Allianz's Mohamed El-Erian weighs the economic impact on Trump replacing Fed Chair Powell

요약 보기

트럼프가 차기 연준의장으로 비둘기파 성향 인사를 택할 것이란 시장 기대가 형성 중이나, 연준의 정치화 우려가 커지고 있다. 장기금리 상승 리스크 때문에 비둘기파 지명이 역효과일 수 있다. 고용은 아직 견조해 금리 인하 논쟁이 계속되며, 연준이 성장 전망을 1.7%에서 1.3%로 낮췄다. 성장률이 1%에 가까워질수록 스톨스피드 우려가 커진다.

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01. Let's bring in Muhammad Ali. Muhammad is gonna have a few thoughts on this for sure. Alian's chief economic adviser, Muhammad. And here's the thing with the president's um kind of furer at Powell who is is not being very dovish right now. And and we've seen this with Supreme Court picks as well. You know, you think you're getting a conservative and you know, so is the president going to go out of his way to get someone who he thinks is going to be Look at everyone he's appointed to his cabinet the second time around.

02. They're they they're much more the type to fall in line. So, shouldn't we expect whoever he picks to be on the dovish side this time as well? That's certainly the expectation that's forming in the market regardless of who's appointed among the various candidates. Um, the concern that I have and that others have.

03. It's very difficult to convince anybody today that the Fed is not political. And that's because there are three different narratives going on. The first one, we talked about it. this notion of a shadowfed chair that is focused on President Trump. There's a second one focused on chair pal that chair pal now is in love with the notion that his legacy will be protecting the fed independence that will replace any concerns about the inflation surge we had we had any concerns about the slippage in bank supervision we had during his tenure and that he's so convinced on this is his legacy that he will be much more hawkish than he would have been otherwise.

04. That's a second narrative. Then there's a third narrative that looks at what has happened with Governor Waller and Governor Bowman and says that they say wanting July to be live is a political view. So it is really confusing right now and I'm worried that the longer these three nar narratives continue the more people are going to doubt whether this institution is really apolitical.

05. And here's how I'd argue against myself if I were to make the point. So if I if I were to say here's the reason why the only reason why the president just wouldn't go for a slam dunk dove somebody the market perceives that way is if it makes the long end go up. So if I were Bessant and making this argument in the room to President Trump I'd say if you pick somebody who's dovish for not economically sound reasons long-term interest rates are going to go up and you're going to have an even bigger problem on your hands.

06. Can I give a before Muhammad answer a very quick response to what I you asked me before which is it is for sure the president will get somebody who believes more in the totality and the results of his total economic program. That is for sure. That means a person who would believe in higher growth that will come with lower inflation and willing perhaps to take a flyer on that and put that into their forecast perhaps more than the current leadership would.

07. No, I think that's absolutely fair. So, Muhammad, who you know, would there be is that and this is the one thing about the president wanting lower rates now that I I I would imagine is part of conversations in the back rooms, which is yeah, you had a Fed that lowered rates h you know, by a full point last fall and the long end just went up and you don't want that to happen again.

08. No, you don't. But I think there's a bit of confusion that people think it's a onetoone. Um on the political side, they think it's one to one. If the Fed cuts, then the what the government pays in interest payment will be less by definition. And we all know that's not the case that it's the market that determines the rate on most of what the the um government pays on rate.

09. So I think there is that confusion, but there's also a very serious debate as to whether we shouldn't be cutting now given evidence that the economy is weakening. And secondly, an even more delicate debate on whether 2% is the right target for for a world in which the supply side is becoming less flexible.

10. So this is really complicated. Um, the one thing that we all know is whoever comes in will have to convince the other members of the FOMC to go along with with them. So, it's not as straightforward as I picked this person. By definition, rates are going to come down. Is it even straightforward that the economy is weakening right now?

11. I mean, I don't know how I would describe things. In some ways, I'd say it's been more resilient um than expected. Although, you know, maybe you point to a data point or two. I I know Q1 GDP was awful, but we sort of know why. Retail sales not great but then other consumer data points have been better.

12. Before Muhammad answers, I'll give a very quick answer which is that we wouldn't be having this discussion if employment was marketkedly and obviously weak and it is not. And that's a reason we're still debating this morning. Should the Fed cut, should the Fed not cut down to 236 n on million on continuing claims is not that big a deal.

13. It is softer but between softer and weak there is a lot of room lot of room right exactly and that's why I sympathize Muhammad go ahead so what do we know the federal officials cut their growth projection from 1.7 to 1.3 last week that is a massive cut that in June you talk about the current year and they've now taken us down to 1.4 before.

14. The closer we get to one, the more people worry about stall speed. So, we've got to be careful. This stuff is not linear. This stuff has cliff effects as you get closer and closer to one and certainly if you go below one. So, there are judgments to be made as to what is the biggest threat right now.

15. And there's also judgment to be made as to what is the most recoverable mistake. If you're going to end up making a mistake, which is the most recoverable mistake?