WEBVTT - Bloomberg Surveillance: Wide Runway for Soft Landing 0:00:05.120 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.319 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.840 for insight from the best and economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:29.840 the Bloomberg Terminal, and the Bloomberg Business app. 0:00:30.040 --> 0:00:30.760 This is a joy. 0:00:30.840 --> 0:00:34.800 Yesterday was humbling ability for everyone, no question about that, 0:00:35.840 --> 0:00:39.600 and today well accept But today a recalibration year of 0:00:39.640 --> 0:00:43.400 where we go in our optimism on the American experiment. 0:00:43.960 --> 0:00:46.479 A few have been right, nobody like Neil duddat how 0:00:46.520 --> 0:00:50.240 to Economics at Renaissance Macro over the last eighteen months 0:00:50.240 --> 0:00:55.040 an absolute tewort of force that America economic might will prevail. 0:00:55.280 --> 0:00:59.639 This morning, David Rosenberg writes of a tepidominal GDP. At 0:00:59.640 --> 0:01:03.240 the same time, the tech analyst Dan ives Hit Webbush 0:01:03.320 --> 0:01:06.360 and Joel Fish buying it truest go out two in 0:01:06.480 --> 0:01:10.520 three years. I'm technical excellence of the Magnificent seven. Can 0:01:10.520 --> 0:01:15.679 our technology lead continue the dota optimism on American economy? 0:01:16.560 --> 0:01:19.440 That's a tough question, Tom, I mean, I hope so. 0:01:19.600 --> 0:01:22.320 I mean, productivity is notoriously difficult to forecast. But if 0:01:22.319 --> 0:01:24.480 productivity is picking up, which it has been over the 0:01:24.520 --> 0:01:29.000 last couple of quarters, then it raises the you know, 0:01:29.040 --> 0:01:32.120 the capacity for the economy grow without stoking inflation, and 0:01:32.120 --> 0:01:33.440 that takes a lot of pressure. 0:01:33.160 --> 0:01:35.679 Off the Fed. The last few months, you've been absolutely 0:01:35.920 --> 0:01:38.160 locked in. You seem to have some kind of visibility 0:01:38.160 --> 0:01:40.520 on what's happening here that some of the people are lacking. 0:01:40.520 --> 0:01:42.760 What's helping you. What's the framework that you're using to 0:01:42.800 --> 0:01:44.880 see things a little bit more clearly over the last 0:01:44.920 --> 0:01:45.600 few months. 0:01:46.080 --> 0:01:48.120 Well, I mean you had mentioned earlier that you know, 0:01:48.200 --> 0:01:52.120 Powell uh sounded some sounded different a couple of weeks ago. 0:01:52.160 --> 0:01:54.880 I mean, but you know, to me, the die has 0:01:54.960 --> 0:01:56.920 been cast for this for for a little bit of 0:01:57.000 --> 0:01:59.640 time now, I mean, and that's because inflation is slowing 0:01:59.640 --> 0:02:01.880 more rapidly than they expect. I mean, I think the 0:02:01.920 --> 0:02:06.040 Fed is following essentially a rules based framework where they're 0:02:06.120 --> 0:02:10.600 taking changes in inflation and the unemployment rate and translating 0:02:10.639 --> 0:02:14.200 that into expectations around the federal funds rate. And that's 0:02:14.240 --> 0:02:17.560 basically what's happening. That's what they did yesterday. And so 0:02:18.960 --> 0:02:22.400 you know, core inflation in November is likely to come 0:02:22.440 --> 0:02:25.880 in barely one tenth of one percent month over month, 0:02:26.360 --> 0:02:31.360 and that means that the momentum going into twenty twenty 0:02:31.400 --> 0:02:34.880 four is quite weak. And so if they're revising down 0:02:34.919 --> 0:02:38.079 inflation in December, which they did, and then a few 0:02:38.080 --> 0:02:40.800 months later they're going to be revising down inflation again 0:02:40.840 --> 0:02:43.640 in March, what do you expect expect them to do? 0:02:44.480 --> 0:02:46.720 What I would push back on, John, is this notion 0:02:46.840 --> 0:02:49.840 that this is because I mean, you know, you see 0:02:49.840 --> 0:02:52.600 all this already. Oh the ten years broken below four percent, 0:02:52.680 --> 0:02:54.960 that means a recession is happening. No, that's not what 0:02:55.000 --> 0:02:58.880 this is about. This is about inflation coming in better 0:02:59.560 --> 0:03:04.000 and the adjusting as a result, and that's ultimately a 0:03:04.040 --> 0:03:06.600 good thing. And you know, I think it's going to, 0:03:07.840 --> 0:03:10.880 you know, give the economy it a chance to continue growing. 