1 00:00:02,360 --> 00:00:09,920 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business App. 10 00:00:36,200 --> 00:00:40,240 Speaker 3: George Conkalvis of MUFG writing, inflation concerns have been misplaced 11 00:00:40,520 --> 00:00:43,320 Speaker 3: and rates may have seen the high prints for twenty six. 12 00:00:43,600 --> 00:00:46,560 Speaker 3: That plus worsh talking hikes off the table is about 13 00:00:46,560 --> 00:00:50,200 Speaker 3: to unleash a bond rally. George joins us here this morning. George, 14 00:00:50,240 --> 00:00:53,840 Speaker 3: great to see you. Happy happy day if you celebrate 15 00:00:54,040 --> 00:00:56,440 Speaker 3: a real question about how much this bond market can 16 00:00:56,520 --> 00:00:59,080 Speaker 3: rally given some of the inflationary pressures. 17 00:00:58,720 --> 00:01:00,360 Speaker 1: That yes are tied to oil, but all of some 18 00:01:00,480 --> 00:01:01,279 Speaker 1: other issues as well. 19 00:01:01,360 --> 00:01:01,600 Speaker 4: Yeah. 20 00:01:01,600 --> 00:01:04,280 Speaker 5: Look, I think we are entering a summer of the 21 00:01:04,280 --> 00:01:06,080 Speaker 5: bond market. I think we probably have seen the high 22 00:01:06,120 --> 00:01:09,640 Speaker 5: prints for rates for a whole host of reasons. Look, 23 00:01:09,880 --> 00:01:13,240 Speaker 5: oil prices, even in the midst of like literally a 24 00:01:13,280 --> 00:01:16,840 Speaker 5: billion plus barrels of less production getting through the straight upfomoves, 25 00:01:17,280 --> 00:01:20,240 Speaker 5: managed to stay contained. Right, So, like this idea that 26 00:01:20,280 --> 00:01:22,200 Speaker 5: you're going to see like a second wave of higher 27 00:01:22,200 --> 00:01:23,679 Speaker 5: oil prices, I don't buy that. 28 00:01:23,720 --> 00:01:26,280 Speaker 6: We don't buy that. We've been skeptical of the move 29 00:01:26,319 --> 00:01:26,759 Speaker 6: in general. 30 00:01:27,000 --> 00:01:30,000 Speaker 5: And inflation has largely come from the inflation from the 31 00:01:30,000 --> 00:01:33,840 Speaker 5: oil shock, and then some second order around the effects 32 00:01:33,920 --> 00:01:37,400 Speaker 5: around some sort of pricing search charges that were added 33 00:01:37,440 --> 00:01:39,720 Speaker 5: to core prices. But in general, there's not a really 34 00:01:39,760 --> 00:01:41,920 Speaker 5: an inflation problem. Look at wages, Look at the way 35 00:01:41,920 --> 00:01:45,040 Speaker 5: that the jobs markets behaving. It's still low paying jobs. 36 00:01:45,080 --> 00:01:47,720 Speaker 5: You're not seeing the sort of impulse of inflation. We 37 00:01:47,800 --> 00:01:49,480 Speaker 5: think that we've kind of seen the high end rates. 38 00:01:49,960 --> 00:01:52,400 Speaker 3: So we'll get to the economic discussion later, because there's 39 00:01:52,400 --> 00:01:55,160 Speaker 3: a lot of divergence even within pros and about exactly 40 00:01:55,240 --> 00:01:57,320 Speaker 3: whether all of that is true in terms of wages 41 00:01:57,360 --> 00:02:00,000 Speaker 3: and some other aspects. Do you think that Kevin Warresh 42 00:02:00,160 --> 00:02:04,280 Speaker 3: truly can unleash the summer of bonds given the fact 43 00:02:04,320 --> 00:02:08,000 Speaker 3: that ultimately he's really squaring off against credibility on one 44 00:02:08,040 --> 00:02:10,960 Speaker 3: hand and the overhang of what could be coming from 45 00:02:10,960 --> 00:02:11,839 Speaker 3: the White House and the other. 46 00:02:11,919 --> 00:02:12,440 Speaker 6: Look, I think. 47 00:02:12,480 --> 00:02:14,880 Speaker 5: Everyone has to temper their enthusiasm, including myself, because we 48 00:02:15,120 --> 00:02:17,359 Speaker 5: have Let's see what happens with the MU and if 49 00:02:17,360 --> 00:02:20,160 Speaker 5: that gets gets done, is a done deal by tomorrow? 50 00:02:20,160 --> 00:02:22,359 Speaker 6: I think? Right, So, like let's see a men or 51 00:02:22,400 --> 00:02:27,079 Speaker 6: of Friday, Let's see what happens there. But I think 52 00:02:27,200 --> 00:02:28,079 Speaker 6: you know we're gonna. 