This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. The Bloomberg
events structure this year is extraordinary. We've got Brad Stone and Emily Chang with a technology conference which is world class. Look for that in the coming weeks. And right now this moment in New York, there is Bloomberg Invests. Brian moynihan will be speaking from Bank of America, otherworthies, Raydale. I believe mister Drucon Miller is going to darken the door. That's all fine and well, and there will also be
tactical discussion around Bloomberg Invests leading that. As Seamas Show, our chief global strategist of Principal Asset Management, who joins us this morning. I love Seema, how buried in your note you have We are underweight in some way equity slightly underweight. You know, you got the adverbs going there. How do you do an equity strategy when you see what Nvidia is doing?
Now?
Oh well, okay, so within our slight underweight to equities, we actually have an overweight to large cap. The reason we have the way overweight to large caps which we made back in February, was actually a cyclical reason, which was threefold. One was that you have we believe a slow downcoming potential recession. We have the towards the end
of the FED hiking cycle. And the third thing is that large caps typically have a greater international exposure revenue than you do in your small cap So that was a reason. And now you've added in the Nvidia. So actually that is playing out fairly well. But of course you have to think about your S and P five hundred target. Could it go back to the September low? Well, last techer is doing this world. The maths just doesn't add up.
Master does an add up for the S and P. Then that's that one hundred. Does the mass add up for the US stocks fifty?
That's an interesting one, the U stocks fifty. I mean, we keep having this conversation with clients about US exceptionalism about six months ago, Everyone's like, well, look maybe for the next decade we could have higher inflation. This is value trade. Therefore, Europe is in the ascendency. And then you have this movement back INTOAI. Sorry, and actually the US is back and that's what everyone is talking about. And certainly from our perspective, yes, as a cyclical or
as a tactical trade. At the moment, the US is not our favorite region. But if you're looking out of a ten year period, do you want to be focused on the US or Europe? Well, it's one hundred percent in US.
Back home, you've just come from London. How are they thinking about this now? They've been parlering into our VMH stock was flying data out of China starts to weaken.
Are they abandoning that trade quickly?
Yeah?
I think there's a lot of disappointment, and I think they're quickly cutting those positions. And the thing is is that look at the moment, so many people are positioned for bearishness in the in the broad market. They've got a cut wherever makes the most sense, where there isn't as much confusion, And I think with the China story, there is a general feeling that this is going to
be very disappointing the second half of the year. It could still reach slightly the GDP target, but we're not looking anything like the kind of stimulus measures that we would have seen in previous cycles. So, yes, the China trade is coming down, and actually as a result of that, because of the European exposure to China that is also coming down as well.
You said that people are looking for ways to express their bearish views. They're struggling to find the places. What other places are you seeing them express their bearish views at a time when it's dangerous to do so, and it's unclear the best way to really express that.
Well, if you have if you can do broad asset allocation, then really the place to be focused is fixed income. Core fixed income is your best place to show that bearishness. Quality, defensive, those are the areas probably hig yield is not the area that you want to be focusing on. You if you believe that a slow down is cup and then there's a core part of it, which is still alternatives that that trade continues to play on fairly well. It
provides really good diversification. I mean, we saw that during the SVB crisis, the things like infrastructure continue to perform extremely well. So if you are one of the people that believes that there is an economic slow downcoming, there are ways to play this which maybe are not as controversial as cerny what you see for the equity market, have.
You shifted your view in terms of what you believe is defensive? And I ask this because we keep hearing about how Apple and some of the big tech stocks have gone from high beta interst rate sensitive sectors to suddenly the star warts of the market, the engines of growth, the place that you have to be if you want to be safe. Are you buying that?
Well, look, the growth trade is typically where you want to go if you believe that the economic environment is turning more negative. That has always been the case. Only all of our models show that same story. The AI is that additional secular story where there may be well be froth, but certainly we bind the idea that technology, and not just AI, but technology is for the future. We actually made a very reluctant decision to color tech exposure last year, in last January in twenty twenty two,
because of the FAED hiking cycle coming up. But we continue to be the long term believers in tech, which is why we went in. Plus, the very important cyclical fact.
Is, well the start twenty two that was the right decision because tech was just brutal. Can I just finish on the loads of October? Where are you on the loads of October now? Because we used to go back and forth about whether we'd retest those lows they're twenty points ago, we've had a twenty percent rally off the bottom. Are we retesting those loas?
