Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's ring on Rich Clarida.
Speaker 1: He is Global Economic Advisor at Pimco. He is also
Speaker 1: a former Federal Reserve Vice chairman.
Speaker 2: Rich.
Speaker 1: Always a pleasure to speak with you. Give us your
Speaker 1: read on the US economy right now, because the economic
Speaker 1: data seem to suggest that it's holding on pretty well.
Speaker 1: It's solid, and the labor market is also not deteriorating,
Speaker 1: even as inflation seems like it's on the right path.
Speaker 3: Well, Hi, Scarlett, Yes, as we used to say during
Speaker 3: my time with the Fed, the US economy is in
Speaker 3: a good place.
Speaker 2: And it is. It's been remarkably resilient.
Speaker 3: Growth for twenty twenty five will probably come in north
Speaker 3: of two percent finishing strong.
Speaker 2: Inflation has been basically flat.
Speaker 3: It did not really move up as a result of
Speaker 3: the tariffs. We've had strong capital spending in the tech sector.
Speaker 3: Now in twenty twenty six, you've got the big Beautiful
Speaker 3: Bill which is providing a fiscal impulse. You've got commitments
Speaker 3: from foreign countries and companies to invest in the US,
Speaker 3: and obviously the capital spending boom and the tech sector continues,
Speaker 3: and so indeed, I think you summarized it, Well, the
Speaker 3: economy is in a pretty good place.
Speaker 1: It's in a pretty good place, certainly by the based
Speaker 1: on the headline economic indicators. Yet when you look at
Speaker 1: the anecdotal and here I'm referring to commentary from airlines
Speaker 1: to PNG to three M so far this earning season,
Speaker 1: a lot of it's focused on uncertainty, on caution, on
Speaker 1: what they're calling low consumer confidence. Rich, how much do
Speaker 1: you read into this downbeat commentary from companies on the
Speaker 1: front line.
Speaker 3: Well, you know, Scrolett, I think both can be true
Speaker 3: at the same time, in the sense that you have
Speaker 3: a very positive impulse from the tech sector, from tech
Speaker 3: capital investment, and obviously households that own a lot of
Speaker 3: stocks and own their own home have done quite well
Speaker 3: because of the wealth effect, you know, the k shape
Speaker 3: economy that you talked about. As you move outside of
Speaker 3: those sectors, I think there is it is a more
Speaker 3: of an uneven a story, and I think uncertainty is
Speaker 3: more relevant. And this may well be a year when
Speaker 3: the aggregates and averages are hiding a lot of interesting
Speaker 3: differences in the economy.
Speaker 1: All right, let's turn out to the Federal Reserve.
Speaker 2: Rich.
Speaker 1: President Trump saying, of course, that he has finished interviewing
Speaker 1: candidates to serve as a next FED chair and earlier
Speaker 1: London Business School lecturer Rebecca Honks appeared on Bloomberg Surveillance
Speaker 1: where she gave her take on who Trump may choose.
Speaker 4: Take listen, We've really had different styles of leadership over
Speaker 4: the past decade or so. You know, Chairman green'spend ran
Speaker 4: a very centralized He was a much different leader. Ben
Speaker 4: Bernaki went much for consensus. We didn't have Janet Yellen
Speaker 4: in for very long. We're learning a lot over what
Speaker 4: Chairman pala is doing and we can handle that. You know,
Speaker 4: the FED is an independent body. Different leadership styles are
Speaker 4: to be expected, and we've seen success from different ones.
Speaker 4: Now I'm not quite sure what President Trump is looking
Speaker 4: for in the new one, but we do know that
Speaker 4: he can very much values loyalty and that's probably part
Speaker 4: of the decision.
Speaker 2: Rich.
Speaker 1: How do you size up the remaining front running candidates
Speaker 1: and how do you think President Trump is going to
Speaker 1: size him up?
Speaker 3: Well, of course, only President Trump knows where he's going
Speaker 3: to land.
Speaker 2: What I would say is I know all of them.
Speaker 3: Well, it does appear as though Kevin Hassett and the
Speaker 3: President have decided that perhaps his best role is to
Speaker 3: stay as the National Economic Council Director, so that leaves
Speaker 3: Governor Waller, Kevin Walsh, and Rick Reeder.
Speaker 2: I know each of them well.
Speaker 3: I think each of them would be an effective FED chair,
Speaker 3: but they bring different strengths and backgrounds to the role.
