Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. David Malpas, the former
Speaker 2: World Bank President, joins us now from the R and
Speaker 2: C in Milwaukee, Wisconsin. David, it's always the wonderful to
Speaker 2: catch up with you, sir. Thanks for making time for
Speaker 2: us this morning. This is a man that you know
Speaker 2: quite well. Walk us through what we need to know
Speaker 2: and how you think this administration might change might be
Speaker 2: different to what we saw the first time around with
Speaker 2: Donald Trump.
Speaker 1: Hi, John, good to see you. World one day is
Speaker 1: high energy, so that's going to I think help. We
Speaker 1: need a lot of US leadership within the world. Another
Speaker 1: theme from last night that was very clear is the
Speaker 1: working person in America you know, I'm a nerd, So
Speaker 1: we talk about median income. Raising the median income. That's
Speaker 1: what I've worked for for forty years, and that means
Speaker 1: what's the wage of the people in the middle of
Speaker 1: the economy. How do you get it up? And there
Speaker 1: was a lot of talk, of course last night about manufacturing.
Speaker 1: Jd Vance is a great choice as you think about
Speaker 1: how do you get people in jobs in rural areas,
Speaker 1: in suburban areas that are manufacturing jobs that are making things. Again,
Speaker 1: that speaks directly to Michigan, to Ohio, to Wisconsin, to
Speaker 1: Minnesota and so on around. I'm from Michigan and manufacturing
Speaker 1: is a key part of the state.
Speaker 2: David, if I can match that with a conversation on
Speaker 2: Wall Street, just to get across the here, there are
Speaker 2: some conversations taking place about foreign exchange. You know Larry
Speaker 2: Kudlow than I do. We both know him well. Larry
Speaker 2: Kudlow would often talk about the strong dollar policy. You
Speaker 2: don't hear that so much from Senate events. Some might say,
Speaker 2: you hear the opposite. What do you think is going
Speaker 2: to change on that front?
Speaker 1: We saw in the platform that the US is going
Speaker 1: to protect the reserve currency status of the dollar. That
Speaker 1: means defend the dollar. You know, I use the phrase
Speaker 1: strong and stable dollar. That means fifty years from now,
Speaker 1: you will know that the US dollar is the stable
Speaker 1: store of value for the world. That's the best thing
Speaker 1: for manufacturing because you can make the new investments. I
Speaker 1: think the key is to create an environment where people
Speaker 1: want to invest in the US. There was the Teamsters
Speaker 1: Union had last night gave a really strong endorsement to
Speaker 1: President Trump talking about breaking the political caste system and
Speaker 1: creating an environment where people who are corporations wanted to
Speaker 1: be in America because they could here. That's going to
Speaker 1: be especially true of energy. You can create energy and
Speaker 1: mining huge value in the US, and that enables all
Speaker 1: of the manufacturing and the technology sectors of the country.
Speaker 3: What do you make of the mister Vance talking about
Speaker 3: and he's questioned j Powell about this as well, the
Speaker 3: fact that the reserve currency status of the US dollar
Speaker 3: worries him and the lack of control we have our
Speaker 3: own currency. Does that bode with some of the members,
Speaker 3: as Jonathan was saying, in the former Trump administration, like Carrot,
Speaker 3: Larry Kudlow.
Speaker 1: I think the FED made big mistakes. You know I've
Speaker 1: been reading about I've been writing about that in the
Speaker 1: Wall Street Journal for well over a decade. The idea
Speaker 1: of having zero percent interest rates didn't defend the dollar,
Speaker 1: and it didn't work for getting investment into the US.
Speaker 1: So you can have a much stronger policy from the
Speaker 1: Federal Reserve. I think that's some of what people are
Speaker 1: getting at that the Fed needs to be talking about
Speaker 1: production in the US as a way to bring down inflation,
Speaker 1: and that will bring down interest rates. So I think
Speaker 1: there is a huge complaint right now that interest rates
Speaker 1: are the only tool being used to try to bring
Speaker 1: down inflation. That's not the right way to go at it,
Speaker 1: and it means that the little guys, small businesses across
Speaker 1: the country are feeling the pain. The interest rates are
Speaker 1: too high for small businesses, and it's feeding into the
Speaker 1: concentration of wealth at the top.
Speaker 2: David, I just want to understand that. Just give me
Speaker 2: some more color. How are you thinking about the Federal Reserve?
