1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

2
00:00:09,200 --> 00:00:13,200
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

3
00:00:13,280 --> 00:00:18,600
Speaker 1: insight from the best and economics, finance, investment, and international relations.

4
00:00:18,800 --> 00:00:23,560
Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot

5
00:00:23,560 --> 00:00:29,800
Speaker 1: Com and of course on the Bloomberg Terminal. It has

6
00:00:29,800 --> 00:00:34,720
Speaker 1: been again a terrific labor report and an inflation report

7
00:00:34,800 --> 00:00:39,120
Speaker 1: that certainly quieted the gloom and the fear that's out

8
00:00:39,200 --> 00:00:42,240
Speaker 1: There always a time for the White House to message

9
00:00:42,280 --> 00:00:44,720
Speaker 1: in this morning or Lisa O Bramo wits in conversation

10
00:00:45,240 --> 00:00:48,919
Speaker 1: with Brian Deese of the White House for audience worldwide

11
00:00:48,920 --> 00:00:51,840
Speaker 1: on Bloomberg TV and radio were now joined by Brian

12
00:00:51,920 --> 00:00:55,080
Speaker 1: D's White House and Director of the National Economic Council. Brian,

13
00:00:55,080 --> 00:00:57,320
Speaker 1: thank you so much for being with us. So, you

14
00:00:57,440 --> 00:00:59,880
Speaker 1: obviously have worked very hard to get oil prices down,

15
00:01:00,000 --> 00:01:02,400
Speaker 1: the Strategic Petroleum Reserve release, and that was one of

16
00:01:02,400 --> 00:01:06,000
Speaker 1: the big components bringing down some of the inflation here,

17
00:01:06,319 --> 00:01:08,360
Speaker 1: how far are you willing to go? Is there more

18
00:01:08,440 --> 00:01:11,000
Speaker 1: to do to bring gas prices down? Or is this

19
00:01:11,080 --> 00:01:15,680
Speaker 1: an area? Is this a level that you're content with? Well, look,

20
00:01:15,760 --> 00:01:19,440
Speaker 1: this was a positive inflation report that we received this morning,

21
00:01:19,959 --> 00:01:23,839
Speaker 1: zero percent month over month growth on headline, and UH

22
00:01:24,040 --> 00:01:28,360
Speaker 1: the core inflation excluding energy and food also moderated down

23
00:01:28,360 --> 00:01:31,800
Speaker 1: to zero point three month over month. One big driver,

24
00:01:31,880 --> 00:01:34,240
Speaker 1: as you note, was the decline in gas prices that

25
00:01:34,280 --> 00:01:36,559
Speaker 1: we've seen over the last two months, now down about

26
00:01:36,600 --> 00:01:41,000
Speaker 1: a dollar over over its highs. And if you look

27
00:01:41,040 --> 00:01:43,400
Speaker 1: at where the market is today in futures pricing, we

28
00:01:43,440 --> 00:01:48,000
Speaker 1: would expect that to continue to come down. Energy markets,

29
00:01:48,000 --> 00:01:49,720
Speaker 1: as you say, has been a key focus for us,

30
00:01:49,720 --> 00:01:52,800
Speaker 1: and we'll continue to be UH, and we would expect

31
00:01:52,880 --> 00:01:55,480
Speaker 1: where the market is today to continue to see that moderation.

32
00:01:55,560 --> 00:01:57,880
Speaker 1: But I think importantly you saw in the July print

33
00:01:57,960 --> 00:02:02,360
Speaker 1: moderation in other areas as well. Apparel down, airfares down,

34
00:02:02,960 --> 00:02:07,080
Speaker 1: automotive used vehicles down slightly. So we're starting to see,

35
00:02:07,120 --> 00:02:10,919
Speaker 1: at least in this report, some signs of deceleration in prices,

36
00:02:10,960 --> 00:02:13,959
Speaker 1: even as UH there are their price increases elsewhere in

37
00:02:13,960 --> 00:02:16,680
Speaker 1: the economy. So we never over index too hard on

38
00:02:16,680 --> 00:02:20,680
Speaker 1: one month of data, but certainly this is a positive signal,

39
00:02:20,680 --> 00:02:23,160
Speaker 1: and of course comes aside the report that we got

40
00:02:23,240 --> 00:02:27,680
Speaker 1: last week on jobs added in July as well. Talking

41
00:02:27,720 --> 00:02:30,799
Speaker 1: about jobs, real wages are still deeply negative, and even

42
00:02:30,800 --> 00:02:33,239
Speaker 1: though they're less negative than they were in the prior month,

43
00:02:33,320 --> 00:02:37,560
Speaker 1: still negative three point six percent, a historic figure. How

44
00:02:37,639 --> 00:02:41,160
Speaker 1: much do you want to see the employee have pricing

45
00:02:41,200 --> 00:02:43,200
Speaker 1: power at a time when so many people are worried

46
00:02:43,240 --> 00:02:47,000
Speaker 1: about a wage spiral. Well, we did see a real

47
00:02:47,000 --> 00:02:49,680
Speaker 1: wage growth of a month over month this month. I

48
00:02:49,720 --> 00:02:51,480
Speaker 1: think you have you have to step back and and

49
00:02:51,560 --> 00:02:54,640
Speaker 1: answer that question. In the broader perspective, we have seen

50
00:02:55,080 --> 00:02:58,800
Speaker 1: one of the strongest labor market recoveries ever in American history,

51
00:02:58,800 --> 00:03:02,239
Speaker 1: and we're seeing that labor market strength continue. That means

52
00:03:02,280 --> 00:03:06,360
Speaker 1: that with jobs plentiful, people have opportunities to move into

53
00:03:06,560 --> 00:03:10,680
Speaker 1: better paying jobs and better paying opportunities. That's a positive

54
00:03:10,720 --> 00:03:13,480
Speaker 1: thing for the American economy. And what we're trying to

55
00:03:13,520 --> 00:03:16,560
Speaker 1: do here is to take the steps that we need

56
00:03:16,600 --> 00:03:19,120
Speaker 1: to take to bring prices down without giving up all

57
00:03:19,160 --> 00:03:22,200
Speaker 1: of those labor market gains. That's absolutely our objective, and

58
00:03:22,240 --> 00:03:25,280
Speaker 1: over the longer term, we think that we are well

59
00:03:25,320 --> 00:03:28,240
Speaker 1: on our way to moving toward an economy that actually

60
00:03:28,240 --> 00:03:31,000
Speaker 1: works better for typical working people and where they do

61
00:03:31,080 --> 00:03:34,239
Speaker 1: have more job opportunities and more leverage in the workplace.

