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Speaker 3: Krishna Guha, Evercore ISI, Vice Chair and head of Central
Speaker 3: Bank Strategy, joins us now for more. Krishna, thanks so
Speaker 3: much for joining us this morning. Do you have an
Speaker 3: understanding of how the court will define for cause in
Speaker 3: this case?
Speaker 4: So I'm not an attorney, I'm an economist, and so
Speaker 4: I certainly don't want to mislead your viewers by offering
Speaker 4: legal expertise here that I don't have. What I will say,
Speaker 4: of course, is that the four course protection and the
Speaker 4: idea that this establishes a high standard before a president
Speaker 4: can consider removing a FED official, is central to our
Speaker 4: understanding of how Central bank independence operates in the US,
Speaker 4: so there's a lot at stake in this litigation.
Speaker 5: Christna, you're head of central bank strategy at Evercore, I say,
Speaker 5: as well as vice chairman. And then I wonder what
Speaker 5: you think about inflation. We're looking for pc to come
Speaker 5: in at two point nine percent. We had Core CPI
Speaker 5: at three point one percent. We had Core PPI at
Speaker 5: three point seven percent. Yet Chris Waller says it's close
Speaker 5: enough to two. Do you agree.
Speaker 4: I think what's important here is that the inflation that
Speaker 4: we really care about is the second round inflation. It's
Speaker 4: the risk of inflation persistence, and no on as a
Speaker 4: matter of theory or practice, thinks that the central bank
Speaker 4: should be directly responding to the first round effect of
Speaker 4: tariffs like attacks mechanically on prices. The issue is what
Speaker 4: pressure does that, if any, in part to underlying inflation dynamics.
Speaker 4: That's the second round question, and so I'm less focused
Speaker 4: on the individual month's inflation passed through from tariffs. That's
Speaker 4: the first round mechanical stuff that I am trying to
Speaker 4: assess what the risks are of inflation persistence and balancing
Speaker 4: those against the risks to the labor market. I actually
Speaker 4: think the conditions likely have been met for an initial
Speaker 4: cautious step down towards a more neutral rate. But I
Speaker 4: also think that the FED should be very careful about
Speaker 4: signaling what follows from here and making it clear that
Speaker 4: it'll take the time it needs to assess the incoming
Speaker 4: data and judge whether, for instance, by December, the case
Speaker 4: for another cut has or hasn't been met.
Speaker 5: Well, what if the FED didn't Krishna take the time
Speaker 5: and needs What if the FED wasn't as thorough? What
Speaker 5: if the FED was stacked with Trump appointees who just
Speaker 5: wanted to do the President's bidding? Would you buy then
Speaker 5: ten year treasuries? I mean, does four to twenty make
Speaker 5: sense to you?
Speaker 4: So I am concerned about the outlook for central bank independence,
Speaker 4: and I'm concerned about the Cook affair in that context. Obviously,
Speaker 4: if the President is able to push Governor Cook out,
Speaker 4: then that accelerates the timeframe over which his nominees may
Speaker 4: acquire a majority on the FED board. And that's as
Speaker 4: you know. That then raises questions as to whether we
Speaker 4: might see an unprecedented effort to deny certain Reserve Bank
Speaker 4: presidents renewal again without cause. But also that the move
Speaker 4: against Cook, based on allegations that have not yet been
Speaker 4: charged or proven in court or established by any kind
Speaker 4: of quasi judicial process, essentially weakens the protections that future
Speaker 4: FED governors, by the way, including the people who present
Speaker 4: trumpets in place, will have in the event that they
Speaker 4: have to make decisions in the future that this or
Speaker 4: a future president doesn't like. So this does absolutely all
Speaker 4: bear then on how you think about the outlook for
Speaker 4: policy and what may happen to bond yields. I personally
Speaker 4: feel that the market is likely underpriced for the risk
Speaker 4: that we could see a more more of a break
Speaker 4: in FED institutional practice and potentially the conduct of monetary
Speaker 4: policy over the next year or so, as the FED
Speaker 4: Board transitions and as the administration attempts to acquire more
Speaker 4: authority over who gets to determine when for course conditions
Speaker 4: have been mere.
