WEBVTT - Israel-Hamas War Enters 60th Day; Kerry & Dalio on Climate 0:00:02.480 --> 0:00:03.079 Good morning. 0:00:03.080 --> 0:00:05.920 I'm Nathan Hager and I'm Karen Moscow. Here are the 0:00:05.960 --> 0:00:07.440 stories we're following today. 0:00:07.840 --> 0:00:11.119 First, the latest developments in the Middle East. Israel continues 0:00:11.160 --> 0:00:14.760 to push its military operations further into the southern Gaza strip, 0:00:14.800 --> 0:00:17.320 with more strikes reported overnight. We get the latest from 0:00:17.320 --> 0:00:18.560 Bloomberg's Oliver Krook. 0:00:18.800 --> 0:00:22.280 Today marks the sixtieth day of war between Israel and Hamas, 0:00:22.280 --> 0:00:25.240 and after a temporary ceasefire last week of seven days, 0:00:25.400 --> 0:00:29.040 fighting is once again raging on the enclave. After intense 0:00:29.040 --> 0:00:31.280 operations in northern Gaza for these last sixty days, the 0:00:31.320 --> 0:00:34.239 Israeli military campaign is really increasing its focus on the 0:00:34.280 --> 0:00:37.040 southern part of Gaza, and much of that around Gaza's 0:00:37.040 --> 0:00:39.800 second biggest city, con Unis. That's a city that held 0:00:39.800 --> 0:00:42.360 more than four hundred thousand people before the war. We 0:00:42.440 --> 0:00:44.560 have satellite photos over the last few days that show 0:00:44.640 --> 0:00:48.280 tanks and troops massing outside the city and under international pressure, 0:00:48.360 --> 0:00:51.559 notably increasingly from the United States. Israel says it is 0:00:51.600 --> 0:00:54.400 beginning to be more precise about it's so called safe 0:00:54.480 --> 0:00:57.080 zones and where it is striking its operations. 0:00:56.600 --> 0:00:59.520 And Bloomberg's Oliver Krook reports one hundred and thirty seven 0:00:59.560 --> 0:01:01.680 hostage still remain in Gaza. 0:01:02.280 --> 0:01:04.400 Well back here in the U, asked Nathan. The presidents 0:01:04.440 --> 0:01:07.800 of Harvard, MIT, and the University of Pennsylvania are set 0:01:07.840 --> 0:01:11.760 to testify before Congress today about combating anti Semitism on 0:01:11.840 --> 0:01:15.720 college campuses. Bloomberg's Amy Morris reports from Washington. 0:01:16.000 --> 0:01:19.080 The three college presidents will testify before a House committee 0:01:19.080 --> 0:01:22.679 about stopping anti Semitism on campuses. The hearing was called 0:01:22.720 --> 0:01:25.280 in response to protests that have sprung up on college 0:01:25.280 --> 0:01:28.560 campuses across the country since the Hamas attack on Israel 0:01:28.640 --> 0:01:32.440 in October. Committee chair Virginia Fox says she'll hold university 0:01:32.520 --> 0:01:35.840 leaders accountable for anti semitism after the Hamas attack and 0:01:36.120 --> 0:01:39.160 during the Israel Hamas War. There's no mention of any 0:01:39.160 --> 0:01:42.560 plans to investigate Islamophobia or any other forms of hate. 0:01:42.720 --> 0:01:46.880 The hearing begins at ten fifteen in Washington. Amy Morris Bloomberg. 0:01:46.520 --> 0:01:49.000 Radio, Okay, Amy, thank you, saying in Washington. 0:01:49.080 --> 0:01:52.760 Ukrainian President Vladimir Zelenski has been invited to address Senators 0:01:52.800 --> 0:01:55.480 today as aid has gotten en snarled in a debate 0:01:55.560 --> 0:01:57.000 over the southern US border. 0:01:57.200 --> 0:01:59.040 Bloomberg's at Baxter has that story. 0:01:59.280 --> 0:02:02.440 The invitation comes from Senate Majority Leader Chuck Schumer to 0:02:02.440 --> 0:02:06.960 speak to senators at a classified briefing on security. Schumer 0:02:07.000 --> 0:02:09.919 says senators need to hear a direct message to untangle 0:02:09.960 --> 0:02:10.880 the circle of debate. 0:02:10.960 --> 0:02:14.200 The hold up on the security supplemental has not been 0:02:14.240 --> 0:02:18.079 over Ukraine or Israel or the Indo Pacific, but over 0:02:18.160 --> 0:02:23.640 Republican decision to inject hard right immigration measures into the debate. 