62
00:03:34,600 --> 00:03:37,160
Speaker 1: We think that's a positive thing, and we can get

63
00:03:37,200 --> 00:03:41,360
Speaker 1: to that kind of sustainable wage growth, sustainable job growth

64
00:03:41,920 --> 00:03:44,360
Speaker 1: through this transition. So we have to make the right

65
00:03:44,360 --> 00:03:48,280
Speaker 1: policy choices. And obviously there are serious global uncertainties, but

66
00:03:48,320 --> 00:03:50,520
Speaker 1: I think that the data points that we're seeing, at

67
00:03:50,560 --> 00:03:52,800
Speaker 1: least our hopeful data points that we're moving in that direction.

68
00:03:52,880 --> 00:03:55,760
Speaker 1: But Brian, even the Federal Reserve has cited wage growth

69
00:03:55,880 --> 00:03:59,200
Speaker 1: as a possible negative when it comes to combating inflation,

70
00:03:59,240 --> 00:04:02,640
Speaker 1: and we've seen that as especially Fed officials say that

71
00:04:02,760 --> 00:04:04,760
Speaker 1: even they would like to see, not like to see,

72
00:04:04,800 --> 00:04:08,120
Speaker 1: but that they need to see the unemployment rate increase

73
00:04:08,240 --> 00:04:12,119
Speaker 1: and the labor market tightens significantly, taking away power from

74
00:04:12,480 --> 00:04:14,960
Speaker 1: the employees. How do you deal with that given that

75
00:04:15,040 --> 00:04:18,159
Speaker 1: your view very much is trying to give people living

76
00:04:18,200 --> 00:04:22,880
Speaker 1: wage and bring up the individual employee. Look, we're living

77
00:04:22,880 --> 00:04:25,640
Speaker 1: through an unprecedented moment, and so there isn't a an

78
00:04:25,640 --> 00:04:28,920
Speaker 1: exact historic analog to the moment that we're in. So

79
00:04:29,480 --> 00:04:31,480
Speaker 1: you have to you have to go back more than

80
00:04:31,520 --> 00:04:35,080
Speaker 1: fifty years to find a moment where the FED began

81
00:04:35,120 --> 00:04:38,160
Speaker 1: a tightening cycle when unemployment was as low as it

82
00:04:38,279 --> 00:04:40,680
Speaker 1: is and We've never had a situation with as many

83
00:04:40,800 --> 00:04:44,000
Speaker 1: job openings in the economy during this cycle. So there

84
00:04:44,040 --> 00:04:47,320
Speaker 1: are there are ways in which this transition can ease

85
00:04:47,600 --> 00:04:50,080
Speaker 1: some of the labor market pressure in a way that

86
00:04:50,120 --> 00:04:53,320
Speaker 1: doesn't have to mean that working people have to bear

87
00:04:53,360 --> 00:04:56,680
Speaker 1: the brunt of that that impact. And again, if you

88
00:04:56,680 --> 00:05:00,240
Speaker 1: step back from a broader perspective, President Biden's view is

89
00:05:00,279 --> 00:05:03,560
Speaker 1: that we had economic challenges, that we're putting working families

90
00:05:03,640 --> 00:05:08,120
Speaker 1: in a negative position long before this pandemic happened, and

91
00:05:08,160 --> 00:05:11,080
Speaker 1: that we are committed to building the foundations of an

92
00:05:11,080 --> 00:05:14,240
Speaker 1: economy that will work better for working people going forward,

93
00:05:14,320 --> 00:05:16,760
Speaker 1: even as we navigate through this transition. So that's why

94
00:05:16,800 --> 00:05:19,760
Speaker 1: you see on the legislative front, even as we're working

95
00:05:19,800 --> 00:05:23,279
Speaker 1: to provide some immediate cost relief for families, we're trying

96
00:05:23,320 --> 00:05:26,200
Speaker 1: to do things like reform the way that prescription drugs

97
00:05:26,720 --> 00:05:29,200
Speaker 1: are negotiated here in the United States. We haven't done

98
00:05:29,200 --> 00:05:31,520
Speaker 1: that for decades. If we do that over time, that's

99
00:05:31,520 --> 00:05:35,040
Speaker 1: going to provide sustained relief to families. That's the kind

100
00:05:35,040 --> 00:05:37,120
Speaker 1: of longer term reformal working on these even as we

101
00:05:37,120 --> 00:05:39,640
Speaker 1: address and media challenges, and Brian, you're you're referring, of

102
00:05:39,680 --> 00:05:42,039
Speaker 1: course to the act that was just passed by the

103
00:05:42,080 --> 00:05:44,560
Speaker 1: Senate out going to the House, how much are you

104
00:05:44,640 --> 00:05:48,360
Speaker 1: prepared to spend more as abide administration prepared to spend

105
00:05:48,440 --> 00:05:51,240
Speaker 1: more if there is as the market broadly expects a

106
00:05:51,279 --> 00:05:54,080
Speaker 1: downturn in the next twelve months. How much is there

107
00:05:54,160 --> 00:05:58,839
Speaker 1: the willingness to give some fiscal support as people blame

108
00:05:58,920 --> 00:06:02,159
Speaker 1: some of the fiscal support back last year for the

109
00:06:02,200 --> 00:06:05,839
Speaker 1: inflationary search that we're seeing now. Yeah, I think that

110
00:06:05,920 --> 00:06:08,560
Speaker 1: question miss is the core economic challenge that we face

111
00:06:08,680 --> 00:06:10,720
Speaker 1: right now, which is that what we need to do

112
00:06:10,839 --> 00:06:14,359
Speaker 1: right now is we need to help bring prices down

113
00:06:14,440 --> 00:06:17,600
Speaker 1: in a way that sustains the economic progress that we've made.

114
00:06:17,720 --> 00:06:20,880
Speaker 1: We saw five more than five thousand jobs created last

115
00:06:20,920 --> 00:06:24,520
Speaker 1: month while the inflation print was zero. We can keep

116
00:06:24,560 --> 00:06:26,440
Speaker 1: making progress on that front. And the way to do

117
00:06:26,520 --> 00:06:29,359
Speaker 1: that from a fiscal policy standpoint is exactly what the

118
00:06:29,360 --> 00:06:32,960
Speaker 1: Inflation Reduction Act does. Bring down costs for prescription drugs,

119
00:06:33,000 --> 00:06:36,240
Speaker 1: for health care, for energy while reducing the deficit. This

120
00:06:36,320 --> 00:06:40,440
Speaker 1: is a bill that will actually contribute to additional deficit reduction,

121
00:06:40,960 --> 00:06:43,360
Speaker 1: which is complementary to what the FETE is trying to do,

122
00:06:43,720 --> 00:06:46,400
Speaker 1: and help us move through this transition away where we

123
00:06:46,400 --> 00:06:48,479
Speaker 1: don't have to give up all of those economic gains.

124
00:06:48,560 --> 00:06:50,880
Speaker 1: That's the right economic prescription right now. It's why we're

125
00:06:50,880 --> 00:06:53,039
Speaker 1: working so hard to get it done in place, and

126
00:06:53,080 --> 00:06:55,200
Speaker 1: if we do that, we're going to be better positioned

127
00:06:55,440 --> 00:06:58,479
Speaker 1: to navigate through this transition and get to that period

128
00:06:58,520 --> 00:07:01,240
Speaker 1: of steady, stable growth in any other country in the world.