Speaker 3: Bill Dudley and Layel Brainer agree with you. We spoke
Speaker 3: to both of them this week. In terms of the
Speaker 3: market reaction, what kind of I guess yield should we see,
Speaker 3: say on the ten year, if the market was really
Speaker 3: taking into account that this could be more of an
Speaker 3: erosion of FED independence.
Speaker 4: So I think what you see at the moment is
Speaker 4: that the bond market is not really quite sure how
Speaker 4: to interpret, first of all, the actions relating to Cook,
Speaker 4: and secondly that the market is wary of shortening bonds
Speaker 4: aggressively in an environment in which, per Governor Walla yesterday,
Speaker 4: we could discover soon that last three payroll months were
Speaker 4: negative right once all the revisions are in. These are
Speaker 4: not necessarily the microeconomic conditions in which you would want
Speaker 4: to ramp yield. But I would say that if and
Speaker 4: we're still dealing in a probabilistic and uncertain environment, that
Speaker 4: if we were to get further confirmation over time that
Speaker 4: the FED is losing independence, and if this resulted, as
Speaker 4: historically generally it has in a central bank becoming more
Speaker 4: structurally dubvish, that I do think at some point you
Speaker 4: would likely see a substantial response in the bond market.
Speaker 4: The issue, of course, is when and under what circumstances
Speaker 4: would that happen. I think it's hard to predict and
Speaker 4: certainly hard to say with any confidence that that adverse
Speaker 4: bond market reaction would come immediately.
Speaker 6: Stay with us.
Speaker 3: More bloomber of surveillance coming up after this, We're going
Speaker 3: to turn to Tech Now. Heath Terry, head of technology
Speaker 3: and Communications at City Research, says, quote first AI analyst
Speaker 3: on Wall Street believes AI revenue will serve eighty billion
Speaker 3: dollars in twenty thirty from forty three billion dollars this year.
Speaker 3: Heath joins us now for more, Heath, that's a massive jump.
Speaker 3: And if you think that's where it's going to go,
Speaker 3: is this market underpriced?
Speaker 4: Look, that's that's the way we look at it.
Speaker 7: I mean, you know, we are in the very early
Speaker 7: stages of this AI cycle, and really we think sort
Speaker 7: of posed for an inflection ahead of us. A lot
Speaker 7: of things that sort of matter to driving growth are
Speaker 7: about to clear in in gross favor. The bottlenecks that
Speaker 7: we've seen in capacity constraint, the model development advances that
Speaker 7: we're seeing particularly around agentic AI, and then of course
Speaker 7: you know the biggest of those being what we think
Speaker 7: could be called AI squared, the idea that AI on
Speaker 7: its own can start programming AI.
Speaker 5: So, you know, I wonder Heath your take on what
Speaker 5: happens in China, because in Nvidia first didn't give us
Speaker 5: a forecast for the third quarter. They had nothing in
Speaker 5: the second quarter, and then the CFO came out and
Speaker 5: said maybe two to five billion, but she's not really
Speaker 5: sure about the president's deal to get a fifteen percent
Speaker 5: take of everything they sell there.
Speaker 7: And to me, it just seems.
Speaker 5: Like the Chinese Communist Party is willing to do a
Speaker 5: whole lot to make sure it's companies don't buy our
Speaker 5: chips anyway. So what's your take on that whole story.
