1
00:00:00,080 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:11,960 --> 00:00:15,560
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along

3
00:00:15,600 --> 00:00:18,960
Speaker 2: with Paul Sweeney. Join us each day for insight from

4
00:00:18,960 --> 00:00:23,160
Speaker 2: the best in economics, finance, investment, and international relations. You

5
00:00:23,160 --> 00:00:26,520
Speaker 2: can also watch the show live on YouTube. Visit the

6
00:00:26,520 --> 00:00:31,280
Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday

7
00:00:31,280 --> 00:00:34,320
Speaker 2: mornings from seven to ten am Eastern from our global

8
00:00:34,360 --> 00:00:39,000
Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify,

9
00:00:39,360 --> 00:00:42,920
Speaker 2: or anywhere else you listen and always I'm Bloomberg Radio,

10
00:00:43,080 --> 00:00:46,800
Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. We got

11
00:00:46,840 --> 00:00:49,360
Speaker 2: so much to talk about with James Bullard. Of course,

12
00:00:49,800 --> 00:00:53,320
Speaker 2: original is Saint Louis Fed with all the research heritage

13
00:00:53,680 --> 00:00:58,000
Speaker 2: of the Saint Louis Fed his PhD from Indiana University,

14
00:00:58,440 --> 00:01:02,520
Speaker 2: and he's wearing a boiler of Purdue pin today with

15
00:01:02,600 --> 00:01:06,319
Speaker 2: this wonderful challenge taken on what's the difference between I

16
00:01:06,440 --> 00:01:07,679
Speaker 2: you in Purdue.

17
00:01:09,160 --> 00:01:14,120
Speaker 3: Purdue is number four engineering school in the country. So

18
00:01:14,160 --> 00:01:16,200
Speaker 3: it's MIT Stanford.

19
00:01:15,640 --> 00:01:17,039
Speaker 2: Berkeley out in the Midwest.

20
00:01:17,319 --> 00:01:22,200
Speaker 3: Yeah, and so the medical school is down at IU,

21
00:01:21,800 --> 00:01:25,400
Speaker 3: but engineering is at Produce. So it's a great Technical

22
00:01:25,520 --> 00:01:30,000
Speaker 3: University and the business school is aiming to combine even

23
00:01:30,040 --> 00:01:33,440
Speaker 3: better than we have with the engineering school and get

24
00:01:33,440 --> 00:01:34,400
Speaker 3: great graduate school.

25
00:01:34,440 --> 00:01:36,440
Speaker 2: You're enjoying the private life.

26
00:01:36,440 --> 00:01:40,039
Speaker 3: Oh I am, and it's going very well. It's great

27
00:01:40,080 --> 00:01:42,640
Speaker 3: to be back on campus and around the students and

28
00:01:43,600 --> 00:01:44,080
Speaker 3: hanging out.

29
00:01:44,360 --> 00:01:46,000
Speaker 2: I want to go back to I believe it was

30
00:01:46,040 --> 00:01:50,960
Speaker 2: twenty sixteen and doctor Bullard, you had a profoundly important

31
00:01:51,000 --> 00:01:55,000
Speaker 2: paper saying, as Leguard is saying at the ECB, we

32
00:01:55,120 --> 00:02:00,280
Speaker 2: got to get off this idiot media micro analysis of

33
00:02:00,400 --> 00:02:03,600
Speaker 2: data and look at the regimes that we live in.

34
00:02:04,080 --> 00:02:06,720
Speaker 2: Is we go to this FED meeting today within disinflation,

35
00:02:06,840 --> 00:02:08,880
Speaker 2: with the FED, with the ECB leading and of the

36
00:02:08,919 --> 00:02:11,960
Speaker 2: rate cut for Jim Bullard, Is there a new regime

37
00:02:12,160 --> 00:02:14,320
Speaker 2: out there right now post pandemic.

38
00:02:14,960 --> 00:02:18,320
Speaker 3: I do think we've switched regimes. We're in a higher

39
00:02:18,360 --> 00:02:22,240
Speaker 3: nominal interest rate, higher inflation environment, and I think that

40
00:02:22,440 --> 00:02:26,520
Speaker 3: means that comparison should be made more to the second

41
00:02:26,520 --> 00:02:29,160
Speaker 3: half of the nineteen nineties in the first part of

42
00:02:29,200 --> 00:02:33,240
Speaker 3: the two thousands than to the twenty nine to twenty

43
00:02:33,320 --> 00:02:36,880
Speaker 3: nineteen period, which was a low noight, low inflation regime.

44
00:02:36,919 --> 00:02:38,840
Speaker 2: Paul wants to get here We're going to tie the

45
00:02:38,880 --> 00:02:42,800
Speaker 2: bow here if I can. It's critical. Is this the

46
00:02:42,880 --> 00:02:47,440
Speaker 2: press conference where we get some form of hint or

47
00:02:47,520 --> 00:02:51,720
Speaker 2: statement to where Bullard and Clarida are, which is away

48
00:02:51,760 --> 00:02:56,959
Speaker 2: from the slavery of two point zero percent? Do we

49
00:02:57,000 --> 00:03:01,520
Speaker 2: get a higher an understanding of higher run rate for

50
00:03:01,639 --> 00:03:03,680
Speaker 2: our start or for inflation.

51
00:03:04,720 --> 00:03:07,480
Speaker 3: Inflation. No, the inflation target will stay at two percent.

52
00:03:07,639 --> 00:03:11,600
Speaker 3: But inflation itself, I think that ideal policy would guide

53
00:03:12,000 --> 00:03:16,680
Speaker 3: inflation to two percent. But assom tote a word that

54
00:03:16,720 --> 00:03:19,680
Speaker 3: you love, Tom assum tote to two percent. So you

55
00:03:19,760 --> 00:03:23,919
Speaker 3: want this gentle reduction inflation right down to two percent.

56
00:03:23,960 --> 00:03:27,000
Speaker 3: You don't want to be bouncing above them below two percent.

57
00:03:27,080 --> 00:03:29,720
Speaker 3: I think you want this nice glide path into two percent.

58
00:03:29,800 --> 00:03:32,519
Speaker 3: So hopefully that's what we'll get here. And this report

59
00:03:32,560 --> 00:03:34,120
Speaker 3: today is very encouraging.

60
00:03:33,800 --> 00:03:36,200
Speaker 4: And so Jim, there are folks out there in academia,

61
00:03:36,520 --> 00:03:38,560
Speaker 4: in practice, in the marketplace. I think this fit of

62
00:03:38,600 --> 00:03:41,360
Speaker 4: reserve is already behind the curve that they should have

63
00:03:41,440 --> 00:03:43,920
Speaker 4: already been cutting. Now, how do you think about that?

64
00:03:44,280 --> 00:03:47,760
Speaker 3: So I've argued that earlier this year we did get

65
00:03:48,000 --> 00:03:52,520
Speaker 3: tremendous reduction and core pc inflation in the second half

66
00:03:52,600 --> 00:03:56,360
Speaker 3: of twenty twenty three, it was four point eight percent.

67
00:03:56,480 --> 00:03:58,920
Speaker 3: Last summer, on a twelve month basis, it came all

68
00:03:58,920 --> 00:04:01,720
Speaker 3: the way down to two point eight percent. So in

69
00:04:01,760 --> 00:04:04,400
Speaker 3: this world, in this game, two hundred basis points of

70
00:04:04,400 --> 00:04:09,440
Speaker 3: inflation reduction over six months or so, this is fantastically large.

71
00:04:09,640 --> 00:04:12,280
Speaker 3: So you should be taking that into account. You should

72
00:04:12,320 --> 00:04:14,960
Speaker 3: be reducing the policy rate. But the committee just couldn't

73
00:04:14,960 --> 00:04:18,400
Speaker 3: find the right moment to do that because all the

74
00:04:18,400 --> 00:04:22,440
Speaker 3: inflation reports up to now we were mixed or even

75
00:04:22,600 --> 00:04:27,080
Speaker 3: even negative. So unfortunately didn't find the right moment to

76
00:04:27,160 --> 00:04:29,800
Speaker 3: do that. But this idea that the policy rate is

77
00:04:29,839 --> 00:04:32,760
Speaker 3: a little too high for where the economy is today,

78
00:04:32,800 --> 00:04:35,640
Speaker 3: I think makes a lot of sense. So I've advocated

79
00:04:35,640 --> 00:04:38,160
Speaker 3: for like a technical adjustment. You know, you want to

80
00:04:38,200 --> 00:04:42,280
Speaker 3: get this idea across that because inflation isn't near five

81
00:04:42,320 --> 00:04:45,680
Speaker 3: percent anymore. Core inflation it's now under three percent, we

82
00:04:46,040 --> 00:04:49,320
Speaker 3: can afford to reduce the policy rate, still be restrictive

83
00:04:49,640 --> 00:04:52,640
Speaker 3: and get this glide path into two percent, the two

84
00:04:52,680 --> 00:04:53,360
Speaker 3: percent target.

85
00:04:53,400 --> 00:04:55,800
Speaker 4: Look to get your opinion on another topic that investors

86
00:04:55,800 --> 00:04:57,800
Speaker 4: are thinking about, which is this is an election year

87
00:04:58,440 --> 00:05:00,960
Speaker 4: and what does that mean for the FIT Reserve to timing.

88
00:05:01,240 --> 00:05:02,440
Speaker 4: I mean, a lot of folks are saying, you don't

89
00:05:02,440 --> 00:05:05,000
Speaker 4: want to be too close to the election, so maybe

90
00:05:05,040 --> 00:05:06,560
Speaker 4: a September might not be the right time.

91
00:05:07,000 --> 00:05:10,000
Speaker 3: I think the first of all, I don't think anybody

92
00:05:10,000 --> 00:05:12,320
Speaker 3: ever won an election based on whether the FED did

93
00:05:12,360 --> 00:05:16,599
Speaker 3: something at the September meeting, so I don't think it

94
00:05:16,640 --> 00:05:19,560
Speaker 3: matters for actual election outcomes. I don't think the median

95
00:05:19,640 --> 00:05:22,320
Speaker 3: voter is voting on that. They're voting on much broader issues.

96
00:05:22,360 --> 00:05:26,040
Speaker 3: So I think that the Committee feels in boldened to

97
00:05:26,360 --> 00:05:29,279
Speaker 3: do whatever it thinks is right at that meeting or

98
00:05:29,320 --> 00:05:32,200
Speaker 3: any of the other meetings and lead up to the election.

99
00:05:33,080 --> 00:05:36,560
Speaker 3: And they have moved in the past during the election cycle,

100
00:05:36,600 --> 00:05:39,280
Speaker 3: and I think they can do that if they wish

101
00:05:39,320 --> 00:05:39,839
Speaker 3: this time.

102
00:05:40,200 --> 00:05:43,120
Speaker 4: When the FED does begin to cut rates, how should

103
00:05:43,200 --> 00:05:48,800
Speaker 4: we think about the next three, six nine meetings after that?

104
00:05:48,839 --> 00:05:53,560
Speaker 4: How will they proceed in what may be a prolonged

105
00:05:53,640 --> 00:05:56,280
Speaker 4: rate reduction move. How will that procede?

106
00:05:56,360 --> 00:05:56,719
Speaker 2: You think?

107
00:05:57,680 --> 00:06:01,240
Speaker 3: I think it'd be slow. I think that you know,

108
00:06:01,279 --> 00:06:04,640
Speaker 3: at least as up today, you would think that the

109
00:06:04,640 --> 00:06:07,880
Speaker 3: inflation rate would come down slowly towards two percent, But

110
00:06:07,960 --> 00:06:11,080
Speaker 3: it would depend on the data and what else is

111
00:06:11,120 --> 00:06:12,320
Speaker 3: going on, as it always does.

