1 00:00:02,520 --> 00:00:08,920 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's ring on Rich Clarida. 2 00:00:09,080 --> 00:00:11,440 Speaker 1: He is Global Economic Advisor at Pimco. He is also 3 00:00:11,480 --> 00:00:13,320 Speaker 1: a former Federal Reserve Vice chairman. 4 00:00:13,600 --> 00:00:13,800 Speaker 2: Rich. 5 00:00:14,000 --> 00:00:16,600 Speaker 1: Always a pleasure to speak with you. Give us your 6 00:00:16,680 --> 00:00:19,440 Speaker 1: read on the US economy right now, because the economic 7 00:00:19,520 --> 00:00:22,880 Speaker 1: data seem to suggest that it's holding on pretty well. 8 00:00:23,680 --> 00:00:27,840 Speaker 1: It's solid, and the labor market is also not deteriorating, 9 00:00:27,880 --> 00:00:30,560 Speaker 1: even as inflation seems like it's on the right path. 10 00:00:31,640 --> 00:00:34,400 Speaker 3: Well, Hi, Scarlett, Yes, as we used to say during 11 00:00:34,560 --> 00:00:36,559 Speaker 3: my time with the Fed, the US economy is in 12 00:00:36,600 --> 00:00:37,200 Speaker 3: a good place. 13 00:00:37,240 --> 00:00:40,440 Speaker 2: And it is. It's been remarkably resilient. 14 00:00:40,920 --> 00:00:44,760 Speaker 3: Growth for twenty twenty five will probably come in north 15 00:00:44,840 --> 00:00:47,440 Speaker 3: of two percent finishing strong. 16 00:00:47,520 --> 00:00:49,320 Speaker 2: Inflation has been basically flat. 17 00:00:49,360 --> 00:00:52,040 Speaker 3: It did not really move up as a result of 18 00:00:52,080 --> 00:00:55,360 Speaker 3: the tariffs. We've had strong capital spending in the tech sector. 19 00:00:55,800 --> 00:00:58,320 Speaker 3: Now in twenty twenty six, you've got the big Beautiful 20 00:00:58,320 --> 00:01:02,280 Speaker 3: Bill which is providing a fiscal impulse. You've got commitments 21 00:01:02,320 --> 00:01:06,040 Speaker 3: from foreign countries and companies to invest in the US, 22 00:01:06,080 --> 00:01:10,520 Speaker 3: and obviously the capital spending boom and the tech sector continues, 23 00:01:10,920 --> 00:01:14,039 Speaker 3: and so indeed, I think you summarized it, Well, the 24 00:01:14,080 --> 00:01:15,880 Speaker 3: economy is in a pretty good place. 25 00:01:16,240 --> 00:01:19,560 Speaker 1: It's in a pretty good place, certainly by the based 26 00:01:19,600 --> 00:01:21,880 Speaker 1: on the headline economic indicators. Yet when you look at 27 00:01:21,920 --> 00:01:25,680 Speaker 1: the anecdotal and here I'm referring to commentary from airlines 28 00:01:25,720 --> 00:01:28,800 Speaker 1: to PNG to three M so far this earning season, 29 00:01:28,840 --> 00:01:32,000 Speaker 1: a lot of it's focused on uncertainty, on caution, on 30 00:01:32,360 --> 00:01:35,480 Speaker 1: what they're calling low consumer confidence. Rich, how much do 31 00:01:35,520 --> 00:01:38,400 Speaker 1: you read into this downbeat commentary from companies on the 32 00:01:38,400 --> 00:01:39,200 Speaker 1: front line. 33 00:01:39,760 --> 00:01:42,199 Speaker 3: Well, you know, Scrolett, I think both can be true 34 00:01:42,200 --> 00:01:45,720 Speaker 3: at the same time, in the sense that you have 35 00:01:45,760 --> 00:01:48,880 Speaker 3: a very positive impulse from the tech sector, from tech 36 00:01:48,920 --> 00:01:53,080 Speaker 3: capital investment, and obviously households that own a lot of 37 00:01:53,120 --> 00:01:55,800 Speaker 3: stocks and own their own home have done quite well 38 00:01:55,960 --> 00:01:58,000 Speaker 3: because of the wealth effect, you know, the k shape 39 00:01:58,000 --> 00:02:01,400 Speaker 3: economy that you talked about. As you move outside of 40 00:02:01,440 --> 00:02:04,600 Speaker 3: those sectors, I think there is it is a more 41 00:02:04,600 --> 00:02:07,960 Speaker 3: of an uneven a story, and I think uncertainty is 42 00:02:08,520 --> 00:02:11,919 Speaker 3: more relevant. And this may well be a year when 43 00:02:11,960 --> 00:02:15,760 Speaker 3: the aggregates and averages are hiding a lot of interesting 44 00:02:15,800 --> 00:02:17,679 Speaker 3: differences in the economy. 