1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Ameri Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:36,680 Speaker 2: Terminal and the Bloomberg Business app. Has turned to the 10 00:00:36,680 --> 00:00:40,280 Speaker 2: Federal Reserve policymakers remaining divided ahead of the December meeting. 11 00:00:40,320 --> 00:00:43,159 Speaker 2: The San Francisco FED President Mary Daily, writing in a 12 00:00:43,159 --> 00:00:45,920 Speaker 2: blog this morning, we must ask ourselves, are we in 13 00:00:45,960 --> 00:00:49,080 Speaker 2: the nineteen seventies or the nineteen nineties. We can't ignore 14 00:00:49,080 --> 00:00:52,040 Speaker 2: the seventies or the post pandemic inflation run up, but 15 00:00:52,560 --> 00:00:55,200 Speaker 2: we can't ignore the rest of history either. The Fed 16 00:00:55,240 --> 00:00:57,800 Speaker 2: President Mary Daily joined us now for more. President Daily, 17 00:00:57,840 --> 00:01:00,000 Speaker 2: welcome back to the program. Always good to see you. 18 00:01:00,160 --> 00:01:02,640 Speaker 2: Let's just start with that question that you ask yourself, 19 00:01:02,960 --> 00:01:05,240 Speaker 2: what's guiding your assessment of where we are? 20 00:01:06,920 --> 00:01:10,040 Speaker 3: So I'm looking at both inflation and productivity. And if 21 00:01:10,040 --> 00:01:13,160 Speaker 3: you look at inflation you're seeing that it's been pretty 22 00:01:13,200 --> 00:01:16,640 Speaker 3: contained so far in the goods prices which have been 23 00:01:16,640 --> 00:01:19,360 Speaker 3: directly tariff and then you look at the other parts 24 00:01:19,360 --> 00:01:22,240 Speaker 3: of inflation, you just don't see much of a run up. 25 00:01:22,280 --> 00:01:25,319 Speaker 3: So that's good news, and inflation expectations what people expect 26 00:01:25,600 --> 00:01:29,000 Speaker 3: remain very well anchored. Look at productivity and you see 27 00:01:29,040 --> 00:01:32,240 Speaker 3: that productivity is rising GDP growth is rising while the 28 00:01:32,319 --> 00:01:34,760 Speaker 3: labor market is slowing. So that tells me there's a 29 00:01:34,800 --> 00:01:38,000 Speaker 3: little bit of that boost coming from firms looking to 30 00:01:38,000 --> 00:01:40,360 Speaker 3: do more with less, but that's also causing a slow 31 00:01:40,400 --> 00:01:42,640 Speaker 3: down in the labor market. So the fifty basis point 32 00:01:42,680 --> 00:01:46,360 Speaker 3: adjustment we've made has helped support the labor market, but 33 00:01:46,480 --> 00:01:49,600 Speaker 3: still keeps policy restrictive so that we can put downward 34 00:01:49,600 --> 00:01:50,480 Speaker 3: pressure on inflation. 35 00:01:51,360 --> 00:01:54,120 Speaker 4: President Daily, what are you looking at to determine whether 36 00:01:54,160 --> 00:01:56,360 Speaker 4: it's the nineteen seventies the nineteen nineties. 37 00:01:57,560 --> 00:01:59,920 Speaker 3: Well, I'm going to really look at things that improve 38 00:02:00,080 --> 00:02:02,960 Speaker 3: productivity to think about the nineties, and it's more than 39 00:02:03,080 --> 00:02:06,680 Speaker 3: just the stock market valuations for AI companies. It really 40 00:02:06,760 --> 00:02:09,680 Speaker 3: is about the companies out there who might be using 41 00:02:09,720 --> 00:02:12,640 Speaker 3: AI and then asking them, going directly to them and 42 00:02:12,680 --> 00:02:14,000 Speaker 3: asking them what's it doing. 43 00:02:13,840 --> 00:02:16,359 Speaker 5: For your bottom line? And how are you using it? 44 00:02:16,600 --> 00:02:20,079 Speaker 3: And what we're hearing are pretty encouraging, but very early signs. 45 00:02:20,280 --> 00:02:22,320 Speaker 3: They see how it can help their bottom line, how 46 00:02:22,360 --> 00:02:25,880 Speaker 3: can improve their productivity, even how they can be supportive 47 00:02:25,919 --> 00:02:28,000 Speaker 3: of their workers, give them more interesting work, take the 48 00:02:28,080 --> 00:02:30,639 Speaker 3: less interesting work away. But they all tell us it's 49 00:02:30,680 --> 00:02:33,120 Speaker 3: early days, so more to come on that. And then 50 00:02:33,160 --> 00:02:36,000 Speaker 3: on the inflation part, are we in the nineteen seventies 51 00:02:36,280 --> 00:02:40,360 Speaker 3: really asking employers and firms what are you doing with prices? 52 00:02:40,680 --> 00:02:43,120 Speaker 3: Are you thinking about raising your prices? How are you 53 00:02:43,320 --> 00:02:45,600 Speaker 3: going to think about losing volumes if you do so 54 00:02:45,760 --> 00:02:49,400 Speaker 3: in a slowing economy, especially for consumers from the fiftieth 55 00:02:49,400 --> 00:02:52,600 Speaker 3: percentile down. And putting those two things together, I think 56 00:02:52,639 --> 00:02:55,760 Speaker 3: we'll get a lot of clarity about which direction we're heading. 57 00:02:55,760 --> 00:02:59,240 Speaker 3: And with policy you know, been slightly adjusted, we are 58 00:02:59,280 --> 00:03:01,960 Speaker 3: in a good place to continue to evaluate the information 59 00:03:02,120 --> 00:03:05,840 Speaker 3: before we make any decisions. We can't know Xante before 60 00:03:05,919 --> 00:03:07,480 Speaker 3: the day to come out, and before we get that 61 00:03:07,560 --> 00:03:10,280 Speaker 3: information really what we're facing. We just have to have 62 00:03:10,360 --> 00:03:12,280 Speaker 3: an open mind about which one it could be. 63 00:03:12,600 --> 00:03:15,000 Speaker 5: And maybe other periods of history. I didn't even mention. 64 00:03:15,080 --> 00:03:18,040 Speaker 4: President Daily how different would the neutral rate be if 65 00:03:18,040 --> 00:03:20,760 Speaker 4: it were, say, more like the nineteen seventies or more 66 00:03:20,800 --> 00:03:24,000 Speaker 4: like the nineteen nineties. Just how different would FED policy 67 00:03:24,040 --> 00:03:27,560 Speaker 4: be in response to one or the other paradigm. 68 00:03:28,160 --> 00:03:31,320 Speaker 3: Well, you know, there's many nuanced ways it could affect 69 00:03:31,320 --> 00:03:33,160 Speaker 3: the neutral rate. But I can back up from that 70 00:03:33,280 --> 00:03:35,520 Speaker 3: and just ask what were the policy remedies. 71 00:03:35,720 --> 00:03:37,720 Speaker 5: If you think we're about to have. 72 00:03:37,600 --> 00:03:40,920 Speaker 3: An inflation run up, then we obviously would have to 73 00:03:40,960 --> 00:03:44,160 Speaker 3: hold policy tighter for longer because we wouldn't want that 74 00:03:44,280 --> 00:03:48,480 Speaker 3: to occur. You know, honestly, Americans have endured already too 75 00:03:48,560 --> 00:03:50,800 Speaker 3: much inflation, and we really need to get that back 76 00:03:50,840 --> 00:03:53,960 Speaker 3: down to two percent to restore price stability, as we've 77 00:03:54,000 --> 00:03:57,800 Speaker 3: committed to. On the other side, if it's productivity, you 78 00:03:57,840 --> 00:04:01,480 Speaker 3: would start seeing the economy run a little bit longer. 79 00:04:01,760 --> 00:04:03,880 Speaker 3: Maybe if you go back to the debates of the nineties, 80 00:04:04,040 --> 00:04:07,480 Speaker 3: you know, we saw the labor market slow. Workers were insecure, 81 00:04:07,560 --> 00:04:10,480 Speaker 3: but the labor market had unemployment that was fairly low, 82 00:04:10,840 --> 00:04:13,400 Speaker 3: and many at the time were worried that could spur inflation. 83 00:04:14,000 --> 00:04:18,080 Speaker 3: But Greenspan Chairman green Span held on with his colleagues. 84 00:04:18,120 --> 00:04:20,839 Speaker 3: They didn't raise rates, and what you saw was, you know, 85 00:04:20,880 --> 00:04:23,560 Speaker 3: the nineties, which was a booming time, and we ended 86 00:04:24,040 --> 00:04:26,839 Speaker 3: around target inflation and we had a productivity boom. So 87 00:04:26,880 --> 00:04:29,560 Speaker 3: you're trying to balance those two things together, and it 88 00:04:29,680 --> 00:04:32,800 Speaker 3: means not looking just at headlined information, but getting below 89 00:04:32,880 --> 00:04:37,160 Speaker 3: that information, talking to firms, talking to consumers, talking to workers, 90 00:04:37,440 --> 00:04:39,880 Speaker 3: really on the ground work like we do at the 91 00:04:39,920 --> 00:04:42,160 Speaker 3: reserve banks and other places. You know, the FED is 92 00:04:42,200 --> 00:04:44,520 Speaker 3: built to do this on the ground work as well 93 00:04:44,560 --> 00:04:45,720 Speaker 3: as look at the published data. 94 00:04:46,040 --> 00:04:48,599 Speaker 4: President Daily, reading the blog post this morning, it seems 95 00:04:48,600 --> 00:04:50,960 Speaker 4: like you're leaning more towards the nineteen ninety side of 96 00:04:50,960 --> 00:04:52,359 Speaker 4: things than in nineteen seventies. 97 00:04:52,400 --> 00:04:52,880 Speaker 6: Is that right? 