WITH DECEMBER. >> THANK YOU FOR TALKING ABOUT MORE ABOUT THIS, NEW DATA, THE ECONOMY, AND THE FED MEETING THAT KICKS OFF TODAY. GOOD TO HAVE YOU BOTH ON SET. UNLIKE WHEN WE'RE REMOTE, I CAN THROW OUT A QUESTION AND I DON'T HAVE TO SAY WHO I'M THROWING IT OUT TO. DO EITHER OF YOU THINK WE'LL HAVE RATE CUTS THIS YEAR. WHO WANTS TO START? SHOULD WE? I THINK THAT A LITTLE MODESTY IS APPROPRIATE. I THINK THAT THE FUTURE IS PERHAPS NOT JUST FOR THE FIRST TIME, INDETERMINANT. I THINK AN INTERESTING QUESTION IS WHETHER OR NOT WE MIGHT HAVE A HIKE. >> ME TOO. >> THE ZERO PROBABILITY ASSIGN THOOD IS EXCESSIVE OR ADEQUATE. AND THERE'S AS MUCH OF A CHANCE OF A HIKE AS THERE IS FOR TWO RATE CUTS AND PERHAPS AS MUCH AS ONE. >> THAT MAKES A BIG DIFFERENCE, DOESN'T IT? WE HAVE GO TO GET THIS STRAIGHT, AS A GREAT ANCHOR ONCE SAID. EITHER TWO RATE CUTS OR WE MIGHT GET A HIKE. THE MARKET, IT'S GOING TO MATTER. >> IT'S GOING TO MATTER AND MATTER A LOT, AND I THINK JIM'S POINT ABOUT HOW MUCH REPRICING WE'VE SEEN OVER THE PAST FOUR MONTHS IS ABSOLUTELY CRITICAL. AND I SUSPECT WE'LL SEE THE SAME TYPES OF SEISMIC SHIFTS. I'LL TAKE THE UNDER IN TERMS OF JIM'S FORECAST, BUT THAT'S ENTIRELY PREDICATED ON OUR VIEW OF WHETHER INFLATION IS GOING FROM HERE. THE ECI NUMBER IS REALLY IMPORTANT, BUT IF YOU SPEND A LOT OF TIME WITH THE DATA, BECAUSE YOU DON'T GET INVITED TO PARTIES, THEN WHAT COMES OUT IS, USUALLY, IT'S THE CONSUMER PRICE INFLATION THAT DRIVES WAGES AND ECI, AS OPPOSED TO THE OTHER DIRECTION. AND SO, WE ARE PRETTY CONVICTED THAT INFLATION KEEPS COMING DOWN FROM HERE OVER THE REST OF THIS YEAR. AND THAT'S WHY WE'RE SORT OF LEANING INTO THEIR BEING PROBABLY EVEN THREE CUTS THIS YEAR. >> AS WE'VE SEEN NUMBER AFTER NUMBER COME IN THE LAST COUPLE OF MONTHS, HAVE YOU WAVERED AT ALL. HAVE ANY OF THEM CAUSED YOU TO SAY, MAYBE OUR -- YOU KNOW, OUR PRIMARY THING WE'RE TALKING ABOUT ISN'T REALLY HAPPENING? ZB >> ABSOLUTELY. THE CHARACTERIZATION OF PEOPLE BEING NEVER RIGHT IS TRICKY. IF WE BREAK DOWN THE COMPONENTS OF INFLATION, IT SORT OF LETS US STAY IN THE SAME PLACE. HOUSING INFLATION, IT'S BEEN COMING DOWN FOR A YEAR. IT'S STILL EVALUATED, BUT IT'S COMING DOWN. AND ALL OF THE AVAILABLE DATA ON CURRENT RENTS RIGHT NOW, THAT THE BLS IS GOING TO USE TO SPREAD OUT FOR THE NEXT SIX, NINE, AND 12 MONTHS, THAT'S CLEARLY INDICATING THAT PART IS GOING TO KEEP COMING DOWN. IF WE GO TO OTHER SERVICES THAT STEVE LIESMAN HIGHLIGHTED, ONE OF THE KEY COMPONENTS HOLDING THAT UP IS AUTO INSURANCE, WHICH HAS BEEN ON THIS JAG FOR A WHILE, BECAUSE PEOPLE HAD TO NEGOTIATE WITH THEIR REGULATOR AND IT'S GOING TO COME OFF LATER THIS YEAR. BUT IT'S NOT DRIVEN BY THE CURRENT STATE OF THE ECONOMY. SO WE FEEL PRETTY GOOD THAT THINGS ARE COMING DOWN. BUT IT'S UNCOMFORTABLE. >> WHAT DO YOU THINK, JIM? >> I THINK THAT THERE'S TOO MUCH WEIGHT ASSIGNED TO THE RATE INFLATION, AND NOT ENOUGH TO THE LEVEL. SO YOU NEVER RECOVER THE PURCHASING POWER YOU HAVE LOFT TO INFLATION. IN TIMES PAST, PRICES WOULD RISE, PRICES WOULD FALL, BUT NOW IN THE MODERN AGE, THEY ALWAYS GO UP. AND THIS HELPS TO SPEXPLAIN THE