1
00:00:09,880 --> 00:00:13,800
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee.

2
00:00:13,960 --> 00:00:17,560
Speaker 1: We bring you insight from the best in economics, finance, investment,

3
00:00:18,000 --> 00:00:23,520
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

4
00:00:23,600 --> 00:00:30,280
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg I'm

5
00:00:30,360 --> 00:00:32,320
Speaker 1: very pleased to say that right now we can cross

6
00:00:32,560 --> 00:00:35,360
Speaker 1: of Bloomberg's Michael McKay to catch up with the Dallas

7
00:00:35,360 --> 00:00:39,000
Speaker 1: Fed President. Well, thank you very much, and we are

8
00:00:39,120 --> 00:00:41,159
Speaker 1: talking with Robert Kaplan. He is the president of the

9
00:00:41,200 --> 00:00:44,480
Speaker 1: Dallas Federal Reserve, the eleventh District and the FEDS set

10
00:00:44,520 --> 00:00:46,440
Speaker 1: up and thank you for getting up early joining us

11
00:00:46,560 --> 00:00:50,120
Speaker 1: this morning on Bloomberg TV and radio worldwide. I gotta

12
00:00:50,200 --> 00:00:53,320
Speaker 1: start with j. Powell. Wall Street took his comments yesterday

13
00:00:53,360 --> 00:00:55,680
Speaker 1: as opening the door to a rake cut. Do you

14
00:00:55,720 --> 00:00:59,760
Speaker 1: think that that door is open? Uh? I think it's

15
00:01:00,040 --> 00:01:02,760
Speaker 1: need to make a judgment on that. We're going to

16
00:01:02,840 --> 00:01:06,839
Speaker 1: be very vigilant about understanding these heightened trade tensions, see

17
00:01:06,840 --> 00:01:09,679
Speaker 1: if they feed through to the economy. More most importantly,

18
00:01:09,720 --> 00:01:13,480
Speaker 1: see if they persist. Uh and uh. And so I

19
00:01:13,480 --> 00:01:16,000
Speaker 1: think it's too soon, though to make a judgment as

20
00:01:16,040 --> 00:01:17,880
Speaker 1: to whether we might or might not take an action.

21
00:01:17,920 --> 00:01:21,000
Speaker 1: I'd rather be patient here and let events unfold a

22
00:01:21,000 --> 00:01:24,120
Speaker 1: little bit more well. Investors have priced in three rate cuts,

23
00:01:24,160 --> 00:01:27,360
Speaker 1: and the Wall Street economists over the weekend basically joined

24
00:01:27,400 --> 00:01:29,680
Speaker 1: the consensus that you're going to cut rates. You've been

25
00:01:29,720 --> 00:01:33,039
Speaker 1: in the watching Wade camp Um. What would tip the

26
00:01:33,040 --> 00:01:35,440
Speaker 1: balance for you? When? When would you think that you

27
00:01:35,520 --> 00:01:37,920
Speaker 1: need to make a decision. I would need to see

28
00:01:37,959 --> 00:01:43,000
Speaker 1: some evidence that there's a deceleration or further deceleration of economy.

29
00:01:43,040 --> 00:01:46,720
Speaker 1: We've expected that growth would slow from eighteen and nineteen,

30
00:01:46,760 --> 00:01:49,600
Speaker 1: but we're still growing above trend. We're still seeing a

31
00:01:49,680 --> 00:01:52,560
Speaker 1: tightening in the labor market, and our Dallas trim mean,

32
00:01:52,720 --> 00:01:55,600
Speaker 1: which is our measure of core inflation, is now at

33
00:01:55,640 --> 00:01:58,240
Speaker 1: two percent. We think we'll end the year around two percent.

34
00:01:58,520 --> 00:02:01,560
Speaker 1: So I would need to see some evidence that there's

35
00:02:01,640 --> 00:02:05,360
Speaker 1: a worsening in those trends. We may well see it.

36
00:02:05,480 --> 00:02:08,840
Speaker 1: I'm very I'm on I'm on watch as to whether

37
00:02:08,880 --> 00:02:11,880
Speaker 1: we see a further deceleration. But that's what I'm watching for.

38
00:02:12,000 --> 00:02:15,880
Speaker 1: The data are lagged cost benefit. What's worse cutting too

39
00:02:15,919 --> 00:02:19,840
Speaker 1: early or waiting too long? So it depends on where

40
00:02:19,919 --> 00:02:23,240
Speaker 1: you are uh in the in the in the cycle

41
00:02:23,480 --> 00:02:27,119
Speaker 1: and UH, and what our stances and my own assessment

42
00:02:27,160 --> 00:02:29,880
Speaker 1: of our stance is, we're in the neighborhood of neutral

43
00:02:30,000 --> 00:02:34,120
Speaker 1: right now. So if if we were to cut, that

44
00:02:34,200 --> 00:02:37,560
Speaker 1: would that would be me making a judgment that we

45
00:02:37,600 --> 00:02:40,960
Speaker 1: need to add stimulus to the economy. That might ultimately

46
00:02:41,080 --> 00:02:44,800
Speaker 1: be a judgment I need to make. But if on

47
00:02:44,840 --> 00:02:47,800
Speaker 1: the other hand, you're you've got a restrictive stance and

48
00:02:47,840 --> 00:02:51,000
Speaker 1: you decided to cut, that's something different. Or if you're

49
00:02:51,040 --> 00:02:54,400
Speaker 1: highly accommodative, it also is a different judgment. But right

50
00:02:54,440 --> 00:02:58,000
Speaker 1: now we're pretty much of a neutral setting. UH. And

51
00:02:58,040 --> 00:03:01,720
Speaker 1: the question is should we be stimulus to this economy?

52
00:03:02,160 --> 00:03:04,799
Speaker 1: That's a question I'm asking. I'm open minded about it.

53
00:03:05,360 --> 00:03:07,440
Speaker 1: I think the risk to the downside in the last

54
00:03:07,480 --> 00:03:10,519
Speaker 1: five or six weeks have increased because of these heightened

55
00:03:10,520 --> 00:03:13,239
Speaker 1: trade tensions. So I'm watching it very carefully. But that's

56
00:03:13,280 --> 00:03:15,960
Speaker 1: the judgment I'm gonna I'm gonna and that's the question

57
00:03:15,960 --> 00:03:18,520
Speaker 1: I'm gonna be asking. Well, they say that the Federal

58
00:03:18,560 --> 00:03:21,520
Speaker 1: Reserve decides when the raise rates, but markets decide when

59
00:03:21,520 --> 00:03:23,760
Speaker 1: you're going to cut them. How much pressure do you

60
00:03:23,840 --> 00:03:28,680
Speaker 1: feel from markets right now? I've spent my entire career

61
00:03:28,720 --> 00:03:31,560
Speaker 1: in the markets, as you know, and I've learned that

62
00:03:31,760 --> 00:03:35,920
Speaker 1: markets can change on a dime. For example, there's been

63
00:03:35,960 --> 00:03:39,120
Speaker 1: a dramatic change in the markets since May first, or

64
00:03:39,160 --> 00:03:42,440
Speaker 1: approximately May first, last five or six weeks, and UH,

65
00:03:42,760 --> 00:03:46,640
Speaker 1: as we've seen, you could see a dramatic change UH

66
00:03:46,680 --> 00:03:49,160
Speaker 1: in a different direction over the next five or six weeks.

67
00:03:49,160 --> 00:03:51,960
Speaker 1: For example, what's happening to the treasury curve I think

68
00:03:52,080 --> 00:03:55,200
Speaker 1: is very much in response to heightened trade tensions, and

69
00:03:55,360 --> 00:03:57,680
Speaker 1: some of those decisions or some of those tensions could

70
00:03:57,680 --> 00:04:01,320
Speaker 1: be reversed in the next several weeks. So I've learned

71
00:04:01,360 --> 00:04:04,680
Speaker 1: to watch markets, but but I don't want to overread

72
00:04:04,880 --> 00:04:08,600
Speaker 1: or overreact to what they're saying and UH, because they

73
00:04:08,600 --> 00:04:11,000
Speaker 1: can change on a dime. Well, what are CEOs in

74
00:04:11,040 --> 00:04:13,640
Speaker 1: your district telling you about what they they see in

75
00:04:13,680 --> 00:04:17,279
Speaker 1: the business climate and what are they asking you to do? So?

76
00:04:17,640 --> 00:04:20,960
Speaker 1: UH the biggest issue for businesses today, and I think

77
00:04:21,000 --> 00:04:23,960
Speaker 1: this is the vulnerability for the US economy. It's not

78
00:04:24,120 --> 00:04:27,000
Speaker 1: the consumers in good shape, it's for businesses. There's a

79
00:04:27,080 --> 00:04:33,280
Speaker 1: high level of uncertainty, and businesses are using UH logistics

80
00:04:33,279 --> 00:04:37,159
Speaker 1: and supply chain arrangements heavily to remain competitive. They have

81
00:04:37,480 --> 00:04:42,360
Speaker 1: they don't have uh much pricing power. Technology and globalization

82
00:04:43,080 --> 00:04:46,080
Speaker 1: have limited their pricing parts. They're using some of these

83
00:04:46,200 --> 00:04:50,680
Speaker 1: other techniques uh to manage their costs, and what they're

84
00:04:50,720 --> 00:04:53,400
Speaker 1: seeing is a lot of uncertainty as to how they're

85
00:04:53,400 --> 00:04:55,240
Speaker 1: going to be able to do that. And I think

86
00:04:55,279 --> 00:04:59,200
Speaker 1: these recent uh, these recent threats against Mexico have further

87
00:04:59,760 --> 00:05:02,440
Speaker 1: put more uncertainty into their minds. So what do businesses do?

