Cameron, FED, Bloomberg discussed on Bloomberg Surveillance


Com. It is always good, folks, to speak, to Cameron Christ. He is what we call a global macro strategist. He has a new title Paul. He's chief of ambiguity. Okay, here at nailed it. Bloomberg and our ambiguity officer shows up with us. I've never seen this. I just ran by Chanel basic our chief financial correspondent in the halls. Okay, excuse me. Up in the food court. I should say Cameron. And next to the cheez its. And Cameron, I'm sorry. The, from a microeconomic standpoint, the ambiguity of the macro picture now, I've never seen. Do you feel that way? Yeah, I mean, clearly, it almost feels like we're in sort of a wile E coyote type situation. On the Nobel Prize. Yeah, so global central banks have had in particular of hiked rates, a heck of a lot over the last year. History sort of common sense dictates that that should eventually have a significant impact on the economy. But to date, it doesn't appear to be playing out quite as we thought. So in a sense, it almost feels like we're the coyote, maybe he's just still on the cliff. Maybe he stepped off the cliff, but he hasn't yet tumbled down to the canyon below. And we're kind of in us and the central banks or in sort of data watching mode and sort of in football terms kind of read and react. So Cameron, just looking at the eco data today, I'm looking at my eco go screen on the Bloomberg terminal. I mean, I've got core PCE higher than expected. Yet, I've got a strong labor market. If I'm chairman pal, I can sit back and say, hire for longer, no problem, right? Yeah, I mean, that seems to be the risk management philosophy of the fed. I mean, I think so many people who are sort of my age, I'm kind of half a century old, and younger have never lived in a world, professionally at least where the fed viewed higher inflation is the primary risk. It's always been growth that's too low inflation that's too low. And so risk management considerations mandated airing on the side of easy policy. That's no longer the case. And so risk management dictates erring on the side of restrictive policy and that is a difficult sea change to accept if you sort of build an investment strategy in predicated on a never ending flow of easy money. But the easy one is gone and this is the real, I think, for all of our listeners across this nation, this is the heart of the matter. There's enough gray hair between the three of us to remember when interest rates were tangible and fabozzi like normal. Okay, great. We had a 13 year interregnum. Is that correct? Yes. Yeah, thank you. Neil, how you guys are killing Cameron's kill with me. I mean, I can think that he can pronounce it's even better. But Cameron the point is the free lunch is over. It's not money for nothing anymore. What do you perceive will be our macro behavior given that it's not a Dire Straits economy anymore? Well, ultimately, it should be a higher level of risk premium across across asset markets. There is an important step to take between now and then, however, which is that the fed itself, I think, has to acknowledge that the world has changed. And for all the discussion of higher for longer, ultimately, they haven't done that yet because the dot plot still has the long-term dot at two and a half percent. The implication being that our star is sort of mythical neutral real interest rate is still only 50 basis points. Back pre GFC in the 90s even that was thought to be two and a half percent, a neutral real interest rate. So I think one of the real key things to watch moving forward is any discussion about whether that are star level, whether the long-term neutral rate, policy rate has shifted higher. And I think the longer that the economy remains resilient in the face of what the models would say is extraordinarily restrictive policy, the more likely it is that they have to acknowledge that maybe neutral is higher than they thought it was. Maybe 6 to 9 months ago, Danielle dimartino booth from quill intelligence said to us that one of the agenda items from mister Powell is to permanently take out the fed put the pal put. Do you think that's that was a focus of fed chairman pal in his fed and if so, have they achieved that? What do they want to permanently remove it? I think is up for debate. I mean, certainly tactically they've wanted to remove it because they've been trying to engender tighter financial conditions. Which again goes back to this idea of that's something that most people have never seen. Prior to last year, the fed actively trying to engineer tighter financial conditions. Whether that proved to be the case in the ultimate fullness of time, 5, ten years from now, on the I think it's too early to say. And to some extent, dictate is going to be dictated by again. The level of neutrality and how the market trades risk premia around whatever the new normal is from entrepreneurs. Cameron, thank you so much, Kim and Christ, Bloomberg global. Macro strategists with our news in New York City here's Michael

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