0:03:11.120 --> 0:03:13.520 And I think that's that's what's likely. 0:03:13.600 --> 0:03:15.240 Well gets you around look on growth in just a moment. 0:03:15.280 --> 0:03:17.679 Policymakers like to use the word if just to hedge 0:03:17.720 --> 0:03:20.520 themselves if this continues, we might do this. You don't 0:03:20.520 --> 0:03:22.760 think that if is that large? You think this is 0:03:22.800 --> 0:03:24.720 already kind of baked in these right cuts are coming. 0:03:25.080 --> 0:03:28.160 Well, I don't know that it'll be six because to me, 0:03:28.280 --> 0:03:31.119 six feels like, you know, if there's a recession, six 0:03:31.120 --> 0:03:33.240 wouldn't be enough, but if the economy is growing, six 0:03:33.280 --> 0:03:36.600 feels like too many. Frankly, but I do. I don't 0:03:36.600 --> 0:03:39.440 think it's much of an if about round inflation. I mean, 0:03:39.480 --> 0:03:42.560 Powell talked earlier this year about a disinflationary process, and 0:03:42.600 --> 0:03:44.800 I think that was a little bit premature to talk 0:03:44.840 --> 0:03:46.840 about it. But now it really does feel like a 0:03:47.200 --> 0:03:52.360 meaningful disinflationary process is underway, and we have continued moderation 0:03:52.440 --> 0:03:56.160 in housing rental inflation coming. You know, the Terminal has 0:03:56.160 --> 0:03:59.200 an article today about Manhattan rants going down year over year. 0:03:59.520 --> 0:04:01.840 We also know that used car prices will continue to 0:04:02.040 --> 0:04:06.240 deflate over the next several months, and that was actually 0:04:06.360 --> 0:04:10.080 it popped in November. So and between that and you know, 0:04:10.520 --> 0:04:13.560 core goods excluding cars, I mean there's continued downside there 0:04:13.600 --> 0:04:16.880 as well, so I do. And the labor markets are 0:04:17.000 --> 0:04:20.360 basically normalized. I mean, they're they're back into balance. So 0:04:20.760 --> 0:04:23.320 I think you kind of go down the line, and 0:04:23.880 --> 0:04:27.159 you know, to me, it suggests that we're going to 0:04:27.160 --> 0:04:30.440 see continued disinflation over the next several quarters. 0:04:30.680 --> 0:04:33.240 Jpewell did not want to really dig into the question 0:04:33.279 --> 0:04:37.520 around financial conditions and the easing of which we've seen 0:04:37.680 --> 0:04:40.080 over the past couple of weeks, but I'd love you 0:04:40.120 --> 0:04:42.120 to weigh in on it. Do you have any concerns 0:04:42.120 --> 0:04:45.400 that the easing and financial conditions will actually push inflation 0:04:45.440 --> 0:04:46.120 in the other direction? 0:04:46.800 --> 0:04:48.919 Well, I think that's a reason to expect there to 0:04:48.920 --> 0:04:51.160 be a ceiling on how many cuts they'll end up doing. 0:04:51.200 --> 0:04:53.120 But I don't think that they're going to be upset 0:04:53.160 --> 0:04:56.400 about the easing of financial conditions in and of themselves. 0:04:56.440 --> 0:04:58.640 I mean, if you think about the Fed's reaction function, right, 0:04:58.680 --> 0:05:02.840 it's labor market, it's inflation, and then financial conditions. If 0:05:03.120 --> 0:05:06.719 labor markets are in balance and inflation is slowing, why 0:05:06.720 --> 0:05:09.719 would they be The markets are then reassessing the Fed's 0:05:10.200 --> 0:05:12.680 interest rate paths, So why would they be upset about that? 0:05:13.440 --> 0:05:16.320 Well, you've been really good about tracking homebuilders. For example, 0:05:16.600 --> 0:05:19.039 if suddenly you start to see a reacceleration in the 0:05:19.080 --> 0:05:21.839 home space, right, if you start to see people re 0:05:21.960 --> 0:05:25.080 engaging with selling homes and being able to price up 0:05:25.279 --> 0:05:27.200 some of these homes because mortgage rates are. 0:05:27.120 --> 0:05:29.000 Lower, could that pose a problem? Right? 