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
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
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.
Speaker 1: That core PCEE figure which came in banging line zero
Speaker 1: point two percent increase following a zero point three percent
Speaker 1: the prior month, it was revised downward for the prior
Speaker 1: month zero point two percent personal income and personal spending.
Speaker 1: That's where it gets pretty interesting to me, the idea
Speaker 1: that you get to get an upside surprise on both
Speaker 1: particularly personal spending zero point six percent increase versus a
Speaker 1: zero point five percent increase and real personal spending increasing
Speaker 1: zero point four percent versus a zero point two percent expected,
Speaker 1: and it was actually revised upward in the prior reading
Speaker 1: as well.
Speaker 3: I am Marie.
Speaker 1: It seems like, people keep spending and that has been
Speaker 1: the engine that keeps on giving to the American economy.
Speaker 4: People keep spending. Jobless claims yesterday very strong number, and
Speaker 4: now when it comes to PC bang in line. So
Speaker 4: what is there actually look at the data like this,
Speaker 4: what is there actually to worry about? When I do
Speaker 4: see spending though increasing, I do wonder how many people
Speaker 4: are like members of my family who went out concerned
Speaker 4: about the tariffs and are continued to spend now, and
Speaker 4: they are concerned about the holidays coming up, and they
Speaker 4: don't want the prices to go up, so they're willing
Speaker 4: to go out and spend a ton.
Speaker 5: Now, I guess it remains to be seen.
Speaker 1: Yeah, that's one reason why people are listening to earnings.
Speaker 1: Former Saint Louis FED President Jim Bullard joins US now
Speaker 1: and I am so excited to speak with you, Jim,
Speaker 1: because right now I'm looking at all of this data
Speaker 1: that suggests a really strong US market, a really strong
Speaker 1: US economy, people continuing to be able to spend, and
Speaker 1: their incomes rising.
Speaker 3: What about this picture.
Speaker 1: Makes you think that the FED needs to be cutting
Speaker 1: rates more aggressively.
Speaker 6: Yeah, thanks for having me. So these numbers look to
Speaker 6: me like they're consistent with what markets were expecting. I
Speaker 6: think markets have a reacceleration hypothesis and I'm sympathetic with that.
Speaker 6: So I do think the economy will be in pretty
Speaker 6: good shape for the rest of this year and into
Speaker 6: twenty twenty six as some of the new administration policies
Speaker 6: come online. On the inflation side, there was no surprise here,
Speaker 6: so that seems to be very consistent with the committee's
Speaker 6: story that they'll be able to look through inflation and
Speaker 6: then expect it to.
Speaker 7: Fall in twenty twenty six.
Speaker 6: So I think this leaves everything on track to have
Speaker 6: further rate cuts during the next two meetings of the
Speaker 6: f HOMC.
Speaker 1: Just put this new perspective, this is what the market
Speaker 1: was expecting, and so there is this rally across the
Speaker 1: board as people say, Okay, the Fed can keep cutting
Speaker 1: even though you are seeing the strength and potentially reacceleration Jim,
Speaker 1: as you are putting yet year over year core PCE,
Speaker 1: that key metric that the FED looks at, is it
Speaker 1: two point nine percent.
Speaker 3: It's not climbing, it.
Speaker 1: Might even be going down to two point eight percent,
Speaker 1: but it's still almost a full percentage point above two percent,
Speaker 1: Is there a feeling that it just isn't really important
Speaker 1: to get it down to two percent that quickly, and
Speaker 1: so you can look through that.
Speaker 6: No, they do want to get it down to two
Speaker 6: percent over the next two years. So you want to
Speaker 6: ask them todian to two percent, I would say, not
Speaker 6: go very quickly to two percent or go under an overshoot.
Speaker 6: So I think you know, usually the way this is
Speaker 6: thought about is that you want to gradually bring it down.
Speaker 6: I think the community's on track to do that, and
Speaker 6: so that part looks looks pretty good.
Speaker 5: So the committee almost looking through inflation.
Speaker 4: Have they been given the green light by the FED
Speaker 4: chair to look through if there's going to be any
Speaker 4: hot print prints upcoming when it comes to inflation.
Speaker 6: Yeah, I do think that the chair at Jackson Hall
Speaker 6: very much signed on to the idea that any inflationary
Speaker 6: effects coming through the tariff channel would be smaller than
Speaker 6: previously anticipated and they're coming later than previously anticipated. And
Speaker 6: so because of that is basically a look through. So
Speaker 6: even though you say, like President Barkin said, well it's
Speaker 6: not getting any better for those that thought there was
Speaker 6: an important teariff component to inflation, that part should go
Speaker 6: away since that's a one time effect, and so that's
Speaker 6: giving the committee confidence that they can go ahead and
Speaker 6: get closer to neutral. They'll still have a you know,
Speaker 6: still be a restricted policy, still putting downward pressure on inflation,
Speaker 6: but not as intensely is what they're doing right now.
