Episode summary
Daybreak Holiday: Kevin Warsh, Costco, Inflation's Impact on Memorial Day | Bloomberg Daybreak:...
Bloomberg Daybreak: US Edition
· · 39 min · Hosts: Nathan Hager · Guests: Kevin Warsh, Michael McKee, Anna Wong, Jenn Bartashus, Lindsay Dutch, Julia Fanzeres, Mark Niquette
Summary
The holiday edition framed the economy as being hit by overlapping shocks: higher energy prices tied to the Iran war, sticky inflation, and a labor market that is still resilient but fragile. The host and Anna Wong argued that Kevin Warsh would inherit an awkward Fed environment, with headline CPI potentially peaking around May a little above 4%, but with risks of second-round effects and a later-year rebound. Michael McKee said the market has effectively done some of the Fed’s tightening already, with 10-year yields near 4.6% acting like additional rate hikes.
They also said the Fed’s biggest challenge may be forecasting correctly rather than acting quickly. Wong argued that if the central bank misreads inflation and moves too late, it could damage growth next year; she said Warsh could try to shift attention toward reforming the Fed’s forecasting capability. McKee said the Fed is likely to wait and see how higher rates affect demand, the labor market, and growth.
The retail previews were more cautious than upbeat. A guest said Costco should still benefit from value-seeking shoppers and strong fuel traffic, while Best Buy may struggle to hit even its modest same-store sales guidance because tax refunds may have gone to essentials and debt paydown instead of discretionary electronics.
Key takeaways
- The guest expects headline CPI to peak in May a little above 4%, with potential second-round pressure later in the year.
- Michael McKee said the recent rise in 10-year yields to about 4.6% is already equivalent to roughly 40 to 50 basis points of rate hikes.
- Anna Wong argued Kevin Warsh may inherit a Fed that is more constrained by forecasting uncertainty than by the size of its policy toolkit.
- Jennifer Bartashus said Costco should keep benefiting from value-focused shoppers, long fuel lines, and a flexible merchandise mix.
- Lindseay Dutch said Best Buy’s 1% same-store sales guidance may be too optimistic because consumers are directing tax refunds to essentials and debt repayment.
Notable quotes
“the market is already doing the hiking for him, and he may be happy about that”
“whenever 10ear yields surpass around the 4.5% mark is when rates become very restrictive”
“Costco is just an engine that doesn't quit”
How the episode opens
Hello everybody and thanks for joining us for this special edition of Bloomberg Daybreak. I'm Nathan Hager. The US stock market is closed for the Memorial Day holiday.
Coming up this hour as we kick off the unofficial start of summer. We'll look at why this one could be one of the most expensive Memorial Days ever with Bloomberg's Julia Fanzer and Mark Dat. Plus, retail in focus for investors this week.
We preview earnings from Costco and Best Buy with Bloomberg Intelligence senior analysts Jen Bartacius and Lindseay Dutch. But first, we have a special round table on the economy and the future of the Federal Reserve under a new chairman. And for that, we're joined by Bloomberg international economics and policy correspondent Michael McKe and Anna Wong, chief US economist at Bloomberg Economics.
It's great to have the both of you with us on this Memorial Day holiday. And Anna, I'll start with you. How would you describe this economy that uh new chairman Worsh is stepping into?
Well, he stepping into a huge supply shock. The Iran war has led to reaceleration and headline CPI. However, he's also stepping in just as the headline change in CPI may be peaking.
We are estimating that uh May the next report is where the headline CPI will peak roughly around uh a little bit over 4%. However, the danger is whether there will be second round effect onto the core. But Kevin Wars is also stepping in just as a second supply shock is about to hit but it's not obvious right now that it's showing up in ZPI.
But this second round or I don't know maybe like fifth round already in last five years is the AIdriven type of inflation uh in memory chips and computer software and uh storage drive.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed chair transition
- inflation impact
- memorial day retail pricing
- costco earnings
- best buy earnings
Companies and tickers mentioned
- COST
- BBY
- Costco
- Best Buy
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Bloomberg Daybreak: US Edition
-
Nvidia Faces Post-Huang Reckoning, Microsoft Races to Fix Outage | Bloomberg Daybreak: US Edition -
Daybreak Weekend: Nvidia Earnings, UK Labour Market, APEC Summit | Bloomberg Daybreak: US Edition -
Nvidia Weighs Succession Plans; Congress Preparing to Subpoena Jensen Huang | Bloomberg... -
GOP Thwarts Hegseth Impeachment; CoreWeave Quiets Doubts | Bloomberg Daybreak: US Edition -
FBI Investigates Nvidia CEO, Anthropic IPO Snafu | Bloomberg Daybreak: US Edition -
Nvidia CEO Affair Sparks Probe, Trump Admits Policy Mistake | Bloomberg Daybreak: US Edition
Bloomberg Daybreak: US Edition, this episode and its artwork belong to Bloomberg. Octagon is not affiliated with the show; this page is an independent summary.
