1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,760 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Julian Emmanuel have evercall. 10 00:00:37,800 --> 00:00:41,600 Speaker 2: Writing yesterday's CPI reinforced the three steps forward, two steps 11 00:00:41,640 --> 00:00:44,400 Speaker 2: back volatile market environment that will be a part of 12 00:00:44,440 --> 00:00:46,400 Speaker 2: the road to wes and p five hundred and sixty 13 00:00:46,400 --> 00:00:49,480 Speaker 2: eight hundred a year end twenty twenty five. Julian joins 14 00:00:49,560 --> 00:00:51,360 Speaker 2: us now for more. Julian, good morning, good morning. Now 15 00:00:51,400 --> 00:00:54,200 Speaker 2: you wrote yesterday, it's not the nineteen seventies show, what 16 00:00:54,400 --> 00:00:55,920 Speaker 2: is it? 17 00:00:54,520 --> 00:00:59,680 Speaker 3: It's twenty twenty five, And in reality is if you 18 00:00:59,720 --> 00:01:03,440 Speaker 3: think about it, every asset market has been in this 19 00:01:03,640 --> 00:01:09,440 Speaker 3: incredibly volatile but range bound condition since the election, right, 20 00:01:09,760 --> 00:01:12,560 Speaker 3: and so we're trying to sort through the potential for 21 00:01:12,640 --> 00:01:18,399 Speaker 3: stronger growth, the potential for geopolitical shift, versus the potential 22 00:01:18,840 --> 00:01:22,280 Speaker 3: for some of the policies that are being considered to 23 00:01:22,360 --> 00:01:28,399 Speaker 3: be increased inflation and drags on growth. And basically the 24 00:01:28,480 --> 00:01:30,960 Speaker 3: net out of it is is we're in this waiting 25 00:01:31,040 --> 00:01:32,959 Speaker 3: game for further development. 26 00:01:33,040 --> 00:01:35,360 Speaker 2: Can we talk about the potential for right hikes? How 27 00:01:35,440 --> 00:01:36,199 Speaker 2: high is that, Bob? 28 00:01:37,520 --> 00:01:40,960 Speaker 3: Extremely high? I think there are a lot of reasons. Look, 29 00:01:41,280 --> 00:01:45,559 Speaker 3: first of all, expectations are still well anchored. Okay, there's 30 00:01:45,640 --> 00:01:49,000 Speaker 3: a lot of volatility around the Michigan survey. The New 31 00:01:49,080 --> 00:01:53,800 Speaker 3: York Fed survey is much more stable. And the reality 32 00:01:54,000 --> 00:01:58,040 Speaker 3: is is that is that when Chairman Powell thinks about 33 00:01:58,080 --> 00:02:01,760 Speaker 3: his legacy, which you know he he's likely to be 34 00:02:01,920 --> 00:02:05,640 Speaker 3: in a different position. Let's say next year, it is 35 00:02:05,880 --> 00:02:10,480 Speaker 3: wrapped up in delivering the soft landing, and a rate 36 00:02:10,639 --> 00:02:14,200 Speaker 3: hike would be the thing that disturbs the potential for 37 00:02:14,360 --> 00:02:19,560 Speaker 3: soft landing. And again, history will say if in fact, 38 00:02:19,600 --> 00:02:22,520 Speaker 3: inflation proves to be sticky into twenty twenty six, and 39 00:02:22,600 --> 00:02:25,080 Speaker 3: we don't believe that's the case. We think this is 40 00:02:25,160 --> 00:02:28,600 Speaker 3: much more like last spring, where you had several months 41 00:02:28,760 --> 00:02:32,120 Speaker 3: of sticky inflation and then the path of travel continued 42 00:02:32,200 --> 00:02:36,919 Speaker 3: lower once again, is that the policies of the current 43 00:02:36,919 --> 00:02:40,399 Speaker 3: White House would be the cause of the inflation if 44 00:02:40,400 --> 00:02:41,880 Speaker 3: it were to remain sticky. 45 00:02:41,600 --> 00:02:43,400 Speaker 4: Which is the reason why you wrote there's literally no 46 00:02:43,480 --> 00:02:46,320 Speaker 4: plausible scenario over the Fed hikes in twenty twenty five. 47 00:02:46,400 --> 00:02:48,600 Speaker 4: I love that kind of conviction at a time where 48 00:02:48,600 --> 00:02:51,880 Speaker 4: everyone else seems conviction list can you put into some 49 00:02:51,919 --> 00:02:54,799 Speaker 4: sort of framework how much conviction you have in the 50 00:02:54,840 --> 00:02:58,120 Speaker 4: three steps forward two steps back that gives you the 51 00:02:58,200 --> 00:03:01,880 Speaker 4: conviction to buy of the two steps back because you 52 00:03:01,880 --> 00:03:04,160 Speaker 4: have confidence that three steps forward are going to come. 53 00:03:04,280 --> 00:03:07,680 Speaker 3: Well, actually, if you think about it in first of all, 54 00:03:07,919 --> 00:03:10,280 Speaker 3: look at the sentiment surveys. There's a lot of bears 55 00:03:10,320 --> 00:03:15,120 Speaker 3: out there. Markets don't top when there's a lot of bears, okay, 56 00:03:15,320 --> 00:03:18,000 Speaker 3: And people can say all they want about the positioning. 57 00:03:18,600 --> 00:03:23,640 Speaker 3: There's still cash there. We've seen inflows and frankly the 58 00:03:23,680 --> 00:03:27,120 Speaker 3: way this market trades, and yesterday is a perfect example. 59 00:03:27,560 --> 00:03:31,080 Speaker 3: It looked like the sky was falling at eight thirty five, 60 00:03:32,240 --> 00:03:36,160 Speaker 3: and then basically people started reassessing. And from our point 61 00:03:36,200 --> 00:03:39,600 Speaker 3: of view, what was interesting is that yesterday the things 62 00:03:39,640 --> 00:03:44,000 Speaker 3: that stabilize the market. Were the things that actually should 63 00:03:44,040 --> 00:03:49,120 Speaker 3: have been the worst performers, technology, long duration, high multiple 64 00:03:49,160 --> 00:03:53,440 Speaker 3: assets which should have been reacting badly against yields going 65 00:03:53,520 --> 00:03:56,560 Speaker 3: up and their secular earnings growers. 66 00:03:56,880 --> 00:03:58,640 Speaker 4: I want to pick up on what you said, which 67 00:03:58,680 --> 00:04:00,320 Speaker 4: is sentiment is so bearish. 68 00:04:00,400 --> 00:04:01,640 Speaker 1: A lot of people disagree with you. 69 00:04:01,720 --> 00:04:04,839 Speaker 4: A lot of people say, actually positioning is pretty bullish. 