Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Joining us now is
Speaker 1: someone who is very familiar with these types of speeches.
Speaker 1: Saint Louis FED President James Bullard, who recently was in
Speaker 1: the media talking about his preference for one hundred basis
Speaker 1: points of ray cuts this year heading into twenty twenty six,
Speaker 1: also a potential contender. I should say to be the
Speaker 1: next FED chair James Jim, how much are you seeing
Speaker 1: what we heard from Fedchair j Powell and seeing anything
Speaker 1: different that you would really say say if you were
Speaker 1: at that podium.
Speaker 2: He used the speech to solidify expectations for twenty five
Speaker 2: basis points in September. I was expecting that anyway, Marcus
Speaker 2: were expecting that.
Speaker 3: He leaned into the most.
Speaker 2: Recent labor market report, which was very soft, and so
Speaker 2: I think that's a done deal. He didn't say too
Speaker 2: much about beyond that, what you want to do with
Speaker 2: the October meeting or the December meeting. I have set
Speaker 2: one hundred basis points, you know, going into twenty twenty six,
Speaker 2: so I think you could adjust as you go forward
Speaker 2: and eventually get a full hundred basis points. But I
Speaker 2: would go slowly in order to watch the data and
Speaker 2: then on the Framework review. I'm sure much earlier in
Speaker 2: the year they had targeted that they would have the
Speaker 2: framework discussion and that they would use the Jackson Hole
Speaker 2: speech to talk.
Speaker 3: About changes for the framework.
Speaker 2: I thought those were thoughtful and they were well presented
Speaker 2: in this speech, and they're about what many have speculated on.
Speaker 3: So I think they did about as much as they
Speaker 3: can on the framework side.
Speaker 4: Jim Bowler, Tom Keenan, good morning to you. I definitely
Speaker 4: consider this my conversation of the day. You served a
Speaker 4: lengthy term the Saint Louis Fed. You have lived the
Speaker 4: decline of a greater economy decades and decades ago in
Speaker 4: the effort to provide for a resurgence Saint Louis is
Speaker 4: a next chairman of the FED, whoever that may be.
Speaker 4: Do they have to manage for two American economies, a
Speaker 4: technology driven exceptional economy and another, to use a cliche,
Speaker 4: America flat on their back. How would a chairman execute
Speaker 4: those two Americas?
Speaker 2: Everything? Yeah, I think in commonwealth distribution have become more
Speaker 2: salient topics for the FED. It's not that clear how
Speaker 2: much the FED can really do providing interest rate policy
Speaker 2: for the whole economy. If you change the rate structure,
Speaker 2: that affects everyone, not just one particular group that.
Speaker 3: You might be targeting.
Speaker 2: So I think that's been something we've had to wrestle with,
Speaker 2: and I've actually done research on it myself to try
Speaker 2: to understand it better from my point of view.
Speaker 3: So I think there's been been a theme for.
Speaker 2: A while, and that'll be an important theme in macroeconomics
Speaker 2: going forward.
Speaker 4: Mike McKee's got a lot of smarter questions than me
Speaker 4: on the immediacy of this speech. I'm going to ask
Speaker 4: one more distant questions, Jim Bollard. You're at Purdue executing
Speaker 4: online technology education every single day. How do you define
Speaker 4: the new technology productivity that America faces? Is it enough
Speaker 4: to save us? Is it enough to really add on
Speaker 4: to our present GDP.
Speaker 3: Oh yeah.
Speaker 2: I think that the AI boom is, you know, it's
Speaker 2: a general purpose technology that will diffuse through the economy.
Speaker 2: I think the key question is how fast does that
Speaker 2: actually diffuse? And sometimes marcus can get ahead of themselves
Speaker 2: and think it's going to happen sooner. Sometimes they're too
Speaker 2: late and it happens faster than markets think. But nevertheless,
Speaker 2: anyway you look at it, It's an important technology. It
Speaker 2: can drive productivity, and I think in higher education is
Speaker 2: one of the places where you can really have the
Speaker 2: biggest impact. We put a AI requirement in at the
Speaker 2: Dannuel School here for every single student, and we're trying
Speaker 2: to expand that to all produce. So I think that
Speaker 2: just shows you how important this technology is.