53 00:02:27,840 --> 00:02:30,440 Speaker 5: Start off at two o'clock into two thirty, right two o'clock, 54 00:02:30,440 --> 00:02:33,280 Speaker 5: We're going to see did a Kevin Woies participate in 55 00:02:33,280 --> 00:02:35,799 Speaker 5: the dot plot submission process? Like that's gonna be a 56 00:02:35,800 --> 00:02:38,799 Speaker 5: big deal. Uh, And like what are the dots telling us? 57 00:02:39,240 --> 00:02:40,880 Speaker 5: Is there going to be like a removal of the 58 00:02:40,919 --> 00:02:44,400 Speaker 5: easing bias at the first first blush? I think this 59 00:02:44,440 --> 00:02:46,360 Speaker 5: is going to be a kind of gradual toe in 60 00:02:46,600 --> 00:02:49,240 Speaker 5: to becoming more like a change at the FED. But 61 00:02:49,800 --> 00:02:51,680 Speaker 5: we don't see a drastic change of the FED starting 62 00:02:51,680 --> 00:02:53,920 Speaker 5: off today. But we do think that you know, this 63 00:02:54,000 --> 00:02:56,400 Speaker 5: is gonna He's just start pivoting the FED differently, and 64 00:02:56,440 --> 00:03:00,520 Speaker 5: that's gonna rearrange the focus and less forward guidance and 65 00:03:00,680 --> 00:03:04,680 Speaker 5: a shift from focusing on other policies towards rate policy. 66 00:03:05,240 --> 00:03:08,120 Speaker 5: I think that if inflation truly has peaked, if oil 67 00:03:08,160 --> 00:03:10,880 Speaker 5: is peaked, if rates have peaked, then you're going to 68 00:03:10,919 --> 00:03:12,880 Speaker 5: see you can open up a window to cut rates 69 00:03:13,000 --> 00:03:13,679 Speaker 5: at the end of the year. 70 00:03:13,720 --> 00:03:15,600 Speaker 1: Does the labor market need to weaken further? 71 00:03:15,880 --> 00:03:17,280 Speaker 7: I mean, it's not weak now, but does it need 72 00:03:17,280 --> 00:03:19,400 Speaker 7: to weaken for him to be able to cut interest rates? 73 00:03:19,400 --> 00:03:20,760 Speaker 5: I mean, I think we have to realize we have 74 00:03:20,800 --> 00:03:23,280 Speaker 5: to look back and see if the labor data actually 75 00:03:23,320 --> 00:03:25,359 Speaker 5: is honest, and we've had two years in a row 76 00:03:25,440 --> 00:03:28,880 Speaker 5: of massive revisions every single year. The later we get 77 00:03:28,919 --> 00:03:30,920 Speaker 5: in the year, we'll get more clarity on the true 78 00:03:30,919 --> 00:03:32,959 Speaker 5: health of the jobs market. So it doesn't have to 79 00:03:33,040 --> 00:03:34,600 Speaker 5: necessarily weaken it. I think it just has to be 80 00:03:34,639 --> 00:03:38,000 Speaker 5: a combination of it's not strong as people think it is, 81 00:03:38,360 --> 00:03:41,040 Speaker 5: and to the inflation story probably has peaked. It gives 82 00:03:41,080 --> 00:03:42,720 Speaker 5: a window for the Fed to cut but. 83 00:03:42,960 --> 00:03:44,360 Speaker 7: They're not going to get back to the two percent 84 00:03:44,360 --> 00:03:47,200 Speaker 7: target this year. So what is going to the catalyst 85 00:03:47,240 --> 00:03:49,720 Speaker 7: for them to really have that confidence? Given the fact 86 00:03:49,720 --> 00:03:51,840 Speaker 7: that there are a lot of members on the committee 87 00:03:51,920 --> 00:03:55,640 Speaker 7: that are concerned that basically inflation is prices are still 88 00:03:55,680 --> 00:03:57,560 Speaker 7: too high and the labor market's not weak enough to 89 00:03:57,600 --> 00:03:58,320 Speaker 7: have this bias. 90 00:03:58,920 --> 00:04:00,000 Speaker 6: Look, there's a whole host that thing. 