Latest / Bloomberg Intelligence / Mark Vitner on Federal Reserve and U.S. Economy (Audio)

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Mark Vitner on Federal Reserve and U.S. Economy (Audio) · Bloomberg Intelligence

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  Speaker 1: Will We're speaking with Mark Vintner. He is a senior
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  Speaker 1: economist at Wells Fargo Securities. The topic, of course, the
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  Speaker 1: think they could well be significant in the way that
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  Speaker 1: stock with Kathleen Hayes and Pim Fox on Bloomberg Radio.
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  Speaker 1: join Pim Fox and really excited to introduce our next guest.
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  Speaker 1: Mark Vintner joins us. He is a senior economist at
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  Speaker 1: Wells Fargo Securities UH and great to have on a
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  Speaker 1: day when we got so much data out that well
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  Speaker 1: a data dependent fed Are they even listening? Mark Vitner,
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  Speaker 1: Thanks so much for your time today. UM it seems
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  Speaker 1: that every measure of inflation you look at, with the
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  Speaker 1: exception of the FEDS preferred core PCE is getting up
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  Speaker 1: to two percent or above. I mean five year five
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  Speaker 1: year forwards are at one and three quarters. The CPI
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  Speaker 1: numbers we got today x food and energy two point
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  Speaker 1: three percent better than the street was looking for. Is
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  Speaker 1: are we starting to see a real pick up and inflation? Mark?
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  Speaker 1: It sure feels that way. If you look at the UH,
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  Speaker 1: the the trip, the Dallas Feds trimmed me you know,
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  Speaker 1: the Cleveland Fed and the Cleveland Feds measure, the Atlanta
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  Speaker 1: Feds measure of wages. Everything seems to be firming up.
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  Speaker 1: I mean it's um. It's not quite where you would
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  Speaker 1: think we would be, given this far into a business
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  Speaker 1: cycle and with the unemployment rate down to five percent,
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  Speaker 1: but it's moving in that direction, and it's certainly inconsistent
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  Speaker 1: with the funds rate near zero. But raising it is
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  Speaker 1: awfully difficult. Well, Mark, in that context, do you think
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  Speaker 1: that the Federal Reserve raise interest rates this year? I
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  Speaker 1: think so. I think the raise rates in December. It um,
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  Speaker 1: it's it's it's going always a tough call for them
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  Speaker 1: because when when the economy is growing just at at
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  Speaker 1: just a two percent rate when things are great. Um,
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  Speaker 1: it makes it awfully tough to raise interest rates when
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  Speaker 1: everything's right. And then when something goes wrong and and
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  Speaker 1: a lot of things have gone wrong, from Brexit to
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  Speaker 1: the continued weakness in Europe and and some some fairly
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  Speaker 1: quirky or weak economic numbers here in the US, it
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  Speaker 1: makes it next to the next impossible than the rates rates.
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  Speaker 1: So there's really no justification to do it in September
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  Speaker 1: because we've had some very wheat numbers right now. I
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  Speaker 1: like to kind of say that it's the defenses their
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  Speaker 1: data dependent, but the data haven't been dependable. Well, but wait,
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  Speaker 1: aren't they I thought inflation like price stability and uh
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  Speaker 1: the labor market where the two things that they had
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  Speaker 1: to worry about the most. Do they have actually other mandates? Well,
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  Speaker 1: that's their their primary mission, and I guess the third
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  Speaker 1: leg of the school was to maintain low interest rates,
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  Speaker 1: although that was long been forgotten because rachs are so low.
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  Speaker 1: But the problem is, how do you normalize interest rates
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  Speaker 1: without uh unleashing havoc in the global financial markets. Well,
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  Speaker 1: it's very hard to do when when the global economy
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  Speaker 1: is barely growing, and the US economy is his only
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  Speaker 1: average one growth over the last three quarters. So but Mark,
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  Speaker 1: let me. I mean, I was talking to Mark Fields
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  Speaker 1: the other day from the Word Motor Company, and he said, Um,
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  Speaker 1: his company is well prepared for a raise in rates
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  Speaker 1: that he wants to see. Obviously a slow and shallow trajectory,
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  Speaker 1: but um, a quarter point fifty basis points no problem.
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  Speaker 1: And they're obviously reliant on a consumer that needs credit
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  Speaker 1: to sell products. So if he's ready, Um, then the
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  Speaker 1: FEDS Uh only holding back what you're saying to do
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  Speaker 1: a favor to other countries who would be unhappy if
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  Speaker 1: they raised rates. No. I don't think it's a favorite
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  Speaker 1: of other countries. I think that the FEDS feeling is
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  Speaker 1: now we we we have to we have to pick
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  Speaker 1: our battles and and uh, let's not. Let's not raise
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  Speaker 1: rates at a time where we're going to unleash havoc
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  Speaker 1: in the in the in the global financial markets, and
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  Speaker 1: raising rates in September might do that, particularly following those
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  Speaker 1: weak I s M reports. Uh, We've and then we
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  Speaker 1: had the weak reports from from the Philly Fed in
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  Speaker 1: the New York yesterday, the client and industrial production. Uh.
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  Speaker 1: The raising interest rates in that environment is totally inconsistent
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  Speaker 1: with everything we've seen in the history of the FED.
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  Speaker 1: I mean, I just can't see I can't see how
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  Speaker 1: they how they in September, the next meetings in November,
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  Speaker 1: they're not gonna raise rates a week before the presidential elections.
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  Speaker 1: That that leaves it December, which we do expect them
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  Speaker 1: to raise rates by a quarter of a point then,
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  Speaker 1: but they're not. But it's not a political thing, right
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  Speaker 1: because didn't we hear from Neil cash Kari that the
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  Speaker 1: FED it takes absolutely no political uh thought into its
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  Speaker 1: decision making. Well, you know, they take absolutely no political
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  Speaker 1: thought into their political decision making. That's my that's my
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  Speaker 1: that's my thinking on it. I mean, yeah, they try
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  Speaker 1: to be they try to be non political by being
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  Speaker 1: you know, by being political. I mean, you can't separate
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  Speaker 1: the two. And there is some precedent for doing something
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  Speaker 1: as latest September, but unfortunately, I think that the data
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  Speaker 1: just doesn't just just doesn't the case for it. And
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  Speaker 1: when it when it comes to making a decision on rates,
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  Speaker 1: they have to weigh the risk of making a mistake
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  Speaker 1: in keeping rates where they are versus versus raising them
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  Speaker 1: and at this point, the risk of raising interest rates
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  Speaker 1: far out weigh the risk of waiting until December. So
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  Speaker 1: I think it's a it's a fairly easy call right now.
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  Speaker 1: In terms of politics, I think it really just comes
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  Speaker 1: down to do we really want to interject ourselves into
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  Speaker 1: this political debate We're getting ready to go through a
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  Speaker 1: series of three presidential debates. Do we want them to
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  Speaker 1: talk about the set at all? It would be best
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  Speaker 1: if we just laid low, and that's that's essentially what
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  Speaker 1: they do, all right, Mark Vitner, he is senior economist
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  Speaker 1: at Wells Fargo of Securities. Talking about rates while taking
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  Speaker 1: a look at the tenuere it is down to thirty seconds,
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  Speaker 1: the yield one point six nine percent the thirty year ago,
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  Speaker 1: and in the other direction there by us up eight
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  Speaker 1: thirty seconds two point four four per cent. You're listening
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