DICHOTOMY BETWEEN HOW PEOPLE FEEL AND HOW THIS KIND OF OKAY ECONOMY IS PRESENTED STATISTICALLY. AS RECENTLY AT 1983, BORROWING COSTS WERE PART OF THE CPI. THEY ARE OUT OF IT. BUT YOU KNOW, PEOPLE ARE PAYING A LOT FOR MORTGAGE RATES, OF COURSE, BUT ALSO FOR -- >> BORROWING COSTS GOT TAKEN DOWN TO 0 CENTS. AS IF YOU DON'T NEED THAT TO -- >> WELL, THEY'RE OUT. BUT CAR PAYMENTS, CAR LOANS ARE VERY COSTLY NOW, AND WE ALL HAVE BEEN IN CREDITED. SO I THINK THAT THE INFLATION PROBLEM IS PERSISTENT AND DEFRUITED, NOT ONLY IN FINANCE, BUT ALSO IN CULTURE. INFLATION IS A CULTURAL PHENOMENON, TOO, I THINK IT'S SOMETHING FOR NOTHING THING WITH INFLATION. >> WE DO FORGET THAT. SOMEONE GOES -- SOMEONE ON, YOU KNOW, ONLY HAS SO MUCH MONEY AND HAS FOUR OR FIVE KIDS, AND LOOKING BACK TWO OR THREE YEARS AGO, AND WE SAW WHAT HAPPENED WITH THE 40-YEAR HIGHS. IF INFLATION DROPS TO PLUS 2%, THEY'RE STILL AT THE SUPERMARKET, AND THE STUFF THEY WERE LOOKING AT LAST YEAR THAT THEY ALREADY WERE HAVING TROUBLE MAKING ENDS MEET, IT'S 2% HIGHER THAN THAT. WE FORGET THAT. INFLATION DOESN'T -- WHEN IT COMES DOWN, IT DOESN'T GO DOWN. >> I COMPLETELY AGREE. AND I THINK THIS IS A KEY TENSION BETWEEN THE PERCEPTION ABOUT THE ECONOMY AND THE REALITY OF IT. PEOPLE DO LOOK AT THE LEVELS. AND PEOPLE WHO WANT TO BUY A HOUSE, YOUNG PEOPLE, 25 TO 35 YEARS OLD, THEY LOOK AT THE PRICE AND THE MORTGAGE TOGETHER. AND THAT'S WHY I THINK A LOT OF THEM VIEW -- HOWEVER, WE'VE BEEN ADDING HUNDREDS OF THOUSANDS OF JOBS PER MONTH. WE'VE BEEN HAVING A SUB-4% UNEMPLOYMENT RATE FOR QUARTERS. IF WE LOOK IN TERMS OF -- WE WERE JUST TALKING ABOUT THE EMPLOYMENT COST INDEX. IF WE L COCOMPARE WHAT'S GOING THOSE WERE UP FOR THE BOSTON HALF OF THE INCOME DISCRIMINATE RELATIVE TO WHEN THIS WHOLE THING STARTED. >> BUT NOW YOU'RE ARGUING FOR NO CUTS AGAIN. IF INFLATION IS THE SLIGHTEST BIT OF A QUESTION, AND WE HAVEN'T SLOWED A LOT OF THOSE METRICS, ARE WE RESTRICTIVE? AND DO CUTS MAKE SENSE? >> OH, BUT I THINK ALL THE METRICS THAT ARE IMPORTANT, RIGHT? CORE PCU INFLATION PEAKED AT 6.5%. WE'RE WELL BELOW THAT. AND IF WE'RE LOOKING AT THE MONTH-ON-MONTH RATES, JANUARY WAS CLEARLY OUTSIZED -- >> DON'T WE NEED UNEMPLOYMENT TO GO UP BEFORE WE FEEL LIKE WE REALLY ARE MAKING A DENT? >> THAT I DON'T WE REALLY DO. I DON'T THINK WE NEED TO SEE THE KIND OF MOVEMENT RATE RISES THAT HISTORICALLY WE'VE SEEN, BECAUSE THIS CYCLE COMING OUT OF COVID WAS JUST SO DIFFERENT THAN THOSE OTHER CYCLES. I DISAGREE FUNDAMENTALLY WITH PEOPLE WHO SAID, YOU NEED UNEMPLOYMENT. >> I THINK JIM MIGHT THINK DIFFERENTLY. >> WE DON'T NEED IT, BUT WE HAVE ALWAYS HAD IT IN THE WAY OF GETTING INFLATION DOWN. FINANCIAL CONDITIONS INDEX IS MEASURED BY THE CHICAGO FED HAVE NEVER DEVIATED DURING THE SO-CALLED TIGHTENING SPAN. MONEY IS EASING, IT'S NOT TIGHT. AND I THINK THAT INFLATION IS GOING TO PROVE TO BE CHRONIC, PERSISTENT, AND RATES WILL BE HIGHER FOR MUCH, MUCH, MUCH LONGER. >> YOU COULD GET REALLY NEGATIVE, JIM, IF WHAT YOU'RE SAYING SPIRALS, COULD YOU NOT? >> THE FED INSISTS ON INFLATION. PEOPLE FORGET THAT. PEOPLE FORGET THAT THE FED TARGETS