98 00:04:54,279 --> 00:04:56,400 Speaker 3: Well, you know right now, you know, I'm in the 99 00:04:56,400 --> 00:04:59,080 Speaker 3: West in I have the nine states in the Western 100 00:04:59,160 --> 00:05:02,280 Speaker 3: United States, and it's not just Silicon Valley that seems 101 00:05:02,279 --> 00:05:04,960 Speaker 3: interested in AI. No matter who we talk to, whether 102 00:05:05,040 --> 00:05:11,080 Speaker 3: they're you know, small businesses, medium or large businesses, manufacturing, tourism, etc. 103 00:05:11,440 --> 00:05:14,479 Speaker 3: They're using AI in a way that they say is 104 00:05:14,560 --> 00:05:18,120 Speaker 3: going to improve their productivity and they're already seeing parts 105 00:05:18,120 --> 00:05:20,279 Speaker 3: of it. So when I see that, I'm like, Okay, 106 00:05:20,279 --> 00:05:22,960 Speaker 3: we need to think about that. What really will spur 107 00:05:23,120 --> 00:05:25,200 Speaker 3: this is an ongoing thing, is if they start to 108 00:05:25,279 --> 00:05:26,640 Speaker 3: change their business processes. 109 00:05:26,680 --> 00:05:28,480 Speaker 5: So that's what I'm looking at now. 110 00:05:28,720 --> 00:05:31,159 Speaker 3: That means, but I guess a different way to say 111 00:05:31,160 --> 00:05:33,640 Speaker 3: that is we cannot take our eyes off inflation again. 112 00:05:33,920 --> 00:05:37,120 Speaker 3: Americans have endured high inflation too long. That's our mandate. 113 00:05:37,360 --> 00:05:40,000 Speaker 3: So while I'm looking for productivity gains and seeing if 114 00:05:40,000 --> 00:05:43,680 Speaker 3: they're going to continue, I'm also keeping my eye completely 115 00:05:43,680 --> 00:05:46,320 Speaker 3: focused on inflation to make sure that it doesn't pick 116 00:05:46,400 --> 00:05:48,680 Speaker 3: up in a way that would suggest we need to 117 00:05:48,720 --> 00:05:50,440 Speaker 3: do more or we need to hold longer. 118 00:05:50,560 --> 00:05:52,560 Speaker 2: President Teddy, how would you respond to the criticism that 119 00:05:52,600 --> 00:05:55,000 Speaker 2: the Federal Reserve as an institution has taken its side 120 00:05:55,200 --> 00:05:57,720 Speaker 2: off inflation, that inflation is close to the three than 121 00:05:57,720 --> 00:05:59,359 Speaker 2: it is the two, and the Fed's been kind of 122 00:05:59,360 --> 00:05:59,880 Speaker 2: interest rates. 123 00:06:01,480 --> 00:06:03,880 Speaker 3: You know, I don't think that if you unpack the 124 00:06:03,880 --> 00:06:06,920 Speaker 3: inflation data you really see signs of that. It's true 125 00:06:07,000 --> 00:06:09,680 Speaker 3: that headline inflation is printing at that level, but you 126 00:06:09,760 --> 00:06:12,360 Speaker 3: have to take a part that inflation and ask how 127 00:06:12,440 --> 00:06:15,280 Speaker 3: much of it is the effective tarots passing through the 128 00:06:15,360 --> 00:06:18,159 Speaker 3: goods prices that we expect to be a one time, 129 00:06:18,480 --> 00:06:21,919 Speaker 3: price level adjustment, and not a consistent run up in inflation. 130 00:06:22,000 --> 00:06:24,120 Speaker 3: And if you unpack the data, what you see is 131 00:06:24,160 --> 00:06:27,320 Speaker 3: you don't see inflation running up in services or housing, 132 00:06:27,520 --> 00:06:31,320 Speaker 3: and importantly, you don't see it spreading into inflation expectations 133 00:06:31,520 --> 00:06:33,520 Speaker 3: that would be the thing that would continue to run 134 00:06:33,600 --> 00:06:36,360 Speaker 3: up inflation coming forward. We also see a labor market 135 00:06:36,440 --> 00:06:39,240 Speaker 3: that's softening and wage growth that is moderating, so you're 136 00:06:39,279 --> 00:06:41,120 Speaker 3: really not going to see a lot of pressure coming 137 00:06:41,360 --> 00:06:43,839 Speaker 3: on the cost side of labor. So I put those 138 00:06:43,839 --> 00:06:45,960 Speaker 3: things together, and we don't want to make the mistake 139 00:06:46,000 --> 00:06:48,880 Speaker 3: of holding on too long for rates only to find 140 00:06:48,880 --> 00:06:50,080 Speaker 3: out we injure the economy. 141 00:06:50,200 --> 00:06:51,880 Speaker 2: Presidents, any can we just pick up on the cost 142 00:06:51,880 --> 00:06:54,760 Speaker 2: of labor. I think this is really important right now, clearly, 143 00:06:55,200 --> 00:06:56,280 Speaker 2: and it's hard to dispute this. 144 00:06:56,279 --> 00:06:56,960 Speaker 7: It's in the data. 145 00:06:56,960 --> 00:06:59,640 Speaker 2: We've had a massive step down and pay rolls growths. 146 00:07:00,320 --> 00:07:03,360 Speaker 2: That is a little bit more confusing. Is it demand? 147 00:07:03,760 --> 00:07:06,360 Speaker 2: Is it cyclical? Is it structural? Is it something else? 148 00:07:06,480 --> 00:07:09,479 Speaker 2: Like immigration? What's your town right now? What can you 149 00:07:09,520 --> 00:07:12,000 Speaker 2: point to that helps tell you it's one thing over 150 00:07:12,040 --> 00:07:12,360 Speaker 2: the other. 151 00:07:13,800 --> 00:07:16,880 Speaker 3: Yes, you look at prices. In this case, the price 152 00:07:16,920 --> 00:07:20,640 Speaker 3: of labor as wages. If it was simply a supply 153 00:07:21,120 --> 00:07:24,600 Speaker 3: and firms were still scrambling to find workers to fill 154 00:07:24,640 --> 00:07:28,280 Speaker 3: what was jobs that were supported by the previous immigrants, 155 00:07:28,640 --> 00:07:31,040 Speaker 3: you would find wages going up as they bid for 156 00:07:31,120 --> 00:07:32,720 Speaker 3: workers to try to fill those jobs. 157 00:07:32,760 --> 00:07:34,160 Speaker 5: But that's actually not what you see. 158 00:07:34,320 --> 00:07:38,080 Speaker 3: You see wage growth slowing, even in sectors where immigration 159 00:07:38,200 --> 00:07:41,720 Speaker 3: played a larger role, and so that to me says 160 00:07:41,720 --> 00:07:44,760 Speaker 3: it's a demand shock, a negative demand shock along with 161 00:07:44,840 --> 00:07:49,280 Speaker 3: just a coincidental negative supply shock. So you lost workers, 162 00:07:49,440 --> 00:07:51,680 Speaker 3: but you lost jobs at the same time, or you 163 00:07:51,720 --> 00:07:55,920 Speaker 3: had job growth slowing. And what we're seeing now does 164 00:07:55,960 --> 00:07:57,160 Speaker 3: that continue to net out? 165 00:07:57,440 --> 00:07:57,600 Speaker 1: Right? 166 00:07:57,760 --> 00:08:00,280 Speaker 3: What if the supply of workers doesn't keep going down 167 00:08:00,320 --> 00:08:02,640 Speaker 3: but the demand for workers does well, then we'd end 168 00:08:02,720 --> 00:08:05,000 Speaker 3: up with a rise in unemployment. So have to keep 169 00:08:05,120 --> 00:08:07,920 Speaker 3: squarely focused on those types of things. We're definitely in 170 00:08:08,000 --> 00:08:13,120 Speaker 3: a low firing, low hiring period and interrogating that labor market, 171 00:08:13,120 --> 00:08:16,160 Speaker 3: continuing to watch the information, see what firms do next. 172 00:08:16,360 --> 00:08:17,960 Speaker 5: That's going to be the important part. 173 00:08:18,080 --> 00:08:19,720 Speaker 4: And it's something that a lot of people have said, 174 00:08:19,880 --> 00:08:22,440 Speaker 4: really is the case shape the idea that, particularly on 175 00:08:22,480 --> 00:08:25,239 Speaker 4: the lower end, you have not seen wages keep pace 176 00:08:25,680 --> 00:08:29,119 Speaker 4: with the rest of the income spheres. I just wonder, though, 177 00:08:29,440 --> 00:08:31,880 Speaker 4: how much we are seeing a massive amount of inflation 178 00:08:31,920 --> 00:08:35,160 Speaker 4: and acid prices and how that feeds into what you're 179 00:08:35,200 --> 00:08:37,920 Speaker 4: looking at, especially at a time that may rhyme with 180 00:08:37,960 --> 00:08:40,000 Speaker 4: the nineteen nineties, and we know what happened after the 181 00:08:40,080 --> 00:08:40,880 Speaker 4: nineteen nineties. 182 00:08:41,200 --> 00:08:43,080 Speaker 6: How much do you weigh that? How much do you 183 00:08:43,320 --> 00:08:46,320 Speaker 6: have to pay attention? Well, you know one of. 184 00:08:46,320 --> 00:08:47,040 Speaker 5: The things that you do. 185 00:08:47,559 --> 00:08:51,440 Speaker 3: So financial market conditions are one input into our decision making. 186 00:08:51,480 --> 00:08:53,400 Speaker 3: That one of the many inputs. You know, we have 187 00:08:53,480 --> 00:08:55,959 Speaker 3: two goals, price stability, full employment. We're trying to think 188 00:08:55,960 --> 00:09:00,640 Speaker 3: about what inputs affect those two variables, those two goals. 189 00:09:00,880 --> 00:09:03,400 Speaker 3: But what I look at is if you look under 190 00:09:03,400 --> 00:09:06,199 Speaker 3: the valuations, you know, people are really talking about one 191 00:09:06,200 --> 00:09:09,520 Speaker 3: of two things. This is going to be a transformative technology. 192 00:09:09,800 --> 00:09:11,720 Speaker 3: AI is going to change the world to be like 193 00:09:11,760 --> 00:09:13,559 Speaker 3: electricity or the steam engine. 194 00:09:13,640 --> 00:09:16,200 Speaker 5: And then the people who are a little more skeptical. 