0:05:29.080 --> 0:05:31.080 These are some of the questions that people have. So 0:05:31.240 --> 0:05:33.279 I think I'm of still robust growth. 0:05:33.360 --> 0:05:36.800 So Powell yesterday talked about the seesaw thing right where 0:05:36.839 --> 0:05:40.240 we go from like one story like no landing, soft landing, 0:05:40.279 --> 0:05:42.599 hard landing back to soft landing. And I just feel 0:05:42.600 --> 0:05:44.719 like we need to get through this about of disinflation 0:05:44.839 --> 0:05:50.040 first before we talk about what happens next. And I mean, 0:05:50.279 --> 0:05:53.400 could I make a case for things may reaccelerate and 0:05:53.440 --> 0:05:55.760 that could reignite inflation, and then the FED will have 0:05:55.839 --> 0:05:57.640 to come back and undo the cuts that they put 0:05:57.680 --> 0:05:59.800 in place in twenty twenty four. I mean, that's a 0:05:59.800 --> 0:06:02.520 plausible scenario. You know, we're not going to have any 0:06:02.560 --> 0:06:05.839 multi family construction really next year, and that could you know, 0:06:05.880 --> 0:06:09.000 reignite inflation because there won't be enough housing supply. But 0:06:10.040 --> 0:06:11.719 I do think the FED has to deal with the 0:06:11.760 --> 0:06:14.000 issues that are in front of them, and right now, 0:06:14.040 --> 0:06:17.120 the overwhelming issue is that inflation is slowing more rapidly 0:06:17.120 --> 0:06:19.640 than expected. And for a central bank that believes that 0:06:19.720 --> 0:06:22.560 neutral rates are two and a half percent, they're going 0:06:22.640 --> 0:06:25.760 to be more cognizant and sensitive to the risk that 0:06:25.760 --> 0:06:28.120 they overtightened, and so I think that's why they want 0:06:28.160 --> 0:06:31.360 to get the cuts away first. It's not about you know, 0:06:31.480 --> 0:06:33.840 I mean what my reaction function is. It's about what 0:06:33.880 --> 0:06:36.080 their reaction function is. And that's what we're trying to get. 0:06:36.120 --> 0:06:38.800 I want to go quickly here. The Neil Deta optimism 0:06:38.960 --> 0:06:41.760 is much like the edge Yardeni optimism. He on Inequity 0:06:41.760 --> 0:06:44.760 Call has a huge stock market out to Dow forty 0:06:44.800 --> 0:06:49.680 seven thousand, SPX six thousand, you know, two three years out, 0:06:49.760 --> 0:06:53.359 and he talks about the Roaring twenty twenties. There was 0:06:53.400 --> 0:06:57.120 a Roaring twenties one hundred some years ago and it 0:06:57.120 --> 0:07:01.160 didn't end. Well. Your optimism, how it different from the 0:07:01.200 --> 0:07:07.080 effervescence the exuberance of an unstable roaring twenties. 0:07:07.680 --> 0:07:09.240 Well, I would just say, I mean, if we do 0:07:09.320 --> 0:07:13.280 have a roaring period of economic activity, I mean, it 0:07:13.280 --> 0:07:15.640 does help that we we had a financial crisis in 0:07:15.680 --> 0:07:17.600 two thousand and eight. We already had the big one, 0:07:18.680 --> 0:07:21.520 and you know we have guardrails and we have well 0:07:21.560 --> 0:07:24.160 we have the benefit of hindsight, right, I mean, you know, 0:07:24.200 --> 0:07:26.000 one of the ways you avoided depression is by going 0:07:26.000 --> 0:07:28.840 through on the first time and you know, so I 0:07:28.840 --> 0:07:30.080 think that that's that's helpful. 0:07:30.240 --> 0:07:34.000 What do they say, congratulations on a great quarter? Congratulations now, oh, 0:07:34.120 --> 0:07:37.320 thank you, thank you, Sir nod'nswer of NISO's Macro. 0:07:41.400 --> 0:07:43.960 At least saw some of US global investment strategist JP 0:07:44.120 --> 0:07:47.240 Morgan Private Bank, and she has a wonderful image in 0:07:47.280 --> 0:07:50.000 her note summing up the FED, the ECB, the Bank 0:07:50.080 --> 0:07:53.960 of England and fourteen other central banks about investment strategy 0:07:54.560 --> 0:07:58.320 into twenty twenty four. Somebody's got to land the plane. 