0:02:23.800 --> 0:02:27.079 Zelenski will be on video now. Schumer also says he 0:02:27.200 --> 0:02:29.959 set up a test vote on advancing a national security 0:02:30.000 --> 0:02:34.800 supplemental package including funding for Ukraine for tomorrow ed Baxter 0:02:34.880 --> 0:02:36.440 Bloomberg Radio, All right, ed. 0:02:36.480 --> 0:02:38.720 Thanks, We'll be turned to the markets now. And Moody's 0:02:38.760 --> 0:02:41.960 has cut its outlook for Chinese as sovereign bonds to negative. 0:02:42.120 --> 0:02:45.480 That's underscoring deepening global concerns about the level of debt 0:02:45.520 --> 0:02:48.959 in the world's second largest economy. Moody says China's usage 0:02:48.960 --> 0:02:52.160 of fiscal stimulus to support local governments and its spiraling 0:02:52.240 --> 0:02:56.040 property downturn opposing risks to the nation's economy. 0:02:56.240 --> 0:02:59.560 In European markets, Karen the London Stock Exchange Group is investigating, 0:02:59.600 --> 0:03:02.240 assists that's an issue that earlier affected trading in large 0:03:02.280 --> 0:03:05.440 numbers of smaller stocks. This is the third outage to 0:03:05.520 --> 0:03:07.040 strike London in a few months. 0:03:07.200 --> 0:03:09.760 Well back here in the US, Nathan concerned mounting that 0:03:09.840 --> 0:03:13.080 the November to Remember for stocks and bonds may have 0:03:13.120 --> 0:03:16.720 gone too far. We get the latest from Bloomberg's John Tucker, John. 0:03:16.800 --> 0:03:21.600 And Karen Markets. Maybe in technically overbought conditions and extreme 0:03:21.639 --> 0:03:26.239 bullish positioning, maybe leaving traders exposed to corrections. The counseters 0:03:26.320 --> 0:03:28.839 CIO Christopher Allman sees it this way. 0:03:29.080 --> 0:03:30.800 I don't know if the Fed is going to ease 0:03:31.080 --> 0:03:32.519 very quickly in twenty four. 0:03:32.560 --> 0:03:35.160 We have to readjust to that November people got ahead 0:03:35.160 --> 0:03:35.880 of themselves. 0:03:36.120 --> 0:03:38.040 The S and P five hundred pound Monday from the 0:03:38.160 --> 0:03:41.320 highest since March twenty twenty two, while the Nasdaq one 0:03:41.360 --> 0:03:44.400 hud have dropped one percent amid of decline. At megacaps, 0:03:44.720 --> 0:03:48.280 two year yields jump ten basis points, and traders today 0:03:48.320 --> 0:03:50.680 we'll focus on the labor market, looking for any signs 0:03:50.680 --> 0:03:53.640 of weakness in the job openings or jolts data. We 0:03:53.760 --> 0:03:56.840 get that at ten am Wall Street time. I'm John Tucker, 0:03:56.840 --> 0:03:57.720 Bloomberg Radio. 0:03:57.960 --> 0:04:00.520 Okay, John, thanks for watching shares of Noke This morning, 0:04:00.560 --> 0:04:03.280 they're down about seven and a half percent overseas. That's 0:04:03.280 --> 0:04:07.080 because AT and T has chosen rival Ericsson to modernize 0:04:07.080 --> 0:04:10.280 its US wireless network. This project could amount to almost 0:04:10.280 --> 0:04:13.320 fourteen billion dollars over five years, and this is another 0:04:13.400 --> 0:04:16.640 blow to Nokia. In October, the company anounced job cuts 0:04:16.680 --> 0:04:20.120 alongside broader struggles in its five G infrastructure business. 0:04:20.520 --> 0:04:22.680 Well, Nathan, some of the world's biggest tech companies are 0:04:22.680 --> 0:04:26.480 collaborating on an artificial intelligence project to meta platforms and 0:04:26.520 --> 0:04:30.039 IBM are joining more than forty companies and organizations to 0:04:30.080 --> 0:04:33.880 create an industry group that's dedicated to open source artificial 0:04:33.920 --> 0:04:37.840 intelligence work. The coalition called the AI Alliance. We'll focus 0:04:38.040 --> 0:04:42.080 on the responsible development of AI technology, including safety and 0:04:42.120 --> 0:04:43.120 security tools. 0:04:43.360 --> 0:04:45.000 Well, well, Karen, let's get to the latest from the 0:04:45.000 --> 0:04:47.800 COP twenty eighth summit in Dubai. Bloomberg has been speaking 0:04:47.800 --> 0:04:50.440 to some big names at the UN Climate event, including 0:04:50.480 --> 0:04:54.200 White House Special Climate ENVOYT John Kerry. He's calling out 0:04:54.240 --> 0:04:57.440 big oil companies like Chevron for skipping on a commitment 0:04:57.480 --> 0:04:59.000 to slash methane emissions. 