Speaker 7: Look, I think you're seeing that kind of mindset from
Speaker 7: every country China, certainly the countries in the Middle East,
Speaker 7: you know, major countries in Europe and the US. Of course,
Speaker 7: everyone feels like AI is an important enough technology that
Speaker 7: you cannot just suc seceed it to sort of the
Speaker 7: global winners, which in other cycles have always been American
Speaker 7: And I think you know, the mistakes of the Internet
Speaker 7: era for a lot of companies on a country basis,
Speaker 7: or a lot of countries on a company basis, of
Speaker 7: allowing the US companies to come in and sort of
Speaker 7: be their own local champions is something that no one
Speaker 7: really wants to make in AI. Now, that's a really
Speaker 7: hard thing to actually enforce for most countries. China can
Speaker 7: obviously do it. They actually did it very successfully in
Speaker 7: the Internet era. I mean, there are no bigger internet
Speaker 7: companies outside of the US than those that are in China,
Speaker 7: and I think they want to make sure that they
Speaker 7: do the same thing when it comes to when it
Speaker 7: comes to AI.
Speaker 5: I noticed also yesterday that an analyst from E Marketer said,
Speaker 5: we have to see returns on these investments and soon.
Speaker 5: And the threat is that these big hyperscalers who are
Speaker 5: spending forty percent of Invidia's revenue and forgive me that
Speaker 5: I'm heavy on in video, but they just came out
Speaker 5: with earning. So it's occupying my mind that these big
Speaker 5: hyperscalers may pull back on the margin in terms of
Speaker 5: capex if they don't start to see return soon on
Speaker 5: the applications, on the AI applications that they're powering. What
Speaker 5: do you think about that?
Speaker 7: Look, I don't think there's any chance of that, right.
Speaker 7: I mean, we go back a year ago and you
Speaker 7: had the CEOs of Alphabet, Meta, Microsoft all get on
Speaker 7: their earnings calls and say some version of the risk
Speaker 7: of overinvest investing is far less than the risk of
Speaker 7: underinvesting in this space. And then we fast forward a
Speaker 7: year later and they've all said, you know what, even
Speaker 7: though we believe that we actually underinvested and capacity constraints
Speaker 7: are still there. Microsoft in particular called that out on
Speaker 7: their most recent earnings. And so you don't see that
Speaker 7: kind of demand outstripping supply if the returns aren't there.
Speaker 7: And there have been a range of studies and MIT
Speaker 7: had theirs which I think most people sort of misunderstood
Speaker 7: or didn't get past the headline. IDC has had one
Speaker 7: that said that you know, cfo or CIOs are getting
Speaker 7: three point seven x for every dollar they put into
Speaker 7: to AI. So there's a lot of work being done
Speaker 7: around this. We obviously did a lot of work around
Speaker 7: this in the one hundred and paid twenty page report
Speaker 7: that we published earlier this week, and the returns and
Speaker 7: admittedly their early returns at the early return show that
Speaker 7: this stuff is working at the enterprise level.
Speaker 3: He's something that Jonathan has been bringing up a lot
Speaker 3: when it comes to the AI story. I'd love to
Speaker 3: get your take on is do we have the power
Speaker 3: the electricity needed to run this industry and especially given
Speaker 3: the outlook you have in your research.
Speaker 7: Yeah, Look, this is something we cover a lot the
Speaker 7: team at City that covers the industrial space and the
Speaker 7: energy space that spent a lot of time on this,
Speaker 7: and look, they're going to be bottlenecks. But here's the
Speaker 7: for lack of a better time, kind of the sad
Speaker 7: reality of this is that when there are shortages, when
Speaker 7: they are bottlenecks, capacity and supply moves to the highest
Speaker 7: value usage, they move to the highest bidder, for lack
Speaker 7: of a better term, and that's going to be AI.
Speaker 7: And so, yeah, they're going to be shortages, they're going
Speaker 7: to be bottlenecks. But if you're in AI and you're
Speaker 7: building a twenty billion dollars data center, you're far more
Speaker 7: likely to get the equipment you need, the power you
Speaker 7: need than the person who's next further down that down
Speaker 7: that line on that list. And so there will be bottlenecks,
Speaker 7: but I don't think you're going to see them in AI,
Speaker 7: and I don't think that they're going to be the
Speaker 7: things that sort of slow development here. Stay with us.