112
00:06:13,279 --> 00:06:16,120
Speaker 2: I look at the FED and I'm going to be honest,

113
00:06:16,160 --> 00:06:19,039
Speaker 2: Jim Buller, do you have prodigious economic chops. There's a

114
00:06:19,040 --> 00:06:22,120
Speaker 2: few other people out there as well, but the fact

115
00:06:22,400 --> 00:06:24,719
Speaker 2: is on this program we've had more than a few

116
00:06:24,800 --> 00:06:28,839
Speaker 2: guests take a shot at a central bank that seems

117
00:06:28,880 --> 00:06:32,560
Speaker 2: to be in love with non economists. Do we need

118
00:06:33,480 --> 00:06:37,360
Speaker 2: a representation at the governor's level and at the senior

119
00:06:37,440 --> 00:06:42,320
Speaker 2: levels of the FED that includes prodigious PhD macroeconomics or

120
00:06:42,360 --> 00:06:44,440
Speaker 2: can we go with a more generalist approach.

121
00:06:45,120 --> 00:06:47,440
Speaker 3: I think it's great to have a mix of voices

122
00:06:47,560 --> 00:06:49,960
Speaker 3: and a mix of backgrounds on the committee. I think

123
00:06:49,960 --> 00:06:52,640
Speaker 3: it really helps. You get too many people like me

124
00:06:52,760 --> 00:06:56,200
Speaker 3: and you get in too much in the weeds about analysis.

125
00:06:57,080 --> 00:06:59,800
Speaker 3: But if you don't have enough of that, then you

126
00:06:59,800 --> 00:07:01,960
Speaker 3: know you can't do a good job either, and so

127
00:07:02,080 --> 00:07:04,760
Speaker 3: a good mix is the right way to go. I've

128
00:07:04,920 --> 00:07:09,200
Speaker 3: learned a lot from my colleagues that have markets experience,

129
00:07:09,240 --> 00:07:10,920
Speaker 3: and now there's a couple of new people coming on

130
00:07:11,040 --> 00:07:12,160
Speaker 3: that have a lot of markets.

131
00:07:12,200 --> 00:07:14,800
Speaker 2: Jim Bullard was this week continue he's a purdue of

132
00:07:14,880 --> 00:07:18,800
Speaker 2: course at Crannerton White The Mitch Daniels combine out there

133
00:07:18,800 --> 00:07:24,239
Speaker 2: of their great graduate and undergraduate programs. Here's the history,

134
00:07:24,360 --> 00:07:26,360
Speaker 2: and you're never going to admit it, but there was

135
00:07:26,400 --> 00:07:32,240
Speaker 2: a rogue dot there and you don't know which dot is.

136
00:07:32,320 --> 00:07:36,120
Speaker 2: You don't know which dot Janet Yellen was, but you

137
00:07:36,200 --> 00:07:39,520
Speaker 2: knew which dot Bullard was because there was a roague dot.

138
00:07:40,000 --> 00:07:43,240
Speaker 2: If the dots lost their meaning, as you protested with

139
00:07:43,400 --> 00:07:47,520
Speaker 2: your rogue dot, you could barely fit on the Bloomberg screen.

140
00:07:47,760 --> 00:07:51,400
Speaker 2: Tom Secunda is over in Bloomberg LP aging because you

141
00:07:51,520 --> 00:07:52,760
Speaker 2: ruined the dot screen.

142
00:07:54,880 --> 00:07:57,920
Speaker 3: That's yeah, Well, it was a different era. You know,

143
00:07:57,960 --> 00:08:02,040
Speaker 3: we were talking about regimes earlier. It was definitely a situation

144
00:08:02,320 --> 00:08:05,720
Speaker 3: where uh interest rates were low around the world. You

145
00:08:05,800 --> 00:08:11,559
Speaker 3: had negative nominal rates around the world, and I just thought,

146
00:08:11,720 --> 00:08:13,960
Speaker 3: why don't we just admit that we're in this low

147
00:08:14,080 --> 00:08:17,960
Speaker 3: nominal intright low inflation regime and project based on that

148
00:08:18,120 --> 00:08:20,560
Speaker 3: and not project not try to project that we're going

149
00:08:20,640 --> 00:08:21,200
Speaker 3: to swing if.

150
00:08:21,120 --> 00:08:23,440
Speaker 2: The dots loss are sell by date, I mean, is

151
00:08:23,480 --> 00:08:25,240
Speaker 2: there any efficacy to the dots now?

152
00:08:26,160 --> 00:08:29,280
Speaker 3: I think there could be great reforms on the on

153
00:08:29,320 --> 00:08:32,560
Speaker 3: the dot plot, but the committee has just not wanted

154
00:08:32,600 --> 00:08:35,959
Speaker 3: to make those reforms. One thing that's very strange about

155
00:08:35,960 --> 00:08:39,120
Speaker 3: the dots is that the horizon shortens up as you

156
00:08:39,160 --> 00:08:41,800
Speaker 3: go through the year. So now you've got a dot

157
00:08:41,840 --> 00:08:44,960
Speaker 3: plot that really isn't comparable to the previous dot plots

158
00:08:45,040 --> 00:08:47,520
Speaker 3: because now you've only got six months left in the year.

159
00:08:47,960 --> 00:08:49,800
Speaker 3: Was when you started, you had a whole year out

160
00:08:49,800 --> 00:08:50,360
Speaker 3: in the future.

161
00:08:50,440 --> 00:08:53,319
Speaker 2: So I just saw this stuff. I think it's all

162
00:08:53,400 --> 00:08:57,800
Speaker 2: just I don't vote, I don't focus on the dots.

163
00:08:58,200 --> 00:09:01,040
Speaker 2: It's a great fun say well save me.

164
00:09:01,280 --> 00:09:04,240
Speaker 4: I'm trying to explain to my offspring Jim, that about

165
00:09:04,960 --> 00:09:07,640
Speaker 4: this is a more normalized interest rate environment. This is

166
00:09:07,679 --> 00:09:11,360
Speaker 4: where most of the time, this society, this economy lives,

167
00:09:11,400 --> 00:09:13,040
Speaker 4: and they're trying to figure out how to borrow for

168
00:09:13,800 --> 00:09:16,800
Speaker 4: cars and houses and things like that. Is this, in

169
00:09:16,840 --> 00:09:19,480
Speaker 4: fact where we're going to be for some time? Do

170
00:09:19,559 --> 00:09:21,520
Speaker 4: you think this kind of No?

171
00:09:21,559 --> 00:09:23,840
Speaker 3: I do think we're in this higher interest rate regime,

172
00:09:23,880 --> 00:09:26,960
Speaker 3: and I do think that it's better on the whole.

173
00:09:27,040 --> 00:09:29,199
Speaker 3: If you think about the second half of the nineties,

174
00:09:30,040 --> 00:09:32,480
Speaker 3: which was really the best period for the US economy

175
00:09:32,480 --> 00:09:35,880
Speaker 3: in the post war era that had interest rates like

176
00:09:35,920 --> 00:09:41,439
Speaker 3: we have today broadly speaking, and the economy can grow

177
00:09:41,559 --> 00:09:45,319
Speaker 3: very rapidly. You know, we had a great run at

178
00:09:45,360 --> 00:09:48,160
Speaker 3: that time, and I do think you probably get a

179
00:09:48,200 --> 00:09:52,559
Speaker 3: little bit better allocation of capital because it's more of

180
00:09:52,640 --> 00:09:56,080
Speaker 3: a decision about it's my project really worth it or not,

181
00:09:56,880 --> 00:09:59,640
Speaker 3: And you don't get this kind of experimenting around with

182
00:10:00,040 --> 00:10:02,840
Speaker 3: kind of projects that probably have low payoff.

183
00:10:03,280 --> 00:10:07,079
Speaker 2: You're West Lafayette, Indiana, Yes, has a three point zero

184
00:10:07,160 --> 00:10:11,880
Speaker 2: percent unemployment rate. They're fully employed at Harry's Chocolate Shop.

185
00:10:11,960 --> 00:10:16,400
Speaker 2: I mean, there's no question about it. What does urban America?

186
00:10:16,559 --> 00:10:18,480
Speaker 2: I mean, you and I have talked about this in

187
00:10:18,960 --> 00:10:23,120
Speaker 2: your offices in Saint Louis years ago. What is urban

188
00:10:23,160 --> 00:10:27,160
Speaker 2: America missing about the vibrancy of the Midwest of this nation?

189
00:10:27,840 --> 00:10:31,800
Speaker 3: I think the Midwest is extremely powerful, very populous. It

190
00:10:31,880 --> 00:10:33,880
Speaker 3: might not all be in one place like it is

191
00:10:33,920 --> 00:10:37,920
Speaker 3: here in New York City, but really a lot of people,

192
00:10:37,960 --> 00:10:41,480
Speaker 3: a lot of great manufacturing, a lot of great businesses

193
00:10:41,920 --> 00:10:44,680
Speaker 3: spread out across the Midwest, and it's a great place

194
00:10:45,480 --> 00:10:47,720
Speaker 3: to live. And that because you're more spread out, you

195
00:10:47,760 --> 00:10:49,520
Speaker 3: have better housing markets, a better option.

196
00:10:49,640 --> 00:10:52,040
Speaker 2: Is there a labor arbitrage still going on right now

197
00:10:52,040 --> 00:10:54,520
Speaker 2: where I'm sorry, we're gonna We're gonna take the Biden

198
00:10:54,600 --> 00:10:56,800
Speaker 2: Investment Program, and that's where we're going to find the

199
00:10:56,880 --> 00:10:59,400
Speaker 2: jobs because the labor total cost all in it.

200
00:10:59,679 --> 00:11:02,240
Speaker 3: There's a lot happening in Indiana. And one thing that's

201
00:11:02,240 --> 00:11:05,720
Speaker 3: happening is this I sixty five cord or between Lafayette

202
00:11:05,800 --> 00:11:08,680
Speaker 3: and Indianapolis. If you drive up and down that you'll

203
00:11:08,720 --> 00:11:12,560
Speaker 3: see lot to launch of businesses locating there. And we

204
00:11:12,720 --> 00:11:16,160
Speaker 3: just had a deal with South Korean chip maker that's

205
00:11:16,200 --> 00:11:19,760
Speaker 3: going to move to West Lafayette to Purdue.

206
00:11:19,520 --> 00:11:21,880
Speaker 2: In studio where there's a former president of Saint Louis

207
00:11:21,960 --> 00:11:26,320
Speaker 2: Feller Reserve System, James Bullard, he of Indiana University. He

208
00:11:26,440 --> 00:11:30,680
Speaker 2: have a profoundly important paper I'm guessing twenty sixteen on

209
00:11:30,800 --> 00:11:34,760
Speaker 2: the regimes that we face within our monetary policy. Paul

210
00:11:34,800 --> 00:11:38,040
Speaker 2: I can report to you at his Purdue at Harry's

211
00:11:38,320 --> 00:11:42,040
Speaker 2: chocolate shop right at the top of the menu domestic cans.

212
00:11:42,160 --> 00:11:44,559
Speaker 2: They have Budweiser. I know, very important.

213
00:11:44,559 --> 00:11:46,199
Speaker 4: Well, Tom, I found another place we're gonna have to

214
00:11:46,240 --> 00:11:47,640
Speaker 4: go through. This could be a busy time for us

215
00:11:47,679 --> 00:11:49,559
Speaker 4: there Lynnwood Tavern.

216
00:11:49,320 --> 00:11:51,719
Speaker 2: Yeah, and grille. I've heard Rachel's mentioned this.

217
00:11:51,800 --> 00:11:54,680
Speaker 4: Z I mean exactly three days Walmash rivers right there.

218
00:11:54,760 --> 00:11:58,280
Speaker 2: You study when you do all nighters in mathematics.

219
00:11:59,200 --> 00:11:59,920
Speaker 4: That's my kind of place.

