WEBVTT - Bloomberg Surveillance TV: May 8, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.000 Terminal and the Bloomberg Business App. Let's turn to the 0:00:37.000 --> 0:00:39.440 economic policy fed shared Jay Powell and for Size, and 0:00:39.479 --> 0:00:41.640 the Central Bank is in wait and see mode pending 0:00:41.680 --> 0:00:45.760 trade negotiations. Noria Rabini of NYU Stern is saying, no pain, 0:00:45.800 --> 0:00:49.240 no gain. American democracy will survive the show, and after 0:00:49.320 --> 0:00:52.839 an initial period of pain, the US economy will thrive. 0:00:53.320 --> 0:00:55.400 Noria joins us now for more nor how good to 0:00:55.400 --> 0:00:56.160 see you. 0:00:56.160 --> 0:00:57.240 You're often created. 0:00:57.000 --> 0:00:59.040 As Doom and Gloom, the big Bear, But I've spent 0:00:59.160 --> 0:01:01.680 many a time with you, and we've had conversations where 0:01:01.720 --> 0:01:03.680 you're constructive, and it feels like this is that moment. 0:01:03.720 --> 0:01:05.959 What are the factors that lead to that constructive view 0:01:06.280 --> 0:01:06.840 for you. 0:01:07.600 --> 0:01:11.640 Well, and recently said that tech Trump stariffs, and what 0:01:11.680 --> 0:01:14.640 I mean is that US is really number one in 0:01:14.920 --> 0:01:18.360 many of the technologies of the future AI, machine learning, 0:01:18.440 --> 0:01:25.440 robotic automation, semi fusion, quantum defence, tech, green tech, arc tech, fintech, 0:01:25.480 --> 0:01:27.840 you un nem it, and I expect that actually US 0:01:27.840 --> 0:01:31.360 potential growth because of that could increase from the current 0:01:31.360 --> 0:01:33.880 two percent towards four percent by the end of the decade. 0:01:33.959 --> 0:01:36.919 So that's the two undred business points increase potential growth. 0:01:37.560 --> 0:01:40.080 Even tariffs and there'll be some of the escalation and 0:01:40.120 --> 0:01:43.560 re stixtion migration. Best estimates that they could reduce potential 0:01:43.560 --> 0:01:45.840 growth by fifty business points. You have two hundred on 0:01:45.880 --> 0:01:48.400 the plus fifty on the minus. So is the ratio 0:01:48.400 --> 0:01:51.480 between four to one. So I think that that's why 0:01:51.520 --> 0:01:54.000 that over the medium term, the fact that the US 0:01:54.080 --> 0:01:57.320 is very innovative implies that whatever Trump does doesn't matter. 0:01:57.360 --> 0:02:01.520 So tech trumpstariff, Tech trumps Trap two, and the traders 0:02:01.560 --> 0:02:04.520 of course trump Trump and they forced him to back 0:02:04.600 --> 0:02:07.040 down to market discipline. The most powerful people in the 0:02:07.080 --> 0:02:10.080 world that the Bombagilantes. So I think it's Box team. 0:02:10.120 --> 0:02:13.440 There'll be the escalation, We'll still have an inflation rate. 0:02:13.919 --> 0:02:18.120 I expect that the trade imply that for most of 0:02:18.160 --> 0:02:20.440 the world you have tartists between ten to fifteen percent. 0:02:20.639 --> 0:02:23.800 On China sixty. But even with ten and sixty, that 0:02:23.960 --> 0:02:26.920 is what actually Trump was announcing in the campaign trail. 0:02:27.360 --> 0:02:30.120 You get inflation core PC towards four percent by the 0:02:30.200 --> 0:02:32.840 end of the year. Let's say to a disposable income, 0:02:33.280 --> 0:02:35.880 you have a weekending of consumer and business sentiment, you 0:02:35.919 --> 0:02:39.280 get a shortened shallow recession by Q four. It's going 0:02:39.320 --> 0:02:41.080 to be shortened shallow because then the FED is going 0:02:41.120 --> 0:02:44.359 to cut rights since inflation expectations are the young chort 0:02:44.440 --> 0:02:47.880 but well, we'll have a shortened shallow recession. But that's 0:02:47.919 --> 0:02:48.960 poorly highly likely. 0:02:49.040 --> 0:02:50.040 Can I jump on that point? 