Speaker 4: Well, when it comes to inflation, we heard from Governor
Speaker 4: Myron almost insinuate.
Speaker 5: Not right now, but maybe in the future.
Speaker 4: The FED should actually have more of a range in
Speaker 4: terms of their target. Can you see the FED moving
Speaker 4: towards that, maybe targeting two to three percent instead of
Speaker 4: just two percent across the board?
Speaker 6: Yes, a classic issue in inflation targeting. The US has
Speaker 6: come down on the side of just having a target.
Speaker 6: It's simpler communication. It doesn't leave ambiguity around having a range.
Speaker 6: One of the problems for countries that have had ranges
Speaker 6: is that the top of the range then becomes okay
Speaker 6: as opposed to the midpoint of the range. So it
Speaker 6: can be interpreted as slippage in your commitment to keep
Speaker 6: inflation low and stable, and households do not like the inflation.
Speaker 6: So I think it's incumbent on the fetter reserve to
Speaker 6: make sure inflation stays low and stable.
Speaker 1: Jim, I'm trying to get a sense of how a
Speaker 1: data dependent FED deals with the potential of not getting
Speaker 1: data next week. We're supposed to get the non farm
Speaker 1: payrolls report on Friday, October third, Ostensibly that could be
Speaker 1: after the government shutdown, where we do not get that data.
Speaker 1: Print how problematic would that be for the feeder reserve?
Speaker 3: Given how balanced right now?
Speaker 5: A lot of people feel the risks are.
Speaker 6: Yeah, well, it's disturbing to not get as much data
Speaker 6: as you can on the state of the economy, and
Speaker 6: so that would be a concern. But the FED has
Speaker 6: managed through that in previous episodes around government shutdown, so
Speaker 6: I think it's manageable. But it's not an ideal situation.
Speaker 1: It feels like a really messy moment because not only
Speaker 1: is there questions about are there questions about the integrity
Speaker 1: of the data when we get the data, which data
Speaker 1: to look at what the data is measuring, but they're
Speaker 1: these sort of sea changes that are overlaid on top
Speaker 1: of it. Whether it's different areas, different income earners that
Speaker 1: are earning a lot and able to spend, lower income
Speaker 1: order workers that are feeling the pinch of inflation and
Speaker 1: not seeing the same types of labor gains. I just
Speaker 1: wonder if the FED should think of a new paradigm,
Speaker 1: a new benchmark to chores to understand exactly what the
Speaker 1: optimal employment level is and how they should weigh these
Speaker 1: two risks.
Speaker 6: Yeah, I do think it's a good time to review
Speaker 6: our models and think about how are we going to
Speaker 6: do this over the next decade. Could we do better
Speaker 6: than where we've been. I think we've been more or
Speaker 6: less preoccupied with the pandemic and the reaction to the
Speaker 6: aftermath of the pandemic, but that's pretty much behind us now,
Speaker 6: So now would be a good moment to really do
Speaker 6: a thorough going review of how the FED operates and
Speaker 6: how the models work. I guess one thing I'd like
Speaker 6: to do is have a what some I'd like to do,
Speaker 6: what other central bank sometimes do, is have a parallel
Speaker 6: process where you have a new model getting ready and
Speaker 6: run that in parallel, and then have a cutover point
Speaker 6: at some point in the future where you actually switch
Speaker 6: to the new model. So I think we could do
Speaker 6: things like that, and that's maybe something to consider at
Speaker 6: this point.
Speaker 4: Governor Lisa Cook is warning her attorneys are warning that
Speaker 4: the removal of her could cause chaos and disruption in
Speaker 4: financial markets. What do you think the reaction will be
Speaker 4: in financial markets if she is removed.
Speaker 6: I think that the court will insist that she gets
Speaker 6: due process for whatever charges have been made against her,
Speaker 6: so that that would prevent political partisans from just making
Speaker 6: charges against members of the committee without having to prove
Speaker 6: those charges and then calling that cause and allowing people
Speaker 6: to be dismissed from the FMC on that basis. I
Speaker 6: think that, you know, the people on the Supreme Court
Speaker 6: will make the justices will probably come down in some
Speaker 6: way to protect that due process clause.
Speaker 2: Stay with us, Malplindex Savana's coming up off to this.
Speaker 1: Bloomberg's Michael McKee joins us from Washington with a very
Speaker 1: special guest.
Speaker 3: Mike, I'll throw it to you.
Speaker 8: Well, thank you very much joining us this morning. Richmond
Speaker 8: fed President Tom Barkin here on Bloomberg television and radio
Speaker 8: worldwide and on radio they can't see it, but on
Speaker 8: television people can see you have a bit of a
Speaker 8: bandage on your head. You just had one of those
Speaker 8: older people's kind of operations.
Speaker 7: Yeah, there's no truth that it was what happened in
Speaker 7: the last meeting.