Speaker 2: Are you saying they need newer tools, more tools, or are
Speaker 2: you saying the emphasis should be elsewhere in Congress?
Speaker 1: They have lots of tools. They have regulatory, regulatory tools
Speaker 1: that really affect how lending is done within the country,
Speaker 1: they're not doing it in order to in order to
Speaker 1: help small businesses. They need to be thinking about that. Also,
Speaker 1: the tradeoff between the balance sheet and the interest rates,
Speaker 1: I think can be done in a more effective way.
Speaker 1: They don't need to be owning all the bonds of
Speaker 1: the US government. They're helping. How is it that we're
Speaker 1: in this environment where central banks buy the bonds of
Speaker 1: their governments and that enables big government spending. So you
Speaker 1: can change that in a way that's very pro growth,
Speaker 1: and I think that also plays into making the dollar
Speaker 1: the reserve currency of the world. China is looking at
Speaker 1: it saying it sure looks to us like the United
Speaker 1: States has lost its way. It's cha chasing its tail,
Speaker 1: and that can be fixed, I think pretty quickly by
Speaker 1: communicating clearly that you want a strong, independent FED that
Speaker 1: is talking about the actual needs of the country as
Speaker 1: a way to bring down inflation and bring down interest rates.
Speaker 2: David, you just sounded like you were saying that you
Speaker 2: think they should accelerate the balance sheet roll off and
Speaker 2: get out of the treasury business. And I'm trying to
Speaker 2: sort of match that up with the prospect of extending
Speaker 2: the tax counts of twenty seventeen. How do you do
Speaker 2: both those things at the same time. You know financial
Speaker 2: markets better than most What was that going to look like?
Speaker 1: They all go together and they actually work toward growth.
Speaker 1: I think if the if they would shrink the balance sheet.
Speaker 1: Remember the balance sheet has two sides, assets and liabilities.
Speaker 1: The liabilities that the FED is using to hold all
Speaker 1: those bonds is short term liabilities. They have this giant
Speaker 1: leverage to trade on that's lost a huge amount of money,
Speaker 1: maybe a trillion dollars of losses from that trade. They
Speaker 1: should they can let it run off in a way
Speaker 1: that puts money through the financial through the private sector,
Speaker 1: so it actually gets to small businesses. Think how better
Speaker 1: the environment would be if we had lower short term
Speaker 1: interest rates? And that that I think can be achieved
Speaker 1: by talking about growth, about the dollar, defending the dollar,
Speaker 1: and about about having more investment in the US, you'd
Speaker 1: have more confidence in the in the country and in
Speaker 1: the future. And that really was the theme at the
Speaker 1: convention yesterday.
Speaker 2: You clearly have a very clear policy preference, David. I
Speaker 2: just wondered you have a clear preference on who you
Speaker 2: would like to run the federal Reserve.
Speaker 1: Oh no, that's not so much the issue as the policies.
Speaker 1: We need good people in strong positions in order to
Speaker 1: turn the country around. I've written a lot about the
Speaker 1: need for a full upheaval of policy thinking, and especially
Speaker 1: the models at the FED. You know, they're still basically
Speaker 1: operating under the Phillips curve model that in some way
Speaker 1: you have to have unemployment in order to bring inflation down.
Speaker 1: And I think that can be switched around to say, look,
Speaker 1: if we have more people working, you're going to get
Speaker 1: lower prices and lower interest rates.
Speaker 2: One of the bad things about TV, David is you
Speaker 2: run out of time, and this is one of those
Speaker 2: conversations where I needed an extra thirty minutes to get
Speaker 2: more clarity from you. David. Let's do it again soon.
Speaker 2: Thanks for making sign for David Malpasta, a former World
Speaker 2: Bank president. This is two New York Congressman Mike Lauda
Speaker 2: and Richie Taurus are introducing bipartisan legislation that would increase
Speaker 2: protection for presidential candidates Trump, Biden and Robert Kennedy. Junior
Speaker 2: Police have said that joining us now is Republican Congressman
Speaker 2: Mike Lawla Congressman. Thanks for sharing some of your time
Speaker 2: this morning, particularly how busy things have been for you
Speaker 2: over the last couple of days following the events of
Speaker 2: Saturday evening. Can you walk us through just the content
Speaker 2: of your bill and the kind of changes that you'd
Speaker 2: like to see.
