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Speaker 1: Bloomberg Audio Studios, podcasts, radio news, It's the latest.

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Speaker 2: This morning, President Trump calling for the FED to cut

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Speaker 2: interest rates once again, saying it's quote not fed to America.

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Speaker 2: After a soft CPR report out just yesterday, Former New

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Speaker 2: York Fed president built out lely Rights in the following,

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Speaker 2: The Fed has little choice when it doesn't know which

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Speaker 2: way the rescue. It must wait for more information. Right now,

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Speaker 2: any major move would have only a fifty to fifty

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Speaker 2: chance of a positive outcome. Build joins us now for more,

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Speaker 2: but welcome to the program. So why such a negative

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Speaker 2: assessment of the position that they're in right now?

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Speaker 1: Because they don't know where the terrorists are going to

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Speaker 1: land number one, And too, they don't know what the

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Speaker 1: effects of the terrists.

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Speaker 3: Are going to be on growth versus inflation. So they're

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Speaker 3: uncertain about two dimensions.

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Speaker 1: So they can't really just sort of flip a coin

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Speaker 1: and say, oh, we're going to worry about the growth

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Speaker 1: mention because that could turn out to be wrong.

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Speaker 3: So they have to sit and wait to wait for

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Speaker 3: more information.

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Speaker 4: I mean, if you're driving a car in a thunderstorm,

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Speaker 4: you want to just put the autopilot that you would

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Speaker 4: get through safely, so he pulled to the side of

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Speaker 4: the road until the weather cleared up.

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Speaker 1: And that's what the FED has to do. You know,

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Speaker 1: the FED are going to be criticized for waiting. They

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Speaker 1: have to wait, and because they are waiting, they're probably

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Speaker 1: ultimately going to be late. But it's not the FED fault.

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Speaker 1: I would behave exactly the same way in this in

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Speaker 1: this set of circumstances.

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Speaker 2: But what's that definition of light? And what's your definition

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Speaker 2: of light? Because he reflected on the move last summer

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Speaker 2: and he said, in some ways we were a little light,

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Speaker 2: and other people thought he was being preemptive. What's light

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Speaker 2: to you?

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Speaker 1: I think, ladies responding only after you've seen a preticizable

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Speaker 1: increase in the unemploying rate, because at that point it's

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Speaker 1: truly hard to avert a recession.

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Speaker 3: You know, when I evaluate the risks.

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Speaker 1: To inflation versus the risks of growth, here, I guess

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Speaker 1: I worry more about the downside risks of growth.

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Speaker 3: But the FED can't put all their marbles that on.

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Speaker 1: That side of the of the equation because inflation has

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Speaker 1: been running above the fed's target for five years. And

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Speaker 1: if they're wrong and inflation expectations get unanchored, then it's

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Speaker 1: a really difficult problem getting inflation back down. So I

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Speaker 1: think they have to wait. Because they wait, because there

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Speaker 1: will be forced to wait, They'll probably be late. Trump

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Speaker 1: will blame the FED for being late, But rally is

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Speaker 1: Trump creates the conditions that forces the Fed to have

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Speaker 1: to wait.

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Speaker 5: Bill, I'm just curious going forward, how much you see

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Speaker 5: the Fed unwilling to move even if the unemployment rate

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Speaker 5: rises by half a percentage point, which is sort of

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Speaker 5: the trigger that a lot of people are looking at.

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Speaker 5: If you do see those inflationary pressures coming back, well, I.

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Speaker 1: Think if the unplay rate rose by above four and

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Speaker 1: a half percent, that would change the feds calculus. They

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Speaker 1: would be much more worried about the self reinforcing deterioration

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Speaker 1: and the layer market leading to a full blown recession.

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Speaker 1: So I think the unplaying rate is really the single

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Speaker 1: most important indicator. If it stays around where it is today,

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Speaker 1: if it's going to just sit and wait. If the

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Speaker 1: unplayer rate starts rising quickly, then the Federal Reserve will

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Speaker 1: start to.