0:04:59.360 --> 0:05:03.000 You can't be outside of this initiative. The evidence is overwhelming. 0:05:03.080 --> 0:05:06.880 There is no doubt about science, and that is why 0:05:06.960 --> 0:05:11.279 I say it is inexcusable. There's no reason to be 0:05:11.440 --> 0:05:14.320 permitting unabated efforts at this point. 0:05:14.560 --> 0:05:17.000 Now, along with former Secretary of State Kerry, we've also 0:05:17.120 --> 0:05:20.520 heard from Bridgewater Associates founder Ray Dalyo. He says it 0:05:20.600 --> 0:05:22.839 is not likely the world will meet the Paris Agreements 0:05:22.839 --> 0:05:25.799 one and a half degree celsius warming target, and addressing 0:05:25.800 --> 0:05:28.160 climate change, he says, is going to be expensive. 0:05:28.640 --> 0:05:32.159 It's estimated that between five and ten trillion dollars a 0:05:32.240 --> 0:05:34.200 year is one way or another. 0:05:34.279 --> 0:05:34.679 No matter. 0:05:34.760 --> 0:05:36.919 If you neglect it, you'll pay the price. If you 0:05:37.000 --> 0:05:39.880 don't neglect it, you'll have the cost either way. 0:05:40.400 --> 0:05:42.920 And both Ray Dalyo and John Kerrey spoke at the 0:05:42.920 --> 0:05:45.760 Bloomberg Green Forum on the sidelines of COP twenty eight 0:05:46.120 --> 0:05:46.880 in Dubai. 0:05:50.080 --> 0:05:51.360 And it's time now for a look at some of 0:05:51.400 --> 0:05:53.560 the other stories making news around the world, and for 0:05:53.600 --> 0:05:56.800 that we're joined by Bloomberg's Amy Moore is saving Good morning. 0:05:56.880 --> 0:05:57.760 Good morning, Karen. 0:05:57.839 --> 0:06:02.000 New York Senator Kirsten Gillibrands says a stronger anti gun 0:06:02.040 --> 0:06:04.960 trafficking law has led to an uptick in seizures of 0:06:05.080 --> 0:06:08.360 illegal guns. Jillibrand is releasing a report and the progress 0:06:08.440 --> 0:06:12.120 law enforcement is made. After the bipartisan Safer Communities Act 0:06:12.200 --> 0:06:15.280 was implemented last year, inspired by a New York City 0:06:15.320 --> 0:06:17.839 teenager who was shot by a stray bullet back in 0:06:17.880 --> 0:06:19.480 two thousand and nine, this gun. 0:06:19.279 --> 0:06:22.880 Trafficking statute has been used to prosecute more than two 0:06:23.040 --> 0:06:27.440 hundred defendants across at least twenty states. In total, law 0:06:27.520 --> 0:06:32.240 enforcement has seized over thirteen hundred guns across the. 0:06:32.200 --> 0:06:33.599 Country under the measure. 0:06:33.640 --> 0:06:36.600 The federal government put seven hundred and fifty million dollars 0:06:36.880 --> 0:06:39.880 toward mental health services to help hire more than fourteen 0:06:39.920 --> 0:06:44.080 thousand mental health professionals across the country, including nearly four 0:06:44.160 --> 0:06:46.920 hundred in New York alone. And we should note that 0:06:46.960 --> 0:06:49.960 Michael Bloomberg, the founder and majority owner of Bloomberg LP, 0:06:50.320 --> 0:06:53.200 the parent of Bloomberg Radio, is a donor to groups 0:06:53.200 --> 0:06:56.520 that support gun control, including every Town for Gun Safety. 0:06:57.200 --> 0:07:01.440 The race to replace expelled Congressman George sand is already underway. 0:07:01.640 --> 0:07:05.279 Chairman of the Nassau County Republican Committee Joseph Cairo says 0:07:05.560 --> 0:07:09.600 they're trying to avoid another Santos fiasco by closely examining 0:07:09.640 --> 0:07:11.560 potential candidates credentials. 0:07:11.640 --> 0:07:14.480 We'll have a much more thorough vetting process. Now we 0:07:14.560 --> 0:07:18.520 will retain an outside firm to do a complete background check. 0:07:18.600 --> 0:07:21.360 Both parties need to present a candidate for a special election, 0:07:21.480 --> 0:07:25.200 with Democrats expected to announce their selection this week. Governor 0:07:25.240 --> 0:07:27.680 Hokel could announce a special election this week and when 0:07:27.720 --> 0:07:30.679 it happens, that election has to take place between seventy 0:07:30.680 --> 0:07:34.400 to eighty days. A Congressional oversight hearing is set for today. 