Bloomberg Surveillance TV: September 15th, 2025

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordert. 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. Christian Melting the global

Joins us now for more. Christian. Welcome back to the program Sir. I think we all understand.

They'll be coming interest rates on Wednesday, all looking for that twenty five basis point reduction.

Christian.

The question we've all got is what happens after that? What are they allowed? What can they ultimately forecast and guide to for twenty twenty six?

Yeah?

So I think we all agree on this probably cut. The question is twenty five or fifty. I would be really in the camp of twenty five, because why would you surprise the market, to be very honest, and if you go for fifty this time, I would say the market could also argue, do they know more about the labor market?

Is that weeker than expected? So I think it's twenty five.

And then, as you rightly say, there's more to come, I think there's room for the Fed to cut. We would expect over the next twelve months, way into twenty six. As you're saying, we expect five cuts, a bit less than the market because we think there's still some inflation pressure, not massively going higher. But I would say it's five cuts over the next twelve months, and the market is, if I look at Woomberg, six cuts.

Christian, forgive me for getting stuck in some of the small print, but I think we've got to We'll all go to the Summary of Economic Projections on Wednesday, the guests delivered alongside the statement, and in that at the moment for twenty twenty five, they've got unemployment for year rundo four point five percent, and I'm just wondering how

Has that picture changed that much?

Yeah?

I agree, right, it still looks very close to being at say, full employment in the US. But I think if you look at the trend, it's weakening a little bit. I'm not saying it's massively going higher, but I think what the market is also prising is the fact is doing something not a recession, but they want to cut now, and from that perspective that should be positive for the economy. And from that perspective, yes, we don't talk. And that's the big difference Johnson to other cycles. Normally you cut

Christian from an investment standpoint, does this make you more willing to go into US assets because of the prospect potentially a faster growth or free because of the potential for faster inflation.

I think if you look at this year twenty twenty five, it's very interesting. So it started with being here in Europe with a nice outperformance of Europe for the first time in many years. I would say that has changed in the second quarter, where the US came back. It's a lot about of course technology AI in the US. I think that doesn't change from my point of view.

Hope doesn't necessarily they'll get their returns. And I am wondering how much you're seeing people double down on this Europe at at a time where the US potentially could grow a lot faster because of ray cuts, and then you've got France getting downgraded over the weekend. You have, yes, this potential spend by Germany, but even the ECB is talking about a one percent one point three percent growth

I would say we suggest to double down on Europe because we do expect fiscal spending. I agree the absolute number one point three one point two percent growth doesn't sound very compelling, but if you think of the potential growth in Europe is roughly zero point four percent, much lower than the US, by the way, and maybe you can bring this a little bit up with fiscal spending.

I think there's room for performance.

And as we see, Europe is clearly underinvested in many many client portfolios, from the US, from the rest of the world, from Asia, and interestingly, I get a lot of requests to explain about euro and normally that comes with some money which is then invested later. But it needs a trigger, and I would say now debates on fiscal spending, especially from Germany, could be a trigger that this gets more intention and that probably could lead to some money flows as well.

Christian language is important, you said, especially from Germany. Is it exclusively from Germany?

I think most is coming from Germany because obviously in France there's not so much room. Yeah, I would say look at Germany first, but it's the large economy in the European Union. So from that perspective, I would expect some money to go into Germany because that should be in the news with the budget discussions this week and next week as well. So from that perspective, maybe start with Germany. That's what we also tell the clients who.

And what do you think benefits from that fiscal spending in Germany. We've already seen a monster rally in the European banks earlier this year.

Yeah, if you look from that perspective, right, So here the picture is a bit different, right. We do expect from the ECB, not as many cuts as we do expect from the fat max of one where, if at all. So it's a lower level of course, ECB being a two percent feed for much higher of course, but if you look, we still have some inflationary pressures, not too much, but there's still a steep curve and that's positive for financials. So that call we made quite some time ago is

That's the medium term this week. I'm curious about the reaction function markets. If we do get a signal from the Fed that they're going to cut more steeply, do you go out.

And buy gold?

We have already a lot of gold in the portfolios. To be very honest, I still like it. Our forecast also to give you a number three eight hundred, so up from here. Again, it has been quite a call because there's so much discussions which currency you want to investment. Of course dollar, but everything in Europe probably also not everything.

