WEBVTT - Bloomberg Surveillance TV: May 4th, 2026

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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<v Speaker 2>with Lisa Bromwitz and Amerie Hordern. Join us each day

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<v Speaker 2>for insight from the best in markets, economics, and geopolitics

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<v Speaker 2>from our global headquarters in New York City. We are

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<v Speaker 2>live on Bloomberg Television weekday mornings from six to nine

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<v Speaker 2>am Eastern. Subscribe to the podcast on Apple, Spotify or

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<v Speaker 2>anywhere else you listen, and as always on the Bloomberg

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<v Speaker 2>Terminal and the Bloomberg Business app. We begin this out

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<v Speaker 2>with stocks turning lower on renewed tensions in the Middle East.

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<v Speaker 2>Ross Mayfield of bad writing, the US blockade is working,

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<v Speaker 2>but we'll take time to force around's hand. The question

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<v Speaker 2>is does the market hold up in the face of

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<v Speaker 2>this risk? Ross joins us now for more. Russ Good morning, sir,

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<v Speaker 2>Answer your own question. Do you think it does hold out?

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<v Speaker 3>I think the risk is that the administration takes the

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<v Speaker 3>market at all time highs as a vote of confidence

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<v Speaker 3>in a longer you know stand off dis blockade being

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<v Speaker 3>the main way that that goes about, and that if

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<v Speaker 3>it goes for you know, another month, there will be

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<v Speaker 3>economic gramifications in the second half of the year that

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<v Speaker 3>are hard to see right now. So I think you

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<v Speaker 3>can hold up if we're a week away. I think

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<v Speaker 3>if we're talking weeks or months, it's a much bigger

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<v Speaker 3>question for an economy that's already you know, fairly narrow

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<v Speaker 3>and being propped up in a lot of ways by

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<v Speaker 3>AI spend and not the strength of the consumer, which

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<v Speaker 3>is obviously had some trouble in the phase.

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<v Speaker 2>Of wells last the debate right now economic ramification, so

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<v Speaker 2>we see the consequences of nature. They're on the horizon,

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<v Speaker 2>if not the reality right now on the ground in Europe.

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<v Speaker 2>For the US, the US has got a lot going

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<v Speaker 2>for it right now, seven hundred billion dollars of campas

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<v Speaker 2>coming from just a handful of companies. More than that

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<v Speaker 2>if you include o US. The radcount's already the pipeline

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<v Speaker 2>from the end of last year, the tax refunds hitting

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<v Speaker 2>bank accounts already at the moment coming into this quart.

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<v Speaker 2>Can that stand up to the risk out it can?

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<v Speaker 3>I mean, I think it's the main reason, along with

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<v Speaker 3>corporate earnings, which've been robust, that the market is back

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<v Speaker 3>at all time highs despite what is so clearly a

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<v Speaker 3>very live war in the Middle East, in despite oil

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<v Speaker 3>that has now been over one hundred dollars a barrel

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<v Speaker 3>both Brandon WTI for a lot of the last two months.

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<v Speaker 3>So there is a lot working for the economy. But

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<v Speaker 3>there are two things that the economy can't stand up

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<v Speaker 3>in the face of, which is higher for longer oil

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<v Speaker 3>or really higher for longer rates. If we continue down

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<v Speaker 3>this path, we run the risk of a little bit

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<v Speaker 3>of both. If we put the FED in such a

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<v Speaker 3>bind because of higher oil prices.

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<v Speaker 2>Well, let's go with the right story. So we're at

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<v Speaker 2>four basis points at the front end of the curve

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<v Speaker 2>on TUESDA today at around three ninety two, not far

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<v Speaker 2>off the highest of the year. At the front end

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<v Speaker 2>on tens, we're basically there. Likewise, on thirties RUSS what

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<v Speaker 2>does a five percent thirty year four forty ten year,

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<v Speaker 2>let's call it four percent two year due to eanquities.