0:02:50.280 --> 0:02:52.240 What gives you the confidence the FED can respond to that, 0:02:52.520 --> 0:02:54.160 because there are some people who are worried about the 0:02:54.160 --> 0:02:56.400 inflation that might pick up and the fact that might 0:02:56.440 --> 0:02:58.600 constrain the FED stablished bias. 0:02:59.120 --> 0:03:01.400 No, you're right, That's why are people already saying they 0:03:01.400 --> 0:03:04.000 should have cut in May or in June or July. 0:03:04.120 --> 0:03:06.639 I don't think it's going to happen before September, because, 0:03:06.680 --> 0:03:10.280 as Powell said, yesterday, inflation will be higher, unemployment is 0:03:10.280 --> 0:03:12.480 going to be higher. Last time around, they made a mistake. 0:03:12.520 --> 0:03:15.120 They thought that increase in inflation was temporary and was not, 0:03:15.520 --> 0:03:17.720 and then they had to catch up on it and 0:03:17.800 --> 0:03:19.760 so on. So this time around, you can make the 0:03:19.880 --> 0:03:22.880 argument that since inflation expectations are anchored, since the Fed 0:03:23.000 --> 0:03:26.480 is not winding out, and for being forced by the 0:03:26.520 --> 0:03:29.519 White House to cut rates right now, when inflation arises, 0:03:29.560 --> 0:03:33.080 going to be a level effect rather than the. 0:03:32.120 --> 0:03:32.919 Rate of inflation. 0:03:33.000 --> 0:03:36.040 If inflation expectation remains anchored, if you don't have second 0:03:36.120 --> 0:03:39.280 round effects, then once unemployment goes higher that week as 0:03:39.320 --> 0:03:41.680 the labor market, then effects are going to feel comfortable 0:03:41.720 --> 0:03:44.000 to cut rates. But right now they have to stay 0:03:44.000 --> 0:03:46.720 on hold exactly because they need to cut once then 0:03:46.720 --> 0:03:48.520 the economy we can significantly. 0:03:48.680 --> 0:03:52.480 People have been talking about styflationary like scenarios. The growth 0:03:52.520 --> 0:03:55.440 is slowing, and as you acknowledge that would probably happen 0:03:55.520 --> 0:03:57.680 to some degree in the near term, and that inflation 0:03:57.800 --> 0:03:59.760 was going to main higher, some of the trade or 0:04:00.120 --> 0:04:04.280 means get readjusted. Why is that not a significant concern 0:04:04.360 --> 0:04:06.640 for you at a time? Or even the Fed seems 0:04:06.640 --> 0:04:08.560 to not have clarity on whether that's going to be 0:04:08.600 --> 0:04:09.440 the predominant theme. 0:04:10.880 --> 0:04:14.560 It's circulationary growth is going to be lower, neuro sexeal 0:04:14.600 --> 0:04:17.120 inflation is going to be higher. I think the difference 0:04:17.160 --> 0:04:19.520 between now and said in nineteen seventies, when you're the 0:04:19.600 --> 0:04:22.000 old shock of seventy three or seventy nine, was the 0:04:22.040 --> 0:04:24.680 inflation was already high in rising and the FED was 0:04:24.720 --> 0:04:27.039 behind the curve, and then you had the uncording of 0:04:27.080 --> 0:04:29.880 inflation expectation. This time around, I think they have shown 0:04:30.200 --> 0:04:32.320 some credibility in uncoding. 0:04:31.960 --> 0:04:33.280 Inflation inflation expectation. 0:04:33.920 --> 0:04:36.440 You're right, however, that you never know second round effects 0:04:36.440 --> 0:04:38.520 may occur. You have not only the impact of the 0:04:38.640 --> 0:04:41.920 tariff now the dollars weakening. That's another impact on import prices. 0:04:42.279 --> 0:04:44.600 That's why the FED has to wait until the hard 0:04:44.680 --> 0:04:46.839 data show that there is the beginning of or a session. 0:04:46.880 --> 0:04:49.440 If they start cutting great earlier, then you have the 0:04:49.520 --> 0:04:52.159 uncording and inflation expectation, and that's going to be a problem. 