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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amerie 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. Jim Zouder, the president of Apollo Global Management, out with a new report, asking the question, what if the world doesn't work the way you think it does? Zout from the team, going on to write the era of free money is over, ultra low interest rates. Our history inflation is structural, not transitory. It's redefining risk, return and the cost of capital. Jim joins us, now for more. Jim good Mornic.
I got to hire you at Apollo as a marketing guy.
You're doing a good job.
Go one step further.
Thank you.
I woke up the other week, came into the office handwritten note from you, and it said, public markets power the narrative, private markets power the economy.
Just start there.
What is the question you're posing for clients at the moment, what you want to get them to think about.
Well, it's a bigger conversation about market structure and the changing backdrops, about how investors think about investing from a sixty to forty portfolio historically, and the tools they have to create better outcomes with less volatility.
The reality is.
Alternatives have worked for forty years for institutions, and if we think thoughtfully about the growing need for retirees around the globe, how do we augment which worked well in the past but may not be the compass for the future. On the other side of the coin, it's for companies eight thousand companies down to four thousand, the role of
private capital is changing. Companies like SpaceX and Spie and Stripe can become the state it for much longer, and so a little bit when I hear about your headlines this morning, I feel like many folks that come on talk a little bit about the world in the rear
view mirror versus looking to the windshield. And the real AHA moment for us came two three years ago when we heard, when we saw what was going on with rates rising dramatically in this cycle, and universally we all thought that the economy would hit skids and they would be tightening financial conditions, and that.
Really didn't happen.
So that was a very practical situation where we really said, maybe our textbook that we've using all along is wrong. But changing market structure, how companies finance, how investors invest, it is a new playbook, a new.
Paradigm redefining public and private markets. Our good friend Mark Round would often talk about this and say, often the distinction was risk high risk in private markets, and now the distinction I think you and a team want to make is liquidity.
Yeah, I mean the old idea when we grew up in a marketplace. This is my fortieth year in the business where private was was risky and volatile and public was safe and liquid. And there's many examples right now. I come from the world of credit, you know, and I started out as a high yield slash junk bond trader back in the eighties, and there was it might have been it might have been a public security, but
trust me, it was volatile and it was risky. And now over thirty years is now junk bonds have become high yield and asset class. There's still a lot of inherent volatility in that. And again we would say that across the whole risk reward spectrum. You know, I grew up in Rochester, New York. Coodeax Xerox, Bousel, MOAM, three great American icon companies. They didn't get the memo on disruption. They were safe in investment grade companies and Vohil they're not in existence anymore.
Can we talk about how things have changed over the last forty years? So you and the team would often talk about you are what you originate, you are what you create. The capex needs of companies now seem to have changed. I was reading the transcript from your address at a financial markets conference earlier this week, and you talked about the capex needs twenty to thirty forty years ago relative to now and the change in quality, the
changing character of things. How important is that given where we're at.
Well, just just to reset that question. You know, in the last thirty years, the high ual market globally has finance companies that are going through either regulatory change or technology change. Think cable, think shale, think airlines, think telecommunications, and for the most part that massive capbax was on non investment grade companies. As we sit here in twenty
twenty five. In the next ten years, massive capbacks boom between data, AI, sustainability, energy transition, transmission lines, the transaction we did for RWE this year, this week in Germany. And so I don't think people are still thinking that private credit and private capital is small, ill liquid, non investment grade companies. And the reality is eighty to ninety percent of the private credit market is really investment grade
counter parties, investment grade debt. And again many, many companies now are afforded the opportunity to stay private much longer because of the breath and the breadth of the financing markets.
To build on what John is talking about, does private debt have more of a role than private equity at this point?
Well, the debt markets and the capital markets and the credit markets are, as the Congress learned in seven oh nine, it's the lifeblood of the economy. When ge could not roll over their commercial paper, it was the aha moment for the Congress to say, wait a second, we need
to act here. And so when you think about the scope of private credit and scale, certainly the application with investment grade solutions, it's in the multi multi trillions, tend to forty trillion, and the PE industry is a seven to ten trillion, depending on how you think about the dry powder and the overhang.
So I would argue over the.
Next decade, the impact of private credit, investment grade and non investment grade will probably have as large an impact, if not larger, than private equity has had in the last decade.
So the peak of private equities over well, I.
Wouldn't say that.
I mean I think that the private equity industry is going to go through an evolution, and it's going to be a Darwinian evolution, and I think that the challenges of monetization, the challenges of upfront capital commitments, there will be fewer and fewer firms that are able to go to investors and have that dialogue and have that relationship.