88
00:05:02,560 --> 00:05:05,279
Speaker 1: What they're telling me they're doing is be more careful,

89
00:05:05,640 --> 00:05:09,159
Speaker 1: hold off on capex, be more cautious. So I think

90
00:05:09,160 --> 00:05:13,039
Speaker 1: this is having some chilling effect. I think the businesses

91
00:05:13,080 --> 00:05:17,000
Speaker 1: will also remark cost the capital is historically low, access

92
00:05:17,040 --> 00:05:20,960
Speaker 1: to capital is historically high, and so uh, they're not

93
00:05:21,040 --> 00:05:23,479
Speaker 1: that sensitive for many of the businesses I talked to,

94
00:05:23,520 --> 00:05:26,080
Speaker 1: other than say the home builders, they're not as sensitive

95
00:05:26,440 --> 00:05:30,640
Speaker 1: to the policy setting as they are all these other

96
00:05:30,720 --> 00:05:34,200
Speaker 1: uncertainties and managing their business. You mentioned the Mexico tariffs.

97
00:05:34,200 --> 00:05:37,360
Speaker 1: No district would be more vulnerable than the eleventh district yours?

98
00:05:38,080 --> 00:05:40,479
Speaker 1: What would be? Have you modeled what the impact would

99
00:05:40,520 --> 00:05:44,440
Speaker 1: be on your district and then on the national economy. Yeah,

100
00:05:44,640 --> 00:05:48,000
Speaker 1: so we're By our estimate, we're probably a third of

101
00:05:48,200 --> 00:05:52,000
Speaker 1: US trade with Mexico. Texas is the largest ex boarding

102
00:05:52,040 --> 00:05:55,960
Speaker 1: state in the United States. Uh, We've taken a number

103
00:05:55,960 --> 00:05:57,400
Speaker 1: of looks at it. I don't even want to throw

104
00:05:57,440 --> 00:06:01,960
Speaker 1: out statistics because I'm still hopeful that that uh there

105
00:06:01,960 --> 00:06:04,200
Speaker 1: actually won't there won't actually be a follow through on

106
00:06:04,240 --> 00:06:07,000
Speaker 1: these tariffs. And the reason I'm hopeful is this is

107
00:06:07,040 --> 00:06:09,719
Speaker 1: a very different trade relationship than the one with China.

108
00:06:10,040 --> 00:06:14,400
Speaker 1: This is substantially an intermediate goods relationships which allow US

109
00:06:14,480 --> 00:06:18,960
Speaker 1: companies to manage their logistics and supply chains, be competitive

110
00:06:19,000 --> 00:06:22,080
Speaker 1: domicile in the United States, and it's allowed North America

111
00:06:22,120 --> 00:06:24,720
Speaker 1: in the US to take share from Asia, so as

112
00:06:24,760 --> 00:06:27,440
Speaker 1: opposed to the trade relationship with China, which is primarily

113
00:06:27,480 --> 00:06:31,479
Speaker 1: a final goods deficit. And so it is so overwhelmingly

114
00:06:31,480 --> 00:06:33,479
Speaker 1: in the interests of the US to have a strong

115
00:06:33,520 --> 00:06:37,320
Speaker 1: trading relationship in North America with with Mexico and to

116
00:06:37,440 --> 00:06:40,920
Speaker 1: some extent Canada, that I don't want to go too

117
00:06:40,960 --> 00:06:43,640
Speaker 1: far expecting that we're going to do something that was

118
00:06:43,640 --> 00:06:47,000
Speaker 1: going to further jeopardize that relationship. It's so clearly in

119
00:06:47,040 --> 00:06:50,920
Speaker 1: our interest to have a strong trading relationship with Mexico. Well,

120
00:06:50,960 --> 00:06:55,320
Speaker 1: we have seen the impact, just as you say, in uncertainty,

121
00:06:56,040 --> 00:06:58,799
Speaker 1: how do you think the Mexicans would react? You speak

122
00:06:58,839 --> 00:07:01,520
Speaker 1: to their positive maker, did you know we're very close

123
00:07:01,600 --> 00:07:04,280
Speaker 1: to senior officials, they're ahead of the central bank. So

124
00:07:04,839 --> 00:07:07,320
Speaker 1: it's not been as reported as much in the press.

125
00:07:07,360 --> 00:07:10,680
Speaker 1: But over the last two years, Mexico has actually is

126
00:07:10,720 --> 00:07:14,240
Speaker 1: the one country in the world that's fighting an inflation problem. Uh.

127
00:07:14,360 --> 00:07:17,720
Speaker 1: They've had a very volatile currency. They've raised their domestic

128
00:07:17,760 --> 00:07:21,880
Speaker 1: interest rate substantially over the last couple of years. I

129
00:07:21,920 --> 00:07:24,920
Speaker 1: think there was hope that there would be some stability

130
00:07:25,040 --> 00:07:28,160
Speaker 1: uh with U S m c A. This just further

131
00:07:28,480 --> 00:07:31,720
Speaker 1: puts volatility in their currency, makes it harder to manage

132
00:07:31,720 --> 00:07:36,560
Speaker 1: their economy, and we see slowing and economic growth in Mexico. Uh,

133
00:07:36,960 --> 00:07:40,320
Speaker 1: they're actually slipping. Uh. They've got a new president. There's

134
00:07:40,400 --> 00:07:43,800
Speaker 1: uncertainty with that. So it's a very challenging time in Mexico.

135
00:07:44,440 --> 00:07:47,720
Speaker 1: You put it all together, what's what the impact has

136
00:07:47,720 --> 00:07:50,440
Speaker 1: there been on your economic outlook for the rest of

137
00:07:50,480 --> 00:07:55,600
Speaker 1: this year. So our forecast for the year still is

138
00:07:55,640 --> 00:07:58,080
Speaker 1: in the neighborhood of two to and a quarter percent

139
00:07:58,160 --> 00:08:00,480
Speaker 1: GDP growth, who could be a little higher, could be

140
00:08:00,480 --> 00:08:03,080
Speaker 1: a little lower. Still think the labor market's kind of tight,

141
00:08:03,120 --> 00:08:04,960
Speaker 1: and we still think we're gonna end the year in

142
00:08:05,000 --> 00:08:08,520
Speaker 1: the neighborhood of two percent on core inflation. Dallas Trim mean,

143
00:08:09,040 --> 00:08:13,080
Speaker 1: I think this These recent events have have raised the

144
00:08:13,200 --> 00:08:16,880
Speaker 1: risk to the downside, and so I'm much more vigilant.

145
00:08:17,040 --> 00:08:21,040
Speaker 1: I'm much more cautious about how events are going to unfold.

146
00:08:21,320 --> 00:08:24,840
Speaker 1: And the question is are these tensions going to persist?

147
00:08:24,880 --> 00:08:27,280
Speaker 1: And if they do, they're likely going to have some

148
00:08:27,360 --> 00:08:29,600
Speaker 1: negative effect on our outlook. But I think it's a

149
00:08:29,600 --> 00:08:31,920
Speaker 1: little too soon for me to make a judgment about that.

150
00:08:32,240 --> 00:08:35,640
Speaker 1: But we're on heightened alert as a result of these tensions.

151
00:08:36,160 --> 00:08:39,400
Speaker 1: You're here in Chicago for a FED Listens conference on

152
00:08:39,480 --> 00:08:42,560
Speaker 1: the monetary policy framework. Is the framework broken? Do you

153
00:08:42,559 --> 00:08:45,480
Speaker 1: need to fix it? No? I think our framework is

154
00:08:45,520 --> 00:08:48,960
Speaker 1: working reasonably well. Uh. There There are a couple of

155
00:08:48,960 --> 00:08:52,360
Speaker 1: big issues though that that we're that we've been talking about.

156
00:08:52,360 --> 00:08:54,480
Speaker 1: One is inflation has been running for the last eight

157
00:08:54,559 --> 00:08:58,520
Speaker 1: or nine years, not completely, but for a lot of

158
00:08:58,559 --> 00:09:01,520
Speaker 1: that time below our two percent target. I think a

159
00:09:01,520 --> 00:09:06,360
Speaker 1: lot of that has to do with technology, technology enabled disruption, globalization,

160
00:09:06,400 --> 00:09:11,600
Speaker 1: I eat structural trends. Should we be revisiting elements of

161
00:09:11,600 --> 00:09:16,559
Speaker 1: our framework, uh so that we can be more confident

162
00:09:17,559 --> 00:09:19,920
Speaker 1: that we're meeting our two percent target and that we're

163
00:09:19,960 --> 00:09:23,400
Speaker 1: anchoring expectations around two percent. And then the other big issue,

164
00:09:23,440 --> 00:09:26,400
Speaker 1: which is somewhat related to that as well as the

165
00:09:26,400 --> 00:09:29,160
Speaker 1: economy is performed over the last number of years, there's

166
00:09:29,160 --> 00:09:32,679
Speaker 1: a number of underrepresentative groups that have not fully participated

167
00:09:32,679 --> 00:09:36,319
Speaker 1: in this recovery. That may be due to educational attainment,

168
00:09:36,480 --> 00:09:39,959
Speaker 1: other impediments uh in their lives that make it harder

169
00:09:40,000 --> 00:09:43,760
Speaker 1: for them to join the workforce and stay in the workforce.