70 00:04:04,920 --> 00:04:08,160 Speaker 4: Rubner over Scott Rubner over at Goldman Sachs came out 71 00:04:08,160 --> 00:04:10,400 Speaker 4: with this report where he said everyone is in the pool, 72 00:04:10,440 --> 00:04:13,000 Speaker 4: including retail traders for one k and flows started, your 73 00:04:13,040 --> 00:04:14,760 Speaker 4: allocations in corporates. 74 00:04:14,520 --> 00:04:16,640 Speaker 1: You're everybody who comes on the show. Yeah, it's going 75 00:04:16,680 --> 00:04:18,000 Speaker 1: to be volatile. But at the end of the day, 76 00:04:18,040 --> 00:04:18,880 Speaker 1: bye bye bye. 77 00:04:19,320 --> 00:04:21,880 Speaker 4: What makes you think that there's actually any bear sentiment 78 00:04:21,920 --> 00:04:22,680 Speaker 4: out there whatsoever? 79 00:04:24,600 --> 00:04:30,320 Speaker 3: Again, the moment to moment reactions, right, people are very 80 00:04:30,400 --> 00:04:34,440 Speaker 3: quick to sell. The market bounces back because of all 81 00:04:34,520 --> 00:04:37,719 Speaker 3: these reasons. And the biggest reason, which we haven't talked about, 82 00:04:38,120 --> 00:04:41,080 Speaker 3: is that earnings are going to grow by ten percent 83 00:04:41,160 --> 00:04:45,039 Speaker 3: this year. And when you have a condition where earnings 84 00:04:45,080 --> 00:04:48,000 Speaker 3: are going to grow that kind of to that kind 85 00:04:48,080 --> 00:04:51,600 Speaker 3: of degree and have fed that, look are base cases. 86 00:04:51,640 --> 00:04:54,320 Speaker 3: They still cut twice. They may not cut at all, 87 00:04:54,600 --> 00:04:58,680 Speaker 3: but they're not hiking. That's okay. All of that lends 88 00:04:58,720 --> 00:05:01,920 Speaker 3: itself to the idea that the bull market is not over. 89 00:05:02,240 --> 00:05:03,400 Speaker 1: You think they're gonna cut twice. 90 00:05:03,440 --> 00:05:06,240 Speaker 5: I have to ask about potentially this being the part 91 00:05:06,279 --> 00:05:10,160 Speaker 5: of the nineteen seventies that is reminiscent of a FED 92 00:05:10,279 --> 00:05:12,200 Speaker 5: chair that maybe is getting under a little bit of 93 00:05:12,240 --> 00:05:13,080 Speaker 5: political pressure. 94 00:05:14,360 --> 00:05:18,479 Speaker 3: Look, there's no question, and I think Chair Powell was 95 00:05:18,520 --> 00:05:22,120 Speaker 3: wondering whether we were replaying back to twenty eighteen in 96 00:05:22,480 --> 00:05:25,039 Speaker 3: some respects, and that's a lot of the market action 97 00:05:25,640 --> 00:05:29,560 Speaker 3: twenty eighteen. But from our perspective, the fact is, if 98 00:05:29,600 --> 00:05:33,000 Speaker 3: you think about those numbers yesterday and you think about 99 00:05:33,040 --> 00:05:36,239 Speaker 3: the FED as you know, a two sided risk factor, 100 00:05:37,120 --> 00:05:40,000 Speaker 3: you know in terms of uncertainty, Well, we know one 101 00:05:40,040 --> 00:05:42,560 Speaker 3: thing is certain. The FED is likely not to be 102 00:05:42,640 --> 00:05:46,120 Speaker 3: relevant until June. Okay, they're just gonna wait and they're 103 00:05:46,120 --> 00:05:49,800 Speaker 3: gonna ingest more data, and that takes one thing off 104 00:05:49,800 --> 00:05:52,400 Speaker 3: the table. But again from our point of view, we 105 00:05:52,560 --> 00:05:55,000 Speaker 3: just don't think you're going to have what we've turned 106 00:05:55,160 --> 00:05:58,080 Speaker 3: an uncooperative FED, which would be a hiking. 107 00:05:58,080 --> 00:05:59,640 Speaker 2: The FED doesn't want to hike. I think we're not 108 00:05:59,640 --> 00:06:01,720 Speaker 2: the same. We can fill that when the communication we 109 00:06:01,760 --> 00:06:04,280 Speaker 2: get from Fed officials Bank for America indicating that if 110 00:06:04,279 --> 00:06:06,760 Speaker 2: you don't want to hike, don't count where the cunt's 111 00:06:06,800 --> 00:06:09,240 Speaker 2: coming from. For you and a team what delivers them. 112 00:06:09,839 --> 00:06:15,400 Speaker 3: It's again this idea that the stickiness of inflation that 113 00:06:15,440 --> 00:06:19,160 Speaker 3: we have right now is not permanent the same way 114 00:06:19,200 --> 00:06:24,040 Speaker 3: we saw it again continuous travel lower after several months 115 00:06:24,040 --> 00:06:25,159 Speaker 3: of stickiness last year. 116 00:06:25,200 --> 00:06:27,679 Speaker 5: And how much more complicated does that picture get though, 117 00:06:27,880 --> 00:06:31,040 Speaker 5: when you have tariffs coming down the pipeline potentially today, 118 00:06:31,320 --> 00:06:33,600 Speaker 5: reciprocal tariffs line by line. 119 00:06:33,480 --> 00:06:37,479 Speaker 3: It gets a lot more complicated. And the offset to 120 00:06:37,520 --> 00:06:40,159 Speaker 3: that is gee. I wonder if there's a bit of 121 00:06:40,240 --> 00:06:44,240 Speaker 3: coincidence that the meeting between Putin and Trump that's likely 122 00:06:44,279 --> 00:06:47,840 Speaker 3: to happen is happening in Saudi Arabia, you know, ground 123 00:06:47,880 --> 00:06:50,359 Speaker 3: central for setting the price of oil. And when you 124 00:06:50,400 --> 00:06:54,039 Speaker 3: think about why Donald Trump was elected is because the 125 00:06:54,160 --> 00:06:58,600 Speaker 3: US population has been incredibly frustrated and stressed by inflation, 126 00:06:59,000 --> 00:07:01,920 Speaker 3: and he set it himself prior to the election, is that, 127 00:07:02,080 --> 00:07:05,000 Speaker 3: you know, the easiest lever to pull is not the 128 00:07:05,080 --> 00:07:08,760 Speaker 3: price of bacon and eggs or coffee. It is oil, 129 00:07:09,080 --> 00:07:10,880 Speaker 3: and so that's the calculus. 130 00:07:11,040 --> 00:07:13,920 Speaker 2: The three biggest energy producers on the planet in the 131 00:07:13,920 --> 00:07:16,520 Speaker 2: same place, having talks coming very. 132 00:07:16,400 --> 00:07:19,240 Speaker 5: Soon, potentially very soon, and the President just set it 133 00:07:19,240 --> 00:07:19,680 Speaker 5: out there. 