1 00:00:00,760 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,400 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,720 Speaker 1: at Bloomberg dot com slash podcast. Let's break it down 7 00:00:21,760 --> 00:00:23,480 Speaker 1: a little bit. We'll get some experts in here, get 8 00:00:23,520 --> 00:00:29,520 Speaker 1: some smart people in the studio. As John Tucker walks out, well, 9 00:00:29,520 --> 00:00:32,240 Speaker 1: it's about I wanted to beat him to it. Ira Jersey, 10 00:00:32,280 --> 00:00:35,200 Speaker 1: chief US interest rate Strategists with Bloomberg Intelligence. He's based 11 00:00:35,200 --> 00:00:37,600 Speaker 1: down there in that Princeton area. Michael McKee and or 12 00:00:37,640 --> 00:00:43,880 Speaker 1: Bloomberg Interactive Broker Studio covered all things economics for Bloomberg Editorial, 13 00:00:43,920 --> 00:00:46,120 Speaker 1: So we appreciate getting these folks on the do a 14 00:00:46,120 --> 00:00:49,240 Speaker 1: little bit of a roundtable here. Let's start with you here. 15 00:00:50,400 --> 00:00:54,000 Speaker 1: I don't know inversion, biggest inversion since nineteen eighty one. 16 00:00:54,400 --> 00:00:55,960 Speaker 1: I mean that was a good year for me, nineteen 17 00:00:56,000 --> 00:00:59,000 Speaker 1: eighty one, by the way, But you know, what does 18 00:00:59,000 --> 00:01:01,840 Speaker 1: that What does that mean to you? Um? It means 19 00:01:01,880 --> 00:01:05,400 Speaker 1: that maybe Blondie's going to come back, Um, Bell bottoms 20 00:01:05,440 --> 00:01:08,720 Speaker 1: and uh and plaid UM. But you know, the the 21 00:01:08,760 --> 00:01:12,840 Speaker 1: inversion is not a huge surprise because at some point, UM, 22 00:01:12,920 --> 00:01:15,840 Speaker 1: we're going to have a significant slowdown in economic activity 23 00:01:15,959 --> 00:01:18,440 Speaker 1: and inflation is going to slow. The question is when, 24 00:01:19,120 --> 00:01:21,800 Speaker 1: um number one and then number two? UM. And this 25 00:01:21,880 --> 00:01:24,400 Speaker 1: is where you know yesterday was important, and I think 26 00:01:24,400 --> 00:01:28,480 Speaker 1: today's reiteration by Chair Powell that there's a possibility that 27 00:01:28,520 --> 00:01:31,360 Speaker 1: they can go fifty basis points in March and certainly 28 00:01:31,680 --> 00:01:34,080 Speaker 1: go higher than what we were expecting prior to his 29 00:01:34,160 --> 00:01:38,440 Speaker 1: testimony yesterday. UM, is it's reasonable to think that we 30 00:01:38,440 --> 00:01:41,520 Speaker 1: could even invert further because the more that the Fed hikes, 31 00:01:41,520 --> 00:01:43,800 Speaker 1: and I've been of this opinion for quite some time 32 00:01:43,840 --> 00:01:46,440 Speaker 1: that the more that the Fed hikes, the the harder 33 00:01:46,520 --> 00:01:49,000 Speaker 1: the ultimate landing will be. UM. You know that the 34 00:01:49,040 --> 00:01:50,920 Speaker 1: timing of when that landing is I think it's more 35 00:01:50,920 --> 00:01:53,040 Speaker 1: in doubt as opposed to whether or not we'll have 36 00:01:53,120 --> 00:01:55,600 Speaker 1: a hard landing. It's just a matter of when. And 37 00:01:55,880 --> 00:01:58,680 Speaker 1: that's why you can get the yield curve inverted by 38 00:01:58,720 --> 00:02:00,640 Speaker 1: one hundred and ten basis points now and maybe one 39 00:02:00,720 --> 00:02:03,600 Speaker 1: hundred and twenty five hundred and fifty basis points ultimately 40 00:02:03,640 --> 00:02:07,000 Speaker 1: in the future. So Mike hop on in here, Michael mckear, 41 00:02:07,120 --> 00:02:10,720 Speaker 1: International Economics and Policy corresponded, to get your title right. 42 00:02:10,840 --> 00:02:15,160 Speaker 1: Fancies fancy that guy? Yeah, that the guy who knows 43 00:02:15,160 --> 00:02:17,720 Speaker 1: the stuff. Well, did we really hear anything new here? 44 00:02:17,760 --> 00:02:19,800 Speaker 1: I mean in today's session or did it was yesterday? 45 00:02:19,840 --> 00:02:24,200 Speaker 1: Really kind of the testimony that took the cake. Almost 46 00:02:24,240 --> 00:02:28,160 Speaker 1: everything that we've heard today has been essentially a repeat. However, 47 00:02:29,320 --> 00:02:33,440 Speaker 1: he did throw in an important line or two when 48 00:02:33,480 --> 00:02:36,680 Speaker 1: he was reading his testimony that they have made no 49 00:02:36,760 --> 00:02:40,160 Speaker 1: decision about twenty five or fifty. That they're going to 50 00:02:40,200 --> 00:02:44,079 Speaker 1: be monitoring the incoming data. The totality of the data 51 00:02:44,120 --> 00:02:48,280 Speaker 1: includes the Job's report, he said, the CPI report. They'll 52 00:02:48,320 --> 00:02:51,720 Speaker 1: be looking at those, they'll be looking at jolts. They're 53 00:02:51,720 --> 00:02:55,000 Speaker 1: going to look at everything that they've got between now 54 00:02:55,000 --> 00:02:59,799 Speaker 1: and then and then make a decision. So I think 55 00:02:59,800 --> 00:03:05,200 Speaker 1: it is probably premature to lock in a bet on 56 00:03:05,440 --> 00:03:08,640 Speaker 1: fifty basis points because the numbers could obviously change that. 57 00:03:08,919 --> 00:03:12,680 Speaker 1: If we get strong numbers, then the Fed is probably 58 00:03:12,720 --> 00:03:15,520 Speaker 1: going to do fifty because he's opened the door for that. 59 00:03:16,440 --> 00:03:19,079 Speaker 1: So Michael, just in terms of the economy, it seemed 60 00:03:19,120 --> 00:03:21,959 Speaker 1: like the recession talk. But I think I was asking 61 00:03:21,960 --> 00:03:23,760 Speaker 1: this question maybe it's recently as two weeks ago. Is 62 00:03:23,800 --> 00:03:27,160 Speaker 1: the recession talk? Is that off the table now? Boy, 63 00:03:27,160 --> 00:03:29,280 Speaker 1: that seems like a long time ago, because now it 64 00:03:29,320 --> 00:03:31,720 Speaker 1: feels like it's right back on their front and center. Yeah, 65 00:03:31,760 --> 00:03:34,519 Speaker 1: if you're looking at the eeel curve, it's right back 66 00:03:34,560 --> 00:03:37,200 Speaker 1: on their front and center. My question was, and I 67 00:03:37,240 --> 00:03:41,440 Speaker 1: was talking about this earlier on Bloomberg Surveillance, if you 68 00:03:41,560 --> 00:03:44,920 Speaker 1: look at a chart of the two year, ten year, 69 00:03:45,000 --> 00:03:49,120 Speaker 1: just to pick one, and you put down the dates 70 00:03:49,280 --> 00:03:52,320 Speaker 1: that we saw the job the FED meaning the Jobs report, 71 00:03:52,720 --> 00:03:55,440 Speaker 1: the CPI report, the retail sales report, and then don't 72 00:03:55,480 --> 00:03:58,760 Speaker 1: forget Laurdemester and Jim Bullard coming out and saying well 73 00:03:58,800 --> 00:04:01,160 Speaker 1: we could have done fifty. You look at all those things, 74 00:04:01,200 --> 00:04:04,560 Speaker 1: and what happened with the yield curve. When those things happened, 75 00:04:04,800 --> 00:04:09,600 Speaker 1: it just traded sideways. It wasn't until yesterday really, until 76 00:04:09,760 --> 00:04:12,480 Speaker 1: Jay Powell came out and said, well, we're going to 77 00:04:12,600 --> 00:04:15,120 Speaker 1: have to do what the yield curve is telling us, 78 00:04:15,440 --> 00:04:18,000 Speaker 1: and you we should be doing. So. I wonder why 79 00:04:19,600 --> 00:04:22,440 Speaker 1: all of a sudden people have decided that this is 80 00:04:22,680 --> 00:04:27,080 Speaker 1: a real thing that we have to react so tremendously too, 81 00:04:27,520 --> 00:04:29,760 Speaker 1: when the data has been pointing in this direction for 82 00:04:29,800 --> 00:04:32,919 Speaker 1: a long time. Well, Irah, you do this for a living. 83 00:04:33,120 --> 00:04:36,160 Speaker 1: Tell us, why why are we looking at a yielding 84 00:04:36,240 --> 00:04:38,600 Speaker 1: version here of one oh eight? What is that really 85 00:04:38,640 --> 00:04:42,719 Speaker 1: telling us? Well, it's all about expectations. So I was 86 00:04:42,760 --> 00:04:46,640 Speaker 1: just just for fun. I was looking at the one 87 00:04:46,720 --> 00:04:48,920 Speaker 1: year forward rates and what the market was implying where 88 00:04:49,320 --> 00:04:52,440 Speaker 1: one year rates would be on a forward basis. And 89 00:04:52,640 --> 00:04:55,520 Speaker 1: when you look at something like one year where the 90 00:04:55,520 --> 00:04:57,840 Speaker 1: one year rate is expected to be three years from now, 91 00:04:58,160 --> 00:05:01,719 Speaker 1: what you realize is, hey, the market's expecting, um, the 92 00:05:01,800 --> 00:05:04,240 Speaker 1: one year rate to be at three point six percent, right, 93 00:05:04,279 --> 00:05:06,680 Speaker 1: so we're talking about, um, you know, one hundred and 94 00:05:06,760 --> 00:05:09,200 Speaker 1: fifty basis points lower than where it is now. So 95 00:05:09,600 --> 00:05:11,800 Speaker 1: all that the market is telling you when it's inverted 96 00:05:11,800 --> 00:05:14,080 Speaker 1: like this, is that the market expects interest rates to 97 00:05:14,160 --> 00:05:16,479 Speaker 1: be lower in the future than they are today. Um. 98 00:05:16,600 --> 00:05:19,880 Speaker 1: And and because of that, you know, And the reason 99 00:05:20,000 --> 00:05:21,880 Speaker 1: is why why does it think that? Well, it thinks 100 00:05:21,880 --> 00:05:24,200 Speaker 1: that because of what I mentioned earlier, is that at 101 