1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,560 --> 00:00:40,200 Speaker 1: That core PCEE figure which came in banging line zero 11 00:00:40,280 --> 00:00:43,400 Speaker 1: point two percent increase following a zero point three percent 12 00:00:43,440 --> 00:00:46,320 Speaker 1: the prior month, it was revised downward for the prior 13 00:00:46,400 --> 00:00:49,839 Speaker 1: month zero point two percent personal income and personal spending. 14 00:00:50,159 --> 00:00:52,240 Speaker 1: That's where it gets pretty interesting to me, the idea 15 00:00:52,280 --> 00:00:54,240 Speaker 1: that you get to get an upside surprise on both 16 00:00:54,280 --> 00:00:58,120 Speaker 1: particularly personal spending zero point six percent increase versus a 17 00:00:58,200 --> 00:01:02,920 Speaker 1: zero point five percent increase and real personal spending increasing 18 00:01:03,160 --> 00:01:07,280 Speaker 1: zero point four percent versus a zero point two percent expected, 19 00:01:07,440 --> 00:01:10,000 Speaker 1: and it was actually revised upward in the prior reading 20 00:01:10,040 --> 00:01:10,280 Speaker 1: as well. 21 00:01:10,319 --> 00:01:10,680 Speaker 3: I am Marie. 22 00:01:10,720 --> 00:01:13,280 Speaker 1: It seems like, people keep spending and that has been 23 00:01:13,480 --> 00:01:16,000 Speaker 1: the engine that keeps on giving to the American economy. 24 00:01:16,080 --> 00:01:20,679 Speaker 4: People keep spending. Jobless claims yesterday very strong number, and 25 00:01:21,160 --> 00:01:23,280 Speaker 4: now when it comes to PC bang in line. So 26 00:01:23,319 --> 00:01:25,240 Speaker 4: what is there actually look at the data like this, 27 00:01:25,400 --> 00:01:27,160 Speaker 4: what is there actually to worry about? When I do 28 00:01:27,280 --> 00:01:30,280 Speaker 4: see spending though increasing, I do wonder how many people 29 00:01:30,480 --> 00:01:32,880 Speaker 4: are like members of my family who went out concerned 30 00:01:32,920 --> 00:01:35,040 Speaker 4: about the tariffs and are continued to spend now, and 31 00:01:35,080 --> 00:01:37,040 Speaker 4: they are concerned about the holidays coming up, and they 32 00:01:37,040 --> 00:01:38,640 Speaker 4: don't want the prices to go up, so they're willing 33 00:01:38,720 --> 00:01:40,039 Speaker 4: to go out and spend a ton. 34 00:01:40,120 --> 00:01:41,640 Speaker 5: Now, I guess it remains to be seen. 35 00:01:41,680 --> 00:01:44,640 Speaker 1: Yeah, that's one reason why people are listening to earnings. 36 00:01:45,000 --> 00:01:47,880 Speaker 1: Former Saint Louis FED President Jim Bullard joins US now 37 00:01:47,960 --> 00:01:49,760 Speaker 1: and I am so excited to speak with you, Jim, 38 00:01:49,800 --> 00:01:52,320 Speaker 1: because right now I'm looking at all of this data 39 00:01:52,400 --> 00:01:55,800 Speaker 1: that suggests a really strong US market, a really strong 40 00:01:55,920 --> 00:01:59,160 Speaker 1: US economy, people continuing to be able to spend, and 41 00:01:59,200 --> 00:02:00,360 Speaker 1: their incomes rising. 42 00:02:00,880 --> 00:02:02,920 Speaker 3: What about this picture. 43 00:02:02,720 --> 00:02:05,320 Speaker 1: Makes you think that the FED needs to be cutting 44 00:02:05,440 --> 00:02:06,559 Speaker 1: rates more aggressively. 45 00:02:08,880 --> 00:02:11,480 Speaker 6: Yeah, thanks for having me. So these numbers look to 46 00:02:11,520 --> 00:02:16,520 Speaker 6: me like they're consistent with what markets were expecting. I 47 00:02:16,560 --> 00:02:22,760 Speaker 6: think markets have a reacceleration hypothesis and I'm sympathetic with that. 48 00:02:22,919 --> 00:02:25,920 Speaker 6: So I do think the economy will be in pretty 49 00:02:25,960 --> 00:02:27,919 Speaker 6: good shape for the rest of this year and into 50 00:02:27,960 --> 00:02:32,399 Speaker 6: twenty twenty six as some of the new administration policies 51 00:02:32,440 --> 00:02:37,360 Speaker 6: come online. On the inflation side, there was no surprise here, 52 00:02:37,520 --> 00:02:41,239 Speaker 6: so that seems to be very consistent with the committee's 53 00:02:41,240 --> 00:02:45,320 Speaker 6: story that they'll be able to look through inflation and 54 00:02:45,360 --> 00:02:46,359 Speaker 6: then expect it to. 55 00:02:46,400 --> 00:02:48,120 Speaker 7: Fall in twenty twenty six. 56 00:02:48,200 --> 00:02:53,079 Speaker 6: So I think this leaves everything on track to have 57 00:02:53,200 --> 00:02:56,520 Speaker 6: further rate cuts during the next two meetings of the 58 00:02:56,600 --> 00:02:57,040 Speaker 6: f HOMC. 59 00:02:57,520 --> 00:02:59,679 Speaker 1: Just put this new perspective, this is what the market 60 00:02:59,760 --> 00:03:02,480 Speaker 1: was expecting, and so there is this rally across the 61 00:03:02,480 --> 00:03:05,640 Speaker 1: board as people say, Okay, the Fed can keep cutting 62 00:03:06,080 --> 00:03:09,519 Speaker 1: even though you are seeing the strength and potentially reacceleration Jim, 63 00:03:09,520 --> 00:03:12,400 Speaker 1: as you are putting yet year over year core PCE, 64 00:03:12,680 --> 00:03:15,240 Speaker 1: that key metric that the FED looks at, is it 65 00:03:15,320 --> 00:03:16,440 Speaker 1: two point nine percent. 66 00:03:16,720 --> 00:03:18,000 Speaker 3: It's not climbing, it. 67 00:03:18,040 --> 00:03:20,000 Speaker 1: Might even be going down to two point eight percent, 68 00:03:20,080 --> 00:03:23,679 Speaker 1: but it's still almost a full percentage point above two percent, 69 00:03:24,200 --> 00:03:28,120 Speaker 1: Is there a feeling that it just isn't really important 70 00:03:28,160 --> 00:03:30,160 Speaker 1: to get it down to two percent that quickly, and 71 00:03:30,200 --> 00:03:31,200 Speaker 1: so you can look through that. 72 00:03:33,320 --> 00:03:35,800 Speaker 6: No, they do want to get it down to two 73 00:03:35,840 --> 00:03:39,680 Speaker 6: percent over the next two years. So you want to 74 00:03:39,680 --> 00:03:42,040 Speaker 6: ask them todian to two percent, I would say, not 75 00:03:43,080 --> 00:03:47,520 Speaker 6: go very quickly to two percent or go under an overshoot. 76 00:03:47,600 --> 00:03:49,920 Speaker 6: So I think you know, usually the way this is 77 00:03:49,960 --> 00:03:52,400 Speaker 6: thought about is that you want to gradually bring it down. 78 00:03:53,160 --> 00:03:57,120 Speaker 6: I think the community's on track to do that, and 79 00:03:57,200 --> 00:03:59,720 Speaker 6: so that part looks looks pretty good. 80 00:04:00,200 --> 00:04:02,840 Speaker 5: So the committee almost looking through inflation. 81 00:04:03,120 --> 00:04:04,960 Speaker 4: Have they been given the green light by the FED 82 00:04:05,040 --> 00:04:06,960 Speaker 4: chair to look through if there's going to be any 83 00:04:07,320 --> 00:04:10,280 Speaker 4: hot print prints upcoming when it comes to inflation. 84 00:04:10,360 --> 00:04:13,440 Speaker 6: Yeah, I do think that the chair at Jackson Hall 85 00:04:14,360 --> 00:04:18,640 Speaker 6: very much signed on to the idea that any inflationary 86 00:04:18,640 --> 00:04:23,400 Speaker 6: effects coming through the tariff channel would be smaller than 87 00:04:24,240 --> 00:04:29,840 Speaker 6: previously anticipated and they're coming later than previously anticipated. And 88 00:04:29,920 --> 00:04:33,640 Speaker 6: so because of that is basically a look through. So 89 00:04:34,680 --> 00:04:38,120 Speaker 6: even though you say, like President Barkin said, well it's 90 00:04:38,160 --> 00:04:41,640 Speaker 6: not getting any better for those that thought there was 91 00:04:41,680 --> 00:04:45,599 Speaker 6: an important teariff component to inflation, that part should go 92 00:04:45,680 --> 00:04:48,800 Speaker 6: away since that's a one time effect, and so that's 93 00:04:48,800 --> 00:04:51,720 Speaker 6: giving the committee confidence that they can go ahead and 94 00:04:51,760 --> 00:04:55,520 Speaker 6: get closer to neutral. They'll still have a you know, 95 00:04:55,760 --> 00:04:59,279 Speaker 6: still be a restricted policy, still putting downward pressure on inflation, 96 00:04:59,440 --> 00:05:01,960 Speaker 6: but not as intensely is what they're doing right now. 97 00:05:02,400 --> 00:05:05,720 Speaker 4: Well, when it comes to inflation, we heard from Governor 98 00:05:05,800 --> 00:05:07,320 Speaker 4: Myron almost insinuate. 