WEBVTT - PIMCO Global Economic Advisor Richard Clarida Talks US Economy, Monetary Policy

0:00:02.480 --> 0:00:09.320
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Unfortunately, he's been dreading

0:00:09.360 --> 0:00:12.080
<v Speaker 1>this all week. Richard claariit with us now. His work

0:00:12.119 --> 0:00:18.400
<v Speaker 1>at Columbia University definitive on fancy economics called dynamic stochastic

0:00:18.440 --> 0:00:22.400
<v Speaker 1>general equilibrium theory. Holding court at the FED, his vice chairman,

0:00:22.880 --> 0:00:27.160
<v Speaker 1>I'm not going to mince words in frankly a professor Claret,

0:00:27.760 --> 0:00:28.920
<v Speaker 1>are you still at Columbia?

0:00:29.120 --> 0:00:29.520
<v Speaker 2>I am?

0:00:29.640 --> 0:00:31.440
<v Speaker 1>You get a piece of chalk out every See. The

0:00:31.520 --> 0:00:35.320
<v Speaker 1>problem is, Xavier Sally Martin wouldn't allow Ai in the class.

0:00:35.600 --> 0:00:38.720
<v Speaker 1>You would allow Ai in a freshman class to make

0:00:38.760 --> 0:00:39.800
<v Speaker 1>the kids smarter.

0:00:39.720 --> 0:00:44.240
<v Speaker 2>Right, don't. I don't teach a freshman anymore.

0:00:43.600 --> 0:00:45.680
<v Speaker 1>But would you let Ai in the class?

0:00:45.760 --> 0:00:45.919
<v Speaker 3>Now?

0:00:47.240 --> 0:00:49.280
<v Speaker 2>Not in the class room, but when I teach, I

0:00:49.360 --> 0:00:51.920
<v Speaker 2>assume the students are making reference to it, which is

0:00:51.920 --> 0:00:55.400
<v Speaker 2>why I've actually put a focus on having in class presentations.

0:00:55.880 --> 0:00:59.000
<v Speaker 2>There you go, there you go, lul swash and Socratic dialog.

0:00:59.200 --> 0:01:02.040
<v Speaker 1>I'm going to cut through the chase Socratic dialogue. You

0:01:02.320 --> 0:01:04.920
<v Speaker 1>saved Jerome Powell, Folks, I'm not going to mince words

0:01:04.959 --> 0:01:09.200
<v Speaker 1>about it. It's called a dual engine leadership mode model,

0:01:09.440 --> 0:01:12.040
<v Speaker 1>and it was Clarida's vice chairman and a guy from

0:01:12.080 --> 0:01:15.200
<v Speaker 1>Wall Street's chairman. And when he came in you allowed

0:01:15.280 --> 0:01:19.760
<v Speaker 1>him to relax and grow with your prodigious academic abilities.

0:01:20.200 --> 0:01:22.880
<v Speaker 1>Does Chairman worsh need a Clarita.

0:01:24.120 --> 0:01:27.400
<v Speaker 2>Well, that that'll be his decision. I enjoyed my four years,

0:01:27.400 --> 0:01:30.240
<v Speaker 2>That's that's for sure. But there are a lot of

0:01:30.240 --> 0:01:32.000
<v Speaker 2>good people at the FED, and I think that's a

0:01:32.000 --> 0:01:34.480
<v Speaker 2>decision he'll he'll make. He's got a very good advice

0:01:34.560 --> 0:01:38.479
<v Speaker 2>chair right now and Phil at Phil Jefferson. But at

0:01:38.480 --> 0:01:41.360
<v Speaker 2>some point there will be a vice chair vacancy.

0:01:41.480 --> 0:01:43.480
<v Speaker 1>Is that something that the committee when he goes in

0:01:43.520 --> 0:01:45.760
<v Speaker 1>front of these tough guys in the Hill, they can

0:01:45.840 --> 0:01:50.480
<v Speaker 1>demand you have a vice chair of the academic skills?