45 00:02:17,840 --> 00:02:19,720 Speaker 1: All right, let's turn out to the Federal Reserve. 46 00:02:19,840 --> 00:02:20,040 Speaker 2: Rich. 47 00:02:20,320 --> 00:02:23,560 Speaker 1: President Trump saying, of course, that he has finished interviewing 48 00:02:23,600 --> 00:02:26,480 Speaker 1: candidates to serve as a next FED chair and earlier 49 00:02:26,600 --> 00:02:30,600 Speaker 1: London Business School lecturer Rebecca Honks appeared on Bloomberg Surveillance 50 00:02:30,639 --> 00:02:33,000 Speaker 1: where she gave her take on who Trump may choose. 51 00:02:33,080 --> 00:02:37,320 Speaker 4: Take listen, We've really had different styles of leadership over 52 00:02:37,360 --> 00:02:39,919 Speaker 4: the past decade or so. You know, Chairman green'spend ran 53 00:02:40,080 --> 00:02:43,240 Speaker 4: a very centralized He was a much different leader. Ben 54 00:02:43,280 --> 00:02:46,040 Speaker 4: Bernaki went much for consensus. We didn't have Janet Yellen 55 00:02:46,080 --> 00:02:47,920 Speaker 4: in for very long. We're learning a lot over what 56 00:02:48,000 --> 00:02:50,840 Speaker 4: Chairman pala is doing and we can handle that. You know, 57 00:02:50,880 --> 00:02:54,000 Speaker 4: the FED is an independent body. Different leadership styles are 58 00:02:54,040 --> 00:02:56,560 Speaker 4: to be expected, and we've seen success from different ones. 59 00:02:57,080 --> 00:02:59,360 Speaker 4: Now I'm not quite sure what President Trump is looking 60 00:02:59,360 --> 00:03:00,960 Speaker 4: for in the new one, but we do know that 61 00:03:00,960 --> 00:03:03,200 Speaker 4: he can very much values loyalty and that's probably part 62 00:03:03,240 --> 00:03:03,880 Speaker 4: of the decision. 63 00:03:05,919 --> 00:03:06,119 Speaker 2: Rich. 64 00:03:06,160 --> 00:03:09,240 Speaker 1: How do you size up the remaining front running candidates 65 00:03:09,280 --> 00:03:11,000 Speaker 1: and how do you think President Trump is going to 66 00:03:11,080 --> 00:03:11,680 Speaker 1: size him up? 67 00:03:12,560 --> 00:03:15,640 Speaker 3: Well, of course, only President Trump knows where he's going 68 00:03:15,680 --> 00:03:16,080 Speaker 3: to land. 69 00:03:16,120 --> 00:03:17,760 Speaker 2: What I would say is I know all of them. 70 00:03:17,800 --> 00:03:20,720 Speaker 3: Well, it does appear as though Kevin Hassett and the 71 00:03:20,760 --> 00:03:24,960 Speaker 3: President have decided that perhaps his best role is to 72 00:03:24,960 --> 00:03:28,200 Speaker 3: stay as the National Economic Council Director, so that leaves 73 00:03:28,760 --> 00:03:31,600 Speaker 3: Governor Waller, Kevin Walsh, and Rick Reeder. 74 00:03:31,720 --> 00:03:33,160 Speaker 2: I know each of them well. 75 00:03:33,240 --> 00:03:36,760 Speaker 3: I think each of them would be an effective FED chair, 76 00:03:36,800 --> 00:03:40,080 Speaker 3: but they bring different strengths and backgrounds to the role. 77 00:03:40,360 --> 00:03:43,440 Speaker 3: Chris Waller is a world class macroeconomist. He's also a 78 00:03:43,480 --> 00:03:48,240 Speaker 3: good forecaster and good communicator. In the case of Kevin Walsh, 79 00:03:48,360 --> 00:03:51,720 Speaker 3: Kevin Walsh was a FED governor. He's had very thoughtful 80 00:03:51,960 --> 00:03:55,560 Speaker 3: and interesting things to say about changing