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- [00:00]
Kitty Richards
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- [00:33]
Bloomberg Announcer
Bloomberg Audio Studios Podcasts Radio news. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [00:56]
Joe
Tuesday edition with President Trump in the air, Creedy, he's on his way to the UK for an important visit. He and the first lady, for that matter. That will be part business and part, I guess, fetting by the royal family. He's done this once before, so it should look pretty familiar, really taking up.
- [01:12]
Interviewer
That invitation, the envelope he was very clearly handed by Keir Starmer directly from King Charles at the time. Real showmanship in that relationship. We'll see if he has something to say that we at the departure today, he had plenty to say on that relationship. We'll see if there's more.
- [01:26]
Joe
Well, you were there in the driveway when he left. Let's listen to Donald Trump on his way to London.
- [01:32]
Donald Trump
They want to see if they can refine the trade deal a little bit. We made a deal and it's a great deal and I'm into helping them. Our country is doing very well. We've never done this well. We're making having trillions of dollars coming because of the tariffs. They'd like to see if they could get a little bit better deal. So we'll talk to them.
- [01:51]
Joe
President and first lady are set to arrive this evening. The main focus of their visit is really tomorrow. They'll be at Windsor Castle, where the ceremonial welcome with the honor guard will greet them, followed by lunch with the royal family. And the president will of course enjoy the flyby. They're going to have the red Arrows out there along with a couple of F35s provided by the United States. But on Thursday he goes to Checkers to meet with the prime minister. And helping us put this ambitious schedule together is Lizzie Burton. Really great to have Bloomberg's TV anchor and correspondent live from London. Lizzie, what's the security going to be like and what's the feeling on the ground.
- [02:32]
Lizzie Burton
It'S already tight, Joe. We've got police in their droves here in Windsor. We're actually not at Buckingham palace for this state visit. We're at Windsor Castle, this 11th century fortress behind me. Because, as you know, this isn't Donald Trump's first state visit. It's an unprecedented second state visit to the uk, uk. And there is much on the agenda here, as you allude to this economic partnership seeking to be built upon after that trade deal for which Britain really was at the front of the queue. Of course, we're enjoying lower tariffs than many of the US's other allies. We're expecting $10 billion of economic partnerships to be signed here, including on defense technology, a nuclear partnership, also efforts to bring together the financial hubs on both sides of the Atlantic. And already we've heard from Google saying that they're going to put 5 billion pound into artificial intelligence here in the UK. Although, of course, that's really a drop in the ocean for Alphabet, but significant nonetheless for the uk. But I have to say, this could not be coming at a worse time for Keir Starmer. So it's fraught with political risk.
- [03:38]
Interviewer
Well, Lizzie, the ftse, as we were talking about earlier in the program, has talked about more cooperation, not just on the tech front, but on the crypto front as well. We know this is an issue that's close to the Trump administration's heart. What can the UK offer when it comes to the crypto agenda?
- [03:56]
Lizzie Burton
Well, of course, crypto crucial to the UK when it's financially, I would say that there's a difference between the UK and the US on the regulation. You know, on the Washington side, Donald Trump's personal interest in this when it comes to investing in crypto and regulatory as well in the uk, we've been a little more hesitant on it, including from the bank of England, Governor Andrew Bailey. And perhaps that's going to be something that holds back back the UK that caution. So I am sure that this is something that will come up in the conversations not just between Starmer and Donald Trump himself, but also when the US Treasury Secretary Scott Bessant, meets with Rachel Reeves. And of course, they're going to be round the table with many of the traditional banking heads, the likes of HSBC and Bank of America, when they're gathering in Chequers on Thursday. So there's much to be discussed, but I really have to underscore the risk here. Look, careful. Obama's government has lost three in just the past two weeks, including the UK ambassador to Washington Peter Mandelson over his links to Jeffrey Epstein. And this comes down to a Bloomberg scoop. It is going to be absolutely painful, not just in the room between the two of them, but possibly in a press conference that we're expecting at the end of this visit. If, for example, Starmer is asked, do you believe that somebody with links to Epstein should not be in high office? There is that. There is the crypto question. There is the question of Palestine as well. Starmer looking to recognize Palestine at the UN General assembly meeting in New York next week. So above all, Starmer can't afford to look to be appeasing President Trump, who is deeply unpopular here in Britain.
