Single Best Idea with Tom Keene: Rebecca Patterson & Ira Jersey

Tom Keene breaks down the Single Best Idea from the latest edition of Bloomberg Surveillance Radio.

In this episode, we feature conversations with Rebecca Patterson & Ira Jersey.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.

Speaker 2 (00:14):
Single best idea of post CPI. That's what we do
of PPI on Thursday and on the retail sales. Everybody
hanging on this, and of course I love what Neil
Duddy called the tariff derangement syndrome. And we'll have to
see just all the cross currents that are going on.
We had a lot of good conversations. Constance Hunter of
EIU got us through the inflation report. Jason Furman out

(00:38):
on Twitter from Harvard with his wonderful four annualized statistics
one month, three months, six month, twelve month, and on
and on. I saw twenty eight different flavors of where
we're heading on inflation. I'll let you decide. We started
strong with Rebecca Patterson from the Council on Foreign Relations.
She talked about regime chain.

Speaker 3 (01:01):
I think we're in a new regime for inflation. I
think we're in a new regime for bond yields. So
if the economy slows a lot, which Constant Constance was
talking about right before me, if the economy slows enough,
that's going to help pull inflation down. But that's not
a situation anyone wants right. Usually you get deflation when
you have a deep recession.

Speaker 2 (01:22):
We don't want that.

Speaker 3 (01:23):
But I think for the Federal Reserve, I was trying
to look at when is the last time we got
this rate cuts with inflation above target and the job
market softening? But okay, okay, nineteen ninety five. So at
the time they did three twenty five basis point insurance cuts,
inflation was running about two point three, so lower than

(01:43):
where we are now. The job market was okay, but
the economy broadly was softening, and so they said we're
going to try to massage this a little bit, and
the stock market obviously loved it. It was up about
fifteen percent over the three cut period the SMP, and
I think that's probably what we're going to get this time.
I don't know if it's one cut, two three. I
lean towards less frankly because of the inflation risk, and

(02:07):
I think they'll do a cut in September. It's so
priced in it would be very difficult for the Fed
to argue against that. But Jackson hole later this month.
I believe it's August twenty first, twenty third. That'll give
us some more color. I think on the sidelines of
where they're leaning.

Speaker 2 (02:23):
Rebecca Patterson just brilliant there on bringing it back to
the ninety four ninety five analogy, and it's not the same,
but nevertheless the history is important to note. Ira Jersey
with us with Bloomberg Intelligence trying to parse out the
bond market of bills, notes and bonds. Here's Ira Jersey.

Speaker 4 (02:42):
What's interesting is that we're priced now for a September
rate cut and a December rate cut. My feeling is
is that once the Fed starts to move, they're going
to move and keep going. They're not going to skip
a meeting just at random. So I think that if
they do cut in September, they'll also go in October
and then December. Now will they go more than say
another you know, four cuts and caught a one hundred

(03:04):
basis points or will they cut more than that? Still
an open question. I suspect that ultimately they will cut
to below three percent. So you're talking about one hundred
and fifty basis points one hundred and seventy five basis
points of ray cuts this cycle. Well, keep in mind, Tom,
like you know, the way that they're thinking about this.
Look inflation right now is two and a half percent
FED funds is over four percent, so that means you

(03:25):
have a one and a half percent or more than
one and a half percent a real funds rate. So
to get the neutral under be kind of there a
simplistic view of the world. They should could be able
to cut one hundred and seventy five base points and
just be at neutral.

Speaker 2 (03:42):
That's what we like. Rebecca Patterson to Ira Jersey just
just absolutely brilliant analysis. Some differences there. I think Ira
looking more aggressively out for raycuts and Rebecca, But at
the same time, it's the conversation that we're having, given
this moment that we're living in, and we'll go to
Jackson Hall here at the end of August all I

(04:03):
thought it'd be a snooze fest. Wrong. I'd scheduled climbing
to the top of the tetons. That's not going to
happen this time. Will be too busy on your podcast
across the nation on Apple, on Spotify, and on YouTube podcasts.
It's single best idea