220
00:12:00,080 --> 00:12:01,760
Speaker 2: Having Jim Billard with us. Jim, I got to go

221
00:12:01,800 --> 00:12:05,000
Speaker 2: to monetary policy or in the measurement of the inflation

222
00:12:05,240 --> 00:12:08,559
Speaker 2: adjusted yield. As you mentioned, we had negative rates nominally

223
00:12:08,640 --> 00:12:12,320
Speaker 2: as completely wacko when you were you know, doing the

224
00:12:12,360 --> 00:12:15,920
Speaker 2: same Los FED. We're now back to a two percent

225
00:12:16,080 --> 00:12:20,480
Speaker 2: is ten year real yield. Does that impinge an investment

226
00:12:20,559 --> 00:12:22,000
Speaker 2: in America?

227
00:12:22,240 --> 00:12:25,080
Speaker 3: I think it does, And like we were saying earlier,

228
00:12:25,160 --> 00:12:29,760
Speaker 3: I think it makes people think more carefully about their projects.

229
00:12:29,800 --> 00:12:32,160
Speaker 3: You know what is really going to pay off, and

230
00:12:32,240 --> 00:12:35,640
Speaker 3: you get probably rid of some of the malinvestment or

231
00:12:35,679 --> 00:12:39,400
Speaker 3: the misinvestment that might otherwise occur with very cheap money available.

232
00:12:40,000 --> 00:12:42,560
Speaker 4: Hey, Jim does to what extent is a FED think

233
00:12:42,600 --> 00:12:45,079
Speaker 4: about the consumer here, because you think about the American consumer,

234
00:12:45,120 --> 00:12:47,640
Speaker 4: we probably have two at least two sets of consumers

235
00:12:47,679 --> 00:12:50,240
Speaker 4: out there. The folks that are maybe you know, do

236
00:12:50,400 --> 00:12:55,160
Speaker 4: have some assets, whether it's stocks, bonds, real estate doing well,

237
00:12:56,200 --> 00:13:00,320
Speaker 4: maybe even benefiting from a higher instrate environment. Everybody else

238
00:13:00,720 --> 00:13:04,240
Speaker 4: who may not have those types of assets or economic support,

239
00:13:04,880 --> 00:13:07,040
Speaker 4: they're really filling the impact of inflation how does it

240
00:13:07,120 --> 00:13:08,160
Speaker 4: fed think about that?

241
00:13:09,240 --> 00:13:13,200
Speaker 3: Yeah, I think inflation is very pernicious and punishes the

242
00:13:13,280 --> 00:13:16,839
Speaker 3: lower end of the income distribution very heavily. And you're

243
00:13:16,880 --> 00:13:20,920
Speaker 3: certainly seeing that and hearing that when you talk to

244
00:13:21,040 --> 00:13:24,679
Speaker 3: people in surveys, they do not like the inflation at all.

245
00:13:24,840 --> 00:13:26,959
Speaker 3: They do not like the fact that the price level

246
00:13:27,040 --> 00:13:31,839
Speaker 3: is up some nineteen percent since twenty twenty one, and

247
00:13:31,000 --> 00:13:33,360
Speaker 3: they're very upset about that.

248
00:13:33,480 --> 00:13:37,679
Speaker 2: One final question, blistering question s k heinins they're going

249
00:13:37,720 --> 00:13:41,280
Speaker 2: to invest in Purdue Research Park. Yes. The number one

250
00:13:41,559 --> 00:13:45,040
Speaker 2: thing in the zeitgeist is America doesn't have the employees

251
00:13:45,640 --> 00:13:49,000
Speaker 2: to be labor in those factories. Are you confident we

252
00:13:49,040 --> 00:13:54,080
Speaker 2: can develop highly motivated, skilled labor as we perceive in Asia. No.

253
00:13:54,080 --> 00:13:56,840
Speaker 3: No, I think we'll have no trouble pulling in the

254
00:13:56,960 --> 00:14:01,760
Speaker 3: right workforce for the South Korean company, and that'll be

255
00:14:01,760 --> 00:14:06,360
Speaker 3: a major chip manufacturing facility who tried to reshore a

256
00:14:06,400 --> 00:14:09,720
Speaker 3: lot of our chip making as you know, across the country.

257
00:14:09,720 --> 00:14:10,840
Speaker 3: So this is part of that effort.

258
00:14:10,960 --> 00:14:13,960
Speaker 2: Jim Buller to future governors of the Federal Reserve System,

259
00:14:14,080 --> 00:14:17,160
Speaker 2: Constant Hunter and Julia cordn Otto are here on your

260
00:14:17,200 --> 00:14:21,040
Speaker 2: way out, saying Hello, you're hugely go Jim Bullard, thank

261
00:14:21,080 --> 00:14:25,800
Speaker 2: you so much, greatly appreciated. With the Saint Louis FED,

262
00:14:36,320 --> 00:14:40,000
Speaker 2: we had a huge response. The last time he was on.

263
00:14:40,120 --> 00:14:43,600
Speaker 2: Doctor Mark Zandi joins us from Moody's. He was definitive

264
00:14:43,640 --> 00:14:47,720
Speaker 2: in the Great Financial Crisis for perspective and optimism on

265
00:14:47,800 --> 00:14:51,800
Speaker 2: the American economy, Doctor Xandy. These results was there the

266
00:14:51,920 --> 00:14:56,160
Speaker 2: undershoot A select few talked about. Did they finally show

267
00:14:56,240 --> 00:14:59,400
Speaker 2: to a FED a disinflationary America.

268
00:15:00,200 --> 00:15:01,200
Speaker 5: I hope so, Tom.

269
00:15:01,280 --> 00:15:03,360
Speaker 6: I mean, it feels like all the trend lines are

270
00:15:03,440 --> 00:15:07,720
Speaker 6: moving in the right direction. Inflation's coming in. You know,

271
00:15:07,800 --> 00:15:10,760
Speaker 6: the only thing that's keeping overall inflation from the Fed's

272
00:15:11,200 --> 00:15:14,880
Speaker 6: two percent target is the cost of housing, the implicit

273
00:15:15,720 --> 00:15:19,960
Speaker 6: cost of home ownership. And you know, if I were

274
00:15:20,040 --> 00:15:22,520
Speaker 6: king for the day, I wouldn't be looking at that.

275
00:15:22,600 --> 00:15:27,120
Speaker 6: I'd be looking at inflation x oeer owner's equivalent rent.

276
00:15:27,160 --> 00:15:30,400
Speaker 6: And we're there. So, you know, hopefully the FED takes

277
00:15:30,400 --> 00:15:32,880
Speaker 6: solace in this, and they're not going to move today,

278
00:15:32,960 --> 00:15:36,040
Speaker 6: but hopefully they move relatively move in the next few months.

279
00:15:36,040 --> 00:15:37,760
Speaker 5: We need intertrates to come down.

280
00:15:38,600 --> 00:15:41,640
Speaker 4: Mark, I'm just looking at Bloomberg Red headline across the

281
00:15:41,720 --> 00:15:46,400
Speaker 4: terminal fed swaps fully pricing quarter point rate cut in November.

282
00:15:46,600 --> 00:15:47,520
Speaker 4: Does that make sense to you?

283
00:15:49,280 --> 00:15:53,960
Speaker 6: Yeah, it feels like a preponderance investors probably feel like

284
00:15:54,000 --> 00:15:55,760
Speaker 6: Septembers when they'll start to move.

285
00:15:55,640 --> 00:15:56,560
Speaker 5: And by November.

286
00:15:56,720 --> 00:16:00,800
Speaker 6: Yeah, I think that very high profit that they'll have

287
00:16:00,840 --> 00:16:04,560
Speaker 6: cut rates by that point in time. I mean, everything

288
00:16:04,600 --> 00:16:06,320
Speaker 6: is where they want it to be, right, I mean,

289
00:16:06,400 --> 00:16:09,960
Speaker 6: the economy is at full employment, four percent unemployment rate,

290
00:16:10,520 --> 00:16:13,120
Speaker 6: the libor market is cooled off sufficiently, so wage growth

291
00:16:13,120 --> 00:16:15,720
Speaker 6: has come in, which is consistent with getting inflation back

292
00:16:15,760 --> 00:16:19,200
Speaker 6: in the bottle. You got inflation coming back in, you know,

293
00:16:19,280 --> 00:16:22,520
Speaker 6: in a very graceful way. Financial conditions are you know,

294
00:16:22,600 --> 00:16:24,880
Speaker 6: I think they're right where they wanted them. The stock

295
00:16:24,920 --> 00:16:28,480
Speaker 6: market is up, credits presurren with the dollars strong, you know,

296
00:16:28,480 --> 00:16:30,360
Speaker 6: you add it all up, it feels like they're there.

297
00:16:30,480 --> 00:16:32,240
Speaker 5: They VI should declare victory and move on.

298
00:16:32,320 --> 00:16:35,280
Speaker 6: So yeah, by November, I would be surprised if they

299
00:16:35,280 --> 00:16:36,400
Speaker 6: haven't cut rates.

300
00:16:36,200 --> 00:16:40,120
Speaker 2: Out on YouTube, the live chat a really smart observation.

301
00:16:40,360 --> 00:16:43,000
Speaker 2: Thank you so much for this. I am glad I

302
00:16:43,040 --> 00:16:46,120
Speaker 2: was able to roll over a bunch of CDs. So, Paul,

303
00:16:46,200 --> 00:16:49,560
Speaker 2: you've talked about this. If you get a Zamdi disinflation

304
00:16:49,720 --> 00:16:53,360
Speaker 2: in place, when does it finally crack that five point

305
00:16:53,720 --> 00:16:54,760
Speaker 2: percent money market?

306
00:16:54,760 --> 00:16:57,440
Speaker 4: That's why this Sweeny offspring one bee. She was very

307
00:16:57,440 --> 00:17:00,640
Speaker 4: smart getting in the her CD at five. I'm very

308
00:17:00,640 --> 00:17:03,440
Speaker 4: proud of her for that mark. Are you in a

309
00:17:03,440 --> 00:17:06,159
Speaker 4: camp that says, maybe even that this FED is behind

310
00:17:06,160 --> 00:17:09,280
Speaker 4: the curve that they should be cutting already?

311
00:17:09,440 --> 00:17:12,240
Speaker 6: Yeah, I would have argued that they should be cutting rates.

312
00:17:12,280 --> 00:17:16,600
Speaker 6: I think they have achieved their objectives properly measured, and

313
00:17:17,720 --> 00:17:19,560
Speaker 6: you know, five and a half percent federal fund rate

314
00:17:19,600 --> 00:17:22,760
Speaker 6: target where we are today is just not necessary. I mean,

315
00:17:22,800 --> 00:17:26,080
Speaker 6: there's a lot of reasonable debate. Is to excuse me,

316
00:17:26,080 --> 00:17:28,520
Speaker 6: what the equilibrium rate is? You know, the rate that

317
00:17:29,359 --> 00:17:33,040
Speaker 6: neither that's neither restraining or supporting growth. You know, it's

318
00:17:33,280 --> 00:17:36,320
Speaker 6: higher than it has been historically, but it's not five

319
00:17:36,359 --> 00:17:39,920
Speaker 6: and a half percent. So why such high interest rates

320
00:17:39,920 --> 00:17:41,880
Speaker 6: when you've achieved what.

321
00:17:41,800 --> 00:17:43,400
Speaker 5: You set out to do?

322
00:17:43,600 --> 00:17:47,959
Speaker 6: So in the economy, I think the economy is going

323
00:17:48,000 --> 00:17:50,760
Speaker 6: to soft land, that's most likely scenario, but the risks

324
00:17:50,800 --> 00:17:54,840
Speaker 6: of it going off the rails are not inconsequential. The

325
00:17:54,880 --> 00:17:57,960
Speaker 6: longer you keep rates, you know, unusually high. So yeah,

326
00:17:58,000 --> 00:17:59,680
Speaker 6: I would have argued that they should be cutting rates.

327
00:17:59,680 --> 00:18:02,080
Speaker 2: Alright, Marks, Andy with us with the Moodies. We will

328
00:18:02,080 --> 00:18:05,439
Speaker 2: continue with them. We're commercial free this entire hour for you.