0:01:51.400 --> 0:01:53.680
<v Speaker 2>Well, it's not clear that that's what would be on

0:01:53.760 --> 0:01:59.640
<v Speaker 2>their wish list, but possibility, I suppose. I mean they

0:01:59.640 --> 0:02:00.480
<v Speaker 2>could qush that.

0:02:00.560 --> 0:02:00.960
<v Speaker 1>Certainly.

0:02:02.040 --> 0:02:05.040
<v Speaker 3>Kevin Warrish has called for a new accord with the

0:02:05.080 --> 0:02:07.160
<v Speaker 3>Treasury Department. Yeah, what do you mean by that?

0:02:07.640 --> 0:02:09.720
<v Speaker 2>Well, you know, this is one of those things where

0:02:11.320 --> 0:02:13.920
<v Speaker 2>this is very what they call in DC, very big

0:02:14.000 --> 0:02:17.440
<v Speaker 2>tent language. It means different things to different people. The

0:02:17.480 --> 0:02:20.120
<v Speaker 2>one accord that we do know about, which is the

0:02:20.160 --> 0:02:22.720
<v Speaker 2>one that was struck in nineteen fifty one between the

0:02:22.760 --> 0:02:25.440
<v Speaker 2>Treasury and the FED was a signal moment and FED

0:02:25.480 --> 0:02:28.320
<v Speaker 2>independence because it got the FED out of the business

0:02:28.400 --> 0:02:30.880
<v Speaker 2>of essentially camping treasure yels. In fact is I'd like

0:02:31.160 --> 0:02:34.240
<v Speaker 2>to teach my students. We all know that World War

0:02:34.320 --> 0:02:36.960
<v Speaker 2>Two ended in nineteen forty five, but the FED didn't

0:02:36.960 --> 0:02:39.720
<v Speaker 2>get the memory until nineteen fifty one because the Truman

0:02:39.760 --> 0:02:42.560
<v Speaker 2>administration pressured the FED to keep a camp on rates.

0:02:42.800 --> 0:02:47.200
<v Speaker 2>The FED declare independence in the accord. I think now

0:02:47.240 --> 0:02:49.400
<v Speaker 2>if there is a Treasury Fed accord, it would not

0:02:49.520 --> 0:02:51.880
<v Speaker 2>be so much focused on that. It would be focused

0:02:51.880 --> 0:02:54.480
<v Speaker 2>on for example, should the FED a whole two trillion

0:02:54.520 --> 0:02:58.160
<v Speaker 2>dollars in mortgage backed securities? Should the FED the composition

0:02:58.200 --> 0:03:01.000
<v Speaker 2>of the Fed's portfolio really be tilted toward T bills

0:03:01.480 --> 0:03:04.560
<v Speaker 2>unless from holding ten and thirty year treasury So I

0:03:04.600 --> 0:03:06.480
<v Speaker 2>think there are a lot of conversations to have, and

0:03:06.600 --> 0:03:09.000
<v Speaker 2>even during my time on the FED, there were discussions

0:03:09.040 --> 0:03:14.800
<v Speaker 2>before the pandemic about rethinking the fed s portfolio composition.

0:03:14.880 --> 0:03:17.240
<v Speaker 2>So I think that's entirely appropriate. But I think we're

0:03:17.280 --> 0:03:20.959
<v Speaker 2>a long way away from any formal accord.

0:03:21.240 --> 0:03:24.480
<v Speaker 3>So what do you expect this Federal Reserve to do

0:03:25.200 --> 0:03:26.480
<v Speaker 3>in County or twenty six.

0:03:27.480 --> 0:03:30.720
<v Speaker 2>Well, first we have to get the chair confirmed.

0:03:31.440 --> 0:03:33.520
<v Speaker 3>He's a foregone conclusion, right.

