1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,920 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:36,720 Speaker 2: Terminal and the Bloomberg Business App will be given the 10 00:00:36,720 --> 00:00:39,760 Speaker 2: big issue. Stocks get their big Dubvish pivot, as fed shared. 11 00:00:39,840 --> 00:00:43,120 Speaker 2: J Powell sets the stage for September Jason Thomas of 12 00:00:43,200 --> 00:00:45,800 Speaker 2: Carlisle saying this, the case for a September raker is 13 00:00:45,920 --> 00:00:50,400 Speaker 2: very simple. As inflation fools, policy becomes tighter if base 14 00:00:50,479 --> 00:00:53,840 Speaker 2: rates remain unchanged, with cooler labor markets and a modest 15 00:00:53,880 --> 00:00:56,560 Speaker 2: slowdown in nominal growth. There is no reason for tighter 16 00:00:56,600 --> 00:01:00,440 Speaker 2: policy today. Jason joins us now for more. To catch 17 00:01:00,520 --> 00:01:02,240 Speaker 2: up with you once again, Let's talk about that base 18 00:01:02,320 --> 00:01:05,880 Speaker 2: case September. Like seventy people, it's what happens next. Weather 19 00:01:05,920 --> 00:01:09,360 Speaker 2: seems to be some division and confusion the ultimate destination here. Jason, 20 00:01:09,840 --> 00:01:12,600 Speaker 2: what do you think of the pricing beyond September for 21 00:01:12,720 --> 00:01:16,360 Speaker 2: the next eighteen months or so, Well. 22 00:01:16,240 --> 00:01:19,080 Speaker 3: I think it's very aggressive. I think the big lesson 23 00:01:19,280 --> 00:01:22,360 Speaker 3: that we've learned over the last year is that policy 24 00:01:22,400 --> 00:01:26,080 Speaker 3: has not been as tight as many suspected. Entering the year. 25 00:01:26,720 --> 00:01:30,280 Speaker 3: There was, of course, expectations for six or seven rate cuts. 26 00:01:30,600 --> 00:01:33,800 Speaker 3: That was predicated on the idea that a real interest 27 00:01:33,880 --> 00:01:38,280 Speaker 3: rate of two percent would absolutely smother economic activity. Of course, 28 00:01:38,319 --> 00:01:41,319 Speaker 3: that's not what we've observed, and I think learning from 29 00:01:41,360 --> 00:01:44,600 Speaker 3: this experience would suggest that the fat is going to 30 00:01:44,600 --> 00:01:48,160 Speaker 3: behave very cautiously. I think, in general, the less certain 31 00:01:48,200 --> 00:01:51,160 Speaker 3: you are of the destination the terminal rate in this case, 32 00:01:51,840 --> 00:01:55,240 Speaker 3: the more slowly, the more cautiously you're going to proceed 33 00:01:55,600 --> 00:01:56,280 Speaker 3: in that direction. 34 00:01:57,560 --> 00:02:00,000 Speaker 4: You put a comment out in your recent commentary, Jason, 35 00:02:00,080 --> 00:02:02,160 Speaker 4: and I'm still trying to wrap my head around it, 36 00:02:02,160 --> 00:02:04,240 Speaker 4: so I'd like your help. You wrote, it may be 37 00:02:04,240 --> 00:02:07,720 Speaker 4: a time for investors to hold two seemingly contradictory thoughts 38 00:02:07,760 --> 00:02:11,799 Speaker 4: in their head simultaneously. The time for rate cuts has arrived, 39 00:02:12,120 --> 00:02:14,959 Speaker 4: but financial conditions are too accommodative for the FED to 40 00:02:15,000 --> 00:02:18,960 Speaker 4: deliver the scale of easing anticipated by some market participants. 41 00:02:19,400 --> 00:02:22,160 Speaker 4: Can you explain what the Fed should do with that 42 00:02:22,560 --> 00:02:23,920 Speaker 4: and what that exactly means. 43 00:02:26,000 --> 00:02:28,760 Speaker 3: Well, So, since the start of the year, policy is 44 00:02:28,800 --> 00:02:32,840 Speaker 3: effectively tightened by fifty basis points, that's just the decline 45 00:02:33,080 --> 00:02:36,200 Speaker 3: in core PC inflation observed in the first six months. 46 00:02:35,960 --> 00:02:36,359 Speaker 1: Of the year. 47 00:02:36,720 --> 00:02:38,440 Speaker 3: So I think there's a very strong case for two 48 00:02:38,520 --> 00:02:44,360 Speaker 3: cuts September and December. Thereafter things get much murkier, and 49 00:02:44,400 --> 00:02:46,760 Speaker 3: so really that's what I'm suggesting. You heard a lot 50 00:02:46,760 --> 00:02:50,560 Speaker 3: of talk yesterday at the press conference about normalization. Are 51 00:02:50,560 --> 00:02:53,640 Speaker 3: you just cutting rates once or are you normalizing policy? 52 00:02:53,960 --> 00:02:56,520 Speaker 3: And I found this odd because we don't really know 53 00:02:56,840 --> 00:03:02,120 Speaker 3: what normal is in the new environment. Have massive budget deficits. 54 00:03:02,440 --> 00:03:05,320 Speaker 3: I don't mean to catastrophize those, but we do have 55 00:03:05,400 --> 00:03:09,120 Speaker 3: to appreciate that right now, the after tax incomes of 56 00:03:09,160 --> 00:03:12,960 Speaker 3: households and the corporate sector are about one trillion dollars 57 00:03:13,080 --> 00:03:15,560 Speaker 3: larger than they would be if you had a fiscal 58 00:03:15,600 --> 00:03:21,320 Speaker 3: policy that was stabilizing debt to GDP ratios at reasonable levels. Secondly, 59 00:03:21,840 --> 00:03:25,560 Speaker 3: you have the largest concentrated kapex boom we've seen in 60 00:03:25,600 --> 00:03:29,200 Speaker 3: this country since the telecom boom of the late nineteen nineties. 61 00:03:29,880 --> 00:03:33,080 Speaker 3: You just mentioned the quote yesterday from Alphabet about the 62 00:03:33,160 --> 00:03:36,280 Speaker 3: risk of underinvesting. This seems to be something that's going 63 00:03:36,360 --> 00:03:41,240 Speaker 3: to persist. Finally, you have deglobalization, or at least the 64 00:03:41,360 --> 00:03:45,000 Speaker 3: presumption that more of what we consume in the US 65 00:03:45,320 --> 00:03:47,720 Speaker 3: is going to be produced here, which is of course 66 00:03:48,080 --> 00:03:51,240 Speaker 3: going to lead to potentially some upward pressure on prices, 67 00:03:52,000 --> 00:03:55,600 Speaker 3: the potential for supply shocks, more volatile inflation. If you 68 00:03:55,680 --> 00:03:59,040 Speaker 3: put all of this together, it sets up for, on 69 00:03:59,080 --> 00:04:02,040 Speaker 3: the one hand, some rate cuts coming at the end 70 00:04:02,080 --> 00:04:05,960 Speaker 3: of this year September again probably December, but then thereafter 71 00:04:06,480 --> 00:04:10,920 Speaker 3: you could have rates that essentially settle in at four six, five, 72 00:04:11,120 --> 00:04:12,440 Speaker 3: four and a half somewhere. 