1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio News. 2 00:00:07,000 --> 00:00:09,840 Speaker 2: We're on Central Bank Watch Markets fully pricing in a 3 00:00:09,920 --> 00:00:13,520 Speaker 2: September rate cut for the FO ANDC after some encouraging 4 00:00:13,600 --> 00:00:17,080 Speaker 2: signs from recent inflation data. Here to talk about maybe 5 00:00:17,120 --> 00:00:19,400 Speaker 2: what we might learn out of the FED tomorrow as 6 00:00:19,440 --> 00:00:22,320 Speaker 2: it makes that big decision is rober Ram Rajan, Professor 7 00:00:22,360 --> 00:00:25,079 Speaker 2: of Finance at the University of Chicago Booth School of 8 00:00:25,200 --> 00:00:27,640 Speaker 2: Business and of course former governor of the Reserve Bank 9 00:00:27,720 --> 00:00:30,320 Speaker 2: of India as well as a former a chief economist 10 00:00:30,720 --> 00:00:33,720 Speaker 2: over at the International Monetary Fund. All Right, rajer There's 11 00:00:33,720 --> 00:00:36,000 Speaker 2: been a lot of talk right now about the idea 12 00:00:36,360 --> 00:00:38,760 Speaker 2: that the FED and all the data points that we've 13 00:00:38,760 --> 00:00:41,400 Speaker 2: gotten leading up to this meeting basically leaves it with 14 00:00:41,479 --> 00:00:45,560 Speaker 2: no choice other than to at least telegraph some type 15 00:00:45,560 --> 00:00:48,559 Speaker 2: of cut sometime in twenty twenty four. When you look 16 00:00:48,600 --> 00:00:50,800 Speaker 2: at the data that we've gotten so far, do you 17 00:00:50,840 --> 00:00:52,479 Speaker 2: think that would be justified? 18 00:00:53,880 --> 00:00:57,360 Speaker 3: Yeah, I mean, as far as the FED goes, I 19 00:00:57,400 --> 00:01:01,040 Speaker 3: think all the data, recent data point towards, you know, 20 00:01:01,080 --> 00:01:04,319 Speaker 3: things moving in the direction at once. It's not there yet, 21 00:01:05,000 --> 00:01:08,440 Speaker 3: but it's moving in the right direction. Certainly, chem and 22 00:01:08,520 --> 00:01:15,760 Speaker 3: Paul doesn't want to commit himself in his post decision 23 00:01:15,920 --> 00:01:19,039 Speaker 3: talk to a cut in September, but he wants to 24 00:01:19,160 --> 00:01:21,120 Speaker 3: hint as much as he can. 25 00:01:22,120 --> 00:01:24,199 Speaker 4: I think the FED is seeing well. 26 00:01:24,280 --> 00:01:28,960 Speaker 3: Inflation is nearabouts where it wants to be, two and 27 00:01:29,000 --> 00:01:32,720 Speaker 3: a half percent on the core PC is getting there, 28 00:01:33,319 --> 00:01:38,520 Speaker 3: and labor markets are certainly cooling at least when you 29 00:01:38,560 --> 00:01:43,759 Speaker 3: look at unemployment claims, openings are down to one point 30 00:01:43,840 --> 00:01:47,880 Speaker 3: two per unemployed person and quits a low and stable 31 00:01:48,120 --> 00:01:52,680 Speaker 3: at below pre pandemic levels. So other than the jobs numbers, 32 00:01:52,720 --> 00:01:55,240 Speaker 3: which are still in the one hundred to two hundred range, 33 00:01:55,880 --> 00:01:57,400 Speaker 3: it is a labor. 