were all thinking the same thing, like, okay, wait, does 0:05:34.920 --> 0:05:37.240 the FED pull out like a giant whiteboard say, okay, guys, 0:05:37.279 --> 0:05:39.800 we have to erase this because the CPI came in differently. 0:05:40.080 --> 0:05:43.799 You are saying, bottom line, Yeah, if it's something very dramatic, 0:05:44.080 --> 0:05:45.360 they're going to rethink. 0:05:46.000 --> 0:05:48.600 If it is away from consensus, if it is better 0:05:48.680 --> 0:05:53.320 than expected or worse than expected, they can definitely change 0:05:53.400 --> 0:05:55.599 their dots and they can change the way the median 0:05:55.680 --> 0:05:56.680 turns out. 0:05:56.960 --> 0:05:59.720 Okay, I guess that that's really interesting to hear because 0:05:59.720 --> 0:06:02.440 I actually thought Molly that you know, they wouldn't take 0:06:02.440 --> 0:06:05.440 into account data that came day of. But look, if 0:06:05.680 --> 0:06:08.080 if it is an upside surprise or a downside surprise, 0:06:08.480 --> 0:06:10.680 like Stieve said, that could be part of the equation tomorrow. 0:06:10.760 --> 0:06:12.920 Yeah. It really speaks to that whole cliffhanger element that 0:06:13.000 --> 0:06:15.040 Sea was telling us about here. So we're going to 0:06:15.080 --> 0:06:16.839 be on the edge of our seats in the morning. 0:06:16.920 --> 0:06:18.760 I'm sure, you know, God only knows what's going to 0:06:18.760 --> 0:06:21.760 be happening in Washington at that time. Yeah, and of 0:06:21.839 --> 0:06:23.560 course they're going to be looking for that, you know, 0:06:23.640 --> 0:06:26.400 core services ex housing number, that's always a big one 0:06:26.400 --> 0:06:28.240 that they like to look at. So this is like 0:06:28.320 --> 0:06:32.200 the underlying services inflation in the economy that you know, 0:06:32.279 --> 0:06:35.800 taking out housing inflation because that has been so sticky 0:06:35.880 --> 0:06:37.679 to just get a sense of what are the kinds 0:06:37.680 --> 0:06:40.920 of services you know, like travel, entertainment, other things that 0:06:41.040 --> 0:06:44.400 Americans are spending on. Where is that momentum heading. So 0:06:44.440 --> 0:06:46.440 that's going to be another one that they're going to 0:06:46.440 --> 0:06:47.520 be looking at very closely. 0:06:47.680 --> 0:06:50.240 You know, Steve Matthew Boly has that Collaly has that 0:06:50.360 --> 0:06:54.640 exactly right. The FED is very focused on services and 0:06:54.800 --> 0:06:57.720 Jay Powell is very focused on what's happening with services, 0:06:57.760 --> 0:06:59.960 and that's affected by what's happening with the labor market. 0:07:00.480 --> 0:07:02.960 So you know, to the extent that you've seen some 0:07:03.080 --> 0:07:06.599 kind of moderation in the labor market with unemployment ticking 0:07:06.680 --> 0:07:10.240 up just a little bit, then if you see that 0:07:10.920 --> 0:07:14.120 in the services inflation, that would be really encouraging to 0:07:14.160 --> 0:07:14.559 the FED. 0:07:14.840 --> 0:07:16.520 Well, here's the thing to you, because I know that 0:07:16.560 --> 0:07:18.360 we talk about this all the time in our group, 0:07:18.360 --> 0:07:21.840 but you know, I find it hard when we're covering 0:07:21.840 --> 0:07:25.280 the jobs report and we've got the payrolls survey, you know, 0:07:25.320 --> 0:07:28.280 with the survey of businesses, the establishment survey, sorry saying 0:07:28.320 --> 0:07:30.680 one thing with the payroll's number that was so strong 0:07:30.760 --> 0:07:33.240 last week, and then the household survey painting a very 0:07:33.240 --> 0:07:37.160 different picture of the labor market. So in your expert opinion, 0:07:37.200 --> 0:07:39.200 because you are the expert here, like, what would you 0:07:39.240 --> 0:07:41.600 say is the Fed's better signal right now of the 0:07:42.000 --> 0:07:43.760 truer signal of the labor market. 