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markets the economy and more joining us now Mohammad L Aran a chief economic advisor at Alan and uh president of Queens College at Cambridge University and I don't know what what that told us last week uh Muhammad no one thought the move all the way to 2% uh was going to be a straight line we we know about you know progress has made and you you know you get a little bit of a of a setback it's not just a straight line but was it more troubling than that we knew that was there something more troubling in those numbers I think those numbers just confirmed how bumpy that the last mile of getting to 2% will be and you you're seeing expectations move tremendously Joe two months ago we were pricing in six to seven Cuts today some people are even saying maybe we'll get a hike I don't think we will but it shows you how much the conventional wisdom has shifted and that's because consistent with what you've heard just now from Walmart people realize that there's a limit to Goods deflation Goods prices actually coming down and service inflation stays sticky which means that getting to 2% is going to be tricky the uh would it surprise you Muhammad if we got only two raid Cuts this year and it didn't happen till the second half of the year is that looking more like now no I've been in the three Cuts in starting in June so two cuts wouldn't surprise me um My Hope Is that the FED realizes that they have to think much harder about the soft Landing Glide path to 2% it's going to be much longer than they would like which is another way of saying that 2% inflation is not shouldn't be the immediate Target should be the much longer term Target um but the Glide path is going to be longer than expected we have to maintain this us exceptionalism in growth has been something that has allowed for a softish landing so far and it's also serving as a global Eon as the global locomotive for the international economy well that was fine until as long as inflation was behaving it was uh it was kind of Goldilocks that we love the strong economy are we back to thinking that the FED needs to slow down the economy and that if that's true if they do need to do that with interest rates they can always overshoot and then we're back in the possibility of a hard Landing okay so we are in restrictive territory in terms of interest rates so the question is how long do we stay in restrictive territory um this economy is is slowing but it's not slowing into recession and that's something that is really important for the well-being of the economy for the wellbeing of the global economy so the risk is Joe that the FED ends up in restrictive zone for too long that is the risk right now that is the potential policy error very different from where we were when you and I were talking in 2021 when the Fed was thinking inflation will be transitory now there's a risk that'll make the policy error the other way around so we moham if we're really in restrictive territory we've been in there we've been there for a while why haven't we already seen that reflected in the jobs number or GDP so first we've seen it in inflation inflation has come down sharply why haven't we seen it in GDP it turns out that we have an exceptional economy it turns out that there was much more resilience balance sheets were much stronger um than people had expected both at the corporate and household level it turns out that we are an incredibly agile economy it turns out that we are starting to promote more and more the future drivers of growth you know I'm speaking to you from the UK look around the world UK recession Germany recession Japan recession China struggling the US has been able to navigate this period of tighter interest rates well and it's something that we hope will continue I just don't know how to to view that that if the rest of the world you know we can be you know the exception to the rule or we can just join everyone else eventually you don't think that's likely that that that we're just going to be the last to to to actually see a a a slowing economy you think we we continue to maintain our preeminence so to be clear I think we we will be a 1 to 2% growth economy I don't think that we need to fall into recession unless we get a policy mistake or an external shock um Joe household balance sheets in the US were were much stronger in the rest of the world why because the fiscal transfers were stronger so that helped growth last year but it's not going to help growth as much this year so we're not going to go at the 4.9% pace of the third quarter the 3.3% pace of the fourth quarter we will go to 1 to 2% but there's no need for us to fall into recession all right we will see uh Muhammad the the FED got to take down that mission accomplished Banner we're still it's still in the process right it's a working progress and we got an election coming mistake is the mission accomplished that that would be big big mistake yeah and we got an election coming up so so just to recap Mohammad said it's going to be very bumpy on the last mile to 2% hinting at the CPI and PPI data being hotter than expected he said two months ago markets were pricing in six to seven cuts and today say they're pricing in a potential hike Muhammad Alan does not think so but hey he wouldn't be surprised if we only get two cuts this year and they started the back half of the year he said the path to inflation the path to 2% inflation will be much longer than the FED expected the question is how long do we stay in this restrictive Zone inflation has come down sharply we have an exceptional economy and an incredibly agile economy he said the UK Germany Japan are all in recessions and China struggling the US is basically the only one not having a recession so so far U Muhammad does not expect a recession but expects 1 to 2% growth for the economy not the 3 to 4% that we were getting he said it will be a huge mistake If the Fed comes out and says mission accomplished right now other than that guys I hope you enjoyed the video I hope you learned something see you in the next one
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