Speaker 5: Jim, it's Mike McKee. I have a question about sort
Speaker 5: of the process involved in this speech. The chairman is
Speaker 5: giving his own speech, but basically when he says it's
Speaker 5: time to maybe adjust policy, he's speaking for the entire
Speaker 5: Open Market Committee. Going into a speech like this, would
Speaker 5: he have polled everybody? Does he think he has the
Speaker 5: votes for that, because we've been speaking with FED officials
Speaker 5: in Jackson Hole and there are still some who were saying, well,
Speaker 5: we're not sure that we need to do that.
Speaker 2: Yet He's going to report on the center of gravity
Speaker 2: of the committee, even though there might be people that
Speaker 2: have misgivings. At the June meeting, the committee had a
Speaker 2: median dot dot plot of two rate reductions by the
Speaker 2: end of the year, and I think the minutes, you know,
Speaker 2: suggested something that was more like fifty to fifty, but
Speaker 2: then the labor market report came in. I think that
Speaker 2: tilted the balance, so he could have he could have
Speaker 2: pushed back a little bit. I think financial markets were
Speaker 2: expecting him to come be a little bit more hawkish
Speaker 2: here and try to set up a fifty to fifty
Speaker 2: meeting where you would wait and see for the rest
Speaker 2: of the data to come in. But I don't think
Speaker 2: that's where the center of gravity is on the committee, so.
Speaker 3: He went ahead and leaned in.
Speaker 2: I thought there was quite a bit of talk about
Speaker 2: the labor market at the at the beginning. You know,
Speaker 2: you could have could have been a little more, you know,
Speaker 2: a little more emphasis on the low unemployment rate, for instance.
Speaker 2: And you know he did come out at the end
Speaker 2: of that discussion saying, well, it's.
Speaker 3: In balance, but we're a little bit nervous.
Speaker 2: So I think, you know, I think he's accurately describing
Speaker 2: where the bulk of the committee is.
Speaker 5: Well, where would you be on this question, because we've
Speaker 5: heard FED officials for some time now saying, yes, we
Speaker 5: had poor job creation in recent months, but the unemployment rate,
Speaker 5: as you just mentioned, has been low, and they've described
Speaker 5: the labor market as solid. Now this seems to be
Speaker 5: sort of a major shift in the way they view
Speaker 5: the outlook and the sort of balance between the two mandates.
Speaker 2: Yeah, what he did at the end of that discussion,
Speaker 2: he said, well, it's in balance.
Speaker 3: But I think the committee's nervous.
Speaker 2: I think it has been slowing, and I think the
Speaker 2: policy rate is moderately restrictive. Is maybe you know, one
Speaker 2: hundred and twenty five basis points above the neutral rate.
Speaker 2: Is that really where you want to be in this circumstance.
Speaker 2: I think the answers no, So you can come down
Speaker 2: some and still have moderately restrictive monetary policy that puts
Speaker 2: gentle downward pressure on inflation. And then the other thing
Speaker 2: I think has happened is that this argument from Chris
Speaker 2: Waller and others on the committee that the you know,
Speaker 2: you should look through the one time increase in goods
Speaker 2: prices coming from tariffs.
Speaker 3: I think that's carrying the day.
Speaker 2: And you know, then he emphasized that inflation expectations remain
Speaker 2: anchored and so on, and so I think that sets
Speaker 2: up a modest move downward in September.
Speaker 1: Jim, We've been talking with you for years and you
Speaker 1: are very focused on the discipline of economics. Right now,
Speaker 1: I'm looking at the headlines that are crossing from the
Speaker 1: past hour. The top one, of course, is a Jerome
Speaker 1: Powell FED chair saying that shifting risks may warrant adjusting rates.