170
00:09:43,880 --> 00:09:48,240
Speaker 1: And I think running a somewhat hotter labor market may

171
00:09:48,280 --> 00:09:51,160
Speaker 1: help those groups get in and stay in and help

172
00:09:51,280 --> 00:09:55,000
Speaker 1: create somewhat more inclusive growth in this country. And I

173
00:09:55,040 --> 00:09:58,240
Speaker 1: think that's another issue that we're actively talking about. Can

174
00:09:58,320 --> 00:10:02,040
Speaker 1: you generate inflation if you cut rates? Say, would that

175
00:10:02,120 --> 00:10:07,520
Speaker 1: raise inflation? So you've heard me say before, the the

176
00:10:08,280 --> 00:10:12,120
Speaker 1: monetary policy has a pretty potent effect on the cyclical

177
00:10:12,200 --> 00:10:17,200
Speaker 1: aspects of inflation, tightness of the labor market, other elements

178
00:10:17,360 --> 00:10:20,319
Speaker 1: of the cyclical elements, the part that might be a

179
00:10:20,360 --> 00:10:24,920
Speaker 1: little less susceptible to monetary policy or the structural drivers

180
00:10:25,000 --> 00:10:29,720
Speaker 1: of again technology, technology enabled disruption, globalization, which are limiting

181
00:10:29,720 --> 00:10:34,720
Speaker 1: the pricing power of business, improving the negotiating leverage of consumers,

182
00:10:35,040 --> 00:10:37,720
Speaker 1: making it harder for businesses to raise prices even if

183
00:10:37,760 --> 00:10:41,200
Speaker 1: they have wage increases. And so I think it's muting

184
00:10:41,240 --> 00:10:44,719
Speaker 1: the inflation effect. And so uh, I think these are

185
00:10:44,920 --> 00:10:47,079
Speaker 1: this dynamic is one we just need to take into

186
00:10:47,080 --> 00:10:50,600
Speaker 1: account as we think about monetary policy. Is there any suggestion,

187
00:10:50,640 --> 00:10:52,520
Speaker 1: and there have been many of them made for policies

188
00:10:52,559 --> 00:10:55,920
Speaker 1: you can adopt that you find intriguing or interesting. Well,

189
00:10:56,679 --> 00:11:01,880
Speaker 1: I'm I'm open minded on all these proposals, nominal GDP targeting,

190
00:11:02,240 --> 00:11:05,640
Speaker 1: elements of price level targeting, inflation averaging. I think the

191
00:11:05,720 --> 00:11:09,400
Speaker 1: key for me is do we want to come out

192
00:11:09,400 --> 00:11:12,000
Speaker 1: of this framework review saying there are two or three

193
00:11:12,080 --> 00:11:15,400
Speaker 1: new factors we want to take into account, or we

194
00:11:15,480 --> 00:11:20,120
Speaker 1: want to update our framework, for example, to take into

195
00:11:20,120 --> 00:11:24,000
Speaker 1: account average inflation over a period of time. It's one

196
00:11:24,040 --> 00:11:26,880
Speaker 1: thing to take those factors into account. It's another thing

197
00:11:26,920 --> 00:11:30,680
Speaker 1: to make a commitment or create a rule that would

198
00:11:30,679 --> 00:11:36,520
Speaker 1: bind future actions. I'm reluctant, uh to uh to bind

199
00:11:36,600 --> 00:11:41,560
Speaker 1: ourselves to future scenarios that we you know, we can't predict,

200
00:11:41,760 --> 00:11:45,560
Speaker 1: but I am in favor of alternating, probably updating our

201
00:11:45,600 --> 00:11:49,120
Speaker 1: framework to take a few additional factors into account, which

202
00:11:49,160 --> 00:11:52,000
Speaker 1: I think may serve us well in meeting our dual mandate.

203
00:11:52,040 --> 00:11:54,920
Speaker 1: Are you're worried at all that the FENS raised expectations

204
00:11:54,960 --> 00:11:56,680
Speaker 1: for what's going to come out of this process and

205
00:11:56,720 --> 00:11:58,760
Speaker 1: you may disappoint the market. I think we have to

206
00:11:58,800 --> 00:12:02,960
Speaker 1: be careful. The commune AKA clearly that, uh that I

207
00:12:02,960 --> 00:12:05,320
Speaker 1: think it's a healthy thing to do a framework review.

208
00:12:05,559 --> 00:12:07,199
Speaker 1: I don't think it should be a one time thing.

209
00:12:07,240 --> 00:12:10,720
Speaker 1: I think it's something a good organization does regularly. Uh.

210
00:12:11,720 --> 00:12:13,880
Speaker 1: But because we haven't done it in a long time,

211
00:12:14,200 --> 00:12:16,480
Speaker 1: it may raise some expectations. But I think we're gonna

212
00:12:16,480 --> 00:12:19,079
Speaker 1: have to just communicate what we're thinking and how we're

213
00:12:19,120 --> 00:12:22,280
Speaker 1: doing it, so we we we sort of balance how

214
00:12:22,320 --> 00:12:25,000
Speaker 1: we're going about this. All right, Robert Caplan, thank you

215
00:12:25,080 --> 00:12:28,680
Speaker 1: very much, President of the Dallas Federal Reserve. We'll send

216
00:12:28,720 --> 00:12:31,679
Speaker 1: it back to you. Michael McKay, thank you very much, sir.

217
00:12:31,800 --> 00:12:49,400
Speaker 1: A fantastic interview with the Dallas Fed President. An ugly

218
00:12:49,520 --> 00:12:53,600
Speaker 1: a DP report, a massive downside surprise ahead of payrolls

219
00:12:53,640 --> 00:12:56,240
Speaker 1: Friday in the United States, the number coming in at

220
00:12:56,280 --> 00:13:00,400
Speaker 1: twenty seven k, the median estimate one D eight. He five.

221
00:13:00,440 --> 00:13:03,720
Speaker 1: It sparks a big bond market rally, and now we

222
00:13:03,760 --> 00:13:06,560
Speaker 1: can get reaction from the Federal Reserve. The Chicago Fed

223
00:13:06,600 --> 00:13:11,559
Speaker 1: president Charles Evans sitting down with Bloomberg's Michael McKay. Well,

224
00:13:11,600 --> 00:13:13,840
Speaker 1: thank you very much, and welcome back to Chicago where

225
00:13:13,880 --> 00:13:16,360
Speaker 1: we're speaking with the president of the Chicago Fed and

226
00:13:16,440 --> 00:13:19,640
Speaker 1: our host for this conference, Charlie Evans. Thanks for joining

227
00:13:19,679 --> 00:13:23,520
Speaker 1: us of Morning on Blueberg Television and radio worldwide. Got

228
00:13:23,520 --> 00:13:26,679
Speaker 1: to start with the news. J Powell yesterday his comments

229
00:13:26,720 --> 00:13:30,120
Speaker 1: taken by Wall Street as suggesting the Fed is putting

230
00:13:30,120 --> 00:13:33,200
Speaker 1: a rate cut on the table for consideration. Did you

231
00:13:33,320 --> 00:13:35,720
Speaker 1: take it that way? Is a cut as the door

232
00:13:35,800 --> 00:13:38,640
Speaker 1: open to a cut? Uh? Well, I think we've been

233
00:13:38,679 --> 00:13:42,080
Speaker 1: looking at the data and you know, talking to businesses

234
00:13:42,160 --> 00:13:46,280
Speaker 1: and thinking about how the forecast is evolving. I still

235
00:13:46,320 --> 00:13:49,079
Speaker 1: think that the fundamentals are solid for the economy. There

236
00:13:49,120 --> 00:13:51,920
Speaker 1: is uncertainty and you you know, might be wondering if

237
00:13:51,960 --> 00:13:55,200
Speaker 1: businesses are you know, delayne a little bit more taking

238
00:13:55,800 --> 00:13:58,560
Speaker 1: stock of you know, what the international situation looks like

239
00:13:58,600 --> 00:14:00,680
Speaker 1: I think it would be prudent to take a look

240
00:14:00,720 --> 00:14:04,400
Speaker 1: at you know, our you know setting for monetary policy,

241
00:14:04,440 --> 00:14:08,040
Speaker 1: as we do each and every time, and as I've said, um,

242
00:14:08,080 --> 00:14:10,520
Speaker 1: you know earlier, I'm a little nervous about the low

243
00:14:10,559 --> 00:14:14,760
Speaker 1: inflation rate and so um, even though we expect it's

244
00:14:14,800 --> 00:14:16,840
Speaker 1: kind of temporary. I think that that by itself could

245
00:14:16,880 --> 00:14:18,719
Speaker 1: be a reason for a little bit more accommodation. But

246
00:14:18,800 --> 00:14:19,960
Speaker 1: I think we're just gonna have to look at how

247
00:14:20,000 --> 00:14:24,760
Speaker 1: things are evolving. Cut rates basis points. Will that generate

248
00:14:24,800 --> 00:14:27,960
Speaker 1: inflation hasn't so far? Well, I think that's a good

249
00:14:28,040 --> 00:14:31,560
Speaker 1: question because I think it depends on just supporting and

250
00:14:31,600 --> 00:14:35,120
Speaker 1: an accommodative fashion. We've been under running inflation. We're about

251
00:14:35,160 --> 00:14:37,160
Speaker 1: one point six percent year over year. We ought to

252
00:14:37,160 --> 00:14:39,080
Speaker 1: be at two too and a quarter by now this

253
00:14:39,200 --> 00:14:42,640
Speaker 1: late in the cycle, sort of averaging higher inflation at

254
00:14:42,720 --> 00:14:46,840
Speaker 1: least defending our symmetric objective. And so I think more

255
00:14:46,840 --> 00:14:51,520
Speaker 1: accommodative stance would be supportive of that. Um, you know,

256
00:14:51,560 --> 00:14:53,480
Speaker 1: it depends on the evolution of the economy to whether

257
00:14:53,560 --> 00:14:55,560
Speaker 1: or not that supportive of that or not. I think

258
00:14:55,600 --> 00:14:59,160
Speaker 1: additional nervousness would you know, also um, you know, call

259
00:14:59,240 --> 00:15:02,520
Speaker 1: some of that into question. Something changed with inflation dynamics

260
00:15:02,560 --> 00:15:05,960
Speaker 1: that maybe they Fed an economists in general don't understand.

