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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App. Matt Miskin of John

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Speaker 2: Hancock Investment Management, writing, if you are not easing your tightening,

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Speaker 2: the bond market has already priced in two point five

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Speaker 2: percentage points in RAID cuts over the next twelve to

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Speaker 2: sixteen months.

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Speaker 3: If the Fed shoes is.

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Speaker 2: Less than that, in essence, they will be tightening monetary policy.

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Speaker 2: Matt joined us now for more. Matt, welcome to the program.

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Speaker 2: Have you ever when was the last time you saw

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Speaker 2: a decision this finally balanced twenty four hours out?

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Speaker 1: I don't remember when.

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Speaker 4: I think twenty fifteen was the last one that I

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Speaker 4: that I've heard of as a recalling this, but it

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Speaker 4: is leaving a lot of uncertainty, and you know, I

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Speaker 4: think the FED would like to have more.

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Speaker 1: Prepared kind of communication around this.

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Speaker 4: And you know what we're looking at is, though not

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Speaker 4: to overemphasize one meeting, one data point. I know retail

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Speaker 4: sales are going to be exciting here in a couple

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Speaker 4: in just about an hour, but at the end of

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Speaker 4: the day, we're starting a cutting cycle.

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Speaker 1: That's what we know.

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Speaker 4: We know that inflation has come down a lot and

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Speaker 4: the unemployment rate is rising. Keep it simple, is it

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Speaker 4: relates to that? That means the Fed's going to be cutting.

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Speaker 1: In argue, we.

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Speaker 4: Could end this cutting cycle with a two handle on

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Speaker 4: the ten year and frankly a two handle on the

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Speaker 4: Fed funds rate. And that's with just inflation coming down

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Speaker 4: we see a recession. We think, actually we can get

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Speaker 4: a one handle on the Fed funds rate and low

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Speaker 4: twos on the tenure.

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Speaker 2: Matt, two handles on tens, two handles on Fed funds.

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Speaker 2: Tell me where the S and P five hundred is

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Speaker 2: against that backdrop?

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Speaker 4: Yeah, So that would be assuming a soft landing, which

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Speaker 4: to us means more chopped.

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Speaker 1: The problem with.

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Speaker 4: Wanting more out of the S and P five hundred

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Speaker 4: is the valuations are already at the upper end of

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Speaker 4: the range, so we're at about twenty one times on

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Speaker 4: the forward PE and the SMP, and then we're baking

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Speaker 4: in fifteen.

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Speaker 1: Percent earning strowth.

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Speaker 4: So we need earnings growth from here to drive equities.

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Speaker 4: But frankly, there's already baked in massive growth, so it's

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Speaker 4: going to be really hard to get much more out

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Speaker 4: of that. You can make the argument for rotations.

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Speaker 1: We do like that.

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Speaker 4: Right now, we're in MidCap for cheaper ideas across the

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Speaker 4: equity market, and we're looking at some high quality cyclicals.

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Speaker 4: But at the end of the day, what we're seeing

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Speaker 4: is the bond market still might have about an eight

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Speaker 4: percent total return over the next twelve months. We think

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Speaker 4: that's going to be really competitive on a risk adjusted basis.

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Speaker 5: It's a pretty radical thought, Matt, the idea of a

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Speaker 5: two handle on ten year notes at a time where

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Speaker 5: some people are saying it neutral rate is something more

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Speaker 5: kin to three and a half percent. Why do you

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Speaker 5: reject the markets expectations of where the Fed's neutral rate

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Speaker 5: really will end up?

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Speaker 4: Yeah, I mean starting out with the neutral rate, you know,

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Speaker 4: being around this industry for as long as that in

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Speaker 4: about ten years now.

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Speaker 1: The neutral rate has always been almost like a.

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Speaker 4: Mysterious number that can never be quantified or found out.