0:04:52.440 --> 0:04:55.160 How much of the Fed's hands tied because the long 0:04:55.279 --> 0:04:57.560 end of the yield curve is not necessarily anchored to 0:04:57.600 --> 0:05:00.360 FED policy in the same way, especially given some of 0:05:00.440 --> 0:05:02.760 the deficit concerns. And I know that that congress member 0:05:02.800 --> 0:05:05.280 wanted to talk about what was going to happen with 0:05:05.440 --> 0:05:08.080 the total pool of debt, not the debt GP. But 0:05:08.240 --> 0:05:10.680 I'm actually curious about how they issue that debt and 0:05:10.800 --> 0:05:13.039 just what that does to some of the yield premium 0:05:13.120 --> 0:05:13.719 going forward. 0:05:14.360 --> 0:05:15.000 Well, the long it. 0:05:15.080 --> 0:05:17.640 Depends on the FED in terms of inflation expectation and 0:05:17.720 --> 0:05:20.160 the fences. As you point out this premium or term 0:05:20.240 --> 0:05:24.320 premium on fiscal policy. I think the administration is sensitive 0:05:24.400 --> 0:05:27.880 to the idea that if you'll have a very large deficit, 0:05:27.960 --> 0:05:31.160 eventually bondiles can go higher, they can further crowd out 0:05:31.200 --> 0:05:34.719 economic recovery. And we'll see the results of these fiscal plans. 0:05:34.839 --> 0:05:37.360 Some of the stuff they're doing and increase the deficit. 0:05:37.800 --> 0:05:38.760 Some of it like. 0:05:39.360 --> 0:05:43.839 Tariffs or reduction in highris subsidies, medicaid, those cuts will 0:05:43.880 --> 0:05:46.560 reduce the deficit. I think they'll be quite sensitive not 0:05:46.640 --> 0:05:49.240 to have a headline number for deficit next year higher 0:05:49.279 --> 0:05:51.480 this year, because then bodiles will go much higher and 0:05:51.560 --> 0:05:54.160 that's going to hurt further the economy. But because you're 0:05:54.160 --> 0:05:56.480 going to have a physical drug I think most likely 0:05:56.640 --> 0:05:59.240 next year than the FED as zoom for using a 0:05:59.279 --> 0:06:01.640 little bit more now they want to start all so 0:06:01.720 --> 0:06:05.160 manipulating the long end of the bonding curve. You know, 0:06:05.200 --> 0:06:08.719 I wrote this paper with Steve Miran criticizing what Yaren 0:06:08.880 --> 0:06:11.480 was doing by reducing the supply of long debt and 0:06:11.560 --> 0:06:12.720 issue more of the short one. 0:06:13.040 --> 0:06:14.599 But this time I run is not just the ratio 0:06:14.640 --> 0:06:15.200 between the two. 0:06:15.360 --> 0:06:18.080 They're talking about buybacks literally buying more of the long 0:06:18.200 --> 0:06:19.640 term to get the outBut. 0:06:19.440 --> 0:06:20.800 Marketution more of the short term. 0:06:21.120 --> 0:06:23.920 That is doubling down on these itthei policy just doing 0:06:24.000 --> 0:06:26.080 more of it actually rather less of it. 0:06:26.200 --> 0:06:27.960 No, there's only one person I know with more rare 0:06:28.000 --> 0:06:30.400 moles than you, and it's our friend muhammadal Aian. You 0:06:30.520 --> 0:06:35.160 travel the world a ton, have attitudes towards US assets changed? 0:06:35.520 --> 0:06:38.320 Have the conversation shifted in the past few months. 0:06:38.680 --> 0:06:40.840 They've shifted, But I would say there's going to be 0:06:40.920 --> 0:06:44.320 a difference between fixing come investors. Many of them can 0:06:44.400 --> 0:06:48.800 be solving either central banks or SOMN wealth funds. These 0:06:48.839 --> 0:06:51.479 folks are worried about the deficit, are worried about us 0:06:51.560 --> 0:06:54.040 having damage the creability of the United States. 0:06:54.120 --> 0:06:56.920 That's why you had higher bond deals and weakening dollars. 0:06:57.320 --> 0:06:59.760 So that trend may be continuing because they're going to 0:06:59.760 --> 0:07:01.279 have to be doubt and the rivals of the US, 0:07:01.400 --> 0:07:03.679 like China, they have to get out of dollar assets 0:07:03.960 --> 0:07:05.640 probably got to go into the gold in terms of 0:07:05.720 --> 0:07:08.320 that sort. But my view is that since there will 0:07:08.320 --> 0:07:12.200 be an investment boom driven by this increasing productivity, capex 0:07:12.320 --> 0:07:13.760 in the units is going to be much higher. The 0:07:13.800 --> 0:07:17.200 current account divers is going to become larger even even 0:07:17.280 --> 0:07:20.000 with the tariffs, just because investment is going to be higher. 