Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business App. Matt Miskin of John
Speaker 2: Hancock Investment Management, writing, if you are not easing your tightening,
Speaker 2: the bond market has already priced in two point five
Speaker 2: percentage points in RAID cuts over the next twelve to
Speaker 2: sixteen months.
Speaker 3: If the Fed shoes is.
Speaker 2: Less than that, in essence, they will be tightening monetary policy.
Speaker 2: Matt joined us now for more. Matt, welcome to the program.
Speaker 2: Have you ever when was the last time you saw
Speaker 2: a decision this finally balanced twenty four hours out?
Speaker 1: I don't remember when.
Speaker 4: I think twenty fifteen was the last one that I
Speaker 4: that I've heard of as a recalling this, but it
Speaker 4: is leaving a lot of uncertainty, and you know, I
Speaker 4: think the FED would like to have more.
Speaker 1: Prepared kind of communication around this.
Speaker 4: And you know what we're looking at is, though not
Speaker 4: to overemphasize one meeting, one data point. I know retail
Speaker 4: sales are going to be exciting here in a couple
Speaker 4: in just about an hour, but at the end of
Speaker 4: the day, we're starting a cutting cycle.
Speaker 1: That's what we know.
Speaker 4: We know that inflation has come down a lot and
Speaker 4: the unemployment rate is rising. Keep it simple, is it
Speaker 4: relates to that? That means the Fed's going to be cutting.
Speaker 1: In argue, we.
Speaker 4: Could end this cutting cycle with a two handle on
Speaker 4: the ten year and frankly a two handle on the
Speaker 4: Fed funds rate. And that's with just inflation coming down
Speaker 4: we see a recession. We think, actually we can get
Speaker 4: a one handle on the Fed funds rate and low
Speaker 4: twos on the tenure.
Speaker 2: Matt, two handles on tens, two handles on Fed funds.
Speaker 2: Tell me where the S and P five hundred is
Speaker 2: against that backdrop?
Speaker 4: Yeah, So that would be assuming a soft landing, which
Speaker 4: to us means more chopped.
Speaker 1: The problem with.
Speaker 4: Wanting more out of the S and P five hundred
Speaker 4: is the valuations are already at the upper end of
Speaker 4: the range, so we're at about twenty one times on
Speaker 4: the forward PE and the SMP, and then we're baking
Speaker 4: in fifteen.
Speaker 1: Percent earning strowth.
Speaker 4: So we need earnings growth from here to drive equities.
Speaker 4: But frankly, there's already baked in massive growth, so it's
Speaker 4: going to be really hard to get much more out
Speaker 4: of that. You can make the argument for rotations.
Speaker 1: We do like that.
Speaker 4: Right now, we're in MidCap for cheaper ideas across the
Speaker 4: equity market, and we're looking at some high quality cyclicals.
Speaker 4: But at the end of the day, what we're seeing
Speaker 4: is the bond market still might have about an eight
Speaker 4: percent total return over the next twelve months. We think
Speaker 4: that's going to be really competitive on a risk adjusted basis.
Speaker 5: It's a pretty radical thought, Matt, the idea of a
Speaker 5: two handle on ten year notes at a time where
Speaker 5: some people are saying it neutral rate is something more
Speaker 5: kin to three and a half percent. Why do you
Speaker 5: reject the markets expectations of where the Fed's neutral rate
Speaker 5: really will end up?
Speaker 4: Yeah, I mean starting out with the neutral rate, you know,
Speaker 4: being around this industry for as long as that in
Speaker 4: about ten years now.
Speaker 1: The neutral rate has always been almost like a.
Speaker 4: Mysterious number that can never be quantified or found out.
Speaker 4: You know, it almost reminds me of productivity in terms
Speaker 4: of economists. But at the end of the day, it's
Speaker 4: a cycle. You know, soft landing isn't destination. We're always
Speaker 4: changing and evolving as relates to economic cycle. I wish
Speaker 4: you could just stay in one place, but that's not
Speaker 4: how it works. If the unemployment rate is changing and
Speaker 4: shifting like a pendulum to a higher unemployment rate, if
Speaker 4: inflation is shifting like a pendulum to lower inflation, to us,
Speaker 4: that means lower rates. And I think one of the
Speaker 4: things we're anchoring on as investors is still thinking about
Speaker 4: the COVID era monetary policy fiscal policy disruptions to the
Speaker 4: global economy as the new normal, and it's not.
Speaker 1: That was a massive outlier.
