Pimco's Wilding Says the Fed Pivot Party Is Over

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Bloomberg Apr 25 03:10 · 18.2k Views

Tiffany Wilding, Pimco managing director and economist, says the US economy is "incredibly strong" and isn't consistent with inflation pressures further moderating. She speaks on Bloomberg Television.

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Transcript

  • 00:00 What are you expecting from the first quarter and how do you think everything we've seen in the first quarter of this year will shape the conversation next week?
  • 00:08 Yeah,
  • 00:09 So we're looking for a pretty strong report.
  • 00:11 I think the Bloomberg consensus, as you mentioned is, is 2 1/2, but but Arlene as well is, is on the higher side of that.
  • 00:16 And I think the more important thing that we'll be focused on, you know is just the core measure of GDP, final domestic demand growth which economists call it,
  • 00:24 that's going to be incredibly strong, that strips out the volatile
  • 00:27 trade and inventories categories and that looks like that's going to be above 3.
  • 00:32 You know, the thing that we've been really highlighting and focusing in is that will be the third quarter in a row that we've gotten core GDP growth of above 3.
  • 00:41 And that's something that we haven't seen since 2014 absent the
  • 00:45 pandemic related rebound.
  • 00:46 So all of this is to say is that GDP in the United States is incredibly strong
  • 00:51 and and that strength has has continued after 2023.
  • 00:55 We've seen strong momentum going into to 2024.
  • 00:58 All of that suggests that inflationary pressures in the economy,
  • 01:02 you know we'll we're running, we're running at a hot economy here and it's it's not really consistent with inflationary pressures further moderating.
  • 01:08 Do you think that will shape the language in the statement next Wednesday when we open that up
  • 01:12 at 2:00 PM Eastern Time, Is that going to look any different?
  • 01:16 Yeah, I mean I certainly, I think you could see some changes to the statement, but I think what markets will be more focused on is what Powell says in the press conference.
  • 01:24 And and his, you know
  • 01:25 in the past at least Powell has made reference to the Sep projections,
  • 01:31 prior Sep projections at a non, you know, Sep meeting and given us some hints on how he thinks they could change.
  • 01:37 And we think that's potentially what he could do now set the stage for more revisions to the SCP that we're going to get in June.
  • 01:45 You know, say that the inflation forecasts are likely going to have to be revised up.
  • 01:49 And then as a result of that sort of hint at the fact that you could take out maybe 1 or even 2 cuts
  • 01:55 in the forecast for 2024.
  • 01:57 Tiffany,
  • 01:58 I hate to do this.
  • 01:59 I feel kind of a little bit dirty doing this,
  • 02:02 but is this a pivot to the pivot that we got in December?
  • 02:08 Well, it does seem like in some sense the the pivot party from December is over.
  • 02:13 You know and I and I think that's as a result of the inflation Prince that we've seen.
  • 02:17 You know and again just the economy is just incredibly strong.
  • 02:20 You know, we have argued, you know, that, you know, the so-called last mile on the inflation
  • 02:25 in the inflation race
  • 02:26 is going to be the toughest, you know, and that's just because we have a strong economy, labor markets are tight
  • 02:32 and that and that just as likely to result in inflation hanging above their target.
  • 02:36 And really the question is, is you know, are they OK with that?
  • 02:39 And it seems like, you know, there is some threshold
  • 02:42 maybe we think it's 3% where they won't be OK with that.
  • 02:46 But you know above 3 it's OK.
  • 02:48 But again, you know, it's it's a bit, you know, monetary policy is a bit of an art and a science here.
  • 02:53 So you
  • 02:54 know, I think the art is that, you know, they don't really need to be cutting.
  • 02:57 They're they're not, they shouldn't be in a rush.
  • 02:59 And so really it's up to them to choose when they start to do.