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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App.

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Speaker 3: Former New York Fed President Bill Dudley, writing in his

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Speaker 3: latest Bloomberg opinion piece, US Federal Reserve and it's chair

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Speaker 3: Jerome Powell are greatly choosing not to act on any

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Speaker 3: assumptions about what Donald Trump might do as president.

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Speaker 4: That said, if he falls.

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Speaker 3: Through on his more extreme campaign promises, they'll struggle to

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Speaker 3: contain the economic consequences, a problem that equity investors ignore

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Speaker 3: at their peril. Bill joins us, Now, Bill, you've been.

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Speaker 5: In the room.

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Speaker 3: You understand what this is like. Give us a sense,

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Speaker 3: potentially of this tension that might grew between the Fed

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Speaker 3: chair and President elect Trump.

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Speaker 6: Well on the sharp run, there's not going to be

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Speaker 6: much atention because I think the Federal Reserve is still

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Speaker 6: going to cut interest rates a bit further. But the

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Speaker 6: longer term, if you look at what the President elect

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Speaker 6: Trump is proposing, higher terrorists, deportations, and fiscal steamless, that's

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Speaker 6: going to tend to boost inflation, disrupt economic growth because

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Speaker 6: terrorists will corrupt, force people to reorient their supply chains,

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Speaker 6: and it's going to make the economic environment more difficult.

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Speaker 6: And so the Federal Reserve ultimately is going to react

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Speaker 6: to that. But as Paul said in his press conference

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Speaker 6: last week, we don't assume, we don't guess, we don't speculate,

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Speaker 6: So they're not going to act until they actually see

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Speaker 6: the Trump agenda actually take form. So don't expect any

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Speaker 6: near term response from the Fed. But in the longer term,

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Speaker 6: I think if Trump does what he said he's going

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Speaker 6: to do, it's going to be difficult to economic ride well. Bill.

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Speaker 4: As you point out, though, if Trump does anything big

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Speaker 4: or abrupt, in your words, the central banks response will

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Speaker 4: occur too late to mitigate fully the economic impact. So

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Speaker 4: what is the needle to thread to not respond too

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Speaker 4: soon when we don't know the extent of things, but

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Speaker 4: also not waiting too late that you just can't do

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Speaker 4: anything at that moment.

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Speaker 6: Well, I do think there's a risk that if Trump

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Speaker 6: is very aggressive in terms of his policy choices, that

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Speaker 6: the Federal Reserve will be late. I'll be waiting to

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Speaker 6: see what happens, and then when it does happen, it'll

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Speaker 6: be bigger than expected and it'll have bigger consequences for

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Speaker 6: growth and inflation. At that point, I think the Federal

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Speaker 6: Reserve would be a little bit behind the curve and

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Speaker 6: they might have to actually catch up. But that's not

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Speaker 6: a near term story. That's probably late twenty twenty five,

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Speaker 6: first half of twenty twenty six, just at the time

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Speaker 6: that Paul is wrapping up his term.

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Speaker 4: Is Chuir, Good morning to you.

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Speaker 7: Bill. In your opinion piece this morning, you talk about

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Speaker 7: an oddly divergent reaction from the bomb market and the

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Speaker 7: equity market. I want to focus on the bomb market

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Speaker 7: because it has been a wild ride. This morning. We

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Speaker 7: waken up again and the bars have been reawakened. The

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Speaker 7: question I put to you is this, we don't know

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Speaker 7: the tariff, we don't know the tax, we don't know

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Speaker 7: anything about the fiscal policy. Exactly with some broad parameters.

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Speaker 7: When you look at the term premium in the bond market,

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Speaker 7: the debate is how much more term premium there needs

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Speaker 7: to be if there's going to be such a large

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Speaker 7: deficit run. Some of the numbers throwing out there are

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Speaker 7: pretty obscure, but we on the brink of where there

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Speaker 7: needs to be a lot more term premium to hold

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Speaker 7: US treasuries.

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Speaker 6: Well, I think that there needs to be some more

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Speaker 6: more tanient term premium to reflect the uncertainty about the

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Speaker 6: economic outlook and the unsustainable fiscal paths of the United States.