0:07:44.520 --> 0:07:46.120 Well, I think that is going to be a really 0:07:46.200 --> 0:07:50.200 key question for share Pale in the press conference, is 0:07:50.240 --> 0:07:52.600 how does he view the labor market, because it's like, 0:07:52.640 --> 0:07:55.640 if you look at the job openings figures and the 0:07:55.720 --> 0:08:00.080 quick rate, you know, the number of people quitting and 0:07:59.800 --> 0:08:03.120 the job openings per unemployed, all those seem to have 0:08:03.280 --> 0:08:08.000 returned to pre COVID levels. So there are definitely some 0:08:08.120 --> 0:08:11.520 science and moderation, but it will be really key to 0:08:11.600 --> 0:08:13.920 see how he sees the labor market because if he 0:08:13.960 --> 0:08:18.040 sees the labor market is basically back to balance, then 0:08:18.160 --> 0:08:21.200 that says that they would be much more open to 0:08:22.200 --> 0:08:22.960 cutting rights. 0:08:23.080 --> 0:08:24.760 All right, guys, sit tight, We we got another great 0:08:24.840 --> 0:08:26.760 voice we want to bring into this conversation. Back with 0:08:26.840 --> 0:08:29.760 us is Steve Skanky, chief economic advisor at the Wealth 0:08:29.800 --> 0:08:32.319 Management from Keel Point. Former US Treasury in White House 0:08:32.400 --> 0:08:36.560 National Security Council staff member Steve Skanky joining us from Washington, 0:08:36.640 --> 0:08:38.800 d C. Steve, good to have you here and join 0:08:38.880 --> 0:08:42.520 our conversation. You know, curious about what you've been hearing 0:08:42.559 --> 0:08:46.760 from Molly and from Steve Matthews and what your expectations 0:08:46.800 --> 0:08:49.240 are about what we get from the Fed tomorrow. It's, 0:08:49.280 --> 0:08:51.920 as I agree with Steve Matthews, a little bit of 0:08:51.920 --> 0:08:52.559 a cliffhanger. 0:08:52.679 --> 0:08:53.600 Maybe it's the dot plot. 0:08:53.600 --> 0:08:55.520 You know, we're just kind of trying to figure out 0:08:55.720 --> 0:08:58.000 what the Fed is thinking, especially when you have a 0:08:58.000 --> 0:09:00.560 lot of folks saying, wait, it's not about a rate 0:09:00.600 --> 0:09:04.160 move this year, think about twenty twenty five and beyond. 0:09:06.080 --> 0:09:08.800 Well, that's right, Carol, and thanks for having me on. 0:09:09.520 --> 0:09:12.160 I agree it is a cliphanger, and there's a lot 0:09:12.160 --> 0:09:14.520 of ways that it could go. I think though, we 0:09:14.559 --> 0:09:17.880 start with the with the premise that j. Powell would 0:09:17.880 --> 0:09:22.600 actually like to send a Dubvish tone, and the only 0:09:22.600 --> 0:09:25.480 adhibition to that would be as if we have a 0:09:25.559 --> 0:09:30.480 bad surprise on the CPI, but absent that, even though 0:09:30.480 --> 0:09:32.439 they're not going to cut rates, they're going to have 0:09:32.480 --> 0:09:35.880 a new dot plot. I think there's a growing concern 0:09:36.200 --> 0:09:41.319 that the economic data are moving toward a an inconvenient 0:09:41.440 --> 0:09:42.960 to slow down in the economy. 0:09:43.760 --> 0:09:44.640 The jobs number was. 0:09:44.640 --> 0:09:47.520 A surprise, but as you or Steve pointed out, I 0:09:47.559 --> 0:09:51.920 think Carol, you pointed out, the household number was four 0:09:52.000 --> 0:09:57.360 hundred thousand jobs down, an increase in the unemployment rate 0:10:00.480 --> 0:10:03.400 to reconcile that with two hundred and seventy two after 0:10:03.440 --> 0:10:07.040 they revised down April to one sixty five, A. 0:10:07.040 --> 0:10:07.559 Lot of. 0:10:09.120 --> 0:10:12.280 Opportunity to be confused in that as you're looking at 0:10:12.920 --> 0:10:16.880 first quarter GDP revised down, the second quarter GDP estimates 0:10:17.480 --> 0:10:20.840 among economists are now being revised down below two percent, 0:10:22.040 --> 0:10:24.040 and that spells concerned. 