Speaker 4: That likely will never happen again, knock on wood in
Speaker 4: our lifetime. And therefore, if we're back to the way
Speaker 4: we were pre COVID, why wouldn't.
Speaker 1: We be back to a lower rate regime.
Speaker 4: And if it's a lower rate regime that's actually good
Speaker 4: for stocks and bonds. It means lower inflation, but it
Speaker 4: likely means bonds has more catch up after equities have
Speaker 4: done so well as a belief.
Speaker 5: So it sounds like you're still overweight bonds relative to
Speaker 5: stocks at this juncture. What could make you flip that
Speaker 5: given the fact that ultimately this is a pretty benign
Speaker 5: setup for stocks, given the fact that we spent years
Speaker 5: talking about how low rates really boosted valuations among equities.
Speaker 4: So strategically stocks have done always better than bonds longer term,
Speaker 4: and so we are just a modest underweight to stocks
Speaker 4: first bonds. But the biggest change we made in our
Speaker 4: tactical views is just overweighting higher quality.
Speaker 1: Parts of the market.
Speaker 4: So on the equity side, we're overweight higher quality markets, technology,
Speaker 4: US equities, US large your cap versus smaller camp. And
Speaker 4: then in the bond market, investment grade corporates with about
Speaker 4: a single a credit quality is about as much credit
Speaker 4: risk as we really want to overweight. Agency NBS, investment
Speaker 4: grade corporates and things we like. We were doing five
Speaker 4: to six percent in yield just a couple of months ago,
Speaker 4: and now we're doing four to five, but again on
Speaker 4: a risk adju a basis, we think that's really competitive
Speaker 4: versus stocks.
Speaker 2: Here, you're not scared of being contrarian. Do you find
Speaker 2: it uncomfortable that what you're saying this morning is basically
Speaker 2: what everyone's been telling us now for the last month.
Speaker 4: So I hear that a lot, right, So I don't
Speaker 4: hear that a lot, But nowadays we are hearing that
Speaker 4: everyone's bullish on bonds, right, and utilities as you said
Speaker 4: earlier in the show, Jell and around the fund manager survey,
Speaker 4: the interest rate sensitive sectors, you know, And I look
Speaker 4: at the pricing note of the market, and I also
Speaker 4: look at the guts of the market and just cross
Speaker 4: asset performance. So we've got goal doing great, the end
Speaker 4: doing great, Treasury is doing great.
Speaker 1: Those are all defensive.
Speaker 4: Those are all saying, hey, the economy slowing, inflation slowing.
Speaker 4: Then you got high spreads, it's super tight levels, the
Speaker 4: SMP multiple is really high, and it's more small caps
Speaker 4: are starting to do well. We're getting cyclicals out of
Speaker 4: Europe doing well. So it doesn't add up. That's the
Speaker 4: part of the consensus that I don't get. If you
Speaker 4: if you want to say that everyone is more bearish
Speaker 4: or suggesting more rate cuts, there's another part of the
Speaker 4: market that is saying that's contrary to that. So I
Speaker 4: think you just need to be careful with that. When
Speaker 4: we look at what's priced in, it's a lot of
Speaker 4: good news on the risk front, and to me, that
Speaker 4: just needs to be shaken out here because the Fed
Speaker 4: can't do everything. They can't just cut you know, it
Speaker 4: consistently and meet up to these expectations and then you know,
Speaker 4: support everything that has happened here. So we just want
Speaker 4: to take a more managed risk managed approach, a more
Speaker 4: conservative approach. We're not underweight, you know, we're not underinvested,
Speaker 4: but that income is a key component and that's to
Speaker 4: us going to pay off over time.
Speaker 2: Matt, just love your thoughts on how a price going
Speaker 2: into tomorrow and how you think might respond to any
Speaker 2: given decision. Do you think it's sufficient just to validate
Speaker 2: market pricing and the dog plot it is not enough?
Speaker 2: Or does this market need more?
Speaker 1: I think that's key, John to your point, because.
Speaker 4: They could just say twenty five or fifty, but then
Speaker 4: it's how do they say on top of that, what
Speaker 4: we're going to do is the end of the year.
Speaker 4: So in the June Summary of Economic Projections dot plot,
Speaker 4: they said five point one on the FED funds rate
Speaker 4: by the end of the year. That was the mean
Speaker 4: median that has to come down to some degree or else.