Speaker 8: All right, Speaking of the last meeting, we came out
Speaker 8: of that believing that, or at least Wall Street, that
Speaker 8: you're going to cut rates again in October and maybe
Speaker 8: in December. But since then we've gotten some numbers that
Speaker 8: show GDP is hotter, inflation is still running hot, and
Speaker 8: the Javas claims numbers suggest companies aren't laying anybody off.
Speaker 8: So should we have less confidence in the path going forward?
Speaker 7: Well, I don't think you can mark to market the
Speaker 7: next meeting every week, even though that's what the markets do.
Speaker 7: I mean, let's see what happens on the employment side.
Speaker 7: We'll get some important data in a couple of minutes
Speaker 7: here on the inflation side, and I think we'll get
Speaker 7: there when we get there.
Speaker 8: Well, the majority seem to believe, at least according to
Speaker 8: what the chairman tells us, that inflation is going to
Speaker 8: be a one time rise in the price level. And
Speaker 8: overnight we got a bunch of new tariffs, as you
Speaker 8: just saw on a lot of different things from the President.
Speaker 8: How much confidence do you have in any kind of
Speaker 8: inflation forecast at this point?
Speaker 7: Not much. I mean, what I definitely see happening is
Speaker 7: there are costing increases that suppliers want to pass on,
Speaker 7: there's no question about that, and tariffs are a big
Speaker 7: part of it. But you could put health insurance in
Speaker 7: other other costs in there too, But those costs are
Speaker 7: going to attempt to get passed on to a consumer
Speaker 7: who's frankly exhausted of price increases. And so you know,
Speaker 7: we're seeing a lot of trading down, you know, branded
Speaker 7: to private label kind of choices, but we're also seeing
Speaker 7: people trade off. And it wouldn't surprise me at all
Speaker 7: if people who are forced to accept certain price increases
Speaker 7: therefore don't buy something else on the other side, and
Speaker 7: that's your classic relative price trade off, and that may
Speaker 7: mean that you won't see as much broad based inflationary
Speaker 7: impact as you'd see. You know, price increases on particular
Speaker 7: items we'll see.
Speaker 8: And yet you get PCE in an hour and basically
Speaker 8: you've already calculated the numbers. Inflation's not moving in the
Speaker 8: right direction. So can you still justify or how long
Speaker 8: can you justify cutting rates in that environment?
Speaker 7: Well, we have inflation moving in the wrong direction. Unfortunately,
Speaker 7: we also have unemployment moving in the wrong direction. And
Speaker 7: that was the backdrop of the last meeting, you have
Speaker 7: to ask yourself, you know, how are the risks still
Speaker 7: the same as you saw them two three, four months earlier,
Speaker 7: when you had unemployment in the right direction and inflation
Speaker 7: in the wrong direction. You know. My overall thesis though,
Speaker 7: is that while it's not, you know, ticking in the
Speaker 7: right place, the downside is relatively limited. I see, the
Speaker 7: inflation downside is limited by this customer pushback that I
Speaker 7: just talked about. Also productivity, which I think is we're
Speaker 7: seeing that at real scale, and so that means there's
Speaker 7: less pressure to pass costs on. And then on the
Speaker 7: unemployment side, obviously, labor supply is dropping at the same
Speaker 7: time as labor demand, and that's keeping the unemployment rate
Speaker 7: relatively balanced. And that's the combination of immigration and ravocation
Speaker 7: of temporary status. Also, you know our generation Mike, which
Speaker 7: is leaving the workforce. I mean, you're seeing a million
Speaker 7: three more people over sixty five out of the workforce
Speaker 7: every year, and so you've got less labor demand, low hiring,
Speaker 7: low firing environment, but you've also got less labor supply,
Speaker 7: and that probably means that the unemployment rate increases are
Speaker 7: going to be relatively limited.
Speaker 8: At least you and I are still employed as of today.
Speaker 7: We'll see how this interview goes.
Speaker 8: You suggested that companies in your district are beginning to
Speaker 8: feel a little bit better, or at least some of
Speaker 8: the uncertainty has come off of their planning and their thinking.
Speaker 8: Are these kind of big new tariffs that we got
Speaker 8: today just going to change that mind has the idea
Speaker 8: that ongoing tariffs and ongoing disruption are going to be
Speaker 8: part of this administration and economy. Is that in their planning.
Speaker 7: Well, I've been describing it as a fog that's created uncertainty,
Speaker 7: and I definitely think in the context of the last
Speaker 7: couple of months, the fog has started to lift. Businesses
Speaker 7: don't know exactly what the tariff will be on their
Speaker 7: sector necessarily, but they kind of have a sense of
Speaker 7: the range. People aren't really following the news every day, yeah,
Speaker 7: the same way they were back in April, and a
Speaker 7: lot of businesses I talk to say, look, I've just
Speaker 7: got to do something. I've got to take action. I
Speaker 7: can't be on the sidelines forever. So I am seeing
Speaker 7: people more in the game now. If you're in a
Speaker 7: particular sector where you see a new announcement. Of course,
Speaker 7: that's going to set you back. And so, you know,
Speaker 7: what I say about businesses in general is not true
Speaker 7: of businesses in every sector. And so there's sectors with
Speaker 7: a lot more clarity and sectors with a lot less clarity.