We know.

That's why people look into buying gold. We think that's continuing. Central banks are buying gold, but also retail investors are looking into this. I think the trend will continue. But we have already quite a portion of gold and enjoying quite a nice ready. But as I said, we think that could continue as well, with our forecast being three thy eight hundred.

Underlying that question is this question about government bonds and just the develop markets whether they still count as the haven asset. Do you view the rally that we've seen in long term bonds, particularly in the United States, not necessarily in Europe, as reaffirming this quality of the securities at a time where they have had a lot of questions.

Yeah, I think it's quite interesting.

I've just discussed with a lot of clients that also if you look at corporates, that's quite interesting, right, look at the size of some corporates and then the discussions about higher debt levels. What's quite interesting for me what we have seen is the US year is not moving higher in Europe. You have seen some years moving higher also in Asia. So there seems to be a lot

Clients should also debate.

Stay with us more Bloomberg surveillance coming up after this, Trader spelling with there certainty the Federal Reserve or cut interest rates by twenty five basis points this week, joining us to discuss the former New York Fed President Bill Dudley. But welcome back, So let's go straight to it. What are you expecting to say this coming Wednesday, right.

Along with everybody else, I expect a quarter point cut. It's baked in the cake. I'd be surprised if that they do anything else.

Do you think they'll guide much beyond that?

Well, they'll be guide in because they're going to publish the Summary of Economic Projections, which shows their interest rate outlook for the rest of the year and into twenty twenty six and twenty twenty seven. And I think the big debate there is do they show one more cut after September or do they shoot show two more cuts? And I think it's going to be a very close call between those two outcomes.

Yeah, Bill, I think we should build on that that's the interesting piece of information for me. At the last meeting, the last round of forecasts, if you will, they were forecasting two cuts and they had unemployment year end at about four point five percent, and Bill, we could have this really strange situation where people are basically looking for the unemployment rate to stay study in the forecast, but all the dots to come down. Just what's happening there?

I think you're right that the forecast is evolving pretty close to what they had last summer of our economic projections in June. So if they're on the same forecast track, where would they pencil in more recuts? Thing that's changed is the just this weakness of the labor market in the sense of perial employment growth. So I've been thirty thousand a month over the last three months, and you see a lot of indicators that the labor market is

Doesn't the market agree with them?

Isn't that the takeaway from the rally that we've seen in the long end of the yield curve?

Yeah?

Absolutely, I mean market is an agreement that rates are coming down not just this year, but in twenty twenty six and twenty twenty seven. In fact, the market you look at the federal funds futures market, it's has rates coming all the way down to about three percent on the federal funds rate the end of end of next year.

So I want to dig a little bit deeper into what you just said.

The idea that the long end of the yield curve is pricing in steeper cuts. You could make the argument that if the economy isn't falling out of bed, that any steeper cuts would cause a reacceleration and inflation and potentially some.

Deterioration and the dollar.

That could cause kind.

Of the opposite in a long end in terms of a selloff and a yield curve steepening. What's your understanding of why the market doesn't seem concerned about that?

Well, I think they think that the reasons for cutting now are actually quite compelling, given that the inflation path through from terrace has been smaller than expected and the weakness in the labor market has been at least as large as expected.

So I think the market is shares the view of J.

Powell that the downside risk to the labor market outweigh the upside risk to the inflation, so therefore redcuts are warranted. But I think the question is how far are they going to go over the medium to longer term. That's where the markets I think, maybe a little bit ahead of themselves now. Some of this it's hard to factor in how much is the pressure of the Trump administration on the Fed, and some risks that the Trump administration

Well, just to talk about what we might get from the news conference as well with Sham and Pal, how difficult is it going to be for him to establish a consensus at this meeting. If you go back to the last dot plot, and things may have changed, but in the last dot plot, there were a big group of individuals that saw no cuts in twenty twenty five, And I'm just wondering how much has changed, not just

I think most people are going to go along with what Chirpowell wants because they're not in disagreement about direction of rates. They're just to maybe be we have a small disagreement about timing. Should we start in September? Shall we wait a little bit longer. So the fact that they are all in agreement that rates are going to be coming down, I think they're going to give the chairman what he wants it.

This means, so I'm.