00:05:24,200 --> 00:05:26,360 Speaker 1: some point we're going to have a recession. We're going 102 00:05:26,400 --> 00:05:28,800 Speaker 1: to see lower interest rates, We're going to see lower 103 00:05:28,839 --> 00:05:32,599 Speaker 1: inflation UM, and what the market's saying right now is 104 00:05:32,600 --> 00:05:35,159 Speaker 1: that that that's not going to probably start till twenty 105 00:05:35,200 --> 00:05:37,240 Speaker 1: twenty four at this point. So so we're in a 106 00:05:37,320 --> 00:05:38,960 Speaker 1: situation where the FED is going to hike more and 107 00:05:39,040 --> 00:05:41,240 Speaker 1: and the Fed's going to keep rates high. That's what 108 00:05:41,279 --> 00:05:44,880 Speaker 1: the market's uh indicating right now. That's saying that one 109 00:05:44,920 --> 00:05:46,440 Speaker 1: year rates a year from now, we're still going to 110 00:05:46,520 --> 00:05:49,600 Speaker 1: be five percent UM, and that means that you know, 111 00:05:49,680 --> 00:05:51,760 Speaker 1: we're we're probably just going to have a harder landing 112 00:05:51,839 --> 00:05:55,040 Speaker 1: and um and ultimately have a recession. It's just you know, 113 00:05:55,080 --> 00:05:57,839 Speaker 1: these long lags, like like there's not like a set 114 00:05:57,920 --> 00:06:00,200 Speaker 1: time when you say, okay, when two stents inverts, when 115 00:06:00,240 --> 00:06:02,320 Speaker 1: three tens and birds that you're going to get a 116 00:06:02,360 --> 00:06:04,480 Speaker 1: recession right there. There's all these models that the FED 117 00:06:04,520 --> 00:06:07,280 Speaker 1: has and all the economists have, but the thing is 118 00:06:07,279 --> 00:06:10,160 Speaker 1: is that there's a massively wide range as to how 119 00:06:10,200 --> 00:06:13,920 Speaker 1: long that takes. And obviously this cycle is significantly different 120 00:06:13,920 --> 00:06:16,279 Speaker 1: from demos others, in particular because of how tight the 121 00:06:16,320 --> 00:06:18,720 Speaker 1: labor market is. If the labor market wasn't nearly as 122 00:06:18,760 --> 00:06:21,640 Speaker 1: sized as it is, we'd probably already be in a recession. 123 00:06:21,640 --> 00:06:24,799 Speaker 1: We're very darn close to one. But but the fact 124 00:06:24,880 --> 00:06:28,559 Speaker 1: is is that we have changing paradigm in the labor 125 00:06:28,600 --> 00:06:31,320 Speaker 1: market since the end of the pandemic. That's I think 126 00:06:31,320 --> 00:06:34,159 Speaker 1: caused the economy to be more robust than almost anyone 127 00:06:34,480 --> 00:06:36,920 Speaker 1: had expected it to be six months ago or even 128 00:06:36,920 --> 00:06:40,000 Speaker 1: three months ago. Hey, Mike, you know Irish just mentioning 129 00:06:40,360 --> 00:06:43,120 Speaker 1: the Jolts number, and again it's surprised to the upside. 130 00:06:43,120 --> 00:06:45,720 Speaker 1: I guess ten point eight two million job openings versus 131 00:06:45,760 --> 00:06:48,400 Speaker 1: the consensus it's had ten point five five And then 132 00:06:48,440 --> 00:06:51,719 Speaker 1: Bloomer's got a fascinating story that I was talking about earlier. 133 00:06:52,160 --> 00:06:54,599 Speaker 1: Restaurant people are going back to the restaurants like crazy 134 00:06:54,640 --> 00:06:57,159 Speaker 1: despite the inflation, and restaurants are like Gray will up 135 00:06:57,240 --> 00:06:59,200 Speaker 1: up more stores, but they can't find people to work 136 00:06:59,200 --> 00:07:03,960 Speaker 1: in them. What has changed fundamentally about the US labor force? 137 00:07:04,000 --> 00:07:07,240 Speaker 1: Are people really just leaving their incoming back? There are 138 00:07:07,320 --> 00:07:09,600 Speaker 1: fewer people in the labor I mean, the good news 139 00:07:09,680 --> 00:07:11,760 Speaker 1: is you guys are doing a morning show here where 140 00:07:11,840 --> 00:07:13,640 Speaker 1: so you can go out and get a restaurant job 141 00:07:13,680 --> 00:07:19,720 Speaker 1: to not out here on the side. Yeah, exactly. We 142 00:07:19,800 --> 00:07:23,640 Speaker 1: have seen a definite shrinking in the labor force that 143 00:07:23,800 --> 00:07:25,720 Speaker 1: has come about for a number of reasons. We've had 144 00:07:25,760 --> 00:07:29,920 Speaker 1: a long term drop in labor force participation by older 145 00:07:29,960 --> 00:07:33,240 Speaker 1: workers because the baby boomers are hitting sixty five and 146 00:07:33,440 --> 00:07:36,880 Speaker 1: they are starting to retire, and a lot of them 147 00:07:36,920 --> 00:07:40,280 Speaker 1: just up and retired during the pandemic because they couldn't 148 00:07:40,280 --> 00:07:42,200 Speaker 1: go to work anyway, and they say, oh, might as well, 149 00:07:42,800 --> 00:07:45,840 Speaker 1: you know, get that social Security check um. And then 150 00:07:46,000 --> 00:07:48,720 Speaker 1: we saw a lot of people, as they do go 151 00:07:48,760 --> 00:07:50,640 Speaker 1: back to school during that period, took off some of 152 00:07:50,640 --> 00:07:55,280 Speaker 1: the young people. Uh. And then we had and I 153 00:07:55,280 --> 00:07:57,960 Speaker 1: should throw in, of course, the childcare issues that we 154 00:07:58,040 --> 00:08:01,920 Speaker 1: had in schools out that we had basically a lot 155 00:08:01,960 --> 00:08:04,840 Speaker 1: of people who were looking at the jobs in restaurants 156 00:08:04,840 --> 00:08:07,920 Speaker 1: and saying, well, there's a lot of jobs open that 157 00:08:08,000 --> 00:08:10,720 Speaker 1: won't require me to walk around on my feet for 158 00:08:10,760 --> 00:08:14,080 Speaker 1: eight hours a day and struggle for tips. And so 159 00:08:14,160 --> 00:08:16,960 Speaker 1: people went into other fields of work. So it's been 160 00:08:17,000 --> 00:08:19,960 Speaker 1: a while. The jobs that are have been growing the 161 00:08:20,000 --> 00:08:23,080 Speaker 1: fastest now our restaurant jobs, because they're finally getting around 162 00:08:23,120 --> 00:08:26,320 Speaker 1: to people who are willing to take the jobs again 163 00:08:26,400 --> 00:08:28,920 Speaker 1: and they are getting paid a little bit more now. 164 00:08:29,000 --> 00:08:32,800 Speaker 1: So it's it's been a combination of factors, but it's 165 00:08:32,800 --> 00:08:36,640 Speaker 1: been an issue and one that's gonna likely remain. We're 166 00:08:37,400 --> 00:08:40,400 Speaker 1: not going to see a big increase in the labor force, 167 00:08:40,480 --> 00:08:42,480 Speaker 1: it looks like, and I guess that I just a 168 00:08:42,520 --> 00:08:44,959 Speaker 1: little bit of follow the immigration that's got to play 169 00:08:44,960 --> 00:08:46,880 Speaker 1: a part in it. I mean, immigration became so much 170 00:08:46,880 --> 00:08:51,040 Speaker 1: tougher over the last several years, and especially for some 171 00:08:51,120 --> 00:08:54,840 Speaker 1: of these lower end jobs. If you're an immigrant who 172 00:08:54,880 --> 00:08:56,880 Speaker 1: doesn't speaking, it's gonna be hard to get a restaurant 173 00:08:56,960 --> 00:09:00,559 Speaker 1: or or at least in front of the house restaurant 174 00:09:00,640 --> 00:09:05,199 Speaker 1: or bar job. But other lower paid jobs, it's been 175 00:09:05,240 --> 00:09:08,079 Speaker 1: hard to fill them because they can't find people who 176 00:09:09,120 --> 00:09:11,679 Speaker 1: who want to work for those wages, and immigrants played 177 00:09:11,679 --> 00:09:15,560 Speaker 1: a big role in filling that in the past. Well, 178 00:09:15,600 --> 00:09:18,160 Speaker 1: Ira Hot back in here because we talked a little 179 00:09:18,160 --> 00:09:20,120 Speaker 1: bit about the labor market. Of course, the payrolls report, 180 00:09:20,160 --> 00:09:23,840 Speaker 1: I think, what is it ten ten positive or beat 181 00:09:23,960 --> 00:09:26,280 Speaker 1: or hot reports or something like that is a statistic 182 00:09:26,320 --> 00:09:30,080 Speaker 1: I saw that's on Friday. Then you've got CPI on Tuesday, 183 00:09:30,240 --> 00:09:35,080 Speaker 1: with inflation expected to drop again, um by some margin. 184 00:09:35,480 --> 00:09:38,080 Speaker 1: What is the trade on Monday sandwich between the two 185 00:09:38,160 --> 00:09:42,120 Speaker 1: data points. Um, well, I'm not sure Monday will be 186 00:09:42,120 --> 00:09:44,160 Speaker 1: because obviously Friday is going to be the big one. 187 00:09:44,200 --> 00:09:47,959 Speaker 1: And and we actually did some work on, you know, 188 00:09:48,080 --> 00:09:51,040 Speaker 1: how how big moves tend to be in the bond 189 00:09:51,080 --> 00:09:54,640 Speaker 1: market based on the different data points. And even though 190 00:09:54,840 --> 00:09:58,240 Speaker 1: CPI and inflation is, you know, the hot topic and 191 00:09:58,320 --> 00:10:00,520 Speaker 1: the reason why the Fed's hiking some ch and the 192 00:10:00,559 --> 00:10:03,280 Speaker 1: reason why markets moving the way they are, the market 193 00:10:03,360 --> 00:10:06,120 Speaker 1: still tends to move the most on the payrolls report, 194 00:10:06,120 --> 00:10:09,040 Speaker 1: on the employment number and it's not necessarily the employment 195 00:10:09,120 --> 00:10:12,600 Speaker 1: number itself, although obviously that's critically important, but it's really 196 00:10:12,640 --> 00:10:14,960 Speaker 1: it's also the wage data, right, So the wage numbers 197 00:10:14,960 --> 00:10:17,440 Speaker 1: that come out because like Mike was talking about, with 198 00:10:18,280 --> 00:10:21,520 Speaker 1: a lot of the changes in the job market, Um, 199 00:10:21,800 --> 00:10:26,080 Speaker 1: you know, services jobs and services inflation tend to be 200 00:10:26,760 --> 00:10:32,680 Speaker 1: influenced most heavily by them by the wages of services workers. 