195 00:09:15,800 --> 00:09:18,280 Speaker 3: Are saying it's going to be a business as usual technology. 196 00:09:18,360 --> 00:09:20,960 Speaker 3: Think of computers in the Internet. The thing that's true 197 00:09:20,960 --> 00:09:23,840 Speaker 3: about both of those is they're both productive. You get 198 00:09:23,840 --> 00:09:26,600 Speaker 3: productivity from both of those. They both help with growth. 199 00:09:26,840 --> 00:09:30,280 Speaker 3: They both help the pie and the US expand. And 200 00:09:30,360 --> 00:09:33,080 Speaker 3: so we're not talking about a bunch of ideas with 201 00:09:33,160 --> 00:09:36,760 Speaker 3: no backing. We're talking about, you know, equity investors, not 202 00:09:36,960 --> 00:09:41,240 Speaker 3: highly leveraged going in and making banking bets really on 203 00:09:41,360 --> 00:09:43,840 Speaker 3: whether it's going to be transformative or business as usual. 204 00:09:44,080 --> 00:09:47,239 Speaker 3: But everybody agrees on one thing. It will change productivity. 205 00:09:47,480 --> 00:09:49,880 Speaker 4: At the same time, President Daily some people would suggest 206 00:09:49,920 --> 00:09:52,439 Speaker 4: that yes, you will see stocks continue to go up 207 00:09:52,600 --> 00:09:55,200 Speaker 4: in the face of another rate cut, But at the 208 00:09:55,200 --> 00:09:59,160 Speaker 4: same time, the transmission mechanism of the additional cuts are 209 00:09:59,200 --> 00:10:02,120 Speaker 4: slower to take. It's less efficient in terms of the 210 00:10:02,160 --> 00:10:04,400 Speaker 4: pass through just based on how much lending there is, 211 00:10:04,400 --> 00:10:06,880 Speaker 4: whether it's in the private lending sphere or beyond. 212 00:10:07,400 --> 00:10:08,520 Speaker 5: How do you measure. 213 00:10:08,240 --> 00:10:11,440 Speaker 4: These things at a confusing moment, Well, you. 214 00:10:11,440 --> 00:10:14,679 Speaker 3: Know, I guess this argument that we've somehow lost our 215 00:10:14,679 --> 00:10:18,240 Speaker 3: power monetary policy doesn't transmit. I simply don't see it 216 00:10:18,280 --> 00:10:20,640 Speaker 3: in the information. If you go out and you look 217 00:10:20,679 --> 00:10:24,320 Speaker 3: at what happened when inflation was running really, really high, 218 00:10:24,480 --> 00:10:28,880 Speaker 3: we raised rates pretty aggressively, and mortgage interest rates rose rapidly, 219 00:10:29,000 --> 00:10:32,480 Speaker 3: car loan rates rose rapidly, and the economy slowed. Inflation 220 00:10:32,600 --> 00:10:35,560 Speaker 3: came down. Right now, what I'm seeing is we adjust rates. 221 00:10:35,600 --> 00:10:38,600 Speaker 3: Mortgage interest rates come down, not one for one, that's 222 00:10:38,640 --> 00:10:41,000 Speaker 3: not how it works. Usually is less than one for one, 223 00:10:41,040 --> 00:10:43,320 Speaker 3: but they come down. You see a little more activity 224 00:10:43,320 --> 00:10:45,840 Speaker 3: in the housing market, you see a little more activity 225 00:10:45,840 --> 00:10:48,840 Speaker 3: in the borrowing market more generally, and you see that 226 00:10:48,960 --> 00:10:51,960 Speaker 3: dynamic work. So I guess the most important thing is 227 00:10:52,040 --> 00:10:54,600 Speaker 3: just to remember that Monterey policy acts with a lag 228 00:10:54,840 --> 00:10:57,000 Speaker 3: and right now we're making decisions not just for what's 229 00:10:57,000 --> 00:10:59,240 Speaker 3: going to happen next week, but what's going to happen 230 00:10:59,240 --> 00:11:01,400 Speaker 3: in the next six month to a year. So that's 231 00:11:01,440 --> 00:11:03,599 Speaker 3: how we have to think about it, with our forecasts 232 00:11:03,679 --> 00:11:07,040 Speaker 3: and then how we adjust policy as those forecasts evolve. 233 00:11:07,200 --> 00:11:11,160 Speaker 4: How frustrating has it been not to get government data? 234 00:11:11,280 --> 00:11:14,480 Speaker 3: You know, I really want the information, the fullest amount 235 00:11:14,480 --> 00:11:16,800 Speaker 3: of information we can possibly get. But one of the 236 00:11:16,840 --> 00:11:21,679 Speaker 3: things that I think maybe underestimated in public about what 237 00:11:21,679 --> 00:11:25,160 Speaker 3: the FED does is we're regularly relying on government provided 238 00:11:25,240 --> 00:11:27,560 Speaker 3: data that's the gold standard of data in the world. 239 00:11:27,880 --> 00:11:30,679 Speaker 3: We're also relying on private sector surveys which have been 240 00:11:30,679 --> 00:11:34,120 Speaker 3: collected for many, many years, and we can correlate them 241 00:11:33,920 --> 00:11:37,120 Speaker 3: with the government collected data over time and know exactly 242 00:11:37,320 --> 00:11:39,480 Speaker 3: how they relate to one another. And then, of course 243 00:11:39,480 --> 00:11:43,199 Speaker 3: there's really no replacement, especially at inflection points in the economy, 244 00:11:43,520 --> 00:11:49,880 Speaker 3: for talking to businesses, workers, communities, and consumers, asking people 245 00:11:49,920 --> 00:11:50,920 Speaker 3: what they're really doing. 246 00:11:51,200 --> 00:11:53,280 Speaker 5: And then you know, I like to do this, Go to. 247 00:11:53,240 --> 00:11:56,000 Speaker 3: The parking lots of your favorite retail stores and look 248 00:11:56,040 --> 00:11:57,640 Speaker 3: at how many cars are in the parking lot and 249 00:11:57,640 --> 00:11:58,560 Speaker 3: what people are buying. 250 00:11:58,840 --> 00:11:59,920 Speaker 5: That tells you a lot. 251 00:12:00,240 --> 00:12:03,240 Speaker 3: You know, airports are are full, people are out there. 252 00:12:03,480 --> 00:12:05,199 Speaker 3: You can go to you know, go to a sporting 253 00:12:05,200 --> 00:12:07,320 Speaker 3: event or a concert, see how many people are there. 254 00:12:07,600 --> 00:12:09,800 Speaker 3: What you see as an economy that is slower than 255 00:12:09,800 --> 00:12:13,200 Speaker 3: it was. Consumers that are not they're more picky about 256 00:12:13,200 --> 00:12:16,240 Speaker 3: what they spend on, but they're still out there participating 257 00:12:16,240 --> 00:12:16,960 Speaker 3: in the economy. 258 00:12:17,000 --> 00:12:17,880 Speaker 5: And that's how we get the. 259 00:12:17,840 --> 00:12:21,040 Speaker 3: Information we need to make the right decisions that are 260 00:12:21,080 --> 00:12:23,640 Speaker 3: according to our mandates, but mostly for the American people. 261 00:12:23,760 --> 00:12:24,319 Speaker 6: Presidentially. 262 00:12:24,360 --> 00:12:26,280 Speaker 4: You've been working with the FED or on the FED 263 00:12:26,800 --> 00:12:29,440 Speaker 4: Committee for a long long time on these in these debates, 264 00:12:29,480 --> 00:12:32,000 Speaker 4: have you ever seen it more divided than it is 265 00:12:32,080 --> 00:12:32,439 Speaker 4: right now? 266 00:12:32,480 --> 00:12:33,280 Speaker 6: On the FMC. 267 00:12:35,160 --> 00:12:36,320 Speaker 5: He knows, of course. 268 00:12:36,679 --> 00:12:38,000 Speaker 3: I mean, look at the if you look at the 269 00:12:38,040 --> 00:12:40,520 Speaker 3: transcripts and the meeting minutes, and you know it's helpful. 270 00:12:40,600 --> 00:12:42,760 Speaker 3: Go back and look at the nineteen nineties debates, and 271 00:12:42,800 --> 00:12:45,760 Speaker 3: go back and look at the commentary around the nineteen seventies. 272 00:12:46,040 --> 00:12:49,000 Speaker 3: You know it is a misnomer to think people always 273 00:12:49,040 --> 00:12:51,640 Speaker 3: agree the right way to think about it. In my judgment, 274 00:12:51,679 --> 00:12:54,520 Speaker 3: this has been my experience, is that the debate we 275 00:12:54,640 --> 00:12:57,200 Speaker 3: have I wouldn't even call a division. I would call 276 00:12:57,240 --> 00:13:00,439 Speaker 3: it differences of opinion that are really healthy in about 277 00:13:00,440 --> 00:13:03,160 Speaker 3: trying to make policy in an uncertain time. 278 00:13:03,200 --> 00:13:05,600 Speaker 5: With no truth. We don't have truth. 279 00:13:05,679 --> 00:13:09,840 Speaker 3: We have forecasts, we have our best estimates. We have 280 00:13:10,080 --> 00:13:12,520 Speaker 3: taking the evidence and then taking it again and looking 281 00:13:12,559 --> 00:13:15,560 Speaker 3: through it with different lenses. I see that as a 282 00:13:15,600 --> 00:13:18,240 Speaker 3: strength of the committee, a strength of the Federal Reserve, 283 00:13:18,600 --> 00:13:22,520 Speaker 3: and importantly is it is delivering the best possible decisions 284 00:13:22,520 --> 00:13:26,320 Speaker 3: we can make. So I have seen this many times before, 285 00:13:26,520 --> 00:13:28,680 Speaker 3: and I think it's always at inflection points that you 286 00:13:28,720 --> 00:13:32,160 Speaker 3: see the broadest amount of disagreement, and it's exactly what 287 00:13:32,200 --> 00:13:35,360 Speaker 3: I hope people would want from a committee making decisions 288 00:13:35,400 --> 00:13:38,319 Speaker 3: on inflation and full employment. It really does help us 289 00:13:38,640 --> 00:13:41,120 Speaker 3: make sure that we're doing the best we possibly can. 290 00:13:41,280 --> 00:13:43,160 Speaker 2: So you're happy to confirm on the record you have 291 00:13:43,200 --> 00:13:45,600 Speaker 2: not seen Governor Maron and President Smith in a fight 292 00:13:45,920 --> 00:13:48,200 Speaker 2: in the C day meeting. Can we confirm that President 293 00:13:48,280 --> 00:13:49,920 Speaker 2: Daty today that hasn't happened. 