WEBVTT - Surveillance: Tech Is Keeping Inflation Muted, Rosner Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:31.520 Bloomberg dot Com, and of course on the Bloomberg here 0:00:31.520 --> 0:00:35.040 in New York and Police. To say Droomatis MetLife Investment Management, 0:00:35.120 --> 0:00:39.080 chief market strategist, through it looks like the new battleground. 0:00:39.159 --> 0:00:41.480 We've seen it coming for a while. It's an incremental 0:00:41.600 --> 0:00:44.559 step in what could be something much more severe. The 0:00:44.640 --> 0:00:47.120 market though fairly relaxed in the face of this. What's 0:00:47.159 --> 0:00:51.040 your view, Well, I mean I think it's it's because 0:00:51.080 --> 0:00:53.960 it's just another front. Uh, you know, it's not really 0:00:54.000 --> 0:00:57.319 adding to anything, because the big ones really are, you know, 0:00:57.560 --> 0:00:59.760 what happens with China, and as long as China trade 0:00:59.800 --> 0:01:02.640 can used to progress, everything else is a little bit 0:01:02.640 --> 0:01:04.479 of a side show. So we were worried about NAFTA 0:01:04.520 --> 0:01:07.640 because the direct impacts on the us UM and so 0:01:07.720 --> 0:01:10.240 that kind of got negotiated, even though it's still kind 0:01:10.240 --> 0:01:13.520 of ongoing. If we get a deal with China, it's 0:01:13.520 --> 0:01:17.560 gonna pardon the punt Trump. Everything else just in terms 0:01:17.600 --> 0:01:20.160 of the European equity market. This morning, folk taking a 0:01:20.160 --> 0:01:22.520 lot of this and it's stride as well. Surely Europe 0:01:22.800 --> 0:01:24.880 does it have the ability and willingness to respond to 0:01:25.240 --> 0:01:27.840 a propose trade war if that's what we do end 0:01:27.920 --> 0:01:29.840 up with. And I'm not saying that's my base case 0:01:29.920 --> 0:01:32.760 or anybody's at this point, but let's assume we do. 0:01:32.760 --> 0:01:34.960 Does Europe have the ability and willing this to respond 0:01:34.959 --> 0:01:37.559 to that? In the same vein the Chinese do uh? 0:01:37.600 --> 0:01:40.760 You know, my guests would be they don't, uh, simply 0:01:40.800 --> 0:01:44.399 because China's you know, kind of going much more on 0:01:44.400 --> 0:01:47.000 on a partner to partner basis with US. Um. You know, 0:01:47.080 --> 0:01:49.040 they're a very large part of our economy. We're a 0:01:49.120 --> 0:01:52.520 very large part of theirs. I think with Europe they 0:01:52.560 --> 0:01:54.240 have a lot more to lose. And and you know, 0:01:54.320 --> 0:01:56.200 it's probably not a coincidence that the U S is 0:01:56.280 --> 0:01:59.760 choosing this moment. What about the American economy right now? 0:02:00.040 --> 0:02:01.920 If we look at the American economy, if I look 0:02:01.960 --> 0:02:05.760 at the development of g d P, we migrate down. 0:02:05.800 --> 0:02:08.280 We've got maybe a first quarter that's ugly, some people 0:02:08.320 --> 0:02:11.720 even saying below one percent. But you've been resilient at 0:02:11.720 --> 0:02:14.000 a two point five two point six percent run right, 0:02:14.200 --> 0:02:16.760 how do you get there? While you get there with 0:02:16.800 --> 0:02:19.600 the US consumer um, and you get there by the 0:02:19.600 --> 0:02:21.800 fact that, you know, things that people have been worrying about, 0:02:21.880 --> 0:02:25.240 for example, trade, housing, et cetera, have all actually been 0:02:25.400 --> 0:02:30.240 very minor net drags on growth or even net ads. Uh. 0:02:30.280 --> 0:02:31.519 You know, I'm gonna give a shout out to my 0:02:31.560 --> 0:02:33.840 good friend Neil Datta. He's been talking about the kind 0:02:33.840 --> 0:02:37.120 of the the the rebound and housing activity, um, and 0:02:37.200 --> 0:02:40.600 that being very unusual for late cycle as well. So um, 0:02:40.639 --> 0:02:44.200 you know, once again it suggests like productivity and margins. Uh. 0:02:44.240 --> 0:02:46.280 If this is late cycle, this is the oddest late 0:02:46.320 --> 0:02:48.639 cycle we've ever seen. You and Neil Datta, and I'm 0:02:48.680 --> 0:02:52.040 glad you mentioned him. There's a gloomy day, John Farrow. 