134 00:07:19,760 --> 00:07:21,280 Speaker 1: I have been talking to a lot of people. 135 00:07:21,280 --> 00:07:25,160 Speaker 5: There's been preliminary discussions about this meeting potentially in Saudi Arabia, but. 136 00:07:25,120 --> 00:07:27,040 Speaker 1: The President just sort of put it out there for 137 00:07:27,080 --> 00:07:27,480 Speaker 1: the world. 138 00:07:27,600 --> 00:07:30,520 Speaker 5: Also, next week he is going to Saudi Arabia's Sovereign 139 00:07:30,560 --> 00:07:34,280 Speaker 5: Wealth Funds conference being handled in Miami. So there's a 140 00:07:34,720 --> 00:07:38,280 Speaker 5: lot of overtures and olive branches between RIOD and the 141 00:07:38,360 --> 00:07:41,000 Speaker 5: United States, and potentially RIOD could be that place between 142 00:07:41,000 --> 00:07:42,960 Speaker 5: the Washington and Moscow. 143 00:07:42,600 --> 00:07:54,320 Speaker 2: Brun creage right now negative one percent, seventy four thirty three. 144 00:07:55,600 --> 00:07:58,080 Speaker 2: It's joining us now to discuss Nadia, mountsin Wigan is 145 00:07:58,120 --> 00:08:00,800 Speaker 2: seiling capital. NATI. Welcome to the program. Let's talk about 146 00:08:00,840 --> 00:08:03,320 Speaker 2: the developments of the past twenty four hours. What does 147 00:08:03,360 --> 00:08:05,360 Speaker 2: it change for this energy market? 148 00:08:07,040 --> 00:08:10,720 Speaker 6: Well, right now it's brought to the forefront that discussions 149 00:08:10,760 --> 00:08:14,680 Speaker 6: are underway and that the Munich meeting from the fourteenth 150 00:08:14,760 --> 00:08:17,760 Speaker 6: to sixteenth of February. The pressure is on Europe to 151 00:08:17,800 --> 00:08:20,880 Speaker 6: get its act together. What we see on the market 152 00:08:21,000 --> 00:08:24,280 Speaker 6: side is that equity markets are already pricing in peace 153 00:08:24,920 --> 00:08:27,680 Speaker 6: in Ukraine, but when we look at the commodities markets, 154 00:08:28,000 --> 00:08:31,360 Speaker 6: they are not exhibiting that same type of pressure. And 155 00:08:31,840 --> 00:08:33,600 Speaker 6: you can say that oil is a bit under pressure, 156 00:08:33,640 --> 00:08:37,760 Speaker 6: but if we actually had the real semblance of peace, 157 00:08:38,000 --> 00:08:40,400 Speaker 6: we would be trading in the low seventies, at least 158 00:08:40,440 --> 00:08:42,800 Speaker 6: the bottom of the range that we've been experiencing. We'd 159 00:08:42,800 --> 00:08:47,000 Speaker 6: have much lower natural gas prices. So so far, the markets, 160 00:08:47,080 --> 00:08:49,679 Speaker 6: in terms of the commodity traders, they don't believe it. 161 00:08:50,040 --> 00:08:52,559 Speaker 6: Red crude is still highly backwardated. 162 00:08:53,040 --> 00:08:54,959 Speaker 5: Do they not believe there'll be a peace agreement or 163 00:08:55,000 --> 00:08:58,160 Speaker 5: they not believe that Russian energy will flow as it 164 00:08:58,240 --> 00:08:59,040 Speaker 5: once did. 165 00:09:00,080 --> 00:09:01,400 Speaker 7: Well both sides. 166 00:09:01,640 --> 00:09:04,120 Speaker 6: So the first part is whether there will be a 167 00:09:04,160 --> 00:09:08,520 Speaker 6: peace agreement and how quickly it's impossible for Europe to 168 00:09:08,800 --> 00:09:12,360 Speaker 6: agree on how they will handle this peace agreement before 169 00:09:12,400 --> 00:09:15,640 Speaker 6: the German elections that's in ten days. Then they can 170 00:09:15,679 --> 00:09:18,480 Speaker 6: sit and work together and try to figure out what 171 00:09:18,600 --> 00:09:21,439 Speaker 6: a peace agreement would look like, most importantly in terms 172 00:09:21,440 --> 00:09:23,880 Speaker 6: of enforcement. And this is part of what the Munich 173 00:09:23,960 --> 00:09:27,440 Speaker 6: Security Council has to agree because in their own notes 174 00:09:27,960 --> 00:09:30,600 Speaker 6: and preparatory detail. They say they have to come up 175 00:09:30,600 --> 00:09:35,040 Speaker 6: with an ironclad security guarantee that Donald Trump has said 176 00:09:35,200 --> 00:09:39,240 Speaker 6: and Pete Heads have said does not include the US 177 00:09:39,360 --> 00:09:41,720 Speaker 6: on the front line. So they have to agree together. 178 00:09:42,600 --> 00:09:45,720 Speaker 6: In terms of the energy side, that's what the German 179 00:09:45,760 --> 00:09:47,680 Speaker 6: election is really considering as well. 180 00:09:47,720 --> 00:09:50,120 Speaker 7: We have the political party. 181 00:09:49,800 --> 00:09:54,800 Speaker 6: The AfD, that is much more pro putin than the 182 00:09:54,880 --> 00:09:57,800 Speaker 6: other parties. They are willing to step away. 183 00:09:57,520 --> 00:09:59,920 Speaker 1: From NATO and they would like to have that. 184 00:10:00,120 --> 00:10:05,679 Speaker 6: Energy flowing again to make German industry more competitive. Then 185 00:10:05,760 --> 00:10:07,760 Speaker 6: on the flip side, you have other parties that don't 186 00:10:07,800 --> 00:10:11,240 Speaker 6: trust the Russians and believe we have to build Europe 187 00:10:11,240 --> 00:10:14,560 Speaker 6: going forward, and the five percent gd Fennig that can 188 00:10:14,760 --> 00:10:19,360 Speaker 6: really work on the industrial engine of Europe building these arms. 189 00:10:19,360 --> 00:10:22,680 Speaker 6: But right now it's a very fragmented market. Germany creates things, 190 00:10:22,720 --> 00:10:26,160 Speaker 6: Norway creates things. Norway's not even part of the EU. 191 00:10:26,480 --> 00:10:28,400 Speaker 6: The UK is not part of the EU. So they 192 00:10:28,520 --> 00:10:31,320 Speaker 6: really have to pull themselves together. And when we see 193 00:10:31,520 --> 00:10:36,040 Speaker 6: Trump's tactics, he's being very tough on his allies and 194 00:10:36,120 --> 00:10:39,880 Speaker 6: asking ben to step up versus his actual adversaries. 