Speaker 4: So the market's going to be pissed, right, it's overdo it,
Speaker 4: but it's not going to be happy unless they say,
Speaker 4: on top of this cut, hey, we're still suggesting cuts
Speaker 4: to come. Because again, if they're not easing, they're tightening,
Speaker 4: and that's okay. If they want to push back on
Speaker 4: the bond market, if they want to push back on
Speaker 4: on the easing that's already baked in, that's fine, but
Speaker 4: they got to know that that's what they're doing, and
Speaker 4: it's a precarious time to really put more tightening into
Speaker 4: this market. We would follow the bond market. If you
Speaker 4: want to create a soft landing, you need that, You
Speaker 4: need tight credit sprints, and you need the initial jobs
Speaker 4: claims to stay low. If you get those three things,
Speaker 4: you can keep the soft landing. If not, you're probably
Speaker 4: looking at more risks that come.
Speaker 5: Matt, just to sort of underscore one point that you
Speaker 5: just made about the stock market just generally being pretty
Speaker 5: ticked off, there is a question about whether this photos
Speaker 5: or of cares.
Speaker 3: It didn't really care.
Speaker 5: On the way up, it seems to care on the
Speaker 5: way down. Is that basically the litmus tests that we're
Speaker 5: working with.
Speaker 4: Well, there is a wealth effect to these things. So
Speaker 4: you know, consuming at worth through the second quarter hit
Speaker 4: all time high, ridiculous trillion trillion dollar amount. But that's
Speaker 4: probably helping the economy, that's probably helping consumer spending, that's
Speaker 4: helping consumer confidence. And you know, the markets are very
Speaker 4: thickle and volatile, and it's very difficult for the FED
Speaker 4: to over extrapolate things because it could change on a dime.
Speaker 4: But at the end of the day, they too need
Speaker 4: to be cautious of being too dubbish because yeah, if
Speaker 4: the wealth effect becomes even bigger, of housing continues to
Speaker 4: go hire, that's going to lift inflation. Uh And if
Speaker 4: stock markets continue to go up. We could be cautious
Speaker 4: here because of more bubble territories. We've had histories, lessons
Speaker 4: and lessons of not over stimulating with ultra low interest
Speaker 4: rates because it can create bubbles. You know, for us
Speaker 4: right now cycle wise, we want to protect On the downside,
Speaker 4: I think their mandate really they're dual mandate. They've got
Speaker 4: to focus more on employment than inflation, and that's really
Speaker 4: what we've got to look at. But yeah, they've got
Speaker 4: to use the side of their eye. They've always got
Speaker 4: to be watching for too much speculative nature in markets,
Speaker 4: and we're coming off some pretty sig significant speculation, but
Speaker 4: it's still not relieved from the market yet.
Speaker 1: Match.
Speaker 2: Just to reminder for next time, we curse in surveillance
Speaker 2: after ours, that's a podcast coming in Q four where
Speaker 2: there'll be lots of success if you want to cigaretts.
Speaker 2: Oh yeah, oh yeah, that's you just breaking all the
Speaker 2: rou Oh yeah, completely.
Speaker 5: Let's not get carried away.
Speaker 4: Let's just curse.
Speaker 2: I'm not missing at John Hancock in Lingo Tobimo writing,
Speaker 2: the primary risk of a fifty basis point cut is
Speaker 2: that the market translates the move into a series of
Speaker 2: fifty basis point reductions that quickly brings the FED funds
Speaker 2: rate back to neutral, thereby effectively cutting for the Fed
Speaker 2: and potentially stoking reflation. Ian joins us now for more
Speaker 2: in It's going to see you, sir, Thanks for joining us,
Speaker 2: Thanks for having me.
Speaker 1: Err.
Speaker 2: I want to start with your note from Yes to them.
Speaker 2: Pick out another quote. Can we expect quote a notably
Speaker 2: quick pace of cuts in the absence of more meaningful
Speaker 2: downside in the rear economy, said differently, will the FED
Speaker 2: simply mark to market the dot plot or our investors
Speaker 2: in for a surprise, what's your base case?
Speaker 6: So I think they should go twenty five. But I
Speaker 6: suspect that if we go into the event priced with
Speaker 6: a higher than eighty percent probability of fifty, that there's
Speaker 6: a really good chance there they move fifty simply to
Speaker 6: front load the process. Now this becomes tricky for the
Speaker 6: FED from a communications perspective, because we call what happened
Speaker 6: in June. We went into the June FMC decision, they'd
Speaker 6: already submitted their dots, and so if it is a
Speaker 6: game time decision we're walking in, we're going to get fifty,
Speaker 6: but it's going to be hawkish or twenty five and
Speaker 6: it's going to be duffish.
