June 18, 2025 • 31 mins
- Rafael Grossi, IAEA Director
- Jim Bullard, Dean of the Purdue Business School and former St. Louis Fed President
- Gargi Chaudhuri, Chief Investment and Portfolio Strategist, Americas at BlackRock
- Claudia Sahm, Chief Economist at New Century Advisors
Rafael Grossi, IAEA Director, joins to discuss the outlook for global energy prices amid the escalating conflict between Israel and Iran. Jim Bullard, Dean of the Purdue Business School and former St. Louis Fed President, looks ahead to today's Fed meeting and discusses whether the Fed will soon cut rates. Gargi Chaudhuri, Chief Investment and Portfolio Strategist, Americas at BlackRock, talks about the outlook for equities amid continued global uncertainty and rising geopolitical tensions. Claudia Sahm, Chief Economist at New Century Advisors, talks about whether the Fed will lower rates should the labor market show signs of deteriorating.
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Episode Transcript
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Speaker 1 (00:02):
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Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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(00:34):
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Speaker 3 (00:36):
You and Nuclear Watchdog Saying in Richmond.
Speaker 1 (00:39):
Facilities in Iran have taken direct military strikes.
Speaker 3 (00:42):
Joining us now is I'm so pleased to.
Speaker 1 (00:44):
Say the IAEA Director General, Raphael Grossi, Director General, You've
had a very busy couple of weeks.
Speaker 3 (00:51):
Thank you so much for making time for us.
Speaker 1 (00:53):
I wanted to start with what damage has been done
and what remains operational in Iran.
Speaker 4 (00:59):
Well, thank you very much. A pleasure to be with you.
Speaker 5 (01:03):
There has been a number of There have been a
number of attacks since the beginning of the operation. First
of all, a very important facility in Athans was badly
hit with a full enrichment operating hall being destroyed completely
above ground means that it means then the electrical substation
(01:27):
and power infrastructure in this big facility also being taken
out with a direct impact on a very important underground
enrichment facility which is which is also there because of
the sudden loss of power that caused of course immediate
(01:47):
damage to these very delicate systems that the ultra centrifugues
that produce the enriched uranium are.
Speaker 4 (01:54):
So this is one thing.
Speaker 5 (01:55):
Is Soahan, another very important nuclear compound which was repeatedly
hit with a few buildings being affected. The one that
has not sustained a similar degree of damage seems to
be so far a very important facility which is also
(02:17):
has the most important and sensitive parts secuted underground deep
in the mountains, which is the facility at four door today.
Speaker 6 (02:27):
So you mentioned Isfahan, So if I could just jump in,
is the four hundred and nine kilogram stockpile of highly
urined uranium still safely underground and that site.
Speaker 5 (02:38):
Well, to say safely, I'm not so sure what could
be could be the case.
Speaker 4 (02:44):
Let me say, let me say one thing.
Speaker 5 (02:46):
Which is very very important. It is it is in principle,
it is there. It is stored there, as you can imagine,
at a time of war. At a time of war,
all nuclear sites are closed, so are in inspecters who
are still i must say still in Iran, although they
(03:06):
are in a protected place as you can imagine, but
they are not inspecting no inspection, normal activity can take place.
We assume we have not seen anything that would suggest
that the stockpile has been moved, but of course this
might need to be reconfirmed as soon as we have access.
(03:28):
One has to say that Iran is aware of the
fact that this stockpile needs to be there under iaa
constant supervision.
Speaker 6 (03:38):
Well, even before hostilities began, Iran had told you they
would implement special measures to protect its enriched uranium stockpile.
What specifically are those special measures and how are they
impacting your team that's on the ground.
Speaker 7 (03:51):
We don't know.
Speaker 5 (03:52):
We have been informed, as you rightly say, and I
was also totally one of my last personal meetings with
a foreign minister, doctor Abbas ACTI, that in case something happened,
Iran would take measures to protect its material, equipment and
so forth. But we haven't been informed of anything in detail.
(04:15):
We have reminded, and I have personally reminded in a
letter to Foreign Minister or ACGLY that there are obligations
that need to be observed and that of course we
would be available in case they want to share with us,
as they should, what they are planning to do. If
they are planning to do anything, we don't know what
(04:37):
these protective additional measures could be.
Speaker 3 (04:40):
Even before the hostilities. We know.
Speaker 6 (04:42):
Your inspectors also reported that there was no systemic weapons programmed.
Does that mean that no smoking gun existed to justify
what we're seeing right now with preemptive invasion, Well, I.
Speaker 5 (04:53):
Don't know the metric of a smoking gun. How you
would define that.
Speaker 3 (05:00):
To making a nuclear weapons?
Speaker 4 (05:01):
I have said, let me get to that.
Speaker 5 (05:04):
I have said that no country in the world is
enriching uranium at this level of sixty percent, which is
technically almost equivalent of ninety percent, which is needed to
have a nuclear weapon.
Speaker 4 (05:21):
At the same time, we are inspectors.
Speaker 5 (05:22):
We are not political analysts or national political officials, so
we have to have concrete proof in order to say
that there is an active program to make a nuclear
weapon which we have not seen. That doesn't mean that
doesn't mean that they are in a territory which is
(05:46):
of concern, and this is the reason why there is
international concern. Why I had a very i would say
serious report that I presented, as you may know, to
the Board of Governors of the EYE a few days ago.
I should also mention that in my conversations with my
(06:07):
Iranian counter counterparts, they have always reminded that there is
a fatua from the leader saying that no nuclear weapon
would be compatible with Islam and things like that. But
at the same time I have told them that many
high officials have said that Iran has all the pieces
of the puzzle, so to speak. So there has been
(06:29):
a lot of ambiguity, and this is never good.
Speaker 1 (06:32):
Director General, There's a real question about what type of
nuclear risk there is should there be some sort of
explosion at some of these facilities. I know you've been
directing a number of studies on this.
Speaker 3 (06:44):
What if you detected so far?
Speaker 1 (06:45):
And how concerned are you that a direct strike on
Photo in particular could release nuclear material into the environment.
Speaker 5 (06:54):
Well, there could be, of course a release. We are
following as good and as much as we can every
military activity and assessing.
Speaker 4 (07:06):
The radiological impact of those.
Speaker 5 (07:11):
For example, I informed that in Natans, this facility that
sustained the most I would say serious damage. There has
been some contamination, but it is contained inside the perimeter
if you want, of the facility, so there is no
immediate danger for the population. Then if you move to
(07:33):
a higher amount of material like for example, these highly
enriched uranium and more, because there is not only let's
not forget, there's not only the sixty percent, there's the
five percent stop pile, there's the twenty percent stockpile. There's
a lot of nuclear material around in the country. And
(07:56):
of course a direct impact would have a radiological sequences
which would be commensurate with the attack. So this is
why I must I unfortunately cannot be as precise as
I would like to, because it would depend if only
a part of it is affected or more. But certainly,
(08:17):
certainly the possibility of a radiological impact environmental impact exists.
