Bloomberg Surveillance TV: June 17th, 2026

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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 Terminal and the Bloomberg Business App.

George Conkalvis of MUFG writing, inflation concerns have been misplaced and rates may have seen the high prints for twenty six. That plus worsh talking hikes off the table is about to unleash a bond rally. George joins us here this morning. George, great to see you. Happy happy day if you celebrate a real question about how much this bond market can rally given some of the inflationary pressures.

That yes are tied to oil, but all of some other issues as well.

Yeah.

Look, I think we are entering a summer of the bond market. I think we probably have seen the high prints for rates for a whole host of reasons. Look, oil prices, even in the midst of like literally a billion plus barrels of less production getting through the straight upfomoves, managed to stay contained. Right, So, like this idea that you're going to see like a second wave of higher oil prices, I don't buy that.

We don't buy that. We've been skeptical of the move in general.

And inflation has largely come from the inflation from the oil shock, and then some second order around the effects around some sort of pricing search charges that were added to core prices. But in general, there's not a really an inflation problem. Look at wages, Look at the way that the jobs markets behaving. It's still low paying jobs. You're not seeing the sort of impulse of inflation. We think that we've kind of seen the high end rates.

So we'll get to the economic discussion later, because there's a lot of divergence even within pros and about exactly whether all of that is true in terms of wages and some other aspects. Do you think that Kevin Warresh truly can unleash the summer of bonds given the fact that ultimately he's really squaring off against credibility on one hand and the overhang of what could be coming from the White House and the other.

Look, I think.

Everyone has to temper their enthusiasm, including myself, because we have Let's see what happens with the MU and if that gets gets done, is a done deal by tomorrow?

I think? Right, So, like let's see a men or of Friday, Let's see what happens there. But I think you know we're gonna.

Start off at two o'clock into two thirty, right two o'clock, We're going to see did a Kevin Woies participate in the dot plot submission process? Like that's gonna be a big deal. Uh, And like what are the dots telling us? Is there going to be like a removal of the easing bias at the first first blush? I think this is going to be a kind of gradual toe in to becoming more like a change at the FED. But we don't see a drastic change of the FED starting

Does the labor market need to weaken further?

I mean, it's not weak now, but does it need to weaken for him to be able to cut interest rates?

I mean, I think we have to realize we have to look back and see if the labor data actually is honest, and we've had two years in a row of massive revisions every single year. The later we get in the year, we'll get more clarity on the true health of the jobs market. So it doesn't have to necessarily weaken it. I think it just has to be a combination of it's not strong as people think it is, and to the inflation story probably has peaked. It gives a window for the Fed to cut but.

They're not going to get back to the two percent target this year. So what is going to the catalyst for them to really have that confidence? Given the fact that there are a lot of members on the committee that are concerned that basically inflation is prices are still too high and the labor market's not weak enough to have this bias.

Look, there's a whole host that thing.

I mean it depending on how you look at the data and you look at real pure cores, you can get down towards you know, mid mid twes by the end of the year, and into projecting into twenty twenty seven, you can start to get into the twos. So I think it's not about and plus, by the way, we defences eased the last two years with inflation well above their target, right, So it's more about what's your understanding

Well, that's something people are looking for. What is inflation? If you could choose your inflation, is it an inflation target that we're going to care more about?

I'll choose one inflation target.

How about anyone who's invested either Incursor or SpaceX and the new billionaires that have been minted.

There's some inflation there. Given the fact that.

Markets have absolutely been on a tear, how does that factor into the Fed's assessment of current conditions?

I mean, look, the going is great when it's going. The question is how does it look like at the end of the year. We've had moments where we have these massive u fourth moves like we're in right now, and then they peter out and they burn out. So the question is is if the momentum continues and stocks continue to make new highs, yes, then you're building in financial conditions easing, which takes pressure off the FEN to do anything, or like, at least in their calculus, it

The end of the year.

If you put this another way, is the summer of the bond going to be also the summer of the stock Because we've seen correlations between stocks and box bonds essentially good at one right, they've been directly correlated rather than diversely correlated as they have been historically. Why wouldn't any additional bond rally just continue to fuel and even bigger remove in the equity market.

I mean, for like the long duration type sectors like technology, it probably would, right, I mean, until something breaks that correlation down completely, it probably would have kind of a self reinforcing mechanism. But you know, I do think that, you know, as we get towards the end of the year and we realize that our more optimistic collectively the market's more optimistic view.

On the macro is proven wrong.

You're going to see the bomb market end up winning out versus the stock market.

Stay with us, multilintex Divanan's counting.

Up off to this, Stephen Cook of the Council on Foreign Relations writing, clearly the President was done and grabbed the deal before him. He is going to spin it as a victory, but it heavily favors Roan. This raises the question why do we even.

Go to war?

Stephen joins us Now for more, Stephen why do you say that this is giving a win to a run given that we don't really know all the details yet.

Well, we have a fairly good sense of what is going to be in this deal based on what's been leaking out to Bloomberg to be English and a variety of other news outlets, and what we've seen so far would suggest that the Iranians will retain their right to enrich uranium, They'll be able to export oil immediately, the blockade will be lifted, although the Iranians are saying that there will be freedom of navigation through the straight up worm moves, but only for sixty days and then they

Stephen I also noticed that there is no language when it comes to Iron's ballistic missile program. Has the Trump administration given up their three red lines, which has always been for years, nuclear ballistic missiles, and money to proxies.