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<v Speaker 3>We've seen over this pullmarket, you know, particularly the ten year,

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<v Speaker 3>when it pushes past four fifty and starts to move

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<v Speaker 3>towards five. That's really the like red zone for risk

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<v Speaker 3>on equities, you know, the thirty I think the market

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<v Speaker 3>cares a little bit less about but that four point

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<v Speaker 3>fifty on the ten year.

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<v Speaker 4>Is a really key level.

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<v Speaker 3>So obviously market watchers and investors will be allaised on

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<v Speaker 3>that for the next couple of weeks.

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<v Speaker 4>Here, you know, on the front end of the curve.

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<v Speaker 3>I think it's representative of a FED that is going

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<v Speaker 3>to have its hand force. And I don't think we're

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<v Speaker 3>talking hikes yet, but certainly it would be surprising to

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<v Speaker 3>see a cut. In particular, following the descents from a

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<v Speaker 3>handful of governors last week.

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<v Speaker 2>When you say it.

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<v Speaker 1>Has its hands force, that basically just mean you think

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<v Speaker 1>the FED is on hold for the rest of the year.

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<v Speaker 4>Yes, I think so.

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<v Speaker 3>I think it would be really hard, even if worsh

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<v Speaker 3>makes a convincing AI productivity case, to build consensus to

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<v Speaker 3>get a rate cut, unless we're talking about maybe a

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<v Speaker 3>rake cut in December, if we can get past I ran,

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<v Speaker 3>you know, in a timely order. But yeah, I think

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<v Speaker 3>a base case should be a hold for the remainder

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<v Speaker 3>of the year.

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<v Speaker 1>Well, so, if you're watching the market, what would it

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<v Speaker 1>take for the FED you think to have to actually

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<v Speaker 1>hike It's.

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<v Speaker 3>Core inflation, right, So I think the FED is rightfully

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<v Speaker 3>saying all the right things about looking through an energy shock.

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<v Speaker 3>But we've also seen some pressure in core services inflation.

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<v Speaker 3>We know the labor market is really tight in terms

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<v Speaker 3>of you know, we're not adding jobs. The labor force

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<v Speaker 3>is probably even shrinking. So if you started to see

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<v Speaker 3>wage pressure, if you started to see housing and rent's

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<v Speaker 3>bottom and turn back up, then the FED is forced

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<v Speaker 3>to reconsider where we're at. The problem is the labor

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<v Speaker 3>market doesn't look strong enough to stomach many heights.

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<v Speaker 4>So we'll keep an eye on core services inflation.

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<v Speaker 3>But I think the FED is again kind of caught

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<v Speaker 3>between a rock and a hard place here, which maybe

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<v Speaker 3>makes their job easier in some ways.

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<v Speaker 2>And so what kind of FED reserve do you think

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<v Speaker 2>that Kevin Walsh is inheriting when he steps into the

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<v Speaker 2>big seat in June.

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<v Speaker 4>Obviously very split FED.

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<v Speaker 3>I mean, we haven't seen so many descents in a

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<v Speaker 3>couple of decades at least. I think it's going to

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<v Speaker 3>be really hard to build consensus towards a view that

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<v Speaker 3>AI productivity merits rate cuts. Now, I think you might

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<v Speaker 3>get a little bit more consensus on winding down the

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<v Speaker 3>balance sheet a little bit maybe on some of the

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<v Speaker 3>banking regulation issues that the FED has a hand in.

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<v Speaker 3>But I think it's going to be really hard to

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<v Speaker 3>build consensus, even if the economic argument is sound, because

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<v Speaker 3>of all of the other noise from Iran, from the

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<v Speaker 3>labor market, and from what AI might.

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<v Speaker 4>Do to jobs.

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<v Speaker 2>Stay with us. More Bloomberg surveillance coming up after this.

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<v Speaker 2>So here's the links this this morning, the President announcing

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<v Speaker 2>the US will have ships transit the strate of form,

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<v Speaker 2>Mercer run warning US forces will be attacked if they

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<v Speaker 2>enter the waterway. Norman role of csis right in the following.

