Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Bloomberg Surveillance is about conversation. That's the way we do it.
Speaker 2: Right now, joining us with our question or interview of
Speaker 2: the day. Steven Englander with Earn Credit the standard Charter bank,
Speaker 2: definitive at City Group for years on cross rates, absolutely
Speaker 2: known globally for the relationships and currency show. I want
Speaker 2: to cut to the chase and go back to Yale. Okay,
Speaker 2: you at Bob Evanson is your faculty advisor at Yale.
Speaker 2: Did you ever go to the Yale Harvard tailgate games
Speaker 2: that were legendary with Evanson?
Speaker 3: No, but he did send me to the Pesol Fundeau
Speaker 3: in Brazil to look at their agricultural experiment stations and
Speaker 3: see what they were doing.
Speaker 2: His was granular data, which is the way Steve Englander rolls.
Speaker 4: What take the Yale.
Speaker 2: Granular study that Colls commissioned, Schill Earn all that and
Speaker 2: bring it over to how you make a call of
Speaker 2: fifty basis points September.
Speaker 3: I think the trick is to try and understand everything
Speaker 3: that's in the market and ask, you know, why does
Speaker 3: the market think what it's thinking? What is the market logic?
Speaker 3: And then say, do I have a right to disagree
Speaker 3: with it? Do I think that there's something I know
Speaker 3: that the market doesn't know? And how comfortable am I
Speaker 3: with it?
Speaker 2: Let's start on the dual mandate of inflation. Let's go
Speaker 2: back to Evanson, giant of Minnesota and teaching it Yale
Speaker 2: iconic and that's the American farmer. The images this weekend
Speaker 2: of farmers in Arkansas flat on their back, how pernicious,
Speaker 2: Stephen Englander is the inflation now in America?
Speaker 3: I think the perception is quite strong, and there is
Speaker 3: a justification. I'd say this that the if you look
Speaker 3: at some of the adjustments for technological progress, our computers
Speaker 3: are much better, but we don't use that much of
Speaker 3: their capacity. So you know, some of the softness that
Speaker 3: we sometimes see in inflation is sort of added on
Speaker 3: by the bl It's completely legitimate, but it's not what
Speaker 3: the price of coffee is. What you know Arkansas farmers
Speaker 3: or inputs from Markansas farmers.
Speaker 2: Steven Anglander, where there's the standard charter bank, we are
Speaker 2: commercial trees through the market opening and well into this
Speaker 2: nine o'clock hour.
Speaker 4: David Gurray in for Paul Sweeney.
Speaker 5: David, you mentioned that you're sort of looking at all
Speaker 5: of these market factors as you come up with that forecaster.
Speaker 5: What was it that led you to make this call?
Speaker 5: Was it the simple variable of just the jobs numbers
Speaker 5: that we got, or were there was there some other
Speaker 5: mechanism or variable that made you feel confident in that.
Speaker 3: Well, you also have to try and read the mind
Speaker 3: of the FED and the in sentence in the market
Speaker 3: and so on, and they think, you know, yeah.
Speaker 1: You know, I actually think it's the right thing to do.
Speaker 3: And one question I asked myself is, say they had
Speaker 3: known the data for the last four months, nonfarm pay
Speaker 3: rolls last four months as averaged twenty seven thousand, and
Speaker 3: because of the bias that you get from the birth
Speaker 3: death adjustment, we think even that's overstated. Would they have cut?
Speaker 3: And you know the answer is yeah, entire mind that
Speaker 3: they would have cut. And so we think that they're
Speaker 3: not going to commit themselves to making a series of cuts,
Speaker 3: but they're going to say, look, you know, the numbers
Speaker 3: are softer than we expected. We're reading the numbers and
Speaker 3: they justify cutting, but also a bit of catchup.
Speaker 5: We're in this moment where the integrity of government data
Speaker 5: is being cast into question more than it has been,
Speaker 5: certainly by personnel movements, but also as you listen to
Speaker 5: the present's economic advisors suggesting that they're not capturing the
Speaker 5: labor economy in a holistic sense. How does that complicate
Speaker 5: your job as a private sector economist who's looking at
Speaker 5: the economy. Does it raise doubts in your mind?