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Speaker 3: Respond, But I think it's going to take some time.

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Speaker 1: I mean, the hard data on the economy shows that

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Speaker 1: the economy is still just fine. I mean, the first

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Speaker 1: quarter report was very misleading because it was mainly the

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Speaker 1: fact that they couldn't count inventories properly to match up

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Speaker 1: with the big surgeon imports bill.

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Speaker 5: If you were still on the FED, and you have

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Speaker 5: been on the FED through crises and through really difficult

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Speaker 5: times where the market was moving faster than the underlying economy,

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Speaker 5: what data would you look at to get a real

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Speaker 5: read on what was going on in the United States.

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Speaker 1: Well, I think some of the bank the banks have

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Speaker 1: actually pretty good realtime data in terms of what's happening

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Speaker 1: sort of credit cards, and they're not seeing much of

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Speaker 1: a slowdown at this point, you know, initially unplanted claims.

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Speaker 1: It gives you a pretty high frequency look at what's

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Speaker 1: happening to the labor market that doesn't show any deterioration

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Speaker 1: yet of note, So I think you're looking at things

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Speaker 1: at the margin that suggests that weaknesses that are starting

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Speaker 1: to accumulate. Now what's interesting is the tariffs are actually

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Speaker 1: starting to bring in revenue, so fiscal policy and right

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Speaker 1: now is actually.

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Speaker 3: Starting to become tighter.

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Speaker 1: And I'd also look at low income households because I

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Speaker 1: think that's where the squeeze is going to be the

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Speaker 1: mostative significant. So if you start to see delinquency rates

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Speaker 1: on subprime all loans really start to hit up.

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Speaker 3: I mean they're already high.

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Speaker 1: If they start to head up even more substantially, that

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Speaker 1: would be also a sign of a growing strain on

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Speaker 1: the growth side.

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Speaker 2: But at some point the Fed will have to update

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Speaker 2: their numbers. On March nineteenth, they put out these forecasts

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Speaker 2: GDP at one point seven percent for twenty twenty five

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Speaker 2: PC at two point a unemployment of four point four

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Speaker 2: On June eighteenth, they'll have to deliver an update. When

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Speaker 2: we get that update, Bill, what do you think it

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Speaker 2: will look like relative to March.

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Speaker 1: I think I'll show somewhat slower growth to reflect the

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Speaker 1: fact that terists have gone up more than they anticipated,

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Speaker 1: and somewhat higher inflation to reflect the same consequence. So

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Speaker 1: I think he'll be even a more pessimistic forecast in

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Speaker 1: the sense that the FED will be missing both of

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Speaker 1: its deal mandate objectives by a bigger magnitude. But they

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Speaker 1: still want to have clarity on what's happening to terrorists

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Speaker 1: and the impact of terrorists on the economy, and so

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Speaker 1: I think it's going to take a while for that

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Speaker 1: to be realized, and only then will the Fed be

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Speaker 1: able to act.

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Speaker 2: One missing piece slower growth, somewhat higher inflation. What does

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Speaker 2: the median dot do? Bill, because I think that implies

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Speaker 2: what their reaction function is, how they respond to that

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Speaker 2: kind of data mix. Do you think it changes?

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Speaker 1: I think that you can make the case that the

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Speaker 1: Fed starts to cut rates in September and maybe we

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Speaker 1: could still get three racuts this year, which would be

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Speaker 1: consistent with the March set some rate economic projections. But obviously,

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Speaker 1: as time passes and the Fed doesn't act, the likelihood

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Speaker 1: is the number of median number of recuts starts to

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Speaker 1: come down just because there's fewer meetings left.

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Speaker 3: Bill.

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Speaker 2: I appreciate your time as always, sir, and enjoy your

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Speaker 2: pieces on Bloomberg dot Com on Bloomberg Opinion, they form

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Speaker 2: a New York Fed President Bill Dudley, There