We believe for one of them because of our investment track record, But the reality is I think that many PE firms that business model is going to change and how can they adapt.
This is a really important conversation to be having, especially because on surveillance we keep talking about the divide between public markets and the underlying economy, and it seems like it's growing increasingly dramatic fashion, and we keep wondering whether the economy is really struggling right now, at least by virtue of some of these labor market pictures. The same time that you're seeing the oracles of the world do very well.
Are you seeing that?
Are you seeing the need for money to be a little more free right now in order to rejucee some of that activity?
You know, we're not seeing yet.
But I do think the question you're really asking is and it is the same question about you know, with the amount public markets used to be a great diversifier for portfolios, and it really was the bellweather how the US economy and the global economy was doing. But as more companies have stayed private and more companies are funding privately, you really are questioning that barometer and what is telling you.
Torsen has a good piece out this morning talking about the concentration of the CAPEX cycle and how it's concentrated in a handful of companies in data, AI and technology. And while the CAPEX is a massive number and it's driving a north started growth. You're asking a provocative question, is it really hiding the underlying economy, which is driven by private companies? Ninety percent of the hiring in America is by private companies, and is at a different story today?
It could be we're seeing if you look at the public numbers in terms of earnings over the second quarter, it beat consensus by seven hundred basis points eleven versus four. And for the most part, the credit portfolios that we oversee, the multi thousands of counterpartysusite to four thousand, it actually showed quality upgrades three to one versus downgrades in terms of performance. So in the breadth of our credit portfolios, we're not seeing a weakness. I will tell you we
definitely see more lingering inflation. And I do believe that the while this administration is dead set on getting rates lower, I believe that there is a legacy inflation issues in the economy. When's the last time any one of us bought something in the last year and he said, wow, that was cheaper than a year ago.
It has not happened.
And that's just in the and I do believe that's going to be the scourge of this rate cycle because I do believe there's greater inflation and companies are having it a much more challenging time passing that along to consumers. This is that we're seeing it across the board.
There's lots to impact that.
One of the things I wanted to impact was the concentration risk and the AI financing that we've seen both in data centers and the energy transition. There's a quote in the last year that's just stuck with me for the last twelve months, and it came from the Alphabet CEO that the bigger risk is under investing and not over investing, and that just sounded like a commitment to
over investing. Now, I'd want to understand how your industry avoids a massive misallocation of resources at a time when everyone is chasing the same story.
Well, it feels like you have a bug in our investment committee rooms. I mean, I've been talking the last six months about the cycles of dark fiber and the late nineties, of shale on the early teens, ten to twelve to sixteen, and certainly enterprise software in the last five years, and you have to be concerned as an investor today, are you taking equity risk for a fixed rate of return. That's the ultimate sort of bubble, if you would, And I don't think that the true economics.
Certainly consumers industry, the economy is going to benefit, but not all industries as they evolved. Was it a great investor to be an investor? The cell phone industry is a great example. Only in the last decade is it become a good investment for companies to invest. So I don't have the answer that once it's a question we're asking ourselves. Now we find ourselves both on the debt and the equity side of funding a lot of the data center activity. But there's a tremendous amount needed and
there's a voracious appetite. But I certainly understand what the Alphabet executive was saying.
Do you think there's a bit of a duration mismatch between how long it takes to build a data center and how long it takes to build the energy infrastructure to enable it?
And could that be problematic?
There?
Certainly is we have spent more time. The energy supply issue could be a governor to growth, and that's a challenge that we've not seen yet. But if you pencil out the numbers, that could be a concern, but I think the bigger questions back The first one we asked is these are ten twenty thirty year infrastructure builds. Who really with our marketplace going towards indexes and ETFs and multipod shops that are all thinking about, you know, moment
to moment liquidity. The era of the long investor is a question mark. Who is that long investor? And we would say it's the retirees of tomorrow. Every day twelve thousand folks in the US you hit sixty five, and the West broadly speaking, and other countries around the world have not done a great job with retirees, and so the ability to thoughtfully introduce long duration infrastructure inflation hedge assets into these portfolios. In the UK they call it
matching adjustment for insurance assets. Those are really where the growth of our business is going to go, and that's going to benefit investors.
