1 00:00:00,800 --> 00:00:03,680 Speaker 1: The latest inflation numbers came out, and they're a big 2 00:00:03,720 --> 00:00:07,880 Speaker 1: deal the United States. We're in an inflation moment. It's 3 00:00:07,960 --> 00:00:11,360 Speaker 1: driving a lot of political opinion, it's driving Fed action, 4 00:00:11,840 --> 00:00:14,960 Speaker 1: it's driving all the conversations I'm a part of. And 5 00:00:15,000 --> 00:00:18,599 Speaker 1: today good news, good news, which is that it's not 6 00:00:18,640 --> 00:00:21,919 Speaker 1: as bad as we feared it was. Headline inflation came 7 00:00:21,960 --> 00:00:24,840 Speaker 1: in at three and a half percent. That's a high rate, 8 00:00:25,640 --> 00:00:27,920 Speaker 1: but much lower than the four point two percent it 9 00:00:27,960 --> 00:00:32,159 Speaker 1: had been recently. That's headline inflation that includes food and energy. 10 00:00:32,159 --> 00:00:34,360 Speaker 1: If we exclude that out and get to core inflation, 11 00:00:35,240 --> 00:00:40,120 Speaker 1: then core inflation came in at two point six percent, 12 00:00:40,440 --> 00:00:42,400 Speaker 1: higher than the FED wants it, but again down from 13 00:00:42,479 --> 00:00:43,600 Speaker 1: two point nine percent. 14 00:00:43,760 --> 00:00:45,880 Speaker 2: So on the surface. 15 00:00:45,479 --> 00:00:49,559 Speaker 1: Here, if you compare where we are today where we 16 00:00:49,680 --> 00:00:52,080 Speaker 1: hoped we would be yesterday, this is good news. If 17 00:00:52,120 --> 00:00:54,080 Speaker 1: you compare where we are today with where we hoped 18 00:00:54,080 --> 00:00:56,560 Speaker 1: it would have burned a year ago, we're still in 19 00:00:56,640 --> 00:00:59,480 Speaker 1: the midst of a very difficult inflation. Let me tell 20 00:00:59,480 --> 00:01:02,520 Speaker 1: you about my imdiate reaction to this report. I saw 21 00:01:02,560 --> 00:01:04,120 Speaker 1: it actually I had to go drop the kids off 22 00:01:04,120 --> 00:01:05,440 Speaker 1: at camp, so I was in a bit of a 23 00:01:05,520 --> 00:01:07,720 Speaker 1: hurry and I saw the numbers and I thought, oh, 24 00:01:07,840 --> 00:01:10,399 Speaker 1: you beauty. Look, I've been very worried about inflation. A 25 00:01:10,400 --> 00:01:12,160 Speaker 1: lot of us are very worried about the rising cost 26 00:01:12,160 --> 00:01:16,000 Speaker 1: of living right now. And while the numbers were high, 27 00:01:16,640 --> 00:01:18,559 Speaker 1: they were less high than. 28 00:01:18,480 --> 00:01:20,040 Speaker 2: Wall Street had expected. 29 00:01:20,200 --> 00:01:24,119 Speaker 1: So the really striking thing is actually, if you compare 30 00:01:24,160 --> 00:01:27,520 Speaker 1: the average price level this month to last month, it 31 00:01:27,560 --> 00:01:32,039 Speaker 1: actually fell. Now, before you come at me the idea 32 00:01:32,080 --> 00:01:33,759 Speaker 1: that the cost of living fell, I know it feels 33 00:01:33,959 --> 00:01:36,479 Speaker 1: utterly preposterous to a lot of people. But what happened, 34 00:01:36,480 --> 00:01:40,880 Speaker 1: of course, is with the announcement of the ceasefire. Man, 35 00:01:40,920 --> 00:01:43,960 Speaker 1: I remember those days anyway, with the announcement of the ceasefire, 36 00:01:44,000 --> 00:01:47,760 Speaker 1: that led energy prices to decline. Energy prices fell, prices 37 00:01:47,800 --> 00:01:51,040 Speaker 1: through the rest of the economy rose, And that's why 38 00:01:51,080 --> 00:01:53,680 Speaker 1: the headline is that the cost of living fell. It's 39 00:01:53,840 --> 