201 00:10:32,960 --> 00:10:36,000 Speaker 1: So if restaurant employees are making more money, that's going 202 00:10:36,040 --> 00:10:37,920 Speaker 1: to be passed on at least to some degree to 203 00:10:38,160 --> 00:10:40,440 Speaker 1: their consumer. Right that either that or the margins for 204 00:10:40,480 --> 00:10:44,600 Speaker 1: those businesses have to contract. So so the the job 205 00:10:44,720 --> 00:10:46,559 Speaker 1: number is going to be critically important, and I think 206 00:10:46,559 --> 00:10:49,560 Speaker 1: the CPI report maybe a little bit less so interestingly, 207 00:10:49,640 --> 00:10:52,280 Speaker 1: and I think this is um kind of with in 208 00:10:52,320 --> 00:10:55,720 Speaker 1: our analysis of the market moves versus the data released, 209 00:10:56,080 --> 00:10:58,599 Speaker 1: retail sales actually is the second most important and with 210 00:10:58,760 --> 00:11:02,240 Speaker 1: CPI as a third. So so retail sales is still 211 00:11:02,280 --> 00:11:04,800 Speaker 1: which makes sense, right, So if there's more demand and 212 00:11:04,920 --> 00:11:08,640 Speaker 1: sales remain strong, then clearly prices will probably be stickier 213 00:11:08,640 --> 00:11:11,520 Speaker 1: than they would be if if sales started to either 214 00:11:11,600 --> 00:11:15,120 Speaker 1: decline or didn't grow as quickly as they had men So, 215 00:11:15,120 --> 00:11:18,200 Speaker 1: so really it's still retail sales and jobs still are 216 00:11:18,720 --> 00:11:22,080 Speaker 1: the key elements of what the market is looking at 217 00:11:22,280 --> 00:11:25,600 Speaker 1: in terms of in terms of the future moves. All right, ire, 218 00:11:25,720 --> 00:11:28,480 Speaker 1: let's fast forward to March twenty second, what is your 219 00:11:28,520 --> 00:11:33,600 Speaker 1: federal reserve going to do? Twenty five, fifty or maybe other? Yeah, 220 00:11:33,640 --> 00:11:36,640 Speaker 1: so you know, it's it's hard to gauge right now 221 00:11:36,640 --> 00:11:39,840 Speaker 1: because I do think that they are incredibly data dependent. 222 00:11:39,960 --> 00:11:42,640 Speaker 1: So if the data comes out as strong as the 223 00:11:42,679 --> 00:11:45,240 Speaker 1: market's expecting, then I would not be surprised to see 224 00:11:45,240 --> 00:11:48,280 Speaker 1: a fifty basis point move again, I think seventy five 225 00:11:48,440 --> 00:11:50,560 Speaker 1: like so that other you know, there has been some 226 00:11:50,600 --> 00:11:53,160 Speaker 1: talk about that. But I don't see the FED jumping 227 00:11:53,240 --> 00:11:56,600 Speaker 1: from twenty five basis point moves to seventy five, you know, 228 00:11:56,679 --> 00:11:58,959 Speaker 1: incrementally that though they could move back to a fifty 229 00:11:59,000 --> 00:12:01,160 Speaker 1: basis point move, particularly if the data is very hot, 230 00:12:02,200 --> 00:12:05,240 Speaker 1: it's that stepped down versus step up approach. It feels 231 00:12:05,240 --> 00:12:08,880 Speaker 1: like if we go fifty, Mike, how scary is that? 232 00:12:08,960 --> 00:12:11,120 Speaker 1: Did that? Then put on the table perhaps seventy five 233 00:12:11,280 --> 00:12:17,080 Speaker 1: for the next meeting? No, UM, want to make it 234 00:12:17,120 --> 00:12:19,680 Speaker 1: that way. Remember where we are, not where we were. 235 00:12:19,720 --> 00:12:21,800 Speaker 1: I mean we're at four seven five. Now, if you 236 00:12:21,800 --> 00:12:26,280 Speaker 1: did fifty, you'd be at twenty five, So seventy five 237 00:12:26,320 --> 00:12:30,160 Speaker 1: would put you over six at that point? Why why 238 00:12:30,840 --> 00:12:33,199 Speaker 1: you wouldn't need to go that fat far that fast? 239 00:12:33,240 --> 00:12:35,560 Speaker 1: And the feed isn't sure that it needs to go 240 00:12:35,800 --> 00:12:39,440 Speaker 1: to six yet we haven't even seen their SEP So 241 00:12:39,559 --> 00:12:42,400 Speaker 1: I think that it doesn't put seventy five on the table. 242 00:12:42,720 --> 00:12:47,800 Speaker 1: But what it does do is raises the question of 243 00:12:47,840 --> 00:12:51,920 Speaker 1: were they behind the curve? And I think what what 244 00:12:52,200 --> 00:12:54,680 Speaker 1: to be honest if everybody were honest about it, is 245 00:12:54,720 --> 00:12:58,400 Speaker 1: everybody's behind the curve. And if we get this data 246 00:12:58,440 --> 00:13:01,160 Speaker 1: that comes in strong and they're doing the market's going 247 00:13:01,160 --> 00:13:04,040 Speaker 1: to be essentially giving them permission to do it, saying, 248 00:13:04,200 --> 00:13:07,320 Speaker 1: you know, this is uh, this is scaring us too. 249 00:13:07,600 --> 00:13:11,240 Speaker 1: And so the FED would do probably fifty, as Iris says, 250 00:13:11,360 --> 00:13:13,920 Speaker 1: to catch up. But I don't think they need to 251 00:13:13,920 --> 00:13:17,040 Speaker 1: go beyond that, I mean not in one move. Put 252 00:13:17,040 --> 00:13:19,400 Speaker 1: it that way, all right. I'm looking at the World 253 00:13:19,559 --> 00:13:23,679 Speaker 1: interest rate probability function on the Bloomberg turb Terminal WARP 254 00:13:23,880 --> 00:13:26,559 Speaker 1: wi RP, and it shows me it's kind of got. 255 00:13:27,160 --> 00:13:31,120 Speaker 1: I don't know. FED fund rates peaking maybe September ish 256 00:13:31,120 --> 00:13:35,040 Speaker 1: around five point six percent. Is that enough because I've 257 00:13:35,040 --> 00:13:37,520 Speaker 1: been hearing talk about a six percent number, maybe even 258 00:13:37,559 --> 00:13:42,440 Speaker 1: six and a quarter. Is the market still not buying it? Well? 259 00:13:42,720 --> 00:13:45,719 Speaker 1: I think the markets, you know, when we look at 260 00:13:45,760 --> 00:13:48,439 Speaker 1: something like w IRP, we're looking at a linear probability. 261 00:13:48,520 --> 00:13:51,640 Speaker 1: So we're saying, okay, the the average, right, So so 262 00:13:51,720 --> 00:13:54,439 Speaker 1: the average, the weight at average thinks that we're going 263 00:13:54,480 --> 00:13:56,559 Speaker 1: to hike to around five point seventy five percent at 264 00:13:56,559 --> 00:13:59,079 Speaker 1: this point, right, which is gets you too. And that's 265 00:13:59,080 --> 00:14:01,800 Speaker 1: on the upper bounds. That's a five point six percent, 266 00:14:01,840 --> 00:14:04,240 Speaker 1: which is it looks like the market is pricing that 267 00:14:04,320 --> 00:14:07,320 Speaker 1: for four July. But keep in mind, is that some 268 00:14:07,400 --> 00:14:09,640 Speaker 1: of that is six percent, and then built into that 269 00:14:09,679 --> 00:14:12,440 Speaker 1: also is only five and a half. So you know, 270 00:14:12,440 --> 00:14:14,920 Speaker 1: when you think about the probabilities that are being built in, 271 00:14:15,040 --> 00:14:18,520 Speaker 1: that's just the kind of the the median probability or 272 00:14:18,520 --> 00:14:22,280 Speaker 1: the mean probability of that distribution. So, I, you know, 273 00:14:22,320 --> 00:14:24,880 Speaker 1: it's very unclear right now, and I think that the 274 00:14:25,200 --> 00:14:27,680 Speaker 1: Federal Reserve is still in calibration mode, and they've been 275 00:14:27,720 --> 00:14:30,240 Speaker 1: in calibration mode for the last you know, basically since 276 00:14:30,280 --> 00:14:33,360 Speaker 1: the December meeting. But you know, is that calibration going 277 00:14:33,400 --> 00:14:34,920 Speaker 1: to be that we're only hiking to five and a 278 00:14:35,000 --> 00:14:36,360 Speaker 1: half or is it that we have to hike to 279 00:14:36,440 --> 00:14:39,280 Speaker 1: six because the data is not not cooperating the way 280 00:14:39,320 --> 00:14:41,280 Speaker 1: that we had hoped, and it's possible that they could 281 00:14:41,280 --> 00:14:44,520 Speaker 1: go more. Right like, look, right now, we're all data 282 00:14:44,560 --> 00:14:48,280 Speaker 1: dependent and almost everyone's forecast from the beginning of the year. 283 00:14:48,280 --> 00:14:49,840 Speaker 1: If you go back to December and you look at 284 00:14:49,880 --> 00:14:52,240 Speaker 1: what everyone was thinking the path of the economy and 285 00:14:52,240 --> 00:14:55,600 Speaker 1: inflation was going to be in in twenty twenty three, 286 00:14:55,800 --> 00:14:59,080 Speaker 1: the January data blew those up. And because of that, 287 00:14:59,160 --> 00:15:03,600 Speaker 1: we're now to say, okay, is the market going to 288 00:15:03,600 --> 00:15:05,800 Speaker 1: follow what the economy is doing. And if the economy 289 00:15:05,880 --> 00:15:08,000 Speaker 1: is hot, that means we're going to have higher interest 290 00:15:08,080 --> 00:15:09,400 Speaker 1: rates in the front and that means we're going to 291 00:15:09,440 --> 00:15:12,760 Speaker 1: get a more inverted yield curve. And that's just the 292 00:15:12,800 --> 00:15:14,640 Speaker 1: way that I think this year is going to shape 293 00:15:14,680 --> 00:15:16,120 Speaker 1: up is that we just have to look at each 294 00:15:16,200 --> 00:15:18,240 