This makes a lot of sense, particularly if you're investing for retirement. You don't need daily liquidity, that's just logical. I think where the criticism is coming from for your industry at the moment is that family offices are already doing a lot of this. I think you are the team we talked about that a ton high net worth individuals are doing the same. You're now going go after retail, and then people start to feel a little bit uncomfortable
with that. Are you're looking for a new bank older? Are we looking for someone else to pick up the pieces? What's the response from you and the team to address that head on?
I think it's all about doing it in a methodical, logical, diverse way. You know, this is all about the you know, the proper amount in the proper diversity. Certainly, we would never advocate for someone taking an outsized portfolio of their retirement and putting it all into alternatives. But clearly, over the last thirty to forty years, history has shown us that an allocation of alternatives ten to twenty percent of
a portfolio increases returns and brings down volatility. And so from our perspective, there's a variety of areas in the world of credit, in particular the world of infrastructure, the world of secondaries that are more yield oriented, compounding type of vehicles. And certainly we have a view that private equity, while a very attractive asset class, even in returns over the next decade, mid to high teens that that should
be done in appropriate doses. So it's all about diversity and proper portfolio allocation.
Stay with us more Bloomberg surveillance coming up.
Off to this.
Congressman French Hill, chairman of the House Financial Committee on Financial Services, joined us now for more. Congressman Hill, welcome to the program. So I've got a lot to get through, and I just wanted to stop with the independence of the Federal serve and the role that your committee's got to play is this spat continues to build down at Washington.
Blogan Morthon, Jonathan, great to be with you. As you know, I've spoken out many times about the importance of the independence of the FED, and so has my colleague across the capital, Tim Scott, the chairman of the Senate Banking Committee. But because we fully support FED independence doesn't mean the Fed's immune from criticism. And every president in my adult life has been very vocal about criticizing the FED at
one time or another. So I don't think FED independence is in question when it comes.
To what could actually happen in terms of financial stability. We have FED Governor Lisa Cook's lawyer saying that the President was a lawful and removing Governor Cook and said it's vague allegations would endanger the stability of our financial system and undermine the rule of law.
Do you agree with that assessment?
Well, I think there's some hyperbole in there. Lisa Cook has been accused of effectively mortgage fraud. Those are significant allocations for someone, allegations, for someone who is a financial regulator. But I think they need to be adjudicated. I mean, she needs her due process, her day in court to prove that in fact that's not the case, and I think that's underway right now. And that's again something I've said in recent days.
Do you think the president should have waited for the courts to play out in terms of this investigation, for these allegations to actually become charges and a conviction to then take up this idea to fire her for cause.
Look, the president's entitled to his own opinion. He has access to the facts that probably I don't, so he's made his decision about it. But by judgment is that's a serious allegation and if true, is certainly potentially a disqualifying allegation and charge for someone who's involved, very much intimately involved in the federal regulatory process.
Taking a step back, though, do you agree with the Treasury Secretary on resetting the Fed's mission.
Well, you know, I believe that for a long time, I believe the FED should have a single mandate, which is price stability. The biggest, most punishing tax on the American people, our citizens, is inflation, and inflation's caused by too much money chasing too few goods. And we've had a dramatic example of that FED policy during the pandemic and the Biden administration's fiscal policy in combination very punishing
forty year highs in inflation. So I believe we need fewer mandates, and I think we need that monetary policy focused on price stability.
Again.
That's why I set up a task force in this Congress to review the Fed's monetary policy since two thousand and eight, review the Fed's role and a financial regulation and supervision, and to make sure that we're also taking steps to make sure our treasury security market is resilient. All this work is led by Frank Lucas of Oklahoma,
and we're deep in that process. So I think taking a strong look at the Fed's monetary policy and their Governman, it's an important factor, and I agree with the Treasury Secretary on that.
Well, inflation has not been below two percent for more than four years at this point, and we're still talking about fifty basis point rate cuts, maybe seventy five basis points of rate cuts this year. Do you think that that's premature, If this should be a single mandate federal Reserve that looks solely on inflation, Well, I.
Think this is the tough decision they have coming up. And we've seen a softness in the economy during the whole year in terms of consumer's ability to purchase the jobs reports that we've gotten. This is why the FED chairman,
I think consistent. We have said, let's look at the data, look at our data assessment and the forecast associated with it, and also make our own judgment about whether we're at the neutral rate for pricing, because we don't want to see the economy stall out and then go into stagflation, particularly when you're right about inflation getting close to two
but not below too and not right at two. But when you look at inflation expectations, they seem to be more closely anchored it to and that should give the Fed some confidence as they entertain their decision in the next few days.
Cheer Hill.