0:07:20.000 --> 0:07:22.400 As a shut GDP savings are going to remain low 0:07:22.440 --> 0:07:25.240 because private and public say below. So our current account 0:07:25.240 --> 0:07:27.360 dets are going to be wider, but the influence financing 0:07:27.480 --> 0:07:30.080 is going to be both FDI and portfolio investment into 0:07:30.120 --> 0:07:33.600 equity market. So you have actually more even overweight in 0:07:33.720 --> 0:07:37.560 US equity assets over time because of the increasing cycle large. 0:07:37.320 --> 0:07:38.800 Which is say on that this is really important. 0:07:38.880 --> 0:07:40.880 So we've been depending there for a number of months 0:07:40.880 --> 0:07:42.840 apout whether this was a cycle level shock or a 0:07:42.920 --> 0:07:45.720 system level shock. The policy announcement at the last month, 0:07:45.760 --> 0:07:48.400 and we wanted whether that structure long into the US dollar, 0:07:48.400 --> 0:07:51.360 which is a system level story, would be disrupted. Are 0:07:51.400 --> 0:07:53.240 you saying that will stay the same that you just 0:07:53.320 --> 0:07:55.520 see this flood of money keep coming in to the 0:07:55.600 --> 0:07:57.040 United States into US assets. 0:07:57.560 --> 0:07:58.920 As I said in fixing. 0:07:58.640 --> 0:08:00.520 Income, maybe people are going to try to get out, 0:08:00.720 --> 0:08:03.360 especially if the death is are larger, unless bond years 0:08:03.400 --> 0:08:05.680 are much higher. But I see an investment moving in 0:08:05.680 --> 0:08:08.760 the United States, an increasing productivity, secular. 0:08:08.480 --> 0:08:11.440 Boom and therefore being overweight in usycut. 0:08:11.040 --> 0:08:13.360 Is going to become the story over the next two years, 0:08:13.480 --> 0:08:16.720 and that's going to compensate any exit out of fixing 0:08:16.760 --> 0:08:18.480 come assets. So the dollar is going to weakend, that's 0:08:18.480 --> 0:08:21.160 going to weekend gradually, and there's a currency role of 0:08:21.200 --> 0:08:23.800 the dollar is going to be dented, but not damage 0:08:23.800 --> 0:08:24.800 to any signing extent. 0:08:24.920 --> 0:08:26.559 So we can live in a world in which actually 0:08:26.560 --> 0:08:26.880 the US. 0:08:26.840 --> 0:08:29.000 Current account deft is going to be much larger, but 0:08:29.160 --> 0:08:32.640 driven more by booming investment rather than week into sublic savings. 0:08:32.920 --> 0:08:35.000 The dollar remains strong, and we're going to live with 0:08:35.080 --> 0:08:36.680 that because there'll be strong economic growth. 0:08:37.000 --> 0:08:38.520 You mentioned some of the divers I find that you 0:08:38.520 --> 0:08:40.839 could see a wife from the dollar to things like gold, 0:08:41.160 --> 0:08:43.800 any of the thoughts somewhere that money might go beyond 0:08:43.960 --> 0:08:44.360 just gold. 0:08:45.760 --> 0:08:48.160 Well, you know, if your arrival at the US, say China, 0:08:48.679 --> 0:08:51.240 if you dump your treasury first, you have a market 0:08:51.240 --> 0:08:54.000 to market loss on the value of those things. If 0:08:54.040 --> 0:08:57.280 you sell treasury in by RMB, you appreciate the RMB. 0:08:57.120 --> 0:08:58.000 Something you don't want to do. 0:08:58.600 --> 0:09:01.800 If you sell dollar instead of buying r mvu by 0:09:02.040 --> 0:09:04.319 yen and euro, you appreciate the yen and you and 0:09:04.320 --> 0:09:06.599 you upset the Japanese the Europeans. You want to have 0:09:06.679 --> 0:09:09.040 good relations, So what do you do. The best thing 0:09:09.080 --> 0:09:11.480 you can do is to sell treasuries. 