00:01:57,120 Speaker 1: just that the energy situation last month is not as 40 00:01:57,160 --> 00:02:01,280 Speaker 1: bad as it had been pre But let me come 41 00:02:01,320 --> 00:02:02,840 Speaker 1: back to it. One of the ways we judge these 42 00:02:02,880 --> 00:02:07,040 Speaker 1: reports is how is inflation doing relative to expectations? And 43 00:02:07,160 --> 00:02:09,960 Speaker 1: this is very very clearly good news, which is there's 44 00:02:10,080 --> 00:02:13,720 Speaker 1: less inflation in the system than many had feared. But 45 00:02:13,760 --> 00:02:16,519 Speaker 1: there's still more than all of us want. One of 46 00:02:16,560 --> 00:02:19,200 Speaker 1: the questions I get asked a lot is there's so 47 00:02:19,320 --> 00:02:23,840 Speaker 1: many numbers in this report, which which numbers, madamize for 48 00:02:23,960 --> 00:02:26,960 Speaker 1: the typical American in your pocketbook? And I'm going to 49 00:02:26,960 --> 00:02:29,600 Speaker 1: be a frustrating economist and say, on the one hand, 50 00:02:29,600 --> 00:02:32,480 Speaker 1: on the other and I mean it. The first thing 51 00:02:32,600 --> 00:02:34,679 Speaker 1: is there is what we call headline inflation. That's the 52 00:02:34,760 --> 00:02:37,280 Speaker 1: number you'll see at the front of the newspaper tomorrow 53 00:02:37,639 --> 00:02:40,359 Speaker 1: that measures the overall change in the cost of living, 54 00:02:40,520 --> 00:02:42,440 Speaker 1: and that says that the cost of living rose by 55 00:02:42,440 --> 00:02:46,320 Speaker 1: three and a half percent this year. That's exactly why 56 00:02:46,360 --> 00:02:48,519 Speaker 1: it feels like there's less money left over at the 57 00:02:48,600 --> 00:02:50,399 Speaker 1: end of the week. The answer is, once you've paid 58 00:02:50,440 --> 00:02:52,639 Speaker 1: your grocery bills, once you filled up your car, there's 59 00:02:52,720 --> 00:02:56,200 Speaker 1: less money there. This is the official statistician saying, hey, 60 00:02:56,280 --> 00:02:59,280 Speaker 1: you know what. You're not imagining it, but I also 61 00:02:59,400 --> 00:03:01,800 Speaker 1: know something of you. You don't care just about the 62 00:03:01,800 --> 00:03:05,160 Speaker 1: present moment. You care about the future. The question inflation 63 00:03:05,240 --> 00:03:07,639 Speaker 1: today is painful, But you know what's even more painful, 64 00:03:07,919 --> 00:03:10,800 Speaker 1: ongoing inflation that would afflict you and I and the 65 00:03:10,800 --> 00:03:13,520 Speaker 1: rest of the economy for years to come. And it 66 00:03:13,520 --> 00:03:15,799 Speaker 1: turns out if you want to figure out the underlying 67 00:03:16,000 --> 00:03:18,760 Speaker 1: inflationary momentum in the economy, what you want to do 68 00:03:18,800 --> 00:03:21,239 Speaker 1: is focus on what economy is called core inflation. They 69 00:03:21,280 --> 00:03:24,200 Speaker 1: strip out food and energy. I'm not saying food doesn't matter, 70 00:03:24,280 --> 00:03:27,080 Speaker 1: it's delicious. I'm not saying energy doesn't matter. It gets 71 00:03:27,080 --> 00:03:29,640 Speaker 1: your places. What I am saying is those prices rise 72 00:03:29,680 --> 00:03:32,080 Speaker 1: in full for a whole lot of reasons that have 73 00:03:32,200 --> 00:03:35,560 Speaker 1: nothing to do with the underlying inflationary psychology. In fact, 74 00:03:35,600 --> 00:03:37,320 Speaker 1: you and I know a lot about what's driving energy 75 00:03:37,320 --> 00:03:38,040 Speaker 1: prices right now. 76 00:03:38,080 --> 00:03:38,600 