Speaker 2: And let's talk about resale sales and how that might
Speaker 2: influence things. Are you saying it's not that that data
Speaker 2: point dependent, it's that that data point could shift market
Speaker 2: expectations so close to fifty they won't want to disappoint.
Speaker 6: Them only if it's really weak. If it comes in stronger,
Speaker 6: it's not going to be part of the analysis because
Speaker 6: we already know that the consumer remains and relatively strong footing.
Speaker 6: But if we see a negative print, particularly in that
Speaker 6: control group, that probably tips the scale to fifty.
Speaker 3: What are we pricing in right now?
Speaker 5: In the rates market? We've heard a lot of people
Speaker 5: disagree around this table, some people saying it is accurately
Speaker 5: pricing in about a forty percent chance of recession, which
Speaker 5: is the baseline for bank from America the fund manager
Speaker 5: survey that just came out. Other people saying price is
Speaker 5: in a much bigger tail risk of something that's negative.
Speaker 7: What's your take?
Speaker 6: So when I look at the futures market, what I
Speaker 6: see is the market expects us the FED to get
Speaker 6: back to neutral, but not end up cutting into the
Speaker 6: one handled territory. So that implies that at least from
Speaker 6: a monetary policy perspective, we're still in a soft landing narrative.
Speaker 3: Now. Ten year yields close to three point fifty.
Speaker 6: Suggests that we're in verse of economic downside over the
Speaker 6: course of the next two or three years, which I
Speaker 6: certainly agree with. But I do think that the soft
Speaker 6: landing narrative can probably survive this year, particularly if the
Speaker 6: FED is a bit proactive, and even if we see
Speaker 6: a little bit of weakness towards the end of the year,
Speaker 6: the market will still think that it's a love.
Speaker 5: Do you not buy the argument that they're just trying
Speaker 5: to get back to neutrals, they're not increasing their restrictiveness.
Speaker 5: In other words, does that hold less weight for you
Speaker 5: when you don't have clarity over what they believe the
Speaker 5: neutral right to actually be.
Speaker 6: Well, one thing we know is true is that as
Speaker 6: realized inflation decreases or a year over year basis, that
Speaker 6: means that real policy rates are more restrictive. So given
Speaker 6: where we are in the cycle, they need to cut
Speaker 6: rates just to keep the prevailing level of real rates
Speaker 6: as high as that are.
Speaker 8: And if we get a softer retail sales print and
Speaker 8: we have the FED coming or the markets pricing in
Speaker 8: fifty more notably not on an I edge really starting fifty,
Speaker 8: but the FED comes out in US twenty five, what
Speaker 8: happens to the market.
Speaker 6: I think it all depends on how Powell spins it,
Speaker 6: and it all depends on what the dot plot tells us,
Speaker 6: because recalled that in June the twenty twenty four dot
Speaker 6: was a five. Twenty five was four point one. If
Speaker 6: we look at what's priced into the market to simply
Speaker 6: mark to market, do we have to get to three percent?
Speaker 6: And so if the Fed says, okay, we'll go into neutral,
Speaker 6: that gives us a three percent and they do that
Speaker 6: via the twenty twenty five dot. I think that the
Speaker 6: market doesn't sell off as much as it would otherwise.
Speaker 2: You mentioned the risk of stoking reinflation or reflation Bill
Speaker 2: Dunkley yesterday, formerly the neo Fed right and Bloombag opinion.
Speaker 3: He thinks they should go big.
Speaker 2: He thinks they will go big, and he asked himself
Speaker 2: this question, do downsound risk to employment outweigh upside risk
Speaker 2: to inflation.
Speaker 3: I'm going to address you with that question. Do you
Speaker 3: think they do well? They certainly did throughout the bulk
Speaker 3: of this cycle.
Speaker 6: Now we're at the point where we have seen the
Speaker 6: unemployment rate materially increase off of.
Speaker 3: The cycle low.
Speaker 6: The conversation about whether we're overdue for a spike higher
Speaker 6: and on the unemployment remains very valid. In effect, what
Speaker 6: the Fed is doing is their changing monetary policy for
Speaker 6: the second half of next year, not for the current data.
Speaker 6: So it's the trajectory of the prevailing data, and it
Speaker 6: might make sense to go big early with the expectations
Speaker 6: that they can solve next year's problem.
Speaker 2: We keep saying the FED, but when we're talking about
Speaker 2: the FED, we're talking about a group of individual policymakers
Speaker 2: who apparently have some different views on where we are
Speaker 2: at the moment. And I wonder tomorrow, when that decision
Speaker 2: drops and we talk about the decision twenty five versus fifteen,
Speaker 2: then we go for the forecast, we'll just be talking
Speaker 2: about medians. Will that mask a great divide on a
Speaker 2: cephalem C?
Speaker 3: I think that we also might see a descent.
Speaker 6: There's nothing to suggest that everyone needs to vote in
Speaker 6: for twenty five or fifty, So I think that that
Speaker 6: could be another way to communicate to the market that
Speaker 6: it was a knife edged decision and it's uncertain going forward.
Speaker 5: Do you think that there's a chance of a seventy
Speaker 5: five basis point rate cut because of Elizabeth Warren?
Speaker 3: That's really not been top of mine recently.
Speaker 5: The reason why I had is because we were talking
Speaker 5: about it earlier, and as someone who's in this market,
Speaker 5: I wonder sort of whether people actually dismiss this, whether
Speaker 5: it's actually harmful to the functioning of the Federal Reserve,
Speaker 5: or basically just noise with people trying to get their
Speaker 5: voices heard.
Speaker 3: I think the I think the latter point. I think
Speaker 3: that they're just trying.
Speaker 6: To be part of the micro conversation and it's not
Speaker 6: going to be particularly influential for the FLMC.
Speaker 2: I love that you got last it a site noise
Speaker 2: for you to continue this conversation. Joining us now, Islurina
Speaker 2: Ruchi of t row Price Plurina, let's get to this data.
Speaker 2: It seems to have settled absolutely nothing about whether we
Speaker 2: go twenty five or fifty tomorrow afternoon. What's your base
Speaker 2: case now?
Speaker 9: So I would say that what we discussed here in
Speaker 9: the past is still valid, that the FED is data dependent,
Speaker 9: not data point dependent, And so I hope when they
Speaker 9: sit in their deliberations today and tomorrow, they'll look at
Speaker 9: what we've seen in the economy over the last three months.
Speaker 7: I would say, before the quiet period, we.
Speaker 9: Didn't have an indication that they wanted to start this
Speaker 9: cutting cycle with a big cut. But it seems like
Speaker 9: perhaps we don't have as good a sense of how
Speaker 9: the FED is interpreting the labor market data as we should,
Speaker 9: And so I think into the decision.
Speaker 7: It's really essentially a coin flip.
Speaker 9: And I don't disagree with market expectations here. I do
Speaker 9: think that the FED perhaps is looking at the fall
Speaker 9: in vacancy rates, at the recent uptack in the unemployment rate,
Speaker 9: and the labor market differential from the consumer side of
Speaker 9: the data, and saying, Okay, the labor market is really
Speaker 9: slowing down, and perhaps we are a bit behind the curve,
Speaker 9: and we want to take some insurance cuts early in
Speaker 9: the cycle. So I think it's completely possible that we
Speaker 9: get a fifty basis point cut tomorrow. And I do
Speaker 9: think that the Summary of Economic Projections is probably going
Speaker 9: to show that the dot plot has one hundred basis
Speaker 9: point worth of cuts for the year as a whole.
Speaker 9: And I think if you consider how the market deals
Speaker 9: with uncertainty, perhaps from the FMCS perspective, it makes communication easier.
Speaker 9: They start with fifty basis points and then the market
Speaker 9: can expect that the November and December meeting a couple
Speaker 9: of twenty five basis point cuts.
Speaker 2: You mentioned the SEP. Let's start there and we'll unpack
Speaker 2: the rest in just a moment. The so Many of
Speaker 2: Economic Projections was last published on June twelfth, and that
Speaker 2: is super superstow. We're going to see some major revisions
Speaker 2: to that one. You mentioned how the median dot would
Speaker 2: come down and show in basically one hundred basis points
Speaker 2: of cuts for this year. Can you walk me through
Speaker 2: twenty twenty five? Where's that median doll for twenty five.
Speaker 7: Right? I think you're absolutely right.
Speaker 9: We're going to get a much more doavash dot cloud
Speaker 9: than we had in June. Just a reminder in June
Speaker 9: which had only one cut for this year. So the
Speaker 9: INFORMC has really changed their assessment of the economy and
Speaker 9: of the cutting cycle for next year. I don't expect changes.