99 00:05:07,400 --> 00:05:08,920 Speaker 5: Not right now, but maybe in the future. 100 00:05:08,960 --> 00:05:11,320 Speaker 4: The FED should actually have more of a range in 101 00:05:11,400 --> 00:05:13,520 Speaker 4: terms of their target. Can you see the FED moving 102 00:05:13,560 --> 00:05:17,120 Speaker 4: towards that, maybe targeting two to three percent instead of 103 00:05:17,279 --> 00:05:18,640 Speaker 4: just two percent across the board? 104 00:05:19,880 --> 00:05:24,480 Speaker 6: Yes, a classic issue in inflation targeting. The US has 105 00:05:24,520 --> 00:05:26,440 Speaker 6: come down on the side of just having a target. 106 00:05:27,040 --> 00:05:32,839 Speaker 6: It's simpler communication. It doesn't leave ambiguity around having a range. 107 00:05:33,279 --> 00:05:36,120 Speaker 6: One of the problems for countries that have had ranges 108 00:05:36,480 --> 00:05:39,880 Speaker 6: is that the top of the range then becomes okay 109 00:05:39,920 --> 00:05:43,320 Speaker 6: as opposed to the midpoint of the range. So it 110 00:05:43,360 --> 00:05:46,599 Speaker 6: can be interpreted as slippage in your commitment to keep 111 00:05:46,640 --> 00:05:50,240 Speaker 6: inflation low and stable, and households do not like the inflation. 112 00:05:50,360 --> 00:05:53,720 Speaker 6: So I think it's incumbent on the fetter reserve to 113 00:05:53,760 --> 00:05:55,799 Speaker 6: make sure inflation stays low and stable. 114 00:05:56,200 --> 00:05:58,800 Speaker 1: Jim, I'm trying to get a sense of how a 115 00:05:58,880 --> 00:06:02,400 Speaker 1: data dependent FED deals with the potential of not getting 116 00:06:02,480 --> 00:06:05,280 Speaker 1: data next week. We're supposed to get the non farm 117 00:06:05,320 --> 00:06:09,080 Speaker 1: payrolls report on Friday, October third, Ostensibly that could be 118 00:06:09,160 --> 00:06:12,359 Speaker 1: after the government shutdown, where we do not get that data. 119 00:06:12,400 --> 00:06:15,679 Speaker 1: Print how problematic would that be for the feeder reserve? 120 00:06:16,000 --> 00:06:18,040 Speaker 3: Given how balanced right now? 121 00:06:18,080 --> 00:06:20,120 Speaker 5: A lot of people feel the risks are. 122 00:06:22,400 --> 00:06:27,080 Speaker 6: Yeah, well, it's disturbing to not get as much data 123 00:06:27,080 --> 00:06:29,280 Speaker 6: as you can on the state of the economy, and 124 00:06:30,440 --> 00:06:33,760 Speaker 6: so that would be a concern. But the FED has 125 00:06:33,839 --> 00:06:38,719 Speaker 6: managed through that in previous episodes around government shutdown, so 126 00:06:38,800 --> 00:06:42,479 Speaker 6: I think it's manageable. But it's not an ideal situation. 127 00:06:42,960 --> 00:06:45,279 Speaker 1: It feels like a really messy moment because not only 128 00:06:45,400 --> 00:06:48,720 Speaker 1: is there questions about are there questions about the integrity 129 00:06:48,720 --> 00:06:51,200 Speaker 1: of the data when we get the data, which data 130 00:06:51,240 --> 00:06:53,240 Speaker 1: to look at what the data is measuring, but they're 131 00:06:53,320 --> 00:06:56,000 Speaker 1: these sort of sea changes that are overlaid on top 132 00:06:56,040 --> 00:06:59,279 Speaker 1: of it. Whether it's different areas, different income earners that 133 00:06:59,360 --> 00:07:02,400 Speaker 1: are earning a lot and able to spend, lower income 134 00:07:02,520 --> 00:07:05,840 Speaker 1: order workers that are feeling the pinch of inflation and 135 00:07:05,880 --> 00:07:08,960 Speaker 1: not seeing the same types of labor gains. I just 136 00:07:09,080 --> 00:07:12,280 Speaker 1: wonder if the FED should think of a new paradigm, 137 00:07:12,440 --> 00:07:16,880 Speaker 1: a new benchmark to chores to understand exactly what the 138 00:07:16,960 --> 00:07:20,240 Speaker 1: optimal employment level is and how they should weigh these 139 00:07:20,240 --> 00:07:20,800 Speaker 1: two risks. 140 00:07:22,560 --> 00:07:24,640 Speaker 6: Yeah, I do think it's a good time to review 141 00:07:24,720 --> 00:07:29,040 Speaker 6: our models and think about how are we going to 142 00:07:29,080 --> 00:07:32,720 Speaker 6: do this over the next decade. Could we do better 143 00:07:32,760 --> 00:07:36,440 Speaker 6: than where we've been. I think we've been more or 144 00:07:36,520 --> 00:07:40,400 Speaker 6: less preoccupied with the pandemic and the reaction to the 145 00:07:40,400 --> 00:07:44,280 Speaker 6: aftermath of the pandemic, but that's pretty much behind us now, 146 00:07:44,360 --> 00:07:47,480 Speaker 6: So now would be a good moment to really do 147 00:07:47,560 --> 00:07:51,200 Speaker 6: a thorough going review of how the FED operates and 148 00:07:52,120 --> 00:07:55,680 Speaker 6: how the models work. I guess one thing I'd like 149 00:07:55,760 --> 00:07:58,960 Speaker 6: to do is have a what some I'd like to do, 150 00:07:59,000 --> 00:08:01,840 Speaker 6: what other central bank sometimes do, is have a parallel 151 00:08:01,880 --> 00:08:06,920 Speaker 6: process where you have a new model getting ready and 152 00:08:07,360 --> 00:08:10,040 Speaker 6: run that in parallel, and then have a cutover point 153 00:08:10,080 --> 00:08:12,880 Speaker 6: at some point in the future where you actually switch 154 00:08:12,960 --> 00:08:15,720 Speaker 6: to the new model. So I think we could do 155 00:08:15,840 --> 00:08:18,600 Speaker 6: things like that, and that's maybe something to consider at 156 00:08:18,600 --> 00:08:19,120 Speaker 6: this point. 157 00:08:19,360 --> 00:08:21,840 Speaker 4: Governor Lisa Cook is warning her attorneys are warning that 158 00:08:22,200 --> 00:08:25,200 Speaker 4: the removal of her could cause chaos and disruption in 159 00:08:25,280 --> 00:08:28,440 Speaker 4: financial markets. What do you think the reaction will be 160 00:08:28,440 --> 00:08:33,000 Speaker 4: in financial markets if she is removed. 161 00:08:33,679 --> 00:08:37,760 Speaker 6: I think that the court will insist that she gets 162 00:08:37,880 --> 00:08:41,360 Speaker 6: due process for whatever charges have been made against her, 163 00:08:41,440 --> 00:08:46,400 Speaker 6: so that that would prevent political partisans from just making 164 00:08:46,520 --> 00:08:50,240 Speaker 6: charges against members of the committee without having to prove 165 00:08:50,280 --> 00:08:55,560 Speaker 6: those charges and then calling that cause and allowing people 166 00:08:55,600 --> 00:09:01,280 Speaker 6: to be dismissed from the FMC on that basis. I 167 00:09:01,320 --> 00:09:05,959 Speaker 6: think that, you know, the people on the Supreme Court 168 00:09:06,040 --> 00:09:09,840 Speaker 6: will make the justices will probably come down in some 169 00:09:09,960 --> 00:09:13,200 Speaker 6: way to protect that due process clause. 170 00:09:16,040 --> 00:09:19,480 Speaker 2: Stay with us, Malplindex Savana's coming up off to this. 171 00:09:28,640 --> 00:09:32,360 Speaker 1: Bloomberg's Michael McKee joins us from Washington with a very 172 00:09:32,400 --> 00:09:33,160 Speaker 1: special guest. 173 00:09:33,559 --> 00:09:34,959 Speaker 3: Mike, I'll throw it to you. 174 00:09:35,720 --> 00:09:38,000 Speaker 8: Well, thank you very much joining us this morning. Richmond 175 00:09:38,160 --> 00:09:41,920 Speaker 8: fed President Tom Barkin here on Bloomberg television and radio 176 00:09:42,120 --> 00:09:45,080 Speaker 8: worldwide and on radio they can't see it, but on 177 00:09:45,120 --> 00:09:46,840 Speaker 8: television people can see you have a bit of a 178 00:09:46,880 --> 00:09:49,800 Speaker 8: bandage on your head. You just had one of those 179 00:09:50,280 --> 00:09:53,160 Speaker 8: older people's kind of operations. 