WEBVTT - PIMCO Global Economic Advisor Richard Clarida Talks US Inflation, Economy

0:00:02.520 --> 0:00:08.920
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Let's ring on Rich Clarida.

0:00:09.080 --> 0:00:11.440
<v Speaker 1>He is Global Economic Advisor at Pimco. He is also

0:00:11.480 --> 0:00:13.320
<v Speaker 1>a former Federal Reserve Vice chairman.

0:00:13.600 --> 0:00:13.800
<v Speaker 2>Rich.

0:00:14.000 --> 0:00:16.600
<v Speaker 1>Always a pleasure to speak with you. Give us your

0:00:16.680 --> 0:00:19.440
<v Speaker 1>read on the US economy right now, because the economic

0:00:19.520 --> 0:00:22.880
<v Speaker 1>data seem to suggest that it's holding on pretty well.

0:00:23.680 --> 0:00:27.840
<v Speaker 1>It's solid, and the labor market is also not deteriorating,

0:00:27.880 --> 0:00:30.560
<v Speaker 1>even as inflation seems like it's on the right path.

0:00:31.640 --> 0:00:34.400
<v Speaker 3>Well, Hi, Scarlett, Yes, as we used to say during

0:00:34.560 --> 0:00:36.559
<v Speaker 3>my time with the Fed, the US economy is in

0:00:36.600 --> 0:00:37.200
<v Speaker 3>a good place.

0:00:37.240 --> 0:00:40.440
<v Speaker 2>And it is. It's been remarkably resilient.

0:00:40.920 --> 0:00:44.760
<v Speaker 3>Growth for twenty twenty five will probably come in north

0:00:44.840 --> 0:00:47.440
<v Speaker 3>of two percent finishing strong.

0:00:47.520 --> 0:00:49.320
<v Speaker 2>Inflation has been basically flat.

0:00:49.360 --> 0:00:52.040
<v Speaker 3>It did not really move up as a result of

0:00:52.080 --> 0:00:55.360
<v Speaker 3>the tariffs. We've had strong capital spending in the tech sector.

0:00:55.800 --> 0:00:58.320
<v Speaker 3>Now in twenty twenty six, you've got the big Beautiful

0:00:58.320 --> 0:01:02.280
<v Speaker 3>Bill which is providing a fiscal impulse. You've got commitments

0:01:02.320 --> 0:01:06.040
<v Speaker 3>from foreign countries and companies to invest in the US,

0:01:06.080 --> 0:01:10.520
<v Speaker 3>and obviously the capital spending boom and the tech sector continues,

0:01:10.920 --> 0:01:14.039
<v Speaker 3>and so indeed, I think you summarized it, Well, the

0:01:14.080 --> 0:01:15.880
<v Speaker 3>economy is in a pretty good place.

0:01:16.240 --> 0:01:19.560
<v Speaker 1>It's in a pretty good place, certainly by the based

0:01:19.600 --> 0:01:21.880
<v Speaker 1>on the headline economic indicators. Yet when you look at

0:01:21.920 --> 0:01:25.680
<v Speaker 1>the anecdotal and here I'm referring to commentary from airlines

0:01:25.720 --> 0:01:28.800
<v Speaker 1>to PNG to three M so far this earning season,

0:01:28.840 --> 0:01:32.000
<v Speaker 1>a lot of it's focused on uncertainty, on caution, on

0:01:32.360 --> 0:01:35.480
<v Speaker 1>what they're calling low consumer confidence. Rich, how much do

0:01:35.520 --> 0:01:38.400
<v Speaker 1>you read into this downbeat commentary from companies on the

0:01:38.400 --> 0:01:39.200
<v Speaker 1>front line.

0:01:39.760 --> 0:01:42.199
<v Speaker 3>Well, you know, Scrolett, I think both can be true

0:01:42.200 --> 0:01:45.720
<v Speaker 3>at the same time, in the sense that you have

0:01:45.760 --> 0:01:48.880
<v Speaker 3>a very positive impulse from the tech sector, from tech

0:01:48.920 --> 0:01:53.080
<v Speaker 3>capital investment, and obviously households that own a lot of

0:01:53.120 --> 0:01:55.800
<v Speaker 3>stocks and own their own home have done quite well

0:01:55.960 --> 0:01:58.000
<v Speaker 3>because of the wealth effect, you know, the k shape

0:01:58.000 --> 0:02:01.400
<v Speaker 3>economy that you talked about. As you move outside of

0:02:01.440 --> 0:02:04.600
<v Speaker 3>those sectors, I think there is it is a more

0:02:04.600 --> 0:02:07.960
<v Speaker 3>of an uneven a story, and I think uncertainty is

0:02:08.520 --> 0:02:11.919
<v Speaker 3>more relevant. And this may well be a year when

0:02:11.960 --> 0:02:15.760
<v Speaker 3>the aggregates and averages are hiding a lot of interesting

0:02:15.800 --> 0:02:17.679
<v Speaker 3>differences in the economy.