34 00:01:57,160 --> 00:01:59,520 Speaker 4: Market that seems to be cooling off. 35 00:02:00,120 --> 00:02:02,280 Speaker 3: And of course there are other parts of the economy 36 00:02:02,320 --> 00:02:06,080 Speaker 3: we're just showing signs of some stress. I mean, housing 37 00:02:06,280 --> 00:02:09,880 Speaker 3: isn't great, and of course you look at credit card 38 00:02:09,919 --> 00:02:12,680 Speaker 3: defaults and all that. It's starting to pick up. So 39 00:02:12,720 --> 00:02:16,440 Speaker 3: the FED is saying we're nearly there. If wait too long, 40 00:02:16,919 --> 00:02:18,880 Speaker 3: we see a slowdown, which we don't want. 41 00:02:19,000 --> 00:02:20,960 Speaker 2: Well, well, that's what I'm curious about, particularly when it 42 00:02:21,000 --> 00:02:23,760 Speaker 2: comes to the consumer side of the equation, household spending 43 00:02:24,000 --> 00:02:26,160 Speaker 2: and the idea that we have started to see softness 44 00:02:26,160 --> 00:02:29,000 Speaker 2: there at least softness that showed up in the official data, 45 00:02:29,040 --> 00:02:31,200 Speaker 2: and of course there's a ton of a acdotal evidence 46 00:02:31,280 --> 00:02:34,280 Speaker 2: out there that households have at least started to rethink 47 00:02:34,800 --> 00:02:37,560 Speaker 2: just how much they spend on discretionary items. How much 48 00:02:37,639 --> 00:02:40,800 Speaker 2: does that that particular data point have the factor into 49 00:02:40,800 --> 00:02:41,400 Speaker 2: this decision. 50 00:02:42,240 --> 00:02:45,520 Speaker 4: It does weigh into the Fed's decision. 51 00:02:45,680 --> 00:02:49,280 Speaker 3: But remember that at the aggregate level or the overall level, 52 00:02:49,560 --> 00:02:54,120 Speaker 3: the economy is still chugging on pretty strongly. The second 53 00:02:54,240 --> 00:02:57,840 Speaker 3: quarter growth numbers were really quite quite strong at two 54 00:02:57,880 --> 00:03:01,720 Speaker 3: point eight. And what you're seeing is, you know, for 55 00:03:01,800 --> 00:03:05,640 Speaker 3: every sort of bit of weakness that you hear about, 56 00:03:06,560 --> 00:03:09,639 Speaker 3: there is potentially an offsetting strength. What the FED doesn't 57 00:03:09,720 --> 00:03:13,919 Speaker 3: want to do is maybe, you know, cut in July 58 00:03:14,600 --> 00:03:18,120 Speaker 3: and then see things pick up. There's also the sort 59 00:03:18,120 --> 00:03:22,440 Speaker 3: of uncertainty surrounding the election. How much do they want 60 00:03:22,520 --> 00:03:26,840 Speaker 3: to ease before the election only to see an administration 61 00:03:27,040 --> 00:03:29,360 Speaker 3: come in which may change things. 62 00:03:29,080 --> 00:03:30,440 Speaker 4: On the ground substantially. 63 00:03:30,840 --> 00:03:35,200 Speaker 3: So I think a gentle cut, if the data cooperate 64 00:03:35,320 --> 00:03:39,080 Speaker 3: by September, is what they want to sort of signal, 65 00:03:39,680 --> 00:03:42,840 Speaker 3: and I think it'll be hint Hay and down Sinach 66 00:03:43,480 --> 00:03:48,760 Speaker 3: without any kind of commitment tomorrow that they will cut 67 00:03:48,760 --> 00:03:49,880 Speaker 3: in September. 68 00:03:49,520 --> 00:03:52,560 Speaker 1: To give themselves maximum optionality, as they've been careful to 69 00:03:52,600 --> 00:03:55,680 Speaker 1: do each step along the way. So Rabram, you had 70 00:03:55,760 --> 00:03:58,200 Speaker 1: mentioned that the labor market seems to be cooling, But 71 00:03:58,280 --> 00:04:01,440 Speaker 1: I look at the estimates for job growth for the 72 00:04:01,480 --> 00:04:03,280 Speaker 1: jobs of what we're going to get on Friday, and 73 00:04:03,320 --> 00:04:06,840 Speaker 1: an estimated one hundred and seventy five thousand jobs added 74 00:04:07,000 --> 00:04:09,240 Speaker 1: after two hundred and six thousand jobs are added in 75 00:04:09,240 --> 00:04:11,800 Speaker 1: the month of June. You don't really see signs of 76 00:04:11,840 --> 00:04:14,760 Speaker 1: cooling as much in new jobs growth as you do 77 00:04:14,880 --> 00:04:18,200 Speaker 1: in say jobless claims or job openings and quits. Does 78 00:04:18,200 --> 00:04:19,279 Speaker 1: that matter that mix? 79 00:04:20,680 --> 00:04:23,799 Speaker 3: That's right, I mean it's not telling the same story. 