Speaker 7: And that's I think, just going to be part of
Speaker 7: the game here.
Speaker 8: This morning, we had an investor on who basically said
Speaker 8: markets are rising because of the idea that a year
Speaker 8: from now rates will be substantially lower. Is that the
Speaker 8: right way to look at it? The wrong way to
Speaker 8: look at it?
Speaker 7: Oh, I wouldn't know how to think about, you know,
Speaker 7: how markets ought to rise or not rise. I mean,
Speaker 7: we're very much focused on trying to land the plan
Speaker 7: here and balancing inflation unemployment. As I said, I think
Speaker 7: both of them have ticked in the wrong direction. But
Speaker 7: on the other hand, the downside is limited and we're
Speaker 7: just going to have to, you know, adjust our stance
Speaker 7: as we learn more.
Speaker 8: Well, where's your dot What are you thinking in terms
Speaker 8: of the next couple of meetings? And then for twenty twenty.
Speaker 7: Six, Well, I really like the DOT process for me
Speaker 7: because it's a it forces real integration of your thinking
Speaker 7: in terms of where you think the economy is going
Speaker 7: where you think policy is going. But I don't have
Speaker 7: it as a forecast prediction. It's not, you know, something
Speaker 7: I like to talk about publicly because it adjusts. You know,
Speaker 7: we do mark that dot to market as things go.
Speaker 7: So you know, every meeting for me is one where
Speaker 7: I want to stop and look at the balance between
Speaker 7: how we're doing on the inflation side of the unemployment
Speaker 7: side and make the right decision.
Speaker 8: Well, the story around the fad this week has been,
Speaker 8: shall we say, the debate over where the neutral rate is?
Speaker 8: Where do you think it is? And how fast would
Speaker 8: you want to get there?
Speaker 7: Well, you know, I've seen a lot of the stuff
Speaker 7: that's been in the press, and we're studying that, and
Speaker 7: you know I always try to understand all arguments and
Speaker 7: figure out how to integrate them into my thinking. I'd
Speaker 7: point you to the Richmond Fed neutral rate. The lubric
Speaker 7: mathis model. It takes a lot of signal from what
Speaker 7: you see in the real economy, and in the real
Speaker 7: economy over the last couple of years, what you've seen
Speaker 7: is interest rate. I mean, interest rates go up in
Speaker 7: the economy stay relatively healthy, and so that model doesn't
Speaker 7: take a lot of it doesn't has a relatively high
Speaker 7: neutral rate because it takes a lot of signal from
Speaker 7: the current environment. Now, things can change, but that's where
Speaker 7: the Richmond Fed model is right now, and i'd point
Speaker 7: you to that. What number do they have where you
Speaker 7: it moves around based on what's happening in the economy.
Speaker 8: Well, that gets the next question is Chairman Powell saying
Speaker 8: that you really don't want to target the neutral rate
Speaker 8: because it moves around, also saying that for any voter
Speaker 8: to really move things around, you have to be incredibly persuasive.
Speaker 8: Do you find Steven Myron's arguments persuasive?
Speaker 7: Well, I'm looking forward to digging into them with my team,
Speaker 7: and I like every voice in the room and every
Speaker 7: argument in the room. You know, that's what we do
Speaker 7: as a discipline, as we sit down and try to
Speaker 7: take those arguments apart and figure out which parts of
Speaker 7: them really resonate with the way we think about things
Speaker 7: and which parts don't. We're looking forward to doing that.
Speaker 7: Is now on the neutral rate, you know, in general,
Speaker 7: I just want to agree it's not that useful as
Speaker 7: a operational tool. The models out there, even the one
Speaker 7: that I talked about, have a confidence interval of about
Speaker 7: two hundred basis points, and so you could say it's three,
Speaker 7: which is around the SEP media, and you could say
Speaker 7: it's three and a half or two and a half.
Speaker 7: But if you add a two hundred basis point range
Speaker 7: to it, you say, that's not that helpful for making
Speaker 7: operational decisions on monetary policy. What is more helpful, and
Speaker 7: the reason I favor the model we've got in Richmond
Speaker 7: is how are you seeing the economy react real time
Speaker 7: to the level of rates you've got in the market.
Speaker 7: And if you see it weakening, that's a signal that
Speaker 7: maybe you've got it too high. If you see it
Speaker 7: relatively strong, that's the signal.
Speaker 8: The other way, Logan went to Richmond to announce her
Speaker 8: idea of changing the operational rate for the FED. What
Speaker 8: do you think of that?
