LATEST READ ON CORE PCE. THAT'S THE FED'S PREFERRED MEASURE OF INFLATION. UNCERTAIN ABOUT THE RATE PATH DRIVEN TO THE YIELDS AT THE HIGH ELF LEVEL. FOR MORE, LET'S BRING IN MARK AT BANK OF AMERICA SECURITIES. IT IS INTERESTING, MARK, THERE IS A LOT OF FACTORS RIGHT NOW. AUCTIONS. THAT SHOULD BE THE BOTTOM LINE IS WHETHER WE CAN SELL THE STUFF AT CERTAIN YIELDS. I GUESS THAT'S WHERE THE RUBBER MEETS THE ROAD A LOT OF THE TIME. THEN WE GET ECONOMIC NUMBERS AND WE GET INFLATION NUMBERS. IT LOOKS LIKE WE'RE SLOWING A LITTLE. LIKE GDP IS NOT SUPPOSED TO BE RIP ROERARING. THAT LOOKS TO GET AN INFLATION CUT, BUT NOT UNTIL PRESUMED A DOWNWARD TRAJECTORY. >> WE HAVE SEEN TH BASIS POINTS UP FOR THE YEAR. WE THINK THIS IS DUE TO A COMBINATION OF FACTORS. IT IS DUE TO SOME BETTER THAN EXPECTED RECENT ECONOMIC DATA INCLUDING CONSUMER CONFIDENCE. IT IS DUE TO POSITIONING WHERE WE HAVE SEEN ASSET MANAGERS GET QUITE LONG AND HAVE LIMITED CAPACITY AGAINST THE RATE MOVE. IT IS DUE TO SOME OF THOSE UNDERWHELMING AUCTIONS WE HAD RECENTLY. THIS WEEK, WE HAD TWO-YEAR AND F FIVE-YEAR AND SEVEN-YEAR AUCTIONS. THEY CAME IN AT SLIGHTLY HIGHER RATES THAN WHAT THE MARKET WAS PREVIOUSLY ANTICIPATING GOING INTO THE AUCTIONS. ALL OF THOSE HAVE CONTRIBUTED TO RATES MOVING HIGHER. THE MARKET IS REALLY ASKING ITSELF NOW WHAT'S THE NEXT MOVE FROM YEAR. OUR FORECASTS HAVE RATES GOING DOWN SLIGHTLY THROUGH THE END OF THE YEAR. THAT IS DUE TO WHAT WE THINK WILL BE A SLIGHT MODERATION IN THE U.S. ECONOMIC ACTIVITY AND INFLATION THAT COMES BACK DOWN AND A LABOR MARKET THAT MOVES INTO BETTER BALANCE. THE PATH TO GET THERE WILL BE SOMEWHAT BUMPY. >> MARK, WHAT IF JUST THE FIRST THING HAPPENED THAT YOU SAID AND THE ECONOMY SLOWS A LITTLE BIT, BUT INFLATION STAYS STICKY, THAT LAST MILE AND THAT IS MUCH HARDER THAN WE THOUGHT. CAN THE FED ASSUME IT WILL LAG AND INFLATION WILL COME DOWN OR CAN WE NOT ASSUME THAT? I'M WOURRIED ABOUT STAGFLATION. WE COULD HAVE THE WORST OF BOTH. >> SURE. THAT IS THE CONCERN FOR MANY IN THE MARKET. SOME NEED CON IFI THE MARKET. SOME NEED CON IDENCE THAT INFLATION WILL MOVE LOWER OVER TIME. THE FACTOR TO GIVE THEM THAT CONFIDENCE IS A MODERATION OF GROWTH AND RE-BALANCE OF THE LABOR MARKET. THE PACE OF JOB GROWTH BETWEEN 100,000 TO 150,000 PAYROLL PER MONTH. THEY WILL HAVE CONFIDENCE WAGE WILL DECELERATE WITH THAT. AS LONG AS THAT HAPPENS, THE FED WILL BELIEVE IT WILL BE SUCCESSFUL AND THE LAST MILE AGAINST INFLATION. IF IT DOESN'T SEE THAT DEMAND DESTRUCTION, IT WILL NOT HAVE THAT CONFIDENCE AND IT NEEDS TO KEEP RATES HIGHER FOR LONGER. >> WHAT WE SEE IN COMMODITIES, MARK, I WONDER A SUPER SPIKE IN OIL AND I DON'T KNOW WHAT WOULD CAUSE IT -- FILL IN THE BLANKS ON WHAT WOULD CAUSE A SUPER SPIKE IN OIL -- YOU COULD HAVE A LABOR MARKET RE-BALANCING AND ALL OF THE THINGS YOU SAID. IF YOU DON'T GET -- YOU COULD HAVE THE INFLATION COMING FROM SOMETHING ELSE TOTALLY UNRELATED TO THAT. >> ABSOLUTELY. THAT IS THE RISK THE FED ALWAYS CONTENDS WITH. CERTAINLY THERE ARE A NUMBER OF GEOPOLITICAL FLASH POINTS IN THE WORLD TODAY. THERE ARE A NUMBER OF REASONS TO BELIEVE IF THERE IS SOME MISCALCULATION, YOU COULD SEE COMMODITY PRICES HIGHER. THAT NOT ONLY MATTERS FOR CONSUMERS AND WHAT'S COMING OUT OF THEIR POCKET EVERY MONTH, BUT IT REALLY MATTERS FOR INFLATION EXPECTATIONS. IF THE FED SEES INFLATION EXPECTATIONS THAT START TO MOVE HIGHER IN A MEANINGFUL WAY, AND VERY STABLE OF LATE, BUT IF THEY SEE EXPECTATIONS MOVE HIGHER, THEN THE FED WILL FEEL PRESSURED TO NOT JUST KEEP RATES HIGHER FOR LONGER, BUT, INDEED, HIKE RATES AGAIN. THAT, WE THINK IS ARGUABLY THE BIGGEST RISK FOR MARKETS BROADLY. IF THE FED WERE TO START HIKING AGAIN, IT IS NOT OUR BASE CASE, BUT IT IS A RISK. WE DO THINK THAT WOULD LIKELY LEAD TO A TIGHTENING OF FINANCIAL CONDITIONS BROADLY AND WE SUSPECT THE EQUITY MARKET WOULD NOT NECESSARILY VIEW THAT TOO FAVORABLY. >> WE WILL NOT HAVE A RECESSION IN 2024. IS THAT 100%? >> AH, IT SEEMS VERY UNLIKELY RIGHT NOW. YOU NEVER WANT TO SAY 100% PROBABILITY OF ONE THING AND ZERO PERCENT OF ANOTHER BECAUSE THE ECONOMY CAN EVOLVE IN DIFFERENT WAYS. BASED ON THE DATA WE HAVE IN HAND RIGHT NOW, IT CERTAINLY DOESN'T LOOK LIKE A RECESSION. THE FED IS GRAPPLING WITH DEMAND BEING TOO STRONG AND NOT TOO WEAK. THAT ELEVATED DEMAND IS PUTTING UPWARD PRESSURE ON PRICES. >> A LOT OF STUFF STILL. A LOT OF LIQUIDITY STILL AROUND. A LOT OF FISCAL AND MONETARY AND EVERYTHING ELSE. YOU KNOW, WHAT'S GDP -- FOR THE LAST SIX MONTHS OF THE YEAR, WHAT DO YOU EXPECT GDP TO RUN? WHERE WILL THAT RUN? >> WE EXPECT REAL GDP GROWTH, OUR ECONOMISTS BELIEVE, 2% IN REAL TERMS. >> OKAY. >> THAT'S ELEVATED I