Speaker 1: data point as it comes in, and the Fed is 295 00:15:18,240 --> 00:15:20,560 Speaker 1: going to be reactive to all of those. I're at 296 00:15:20,600 --> 00:15:22,120 Speaker 1: thirty seconds, yere, I'm gonna put you on the spot 297 00:15:22,120 --> 00:15:23,760 Speaker 1: and looking at a two year yield at five oz 298 00:15:23,920 --> 00:15:26,960 Speaker 1: two for talking about six percent, do we also see 299 00:15:27,000 --> 00:15:29,840 Speaker 1: six percent on the two year yield this year? Now, 300 00:15:30,400 --> 00:15:32,840 Speaker 1: the two year yield will would probably get up to 301 00:15:32,880 --> 00:15:35,960 Speaker 1: like five twenty five, five forty, because that really depends 302 00:15:35,960 --> 00:15:38,360 Speaker 1: on when they start to cut and which the market 303 00:15:38,400 --> 00:15:40,280 Speaker 1: is still going too price for twenty twenty four cuts 304 00:15:40,320 --> 00:15:42,440 Speaker 1: at some point, So the question is how fast and 305 00:15:42,480 --> 00:15:45,000 Speaker 1: when do they start those cuts. So you'll never have 306 00:15:45,120 --> 00:15:46,920 Speaker 1: the two year yield up to the Fed funds rate, 307 00:15:47,240 --> 00:15:50,320 Speaker 1: but it'll be it'll still go in the same direction, 308 00:15:50,400 --> 00:15:53,280 Speaker 1: just with a lower data All right, good stuff, I Jersey, 309 00:15:53,320 --> 00:15:55,280 Speaker 1: thank you so much for joining us. Our Jersey chief 310 00:15:55,360 --> 00:15:58,240 Speaker 1: US interest Rate strategist for Bloomer Intelligence, joining us from 311 00:15:58,520 --> 00:16:00,640 Speaker 1: Lovely Princeton, New Jersey. Michael mcke here in the Bloomberg 312 00:16:00,640 --> 00:16:04,240 Speaker 1: inter Actor Broker Studio, International Economics and Policy reporter for 313 00:16:04,320 --> 00:16:07,520 Speaker 1: Bloomberg TV and Radio, just kind of breaking down what 314 00:16:07,560 --> 00:16:10,720 Speaker 1: we have been hearing from this feder Reserve, what we 315 00:16:10,760 --> 00:16:13,440 Speaker 1: were likely to see from the Federal Reserve, kind of 316 00:16:13,480 --> 00:16:15,880 Speaker 1: in the context of a lot of data coming out 317 00:16:16,360 --> 00:16:18,480 Speaker 1: over the next several days. It seems like there always 318 00:16:18,560 --> 00:16:20,960 Speaker 1: is data, but this is a really important because, as 319 00:16:21,240 --> 00:16:24,600 Speaker 1: Mike mckehon and our Jersey were suggesting, this is a 320 00:16:24,640 --> 00:16:27,480 Speaker 1: federal reserve that is data dependent. So the day we'll 321 00:16:27,520 --> 00:16:30,240 Speaker 1: be looking at, you know, the job's number on Friday, 322 00:16:30,280 --> 00:16:34,480 Speaker 1: the CPI number next week, retail sales as well, so 323 00:16:34,520 --> 00:16:41,040 Speaker 1: we'll be following that as well. Alice Andrea Joyan says 324 00:16:41,080 --> 00:16:45,120 Speaker 1: she's US Interest Rates and Foreign Exchange reporter for Bloomberg News. Alice, 325 00:16:45,120 --> 00:16:47,480 Speaker 1: I'd love to get your perspective on kind of how 326 00:16:47,520 --> 00:16:50,920 Speaker 1: you've interpreted FED Chairman Pal's test menu over the past 327 00:16:50,960 --> 00:16:54,000 Speaker 1: couple of days. Well, you know, he really had an 328 00:16:54,000 --> 00:16:57,040 Speaker 1: opportunity to walk it back today and take back a 329 00:16:57,080 --> 00:16:59,800 Speaker 1: little bit of that hawkishness that he brought out yesterday, 330 00:16:59,840 --> 00:17:03,360 Speaker 1: and he just didn't you know, we settled September fed 331 00:17:03,440 --> 00:17:06,600 Speaker 1: swaps around five to sixty three yesterday and they're five 332 00:17:06,800 --> 00:17:10,280 Speaker 1: sixty four today, So you know, he knew where these were, 333 00:17:10,320 --> 00:17:14,399 Speaker 1: and he knew that the market was pricing in potentially 334 00:17:14,400 --> 00:17:16,520 Speaker 1: a bigger hike coming up at this March meeting, and 335 00:17:16,560 --> 00:17:18,520 Speaker 1: he didn't take it as an opportunity to say no, 336 00:17:18,520 --> 00:17:21,439 Speaker 1: no, no no, we're going to do twenty five. So you 337 00:17:21,480 --> 00:17:24,399 Speaker 1: know what's happening in the treasury market is there. They've 338 00:17:24,440 --> 00:17:27,120 Speaker 1: obviously flattened the curve quite a bit. We did see 339 00:17:27,160 --> 00:17:30,520 Speaker 1: some historic tights today down to about minus one hundred 340 00:17:30,560 --> 00:17:34,159 Speaker 1: and ten on two tents, and investors are putting some 341 00:17:34,200 --> 00:17:37,880 Speaker 1: money behind this for sure. What we're seeing here is 342 00:17:38,119 --> 00:17:42,280 Speaker 1: that the thematic trades that are going through is we're 343 00:17:42,280 --> 00:17:45,840 Speaker 1: seeing very very strong real money buying in the back 344 00:17:45,960 --> 00:17:47,840 Speaker 1: end of the curve. Now, real money buyer would be 345 00:17:47,880 --> 00:17:50,360 Speaker 1: something like an end user or something like an asset 346 00:17:50,480 --> 00:17:53,800 Speaker 1: manager and ensure and a pension fund, and we are 347 00:17:53,840 --> 00:17:57,080 Speaker 1: seeing those types of accounts buying in the five year sector, 348 00:17:57,640 --> 00:18:01,280 Speaker 1: ten year sector, and ultra ten years spector, mostly in 349 00:18:01,359 --> 00:18:05,240 Speaker 1: the future's curve, and traders there are telling me that 350 00:18:05,320 --> 00:18:08,560 Speaker 1: also there's been some big option plays that are targeting 351 00:18:08,600 --> 00:18:11,960 Speaker 1: three sixty on tens that's about thirty four basis points 352 00:18:12,000 --> 00:18:14,639 Speaker 1: below where we are now. So we're getting some real 353 00:18:14,720 --> 00:18:17,240 Speaker 1: money investing in the back end of the curve looking 354 00:18:17,280 --> 00:18:21,639 Speaker 1: for lower rates. So, Alice, you have cut your teeth 355 00:18:21,680 --> 00:18:25,240 Speaker 1: on Wall Street as a tried and true professional bond trader. 356 00:18:25,359 --> 00:18:29,239 Speaker 1: What's the trade here? Well, I have to say that 357 00:18:29,320 --> 00:18:35,760 Speaker 1: people have been in flatners for a very long time. Sure, 358 00:18:35,840 --> 00:18:38,160 Speaker 1: a flatner is something where you might want to sell 359 00:18:38,240 --> 00:18:40,359 Speaker 1: the front end of the treasury curve and buy the 360 00:18:40,359 --> 00:18:42,160 Speaker 1: back end. So we're seeing the buying in the back 361 00:18:42,280 --> 00:18:44,960 Speaker 1: end today as I telegraphed earlier, and so you'd want 362 00:18:44,960 --> 00:18:46,639 Speaker 1: to sell the front end buy the back end, and 363 00:18:46,760 --> 00:18:51,360 Speaker 1: that the spread between these two instruments would then flatten out. 364 00:18:51,400 --> 00:18:55,360 Speaker 1: And at the current pace, we're seeing that spread inverted, 365 00:18:55,520 --> 00:19:00,919 Speaker 1: meaning that it's negative. So two year yields yielding one 366 00:19:01,000 --> 00:19:04,040 Speaker 1: hundred and ten basis points over a ten year treasury 367 00:19:04,440 --> 00:19:08,200 Speaker 1: and economists Alice have told me, and I'm an equity person, 368 00:19:08,200 --> 00:19:09,480 Speaker 1: so I don't know, but they told me. When that 369 00:19:09,520 --> 00:19:12,560 Speaker 1: happens to this degree. Again, we haven't seen that inversion 370 00:19:12,680 --> 00:19:18,800 Speaker 1: since nineteen eighty one. I think, what does that tell you? Well, 371 00:19:19,200 --> 00:19:22,400 Speaker 1: to me, it tells me that the consumer is very strong, 372 00:19:23,480 --> 00:19:27,800 Speaker 1: that people think that this will continue, that we will 373 00:19:27,840 --> 00:19:33,199 Speaker 1: continue to see more inflation. And the problem with the 374 00:19:33,240 --> 00:19:35,440 Speaker 1: two tenths curve right now is that it's really in 375 00:19:35,520 --> 00:19:38,840 Speaker 1: no man's lands. Right we hit that triple digit target 376 00:19:38,920 --> 00:19:41,600 Speaker 1: that we've been really eyeing since November. We got to 377 00:19:41,680 --> 00:19:45,560 Speaker 1: that one hundred level and it really splids fast down 378 00:19:45,560 --> 00:19:48,400 Speaker 1: to one hundred and ten. Problem is, right now it's 379 00:19:48,440 --> 00:19:50,080 Speaker 1: in a little bit of no man's land. There's no 380 00:19:50,160 --> 00:19:54,560 Speaker 1: support until two hundred basis points. I think that that's 381 00:19:54,600 --> 00:19:56,520 Speaker 1: like an outlier. I don't think that we're going to 382 00:19:56,560 --> 00:19:58,479 Speaker 1: get there. But at this point, what you have to 383 00:19:58,520 --> 00:20:01,800 Speaker 1: watch for is like the round targets. Now, today we 384 00:20:02,040 --> 00:20:05,199 Speaker 1: slipped another ten basis points, so minus one hundred and ten. 385 00:20:05,240 --> 00:20:08,200 Speaker 1: The next one might be a one hundred and twenty 386 00:20:08,200 --> 00:20:10,800 Speaker 1: five basis points. So we need to test these levels 387 00:20:10,840 --> 00:20:13,400 Speaker 1: to see and you know, until we can finally pick 388 00:20:13,440 --> 00:20:17,639 Speaker 1: a bottom it. I will mention that treasury yields at 389 00:20:17,680 --> 00:20:21,120 Speaker 1: the back end would be even lower if it had 390 00:20:21,160 --> 00:20:25,600 Speaker 1: not been for some supply coming in in the mortgage market. 