reporter All right a ░░░░░░░░ looks at the earnings ░░░░░░░░ of us We re ░░░░░░░░ to talk about the ░░░░░░░░ now We ve got ░░░░░░░░ Cleveland joining us Principal ░░░░░░░░ Chief Economist at Payden ░░░░░░░░ Jeff glad we got ░░░░░░░░ this afternoon Good to ░░░░░░░░ you again CLEVELAND Good ░░░░░░░░ see you Oliver reporter ░░░░░░░░ right we got inflation ░░░░░░░░ markets ramping up without ░░░░░░░░ seeing the number Any ░░░░░░░░ to expect this to ░░░░░░░░ a cool print CLEVELAND ░░░░░░░░ In fact I would ░░░░░░░░ the opposite I mean ░░░░░░░░ think about how the ░░░░░░░░ has gone so far ░░░░░░░░ terms of the economic ░░░░░░░░ you had payroll growth ░░░░░░░░ in January so nice ░░░░░░░░ pick up in in ░░░░░░░░ activity We re seeing ░░░░░░░░ the other data looking ░░░░░░░░ strong so GDP growth ░░░░░░░░ picked up a little ░░░░░░░░ surprising to say that ░░░░░░░░ Q1 GDP tracking 3 ░░░░░░░░ 5 percent right now ░░░░░░░░ we re going to ░░░░░░░░ up from Q4 So ░░░░░░░░ wouldn t surprise me ░░░░░░░░ all Oliver if January ░░░░░░░░ also picked up So ░░░░░░░░ m just thinking about ░░░░░░░░ CPI the expectation is ░░░░░░░░ a 3 I mean ░░░░░░░░ can t rule out ░░░░░░░░ 4 Even with a ░░░░░░░░ month to month change ░░░░░░░░ s pretty sticky inflation ░░░░░░░░ that that could be ░░░░░░░░ could be a real ░░░░░░░░ event for the markets ░░░░░░░░ think reporter The 3 ░░░░░░░░ annual kind of seems ░░░░░░░░ an important whole number ░░░░░░░░ because you know the ░░░░░░░░ wants 2 percent 2 ░░░░░░░░ 2 percent and lot ░░░░░░░░ people kind of looking ░░░░░░░░ this under the hood ░░░░░░░░ okay these moving averages ░░░░░░░░ these narrowed core figures ░░░░░░░░ know everybody s got ░░░░░░░░ own inflation metric A ░░░░░░░░ of people are arguing ░░░░░░░░ re already deep into ░░░░░░░░ 2s but I mean ░░░░░░░░ is still the benchmark ░░░░░░░░ and we re not ░░░░░░░░ Well I think bond ░░░░░░░░ look at a wide ░░░░░░░░ of inflation measures so ░░░░░░░░ only core PCE was ░░░░░░░░ and then 100 basis ░░░░░░░░ above that on a ░░░░░░░░ on year basis you ░░░░░░░░ core CPI I think ░░░░░░░░ investors would say No ░░░░░░░░ s still evidence of ░░░░░░░░ So it does matter ░░░░░░░░ what we ve seen ░░░░░░░░ far is goods prices ░░░░░░░░ really cooled off Those ░░░░░░░░ been negative in the ░░░░░░░░ few months That dragged ░░░░░░░░ for inflation But where ░░░░░░░░ haven t seen I ░░░░░░░░ enough progress in my ░░░░░░░░ is we need to ░░░░░░░░ housing cool off more ░░░░░░░░ the CPI and we ░░░░░░░░ to see everything else ░░░░░░░░ housing services that needs ░░░░░░░░ cool off a bit ░░░░░░░░ So I don t ░░░░░░░░ we ve seen enough ░░░░░░░░ yet And if you ░░░░░░░░ a sticky print or ░░░░░░░░ a strong print spicy ░░░░░░░░ if you will tomorrow ░░░░░░░░ mean that would just ░░░░░░░░ to that that feeling ░░░░░░░░ it does matter Even ░░░░░░░░ we get a 3 ░░░░░░░░ sorry Oliver we would ░░░░░░░░ be 3 7 percent ░░░░░░░░ over year on core ░░░░░░░░ which is I think ░░░░░░░░ high to justify rate ░░░░░░░░ at this point reporter ░░░░░░░░ debate about when versus ░░░░░░░░ seems like it s ░░░░░░░░ more a when discussion ░░░░░░░░ if Is there any ░░░░░░░░ on your mind where ░░░░░░░░ Fed just keeps holding ░░░░░░░░ CLEVELAND Yeah if we ░░░░░░░░ in a scenario where ░░░░░░░░ picks back up so ░░░░░░░░ get a pick up ░░░░░░░░ goods prices housing remains ░░░░░░░░ non housing services doesn ░░░░░░░░ really cool off so ░░░░░░░░ get that or if ░░░░░░░░ just stall Oliver Like ░░░░░░░░ could imagine a scenario ░░░░░░░░ you get on core ░░░░░░░░ month to month like ░░░░░░░░ said you get those ░░░░░░░░ every month and then ░░░░░░░░ the course of a ░░░░░░░░ you re somewhere around ░░░░░░░░ 3 4 percent in ░░░░░░░░ range I think that ░░░░░░░░ too high That is ░░░░░░░░ that yeah it s ░░░░░░░░ off for where we ░░░░░░░░ last summer no doubt ░░░░░░░░ questions there no argument ░░░░░░░░ me but I still ░░░░░░░░ a 3 3 5 ░░░░░░░░ you re too high ░░░░░░░░ Core CPI So in ░░░░░░░░ situation the Fed doesn ░░░░░░░░ cut So we re ░░░░░░░░ not in a when ░░░░░░░░ re still in an ░░░░░░░░ to use your phrasing ░░░░░░░░ That definitely puts you ░░░░░░░░ a bit of an ░░░░░░░░ because the market seems ░░░░░░░░ be very convinced that ░░░░░░░░ it s not March ░░░░░░░░ will be May and ░░░░░░░░ there s like no ░░░░░░░░ we re not cutting ░░░░░░░░ the summer at worst ░░░░░░░░ mean even as we ░░░░░░░░ the gyrations between March ░░░░░░░░ May June July everything ░░░░░░░░ it is like a ░░░░░░░░ lock So I guess ░░░░░░░░ s kind of like ░░░░░░░░ contrarian play right now ░░░░░░░░ just be to bet ░░░░░░░░ maybe we don t ░░░░░░░░ by the summer CLEVELAND ░░░░░░░░ I think that s ░░░░░░░░ And I think also ░░░░░░░░ my defense Oliver if ░░░░░░░░ go back two weeks ░░░░░░░░ know at that time ░░░░░░░░ were saying you re ░░░░░░░░ 50 maybe 60 40 ░░░░░░░░ March so now it ░░░░░░░░ just like that s ░░░░░░░░ pushed out into May ░░░░░░░░ maybe that ll get ░░░░░░░░ out again That s ░░░░░░░░ I think people should ░░░░░░░░ here yeah reporter Absolutely ░░░░░░░░ then when I hear ░░░░░░░░ coming on and keep ░░░░░░░░ like pushing the duration ░░░░░░░░ and further and further ░░░░░░░░ mean I guess that ░░░░░░░░ wouldn t resonate with ░░░░░░░░ so much CLEVELAND Yeah ░░░░░░░░ does not resonate I ░░░░░░░░ the time to really ░░░░░░░░ to duration in our ░░░░░░░░ is you need to ░░░░░░░░ inflation back on target ░░░░░░░░ your month to month ░░░░░░░░ needs to be cooler ░░░░░░░░ need to have a ░░░░░░░░ that is willing to ░░░░░░░░ more than is already ░░░░░░░░ in Oliver I don ░░░░░░░░ see that based on ░░░░░░░░ s priced in probably ░░░░░░░░ many cuts are already ░░░░░░░░ in so that s ░░░░░░░░ a that s not ░░░░░░░░ check mark for inaudible ░░░░░░░░ the third thing for ░░░░░░░░ it s really important ░░░░░░░░ speaking you need to ░░░░░░░░ a deterioration in the ░░░░░░░░ market You need to ░░░░░░░░ much weaker labor market ░░░░░░░░ The three month average ░░░░░░░░ 289 000 jobs in ░░░░░░░░ three month average for ░░░░░░░░ that is way too ░░░░░░░░ a labor market to ░░░░░░░░ I think get bullish ░░░░░░░░ duration in our view ░░░░░░░░ Is there any truth ░░░░░░░░ the notion that the ░░░░░░░░ is currently restrictive I ░░░░░░░░ I know that s ░░░░░░░░ the assumption it s ░░░░░░░░ everybody says Okay we ░░░░░░░░ to cut because of ░░░░░░░░ I don t get ░░░░░░░░ where that is coming ░░░░░░░░ at this point I ░░░░░░░░ believing that a lot ░░░░░░░░ when markets were pulling ░░░░░░░░ regional banks were freaking ░░░░░░░░ out few things here ░░░░░░░░ there but like now ░░░░░░░░ we ve seen the ░░░░░░░░ the economy dipped and ░░░░░░░░ came back the last ░░░░░░░░ months I mean where ░░░░░░░░ this idea that we ░░░░░░░░ restrictive Where s it ░░░░░░░░ from Should we take ░░░░░░░░ seriously who are saying ░░░░░░░░ CLEVELAND Most bond people ░░░░░░░░ I talk to Oliver ░░░░░░░░ look at real Fed ░░░░░░░░ you know the real ░░░░░░░░ funds rate so you ░░░░░░░░ the nominal rate you ░░░░░░░░ out some measure of ░░░░░░░░ inflation that is modestly ░░░░░░░░ Now people say Look ░░░░░░░░ s restrictive I m ░░░░░░░░ in your camp I ░░░░░░░░ just saying Okay that ░░░░░░░░ something we can t ░░░░░░░░ observe in real time ░░░░░░░░ let s look at ░░░░░░░░ evidence Let s look ░░░░░░░░ growth Seems to be ░░░░░░░░ up In fact it ░░░░░░░░ have accelerated Payroll growth ░░░░░░░░ accelerated You noticed the ░░░░░░░░ from the Fed chair ░░░░░░░░ the last meeting He ░░░░░░░░ talking about going around ░░░░░░░░ talking to people in ░░░░░░░░ of the Beige Book ░░░░░░░░ things like that and ░░░░░░░░ chatter is that activity ░░░░░░░░ actually picked up So ░░░░░░░░ think to your point ░░░░░░░░ there s an argument ░░░░░░░░ things aren t as ░░░░░░░░ as people imagine or ░░░░░░░░ they re not that ░░░░░░░░ I m definitely open ░░░░░░░░ that viewpoint reporter Do ░░░░░░░░ have any concerns about ░░░░░░░░ wall of debt on ░░░░░░░░ horizon in the commercial ░░░░░░░░ estate or any of ░░░░░░░░ real estate chatter out ░░░░░░░░ Jeff that keep you ░░░░░░░░ at night CLEVELAND It ░░░░░░░░ t keep me up ░░░░░░░░ night A year ago ░░░░░░░░ was more concerned you ░░░░░░░░ we were looking at ░░░░░░░░ of lending standards we ░░░░░░░░ bank lending slowing but ░░░░░░░░ turned out not to ░░░░░░░░ a huge impact in ░░░░░░░░ of spending activity and ░░░░░░░░ held up pretty well ░░░░░░░░ I think you know ░░░░░░░░ was right to be ░░░░░░░░ little more concerned in ░░░░░░░░ April but now you ░░░░░░░░ those concerns have diminished ░░░░░░░░ think that s just ░░░░░░░░ that we re gonna ░░░░░░░░ to wrestle with over ░░░░░░░░ next couple of years ░░░░░░░░ All right Glad we ░░░░░░░░ you Good to catch ░░░░░░░░ Always an independent thinker ░░░░░░░░ I appreciate that Thanks ░░░░░░░░ CLEVELAND Have a good ░░░░░░░░ reporter You too Jeffrey ░░░░░░░░ Principal and Chief Economist ░░░░░░░░ Payden & Rygel.”