195 00:10:39,920 --> 00:10:41,360 Speaker 7: He's consistent, he's. 196 00:10:41,160 --> 00:10:45,160 Speaker 6: Putting the pressure on Europe and going along listening to 197 00:10:45,200 --> 00:10:48,360 Speaker 6: what Putin wants. He's being very tough on Canada in 198 00:10:48,480 --> 00:10:51,640 Speaker 6: terms of tariffs compared to how he's been on China, 199 00:10:51,720 --> 00:10:55,199 Speaker 6: when we know his ultimate goal is to be tougher 200 00:10:55,920 --> 00:10:59,920 Speaker 6: on China. And he doesn't like that relationship between Russia 201 00:11:00,080 --> 00:11:02,400 Speaker 6: in Germany being so close together. He made that very 202 00:11:02,480 --> 00:11:05,560 Speaker 6: clear in Trump one point oh that he did not 203 00:11:05,840 --> 00:11:10,280 Speaker 6: like this energy dependency. And Scott Besant is in Ukraine 204 00:11:10,320 --> 00:11:13,079 Speaker 6: now showing that the US is open for business. They 205 00:11:13,080 --> 00:11:17,280 Speaker 6: will sell oil and gas to Europe and they will 206 00:11:17,320 --> 00:11:20,960 Speaker 6: take they will take in exchange as a lone rare 207 00:11:21,000 --> 00:11:25,240 Speaker 6: earth minerals from Ukraine. He's a transactional president and it makes. 208 00:11:25,120 --> 00:11:25,960 Speaker 1: Sense, Nadia. 209 00:11:26,120 --> 00:11:29,240 Speaker 5: One adversary though Trump has been tough on is the 210 00:11:29,240 --> 00:11:32,000 Speaker 5: Iranians and the crew they ship to China. 211 00:11:32,280 --> 00:11:33,640 Speaker 1: When you're looking at the oil. 212 00:11:33,440 --> 00:11:36,640 Speaker 5: Market, how are you starting to factor in maximum pressure 213 00:11:36,920 --> 00:11:38,640 Speaker 5: that we are going to see under this administration. 214 00:11:40,040 --> 00:11:42,400 Speaker 6: This is where we've really seen that playing out more 215 00:11:42,520 --> 00:11:46,120 Speaker 6: on the shipping side. And Trump had a success in 216 00:11:46,160 --> 00:11:48,840 Speaker 6: Trump one point one on being tough on the Iranians. 217 00:11:48,840 --> 00:11:50,280 Speaker 7: So that's where the. 218 00:11:50,280 --> 00:11:55,920 Speaker 6: Crude markets believe the most in the Iranian maximum pressure scenario. 219 00:11:56,320 --> 00:11:58,840 Speaker 6: When we look at Russia, they are such a huge 220 00:11:58,920 --> 00:12:03,959 Speaker 6: producer that Russian oil has always tended to get out somehow, 221 00:12:04,000 --> 00:12:08,079 Speaker 6: even though it's in a tougher way. So on that side, 222 00:12:08,120 --> 00:12:10,880 Speaker 6: we are looking at potentially a loss of one million 223 00:12:10,880 --> 00:12:14,000 Speaker 6: barrels per day of production. But Trump also wants the 224 00:12:14,040 --> 00:12:17,680 Speaker 6: Saudis to step in and produce more oil in that place, 225 00:12:17,800 --> 00:12:21,439 Speaker 6: and the Saudis have this memory of Trump one point 226 00:12:21,600 --> 00:12:25,360 Speaker 6: oh when he granted a six month grace period for 227 00:12:25,520 --> 00:12:29,160 Speaker 6: countries that were taking Iranian oil, and then the Saudis, 228 00:12:29,200 --> 00:12:33,160 Speaker 6: the Russians, and the American companies brought back two and 229 00:12:33,200 --> 00:12:36,520 Speaker 6: a half million barrels per day of oil in anticipation 230 00:12:37,360 --> 00:12:42,000 Speaker 6: of this outage of Iranian oil and crude prices collapse. 231 00:12:42,080 --> 00:12:45,760 Speaker 6: So it's a much tougher negotiating tool this time to 232 00:12:45,840 --> 00:12:48,960 Speaker 6: push the Saudis. Also, the Saudis have been very protective 233 00:12:49,000 --> 00:12:52,360 Speaker 6: of the Russians up to now, so that relationship very important. 234 00:12:52,400 --> 00:12:55,680 Speaker 6: And it's not by accident that a meaning between Trump 235 00:12:55,720 --> 00:12:59,319 Speaker 6: and Putin will probably start in Saudi Arabia. 236 00:12:59,440 --> 00:13:01,000 Speaker 4: Now, do you just quick here or what are the 237 00:13:01,040 --> 00:13:03,439 Speaker 4: chances in your view that we could get a normalization 238 00:13:03,520 --> 00:13:08,040 Speaker 4: and relationship enough with European Union nations with Russia to 239 00:13:08,120 --> 00:13:11,480 Speaker 4: allow Russian liquefied natural gas to flow once again through 240 00:13:11,600 --> 00:13:13,960 Speaker 4: Ukraine into the European Union. 241 00:13:15,520 --> 00:13:19,679 Speaker 6: Well, right now, from a European perspective, what has been 242 00:13:19,760 --> 00:13:21,760 Speaker 6: laid out in terms of peace sounds much more like 243 00:13:21,800 --> 00:13:24,760 Speaker 6: a surrender for Ukraine. So there has to be an 244 00:13:24,840 --> 00:13:27,760 Speaker 6: understanding that there will actually be a Ukraine and that 245 00:13:27,840 --> 00:13:28,920 Speaker 6: it will be. 246 00:13:31,400 --> 00:13:32,839 Speaker 2: I think we've lost the connection there. That was not 247 00:13:32,920 --> 00:13:34,800 Speaker 2: the amount of work in there as fun and capital. Now, 248 00:13:44,320 --> 00:13:46,400 Speaker 2: Steve Roshuta of Missia, do you want to guess around 249 00:13:46,400 --> 00:13:48,960 Speaker 2: the table? Steve, let's have that conversation. Now, let's talk 250 00:13:48,960 --> 00:13:50,960 Speaker 2: about the headlines we've just seen from the President. This 251 00:13:51,080 --> 00:13:53,400 Speaker 2: is what we were expecting, reciprocal tarifs, and it comes 252 00:13:53,440 --> 00:13:55,360 Speaker 2: to an interesting time. It comes at a time where 253 00:13:55,400 --> 00:13:57,600 Speaker 2: we just had hats of that expected CPI. So let's 254 00:13:57,640 --> 00:14:00,720 Speaker 2: start with CPI. What was concerning about that print for you? 255 00:14:01,280 --> 00:14:05,240 Speaker 8: Well, the continuous period of the extended period at which 256 00:14:05,280 --> 00:14:08,160 Speaker 8: the core CPI numbers are running on the hotter side 257 00:14:08,320 --> 00:14:10,160 Speaker 8: on a year over year basis, you know, and everyone's 258 00:14:10,160 --> 00:14:12,400 Speaker 8: always looking for a base effect to roll off or 259 00:14:12,400 --> 00:14:14,839 Speaker 8: everyone looks in an excuse for an individual component of the. 260 00:14:14,800 --> 00:14:16,240 Speaker 1: Report to drive the report. 261 00:14:16,440 --> 00:14:18,440 Speaker 8: The reality is this is an index for a reason 262 00:14:18,600 --> 00:14:21,080 Speaker 8: because it has to include lots of components. And when 263 00:14:21,120 --> 00:14:22,800 Speaker 8: you look at a lot of the line item components, 264 00:14:22,800 --> 00:14:25,200 Speaker 8: they can't even be seasonally adjusted. So we have to 265 00:14:25,240 --> 00:14:27,160 Speaker 8: aggregate them in order to seasonally adjust it because they 266 00:14:27,200 --> 00:14:30,920 Speaker 8: are very, very volatile, and ignoring something because it's volatile 267 00:14:31,080 --> 00:14:33,880 Speaker 8: is just an inappropriate way to deal with monetary policy, 268 00:14:34,000 --> 00:14:36,240 Speaker 8: to inappropriate way to deal with economics, to be honest 269 00:14:36,240 --> 00:14:36,440 Speaker 8: with you. 270 00:14:36,640 --> 00:14:39,600 Speaker 2: So Step one, let's accept the data. You're accepting the 271 00:14:39,680 --> 00:14:41,920 Speaker 2: data for what it is. Step two, let's incorporate something 272 00:14:41,960 --> 00:14:45,040 Speaker 2: into the outlook, a change in policy. Terrorists. What's the 273 00:14:45,040 --> 00:14:47,400 Speaker 2: contribution of these terrists going to be in a months 274 00:14:47,440 --> 00:14:47,760 Speaker 2: to come? 275 00:14:48,000 --> 00:14:50,320 Speaker 8: You know, again, this is this is a difficult component 276 00:14:50,360 --> 00:14:53,520 Speaker 8: because the dollar is firm and the global economy is 277 00:14:53,600 --> 00:14:57,200 Speaker 8: particularly weak. You look at the response of China to 278 00:14:57,600 --> 00:15:00,480 Speaker 8: the terrorists that Donald Trump has imposed again the ten 279 00:15:00,520 --> 00:15:04,080 Speaker 8: percent tiers. It's a very very muted response back, and 280 00:15:04,160 --> 00:15:05,760 Speaker 8: I think it reflects the fact that there is a 281 00:15:05,800 --> 00:15:08,400 Speaker 8: global excess supply of tradable goods and as a result, 282 00:15:08,480 --> 00:15:11,640 Speaker 8: of COVID, We've diversified supply chains, we have more excess 283 00:15:11,640 --> 00:15:14,280 Speaker 8: supply of tradable goods than we've ever had before, So 284 00:15:14,400 --> 00:15:17,680 Speaker 8: there is offsetting pressures. So I don't think you can say, well, 285 00:15:17,680 --> 00:15:20,080 Speaker 8: we bumped this component up, therefore we're going to bump 286 00:15:20,200 --> 00:15:22,760 Speaker 8: this up in the inflation component. If to look the 287 00:15:22,760 --> 00:15:25,760 Speaker 8: fact that margins are going to be squeezed when it. 288 00:15:25,680 --> 00:15:28,440 Speaker 5: Comes to these tariffs, do you think they will be 289 00:15:28,440 --> 00:15:31,000 Speaker 5: passed on to the consumer at least a one off head. 290 00:15:32,160 --> 00:15:37,480 Speaker 8: It's possible, It's not definite, and it really depends on 291 00:15:37,760 --> 00:15:41,560 Speaker 8: how tight the labor market is, whether the consumer matters 292 00:15:41,920 --> 00:15:44,920 Speaker 8: or it bothers the consumer. Understand what really took Joe 293 00:15:44,920 --> 00:15:47,840 Speaker 8: Biden down in my assessment, is not inflation. It was 294 00:15:47,840 --> 00:15:50,280 Speaker 8: the level of prices. Moreover, it was the level of 295 00:15:50,320 --> 00:15:53,120 Speaker 8: price in the fact that real disposable income was squeezed 296 00:15:53,720 --> 00:15:56,880 Speaker 8: under the bodied administration. So if you're in an environment 297 00:15:56,920 --> 00:15:59,200 Speaker 8: where prices are going up but your income is going 298 00:15:59,280 --> 00:16:02,800 Speaker 8: up and purchasing power has actually expanded, do you mind 299 00:16:03,080 --> 00:16:06,280 Speaker 8: The answer is probably not. And that's the end game 300 00:16:06,320 --> 00:16:08,040 Speaker 8: that I think this administration is going for. 301 00:16:08,200 --> 00:16:10,520 Speaker 5: Take it one step for the Bank of America came 302 00:16:10,560 --> 00:16:12,760 Speaker 5: out and said the dollar may not like taris after all, 303 00:16:12,800 --> 00:16:14,920 Speaker 5: even though the dollar's been on a tear because of 304 00:16:15,040 --> 00:16:18,760 Speaker 5: these tarror threats, because of full retaliation, the dollar could weaken. 305 00:16:18,840 --> 00:16:21,040 Speaker 1: How vulnerable do you think the US is to retaliation? 306 00:16:21,480 --> 00:16:25,200 Speaker 8: I think the global global economy, being as weak as 307 00:16:25,240 --> 00:16:29,640 Speaker 8: it is, reduces the ability of people to respond back. Again, 308 00:16:30,160 --> 00:16:33,680 Speaker 8: we are the buyer of last resort, and so therefore 309 00:16:33,760 --> 00:16:36,640 Speaker 8: there is a certain amount of power that is imposed 310 00:16:36,760 --> 00:16:40,400 Speaker 8: or implied by that. And the administration is pushing that envelope, 311 00:16:40,440 --> 00:16:43,840 Speaker 8: There's no doubt about that. How long can they push it, 312 00:16:43,960 --> 00:16:46,160 Speaker 8: how far can they push it? They're going to attempt 313 00:16:46,200 --> 00:16:48,600 Speaker 8: to find out. But we have to understand the Federal 314 00:16:48,600 --> 00:16:51,720 Speaker 8: Reserve is pushing the envelope as well. The Chairman continuously 315 00:16:51,760 --> 00:16:55,040 Speaker 8: talks about the fact that he believes monetary policy is restrictive. 316 00:16:55,520 --> 00:16:57,720 Speaker 8: Yet he began cutting rates when the economy was running 317 00:16:57,720 --> 00:17:00,840 Speaker 8: above trend. He began cutting rates when inflation was running 318 00:17:00,840 --> 00:17:01,960 Speaker 8: well above the Fed's target. 