180 00:09:53,240 --> 00:09:55,040 Speaker 7: Yeah, there's no truth that it was what happened in 181 00:09:55,040 --> 00:09:55,720 Speaker 7: the last meeting. 182 00:09:57,240 --> 00:10:00,200 Speaker 8: All right, Speaking of the last meeting, we came out 183 00:10:00,240 --> 00:10:04,400 Speaker 8: of that believing that, or at least Wall Street, that 184 00:10:04,440 --> 00:10:06,840 Speaker 8: you're going to cut rates again in October and maybe 185 00:10:06,880 --> 00:10:09,079 Speaker 8: in December. But since then we've gotten some numbers that 186 00:10:09,120 --> 00:10:13,120 Speaker 8: show GDP is hotter, inflation is still running hot, and 187 00:10:13,320 --> 00:10:17,200 Speaker 8: the Javas claims numbers suggest companies aren't laying anybody off. 188 00:10:17,360 --> 00:10:21,440 Speaker 8: So should we have less confidence in the path going forward? 189 00:10:21,920 --> 00:10:23,480 Speaker 7: Well, I don't think you can mark to market the 190 00:10:23,520 --> 00:10:26,640 Speaker 7: next meeting every week, even though that's what the markets do. 191 00:10:26,840 --> 00:10:29,600 Speaker 7: I mean, let's see what happens on the employment side. 192 00:10:29,600 --> 00:10:31,960 Speaker 7: We'll get some important data in a couple of minutes 193 00:10:31,960 --> 00:10:34,880 Speaker 7: here on the inflation side, and I think we'll get 194 00:10:34,880 --> 00:10:35,800 Speaker 7: there when we get there. 195 00:10:36,320 --> 00:10:38,800 Speaker 8: Well, the majority seem to believe, at least according to 196 00:10:38,880 --> 00:10:41,599 Speaker 8: what the chairman tells us, that inflation is going to 197 00:10:41,640 --> 00:10:44,960 Speaker 8: be a one time rise in the price level. And 198 00:10:45,200 --> 00:10:47,439 Speaker 8: overnight we got a bunch of new tariffs, as you 199 00:10:47,640 --> 00:10:51,120 Speaker 8: just saw on a lot of different things from the President. 200 00:10:51,520 --> 00:10:54,160 Speaker 8: How much confidence do you have in any kind of 201 00:10:54,160 --> 00:10:55,960 Speaker 8: inflation forecast at this point? 202 00:10:56,559 --> 00:10:59,320 Speaker 7: Not much. I mean, what I definitely see happening is 203 00:10:59,320 --> 00:11:02,400 Speaker 7: there are costing increases that suppliers want to pass on, 204 00:11:02,440 --> 00:11:04,520 Speaker 7: there's no question about that, and tariffs are a big 205 00:11:04,559 --> 00:11:06,200 Speaker 7: part of it. But you could put health insurance in 206 00:11:06,240 --> 00:11:10,120 Speaker 7: other other costs in there too, But those costs are 207 00:11:10,120 --> 00:11:12,160 Speaker 7: going to attempt to get passed on to a consumer 208 00:11:12,200 --> 00:11:16,560 Speaker 7: who's frankly exhausted of price increases. And so you know, 209 00:11:16,559 --> 00:11:19,000 Speaker 7: we're seeing a lot of trading down, you know, branded 210 00:11:19,000 --> 00:11:21,880 Speaker 7: to private label kind of choices, but we're also seeing 211 00:11:21,920 --> 00:11:24,480 Speaker 7: people trade off. And it wouldn't surprise me at all 212 00:11:24,480 --> 00:11:28,040 Speaker 7: if people who are forced to accept certain price increases 213 00:11:28,080 --> 00:11:30,679 Speaker 7: therefore don't buy something else on the other side, and 214 00:11:30,679 --> 00:11:34,400 Speaker 7: that's your classic relative price trade off, and that may 215 00:11:34,520 --> 00:11:37,400 Speaker 7: mean that you won't see as much broad based inflationary 216 00:11:37,400 --> 00:11:41,080 Speaker 7: impact as you'd see. You know, price increases on particular 217 00:11:41,120 --> 00:11:42,040 Speaker 7: items we'll see. 218 00:11:42,200 --> 00:11:45,320 Speaker 8: And yet you get PCE in an hour and basically 219 00:11:45,360 --> 00:11:49,240 Speaker 8: you've already calculated the numbers. Inflation's not moving in the 220 00:11:49,280 --> 00:11:53,199 Speaker 8: right direction. So can you still justify or how long 221 00:11:53,240 --> 00:11:55,440 Speaker 8: can you justify cutting rates in that environment? 222 00:11:55,960 --> 00:11:58,880 Speaker 7: Well, we have inflation moving in the wrong direction. Unfortunately, 223 00:11:58,880 --> 00:12:01,679 Speaker 7: we also have unemployment moving in the wrong direction. And 224 00:12:01,679 --> 00:12:04,240 Speaker 7: that was the backdrop of the last meeting, you have 225 00:12:04,280 --> 00:12:07,880 Speaker 7: to ask yourself, you know, how are the risks still 226 00:12:07,880 --> 00:12:10,920 Speaker 7: the same as you saw them two three, four months earlier, 227 00:12:10,960 --> 00:12:13,600 Speaker 7: when you had unemployment in the right direction and inflation 228 00:12:13,640 --> 00:12:16,959 Speaker 7: in the wrong direction. You know. My overall thesis though, 229 00:12:17,040 --> 00:12:19,240 Speaker 7: is that while it's not, you know, ticking in the 230 00:12:19,280 --> 00:12:23,120 Speaker 7: right place, the downside is relatively limited. I see, the 231 00:12:23,160 --> 00:12:26,960 Speaker 7: inflation downside is limited by this customer pushback that I 232 00:12:27,000 --> 00:12:30,439 Speaker 7: just talked about. Also productivity, which I think is we're 233 00:12:30,440 --> 00:12:33,320 Speaker 7: seeing that at real scale, and so that means there's 234 00:12:33,360 --> 00:12:35,880 Speaker 7: less pressure to pass costs on. And then on the 235 00:12:35,920 --> 00:12:39,280 Speaker 7: unemployment side, obviously, labor supply is dropping at the same 236 00:12:39,280 --> 00:12:41,600 Speaker 7: time as labor demand, and that's keeping the unemployment rate 237 00:12:42,800 --> 00:12:48,320 Speaker 7: relatively balanced. And that's the combination of immigration and ravocation 238 00:12:48,360 --> 00:12:52,000 Speaker 7: of temporary status. Also, you know our generation Mike, which 239 00:12:52,040 --> 00:12:53,960 Speaker 7: is leaving the workforce. I mean, you're seeing a million 240 00:12:54,120 --> 00:12:57,439 Speaker 7: three more people over sixty five out of the workforce 241 00:12:57,800 --> 00:13:01,679 Speaker 7: every year, and so you've got less labor demand, low hiring, 242 00:13:01,679 --> 00:13:04,360 Speaker 7: low firing environment, but you've also got less labor supply, 243 00:13:04,840 --> 00:13:07,679 Speaker 7: and that probably means that the unemployment rate increases are 244 00:13:07,679 --> 00:13:09,240 Speaker 7: going to be relatively limited. 245 00:13:09,040 --> 00:13:12,240 Speaker 8: At least you and I are still employed as of today. 246 00:13:12,600 --> 00:13:13,760 Speaker 7: We'll see how this interview goes. 247 00:13:15,080 --> 00:13:17,800 Speaker 8: You suggested that companies in your district are beginning to 248 00:13:17,800 --> 00:13:19,920 Speaker 8: feel a little bit better, or at least some of 249 00:13:19,960 --> 00:13:24,920 Speaker 8: the uncertainty has come off of their planning and their thinking. 250 00:13:25,559 --> 00:13:27,760 Speaker 8: Are these kind of big new tariffs that we got 251 00:13:27,760 --> 00:13:31,319 Speaker 8: today just going to change that mind has the idea 252 00:13:31,360 --> 00:13:34,680 Speaker 8: that ongoing tariffs and ongoing disruption are going to be 253 00:13:34,760 --> 00:13:38,240 Speaker 8: part of this administration and economy. Is that in their planning. 