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Speaker 6: That's one area where Pable actually did speak out last week.

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Speaker 6: He did say that the fiscal path of the United States

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Speaker 6: is unsustainable and if President elect Trump does all the

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Speaker 6: things he wants to do in terms of corporate tax reduction,

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Speaker 6: extending the twenty seventeen tax cuts, the fiscal situation is

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Speaker 6: going to worsen, not improve going forward. So I think

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Speaker 6: that the path to higher bodis is the most likely path.

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Speaker 6: The other thing that's happened, of course, is people have

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Speaker 6: change their expectations of where the Fed's going in terms

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Speaker 6: of short term interest rates. A couple of months ago,

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Speaker 6: people are respecting the federal fund rate to bottom below

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Speaker 6: three percent. Now the markets are expecting the federal fund

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Speaker 6: rate to bottom at around three and three quarters percent.

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Speaker 6: So if you have a higher federal fund rate, then

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Speaker 6: you're going to have a higher bondiold just by construction.

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Speaker 7: So the direction of travel you say, is higher in yields.

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Speaker 7: When you look at the response from Power at that

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Speaker 7: news conference, and we've touched on this with various people,

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Speaker 7: are we going to hear much more? I don't know

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Speaker 7: what the right word is, aggressive, demonstrative, exacting language from

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Speaker 7: the FED? What word would you choose that the Fed's

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Speaker 7: rhetoric needs to become more emboldant in twenty twenty five.

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Speaker 6: I think the FED is actually going to be very

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Speaker 6: mild in terms of their language. They're going to set

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Speaker 6: monetary policy based on what they think is appropriate given

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Speaker 6: the growth and inflation. I'll look and as you noticed,

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Speaker 6: it's going to take time for that to manifest this

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Speaker 6: stuff because we don't really know exactly what the President

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Speaker 6: Electrump is going to do, so I think the language

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Speaker 6: will be actually not combative at all. You saw last week,

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Speaker 6: you know, reporters asked Trump Powell about you know, what's

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Speaker 6: how you can react to the Trump policy mix and

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Speaker 6: pile basis in no common So I think then in

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Speaker 6: the very short term, the Fed is going to keep

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Speaker 6: its head down and conduct policy based on how the

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Speaker 6: economy is doing right now.

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Speaker 4: Those who can take a step back to the reaction

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Speaker 4: that we've seen here and then now, as you write

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Speaker 4: in your column, you find the stock market response baffling.

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Speaker 4: Equity bowls have been really excited about the prospects of

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Speaker 4: tax cuts and deregulation. What are they missing?

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Speaker 6: Well, I think that the stock market has this notion

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Speaker 6: that we're going to have deregulation, Uh, we're going to

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Speaker 6: have corporate tax cuts, and that's going to boost corporate

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Speaker 6: profit margins. And I think that's probably part fair part

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Speaker 6: of the argument. But I think what they're missing is

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Speaker 6: all the consequences of the other parts of the Trump agenda.

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Speaker 6: Higher tariffs, higher inflation, they mean disruption, lower productivity growth,

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Speaker 6: deportations affect the supply of labor, and unsustainable fiscal path

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Speaker 6: means higher interest rates. When I look at the bond

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Speaker 6: market versus the stock market, I think the bond market

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Speaker 6: at bond mules rise that's been put increasing pressure on

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Speaker 6: the stock market. We're starting from points that the stock

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Speaker 6: market evaluations are already extremely high, So if bonials go up,

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Speaker 6: I think that will weigh on the stock market. I

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Speaker 6: would not be a big stock market bowl at this point.

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Speaker 3: Bill, given that backdrop, how difficult is this December meeting

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Speaker 3: going to be for the Fed?

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Speaker 6: I don't think it's gonna be that difficult, because I

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Speaker 6: think Paul laid it out pretty clearly last week. They

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Speaker 6: think that the economy is the risk of inflation, and

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Speaker 6: the layer market are roughly in balanced. They think monetary

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Speaker 6: policy is still restrictive, so that they're heading back towards

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Speaker 6: neutrals slowly. So I think at twenty five basic point

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Speaker 6: rate to cut in December is still the most likely case. Now.