80 00:04:24,360 --> 00:04:27,680 Speaker 3: But then you know household surveys, for example, are telling 81 00:04:27,720 --> 00:04:32,560 Speaker 3: a different story from the payrolls. So I think, again, 82 00:04:33,080 --> 00:04:36,880 Speaker 3: there are lots of data out there. Depending on your persuasion, 83 00:04:36,920 --> 00:04:40,320 Speaker 3: you can find something to satisfy you that cuts up 84 00:04:40,520 --> 00:04:43,320 Speaker 3: way over you, or you know, we should wait a 85 00:04:43,360 --> 00:04:45,159 Speaker 3: little longer. I think the fad is going to be 86 00:04:46,080 --> 00:04:49,200 Speaker 3: fairly pragmatic and say, well, we don't have any economy 87 00:04:49,240 --> 00:04:53,080 Speaker 3: that's tanking yet, and if it does show signs of weakness. 88 00:04:53,320 --> 00:04:56,400 Speaker 3: We can always cut a little faster. So for now, 89 00:04:56,720 --> 00:05:00,640 Speaker 3: let's hold and see what happens, and we can cut September. 90 00:05:01,360 --> 00:05:03,000 Speaker 1: Do you believe ra rum that we're going to get 91 00:05:03,000 --> 00:05:05,960 Speaker 1: a unanimous decision? And I asked that because Bill Dudley, 92 00:05:06,360 --> 00:05:09,560 Speaker 1: of course, a former New York FED president, wrote an 93 00:05:09,600 --> 00:05:12,920 Speaker 1: opinion piece for US where he said he has changed 94 00:05:12,960 --> 00:05:15,760 Speaker 1: his mind and now sees the need to cut this 95 00:05:15,880 --> 00:05:18,800 Speaker 1: month as opposed to waiting until September because that increases 96 00:05:18,839 --> 00:05:22,640 Speaker 1: the risk of a recession. Will anyone stick their head 97 00:05:22,640 --> 00:05:24,920 Speaker 1: out on that idea when it comes down to a 98 00:05:24,960 --> 00:05:25,560 Speaker 1: bout tomorrow. 99 00:05:26,200 --> 00:05:30,000 Speaker 3: It's not an entirely bad outcome. If one or two 100 00:05:30,640 --> 00:05:36,159 Speaker 3: depart from the overall decision, especially towards a cut. It 101 00:05:36,320 --> 00:05:38,760 Speaker 3: shows that the FED is debating things, and in this 102 00:05:39,920 --> 00:05:43,960 Speaker 3: environment where the political pressure on the FED will start 103 00:05:44,080 --> 00:05:47,359 Speaker 3: amping up before the election, it's good to show that 104 00:05:47,440 --> 00:05:49,799 Speaker 3: the FED is mildly split. 105 00:05:51,000 --> 00:05:52,080 Speaker 4: But you know, let's see. 106 00:05:52,320 --> 00:05:55,160 Speaker 3: I don't know if they will engineer that or it 107 00:05:55,200 --> 00:05:59,080 Speaker 3: will come because of natural differences in opinion. But I 108 00:05:59,080 --> 00:06:00,680 Speaker 3: don't think it's the end of the world if there 109 00:06:00,800 --> 00:06:02,279 Speaker 3: is a little bit of a split. 110 00:06:03,080 --> 00:06:04,600 Speaker 2: Right, I have to ask you a little bit about 111 00:06:04,720 --> 00:06:06,800 Speaker 2: what's going on overseas, because there's been a lot of 112 00:06:06,839 --> 00:06:09,400 Speaker 2: talk about the idea that we might start to see 113 00:06:09,440 --> 00:06:12,760 Speaker 2: significant divergence in central banks. We know the ECB has 114 00:06:12,760 --> 00:06:15,120 Speaker 2: already cut. There's a big question as to whether they'll 115 00:06:15,160 --> 00:06:17,520 Speaker 2: do anything else again and whether they went to early. 