Speaker 3: More Bloomberg surveillance coming up after this. We're going to
Speaker 3: stick with retail investors digesting a slew of earnings from
Speaker 3: the sector and their signals about the economy. Data Telsea
Speaker 3: of the CEO of Telsey Advisory Group, saying the tariff
Speaker 3: impacts on EPs and margins are being managed and price
Speaker 3: increases have not been fully passed on to customers. The
Speaker 3: bulk are expected to be visible in the third and
Speaker 3: fourth quarter, and Dana joins us, now, good morning, good morning,
Speaker 3: very busy earning season. When will we see the full
Speaker 3: impact of the tariffs.
Speaker 8: I don't think you're going to see the full impact
Speaker 8: of tariffs until heading into the fourth quarter, and it's
Speaker 8: on a select group of merchandise. And frankly, when you
Speaker 8: think of the newness that's coming in, particularly on the
Speaker 8: apparel side, perhaps you'll see more of the price increases
Speaker 8: on the newer products, which you may not even know
Speaker 8: because they never were issued before. So that's some of
Speaker 8: the bulk of it. What we've seen, is we've gone
Speaker 8: through earning season, is you haven't heard that it's been
Speaker 8: the full impact. And keep in mind, we've had a
Speaker 8: price tracker on eighty items since April, and what we've
Speaker 8: seen on iconic items, whether Levi's five oh one, Barbie dolls,
Speaker 8: we haven't seen big increases across the board. It's very
Speaker 8: selective with those price increases, you know.
Speaker 5: I'm the administration has long argued that this is just
Speaker 5: like a sales tax, and it's only just a one
Speaker 5: time price hike. But the thing is, these tariffs trickle
Speaker 5: in over months and months and months, and the manufacturers
Speaker 5: try and hold back price increases when they can, so
Speaker 5: they take some into margins, they pass some to suppliers.
Speaker 5: I feel like we're going to see a step up
Speaker 5: of prices over time.
Speaker 8: That's what's expected. The expectation is it will step up,
Speaker 8: and you're right, it's a third to third. A third,
Speaker 8: a third look to diversify their sourcing, a third look
Speaker 8: to share the cost with manufacturers, and then a third
Speaker 8: of the headwind is passing the prices onto the consumer,
Speaker 8: which we not have fully seen yet.
Speaker 5: What do you think about? Jonathan Levin wrote a column
Speaker 5: for Bloomberg Opinion yesterday pointing out that we have higher
Speaker 5: pes on some of these retailers than we do on Nvidia.
Speaker 5: If you look at the forward pe for cost Co,
Speaker 5: it's fifty two times earnings and in Vidia is only forty.
Speaker 5: Why are investors willing to ascribe such a value to
Speaker 5: these retailers?
Speaker 8: Frankly, for something like a Costco, you have annuity from
Speaker 8: continued membership. You don't have a lot of people not
Speaker 8: renewing their membership. The fact that you still have the
Speaker 8: opportunity to grow your unit base globally, that it encaptures
Speaker 8: such a wide customer. So I've got great value on prices,
Speaker 8: I've got a sticky customer base that's only growing, and
Speaker 8: I still have the ability to open more units. And
Speaker 8: don't forget Kirklands. They've got private label that's of value
Speaker 8: that can expand to many more.
Speaker 4: Category fantastic products when it go.
Speaker 5: Always impressed by Kirkland products.
Speaker 3: Are you a big costco shopper?
Speaker 5: Yeah, I love it.
Speaker 3: Do you have a costco membership?
Speaker 5: Of course, I have the executive membership.
Speaker 3: Wow, you're definitely a different person than I remember you
Speaker 3: a few years ago. So who's doing well in this environment?
Speaker 3: It's the costcos, It's the walmarts because they're big and
Speaker 3: they're able to really mitigate these tariff concerns.