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Speaker 4: You know, it almost reminds me of productivity in terms

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Speaker 4: of economists. But at the end of the day, it's

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Speaker 4: a cycle. You know, soft landing isn't destination. We're always

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Speaker 4: changing and evolving as relates to economic cycle. I wish

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Speaker 4: you could just stay in one place, but that's not

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Speaker 4: how it works. If the unemployment rate is changing and

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Speaker 4: shifting like a pendulum to a higher unemployment rate, if

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Speaker 4: inflation is shifting like a pendulum to lower inflation, to us,

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Speaker 4: that means lower rates. And I think one of the

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Speaker 4: things we're anchoring on as investors is still thinking about

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Speaker 4: the COVID era monetary policy fiscal policy disruptions to the

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Speaker 4: global economy as the new normal, and it's not.

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Speaker 1: That was a massive outlier.

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Speaker 4: That likely will never happen again, knock on wood in

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Speaker 4: our lifetime. And therefore, if we're back to the way

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Speaker 4: we were pre COVID, why wouldn't.

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Speaker 1: We be back to a lower rate regime.

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Speaker 4: And if it's a lower rate regime that's actually good

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Speaker 4: for stocks and bonds. It means lower inflation, but it

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Speaker 4: likely means bonds has more catch up after equities have

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Speaker 4: done so well as a belief.

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Speaker 5: So it sounds like you're still overweight bonds relative to

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Speaker 5: stocks at this juncture. What could make you flip that

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Speaker 5: given the fact that ultimately this is a pretty benign

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Speaker 5: setup for stocks, given the fact that we spent years

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Speaker 5: talking about how low rates really boosted valuations among equities.

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Speaker 4: So strategically stocks have done always better than bonds longer term,

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Speaker 4: and so we are just a modest underweight to stocks

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Speaker 4: first bonds. But the biggest change we made in our

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Speaker 4: tactical views is just overweighting higher quality.

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Speaker 1: Parts of the market.

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Speaker 4: So on the equity side, we're overweight higher quality markets, technology,

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Speaker 4: US equities, US large your cap versus smaller camp. And

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Speaker 4: then in the bond market, investment grade corporates with about

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Speaker 4: a single a credit quality is about as much credit

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Speaker 4: risk as we really want to overweight. Agency NBS, investment

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Speaker 4: grade corporates and things we like. We were doing five

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Speaker 4: to six percent in yield just a couple of months ago,

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Speaker 4: and now we're doing four to five, but again on

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Speaker 4: a risk adju a basis, we think that's really competitive

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Speaker 4: versus stocks.

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Speaker 2: Here, you're not scared of being contrarian. Do you find

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Speaker 2: it uncomfortable that what you're saying this morning is basically

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Speaker 2: what everyone's been telling us now for the last month.

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Speaker 4: So I hear that a lot, right, So I don't

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Speaker 4: hear that a lot, But nowadays we are hearing that

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Speaker 4: everyone's bullish on bonds, right, and utilities as you said

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Speaker 4: earlier in the show, Jell and around the fund manager survey,

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Speaker 4: the interest rate sensitive sectors, you know, And I look

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Speaker 4: at the pricing note of the market, and I also

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Speaker 4: look at the guts of the market and just cross

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Speaker 4: asset performance. So we've got goal doing great, the end

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Speaker 4: doing great, Treasury is doing great.

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Speaker 1: Those are all defensive.

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Speaker 4: Those are all saying, hey, the economy slowing, inflation slowing.

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Speaker 4: Then you got high spreads, it's super tight levels, the

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Speaker 4: SMP multiple is really high, and it's more small caps

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Speaker 4: are starting to do well. We're getting cyclicals out of

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Speaker 4: Europe doing well. So it doesn't add up. That's the

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Speaker 4: part of the consensus that I don't get. If you

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Speaker 4: if you want to say that everyone is more bearish

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Speaker 4: or suggesting more rate cuts, there's another part of the

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Speaker 4: market that is saying that's contrary to that. So I

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Speaker 4: think you just need to be careful with that. When

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Speaker 4: we look at what's priced in, it's a lot of

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Speaker 4: good news on the risk front, and to me, that

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Speaker 4: just needs to be shaken out here because the Fed

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Speaker 4: can't do everything. They can't just cut you know, it

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Speaker 4: consistently and meet up to these expectations and then you know,

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Speaker 4: support everything that has happened here. So we just want

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Speaker 4: to take a more managed risk managed approach, a more

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Speaker 4: conservative approach. We're not underweight, you know, we're not underinvested,

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Speaker 4: but that income is a key component and that's to

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Speaker 4: us going to pay off over time.

