WEBVTT - US CPI Comes in Lower Than Expected 0:00:02.520 --> 0:00:13.800 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.239 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.720 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.000 us live on YouTube. 0:00:27.160 --> 0:00:30.920 Sure Lucas with us with SMBC Nico Securities. He writ 0:00:30.920 --> 0:00:33.400 it's a brilliant report with lots of charts. I don't 0:00:33.400 --> 0:00:35.840 want to go narrow here. I want to go more 0:00:35.960 --> 0:00:40.080 like sixty thousand feet. Are we through the pandemic? Are 0:00:40.080 --> 0:00:43.080 we through the shutdown? When we look at price change 0:00:43.360 --> 0:00:44.560 in America. 0:00:44.560 --> 0:00:47.440 I think we're still in the process of normal normalization 0:00:47.560 --> 0:00:49.520 on the prices angle, shorting. 0:00:49.120 --> 0:00:51.720 With the pandemic as well. I still think there's a 0:00:51.760 --> 0:00:53.880 debris there apps for sure. 0:00:54.600 --> 0:00:57.040 And then I think the biggest effect is really psychological, 0:00:57.480 --> 0:00:59.520 not only on the half of businesses, but also on 0:00:59.560 --> 0:01:02.640 consumers that are willing to tolerate you know, high inflation. 0:01:03.280 --> 0:01:05.760 Well, I mean, because we know that shelter has always 0:01:05.800 --> 0:01:08.920 been a big part, a big component, right, takes up 0:01:08.959 --> 0:01:11.200 more percentage I think of that CPI than any other 0:01:11.560 --> 0:01:15.720 category month over month. I guess it's I guess it's 0:01:15.760 --> 0:01:18.360 trending lower, But tell that to somebody who's actually trying 0:01:18.400 --> 0:01:20.559 to buy something or rent something right now, Right. 0:01:20.720 --> 0:01:24.360 Well, this is the classic divergence between what economists look 0:01:24.360 --> 0:01:26.440 at and what people on main street actually care about. 0:01:26.760 --> 0:01:29.400 So the truth is that shelter inflation is coming down. 0:01:29.760 --> 0:01:32.240 It's coming down pretty quickly, and it's coming down pretty 0:01:32.280 --> 0:01:36.200 quickly because home prices lead the CPI's measure of shelter 0:01:36.240 --> 0:01:39.200 costs by about sixteen months. So the question ultimately we 0:01:39.240 --> 0:01:40.959 need to answer is where a home price is going 0:01:41.280 --> 0:01:44.080 and they are weak, and we're expecting that they're going 0:01:44.120 --> 0:01:44.479 to come down. 0:01:44.560 --> 0:01:46.760 National I got everybody Troy telling me this is not 0:01:46.840 --> 0:01:47.800 a big deal report. 0:01:47.880 --> 0:01:50.400 I don't buy it, and particularly with the backdrop with 0:01:50.520 --> 0:01:53.760 Sherman Paul right now, the fact is I have people 0:01:53.880 --> 0:01:57.680 like you who are two three four rate cuts. 0:01:57.480 --> 0:01:59.640 Going yeh, wait a minute, maybe not. 0:02:00.160 --> 0:02:04.720 Are you pulling back the rate reduction scenario that you 0:02:04.800 --> 0:02:07.600 see because of a set of inflation data. 0:02:08.360 --> 0:02:13.200 We're essentially moving back our rate cut expectations. So January, 0:02:13.240 --> 0:02:16.280 they're likely not going to cut unless this CPS shifting 0:02:16.280 --> 0:02:20.440 it out correct unless the CPI report is extremely soft, 0:02:20.440 --> 0:02:21.359 which we're not expecting. 0:02:21.680 --> 0:02:22.840 So are you still looking? 0:02:22.880 --> 0:02:24.600 I saw on your note unless your note was a 0:02:24.639 --> 0:02:27.240 little bit old, just my hours because of the way 0:02:27.280 --> 0:02:29.640 things move so quickly. Are you still looking at three 0:02:29.680 --> 0:02:30.120 rate cuts? 0:02:30.320 --> 0:02:32.079 You're just throw shade on our guests. 0:02:32.280 --> 0:02:37.880 I mean, no, but things lighting see this week. 0:02:37.800 --> 0:02:40.000 Know, jeez, it's a little shady here this morning. 