0:09:11.000 --> 0:09:13.560 And buy gold. And that's why gold has been going. 0:09:13.480 --> 0:09:15.880 Higher, because the goal is the only reserve asset that 0:09:16.000 --> 0:09:18.760 cannot be seized. Because we've seen the actual Ukraine that 0:09:18.880 --> 0:09:21.839 even yeah and euro Swiss frank palents can be seized. 0:09:22.080 --> 0:09:26.360 So I would see gold being the biggest winner now. 0:09:26.440 --> 0:09:28.040 Over time, of course, the Chinese want to have a 0:09:28.080 --> 0:09:30.920 new rail of payment systems, that is bypassing the US 0:09:31.000 --> 0:09:34.240 dollar and swift, and they are now technology that gradually 0:09:34.320 --> 0:09:36.319 over time they're going to allow them to do so. 0:09:36.840 --> 0:09:38.600 But the thing is going to be a very gradual. 0:09:38.320 --> 0:09:42.080 Process, so the dollars going to remain meaningful global reserve currency. 0:09:42.280 --> 0:09:44.760 Are super thoughtful. As always, it's going to say thanks 0:09:44.800 --> 0:09:58.800 to dropping buy no repny that of n Yu Starnel, 0:09:58.840 --> 0:10:01.959 emphasizing a waiting see approach as a growing chorus on 0:10:02.040 --> 0:10:06.560 Wall Street lifts recession onds citing tariff related stankflation concerns. 0:10:06.640 --> 0:10:09.200 Johning us now to discuss is the former Kansas City 0:10:09.240 --> 0:10:11.840 Fed President Esther George as the welcome back to the program. 0:10:12.200 --> 0:10:15.640 It is the central bankers dilemma, the prospect of higher inflation, 0:10:16.080 --> 0:10:19.240 higher unemployment, and decelerating economic growth. 0:10:19.360 --> 0:10:20.079 It's a challenge. 0:10:20.200 --> 0:10:22.560 What did you make of the chairman's ability to rise 0:10:22.600 --> 0:10:24.760 to that challenge in yesterday's news conference? 0:10:26.240 --> 0:10:28.000 Well, I thought, based on what I heard in the 0:10:28.080 --> 0:10:32.280 market reaction, he stuck to the story that he's been telling, 0:10:32.480 --> 0:10:35.800 which is we're holding these rates until we can get 0:10:35.880 --> 0:10:39.320 more clarity about the policy mix. And I also heard 0:10:39.480 --> 0:10:43.560 in his comments something interesting. He certainly highlighted tariffs that's 0:10:43.640 --> 0:10:47.160 been the topic of the day, but he also mentioned 0:10:47.360 --> 0:10:51.079 we have to think about the impact of immigration policy changes, 0:10:51.320 --> 0:10:55.760 fiscal policy changes, and this emerging prospect of how regulation 0:10:56.200 --> 0:10:58.760 might change around this. So that is a pretty big 0:10:58.920 --> 0:11:03.959 dynamic to try to play out when you're judging the 0:11:04.080 --> 0:11:06.040 appropriate stance of monetary policy. 0:11:06.360 --> 0:11:08.280 Es, do do you have a better sense of what 0:11:08.440 --> 0:11:11.760 the reaction function is when it comes to looking at 0:11:11.800 --> 0:11:14.640 different indicators, whether it's soft data or hard data, and 0:11:14.800 --> 0:11:19.320 understanding how the FED would prioritize certain readings, how they 0:11:19.320 --> 0:11:23.720 would respond to, say, an increase in unemployment if also 0:11:23.880 --> 0:11:26.080 it came in tandem with increasing inflation. 0:11:28.040 --> 0:11:31.520 So I think, Lisa, the soft data is really important 0:11:31.600 --> 0:11:35.040 right now, and you do see the FED looking at that. 0:11:35.200 --> 0:11:38.320 You see that come through in the Reserve banks. 