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<v Speaker 2>There is still no evidence that either Washington or ten

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<v Speaker 2>Round is prepared to make the concessions necessary for a

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<v Speaker 2>near term settlement, nor I'm joined us now for more

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<v Speaker 2>non Welcome to the program. Things feel a little bit

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<v Speaker 2>tense coming into this week. How frangile is this true? Still?

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<v Speaker 4>Good morning?

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<v Speaker 5>Well, we have two countries that are each uninterested in

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<v Speaker 5>starting hostilities, but neither ours are interested in making the

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<v Speaker 5>concessions that would bring about a settlement. As I mentioned

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<v Speaker 5>earlier the piece, the talks do remain ongoing, and that

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<v Speaker 5>is a good thing and are likely to continue. And

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<v Speaker 5>I think we're watching with Washington with the Project Freedom

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<v Speaker 5>is to test the environment to see how far Ron

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<v Speaker 5>is willing to go to change the atmosphere of the region.

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<v Speaker 5>So the next couple of days will be quite important.

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<v Speaker 1>But norm Project Freedom, it sounds like electronic guiding of

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<v Speaker 1>ships through the strait of her moves. Is that actually possible?

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<v Speaker 1>Do these ships actually need a naval escort?

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<v Speaker 5>Well, they don't need a naval escort per se. But

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<v Speaker 5>just because we're providing electronic guidance doesn't mean that we

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<v Speaker 5>wouldn't be also having radar, perhaps air surveillance, and if

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<v Speaker 5>they were to come under attack, that doesn't mean that

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<v Speaker 5>we wouldn't be able to provide.

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<v Speaker 4>Assistance if that decision.

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<v Speaker 5>Were to be made, and we would be able to

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<v Speaker 5>do so, but presumably from aircraft for example, if that

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<v Speaker 5>were needed. Now, when you're talking about how the ships

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<v Speaker 5>are moving, it's conceivable that they could be moving through

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<v Speaker 5>Omani waters. So let's pull this issue apart. We've watched

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<v Speaker 5>the Iranians in the last few weeks use their own

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<v Speaker 5>waters to move ships from the north of the Persian

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<v Speaker 5>Gulf to Pakistan. It could be that what is being

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<v Speaker 5>considered is just to allow ships to move through Omani

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<v Speaker 5>waters through the straight up hor Moos and then to

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<v Speaker 5>exits to the Arabian Sea. So in essence, it's a

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<v Speaker 5>reverse of what the Iranians themselves are doing. And then

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<v Speaker 5>if the Iranians were to attack, they would be an

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<v Speaker 5>essence attacking into Omani territory. The Omani's would have given

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<v Speaker 5>the US permission to conduct operations. We would be providing

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<v Speaker 5>defensive support. All of that would be legal under international law.

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<v Speaker 5>So again that is a hypothetical scenario, but that is

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<v Speaker 5>something that might be possible.

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<v Speaker 1>Around this morning, is announcing a new control zone of

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<v Speaker 1>the Strait of Hormuz. Is there any evidence that they're

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<v Speaker 1>going to allow the US to have such operation, Well.

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<v Speaker 5>There's no evidence that the Iranians are going to say

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<v Speaker 5>anything that the US will care about him, and the

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<v Speaker 5>Iranians are going to make a number of statements exerting

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<v Speaker 5>their control over the straight orfor moves, but the US

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<v Speaker 5>doesn't recognize that because they have no legal authority to

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<v Speaker 5>control an international waterway. So this is just another statement

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<v Speaker 5>by the Iranian government, and their parliament has made a

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<v Speaker 5>number of statements making such claims.

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<v Speaker 4>So this is just one more and a long line

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<v Speaker 4>of such statements.

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<v Speaker 1>Normal when do you think the Iranian oil industry will

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<v Speaker 1>start to see shut ins and really be forced to

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<v Speaker 1>potentially have a little bit more of an economic collapse

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<v Speaker 1>in the oil industry. The Treasury Secretary yesterday said next week,

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<v Speaker 1>although two weeks ago he said it was just a

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<v Speaker 1>matter of days. We are seeing the Iranians use alternative roots,

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<v Speaker 1>like putting some oil by rail to China. At what

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<v Speaker 1>point do you think we see really economic collapse.