73 00:04:12,120 --> 00:04:12,960 Speaker 5: In that range. 74 00:04:13,360 --> 00:04:15,440 Speaker 4: Are you saying that that's a more likely neutral rate 75 00:04:15,480 --> 00:04:17,760 Speaker 4: at this point and that the market has gotten way 76 00:04:17,800 --> 00:04:20,480 Speaker 4: ahead of itself in terms of estimating that it's something 77 00:04:20,560 --> 00:04:23,520 Speaker 4: closer to four or even three and a half percent. 78 00:04:25,640 --> 00:04:28,599 Speaker 3: I think you have to ignore the experience of this year, 79 00:04:28,880 --> 00:04:31,560 Speaker 3: of the last eighteen months to think that the neutral 80 00:04:31,640 --> 00:04:35,200 Speaker 3: rate is still five fifty basis points in real terms. 81 00:04:36,160 --> 00:04:38,800 Speaker 3: And so again, this is a situation where there's a 82 00:04:38,800 --> 00:04:43,040 Speaker 3: lot of uncertainty. To be so wetted to a neutral 83 00:04:43,160 --> 00:04:46,479 Speaker 3: rate at these low levels, at levels that persisted between 84 00:04:46,520 --> 00:04:49,960 Speaker 3: the global financial crisis and the pandemic is to ignore 85 00:04:50,240 --> 00:04:53,440 Speaker 3: recent experience. I think that would be very unwise for 86 00:04:53,480 --> 00:04:55,040 Speaker 3: the FED to take that sort of approach. 87 00:04:55,320 --> 00:04:57,920 Speaker 4: Well, Jason, this goes to a deeper question really, which 88 00:04:57,960 --> 00:05:00,840 Speaker 4: is essentially a lot of people are betting that rate 89 00:05:00,920 --> 00:05:03,920 Speaker 4: cuts are going to support the next leg of growth 90 00:05:03,960 --> 00:05:06,479 Speaker 4: in the US economy. Are you saying that that's not 91 00:05:06,560 --> 00:05:08,839 Speaker 4: a lever that they can really pull in the same 92 00:05:08,960 --> 00:05:12,280 Speaker 4: kind of way that maybe some of those inflation sensitive 93 00:05:12,320 --> 00:05:16,080 Speaker 4: strategies look better and some of the ones that rely 94 00:05:16,279 --> 00:05:20,120 Speaker 4: on inflation coming off and the FED cutting rates are 95 00:05:20,120 --> 00:05:21,960 Speaker 4: maybe a little fraudy. 96 00:05:24,360 --> 00:05:26,880 Speaker 3: Well, I think that in general, if you look at 97 00:05:27,000 --> 00:05:30,159 Speaker 3: risk premium in the economy, if you look at where 98 00:05:30,160 --> 00:05:33,480 Speaker 3: credit spreads are today, they're tighter than they were again 99 00:05:33,520 --> 00:05:36,320 Speaker 3: at any point since two thousand and seven. If you 100 00:05:36,360 --> 00:05:39,760 Speaker 3: look at duration risk premium, where's the tenure in relation 101 00:05:39,839 --> 00:05:42,640 Speaker 3: to the expected path for FED funds over the next 102 00:05:42,640 --> 00:05:45,880 Speaker 3: ten years, it's effectively zero. If you look at estimates 103 00:05:45,920 --> 00:05:50,080 Speaker 3: of the equity risk premium, based on consensus forecast for 104 00:05:50,120 --> 00:05:53,359 Speaker 3: dividend or earnings growth, it also looks very very tight, 105 00:05:53,880 --> 00:05:56,560 Speaker 3: very narrow. So you know, I think that this all 106 00:05:56,640 --> 00:06:00,480 Speaker 3: suggests that you have a market that is really priced 107 00:06:00,560 --> 00:06:04,880 Speaker 3: for perfection to a large extent, and going forward, if 108 00:06:04,920 --> 00:06:08,640 Speaker 3: we have some really unfortunate, unforeseen developments in the economy, 109 00:06:08,680 --> 00:06:11,320 Speaker 3: of course, the fad with base rates at five point 110 00:06:11,360 --> 00:06:14,200 Speaker 3: three percent has a lot of firepower, could do a 111 00:06:14,240 --> 00:06:16,440 Speaker 3: lot to stabilize economic activity. 112 00:06:16,720 --> 00:06:17,520 Speaker 5: But if things. 113 00:06:17,320 --> 00:06:20,960 Speaker 3: Persist as they do today, again, I think base rates 114 00:06:21,000 --> 00:06:24,000 Speaker 3: that you know, I would use as a baseline nothing 115 00:06:24,040 --> 00:06:26,520 Speaker 3: that is lower than one hundred basis points from here 116 00:06:26,720 --> 00:06:29,600 Speaker 3: as a reasonable expectation should growth persist. 117 00:06:29,960 --> 00:06:31,360 Speaker 2: Jason, I don't want to put words in your mouth, 118 00:06:31,360 --> 00:06:33,280 Speaker 2: so I just want to last for your opinion directly. 119 00:06:33,880 --> 00:06:35,400 Speaker 2: Do you think the Federal Reserve is getting it wrong? 120 00:06:37,279 --> 00:06:40,240 Speaker 3: No? Again, I think the case for rate cuts today 121 00:06:40,360 --> 00:06:41,119 Speaker 3: is very clear. 122 00:06:41,600 --> 00:06:43,680 Speaker 2: Not the same time labor Mark and Jason. I just 123 00:06:43,760 --> 00:06:45,839 Speaker 2: mean in terms of how they think about the economy. 124 00:06:45,880 --> 00:06:47,680 Speaker 2: Because I'll tell you what I heard in the news 125 00:06:47,680 --> 00:06:49,960 Speaker 2: conference yesterday and even say this directly, but I think 126 00:06:49,960 --> 00:06:52,120 Speaker 2: he gave us a lot of clues. He almost frames 127 00:06:52,120 --> 00:06:54,520 Speaker 2: the inflation shop coming out of the pandemic because due 128 00:06:54,560 --> 00:06:57,279 Speaker 2: to one of factors that are ultimately finding And what 129 00:06:57,320 --> 00:06:59,520 Speaker 2: I hear from you is that actually some of these 130 00:06:59,520 --> 00:07:02,680 Speaker 2: forces to hang around. Do you think he's getting that 131 00:07:02,720 --> 00:07:03,440 Speaker 2: piece of it wrong. 