And as you also know, there are other facilities, including
a nuclear power plant in Iran, which of course should
never be touched because this could be another level of.
Speaker 4 (08:39):
Concern and environmental damage. So this is where this is
what we see at.
Speaker 3 (08:47):
The moment, Director General.
Speaker 1 (08:48):
This is one reason why some people have speculated that
there has been hesitance by Israelis as well as by
the United States truly dropping some of the bunker bombers
and other types of military equipment to try to destroy
some of this weaponry. Do you think that this is
actually a real risk, the sort of release potentially of
(09:09):
radiological material into the environment that you think people are
taking seriously. Have you had conversations with the US or Israel.
Speaker 5 (09:18):
Well, we have reminded everyone not that we need to
be honest, because I think in the United States, you
are the leading country in nuclear science and technology in
the world. So I think there is complete awareness. And
also in Israel and in Iran, and in the region
(09:38):
and in Europe. I'm talking to and I would say
in the Gulf States, I'm getting lots of calls from
high officials, ministers, prime ministers. They are all very, very
concerned about this probability. And I think, of course, I'm
a diplomat, I'm not private to military decision making. But
(09:59):
I want to believe and I think this should be
the case that the potential radiological consequences of any military
action is well taken into into account. But it's important
is to return to the diplomatic to the diplomatic table
as soon as possible, because what it's a state is very.
Speaker 3 (10:16):
Serious given the hostilities.
Speaker 6 (10:18):
Can you just walk us through the gap that exists
from your inspectors and how potentially what the i a
e a does every single day is being degraded.
Speaker 5 (10:28):
Well, obviously, I think nothing will be like in the past.
We have crossed the line in the sense that there
is a there is a war. There is a military
conflict which has been triggered rightly or wrongly, on the
assumption of certain nuclear.
Speaker 4 (10:48):
Activities taking place in Iran.
Speaker 5 (10:50):
And all these facilities which are or where the facilities
that the i a e a. Inspectors were looking at
day by day, some of them have been destroyed, some
of them have been affected, and we do not know
what the future holds in terms of what may happen
(11:11):
over the next few days.
Speaker 4 (11:12):
So there will, of course there will be a reshuffle.
Speaker 5 (11:17):
We will continue inspecting and carrying out our activities, but
that will be and I think we have to be
realistic about this. That will be a function of the
political and military evolution. Iran has said, and you mentioned
this just now in our conversation. Iran has said that
(11:38):
they might take additional measures. There are people in Iran saying,
for example, which I hope will not be the case,
that Iran should leave the Treaty on the Non Proliferation
of Nuclear Weapons and expelled the IAEA, as it was
the case in North Korea, as you remember a few
years ago. So here, I think is a big political
(12:01):
scenario unfolding which will hold a lot of events that
we will have to take into consideration for international peace
and security in the region and in the world.
Speaker 1 (12:13):
Quite obviously, IAEA Director General Raphael Grossi, thank you so
much for spending time with us amid this conflict that
I know you are closely following. Here's the latest markets
awaiting the FED rate decision out later today. The consensus
(12:35):
widely expecting the FED to hold rate steady, but updated
economic forecast, which might be the most interesting part.
Speaker 3 (12:42):
Former Saint Louis.
Speaker 1 (12:43):
FED President Jim Bullard joins us now for more. Jim,
so glad that you could join us.
Speaker 3 (12:47):
Thank you.
Speaker 1 (12:48):
I want to start with why would they say anything
today at all? Can they avoid I guess his better question,
can they avoid saying anything at a time where there
is so much uncertainty?
Speaker 7 (12:58):
Yeah?
Speaker 8 (12:59):
Well, the FEDS certainly not taking the headlines today with
the war in the Middle East, so that might play
to their benefit. I don't think they would have said
too much anyway. I do think there is the SEP
coming out, and this will be the first SEP post
April seconds, and so I think it will be a
(13:20):
more stagflationary SVP, and I think markets are already anticipating that,
but there is some room there for surprise depending on
where that goes. And so I think during the Chairs
press conference, he'll want to be talking about the SEP.
Speaker 1 (13:38):
Well, yeah, the idea of whether they do downgrade growth
and increase their expectations for inflation at the same time,
how do they respond with the dot plot, how do
they respond with the reaction function?
Speaker 3 (13:48):
And that's really the ultimate question.
Speaker 1 (13:50):
Do they place the emphasis on inflation or do they
place the emphasis on the slowing growth and potential hits
the labor market. Do you have a sense, Jim, of
whether the Fed this FED is more focused on inflation
than growth or if their focus is shifting just a
little more with some of the weakening data that we've
seen over the past couple of weeks.
Speaker 8 (14:09):
Well, that's why this will be moderately interesting. I think
you've also got comments from many members of the committee,
But I think that if it was me, I'd be
talking about slower growth due to the trade war, because
that's what happened in twenty eighteen twenty nineteen, and I'd
play down the inflation effects because I didn't really see
(14:30):
too much in that earlier trade war. In fact, course,
PC inflation actually declined in the first half of twenty nineteen,
and by the time you got to the summer of
twenty nineteen, that economy.
Speaker 7 (14:42):
Was slower and the FED lowered the policy rate.
Speaker 8 (14:45):
So I think the baseline would be here to get
to September and make a judgment there about how they
want to play this for the rest of twenty twenty five.
Speaker 6 (14:56):
Well, Jim, given your analysis and given the actual hard
day that we have seen with inflation coming down in
the past four prints, why wouldn't the FED be cutting
today or do you think they would if they weren't
so concerned about the uncertainty from policymakers in Washington.
Speaker 8 (15:13):
Yeah, I mean, I think one thing is just to
get past this deadline, the ninety day deadline on trade deals,
and see what comes out of that whether that would
be extended or whether there would just be deal set
or preliminary deal set. I think that would provide a
lot of information to the committee. Also, the data on
(15:33):
the economy has been reasonably good. Looks like second quarter
GDP now is I just checked it three and a
half percent, So that'll off set a week first quarter
and keep the first half on average around two percent
or a little below two percent growth. So you're okay
on that. A lot of the other indicators are pretty good.
(15:56):
Core PC inflation or dallas FTRIM mean about two and
a half a half percent on an annual basis is still
a little bit high, and so I think the committees
probably got about the right stance here.
Speaker 7 (16:07):
But they can decide to do something a little bit.
Speaker 8 (16:11):
Later in the year, or if the data do come
in in an adverse way, they can push things off
to twenty twenty six.
Speaker 6 (16:18):
There's another point of consternation as well at this meeting,
and of course that's the hostilities going on between Israel
and Iran and the concern that there's going to be
prolonged elevated oil prices.
Speaker 3 (16:29):
How does the FED deal with this?
Speaker 8 (16:32):
Yeah, Well, price shocks are always always vexing. From the
FED point of view, I think the response so far
has been muted. Considering that this is open warfare between
Israel and Iran.
Speaker 7 (16:46):
I think Iran militarily.