294 00:13:51,440 --> 00:13:53,960 Speaker 5: You always try, and yet I'm not a rookie. 295 00:13:54,880 --> 00:13:57,520 Speaker 7: Marry Daty, thank you. That's always good to see you. 296 00:13:57,679 --> 00:13:58,319 Speaker 7: Stay with us. 297 00:13:58,640 --> 00:14:11,040 Speaker 2: Multile Imberg surveillance coming up after this, stop scanning some ground. 298 00:14:11,120 --> 00:14:14,600 Speaker 2: Sarah Hunt Vampindt Saxton words, writing, investors are seeking refuge 299 00:14:14,600 --> 00:14:19,520 Speaker 2: in companies that demonstrate financial resilience, prioritizing steady dividend growers 300 00:14:19,600 --> 00:14:22,120 Speaker 2: and firms with a strong free cash flow needed to 301 00:14:22,240 --> 00:14:23,440 Speaker 2: weather a downturn. 302 00:14:23,680 --> 00:14:25,880 Speaker 7: Sarah joins us now for more. Sarah Good Mornick Heaoy morning. 303 00:14:25,920 --> 00:14:28,320 Speaker 2: There's some tech companies determined to eat into that cash flow, 304 00:14:28,320 --> 00:14:28,720 Speaker 2: aren't they. 305 00:14:29,080 --> 00:14:31,120 Speaker 8: They are definitely determined to eat into it. And I 306 00:14:31,160 --> 00:14:33,240 Speaker 8: think that between that and the fact that they're raising 307 00:14:33,320 --> 00:14:35,080 Speaker 8: some debt is what's given some people. 308 00:14:34,840 --> 00:14:36,560 Speaker 6: Some pause on the story right now. 309 00:14:36,760 --> 00:14:38,960 Speaker 8: So I think you mentioned earlier today sticker shock that 310 00:14:39,000 --> 00:14:40,800 Speaker 8: people are getting from some of these investments, So I 311 00:14:40,800 --> 00:14:42,000 Speaker 8: think that there is an issue there. 312 00:14:42,040 --> 00:14:44,520 Speaker 2: So it's AI the consumer slowed down. I mentioned that 313 00:14:44,600 --> 00:14:46,760 Speaker 2: note from Stuart Kaisher City. There's been a range of 314 00:14:46,800 --> 00:14:48,320 Speaker 2: reasons for the pullback. What do you think is the 315 00:14:48,320 --> 00:14:50,000 Speaker 2: dominant one in the last week. 316 00:14:50,880 --> 00:14:53,120 Speaker 6: It's interesting. I think it's really the end of all 317 00:14:53,160 --> 00:14:53,360 Speaker 6: of it. 318 00:14:53,400 --> 00:14:55,440 Speaker 8: And I think the government shutdown didn't matter until it 319 00:14:55,480 --> 00:14:57,200 Speaker 8: started to matter. And when you start to see those 320 00:14:57,240 --> 00:14:59,200 Speaker 8: pain points, people start thinking about when do we get 321 00:14:59,200 --> 00:15:01,360 Speaker 8: this resolved, how do we get this resolved? And how 322 00:15:01,400 --> 00:15:04,360 Speaker 8: bad does it make things going forward? And I think 323 00:15:04,680 --> 00:15:06,840 Speaker 8: all of a sudden that started to matter again. You 324 00:15:06,920 --> 00:15:09,640 Speaker 8: start to layer in enough things and it's the totality 325 00:15:09,640 --> 00:15:11,760 Speaker 8: of them, I think, more than an individual one. 326 00:15:12,000 --> 00:15:12,800 Speaker 6: Is it noise or. 327 00:15:12,760 --> 00:15:14,960 Speaker 4: Signal the sell off that we saw last week. Is 328 00:15:15,000 --> 00:15:17,400 Speaker 4: it something that is viable and just a blip that 329 00:15:17,440 --> 00:15:20,040 Speaker 4: offers opportunities, or is it signaling that there is some 330 00:15:20,120 --> 00:15:22,840 Speaker 4: weakness under the surface that needs to be paid attention to. 331 00:15:23,520 --> 00:15:25,640 Speaker 8: I think the magnitude of some of the declines on 332 00:15:25,680 --> 00:15:27,800 Speaker 8: the MISSUS gives you a little bit more pause than 333 00:15:27,920 --> 00:15:29,120 Speaker 8: you would have normally. 334 00:15:29,160 --> 00:15:30,800 Speaker 6: I think there's nothing wrong. 335 00:15:30,560 --> 00:15:33,840 Speaker 8: With having the market stabilize and or have some sort 336 00:15:33,840 --> 00:15:36,240 Speaker 8: of a down draft for a while after hitting record high. 337 00:15:36,120 --> 00:15:37,720 Speaker 6: After record high after record high. 338 00:15:37,920 --> 00:15:41,320 Speaker 8: So this is not like there's some massive change underneath, 339 00:15:41,520 --> 00:15:44,240 Speaker 8: but I do think that there is some willingness now 340 00:15:44,320 --> 00:15:46,720 Speaker 8: to look out and say these better grow, these earnings 341 00:15:46,720 --> 00:15:48,720 Speaker 8: better grow into some of these valuations, and or these 342 00:15:48,800 --> 00:15:51,320 Speaker 8: valuations are on a high level. Markets don't generally correct 343 00:15:51,360 --> 00:15:53,960 Speaker 8: because of valuation, but it certainly could give things pause. 344 00:15:54,000 --> 00:15:56,000 Speaker 8: And I don't think you've seen a major downdraft here, 345 00:15:56,000 --> 00:15:58,320 Speaker 8: but you definitely have seen some under the surface. You've 346 00:15:58,320 --> 00:16:01,080 Speaker 8: seen a lot more percolating and big drawdowns than you 347 00:16:01,160 --> 00:16:02,520 Speaker 8: normally would in individual names. 348 00:16:02,640 --> 00:16:05,200 Speaker 4: One thing that's raised some concerns, at least in conversations 349 00:16:05,200 --> 00:16:07,000 Speaker 4: that I've had, is that one of the biggest players 350 00:16:07,000 --> 00:16:09,120 Speaker 4: in this space is open Ai. And open Ai is 351 00:16:09,160 --> 00:16:12,080 Speaker 4: a private company that's expanding very rapidly and has circular 352 00:16:12,120 --> 00:16:14,080 Speaker 4: deals with all of the big tech players, and you 353 00:16:14,120 --> 00:16:16,720 Speaker 4: don't have visibility into what they're doing, who they're hiring, 354 00:16:16,720 --> 00:16:19,240 Speaker 4: how they're spending, or what their plans to growth grow 355 00:16:19,320 --> 00:16:22,920 Speaker 4: in terms of specific new programming. How much does that 356 00:16:22,960 --> 00:16:25,720 Speaker 4: give you true pause and actually make you lighten up 357 00:16:25,960 --> 00:16:28,560 Speaker 4: some of your exposure to the AI players. 358 00:16:29,120 --> 00:16:32,360 Speaker 8: I think the real question is the functionality and how 359 00:16:32,360 --> 00:16:34,840 Speaker 8: we are going to use everything. I don't disagree on 360 00:16:34,840 --> 00:16:36,280 Speaker 8: the open AI, and I think that part of the 361 00:16:36,320 --> 00:16:38,640 Speaker 8: issue was the serve of discussion around whether or not 362 00:16:38,640 --> 00:16:40,240 Speaker 8: there needed to be guarantees or needed to be this, 363 00:16:40,360 --> 00:16:40,920 Speaker 8: or needed. 364 00:16:40,680 --> 00:16:42,040 Speaker 6: To be that. In the end, we're going to need 365 00:16:42,280 --> 00:16:43,880 Speaker 6: a lot more power. Are we going to need as 366 00:16:43,920 --> 00:16:45,400 Speaker 6: much as we think we are. I'm not sure. 367 00:16:45,440 --> 00:16:48,160 Speaker 8: I think that there will be efficiencies in there, but 368 00:16:48,240 --> 00:16:50,920 Speaker 8: I think that the overall build is going to continue. 369 00:16:50,960 --> 00:16:54,640 Speaker 8: The emphasis on CHAT GPT of all of the different 370 00:16:54,840 --> 00:16:58,040 Speaker 8: large language models is one, but there are other ones 371 00:16:58,080 --> 00:17:00,520 Speaker 8: out there. But I do think that the circular financing 372 00:17:00,600 --> 00:17:02,920 Speaker 8: started to cause people to question it. And every time 373 00:17:02,960 --> 00:17:04,840 Speaker 8: the questions come is when you start to see that 374 00:17:04,920 --> 00:17:05,639 Speaker 8: NASA wobble. 375 00:17:05,880 --> 00:17:06,880 Speaker 6: One reason why. 376 00:17:06,680 --> 00:17:09,080 Speaker 4: This has been such a difficult economy and market to 377 00:17:09,119 --> 00:17:12,000 Speaker 4: call is because you have this sort of secular tech trade. 