Speaker 2: It's Iran. 77 00:03:39,440 --> 00:03:42,400 Speaker 1: The Iran War, though, isn't driving the whole economy. And 78 00:03:42,440 --> 00:03:43,600 Speaker 1: so if you want to get a sense of the 79 00:03:43,640 --> 00:03:45,640 Speaker 1: future of inflation, you want to focus a little bit 80 00:03:45,680 --> 00:03:48,040 Speaker 1: more on core inflation. And this is where a lot 81 00:03:48,080 --> 00:03:50,040 Speaker 1: of commentators are going to be really quite pleased to 82 00:03:50,080 --> 00:03:53,400 Speaker 1: see that core inflation came in at two point six percent. 83 00:03:53,520 --> 00:03:56,200 Speaker 1: So that says inflation's a little uncomfortably higher than we 84 00:03:56,240 --> 00:03:59,520 Speaker 1: would want it to be, but it's not particularly tragic. 85 00:04:00,040 --> 00:04:03,520 Speaker 1: We are within striking distance of getting back to the 86 00:04:03,560 --> 00:04:06,640 Speaker 1: sorts of outcomes that might be acceptable. Put a big 87 00:04:06,680 --> 00:04:09,120 Speaker 1: asterix on that that is, if we don't stuff anything 88 00:04:09,200 --> 00:04:11,760 Speaker 1: up along the way, if we don't start new wars, 89 00:04:11,800 --> 00:04:14,360 Speaker 1: if we don't start new trade wars, if we don't 90 00:04:14,360 --> 00:04:17,400 Speaker 1: do more to raise the cost of living. But there's 91 00:04:17,400 --> 00:04:19,880 Speaker 1: been a few of those shops lately. One of the 92 00:04:19,960 --> 00:04:21,920 Speaker 1: things I think is really important. When you get numbers 93 00:04:22,040 --> 00:04:24,400 Speaker 1: like this, the press is going to tell you a 94 00:04:24,400 --> 00:04:26,640 Speaker 1: lot about this month's number relative to last month. 95 00:04:27,360 --> 00:04:29,240 Speaker 2: What do you do that tells you about two months? 96 00:04:29,240 --> 00:04:31,280 Speaker 1: What I want to urge folks to do is step 97 00:04:31,320 --> 00:04:34,560 Speaker 1: back and get some broader context about this. And so 98 00:04:34,839 --> 00:04:36,360 Speaker 1: one of the things I like to do is draw 99 00:04:36,440 --> 00:04:40,279 Speaker 1: a histogram. Might say, what's a histogram? It's just to 100 00:04:40,320 --> 00:04:43,479 Speaker 1: say what is been inflation, you know, at different points 101 00:04:43,480 --> 00:04:44,080 Speaker 1: in our past. 102 00:04:44,160 --> 00:04:45,120 Speaker 2: It turns out it's sort of. 103 00:04:45,080 --> 00:04:48,719 Speaker 1: A bell shaped distribution, but with a big, fat right tail. 104 00:04:48,920 --> 00:04:51,960 Speaker 1: So right now, remember inflation's three and a half percent. 105 00:04:52,040 --> 00:04:54,599 Speaker 1: The FED wants it to be two percent. So it's 106 00:04:54,600 --> 00:04:57,719 Speaker 1: definitely high and what the FED wants. Over the past 107 00:04:57,720 --> 00:05:00,240 Speaker 1: fifty years, most of the time we've been fortunate that 108 00:05:00,240 --> 00:05:02,560 Speaker 1: inflation has been lower than this. So if you want 109 00:05:02,560 --> 00:05:05,680 Speaker 1: to think to yourself, inflation feels uncomfortably high, right now, 110 00:05:05,839 --> 00:05:09,200 Speaker 1: the answer is yes, in a historical perspective, it's uncomfortable 111 00:05:09,279 --> 00:05:12,320 Speaker 1: right now, but I don't want you to call it 112 00:05:12,360 --> 00:05:13,279 Speaker 1: a four alarm fire. 113 00:05:14,160 --> 00:05:15,119 Speaker 2: We've lived through those. 114 00:05:15,960 --> 00:05:19,200 Speaker 1: During the pandemic, inflation got as high as nine percent. 