the FED as 81 00:03:55,560 --> 00:04:00,400 Speaker 3: an institution and in particular thoughts on the balance sheet. Finally, 82 00:04:00,480 --> 00:04:06,040 Speaker 3: Rick Reader is a very respected legendary investor in financial 83 00:04:06,160 --> 00:04:09,880 Speaker 3: markets and obviously would bring a lot of connectivity to 84 00:04:09,960 --> 00:04:14,280 Speaker 3: the bond market. So all three brings something a lot 85 00:04:14,320 --> 00:04:16,480 Speaker 3: to the table. It's really going to be the call 86 00:04:16,560 --> 00:04:19,919 Speaker 3: of President Trump, and we'll see where he ends. 87 00:04:19,800 --> 00:04:20,719 Speaker 2: Up at this point. 88 00:04:20,760 --> 00:04:23,200 Speaker 1: When any of those picks surprise the bond market. 89 00:04:24,880 --> 00:04:28,200 Speaker 3: I think right now it's pretty even in the betting odds. 90 00:04:28,760 --> 00:04:32,360 Speaker 3: I guess right now would be a surprise. There'd be 91 00:04:32,400 --> 00:04:36,360 Speaker 3: two surprises. One would be if if Kevin Hassett decides, 92 00:04:36,440 --> 00:04:38,200 Speaker 3: and the President decided they do. When I'm at the 93 00:04:38,200 --> 00:04:40,960 Speaker 3: FAT after a week ago saying no, then of course 94 00:04:41,000 --> 00:04:44,760 Speaker 3: there is some probability that Scott Bessant does it. He 95 00:04:44,800 --> 00:04:49,920 Speaker 3: would obviously be an excellent and very effective choice. But 96 00:04:50,240 --> 00:04:55,320 Speaker 3: again they've indicated that the President wants a secretary Bustant 97 00:04:55,320 --> 00:04:56,560 Speaker 3: to stay at the Treasury. 98 00:04:56,600 --> 00:04:58,720 Speaker 2: But I think among the other three, probably. 99 00:04:58,400 --> 00:05:01,719 Speaker 3: Right now, the odds of Waller are a bit lower, 100 00:05:01,800 --> 00:05:05,080 Speaker 3: simply because he doesn't seem to have that connectivity to 101 00:05:05,200 --> 00:05:07,599 Speaker 3: either the President or the Treasury Secretary. 102 00:05:08,240 --> 00:05:10,320 Speaker 1: And of course personnel's policy when it comes to the 103 00:05:10,320 --> 00:05:12,760 Speaker 1: Federal Reserve, which is why the President is so intent 104 00:05:12,960 --> 00:05:16,080 Speaker 1: on changing the folks there. The Supreme Court this week 105 00:05:16,320 --> 00:05:18,880 Speaker 1: heard arguments in the Lisa Cook case for the governor. 106 00:05:19,440 --> 00:05:22,680 Speaker 1: They gave no ruling, but the justices do appear to 107 00:05:22,720 --> 00:05:26,400 Speaker 1: be weary of President Trump's effort to fire her. What 108 00:05:26,440 --> 00:05:30,279 Speaker 1: would I mean, do you expect any kind of change 109 00:05:30,400 --> 00:05:33,279 Speaker 1: in the Board of the Fed based on the Lisa 110 00:05:33,320 --> 00:05:35,160 Speaker 1: Cook hearing? Or is it safe to say that she 111 00:05:35,200 --> 00:05:37,880 Speaker 1: would be in place through the first half of the year. 112 00:05:38,480 --> 00:05:41,919 Speaker 2: Oh. Again, not a legal expert, I just do economics. 113 00:05:41,960 --> 00:05:42,920 Speaker 2: But I talked to them. 114 00:05:43,800 --> 00:05:47,680 Speaker 3: And my sense from all the reporting, including by Bloomberg, 115 00:05:49,120 --> 00:05:51,679 Speaker 3: is that the justices, both you know, the more liberal 116 00:05:51,760 --> 00:05:55,800 Speaker 3: and more conservative justices, seem skeptical of the White House 117 00:05:55,920 --> 00:06:00,479 Speaker 3: argument that it had met the standard of a four 118 00:06:00,640 --> 00:06:04,520 Speaker 3: cause removal. And so I think there's a very high 119 00:06:04,640 --> 00:06:09,800 Speaker 3: likelihood that that Lisa Cook will continue in this role, 120 00:06:10,440 --> 00:06:15,520 Speaker 3: you know, throughout certainly much of not all of this year. 121 00:06:15,600 --> 00:06:18,160 Speaker 3: I mean, legal scholars seem to think that one likely 122 00:06:18,200 --> 00:06:22,920 Speaker 3: scenario is that the Supreme Court merely rules narrowly that 123 00:06:23,000 --> 00:06:25,640 Speaker 3: she cannot be removed and bumping back down. 124 00:06:25,480 --> 00:06:27,600 Speaker 2: To the lower courts to finally. 