0:07:34.480 --> 0:07:38.200 Over national park flights, now, National Park Service rules are 0:07:38.200 --> 0:07:41.680 in effect that limit airplanes and helicopters flying over national 0:07:41.720 --> 0:07:45.400 monuments and parks. Visitors complain about the noise from those flyovers, 0:07:45.640 --> 0:07:48.840 but Baileywood is with the Helicopter Association International. 0:07:49.000 --> 0:07:52.680 We believe that air tours are the least damaging to 0:07:52.720 --> 0:07:56.320 the parks when compared to cars and foot traffic. 0:07:56.560 --> 0:07:59.000 Some of the strictest new flight restrictions are at Mount 0:07:59.040 --> 0:08:02.920 Rushmore and Badly National Park in South Dakota. Global News 0:08:02.920 --> 0:08:04.720 twenty four hours a day and whenever you want it 0:08:04.720 --> 0:08:05.880 with Bloomberg News Now. 0:08:06.240 --> 0:08:09.040 I Amy Morrison, this is Bloomberg Karen great Amy. 0:08:09.080 --> 0:08:10.880 Thank you what we do bring you news throughout the 0:08:10.960 --> 0:08:14.200 day right here on Bloomberg Radio. As you heard Amy say, 0:08:14.320 --> 0:08:16.840 but now you can get the latest news on demand 0:08:16.880 --> 0:08:21.440 whenever you wanted to. Subscribe to Bloomberg News Now, and 0:08:21.520 --> 0:08:23.840 you can get the latest headlines right at the click 0:08:23.960 --> 0:08:27.320 of a button. Get informed on your schedule. You can 0:08:27.360 --> 0:08:30.960 listen and subscribe to Bloomberg News Now on the Bloomberg 0:08:31.000 --> 0:08:35.360 Business app, Bloomberg dot com plus Apples, Spotify, and anywhere 0:08:35.360 --> 0:08:42.320 else you get your podcasts. Time now for the Bloomberg 0:08:42.360 --> 0:08:45.120 Sports Update with John Stashaur, John. 0:08:45.120 --> 0:08:47.920 Karen Mother Life Football was in Jacksonville. The Jaguars in 0:08:48.000 --> 0:08:51.319 first place in AFC South of Bengals under five hundred 0:08:51.440 --> 0:08:54.319 and last place in the AFC North, but Cincinnati, who 0:08:54.400 --> 0:08:57.000 was playing without the injured Joe Burrows, still one in 0:08:57.120 --> 0:09:00.840 overtime thirty four to thirty one. Burroughs replaced Jake Browning 0:09:01.200 --> 0:09:03.600 thirty two of thirty seven three hundred and fifty four yards, 0:09:03.640 --> 0:09:06.440 including the seventy six yard touchdown pass to Jamar Chase. 0:09:06.440 --> 0:09:08.920 The Bengals won on a field goal with one forty 0:09:08.920 --> 0:09:12.880 five to go in ot The Jacksonville quarterback Trevor Lawrence 0:09:12.960 --> 0:09:15.400 left the game late fourth quarter with a springed ankle 0:09:15.400 --> 0:09:18.480 and a couple of other injured quarterbacks. Pittsburgh's Kenny Pickett 0:09:18.720 --> 0:09:21.280 needing ankle surgery. He's going to miss two to four weeks, 0:09:21.280 --> 0:09:24.320 so the Steelers will turn to Mitchell Trubisky beginning with 0:09:24.400 --> 0:09:27.600 their game Thursday at home against New England. In New Orleans, 0:09:27.600 --> 0:09:30.320 Derek Carr in concussion protocol for the second time in 0:09:30.400 --> 0:09:33.480 a month. Tennessee running back Derek Henry was feared to 0:09:33.520 --> 0:09:35.360 have suffered a concussion last Sunday. 0:09:35.720 --> 0:09:37.280 That turned out to be not the case. 0:09:37.679 --> 0:09:40.240 Linebacker Shack Leonard, a three time Pro Bowler who was 0:09:40.280 --> 0:09:44.480 surprisingly released by Indianapolis, signing with Philadelphia. He chose the 0:09:44.520 --> 0:09:47.280 Eagles over the Cowboys. Those two teams play a big 0:09:47.320 --> 0:09:49.120 Sunday night football game this week. 0:09:49.160 --> 0:09:50.120 That's for first place. 0:09:50.160 --> 0:09:53.400 They played in the quarterfinals the NBA's in season tournament. 0:09:53.440 --> 0:09:56.640 Pacers beat the Celtics one twenty two to one twelve 0:09:56.679 --> 0:09:59.959 tybees Halibert in twenty six points his first career triple double, 0:10:00.280 --> 0:10:03.040 and the Pelicans won in Sacramento one twenty seven to 0:10:03.120 --> 0:10:03.880 one seventeen. 