254 00:13:38,720 --> 00:13:41,800 Speaker 7: Well, I've been describing it as a fog that's created uncertainty, 255 00:13:41,800 --> 00:13:43,880 Speaker 7: and I definitely think in the context of the last 256 00:13:43,920 --> 00:13:47,480 Speaker 7: couple of months, the fog has started to lift. Businesses 257 00:13:47,640 --> 00:13:49,520 Speaker 7: don't know exactly what the tariff will be on their 258 00:13:49,559 --> 00:13:52,320 Speaker 7: sector necessarily, but they kind of have a sense of 259 00:13:52,320 --> 00:13:56,000 Speaker 7: the range. People aren't really following the news every day, yeah, 260 00:13:56,040 --> 00:13:58,120 Speaker 7: the same way they were back in April, and a 261 00:13:58,120 --> 00:14:00,680 Speaker 7: lot of businesses I talk to say, look, I've just 262 00:14:00,720 --> 00:14:03,319 Speaker 7: got to do something. I've got to take action. I 263 00:14:03,360 --> 00:14:05,959 Speaker 7: can't be on the sidelines forever. So I am seeing 264 00:14:06,000 --> 00:14:08,720 Speaker 7: people more in the game now. If you're in a 265 00:14:08,720 --> 00:14:11,760 Speaker 7: particular sector where you see a new announcement. Of course, 266 00:14:11,760 --> 00:14:15,040 Speaker 7: that's going to set you back. And so, you know, 267 00:14:15,200 --> 00:14:17,800 Speaker 7: what I say about businesses in general is not true 268 00:14:17,800 --> 00:14:20,520 Speaker 7: of businesses in every sector. And so there's sectors with 269 00:14:20,560 --> 00:14:23,400 Speaker 7: a lot more clarity and sectors with a lot less clarity. 270 00:14:23,400 --> 00:14:25,200 Speaker 7: And that's I think, just going to be part of 271 00:14:25,200 --> 00:14:25,760 Speaker 7: the game here. 272 00:14:26,680 --> 00:14:29,000 Speaker 8: This morning, we had an investor on who basically said 273 00:14:29,040 --> 00:14:32,760 Speaker 8: markets are rising because of the idea that a year 274 00:14:32,800 --> 00:14:35,440 Speaker 8: from now rates will be substantially lower. Is that the 275 00:14:35,480 --> 00:14:36,880 Speaker 8: right way to look at it? The wrong way to 276 00:14:36,880 --> 00:14:37,280 Speaker 8: look at it? 277 00:14:37,440 --> 00:14:39,120 Speaker 7: Oh, I wouldn't know how to think about, you know, 278 00:14:39,160 --> 00:14:41,840 Speaker 7: how markets ought to rise or not rise. I mean, 279 00:14:41,880 --> 00:14:44,520 Speaker 7: we're very much focused on trying to land the plan 280 00:14:44,640 --> 00:14:49,000 Speaker 7: here and balancing inflation unemployment. As I said, I think 281 00:14:49,040 --> 00:14:51,000 Speaker 7: both of them have ticked in the wrong direction. But 282 00:14:51,040 --> 00:14:53,840 Speaker 7: on the other hand, the downside is limited and we're 283 00:14:53,840 --> 00:14:55,840 Speaker 7: just going to have to, you know, adjust our stance 284 00:14:55,880 --> 00:14:56,640 Speaker 7: as we learn more. 285 00:14:57,000 --> 00:14:59,240 Speaker 8: Well, where's your dot What are you thinking in terms 286 00:14:59,280 --> 00:15:02,520 Speaker 8: of the next couple of meetings? And then for twenty twenty. 287 00:15:02,240 --> 00:15:05,960 Speaker 7: Six, Well, I really like the DOT process for me 288 00:15:06,120 --> 00:15:11,920 Speaker 7: because it's a it forces real integration of your thinking 289 00:15:12,840 --> 00:15:14,960 Speaker 7: in terms of where you think the economy is going 290 00:15:14,960 --> 00:15:17,800 Speaker 7: where you think policy is going. But I don't have 291 00:15:17,840 --> 00:15:20,520 Speaker 7: it as a forecast prediction. It's not, you know, something 292 00:15:20,520 --> 00:15:23,800 Speaker 7: I like to talk about publicly because it adjusts. You know, 293 00:15:23,880 --> 00:15:26,160 Speaker 7: we do mark that dot to market as things go. 294 00:15:26,320 --> 00:15:29,440 Speaker 7: So you know, every meeting for me is one where 295 00:15:29,440 --> 00:15:31,480 Speaker 7: I want to stop and look at the balance between 296 00:15:31,480 --> 00:15:33,360 Speaker 7: how we're doing on the inflation side of the unemployment 297 00:15:33,360 --> 00:15:34,480 Speaker 7: side and make the right decision. 298 00:15:34,920 --> 00:15:37,880 Speaker 8: Well, the story around the fad this week has been, 299 00:15:38,840 --> 00:15:42,040 Speaker 8: shall we say, the debate over where the neutral rate is? 300 00:15:42,680 --> 00:15:45,600 Speaker 8: Where do you think it is? And how fast would 301 00:15:45,640 --> 00:15:46,480 Speaker 8: you want to get there? 302 00:15:47,600 --> 00:15:50,240 Speaker 7: Well, you know, I've seen a lot of the stuff 303 00:15:50,240 --> 00:15:52,520 Speaker 7: that's been in the press, and we're studying that, and 304 00:15:52,760 --> 00:15:55,200 Speaker 7: you know I always try to understand all arguments and 305 00:15:55,560 --> 00:15:58,520 Speaker 7: figure out how to integrate them into my thinking. I'd 306 00:15:58,520 --> 00:16:02,520 Speaker 7: point you to the Richmond Fed neutral rate. The lubric 307 00:16:02,560 --> 00:16:05,440 Speaker 7: mathis model. It takes a lot of signal from what 308 00:16:05,480 --> 00:16:07,480 Speaker 7: you see in the real economy, and in the real 309 00:16:07,520 --> 00:16:10,280 Speaker 7: economy over the last couple of years, what you've seen 310 00:16:10,400 --> 00:16:13,560 Speaker 7: is interest rate. I mean, interest rates go up in 311 00:16:13,640 --> 00:16:17,440 Speaker 7: the economy stay relatively healthy, and so that model doesn't 312 00:16:17,480 --> 00:16:19,680 Speaker 7: take a lot of it doesn't has a relatively high 313 00:16:20,080 --> 00:16:22,720 Speaker 7: neutral rate because it takes a lot of signal from 314 00:16:22,720 --> 00:16:25,720 Speaker 7: the current environment. Now, things can change, but that's where 315 00:16:25,720 --> 00:16:28,080 Speaker 7: the Richmond Fed model is right now, and i'd point 316 00:16:28,080 --> 00:16:31,400 Speaker 7: you to that. What number do they have where you 317 00:16:31,520 --> 00:16:34,320 Speaker 7: it moves around based on what's happening in the economy. 318 00:16:34,640 --> 00:16:38,080 Speaker 8: Well, that gets the next question is Chairman Powell saying 319 00:16:38,120 --> 00:16:41,440 Speaker 8: that you really don't want to target the neutral rate 320 00:16:41,560 --> 00:16:45,560 Speaker 8: because it moves around, also saying that for any voter 321 00:16:45,840 --> 00:16:50,040 Speaker 8: to really move things around, you have to be incredibly persuasive. 322 00:16:50,480 --> 00:16:53,360 Speaker 8: Do you find Steven Myron's arguments persuasive? 323 00:16:53,800 --> 00:16:56,200 Speaker 7: Well, I'm looking forward to digging into them with my team, 324 00:16:56,240 --> 00:16:59,200 Speaker 7: and I like every voice in the room and every 325 00:16:59,320 --> 00:17:00,960 Speaker 7: argument in the room. You know, that's what we do 326 00:17:01,000 --> 00:17:03,360 Speaker 7: as a discipline, as we sit down and try to 327 00:17:03,400 --> 00:17:05,520 Speaker 7: take those arguments apart and figure out which parts of 328 00:17:05,520 --> 00:17:07,880 Speaker 7: them really resonate with the way we think about things 329 00:17:08,160 --> 00:17:10,120 Speaker 7: and which parts don't. We're looking forward to doing that. 330 00:17:10,359 --> 00:17:13,760 Speaker 7: Is now on the neutral rate, you know, in general, 331 00:17:13,840 --> 00:17:16,920 Speaker 7: I just want to agree it's not that useful as 332 00:17:16,960 --> 00:17:21,240 Speaker 7: a operational tool. The models out there, even the one 333 00:17:21,280 --> 00:17:24,040 Speaker 7: that I talked about, have a confidence interval of about 334 00:17:24,040 --> 00:17:28,200 Speaker 7: two hundred basis points, and so you could say it's three, 335 00:17:28,240 --> 00:17:30,200 Speaker 7: which is around the SEP media, and you could say 336 00:17:30,200 --> 00:17:31,600 Speaker 7: it's three and a half or two and a half. 337 00:17:32,280 --> 00:17:34,120 Speaker 7: But if you add a two hundred basis point range 338 00:17:34,160 --> 00:17:36,720 Speaker 7: to it, you say, that's not that helpful for making 339 00:17:36,800 --> 00:17:39,840 Speaker 7: operational decisions on monetary policy. What is more helpful, and 340 00:17:39,840 --> 00:17:42,280 Speaker 7: the reason I favor the model we've got in Richmond 341 00:17:42,880 --> 00:17:45,600 Speaker 7: is how are you seeing the economy react real time 342 00:17:46,080 --> 00:17:48,000 Speaker 7: to the level of rates you've got in the market. 343 00:17:48,040 --> 00:17:50,159 Speaker 7: And if you see it weakening, that's a signal that 344 00:17:50,480 --> 00:17:51,960 Speaker 7: maybe you've got it too high. If you see it 345 00:17:52,000 --> 00:17:53,520 Speaker 7: relatively strong, that's the signal. 