WEBVTT - Instant Reaction: Inflation Data 0:00:02.600 --> 0:00:06.960 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.480 --> 0:00:11.719 I'm Nathan Hager in New York, and we are getting 0:00:11.760 --> 0:00:16.720 some breaking economic data crossing the Bloomberg terminal Personal Consumption 0:00:16.960 --> 0:00:21.200 Expenditures Price Index for February. This is the Fed's preferred 0:00:21.360 --> 0:00:24.919 gage of inflation. It comes in at two point eight 0:00:25.000 --> 0:00:28.520 percent on a year over year basis. That is the 0:00:28.560 --> 0:00:33.279 core deflator, which leaves out housing rents, which is very 0:00:33.360 --> 0:00:36.440 volatile in terms of the price pressures that we see. 0:00:37.080 --> 0:00:41.479 The personal income deflator for the month of February on 0:00:41.520 --> 0:00:44.960 a month over month basis comes in at three tenths 0:00:45.000 --> 0:00:48.040 of one percent. That was just shy of what economists 0:00:48.040 --> 0:00:51.199 surveyed by Bloomberg we're expecting on a four tenths of 0:00:51.240 --> 0:00:56.000 one percent read, so that's unchanged from the month of January. 0:00:56.480 --> 0:00:59.720 Personal income comes in a little light at three tenths 0:00:59.720 --> 0:01:03.600 of one one percent, that's down from one percent in January. 0:01:03.920 --> 0:01:07.720 And personal spending comes in at eight tenths of one percent. 0:01:08.360 --> 0:01:11.680 That's quite a bit higher than economists surveyed by Bloomberg 0:01:11.720 --> 0:01:14.320 had been expecting, and a big jump from a two 0:01:14.400 --> 0:01:17.240 tenths of one percent read in January. Let's bring in 0:01:17.480 --> 0:01:22.640 Bloomberg's International Economics and Policy correspondent Mike McKee with a 0:01:22.680 --> 0:01:26.880 little bit more context on these numbers. In terms of 0:01:26.920 --> 0:01:29.600 the PC to flavor MIC, it looks like it comes 0:01:29.680 --> 0:01:31.840 in bang in line with expectations. 0:01:33.319 --> 0:01:36.319 The headline number is a little bit lower three tenths 0:01:36.360 --> 0:01:39.480 than was expected at four tenths was the consensus, but 0:01:39.760 --> 0:01:44.120 of course this is very tight numbers and rounding is 0:01:44.160 --> 0:01:47.560 probably involved here. We did see inflation revised up on 0:01:47.600 --> 0:01:51.400 a month over month basis for January from three tenths 0:01:51.400 --> 0:01:54.040 to four tenths, so we do see a decline there 0:01:54.200 --> 0:01:56.280 in the month over month, but the year over year 0:01:56.440 --> 0:02:00.640 rises a little bit from two point forward a two 0:02:00.680 --> 0:02:05.000 point five percent. That's probably base effects. The core comes 0:02:05.040 --> 0:02:09.360 in much lower than the prior month. In January it 0:02:09.440 --> 0:02:12.080 was up half a percent, now it's only up three tenths, 0:02:12.440 --> 0:02:15.680 and the core deflator on a year over year basis 0:02:15.760 --> 0:02:18.160 is down to tick two point eight percent for two 0:02:18.200 --> 0:02:20.960 point nine percent, so it's sort of a mixed picture here. 0:02:21.480 --> 0:02:25.600 In terms of prices, goods prices increased about half a percent, 0:02:26.000 --> 0:02:29.280 prices for services increased three tenths of a percent. Now, 0:02:29.360 --> 0:02:33.519 goods prices had been the major deflationary force over the 0:02:33.600 --> 0:02:36.760 last several months. So the fact that goods prices increased 0:02:37.120 --> 0:02:40.080 not particularly good news. We'll look for the breakdown on 0:02:40.800 --> 0:02:44.400 what happened. Their energy prices were up two point three percent, 0:02:44.720 --> 0:02:47.840 so that was the major problem. I think. With the 0:02:48.120 --> 0:02:51.480 good side, food prices increased just a tenth of eight percent, 0:02:51.600 --> 0:02:56.079 so good news there. So it looks Nathan like it's 0:02:56.080 --> 0:02:59.160 sort of a mixed picture. It is a little bit 0:02:59.240 --> 0:03:03.680 better than anticipated, but for the Fed it is not 0:03:03.919 --> 0:03:06.920 enough to push them to want to make any changes 0:03:06.960 --> 0:03:08.880 in their timing for rate cuts. 0:03:09.080 --> 0:03:12.000 Let's talk a little bit about the revisions as well, Mike. 0:03:12.040 --> 0:03:14.640 We've got those numbers just coming in as well. 0:03:16.520 --> 0:03:20.520 Yes, as I mentioned the personal spending numbers and eight 0:03:20.560 --> 0:03:24.960 tenths unrevised real personal spending, though was revised a little 0:03:25.040 --> 0:03:29.360 bit lower from a last month inflation adjusted basis. In 0:03:29.480 --> 0:03:33.080 January was down two tenths. It had originally been reported 0:03:33.120 --> 0:03:37.840 down one tenth and now it's up four tenths for February. 0:03:37.920 --> 0:03:42.280 So again, that is a good news number for the 0:03:42.320 --> 0:03:46.120 Fed and for probably the White House because it shows 0:03:46.160 --> 0:03:51.000 that people are getting a little bit ahead of inflation. 0:03:51.440 --> 0:03:54.960 So let's talk a little bit more about what's driving 0:03:55.560 --> 0:03:58.920 these latest numbers right now. You mentioned that the goods 0:03:59.160 --> 0:04:02.040 side of the inflation picture came in a little bit 0:04:02.240 --> 0:04:06.000 hotter in terms of the fact that this seems to 0:04:06.040 --> 0:04:08.640 be coming in as a mixed read. What does that 0:04:08.720 --> 0:04:12.160 tell us about how the Fed could react. 0:04:14.080 --> 0:04:16.960 Well, they're going to look past this, They're gonna take 0:04:17.000 --> 0:04:20.400 it on board, but they don't meet again until May first, 0:04:20.480 --> 0:04:24.200 so they'll have another indicator for the March numbers just 0:04:24.279 --> 0:04:27.720 before their meeting at the end of March, and if 0:04:27.760 --> 0:04:30.920 they see this kind of progress, it's probably not going 0:04:31.000 --> 0:04:33.960 to be enough to get them to make any kind 0:04:34.000 --> 0:04:38.240 of moves in May. We're still seeing the inflation numbers 0:04:38.320 --> 0:04:41.000 a little bit on the high side for them. They 0:04:41.160 --> 0:04:44.919 use the PCE as their target, and their target of 0:04:44.920 --> 0:04:47.880 course two percent, and now they're two and a half percent, 0:04:47.960 --> 0:04:50.440 so they'd want to see more progress there. They'd want 0:04:50.440 --> 0:04:53.680 to see more progress on the core deflator, because the 0:04:53.720 --> 0:04:56.560 only reason it looks better today is because it was 0:04:56.640 --> 0:04:58.400 revised up in January. 0:04:59.080 --> 0:05:02.960 Bloomberg Internet National Economics and Policy correspondent Michael McKee with 0:05:03.080 --> 0:05:07.760 us as we continue to analyze this preferred gauge of 0:05:07.800 --> 0:05:11.800 inflation for the Federal Reserve. The PC deflator coming in 0:05:12.000 --> 0:05:15.600 a little bit hotter than expected, with two and a 0:05:15.640 --> 0:05:20.040 half percent year over year read in terms of the 0:05:20.080 --> 0:05:25.280 headline number, and three tenths of one percent also unchanged 0:05:25.600 --> 0:05:28.680 on a month over month basis from the month of January. 0:05:28.800 --> 0:05:30.160 Let's get some more analysis. 0:05:30.160 --> 0:05:30.280 Now. 0:05:30.360 --> 0:05:33.800 We're joined by Tom Porcelli, the chief US economist at 0:05:33.880 --> 0:05:37.000 p GYM Fixed Income. Tom, great to have you with 0:05:37.080 --> 0:05:40.560 us on this good Friday. Your reaction to these numbers, Yeah. 0:05:40.400 --> 0:05:43.520 I mean, look, I think Mike has always nailed it. 0:05:43.520 --> 0:05:45.360 I mean I think that it's sort of a mixed 0:05:45.400 --> 0:05:47.920 bag here. You know. I think people will look at 0:05:47.920 --> 0:05:50.360 the spending number and I think, you know, let's say, hey, 0:05:50.400 --> 0:05:52.160 you know, the consumer is really sort of crushing it 0:05:52.200 --> 0:05:56.520 here in Q one. But the reality is, I mean 0:05:56.520 --> 0:05:59.200 this came with a drawdown in saving, an additional drawdown 0:05:59.200 --> 