329
00:18:05,520 --> 00:18:08,840
Speaker 2: Thank you so much to Commonwealth, to con Residant, to

330
00:18:08,920 --> 00:18:12,760
Speaker 2: interactive brokers for their support of our discussion of economics.

331
00:18:12,760 --> 00:18:16,280
Speaker 2: If you're just joining us worldwide on YouTube across this nation.

332
00:18:17,080 --> 00:18:20,800
Speaker 2: A stunning report. It is what a few wrote about.

333
00:18:20,800 --> 00:18:24,359
Speaker 2: Good Morning Goldbin Sachson on Hatzias, who really parsed this?

334
00:18:25,080 --> 00:18:28,000
Speaker 2: I thought, well, what if it comes in with an

335
00:18:28,080 --> 00:18:32,160
Speaker 2: undertone headline? CPI three point four percent came in three

336
00:18:32,200 --> 00:18:36,239
Speaker 2: point three percent, futures of forty two, the Sweeney yield here,

337
00:18:36,320 --> 00:18:40,280
Speaker 2: the two year yield in fourteen fourteen basis points four

338
00:18:40,320 --> 00:18:41,600
Speaker 2: point seven zero percent.

339
00:18:41,680 --> 00:18:44,959
Speaker 4: Paul, Hey, Mark, what do you think the Federal Reserve

340
00:18:45,040 --> 00:18:47,520
Speaker 4: is really keying on here? And what kind of message

341
00:18:47,520 --> 00:18:49,280
Speaker 4: do you think they want to get across today?

342
00:18:51,119 --> 00:18:55,040
Speaker 6: Well, I think with this report they have a strong

343
00:18:55,119 --> 00:18:58,000
Speaker 6: case to make that the interest rates are coming. I

344
00:18:58,040 --> 00:19:01,200
Speaker 6: think they will still make the case make the argument

345
00:19:01,280 --> 00:19:04,800
Speaker 6: that they want to see more inflation, good inflation numbers,

346
00:19:05,160 --> 00:19:08,600
Speaker 6: things that are very consistent inflation numbers are very consistent

347
00:19:08,680 --> 00:19:12,880
Speaker 6: with their two percent target. But with today's numbers like today,

348
00:19:13,400 --> 00:19:16,919
Speaker 6: what joggers well for the consumer expenditure deflator, which we're

349
00:19:16,960 --> 00:19:19,000
Speaker 6: going to get here in a couple of weeks, which

350
00:19:19,040 --> 00:19:21,240
Speaker 6: is what their target is based on.

351
00:19:23,359 --> 00:19:24,720
Speaker 5: I think they want to signal.

352
00:19:24,400 --> 00:19:28,280
Speaker 6: That another month two or three of good inflation satistics,

353
00:19:28,359 --> 00:19:31,280
Speaker 6: they'll they'll cut the numbers like this really makes the

354
00:19:31,320 --> 00:19:34,160
Speaker 6: case very easily for a race cut.

355
00:19:34,240 --> 00:19:38,040
Speaker 2: Okay, Mark, I'm looking at inflation back pre pandemic, and

356
00:19:38,080 --> 00:19:42,680
Speaker 2: we had an immense stability core CPI. We were two

357
00:19:42,720 --> 00:19:46,960
Speaker 2: percent two point two percent the two standard deviation band.

358
00:19:46,960 --> 00:19:50,400
Speaker 2: I don't want to get too mathey here was extremely narrow,

359
00:19:50,520 --> 00:19:55,160
Speaker 2: extremely predictable. We had an upset of disinflation, deflation down

360
00:19:55,160 --> 00:19:58,439
Speaker 2: to one point x percent with the pandemic, and then

361
00:19:58,520 --> 00:20:02,440
Speaker 2: boom the stimulus up over six percent. Of course CPI.

362
00:20:03,080 --> 00:20:09,080
Speaker 2: I see almost doctor Zandy in inertial force of disinflation

363
00:20:09,359 --> 00:20:13,920
Speaker 2: now almost with what I'm gonna call convexity or acceleration

364
00:20:14,760 --> 00:20:19,280
Speaker 2: in the form of disinflation. Explain to our audience why

365
00:20:19,320 --> 00:20:21,960
Speaker 2: this central bank that you should think should cut this afternoon.

366
00:20:22,240 --> 00:20:24,720
Speaker 2: That's a joke. I'm putting words in doctor Sandy's book.

367
00:20:24,960 --> 00:20:28,639
Speaker 2: But Mark Zandy, why are they such a slave to

368
00:20:28,760 --> 00:20:32,280
Speaker 2: an ex post strategy? What are they afraid of.

369
00:20:34,080 --> 00:20:35,480
Speaker 5: Losing credibility? Tom?

370
00:20:35,560 --> 00:20:40,800
Speaker 6: I think they've got a target two percent on the

371
00:20:41,200 --> 00:20:45,040
Speaker 6: consumer expenditure to flavor. They feel like if they don't

372
00:20:45,080 --> 00:20:49,840
Speaker 6: hit that target, they'll lose credibility, and credibilities really is important.

373
00:20:50,119 --> 00:20:52,640
Speaker 6: That's key to keeping inflation expectations down.

374
00:20:52,880 --> 00:20:53,840
Speaker 5: People have to believe.

375
00:20:53,880 --> 00:20:56,840
Speaker 6: Investors have to believe the BED is going to do

376
00:20:57,119 --> 00:20:58,480
Speaker 6: you know what it says it's going to do.

377
00:20:58,640 --> 00:21:02,480
Speaker 5: So I think that's that's the motivation here.

378
00:21:02,560 --> 00:21:02,720
Speaker 7: Now.

379
00:21:02,720 --> 00:21:05,639
Speaker 6: Having said that, I do think once they hit the

380
00:21:05,640 --> 00:21:08,200
Speaker 6: two percent target and they do start cutting and you

381
00:21:08,320 --> 00:21:12,440
Speaker 6: kind of rethink their framework for monetary policy going forward.

382
00:21:12,200 --> 00:21:15,200
Speaker 5: That they should they should come up with a better

383
00:21:15,359 --> 00:21:16,000
Speaker 5: mouse trap.

384
00:21:16,080 --> 00:21:19,159
Speaker 6: That the two percent target on consumer expenditi flavor is

385
00:21:19,240 --> 00:21:21,600
Speaker 6: probably not the target they want or the way they

386
00:21:21,600 --> 00:21:22,560
Speaker 6: want people.

387
00:21:22,320 --> 00:21:22,960
Speaker 5: To think about it.

388
00:21:23,040 --> 00:21:26,920
Speaker 6: So once they've gotten there, they've established credibility, then they

389
00:21:27,080 --> 00:21:29,280
Speaker 6: really need to think about their framework and how they

390
00:21:29,280 --> 00:21:31,080
Speaker 6: want to do this going forward. Two percent is not

391
00:21:31,119 --> 00:21:33,920
Speaker 6: the right number and the pcees not the right to flavor.

392
00:21:33,800 --> 00:21:37,200
Speaker 2: Zandy Paul, this is so important. You're going to see

393
00:21:37,200 --> 00:21:43,359
Speaker 2: a tweet someday Zamdi National Bureau of Economic Research nb ER.

394
00:21:44,040 --> 00:21:47,440
Speaker 2: It's going to be a paper by Mark Zamdy, The

395
00:21:47,480 --> 00:21:49,399
Speaker 2: FED and the Better mouse Trap.

396
00:21:50,960 --> 00:21:54,560
Speaker 4: All right, Yeah, Like, hey, Mark, what do you think

397
00:21:54,560 --> 00:21:56,560
Speaker 4: about I mean, when you see an inflation print like today,

398
00:21:56,600 --> 00:21:59,280
Speaker 4: what do you think about the US consumer? Because the

399
00:21:59,320 --> 00:22:01,280
Speaker 4: US consumer, you go out there and ask the consumer

400
00:22:01,280 --> 00:22:04,640
Speaker 4: out on the street in South Philadelphia or you know, Peoria,

401
00:22:04,920 --> 00:22:06,760
Speaker 4: They're gonna say, boy, I'm paying a lot for a

402
00:22:06,760 --> 00:22:08,720
Speaker 4: lot of the key things I have in my cart

403
00:22:08,760 --> 00:22:12,960
Speaker 4: every day. How do you think about the consumer these days?

404
00:22:13,840 --> 00:22:15,280
Speaker 5: Well, there there, You're right.

405
00:22:15,320 --> 00:22:17,639
Speaker 6: They're feeling they're still feeling the financial pain from the

406
00:22:17,680 --> 00:22:20,680
Speaker 6: surgeon inflation that Tom mentioned back a couple three years ago,

407
00:22:21,040 --> 00:22:27,000
Speaker 6: particularly for staples, for food, for rent, for gasoline. But

408
00:22:27,880 --> 00:22:31,880
Speaker 6: I do think the sting of that higher, those higher

409
00:22:31,920 --> 00:22:35,199
Speaker 6: inflation numbers are starting to fade and to continue to

410
00:22:35,200 --> 00:22:39,520
Speaker 6: be going forward, because look at food prices today, they

411
00:22:39,680 --> 00:22:41,720
Speaker 6: barely rose on the month on year over year of

412
00:22:41,800 --> 00:22:45,480
Speaker 6: food at home is up one percent. Rents have been

413
00:22:45,520 --> 00:22:48,040
Speaker 6: flat for a couple of years, you know, market rents

414
00:22:48,040 --> 00:22:50,000
Speaker 6: have been flat for a couple of years. Gasoline prices

415
00:22:50,000 --> 00:22:52,440
Speaker 6: are back down to about fifty per gallon regular and

416
00:22:52,560 --> 00:22:54,040
Speaker 6: leaded mart.

417
00:22:53,760 --> 00:22:56,679
Speaker 5: And wages are growing more strongly. So I think they should.

418
00:22:56,920 --> 00:22:59,960
Speaker 6: You know, there's no game changing event here in terms

419
00:23:00,040 --> 00:23:01,639
Speaker 6: to help people think about things, but I think with

420
00:23:01,720 --> 00:23:03,200
Speaker 6: each passing month they should feel better.

421
00:23:03,320 --> 00:23:05,520
Speaker 2: Doctor Zandy got time for one more question. I want

422
00:23:05,520 --> 00:23:08,960
Speaker 2: to go to University of Pennsylvania and your inbred optimism

423
00:23:09,000 --> 00:23:14,280
Speaker 2: on the American economy. Are we underestimating American growth given

424
00:23:14,359 --> 00:23:20,160
Speaker 2: new productivity, new technology? Joe Wisenthal would say, ai ai eio,

425
00:23:20,440 --> 00:23:25,080
Speaker 2: Mark Sandy, do we underestimate American growth? Very possible, Tom.

426
00:23:25,440 --> 00:23:27,560
Speaker 6: I think a prudent planner would say, okay, we're going

427
00:23:27,600 --> 00:23:30,720
Speaker 6: to grow two percent real GDP. I think that we

428
00:23:30,760 --> 00:23:33,760
Speaker 6: should count on that. That should be baked into our

429
00:23:33,760 --> 00:23:38,760
Speaker 6: budget forecasts and planning as business people and as government.

430
00:23:38,800 --> 00:23:42,200
Speaker 6: But I do think there are risks on both sides

431
00:23:42,240 --> 00:23:45,280
Speaker 6: of that. But I think there is a good argument

432
00:23:45,320 --> 00:23:47,040
Speaker 6: to be made that the economy is going to perform

433
00:23:47,119 --> 00:23:47,720
Speaker 6: better here.

434
00:23:47,560 --> 00:23:48,480
Speaker 5: Than people anticipate.

435
00:23:48,600 --> 00:23:51,400
Speaker 6: We did that last year in twenty twenty three, much

436
00:23:51,440 --> 00:23:54,280
Speaker 6: better than folks thought. A lot of folks thought recession

437
00:23:54,400 --> 00:23:56,920
Speaker 6: we got even not only not a recession, but a

438
00:23:57,000 --> 00:24:00,320
Speaker 6: very strong economy because of those supply side that you

439
00:24:00,400 --> 00:24:02,359
Speaker 6: talked about and that could continue.