0:02:40.080 --> 0:02:42.240 Huh. 0:02:42.360 --> 0:02:44.800 No, No, So we are looking for three rate cuts still. 0:02:45.040 --> 0:02:47.680 We see the economy slow in, particularly in the labor market, 0:02:47.919 --> 0:02:50.040 and we also see inflation coming down and that's going 0:02:50.080 --> 0:02:50.359 to work. 0:02:50.520 --> 0:02:52.919 Are shifting to twenty seven? Like JP Morgan? 0:02:53.080 --> 0:02:53.200 No? 0:02:53.960 --> 0:02:55.799 No, you really think we're going to see it now? 0:02:55.840 --> 0:02:56.919 Three rate cuts this year? 0:02:56.960 --> 0:02:59.160 Is this way I look at? Is Myron want six 0:02:59.280 --> 0:02:59.880 rate cuts? 0:03:00.440 --> 0:03:02.760 If he gets four, he's a genius because he's so 0:03:02.960 --> 0:03:04.160 alone on this call. 0:03:04.600 --> 0:03:06.639 Are you Are you on the edge of Myron? 0:03:07.080 --> 0:03:09.280 No, we're not looking for four, We're looking for three. 0:03:10.720 --> 0:03:13.639 We think with this new Fed chair coming in, combined 0:03:13.680 --> 0:03:16.720 with the fact that the regional Fed Bank quotation is 0:03:16.840 --> 0:03:20.280 comparatively dubbish to last year's Fed Bank quotation, that that 0:03:20.360 --> 0:03:22.880 might be enough to shift the calculus in terms of three. 0:03:22.840 --> 0:03:25.679 Rate Now the ten year inflation just a yield is 0:03:25.720 --> 0:03:27.600 a wonderful trend based barometer. 0:03:27.680 --> 0:03:30.079 It's in a very tight collar, if you will. 0:03:30.120 --> 0:03:33.000 It comes in two basis points one point eighty three 0:03:33.120 --> 0:03:36.920 sixty three percent, a dampening of yields, a bid to 0:03:37.040 --> 0:03:40.760 Bill's notes and bonds. And as Lisa mentioned, green on 0:03:40.800 --> 0:03:42.600 the screen here as well. 0:03:42.480 --> 0:03:43.440 Troy luck with us. 0:03:43.440 --> 0:03:48.040 Who is there's like forty seven lines of David Rosenberg 0:03:48.120 --> 0:03:51.080 inflation data. You haven't had time to look at him. 0:03:51.400 --> 0:03:54.080 I'm not looking for that, but is there color here 0:03:54.120 --> 0:03:57.160 that you can give of pretty much a rote idea, 0:03:57.200 --> 0:03:59.200 except course CPI a little more damp. 0:03:59.720 --> 0:04:02.560 Yeah, A bit surprised here that it's core CPI, which 0:04:02.560 --> 0:04:06.560 misses expectations here at zero point two percent. Considering the 0:04:06.560 --> 0:04:09.360 fact that gasoline prices were down nearly five percent on 0:04:09.400 --> 0:04:11.320 a month over month basis, you would expect that it 0:04:11.360 --> 0:04:13.520 was headline that would be weak. But the fact that 0:04:13.600 --> 0:04:17.839 core is actually a bit softer is a profoundly strong signal, 0:04:18.040 --> 0:04:21.359 at least to us, that inflation is coming down, inflationary 0:04:21.360 --> 0:04:23.080 pressures are dissipating, and the Fed is going to be 0:04:23.080 --> 0:04:23.600 cutting this year. 0:04:23.960 --> 0:04:27.760 Alexisay asked a brilliant question earlier about tariff dynamics. Let's 0:04:27.760 --> 0:04:32.120 combine that with the export of Chinese deflation. Is that 0:04:32.200 --> 0:04:36.080 an untold story for twenty twenty six of a dampening 0:04:36.680 --> 0:04:41.080 price change in America because of the realities Beijing faces. 0:04:41.040 --> 0:04:42.080 One hundred percent. 0:04:42.440 --> 0:04:45.159 And it's funny because if you look at the two 0:04:45.200 --> 0:04:48.960 most tariff sensitive components of CPI, you look at household 0:04:49.000 --> 0:04:52.080 appliances and you look at apparel the year of a year, 0:04:52.160 --> 0:04:55.040 rates of change in these prices zero point five percent. 