0:02:52.080 --> 0:02:55.200 They'll be like a gloomy statistic out or whatever. And 0:02:55.240 --> 0:02:57.200 basically you guys come out and go, yes, it's a 0:02:57.200 --> 0:03:01.320 gloomy statistic. But is the butt under consumption? Is the 0:03:01.360 --> 0:03:04.760 butt under investment? Is that that net exports will improve 0:03:04.800 --> 0:03:07.799 away from this trade. I think the butt is is 0:03:07.840 --> 0:03:09.640 that you know, for for a lot of this data, 0:03:09.680 --> 0:03:11.920 we've been seeing that there's a reason why it's behaving 0:03:11.919 --> 0:03:14.600 the way it is in that time frame. We don't 0:03:14.639 --> 0:03:17.040 want to always put a rosy outlook on things. And 0:03:17.080 --> 0:03:19.840 if you look at the last consumer confidence data, for example, 0:03:19.880 --> 0:03:23.240 it was it was really bad. Uh, but it was 0:03:23.280 --> 0:03:26.040 really bad at a high level, so it was coming 0:03:26.080 --> 0:03:30.119 down directionally. It's going badly. Um, but on a level basis, 0:03:30.360 --> 0:03:32.480 it's still extraordinarily high, and we have to keep that 0:03:32.560 --> 0:03:35.960 in perspective rather than just assuming that every slight downturn 0:03:36.040 --> 0:03:38.800 in the data is a negative. And John, that about 0:03:38.800 --> 0:03:41.560 describes the market stock market as well. It's on a 0:03:41.720 --> 0:03:44.440 level basis. You know what where we're on Swiss stocks, 0:03:44.800 --> 0:03:47.040 the s M I John, I'm sure you know that. 0:03:47.160 --> 0:03:49.360 I don't know it. The Swiss stock is changing in 0:03:49.400 --> 0:03:53.840 Swiss Frank's all just a brief question on the U 0:03:53.880 --> 0:03:56.640 S economy. Is the United States ever in recent history 0:03:56.720 --> 0:04:01.880 imported a recession? Uh, It's it's quite difficult to do. Actually, 0:04:01.920 --> 0:04:05.560 if you half of US GDP is not just the consumer, 0:04:05.600 --> 0:04:10.440 but consumer spending on services, alright, so going to the doctor, 0:04:11.120 --> 0:04:15.880 getting the haircut, buying the cup of coffee in the morning. Um. 0:04:15.960 --> 0:04:18.960 When you see very bad recessions in the US. It's 0:04:19.000 --> 0:04:22.240 when that's spending on services turns negative, right, and it 0:04:22.279 --> 0:04:24.280 doesn't have to turn negative by a lot because it's 0:04:24.320 --> 0:04:27.120 half of US g d P. But the flip side 0:04:27.120 --> 0:04:28.920 of that, though, is is very difficult to drive the 0:04:29.000 --> 0:04:32.839 US into a recession from overseas. This is really smart. 0:04:33.080 --> 0:04:36.120 I mean, I mean it's a really important observation. Well, 0:04:36.120 --> 0:04:43.080 can we continue the conversation? Yeah, continued, Please talking. I 0:04:43.160 --> 0:04:46.960 just thought you'd want an example of service sectors spending 0:04:47.839 --> 0:04:53.039 that comes out of nowhere. Vet Bill got sick and 0:04:53.040 --> 0:04:54.880 I had to go to the veterinarian yesterday. Do you 0:04:54.920 --> 0:04:56.919 know that my veterinarian, I don't even make I go 0:04:57.000 --> 0:04:59.600 to the I make it right out to the Horseman School. 0:05:00.320 --> 0:05:02.120 You just you just make the check right out to 0:05:02.200 --> 0:05:05.480 some prep school in New York City. How much was 0:05:05.520 --> 0:05:10.080 the bell for those many minutes? It's like, you know, 0:05:10.200 --> 0:05:12.880 it's like going to the high fancy law firm or something. 0:05:12.880 --> 0:05:16.200 Are you saying that you're keeping the United States insulated 0:05:16.240 --> 0:05:19.679 from the weakness about single handedly kept Drew Madison service 0:05:19.720 --> 0:05:24.400 series positive? An important question and something important to explore, 0:05:24.440 --> 0:05:26.920 because I just wonder to what degree we should be 0:05:27.240 --> 0:05:30.359 obsessing over the weakness abroad if you are exclusively based 0:05:30.360 --> 0:05:33.200 here in the United States. Good question. So what you 0:05:33.240 --> 0:05:37.159 want to watch out for is transmission mechanism through the 0:05:37.279 --> 0:05:41.000 US markets, particularly the equip markets. Uh. And this is 0:05:41.040 --> 0:05:44.239 where the trade war has actually been pronounced. Right. People 0:05:44.440 --> 0:05:48.839 worry about the trade war. Stock prices go down. CEOs 0:05:48.839 --> 0:05:51.160 look at their stock prices going down and think to themselves, 0:05:51.240 --> 0:05:52.840 I can't have my stock, frice go down. I need 0:05:52.880 --> 0:05:55.240 to figure out a way to kind of encourage people 0:05:55.279 --> 0:05:58.560 to believe that my stock is better than everyone else's stock. Um. 0:05:58.880 --> 0:06:02.480 So when the problem occurs is when they look at 0:06:02.480 --> 0:06:04.880 that and they say, I know, I'm gonna cut jobs 0:06:04.920 --> 0:06:07.000 or cut investments in order to kind of make sure 0:06:07.080 --> 0:06:10.400 that my numbers look good. Um And if you have 0:06:10.520 --> 0:06:13.000 enough people doing that at the same time, you end 0:06:13.080 --> 0:06:15.000 up talking your way into a recession. I think that's 0:06:15.040 --> 0:06:17.120 what you have to worry about. Dreamt of grit to 0:06:17.160 --> 0:06:20.159 catch you out with you Mental life investment manage market 0:06:20.200 --> 0:06:24.760 strategist on Europe. The perspective they put the chances of 0:06:24.760 --> 0:06:40.280 a tray to a tomp, the chances we should say 0:06:42.800 --> 0:06:45.120 in Washington lots going on. We'll get to that in 0:06:45.120 --> 0:06:48.520 a moment with Henrietta Treys on immigration the shocks that 0:06:48.600 --> 0:06:52.560 we saw yesterday. Whatever your politics, let us digress to 0:06:52.640 --> 0:06:56.320 a conversation that was different at twelve noon yesterday than 0:06:56.360 --> 0:06:59.000 it is now at eight oh two Wall Street time. 0:06:59.040 --> 0:07:02.120 Henritta Treys is the Veta Partners. She spent a lot 0:07:02.160 --> 0:07:06.360 of time really focused on the border, and that discussion 0:07:06.480 --> 0:07:10.040 changed yesterday. Henrietta, how did you respond to is the 0:07:10.160 --> 0:07:14.760 languages of the moment a purge of homeland security. I 0:07:15.360 --> 0:07:19.920 think it's incredibly important and underappreciated right now. The purge 0:07:19.920 --> 0:07:23.440 at homeland security is exclusively to do with the US 0:07:23.520 --> 0:07:27.440 Mexico border, which of course is about immigration. But my 0:07:27.640 --> 0:07:31.640 concern and investors concern is that cargo and freight is 0:07:31.680 --> 0:07:34.800 being seriously tripped up at the border, um to the 0:07:34.840 --> 0:07:38.400 point now where I understand from manufacturers they are running 0:07:38.400 --> 0:07:42.400 out of inventory of the supply chains that they depend 0:07:42.440 --> 0:07:46.679 on from Mexico. UM. So I think that the shipping 0:07:46.760 --> 0:07:49.200 and the issue of that is the most important now. 0:07:49.400 --> 0:07:51.720 I mean, we're we're going to speak with Senator Grassley here. 0:07:51.880 --> 0:07:54.960 He's making the rounds today. But what can Capitol He'll 0:07:55.080 --> 0:07:59.800 do to amend a just a suage. What can Capital 0:08:00.000 --> 0:08:05.680 Will do to amend these announcements of yesterday. Honestly, I 0:08:05.720 --> 0:08:07.760 don't think there's very much they can do. When I 0:08:07.800 --> 0:08:11.800 speak with Ways and Means, senior counsel on the trade committees, 0:08:11.800 --> 0:08:14.320 what they tell me is they can't move the U. S. M. 0:08:14.400 --> 0:08:17.520 C A, They can't alleviate concerns that the President has 0:08:17.760 --> 0:08:21.960 with saying NAFTA. They can't move anything legislatively. While this 0:08:22.120 --> 0:08:25.200 border crisis is happening, and as we head into Holy 0:08:25.200 --> 0:08:28.320 Week next week, it's expected to be compounded well within 0:08:28.360 --> 0:08:30.520 the border crisis. I want to go to one single 0:08:30.560 --> 0:08:33.840 sentence in the Washington Post today, which is the idea 0:08:34.000 --> 0:08:38.520 of substantial quote unquote Central American families lined up at 0:08:38.559 --> 0:08:41.480 the border, which is clearly the emotion of the President 0:08:41.520 --> 0:08:43.960 of the United States, and I understand how that gets 0:08:43.960 --> 0:08:47.000 in the way of normal trade at El Paso, etcetera. 0:08:47.400 --> 0:08:49.600 Is that going to go away or is there a 0:08:49.679 --> 0:08:54.120 permanence to the accountable number of people at the border 0:08:54.400 --> 0:08:57.360 who want in. I don't think this is going to 0:08:57.440 --> 0:08:59.880 go away, and I think it's gonna get worse our 0:09:00.040 --> 0:09:01.800 So I was speaking with some folks down on the 0:09:01.800 --> 0:09:05.240 border yesterday and they tell me that the administration is 0:09:05.280 --> 0:09:09.240 looking to bring in federal agents from every single sector 0:09:09.360 --> 0:09:14.200 and agency that's available outside of narcotics and terrorism. So 0:09:14.320 --> 0:09:17.679 that means more federal agents at the southern border, which 0:09:17.840 --> 0:09:23.480 is creating these tremendous backlogs, and um really vetting really 0:09:23.559 --> 0:09:28.000 thoroughly the request for asylum whether or not you know, 0:09:28.080 --> 0:09:30.360 people when they are saying I can't go back home, 0:09:30.360 --> 0:09:33.320 it's too dangerous for me. The federal government, the Trump 0:09:33.320 --> 0:09:35.520 administration at least, is going to try to really do 0:09:35.640 --> 0:09:38.600 some due diligence and understand whether or not that threat 0:09:38.679 --> 0:09:41.680 is real. And so that's going to be more time consuming, 0:09:41.720 --> 0:09:43.439 more folks are going to be vetted in a more 0:09:43.480 --> 0:09:46.839 aggressive manner, and this will likely not end at least 0:09:46.880 --> 0:09:49.600 for the next month, is my expectation. So, Henrietta, let's 0:09:49.640 --> 0:09:52.280 talk about the economic reality of all of this. Typically 0:09:52.280 --> 0:09:54.560 we think of the United States, it's rather insulated from 0:09:54.840 --> 0:09:57.880 international trade issues, but that southern border is important. When 0:09:57.880 --> 0:10:00.600 does the reality of that start to bite? I think 0:10:00.600 --> 0:10:03.240 it's I think it's starting literally as we speak, so 0:10:03.600 --> 0:10:07.280 the drivers that are bringing goods to and from Mexico 0:10:07.360 --> 0:10:09.520 to various plants. You know, it's so integrated. We've been 0:10:09.520 --> 0:10:13.640 dealing with NAFTA since and these businesses don't have you know, 0:10:13.720 --> 0:10:17.600 big warehouses with with caches of whatever, you know, widget 0:10:17.600 --> 0:10:20.640 they need to import or put into their car assembly. 0:10:21.000 --> 0:10:24.160 So they rely on this constant flow of traffic between 0:10:24.200 --> 0:10:27.040 the US and Mexico, and it's roughly one and a 0:10:27.080 --> 0:10:30.679 half billion dollars per day, and so tie up at 0:10:30.720 --> 0:10:34.120 the cargo side of you know, two hours is meaningfully 0:10:34.160 --> 0:10:37.679 impactaful because, uh, the driver can't make his next shipment, 0:10:37.760 --> 0:10:40.439 he can't run on time. And speaking with the manufacturers 0:10:40.440 --> 0:10:44.200 associations yesterday, the expectation is that the manufacturing plants are 0:10:44.240 --> 0:10:46.920 going to have to cut entire lines of production because 0:10:46.920 --> 0:10:50.600 they don't have certain components to plug into whatever their 0:10:50.600 --> 0:10:53.000 final product is. It's what degree if it's old, does 0:10:53.040 --> 0:10:55.640 this issue these issues fold into the hold off of 0:10:55.760 --> 0:10:58.000 U S m C I At the moment, it's a 0:10:58.120 --> 0:11:02.040 hundred percent hold up. That's That's exactly what Ways and 0:11:02.080 --> 0:11:05.920 Means was saying yesterday. Even well intentioned Democrats who want 0:11:05.920 --> 0:11:08.000 to push the U S M c A forward can't 0:11:08.040 --> 0:11:10.760 get their members to have a conversation about, say, you know, 0:11:10.840 --> 0:11:15.240 labor standards down in Mexico or environmental regulatory oversight UH 0:11:15.440 --> 0:11:17.800 or enforcement for that matter, because all they can talk 0:11:17.840 --> 0:11:20.000 about is the crisis at the southern border that is 0:11:20.040 --> 