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<v Speaker 5>Well, we're that this Treasury secretary was correct. Within some days,

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<v Speaker 5>the Iranian system was facing severe problems. They started to

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<v Speaker 5>use old ships that they had in storage to store oil,

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<v Speaker 5>and they are indeed sending some oil out through land

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<v Speaker 5>routes through Pakistan reportedly, but this does not relieve them

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<v Speaker 5>of their problem. But the question really becomes that once

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<v Speaker 5>they start shutting oil fields, does this really change their

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<v Speaker 5>decision making?

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<v Speaker 4>And so there's a question of.

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<v Speaker 5>Why will they feel economic pain and will the pain

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<v Speaker 5>be sufficient to actually matter in terms of the diplomatic negotiations. So, yes,

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<v Speaker 5>they will start feeling pain significant increase, probably in about

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<v Speaker 5>a week to two weeks, but it's going to be

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<v Speaker 5>some time after that before they actually reach a point

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<v Speaker 5>where it starts to grade ier GC revolutionary Guard operations

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<v Speaker 5>and government operations to the point where the government fields

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<v Speaker 5>that have to make changes. That could be some time,

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<v Speaker 5>but we should be upfront. The Iranian government is losing

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<v Speaker 5>hundreds of millions of dollars a day because of their

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<v Speaker 5>decision making, and that is certainly impacting the debate within

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<v Speaker 5>their decision making. However, as we've seen over the weekend,

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<v Speaker 5>it has not changed their diplomatic positions, which essentially remained

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<v Speaker 5>unchanged from the beginning of the war.

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<v Speaker 1>The President will be heading to China soon. At what

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<v Speaker 1>moment could China potentially play a bigger role to making

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<v Speaker 1>sure the Iranians actually show up to the table and

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<v Speaker 1>have a negotiation with the United States.

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<v Speaker 5>No country has significant influence over Iranian decision making. The Iranians, however,

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<v Speaker 5>do use the number of countries as doorways to diplomatic

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<v Speaker 5>exits when they wish to do so. In China, Russia,

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<v Speaker 5>Pakistan could be those doorways when necessary, But we should

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<v Speaker 5>be clear China does not have significant influence over the

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<v Speaker 5>Supreme Council for National Security in Iran, or they would

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<v Speaker 5>have stopped this war some time ago. We should recall

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<v Speaker 5>that China was a facilitator for the Saudi Iranian Peace

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<v Speaker 5>of Court March twenty twenty three, and that obviously.

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<v Speaker 4>Didn't mean it didn't mean anything.

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<v Speaker 1>Where do you think talks stand right now? Because the

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<v Speaker 1>President yesterday announced this operation to guide ships or the

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<v Speaker 1>straightup removes, also said that there have been positive discussions

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<v Speaker 1>with the Iranians.

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<v Speaker 5>Well, talks are underway indirectly through the Pakistanis, which indicates

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<v Speaker 5>that the diplomatic process does exist, and that's a good thing,

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<v Speaker 5>and it shows that a process exists vice a move

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<v Speaker 5>towards hostilities. So as long as that trend continues, we're

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<v Speaker 5>moving in the right directions. At the same time, the

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<v Speaker 5>President has a good history of showing that when he

0:11:41.080 --> 0:11:44.160
<v Speaker 5>feels his time has been wasted, he will move to

0:11:45.080 --> 0:11:48.559
<v Speaker 5>military action. And we do have two aircraft carrier task

0:11:48.640 --> 0:11:54.040
<v Speaker 5>forces in the region, and those military personnel are prepared

0:11:54.080 --> 0:11:57.320
<v Speaker 5>to initiate operations to clear the straight of removes, which

0:11:57.320 --> 0:12:01.040
<v Speaker 5>of course would mean operations against the billistic missiles and

0:12:01.080 --> 0:12:05.199
<v Speaker 5>dernes in mainland Iran were that to order be given.

