Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Lots of FED speak today and into next week. Bauman barking,
Speaker 2: Kashgari speaking on Monday. Then you get data next week
Speaker 2: as well. USCPI on Tuesday, PPI next Friday. Bloomberg survey
Speaker 2: expecting core CPI year over year to tick down to
Speaker 2: three point seven percent from three point nine data. Peterson
Speaker 2: of the Conference Board, seeing risk to those numbers. Evidence
Speaker 2: of sustained disinflation is needed for comfort. Then return to
Speaker 2: target and staying there is possible risks of a pickup
Speaker 2: in inflation are present, especially from a tight labor market
Speaker 2: and elevated wages. Then one please to say, join us
Speaker 2: now for more. Can we go straight to those revisions
Speaker 2: or lack thereof your response to the in the last
Speaker 2: couple of minutes.
Speaker 3: Sure, I agree, it certainly is a nothing burger, and
Speaker 3: that is good news. But again, as Mike McKee mentioned,
Speaker 3: the FED is focused on PCE inflation, and it's good
Speaker 3: to know that we don't have lingering concerns about whether
Speaker 3: the CPI is breaking away from what we've seen in
Speaker 3: the PCE and certainly when we look at the PCEE deflator,
Speaker 3: it's flowing. It's above two percent target, but it's headed
Speaker 3: in the right direction.
Speaker 2: As you know, the Federal Reserve wants more confidence. They
Speaker 2: want more data, not better data, just maybe more of
Speaker 2: the same. Now, Danna, I wonder from your perspective, the
Speaker 2: risk of stabilizing above target on inflation? Is that a
Speaker 2: concern that you share? Sorry our last audio, can you
Speaker 2: hear us now or we've still got a problem. I
Speaker 2: think we've lost audio there with Dani Peterson of the
Speaker 2: conference board. If we can re establish that, we'll come
Speaker 2: back to her. We can go back to those concerns.
Speaker 2: On Wednesday, you heard it in the news conference. The
Speaker 2: chairman just not quite comfortable yet to say that he's
Speaker 2: got complete confidence that this is going to be the
Speaker 2: trend through the rest of this year. What are the
Speaker 2: one off factors that we've seen that have led to
Speaker 2: this disinflationary trend that has emerged over the last twelve months.
Speaker 2: What are they exactly?
Speaker 4: Well, the things that they're worried about. They still don't
Speaker 4: understand why house prices or the home price index part
Speaker 4: of all of this is not going down fast than
Speaker 4: it has. They're watching use cars because they've been very
Speaker 4: volatile airfares, hotel hotel costs. Those are the things that
Speaker 4: have been bouncing around a lot, so they're waiting for
Speaker 4: them to sort of steady out and we get I
Speaker 4: think the term that was used was a broad drop
Speaker 4: in the inflation data. One of the things that they
Speaker 4: can't control, obviously is energy, and they have to worry
Speaker 4: about what's going to happen with the Middle East, but
Speaker 4: they'll look beyond that. They're looking for these other internal
Speaker 4: things to continue going down enough that they feel that
Speaker 4: it's not going to be something that will turn the
Speaker 4: whole thing over.
Speaker 1: There is concern about the Atlanta Fed wagechecker. It's something
Speaker 1: that I've seen in a host of notes coming out. Yes,
Speaker 1: it's come down dramatically, but it's still as well above
Speaker 1: what you would expect to get back to two percent.
Speaker 1: What do they need to see there, given that it's
Speaker 1: running about five percent or north of five percent, still
Speaker 1: above pre pandemic norms.
Speaker 4: Well, that's one indicator on way pages, and in general,
Speaker 4: we're seeing wages rise at a faster pace than the
Speaker 4: Fed is looking for. We saw wages in the ECI
Speaker 4: going up at about half a percent, and that is
Speaker 4: a concern. If it continues. They want to see it
Speaker 4: come down. They think three and a half percent, three
Speaker 4: to three and a half percent is consistent with stable inflation.
Speaker 4: So we've still got a ways to go with wages.
Speaker 4: But they don't seem to think at this point that
Speaker 4: the Fed has got a problem because CEOs are telling
Speaker 4: them they're slowing the rate of pay increases.
Speaker 1: Now, Dana Peterson, I believe we've reestablished our audio.
Speaker 2: We apologize for.