Speaker 8 (16:48):
Speaking, doesn't look like they're in a very good position here.
So possibly we get some kind of resolution one way
or another, and markets are.
Speaker 7 (16:58):
Waiting to see where that's going to come out. But
it certainly does.
Speaker 8 (17:02):
Affect headline inflation, does affect what people actually pay at
the pump and in the US and so and around
the world, and so that's definitely.
Speaker 7 (17:13):
A factor, Jim.
Speaker 1 (17:14):
As we look ahead, a lot of people are saying
that this is increasingly a lame duck FED chair and
that after he is gone, there's going to be someone
new in his seat who will be a lot more dubvish.
How realistic do you think that that actually is?
Speaker 8 (17:29):
Well, one share at a time, and it's really the
committee that makes policy. It's not really any one person.
Certainly Chair PubL guides the committee, but.
Speaker 7 (17:39):
It's having been on it.
Speaker 8 (17:41):
There's many people with their own staffs and their own analysis,
and they've got their own ideas about where policy should go.
Speaker 7 (17:49):
I do think that the committee's.
Speaker 8 (17:51):
Smarter than any one person on the committee, and it
really pays off to have a lot of different viewpoints
as you're trying to make reason judgments where to take
monetary policy for the United States.
Speaker 3 (18:02):
Jim, do you.
Speaker 1 (18:03):
Think that most of the committee members agree with you
that they should be taking the slowing growth more into
consideration than the inflationary potential shock given the fact that
they haven't really seen it yet, or do you think
that they are focusing on what some people have said
is fighting the last war, which is inflation that got
maybe a little away from them.
Speaker 8 (18:22):
Yeah, it's a little bit. I think about half the committee.
It's once burned twice shy. I think they really don't
want to let anything occur that would send inflation expectations
meaningfully higher. You do have these survey based expectations. Those
seem to have a big political element to them, and
(18:42):
so I think you have to discard them right now.
The tips market five year tips inflation compensation about two
thirty two today trading right in that area. So that
sounds pretty good for a five year outlook on inflation.
And if you think some of that's a little bit
of risk premium, so market is pretty confident as the
(19:05):
FED will hit the inflation target over the five year horizon,
which is really about the best you can do as
far as the FED.
Speaker 1 (19:13):
Former Saint Louis FED President jimbull Ard, thank you so
much for being with us.
Speaker 3 (19:27):
Recovery of black Rock. Writing this.
Speaker 1 (19:29):
The Federal keep rates on hold and highlight elevated uncertainty.
Speaker 3 (19:32):
No surprise there.
Speaker 1 (19:33):
All eyes will be on the statement of economic projections.
Gargee joins us. Now for more gargy. How focused are
you on the FED? How focused are you on the geopolitics?
How do you sort of weigh the two?
Speaker 9 (19:44):
Absolutely, good morning, great to be here. Usually, you know,
the saying goes the marketing can only focus on one
thing at a time, and we've had many one things
this year. Obviously oil prices, the impact of geopolitics, what
that might do to headline inflation to consumer, that's top
of mind, but I wouldn't. I mean, obviously this is
(20:04):
an SEP FED meeting. I think that's also going to
be important. In particular whether they're going to hint at
two more rate cuts or just one more I think
that is relevant.
Speaker 3 (20:17):
And at the same.
Speaker 9 (20:18):
Time, how they handled all this additional uncertainty to your
drinking blood game. I think all of that is going
to weigh on them. So I think both are going
to be important. But obviously the market is the most
important thing right now for both the humans involved, as
well as oil prices and broader risks off in the markets,
(20:38):
even for a short term. Is certainly the geopolitics in
the Middle East.
Speaker 3 (20:41):
And just to be clear, the drinking game is with water.
Speaker 1 (20:43):
We all should be hydrated, So clearly that is where
we're going online. But there is this question going forward
about how much this economy needs that kind of support
versus has some sort of threat, not necessarily of overheating,
but facing a real sticky inflation that could.
Speaker 3 (20:57):
Be really punitive.
Speaker 1 (20:59):
I'm just wondering from your perspective, and the message from
markets aren't equity is telling us that actually there is
no problem, even though the economic data might suggest otherwise.
Speaker 9 (21:09):
So time and again we've seen that when there is
geopolitical uncertainty in the markets, yes, we see that spike
and oil prices. Historically this has been a great time
to be diversified into products like gold, because that has
been an excellent diversifier. But historically what we've seen is
that the three month forward or even the one month
forward on high quality parts of equity markets. They have
(21:32):
looked through geopolitical uncertainty. However, I think as we go
into two and two thirty pm today, let's take a
look back of what we've gotten since the May sixth,
May seventh FOMC last meeting. Inflation has been you know,
there have been no impacts of tariffs yet yesterday, I
think the most important thing was around the weakness of
(21:53):
retail sales and global ip that is softening, and I
think that is important and perhaps had some lot of
an impact on price action in markets yesterday, and I
think the FED recognizes that and more importantly at eight
thirty today, initial jobless claims and the continuing claims that
have ever so slightly gotten worse. I think those are
the important things that we should all be looking forward to.
(22:16):
But at the same time, like we've seen before, the
market does tend to sort of look through neo term
shifts in volatility, and I think the macro picture for
now is still not too weak, so equities or especially
quality equities and AI equities are probably going to be okay.
Speaker 3 (22:36):
But gardy is that a mistake?
Speaker 6 (22:37):
For all we know the president right now is still
weighing his options, and one of those options is a strike.
Speaker 9 (22:43):
You know, one of those options is a strike. The
market always responds in probabilities, not binary outcomes, So let's
think about the probability of that. Yes, that's the headlines
right now, with the surrender headlines from yesterday, for the
US to get involved, for retaliatory retaliatory strikes to come through.
(23:05):
I think that's going to be a big thing for
the markets. Absolutely. And that's again why I would suggest
that if you're listening to this right now, if you're
an investor, having diversifying stuff in your portfolio, having diversifying
asset classes like international equities, having some bonds in the
front end of the curve and the belly of the curve,
having things like gold and having inflation protection is really important.
Speaker 6 (23:29):
How much have you been advocating for more gold and
our portfolio since Trump took office.
Speaker 9 (23:34):
I won't say it's to do with Trump. I think
that we were talking about gold even if you think
back to last year, just as another way in which
you can diversify against people moving away other countries moving
away from the US dollar. It's certainly a geopolitical risk,
and by the way, we've been faced with geopolitical risk
much before November twenty twenty four. This was something that
(23:58):
has the geopolitical fragmentation we're seeing wars in the up Pakistan, Israel,
Gaza and now of course with Iran. That's been going
on for some time. So we've been talking about that,
and I think it's a balast and a portfolio that
investors need.
Speaker 1 (24:12):
I'm going to put you on the spot, so I
apologize in advance. But a lot of people have been
talking about stock selection, and they've been talking about the
importance of going away from indexes.
Speaker 3 (24:22):
And moving into companies.
