17 Burst results for "Richard Clare"
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Deeper cuts next year without a recession and that's the critical that's not built in across markets i want to get the money question out of the way right away a ceo of a major two million employee company in america called walmart yesterday brought up a d -word deflation seared into the fabric of Cambridge oxford in the london school of economics is a study of british deflation of the 30s and 40s america's has never faced that have they they haven't and we've had japan recently and the problem with deflation is it discourages people from buying today however i want to stress the u .s. is deflation in certain products food being the primary example and that's why mo walmart we decided it we don't have general deflation and i doubt we have can general deflation and i look at the general deflation question is a vector of disinflation in place clearly we see that what is your optimism of getting back to john williams 2 .0 percent for richard clare's two -point experts and i think which it is a great is it is more likely to be right than john i think we're going to get stuck in the high twos and the fed is going to have to make a very difficult decision does it live with inflation higher than target because the target itself is too low here the the full conversation on the latest edition of the bloomberg surveillance podcast subscribe on apple find anywhere else you get your podcast plus listen anytime on the bloomberg business app and bloomberg huh this is caroline interactive brokers charges usd margin loan rates from 5 .83 to 6 .83 percent rated the lowest margin fees by stockbrokers dot com their clients can also earn extra income by lending their fully paid shares of stock join interactive to brokers clients from two hundred -plus countries and territories to invest in stocks options futures funds and bonds on 150 global markets rate subject to change learn more at ibkr com slash compare download the drafting sports book at now and use code i hart new customers can get one hundred fifty instantly and bonus bets for betting just five on basketball only on draft king sports book with code i heart the crown is yours gambling problem call one eight hundred gambler or visit one hundred gambler dot net twenty one and over age varies by jurisdiction void in ontario bonus bets expire one hundred sixty eight hours after
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"In America called Walmart yesterday brought up a D word, deflation, seared into the fabric of Cambridge, Oxford, and the London School of Economics as a study of British deflation of the thirties and forties. America's never faced that, have they? They haven't. And we've had Japan recently. And the problem with deflation is it discourages people from buying today. However, I want to stress the US is deflation in certain products, food being the primary example. And that's why Walmart really cited it. We don't have general deflation. And I doubt we can have general deflation. I mean, I look at the general deflation question and it is a factor of disinflation in place. Clearly, we see that. What is your optimism of getting back John to Williams 2 .0 % or Richard Clared as 2 .X %? I think Richard is more likely to be right than John. I think we're going to get stuck in the high twos and the Fed going is to have to make a very difficult decision. Does it live with inflation higher than target? But the target itself is too low. Hear the full conversation on the latest edition of the Bloomberg surveillance podcast. Subscribe on Apple, Spotify and anywhere else you get your podcasts. Plus, listen anytime on the Bloomberg business app and Bloomberg .com. Bloomberg. financial advisors are you looking to add or switch custodians are you going independent interactive brokers provides lowest cost trading and turnkey custody solutions for all size firms trade globally from a single integrated master account with no ticket charges, no custody fees, no minimums and no tech platform or reporting fees. Plus, IBKR has no advisory team or prop trading group to compete with you for your clients switch to the custody solutions that work for you at IBKR .com slash RIA. Download the sports book app now and use code I heart new customers can get 150 instantly and bonus bets betting for just five on basketball. Only on DraftKings sports book with code I heart. The crown
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Not just a fiscal problem. We have a personal finance problem. I want to ask you as former vice chairman of JPMorgan if diamonds on target to do 5 days of work week here and lose work from home, but forget about that. This is too important. Do we lose a 2% line? John Taylor of Stanford is adamant. There's efficacy to keeping those rules based structures lower and lower. Do we have to reset 2% to a higher level? I don't think so it's not obvious to me what would be gained at this moment by announcing that we're going to change our definition of where fever lies and we're going to decide that actually you can have a higher than 98.6% fever temperature and it's going to be fine. Stanford economics just like ours through there. Those guys are nice. Thanks for this. Just wonderful. John lives over there. It's always great. With a different view charm on things, we're going to catch up with Muhammad Ali and tomorrow, who I know has a different view on this situation. Let's put it. Well, within the publishing area, and of course, everyone's publishing here, folks, as we go into these meetings, Richard Clare, dean of Columbia economics, as a former vice chairman recent, even suggested not that there would be a policy as doctor Lipsky talks about to move away from 2%, but maybe the end result would we would be higher than a 2% set. There is this idea and some people, the cynical ones amongst us believe that this is something. I might be speaking. There are some people out there who believe that the fed may well want to go in this direction, but now it's not the time. Now it's not the time to make that shift. There is a tension right now between being aggressive to bring inflation down and a tangible boy sooner and having the patience to wait knowing that if inflation ends up at 3%, it's not the end of the world. Okay, so we can live with that because a temperature at 99 isn't that really a temperature if you're otherwise good enough. The email who's playing drums for Jerome and the dot plots. Who is that? Schools me. It looks like Mick Fleetwood. This goes behind the drums. Yeah, it's for now. He's a little bit academy. He was like scary good years ago. I don't believe you. He's like a Mick Fleetwood thing. He's sitting low on the chair. It's a symbol. He's the singer. Rich is a singer. And the guitarist. Exactly. So you want to sit. Do that. No, no, I'm not going to sit and I'll be placed drums like a Democrat. That's all there is to it. What does that mean? What does that mean? Lipska got it. Why is that Beyoncé? A city is this is Virginia lottery recording session. We are rolling whenever you're ready, Sam. Coming, this Tuesday. The Virginia lottery is. Three. Bar Virginia lottery has newly brewed and fun to do. Try four. We have a rotating selection of scratches, online games, Quentin play, actually just read option one. Virginia lottery new games every Tuesday? Perfect. For more information, visit VA lottery dot com slash Tuesday. Parks, it is streets at its schools above all. It is the people that live there and the people that work there. Bogotá had a real issue with their parks. They were dark. They were unsafe
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"The fed wants to see real yield higher, really to make sure inflation is down and stays down for a while. The fed is hawkish, but they're sort of reiterating a message that the markets are any kind of gotten comfortable with. There are a lot of structural forces at play that are not going to bring us back to 0% or almost no inflation. They're going to be very careful about signaling that they are ready to pause and cut before they know it's the right path. What the fed does matters and it matters a lot for the global economy. This is Bloomberg surveillance with Tom Keene, Jonathan farrow, and Lisa abramo. The Federal Reserve decision coming up this afternoon. Life from New York City this morning. Good morning, good morning, for our audience worldwide on TV and radio. This is Bloomberg surveillance alongside Tom keen and Lisa branded some Jonathan pharaoh features a negative about a third of 1% on the S&P TK as we kick off the month of February. Are we looking for 25 from this Federal Reserve? Well, it's a big mystery this afternoon. We'll kick it off with Richard Clare to some other great guess. I'm really looking forward to talking to Priya mizrahi with a great inversion call to reinvention. We saw yesterday under 70 beats right now negative 71 beeps. And I think it's great set of guests to set up the optionality now, but what will chairman Powell say about his choices his degrees of freedom out to in three meetings out? That's a mystery. And Lisa, will you push back against the easing of financial conditions we've seen over the last month? And perhaps the way he could do that is to talk about indicators that he's watching that show greater inflation than others. There was a story about super core inflation. And this is the new hot metric that the fed is looking at that strips out a couple of things that are actually going down and looks a little bit hotter than others. So there are ways that they could try to tweak it, but will the markets actually listen. Apollo's tourist and slack, who writes the following this morning, he's just published, he says, Tom, it is continuing to look like a soft landing. He said that ECI wage inflation is coming down. The consensus is expecting non farm payrolls on Friday to come in at 190,000, and he said none of the indicators, the mbe R recession committee normally looks at suggests that we are in a recession at the moment. Yeah, and what's so important here, John, is the basic idea of what is the history of disinflation and is a generalization it's largely what's called stochastic, which is when it moves, it keeps moving lower, and that's how you get to the repeated 3% inflation caused by some respected houses. The problem you've got is that the MBR might look at one thing after the fact to look back and say yes, that's what it was. The market's looking at another. Yield curve inversion, PMI sub 50. That's the tug of war right now. So what are the specific indicators that people are going to get a sense of to know that they're right or wrong? Because right now people have a lot of conviction in their bet against the fed. And to me, the employment cost index yesterday was telling. The fact that markets moved so much to this idea that the employment costs weren't going up as quickly as they previously thought perhaps points to the power of jobs. How would the S&P yesterday that's for sure the S&P 500 closing higher by almost 1.5%, this morning, good morning to you. Equity futures, look a little something like this. We're down a third of 1% on a S&P, yields are coming in a couple of basis points on a ten year three 48 64 and Euro dollar firmer by a quarter of 1% at one zero 8 91. Looking for the fed to go 25 potentially today. So maybe they surprise and go 50, but we're looking for the ECB to go 50 tomorrow. And the combination, I think, is important, John. It's a statement by central bankers of what we're going to hear. And the one common feature here is let's go Latin, ex ante ex post by definition thereafter the fact. And I think chairman Powell going back to Jackson hole in an 8 minute speech. I think they're switching your blanket. I don't know if you got the whole speech at that time, John, but this is called that morning. He's back. What do you mean he's back? We're not ready. But the answer is, if it's an 8 minute press conference, it's all going