0:04:56.200 --> 0:04:59.440 We're looking for tariff inflation, really struggling to find it. 0:05:00.920 --> 0:05:03.240 I'm looking at this report right now breaking it down. 0:05:03.360 --> 0:05:06.240 Food up seven tenths of a percent in December, so 0:05:06.279 --> 0:05:09.160 we're still not getting a break there, right, Americans are 0:05:09.160 --> 0:05:13.200 still paying more for the basics, and energy increasing three 0:05:13.240 --> 0:05:16.359 tenths of a percent in December. So again we're finding 0:05:16.400 --> 0:05:19.359 that there are these areas of sticky inflation and no 0:05:19.440 --> 0:05:21.280 reason to believe they're going to come down anytime soon. 0:05:21.360 --> 0:05:24.200 Troy Well on the energy side of things, what I 0:05:24.240 --> 0:05:28.080 would add is that that's likely a reflection of electricity 0:05:28.160 --> 0:05:32.360 prices going higher on the back of higher natural gas prices. Now, 0:05:32.600 --> 0:05:34.720 it's hard to disentangle how much of this is just 0:05:34.800 --> 0:05:39.400 a simple commodity effect versus something that is more related 0:05:39.400 --> 0:05:43.560 to the AI theme. But that is something that we've 0:05:43.600 --> 0:05:45.440 been worried about for about a year now. 0:05:45.480 --> 0:05:48.240 I mean, the reality is there are these little things 0:05:48.240 --> 0:05:51.560 that people think. You mentioned electricity rates. You know, I'd 0:05:51.600 --> 0:05:54.000 go to the internet like everybody else and I'm sorry, 0:05:54.440 --> 0:05:58.000 up eight percent, up ten percent. Elisa just emailed me. 0:05:58.279 --> 0:06:01.200 We have a whole internal emails system, folks that we 0:06:01.240 --> 0:06:04.560 took from the US military, and Lisa emails me, this 0:06:04.680 --> 0:06:08.240 is Tom, what's inflation and door dash, grub up and seamless? 0:06:08.640 --> 0:06:12.080 And the answer is ginormous. I mean, how far apart 0:06:12.120 --> 0:06:16.480 of fancy people like you from the public on inflation. 0:06:17.279 --> 0:06:20.880 There is for sure a ca shaped economy, and that 0:06:20.920 --> 0:06:23.000 applies not only to spending but also in terms of 0:06:23.120 --> 0:06:26.080 rates of inflation. But this is something that we discussed 0:06:26.120 --> 0:06:28.680 really in depth in our year ahead outlook, which is 0:06:28.680 --> 0:06:32.120 that the household net worth of the top one percent 0:06:32.200 --> 0:06:36.040 is up eighteen percent since the Fed started hiking rates. 0:06:36.240 --> 0:06:39.359 For the bottom fifty percent, it's like eight percent. So 0:06:39.440 --> 0:06:42.480 you're really seeing this divergence of fortunes between we'll say 0:06:42.480 --> 0:06:46.160 the middle classes and then those at the very tippy top, Troy. 0:06:46.200 --> 0:06:48.120 Thank you so much, Troy Ludku with this senior US 0:06:48.200 --> 0:06:53.120 Economists SMBC that egosecurities stay with us. More from Bloomberg 0:06:53.240 --> 0:06:55.279 Surveillance coming up after this. 0:07:02.520 --> 0:07:06.119 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:07:06.160 --> 0:07:09.320 weekday afternoons from seven to ten am Eastern Listen on 0:07:09.400 --> 0:07:13.080 Applecarplay and Android Otto with the Bloomberg Business app, or 0:07:13.240 --> 0:07:14.840 watch US live on YouTube. 0:07:15.120 --> 0:07:19.440 Holding Court in the United Kingdom for ages. Leslie Venerburry 0:07:19.560 --> 0:07:24.600 just was fabulous on international relations. Like the Chicago Cubs 0:07:24.640 --> 0:07:27.640 picked up Alex Bregman from the Red Sox. Yep, the 0:07:27.760 --> 0:07:31.560 Chicago Council of Global Affairs picked up Vingerburry. That's how 0:07:31.680 --> 0:07:35.600 from Tottenham or something like, Leslie, how about Chicago. 0:07:35.520 --> 0:07:37.360 Arsenal Tom Arsenal always? 0:07:37.360 --> 0:07:38.160 How's that winter? 0:07:38.280 --> 0:07:38.480 Well? 0:07:38.640 --> 0:07:41.679 I know that we were smoking cigars at that fancy 0:07:41.720 --> 0:07:43.640 hotel in Mcgravia. 0:07:43.920 --> 0:07:47.440 You know, Leslie's going Arsenal. I'm going Tottenham. How about 0:07:47.440 --> 0:07:50.600 those Chicago winters, Leslie Vingerburry, you. 0:07:50.600 --> 0:07:55.440 Know miles So far two pretty frigid weekends I happened 0:07:55.480 --> 0:07:57.040 to be in London and one in New York and 0:07:57.080 --> 0:07:59.480 the other. But Chicago's fabulous. I mean, talk about a 0:07:59.480 --> 0:08:02.200 beautiful It looks great when it's on the ground. Tom, 0:08:02.240 --> 0:08:07.000 the snow is absolutely stunning surrounding Lake Michigan and Millennium Park. 0:08:07.080 --> 0:08:09.640 I mean, there's there's nothing like it. It's it's really 0:08:09.680 --> 0:08:10.560 something you should come. 0:08:10.680 --> 0:08:14.240 My basic take on our international relations is it's all 0:08:14.560 --> 0:08:19.200 wonderful until something breaks. How close in our multi front 0:08:19.840 --> 0:08:23.560 Trump foreign policy, are we just something breaking? 0:08:24.800 --> 0:08:27.720 I mean, it's it definitely feels like it's on the edge. 0:08:27.800 --> 0:08:32.160 The return early in the new year, I think was 0:08:32.160 --> 0:08:38.320 was boy talk about taking off with speed the you know, 0:08:38.400 --> 0:08:43.199 the capture of Madura and quickly pivoting to making claims 0:08:43.240 --> 0:08:45.640 on Greenland, and then you know, Iran of its own 0:08:45.679 --> 0:08:49.080 accord people on the streets, and Trump contemplating what his 0:08:49.120 --> 0:08:53.000 options are. It really is extraordinary. And that's even setting 0:08:53.040 --> 0:08:59.040 aside the domestic story. You know, I think that you know, 0:08:59.760 --> 0:09:02.079 it's inter national relations hasn't always been easy. It's been 0:09:02.240 --> 0:09:05.560 very difficult the last one year. There's so many questions 0:09:05.600 --> 0:09:07.960 about the United States, But I think nobody could have 0:09:08.040 --> 0:09:11.560 predicted that this was going to become so much about 0:09:11.679 --> 0:09:17.440 pre eminence in the Western hemisphere about pushing territorial borders, 0:09:17.559 --> 0:09:21.760 whether it's through threats or actual use of force taking 0:09:21.920 --> 0:09:23.760 leaders out. You know, we thought this would be a 0:09:23.760 --> 0:09:28.000 president who might be neo isolationists, who might be you know, 0:09:28.040 --> 0:09:30.680 inclined towards restraint. That is just not what we're seeing 0:09:30.760 --> 0:09:34.480 right now, with the major exception of you know, China, 0:09:34.960 --> 0:09:38.480 US policy towards China and Russia exactly where we thought, 0:09:38.960 --> 0:09:41.000 you know, it might be much tougher at least when 0:09:41.320 --> 0:09:42.120 it comes to China. 0:09:42.160 --> 0:09:43.880 And again, that's not what we've seen. 0:09:44.640 --> 0:09:46.520 And Leslie to throw into the mix. 0:09:46.600 --> 0:09:49.600 Now we're ratcheting things up against Iran, right with the 0:09:49.600 --> 0:09:52.600 president now saying he wants to impose twenty five percent 0:09:52.640 --> 0:09:56.120 tariffs on any country doing business with Iran. What are 0:09:56.160 --> 0:09:59.160 the the implications there as that country now sees its 0:09:59.160 --> 0:10:02.920 biggest anti govern a protests and years and killing of 0:10:03.320 --> 0:10:04.199 many civilians. 0:10:05.080 --> 0:10:07.760 Yeah, well, I mean the Iran story is an extraordinary one, 0:10:07.800 --> 0:10:12.080 devastating for the presumably thousands of people who are at 0:10:12.160 --> 0:10:16.040 risk or have been targeted by the regime. And I 0:10:16.280 --> 0:10:18.160 you know, I think President Trump is weighing his options. 0:10:18.160 --> 0:10:20.200 You're right, those twenty five percent, you know, he's cracking 0:10:20.240 --> 0:10:26.240 down on secondary violation of sanctions basically, and that hits 0:10:26.480 --> 0:10:29.040 of course, China and others that he's been you know, 0:10:29.200 --> 0:10:33.960 lighter touch with. But relative to the other options that 0:10:34.040 --> 0:10:37.000 the US could be considering, that is, you know, perhaps 0:10:37.000 --> 0:10:39.480 a first step. The real question is whether there will 0:10:39.520 --> 0:10:45.240 be any use of military force, obviously a much harder, 0:10:45.400 --> 0:10:50.120 more risky lift. I'm skeptical at the moment, but Trump 0:10:50.160 --> 0:10:54.760 today is meeting to consider his options. It could be 0:10:54.840 --> 0:10:57.360 that we just continue to see cracking. 0:10:56.960 --> 0:10:59.119 Down on you know, these these. 0:10:59.000 --> 0:11:01.959 Sanctions, as you've mentioned, is as sort of the and 0:11:02.000 --> 0:11:03.800 wait and see what happens internally. 0:11:04.000 --> 0:11:07.920 Good morning Chicago, Good morning across America, Leslie, Vinjamuri with 0:11:08.080 --> 0:11:11.040 US year we continue, whether Lesslie, your hallmark is to 0:11:11.080 --> 0:11:15.360 always bring in academics. You bring in from Minnesota professor 0:11:15.400 --> 0:11:18.680 Fasal Tanisha Fassal, and just say she has written the 0:11:18.840 --> 0:11:24.360 absolute best on autocratic states. How autocratic is the United 0:11:24.400 --> 0:11:25.600 States of America? 0:11:26.520 --> 0:11:29.400 Look, the United States of America is not autocratic. We 0:11:29.480 --> 0:11:35.120 have a leader with autocratic tendency, who likes to play 0:11:35.120 --> 0:11:38.640 fast and loose with the rule of law, who doesn't 0:11:38.679 --> 0:11:44.640 really feel like you should be constrained by Congress, the courts, norms. 0:11:45.000 --> 0:11:47.280 Standard ways of doing things, convention. 0:11:48.679 --> 0:11:51.240 And this is the year of the people, tom this 0:11:51.280 --> 0:11:54.400 is the year when Americans are you making choices about 0:11:54.400 --> 0:11:56.600 whether they're going to kind of stand up and hold 0:11:56.640 --> 0:11:57.000 the line. 0:11:57.000 --> 0:11:59.360 And we've just seen a bunch of past. 0:12:00.880 --> 0:12:03.040 Leaders of the FED decide that they are going to 0:12:03.080 --> 0:12:07.959 stand up and and you know, we saw a couple 0:12:07.960 --> 0:12:10.920 of senators, Republican senators flip over to the other side 0:12:11.160 --> 0:12:14.680 and and vote for you know, the president to be 0:12:14.800 --> 0:12:17.600 required to report to Congress if he wishes to do 0:12:18.040 --> 0:12:21.240 more in Venezuela. So we're seeing a few hints this 0:12:21.360 --> 0:12:25.560 year early days that we didn't see last year. And 0:12:25.600 --> 0:12:27.440 we have you know, it's a long ways out, Silvi, 0:12:27.520 --> 0:12:31.560 we have the midterms coming, so there are you know, 0:12:31.600 --> 0:12:33.400 there are some signs that there's going to be a 0:12:33.400 --> 0:12:34.360 little bit more pushback. 0:12:34.400 --> 0:12:35.920 We don't live in an autocracy. 0:12:36.240 --> 0:12:39.280 We live in a you know, very dysfunctional democracy, but 0:12:39.400 --> 0:12:43.160 still a very robust democracy with a leader who you know, 0:12:43.240 --> 0:12:46.920 by all accounts, wants to make some changes. Some of 0:12:46.960 --> 0:12:50.360 his instincts are very good, but he doesn't want to 0:12:50.400 --> 0:12:52.800 do it through the processes that you know, we've come 0:12:52.840 --> 0:12:57.360 to think are not not necessarily efficient, but that are important. 0:12:57.160 --> 0:13:01.480 Right and Trump certainly is unbound and undeterred by precedent. 0:13:01.559 --> 0:13:05.640 So what happens with little old Greenland in twenty twenty six? 0:13:05.760 --> 0:13:10.040 Leslie, You know, I'm I'm kind of concerned on this 0:13:10.080 --> 0:13:10.440 one that. 0:13:10.920 --> 0:13:12.040 I mean a couple of things. 