Speaker 3: Chris Waller is a world class macroeconomist. He's also a
Speaker 3: good forecaster and good communicator. In the case of Kevin Walsh,
Speaker 3: Kevin Walsh was a FED governor. He's had very thoughtful
Speaker 3: and interesting things to say about changing the FED as
Speaker 3: an institution and in particular thoughts on the balance sheet. Finally,
Speaker 3: Rick Reader is a very respected legendary investor in financial
Speaker 3: markets and obviously would bring a lot of connectivity to
Speaker 3: the bond market. So all three brings something a lot
Speaker 3: to the table. It's really going to be the call
Speaker 3: of President Trump, and we'll see where he ends.
Speaker 2: Up at this point.
Speaker 1: When any of those picks surprise the bond market.
Speaker 3: I think right now it's pretty even in the betting odds.
Speaker 3: I guess right now would be a surprise. There'd be
Speaker 3: two surprises. One would be if if Kevin Hassett decides,
Speaker 3: and the President decided they do. When I'm at the
Speaker 3: FAT after a week ago saying no, then of course
Speaker 3: there is some probability that Scott Bessant does it. He
Speaker 3: would obviously be an excellent and very effective choice. But
Speaker 3: again they've indicated that the President wants a secretary Bustant
Speaker 3: to stay at the Treasury.
Speaker 2: But I think among the other three, probably.
Speaker 3: Right now, the odds of Waller are a bit lower,
Speaker 3: simply because he doesn't seem to have that connectivity to
Speaker 3: either the President or the Treasury Secretary.
Speaker 1: And of course personnel's policy when it comes to the
Speaker 1: Federal Reserve, which is why the President is so intent
Speaker 1: on changing the folks there. The Supreme Court this week
Speaker 1: heard arguments in the Lisa Cook case for the governor.
Speaker 1: They gave no ruling, but the justices do appear to
Speaker 1: be weary of President Trump's effort to fire her. What
Speaker 1: would I mean, do you expect any kind of change
Speaker 1: in the Board of the Fed based on the Lisa
Speaker 1: Cook hearing? Or is it safe to say that she
Speaker 1: would be in place through the first half of the year.
Speaker 2: Oh. Again, not a legal expert, I just do economics.
Speaker 2: But I talked to them.
Speaker 3: And my sense from all the reporting, including by Bloomberg,
Speaker 3: is that the justices, both you know, the more liberal
Speaker 3: and more conservative justices, seem skeptical of the White House
Speaker 3: argument that it had met the standard of a four
Speaker 3: cause removal. And so I think there's a very high
Speaker 3: likelihood that that Lisa Cook will continue in this role,
Speaker 3: you know, throughout certainly much of not all of this year.
Speaker 3: I mean, legal scholars seem to think that one likely
Speaker 3: scenario is that the Supreme Court merely rules narrowly that
Speaker 3: she cannot be removed and bumping back down.
Speaker 2: To the lower courts to finally.
Speaker 3: And indeed, many justices indicated that they that they thought
Speaker 3: that the process was a bit rushed, indicating they would
Speaker 3: have preferred it to work through the lower courts before
Speaker 3: reaching them for final judgment.
Speaker 1: Do you feel more or less confident in Federal Reserve
Speaker 1: independence this week?
Speaker 3: I'm confident in Federal Reserve independence. That's clearly what Congress
Speaker 3: intended in terms of the way the FEDA, the FED
Speaker 3: is set up. And I've also said, including when I've
Speaker 3: done shows on Bloomberg, that I think an important factor
Speaker 3: that supports FED independence is the financial markets and the
Speaker 3: bond market, and in particular, politicians who want low interest
Speaker 3: rates would not be getting low interest rates if the
Speaker 3: markets lost confidence in the Fed's inflation credibility.
Speaker 2: So I am.
Speaker 3: I am confident that FED independence will continue and.
Speaker 1: Be robust, and that is something that Jay Powell is
Speaker 1: extremely concerned about.
Speaker 2: Clearly, given the.
Speaker 1: DOJ's subpoenas and investigation into his remarks, how does the
Speaker 1: FED chair address the subpoenas in the post decision Q
Speaker 1: and A on Wednesday? Because I feel like it threads
Speaker 1: to take over the entire proceedings.
Speaker 2: He will be asked that.
Speaker 3: I think he will have a crisp answer when he's
Speaker 3: asked initially, and I think he'll stick to that answer,
Speaker 3: probably not really wander too far away from what he
Speaker 3: said in that two minute video that was really at
Speaker 3: least a couple of weeks ago. I don't expect him
Speaker 3: to belabor it. I think he'll have a crisp answer
Speaker 3: and he'll try to move on, would be my guess.
Speaker 1: All right, good stuff, Rich, Always appreciate your joining us.
Speaker 1: Rich Claard as the economic advisor PIMCO and of course
Speaker 1: a former vice chairman at the Federal Reserve as well.