- [05:37]
Joe
It's really great to have you, Lizzie. Thank you so much for the readout. And we'll be staying in touch with Lizzie Burden over the next 48 to 72 hours as the president and first lady make their way. By the time we're on the late edition of BALANCE OF Power when you join us again at 5:00pm Eastern, we should be looking at their arrival if all things stay on time. We do have some breaking news coming from Capitol Hill and it has to do with a potential government shutdown or in this case, averting one. The continuing resolution that has been written up by House Republicans would keep government funding static. A continuing resolution continues the budget that's already in place until the 21st of November. That's roughly what we expected with reporting yesterday suggesting the 20th of November would be the case. And it's a far cry from going to the end of the year and pushing everybody into a Christmas deadline. And an even further cry from the full year CR that the administration had suggested. It's a great opportunity to start our conversation with Congressman Mike Heridopoulos. The Republican from Florida's 8th district is joining us now live from Capitol Hill. And Congressman, it's great to have you with us. How do you feel about this idea? I know the speaker presented some options to the conference this morning. Are you good keeping things where they are until November 21st?
- [06:53]
Congressman Mike Heridopoulos
I am. We want to make sure the government stays open. It is common sense as we're getting our economic rebound with a new bill that, of course, keeps taxes stable. We do not see a tax increase and, of course, all the investment coming from overseas. We want to keep that momentum going. And I'm optimistic we can strike a deal. But Republicans are 100% committed to keeping the government open. We know vital it is as we move forward.
- [07:20]
Interviewer
Representative Hieropoulos, some of your colleagues. I'll just name a few here Representatives Massie, Burchett, Sparks, Davidson, even Greene have started to raise questions about this particular bill. Do you think you're going to get them across the finish line or do you still need to appease some of the centrist Democrats that are holding out.
- [07:37]
Congressman Mike Heridopoulos
Or we're under the assumption that Democrats simply want to shut the government down. You've heard Chuck Schumer's comments throughout the last few weeks. They want to play politics with it. We choose to keep the government open. I know that some of my colleagues in the House have some concerns and, and that's always part of the internal discussion we're going to have. But that said, I'm committed to moving the government forward. I got elected to get things done. I'm happy to say that the border has been secured. And of course, we passed the big budget bill back on July 4, which finally offered certainty and stability to taxpayers. And another part of the process is to make sure we keep the government open as we look to lower interest rates and do other things to make sure that we stimulate this economy and send a message around the world that the United States is open for business.
- [08:24]
Joe
There's been some talk about maybe a longer term conversation. Congressman, you get the CR out of the blocks and to be able to actually get to the table with Democrats over the expiration of Affordable Care act credits, some have suggested that extending those might unlock a potential deal with your colleagues on the other side of the aisle. We've also seen polling, I believe it was from Tony Fabrizio, that the expiration of those credits could cause a lot of trouble for Republicans in the midterms. Where are you on that conversation now? Should that be the point of engagement with Democrats?
- [08:57]
Congressman Mike Heridopoulos
Well, I think more than anything else is we want to have a discussion with the American public about what this bill is and what it isn't. These credits are important to a lot of families, but we also want to make sure we have a level playing field for people who are buying insurance without the help of the federal government. So I think that will be one of the key points as we move forward. But let's be clear here. The Democrats want to shut the government down. They're in a total chaotic situation and they think the only way to appease their base is probably to shut it down. What Mike Johnson has done as our speaker throughout the year has always been able to bring this caucus together to push some common sense forward. And of course, the president has been leading that charge. And so I think we'll work this thing out. But again, we have to work under the assumption, given the rhetoric from the Democrats for weeks now, that they're okay with shutting down the government. We're not. And we're going to do everything in our power in a common sense way to protect taxpayers, to keep the government open.
- [09:50]
Interviewer
Just to be clear, Congressman, does that mean that even though, as you mentioned, it's a key sticking point, is that's not necessarily the starting point when it comes to these discussions ahead of Thanksgiving?
- [10:00]
Congressman Mike Heridopoulos
Well, again, all I can say is I can't speak for others, you know, the in and out maneuvers that the Democrats have been talking about. But bottom line is they think that if you raise taxes and grow government that somehow that's going to stimulate the economy. We happen to think differently. I always welcome conversations with the Democrats, but they need to put something up on the table. The American public was very clear last November they wanted change in Washington. We've given them that change and we solved the problems on the border and we solved the problems with the tax situation, which was very much uneasy. I mean, Bloomberg is dedicated to business. And the best thing the government can always do is offer certainty and stability to the business world. That's what we're trying to do. We hope that the Democrats don't throw in some kind of monkey wrench to mess this up.
- [10:44]
Joe
Well, you know what? We've heard from a lot of them and I, I'd love to ask you about business in the Federal Reserve meeting that's starting today, Congressman. But just lastly, we've had Democrats, including Brendan Boyle, the top Democrat on the Budget Committee, explain that their concern boiled down to not just the debate over the big beautiful bill, but the rescissions that followed that. There's a, there's a lack of trust between the two parties because monies agreed upon and appropriated were clawed back by Republicans. Do you see them on that front? What would be your response?
- [11:16]
Congressman Mike Heridopoulos
Well, it's a good question to ask a bit. Let's be clear. The Democrats were absolutely OK given how they voted to raising taxes. I mean, if you looked at the big bill, they were okay with going back to the old tax rates, which on average would have been a 23% tax increase. I don't think that's a good thing for the economy. As far as rescissions bills are concerned, when you look at what we cut out of there, we're talking about NPR and pbs. That is not a vital government function. Remember, when I was growing up, there might have been three or four channels, but today there are hundreds of channels with Whatever people want to see. And so we don't need to be subsidizing those programs. And it was a message.
- [11:52]
Joe
Also USAID was how we worked out.
- [11:54]
Congressman Mike Heridopoulos
Oh, the USAID is even clearer to me. I am glad you asked, Joe. I mean, if anybody looks at this in a common sense lens, they're going to say we spent money on that when we have a budget shortfall. I thought the US Cuts were the most obvious ones to make and I think we need to look further. And it's the reason of the reasons why I created a bill that we're looking at called the Ledger Act. It says everything should be out there. You should see exactly where all of your money is being spent. Not just the top line but the specifics within. That's what we did in Florida and we're the most transparent state in the nation and it turned around our economy and it's reason why rick Scott, our U.S. senator and of course myself has pushed this bill with literally 70 co sponsors in the House. We want to make the government more transparent so we don't have these bogus expenditures like we saw with usaid.
- [12:41]
Interviewer
Congressman, we've also got one eye firmly on the Federal Reserve, as Joe had mentioned earlier. I just want to play with for you some sounds and comments that the President had made earlier when it comes to the new appointee to the FOMC board, Stephen Myerange. Take a listen.
- [12:53]
Congressman Mike Heridopoulos
Thank you.
- [12:54]
Donald Trump
He'll have a big influence on this. When too late getting his rates down, I guess. Who knows? You never know with too late. But he's done a lousy job. Rates, the rate should be much lower.
- [13:03]
Miles Miller
What do you think about the independent?
- [13:04]
Donald Trump
Oh, it should be. It should be. But I think they should listen to smart people like me. I think I have a better instinct than him. If you look, all the economists got it wrong. I got it right.
- [13:16]
Interviewer
The President there speaking, of course, ahead of his departure to London. Congressman, he's making the case that rates should be significantly lower. Traditionally, when we hear rhetoric like that, it means that the economy is in trouble, that we're heading for recession. Do you see any signs of that?
- [13:31]
Congressman Mike Heridopoulos
Well, I think we all had concerns with the latest job reports and the President has said we've been pushing for this for months. Unfortunately, the Fed board has been giving us kind of the runaround on that. But bottom line is this. I had Mr. Powell in the committee where I serve on the Financial Services Committee where I serve as whip, and I asked him to fundamental questions. Did they make a mistake in the biden years on the interest rates. He admitted, yes, we made a mistake. Second, I said that the overspending in Washington also stimulate this inflation. He said, yes. So with that in mind, when other nations are cutting their interest rates, we need to do the same. Here where I live in Florida, the difference between a 7% interest rate and a 3% interest rate on an average home where I live is $1200 a month. That's $15,000 a year, and people can't afford it. That's the inflationary effect we want is we want to get rid of. We want to tackle inflation by doing common sense things, by reducing spending and giving certainty to the economy, by keeping the government open and making sure that people know that the tax rate is stable now and they can make those investments long term.
- [14:36]
Joe
It's got to be an interesting day in the room. Congress. I mean, you've got Stephen Myron, first day on the job, presumably sitting next to Lisa Cook as they hash out this decision and review the data. Do you believe Lisa Cook should be fired?
- [14:50]
Congressman Mike Heridopoulos
Well, I think that facts speak for themselves and we want people who truly understand the economy. It's the reason why I'm out in the real world every day talking to people who create jobs and opportunity, not just the folks here in Washington, D.C. and as you saw in the last meeting of the Fed, there was a split vote, which is very rare, as you know. I think that given the numbers that we're seeing right now, I think there's a good chance we'll get at least a, a quarter point, hopefully a little bit more to help people who've been so hard hit the last four years with higher rent prices and gas prices. We want to help them out, and one way to do that is to help them on their mortgage payment.
- [15:24]
Joe
I know you mentioned the facts speaking for themselves. Do you think she deserves due process in this case before she's fired or not fired?
- [15:31]
Congressman Mike Heridopoulos
Well, look, we always want to provide that, but also when you apply for jobs like this, you need to be honest. And clearly that was not the case. And I think that that full transparency that I talked about earlier, Joe, that idea where government spending should be in the sunshine, we need to do that. But bottom line is the Fed needs to react to the markets and the markets they're telling them, reduce interest rates.
- [15:52]
Joe
He's a man who took his doors off his own office back when he was president of the Florida Senate. Congressman, it's good to have you with us on Bloomberg. Come back and see us again. Mike carried off Florida's 8th District. Stay with us on Balance of Power. We'll have much more coming up after this.
- [16:12]
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- [16:48]
Bloomberg Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.
- [17:07]
Joe
We keep an eye on an ear and an ear, I should say, on Cash Patel's testimony today, the FBI Director is on Capitol Hill and this has crossed over into the noon hour. It's been several hours of, in many cases, contentious back and forth, as you might expect, with the senators who are there appearing before the Judiciary Committee and facing questions about his leadership of this bureau, of course, including the firing of top officials and agents, as well as, of course, his handling of the Epstein case and the Charlie Kirk case. There's been a lot to talk about here and the ranking member on the panel, Senator Dick Durbin of Illinois, the Democrat you've heard from many times on this program, decided to dig right in. He was the second questioner, of course, following the chair. Let's give you a taste of this back and forth. Director Patel, much like you, Deputy Director Diane Bongino, was a conspiracy theorist who built a lucrative career making inflammatory and unsubstantiated statements about the FBI that would be disqualifying in any administration that cared about nonpartisan law enforcement. What is the evidence to suggest the pipe bombs placed Outside of the DNC and RNC on January 6th were an inside job?
- [18:24]
Congressman Mike Heridopoulos
I appreciate the opportunity to discuss Director Bongino's mind record, so many on this committee in the media jettison our 31 years of public service.
- [18:33]
Joe
Can you answer the question, sir?
- [18:34]
Congressman Mike Heridopoulos
I'm answering the question. You're questioning the integrity of the deputy director and I'm going to answer the question. The pipe bomb investigation is ongoing and I'm not going to discuss the details of the pipe bomb investigation.
- [18:50]
Joe
That was how things started. Also asked about the FBI investigation into the Discord Group chat where Charlie Kirk's shooting suspect allegedly confessed. He said that they're looking at a lot more than the 20 users who have been already described. Now, this is an important day for this story. We're going to talk about a couple of sides of this. Ashley Davis will join us in just a moment for the political side of this story. But Miles Miller has been all over the law enforcement side of things in the court hearing that we're going to see today, Bloomberg senior national security reporter with us live from world headquarters in New York. Miles, we expect charges to be made public about 90 minutes from now. And then we're actually going to see the suspect in court today. Tell us what to expect.
- [19:40]
Miles Miller
We'll see the suspect from a video link likely from his. I don't know if he'll actually be brought to court. He's in a special protected unit at the Utah County Jail just for his own protection. But what we know is that 3pm mountain time he's expected to go before that judge. He'll face those charges, which include murder, obstruction and, of course, discharge of a firearm. We learned yesterday from the FBI director that there is a definitive link between the suspect and and the weapon that was found. His DNA was found on that weapon as well as found on that towel that he allegedly stashed in the woods there. And they know this, of course, because of that Discord server you were talking about engaging in this conversation in detail about what he did allegedly to Charlie Kirk.
- [20:30]
Joe
Really interesting here. Well, will we have cameras, so to speak, in the courtroom for this trial, Miles, or do we still have yet to learn?
- [20:39]
Miles Miller
Yeah. So for every stage of the state case, and I say that, and I'll reference why in a moment, every stage in the state case, there'll be cameras in the court. Utah has that there. But we have heard hints from sources and also from Pam Bondi yesterday on Fox News that this case is likely to also go federal. She also mentioned, you know, the death penalty. Now, of course, the death penalty was something mentioned by Donald Trump itself. Not clear if it would go to that stage in state court, but certainly he could face life in prison federally or the death penalty in the federal side as well.
- [21:14]
Joe
That's going to be 5pm when we see him virtually, as you point out, right, miles? That's right, 5:00pm Eastern time. Great to have you with us, Miles. We'll talk later. Miles Miller, live from world headquarters in New York as we add the voice of Ashley Davis, realizing there is an important part, political side to this whole story. And Ashley is a partner at S3 Group, Republican strategist and former special assistant to the Director of Homeland Security, having specialized in national security over the course of her career here in Washington. It's nice to see you. Welcome back.
- [21:45]
Ashley Davis
Thank you. How are you?
- [21:46]
Joe
So much to talk about. I'm doing fine, but this is a pretty tough story to talk about, as I'm sure you've been finding, as well as somebody who's doing public commentary and analysis, I feel like things are going to feel differently later today. You hear the charges at 2 o'. Clock. We're going to actually see virtually the suspect at 5 o'. Clock. What will that do to the psychology around this case?
- [22:09]
Ashley Davis
Listen, Joe, I think the whole situation is heart wrenching and especially obviously for his family, his wife and children. But what I'm nervous about is that the country's kind of coming together right now. Obviously you see some fractions of people that were celebrating Charlie getting murdered, but for the most part, people are trying to come around and be nice to one another. But when this happened with the president, it lasted a week and then everyone went back to their corners and started fighting again. And so I really hope that after Sunday, I feel all week, obviously we're going to see what happens today with seeing the suspect for the first time. Exactly as you said. I think that we will find more information out about what was the motive behind this and some of the court proceedings. But after Sunday, when the president does his memorial service in Arizona, I just hope that next week we just don't go back to our old ways.
- [23:07]
Joe
We're pretty good at doing that.
- [23:09]
Ashley Davis
We're very good at forgetting.
- [23:10]
Joe
You know, this of course, coincided with the 24th anniversary of 9 11, which I know is something that's really important to you. And so many people were talking in that day about the unity that people felt following the September 11 attacks and how quickly that went away. We've been trying to reach our way back to that somehow ever since. This could be an opportunity, but we're hearing a lot of blaming, a lot of left versus right here. Even the president himself has been kind of leading this dialogue. And we heard it at the vigils for Charlie Cook. We heard it from J.D. vance when he filled it on his show that this is a radical left problem. Governor Shapiro, whose home was firebombed a couple of months ago, of Pennsylvania, a Democrat, spoke eloquently yesterday, much as Spencer Cox has about it's not good on either side here. Do you feel like we're having the right conversation in that regard.
- [24:04]
Ashley Davis
I think it's very hard. One of the things that's happening right now with the, with the death with Charlie is this is really personal to this White House. This is a personal friend to J.D. vance, this is a personal friend to the President, the President's son. A lot of the staff are very close with Charlie, also members of Congress on the Hill. So I think that some of the raw emotions that you see with some of how people are talking about this hopefully subsides because I think both the right and the left should make sure that they're not getting too much into the blame game because it's everyone's fault. And I actually agree with the Governor who's saying, first of all, I'm a huge, huge Josh Shapiro fan, think he's a great governor of Pennsylvania. But when the governor of Utah was saying about the social media issues, I really do believe in that because of the way you're targeted and as well as what the information that you can read online. And you see a lot of this. I was just talking a little bit earlier with this whole Discord, Discord app or chat room, whatever it is. I mean, this is where my 16 year olds on that. That's how they communicate, communicate. And so if a lot of things are coming out through this chat system, which is not probably as highly monitored.
- [25:21]
Joe
As it should be, you and I could have a whole different conversation as parents here because this is very real and we know these names because we hear about them in our house.
- [25:29]
Ashley Davis
Exactly.
- [25:31]
Joe
Let's bring your experience to bear here. With the conversation over lawmaker security, it was up to Brian Stile this morning, the chair of the Admin Committee, to present options to the conference because not everyone has bought in on these ideas. And I'm wondering what you think is realistic. We're not going to have every member of the House walking around with a detail, are we?
- [25:49]
Ashley Davis
No, it's impossible and way too expensive. Even if you go the numbers today were somewhere between 35 million and 50 million. And that includes not just Congress, but the justices, some senior judges as well, outside the justices and the Senate. I mean, that's just. The money's not going to go very far, as you know. Here's. Here's what I keep saying about what happened in Butler, Pennsylvania with the President and what happened last week with Charlie. How do you manage that outdoor space anyway? You really can. I mean, obviously Charlie had his own security and then you had the local police force. But if you saw time and time again, how he was set up that day. Do you have to move all your events inside? And it's a real, if you're a member of Congress and go to a townhome, oh, you're not going. The guests aren't going through mags like, is that where we're going? I just think that it's almost impossible to do.
- [26:41]
Joe
Yeah. This is, well, that's scary. And this is why a lot of lawmakers are terrified right now. It's UNGA week next week. And part of the review that came from the congressional panel investigating the attempted assassination of Donald Trump was we have a Secret Service that is being stressed by any number of other dignitaries they need to protect. And part of that includes what takes place during United Nations Week in New York. President's going to be there speaking. How difficult will this be?
- [27:11]
Ashley Davis
Well, a lot of the security that will happen around UNGA will also be State Department. So that's a little bit different obviously than the Secret Service. But I think, listen, what happened, I was on your show shortly after what happened with the Butler situation was there were a lot of mistakes. There were a lot of mistakes made, whether it was because of their being stretched or not. But I think that the president, United States is one of the most, is not, is the most secure person in the world. Maybe Putin's just the same. But I have faith in our, our, in our Secret Service. And there has been a big revamp that's happened. But a lot of these, a lot of these folks, foreign dignitaries that will be here will have their own security as well. But it's a logistical nightmare. I get completely where you're going.
- [27:57]
Joe
Yes, absolutely. Let's go to New York. It's going to be a blast, a lot of traffic.
- [28:02]
Ashley Davis
Yes.
- [28:02]
Joe
We actually will be in New York next week for the president's address and we're going to bring you special coverage of the Bloomberg Global Business Forum the very day after. This is an interesting moment that we're in here, Ashley, and it's a pleasure to have yourself and others who have some grace to talk about this. This is the way we're supposed to do this around here.
- [28:21]
Ashley Davis
I appreciate it.
- [28:22]
Joe
As Republican strategist Ashley Davis, partner at S3 Group, stay with us. On balance of power. We'll have much more coming up after this.
- [28:32]
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Running small and medium sized businesses is hard work. Business owners need to be sure that their ads are working just as hard as they do. Amazon ads allows businesses to track and optimize campaigns for better ROI from their marketing with Amazon ads, you can be more sure that your marketing is reaching relevant audiences during premium content and shows they're actually watching. Trillions of browsing, shopping and streaming insights help you optimize your campaigns in real time, and measurement tools show you what's working the hardest. Gain the edge with Amazon ads.
- [29:08]
Bloomberg Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen to live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30 the.
- [29:28]
Joe
True connection of Washington and Wall street and around this time tomorrow will be in special coverage, special Fed coverage with the crew in New York. The outcome seems fairly well determined. It's a quarter point, right? Tell me if I'm wrong. The big question is the conversation that takes place in the news conference afterward. Knowing that right now, just imagine to be a fly on the wall, it is entirely possible Lisa Cook and Stephen Myron, who are in the same room, are sitting right next to each other based on the seniority that dictates everyone's position around the table. Learned that from Michael McKee earlier today. And so what will this meeting bring, and will it be justified? We're joined now by Kitty Richards, senior strategic adviser at the Groundwork Collaborative, former Official at the U.S. department of the treasury in the Biden administration. Kitty, it's always great to have you. Happy Fed Day. Almost.
- [30:19]
Kitty Richards
Thanks for having me.
- [30:20]
Joe
I'm wondering your thoughts here just broadly, with all of the confrontation and drama that has surrounded this meeting. They're behind closed doors now, culturally speaking. Can the Fed handle this?
- [30:34]
Kitty Richards
I think that the Fed has been put in an unprecedented situation. That said, as you alluded to, we pretty much think we know what's going to happen with the interest rate decision. The Fed has been signaling for quite some time that they were seeing interest rate cuts on the horizon, but not yet. I think markets and the signals we've been getting from various Fed governors from across the political spectrum all point to a quarter point rate cut. In some ways, that makes the Trump administration's really vicious targeting of Lisa Cook especially surprising and potentially counterproductive. The reason that we all think that the Fed is going to be cutting rates is that we've seen significant deterioration in the labor market between last month's job reports and the big revisions we saw. It looks like the labor market has been softer for longer than policymakers understood, and now we're seeing a market slowing. We're seeing job opening below the level of job seekers for the first time in several years. And we've seen a spike in the black unemployment rate, which is both troubling for black workers and often a harbinger of further softening in the labor market to come. And so all of those things are really pointing to the Fed loosening monetary policy to try to boost that struggling labor market. That's been made more complicated by inflation, which remains elevated and which is being driven up by the Trump administration's handling of tariff policy. But all of those things would point to a rate cut. Unfortunately, by undermining the Federal Reserve's independence in the eyes of the market, we are seeing some signs that market participants are going to start to worry that the Fed is not going to keep inflation under control. And that can be a self fulfilling prophecy that actually makes it harder for them to lower real long term interest rates, which can be very important.