125 00:06:28,120 --> 00:06:30,960 Speaker 3: And indeed, many justices indicated that they that they thought 126 00:06:31,000 --> 00:06:33,880 Speaker 3: that the process was a bit rushed, indicating they would 127 00:06:33,920 --> 00:06:36,280 Speaker 3: have preferred it to work through the lower courts before 128 00:06:36,320 --> 00:06:38,640 Speaker 3: reaching them for final judgment. 129 00:06:39,000 --> 00:06:41,880 Speaker 1: Do you feel more or less confident in Federal Reserve 130 00:06:41,960 --> 00:06:43,760 Speaker 1: independence this week? 131 00:06:45,720 --> 00:06:50,799 Speaker 3: I'm confident in Federal Reserve independence. That's clearly what Congress 132 00:06:50,800 --> 00:06:54,320 Speaker 3: intended in terms of the way the FEDA, the FED 133 00:06:54,520 --> 00:06:58,560 Speaker 3: is set up. And I've also said, including when I've 134 00:06:58,560 --> 00:07:02,280 Speaker 3: done shows on Bloomberg, that I think an important factor 135 00:07:02,320 --> 00:07:06,320 Speaker 3: that supports FED independence is the financial markets and the 136 00:07:06,360 --> 00:07:10,120 Speaker 3: bond market, and in particular, politicians who want low interest 137 00:07:10,200 --> 00:07:13,120 Speaker 3: rates would not be getting low interest rates if the 138 00:07:13,160 --> 00:07:17,040 Speaker 3: markets lost confidence in the Fed's inflation credibility. 139 00:07:16,760 --> 00:07:17,880 Speaker 2: So I am. 140 00:07:18,040 --> 00:07:22,000 Speaker 3: I am confident that FED independence will continue and. 141 00:07:22,840 --> 00:07:25,200 Speaker 1: Be robust, and that is something that Jay Powell is 142 00:07:25,240 --> 00:07:26,400 Speaker 1: extremely concerned about. 143 00:07:26,400 --> 00:07:28,000 Speaker 2: Clearly, given the. 144 00:07:28,000 --> 00:07:33,200 Speaker 1: DOJ's subpoenas and investigation into his remarks, how does the 145 00:07:33,320 --> 00:07:37,320 Speaker 1: FED chair address the subpoenas in the post decision Q 146 00:07:37,440 --> 00:07:40,160 Speaker 1: and A on Wednesday? Because I feel like it threads 147 00:07:40,200 --> 00:07:41,920 Speaker 1: to take over the entire proceedings. 148 00:07:45,240 --> 00:07:46,600 Speaker 2: He will be asked that. 149 00:07:47,280 --> 00:07:51,080 Speaker 3: I think he will have a crisp answer when he's 150 00:07:51,120 --> 00:07:54,800 Speaker 3: asked initially, and I think he'll stick to that answer, 151 00:07:54,880 --> 00:07:57,320 Speaker 3: probably not really wander too far away from what he 152 00:07:57,440 --> 00:08:00,080 Speaker 3: said in that two minute video that was really at 153 00:08:00,120 --> 00:08:03,400 Speaker 3: least a couple of weeks ago. I don't expect him 154 00:08:03,440 --> 00:08:05,920 Speaker 3: to belabor it. I think he'll have a crisp answer 155 00:08:05,960 --> 00:08:08,440 Speaker 3: and he'll try to move on, would be my guess. 156 00:08:08,720 --> 00:08:10,960 Speaker 1: All right, good stuff, Rich, Always appreciate your joining us. 157 00:08:11,040 --> 00:08:14,200 Speaker 1: Rich Claard as the economic advisor PIMCO and of course 158 00:08:14,200 --> 00:08:16,960 Speaker 1: a former vice chairman at the Federal Reserve as well.