1 00:00:02,520 --> 00:00:08,440 Speaker 1: Bloomberg Audio Studios, podcasts, radio news send back to our 2 00:00:08,480 --> 00:00:11,560 Speaker 1: top story. Surging oil prices sending bond your tire across 3 00:00:11,560 --> 00:00:14,560 Speaker 1: the globe. Investors raising bet central banks will keep rates 4 00:00:14,560 --> 00:00:17,640 Speaker 1: on hold. The former Kansas City Fed president es the George, writing, 5 00:00:17,880 --> 00:00:20,600 Speaker 1: with oil prices surging over one hundred dollars a barrel, 6 00:00:20,640 --> 00:00:23,239 Speaker 1: inflation is sure to move higher. The Fed will want 7 00:00:23,280 --> 00:00:26,000 Speaker 1: to look through this price pressure, but it will likely 8 00:00:26,040 --> 00:00:30,360 Speaker 1: stay their hand for entering rate cuts or entertaining red cuts. 9 00:00:30,400 --> 00:00:33,120 Speaker 1: The former Fed president joins us now for more Es, So, 10 00:00:33,200 --> 00:00:35,280 Speaker 1: welcome to the program. Let's just get to that statement 11 00:00:35,320 --> 00:00:37,479 Speaker 1: and your experience too. I always want to lean on that. 12 00:00:37,560 --> 00:00:40,800 Speaker 1: You lift the twenty two energy shark. Can you frame 13 00:00:40,840 --> 00:00:44,280 Speaker 1: for our audience the similarities the differences between this moment 14 00:00:44,600 --> 00:00:46,400 Speaker 1: and that one. 15 00:00:46,880 --> 00:00:50,080 Speaker 2: Well, good morning, Jonathan, Yeah. I think I think the 16 00:00:50,200 --> 00:00:53,960 Speaker 2: uncertainty that we've talked about for some time is one 17 00:00:53,960 --> 00:00:56,520 Speaker 2: of the characteristics here that we have to remember. We 18 00:00:56,600 --> 00:01:01,160 Speaker 2: have been relying heavily on a consumer that has faced 19 00:01:01,360 --> 00:01:05,880 Speaker 2: significant price shock coming out of the pandemic. This is 20 00:01:05,880 --> 00:01:09,360 Speaker 2: a consumer that has felt the impact of the tariffs, 21 00:01:09,800 --> 00:01:12,800 Speaker 2: and they also have felt the uncertainty associated with a 22 00:01:12,920 --> 00:01:17,760 Speaker 2: job market that has shifted significantly, and so when we 23 00:01:17,840 --> 00:01:20,600 Speaker 2: rely on the consumer, as we do here in the US, 24 00:01:21,240 --> 00:01:24,280 Speaker 2: that becomes a real focal point. I think for trying 25 00:01:24,280 --> 00:01:28,200 Speaker 2: to understand now we have added a new shock, this 26 00:01:28,520 --> 00:01:32,720 Speaker 2: gasoline price at the pump. We understand that diesel prices 27 00:01:32,760 --> 00:01:35,160 Speaker 2: will be affected, which of course will feed into the 28 00:01:35,200 --> 00:01:37,920 Speaker 2: cost of transportation and other things. And I think it 29 00:01:38,040 --> 00:01:41,520 Speaker 2: creates a real point not just of uncertainty, but I 30 00:01:41,560 --> 00:01:44,760 Speaker 2: think heightened risk around consumer spending and growth as we 31 00:01:44,800 --> 00:01:45,319 Speaker 2: look ahead. 32 00:01:45,440 --> 00:01:47,800 Speaker 1: When you were at the Federalserve through the twenty two shock, 33 00:01:48,200 --> 00:01:51,920 Speaker 1: household balance sheets arguably much stronger and the labor market 34 00:01:52,160 --> 00:01:55,280 Speaker 1: was much tighter. Do you think differently about how this 35 00:01:55,360 --> 00:01:57,400 Speaker 1: price shock or the energy market will work its way 36 00:01:57,440 --> 00:01:59,840 Speaker 1: through the economy. 