0:13:12.120 --> 0:13:16.400 Obviously, Europeans are right rightfully up in arms. They are 0:13:16.440 --> 0:13:20.200 really talking to each other. They're completely unsettled by the 0:13:20.200 --> 0:13:24.480 President's willingness to threaten the use of force to argue 0:13:24.480 --> 0:13:26.319 that he can get it just you know, with money 0:13:26.320 --> 0:13:30.559 and language. It sort of doesn't matter whether he actually 0:13:30.600 --> 0:13:34.400 uses force in one sense, which is he's already completely unsettled. 0:13:34.880 --> 0:13:37.560 The most important norm that has guided the system, at 0:13:37.679 --> 0:13:42.280 least since nineteen forty five Article to Chapter four of 0:13:42.320 --> 0:13:44.880 the UN Charter. You know, you don't use force to 0:13:45.640 --> 0:13:52.240 unsettle territorial boundaries. It's a sovereignty norm. But here's the rub. 0:13:52.640 --> 0:13:55.720 If you look at the data, most Greenlanders would prefer 0:13:56.280 --> 0:13:59.720 to be independent than to be ruled by Denmark. And 0:13:59.760 --> 0:14:02.199 this is I think where the administration is going to 0:14:02.240 --> 0:14:02.840 play its hand. 0:14:02.880 --> 0:14:05.720 It's going to push that division internally. 0:14:06.360 --> 0:14:08.680 It's going to you know, we've already seen there have 0:14:08.720 --> 0:14:12.680 been trips by the administration meeting with those leaders of 0:14:12.720 --> 0:14:13.720 the independence movement. 0:14:13.760 --> 0:14:17.040 I think that's going to continue. 0:14:17.520 --> 0:14:21.600 And you can see a scenario where Greenland is given 0:14:21.760 --> 0:14:26.280 the opportunity, the voice its preferences and it wishes to 0:14:26.320 --> 0:14:28.480 have an independence. And as we know, Greenland can't really 0:14:28.520 --> 0:14:31.440 survive as an independent country. It's fifty seven thousand people. 0:14:31.840 --> 0:14:33.840 It isn't a part of the world where it needs 0:14:33.880 --> 0:14:37.320 more security. So I think this one is definitely a 0:14:37.360 --> 0:14:41.360 live option and want something to watch, and it's going 0:14:41.440 --> 0:14:44.800 to really rupture relations between the US and Europe. 0:14:44.880 --> 0:14:47.600 Less I got twenty seconds. Clubs are White Sox. 0:14:47.800 --> 0:14:50.800 You move into Chicago, I mean you're five miles south 0:14:50.840 --> 0:14:53.600 of wrigley Field. You got the rock Star location on 0:14:53.680 --> 0:14:56.520 Randolph Street. Do you make the easy slide to Wrigley 0:14:56.560 --> 0:14:59.960 Field or do you vote for those lowly support those 0:15:00.120 --> 0:15:01.680 lowly Chicago white Sox. 0:15:02.400 --> 0:15:06.200 You know, Tom always follow the Pope. That's all we follow. 0:15:06.400 --> 0:15:09.400 So the Pope and my daughter and and there you 0:15:09.400 --> 0:15:11.160 have the app. But I don't choose. I can't choose. 0:15:11.440 --> 0:15:12.200 I'm independent. 0:15:12.600 --> 0:15:13.840 Oh you're very independent. 0:15:13.880 --> 0:15:16.520 I can see that Pope merch on the way, and 0:15:16.680 --> 0:15:18.680 let's say vener Mary, thank you so much. Really has 0:15:18.880 --> 0:15:21.680 been way too long in Chicago, greatly appreciate. 0:15:21.760 --> 0:15:23.680 Let's evenger Mary with us, Stay with us. 0:15:23.920 --> 0:15:27.160 More from Bloomberg Surveillance coming up after this. 0:15:34.400 --> 0:15:38.000 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:15:38.080 --> 0:15:41.200 weekday afternoons from seven to ten am Eastern Listen on 0:15:41.320 --> 0:15:44.680 Apple Karplay and Android Otto with the Bloomberg Business app, 0:15:44.880 --> 0:15:46.600 or watch us live on YouTube. 