378 00:17:12,080 --> 00:17:15,040 Speaker 4: John's talked a lot about this overlaid on what could 379 00:17:15,080 --> 00:17:19,040 Speaker 4: be a cyclical shift in the underlying economy. How much 380 00:17:19,080 --> 00:17:22,680 Speaker 4: are you seeing a cyclical shift to the downside. It's 381 00:17:22,680 --> 00:17:26,440 Speaker 4: some of the recent earnings reports, whether it's fast retailers, 382 00:17:26,480 --> 00:17:29,120 Speaker 4: fast casual restaurants, or whether it's some of the other 383 00:17:29,200 --> 00:17:33,040 Speaker 4: margin compression we've seen in other stores versus a sort 384 00:17:33,080 --> 00:17:35,440 Speaker 4: of bottoming out in some ways, like the Mike Wilson's 385 00:17:35,480 --> 00:17:36,320 Speaker 4: of the world seem. 386 00:17:36,119 --> 00:17:39,040 Speaker 8: To think, well, this is going to come down to 387 00:17:39,480 --> 00:17:41,639 Speaker 8: and this is where the tricky the data being not 388 00:17:41,800 --> 00:17:44,360 Speaker 8: available is tricky. It's going to come down a lot 389 00:17:44,400 --> 00:17:46,480 Speaker 8: to the labor market in the near term because what 390 00:17:46,520 --> 00:17:49,040 Speaker 8: has happening there is going to i think, inform both 391 00:17:49,080 --> 00:17:51,879 Speaker 8: the FED and some other areas of what's going to 392 00:17:51,880 --> 00:17:54,680 Speaker 8: happen next. And I think it's hard to figure out 393 00:17:54,760 --> 00:17:57,280 Speaker 8: right now if people are if that's an AI problem, 394 00:17:57,359 --> 00:17:59,639 Speaker 8: if it's an inflation problem, if it's a cost problem. 395 00:17:59,800 --> 00:18:02,280 Speaker 8: All those different pieces are swelling together, and without data, 396 00:18:02,320 --> 00:18:04,119 Speaker 8: it's kind of hard to get a gut check on that. 397 00:18:04,440 --> 00:18:06,560 Speaker 8: But I don't know that you're having a major major 398 00:18:06,680 --> 00:18:09,439 Speaker 8: change until we really start to understand how to use 399 00:18:09,480 --> 00:18:12,640 Speaker 8: the tools. So I'm not sure that it's a secular 400 00:18:12,680 --> 00:18:14,399 Speaker 8: shift in the labor market as so much as we 401 00:18:14,480 --> 00:18:16,879 Speaker 8: have some cyclical issues going on in some higher costs. 402 00:18:16,960 --> 00:18:19,480 Speaker 2: There are some things going on though. Earnings growths fantastic, 403 00:18:19,560 --> 00:18:21,960 Speaker 2: so that corporations seemingly are making money. 404 00:18:22,240 --> 00:18:23,520 Speaker 7: Employment growth is terrible. 405 00:18:23,800 --> 00:18:26,240 Speaker 2: GDP is tracking really well at the moment, could change 406 00:18:26,320 --> 00:18:28,320 Speaker 2: given the government shut down, but at the moment tracking 407 00:18:28,400 --> 00:18:31,480 Speaker 2: quite well. And yet employment growth is pretty terrible based 408 00:18:31,480 --> 00:18:32,520 Speaker 2: on Vario syndicators. 409 00:18:32,600 --> 00:18:34,040 Speaker 7: What gives? What explains that? 410 00:18:34,520 --> 00:18:36,920 Speaker 8: I think it's a combination of there's still some scar 411 00:18:37,040 --> 00:18:39,199 Speaker 8: tissue of letting too many people go and people not 412 00:18:39,240 --> 00:18:40,840 Speaker 8: wanting to let people go if they think there's going 413 00:18:40,880 --> 00:18:41,560 Speaker 8: to be some growth. 414 00:18:41,720 --> 00:18:43,960 Speaker 6: But I think that the movement in jobs is part 415 00:18:44,000 --> 00:18:44,480 Speaker 6: of the problem. 416 00:18:44,480 --> 00:18:46,120 Speaker 8: It's sort of like the movement in houses is part 417 00:18:46,119 --> 00:18:48,119 Speaker 8: of the problem because unless you can get you know, 418 00:18:48,160 --> 00:18:50,760 Speaker 8: it's interesting they were talking about making mortgages assumable again, 419 00:18:50,760 --> 00:18:53,200 Speaker 8: which they weren't for a while. Unless you can get 420 00:18:53,640 --> 00:18:55,840 Speaker 8: you can keep somebody these old mortgage There's a lot 421 00:18:55,880 --> 00:18:58,480 Speaker 8: of stuckness in the housing market. There's some stuckness in 422 00:18:58,480 --> 00:19:00,680 Speaker 8: the labor market because people don't necess early want to 423 00:19:00,760 --> 00:19:02,840 Speaker 8: let people go and see what happens next. And I 424 00:19:02,880 --> 00:19:05,600 Speaker 8: don't know how that resolves itself in the near term. 425 00:19:05,880 --> 00:19:07,640 Speaker 8: It's harder to get a job now than I think 426 00:19:07,640 --> 00:19:09,320 Speaker 8: it probably was a few months ago. It's certainly from 427 00:19:09,320 --> 00:19:11,440 Speaker 8: a younger person standpoint, very difficult to get a job, 428 00:19:11,440 --> 00:19:13,399 Speaker 8: because when I talk to my younger people, they are 429 00:19:13,440 --> 00:19:14,400 Speaker 8: quite worried about that. 430 00:19:14,480 --> 00:19:17,480 Speaker 7: Fifty mL coas that's the proposal over the weekend? Do 431 00:19:17,560 --> 00:19:18,960 Speaker 7: you buy it? Does that make sense to you? 432 00:19:19,800 --> 00:19:22,720 Speaker 8: I think that your previous guests made a great point 433 00:19:22,760 --> 00:19:24,360 Speaker 8: about the fact that that or you made a great 434 00:19:24,359 --> 00:19:26,159 Speaker 8: point about the fact that that's a demand. 435 00:19:27,040 --> 00:19:28,719 Speaker 6: A response and not a supply response. 436 00:19:28,920 --> 00:19:30,600 Speaker 8: We need to be able to build more houses, so 437 00:19:30,600 --> 00:19:32,760 Speaker 8: there's either a regulatory push that needs to change. 438 00:19:32,960 --> 00:19:34,240 Speaker 6: Something needs to happen where you. 439 00:19:34,200 --> 00:19:36,520 Speaker 8: Actually get more affordable housing built. And that is the 440 00:19:36,560 --> 00:19:39,480 Speaker 8: problem right now. Making mortgages go out to fifty years. Sure, 441 00:19:39,520 --> 00:19:42,000 Speaker 8: it's like car loans to ten. It makes it cheaper, 442 00:19:42,000 --> 00:19:43,600 Speaker 8: but does it make sense? And is that what you 443 00:19:43,640 --> 00:19:45,320 Speaker 8: want to do to yourself from a financial. 444 00:19:45,000 --> 00:19:47,440 Speaker 2: Stand makes it cheaper on a monthly basis, but over 445 00:19:47,480 --> 00:19:49,239 Speaker 2: the term of the loan makes it a whole lot 446 00:19:49,280 --> 00:19:49,880 Speaker 2: more expensive. 447 00:19:49,920 --> 00:19:51,560 Speaker 4: And you're paying all the interest upfront, so at a 448 00:19:51,600 --> 00:19:54,080 Speaker 4: certain point, you're just paying the interest upfront to pay 449 00:19:54,119 --> 00:19:57,000 Speaker 4: the actual mortgage back when you're three hundred and four 450 00:19:57,080 --> 00:19:57,520 Speaker 4: years old. 451 00:19:57,680 --> 00:20:01,200 Speaker 2: Congresswoman Mantre Tanda Green, pushing back, heinst this proposal as well, 452 00:20:01,560 --> 00:20:03,359 Speaker 2: where is she on the political spectrum right now? 453 00:20:04,160 --> 00:20:05,600 Speaker 7: It's really pushing back the. 454 00:20:05,560 --> 00:20:08,480 Speaker 4: Circle, as we've been saying, right units on the other end, 455 00:20:08,480 --> 00:20:10,399 Speaker 4: after it gets to a certain place. There is a 456 00:20:10,440 --> 00:20:13,320 Speaker 4: populace tilt right now, and we have to keep pointing 457 00:20:13,359 --> 00:20:15,320 Speaker 4: to what it is responding to, and it is the 458 00:20:15,359 --> 00:20:17,679 Speaker 4: cost of living. It is some structural issues and the 459 00:20:17,680 --> 00:20:19,879 Speaker 4: real debate needs to be exactly what the best way. 460 00:20:19,800 --> 00:20:20,680 Speaker 6: Is to fix those. 461 00:20:20,720 --> 00:20:22,359 Speaker 2: So, Sarah, I just want to finish on tech. You 462 00:20:22,400 --> 00:20:23,879 Speaker 2: can do single names, So I want to bring up 463 00:20:23,920 --> 00:20:26,320 Speaker 2: a single name. Metsro and Microsoft have had a really 464 00:20:26,359 --> 00:20:29,280 Speaker 2: lousy thirty days and sitting out all this spending is 465 00:20:29,320 --> 00:20:33,040 Speaker 2: Apple and Apple has had a really really good thirty days. 466 00:20:33,280 --> 00:20:34,240 Speaker 7: Is there a story there? 467 00:20:35,440 --> 00:20:38,119 Speaker 8: I think that the difference between Microsoft and Meta on 468 00:20:38,160 --> 00:20:41,080 Speaker 8: the spending is that Metas had more of a checkered 469 00:20:41,119 --> 00:20:43,879 Speaker 8: history on money spent versus Microsoft, where I don't think 470 00:20:43,920 --> 00:20:46,119 Speaker 8: you can make that argument. I think that they're stuck 471 00:20:46,200 --> 00:20:48,960 Speaker 8: in a problematic we need more capacity than we have, 472 00:20:49,640 --> 00:20:51,800 Speaker 8: and I think for Apple there's been another story too, 473 00:20:51,840 --> 00:20:53,199 Speaker 8: because it's whether or not this is going to. 474 00:20:53,160 --> 00:20:53,919 Speaker 6: Be a refresh year. 475 00:20:54,040 --> 00:20:56,159 Speaker 8: Finally, after all the years of hoping that it was 476 00:20:56,200 --> 00:20:58,399 Speaker 8: going to be, so I think that there's some differentiation there, 477 00:20:58,680 --> 00:21:01,440 Speaker 8: but to the extent that it's not putting any strain 478 00:21:01,480 --> 00:21:03,400 Speaker 8: on Apple's balance sheet. This goes back to the argument 479 00:21:03,440 --> 00:21:04,240 Speaker 8: about balance sheets and. 480 00:21:04,240 --> 00:21:05,040 Speaker 6: Cash flow, right. 