440
00:24:02,520 --> 00:24:05,480
Speaker 2: The heritage of our guests are important. I can't say

441
00:24:05,600 --> 00:24:09,439
Speaker 2: enough Paul for how Mark Zandy was a nearly lone

442
00:24:09,680 --> 00:24:14,000
Speaker 2: optimistic vote think spring of two thousand and eight. He

443
00:24:14,080 --> 00:24:16,720
Speaker 2: was we will clear the markets. Yep, we will do

444
00:24:16,840 --> 00:24:20,200
Speaker 2: fine on this, doctor Sandy, thank you so much, always

445
00:24:20,320 --> 00:24:27,320
Speaker 2: with Moody's as well. This is a joy. This is

446
00:24:27,359 --> 00:24:31,280
Speaker 2: something Paul's demanded that we get from macro policy perspectives.

447
00:24:31,320 --> 00:24:35,000
Speaker 2: Constant Hunter in here with Julia Cornado and Taviam Paul

448
00:24:35,040 --> 00:24:37,800
Speaker 2: in this day is just you know, I just think

449
00:24:38,320 --> 00:24:42,639
Speaker 2: that killer Julia does this shift Powell's discussion of the

450
00:24:42,800 --> 00:24:45,840
Speaker 2: character of our disinflation. This stunning report.

451
00:24:46,200 --> 00:24:49,200
Speaker 8: I think it's an important report. I think Chair Powell

452
00:24:49,320 --> 00:24:53,280
Speaker 8: is likely to express some optimism that progress has resumed

453
00:24:53,400 --> 00:24:56,720
Speaker 8: after a disappointing first quarter and that the plan to

454
00:24:56,880 --> 00:25:00,440
Speaker 8: lower rates is on track. We think that will come

455
00:25:00,440 --> 00:25:03,480
Speaker 8: out with a two cut baseline. This report sort of

456
00:25:03,560 --> 00:25:06,719
Speaker 8: solidifies that we think that Shairpowell sort of has that

457
00:25:06,800 --> 00:25:10,560
Speaker 8: control over the median and the message, and that he

458
00:25:10,720 --> 00:25:14,440
Speaker 8: can sort of credibly express optimism, say that we saw

459
00:25:14,440 --> 00:25:19,920
Speaker 8: some broad based progress in today's report after a decent April,

460
00:25:20,920 --> 00:25:22,880
Speaker 8: So if we get a few more prints like that,

461
00:25:22,960 --> 00:25:25,359
Speaker 8: then they can begin a process. The FED is now

462
00:25:25,400 --> 00:25:28,560
Speaker 8: having to deal with the decision of do we start

463
00:25:28,840 --> 00:25:31,240
Speaker 8: early so that we can go slow, or do we

464
00:25:31,320 --> 00:25:33,840
Speaker 8: wait till weakness arrives, which is the track record of

465
00:25:33,880 --> 00:25:36,960
Speaker 8: central banks right, wait till weakness arrives, and then cut quickly.

466
00:25:37,240 --> 00:25:41,840
Speaker 8: This is a new approach, or a relatively untested left.

467
00:25:41,720 --> 00:25:44,240
Speaker 2: Roach, because she knows I'm going to go mental. Yes,

468
00:25:45,080 --> 00:25:46,040
Speaker 2: put the surveillance.

469
00:25:49,080 --> 00:25:50,520
Speaker 4: There's a lot of folks out there that says this

470
00:25:50,560 --> 00:25:52,760
Speaker 4: FED is already behind the curve, that they should be

471
00:25:52,880 --> 00:25:53,800
Speaker 4: cutting already.

472
00:25:53,800 --> 00:25:55,919
Speaker 7: Do you, guys, how do you think about that?

473
00:25:56,680 --> 00:26:00,359
Speaker 1: I think that that is a valid perspective. Of course,

474
00:26:00,800 --> 00:26:02,800
Speaker 1: they also have there's people who are saying that there's

475
00:26:02,800 --> 00:26:05,119
Speaker 1: going to be no landing, that the FED isn't going

476
00:26:05,200 --> 00:26:08,440
Speaker 1: to cut it all this year. So I think I

477
00:26:08,560 --> 00:26:12,160
Speaker 1: understand the perspective of the FED of deciding to wait,

478
00:26:13,000 --> 00:26:14,879
Speaker 1: given the prints that we had in the beginning of

479
00:26:14,960 --> 00:26:18,000
Speaker 1: the year, and given the fact that we're seeing anomalies

480
00:26:18,119 --> 00:26:21,000
Speaker 1: in the CPI data that we didn't see prior to

481
00:26:21,040 --> 00:26:24,960
Speaker 1: the pandemic, and so I think from their perspective, you know,

482
00:26:25,080 --> 00:26:28,320
Speaker 1: caution is the better part of valor. On the other hand,

483
00:26:28,400 --> 00:26:33,520
Speaker 1: as Julia said, historically they are late, and so I

484
00:26:33,560 --> 00:26:36,879
Speaker 1: think that they do run that risk. Fortunately, the jobs

485
00:26:36,920 --> 00:26:41,280
Speaker 1: print last week was stronger than expected. But our big

486
00:26:41,280 --> 00:26:44,040
Speaker 1: concern if they're late is that labor market starts to weaken.

487
00:26:44,119 --> 00:26:46,080
Speaker 1: And once you see that, it's too late, because it

488
00:26:46,160 --> 00:26:47,880
Speaker 1: is at best a coincident indicator.

489
00:26:48,000 --> 00:26:51,359
Speaker 4: Right, And Julie, I mean Joe Wisenthal from a Bloomberg

490
00:26:51,400 --> 00:26:55,199
Speaker 4: Onlins podcast just moments ago, said, you know, raising some

491
00:26:55,240 --> 00:26:57,800
Speaker 4: concerns about the labor market here that we you know,

492
00:26:57,840 --> 00:27:00,760
Speaker 4: four percent, you get pay attention to that kind of number.

493
00:27:00,960 --> 00:27:02,800
Speaker 8: So how do you feel about the labor pook? Yeah, no,

494
00:27:02,880 --> 00:27:06,359
Speaker 8: I think that the the the May employment report was

495
00:27:06,560 --> 00:27:07,600
Speaker 8: truly mixed.

496
00:27:07,680 --> 00:27:07,840
Speaker 2: Right.

497
00:27:07,920 --> 00:27:11,439
Speaker 8: The payroll number is strong, it was broad based, but

498
00:27:11,520 --> 00:27:15,240
Speaker 8: the household survey is showing rising slack. You have to

499
00:27:15,280 --> 00:27:18,439
Speaker 8: take that message at face value. The fact that we

500
00:27:18,560 --> 00:27:20,760
Speaker 8: have gone from a low of three point four to

501
00:27:20,880 --> 00:27:23,360
Speaker 8: four point zero. It's still a low unemployment rates, still

502
00:27:23,400 --> 00:27:27,320
Speaker 8: a healthy job market, but you know it is not

503
00:27:27,720 --> 00:27:30,159
Speaker 8: at is more balanced than it was before. There are

504
00:27:30,280 --> 00:27:34,000
Speaker 8: risks on both sides now, and as Constance said, if

505
00:27:34,040 --> 00:27:39,520
Speaker 8: you keep restrictive policy in place for too long, then

506
00:27:39,600 --> 00:27:43,840
Speaker 8: you're going to lose that resilience. So even actually Governor

507
00:27:43,960 --> 00:27:46,800
Speaker 8: Waller said this earlier this year. He said, you know,

508
00:27:46,880 --> 00:27:51,359
Speaker 8: the low hanging fruit of bringing down job openings, you know,

509
00:27:51,440 --> 00:27:55,359
Speaker 8: without a rise in unemployment is probably behind us. To

510
00:27:55,520 --> 00:27:59,760
Speaker 8: really see a decline in labor demand from here, you're

511
00:27:59,760 --> 00:28:02,280
Speaker 8: going to get that alongside a rise in unemployment.

512
00:28:02,359 --> 00:28:04,720
Speaker 2: Yeah, we're going to come back. It's just a joy

513
00:28:04,720 --> 00:28:07,480
Speaker 2: to have Constance Hunter and Julia Coronatti with us. But

514
00:28:07,800 --> 00:28:12,320
Speaker 2: I got one fundamental question. Are we more than ever

515
00:28:13,000 --> 00:28:16,560
Speaker 2: John Edwards in Louisiana as you were studying in Texas?

516
00:28:16,840 --> 00:28:20,160
Speaker 2: Are we more than ever? Two Americas? And the idea

517
00:28:20,280 --> 00:28:23,959
Speaker 2: idea of aggregate analysis that the Eccles building is just quaint.

518
00:28:25,280 --> 00:28:28,879
Speaker 8: You know, I think there are always lots of Americas.

519
00:28:29,600 --> 00:28:32,120
Speaker 2: But is there more now? Is it more polarized now

520
00:28:32,200 --> 00:28:33,320
Speaker 2: in terms of politically?

521
00:28:33,359 --> 00:28:37,240
Speaker 8: Absolutely, we're in a very economize economically. No, I would

522
00:28:37,280 --> 00:28:40,040
Speaker 8: say Tom, Actually the good news is that we're less

523
00:28:40,080 --> 00:28:44,440
Speaker 8: polarized economically in a sense that the lower wage workers

524
00:28:44,480 --> 00:28:48,200
Speaker 8: have the best labor market they've seen in generations this cycle,

525
00:28:48,440 --> 00:28:51,400
Speaker 8: and it hasn't cracked yet. Really, the weakness we see

526
00:28:51,400 --> 00:28:53,080
Speaker 8: in the labor market is at the top is the

527
00:28:53,440 --> 00:28:58,520
Speaker 8: professional service sector jobs that are experiencing the weakness. So no,

528
00:28:58,760 --> 00:29:01,040
Speaker 8: I would say, actually, we've seen in a narrowing and

529
00:29:01,120 --> 00:29:04,560
Speaker 8: wage inequality this cycle that we haven't seen in thirty years.

530
00:29:04,800 --> 00:29:07,160
Speaker 2: It's just a bang update here, folks. If Jim Bullard

531
00:29:07,160 --> 00:29:09,240
Speaker 2: with us, the former president of Saint Louis FED, and

532
00:29:09,840 --> 00:29:12,640
Speaker 2: here for a half hour, Julia Cornado with us in

533
00:29:12,680 --> 00:29:16,720
Speaker 2: Constance hunder a micro policy perspectives to get us towards

534
00:29:16,720 --> 00:29:20,880
Speaker 2: the FED meeting this afternoon, most importantly at ten o'clock,

535
00:29:20,880 --> 00:29:23,959
Speaker 2: Paul Sweeney will drive forward with Alex Steele. I mean,

536
00:29:23,960 --> 00:29:26,040
Speaker 2: you got you got something to talk about to this

537
00:29:26,120 --> 00:29:27,760
Speaker 2: inflation report. They got it.

538
00:29:27,960 --> 00:29:31,160
Speaker 4: Get a very interesting inflation report, very something very important

539
00:29:31,160 --> 00:29:33,120
Speaker 4: for the FED to take into consideration here as we

540
00:29:33,120 --> 00:29:35,080
Speaker 4: hear from the Fed. And you're gonna have full coverage

541
00:29:35,080 --> 00:29:36,760
Speaker 4: this afternoon, right tom starting.

542
00:29:36,440 --> 00:29:39,840
Speaker 2: Can I go? Can I go? Odd? Sure? Mexican pace

543
00:29:39,920 --> 00:29:40,800
Speaker 2: of weakness, I'll buy.

544
00:29:40,800 --> 00:29:41,480
Speaker 5: I don't know where to go.

545
00:29:41,520 --> 00:29:45,840
Speaker 2: There is just stunning. We have Julia Cornado in the room.