319 00:17:02,120 --> 00:17:03,840 Speaker 7: So was policy really restrictive? 320 00:17:04,119 --> 00:17:07,320 Speaker 8: And now we're in a situation where policy's actually more accommodative. 321 00:17:08,440 --> 00:17:10,640 Speaker 4: Julian Emmanuel was on the show about fifteen minutes ago, 322 00:17:10,680 --> 00:17:13,400 Speaker 4: and he had written, there is literally no plausible scenario 323 00:17:13,400 --> 00:17:15,080 Speaker 4: where the Fed hikes in twenty twenty five. 324 00:17:15,440 --> 00:17:20,560 Speaker 8: Do you agree there is a plausible scenario? There isn't 325 00:17:20,600 --> 00:17:24,920 Speaker 8: necessarily statistically viable scenario. Okay, what I think you need 326 00:17:24,960 --> 00:17:26,920 Speaker 8: to get the Fed to hike rates in twenty twenty 327 00:17:26,920 --> 00:17:30,200 Speaker 8: five is the unemployment rate to move significantly below four. 328 00:17:30,840 --> 00:17:32,719 Speaker 8: Put three point eight ad because once you get back 329 00:17:32,760 --> 00:17:35,280 Speaker 8: to three point eight, you've basically taken all of the 330 00:17:35,359 --> 00:17:38,439 Speaker 8: uptick in the unemployment rate that they responded to in 331 00:17:38,480 --> 00:17:40,960 Speaker 8: cutting rates out of the equation. So therefore they don't 332 00:17:40,960 --> 00:17:43,240 Speaker 8: have that argument anymore. Then you take the ten you 333 00:17:43,240 --> 00:17:45,280 Speaker 8: note and see if the ten you note pushes above five, 334 00:17:45,760 --> 00:17:48,560 Speaker 8: then guess what their argument that inflation expectations are anchored 335 00:17:48,840 --> 00:17:51,800 Speaker 8: goes away. Then you have a reason. So you have 336 00:17:51,840 --> 00:17:54,320 Speaker 8: a necessary condition the unemployment rate. You have a sufficient 337 00:17:54,320 --> 00:17:56,399 Speaker 8: condition the ten note. You're not going to get the 338 00:17:56,400 --> 00:17:59,080 Speaker 8: ten year note unless you get the unemployment rate. That's 339 00:17:59,119 --> 00:18:01,639 Speaker 8: the key thing to what if the unemployment rate starts 340 00:18:01,680 --> 00:18:04,560 Speaker 8: to move down and significantly below four, the markets will 341 00:18:04,640 --> 00:18:06,040 Speaker 8: jump the gun and price it it. 342 00:18:06,480 --> 00:18:09,280 Speaker 2: You know, an inflation expectations bottomed in the last twelve months. 343 00:18:09,880 --> 00:18:12,400 Speaker 2: Middle of September. What happened in the middle of September 344 00:18:12,560 --> 00:18:14,080 Speaker 2: feedsnat kind of interest rates? 345 00:18:14,359 --> 00:18:17,040 Speaker 4: You know what fedher? J Powell said yesterday. He said 346 00:18:17,160 --> 00:18:20,119 Speaker 4: that the reason why is not because of inflation expectations. 347 00:18:20,320 --> 00:18:21,520 Speaker 1: He actually said that the. 348 00:18:21,440 --> 00:18:24,840 Speaker 4: Increase in yields was due to other concerns, which I 349 00:18:24,840 --> 00:18:27,639 Speaker 4: thought was very interesting, sort of discounting the argument that 350 00:18:27,760 --> 00:18:29,240 Speaker 4: was implicit and what you just said. 351 00:18:29,040 --> 00:18:29,720 Speaker 1: What do you make of that? 352 00:18:30,320 --> 00:18:32,640 Speaker 2: Is he giving a nod to politics? Will be thinking 353 00:18:32,640 --> 00:18:34,199 Speaker 2: about that in the middle of September. 354 00:18:34,280 --> 00:18:36,919 Speaker 1: He's saying, it's not my fault. Don't look at me. 355 00:18:37,359 --> 00:18:39,720 Speaker 2: Adam Posen at the Pediston Institute joined us in about 356 00:18:39,840 --> 00:18:41,440 Speaker 2: sixty minutes. I think you might have a different view 357 00:18:41,440 --> 00:18:43,879 Speaker 2: on things. Steve A shuddo, Steve, it's going to see us. 358 00:18:44,160 --> 00:18:57,720 Speaker 2: It's always thank you. Andrew Homhols of City. Andrew, you've 359 00:18:57,720 --> 00:18:59,200 Speaker 2: had in the books for a while that you expect 360 00:18:59,280 --> 00:19:01,879 Speaker 2: the Federal Reserve will reduce interest rates this year. I 361 00:19:01,920 --> 00:19:04,359 Speaker 2: believe you think it's going to happen now sometime later 362 00:19:04,400 --> 00:19:06,960 Speaker 2: on in the spring, around May time. How does this 363 00:19:07,080 --> 00:19:10,359 Speaker 2: CPI number of yesterday and PPI this morning help your case. 364 00:19:11,359 --> 00:19:15,360 Speaker 9: Yeah, this definitely still is all in the column of 365 00:19:15,400 --> 00:19:18,000 Speaker 9: the Fed is not in a hurry to reduce interest rates. 366 00:19:18,080 --> 00:19:19,240 Speaker 7: That's what we've heard from Cha Powell. 367 00:19:19,240 --> 00:19:21,359 Speaker 9: That's what we saw the January FMC meeting and in 368 00:19:21,359 --> 00:19:24,479 Speaker 9: congressional testimony. So they're going to need to see some 369 00:19:24,520 --> 00:19:28,880 Speaker 9: more evidence that inflation is cooling. I think they will 370 00:19:28,920 --> 00:19:31,679 Speaker 9: get some of that in the PCEE reading. Now, you 371 00:19:31,720 --> 00:19:33,520 Speaker 9: want to be careful here. We have CPI, we have 372 00:19:33,560 --> 00:19:35,960 Speaker 9: pce we have year on year, we have three months. 373 00:19:36,119 --> 00:19:38,240 Speaker 9: You can look at all these different metrics on inflation. 374 00:19:38,600 --> 00:19:40,919 Speaker 9: When you dig down into the details, the fact that 375 00:19:41,000 --> 00:19:43,439 Speaker 9: shelter inflation is slowing down, I think that is going 376 00:19:43,480 --> 00:19:46,480 Speaker 9: to give Fed officials confidence that we're getting some slowing 377 00:19:46,960 --> 00:19:47,680 Speaker 9: in terms of what this. 378 00:19:47,640 --> 00:19:48,840 Speaker 7: PPI number means. 