391 00:20:26,000 --> 00:20:28,119 Speaker 1: We've had about two and a half billion in mortgage 392 00:20:28,160 --> 00:20:31,560 Speaker 1: origination in the last three days. That's a lot. That's 393 00:20:31,560 --> 00:20:33,760 Speaker 1: a way lot. And what that's telling me is that 394 00:20:33,840 --> 00:20:37,360 Speaker 1: consumers again are being very stabby. They're seeing these yields 395 00:20:37,359 --> 00:20:39,560 Speaker 1: fall at the back end of the curve and they're saying, 396 00:20:39,600 --> 00:20:42,480 Speaker 1: this is an opportunity for me to get this mortgage 397 00:20:42,640 --> 00:20:46,280 Speaker 1: by this house. It's becoming more affordable to me. And 398 00:20:46,680 --> 00:20:49,600 Speaker 1: you know when you see people buying houses and the 399 00:20:49,680 --> 00:20:53,040 Speaker 1: housing market elevating, all that means to me is more 400 00:20:53,080 --> 00:20:57,400 Speaker 1: consumer demand, more inflation. Well, Alice, then walk us through 401 00:20:57,680 --> 00:20:59,399 Speaker 1: kind of what could be the game changers here. You 402 00:20:59,400 --> 00:21:01,639 Speaker 1: talked about flattners that we're seeing in the inversion that 403 00:21:01,640 --> 00:21:03,800 Speaker 1: we've really been talking about all morning, negative one ten 404 00:21:03,840 --> 00:21:06,920 Speaker 1: on the twos tens. But that is actually not the 405 00:21:07,000 --> 00:21:10,679 Speaker 1: preferred kind of pair that I believe the Fellow Reserve 406 00:21:10,720 --> 00:21:13,959 Speaker 1: looks at. It's like three months, ten year, I think, so, 407 00:21:14,000 --> 00:21:17,880 Speaker 1: what are you seeing in other parts of the curve. Well, actually, 408 00:21:17,920 --> 00:21:21,760 Speaker 1: I'm not really seeing this big selling in the very 409 00:21:21,840 --> 00:21:23,639 Speaker 1: very front end of the curve. I have heard that 410 00:21:23,720 --> 00:21:26,600 Speaker 1: in treasury bills there's been a fair amount of short covering, 411 00:21:27,000 --> 00:21:32,199 Speaker 1: so people taking some profits there. I would say that 412 00:21:32,240 --> 00:21:35,360 Speaker 1: the you know, obviously the big game changer will be Friday, right, 413 00:21:35,400 --> 00:21:38,200 Speaker 1: There's this a whole lot of volatility that's going to 414 00:21:38,280 --> 00:21:40,640 Speaker 1: be sorted out on Friday. The other thing I would 415 00:21:40,680 --> 00:21:46,040 Speaker 1: mention is that on Friday at midnight, so Saturday morning, 416 00:21:46,560 --> 00:21:49,439 Speaker 1: the sect goes into blackouts. So if anybody wants to 417 00:21:49,440 --> 00:21:52,000 Speaker 1: say anything about jobs, they're going to have to hurry 418 00:21:52,080 --> 00:21:56,000 Speaker 1: up and say it Friday. But you know, I think 419 00:21:56,040 --> 00:21:58,600 Speaker 1: that actually Pale has kind of laid the groundwork. He said, 420 00:21:58,760 --> 00:22:02,280 Speaker 1: you know, we've made no decision, and you know, maybe 421 00:22:02,280 --> 00:22:05,200 Speaker 1: some of those FED officials that it said we're looking 422 00:22:05,240 --> 00:22:07,679 Speaker 1: at doing twenty five, you know, maybe they're not going 423 00:22:07,760 --> 00:22:12,760 Speaker 1: to be speaking, and maybe them not speaking actually speaks volumes. Alice, 424 00:22:12,760 --> 00:22:15,760 Speaker 1: you mentioned earlier that you've been seeing some real money 425 00:22:15,800 --> 00:22:17,439 Speaker 1: come into the back end of the curve. Tells us 426 00:22:17,440 --> 00:22:21,040 Speaker 1: about just the liquidity in the treasury market these days. 427 00:22:21,040 --> 00:22:22,199 Speaker 1: If I want to go in there and put a 428 00:22:22,240 --> 00:22:25,480 Speaker 1: big trade on, yeah, is it out there? Liquidity out there? 429 00:22:26,280 --> 00:22:32,600 Speaker 1: It's much better, Thank goodness, you know, um I and 430 00:22:32,720 --> 00:22:36,240 Speaker 1: I know that because I'm getting flows. You know, before 431 00:22:36,280 --> 00:22:38,680 Speaker 1: I would say, hey, you know, markets moving around, what's 432 00:22:38,720 --> 00:22:41,240 Speaker 1: going on? And they're like, there's no flows, and that's 433 00:22:41,280 --> 00:22:44,680 Speaker 1: when you would see, you know, yield spike or collapse 434 00:22:44,840 --> 00:22:47,520 Speaker 1: really really fast. But you know, the market seems to 435 00:22:47,600 --> 00:22:52,240 Speaker 1: be um much more orderly, you know, and I think 436 00:22:52,240 --> 00:22:54,080 Speaker 1: that we're seeing that too, because you know, you're not 437 00:22:54,119 --> 00:22:57,479 Speaker 1: seeing yields, you know, with these you know, fifteen twenty 438 00:22:57,480 --> 00:23:01,320 Speaker 1: basis point rises and decline. You know, we are seeing 439 00:23:01,359 --> 00:23:04,840 Speaker 1: big ones, but they're a little more modest. But I 440 00:23:04,920 --> 00:23:07,720 Speaker 1: definitely think liquidity is back in the market. Players are 441 00:23:07,840 --> 00:23:12,200 Speaker 1: in their trading, they're providing liquidity, and I would say 442 00:23:12,200 --> 00:23:15,239 Speaker 1: that overall trading flows are much better. In liquidity is 443 00:23:15,400 --> 00:23:20,840 Speaker 1: much improved. Alice thirty seconds here? What change? What change? 444 00:23:21,000 --> 00:23:25,280 Speaker 1: In terms? How did you recover? How does what recover? 445 00:23:25,400 --> 00:23:27,920 Speaker 1: How did the liquidity recover? Oh? How did it look? Okay? 446 00:23:28,720 --> 00:23:31,720 Speaker 1: You know what? I think that finally when we have 447 00:23:31,840 --> 00:23:35,440 Speaker 1: the yield higher, I mean people wanted them. Yeah, we're 448 00:23:35,440 --> 00:23:37,560 Speaker 1: going to have a big auction coming up here at 449 00:23:37,840 --> 00:23:40,520 Speaker 1: a ten year auction coming up at one o'clock. And 450 00:23:40,840 --> 00:23:42,480 Speaker 1: I have no doubt that that thing's going to go 451 00:23:42,600 --> 00:23:46,680 Speaker 1: just fine. People want these high yields. Yeah, absolutely, I 452 00:23:46,720 --> 00:23:48,600 Speaker 1: mean I can sit there at the two year get 453 00:23:48,600 --> 00:23:53,040 Speaker 1: five zero five point zero five percent, just extraordinary. Alice, 454 00:23:53,040 --> 00:23:56,600 Speaker 1: thanks so much for joining us. Really appreciate getting your perspective. 455 00:23:56,600 --> 00:24:01,160 Speaker 1: And you're reporting, Alice Ander, I'm sorry. Alice Andrey, us 456 00:24:01,280 --> 00:24:04,840 Speaker 1: interest rates and foreign exchange reporter for Bloomberg News. She's 457 00:24:04,840 --> 00:24:08,119 Speaker 1: in Chicago. She's a former floor clerk at bear Sterns, 458 00:24:08,200 --> 00:24:12,040 Speaker 1: so she gives you a good trader's perspectives market and 459 00:24:12,040 --> 00:24:14,680 Speaker 1: all that kind of stuff. So pretty good stuff. But again, 460 00:24:14,880 --> 00:24:18,320 Speaker 1: this is a federal reserve that has said it is 461 00:24:18,400 --> 00:24:20,360 Speaker 1: data dependent, and boy, are they gonna get a lot 462 00:24:20,400 --> 00:24:25,960 Speaker 1: of data to digest over the next several days. Let's 463 00:24:25,960 --> 00:24:28,119 Speaker 1: get down to Washington, DC, because there's a lot of 464 00:24:28,119 --> 00:24:30,840 Speaker 1: work being done in the halls of Congress. A lot 465 00:24:30,880 --> 00:24:34,040 Speaker 1: going on down there. President Biden just announced his budget. 466 00:24:34,119 --> 00:24:36,159 Speaker 1: We've got apparently some talk I got to keep the 467 00:24:36,240 --> 00:24:38,719 Speaker 1: government funded or something like that. I think that's important. 468 00:24:38,760 --> 00:24:40,960 Speaker 1: It's nice to have funds the account. I want to 469 00:24:40,960 --> 00:24:42,800 Speaker 1: start there. You do that with Steve Dennis. He's a 470 00:24:42,800 --> 00:24:45,639 Speaker 1: congressional reporter for Bloomberg News. Steve, let's start there with 471 00:24:45,720 --> 00:24:49,560 Speaker 1: the debt ceiling here, could you lay out, for simple terms, 472 00:24:49,640 --> 00:24:52,920 Speaker 1: kind of what it is where we are and what 473 00:24:53,000 --> 00:24:56,640 Speaker 1: kind of has to happen, do you think? Yeah? I mean, 474 00:24:56,920 --> 00:25:01,439 Speaker 1: right now, both sides are basically still you know, putting 475 00:25:01,480 --> 00:25:05,400 Speaker 1: out their sort of talking points. The way I look 476 00:25:05,400 --> 00:25:08,200 Speaker 1: at a president's budget, it's sort of like the kickoff, 477 00:25:08,320 --> 00:25:11,920 Speaker 1: and it's like, this is basically in my dream scenario, 478 00:25:12,000 --> 00:25:13,920 Speaker 1: this is what I would like, and it's a it's 479 00:25:13,920 --> 00:25:16,720 Speaker 1: a PR document, but Congress is going to drop kick 480 00:25:16,760 --> 00:25:20,919 Speaker 1: it into the sun and then then the real negotiations 481 00:25:20,920 --> 00:25:23,960 Speaker 1: presumably can start. I mean they he met once, was 482 00:25:24,119 --> 00:25:28,879 Speaker 1: Speaker Kevin McCarthy. They really haven't gotten anywhere on what 483 00:25:29,200 --> 00:25:32,240 Speaker 1: is ultimately going to be a deal to raise a 484 00:25:32,320 --> 00:25:36,760 