129
00:07:01,560 --> 00:07:03,840
Speaker 1: Right and has this administration done everything that it can

130
00:07:04,080 --> 00:07:07,800
Speaker 1: to bring down inflation, Like I think you see a

131
00:07:07,839 --> 00:07:10,960
Speaker 1: president and you see administration right now that is using

132
00:07:11,160 --> 00:07:14,720
Speaker 1: all the tools at its disposal and also working on

133
00:07:14,800 --> 00:07:16,840
Speaker 1: the most important things. And that's why we really are

134
00:07:16,880 --> 00:07:19,840
Speaker 1: focused on the Inflation Reduction Act at this point because

135
00:07:19,840 --> 00:07:23,200
Speaker 1: there is no more significant step that Congress or the

136
00:07:23,200 --> 00:07:26,680
Speaker 1: President could take than passing this piece of legislation. It

137
00:07:26,720 --> 00:07:30,800
Speaker 1: will have historic impacts, bring down prescription drug prices, bring

138
00:07:30,880 --> 00:07:34,960
Speaker 1: down healthcare prices this fall this fall for millions of Americans,

139
00:07:35,080 --> 00:07:39,800
Speaker 1: and have a long term sustainable energy strategy that will

140
00:07:39,840 --> 00:07:43,800
Speaker 1: reduce prices for for people in their utility bills. That's

141
00:07:43,840 --> 00:07:46,000
Speaker 1: the most significant step that we could take, which is

142
00:07:46,000 --> 00:07:48,400
Speaker 1: why you're seeing the priority put there even as we

143
00:07:48,440 --> 00:07:51,640
Speaker 1: are working on supply chains and ports and logistics, as

144
00:07:51,680 --> 00:07:54,960
Speaker 1: you mentioned, the Strategic Patroleum Reserve and elsewhere we're doing.

145
00:07:55,200 --> 00:07:57,040
Speaker 1: We're using all the tools that are disposal, but we're

146
00:07:57,040 --> 00:08:00,240
Speaker 1: also prioritizing those that will be the biggest dial movers. Brian,

147
00:08:00,280 --> 00:08:02,600
Speaker 1: I'm sure that you saw this University of Pennsylvania, the

148
00:08:02,640 --> 00:08:05,040
Speaker 1: Warton School study that showed that not only with this

149
00:08:05,320 --> 00:08:08,680
Speaker 1: Inflation Reduction Act not necessarily reduce inflation in the very

150
00:08:08,680 --> 00:08:10,840
Speaker 1: short room, but it might increase it before bringing it

151
00:08:10,880 --> 00:08:15,200
Speaker 1: down in and beyond. How much do you give evidence

152
00:08:15,200 --> 00:08:17,760
Speaker 1: a rebut that, And if that is the case, how

153
00:08:17,840 --> 00:08:20,240
Speaker 1: much are you leaning on gasoline prices to really take

154
00:08:20,240 --> 00:08:23,920
Speaker 1: the lead here? Is that as you expect, continues to decline.

155
00:08:26,040 --> 00:08:27,760
Speaker 1: So I think you know that study said that the

156
00:08:27,800 --> 00:08:31,000
Speaker 1: impact would be negligible. Respectfully, we have looked at the

157
00:08:31,080 --> 00:08:34,960
Speaker 1: broad consensus of economists, including those who have not necessarily

158
00:08:35,000 --> 00:08:37,360
Speaker 1: agreed with us. Over the last couple of years, former

159
00:08:37,400 --> 00:08:40,760
Speaker 1: Treasury secretaries from both political parties have all said this

160
00:08:40,840 --> 00:08:45,880
Speaker 1: bill will help reduce inflation while also lowering costs for families.

161
00:08:46,040 --> 00:08:48,520
Speaker 1: We think that that's exactly the economic prescription that we need,

162
00:08:48,559 --> 00:08:50,760
Speaker 1: and we think that that's the impact that this bill

163
00:08:50,800 --> 00:08:54,720
Speaker 1: will have. Obviously, gas prices and energy prices are incredibly

164
00:08:54,760 --> 00:08:58,360
Speaker 1: salient for American consumers and they hit people in their pocketbooks.

165
00:08:58,360 --> 00:09:00,280
Speaker 1: So when we bring the price of gas down by

166
00:09:00,280 --> 00:09:02,959
Speaker 1: a dollar, and we keep having some progress and bringing

167
00:09:03,000 --> 00:09:05,200
Speaker 1: that down, that's a positive thing. But I think, as

168
00:09:05,240 --> 00:09:06,960
Speaker 1: you saw in the July print, what we want to

169
00:09:06,960 --> 00:09:09,120
Speaker 1: see is more progress in that direction where we're seeing

170
00:09:09,120 --> 00:09:11,960
Speaker 1: prices moderate across the board, and that's what we saw

171
00:09:12,000 --> 00:09:15,079
Speaker 1: in this July print. It was of course gas prices.

172
00:09:15,440 --> 00:09:17,320
Speaker 1: We're doing a lot of work here, but we also

173
00:09:17,360 --> 00:09:20,160
Speaker 1: saw absolute declines, as I said, in things like airfares

174
00:09:20,440 --> 00:09:25,000
Speaker 1: and apparel, consumer electronics, and so we want to make

175
00:09:25,040 --> 00:09:28,000
Speaker 1: this we want to encourage this transition to where price

176
00:09:28,200 --> 00:09:32,160
Speaker 1: pressures moderate across the economy, but also do things that

177
00:09:32,200 --> 00:09:34,880
Speaker 1: will make things more affordable for people right now, because

178
00:09:34,880 --> 00:09:36,920
Speaker 1: at the end of the day, typical families look at

179
00:09:36,960 --> 00:09:39,600
Speaker 1: their monthly budget all in so if we can provide

180
00:09:39,640 --> 00:09:42,560
Speaker 1: some relief on things like prescription drugs or healthcare premiums,

181
00:09:42,600 --> 00:09:45,040
Speaker 1: that's going to help them overall. Brian D's thank you

182
00:09:45,120 --> 00:09:46,960
Speaker 1: so much for being with us. Brian D's White House

183
00:09:47,000 --> 00:09:50,120
Speaker 1: Director of the National Economic Council. We appreciate you taking

184
00:09:50,160 --> 00:09:53,360
Speaker 1: the time. Lisa Brands there with brand D's of the

185
00:09:53,400 --> 00:10:02,920
Speaker 1: White House. Off of a good, good inflation report. Michael

186
00:10:02,920 --> 00:10:06,560
Speaker 1: Pond at the Global Inflation Link Research at Berkeley's Pond

187
00:10:06,679 --> 00:10:10,160
Speaker 1: always diving into the inflation data. Michael, you and I

188
00:10:10,240 --> 00:10:12,559
Speaker 1: go back to when nobody wanted to talk to you

189
00:10:12,640 --> 00:10:17,040
Speaker 1: because inflation was boring. Inflation is now less than boring.