0:06:01.920 in saving, which is you know again it's it's it's 0:06:01.920 --> 0:06:05.200 sustainable only to a point, you know, and and and 0:06:05.240 --> 0:06:07.560 so I don't like that you have this big burst 0:06:07.600 --> 0:06:10.000 in spending with income that was, you know, sort of 0:06:10.040 --> 0:06:13.040 fairly modest. Now again, I would say to the mixed 0:06:13.120 --> 0:06:15.760 bag idea, if you look at wages. Wages were pretty 0:06:15.839 --> 0:06:20.120 pretty decent. But you know the problem for me, and 0:06:20.200 --> 0:06:21.880 you know, this is something we've been flagging if you 0:06:21.960 --> 0:06:24.360 just look at disposable income, right, I mean, that's really 0:06:24.360 --> 0:06:27.000 where the rubber meets the road on this, you know, 0:06:27.040 --> 0:06:31.560 disposable income, real disposal income to be specific. You know, 0:06:31.640 --> 0:06:34.320 it's it's it's been flat. I mean it actually it 0:06:34.360 --> 0:06:37.479 fell slightly month on months in this report, but you 0:06:37.480 --> 0:06:40.200 know it's been pretty flat now over the last couple 0:06:40.200 --> 0:06:43.320 of months. That again, I think just speaks to sort 0:06:43.360 --> 0:06:46.160 of the long term sustainability of you know, sort of 0:06:46.200 --> 0:06:48.120 the kind of consumption numbers that we've seen over the 0:06:48.200 --> 0:06:50.560 last couple of quarters, which is to say, we don't 0:06:50.640 --> 0:06:52.359 think you know, you're you're looking at a sort of 0:06:52.360 --> 0:06:54.720 a ripping backdrop here. I mean, I think things are 0:06:54.720 --> 0:06:56.560 just sort of just moving along at a sort of 0:06:56.600 --> 0:06:58.960 a you know, a decent pace. It's been our call, 0:06:59.040 --> 0:07:01.239 you know that that twenty four would be a pretty 0:07:01.279 --> 0:07:04.080 reasonable year from a growth perspective. But I think there's 0:07:04.200 --> 0:07:07.120 enough in here and enough being happening that we know, 0:07:07.160 --> 0:07:09.640 we sort of wonder about the ability for the consumer 0:07:09.680 --> 0:07:13.160 to really sort of press this meaningfully. More from here. 0:07:13.440 --> 0:07:16.680 The last thing I'll say on the inflation numbers. You know, look, 0:07:16.920 --> 0:07:20.360 I think they basically came in as was expected, particularly 0:07:20.400 --> 0:07:23.679 on the core. You know, core was a three tenths 0:07:23.680 --> 0:07:25.520 and it actually rounded up to three tenths. You know, 0:07:25.560 --> 0:07:28.280 it was actually point two six again for whatever that's worth. 0:07:28.720 --> 0:07:31.240 But I think this is the kind of movement that 0:07:31.360 --> 0:07:33.000 you know, we've been expecting. I think this is the 0:07:33.080 --> 0:07:35.120 kind of movement that the Fed continues to expect. So 0:07:35.160 --> 0:07:37.880 I think unbalanced, there's no big surprises here. I mean, 0:07:37.920 --> 0:07:39.760 I think whatever you thought about the sort of the 0:07:39.760 --> 0:07:41.880 backdrop before this number, I think you're going to continue 0:07:41.880 --> 0:07:42.240 to think that. 0:07:44.240 --> 0:07:46.440 Oh right up in Tom with a couple of numbers 0:07:46.440 --> 0:07:48.320 to lead people up to speed on some of the 0:07:48.320 --> 0:07:50.560 things that you're saying here. Wages and salaries were up 0:07:50.560 --> 0:07:53.520 eight tenths, which is a very large gain after three 0:07:53.560 --> 0:07:59.520 tenths in January. Interestingly enough, because the market has risen 0:07:59.680 --> 0:08:01.840 so much much, we should have seen I would have 0:08:01.840 --> 0:08:06.160 thought more income on assets, but personal interest income fell 0:08:06.280 --> 0:08:10.600 four tenths and dividend income down by three point seven percent. 