379 00:19:48,920 --> 00:19:51,040 Speaker 9: I think part of the reason the market is reluctant 380 00:19:51,080 --> 00:19:52,880 Speaker 9: to react is you really have to look at these 381 00:19:52,920 --> 00:19:55,159 Speaker 9: detailed categories and how they're going to play into that 382 00:19:55,359 --> 00:19:57,520 Speaker 9: PCEE reading that I think is going to be softer 383 00:19:57,640 --> 00:19:59,400 Speaker 9: than the CPI reading we saw yesterday. 384 00:19:59,440 --> 00:20:02,160 Speaker 2: Well, Andrea trustand the details. Then, when you think about 385 00:20:02,160 --> 00:20:05,919 Speaker 2: the sources of inflation, energy, labor, goods, services, what do 386 00:20:05,960 --> 00:20:08,720 Speaker 2: you think the source of disinflation will be through the 387 00:20:08,720 --> 00:20:09,399 Speaker 2: next year or so. 388 00:20:10,760 --> 00:20:14,760 Speaker 9: I think the single biggest factor that is causing me 389 00:20:14,880 --> 00:20:16,960 Speaker 9: to be confident and I think will cause beneficials to 390 00:20:16,960 --> 00:20:19,840 Speaker 9: be confident that inflation is slowing is a slowdown in 391 00:20:19,840 --> 00:20:23,320 Speaker 9: shelter prices. Again, even though we saw it stronger overall 392 00:20:23,359 --> 00:20:26,680 Speaker 9: reading for CPI inflation, we saw shelter prices that were 393 00:20:26,720 --> 00:20:29,200 Speaker 9: slower yesterday, And if you look at what was strong 394 00:20:29,280 --> 00:20:32,680 Speaker 9: in the CPI reading, it was really things like motor 395 00:20:32,760 --> 00:20:38,200 Speaker 9: vehicle insurance used car prices. These are more volatile categories 396 00:20:38,600 --> 00:20:41,360 Speaker 9: and categories that don't get in some cases as high 397 00:20:41,359 --> 00:20:43,880 Speaker 9: a weight in the PCE reading. So I think we'll 398 00:20:43,880 --> 00:20:47,080 Speaker 9: see some volatility in CPI, but that through line, as 399 00:20:47,359 --> 00:20:50,760 Speaker 9: Chicago Fed President Gulesby would say, is still lower in inflation. 400 00:20:51,480 --> 00:20:53,320 Speaker 4: What would you have to see, Andrew to change your 401 00:20:53,400 --> 00:20:55,560 Speaker 4: view that maybe this is something that's a bit stickier. 402 00:20:56,200 --> 00:20:56,800 Speaker 7: Yeah, So what. 403 00:20:56,680 --> 00:20:59,600 Speaker 9: Would be concerning is if you saw just a lot 404 00:20:59,640 --> 00:21:04,600 Speaker 9: of visual strength in wages and in services prices. Now, 405 00:21:04,600 --> 00:21:07,960 Speaker 9: we still have somewhat elevated wage growth, but it looks 406 00:21:08,000 --> 00:21:08,760 Speaker 9: to be cooling. 407 00:21:09,200 --> 00:21:11,680 Speaker 7: We know the labor market has softened. Maybe it's kind of. 408 00:21:11,600 --> 00:21:15,600 Speaker 9: Stabilized more recently, but softened before stabilizing. 409 00:21:16,000 --> 00:21:18,639 Speaker 7: That should all mean that we get a glide down. 410 00:21:18,480 --> 00:21:22,080 Speaker 9: In wages, we get a glide down in services price pressure. 411 00:21:22,640 --> 00:21:25,120 Speaker 9: If we're wrong about that and you were to see 412 00:21:25,119 --> 00:21:28,360 Speaker 9: wage growth that was actually picking up again, that's where I. 413 00:21:28,280 --> 00:21:28,920 Speaker 7: Would get concerned. 414 00:21:28,960 --> 00:21:30,720 Speaker 9: That's where I think FED officials would get concerned. 415 00:21:30,880 --> 00:21:33,399 Speaker 4: That's the reason why that was the number that people 416 00:21:33,400 --> 00:21:36,040 Speaker 4: looked at in the jobs report, the payrolls report. 417 00:21:35,720 --> 00:21:37,280 Speaker 1: That we got last Friday, Although. 418 00:21:37,040 --> 00:21:39,720 Speaker 4: It was explained away by the hours worked going down. 419 00:21:40,119 --> 00:21:43,520 Speaker 4: I am curious about which aspects people are hoding in 420 00:21:43,600 --> 00:21:46,719 Speaker 4: on that are not necessarily inflationary when you have fairly 421 00:21:46,760 --> 00:21:50,520 Speaker 4: broad based inflationary pressure. People had theorized that you would 422 00:21:50,520 --> 00:21:55,160 Speaker 4: get this disinflation in services that was enough to offset 423 00:21:55,200 --> 00:21:59,040 Speaker 4: a reinflation in goods. It doesn't seem like that's happening 424 00:21:59,080 --> 00:22:01,560 Speaker 4: to the same degree people previously expected. 425 00:22:02,160 --> 00:22:03,320 Speaker 1: Why do you dismiss that? 426 00:22:04,560 --> 00:22:07,400 Speaker 9: Well, I think shelter services are on track. The non 427 00:22:07,440 --> 00:22:10,080 Speaker 9: shelter services that is where we should be concerned. And 428 00:22:10,119 --> 00:22:15,440 Speaker 9: again it's this whole issue of wage pressure labor markets 429 00:22:15,480 --> 00:22:17,679 Speaker 9: and does that bubble up into services prices. 430 00:22:18,760 --> 00:22:21,560 Speaker 7: We saw that again in the January reading. 431 00:22:21,720 --> 00:22:25,720 Speaker 9: This what we call residual seasonality, where people increase prices 432 00:22:25,760 --> 00:22:27,639 Speaker 9: at the beginning of the year and they increase prices 433 00:22:27,640 --> 00:22:29,080 Speaker 9: by more at the beginning of the year, and we 434 00:22:29,160 --> 00:22:32,800 Speaker 9: get these really strong January readings. So I'm really looking 435 00:22:32,840 --> 00:22:35,840 Speaker 9: to see not just in the January inflation number, but 436 00:22:36,080 --> 00:22:37,680 Speaker 9: what do we see in February, what do we see 437 00:22:37,680 --> 00:22:39,680 Speaker 9: in March. I think those services prices are going to 438 00:22:39,760 --> 00:22:42,159 Speaker 9: cool again in February and March. 439 00:22:42,440 --> 00:22:45,520 Speaker 7: They were cooler in November and December. 440 00:22:45,640 --> 00:22:47,840 Speaker 9: So if you put together, you know, five out of 441 00:22:47,880 --> 00:22:50,359 Speaker 9: six months that's cooler there, and you have wages that 442 00:22:50,400 --> 00:22:50,960 Speaker 9: are slowing. 