346 00:17:53,520 --> 00:17:57,439 Speaker 8: The other way, Logan went to Richmond to announce her 347 00:17:57,600 --> 00:18:00,840 Speaker 8: idea of changing the operational rate for the FED. What 348 00:18:00,880 --> 00:18:01,600 Speaker 8: do you think of that? 349 00:18:02,240 --> 00:18:04,280 Speaker 7: Well, I appreciate Laurie making the trip. We had a 350 00:18:04,280 --> 00:18:07,080 Speaker 7: balance sheet conference yesterday that was very well attended and 351 00:18:07,119 --> 00:18:09,960 Speaker 7: I thought lots of thoughtful papers, including hers, and I 352 00:18:09,960 --> 00:18:13,240 Speaker 7: thought she made an extremely articulate, well reasoned argument, and 353 00:18:13,280 --> 00:18:14,879 Speaker 7: I'm looking forward to digging into it further. 354 00:18:15,280 --> 00:18:18,040 Speaker 8: You anticipate the FED making a change, Oh, I don't know. 355 00:18:19,680 --> 00:18:22,800 Speaker 8: The Supreme Court if it allows the president to fire 356 00:18:22,840 --> 00:18:24,919 Speaker 8: Lisa Cook. What does that mean for the FED? 357 00:18:26,080 --> 00:18:30,600 Speaker 7: Well, the judicial processes and political processes will operate, however 358 00:18:30,640 --> 00:18:33,199 Speaker 7: they operate. What I do every day is show up 359 00:18:33,240 --> 00:18:37,520 Speaker 7: and try to argue for the best monetary policy we 360 00:18:37,560 --> 00:18:39,320 Speaker 7: can and make the case, as you said, in a 361 00:18:39,359 --> 00:18:42,399 Speaker 7: persuasive way to my colleagues. And that's what I'm going 362 00:18:42,480 --> 00:18:43,199 Speaker 7: to continue to do. 363 00:18:43,600 --> 00:18:46,919 Speaker 8: Well, let's leave it with this. What is the best 364 00:18:47,000 --> 00:18:51,840 Speaker 8: monetary policy right now? Continued rate cuts or do you 365 00:18:51,920 --> 00:18:52,280 Speaker 8: not know? 366 00:18:52,480 --> 00:18:54,120 Speaker 7: At this point? I think you have to be very 367 00:18:54,160 --> 00:18:57,560 Speaker 7: adaptive to what's playing out here. The world I've described 368 00:18:57,600 --> 00:19:00,719 Speaker 7: as one where the labor market isning. It's a low 369 00:19:00,840 --> 00:19:04,560 Speaker 7: hiring environment, but the labor supply is also short, and 370 00:19:04,560 --> 00:19:07,000 Speaker 7: you have to be very attentive to that balance because 371 00:19:07,000 --> 00:19:10,000 Speaker 7: it could get out of balance right similar on the 372 00:19:10,040 --> 00:19:13,240 Speaker 7: inflation side, you do have these cost pressures and four 373 00:19:13,280 --> 00:19:15,639 Speaker 7: and a half years of inflation over target. On the 374 00:19:15,680 --> 00:19:18,280 Speaker 7: other hand, you're not seeing that show up and spikes 375 00:19:18,280 --> 00:19:21,200 Speaker 7: and inflation in the real time numbers. We are seeing 376 00:19:21,280 --> 00:19:23,399 Speaker 7: what seems to be a productivity boom, and so I 377 00:19:23,440 --> 00:19:26,440 Speaker 7: think you have to be very attentive to how little 378 00:19:26,480 --> 00:19:29,000 Speaker 7: we know about how each of our mandate variables is 379 00:19:29,040 --> 00:19:31,440 Speaker 7: going to play out, and so, you know, I feel 380 00:19:31,440 --> 00:19:33,240 Speaker 7: like very adaptive is the way to think about it, 381 00:19:33,240 --> 00:19:34,800 Speaker 7: as opposed and that's part of why I'm not being 382 00:19:34,880 --> 00:19:38,600 Speaker 7: prescriptive into well, it's this many cuts over this period 383 00:19:38,640 --> 00:19:41,320 Speaker 7: of time, because I think we're going to see and 384 00:19:41,400 --> 00:19:44,240 Speaker 7: learn a lot as we go here. 385 00:19:45,080 --> 00:19:48,520 Speaker 2: Stay with us mult Bloomberg Savannon's coming up off to this. 386 00:19:57,880 --> 00:20:00,440 Speaker 3: Let's turn batchday's core PCE results. 387 00:20:00,440 --> 00:20:03,720 Speaker 1: We did see that inline reading of zero point two percent, 388 00:20:03,840 --> 00:20:08,159 Speaker 1: as expected. Ryan Wang of HSBC joins us. Now, Ryan, 389 00:20:08,400 --> 00:20:10,399 Speaker 1: thank you so much for being here. It's great to 390 00:20:10,400 --> 00:20:12,320 Speaker 1: have you on a Friday. What was your takeaway from 391 00:20:12,359 --> 00:20:14,080 Speaker 1: the data, Yeah, thanks so much. 392 00:20:13,920 --> 00:20:14,399 Speaker 3: For having me. 393 00:20:14,560 --> 00:20:17,719 Speaker 9: Well, the data was pretty close to expectations. I do 394 00:20:17,800 --> 00:20:20,440 Speaker 9: think still it's important that the year on year rate 395 00:20:20,480 --> 00:20:23,520 Speaker 9: of core inflation is getting ever so closer to that 396 00:20:23,560 --> 00:20:26,200 Speaker 9: three percent level. It actually doesn't matter what measure of 397 00:20:26,240 --> 00:20:29,320 Speaker 9: inflation you look at, headline CPI, core CPI, either of 398 00:20:29,359 --> 00:20:31,959 Speaker 9: the PC measures, they're all running close to three percent. 399 00:20:32,040 --> 00:20:33,399 Speaker 9: That's not as high as it was a couple of 400 00:20:33,480 --> 00:20:35,960 Speaker 9: years ago, but it's still, of course significantly higher than 401 00:20:35,960 --> 00:20:37,080 Speaker 9: the FEDS two percent target. 402 00:20:37,200 --> 00:20:39,080 Speaker 1: So we being gas lit when people say it's just 403 00:20:39,119 --> 00:20:40,840 Speaker 1: going to keep its downward trajectory. 404 00:20:41,000 --> 00:20:43,080 Speaker 3: Is this the real reality that we're at a three. 405 00:20:42,920 --> 00:20:46,480 Speaker 1: Percent inflation level and that's probably where it's going to continue, 406 00:20:46,720 --> 00:20:50,240 Speaker 1: even as we talk about some sort of asymptotic progression 407 00:20:50,640 --> 00:20:53,040 Speaker 1: to two percent over the next hundred years. 408 00:20:53,960 --> 00:20:56,400 Speaker 7: Yeah, well, you know, I mean that's a very good point. 409 00:20:56,400 --> 00:20:59,360 Speaker 9: And actually our own projections do have us staying closer 410 00:20:59,400 --> 00:21:02,200 Speaker 9: to three percent than getting down to two percent even 411 00:21:02,200 --> 00:21:04,040 Speaker 9: in the next twelve eighteen months. 412 00:21:04,119 --> 00:21:07,040 Speaker 7: I think that's very much the case. We've heard clearly from. 413 00:21:07,000 --> 00:21:09,440 Speaker 9: FED chair Drone pal that okay, you can call tariffs 414 00:21:09,440 --> 00:21:11,840 Speaker 9: a one time effect, but that's a one time effect 415 00:21:11,880 --> 00:21:14,760 Speaker 9: that can last several quarters, well into next year, maybe 416 00:21:14,760 --> 00:21:17,360 Speaker 9: even beyond, as the full effect of those tariffs comes through, 417 00:21:17,840 --> 00:21:19,920 Speaker 9: and you know, at that point we have to say, well, 418 00:21:19,920 --> 00:21:22,080 Speaker 9: what is that going to do to inflation expectations along 419 00:21:22,119 --> 00:21:22,400 Speaker 9: the way. 420 00:21:22,600 --> 00:21:25,080 Speaker 4: So is the FED basically just accepted three percent inflation 421 00:21:25,160 --> 00:21:27,080 Speaker 4: without coming out and saying that's our new target. 422 00:21:27,080 --> 00:21:30,680 Speaker 5: To Lisa's point, well, they move the goalpost on us. 423 00:21:30,800 --> 00:21:32,560 Speaker 9: I think this is why you see the divide on 424 00:21:33,040 --> 00:21:36,679 Speaker 9: the Fed, because clearly inflation is running slower than it 425 00:21:36,720 --> 00:21:38,720 Speaker 9: was a few years ago, yet it never reached that 426 00:21:38,760 --> 00:21:41,480 Speaker 9: two percent level. So you're never going to hear any 427 00:21:41,480 --> 00:21:43,560 Speaker 9: of the FED policy makers say that, Okay, you know, 428 00:21:43,640 --> 00:21:45,399 Speaker 9: they just reaffirmed the two percent target. 429 00:21:45,440 --> 00:21:47,639 Speaker 7: They're not going to say that three percent is acceptable. 