0:03:33.520 --> 0:03:36.160
<v Speaker 2>I think once he has a hearing, he will get

0:03:36.160 --> 0:03:40.240
<v Speaker 2>confirmed because he's very well qualified. But it may be

0:03:40.720 --> 0:03:44.280
<v Speaker 2>maybe a while before he has a hearing. I think

0:03:44.320 --> 0:03:47.760
<v Speaker 2>it's important to note that the pal FED in December

0:03:47.840 --> 0:03:51.280
<v Speaker 2>when they release those dots, those famous or infamous dots,

0:03:51.320 --> 0:03:54.360
<v Speaker 2>the pal FED, or at least a majority of the

0:03:54.400 --> 0:03:57.200
<v Speaker 2>FED in December, thought at least one rate cut this

0:03:57.280 --> 0:03:59.920
<v Speaker 2>year would be appropriate, and I think eight folks thought

0:04:00.080 --> 0:04:02.960
<v Speaker 2>maybe two raycus would be appropriate. So I do think

0:04:03.000 --> 0:04:06.680
<v Speaker 2>that when Warsh gets in, if the economic data play

0:04:06.720 --> 0:04:09.360
<v Speaker 2>out the way that I and others expect, I think

0:04:09.360 --> 0:04:12.320
<v Speaker 2>he'll be able to persuade the committee to continue to

0:04:12.360 --> 0:04:15.000
<v Speaker 2>cut rights down describe around three percent.

0:04:15.120 --> 0:04:17.760
<v Speaker 1>Okay, Richard Claarder with his folks, the former vice chairman

0:04:17.839 --> 0:04:20.560
<v Speaker 1>of the FED, hugely visible, does a great job helping

0:04:20.640 --> 0:04:23.960
<v Speaker 1>us on the FED day the FED decides thrilledy could

0:04:23.960 --> 0:04:26.160
<v Speaker 1>be in studio with us for you across the nation

0:04:26.279 --> 0:04:29.039
<v Speaker 1>and around the world. Thank you for your attendance on

0:04:29.120 --> 0:04:34.640
<v Speaker 1>YouTube subscribe to Bloomberg A podcast. I look at all this,

0:04:35.279 --> 0:04:38.240
<v Speaker 1>I look at the parlor game, and just what it

0:04:38.279 --> 0:04:42.039
<v Speaker 1>comes down to is staggering from meeting from meeting. When

0:04:42.080 --> 0:04:46.919
<v Speaker 1>mister Wharsh joins, do we have a theory of monetary policy?

0:04:47.480 --> 0:04:50.560
<v Speaker 1>Or is it every president and governor for themselves?

0:04:51.440 --> 0:04:55.599
<v Speaker 2>Tom fantastic question, because I do think that based upon

0:04:55.640 --> 0:04:59.200
<v Speaker 2>what Kevin has said with his very voluminous paper trail

0:04:59.480 --> 0:05:03.120
<v Speaker 2>over the last fifteen years, I think that will I

0:05:03.160 --> 0:05:05.360
<v Speaker 2>think that will be a discussion. I think Kevin has

0:05:05.400 --> 0:05:09.320
<v Speaker 2>expressed some skepticism for reliance on what he believes are

0:05:09.360 --> 0:05:13.479
<v Speaker 2>flawed models, too much of a backward looking approach. What

0:05:13.520 --> 0:05:15.560
<v Speaker 2>I would point out, at least during my four years

0:05:16.760 --> 0:05:19.760
<v Speaker 2>is the palwfed and certainly declared device chair. It was

0:05:19.760 --> 0:05:22.679
<v Speaker 2>not handcuffed to the models, even though I developed many

0:05:22.839 --> 0:05:23.080
<v Speaker 2>of them.

0:05:23.240 --> 0:05:25.440
<v Speaker 1>I'd give you great credit. I'm gonna Paul can I, editor,

0:05:26.200 --> 0:05:28.360
<v Speaker 1>I give you great credit for this. You are the

0:05:28.400 --> 0:05:30.720
<v Speaker 1>one person who could have said we'd go for the

0:05:30.720 --> 0:05:31.280
<v Speaker 1>models well.