I know you and your colleagues almost just recently got back from summer recess. But our Trumper first is fast approaching and the Trump administration is weighing and pushing for this idea for a stopgap funding measure to keep the government open through January thirty first, would you be on board with that?
But we're talking about it among ourselves and obviously with our friends in the Senate. We've each passed three appropriations bills and the Senate in the House, I think it would be great to go to conference on those bills and then pursue get those enacted into law, and then pursue a CR that's a shorter term. CR would be my advice for consideration so that we can get this work done. We're very close. Both the House and Senate
are processing these bills. We have the Republicans in charge of the House and the Senator in the White House. So we ought to get together, find our top line number, and get our work done this year.
T Wisman, Before you got the important stuff Arkansas football razor Backs got to get done this year.
I really enjoyed watching the quarterback come and have his great game against Arkansas State. This was the first time in Arkansas history that Arkansas State played the University of Arkansas in Little Rocket, the famous nineteen forty nine War Memorial Stadium. It was a fantastic day. He looks pretty good. We play Ole Miss this weekend, so that'll be the first SEC game and that's where the rubber hits the road.
Stay with us, Mulplindex. Savanna's coming up after this. Let's get the bullush freew on things. Danas of Wetbush two seventy price target outperform writing on Chance of Apple. Dan John just now for more dank and monic.
Great to be here.
You've sat here so many times in September alongside us and talked about the upgrade super cycle.
It hasn't happened. Is it has happened? With this? And why no?
I mean, I look this in those supercycles we've talked about, I mean they definitely were disappointing, right, I mean the reality I think this is one where street expectations going in are I think pretty soft relative to the next year. So when you think about on scale one ten, this is probably eight point five. Well, do you have over three hundred million that haven't upgrade their iPhone? Is there going to be a huge catalyst here? Are they a wi just pin up to men, especially in China?
But the reality.
Is the elephant in the room, it's AI and I think that's when you talk about what's going to truly drive the stock.
That's it. We've talked about it. That right now is front and.
Center before we get there, and we'll find out more I'm assuming later this year at the WWDC. There is this signal from the fact that they didn't raise prices on the phone significantly except for the highest end phone. Does this suggest that they're going to take it more on margin, especially given how much their costs are increasing pretty much across the board.
Yeah, I mean some small price increased book. I think also the reality that's why Cook, you know, play nice in the sandbox with Trump, right because it's very important in terms of Indian and trying to make sure that you have some exemptions when it comes to the tariffs. But look, the reality is they cannot raise prices significant at this point because the last thing you want is churn other competitive issues. You have a phone that's definitely
an improvement, but nothing that's jaw dropping. And it all leads the whole reason you own Apple. See in saal base. I mean, it's all about when they monetize the one point five billion iPhones for.
Just jump in the install base.
For a long time, you've seen that as a source of potential growth. It isn't about time to start seeing as a source of potential risk that you've got this massive install base that hasn't upgraded for a long long time.
Done.
We have to start questioning whether they have a will and whether the real risk here is they might actually go and buy a different phone from someone else.
Look, we've talked about that.
That's what we've been so I think, you know, strong in our view, like the clock struck midnight in terms of them needing to now goes back to AI because when you talking about monization and what keeps people in the ecosystem and what really is the golden goods for mines comes down to AI and reality is every Apple event the last few years, I feel like Michael J.
Fox back to the future, you know, and.
That's been a big part of the problem relative to the rest of tech when it comes embracing AI.
The install based is sick of waiting.
That is sort of a worry that a lot of people have in Samsung right now. And Google are out there trying to troll everybody who's been waiting for something new and saying.
Ha ha, look ours fold.
There's a question about, especially if they're getting a heads up or if they're getting a head start on the AI development of whether they install base starts to leave.
Aren't we starting to see signs? If that doesn't that worry you.
Look, I think it is.
It's probably the stickiest install based out there right in terms of just when you think about Apple and customers that really don't leave. I think the worry is really around the monization, and that's why we've said, like okay, perplexity was really more to see what happened with Google once DOJ Once they had that victory.
Now I think they walk down the aisle.
From some sort of major partnership from a Gemini perspective, but I think this is Look, this is a critical time next six to nine months for Apple to make sure you have the AI strategy, you don't lose customers, you have an upgrade cycle that you know right now in New York City cab drivers, Barish and Apple. So I think that sets up pretty positive relative there. But
it comes down to AI innovation. This is a very chance to me playing Ryder Cup bes Page and that happening inside of Apple, it has come externally.
