'Ultra dovish' cuts may be off the table after CPI report, says Ed Yardeni

Published: Sep 10, 2024 Duration: 00:05:06 Category: News & Politics

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CLASS. GROW OPPORTUNITY INTO THE FUTURE >> LAEL BRAINARD THANK YOU FOR JOINING US WE APPRECIATE IT ON REACTION TO CPI AND SOME OF THE ECONOMIC POLICIES FROM THE WHITE HOUSE THIS MORNING. >> THANK YOU. >>> LET'S GET TO THE MARKETS THIS MORNING AND GET REACTION TO THE INFLATION PRINT. JOINING US IS ED YARDENY GOOD TO SEE YOU AGAIN. >> THANK YOU GOOD MORNING >> YOU WROTE ABOUT EXPECTED CHOP IN SEPTEMBER, CHINA LAST NIGHT, BUT DOES THE CORE CPI PRINT SHOULD IT BE CONSIDERED A THREAT TO THE DOVES >> I THINK TO THE EXTENT THERE WAS SOME HEIGHTENED EXPECTATIONS THAT WOULD BE A 50 BASIS POINTS CUT IN THE FED'S FUND RATE NEXT WEEK WHICH WOULD BE THE ULTRA DOVISH POSITION, I THINK THAT'S OFF THE TABLE NOW AND YOU'RE LIKELY TO SEE 25 BASIS POINTS. I SHOULDN'T SAY IT'S OFF THE TABLE. I DON'T KNOW WHAT THE THINKING OF THE FED IS, OTHER THAN THEY'VE CERTAINLY PIVOTED AWAY FROM BEING CONCERNED ABOUT INFLATION TO BEING MORE CONCERNED ABOUT KEEPING THE UNEMPLOYMENT RATE DOWN BUT THE DATA TODAY WAS PRETTY GOOD TAKE OUT RENT AND THE HEADLINE INFLATION RATE WAS 1.2%. WE'VE BEEN TALKING ABOUT GETTING TO THIS LEVEL FOR A FEW YEARS. WE THOUGHT IT WOULD COME DOWN. SO THINGS ARE GOING RIGHT ON INFLATION AND I THINK THE SURPRISE IS GOING TO BE THAT THE ECONOMY IS MORE RESILIENT THAN PEOPLE ARE THINKING. >> IF THAT'S TRUE, WHAT DID YOU MAKE OF THE BANK COMMENTARY YESTERDAY? DID THAT MOVE THE CONVERSATION MEANINGFULLY >> CARL, I ONLY LISTEN TO WHAT SUPPORTED MY STORY AND THE FELLOW FROM BANK OF AMERICA, BRIAN MOYNIHAN, CERTAINLY WAS VERY POSITIVE ON THAT JAMIE DIMON HAS BEEN KIND OF PESSIMISTIC ABOUT THE OUTLOOK SINCE MAY OF 2022, HE'S BEEN A LONG-TIME PESSIMIST BUT YOU CAN'T REALLY GENERALIZE ABOUT THE CONSUMER WE HAVE CONSUMERS THAT ARE STRUGGLING, MAYBE MAXED OUT ON THEIR CREDIT CARDS BUT WE HAVE PLENTY OF OTHER CONSUMERS, PARTICULARLY THE BABY BOOMERS, SAY THERE'S 78 MILLION OF THEM THAT HAVE 78 TRILLION OF ASSETS A LOT OF THEM ARE RETIRING AND THEY'RE SPENDING MONEY THEY DON'T HAVE MORTGAGES. DON'T HAVE TO PAY FOR COLLEGE EDUCATION. SO I THINK IT'S A MIXED STORY ON THE CONSUMER THE ATLANTA FED ESTIMATE FOR CONSUMPTION DURING THE THIRD QUARTER, REAL CONSUMPTION IS 3.5% THAT'S GANG BUSTERS. >> I'M THINKING ABOUT WHAT YOU HAVE WRITTEN ABOUT, THE TRANSFER OF WEALTH, THE PRODUCTIVITY WE'RE MAKING AND THE EXPORT OF DEFLATION OUT OF CHINA, SHOULDN'T THOSE BE CONSIDERED POSITIVES FOR THE U.S. ECONOMY >> ABSOLUTELY. I THINK THE U.S. ECONOMY IS THE BIG WINNER HERE. YOU KNOW, WHEN THE FED STARTED TO RAISE INTEREST RATES FROM 2022 THROUGH 2023, IT WAS LOGICAL TO BELIEVE THAT TIGHTENING OF MONETARY POLICY WOULD CAUSE A RECESSION. AND THE REALITY IS, THERE WAS A RECESSION. IT JUST HAPPENED TO BE IN CHINA. THEY HAVE A PROPERTY DEPRESSION AND THEY'RE EXPORTING DEFLATION THAT'S ONE OF THE REASONS THE CPI INFLATION RATE HAS COME DOWN SO RAPIDLY BECAUSE DURABLE GOODS, WE OPERATE A LOT IN THAT REGARD THAT'S COME DOWN TO DEFLATION AGAIN. SO ABSOLUTELY, ALL THOSE THINGS ARE GOOD FOR THE ECONOMY AND POSITIVE FOR THE STOCK MARKET. >> ED, DID YOU READ THE BEIGE BOOK MORE DISTRICTS CONTRACTING ALSO IT DOES JIBE WITH SOME OF THE RECENT COMMENTARY. I WAS LOOKING AT DAVE AND BUSTERS TODAY. NOT NECESSARILY THAT'S THE MOST INDICATIVE OF THE ECONOMY. BUT TOUGH CONSUMER ENVIRONMENT, MANY OTHERS ARE FEELING THE PRESSURE PETCO CFO, CHOICEFUL AND VALUE IF YOU LISTEN TO COMPANIES AND LOOK AT THE AN NICECDOTES IT'S OF WEAKNESS AND SOFTNESS ON THE PART OF THE CONSUMER. >> ALL TRUE AND GOOD POINTS BUT IT SEEMS THE SURVEY DATA IS MORE PESSIMISTIC THAN THE ACTUAL DATA IT'S THE ACTUAL DATA THAT MATTERS. THE REAL GDP IS RUNNING 2.5% DURING THE CURRENT QUARTER AND THAT'S EVEN WITH JULY AFFECTED BY THE WEATHER THE RUN RATE IS 3.5% IN THE THIRD QUARTER. SO I THINK THAT FOR SOME REASON THE SURVEYS ARE PICKING UP A MORE PESSIMISTIC TONE THAN THE DATA IS REFLECTING INITIAL PLANS REMAIN LOW EVERYBODY KIND OF GOT BUMMED OUT BY THE PAYROLL EMPLOYMENT REPORT FOR AUGUST BUT, ACTUALLY, THE WORK WEEK ROSE AND SO AGGREGATE HOURS WORKED AS AN ALL-TIME RECORD HIGH AND I THINK RETAIL SALES ARE GOING TO SURPRISE TO THE UPSIDE AS WILL PERSONAL INCOME BECAUSE NOT ONLY DID WE HAVE MORE PEOPLE WORKING IN AGGREGATE IN TERMS OF HOURS, WE ALSO HAD A NICE INCREASE IN WAGES AND TO THE POINT YOU MADE, SARA, ABOUT REAL WAGES

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