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Speaker 6: If the economy continues to stay stronger than expected and

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Speaker 6: inflation stays stickier than expected, then that December rate cut

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Speaker 6: might be the last rate cut for a while. But

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Speaker 6: that really depends on the data. The Fed right now

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Speaker 6: is really data dependent in terms of they're going. The

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Speaker 6: direction of rates is downward, but slowly because the Communists

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Speaker 6: continued to perform pretty well on the growth side.

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Speaker 3: Last week, Powell was asked a number of time by

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Speaker 3: journalists about what would happen if President elect Donald Trump

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Speaker 3: tried to remove him, and this morning in the Wall

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Speaker 3: Street Journal they talked about twenty eighteen and Powell then

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Speaker 3: went what they're right reporting to Treasury Secretory Stephen Minuchin

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Speaker 3: and said that he would fight his removal of salt

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Speaker 3: by the president. Are you concerned about the independence of

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Speaker 3: this Fed?

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Speaker 6: Well, I think you have to always be concerned about

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Speaker 6: the independence of the FED when you have a president

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Speaker 6: that seems to be a president elect that seems to

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Speaker 6: be hostile to the Fed's independence. And the reason why

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Speaker 6: we want an independent central bank is because historically independent

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Speaker 6: central banks actually do a better job in terms of

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Speaker 6: managing monitoring policy to achieve the outcomes that we want

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Speaker 6: in terms of growth and inflation. So independence is really

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Speaker 6: driven by the fact that you actually get better outcomes.

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Speaker 6: That people think that the Federal serve is going to

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Speaker 6: change course based on pressure from the President, that increases

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Speaker 6: uncertainty and risk, and it also makes the FED very

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Speaker 6: short sighted in terms of its policy agenda. So I

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Speaker 6: think the FED, you know, basis of the Fed's going

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Speaker 6: to try to maintain its independent poull I think it

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Speaker 6: was very very clear last week when asked about whether

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Speaker 6: he's playing the resign early no, whether Trump has the

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Speaker 6: right to fire him legally, no, So Pob basically said

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Speaker 6: pretty clearly, I'm going to finish out my term, which

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Speaker 6: ends in May twenty twenty six, and so trying to

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Speaker 6: close off the debate.

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Speaker 3: On that whole issue not permitted under the law. He

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Speaker 3: kept saying that no, no, no, And the Wall Street

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Speaker 3: Journal gives some insight in so he knows this because

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Speaker 3: he went through it in twenty eighteen. Former New York

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Speaker 3: Fed President Bill Dudley, thank you so much for your

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Speaker 3: time and insight this morning. All right, let's turn back

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Speaker 3: to US politics. Donald Trump's next cabinet beginning to take shape.

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Speaker 3: Trump picking former New York Congressman Lee Zelden to lead

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Speaker 3: the Environmental Protection Agency. Trump's saying Zelden will quote ensure

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Speaker 3: fair and swift regulatory decisions. They'll be enacted in a

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Speaker 3: way to unleash the power of American businesses. Joining us

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Speaker 3: now as Tom Steyer, former Democratic presidential candidate, of course

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Speaker 3: and the co founder of Galvanized Climate Solutions, thank you

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Speaker 3: so much for joining us around the table.

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Speaker 4: So we're going to get a.

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Speaker 3: Trump two point out. Potentially they're going to roll back

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Speaker 3: a lot of the work the Biden administration did. When

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Speaker 3: it comes to the energy transition, how much does it

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Speaker 3: matter because the market is already off to the races.

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Speaker 1: Well, let's talk for a second about what's really driving

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Speaker 1: the energy transition, which is economics, prices, and markets. Over

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Speaker 1: the last four years, solar prices have gone down by

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Speaker 1: sixty percent. Solar sales have gone up four x. If

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Speaker 1: you look at what's happened to batteries last year, just

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Speaker 1: in one year they have in China, the price had

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Speaker 1: If you look at what's going on in terms of

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Speaker 1: ev sales, we look at it in the United States,

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Speaker 1: still going up, but not going up that fast. If

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Speaker 1: you look at what's going on in China, they went

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Speaker 1: up eleven percent month over month. They went up fifty

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Speaker 1: percent year over year. When you look around the world,

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Speaker 1: what's going on is abundant renewable energy. That is actually

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Speaker 1: the story. What we're seeing in the world is a

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Speaker 1: huge move to renewable energy and the energy transition happening

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Speaker 1: much faster than people in the United States understand. While

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Speaker 1: we're talking about oil and gas, which is basically a

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Speaker 1: stagnant market.