Dan, you mentioned Tim Cook playing nice in the sandbox with Donald Trump. Should he go on the state visit next week when Trump's bringing a bunch of tech executives like Jensen Wang.
I think you get on that plane because I mean, you know, you know it so well. It's like he obviously got called out in terms of Middle East. To the right, you have really the new Trust their advisor wearing the black leather jack of Jens And I mean Cook needs to make sure he's not on the outside looking in. And that's why that you know, what we saw last week in DC was also an important moment.
Too when you say that he's playing nice in the sandbox when Lisa was asking about pricing of iPhones. He's constrained you think by the White House and audience are one. You think he's constrained by where the consumers are right now and has to meet them where they are.
Yeah, I think it's a combo.
But I think the reality too is that raising prices definitely is not the right thing to do from a consumer perspective.
But when it comes to.
Tariffs, that's also where like the India, they're essentially doing a dance around right when it comes to India and China tariff exemptions. Obviously, he's significantly investing in the US, but we've talked about like it's a fairy tale that they'll ever make iPhone pros.
In the US.
Again, it goes back to like if you like three thousand dollars iPhones, we should make them New Jersey. So I just think that that's going to continue to be something that's in Asia despite off to a lot of the investments from an AI perspective.
In the US.
You're a published guy. Let's just finish on already pick nine this morning, Oracle and twenty five. But the dollar plus a market camp could be added to this company, like thround this morning, we're high up by thirty two percent in the pre market.
What do you make of this month?
I mean it's a.
Drop the mic from Saffra and Ellison, right, because the reality is that it shows this AI revolution, you know, as much of the haters and the skeptic you could. No, no, no, no, I'm saying, dude, you're dude, you're a big supporter. I'm saying, like but Li said, I think, but I think the reality is that many they are is skeptical of maybe like.
Some of the growth.
You look at these numbers, that arr number, that that's a drop to mic and I think with that sho the rest of tech, the rest of a That's what.
We continue to say.
It's ten fifteen and the AI party was nine pm, and that party goes to four am.
It's an outfit worthy of the SNCK move. It's going to see it. Thanks, Do I appreciate it, sir. I've got a distance to play, Beth Page, you never know more of.
A short game. I don't have. I don't have Pharaoh's long long.
I wish I had that kind of distant exactly like Mcarroy three fifty kind of stuff.
Exactly book Bethpage Black that that tests the distance.
I'm very pro America.
That's gonna be like a few days that I'm going to be very pro Europe on this program. Oh but I's just you're gonna have to let it go, of course, give me some space.
But again Europe doesn't have a guy named.
Scarley stay with us.
Marblinderg surveillance coming up after this. Seth competor of Mark and Stanley Seth, good.
Morning, it's good to see it, great to be here.
Thank you. I want to give you some time before we get into this data point to flesh out how you view the world right now. So I've been following your research and certainly you and the team consider what took place on April second and the months after that not as an event but as a process. And we've got to wait to let this play out in the coming months. Just flesh that out for us. How you're thinking about the world with regards the teriffs and a pass through to end inflation.
Yeah, no, I think that's a key question. And I do get the sense talking to lots of investors around the world that people feel like we've seen seen tariffs, we've seen sort of how high they could go, we've seen the retlacement. We get it. Now let's move on and look at what's next. And I'm not sure we can quite move that quickly. Evidence we have from twenty
eighteen to twenty nineteen. Evidence we have now this round is that it takes three four months before you really start to see the effect of the tariffs show through to consumer prices. The last two cbi prints, in fact, we were able to get evidence that in at least the core consumer goods components where we expect to see it, are starting to see an initial pickup. It's not crazy. It's not the inflation that we saw a few years ago,
but it's moving up for sure. I think the tricky part here is going to be the tariffs were much broader than what we saw in twenty eighteen, so trade diversion is going to be harder. On the other hand, there's a lot more negotiation back and forth, So how many industries are going to be gaming absorb it for now, pass it on later? And I think that uncertainty is critical. I think we still have a lot of additional inflation
from tariffs in front of us. And then what we can't forget as well is that tariffs hurt economic growth as well. In twenty eighteen, the evidence was six, seven, eight, nine months of a lag. We're just coming up on that in the fourth quarter and then into next year. Take the imports from China. Two thirds of what we import from China are either capital goods or intermedia goods
that go into manufacturing in the US. So the tariffs are at tax on domestic capex and attacks on domestic manufacturing. The tax provision helped on the capex side of things to some degree. A tariff are going in the opposite direction. Where's the net? How are things going to work out? I think these are the reasons why no one should feel like they have the whole picture already clear in their head.