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Speaker 2: Matt, just love your thoughts on how a price going

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Speaker 2: into tomorrow and how you think might respond to any

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Speaker 2: given decision. Do you think it's sufficient just to validate

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Speaker 2: market pricing and the dog plot it is not enough?

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Speaker 2: Or does this market need more?

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Speaker 1: I think that's key, John to your point, because.

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Speaker 4: They could just say twenty five or fifty, but then

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Speaker 4: it's how do they say on top of that, what

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Speaker 4: we're going to do is the end of the year.

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Speaker 4: So in the June Summary of Economic Projections dot plot,

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Speaker 4: they said five point one on the FED funds rate

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Speaker 4: by the end of the year. That was the mean

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Speaker 4: median that has to come down to some degree or else.

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Speaker 4: So the market's going to be pissed, right, it's overdo it,

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Speaker 4: but it's not going to be happy unless they say,

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Speaker 4: on top of this cut, hey, we're still suggesting cuts

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Speaker 4: to come. Because again, if they're not easing, they're tightening,

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Speaker 4: and that's okay. If they want to push back on

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Speaker 4: the bond market, if they want to push back on

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Speaker 4: on the easing that's already baked in, that's fine, but

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Speaker 4: they got to know that that's what they're doing, and

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Speaker 4: it's a precarious time to really put more tightening into

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Speaker 4: this market. We would follow the bond market. If you

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Speaker 4: want to create a soft landing, you need that, You

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Speaker 4: need tight credit sprints, and you need the initial jobs

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Speaker 4: claims to stay low. If you get those three things,

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Speaker 4: you can keep the soft landing. If not, you're probably

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Speaker 4: looking at more risks that come.

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Speaker 5: Matt, just to sort of underscore one point that you

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Speaker 5: just made about the stock market just generally being pretty

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Speaker 5: ticked off, there is a question about whether this photos

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Speaker 5: or of cares.

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Speaker 3: It didn't really care.

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Speaker 5: On the way up, it seems to care on the

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Speaker 5: way down. Is that basically the litmus tests that we're

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Speaker 5: working with.

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Speaker 4: Well, there is a wealth effect to these things. So

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Speaker 4: you know, consuming at worth through the second quarter hit

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Speaker 4: all time high, ridiculous trillion trillion dollar amount. But that's

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Speaker 4: probably helping the economy, that's probably helping consumer spending, that's

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Speaker 4: helping consumer confidence. And you know, the markets are very

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Speaker 4: thickle and volatile, and it's very difficult for the FED

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Speaker 4: to over extrapolate things because it could change on a dime.

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Speaker 4: But at the end of the day, they too need

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Speaker 4: to be cautious of being too dubbish because yeah, if

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Speaker 4: the wealth effect becomes even bigger, of housing continues to

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Speaker 4: go hire, that's going to lift inflation. Uh And if

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Speaker 4: stock markets continue to go up. We could be cautious

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Speaker 4: here because of more bubble territories. We've had histories, lessons

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Speaker 4: and lessons of not over stimulating with ultra low interest

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Speaker 4: rates because it can create bubbles. You know, for us

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Speaker 4: right now cycle wise, we want to protect On the downside,

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Speaker 4: I think their mandate really they're dual mandate. They've got

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Speaker 4: to focus more on employment than inflation, and that's really

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Speaker 4: what we've got to look at. But yeah, they've got

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Speaker 4: to use the side of their eye. They've always got

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Speaker 4: to be watching for too much speculative nature in markets,

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Speaker 4: and we're coming off some pretty sig significant speculation, but

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Speaker 4: it's still not relieved from the market yet.

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Speaker 1: Match.

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Speaker 2: Just to reminder for next time, we curse in surveillance

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Speaker 2: after ours, that's a podcast coming in Q four where

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Speaker 2: there'll be lots of success if you want to cigaretts.