Speaker 4: Well, we're working through the logistics right now and plan
Speaker 4: to introduce this week. But the intention here is to
Speaker 4: ensure that President Trump, President Biden, and RFK Junior, whose
Speaker 4: family has twice been victim of political assassination, have enhanced security. Obviously,
Speaker 4: as more information is uncovered about the events on Saturday
Speaker 4: to day, it raises serious questions about, you know, what
Speaker 4: level of security the former president had. The fact that
Speaker 4: a armed shooter was able to get on a roof
Speaker 4: with a clear line of sight at the former president
Speaker 4: and get a shot off that went through Donald Trump's ear.
Speaker 4: But not for the grace of God, we'd be having
Speaker 4: a very different conversation right now. So, you know, the
Speaker 4: fact that this was able to happen, There's been lots
Speaker 4: of questions about, you know, the lack of resources, the
Speaker 4: lack of air support, if you will, as well as
Speaker 4: the use of drone technology. You know, lots of questions
Speaker 4: being raised that require immediate and serious answers, and this
Speaker 4: cannot be a you know, cover your own ass situation.
Speaker 4: This has to be a full and transparent investigation into
Speaker 4: what happened and why it happened, and how to ensure
Speaker 4: that this never happens again. Our elections must be determined
Speaker 4: by votes at a ballot box, not.
Speaker 1: By violence at a rally.
Speaker 4: And obviously, the Secret Service has a responsibility to ensure
Speaker 4: the safety and well being and this cannot be a
Speaker 4: question of expense or resources. The federal government has a
Speaker 4: responsibility to ensure the safety and well being of these
Speaker 4: candidates and to ensure that every resource necessary is available
Speaker 4: to them.
Speaker 3: Congressman, I think many of your colleagues on the other
Speaker 3: side of the aisle also agree with you. But just
Speaker 3: from a logistical point of view, how quickly can this
Speaker 3: bill get passed and then we actually see those resources
Speaker 3: hit the ground.
Speaker 4: Look, obviously this is a question for leadership on getting
Speaker 4: this bill to the floor as quickly as possible. I'm
Speaker 4: heartened to see that the binding Administration did move yesterday
Speaker 4: to get give RFK Secret Service protection after many months
Speaker 4: of him requesting it, and obviously the head of the
Speaker 4: Secret Service saying that there's going to be immediate changes
Speaker 4: with respect to President Trump's detailed butt. We need to
Speaker 4: make sure as a Congress that we are ensuring that
Speaker 4: the resources are there both financially and that there is
Speaker 4: more stringent requirement on providing this security. I mean, it
Speaker 4: shouldn't have taken a shooting on Saturday for them to
Speaker 4: realize that President Trump needed enhanced security and that RFK
Speaker 4: Junior should have security.
Speaker 1: That should have been.
Speaker 4: A no brainer in this heightened political environment in which look,
Speaker 4: we're a deeply divided country and obviously we've seen incidents
Speaker 4: in recent years, attacks on members of Congress, threats against
Speaker 4: sitting governors, violence against the former speaker's husband.
Speaker 1: So this is.
Speaker 4: Critical in this moment that we recognize the seriousness of
Speaker 4: this the threat, and that Congress acts both in terms
Speaker 4: of ensuring the support financially and otherwise for the Secret Service,
Speaker 4: as well as these congressional investigations that are going to
Speaker 4: get underway next week when we get back to Washington.
Speaker 3: Congressman, given we are deeply divided country at the moment.
Speaker 3: Following that assassination attempt, the now VP pick of President
Speaker 3: Trump said that this had ties back to Biden. Do
Speaker 3: you think that kind of rhetoric is appropriate coming from
Speaker 3: the VP candidate.
Speaker 4: Well, first of all, the investigation obviously is underway. We
Speaker 4: don't yet know the motivation of the shooter, and that
Speaker 4: will come out in due time, and we should allow
Speaker 4: that process to play itself out. I think what you
Speaker 4: know the vice presidential nominee was alluding to in his
Speaker 4: comments is the continued assertion that Donald Trump is a
Speaker 4: threat to democracy or a fascist, or that if he
Speaker 4: somehow wins in November, that therefore American democracy is going
Speaker 4: to end.
Speaker 1: Is destructive.
Speaker 4: It's destructive to our country. It undermines our democracy, it
Speaker 4: undermines our electoral process.
Speaker 1: And should stop.
Speaker 4: And I think all of us can recognize the need
Speaker 4: to bring down the temperature several notches to look at
Speaker 4: the rhetoric that is being used. Both Republicans and Democrats
Speaker 4: have a responsibility here in this moment of heightened political disagreement,
Speaker 4: that we really recognize the importance of the moment.
Speaker 1: As I said.
Speaker 4: Before, our election should always be determined by votes at
Speaker 4: a ballot box, not by violence at a rally, and
Speaker 4: all of us have a responsibilit to understand that words matter,
Speaker 4: Our rhetoric can at times cause harm, and we need
Speaker 4: to be clear that we're not going to tolerate it.
Speaker 4: And I think what the vice presidential nominee was alluding
Speaker 4: to in that is that, you know, the continued effort
Speaker 4: to somehow say that Donald Trump getting elected is going
Speaker 4: to destroy our democracy needs to stop and representative.
Speaker 5: I mean to be clear, this was of course shocking
Speaker 5: events over the weekend and deeply disturbing to anyone, but
Speaker 5: it is not the only case of political violence.
Speaker 1: You only need to look back.
Speaker 5: Over the past few years, whether it be the insurrection
Speaker 5: on January sixth, whether it be Nancy Pelosi's husband being attacked.
Speaker 5: I want to understand from you the temperature read that
Speaker 5: you're getting at this moment in this country, what you're
Speaker 5: hearing from constituents. Are we starting to dial down the temperature?
Speaker 5: Does this weekend represent a peak to you? Or how
Speaker 5: concerned are you still of this deeply divided rhetoric that
Speaker 5: continue to hear.
Speaker 4: Well, if this doesn't shock our nation's conscience to its core,
Speaker 4: I don't.
Speaker 6: Know what would look.
Speaker 4: I've been very clear over the years. I was the
Speaker 4: first Republican member of the state legislature in New York
Speaker 4: to denounce the events of January sixth. On January sixth,
Speaker 4: I spoke out when Nancy Pelosi's husband was attacked in
Speaker 4: the same way I'm speaking out about the assassination attempt
Speaker 4: against President Trump. All of us should be universally clear
Speaker 4: in this political violence has no place in our democracy.
Speaker 4: There should be no tolerance for it wherever it occurs.
Speaker 4: Whether it's those that seized control of a federal courthouse
Speaker 4: in Portland, burned down a police station in Minneapolis, or
Speaker 4: storm to capital on January sixth, it should never be
Speaker 4: tolerated or condoned, period.
Speaker 2: Congressman, appreciate perspective. Thanks for making time for us this morning.
Speaker 2: Thank you, Sir Michael that joining us now to talk
Speaker 2: about bank earnings is Chris marronach of Jenny Montgomery Sco.
Speaker 2: Chris Water for to catch up with you. So we've
Speaker 2: got a lot to talk about, particularly the rally in
Speaker 2: small caps in a regionals, but I want to start
Speaker 2: with the earnings from the big players on Wall Street. First,
Speaker 2: we've had JP Morgan, We've had City, We've had Bank
Speaker 2: for America. What stands out for you, not just this morning,
Speaker 2: but over the last week.
Speaker 6: Well, nenadist.
Speaker 7: Margins aren't really increasing yet, John Amie, I think we
Speaker 7: have this final quarter where margins bottom.
Speaker 8: You know, we're happy that the cost of funds at BNA.
Speaker 7: Was only up marginally, so they're still the leader in
Speaker 7: terms of low cost deposits. I think that yield you're
Speaker 7: going to get better as things roll over on the upside,
Speaker 7: but the cost of funds has to come down. That's
Speaker 7: where the Fed policy, the possible shift and interest rates
Speaker 7: third fourth.
Speaker 8: Quarter could be very useful.
Speaker 7: I was very thankful that the criticized loans were flat
Speaker 7: in the quarter from Q one, charge offs only up
Speaker 7: one basis point.
Speaker 6: The provision was higher.
Speaker 7: They could build slightly, but I think overall that was
Speaker 7: a win as well. But you're not really seeing the
Speaker 7: big revenue growth on the spread side. Investment banking, as
Speaker 7: you mentioned, was definitely higher, so no issues there. That
Speaker 7: was a beat. I think expenses acted well, but no
Speaker 7: major surprise on the expense front.
Speaker 2: Chris, I went through the today gains for the Stokes
Speaker 2: to some of these major players. If you go over
Speaker 2: the last twelve months, you can double it. They've been tremendous. Chris,
Speaker 2: there was something about this environment in the last year
Speaker 2: that has been particularly good for the bigger players in
Speaker 2: the financial world. Is something changing, Chris? Why you think
Speaker 2: things get better for the smaller, the mid sized banks,
Speaker 2: the more regional players. Sure.
Speaker 7: I think on the regional and the smaller players, I
Speaker 7: think what you have is the cost of funds is
Speaker 7: beginning to crust. That was the major challenge even before
Speaker 7: you had the Silicon Valley and First Republic failures last year.
Speaker 7: I also think that generally speaking, the expense leverage in
Speaker 7: this business is very good. We've seen banks much more
Speaker 7: efficient today than they were fifteen years ago, John, and
Speaker 7: that's a tremendous difference. You know, the cost of technology
Speaker 7: is helping banks do more with less. I think they're
Speaker 7: getting much more efficient with their staffing. They still have
Speaker 7: to spend money, but I think they're much more efficient
Speaker 7: at doing so. So I think as we get to
Speaker 7: a period where the cost of funds comes down or
Speaker 7: the at least flattens out, that's going to lead to
Speaker 7: better spread in common I think overall, the expense leverage
Speaker 7: is still there for the industry.
Speaker 2: The moving regional banks over the last few days has
Speaker 2: been absolutely phenomenal. Chris. I think We're up by something
Speaker 2: like eleven percent in just five days. There was a
Speaker 2: note from City just yesterday from Scott cron Now I'm
Speaker 2: going to share it with our audience.
Speaker 6: Maybe you've seen it.
Speaker 2: Overweight US banks, our preferred Trump trade. Easy evaluation sets up,
Speaker 2: stable fundamentals, lesser tariff risk combined with incremental deregulatory inertia
Speaker 2: give this sector a good risk reward sets up. It's
Speaker 2: the conversation at the moment, Chris, how would does Trump's
Speaker 2: second term influence shape the performance of these stocks?
Speaker 8: Well, John, for sure, the regulatory environment's going to shift.
Speaker 7: I think regulation can very much have peaked in terms
Speaker 7: of the banks in the industry. Under a new administration,
Speaker 7: you would see regulations change dramatically.
Speaker 8: I think it would take about eighteen months to really
Speaker 8: affect the rank and file.
Speaker 7: Do not change that quickly just because the head of
Speaker 7: the White House changes, But it is going to be
Speaker 7: a perception shift which is going to be anticipated and
Speaker 7: already is by the stocks. You know, the banks were
Speaker 7: training at forty eight percent relative multiples last week. Today
Speaker 7: they're fifty three or fifty four relative pe to SMP.
Speaker 7: That has a long way to go, because we used
Speaker 7: to be at sixty six to seventy percent. You know,
Speaker 7: median reigns for the last ten years, so there's a
Speaker 7: lot more valuation to recapture. The regulatory perception change is
Speaker 7: a massive one. We have to see the follow through
Speaker 7: in the fall, but that certainly is a very good start.
Speaker 7: They last several days.
Speaker 3: We heard jd Vance, the Foreign President's VP pick in
Speaker 3: the past, talk about big banks, but also talk about regional,
Speaker 3: smaller banks. He says community lenders. He thinks they operate
Speaker 3: at a financial disadvantage to the biggest banks. Would that
Speaker 3: be another reason why potentially put on trades for some
Speaker 3: of these all are regional players.
Speaker 7: Well, sure, I mean I think you have to have
Speaker 7: a regulatory framework that's going to fit the community banks
Speaker 7: and it makes it elite.
Speaker 8: Easier and less onerous on them.
Speaker 7: I think having the trickle down to the same regulation
Speaker 7: applied to one hundred or two hundred million dollar bank
Speaker 7: on one that's a billion or two billion dollars is
Speaker 7: just very difficult to execute. It gets back to the
Speaker 7: opposite of the expense leverage I was mentioning. So if
Speaker 7: we can have relief there, that is a tremendous shift
Speaker 7: I think that is a possibility. I do think it
Speaker 7: takes time, but that absolutely happens. The small banks are
Speaker 7: the major lenders in the country. Small businesses are still
Speaker 7: to generate. They generate the new jobs, the new activity
Speaker 7: in the country.
Speaker 8: That's where community banks really do their best work.
Speaker 2: Hik Chris Wonderful, I hear from you, sir, great echo
Speaker 2: of ey alongside Andrew Husby of BNP Parwaback, Greg, I
Speaker 2: want to come across the US first. Your reaction to
Speaker 2: this data is the shaky period for the consumer over
Speaker 2: or is the jury still out?
Speaker 6: What we're doing is just generally more prudence.
Speaker 9: I don't think we're seeing any form of retrenchment in
Speaker 9: consumer spending activity. And this type of June report, which
Speaker 9: was quite strong across the word, as Mike was just highlighting,
Speaker 9: is indication that consumers are not pulling back, but they
Speaker 9: are being more judicious with how they spend, how much
Speaker 9: they spent, and where they spend. And that's still the
Speaker 9: reality today despite this fairly favorable report.
Speaker 6: Let's not forget we still.
Speaker 9: Have a job market that's still adding the decent number
Speaker 9: of jobs one hundred and eighty thousand on a three
Speaker 9: month moving average, and wage growth is still around four percent,
Speaker 9: so combined it too, you still have that income support.
Speaker 9: It's not any sign of a retrenchment, but it is
Speaker 9: more prudence.
Speaker 6: On the part of consumers.
Speaker 2: The Federal Reserve for a while has pointed to the
Speaker 2: consumer the labor market and said the strength there is
Speaker 2: a reason to wait. It gives us the luxury of
Speaker 2: time just to see how the inflation trajectory changes evolves. Greg,
Speaker 2: do you think they have that time? Can they wait?
Speaker 2: Can they skip your line? Wait until September.
Speaker 9: I think we're not talking about necessarily bringing rates down
Speaker 9: to zero or cutting rates in an emergency fashion. What
Speaker 9: we're talking about is really recalibrating monetary policy, and I
Speaker 9: think now would be optimal to recalibrate monetary policy.
Speaker 6: Now that the labor market is rebalanced.
Speaker 9: You probably don't need as restrictive monetary polsy. Now that
Speaker 9: the labor market is rebalanced, and now that inflation is
Speaker 9: continuing to move to the downside, what you wanted to
Speaker 9: do is sustain the economic expansion in a low inflation environment.
Speaker 6: That calls for a recalibration of monetary policy. I've been
Speaker 6: discussing this for a few.
Speaker 9: Months now, I think now would be optimal to recalibrate
Speaker 9: monetary policy.
Speaker 6: June would probably also have been good as well.
Speaker 5: Andel, let me bring you into the conversation, get your
Speaker 5: first read and whether you kind of agree with Greg here,
Speaker 5: whether still now is the time to act?
Speaker 10: Yeah, I definitely agree with Greg here. This is a
Speaker 10: consumer that's taking a breather after a pretty solid sprint
Speaker 10: over much of the pandemic here. So what we've seen
Speaker 10: in the consumer sentiment data is some fatigue about high
Speaker 10: interest rates and higher prices. But this is not, as
Speaker 10: Greg said, a consumer that's kind of rolling over, and
Speaker 10: the labor market is a key key part of that.
Speaker 10: Income is still growing, wages are still growing, and really
Speaker 10: the economy is not really set to really take a dive.
Speaker 2: Right The balance of risk around Joel Manday has clearly shifted,
Speaker 2: and you can see that with the communication coming from
Speaker 2: Chair and Pal. The focus now, can we say is
Speaker 2: equally on CPI's equally on price stability and full employment.
Speaker 10: I think you're if they're not going to say that exactly. Basically,
Speaker 10: that's where we are right now. It's a FED that's
Speaker 10: going to be very attuned until weakness in the labor market,
Speaker 10: the job is rate above four point one percent, the
Speaker 10: economy probably slowing below trend in the back half of
Speaker 10: this year on our estimate, so it's a time where
Speaker 10: they can think about recalibrating policy.
Speaker 5: Lower greg with all the things of lining up to
Speaker 5: be able to recalibrate, Jan Hasias probably agrees with you,
Speaker 5: and he even goes so far as to put a
Speaker 5: note out yesterday saying, why wait, if everything is lining up,
Speaker 5: why wait seven weeks? Would you agree with that? That
Speaker 5: July actually makes sense?
Speaker 6: I think June might have made sense.
Speaker 9: I mean, you're really talking about recalibrating monetary policy gradually.
Speaker 9: You want to avoid a situation where you're reacting to
Speaker 9: a more significant slowdown in economic activity.
Speaker 6: That's really the risk right now, as John was saying,
Speaker 6: you have an equally.
Speaker 9: Balanced balanced environment when it comes to the downside risk
Speaker 9: on the labor market front and the easing of inflation.
Speaker 9: So now is really the time to gradually recalibrate monetary policy.
Speaker 9: Do so with a lot of regard towards how the
Speaker 9: data is evolving, but gradually moved towards the state where
Speaker 9: interest rates are more in line with potential growth through
Speaker 9: the economy and an environment where inflation is continuing to
Speaker 9: move towards two percent.
Speaker 6: So yes, I would agree.
Speaker 9: With yanhatsyus there in terms of easing monetary policy now
Speaker 9: and not necessarily waiting until September.
Speaker 2: Andrew Honjost of City, Yes, that I put out a
Speaker 2: pace in the title read like this, rates cuts go
Speaker 2: from if to when to how many? On the if
Speaker 2: not a matter of if. I think we're all waiting
Speaker 2: for that move on the when, debate about what it
Speaker 2: is July September or shortly afterwards, a thinmic compos Let's
Speaker 2: talk about the how many greg when you start to adjust,
Speaker 2: are they talking about a fine tuning amid cycle adjustment?
Speaker 2: What kind of adjustments are you actually looking for? And
Speaker 2: how on earth? And this is a difficult question. Can
Speaker 2: we make that call for twenty twenty five Given the
Speaker 2: kind of political conversations we're having in this country, we.
Speaker 6: Tend to focus a little bit too much on the years.
Speaker 9: Right, There's nothing that says that there have to be
Speaker 9: a certain number of rate cuts in any given year.
Speaker 9: We're anticipating a couple of rate cuts this year in
Speaker 9: September and December. Given what we've heard from policy makers,
Speaker 9: and we're anticipating about one hundred and twenty five based
Speaker 9: points of further easing in twenty twenty five. But as
Speaker 9: you said, there's a lot of uncertainty, whether it's political uncertainty,
Speaker 9: policy uncertainty, geopolitical uncertainty that comes on top of the
Speaker 9: macro uncertainty. So the direction of travel of the economy
Speaker 9: is one in which you're seeing at gradual slow down
Speaker 9: in the pace of growth, which warrants a recalibration of
Speaker 9: monetary policy.
Speaker 6: We're in the early stages now. I think the FED
Speaker 6: would be well placed now.
Speaker 9: To correct, Actually, we calibrate and allow itself some time
Speaker 9: to observe how the economy is evolving while recalibrating the
Speaker 9: pace of monetary pols and tightening.
Speaker 3: I think certain right now is the uncertainty. But if
Speaker 3: we could pick up Andrew on the politics, how are
Speaker 3: you thinking about twenty twenty five, because the Fed could
Speaker 3: be looking at a set of policies that are very different.
Speaker 10: Yeah, it's certainly a key key catalyst. Obviously here we're
Speaker 10: talking about tariff's taxes, other issues. It's potentially labor supply
Speaker 10: as well. The key catalyst for us. We think On
Speaker 10: the inflation front, the FED might be thinking about, or
Speaker 10: might have to think about in short order is tariffs.
Speaker 10: We did put out a pretty extensive note last month,
Speaker 10: and certainly there's a lot of detail that's left unsaid
Speaker 10: right now about what that might exactly look like. But illustratively,
Speaker 10: you're looking at inflation that could be a percentage point,
Speaker 10: couple percentage points, or even several percentage points higher than
Speaker 10: the base case right now. So that with the Fed
Speaker 10: having gotten inflation roughly in the neighborhood of where it
Speaker 10: wants to, it hasn't gotten it all the way home yet,
Speaker 10: so that's going to be potentially.
Speaker 3: Something potentially in twenty twenty five.
Speaker 10: So that'll be so with cuts priced in right now.
Speaker 10: One way you could look at it is basically just
Speaker 10: a hold for longer, but certainly, depending on the mix
Speaker 10: of policies, you could be thinking about hikes potentially after
Speaker 10: some cuts, so that you've seen in the past.
Speaker 2: Andrew Husby have been preparabout together with Greg daco Ey,
Speaker 2: both trying to figure out the future here, which is
Speaker 2: tremendously difficult to do in twenty twenty five. This is
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