115 00:05:20,160 --> 00:05:22,679 Speaker 1: Prior to the nineteen eighties, we would sometimes see double 116 00:05:22,680 --> 00:05:26,440 Speaker 1: digit inflation. So inflation of three point five percent is very, 117 00:05:26,520 --> 00:05:29,840 Speaker 1: very different than the real four alarm fires that we've 118 00:05:29,839 --> 00:05:32,840 Speaker 1: had in the past. One of the important things to 119 00:05:32,880 --> 00:05:35,800 Speaker 1: think about when you're thinking about inflation is obviously not 120 00:05:35,839 --> 00:05:38,599 Speaker 1: just what's happening here, but there are so many stories 121 00:05:38,640 --> 00:05:41,320 Speaker 1: about what's going on. For instance, one might say, oh, 122 00:05:41,320 --> 00:05:43,520 Speaker 1: of course inflation's higher at war with the run, and 123 00:05:43,560 --> 00:05:46,800 Speaker 1: that's caused energy prices to rise, And you want to 124 00:05:46,839 --> 00:05:50,200 Speaker 1: know where a different story is, well, the United States 125 00:05:50,240 --> 00:05:54,479 Speaker 1: is experiencing an unusual inflation right now because of the 126 00:05:54,520 --> 00:05:57,080 Speaker 1: Trump tariffs. One of the ways to try and get 127 00:05:57,080 --> 00:05:58,920 Speaker 1: a handle on this would be, why don't we look 128 00:05:58,960 --> 00:06:02,839 Speaker 1: at how america inflation experience is relative to other countries. 129 00:06:03,480 --> 00:06:06,719 Speaker 1: This was incredibly informative during COVID. If you remember, during COVID, 130 00:06:06,880 --> 00:06:09,760 Speaker 1: we saw quite rapid inflation and there was a lot 131 00:06:09,760 --> 00:06:13,680 Speaker 1: of rhetoric around that being Washington's fault, but it turns 132 00:06:13,680 --> 00:06:16,359 Speaker 1: out you got the same rapid rates of inflation in 133 00:06:16,400 --> 00:06:18,520 Speaker 1: every other country. It turns out it was a microbe's 134 00:06:18,520 --> 00:06:24,080 Speaker 1: fault that COVID set and chain events that disrupted supply 135 00:06:24,200 --> 00:06:27,400 Speaker 1: chains all around the world, and every industrialized country had 136 00:06:27,400 --> 00:06:30,480 Speaker 1: the same sorts of struggles the United States had. So 137 00:06:30,520 --> 00:06:33,359 Speaker 1: when I look at what inflation is right now in 138 00:06:33,360 --> 00:06:35,480 Speaker 1: the United States and in other countries, what I see, 139 00:06:35,520 --> 00:06:38,160 Speaker 1: and I've compared it just for now to the G 140 00:06:38,320 --> 00:06:41,400 Speaker 1: seven so other very large economies, is the United States 141 00:06:41,440 --> 00:06:44,160 Speaker 1: actually currently has the highest rate of inflation of these 142 00:06:44,200 --> 00:06:47,720 Speaker 1: major economies. Our friends in Canada, who have a very 143 00:06:47,720 --> 00:06:51,040 Speaker 1: similar economy, have quite similar inflation just to touch lower 144 00:06:51,040 --> 00:06:54,320 Speaker 1: at three point two percent. But across Europe you're seeing 145 00:06:54,320 --> 00:06:57,800 Speaker 1: lower rates of inflation, even though they're definitely feeling the 146 00:06:57,880 --> 00:07:03,000 Speaker 1: energy scois or maybe because they're feel even though France, Japan, 147 00:07:03,800 --> 00:07:07,719 Speaker 1: other major economies are not experiencing quite the extent of 148 00:07:07,760 --> 00:07:11,400 Speaker 1: the inflationary moment that the United States is. And so look, 149 00:07:11,440 --> 00:07:13,440 Speaker 1: I don't know exactly what to make of that, But 