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Speaker 2: Oh yeah, oh yeah, that's you just breaking all the

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Speaker 2: rou Oh yeah, completely.

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Speaker 5: Let's not get carried away.

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Speaker 4: Let's just curse.

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Speaker 2: I'm not missing at John Hancock in Lingo Tobimo writing,

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Speaker 2: the primary risk of a fifty basis point cut is

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Speaker 2: that the market translates the move into a series of

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Speaker 2: fifty basis point reductions that quickly brings the FED funds

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Speaker 2: rate back to neutral, thereby effectively cutting for the Fed

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Speaker 2: and potentially stoking reflation. Ian joins us now for more

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Speaker 2: in It's going to see you, sir, Thanks for joining us,

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Speaker 2: Thanks for having me.

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Speaker 1: Err.

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Speaker 2: I want to start with your note from Yes to them.

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Speaker 2: Pick out another quote. Can we expect quote a notably

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Speaker 2: quick pace of cuts in the absence of more meaningful

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Speaker 2: downside in the rear economy, said differently, will the FED

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Speaker 2: simply mark to market the dot plot or our investors

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Speaker 2: in for a surprise, what's your base case?

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Speaker 6: So I think they should go twenty five. But I

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Speaker 6: suspect that if we go into the event priced with

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Speaker 6: a higher than eighty percent probability of fifty, that there's

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Speaker 6: a really good chance there they move fifty simply to

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Speaker 6: front load the process. Now this becomes tricky for the

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Speaker 6: FED from a communications perspective, because we call what happened

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Speaker 6: in June. We went into the June FMC decision, they'd

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Speaker 6: already submitted their dots, and so if it is a

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Speaker 6: game time decision we're walking in, we're going to get fifty,

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Speaker 6: but it's going to be hawkish or twenty five and

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Speaker 6: it's going to be duffish.

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Speaker 2: And let's talk about resale sales and how that might

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Speaker 2: influence things. Are you saying it's not that that data

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Speaker 2: point dependent, it's that that data point could shift market

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Speaker 2: expectations so close to fifty they won't want to disappoint.

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Speaker 6: Them only if it's really weak. If it comes in stronger,

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Speaker 6: it's not going to be part of the analysis because

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Speaker 6: we already know that the consumer remains and relatively strong footing.

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Speaker 6: But if we see a negative print, particularly in that

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Speaker 6: control group, that probably tips the scale to fifty.

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Speaker 3: What are we pricing in right now?

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Speaker 5: In the rates market? We've heard a lot of people

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Speaker 5: disagree around this table, some people saying it is accurately

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Speaker 5: pricing in about a forty percent chance of recession, which

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Speaker 5: is the baseline for bank from America the fund manager

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Speaker 5: survey that just came out. Other people saying price is

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Speaker 5: in a much bigger tail risk of something that's negative.

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Speaker 7: What's your take?

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Speaker 6: So when I look at the futures market, what I

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Speaker 6: see is the market expects us the FED to get

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Speaker 6: back to neutral, but not end up cutting into the

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Speaker 6: one handled territory. So that implies that at least from

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Speaker 6: a monetary policy perspective, we're still in a soft landing narrative.

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Speaker 3: Now. Ten year yields close to three point fifty.

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Speaker 6: Suggests that we're in verse of economic downside over the

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Speaker 6: course of the next two or three years, which I

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Speaker 6: certainly agree with. But I do think that the soft

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Speaker 6: landing narrative can probably survive this year, particularly if the

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Speaker 6: FED is a bit proactive, and even if we see

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Speaker 6: a little bit of weakness towards the end of the year,

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Speaker 6: the market will still think that it's a love.

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Speaker 5: Do you not buy the argument that they're just trying

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Speaker 5: to get back to neutrals, they're not increasing their restrictiveness.

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Speaker 5: In other words, does that hold less weight for you

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Speaker 5: when you don't have clarity over what they believe the

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Speaker 5: neutral right to actually be.