0:11:38.200 --> 0:11:39.319 Beayes, book data. 0:11:39.880 --> 0:11:43.480 You know they are out there really just combing the 0:11:43.600 --> 0:11:46.880 landscape to hear from different parts of the economy what 0:11:47.040 --> 0:11:49.080 they expect. And I think what they're hearing right now 0:11:49.320 --> 0:11:54.079 is we're not sure we are pausing, We're waiting. The 0:11:54.160 --> 0:11:58.319 FED knows that even pausing has a negative impact on 0:11:58.480 --> 0:12:01.800 the economy, and I think for the US, we've come 0:12:01.920 --> 0:12:05.199 into this at a time of strength in that economy, 0:12:05.800 --> 0:12:09.560 and judging how much will come off of growth, how 0:12:09.679 --> 0:12:14.120 much will hit the employment numbers, and certainly watching inflation 0:12:14.320 --> 0:12:18.079 expectations at a time like this are a dynamic that 0:12:18.440 --> 0:12:20.719 just takes time, I think to figure out. 0:12:21.040 --> 0:12:24.840 Yesterday on Bloomberg TV, Abob Michael of JPMorgan Asset Management 0:12:24.960 --> 0:12:28.440 noted that the word transitory was used as recently as 0:12:28.520 --> 0:12:32.360 the March nineteenth meeting, the last time the Federal Reserve met. 0:12:32.920 --> 0:12:35.560 Do you think that it was a mistake for them 0:12:35.600 --> 0:12:38.640 to say that it was notably absent from yesterday in 0:12:38.800 --> 0:12:42.280 reference to any kind of inflationary impact from the tariffs 0:12:42.559 --> 0:12:43.160 that have been put on. 0:12:44.840 --> 0:12:47.840 Well, I think it probably was intentional to drop that word. 0:12:47.960 --> 0:12:52.520 It has taken on some very negative connotations, maybe rightly so. 0:12:52.800 --> 0:12:55.959 But the truth is, we know that these kinds of 0:12:56.120 --> 0:12:59.400 shocks can be a one time price level shock. I 0:12:59.480 --> 0:13:01.920 think what we can't know right now is the fact 0:13:02.000 --> 0:13:05.880 that we already have elevated inflation relative to the Fed's target. 0:13:06.520 --> 0:13:10.640 We know that certain measures of inflation expectations are moving 0:13:11.360 --> 0:13:15.760 in ways that flash caution, and so I think you 0:13:15.920 --> 0:13:20.520 can't know how this dynamic unfolds with inflation without a 0:13:20.600 --> 0:13:25.120 little more sense of when these policies get a better 0:13:25.200 --> 0:13:28.160 able to be quantified and put into the models that 0:13:28.240 --> 0:13:31.439 the Fed's looking at to know. Not if I think 0:13:31.600 --> 0:13:33.599 this is a FED that is clear we are on 0:13:34.080 --> 0:13:37.559 a cutting path, we've taken a pause. It's really a 0:13:37.679 --> 0:13:38.680 question of when. 0:13:39.280 --> 0:13:41.199 How do you know as to the difference between the two, 0:13:41.640 --> 0:13:44.040 Because clearly the committee struggled with what was trying to 0:13:44.120 --> 0:13:46.520 trie and what wasn't coming out of the pandemic. So 0:13:46.600 --> 0:13:48.520 how would they know the difference this time around, the 0:13:48.559 --> 0:13:52.200 difference between inflation being short lived and more persistent. 0:13:52.320 --> 0:13:54.280 Do you just have to wait, wait a long long time. 0:13:54.679 --> 0:13:55.680 How do you know the difference? 0:13:56.520 --> 0:13:59.920 Well, you absolutely cannot know the difference, and that is 0:14:00.160 --> 0:14:04.280 really the crux of uncertainty for a policy maker is 0:14:04.520 --> 0:14:09.120 to read into this whether you will continue a disinflationary 0:14:09.240 --> 0:14:13.959 path that underlying sense of inflation where we were and 0:14:14.160 --> 0:14:18.079 really watching inflation expectations. So for me, I think keeping 0:14:18.120 --> 0:14:21.360 an eye on those inflation expectations will tell the committee 0:14:21.480 --> 0:14:26.640 a lot about what they're dealing with relative to a 0:14:26.720 --> 0:14:30.360 one time versus a more permanent impact to inflation. 0:14:30.520 --> 0:14:31.760 And that's just a double down on that. 0:14:31.840 --> 0:14:34.480 Do you put more weight on survey based expectations or 0:14:34.560 --> 0:14:35.920 market based expectations? 