0:05:31.839 --> 0:05:35.360
<v Speaker 2>And in fact, my first speech in October of twenty eighteen,

0:05:35.440 --> 0:05:38.760
<v Speaker 2>I basically made the case that the economy appeared to

0:05:38.839 --> 0:05:42.840
<v Speaker 2>have stronger growth potential and a potential for lower unemployment

0:05:42.880 --> 0:05:45.719
<v Speaker 2>than the FED models thought, and that the POWERFED should

0:05:45.720 --> 0:05:48.640
<v Speaker 2>be willing if the labor market was continuing to blossom

0:05:48.720 --> 0:05:51.839
<v Speaker 2>and inflation didn't appear to allow that to happen. In fact,

0:05:51.880 --> 0:05:54.599
<v Speaker 2>I think I said, you know, monetary policy is not

0:05:54.680 --> 0:05:57.160
<v Speaker 2>a problem if too many people are working right. And

0:05:57.200 --> 0:06:00.280
<v Speaker 2>indeed the PALWFED cut rates in twenty nineteen the noun

0:06:00.320 --> 0:06:02.840
<v Speaker 2>a Plummer rate out of fifty year low. So I

0:06:02.880 --> 0:06:05.920
<v Speaker 2>think the FED has probably been less handcuffed to models

0:06:05.680 --> 0:06:11.119
<v Speaker 2>than Kevin's remarks might suggest. But I certainly think based

0:06:11.160 --> 0:06:14.240
<v Speaker 2>upon that there will be a discussion of the best

0:06:14.279 --> 0:06:18.200
<v Speaker 2>way to incorporate modeling into FED analysis.

0:06:18.600 --> 0:06:21.320
<v Speaker 3>What happens to j. Powell when he does step down

0:06:21.360 --> 0:06:23.799
<v Speaker 3>from fit? Does he stay on the at the FED?

0:06:23.839 --> 0:06:27.040
<v Speaker 3>Does he leave? Typically they ride off into the sunset?

0:06:27.120 --> 0:06:28.080
<v Speaker 1>Right they do.

0:06:28.200 --> 0:06:31.000
<v Speaker 2>In fact, there's only one example in FED history of

0:06:31.000 --> 0:06:33.320
<v Speaker 2>a chair that did not ride off into the sunset,

0:06:33.400 --> 0:06:36.600
<v Speaker 2>and a very important FED chair gentleman named Marin Eckles,

0:06:36.640 --> 0:06:38.960
<v Speaker 2>so important he is a building names there you go.

0:06:39.640 --> 0:06:44.320
<v Speaker 2>And Eccles was an FDR appointee. And when Harry Truman

0:06:44.400 --> 0:06:46.880
<v Speaker 2>came in, Harry Truman wanted a different FED chair, but

0:06:46.960 --> 0:06:49.839
<v Speaker 2>Eckles stayed on for four years as governor and actually

0:06:49.839 --> 0:06:53.920
<v Speaker 2>turned out to be a real thorn and Harry Truman's side.

0:06:54.040 --> 0:06:57.000
<v Speaker 2>But fast forward to Pale. You know, j Pal's been

0:06:57.040 --> 0:07:00.400
<v Speaker 2>asked many times and including at the most recent press conference,

0:07:01.160 --> 0:07:03.760
<v Speaker 2>what his intentions are when his term is chair is up,

0:07:04.040 --> 0:07:06.719
<v Speaker 2>and he's really not commented. So there's the possibility he

0:07:06.760 --> 0:07:10.440
<v Speaker 2>could stay on. I myself think that it's unlikely that

0:07:10.480 --> 0:07:12.640
<v Speaker 2>he stays on for the remainder of his term, which

0:07:12.640 --> 0:07:14.440
<v Speaker 2>goes through twenty twenty eight.

0:07:14.880 --> 0:07:18.120
<v Speaker 1>Richard Clarida with us, so we did a Bloomberg function.