0:10:24.640 --> 0:10:28.240 So Steve J. Powell and the Fed. 0:10:28.360 --> 0:10:30.480 So Steve, Steve Skanky, how are you thinking about this 0:10:30.520 --> 0:10:32.760 at kel point in terms of how many rate cuts 0:10:32.800 --> 0:10:34.440 you think the Fed will actually be able to do 0:10:34.679 --> 0:10:36.520 this year or should do this year? 0:10:36.559 --> 0:10:36.960 And it gets a. 0:10:36.920 --> 0:10:39.640 Little complicated with the whole election coming up in November. 0:10:40.800 --> 0:10:44.720 It does we still believe there's an opportunity for two 0:10:44.800 --> 0:10:48.640 rate cuts. Now, obviously that could change very quickly if 0:10:48.679 --> 0:10:54.440 we have higher inflation prints, certainly from the CPI, which 0:10:54.480 --> 0:10:58.080 is not the Fed's preferred measure, but that then ultimately 0:10:58.200 --> 0:11:04.560 works itself into the pc crystal conception expenditures deflator. I 0:11:04.600 --> 0:11:07.800 think that they'd like to cut twice, Yeah, and and 0:11:08.280 --> 0:11:10.160 so how do they do that? And if they can't 0:11:10.160 --> 0:11:13.800 cut cut twice, how does j. Powell's signal to the 0:11:13.840 --> 0:11:18.280 market that they're they're they're they're trying to go easier 0:11:19.120 --> 0:11:22.400 in their in their policy moves. You know, if it 0:11:22.840 --> 0:11:26.360 if CPI goes the wrong way, it we very easily 0:11:26.360 --> 0:11:30.920 could see a dot plot that shows rate increases right, 0:11:31.400 --> 0:11:35.440 which would which would certainly disrupt market. 0:11:35.640 --> 0:11:39.600 That would be that would be definitely a cliff hangar 0:11:39.720 --> 0:11:41.920 turning into falling off a cliff perhaps. 0:11:42.360 --> 0:11:44.680 But come on back in right, I want to I 0:11:44.679 --> 0:11:46.600 want to come back to Steve Matthews here. This is 0:11:46.640 --> 0:11:49.400 something that we talk about before every FED meeting. And 0:11:49.480 --> 0:11:51.560 you know, Steve, sometimes it's you who's in the chair 0:11:52.000 --> 0:11:54.240 in the in DC who's asking Jay. 0:11:54.280 --> 0:11:55.960 The questions we talked about. 0:11:56.200 --> 0:11:59.040 One that Powell will probably get is how are you 0:11:59.600 --> 0:12:02.400 viewing the labormarket. Right now, what's another one you'd really 0:12:02.440 --> 0:12:04.000 want to hear Powell answer. 0:12:05.240 --> 0:12:09.360 I think, as Steve said, the big question is how 0:12:09.400 --> 0:12:11.440 does he see the current economy? I mean, if you 0:12:11.480 --> 0:12:17.200 look at, for example, the Bloomberg Economic Surprise Index, the 0:12:17.600 --> 0:12:21.000 economic surprises have turned negative. I mean we're now seeing 0:12:21.480 --> 0:12:27.280 data that is trailing the consensus estimates fairly consistently. And 0:12:27.679 --> 0:12:30.400 you know, does that raise some concern that maybe the 0:12:30.600 --> 0:12:34.280 economy is moving to a below trend state? And how 0:12:34.320 --> 0:12:38.240 does he how much worried is about about that? I mean, 0:12:38.280 --> 0:12:40.920 obviously he's going to be asked about the dot plot 0:12:41.000 --> 0:12:44.440 and inflation, but it's like just the view of the 0:12:44.480 --> 0:12:46.720 total economy would be really important. 