Speaker 1: Well, you can forget about a soft landing. Fed J. J.
Speaker 1: Pale is now aiming for something much more painful for
Speaker 1: the economy, to put an end to elevated inflation. This
Speaker 1: is the subject of a column with my Richard Miller
Speaker 1: Bloomberg Economics Report, and he joins us. Now, Richard, so
Speaker 1: what's what's going to be more painful? Well, it's something
Speaker 1: trying not to laugh at something that economist called a
Speaker 1: growth recession. Right, it sounds like an oxymoron, then I
Speaker 1: guess it is. But what it is is the growth
Speaker 1: slows down to basically to a crawl, and unemployment rises,
Speaker 1: and then you slowly slow and you have that for
Speaker 1: a while, like a year maybe more, and you slowly
Speaker 1: ring this inflation out of the economy. It's it's like
Speaker 1: we got an economist in the story quota As saying,
Speaker 1: it's like you know, dripping water torture. Um, but you
Speaker 1: know the economy never goes south, never goes into a contraction. Yeah.
Speaker 1: Well yeah, that's Diane swanksline right right exactly. Um, this
Speaker 1: is a pretty negative period if your long equities one
Speaker 1: would think it sort of reminds me of once it
Speaker 1: became painfully obvious that Chinese officials just didn't feel comfortable
Speaker 1: with the size of big tech players in China, and
Speaker 1: you'd get these, you know, a couple of days where
Speaker 1: you'd get some positive news, but it was always slammed.
Speaker 1: It feels like the FED is slamming risk assets now
Speaker 1: and it really wants you to know that, uh, if
Speaker 1: you fight the FED, you'll lose. Yeah, I mean, I
Speaker 1: mean that's a good point. I mean, basically, it suggests
Speaker 1: that they're just gonna keep They're gonna raise interest rates
Speaker 1: up to a pretty high level, at least high compared
Speaker 1: to where we wove been most recently, and just hold
Speaker 1: them there. And even if growth slows and then the
Speaker 1: market's waiver, they're just going to keep, you know, keep
Speaker 1: the screws on until I get you know, what they
Speaker 1: want on inflation. So you're right, it does not sound
Speaker 1: like a an attractive time to be, you know, uh, risk.
Speaker 1: It certainly doesn't sound like a risk on time. And
Speaker 1: the other danger is, of course, when you're growing so slowly,
Speaker 1: it doesn't take all that much to knock you actually,
Speaker 1: you know, in south and into an actual recession. So,
Speaker 1: you know, another another run up in oil prices or
Speaker 1: you know anything. So you know, you're you're, you're as
Speaker 1: you say, it's not it's not necessarily conducive to taking
Speaker 1: a lot of risks. Yeah, this is said, I mean exactly.
Speaker 1: And you want to get slow growth down to below
Speaker 1: its potential, which I think some people have pegged that
Speaker 1: at one point eight per cent, as you've alluded to.
Speaker 1: As you also, you can easily easily miss that and
Speaker 1: go directly below and into contraction territory. And it's is
Speaker 1: it really at the moment, almost like Russian roulette. Yeah, it's,
Speaker 1: you know, it's it's it's certainly not an easy thing
Speaker 1: to do, right, I mean, you know, uh it somebody said,
Speaker 1: is you know, like they trying to Someone said they're
Speaker 1: trying to you know, thread and needle in the dark
Speaker 1: with you know, with oven mits on. You know, I mean,
Speaker 1: this is you know, a pretty pretty difficult thing to
Speaker 1: pull off with as you say, not making a misstep,
Speaker 1: and and and the on the other side is if
Speaker 1: they don't get the slow growth, and the inflation stuck
Speaker 1: you know, keeps highing higher than they want, so they're
Speaker 1: kind of you know, stuck but rich. If if you
Speaker 1: abandon the soft landing it's not that difficult. You just
Speaker 1: have to get you know what I mean. I mean,
Speaker 1: you just have to get the FED funds rate in
Speaker 1: a restrictive mode so higher than inflation. This is what
Speaker 1: Vulker did you know back in in uh in the
Speaker 1: early eighties. Um, it's just that, you know, you you
Speaker 1: sort of want to have a FED that seemingly has
Speaker 1: the power to pull off a FED a soft landing
Speaker 1: and give both investors and workers and companies the hope
Speaker 1: that this could happen. But it seems like that's abandoned now. Yeah,
Speaker 1: I mean I think it's you know, they held out
Speaker 1: that out for a while and um, but they're coming
Speaker 1: around to the view that it's it's not realistic. You
Speaker 1: know that this can't be done. You can't get rid
Speaker 1: of this inflation. Yes, some of it's gonna melt away
Speaker 1: when you know, uh uh, when you know, you know,
Speaker 1: the chips chips makers start pumping out more chips, et cetera.
Speaker 1: But you know there's there there's enough underlying momentum to
Speaker 1: inflation that it's not going to melt away without some pain.
Speaker 1: You know. That's what and that's what basically saying. You know,
Speaker 1: it's not going to be this soft gentle landing where
Speaker 1: you know, everything is called pathetic. It's it's gonna be,
Speaker 1: you know, this growth recession where you're gonna have you know,
Speaker 1: you know, you're gonna be growing, but it's not gonna
Speaker 1: feel very good. The thing is also what complicates it
Speaker 1: is perhaps an arguably quantitative tightening. What do you make
Speaker 1: of that region? I'm sorry, I didn't I didn't quite
Speaker 1: get that right, oh qt. Oh yeah, I mean, um,
Speaker 1: that's a good point. I mean yeah, they themselves admit
Speaker 1: they're not quite sure how this is gonna, you know,
Speaker 1: work out. They're hoping that the markets have already you know,
Speaker 1: discounted the quantitive quantity of tightening and playing down its impact.
Speaker 1: But you know, when you talk to them, they say, look,
Speaker 1: you know, we only did this once before. Uh, we
Speaker 1: didn't do it anywhere near the size we're about to
Speaker 1: do it. We don't really know. Rich Thanks very much,
Speaker 1: interesting story. Richard Miller, Bloomberg Economics reporter,