WEBVTT - Bloomberg Surveillance TV: May 14th, 2026 0:00:00.040 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordert. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.120 Terminal and the Bloomberg Business app. So here's the LASiS. 0:00:37.159 --> 0:00:40.120 This morning, President Donald trumpigs standing an invitation to the 0:00:40.200 --> 0:00:44.320 Chinese President Jujinping, the two leaders participating in a state banquet. 0:00:44.560 --> 0:00:48.320 Following discussing trade and Iran last night, Former Senior White 0:00:48.320 --> 0:00:50.800 House Trade advisor Kelly and Shaw writes the following, we 0:00:50.880 --> 0:00:53.000 have a long way to go in terms of navigating 0:00:53.000 --> 0:00:56.080 the future of US China relations. Many of these conversations 0:00:56.120 --> 0:00:58.960 will continue well past September when the two leaders meet 0:00:59.000 --> 0:01:01.840 again on newba Soil. Kelly an joined us now for 0:01:01.920 --> 0:01:03.920 more Kelly and welcome to the program. An Marie has 0:01:04.080 --> 0:01:06.760 alluded to this a few times that this leader in 0:01:06.840 --> 0:01:10.200 China has taken a more assertive stance on Taiwan at 0:01:10.200 --> 0:01:12.720 this meeting. With that in mind, how sustainable is this 0:01:12.720 --> 0:01:15.800 more stable phase of relations between the two countries. 0:01:17.160 --> 0:01:18.080 Yeah, good morning. 0:01:18.360 --> 0:01:21.480 I think this is the most highly anticipated leader to 0:01:21.560 --> 0:01:26.040 leader conversation of the year. Now, certainly there have been 0:01:26.360 --> 0:01:29.560 a number of mentions of Taiwan, predominantly on the Chinese 0:01:29.600 --> 0:01:32.399 side as part of the readout, and this was some 0:01:32.480 --> 0:01:34.800 of the fear on the US side going into this 0:01:34.880 --> 0:01:38.399 meeting that we might see President She lean on President 0:01:38.440 --> 0:01:41.000 Trump to get some sort of concession when it comes 0:01:41.000 --> 0:01:44.200 to Taiwan. But what I'll say about She's comments is 0:01:44.360 --> 0:01:46.800 this is not unusual. And I think back to the 0:01:46.880 --> 0:01:50.200 last phone call that the two leaders had. The Chinese 0:01:50.240 --> 0:01:54.680 readout was almost entirely focused on Taiwan and weapons sales. 0:01:55.040 --> 0:01:57.160 It again, it is not unusual for the Chinese to 0:01:57.200 --> 0:01:59.800 emphasize this. The US on the other side is basically 0:01:59.800 --> 0:02:02.280 not saying anything at all as part of the formal readout. 0:02:02.680 --> 0:02:05.480 And then you had Secretary Rubio just a few moments 0:02:05.480 --> 0:02:08.160 ago talking about the fact that the policy on the 0:02:08.200 --> 0:02:11.080 US side has not changed. So while this will continue 0:02:11.080 --> 0:02:12.639 to be a pressure point, and it's one that we're 0:02:12.680 --> 0:02:15.960 watching very closely. I don't think anything has shifted, at 0:02:16.000 --> 0:02:16.639 least not yet. 0:02:16.840 --> 0:02:19.560 Let's talk about things that might be shifting right now. 0:02:19.680 --> 0:02:22.560 The Chinese leader talked about China opening more to trade. 0:02:22.600 --> 0:02:25.359 We've been talking about that for ages. The more intriguing 0:02:25.400 --> 0:02:27.440 part of this is everyone else shutting the door to them. 0:02:27.560 --> 0:02:29.840 We heard from the Treasury Secretary speaking to the press 0:02:29.880 --> 0:02:33.360 earlier on this morning, who talked about Chinese investment and 0:02:33.440 --> 0:02:35.400 saying this, what we want to do is make sure 0:02:35.400 --> 0:02:39.079 that some of these investments don't get referred to Syphius Caana. 0:02:39.120 --> 0:02:40.320 Things changing on that front. 0:02:41.320 --> 0:02:43.080 Yeah, and this is one of the points that I 0:02:43.160 --> 0:02:46.280 was watching the most carefully in terms of what would 0:02:46.320 --> 0:02:46.760 come out. 0:02:46.639 --> 0:02:47.200 Of this summit. 