I'll be honest, I think this is a really, really difficult decision to make. So look, the tech story means that it's unlikely, right you could see a little bit of a pullback because of the froth in the market. Yes, But if you don't get that pullback and you get the momentum story that Julian was talking about yesterday, if you get that momentum pulling up the rest of the market, and actually then you're getting a melt up potential deeper
recession down the line. I do believe if you don't get a recession sooner, the later it is, the harder it becomes. So you want to get this out the way. And if that happens, then maybe you get another move up, but next year it'll be a tougher story.
Same it good to say in New York. Great to catch up of principals and management.
Briefing US now. Marilyn Watson with Black Rocketed Global Fundamental Fixed Income Strategy, Maryland. The pain in the bond market is down seventeen percent on the Bloomberg Total Return Index and we've come back six or seven percent. We've come back. Just a simple question, now, what do you presume price up, yield down? Do you assume a new leveling or do we revisit price down yield up.
Yeah, So, as you say, we've seen a huge amount of holacility in fixing markets.
In particular this year, which has exceeded that.
In the equity market in the markets as well. I think now that we've seen the resolution of the debt ceiling negotiations and then seventy around that, we now know that we're going to have a huge amount of issuance coming the US treasure We needs to build up the TJ balance again, so we know we have a lot of issuance coming there, and that amount of supply obviously
will need to be absorbed by the market. On the other hand, that is going to also obviously, you know, train some sort of liquidity from the system as well. But I think at the moment, you know, when we talk about f MC rhetoric, when we look at the data coming through, we saw, you know, in terms of
the jobs data, the name market remains incredibly tight. We have seen some softening in terms of sentiment obviously, and you know other data, but you know, consumers continue to spend, the real estate housing market remains on a pretty solid footing, and so the economy actually in the US remains on a very us putting at the moment. And so I think, you know, coming into next week to say, all eyes
will certainly be on the CPI data. Inflation is still you know, far above the Fed's target, and so they may choose to pause or to skip or have you want to phrase it. But it's certainly not a dunde that there won't be more hikes to come. But I think, you know, they need to absorb and continue to look at the lags in the transmission, you know, the previous rate hikes.
So take that excuse me, take that MAC review and bring it over to a strategy. Do you manage for coupon or do you manage for total return?
Well, we try to manage for both. So I think if you have a very flexible, you know, unconstrained approach to fixed income, you can have both. And so at the moment you can have very high quality, decent carry, which given spreads today, you also do have a decent amount of buffer. Now you would have to see a significant repricing from here to actually see you know, a further loss in total return. So I think you can have both.
What we try to do is construct.
Portfolio where you know, we have you know, low volatility, where we have decent carry, decent liquidity, and we have a very wide range of different positions as well, so we can take advantage of relative value positions where we're stripping out the beta effectively. And you know, in today's environment where we see a lot more dispersion between individual bond issuers in between the individual names, it's much easier
as well to capture that relative value. You know, we're taking advantage of the different valuations between you know, for example, some names and emergent markets in her yield in investment grade corporate, So I mean think the bond market today is a very different beast to the one that was a year ago, five years ago, and I think the amount of opportunities out there now are so much larger that you know, if you can construct a very very
balanced portfolio with a lot of different risk factors, you can get both the income and the carry, but you can also help to protect returns.
I can't remember the last time the two massive bond shops have had such divergent views on where long term rates are going to go. And I'm thinking of you Black Rock as well as JP Morgan Asset Management that see you've got by Michael saying the entire curve is going to be at three percent or below in the near term. How do you push back against that, that feeling that we are not going to go back to a low rate era and see something that does depart from the past twenty years.
So I think, first of all, we do think that inflation it's coming down, but it's going to remain elevated and at the higher levels than we've seen in previous cycles. I think, you know, inflation is or it looks like it's going to be relatively persistent. Secondly, I think the FED is going to remain higher for longer as well, And as I say, you know, it may well move more. We'll see what they do next next week and in
the coming months as well. But given the economic data we have at the moment, then it's highly likely or very possible that the FED could hype again and then they say, we have this huge amount of issuance you know that's coming in the market as well. And I mean on the other side of that, obviously, we do have a lot of demand from investors who are still parked in cash or who are parked in money market
funds and you know, somewhat on the sidelines. But I think when you look at long term, when you look at the economy, when you look at growth, and you're talking about the tech sector before, we're continuing to see huge amount of investment in that area that's continuing to drive productivity. So I think there are a huge number of factors that mean that you know, inflation and rates will remain higher for longer.