132 00:07:05,279 --> 00:07:08,279 Speaker 3: Well, there was, of course an element of inflation that 133 00:07:08,360 --> 00:07:13,160 Speaker 3: was transitory, but I'm surprised given that the second and 134 00:07:13,200 --> 00:07:16,640 Speaker 3: third order effects that we saw that people would still 135 00:07:16,640 --> 00:07:19,320 Speaker 3: be of this mind. What we learned, I think in 136 00:07:19,360 --> 00:07:22,920 Speaker 3: the inflation shock is that when you have shortages, you 137 00:07:23,040 --> 00:07:26,640 Speaker 3: have a response to that. People over order. If they're 138 00:07:26,680 --> 00:07:29,960 Speaker 3: expecting one hundred units of a component or part and 139 00:07:30,000 --> 00:07:32,760 Speaker 3: they fear getting cut back, they order two hundred. You 140 00:07:32,800 --> 00:07:37,000 Speaker 3: start seeing courting, You start seeing downstream price dynamics that 141 00:07:37,040 --> 00:07:39,880 Speaker 3: are very difficult to control. And again, I think when 142 00:07:39,920 --> 00:07:44,440 Speaker 3: we compare today relative to twenty nineteen, we see both 143 00:07:44,480 --> 00:07:48,480 Speaker 3: with the fiscal deficit, with the kapex boom that certainly 144 00:07:48,520 --> 00:07:51,040 Speaker 3: was not occurring. Then, I mean, you have fixed industrial 145 00:07:51,080 --> 00:07:54,760 Speaker 3: investment in the United States right now that's three times 146 00:07:54,800 --> 00:07:59,160 Speaker 3: twenty nineteen levels. And then again the shock from the 147 00:07:59,680 --> 00:08:03,360 Speaker 3: Terra on China in twenty nineteen, most people expected they 148 00:08:03,360 --> 00:08:06,679 Speaker 3: would be rolled back. Vice President Biden at the time 149 00:08:07,040 --> 00:08:10,280 Speaker 3: suggested that this policy was unwise, it was harming American 150 00:08:10,320 --> 00:08:13,560 Speaker 3: consumers and farmers. Now no one is speaking like that. 151 00:08:13,760 --> 00:08:17,000 Speaker 3: In fact, the direction as it relates to trade frictions, 152 00:08:17,200 --> 00:08:19,960 Speaker 3: I think is only in the direction of war. So 153 00:08:20,440 --> 00:08:24,440 Speaker 3: you know, again, it's very important to when we contextualize 154 00:08:24,520 --> 00:08:27,720 Speaker 3: the current situation, when we account for all of these 155 00:08:27,880 --> 00:08:31,680 Speaker 3: massive changes relative to twenty nineteen, I think you're left 156 00:08:32,000 --> 00:08:35,400 Speaker 3: with much more upside risk to inflation. Should you act 157 00:08:35,440 --> 00:08:38,520 Speaker 3: more aggressed, should the Fed act more aggressively over the 158 00:08:38,520 --> 00:08:41,760 Speaker 3: next six to twelve months than perhaps many perceive. 159 00:08:42,280 --> 00:08:46,520 Speaker 4: Jason, you said that if growth continues, then this market 160 00:08:46,760 --> 00:08:50,760 Speaker 4: is somewhat priced to perfection. Which market in particular is 161 00:08:50,800 --> 00:08:51,680 Speaker 4: price to perfection? 162 00:08:52,000 --> 00:08:52,600 Speaker 5: Is it sort of. 163 00:08:52,559 --> 00:08:54,880 Speaker 4: A good news is bad news and bad news is 164 00:08:54,920 --> 00:08:57,160 Speaker 4: bad news type of paradigm that we're entering into. 165 00:08:58,679 --> 00:09:01,679 Speaker 3: To be clear, I think that when you look at indexes, 166 00:09:01,760 --> 00:09:03,560 Speaker 3: if you look at the NASDAC, if you look at 167 00:09:03,600 --> 00:09:06,720 Speaker 3: the SMP five hundred, because so much of the gains 168 00:09:07,080 --> 00:09:10,160 Speaker 3: have been concentrated in, of course a very small number 169 00:09:10,400 --> 00:09:13,400 Speaker 3: of stocks, and you look at the aggregates, and you 170 00:09:13,440 --> 00:09:16,160 Speaker 3: look at the equity risk premium in the index. 171 00:09:17,200 --> 00:09:17,880 Speaker 5: Then you say that. 172 00:09:18,080 --> 00:09:20,360 Speaker 3: It's priced to perfection. Now, if you look at the 173 00:09:20,400 --> 00:09:24,240 Speaker 3: broader US stock market, you see many stocks that look 174 00:09:24,360 --> 00:09:27,400 Speaker 3: quite reasonably priced because they have not participated to the 175 00:09:27,400 --> 00:09:30,600 Speaker 3: same extent. Many stocks where you've seen earning's growth fear 176 00:09:30,640 --> 00:09:35,040 Speaker 3: an excess of price appreciation, of course, implying that valuations 177 00:09:35,040 --> 00:09:38,960 Speaker 3: have come down in some cases quite materially. So you know, 178 00:09:39,320 --> 00:09:42,200 Speaker 3: it's a market that I think is gravitating from momentum 179 00:09:42,240 --> 00:09:45,400 Speaker 3: trades very focused on those stocks that you know actually 180 00:09:45,480 --> 00:09:48,560 Speaker 3: quite benefited in many cases from higher rates. Many of 181 00:09:48,600 --> 00:09:52,800 Speaker 3: these megacap companies, of course have negative net debt, and 182 00:09:53,080 --> 00:09:55,640 Speaker 3: of course they have large cash piles that are earning 183 00:09:55,840 --> 00:09:59,199 Speaker 3: floating rate interests that is an excess of their relatively 184 00:09:59,240 --> 00:10:02,559 Speaker 3: low fixed rate liabilities. They're also, of course, generates so 185 00:10:02,679 --> 00:10:05,839 Speaker 3: much cash in the near term that you know the 186 00:10:06,360 --> 00:10:10,520 Speaker 3: effects of rates isn't so great. So it's quite rational 187 00:10:10,640 --> 00:10:14,120 Speaker 3: that the market rotated into those stocks and they just 188 00:10:14,160 --> 00:10:17,079 Speaker 3: the valuations now have reached levels where you know, I 189 00:10:17,120 --> 00:10:20,800 Speaker 3: think on a perspective expected return basis, people have to 190 00:10:20,800 --> 00:10:21,840 Speaker 3: start looking elsewhere. 191 00:10:22,240 --> 00:10:24,839 Speaker 2: Jason, this was deeply thoughtful one of those conversations I'm 192 00:10:24,840 --> 00:10:26,600 Speaker 2: going to re listen to a little bit later on 193 00:10:26,600 --> 00:10:29,160 Speaker 2: this afternoon. Jason salmasa Kala, Jason, thank you. 194 00:10:39,040 --> 00:10:40,240 Speaker 5: I want to turn to this story. 