0:15:46.680 --> 0:15:50.080 I wanted to get some perspective on this moment for 0:15:50.240 --> 0:15:54.400 Chairman Powell for the Federal Reserve System, and as we 0:15:54.440 --> 0:15:58.640 saw with the letter last night led by Leguard and Bailey, 0:15:59.280 --> 0:16:03.560 central banker around the world, no one is better qualified 0:16:03.600 --> 0:16:07.200 than Richard Portis. He is at London Business School, but 0:16:07.280 --> 0:16:11.960 that barely describes his contribution to thinking about global and 0:16:12.000 --> 0:16:16.000 transatlantic economics, back to his time as a Rhodes scholar 0:16:16.520 --> 0:16:19.600 long ago and far away to Yale professor. Honored to 0:16:19.600 --> 0:16:23.680 have you with us this morning. I mentioned McCabe McChesney 0:16:23.760 --> 0:16:26.080 Martin in nineteen fifty one. 0:16:26.600 --> 0:16:32.080 Is this moment is seismic? Is nineteen fifty one potentially? 0:16:32.160 --> 0:16:38.680 Quite? Yes, absolutely, this is a major, major attack not 0:16:39.000 --> 0:16:44.760 just on a man of unparalleled integrity in his post, 0:16:45.440 --> 0:16:51.840 but also on the institution, on the FED itself and 0:16:50.880 --> 0:16:56.040 the independence of the FED is many people would say, oh, 0:16:56.240 --> 0:16:59.440 you know, let's not express this too much. I mean, 0:16:59.480 --> 0:17:02.080 maybe if it is two independent, we really ought to 0:17:02.080 --> 0:17:05.560 three think the mandate and so on and so forth. Yes, yes, 0:17:05.640 --> 0:17:11.680 it's worth having a reflection on all that. But this 0:17:11.760 --> 0:17:14.760 is something quite different. This is where the President of 0:17:14.800 --> 0:17:20.160 the United States, through his minions, is seeking to take 0:17:20.200 --> 0:17:24.879 control of monetary policy, and that whatever you think about 0:17:24.880 --> 0:17:29.680 what Defend has done, what might do in future, pressure 0:17:30.359 --> 0:17:31.600 that is unacceptable. 0:17:31.840 --> 0:17:35.399 The key question for me, Professor port is is, Okay, 0:17:35.440 --> 0:17:38.399 we're here and based on what we've seen the last 0:17:38.560 --> 0:17:41.440 X number of years with President Trump, he may get 0:17:41.480 --> 0:17:42.480 his way, et cetera. 0:17:43.480 --> 0:17:44.960 Is it repairable? 0:17:45.280 --> 0:17:50.120 Is your study across your exceptional career, is your study 0:17:50.440 --> 0:17:54.760 that the system and the American system can repair. 0:17:54.760 --> 0:18:00.520 Hurt and harm by one person. I think. 0:18:02.960 --> 0:18:06.159 That is That's a very very good question because it 0:18:06.200 --> 0:18:09.640 goes to the heart of what we mean by trust 0:18:10.080 --> 0:18:16.520 by reputation and how those qualities can be squandered and 0:18:16.600 --> 0:18:22.040 once reputation and trust are imperiled, are damaged. 0:18:22.400 --> 0:18:24.040 They're very, very hard to repair. 0:18:24.920 --> 0:18:29.680 So if the President were to have his way, then 0:18:29.880 --> 0:18:34.080 down the road you would see I think, a real 0:18:34.160 --> 0:18:39.159 deterioration in the in the way that monetary policy is 0:18:39.200 --> 0:18:41.560 run in the United States, and that has implications for 0:18:41.640 --> 0:18:44.359 us over here, for outside of the United States because 0:18:44.440 --> 0:18:49.439 the effects of FED policy on money markets throughout the world. 0:18:50.119 --> 0:18:53.160 Now, Professor I was looking at this unprecedented letter from 0:18:53.280 --> 0:18:56.720 from the ECB, and I just want to read a 0:18:56.760 --> 0:18:59.360 portion of it. Here says we stand in full solidarity 0:18:59.359 --> 0:19:02.040 with the Federal Reserve System and it's Chair Jerome Powell. 0:19:02.280 --> 0:19:04.679 They go on to say that Powell has served with integrity, 0:19:04.760 --> 0:19:08.439 focused on his mandate in an unwavering commitment to the 0:19:08.480 --> 0:19:11.360 public interest. I wonder if this letter at all, well, 0:19:11.440 --> 0:19:13.840 do you think it will sway President Trump to pull 0:19:13.880 --> 0:19:15.560 back a little bit or might not have the opposite 0:19:15.560 --> 0:19:17.520 effect and have him dig in his heels. 