0:07:18.160 --> 0:07:20.240
<v Speaker 1>It was great. Michael mcke organized it. It was all these

0:07:20.280 --> 0:07:23.040
<v Speaker 1>worthies in the audience. Catherine Man comes up and gives

0:07:23.040 --> 0:07:25.240
<v Speaker 1>me a hug. The Queen of descent over at the

0:07:25.240 --> 0:07:28.800
<v Speaker 1>Bank of England. What's wrong with us being like the

0:07:28.840 --> 0:07:31.160
<v Speaker 1>Bank of England? And they come out like a Supreme

0:07:31.200 --> 0:07:34.280
<v Speaker 1>Court decision. Oh no, it's a FED meeting five to

0:07:34.400 --> 0:07:37.640
<v Speaker 1>four and the chairman voted against the majority. Is that

0:07:37.680 --> 0:07:38.400
<v Speaker 1>a bad thing?

0:07:39.200 --> 0:07:41.600
<v Speaker 2>I don't think it's a bad thing. I think the

0:07:41.640 --> 0:07:46.600
<v Speaker 2>Bank of England, really beginning under Mervyn King's tens actually

0:07:46.640 --> 0:07:48.680
<v Speaker 2>viewed it as a feature, not a bug, to have

0:07:48.760 --> 0:07:53.000
<v Speaker 2>close votes encourage thoughtful descent. And as I recall, the

0:07:53.080 --> 0:07:56.239
<v Speaker 2>governor has been on losing sight on some votes. There

0:07:56.480 --> 0:07:59.280
<v Speaker 2>unusual in FED history. In fact, I did prepare for

0:07:59.320 --> 0:08:01.640
<v Speaker 2>your show. I went back and looked. Saint Louis FED

0:08:01.720 --> 0:08:04.960
<v Speaker 2>has a great database on this, and you'd have to

0:08:04.960 --> 0:08:08.600
<v Speaker 2>go back to nineteen thirty nineteen thirty nine the last

0:08:08.600 --> 0:08:11.200
<v Speaker 2>time a chair actually lost an FMC vote, and that

0:08:11.280 --> 0:08:14.679
<v Speaker 2>was Mariner Eccles. But Jane William Miller and Paul Volker

0:08:14.960 --> 0:08:18.680
<v Speaker 2>lost votes on discount rate adjustments. But again we're going

0:08:18.720 --> 0:08:20.280
<v Speaker 2>back forty to fifty years.

0:08:20.400 --> 0:08:25.280
<v Speaker 1>Did do you prepare for this show? Are you kidding me?

0:08:25.640 --> 0:08:30.640
<v Speaker 2>You'd be the only one, Richard?

0:08:30.640 --> 0:08:33.760
<v Speaker 3>What's the FED focusing on now? Is it the labor market?

0:08:34.000 --> 0:08:37.319
<v Speaker 3>Is it inflation? Where's the balance these days?

0:08:37.840 --> 0:08:41.760
<v Speaker 2>They've been pretty consistent for a while that inflation's too high.

0:08:41.800 --> 0:08:44.240
<v Speaker 2>It's been above target for five years, it'll probably be

0:08:44.320 --> 0:08:47.520
<v Speaker 2>above target this year for six years. But the FED

0:08:47.559 --> 0:08:50.920
<v Speaker 2>has a dual mandate and the unemployment rate is basically

0:08:51.000 --> 0:08:54.560
<v Speaker 2>right now at a point that they think is consistent

0:08:54.760 --> 0:08:58.080
<v Speaker 2>with a healthy labor market. But they are noticing the

0:08:58.120 --> 0:09:00.920
<v Speaker 2>payroll employment gains have been very much. Indeed, when we

0:09:00.960 --> 0:09:04.080
<v Speaker 2>get the revisions later this week, it actually may show

0:09:04.160 --> 0:09:07.839
<v Speaker 2>negative payroll gains in the second half of the year.

0:09:08.720 --> 0:09:12.880
<v Speaker 2>And so I do think that I take them at

0:09:12.920 --> 0:09:15.280
<v Speaker 2>their word when they say they would not welcome any

0:09:15.280 --> 0:09:18.520
<v Speaker 2>additional rise in the unemployment rate, and I think they

0:09:18.520 --> 0:09:21.880
<v Speaker 2>would react to that. But so long as the economy

0:09:21.960 --> 0:09:25.960
<v Speaker 2>sort of turns along as people expect, I think they

0:09:26.160 --> 0:09:30.600
<v Speaker 2>are trying to balance that against their concerns about elevated inflation.

0:09:30.880 --> 0:09:33.640
<v Speaker 1>Paul Sweeney with Richard Clarita, right now, can I ask,

0:09:33.840 --> 0:09:37.559
<v Speaker 1>can we go NERD right now out of Monday freezing money? Okay?

0:09:37.679 --> 0:09:41.560
<v Speaker 1>Did you recruit Woodford to Columbia? Was that your trying?

0:09:42.679 --> 0:09:45.560
<v Speaker 2>I was not shre when Mike was recruited that, but

0:09:45.640 --> 0:09:48.920
<v Speaker 2>I certainly was enthusiastic and worked hard on getting him

0:09:48.920 --> 0:09:52.199
<v Speaker 2>to Columbia, which was a huge appointment for Colombia now

0:09:52.200 --> 0:09:53.040
<v Speaker 2>twenty two years ago.

0:09:53.120 --> 0:09:55.320
<v Speaker 1>Yeah, I told you, Michael Woodford. Folks, it's a thousand

0:09:55.400 --> 0:09:58.400
<v Speaker 1>page book. Everybody owns it. Martin Feldtsen once said, Tom,

0:09:58.640 --> 0:10:02.240
<v Speaker 1>no one's ever read it cover to cover. Clar I have,

0:10:02.480 --> 0:10:05.200
<v Speaker 1>but the bottom line and I'm bringing this up, folks,

0:10:05.200 --> 0:10:07.240
<v Speaker 1>because we had an Ezrab prosade the other day from

0:10:07.240 --> 0:10:10.400
<v Speaker 1>Cornell with his wonderful important books Doomload the Doom Look

0:10:10.600 --> 0:10:14.480
<v Speaker 1>really important book, And the bottom line is we assume

0:10:14.880 --> 0:10:19.600
<v Speaker 1>Woodford like Eiler equations, they come down to a point

0:10:19.640 --> 0:10:23.679
<v Speaker 1>of stability, and within the system there's stability. The end

0:10:23.679 --> 0:10:27.280
<v Speaker 1>result is stability, and Professor Presada is saying, no, it's

0:10:27.320 --> 0:10:29.680
<v Speaker 1>not They're going to go out on the X axis

0:10:29.760 --> 0:10:31.200
<v Speaker 1>and be unstable.

0:10:31.640 --> 0:10:37.400
<v Speaker 2>Discuss well, okay, I think at a thirty thousand foot

0:10:37.480 --> 0:10:41.920
<v Speaker 2>level in thirty seconds, all macro models, or almost all

0:10:41.960 --> 0:10:48.040
<v Speaker 2>macro models really our best thought of as approximations typically

0:10:48.080 --> 0:10:50.440
<v Speaker 2>linear in a neighborhood of where you want to be,

0:10:51.760 --> 0:10:54.160
<v Speaker 2>and the real world can be a lot messier and

0:10:54.320 --> 0:10:56.760
<v Speaker 2>very nonlinear. Term that I know pops up on this

0:10:56.880 --> 0:10:59.240
<v Speaker 2>show and I think, what I'm just beginning to read

0:10:59.240 --> 0:11:02.160
<v Speaker 2>his book, but he's been highlighting is we could be

0:11:02.360 --> 0:11:08.599
<v Speaker 2>in a prolonged period of very nonlinear market and economic development.

0:11:08.240 --> 0:11:12.680
<v Speaker 1>Geopolitical development. So if you're halfway through the book, he

0:11:12.720 --> 0:11:16.000
<v Speaker 1>sold the movie, right, Yeah, DiCaprio's playing. I mean, it's

0:11:16.000 --> 0:11:18.439
<v Speaker 1>a gloomy book. It's shockingly gloomy.

0:11:18.600 --> 0:11:22.560
<v Speaker 2>Yeah, yeah, again, I have not I've not worked through it,

0:11:22.920 --> 0:11:27.120
<v Speaker 2>but I certainly must read for me, So I'll wait

0:11:27.160 --> 0:11:28.440
<v Speaker 2>till I finish it before our wait.