37 00:01:59,800 --> 00:02:02,400 Speaker 2: Yeah, I think you hear a lot about the K 38 00:02:02,640 --> 00:02:05,240 Speaker 2: shaped economy, and I think that will come into the 39 00:02:05,280 --> 00:02:07,800 Speaker 2: four now. We have really been relying on a group 40 00:02:07,880 --> 00:02:11,200 Speaker 2: of consumers that can power through this. But you can 41 00:02:11,240 --> 00:02:16,400 Speaker 2: only stress weaker household balance sheets that have again had 42 00:02:16,440 --> 00:02:19,280 Speaker 2: the benefit of having jobs. That has been really I 43 00:02:19,280 --> 00:02:22,280 Speaker 2: think one of the tailwinds here. But there is a 44 00:02:22,320 --> 00:02:24,800 Speaker 2: breaking point, I think, and so I think the FED 45 00:02:24,919 --> 00:02:29,040 Speaker 2: will have to be particularly focused on thinking about how 46 00:02:29,080 --> 00:02:32,560 Speaker 2: that consumer is going to be positioned today to be 47 00:02:32,680 --> 00:02:36,800 Speaker 2: able to look through this kind of additional price pressure. 48 00:02:37,200 --> 00:02:39,200 Speaker 3: As so, they could go one or two ways. On 49 00:02:39,200 --> 00:02:41,440 Speaker 3: one hand, you can make an argument for easing policy 50 00:02:41,720 --> 00:02:45,520 Speaker 3: to try to give lower income consumers a better scenario, 51 00:02:45,639 --> 00:02:48,639 Speaker 3: a better backdrop to meet this price shock. On the 52 00:02:48,680 --> 00:02:50,799 Speaker 3: other hand, you could say the FED has a role 53 00:02:50,880 --> 00:02:54,440 Speaker 3: to play to combat inflation. Which side of the equation 54 00:02:54,560 --> 00:02:55,080 Speaker 3: do you fit on? 55 00:02:56,400 --> 00:02:56,640 Speaker 1: Well? 56 00:02:56,800 --> 00:02:59,680 Speaker 2: The FED has been focusing on the labor market and 57 00:02:59,720 --> 00:03:05,400 Speaker 2: on weakness at I think the risk of inflation even 58 00:03:05,440 --> 00:03:09,560 Speaker 2: before this oil price shock. Now I think the FED 59 00:03:09,600 --> 00:03:12,720 Speaker 2: and you hear them increasingly talking about the risk of inflation. 60 00:03:13,480 --> 00:03:16,320 Speaker 2: They have allowed it to extend out for a period 61 00:03:16,320 --> 00:03:19,280 Speaker 2: of time. That now puts them in a very very 62 00:03:19,320 --> 00:03:23,080 Speaker 2: difficult position, I think, and understanding how they're going to 63 00:03:23,120 --> 00:03:27,000 Speaker 2: weigh their policy risk, whether they continue to think they 64 00:03:27,000 --> 00:03:31,360 Speaker 2: are as well balanced coming into this March meeting, I 65 00:03:31,360 --> 00:03:33,560 Speaker 2: think is going to be something to listen for here, 66 00:03:33,639 --> 00:03:37,880 Speaker 2: because you are going to have headline inflation. For sure, 67 00:03:38,000 --> 00:03:40,720 Speaker 2: we'll be getting more numbers than this week to see that. 68 00:03:41,560 --> 00:03:46,440 Speaker 2: And I think the calculus around keeping those inflation expectations 69 00:03:46,440 --> 00:03:49,760 Speaker 2: in the long run anchored is going to be a 70 00:03:49,800 --> 00:03:51,600 Speaker 2: point worth talking about rates. 71 00:03:51,600 --> 00:03:54,440 Speaker 3: Traders are pricing in rate hikes over at the ECB 72 00:03:54,640 --> 00:03:56,800 Speaker 3: as well as the Bank of England. Do you think 73 00:03:56,840 --> 00:03:59,320 Speaker 3: that as this progresses, if it does continue for a 74 00:03:59,360 --> 00:04:02,160 Speaker 3: longer period of time, that that's going to be a 75 00:04:02,200 --> 00:04:06,440 Speaker 3: scenario that's reflected in how the Federal Reserve is being priced. 