Speaker 1 (24:24):
We're not focusing necessarily on big existential risk, but you're
focusing on AI adoption, or you're focusing on the fact
that people are eating more.
Speaker 3 (24:32):
Breadsticks at this particular company.
Speaker 1 (24:34):
How much is that challenging some of the ETF landscape
and the indexing landscape.
Speaker 3 (24:40):
They got a lot of popularity at.
Speaker 1 (24:41):
A time where there was a much more beta type
a trend rather than this sort of alpha aspect of
the conversations we have today.
Speaker 9 (24:48):
Absolutely not a challenge at all. Actually, when we think
about where black Rock has been able to garner the
most amount of flows. It is investors more and more
adopting active ETFs. Exactly. The trend that you're portraying is
playing out in the markets where activetfs such as BAI
that focuses on AI in an active manner because obviously
(25:10):
you can't just set it and forget about it. Things
like bink, which is flexible fixed income where you're focusing
on harnessing income in the markets, those have been so
popular that pickers investors are recognizing the need to be
dynamic as well as quite nimble in this environment. Having
said that, for many investors who are just entering the
(25:30):
markets that need to understand the market is theirs to own.
Perhaps owning just a simple index is a very good
first step to be in the markets. And frankly, when
we look at the flows, there's a tremendous amount of
inflows to products like bitcoin for example, ibit one of
the it's obviously an index product, but something that has
gonered huge amount of inflows, yurtel date and products like
(25:53):
the very front end of the fixed income markets with ASGOV.
So there is a place for both, but absolutely no
doubt investors are focusing on more and more bespoke ways
to access the market with active fixed income and active
equity ETF.
Speaker 1 (26:07):
Bitcoin ETF in tandem with the gold ETF.
Speaker 3 (26:10):
I just wonder, how do you have bitcoin?
Speaker 1 (26:13):
That's the underlying to an ETF that people we can get.
Speaker 3 (26:16):
In that gargiechattery and flat round. Thank you so much.
Speaker 1 (26:29):
Joining us now is Claudius Sum of New Century Advisors. Claudia,
great to see you, Thank you so much for being
with us. I want to start with this idea that
the weight and see FED doesn't have to tell us anything.
A lot of people would argue and push back and say, actually,
they have to give us a sense of what their
scenario analysis looks like at a time or potentially that
it could increase their chance of stagflation. What's your sense
(26:52):
of what their scenario analysis looks like. What's their response
mechanism to that?
Speaker 8 (26:58):
Right?
Speaker 10 (26:58):
I think that'll be a really important part of the
press conference today is to have how talk through the
risks the scenarios that the FED is considering. Unfortunately, their tools,
like the Summary of Economic Projections, the way it's put
together right now, doesn't do a great job of getting
you know, scenarios across, but it is so clear that
the FED is in risk management mode, right, this is
(27:18):
about where inflation could go, how it could persist, and
that you know, this is this is kind of an
insurance pause, right. They want to avoid those risk outcomes.
And so then it is a big part of explaining
why why is it you're on hold? Inflation's coming down,
you know, why aren't you cutting now? So I think
they really do need to kind of spell that out
and give us a sense of what they're looking for
(27:40):
in the data as it's coming in.
Speaker 6 (27:42):
What potential damage could they do if they are too
late and they should be cutting because inflation's coming down.
Speaker 10 (27:49):
Well, it's it's unnecessary weakness on the economy. I mean,
if you look at interest rate sensitive sectors like the
housing market, the higher rates they are having an effect, right,
They're having a on people who are out there trying
to buy homes, builders who are trying to you know,
construct new housing.
Speaker 11 (28:05):
So you know, if like that, that is a pain.
Speaker 10 (28:09):
It may be necessary to keep inflation under control, to
keep inflation expectations under control, but there is a cost, right,
and I think the Fed is balancing that well. But
it is something that should be communicated because otherwise, just
if you look at the data on hand and you
think of the data driven FED, it's like, well, why
aren't you starting to cut or even talking about cutting?
Like they're really not just going to pause today, They're
(28:30):
going to push that pause pretty hard through probably much
of the rest of this year.
Speaker 6 (28:35):
It sounds like you think Chair Powell is going to
be hawkish today. We just got to know from Andrew Holland,
Horse of City, and he said there's three reasons for
Powell to be dubbish. One three months of softer core inflation.
Two rising jobless claims, continuing jobless claims and softer housing data.
Speaker 3 (28:50):
Do you think his rhetoric is.
Speaker 6 (28:51):
Going to lean hawkish when a lot of people think
he should actually come out and sound a bit dubbish?
Speaker 10 (28:59):
Yeah, I mean it's I think a lot of it
comes down to how to me. One big question to
listen to how today is to explain, you know that
inflation data in the last four months that's been unexpectedly soft.
Speaker 11 (29:10):
What's that about, right, Because.
Speaker 10 (29:12):
If it comes a hawkish tone to me would be saying, oh, well,
the terriff inflation is still coming.
Speaker 11 (29:16):
We just it's timing. We just need to wait, it's coming.
Speaker 10 (29:19):
But you know there's you can look at that data
and see some nuance not just from what you think
are teriff effects, but just inflation in general, where it's like, man,
the demands a little softer. Maybe this isn't pushing through
like anything that he would say today that would kind
of soften or push against all of these upside risk
to inflation to me would.
Speaker 11 (29:36):
I think be pretty balanced. But you know, we'll just
have to see where he says.
Speaker 10 (29:40):
And one difficult thing today with listening to Howe is
understanding that you know he is speaking for the FEC.
Speaker 11 (29:45):
That's what he does, is fed shair.
Speaker 10 (29:46):
He has his interpretation of it as well, and he
probably will be in something of a live debate with
the dot plot and the summary projection, so it's kind
of tough to parse it on days where we get
like these forecasts.
Speaker 11 (29:58):
In addition to him speaking.
Speaker 1 (30:01):
I love that a live debate with him basically arguing
the side of everyone on the committee and trying to
sort of come out somewhere in the middle. I'm struck
by what's keep some people keep on saying, which is
a number of members of this committee are fighting the
last war. They are so scarred from the use of
transitory and failing to curtail inflation a couple of years ago,
(30:21):
that they are more willing to look through any weakness
in the labor market in order to prioritize inflation. Do
you expect that to be the same today, which is
the reason why people are expecting more of.
Speaker 3 (30:32):
A hawkish tone.
Speaker 10 (30:34):
I think we'll continue to see the focus of the
informc on the inflation risks, on inflation going higher. Again,
the claims data today didn't reinforce any kind of an emergency,
and we aren't four point two percent unemployment right like,
we aren't a full employment economy, so.
Speaker 11 (30:50):
We're starting from a good place.
Speaker 10 (30:51):
Inflation still somewhat elevated, and just everything we've gone in
terms of the data, and then, like you said, kind
of fighting the last war, the inflation risk just loomed
really large. But as we're just seeing how they're interpreting
the data, how they're questioning their own assumptions about you know,
inflation could really get out of hand. I think that's
the piece, you know, that would be really important to understand.
