FED, Charlie Palette, Liz Mccormick discussed on Bloomberg Markets


Very much, Charlie palette at the Bloomberg business flash. Now let's get over to our chief correspondent for global macro markets Liz McCormick joins us to talk about what we're seeing happen in the fixed income on the fixed income side of things. Me and Paul are just dumb equity guys. So it's good to get slowly. Smart person's take. Yeah, please use small words for us. You have a story out today that jobs the jobs data that we see tomorrow is potential to push the fed towards a third jumbo hike. So a third, what? 75 basis point hike. If payrolls beat, right? Right. Even like you saw the ISM numbers today, the sub index unemployment showed it was decently holding in some strength. So if the jobs number comes out, especially if it beats like you said, I mean, the data just seems to be building that shows the fed has room to keep rising. Inflation is still a problem. Powell has said, I think the economy can withstand it. So while we get these numbers that kind of back that up for him, it seems to bode for that them going 75 basis points the next time. So yeah, there's a lot of eyes on payrolls tomorrow. You know, Vince ignore Bloomberg has a call here that basically the market's taken care of itself. It's taken care of inflation. And as a result, the fed should and is likely to pause after this next rate hike and that in and of itself is bullish for risk assets. The market's not sure about that. What do you think? Yeah, yeah, I think the market's in a quandary, right? There are some that we're saying, yeah, that's got to slow down. There's a decent amount that say, hey, the fed can get the funds rate to maybe a little under 4%. And then like Vince says they got to kind of slow down, pause. And then there are others that even our analog I keep bringing her up economics. She says fed goes to 5%. The folks at Bridgewater have said fed goes even higher. So I think it's like, I hate to say it, but the truth is in the data. It does inflation really keep rolling over. Does the economy start to falter or not? There's a lot of data that fed's got to sift through and decide. But there is a lot saying if they do another 75 bps that maybe they have to at least slow down the pace, you know? But we have to see. But what about turning around? Yesterday, master said, you know what, in my opinion, we're not going to cut in 2023. And that was kind of the fed's message checks and whole that to the market, like, hey guys, seriously, we're not going to cut next year. You are going to keep raising and then we're going to wait until inflation comes down. Kashkari has been extremely hawkish. And then yesterday, rich Miller had a piece out saying, Powell is now aiming for something much more painful for the economy. Somebody wrote in to me and said, the idea that one of the most powerful arms of the U.S. government is purposely aiming for pain. They're trying to put American people out of work. They're trying to raise unemployment is absolutely insane. If you see jobs starting to miss, if you see unemployment starting to go to 5%, don't they have to cut isn't the political pressure too strong? Well, you know, that's what Elizabeth Warren would say. She's been out saying, you know, we're worried about the fed is going to crush the economy, jobs. That's terrible. But the other argument, and I have to say, I kind of lean to that is what Powell saying is, you know, kind of inflation is a, let's call it a cancer attacks on everyone that if that lasts and it is strong, that's worse than sadly some people losing their jobs. So it's a bit of a push pull that the fed, of course, would love a soft landing, but I think, you know, through the months palace kind of moves away from that. Well, Liz, what's the idea? What's the consensus on how great a tool monetary policy is to fight supply side driven inflation? Well, of course, that's a lot of people say, not a good tool at all. So then what's the point? Well, the fed will say, well, if we slow down, we can affect what we can. That's demand, right? And let's say the supply stuff they have limited control over, fed is emitted that. But if they slow down the man, they'll slow what they can. So yeah, so if a supply issues and the sadly with the war and the energy crisis in Europe, if all that energy sector, all that remains sticky with inflation, then the fed may not be able to bring down that arm, but maybe sadly, maybe it's going to crush the part that they can, which is demanded from the U.S. consumer. So I guess the feeling is they've got to do what they can. But you're right. I mean, and I think they've admitted that. They can't control everything, but I think if they sit on their hands, they're in big trouble. There's enough of this macro stuff. I'm looking at the global ag here down basically 20% from its highs, right? And this month, we're just starting September today, Paul. Huge month for issuance. What's going on on the ground in the real financing markets? Well, first of all, companies need money, right? And summertime is usually a lull for issuance, not a good time. So they tend to come in after the summer's over. So they need some funding. And as bad as things are and it's pretty brutal where the ag has been, like you said, if rates are only going higher, you would kind of want to get now. Yes, get some fixed rates, three and a half may not be as bad as four and a half in a year. I don't know where it's going, but I think that's the thing. They need a certain amount of financing. It looks like rates are just at least for a while going nowhere, but up. So try to get in there when you can. All right, Liz, good stuff. As always, Liz McCormack chief correspondent, global macro markets for Bloomberg news. Matt, I'm looking at our Bloomberg video feed, it looks they are setting up Bloomberg businessweek at flushing meadow to U.S. tennis. These junkets, you know? Well, you could tear a master is the best at doing that. She is. She can interview anybody anywhere anytime, she was recently down at the Panama Canal of all places. And now wherever the cool people are, wherever the beautiful people are, that's where they send Carol and Tim. Well, and this is the place

Coming up next