76 00:04:07,840 --> 00:04:10,720 Speaker 2: Well. I think obviously a little bit different for the 77 00:04:10,840 --> 00:04:13,200 Speaker 2: US to think about that in the FED as it 78 00:04:13,280 --> 00:04:17,960 Speaker 2: contemplates its updated dot plots, But I do think it 79 00:04:18,160 --> 00:04:22,960 Speaker 2: stays their hand on being able to suggest that they 80 00:04:23,000 --> 00:04:27,359 Speaker 2: are looking to rate cuts, but maybe in a pause mode. 81 00:04:27,360 --> 00:04:30,960 Speaker 2: I think this kind of environment will really remind them 82 00:04:31,160 --> 00:04:34,880 Speaker 2: that inflation target has to be credible and they have 83 00:04:34,960 --> 00:04:38,320 Speaker 2: to keep focused on that, even if their tools right 84 00:04:38,320 --> 00:04:41,640 Speaker 2: now are in conflict. They are looking at a job 85 00:04:41,720 --> 00:04:45,919 Speaker 2: market that may be stable but has shown signs of weakness, 86 00:04:46,520 --> 00:04:49,560 Speaker 2: while they have been looking at inflation that continues not 87 00:04:49,600 --> 00:04:52,239 Speaker 2: only to be persistent, but as we've been talking about, 88 00:04:52,640 --> 00:04:55,000 Speaker 2: is now going to show some upward pressure. 89 00:04:55,279 --> 00:04:57,080 Speaker 1: Would you describe this lave and market as stable? 90 00:05:00,000 --> 00:05:02,680 Speaker 2: I consider it stable in the sense when you step 91 00:05:02,720 --> 00:05:05,280 Speaker 2: back and look at the unemployment rate, which is our 92 00:05:05,279 --> 00:05:08,320 Speaker 2: best gauge. I think of how that labor market looks, 93 00:05:08,720 --> 00:05:13,120 Speaker 2: it does mask what is underneath that surface of a 94 00:05:13,160 --> 00:05:16,039 Speaker 2: lot of moving parts. I think we're beginning to see 95 00:05:16,080 --> 00:05:20,000 Speaker 2: the real impact of some of the immigration policy hits here. 96 00:05:20,480 --> 00:05:24,360 Speaker 2: We're beginning to see the uncertainty, I would argue, play 97 00:05:24,360 --> 00:05:27,600 Speaker 2: out where businesses are happy to hire for positions they 98 00:05:27,640 --> 00:05:31,360 Speaker 2: feel confident about, but they're not going to move hard 99 00:05:31,440 --> 00:05:35,360 Speaker 2: and fast relative to the growth levels that we've seen. 100 00:05:35,480 --> 00:05:39,080 Speaker 2: So I think it's a tentative labor market in my view, 101 00:05:39,120 --> 00:05:42,560 Speaker 2: even though we continue to enjoy a relatively low unemployment rate. 102 00:05:42,600 --> 00:05:44,960 Speaker 1: That's the George always appreciate your time, thanks for jumping 103 00:05:44,960 --> 00:05:47,280 Speaker 1: on for us. The former Kansas City Fed president, an 104 00:05:47,279 --> 00:05:49,599 Speaker 1: individual who lived the Nagy Shelka twenty two at the 105 00:05:49,640 --> 00:05:52,640 Speaker 1: Federal Reserve talking about this Federal Reserve and a meeting 106 00:05:52,680 --> 00:05:55,360 Speaker 1: that takes place on the eighteenth. That's a week away 107 00:05:55,400 --> 00:05:58,440 Speaker 1: next Wednesday. That feels like a lifetime away. And if 108 00:05:58,440 --> 00:06:00,680 Speaker 1: this conflict is still on going with no sign of 109 00:06:00,680 --> 00:06:03,400 Speaker 1: an off ramp or the escalation, all bets are off 110 00:06:03,680 --> 00:06:04,599 Speaker 1: for the next nine months.