0:08:10.840 --> 0:08:14.120 So I guess people aren't selling at this point, they're 0:08:14.120 --> 0:08:19.040 just reinvesting. You mentioned the real personal disposable income. It 0:08:19.120 --> 0:08:22.200 was down a tenth after being flat last month. That's 0:08:22.200 --> 0:08:25.760 the first decline since September. So you're right about the 0:08:25.800 --> 0:08:29.560 issue here of whether or not we're seeing people continually 0:08:29.720 --> 0:08:33.920 able to spend. It looks like from their from their 0:08:33.960 --> 0:08:37.600 wages and salaries they can. You mentioned the savings rate 0:08:37.800 --> 0:08:40.520 three point six percent compared to four point one percent, 0:08:40.760 --> 0:08:44.280 which is more important the savings rate or raises in 0:08:44.320 --> 0:08:45.360 your weekly paycheck. 0:08:46.080 --> 0:08:48.880 Yeah, I mean, you know, they obviously both matter. I 0:08:48.960 --> 0:08:51.079 mean they matter for different reasons, though, I think that's 0:08:51.120 --> 0:08:55.040 a really important idea. It's it's great that, you know, 0:08:55.400 --> 0:08:59.920 we continue to see income at large, right through through wages, 0:09:00.000 --> 0:09:02.160 through the wage channel, continue to move along at a 0:09:02.240 --> 0:09:05.920 at a pretty reasonable pace. But again, this this I 0:09:05.960 --> 0:09:07.800 think you know, we're trying to think big picture here. 0:09:08.040 --> 0:09:12.000 So the big picture thesis is, well, look, how has 0:09:12.000 --> 0:09:15.600 the consumer been driving spending. And they've been driving spending 0:09:15.720 --> 0:09:18.520 through a combination of drawing down saving and then again 0:09:18.520 --> 0:09:20.560 we're not talking about the excess savings thing, right that 0:09:20.559 --> 0:09:23.480 that long that story is long since gone. But you 0:09:23.480 --> 0:09:25.719 know what we're talking about now is cutting into the 0:09:25.760 --> 0:09:28.720 muscle of saving and so if you look at you know, 0:09:28.760 --> 0:09:31.400 sort of the bottom ninety nine percent, right, so just 0:09:31.440 --> 0:09:34.720 excluding the top one percent, what you see is that 0:09:35.800 --> 0:09:38.960 saving is now below where you would have been in 0:09:39.040 --> 0:09:42.680 a sort of a pre COVID baseline estimate. You know, 0:09:42.760 --> 0:09:45.160 that to me is noteworthy. And then you have to 0:09:45.200 --> 0:09:47.240 also consider there's sort of the other channel through which 0:09:47.280 --> 0:09:50.360 the consumer has really been able to sort of drive spending, 0:09:50.400 --> 0:09:54.040 and that's that's through credit usage, which again you know 0:09:54.080 --> 0:09:57.880 these are these are things that can persist, but you 0:09:57.920 --> 0:10:00.480 know that that this is not necessarily the healthy way 0:10:01.000 --> 0:10:02.280 of doing that spending. 0:10:03.360 --> 0:10:06.439 And just to reiterate, the Fed's preferred gauge of underlying 0:10:06.440 --> 0:10:10.360 inflation did cool last month after an even bigger January increase. 0:10:10.679 --> 0:10:13.800 When you factor in the revisions, the core Personal Consumption 0:10:13.880 --> 0:10:17.720 Expenditures price index stripping out food and energy increased three 0:10:17.800 --> 0:10:22.520 tenths percent from January, following a half percent reading in January. 0:10:23.040 --> 0:10:24.559 That was the biggest back to back gain in the 0:10:24.679 --> 0:10:28.640 year two point eight percent on a year over year basis. 0:10:29.040 --> 0:10:33.280 Nathan Hager in New York with more analysis of these 0:10:33.480 --> 0:10:38.520 inflation numbers and talking about the spending that we continue 0:10:38.559 --> 0:10:42.280 to see in this economy, the consumer continuing to hold up. 0:10:42.360 --> 0:10:45.720 Is there still a concern Tom that that is being 0:10:45.960 --> 0:10:51.520 driven by credit card usage by pulling into debt and 0:10:52.160 --> 0:10:56.360 can savings bolster that when we have the kind of 0:10:56.480 --> 0:11:01.160 inflation of elevated interest rates that we're seeing in this 0:11:01.240 --> 0:11:02.160 economy right now. 0:11:02.600 --> 0:11:04.679 Yeah, it can, it can it can persist. I mean 0:11:04.720 --> 0:11:08.200 we've seen this right historically. I mean to say, if 0:11:08.280 --> 0:11:10.640 if the consumer wants, they could draw down saving to zero, 0:11:11.440 --> 0:11:13.520 you know, in over three point six percent, So so 0:11:13.600 --> 0:11:16.800 it can certainly happen, and I think it can persist. 