Speaker 2: How?
Speaker 5: How does it sort of change the work that you're
Speaker 5: doing if that's coming about.
Speaker 3: Well, we actually spend a lot of time looking at
Speaker 3: the data and trying to understand if they're legitimate or not.
Speaker 3: Like last year, one of our big papers, and I
Speaker 3: think we were one of the first, was sort of
Speaker 3: integrating undocumented immigrants and kind of saying, there's a reason
Speaker 3: the pyerials are so strong because they're getting work permits
Speaker 3: and getting picked up by NFP.
Speaker 4: I want to take a little bit of theory here.
Speaker 2: The Yale a Budget Lab at Yale has been absolutely
Speaker 2: brilliant in teaching us about this legislation and about tariffs
Speaker 2: as well. I personally saw terriffs this weekend in Canna paint.
Speaker 2: When I'm fifteen percent out of the blue, Steve Englander,
Speaker 2: I'm in the camp. David Kelly, I want to say
Speaker 2: at Putnam at JP Morgan David Kelly writing about the
Speaker 2: income effect as well, we're all focused on substituting. Lisa's
Speaker 2: going to go to Costco. She's not gonna buy coffee,
Speaker 2: She's going to buy Sanka Blogony to me right now,
Speaker 2: what's going on as a major income effect affected by
Speaker 2: purchasing power? This goes back to a guy named Hicks, folks,
Speaker 2: a guy named Slutsky. But the answer is we're being
Speaker 2: a hit with a new purchasing power that's evaporating.
Speaker 3: I think that's correct, and you know a lot of
Speaker 3: people understand it. You know, in terms of oil prices,
Speaker 3: right you know you were paying forty to fill up
Speaker 3: your tank.
Speaker 1: Now you pay eighty.
Speaker 3: It means one, let's trip with the kids to McDonald
Speaker 3: in the week. With tariffs and import prices, it's more
Speaker 3: spread out and less dramatic, but it's the same kind
Speaker 3: of impact. All of a sudden, everything you see is
Speaker 3: a little bit more expensive and you have to make
Speaker 3: decisions and prioritize your spending.
Speaker 2: Feel the dreams will fifty basis points ease our pain ultimately?
Speaker 3: I think yes, And let me be clear, because we
Speaker 3: think that they do fifty and then they pause because
Speaker 3: GDP numbers aren't bad. Productivity looks like it's actually pretty good.
Speaker 4: You sure Sharma said that in the Ft today and the.
Speaker 3: You know, you look at the labor numbers, as you know,
Speaker 3: they're really mediocre. Its sluggish, softish. But you know, as
Speaker 3: you know, I was at Lehman's in two thousand and eight,
Speaker 3: this is not a two thousand and eight type of
Speaker 3: labor market. That's not a twenty April twenty twenty labor market.
Speaker 3: It's a mediocre, sluggish, poor labor market where you know
Speaker 3: you probably should get closer to neutral, but nothing is
Speaker 3: falling off.
Speaker 5: The Chairman has talked about the oddness of that and
Speaker 5: the challenge of having a market like you describe. How
Speaker 5: much closer are we to figuring out why it is
Speaker 5: that way and why it continues to be Is it's
Speaker 5: just the simple sense of ambiguity about policies and their effects,
Speaker 5: Is it? As you hear from Scott Bessant or Kevin Hassett,
Speaker 5: You know, things will take time to equilibrate or work
Speaker 5: themselves out. What do you make of the labor market
Speaker 5: the state in which it's in right now?
Speaker 3: Well, look if I want to criticize the fad, I'd
Speaker 3: say that they spend ninety percent of their time worrying
Speaker 3: about the man shocks. And here we are talking about
Speaker 3: productivity shocks, talking about labor market shocks, and there's a
Speaker 3: lot of ambiguity in terms of how you interpret numbers
Speaker 3: when they come in because you don't know if they're moving,
Speaker 3: you know what shock is moving them. So I think
Speaker 3: that that's the big issue that leaves things uncertain, and
Speaker 3: you know, uncertain about how bad things are. So I
Speaker 3: think that you know, in some ways, it argues that
Speaker 3: you know, you kind of know the direction, so you
Speaker 3: make a move, but you'd be very cautious. I mean,
Speaker 3: what if we're in nineteen ninety seven.
Speaker 5: Is stagflation a word that is bandied about in the
Speaker 5: standard charted offices? Is it something that you were thinking
Speaker 5: about or worried about at this moment.
Speaker 1: It's always a worry.
Speaker 3: But you know, with labor markets so soft, you know,
Speaker 3: and spending going to be soft, I don't think labor
Speaker 3: is going to be able to push wages up, you know.
Speaker 1: So I think that you know, irrespected.
Speaker 3: In the sixties, he's so Yale, irrespectful, irrespected of the
Speaker 3: productivity story.
Speaker 1: I think that the you know, uh yeah, Dart.
Speaker 2: With a brilliant essay this weekend, and he goes back
Speaker 2: to nominal GDP, and I get it. It's a conundrum.
Speaker 2: Do we have terrible economic growth but still buoying inflation?
Speaker 2: Stagflation is doctor Ger talks about here, Stephen Englander. Is
Speaker 2: the real risk here that we get this wrong and
Speaker 2: we have dampen growth and quiescent inflation where nominal GDP
Speaker 2: dips below five percent, ginormous number dips below Dare I
Speaker 2: say four percent or worse? Er?
Speaker 4: Is that in one of your probabilities? You know?
Speaker 3: I think that you know, we all talk about AI
Speaker 3: all day long, and I think that that's going to
Speaker 3: be the real decisor for how the economy breaks that
Speaker 3: if it turns out that we're, you know, partly because
Speaker 3: of AI or other factors, that productivity growth is strong, right,
Speaker 3: everything's going to be fun.
Speaker 4: But the FED doesn't have that luxury.
Speaker 2: We can talk about it, we can go yeah, yeah,
Speaker 2: bring in Simon Johnson up at MIT. Rogueoff was on
Speaker 2: the other day. It's a bunch of bow type of stuff.
Speaker 2: The FED doesn't have that luxury. Do they to ponder
Speaker 2: AI in productivity?
Speaker 1: Well, A, they should, But I know.
Speaker 4: Schoomberg prescriptive of should. I thought Crewman was.
Speaker 2: On once and I couldn't get him to say the
Speaker 2: dreaded s word should Englanders doing it?
Speaker 4: What should got to do with it?
Speaker 3: But I think you know, in practice, given the absence
Speaker 3: of knowledge, it just means that you you sort of
Speaker 3: go slowly in the direction that you think that data
Speaker 3: are telling you. I mean, there's no straw here with
Speaker 3: which to make bricks, and you know you can critique
Speaker 3: the productivity data very easily as well. So I think
Speaker 3: that they sort of you know, you take a step,
Speaker 3: you see what happens, Take another step, see what happens.
Speaker 3: If something bad happens, you stop, or you step back
Speaker 3: a little bit. If it looks good, you keep going.
Speaker 2: I want you to jump in here and finish out
Speaker 2: the interview. We're having so much funnier folks with the
Speaker 2: academics of doctor England or I really want to emphasize
Speaker 2: some of this stuff is incredible dynamics moving parts. David
Speaker 2: Off of that is this dreaded word ambiguity, which is
Speaker 2: we really don't know where we are or what's going
Speaker 2: to happen?
Speaker 5: Continue will I will ask you to indulge me and
Speaker 5: do a little work for us here as we look
Speaker 5: ahead to this week of data. So we have these revisions,
Speaker 5: I'm curious how you're thinking about them, But also we
Speaker 5: had priceding goals beyond Friday, saying he wants to see
Speaker 5: the inflation data this week. That matters to him. We've
Speaker 5: got to look at the inflation side too, He says,
Speaker 5: how important is that to you? So how should be
Speaker 5: thinking or framing the data releases that we're going to
Speaker 5: get this week.
Speaker 3: I think the important thing about the benchmark revisions is
Speaker 3: we think they're going to be significant, maybe seven hundred
Speaker 3: and fifty to one million down. And the important things
Speaker 3: there is there's no reason to think that things have
Speaker 3: gotten better since the March of twenty twenty five as
Speaker 3: far as inflation goes, I think the real issue you know, yeah,
Speaker 3: so you know my shirt price went up because there's
Speaker 3: a tariff on shirts.
Speaker 1: I mean, you don't know how to gauge it.
Speaker 3: If it turns out that you know, say, services inflation
Speaker 3: is heating up, stuff that you know is not related
Speaker 3: to tariffs is heating up, then there's a problem.
Speaker 2: What happens to the animal spirit? You mentioned seven fifty
Speaker 2: to one million, most people are below that. I'd say
Speaker 2: four hundred and five. I mean Steve Englander's out in
Speaker 2: a linear folks, with what we're gonna see tomorrow.
Speaker 4: We'll have complete.
Speaker 2: Coverage of this and Steven Angler, what does it mean
Speaker 2: for people's retirement plans? Slash the stock market? If we
Speaker 2: get Anglander rate cuts? Is that good or bad for equities?
Speaker 3: You know, a little bit of bad news is probably
Speaker 3: pretty good for equities because it calms the market down
Speaker 3: and it sort of says, look, if if you get
Speaker 3: your company right, cost the capital isn't going to be
Speaker 3: an issue for you. I think if things are really
Speaker 3: falling apart, like you know twenty twenty or two thousand
Speaker 3: and eight, then you know, bad news is really bad news.
Speaker 3: But in many circumstances, a little bit of bad news
Speaker 3: is actually good news for equities. And I'd say this
Speaker 3: is that the equity you know, you sort of say
Speaker 3: wire equity is so strong when when everybody thinks things
Speaker 3: are a mush, it sort of makes you look at
Speaker 3: the productivity element again, kind of saying, well, wages aren't
Speaker 3: going up, but it looks like GDP is fairly strong.
Speaker 3: What's left. It's not going into Texas. There's only profits.
Speaker 2: Bill from London emails in, he's with a standard charter
Speaker 2: bank and says, ask Steven what it means for the
Speaker 2: rest of the world.
Speaker 4: How about a standard charter.
Speaker 2: Question this morning for Bill Winters? What does all this
Speaker 2: Anglander talk mean for Singapore, for London and the rest
Speaker 2: of the standard charter world?
Speaker 1: In some ways it's actually okay. I mean there are
Speaker 1: two elements.
Speaker 3: One is that if you look at the AI game,
Speaker 3: if that's the game, you sort of say, okay, US
Speaker 3: seems to be on the game. China might be in
Speaker 3: the game. A bunch of other countries trying to get
Speaker 3: in Europe, you know.
Speaker 1: Right not there having some conferences.
Speaker 3: On the other hand, you know, the say US GDP
Speaker 3: or say the FED cuts by the fifty basis points.
Speaker 1: That's everybody else.
Speaker 3: His interest rates go down by thirty to fifty bases points,
Speaker 3: and that's far more important to them than sort of saying, well, oh,
Speaker 3: you know, if Englander's right, you know, they're forty your jobs,
Speaker 3: so they're not going to buy a Singapore export. The
Speaker 3: fact that they can get their cost of capital and
Speaker 3: the risk premium is down.
Speaker 1: They think is more important to the rest of them.
Speaker 2: Does Bill Winters know that Standard Charter Bank is up
Speaker 2: eighty nine points sixty seven percent in the past twelve
Speaker 2: months because of Steve Englander.
Speaker 3: Well, I think he can add like four or five
Speaker 3: decimal points, but I'm not From from your mouth to
Speaker 3: his ears, honored.
Speaker 2: We'd love to get a phone call with you tomorrow
Speaker 2: on your busy day, Steve Englander when we get this data.
Speaker 2: Doctor Englander is with a Standard Charter Bank and they're
Speaker 2: just thrilled to give you extended conversations there. That's what
Speaker 2: Bloomberg likes to do for Global at Wall Street