195 00:10:40,360 --> 00:10:43,120 Speaker 2: Barklay's unvanning a share buyback plan worth more than nine 196 00:10:43,200 --> 00:10:45,480 Speaker 2: hundred and sixty million US dollars This coming is the 197 00:10:45,480 --> 00:10:48,920 Speaker 2: British lender reported better than expected second quarter investment banking 198 00:10:48,960 --> 00:10:51,760 Speaker 2: revenue and boosted its guidance for the full year. 199 00:10:52,160 --> 00:10:52,959 Speaker 5: Joining us now is. 200 00:10:52,880 --> 00:10:56,880 Speaker 2: The Barklay CEO, CS ven Kada Krishnan Venkatt, it's great 201 00:10:56,920 --> 00:10:59,520 Speaker 2: to catch up with you, sir. Once again, I will 202 00:10:59,520 --> 00:11:01,760 Speaker 2: go through the numbers so you could be modest and 203 00:11:01,880 --> 00:11:04,480 Speaker 2: you don't have to Equity underwriting booming. 204 00:11:04,840 --> 00:11:06,400 Speaker 5: Equity is trading up nicely. 205 00:11:06,480 --> 00:11:10,200 Speaker 2: The stock is up by something like fifty percent year today, Venkat. 206 00:11:10,240 --> 00:11:11,920 Speaker 2: There was some weakness in thick trading that I want 207 00:11:11,960 --> 00:11:13,440 Speaker 2: to get to in just a moment. But let's start 208 00:11:13,440 --> 00:11:15,880 Speaker 2: with the position of strength you're in Equity is trading. 209 00:11:16,160 --> 00:11:18,440 Speaker 2: Where did that strength come from, Venkat? And do you 210 00:11:18,480 --> 00:11:20,320 Speaker 2: expect you to continue through the year. 211 00:11:23,080 --> 00:11:26,000 Speaker 6: Well, thank you for asking me to join the program. 212 00:11:26,040 --> 00:11:27,280 Speaker 6: I'm very grateful to be here. 213 00:11:27,720 --> 00:11:28,280 Speaker 5: And as you. 214 00:11:28,280 --> 00:11:32,160 Speaker 6: Say, we are in the process of delivering on the 215 00:11:32,160 --> 00:11:34,720 Speaker 6: investor plan that we laid out in February of this year, 216 00:11:35,160 --> 00:11:38,160 Speaker 6: which was to have a simpler, better, more balanced bank, 217 00:11:38,440 --> 00:11:41,320 Speaker 6: a bank that returns twelve percent hour rote and above 218 00:11:41,360 --> 00:11:44,480 Speaker 6: by twenty twenty six, returning about ten billion pounds to 219 00:11:44,559 --> 00:11:49,000 Speaker 6: shareholders by twenty twenty six and more, and then rebalancing 220 00:11:49,040 --> 00:11:51,520 Speaker 6: the bank so that the investment bank goes from around 221 00:11:51,600 --> 00:11:53,559 Speaker 6: sixty percent of the bank to around fifty percent of 222 00:11:53,600 --> 00:11:55,920 Speaker 6: the bank. One part of the investment bank is our 223 00:11:55,960 --> 00:11:59,559 Speaker 6: market's business and the equity business, which you highlight. We've 224 00:11:59,600 --> 00:12:02,200 Speaker 6: always had a great strength in equity, and I think 225 00:12:02,280 --> 00:12:05,720 Speaker 6: as equity markets themselves have gone through the changes that 226 00:12:05,760 --> 00:12:08,120 Speaker 6: you've seen in this since the start of this year, 227 00:12:08,559 --> 00:12:11,360 Speaker 6: our traders have been able to capitalize on client demand, 228 00:12:11,440 --> 00:12:15,520 Speaker 6: on increasing volatility and providing the kind of innovative derivative 229 00:12:15,559 --> 00:12:19,319 Speaker 6: solutions they seek clients seek from Barclays and I do 230 00:12:19,400 --> 00:12:23,319 Speaker 6: expect as market volatility keeps the pace for our performance 231 00:12:23,400 --> 00:12:24,760 Speaker 6: in equities to continue. 232 00:12:25,080 --> 00:12:27,760 Speaker 2: While we're seeing that same strength in Fick trading VENCAT, 233 00:12:27,920 --> 00:12:30,560 Speaker 2: I wonder what you can do to turn things around 234 00:12:30,559 --> 00:12:32,880 Speaker 2: in that particular part of the business. 235 00:12:35,240 --> 00:12:38,840 Speaker 6: So within FEC we are a very very strong credit 236 00:12:38,880 --> 00:12:42,600 Speaker 6: house and typically in the top three. One of the 237 00:12:42,640 --> 00:12:45,160 Speaker 6: reasons in FICK that in the market and for US 238 00:12:45,200 --> 00:12:47,680 Speaker 6: it affects us maybe a little more, is that credit 239 00:12:47,679 --> 00:12:50,240 Speaker 6: spreads have been muted and credit volatility has been muted, 240 00:12:50,320 --> 00:12:53,959 Speaker 6: quite the opposite case from equities. In European rates, which 241 00:12:54,000 --> 00:12:56,080 Speaker 6: is an area of growth for US, we've improved from 242 00:12:56,120 --> 00:12:59,280 Speaker 6: the first quarter to the second quarter, and securitized products, 243 00:12:59,280 --> 00:13:02,080 Speaker 6: which is an important part of fixed income, is growing 244 00:13:02,120 --> 00:13:06,560 Speaker 6: from strength to strength. So our fit performance is improved 245 00:13:06,559 --> 00:13:08,400 Speaker 6: from the first quarter to the second and I could 246 00:13:08,480 --> 00:13:11,319 Speaker 6: expect to continue to see more of that improvement as 247 00:13:11,320 --> 00:13:12,040 Speaker 6: the year goes on. 248 00:13:12,360 --> 00:13:14,680 Speaker 4: Venkatte, We've been having a debate for several months now. 249 00:13:14,800 --> 00:13:17,560 Speaker 4: Are rate cuts good or bad for banks? Or rate 250 00:13:17,640 --> 00:13:21,800 Speaker 4: hikes good or bad for banks? Our rate cuts broadly 251 00:13:22,040 --> 00:13:25,319 Speaker 4: good or bad for your profitability at a time when 252 00:13:25,320 --> 00:13:27,359 Speaker 4: a lot of people are expecting them globally. 253 00:13:28,280 --> 00:13:29,679 Speaker 1: Than you and Mark. 254 00:13:30,360 --> 00:13:33,040 Speaker 6: So what I would say is very special about this 255 00:13:33,120 --> 00:13:37,200 Speaker 6: rate cycle is that the what we're expecting is not 256 00:13:37,240 --> 00:13:40,400 Speaker 6: a state of cuts but fine tuning adjustments. So the 257 00:13:40,480 --> 00:13:42,559 Speaker 6: answer to your question is, I don't think they'll make 258 00:13:42,640 --> 00:13:45,040 Speaker 6: that much of a difference to a bank like ours 259 00:13:45,120 --> 00:13:46,000 Speaker 6: or to the large banks. 