546
00:29:45,960 --> 00:29:47,880
Speaker 2: You think we should go all Mexican, pa, I want

547
00:29:47,880 --> 00:29:48,200
Speaker 2: to do that.

548
00:29:48,320 --> 00:29:53,360
Speaker 8: Yeah, there it is political risk for you, yes, exactly.

549
00:29:53,520 --> 00:29:56,640
Speaker 8: And the bond market action we saw in France yesterday,

550
00:29:56,720 --> 00:29:59,959
Speaker 8: you know, on just a rumor, there's a lot of uncertainty.

551
00:30:00,080 --> 00:30:01,680
Speaker 2: What a joy to have us here for a half hour,

552
00:30:01,760 --> 00:30:07,280
Speaker 2: Julia Cornado and Constance Hunter of Macro Policy Perspectives. Constant,

553
00:30:07,320 --> 00:30:10,000
Speaker 2: You know I love Neil Duddy. He doesn't mince words.

554
00:30:10,480 --> 00:30:14,120
Speaker 2: May I quote Paul? It does not take a rocket

555
00:30:14,160 --> 00:30:17,640
Speaker 2: scientist to figure out what needs to be done. Yeah,

556
00:30:17,680 --> 00:30:20,440
Speaker 2: and he's like, let's go. Fed needs to get on

557
00:30:20,520 --> 00:30:22,840
Speaker 2: with it. Constance, what are they waiting for? I mean

558
00:30:22,880 --> 00:30:25,800
Speaker 2: I get at their ex post. You know within that

559
00:30:26,040 --> 00:30:28,520
Speaker 2: we all know this. Can we really hope for a

560
00:30:28,560 --> 00:30:30,840
Speaker 2: new regime where they get on with it?

561
00:30:31,400 --> 00:30:33,560
Speaker 1: I mean one thing that is holding going to hold

562
00:30:33,560 --> 00:30:36,440
Speaker 1: them back is that shelter print now that was isolated

563
00:30:36,600 --> 00:30:39,480
Speaker 1: to New York rents, which went up and played an

564
00:30:39,480 --> 00:30:41,360
Speaker 1: oversized part.

565
00:30:41,600 --> 00:30:44,000
Speaker 2: No, no, no, no, how much did two blocks in New

566
00:30:44,080 --> 00:30:45,080
Speaker 2: Jersey play? Paul?

567
00:30:45,200 --> 00:30:46,240
Speaker 8: Yes, step in here?

568
00:30:47,240 --> 00:30:51,320
Speaker 2: Are you telling me? National inflation was Paul Sweeney's housing fault.

569
00:30:51,840 --> 00:30:53,680
Speaker 1: I think it was Paul Swen's fault in particular.

570
00:30:53,800 --> 00:30:55,080
Speaker 8: Yeah, yeah, he used to blame.

571
00:30:55,080 --> 00:30:57,600
Speaker 1: You should get all the hate mail, you know, But seriously,

572
00:30:57,640 --> 00:30:59,640
Speaker 1: they're gonna need to see that shelter number come down

573
00:30:59,640 --> 00:31:04,240
Speaker 1: a bit, and you know, but I don't disagree. Look

574
00:31:04,600 --> 00:31:07,360
Speaker 1: that September has to be firmly on the table. The

575
00:31:07,400 --> 00:31:10,760
Speaker 1: markets believe it's firmly on the table, and even I

576
00:31:10,760 --> 00:31:13,120
Speaker 1: FED that's a little bit behind, should be able to

577
00:31:13,200 --> 00:31:14,400
Speaker 1: move in September.

578
00:31:14,800 --> 00:31:17,479
Speaker 4: Jowey, how do you think about the US consumer here?

579
00:31:17,520 --> 00:31:21,320
Speaker 4: Because we're getting inflation's coming down, but it's still at

580
00:31:21,320 --> 00:31:24,600
Speaker 4: that high reset level of nineteen percent versus twenty nineteen.

581
00:31:24,840 --> 00:31:26,320
Speaker 5: How's the US consumer doing today?

582
00:31:26,400 --> 00:31:28,560
Speaker 8: Look, I'll reframe it this way. We should thank the

583
00:31:28,680 --> 00:31:31,560
Speaker 8: US consumer because one thing we keep hearing in earnings

584
00:31:31,640 --> 00:31:34,200
Speaker 8: reports and in the fed's Beige book is that consumers

585
00:31:34,240 --> 00:31:37,120
Speaker 8: are priced sensitive. Again when we look at things like

586
00:31:37,160 --> 00:31:42,200
Speaker 8: goods prices broad based deflation, consumers want deals and they're

587
00:31:42,240 --> 00:31:47,840
Speaker 8: getting them on cars, on furniture, and on apparel. This month,

588
00:31:48,120 --> 00:31:52,960
Speaker 8: so on airfares. On airfares, airfares plunged, So consumers are

589
00:31:53,120 --> 00:31:56,760
Speaker 8: back to that norm that they had before the pandemic

590
00:31:56,800 --> 00:31:58,920
Speaker 8: of to part with my money, you're going to have

591
00:31:58,960 --> 00:32:02,280
Speaker 8: to offer me value, and that is helping restore healthy

592
00:32:02,320 --> 00:32:05,600
Speaker 8: inflation dynamics. So they might still be grumpy from what

593
00:32:05,640 --> 00:32:10,000
Speaker 8: we've all been through. And we also, as Tom had alluded,

594
00:32:10,040 --> 00:32:13,320
Speaker 8: to see a lot of polarization in those sentiment numbers.

595
00:32:14,240 --> 00:32:17,280
Speaker 8: But you know the reality is that consumers have taken

596
00:32:17,400 --> 00:32:20,600
Speaker 8: control back. That pricing power that companies enjoyed during the

597
00:32:20,640 --> 00:32:25,000
Speaker 8: pandemic has evaporated, and now they need to deliver values.

598
00:32:25,080 --> 00:32:27,520
Speaker 8: So some of those margins are going to get pressed.

599
00:32:27,600 --> 00:32:29,600
Speaker 2: We had a GDP number first quarter. Where are we

600
00:32:29,680 --> 00:32:32,480
Speaker 2: one point three one point four percent? Whatever Atlanta GDP

601
00:32:32,840 --> 00:32:35,239
Speaker 2: balloons out four percent, they bring it back. Now we're

602
00:32:35,320 --> 00:32:38,640
Speaker 2: running what's the run rate? To both of you? What's

603
00:32:38,720 --> 00:32:40,520
Speaker 2: do you? I mean, do you guys argue about this?

604
00:32:40,560 --> 00:32:43,640
Speaker 2: What's the run rate? Unreal? GDP? Are you that far

605
00:32:43,720 --> 00:32:45,600
Speaker 2: apart the two of you? I don't know.

606
00:32:45,640 --> 00:32:47,640
Speaker 1: I think so. I think we're at both at about two

607
00:32:47,720 --> 00:32:49,640
Speaker 1: point four two point five. I mean, you have to

608
00:32:49,640 --> 00:32:53,240
Speaker 1: look at GDI when you look at this, and last

609
00:32:53,360 --> 00:32:57,640
Speaker 1: last quarter was really trade in inventories, right, and so

610
00:32:57,920 --> 00:32:59,920
Speaker 1: the question is how much are those inventories going to

611
00:32:59,920 --> 00:33:03,240
Speaker 1: be rebuilt. That's a very tricky thing to forecast. And

612
00:33:03,280 --> 00:33:06,680
Speaker 1: then obviously we have this strong dollar which is hurting

613
00:33:06,760 --> 00:33:09,760
Speaker 1: trade in some respects, but we also see tailwinds from

614
00:33:09,760 --> 00:33:12,760
Speaker 1: the global economy that we haven't seen for four years

615
00:33:13,320 --> 00:33:15,600
Speaker 1: that could slightly help our trade numbers.

616
00:33:15,720 --> 00:33:18,440
Speaker 2: I mean it comes down to domestic final sales. What's

617
00:33:19,080 --> 00:33:21,280
Speaker 2: twelve months for me, Julie, you were a BMP PARI

618
00:33:21,320 --> 00:33:25,400
Speaker 2: bout years ago making headlines on this. What's domestic final

619
00:33:25,520 --> 00:33:28,480
Speaker 2: sales look like one year out? Don't give me this

620
00:33:28,680 --> 00:33:29,479
Speaker 2: gloom stuff.

621
00:33:29,640 --> 00:33:32,800
Speaker 8: No, it's not gloomy. I think we're both very constructive

622
00:33:32,840 --> 00:33:36,680
Speaker 8: on a better productivity cycle, not just because of AI.

623
00:33:36,880 --> 00:33:39,640
Speaker 8: AI hasn't even begun to enter the room yet. This

624
00:33:39,760 --> 00:33:44,520
Speaker 8: is about a healthier labor market. We'll entered the stock

625
00:33:44,600 --> 00:33:48,160
Speaker 8: market room, but not necessarily the productivity numbers. It is

626
00:33:48,240 --> 00:33:50,719
Speaker 8: a bit. We've had a strong investment cycle, we've had

627
00:33:50,720 --> 00:33:54,400
Speaker 8: a good labor market, good matching of employers and employees,

628
00:33:54,840 --> 00:33:57,640
Speaker 8: and it's we're not deleveraging. Last cycle was all about

629
00:33:57,640 --> 00:34:01,520
Speaker 8: deleveraging and global fragility and find ancial fragilities. And we

630
00:34:01,600 --> 00:34:05,000
Speaker 8: have strong balance sheets and a healthy, broad based economy.

631
00:34:05,080 --> 00:34:07,840
Speaker 8: So I think we are pretty constructive. That we've got

632
00:34:07,840 --> 00:34:12,080
Speaker 8: a better productivity trend. We've got immigration, at least for now.

633
00:34:12,120 --> 00:34:15,640
Speaker 8: That's going to be a big policy different differentiator in

634
00:34:15,680 --> 00:34:19,600
Speaker 8: twenty twenty five. But for now, the US economy looks

635
00:34:19,640 --> 00:34:22,359
Speaker 8: like it can run, you know, above two percent, uh,

636
00:34:22,719 --> 00:34:24,160
Speaker 8: and not generate inflation.

637
00:34:24,600 --> 00:34:29,560
Speaker 2: Apple's up nine since the gloom of the AI presence.

638
00:34:29,600 --> 00:34:31,239
Speaker 4: Actually that's true.

639
00:34:31,520 --> 00:34:31,759
Speaker 2: Nine.

640
00:34:31,880 --> 00:34:35,600
Speaker 4: This is just the AI bump that everybody was looking for,

641
00:34:35,640 --> 00:34:41,200
Speaker 4: and they got it. I probably did too extensive, But

642
00:34:41,239 --> 00:34:42,600
Speaker 4: here we go up higher again.

643
00:34:42,640 --> 00:34:44,080
Speaker 8: It constant navidia.

644
00:34:44,200 --> 00:34:46,880
Speaker 2: So there you go. Very good, very good.

645
00:34:47,320 --> 00:34:51,160
Speaker 8: Yeahile, actually good. Now I need to start trimming that position.

646
00:34:51,040 --> 00:34:55,000
Speaker 4: Just loading and up by the momentum constance. What do

647
00:34:55,040 --> 00:34:56,799
Speaker 4: you what would you like to hear from the FED

648
00:34:57,080 --> 00:34:58,919
Speaker 4: chairman today versus maybe what do you think we will

649
00:34:58,920 --> 00:34:59,920
Speaker 4: hear from the FED chairman?

650
00:35:00,120 --> 00:35:02,200
Speaker 1: Yeah, that's that's a great question. I mean, I'd like

651
00:35:02,280 --> 00:35:05,560
Speaker 1: to hear him say that they as long as inflation

652
00:35:05,719 --> 00:35:09,120
Speaker 1: is making progress towards two percent, that it will be

653
00:35:09,200 --> 00:35:13,040
Speaker 1: appropriate for them to take away some policy tightness. And

654
00:35:13,480 --> 00:35:16,840
Speaker 1: let's remember where where is our star. Let's say it's higher.

655
00:35:16,880 --> 00:35:19,080
Speaker 1: Let's say it's three and a half, right in say

656
00:35:19,200 --> 00:35:21,719
Speaker 1: two and a half, let's say it's there. They can

657
00:35:21,880 --> 00:35:24,920
Speaker 1: start cutting and still be restrictive. And so I'd like

658
00:35:25,000 --> 00:35:28,439
Speaker 1: that message of we can start cutting and policy will

659
00:35:28,440 --> 00:35:29,640
Speaker 1: still be restrictive.

660
00:35:30,000 --> 00:35:33,000
Speaker 2: Okay, So economic historian from the University of Texas, is

661
00:35:33,040 --> 00:35:37,080
Speaker 2: there any heritage that we do that besides a green

662
00:35:37,160 --> 00:35:41,120
Speaker 2: spanning and measured after the fact, I don't observe. I

663
00:35:41,160 --> 00:35:45,080
Speaker 2: mean Richard Timberlake at Georgia or mcteera Dallas Fed years ago.

664
00:35:46,000 --> 00:35:52,400
Speaker 8: No, Yeah, there's no history. The history of what you

665
00:35:52,400 --> 00:35:55,480
Speaker 8: you just noted is green span is the mid nineties,

666
00:35:55,520 --> 00:35:57,600
Speaker 8: mid and late nineties where they kind of ebbed and

667
00:35:57,600 --> 00:35:59,560
Speaker 8: flowed the FED funds right, it went up, it went down,

668
00:35:59,600 --> 00:36:02,160
Speaker 8: it went up, it went down, and without a recession,

669
00:36:02,719 --> 00:36:05,080
Speaker 8: and it was about fine tuning and keeping the experience.

670
00:36:05,080 --> 00:36:07,720
Speaker 2: Does he have to address that today? Is the garden

671
00:36:07,800 --> 00:36:09,279
Speaker 2: company he addressed it.

672
00:36:09,280 --> 00:36:09,600
Speaker 7: It is.

673
00:36:11,600 --> 00:36:14,000
Speaker 8: The Bloomberg reporters in the room and asked him that

674
00:36:14,120 --> 00:36:16,680
Speaker 8: very question, because they need to have a strategy. That's

675
00:36:16,719 --> 00:36:17,880
Speaker 8: the one they've been rich.

676
00:36:17,840 --> 00:36:20,399
Speaker 2: Take a memo. Corn Ota wants to tell me what

677
00:36:20,440 --> 00:36:22,719
Speaker 2: to say.

678
00:36:22,000 --> 00:36:24,200
Speaker 1: Well, and you brought up McTeer and he was the

679
00:36:24,200 --> 00:36:26,680
Speaker 1: one arguing for the productivity revolution.

680
00:36:26,880 --> 00:36:27,760
Speaker 8: He was the one.

681
00:36:27,640 --> 00:36:31,200
Speaker 1: Arguing saying, we're going to be getting productivity and we

682
00:36:31,280 --> 00:36:33,680
Speaker 1: need to we need to make sure that we don't

683
00:36:33,920 --> 00:36:36,400
Speaker 1: raise race into this stronger GDP, because if you recall

684
00:36:36,480 --> 00:36:38,759
Speaker 1: in the second half of the nineties, GDP started to

685
00:36:38,880 --> 00:36:42,560
Speaker 1: gain momentum after those three races while inflation fell.

686
00:36:43,320 --> 00:36:45,000
Speaker 4: The nineties late nineties were very good.

687
00:36:45,000 --> 00:36:45,120
Speaker 2: To me.

688
00:36:45,200 --> 00:36:49,320
Speaker 4: They were good I don't to young so Julia, you know,

689
00:36:49,360 --> 00:36:51,400
Speaker 4: I'm trying to explain to my kids are in the

690
00:36:51,400 --> 00:36:54,600
Speaker 4: workforce now that this is a more normalized rate environment.

691
00:36:54,680 --> 00:36:57,640
Speaker 4: That's your stuff we live through before. Is that kind

692
00:36:57,680 --> 00:36:59,520
Speaker 4: of where we are now, we're back back to normal?

693
00:36:59,560 --> 00:37:01,840
Speaker 8: I guess so. I mean, I think we've got or

694
00:37:01,880 --> 00:37:04,400
Speaker 8: in a positive real rate environment. It looks like the

695
00:37:04,400 --> 00:37:07,520
Speaker 8: economy can handle that. So I agree, our star is

696
00:37:07,600 --> 00:37:11,160
Speaker 8: probably higher. That's where we wanted to end up, right,

697
00:37:11,239 --> 00:37:14,520
Speaker 8: That's what the whole idea of the last strategy review

698
00:37:14,560 --> 00:37:18,480
Speaker 8: at the FED was about engineering a somewhat higher run

699
00:37:18,560 --> 00:37:22,279
Speaker 8: rate on inflation and gaining some policy space. And I

700
00:37:22,280 --> 00:37:25,400
Speaker 8: think signs are that we're that's exactly where we're heading

701
00:37:25,960 --> 00:37:28,920
Speaker 8: that will give them better trade offs. I know I'm

702
00:37:28,920 --> 00:37:31,320
Speaker 8: going to say this, and people's heads aren't going to explode.

703
00:37:31,320 --> 00:37:34,319
Speaker 8: We've got a better mix of fiscal and monetary policy. Now,

704
00:37:34,360 --> 00:37:38,000
Speaker 8: of course, six percent deficits are not sustainable forever. But

705
00:37:38,760 --> 00:37:40,640
Speaker 8: you know what we have had is better state in

706
00:37:40,719 --> 00:37:44,799
Speaker 8: local government, better fiscal participation. The FED isn't carrying all

707
00:37:44,920 --> 00:37:46,480
Speaker 8: the water for the economy.

708
00:37:46,960 --> 00:37:49,360
Speaker 2: You guys aren't allowed to travel together for safety. But

709
00:37:49,920 --> 00:37:52,640
Speaker 2: and you guys talked about how you adjust your FED

710
00:37:52,680 --> 00:37:55,319
Speaker 2: calls seriously to the end of the year. Did you

711
00:37:55,360 --> 00:37:58,280
Speaker 2: make a switch this morning when you publish for macro

712
00:37:58,280 --> 00:38:01,400
Speaker 2: policy perspectives? Know switched this morning.

713
00:38:01,640 --> 00:38:04,920
Speaker 8: I think what we've been flagging for our clients is that,

714
00:38:05,080 --> 00:38:08,760
Speaker 8: you know, the outcome of today's meeting and the tone

715
00:38:08,800 --> 00:38:11,359
Speaker 8: and the tenor is going to depend on this morning's data.

716
00:38:11,760 --> 00:38:14,560
Speaker 8: It is an important data point, and if we get

717
00:38:14,600 --> 00:38:17,719
Speaker 8: what we we were below consensus on inflation. It came

718
00:38:17,800 --> 00:38:21,880
Speaker 8: in at our actually even a little bit below our forecast,

719
00:38:21,960 --> 00:38:26,640
Speaker 8: but that that would lean towards a more positive, constructive

720
00:38:26,719 --> 00:38:29,200
Speaker 8: message that we're going to start in September. So I

721
00:38:29,200 --> 00:38:32,239
Speaker 8: think that that's where we're at. The data has ratified

722
00:38:32,280 --> 00:38:36,360
Speaker 8: that orientation, and now it's up to share Powell to

723
00:38:36,400 --> 00:38:37,200
Speaker 8: deliver the message.

724
00:38:37,239 --> 00:38:39,680
Speaker 2: And I Lingen is a third of a way to

725
00:38:39,760 --> 00:38:42,319
Speaker 2: a stunning call in the ten year yield YEP four

726
00:38:42,360 --> 00:38:44,520
Speaker 2: point two eight percent. I'm not saying it's going to

727
00:38:44,640 --> 00:38:47,680
Speaker 2: drive lower, but that's what BEMO Capital Markets is saying.

728
00:38:47,800 --> 00:38:48,560
Speaker 2: Yep exactly.

729
00:38:48,920 --> 00:38:50,800
Speaker 8: So where's constance.

730
00:38:50,800 --> 00:38:53,040
Speaker 4: Where are you guys thinking about GDP this year? Next year?

731
00:38:53,239 --> 00:38:55,400
Speaker 4: How's this economy going to be growing?

732
00:38:55,760 --> 00:38:55,960
Speaker 2: Yeah?

733
00:38:56,000 --> 00:38:58,120
Speaker 1: So we had originally been thinking we would have a

734
00:38:58,160 --> 00:39:01,080
Speaker 1: soft patch this year because high race would begin to

735
00:39:01,120 --> 00:39:04,520
Speaker 1: take a bite out of growth, and now we're thinking

736
00:39:04,640 --> 00:39:08,200
Speaker 1: that if the FED can act and then in time,

737
00:39:08,560 --> 00:39:10,799
Speaker 1: that that may be able to be avoided. And part

738
00:39:10,800 --> 00:39:12,839
Speaker 1: of the reason that's going to be avoided is this

739
00:39:12,880 --> 00:39:16,200
Speaker 1: productivity story that Julia was talking about earlier, right, and

740
00:39:16,760 --> 00:39:18,799
Speaker 1: all of the aspects of that that are playing out

741
00:39:18,800 --> 00:39:21,360
Speaker 1: in the economy. So we're looking for a little softer

742
00:39:21,520 --> 00:39:24,440
Speaker 1: than last year, and then a little bit of a

743
00:39:24,440 --> 00:39:27,000
Speaker 1: pickup probably in the second half of twenty twenty five

744
00:39:27,080 --> 00:39:30,080
Speaker 1: as lower rates continue and feed into growth.

745
00:39:30,120 --> 00:39:35,120
Speaker 2: Way too optimistic constant condo micro policy perspectives. Can we

746
00:39:35,160 --> 00:39:38,080
Speaker 2: do this again? Yeah? Thank you. Thank you so much.

747
00:39:49,239 --> 00:39:52,399
Speaker 2: Right now, we've really been anticipating this. If you get

748
00:39:52,400 --> 00:39:55,359
Speaker 2: off a plane at Heathrow and you take the road

749
00:39:55,440 --> 00:39:58,080
Speaker 2: in and the green they have these taxi kepts Paul

750
00:39:58,120 --> 00:40:02,600
Speaker 2: that drive like a Bentley like electric taxicabs that are spectacular,

751
00:40:03,320 --> 00:40:07,239
Speaker 2: And if you drive into Jonathan Maxwell's London, it's immediately

752
00:40:07,320 --> 00:40:10,239
Speaker 2: evident that it's different than here. And then you take

753
00:40:10,239 --> 00:40:13,799
Speaker 2: that over to the recent elections in Europe and you've

754
00:40:13,800 --> 00:40:16,320
Speaker 2: got a green Europe, a green United Kingdom compared to

755
00:40:16,320 --> 00:40:19,040
Speaker 2: the United States. And this is front and center now

756
00:40:19,080 --> 00:40:22,560
Speaker 2: with all the politics of France mccroon, Frankly of Germany

757
00:40:22,640 --> 00:40:27,880
Speaker 2: as well Jonathan Maxwell's CEO, It's Sustainable Development Capital heritage

758
00:40:27,880 --> 00:40:32,120
Speaker 2: of HSBC Infrastructure. Jonathan thrilled to have you on the show.

759
00:40:32,840 --> 00:40:37,600
Speaker 2: The protest against green in the recent elections is that

760
00:40:37,640 --> 00:40:41,280
Speaker 2: about green or is that about the cost of green

761
00:40:41,640 --> 00:40:43,160
Speaker 2: to citizens?