Speaker 7: Well, I appreciate Laurie making the trip. We had a
Speaker 7: balance sheet conference yesterday that was very well attended and
Speaker 7: I thought lots of thoughtful papers, including hers, and I
Speaker 7: thought she made an extremely articulate, well reasoned argument, and
Speaker 7: I'm looking forward to digging into it further.
Speaker 8: You anticipate the FED making a change, Oh, I don't know.
Speaker 8: The Supreme Court if it allows the president to fire
Speaker 8: Lisa Cook. What does that mean for the FED?
Speaker 7: Well, the judicial processes and political processes will operate, however
Speaker 7: they operate. What I do every day is show up
Speaker 7: and try to argue for the best monetary policy we
Speaker 7: can and make the case, as you said, in a
Speaker 7: persuasive way to my colleagues. And that's what I'm going
Speaker 7: to continue to do.
Speaker 8: Well, let's leave it with this. What is the best
Speaker 8: monetary policy right now? Continued rate cuts or do you
Speaker 8: not know?
Speaker 7: At this point? I think you have to be very
Speaker 7: adaptive to what's playing out here. The world I've described
Speaker 7: as one where the labor market isning. It's a low
Speaker 7: hiring environment, but the labor supply is also short, and
Speaker 7: you have to be very attentive to that balance because
Speaker 7: it could get out of balance right similar on the
Speaker 7: inflation side, you do have these cost pressures and four
Speaker 7: and a half years of inflation over target. On the
Speaker 7: other hand, you're not seeing that show up and spikes
Speaker 7: and inflation in the real time numbers. We are seeing
Speaker 7: what seems to be a productivity boom, and so I
Speaker 7: think you have to be very attentive to how little
Speaker 7: we know about how each of our mandate variables is
Speaker 7: going to play out, and so, you know, I feel
Speaker 7: like very adaptive is the way to think about it,
Speaker 7: as opposed and that's part of why I'm not being
Speaker 7: prescriptive into well, it's this many cuts over this period
Speaker 7: of time, because I think we're going to see and
Speaker 7: learn a lot as we go here.
Speaker 2: Stay with us mult Bloomberg Savannon's coming up off to this.
Speaker 3: Let's turn batchday's core PCE results.
Speaker 1: We did see that inline reading of zero point two percent,
Speaker 1: as expected. Ryan Wang of HSBC joins us. Now, Ryan,
Speaker 1: thank you so much for being here. It's great to
Speaker 1: have you on a Friday. What was your takeaway from
Speaker 1: the data, Yeah, thanks so much.
Speaker 3: For having me.
Speaker 9: Well, the data was pretty close to expectations. I do
Speaker 9: think still it's important that the year on year rate
Speaker 9: of core inflation is getting ever so closer to that
Speaker 9: three percent level. It actually doesn't matter what measure of
Speaker 9: inflation you look at, headline CPI, core CPI, either of
Speaker 9: the PC measures, they're all running close to three percent.
Speaker 9: That's not as high as it was a couple of
Speaker 9: years ago, but it's still, of course significantly higher than
Speaker 9: the FEDS two percent target.
Speaker 1: So we being gas lit when people say it's just
Speaker 1: going to keep its downward trajectory.
Speaker 3: Is this the real reality that we're at a three.
Speaker 1: Percent inflation level and that's probably where it's going to continue,
Speaker 1: even as we talk about some sort of asymptotic progression
Speaker 1: to two percent over the next hundred years.
Speaker 7: Yeah, well, you know, I mean that's a very good point.
Speaker 9: And actually our own projections do have us staying closer
Speaker 9: to three percent than getting down to two percent even
Speaker 9: in the next twelve eighteen months.
Speaker 7: I think that's very much the case. We've heard clearly from.
Speaker 9: FED chair Drone pal that okay, you can call tariffs
Speaker 9: a one time effect, but that's a one time effect
Speaker 9: that can last several quarters, well into next year, maybe
Speaker 9: even beyond, as the full effect of those tariffs comes through,
Speaker 9: and you know, at that point we have to say, well,
Speaker 9: what is that going to do to inflation expectations along
Speaker 9: the way.
Speaker 4: So is the FED basically just accepted three percent inflation
Speaker 4: without coming out and saying that's our new target.
Speaker 5: To Lisa's point, well, they move the goalpost on us.
Speaker 9: I think this is why you see the divide on
Speaker 9: the Fed, because clearly inflation is running slower than it
Speaker 9: was a few years ago, yet it never reached that
Speaker 9: two percent level. So you're never going to hear any
Speaker 9: of the FED policy makers say that, Okay, you know,
Speaker 9: they just reaffirmed the two percent target.
Speaker 7: They're not going to say that three percent is acceptable.
Speaker 9: But simply put, I do think it's more likely that
Speaker 9: we'll be closer to that higher number through the end
Speaker 9: of next year.
