tv Whatd You Miss Bloomberg November 30, 2021 4:30pm-5:00pm EST
♪ romaine: from bloomberg headquarters, i am romaine bostick. we are going to talk about socks. they close in the red after federal reserve chairman jerome powell shifted his message on inflation. out goes transitory, in goes the lasting impact on some recent price pressures. it was a hawkish pivot before the senate banking committee that triggered a widespread market selloff. investors questioned the timing
of the pivot, the form in which it was made on the unambiguous disclosure the fed was ready to discuss, accelerating that taper. we are going to hear remarks from president biden where he is set to break down his hopes for his bipartisan infrastructure law and its impact on easing supply chain constraints that feed into inflationary pressures. over the next 30 minutes, we will bring you those remarks and dive deeper into the three big risks facing the u.s. economy. you could probably say the global economy. inflation, supply chain issues, and the omicron variant of covid-19. let's get right to what powell had to say today. >> the threat of persistently higher inflation has grown. the test we have articulated clearly has been met. inflation has run well above 2% for long enough. the word transitory has different meanings for different
people. it is a good time to retire that word and explain more clearly what we mean. you have seen our policy and adapted it will continue to adapt. we will use our tools to make sure that higher inflation does not become entrenched. the economy is strong and inflationary pressures are high. it is appropriate to consider wrapping up the taper of asset purchases, which we announced at the november meeting. perhaps a few months sooner. taylor: let's bring in betsey stevenson, professor of public policy and economics at the university of michigan. also, an advisor to president obama. talk to us about what you heard today. most of the research notes i got highlighted the significant change in tone we got from powell today. did that tone change for you? >> i think he has been remarkably consistent. he has said we are going to keep reading the evidence and we are
going to adapt as we get new evidence. what we saw was slightly higher inflation than expected in october. some concerns that maybe it is time that we dial back slightly how accommodative our monetary policy is going to be. with inflation running higher, those low interest rates are even more accommodative than they were a year ago when inflation was lower. it makes sense for the fed to speed up the taper a little bit. that is all they said they were going to do. sonali: how does this complicate the fed's focus on employment? there was discussion today not just about inflation but the employment picture and the fact that participation is not picking up. how does that make the fed balance tougher? >> participation is ticking up good -- is picking up.
we have seen people returning to work. we are going to continue to see people return to work. one thing to realize, as the economy strengthens, we build labor force participation by keeping people in jobs so they are not exiting the labor force, just as much as we build by bringing new people in. what powell said was the economy is looking strong. it is time we can slow things down, but they absolutely did not say that next month, tomorrow, early 2022 will they begin to raise rates. we have a path we have to follow to make sure the economy is strong enough and we have brought enough people back to work before they are at neutral monetary policy. romaine: betsy stephenson. we are still waiting on president biden who is scheduled to speak about some of the issues going on with the economy, particularly the supply chain issue and how that feeds into inflation.
hang tight for one second, we are actually watching president biden walking out right now. he is at the dakota county technical college in rosemount, minnesota. he is expected to deliver remarks. if you are still with us, we will keep an eye here on president biden. i am curious if you could talk about supply chain issues and how that factors into the inflation picture and whether there needs to be a reaction to that. >> one of the things we are seeing is that people are out there buying goods at a very high rate. as opposed to services. we have been cooped up with the pandemic for so long and we want new cars and couches. we want new stuff. we are still hesitant to go to restaurants and shows and do things in person. the inflation is coming from that real surge in demand to buy
stuff at the same time that countries around the world are having a hard time. romaine: the big debate is that a lot of people when they say this is transitory or temporary, or whatever phrase you want to use, they point to this surge. the idea that there is pent up demand, and that can't last. we can only buy so many cars, at some point this comes down to a sustainable rate. that raises the question to why we need a reaction -- a policy reaction. >> this reaction is very small. he is talking about speeding up the taper a tiny bit. the reason we need that reaction is because the higher interest rate means higher inflation rates, actually monetary policy has become more accommodative and they need to wind that back. but that is not the case we want for monetary policy yet. we need to see the fed continue
to provide support to this economy so that we can get more people back to work. the big test is going to be when we demand more from services we do not know the answer yet. if they don't, we will see inflation in services. right now, the price increases in services have been very modest. if that stays modest, i am all for transitory because some of this inflation we are seeing now is transitory. taylor: what about all the fiscal stimulus? $2 trillion, how does that complicate this story? >> one of the things people have been concerned about is if you give people a lot of money they will spend it. but, we haven't been producing as much, so that will drive prices up.