261
00:15:05,960 --> 00:15:09,040
Speaker 1: At this point. We've certainly been under running two percent

262
00:15:09,120 --> 00:15:11,560
Speaker 1: now for quite some time. We've had moments where we've

263
00:15:11,600 --> 00:15:14,200
Speaker 1: gotten up to two percent, and certainly a year and

264
00:15:14,200 --> 00:15:17,280
Speaker 1: a half ago, as we were tightening raising rates, I

265
00:15:17,440 --> 00:15:19,760
Speaker 1: was more confident that we were going to be able

266
00:15:19,800 --> 00:15:22,040
Speaker 1: to get to two percent on a sustainable basis. I

267
00:15:22,040 --> 00:15:24,560
Speaker 1: think that's really important, that would be sustainable. It turns

268
00:15:24,600 --> 00:15:26,720
Speaker 1: out that we weren't. We haven't been able to do that,

269
00:15:27,240 --> 00:15:30,160
Speaker 1: and it seems to be one cycle of temporary uh

270
00:15:30,320 --> 00:15:33,080
Speaker 1: downside risk to inflation after another one after a while.

271
00:15:33,120 --> 00:15:34,760
Speaker 1: I think you really do have to wonder about the

272
00:15:34,800 --> 00:15:38,200
Speaker 1: inflation process and whether or not we just need more accommodation.

273
00:15:38,600 --> 00:15:40,960
Speaker 1: But you're hosting a conference that's part of the fed's

274
00:15:41,040 --> 00:15:45,080
Speaker 1: review of its monetary policy framework designed to sort of

275
00:15:45,080 --> 00:15:49,080
Speaker 1: solve that problem. Have you heard any uh suggestions, and

276
00:15:49,120 --> 00:15:50,800
Speaker 1: there's been a lot of them for different policies you

277
00:15:50,800 --> 00:15:54,160
Speaker 1: could adopt that you think actually would produce the result

278
00:15:54,440 --> 00:15:57,760
Speaker 1: that you want. Well, I think the conference papers have

279
00:15:57,840 --> 00:15:59,880
Speaker 1: been very good. We had a panel yesterday where we

280
00:16:00,080 --> 00:16:04,760
Speaker 1: had people, um, you know, labor, business people in the

281
00:16:04,760 --> 00:16:08,680
Speaker 1: community talking about what maximum employment means for their constituents.

282
00:16:08,720 --> 00:16:11,160
Speaker 1: And I think that, uh, we had a very nice

283
00:16:11,160 --> 00:16:14,600
Speaker 1: paper looking at evaluating different approaches that the FED has

284
00:16:14,680 --> 00:16:17,520
Speaker 1: taken over the last ten in fifteen years. I took

285
00:16:17,560 --> 00:16:21,800
Speaker 1: away from that that it's very important that we continue

286
00:16:21,840 --> 00:16:24,960
Speaker 1: to demonstrate credibility that with all of our actions, we

287
00:16:25,000 --> 00:16:28,200
Speaker 1: want to indicate that we're here to generate symmetric two

288
00:16:28,200 --> 00:16:33,440
Speaker 1: percent inflation and maximum employment. Some of that could be, um,

289
00:16:33,960 --> 00:16:37,680
Speaker 1: another reason for sort of pushing a little harder further

290
00:16:37,840 --> 00:16:40,800
Speaker 1: into the cycle in order to average higher inflation to

291
00:16:41,840 --> 00:16:44,880
Speaker 1: ratify symmetry. I think we're today's papers are going to

292
00:16:44,920 --> 00:16:46,920
Speaker 1: be on that point even more so, and I think

293
00:16:46,920 --> 00:16:49,440
Speaker 1: it will be very interesting to listen to those. Your

294
00:16:49,680 --> 00:16:52,280
Speaker 1: district is sort of at the center of manufacturing in

295
00:16:52,320 --> 00:16:55,280
Speaker 1: the United States. We've seen the I s M reports,

296
00:16:55,640 --> 00:17:02,920
Speaker 1: We've seen the the manufacturing vase suggests ongoing weakness. They

297
00:17:03,000 --> 00:17:06,000
Speaker 1: keep grinding lower, but some say is reminiscent of two

298
00:17:06,000 --> 00:17:09,880
Speaker 1: thousand fifteen. What do you see in manufacturing, Well, we've

299
00:17:09,920 --> 00:17:12,280
Speaker 1: definitely seen the I S M moved down it's still

300
00:17:12,320 --> 00:17:18,560
Speaker 1: expansionary for manufacturing, but there's definitely more uncertainty about you know,

301
00:17:18,960 --> 00:17:22,159
Speaker 1: you know CAPEX orders business fixed investment and you know

302
00:17:22,160 --> 00:17:24,440
Speaker 1: how that's likely to proceed, So that obviously hits the

303
00:17:24,480 --> 00:17:27,680
Speaker 1: manufacturing sector in a pretty big way. UM. I also

304
00:17:27,760 --> 00:17:31,280
Speaker 1: think that the tariffs on agricultural products are really big

305
00:17:31,320 --> 00:17:35,320
Speaker 1: in that effects of farm equipment manufacturers as well, and

306
00:17:35,400 --> 00:17:38,639
Speaker 1: so um, you know, that's just another headwind that the

307
00:17:38,680 --> 00:17:41,280
Speaker 1: economy has got to work its way through in order

308
00:17:41,320 --> 00:17:45,160
Speaker 1: to achieve growth at potential or above potential. I'm looking

309
00:17:45,160 --> 00:17:47,960
Speaker 1: for two percent growth this year. That's actually a pretty

310
00:17:47,960 --> 00:17:50,880
Speaker 1: good growth rate in terms of trend growth. But uh,

311
00:17:51,240 --> 00:17:53,280
Speaker 1: you know, we're gonna have to navigate, um, all of

312
00:17:53,320 --> 00:17:55,640
Speaker 1: the headwinds that we're facing right now. What are your

313
00:17:55,880 --> 00:17:59,600
Speaker 1: district CEO telling you about what they think is going

314
00:17:59,640 --> 00:18:03,080
Speaker 1: to happen to the economy and how they're reacting to it. Um,

315
00:18:03,320 --> 00:18:05,800
Speaker 1: you know, my information from CEOs is a little bit stale.

316
00:18:05,840 --> 00:18:07,920
Speaker 1: It's you know, six weeks since we almost six weeks

317
00:18:07,920 --> 00:18:09,960
Speaker 1: since we had our cycle. I've got my directors meeting today.

318
00:18:10,000 --> 00:18:13,800
Speaker 1: I look forward to their comments. I believe I'm expecting

319
00:18:13,920 --> 00:18:17,000
Speaker 1: sort of a little bit of a continuation of their

320
00:18:17,080 --> 00:18:20,640
Speaker 1: balls up in the air. There's uncertainty. The fundamentals for

321
00:18:21,119 --> 00:18:25,080
Speaker 1: their operations are pretty good, but of course if you

322
00:18:25,119 --> 00:18:29,640
Speaker 1: start making adjustments to the effect supply chains and how

323
00:18:29,680 --> 00:18:33,120
Speaker 1: you move product over and back across the border with Mexico,

324
00:18:33,160 --> 00:18:35,280
Speaker 1: that would have, you know, a negative effect. And so

325
00:18:35,320 --> 00:18:37,840
Speaker 1: I think we have to be aware of all of

326
00:18:37,880 --> 00:18:40,040
Speaker 1: that and make sure that the FED is not getting

327
00:18:40,040 --> 00:18:43,119
Speaker 1: in the way of continued good growth. The FED may

328
00:18:43,160 --> 00:18:45,639
Speaker 1: not be getting in the way, but trade policy maybe

329
00:18:45,760 --> 00:18:49,240
Speaker 1: getting in the way. Have you seen measurable impacts? We

330
00:18:49,280 --> 00:18:52,639
Speaker 1: all talk about the possibility of faster inflation when we

331
00:18:52,680 --> 00:18:56,080
Speaker 1: talk about slower growth. Can you quantify an effect so

332
00:18:56,160 --> 00:18:58,000
Speaker 1: far in the data? So I think that's a challenge.