to be the same, which is going to say we have to wait for the data, including jobs day on Friday. Can you imagine if jobs day shows disinflation? Trey. You do what you always do when we're outside in the cult. You still the heater. Lisa can confirm that bramo TK always steals the heater. Never mind the blanket. You mean like the two heaters. Moves it towards him. Stanley Fisher, IMF China, I believe still now at black rock, professor Fisher taught me that trick. Stanley Fisher needs the heat. I don't post it and had a unique view on it. I just wanted to do a short sleeved show. There's photos to prove it. 38° weather. Today here's what we're looking at. ISM manufacturing data comes out for the month of January and then jolts job openings for December. Manufacturing has been bleeding softer for potentially the 5th consecutive read. Do we start to see an ongoing weakening and ongoing deepening in the contraction there? But the jobs opening, the job openings is what I'm watching. Do you see a softening in the labor market? It starts to come through in a leading indicator, not a lagging one. At 2 p.m., we get the FOMC rate decision followed by a two 30 p.m. press conference by fed chair Jay Powell. We will be speaking with some incredible guests, including fed vice chair, Richard clarita, Priya miser, we've been talking about with the yield curve inversion discussion Diane swank of KPMG and Greg Davis of the Vanguard group. And then aftermarket met a reports earnings. To me, this is going to take on a new importance, particularly because it builds on what we saw from snap. This concern about the first negative revenue growth that we've seen in snap's history. Do we see meta struggle with some of the same issues John and how much is this a read on the broader economy, with respect to ad spending versus an idiosyncratic model that as you've said, hasn't really faced this kind of cyclical downturn for its industry? Is it a company problem? An industry problem, or an economy problem, and I think a lot of people think it's definitely one. It's definitely two, and it's probably three as well, Tom, as we look for economic growth to soften through the rest of this year. Well, the real growth is going to be something that's going to soften through the year. I think everyone agrees on that. That's where we talked John about this domestic final sales, which takes a lot of the trade noise out in the inventory dynamics out. But even if the inflation comes down, that gives you a nominal GDP to keep it going. Does Europe have that same animal spirit that same nominal GDP? Let's keep this conversation going. Joining us now. Christian Milligan, the managing director for portfolio strategy over at Goldman Sachs. Christian, a simple one for you. Are you expecting chairman power to deliver a little bit of pushback later on this afternoon? Yeah, I mean, this is a good question. I think you mentioned it earlier already. It feels like the data has been quite supportive and you're making progress. I think the wage inflation is coming in. The services inflation is coming in. I think you are on track for a soft landing. Certainly markets are shifting in this direction. So it seems to be like everything is on track. So we expect him to reiterate the message he has given before. We expect three more 25 basis point hikes and probably a relatively balanced meeting. You mentioned earlier to me, the macro data would be much more important. I think the central banks are probably a bit in state of course mode. Christian, we talked to the head of the Norwegian sovereign wealth fund yesterday who's got an immense challenge moving the needle because of his mass, his size. Many of us don't have that problem. Do we want to be index based or more choosy, skew to a lower R squared, more actively managed? Listen, I think, as you know, in the last cycle, it was fine to be an indie says. I think the market kept weights when you're favor, both in global indices with the U.S. being the largest market and within the U.S. with tech being the largest weight. And what we've been saying for some time is that in the next few
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Landing. Do you agree or do you think that you're going to hear pushback today from the fed about the rally? Well, you know, it is a balancing act. And it's a balancing act. And I think the way that the chair and the more hawkish members of the committee were assessing that balance throughout most of the summer in the fall was to push back against an easing of financial conditions. I think we'll still see that today in the press conference, but there may be some nuance to the chairs message. And again, I'm taking some signal from what we heard at brookings a couple of weeks ago. Richard, how do you actually do the dots? Is it like a Powerball ticket, where you do a quick pick or you actually go in and like, I mean, how do you actually report your dots to the chairman? Is it a piece of paper? It's a form, the staff puts together it's an electronic form that you fill out. And I think with a 5 year lag, those are released freedom of information so you can see those. Yes, no. It's not a slip of paper in a top hat. No, it's a form that you fill out. And also officials are able for each of the questions to give a detailed text answer, not just in numbers, so people sometimes really text within it seriously. Yeah, oh yeah, sometimes have you ever said what was written? Well, for example, you might get a question, what does GDP growth next year? You'll write that down, and then there's a little box where you can comment. Thank you. This was very insightful too. It was. Rich, I wanted to finish on the human element here. Can you speak to that? Do you think there is a side of this committee that feels somewhat scarred by what's happened in the last 12 months, and it will shape their approach as they start to see evidence that inflation is starting to fade. Do you think it will make them a little bit more nervous about backing away too soon? Because of recent experience. I think the real issue for the committee and for those of us like myself and my academic work who worked on forward looking monetary policy forward looking monetary policy makes sense because of the lags, but it's more challenging to pull off when your forecaster not are not very good. There's some big Vincent big changes in the economy because of the pandemic. So what I do think, John, is that what it does mean is this committee at the margin is going to be less forecast based and really more focusing decisions on things like a pause or an ultimate easing on what they're actually seeing in the hard inflation data. To their credit, the financial markets at least tend to believe that the fed is going to do what it takes as the share set at Jackson hole inflation expectations are well anchored as you move out several years. And so that's certainly a good sign. But yes, I do think that at the margin probably less based on their own forecast and more based on what they're seeing in the data. And of course, what we've been getting on the CPI the last two prints makes them feel better about that. Well, we can talk about that tension over rate cuts in the back end of next year as well. Just a moment, Richard clarity there. Formerly the Federal Reserve term. When I was valuable things to do on a Bloomberg seriously, I mean, I'm busting Richard Clare's chopstick. You think, looking at mister bullard's in the cafeteria at the eccles building, look at you. But one of the most powerful things you can do is go dots go and the terminal. Yeah. And click through the meetings from, say, 18 months ago. And how things have developed. Well, that's the media line developed. And my question, you know, with great respect to Richard Claire and Bill Dudley and the rest. If the dots went away tomorrow, would anything change for this Federal Reserve? I think with the dialysis of a very important tool to signal, the unwillingness to count interest rates next year against a market pricing interest rate cuts next year. And later, it's going to be interested to see what that looks like today. If indeed that pushback continues and whether this market responds to that pushback if it does develop. That's the credibility issue. Does the fed have the credibility to say, we're still not going to cut and will the market actually listen because the market is pricing and cuts they have repeatedly posting cuts, even as the fed continues to push back. You tell them in the brembo timeout chair. Oh, she is not happy. She's not happy with you. I will speak for myself. You two you. If you don't want to. There's somebody on there. There's somebody on the committee doing a Powerball quick pick with a dice. I think what rich shot to say then about risk management into next year is really important. I'm going to continue that conversation with Priya misra of TD, la from New York. This is Bloomberg. Markets, headlines, and breaking news 24 hours a day. At Bloomberg dot com, the Bloomberg business app and at Bloomberg quick tape. This is a Bloomberg business flash. Songs limberg world, Hank waters, I'm Charlie pallet we are 15 minutes away from the latest step OMC decision just about 45 minutes away from the news conference with fed chair Jay Powell. Michael gapen is head of U.S. economics at B of a securities
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"It is a different fed day. It is Bloomberg surveillance, and yes, we'll be here this afternoon at 2 p.m., but we have been distracted in the last 48 hours by other issues in particularly all of this issue about cryptocurrency in exchanges. Lisa Brown was in Tom Keane, mister farrow's in preparation for his 9 o'clock opera that he will do later. I think he needs to do an update. Opera. Did you say opera? Yes. So he is going to be mandated to sing. Yeah, well, it's happened before. Use the beverage in his hand at a watching a football game. Lisa, we got to bring an update here on crypto. What we've learned today, and this is very important folks. And it sort of goes to mister Musk as well. Twitter spaces is how you communicate now if you're in modest crisis binance in the last couple hour folks is used Twitter space or spaces. To communicate. Yeah, how do you address fascinating about a broad base of investors at scale that range from institutions to individuals? The fallout is unclear. Peter scher was saying the Lehman moment was not a moment. It was a cascade of events that transpired over time. It will take time to understand the full fallout here. The Twitter space. I think it's new. This is something original. It happened this morning. No, I have no clue what it is, but there it was. And so that's where we are. Right now, they're not going to use Twitter space as this afternoon for the press conference. We will wait for sharp questioning, always for Michael McKee, headed our economics and policy international. Mister mckey, I want you to give away what the question is today. But what's the greatest mystery we need to ask of mister Powell? Oh, probably whether he's favoring Morocco or France today. And why they chose to schedule a fed meeting on the day of a World Cup semifinal. That's key for a lot of people I know in the surveillance in the surveillance. But for those few people who are in the financial markets, they kind of want to know at this point where we are and where we're going in the sense that we know that they're going to do 50 basis points today and we know they're going to warn their continuing to raise rates and they'll hold them at a high level. But what does that exactly mean? Does that mean 25 basis points at the next meeting? 25 more, is there a chance that they cut rates in 2023 if we see inflation continue to fall in the same way that it has or do they want to warn people we're not going to do anything until the end of 2023 to keep financial markets from loosening even more. So those are kind of, I think the front and center questions for the chairman today. Mike, how concerned our fed officials from your vantage point about the fact that we have gotten looser financial conditions over the past few weeks? I think the looser they get, the more concerned they will be, they know that the combination of good news in terms of inflation, which is what they're looking for. And the fact that the fed's getting close to the end here are going to create these conditions. The question is, how far did the conditions go? And can the fed, particularly Jay Powell, put a floor under that by verbally job owning Wall Street and suggesting, don't get carried away. Michael, one final question. And maybe it's with the inflation shift that we saw yesterday in the drama of good markets. Can you define cumulative? I would predict he may actually talk about that more today now that it's going in his direction. When they say cumulative as vice chairman brainard has, what exactly does that mean? Well, that means that they have been getting ever tighter and so rates are rising ever more across the economy, but as we know, long and variable lags yada yada yada. So that's going to hit the economy at some point in 2023. And it's going to be an accumulation of all these interest rate increases over time. So how does that play out in terms of discouraging additional borrowing? That's what the fed is going to try to guesstimate. They don't really know, but then you throw in on top of that. The fact that our neighbors to the north and the BOE and the ECB are all raising rates as well. And liquidity is a global thing. So there is a cumulative impact on the overall economy that's hard to measure, but they know it's there. Okay, Michael McKeon thank you so much. And of course, he will join us at the 2 o'clock hour along with Richard Clare to the former vice chairman of the fed. We are honored to bring a torsten slot for years at Deutsche Bank and now chief economist at Apollo management to brief this morning, as we said, to find cumulative, let's define faster. That's a lead note. David Mel passed out the World Bank when he was at bear Stearns. Love to use that word as a calculus substitution. What is faster mean as we look at the inflation continuum right now? So, of course, what's very important is, as you just talked about, the interest rates have already gone up. And the cumulative effects are beginning to show most importantly in the interest rate sensitive components of GDP. We are seeing a slowdown in housing. We're seeing a slowdown in autos. Because those are the sectors that require financing. So at the moment, the good spot of the economy, housing all those durable goods, washer dryers, is slowing down. It's a service sector that the fed would like to see slow down at this point. You said that it's too soon to call the all clear that we're actually on some sort of disinflationary trend. But you also have been talking about how there is this strong year over year comparison effect that is taking effect and that is going to drive inflation lower. So how should investors look at this? Are we heading into the same era that we
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"The S&P with the fed in focus, as for what to expect from fed chair Jay Powell at the news conference, Richard Clara is with pimco and a former fed vice chair he was interviewed moments ago right here on Bloomberg radio. He has to restate what he did at Jackson hole or emphasize it that they will keep at it till the job is done. And at the Jane family institute, a senior fellow Claudia Sam says the fed could not allow jobs to be a casualty of monetary policy. I think the rhetoric about quote unquote softening the labor market is a really pathetic euphemism for throwing people out of work, so I think it's important to remind them I'm fully supportive of sherrod brown's letter. I frankly, I think every single member of Congress should be telling them to trust back off a little bit, just slow it down. And again, the decision coming up 16 minutes from now, Jay Powell's news conference live on Bloomberg radio two 30, Wall Street time. S&P now down 14, a drop there of four tenths of 1% we have got the Dow up 15 up by less than one tenth of 1% as stacked down 93 down 9 tenths, ten year yield four 3% of the two year yielding 4.54%. U.S. stocks now trading mix ahead of the decision. That's a Bloomberg business flash. This is a really, really tough meeting. How much does the fed lean into a downshift? They look at those PMI numbers, you look at the housing numbers, you look at the slowdown in the global economy. Maybe it's time for the fed to at least downshift. Eventually, yeah, the step down has to come. Is it too early in my opinion? Yes. And the difficulty obviously is that the inflation numbers haven't come down yet. Having said that, if I was sitting at the fed right now, I would really struggle. Can Powell talk about slowing down the pace, but still indicate resolve on fighting inflation. They can't take rates off at 75 basis points rate indefinitely. All eyes will then focus on that December rate hike meeting. Obviously, November is all about December. The focus in the November meeting is really on December. November is all about December. I think a lot of people agree with that right now. The decision 15 minutes away, the price action looks like this on the S&P 500. Equities are negative four tenths of 1% on the S&P on the NASDAQ with down about 9 tenths of 1%. We've seen some major moves in the news conference. For the Federal Reserve, through much of this year. So let's see what it looks like with a little bit later. The next day has been the story sometimes. Let's get to the bond market twos tens and 30s look like this. The last time the fed met we were about 50 basis points lower than where we are at the front end. Four 54 48 on a two year unchanged yield was coming about a basis point on tens, 4.0318% and to finish on the U.S. dollar, let's finish with the rest of the world. The rest of the world would love this thing to be a whole lot weaker. John, you had a great insight this morning here on the equity markets and I went back, of course, with the research of team surveillance and looked at the Dow and basically it's 32,029 1032 thousand. Stocks are going nowhere. Since the last meeting, yeah. Churning on. I mean, within the earnings and the surprises we've seen, some of that based on buoyant nominal GDP, we continue with the former vice chairman of the Federal Reserve system, Richard Clare, doctor Claire, I want to speak to you about your X axis, your timeline for it. I understand it's a delicate as a current former fed official, but the idea that we get a hold of inflation and actually get this fixed. You're talking to President Biden. Are you out to June of next year? Are you into 2024? What's declared a timeline look like? Well, Tom, I think what I think of as a plausible best case scenario is a scenario whereby through some combination of the tighter policy and some adjustments in the labor market and frankly some good luck. That by the end of next year, by the end of 2023, the measure of inflation, the fed looks at the court, the core PCE measure is running at two point something. You know, it might be 2.8 or 2.9. It'll start with the two. I think that's the plausible best case scenario. Unfortunately, if there's risk to that outlook, I think it's risk to the upside on inflation because inflation now we see the employment cost index, for example, a very good example is now running at 5 percent adjust for some productivity. That means underlying inflation is somewhere in the mid threes at best. So the fed has work to do and really the most difficult disinflation assignment really since the 1980s. And so what I think of as the plausible best case scenario by about a year from now on a year over year basis inflation is below three, but a lot has to happen for that to play out. Rich policymakers always talk about the balance of risks about the outlook and the next policy move. One thing we've heard from this Federal Reserve repeatedly in fact from several officials and it's in the minutes from the last meeting is that the risk of doing too little outweighs the risk of doing too much. Is that still your assessment of things as you'd look at a set interest rate if you were back on that committee today? Yeah, it is, John, it is my assessment. Because history has shown this is not just an academic history has shown that if central banks don't have credibility and they don't are not able to over time achieve price stability, the cost of the economy are significant and ultimately that inflation, the cost of bringing down inflation is higher. So absolutely, I am very much if I are on the committee, I would be articulating that view, which might not make me popular with everybody, but it's what I believe. Rich, a viewer just wrote in and said that he's been asking piers question this one question. Where do you see inflation in December 2023? And he said it's been very concerning to him to see how far and how vastly different the projections are. Where do you stand? And how concerning is it to you that people really can't pinpoint with any consensus where it will be? Well, well, it is concerning because in retrospect, you know, all of us sort of got lulled in the great, the great moderation from, say, the mid 90s until the global pandemic collapse, you know, in a good year, inflation was running, you know, 2.1 or two, and then a soft year, 1.8, 1.6. And so we all got used to very little, very little volatility in inflation. And it is something of a shock and a wake-up call to have to look at the uncertainty, but it is a fact of life. Now, look, it's not just in the U.S., we see a similar dynamic in the UK, Canada, the Eurozone, Australia. So for a variety of reasons, and I think not coincidentally, due to the shutdown, the pandemic, the reopening, and now what's going on in Ukraine, there are big, big shocks hitting these economies, but unfortunately they're all moving in the same direction and they're moving inflation up into levels that nobody likes. Which cleared a lot of people are looking back at other bouts of strong inflation. Originally it was back to the 60s, maybe Walter Heller and all that. But more and more people look back to the stochastic moments of the 40s into the early 1950s. Do you have an enthusiasm? Do you have a belief that once the trend moves, it will move quickly to disinflation? Well, I do think that's, I do think once we start to see this in the labor market, yes, I think it can be quite quick. And indeed, if you look at past cycles, wage inflation in both the early 2000s and after the global pandemic, global financial crisis, wage inflation actually fell pretty pretty substantially once the economy slowed in terms of your analogies actually, sometimes I like to think about whether or not this is more like 1951 or 1966. I wasn't around for 1950 one, but if you look at the data, for example, in the U.S., we had a supply shock. We had a demand shine, Korean War inflation went up to ten and then the next year was at 1%. So we can have rapid disinflation. Rich, I was on the back end of Eisenhower in 1950. Got the tickets out long and short. Rich clarita where this for those of you on radio are thrilled average clearing it with us with his work on de S GE and other things. The only one I know is ever read Claire to gertler was pretty miserable. Right now, the head of global race strategy at TD securities prayer fantastic to have you with us