0:19:18.800 --> 0:19:22.200 He doesn't care what the foreigners think. That's clear one 0:19:22.200 --> 0:19:24.040 way or not. It doesn't matter what the topic is. 0:19:24.160 --> 0:19:27.800 He still doesn't care what the foreigners think. So certainly 0:19:27.800 --> 0:19:32.719 not on this one. But it may affect views in 0:19:32.760 --> 0:19:35.800 the United States Senate, for example, which is quite important. 0:19:36.760 --> 0:19:40.640 It may affect views in the markets in New York 0:19:40.720 --> 0:19:43.720 and the financial sector in New York, which has been 0:19:43.840 --> 0:19:47.359 very silent. I don't know whether Jamie Diamond talked about 0:19:48.160 --> 0:19:54.280 this issue in his early call today, but he should. 0:19:54.600 --> 0:19:57.159 And where are these where are these as? They're scared? 0:19:57.480 --> 0:20:00.680 They're all scared. They're scared that Trump will take revenge 0:20:00.680 --> 0:20:03.239 against them. That's where we got to. 0:20:03.760 --> 0:20:07.200 What's interesting, though, Professor Portas, is we're seeing blowback from 0:20:07.240 --> 0:20:09.720 within the Republican Party now a number of well, I 0:20:09.760 --> 0:20:12.680 think it's three in counting now a Republican senator saying 0:20:12.680 --> 0:20:15.000 we're not going to vote on a new FED share 0:20:15.240 --> 0:20:19.280 until the legal matter with Powell is settled. Might that 0:20:20.160 --> 0:20:22.760 have a little more weight than this letter you think 0:20:22.760 --> 0:20:23.400 from the ECB. 0:20:24.320 --> 0:20:24.480 Oh? 0:20:24.560 --> 0:20:32.320 Certainly, absolutely, and that that really is a cause for 0:20:32.320 --> 0:20:37.920 for concern for Trump in terms of nominating a new chair, 0:20:38.800 --> 0:20:42.280 in terms of trying to get uh, trying to get 0:20:42.320 --> 0:20:46.919 other seats on the on the board of the FED. 0:20:48.200 --> 0:20:53.080 There the resistance now is much stronger. That said, you 0:20:53.160 --> 0:20:54.800 might think if you were a member of the Federal 0:20:54.800 --> 0:20:59.840 Open Market SWINNY, you might think that you might try 0:21:00.480 --> 0:21:05.120 revenge against you two if you consist of any vote against. 0:21:05.040 --> 0:21:07.359 Richard Porters take at time for one more question. 0:21:07.400 --> 0:21:08.960 Lauren Goodwin's here and we got to get to the 0:21:09.080 --> 0:21:12.280 CPI report, you know, coming up here in twenty minutes, 0:21:12.720 --> 0:21:15.920 Professor port is as simple as I can is the 0:21:15.960 --> 0:21:24.080 Trump moment transportable, translatable to a parliamentary system and a 0:21:24.119 --> 0:21:29.720 prime minister named Farage. Can the reach of Donald Trump 0:21:30.320 --> 0:21:33.240 reach over to a different form of democracy? 0:21:34.320 --> 0:21:38.679 Well, you know, we had a central bank that was 0:21:38.720 --> 0:21:43.040 not independent at all, that took its marching orders from 0:21:43.080 --> 0:21:47.040 the UK Treasury up until the Blair government came in 0:21:47.119 --> 0:21:49.840 nineteen ninety seven, and the first thing that they did 0:21:50.760 --> 0:21:53.040 was established the independence of the Bank of England in 0:21:53.119 --> 0:21:56.439 terms of monetary policy, the very first move that the 0:21:56.480 --> 0:22:01.560 Blair government took, and that has made a remarkable change. 0:22:01.760 --> 0:22:04.359 We had an inflationary boom and at the end of 0:22:04.400 --> 0:22:07.119 the eighties, precisely because the Chancellor of the Excheck of 0:22:07.160 --> 0:22:10.520 the Finance Minister at that time wanted to have expansion 0:22:10.840 --> 0:22:13.560 and so we had a very lose monetary policy and 0:22:13.600 --> 0:22:17.520 guess what, you know, we had this inflationary boom and consequence, 0:22:17.560 --> 0:22:18.400 we're not nice. 0:22:19.040 --> 0:22:21.160 Got to leave it there. Richard porters. Thank you so much, 0:22:21.240 --> 0:22:24.119 really appreciate it. From London Business School today on the 0:22:24.160 --> 0:22:26.959