481 00:21:05,080 --> 00:21:07,720 Speaker 8: You want to make sure in an uncertain environment that 482 00:21:07,760 --> 00:21:12,119 Speaker 8: those companies are running through the proper amount of cash 483 00:21:12,160 --> 00:21:14,200 Speaker 8: and everything else. I don't think that's a problem for 484 00:21:14,280 --> 00:21:16,520 Speaker 8: Microsoft or Meta, but I do think that on the 485 00:21:16,680 --> 00:21:19,040 Speaker 8: edges that's starting to make people more wary, which is 486 00:21:19,040 --> 00:21:19,560 Speaker 8: why we like. 487 00:21:19,520 --> 00:21:20,400 Speaker 6: To look for lots of cash. 488 00:21:20,480 --> 00:21:23,000 Speaker 2: A month ago, though the bus was so different. Everything 489 00:21:23,080 --> 00:21:27,000 Speaker 2: with AI related was up and up into the right aggressively. 490 00:21:27,040 --> 00:21:29,600 Speaker 2: And a month later we're talking about Apple as if 491 00:21:29,600 --> 00:21:32,520 Speaker 2: it's spending discipline. And a month ago we had people 492 00:21:32,560 --> 00:21:34,520 Speaker 2: coming on the program saying they're missing a moment, they're 493 00:21:34,560 --> 00:21:36,920 Speaker 2: not spending enough. Is it a feature or a bug 494 00:21:37,160 --> 00:21:38,280 Speaker 2: the discipline of Apple. 495 00:21:39,800 --> 00:21:42,560 Speaker 8: It's both, depending on exactly what the psychology is. And 496 00:21:42,600 --> 00:21:44,640 Speaker 8: I will say that this year has not been rewarding 497 00:21:44,640 --> 00:21:46,600 Speaker 8: the people who are more cautious with their dollars as 498 00:21:46,640 --> 00:21:48,480 Speaker 8: much as it's been rewarding the people who are spending 499 00:21:48,520 --> 00:21:50,639 Speaker 8: like crazy. But when people start to worry that spending 500 00:21:50,680 --> 00:21:52,720 Speaker 8: like crazy can't go on. They go right back to 501 00:21:52,760 --> 00:21:54,800 Speaker 8: the folks where they think that there's some discipline there. 502 00:21:54,920 --> 00:21:56,240 Speaker 8: So I could be a little bit of a back 503 00:21:56,240 --> 00:21:56,560 Speaker 8: and forth. 504 00:21:56,600 --> 00:21:57,879 Speaker 6: I think it's an and a non in the. 505 00:21:57,880 --> 00:22:02,720 Speaker 2: War stay with US Multlomberg surveillance coming up after this. 506 00:22:11,560 --> 00:22:12,280 Speaker 7: The shutdown. 507 00:22:12,320 --> 00:22:15,480 Speaker 2: Adding to economic uncertainty is the White House estimates losses 508 00:22:15,760 --> 00:22:18,439 Speaker 2: of fifteen billion dollars per week. Lindsay pix Or of 509 00:22:18,440 --> 00:22:21,679 Speaker 2: Stifhel writing, investors will be listening closely to any indications 510 00:22:21,680 --> 00:22:24,600 Speaker 2: of a growing divide among policy opinions, the threshold for 511 00:22:24,600 --> 00:22:28,680 Speaker 2: additional rate cuts and broader expectations for policy going forward. 512 00:22:28,920 --> 00:22:31,040 Speaker 2: Lindsay joint us Now for more, Lindsay, welcome back. What 513 00:22:31,119 --> 00:22:33,240 Speaker 2: is the strongest argument right now for this Fed to 514 00:22:33,320 --> 00:22:35,480 Speaker 2: sit out the December ratecount decision? 515 00:22:36,560 --> 00:22:37,960 Speaker 9: Well, I think right now, when we look at the 516 00:22:37,960 --> 00:22:41,840 Speaker 9: broader pace of economic activity trending near three percent, coupled 517 00:22:41,840 --> 00:22:45,639 Speaker 9: with inflation still elevated well above the Fed's two percent target, 518 00:22:46,359 --> 00:22:48,720 Speaker 9: I think it's going to be difficult to justify any 519 00:22:48,760 --> 00:22:52,320 Speaker 9: further policy easing and really solidify the need for the 520 00:22:52,359 --> 00:22:55,439 Speaker 9: FED to take a pause sit on the sideline allow 521 00:22:55,560 --> 00:22:58,000 Speaker 9: further data to evolve and give the FED a better 522 00:22:58,119 --> 00:23:01,720 Speaker 9: sense of where we're headed go going forward. But right now, 523 00:23:01,840 --> 00:23:04,200 Speaker 9: not only is that justification not there, but the sense 524 00:23:04,240 --> 00:23:06,760 Speaker 9: of urgency is far from there as well. 525 00:23:07,000 --> 00:23:09,359 Speaker 4: Lindsay, when we've been looking at other data points to 526 00:23:09,480 --> 00:23:12,640 Speaker 4: try to backfill what we haven't been getting from the government, 527 00:23:12,920 --> 00:23:16,240 Speaker 4: everyone seems to focus on the labor market. What metrics 528 00:23:16,280 --> 00:23:19,679 Speaker 4: are you watching for inflation? On the other side of things, 529 00:23:20,160 --> 00:23:20,560 Speaker 4: I think. 530 00:23:20,440 --> 00:23:22,560 Speaker 9: One of the key metrics that we're focused on right 531 00:23:22,600 --> 00:23:26,440 Speaker 9: now is inflation expectations. Despite the fact that the FED 532 00:23:26,480 --> 00:23:29,680 Speaker 9: continues to vocalize a desire to get back to two percent, 533 00:23:30,119 --> 00:23:32,639 Speaker 9: as we've seen over the past several years, they failed 534 00:23:32,720 --> 00:23:35,600 Speaker 9: to take the needed steps to ensure a return to 535 00:23:35,640 --> 00:23:38,560 Speaker 9: price stability, and the market is seeing that when we 536 00:23:38,600 --> 00:23:42,600 Speaker 9: look at the latest inflation expectation calculations near terms still 537 00:23:42,680 --> 00:23:45,480 Speaker 9: up near five percent, but longer term, so we're talking 538 00:23:45,560 --> 00:23:48,879 Speaker 9: five years and out, still up near four percent. So 539 00:23:48,920 --> 00:23:51,280 Speaker 9: there is a lot of concern that despite where the 540 00:23:51,280 --> 00:23:54,920 Speaker 9: FED is right now, further inflationary pressures may be coming 541 00:23:54,920 --> 00:23:55,960 Speaker 9: down the pipeline A. 542 00:23:56,040 --> 00:23:58,159 Speaker 4: So you're talking about I believe the University of Michigan 543 00:23:58,280 --> 00:24:00,920 Speaker 4: Sentiment Survey, because when I look at say break even rates, 544 00:24:00,960 --> 00:24:02,879 Speaker 4: it's still around the two point two percent over the 545 00:24:02,920 --> 00:24:04,960 Speaker 4: next five to ten years. So when you take a 546 00:24:04,960 --> 00:24:08,720 Speaker 4: look at the market based inflation expectations, they haven't risen. 547 00:24:09,000 --> 00:24:12,080 Speaker 4: How do you explain that that sort of discrepancy. 548 00:24:12,960 --> 00:24:15,040 Speaker 9: Well, I think right now it goes back to the 549 00:24:15,040 --> 00:24:18,320 Speaker 9: telltale story that we're feeling more inflation from a consumer 550 00:24:18,400 --> 00:24:22,680 Speaker 9: standpoint than maybe the market calculations are presenting that two 551 00:24:22,680 --> 00:24:25,760 Speaker 9: and a half is to three percent range. Consumers are 552 00:24:25,760 --> 00:24:29,360 Speaker 9: feeling twenty percent increases, thirty percent increases at least over 553 00:24:29,400 --> 00:24:32,200 Speaker 9: the past five years across a number of key categories, 554 00:24:32,440 --> 00:24:37,480 Speaker 9: from transportation, household energy, to your morning coffee. This has 555 00:24:37,520 --> 00:24:40,680 Speaker 9: been compounding pressure on the consumer. And of course, as 556 00:24:40,680 --> 00:24:44,439 Speaker 9: we know, inflation expectations feed directly back in to the 557 00:24:44,480 --> 00:24:47,720 Speaker 9: realized inflation calculation, and this is something that the FED 558 00:24:47,800 --> 00:24:52,159 Speaker 9: has historically kept a very zion in order to not 559 00:24:52,280 --> 00:25:00,479 Speaker 9: allow inflation expectations big on further underlying inflationary data is 560 00:25:00,640 --> 00:25:04,119 Speaker 9: one key data point to suggest the FED needs to 561 00:25:04,240 --> 00:25:08,520 Speaker 9: take a further more direct focus on teaming price pressures 562 00:25:08,520 --> 00:25:09,120 Speaker 9: in the marketplace. 563 00:25:09,240 --> 00:25:10,919 Speaker 2: Lindsay the last time we had a big moment with 564 00:25:11,040 --> 00:25:13,240 Speaker 2: inflation was of course coming out of the pandemic, but 565 00:25:13,280 --> 00:25:15,680 Speaker 2: it was easier for the Federal Reserve that time. Even 566 00:25:15,720 --> 00:25:17,960 Speaker 2: though they took that time, it was certainly easier because 567 00:25:17,960 --> 00:25:21,640 Speaker 2: the labor market was so tight. What's interesting about this moment, lindsay, 568 00:25:21,840 --> 00:25:24,359 Speaker 2: is that they feel not great about inflation, but they 569 00:25:24,400 --> 00:25:27,280 Speaker 2: also feel pretty lousy about the labor market as well. 570 00:25:27,320 --> 00:25:30,480 Speaker 2: And you see that across sentiment surface and lindsay, I'm 571 00:25:30,520 --> 00:25:33,440 Speaker 2: curious why you believe we're tracking so well with GDP 572 00:25:33,920 --> 00:25:36,720 Speaker 2: and your attitudes about the labor market are so lousy. 