0:02:17.840 --> 0:02:19.720
<v Speaker 1>All right, let's turn out to the Federal Reserve.

0:02:19.840 --> 0:02:20.040
<v Speaker 2>Rich.

0:02:20.320 --> 0:02:23.560
<v Speaker 1>President Trump saying, of course, that he has finished interviewing

0:02:23.600 --> 0:02:26.480
<v Speaker 1>candidates to serve as a next FED chair and earlier

0:02:26.600 --> 0:02:30.600
<v Speaker 1>London Business School lecturer Rebecca Honks appeared on Bloomberg Surveillance

0:02:30.639 --> 0:02:33.000
<v Speaker 1>where she gave her take on who Trump may choose.

0:02:33.080 --> 0:02:37.320
<v Speaker 4>Take listen, We've really had different styles of leadership over

0:02:37.360 --> 0:02:39.919
<v Speaker 4>the past decade or so. You know, Chairman green'spend ran

0:02:40.080 --> 0:02:43.240
<v Speaker 4>a very centralized He was a much different leader. Ben

0:02:43.280 --> 0:02:46.040
<v Speaker 4>Bernaki went much for consensus. We didn't have Janet Yellen

0:02:46.080 --> 0:02:47.920
<v Speaker 4>in for very long. We're learning a lot over what

0:02:48.000 --> 0:02:50.840
<v Speaker 4>Chairman pala is doing and we can handle that. You know,

0:02:50.880 --> 0:02:54.000
<v Speaker 4>the FED is an independent body. Different leadership styles are

0:02:54.040 --> 0:02:56.560
<v Speaker 4>to be expected, and we've seen success from different ones.

0:02:57.080 --> 0:02:59.360
<v Speaker 4>Now I'm not quite sure what President Trump is looking

0:02:59.360 --> 0:03:00.960
<v Speaker 4>for in the new one, but we do know that

0:03:00.960 --> 0:03:03.200
<v Speaker 4>he can very much values loyalty and that's probably part

0:03:03.240 --> 0:03:03.880
<v Speaker 4>of the decision.

0:03:05.919 --> 0:03:06.119
<v Speaker 2>Rich.

0:03:06.160 --> 0:03:09.240
<v Speaker 1>How do you size up the remaining front running candidates

0:03:09.280 --> 0:03:11.000
<v Speaker 1>and how do you think President Trump is going to

0:03:11.080 --> 0:03:11.680
<v Speaker 1>size him up?

0:03:12.560 --> 0:03:15.640
<v Speaker 3>Well, of course, only President Trump knows where he's going

0:03:15.680 --> 0:03:16.080
<v Speaker 3>to land.

0:03:16.120 --> 0:03:17.760
<v Speaker 2>What I would say is I know all of them.

0:03:17.800 --> 0:03:20.720
<v Speaker 3>Well, it does appear as though Kevin Hassett and the

0:03:20.760 --> 0:03:24.960
<v Speaker 3>President have decided that perhaps his best role is to

0:03:24.960 --> 0:03:28.200
<v Speaker 3>stay as the National Economic Council Director, so that leaves

0:03:28.760 --> 0:03:31.600
<v Speaker 3>Governor Waller, Kevin Walsh, and Rick Reeder.

0:03:31.720 --> 0:03:33.160
<v Speaker 2>I know each of them well.

0:03:33.240 --> 0:03:36.760
<v Speaker 3>I think each of them would be an effective FED chair,

0:03:36.800 --> 0:03:40.080
<v Speaker 3>but they bring different strengths and backgrounds to the role.