260 00:13:46,559 --> 00:13:47,760 Speaker 5: You know, my colleague A. J. 261 00:13:47,920 --> 00:13:50,440 Speaker 6: Raja at Thyaksha, who runs in macro research for US, 262 00:13:50,840 --> 00:13:54,640 Speaker 6: often says a rate cycle is when you go up 263 00:13:54,679 --> 00:13:57,520 Speaker 6: in an escalator meaning slow cuts, and come down in 264 00:13:57,559 --> 00:14:00,560 Speaker 6: an elevator. Slow rises and then fast cut coming down 265 00:14:00,600 --> 00:14:03,800 Speaker 6: in an elevator. What we've seen this time is we 266 00:14:03,840 --> 00:14:07,120 Speaker 6: went up in an elevator meaning very fast rate hikes, 267 00:14:07,520 --> 00:14:09,840 Speaker 6: and we may be coming down by the stairs. So 268 00:14:09,880 --> 00:14:11,920 Speaker 6: you saw a fine tuning adjustment by the Bank of 269 00:14:11,960 --> 00:14:16,560 Speaker 6: England this morning. You saw the FED pause, but they're 270 00:14:16,559 --> 00:14:19,440 Speaker 6: indicating they may go later this year. All of these 271 00:14:19,440 --> 00:14:22,520 Speaker 6: things are just trying to adjust interest rates by a 272 00:14:22,560 --> 00:14:25,880 Speaker 6: small amount because real rates have crept up at a 273 00:14:25,920 --> 00:14:28,840 Speaker 6: constant inflation which is two percent, which is low. But 274 00:14:29,000 --> 00:14:33,360 Speaker 6: it's just trying to overcome the slight impediment of rising 275 00:14:33,400 --> 00:14:35,720 Speaker 6: real rates. So I don't expect this to have much 276 00:14:35,760 --> 00:14:38,040 Speaker 6: of an effect on the banking sector of any and 277 00:14:38,080 --> 00:14:40,240 Speaker 6: certainly we are not changing the way we view the 278 00:14:40,240 --> 00:14:42,280 Speaker 6: world because of this modest rate cut. 279 00:14:42,480 --> 00:14:44,400 Speaker 4: In the meantime, you say that you are on track 280 00:14:44,480 --> 00:14:48,080 Speaker 4: to achieve one billion pounds in cost cuts. There is 281 00:14:48,160 --> 00:14:51,520 Speaker 4: sort of some swirling questions around where those cost cuts 282 00:14:51,560 --> 00:14:54,480 Speaker 4: are coming from. Is it simply just being more efficient 283 00:14:54,520 --> 00:14:57,440 Speaker 4: in certain sectors, is it ongoing job cuts? 284 00:14:57,720 --> 00:15:01,480 Speaker 2: What are you executing? 285 00:15:01,600 --> 00:15:04,560 Speaker 6: So we did a billion pounds worth of structural cost 286 00:15:04,600 --> 00:15:08,080 Speaker 6: actions last year. We're seeing a the benefits of some 287 00:15:08,200 --> 00:15:10,800 Speaker 6: of that. B We're seeing the benefits of a greater 288 00:15:10,880 --> 00:15:14,520 Speaker 6: focus on productivity and efficiency in the way in which 289 00:15:14,520 --> 00:15:17,640 Speaker 6: we run the bank. And what we're also seeing is 290 00:15:18,480 --> 00:15:21,880 Speaker 6: the results of investments which we have made, particularly in markets, 291 00:15:21,920 --> 00:15:25,080 Speaker 6: particularly in trading technology. I'm talking to you from our 292 00:15:25,120 --> 00:15:28,720 Speaker 6: equity trading flow in London and the way we have 293 00:15:28,920 --> 00:15:31,680 Speaker 6: increased our market share and electronic trading here in Europe 294 00:15:31,720 --> 00:15:34,560 Speaker 6: and in the US is all a result of past investment. 295 00:15:34,680 --> 00:15:37,080 Speaker 6: You have to continue to do it, but it's probably 296 00:15:37,080 --> 00:15:38,920 Speaker 6: at a slower pace than we did in the last 297 00:15:38,960 --> 00:15:42,320 Speaker 6: couple of years. So it's efficiency and better investment. 298 00:15:42,400 --> 00:15:44,400 Speaker 2: Can I ask you about the advisory business with that 299 00:15:44,480 --> 00:15:46,720 Speaker 2: in mind, how is that going? How's the turnaround going 300 00:15:46,760 --> 00:15:47,320 Speaker 2: in that unit? 301 00:15:50,160 --> 00:15:53,880 Speaker 6: So investment banking we've done, as you've seen the results 302 00:15:53,920 --> 00:15:57,840 Speaker 6: in the banking side quite strongly. Equity capital markets did 303 00:15:57,920 --> 00:16:01,560 Speaker 6: very well, advisories improving. We still have a little way 304 00:16:01,560 --> 00:16:05,720 Speaker 6: to go. We are seeing deal volume pickup, We're seeing 305 00:16:05,760 --> 00:16:09,040 Speaker 6: our backlog increasing, and I think over time, as some 306 00:16:09,120 --> 00:16:12,400 Speaker 6: of these ideas fructify, you will see an improvement in 307 00:16:12,440 --> 00:16:13,400 Speaker 6: the advisory numbers. 308 00:16:13,840 --> 00:16:15,920 Speaker 2: I'd love your view, vencoun on how business is going 309 00:16:15,960 --> 00:16:19,200 Speaker 2: more generally, as you look across Corporate America and corporations 310 00:16:19,240 --> 00:16:21,120 Speaker 2: across Europe. I can share with you some of the 311 00:16:21,120 --> 00:16:23,520 Speaker 2: comments we've heard from Corporate America over the last couple 312 00:16:23,560 --> 00:16:26,360 Speaker 2: of weeks from P ANDNG they're seeing slower price increases. 313 00:16:26,760 --> 00:16:29,680 Speaker 2: Kimberly Clark also saying the same thing. McDonald's are talking 314 00:16:29,720 --> 00:16:33,040 Speaker 2: about the first sales slide since twenty twenty, PEPSI saying 315 00:16:33,080 --> 00:16:36,080 Speaker 2: the consumer is becoming more challenged. You've got a massive 316 00:16:36,080 --> 00:16:39,160 Speaker 2: consumer business as well with the barclaycart business. When you 317 00:16:39,200 --> 00:16:41,840 Speaker 2: look at corporations and the consumer, are you seeing the 318 00:16:41,880 --> 00:16:44,720 Speaker 2: same kind of slow down VNCAP from your vantage point? 319 00:16:47,680 --> 00:16:49,880 Speaker 6: So, what we are seeing, which is good for the 320 00:16:49,880 --> 00:16:53,240 Speaker 6: credit performance of banks, is we are seeing both consumers 321 00:16:53,280 --> 00:16:58,480 Speaker 6: and corporates focusing on efficiency and managing their budgets more carefully. 