(31:14):
If if they're focused on the current threats to the
economy as opposed to the threats we had four years ago.
Speaker 1 (31:20):
Claudia Sam of New Central Advisors, thank you so much
for being with us. Really appreciate your insights.
Speaker 2 (31:26):
This is the Bloomberg Surveillance Podcast, bringing you the best
in markets, economics, angiopolitics. You can watch the show live
on Bloomberg TV weekday mornings from six am to nine
am Eastern. Subscribe to the podcast on Apple, Spotify, or
anywhere else you listen, and as always, on the Bloomberg
Terminal and the Bloomberg Business app.
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hordern. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business app.
Speaker 3 (00:36):
You and Nuclear Watchdog Saying in Richmond.
Speaker 1 (00:39):
Facilities in Iran have taken direct military strikes.
Speaker 3 (00:42):
Joining us now is I'm so pleased to.
Speaker 1 (00:44):
Say the IAEA Director General, Raphael Grossi, Director General, You've
had a very busy couple of weeks.
Speaker 3 (00:51):
Thank you so much for making time for us.
Speaker 1 (00:53):
I wanted to start with what damage has been done
and what remains operational in Iran.
Speaker 4 (00:59):
Well, thank you very much. A pleasure to be with you.
Speaker 5 (01:03):
There has been a number of There have been a
number of attacks since the beginning of the operation. First
of all, a very important facility in Athans was badly
hit with a full enrichment operating hall being destroyed completely
above ground means that it means then the electrical substation
(01:27):
and power infrastructure in this big facility also being taken
out with a direct impact on a very important underground
enrichment facility which is which is also there because of
the sudden loss of power that caused of course immediate
(01:47):
damage to these very delicate systems that the ultra centrifugues
that produce the enriched uranium are.
Speaker 4 (01:54):
So this is one thing.
Speaker 5 (01:55):
Is Soahan, another very important nuclear compound which was repeatedly
hit with a few buildings being affected. The one that
has not sustained a similar degree of damage seems to
be so far a very important facility which is also
(02:17):
has the most important and sensitive parts secuted underground deep
in the mountains, which is the facility at four door today.
Speaker 6 (02:27):
So you mentioned Isfahan, So if I could just jump in,
is the four hundred and nine kilogram stockpile of highly
urined uranium still safely underground and that site.
Speaker 5 (02:38):
Well, to say safely, I'm not so sure what could
be could be the case.
Speaker 4 (02:44):
Let me say, let me say one thing.
Speaker 5 (02:46):
Which is very very important. It is it is in principle,
it is there. It is stored there, as you can imagine,
at a time of war. At a time of war,
all nuclear sites are closed, so are in inspecters who
are still i must say still in Iran, although they
(03:06):
are in a protected place as you can imagine, but
they are not inspecting no inspection, normal activity can take place.
We assume we have not seen anything that would suggest
that the stockpile has been moved, but of course this
might need to be reconfirmed as soon as we have access.
(03:28):
One has to say that Iran is aware of the
fact that this stockpile needs to be there under iaa
constant supervision.
Speaker 6 (03:38):
Well, even before hostilities began, Iran had told you they
would implement special measures to protect its enriched uranium stockpile.
What specifically are those special measures and how are they
impacting your team that's on the ground.
Speaker 7 (03:51):
We don't know.
Speaker 5 (03:52):
We have been informed, as you rightly say, and I
was also totally one of my last personal meetings with
a foreign minister, doctor Abbas ACTI, that in case something happened,
Iran would take measures to protect its material, equipment and
so forth. But we haven't been informed of anything in detail.
(04:15):
We have reminded, and I have personally reminded in a
letter to Foreign Minister or ACGLY that there are obligations
that need to be observed and that of course we
would be available in case they want to share with us,
as they should, what they are planning to do. If
they are planning to do anything, we don't know what
(04:37):
these protective additional measures could be.
Speaker 3 (04:40):
Even before the hostilities. We know.
Speaker 6 (04:42):
Your inspectors also reported that there was no systemic weapons programmed.
Does that mean that no smoking gun existed to justify
what we're seeing right now with preemptive invasion, Well, I.
Speaker 5 (04:53):
Don't know the metric of a smoking gun. How you
would define that.
Speaker 3 (05:00):
To making a nuclear weapons?
Speaker 4 (05:01):
I have said, let me get to that.
Speaker 5 (05:04):
I have said that no country in the world is
enriching uranium at this level of sixty percent, which is
technically almost equivalent of ninety percent, which is needed to
have a nuclear weapon.
Speaker 4 (05:21):
At the same time, we are inspectors.
Speaker 5 (05:22):
We are not political analysts or national political officials, so
we have to have concrete proof in order to say
that there is an active program to make a nuclear
weapon which we have not seen. That doesn't mean that
doesn't mean that they are in a territory which is
(05:46):
of concern, and this is the reason why there is
international concern. Why I had a very i would say
serious report that I presented, as you may know, to
the Board of Governors of the EYE a few days ago.
I should also mention that in my conversations with my
(06:07):
Iranian counter counterparts, they have always reminded that there is
a fatua from the leader saying that no nuclear weapon
would be compatible with Islam and things like that. But
at the same time I have told them that many
high officials have said that Iran has all the pieces
of the puzzle, so to speak. So there has been
(06:29):
a lot of ambiguity, and this is never good.
Speaker 1 (06:32):
Director General, There's a real question about what type of
nuclear risk there is should there be some sort of
explosion at some of these facilities. I know you've been
directing a number of studies on this.
Speaker 3 (06:44):
What if you detected so far?
Speaker 1 (06:45):
And how concerned are you that a direct strike on
Photo in particular could release nuclear material into the environment.
Speaker 5 (06:54):
Well, there could be, of course a release. We are
following as good and as much as we can every
military activity and assessing.
Speaker 4 (07:06):
The radiological impact of those.
Speaker 5 (07:11):
For example, I informed that in Natans, this facility that
sustained the most I would say serious damage. There has
been some contamination, but it is contained inside the perimeter
if you want, of the facility, so there is no
immediate danger for the population. Then if you move to
(07:33):
a higher amount of material like for example, these highly
enriched uranium and more, because there is not only let's
not forget, there's not only the sixty percent, there's the
five percent stop pile, there's the twenty percent stockpile. There's
a lot of nuclear material around in the country. And
(07:56):
of course a direct impact would have a radiological sequences
which would be commensurate with the attack. So this is
why I must I unfortunately cannot be as precise as
I would like to, because it would depend if only
a part of it is affected or more. But certainly,
(08:17):
certainly the possibility of a radiological impact environmental impact exists.
And as you also know, there are other facilities, including
a nuclear power plant in Iran, which of course should
never be touched because this could be another level of.
Speaker 4 (08:39):
Concern and environmental damage. So this is where this is
what we see at.
Speaker 3 (08:47):
The moment, Director General.