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Speaker 6: Well, one thing we know is true is that as

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Speaker 6: realized inflation decreases or a year over year basis, that

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Speaker 6: means that real policy rates are more restrictive. So given

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Speaker 6: where we are in the cycle, they need to cut

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Speaker 6: rates just to keep the prevailing level of real rates

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Speaker 6: as high as that are.

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Speaker 8: And if we get a softer retail sales print and

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Speaker 8: we have the FED coming or the markets pricing in

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Speaker 8: fifty more notably not on an I edge really starting fifty,

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Speaker 8: but the FED comes out in US twenty five, what

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Speaker 8: happens to the market.

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Speaker 6: I think it all depends on how Powell spins it,

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Speaker 6: and it all depends on what the dot plot tells us,

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Speaker 6: because recalled that in June the twenty twenty four dot

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Speaker 6: was a five. Twenty five was four point one. If

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Speaker 6: we look at what's priced into the market to simply

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Speaker 6: mark to market, do we have to get to three percent?

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Speaker 6: And so if the Fed says, okay, we'll go into neutral,

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Speaker 6: that gives us a three percent and they do that

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Speaker 6: via the twenty twenty five dot. I think that the

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Speaker 6: market doesn't sell off as much as it would otherwise.

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Speaker 2: You mentioned the risk of stoking reinflation or reflation Bill

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Speaker 2: Dunkley yesterday, formerly the neo Fed right and Bloombag opinion.

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Speaker 3: He thinks they should go big.

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Speaker 2: He thinks they will go big, and he asked himself

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Speaker 2: this question, do downsound risk to employment outweigh upside risk

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Speaker 2: to inflation.

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Speaker 3: I'm going to address you with that question. Do you

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Speaker 3: think they do well? They certainly did throughout the bulk

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Speaker 3: of this cycle.

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Speaker 6: Now we're at the point where we have seen the

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Speaker 6: unemployment rate materially increase off of.

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Speaker 3: The cycle low.

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Speaker 6: The conversation about whether we're overdue for a spike higher

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Speaker 6: and on the unemployment remains very valid. In effect, what

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Speaker 6: the Fed is doing is their changing monetary policy for

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Speaker 6: the second half of next year, not for the current data.

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Speaker 6: So it's the trajectory of the prevailing data, and it

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Speaker 6: might make sense to go big early with the expectations

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Speaker 6: that they can solve next year's problem.

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Speaker 2: We keep saying the FED, but when we're talking about

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Speaker 2: the FED, we're talking about a group of individual policymakers

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Speaker 2: who apparently have some different views on where we are

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Speaker 2: at the moment. And I wonder tomorrow, when that decision

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Speaker 2: drops and we talk about the decision twenty five versus fifteen,

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Speaker 2: then we go for the forecast, we'll just be talking

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Speaker 2: about medians. Will that mask a great divide on a

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Speaker 2: cephalem C?

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Speaker 3: I think that we also might see a descent.

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Speaker 6: There's nothing to suggest that everyone needs to vote in

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Speaker 6: for twenty five or fifty, So I think that that

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Speaker 6: could be another way to communicate to the market that

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Speaker 6: it was a knife edged decision and it's uncertain going forward.

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Speaker 5: Do you think that there's a chance of a seventy

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Speaker 5: five basis point rate cut because of Elizabeth Warren?

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Speaker 3: That's really not been top of mine recently.

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Speaker 5: The reason why I had is because we were talking

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Speaker 5: about it earlier, and as someone who's in this market,

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Speaker 5: I wonder sort of whether people actually dismiss this, whether

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Speaker 5: it's actually harmful to the functioning of the Federal Reserve,

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Speaker 5: or basically just noise with people trying to get their

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Speaker 5: voices heard.

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Speaker 3: I think the I think the latter point. I think

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Speaker 3: that they're just trying.

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Speaker 6: To be part of the micro conversation and it's not

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Speaker 6: going to be particularly influential for the FLMC.

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Speaker 2: I love that you got last it a site noise

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Speaker 2: for you to continue this conversation. Joining us now, Islurina

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Speaker 2: Ruchi of t row Price Plurina, let's get to this data.

