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Speaker 1: The data is the next way joining us to discuss

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Speaker 1: some place to say, always a pleasure. Muhammed al Aaron

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Speaker 1: of Queen's College, Cambridge. Mohammed, let's start there with the Fed.

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Speaker 1: In a few weeks time, our rate hikes on ice

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Speaker 1: and can CEPI next week change it.

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Speaker 2: So CPI next week can definitely change it. Not September,

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Speaker 2: but can change the next rate hike at the end

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Speaker 2: of October beginning of November, John, there are bigger issues here.

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Speaker 2: I think the discussion is going from whether they will

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Speaker 2: hike or not to what's the overall impact of the

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Speaker 2: level of interest rates. There's also now more more discussion

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Speaker 2: of how high, not how high? How long are they

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Speaker 2: going to say that? And underneath all that, John, are

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Speaker 2: some really really challenging technical issues about monetary policy, everything

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Speaker 2: from our star to you know, what are the real

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Speaker 2: lags in play? This is a very complicated time for

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Speaker 2: the Fed and markets should not jump to conclusion too

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Speaker 2: easyly as to what's going to happen beyond September.

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Speaker 1: Speaking to those complications, Muhammad's some contradictions in the economic

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Speaker 1: data this week alone, and maybe you can help us

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Speaker 1: jobless claim to the lows we haven't seen since February.

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Speaker 1: The ICM was pretty punchy. The basebook screen slowed down.

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Speaker 1: I've been asking all week, Muhammad. I'm sure you've heard

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Speaker 1: me ask it. How much wage should I put on

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Speaker 1: each data point that's coming out at the moment? What's

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Speaker 1: given me a clearer story of what you think is happening.

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Speaker 2: So I think the consistent story, John, is that services

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Speaker 2: are strong, and they are strong and employment. They are

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Speaker 2: strong in wages, they are strong in output, and that

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Speaker 2: is a very important thing to focus on. Beyond that,

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Speaker 2: you have massive ambiguities. Beyond that, you have also the

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Speaker 2: dependence on the rest of the world, which is in

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Speaker 2: a very different place from the US. So I think

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Speaker 2: the key issues get services right. And if you get

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Speaker 2: services right, you can explain much of what's going to

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Speaker 2: happen going forward. But there are other issues that are

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Speaker 2: going to become more important as we go deeper into

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Speaker 2: twenty twenty four.

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Speaker 1: What do you think those issues are? Mohammed? What's number

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Speaker 1: one for you?

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Speaker 2: So it's the supply side, John, and the way it

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Speaker 2: plays out, whether it's labor negotiations, whether it's the price

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Speaker 2: of oil staying so high when Chinese demand is under pressure,

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Speaker 2: whether it's what's happened to Apple in terms of jeopolitics,

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Speaker 2: and what does what that does to supply chains and

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Speaker 2: what does that to demand change. You know, there's a

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Speaker 2: lot of aspects, but supply is the number one. We've

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Speaker 2: transitioned from a world of insufficient aggregate demand to a

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Speaker 2: world of insufficient aggregate supply, and that's going to play

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Speaker 2: out for not just one year, but for a number

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Speaker 2: of years.

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Speaker 1: We talked about crude earlier this week being at high

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Speaker 1: as we haven't seen oh year back to November ninety

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Speaker 1: dollars on brand, Mohammed, If we just looked at that

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Speaker 1: one commodity, I'd be with you. I'd say, that's just

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Speaker 1: a supply story, the saudast Russia pulling back, but iron

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Speaker 1: also in to mix as well, multi month ties. We

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Speaker 1: just talked about the contradictions in the US state, So

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Speaker 1: let's talk about the contradictions in the global story, which

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Speaker 1: told slow down in Europe. We can see it, slow

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Speaker 1: down in China, we can see it. And then I

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Speaker 1: see commodities where they are Mohammed and I'm trying to

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Speaker 1: reconcile those two things. Are those two things competing with

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Speaker 1: each other for you.

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Speaker 2: So once you go beyond the supply story, it becomes

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Speaker 2: very specific. You can explain a lot on the supply side.

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Speaker 2: You didn't mention food, but food prices have picked up again,

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Speaker 2: so there was a lot to be explained by the

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Speaker 2: supply side. But then if you go to individual commodities,

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Speaker 2: you will have other factors playing in John I mean,

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Speaker 2: for me, there were three big surprises in the first

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Speaker 2: eight months of the year, two positive, one negative. The

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Speaker 2: negative we know it's China. The positive we know is

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Speaker 2: the US, but also Europe was better than many expected

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Speaker 2: going forward. China doesn't recover, Europe doesn't maintain a positive surprise.

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Speaker 2: It's all about the US. When it comes to global growth.

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Speaker 3: Well, let's tell you that story. Push it through effects.

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Speaker 1: You know what, We've got stronger dollar, eight weeks of it,

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Speaker 1: eight consecutive weeks.

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Speaker 3: Of dollar strength.

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Speaker 1: Is that because the US is just so great right

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Speaker 1: now or the rest of the world Mohammad is so bad.

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Speaker 2: It's both. It's US exceptionalism in absolute and relative terms

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Speaker 2: that results in weight differentials that result in flows of

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Speaker 2: oign direct investment being even more concentrated in the US.

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Speaker 2: It is about all it's all about relative and absolute

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Speaker 2: US exceptionalism.

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Speaker 1: Well, Europe's in a dark place going into the ECP

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Speaker 1: next week, Mohammed, can you speak to me about the

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Speaker 1: inflation growth makes you'd expect to see from Europe over

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Speaker 1: the coming quarters.

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Speaker 2: Yeah, it's tricky, John. I mean, if you're worried about stagflation,

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Speaker 2: it's Europe and it's the UK where the threat is highest.

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Speaker 2: And it's a really tough situation for the ECB. If

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Speaker 2: the ECB wasn't a single mandate central bank, they probably

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Speaker 2: wouldn't hike. I've put a fifty five percent probability that

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Speaker 2: the end by hiking, but it's that close strawn as

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Speaker 2: so whether they should.

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Speaker 3: Hike again split right down the middle.

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Speaker 1: There are things that FED officials can say right now,

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Speaker 1: the ACP officials cannot say. We're in a good place.

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Speaker 1: My McKay caught up with John Williams and the New

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Speaker 1: York Fed. It's like a listen right now.

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Speaker 4: I think you know things are moving in the right direction.

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Speaker 4: We've got policy in a good place, but we're going

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Speaker 4: to need to continue to be data dependent, watch the

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Speaker 4: developments and assess what we need to do.

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Speaker 3: My McKay are we in a good place. We are

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Speaker 3: in a good place.

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Speaker 5: If the Fed could design where it wanted to be

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Speaker 5: with its policies, this would probably be it. They don't

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Speaker 5: know exactly what's going to happen, but right now they've

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Speaker 5: got low unemployment and inflation that's going down. John Williams,

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Speaker 5: in terms of the September meeting put the nail in place.

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Speaker 5: Laurie Logan from the Dallas Fed hammered at home last

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Speaker 5: night giving a speech, and she's the most hawkish member

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Speaker 5: pretty much of the Open Market Committee at this point,

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Speaker 5: saying another skip could be appropriate, but caveats that with

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Speaker 5: skipping does not imply stopping. So I think what you're

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Speaker 5: looking at here is definitely pretty much everyone in favor

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Speaker 5: of skipping in September, maybe Mester and Bowman.

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Speaker 3: We got the sorting hat out.

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Speaker 5: Now that we're heading into the final week before the

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Speaker 5: FED meeting and the quiet period, and you can see

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Speaker 5: on the left hand side and in the center there's

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Speaker 5: a majority who've said we can skip this time. Not

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Speaker 5: everybody thinks they should skip in November. But you go

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Speaker 5: on to the calendar and you see what's up next week.

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Speaker 5: Besides CPI, there's a lot of data coming in that

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Speaker 5: could weigh on them. But I think Muhammad said something

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Speaker 5: very smart. The CPI is probably going to affect what

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Speaker 5: people think of the November meeting rather than the September meeting,

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Speaker 5: in part because economists are pretty good at forecasting CPI,

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Speaker 5: but in part because so many Fed officials have already

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Speaker 5: set the market up to get through the September meeting

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Speaker 5: without a move. But watch retail sales. And of course,

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Speaker 5: the big question next week is going to be whether

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Speaker 5: the U a W goes on strike. That would have

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Speaker 5: a significant impact on the economy. Probably short lived, but

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Speaker 5: we'll have to see. That is the big wildcard for

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Speaker 5: next week. A long job with the hurricane that may

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Speaker 5: or may not come.

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Speaker 1: I've seen some of that that does not look good,

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Speaker 1: my mckayth, Thank you sir. Looking ahead to next week, Muhammad,

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Speaker 1: Mike talked about it, you mentioned it in the last

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Speaker 1: five minutes. These labor debates, Unions, the Detroit three and UAW.

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Speaker 1: I've asked this question this week. I'll ask it if you, Muhammad,

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Speaker 1: do you think that's the dying gambers of a hot

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Speaker 1: labor market or maybe the story that's going to stay

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Speaker 1: with us for a while.

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Speaker 2: It will stay with us for a while. This is

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Speaker 2: an indication that labor has more bargaining power. It has

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Speaker 2: taken decades, but labor has restored some of its bargaining power.

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Speaker 2: And you see this not just in the US, you

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Speaker 2: see it elsewhere as well. And that's another supply side issue. John,

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Speaker 2: can I just say something. Mike McKee's interview with John

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Speaker 2: Williams was excellent. His mention of what lawyer logansd was

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Speaker 2: really good. But the quote that really hit me from

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Speaker 2: her last night was when she came to talk about

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Speaker 2: what approach you needed on monetary policy, and she said

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Speaker 2: something like we need a very calibrated approach as opposed

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Speaker 2: to a quote throwing buckets of cold water on it.

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Speaker 2: And I think that that is critical going forward. Is

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Speaker 2: what does calibration mean. We're no longer in the phase

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Speaker 2: of catch up where you made a mistake. You called

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Speaker 2: it transitory and you have to rush. Now it's really

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Speaker 2: back to old fashioned calibrated monetary policy and that gets

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Speaker 2: a lot more complicated.

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Speaker 1: Let's get away from the last month or so looking

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Speaker 1: ahead to the next month. Muhammed, Let's talk about the

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Speaker 1: complications of maybe the next several years there was a

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Speaker 1: headline from our reporting on the G twenty of a

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Speaker 1: draft of their final communicating and it read as follows

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Speaker 1: the G twenty ce's it challenged to long term growth

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Speaker 1: from what they called cascading crises. And right in that moment, Muhammad,

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Speaker 1: I read that headline and I thought of your book

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Speaker 1: coming out, Brown Spent Salarian, A Plan to fix a

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Speaker 1: fractured world perma crisis. Mohammah, can you breath some life

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Speaker 1: into that conversation? What is it that you and Gordon

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Speaker 1: Brown and Michael Spency that maybe speaks to what the

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Speaker 1: G twenty are talking about this weekend.

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Speaker 2: So that book originated from zoom calls. The three of

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Speaker 2: us had weekly zoom calls, and after a while, when

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Speaker 2: talking about going from crisis to crisis over a number

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Speaker 2: of decades, we ask ourselves why, And basically it comes

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Speaker 2: down to three issues. John, We haven't figured out a

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Speaker 2: way to grow in a high, sustainable, inclusive manner, so

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Speaker 2: it's about growth models. Domestic economic policy management has been lacking,

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Speaker 2: that's the second issue. And global coordination is at the

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Speaker 2: lowest level that the three of us could remember for

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Speaker 2: a very long time. So we asked the question. The

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Speaker 2: other way is if you want to get out of

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Speaker 2: this notion of cascading crises or perma crisis, what do

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Speaker 2: you do? And we wrote down on basically a plan

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Speaker 2: to fix all three.

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Speaker 1: Looking forward to gett my hands on the book, mohammach.

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Speaker 1: So we finished with an easy quot Jets Bills Monday

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Speaker 1: night football. I had to zoom in and see the tie.

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Speaker 1: The Jets tie this morning. Muhammad, what are you looking

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Speaker 1: for from the team this season.

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Speaker 2: I'm hoping for a good season, but I tell you

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Speaker 2: our first six games, including Mike mckea's Broncos, are quite tough.

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Speaker 2: So fingers and toes crossed, and as I'm wearing the tie,

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Speaker 2: US Jets fans, US long suffering Jets fans. Jets fans

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Speaker 2: will do whatever it takes and whatever we can to

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Speaker 2: support our team.

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Speaker 1: You were slightly critical about taking on Aaron Rodgers. You

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Speaker 1: still feel the same way.

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Speaker 2: Long Drant's done, so we fully behind the team.

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Speaker 1: Now, Muhammed, thank you sir, good luck for the rest

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Speaker 1: of the season. We'll catch ever with you soon, no doubt.

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Speaker 1: Muhammad al Arion on a bunch of issues looking ahead

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Speaker 1: to next week,