0:07:58.880 --> 0:08:01.480 After what we saw on the turbulence yesterday at two 0:08:01.480 --> 0:08:05.240 o'clock and in that press conference, recalibrate this morning, how 0:08:05.240 --> 0:08:07.960 are we going to land the plane given the instabilities 0:08:07.960 --> 0:08:09.720 of the last fifteen hours. 0:08:10.000 --> 0:08:12.400 Look, I think there is a distinction between what's going 0:08:12.400 --> 0:08:14.840 on domestically in the United States and the position that 0:08:14.840 --> 0:08:17.000 that puts the FED in too potentially cut in the 0:08:17.000 --> 0:08:19.840 first half of next year, versus what we're seeing abroad 0:08:19.960 --> 0:08:23.400 in England and in the broader euro region. You know, 0:08:23.560 --> 0:08:26.120 it's no surprise to us that both the BOE and 0:08:26.360 --> 0:08:29.240 the ECB stayed on hold, and we do think that 0:08:29.320 --> 0:08:32.320 the ECB is probably still the most obvious candidate to 0:08:32.440 --> 0:08:35.480 deliver the first cut simply in light of the economic 0:08:35.520 --> 0:08:36.480 weakness that you're seeing. 0:08:36.600 --> 0:08:38.640 This is a really interesting point, and it's frankly what 0:08:38.679 --> 0:08:40.720 I'm sniffing out from markets that are not reacting to 0:08:40.760 --> 0:08:42.760 this as I thought that they would. I would expect 0:08:42.800 --> 0:08:45.480 the euro to actually strengthen dramatically on the heels of 0:08:45.520 --> 0:08:49.079 this in response to a more hawkish ECB that many 0:08:49.120 --> 0:08:52.200 people say, are you just saying that you don't believe them? 0:08:52.400 --> 0:08:55.280 No, not necessarily, you know, I think the ECB has 0:08:55.320 --> 0:08:58.840 to continue to kind of hold this hawkish posture, especially 0:08:58.840 --> 0:09:01.480 given that wage growth hasn't necessarily rolled over in a 0:09:01.480 --> 0:09:04.960 commencing way in Europe, but given the economic slow down 0:09:05.080 --> 0:09:09.600 and maybe nascent signs of some sort of economic life 0:09:09.640 --> 0:09:12.160 coming back, I think the ECB has to talk tough, 0:09:12.200 --> 0:09:14.760 but we'll probably be the first to cut, maybe as 0:09:14.760 --> 0:09:15.439 soon as the spring. 0:09:15.640 --> 0:09:17.760 This was the conversation we had yesterday before we went 0:09:17.760 --> 0:09:19.760 into chair and powe. If we got push back, how 0:09:19.760 --> 0:09:22.200 credible would it be? Just feels like from the ECB 0:09:22.440 --> 0:09:24.880 doesn't feel as credible might be given what we already 0:09:24.920 --> 0:09:27.319 know about what's happening in the economy. Here's the market 0:09:27.400 --> 0:09:29.559 question at least you're more bullish now than you were 0:09:29.640 --> 0:09:31.679 yesterday morning after what you heard from Powe. 0:09:31.880 --> 0:09:34.480 Sure, we were having a lot of conversations about this 0:09:34.559 --> 0:09:37.480 on our floor yesterday. I think what we learned from 0:09:37.480 --> 0:09:40.280 the FED is that we have to start entertaining our 0:09:40.320 --> 0:09:42.719 bowl case a little bit more. But we came into 0:09:42.800 --> 0:09:46.520 yesterday's decision on the front foot, and we've been encouraging 0:09:46.520 --> 0:09:49.200 investors to add back to risk exposure. We have a 0:09:49.240 --> 0:09:51.440 relatively bullish view on the S and P five hundred 0:09:51.480 --> 0:09:53.520 for the year ahead, and I think this just kind 0:09:53.520 --> 0:09:55.640 of underwrites our conviction in that call. 0:09:55.800 --> 0:09:58.240 What's the bullcase bolcase is S. 0:09:58.240 --> 0:10:01.120 And P five hundred ends next year five thousand, But 0:10:01.520 --> 0:10:04.199 we'll see. I think that would probably dictate the FED 0:10:04.320 --> 0:10:07.480 cutting before the second half of the year. But right 0:10:07.520 --> 0:10:09.839 now our base case pencils and cuts in the second 0:10:09.840 --> 0:10:10.679 half of the year and not yet. 0:10:10.679 --> 0:10:14.560 So the Banner's Awesome Bosses Fortress Diamond calls five fodcast. 