Speaker 1: Any technical difficulties data your take on just what you're
Speaker 1: looking for to understand whether the inflation geniees truly been
Speaker 1: slater the inflation dragon. I assume people don't want to
Speaker 1: slay genies, but how much are you seeing this actually
Speaker 1: as a done deal versus still concerned about a couple areas.
Speaker 3: I think much of the FED speak in terms of
Speaker 3: wanting to see sustained disinflation in order to get back
Speaker 3: to the two percent target. Sustainably is important when we
Speaker 3: look at some of the details of inflation. Yes, home
Speaker 3: prices have ease, and that's showing up in rents and
Speaker 3: the shelter costs. But when you look further out, they
Speaker 3: picked up, and so that poses some risk later this
Speaker 3: year and even into next year. But more importantly, wages
Speaker 3: are still elevated. We're seeing them rise, especially in those
Speaker 3: sectors like manufactory construction where there's a lot of demand
Speaker 3: and you have to show up for work. So I
Speaker 3: think wages are continued will continue to be upward pressure
Speaker 3: that the Fed's going to have to watch. So it's
Speaker 3: important to have more readings and maybe getting into the
Speaker 3: springtime to feel confident such that the FED can start
Speaker 3: cutting rates maybe around June.
Speaker 1: Can you give us a sentence based on the increasing
Speaker 1: confidence that you track, given the fact among consumers, given
Speaker 1: the fact that you are concerned about some of these
Speaker 1: areas that are still elevated in terms of inflation, how
Speaker 1: many times you think the FED could cut rates this
Speaker 1: year versus where the markets at.
Speaker 3: Sure, we think the FED could probably cut rates four
Speaker 3: or five times this year. That's roughly one hundred and
Speaker 3: twenty five basis points, and that would be reasonable, especially
Speaker 3: given the fact that the economy is doing better than expected.
Speaker 3: We still think there could be somewhat of a lull,
Speaker 3: maybe not a recession, but inflation should probably continue to slow.
Speaker 3: But again, we have a number of risks out there,
Speaker 3: both to the upside and the downside, but I think
Speaker 3: that's certainly one hundred and twenty five basis points this
Speaker 3: year is possible.
Speaker 1: Is that basically the idea that the neutral is back
Speaker 1: to two percent or something like that, the neutral rate,
Speaker 1: I mean, what is that based on. If you do
Speaker 1: see these risks to the upside for inflation still present
Speaker 1: in the market.
Speaker 3: Well, I think that the neutral rate is probably higher
Speaker 3: now than it was before the pandemic. Here's why we've
Speaker 3: had a major structural change in terms of the labor market.
Speaker 3: We're losing workers, We're experiencing severe labor shorages, and that's
Speaker 3: putting upward pressure on wages. We also have a number
Speaker 3: of outside factors such as globalization, and also the fact
Speaker 3: that you have a number of geopolitical risks that are
Speaker 3: disrupting supply chains that can continue to put some upward
Speaker 3: pressure on inflation. But those are all in the risk category.
Speaker 3: Our base case is still that we're going to see
Speaker 3: inflation get back to two percent and remain there, but
Speaker 3: that the Fed's going to have to keep rates higher
Speaker 3: than expected and not see as much in terms of
Speaker 3: cutting as the market probably is pricing in right now.
Speaker 2: Daniel, I'd love your views on the pickup and consumer
Speaker 2: confidence we've seen more recently. Likewise for CEO confidence as well,
Speaker 2: how do you read that at the moment you read
Speaker 2: that as temporary, Could that be the trend and ultimately
Speaker 2: what does that mean for the forward look the outlook
Speaker 2: for the rest of this year.
Speaker 3: I think they're both positive frends. But to res back
Speaker 3: to consumer confidence, we've seen a few months of improvements.
Speaker 3: Consumers are complaining a little less about inflation. They still
Speaker 3: think prices are high, but they're not rising as quit quickly.
Speaker 3: They're looking forward to interest rates being lower, and they
Speaker 3: think the stock market is going to continue to rise.
Speaker 3: They also feel that they're going to continue to work,
Speaker 3: and certainly that's showing up in our CEO confidence measure,
Speaker 3: where CEOs are still worried about labor and they want
Speaker 3: to hold on to their workers. So if you're a consumer,
Speaker 3: you're working, you have a credit card you can spend,
Speaker 3: then you're probably going to feel better about life.
Speaker 2: Interesting, Dennis, Thank you. Danni Pitterson, the of the Conference Board,