How much higher Where do you see the curve kind of settling out at.
So it's hard to see.
I mean, we could see a little bit higher sort of you know, from here over the next few months, depending on how the economic data comes through, depending on what we see in terms of the stresses that continue toble through in the in the banking sector and elsewhere.
I mean, I think there are reasonable levels now if you look at you know, certainly the fixing market compared to the stock market, then you know, I would say the actually market maybe is overpriced, but I think from here you could see them.
A little bit higher.
But it really depends on the data that we see coming through in terms of inflation, in terms of the economy over the next few months.
Usually it's the equity people commenting on bonds. Mount and that was a comment on equities there. It's kind of interesting to me. I've heard that a couple of times now in the last twenty four hours. Mounting the bond investors thrown some shade at equities.
What's that about.
Well, it's been a long time coming, John, I could say that, I you know, I really think that that now the bond market has a huge amount of values.
Off Mountain Watson a Blackrock Mountain. Thank you.
We need a political brief here. She's hugely popular with all of you. Thank you so much for supporting Wendy shil Or Brown University, Director of the tomb And Center for American Politics. Give me the history here on how people of low polling either party can advance towards the primaries. If I see from five thirty eight to fifty four percent, DeSantis less than half that, and the others are all single digit. Is there any history, Professor Schiller, of single digity people doing better?
No, no cstantial history. I mean, you remember the expression the big mo, and we were talking about George Herbert Walker Bush way back when God about the big mo, and people perceived other people as more impalatable, and he ended up getting the nomination in nineteen eighty eight, for example. So I think that the issue here is the difference for Donald Trump in August when the first debate comes, is that everybody on the stage will be attacking him in this subtle way, but they are going to use
him as the target. That's a new position for him. He wasn't really the front runner when he first announced. When we first got to the stage, he emerged as a star.
But everybody else is trying to make their own case.
Now they have to attack him subtly not to anger his supporters.
And make a case for themselves.
That's the big problem for the debate for everybody challenging Trump. You do that, well, there's not enough airtime in a debate with ten people. If that's how my people are going to be on the stage.
Professor, you have a definitive textbook, which you know is great Civics one oh one on America. I told you once, Wendy, that you needed to rename the textbook follow the money. Is that what this is about? I mean, are all these people running because of a financial advantage in running?
Well?
That has become a new cottage industry that you know, with the advent of social media and the way of making a reputation without the mainstream media, then you have a way of getting speaking gigs, of raising donations.
I mean, it just changes everything.
But I still think you need the biggest money donors to make it through the primary season to really launch a challenge to Trump.
For example, you need Chris Christy. Where's you going to get the money. There's a couple of people in Jersey that.
Have given a lot of money to the Republican presidential campaigns in the past.
Are they going to back Christie? Are they going to back Mike Pence.
I mean, with enough really big money, you can run enough ads in some states may be that not me, but not super solid to dent him. But where are those big money donors going to line up? They haven't really announced for Trump, but they aren't really lining up.
We saw a little movement towards the Santis, but.
Then they backed off when you had a pretty disastrous front announcement of was a campaign.
So now where do they go? That will make a.
Difference, exactly as John's saying, between now and August, those signals are going to be important.
One other signal it's going to be important's whether there's unification among the different Republican candidates on some key issues that affect the money that you're following, such as trade. How much is this sort of a unified view not only against China but in general in a more sort of regionalization of trade, a pullback from sort of the traditional globalization models.
Well, Lisa, this is an amazingly important point because our primary is just no regional right, and so you still need the big money to worry about regulation and free trade and taxes, and that's pretty constant.
That's what they've always worried about. But they also want stability and certainty.
They don't want chaos, they don't want unpredictability.
And it's funny because it's not funny.
But Trump, you know, presents pretty chaotic future. We don't know what he's ever going to do in any given moment. But now DeSantis has proven to be someone who may not be predictable.
Who may kind of want to jump the shark in terms of.
Regulating business with his few but Disney, is he really a reliable investment? And that's what I think businesses are looking for traditional Republican platform, but it's also coupled with certainty and competence in terms of smooth government running.
We saw McCarthy sent that signal.
Clearly to Wall Street. I will make sure the trains run on time and I won't crash the economy. One big question, very clear signal.
One big question I keep hearing from analysts on Wall Street is if the rhetoric on both sides of the aisle is rewarded, if it's inflammatory towards TIA, in particular, saying that we want to isolate them, we are in a huge rivalry with them. How are we going to soften the tensions even as Tony Blinket heads over to Beijing.
