00:00 Speaker A
We did just this afternoon get the beige book, Dennis and it's some interesting commentary there.
00:05 Speaker A
Contacts, it says, reported flat to declining consumer spending for many households.
00:11 Speaker A
It says wages failing to keep up with rising prices. That doesn't sound great.
00:16 Speaker A
Combine that with the JOLTS job openings, Dennis. We we get got this morning. That came in below expectations. Add it up for us, Dennis.
00:23 Speaker A
You're your baseline expectations for the US economy. What what are you forecasting Dennis now and ahead?
00:29 Dennis
Well, there's still a lot of uncertainty. The and and the tariff picture is an important part of that uncertainty.
00:35 Dennis
Clearly the economy is slowing and the labor market is slowing.
00:40 Dennis
I I think it's debatable whether what we're seeing in the labor market is in a late cycle natural slowdown or something worse.
00:50 Dennis
And I think some of the FOMC members are now beginning to become more concerned that it's something worse or it could be something worse shortly.
01:00 Dennis
and that's the reason we're hearing more voices consider a rate cut at the September meeting.
01:07 Speaker A
So, the market of course Dennis is expecting a cut at this meeting. Um, is that what you expect? And and to your point about, you know, we have economists come on Dennis and they say, listen, it's it's despite maybe their worries about inflation.
01:21 Speaker A
The reason they'll argue that cut is a lock, they'll say Dennis, is because the labor market is weakening and when hey, when when the labor market starts to weaken, things can go south quickly.
01:28 Speaker A
Is that your take?
01:31 Dennis
Well, the the speed with which the labor mark could deteriorate is really an important consideration.
01:36 Dennis
Having said that, I actually believe that this meeting will be more of a close call than the markets seem to have priced in.
01:44 Dennis
Um, you know, the inflation picture has not really improved and it has deteriorated just a bit, particularly at the core level in the most recent reading.
01:57 Dennis
And uh they're still substantially above the 2% target.
02:02 Dennis
So it would depend a little bit on how the committee breaks between those who really want to prioritize inflation and inflation expectations as Raphael Bostic said.
02:13 Dennis
Uh or those who are really concerned that we're going to see a rapidly deteriorating labor side.
02:20 Dennis
I don't think it's a clear picture. I think there'll be voices on both sides.