Speaker 1: The second one is that Trump says that he'll fire
Speaker 1: the Fed's Lisa's Cook if she doesn't resign as someone
Speaker 1: who is thought to be a contender to become the
Speaker 1: next FED chair. Jim, how much does it concern you
Speaker 1: that there's this increasing political noise around the seat and
Speaker 1: exactly what the path of policy forward looks like.
Speaker 3: Yeah, I want to see due process around something like this.
Speaker 3: I want to see you know, you can make.
Speaker 2: Charges against anybody about anything, I guess, and you know
Speaker 2: the person can answer the charges, and the dojken decide
Speaker 2: what they want to do and so on. So I
Speaker 2: think this has, you know, should have longer to play
Speaker 2: out before you took that step. Otherwise it's just is
Speaker 2: kind of the wild West and sheet reinstated later, I
Speaker 2: guess or something if there wasn't a conviction.
Speaker 3: So seems messy to me.
Speaker 2: I think these kinds of these kinds of charges are
Speaker 2: made from time to time against various officials around Washington,
Speaker 2: but I'd like to see due process there.
Speaker 1: Jim, there's another question here, and aside from Governor Cook
Speaker 1: and what happens there, about how the perception of political
Speaker 1: interference handles the market reaction to Fed policy. There is
Speaker 1: this perception that that could cause the dollar a week
Speaker 1: in more because there is more of an emphasis on
Speaker 1: supporting growth and supporting the label market than containing inflation.
Speaker 1: And some people are worried that if the Fed does
Speaker 1: cut by fifty seventy five one hundred basis points, as
Speaker 1: you were talking about this past week, that you could
Speaker 1: see a move up in long end yields akin to
Speaker 1: what we saw last year. If you are on the
Speaker 1: FED currently and you did see yields along the long
Speaker 1: end moving up in response to near term FED rate cuts,
Speaker 1: what would you do?
Speaker 3: That would definitely be a concern.
Speaker 2: And that's the tricky part of this business is that
Speaker 2: you know, you think you're pursuing a dubbish policy at
Speaker 2: the short end, but the long end goes up because
Speaker 2: inflation expectations start to rise, Markets start to lose confidence
Speaker 2: in the FED and the credibility of the FED, and
Speaker 2: that can go very very badly, and unfortunately fairly quickly.
Speaker 3: So I think you do have to be come. You
Speaker 3: do have to be careful here.
Speaker 2: But I'm saying that I think that committee has room
Speaker 2: to maneuver if they proceed carefully over the remainder of
Speaker 2: twenty five and the first half of twenty twenty six.
Speaker 4: I don't want to get out front of the debate
Speaker 4: here at the moment Jim Bullard, but what I would
Speaker 4: say to Chairman Bullart and Mike McKee, I got to
Speaker 4: turn to you. You and I used to sit and
Speaker 4: look at the dots and go which one is Bullart?
Speaker 3: I mean you and I do.
Speaker 5: It's fairly easy after a while to figure out.
Speaker 4: I've Jim, Chairman Bullard, is your first act if you
Speaker 4: take over the FED as your first act to get
Speaker 4: rid of the dots.
Speaker 3: Yeah. I've threatened to well.
Speaker 2: As president, I threatened to withdraw from the dot plot.
Speaker 3: I think this could be done better. This was discussed
Speaker 3: at the Framework conference and former chair.
Speaker 2: Of Bernanke gave a very nice presentation and talk about
Speaker 2: a quarterly monetary policy report, get more organized about it,
Speaker 2: put out a forecast.
Speaker 3: I think all of that could be done.
Speaker 2: I've advocated that for a long time, and so I
Speaker 2: think that would sort of clear up some of the
Speaker 2: misconceptions around the dot plot.
Speaker 4: Okay, this is really really important for US. Is Jim
Speaker 4: Bullard made He can have a history i'd say a
Speaker 4: decade ago with a small, short paper forceful on regime change.
Speaker 4: How do we get a new FED away from the
Speaker 4: guessing and the certitude and the silly parlor game of it,
Speaker 4: Jim Bullard, with great respect, how do we get to
Speaker 4: that more discipline study around the game of the FED
Speaker 4: and regime change?
Speaker 2: Yeah, I think regime switching is a great way to
Speaker 2: think about the global economy and the US economy and
Speaker 2: how it operates. There are relatively long periods of time
Speaker 2: where you might have let's say, slow growth and very
Speaker 2: low interest rates, and then you might switch to another
Speaker 2: time with faster growth and higher interist rates. I think
Speaker 2: understanding that and understanding how that affects policy choices is
Speaker 2: a great thing to study further and talk about further
Speaker 2: in the years ahead. So you know, I think it's
Speaker 2: very salient for what the Committee does.
Speaker 1: Jim Bullard, FED, former FED President of the Saint Louis Bank,
Speaker 1: will be sticking with us. Right now. In markets, you
Speaker 1: can see a cheering across Wall Street to the opening
Speaker 1: the door to a potential rate cut next month. Potentially more.
Speaker 1: You could see equities surging higher across the different of
Speaker 1: the different indexes, led by some of the more interest
Speaker 1: rate sensitive sectors. The Russell two thousand. You can see
Speaker 1: ten year yields down now about six basis points, even
Speaker 1: more at the front end, down ten basis points. As
Speaker 1: people look to the prospect of the FED looking through
Speaker 1: some of the inflation from tariffs, you could see the
Speaker 1: dollar markedly weaker one p seventeen on the euro dollar cross,
Speaker 1: up on nine tenths of a percent. In terms of
Speaker 1: just the percentage rise up about a basis point. And
Speaker 1: there's a real question here about what this means going forward.
Speaker 1: City Wealth Chief Investment Officer Kate Moore is still with
Speaker 1: us freezing a little bit because it is a little
Speaker 1: bit chilly here, nippy in the morning. I am curious
Speaker 1: though about what you're hearing in terms of prospective FED
Speaker 1: chairs and the politicization of the Federal Reserve. If this
Speaker 1: is a FED willing to air on the duttish side,
Speaker 1: does that mean something that materially is higher with respect
Speaker 1: to returns and with respect to risk appetite.
Speaker 6: Look, markets love certainty, and our investors love certainty, and
Speaker 6: we want a certainty in terms of the process around
Speaker 6: making monetary policy decisions. So I don't have any insight
Speaker 6: into who might be named next FED chair, but what
Speaker 6: I will say is if there is a sense that
Speaker 6: the process is changing, I think that will lead to
Speaker 6: some pause and perhaps some volatility in the market. You know,
Speaker 6: our expectation is that regardless of who takes the next
Speaker 6: chair and what its seats are filled, we'll have a
Speaker 6: continuous continuation of the process of being data dependent, of
Speaker 6: being thoughtful, of having you know, great debate and discussion
Speaker 6: amongst the FED governors and their staff. But if that
Speaker 6: were to change, I think that would introduce volatility. I
Speaker 6: think the most important thing for us right now is
Speaker 6: to recognize that so much of the data is going
Speaker 6: to be mixed through the back half of the year,
Speaker 6: and that's going to have a huge impact, I think
Speaker 6: in terms of investor sentiment, and I would suggest even
Speaker 6: more crowding in some of the favored trades.
Speaker 5: We tend to get reactions like we're seeing in the
Speaker 5: market now on a day when news breaks, But I
Speaker 5: think we're probably going to see extended rally here because
Speaker 5: people are anticipating rate cuts. Does that worry you in
Speaker 5: terms of a bubble forming or some sort of excess
Speaker 5: spending that would push up inflation because of inflated asset prices.
Speaker 6: Yeah, so I have been a little bit worried actually
Speaker 6: about positioning. I feel like I've been a little bit
Speaker 6: more cautious frankly than some of my peers on the
Speaker 6: street and saying, you know, people own the highest quality
Speaker 6: parts of the market. It's quite crowded. Some of the
Speaker 6: shorts when we're looking at some of the fast money
Speaker 6: a community are very similar across the board, and we've
Speaker 6: seen people kind of shrug off concerns around economic growth
Speaker 6: or even the technological disruption across a lot of industries.
Speaker 6: We've seen significant improvements in terms of the earnings or
Speaker 6: vision ratios, City Economic Surprise index has moved up, you know,
Speaker 6: and all of this together, I think sets us up
Speaker 6: for you a little bit of weakness if there was
Speaker 6: a bad data point or if there was a bit
Speaker 6: of a shock where there's a lot of consensus positioning, well, Jim.
Speaker 1: Jim Bullard, I'd love to bring you back in here.
Speaker 1: How much does that concern you that sort of a
Speaker 1: bias to cut rates could cause uset price inflation to
Speaker 1: get ahead maybe of where the economy is.
Speaker 2: Yeah, equities, except for just recently, equities have been doing
Speaker 2: very well as they've digested the new trade policy of
Speaker 2: the US and how that's going to play out.
Speaker 3: Globally.
Speaker 2: You've got the AI boom going on, really a driver
Speaker 2: for the big tech companies, and you know, I do
Speaker 2: get concerned that things we get ahead of ourselves. Sure
Speaker 2: it's a great technology and everything, but how fast is
Speaker 2: it really going to interfuse into actual productivity.
Speaker 3: In the economy. But overall, I would.
Speaker 2: Say, you know, it's possible that we'll get higher productivity
Speaker 2: growth ahead and really a good outcome for the second
Speaker 2: half of the twenty twenties here, much as we had
Speaker 2: in the half of the nineteen nineties.
Speaker 4: All right, let me talk to the chief investment strategist
Speaker 4: Purdue University right now. I'm going to do a double
Speaker 4: barreled question, first to doctor Bullard and then to doctor Moore.
Speaker 4: Jim Bullard as simple as I can all of my
Speaker 4: conversations rather Jakomnagel Bundesbank, Kate Moore City Group and on
Speaker 4: and on is about an elevated or persistent nominal GDP.
Speaker 4: Do you frame out that we're going to have an
Speaker 4: animal spirit in the country, whether it's better real growth okay,
Speaker 4: inflation too much inflation, okay, real growth, But what we're
Speaker 4: talking about forward is an elevated nominal GDP.
Speaker 2: If you think real growth is going to be faster
Speaker 2: than yes, nominal gp growth would be faster even if
Speaker 2: the Fed hits it's two percent inflation target over that period.
Speaker 2: So yeah, you would see faster nominal GDP growth.
Speaker 4: I mean, I look at this, Kate More, and it's
Speaker 4: a higher the matter, I'm really surprised by your comments.
Speaker 4: I think they're extremely important our back to the US quality,
Speaker 4: et cetera. But it sounds like City Group is modeling
Speaker 4: out through all the emotion, the fear, the turmoil, the
Speaker 4: political debate, as we just signed next to the eight
Speaker 4: foot bear in the lobby. The answer here is you're
Speaker 4: modeling out that will be okay and there'll be a
Speaker 4: better nominal GDP. It leads into revenue, et cetera.
Speaker 6: Look, I think we're going to have an okay growth environment.
Speaker 6: But one thing we keep on talking about is sort
Speaker 6: of the K shape right. There are the haves and
Speaker 6: have nots across all the different industries and different consumer groups,
Speaker 6: and so I don't think that we want to assume
Speaker 6: that everyone is going to experience strong growth in the
Speaker 6: second half the year. And we're seeing this, of course
Speaker 6: in the consumer companies. We're seeing this across you know,
Speaker 6: segments of different households. We're seeing this even in technology companies,
Speaker 6: those that have made the investments that are reaping dividends
Speaker 6: from it. So yes, we may have these good headline numbers,
Speaker 6: but I think as investors we have to really pay
Speaker 6: attention to what's going on beneath the surface, and I
Speaker 6: think there's an opportunity for differentiation over the next couple quarters.
Speaker 1: We are looking at a market that is moving, We
Speaker 1: are looking at headlines that are coming. And I want
Speaker 1: to bring this to you that Canada is planning to
Speaker 1: remove retaliatory tariffs on many US products in an olive
Speaker 1: branch to President Trump, and there is this feeling that
Speaker 1: maybe some of the tariffs are fungible, that we are
Speaker 1: going to see some of them removed or used as
Speaker 1: a negotiating routate.
Speaker 4: I strongly agree with what you're saying this was sort
Speaker 4: of out there in the ether last night, but to
Speaker 4: see these headlines is another example we adjust well.
Speaker 1: And that's one of the reasons why there has been
Speaker 1: a focus on the labor market. Fed Chair to Rome
Speaker 1: Powell speaking just moments ago, really focusing on the complications
Speaker 1: for the labor market overall.
Speaker 7: While the labor market appears to be imbalance, it is
Speaker 7: a curious kind of that results from a marked slowing
Speaker 7: in both the supply of and demand for workers. This
Speaker 7: unusual situation suggests that downside risks to employment are rising,
Speaker 7: and if those risks materialize, they can do so quickly
Speaker 7: in the form of sharply higher layoffs and rising unemployment.
Speaker 1: Some people might say that FED Chair J. Powell is
Speaker 1: coming around the Chris Waller view of things, that there
Speaker 1: is this feeling of potentially the weakening and the labor
Speaker 1: marketing taking priority over inflation at a time where some
Speaker 1: of these tariffs are put on taken off, and that's
Speaker 1: what we're seeing a little bit in terms of negotiation
Speaker 1: this morning.
Speaker 4: Well, the given the take and it goes back to
Speaker 4: Kate Moore's optimism on investment in America, and you see
Speaker 4: it a dollar thank you for putting up that wonderful
Speaker 4: dollar Larny chart and you see things adjusts and you wonder, Okay,
Speaker 4: what do we do with China, what do we do
Speaker 4: with Mexico with the produce debate and pharmaceuticals with Europe?
Speaker 4: Guess what there may be constructive supp rises. Is a
Speaker 4: certitude of the tariff debate gives way, It makes it
Speaker 4: easier for the next chairman and maybe maybe I'll get
Speaker 4: out of triple leverge. Doll cash is fifty fifty.
Speaker 1: Oh, now is the time to definitely do it? Yeah,
Speaker 1: for sure, Jim.
Speaker 3: Before we let.
Speaker 1: You get on with your day, I do want to
Speaker 1: finish there that have we seen from tariffs that there
Speaker 1: is this fungibility there that they get put on, they
Speaker 1: get taken off, and that right now the path of
Speaker 1: travel is lower from where we were maybe on April second,
Speaker 1: not higher again, and so you can look through in
Speaker 1: another kind of way some of the inflationary impact.
Speaker 2: Yeah, I mean, I think it was great to reach
Speaker 2: a pluminary deal with the EU.
Speaker 3: That's one of the bigger blocks in the world.
Speaker 2: China put on the back burner markets like that for now,
Speaker 2: and then you've.
Speaker 3: Got Canada and Mexico.
Speaker 2: Looks like we're headed toward renegotiation of the USMCA, which
Speaker 2: I think would be a fine thing to revisit. Was
Speaker 2: scheduled for twenty twenty six anyway, so it's maybe a
Speaker 2: little bit more settled than it was earlier this year,
Speaker 2: and I think markets are liking that.
Speaker 3: That's making it easier to plan. So far, so good
Speaker 3: on that.
Speaker 1: Jim Bullard, former Saint Louis FED president, joining us, Thank
Speaker 1: you so much for being with us. Maybe future FED chair.
Speaker 3: We shall see.