Well that's I mean, I think the question is how much cheology or how much credibility do these Republican candidates for president have on foreign policy?
You know, Trump made China the enemy, right, you know, very large tariffs.
And then with COVID, you know, blaming China.
How's he going to walk that back? He's not going to be able to do that.
And Ron DeSantis, you know, just had a big Asia trip trying to sell himself as somebody who can negotiate the world stage.
You know, Mike Pence has a pretty calm demeanor. What's he going to do? How is he going to sell himself this way?
And the rest of the candidates don't really have except for Rinickki Haley have a lot of foreign policy experience. So who's got the credibility in the Republican primary on China and China.
Doesn't even know?
I mean, who do you really look to and say this person could get elected and we can do business with them. You know, that's where Biden has been somewhat measured with China, as you just point out, you know, Secretary Stata sort of attacking China but not attacking China, and that's going to be somewhat calming as a signal, I think to the business community, Wendy.
This one nine that we haven't mentioned Kevina Youngkin Wheny does this feeling at the moment from people I speak to that the worst that governed descentist does, or rather the fact that he's not improving the more Governor Youngkin thinks about making a run. How are you thinking about that one?
No, I just don't know that he has, you know, the ability to jump to the national stage with any force or energy.
He's got a good platform.
He won an election against somebody was well known and not always well liked, term a call up in Virginia, so he got kind of lucky with his opposition.
And Virginia is still a swing state.
It's swung more to the right recently, but it's still a swing state.
Do you really nominate for your nominee.
Somebody who cannot absolutely deliver their own state? You know, DeSantis will deliver Florida, so al Gore did not deliver Tennessee.
These are things strategic. People worry about.
Money people worry about can he sell himself really to money people to make a big enough launch.
Interesting, Wendy just wanted for to get your perspective. Wendy shall have there of Brown University.
Alberto Garlo of Andromeda Capital, John, I want you to take bring in Alberto here, and I want you to bring in me in off the detailed discussion I'm an off camera yesterday at PIMCO about what the moderate end and the long ends going to do. And you mentioned in the break the term premium. Bring that into the shock that we could see priced down in a higher long term mul Well.
I think you have to start with the inflation target of the Federal Reserve, which is two percent, and you have to make a call on what they're going to tolerate. Pimco believes they'll tolerate two point something.
Claire has been very visible on the former.
Fed Vice chair, and ultimately they're going to carry on forecasting a return to two whilst accepting and tolerating two points something. So something may be even approaching three. And with that in mind, there is a call on the long end that you start to price in and rebuild this so called term premium around the inflation story, and you end up with a steeper curve, So that's the
long end yields shifting higher. This is the call right now, Alberto from the likes of PIMCO and I think that you're thinking about a similar thing.
So look, we had five hundred basis points off hikes and the job market is still pretty solid. So there's something central bankers are not doing, and that's the long end of curves. If you think about a large company in the US, you can fund a three point six percent roughly plus a spread, and then you can invest in T bills that's a carry trade. Same for homeowners. Ninety eight percent of all owners, according to Goman Sex Research,
has a mortgage that was issued at lower rates. So if you just hike the short end even to six percent, that's not really tightening. You're doing half of your job as the Federal Reserve. So what you really need to do is to make sure that the long end funding costs also goes up. That's how you tighten financial conditions,
and so far that hasn't happened. So it's really you know, if central bankers are serious about what they're doing, there needs to be some steepening in the in the five year and ten year point of the curve, and that's really what's going to hurt financial conditions. That's going to tighten as prices. But that hasn't happened yet.
So let's make the policy call.
Do you think they need to rethink Q to say, the kind of maturities they let roll off, maybe even think about selling.
So suppose you get to target to pose, you know, you hike close to high five maybe six percent, and that inflation remains above two percent. We think it will be above three at the end of this year in the US, and what do you do with QT? You know, you need to start thinking about QT. You can't just hike the short term rate, and so you need to think about balance sheet reduction. There are no targets on that.
Remember the Bank of Indian told briefly about it at the end of May, and guilds wide and fifty basis points in a ten year so there's a lot of sensitivity there. There's a lot of banks but also non bank financial institutions that are long duration, and we need as prices to come down. So we're not going to have a recession here, but we are in an asset
price recession. The investible world is shrinking. You know, China potentially is not investible, and so everyone is going into fewer assets in the US, like tech or like high quality credit. Everyone is long high quality credit. You know, surprise surprises has a very high so we don't like it in this environment where there's a lot of treasurations and the long enough curves can steepen.