116 00:06:17,720 --> 00:06:19,880 Speaker 2: But I'm wondering if it actually matters this time. I 117 00:06:19,880 --> 00:06:21,960 Speaker 2: know we used to in the past focus so much 118 00:06:21,960 --> 00:06:24,840 Speaker 2: on the correlations between these central banks raising and cutting 119 00:06:24,839 --> 00:06:28,400 Speaker 2: at least somewhat in sync here, but is that sort 120 00:06:28,400 --> 00:06:30,000 Speaker 2: of the wrong thing to look at this cycle? 121 00:06:30,880 --> 00:06:34,240 Speaker 3: No, I think it does matter. You can see the 122 00:06:34,400 --> 00:06:40,200 Speaker 3: problem with Japan. Right when Japan was holding firm on 123 00:06:40,360 --> 00:06:45,640 Speaker 3: a relatively mild monitory policy while everybody else was tightening, 124 00:06:45,920 --> 00:06:48,600 Speaker 3: you saw a weakening of the end and that has 125 00:06:48,680 --> 00:06:52,120 Speaker 3: had an impact domestically, both in terms of consumer confidence 126 00:06:52,560 --> 00:06:56,479 Speaker 3: as well as inflation. Now it would seem this week 127 00:06:57,080 --> 00:07:00,719 Speaker 3: tomorrow Japan has to make a decision and probably start 128 00:07:00,800 --> 00:07:03,640 Speaker 3: raising rates, even as the rest of the world is 129 00:07:03,680 --> 00:07:08,040 Speaker 3: starting to contemplate cuts. So you know that does have 130 00:07:08,080 --> 00:07:11,760 Speaker 3: to be an equilibrium, and it doesn't sort of emerge. 131 00:07:12,040 --> 00:07:15,440 Speaker 3: You see the effects in exchange rates, which eventually cause 132 00:07:16,080 --> 00:07:19,360 Speaker 3: you know, central banks to have to adjust. I think 133 00:07:19,400 --> 00:07:23,280 Speaker 3: the ECB is seeing weakness in Europe right now, so 134 00:07:23,400 --> 00:07:27,000 Speaker 3: they actually have a greater reason to cut in September 135 00:07:27,040 --> 00:07:29,640 Speaker 3: than potentially the FED has at this point. 136 00:07:30,360 --> 00:07:32,640 Speaker 2: Well, it's interesting you bring up Japan because obviously they're 137 00:07:32,680 --> 00:07:35,520 Speaker 2: going in a different direction than everyone else, and maybe 138 00:07:35,520 --> 00:07:37,760 Speaker 2: that's a good thing. I am curious. I mean you've 139 00:07:37,800 --> 00:07:39,320 Speaker 2: seen a lot, of course, going back to your days 140 00:07:39,360 --> 00:07:41,480 Speaker 2: at dimth and then of course at the Reserve Bank 141 00:07:41,520 --> 00:07:44,280 Speaker 2: of India, when you look at Japan and this multi 142 00:07:44,360 --> 00:07:46,600 Speaker 2: decade doll drums if you will, that it's been in 143 00:07:47,040 --> 00:07:49,320 Speaker 2: do you look at what's happening now as sort of 144 00:07:49,320 --> 00:07:51,920 Speaker 2: a real upcycle, the idea that they're finally breaking free 145 00:07:51,920 --> 00:07:54,080 Speaker 2: from the past and moving on to something better. 146 00:07:55,240 --> 00:07:58,200 Speaker 3: I think they are, and it's not just monetary policy. 