Speaker 8: What about off price? Look what you just saw at
Speaker 8: Burlington a five percent same store sales increase. Look at
Speaker 8: Alta Beauty very strong, that whole beauty category. There's newness
Speaker 8: and beauty and it's driving demand. What about the category
Speaker 8: of Denham and we've seen Denham be look at Levi's
Speaker 8: they talked about Denham on the category side. I mean
Speaker 8: Gap did well with denhim both at Old Navy and
Speaker 8: the Gap brand. And you're seeing in some of the
Speaker 8: intimates areas the rebound of Victoria's Secret in the turnaround
Speaker 8: with the inflection point and intimates give consumers something that's
Speaker 8: new and different, they'll open their wallet.
Speaker 5: No denim intimates.
Speaker 8: I hope there's no denim in.
Speaker 6: Yeah. When it comes to Matt Tmi, you've got to
Speaker 6: have good genes, right, This is the whole American eagle debate,
Speaker 6: is there or do you see a push in retailers
Speaker 6: of trying to go to this cultural Americana?
Speaker 8: You know what? I think it is cultural? What's part
Speaker 8: of the conversation. So you look at the Catside group
Speaker 8: that basically has the better denin campaign for Gap. It's
Speaker 8: driving up tremendous number of views. You take a look,
Speaker 8: look what was just signed by Abercrombie, whether it is
Speaker 8: the NFL Partnerships, whether it's the Dallas Cowboys. How do
Speaker 8: your remain relevant and expand your.
Speaker 3: Audio that Brittany Mahomes is now going to be the
Speaker 3: face of Averercrombie, Travis Kelcey and I think this came
Speaker 3: out in the day they announced their engagement is.
Speaker 8: Doing American Eagle.
Speaker 3: Partnership with American Eagle, you do have to have a
Speaker 3: celebrity endorsement tied to your brand.
Speaker 8: It's working. I mean you look at Beyonce and Levi's
Speaker 8: and the effectiveness of being able to capture the number
Speaker 8: of their audience and their clubs. You're part of their
Speaker 8: club now.
Speaker 5: By the way, I was shocked the other day when
Speaker 5: I looked at the tj Max stock chart over five years,
Speaker 5: they absolutely crushed it. And I'm guessing that like a
Speaker 5: Burlington and a Ross stores and these discounters are all
Speaker 5: doing very well. What do you like the best? Like
Speaker 5: if you could own a couple of retailers, only a
Speaker 5: couple of retailers, which would they do When you.
Speaker 8: Think of best in class in my world you talked
Speaker 8: about Costco. Look at TJX. They are best in class.
Speaker 8: They have category strength. It's very impressive what they've done.
Speaker 8: You take a look, frankly, what Alta Beauty is doing
Speaker 8: and the Beauty Unleashed plan with the new CEO. Well,
Speaker 8: she's promoted CEO. But it's working and they're capturing a
Speaker 8: wider customer base. It's compelling. You look at brand leaders
Speaker 8: and brand leaders like a tapestry, like a Ralph Lauren Levi's.
Speaker 8: They're effective because they capture the consumer and you think
Speaker 8: about what can be what can be enhanced. Take a
Speaker 8: look at Bathroom Bodyworks, watching that very carefully for the
Speaker 8: speed which they're transforming their.
Speaker 5: Business Bottles and bodyworks. Is that just like soap bombs
Speaker 5: or it's.
Speaker 8: Soaps and sanitizers, But what about forty million loyalty members,
Speaker 8: forty million loyalty members who are going there on a
Speaker 8: regular basis that matters and today capturing that customer's key.
Speaker 7: Here's the key.
Speaker 5: That sounds like the consumer has too much money?
Speaker 6: Well not yet.
Speaker 3: Well it depends some people like you know, special bath
Speaker 3: bombs and things like that.
Speaker 8: And also there's a trade doown.
Speaker 3: Here's the true Here's the big question though, in the
Speaker 3: luxury market, especially makeup, would you buy do you think
Speaker 3: consumers will buy one hundred and sixty dollars lipstick.
Speaker 8: Very expensive, more expensive than the Emez eighty dollars lipstick
Speaker 8: or Chanelle fifty dollars lipstick. Yes, there will be people
Speaker 8: who buy it because it's the entryway too. Instead of
Speaker 8: getting the two or three thousand dollars naval full bag,
Speaker 8: you're going to get one hundred and sixty dollars lipstick
Speaker 8: and you'll get a case that says LV Wow.