573 00:25:38,119 --> 00:25:39,320 Speaker 9: Well, I think when we look at some of the 574 00:25:39,400 --> 00:25:41,359 Speaker 9: labor market conditions, we have to be careful not to 575 00:25:41,400 --> 00:25:44,080 Speaker 9: put too much stock in one data set, or one 576 00:25:44,160 --> 00:25:46,960 Speaker 9: data point for that matter. First off, a top line 577 00:25:47,040 --> 00:25:50,800 Speaker 9: job creation has slowed markedly over the past couple of years, 578 00:25:50,840 --> 00:25:53,960 Speaker 9: but this is somewhat expected in an aged recovery, not 579 00:25:54,080 --> 00:25:58,400 Speaker 9: to mention an ongoing structural shift with businesses increasingly relying 580 00:25:58,600 --> 00:26:02,359 Speaker 9: on technology the adoption of AI, so we no longer 581 00:26:02,560 --> 00:26:05,399 Speaker 9: need two hundred three hundred thousand jobs to reach that 582 00:26:05,440 --> 00:26:08,640 Speaker 9: full employment level. Second, just because we see that one 583 00:26:08,680 --> 00:26:11,680 Speaker 9: data point again, top line, job creation is slowing. Other 584 00:26:11,800 --> 00:26:15,040 Speaker 9: metrics suggest we're on more solid footing. When we look 585 00:26:15,040 --> 00:26:18,160 Speaker 9: at the unemployment rates still near ish four percent, when 586 00:26:18,160 --> 00:26:20,439 Speaker 9: we look at wage growth, still up at four percent, 587 00:26:20,800 --> 00:26:23,520 Speaker 9: when we look at jobless claims, still very range bound 588 00:26:23,520 --> 00:26:25,600 Speaker 9: as they have been for the past couple of years. 589 00:26:25,800 --> 00:26:29,520 Speaker 9: So just as there's some indications of cooling, there's vast 590 00:26:29,560 --> 00:26:32,360 Speaker 9: other indications that the labor market is far more solid 591 00:26:32,760 --> 00:26:34,680 Speaker 9: than some of these more dire predictions. 592 00:26:34,720 --> 00:26:36,480 Speaker 2: So lindsay, just to follow up, because we've gone over 593 00:26:36,480 --> 00:26:39,240 Speaker 2: this ground a few times throughout summer chair and Powell 594 00:26:39,280 --> 00:26:41,560 Speaker 2: appears to have shifted his view on the labor market 595 00:26:41,600 --> 00:26:44,280 Speaker 2: and the way he anchors his view around the labor market. 596 00:26:44,680 --> 00:26:46,960 Speaker 2: He took your view of things at the start of summer, 597 00:26:47,080 --> 00:26:49,080 Speaker 2: he anchored his view with the labor market around the 598 00:26:49,160 --> 00:26:52,280 Speaker 2: unemployment rate, and then things changed through the summer and 599 00:26:52,359 --> 00:26:54,840 Speaker 2: he appeared to anchor his view around the deceleration we've 600 00:26:54,880 --> 00:26:57,480 Speaker 2: seen in overall pay roads. Where do you think will 601 00:26:57,520 --> 00:27:00,200 Speaker 2: be by the time we get to December. 602 00:27:00,280 --> 00:27:01,440 Speaker 5: Well, I think it was pretty clear. 603 00:27:01,560 --> 00:27:03,120 Speaker 6: We saw in this statement. 604 00:27:02,760 --> 00:27:06,159 Speaker 9: That the Fed downgraded their assessment of the risks on 605 00:27:06,200 --> 00:27:09,920 Speaker 9: the employment side, but not necessarily in terms of forward 606 00:27:09,920 --> 00:27:13,280 Speaker 9: looking thinking, but as justification for the September and October 607 00:27:13,359 --> 00:27:16,600 Speaker 9: rate cut. But cheer Paul clarified during the press conference, 608 00:27:16,640 --> 00:27:20,240 Speaker 9: saying that he does not expect any further deterioration in 609 00:27:20,359 --> 00:27:23,199 Speaker 9: labor market conditions, suggesting that we may have reached this 610 00:27:23,280 --> 00:27:27,160 Speaker 9: point of stability, further justifying than a position of policy 611 00:27:27,160 --> 00:27:28,120 Speaker 9: on the sideline. 612 00:27:29,320 --> 00:27:29,960 Speaker 7: Stay with us. 613 00:27:30,280 --> 00:27:42,680 Speaker 2: More Bloomberg surveillance coming up after this. Magot swipert Bank 614 00:27:42,720 --> 00:27:45,320 Speaker 2: for American Writing. Our houseview is still that the FED 615 00:27:45,359 --> 00:27:47,600 Speaker 2: holds off on a cup at the December meeting and 616 00:27:47,680 --> 00:27:51,520 Speaker 2: indeed doesn't cut again until the middle of twenty twenty six. 617 00:27:51,600 --> 00:27:53,879 Speaker 2: Maket joined this now for more Meccan Good morning morning. 618 00:27:54,080 --> 00:27:57,200 Speaker 2: You're essentially saying that Chairman POW's a last cup as 619 00:27:57,240 --> 00:27:59,000 Speaker 2: FED chair was last month. 620 00:27:59,040 --> 00:27:59,680 Speaker 7: He's done. 621 00:27:59,760 --> 00:28:01,040 Speaker 6: That's indeed true. 622 00:28:01,080 --> 00:28:01,320 Speaker 7: John. 623 00:28:01,560 --> 00:28:04,240 Speaker 1: You know, ultimately the FED reaction function that we see 624 00:28:04,320 --> 00:28:06,640 Speaker 1: right now, and we're hearing this from a number of voters, 625 00:28:07,200 --> 00:28:10,760 Speaker 1: is this caution around inflation. And you know, I think 626 00:28:10,840 --> 00:28:13,040 Speaker 1: to help answer this question of is it demand is 627 00:28:13,040 --> 00:28:15,320 Speaker 1: it supply related? Look at some of the claims data 628 00:28:15,400 --> 00:28:18,399 Speaker 1: claims is still quite low, which is a pretty decent 629 00:28:18,440 --> 00:28:21,240 Speaker 1: sign to me that people are not being fired at large, 630 00:28:21,240 --> 00:28:23,840 Speaker 1: at least in the private sector right now. And what 631 00:28:23,880 --> 00:28:25,760 Speaker 1: we see in our B of a card data is 632 00:28:25,800 --> 00:28:28,880 Speaker 1: still this resilience of the US consumer and the importance 633 00:28:28,880 --> 00:28:32,280 Speaker 1: of the consumer we see generally speaking in terms of 634 00:28:32,320 --> 00:28:35,680 Speaker 1: that leading what we look at from a labor market perspective, 635 00:28:35,720 --> 00:28:38,960 Speaker 1: we usually see consumption lead labor, not the other way around. 636 00:28:39,080 --> 00:28:41,680 Speaker 2: So the last time they put out forecasts, which was September, 637 00:28:42,080 --> 00:28:45,120 Speaker 2: they conceded the outlook hadn't really changed, but the risk 638 00:28:45,200 --> 00:28:48,040 Speaker 2: around the outlook had let's cut risk management. When they 639 00:28:48,040 --> 00:28:50,400 Speaker 2: get together in December, the middle of December and they 640 00:28:50,440 --> 00:28:52,240 Speaker 2: have to put out new forecasts, are they going to 641 00:28:52,240 --> 00:28:54,960 Speaker 2: say the same thing again, the outlook hasn't really changed. 642 00:28:55,240 --> 00:28:57,880 Speaker 1: Well, I think John, it's really about this balance of 643 00:28:58,000 --> 00:29:01,640 Speaker 1: risk assessment and what changed in September and why they 644 00:29:01,680 --> 00:29:05,280 Speaker 1: penciled in this additional cut at the December meeting is 645 00:29:05,320 --> 00:29:08,240 Speaker 1: because they were viewing this risk more to the downside 646 00:29:08,280 --> 00:29:11,240 Speaker 1: on the labor market, and we're thinking that that would 647 00:29:11,320 --> 00:29:14,320 Speaker 1: drive more of a downside shift in inflation. But if 648 00:29:14,320 --> 00:29:16,480 Speaker 1: we look at some of the inflation data right now, 649 00:29:16,920 --> 00:29:19,400 Speaker 1: we're still seeing a lot of strength in services inflation 650 00:29:19,520 --> 00:29:21,720 Speaker 1: that tends to be more of the cyclical component of 651 00:29:21,720 --> 00:29:24,880 Speaker 1: the inflation basket. And then again we are also in 652 00:29:25,040 --> 00:29:28,840 Speaker 1: importantly this absence of data from the Fed. Probably one 653 00:29:28,840 --> 00:29:30,440 Speaker 1: of the first data points that we're going to get 654 00:29:30,480 --> 00:29:34,200 Speaker 1: out once the government reopens is the September Labor report, 655 00:29:34,600 --> 00:29:37,960 Speaker 1: and an our view, that's going to be above consensus expectations. 656 00:29:38,360 --> 00:29:41,080 Speaker 4: Why aren't wages increasing more than if this is the 657 00:29:41,120 --> 00:29:42,880 Speaker 4: demand picture that you're talking about. 658 00:29:43,120 --> 00:29:47,040 Speaker 1: Well, while we are certainly seeing this cooling in hiring, 659 00:29:47,840 --> 00:29:51,520 Speaker 1: we are not seeing companies turned to be outright firing folks. 660 00:29:51,840 --> 00:29:54,080 Speaker 1: And so the reason why we're not seeing this uptick 661 00:29:54,320 --> 00:29:57,320 Speaker 1: in wages is largely because we're seeing the shift from 662 00:29:57,360 --> 00:30:01,680 Speaker 1: a supply perspective. AI maybe one fact that's slowing the 663 00:30:01,720 --> 00:30:05,200 Speaker 1: growth of employment overall, but we're not seeing this turn 664 00:30:05,280 --> 00:30:08,160 Speaker 1: the other way around in terms of net firing. 665 00:30:08,240 --> 00:30:10,360 Speaker 4: Right now, if the Fed does cut race, does that 666 00:30:10,440 --> 00:30:13,080 Speaker 4: make you less likely to go into duration? I mean, 667 00:30:13,080 --> 00:30:15,520 Speaker 4: how much does that affect the longer term inflation backdrop? 