147 00:07:58,240 --> 00:08:03,360 Speaker 3: Of course, a lot of work on corporate governance. There 148 00:08:03,480 --> 00:08:07,600 Speaker 3: is now a greater sense, for example, that Japanese cooperations 149 00:08:07,720 --> 00:08:11,200 Speaker 3: have to deliver a value for money to their investors, 150 00:08:11,680 --> 00:08:13,720 Speaker 3: and there's been a lot of pressure on them. 151 00:08:13,600 --> 00:08:14,520 Speaker 4: To up their game. 152 00:08:15,000 --> 00:08:17,840 Speaker 3: So I think Japan has spent a lot of time 153 00:08:17,840 --> 00:08:21,000 Speaker 3: in the doldrums, but is slowly starting to come out 154 00:08:21,280 --> 00:08:21,520 Speaker 3: for a. 155 00:08:21,560 --> 00:08:25,360 Speaker 4: Variety of reasons. You know, this time is different. 156 00:08:25,440 --> 00:08:28,080 Speaker 3: But of course Japan still has the huge aging problem 157 00:08:28,160 --> 00:08:30,920 Speaker 3: that you know other countries are yet to confront but 158 00:08:31,000 --> 00:08:34,360 Speaker 3: will eventually, and how they manage that is going to 159 00:08:34,400 --> 00:08:37,480 Speaker 3: be really important. How much immigration do they allow? How 160 00:08:37,559 --> 00:08:41,000 Speaker 3: much immigration can they sustain? So it still has problems, 161 00:08:41,520 --> 00:08:45,840 Speaker 3: but I think at least the malaise from the Great 162 00:08:46,280 --> 00:08:49,800 Speaker 3: Recession and the slowdown after that is finally coming to 163 00:08:49,840 --> 00:08:50,199 Speaker 3: an end. 164 00:08:50,640 --> 00:08:52,600 Speaker 1: All right, rob Ram, we started with the FED. I 165 00:08:52,640 --> 00:08:55,520 Speaker 1: want to end with the FED. What is the headline 166 00:08:55,720 --> 00:08:59,079 Speaker 1: going to be tomorrow when jape House speaks? Where could 167 00:08:59,120 --> 00:09:01,599 Speaker 1: he surprise everyone? 168 00:09:02,960 --> 00:09:06,760 Speaker 3: I think he's going to try and not to surprise anyone. 169 00:09:07,280 --> 00:09:09,800 Speaker 3: He's going to try and say, look, we're still in 170 00:09:09,880 --> 00:09:13,439 Speaker 3: data contingent more but the data are cooperating right now, 171 00:09:14,120 --> 00:09:17,880 Speaker 3: and you know, if things go the right way, you 172 00:09:17,920 --> 00:09:20,359 Speaker 3: guys should expect some good news in September. 173 00:09:20,400 --> 00:09:24,120 Speaker 4: As far as Reid Country School, that's sort of the message. 174 00:09:24,200 --> 00:09:26,839 Speaker 3: I don't know how clear he's going to be, yeah, 175 00:09:26,880 --> 00:09:27,920 Speaker 3: but that's the message. 176 00:09:28,040 --> 00:09:28,880 Speaker 4: He is probably going to. 177 00:09:28,880 --> 00:09:31,040 Speaker 2: Say, all right, all right, we've got to leave it 178 00:09:31,120 --> 00:09:32,920 Speaker 2: there here and always great to talk to you and 179 00:09:33,080 --> 00:09:34,640 Speaker 2: great to see that view. You know, I'm not sure 180 00:09:34,679 --> 00:09:36,559 Speaker 2: exactly what way your windows facing, but if you turn 181 00:09:36,640 --> 00:09:38,240 Speaker 2: to the left of the right, you actually see the 182 00:09:38,280 --> 00:09:40,440 Speaker 2: home that I grew up in right down. 183 00:09:40,320 --> 00:09:42,640 Speaker 4: The street, the University of Chicago right now. 184 00:09:42,720 --> 00:09:44,360 Speaker 2: Right down by Medici. I don't know if it's sill there. 185 00:09:44,440 --> 00:09:46,760 Speaker 2: Rag Aaram Raja and always a pleasure. Professor of Finance 186 00:09:46,920 --> 00:09:49,560 Speaker 2: at the University of Chicago Booth School, the business former 187 00:09:49,640 --> 00:09:51,560 Speaker 2: Reserve Bank of India Governor