Speaker 1 (08:48):
This is one reason why some people have speculated that
there has been hesitance by Israelis as well as by
the United States truly dropping some of the bunker bombers
and other types of military equipment to try to destroy
some of this weaponry. Do you think that this is
actually a real risk, the sort of release potentially of
(09:09):
radiological material into the environment that you think people are
taking seriously. Have you had conversations with the US or Israel.
Speaker 5 (09:18):
Well, we have reminded everyone not that we need to
be honest, because I think in the United States, you
are the leading country in nuclear science and technology in
the world. So I think there is complete awareness. And
also in Israel and in Iran, and in the region
(09:38):
and in Europe. I'm talking to and I would say
in the Gulf States, I'm getting lots of calls from
high officials, ministers, prime ministers. They are all very, very
concerned about this probability. And I think, of course, I'm
a diplomat, I'm not private to military decision making. But
(09:59):
I want to believe and I think this should be
the case that the potential radiological consequences of any military
action is well taken into into account. But it's important
is to return to the diplomatic to the diplomatic table
as soon as possible, because what it's a state is very.
Speaker 3 (10:16):
Serious given the hostilities.
Speaker 6 (10:18):
Can you just walk us through the gap that exists
from your inspectors and how potentially what the i a
e a does every single day is being degraded.
Speaker 5 (10:28):
Well, obviously, I think nothing will be like in the past.
We have crossed the line in the sense that there
is a there is a war. There is a military
conflict which has been triggered rightly or wrongly, on the
assumption of certain nuclear.
Speaker 4 (10:48):
Activities taking place in Iran.
Speaker 5 (10:50):
And all these facilities which are or where the facilities
that the i a e a. Inspectors were looking at
day by day, some of them have been destroyed, some
of them have been affected, and we do not know
what the future holds in terms of what may happen
(11:11):
over the next few days.
Speaker 4 (11:12):
So there will, of course there will be a reshuffle.
Speaker 5 (11:17):
We will continue inspecting and carrying out our activities, but
that will be and I think we have to be
realistic about this. That will be a function of the
political and military evolution. Iran has said, and you mentioned
this just now in our conversation. Iran has said that
(11:38):
they might take additional measures. There are people in Iran saying,
for example, which I hope will not be the case,
that Iran should leave the Treaty on the Non Proliferation
of Nuclear Weapons and expelled the IAEA, as it was
the case in North Korea, as you remember a few
years ago. So here, I think is a big political
(12:01):
scenario unfolding which will hold a lot of events that
we will have to take into consideration for international peace
and security in the region and in the world.
Speaker 1 (12:13):
Quite obviously, IAEA Director General Raphael Grossi, thank you so
much for spending time with us amid this conflict that
I know you are closely following. Here's the latest markets
awaiting the FED rate decision out later today. The consensus
(12:35):
widely expecting the FED to hold rate steady, but updated
economic forecast, which might be the most interesting part.
Speaker 3 (12:42):
Former Saint Louis.
Speaker 1 (12:43):
FED President Jim Bullard joins us now for more. Jim,
so glad that you could join us.
Speaker 3 (12:47):
Thank you.
Speaker 1 (12:48):
I want to start with why would they say anything
today at all? Can they avoid I guess his better question,
can they avoid saying anything at a time where there
is so much uncertainty?
Speaker 7 (12:58):
Yeah?
Speaker 8 (12:59):
Well, the FEDS certainly not taking the headlines today with
the war in the Middle East, so that might play
to their benefit. I don't think they would have said
too much anyway. I do think there is the SEP
coming out, and this will be the first SEP post
April seconds, and so I think it will be a
(13:20):
more stagflationary SVP, and I think markets are already anticipating that,
but there is some room there for surprise depending on
where that goes. And so I think during the Chairs
press conference, he'll want to be talking about the SEP.
Speaker 1 (13:38):
Well, yeah, the idea of whether they do downgrade growth
and increase their expectations for inflation at the same time,
how do they respond with the dot plot, how do
they respond with the reaction function?
Speaker 3 (13:48):
And that's really the ultimate question.
Speaker 1 (13:50):
Do they place the emphasis on inflation or do they
place the emphasis on the slowing growth and potential hits
the labor market. Do you have a sense, Jim, of
whether the Fed this FED is more focused on inflation
than growth or if their focus is shifting just a
little more with some of the weakening data that we've
seen over the past couple of weeks.
Speaker 8 (14:09):
Well, that's why this will be moderately interesting. I think
you've also got comments from many members of the committee,
But I think that if it was me, I'd be
talking about slower growth due to the trade war, because
that's what happened in twenty eighteen twenty nineteen, and I'd
play down the inflation effects because I didn't really see
(14:30):
too much in that earlier trade war. In fact, course,
PC inflation actually declined in the first half of twenty nineteen,
and by the time you got to the summer of
twenty nineteen, that economy.
Speaker 7 (14:42):
Was slower and the FED lowered the policy rate.
Speaker 8 (14:45):
So I think the baseline would be here to get
to September and make a judgment there about how they
want to play this for the rest of twenty twenty five.
Speaker 6 (14:56):
Well, Jim, given your analysis and given the actual hard
day that we have seen with inflation coming down in
the past four prints, why wouldn't the FED be cutting
today or do you think they would if they weren't
so concerned about the uncertainty from policymakers in Washington.
Speaker 8 (15:13):
Yeah, I mean, I think one thing is just to
get past this deadline, the ninety day deadline on trade deals,
and see what comes out of that whether that would
be extended or whether there would just be deal set
or preliminary deal set. I think that would provide a
lot of information to the committee. Also, the data on
(15:33):
the economy has been reasonably good. Looks like second quarter
GDP now is I just checked it three and a
half percent, So that'll off set a week first quarter
and keep the first half on average around two percent
or a little below two percent growth. So you're okay
on that. A lot of the other indicators are pretty good.
(15:56):
Core PC inflation or dallas FTRIM mean about two and
a half a half percent on an annual basis is still
a little bit high, and so I think the committees
probably got about the right stance here.
Speaker 7 (16:07):
But they can decide to do something a little bit.
Speaker 8 (16:11):
Later in the year, or if the data do come
in in an adverse way, they can push things off
to twenty twenty six.
Speaker 6 (16:18):
There's another point of consternation as well at this meeting,
and of course that's the hostilities going on between Israel
and Iran and the concern that there's going to be
prolonged elevated oil prices.
Speaker 3 (16:29):
How does the FED deal with this?
Speaker 8 (16:32):
Yeah, Well, price shocks are always always vexing. From the
FED point of view, I think the response so far
has been muted. Considering that this is open warfare between
Israel and Iran.
Speaker 7 (16:46):
I think Iran militarily.
Speaker 8 (16:48):
Speaking, doesn't look like they're in a very good position here.
So possibly we get some kind of resolution one way
or another, and markets are.
Speaker 7 (16:58):
Waiting to see where that's going to come out. But
it certainly does.
Speaker 8 (17:02):
Affect headline inflation, does affect what people actually pay at
the pump and in the US and so and around
the world, and so that's definitely.