But there's this issue.
If you do see exactly the scenario that you're talking about, which is a surprisingly hakish fusual reserve, wouldn't that be a huge support for the dollar, especially in this non recession kind of period where people are consolidating their wagers on an area of dynamism and growth.
Look, the paint right now is clearly you know, market's going up and you know other currency is going up. But if we have a persistently hokish central bank and if the long end goes up, and then the consequences for markets are pretty heavy. I know we're having big set fourteen now. Credit spreads in CDs in particular record lows, so you know there's some pockets of value, but you want to really be careful about that moving the second half of the year, where liquidity is going to contract.
There's a lot of treasurations e CBQT and then the boj exiting you've got control.
How do you play though pain trade?
So essentially it's very important to be able to stay in the trade.
Here.
There are some longs that are very interesting with double digit yields. So you know, obviously rates are higher, but you can get ten percent plus yields on credit in some nichues of the market. Some of them are in Europe, which has been on love.
Give us an example of that double digit yield ware.
So you know, talk about national champion banks in Greece or Italy. Greece is going to investment grade this year post elections. So there's very few countries that are going into the investable universe from being less investible, and Greece is one of them, from high yield to investment grade.
This is what you're doing, So, I mean, I can name the names you're thinking about the UNI credits. So this world, these big banks, national champion banks, Italy, across Europe, is that what you've been doing.
It's more popular now, but obviously in March and April, you know, there was a big opportunity to buy some of these and so we're keeping them. And then also so European high yield. You know, we're being a differential around six months or or maybe longer in the credit cycle between Europe and US. So the faults are going to rise, but they're going to say two and a half to four in Europe, they're probably going to five
in the US. Everyone is long high quality credit. It's the easiest call, but spreads a seventy basis points on investment on investment grade. They don't really pay you. So you need to write, you need to barble your portfolio, You need to have some bills if you want and have some high yield.
Has there ever been a time where you've finished positive on European banks? And I ask this because you flagged the joke that was the first thing that an alien does what he lands on Earth, he destroys the European bank. So why is it that now you think this time is different?
So that's that's basically tells you that people normally are pretty bearish on you know, on Europe, and we had peak bearishness in March and April, so that's where I got excited. Unfortunately, the window was very short. It wasn't like it wasn't a long lived panic, but there's still value and look, we do things, something else will break between now and your end, so we're keeping some powder dry.
How much does China really factor into whether you're going to be willing to double down on your European vet?
So, look, China has definitely been a drag on EMS. There's a lot of stressed credits in EMS, a lot of countries that have restructured, but unfortunately a lot of value traps there in Europe. The Chinese did the foreigner man is weaker, but domestic spending is really high. There is no government even in the periphery that has talked about US thirty as far as I can remember. So that's that's very supportive.
Nice fun talk. How did Napoli do it? I mean Napoli was not considered. How did Naples in Italy do so well this year?
I mean Naples is always a contrarian trade, right, it took twenty years since Maradona, but okay, we call that.
But Tatanam is a new coach in the last twenty four hours from Glasgow, Right, they dig from the best practices of Napoli. Is that how you pronounce it? Yeah, Napoli. What is the best practices in Napoli that the loser Tots can do that? When was the last time the Tots won, like eighteen?
I can I can tell you, Yeah, what is the.
Best practice to make it a surprise next year where Tottenham does better than good?
I think they've been investing in players that were undervalued, and you know, it's definitely a team that has less less capacity, less spending capacity than others. But you know, so shows you that.
They've got a history of picking up some fantastic players and they're sending them on for huge sums of money. So this song is going to be interesting to see whether they can hold onto those players.
Really interesting.
Manager is mister Delaarentis, who owns Napoli also I think in the family.
Yeah, in the family.
They also own Bari, which is the city in Pulia, tom which is looking to get promoted this year to Sarahas. So that family's having a great year, fantastic.
I just it's exciting. I see all these changes, and Frank it's Greek to me. I like the Greek investment, great idea, but the idea here I've taught him. Having a new coach from Glasgow. Is that right?
From Celtic?
From Celtic, it's pronounced from.
Rangis what's he going coming in?
Raise? Hell?
They need to spend money and do something about that squad.
I just got to fit and tell them this is going to be a repeat of what we've seen before time and time again with that club. I better, We've got to leave it there. I better Gala Andromeda Capital Management.