0:02:47.480 --> 0:02:49.320 There have been a lot of talk about the Board 0:02:49.320 --> 0:02:51.960 of Trade and trying to manage the flow of goods 0:02:51.960 --> 0:02:55.000 going back and forth between the two economies, but there 0:02:55.120 --> 0:02:57.240 was really not a lot of clarity about what the 0:02:57.280 --> 0:02:59.840 investment commitments would look like, and frankly, a lot of 0:03:00.000 --> 0:03:05.040 concerned by US lawmakers, by stakeholders that the President might 0:03:05.080 --> 0:03:08.240 allow more Chinese investment into the United States. And so 0:03:08.280 --> 0:03:11.480 I found this comment really curious as well, now, to 0:03:11.520 --> 0:03:14.240 the extent they are talking about investment, to the extent 0:03:14.320 --> 0:03:16.160 they're talking about the fact that there may be some 0:03:16.320 --> 0:03:20.320 transactions where there's really no national security nexus. They want 0:03:20.360 --> 0:03:24.080 to make sure that Siphius is being used and calibrated appropriately. 0:03:24.760 --> 0:03:27.600 Maybe that's less concerning, But if what we're talking about 0:03:27.800 --> 0:03:31.840 is allowing large Chinese investments into strategic sectors in the 0:03:31.960 --> 0:03:34.200 United States, that's going to be very concerning for the 0:03:34.200 --> 0:03:36.720 President if he gets back home to that kind of outcome. 0:03:36.960 --> 0:03:39.840 We've also heard that there is some sort of early 0:03:39.880 --> 0:03:42.800 speculation from the likes of Julian Emmanuel earlier on the show, 0:03:43.240 --> 0:03:46.160 that there could be some sort of trade tech for 0:03:46.320 --> 0:03:51.200 oil technology investments, both into China in the form of 0:03:51.320 --> 0:03:55.160 selling chips and possibly China in the US in favor 0:03:55.360 --> 0:03:57.720 of some sort of help with the Strait of Ramos. 0:03:57.920 --> 0:03:59.600 Are you expecting anything on that front? 0:04:00.760 --> 0:04:04.400 So my expectations overall for the summer were relatively low 0:04:04.520 --> 0:04:08.160 in terms of outcomes. I think the administration has forecasted 0:04:08.200 --> 0:04:11.480 for weeks not much to see here. We're enforcing the 0:04:11.520 --> 0:04:14.680 Busan deal, and the fact that Johnson Wand was not 0:04:14.840 --> 0:04:19.040 included on the initial delegation list made it seem more 0:04:19.200 --> 0:04:21.960 likely than not that export controls would not be part 0:04:22.000 --> 0:04:24.520 of any sort of outcome. But of course it wouldn't 0:04:24.520 --> 0:04:27.000 be a G two summit, a Trump She summit without 0:04:27.000 --> 0:04:30.600 a little bit of drama and some surprising deliverables at 0:04:30.640 --> 0:04:32.680 the end of this. So we could see some sort 0:04:32.720 --> 0:04:35.440 of broke or deal around these things, but it wasn't 0:04:35.440 --> 0:04:38.279 part of the formal negotiating agenda going in. So I'll 0:04:38.279 --> 0:04:40.720 also be curious to see what comes out of a 0:04:40.720 --> 0:04:42.159 potential transaction that way. 0:04:42.600 --> 0:04:45.320 Right now, how much do you expect China to reciprocate 0:04:45.400 --> 0:04:47.640 and come to the United States and September twenty fourth, 0:04:47.680 --> 0:04:52.000 as a president has requested or invited, Yeah. 0:04:51.960 --> 0:04:54.000 I think this has been on the calendar for a while. 0:04:54.240 --> 0:04:57.320 These two leaders will likely meet face to face four 0:04:57.360 --> 0:05:01.560 times this year, so I have re expectation that President 0:05:01.640 --> 0:05:05.400 She will come to the United States this fall. The 0:05:05.440 --> 0:05:08.159 two leaders will meet again later in the year as well. 0:05:09.400 --> 0:05:13.520 This is a very robust year in terms of potential developments. 