Speaker 3: You really think that people are gonna buy this?
Speaker 8: You can't surpass what a brand can generate with a
Speaker 8: lifestyle offering.
Speaker 3: And for Matt, if you don't know this is Vaton
Speaker 3: stay with us. More Bloomberg surveillance coming up after this.
Speaker 3: Now we're going to get a reaction from Ryan Wang,
Speaker 3: the US economist at HSBC. So what do you make
Speaker 3: of this?
Speaker 1: Yeah, Well, as Michael said, the numbers are broadly in
Speaker 1: line with expectations. I still do think it's important that
Speaker 1: we're seeing that step up in the core PC inflation
Speaker 1: rate up to two point nine percent. The Fed has
Speaker 1: been projecting that it will reach at least a little
Speaker 1: bit above three percent at the end of this year,
Speaker 1: and that's very key. I mean, if we know that
Speaker 1: inflation is going to go up, and then we're hoping
Speaker 1: that inflation eventually begins to cool off after the full
Speaker 1: effect of tariffs comes through, it's still important to track
Speaker 1: these numbers every month.
Speaker 3: How uncomfortable is it to actually see on your screen
Speaker 3: two point nine percent for core PCEE yet at the
Speaker 3: same time pretty much knowing the FED is going to
Speaker 3: cut interest rates next month.
Speaker 1: Well, that's that's really the tricky part. I mean, inflation
Speaker 1: admittedly is much slower than it was just a few
Speaker 1: years ago. We're not getting those types of price increases.
Speaker 1: But at the end of the day, three percent is
Speaker 1: still not the fedes two percent. And this is why,
Speaker 1: although we do have some kind of consistency amongst the
Speaker 1: FED policy makers, FED shared drone pal saying that yes, okay,
Speaker 1: tariffs are going to be a one time effect, even
Speaker 1: if that one time effect takes a year or multiple
Speaker 1: quarters that fully pass through. But still we need to
Speaker 1: track the data. And I do think you know, if
Speaker 1: the FED does cut rates by twenty five base points
Speaker 1: in September, it's still not going to necessarily mean a
Speaker 1: sequence of rate cuts. And that's largely because of these
Speaker 1: inflation numbers.
Speaker 5: Chris Waller called underlying inflation close to two percent. I
Speaker 5: don't know if he's a statistician, but do you agree.
Speaker 4: Well, I just think.
Speaker 1: It's very tricky to get into this idea of just
Speaker 1: excluding the tariff effect and trying to look at inflation
Speaker 1: on that basis. So no, I mean, if we were
Speaker 1: talking about core inflation that was below two and a
Speaker 1: half percent, Okay, now we're talking about arrange, that's sort
Speaker 1: of within a few tents. But when you see an
Speaker 1: inflation rate that's closer to three percent, and really it's
Speaker 1: the mix of inflation that's coming through. Some of it
Speaker 1: has been, you know, incremental increases in goods prices that
Speaker 1: are clearly related to tariffs, but some of it has
Speaker 1: been on the services side, and that's more structural. Of course,
Speaker 1: services inflation tends to run above goods inflation, and although
Speaker 1: we've seen some deceleration in rental inflation, the overall numbers
Speaker 1: are still adding up to to what we see two
Speaker 1: point nine.
Speaker 5: By the way, we were talking about this with Dana
Speaker 5: Telsea just a moment ago. The administration has argued that
Speaker 5: these tariffs are just going to be a one time
Speaker 5: price increase, But I keep wondering, because the tariff structure
Speaker 5: is so dragged out, doesn't that lead to incremental price
Speaker 5: increases over time?
Speaker 1: Well, I think we're definitely going to see a mix.
Speaker 1: If you really talk to businesses they're adopting different strategies.