333
00:18:58,040 --> 00:19:01,280
Speaker 1: I think most of what I've been hearing what I

334
00:19:01,359 --> 00:19:04,640
Speaker 1: just indicated is that this is on the soft data

335
00:19:04,720 --> 00:19:08,080
Speaker 1: kind of side. It's uncertainty. It does get at business

336
00:19:08,119 --> 00:19:12,240
Speaker 1: attitudes towards putting precious capital at risk over a longer

337
00:19:12,280 --> 00:19:16,440
Speaker 1: period of time, when the actions might be undone by

338
00:19:16,480 --> 00:19:20,560
Speaker 1: a change in trade policy or other actions. And so

339
00:19:20,680 --> 00:19:23,479
Speaker 1: I think it's a more difficult time to take a

340
00:19:23,520 --> 00:19:26,760
Speaker 1: longer perspective. And so people are waiting and just sort

341
00:19:26,800 --> 00:19:30,120
Speaker 1: of seeing how things play out. Could come out fine. Um,

342
00:19:30,160 --> 00:19:32,240
Speaker 1: you know that's what everybody helps with the trade policies,

343
00:19:32,640 --> 00:19:36,520
Speaker 1: your cost benefit analysis. Is it better to be slow

344
00:19:36,600 --> 00:19:39,680
Speaker 1: to cut if needed, or better to be cutting through

345
00:19:39,760 --> 00:19:42,360
Speaker 1: seeing Yeah, that's that's a good question too. And and

346
00:19:42,400 --> 00:19:44,399
Speaker 1: I'm gonna I'm gonna pause a little bit and just

347
00:19:44,400 --> 00:19:46,720
Speaker 1: sort of say it gets at the strategy. And my

348
00:19:46,760 --> 00:19:49,439
Speaker 1: own take on things is that inflation is just a

349
00:19:49,480 --> 00:19:53,280
Speaker 1: little light relative to our symmetric two percent inflation. So

350
00:19:53,320 --> 00:19:56,680
Speaker 1: before we even talk about, you know, more trade uncertainty,

351
00:19:57,040 --> 00:19:59,119
Speaker 1: I'm a little more inclined to kind of think, you know,

352
00:19:59,240 --> 00:20:02,320
Speaker 1: we might you I wonder if we've got the appropriately

353
00:20:02,359 --> 00:20:05,320
Speaker 1: accommodative setting in order to generate inflation at two to

354
00:20:05,359 --> 00:20:07,200
Speaker 1: two one a quarter per cent and two and a

355
00:20:07,240 --> 00:20:10,920
Speaker 1: half percent inflation would not be um against our symmetric

356
00:20:10,960 --> 00:20:13,679
Speaker 1: inflation objective as long as it was relatively contained. So

357
00:20:13,720 --> 00:20:15,879
Speaker 1: I think that there's scope for that. Now if you

358
00:20:15,960 --> 00:20:19,240
Speaker 1: layer on top of this additional uncertainties as to the

359
00:20:19,280 --> 00:20:22,520
Speaker 1: real economy and just you know, there are insurance reasons

360
00:20:22,560 --> 00:20:25,920
Speaker 1: to talk about adjustments, I think, um, you know, there's

361
00:20:25,960 --> 00:20:27,800
Speaker 1: more to talk about these days when it comes to

362
00:20:27,840 --> 00:20:31,120
Speaker 1: monetary policy, and we'll be doing that in Washington before

363
00:20:31,160 --> 00:20:32,720
Speaker 1: too long. One of the things you've gotta be talking

364
00:20:32,720 --> 00:20:35,440
Speaker 1: about is what's happening overseas and the impact that comes

365
00:20:35,440 --> 00:20:37,200
Speaker 1: back into the US. And one thing we have seen

366
00:20:37,320 --> 00:20:43,520
Speaker 1: is much stronger dollar companies feeling that impact in your district. Um.

367
00:20:43,560 --> 00:20:46,000
Speaker 1: You know, I think that there are you know, a

368
00:20:46,080 --> 00:20:50,040
Speaker 1: number of headwinds that they're facing, and obviously relative prices

369
00:20:50,080 --> 00:20:53,959
Speaker 1: would have one effect on that. I think commodity prices

370
00:20:54,000 --> 00:20:58,040
Speaker 1: have been another. But they've sort of come off those

371
00:20:58,119 --> 00:21:01,440
Speaker 1: kinds of pressures mentioned agriculture. I wanted to ask you

372
00:21:01,480 --> 00:21:04,679
Speaker 1: about that because of course this is a huge agricultural district.

373
00:21:04,880 --> 00:21:07,960
Speaker 1: You've got tariffs and you've got floods. Uh, you've got

374
00:21:07,960 --> 00:21:10,320
Speaker 1: reports that farmers aren't gonna be able to plant. How

375
00:21:10,320 --> 00:21:13,080
Speaker 1: how bad is it? Um? Yeah, the weather effects have

376
00:21:13,160 --> 00:21:17,520
Speaker 1: been really uh you know, um, not good obviously. UM.

377
00:21:17,560 --> 00:21:19,080
Speaker 1: You know, a lot of flooding, a lot of just

378
00:21:19,160 --> 00:21:22,960
Speaker 1: navigating going around the area. You know, bridges are out

379
00:21:23,000 --> 00:21:25,240
Speaker 1: and things like that in the fields are more difficult.

380
00:21:25,320 --> 00:21:28,679
Speaker 1: So um yeah, everybody struggling with that, and the uh,

381
00:21:29,280 --> 00:21:33,679
Speaker 1: crop prices aren't supportive of you know, that profitability either well,

382
00:21:33,720 --> 00:21:38,000
Speaker 1: what's that going to do to inflation or to growth? Um,

383
00:21:38,080 --> 00:21:40,399
Speaker 1: you know, crop prices have been low, so obviously if

384
00:21:40,400 --> 00:21:43,280
Speaker 1: supply was curtailed by some effect, you might predict that

385
00:21:43,600 --> 00:21:46,040
Speaker 1: prices would go up a little bit, you know, somewhat,

386
00:21:46,040 --> 00:21:48,720
Speaker 1: But it's going to depend on the entire um, you know,

387
00:21:48,800 --> 00:21:52,640
Speaker 1: the market where planting takes place, elsewhere in world conditions.

388
00:21:52,640 --> 00:21:54,639
Speaker 1: So it's hard to say. I'm not really concerned about

389
00:21:54,640 --> 00:22:00,600
Speaker 1: the inflationary consequences of that, nor the tariff effects. Um,

390
00:22:00,640 --> 00:22:02,879
Speaker 1: even larger tariffs I think would sort of be a

391
00:22:02,920 --> 00:22:05,960
Speaker 1: one off effect on overall prices, and so I don't

392
00:22:05,960 --> 00:22:09,479
Speaker 1: think that would risk our inflation objective at the moment. Well,

393
00:22:09,480 --> 00:22:12,679
Speaker 1: then where do you get the symmetric two percent that

394
00:22:12,760 --> 00:22:14,840
Speaker 1: you want from? Well, I think we're trying to find

395
00:22:14,880 --> 00:22:18,800
Speaker 1: the appropriate setting for monetary policy, and uh, you know,

396
00:22:18,920 --> 00:22:22,119
Speaker 1: so far, we sort of decided that settling on the

397
00:22:22,160 --> 00:22:25,879
Speaker 1: low end of the range of neutral uh interest rate

398
00:22:26,000 --> 00:22:28,280
Speaker 1: seems to be a good place to sit because it

399
00:22:28,359 --> 00:22:32,760
Speaker 1: supports the economy and helps support inflation a little bit.

400
00:22:32,800 --> 00:22:35,240
Speaker 1: If all of a sudden, we you know, realize that

401
00:22:35,240 --> 00:22:37,719
Speaker 1: that's a little bit more contractionary than we thought. If

402
00:22:37,760 --> 00:22:39,520
Speaker 1: we're getting in the way of the economy, I think

403
00:22:39,560 --> 00:22:42,159
Speaker 1: we would have to rethink that and make adjustments. But

404
00:22:42,200 --> 00:22:44,040
Speaker 1: that's a determination that we need to look at the

405
00:22:44,080 --> 00:22:46,440
Speaker 1: day to talk to people about and UH come together

406
00:22:46,480 --> 00:22:48,359
Speaker 1: as a committee on We had a viewer a question

407
00:22:48,400 --> 00:22:50,240
Speaker 1: come in that kind of gets at one of the

408
00:22:50,280 --> 00:22:54,119
Speaker 1: panels that was here yesterday about FED communication. UM, and

409
00:22:54,200 --> 00:22:56,320
Speaker 1: I think back to when you and I were down

410
00:22:56,440 --> 00:22:59,680
Speaker 1: in Florida recently and Kevin Walsh, the former FED governor,

411
00:22:59,760 --> 00:23:01,800
Speaker 1: said we could have chosen a one point five percent

412
00:23:01,840 --> 00:23:04,520
Speaker 1: inflation target, and then everybody thinked we great because we

413
00:23:04,600 --> 00:23:08,320
Speaker 1: keep hitting that. Um, what's magical about two percent? And

414
00:23:08,920 --> 00:23:11,240
Speaker 1: why is it off the table that you would want

415
00:23:11,280 --> 00:23:14,280
Speaker 1: to change that number? Yeah, I didn't agree with that assessment.

416
00:23:14,320 --> 00:23:17,159
Speaker 1: I worry that, UM, you know, if you if you

417
00:23:17,280 --> 00:23:20,840
Speaker 1: choose a lower inflation objective, that conservative central bankers are

418
00:23:20,840 --> 00:23:22,640
Speaker 1: always going to be a little bit nervous about going

419
00:23:22,680 --> 00:23:25,639
Speaker 1: above their inflation objective. I think the real issue and

420
00:23:25,680 --> 00:23:29,560
Speaker 1: that we have is UH UM stating very clearly what

421
00:23:29,600 --> 00:23:32,719
Speaker 1: we mean by symmetric and stating that you're comfortable with

422
00:23:32,800 --> 00:23:35,640
Speaker 1: inflation half a point above your objective. If we had

423
00:23:35,640 --> 00:23:37,639
Speaker 1: lowered the objective to one and a half, for all

424
00:23:37,680 --> 00:23:39,200
Speaker 1: I know, we'd be down at one and a quarter,

425
00:23:39,640 --> 00:23:41,720
Speaker 1: and so I don't really think that's a great idea.

426
00:23:41,720 --> 00:23:44,520
Speaker 1: It also wouldn't give us enough capacity to cut rates.

427
00:23:44,960 --> 00:23:49,720
Speaker 1: One and a half was reasonable discussion back in the

428
00:23:49,840 --> 00:23:53,440
Speaker 1: mid two thousands when productivity was so much stronger, real

429
00:23:53,520 --> 00:23:55,760
Speaker 1: interest rates were higher, and the threat of the zero

430
00:23:55,800 --> 00:23:59,200
Speaker 1: lower bound was not really what it is now. But currently,

431
00:23:59,240 --> 00:24:04,200
Speaker 1: with lower trend growth rates, lower labor force growth expected UH,

432
00:24:04,200 --> 00:24:07,119
Speaker 1: and productivity growth, I think that would you know, we

433
00:24:07,200 --> 00:24:10,320
Speaker 1: need to defend our two percent symmetric inflation objective very strongly.