0:14:37.480 --> 0:14:39.240 Well, I think you have to look at both, and 0:14:39.360 --> 0:14:42.520 normally you might say that some of these household survey 0:14:42.640 --> 0:14:46.400 measures and other things are not so definitive around where 0:14:46.400 --> 0:14:49.840 inflation is going. I think what's gotten my attention this 0:14:50.000 --> 0:14:53.440 time is how dramatically they are moving and so that 0:14:53.720 --> 0:14:57.360 in and of itself tells you that the volatility you're 0:14:57.400 --> 0:15:01.560 dealing with has to give you some pause. And I 0:15:01.640 --> 0:15:04.400 think it's right for the FID to pay attention here 0:15:04.600 --> 0:15:06.320 to how these dynamics are unfolding. 0:15:06.400 --> 0:15:08.560 And that's certainly what they're doing. As to appreciate your take. 0:15:08.640 --> 0:15:11.640 As always the former Kansas City FED President Esther George 0:15:11.680 --> 0:15:13.520 on the challenge this feder Reserve faces. 0:15:23.880 --> 0:15:26.240 We are all in wait and see mode, including the 0:15:26.280 --> 0:15:27.520 FED chair J. Powell. 0:15:27.720 --> 0:15:30.200 Claudia Sam of New Century Advice is right in the following. 0:15:30.280 --> 0:15:32.400 I agree with the first decision to hold rates and 0:15:32.480 --> 0:15:35.680 flank the risk of higher unemployment and inflation. However, it 0:15:35.800 --> 0:15:38.160 was a missed opportunity to lay out how it plans 0:15:38.200 --> 0:15:42.480 to decide whether the tariff induced inflation is temporary. Claudia 0:15:42.520 --> 0:15:44.280 joint is now for more. Claudia, welcome to the program. 0:15:44.400 --> 0:15:46.000 Let's build on some of that. What would you have 0:15:46.120 --> 0:15:48.800 liked to hear, specifically from the chairman in that news conference. 0:15:51.160 --> 0:15:53.920 I like to hear their framework, what kind of data 0:15:53.960 --> 0:15:56.400 they're looking at, how they're going to move back into 0:15:56.720 --> 0:16:00.920 some forecasting, right, what is it they're going to use 0:16:00.960 --> 0:16:02.760 to But it's It's clear that the FED, or at 0:16:02.840 --> 0:16:05.920 least Powell, has not They're not embracing this. It's the 0:16:06.000 --> 0:16:09.280 textbook case inflation when it's because of tariffs. It's temperate. 0:16:09.320 --> 0:16:11.480 Now we do do your Governor Waller making that case. 0:16:11.520 --> 0:16:13.960 We got to be brave and it's temper. We need 0:16:14.080 --> 0:16:16.640 more than that, right, Like what are they looking at 0:16:16.800 --> 0:16:19.040 in the data? And this is where I think, I 0:16:19.240 --> 0:16:23.000 you know, looking more broadly, not just the CPI, the 0:16:23.320 --> 0:16:26.359 labor report, but how are they using all these services 0:16:26.480 --> 0:16:29.640 of business or surveys of businesses, the surveys of consumers, 0:16:29.680 --> 0:16:33.040 that soft data that seems somewhat maligned, Like what are 0:16:33.080 --> 0:16:35.000 they going to use to make that decision? And I 0:16:35.200 --> 0:16:38.040 just I mean, I know they must be doing that work. 0:16:38.080 --> 0:16:40.880 It's just I think sharing more of that before we 0:16:41.040 --> 0:16:43.080 actually get to the position where the dual mand data 0:16:43.120 --> 0:16:45.560 is in conflict would really be helpful as a guide. 0:16:46.040 --> 0:16:48.080 Claudia, do you agree with FED Shair J. 0:16:48.280 --> 0:16:51.480 Powell that there isn't that big of a cost to waiting. 0:16:53.920 --> 0:16:56.400 I mean, the FEDCE tools work with a lag, so 0:16:56.640 --> 0:17:00.680 like there are costs to waiting now I agree that 0:17:00.800 --> 0:17:03.920 at this moment too, it's too fluid, right, and this 0:17:04.119 --> 0:17:07.520 is a historic shock that is facing the economy and 0:17:07.680 --> 0:17:10.359 businesses are just starting to work through it, and it 0:17:10.400 --> 0:17:12.200 could go in a lot of different directions. So again 0:17:12.200 --> 0:17:15.080 I understand why this is a moment where you know, 0:17:15.440 --> 0:17:20.439 holding makes sense and yet like there are costs to waiting. 