0:05:13.600 --> 0:05:15.880 But what I will say is this is about managing 0:05:15.920 --> 0:05:20.360 the relationship. It's about keeping an otherwise rocky situation as 0:05:20.400 --> 0:05:23.480 stable as possible. These two economies are still going in 0:05:23.720 --> 0:05:27.960 very different directions, particularly in strategic sectors, and so having 0:05:27.960 --> 0:05:30.839 that leader to leader touch point keeps the connectivity, keeps 0:05:30.839 --> 0:05:33.800 the stability without this whole thing falling off a cliff. 0:05:33.800 --> 0:05:36.239 And I think that's in the interest of both sides, 0:05:36.240 --> 0:05:38.000 and that's where both leaders are thinking. 0:05:38.240 --> 0:05:39.839 Kelly and I go one step further, it's in the 0:05:39.839 --> 0:05:41.760 interest of the world to make sure there is never 0:05:41.800 --> 0:05:45.680 a direct conflict militarily between these two superpowers. But we 0:05:45.760 --> 0:05:47.960 have to face the reality. The reality is this has 0:05:48.040 --> 0:05:52.040 been an adversary, the supports adversaries of the United States, 0:05:52.120 --> 0:05:55.200 including Iran. How do we tackle that issue this year? 0:05:56.400 --> 0:05:59.400 Yeah, I mean, Ron, I'm not really expecting any sort 0:05:59.440 --> 0:06:02.760 of jointnouncement by President Trump and President Hian Iran other 0:06:02.800 --> 0:06:05.040 than the fact that they are both seeking some sort 0:06:05.080 --> 0:06:08.240 of de escalation and opening up the strait of removes 0:06:08.600 --> 0:06:12.240 and something to try to address the energy costs as 0:06:12.240 --> 0:06:15.400 well as the ongoing conflict and to prevent it from spreading. 0:06:16.040 --> 0:06:18.640 Now that said, both sides do have an interest in 0:06:18.680 --> 0:06:21.960 de escalation, and so I think that behind the scenes 0:06:22.040 --> 0:06:24.680 and in non public ways, we are going to see 0:06:24.680 --> 0:06:28.400 some cooperation come on the back of this. I completely 0:06:28.440 --> 0:06:30.080 agree with you that it is in the interests of 0:06:30.120 --> 0:06:32.640 the world to not have any of this breakout into 0:06:32.680 --> 0:06:35.800 broader direct conflict. And I think that's what both sides 0:06:35.839 --> 0:06:38.400 are trying to do in their own way while continuing 0:06:38.440 --> 0:06:42.680 to compete on economic and national security areas where it 0:06:42.720 --> 0:06:43.520 matters as well. 0:06:44.120 --> 0:06:46.960 Stay with us. Multiple IMPAG surveillance coming up. 0:06:47.120 --> 0:06:47.640 Off to this. 0:06:56.960 --> 0:06:58.839 NAT the Richardson of ABPA joins is now from more 0:06:58.920 --> 0:07:01.680 NATA goodmarnicline. What avoid that conversation. We'll talk about the 0:07:01.720 --> 0:07:04.200 dates that we just call retail sales and jembless claims. 0:07:04.320 --> 0:07:05.120 Is this thy to do an all? 0:07:05.200 --> 0:07:05.360 Right? 0:07:05.440 --> 0:07:06.680 Is this economy okay? 0:07:07.480 --> 0:07:10.760 The headline numbers are all okay. You look at those 0:07:10.800 --> 0:07:16.560 retail sales impervious in some ways to recent shocks, in 0:07:16.680 --> 0:07:20.400 previous to downbeat sentiment. You have a jobs market that's 0:07:20.400 --> 0:07:24.559 still functional, still producing jobs, and you have wage growth 0:07:24.600 --> 0:07:28.560 that's still holding its own. The interesting parts is underneath 0:07:28.560 --> 0:07:31.680 the surface always so going a level deeper, you know 0:07:31.840 --> 0:07:36.000 just how much did energy prices impact retail sales? That 0:07:36.440 --> 0:07:39.600 iPhone is now a durable good, not something we switch 0:07:39.640 --> 0:07:42.200 out every two years, so there is some change in 0:07:42.240 --> 0:07:45.920 consumer spending. And then you got some data from the 0:07:46.080 --> 0:07:50.840 BLS saying that real wages actually edged down, they declined, 0:07:51.240 --> 0:07:54.040 And so you put all that together, Yeah, it's a 0:07:54.080 --> 0:07:57.760 pretty good economy. But that doesn't mean there's not tensions 0:07:57.800 --> 0:07:58.320 underneath you. 0:07:58.400 --> 0:08:00.920 Now the one tension is real. Why just disguace if 0:08:00.920 --> 0:08:01.680 you worried about that. 0:08:02.040 --> 0:08:04.160 Yeah, and here's why I'm worried. So when we look 0:08:04.160 --> 0:08:06.600 at our data at ADP and we are able to 0:08:06.760 --> 0:08:10.480 match individuals over time, we're seeing a couple things. The 0:08:10.520 --> 0:08:13.760 first thing we're seeing is very robust wage growth. Even 0:08:13.800 --> 0:08:16.760 when we put divided into the bottom quartile and the 0:08:16.800 --> 0:08:20.800 top quartile of income earners, wage growth is robusts. But 0:08:20.920 --> 0:08:25.640 here's the rub. There is this widening inequality gap. We're 0:08:25.760 --> 0:08:30.080 tracking it in real time. Last year, the wealthiest twenty 0:08:30.120 --> 0:08:33.440 five percent made about five hundred times with the lowest 0:08:33.720 --> 0:08:35.920 bottom twenty five percent. I know, you raise your eye 0:08:36.160 --> 0:08:39.160 a lot. This year, it's more like six hundred and 0:08:39.200 --> 0:08:43.280 forty percent more. So we're seeing this widening gap. And 0:08:43.320 --> 0:08:46.720 that's an issue because the wealthier, the higher income you are, 0:08:46.840 --> 0:08:49.720 you start saving, you start investing. Good for you, not 0:08:49.840 --> 0:08:52.880 so great for the economy. Consumers at that bottom end, 0:08:53.000 --> 0:08:56.360 they spend more, and when you don't have that savings 0:08:56.440 --> 0:08:59.880 lever and things prices go up, you start can stop 0:09:00.040 --> 0:09:02.680 consuming as much. And that is the concern when it 0:09:02.679 --> 0:09:03.440 comes to wages. 0:09:03.520 --> 0:09:05.240 This has been the conundrum when we talk about this 0:09:05.440 --> 0:09:08.280 all the time. It really is an increasing issue and 0:09:08.280 --> 0:09:10.160 you're seeing it politically, but you're not seeing it in 0:09:10.200 --> 0:09:13.679 the overall averages from economic data. At what point does 0:09:13.800 --> 0:09:17.400 it become more of a concern on the averages not 0:09:17.440 --> 0:09:19.240 just a political problem but a market problem. 0:09:19.320 --> 0:09:22.480 Yeah, wage in equality is really just it's a long 0:09:22.559 --> 0:09:26.319 term drag on economic potential. For the reasons, we are 0:09:26.320 --> 0:09:29.760 not as savings and investment economy. We are a consumption 0:09:29.880 --> 0:09:34.480 driven economy. And if you have a significant proportion of 0:09:34.520 --> 0:09:36.600 the new jobs, remember a lot of jobs that are 0:09:36.600 --> 0:09:39.880 coming on under those low paid hourly working jobs. So 0:09:39.960 --> 0:09:42.920 our labor market is being fueled by low paid. 0:09:42.840 --> 0:09:43.720 Jobs right now. 0:09:44.040 --> 0:09:47.760 And then you have those very sane people who traditionally 0:09:47.760 --> 0:09:50.319 spend more out of their income not consuming as much 0:09:50.360 --> 0:09:53.920 because of higher energy prices. So if I could bottle 0:09:53.960 --> 0:09:57.400 this up and then like a tagline, monetary policy is 0:09:57.480 --> 0:10:01.760 really concerned with core Consumers are concerned with headline, and 0:10:01.800 --> 0:10:06.520 this wage in equality hits right at that headline difference 0:10:06.840 --> 0:10:10.280 and higher income and lower income when it comes to spending. 0:10:10.040 --> 0:10:13.360 What would help the lower income consumer more? A rate 0:10:13.440 --> 0:10:16.559 hike or a rate cut, that's. 0:10:16.400 --> 0:10:21.000 A great question if you're in the bottom coure tile. Unfortunately, 0:10:21.040 --> 0:10:23.680 buying a house is probably not on your horizon. It's 0:10:23.840 --> 0:10:29.000 just too expensive now. So borrowing money it would help 0:10:29.000 --> 0:10:31.600 with credit card fees, if you're putting more and more 0:10:31.640 --> 0:10:35.880 of your consumption and debt or that would be helpful. 0:10:36.760 --> 0:10:40.520 But that's not the way to increase growth. The way 0:10:40.559 --> 0:10:44.600 to increase wages is through productivity enhancement. So if you 0:10:44.920 --> 0:10:48.160 can get an economy that invests in a way that 0:10:48.200 --> 0:10:51.160 creates more jobs and increases wages and standards of living, 0:10:51.440 --> 0:10:55.199 that's wonderful. But will you know a couple basis points 0:10:56.000 --> 0:10:58.920 downward or a couple of rate cuts actually lead to 0:10:58.960 --> 0:11:01.200 those changes. It would be hard to see that. 0:11:01.240 --> 0:11:04.040 In real time we see the standard of living climb 0:11:04.080 --> 0:11:07.160 for everyone. This whole conversation, and forgive me for sort 0:11:07.160 --> 0:11:09.720 of digressing a bit, reminds me of an address from 0:11:09.760 --> 0:11:12.839 Margaret Thatcher to Parliament, and she went at the left 0:11:12.880 --> 0:11:14.760 wing of Parliament at the time, and she talked about 0:11:14.800 --> 0:11:16.320 the gap between the rich and the poor, and her 0:11:16.360 --> 0:11:19.000 accusation to people on the left in Parliament at the 0:11:19.000 --> 0:11:21.240 time was that the only thing you care about is 0:11:21.280 --> 0:11:23.640 making the gap smaller, and you don't care if the 0:11:23.679 --> 0:11:27.160 poor get poorer. Do you remember that line from Margaret Thatcher. Now, 0:11:27.240 --> 0:11:30.360 for me, the gap alone is not concerning so long 0:11:31.040 --> 0:11:33.640 as everyone's living standards are improving. So if you see 0:11:33.640 --> 0:11:36.400 the upper income cohorts get a lot richer than lower 0:11:36.400 --> 0:11:39.760 income but living standards for everyone climbs, you've got an 0:11:39.800 --> 0:11:41.959 argument to make that maybe we're moving in the right direction. 0:11:42.160 --> 0:11:42.880 Is that happening? 0:11:42.880 --> 0:11:43.200 Now? 0:11:43.200 --> 0:11:44.040 Has that been happening? 0:11:44.080 --> 0:11:47.200 Actually, you uncovered attention that I have because you are 0:11:47.240 --> 0:11:50.920 seeing really robust wage growth even at the bottom quartile. 0:11:51.280 --> 0:11:54.960 So it's not that lower income people are not seeing 0:11:54.960 --> 0:11:58.560 their wages increase faster than higher income people. 0:11:58.600 --> 0:12:00.120 It's quite the opposite. 0:12:00.320 --> 0:12:02.920 The problem is it's still not enough, and. 0:12:02.840 --> 0:12:06.320 You still continue to see this gap widening. If the 0:12:06.360 --> 0:12:09.160 gap stayed the same or narrowed, there's an argument right 0:12:09.240 --> 0:12:12.040 in line with Thatcher, but the fact that is widening 0:12:12.200 --> 0:12:15.480 is problematic in terms of economic growth long term. 0:12:15.640 --> 0:12:19.160 Stay with us more Bloomberg Surveillance coming up after this. 0:12:28.320 --> 0:12:30.680 We begin this hour with stocks adding to record highs 0:12:30.720 --> 0:12:33.400 at a pivotal moment for the Federal Reserve, rising inflation 0:12:33.520 --> 0:12:36.440 complicating the rate outlookers. A new regime takes hold at 0:12:36.480 --> 0:12:38.839 the top of the Central Bank tomorrow, joining us now 0:12:38.960 --> 0:12:40.839 in his final broadcast interview as a member of the 0:12:40.880 --> 0:12:43.640 Federal Reserve Board of Governors, Stephen Myron, Governor Maron, good 0:12:43.640 --> 0:12:44.360 to see you, sir. 0:12:44.320 --> 0:12:45.800 Good to see you. Thanks for having me back. 0:12:45.920 --> 0:12:47.920 We've got a moment to step back and sort of 0:12:47.920 --> 0:12:51.520 reflect on your experience at this institution. We've talked lots 0:12:51.520 --> 0:12:53.720 about how you've been received externally. Can we just start 0:12:53.760 --> 0:12:56.960 with how you've been received internally over the last few months. 0:12:57.160 --> 0:12:58.200 Sure, this has actually. 0:12:58.040 --> 0:12:59.840 Been one of the biggest surprises, you know, given what 0:13:00.080 --> 0:13:02.559 all the drama at the beginning. I've been perceived internally, 0:13:02.600 --> 0:13:05.440 I think very very politely, very cordially, and very kindly. 0:13:05.480 --> 0:13:09.160 And I think folks have largely enjoyed some of the 0:13:09.440 --> 0:13:11.880 some of the intellectual conversations, some of the challenges that 0:13:11.920 --> 0:13:14.040 I've leveled against, some of the ways that they had 0:13:14.040 --> 0:13:17.280 been thinking beforehand. And I think that the overall response 0:13:17.320 --> 0:13:19.560 has been, you know, very welcoming and very kind, and 0:13:19.559 --> 0:13:21.120 that's one of the things that I'm most grateful for. 0:13:21.200 --> 0:13:23.760 One of the kind of ideas that have been received well, 0:13:24.160 --> 0:13:26.920 that are shaping debates right now that will linger and 0:13:26.920 --> 0:13:28.720 continue beyond your departure. 0:13:29.040 --> 0:13:30.360 Yeah, sure, so one, you know. 0:13:30.440 --> 0:13:32.720 So an example of one of those things is the 0:13:32.720 --> 0:13:35.840 importance of regulations for determining the supply side of the economy. 0:13:35.960 --> 0:13:37.600 I mean, we spend a lot of time, you know, 0:13:37.679 --> 0:13:40.480 out in the financial world at in policy discussing the 0:13:40.520 --> 0:13:43.240 effects of a thirty three versus thirty five percent marginal 0:13:43.320 --> 0:13:43.720 tax rate. 0:13:43.760 --> 0:13:46.000 But the truth is that regulations. 0:13:45.600 --> 0:13:48.240 Are often infinite taxes, and being told you're not allowed 0:13:48.240 --> 0:13:49.960 to do something versus you are allowed to do something 0:13:50.240 --> 0:13:52.760 is a very very strong difference. And this had played 0:13:52.760 --> 0:13:54.920 a very small role in a lot of the modeling 0:13:54.960 --> 0:13:57.000 discussions happening at the FED, in a lot of the 0:13:57.040 --> 0:14:00.600 outlooks that that I heard people present, and I came 0:14:00.640 --> 0:14:03.000 in and really hammered that idea, and I think sort 0:14:03.000 --> 0:14:04.480 of moved it forward. And now a lot of people 0:14:04.520 --> 0:14:08.079 talk about it very often internally and externally, and you know. 0:14:08.080 --> 0:14:09.640 Sort of talk a lot about supply shocks. 0:14:09.720 --> 0:14:11.800 This is a positive supply shock that is unfolding and 0:14:11.840 --> 0:14:14.719 continues to unfold, and will I hope mitigate some of 0:14:14.760 --> 0:14:16.600 the negative supply shocks we also get hit by. 0:14:16.600 --> 0:14:18.240 Well, let's talk about another supply shock. And I think 0:14:18.280 --> 0:14:20.000 it's been central to some of the arguments you've made 0:14:20.000 --> 0:14:23.160 on the committee, and that's population growth, the negative population 0:14:23.240 --> 0:14:25.720 growth that we've seen, which is lower the break even 0:14:25.800 --> 0:14:28.760 rate for the labor market, and contribute it to arguments 0:14:28.760 --> 0:14:32.400 in some places for hotter, stickier inflation. You've taken the 0:14:32.480 --> 0:14:35.120 other side of that. Can you just explain that for us? 0:14:35.440 --> 0:14:37.200 Yeah, So, I think this is a really subtle issue 0:14:37.240 --> 0:14:39.200 with a lot of moving parts. Now at a very 0:14:39.240 --> 0:14:42.000 high level, what I would say historically is that we've 0:14:42.040 --> 0:14:44.440 seen a lot of countries in different places have declines 0:14:44.440 --> 0:14:47.800 in population growth rates and stagnant populations or shrinking populations. 0:14:48.000 --> 0:14:50.040 And I think the cross country and historical evidence is 0:14:50.040 --> 0:14:56.080 that it's unambiguously disinflationary or even eventually deflationary. Now, there's 0:14:56.080 --> 0:14:59.160 a few ways that that works. One is by reducing sorry, 0:14:59.160 --> 0:15:02.040 there's a few consequence of lower population growth. One is 0:15:02.080 --> 0:15:04.880 it does reduce the break even in payroll growth. Rate, 0:15:04.960 --> 0:15:06.960 so the number of jobs you need to create every 0:15:06.960 --> 0:15:09.720 month to hold the uneplomary constant that does come down. 0:15:10.000 --> 0:15:12.760 That's a mildly hawkish implication because it means you shouldn't 0:15:12.760 --> 0:15:16.600 get so concerned about very very low job creation rates. However, 0:15:16.760 --> 0:15:19.800 there's also there's also duffish implications as well, which are 0:15:19.800 --> 0:15:22.240 that it lowers the neutral rate, it brings interest rates 0:15:22.280 --> 0:15:25.000 down over time, and we've sort of seen that across 0:15:25.160 --> 0:15:28.000 countries and historically and historically to be the case. And 0:15:28.040 --> 0:15:32.160 it's also disinflationary through long lived capital and consumer goods. 0:15:32.280 --> 0:15:34.680 And if you think about something like housing, right, the 0:15:34.720 --> 0:15:37.240 supply of houses is relatively fixed in the short run, 0:15:37.320 --> 0:15:39.680 and if you throw millions of new people into an economy, 0:15:39.760 --> 0:15:41.360 you're going to drive up the price of rents because 0:15:41.360 --> 0:15:43.680 they need places to live, right, You're going to create inflation. 0:15:43.880 --> 0:15:46.000 And that inflation is very very persistent because of the 0:15:46.000 --> 0:15:47.720 way that housing inflation is calculated. 0:15:47.720 --> 0:15:48.800 It's very very sticky. 0:15:49.160 --> 0:15:51.760 If you have declining population growth, you don't need as much, 0:15:51.840 --> 0:15:53.800 you don't need as much home price growth, and that 0:15:54.000 --> 0:15:58.400 very inflationary tailwind gets taken away and ceases to be 0:15:58.440 --> 0:16:01.280 a major driver inflation. I think you've been seeing that 0:16:01.320 --> 0:16:03.240 start to play out in the data market. Rents in 0:16:03.280 --> 0:16:05.160 this country have been growing at a one percent rate 0:16:05.320 --> 0:16:07.200 for the last few years. This is one of the 0:16:07.200 --> 0:16:09.960 biggest components of the inflation in disease, and I think 0:16:10.000 --> 0:16:13.960 you're going to continue seeing measured measured PCE and CPI 0:16:14.080 --> 0:16:17.160 rents and measured pc and CPI shelter inflation continue to 0:16:17.160 --> 0:16:19.480 converge down to those very low levels. So I think 0:16:19.520 --> 0:16:22.400 there's one hawkish implication, which is the lower break even 0:16:22.400 --> 0:16:25.440 peril rate, But there's also some very dublish implications because 0:16:25.440 --> 0:16:27.640 that it reduces the neutral rate and it brings down 0:16:27.680 --> 0:16:30.480 inflation through some of these long lived capital and investment goods. 0:16:30.520 --> 0:16:32.720 This is a longer term structure for how to think 0:16:32.760 --> 0:16:36.440 about inflation and the benchmark rate of the Federal Reserve 0:16:36.800 --> 0:16:39.640 and how it sort of it works with the sort 0:16:39.640 --> 0:16:42.560 of long term inflation rate. Near term though, one thing 0:16:42.560 --> 0:16:44.440 that you've been known for a hallmark of your time 0:16:44.480 --> 0:16:46.880 on the FED was that you voted to cut rates 0:16:46.960 --> 0:16:50.320 at least once at every single meeting. Do you think 0:16:50.560 --> 0:16:53.600 that that still holds even though in the short term 0:16:53.920 --> 0:16:58.000 it does seem like the inflationary shock is overwhelming potential 0:16:58.040 --> 0:17:00.400 structural changes that could lead inflation. 0:17:00.800 --> 0:17:03.680 I do, and I think I think this is maybe 0:17:03.720 --> 0:17:05.600 one of the biggest differences between me and a lot 0:17:05.640 --> 0:17:08.439 of other folks is that I take very seriously the 0:17:08.440 --> 0:17:10.800 idea of Montera policy lacks, very very seriously. 