434
00:24:10,640 --> 00:24:13,760
Speaker 1: We mentioned capex slowing down. Do you see any evidence

435
00:24:13,800 --> 00:24:18,359
Speaker 1: that productivity is picking up other than cyclically? And will

436
00:24:19,800 --> 00:24:23,520
Speaker 1: or will? I mean, we've certainly seen stronger productivity growth

437
00:24:23,520 --> 00:24:26,760
Speaker 1: in the first quarter and last year it was stronger

438
00:24:26,800 --> 00:24:29,439
Speaker 1: than it has been UM. I think you're right to

439
00:24:29,480 --> 00:24:32,479
Speaker 1: point out that it's been cyclical, and I think that

440
00:24:33,080 --> 00:24:35,800
Speaker 1: if you look at us sufficiently medium term and longer

441
00:24:35,880 --> 00:24:38,840
Speaker 1: term perspective, it's far more likely. UM. I'd love to

442
00:24:38,880 --> 00:24:41,159
Speaker 1: see stronger productivity growth, there's no doubt about it, and

443
00:24:41,200 --> 00:24:43,920
Speaker 1: more innovation would be helpful for that, but it's got

444
00:24:43,920 --> 00:24:47,080
Speaker 1: to hit business practices, it's got to hit the factory floor,

445
00:24:47,119 --> 00:24:49,320
Speaker 1: it's got to be integrated into all of the offices

446
00:24:49,320 --> 00:24:51,359
Speaker 1: in a way that leads to higher productivity. And there

447
00:24:51,359 --> 00:24:54,480
Speaker 1: are a lot of disruptive technologies coming about that get

448
00:24:54,480 --> 00:24:58,760
Speaker 1: in the way of that adoption for for everything, and so, UM,

449
00:24:58,800 --> 00:25:01,240
Speaker 1: I'm kind of with John Fernal and others where I

450
00:25:01,280 --> 00:25:03,919
Speaker 1: think that productivity going forward it's gonna be stronger than

451
00:25:03,960 --> 00:25:06,159
Speaker 1: seventy three to nine five, but it's not going to

452
00:25:06,280 --> 00:25:08,520
Speaker 1: be it's unlikely to be as strong as ninety five

453
00:25:08,560 --> 00:25:11,119
Speaker 1: to two thousand five. And so I'm looking for about

454
00:25:11,119 --> 00:25:13,879
Speaker 1: one and a quarter percent productivity combined with half a

455
00:25:13,880 --> 00:25:18,120
Speaker 1: percent labor growth over the medium term structural sustainable. That's

456
00:25:18,160 --> 00:25:20,800
Speaker 1: one of three quarters percent trend growth. We need to

457
00:25:20,840 --> 00:25:24,320
Speaker 1: make sure that we've got the accommodated, the appropriate policy

458
00:25:24,560 --> 00:25:28,400
Speaker 1: in place so that we can achieve that you have now, Um,

459
00:25:28,480 --> 00:25:31,679
Speaker 1: you know, I've been optimistic that we did on the

460
00:25:31,720 --> 00:25:33,960
Speaker 1: basis of the most recent data and the fact that

461
00:25:34,000 --> 00:25:36,040
Speaker 1: we think that we're on the low end of the

462
00:25:36,119 --> 00:25:39,280
Speaker 1: neutral rate. But with all the uncertainties coming about, and

463
00:25:39,760 --> 00:25:41,399
Speaker 1: you know, new data We're gonna have to take a

464
00:25:41,400 --> 00:25:43,960
Speaker 1: look at that, all right, Charlie Evans will watch for

465
00:25:44,000 --> 00:25:46,160
Speaker 1: what you do at the next time. Thanks for joining

466
00:25:46,240 --> 00:25:49,200
Speaker 1: us today. I'm Bloomberg Radio and Television worldwide. We'll send

467
00:25:49,200 --> 00:25:51,600
Speaker 1: it back to you. Mcal McKee, thank you so much.

468
00:25:51,640 --> 00:25:53,920
Speaker 1: What a tour to force. Michael McKee with two very

469
00:25:53,960 --> 00:25:57,760
Speaker 1: different interviews with two very different presidents, Camplain of Dallas

470
00:25:58,200 --> 00:26:01,240
Speaker 1: and then Charles Evans, truly one of a great monetary theorist,

471
00:26:01,320 --> 00:26:05,560
Speaker 1: Evans of Chicago, with a more PhD like I guess

472
00:26:05,600 --> 00:26:08,840
Speaker 1: I think Mr Kepel would say, yeah, fancier economic analysis.

473
00:26:21,840 --> 00:26:24,720
Speaker 1: It is a perfect time to speak to a guy

474
00:26:24,760 --> 00:26:29,120
Speaker 1: with a big fancy title executive editor Economics Holding Court

475
00:26:29,160 --> 00:26:33,960
Speaker 1: out of London. Uh. Simon Kennedy, who of course led

476
00:26:33,960 --> 00:26:37,440
Speaker 1: our our nascent Brexit coverage and put together all that

477
00:26:37,480 --> 00:26:41,840
Speaker 1: team as well, but far more important Simon Kennedy of

478
00:26:41,920 --> 00:26:44,840
Speaker 1: a few years back, a younger Simon Kennedy working in

479
00:26:44,960 --> 00:26:50,560
Speaker 1: Washington saw during the financial crisis where institutions have to

480
00:26:50,600 --> 00:26:54,199
Speaker 1: catch up and institutions adjust. Simon, I want to go

481
00:26:54,240 --> 00:26:56,760
Speaker 1: back to a moment you and I shared at the St.

482
00:26:56,800 --> 00:27:02,080
Speaker 1: Regis Hotel a million years ago, with John snow Treasury Secretary,

483
00:27:02,119 --> 00:27:05,320
Speaker 1: where he adjusted with a card soil or appendix to

484
00:27:05,480 --> 00:27:08,880
Speaker 1: whatever the blah blah blah statement was. Are we near

485
00:27:08,960 --> 00:27:13,760
Speaker 1: a point within all of our economic reporting where elites

486
00:27:13,800 --> 00:27:17,439
Speaker 1: and institutions are going to have to radically adjust? And

487
00:27:17,480 --> 00:27:20,480
Speaker 1: will we see that from the Fed? Um? Well, we

488
00:27:20,760 --> 00:27:23,840
Speaker 1: we saw some scientists that they're open to it. They

489
00:27:24,760 --> 00:27:27,720
Speaker 1: in some ways of talking with Carna earlier economists and

490
00:27:27,760 --> 00:27:30,040
Speaker 1: cast money. This is just what Jerne Pals from the

491
00:27:30,040 --> 00:27:31,840
Speaker 1: FED suggested was a statement of what the said, does

492
00:27:31,880 --> 00:27:33,520
Speaker 1: you know it monsitors things and it ad just as

493
00:27:33,680 --> 00:27:36,440
Speaker 1: as as needed. But I think in the past you've

494
00:27:36,480 --> 00:27:39,199
Speaker 1: had some criticism of your own powers fect chairman for

495
00:27:39,240 --> 00:27:42,320
Speaker 1: his communications with the market, maybe appearing a little tone

496
00:27:42,320 --> 00:27:44,920
Speaker 1: deaf from time to time. Uh, And so I think

497
00:27:44,960 --> 00:27:46,800
Speaker 1: from the boxic point of view, it was a welcome

498
00:27:46,840 --> 00:27:49,560
Speaker 1: thing that he at least acknowledged the debate that's going

499
00:27:49,640 --> 00:27:52,920
Speaker 1: on on Wall Street, and and even if he didn't

500
00:27:53,280 --> 00:27:55,000
Speaker 1: say that the rate comes coming here, at least said

501
00:27:55,080 --> 00:27:57,720
Speaker 1: you were aware of the we're aware of the debate.

502
00:27:57,760 --> 00:27:59,400
Speaker 1: And perhaps the risk had been if he'd just stood

503
00:27:59,440 --> 00:28:02,680
Speaker 1: up and talked about out the monetary policy framework for

504
00:28:02,720 --> 00:28:05,360
Speaker 1: the long term, which obviously the theme of that conference. Um,

505
00:28:05,600 --> 00:28:07,800
Speaker 1: the markets would have fallen out of bed. So I

506
00:28:07,840 --> 00:28:11,159
Speaker 1: think he's the center of gravity. As as as we

507
00:28:11,200 --> 00:28:14,119
Speaker 1: report today, central garrity has moved towards the cut. Is

508
00:28:14,160 --> 00:28:16,960
Speaker 1: it there? Yeah, it doesn't look like it. Um. Is

509
00:28:17,000 --> 00:28:20,600
Speaker 1: the feed aware that the debates going on? Absolutely? The

510
00:28:20,720 --> 00:28:25,000
Speaker 1: Jazz report is tomorrow, excuse me, two days. But in

511
00:28:25,040 --> 00:28:28,440
Speaker 1: between there is an ECB meeting and certainly we've heard

512
00:28:28,800 --> 00:28:32,560
Speaker 1: Simon this morning from all that all of a sudden

513
00:28:32,560 --> 00:28:36,720
Speaker 1: it's a very important ECB meeting. State from our team

514
00:28:36,720 --> 00:28:41,640
Speaker 1: in Frankfort. Why Mr drag sire tomorrow is so important.

515
00:28:42,360 --> 00:28:44,280
Speaker 1: So I think you've got a few few moving parts.

