WEBVTT - Single Best Idea with Tom Keene: Rebecca Patterson & Ira Jersey

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Single best idea of post CPI. That's what we do

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<v Speaker 2>of PPI on Thursday and on the retail sales. Everybody

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<v Speaker 2>hanging on this, and of course I love what Neil

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<v Speaker 2>Duddy called the tariff derangement syndrome. And we'll have to

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<v Speaker 2>see just all the cross currents that are going on.

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<v Speaker 2>We had a lot of good conversations. Constance Hunter of

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<v Speaker 2>EIU got us through the inflation report. Jason Furman out

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<v Speaker 2>on Twitter from Harvard with his wonderful four annualized statistics

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<v Speaker 2>one month, three months, six month, twelve month, and on

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<v Speaker 2>and on. I saw twenty eight different flavors of where

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<v Speaker 2>we're heading on inflation. I'll let you decide. We started

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<v Speaker 2>strong with Rebecca Patterson from the Council on Foreign Relations.

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<v Speaker 2>She talked about regime chain.

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<v Speaker 3>I think we're in a new regime for inflation. I

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<v Speaker 3>think we're in a new regime for bond yields. So

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<v Speaker 3>if the economy slows a lot, which Constant Constance was

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<v Speaker 3>talking about right before me, if the economy slows enough,

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<v Speaker 3>that's going to help pull inflation down. But that's not

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<v Speaker 3>a situation anyone wants right. Usually you get deflation when

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<v Speaker 3>you have a deep recession.

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<v Speaker 2>We don't want that.

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<v Speaker 3>But I think for the Federal Reserve, I was trying

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<v Speaker 3>to look at when is the last time we got

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<v Speaker 3>this rate cuts with inflation above target and the job

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<v Speaker 3>market softening? But okay, okay, nineteen ninety five. So at

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<v Speaker 3>the time they did three twenty five basis point insurance cuts,

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<v Speaker 3>inflation was running about two point three, so lower than

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<v Speaker 3>where we are now. The job market was okay, but

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<v Speaker 3>the economy broadly was softening, and so they said we're

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<v Speaker 3>going to try to massage this a little bit, and

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<v Speaker 3>the stock market obviously loved it. It was up about

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<v Speaker 3>fifteen percent over the three cut period the SMP, and

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<v Speaker 3>I think that's probably what we're going to get this time.

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<v Speaker 3>I don't know if it's one cut, two three. I

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<v Speaker 3>lean towards less frankly because of the inflation risk, and

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<v Speaker 3>I think they'll do a cut in September. It's so

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<v Speaker 3>priced in it would be very difficult for the Fed

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<v Speaker 3>to argue against that. But Jackson hole later this month.

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<v Speaker 3>I believe it's August twenty first, twenty third. That'll give

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<v Speaker 3>us some more color. I think on the sidelines of

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<v Speaker 3>where they're leaning.

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<v Speaker 2>Rebecca Patterson just brilliant there on bringing it back to

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<v Speaker 2>the ninety four ninety five analogy, and it's not the same,

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<v Speaker 2>but nevertheless the history is important to note. Ira Jersey

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<v Speaker 2>with us with Bloomberg Intelligence trying to parse out the

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<v Speaker 2>bond market of bills, notes and bonds. Here's Ira Jersey.

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<v Speaker 4>What's interesting is that we're priced now for a September

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<v Speaker 4>rate cut and a December rate cut. My feeling is

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<v Speaker 4>is that once the Fed starts to move, they're going

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<v Speaker 4>to move and keep going. They're not going to skip

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<v Speaker 4>a meeting just at random. So I think that if

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<v Speaker 4>they do cut in September, they'll also go in October

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<v Speaker 4>and then December. Now will they go more than say

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<v Speaker 4>another you know, four cuts and caught a one hundred

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<v Speaker 4>basis points or will they cut more than that? Still

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<v Speaker 4>an open question. I suspect that ultimately they will cut

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<v Speaker 4>to below three percent. So you're talking about one hundred

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<v Speaker 4>and fifty basis points one hundred and seventy five basis

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<v Speaker 4>points of ray cuts this cycle. Well, keep in mind, Tom,

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<v Speaker 4>like you know, the way that they're thinking about this.

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<v Speaker 4>Look inflation right now is two and a half percent

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<v Speaker 4>FED funds is over four percent, so that means you

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<v Speaker 4>have a one and a half percent or more than

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<v Speaker 4>one and a half percent a real funds rate. So

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<v Speaker 4>to get the neutral under be kind of there a

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<v Speaker 4>simplistic view of the world. They should could be able

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<v Speaker 4>to cut one hundred and seventy five base points and

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<v Speaker 4>just be at neutral.

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<v Speaker 2>That's what we like. Rebecca Patterson to Ira Jersey just

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<v Speaker 2>just absolutely brilliant analysis. Some differences there. I think Ira

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<v Speaker 2>looking more aggressively out for raycuts and Rebecca, But at

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<v Speaker 2>the same time, it's the conversation that we're having, given

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<v Speaker 2>this moment that we're living in, and we'll go to

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<v Speaker 2>Jackson Hall here at the end of August all I

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<v Speaker 2>thought it'd be a snooze fest. Wrong. I'd scheduled climbing

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<v Speaker 2>to the top of the tetons. That's not going to

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<v Speaker 2>happen this time. Will be too busy on your podcast

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<v Speaker 2>across the nation on Apple, on Spotify, and on YouTube podcasts.

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<v Speaker 2>It's single best idea