Speaker 5: What do you make of the tariff impact right now?
Speaker 4: And I say this on the heels of last night,
Speaker 4: still trying to digest exactly what is going to be
Speaker 4: tariff in terms of kitchen cabinets, bathroom vanities, furniture, upholstery, furniture,
Speaker 4: all these new sectoral tariffs of Trump administration announced.
Speaker 9: Yeah, well we're entering Act two of tariffs, right. I mean,
Speaker 9: all the focus up into this point has mostly been
Speaker 9: on these reciprocal tariffs, but those have had significant, significant
Speaker 9: sectoral exemptions, and now those exemptions are being filled in
Speaker 9: as we get these proposed tariffs on these products.
Speaker 10: So that's just.
Speaker 9: Another reason why, you know, the full story of the
Speaker 9: effect on consumer prices has yet to be felt. And yeah,
Speaker 9: we're going to be watching really in the rest of
Speaker 9: the year. It's going to be those sectoral tariffs that
Speaker 9: I think take most of the air plug.
Speaker 1: Just to wrap up a week where we've gotten a
Speaker 1: lot of commentary, a lot of bullishness on the economy,
Speaker 1: on the idea of a FED that was going to
Speaker 1: be cutting rates even into strength. I'm struck by Wiscott
Speaker 1: KROHNERD of Citygroup had to say when he was talking
Speaker 1: about how it feels like they're two different markets. It
Speaker 1: feels like they're those that are touched by AI and
Speaker 1: the investment cycle that we've seen, and it feels like
Speaker 1: there's everything else which hasn't necessarily been as leverage to
Speaker 1: the gains that we've seen in markets, to the gains
Speaker 1: that we've seen from AI and the other types of
Speaker 1: rising tides.
Speaker 3: And I just wonder how when you.
Speaker 1: Look at this aggregate data, you can parse that out
Speaker 1: and understand why some people might be feeling really rotten
Speaker 1: about the pace of inflation and the state of the
Speaker 1: labor market while other people feel pretty good and are
Speaker 1: flying around the world.
Speaker 9: Yeah, well, you know, I would say the macroeconomic data
Speaker 9: do actually bear out some of this characterization that you
Speaker 9: just said, because really since the start of this year
Speaker 9: economic growth we just got new GDP numbers will probably
Speaker 9: be below two percent when this year is done, but
Speaker 9: we won't necessarily be below one percent. So despite all
Speaker 9: the focus on the weaker employment growth numbers that we've
Speaker 9: seen come through in recent months, actually the expenditure data,
Speaker 9: the GDP data, the output data have held up reasonably well,
Speaker 9: and I think that speaks to this split where, of
Speaker 9: course those that are seeing that hiring activity is slower,
Speaker 9: those trying to get a job are really being impacted
Speaker 9: by that softer job market prices aren't any lower regardless
Speaker 9: of how you're faring in the labor market, right, So
Speaker 9: again that speaks of that inflation. But at the same time,
Speaker 9: company sales haven't necessarily weakened in the way that most
Speaker 9: pessimistic views would have thought.
Speaker 7: A few months ago.
Speaker 2: Stay with us more Blindberg. Savannah's coming up after.
Speaker 1: This a really important conversation. Let's get right to it.
Speaker 1: Bloomberg News editor in chief John Mickelthwaite is standing by
Speaker 1: with a very special guest.
Speaker 3: John, I'll send it to you.
Speaker 11: Lisa, Thank you very much. We have Kiriako Smith's attackers.
Speaker 11: Prime Minister of Greece here with us, we jumped straight
Speaker 11: in a lot of movement on Ukraine this week. You've
Speaker 11: had Trump saying stuff about it. You have various NATO
Speaker 11: allies getting crossed about the fighter jets in curtaining into
Speaker 11: their territory and warning Russia about it. You even had
Speaker 11: Germany coming forward and saying, let's use the one hundred
Speaker 11: and forty billion dollar billion euro frozen assets to help Ukraine. Now,
Speaker 11: you have always been a kind of champion of this
Speaker 11: idea of having a common European fund for defense, and
Speaker 11: you've always had pushback from the Germans on that. Do
Speaker 11: you think now it stands the chance of going through?
Speaker 10: Well, thanks for having me, John. I've been advocating for
Speaker 10: quite some time about the need to create some joint
Speaker 10: European borrowing facility to cover what I consider the quintessential
Speaker 10: European public good, which is common European defense, and I
Speaker 10: do sense that there is much more moventum now marks
Speaker 10: my colleagues. Some of the countries that were inherently against
Speaker 10: the idea of additional further joint borrowing have changed their mind,
Speaker 10: and I'm pretty sure that Germany will eventually also agree
Speaker 10: to this necessity, and we need to make sure that
Speaker 10: this facility finances projects of common interest. And I would
Speaker 10: put missile defense, drone defense right up there in terms
Speaker 10: of our collective European priorities. So I would expect some
Speaker 10: movement soon. We have two European councils and hopefully we
Speaker 10: can make progress towards that direction.