0:10:15.320 --> 0:10:17.880 Yeah, not quite, I would say, isn't there a risk 0:10:17.960 --> 0:10:20.199 we could be there in January based on what we're seeing? 0:10:21.679 --> 0:10:24.840 How I think January feels a little aggressive. We still 0:10:24.880 --> 0:10:27.400 have to see, you know, the earnings come through. We 0:10:27.480 --> 0:10:30.079 are making this call that the earnings recession is likely 0:10:30.120 --> 0:10:32.600 over and that we're going to see rolling earnings recoveries. 0:10:33.320 --> 0:10:35.760 But let's get through the fourth quarter reporting season and 0:10:35.800 --> 0:10:37.640 then look beyond to twenty twenty four US. 0:10:37.840 --> 0:10:40.800 That sounds like equal white and not market cat whited SMP. 0:10:41.000 --> 0:10:41.440 Is that right? 0:10:41.920 --> 0:10:44.560 We do have conviction in making sure that you have 0:10:44.640 --> 0:10:47.000 exposure to the other four hundred and ninety three names 0:10:47.000 --> 0:10:50.200 in the index beyond the magnificent seven. But we're constructive 0:10:50.240 --> 0:10:52.840 on the magnificent seven. I mean, these companies are projected 0:10:52.840 --> 0:10:56.440 to grow earnings north of twenty percent in twenty twenty four, 0:10:56.480 --> 0:10:59.760 and that is definitely an exposure that we're encouraging investors. 0:11:00.000 --> 0:11:02.400 That's your conviction. When everybody gets out of cash, what's 0:11:02.400 --> 0:11:04.360 going to happen? I want to We've never been here, 0:11:04.440 --> 0:11:07.600 six trillion in cash, we get under five percent money 0:11:07.600 --> 0:11:09.040 market fund, what happens? 0:11:09.720 --> 0:11:10.000 Well? 0:11:10.040 --> 0:11:12.120 I think you have to take into consideration that bonds 0:11:12.120 --> 0:11:15.240 are back on the table, right. That to me means 0:11:15.280 --> 0:11:18.000 that there is still a trade to step into some 0:11:18.120 --> 0:11:21.280 duration and not necessarily just plow into the equity market. 0:11:21.320 --> 0:11:23.960 I think some folks will remain a little reticent given 0:11:24.000 --> 0:11:27.520 where valuations are today, but given the you know, improved 0:11:27.559 --> 0:11:29.680 free cash flow generation of S and P five hundred 0:11:29.720 --> 0:11:32.480 companies relative to ten years ago, we are comfortable with 0:11:32.520 --> 0:11:35.199 today's valuations. We just don't think that that's going to 0:11:35.280 --> 0:11:38.439 be what drives the upside into the next twelve months. 0:11:38.480 --> 0:11:40.080 At least it's going to see in person. Thanks for 0:11:40.080 --> 0:11:44.760 coming in that Jpmulgan private bank following the ACP decision. 0:11:55.040 --> 0:11:58.800 These are absolutely extraordinary time. Let's get a European brief 0:11:58.840 --> 0:12:03.560 on this with Aberdeen three Katrikavidian joining us this morning. Siri, 0:12:03.920 --> 0:12:06.920 the divide here between the central banks, I believe I've 0:12:07.000 --> 0:12:11.160 never seen. Do you perceive that, how alone is Jay 0:12:11.240 --> 0:12:14.560 Powell versus Governor Bailey or what we're going to see 0:12:14.559 --> 0:12:16.480 from Christine Lagard in a bit. 0:12:17.840 --> 0:12:21.120 I think this really highlights is the differences across the 0:12:21.160 --> 0:12:24.240 economies and the different challenges that each of these central 0:12:24.240 --> 0:12:27.040 bankers are facing. So obviously we had a bit of 0:12:27.040 --> 0:12:29.600 a pivot yesterday from the FED and that's really spilled 0:12:29.600 --> 0:12:34.000 over into rates markets across these different regions. However, as 0:12:34.000 --> 0:12:36.559 we've seen the Bank of England does face a very 0:12:36.559 --> 0:12:40.480 different challenge. Inflation is less of an outlier that it 0:12:40.600 --> 0:12:43.040 used to be. It is coming down at a steady pace, 0:12:43.080 --> 0:12:45.240 but they still have some challenges if you look at 0:12:46.240 --> 0:12:49.920 the core inflation and services inflation in particular services is 0:12:49.960 --> 0:12:52.360 still running at six point six percent year on year, 0:12:52.880 --> 0:12:57.160 So that's still a problem there for a Bank of 0:12:57.160 --> 0:13:02.040 England which is trying to manage we GDP growth as 0:13:02.040 --> 0:13:06.360 well as a stickier inflation picture then compared to other regions. 