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Speaker 4: So what does that mean to have a drill baby

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Speaker 4: drill policy at a time where you already have peak

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Speaker 4: oil domestic production in the US and you have this

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Speaker 4: transformation you're talking about.

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Speaker 1: So let's put some numbers on it so that we

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Speaker 1: can really understand what we're talking about. The US is

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Speaker 1: the biggest oil and gas producer in the world. We

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Speaker 1: do about thirteen and a half million barrels a day.

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Speaker 1: If we do drill babel baby drill, we could take

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Speaker 1: thirteen and a half and move it to fourteen. In

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Speaker 1: the context of the world oil market, we're doing about

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Speaker 1: one hundred and two million barrels a day. That is

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Speaker 1: not This is a stagnant market. Even Opek thinks that

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Speaker 1: the total amount of oil sales will go up by

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Speaker 1: eight percent in the next twenty five years. Solar sales

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Speaker 1: went up four x in the last four years.

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Speaker 4: So what we're really.

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Speaker 1: Seeing is an exploding clean energy market. We're not going

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Speaker 1: to ever, We're not running out of oil and gas.

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Speaker 1: But what we're seeing is an abundance of renewable energy

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Speaker 1: and an abundance of new technologies that are competing on price.

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Speaker 1: You know, I wrote a book cheaper, faster, better, how

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Speaker 1: we win the climate war? And really that's all we're

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Speaker 1: seeing is market forces business. How do you win cheaper,

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Speaker 1: it's cheaper, faster, it's faster and better. And so when

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Speaker 1: we look around the world, governments can't repeal markets. China

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Speaker 1: can't repeal markets, neither can Donald Trump. What we're seeing

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Speaker 1: is people around the world acting based on prices, what's

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Speaker 1: in their own interest and what's the best part.

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Speaker 4: There is another large source of energy demand that's really

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Speaker 4: ramping up quickly besides the renewables, or it goes in

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Speaker 4: tantem with the renewables, and that's the energy needed to

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Speaker 4: power AI. Basically the amount equivalent to large cities needed

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Speaker 4: to power just maybe even just metas AI demand. When

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Speaker 4: you look at that, you look at the Trump White

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Speaker 4: House push or the coming White House for deregulation, is

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Speaker 4: there red tape that needs to be cut anyway to

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Speaker 4: allow for this huge source of energy that's going to

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Speaker 4: be needed to power the future?

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Speaker 1: Of course there is. I mean, when you look at

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Speaker 1: the United States, we are very very slow in terms

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Speaker 1: of permitting, we're very very slow in terms of adding

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Speaker 1: new clean energy products or oil and gas projects to

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Speaker 1: the grid. So yes, we have a very slow moving

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Speaker 1: process because so many people are allowed to weigh in.

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Speaker 1: It just takes so much time. And of course we

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Speaker 1: should be moving much faster. But when we really look

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Speaker 1: globally about where the new we're talking AI can move

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Speaker 1: US energy consumption by twenty percent over the next decade.

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Speaker 1: That's a huge move for us. But if you look

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Speaker 1: around the world, if you see what's happening in Asia,

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Speaker 1: Southeast Asia and South Asia, like in India, it is

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Speaker 1: growing exponentially. They're going to do five times as much

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Speaker 1: electricity by twenty fifty five times as much. And so

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Speaker 1: when we really think about what's going on in terms

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Speaker 1: of what's driving prices, what's driving volumes around the world,

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Speaker 1: where the real business is what we're seeing is it's

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Speaker 1: really in renewables.