0:12:47.040 --> 0:12:48.160 One point I wanted to bring up. 0:12:48.160 --> 0:12:50.880 It was really interesting on surveillance this morning with a 0:12:50.920 --> 0:12:54.400 guest about how keeping rates more normal, remember what we 0:12:54.440 --> 0:12:57.160 are in right now is more normal, actually gives the 0:12:57.200 --> 0:12:59.120 Fed a lot more room to cut rates if and 0:12:59.160 --> 0:13:03.400 when that is necessary. And that's a good good thing. 0:13:03.480 --> 0:13:05.800 Steve Matthews, you understand how the Fed moves and how 0:13:05.840 --> 0:13:08.600 it all works, right, The Fed having breathing room around 0:13:08.600 --> 0:13:10.080 policy is a really good thing. 0:13:11.040 --> 0:13:14.840 Yeah, if you hear Powell or other FED officials in 0:13:14.880 --> 0:13:17.600 the aftermath of this meeting talk about the Taylor rule 0:13:17.960 --> 0:13:22.320 and about monetary politicy benchmarks. That is dubvish because right 0:13:22.360 --> 0:13:26.200 now the Fed's rates are much higher than what monetary 0:13:26.240 --> 0:13:29.280 policy rules would suggest they should be, which is around 0:13:29.520 --> 0:13:33.640 four percent. So there is room to bring rates down 0:13:33.800 --> 0:13:38.280 just based on inflation right now if they become convinced 0:13:38.320 --> 0:13:40.840 that the economy can handle that. 0:13:41.360 --> 0:13:44.599 So, Steve Skanky, then is the conversation of potentially a 0:13:44.679 --> 0:13:45.160 rate hike. 0:13:45.280 --> 0:13:47.559 Is that just completely inappropriate? 0:13:47.559 --> 0:13:47.719 Then? 0:13:47.760 --> 0:13:49.599 Based on what Steve Matthews is telling. 0:13:49.400 --> 0:13:53.160 Us, Yeah, I believe that it's inappropriate, and I think J. 0:13:53.320 --> 0:13:57.600 Powell probably has some concern about that if we should 0:13:57.600 --> 0:14:02.680 see a negative surprise on the CPI. You know, the 0:14:02.720 --> 0:14:08.160 feed uses forward guidance to constrain economic activity. I think 0:14:08.200 --> 0:14:12.880 the concern is that they need to encourage economic activity 0:14:12.920 --> 0:14:16.040 for the reasons that we talked about, and so I 0:14:16.080 --> 0:14:18.880 would believe that there's a good chance, absent to a 0:14:18.920 --> 0:14:23.200 CPI surprise, that the forward guidance is going to be 0:14:24.000 --> 0:14:28.240 forward easing, even though they won't change interest rates for 0:14:28.360 --> 0:14:29.800 probably the next couple of meetings. 0:14:29.920 --> 0:14:32.320 Hey, Steve Skanky, very briefly because we want to do 0:14:32.320 --> 0:14:34.240 a final round, but just in thirty seconds. What's at 0:14:34.240 --> 0:14:36.560 stake here? If you don't see the Fed cutting rates 0:14:36.600 --> 0:14:38.400 this year, if that doesn't happen, how would you change 0:14:38.400 --> 0:14:39.960 how you advise the folks at kill point? 0:14:41.760 --> 0:14:48.320 Well, the economy is fundamentally okay, but the downward revision 0:14:48.560 --> 0:14:52.120 that we've had in GDP growth and some of the 0:14:52.200 --> 0:14:56.600 mixed signals in the labor market certainly generate concern. Now, 0:14:56.880 --> 0:15:01.440 earning's growth continues to be remarkably power positive and so 0:15:01.600 --> 0:15:05.960 on that front, we're certainly positive, but we're very cautious 0:15:06.040 --> 0:15:09.680 if the bet continues to hold tight and doesn't signal 0:15:09.800 --> 0:15:13.120 a willingness or desire to loose, and we think that'll 0:15:13.400 --> 0:15:17.000 that'll work poorly for the economy and ultimately financial markets. 0:15:17.080 --> 0:15:18.120 All Right, our wrapid round. 0:15:18.120 --> 0:15:19.600 As we get ready to wrap up, and I'm going 0:15:19.640 --> 0:15:21.960 to start with you, Steve Skanky, very quickly, what would 0:15:22.000 --> 0:15:24.240 be a surprise coming from the Fed tomorrow? 0:15:24.320 --> 0:15:25.600 And you do need to be quick. 