516
00:28:44,320 --> 00:28:48,360
Speaker 1: You've got one that global backdrop that that they we're

517
00:28:48,360 --> 00:28:50,960
Speaker 1: talking about, that Pal's talking about the trade war and

518
00:28:51,000 --> 00:28:53,160
Speaker 1: the light and there's a chance that Europe actually ends

519
00:28:53,200 --> 00:28:56,600
Speaker 1: up the loser both ways. You know, the expert powerhouse

520
00:28:56,680 --> 00:28:59,160
Speaker 1: that Germany suffers with a trade war. If there's the

521
00:28:59,240 --> 00:29:03,000
Speaker 1: US China deal, um to create a kind of a

522
00:29:03,000 --> 00:29:07,160
Speaker 1: trading block within those two powerhouses, than the neural gets

523
00:29:07,160 --> 00:29:10,120
Speaker 1: squeezed out either way. So there's a global picture. Um.

524
00:29:10,120 --> 00:29:12,520
Speaker 1: There's also stents that like the FED, the ECB thought

525
00:29:12,520 --> 00:29:15,840
Speaker 1: it was was on the way out, had had obviously

526
00:29:15,840 --> 00:29:19,760
Speaker 1: stopped que um and was looking to raise rates even

527
00:29:19,840 --> 00:29:22,240
Speaker 1: even at some point a year now pushed that into

528
00:29:22,280 --> 00:29:26,200
Speaker 1: the future. UM. And so you've got to what they're

529
00:29:26,200 --> 00:29:28,480
Speaker 1: gonna do tomorrow is some bad new bank loans that

530
00:29:28,480 --> 00:29:30,120
Speaker 1: they previously had hoped not to do. So they're going

531
00:29:30,200 --> 00:29:32,640
Speaker 1: to release these bank loans to two banks, or at

532
00:29:32,680 --> 00:29:35,640
Speaker 1: least detail the framework or how they'll do it. Um.

533
00:29:35,720 --> 00:29:37,720
Speaker 1: There's obviously pressure on them to be very generous on

534
00:29:37,760 --> 00:29:40,480
Speaker 1: the terms their attack. But now yet again the ECB

535
00:29:40,640 --> 00:29:42,480
Speaker 1: is now back into a debate about there whether it

536
00:29:42,520 --> 00:29:45,440
Speaker 1: can do more stimulus. UM. Story on the Bloombow terminal

537
00:29:45,440 --> 00:29:47,960
Speaker 1: to day about what those options could possibly be a

538
00:29:48,000 --> 00:29:50,240
Speaker 1: couple of things. On that one, there's not much room

539
00:29:50,320 --> 00:29:52,280
Speaker 1: for the ECB two cart Remember when we're talking about

540
00:29:52,360 --> 00:29:55,760
Speaker 1: FED lacking ammunition. The FED height the FED created a

541
00:29:55,800 --> 00:29:58,320
Speaker 1: little bit of a buffer between itself and zero. The

542
00:29:58,400 --> 00:30:00,400
Speaker 1: e CP doesn't have that buffer in ever got to

543
00:30:00,480 --> 00:30:04,200
Speaker 1: hike UM even last year when the economy was doing okay.

544
00:30:04,440 --> 00:30:07,239
Speaker 1: So it's got less room to um uh to uh

545
00:30:07,640 --> 00:30:09,800
Speaker 1: well come to the rescue. It need be and thirdly,

546
00:30:09,840 --> 00:30:12,960
Speaker 1: you've got the sense that Mario Druggi leaves UM the

547
00:30:13,000 --> 00:30:16,840
Speaker 1: ECB in October. He's he's done, he's term limited, he's out. Um.

548
00:30:17,320 --> 00:30:20,680
Speaker 1: You know, it could be that he tries to hum

549
00:30:21,160 --> 00:30:23,240
Speaker 1: as a city group just today, it could it could

550
00:30:23,240 --> 00:30:25,520
Speaker 1: be that he tries to overcome that lame duck status

551
00:30:26,000 --> 00:30:28,960
Speaker 1: um that he risked having by actually going going harder

552
00:30:29,040 --> 00:30:32,720
Speaker 1: doing it now, maybe doing a favor for to whoever exactly.

553
00:30:33,600 --> 00:30:35,760
Speaker 1: And and also what's changing. We saw this this morning

554
00:30:35,800 --> 00:30:38,360
Speaker 1: in a blur of headlines, folks. I really can't convey

555
00:30:38,480 --> 00:30:44,280
Speaker 1: from our London studios the global sense of news flows extraordinary. Mean, really,

556
00:30:44,320 --> 00:30:46,400
Speaker 1: all we haven't seen, maybe in the last twelve hours

557
00:30:46,880 --> 00:30:49,960
Speaker 1: is a Chinese say something. But Simon Kennedy, there was

558
00:30:50,080 --> 00:30:54,720
Speaker 1: Italy finally chastised by the European Commission. How does the

559
00:30:54,960 --> 00:31:01,560
Speaker 1: ECB fold into the arch debate between mean, the Germanic

560
00:31:01,680 --> 00:31:06,760
Speaker 1: austerity crew in an Italy desperately trying to deal with

561
00:31:07,160 --> 00:31:13,360
Speaker 1: one currency and no combined fiscal policy. Well they should

562
00:31:13,360 --> 00:31:14,880
Speaker 1: be has done quite a bit for Italy in the past,

563
00:31:14,920 --> 00:31:19,560
Speaker 1: obviously with its contrib easing. But the messages are staying

564
00:31:19,640 --> 00:31:22,040
Speaker 1: that countries have to get there are the debts in

565
00:31:22,160 --> 00:31:25,000
Speaker 1: order the death. It's not it's interesting in that the

566
00:31:25,080 --> 00:31:28,000
Speaker 1: European Commission is that is trustising Italy. It's probial trustis

567
00:31:28,080 --> 00:31:32,520
Speaker 1: in France exactly. Debt metrics are not not opticity great either.

568
00:31:32,680 --> 00:31:35,440
Speaker 1: And then it comes back to the plane facts and

569
00:31:35,480 --> 00:31:40,280
Speaker 1: this will obviously inform the CP appointment. The euro is

570
00:31:40,360 --> 00:31:44,320
Speaker 1: a is a political construct and um and and and

571
00:31:44,520 --> 00:31:47,280
Speaker 1: making the economy kind of work within that place construct

572
00:31:47,360 --> 00:31:49,520
Speaker 1: is that is the challenge of the times for for

573
00:31:49,640 --> 00:31:52,680
Speaker 1: European policymakers. The same in Kennedy and Shortners, thank you

574
00:31:52,760 --> 00:31:56,080
Speaker 1: so much, executive or running all of our economic coverage worldwide,

575
00:32:09,880 --> 00:32:11,760
Speaker 1: I'm gonna turn to the experts time when it comes

576
00:32:11,800 --> 00:32:16,600
Speaker 1: to economic theory. And she didn't. Unfortunately, you know, an

577
00:32:16,640 --> 00:32:18,920
Speaker 1: expert just darkened the door here of our Bloomberg and actor,

578
00:32:20,040 --> 00:32:25,280
Speaker 1: Elena Shulietteva Bloomberg Economic senior US economist. So, Elena, let's

579
00:32:25,280 --> 00:32:27,160
Speaker 1: just go back to yesterday. What did you take away

580
00:32:27,680 --> 00:32:32,920
Speaker 1: from Chairman Pal's comments? Not as much as the market

581
00:32:33,000 --> 00:32:36,720
Speaker 1: seem to have taken from it. So I think J.

582
00:32:36,960 --> 00:32:42,160
Speaker 1: Powell just used a simple boilerplate language when he talked

583
00:32:42,200 --> 00:32:47,400
Speaker 1: about how AFMC will react to slowing in economic growth.

584
00:32:47,760 --> 00:32:51,440
Speaker 1: So obviously they're watching and monitoring what is happening in

585
00:32:51,520 --> 00:32:55,680
Speaker 1: the economy with respect to tariffs and otherwise, he did not,

586
00:32:56,080 --> 00:33:00,320
Speaker 1: in our of you, signal any um biased towards uh

587
00:33:00,760 --> 00:33:03,440
Speaker 1: the rate move. I don't think not yet. At least

588
00:33:03,680 --> 00:33:07,520
Speaker 1: it's interesting because the market clearly is ahead of where

589
00:33:07,640 --> 00:33:09,760
Speaker 1: the Fed is. The market is you know, pricing in

590
00:33:10,120 --> 00:33:12,040
Speaker 1: you know, a couple of discounts, maybe even you know,

591
00:33:12,360 --> 00:33:15,480
Speaker 1: a rate cut, maybe even this summer. Um is the

592
00:33:15,560 --> 00:33:17,920
Speaker 1: market too far ahead of itself, do you think? I

593
00:33:18,040 --> 00:33:22,280
Speaker 1: think so, although the data seemed to be starting to

594
00:33:22,400 --> 00:33:27,200
Speaker 1: signal that things are actually filtering into the real economic activities.

595
00:33:27,320 --> 00:33:30,600
Speaker 1: So the Ladies da DP print this morning actually was

596
00:33:30,800 --> 00:33:36,040
Speaker 1: quite shocking, not that much the extent of the drop

597
00:33:36,160 --> 00:33:38,400
Speaker 1: in the hiring pace because it comes on the back

598
00:33:38,440 --> 00:33:42,160
Speaker 1: of a very strong reading, but rather than the breadths

599
00:33:42,520 --> 00:33:46,360
Speaker 1: of of trouble in in in terms of hiring. So

600
00:33:46,560 --> 00:33:51,040
Speaker 1: you saw manufacturing payrolls continue to be weak. You see

601
00:33:51,160 --> 00:33:56,440
Speaker 1: some tangential services industries starting to get a hit from

602
00:33:56,760 --> 00:34:00,520
Speaker 1: trade tensions. If you look at trade and transportation industries,

603
00:34:00,840 --> 00:34:03,800
Speaker 1: that is slowing as well, so that that is telling

604
00:34:03,920 --> 00:34:06,760
Speaker 1: us that all this trade judice are starting to filter

605
00:34:06,920 --> 00:34:10,920
Speaker 1: into the mystic real economy. So, Lena, do you think

606
00:34:10,920 --> 00:34:13,520
Speaker 1: any of them it's interially when you think about that.