150 00:07:13,520 --> 00:07:16,160 Speaker 1: as we start to tell stories and try to understand 151 00:07:16,200 --> 00:07:16,800 Speaker 1: what's going on. 152 00:07:16,840 --> 00:07:18,680 Speaker 2: I think this is a really important fact. 153 00:07:20,120 --> 00:07:22,800 Speaker 1: One of the things I always like to do when 154 00:07:22,800 --> 00:07:25,840 Speaker 1: the inflation numbers come out is, first of all, inflation 155 00:07:25,960 --> 00:07:28,920 Speaker 1: is in and of itself, a useful measure. The second thing, though, 156 00:07:29,080 --> 00:07:32,680 Speaker 1: is realized that we need to know the inflation rate 157 00:07:32,720 --> 00:07:35,080 Speaker 1: in order to know how much people are getting ahead. 158 00:07:35,920 --> 00:07:37,600 Speaker 1: The measure of how you're getting ahead would be so 159 00:07:37,720 --> 00:07:40,840 Speaker 1: your real wage, how much is you're purchasing. 160 00:07:40,320 --> 00:07:41,600 Speaker 2: Power growing or falling? 161 00:07:42,400 --> 00:07:44,640 Speaker 1: And the US had been through a pretty nice period 162 00:07:44,640 --> 00:07:48,720 Speaker 1: over the past three or four years of real wage growth, 163 00:07:48,960 --> 00:07:54,119 Speaker 1: not dramatic real wage growth, but acceptably pleasant real wage growth, 164 00:07:54,120 --> 00:07:57,880 Speaker 1: folks on average experiencing wages growing by about one percent 165 00:07:58,040 --> 00:08:02,080 Speaker 1: per year. What's been striking about the current moment Following tariffs, 166 00:08:02,120 --> 00:08:05,400 Speaker 1: following the war at Iran, as a result of the 167 00:08:05,400 --> 00:08:10,280 Speaker 1: current inflationary moment, most people are getting just the usual 168 00:08:10,400 --> 00:08:12,320 Speaker 1: sort of pay rises that they were getting before. But 169 00:08:12,360 --> 00:08:14,360 Speaker 1: the cost of living is zooming to the moon, not 170 00:08:14,400 --> 00:08:18,560 Speaker 1: to the moon, zooming up, don't let me exaggerate. As 171 00:08:18,600 --> 00:08:22,720 Speaker 1: a result, real wage growth has fallen dramatically over the 172 00:08:22,760 --> 00:08:26,680 Speaker 1: past year. Real wages are almost completely unchanged. Real wage 173 00:08:26,680 --> 00:08:30,239 Speaker 1: growth you have to go to an extra decimal place 174 00:08:30,280 --> 00:08:32,560 Speaker 1: to see something that's going on. But I think one 175 00:08:32,600 --> 00:08:35,880 Speaker 1: of the more striking things is the current inflationary moment 176 00:08:36,400 --> 00:08:39,480 Speaker 1: is related to a stark decline in. 177 00:08:39,440 --> 00:08:40,320 Speaker 2: Real wage growth. 178 00:08:41,120 --> 00:08:43,360 Speaker 1: You can also see this another way, just by looking 179 00:08:43,440 --> 00:08:47,280 Speaker 1: at how much of price has risen since Trump came 180 00:08:47,320 --> 00:08:49,600 Speaker 1: to power, how much of wages risen. You can think 181 00:08:49,600 --> 00:08:51,800 Speaker 1: about this as a horse race, which is prices rise 182 00:08:51,880 --> 00:08:52,800 Speaker 1: and wages. 