Speaker 11: Just looking at the economy at the moment, the Greek
Speaker 11: economy has been doing very well. Is no doubt you
Speaker 11: will tell me. But in twenty twenty four you forecast
Speaker 11: a deficit and then you ended up with a surplus.
Speaker 11: And this year you're again forecasting a deficit. But it's
Speaker 11: quite close to the end of the year. I wondered
Speaker 11: if now you're close enough to say this year you
Speaker 11: end up with a surplus again.
Speaker 10: For the more we've been having, we've been producing significant
Speaker 10: primary surpluses, and I think it's quite possible that we
Speaker 10: may have a real surplus again this year. This is
Speaker 10: a foundation of our economic policy. We've suffered a lot
Speaker 10: from not being fiscally disciplined. This is not going to
Speaker 10: happen again. But I think the big success of our
Speaker 10: policy is to ensure that the economy is growing at
Speaker 10: the same time that to create jobs. We've created five
Speaker 10: hundred thousand jobs since I became Prime Minister. And the
Speaker 10: real goal is to ensure that this collective wealth is
Speaker 10: spread equally. So my focus now is to use whatever
Speaker 10: physical space I can create through growth and tackling tax
Speaker 10: evasion to cut taxes for the middle class. It's important
Speaker 10: for me that this discussion is not just limited to
Speaker 10: the economists saying good things about the economy. I want
Speaker 10: the average Greek to really feel a tangible benefit from
Speaker 10: this growth story. And starting January first, when these tax
Speaker 10: cuts will kick in, they will see a real increase
Speaker 10: in their paychecks. And this is very, very important to me.
Speaker 11: It just come back to the average Greek in a second.
Speaker 11: You just mentioned fiscal discipline. I mean you look at
Speaker 11: the core of Europe. I sat down with Primisus Sanchez
Speaker 11: of Spain the other day as well. Something dramatic has changed.
Speaker 11: You know, Greece, Spain, You're the country is growing really fast.
Speaker 11: In the middle You've got countries in much greater trouble.
Speaker 11: You look at France, You're growing cut me now over
Speaker 11: two percent. They're struggling to get to half a percent
Speaker 11: of growth that death is ballooning. We now in a
Speaker 11: situation where you would worry about financial contagion from France.
Speaker 10: This seemed inconceivable a few years ago. What I can
Speaker 10: tell you is that eventually no one can beat the markets.
Speaker 10: We know this very well, and I do think that
Speaker 10: at some point governments have to take difficult decision to
Speaker 10: put our fiscal house in order. We've done that. Once
Speaker 10: you do it, then you can enter into this virtures
Speaker 10: cycle where you can actually grow the economy, you can
Speaker 10: cut taxes, you can support income through targeted measures. We're there,
Speaker 10: but we also went through very very difficult periods and
Speaker 10: very painful reforms. So I do hope that the political
Speaker 10: situation in France somehow as stabilizes. It is important that
Speaker 10: the core of Europe, you know, France, Germany, that these
Speaker 10: economies are doing well. Look at I mean, we will
Speaker 10: receive thirty six million tourists this Yere our tourism industry
Speaker 10: is booming. But the far core markets don't do well,
Speaker 10: we will also at some point indirectly be affected.
Speaker 11: You're famously polite man, and I know that Sheldenfreuder is
Speaker 11: not a Greek word, it's a German one. But there
Speaker 11: must be some element in Greece of looking at these
Speaker 11: people who nearly push Greece out and thinking, well things
Speaker 11: have changed.
Speaker 10: Well, things have changed. But at the end of the day,
Speaker 10: this is not about you know, pointing fingers or about
Speaker 10: saying that you were wrong and we were right. It's
Speaker 10: about ensuring that Europe collectively grows. I'm disappointed by the
Speaker 10: fact that when I look at the drug report, we
Speaker 10: have not made significant progress, and I think it's time
Speaker 10: that you know, you know, in Europe, we were usually
Speaker 10: were two hats at the Council. We were our European
Speaker 10: hat and we were our national hat. And it seems
Speaker 10: to me that for some countries the European hats seems
Speaker 10: to be shrinking. So we have to look at the
Speaker 10: big picture. Some of the decisions that we need to
Speaker 10: take require more funding, it's pretty clear, and we need
Speaker 10: to put our European interest, not necessarily ahead of our
Speaker 10: national interest, but to realize that some difficult decisions need
Speaker 10: to be taken at the European level.
Speaker 11: One of the areas where Europe has been pretty useless
Speaker 11: at doing these things is banking, the Banking Union and
Speaker 11: things like that. At least unique Credit has built up
Speaker 11: a stake in Alpha Bank, which you were famously much
Speaker 11: more relaxed about than the Germans were they when they
Speaker 11: built up one in Commets Bank. Would you be prepared
Speaker 11: if they were to take over Alpha Bank? Would you
Speaker 11: be relaxed about that?