91 00:04:00,080 --> 00:04:02,000 Speaker 5: I mean it depending on how you look at the 92 00:04:02,080 --> 00:04:04,840 Speaker 5: data and you look at real pure cores, you can 93 00:04:04,840 --> 00:04:08,680 Speaker 5: get down towards you know, mid mid twes by the 94 00:04:08,760 --> 00:04:11,440 Speaker 5: end of the year, and into projecting into twenty twenty seven, 95 00:04:11,520 --> 00:04:13,600 Speaker 5: you can start to get into the twos. So I 96 00:04:13,640 --> 00:04:16,360 Speaker 5: think it's not about and plus, by the way, we 97 00:04:17,040 --> 00:04:19,760 Speaker 5: defences eased the last two years with inflation well above 98 00:04:19,800 --> 00:04:23,000 Speaker 5: their target, right, So it's more about what's your understanding 99 00:04:23,000 --> 00:04:26,120 Speaker 5: of neutral? And that's why I think today's a we 100 00:04:26,160 --> 00:04:28,560 Speaker 5: get to dop plot most likely how the dop plot 101 00:04:28,560 --> 00:04:31,920 Speaker 5: looks like, and then what is the glide path from 102 00:04:32,000 --> 00:04:33,920 Speaker 5: this year, which we think they're going to remove the 103 00:04:34,279 --> 00:04:37,760 Speaker 5: one potential cut that was in the last forecast or projections, 104 00:04:38,320 --> 00:04:41,120 Speaker 5: and what is the path towards neutral, Because like they've 105 00:04:41,120 --> 00:04:43,960 Speaker 5: been very gingerly moving up neutral rate abound three and 106 00:04:44,000 --> 00:04:46,120 Speaker 5: one eighth, are they going to move that up now 107 00:04:46,279 --> 00:04:48,359 Speaker 5: at Kevin Warsh's first meeting, that would make no sense. 108 00:04:48,440 --> 00:04:50,800 Speaker 5: So like they had to get down to neutral or 109 00:04:50,839 --> 00:04:52,160 Speaker 5: redefine what neutral is. 110 00:04:52,400 --> 00:04:54,880 Speaker 3: Well, that's something people are looking for. What is inflation? 111 00:04:54,920 --> 00:04:57,520 Speaker 3: If you could choose your inflation, is it an inflation 112 00:04:57,560 --> 00:04:58,839 Speaker 3: target that we're going to care more about? 113 00:04:59,000 --> 00:05:00,359 Speaker 1: I'll choose one inflation target. 114 00:05:00,400 --> 00:05:03,240 Speaker 3: How about anyone who's invested either Incursor or SpaceX and 115 00:05:03,360 --> 00:05:04,680 Speaker 3: the new billionaires that have been minted. 116 00:05:04,720 --> 00:05:07,040 Speaker 1: There's some inflation there. Given the fact that. 117 00:05:07,320 --> 00:05:09,560 Speaker 3: Markets have absolutely been on a tear, how does that 118 00:05:09,640 --> 00:05:12,920 Speaker 3: factor into the Fed's assessment of current conditions? 119 00:05:13,839 --> 00:05:17,520 Speaker 5: I mean, look, the going is great when it's going. 120 00:05:18,600 --> 00:05:20,599 Speaker 5: The question is how does it look like at the 121 00:05:20,640 --> 00:05:22,640 Speaker 5: end of the year. We've had moments where we have 122 00:05:22,720 --> 00:05:25,039 Speaker 5: these massive u fourth moves like we're in right now, 123 00:05:25,560 --> 00:05:27,360 Speaker 5: and then they peter out and they burn out. So 124 00:05:27,400 --> 00:05:29,599 Speaker 5: the question is is if the momentum continues and stocks 125 00:05:29,600 --> 00:05:32,479 Speaker 5: continue to make new highs, yes, then you're building in 126 00:05:32,520 --> 00:05:35,279 Speaker 5: financial conditions easing, which takes pressure off the FEN to 127 00:05:35,279 --> 00:05:37,960 Speaker 5: do anything, or like, at least in their calculus, it 128 00:05:38,000 --> 00:05:40,440 Speaker 5: would be less of a need to ease. But that's 129 00:05:40,480 --> 00:05:42,200 Speaker 5: really a judgment call on where you think markets are 130 00:05:42,200 --> 00:05:42,600 Speaker 5: going to be at. 131 00:05:42,560 --> 00:05:43,080 Speaker 6: The end of the year. 132 00:05:43,360 --> 00:05:45,640 Speaker 3: If you put this another way, is the summer of 133 00:05:45,640 --> 00:05:47,800 Speaker 3: the bond going to be also the summer of the 134 00:05:47,839 --> 00:05:50,400 Speaker 3: stock Because we've seen correlations between stocks and box bonds 135 00:05:50,480 --> 00:05:53,560 Speaker 3: essentially good at one right, they've been directly correlated rather 136 00:05:53,560 --> 00:05:57,200 Speaker 3: than diversely correlated as they have been historically. Why wouldn't 137 00:05:57,240 --> 00:05:59,720 Speaker 3: any additional bond rally just continue to fuel and even 138 00:05:59,720 --> 00:06:01,839 Speaker 3: bigger remove in the equity market. 