0:11:16.880 --> 0:11:18.679 And I think, you know, if I think about our 0:11:18.720 --> 0:11:22.640 forecast for this year and even into next year, you know, 0:11:22.720 --> 0:11:24.320 I think you're looking at a sort of you know, 0:11:24.360 --> 0:11:27.280 well again what will be sort of a trend like growth. 0:11:27.679 --> 0:11:30.600 So I have no I have no challenge with the 0:11:30.640 --> 0:11:32.760 actual numbers. What I have the challenge. What I have 0:11:32.760 --> 0:11:36.360 a challenge with is is how it's being achieved, because 0:11:36.400 --> 0:11:38.720 that that that's not enduring, right, I mean, you don't, 0:11:38.760 --> 0:11:42.120 you don't you don't generate and enduring you know, slash 0:11:42.280 --> 0:11:47.240 lasting economic expansion when when when that's doing the driving 0:11:47.559 --> 0:11:49.440 I think what we need to really look to is 0:11:49.520 --> 0:11:51.559 the sort of the labor backdrop, and look, I think 0:11:51.559 --> 0:11:55.319 that there's certainly some slowing that's taking place in pockets 0:11:55.800 --> 0:11:58.160 of the labor backdrop. I think that's, you know, been 0:11:58.200 --> 0:12:03.040 pretty apparent now for the lack tendful of months. I 0:12:03.080 --> 0:12:08.880 am encouraged by the wages and salaries increase. We'll want 0:12:08.920 --> 0:12:11.440 to dig into that more just to sort of see 0:12:11.480 --> 0:12:14.360 what the details were on the back of this number. 0:12:15.160 --> 0:12:18.800 But that kind of story for us really sort of 0:12:18.800 --> 0:12:20.920 fits snugly into our view. I mean, we think you 0:12:20.920 --> 0:12:22.520 can easily run at a one and a half to 0:12:22.520 --> 0:12:24.720 two percent pace this year, and I don't see any 0:12:24.760 --> 0:12:27.880 reason to sort of alter that view at this point. 0:12:27.920 --> 0:12:30.920 We had a little something here on the markets because 0:12:30.920 --> 0:12:34.839 we talked about how dividend and interest income was down 0:12:35.000 --> 0:12:39.240 during the month. We also see that the contributions to 0:12:39.400 --> 0:12:43.800 inflation from Wall Street are down significantly, I guess because 0:12:44.320 --> 0:12:48.320 maybe everybody's just reinvesting and not taking profits. But financial 0:12:48.360 --> 0:12:52.679 services fees and commissions just up a tenth of a 0:12:52.920 --> 0:12:56.880 percent after rising more than two percent last month, So 0:12:57.480 --> 0:13:01.480 a little bit less inflation pressure coming out of Wall Street. 0:13:01.559 --> 0:13:04.200 What we had called the pogo problem. As we do 0:13:04.320 --> 0:13:09.400 well on Wall Street, it increases inflation. But that brings 0:13:09.480 --> 0:13:13.360 up another question for you, Tom, and that is the 0:13:13.400 --> 0:13:16.840 wealth effect. The FED worries that the wealth effect is 0:13:17.240 --> 0:13:21.720 going to drive the economy longer. Do we see that 0:13:21.880 --> 0:13:26.280 really from the gains that we have seen in equity markets? 0:13:26.360 --> 0:13:29.040 Are people out spending that money or is that a 0:13:29.120 --> 0:13:32.440 subset of people who are making money who don't really 0:13:32.440 --> 0:13:36.520 have a marginal propensity to consume that is all that 0:13:36.679 --> 0:13:37.920 very high? 0:13:38.280 --> 0:13:40.960 So I will say that I believe in the wealth 0:13:40.960 --> 0:13:44.600 effect in the extremes, and I think it's very fair 0:13:44.640 --> 0:13:46.760 to say that we're in an extreme. I mean, if 0:13:46.800 --> 0:13:49.720 you think about sort of the single biggest asset for 0:13:49.840 --> 0:13:52.680 most people in this country, the single biggest outset at 0:13:52.679 --> 0:13:55.440 their house. And I think what people see is that 0:13:55.480 --> 0:13:58.640 their home prices have accelerated