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Speaker 2: It seems to have settled absolutely nothing about whether we

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Speaker 2: go twenty five or fifty tomorrow afternoon. What's your base

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Speaker 2: case now?

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Speaker 9: So I would say that what we discussed here in

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Speaker 9: the past is still valid, that the FED is data dependent,

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Speaker 9: not data point dependent, And so I hope when they

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Speaker 9: sit in their deliberations today and tomorrow, they'll look at

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Speaker 9: what we've seen in the economy over the last three months.

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Speaker 7: I would say, before the quiet period, we.

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Speaker 9: Didn't have an indication that they wanted to start this

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Speaker 9: cutting cycle with a big cut. But it seems like

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Speaker 9: perhaps we don't have as good a sense of how

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Speaker 9: the FED is interpreting the labor market data as we should,

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Speaker 9: And so I think into the decision.

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Speaker 7: It's really essentially a coin flip.

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Speaker 9: And I don't disagree with market expectations here. I do

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Speaker 9: think that the FED perhaps is looking at the fall

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Speaker 9: in vacancy rates, at the recent uptack in the unemployment rate,

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Speaker 9: and the labor market differential from the consumer side of

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Speaker 9: the data, and saying, Okay, the labor market is really

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Speaker 9: slowing down, and perhaps we are a bit behind the curve,

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Speaker 9: and we want to take some insurance cuts early in

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Speaker 9: the cycle. So I think it's completely possible that we

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Speaker 9: get a fifty basis point cut tomorrow. And I do

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Speaker 9: think that the Summary of Economic Projections is probably going

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Speaker 9: to show that the dot plot has one hundred basis

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Speaker 9: point worth of cuts for the year as a whole.

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Speaker 9: And I think if you consider how the market deals

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Speaker 9: with uncertainty, perhaps from the FMCS perspective, it makes communication easier.

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Speaker 9: They start with fifty basis points and then the market

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Speaker 9: can expect that the November and December meeting a couple

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Speaker 9: of twenty five basis point cuts.

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Speaker 2: You mentioned the SEP. Let's start there and we'll unpack

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Speaker 2: the rest in just a moment. The so Many of

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Speaker 2: Economic Projections was last published on June twelfth, and that

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Speaker 2: is super superstow. We're going to see some major revisions

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Speaker 2: to that one. You mentioned how the median dot would

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Speaker 2: come down and show in basically one hundred basis points

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Speaker 2: of cuts for this year. Can you walk me through

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Speaker 2: twenty twenty five? Where's that median doll for twenty five.

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Speaker 7: Right? I think you're absolutely right.

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Speaker 9: We're going to get a much more doavash dot cloud

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Speaker 9: than we had in June. Just a reminder in June

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Speaker 9: which had only one cut for this year. So the

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Speaker 9: INFORMC has really changed their assessment of the economy and

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Speaker 9: of the cutting cycle for next year. I don't expect changes.

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Speaker 9: I think they're going to still have four cuts. It

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Speaker 9: would be a very doubbish surprise if they fully embrace

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Speaker 9: market pricing and show four cuts this year and six

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Speaker 9: cuts next year. It's a risk to my view, but

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Speaker 9: I do think that's shifting to eight cuts over the

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Speaker 9: next fifteen months or so. It's already a very douvish

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Speaker 9: move from the side of the fat. And then if

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Speaker 9: you consider where they had interest rates at the end

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Speaker 9: of the cutting sete, I think essentially what's.

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Speaker 7: Happening is they're not changing.

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Speaker 9: Their idea or their view of the destination and the

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Speaker 9: long run rate.

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Speaker 7: They're just bringing.

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Speaker 9: Those cuts forward because the cooling in the labor market

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Speaker 9: and inflation is happening faster than they expected back in June.

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Speaker 5: Just to sort of build on that, there's this feeling

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Speaker 5: that later this year it'll get that much more difficult

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Speaker 5: for the Federal Reserve to project out some sort of

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Speaker 5: path with potentially some different fiscal proposals they could come

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Speaker 5: to the fore that could very much affect inflation. Do

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Speaker 5: you expect that to be sort of hinted at or

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Speaker 5: suggested discussed by a Federal Reserve that has hinted about

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Speaker 5: the deficit as well as some other government programs.