139 00:06:01,960 --> 00:06:05,120 Speaker 5: I mean, for like the long duration type sectors like technology, 140 00:06:05,279 --> 00:06:07,520 Speaker 5: it probably would, right, I mean, until something breaks that 141 00:06:07,560 --> 00:06:10,279 Speaker 5: correlation down completely, it probably would have kind of a 142 00:06:10,279 --> 00:06:14,360 Speaker 5: self reinforcing mechanism. But you know, I do think that, 143 00:06:14,480 --> 00:06:15,960 Speaker 5: you know, as we get towards the end of the 144 00:06:16,040 --> 00:06:20,040 Speaker 5: year and we realize that our more optimistic collectively the 145 00:06:20,080 --> 00:06:21,360 Speaker 5: market's more optimistic view. 146 00:06:21,240 --> 00:06:23,480 Speaker 6: On the macro is proven wrong. 147 00:06:23,839 --> 00:06:26,040 Speaker 5: You're going to see the bomb market end up winning 148 00:06:26,080 --> 00:06:27,279 Speaker 5: out versus the stock market. 149 00:06:27,640 --> 00:06:30,360 Speaker 2: Stay with us, multilintex Divanan's counting. 150 00:06:30,160 --> 00:06:42,160 Speaker 3: Up off to this, Stephen Cook of the Council on 151 00:06:42,240 --> 00:06:45,560 Speaker 3: Foreign Relations writing, clearly the President was done and grabbed 152 00:06:45,560 --> 00:06:47,640 Speaker 3: the deal before him. He is going to spin it 153 00:06:47,720 --> 00:06:50,839 Speaker 3: as a victory, but it heavily favors Roan. This raises 154 00:06:50,920 --> 00:06:52,560 Speaker 3: the question why do we even. 155 00:06:52,440 --> 00:06:52,800 Speaker 2: Go to war? 156 00:06:52,920 --> 00:06:55,080 Speaker 3: Stephen joins us Now for more, Stephen why do you 157 00:06:55,160 --> 00:06:57,120 Speaker 3: say that this is giving a win to a run 158 00:06:57,360 --> 00:06:59,440 Speaker 3: given that we don't really know all the details yet. 159 00:07:00,640 --> 00:07:03,480 Speaker 8: Well, we have a fairly good sense of what is 160 00:07:03,640 --> 00:07:05,520 Speaker 8: going to be in this deal based on what's been 161 00:07:05,640 --> 00:07:10,760 Speaker 8: leaking out to Bloomberg to be English and a variety 162 00:07:10,800 --> 00:07:13,320 Speaker 8: of other news outlets, and what we've seen so far 163 00:07:13,840 --> 00:07:16,640 Speaker 8: would suggest that the Iranians will retain their right to 164 00:07:16,880 --> 00:07:21,200 Speaker 8: enrich uranium, They'll be able to export oil immediately, the 165 00:07:21,280 --> 00:07:24,440 Speaker 8: blockade will be lifted, although the Iranians are saying that 166 00:07:24,560 --> 00:07:26,680 Speaker 8: there will be freedom of navigation through the straight up 167 00:07:26,720 --> 00:07:29,080 Speaker 8: worm moves, but only for sixty days and then they 168 00:07:29,120 --> 00:07:33,760 Speaker 8: will levy a surcharge on transit through that waterway. Then, 169 00:07:33,840 --> 00:07:40,400 Speaker 8: of course, there's nothing in the document about dismantling proxies. Yes, 170 00:07:40,640 --> 00:07:43,280 Speaker 8: giving up the highly enricheranium, but if they can enricheranium, 171 00:07:43,320 --> 00:07:48,120 Speaker 8: they can replace that stock of highly enricheranium. Basically, the 172 00:07:48,240 --> 00:07:50,280 Speaker 8: United States walks away from this with a lot of 173 00:07:50,400 --> 00:07:54,920 Speaker 8: tactical battlefield achievements, but what can only be described as 174 00:07:54,920 --> 00:07:55,920 Speaker 8: a strategic defeat. 175 00:07:56,240 --> 00:07:58,640 Speaker 7: Stephen I also noticed that there is no language when 176 00:07:58,680 --> 00:08:01,400 Speaker 7: it comes to Iron's ballistic missile program. Has the Trump 177 00:08:01,400 --> 00:08:04,240 Speaker 7: administration given up their three red lines, which has always 178 00:08:04,360 --> 00:08:08,840 Speaker 7: been for years, nuclear ballistic missiles, and money to proxies. 179 00:08:10,440 --> 00:08:12,720 Speaker 8: Yes, indeed they have given it up. There is nothing 180 00:08:12,880 --> 00:08:16,800 Speaker 8: that we know of regarding ballistic missiles. The United States 181 00:08:16,840 --> 00:08:18,360 Speaker 8: and the Israelis did a lot of damage to the 182 00:08:18,400 --> 00:08:21,280 Speaker 8: ballistic missile program. But the fear is is that all 183 00:08:21,360 --> 00:08:24,760 Speaker 8: of these resources that can flow into Iran, including the 184 00:08:24,840 --> 00:08:28,640 Speaker 8: revenue from immediately exporting oil, can be devoted to reconstructing 185 00:08:29,560 --> 00:08:32,480 Speaker 8: their capacity to build ballistic missiles. And it is one 186 00:08:32,520 --> 00:08:34,960 Speaker 8: of the biggest ballistic missile programs in the world. 187 00:08:35,520 --> 00:08:37,480 Speaker 1: So the first point and Tyler brought this up. 188 00:08:37,640 --> 00:08:41,040 Speaker 7: According to the text Bloomberg has its hand on when 189 00:08:41,080 --> 00:08:43,880 Speaker 7: it comes to the MoU means that this would include 190 00:08:44,000 --> 00:08:46,439 Speaker 7: a permanent end to the war on all fronts quote 191 00:08:46,520 --> 00:08:47,640 Speaker 7: including Lebanon. 192 00:08:48,360 --> 00:08:50,440 Speaker 1: Is israel An agreement. 193 00:08:50,080 --> 00:08:52,240 Speaker 4: With this absolutely not. 194 00:08:53,040 --> 00:08:56,160 Speaker 8: The Israelis maintained that they will not give to run 195 00:08:56,679 --> 00:09:01,160 Speaker 8: a veto over their security. But the Israelis are in 196 00:09:01,200 --> 00:09:04,839 Speaker 8: a very difficult position if his belaw attacks and the 197 00:09:04,960 --> 00:09:09,160 Speaker 8: Israelis respond. In a neighborhood of bear Root, for example, 198 00:09:09,600 --> 00:09:12,080 Speaker 8: the Iranians will threaten to close the Straight of removes 199 00:09:12,120 --> 00:09:15,080 Speaker 8: once again putting tremendous pressure on the global economy as 200 00:09:15,120 --> 00:09:18,560 Speaker 8: we've seen over the course of this war. But Israelis 201 00:09:18,679 --> 00:09:22,120 Speaker 8: are in an election season and Prime Minister Nitaio is 202 00:09:22,400 --> 00:09:25,199 Speaker 8: not going to give up the fight in Lebanon, which 203 00:09:25,280 --> 00:09:29,679 Speaker 8: is actually quite popular among Israelis. As President Trump's popularity 204 00:09:29,679 --> 00:09:32,160 Speaker 8: among Israelis has dropped precipitously. 205 00:09:31,559 --> 00:09:33,719 Speaker 3: In recent weeks, there is a sense right now that 206 00:09:33,800 --> 00:09:34,720 Speaker 3: everyone's buying time. 207 00:09:35,040 --> 00:09:36,520 Speaker 1: It seems like the Iranian regime is. 208 00:09:36,559 --> 00:09:39,000 Speaker 3: Buying time to try to survive, and it seems like 209 00:09:39,080 --> 00:09:41,960 Speaker 3: some Middle Eastern nations are buying time to create alternative 210 00:09:42,040 --> 00:09:45,439 Speaker 3: roots from the Strait of Removes to export some of 211 00:09:45,520 --> 00:09:48,560 Speaker 3: their supplies. The UAE this morning saying that they're planning 212 00:09:48,640 --> 00:09:52,000 Speaker 3: to cut the dependency on the Strait of Hermoves to zero, 213 00:09:52,440 --> 00:09:54,720 Speaker 3: saying that even if the Strait of Removes does reopen, 214 00:09:55,000 --> 00:09:57,440 Speaker 3: nothing will change that plan. How much is this going 215 00:09:57,520 --> 00:10:00,520 Speaker 3: to be an interim type deal for months, maybe years, 216 00:10:00,600 --> 00:10:03,160 Speaker 3: trying to get enough through well nations in the region 217 00:10:03,360 --> 00:10:04,400 Speaker 3: figure out workarounds. 218 00:10:05,280 --> 00:10:07,000 Speaker 4: Yeah, I think that's a very important point. 219 00:10:07,120 --> 00:10:10,520 Speaker 8: The Emordis and the Saudis certainly have options to build 220 00:10:10,559 --> 00:10:12,959 Speaker 8: their way out of the Strait of Removes. The cut 221 00:10:13,000 --> 00:10:16,880 Speaker 8: there is the Kuwaitis, the Bahrains absolutely do not have 222 00:10:17,080 --> 00:10:19,320 Speaker 8: the ability to do with the Saudis and the Amorantis, 223 00:10:19,360 --> 00:10:23,240 Speaker 8: so just by geography, so there'll be some countries that 224 00:10:23,320 --> 00:10:28,480 Speaker 8: will be able to see this as an interim deal, 225 00:10:28,520 --> 00:10:30,839 Speaker 8: and there are others of the pressure on it in 226 00:10:31,120 --> 00:10:34,240 Speaker 8: order to see through so that they can navigate through 227 00:10:34,400 --> 00:10:37,640 Speaker 8: the Strait of Removes. Their economies are absolutely dependent upon it. 228 00:10:38,600 --> 00:10:40,959 Speaker 8: There is a big question though, whether we will get 229 00:10:41,000 --> 00:10:45,480 Speaker 8: beyond this sixty day period of the MoU There's lots 230 00:10:45,520 --> 00:10:48,400 Speaker 8: to be worked out here, especially on the nuclear front 231 00:10:48,600 --> 00:10:51,199 Speaker 8: that took the Obama administration a couple of years. The 232 00:10:51,320 --> 00:10:53,640 Speaker 8: President is suggesting that this is going to happen in 233 00:10:53,720 --> 00:10:56,640 Speaker 8: sixty days, But overall, I think you're quite right, Lisa. 234 00:10:57,960 --> 00:11:00,240 Speaker 8: The straight up remouves is something that is now seen 235 00:11:00,240 --> 00:11:02,760 Speaker 8: as a problem for countries in the region, and they're 236 00:11:02,800 --> 00:11:06,520 Speaker 8: going to do everything possible they can to ease their 237 00:11:06,720 --> 00:11:07,439 Speaker 8: reliance on it. 238 00:11:07,760 --> 00:11:10,719 Speaker 7: Twenty months, JCPOA took twenty months. Stephen, how long do 239 00:11:10,760 --> 00:11:11,600 Speaker 7: you think this could take? 240 00:11:12,960 --> 00:11:15,720 Speaker 8: Well, I think it can take quite some time unless 241 00:11:15,800 --> 00:11:21,120 Speaker 8: the President really goes back on his red lines, there's 242 00:11:21,160 --> 00:11:24,199 Speaker 8: every indication to suggest that he will, and the US 243 00:11:24,280 --> 00:11:28,880 Speaker 8: intelligence community has warned the president that their Iranians are 244 00:11:29,360 --> 00:11:31,440 Speaker 8: unlikely to give up their nuclear program. 245 00:11:32,000 --> 00:11:34,760 Speaker 2: Stay with US, Multlinpex Savannah's coming up. 246 00:11:35,040 --> 00:11:47,800 Speaker 3: After this, and former Boston FED President Eric Rosengren expecting 247 00:11:47,880 --> 00:11:50,800 Speaker 3: no forward guidance from Warsha's statement, writing the new chair 248 00:11:50,920 --> 00:11:53,560 Speaker 3: is likely to want to emphasize at this meeting a new, 249 00:11:54,080 --> 00:11:56,079 Speaker 3: less transparent communication style. 250 00:11:56,520 --> 00:11:58,719 Speaker 1: Eric joins us now for more. Eric, great to see you, 251 00:11:58,800 --> 00:12:01,880 Speaker 1: Thank you for being with us. Can we take anything 252 00:12:02,400 --> 00:12:04,400 Speaker 1: from Kevin Worsh's first. 253 00:12:04,200 --> 00:12:06,840 Speaker 3: Appearance on the board of the FMC back in two 254 00:12:06,880 --> 00:12:09,720 Speaker 3: thousand and six to twenty eleven that we can pull 255 00:12:09,800 --> 00:12:12,920 Speaker 3: forward to today as guidance over how he will really 256 00:12:13,320 --> 00:12:15,080 Speaker 3: preside over this Central Bank. 257 00:12:16,120 --> 00:12:19,280 Speaker 9: Well, I think he's made pretty clear that he thinks 258 00:12:19,360 --> 00:12:25,719 Speaker 9: that previous fmcs have over communicated and that it's been 259 00:12:25,760 --> 00:12:29,680 Speaker 9: a bit confusing, with a number of voices sometimes giving 260 00:12:29,800 --> 00:12:33,079 Speaker 9: discordant opinions. So I think he's going to try to 261 00:12:33,520 --> 00:12:37,840 Speaker 9: slow down the amount of speeches made by members. He's 262 00:12:37,960 --> 00:12:43,360 Speaker 9: probably going to redraft the statement so that it's very 263 00:12:43,520 --> 00:12:48,679 Speaker 9: factual and doesn't provide any forward guidance, and this is 264 00:12:48,800 --> 00:12:53,320 Speaker 9: normally a meeting where the Summary of Economic Projections has provided, 265 00:12:53,720 --> 00:12:57,199 Speaker 9: which includes a dot plot that gives the participants expectations 266 00:12:57,240 --> 00:12:59,800 Speaker 9: off where interest rates will go. It will be in 267 00:13:00,520 --> 00:13:03,440 Speaker 9: how he handles if they go through with that. It'll 268 00:13:03,520 --> 00:13:06,960 Speaker 9: be interesting to see how he handles that, because even 269 00:13:07,000 --> 00:13:10,000 Speaker 9: if there's no forward guidance in the statement, if they 270 00:13:10,160 --> 00:13:12,120 Speaker 9: put the dot plot out, it's going to give some 271 00:13:12,280 --> 00:13:15,920 Speaker 9: indication that many members of the FMC think the next 272 00:13:16,000 --> 00:13:16,600 Speaker 9: move ought to be. 273 00:13:16,679 --> 00:13:17,360 Speaker 4: Up not down. 274 00:13:17,679 --> 00:13:19,520 Speaker 3: You said, if they put the dot plot out, do 275 00:13:19,559 --> 00:13:21,080 Speaker 3: you think that there's a chance that they won't. 276 00:13:22,520 --> 00:13:24,600 Speaker 9: I mean, at the first meeting he said there's going 277 00:13:24,679 --> 00:13:28,120 Speaker 9: to be a regime change. I expect this meeting is 278 00:13:28,200 --> 00:13:32,440 Speaker 9: mostly going to be about communications. Communications within the committee, 279 00:13:33,080 --> 00:13:37,880 Speaker 9: communications about the statement, communications with the press conference, and 280 00:13:38,200 --> 00:13:40,599 Speaker 9: at a very minimum, I think he's probably going to 281 00:13:40,640 --> 00:13:45,439 Speaker 9: seek to de emphasize the Summary of Economic Projections and 282 00:13:45,480 --> 00:13:49,400 Speaker 9: the dot plot with the hope that eventually it goes away. 283 00:13:49,520 --> 00:13:54,400 Speaker 9: But when you talk about regime change sometimes is fairly quick. 284 00:13:54,880 --> 00:13:57,120 Speaker 9: So it will be interesting to see what happens at 285 00:13:57,160 --> 00:13:59,680 Speaker 9: the press conference and what actually is released publicly. 286 00:14:00,200 --> 00:14:01,720 Speaker 7: Eric you also said he's going to try to slow 287 00:14:01,760 --> 00:14:04,240 Speaker 7: down the number of speeches. How does he do that 288 00:14:04,320 --> 00:14:08,800 Speaker 7: while also making sure he's gaining consensus amongst his new colleagues. 289 00:14:10,200 --> 00:14:12,720 Speaker 9: I mean, I think it is a challenge, particularly given 290 00:14:13,120 --> 00:14:16,400 Speaker 9: the president that many presidents probably have quite a lot 291 00:14:16,440 --> 00:14:18,440 Speaker 9: of speeches that they've already agreed to give, as well 292 00:14:18,480 --> 00:14:21,240 Speaker 9: as some of the governors. But I think he's just 293 00:14:21,360 --> 00:14:23,760 Speaker 9: going to emphasize that he doesn't want to see forward 294 00:14:23,800 --> 00:14:28,520 Speaker 9: guidance in any of the speeches, and that the forward 295 00:14:28,600 --> 00:14:31,360 Speaker 9: guidance has often been misleading and misdirect at the market, 296 00:14:31,920 --> 00:14:36,560 Speaker 9: and he thinks that both in statements and speeches, people 297 00:14:36,600 --> 00:14:39,320 Speaker 9: should stick to the facts and explaining the policy that 298 00:14:39,480 --> 00:14:40,960 Speaker 9: was just taken well. 299 00:14:41,160 --> 00:14:43,520 Speaker 7: Is Warsh himself also going to speak less? And if 300 00:14:43,560 --> 00:14:46,160 Speaker 7: that's the case, and Jonathan Farroh has brought up this 301 00:14:46,200 --> 00:14:48,720 Speaker 7: point a lot, doesn't he just outsource how he's thinking 302 00:14:48,840 --> 00:14:51,080 Speaker 7: to other members of the committee and then they will 303 00:14:51,120 --> 00:14:51,680 Speaker 7: define him. 304 00:14:52,520 --> 00:14:54,960 Speaker 9: I mean, he's indicated he thinks that the chair as 305 00:14:55,000 --> 00:14:58,520 Speaker 9: well as everybody should speak less. We'll see how difficult 306 00:14:58,600 --> 00:15:01,920 Speaker 9: that is, particularly if they're expecting to make significant changes. 