i do not think we have seen a surge in people spending and some of the ways that has been spent have been helpful. his has -- it has preserved businesses. romaine: betsy stephenson, university of michigan. let's go to president biden speaking in minnesota. pres. biden: the idi would be standing, waiting to introduce a president, i would find daunting. i was trying to reassure her, but she clearly did not need any reassurance. [laughter] pres. biden: thank you for your service in the united states military. [applause] governor, thanks for the welcome to minnesota. i was telling the governor on the ride here from the airport that i started coming to minnesota back in 1973. one of my mentors, for real, ended up being two, was hubert humphrey.
he helped me campaign in 1972 as a 29-year-old candidate for united states senate from my home state of delaware. he gave me credibility i am not sure i deserve, but it helped a great deal. i had to wait to be eligible to be sworn into you have to be 30 years old to be sworn in. while i was in making sure i was hiring my staff, i got a phone call from the fire department saying there had been an accident and the poor woman they put on the phone had to say, your wife and daughter are dead. my wife was christmas shopping and was broadsided by a tractor-trailer. my point is, one of the first persons to come to me were the humphreys.
not just the senator. and then, a guy who became a great friend and mentor was fritz mondale. i've been from the -- all the way down to southeastern mortar and it is an incredible state and you have elected incredible people, including the people you heard from earlier today. i see a lot of mirrors here. that is the toughest job in america, they know where you live. [laughter] it really is, u.s. tech people's lives more than anybody directly. thank you for what you do. from my administration, the secretary of education mark -- miguel cardona. [applause]
he served in congress for a long time and i am delighted for him being here. before getting to my remarks in detail, i was informed after the tour, i learned database -- i learned about a school shooting in michigan. as we learn the details, my heart goes out to the families during the on imaginable grief of losing a loved one. apparently there are somewhere in the order of nine people shot , three are dead. the young man, as i understand from staff, about 15 years old. he turned himself in. he claimed is right against self-incrimination and handed over his pistol. that is all we know, but you've got to know that whole community has got to be in a state of shock right now. one of the things i wanted to
mention, i want to tell you about the infrastructure law i signed on thanksgiving. this is not hyperbole, it would not be possible without the minnesota congressional delegation. senator klobuchar is a leader on many issues. her colleagues looked to her for lowering the cost of prescription drugs, to how to get broadband to the country. senator klobuchar and i have been friends for a while. she knows how to make progress. [applause] romaine: we were listening to president biden speaking at an event in rosemount, minnesota. this is primarily to pitch his new bipartisan infrastructure law. you heard his comments there at the start about the school shooting we learned about a little bit earlier out in rural michigan, just a few miles north of detroit. we will keep an eye on what joe biden has to say, particularly about supply chain issues and
other big risks facing the economy. that is ostensibly what we are covering right now here on this program. we want to continue with that conversation and focus more on supply issues, which have been a big part of the inflationary pressure we have seen this year. brian bork is the chief growth officer at seco logistics. brian, thanks for being here today. i think when we talk about inflation, we talk about the price pressures that regular people feel on the ground. we have been drawing this thread all the way to what has been going on at the ports, and the trucking companies and all the things in between that help us get goods from wherever they are coming from to our store shelves. is there any sense those logjams are easing at all? >> thank you for having me. i should say, is the pressure easing? i think it is beginning to. we have turned a corner.