Speaker 7 (17:13):
A factor, Jim.
Speaker 1 (17:14):
As we look ahead, a lot of people are saying
that this is increasingly a lame duck FED chair and
that after he is gone, there's going to be someone
new in his seat who will be a lot more dubvish.
How realistic do you think that that actually is?
Speaker 8 (17:29):
Well, one share at a time, and it's really the
committee that makes policy. It's not really any one person.
Certainly Chair PubL guides the committee, but.
Speaker 7 (17:39):
It's having been on it.
Speaker 8 (17:41):
There's many people with their own staffs and their own analysis,
and they've got their own ideas about where policy should go.
Speaker 7 (17:49):
I do think that the committee's.
Speaker 8 (17:51):
Smarter than any one person on the committee, and it
really pays off to have a lot of different viewpoints
as you're trying to make reason judgments where to take
monetary policy for the United States.
Speaker 3 (18:02):
Jim, do you.
Speaker 1 (18:03):
Think that most of the committee members agree with you
that they should be taking the slowing growth more into
consideration than the inflationary potential shock given the fact that
they haven't really seen it yet, or do you think
that they are focusing on what some people have said
is fighting the last war, which is inflation that got
maybe a little away from them.
Speaker 8 (18:22):
Yeah, it's a little bit. I think about half the committee.
It's once burned twice shy. I think they really don't
want to let anything occur that would send inflation expectations
meaningfully higher. You do have these survey based expectations. Those
seem to have a big political element to them, and
(18:42):
so I think you have to discard them right now.
The tips market five year tips inflation compensation about two
thirty two today trading right in that area. So that
sounds pretty good for a five year outlook on inflation.
And if you think some of that's a little bit
of risk premium, so market is pretty confident as the
(19:05):
FED will hit the inflation target over the five year horizon,
which is really about the best you can do as
far as the FED.
Speaker 1 (19:13):
Former Saint Louis FED President jimbull Ard, thank you so
much for being with us.
Speaker 3 (19:27):
Recovery of black Rock. Writing this.
Speaker 1 (19:29):
The Federal keep rates on hold and highlight elevated uncertainty.
Speaker 3 (19:32):
No surprise there.
Speaker 1 (19:33):
All eyes will be on the statement of economic projections.
Gargee joins us. Now for more gargy. How focused are
you on the FED? How focused are you on the geopolitics?
How do you sort of weigh the two?
Speaker 9 (19:44):
Absolutely, good morning, great to be here. Usually, you know,
the saying goes the marketing can only focus on one
thing at a time, and we've had many one things
this year. Obviously oil prices, the impact of geopolitics, what
that might do to headline inflation to consumer, that's top
of mind, but I wouldn't. I mean, obviously this is
(20:04):
an SEP FED meeting. I think that's also going to
be important. In particular whether they're going to hint at
two more rate cuts or just one more I think
that is relevant.
Speaker 3 (20:17):
And at the same.
Speaker 9 (20:18):
Time, how they handled all this additional uncertainty to your
drinking blood game. I think all of that is going
to weigh on them. So I think both are going
to be important. But obviously the market is the most
important thing right now for both the humans involved, as
well as oil prices and broader risks off in the markets,
(20:38):
even for a short term. Is certainly the geopolitics in
the Middle East.
Speaker 3 (20:41):
And just to be clear, the drinking game is with water.
Speaker 1 (20:43):
We all should be hydrated, So clearly that is where
we're going online. But there is this question going forward
about how much this economy needs that kind of support
versus has some sort of threat, not necessarily of overheating,
but facing a real sticky inflation that could.
Speaker 3 (20:57):
Be really punitive.
Speaker 1 (20:59):
I'm just wondering from your perspective, and the message from
markets aren't equity is telling us that actually there is
no problem, even though the economic data might suggest otherwise.
Speaker 9 (21:09):
So time and again we've seen that when there is
geopolitical uncertainty in the markets, yes, we see that spike
and oil prices. Historically this has been a great time
to be diversified into products like gold, because that has
been an excellent diversifier. But historically what we've seen is
that the three month forward or even the one month
forward on high quality parts of equity markets. They have
(21:32):
looked through geopolitical uncertainty. However, I think as we go
into two and two thirty pm today, let's take a
look back of what we've gotten since the May sixth,
May seventh FOMC last meeting. Inflation has been you know,
there have been no impacts of tariffs yet yesterday, I
think the most important thing was around the weakness of
(21:53):
retail sales and global ip that is softening, and I
think that is important and perhaps had some lot of
an impact on price action in markets yesterday, and I
think the FED recognizes that and more importantly at eight
thirty today, initial jobless claims and the continuing claims that
have ever so slightly gotten worse. I think those are
the important things that we should all be looking forward to.
(22:16):
But at the same time, like we've seen before, the
market does tend to sort of look through neo term
shifts in volatility, and I think the macro picture for
now is still not too weak, so equities or especially
quality equities and AI equities are probably going to be okay.
Speaker 3 (22:36):
But gardy is that a mistake?
Speaker 6 (22:37):
For all we know the president right now is still
weighing his options, and one of those options is a strike.
Speaker 9 (22:43):
You know, one of those options is a strike. The
market always responds in probabilities, not binary outcomes, So let's
think about the probability of that. Yes, that's the headlines
right now, with the surrender headlines from yesterday, for the
US to get involved, for retaliatory retaliatory strikes to come through.
(23:05):
I think that's going to be a big thing for
the markets. Absolutely. And that's again why I would suggest
that if you're listening to this right now, if you're
an investor, having diversifying stuff in your portfolio, having diversifying
asset classes like international equities, having some bonds in the
front end of the curve and the belly of the curve,
having things like gold and having inflation protection is really important.
Speaker 6 (23:29):
How much have you been advocating for more gold and
our portfolio since Trump took office.
Speaker 9 (23:34):
I won't say it's to do with Trump. I think
that we were talking about gold even if you think
back to last year, just as another way in which
you can diversify against people moving away other countries moving
away from the US dollar. It's certainly a geopolitical risk,
and by the way, we've been faced with geopolitical risk
much before November twenty twenty four. This was something that
(23:58):
has the geopolitical fragmentation we're seeing wars in the up Pakistan, Israel,
Gaza and now of course with Iran. That's been going
on for some time. So we've been talking about that,
and I think it's a balast and a portfolio that
investors need.
Speaker 1 (24:12):
I'm going to put you on the spot, so I
apologize in advance. But a lot of people have been
talking about stock selection, and they've been talking about the
importance of going away from indexes.
Speaker 3 (24:22):
And moving into companies.
Speaker 1 (24:24):
We're not focusing necessarily on big existential risk, but you're
focusing on AI adoption, or you're focusing on the fact
that people are eating more.
Speaker 3 (24:32):
Breadsticks at this particular company.
Speaker 1 (24:34):
How much is that challenging some of the ETF landscape
and the indexing landscape.
Speaker 3 (24:40):
They got a lot of popularity at.
