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we want to bring in Muhammad alaran he's chief economic adviser at alian he's also the and Mohamed how much is writing on this number today a lot you know after last month's hotter than expected number people are nervous they're hoping that last month was a fluke remember what happened last month when when the release came out stocks sold off yields went up and people really changed expectation of rate Cuts this year and you even had people talk about a rate hike so the hope is that this month we will establish that last month was a fluke but I think there's a bigger picture and that was picked up yesterday by the New York fed inflationary expectation survey and that is inflation expectations are stuck just under 3% and that's I think is our reality for a while that those inflation expectations that's a leading indicator it is is ask people what do you expect for the next year what do you expect for the next three years and what do you expect for the next five years and the next year is 3% and then when you go to 3 to 5 years it's 2.7 to 2.9% so still far away from what people tend to think of the fed's inflation Target even though that inflation Target is applicable to another measure if the numbers hotter than anticipated what does that mean for the fed's possibility of rate Cuts in June which is kind of the impression we got from J poell the last time he spoke last week um just this idea that they're ready to cut and they think it that time is coming sooner rather than later yeah you know unlike the market that's been on a roller coaster um you know we were pricing in as many as seven cut Cuts then two cuts now we're at four Cuts we are pricing it at one time March now we at June the FED has held a steady course three Cuts most likely starting in June and that was reaffirmed by chair pal and I think Becky that is the right Outlook that is what I think should happen given the economy that we are living in today even if that inflation number comes in hotter than anticipated you don't think that'll push things off because Jamie Diamond speaking yesterday uh said he thinks maybe the FED shouldn't cut in June maybe wait and see how the numbers go and give themselves a little room he he he actually suggested that the Freds fed's credibility is at risk if they cut too soon yeah or that can be stayed too tight for too long and then the credibility will be at risk there look all this has a critical issue what do you think is the right underlying inflation rate um or what economists call the neutral interest rates what do you think is the equilibrium rate if you think the equilibrium rate is 2% that's what the FED should be targeting in terms of inflation then they should hold off if like me you believe that we are living in a world where Supply is insufficiently flexible and that you should aim higher than 2% tolerate more than 2% for a while two and a half to three then we are restrictive and they should cut so all these discussions lead back to something that people don't like talking about which is what is the right inflation Target for the world we live in today and what do you think it is I think it's around two and a half to three um I think the biggest likely error is that the FED gets two data dependent continues to be two data dependent focuses only on 2% and in the process sacrifices what has been an exceptional economy that has outpaced all the other economies in the world you think the data is wrong or outdated I think the I first of all I think the data is lagged and their tools act with a lag to the Future so think of driving a car looking at the review mirror if all you do is look at the reiew mirror if you're completely data dependent then that's you'll likely crash if however the re review mirror informs you but you're looking forward that's a different way of policy making um you know the FED got burnt goe the FED got totally burnt inflation went all the way up 9% they had dismissed it as as as um transitory and because of that they are now overly dependent on the data and I think that at some point they've got a transition to a broader view of the economy Steve lean was just pointing out in the last hour how the housing numbers are that's the most stubborn part of the inflation data that's been here um that they may at some point say forget it we're not going to be paying attention to this because we think it's basically flawed data yeah and there's a good reason for that you know we now all become experts on OE single family multif family what are the weights between the two and there's a lot going on there and it is the owner equivalent went that caused the inflation numbers to be hotter than what was expected last month I don't think you can ignore it totally but I do think that the FED will see through a lot of it as Steve said so if this number is hotter today you would say take that with a grain of salt too even though it would be two months in a row of higher inflation coming in on the CPI number I would say understand that because of what's happening on the supply side and what's going to continue to happen on the supply side we're going to live in a world where inflation is nearer to 3% than 2% it is not the end of the world the economy is functioning well people have adjusted we will ultimately get go lower but if we force it Becky that's what I'm worried about if we force it then this is what will result we will push the economy into recession unduly so this economy doesn't need into recession and we may cause more financial accidents so you know at the end of the day there's a judgment to be made here as to what is the new equilibrium inflation rate and I suspect that the numbers will keep on telling us as yesterday's number from the New York fed did that it is higher than the 2%
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