190
00:10:17,400 --> 00:10:20,560
Speaker 1: When do we get back to boring inflation? Well, first

191
00:10:20,559 --> 00:10:22,719
Speaker 1: of all, Tom, this was a good report. Let's see

192
00:10:22,760 --> 00:10:25,360
Speaker 1: we we can stop there, but we're not going to

193
00:10:25,640 --> 00:10:28,160
Speaker 1: You know, this is a necessary print for the Fed,

194
00:10:28,720 --> 00:10:30,520
Speaker 1: but but it's not sufficient. We need to see a

195
00:10:30,600 --> 00:10:33,199
Speaker 1: lot more. You can think about this print as as

196
00:10:33,200 --> 00:10:35,199
Speaker 1: sort of like the weather. You know, it's better today

197
00:10:35,200 --> 00:10:37,240
Speaker 1: that it has been over over the past few days,

198
00:10:37,559 --> 00:10:39,760
Speaker 1: but it's still summer. There's still a lot of humidity

199
00:10:39,760 --> 00:10:42,360
Speaker 1: out there. It's it's not great. Um, so you know

200
00:10:42,600 --> 00:10:45,679
Speaker 1: it's in the right direction, but we're certainly not not

201
00:10:45,720 --> 00:10:48,240
Speaker 1: there yet. What will be the bond response to this? Michael,

202
00:10:48,240 --> 00:10:51,959
Speaker 1: you are expert at the analysis across full faith and credit.

203
00:10:52,320 --> 00:10:57,360
Speaker 1: What is your government bond theme? Off a better inflation

204
00:10:57,480 --> 00:11:00,560
Speaker 1: report for America. Well, again, what doesn't mean for the

205
00:11:00,559 --> 00:11:02,160
Speaker 1: FED and what we think it means for of the

206
00:11:02,200 --> 00:11:04,480
Speaker 1: FED is it makes more likely that our call will

207
00:11:04,520 --> 00:11:08,640
Speaker 1: be right for the September FOMC hike of fifty basis

208
00:11:08,679 --> 00:11:11,560
Speaker 1: points if we had gotten another strong reading even on

209
00:11:11,720 --> 00:11:15,720
Speaker 1: consensus reading uh going into it, that increased the chance

210
00:11:15,760 --> 00:11:18,400
Speaker 1: of seventy five. So for now we feel pretty comfortable

211
00:11:18,640 --> 00:11:21,120
Speaker 1: about our fifty basis point call. That's less than what

212
00:11:21,240 --> 00:11:24,040
Speaker 1: was priced in. So it's not surprising that we're seeing

213
00:11:24,040 --> 00:11:26,080
Speaker 1: a bit of a rally here with a bit of

214
00:11:26,080 --> 00:11:28,920
Speaker 1: a steepening in the curve. Michael, how about that bogus

215
00:11:28,960 --> 00:11:31,719
Speaker 1: mathematics that Tom Keane was doing trying to extrapolate out

216
00:11:31,720 --> 00:11:34,360
Speaker 1: the pace of declines? Can we do that? Is there

217
00:11:34,400 --> 00:11:38,000
Speaker 1: any linear extrapolation that you're looking at to determine how

218
00:11:38,080 --> 00:11:40,480
Speaker 1: quickly we go back to a rate that's much more

219
00:11:40,520 --> 00:11:43,440
Speaker 1: palatable to both of the consumers as well as officials.

220
00:11:43,960 --> 00:11:46,760
Speaker 1: Sure so, As as Mike was saying that the details matter,

221
00:11:46,880 --> 00:11:49,360
Speaker 1: and one of the key details of today's report was

222
00:11:49,400 --> 00:11:53,080
Speaker 1: that the shelter component, which makes up of core, is

223
00:11:53,080 --> 00:11:56,360
Speaker 1: still rising at a strong rate. Importantly, that tends to

224
00:11:56,440 --> 00:11:59,320
Speaker 1: trend so if the downside surprise was because of a

225
00:11:59,360 --> 00:12:02,839
Speaker 1: couple of outlaw fires that aren't expected to continue, then

226
00:12:02,880 --> 00:12:06,160
Speaker 1: that's going to get not give the Fed any complacencies here, Uh,

227
00:12:06,200 --> 00:12:10,080
Speaker 1: They're going to continue away on the factors within CPI

228
00:12:10,200 --> 00:12:13,480
Speaker 1: that trend, So the fact that shelter component continues to

229
00:12:13,480 --> 00:12:17,320
Speaker 1: be strong, you can't just linear extrapolate today's print into

230
00:12:17,400 --> 00:12:20,000
Speaker 1: even the August print, which we expect still expect to

231
00:12:20,000 --> 00:12:22,439
Speaker 1: be relatively strong. How concerning is it to you, Michael,

232
00:12:22,440 --> 00:12:25,000
Speaker 1: that the nejerk reaction is what we're seeing in equity

233
00:12:25,040 --> 00:12:28,000
Speaker 1: markets right now, a strong rally just over like in

234
00:12:28,040 --> 00:12:30,840
Speaker 1: one minute, just bam, there you go. People are going

235
00:12:30,880 --> 00:12:33,199
Speaker 1: full risk on. How much would you fade that versus

236
00:12:33,240 --> 00:12:36,480
Speaker 1: lean into that on the expectation that, yes, we are

237
00:12:36,520 --> 00:12:40,800
Speaker 1: seeing a deceleration and yes we have been past peak inflation. Well,

238
00:12:40,800 --> 00:12:43,240
Speaker 1: first of all, it's not surprising, you know these days,

239
00:12:43,400 --> 00:12:46,839
Speaker 1: when when data comes out, their markets reaction, particularly risk

240
00:12:46,960 --> 00:12:50,880
Speaker 1: on assets, tend to be um. Good news is bad news.

241
00:12:50,960 --> 00:12:54,320
Speaker 1: We saw that in the employment report on Friday when

242
00:12:54,880 --> 00:12:57,600
Speaker 1: we got a really good report, and what that did

243
00:12:57,720 --> 00:13:01,720
Speaker 1: is raise expectations of more Fed hikes, which isn't good

244
00:13:01,760 --> 00:13:05,400
Speaker 1: for risk on assets. So we have a report today

245
00:13:05,480 --> 00:13:08,040
Speaker 1: that leads to a little bit more less hawks fat

246
00:13:08,080 --> 00:13:10,880
Speaker 1: I won't say duvish uh and and therefore it's good

247
00:13:10,880 --> 00:13:14,160
Speaker 1: for risk assets today. Michael McKee with this as well,

248
00:13:14,200 --> 00:13:16,640
Speaker 1: Michael Ponda Barclays with us, if you're just joining us

249
00:13:16,640 --> 00:13:20,400
Speaker 1: on radio and television. It's terrific inflation report, A joy

250
00:13:20,480 --> 00:13:23,280
Speaker 1: for the White House, no question about that. And markets

251
00:13:23,280 --> 00:13:27,720
Speaker 1: celebrate up sixty eight SMP points one point seven percent,

252
00:13:27,760 --> 00:13:30,240
Speaker 1: and as take up two point three percent, even up

253
00:13:30,280 --> 00:13:32,840
Speaker 1: more a bit ago. Michael McKee has at a few

254
00:13:32,840 --> 00:13:35,840
Speaker 1: minutes here to dive further into the report. You're making

255
00:13:35,840 --> 00:13:40,680
Speaker 1: a joke about spirits at home. That's that's the degree

256
00:13:40,840 --> 00:13:44,240
Speaker 1: of granularity you can go to. What's another granular item

257
00:13:44,600 --> 00:13:46,880
Speaker 1: that sticks out? Well? One thing I was interested in

258
00:13:46,960 --> 00:13:49,120
Speaker 1: was what happened with medical care because we've just had

259
00:13:49,120 --> 00:13:54,000
Speaker 1: this legislation. Uh, that would be past prescription drugs were

260
00:13:54,080 --> 00:13:56,800
Speaker 1: up three tenths of a percent after a one tenth gain.

261
00:13:57,400 --> 00:14:01,120
Speaker 1: That's a fairly high move for prescription drugs. So that's

262
00:14:01,160 --> 00:14:04,839
Speaker 1: something that could be affected if the administration is able

263
00:14:04,880 --> 00:14:09,560
Speaker 1: to get something in place to negotiate for medicare, and

264
00:14:09,679 --> 00:14:11,839
Speaker 1: if the companies don't raise the price on people who

265
00:14:11,840 --> 00:14:15,079
Speaker 1: don't get medicare UH. Non prescription drugs up one point

266
00:14:15,120 --> 00:14:17,800
Speaker 1: three percent. So if you're taking tile at all because

267
00:14:18,040 --> 00:14:21,280
Speaker 1: you had too much of the distilled spirits, Tom, You're

268
00:14:21,560 --> 00:14:26,440
Speaker 1: you're paying more for that. Uh. The recreation uh component

269
00:14:26,760 --> 00:14:31,440
Speaker 1: up to tents commodities with declining prices as we've seen

270
00:14:31,520 --> 00:14:35,200
Speaker 1: for some time for television's video equipment, et cetera. So

271
00:14:35,960 --> 00:14:39,360
Speaker 1: some of the inflation dynamics that we are used to

272
00:14:39,880 --> 00:14:42,840
Speaker 1: are coming into play here. If you're just joining us

273
00:14:42,920 --> 00:14:46,000
Speaker 1: on radio and on television to the Bloomberg world, Michael

274
00:14:46,040 --> 00:14:48,560
Speaker 1: McKee is with us and Michael Pond as well of

275
00:14:48,640 --> 00:14:53,240
Speaker 1: Barclays and of course Bloomberg after an historic inflation report

276
00:14:53,600 --> 00:14:58,400
Speaker 1: calendar item Brian deeson conversation with our Lisa Bramowitz. Here

277
00:14:58,480 --> 00:15:02,040
Speaker 1: within the we're we've seen markets, of course surge and

278
00:15:02,080 --> 00:15:05,520
Speaker 1: continue to surge SMP five under to one point seven

279
00:15:05,520 --> 00:15:08,720
Speaker 1: percent moving critically. The VIX comes in a whole stick.

280
00:15:08,800 --> 00:15:12,520
Speaker 1: We've walked away from twenty two to a more constructive

281
00:15:12,520 --> 00:15:16,560
Speaker 1: market of twenty point six nine. Kylee, Well, Tom, I'm

282
00:15:16,560 --> 00:15:18,680
Speaker 1: looking at break even races as well, not just nominal

283
00:15:18,760 --> 00:15:20,800
Speaker 1: yields on the two year, we're down eleven basis points

284
00:15:20,800 --> 00:15:24,160
Speaker 1: on the day two point seven. So, Michael Pond, does

285
00:15:24,200 --> 00:15:26,560
Speaker 1: that seem correct to do you that two years out

286
00:15:26,600 --> 00:15:29,760
Speaker 1: from now we're realistically going to have inflation that much

287
00:15:29,760 --> 00:15:33,160
Speaker 1: closer to the Fed's target. We we think, so the

288
00:15:33,240 --> 00:15:36,480
Speaker 1: market is priced for a decent amount of disinflation, and

289
00:15:36,640 --> 00:15:40,320
Speaker 1: our forecast actually have even more disinflation, so lower inflation

290
00:15:40,360 --> 00:15:43,040
Speaker 1: than what the market is priced in. Markets priced for

291
00:15:43,280 --> 00:15:47,000
Speaker 1: almost three percent inflation, not just next year, but two

292
00:15:47,080 --> 00:15:50,040
Speaker 1: years from now. The one year right and applied by

293
00:15:50,520 --> 00:15:54,320
Speaker 1: Brake Evans is almost at three percent. So the markets

294
00:15:54,400 --> 00:15:57,280
Speaker 1: not believing that the Fed is yet done enough to

295
00:15:57,360 --> 00:16:00,720
Speaker 1: bring inflation down anytime soon. Now, if we look further out,

296
00:16:00,800 --> 00:16:03,240
Speaker 1: say five year, five year, imply to buy the market

297
00:16:03,280 --> 00:16:06,280
Speaker 1: that is priced more consistent with the Fed's target of

298
00:16:06,280 --> 00:16:09,720
Speaker 1: two percent. Uh. So the market thinks that over time

299
00:16:09,760 --> 00:16:12,800
Speaker 1: the federill get it right, but it will take several years,

300
00:16:12,880 --> 00:16:15,520
Speaker 1: not just a couple of quarters. Michael Pin stay with us, please,

301
00:16:15,520 --> 00:16:17,680
Speaker 1: with Barkleys and Michael McKee with us now joining us.

302
00:16:17,680 --> 00:16:20,440
Speaker 1: We're only doing Michael's today on the Inflation Show. Kayley

303
00:16:20,520 --> 00:16:24,160
Speaker 1: demanded that Michael Gapan joins US now head of US

304
00:16:24,200 --> 00:16:27,240
Speaker 1: Economics at Bank of America Global Research, and this is

305
00:16:27,280 --> 00:16:30,480
Speaker 1: an incredibly important add on to our coverage in the

306
00:16:30,600 --> 00:16:33,400
Speaker 1: b of A as a really cautious call on the

307
00:16:33,440 --> 00:16:36,640
Speaker 1: equity markets and on the bond space as well. Michael,

308
00:16:36,720 --> 00:16:39,800
Speaker 1: you have my best chart I've seen in three days,

309
00:16:40,160 --> 00:16:44,920
Speaker 1: which is the duration of painful inflation for America's Does

310
00:16:44,960 --> 00:16:48,200
Speaker 1: it really sustain out in the next year and even

311
00:16:48,320 --> 00:16:52,480
Speaker 1: into two thousand twenty four, I mean we think it.

312
00:16:52,760 --> 00:16:54,840
Speaker 1: We think it does in the sense that it will

313
00:16:54,880 --> 00:16:57,360
Speaker 1: take a few years for inflation to get back down

314
00:16:57,440 --> 00:17:01,000
Speaker 1: to the to the FEDS target and restore price stability.

315
00:17:01,080 --> 00:17:04,800
Speaker 1: We think they'll be stickiness, primarily in the area of

316
00:17:04,840 --> 00:17:07,919
Speaker 1: some of these services prices that yes, airlines gave us

317
00:17:07,920 --> 00:17:11,359
Speaker 1: a bit of a release today, but there will likely

318
00:17:11,440 --> 00:17:14,560
Speaker 1: be some ongoing stickiness on the services side. Obviously, the

319
00:17:14,720 --> 00:17:16,800
Speaker 1: very good news in this report is what we saw

320
00:17:16,880 --> 00:17:19,760
Speaker 1: with used cars. We've all been waiting for some of

321
00:17:19,800 --> 00:17:22,680
Speaker 1: these durable prices to come down. That would be the

322
00:17:22,720 --> 00:17:26,679
Speaker 1: next shoe to drop after gasoline prices come down. So

323
00:17:26,800 --> 00:17:28,879
Speaker 1: a lot of good news in this report and no

324
00:17:29,040 --> 00:17:30,960
Speaker 1: questions at all, but I think we're looking for some

325
00:17:31,000 --> 00:17:33,639
Speaker 1: stickiness and services to persist. Michael, let me see the

326
00:17:33,720 --> 00:17:37,480
Speaker 1: thunder then from Kaytie lines. She was discussing demand destruction.

327
00:17:37,760 --> 00:17:41,280
Speaker 1: Do we see demand destruction in this report away from

328
00:17:41,359 --> 00:17:46,600
Speaker 1: used cars? Not in not in this one particular report. No,

329
00:17:46,800 --> 00:17:50,800
Speaker 1: we see some release here, right, So paradoxically, the weaker

330
00:17:50,880 --> 00:17:53,600
Speaker 1: the rest of the world gets, sometimes it helps out

331
00:17:53,600 --> 00:17:57,159
Speaker 1: the US and in this case to decline and energy

332
00:17:57,200 --> 00:18:01,600
Speaker 1: prices and how quickly that speeds through to take gasolene prices.

333
00:18:01,680 --> 00:18:04,119
Speaker 1: And again, if we if this is the first of

334
00:18:04,320 --> 00:18:08,160
Speaker 1: successive reports where we could see some reversals and durable prices,

335
00:18:08,240 --> 00:18:11,720
Speaker 1: that's going to help out the US consumer. Well. Obviously, Michael,

336
00:18:11,760 --> 00:18:14,320
Speaker 1: the Fed's goal is to get demand down. They also

337
00:18:14,359 --> 00:18:17,800
Speaker 1: would like to see financial conditions getting more restrictive. And

338
00:18:17,880 --> 00:18:19,800
Speaker 1: yet what we see with a more than two percent

339
00:18:19,920 --> 00:18:22,240
Speaker 1: rally on the NAZAC one hundred futures right now, is

340
00:18:22,280 --> 00:18:25,560
Speaker 1: financial conditions actually getting easier. Is a good news report

341
00:18:25,560 --> 00:18:27,840
Speaker 1: on the inflation front, still a bad news report for

342
00:18:27,880 --> 00:18:31,560
Speaker 1: the Federal Reserve if that is the outcome. No, I

343
00:18:31,600 --> 00:18:33,239
Speaker 1: think that the way that I would look at it

344
00:18:33,320 --> 00:18:37,080
Speaker 1: is obviously the labor market is extremely strong, and demand

345
00:18:37,080 --> 00:18:41,520
Speaker 1: conditions are strong. And as your previous guy, Michael Pawn mentioned,

346
00:18:42,000 --> 00:18:44,159
Speaker 1: good news there is bad news in terms of what

347
00:18:44,200 --> 00:18:47,800
Speaker 1: it means for the FED. The FED soft landing outlook

348
00:18:47,920 --> 00:18:51,480
Speaker 1: is greatly improved if core goods start rolling over for exams.

349
00:18:51,520 --> 00:18:54,960
Speaker 1: So the softer and prints are, the more the FED

350
00:18:55,040 --> 00:18:57,639
Speaker 1: can accept good news on the other side of the

351
00:18:57,720 --> 00:19:00,399
Speaker 1: data front. So you know, they need these types of

352
00:19:00,440 --> 00:19:03,800
Speaker 1: reports in order to you know, improve the likelihood of

353
00:19:04,960 --> 00:19:07,480
Speaker 1: what's the calendar, right, I'm on, Michael McKee, I believe

354
00:19:07,520 --> 00:19:12,240
Speaker 1: we're in August tennis. We're gonna get to September tennis.

355
00:19:12,359 --> 00:19:15,520
Speaker 1: There's gonna be another report, right, I believe it's septem

356
00:19:18,400 --> 00:19:22,080
Speaker 1: But the point is, if we get two months like this,

357
00:19:22,440 --> 00:19:25,640
Speaker 1: how does that change the dialogue for Chairman Paul. Does

358
00:19:25,680 --> 00:19:28,400
Speaker 1: he take a victory lap? Uh No, he doesn't take

359
00:19:28,400 --> 00:19:30,879
Speaker 1: a victory lap. He makes sure that everybody knows that

360
00:19:30,920 --> 00:19:33,439
Speaker 1: the FED is still focused on this because it's going

361
00:19:33,480 --> 00:19:36,159
Speaker 1: to take it just just mathematically. And you know, Michael

362
00:19:36,160 --> 00:19:38,760
Speaker 1: Gapon could probably give you a better off the top

363
00:19:38,800 --> 00:19:41,680
Speaker 1: of his head hint than me. It's going to take

364
00:19:41,680 --> 00:19:43,680
Speaker 1: a long time to get down to where the FED

365
00:19:44,160 --> 00:19:47,879
Speaker 1: will feel comfortable in moving rates. They've said they're going

366
00:19:47,920 --> 00:19:51,480
Speaker 1: to get to neutral or above neutral and stay there

367
00:19:51,560 --> 00:19:54,439
Speaker 1: even as inflation declines. So they're gonna have to get

368
00:19:54,480 --> 00:19:57,040
Speaker 1: down to three or so. Is that is what they're

369
00:19:57,119 --> 00:19:59,920
Speaker 1: hinting before they do any kind of move? How long

370
00:20:00,119 --> 00:20:02,760
Speaker 1: does that take? We've seen advanced out features now have

371
00:20:02,840 --> 00:20:05,359
Speaker 1: four hundred thirty three thousand, one fifty two and the

372
00:20:05,400 --> 00:20:09,440
Speaker 1: dows p X up seventy one and two. Move on,

373
00:20:09,520 --> 00:20:13,399
Speaker 1: nastac on really something, Kaylee, Let's bring Michael Pond back

374
00:20:13,440 --> 00:20:16,159
Speaker 1: into the conversation as well. Obviously we've now had a

375
00:20:16,160 --> 00:20:18,960
Speaker 1: few minutes to digest this report. Yet the moves are

376
00:20:19,040 --> 00:20:23,680
Speaker 1: sticking in the bond market. Can they stick past today? Well,

377
00:20:23,520 --> 00:20:26,200
Speaker 1: we think was clear in this report, and it's been

378
00:20:26,200 --> 00:20:29,280
Speaker 1: our view that the inflation outlook is now much more

379
00:20:29,359 --> 00:20:32,320
Speaker 1: balanced than it had been a few months ago. Everything

380
00:20:32,480 --> 00:20:35,880
Speaker 1: was pointing in the same direction of risk to inflation

381
00:20:35,960 --> 00:20:39,520
Speaker 1: being to the upside. Whether we look at commodities, shipping costs,

382
00:20:39,560 --> 00:20:43,000
Speaker 1: the dollar, wage growth, etcetera. They're all in the same

383
00:20:43,040 --> 00:20:47,000
Speaker 1: exact direction, and now it's a much more balanced outlook. Wages,

384
00:20:47,080 --> 00:20:49,840
Speaker 1: as Mike cap And just said, uh, you know, laymore work.

385
00:20:49,880 --> 00:20:51,879
Speaker 1: It is very tight and that's coming through in in

386
00:20:51,920 --> 00:20:54,240
Speaker 1: the wage report that we got on Friday and um

387
00:20:54,600 --> 00:20:58,320
Speaker 1: average early earnings as well, So you know, but on

388
00:20:58,359 --> 00:21:01,240
Speaker 1: the flip side, commodity is have rolled over. You'd look

389
00:21:01,280 --> 00:21:06,280
Speaker 1: at copper, palm oil, corn, coffee, cotton, pick any commodity

390
00:21:06,440 --> 00:21:09,600
Speaker 1: and you it's likely been you know, off its peak.

391
00:21:09,800 --> 00:21:12,240
Speaker 1: Shipping costs on a year of your basis are down,

392
00:21:14,080 --> 00:21:16,560
Speaker 1: so energies down, so you can go down the list

393
00:21:17,040 --> 00:21:19,240
Speaker 1: and it's a much more balanced outlook. And that's some

394
00:21:19,359 --> 00:21:21,960
Speaker 1: of what we we got today. But you really need

395
00:21:22,080 --> 00:21:25,560
Speaker 1: consistency in these reports. One report is not all it's

396
00:21:25,600 --> 00:21:27,680
Speaker 1: going to take well, and of course one report is

397
00:21:27,720 --> 00:21:30,000
Speaker 1: not all we're getting this week. Michael gap in p

398
00:21:30,000 --> 00:21:33,600
Speaker 1: P I is tomorrow. What's the read through? I think

399
00:21:33,600 --> 00:21:36,520
Speaker 1: the read through there is, you know, ex energy prices,

400
00:21:36,560 --> 00:21:39,880
Speaker 1: we're still likely to see you know, solid underlying price

401
00:21:39,960 --> 00:21:43,800
Speaker 1: pressures in in the domestic economy. So point four is

402
00:21:43,920 --> 00:21:46,280
Speaker 1: point five, which is kind of where the market is

403
00:21:46,600 --> 00:21:50,240
Speaker 1: is thinking later in the in the week. I you know,

404
00:21:50,600 --> 00:21:53,080
Speaker 1: I think what will be really interesting to see at

405
00:21:53,119 --> 00:21:57,440
Speaker 1: import prices x petroleum decline again for the second straight month,

406
00:21:57,520 --> 00:22:01,240
Speaker 1: that's where our head is around. That's working. Census is again,

407
00:22:01,320 --> 00:22:03,960
Speaker 1: that's a mic Fond point. We need to see these

408
00:22:04,000 --> 00:22:06,280
Speaker 1: types of things coming true. We need to see them

409
00:22:06,320 --> 00:22:09,280
Speaker 1: on more than one report. Getting a strong dollar to

410
00:22:09,320 --> 00:22:12,359
Speaker 1: give us some pass through into import prices in the

411
00:22:12,440 --> 00:22:16,440
Speaker 1: context of lower trade costs would would be very important.

412
00:22:16,440 --> 00:22:20,240
Speaker 1: But I think we suspect a blend here strong import

413
00:22:20,400 --> 00:22:24,040
Speaker 1: or strong underlying price pressures producer prices. But we could

414
00:22:24,040 --> 00:22:27,679
Speaker 1: get some more relief on import prices. Michael, what's the number? Michael?

415
00:22:27,880 --> 00:22:32,480
Speaker 1: I got five Michaels with me today, Nathan who did this?

416
00:22:32,640 --> 00:22:35,680
Speaker 1: I've never had so many Michaels around me in my life.

417
00:22:35,720 --> 00:22:39,479
Speaker 1: Michael Gapon a Bank of America. What is the single

418
00:22:39,680 --> 00:22:45,800
Speaker 1: attribute that drives inflation lower from a nine level? I

419
00:22:45,840 --> 00:22:48,520
Speaker 1: don't think that there's one. This is the point. You

420
00:22:48,560 --> 00:22:51,119
Speaker 1: don't get bad outcomes on inflation like this without a

421
00:22:51,200 --> 00:22:54,160
Speaker 1: multitude of things happening. So I think we need relief

422
00:22:54,200 --> 00:22:58,240
Speaker 1: on energy and commodity prices. We're getting that, we need

423
00:22:58,480 --> 00:23:02,280
Speaker 1: payback on core goods. Rasis some signs for getting right,

424
00:23:02,440 --> 00:23:05,000
Speaker 1: and then the moderation of the domestic economy. I don't

425
00:23:05,040 --> 00:23:07,280
Speaker 1: think it's one thing I think we need to have

426
00:23:07,560 --> 00:23:10,439
Speaker 1: advances on multiple front time. If I could out just

427
00:23:10,520 --> 00:23:14,200
Speaker 1: one more to that inflation expectations. So the FED in

428
00:23:14,200 --> 00:23:17,399
Speaker 1: in June was particularly concerned about a sharp jump in

429
00:23:18,119 --> 00:23:22,480
Speaker 1: the inflation component in flash expectation component of the Michigan survey.

430
00:23:22,560 --> 00:23:26,480
Speaker 1: That's back down now, as is the inflation deputations components

431
00:23:26,600 --> 00:23:29,560
Speaker 1: of the New York Fed survey and break even as

432
00:23:29,560 --> 00:23:32,720
Speaker 1: well off their high. So that's an important factor for

433
00:23:32,800 --> 00:23:36,119
Speaker 1: the Fed in their outlook for inflation. Right now. Michael

434
00:23:36,119 --> 00:23:38,560
Speaker 1: Gabon has to leave us at Bank of America. Thank

435
00:23:38,600 --> 00:23:40,840
Speaker 1: you so much, Michael gaban for dropping by today in

436
00:23:40,880 --> 00:23:51,320
Speaker 1: this historic moment. Dropping in briefly to briefly, Kethy Jones

437
00:23:51,400 --> 00:23:55,639
Speaker 1: joins his chief fixed income strategist at Charles Schwab Cathy,

438
00:23:55,840 --> 00:24:01,240
Speaker 1: good news. Do I buy bonds, bills and notes? Well?

439
00:24:01,320 --> 00:24:04,919
Speaker 1: I think this, uh, this is as all your previous

440
00:24:04,920 --> 00:24:07,920
Speaker 1: speakers have been saying, is it's the first stat that's

441
00:24:07,920 --> 00:24:11,680
Speaker 1: certainly not conclusive that we've got you know, peak inflation

442
00:24:11,760 --> 00:24:15,359
Speaker 1: behind us. But yes, I you know, all along we

443
00:24:15,480 --> 00:24:18,040
Speaker 1: have thought that as long as the FET is determined

444
00:24:18,080 --> 00:24:23,119
Speaker 1: to get inflation down, that um, the you know, yield

445
00:24:23,119 --> 00:24:26,240
Speaker 1: curve will invert, They will tighten until that happens, and

446
00:24:26,359 --> 00:24:29,560
Speaker 1: ultimately that is good news for the bond market. On

447
00:24:29,720 --> 00:24:32,320
Speaker 1: that curb in version, obviously it is less so now

448
00:24:32,359 --> 00:24:35,840
Speaker 1: after the report Cathy negative forty two basis points. Have

449
00:24:35,960 --> 00:24:38,760
Speaker 1: we already seen the depths? If this is the trend,

450
00:24:40,080 --> 00:24:43,000
Speaker 1: you know, if we get some more good prints like this,

451
00:24:43,440 --> 00:24:47,399
Speaker 1: uh and some easing up in the labor market data,

452
00:24:47,880 --> 00:24:49,919
Speaker 1: I would say that maybe that was it. You know,

453
00:24:50,040 --> 00:24:52,679
Speaker 1: historically it's been hard to go below fourty or fifty

454
00:24:52,680 --> 00:24:56,159
Speaker 1: basis points on two tents, so we we did it

455
00:24:56,200 --> 00:24:58,639
Speaker 1: in the early eighties, but we haven't really done it since.

456
00:24:59,040 --> 00:25:01,879
Speaker 1: So my my guess is that that could be the

457
00:25:01,920 --> 00:25:04,679
Speaker 1: low if we are in a in a place where,

458
00:25:05,080 --> 00:25:07,399
Speaker 1: you know, where we start to see these trends in

459
00:25:07,400 --> 00:25:10,560
Speaker 1: the right directions. Kathy to move it to Fed policy.

460
00:25:10,640 --> 00:25:12,560
Speaker 1: Michael McKee has had to leave here as he gets

461
00:25:12,560 --> 00:25:15,520
Speaker 1: ready for his continuing coverage for the morning of this

462
00:25:15,800 --> 00:25:18,080
Speaker 1: huge news, and I do want to emphasize, folks, we've

463
00:25:18,080 --> 00:25:20,480
Speaker 1: still got a bid to the market. We're not down

464
00:25:20,520 --> 00:25:23,800
Speaker 1: to a nineteen vix, but we're getting there rapidly. Twenty

465
00:25:24,520 --> 00:25:29,120
Speaker 1: eight on the vix. Kathy is today a seat change

466
00:25:29,680 --> 00:25:33,080
Speaker 1: for the analysis of this FED. Is today a profound

467
00:25:33,160 --> 00:25:37,440
Speaker 1: day or another day along the path? Well, I guess

468
00:25:37,480 --> 00:25:39,720
Speaker 1: we'll only know that, you know, a couple of months

469
00:25:39,720 --> 00:25:42,840
Speaker 1: from here, but I think it could be. It's a

470
00:25:42,920 --> 00:25:45,600
Speaker 1: huge sigh of relief for the FED. It gives them

471
00:25:45,640 --> 00:25:48,800
Speaker 1: some breathing room, and it could be it could mark

472
00:25:48,840 --> 00:25:51,440
Speaker 1: the turning point. We just need to see more confirmation

473
00:25:51,520 --> 00:25:54,399
Speaker 1: of that, where where we start to see the numbers

474
00:25:54,440 --> 00:25:58,720
Speaker 1: have a bit consistently, and then then the FED can say, yeah,

475
00:25:58,720 --> 00:26:01,520
Speaker 1: that this was the term r point. But Kathy, a

476
00:26:01,600 --> 00:26:03,800
Speaker 1: turning point in the pace of RAED hikes or a

477
00:26:03,840 --> 00:26:07,639
Speaker 1: turning point in terms of the ultimate destination. Oh, the

478
00:26:07,680 --> 00:26:10,840
Speaker 1: pace more than the destination. Now the destination has been

479
00:26:10,920 --> 00:26:13,480
Speaker 1: up for grabs anyway. Um, I think there's been a

480
00:26:13,520 --> 00:26:18,919
Speaker 1: wide disagreement among economists, among the FED members and in

481
00:26:18,960 --> 00:26:22,400
Speaker 1: the market is to where the ultimate destination is. And

482
00:26:22,440 --> 00:26:26,239
Speaker 1: we still don't know. But the pace could ease up

483
00:26:26,240 --> 00:26:29,680
Speaker 1: a bit, which would be good news. Kathy Jones, thank

484
00:26:29,720 --> 00:26:32,359
Speaker 1: you so much, greatly appreciated, too short notice here and

485
00:26:32,400 --> 00:26:34,720
Speaker 1: we'll have much more with her in the coming day.

486
00:26:34,800 --> 00:26:37,960
Speaker 1: She is at Charles Schwab as well. This is the

487
00:26:37,960 --> 00:26:42,639
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

488
00:26:42,680 --> 00:26:46,119
Speaker 1: from seven to ten am Eastern on Bloomberg Radio and

489
00:26:46,240 --> 00:26:50,040
Speaker 1: on Bloomberg Television each day from six to nine am

490
00:26:50,560 --> 00:26:54,320
Speaker 1: for insight from the best and economics, finance, investment, and

491
00:26:54,440 --> 00:26:59,679
Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple,

492
00:26:59,680 --> 00:27:03,159
Speaker 1: pod Cast, SoundCloud, Bloomberg dot com, and of course, on

493
00:27:03,280 --> 00:27:09,840
Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg m