Garfield Reynolds, FED, Bloomberg discussed on Biz 1190 Overnight featuring Bloomberg Radio
Inflation will become the problem will they have been simply wrong in the ceases. Let's bring an mlive editor Garfield Reynolds. He leads our live markets coverage. It's cooked to see you this morning. Garfield we got to start with that CPI figure Barclays is saying that may inflation figure is soft as a feather. But of course, CPI is not necessarily the feds preferred measure for inflation. And in fact, you take a look at this chart pulled up on the GT function on your Bloomberg. If you have one, you can see that PC has actually been firming lately versus that CPI number. So I guess my question to you is, is this going to give the fed pause? When it comes to it's expected monetary policy path. Is it going to potentially give cover for a rate cut? Well trae says a very interesting question, because it's not at all clear that Powell does want cover for Kat. A lot of analysts and investors have been saying that in fact, if there is going to be a right cut, then that's going to play off of a further breakdown in the trade talks between the US and China. When you look at that shot that you showed just then now and I've seen quite a few nights out. Also about the CPI talking about the idea that the although the pre was week. There was nothing in it to really kill off house thesis, which has been out there, which is that the slowdown in inflation has been transitory and therefore, they can be patient. His patients has shaded towards the idea that rate cuts could be needed. But I think the fed in general has been considerably less eager to rush towards rate cuts than some of the trade is out there who are busy. One thing is clear is that inflation expectations have dropped us. We put together another GT for that additional perspective at our clients can access GT go on the Bloomberg story of those five year break even hovering at about one point five three percent. B M O's looking for a twenty-five bit cuts from the FOMC Pacific investment management is among those saying, half point cut is July as possible. What do you think is likely? What I think is likely in July. I actually think this quite a decent chance of the fate is going to disappoint traders and, and, and try and hold the line. Because once they start the Cup. They're going to have a great deal of difficulty not then following with a series of cuts, the difficulty is that they've already shown that they have a great deal of, of a great problem holding off, when the markets screaming to them, you need to shift, your your policy stance. As far as the break evens that you're talking about a big factor. There is what's going on with crude oil. Crude oil plays a very strong role in inflation expectations. And we saw crew just crash again, either night, and that seems something that's going to continue. He you have your prime suspect for the idea that global demand is weakening when you have a commodity that is both extremely important for global demand. It's also being manipulated by supply from some of its biggest produces, and yet it keeps on crashing Loa that's his demand that there is weak, which is part of, what's feeding, the, the global move towards easier central Bank policy, and it's also going to drive down and keep driving down those US inflation, expectations, and that's going to make it harder for the fed to avoid cutting rights. Garfield you are, of course, in Sydney, the land down under and also the land of sub one percent yields on three here bonds. Now, we also have the long end of the j gbi also trending ever lower. What are you seeing in the market? In terms of what is driving. Those bond yields further down. Well, what's driving this bond yields fo the down is that central banks are being driven by their own logic to, to cut rights? Yeah, the for example, we had what in even a few months ago would have been regarded as a fairly decent result in, in the job site. That came out jobs rose more than expected. And there was some upward revisions, but the unemployment rate stayed stubbornly at five point two percent, which is also still a fairly good level. However, the Reserve Bank has made it clear that they think that unemployment can go significantly lower from here, and that they will be willing to use the only real tool. They have for the moment interest rate cuts to take it there. So we've got a better than sixty percent chance of a right, cut next month and in Japan, the, the, the way that everybody's moving towards talking about right cuts. That's got people bidding on rate cuts in Japan. Even though the rights there are negative and that's because if they don't move to do that. The game is going to rise too far. And that's not what the Bank of Japan, once the CD, be quite happy with the yen staying at least somewhat close to one hundred and ten per dollar. So as everything else moves down, and the yen rate starts to go, lower the B O J's is forced into into action. Yeah. Rate cuts everywhere. It seems like all right. Mlive editor Garfield Reynolds in Sydney, for us. Thank you so much. Now still ahead. The latest on the situation in Hong Kong as lawmakers again..