0:11:23.320 growing by the hour. What do we want from the 0:11:23.360 --> 0:11:26.760 Mexican government? I mean, I assume President Trump has a 0:11:26.880 --> 0:11:30.720 very clear, boisterous Trumpian statement on what he wants. What 0:11:30.800 --> 0:11:35.120 does business want from the Mexican government to assist us 0:11:35.160 --> 0:11:38.720 out of this quagmire? I think what I've noticed is 0:11:38.760 --> 0:11:42.200 that they are looking for, um, the Mexican government to 0:11:42.760 --> 0:11:46.120 take this vote on labor enforcement, which they're planning to do, 0:11:46.400 --> 0:11:49.360 I believe this week, if I'm not mistaken, UM, and 0:11:49.400 --> 0:11:54.000 then quickly give some deliverables to the Democrats on Capitol 0:11:54.080 --> 0:11:56.600 Hill who are looking not just to see passage of 0:11:56.720 --> 0:12:01.480 legislation about labor enforcement, UM, but actual action from Mexico. 0:12:01.600 --> 0:12:04.719 So for the business community, whose number one priority is 0:12:04.760 --> 0:12:07.280 just making sure that NAFTA has maintained, you know, forget 0:12:07.320 --> 0:12:10.400 about US China or the new EU tariffs or any 0:12:10.440 --> 0:12:13.679 of the overarching trade issues. This is just about as you, 0:12:13.880 --> 0:12:16.160 as you mentioned a minute ago, how important it is 0:12:16.200 --> 0:12:19.680 how integrated our our Mexico and U S supply chains are. 0:12:19.920 --> 0:12:22.959 They have to have this open so for I think 0:12:23.000 --> 0:12:26.880 businesses right now they want the backlog cleared up at 0:12:26.880 --> 0:12:29.600 the border about physical imports, but mostly they want to 0:12:29.720 --> 0:12:34.760 protect NAFTA. Is Steven Miller aware of Henrietta Treys conversation? 0:12:35.160 --> 0:12:37.960 Is he aware of the trade issues? Or do you 0:12:38.040 --> 0:12:40.680 just look at the White House and I guess he's 0:12:40.679 --> 0:12:44.400 our Director of Immigration as being uniquely fixed on the 0:12:44.480 --> 0:12:49.520 social issues. I consider U s tr Bob Lifeiser to 0:12:49.520 --> 0:12:51.880 be the one who's principally focused on all these trade 0:12:51.920 --> 0:12:55.520 issues and this complicates his life dramatically. Um But I 0:12:55.520 --> 0:12:58.240 think Stephen Miller is much more in the camp of immigration, 0:12:58.360 --> 0:13:00.079 and when you look at President Trump and what his 0:13:00.200 --> 0:13:03.320 priorities are heading into an election, I think it's very 0:13:03.320 --> 0:13:08.520 clear that he's more focused on immigration than trade. Very Miller, well, 0:13:08.600 --> 0:13:14.839 he than the trade dynamics wrapped around these political emotions. 0:13:14.840 --> 0:13:31.679 Henry the trades with Veta Partners. They get us up 0:13:31.679 --> 0:13:33.600 to speed on the next twenty four hours, looking forward 0:13:33.640 --> 0:13:35.480 to catching up right now with Laura Rose and a 0:13:35.600 --> 0:13:39.040 senior economists at Macro Policy Perspectives. Laura, great to have 0:13:39.080 --> 0:13:40.839 you with us on the program. Let's just begin with 0:13:40.880 --> 0:13:42.480 the next twenty four hours what are you looking for 0:13:42.600 --> 0:13:44.960 from cp I that print in twenty four hours time 0:13:45.200 --> 0:13:47.000 and Fed minutes to come up a little bit light. 0:13:47.040 --> 0:13:51.440 So Hi, Jonathan, great to talk to you too. So, um, 0:13:51.480 --> 0:13:54.479 we think we're in a soft patch for core inflation, 0:13:54.600 --> 0:13:57.240 and we think tomorrow's report will confirm that we're looking 0:13:57.280 --> 0:13:59.920 for only a point one percent month on month game 0:14:00.400 --> 0:14:02.600 in core cp I and for the annual rate to 0:14:02.640 --> 0:14:06.600 actually decline from two point one to two. And now 0:14:06.679 --> 0:14:10.200 remember the Fed's target is specified in terms of core 0:14:10.320 --> 0:14:13.319 PC inflation. This is c p I, which is generally 0:14:13.360 --> 0:14:16.880 a little bit higher. So this actually implies core PC 0:14:17.120 --> 0:14:21.600 inflation is moderating close to one point seven percent, probably 0:14:21.640 --> 0:14:24.080 by the end of this year. So we're moving away 0:14:24.080 --> 0:14:27.040 from target. Lord, you've got a very important paragraph and 0:14:27.040 --> 0:14:29.240 it really goes to your work with Juliet BMP Perry 0:14:29.960 --> 0:14:34.280 over the years, and that is technology imputing disinflation and deflation. 0:14:34.360 --> 0:14:38.560 John mentioned this earlier on recessage from abroad. Are we 0:14:38.640 --> 0:14:42.040 just are we seeing a disinflation because of all this 0:14:42.240 --> 0:14:47.640 modern technology that's overlaid on our everyday lives. Absolutely. Um. 0:14:47.680 --> 0:14:50.600 So the way we think about it is that technology 0:14:50.640 --> 0:14:54.200 plays a peek a boo role in depressing inflation. It 0:14:54.240 --> 0:14:59.080 doesn't show up every month. It rotates from component to component, 0:14:59.360 --> 0:15:02.120 but it is a trend. And the trend is that 0:15:02.200 --> 0:15:06.200 we have a lot of innovations faster internet, you know, 0:15:06.280 --> 0:15:10.960 mobile devices, cloud computing, along with the growth of digital content, 0:15:11.080 --> 0:15:15.680 electronic marketplaces, the sharing economy. All of these things put 0:15:15.760 --> 0:15:18.400 downward pressure on prices. What do they do to GDP? 0:15:19.000 --> 0:15:21.000 But the money question here is how many tents of 0:15:21.000 --> 0:15:24.400 a percentage point is not seen in GDP because all 0:15:24.440 --> 0:15:28.000 of this wonderment. I mean, that's that's a fair argument. 0:15:28.080 --> 0:15:31.040 You know, some people have looked closely at whether you know, 0:15:31.080 --> 0:15:35.080 there are measurement issues and in estimating productivity growth that 0:15:35.120 --> 0:15:37.920 they actually have found that that doesn't explain a whole lot. 0:15:38.440 --> 0:15:42.160 So this is something that is depressing inflation. But uh, 0:15:42.280 --> 0:15:45.280 in terms of a measurement issue, there isn't strong evidence 0:15:45.320 --> 0:15:48.840 that that explains low predictives. Do you buy this gen 0:15:49.200 --> 0:15:51.640 Do you buy this idea that all this technology overlays 0:15:51.680 --> 0:15:55.680 not in GDP? I think there's a massive argument behind that, Tom, 0:15:55.720 --> 0:15:57.840 and I think a lot of people are making it. Laura. 0:15:57.880 --> 0:15:59.640 Another argument I want to sort of get through with 0:15:59.680 --> 0:16:03.840 you is a distinction between pc and CPI. What is 0:16:03.840 --> 0:16:07.320 the clear distinction between the two gages of inflation. Well, 0:16:07.360 --> 0:16:11.760 they're they're different measures, they're conceptually different. PCE covers a 0:16:11.800 --> 0:16:16.760 wider set of prices. It covers public sector goods and 0:16:16.840 --> 0:16:20.720 services that are bought and purchased on behalf of individuals. 0:16:20.800 --> 0:16:24.320 Those aren't included in in CPI, and in fact it's 0:16:24.360 --> 0:16:28.000 the public sector purchases that we're seeing a lot of 0:16:28.040 --> 0:16:32.800 disinflation in. And healthcare is one example. So the government 0:16:33.240 --> 0:16:36.360 is a key setter, price setter in the market for healthcare. 0:16:36.880 --> 0:16:42.280 It has rising obligations associated with an aging population. Um 0:16:42.360 --> 0:16:46.600 it sets prices again at the Medicare and Medicaid expenditures 0:16:46.600 --> 0:16:52.040 are about of the total healthcare market, so it's pricing 0:16:52.040 --> 0:16:55.760 decisions affect other prices and it's incentivized to set those 0:16:55.800 --> 0:16:59.720 prices low. So that's a source of inflation repression that 0:16:59.800 --> 0:17:03.280 we're seeing more in TC and c p I. But 0:17:03.360 --> 0:17:06.240 it's quite important. It's one factor that is keeping the 0:17:06.240 --> 0:17:09.119 inflation environment very muted and Laura. For a lot of 0:17:09.160 --> 0:17:12.280 people who might have accidentally stumbled across Blomberg Radio not 0:17:12.320 --> 0:17:15.560 intending to listen to Financial news this morning, their reality 0:17:15.600 --> 0:17:18.840 and what they live just in terms of inflation is 0:17:18.840 --> 0:17:21.640 not what they hear when they listen to programs like this. 0:17:22.119 --> 0:17:25.000 We say that inflation is low, it's below target. That's 0:17:25.000 --> 0:17:27.639 not the America, that's not the Europe that some people 0:17:27.640 --> 0:17:31.080 are living. That's true. I mean again, this is the 0:17:31.200 --> 0:17:35.359 average basket for the average you know individual in the US. 0:17:35.440 --> 0:17:41.160 It's not reflective of individual experiences in specific areas. So 0:17:41.520 --> 0:17:44.200 you know, one example of that is is rental how 0:17:44.359 --> 0:17:47.600 you know, apartment rents, which have been rising so much 0:17:47.640 --> 0:17:50.200 and I think a lot of people feel that burden. 0:17:50.800 --> 0:17:54.560 We actually see that as slowing somewhat um So rent 0:17:54.680 --> 0:17:58.199 growth has been very strong over the course of this expansion. 0:17:58.280 --> 0:18:01.840 It has added to inflation shin when the unemployment rate 0:18:01.920 --> 0:18:04.679 was really high, so it kind of accounts for some 0:18:04.800 --> 0:18:08.600 missing inflation. Now we think that's starting to moderate. Well, 0:18:09.080 --> 0:18:12.040 provide clarity here for our audience. What is the inflation 0:18:12.160 --> 0:18:15.240 rate blending services and goods right now? Where does macro 0:18:15.320 --> 0:18:20.159 policy put that? So we expect overall core so that 0:18:20.320 --> 0:18:22.560 strips out food and energy. We think we're going to 0:18:22.680 --> 0:18:26.280 moderate to two percent on a year on your basis, 0:18:26.280 --> 0:18:28.600 and we see that over the course of the next 0:18:28.600 --> 0:18:33.880 two years moderating slightly below that one nine or one eight. 0:18:34.000 --> 0:18:36.880 So prices are rising on a year on your basis 0:18:36.920 --> 0:18:40.160 a little bit under two percent, which is the FEDS mandate. 0:18:40.320 --> 0:18:43.359 La Rossa, thank you so much. Perspectives and John, that 0:18:43.480 --> 0:18:45.879 goes right to Mr Dragging tomorrow if you have the 0:18:45.880 --> 0:18:48.120 same conversation in Europe. I mean, where do you put 0:18:48.119 --> 0:18:50.800 that run rate for year? What? One point four? I 0:18:50.840 --> 0:19:05.080 am ready looking forward to that news conference tomorrow. There 0:19:05.160 --> 0:19:08.040 is an election today, well know not some of the 0:19:08.040 --> 0:19:11.400 primaries are the small elections of the United Kingdom, Newport, 0:19:11.480 --> 0:19:15.159 South of Wales and all that, or maybe elections in 0:19:15.200 --> 0:19:19.920 the United States, but a genormous, an important election in Israel, 0:19:19.960 --> 0:19:23.960 of course, involving Mr Yahoo. We have the perfect guest 0:19:24.040 --> 0:19:26.800 to provide perspective, not one, but two tours of duty. 0:19:27.240 --> 0:19:30.560 Is Ambassador of the United States to Israel, Martin Indick 0:19:30.640 --> 0:19:33.000 joins us, of course with the Counsul on Foreign Relations, 0:19:33.400 --> 0:19:37.000 and he distinguished fellow Martin. Within the news reporting there 0:19:37.080 --> 0:19:40.240 is discussion of the election, some focused, less focus. What 0:19:40.400 --> 0:19:43.680 is the single salient point you would make about this 0:19:43.840 --> 0:19:50.720 moment for Israel? Tom Well, the moment itself is one 0:19:50.760 --> 0:19:56.600 in which Israel it's strong, enjoys strong relationships with the 0:19:56.680 --> 0:20:00.920 major powers, not just its traditional the States, but China 0:20:01.640 --> 0:20:06.960 and Russia and India, and emerging relationships with the our world. 0:20:07.040 --> 0:20:10.040 So things are pretty good for Israel at the moment. 0:20:10.080 --> 0:20:12.840 And of course the Netanya has a strong backing of Trump. 