Speaker 9: I think they're going to still have four cuts. It
Speaker 9: would be a very doubbish surprise if they fully embrace
Speaker 9: market pricing and show four cuts this year and six
Speaker 9: cuts next year. It's a risk to my view, but
Speaker 9: I do think that's shifting to eight cuts over the
Speaker 9: next fifteen months or so. It's already a very douvish
Speaker 9: move from the side of the fat. And then if
Speaker 9: you consider where they had interest rates at the end
Speaker 9: of the cutting sete, I think essentially what's.
Speaker 7: Happening is they're not changing.
Speaker 9: Their idea or their view of the destination and the
Speaker 9: long run rate.
Speaker 7: They're just bringing.
Speaker 9: Those cuts forward because the cooling in the labor market
Speaker 9: and inflation is happening faster than they expected back in June.
Speaker 5: Just to sort of build on that, there's this feeling
Speaker 5: that later this year it'll get that much more difficult
Speaker 5: for the Federal Reserve to project out some sort of
Speaker 5: path with potentially some different fiscal proposals they could come
Speaker 5: to the fore that could very much affect inflation. Do
Speaker 5: you expect that to be sort of hinted at or
Speaker 5: suggested discussed by a Federal Reserve that has hinted about
Speaker 5: the deficit as well as some other government programs.
Speaker 9: I do expect that the f Y and C and
Speaker 9: Powell in particular, during the press conference will be asked
Speaker 9: this question. I think they will stick with their mantra
Speaker 9: here that they take fiscal policy as given.
Speaker 7: I do think, though, they.
Speaker 9: Are sure assessing risks around their outlook as with regards
Speaker 9: to what will happen if we have tariffs across the board.
Speaker 9: I know that we've had tariffs in the past. It's
Speaker 9: a one off shock to the price level, but we
Speaker 9: haven't had sustained high inflation at these levels for quite
Speaker 9: some decades, So what will it do to inflation expectations
Speaker 9: if you have another shock to prices?
Speaker 7: So I think this will be part of the deliberation.
Speaker 9: I do think that when they get asked directly about it,
Speaker 9: they're not going to comment. But for me, I think,
Speaker 9: even setting aside fiscal policy uncertainty, I do have a
Speaker 9: more benign or optimistic interpretation of data, both from the
Speaker 9: labor market and activity then the market seem to have.
Speaker 9: And I do think if the FED front loads cuts
Speaker 9: and eating in financial conditions, that it's setting up the
Speaker 9: economy to perform quite well later this year and at
Speaker 9: the beginning of twenty twenty five. And I think this
Speaker 9: will put forward some challenges to them bringing inflation down
Speaker 9: to two percent.
Speaker 8: Is there any chance that there's a risk that this
Speaker 8: could set up the economy to, besides doing quite well,
Speaker 8: potentially reaccelerate inflation Marena.
Speaker 9: I think this is the key risk that people are
Speaker 9: not talking about anymore. I do think there is too
Speaker 9: much certainty priced in the market that the FED is
Speaker 9: going to bring inflation down to two percent. And when
Speaker 9: I look at the progress we've made so far on
Speaker 9: goods disinflation, A lot of that has been driven by
Speaker 9: dollar strength by week, import prices, improving supply chains. I
Speaker 9: don't expect that impulse to help the FED quite as much.
Speaker 9: I get the idea that globally commodity prices are soft
Speaker 9: because we have a China slowdown in the picture, But
Speaker 9: we're seeing signs of gold and copper picking up, and
Speaker 9: I think that's basically a precursor to global commodity prices
Speaker 9: perhaps picking up, and that's not good news for the
Speaker 9: FED cutting interest rates. The market is pricing more aggressive
Speaker 9: cuts from the Fed than say the ECB Bank of
Speaker 9: Canada or buy at the moment. I think that's going
Speaker 9: to lead to some dollar weakness as well.
Speaker 7: So I'm not very.
Speaker 9: Optimistic that the disinflation in goods is going to be sustained.
Speaker 9: And I think we're going to have more volatility when
Speaker 9: it comes to domestic services prices.
Speaker 7: And rent inflation.
Speaker 9: So too much uncertainty, and my view is priced in
Speaker 9: with regards to bringing inflation down to two percent.
Speaker 2: We've got to leave it there. We appreciate your insight
Speaker 2: got into the Federal Reserve decision tomorrow Loriina Richie at
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