New York, Iran, Bloomberg discussed on Bloomberg Businessweek

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Two days Wednesday and Thursday crude oil in New York had been higher earlier this after Iran threatened to retaliate over a cease to crude tanker right now though proved giving back a little bit in the electronic session we're trading fifty seven sixty you're caught up on markets let's get back to Bloomberg businessweek you're listening to Bloomberg businessweek with Carol Messer and Jason Kelly on Bloomberg radio let's check in with the business week economics team now Kathleen Hays global economics and policy editor for Bloomberg and correct it on a chief US economist for Bloomberg economics both here with us in our Bloomberg interactive brokers studio hi team hello why was it Monday day after a holiday yeah really excited to have you here in the studio so what's going on in the forever yeah let's stop with red bulls all around echo anyway yes the bond market is interesting day I think I I just think it again it's became off of a long week an exciting Friday or long holiday week I should save the the jobs report what does it mean for the fed and then in the initial reaction is oh my gosh they're not gonna cut fifty basis points when will they cut it cetera and I think as stocks pull back today you see we just because he the police along and trading off that a bit because the ten years flout the thirty years of about a half a point stocks aren't usually down but they're definitely down across the board and you know we can it now mental J. Pulgas a strong signals on Wednesday we hope when he starts his two day semi annual testimony to Congress on the economy and monetary policy I think you I'm reading a lot of stories today the second thinking okay sell bonds first and then say now wait a minute the main reason the fed is going to still cut rates well there's two or three of them and one is the yield curve is still flat bloomer economics has been stressing out number two you still see signs that this global that the trade war is heard in the global economy and this news from B. A. S. F. right the yeah you know the world's biggest chemical maker saying that their earnings before interest taxes and special items lose but just thirty percent lower this year than in twenty eighteen mainly due to trade conflicts that's just one specific company but right I think that sends a significant number to the ECB to the fed that is they're not just looking at their own economies what's happening there looking at these global forces and that's a big reason for for them to say go along with jumbled from St Louis fed insurance cuts working on where you guys because I was thinking us stronger labor for Carl's kind of insane right well this is that the certainly the jobs report confirms that what we saw in may was just noise wasn't the beginning of a meaningful retrenchment among hiring managers as they face a crisis of confidence so may was the fluke exactly may was a fluke and the fact that everything out rebounded so swiftly in the June in fact the payroll number was above even the high end of the forecast range of all of the economist is submitted forecaster Bloomberg so what this tells us that the economy some pretty sound footing absolutely were rob moderating from where we were last year so we don't ship from three percent down to something in the low two percent territory but we're not falling off a cliff that was a signal from the June jobs report if we're not falling off a cliff then that means that the fed should not be racing towards the lower interest rates and by racing I mean moving in fifty basis point increments for example our view that this past Corey study member they have nine Aeros left in the quiver right right so way to go into and suddenly you you know you're really facing lead emanation some complicated math thank you economics to but they do need to save ammunition for the next economic downturn you cut enough to an inverted yield curve which looking where ten year yields are right around two percent that means probably fifty basis points of cuts maybe seventy five in total for this whole insurance round of cuts but that's going to mean they move in baby steps so twenty five bit increments does that mean they move in July well no I just want to I want to cook two steps one out because I'm I'm not sure if it's going to be July or not the G. powers just gonna lay that out very clearly in his blue prints when he speaks okay the senator from New Jersey has the floor the other senator now what I would like to add is I think it's an interesting idea that Carl his team we've been talking about that they will move one reasons move in September is because the un wind of the balance sheet will be finished by then and I'm wanting the balance sheet is on all other things being equal is tightening cutting rates is easing and if I remember my interview Westerville bill Dudley former prison York fed I think was in January of this year bill the time what was saying it was so what about the dots and how can you forecast rate cuts if that we got to that point this year and still be in wanting the balance sheet will of course you wouldn't be cutting rates and on wanting the balance sheet the same times I think there's a lot of logic for that I think the risk for the fed because it would just the gate well yeah yeah I think what order maybe a sense opposite signals now what but but more recently I think bill is argued in others that is not a policy tool ignore that balance sheet on white it's almost over its mode it's all about rate cuts but I think if you're somebody really worried about what could happen to the to the US economy in the context of the global economy and you really want to keep the expansion going which Jay Powell said over and over then it argues I would say for not waiting until September do something now send a message do something that shows the fed is determined to keep to do what it says right I think that that means the debate at the July meeting is going to be an intense one so Carl you meet you mentioned the blueprint that he's gonna so effectively lay out up on Capitol Hill what is going to be the tone when he sits before lawmakers youth while the tone is going to be that the the jobs report tell us that the economy some pretty sound footing things are slowing as I mentioned but not rolling off the cliff also what uncertainty is reduced given the the positive outcome of the G. twenty summit in Osaka until one of the reasons the fed had cited for reasons to cut I have actually diminished since he last spoken so that would augur for waiting longer but then again just to get the political pressure off of his back in the Twitter pressure off of his back that maybe they will just go in July and you know I I I it in my heart of hearts I think that they'll try to string the markets along to September so you say yes it's coming but it's not coming in July for this technical reason which Kathleen laid out that being said if they want to go in July they can go in July right but the issue is they don't want to fall down the slippery slope here in the us to come to market feeding frenzy with market thing we won fifty in one move we want seventy five deaths by year end and you know this goes back to the errors in the quiver argument they can't just **** nilly be cutting rates they don't have as much leeway as they did during prior episodes of insurance cuts where they had literally hundreds of basis points of cuts that they could administer the to the economy of a recession did come about and let's remember that we did already get the monetary policy report summary on Friday so we know the feds bottom line it got lost I think in the shuffle the jobs report because the fed up for years waited until the day of the first testimony but in the last year or two they started releasing at the Friday before I think they wanna make sure people Congress actually read it before the fed chair goes to testify data for the second quarter suggest a moderation GDP growth despite a pickup in consumption as the contributions from net exports of inventories rivers and the impetus from business investment Wayne's further so that's that's already out there and our Bloomberg eco team sees that as a sign they're leaving clearly leaving the door open to rate cuts not saying when they're going to walk through it or how big the steps are going to be but still keeping that on the day not if it's when at this point really this is just laying out the the again the blueprints do you start in July due to start in September but then managing the market expectations that is not gonna be a huge move all right as woke up and I know nine Lee I really appreciate that get on our TVS account was a Bloomberg economics along with Kathleen Hays global economics and policy editor at Bloomberg news both in our studio indeed as his father he's going.

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