322 00:16:58,840 --> 00:17:00,720 Speaker 6: So if you are in the concer humer business and 323 00:17:00,720 --> 00:17:04,160 Speaker 6: if you're a consumer oriented company. What you will see 324 00:17:04,800 --> 00:17:09,000 Speaker 6: is therefore a lack of pricing power and then people economizing. 325 00:17:09,280 --> 00:17:13,280 Speaker 6: We see that in our own customers. What that means though, 326 00:17:13,760 --> 00:17:16,520 Speaker 6: is that even though employment is still very strong, both 327 00:17:16,520 --> 00:17:19,320 Speaker 6: in the UK and the US, people are managing their 328 00:17:19,320 --> 00:17:22,280 Speaker 6: budgets more carefully, which is one of the reasons why 329 00:17:22,320 --> 00:17:25,639 Speaker 6: buy and large credit impairment costs for banks have been 330 00:17:25,680 --> 00:17:29,600 Speaker 6: relatively well controlled. So it's good for the consumer to 331 00:17:29,600 --> 00:17:31,000 Speaker 6: do this and manage their budgets. 332 00:17:31,359 --> 00:17:33,080 Speaker 5: It's good for their lenders. 333 00:17:33,000 --> 00:17:37,560 Speaker 6: Because they're seeing less signs of consumer distress. It's good however, 334 00:17:38,000 --> 00:17:40,880 Speaker 6: it's for the economy. However, there are winners and losers, 335 00:17:41,240 --> 00:17:43,359 Speaker 6: and that's what you're seeing from some of the people 336 00:17:43,400 --> 00:17:43,840 Speaker 6: you're courting. 337 00:17:44,280 --> 00:17:46,920 Speaker 4: Are you seeing a big difference in terms of consumer 338 00:17:47,000 --> 00:17:50,280 Speaker 4: strength globally depending on the region. We've been talking a 339 00:17:50,280 --> 00:17:53,840 Speaker 4: lot about how the consumer shows a lot of I 340 00:17:53,840 --> 00:17:56,600 Speaker 4: guess restraint when it comes to spending, but more so 341 00:17:57,040 --> 00:18:01,080 Speaker 4: in some of the sector is more leverage to highese consumers. 342 00:18:01,160 --> 00:18:03,560 Speaker 4: How much you see in Europe in a weaker spot 343 00:18:03,560 --> 00:18:09,000 Speaker 4: than say the US, well, I. 344 00:18:08,960 --> 00:18:12,160 Speaker 6: Think I think the the slow down which we've seen 345 00:18:12,240 --> 00:18:15,640 Speaker 6: in China is palpable and what Chinese demand has done 346 00:18:16,280 --> 00:18:19,159 Speaker 6: is affected sectors which were particularly exposed to them. You 347 00:18:19,200 --> 00:18:22,240 Speaker 6: saw some of it in the fashion goods industry, and 348 00:18:22,359 --> 00:18:27,280 Speaker 6: tech of course is a different situation because you know 349 00:18:27,359 --> 00:18:30,280 Speaker 6: the trade with China is being limited in tech for 350 00:18:30,359 --> 00:18:33,080 Speaker 6: other reasons. But I do think that what you will 351 00:18:33,119 --> 00:18:36,600 Speaker 6: see as people with that exposure to China being more affected. 352 00:18:36,640 --> 00:18:38,560 Speaker 6: You've already seen it in the numbers and that I 353 00:18:38,600 --> 00:18:40,440 Speaker 6: expect that you'll see that for some time to come. 354 00:18:41,280 --> 00:18:43,280 Speaker 4: How much does it affect where you're expanding or where 355 00:18:43,280 --> 00:18:44,080 Speaker 4: you're not expanding. 356 00:18:46,600 --> 00:18:50,879 Speaker 6: Well, Barclay's is a first and foremost a consumer bank 357 00:18:50,920 --> 00:18:56,480 Speaker 6: in the UK, a global investment bank, and so've got 358 00:18:56,480 --> 00:18:59,560 Speaker 6: a very strong corporate presence and a wealth presence. But 359 00:18:59,680 --> 00:19:04,960 Speaker 6: all of that is very highly connected to London, from Europe, 360 00:19:05,080 --> 00:19:08,680 Speaker 6: from the United States, and then from India, Singapore, Hong Kong. 361 00:19:09,480 --> 00:19:12,520 Speaker 6: We are not a major presence in mainland China, and 362 00:19:12,600 --> 00:19:15,040 Speaker 6: so what we think is that the impact of what's 363 00:19:15,080 --> 00:19:19,280 Speaker 6: happening in China is relatively more muted for US compared 364 00:19:19,280 --> 00:19:20,959 Speaker 6: to other banks with larger exposures. 365 00:19:21,440 --> 00:19:23,080 Speaker 4: It has really a question though about some of the 366 00:19:23,520 --> 00:19:27,080 Speaker 4: tensions that have been coming to the fore politically internationally 367 00:19:27,119 --> 00:19:32,359 Speaker 4: in terms of potential tariffs, potential restrictions, changing policies, the elections. 368 00:19:32,480 --> 00:19:34,080 Speaker 4: How are you trying to get ahead of that at 369 00:19:34,119 --> 00:19:36,040 Speaker 4: a time where there's a lot of policy uncertainty. And 370 00:19:36,160 --> 00:19:40,120 Speaker 4: arguably that's one reason why advisory and mergers and acquisitions 371 00:19:40,200 --> 00:19:43,399 Speaker 4: hasn't been as robust as some people had expected it 372 00:19:43,440 --> 00:19:43,600 Speaker 4: to be. 373 00:19:47,040 --> 00:19:48,760 Speaker 6: It's a very very good point, and I think the 374 00:19:48,760 --> 00:19:52,040 Speaker 6: big area where all that comes into play is cross 375 00:19:52,040 --> 00:19:55,560 Speaker 6: border m and A and cross border transactions. You've even 376 00:19:55,560 --> 00:19:57,720 Speaker 6: seen slowdown of that within Europe itself. 377 00:19:58,200 --> 00:19:58,960 Speaker 5: You know, for. 378 00:19:58,840 --> 00:20:01,480 Speaker 6: Us it highlight it's one of the things which we've done, 379 00:20:01,520 --> 00:20:03,639 Speaker 6: which is we decided very early this year when we 380 00:20:03,680 --> 00:20:06,280 Speaker 6: did our investorday and made the decision towards the end 381 00:20:06,320 --> 00:20:08,919 Speaker 6: of last year to invest thirty billion pounds. 382 00:20:08,680 --> 00:20:10,080 Speaker 5: Of risk created assets in the UK. 383 00:20:10,680 --> 00:20:13,679 Speaker 6: The UK has had its election, We've elected a business 384 00:20:13,720 --> 00:20:18,040 Speaker 6: friendly government. The transition has been smooth and it points 385 00:20:18,040 --> 00:20:20,840 Speaker 6: to the importance for banks like us to be in 386 00:20:20,880 --> 00:20:25,160 Speaker 6: places with very clear economic policy, the good rule of law, 387 00:20:25,680 --> 00:20:28,840 Speaker 6: growth and stable governments and stable economic policies. 388 00:20:29,320 --> 00:20:30,560 Speaker 5: Venkat, the year is going well. 389 00:20:30,640 --> 00:20:32,320 Speaker 2: Hopefully next time we're in New York we can catch 390 00:20:32,400 --> 00:20:33,280 Speaker 2: up again here in the studio. 391 00:20:33,280 --> 00:20:34,720 Speaker 5: I appreciate your time this morning, sir. 392 00:20:35,000 --> 00:20:49,160 Speaker 2: Thank you the Farculey CEO cs ven Kara Krishna. Here's 393 00:20:49,160 --> 00:20:52,000 Speaker 2: the latest investors turning their attention to the data following 394 00:20:52,080 --> 00:20:55,360 Speaker 2: yesterday's FED decision. The July payrolls report you out tomorrow 395 00:20:55,600 --> 00:20:58,680 Speaker 2: and CPI coming in just two weeks time. Fetch JPOW 396 00:20:58,760 --> 00:21:01,520 Speaker 2: waiting for the numbers before committing to a Rake cup. 397 00:21:01,680 --> 00:21:04,000 Speaker 2: The former Kansas City FED president as the George right 398 00:21:04,040 --> 00:21:06,960 Speaker 2: in this I found the chair leaned pretty clearly to 399 00:21:07,000 --> 00:21:10,600 Speaker 2: confirm market expectations for a September cup. While September looks 400 00:21:10,640 --> 00:21:12,920 Speaker 2: like the meeting to take this action, I think this 401 00:21:13,080 --> 00:21:15,879 Speaker 2: room to be patient as the joined us now for 402 00:21:15,920 --> 00:21:17,600 Speaker 2: more as the waterfall to catch up with you. It's 403 00:21:17,600 --> 00:21:19,119 Speaker 2: been far too long. Thanks for being with us. I 404 00:21:19,160 --> 00:21:21,919 Speaker 2: want to talk about that word you've used, patients. What 405 00:21:22,080 --> 00:21:25,840 Speaker 2: underpins that patience? Why should we have that patience? 406 00:21:27,640 --> 00:21:32,159 Speaker 1: Welcome morning. I think my view on this really comes 407 00:21:32,160 --> 00:21:35,760 Speaker 1: from the fact that we are looking at an economy 408 00:21:35,840 --> 00:21:40,040 Speaker 1: that is growing and by the reads of the second quarter, 409 00:21:40,080 --> 00:21:43,920 Speaker 1: growing well above it's sustainable long run growth. You've got 410 00:21:44,000 --> 00:21:48,119 Speaker 1: a strong labor market and you still have elevated inflation. 411 00:21:48,280 --> 00:21:52,080 Speaker 1: And I think that combination reminds me that the FEDS 412 00:21:52,160 --> 00:21:56,359 Speaker 1: mandate is a long run objective. And just as we 413 00:21:56,440 --> 00:22:00,560 Speaker 1: saw earlier this year, the market had priced innumber of 414 00:22:00,680 --> 00:22:03,679 Speaker 1: cuts only to have to pull back on that. So 415 00:22:04,160 --> 00:22:06,879 Speaker 1: the central Bank's job is really to pay attention to 416 00:22:07,560 --> 00:22:10,200 Speaker 1: the data. And as that gets closer, of course, that's 417 00:22:10,200 --> 00:22:12,760 Speaker 1: going to be more difficult for them, and they recognize that. 418 00:22:13,040 --> 00:22:14,640 Speaker 2: How big is the risk that we take that strong 419 00:22:14,720 --> 00:22:16,280 Speaker 2: labor market for grants it? 420 00:22:18,440 --> 00:22:21,199 Speaker 1: Well, I think you're always looking at this because we 421 00:22:21,320 --> 00:22:26,840 Speaker 1: don't know with any great certainty where that equilibrium rate 422 00:22:26,960 --> 00:22:29,760 Speaker 1: is for the labor market. Obviously, we came out of 423 00:22:29,800 --> 00:22:34,080 Speaker 1: the pandemic during that recovery with a very tight labor market, 424 00:22:34,119 --> 00:22:38,480 Speaker 1: and so as we watch it normalize, the space between 425 00:22:38,520 --> 00:22:42,720 Speaker 1: normalization and weakening is one that policymakers are going to 426 00:22:42,760 --> 00:22:46,320 Speaker 1: be very attentive to. So we'll get a report tomorrow. 427 00:22:46,520 --> 00:22:49,159 Speaker 1: It will give a clue. I don't expect it'll be 428 00:22:49,240 --> 00:22:52,719 Speaker 1: definitive and by any means around that, but it is 429 00:22:52,840 --> 00:22:57,359 Speaker 1: the collection, the aggregate of these reports that begin to 430 00:22:57,480 --> 00:23:01,000 Speaker 1: give the committee a better sense just where that labor 431 00:23:01,040 --> 00:23:02,960 Speaker 1: market is right now, Ester, do. 432 00:23:02,880 --> 00:23:05,520 Speaker 4: You get the sense that this fuge reserve still embraces 433 00:23:05,520 --> 00:23:08,920 Speaker 4: the idea of transitory in that basically the inflation was 434 00:23:09,000 --> 00:23:11,720 Speaker 4: largely due to the pandemic. It's come off the boil, 435 00:23:11,800 --> 00:23:14,960 Speaker 4: and now some of the ramifications, the ripple effects are 436 00:23:15,000 --> 00:23:16,560 Speaker 4: just being worked out of the economy. 437 00:23:18,440 --> 00:23:21,000 Speaker 1: I think that could have a lot to do with it. Lisa, 438 00:23:21,600 --> 00:23:25,800 Speaker 1: you did see tremendous supply adjustments, and it had been 439 00:23:25,880 --> 00:23:28,159 Speaker 1: some time since we'd had to pay attention to the 440 00:23:28,160 --> 00:23:31,880 Speaker 1: supply side of the economy. So as we watched supply 441 00:23:32,040 --> 00:23:34,440 Speaker 1: and that was true on the labor side, certainly good 442 00:23:34,920 --> 00:23:39,560 Speaker 1: on the good side, begin to adjust. That creates a challenge, 443 00:23:39,560 --> 00:23:42,720 Speaker 1: I think for the Committee and understanding just how restrictive 444 00:23:42,800 --> 00:23:46,160 Speaker 1: is our policy. How do we understand when the economy 445 00:23:46,200 --> 00:23:49,400 Speaker 1: is approaching an equilibrium? And I think, as they've noted 446 00:23:49,920 --> 00:23:54,600 Speaker 