0:20:12.960 --> 0:20:17.280 So the moment is really about Netanyahu himself and whether 0:20:17.359 --> 0:20:20.679 the people of Israel decide that they've had enough of 0:20:20.800 --> 0:20:25.640 him after ten continuous years of rule and corruption charges 0:20:25.800 --> 0:20:29.960 against him and a sense of a kind of royalty 0:20:30.080 --> 0:20:33.800 ruling Israel, whether they're ready for a change or whether 0:20:33.840 --> 0:20:39.639 they want to stick with the secure Netanyahu. Who is 0:20:39.720 --> 0:20:42.840 the other side, who is the alternative vote for the 0:20:42.880 --> 0:20:47.640 people of Israel this day? The leader of the opposing 0:20:48.680 --> 0:20:54.879 forces is Benny Gantz. He's former Israeli Army chief of staff, 0:20:55.280 --> 0:21:00.520 and he has around him three other two other chiefs 0:21:00.520 --> 0:21:07.040 of staff, Gabishkenazi and bog and uh your Lapid, who 0:21:07.080 --> 0:21:10.879 is quite an attractive former anchor like yourself, Tom, but 0:21:11.359 --> 0:21:13.639 has become quite a fixture on the political scene as 0:21:13.640 --> 0:21:19.280 a centrist. So it's really a centrist, security oriented alternative 0:21:19.400 --> 0:21:21.879 that's being presented. What what's the mood of the people. 0:21:21.920 --> 0:21:23.760 I mean with the election going. I don't want to 0:21:23.760 --> 0:21:27.199 get into any polling data or that, but is Israel 0:21:27.280 --> 0:21:30.600 completely focused on this election or is it just another 0:21:30.640 --> 0:21:34.920 cycle with Mr Netya, who alway Israeli has take their elections. 0:21:35.000 --> 0:21:40.200 Very big turnout could be inspected. It's always has been 0:21:40.280 --> 0:21:43.920 up in the in the in the high sixties seventy turnout, 0:21:43.960 --> 0:21:47.040 which is which is huge compared to the United States. 0:21:47.800 --> 0:21:53.600 It's a it's a raucous rambaptuous elections seen now over there. 0:21:54.200 --> 0:21:57.920 Uh and and I think that that The other element 0:21:58.000 --> 0:22:01.119 that's important to remember is that there are many parties 0:22:01.119 --> 0:22:04.040 I think something like twenty seven parties contesting this. This 0:22:04.200 --> 0:22:10.160 is a proportional representation election in which the percentage votes 0:22:10.200 --> 0:22:13.080 that you get determined the number of seats that you get. 0:22:13.160 --> 0:22:17.320 So whoever wins, whether it's Gans or Orton, they're going 0:22:17.359 --> 0:22:20.680 to have to cobble together a coalition with smaller parties 0:22:21.119 --> 0:22:25.200 that are really boutique parties for the religious, for for 0:22:25.840 --> 0:22:30.919 the right wing, for the center left. Is Mr Neyaho 0:22:30.960 --> 0:22:34.080 a centrist who has been forced to the right or 0:22:34.160 --> 0:22:37.000 is he comfortable with the boutique parties of the far 0:22:37.119 --> 0:22:42.320 right in Israel. He I would say he's a center 0:22:42.480 --> 0:22:47.200 right person himself in terms of his preferences and personality. 0:22:47.800 --> 0:22:51.080 But he is above all a survivalist and a very 0:22:51.119 --> 0:22:54.719 good one at that, and that has led him in 0:22:54.760 --> 0:22:58.600 the in the recent past to form a coalition government 0:22:58.680 --> 0:23:01.720 of the right and extreme him right and religious parties, 0:23:02.280 --> 0:23:05.560 and that has proved to be a stable government for 0:23:05.640 --> 0:23:08.679 him at last go around. And so I think that 0:23:08.800 --> 0:23:12.399 will be his preference again, even though it does push 0:23:12.480 --> 0:23:16.040 him towards positions to the more extreme than he would 0:23:16.080 --> 0:23:18.840 otherwise establish. If you're just joining us, Martin Indeck, with 0:23:18.920 --> 0:23:21.240 us with the Council on Foreign Relations, and of course 0:23:21.280 --> 0:23:25.480 to UH tours as Ambassador of the United States to 0:23:25.560 --> 0:23:30.399 Israel as well, Ambassador Indeck, I must take time on 0:23:30.480 --> 0:23:33.159 the Golden Heights. There are the photographs of the heights, 0:23:33.160 --> 0:23:36.399 the plateau looking down in the Sea of Galilee. I 0:23:36.440 --> 0:23:39.720 think for so many Americans removed from ninety seven and 0:23:40.119 --> 0:23:43.119 the other wars of the region, it's like, Okay, go 0:23:43.320 --> 0:23:46.479 on heights. Explain to our audience the importance of the 0:23:46.520 --> 0:23:52.000 Golden Heights and why President Trump's announcement was so critical. Well, 0:23:52.480 --> 0:23:54.880