430 00:21:48,119 --> 00:21:50,800 Speaker 9: But simply put, I do think it's more likely that 431 00:21:50,840 --> 00:21:53,119 Speaker 9: we'll be closer to that higher number through the end 432 00:21:53,119 --> 00:21:53,640 Speaker 9: of next year. 433 00:21:53,760 --> 00:21:55,840 Speaker 5: What do you make of the tariff impact right now? 434 00:21:55,840 --> 00:21:58,320 Speaker 4: And I say this on the heels of last night, 435 00:21:58,520 --> 00:22:01,359 Speaker 4: still trying to digest exactly what is going to be 436 00:22:01,440 --> 00:22:09,119 Speaker 4: tariff in terms of kitchen cabinets, bathroom vanities, furniture, upholstery, furniture, 437 00:22:09,640 --> 00:22:13,040 Speaker 4: all these new sectoral tariffs of Trump administration announced. 438 00:22:13,640 --> 00:22:17,200 Speaker 9: Yeah, well we're entering Act two of tariffs, right. I mean, 439 00:22:17,240 --> 00:22:19,240 Speaker 9: all the focus up into this point has mostly been 440 00:22:19,280 --> 00:22:23,960 Speaker 9: on these reciprocal tariffs, but those have had significant, significant 441 00:22:24,000 --> 00:22:27,280 Speaker 9: sectoral exemptions, and now those exemptions are being filled in 442 00:22:27,440 --> 00:22:30,199 Speaker 9: as we get these proposed tariffs on these products. 443 00:22:30,200 --> 00:22:30,680 Speaker 10: So that's just. 444 00:22:30,640 --> 00:22:33,679 Speaker 9: Another reason why, you know, the full story of the 445 00:22:33,680 --> 00:22:36,840 Speaker 9: effect on consumer prices has yet to be felt. And yeah, 446 00:22:36,880 --> 00:22:39,000 Speaker 9: we're going to be watching really in the rest of 447 00:22:39,040 --> 00:22:40,879 Speaker 9: the year. It's going to be those sectoral tariffs that 448 00:22:40,920 --> 00:22:42,280 Speaker 9: I think take most of the air plug. 449 00:22:42,680 --> 00:22:45,439 Speaker 1: Just to wrap up a week where we've gotten a 450 00:22:45,440 --> 00:22:48,200 Speaker 1: lot of commentary, a lot of bullishness on the economy, 451 00:22:48,320 --> 00:22:50,199 Speaker 1: on the idea of a FED that was going to 452 00:22:50,200 --> 00:22:53,360 Speaker 1: be cutting rates even into strength. I'm struck by Wiscott 453 00:22:53,400 --> 00:22:55,760 Speaker 1: KROHNERD of Citygroup had to say when he was talking 454 00:22:55,760 --> 00:22:58,320 Speaker 1: about how it feels like they're two different markets. It 455 00:22:58,359 --> 00:23:00,960 Speaker 1: feels like they're those that are touched by AI and 456 00:23:01,000 --> 00:23:03,439 Speaker 1: the investment cycle that we've seen, and it feels like 457 00:23:03,520 --> 00:23:07,040 Speaker 1: there's everything else which hasn't necessarily been as leverage to 458 00:23:07,240 --> 00:23:09,399 Speaker 1: the gains that we've seen in markets, to the gains 459 00:23:09,400 --> 00:23:12,199 Speaker 1: that we've seen from AI and the other types of 460 00:23:12,359 --> 00:23:13,280 Speaker 1: rising tides. 461 00:23:13,400 --> 00:23:15,160 Speaker 3: And I just wonder how when you. 462 00:23:15,080 --> 00:23:17,919 Speaker 1: Look at this aggregate data, you can parse that out 463 00:23:18,000 --> 00:23:21,080 Speaker 1: and understand why some people might be feeling really rotten 464 00:23:21,119 --> 00:23:23,600 Speaker 1: about the pace of inflation and the state of the 465 00:23:23,680 --> 00:23:26,480 Speaker 1: labor market while other people feel pretty good and are 466 00:23:26,480 --> 00:23:27,560 Speaker 1: flying around the world. 467 00:23:28,240 --> 00:23:30,440 Speaker 9: Yeah, well, you know, I would say the macroeconomic data 468 00:23:30,560 --> 00:23:33,879 Speaker 9: do actually bear out some of this characterization that you 469 00:23:34,040 --> 00:23:36,240 Speaker 9: just said, because really since the start of this year 470 00:23:36,600 --> 00:23:40,000 Speaker 9: economic growth we just got new GDP numbers will probably 471 00:23:40,200 --> 00:23:43,600 Speaker 9: be below two percent when this year is done, but 472 00:23:43,640 --> 00:23:46,679 Speaker 9: we won't necessarily be below one percent. So despite all 473 00:23:46,720 --> 00:23:49,600 Speaker 9: the focus on the weaker employment growth numbers that we've 474 00:23:49,600 --> 00:23:52,600 Speaker 9: seen come through in recent months, actually the expenditure data, 475 00:23:52,640 --> 00:23:56,320 Speaker 9: the GDP data, the output data have held up reasonably well, 476 00:23:56,359 --> 00:23:58,919 Speaker 9: and I think that speaks to this split where, of 477 00:23:58,920 --> 00:24:02,080 Speaker 9: course those that are seeing that hiring activity is slower, 478 00:24:02,119 --> 00:24:05,119 Speaker 9: those trying to get a job are really being impacted 479 00:24:05,119 --> 00:24:09,439 Speaker 9: by that softer job market prices aren't any lower regardless 480 00:24:09,440 --> 00:24:11,240 Speaker 9: of how you're faring in the labor market, right, So 481 00:24:11,320 --> 00:24:13,560 Speaker 9: again that speaks of that inflation. But at the same time, 482 00:24:13,800 --> 00:24:17,240 Speaker 9: company sales haven't necessarily weakened in the way that most 483 00:24:17,280 --> 00:24:18,720 Speaker 9: pessimistic views would have thought. 484 00:24:18,560 --> 00:24:19,200 Speaker 7: A few months ago. 485 00:24:22,240 --> 00:24:25,880 Speaker 2: Stay with us more Blindberg. Savannah's coming up after. 486 00:24:25,600 --> 00:24:37,840 Speaker 1: This a really important conversation. Let's get right to it. 487 00:24:37,880 --> 00:24:41,880 Speaker 1: Bloomberg News editor in chief John Mickelthwaite is standing by 488 00:24:42,119 --> 00:24:43,840 Speaker 1: with a very special guest. 489 00:24:43,920 --> 00:24:44,880 Speaker 3: John, I'll send it to you. 490 00:24:45,280 --> 00:24:48,480 Speaker 11: Lisa, Thank you very much. We have Kiriako Smith's attackers. 491 00:24:48,880 --> 00:24:52,399 Speaker 11: Prime Minister of Greece here with us, we jumped straight 492 00:24:52,440 --> 00:24:56,360 Speaker 11: in a lot of movement on Ukraine this week. You've 493 00:24:56,400 --> 00:24:59,000 Speaker 11: had Trump saying stuff about it. You have various NATO 494 00:24:59,080 --> 00:25:02,720 Speaker 11: allies getting crossed about the fighter jets in curtaining into 495 00:25:03,000 --> 00:25:05,840 Speaker 11: their territory and warning Russia about it. You even had 496 00:25:05,840 --> 00:25:08,920 Speaker 11: Germany coming forward and saying, let's use the one hundred 497 00:25:08,960 --> 00:25:14,400 Speaker 11: and forty billion dollar billion euro frozen assets to help Ukraine. Now, 498 00:25:14,480 --> 00:25:16,320 Speaker 11: you have always been a kind of champion of this 499 00:25:16,440 --> 00:25:21,280 Speaker 11: idea of having a common European fund for defense, and 500 00:25:21,320 --> 00:25:23,679 Speaker 11: you've always had pushback from the Germans on that. Do 501 00:25:23,720 --> 00:25:26,760 Speaker 11: you think now it stands the chance of going through? 502 00:25:27,119 --> 00:25:29,760 Speaker 10: Well, thanks for having me, John. I've been advocating for 503 00:25:29,840 --> 00:25:33,240 Speaker 10: quite some time about the need to create some joint 504 00:25:33,280 --> 00:25:36,960 Speaker 10: European borrowing facility to cover what I consider the quintessential 505 00:25:37,000 --> 00:25:40,159 Speaker 10: European public good, which is common European defense, and I 506 00:25:40,200 --> 00:25:42,680 Speaker 10: do sense that there is much more moventum now marks 507 00:25:42,720 --> 00:25:46,160 Speaker 10: my colleagues. Some of the countries that were inherently against 508 00:25:46,200 --> 00:25:49,960 Speaker 10: the idea of additional further joint borrowing have changed their mind, 509 00:25:50,520 --> 00:25:54,520 Speaker 10: and I'm pretty sure that Germany will eventually also agree 510 00:25:54,520 --> 00:25:57,600 Speaker 10: to this necessity, and we need to make sure that 511 00:25:57,640 --> 00:26:02,080 Speaker 10: this facility finances projects of common interest. And I would 512 00:26:02,119 --> 00:26:06,320 Speaker 10: put missile defense, drone defense right up there in terms 513 00:26:06,359 --> 00:26:09,879 Speaker 10: of our collective European priorities. So I would expect some 514 00:26:09,960 --> 00:26:13,119 Speaker 10: movement soon. We have two European councils and hopefully we 515 00:26:13,119 --> 00:26:14,439 Speaker 10: can make progress towards that direction. 