a better analogy is to say that the light at the end of the tunnel, we were not sure if it was an oncoming train were truly an opening. it seems more and more today we are seeing signs it is not an oncoming train. perhaps the worst is over. this is a broad statement because in certain areas like the port of long beach, there continues to be a lot of pressure and congestion. we see congestion everywhere from shanghai to savannah to rotterdam to frankfurt. there are cargo pressures everywhere, congestion everywhere. for the most part, we are starting to see signs of improvement, even in the port of l.a., long beach. the pressures are beginning te's. the number of ships coming to the u.s. is beginning to dip lower. to answer your question, the pressure is easing a bit but it
is still there. taylor: talk about the international pressure, particularly with this new variant. some international countries have a no covid policy. are you risking that the pressure intensifies if international ports shut down again? >> that is certainly a risk and it was a risk before the announcement of the neubert -- the new variant. that risk has only elevated. i think in the next coming months we will see. it is very early now to tell with the impacts may be, but certainly countries with a zero-tolerance policy carry the most risk. whereas countries like australia and singapore, which previously had been among the most strict, are beginning to ease restrictions. in a country such as china which has been successful at combating the covid pandemic, we can see circuit breaker events where
certain ports are shut down again, especially in preparation for the big event in february, the winter old and picks. -- olympics. the risk may be elevated a bit in the near future, but it is really early to tell with the potential supply chain impacts might be. romaine: let's talk about the lessons learned. this obviously brought a lot of light to our overall supply chain. what works and what does not work. are there longer-term changes that can be made that may potentially insulate us from a pandemic, or even something less severe? brian: the biggest way that anybody, whether it is a country, company or individual can prepare, at least in relation to business, diversification. keeping all of your eggs in one basket, whether they be investments or where you are sourcing your goods from
inherently carries a lot of risk. a lot of companies and countries are now factoring in what the real risk has always been. if you look back to other natural disasters like the fukushima earthquake and tsunami, that exposed certain industries that only sourced from a few companies within a 100 mile radius. there's a lot of exposed risk. a lot of companies today, a lot of countries are looking to diversify where they are sourcing from. they are looking at introducing, not replacing domestic production as one option. we are starting to see more of what people were talking about, in sourcing and re-shoring. that was more talk for the past 10 years, we are actually seeing plans being implement it. diversification is big. sonali: how big of a scale is
that re-shoring happening at? brian: it is very early and it is very anecdotal. we are starting to see more of our clients asking specific questions about countries like mexico and vietnam, and bringing product here and manufacturing back in the u.s. these are plans with execution dates, which is something we have not seen before at this scale. it is still early days but you cannot couple supply chain in a matter of months or years. this will be a long-term trend, but diversification and where companies are sourcing from and ensuring companies have domestic supply chains set up for key products, we will see more of that. taylor: why, behind that, is that protectionism? is it worrying about having all your eggs in one basket? is it a labor issue?
is it physical geographics? what is the why behind that shift? brian: it has to do with options. even after the covid pandemic ins, -- ends, there will be future supply shock. they were here before the pandemic, they will be hereafter. what the pandemic did was when you stress certain systems and organizations, make it better. having an agile and nibble supply chain becomes a competitive advantage. -- nimble supply chain. they are the ones that are winning. companies are seeing that. they want to emulate successful strategies and being able to say ok, i can reserve 20% of my widgets to this supplier in mexico where i may pay three times as much but my lead time is three weeks, not three
but, saying the benefits outweigh the risks. shares are up just a little bit here in the market. we have been talking about this risk, one of those is the very end. it has created inflation headaches when it comes to policy decisions. here to discuss further is john authers. you sit down and asked me if we were going to discuss the yield curve. what did you think we were going to talk about? >> i had a premonition. [laughter] taylor: the yield curve is a lot flatter than yesterday. i noticed that too. that is very important. the amazing thing is after the huge macro development's we have had this year, inflation blindsided a huge number of people in the markets. the yield curve is exactly as flat as it was on january 6. after the huge upheavals,
complete alteration and what people were expecting in terms of price levels, we are back where we were. romaine: the question now is when we talk about flattening, how much further can we go? what does the fed have to do and what does the market price -- >> this is where we get into so many inconsistencies. the first is if you actually -- the two-year has gone up dramatically. actual fed funds futures didn't move all that much. we are still not pricing and hikes for the next year, which you would've thought if people were that scared by that big a hawkish intervention by jay powell. we are still pricing and fewer hikes than a year ago, which surprises me. at the other end is this clear belief that the fed is going to
have to tighten and that is going to choke off growth and inflation with the results, you see these very low yields at the long end. romaine: do you anticipate that there will be a real tantrum, a significant tantrum from the bond market? >> it is amazing we have not had one yet. we probably will. i do not think you can bring inflation under control with steeply negative real yields. i find it questionable. the 30 year is yielding less than 2% at the moment. that is really low. sonali: 1.79%. >> that is really low. it does not take much in the way -- you can just have dots saying -- it doesn't take much. to instill quite the tantrum. romaine: we are out of time.
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