0:12:06.040 --> 0:12:09.559
<v Speaker 2>Stay with us more Bloomberg surveillance coming up. After this,

0:12:18.880 --> 0:12:21.880
<v Speaker 2>Three FED officials single in caution about the Central Bank's

0:12:21.920 --> 0:12:24.600
<v Speaker 2>path forward. The former New York Fed President Bill Dudley,

0:12:24.880 --> 0:12:27.600
<v Speaker 2>seeing no good reason for Kevin Walsh to allow interest rates,

0:12:27.600 --> 0:12:31.560
<v Speaker 2>writing his latest rustionale that inflationary pressures are subsiding is

0:12:31.600 --> 0:12:34.920
<v Speaker 2>no more convincing than its predecessors. Bill joined us now

0:12:34.920 --> 0:12:37.520
<v Speaker 2>for more. Bill, Welcome to the program, Sir. What is

0:12:37.559 --> 0:12:41.640
<v Speaker 2>the strongest argument against not cunning interest rates right now?

0:12:42.280 --> 0:12:42.400
<v Speaker 6>Well?

0:12:42.440 --> 0:12:43.160
<v Speaker 4>I think two things.

0:12:43.240 --> 0:12:46.199
<v Speaker 6>Number One, the risks of inflation have increased, obviously because

0:12:46.240 --> 0:12:49.760
<v Speaker 6>of the team rise and energy prices. And number two

0:12:49.800 --> 0:12:52.040
<v Speaker 6>that the liver market seems to be pretty stable. We're

0:12:52.040 --> 0:12:53.680
<v Speaker 6>not seeing a lot of job growth, but we're seeing

0:12:53.800 --> 0:12:56.680
<v Speaker 6>enough job growth to keep the unemployment rate from rising.

0:12:57.120 --> 0:12:59.319
<v Speaker 6>So I think that the balance of risk is actually

0:12:59.520 --> 0:13:01.839
<v Speaker 6>shifting more or to the inflation side away from the

0:13:01.880 --> 0:13:04.400
<v Speaker 6>libor market side. Second thing is that there's not a

0:13:04.440 --> 0:13:07.280
<v Speaker 6>real evidence that monetary policy is actually restrictive right now.

0:13:07.520 --> 0:13:10.840
<v Speaker 6>We've had Bodally a restrictive manitary policy for quite some time.

0:13:11.200 --> 0:13:12.760
<v Speaker 4>Yet the economy is operating at.

0:13:12.679 --> 0:13:15.400
<v Speaker 6>Full employment and inflation is well above the Pedes two

0:13:15.400 --> 0:13:18.280
<v Speaker 6>percent objective. So the evidence that the Mandrey policy is

0:13:18.280 --> 0:13:20.440
<v Speaker 6>actually holding back the economy, I think it's pretty weak

0:13:20.640 --> 0:13:21.600
<v Speaker 6>in the current environment.

0:13:21.800 --> 0:13:23.600
<v Speaker 2>But what do you make at the AI argument. It

0:13:23.640 --> 0:13:25.760
<v Speaker 2>wasn't something that was articulated in the hearing, but it's

0:13:25.760 --> 0:13:28.240
<v Speaker 2>something we've heard from Kevin Walsh before in the lead

0:13:28.320 --> 0:13:30.640
<v Speaker 2>up to its confirmation that ultimately will lead to lower

0:13:30.679 --> 0:13:33.120
<v Speaker 2>prices and will give them room to reduce interest rates.

0:13:33.120 --> 0:13:34.160
<v Speaker 2>What's the pushback to that.

0:13:34.720 --> 0:13:36.880
<v Speaker 4>I think the pushback to that is twofold number one.

0:13:37.000 --> 0:13:39.960
<v Speaker 6>AI in the short term is actually increasing investment demand,

0:13:40.320 --> 0:13:43.880
<v Speaker 6>so that's actually pushing upward pressure on interest rates. Number two.