443 00:22:51,480 --> 00:22:53,639 Speaker 7: That's a pretty good picture for the Fed. We have 444 00:22:53,680 --> 00:22:55,520 Speaker 7: to watch these next couple of reports, Andrew. 445 00:22:55,560 --> 00:22:58,280 Speaker 2: Today's the big one, apparently reciprocal tariffs. We've had this 446 00:22:58,320 --> 00:23:02,320 Speaker 2: conversation about inflation with that so much about trade now, Andrew, 447 00:23:02,440 --> 00:23:05,440 Speaker 2: you've got as a baseline interest rate reductions for twenty 448 00:23:05,480 --> 00:23:07,760 Speaker 2: twenty five. How do you think about tariffs and the 449 00:23:07,800 --> 00:23:11,679 Speaker 2: potential feed through into higher prices. We've got ten percent 450 00:23:11,720 --> 00:23:14,119 Speaker 2: on China, we could have more still to count. 451 00:23:15,280 --> 00:23:17,119 Speaker 9: Yeah, so the details are what are really going to 452 00:23:17,200 --> 00:23:19,879 Speaker 9: matter here. And we don't know the details. I do 453 00:23:19,960 --> 00:23:22,399 Speaker 9: expect we're going to get some kind of broad based tariff. 454 00:23:22,440 --> 00:23:27,000 Speaker 9: That's been pre core to the Trump administration messaging to 455 00:23:27,040 --> 00:23:30,760 Speaker 9: their economic policy. They need that both for incentive to 456 00:23:30,800 --> 00:23:33,000 Speaker 9: produce in the US as well as to raise revenue. 457 00:23:33,640 --> 00:23:36,879 Speaker 9: The question is are there any carveouts to those tariffs? 458 00:23:36,880 --> 00:23:39,679 Speaker 9: Are we including Canada and Mexico. That's almost thirty percent 459 00:23:39,680 --> 00:23:42,439 Speaker 9: of trade if you include or exclude Canada and Mexico, 460 00:23:42,520 --> 00:23:45,879 Speaker 9: so that makes a big difference. Also, are there carveouts 461 00:23:45,880 --> 00:23:48,359 Speaker 9: for certain products That can make a big difference because 462 00:23:48,760 --> 00:23:51,080 Speaker 9: some products you would expect those tariffs to be almost 463 00:23:51,080 --> 00:23:55,280 Speaker 9: fully passed through into consumer prices. Most tariffs, most products 464 00:23:55,280 --> 00:23:58,359 Speaker 9: you would expect those tariffs would not be fully passed through, 465 00:23:58,480 --> 00:24:01,159 Speaker 9: so the inflationary effect will be less the more you 466 00:24:01,160 --> 00:24:03,000 Speaker 9: get carve outs and the more you focus on those 467 00:24:03,040 --> 00:24:03,720 Speaker 9: products where. 468 00:24:03,560 --> 00:24:05,200 Speaker 7: You get less passed through. 469 00:24:05,880 --> 00:24:09,840 Speaker 9: If the inflationary impetus is not too great, then I 470 00:24:09,840 --> 00:24:13,080 Speaker 9: think FED officials can say it's a one time price 471 00:24:13,200 --> 00:24:19,680 Speaker 9: level increase, it's not an inflationary pressure issue. The challenge 472 00:24:19,680 --> 00:24:22,479 Speaker 9: for the FED is going to be if inflation is 473 00:24:22,480 --> 00:24:25,120 Speaker 9: not otherwise slowing, can you say that, So I think 474 00:24:25,119 --> 00:24:27,560 Speaker 9: you need inflation to be slowing down just by basic 475 00:24:27,600 --> 00:24:30,879 Speaker 9: macro economic dynamics, then you need these tariffs to not 476 00:24:30,920 --> 00:24:32,679 Speaker 9: be too great an extent, then you will get a 477 00:24:32,680 --> 00:24:33,600 Speaker 9: limited FED reaction. 478 00:24:33,680 --> 00:24:36,680 Speaker 2: Andrew, that sounds a lot like transitory and that argument's 479 00:24:36,720 --> 00:24:38,840 Speaker 2: not a good one these days, even if they think 480 00:24:38,840 --> 00:24:41,000 Speaker 2: it's the right one. You saw back in the middle 481 00:24:41,000 --> 00:24:45,000 Speaker 2: of September, the inflation expectations bottomed. At least market perception 482 00:24:45,480 --> 00:24:49,760 Speaker 2: of inflation expectations, Andrew, the FED share is least appointed 483 00:24:49,760 --> 00:24:51,919 Speaker 2: out chair and Power kind of pushed back at the 484 00:24:51,960 --> 00:24:55,879 Speaker 2: idea that they contributed to higher inflation expectations with one 485 00:24:55,920 --> 00:24:59,159 Speaker 2: hundred basis points of rate reductions. Andrew, can I get 486 00:24:59,200 --> 00:25:01,000 Speaker 2: your thoughts on that? Just to wrap up, do you 487 00:25:01,000 --> 00:25:03,800 Speaker 2: think they did contribute to high inflation expectations. 488 00:25:04,720 --> 00:25:07,679 Speaker 9: I think it wasn't so much the FED rate cuts. 489 00:25:07,760 --> 00:25:10,080 Speaker 9: I think it's more the expectation of teriffs. We see 490 00:25:10,080 --> 00:25:12,560 Speaker 9: that in the consumer surveys where people say they're worried 491 00:25:12,600 --> 00:25:14,960 Speaker 9: that prices on durable goods are going to go up. 492 00:25:15,640 --> 00:25:17,760 Speaker 9: So I would see that as more terraff related, and 493 00:25:17,800 --> 00:25:20,560 Speaker 9: it's the short term expectations. One of your expectations, not 494 00:25:20,640 --> 00:25:23,080 Speaker 9: the long term expectations that FED officials. 495 00:25:22,720 --> 00:25:23,640 Speaker 7: Would worry about more. 496 00:25:23,920 --> 00:25:26,439 Speaker 2: Andrew, I appreciate it. Thank you, Sir, Andrew hanhost, Then 497 00:25:26,680 --> 00:25:30,840 Speaker 2: a City. This is the Bloomberg Surveillance Podcast, bringing you 498 00:25:31,119 --> 00:25:34,520 Speaker 2: the best in markets, economics, ANNGIO politics. You can watch 499 00:25:34,520 --> 00:25:37,320 Speaker 2: the show live on Bloomberg TV weekday mornings from six 500 00:25:37,359 --> 00:25:40,919 Speaker 2: am to nine am Eastern. Subscribe to the podcast on Apple, 501 00:25:41,200 --> 00:25:44,040 Speaker 2: Spotify or anywhere else you listen, and as always, on 502 00:25:44,080 --> 00:25:46,520 Speaker 2: the Bloomberg Terminal and the Bloomberg Business app.