0:13:06.360 --> 0:13:10.319 So hence there's no change in guidance, no changing statement, 0:13:11.160 --> 0:13:13.720 and we still have a six to three vote split. 0:13:13.800 --> 0:13:16.400 And I think that's a key communication point right there, 0:13:16.760 --> 0:13:18.000 the fact that you. 0:13:17.960 --> 0:13:21.000 Know we have that split, given that there is no 0:13:21.040 --> 0:13:24.360 statement of economic projections, let's create our own. If they 0:13:24.360 --> 0:13:27.400 did put out whether they thought that the economic growth 0:13:27.480 --> 0:13:30.160 was going to be better or worse they previously expected, 0:13:30.480 --> 0:13:31.920 what direction do you think it would go? 0:13:33.080 --> 0:13:36.240 Well, I think what we've seen just in the recent data, 0:13:36.360 --> 0:13:39.240 we had the October GDP which was a disappointment there 0:13:39.480 --> 0:13:41.120 and I think that will be something that they would 0:13:41.120 --> 0:13:44.280 definitely consider. If we look at the moving averages across 0:13:44.360 --> 0:13:47.040 if we look through that contraction that we saw a 0:13:47.240 --> 0:13:50.040 month or month for October that was across the board 0:13:50.080 --> 0:13:56.560 for services, construction and manufacturing. But if we smooth that out, 0:13:56.640 --> 0:13:58.480 it is we are looking at a flat three month 0:13:58.520 --> 0:14:01.160 on three months, but there's a possibility tive a start 0:14:01.240 --> 0:14:05.320 of a technical recession and recession like what we're expecting 0:14:05.400 --> 0:14:08.520 is recession like conditions to persist throughout the first half 0:14:08.559 --> 0:14:13.320 of next year. So really it's a difficult balancing act 0:14:13.320 --> 0:14:15.079 for the Bank of England, but we do think that 0:14:15.120 --> 0:14:18.840 they're more likely to hold on with this five point 0:14:18.840 --> 0:14:23.000 two five percent and stay there for a few more months. Yet, 0:14:23.280 --> 0:14:26.560 timing is obviously quite fluid and will depend on inflation 0:14:26.680 --> 0:14:30.280 how fast inflation decelerates, But they might be one of 0:14:30.320 --> 0:14:33.160 the later central banks to cut if we compare with 0:14:33.480 --> 0:14:37.400 potentially ECB and the change in tone from the Fed. 0:14:37.720 --> 0:14:39.440 Se how much does that benefit them in a sense, 0:14:39.560 --> 0:14:41.600 given the fact that we are seeing the pound strengthen 0:14:41.800 --> 0:14:44.880 that this actually could be a disinflationary if they do 0:14:45.040 --> 0:14:46.920 diverge from the other central banks. 0:14:47.760 --> 0:14:50.360 Yes, I think the move in the sterling will help 0:14:50.440 --> 0:14:55.120 somewhat in terms of imported price impact, but really it 0:14:55.280 --> 0:14:59.840 comes down to this wage inflation that's that's really going 0:14:59.880 --> 0:15:00.640 to be key. 0:15:01.080 --> 0:15:01.240 Now. 0:15:01.280 --> 0:15:03.240 One good piece of news is that real wages are 0:15:03.240 --> 0:15:06.000 a bit stronger because inflation has come down a bit, 0:15:06.800 --> 0:15:10.280 so that should help boost or at least support consumers 0:15:10.320 --> 0:15:15.120 to some extent. But nonetheless, the imbalances in the UK 0:15:15.280 --> 0:15:18.800 labor market are still there. They've improved, but they're still 0:15:18.800 --> 0:15:22.120 there and that's going to create that bumpy last mile 0:15:22.520 --> 0:15:23.440 for the UK. 0:15:24.160 --> 0:15:25.760 Three if we've got to run rate in the United 0:15:25.800 --> 0:15:29.400 States of nominal GDP of four