Yeah, well, what you just describe sounds a lot like stagflation, which no one should feel too happy about. It's always kind of a disaster, at least tagflation light, as some people have been describing it as.
Do you disagree with fed Shair J.
Powell who said that any kind of inflationary pressure from tariff's will be a one time price adjustment, and that is the reason why this central bank seems to be placing a greater emphasis on the slow on that you're talking about, or as we saw yesterday, some of the revisions and just the labor market lack of momentum that we've seen.
Well, I think as a baseline forecast and we have to make our baseline forecast. The answer to that is yeah, the most likely outcome is that teriffs will lead to a one time increase in the price level, which means that the inflationary effect, the percentage change in prices will be temporary. I think that's a really great place to start a forecast. That's where our forecast is. That's not
the only game that the FED has to play. They also have to ask, well, what if we are wrong about our forecast when things turn out differently than our baseline. And in particular, the last time we saw tariffs and it was temporary, we had the biggest problem for the FED was too low inflation, not too high inflation. Here we are over four years into inflation being above the fed's target for a long time. Businesses are kind of getting used to inflation being high. Consumers might be getting
used to inflation being high. They might be getting sick of it, But they also might put less effort into thinking, oh my god, do I have to go look somewhere else for an additional lower price because now everything is just more expensive. So I think there's a risk that the inflationary impulse is longer this time.
Gets more embedded.
And let's not forget in the services component of things, we have now labor restriction going on because of immigration. We talked about the revisions to the labor market. Job creation was less than people thought. Job creation has come down a great deal. The unemployment rate four point three percent. I'm old enough to remember when four point three percent was actually pretty good, and it's bowed unchanged. It's only
up a little bit from a year ago. That to me says is that the labor supply side of things has also come down a lot. And so then the question becomes, how do the services industry, especially the ones who might find themselves constrained for labor, How does that show through in prices?
So that brings us to the data that we get today, which shows that inflation really isn't as big of a concern as some people expected. When it comes to producer prices. We'll see what CPI has to say. Some people are calling for the FED to cut in a more significant
way next week, maybe even fifty basis points. Do you think that if they were to do story even seventy five basis points, it's catered to that bloomberpose subscriber do you think that that would actually ignite the risk of inflation over the medium term, or do you think that would be appropriate.
So I think the risk is that it would be premature to cut seventy five basis points for sure, and even fifty basis points. I don't know from my judgment that it balances the risk between slow growth and inflation.
Now this is flash.
I am not the chair of.
The Fed is so my opinion is much less important.
Yet I hear that you could be in the running.
So the way I think about it is they've got a dual mandate full employment maximustainable employment, i e. How close is the unemployment rate to what they perceive to be full employment, which they've told us is four point two percent, and stable prices, which they've defined as two percent.
Inflation.
Inflation's above target. Inflation's rising, it's not skyrocketing, but it's going up. Tomorrow's CPI is going to be really important for the consumer goods side of things. So where is that balance of risks? I think that's really the question. What char Powell told us that Jackson Hole was he changed his mind a bit and said, you know what, now we're going to lean more on the risk of employment getting weaker and accept a little bit more risk
on inflation going higher. At the prior FMC press conference, so he kind of had said, let's look at the unemployment rate. You know, you could imagine payrolls coming down a lot as long as the unemployment rate is stable. That's what full employment, maximum sustainable employment is really about. So there has been a little bit of a change in that risk adjustment. Can't There's no black and white. He's clearly wrong, He's clearly right. This is a very
very difficult situation for the Fed. There two variables that they have mandates for are kind of going in opposite directions. That is the most difficult situation for a central banker.
Well, he went full Waller basically at Jackson Hole. But to John's point, all morning, if they had had this information in terms of actually where the economy was, the labor market was, do you think they should have been cutting? Wouldn't they have been cutting sooner?
I mean, I think there's clearly the argument that they might have been cutting sooner given where Powell is now, given his remarks at Jackson Hole, given his remarks though at the July press conference that the unemployment rate, which is saying, how is labor demand doing relative to labor supply. It's much less obvious that they're anywhere near as far behind the curve as you would infer just from a read on the non farm payrolls print. So this is
an extraordinarily difficult, nuanced, tricky situation. It is the time where it's both great to be an economy because we get to go into details, and it's terrible to be an economist because nobody.
Wants to hear it. Well, actually, what do they tell you? A matter a lot.
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