Actually expecting very few descents on the side of no rate cuts, maybe zero or one the other side of the equations that are going to get fifty people supporting a fifty bas appoint raycut. I think one person I'm expecting there and perhaps is Steve Moran if he gets confirmed and is sitting on the FLUC on Wednesday afternoon.

Bill, do you think that it's healthy to have a character like Stephen Marian Meran on the Federal Reserve on the Board of Governors to really foster a robust debate about not just whether to cut twenty five or fifty basis points, but the overarching framework that the FED is operating in.

I think it's good to have a diversity of views on the Federal Reserves to debate a lot of the framework. I think the FED could do quite a bit more in terms of developing a framework for quantitative easing and quantity tight and I've written about that over the last few months, so I think there are things for the FED to do. I think it's a little odd as someone that's essentially on loan from the administration for four

For people who aren't familiar with the meeting, a meeting that you've been a part of many many times, can you describe to them what that kind of room will look like, that situation, how the meeting actually progresses, who runs things, and what kind of opportunity Steven Mann would have as he sits around that table to make his points.

So the meetings typically are obviously chaired by the chairman, and there's a typically a discussion about the economy. Everybody goes around and gives their views out of the economy, and then there's a discussion about monetary policy. Everybody goes around the room and talks about their views on monetary policy. So Steve Rann will have a chance to speak on both of those, but he's going to be only one

But will you take it in turns?

Are there any kind of debates at all or do you just go around one by one by one around nineteen individuals.

Now, there's there can be some back and forth. You know, people do respond to what other people said say. But I mean, remember, everybody's looking at the same set of information, So the disagreements tend to be small, you know, more at the margin rather than large, because everybody's looking at the same set of information and hearing the same staff for work ask evaluating the same economic information.

Stay with us more Bloomberg surveillance coming up after this. Abaga one if ups rights in the following here's the quote. We expect the FMC wants to signal a series of rate cuts. We expect a total of one hundred basis points of rate cuts this year. Abigail joined us now for more Abigail, good morning, this year as in the rest of twenty twenty five. Yes, okay, quick math some a simple point. The three meets, So it's one hundred basis points. You expect a fifty.

Yeah, So we've been expecting the Fed would deliver one hundred basis points of using this year since April. So we had after the Liberation Day tariff announcements, we felt that you know, we would see it come to the four that the Fed would have to make this decision essentially between kind of the potential for an uplift and inflation versus the weakness in the labor market. We thought that would become most acute at this September meeting. And you know, we continue to expect that we'll see the

You saw July popping a little bit higher.

So I do think that August print is going to be an important one just in terms of getting a sense of how this consumer is vary.

So is twenty twenty five going to be a mirror image of twenty twenty four when it comes to one hundred basis points of rate cuts into data that only gets better economically.

Yeah, So I think it's interesting because you know, we are expecting to see kind of more weakness in the labor market side. Right if we remember the kind of layoff program from the federal government side, you've got a slug of around seventy seventy five thousand workers that are expected to come off the payroll at the end of the fiscal year.

So that's going to dent your average right through the end of the year.

So I do think there are signs that you'll continue to see that weakness in the labor market data. I think the key thing to note here is you've seen that weakness in the consumer but you've not seen the impact of tariffs yet.

Right, We're just.

Starting to see some of those price increases coming through for consumers. We saw reports obviously from Walmart recently around potentially passing through some price increases in August.

So I think that's why we're watching very closely.

You know, what's happening in this retail sales data this week, because you've not seen the kind of impact from the tariff. Yet on the consumer, you've already seen a slow consumer. So the question is kind of when that kind of feeds through, it's kind.

Of weaker real disposable income.

As you start to see inflation reaccelerating, how does the consumer then respond?

Could you see a job less reaccelerating?

And I ask this, given the fact that you've got companies that are investing more in automating different things, creating greater efficiencies, especially in the face of uncertainty with respect to policy, could you see a pretty sluggish labor market even as corporate profits expand, even as people continue to spend.

Yeah.

Look, I think our senses that we continue to see the labor market weaken through the end of the year, but then we think you will see a little bit of a turning point and into twenty twenty six.

I think there's a number of things to look to in.