0:11:28.480 --> 0:11:31.079
<v Speaker 1>Okay, sure, hey, Richard worked.

0:11:31.080 --> 0:11:35.280
<v Speaker 3>We're thirteen months into this whole tariff thing. I'm going

0:11:35.320 --> 0:11:38.440
<v Speaker 3>to look back on and say, boy, this was nothing.

0:11:38.640 --> 0:11:41.560
<v Speaker 3>It didn't seem to be that big of an issue.

0:11:41.679 --> 0:11:43.600
<v Speaker 3>And that's not when I heard it. Early on. I

0:11:43.600 --> 0:11:44.960
<v Speaker 3>heard a lot of folks saying, boy, this is going

0:11:45.000 --> 0:11:46.960
<v Speaker 3>to be inflationary and so on and so forth. We

0:11:47.120 --> 0:11:50.040
<v Speaker 3>just haven't seen it. So with a little bit of hindsight.

0:11:49.679 --> 0:11:52.240
<v Speaker 2>Yeah, yeah, what's happened. So let me reinforce what you

0:11:52.280 --> 0:11:54.960
<v Speaker 2>said when we eventually, when we get the data for

0:11:55.000 --> 0:12:00.360
<v Speaker 2>twenty twenty five, it may show GDP growth this as

0:12:00.360 --> 0:12:02.800
<v Speaker 2>it was in twenty twenty four, maybe down to tenth.

0:12:03.200 --> 0:12:08.520
<v Speaker 2>It will likely show inflation unchanged from twenty twenty four,

0:12:09.360 --> 0:12:12.440
<v Speaker 2>And so a future historian may well say what you

0:12:12.559 --> 0:12:15.560
<v Speaker 2>just said, which is what was the big deal? GDP

0:12:15.720 --> 0:12:19.480
<v Speaker 2>growth didn't move, inflation didn't move. I think a couple

0:12:19.520 --> 0:12:22.080
<v Speaker 2>of things. One is that the ultimate tariffs put in

0:12:22.120 --> 0:12:25.440
<v Speaker 2>place were a lot lower than the Liberation Day levels,

0:12:25.480 --> 0:12:27.520
<v Speaker 2>and his best in his emphasized that was part of

0:12:27.559 --> 0:12:32.480
<v Speaker 2>the negotiating strategy. Secondly, you know, there's a saying in

0:12:32.520 --> 0:12:35.959
<v Speaker 2>baseball sometimes you'd rather be lucky than good. I think

0:12:36.000 --> 0:12:38.520
<v Speaker 2>the other thing that happened is whatever headwind there might

0:12:38.520 --> 0:12:42.800
<v Speaker 2>have been from tariff's counterfactually was offset by the buoyant

0:12:43.280 --> 0:12:46.920
<v Speaker 2>capax spending, especially by the tech companies, and the fact

0:12:47.000 --> 0:12:51.080
<v Speaker 2>that the stock market is very optimistic on this story,

0:12:51.160 --> 0:12:54.040
<v Speaker 2>so that generates a wealth effect and an investment effect.

0:12:54.160 --> 0:13:01.480
<v Speaker 2>And then thirdly, US companies absorbed more of the tariff

0:13:01.559 --> 0:13:05.480
<v Speaker 2>hit in somewhat reduced margins, and you know in the

0:13:05.480 --> 0:13:07.680
<v Speaker 2>Act they did have that room profit margins have been

0:13:07.760 --> 0:13:11.160
<v Speaker 2>very healthy, and they didn't pass it through to the consumer.

0:13:11.200 --> 0:13:13.360
<v Speaker 2>And again, of course, we have the IAPA decision the

0:13:13.400 --> 0:13:17.120
<v Speaker 2>Supreme Court is about to release, and that may further

0:13:18.280 --> 0:13:20.480
<v Speaker 2>lead to lower Just put it this way. I think

0:13:20.559 --> 0:13:23.720
<v Speaker 2>if you calculate the actually the tariff revenue we're collecting

0:13:23.720 --> 0:13:26.720
<v Speaker 2>divided by imports, it's coming in at about ten percent,

0:13:26.760 --> 0:13:29.240
<v Speaker 2>and liberation day was like thirty five percent. So that's

0:13:29.240 --> 0:13:30.560
<v Speaker 2>sort of the order of magnitude.

