Bloomberg Audio Studios, podcasts, radio news. Let's ring on Rich Clarida. He is Global Economic Advisor at Pimco. He is also a former Federal Reserve Vice chairman.
Rich.
Always a pleasure to speak with you. Give us your read on the US economy right now, because the economic data seem to suggest that it's holding on pretty well. It's solid, and the labor market is also not deteriorating, even as inflation seems like it's on the right path.
Well, Hi, Scarlett, Yes, as we used to say during my time with the Fed, the US economy is in a good place.
And it is. It's been remarkably resilient.
Growth for twenty twenty five will probably come in north of two percent finishing strong.
Inflation has been basically flat.
It did not really move up as a result of the tariffs. We've had strong capital spending in the tech sector. Now in twenty twenty six, you've got the big Beautiful Bill which is providing a fiscal impulse. You've got commitments from foreign countries and companies to invest in the US, and obviously the capital spending boom and the tech sector continues, and so indeed, I think you summarized it, Well, the economy is in a pretty good place.
It's in a pretty good place, certainly by the based on the headline economic indicators. Yet when you look at the anecdotal and here I'm referring to commentary from airlines to PNG to three M so far this earning season, a lot of it's focused on uncertainty, on caution, on what they're calling low consumer confidence. Rich, how much do you read into this downbeat commentary from companies on the front line.
Well, you know, Scrolett, I think both can be true at the same time, in the sense that you have a very positive impulse from the tech sector, from tech capital investment, and obviously households that own a lot of stocks and own their own home have done quite well because of the wealth effect, you know, the k shape economy that you talked about. As you move outside of those sectors, I think there is it is a more of an uneven a story, and I think uncertainty is
more relevant. And this may well be a year when the aggregates and averages are hiding a lot of interesting differences in the economy.
All right, let's turn out to the Federal Reserve.
Rich.
President Trump saying, of course, that he has finished interviewing candidates to serve as a next FED chair and earlier London Business School lecturer Rebecca Honks appeared on Bloomberg Surveillance where she gave her take on who Trump may choose.
Take listen, We've really had different styles of leadership over the past decade or so. You know, Chairman green'spend ran a very centralized He was a much different leader. Ben Bernaki went much for consensus. We didn't have Janet Yellen in for very long. We're learning a lot over what Chairman pala is doing and we can handle that. You know, the FED is an independent body. Different leadership styles are to be expected, and we've seen success from different ones.
Now I'm not quite sure what President Trump is looking for in the new one, but we do know that he can very much values loyalty and that's probably part of the decision.
Rich.
How do you size up the remaining front running candidates and how do you think President Trump is going to size him up?
Well, of course, only President Trump knows where he's going to land.
What I would say is I know all of them.
Well, it does appear as though Kevin Hassett and the President have decided that perhaps his best role is to stay as the National Economic Council Director, so that leaves Governor Waller, Kevin Walsh, and Rick Reeder.
I know each of them well.
I think each of them would be an effective FED chair, but they bring different strengths and backgrounds to the role. Chris Waller is a world class macroeconomist. He's also a good forecaster and good communicator. In the case of Kevin Walsh, Kevin Walsh was a FED governor. He's had very thoughtful and interesting things to say about changing the FED as
an institution and in particular thoughts on the balance sheet. Finally, Rick Reader is a very respected legendary investor in financial markets and obviously would bring a lot of connectivity to the bond market. So all three brings something a lot to the table. It's really going to be the call of President Trump, and we'll see where he ends.
Up at this point.
When any of those picks surprise the bond market.
I think right now it's pretty even in the betting odds. I guess right now would be a surprise. There'd be two surprises. One would be if if Kevin Hassett decides, and the President decided they do. When I'm at the FAT after a week ago saying no, then of course there is some probability that Scott Bessant does it. He would obviously be an excellent and very effective choice. But again they've indicated that the President wants a secretary Bustant to stay at the Treasury.
But I think among the other three, probably.
Right now, the odds of Waller are a bit lower, simply because he doesn't seem to have that connectivity to either the President or the Treasury Secretary.
And of course personnel's policy when it comes to the Federal Reserve, which is why the President is so intent on changing the folks there. The Supreme Court this week heard arguments in the Lisa Cook case for the governor. They gave no ruling, but the justices do appear to be weary of President Trump's effort to fire her. What would I mean, do you expect any kind of change in the Board of the Fed based on the Lisa
Cook hearing? Or is it safe to say that she would be in place through the first half of the year.
Oh. Again, not a legal expert, I just do economics. But I talked to them.
And my sense from all the reporting, including by Bloomberg, is that the justices, both you know, the more liberal and more conservative justices, seem skeptical of the White House argument that it had met the standard of a four cause removal. And so I think there's a very high likelihood that that Lisa Cook will continue in this role, you know, throughout certainly much of not all of this year.
I mean, legal scholars seem to think that one likely scenario is that the Supreme Court merely rules narrowly that she cannot be removed and bumping back down.
To the lower courts to finally.
And indeed, many justices indicated that they that they thought that the process was a bit rushed, indicating they would have preferred it to work through the lower courts before reaching them for final judgment.
Do you feel more or less confident in Federal Reserve independence this week?
I'm confident in Federal Reserve independence. That's clearly what Congress intended in terms of the way the FEDA, the FED is set up. And I've also said, including when I've done shows on Bloomberg, that I think an important factor that supports FED independence is the financial markets and the bond market, and in particular, politicians who want low interest rates would not be getting low interest rates if the markets lost confidence in the Fed's inflation credibility.
So I am.
I am confident that FED independence will continue and.
Be robust, and that is something that Jay Powell is extremely concerned about.
Clearly, given the.
DOJ's subpoenas and investigation into his remarks, how does the FED chair address the subpoenas in the post decision Q and A on Wednesday? Because I feel like it threads to take over the entire proceedings.
He will be asked that.
I think he will have a crisp answer when he's asked initially, and I think he'll stick to that answer, probably not really wander too far away from what he said in that two minute video that was really at least a couple of weeks ago. I don't expect him to belabor it. I think he'll have a crisp answer and he'll try to move on, would be my guess.
All right, good stuff, Rich, Always appreciate your joining us. Rich Claard as the economic advisor PIMCO and of course a former vice chairman at the Federal Reserve as well.