0:13:44.000 --> 0:13:46.960
<v Speaker 6>There's a lot of uncertainly about how fast the AI

0:13:47.000 --> 0:13:50.199
<v Speaker 6>protivity benefits will materialize, and it's not really clear whether

0:13:50.240 --> 0:13:52.760
<v Speaker 6>that will you know, what will dominate the downward effect

0:13:52.800 --> 0:13:56.240
<v Speaker 6>on inflation or the upward effect on the demand for capital,

0:13:56.280 --> 0:13:59.240
<v Speaker 6>and that effect of that on interest rates. There was

0:13:59.280 --> 0:14:02.240
<v Speaker 6>a poll of a comust that basically found that over

0:14:02.280 --> 0:14:04.400
<v Speaker 6>eighty percent of the economist said no, I would not

0:14:04.600 --> 0:14:08.760
<v Speaker 6>recommend cutting rates now prospectively on the basis of an

0:14:08.800 --> 0:14:12.400
<v Speaker 6>AI productivity boom. The other weakness of the argument is

0:14:12.840 --> 0:14:15.079
<v Speaker 6>Kevin Wirsch has cited the green span experience in the

0:14:15.120 --> 0:14:17.800
<v Speaker 6>late nineteen nineties is a reason to cut well The

0:14:17.840 --> 0:14:20.680
<v Speaker 6>reality is Greenspan did not cut in the ninety nineteen nineties.

0:14:20.760 --> 0:14:22.640
<v Speaker 6>He just didn't raise interest rates, and.

0:14:22.680 --> 0:14:24.520
<v Speaker 4>Interest rates at the time we're well about where they

0:14:24.520 --> 0:14:24.960
<v Speaker 4>are today.

0:14:25.200 --> 0:14:27.160
<v Speaker 2>Bill. Do you think that's just a sequencing problem. What's

0:14:27.160 --> 0:14:29.480
<v Speaker 2>your ultimate view? Your personal view on the matter is

0:14:29.480 --> 0:14:31.680
<v Speaker 2>that a sequencing gets you that is expensive up front,

0:14:31.880 --> 0:14:34.640
<v Speaker 2>It pushes up costs, there's a climate to buy all

0:14:34.720 --> 0:14:37.400
<v Speaker 2>kinds of things, and then later on costs for well.

0:14:37.440 --> 0:14:39.640
<v Speaker 6>I think AI, if we do get a productivity surge,

0:14:39.680 --> 0:14:42.000
<v Speaker 6>it's going to be good for the outlook for inflation.

0:14:42.080 --> 0:14:44.760
<v Speaker 4>I think it's less clear what that means for interest rates.

0:14:44.560 --> 0:14:47.960
<v Speaker 6>Because if AI results in a you know, obsoletes lot

0:14:48.000 --> 0:14:50.040
<v Speaker 6>of the capital stopping, you need to sort of build

0:14:50.040 --> 0:14:52.080
<v Speaker 6>a new capital to take full benefits of the AI.

0:14:52.440 --> 0:14:55.160
<v Speaker 4>If you can actually see continued upward pressure on real interest.

0:14:54.920 --> 0:14:57.520
<v Speaker 2>Rates, no good races account rights. That was the title

0:14:57.600 --> 0:14:59.800
<v Speaker 2>of your pace right now, Bill, you echo that in

0:14:59.840 --> 0:15:02.160
<v Speaker 2>this conversation. It does bank the question why is the

0:15:02.200 --> 0:15:06.080
<v Speaker 2>current FED chair and the committee maintaining an easing bias?

0:15:06.560 --> 0:15:08.760
<v Speaker 6>I think they can start with the presumption that number

0:15:08.760 --> 0:15:11.400
<v Speaker 6>one entre policy is restrictive, which I don't really agree

0:15:11.440 --> 0:15:14.240
<v Speaker 6>with and number two that they're concerned about the downside

0:15:14.320 --> 0:15:16.960
<v Speaker 6>risks of the labor market. I think those downside risks

0:15:16.960 --> 0:15:19.080
<v Speaker 6>of the labor market were probably pretty relevant, you know,

0:15:19.080 --> 0:15:21.440
<v Speaker 6>a few months ago, but the labor market seems to

0:15:21.480 --> 0:15:24.120
<v Speaker 6>have stabilized. Look at the level of initial unemployment claims

0:15:24.120 --> 0:15:26.600
<v Speaker 6>and total unemploymable cains. They're really basically as low as

0:15:26.600 --> 0:15:28.800
<v Speaker 6>they've been in many, many years. So there really is

0:15:28.920 --> 0:15:30.960
<v Speaker 6>very little evidence that the liver market's falling apart at

0:15:30.960 --> 0:15:31.440
<v Speaker 6>this point.