183 00:08:52,440 --> 00:08:55,400 Speaker 2: Try to catch up, and it's a pretty close horse race. 184 00:08:57,080 --> 00:09:00,480 Speaker 1: It turns out that wages have risen about five percent, 185 00:09:00,559 --> 00:09:04,280 Speaker 1: prices risen about four point three percent. So as a result, 186 00:09:04,400 --> 00:09:09,200 Speaker 1: there has been a very modest, very modest growth in 187 00:09:09,280 --> 00:09:12,840 Speaker 1: real wages over the past year and a half. And 188 00:09:12,880 --> 00:09:14,480 Speaker 1: I think this is still a story yet to be 189 00:09:14,559 --> 00:09:17,280 Speaker 1: told of how the American people adjust to and feel 190 00:09:17,280 --> 00:09:22,520 Speaker 1: about not really getting ahead. The inflation numbers are really 191 00:09:22,559 --> 00:09:25,920 Speaker 1: important on Wall Street for one more reason. Remember the 192 00:09:25,920 --> 00:09:29,400 Speaker 1: Federal Reserve cares deeply about inflation. It's the Fed's job 193 00:09:29,440 --> 00:09:33,640 Speaker 1: to get inflation down. It wants inflation at two percent. Moreover, 194 00:09:33,960 --> 00:09:36,280 Speaker 1: this is not just any FED. We now have Kevin 195 00:09:36,520 --> 00:09:39,199 Speaker 1: wash as the FED chair. The president of hope that 196 00:09:39,280 --> 00:09:41,400 Speaker 1: Kevin wohsh should be a sock puppet who'd lower rates 197 00:09:41,440 --> 00:09:43,160 Speaker 1: no matter what, And as far as we can tell 198 00:09:43,240 --> 00:09:47,160 Speaker 1: so far, instead Kevin Walshes what is an inflation hawk, 199 00:09:47,600 --> 00:09:49,880 Speaker 1: someone who really wants to get rid of inflation, even 200 00:09:49,920 --> 00:09:53,000 Speaker 1: if that means slowing the real economy. So what we 201 00:09:53,040 --> 00:09:57,200 Speaker 1: saw today was inflation came in lower, and we'd anticipated 202 00:09:57,400 --> 00:09:59,480 Speaker 1: so the way the markets might think about that as well, 203 00:09:59,480 --> 00:10:02,040 Speaker 1: If inflation is lowered and we thought it would be, 204 00:10:02,480 --> 00:10:05,160 Speaker 1: then the need for the Fed to raise rates to 205 00:10:05,200 --> 00:10:08,760 Speaker 1: club of the economy has gone down. And so if 206 00:10:08,800 --> 00:10:10,839 Speaker 1: you look at federal funds futures, you'll actually say this 207 00:10:10,960 --> 00:10:16,839 Speaker 1: a very dramatic day today for expectations about future interest rates. 208 00:10:16,880 --> 00:10:20,360 Speaker 1: So we still expect interest rates to rise next, but 209 00:10:20,440 --> 00:10:22,280 Speaker 1: the rise over the next couple of months is quite 210 00:10:22,280 --> 00:10:25,280 Speaker 1: a bit smaller than we might have expected. The currently 211 00:10:25,360 --> 00:10:28,160 Speaker 1: expected rise in industrates over the next few months is 212 00:10:28,200 --> 00:10:31,920 Speaker 1: quite a bit smaller than folks had feared even yesterday. 213 00:10:32,559 --> 00:10:33,840 Speaker 2: Finally, let's look forward. 214 00:10:34,480 --> 00:10:37,000 Speaker 1: We already know quite a bit about what's going on 215 00:10:37,080 --> 00:10:39,520 Speaker 1: with prices, not because we know what's going on with 216 00:10:39,559 --> 00:10:41,400 Speaker 1: all of the economy, but because we know what's going 217 00:10:41,440 --> 00:10:43,680 Speaker 1: on in the run. What's going on in the straight 218 00:10:43,720 --> 00:10:47,760 Speaker 1: up from laws drives, oil and energy prices, fertilizer prices, 219 00:10:47,800 --> 00:10:50,720 Speaker 1: and a whole bunch of other prices, and what we've 220 00:10:50,720 --> 00:10:54,560 Speaker 1: seen subsequent. Remember these data are data. The data from today. 