0:03:40.360 --> 0:03:43.440
<v Speaker 3>Chris Waller is a world class macroeconomist. He's also a

0:03:43.480 --> 0:03:48.240
<v Speaker 3>good forecaster and good communicator. In the case of Kevin Walsh,

0:03:48.360 --> 0:03:51.720
<v Speaker 3>Kevin Walsh was a FED governor. He's had very thoughtful

0:03:51.960 --> 0:03:55.560
<v Speaker 3>and interesting things to say about changing the FED as

0:03:55.560 --> 0:04:00.400
<v Speaker 3>an institution and in particular thoughts on the balance sheet. Finally,

0:04:00.480 --> 0:04:06.040
<v Speaker 3>Rick Reader is a very respected legendary investor in financial

0:04:06.160 --> 0:04:09.880
<v Speaker 3>markets and obviously would bring a lot of connectivity to

0:04:09.960 --> 0:04:14.280
<v Speaker 3>the bond market. So all three brings something a lot

0:04:14.320 --> 0:04:16.480
<v Speaker 3>to the table. It's really going to be the call

0:04:16.560 --> 0:04:19.919
<v Speaker 3>of President Trump, and we'll see where he ends.

0:04:19.800 --> 0:04:20.719
<v Speaker 2>Up at this point.

0:04:20.760 --> 0:04:23.200
<v Speaker 1>When any of those picks surprise the bond market.

0:04:24.880 --> 0:04:28.200
<v Speaker 3>I think right now it's pretty even in the betting odds.

0:04:28.760 --> 0:04:32.360
<v Speaker 3>I guess right now would be a surprise. There'd be

0:04:32.400 --> 0:04:36.360
<v Speaker 3>two surprises. One would be if if Kevin Hassett decides,

0:04:36.440 --> 0:04:38.200
<v Speaker 3>and the President decided they do. When I'm at the

0:04:38.200 --> 0:04:40.960
<v Speaker 3>FAT after a week ago saying no, then of course

0:04:41.000 --> 0:04:44.760
<v Speaker 3>there is some probability that Scott Bessant does it. He

0:04:44.800 --> 0:04:49.920
<v Speaker 3>would obviously be an excellent and very effective choice. But

0:04:50.240 --> 0:04:55.320
<v Speaker 3>again they've indicated that the President wants a secretary Bustant

0:04:55.320 --> 0:04:56.560
<v Speaker 3>to stay at the Treasury.

0:04:56.600 --> 0:04:58.720
<v Speaker 2>But I think among the other three, probably.

0:04:58.400 --> 0:05:01.719
<v Speaker 3>Right now, the odds of Waller are a bit lower,

0:05:01.800 --> 0:05:05.080
<v Speaker 3>simply because he doesn't seem to have that connectivity to

0:05:05.200 --> 0:05:07.599
<v Speaker 3>either the President or the Treasury Secretary.

0:05:08.240 --> 0:05:10.320
<v Speaker 1>And of course personnel's policy when it comes to the

0:05:10.320 --> 0:05:12.760
<v Speaker 1>Federal Reserve, which is why the President is so intent

0:05:12.960 --> 0:05:16.080
<v Speaker 1>on changing the folks there. The Supreme Court this week

0:05:16.320 --> 0:05:18.880
<v Speaker 1>heard arguments in the Lisa Cook case for the governor.

0:05:19.440 --> 0:05:22.680
<v Speaker 1>They gave no ruling, but the justices do appear to

0:05:22.720 --> 0:05:26.400
<v Speaker 1>be weary of President Trump's effort to fire her. What

0:05:26.440 --> 0:05:30.279
<v Speaker 1>would I mean, do you expect any kind of change

0:05:30.400 --> 0:05:33.279
<v Speaker 1>in the Board of the Fed based on the Lisa

0:05:33.320 --> 0:05:35.160
<v Speaker 1>Cook hearing? Or is it safe to say that she

0:05:35.200 --> 0:05:37.880
<v Speaker 1>would be in place through the first half of the year.

0:05:38.480 --> 0:05:41.919
<v Speaker 2>Oh. Again, not a legal expert, I just do economics.

0:05:41.960 --> 0:05:42.920
<v Speaker 2>But I talked to them.

0:05:43.800 --> 0:05:47.680
<v Speaker 3>And my sense from all the reporting, including by Bloomberg,

0:05:49.120 --> 0:05:51.679
<v Speaker 3>is that the justices, both you know, the more liberal

0:05:51.760 --> 0:05:55.800
<v Speaker 3>and more conservative justices, seem skeptical of the White House

0:05:55.920 --> 0:06:00.479
<v Speaker 3>argument that it had met the standard of a four

0:06:00.640 --> 0:06:04.520
<v Speaker 3>cause removal. And so I think there's a very high

0:06:04.640 --> 0:06:09.800
<v Speaker 3>likelihood that that Lisa Cook will continue in this role,

0:06:10.440 --> 0:06:15.520
<v Speaker 3>you know, throughout certainly much of not all of this year.

0:06:15.600 --> 0:06:18.160
<v Speaker 3>I mean, legal scholars seem to think that one likely

0:06:18.200 --> 0:06:22.920
<v Speaker 3>scenario is that the Supreme Court merely rules narrowly that

0:06:23.000 --> 0:06:25.640
<v Speaker 3>she cannot be removed and bumping back down.

0:06:25.480 --> 0:06:27.600
<v Speaker 2>To the lower courts to finally.

0:06:28.120 --> 0:06:30.960
<v Speaker 3>And indeed, many justices indicated that they that they thought

0:06:31.000 --> 0:06:33.880
<v Speaker 3>that the process was a bit rushed, indicating they would

0:06:33.920 --> 0:06:36.280
<v Speaker 3>have preferred it to work through the lower courts before

0:06:36.320 --> 0:06:38.640
<v Speaker 3>reaching them for final judgment.

0:06:39.000 --> 0:06:41.880
<v Speaker 1>Do you feel more or less confident in Federal Reserve

0:06:41.960 --> 0:06:43.760
<v Speaker 1>independence this week?

0:06:45.720 --> 0:06:50.799
<v Speaker 3>I'm confident in Federal Reserve independence. That's clearly what Congress

0:06:50.800 --> 0:06:54.320
<v Speaker 3>intended in terms of the way the FEDA, the FED

0:06:54.520 --> 0:06:58.560
<v Speaker 3>is set up. And I've also said, including when I've

0:06:58.560 --> 0:07:02.280
<v Speaker 3>done shows on Bloomberg, that I think an important factor

0:07:02.320 --> 0:07:06.320
<v Speaker 3>that supports FED independence is the financial markets and the

0:07:06.360 --> 0:07:10.120
<v Speaker 3>bond market, and in particular, politicians who want low interest

0:07:10.200 --> 0:07:13.120
<v Speaker 3>rates would not be getting low interest rates if the

0:07:13.160 --> 0:07:17.040
<v Speaker 3>markets lost confidence in the Fed's inflation credibility.

0:07:16.760 --> 0:07:17.880
<v Speaker 2>So I am.

0:07:18.040 --> 0:07:22.000
<v Speaker 3>I am confident that FED independence will continue and.

0:07:22.840 --> 0:07:25.200
<v Speaker 1>Be robust, and that is something that Jay Powell is

0:07:25.240 --> 0:07:26.400
<v Speaker 1>extremely concerned about.

0:07:26.400 --> 0:07:28.000
<v Speaker 2>Clearly, given the.

0:07:28.000 --> 0:07:33.200
<v Speaker 1>DOJ's subpoenas and investigation into his remarks, how does the

0:07:33.320 --> 0:07:37.320
<v Speaker 1>FED chair address the subpoenas in the post decision Q

0:07:37.440 --> 0:07:40.160
<v Speaker 1>and A on Wednesday? Because I feel like it threads

0:07:40.200 --> 0:07:41.920
<v Speaker 1>to take over the entire proceedings.

0:07:45.240 --> 0:07:46.600
<v Speaker 2>He will be asked that.

0:07:47.280 --> 0:07:51.080
<v Speaker 3>I think he will have a crisp answer when he's

0:07:51.120 --> 0:07:54.800
<v Speaker 3>asked initially, and I think he'll stick to that answer,

0:07:54.880 --> 0:07:57.320
<v Speaker 3>probably not really wander too far away from what he

0:07:57.440 --> 0:08:00.080
<v Speaker 3>said in that two minute video that was really at

0:08:00.120 --> 0:08:03.400
<v Speaker 3>least a couple of weeks ago. I don't expect him

0:08:03.440 --> 0:08:05.920
<v Speaker 3>to belabor it. I think he'll have a crisp answer

0:08:05.960 --> 0:08:08.440
<v Speaker 3>and he'll try to move on, would be my guess.

0:08:08.720 --> 0:08:10.960
<v Speaker 1>All right, good stuff, Rich, Always appreciate your joining us.

0:08:11.040 --> 0:08:14.200
<v Speaker 1>Rich Claard as the economic advisor PIMCO and of course

0:08:14.200 --> 0:08:16.960
<v Speaker 1>a former vice chairman at the Federal Reserve as well.