0:17:10.800 --> 0:17:12.760 Mantera policy doesn't hit the economy right now. 0:17:12.960 --> 0:17:15.720 If we changed interest rates today, it wouldn't flow through 0:17:15.720 --> 0:17:17.840 into the economy until twelve to eighteen months from now. 0:17:18.000 --> 0:17:20.200 Right now, there's some disagreement of exactly how long those 0:17:20.240 --> 0:17:22.480 lags are, but I think twelve to eighteen is the 0:17:22.520 --> 0:17:26.199 consensus view. And therefore, for any shock that's hitting the 0:17:26.200 --> 0:17:28.480 economy today, you can't think about what the effect in 0:17:28.520 --> 0:17:30.280 the next few months is. You need to think about 0:17:30.320 --> 0:17:32.399 what the effect in the next twelve to eighteen months is, 0:17:32.880 --> 0:17:35.439 and sorry, the effect twelve to eighteen months out. So 0:17:35.760 --> 0:17:38.359 if oil goes higher, it's a supply shock. Straits of 0:17:38.400 --> 0:17:40.840 hore moves are closed, right, that's going to boost the 0:17:40.840 --> 0:17:42.800 oil price today. And with a bunch of other stuff 0:17:42.800 --> 0:17:46.080 that's very tightly tied to energy prices like airfares, right, 0:17:46.359 --> 0:17:48.240 that's going to go higher very quickly within the course 0:17:48.280 --> 0:17:50.080 of a few months. And we've been living through that, 0:17:50.359 --> 0:17:52.879 and that is very real, right, there's no way that 0:17:53.200 --> 0:17:55.280 is very real inflation. But it is not inflation that 0:17:55.280 --> 0:17:58.240 montera policy can affect. Montera policy can affect twelve to 0:17:58.240 --> 0:18:00.879 eighteen months from now. So there's got to be a 0:18:00.920 --> 0:18:03.919 reason that you think airfares and oil prices are going 0:18:03.960 --> 0:18:06.720 to be moving higher in the summer of twenty twenty seven, 0:18:07.680 --> 0:18:10.040 in the fall of twenty twenty seven, not the summer 0:18:10.040 --> 0:18:11.520 and fall of twenty twenty six. 0:18:12.000 --> 0:18:15.200 And so it's those lags that really should. 0:18:14.880 --> 0:18:17.760 Be driving where you think about forward looking monetary policy 0:18:17.800 --> 0:18:18.199 should be. 0:18:18.440 --> 0:18:19.679 And that's a lot of what I've tried. 0:18:19.560 --> 0:18:23.040 To hone into when thinking about population growth and deregulation 0:18:23.200 --> 0:18:25.240 and saying that the traditional view that we should look 0:18:25.240 --> 0:18:28.199 through in oil shock should prevail. This is very you know, 0:18:28.320 --> 0:18:31.320 vanilla basic traditional mondary policy. 0:18:31.359 --> 0:18:31.760 Part of the. 0:18:31.720 --> 0:18:34.199 Problem is that the market doesn't agree, at least not 0:18:34.320 --> 0:18:37.280 in terms of where longer dated bonds are trading and 0:18:37.280 --> 0:18:40.200 where yields are shifting. Where you see them shifting higher 0:18:40.280 --> 0:18:43.719 even as the front end stays where it is. Do 0:18:43.800 --> 0:18:46.800 you think that in this type of environment it's imperative 0:18:46.840 --> 0:18:49.320 to have some sort of Fed Treasury accord akin to 0:18:49.359 --> 0:18:52.359 what people have been talking about, where the Treasury steps 0:18:52.359 --> 0:18:55.560 into sort of influence the long end while the FED 0:18:55.640 --> 0:18:56.920 cuts rates on the short end. 0:18:57.320 --> 0:18:58.920 So let me address those separately. 0:18:59.040 --> 0:19:01.360 So the market not agreeing is in part a hall 0:19:01.400 --> 0:19:04.000 of mirrors issue, because if you have if the FED 0:19:04.080 --> 0:19:07.240 says we're very backward looking and inflation over the last 0:19:07.359 --> 0:19:10.400 twelve months is going to determine policy that affects twelve 0:19:10.400 --> 0:19:14.000 to eighteen months from now, meaning the economy in twenty 0:19:14.040 --> 0:19:16.240 twenty seven is affected by data in twenty twenty five 0:19:16.280 --> 0:19:18.880 in that world, right, So very very backward looking. If 0:19:18.880 --> 0:19:21.480 that's how the FED communicates that it's setting policy, then 0:19:21.480 --> 0:19:23.479 the market is going to start to reflect that. And 0:19:23.520 --> 0:19:26.800