Episode summary
Sticky Inflation is Testing the Fed; Midterm Election Countdown | Bloomberg Surveillance
Bloomberg Surveillance
· · 30 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Julia Coronado, Jennifer Lawless, Sean Henry, Damian Sassower, Michael Dean
Summary
Sticky inflation and the Fed dominated the first half of the conversation. The host and a guest argued that the October FOMC decision is effectively a hold, because the central bank is in its quiet period and leadership has already signaled it wants more information. The guest said the committee is increasingly worried about persistence in inflation, and argued that the Fed should not start excusing away price pressure or treating 2% as obsolete. She also pushed back on the idea that AI is immune to rates, saying the sector is capital hungry and therefore sensitive to the cost of capital.
The guest said AI is still a major support for the economy, but not without limits. She described a speed limit to the AI buildout, said consumer purchasing power is being squeezed, and said nominal GDP growth could moderate in 2027 as capex growth slows. Real wages, she said, are not growing, even though the labor market remains balanced.
The second half turned to the midterms. The election analyst said turnout is likely to be strong, the Senate is in play, and Democrats could retake it by one or two seats if the election were held today. She said Republicans have two main options: distance some candidates from Donald Trump or try to maximize MAGA turnout. The final segment on autos said European carmakers must stay in EVs while cutting jobs and capacity, with Chinese brands intensifying pressure and forcing EU policy changes.
Key takeaways
- The guest said the Fed is effectively set to hold rates in October because it has already signaled it wants more information.
- The guest argued that sticky inflation is constraining Chair Worsh and that the Fed should not accept a higher inflation ‘new normal.’
- The guest said AI is supporting growth, but the buildout has a speed limit and consumer purchasing power is being squeezed.
- The analyst said record midterm turnout is plausible and that Democrats could retake the Senate by one or two seats.
- The analyst said Republicans are either trying to distance vulnerable candidates from Donald Trump or drive turnout among the MAGA base.
- The auto discussion said European automakers still need EV exposure, but they face job cuts, capacity cuts and tougher competition from Chinese brands.
Notable quotes
“we already know what they're going to do because we in fact did get forward guidance”
“If your goal is going to be to cut rates or even to hold them steady, you were confronting a committee that was increasingly worried about stickiness and inflation”
“I think it's very important that we remember why the Federal Reserve was created in the first place”
“there is a speed limit to the AI buildout”
“my bet is that we'll see record turnout this time”
How the episode opens
Bloomberg Audio Studios podcasts, radio, news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. We have been remiss. One of the interns at Macropolicy Perspectives emailed me. Okay.
I think out of Texas and you know it's Julia. What do you want? And she said, "Julia's miffed. There's just not enough Fed chat — On Bloomberg Surveillance joining us now from the Texas fear. Julia Coronado, president, founder, macropolicy perspectives. Julia, are we talking less about the Fed because Chairman Worsh wants us to talk less about the Fed?
Um, I don't know if I would describe it that way, Tom. I mean, right now we're talking less about the Fed because it's the quiet period ahead of the FOMC meeting, number one. And number two, we all know what they're going to do.
Why do we know what they're going to do? because we got good old-fashioned forward guidance from leadership on the FOMC telling us that October was a hold to gather more information. So I think that that's the the real answer is we already know what they're going to do because we in fact did get forward guidance.
Can you glean and folks full disclosure Dr. Cornell has been you know verbally shortlisted for governor and all that. Can you glean, Julia, the governor and president's power or push against their newly minted chairman? — Yeah. I mean, look, there there was already a rethinking of the inflationary dynamics we're seeing before Chair Walsh walked into the door uh of the FOMC of the Federal Reserve and and and that didn't that kept going, you know.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- sticky inflation
- fed policy
- midterm election countdown
- economic outlook
- market conditions
Companies and tickers mentioned
- Macropolicy Perspectives
- STORD
- Bloomberg Intelligence
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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