762
00:40:44,320 --> 00:40:48,839
Speaker 7: It's mostly about economics. I mean there have been some

763
00:40:49,640 --> 00:40:53,879
Speaker 7: there's a statement by the Italian Prime Minister ushy Back,

764
00:40:54,080 --> 00:40:57,920
Speaker 7: for example, on one of Italy's greatest industries, the motor industry,

765
00:40:58,760 --> 00:41:03,320
Speaker 7: and the European proposals to phase out petrol diesel class

766
00:41:03,360 --> 00:41:08,240
Speaker 7: by twenty thirty five saying that was an ideological mistake

767
00:41:09,280 --> 00:41:13,399
Speaker 7: or an ideologically lead right. But the yes, I think

768
00:41:13,400 --> 00:41:16,960
Speaker 7: that the economics is one of the very big factors that's.

769
00:41:16,800 --> 00:41:17,560
Speaker 2: Going on here.

770
00:41:18,800 --> 00:41:21,880
Speaker 7: What Look, two three years ago in Europe, you'd be

771
00:41:21,920 --> 00:41:24,799
Speaker 7: accused of greenwash, you know that is, you know, you're

772
00:41:24,800 --> 00:41:26,880
Speaker 7: trying to put yourself out as green as a government

773
00:41:26,960 --> 00:41:29,080
Speaker 7: or a company and you're not as green as you

774
00:41:29,160 --> 00:41:31,319
Speaker 7: could or should be. Then it got into kind of

775
00:41:31,400 --> 00:41:36,280
Speaker 7: green hush. You know, people got sued of a state. Interesting,

776
00:41:37,120 --> 00:41:39,640
Speaker 7: now we're in this kind of what the European councilor

777
00:41:39,960 --> 00:41:46,359
Speaker 7: relationships green lash, green lash, backlash against the economics.

778
00:41:46,880 --> 00:41:51,359
Speaker 2: It doesn't that way. You're encyclopedica on this. And I'm

779
00:41:51,440 --> 00:41:56,239
Speaker 2: fascinated if green in Europe comes towards what I'm going

780
00:41:56,280 --> 00:42:00,239
Speaker 2: to call the anti climate change of America, or does

781
00:42:00,280 --> 00:42:03,520
Speaker 2: America come towards the green of Europe? Which is it?

782
00:42:05,000 --> 00:42:07,319
Speaker 7: Look, there are three big things going on here. The

783
00:42:07,320 --> 00:42:10,560
Speaker 7: biggest one is about economics, and I'll come back to

784
00:42:10,600 --> 00:42:13,840
Speaker 7: that because I think it's just completely misunderstood how the

785
00:42:13,880 --> 00:42:16,640
Speaker 7: economics of the energy system can and should work and

786
00:42:16,840 --> 00:42:17,319
Speaker 7: does work.

787
00:42:17,320 --> 00:42:17,680
Speaker 2: Today.

788
00:42:18,360 --> 00:42:19,680
Speaker 7: There are a couple of other bits that are going

789
00:42:19,680 --> 00:42:22,160
Speaker 7: on in Europe. We've got a huge problem with energy.

790
00:42:22,160 --> 00:42:24,920
Speaker 7: Security and resilience in Europe is a very big difference

791
00:42:24,960 --> 00:42:28,400
Speaker 7: from America in Europe, which is that you make energy.

792
00:42:28,560 --> 00:42:30,640
Speaker 7: In fact, you're a net exporty of the world's larger

793
00:42:30,719 --> 00:42:36,800
Speaker 7: soil and gas producer and exporter. Going forward, Europe doesn't.

794
00:42:36,880 --> 00:42:39,840
Speaker 7: It imports energy, right, It depends by and large on

795
00:42:39,880 --> 00:42:43,680
Speaker 7: other countries. In fact, after the Russian Ukraine crisis cut

796
00:42:43,719 --> 00:42:48,400
Speaker 7: off gas to most of Europe, actually Europe's now dependent

797
00:42:48,440 --> 00:42:50,520
Speaker 7: on the United States as much as other regions like

798
00:42:50,640 --> 00:42:53,920
Speaker 7: Kattern and so on. So there's a big difference. You know,

799
00:42:53,960 --> 00:42:57,440
Speaker 7: you export, we import a gweeb in Europe, right, But

800
00:42:59,160 --> 00:43:03,719
Speaker 7: resilience and then security is now a massive feature. The

801
00:43:03,800 --> 00:43:07,040
Speaker 7: second massive feature obviously is environment and carbon And yes,

802
00:43:07,120 --> 00:43:10,560
Speaker 7: there have been some really quite progressive policies in Europe.

803
00:43:10,680 --> 00:43:13,399
Speaker 7: But you've got the Inflation Reduction Act. It's dollar for dollar,

804
00:43:13,440 --> 00:43:15,200
Speaker 7: it's about the same amount if you look at the

805
00:43:15,239 --> 00:43:18,040
Speaker 7: amount of money that's been put in, so to speak,

806
00:43:18,080 --> 00:43:20,440
Speaker 7: the green or climate economy in America versus Yeah, but

807
00:43:20,440 --> 00:43:22,319
Speaker 7: it's about the same. It's about the same. We had

808
00:43:22,360 --> 00:43:24,720
Speaker 7: about a seven hundred and fifty billion dollar post COVID

809
00:43:24,719 --> 00:43:28,080
Speaker 7: stimulus package. Biggest part of it, which is now the

810
00:43:28,080 --> 00:43:30,880
Speaker 7: controversial bit, is the Green Deal. It's about the same

811
00:43:31,120 --> 00:43:33,680
Speaker 7: as the as the Inflation Reduction Act. But here's the

812
00:43:33,719 --> 00:43:36,359
Speaker 7: big one. And this is why I think it's SAIDs understood.

813
00:43:36,520 --> 00:43:40,120
Speaker 7: If people are perbasuring back in Europe on the energy

814
00:43:40,160 --> 00:43:44,279
Speaker 7: or clean energy sector for cost, it just misunderstands the

815
00:43:44,320 --> 00:43:47,080
Speaker 7: biggest problem of the energy sector. Most of it's wasted.

816
00:43:47,800 --> 00:43:48,200
Speaker 2: You know, in.

817
00:43:48,200 --> 00:43:51,200
Speaker 7: America, about seventy percent of all the primary energy, that

818
00:43:51,320 --> 00:43:54,319
Speaker 7: is all the original natural resource is lost. What it

819
00:43:54,360 --> 00:43:57,000
Speaker 7: gets to the point of views through conversion, generation, and

820
00:43:57,000 --> 00:44:00,200
Speaker 7: distribution and transmission. It's about the same in Europe. So

821
00:44:00,239 --> 00:44:03,920
Speaker 7: what actually the European real policy is on energy. It's

822
00:44:04,000 --> 00:44:07,440
Speaker 7: actually very very interesting and possibly more progressive than America

823
00:44:07,440 --> 00:44:11,040
Speaker 7: at this stage. And it basically says energy efficiency first,

824
00:44:11,080 --> 00:44:13,799
Speaker 7: what happens if you use less energy to do the

825
00:44:13,800 --> 00:44:18,480
Speaker 7: same job when you become productive more competitive. So actually, yep,

826
00:44:18,680 --> 00:44:23,640
Speaker 7: being there is some strange and maybe over egged policies

827
00:44:23,680 --> 00:44:26,480
Speaker 7: where you know, doing things like maybe people got a

828
00:44:26,480 --> 00:44:29,719
Speaker 7: bit too excited about technologies like hydrogen from time to

829
00:44:30,120 --> 00:44:33,560
Speaker 7: batteries don't necessarily help them cost more, But there's an

830
00:44:33,600 --> 00:44:35,480
Speaker 7: awful lot we can do that costs less.

831
00:44:36,360 --> 00:44:40,160
Speaker 4: Right, And Jonathan, I you know General Atlantic Fund. I

832
00:44:40,160 --> 00:44:42,760
Speaker 4: mean these are financial players. They just bought a stake

833
00:44:42,840 --> 00:44:46,279
Speaker 4: in your company. I mean that tells me that, I

834
00:44:46,280 --> 00:44:50,120
Speaker 4: don't know, some smart money is still pursuing these types

835
00:44:50,120 --> 00:44:52,320
Speaker 4: of policies. Talk to us about that transaction.

836
00:44:53,080 --> 00:44:56,440
Speaker 7: So, I mean our firm, our company is Sustainable Development

837
00:44:56,440 --> 00:44:59,359
Speaker 7: Capital fundamentally looks at the world and says, what's the

838
00:44:59,360 --> 00:45:02,719
Speaker 7: most resorts sufficient way of doing business? Why do we

839
00:45:02,760 --> 00:45:05,279
Speaker 7: care about being resource sufficient? Because you can use less

840
00:45:05,280 --> 00:45:08,439
Speaker 7: and do the same or more. That's more competitive, more productive, more.

841
00:45:08,360 --> 00:45:10,759
Speaker 2: Part of it. But in the time, I'm going to

842
00:45:10,840 --> 00:45:13,719
Speaker 2: interrupt you here because I think, Jonathan, this is really

843
00:45:13,760 --> 00:45:16,920
Speaker 2: really important and the time that we've got left. Is

844
00:45:16,960 --> 00:45:20,000
Speaker 2: it simple to say that with these set of elections,

845
00:45:20,400 --> 00:45:24,840
Speaker 2: there's been a massive protest against Green. Is that correct

846
00:45:24,880 --> 00:45:25,080
Speaker 2: or not?

847
00:45:27,080 --> 00:45:30,280
Speaker 7: I think that there's been a protest. There were seventy

848
00:45:30,280 --> 00:45:33,680
Speaker 7: three seats out of seven hundred and five that were Green.

849
00:45:33,719 --> 00:45:36,600
Speaker 7: It's now fifty three seats. The biggest story is the

850
00:45:36,600 --> 00:45:40,319
Speaker 7: fact that the real opportunity for Europe and the real

851
00:45:40,400 --> 00:45:43,880
Speaker 7: problem is how do you manage cost and reliability and

852
00:45:43,920 --> 00:45:46,279
Speaker 7: carbon and energy. The real solution to that is be

853
00:45:46,400 --> 00:45:50,920
Speaker 7: more productive, more efficient, more competitive, and it's efficiency first.

854
00:45:51,000 --> 00:45:54,600
Speaker 7: That's the European policy, that's the business plan, and that's

855
00:45:54,600 --> 00:45:58,160
Speaker 7: what General Atlantic have backed in US because that's everything

856
00:45:58,200 --> 00:46:01,360
Speaker 7: that we did will when we make in the mabket.

857
00:46:01,400 --> 00:46:05,399
Speaker 7: We're looking for project companies, opportunities that are more energy

858
00:46:05,440 --> 00:46:08,520
Speaker 7: efficient because you can deliver the same or better outcome

859
00:46:08,560 --> 00:46:12,040
Speaker 7: economically using less energy. That's the biggest bang from the

860
00:46:12,040 --> 00:46:15,080
Speaker 7: back from the carbon emission. But doctor expect Jan that's

861
00:46:15,680 --> 00:46:16,640
Speaker 7: Atlantic of backing.

862
00:46:16,760 --> 00:46:19,320
Speaker 2: I have to go, Jonathan, Thank you so much. Jonathan

863
00:46:19,360 --> 00:46:23,040
Speaker 2: Maxwell with US is Sustainable Development Capital. This is the

864
00:46:23,080 --> 00:46:28,080
Speaker 2: Bloomberg Surveillance Podcast, bringing you the best in economics, finance, investment,

865
00:46:28,239 --> 00:46:31,880
Speaker 2: and international relations. You can also watch the show live

866
00:46:32,080 --> 00:46:36,440
Speaker 2: on YouTube. Visit the Bloomberg Podcast channel on YouTube to

867
00:46:36,560 --> 00:46:39,960
Speaker 2: see the show weekday mornings from seven to ten am

868
00:46:40,000 --> 00:46:44,040
Speaker 2: Eastern from our global headquarters in New York City. Subscribe

869
00:46:44,040 --> 00:46:47,800
Speaker 2: to the podcast on Apple, Spotify, or anywhere else you listen,

870
00:46:48,120 --> 00:46:51,759
Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the

871
00:46:51,800 --> 00:46:53,320
Speaker 2: Bloomberg Business App.