0:13:30.640 --> 0:13:32.920
<v Speaker 1>I got eight other questions. I gotta squeeze us in

0:13:33.080 --> 0:13:37.160
<v Speaker 1>to be responsible or zegg and pose and creating a

0:13:37.160 --> 0:13:40.960
<v Speaker 1>firestorm with an idea of resilient higher rates, or even

0:13:41.040 --> 0:13:44.400
<v Speaker 1>driving higher rates somewhat due to the surprise of higher

0:13:44.440 --> 0:13:48.160
<v Speaker 1>wages riding this up. At the Peterson Institute, do you

0:13:48.280 --> 0:13:51.400
<v Speaker 1>and PIMCO worry about price down yield up?

0:13:53.160 --> 0:13:54.960
<v Speaker 2>Well, you know, we get paid to worry about it.

0:13:55.200 --> 0:13:57.559
<v Speaker 2>What we do observe, at least in the treasure rate

0:13:57.640 --> 0:14:01.839
<v Speaker 2>market is the fact act, which is really since the

0:14:01.920 --> 0:14:03.679
<v Speaker 2>last FED rate hike, which was two and a half

0:14:03.760 --> 0:14:06.880
<v Speaker 2>years ago ten, your treasury yields have been in a

0:14:06.880 --> 0:14:09.920
<v Speaker 2>pretty tight range four and three quarters at the high end,

0:14:09.960 --> 0:14:13.800
<v Speaker 2>three and three quarters at the low end. Now that

0:14:14.480 --> 0:14:18.480
<v Speaker 2>also you also need to note that underlying real rates,

0:14:18.520 --> 0:14:21.400
<v Speaker 2>which we can see from the inflation index bond market,

0:14:21.960 --> 0:14:25.840
<v Speaker 2>are much higher than they were in twenty nineteen, and

0:14:25.920 --> 0:14:27.880
<v Speaker 2>so we're going to have a steeper yield curve than

0:14:27.920 --> 0:14:30.120
<v Speaker 2>we did pre pandemic, which is a good thing. I

0:14:30.120 --> 0:14:35.280
<v Speaker 2>think we're going to probably have elevated, somewhat elevated volatility

0:14:35.840 --> 0:14:38.640
<v Speaker 2>relative to the decade before the pandemic, in which rate

0:14:38.720 --> 0:14:42.760
<v Speaker 2>volatility was suppressed through zero or negative number at one point.

0:14:42.800 --> 0:14:45.359
<v Speaker 2>I think in Europe, there was like eighteen trillion dollars

0:14:45.400 --> 0:14:49.640
<v Speaker 2>of negative yielding sovereign debts, so we do pay attention

0:14:49.720 --> 0:14:51.800
<v Speaker 2>to it, but we think a lot of the repricing

0:14:51.840 --> 0:14:55.440
<v Speaker 2>that needed to happen because of the fiscal outlook has

0:14:55.480 --> 0:14:57.720
<v Speaker 2>basically already happened and is in the price.

0:14:57.960 --> 0:15:00.640
<v Speaker 1>I am begging when you get through the doom loop.

0:15:01.040 --> 0:15:04.400
<v Speaker 1>When I get through the doomom, I would be honored

0:15:04.440 --> 0:15:07.560
<v Speaker 1>to have you and Prisada in the same studio together.

0:15:08.400 --> 0:15:12.760
<v Speaker 1>Would be a service to a lot of people thinking

0:15:12.760 --> 0:15:15.560
<v Speaker 1>about this. His public service to the nation at the

0:15:15.600 --> 0:15:19.840
<v Speaker 1>Federal Reserve System. Richard Claritay he is Global Economic Advisor

0:15:20.200 --> 0:15:20.800
<v Speaker 1>at PIMCO