Speaker 1: dead limit, probably this summer and have some kind of 485 00:25:36,840 --> 00:25:40,040 Speaker 1: spending deal at least for the next two years that's 486 00:25:40,119 --> 00:25:44,840 Speaker 1: probably gonna cap discretionary spending. The idea that there's gonna 487 00:25:44,840 --> 00:25:48,560 Speaker 1: be a big, sweeping budget deal that would have long 488 00:25:48,640 --> 00:25:53,720 Speaker 1: term implications. The expectations for that are very low. But 489 00:25:53,880 --> 00:25:56,399 Speaker 1: you know, there's still you know, there's still people talking 490 00:25:56,440 --> 00:25:59,800 Speaker 1: on both sides about doing stuff like that. It's just 491 00:26:00,040 --> 00:26:02,119 Speaker 1: you know, the appetite from the White House or anything 492 00:26:02,160 --> 00:26:06,240 Speaker 1: that would touch entitlements zilch. And they just want to 493 00:26:06,320 --> 00:26:08,840 Speaker 1: tax people making more than four hundred thousand dollars a 494 00:26:08,880 --> 00:26:11,520 Speaker 1: year to sort of raise a couple of trillion dollars 495 00:26:11,520 --> 00:26:13,520 Speaker 1: over the next ten years. That's going nowhere with the 496 00:26:13,560 --> 00:26:18,080 Speaker 1: republicands And you've got guys in the middle like Joe Manchin, 497 00:26:19,160 --> 00:26:22,480 Speaker 1: who has to decide whether to run for reelection next year, 498 00:26:22,640 --> 00:26:26,760 Speaker 1: has flirted with running for president and has been attacking 499 00:26:26,880 --> 00:26:29,960 Speaker 1: the White House on a whole host of issues, basically saying, look, 500 00:26:30,359 --> 00:26:34,560 Speaker 1: why don't we cap just start with capping some discretionary 501 00:26:34,640 --> 00:26:40,360 Speaker 1: spending to try to reverse this trajectory on debt. Well, 502 00:26:40,359 --> 00:26:43,440 Speaker 1: Steve talked to us a little bit about the money situation. 503 00:26:43,560 --> 00:26:44,960 Speaker 1: For lack of a better term, I really want to 504 00:26:45,000 --> 00:26:48,239 Speaker 1: talk about the defense budget specifically because it feels like, 505 00:26:48,720 --> 00:26:51,040 Speaker 1: just from a Marcus perspective of markets, Gal, after all, 506 00:26:51,080 --> 00:26:54,480 Speaker 1: you saw a lot of these defense stocks really outperform 507 00:26:54,520 --> 00:26:57,280 Speaker 1: after the war Ukraine. Now we're talking about the Chinese 508 00:26:57,840 --> 00:27:03,160 Speaker 1: rivalry as well. How much momentum does defense really have 509 00:27:03,640 --> 00:27:08,200 Speaker 1: under kind of a democratic administration. Yeah, I think that 510 00:27:08,280 --> 00:27:12,440 Speaker 1: this is something where you know, the stars are kind 511 00:27:12,440 --> 00:27:17,640 Speaker 1: of aligning for more defense spending. You've got Mitch McConnell 512 00:27:17,720 --> 00:27:20,439 Speaker 1: sort of been He's been pounding the table now for 513 00:27:20,480 --> 00:27:23,919 Speaker 1: two years to ramp up defense spending, not just to 514 00:27:24,000 --> 00:27:29,040 Speaker 1: deal with Ukraine but also to counter China and the Pacific. 515 00:27:29,920 --> 00:27:33,440 Speaker 1: And you know, he secured that big deal in December, 516 00:27:33,520 --> 00:27:36,520 Speaker 1: the Omnibus package with a ten percent defense increase. He 517 00:27:36,560 --> 00:27:41,200 Speaker 1: wants another big increase is summer. I suspect that whatever 518 00:27:41,400 --> 00:27:45,199 Speaker 1: Biden's number ultimately comes in at, and we're expecting it 519 00:27:45,240 --> 00:27:49,640 Speaker 1: to be pretty robust, McConnell will want more. I think 520 00:27:49,640 --> 00:27:53,280 Speaker 1: the the open question is what happens in the House 521 00:27:54,000 --> 00:27:58,879 Speaker 1: where there are a lot of defense spending hawks in leadership. 522 00:28:00,160 --> 00:28:03,600 Speaker 1: You know, Kevin McCarthy also has to deal with folks 523 00:28:03,640 --> 00:28:08,159 Speaker 1: who don't support of spending on Ukraine and and aren't 524 00:28:08,200 --> 00:28:14,080 Speaker 1: necessarily is enamored with spending in general. So I think 525 00:28:14,160 --> 00:28:18,160 Speaker 1: there's also a question of dealing with progressive Democrats who 526 00:28:18,280 --> 00:28:22,119 Speaker 1: don't like spending more on defense and are going to 527 00:28:22,200 --> 00:28:26,360 Speaker 1: be unhappy if any budget deal Biden signs onto caps 528 00:28:26,440 --> 00:28:29,680 Speaker 1: the spending that they like the the best discretionary spending, 529 00:28:30,119 --> 00:28:34,639 Speaker 1: but doesn't cap the defense spending. So you know, I 530 00:28:34,680 --> 00:28:38,240 Speaker 1: think that's going to be you know, an open you know, 531 00:28:38,400 --> 00:28:41,400 Speaker 1: skirmish in the halls of Congress. Is you know, if 532 00:28:41,400 --> 00:28:43,880 Speaker 1: we end up with a big defense increase, it's going 533 00:28:43,920 --> 00:28:48,800 Speaker 1: to be hard to have Biden's left lank happy. How 534 00:28:48,800 --> 00:28:52,200 Speaker 1: about the tax situation here, I think, you know, President 535 00:28:52,240 --> 00:28:55,200 Speaker 1: Biden and a fairly characteristic I guess Democratic move is 536 00:28:55,320 --> 00:28:59,680 Speaker 1: talking down, you know, tax hike on folks over earning 537 00:28:59,680 --> 00:29:03,360 Speaker 1: over one a thousand dollars, what's the whole tax The 538 00:29:03,360 --> 00:29:08,720 Speaker 1: appetite in Washington to do anything on the tax code, yeah, 539 00:29:09,000 --> 00:29:12,239 Speaker 1: I mean every once in a while somebody brings up 540 00:29:12,280 --> 00:29:17,240 Speaker 1: there some expiring business tax breaks on research and development, 541 00:29:17,320 --> 00:29:20,440 Speaker 1: some other things on the side that you could come 542 00:29:20,520 --> 00:29:24,160 Speaker 1: up with some kind of a smaller tax deal. But 543 00:29:24,280 --> 00:29:26,640 Speaker 1: you know, I think everybody's kind of looking ahead to 544 00:29:26,720 --> 00:29:32,200 Speaker 1: the election, and certainly Biden is sort of trying to 545 00:29:32,240 --> 00:29:35,800 Speaker 1: portray the Republicans as beholden to the rich and the 546 00:29:35,920 --> 00:29:40,000 Speaker 1: wealthy and sort of playing the populist card, and you 547 00:29:40,040 --> 00:29:42,520 Speaker 1: know that's just not going to you know, there's just 548 00:29:42,720 --> 00:29:48,360 Speaker 1: no appetite amoute for that among Republicans on Capitol Hill. 549 00:29:49,160 --> 00:29:51,320 Speaker 1: And so I think this is something that ends up 550 00:29:51,320 --> 00:29:56,440 Speaker 1: getting taken to the election, assuming Biden is the nominee 551 00:29:56,560 --> 00:29:59,560 Speaker 1: and and runs, you know, which you know he still 552 00:29:59,560 --> 00:30:03,480 Speaker 1: hasn't a officially announced, and you know, we'll see what 553 00:30:03,600 --> 00:30:06,200 Speaker 1: goes what comes out of the election. Really, I mean, 554 00:30:06,360 --> 00:30:09,160 Speaker 1: the next big thing that happens on taxes, as far 555 00:30:09,200 --> 00:30:11,920 Speaker 1: as like a big thing is when the Trump tax 556 00:30:12,040 --> 00:30:15,840 Speaker 1: cuts expire in a few years. That's gonna prompt a 557 00:30:15,880 --> 00:30:19,800 Speaker 1: big bipartisan discussion on things like the salt tax break, 558 00:30:19,840 --> 00:30:24,320 Speaker 1: which I don't know a lot of our listeners, Uh, 559 00:30:24,640 --> 00:30:29,040 Speaker 1: you know that saltcap goes away unless Congress keeps it 560 00:30:29,120 --> 00:30:31,240 Speaker 1: in place. So you know, there's that's gonna be a 561 00:30:31,400 --> 00:30:34,520 Speaker 1: huge fight in a couple of years, you know, after 562 00:30:34,560 --> 00:30:38,000 Speaker 1: the next presidential election. In all likelihoods, Steve, can we 563 00:30:38,040 --> 00:30:40,880 Speaker 1: fold in the Federal Reserve here? I think yesterday's testimony 564 00:30:40,960 --> 00:30:43,280 Speaker 1: was a bit more juicy than perhaps today's is. But 565 00:30:43,600 --> 00:30:47,120 Speaker 1: I think the fiery exchange between Elizabeth Warren and Jerome 566 00:30:47,160 --> 00:30:50,280 Speaker 1: Powell really caught a lot of people's attention. Talked to 567 00:30:50,400 --> 00:30:52,840 Speaker 1: us a little bit about how Congress and all these 568 00:30:52,840 --> 00:30:57,280 Speaker 1: congressional representatives are really viewing what's going on at the 569 00:30:57,280 --> 00:31:02,600 Speaker 1: Federal Reserve. Yeah, I mean, it's a very diverse stead 570 00:31:02,640 --> 00:31:05,600 Speaker 1: of views on the Fed right now, which you can 571 00:31:05,640 --> 00:31:09,440 Speaker 1: expect when they're making such big moves and so much 572 00:31:09,440 --> 00:31:11,360 Speaker 1: as at stake. This is not like you know, the 573 00:31:11,400 --> 00:31:15,080 Speaker 1: past decade where it was like tiny moves. These are 574 00:31:15,120 --> 00:31:17,920 Speaker 1: major moves. Millions of people's jobs hang in the balance. 