It is a global growth story that's under adjustment. John, let's review it now quickly. I usually don't do this, but I think it's so important. You've got four five, six global institutions. I'm going to say, get to go open as at the IMF and our team with the Bloomberg OECD, who are going to do in a moment here and BOI, it's been underplayed. The shift out one year, two years, three years to something. I remember talking to Larry and about this years ago and the benchmark was
three percent growth is a global recession. I think we're there, yeah, and it's been underplayed. OECD readjusting and recalibrating clear Lambardelli joins us right now, chief economists at OECD in Paris with their adjustment. Claire, let me just cut to the chase at the margin. Does OECD confirm the shocking duration of weakness that IMF modeled a number of months ago.
We have global growth improving over the period that we're forecasting today. So we expect global growth to moderate to two point seven percent in twenty twenty three and then edge up slightly to two point nine percent in twenty twenty four. These are historically low numbers for the global for the global economy, we've seen higher rates in the past. So the outlook is certainly without change and without action, the outlook would be for global growth to return, but to be at weak levels.
Claire, these are shocking numbers. Am I wrong? And for all of our listeners viewers that three percent growth is a global recession. With that sort of three percent view can always see these say it is a global recession.
It's not a global recession. We're projecting that the global economy is going to grow at two point seven and then two point three percent. That's not a recession, but it's a lower level of growth than we have seen historically.
Right now, when we look forward at the potential for fiscal stimulus, you want governments to pull back.
Why so what we saw.
Is fiscal policy played a really important role during the crisis, and in twenty twenty two, governments extended high levels of fiscal support and that was necessary to prevent the impact
of the war being greater than it otherwise was. But now as we're seeing prices, energy prices falling and some other prices beginning to fall, it's time to target that fiscal support better so that it's only going to the vulnerable people who who need it, and it's time to remove away from the blanket support that was put in place in immediate response to the crisis.
People have been predicting a recession for quite a while, and we're at a time when in the US the promise of artificial intelligence seems to be upending all of the persimism and really pushing people into equities. How do you feature the concept of artificial intelligence the concepts of some of the technological advancements in your forecast, So as you.
Say, technology is evolving rapidly and the potential upside from that in terms of productivity gain is potentially very very high. It's quite at this early stage of understanding what the impact of things are artificial intelligence can be. There are some estimates out there at this point quite uncertain, and so I think we're going to learn a lot over the coming months and years about the impact of artificial intelligence in terms of feeding it through to the numbers.
There's clearly a high potential upside from artificial intelligence in terms of productivity and other technological advances, but quite hard to put a number on that at the moment as we're learning what it's capable of and also what the other wider impacts will be on labor markets, on competition.
And they're like bring an incredibly sophisticated British view of economics which is enjoyed, and I mean they're facetiously. You've enjoyed horrific inflation and enduring inflation in the United Kingdom. Now the phrase it's tossed around. Bloomberg News mentions this and maybe OECD is an inflation plagued recovery. What is your optimism that the global system can disinflate.
So inflate we project inflation to four quite rapidly this year and into twenty twenty four as well, from the high levels that we've seen. Obviously, there is a risk to that, particularly from core inflation and tight labor markets in particular, I mean that wages are expected to rise. That said, there's a lot of potential out there for the labor market in terms of bringing more people into the labor market, a lot of opportunity if we bring more people into the labor market, that will help on
that side. So there's an opportunity to bring more women, older workers, people with health conditions and disabilities. If you bring more people into a labor market, that will use some of those pressures.
Can we just talk about the nature of inflation and the contribution from those tight labor markets to the headline inflation that we witness every single month. Just how important is that tight labor market to the inflation pressure we're seeing currently, because there is some debate around that as to whether the Federal Reserve just still believe in that dreaded tea word transitory and just wait a little longer.
I mean, obviously the picture differs for different countries, but tight labor markets are a key part of what is going on at the moment. They're a key part of why we're seeing the headline wine. Headline inflation is coming down.
Core inflation is proving to be more persistent and in some ways is going up in some countries still, and that is mainly driven by tight labor markets and those what we thought were in transitory inflationary pressures feeding into wage pressures, and so saying a little longer.
The latest on the OECD from the chief economists, Claire Lombardaddy the Cliff. Wonderful to catch up with you. Thanks for that outlook.
Subscribe to the Bloomberg Surveillance podcasts on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern. I'm Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and this is Bloomberg