0:15:31.600 --> 0:15:34.080
<v Speaker 1>Well, what do you make of Chair j Powell staying

0:15:34.120 --> 0:15:37.880
<v Speaker 1>on for longer than many have anticipated, given he will

0:15:37.920 --> 0:15:39.800
<v Speaker 1>be a former FED chair at the next meeting.

0:15:40.320 --> 0:15:44.680
<v Speaker 6>Well, it's clearly unusual, but not without president. And you know,

0:15:44.720 --> 0:15:47.160
<v Speaker 6>for the people that are criticizing, you know, Jay Powell

0:15:47.240 --> 0:15:49.440
<v Speaker 6>for staying on, I think that's not really fair.

0:15:49.840 --> 0:15:52.400
<v Speaker 4>I mean, he didn't start this whole situation.

0:15:53.080 --> 0:15:56.920
<v Speaker 6>You know, the FED has been under merciful attack, merciless

0:15:56.960 --> 0:16:01.560
<v Speaker 6>attack from the President, and the FED independence is under question,

0:16:02.000 --> 0:16:04.400
<v Speaker 6>and I think Paul thinks that by staying on the FED,

0:16:04.480 --> 0:16:07.840
<v Speaker 6>that's going to actually bolster of the FEDS the perception

0:16:07.920 --> 0:16:10.120
<v Speaker 6>of the Fed's independence. So I think it makes sense

0:16:10.160 --> 0:16:12.160
<v Speaker 6>for him to day on if he's willing to do so.

0:16:12.440 --> 0:16:14.880
<v Speaker 1>I believe over the weekend the Treasury Secretary called it

0:16:14.880 --> 0:16:18.680
<v Speaker 1>an overreaching shadow FED chair. Do you believe that this

0:16:18.760 --> 0:16:22.400
<v Speaker 1>will be confusing for financial markets to have what some

0:16:22.560 --> 0:16:24.280
<v Speaker 1>might think to co chairs.

0:16:25.000 --> 0:16:26.600
<v Speaker 6>Well, I think Paul has made it very clear that

0:16:26.600 --> 0:16:28.120
<v Speaker 6>he's going to keep a very low profile.

0:16:28.160 --> 0:16:29.600
<v Speaker 4>So I don't think you're going to see Paul going

0:16:29.600 --> 0:16:30.240
<v Speaker 4>out and giving.

0:16:30.080 --> 0:16:32.120
<v Speaker 6>A lot of speeches about the economic outlook and the

0:16:32.120 --> 0:16:36.920
<v Speaker 6>implications for monetary policy. But obviously around the committee, when

0:16:36.920 --> 0:16:39.720
<v Speaker 6>you have the actual fmc meing, it's going to be

0:16:39.720 --> 0:16:42.880
<v Speaker 6>pretty relevant what Chair Powell says about the economic outlook

0:16:42.880 --> 0:16:44.840
<v Speaker 6>that people are certainly going to continue to listen to him.

0:16:45.040 --> 0:16:47.240
<v Speaker 2>Well, obviously the incoming FED chair is going to want

0:16:47.240 --> 0:16:49.000
<v Speaker 2>to do it his own way. What kind of changes

0:16:49.000 --> 0:16:52.280
<v Speaker 2>would you advocate for in communication? Whatever it might be,

0:16:52.280 --> 0:16:55.359
<v Speaker 2>a fewer speeches, the dot plot, what would you change?