and accelerated in a very 0:13:58.679 --> 0:14:01.200 notable way. And I don't doubt for second that that 0:14:01.400 --> 0:14:05.079 feeds into this sort of hey, you know, I'm actually 0:14:05.160 --> 0:14:09.160 doing pretty good here, and that emboldens people to continue 0:14:09.160 --> 0:14:12.520 to go out and feel comfortable spending. Of course, I 0:14:12.520 --> 0:14:15.080 think what we have to recognize is it's great that 0:14:15.120 --> 0:14:17.360 home prices have written as much as they have, but 0:14:17.640 --> 0:14:20.920 you know, any of that home equity is trapped, right, 0:14:21.040 --> 0:14:24.080 This trapped because we're in a higher rate environment and 0:14:24.720 --> 0:14:28.280 it becomes incredibly complicated or very expensive for people to 0:14:28.280 --> 0:14:32.760 basically extract that money. So you know, again, i'd be 0:14:32.800 --> 0:14:35.640 careful with that idea. I mean again, I don't doubt 0:14:35.640 --> 0:14:39.840 for a second that it's happening, but it's paper wealth 0:14:40.480 --> 0:14:43.520 because because of high rates, no one can extract any 0:14:43.560 --> 0:14:43.760 of that. 0:14:44.960 --> 0:14:46.600 And tom as you know, we're going to be hearing 0:14:46.720 --> 0:14:49.280 from Chairman Powell in just a couple hours here eleven 0:14:49.360 --> 0:14:51.320 thirty am Wall Street time. He's going to be taking 0:14:51.320 --> 0:14:54.720 part in a moderated discussion. Do you expect these numbers 0:14:54.720 --> 0:14:57.080 are really going to change the message that we hear 0:14:57.600 --> 0:15:01.120 from Powell? As he's sounded a little at least a 0:15:01.160 --> 0:15:06.680 little bit more comfortable with the way the inflation roadmap 0:15:06.680 --> 0:15:07.840 has been going up to this point. 0:15:08.160 --> 0:15:10.600 Yeah, that's it's a resounding no. I mean that these 0:15:10.680 --> 0:15:14.200 numbers will not change anything for Powell. He literally just 0:15:14.240 --> 0:15:18.000 spoke there will be no reason for him to alter 0:15:18.160 --> 0:15:21.520 any of his messaging. Again, I think you know, this 0:15:21.560 --> 0:15:24.760 is something that they were looking for, particularly this core deflator, 0:15:25.120 --> 0:15:27.440 you know, hovering here at it now at two eight 0:15:28.520 --> 0:15:30.120 I think that this is this is the path that 0:15:30.120 --> 0:15:33.120 they were expecting from from an inflation perspective, and you know, 0:15:33.160 --> 0:15:35.520 and and again, I think the one thing that really 0:15:35.560 --> 0:15:38.760 came through very loud and clear during his last press 0:15:38.800 --> 0:15:42.080 conference was this this idea of over time, right. He 0:15:42.160 --> 0:15:44.680 kept on saying. In fact, I think he literally even said, 0:15:44.680 --> 0:15:49.480 we stress over time inflation will improve. Uh. And he 0:15:49.480 --> 0:15:51.960 said the multiple times. And I think that that that 0:15:51.960 --> 0:15:54.960 that fits very nicely with the numbers that we just saw. 0:15:55.960 --> 0:16:00.200 It is continuing to prove improve over time. I think 0:16:00.200 --> 0:16:01.760 the other thing that was really interesting, and this is 0:16:01.760 --> 0:16:04.880 probably more micro, but on Powell, I thought it was 0:16:04.880 --> 0:16:07.360 really interesting that he was that he acknowledged sort of 0:16:07.440 --> 0:16:09.800 these these base effects that we're going to start to 0:16:09.800 --> 0:16:11.920 bump up against in the second half of the year. 0:16:12.920 --> 0:16:14.960 You know, it's it's going to be a challenge for 0:16:14.960 --> 0:16:18.480 for inflation to really improve in earnest from a month 0:16:18.480 --> 0:16:20.840 on month perspective, because you're going to have these easy 0:16:20.920 --> 0:16:23.880 year ago comps, excuse me, these unfavorable year ago comps 0:16:24.440 --> 0:16:26.320 in the second half of the year. So if you 0:16:26.360 --> 0:16:28.400 think about excuse me, if you think about sort of 0:16:28.400 --> 0:16:32.520 a direction of inflation, you know, you'll continue to drift lower. 