0:10:03.960 --> 0:10:04.880 So Indiana and. 0:10:04.840 --> 0:10:08.480 New Orleans heading to Las Vegas for the semifinals Thursday, 0:10:08.559 --> 0:10:11.600 two more games tonight, the Nicks in Milwaukee Phoenix playing 0:10:11.640 --> 0:10:12.200 the Lakers. 0:10:12.320 --> 0:10:15.040 Johns Dashawer Bloomberg Sports. 0:10:16.600 --> 0:10:19.600 From coast to coast, from New York to San Francisco, 0:10:19.920 --> 0:10:24.559 Boston to Washington, DC, nationwide on Syria's Exam, the Bloomberg 0:10:24.600 --> 0:10:26.760 Business app in Bloomberg dot Com. 0:10:26.800 --> 0:10:31.400 This is Bloomberg Daybreak. Good morning, I'm Nathan Hager. 0:10:31.559 --> 0:10:34.640 After a November to remember for stocks and just about 0:10:34.679 --> 0:10:37.960 every investment asset rally, December has gotten off to a 0:10:37.960 --> 0:10:42.080 bit of a rough start for long traders, dialing back 0:10:42.280 --> 0:10:44.360 some of their bets that the Federal Reserve will cut 0:10:44.440 --> 0:10:47.200 rates as aggressively as they might have thought just a 0:10:47.240 --> 0:10:49.640 few weeks ago. Really, I've seen some weakness in the 0:10:49.720 --> 0:10:53.800 latest economic data, but Fedchairman Jerome Powell is keeping up 0:10:53.800 --> 0:10:56.560 his message that the Central Bank needs to move carefully 0:10:56.640 --> 0:11:00.280 on policy into next year. So let's talk more about 0:11:00.320 --> 0:11:02.680 this economy and the policy path from here on out. 0:11:02.679 --> 0:11:04.640 We are very pleased to be joined this morning by 0:11:04.720 --> 0:11:08.000 Mohammad al Arian, the chief economic advisor at Alliance, the 0:11:08.000 --> 0:11:11.360 president of Queen's College, Cambridge, and of course columnist for 0:11:11.400 --> 0:11:14.080 Bloomberg Opinion. Muhammad, thank you so much for taking the 0:11:14.120 --> 0:11:16.800 time this morning. I want to start by asking what 0:11:16.840 --> 0:11:21.360 you made of the exuberance we saw over rate cuts 0:11:21.720 --> 0:11:22.400 last month. 0:11:22.600 --> 0:11:23.440 Was it overdone? 0:11:25.200 --> 0:11:27.560 First? Good morning, Nathan, Thanks for having me. Yes, I 0:11:27.600 --> 0:11:30.720 believe it was overdone. I do believe that the Fed 0:11:31.480 --> 0:11:34.400 is done raising weights, but I don't think they will 0:11:34.480 --> 0:11:38.120 validate what's currently christ in by the markets in terms 0:11:38.160 --> 0:11:39.360 of weightcuts next year. 0:11:40.600 --> 0:11:45.120 Now we have this debate going about how long the 0:11:45.200 --> 0:11:48.960 Fed will keep rates elevated, whether it's higher for longer, 0:11:49.120 --> 0:11:51.760 high for longer. I mean the market is pricing in 0:11:51.840 --> 0:11:54.439 one hundred and twenty five basis points of rate cuts 0:11:54.520 --> 0:11:57.920 next year. Does the Fed have room for that kind 0:11:57.920 --> 0:11:58.400 of easing? 0:12:00.240 --> 0:12:00.520 Yet? 0:12:01.040 --> 0:12:02.880 There's a few things that we have to keep in mind. 0:12:03.000 --> 0:12:08.920 One is inflation dynamic. While we've had goods deflation, services 0:12:09.200 --> 0:12:14.200 remain rather hot in terms of the inflation rate, they're 0:12:14.240 --> 0:12:17.880 not disinflating fast enough, and at some point the goods 0:12:17.920 --> 0:12:22.960 deflation will stop. So getting to two percent inflation is 0:12:23.800 --> 0:12:27.079 the inflation target is far from automatic. Second, and we'll 0:12:27.160 --> 0:12:31.079 get more evidence this week, the labor market is still 0:12:31.120 --> 0:12:34.520 doing really well, and I suspect that the FED would 0:12:34.559 --> 0:12:39.680 like to see some weakening in the labor market. Thirdly, 0:12:40.000 --> 0:12:45.680 the markets have already loosened financial conditions significantly, you know, Nathan, 0:12:46.640 --> 0:12:51.080 November going to the Goman SAX index of financial conditions 0:12:51.640 --> 0:12:56.000 was the biggest loosening of conditions in any month since