percent, anybody's guests, what 0:15:29.520 --> 0:15:33.080 is your custamate a nominal GDP for the Bank of 0:15:33.120 --> 0:15:36.120 England and for the ECB, what numbers are What of 0:15:36.120 --> 0:15:39.960 those two different numbers this morning, what. 0:15:40.080 --> 0:15:41.840 We have seen. I think we're going to see a 0:15:41.840 --> 0:15:45.840 slow down there in terms of GDP growth, particularly for 0:15:46.840 --> 0:15:49.840 the Euro Area. I think the challenge there is that 0:15:50.400 --> 0:15:55.040 we've seen a much weaker inflation outlook than they've they've 0:15:55.040 --> 0:15:58.600 actually projected, and I think that what we're projecting versus 0:15:58.680 --> 0:16:01.400 what's happening versus what c beer projecting. I think that 0:16:01.520 --> 0:16:04.360 challenge is what we're going to really see later on 0:16:04.440 --> 0:16:08.200 today from from the ECB, whether they're you know, how 0:16:08.240 --> 0:16:11.000 they address the fact that actual data has been weaker, 0:16:11.040 --> 0:16:15.240 both inflation as well as the growth outlook is weakening, 0:16:15.600 --> 0:16:18.720 so I think that could be quite important in terms 0:16:18.760 --> 0:16:21.800 of what they say about the shift in timing. Obviously, 0:16:21.840 --> 0:16:25.880 the markets have pulled forward the timing for the first 0:16:25.920 --> 0:16:30.160 cut from the ECB, and we have as well. We've moved. 0:16:30.160 --> 0:16:32.120 We were looking more mid year and now we're looking 0:16:32.160 --> 0:16:37.000 for in March April, more likely April. So you know, 0:16:37.080 --> 0:16:39.200 I think this is the kind of signaling that we 0:16:39.280 --> 0:16:43.280 need to be focusing on in terms of what what 0:16:43.360 --> 0:16:47.040 messages are coming out of the ECB later today and 0:16:47.160 --> 0:16:49.760 again going forward for the for the UK as well, 0:16:49.800 --> 0:16:52.680 it's going to be you know, that relative shift in 0:16:53.200 --> 0:16:56.440 data that the UK will be will be focusing on 0:16:56.480 --> 0:16:57.680 in the coming meetings. 0:16:58.040 --> 0:17:01.840 Sorry, thank you, Sory goatcha guvnd of Appetite. 0:17:05.680 --> 0:17:09.520 Stephanie Rod's had a very busy weekend scheduled cancel that 0:17:10.119 --> 0:17:12.920 the chief economist at Wolf Research has to rewrite the view, 0:17:13.000 --> 0:17:16.760 as she did last night in a sharp post FED note. 0:17:17.200 --> 0:17:18.920 Let's go to your post FED note. What was the 0:17:19.000 --> 0:17:21.960 biggest change in that note after the drama of two 0:17:22.000 --> 0:17:22.920 o'clock yesterday. 0:17:23.480 --> 0:17:25.399 I think the biggest change is that the FED is 0:17:25.480 --> 0:17:27.760 less scared of stronger growth and they're now appreciating that 0:17:27.840 --> 0:17:30.600 inflation's come down. Like they took up their growth numbers, 0:17:30.760 --> 0:17:33.359 but inflation came down so much that they feel pretty 0:17:33.359 --> 0:17:35.680 good about the backdrop. It said, so far, so good. 0:17:36.000 --> 0:17:37.320 Is this FED still data dependent? 0:17:37.560 --> 0:17:40.719 They're data dependent, but they're more inflation dependent than growth dependent. 0:17:41.160 --> 0:17:43.880 I think they're recognizing that inflation can come down even 0:17:43.880 --> 0:17:45.160 if growth remains fairly strong. 0:17:45.359 --> 0:17:47.920 This, to me was the biggest change that basically this 0:17:48.119 --> 0:17:50.119 is not going to be contingent on some sort of 0:17:50.480 --> 0:17:53.639 deceleration in the economy that they are really leading into 0:17:53.880 --> 0:17:57.600 the soft landing narrative. Do you have a more optimistic 0:17:57.760 --> 0:18:00.960 view that they can achieve a soft landing after yesterday. 0:18:02.040 --> 0:18:02.920 Than you had before? 0:18:03.320 --> 0:18:05.200 Yeah, and I've been calling for a soft dish landing. 