Terms of the potential for kind of a more positive growth outlook through twenty twenty six. I just think that the kind of bite of the kind of tariff policies with the inflation pass through, will be fouled through the kind of fourth quarter and into the end of the year. Our expectation then is, you know, potentially start to see some of the kind of fiscal impulse from the One Big Beautiful Bill Act kind of coming through. We should see that, you know in the April tax refund season.

I have to say, I think that final point is still really underappreciated because for a lot of people, they view the Tanks Bill as an extension of current policy.

Can you just sort of build that out for us? Why is that still so important? What kind of refunds out be expecting and why?

Yeah.

So, I think there's a number of kind of consumer policies around kind of child tax credits, you know, some of the focus from the campaign around tip income deduction, standard standard deductions for seniors being boosted. I think there's a number of different elements where you could see that potentially feeding through into a little bit stronger consumption through that period. I think the question is how sustainable that is. I think it would be kind of an impact through

Increase in investment.

So I think the question is whether some of the extension, as you say, of some of the expensing provisions, does that then feed into stronger investment next year potentially, You know, we're a little bit hesitant just given the extent of the response you saw in twenty seventeen, but you know, that's another potential kind of boost that you could see. But overall, you know, we still expect a relatively muted pace of growth next year.

You know, we're still below trend. We've got a one point six percent rate of growth next year.

Stay with us.

More Bloomberg surveillance coming up after this. Looking ahead to the rest of this week, Great Peters, a PGM has this to say, us macro base case is a muddle through well downside tails remain, There is a chance of a mild recession. We see limited crash risk. Great joins us now for more, Greg, welcome back. I'd love an update on where you are now because the last time we spoke you talked about the risk of a repeat of last year the FED was going to come and

Yeah, there's definitely been a reversal.

The steady, unrelenting kind of steep nur trade kind of reverse itself for the past week or so. But I'm not convinced that that is kind of how it's going to continue to play out. You know, I still think the risk in the system is for steeper curves, not flatter curves. You know, you look at kind of where we are economically. You have you know, just talked about, you know, the fiscal lift that I think you'll see. You'll see more monetary stimulus. You're seeing the effects of

I just don't know, you know, this is something that we've been talking about here. How much is it just crowded positioning getting stopped out in terms of the yield curve flattening. I'm just wondering about the reaction function to Wednesday's announcement. If there is a real Dubvish bias to what the Fed does, do you see that curve steepening reinstating itself or do you think that right now the market's just in a different frame of thought.

You know, I think the answer is both, Lisa. So I do think there's an expectation that the Fed will just do twenty five. But you know, I don't think anyone will be completely shocked by, you know, a more Aduvish bias here. That's where the markets are leaning, so that should largely be in the price. But I think It's important to note that the inflationary effects haven't really come.

Through yet, you know, from a tower standpoint.

And then if in fact this administration and this FED is trying to kind of goose housing, then.

That's the area that has actually pulled down inflation.

Right.

It's been a disinflationary environment on the housing front. So if you kind of do programs and policies to reignite housing, that that should all seq will put pressure on the back end.

Of the curve. So what do you like right now?

Are you just going into high old bonds and cash.

Well, you know, we like what we continued to like all along, and that's kind of the safe carry trade. So I think economically the environment's in pretty decent shape. There is this risk that you can actually overheat and hear just given all the policies we've just talked about.

But for me as a credit investor, I just don't see a lot of value right. Credit spreads are pretty tight.

So the bet that you're making to be really long credit in a beta way is that you have to go through all time types, which is a heroic bet in my mind. So it's about safe carry kind of front to you know, intermediate part of the curve, and I still think the back end of curves are quite susceptible.

Here.

Great, before you go, I'd love your response to this. It just came in from No downta of run Mac just send me a message and said, the market is the Fed going to neutral two years before the Fed has it? They can't meet those expectations. Greg, would you agree with that? It's not the risk into Wednesday?

Yeah, but I think that's kind of a persistent risk, right. Markets always are ahead where central bankers, you know, tend to be.

So I don't think that's a complete shock.

You know, you look at one year forward, you kind of have a three percent, which is you know, quite in the neutral range, if you know, even maybe a little lower than neutral.

So I think gift to neutral. See how the economy responds.

The markets have a tendency of getting ahead of itself our usual well, and I don't.

Think this is any different this SUMMERUD.

This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, angient politics. 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.