0:15:27.880 --> 0:15:32.320 Well for for CPI to bump up and the dot 0:15:32.320 --> 0:15:38.360 plot to show a heavier orientation toward raising rates. 0:15:38.600 --> 0:15:41.640 Wow, that would be crazy, Steve Matthews, real quick. 0:15:42.800 --> 0:15:46.760 I'd say the dot plot showing just zero or one cut, 0:15:47.040 --> 0:15:50.880 and also for long term rights to in the dot 0:15:50.960 --> 0:15:54.160 plot to move up in the neutral so called neutral right. 0:15:54.280 --> 0:15:56.160 That would be our new narrative. Molly Smith save in 0:15:56.200 --> 0:15:57.160 the last thirty for you. 0:15:57.240 --> 0:15:59.560 Maybe if Powell were to say that the labor market 0:15:59.600 --> 0:16:02.160 is still tight, I think that would be a bit 0:16:02.520 --> 0:16:05.240 It would be questionable of how he would fully support that. 0:16:05.280 --> 0:16:06.840 I think there are a lot of other data points 0:16:06.840 --> 0:16:09.000 that would maybe suggest otherwise. 0:16:08.640 --> 0:16:10.960 Which is interesting, right, considering the missed signals in the 0:16:11.040 --> 0:16:13.520 labor market. If you comes out and the title you 0:16:13.560 --> 0:16:16.840 guys the trifecta. Molly Smith, Economics editor at Bloomberg News, 0:16:16.880 --> 0:16:18.760 right here in studio, Steve Matthews out there in our 0:16:18.760 --> 0:16:21.920 Atlanta bureau. He is our economics reporter, follows the Fed 0:16:21.960 --> 0:16:24.520 for US, and Steve Skanke, a regular guest here on 0:16:24.560 --> 0:16:27.600 Bloomberg business Week, chief Economic advisor at kill Point, former 0:16:27.720 --> 0:16:30.520 US Treasury and White House National Security Council staff member. 0:16:31.600 --> 0:16:35.120 You're listening to the Bloomberg Business Week podcast. Catch us 0:16:35.160 --> 0:16:38.400 live weekday afternoons from two to five pm Eastern Listen 0:16:38.440 --> 0:16:40.600 on Apple car Play and then brought auto with a 0:16:40.600 --> 0:16:45.800 Bloomberg Business app or want us live on YouTube. 0:16:46.600 --> 0:16:47.920 We do want to talk a little bit about Apple. 0:16:47.960 --> 0:16:49.480 It's your number one gainer in the S and P 0:16:49.560 --> 0:16:51.240 five hundred and the Nasdaq one hundred. 0:16:51.280 --> 0:16:51.800 What's interesting? 0:16:51.880 --> 0:16:55.560 Apple investors not impressed yesterday, and we also saw shares 0:16:55.600 --> 0:16:59.080 of some key Apple suppliers sinking overnight as well, following 0:16:59.160 --> 0:17:02.720 their big event that got underway yesterday. But as we said, 0:17:03.120 --> 0:17:06.280 very different tone. Apple shares at a record after that 0:17:06.320 --> 0:17:08.560 great AI reveal. We want to get to it though. 0:17:08.600 --> 0:17:10.240 Once again, I'm lucky for us to have back with 0:17:10.320 --> 0:17:13.480 us our own Bloomberg News Chief Technology correspondent markerm And, 0:17:13.480 --> 0:17:16.760 who continues to write about everything that we are getting 0:17:16.840 --> 0:17:19.119 from the event on Apple and just Apple in general. 0:17:19.359 --> 0:17:23.000 Mark out there in La. So Mark, what happened? Apple 0:17:23.040 --> 0:17:25.960 shares treated lower yesterday? We talked to you realing big 0:17:26.000 --> 0:17:29.159 time today when we talked kind of following the keynote, 0:17:29.240 --> 0:17:30.920 you said your view was that we kind of saw 0:17:31.000 --> 0:17:36.000 nothing better than or different from the competition except marketing 0:17:36.000 --> 0:17:37.240 and a focus on privacy. 0:17:37.320 --> 0:17:39.159 And I love something you said was that. 0:17:39.240 --> 0:17:41.119 They showed up to a party without a gift. It 0:17:41.160 --> 0:17:44.359 was like something we thought just said so much. So 0:17:44.400 --> 0:17:45.960 what's happened in the last twenty four hours. 