0:17:21.240 --> 0:17:24.040 And I think one of the issues I really took 0:17:24.520 --> 0:17:27.240 in the press commerce was how you know reinforcing Well, 0:17:27.280 --> 0:17:30.760 but the data are fine. You know, the inflation's fine, 0:17:30.800 --> 0:17:34.919 the unemployment's fine. Like the data are not fine. Right 0:17:35.040 --> 0:17:37.679 if we look at say into the first quarter GDP, 0:17:38.000 --> 0:17:41.440 that surge and imports, that is telling us this is 0:17:41.560 --> 0:17:44.720 a really big shock that's coming at the economy. This 0:17:44.880 --> 0:17:49.600 is out of expectations. Businesses are pulling in, rushing imports, 0:17:49.640 --> 0:17:52.320 probably building inventories. That all comes at a cost. And 0:17:52.480 --> 0:17:54.639 remember what we thought in the first quarter was going 0:17:54.680 --> 0:17:57.600 to be the tarif increase, It's actually worse now. So 0:17:58.080 --> 0:18:00.920 like it's already here, people are changing behavior. No it's 0:18:00.960 --> 0:18:03.239 not in CPI, No, it's not in the unemployment rate yet, 0:18:03.680 --> 0:18:07.320 but it's coming. So you know, prepare, You can wait, 0:18:07.440 --> 0:18:09.040 but you really need to be prepared. 0:18:09.760 --> 0:18:11.760 There was another aspect of this press conference that I 0:18:11.800 --> 0:18:14.600 found particularly interesting, and it was when fedcher J. Powell 0:18:14.680 --> 0:18:17.800 said that the twenty twenty four rate cuts were not preemptive. 0:18:18.200 --> 0:18:20.400 If anything, it was a little late, And of course 0:18:20.480 --> 0:18:24.120 this is referring to the unemployment rate that had increased 0:18:24.520 --> 0:18:27.160 by a half a percentage point, as the som rule 0:18:27.240 --> 0:18:31.320 dictates your rule, and they did respond and then some. 0:18:31.400 --> 0:18:33.119 Of that data was revised upward. 0:18:33.240 --> 0:18:36.680 Actually, what did you make of that, that comment that, 0:18:36.760 --> 0:18:38.800 if anything, we were a bit late. 0:18:40.800 --> 0:18:43.560 I don't think they anticipated going straight up with fifty 0:18:43.640 --> 0:18:46.520 basis points. I think the fifty basis points was a 0:18:46.600 --> 0:18:49.480 ketchup that they should have started one meeting earlier. I 0:18:49.560 --> 0:18:52.480 think that's the late and it's because they weren't. They 0:18:52.520 --> 0:18:55.480 weren't reacting to the bottom falling out. It was a 0:18:55.600 --> 0:18:57.920 we don't want to see further weakening. So I think 0:18:58.040 --> 0:19:00.520 the FED probably would have preferred to have had that in, 0:19:00.720 --> 0:19:03.159 you know, more spread out, in like twenty five basis 0:19:03.160 --> 0:19:06.720 point increments. But I think that's where it came from. 0:19:06.760 --> 0:19:09.879 But that's such a fine point on timing, so I 0:19:09.960 --> 0:19:12.240 can understand whether that's a little seems a little modeled. 0:19:12.560 --> 0:19:14.439 I think it's important to go back over it, though 0:19:14.520 --> 0:19:16.640 Lisa I'm place you brought it up. We've had somebody 0:19:16.680 --> 0:19:18.399 guests say this Fed it's willing to be late, and 0:19:18.440 --> 0:19:20.760 we're all struggling to defind what latest to the FED reserve. 0:19:21.000 --> 0:19:23.000 If last year was late, I think the market would 0:19:23.000 --> 0:19:23.200 take that. 0:19:23.520 --> 0:19:23.960 Is that late? 0:19:24.359 --> 0:19:26.680 One hundred basis points in the summer, little drift, tire 0:19:26.680 --> 0:19:27.359 and unemployment. 0:19:27.480 --> 0:19:30.000 Yeah, if that's late, that is the most dubvish message 0:19:30.000 --> 0:19:32.880 you possibly send, because that means that being late means 0:19:33.040 --> 0:19:34.760 being on time for a lot of other people. 0:19:35.080 --> 0:19:36.080 That seems to be my take. 0:19:36.240 --> 0:19:39.160 Claudia, you're one of the best, always clinical. Appreciate your time. Claudia, 0:19:39.240 --> 0:19:52.000