516 00:26:15,520 --> 00:26:17,359 Speaker 11: Just looking at the economy at the moment, the Greek 517 00:26:17,359 --> 00:26:19,320 Speaker 11: economy has been doing very well. Is no doubt you 518 00:26:19,359 --> 00:26:22,760 Speaker 11: will tell me. But in twenty twenty four you forecast 519 00:26:23,359 --> 00:26:26,040 Speaker 11: a deficit and then you ended up with a surplus. 520 00:26:26,480 --> 00:26:29,879 Speaker 11: And this year you're again forecasting a deficit. But it's 521 00:26:29,960 --> 00:26:31,760 Speaker 11: quite close to the end of the year. I wondered 522 00:26:31,800 --> 00:26:34,680 Speaker 11: if now you're close enough to say this year you 523 00:26:34,840 --> 00:26:35,960 Speaker 11: end up with a surplus again. 524 00:26:36,000 --> 00:26:38,680 Speaker 10: For the more we've been having, we've been producing significant 525 00:26:38,720 --> 00:26:41,720 Speaker 10: primary surpluses, and I think it's quite possible that we 526 00:26:41,760 --> 00:26:43,680 Speaker 10: may have a real surplus again this year. This is 527 00:26:43,720 --> 00:26:47,359 Speaker 10: a foundation of our economic policy. We've suffered a lot 528 00:26:48,320 --> 00:26:50,639 Speaker 10: from not being fiscally disciplined. This is not going to 529 00:26:50,680 --> 00:26:52,639 Speaker 10: happen again. But I think the big success of our 530 00:26:52,680 --> 00:26:55,480 Speaker 10: policy is to ensure that the economy is growing at 531 00:26:55,520 --> 00:26:57,840 Speaker 10: the same time that to create jobs. We've created five 532 00:26:57,880 --> 00:27:00,480 Speaker 10: hundred thousand jobs since I became Prime Minister. And the 533 00:27:00,520 --> 00:27:03,560 Speaker 10: real goal is to ensure that this collective wealth is 534 00:27:03,640 --> 00:27:06,600 Speaker 10: spread equally. So my focus now is to use whatever 535 00:27:06,600 --> 00:27:09,600 Speaker 10: physical space I can create through growth and tackling tax 536 00:27:09,600 --> 00:27:12,280 Speaker 10: evasion to cut taxes for the middle class. It's important 537 00:27:12,280 --> 00:27:15,199 Speaker 10: for me that this discussion is not just limited to 538 00:27:15,760 --> 00:27:18,360 Speaker 10: the economists saying good things about the economy. I want 539 00:27:18,400 --> 00:27:22,280 Speaker 10: the average Greek to really feel a tangible benefit from 540 00:27:22,320 --> 00:27:26,080 Speaker 10: this growth story. And starting January first, when these tax 541 00:27:26,119 --> 00:27:28,600 Speaker 10: cuts will kick in, they will see a real increase 542 00:27:28,640 --> 00:27:31,080 Speaker 10: in their paychecks. And this is very, very important to me. 543 00:27:31,840 --> 00:27:34,359 Speaker 11: It just come back to the average Greek in a second. 544 00:27:34,359 --> 00:27:37,560 Speaker 11: You just mentioned fiscal discipline. I mean you look at 545 00:27:37,560 --> 00:27:40,560 Speaker 11: the core of Europe. I sat down with Primisus Sanchez 546 00:27:40,560 --> 00:27:44,880 Speaker 11: of Spain the other day as well. Something dramatic has changed. 547 00:27:44,920 --> 00:27:48,359 Speaker 11: You know, Greece, Spain, You're the country is growing really fast. 548 00:27:48,840 --> 00:27:51,359 Speaker 11: In the middle You've got countries in much greater trouble. 549 00:27:51,480 --> 00:27:54,600 Speaker 11: You look at France, You're growing cut me now over 550 00:27:54,640 --> 00:27:57,479 Speaker 11: two percent. They're struggling to get to half a percent 551 00:27:57,520 --> 00:28:00,800 Speaker 11: of growth that death is ballooning. We now in a 552 00:28:00,840 --> 00:28:05,199 Speaker 11: situation where you would worry about financial contagion from France. 553 00:28:05,840 --> 00:28:09,360 Speaker 10: This seemed inconceivable a few years ago. What I can 554 00:28:09,440 --> 00:28:12,280 Speaker 10: tell you is that eventually no one can beat the markets. 555 00:28:12,320 --> 00:28:16,919 Speaker 10: We know this very well, and I do think that 556 00:28:16,960 --> 00:28:19,840 Speaker 10: at some point governments have to take difficult decision to 557 00:28:19,840 --> 00:28:22,520 Speaker 10: put our fiscal house in order. We've done that. Once 558 00:28:22,560 --> 00:28:25,399 Speaker 10: you do it, then you can enter into this virtures 559 00:28:26,240 --> 00:28:29,119 Speaker 10: cycle where you can actually grow the economy, you can 560 00:28:29,160 --> 00:28:34,880 Speaker 10: cut taxes, you can support income through targeted measures. We're there, 561 00:28:34,880 --> 00:28:38,680 Speaker 10: but we also went through very very difficult periods and 562 00:28:39,040 --> 00:28:43,600 Speaker 10: very painful reforms. So I do hope that the political 563 00:28:43,600 --> 00:28:47,760 Speaker 10: situation in France somehow as stabilizes. It is important that 564 00:28:47,800 --> 00:28:50,120 Speaker 10: the core of Europe, you know, France, Germany, that these 565 00:28:50,120 --> 00:28:54,680 Speaker 10: economies are doing well. Look at I mean, we will 566 00:28:54,680 --> 00:28:58,040 Speaker 10: receive thirty six million tourists this Yere our tourism industry 567 00:28:58,720 --> 00:29:01,760 Speaker 10: is booming. But the far core markets don't do well, 568 00:29:01,880 --> 00:29:04,280 Speaker 10: we will also at some point indirectly be affected. 569 00:29:04,440 --> 00:29:07,640 Speaker 11: You're famously polite man, and I know that Sheldenfreuder is 570 00:29:07,680 --> 00:29:09,600 Speaker 11: not a Greek word, it's a German one. But there 571 00:29:09,640 --> 00:29:11,640 Speaker 11: must be some element in Greece of looking at these 572 00:29:11,680 --> 00:29:15,920 Speaker 11: people who nearly push Greece out and thinking, well things 573 00:29:15,920 --> 00:29:16,520 Speaker 11: have changed. 574 00:29:16,920 --> 00:29:19,760 Speaker 10: Well, things have changed. But at the end of the day, 575 00:29:20,840 --> 00:29:24,160 Speaker 10: this is not about you know, pointing fingers or about 576 00:29:24,200 --> 00:29:27,040 Speaker 10: saying that you were wrong and we were right. It's 577 00:29:27,040 --> 00:29:30,720 Speaker 10: about ensuring that Europe collectively grows. I'm disappointed by the 578 00:29:30,760 --> 00:29:32,600 Speaker 10: fact that when I look at the drug report, we 579 00:29:32,640 --> 00:29:35,360 Speaker 10: have not made significant progress, and I think it's time 580 00:29:35,440 --> 00:29:38,280 Speaker 10: that you know, you know, in Europe, we were usually 581 00:29:38,280 --> 00:29:40,360 Speaker 10: were two hats at the Council. We were our European 582 00:29:40,400 --> 00:29:42,920 Speaker 10: hat and we were our national hat. And it seems 583 00:29:42,920 --> 00:29:45,520 Speaker 10: to me that for some countries the European hats seems 584 00:29:45,520 --> 00:29:47,880 Speaker 10: to be shrinking. So we have to look at the 585 00:29:47,920 --> 00:29:50,920 Speaker 10: big picture. Some of the decisions that we need to 586 00:29:50,960 --> 00:29:55,760 Speaker 10: take require more funding, it's pretty clear, and we need 587 00:29:55,800 --> 00:29:59,600 Speaker 10: to put our European interest, not necessarily ahead of our 588 00:29:59,640 --> 00:30:02,880 Speaker 10: national interest, but to realize that some difficult decisions need 589 00:30:02,920 --> 00:30:04,280 Speaker 10: to be taken at the European level. 