records, 0:12:56.000 --> 0:12:59.200 So there's been a tremendous loosening of financial conditions. I 0:12:59.200 --> 0:13:01.760 think if you look at these three things, they suggest 0:13:01.800 --> 0:13:05.000 the Fed will be more careful in cutting weights than 0:13:05.040 --> 0:13:06.559 what the markets expect right now. 0:13:06.760 --> 0:13:09.920 Well, let's take those three things in turn. Then, starting 0:13:09.920 --> 0:13:13.200 with the stickiness of services inflation, why do you see 0:13:13.240 --> 0:13:16.239 it sticking around as much as it has? Can policy 0:13:16.760 --> 0:13:21.880 make an impact on the elevated services price pressures that 0:13:21.880 --> 0:13:23.599 we're seeing in this economy. 0:13:24.320 --> 0:13:26.680 Nathan, That's a key question, and a very good one. 0:13:27.360 --> 0:13:30.400 The problem with falling behind on inflation, which is what 0:13:30.440 --> 0:13:33.440 has what happened to the FED, is that you allow 0:13:33.720 --> 0:13:37.560 the inflation process to go from a few items in 0:13:37.600 --> 0:13:40.520 this case it was energy and food to the good 0:13:40.640 --> 0:13:43.360 sector as a whole, and then next thing you know, 0:13:43.520 --> 0:13:46.080 it starts getting embedded in the service sector. Now, why 0:13:46.120 --> 0:13:49.400 is that a problem. Because the service sector is less 0:13:49.800 --> 0:13:53.160 sensitive to interest rate hikes, So the minute it gets 0:13:53.200 --> 0:13:57.679 embedded in the service sector, it's harder for the central 0:13:57.679 --> 0:14:01.120 bank to get to that inflation, and that's why the 0:14:01.200 --> 0:14:06.440 stickiness of the service component of inflation is something to 0:14:06.600 --> 0:14:09.400 keep on the weight O skein. Hopefully it's not going 0:14:09.440 --> 0:14:12.360 to last for a very long time, but don't forget 0:14:12.640 --> 0:14:16.120 the outright deflation and good is going to stop. So 0:14:16.200 --> 0:14:19.120 we do need the service sector to disinflate further. 0:14:19.960 --> 0:14:23.840 And that gets to the question about whether cracks in 0:14:23.880 --> 0:14:27.360 the labor market are what it's going to take to 0:14:27.440 --> 0:14:31.080 get inflation down to the target that the Fed has 0:14:31.120 --> 0:14:34.160 set out two percent because services are so tied to 0:14:34.360 --> 0:14:38.200 the labor market. What is your expectation about the data 0:14:38.240 --> 0:14:40.880 that we're going to see on the jobs market this week, 0:14:41.160 --> 0:14:45.480 particularly the JOLTS data today and the all important Friday 0:14:45.560 --> 0:14:46.280 jobs report. 0:14:47.600 --> 0:14:50.480 So it's interesting that for the JOLTS data today, Blommerk 0:14:50.560 --> 0:14:56.520 Economics expects only a marginal decline and Roomerk Economics expects 0:14:56.560 --> 0:15:01.520 that the ratio of the unemployed to job vacancies will 0:15:01.560 --> 0:15:05.720 stay above the historical averages. So to put it into context, 0:15:06.320 --> 0:15:09.600 Rulemak Economics expects that way should to go from one 0:15:09.600 --> 0:15:12.520 point five to one point four to four, and that's 0:15:12.560 --> 0:15:17.480 still above the average. Nathan, your question really comes down 0:15:17.520 --> 0:15:19.960 to something that the FED doesn't want to talk about, 0:15:20.480 --> 0:15:24.440 but increasingly others are talking about, which is two percent 0:15:24.560 --> 0:15:28.560 the right inflation target. If our labor market is slightly 0:15:28.640 --> 0:15:31.360 less flexible than what it used to be before, if 0:15:31.400 --> 0:15:35.960 the supply side as a whole is less flexible around 0:15:36.000 --> 0:15:40.120 the world, which it is, should we continue to insist 0:15:40.160 --> 0:15:43.120 on a two percent infation target or should the FED 0:15:43.680 --> 0:15:46.640 be willing to tolerate somewhere above that. Why would the 0:15:46.640 --> 0:15:49.920 FED want to tolerate somewhere above that? Not because it 0:15:49.960 --> 0:15:53.720 wants to create inflation expectations that won't happen, but instead 0:15:54.160 --> 0:15:57.960 because it doesn't want to unduly sacrifice the job market, 0:15:58.440 --> 0:16:03.920 unduly sacrifice growth, and unduly sacrifice aspects of our key 0:16:04.000 --> 0:16:08.000 to the equality of income and wealth. So that's going 0:16:08.080 --> 0:16:11.760 to ultimately be the big question is does the FED 0:16:11.800 --> 0:16:15.640 insist on staying at two percent and therefore with really 0:16:15.640 --> 0:16:19.080 weakening the labor market, or is it willing to tolerate 0:16:19.280 --> 0:16:23.440 slightly higher inflation because that's the reality of today's supply 0:16:23.520 --> 0:16:24.880 constrain global economy. 0:16:25.080 --> 0:16:28.320 We're speaking with Muhammad al Aarian Bloomberg opinion columnist and 0:16:28.360 --> 0:16:33.240 the chief economic advisor at Alliance. That is a big question, Muhammad, 0:16:33.320 --> 0:16:37.560 because this FED has really hammered home the target of 0:16:37.840 --> 0:16:41.720 two percent. They've really been laser focused on that. Do 0:16:41.840 --> 0:16:45.320 you see room from some of the commentary that we're 0:16:45.320 --> 0:16:47.760 hearing from this Federal Reserve that it could be open 0:16:48.280 --> 0:16:50.040 to a higher inflation target? 0:16:50.080 --> 0:16:53.520 And what would that mean for the US economy? 0:16:54.200 --> 0:16:57.600 So I don't think we'll ever hear this FED say 0:16:57.840 --> 0:17:01.120 we are revising our inflation target from two to say 0:17:01.160 --> 0:17:02.880 three percent. That's not going to happen. They're not going 0:17:02.960 --> 0:17:07.040 to explicitly revise up the inflation target because they've missed 0:17:07.040 --> 0:17:09.959 it for so long and by so much that they 0:17:10.000 --> 0:17:13.320 will feel that that will undermine the credibility. What they 0:17:13.359 --> 0:17:16.080 may do is continue to promise us two percent in 0:17:16.119 --> 0:17:22.240 the future, but tolerate I don't get to two percent 0:17:22.560 --> 0:17:25.560 very quickly. Now, what does that mean for the economy? 0:17:25.560 --> 0:17:27.720 I think ultimately the choice facing the FEED is the 0:17:27.720 --> 0:17:32.439 following Nason. Either they stick to two percent and with 0:17:32.840 --> 0:17:38.720 tipping the economy into recession, or they tolerate slightly high inflation. 0:17:40.400 --> 0:17:43.000 They don't push the economy into recession and they find 0:17:43.000 --> 0:17:45.960 out that that is stable, that it doesn't un anchor 0:17:46.040 --> 0:17:49.879 inflation or expectations. My hope is that they will opt 0:17:49.880 --> 0:17:53.400 for the second option, but we will have to wait 0:17:53.440 --> 0:17:53.800 and see. 0:17:54.280 --> 0:17:57.680 Well what could that mean though for market volatility? I mean, 0:17:57.720 --> 0:18:01.159 we've seen a lot of questioning in this market about 0:18:01.200 --> 0:18:04.280 whether the FED is serious about the message that it's 0:18:04.320 --> 0:18:06.760 putting out there. If we do see the sort of 0:18:06.960 --> 0:18:11.960 rhetorical focus on a two percent target but maybe not 0:18:12.040 --> 0:18:15.480 a realistic two percent target, what could that mean for 0:18:15.520 --> 0:18:16.480 market volatility? 0:18:17.840 --> 0:18:20.359 So, first, the sources of volatility we've seen in the 0:18:20.359 --> 0:18:26.119 fixed income market was unthinkable not so long ago. Everyday 0:18:26.440 --> 0:18:29.639 seven to ten basis points move is often on very little, 0:18:30.480 --> 0:18:33.399 So that's something else going on in the fix income market. 0:18:33.760 --> 0:18:37.840 What is more worrisome is the issue you raised, which 0:18:37.880 --> 0:18:41.440 is that the FED says things and the market totally 0:18:41.440 --> 0:18:44.480 ignored it. Last Friday was a perfect example of that. 0:18:45.240 --> 0:18:49.080 Chappout was very clear. He said it would be premature 0:18:49.520 --> 0:18:52.520 to talk about any interest rate cuts and he left 0:18:52.520 --> 0:18:56.919 the door open for interest rate hikes, and yet a 0:18:57.080 --> 0:19:01.199 market that had already rallied by four basis points in 0:19:01.240 --> 0:19:03.200 the front end on the second year. The second year, 0:19:03.560 --> 0:19:07.160 the two year, yield had come down by forty basis points, 0:19:07.840 --> 0:19:12.680 rallied another ten basis points, and that, you know, started 0:19:12.720 --> 0:19:18.720 a whole conversation yesterday about whether Pole was steamrolled by 0:19:18.760 --> 0:19:22.480 the market, whether FED pal was stiff armed by the market. 