Speaker 1 (24:41):
A time where there was a much more beta type
a trend rather than this sort of alpha aspect of
the conversations we have today.
Speaker 9 (24:48):
Absolutely not a challenge at all. Actually, when we think
about where black Rock has been able to garner the
most amount of flows. It is investors more and more
adopting active ETFs. Exactly. The trend that you're portraying is
playing out in the markets where activetfs such as BAI
that focuses on AI in an active manner because obviously
(25:10):
you can't just set it and forget about it. Things
like bink, which is flexible fixed income where you're focusing
on harnessing income in the markets, those have been so
popular that pickers investors are recognizing the need to be
dynamic as well as quite nimble in this environment. Having
said that, for many investors who are just entering the
(25:30):
markets that need to understand the market is theirs to own.
Perhaps owning just a simple index is a very good
first step to be in the markets. And frankly, when
we look at the flows, there's a tremendous amount of
inflows to products like bitcoin for example, ibit one of
the it's obviously an index product, but something that has
gonered huge amount of inflows, yurtel date and products like
(25:53):
the very front end of the fixed income markets with ASGOV.
So there is a place for both, but absolutely no
doubt investors are focusing on more and more bespoke ways
to access the market with active fixed income and active
equity ETF.
Speaker 1 (26:07):
Bitcoin ETF in tandem with the gold ETF.
Speaker 3 (26:10):
I just wonder, how do you have bitcoin?
Speaker 1 (26:13):
That's the underlying to an ETF that people we can get.
Speaker 3 (26:16):
In that gargiechattery and flat round. Thank you so much.
Speaker 1 (26:29):
Joining us now is Claudius Sum of New Century Advisors. Claudia,
great to see you, Thank you so much for being
with us. I want to start with this idea that
the weight and see FED doesn't have to tell us anything.
A lot of people would argue and push back and say, actually,
they have to give us a sense of what their
scenario analysis looks like at a time or potentially that
it could increase their chance of stagflation. What's your sense
(26:52):
of what their scenario analysis looks like. What's their response
mechanism to that?
Speaker 8 (26:58):
Right?
Speaker 10 (26:58):
I think that'll be a really important part of the
press conference today is to have how talk through the
risks the scenarios that the FED is considering. Unfortunately, their tools,
like the Summary of Economic Projections, the way it's put
together right now, doesn't do a great job of getting
you know, scenarios across, but it is so clear that
the FED is in risk management mode, right, this is
(27:18):
about where inflation could go, how it could persist, and
that you know, this is this is kind of an
insurance pause, right. They want to avoid those risk outcomes.
And so then it is a big part of explaining
why why is it you're on hold? Inflation's coming down,
you know, why aren't you cutting now? So I think
they really do need to kind of spell that out
and give us a sense of what they're looking for
(27:40):
in the data as it's coming in.
Speaker 6 (27:42):
What potential damage could they do if they are too
late and they should be cutting because inflation's coming down.
Speaker 10 (27:49):
Well, it's it's unnecessary weakness on the economy. I mean,
if you look at interest rate sensitive sectors like the
housing market, the higher rates they are having an effect, right,
They're having a on people who are out there trying
to buy homes, builders who are trying to you know,
construct new housing.
Speaker 11 (28:05):
So you know, if like that, that is a pain.
Speaker 10 (28:09):
It may be necessary to keep inflation under control, to
keep inflation expectations under control, but there is a cost, right,
and I think the Fed is balancing that well. But
it is something that should be communicated because otherwise, just
if you look at the data on hand and you
think of the data driven FED, it's like, well, why
aren't you starting to cut or even talking about cutting?
Like they're really not just going to pause today, They're
(28:30):
going to push that pause pretty hard through probably much
of the rest of this year.
Speaker 6 (28:35):
It sounds like you think Chair Powell is going to
be hawkish today. We just got to know from Andrew Holland,
Horse of City, and he said there's three reasons for
Powell to be dubbish. One three months of softer core inflation.
Two rising jobless claims, continuing jobless claims and softer housing data.
Speaker 3 (28:50):
Do you think his rhetoric is.
Speaker 6 (28:51):
Going to lean hawkish when a lot of people think
he should actually come out and sound a bit dubbish?
Speaker 10 (28:59):
Yeah, I mean it's I think a lot of it
comes down to how to me. One big question to
listen to how today is to explain, you know that
inflation data in the last four months that's been unexpectedly soft.
Speaker 11 (29:10):
What's that about, right, Because.
Speaker 10 (29:12):
If it comes a hawkish tone to me would be saying, oh, well,
the terriff inflation is still coming.
Speaker 11 (29:16):
We just it's timing. We just need to wait, it's coming.
Speaker 10 (29:19):
But you know there's you can look at that data
and see some nuance not just from what you think
are teriff effects, but just inflation in general, where it's like, man,
the demands a little softer. Maybe this isn't pushing through
like anything that he would say today that would kind
of soften or push against all of these upside risk
to inflation to me would.
Speaker 11 (29:36):
I think be pretty balanced. But you know, we'll just
have to see where he says.
Speaker 10 (29:40):
And one difficult thing today with listening to Howe is
understanding that you know he is speaking for the FEC.
Speaker 11 (29:45):
That's what he does, is fed shair.
Speaker 10 (29:46):
He has his interpretation of it as well, and he
probably will be in something of a live debate with
the dot plot and the summary projection, so it's kind
of tough to parse it on days where we get
like these forecasts.
Speaker 11 (29:58):
In addition to him speaking.
Speaker 1 (30:01):
I love that a live debate with him basically arguing
the side of everyone on the committee and trying to
sort of come out somewhere in the middle. I'm struck
by what's keep some people keep on saying, which is
a number of members of this committee are fighting the
last war. They are so scarred from the use of
transitory and failing to curtail inflation a couple of years ago,
(30:21):
that they are more willing to look through any weakness
in the labor market in order to prioritize inflation. Do
you expect that to be the same today, which is
the reason why people are expecting more of.
Speaker 3 (30:32):
A hawkish tone.
Speaker 10 (30:34):
I think we'll continue to see the focus of the
informc on the inflation risks, on inflation going higher. Again,
the claims data today didn't reinforce any kind of an emergency,
and we aren't four point two percent unemployment right like,
we aren't a full employment economy, so.
Speaker 11 (30:50):
We're starting from a good place.
Speaker 10 (30:51):
Inflation still somewhat elevated, and just everything we've gone in
terms of the data, and then, like you said, kind
of fighting the last war, the inflation risk just loomed
really large. But as we're just seeing how they're interpreting
the data, how they're questioning their own assumptions about you know,
inflation could really get out of hand. I think that's
the piece, you know, that would be really important to understand.
(31:14):
If if they're focused on the current threats to the
economy as opposed to the threats we had four years ago.
Speaker 1 (31:20):
Claudia Sam of New Central Advisors, thank you so much
for being with us. Really appreciate your insights.
Speaker 2 (31:26):
This is the Bloomberg Surveillance Podcast, bringing you the best
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