Speaker 10: If? If we really mean what we say about creating
Speaker 10: scale in banking Union, we should be open to these
Speaker 10: types of transactions. I see value when an important foreign
Speaker 10: bank wants to acquire a stake in a Greek bank.
Speaker 10: It means they believe in the potential of the Greek economy,
Speaker 10: and it means that you know the bank could possibly
Speaker 10: do better. I'm pushing my banks to extend more credit
Speaker 10: to mortgages, to small medium sized enterprises. The stronger their
Speaker 10: balance sheet is, the more likely it is that they
Speaker 10: will do so. Yes, in principle, we are in favor
Speaker 10: of these transactions, and I'm happy that Uncredit has decided
Speaker 10: to look at one of our Greek banks and take
Speaker 10: a significant stake.
Speaker 11: Isn't that But as you said earlier, that's the kind
Speaker 11: of problem with Europe at the moment. Most people are
Speaker 11: taking these decisions on suppose purely nationalist or that kind
Speaker 11: of level. You look around Europe at the moment, the
Speaker 11: ability to create common things like a banking union. That's
Speaker 11: the real problem at the moment. And do you think
Speaker 11: that is something coming from Brussels or from the national capital.
Speaker 10: I think most of the important if you want to
Speaker 10: understand what's happening in Brussels, look at the national capitals.
Speaker 10: I think the Council has become more complicated in terms
Speaker 10: of taking decisions. But on the other hand, you know,
Speaker 10: in the past we took a moment of decision when
Speaker 10: we had to address COVID is Ukraine, a geopolitical COVID moment.
Speaker 10: I would argue to a certain extent, yes, and I
Speaker 10: remember the COVID fund negotiations. There are a lot of countries,
Speaker 10: including Germany, they said no until they said yes. So
Speaker 10: when it comes to defense, which as I said, is
Speaker 10: the ultimate public good, I do expect that we will
Speaker 10: be able to take important decisions to target specific European projects,
Speaker 10: which will then again require European collaboration.
Speaker 11: You talked a bit earlier about the average Greek I
Speaker 11: was looking at the numbers. Greek GDP has come soaring back,
Speaker 11: but it's still roughly the same level in nominal terms.
Speaker 11: As it was before the crisis, a bit lower in
Speaker 11: real terms? Is that still do you think Greece has
Speaker 11: now been through that phase and it's now the terms
Speaker 11: of looking forward to different form of Greece.
Speaker 10: We have clearly turned the page. But as I said,
Speaker 10: if we want to converge with Europe, we need to
Speaker 10: grow faster than Europe. We've been doing this, but this
Speaker 10: growth needs to be qualitatively different. We needs to focus
Speaker 10: on investment, on innovation, on experts, on creating really valuable jobs.
Speaker 10: And my main goal is to ensure that wages wages increase,
Speaker 10: that we have wage convergence with Europe, and that we
Speaker 10: support disposable income at a time when all europe and
Speaker 10: economies are faced with the cost of living crisis. I mean,
Speaker 10: and the only way to address this is to ensure
Speaker 10: that we support disposable income. But we have to do
Speaker 10: it in a fiscally sustainable way. That's what we have
Speaker 10: done so far. We will continue doing it. I do
Speaker 10: expect that next year we will again perform very well.
Speaker 10: So I tell my fellow Greek citizens that I think
Speaker 10: the best days are ahead of us and that this
Speaker 10: is a policy that will deliver long term benefits to them.
Speaker 11: You have elections coming up in twenty twenty seven. The
Speaker 11: polls at the moment, so you might have to go
Speaker 11: into coalition with people you've won two terms. I think
Speaker 11: you'd be the first person to get a third term
Speaker 11: if you did. Would you be prepared to go into coalition?
Speaker 10: Well, elections are eighteen months ahead. Eighteen months out, we
Speaker 10: are way ahead in the polls. Our goal is to
Speaker 10: win an absolute majority. We've done it twice. There were
Speaker 10: people doubting that we would succeed before the previous elections.
Speaker 10: I think that if we deliver on our commitments, and
Speaker 10: if the economy continues growing, if we work hard to
Speaker 10: improve the National health service, these are the priorities I
Speaker 10: set out in twenty twenty three. We have a reasonable
Speaker 10: chance to win an absolute majority. But if the quick
Speaker 10: people decide otherwise, it's eventually we have to respect the decision.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
Speaker 2: in markets, economics, an gio politics. You can watch the
Speaker 2: show live on Bloomberg TV weekday mornings from six am
Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple,
Speaker 2: Spotify or anywhere else you listen, and as always on
Speaker 2: the Bloomberg Terminal and the Bloomberg Business out