Yes, indeed they have given it up. There is nothing that we know of regarding ballistic missiles. The United States and the Israelis did a lot of damage to the ballistic missile program. But the fear is is that all of these resources that can flow into Iran, including the revenue from immediately exporting oil, can be devoted to reconstructing their capacity to build ballistic missiles. And it is one of the biggest ballistic missile programs in the world.

So the first point and Tyler brought this up.

According to the text Bloomberg has its hand on when it comes to the MoU means that this would include a permanent end to the war on all fronts quote including Lebanon.

Is israel An agreement.

With this absolutely not.

The Israelis maintained that they will not give to run a veto over their security. But the Israelis are in a very difficult position if his belaw attacks and the Israelis respond. In a neighborhood of bear Root, for example, the Iranians will threaten to close the Straight of removes once again putting tremendous pressure on the global economy as

In recent weeks, there is a sense right now that everyone's buying time.

It seems like the Iranian regime is.

Buying time to try to survive, and it seems like some Middle Eastern nations are buying time to create alternative roots from the Strait of Removes to export some of their supplies. The UAE this morning saying that they're planning to cut the dependency on the Strait of Hermoves to zero, saying that even if the Strait of Removes does reopen,

Yeah, I think that's a very important point.

The Emordis and the Saudis certainly have options to build their way out of the Strait of Removes. The cut there is the Kuwaitis, the Bahrains absolutely do not have the ability to do with the Saudis and the Amorantis, so just by geography, so there'll be some countries that will be able to see this as an interim deal, and there are others of the pressure on it in order to see through so that they can navigate through the Strait of Removes. Their economies are absolutely dependent upon it.

Twenty months, JCPOA took twenty months. Stephen, how long do you think this could take?

Well, I think it can take quite some time unless the President really goes back on his red lines, there's every indication to suggest that he will, and the US intelligence community has warned the president that their Iranians are unlikely to give up their nuclear program.

Stay with US, Multlinpex Savannah's coming up.

After this, and former Boston FED President Eric Rosengren expecting no forward guidance from Warsha's statement, writing the new chair is likely to want to emphasize at this meeting a new, less transparent communication style.

Eric joins us now for more. Eric, great to see you, Thank you for being with us. Can we take anything from Kevin Worsh's first.

Appearance on the board of the FMC back in two thousand and six to twenty eleven that we can pull forward to today as guidance over how he will really preside over this Central Bank.

Well, I think he's made pretty clear that he thinks that previous fmcs have over communicated and that it's been a bit confusing, with a number of voices sometimes giving discordant opinions. So I think he's going to try to

Up not down.

You said, if they put the dot plot out, do you think that there's a chance that they won't.

I mean, at the first meeting he said there's going to be a regime change. I expect this meeting is mostly going to be about communications. Communications within the committee, communications about the statement, communications with the press conference, and at a very minimum, I think he's probably going to seek to de emphasize the Summary of Economic Projections and the dot plot with the hope that eventually it goes away. But when you talk about regime change sometimes is fairly quick.

Eric you also said he's going to try to slow down the number of speeches. How does he do that while also making sure he's gaining consensus amongst his new colleagues.

I mean, I think it is a challenge, particularly given the president that many presidents probably have quite a lot of speeches that they've already agreed to give, as well

Is Warsh himself also going to speak less? And if that's the case, and Jonathan Farroh has brought up this point a lot, doesn't he just outsource how he's thinking to other members of the committee and then they will define him.

I mean, he's indicated he thinks that the chair as well as everybody should speak less. We'll see how difficult that is, particularly if they're expecting to make significant changes. But I think if he does that, it's going to be in the context of the entire committee speaking less frequently and less.

With less forward guidance than they have in the past.

It seems like a lot of people have moved past forward guidance anyway, at least in markets, they've been looking at other metrics in terms of inflation, in terms of understanding exactly how tight the label market is. Do you expect any guidance for at least how the FED measures inflation Given the criticisms in the past that Fed Shair Kevin worsh has had about the exact metric.

Used, the chair may talk about that in this comments. Usually those kind of discussions takes several meetings. The staff usually provides briefings, and there are a lot of economists that would work on the issue of what are the best measures of inflation, what's the best way to forecast inflation? So I would be surprised if that came out at this meet I think that probably will take several meetings before he would introduce anything different there.

Do you think it's bad for the FED to communicate.

Less It wouldn't be my first choice. I think that.

During a period of regime change, if there really is regime change, then you need to explain what you're doing and why you're doing it, particularly if it's different than what.

The previous two or three chairs have been doing.

Do you think that the interpretation will be some sort of overly dubvish position. Do you think the implication will be sort of political or do you think the implication will just be more uncertainty, potentially having the opposite effect more volatility and leading to tighter financial conditions.

I mean, Kevin has in the past talked about wanting to go back to the day where there's a little more mystique to monetary policy and not being quite as transparent in general. I think the challenge with that is both the public and investors are now very well informed about what the FED does and how the that effects the economy. So I don't think we can go back to where we were under green Span or Paul Volger, and I think that Kevin's thinking may evolve on this over time.

This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. 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.