0:16:55.680 --> 0:16:57.239
<v Speaker 6>I think there are a lot of things that they

0:16:57.320 --> 0:16:59.520
<v Speaker 6>could change and improve. I mean I think that number one,

0:16:59.640 --> 0:17:02.960
<v Speaker 6>you need a framework for quantitative easing and quantitative tightening.

0:17:03.160 --> 0:17:05.320
<v Speaker 6>They don't have one right now. When you do it,

0:17:05.840 --> 0:17:07.920
<v Speaker 6>how do you do it? How do you exit from it,

0:17:08.240 --> 0:17:10.119
<v Speaker 6>how do you evaluate the cost and benefits of it?

0:17:11.000 --> 0:17:13.080
<v Speaker 6>Number two, I think they really do need to improve

0:17:13.119 --> 0:17:16.119
<v Speaker 6>their communications. And I think what I would recommend, and

0:17:16.160 --> 0:17:18.760
<v Speaker 6>this is something that Ben Bernanke recommended, is to actually

0:17:18.800 --> 0:17:23.600
<v Speaker 6>publish a staff forecast with scenarios, alternative scenarios. Scenario analysis

0:17:23.680 --> 0:17:26.000
<v Speaker 6>right now is so relevant in an environment where we

0:17:26.000 --> 0:17:28.439
<v Speaker 6>don't know how long oil prices, how high oil presses

0:17:28.440 --> 0:17:30.159
<v Speaker 6>are going to go, or how long they're going to

0:17:30.200 --> 0:17:33.960
<v Speaker 6>stay high. So having different scenarios that basically say how

0:17:34.000 --> 0:17:36.680
<v Speaker 6>you respond if things turn out differently than you expect

0:17:37.000 --> 0:17:39.520
<v Speaker 6>is very helpful information to guide markets.

0:17:40.000 --> 0:17:41.480
<v Speaker 4>So I think, you know the ECB does this.

0:17:41.720 --> 0:17:43.800
<v Speaker 6>I had a conversation with Christine Lagard a couple weeks

0:17:43.800 --> 0:17:46.919
<v Speaker 6>ago about this. You know, they have three scenarios baseline,

0:17:47.640 --> 0:17:50.880
<v Speaker 6>adverse scenario, and severe and she basically said, every day

0:17:50.920 --> 0:17:54.240
<v Speaker 6>that the situation in Ron stays the way it is today,

0:17:54.440 --> 0:17:57.080
<v Speaker 6>we're taking one more step away from the baseline scenario

0:17:57.200 --> 0:17:59.840
<v Speaker 6>towards the adverse one. So having alternative scenarios I think

0:18:00.000 --> 0:18:02.199
<v Speaker 6>to help people think better about the monetary policy.

0:18:02.240 --> 0:18:03.920
<v Speaker 2>But is it harder when you have a dual mandate?

0:18:04.600 --> 0:18:06.680
<v Speaker 4>I don't think so. I mean, I think the dual mandate.

0:18:06.880 --> 0:18:09.280
<v Speaker 6>I think people overestimate the tension in the dual mandate

0:18:09.280 --> 0:18:10.359
<v Speaker 6>at the end of the day. I mean, I think

0:18:10.359 --> 0:18:13.280
<v Speaker 6>the Fed's view is we need to keep inflation at

0:18:13.280 --> 0:18:15.760
<v Speaker 6>two percent because that's actually going to help us more

0:18:15.760 --> 0:18:18.439
<v Speaker 6>easily achieve our employment objectives. So the two are not

0:18:18.600 --> 0:18:21.359
<v Speaker 6>quite as much tension in the long run their intention

0:18:21.440 --> 0:18:23.640
<v Speaker 6>in the short runs at times, but the long run,

0:18:23.840 --> 0:18:25.520
<v Speaker 6>you really need to keep inflation at two percent of

0:18:25.560 --> 0:18:28.240
<v Speaker 6>you're actually going to achieve your objective in terms of employment.

0:18:29.000 --> 0:18:32.560
<v Speaker 2>This is the Bloomberg Survendments podcast, bringing you the best

0:18:32.560 --> 0:18:35.639
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0:18:35.640 --> 0:18:38.600
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