0:16:32.560 --> 0:16:34.400 I mean, here we are at what two seven or 0:16:34.400 --> 0:16:36.920 excuse me, two eight rounds up to two eight, and 0:16:36.960 --> 0:16:39.400 I think you'll get probably down to a round two 0:16:39.480 --> 0:16:43.160 four ish in the next few months. But as you 0:16:43.240 --> 0:16:45.600 roll into the second half of the year, it's going 0:16:45.640 --> 0:16:47.920 to start to accelerate again. You know, you can get 0:16:47.960 --> 0:16:50.480 easily back up to about two point seven percent after 0:16:50.600 --> 0:16:52.560 hitting two point four percent around middle of the year, 0:16:52.640 --> 0:16:55.680 just because of comps and I and one of the 0:16:55.680 --> 0:16:57.800 reasons why I love that he said that is because 0:16:58.200 --> 0:17:00.400 he's I think, you know, trying to pre empt what 0:17:00.840 --> 0:17:03.640 could be what will be a conversation around hey, but 0:17:03.720 --> 0:17:07.080 inflation is accelerating again. But again it's important to note 0:17:07.119 --> 0:17:11.000 that it's comp challenge, you know, that's and just to 0:17:11.000 --> 0:17:13.160 be clear, sorry to make sure this is abundantly clear. 0:17:13.720 --> 0:17:16.600 If you print two tents month on month between now 0:17:16.600 --> 0:17:18.920 and the end of the year, that's how those year 0:17:18.920 --> 0:17:20.800 ago comps will unfold. You'll get it down to his 0:17:20.840 --> 0:17:22.920 lowes two four, and then you can get that bounced 0:17:22.960 --> 0:17:25.080 back up to around two seven. So I like that 0:17:25.119 --> 0:17:27.560 he's sort of, you know, trying to draw attention to that. 0:17:28.040 --> 0:17:30.320 But again, yes to The short answer to your question 0:17:30.400 --> 0:17:32.639 is no, I don't think that there's anything here that 0:17:32.680 --> 0:17:36.679 will that will alter his his view on what he already. 0:17:36.440 --> 0:17:38.720 Said, and we will get that message at eleven thirty 0:17:38.720 --> 0:17:42.320 am Wall Street Time live coverage of Chairman Powell's moderated 0:17:42.359 --> 0:17:46.680 remarks at the San Francisco Fed later on this morning. Tom, 0:17:46.720 --> 0:17:49.200 thanks for being with us as we dig a little 0:17:49.200 --> 0:17:53.000 deeper into this latest inflation data. Tom Porcelli there, the 0:17:53.200 --> 0:17:56.639 chief US economist at PGIM Fixed Income, and I'm Nathan 0:17:56.680 --> 0:18:00.480 Hayger along with Bloomberg International Economics and Policy Corps. Responded 0:18:00.840 --> 0:18:03.720 Michael McKee. As we continue to get some more analysis 0:18:04.160 --> 0:18:07.919 of the PCE deflator. We're joined now by Sarah House, 0:18:08.040 --> 0:18:12.520 the senior economist at Wells Fargo. So it seems, Sarah, 0:18:12.640 --> 0:18:15.679 a bit of a mixed bag. The bumpy road to 0:18:15.760 --> 0:18:18.959 disinflation seems to continue following these numbers. 0:18:18.960 --> 0:18:22.119 Your thoughts, Yeah, I think that's right, especially when we 0:18:22.160 --> 0:18:24.520 look at inflation. So we did see some bumps in 0:18:24.600 --> 0:18:28.080 terms of the underlying movers shift around a bit. So 0:18:28.240 --> 0:18:31.280 this month we actually saw some more moderation in terms 0:18:31.280 --> 0:18:34.000 of the services side, but you did see the goods 0:18:34.040 --> 0:18:36.600 inflation pick up a little bit on a month of 0:18:36.640 --> 0:18:39.600 a month basis, which again I think just speaks to 0:18:39.840 --> 0:18:41.760 that month a month. You are going to see some 0:18:42.320 --> 0:18:46.760 volatility in these numbers, but I think overall you're still 0:18:46.760 --> 0:18:50.399 seeing signs of at least the overall trend grinding lower. 0:18:50.440 --> 0:18:52.600 But it's certainly a slow grind that we're seeing. 0:18:55.119 --> 0:18:59.640 It's Michael McKee. I'm looking at the super core number 0:18:59.720 --> 0:19:02.000 for pee. We haven't talked about that yet this morning, 0:19:02.000 --> 0:19:04.480 and on a month over a month basis, it's up 0:19:04.600 --> 0:19:07.879 by two tenths after seven tenths gained the month before. 