607
00:34:13,600 --> 00:34:15,680
Speaker 1: I guess on the jobs number today, my question is,

608
00:34:16,239 --> 00:34:19,480
Speaker 1: is a job's number like that again well below were expectations.

609
00:34:19,520 --> 00:34:22,239
Speaker 1: Where is that consistent with an economy that's slowing to

610
00:34:22,400 --> 00:34:25,040
Speaker 1: a two and two and a half percent kind of rate.

611
00:34:25,760 --> 00:34:30,560
Speaker 1: Today's number clearly over states the trundlining weakness. I think

612
00:34:31,040 --> 00:34:33,240
Speaker 1: you have to look at the three months moving average,

613
00:34:33,280 --> 00:34:37,680
Speaker 1: for example, but that has slowed quite considerably, so in February.

614
00:34:38,080 --> 00:34:40,399
Speaker 1: If you look at the numbers in February and now,

615
00:34:40,920 --> 00:34:44,600
Speaker 1: it has slowed by about a hundred thousand jobs, so

616
00:34:44,840 --> 00:34:48,400
Speaker 1: that is quite significant. And we actually revised that. Or

617
00:34:48,760 --> 00:34:51,600
Speaker 1: reading for payrolls uh this morning? What do you do?

618
00:34:51,760 --> 00:34:56,280
Speaker 1: Where'd you go one sixty down from two or five? Okay,

619
00:34:56,360 --> 00:34:58,560
Speaker 1: we saw Chris wrap you over the MUFG go from

620
00:34:58,600 --> 00:35:02,320
Speaker 1: two hundred down to and twenty. Everybody adjusting numbers and

621
00:35:02,360 --> 00:35:05,440
Speaker 1: they're allowed to do that. Helena, I want to get

622
00:35:05,520 --> 00:35:10,080
Speaker 1: theoretical on you and that. Vice Chairman Clarata, of course

623
00:35:10,280 --> 00:35:15,040
Speaker 1: acclaimed with Clarata Golly Girdler, which is immense mathewness that

624
00:35:15,160 --> 00:35:17,799
Speaker 1: to be honest with the jet leg Helena, I'm too

625
00:35:17,880 --> 00:35:22,480
Speaker 1: tired to go through. But John Cochrane, who's always controversial

626
00:35:22,560 --> 00:35:27,200
Speaker 1: and always smart and interesting in Chicago pushing against everybody

627
00:35:27,280 --> 00:35:33,239
Speaker 1: out there, really emphasizes in a a classroom note that

628
00:35:33,400 --> 00:35:37,160
Speaker 1: the problem with all these theories is they don't assume

629
00:35:37,400 --> 00:35:42,520
Speaker 1: a policy shock, and they don't assume the serial nature

630
00:35:42,719 --> 00:35:47,839
Speaker 1: of many many policy shocks. By definition, right now we're

631
00:35:47,880 --> 00:35:52,719
Speaker 1: going through extraordinary policy shocks. How do people like you

632
00:35:52,880 --> 00:35:59,160
Speaker 1: do their job given policy shock? Well, it's it's absolutely

633
00:35:59,719 --> 00:36:03,600
Speaker 1: it's very difficult because uh, you know, I hate to

634
00:36:03,719 --> 00:36:06,279
Speaker 1: say that that, but this time is different. So you

635
00:36:06,400 --> 00:36:11,719
Speaker 1: made me say that. Um, yes, so, But I think

636
00:36:12,200 --> 00:36:15,160
Speaker 1: you know, what we see right now is really a

637
00:36:15,320 --> 00:36:20,239
Speaker 1: mixture of some unusual circumstances but at the same time

638
00:36:20,400 --> 00:36:25,760
Speaker 1: some really familiar trends. So you do see wage acceleration,

639
00:36:26,160 --> 00:36:30,320
Speaker 1: and we will probably see that in the Friday's jobs report,

640
00:36:30,760 --> 00:36:33,320
Speaker 1: and we do see the unemployment rate is low, and

641
00:36:34,200 --> 00:36:37,600
Speaker 1: that is what's starting to push wages higher. So it's

642
00:36:37,719 --> 00:36:42,120
Speaker 1: probably not as clear given all the policy things that

643
00:36:42,200 --> 00:36:46,440
Speaker 1: are happening around us but the key cyclical momentum, I

644
00:36:46,640 --> 00:36:49,239
Speaker 1: think is still there and we just need to look

645
00:36:49,400 --> 00:36:54,120
Speaker 1: through all these uncertainties and uh, you know, market jitus

646
00:36:54,200 --> 00:36:58,680
Speaker 1: and whatever, give us an update on yquill ce, pussy, pus,

647
00:36:58,760 --> 00:37:02,360
Speaker 1: je pus and X. On the I part, where's investment

648
00:37:02,560 --> 00:37:06,160
Speaker 1: right now? Is a confidence so evaporated that that we're

649
00:37:06,160 --> 00:37:08,440
Speaker 1: going to use the Charles Evans mentioned to Michael McKee

650
00:37:08,480 --> 00:37:10,880
Speaker 1: today that we really don't know what the confidences of

651
00:37:10,960 --> 00:37:14,440
Speaker 1: businesses and their investment may drop. I think that's the

652
00:37:14,560 --> 00:37:19,960
Speaker 1: weakest link in the economy. And unfortunately, all growth will

653
00:37:20,000 --> 00:37:24,520
Speaker 1: be concentrated in the consumer sector again, which makes it

654
00:37:24,680 --> 00:37:28,759
Speaker 1: vulnerable to any major shock. So you keep all your

655
00:37:28,760 --> 00:37:31,640
Speaker 1: eggs in month basket and that's not ideal. You know

656
00:37:32,320 --> 00:37:36,600
Speaker 1: from CFA books, you learn diversification is you know, matters,

657
00:37:36,760 --> 00:37:40,680
Speaker 1: and it's still applying to economic growth as well. Investment

658
00:37:40,800 --> 00:37:45,000
Speaker 1: will continue to be non existent, I think, at least

659
00:37:45,040 --> 00:37:47,840
Speaker 1: in the near to him, actually, in that respect, Thomas

660
00:37:47,960 --> 00:37:51,719
Speaker 1: Barking speaking a couple of weeks ago, he he made

661
00:37:51,760 --> 00:37:54,960
Speaker 1: a really great speech and he basically said, we can

662
00:37:55,040 --> 00:37:58,440
Speaker 1: talk ourselves into a recession if we continue, uh and

663
00:37:58,680 --> 00:38:03,880
Speaker 1: at that pace, and actually business sentiment, business investment really matters. Well,

664
00:38:03,920 --> 00:38:05,959
Speaker 1: that's what exactly where I was going to go next.

665
00:38:06,239 --> 00:38:11,160
Speaker 1: I've been hearing the recession word in much more frequently

666
00:38:11,200 --> 00:38:13,000
Speaker 1: over the last several weeks and a half in the past.

667
00:38:13,120 --> 00:38:16,040
Speaker 1: Is that's something that's in the forecast of Boomer economics. No,

668
00:38:16,200 --> 00:38:19,600
Speaker 1: we're not there yet, and that is exactly for the

669
00:38:19,640 --> 00:38:22,920
Speaker 1: reason I just mentioned that consumers are still in a

670
00:38:23,000 --> 00:38:25,799
Speaker 1: good shape. So you look at consumer sentiment, you look

671
00:38:25,880 --> 00:38:31,280
Speaker 1: at wages, you look at jobs, even like given today's numbers,

672
00:38:31,360 --> 00:38:35,040
Speaker 1: you know, the momentum is still above the trend pace.

673
00:38:35,400 --> 00:38:38,640
Speaker 1: So that means we will continue to see unemployment rate

674
00:38:38,960 --> 00:38:42,360
Speaker 1: falling from where we are right now. In fact, we

675
00:38:42,480 --> 00:38:46,160
Speaker 1: already at the level that the Fed penciled in for

676
00:38:46,239 --> 00:38:48,960
Speaker 1: the end of the year in terms of the unemployment rate,

677
00:38:49,040 --> 00:38:51,560
Speaker 1: so they will have to revise it down again when

678
00:38:51,600 --> 00:38:55,360
Speaker 1: they meet UH this month. So I think the consumers

679
00:38:55,400 --> 00:39:00,520
Speaker 1: are doing still quite well, so that means growth in

680
00:39:00,560 --> 00:39:03,759
Speaker 1: the economy we will continue to be abuff potential, which

681
00:39:03,840 --> 00:39:09,879
Speaker 1: means better labor market, better economy. Still. So, Elena, thank

682
00:39:09,920 --> 00:39:13,839
Speaker 1: you so much at table with us with Bloomberg Economics,

683
00:39:13,880 --> 00:39:15,640
Speaker 1: and I think it's been pretty cool Paul to go

684
00:39:15,840 --> 00:39:20,239
Speaker 1: from Kaplan to Evans to Sherlott Tabor, I think it's

685
00:39:20,280 --> 00:39:24,000
Speaker 1: just to go certain certain walk to it. Thanks for

686
00:39:24,120 --> 00:39:28,480
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

687
00:39:28,680 --> 00:39:34,400
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

688
00:39:34,960 --> 00:39:38,279
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You

689
00:39:38,320 --> 00:39:41,720
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio