WEBVTT - Bloomberg Surveillance TV: June 12, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify, or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.919 Terminal and the Bloomberg Business app. We begin with our 0:00:36.920 --> 0:00:40.400 top story. CPI is about twenty six minutes away. That 0:00:40.479 --> 0:00:43.560 inflation print coming as the fmc's two day meeting comes 0:00:43.560 --> 0:00:46.400 to a close, likely determining what the dot plot looks 0:00:46.479 --> 0:00:49.080 like going forward. The former sen lewis FED president Jim 0:00:49.080 --> 0:00:52.159 Bullard saying he only sees one or two cuts on 0:00:52.159 --> 0:00:55.120 the table this year thanks to slow progress on inflation. 0:00:55.480 --> 0:00:56.880 Jim is with us here in New York. 0:00:56.960 --> 0:00:59.280 Jim, good morning to you, Good morning, good morning. 0:00:59.480 --> 0:01:01.560 Just fantastic to see you, sir. I want to talk 0:01:01.600 --> 0:01:04.320 about your dot plot from a long time ago. We 0:01:04.440 --> 0:01:06.640 all remember when it came out years ago and you 0:01:06.680 --> 0:01:08.800 said enough of this, You put your dot right at 0:01:08.840 --> 0:01:11.399 the bottom and left it there for the next couple 0:01:11.440 --> 0:01:13.480 of years. How do you approach the dot plot and 0:01:13.520 --> 0:01:15.600 how do you think these officials would approach it today? 0:01:16.800 --> 0:01:19.320 Yeah, I mean at that time I wanted to get 0:01:19.360 --> 0:01:21.800 the idea across that we had just switched to a 0:01:21.959 --> 0:01:27.720 low interest rate, low inflation regime and that we were 0:01:27.800 --> 0:01:31.640 unlikely to break out of that regime anytime soon, and 0:01:31.680 --> 0:01:34.040 so it was probably a better forecast just to say 0:01:34.040 --> 0:01:36.440 that you're going to stay in the regime. Now that 0:01:36.520 --> 0:01:41.040 the pandemic came along and up ended the global macro economy, 0:01:41.440 --> 0:01:44.440 it looks like we're in a different regime now, So 0:01:44.840 --> 0:01:46.800 maybe it would be a different dart today. 0:01:46.840 --> 0:01:47.440 Well, let's play it. 0:01:47.480 --> 0:01:49.559 Do you think it would be POSTDFC in reverse? Would 0:01:49.560 --> 0:01:51.120 you just leave it up there at five point fifty 0:01:51.240 --> 0:01:52.440 for a couple of years out? 0:01:52.640 --> 0:01:54.360 I think that's a little high. 0:01:54.560 --> 0:01:57.760 I'd like to see the your curve normalize here as 0:01:57.880 --> 0:02:01.280 a final piece of the soft landing, But I do 0:02:01.360 --> 0:02:04.760 think yields will be higher going forward than anything we 0:02:04.800 --> 0:02:06.840 saw between twenty nine and twenty nineteen. 0:02:07.040 --> 0:02:09.000 Do you think that the FED is accurately reflecting that 0:02:09.040 --> 0:02:11.960 in their current projections that. 0:02:12.040 --> 0:02:13.240 Rates will be higher for longer. 0:02:14.200 --> 0:02:17.239 They've got their long run dot at two point six. 0:02:18.360 --> 0:02:22.360 Maybe that'll shift up a little today. I think the 0:02:22.400 --> 0:02:24.960 idea that you're going to have that low of a 0:02:25.000 --> 0:02:28.480 policy rate, I don't know, that's getting a harder story 0:02:28.520 --> 0:02:28.880 to tell. 0:02:28.919 --> 0:02:30.000 I think, well so steeper. 0:02:30.040 --> 0:02:32.880 Shudo is on earlier and he said, essentially, there's a 0:02:32.880 --> 0:02:35.240 real test of the Fed's credibility right now at a 0:02:35.280 --> 0:02:37.560 time or some people are saying that we're essentially going 0:02:37.560 --> 0:02:40.200 to vacillate between two and three percent in terms of inflation, 0:02:40.320 --> 0:02:43.960 or even stay at three percent, given the feds proclivity 0:02:44.000 --> 0:02:46.680 to cut rates in the near term. Do you agree 0:02:46.680 --> 0:02:49.600 with that that essentially this is a three percent inflation 0:02:49.720 --> 0:02:52.200 target that just hasn't been enunciated by the Fed. 0:02:53.360 --> 0:02:57.040 No, the target is two percent, and if inflation stays 0:02:57.040 --> 0:03:00.600 above two percent, then policy has to be at least 0:03:00.639 --> 0:03:04.079 mildly restrictive to try to push inflation back to two 0:03:04.160 --> 0:03:07.000 percent over a reasonable time horizon. But a key thing 0:03:07.280 --> 0:03:11.880 is what what time horizon do you think you know 0:03:11.960 --> 0:03:14.359 it should take to get inflation back to target? And 0:03:14.400 --> 0:03:17.440 if you look at these projections, they're probably talking. 0:03:17.120 --> 0:03:18.680 Two years or something like that. 0:03:18.800 --> 0:03:21.760 So you've got eighty basis points to go on core 0:03:21.840 --> 0:03:25.080 PC inflation. You know, you can do forty basis points 0:03:25.080 --> 0:03:27.840 in one year, forty basis points the next year, and 0:03:27.919 --> 0:03:30.800 so it's not it's not the urgency that we had 0:03:30.840 --> 0:03:34.200 when inflation was much higher just two years ago. 0:03:34.560 --> 0:03:36.720 When you put in together these forecasts, how much collaboration 0:03:36.840 --> 0:03:39.320 is there on the FMC, I'll go off into a 0:03:39.320 --> 0:03:40.560 corner and just sort of plot it down. 0:03:40.560 --> 0:03:42.440 Do you do it ahead of science that's proping on 0:03:42.480 --> 0:03:43.160 it what it is? 0:03:43.720 --> 0:03:46.720 I have actually tried to call around my colleagues and stuff, 0:03:46.760 --> 0:03:50.640 but it's very time consuming to call everybody, and they've 0:03:50.680 --> 0:03:52.680 got their own staffs and their own stories to tell. 0:03:52.800 --> 0:03:55.720 So it works better just to give your own view. 0:03:55.960 --> 0:03:59.760 And and so there's a lot of communication by asthmosis 0:03:59.800 --> 0:04:02.600 to you kind of know what everybody's saying because you 0:04:02.600 --> 0:04:04.680 see them all the time and you hear their speeches 0:04:04.720 --> 0:04:05.160 and everything. 0:04:05.200 --> 0:04:07.440 Because we heard from someone yesterday that kind of implied 0:04:07.560 --> 0:04:10.160 basically said that for the Federal Reserve would be better 0:04:10.200 --> 0:04:12.760 if the implied cuts. This year, the median DOT for 0:04:12.800 --> 0:04:14.600 twenty four came down from three to two and not 0:04:14.680 --> 0:04:16.800 down to one at least when I would basically send 0:04:16.800 --> 0:04:17.520 to that individual. 0:04:17.680 --> 0:04:18.560 But what are you talking about. 0:04:18.560 --> 0:04:20.200 You're telling me that Chairman Pal is going to get 0:04:20.200 --> 0:04:21.479 on the phone and say, look, guys, we need to 0:04:21.480 --> 0:04:23.600 massage this and collaborate and make sure the median dot 0:04:23.680 --> 0:04:25.400 just shows two cuts for this year and not one. 0:04:25.680 --> 0:04:26.840 That's not how it works, is it. 0:04:27.880 --> 0:04:31.240 No, And people have strong views, so I don't think, 0:04:31.920 --> 0:04:34.039 you know, they take their role very seriously on the 0:04:34.040 --> 0:04:36.880 committee and they're not really willing to say, you know, 0:04:36.920 --> 0:04:40.320 I'm going to compromise my view just because of, you know, 0:04:40.480 --> 0:04:42.440 something that might happen on that particular day. 0:04:42.760 --> 0:04:45.080 Yeah, but this says raised this question of how do 0:04:45.120 --> 0:04:48.440 you message it perfectly? Is there a true consensus and 0:04:48.440 --> 0:04:53.160 what's the differential between consensus view and I dare say 0:04:53.360 --> 0:04:55.960 group think or something where people all to sort of 0:04:55.960 --> 0:04:59.000 are coalescing around this idea that inflation is maybe a 0:04:59.000 --> 0:05:01.880 little bit higher but not that much higher, that rates 0:05:01.920 --> 0:05:05.080 are restrictive even though the economy keeps chugging along. 0:05:06.480 --> 0:05:06.680 Yeah. 0:05:06.720 --> 0:05:08.760 I think one thing to keep in mind about this 0:05:08.960 --> 0:05:12.520 is that the board staff serves the whole Board of Governors, 0:05:12.560 --> 0:05:15.200 so they kind of have Thus they all see the 0:05:15.320 --> 0:05:19.880 same analysis and the same have the same projection, and 0:05:19.920 --> 0:05:23.120 then they may have a view relative to what the 0:05:23.160 --> 0:05:26.880 staff presents, and then they might deviate a little bit. 0:05:26.880 --> 0:05:28.840 But they don't have their own independent. 0:05:28.400 --> 0:05:31.120 Staff, whereas at the banks, all the banks have their 0:05:31.160 --> 0:05:33.800 own research teams and they might have very different views 0:05:33.800 --> 0:05:38.280 from what the board staff thinks. So so you know, 0:05:38.800 --> 0:05:42.080 the tendency for some of the dots to be clustered 0:05:42.200 --> 0:05:43.600 would be at the Board of Governors. 0:05:43.720 --> 0:05:46.120 You were on a FED in twenty twenty when you 0:05:46.160 --> 0:05:48.280 were dealing with some of these issues, and that was 0:05:48.320 --> 0:05:51.200 the last time that we had a CPI print the 0:05:51.240 --> 0:05:52.799 same day as a FED decision. 0:05:52.920 --> 0:05:55.440 Yeah, it's like a solar eclipse or yeah, yeah, business. 0:05:55.640 --> 0:05:58.120 So we're tearing into the sun, the political sun, and 0:05:58.160 --> 0:05:59.279 it's a solar eclipse. 0:05:59.440 --> 0:06:00.400 You're here for us. 0:06:01.480 --> 0:06:03.960 How much does it really alter the discussion? 0:06:04.120 --> 0:06:04.440 Yeah? 0:06:04.520 --> 0:06:09.360 I think I just caution viewers here and listeners that 0:06:10.000 --> 0:06:12.359 what happens is on this day of the meeting. 0:06:12.440 --> 0:06:14.680 This meeting will start at nine o'clock this morning. 0:06:15.080 --> 0:06:17.120 The first thing will happen is that the staff will 0:06:17.120 --> 0:06:20.920 come out and say here's what the CPI reports said. 0:06:21.200 --> 0:06:24.560 And most people will know the number, at least the 0:06:24.560 --> 0:06:26.800 headline number at that point, but they'll give a brief 0:06:26.839 --> 0:06:30.960 analysis of that. But the only thing that will matter 0:06:31.080 --> 0:06:34.240 is is it different from what the staff forecast? So 0:06:34.400 --> 0:06:37.640 did it come in hotter or colder than the staff forecast? 0:06:37.680 --> 0:06:40.159 If it came in about is expected, and the staff 0:06:40.200 --> 0:06:42.640 will say, well, this didn't change anything because we already 0:06:42.640 --> 0:06:43.200 expected this. 0:06:43.320 --> 0:06:47.359 So usually it's not big news at the committee. It 0:06:47.360 --> 0:06:51.480 would have to be some blowout difference. 0:06:51.800 --> 0:06:53.520 Do you think that it is correct that the balance 0:06:53.520 --> 0:06:56.159 of risks between inflation and slow down in growth is 0:06:56.240 --> 0:06:58.440 roughly balanced or do you think that it's more heavily 0:06:58.480 --> 0:07:00.280 weighted to one than the the. 0:07:01.200 --> 0:07:04.480 Well, inflation's been high, and I think you want to 0:07:04.520 --> 0:07:07.240 finish the job here and get inflation back to target. 0:07:07.240 --> 0:07:10.559 So I think that's still job one. And labor market 0:07:10.640 --> 0:07:15.600 seems pretty strong based on the jobs report you know 0:07:15.920 --> 0:07:20.640 last Friday, and other aspects of the economy seem pretty good. 0:07:20.680 --> 0:07:22.520 Atlanta fed GDP now. 0:07:22.400 --> 0:07:25.520 For the second quarter up over three percent at an 0:07:25.560 --> 0:07:29.840 annual rate, so it's daily it does. But I think 0:07:29.880 --> 0:07:32.080 if you're just tracking and just trying to make a 0:07:32.120 --> 0:07:34.679 statement based on the data that you have in hand 0:07:34.800 --> 0:07:39.000 right now, growth looks pretty good, labor market looks pretty. 0:07:38.720 --> 0:07:41.160 Good, inflation's still too high. Might as well stay a 0:07:41.200 --> 0:07:42.520 little bit hawkish, Jim. 0:07:42.600 --> 0:07:44.800 I've never seen people so skeptical of its two seventy 0:07:44.800 --> 0:07:47.520 two on payros as they were on Friday. Can you 0:07:47.560 --> 0:07:50.520 walk me through how you interpreted that economic dight butN 0:07:50.560 --> 0:07:53.520 the establishment survey and a household survey, and how you'd 0:07:53.560 --> 0:07:55.440 read into that, because when you say maybe we need 0:07:55.520 --> 0:07:57.560 to be holkish today, some people think based on that 0:07:57.640 --> 0:07:59.400 number of Friday, we should be dubbish. I mean, how 0:07:59.400 --> 0:08:01.120 would you incept but that economic tight set. 0:08:02.240 --> 0:08:07.240 Yeah, unemployment ticked up to four percent, and that's interesting, 0:08:07.560 --> 0:08:11.840 but it's still below pretty much everyone's estimate of the 0:08:11.920 --> 0:08:15.240 natural rate of unemployment. So they've been saying that, We've 0:08:15.280 --> 0:08:20.040 been saying at the FED that unemployment should probably be 0:08:20.080 --> 0:08:22.680 expected to run a little bit higher than it has 0:08:22.880 --> 0:08:25.560 and a four low fours or mid flors on the 0:08:25.640 --> 0:08:28.720 unemployment rate is a very good number still for the US. 0:08:30.360 --> 0:08:33.679 And then on the headline number, I was just thinking 0:08:33.679 --> 0:08:36.640 about this, so I plotted something that no one ever plots, 0:08:36.720 --> 0:08:39.760 which is the percent change year over year in nonfarm 0:08:39.800 --> 0:08:42.960 payrolls so if you look at that a year ago, 0:08:43.040 --> 0:08:45.319 you would have been at two and a half percent. 0:08:45.040 --> 0:08:46.400 Growth year over year. 0:08:46.640 --> 0:08:49.760 Now you're at one in three quarters year over year. 0:08:50.200 --> 0:08:53.480 That might so that does show the slowdown, but the 0:08:53.480 --> 0:08:57.200 one in three quarters would still be faster than so 0:08:57.240 --> 0:08:59.000 if you took that to be the run rate. We 0:08:59.040 --> 0:09:02.120 always go on the monthly number, which is so volatile, 0:09:02.200 --> 0:09:04.080 and you know, how are we supposed to interpret this? 0:09:04.240 --> 0:09:07.880 But other measures of the economy will go on a 0:09:08.000 --> 0:09:10.160 year or year rate and that controls a little better 0:09:10.160 --> 0:09:11.680 for seasonality and stuff like that. 0:09:21.400 --> 0:09:23.920 Francis doano to Manuel life alongside us as Wow, Francis, 0:09:23.920 --> 0:09:25.080 I want to get out to you and get your 0:09:25.080 --> 0:09:27.040 ready reaction to that CPI print. 0:09:28.840 --> 0:09:32.120 I literally breathed a sigh of relief. For a lot 0:09:32.120 --> 0:09:35.559 of reasons. I suspect your palladed too, for consumers who 0:09:35.679 --> 0:09:37.640 are not going to see as much month over month 0:09:37.720 --> 0:09:40.760 increase in prices. For all the economists out there with 0:09:40.840 --> 0:09:44.520 a September rate cut in their forecast, they're probably also relieved. 0:09:44.760 --> 0:09:48.400 But also a bigger picture, higher rates are working to 0:09:48.520 --> 0:09:53.280 bring down inflation. This was an increasing concern. Our rates 0:09:53.280 --> 0:09:55.920 restrictive enough? Do we keep them? This high. Why is 0:09:55.920 --> 0:09:59.800 inflation not moving downward? That said, John, this is one point. 0:10:00.000 --> 0:10:02.920 We have three more before the September meeting, And as 0:10:02.960 --> 0:10:05.440 exciting as this is this morning for a few hours, 0:10:05.520 --> 0:10:07.839 I'm more interested on the CPI print that comes out 0:10:07.880 --> 0:10:12.400 September eleventh, just one week before the FEDS September cut. 0:10:12.600 --> 0:10:15.040 That number may end up being much more important than 0:10:15.080 --> 0:10:17.200 this one, so we'll take it as a win. It's 0:10:17.240 --> 0:10:20.319 good news for consumers, for markets, for all. But it's 0:10:20.360 --> 0:10:22.920 one print and we got a lot of information coming through. 0:10:22.720 --> 0:10:23.800 Today, Francis. 0:10:23.920 --> 0:10:26.840 Jim Bollerer was also talking about the Pain speech in 0:10:27.320 --> 0:10:30.200 Jackson Hole that Jay Powell gave a couple of years ago, 0:10:30.240 --> 0:10:33.199 when he said that essentially, this is inflation that's running 0:10:33.200 --> 0:10:35.520 too hot, and we are going to get inflation back 0:10:35.559 --> 0:10:38.400 down and it is going to require pain in the economy. Francis, 0:10:38.440 --> 0:10:41.240 you are expecting to see that pain. We haven't seen 0:10:41.320 --> 0:10:43.880 it on a broad based level. Do you have a 0:10:43.960 --> 0:10:47.280 sense of whether this is inflation, is the immaculate type 0:10:47.440 --> 0:10:49.560 that we've been talking about, or whether this is just 0:10:49.760 --> 0:10:53.120 one dot in a series where things are kind of shifting. 0:10:53.120 --> 0:10:54.559 We're at a tipping point. 0:10:55.760 --> 0:10:57.800 I would hope that would be the outcome for the 0:10:57.840 --> 0:11:01.880 American people. At the same time, are leading economic indicators 0:11:01.920 --> 0:11:05.720 on the jobs front continue to show weakness ahead. We're 0:11:05.720 --> 0:11:08.719 at a four percent unemployment rate. I'm watching today to 0:11:08.720 --> 0:11:11.440 see from the Federal Reserve they already had four percent 0:11:11.520 --> 0:11:13.599 penciled in for the end of this year. Are we 0:11:13.679 --> 0:11:15.800 really going to go through the next six months without 0:11:15.840 --> 0:11:18.760 an additional tick up and the unemployment rate? And let's 0:11:18.800 --> 0:11:20.920 remember the simple rule of thumb is that it takes 0:11:20.920 --> 0:11:23.559 about two years for those rate hikes to work their 0:11:23.600 --> 0:11:26.200 way through the system. And we're two years and some 0:11:26.440 --> 0:11:29.120 change after that first rate hike. We're not at the 0:11:29.400 --> 0:11:31.360 end of the impact of rate hikes. We're at the 0:11:31.520 --> 0:11:34.840 very beginning. So while magnitude of the downside for the 0:11:34.920 --> 0:11:38.080 US economy is up for debate, the direction shouldn't be. 0:11:38.400 --> 0:11:41.679 There probably will be much larger slowdown in jobs than 0:11:41.679 --> 0:11:43.520 the second half of the year, and this is when 0:11:43.559 --> 0:11:46.640 the Federal Reserve will have sufficient data to begin cutting 0:11:46.679 --> 0:11:49.880 interest rates and bringing those rates down beginning we think 0:11:49.960 --> 0:11:50.600 in September. 0:11:50.800 --> 0:11:52.720 Jim Boy, what's their take on that, given the fact 0:11:53.120 --> 0:11:57.040 that it seems like something that feels like a stretch. 0:11:57.240 --> 0:11:59.200 The unemployment rate to stay where. 0:11:59.080 --> 0:11:59.959 It is for the foreseeable. 0:12:00.559 --> 0:12:04.120 I think it is immaculate disinflation. And again I think that, 0:12:05.080 --> 0:12:09.280 you know, by being credible and moving quickly, the FED 0:12:09.440 --> 0:12:13.720 was able to get firms to change their pricing strategies quickly. 0:12:14.520 --> 0:12:17.760 The inflation came down relatively quickly. And so, you know, 0:12:17.840 --> 0:12:20.680 one simple theory about how this works would be that 0:12:22.160 --> 0:12:25.840 the FED threatens recession, everyone looks ahead, they see that 0:12:25.840 --> 0:12:27.880 that might be a possibility, they don't want to raise 0:12:27.920 --> 0:12:32.360 prices into that, and the inflation goes away relatively quickly. 0:12:32.440 --> 0:12:37.240 So that isn't the most popular theory around here or 0:12:37.280 --> 0:12:40.200 on Wall Street, but that is, you know, that is 0:12:40.240 --> 0:12:42.280 something that you have to take into account because the 0:12:42.320 --> 0:12:47.520 anticipated effects can overwhelm sort of the mechanical effects and 0:12:47.559 --> 0:12:50.120 you get lower inflation right away. So this is something 0:12:50.160 --> 0:12:52.760 I was advocating for in twenty twenty two, that we 0:12:52.880 --> 0:12:55.000 you know, let's move quickly, let's try to quash the 0:12:55.040 --> 0:13:00.319 inflation quickly. And this report today is helping that story. 0:13:00.440 --> 0:13:02.520 Forgive me for going off pace, but just entertain me 0:13:02.520 --> 0:13:05.520 for a moment. French tenure yield's down by about seven 0:13:05.559 --> 0:13:07.960 or eight basis points right now, that CPI print was 0:13:07.960 --> 0:13:10.840 more important to the European bond market than anything Macrons 0:13:10.840 --> 0:13:12.640 had to say in the last twelve hours. 0:13:12.679 --> 0:13:14.480 The banker to the world, the reason why J. Powace 0:13:14.480 --> 0:13:16.680 would go on tour. But ultimately it does highlight how 0:13:16.720 --> 0:13:19.599 this is the market that everyone is watching, regardless of 0:13:19.679 --> 0:13:20.640 some of the external factors. 0:13:20.720 --> 0:13:23.040 Ara Jersey Blueberg Extelligence joins us. Now for a little 0:13:23.040 --> 0:13:25.439 bit on this bond market are the most important data 0:13:25.440 --> 0:13:26.520 point in global finance? 0:13:26.600 --> 0:13:28.200 Your thoughts on this one. 0:13:28.360 --> 0:13:31.480 Yeah, obviously better than some people had feared, you know 0:13:31.559 --> 0:13:34.600 it on the core CPI it was a low zero 0:13:34.640 --> 0:13:38.040 point two so it was actually under zero point two percent, 0:13:38.120 --> 0:13:40.679 and I think that that's something that traders have been 0:13:40.679 --> 0:13:43.080 able to kind of grasp on to. And like you noted, 0:13:43.600 --> 0:13:46.760 you know, this is pulling down you know, all global 0:13:46.800 --> 0:13:49.560 sovereign bonds at the moment where bond yields at the moment. 0:13:49.800 --> 0:13:52.840 So you look at German yielder down by six basis points, 0:13:52.880 --> 0:13:55.719 like you said, France down by seven basis points. And 0:13:56.280 --> 0:13:58.440 but remember the beta to that is only half of 0:13:58.480 --> 0:14:00.640 what's going on here in the US where you have 0:14:01.000 --> 0:14:03.679 five year yields off fifteen basis points at at at 0:14:03.679 --> 0:14:05.800 one point, and that just shows that you know, you know, 0:14:05.840 --> 0:14:08.360 we're now going to be pricing in for two fol 0:14:08.400 --> 0:14:10.839 cuts probably before the end of the year. And then 0:14:10.920 --> 0:14:13.400 as you get additional data, obviously the market's going to 0:14:13.400 --> 0:14:16.079 have to shift those expectations pretty dramatically. 0:14:16.559 --> 0:14:19.080 So Ira, I have a question for you. So the 0:14:19.920 --> 0:14:21.080 if you just took. 0:14:21.400 --> 0:14:24.640 Rebase where inflation is now, and you said point two 0:14:25.840 --> 0:14:27.480 every report through. 0:14:27.320 --> 0:14:29.840 The end of the year, you would get year over. 0:14:29.800 --> 0:14:34.200 Year core PC inflation on a twelve month basis at 0:14:34.200 --> 0:14:36.680 two point eight at the end of the year. So 0:14:36.760 --> 0:14:39.200 you started out at two point eight in January. 0:14:39.440 --> 0:14:42.200 On that metric, we'd end up at two point eight. 0:14:42.760 --> 0:14:46.520 So maybe that's not really enough. You need you need even. 0:14:46.320 --> 0:14:48.680 Better reports in order to be able to show progress 0:14:49.360 --> 0:14:52.280 through through this year, I. 0:14:52.320 --> 0:14:55.880 Think, But I think I think part of it, James, 0:14:55.720 --> 0:14:59.760 is the fact that we're you know, not increasing, right. 0:14:59.800 --> 0:15:02.440 So so a couple of months ago, when we had 0:15:02.440 --> 0:15:05.720 a couple of inflation scares, the market really dragged onto 0:15:05.760 --> 0:15:07.840 that and said, okay, what happens if the Federal Reserve 0:15:08.640 --> 0:15:10.840 doesn't cut it all this year or maybe even hikes 0:15:10.880 --> 0:15:14.120 Because keep in mind, in January, the market was pricing 0:15:14.160 --> 0:15:18.000 for almost no chance of the Fed staying on hold 0:15:18.000 --> 0:15:22.200 this year, and now we're actually pricing, or were pricing, 0:15:22.320 --> 0:15:24.320 I don't know where we are at the second, but 0:15:24.400 --> 0:15:27.320 we were actually pricing via options on short term interest 0:15:27.360 --> 0:15:30.960 rate futures for the about a twenty percent chance of 0:15:31.360 --> 0:15:34.160 potential hikes by the end of the year. I suspect 0:15:34.160 --> 0:15:36.280 that when you get if you get another print similar 0:15:36.320 --> 0:15:38.520 to this, where you have another well at zero point 0:15:38.520 --> 0:15:43.080 two again on the core, that people will say, like, hey, 0:15:43.120 --> 0:15:45.480 progress is being made. The federal Reserve is still more 0:15:45.600 --> 0:15:49.200 likely to remain on hold and or cut than they 0:15:49.240 --> 0:15:52.720 are to be even thinking about hiking interest rates before 0:15:53.680 --> 0:15:57.000 you June twenty twenty five at this point, so I 0:15:57.080 --> 0:15:59.040 do think that there is a sea change and it matters. 0:15:59.080 --> 0:16:02.320 And to your point, you know, I still think that 0:16:02.400 --> 0:16:06.120 the that the market is going to say, okay, what's 0:16:06.160 --> 0:16:09.600 the trend versus where we were as opposed to as 0:16:09.600 --> 0:16:11.840 opposed to just looking at okay zero point two forever 0:16:12.200 --> 0:16:13.680 is probably not going to be sustained. 0:16:13.720 --> 0:16:16.920 Ara Jersey of Flamberg Intelligence. Ara, thanks for that, appreciate it. 0:16:16.960 --> 0:16:19.680 If you want just joining us about thirteen fourteen, minutes ago, 0:16:19.960 --> 0:16:23.200 we got this data zero point zero percent month of 0:16:23.280 --> 0:16:25.840 a month headline inflation against the estimate of zero point 0:16:25.840 --> 0:16:28.560 one previous number point three stripping out food and energy 0:16:28.600 --> 0:16:30.960 Bramo zero point two percent was the number. 0:16:31.080 --> 0:16:33.160 Zero point three was the estimate. 0:16:32.880 --> 0:16:35.560 And Jim Bullard, a former Saint Louis Fed president, just 0:16:35.600 --> 0:16:38.440 moments ago saying that this is the immaculate disinflation that 0:16:38.480 --> 0:16:41.200 many people were looking for. Francis Donald's still with us, 0:16:41.240 --> 0:16:42.120 and Francis, I'd. 0:16:41.920 --> 0:16:42.760 Love your take on that. 0:16:42.840 --> 0:16:45.840 Do you see this as the friend as the immaculate disinflation? 0:16:46.360 --> 0:16:49.560 Can you bet on that and arrange a portfolio around it? 0:16:51.240 --> 0:16:54.120 Well, for June it feels like immaculate disinflation, or for 0:16:54.320 --> 0:16:57.480 May we had this really large decline or no change 0:16:57.480 --> 0:17:00.320 in inflation month over month and are pretty good non 0:17:00.360 --> 0:17:03.920 farm payrolls number. That's exactly what this immaculate disinflation would 0:17:03.920 --> 0:17:06.840 be defined as. So now it's about what do we 0:17:07.080 --> 0:17:10.240 see next. And on this front, I do see some 0:17:10.359 --> 0:17:13.720 downward momentum that is occurring in the economy. But let's remember, 0:17:13.800 --> 0:17:16.520 if you're sitting on a trading floor, you're managing portfolios. 