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"That's a Bloomberg business flash. I've never seen bremo so fired up for a fed decision. Yes, I'm so just unreal. It's just unreal. The countdown to the fed decision. That's right now. It's one 32. This is a special edition of Bloomberg surveillance with Tom king, Jonathan bell, and Lisa ronalds. Bloomberg surveillance, the fed designs. Life from New York City for our audience worldwide good afternoon, good afternoon, the countdown to the fed decision does begin right now a chairman pound news conference just around the corner about 60 minutes from now. Going into this equities down 6 tenths of 1% on the S&P, Thomas, the most important fed decision since the last one. And so the next one. Let's get serious about this, John. There could be a bombshell your markets could move. We'll have all that over the next good two hours or so, but we really got to drive to December and frankly, I'm through January to February 1st. I love what Michael McKee said moments ago with curti where he talked about strategic ambiguity, that perfectly captures what we're going to see. This is the challenge, isn't it, Brahma, we've talked about it over the last couple of weeks. How do you signal you might be stepping down in the size of your interest rate hikes from 75, perhaps the 50? That's implied by the dot plot anyway. So I'm not sure how big that will actually be. Without triggering a premature esca financial conditions before you've really become convinced that inflation is on its way back down to 2%. Maybe they're being too cute about this. I was actually thinking a lot about this. And how quickly they've raised rates. And I went back to the 1980s when they actually were raising rates at a similar type of pace. And in one month alone, in November of 1980, they raised rates by 4.25 percentage points in just that month. So why are they not just going big and then going home? Why are not that just going big and then stopping? Why are they sort of like dripping it out and all this communication? Have they done that already? To be honest with you. They've done 300 basis points from March through September into October. We're looking for another 75 today. Tom, we went and looked at the dot plot the last time they came out with projections. Across the board. No projections this time, Tom. You'll have to wait until December for that, but they've done a lot in a short amount of time. They have this goes back to Arthur burns. We had Greenspan measured 25 25 up down sideways, whatever, mostly down mostly lower rates within the realm. We've gone back to what some like Richard Clare to study, which is Arthur burns with substantial moves. And then, of course, the idea is we come off that at some point, where at some point. Try not to have 6 tenths of 1% on the S&P, let's whip through it. I'll get some P 500 negative 6 tenths of 1% on the NASDAQ with down about one full percentage point. In the bond market shape and up as follows yield to totally unchanged, Lisa, just north of 4% on a ten year 4.036% right now. Who wants to get ahead of this freight train? Who trades on fed days? Let's be honest. I mean, who's going to say, yeah, whatever happens. Let's get ahead of it. Okay, how many? You trade on fed days until you lose money three fed meetings in a row and then you never do it again. So you think that no one would be trading because it's always the wrong response. Am I wrong? What you want me to say? How many people are trading on fed day? You think I've got nothing. A lot of people. People are in its hazardous year portfolio. It is difficult. Do you like to go through the promo? Because we're leaving the former fed vice chair. All right. Let's coming up. We do have someone who has got a lot more illuminating things to say than I do. Former Visa fed chair vice chair rich claret elbie joining us momentarily currently at Columbia University. Tom will tell us all about his bow tie and how it connects to rich clarita coming up. We also hear from TD TD securities Priya mizra. She will be joining us and they will both be taking us up to the fed rate decision at 2 p.m. eastern followed by immediate reaction by KPMG's Diane swank and Guggenheim's Scott minard and finally breaking down the chair's news conference with some post it Powell commentary, Bank of America's Michael gapen, evidently was not scared away from earlier this morning. And BlackRock's Jeff Rosenberg, a fantastic lineup, and I'm really excited to hear what rich clarita has to say, Tom, not only about what to expect coming up, but also about the mandate of the Federal Reserve in a moment where inflation is at the forefront of the concerns. That's where we want to go to the mandate right now. There seems to be front and center, although doctor Clare has much more to say, he is a former vice chair of the Federal Reserve system. And of course, associated with Columbia, rich just for you today I wore a gift from Ned Phelps from years ago, a Columbia University, bow tie, as you leather economics program, which Claire, I'm going to cut to the chase. You are footnoted with senator Warren in other worries about a single mandate fed. There is the single mandate of inflation. There is a published dual mandate in Steve roach would say there's a triple mandate, which is the idea of asset size. How many mandates does your own Powell face today? Well, well, thank you for having me on. There is a dual mandate, but the point being is that inflation is way too high and it's the chair and other members of the committee has indicated the only way to have sustainable maximum employment is with price stability. And so I think as long as inflation remains elevated and weigh above the fed's target, it's really going to be focused on getting inflation down. In addition, members of the committee, including the chair of indicated that there have been some post pandemic changes in the labor market and the level of unemployment consistent with price stability has probably risen. It's difficult to know how much. So I think for the foreseeable and future, so till we see progress on inflation, the fed is really focused on getting inflation down. Rich clarita, this is all operative off the Phillips curve from long ago and far away at the London school of economics is the Phillips curve. This relationship of labor and inflation is at operative today. Well, certainly Phillips curves are not laws of physics. They can induce shift around and I think likely we have seen a shift in the level of unemployment consistent with price stability. I think we've also seen evidence of a change in the slope of the Phillips curve. So certainly if I were back in my old job, I wouldn't be relying very much on that right now. Rich if you were back in that room over the last couple of days, can you help us understand how this fed would navigate this conundrum? Signaling you're open to smaller rate hikes without triggering a premature easing of financial conditions. How'd you go about doing something like that in the news conference? No, I agree it is a challenge, you know, John the way I see it is that coming out of the September meeting when I was fortunate enough to be on your set, you know, the chair delivered a hawkish 70 5. The dots also shifted up since then the inflation data is actually been worse. It's been higher than they would like. Including the employment cost index and the CPI. And so as a consequence, the market pricing for the terminal rate has shifted up. I think that's appropriate. I don't think he will push back on that today, but I also think the chair will want to have the option and the committee will want to have the option based on the data between now and the December meeting to downshift. So I think he will want to leave that option open, but I don't think he will push back against the idea that the terminal rate may be higher in this cycle because the inflation data has been worse. What are you looking for today, Rach, what do you want to hear from fed chair Jay Powell? Well, I do think that I do think right now coming into this meeting, they're probably not unhappy with market pricing in the sense that as I look at my screens, the
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"And the resolve that it will take to restore price stability on behalf of American families and businesses. The question is, of course, will the fed be able to stick to this plan, and there is some doubt about that, according to Bill Dudley, former New York fed president and Bloomberg opinion columnist. And here he is with Bloomberg's Lisa abramo and Tom Keane. I'll talk about how you need to see real yields positive throughout the yield curve. And the fed is moving pretty quickly in that direction. And 75 basis points last week and there are promising another maybe a 125 basis points before the end of the year taking the federal fund rate well above 4%. So the fed is catching up. And I think the question at this point will they stay the course until they've actually finished the job to get inflation back down to 2%. Paul says he'll do that. But whether the rest of the FMC will come along with them, I think it's an open question at this point. You like Richard Clare, who joined us on fed day, know the mathematics of physics of modern economics, and then you discard it to real world application. You did that at Goldman Sachs for decades and then at the fed. I want to talk about the inertial force in this odd word overshoot. Is it a requirement or is it efficacious that a Central Bank overshoot a given target? Well, ideally, you don't over. So you do just enough to achieve your objectives, but as you know, monetary policy has a lot of long lags in terms of its effects on the economy. And it's hard to judge those effects in real time. I think the fed is probably going to be probably going to ultimately overshoot a bit because they've said that the risks are skewed. The risk of doing too little is much greater than the risk of doing too much because if you do too little, you end up in the 1970s with a more entrenched inflation problem and then you have to do even more later. So I think this is the consequence of the fed being late. If you're late, you have to catch up and catch up, you probably are going to overshoot. If you overshoot, you're going to have a recession. I think where I would fault the fed right now is I don't think they've been realistic about the pain that they're actually going to cause. If you look at their forecast last week, unemployment rate climbs a little bit, it climbs up to 4.4%. And then inflation melts away. I don't think it's going to be quite so simple as that. There's never been an example of the unemployment rate rising from three and a half percent to 4.4% .9 percentage point rise. If it rises more than a half a percentage point, every time that's happened in the post World War II period, the U.S. has ended up in a full blown recession. And the smallest rides in the end of one rate in those situations is two percentage points. So I think the fed is understanding the pain involved. What worries me about that then is that people, when the pain actually rise, people will start to pressure the fed not to follow through. And this is the point of the column that you wrote that there seemed to be some doubts in your mind and in markets minds right now if the market had in mind that the fed is going to stay the course. What do you think they have to do to come out and say they're going to stay the course or do you think they're not going to that they're going to pull back on some of the rate hikes say if unemployment rises above four and a half percent? Well, I think your call is committed to staying the course. I think he's studied history and knows the consequences of not doing enough. But whether it can bring the rest of the federal open market committee along with them later. Right now it's easy to be tough, right? Because everybody wants to get inflation down. The labor market is still very strong. And so the pain hasn't really materialized yet. A year from now when the unemployment rate is considerably higher, the economy has slowed inflation has come down a bit. It's going to be people who are going to start to argue. Do we really need to push inflation all the way back to 2% or can we take a break now? And how much is this going to be a political pressure on the fed? Well, I think the Biden administration will be pretty good about guarding the fed's independence typically if an administration starts to pick on the fed, that just unnerves financial markets and that makes the Central Bank's job even harder. So I would be surprised if the Biden administration started to attack the fed. We already are hearing cries from the left wing of the Democratic Party, but how unfair this is that low income workers are going to be put out of work. As if there's some alternative, the problem here is that once you're late, you have to catch up. Once you're late, the unemployment rate has to go up. There are no other alternatives. And so it's not as if the fed has a better path to achieve better outcomes. They need to do what they need to do to get inflation back down. It's just going to be difficult. If we see services stabilize and maybe reduce if we see goods come down to the goods disinflation or deflation that we saw pre-pandemic, I guess that means we come back towards John Taylor's 2%. Are you wedded to 2.0% or can Bill Dudley construct a new normal at 2.82 .9 two point Adam posen? Where do you stand on that Bill? There's some people that say the fetch had raised their inflation target. But I think that's a bad approach right now because that's like moving the goalposts because you can't achieve your objective. Done this, I think that I think that would undercut the fed's credibility a lot. And I think Paolo has been very clear that his pursuit of 2% inflation from his perspective is unconditional. Whether he can bring the rest of the FMC along with him when the job starts to become more difficult. Fundamental question. Right now, markets are basically believe Powell. Inflation expectations say, well, anchored. But the pain process that's about to unfold is just begun. And that was Bill Dudley, former New York fed president and Bloomberg opinion columnist with Bloomberg's Tom Keene and Lisa Abramovich. And coming up, are we close to the 1998 level of
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"The reality is we take a mild recession today and eradicate inflation now because we know the mistakes of the past that doesn't mean the fed won't make a whole new set of mistakes, which is what I'm worried about. It is Thursday, Diane swank, chief economist at KPMG yesterday with Richard Clare to the former vice chairman of the fed. I thought miss swan and doctor Clare, I really were just lights out in their interpretation of the view forward. We look forward to reduction early November. Right now, and I'm doing this for global Wall Street is a clinic. Ira Jersey long ago and far away worked for global Wall Street. And he wrote the kind of notes where you'd get angry at him because they were 8 pages and you had to read every line every paragraph because they were loaded with intelligence about stuff you flunked and Bond exams. The teacher joins us this morning running all of our interest rate strategy at Bloomberg intelligence. I want to have a clinic right now on this strange word liquidity. In the old days it was commercial paper. There was a wonder man of understanding libor was out of like a Mary Poppins movie and all that. Great. It's all been blown up. How do you measure liquidity in the fixed income space in 2023? Yeah, so there's a couple of different ways that we that we look at liquidity. One is obviously simple, like the bid offer between those people looking to buy those people looking to sell, how wide is that, where do market makers make those markets? And that has gotten a bit wider, particularly since the Federal Reserve backed off from its bond buying program. And then it's just gotten a little worse since the fed store to actually run off its balance sheet. And then second, and I think this is important, and this is that plumbing you're talking about, Tom. And that's the repurchase agreement market. So what's going on under the hood? How do levered investors so investors who are buying bonds with leverage? How do they get leverage and at what price do they get it? And they do that through the repurchase agreement market for treasury securities. And for a few other bond markets as well. And that market has not grown very much at all while the treasury market is now four times larger than it was before the global financial crisis. So you're looking at it at an environment where it just harder to get as much leverage as you used to. And because of that, the kind of let's say that the pipe is the same size, but there's a lot more water trying to get through that pipe. And that's really the problem right now. Should we be concerned about this plumbing? There's a doom crew that you and your career have pushed against every day. There's a doom and gloom crude is going to write this weekend that the plumbing is fractured or rusty or broken in the banking fixed income space. Is it? Well, I think it is in some ways and part of this has to do with the regulatory environment that shifted a decade ago in response to the global financial crisis. So banks and dealers now have to hold a lot more capital, even against their treasury securities, which if they're not supposed to have credit risk, why are they why do they have to hold a lot more credit against it? So this is the reason why a lot of regulators, the Federal Reserve, the SEC, are pushing toward things like central clearing of securities because I guess theoretically and the hope is that by having central clearing of treasury securities, it will just make things flow a little bit easier. People won't have to worry about if they're going to be delivered a bond or not. And if people are going to fail and actually executing that transaction and clearing it. So there are positives from trying to do that. But I think the bigger issue is just the amount of leverage in the system versus the size of the market. I think that's probably the bigger issue for why you're seeing moves of ten, 15, 20 basis points some days when on very little market news. We are going back and particularly this week with all going on in foreign exchange to 1998. And part of it was it wasn't transparent. There were unknown unknowns as doctor Allergan would say. Do we have a knowledge of the liquidity of the American finance system or are there unknown unknowns out there, shadows, if you will? Well, there probably are unknown unknowns. And that's obviously scary because if there were no unknowns, then we would at least have a clue as to what we should be looking for and looking at. But we don't. So there's always potential exogenous factors that could play into the financial markets, right? We had that significant 15 minute 50 basis point rally in treasury securities in 2015 that is still kind of a baffling, right? There has not been any really great explanation for why that happened. So there are certainly risks to the financial system. But the treasury, the treasury market in general, is still one of the most liquid markets that we have. You can get off a significant size without moving the market very much. But it's still because of the size of it. There's
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Almost word for word the same as the one in June, policymakers noting they are highly attentive to inflation risks and anticipate that the ongoing anticipate ongoing increases in the target rate will be appropriate. There's a wide dispersion of forecast for 2024 and 2025. The median suggesting that the fed funds rate falls to 3.9% in 2024 and to 2.9% in 2025, that's because inflation takes longer to fall, not reaching the fed's target until 2025 headline and core this year inflation headline 5.4% core is going to be four and a half percent. Next year, headline 2.8% and in 2024, 2.3 core 3.1% next year, 2.3% in 2024. Now, fed officials also bumped up their unemployment forecast to a medium of 3.8% this year, 4.4% next year and in 2024 and 4.3% in 2025. Growth takes a big hit this year. Annual GDP marked down to just two tenths of 1% from the 1.7%. They saw in June, the economy will expend 1.2% next year, 1.7 in 2024 and reaches a 1.8% potential rate in 2025. Finally, as I mentioned, almost no change to the statement just two words in the opening sentence. Recent indicators point to modest growth in spending and production in June, they said those had softened. Not okay, thank you, ton of numbers to work through there from mine the key. So let's go through it together. Just open up the summary of economic projections off the back of this. So GDP gets a cut to the forecast, unemployment gets kicked higher, inflation gets kicked higher as well. And so does the dot plot in a major way. The market is responding to this as you might expect, equities, heading south on the S&P 500 yields, heading north, particularly at the front end of the curve, we're up 13 basis points now on a two year going into the decision. We took out 4%. We're basically on our way to taking our 4.1% right now in a two year. As you might expect off the back of that, the dollar is a whole lot stronger. TK, you can take your pick on what counts you pay you'd like to see, let's just pick up on Sterling as an example. One 20 handle one 12 handle going into tomorrow once we have 50 right now that currency pair with a 1% move. I would say the word plunge or cratered is probably what you want to see here in international economics, folks, dollar moves are very small, but very important. Maybe only yen at one 44 or 48. Is there a but Sterling E stunning Euro even more so I would say, it's just all of these moves and these dialogs change the game for the governor tomorrow with the Bank of England. The 4.6 is your dot bramo for 2023. It matters for markets. What you're seeing is a very hawkish 75 basis point hike. And that is basically forecasting. There is more to come and they are willing to take pain in the economy and the market is responding. You know, it's up to 13 basis points. There they are. Let's see if it sticks. Yeah. Let's do one more look here at the date. I think it's so important on the fixed income market, the twos ten spread, a primitive, negative 50 basis points. That's where she was when everybody said, no, it could never happen. Ten base out. Move just today. By the way. Yeah, less than that. And the real yield by the time you get to your critical show on Friday, John, where's the real yield going to be? 1.301 based on this price action, so I might not make it to Friday. We will have to see. It is a fed meeting, and this is a different fed meeting for us. He's a former vice chair of the Federal Reserve system, Richard Clare, joins us, of course, always and forever with Columbia University in a small institutional shop in the West Coast pimco. We're thank you so much for being with us on this historic day. I want to touch back to what you did at Columbia with a guy named galleon a guy named gertler. 1999, you looked at the science of monetary policy, which is exploded in this pandemic crisis that we've had. Your summary there is about imperfect information. How blind are good people like you right now. Well, I think obviously we and the fed are navigating imperfect information. I think what you're seeing today, and I agree with the previous comment. This was a very hawkish 75 with the dots. One thing I would say is dispute any rumors you hear about the demise of forward guidance, the committees relying a lot on foreign guys to tighten financial conditions. And I think the fog of uncertainty is the nature of the pandemic shock and the policy response and the reopening means that a lot of the traditional models and guideposts aren't really helping. And so I think this is more of a more of a look at the data as it comes in and wait for the inflation data to fall. These four kinds previously rich and good to see you, by the way, but it's been a while. They were called aspirational fanciful. We've now got an unemployment rate and their forecast for 22 or 4.4 for 23 rather for 4.4 for 24 or 4.4%. Do you think they've ripped the band aid off just yet, or are they doing it slowly still? I wouldn't say it's ripped off. I think that the contrast with where the committee was in March, which was what I've called the immaculate disinflation with no rising unemployment, no fallen growth below trend. So I think this is recognizing that it's the chair said some pain will be part of disinflation. My own personal view is it probably will be more than the rise indicated by the dots. But I think it is acknowledging that the disinflation is going to cause that pain. So the risk is to high unemployment to even higher Federal Reserve race off the back of this, you think. Well, we may not need higher Federal Reserve rates because this is a pretty muscular liftoff this year. And I guess another 25 next year as well. And it clearly pushes the funds right into the high end of the fours. If inflation comes down as the SEP projects, this could well be enough. The challenge though, there's a lot of inertia inflation. And obviously the labor market is red hot. And so this is going to be challenging, but I think right now the committee has put in place a path for rates that could well make sense, but not without causing the pain that the chair referred to. I was just going through the trajectory for inflation as it comes down. I wonder if you still think this is aspiration or 5.4 down to 2.8 down to 2.3. This year for core PCA 4.5 next 3.1 the year after that 2.3. Does that sound about right to you? Is that the appropriate time frame to think about getting these numbers down to back towards the twos? John, what I've called what I call the plausible best case scenario is by the end of the year inflation is running below three. And I think it'll take some good policy and some good luck to get there, but there's obviously risk that inflation is more inertial than that. And then it takes longer. By inflation, you mean core inflation. Yeah, see, folks, this is important, Lisa, the vice chairman mentions it in just assumes core where all of our listeners and viewers are assuming the crushing burden of real inflation. Although real inflation, our CPI headline inflation has been coming down in the fear is that the core has continued to go up. Are you concerned that fed policy doesn't have the same muscular effect on markets on the economy as it used to with a lot of it insulated with corporations that have termed out debt. I think there's an element of that, you know, Milton Friedman, very quotable, one of his quotes was monetary policy operates with long and variable lags. I came to think during my time as vice chair that the logs, the lags may not be as long as we once thought because the economy is very financialized. You are correct. The terming out and household balance sheets are in great shape because of all the fiscal transfers. But I guess I'm from Missouri on this. I think that the financial condition tightening in place and probably what we'll get today is definitely going to begin to show up in the data. As I said, the big question is we have a red hot labor market, 6% wage increases aren't consistent with 2% inflation. And so I think that will really be the issue. How much demand hit do you need to take in order to get that underlying inflation down? This is really important. So you don't think that there is the same kind of lag time as other people seem to think that we're seeing it right now in real time as the NASDAQ falls about 1% here. And as you see yields rise, has the market seen enough pain to transmit that. Well, I think that's probably in the eye of
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"To a fed decision and chairman pound news conference alongside Tom Keane and Lisa rabbit Sam Jonathan farrow alongside us is going to be Scott minded in just a moment, TK, we've got to kick things off with twos four. Absolutely in the history of this with Scott minor knows and all of our guests know Richard Clare to coming up later is August the Thursday, the third Thursday of August O 7 is when the crisis began the two year 4% October 16th of that year. That's the last time we saw this. At least for two year of 4%, a ten year at three 58 ish, yield Tiger gun into this one. Right, and it is real yields and people are trying to game out the economic pain versus some of your inflation that is sticky. No, we talk about the economic pain, right? We have this question. Is it time to go into duration? Is it time to go into treasury yields at nearly 3.6%? Not quite yet, seems to be the resounding decision, at least given the fact that yields are continuing. The focus of this decision, Lisa and you know, well in about 27 minutes time, it's not just going to be about the rate hike. Most people assume it will be 75. It's going to be the forecast. For all this talk of pain, will the forecast capture some of that pain? And will they revise upward their unemployment rate to say, we are serious in terms of what they expect to your point. And we're hearing about just earlier this morning when we were speaking with Peter hooper of Deutsche Bank and he's talking about nehru, going to 5% all of a sudden, this is a new equation for the employment market. There's talk about pain and we make jokes about it with bramos living it every day. But what I would suggest here. I get fired up. Go back to Truman and mcchesney Martin. You go back to LBJ and Arthur burns. There is at the end of the day a social construct. Do we want this fed force a recession? Do we want this fed to force a higher unemployment rate? And as a resounding part of the dialog saying, no, we don't. Are we going to have trouble around this table today? No, absolutely not. I sense we're going to. You tell me I'm going to say something. Just a moment. The recording market set up as follows going into this fed decision, your equity market positive, a half of 1% on the S&P 500 on the NASDAQ up a half of 1% also. Later, it's just about the bond market yields are at the front end by two or three basis points. Just short of 4% at the moment on a ten year three 57. So have we baked in a hawkish surprise, right? And that's one of the main questions as we have discussions today coming up. We have an incredible roster of people, TD securities, Priya mizra, Deutsche Bank, Matt lizette, they will be taking us up to the fed rate decision at 2 p.m., then immediate reaction from former fed vice chair rich Clara, I am so interested to hear how he translates what we're hearing into the reaction on the ground when you are in the fed room. And then finally, breaking down the chairman's news conference was post at Powell commentary with BlackRock's Jeff Rosenberg and of course sitting next to us. Scott minard, which I can not wait. You're from. It's going to be interesting today to say the least and what we're going to do is inform you with different opinions, leading on opinion through all of this most uncertain 2022 has been Scott miner. He's global chief investment officer of Guggenheim, he and I are grievously concerned as Aaron judge go to the Dodgers or to the mets we'll talk about that another time. But that's a stakes involved today. Why is this fed meeting different than any other? This sounds like we're having the Passover. The message here has got to be around the fed's credibility on fighting inflation. And that is it's not just about what rate increase we're getting today. It's going to be in the statement that we see and what comes at the press conference. But this debate about 75 basis points or a hundred basis points. It's interesting. I told someone this morning I said, if I were sitting on that committee, I would argue we know it's coming, raise rates a hundred basis points. Let's send a real message here. But I don't think they have the guts to do that. What do you think they won't do that? They just have the guts to do it. What would happen if they did? What do you actually think would happen if they did? Well, I think John let the market sort it out. I think the bond market would probably rally because they would say, you know what, these people are really serious. And the ultimate decline that I think we're going to see in stocks, it may accelerate it, but let's get it behind us and have it over. One thing we haven't taken seriously over the last few months together around this table has been their forecast. Do you think that we need to see some credible forecasts from this Federal Reserve now? And by credible, if you're talking about pain at a speech at Jackson hole, shouldn't the forecast capture some of that pain now? I think it has to, or what did that whole speech and that Jackson hole mean? But look, John, I was at the conference at Stanford for central banks to Hoover institution. And there were people there who were talking about the neutral rate being at 6% and even higher. None of these forecasts, no one is saying anything like that. Now, personally, I don't think the neutral rate is that high. But there are a lot of people out there who are very smart who think that the neutral rate is much higher than anything that we've seen in the forecast. So let's say the fed goes ahead and does what you want. What happens? What are the ripple effects? You say rip the band aid off, let's go. Right. But does it become a self fulfilling prophecy where you remove some of the strength that still is keeping the hopes of a soft landing alive at least in some of the rhetoric? Well, you know, hope is not a strategy, right? So if that's if that's the fence approach. Let me do it every day. What's going to be the strategy? You carry on. I think the strategy is to say, look, we're serious. We're going to get this done. And we are going to suffer whatever consequences we have. To suffer. Now, it's interesting we're all talking about recession. I believe I personally believe we're in an inner recession. It's an extraordinary one, because unemployment is a tick. Historically, we've never gotten prices to start to fall without having unemployment substantially higher than where we are. So at least a half a point and probably a point higher. So you put out a series of tweets where you were talking about the richness or the potential opportunities within corporate credit, particularly investment grade, the higher rated company bonds. Can you see the value hold in in credit, even if stocks absolutely tumble from here? Look, credits all credit spreads are going to widen if that's the case. I think that I'm caught in a world of relative value. That is
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Us and run away inflation. Just isn't true. I mean, the money supply was has fallen from real money supply for plus 25% of March 21 to minus three and a half today. Fiscal juice was 18 and a half percent of GDP. It's now four. The dollars risen 20% in the last year. And free market yields started to go up in 2020. So my point is, is there's a lot of tightening that's done not by the fed. And fortunately, they did it long time ago, which is why inflation is already rolling over now. If it was up to the fed, I don't think we'd be doing anything yet on inflation front. So we're getting that. Don't forget supply side is starting to show signs of improvement as well. We've created a lot of jobs this year, but we've done it with a fresh new supply in the labor force, which means wage inflation hasn't been accelerated. That's another one. One final question here, Jim. This is too much optimism, Jim lease is going to fall off a chair. Jim, one final question. One final question if we could. Michelle Meyer Mastercard. James Glassman over at JPMorgan. James Paulson over at lethal group are saying the zeitgeist is wrong wrong wrong. How should chairman Powell treat a zeitgeist worried about his world versus the three of you saying, look at the consumer look at America? I don't know. He's got a tough job. I agree with that. I guess I would hope that the Federal Reserve and I'm sure they realized that their legged effects of these other policies and I don't think you keep raising rates up to the moment we get back to 2% inflation. It just makes no sense whatsoever. More clearly have peaked inflation, I think, we're clearly coming down across a wide array of different measures. And I think at a minimum, the fed can slow down its rate hikes. And I still think Tom, they will. And ultimately, they can create a recession if they want to, if they take rates up high enough. But I agree with Michelle and some of the others. I think the balance sheets in this country both corporate and household are really, really strong. And highly liquid with a lot of excess buying power. And so there is a lot of staying force, but I do think that they could still create a recession if they want to. Jim Paulson, Luthor group, in the Midwest and Minneapolis, thank you, thank you so much. This morning, this goes right to our special guest on our fed coverage on Wednesday, Richard Clare to the former vice chairman of the reaction function, if you will, Lisa, and you get an inertial force of raising rates, whatever the parlor game is, and you have to have the courage at some point to go. I don't think so. And the question is how far away are we from that? I don't think so. We found a bull. We found someone who's kind of bullish. That was pretty impressive. Well, out there. Looking at this so called catharsis with a vixa 26. I mean, it's not as gloomy as people would suggest. Well, they think that the fed's not going to go as far. They don't have to, and that they won't. And that I think is probably the big distinction here. There's a charity here as we distinction our way to 19 minutes an important economic data as well. You're under parity Sterling through one 15. On oil on your marginal gallon of guests, Stephen short next. Now with the latest news from New York City and around the world, here's Michael Barr. Tom Lisa John U.S. railroads
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Being the inflation environment. The cool part of inflation is proving to be sticky and persistent. We're already seeing a reduction in forecasts. Earnings expectations growth expectations will be proved to be way, way, way to be bullish. In the grand scheme of things, the fed strategy and the domestic inflation story here dominates. This is Bloomberg surveillance with Tom Keene, Jonathan farrow, and Lisa Abramovich. Countdown to retail sales, good afternoon, good afternoon, if I'm going to do the two word open. I don't have British accent. Good morning. This is Bloomberg surveillance on Bloomberg TV and radio John farrow Lisa Abram with saint Tom Keane. John farrow off Tom Keane very much here with us. John is off on an assignment. I am looking right now toward retail sales to figure out whether we get a confirmation of the robustness of the economy that's going to lead the fed to be more hockey. I'm going to call it the glass and my report. Jim glass went to JPMorgan and Michelle Meyer at Mastercard on the same page. Here is the data. Here's what we see and what it says is a buoyant American consumer. How many people push against that? Well, pushing against it, not of its buoyancy that they're seeing. But what the fed has to do to get inflation under control given that consumers aren't getting the message that they need to stop spending so much. And I think that that's the kind of that's the sort of good news bad news bad news is bad news thing that makes this happen. I mean, to me, it's not a behavioral aspect. They have one exact tool in McKee will talk about this up to Wednesday when we speak with Richard Clare to the former vice chairman of the fed and they don't have a behavioral construct here. They have a simple tool and to your point, ala Jordan Rochester said earlier this morning, the Titan from Nomura, a hundred beeps is an out of the realm. I can't get there. I don't see a stick. It's called a stick folks. You're raising a stick. We haven't seen that, and they're known lives, I would suggest. And a lot of people sort of discount the 30% chance of the market is given that right. That's my control over at JPMorgan. What people are looking at is not just 75 basis points. Next week or a hundred, they're looking at the possibility that rates could go up to 4.4% as a base case, which is we're seeing priced into the market right now. This is important. Life goes on out moments ago, Adobe, we all know them, the PDF people, and all that, they're going to buy figma for 20 kazillion dollars cash and stock. It's a figma of my imagination. I have no idea what figma is. What I know is this signals, Lisa, life goes on. And to your point, Tom, capital markets are reopening after having been closed for the bulk of early this year. And that is notable, especially when you've got S&P futures here that are down a quarter of a percent. You have this sort of sustained softening that we saw a couple of days ago. You do the data check, you do it better than me, but the bottom line, I'm going to start with Sterling under a 1.15 again. If I'm the prime minister of the United Kingdom morning this queen celebrating this new king, I'm sorry, I got one eye on the Bloomberg and the answer is Sterling weaker. And they have also another eye on their energy policy that they have to come out with some more details on next week after just a proposing, one of the biggest physical plans. We're also seeing a ten year yields that is getting higher priced down, yield up 3.45%, but I'm really watching the two year yield, having broken through three 80. And sustained there in this feeling of how far the fed could potentially go. You know, before we get to Jim, we're not in the 4% watch yet and the two year. I mean, we got to get to three 90 to play that game, right? I think that you can, you can play whatever game you want. We are seeing as the velocity of that yield rise and what it infers. I think that that's important to note. Right now, the question that I have is ultimately what kind of earnings pain has to come along with a 4% four and a half percent. Benchmark fed funds rate and Jim Paulson, chief investment strategist at booth hold group, has to parsing through this. Someone who has been concerned about the ramifications of tighter fed policy gym, what is your view on whether the market is adequately grappling with the likelihood, the probability if you view a market's pricing as such, a 4.4% fed funds rate next year. I think 4.4% is not in the market. I don't think it is. And I think that'd be way overdoing it. And I think the risk is now that the fed does overdo this. I think much of the free bond market is pretty good. The ten year yield's been good for months, really since May at this three to three and a half area. Thinking the fed probably quits at the three, three and a quarter. It doesn't look like that at the moment. But I think that if the fed's going to manage monetary policy on the basis of what was the hottest report in the last 30 days, I think they're going to make a big mistake. To me, there's a lot of contractionary force from past economic policies already in the pipeline that have lagged effects on the economy and on inflation in particular that are going to continue to put downward pressure on inflation well into next spring. If the fed would do nothing from here, a tremendous drop in money growth in fiscal juice, a big rise in the dollar massive rises and bond yields, all of that still working the way through the pipe, putting downward pressure. I think the fed's going to lose its case to keep raising rates. Maybe sooner than we think. There's a lot here. In a bigger way. Yeah. There's a lot here. And we have to start unpacking some of it. We could talk about rejecting the idea of their pivot, even though they're saying, we're not going to pivot, but there's also this question of what would be the ramifications if the market's right. If the fed funds rate does get to 4.4% next year, how much downside could there be in equities? Well, I think that I think that supple would blow between by the time we got there and would cause things to stop and quite frankly, if we stopped the tightening of interest rates, I think the market would probably come out of that okay. Earnings would come off much more than we currently think, but I think multiples would expand is where it's kind of where I'm at. You know, if I could just point out that for an equity investor, when I look back, Tom all the way to 1940, we've had 7 major inflationary peaks. And what I find major is over 6%. And of those of those 7, the stock market bottomed almost coincidentally with the peak annual peak in inflation and everyone but one of them. And there isn't about how fast inflation comes down to more when it peaks and it doesn't escape my attention that the CPI inflation rate peaked in June and right now the market low is June. And I'm not so sure that it isn't already working its way back up. Jim fossil fuels you on Bloomberg radio, we are honored to have the backdrop of St Paul's Cathedral here at Queen Victoria street, and as Jim knows, the last time the Minnesota Twins won was in their topping out the dome in 1710 with Christopher Wren. I would suggest Jim even more so that if you go back to 1710 and Queen Anne, you're going to find a gloom permeates and the system fixes it, explain how the corporate system and the economic process Adam Smith's microsystem solves an inflation. Well, I think you're exactly right, Tom. I think everyone thinks that the fed is the only thing standing between
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Rate environment. We were for ten years in a zero lower bound. In fact, we risk conflation. I think we tend to forget where we were one year ago. The fed was generally concerned about deflation. We intervened very forcefully with fiscal policy and that contributed to the solution. Of course, it caused a big jump in inflation, arguably because it compounded with some exogenous forces, like the pandemic, of course, the supply chain problems, the Russian conflict, but ultimately fiscal policy proved to be a very powerful mechanism. I think what we learned on the other hand is that this comes with a cost. And the cost is inflation. Now it's always easy to do policy with the benefit of hindsight, but with the benefit of encyclo, we went a little bit overboard. Well, Francisco, there's a really profound implication here. It's not just what the response was. It's the expectation and the consumer's mind that there will be more fiscal stimulus if there is another downturn. And that that is what is going to lead to inflation expectations, becoming unmoored. How much does that really crimp the ability of policymakers to either add fiscal stimulus in the face of a recession, mitigating some of the downturn or B going for the fiscal stimulus of the past few years and leading to inflation that's much higher than it has been in the past? That's an excellent point. In fact, what we emphasize is what really matters is a long run fiscal sustainability. So what we want is to be able to use this powerful mechanism during recessions, but in order to do that, we need to guarantee that overall in the long run, or at least in the medium run, we are on a stable path. So what that implies is essentially that when things are good when we don't need to provide fiscal stimulus, we should refrain from doing that exactly to keep this ammunition to when we need it. I got one quick question. I saw Richard Clare to Jackson hole, and I want to go back to the core of your paper, which is DS GE, Richard Clare's work with gertler and the rest. Right. How can we trust this math? All the math in his smart guys like you are doing has it been proven wrong given these shocks that we've seen. That so I don't think so. I think the math is just a way to formalize some ideas. So what we are discussing here, I think is something that everybody can relate to. People have had first ideas and then came the math. So the math is only a way to put order. And I don't think that DSG models or more in general macro models in themselves have failed. If anything, there are some risks that we forgot about. Okay. And John, it's important, Lisa good news. I just got it. The car to take you to the abramo house to explain matrix algebra to Lisa's kids, it's waiting. Francesco, thank you. Francesco Bianchi there. On fiscal policy and what it means for inflation expectations. So I wonder what that means for Europe as we get into this energy mess and ultimately we're all looking for fiscal policy to offset some of the pain. Yeah, you've been talking about that. So if you're looking at an inflation problem and Francesco is point is well taken that additional fiscal support exacerbates this expectation that policymakers will jump to the solution to the rescue in the face of trials and tribulations. It will allow inflation to go further up even if it temporarily mitigates the pain of some of the higher gas. I'm going to push against John and then I think there's so many unknowns now and so much uncertainty. I really question the core mathematics of gertler claret and what we see from professor Bianchi, the uncertainties out there in shocks to the system right now. Off of a natural pandemic are huge. We'll keep this conversation going. Samsung was going to join us the chief investment strategist over as CRA. If you're just tuning in where have you been directly market slower by a sense of 1% on a S&P on the NASDAQ 100 down by a little more than 1%, we're fading a little bit here. We're off the lows on the equity market we're off the highs in the bond market yields higher still by 5 or 6 basis points, but below where we were earlier this morning. On your
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"Bloomberg radio What a moment for this economy and for the fed's response to it the next scheduled meeting in March 16th for that decision from New York City this morning good morning Tom Keane Gina Martin Adams Jonathan farrow futures unchanged on the S&P on the NASDAQ down just 0.04% We're about to turn positive Helping the cause we're backing away from session highs on two year yields That was the big move yesterday just blasting kaia Biggest move on a two year going back to 2009 You have to come back in some by four basis points to one 54 on twos on tens down three to one 99 The message following observing this historic day is we've got calmer markets in the last 90 minutes two ten spread 45 basis points in from a 39 shock last night So that's a little steeper yoke curve These are micro moves folks but important for global Wall Street Let's get to it This conversation is too important Seth Carpenter has a shingle out his chief global economist at Morgan Stanley He's not going to front run us today on what Ellen zander is saying about the fed but we can fall back as we could with say Vince Reinhardt to Seth Carpenter's 15 years in monetary affairs at the Federal Reserve system Seth Carpenter how does a chairman find a consensus I think in these current circumstances Jay Powell is going to have to forge that consensus himself I mean we remember back at the December meeting He was recounting how over the course of a weekend sifting through data he changed his mind over what their reaction function was going to be brought the whole committee along with him I think the same sort of circumstances are here now He has said they need to be nimble I expect him to be driving the consensus Is he advantage because he is not a fancy pants economist like you Is he advantage that he's outside the PhDs of saint Richard Clare to allow brainard or the wonderfully skilled PhDs across all of the fed Fancy pants is a great term since we're on Zoom I can say I'm wearing jeans right now and I don't have fancy pants Seriously though I think it is both a bug and a feature And I remember when chair Powell was being nominated to be chair in the first place That was one of the conversations in markets Is it okay that he's not a quote unquote real economist He's very smart He is very good at lateral thinking And I think importantly he is not beholden to his own published research record And so as a result he was able to choose from the best research and ignore the parts that he doesn't think fits Seth I'd love to pivot and talk a little bit more about your global outlook Because clearly the U.S. Central Bank is going to embark upon a pretty severe tightening phase over the next year or so But other central banks have already started their tightening phase in some of them are ending them How do you see the dynamics of central banking changing around the world Where are the opportunities emerging for risk assets and where are they getting worse This cycle has been extraordinarily interesting So one of the points we were making before when the fed was starting to taper was that we didn't see a repeat of the taper tantrum necessarily because many central banks And in this round especially in Latin had already started raising rates that already started tightening and the pivot to DM with short to come and here we are the Bank of England has already gone We're talking about the fed now The ECB has had a change in tone towards the hawkish side of things So I think in that regard it's a very fascinating time Quite to the contrary of course is China right You can't talk about the global economy without talking about China the U.S. and then the rest of the world in response And the PBOC is actually in an easing stance right now The Chinese economy slowed It slowed fairly aggressively They've got a target for at least 5% growth this year Our view rob and shing or China cannabis is more constructive than the market because we think it will be a policy response The more slowing you see the more the policy response will follow in order to get there And we're already seeing in the data for credit measures and other measures that we're turning the corner And do you see anything in currencies that we should be on guard for Obviously the dollar has been or was extremely strong coming into this year Where are you seeing weakness emerge in the global currency markets and subsequently where strength emerging Yeah I mean I'm lucky to work with really great FX strategies here at Morgan Stanley And one key point that at first is counterintuitive and when you think about it it makes sense Typically in a hiking cycle the dollar will appreciate before rates go up And after you start to raise rates when you start to see the peak and eventually it comes off At this time it's a little bit different because of the different synchronization of things but we're still looking for that sort of version of the world not sort of run away ripping dollar for as long as the Seth Carpenter let's go back to Alan blinder one O one What is not the elasticity but as a general statement what is the responsiveness of GDP growth to all of this ballet at the fed Are they inextricably linked that if the fed X growth flows I think they are tightly linked but there are also many other factors going on So we had a great deal of fiscal support last year That's coming off this year I don't think it's going to be the simple textbook fiscal cliff scenario where you just look at the difference in the deficit but no two ways about it less fiscal and participant this year And so we'll see some slowing I think in addition prices are rising Consumers are going to shift away from consumer goods toward services over time And until we're well to the point where Macron is fully in the rearview mirror you may see some hit to consumer spending But the consumer looks to be in pretty good shape of job growth holds up as it has So less fiscal policy should slow things But absolutely over the next several quarters as the fed goes from being accommodative to restrictive we should see some slowing That was under led with the idea inflation to roll over I believe it was Q one it may have been Q two It doesn't matter right now Do you find value in a guesstimate of United States inflation at yearend 2022 or are things so messed up that you must go out into 23 24 to find any sort of terminal value analysis No I think this is one of the very tricky situations where things are not going to be smoother They're not going to be going in a straight line We are looking for the peak in those month on month prints to be coming up with the February CPI that will get in March And then depending on if you're looking at the month on month or if you're looking at the 12 month change the.
Bloomberg Radio New York
"richard clare" Discussed on Bloomberg Radio New York
"In the Tokyo session There were reports on the company considering splitting itself into three separate entities will be talking more about that as we continue here on daybreak Asia In the opening moments of the nikkei now hire by just a tenth of 1% after a couple of records here in the U.S. at least for the three major market measures on the equity side We had the S&P breaking about 4700 for the first time finished at 4701 We were up at about a tenth of 1% on the day Generally speaking sentiment was boosted by those positive test results from Pfizer's antiviral pill We also have the lifting of those U.S. travel restrictions That was a boost as well Question though whether or not the equity rally that we have seen lately can continue without another catalyst Today the chief market strategist over at piper Sandler Craig Johnson was saying the fear over inflation and supply chain headwinds have been replaced by the fear of missing out in this record setting rally Big day for the chip stocks today we had a number of them rallying principally shares an Advanced Micro Devices The company will begin supplying server processors to meta platforms that's the company formerly known as Facebook AMD shares today were up 10% and the Philadelphia semiconductor index finished at a record high We have a move up in long-term interest rates ten year treasury one 48 little bit of dollar weakness not by much would do have a stronger yen here at one 1321 The cost be now higher by half of 1% in Sydney the ASX 200 better by a tenth of 1% We'll take another look at market action in about 15 minutes Juliet Or I will share in U.S. listed China education stocks have rallied on Wall Street with 80 hours in towel and new oriental education gaining as much as 10% Earlier Dow Jones reported that Beijing is planning to issue licenses for the companies to offer after school tutoring Bloomberg's Yi Jin Shen gives us some context Remember these are the stocks really got beaten hard when Patreon started to crack down into the online education sector So today's news is view positive by some investors and analysts because it's a take it as a signal that H is stabilizing its policy towards the sector The report says the Beijing plans to issue more than a dozen such licenses the companies will be able to operate after school tutoring on a nonprofit basis However they'll be allowed to make profit on other businesses such as tutoring adults for professional exams Fed governor Randle quarrels will be stepping down in the last week of December his four year term as vice chair of supervision already expired back in October however quarrels term as a fed governor runs through January 2032 Now this vacancy will give President Biden and other chance to reshape the fed's board of governors Bloomberg's Peggy Collins tells us what we may expect They will be tougher on two things Financial regulation of the Wall Street banks and on climate change So there certainly has been a loud call from Democrats and particularly senators Brown and Warren for tougher financial regulation that was sanded down a bit during the Powell administration and tenure as well as under quarrels as the top Wall Street regulator Well in addition to the quarrels vacancy President Biden has the opportunity to pick a new fed chair if he chooses J Powell's term will expire in February and at the same time vice chair Richard clared his term as a governor will expire at the end of January on top of that there is an open seat on the board of governors so a total of four vacancies approaching Now we are told President Biden recently met with both Powell and fed governor lael brainerd brighter by the way is the only sitting governor appointed by a Democrat and she has been seen as a contender for all three leadership positions It is 5 minutes past the hour time for global news.