0:17:47.560 --> 0:17:50.639 Well, like I said, they rolled out a bunch of 0:17:50.680 --> 0:17:54.240 new AI features with a privacy stance, with deep integration 0:17:54.320 --> 0:17:58.080 into their applications. They didn't bring anything new to the party, 0:17:58.400 --> 0:18:00.720 but they did it in an Apple way. But the 0:18:00.760 --> 0:18:03.119 most important part is they showed up to the party, 0:18:03.320 --> 0:18:06.040 I guess. And it took investors in Wall Street sometimes 0:18:06.320 --> 0:18:09.000 to realize that Apple is now here with or without 0:18:09.000 --> 0:18:12.560 something new. They've arrived. The concern on Wall Street was 0:18:12.600 --> 0:18:14.800 that Apple would never show up, or they wouldn't show 0:18:14.840 --> 0:18:17.080 up for a couple more years from now. But they 0:18:17.119 --> 0:18:19.000 worked as fast as they can. It was a year 0:18:19.000 --> 0:18:21.879 and a half for cleaning effort to get Apple Intelligence 0:18:21.880 --> 0:18:24.960 to market. They had all these AI features under development, 0:18:25.280 --> 0:18:28.560 but no synthesized, no integrated package, so it took a 0:18:28.560 --> 0:18:30.960 while to put it all together. And they did that. 0:18:31.240 --> 0:18:34.280 And it's not going to sell new iPhones. I believe 0:18:34.680 --> 0:18:39.359 it may spur a small number of upgrades, but more importantly, 0:18:39.640 --> 0:18:42.159 it's going to lock people into the ecosystem. They're going 0:18:42.240 --> 0:18:44.840 to keep their existing userpace and they're not going to 0:18:44.920 --> 0:18:48.600 lose people away to Android and other AI driven platforms 0:18:48.640 --> 0:18:51.439 because they did this, so it was critically important for 0:18:51.480 --> 0:18:53.920 them to do it, regardless of the fact that nothing 0:18:53.960 --> 0:18:56.359 they brought to the table here is especially new. 0:18:56.320 --> 0:18:58.600 Mark, why don't you think this is sort of a 0:18:58.680 --> 0:19:01.800 huge prompt for a suit recycle upgrade here? Why don't 0:19:01.840 --> 0:19:03.879 you think it's as big as adding five G to 0:19:03.960 --> 0:19:05.040 the phone for example? 0:19:06.840 --> 0:19:09.200 You know, quite frankly, I didn't think five G was 0:19:09.240 --> 0:19:13.040 a supercycle moment either, and it you know it, it 0:19:13.200 --> 0:19:16.040 turned out that way. I mean, iPhone sales growth has 0:19:16.080 --> 0:19:19.119 been stagnant even prior to the five G iPhone. But 0:19:19.600 --> 0:19:22.399 like with AI, with five G did is it kept 0:19:22.440 --> 0:19:25.240 people within the ecosystem and it didn't allow people to 0:19:25.280 --> 0:19:28.120 switch away to rival products that had five G while 0:19:28.119 --> 0:19:30.879 Apple didn't. And so AI is in the same nature. 0:19:31.080 --> 0:19:34.119 It's going to keep people within the ecosystem. I don't 0:19:34.160 --> 0:19:37.119 think if someone has an iPhone fourteen pro today that 0:19:37.160 --> 0:19:40.000 they're going to upgrade to the iPhone sixteen just because 0:19:40.000 --> 0:19:43.639 of those AI features, right. I think that down the line, 0:19:43.760 --> 0:19:45.720 a year or two from now, when they're ready to upgrade, 0:19:45.880 --> 0:19:48.120 that's going to ensure that upgrade happens. 0:19:48.280 --> 0:19:49.920 I'm going to say that my household were a bunch 0:19:49.920 --> 0:19:52.119 of tech simpletons, because I think the five G we do, 0:19:52.240 --> 0:19:54.680 the upgrades on the Apple Phone were still back. 0:19:54.720 --> 0:19:55.760 There is that where you are. 0:19:56.080 --> 0:19:58.200 I'm at a twelve and I'm getting ready to upgrade this. 0:19:58.200 --> 0:20:00.280