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Speaker 7: It's interesting, just as we touch on that oil. On

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Speaker 7: that oil subject, OPEC has released their report oil consumption

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Speaker 7: is done eighteen percent since July. This is the fourth

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Speaker 7: consecutive cut that they have in terms of demand, and

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Speaker 7: that's to do the chinel. I want to focus on

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Speaker 7: one of the things that erks Donald Trump's Donald Trump,

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Speaker 7: we know is other people eating America's lunch and any

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Speaker 7: move that he makes to step back on IRA, which

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Speaker 7: has done very well in the Red States.

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Speaker 1: By the way, overwhelmingly in the words in the Red States.

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Speaker 7: So just how aggressive a pullbacks are going to be,

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Speaker 7: because I can tell you what, there's a lot of

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Speaker 7: European and global CEO city and out there are going

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Speaker 7: I'm ready to eat your lunch. If you don't want

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Speaker 7: to do if you don't want to build this business,

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Speaker 7: We're ready to do it.

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Speaker 1: Look, that is the point I'm trying to make, which

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Speaker 1: is America has to compete America. If we're going to

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Speaker 1: this transition is happening, America should be leading it. This

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Speaker 1: is an absolute necessity for us to be the leading

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Speaker 1: economic country in the world, the leading political country in

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Speaker 1: the world. And I think it's going to be clear

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Speaker 1: no matter how mister Trump feels about what should happen,

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Speaker 1: what is happening is this transition, and American companies can

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Speaker 1: absolutely dominate here. But we have to choose to do it,

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Speaker 1: and we have to put the money into it, and

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Speaker 1: we have to put the manpower into it. So I

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Speaker 1: look at this as a great chance for business. And

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Speaker 1: it's just business. This is just about what is cheaper, faster,

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Speaker 1: and better, and that is traditionally what Americans have done

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Speaker 1: really well at.

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Speaker 7: Well, then what level of stimulus could we see from him?

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Speaker 7: What level of incentive could we see for these areas.

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Speaker 7: He's been very very very very heavy on the rhetoric

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Speaker 7: against a lot of the incentives that were in the IRA,

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Speaker 7: et cetera. So how does he temper without how does

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Speaker 7: he balance this?

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Speaker 1: I really think that what's going to drive this is

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Speaker 1: American business that it's of course the incentives of the

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Speaker 1: IRA were important in terms of deployment of solar, of wind,

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Speaker 1: and the sale of evs. But the truth is all

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Speaker 1: of those things are going to keep happening globally. All

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Speaker 1: of those things are going to keep happening in the

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Speaker 1: United States. I mean, if you think about the idea

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Speaker 1: of solar prices going down by sixty percent, if that

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Speaker 1: would be oil going to thirty two bucks from eighty

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Speaker 1: bucks to thirty two bucks, that didn't happen. But you

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Speaker 1: know something, it's not stopping down sixty We'll go down

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Speaker 1: another sixty percent and they'll be at the equivalent of

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Speaker 1: fifteen bucks tom or the barrel of oil. If the

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Speaker 1: that's dominance If the.

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Speaker 3: Private sector is doing this already, though, and there was

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Speaker 3: concerns that spending too much at a time on inflation

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Speaker 3: at one point during the Biden presidency hit more than

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Speaker 3: nine percent, then what was the point of something like

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Speaker 3: the Inflation Reduction Act. The former president future president and

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Speaker 3: continues to talk about that he's happy with clean energy.

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Speaker 3: He has someone like Elon must surrounding him, but he

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Speaker 3: thinks it should be driven by the private sector.

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Speaker 1: It is going to be driven by the private sector.

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Speaker 1: It is driven by the private sector. I think when

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Speaker 1: I think about the Inflation Reduction Act, I think about

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Speaker 1: an attempt to try to subsidize companies that are clean,

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Speaker 1: to try and put them on a level playing field

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Speaker 1: with companies that are polluting. That's really how I think

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Speaker 1: about it. But over time, when these prices come down,

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Speaker 1: the subsidies go the need for subsidies goes away. And

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Speaker 1: that's really what Let me give you one example. Over

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Speaker 1: the last three years, Texas has tripled the amount of

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Speaker 1: solar it uses Texas they are by far the biggest

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Speaker 1: wind producer in the United States. The four biggest wind

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Speaker 1: producers in the United States are all deep red states.

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Speaker 1: They're not doing it because they love the concept of renewables.

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Speaker 1: They're doing it because it's cheaper, because it's good business.

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Speaker 1: And that's what we're seeing is in fact, cheaper, faster,

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Speaker 1: better marks, prices, economics. That's what's driving this world. People

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Speaker 1: are talking, people are saying things, but really what's going

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Speaker 1: on behind the scenes is just you know, you guys

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Speaker 1: were talking about the dollar. What's driving the dollar? What's

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Speaker 1: driving interest rates, prices and markets? You can't revoke them.

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Speaker 1: We're in a world where, in fact we are going

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Speaker 1: a very straightforward way, and we can talk about it

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Speaker 1: and the sentiment can move back and forth. But if

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Speaker 1: you look at the first Trump administration, actually clean energy

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Speaker 1: did really well.

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Speaker 5: It did.

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Speaker 1: Yes, there was a lot of rhetoric, there was a

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Speaker 1: lot of anger, there was a lot of emotion, but

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Speaker 1: the fact of the matter is the world just got

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Speaker 1: powering right through us. Tom.

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Speaker 3: We thank you for your time this morning.

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Speaker 1: It's great to see it.

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Speaker 3: Tom Styr of Galvani's Climate Solutions. According to Bank of

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Speaker 3: America's new Consumer Checkpoint, the consumer shows solid momentum as

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Speaker 3: we head into the holidays. The twenty twenty four Bank

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Speaker 3: of America Holiday Survey suggests people are planning to spend

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Speaker 3: twenty one hundred dollars outside of typical obligations and necessities

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Speaker 3: this holiday season. That's up seven percent year over year.

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Speaker 3: Joining us now, David Tinsley of a Bank of America Institute.

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Speaker 4: David, thanks so much for joining us right through your report.

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Speaker 3: So let me just get this straight. Are you seeing

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Speaker 3: any signs at all of a consumer that is slowing down?

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Speaker 1: Yeah?

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Speaker 5: I would tend to take issue with the interview you

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Speaker 5: were just showing there saying that the consumer looks stretched

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Speaker 5: and is potentially slowing. I mean, in our data, what

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Speaker 5: we're seeing is our credit and debit card data was

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Speaker 5: up one percent year on year in October, and that's

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Speaker 5: a pretty good number for this data series. And then,

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Speaker 5: of course, if you overlay that with the i think

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Speaker 5: four months in a row rise in consumer sentiment in

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Speaker 5: the Michigan survey, and then when you look in our

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Speaker 5: data again at what's going on in terms of way

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Speaker 5: is going into people's bank accounts, the year on year

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Speaker 5: growth there I think is around two percent or so

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Speaker 5: across all income cohort So it's not obvious. I don't

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Speaker 5: think to us that the consumer is slowing. I think

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Speaker 5: we would characterize the situation as continued forward momentum.

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Speaker 4: David Emery and I've been talking about all morning different

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Speaker 4: companies saying, look, consumers are putting off big ticket purchases

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Speaker 4: until they know the outcome of this American election. Did

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Speaker 4: you see the same pattern and some of the spending

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Speaker 4: that there's going to be some form of financial firepower

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Speaker 4: unleashed now with the election behind us.

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Speaker 5: You know, that's an interesting question. So in last month's checkpoint,

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Speaker 5: we did note that we saw some consumer durable purchases,

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Speaker 5: so big ticket items, some slow down there. So it

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Speaker 5: could be that there is some pent up consumer demand

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Speaker 5: in those sorts of areas. But overall the position is

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Speaker 5: not is not a bad one in any case. I

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Speaker 5: mean what we do see in our data, and I

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Speaker 5: think this speaks to the kind of differential corporate experience

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Speaker 5: is the consumer continues to be valuing experiences over goods goods,

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Speaker 5: So in other words, it's meals out lodging in our fairs,

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Speaker 5: those kind of things are the items of particular strength

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Speaker 5: more so than on the goods side. So I think

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Speaker 5: that explains some of the differential corporate newsflow on this.

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Speaker 3: David Tinsley, we Thank you so much for your time.

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Speaker 3: David Tinsley, a Bank of America Institute on the Health

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Speaker 3: of the consumer.

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