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Speaker 9: I do expect that the f Y and C and

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Speaker 9: Powell in particular, during the press conference will be asked

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Speaker 9: this question. I think they will stick with their mantra

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Speaker 9: here that they take fiscal policy as given.

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Speaker 7: I do think, though, they.

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Speaker 9: Are sure assessing risks around their outlook as with regards

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Speaker 9: to what will happen if we have tariffs across the board.

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Speaker 9: I know that we've had tariffs in the past. It's

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Speaker 9: a one off shock to the price level, but we

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Speaker 9: haven't had sustained high inflation at these levels for quite

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Speaker 9: some decades, So what will it do to inflation expectations

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Speaker 9: if you have another shock to prices?

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Speaker 7: So I think this will be part of the deliberation.

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Speaker 9: I do think that when they get asked directly about it,

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Speaker 9: they're not going to comment. But for me, I think,

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Speaker 9: even setting aside fiscal policy uncertainty, I do have a

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Speaker 9: more benign or optimistic interpretation of data, both from the

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Speaker 9: labor market and activity then the market seem to have.

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Speaker 9: And I do think if the FED front loads cuts

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Speaker 9: and eating in financial conditions, that it's setting up the

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Speaker 9: economy to perform quite well later this year and at

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Speaker 9: the beginning of twenty twenty five. And I think this

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Speaker 9: will put forward some challenges to them bringing inflation down

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Speaker 9: to two percent.

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Speaker 8: Is there any chance that there's a risk that this

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Speaker 8: could set up the economy to, besides doing quite well,

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Speaker 8: potentially reaccelerate inflation Marena.

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Speaker 9: I think this is the key risk that people are

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00:21:20,040 --> 00:21:22,959
Speaker 9: not talking about anymore. I do think there is too

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Speaker 9: much certainty priced in the market that the FED is

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Speaker 9: going to bring inflation down to two percent. And when

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00:21:30,880 --> 00:21:33,480
Speaker 9: I look at the progress we've made so far on

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00:21:33,560 --> 00:21:36,960
Speaker 9: goods disinflation, A lot of that has been driven by

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00:21:37,000 --> 00:21:41,000
Speaker 9: dollar strength by week, import prices, improving supply chains. I

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00:21:41,040 --> 00:21:44,159
Speaker 9: don't expect that impulse to help the FED quite as much.

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00:21:44,400 --> 00:21:49,040
Speaker 9: I get the idea that globally commodity prices are soft

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00:21:49,119 --> 00:21:51,800
Speaker 9: because we have a China slowdown in the picture, But

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00:21:52,080 --> 00:21:54,919
Speaker 9: we're seeing signs of gold and copper picking up, and

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00:21:54,960 --> 00:21:59,320
Speaker 9: I think that's basically a precursor to global commodity prices

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00:21:59,359 --> 00:22:01,600
Speaker 9: perhaps picking up, and that's not good news for the

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00:22:01,640 --> 00:22:05,600
Speaker 9: FED cutting interest rates. The market is pricing more aggressive

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Speaker 9: cuts from the Fed than say the ECB Bank of

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Speaker 9: Canada or buy at the moment. I think that's going

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Speaker 9: to lead to some dollar weakness as well.

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Speaker 7: So I'm not very.

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Speaker 9: Optimistic that the disinflation in goods is going to be sustained.

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Speaker 9: And I think we're going to have more volatility when

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Speaker 9: it comes to domestic services prices.

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Speaker 7: And rent inflation.

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Speaker 9: So too much uncertainty, and my view is priced in

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Speaker 9: with regards to bringing inflation down to two percent.

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Speaker 2: We've got to leave it there. We appreciate your insight

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Speaker 2: got into the Federal Reserve decision tomorrow Loriina Richie at

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Speaker 2: zero Price. This is the Bloomberg Sevenance podcast, bringing you

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00:22:42,600 --> 00:22:46,080
Speaker 2: the best in markets, economics, angiopolitics. You can watch the

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