575 00:31:18,560 --> 00:31:20,880 Speaker 1: That was the point that Warren's been making. You know, 576 00:31:20,920 --> 00:31:23,920 Speaker 1: I've talked to her many times. I wrote about a 577 00:31:23,960 --> 00:31:26,640 Speaker 1: few days ago about how she's pushing Biden to name 578 00:31:26,760 --> 00:31:30,280 Speaker 1: a vice chair who would counter Powell on these rate hikes, 579 00:31:30,320 --> 00:31:33,440 Speaker 1: because she, as she laid out yesterday to Pow and 580 00:31:33,600 --> 00:31:37,600 Speaker 1: challenged him, you know, you're gambling with millions of people's lives, 581 00:31:37,640 --> 00:31:41,720 Speaker 1: and you know your essential plan is to have the 582 00:31:41,800 --> 00:31:44,440 Speaker 1: unemployment rate go up to four point six percent, which 583 00:31:44,480 --> 00:31:47,680 Speaker 1: puts two million people out of work, and presumably people 584 00:31:47,720 --> 00:31:50,080 Speaker 1: would then be willing to work for less money, and 585 00:31:50,160 --> 00:31:55,080 Speaker 1: therefore you'd have less labor inflation. Well, her worry is 586 00:31:55,240 --> 00:31:58,480 Speaker 1: that every other time the Fed's gone on this kind 587 00:31:58,520 --> 00:32:03,440 Speaker 1: of raising unemployment rate to bring down labor inflation, we've 588 00:32:03,440 --> 00:32:06,680 Speaker 1: had a big recession, and we've never had a recession 589 00:32:07,400 --> 00:32:09,920 Speaker 1: where you end up with only a couple million losing 590 00:32:09,920 --> 00:32:12,000 Speaker 1: your jobs, you end up with a recession sort of 591 00:32:12,040 --> 00:32:14,479 Speaker 1: getting out of hand. Yeah, and you could end up 592 00:32:14,480 --> 00:32:16,960 Speaker 1: with five or six million losing your jobs. And if 593 00:32:17,000 --> 00:32:20,480 Speaker 1: you think about it heading into next year, that could 594 00:32:20,480 --> 00:32:24,080 Speaker 1: be a total disaster for Democrats. So that's something that 595 00:32:24,200 --> 00:32:26,640 Speaker 1: you know, I think when Biden ultimately makes this vice 596 00:32:26,760 --> 00:32:29,520 Speaker 1: chair pick, you know, he could be signaling to the 597 00:32:29,560 --> 00:32:32,360 Speaker 1: Fed does he want a dove? Does he want to hawk? 598 00:32:32,400 --> 00:32:35,680 Speaker 1: And certainly there are people, yeah, the Republican side who 599 00:32:35,720 --> 00:32:39,360 Speaker 1: want hawks, and people like Warrant who want doves. Yeah. 600 00:32:39,400 --> 00:32:41,680 Speaker 1: The politics I think really crucial for the entre policy 601 00:32:41,800 --> 00:32:45,400 Speaker 1: and for international audience. It's worth kind of saying that 602 00:32:45,480 --> 00:32:49,040 Speaker 1: Charon Powell's rebuttal to Elizabeth Warren's argument that Steve just 603 00:32:49,080 --> 00:32:52,280 Speaker 1: so beautifully laid out was simply that, Okay, well, what's 604 00:32:52,320 --> 00:32:55,480 Speaker 1: worse here inflation for lower income households. Then that hits 605 00:32:55,480 --> 00:32:58,640 Speaker 1: five six percent, but is higher for longer, because that's 606 00:32:58,640 --> 00:33:01,040 Speaker 1: really what they're trying to find it again, So two 607 00:33:01,120 --> 00:33:05,160 Speaker 1: certainly different perspectives. But Steve, it sounds like though chairmen Powell, 608 00:33:05,200 --> 00:33:08,360 Speaker 1: he's no stranger to political pressure at all, and m 609 00:33:08,560 --> 00:33:12,320 Speaker 1: kind of referencing here the political pressure during the Trump administration. 610 00:33:12,840 --> 00:33:16,920 Speaker 1: Do you foresee a similar political pressure this time for 611 00:33:17,040 --> 00:33:21,600 Speaker 1: the Biden administration? So far, a Biden administration sort of 612 00:33:21,720 --> 00:33:25,440 Speaker 1: kept their distance, you know, and part I think the 613 00:33:25,440 --> 00:33:28,320 Speaker 1: Biden administration even they wanted to criticize the FED, which 614 00:33:28,440 --> 00:33:31,480 Speaker 1: you know, I'm not sure they do. Uh, you know, 615 00:33:31,800 --> 00:33:36,720 Speaker 1: this is his FED. He renominated Powell over Warren's objections. 616 00:33:37,120 --> 00:33:42,040 Speaker 1: He named most of the FED board members, so it's 617 00:33:42,080 --> 00:33:44,160 Speaker 1: kind of hard for him to turn around and then say, ooops, 618 00:33:44,200 --> 00:33:48,000 Speaker 1: I messed up, right, So yeah, I think I think 619 00:33:48,000 --> 00:33:50,520 Speaker 1: that's that's part of the issue here. But I would 620 00:33:50,520 --> 00:33:53,240 Speaker 1: say I've talked to a lot of Democrats on this, 621 00:33:53,760 --> 00:33:56,880 Speaker 1: and while Warren is out there pounding the table on this, 622 00:33:58,080 --> 00:34:01,680 Speaker 1: Powell still has many many lies on the Democratic side 623 00:34:01,680 --> 00:34:05,520 Speaker 1: who have complimented him. Right before Warren asked her questions, 624 00:34:06,440 --> 00:34:10,200 Speaker 1: Mark Warner was basically schuring him on and saying, I 625 00:34:10,200 --> 00:34:13,120 Speaker 1: think so far you've gotten it right basic. Yeah, all right, 626 00:34:13,120 --> 00:34:16,719 Speaker 1: we did a Democrats, that's right. Steve Dennis, thanks so 627 00:34:16,800 --> 00:34:18,960 Speaker 1: much for joining us. Steve Dennis, he's a congressional reporter 628 00:34:18,960 --> 00:34:21,440 Speaker 1: for Bloomberg News down to Washington, DC. Given the latest 629 00:34:22,160 --> 00:34:25,600 Speaker 1: on some of the I guess budget moves, the debt ceiling, 630 00:34:25,680 --> 00:34:28,680 Speaker 1: lots of work for our friends in Washington tending get going. 631 00:34:31,560 --> 00:34:33,520 Speaker 1: The eco data that got my attention today was that 632 00:34:33,719 --> 00:34:38,240 Speaker 1: Jolt's job openings thing. Consensus was ten point five million, 633 00:34:38,560 --> 00:34:40,759 Speaker 1: came to ten point eight two million. I went back 634 00:34:40,760 --> 00:34:43,160 Speaker 1: and looked at it over the last twenty years or 635 00:34:43,200 --> 00:34:45,200 Speaker 1: whatever it was. I mean, you know, prior to the pandemic, 636 00:34:45,239 --> 00:34:47,640 Speaker 1: it was like six four or five six. I mean, 637 00:34:47,680 --> 00:34:49,200 Speaker 1: you know, now it's up at ten and it's been 638 00:34:49,239 --> 00:34:51,560 Speaker 1: up there for a long time. So where do all 639 00:34:51,560 --> 00:34:53,200 Speaker 1: those people go? But let's check him with the Ana Wong, 640 00:34:53,239 --> 00:34:56,440 Speaker 1: chief US economists for Bloomberg Economics. So, and I'm just 641 00:34:56,520 --> 00:34:58,600 Speaker 1: kind of thinking that that Jolts number. We're gonna get 642 00:34:58,600 --> 00:35:02,480 Speaker 1: the jobs data on farm payrolls Friday. We have a 643 00:35:02,520 --> 00:35:06,799 Speaker 1: tight labor market, and can you have a recession if 644 00:35:06,800 --> 00:35:10,080 Speaker 1: you have a labor market that's this strong. Well, I 645 00:35:10,120 --> 00:35:12,640 Speaker 1: think that all the data that we are getting, the 646 00:35:12,719 --> 00:35:16,000 Speaker 1: Jolts data we just saw on this Friday's report won't 647 00:35:16,000 --> 00:35:20,640 Speaker 1: fully reflect the softening that had already taken place in 648 00:35:20,719 --> 00:35:24,040 Speaker 1: the labor market. So we looked at this very deeply. 649 00:35:24,400 --> 00:35:27,480 Speaker 1: So we looked at you know these notices that employers 650 00:35:27,560 --> 00:35:32,040 Speaker 1: need to give their employeesburg layoffs, which usually is lagged 651 00:35:32,680 --> 00:35:35,759 Speaker 1: announcements by two months. And so we are expecting that 652 00:35:35,800 --> 00:35:39,279 Speaker 1: the JOLTS data in March or April will show that 653 00:35:39,320 --> 00:35:43,400 Speaker 1: the layoff rates would have climbed to slightly just above 654 00:35:43,840 --> 00:35:47,560 Speaker 1: the you know, the twenty nineteen level, the average of 655 00:35:47,560 --> 00:35:49,920 Speaker 1: twenty ten to twenty nineteen. So I would say the 656 00:35:50,800 --> 00:35:53,920 Speaker 1: signs of softening will only really show up in a 657 00:35:54,080 --> 00:35:57,160 Speaker 1: data by the time that the FED meets in May 658 00:35:57,560 --> 00:36:00,719 Speaker 1: or June. So I think right now the picture that 659 00:36:00,760 --> 00:36:02,920 Speaker 1: we are seeing from the data might be just a 660 00:36:02,960 --> 00:36:07,160 Speaker 1: little bit lagged, all right, So what do you think 661 00:36:07,360 --> 00:36:10,760 Speaker 1: is again, we're gonna get a payroll data point on Friday, 662 00:36:10,960 --> 00:36:14,960 Speaker 1: We're gonna get the CPI print on next Tuesday. What 663 00:36:15,040 --> 00:36:17,640 Speaker 1: are you looking for? What would surprise you? What would 664 00:36:17,719 --> 00:36:23,319 Speaker 1: scare you? Maybe nothing scares me? Good, But okay, here 665 00:36:23,480 --> 00:36:26,280 Speaker 1: here's what I think. So I think the fifty BIPs 666 00:36:26,360 --> 00:36:29,600 Speaker 1: that in March is not set in stone yet. Our 667 00:36:29,640 --> 00:36:32,560 Speaker 1: baseline is still for the FED to to go twenty 668 00:36:32,560 --> 00:36:36,399 Speaker 1: five basis point. So if the data, if the non 669 00:36:36,440 --> 00:36:40,640 Speaker 1: farm payroll actually exceed three hundred k, this Friday, and 670 00:36:40,760 --> 00:36:45,319 Speaker 1: the CPI core print exceeds, you know, as zero point 671 00:36:45,400 --> 00:36:50,200 Speaker 1: five percent or more next Tuesday, then I think for 672 00:36:50,239 --> 00:36:54,240 Speaker 1: sure we will be expecting a