221 00:10:54,640 --> 00:10:56,920 Speaker 1: The inflation data were from June. But we're in the 222 00:10:56,960 --> 00:10:58,880 Speaker 1: middle of July, and we know a lot that's happened 223 00:10:58,880 --> 00:11:01,040 Speaker 1: in July. And the most important thing, as the United 224 00:11:01,040 --> 00:11:04,160 Speaker 1: States is officially declared the ceasefire at Iran over. 225 00:11:04,880 --> 00:11:05,800 Speaker 2: We're back at war. 226 00:11:07,200 --> 00:11:10,679 Speaker 1: War is deeply important for so many reasons, but I'm 227 00:11:10,720 --> 00:11:13,800 Speaker 1: going to focus today on just one of them, which 228 00:11:13,960 --> 00:11:16,280 Speaker 1: is that this of course means more disruption and global 229 00:11:16,360 --> 00:11:19,120 Speaker 1: energy markets exactly the forces that are pushed inflation up 230 00:11:19,120 --> 00:11:22,640 Speaker 1: over recent months. If the first time we went to 231 00:11:22,640 --> 00:11:25,200 Speaker 1: war where Iran did that, you know for sure the 232 00:11:25,240 --> 00:11:27,480 Speaker 1: second time will. One of the things I like to 233 00:11:27,520 --> 00:11:29,360 Speaker 1: do is not just track what's happening to today is 234 00:11:29,400 --> 00:11:31,800 Speaker 1: oil price, but there are futures markets where they trade 235 00:11:31,840 --> 00:11:34,120 Speaker 1: on what's going to happen to oi. They're betting what's 236 00:11:34,160 --> 00:11:36,520 Speaker 1: going to happen to oil prices in the future. What 237 00:11:36,600 --> 00:11:40,120 Speaker 1: you've seen is a relatively sharp jump in oil prices, 238 00:11:40,200 --> 00:11:42,480 Speaker 1: not just this month and next month, but actually throughout 239 00:11:42,520 --> 00:11:47,120 Speaker 1: the next few years, well past the midterms, well passed 240 00:11:47,200 --> 00:11:50,840 Speaker 1: the next presidential election even further on. Basically, this is 241 00:11:50,880 --> 00:11:54,280 Speaker 1: market saying we see chaos in the Middle East. We 242 00:11:54,360 --> 00:11:56,560 Speaker 1: don't expect chaos to go away. We can't tell you 243 00:11:56,600 --> 00:11:58,880 Speaker 1: exactly on what date, what bad things going to happen, 244 00:11:58,960 --> 00:12:02,240 Speaker 1: but you should look out energy. Expensive energy is a 245 00:12:02,280 --> 00:12:05,160 Speaker 1: big part of your future, and so already then we know. 246 00:12:05,280 --> 00:12:09,920 Speaker 1: Today's inflation number was pretty good because it reflected energy 247 00:12:09,920 --> 00:12:12,960 Speaker 1: prices coming down as a result of the ceasefire. Notice 248 00:12:13,120 --> 00:12:17,000 Speaker 1: the ceasefire is over. Markets already pricing in higher energy prices, 249 00:12:17,000 --> 00:12:20,840 Speaker 1: and those higher energy prices will move pretty quickly from 250 00:12:20,880 --> 00:12:24,520 Speaker 1: global oil markets to the pump and therefore your car's 251 00:12:24,559 --> 00:12:27,400 Speaker 1: fuel tank. What else am I keeping my eye on 252 00:12:27,480 --> 00:12:31,760 Speaker 1: right now? I think we are still at a very today. 253 00:12:31,800 --> 00:12:34,079 Speaker 1: It was good news on inflation. I want to celebrate that. 254 00:12:34,160 --> 00:12:35,920 Speaker 1: I hate it when bad things happen to people. I 255 00:12:35,920 --> 00:12:37,920 Speaker 1: hate it when bad things happen to the economy. I'm 256 00:12:37,920 --> 00:12:40,960 Speaker 1: breathing a little easier today than I was. Let me 257 00:12:41,000 --> 00:12:43,400 Speaker 1: also tell you the fact that I'm breathing a little 258 00:12:43,400 --> 00:12:45,320 Speaker 1: easier today than I was yesterday. I want to tell 259 00:12:45,320 --> 00:12:48,680 Speaker 1: you I wasn't breathing that easy yesterday. That's because we 260 00:12:48,720 --> 00:12:51,760 Speaker 1: are in an inflationary moment. That