0:19:07.960 --> 0:19:10.800 So that's probably going to make the Fed and j 0:19:11.000 --> 0:19:14.360 POL happy because they've been particularly worried about services prices. 0:19:15.240 --> 0:19:17.200 Yeah, I think that's at least one of the more 0:19:17.280 --> 0:19:20.600 encouraging developments of this morning's data in terms of the 0:19:20.640 --> 0:19:25.560 inflation trajectory. But when we think about the services side, 0:19:25.600 --> 0:19:28.119 you know, we really do need this to start shipping 0:19:28.160 --> 0:19:32.320 in more so. We've had significant goods goods disinflation over 0:19:32.359 --> 0:19:33.960 the past year. So if you look at just the 0:19:35.119 --> 0:19:37.880 change in the year of rear rates of inflation, basically 0:19:37.880 --> 0:19:40.040 two thirds of it has had two thirds of the 0:19:40.080 --> 0:19:43.040 decline has come from the good side, and so given 0:19:43.080 --> 0:19:45.760 how big a share services is, we need to see 0:19:45.760 --> 0:19:49.120 that to clerate more. So this is a good month, 0:19:49.560 --> 0:19:51.640 but the Fed's certainly going to need to see more 0:19:51.800 --> 0:19:56.159 months like this in terms of that services inflation subsiding 0:19:56.200 --> 0:19:56.680 a little bit. 0:19:57.200 --> 0:19:57.760 Well, what's the. 0:19:57.680 --> 0:20:00.919 Outlook then about whether we are going to more months 0:20:01.000 --> 0:20:03.800 like this. Something else we haven't talked about is the 0:20:03.880 --> 0:20:07.040 disruption at the port of Baltimore after the bridge collapse, 0:20:07.080 --> 0:20:10.800 and think about what effect that could have on goods 0:20:10.800 --> 0:20:13.960 inflation down the line. I mean, is that something that 0:20:14.000 --> 0:20:15.280 we can factor in at this point. 0:20:16.160 --> 0:20:18.280 I think it's really hard to put a number around 0:20:18.280 --> 0:20:20.320 what that's going to do, but I think it certainly 0:20:20.359 --> 0:20:25.840 doesn't help in terms of seeing further goods deflation or 0:20:25.880 --> 0:20:28.800 at least a still pretty low rate of goods inflation. 0:20:29.040 --> 0:20:31.680 So it's just one more hurdle. We've seen a lot 0:20:31.720 --> 0:20:35.760 of the benefits from the initial unwinding of supply chains 0:20:35.800 --> 0:20:38.359 already feed through, and we look at even before we 0:20:38.400 --> 0:20:42.680 saw this Baltimore bridge collapse, that supply chain pressures have 0:20:43.119 --> 0:20:46.520 really neutralized. So I think when we look out over 0:20:46.560 --> 0:20:48.920 the course of this year, you aren't going to see 0:20:48.960 --> 0:20:52.760 as much help coming from the goods side in terms 0:20:52.840 --> 0:20:55.360 of in terms of the core, and so again that 0:20:55.440 --> 0:20:57.479 means that services are going to have to pick up 0:20:57.480 --> 0:20:59.160 the baton and we are going to need to see 0:20:59.560 --> 0:21:02.399 more inflation coming from the services side if we're going 0:21:02.480 --> 0:21:04.159 to keep moving back towards two percent. 0:21:06.680 --> 0:21:08.560 So is there much more that the FED can do 0:21:09.240 --> 0:21:13.840 to get that services side of the equation down? 0:21:15.480 --> 0:21:18.119 I think so. They've had a lot of help in 0:21:18.200 --> 0:21:20.679 terms of the supply side on services too, when we 0:21:20.720 --> 0:21:23.400 think about the labor market and just how much we've 0:21:23.400 --> 0:21:26.240 seen labor force growth improve, and that's been a big 0:21:26.280 --> 0:21:30.719 help in terms of reducing those wage pressures. But when 0:21:30.760 --> 0:21:32.600 we look at some of the wage numbers, they're getting 0:21:32.640 --> 0:21:35.000 close to where the FED would need them to be, 0:21:35.119 --> 0:21:37.160 but not there yet, and where we still haven't hit 0:21:37.200 --> 0:21:40.919 two percent inflation, let alone on a sustained basis. I 0:21:40.920 --> 0:21:43.119