Speaker 1: Some businesses passed the tariff straight through right away, but
Speaker 1: that wasn't the majority. The majority adopted other strategies front
Speaker 1: loading of inventory, selling down the pre tariff inventory, and
Speaker 1: some have passed along a portion of those price increases,
Speaker 1: but not all of it. So I do think we're
Speaker 1: going to see an extended period where some products are
Speaker 1: affected by tariffs. Now, is that going to be enough
Speaker 1: to push the overall inflation number, let's say, to three
Speaker 1: and a half percent to four percent? I don't necessarily
Speaker 1: think we're going to get that high. I think more
Speaker 1: likely we're going to see this kind of sticky inflation
Speaker 1: close to three percent. We're looking for actually cor inflation
Speaker 1: to still be above two and a half percent at
Speaker 1: the end of next year. And so again there's this
Speaker 1: idea of a one time effect, but that doesn't mean
Speaker 1: that one time is a short time.
Speaker 5: They also wanted to average two percent, right, and considering
Speaker 5: how high we've been and even how high we are now,
Speaker 5: we need to go far below two percent and hold
Speaker 5: there for years, if not decades, to average two percent,
Speaker 5: wouldn't we.
Speaker 1: Well that's very interesting because the part that was somewhat
Speaker 1: under the radar at Chairpal's latest comments at the Jacksonhalls
Speaker 1: symposium is actually that the FED is backing away from
Speaker 1: that average inflation targeting idea, but they won't say.
Speaker 3: That, not explicit about it. It feels like they're targeting
Speaker 3: a range, but they won't actually say they're targeting range.
Speaker 1: Well, I think this idea that Okay, you know, you
Speaker 1: have a two percent target, and we want to pay
Speaker 1: a lot of attention to that number. But still there
Speaker 1: is some there's some allowance of course for data noise.
Speaker 4: I think that is there.
Speaker 1: But I think we're back in a situation where buy
Speaker 1: guns are by guns. We're not really trying to undershoot
Speaker 1: after the elevated inflation a few years ago, but we
Speaker 1: still do want to get back to two percent.
Speaker 3: Governor Waller yesterday basically said he's all in on seventy
Speaker 3: five basis points, except his view could change depending on
Speaker 3: the employment report. This time next week. We'll be looking
Speaker 3: at that job's report. What are you and the team expecting.
Speaker 1: Yeah, so you know we're looking for a number that's
Speaker 1: around seventy thousand, right, So that would be pretty close
Speaker 1: to the July outcome. But it would be a little
Speaker 1: bit higher than the three month average of thirty five thousand,
Speaker 1: which has attracted a lot of attention. Of course, we
Speaker 1: remember last month those massive downward revisions to really the
Speaker 1: May and the June data, right. So the tricky thing
Speaker 1: here is that we know that a slowdown in net
Speaker 1: immigration has played a huge role in why these numbers
Speaker 1: are lower. We know it's a combination of lower labor
Speaker 1: supply and lower labor demand. Both are playing a role,
Speaker 1: but we're not really sure which is the bigger factor.
Speaker 1: I mean, you could explain this slowdown just from slower
Speaker 1: population growth. Lower population growth probably has taken at least
Speaker 1: a point off of growth in the past year, both
Speaker 1: from a job side and also from a GDP perspective.
Speaker 5: Ran when you look at the curve, when you look
Speaker 5: at the ten year holding at four twenty, and then
Speaker 5: here so many important intelligent people talk about the dangers
Speaker 5: of attacking FED independence.
Speaker 1: How do you reconcile those two things? Well, I do
Speaker 1: think clearly this is a story that has evolved even
Speaker 1: in the last few weeks and months, and it is
Speaker 1: something that is very likely contributing to the steepness of
Speaker 1: the yield curve right. So on the one hand, it's
Speaker 1: the FED that has not really acted at all up
Speaker 1: until this point, and on the other hand, it's these
Speaker 1: concerns incrementally about what FED policy will look like, you know,
Speaker 1: not just for the rest of this year, but into
Speaker 1: next year.
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