1: they are close, those risks are coming into better balance 447 00:23:54,720 --> 00:23:59,439 Speaker 1: right now, and now judging how tight their policy is 448 00:23:59,600 --> 00:24:03,320 Speaker 1: relative to the steady state of the economy, is there 449 00:24:03,359 --> 00:24:06,960 Speaker 1: real challenge? And we heard that yesterday too soon versus 450 00:24:07,000 --> 00:24:08,760 Speaker 1: too late and making adjustments to that. 451 00:24:09,280 --> 00:24:12,320 Speaker 4: It seems like the market really believes that the risks 452 00:24:12,400 --> 00:24:15,119 Speaker 4: at this point are greater potentially on some sort of 453 00:24:15,160 --> 00:24:19,160 Speaker 4: intereration in the labor market than an increase a surge 454 00:24:19,160 --> 00:24:23,159 Speaker 4: and inflation. I'm wondering if you think that maybe the 455 00:24:23,200 --> 00:24:25,439 Speaker 4: FED would have been prudent to push back just a 456 00:24:25,480 --> 00:24:28,320 Speaker 4: little bit on that base on what you're seeing, considering 457 00:24:28,359 --> 00:24:31,320 Speaker 4: that you believe that maybe there should have been a 458 00:24:31,320 --> 00:24:34,080 Speaker 4: little bit more patients, kind of a little more discipline 459 00:24:34,320 --> 00:24:35,720 Speaker 4: imviewed on the market. 460 00:24:37,040 --> 00:24:42,399 Speaker 1: Well, I would agree that the labor market again is 461 00:24:42,440 --> 00:24:46,359 Speaker 1: coming into better balance for this committee, and you will 462 00:24:46,440 --> 00:24:48,560 Speaker 1: have to look at some of the subtleties that come 463 00:24:48,600 --> 00:24:52,719 Speaker 1: in underlying that labor market in terms of the levels 464 00:24:52,720 --> 00:24:55,840 Speaker 1: of activity and the momentum that you see there. But 465 00:24:55,920 --> 00:24:59,320 Speaker 1: at the end of the day, committee is faced with 466 00:24:59,760 --> 00:25:03,800 Speaker 1: an elevated inflation rate relative to the target they've established 467 00:25:03,800 --> 00:25:06,600 Speaker 1: and the credibility they seek around getting back to that, 468 00:25:06,720 --> 00:25:09,840 Speaker 1: and in the long run, as we've heard many times 469 00:25:09,840 --> 00:25:14,400 Speaker 1: from both the chairmen and others, that sets the conditions 470 00:25:14,680 --> 00:25:18,080 Speaker 1: for a healthy labor market long run. So yes, near 471 00:25:18,160 --> 00:25:20,600 Speaker 1: term they're going to be watching a lot of those signals. 472 00:25:22,520 --> 00:25:24,320 Speaker 1: But the real issue, I think at the end of 473 00:25:24,320 --> 00:25:26,159 Speaker 1: the day is their inflation mandate. 474 00:25:26,600 --> 00:25:27,600 Speaker 5: So I'd like to do two things. 475 00:25:27,640 --> 00:25:29,159 Speaker 2: I want to share a quote with you, and then 476 00:25:29,200 --> 00:25:31,440 Speaker 2: I'd like to lean on your experience on the committee. 477 00:25:31,520 --> 00:25:34,480 Speaker 2: You've got plenty of experience of understanding how all of 478 00:25:34,480 --> 00:25:36,920 Speaker 2: this works behind closed doors. The stuff that we don't 479 00:25:36,920 --> 00:25:39,440 Speaker 2: see this is whatever Core had to say. We think 480 00:25:39,440 --> 00:25:42,080 Speaker 2: in practice it's not very data dependent, and view the 481 00:25:42,160 --> 00:25:45,000 Speaker 2: cautious evolution of the statement as intended to carry hawks 482 00:25:45,000 --> 00:25:49,119 Speaker 2: along and avoid dissents. Esther in your experience when you 483 00:25:49,160 --> 00:25:51,680 Speaker 2: hear stuff like that, how true is that? How do 484 00:25:51,800 --> 00:25:53,840 Speaker 2: things come together on the committee? 485 00:25:55,840 --> 00:25:59,040 Speaker 1: Well, it's true. This is a committee that is consensus driven. 486 00:25:59,160 --> 00:26:03,359 Speaker 1: They must make it decision and the nature of a 487 00:26:03,440 --> 00:26:07,960 Speaker 1: large committee with differing views is to try to achieve 488 00:26:08,040 --> 00:26:11,600 Speaker 1: consensus at some point. That doesn't mean you always get 489 00:26:12,160 --> 00:26:16,359 Speaker 1: unanimity around that decision. And I think anytime you begin 490 00:26:16,520 --> 00:26:20,840 Speaker 1: to approach what looks like I think, in their words, 491 00:26:21,040 --> 00:26:26,040 Speaker 1: better balance things coming into balance, the decisions get more difficult. 492 00:26:26,560 --> 00:26:28,520 Speaker 1: It's not as clear cut as it was when you 493 00:26:28,560 --> 00:26:30,560 Speaker 1: know you have to ease, or it's not as clear 494 00:26:30,600 --> 00:26:33,159 Speaker 1: cut when you see an inflation problem emerging that you 495 00:26:33,280 --> 00:26:37,280 Speaker 1: have to address. And so I suspect there is challenge 496 00:26:37,320 --> 00:26:41,199 Speaker 1: within the committee of trying to reconcile views and to 497 00:26:41,280 --> 00:26:45,560 Speaker 1: try to bring a solid consensus to whatever the decision 498 00:26:45,600 --> 00:26:46,800 Speaker 1: will be at their next meeting. 499 00:26:47,000 --> 00:26:49,000 Speaker 2: As to this was wonderful and hopefully the team gets 500 00:26:49,000 --> 00:26:50,879 Speaker 2: to see you in Jackson Holle as we used to 501 00:26:51,080 --> 00:26:53,919 Speaker 2: as the George the formst kinds of City Fed President 502 00:26:53,960 --> 00:26:57,359 Speaker 2: on the latest Fed Reserve decision from yesterday. This is 503 00:26:57,400 --> 00:27:01,760 Speaker 2: the Bloomberg Seventans podcast, bringing you the best in markets, economics, 504 00:27:01,800 --> 00:27:04,760 Speaker 2: and geopolitics. You can watch the show live on Bloomberg 505 00:27:04,800 --> 00:27:07,919 Speaker 2: TV weekday mornings from six am to nine am Eastern. 506 00:27:08,240 --> 00:27:11,600 Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else 507 00:27:11,600 --> 00:27:14,240 Speaker 2: you listen, and as always, on the Bloomberg Terminal and 508 00:27:14,359 --> 00:27:15,560 Speaker 2: the Bloomberg Business app.