307 00:15:02,480 --> 00:15:04,200 Speaker 9: But I think if he does that, it's going to 308 00:15:04,240 --> 00:15:07,840 Speaker 9: be in the context of the entire committee speaking less 309 00:15:08,000 --> 00:15:10,000 Speaker 9: frequently and less. 310 00:15:11,400 --> 00:15:13,680 Speaker 4: With less forward guidance than they have in the past. 311 00:15:14,160 --> 00:15:15,920 Speaker 3: It seems like a lot of people have moved past 312 00:15:15,960 --> 00:15:18,240 Speaker 3: forward guidance anyway, at least in markets, they've been looking 313 00:15:18,280 --> 00:15:20,480 Speaker 3: at other metrics in terms of inflation, in terms of 314 00:15:20,600 --> 00:15:24,200 Speaker 3: understanding exactly how tight the label market is. Do you 315 00:15:24,280 --> 00:15:27,480 Speaker 3: expect any guidance for at least how the FED measures 316 00:15:27,520 --> 00:15:31,080 Speaker 3: inflation Given the criticisms in the past that Fed Shair 317 00:15:31,160 --> 00:15:34,280 Speaker 3: Kevin worsh has had about the exact metric. 318 00:15:34,160 --> 00:15:37,800 Speaker 9: Used, the chair may talk about that in this comments. 319 00:15:39,520 --> 00:15:44,360 Speaker 9: Usually those kind of discussions takes several meetings. The staff 320 00:15:44,520 --> 00:15:49,800 Speaker 9: usually provides briefings, and there are a lot of economists 321 00:15:49,800 --> 00:15:52,400 Speaker 9: that would work on the issue of what are the 322 00:15:52,440 --> 00:15:56,920 Speaker 9: best measures of inflation, what's the best way to forecast inflation? 323 00:15:57,560 --> 00:15:59,560 Speaker 9: So I would be surprised if that came out at 324 00:15:59,600 --> 00:16:02,800 Speaker 9: this meet I think that probably will take several meetings 325 00:16:02,920 --> 00:16:05,720 Speaker 9: before he would introduce anything different there. 326 00:16:06,080 --> 00:16:08,360 Speaker 1: Do you think it's bad for the FED to communicate. 327 00:16:07,920 --> 00:16:11,640 Speaker 4: Less It wouldn't be my first choice. I think that. 328 00:16:13,240 --> 00:16:15,400 Speaker 9: During a period of regime change, if there really is 329 00:16:15,520 --> 00:16:19,720 Speaker 9: regime change, then you need to explain what you're doing 330 00:16:19,800 --> 00:16:22,200 Speaker 9: and why you're doing it, particularly if it's different than what. 331 00:16:23,760 --> 00:16:25,600 Speaker 4: The previous two or three chairs have been doing. 332 00:16:26,000 --> 00:16:29,160 Speaker 3: Do you think that the interpretation will be some sort 333 00:16:29,240 --> 00:16:31,960 Speaker 3: of overly dubvish position. Do you think the implication will 334 00:16:32,000 --> 00:16:34,200 Speaker 3: be sort of political or do you think the implication 335 00:16:34,280 --> 00:16:37,720 Speaker 3: will just be more uncertainty, potentially having the opposite effect 336 00:16:37,840 --> 00:16:40,600 Speaker 3: more volatility and leading to tighter financial conditions. 337 00:16:41,640 --> 00:16:45,200 Speaker 9: I mean, Kevin has in the past talked about wanting 338 00:16:45,240 --> 00:16:46,800 Speaker 9: to go back to the day where there's a little 339 00:16:46,800 --> 00:16:50,840 Speaker 9: more mystique to monetary policy and not being quite as 340 00:16:50,920 --> 00:16:54,280 Speaker 9: transparent in general. I think the challenge with that is 341 00:16:54,440 --> 00:16:58,200 Speaker 9: both the public and investors are now very well informed 342 00:16:58,200 --> 00:17:00,600 Speaker 9: about what the FED does and how the that effects 343 00:17:00,640 --> 00:17:02,960 Speaker 9: the economy. So I don't think we can go back 344 00:17:03,000 --> 00:17:05,639 Speaker 9: to where we were under green Span or Paul Volger, 345 00:17:06,760 --> 00:17:10,119 Speaker 9: and I think that Kevin's thinking may evolve on this 346 00:17:10,240 --> 00:17:10,760 Speaker 9: over time. 347 00:17:11,560 --> 00:17:15,080 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 348 00:17:15,119 --> 00:17:18,440 Speaker 2: in markets, economics, and geopolitics. You can watch the show 349 00:17:18,520 --> 00:17:21,399 Speaker 2: live on Bloomberg TV weekday mornings from six am to 350 00:17:21,560 --> 00:17:25,280 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 351 00:17:25,480 --> 00:17:27,720 Speaker 2: or anywhere else you listen, and as always, on the 352 00:17:27,720 --> 00:17:30,120 Speaker 2: Bloomberg terminal and the Bloomberg Business app.