0:18:05.280 --> 0:18:06.920 Now I think I just have more conviction in that 0:18:07.359 --> 0:18:09.040 they can. The fact that they can cut rates even 0:18:09.080 --> 0:18:10.760 sooner than our base case. Our base case was Q 0:18:10.960 --> 0:18:14.119 three of next year heading into yesterday. We've pushed that 0:18:14.280 --> 0:18:17.760 up to Q two, and that just makes the runway 0:18:17.800 --> 0:18:19.879 even that much wider for the soft landing to happen. 0:18:20.480 --> 0:18:22.920 Do you think that financial conditions don't matter? Were you 0:18:23.240 --> 0:18:27.399 were you okay with how Chair Powell responded to that 0:18:27.520 --> 0:18:28.320 question yesterday. 0:18:29.080 --> 0:18:31.960 Yeah, he didn't. He didn't really talk about financial conditions 0:18:32.119 --> 0:18:34.440 that much, and November he mentioned it thirteen times. This 0:18:35.040 --> 0:18:38.280 was a big turnaround. I think he's just not that 0:18:38.440 --> 0:18:41.240 scared with the way financial conditions have eased, because inflation 0:18:41.320 --> 0:18:43.600 has come down, notably with the markets that where. 0:18:43.400 --> 0:18:46.040 There are futures up twelve. I have been really I've 0:18:46.119 --> 0:18:48.080 really failed at the core theme that I think that 0:18:48.240 --> 0:18:50.879 was somewhat alluded to by the chairman yesterday. We're going 0:18:50.920 --> 0:18:52.800 to go to Mike mckeere and a bit folks before 0:18:52.840 --> 0:18:56.040 we get to Christine Legard and Frankfort. But Stephanie Roth, 0:18:56.080 --> 0:18:58.840 you're quite good at this, which is interpretating what I 0:18:58.960 --> 0:19:03.760 call the three ratio productivity dynamic of capital labor in 0:19:03.880 --> 0:19:07.639 the pixie dust of American efficiency as well. What have 0:19:07.800 --> 0:19:13.720 you learned to reaffirm better productivity in the last fifteen hours. 0:19:14.080 --> 0:19:17.159 Do they have a confidence that we're more efficient, a 0:19:17.280 --> 0:19:18.639 better run economy. 0:19:19.280 --> 0:19:21.840 We have seen productivity pick up in the last couple quarters. 0:19:21.880 --> 0:19:23.879 I don't know if we can bank on that continuing, 0:19:24.280 --> 0:19:26.200 but I think there's real scope for that. The economy 0:19:26.240 --> 0:19:30.560 has learned to operate with fewer workers than what the 0:19:30.600 --> 0:19:31.879 pre COVID trend would suggest. 0:19:32.040 --> 0:19:33.800 The standard idea is of you have ten years, you know, 0:19:33.840 --> 0:19:36.280 we'll know in five years or whatever about productivity now, 0:19:36.320 --> 0:19:40.800 But are you guestimating that we grossly underestimate not the 0:19:40.920 --> 0:19:44.440 capital dynamic, the labor dynamic. And you know Alisa Torsten 0:19:44.480 --> 0:19:47.680 Slock with that comment out today have more employed people 0:19:47.760 --> 0:19:50.280 in the middle of the age bracket in America. But 0:19:50.480 --> 0:19:53.760 is it really about the technology overlay that we're completely 0:19:53.920 --> 0:19:55.639 underestimating even as we live it. 0:19:56.640 --> 0:19:58.000 I think there's an element of that, but I think 0:19:58.040 --> 0:20:00.680 the bigger story here is a labor supply. We've had 0:20:00.760 --> 0:20:03.199 such strong labor supply this year that's helped the rebounds 0:20:03.200 --> 0:20:05.280 the labor market. It was a combination of immigration and 0:20:05.359 --> 0:20:06.639 female elberforce participating in. 0:20:06.600 --> 0:20:09.119 Claudia Sah mentioned this yesterday with a Nobel Lauri at 0:20:09.160 --> 0:20:12.520 Claudia Golden at Harvard and that the women coming back 0:20:12.600 --> 0:20:14.399 into the labor force is jaw dropping. 0:20:14.800 --> 0:20:16.680 If you are just joining us, just to repeat some 0:20:16.800 --> 0:20:19.639 of these numbers because they are notable, I want to 0:20:19.680 --> 0:20:21.960 just take a look. Initial jobless claims came in yet 0:20:22.000 --> 0:20:25.480 again below the expectation. That is a good downward surprise, 0:20:25.520 --> 0:20:27.800 two hundred and two thousand versus the expectation of two 0:20:27.880 --> 0:20:32.000