668 00:30:15,600 --> 00:30:15,800 Speaker 7: Yes? 669 00:30:15,800 --> 00:30:18,000 Speaker 1: And this is exactly the question that we're asking ourselves 670 00:30:18,360 --> 00:30:21,240 Speaker 1: right now, Lisa, is how to think about December and 671 00:30:21,600 --> 00:30:23,440 Speaker 1: the path for the FED in near term versus what 672 00:30:23,480 --> 00:30:25,920 Speaker 1: some of these risks are for a FED more medium, 673 00:30:26,000 --> 00:30:29,560 Speaker 1: longer term. We understand Powell's reaction function pretty clearly. We 674 00:30:29,640 --> 00:30:32,040 Speaker 1: have a nice indicator from a lot of the FED 675 00:30:32,040 --> 00:30:34,120 Speaker 1: speakers right now in terms of how they're thinking about 676 00:30:34,160 --> 00:30:37,160 Speaker 1: this balance. But we worry about a new FED chair 677 00:30:37,160 --> 00:30:39,680 Speaker 1: that's going to be thinking about the balance of risks differently, 678 00:30:40,600 --> 00:30:45,320 Speaker 1: namely not considering three percent inflation to be meaningfully above target. 679 00:30:45,320 --> 00:30:48,480 Speaker 1: We're hearing some of those comments from Myron and Bowman 680 00:30:48,560 --> 00:30:50,880 Speaker 1: right now at three percent is okay. We're discounting that 681 00:30:50,920 --> 00:30:53,880 Speaker 1: three percent inflation rate, and a new FED chair may 682 00:30:53,920 --> 00:30:56,440 Speaker 1: be more concerned about the slow down that we're seeing 683 00:30:56,720 --> 00:30:59,920 Speaker 1: and hiring, which we think is more is more supplied. 684 00:31:00,160 --> 00:31:02,400 Speaker 1: They may be overweighting from a demand person. 685 00:31:02,520 --> 00:31:05,800 Speaker 4: Why isn't the current FED also tacitly saying that three 686 00:31:05,840 --> 00:31:09,200 Speaker 4: percent inflation is fine, because essentially that's where it's been 687 00:31:09,280 --> 00:31:11,360 Speaker 4: for quite a while, and it's been above that two 688 00:31:11,400 --> 00:31:13,320 Speaker 4: percent level for more than five years. So at a 689 00:31:13,320 --> 00:31:15,360 Speaker 4: certain point, maybe they're saying they're still going to get 690 00:31:15,360 --> 00:31:17,080 Speaker 4: down to the two percent target, But at what point 691 00:31:17,320 --> 00:31:19,000 Speaker 4: are they going to say it will get down maybe 692 00:31:19,000 --> 00:31:20,040 Speaker 4: in twenty seventy three. 693 00:31:20,400 --> 00:31:22,480 Speaker 1: And this is a big issue for the fixed income 694 00:31:22,520 --> 00:31:24,520 Speaker 1: market because if you look at what the market's pricing 695 00:31:24,560 --> 00:31:27,720 Speaker 1: for inflation in the medium longer term, they're giving the 696 00:31:27,760 --> 00:31:29,840 Speaker 1: FED full credibility on this. You look at where a 697 00:31:29,840 --> 00:31:33,240 Speaker 1: tenure breaks are priced, considering that thirty forty basis point 698 00:31:33,240 --> 00:31:37,280 Speaker 1: but differential between CPI and PCE. The market's giving the 699 00:31:37,320 --> 00:31:39,880 Speaker 1: FED full credibility on this two percent target. And if 700 00:31:39,920 --> 00:31:41,960 Speaker 1: you do have a FED that's getting more comfortable with 701 00:31:41,960 --> 00:31:45,560 Speaker 1: three percent inflation cutting alongside that, we see more of 702 00:31:45,920 --> 00:31:48,800 Speaker 1: upside to being long inflation. We like that at the 703 00:31:48,800 --> 00:31:49,720 Speaker 1: tenure part of the curve. 704 00:31:49,760 --> 00:31:52,040 Speaker 2: It's kind of strange how well anchored market based inflation 705 00:31:52,080 --> 00:31:55,520 Speaker 2: and expectations have been, how credible this pursuit of two 706 00:31:55,520 --> 00:31:58,840 Speaker 2: percent seems to be when it's anything but based on reality. 707 00:31:59,080 --> 00:32:01,440 Speaker 2: How the DTAs come in, and how Effet's behaved over 708 00:32:01,480 --> 00:32:02,320 Speaker 2: the last few years. 709 00:32:02,440 --> 00:32:04,720 Speaker 6: It's something that I check almost every single day. 710 00:32:04,760 --> 00:32:07,240 Speaker 4: Honestly, the five year, five year break even raids and 711 00:32:07,280 --> 00:32:09,480 Speaker 4: the ten yure break even raids, and I've just been 712 00:32:09,520 --> 00:32:11,360 Speaker 4: looking at where is the breakout going to come? It 713 00:32:11,480 --> 00:32:13,760 Speaker 4: just has not come, And I wonder how much people 714 00:32:13,800 --> 00:32:16,760 Speaker 4: are looking at disinflationary forces, whether it's from AI and 715 00:32:16,800 --> 00:32:19,600 Speaker 4: accounting for that before accounting for some of the inflationary 716 00:32:19,640 --> 00:32:20,560 Speaker 4: aspects or other things. 717 00:32:20,560 --> 00:32:21,480 Speaker 6: I don't really have an answer. 718 00:32:21,520 --> 00:32:23,920 Speaker 2: I've said this week would be super snoozy with a caveat. 719 00:32:23,920 --> 00:32:25,400 Speaker 2: I did say this in the last hour as well, 720 00:32:25,440 --> 00:32:27,479 Speaker 2: that we might get some economic data. So let's talk 721 00:32:27,480 --> 00:32:31,280 Speaker 2: about the data you set above consensus expectations on payrolls 722 00:32:31,480 --> 00:32:34,520 Speaker 2: once it's released. What's above consensus right now? What's good 723 00:32:34,800 --> 00:32:35,360 Speaker 2: for them? 724 00:32:35,640 --> 00:32:38,920 Speaker 1: Good number is just still steady job creation that's modestly 725 00:32:38,960 --> 00:32:41,240 Speaker 1: above break even and break even right now the market 726 00:32:41,240 --> 00:32:44,959 Speaker 1: thinks is probably much much lower than what we had 727 00:32:45,000 --> 00:32:48,320 Speaker 1: been seeing previously, called around fifty k or so. And 728 00:32:48,360 --> 00:32:50,480 Speaker 1: a lot of that comes back to what Lisa's point was, 729 00:32:50,560 --> 00:32:52,760 Speaker 1: related to the supply balance that we have in the 730 00:32:52,800 --> 00:32:54,600 Speaker 1: labor market right now, this slow. 731 00:32:54,320 --> 00:32:55,160 Speaker 6: Down and hiring. 732 00:32:55,560 --> 00:32:58,040 Speaker 1: So any number that doesn't indicate an uptick in the 733 00:32:58,120 --> 00:33:00,840 Speaker 1: unemployment rate, I think is is pretty decent. 734 00:33:00,880 --> 00:33:03,240 Speaker 2: So sixty seventies is enough to keep the Fed on 735 00:33:03,280 --> 00:33:04,240 Speaker 2: the sideline, I think so. 736 00:33:04,440 --> 00:33:06,480 Speaker 1: I think so, John, And again it's going to be 737 00:33:06,520 --> 00:33:09,680 Speaker 1: this decision in the absence of us likely getting any 738 00:33:09,720 --> 00:33:13,280 Speaker 1: more inflation data through the December meeting. We very likely 739 00:33:13,320 --> 00:33:15,560 Speaker 1: had the last CPI print that we're going to get 740 00:33:15,680 --> 00:33:19,960 Speaker 1: until the December the December Fed meeting. CPI was slated 741 00:33:20,000 --> 00:33:23,200 Speaker 1: to come out the second day of the December Fed Meeting, 742 00:33:23,240 --> 00:33:28,360 Speaker 1: but inflation is not something that they can actually calculate retroactively. 743 00:33:28,960 --> 00:33:31,080 Speaker 1: They do this survey throughout the month, and you know, 744 00:33:31,120 --> 00:33:34,160 Speaker 1: we're still now part of the way through November going 745 00:33:34,200 --> 00:33:34,880 Speaker 1: to be okay. 746 00:33:34,880 --> 00:33:36,560 Speaker 2: This is really important because I'm not sure how many 747 00:33:36,560 --> 00:33:38,320 Speaker 2: people are quite aware of this. So you suggest that 748 00:33:38,360 --> 00:33:41,560 Speaker 2: even if the government reopens like tomorrow, we move along, 749 00:33:41,800 --> 00:33:44,440 Speaker 2: that they might not have CPI December meeting. 750 00:33:44,480 --> 00:33:47,960 Speaker 1: They may not because oftentimes when the government's closed for 751 00:33:47,960 --> 00:33:50,560 Speaker 1: a while, it takes them a while to actually get 752 00:33:50,600 --> 00:33:53,920 Speaker 1: back to a normal production schedule in terms of publishing 753 00:33:53,960 --> 00:33:57,000 Speaker 1: the data. So it's very likely that we won't get 754 00:33:57,040 --> 00:33:59,120 Speaker 1: any more inflation data through the December meeting. 755 00:34:00,160 --> 00:34:03,720 Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best 756 00:34:03,720 --> 00:34:07,040 Speaker 2: in markets, economics, and geopolitics. You can watch the show 757 00:34:07,080 --> 00:34:10,040 Speaker 2: live on Bloomberg TV weekday mornings from six am to 758 00:34:10,160 --> 00:34:13,920 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 759 00:34:14,080 --> 00:34:16,320 Speaker 2: or anywhere else you listen, and as always, on the 760 00:34:16,320 --> 00:34:18,759 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.