0:17:16.720 --> 0:17:19.760 Numbers like this aren't just about changing your base case. 0:17:19.800 --> 0:17:21.760 It's not that something like this would make Q move 0:17:21.880 --> 0:17:24.600 from a December to November or even to a September 0:17:24.640 --> 0:17:27.439 rate cut. It can often be about reducing the balance 0:17:27.440 --> 0:17:29.960 of risks or the tails of the risks to your 0:17:30.000 --> 0:17:32.840 base case. So this number probably isn't going to change 0:17:32.880 --> 0:17:35.439 anyone's outlook as to what will happen next. That'll be 0:17:35.480 --> 0:17:38.160 based on their forecast. But it does reduce the chance 0:17:38.200 --> 0:17:40.679 that the said would, if you had it in your scenarios, 0:17:40.720 --> 0:17:42.880 have to hike again, or that they have to stay 0:17:42.880 --> 0:17:46.120 for a prolonged hold. So sometimes it's about reducing those 0:17:46.160 --> 0:17:48.800 fat tails on your outlook as opposed to the individual. 0:17:49.119 --> 0:17:51.879 That is tradable, but usually around the conviction of your 0:17:51.960 --> 0:17:54.639 trade or the balance of risks, or how much leverage 0:17:54.640 --> 0:17:56.760 you're putting onto it as opposed to the trade itself. 0:17:57.160 --> 0:18:00.960 We could J Powill say, Jay Francis would really move 0:18:01.040 --> 0:18:02.280 the needle in your book. 0:18:04.119 --> 0:18:06.040 Well, he could speak to some of his longer term 0:18:06.080 --> 0:18:10.199 concerns that aren't inflation or jobs for example. Well, he 0:18:10.280 --> 0:18:12.960 can't do it. But interest cots for the federal government 0:18:13.000 --> 0:18:16.200 are very high. They are about nineteen percent of revenue 0:18:16.359 --> 0:18:19.040 is going towards interest cocks. If you were to talk 0:18:19.080 --> 0:18:21.240 about and he probably wouldn't some of the risks of 0:18:21.320 --> 0:18:23.679 higher for longer that would move the dial. But we 0:18:23.720 --> 0:18:27.120 have three more inflation reports, three more just about everything 0:18:27.200 --> 0:18:29.399 until we get to September. The seat is in a 0:18:29.600 --> 0:18:32.560 holding period, the market is in a holding period, and 0:18:32.640 --> 0:18:36.320 each individual data point, each individual FED commentary will be 0:18:36.400 --> 0:18:39.080 far less important than the sum of all of their parts. 0:18:39.320 --> 0:18:40.879 So as much as this meaning we'll get a lot 0:18:40.920 --> 0:18:42.800 of attention, I'm sure we'll talk about it all day. 0:18:43.000 --> 0:18:45.359 I'm far more interested about the evolution over the next 0:18:45.359 --> 0:18:48.320 three months. That will be more important than any singular event. 0:18:48.640 --> 0:18:50.439 Francis one of the best. Thanks for faminess. 0:18:50.480 --> 0:19:03.399 Francis Doan with Emanualife City. Scott chron right in this 0:19:03.800 --> 0:19:05.880 the market appears to be pricing a first FED cut 0:19:05.920 --> 0:19:09.400 in December. Cities economists have confidence in a September cut 0:19:09.480 --> 0:19:13.199 predicated on desalrating macros. All told, the S and P 0:19:13.320 --> 0:19:16.040 five hundred continues to be influenced by the structural growth 0:19:16.080 --> 0:19:20.600 opportunity in generative AI as an offset to the mixed 0:19:20.880 --> 0:19:21.960 macro picture. 0:19:22.160 --> 0:19:22.800 Scott's with us. 0:19:22.840 --> 0:19:24.760 Now for more, Scott, I'm going to say it for 0:19:24.840 --> 0:19:27.280 you because you won't do single names on TV. But 0:19:27.440 --> 0:19:29.440