inflation has now been 261 00:12:51,800 --> 00:12:54,160 Speaker 1: above the Fed's target for more than five years. So 262 00:12:55,480 --> 00:12:58,880 Speaker 1: there's a question about what happens to inflation expectations. There's 263 00:12:59,240 --> 00:13:01,920 Speaker 1: very deep questions about how much inflation is already in 264 00:13:01,920 --> 00:13:04,920 Speaker 1: the system. Think about energy price shock as you throw 265 00:13:04,920 --> 00:13:07,640 Speaker 1: a pebble into a pond and you watch it ripleout 266 00:13:07,679 --> 00:13:10,240 Speaker 1: as first of all oil goes up, then gas, then 267 00:13:10,280 --> 00:13:13,680 Speaker 1: airline prices, then transportation, and then the price of vegetables 268 00:13:13,679 --> 00:13:16,480 Speaker 1: at the local market. We don't know exactly where we 269 00:13:16,520 --> 00:13:19,280 Speaker 1: are on that set of ripple effects right now when 270 00:13:19,360 --> 00:13:23,560 Speaker 1: we just threw another stone into the pond. So fairly 271 00:13:23,640 --> 00:13:26,960 Speaker 1: deep questions. There ongoing questions about what's going on with 272 00:13:27,000 --> 00:13:29,280 Speaker 1: the trade war and whether that's going to continue to 273 00:13:29,440 --> 00:13:31,680 Speaker 1: raise goods prices. That's where you would see the trade 274 00:13:31,679 --> 00:13:35,120 Speaker 1: war show up goods rather than services. And I think 275 00:13:35,160 --> 00:13:36,600 Speaker 1: all of us are going to keep our fingers and 276 00:13:36,600 --> 00:13:38,800 Speaker 1: toes crossed for quite a while and be staring at 277 00:13:38,840 --> 00:13:42,959 Speaker 1: every price data observation that we can get. Today's was 278 00:13:43,080 --> 00:13:47,040 Speaker 1: really important. I do want to finish by emphasizing one thing. 279 00:13:47,280 --> 00:13:49,520 Speaker 1: I was on social media this morning and I saw 280 00:13:49,559 --> 00:13:51,760 Speaker 1: a lot of people saying, oh, good news on the economy. 281 00:13:52,240 --> 00:13:54,960 Speaker 1: These numbers may have been must have been faked. I 282 00:13:55,080 --> 00:13:57,319 Speaker 1: want to look you in the eye right now and 283 00:13:57,400 --> 00:14:00,720 Speaker 1: tell you there is absolutely no sign that that has happened. 284 00:14:01,559 --> 00:14:04,240 Speaker 1: I know that the president tried to fire the head 285 00:14:04,240 --> 00:14:06,200 Speaker 1: of the BLS. In fact, you did, But what you 286 00:14:06,480 --> 00:14:08,679 Speaker 1: The part of the story no one told is the 287 00:14:08,720 --> 00:14:13,480 Speaker 1: new commissioner is actually an extraordinarily reliable and honest statistician. 288 00:14:14,000 --> 00:14:16,880 Speaker 1: The staff there continue to do their jobs, and if 289 00:14:16,920 --> 00:14:21,080 Speaker 1: there were problems in the data, you would start to 290 00:14:21,120 --> 00:14:24,760 Speaker 1: see a few little footprints. There are forensic economists out 291 00:14:24,760 --> 00:14:27,440 Speaker 1: there who are always trolling to find things that might 292 00:14:27,480 --> 00:14:30,920 Speaker 1: be wrong. But right now the data look reliable. Moreover, 293 00:14:31,040 --> 00:14:32,520 Speaker 1: to tell you the truth, if I was going to 294 00:14:32,520 --> 00:14:35,040 Speaker 1: fake data, I wouldn't fake this. I'd fake something much 295 00:14:35,080 --> 00:14:40,160 Speaker 1: more exciting. So look, the reality is inflations with us. 296 00:14:40,440 --> 00:14:43,360 Speaker 1: It's painful, and we hope it's on its way down.