590 00:30:04,800 --> 00:30:07,200 Speaker 11: One of the areas where Europe has been pretty useless 591 00:30:07,200 --> 00:30:10,080 Speaker 11: at doing these things is banking, the Banking Union and 592 00:30:10,080 --> 00:30:12,959 Speaker 11: things like that. At least unique Credit has built up 593 00:30:12,960 --> 00:30:16,640 Speaker 11: a stake in Alpha Bank, which you were famously much 594 00:30:16,640 --> 00:30:19,200 Speaker 11: more relaxed about than the Germans were they when they 595 00:30:19,200 --> 00:30:22,680 Speaker 11: built up one in Commets Bank. Would you be prepared 596 00:30:22,720 --> 00:30:25,080 Speaker 11: if they were to take over Alpha Bank? Would you 597 00:30:25,120 --> 00:30:25,960 Speaker 11: be relaxed about that? 598 00:30:27,520 --> 00:30:33,920 Speaker 10: If? If we really mean what we say about creating 599 00:30:33,920 --> 00:30:35,880 Speaker 10: scale in banking Union, we should be open to these 600 00:30:35,920 --> 00:30:40,000 Speaker 10: types of transactions. I see value when an important foreign 601 00:30:40,080 --> 00:30:41,960 Speaker 10: bank wants to acquire a stake in a Greek bank. 602 00:30:42,120 --> 00:30:44,680 Speaker 10: It means they believe in the potential of the Greek economy, 603 00:30:45,160 --> 00:30:47,600 Speaker 10: and it means that you know the bank could possibly 604 00:30:47,640 --> 00:30:50,720 Speaker 10: do better. I'm pushing my banks to extend more credit 605 00:30:50,800 --> 00:30:54,000 Speaker 10: to mortgages, to small medium sized enterprises. The stronger their 606 00:30:54,080 --> 00:30:56,080 Speaker 10: balance sheet is, the more likely it is that they 607 00:30:56,080 --> 00:30:58,920 Speaker 10: will do so. Yes, in principle, we are in favor 608 00:30:58,960 --> 00:31:02,960 Speaker 10: of these transactions, and I'm happy that Uncredit has decided 609 00:31:03,200 --> 00:31:04,680 Speaker 10: to look at one of our Greek banks and take 610 00:31:04,680 --> 00:31:05,440 Speaker 10: a significant stake. 611 00:31:05,920 --> 00:31:07,760 Speaker 11: Isn't that But as you said earlier, that's the kind 612 00:31:07,800 --> 00:31:09,920 Speaker 11: of problem with Europe at the moment. Most people are 613 00:31:09,960 --> 00:31:14,440 Speaker 11: taking these decisions on suppose purely nationalist or that kind 614 00:31:14,440 --> 00:31:16,680 Speaker 11: of level. You look around Europe at the moment, the 615 00:31:16,680 --> 00:31:20,320 Speaker 11: ability to create common things like a banking union. That's 616 00:31:20,360 --> 00:31:22,680 Speaker 11: the real problem at the moment. And do you think 617 00:31:22,720 --> 00:31:25,760 Speaker 11: that is something coming from Brussels or from the national capital. 618 00:31:25,840 --> 00:31:28,120 Speaker 10: I think most of the important if you want to 619 00:31:28,200 --> 00:31:30,680 Speaker 10: understand what's happening in Brussels, look at the national capitals. 620 00:31:31,040 --> 00:31:35,560 Speaker 10: I think the Council has become more complicated in terms 621 00:31:35,600 --> 00:31:38,560 Speaker 10: of taking decisions. But on the other hand, you know, 622 00:31:38,560 --> 00:31:41,480 Speaker 10: in the past we took a moment of decision when 623 00:31:41,520 --> 00:31:46,520 Speaker 10: we had to address COVID is Ukraine, a geopolitical COVID moment. 624 00:31:46,760 --> 00:31:50,400 Speaker 10: I would argue to a certain extent, yes, and I 625 00:31:50,440 --> 00:31:53,640 Speaker 10: remember the COVID fund negotiations. There are a lot of countries, 626 00:31:53,720 --> 00:31:56,680 Speaker 10: including Germany, they said no until they said yes. So 627 00:31:56,800 --> 00:31:58,880 Speaker 10: when it comes to defense, which as I said, is 628 00:31:58,880 --> 00:32:03,440 Speaker 10: the ultimate public good, I do expect that we will 629 00:32:03,480 --> 00:32:10,720 Speaker 10: be able to take important decisions to target specific European projects, 630 00:32:10,760 --> 00:32:14,560 Speaker 10: which will then again require European collaboration. 631 00:32:15,680 --> 00:32:17,560 Speaker 11: You talked a bit earlier about the average Greek I 632 00:32:17,600 --> 00:32:20,880 Speaker 11: was looking at the numbers. Greek GDP has come soaring back, 633 00:32:20,920 --> 00:32:23,520 Speaker 11: but it's still roughly the same level in nominal terms. 634 00:32:23,520 --> 00:32:26,280 Speaker 11: As it was before the crisis, a bit lower in 635 00:32:26,320 --> 00:32:29,720 Speaker 11: real terms? Is that still do you think Greece has 636 00:32:29,760 --> 00:32:32,360 Speaker 11: now been through that phase and it's now the terms 637 00:32:32,400 --> 00:32:34,200 Speaker 11: of looking forward to different form of Greece. 638 00:32:35,840 --> 00:32:38,560 Speaker 10: We have clearly turned the page. But as I said, 639 00:32:38,600 --> 00:32:40,160 Speaker 10: if we want to converge with Europe, we need to 640 00:32:40,160 --> 00:32:42,560 Speaker 10: grow faster than Europe. We've been doing this, but this 641 00:32:42,640 --> 00:32:45,360 Speaker 10: growth needs to be qualitatively different. We needs to focus 642 00:32:45,400 --> 00:32:50,120 Speaker 10: on investment, on innovation, on experts, on creating really valuable jobs. 643 00:32:50,240 --> 00:32:53,760 Speaker 10: And my main goal is to ensure that wages wages increase, 644 00:32:53,800 --> 00:32:57,040 Speaker 10: that we have wage convergence with Europe, and that we 645 00:32:57,120 --> 00:33:00,160 Speaker 10: support disposable income at a time when all europe and 646 00:33:00,880 --> 00:33:03,200 Speaker 10: economies are faced with the cost of living crisis. I mean, 647 00:33:03,880 --> 00:33:07,959 Speaker 10: and the only way to address this is to ensure 648 00:33:08,520 --> 00:33:11,560 Speaker 10: that we support disposable income. But we have to do 649 00:33:11,600 --> 00:33:15,880 Speaker 10: it in a fiscally sustainable way. That's what we have 650 00:33:15,960 --> 00:33:18,360 Speaker 10: done so far. We will continue doing it. I do 651 00:33:18,440 --> 00:33:22,320 Speaker 10: expect that next year we will again perform very well. 652 00:33:23,080 --> 00:33:25,360 Speaker 10: So I tell my fellow Greek citizens that I think 653 00:33:25,360 --> 00:33:27,080 Speaker 10: the best days are ahead of us and that this 654 00:33:27,160 --> 00:33:30,240 Speaker 10: is a policy that will deliver long term benefits to them. 655 00:33:30,480 --> 00:33:32,520 Speaker 11: You have elections coming up in twenty twenty seven. The 656 00:33:32,560 --> 00:33:34,800 Speaker 11: polls at the moment, so you might have to go 657 00:33:34,840 --> 00:33:37,920 Speaker 11: into coalition with people you've won two terms. I think 658 00:33:37,960 --> 00:33:40,080 Speaker 11: you'd be the first person to get a third term 659 00:33:40,080 --> 00:33:43,920 Speaker 11: if you did. Would you be prepared to go into coalition? 660 00:33:43,320 --> 00:33:47,000 Speaker 10: Well, elections are eighteen months ahead. Eighteen months out, we 661 00:33:47,040 --> 00:33:49,520 Speaker 10: are way ahead in the polls. Our goal is to 662 00:33:49,520 --> 00:33:53,000 Speaker 10: win an absolute majority. We've done it twice. There were 663 00:33:53,000 --> 00:33:56,400 Speaker 10: people doubting that we would succeed before the previous elections. 664 00:33:56,760 --> 00:34:01,080 Speaker 10: I think that if we deliver on our commitments, and 665 00:34:01,120 --> 00:34:04,320 Speaker 10: if the economy continues growing, if we work hard to 666 00:34:04,360 --> 00:34:06,680 Speaker 10: improve the National health service, these are the priorities I 667 00:34:06,720 --> 00:34:08,600 Speaker 10: set out in twenty twenty three. We have a reasonable 668 00:34:08,680 --> 00:34:11,520 Speaker 10: chance to win an absolute majority. But if the quick 669 00:34:11,520 --> 00:34:17,040 Speaker 10: people decide otherwise, it's eventually we have to respect the decision. 670 00:34:18,600 --> 00:34:22,120 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 671 00:34:22,200 --> 00:34:25,279 Speaker 2: in markets, economics, an gio politics. You can watch the 672 00:34:25,280 --> 00:34:28,279 Speaker 2: show live on Bloomberg TV weekday mornings from six am 673 00:34:28,440 --> 00:34:31,600 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, 674 00:34:31,880 --> 00:34:34,719 Speaker 2: Spotify or anywhere else you listen, and as always on 675 00:34:34,719 --> 00:34:37,400 Speaker 2: the Bloomberg Terminal and the Bloomberg Business out