fifty BIPs high. Okay. 673 00:36:54,480 --> 00:36:59,080 Speaker 1: But if there's the gray area of what if the 674 00:36:59,239 --> 00:37:03,560 Speaker 1: payroll is about two hundred k and CPI is like 675 00:37:03,680 --> 00:37:07,640 Speaker 1: zero point four percent, that is unclear. But whereas if 676 00:37:07,920 --> 00:37:10,680 Speaker 1: if non farm payroll comes in below two hundred k 677 00:37:11,200 --> 00:37:15,680 Speaker 1: and core pis point three, then for sure twenty five 678 00:37:15,800 --> 00:37:18,960 Speaker 1: days this point. Okay. So that's where we are at all, right, 679 00:37:19,000 --> 00:37:21,719 Speaker 1: And just to summarize, on that non farm payroll data 680 00:37:21,760 --> 00:37:23,839 Speaker 1: point that comes in Friday, the consensus is for two 681 00:37:23,920 --> 00:37:27,239 Speaker 1: hundred and fifteen thousand, down from four or forty three 682 00:37:27,239 --> 00:37:31,840 Speaker 1: thousand the prior month. So and I mean, boy, you know, 683 00:37:31,880 --> 00:37:34,200 Speaker 1: we had a guest in earlier that was painting a 684 00:37:34,280 --> 00:37:38,040 Speaker 1: really barished picture that this FED really runs the risk 685 00:37:38,080 --> 00:37:42,600 Speaker 1: of pushing this economy into a more meaningful and perhaps 686 00:37:42,719 --> 00:37:47,239 Speaker 1: longer recession than investors are discounting. How real is that 687 00:37:47,360 --> 00:37:51,240 Speaker 1: risk in your mind? So, you know, I think part 688 00:37:51,280 --> 00:37:55,360 Speaker 1: of the reason why Powell is, you know, has suddenly 689 00:37:55,440 --> 00:37:59,400 Speaker 1: did a one eighty yesterday is there's a stream of 690 00:37:59,440 --> 00:38:03,360 Speaker 1: research says that the lack of monetary policy is actually shorter. 691 00:38:03,680 --> 00:38:06,560 Speaker 1: In fact, it's only three months long. And if you 692 00:38:06,640 --> 00:38:08,839 Speaker 1: believe that kind of results, you would have think, oh, 693 00:38:08,920 --> 00:38:10,920 Speaker 1: all the effect of the tight most of the effects 694 00:38:10,960 --> 00:38:13,319 Speaker 1: of the tightening had already shown up, and that would 695 00:38:13,360 --> 00:38:16,279 Speaker 1: make the you know you think, well, we definitely need 696 00:38:16,320 --> 00:38:19,920 Speaker 1: to push the peak rates higher. However, that would also 697 00:38:19,960 --> 00:38:22,000 Speaker 1: tell you that, well, it's not that bad. After If 698 00:38:22,040 --> 00:38:25,480 Speaker 1: the peak effects of you know, getting rates to five 699 00:38:25,600 --> 00:38:29,440 Speaker 1: percent is still this really strong economy, it means that 700 00:38:29,480 --> 00:38:32,799 Speaker 1: the economy can handle it. However, I think the more 701 00:38:32,840 --> 00:38:36,320 Speaker 1: potent part of monetary policy is the higher for longer 702 00:38:36,760 --> 00:38:40,640 Speaker 1: part of monetary policy. Imagine if rates are at six 703 00:38:40,719 --> 00:38:45,320 Speaker 1: percent until the end of twenty twenty four, and everybody, 704 00:38:45,560 --> 00:38:47,560 Speaker 1: like the mom and pops on the street are like, well, 705 00:38:47,600 --> 00:38:50,560 Speaker 1: I can get a risk Cree return on my cash 706 00:38:50,680 --> 00:38:52,680 Speaker 1: for six percent. I'm not going to put my money 707 00:38:52,680 --> 00:38:55,879 Speaker 1: in bonds or stocks. That by itself, without the FED 708 00:38:55,960 --> 00:38:59,920 Speaker 1: doing anything more, would cause a lot of financial tightening 709 00:39:00,040 --> 00:39:02,640 Speaker 1: as all these money and liquidity were sucked out of 710 00:39:02,719 --> 00:39:06,279 Speaker 1: bonds and equities. Well, and you know, a reader pinged 711 00:39:06,360 --> 00:39:08,200 Speaker 1: me earlier in the day and say you know, you 712 00:39:08,280 --> 00:39:10,120 Speaker 1: go to a restaurant these days, you pay through the 713 00:39:10,200 --> 00:39:13,160 Speaker 1: nose if you can even get a waiter. But so 714 00:39:13,200 --> 00:39:17,280 Speaker 1: some of the inflation out there the FED really can't impact. 715 00:39:17,400 --> 00:39:20,799 Speaker 1: I mean, it just seems like the FED is trying 716 00:39:20,800 --> 00:39:22,799 Speaker 1: to fight a battle that really it's it doesn't have 717 00:39:22,800 --> 00:39:25,240 Speaker 1: the tools to fight. I e. Sixty to seventy percent 718 00:39:25,280 --> 00:39:28,680 Speaker 1: of our you know, GDP is a consumer. What can 719 00:39:28,719 --> 00:39:30,680 Speaker 1: the FED really do there? Do you again, do you 720 00:39:30,719 --> 00:39:34,560 Speaker 1: think the Fed is maybe going too far too quickly? 721 00:39:34,880 --> 00:39:39,480 Speaker 1: The Fed, Powell acknowledged themselves that monetary policy as a 722 00:39:39,560 --> 00:39:43,040 Speaker 1: very blunt tool. However, they have to do something. So 723 00:39:43,080 --> 00:39:46,759 Speaker 1: I think the most likely you're right that the monetary 724 00:39:46,800 --> 00:39:50,000 Speaker 1: policy is not really suitable for the type of inflation, 725 00:39:50,200 --> 00:39:53,960 Speaker 1: for example, the transition to green you know, with higher 726 00:39:53,960 --> 00:39:57,680 Speaker 1: car prices. However, the FED will have to do something 727 00:39:57,719 --> 00:40:00,600 Speaker 1: about it because their men date is inflation. So I 728 00:40:00,600 --> 00:40:03,560 Speaker 1: think the likely outcome of that is that it increases 729 00:40:03,640 --> 00:40:08,000 Speaker 1: the chance of this very barish thing, a scenario that 730 00:40:08,080 --> 00:40:12,600 Speaker 1: you said your previous guests, right, you know. Another question 731 00:40:12,719 --> 00:40:16,000 Speaker 1: is that I have is this this two percent inflation 732 00:40:16,080 --> 00:40:19,240 Speaker 1: target that the FED has? Why is it two percent? 733 00:40:19,280 --> 00:40:21,080 Speaker 1: Why is that so special. Why is it not two 734 00:40:21,120 --> 00:40:25,320 Speaker 1: point five or one point what's so great about two percent? Well, 735 00:40:25,360 --> 00:40:28,360 Speaker 1: I think it's just an approximation, but it definitely is 736 00:40:28,360 --> 00:40:31,239 Speaker 1: a two percent right now because you cannot the FETE 737 00:40:31,239 --> 00:40:35,839 Speaker 1: cannot afford to change it. When they were unable to 738 00:40:37,120 --> 00:40:39,960 Speaker 1: get to that target. They can think about whether two 739 00:40:40,000 --> 00:40:42,720 Speaker 1: point five or three it's more appropriate after this whole 740 00:40:42,840 --> 00:40:46,080 Speaker 1: ordeal inflation ordeal is over, but right now, if they 741 00:40:46,080 --> 00:40:49,080 Speaker 1: do anything to change it, it will bring make it 742 00:40:49,120 --> 00:40:52,720 Speaker 1: harder for them to control inflation. What do you say 743 00:40:52,760 --> 00:40:55,239 Speaker 1: to people who say the FED is still behind the 744 00:40:55,280 --> 00:40:59,719 Speaker 1: curve and dealing with inflation? Is that still a valid critique? 745 00:41:00,120 --> 00:41:03,920 Speaker 1: You know, I think it's a FED is totally you know, 746 00:41:04,040 --> 00:41:07,120 Speaker 1: trying to achieve one objective, which is brain down inflation. 747 00:41:07,360 --> 00:41:09,640 Speaker 1: They would have rates rates to six or seven percent 748 00:41:09,680 --> 00:41:12,560 Speaker 1: by now, but they have dual mandates. And it's clear 749 00:41:12,640 --> 00:41:16,120 Speaker 1: that Powell still hold out hopes that he could achieve 750 00:41:16,120 --> 00:41:19,360 Speaker 1: a soft landing, and that is what caused what's causing 751 00:41:19,400 --> 00:41:23,560 Speaker 1: this feet dragging and bringing up rates. So I think, 752 00:41:23,840 --> 00:41:27,760 Speaker 1: you know, I think I think that yeah, they're they're 753 00:41:27,840 --> 00:41:31,200 Speaker 1: running very closely behind the curve. That's my opinion. All right, 754 00:41:31,200 --> 00:41:33,000 Speaker 1: and thank you so much for joining us, as I 755 00:41:32,960 --> 00:41:36,439 Speaker 1: always always appreciate getting your perspective again, folks, Anna Wong, 756 00:41:36,640 --> 00:41:40,600 Speaker 1: like nine twelve months ago she Bloomer Economics team, Man, 757 00:41:40,600 --> 00:41:42,480 Speaker 1: were they ahead of the curve. They were calling for 758 00:41:42,640 --> 00:41:45,600 Speaker 1: higher rates for longer. They first ones I read talk 759 00:41:45,640 --> 00:41:49,040 Speaker 1: about a five percent rate. Here we are there now 760 00:41:49,080 --> 00:41:51,120 Speaker 1: people are talking about six percent. So Anna Wong uder 761 00:41:51,120 --> 00:41:53,920 Speaker 1: team doing great work there at Bloomberg Economics and as 762 00:41:53,920 --> 00:41:56,520 Speaker 1: the chief of the US Economist here. Thanks for listening 763 00:41:56,520 --> 00:42:00,000 Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen 764 00:42:00,120 --> 00:42:04,320 Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer. 765 00:42:04,680 --> 00:42:08,000 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller nineteen 766 00:42:08,080 --> 00:42:10,759 Speaker 1: seventy three. And I'm fall Sweeney. I'm on Twitter at 767 00:42:10,800 --> 00:42:13,640 Speaker 1: pt Sweeney. Before the podcast, you can always catch us 768 00:42:13,680 --> 00:42:15,080 Speaker 1: worldwide at Bloomberg Radio