0:19:23.520 --> 0:19:27.919 The fact is that FED communication is not as impactful 0:19:27.960 --> 0:19:28.560 as it used to. 0:19:28.600 --> 0:19:31.800 Be, which gets to a question I've been wanting to 0:19:31.840 --> 0:19:34.719 ask you all morning long. Yeah, I mean, you've been 0:19:34.800 --> 0:19:38.720 very critical of FED messaging FED policy in the past. 0:19:38.760 --> 0:19:42.200 You've said that the FED waited too long to tackle inflation. 0:19:42.840 --> 0:19:45.040 How would you grade the Fed's performance now? 0:19:46.520 --> 0:19:49.800 So, I think they've played major ketchup, which they needed 0:19:49.840 --> 0:19:54.639 to do. So if you look at analysis and action 0:19:54.880 --> 0:19:59.560 where they had failed earlier, they have corrected that. They've 0:19:59.600 --> 0:20:03.680 also paid much more attention to the supervisory role, so 0:20:03.760 --> 0:20:08.399 that is good. Communications remains poor, and again we have 0:20:09.200 --> 0:20:12.040 examples of that over the last few weeks. So they 0:20:12.080 --> 0:20:15.679 still have a significant communication problem, and they still have 0:20:15.720 --> 0:20:19.040 a credibility problem. You know, the whole point of forward 0:20:19.119 --> 0:20:22.919 guidance is for the markets to listen to you and 0:20:22.960 --> 0:20:26.000 for the markets to do the heavy lifting for you. 0:20:26.800 --> 0:20:30.040 What we're seeing now is forward guidance. As we saw 0:20:30.119 --> 0:20:33.679 last Friday is being completely ignored by the market, And 0:20:33.840 --> 0:20:37.000 it is really interesting to me, Nathan, that the market 0:20:37.119 --> 0:20:40.440 is taking on the Fed on variable that the FED 0:20:40.520 --> 0:20:44.800 controls completely. I mean, think about that Fed. The market 0:20:44.840 --> 0:20:47.960 is basically telling the Fed, I don't care what you 0:20:48.040 --> 0:20:51.160 think about an indust rate that you set. I think 0:20:51.200 --> 0:20:54.200 you're going to do something completely different. And that's quite 0:20:54.200 --> 0:20:55.879 a statement from the market to the FED. 0:20:57.000 --> 0:20:59.600 So in our last minute, Muhammad, what would it take 0:20:59.760 --> 0:21:04.240 for the market and for you to get that credibility 0:21:04.280 --> 0:21:05.520 back from the Federal Reserve? 0:21:05.600 --> 0:21:07.320 What does the FED need to do to regain its 0:21:07.359 --> 0:21:08.480 credibility in your view? 0:21:10.320 --> 0:21:13.520 So first time, it just say that in terms of 0:21:13.520 --> 0:21:15.680 the outlook for twenty twenty four, I think the market 0:21:15.720 --> 0:21:17.840 should be listening more to the FED. That's why I 0:21:17.880 --> 0:21:19.760 don't think the Fed is going to end up validating 0:21:19.760 --> 0:21:22.480 what the market is pricing in for cuts. In terms 0:21:22.520 --> 0:21:25.760 of what it takes, takes a couple of things. One 0:21:26.320 --> 0:21:30.159 is something that different recent G thirty report on central 0:21:30.200 --> 0:21:33.480 bank stresses is for central banks to be more humble, 0:21:34.000 --> 0:21:38.159 to recognize that we live in a different world and 0:21:38.200 --> 0:21:41.320 they've got to have a much border mindset and much 0:21:41.320 --> 0:21:45.320 greater cognitive diversity, and the second thing will take is 0:21:45.320 --> 0:21:49.280 better accountability. The FED is not as accountable as it 0:21:49.280 --> 0:21:54.160 should be, and therefore, even when it makes mistakes, repeated mistakes, 0:21:54.200 --> 0:21:57.320 and they've made five different mistakes in the last few years, 0:21:57.640 --> 0:22:02.000