- [32:41]
Interviewer
The irony of this whole thing is that the market reaction to the very fears you've laid out is ultimately showing up on the longer term interest rate side of things, the very piece that affects the housing market, which is the very crisis that the White House is trying to warn everybody about. Does a 25 basis point or even a 50 basis point rate cut address that?
- [33:03]
Kitty Richards
You know, that's exactly right. That what we're seeing is that that yield curve is getting significantly steeper. That is, there's less and less difference between what you have to pay to borrow short term, where the market is predicting those interest rate cuts are going to come, and long term where the long term rate is really driven by the market's economic expectations about future inflation. And so if what the President is trying to do is bring down mortgage interest rates, it's we're going to start to see whether the Fed is losing its ability to drive down those longer term interest rates.
- [33:39]
Joe
So what's the job for Jay Powell? Tomorrow they'll make an announcement on interest rates. The markets will do what they're going to do until the news conference begins. And I suspect that everybody in the room, including Michael McKee, is going to be asking about a lot of difficult stuff that he doesn't want to talk about. Lisa Cook, Stephen Myron, is he going to go back to the White House? The renovations, for crying out loud at the Eccles Building. There's so much that doesn't include data that reporters want to ask about. Does that also cloud the picture for the chair?
- [34:08]
Kitty Richards
I imagine that he is going to try at every turn to bring folks back to the conversation about data and reinforce the idea that the Fed is just moving along business as usual, not getting caught in the noise or the political football and really just continuing to make data informed decisions. Because for the Fed to be able to do their job and affect those longer term interest rates, they really need to signal that they still have a steady hand at the till and that they are going to be making data informed decisions that can then be relied on to move the markets in the ways that they're supposed to.
- [34:50]
Interviewer
The Donald Trump's tariff policy is what's muddying the water. It feels like even though there's been a bipartisan consensus that rate cuts is what this economy needs, even just a normalization of rates, if not ultimately stimulus. But if you look at the data, it feels like there's arguments to be made here that the US has been able to absorb higher tariffs and higher rates and it hasn't affected the end consumer in the way that maybe we thought of on April 2nd. Your thoughts?
- [35:18]
Kitty Richards
Is it, you know, we are, we have seen prices begin to rise. And one of the complicated things about the tariffs is twofold. One, just the chaos around what are tariffs? What will they be? What will they be in 90 days? Creates a lot of uncertainty that makes, makes it difficult to invest. The other complicated thing about predicting when consumers would start to see price increases is that there's often a big lag on those tariffs. You know, companies place orders, retailers for Christmas starting six months in advance. Right. We have shipping times. We did see a pullback around Liberation Day. And then we saw that filter into prices over the following months. At the time, many analysts were saying you have to watch and wait, and we are seeing those prices go up. You know, as you said, I do think there has been a lot of strong indication that the Fed should have begun normalizing rates a lot sooner. I was on the show almost two years ago arguing that housing prices, prices and mortgage prices were really weighing on consumers and that the inflationary period from the pandemic supply chain shocks had largely worked its way through. And I do think that you're right that Trump's tariff policies have made it more difficult for the Fed to engage in the kind of rate cutting that many people were advocating for.
- [36:52]
Interviewer
But if there's a time for prices to go up for the American consumer, is this the right time? And I say that with the caveat of we're still sitting on Covid era stimulus, we're still sitting on elevated savings as kind of the broad American consumer retirement savings are up, loans aren't as much of a burden as they were, say three years ago because so many people have paid off their debt. If there's a time for the American consumer to absorb tariff costs, is that now.
- [37:19]
Kitty Richards
You know, I'd be very careful when thinking about things like retirement savings being up. It's true that people who have significant retirement portfolios have seen asset prices rise dramatically. Also, people who already own a home have seen those asset prices rise dramatically. That has driven up wealth for people who have substantial holdings in the stock market and own a home that is not the majority of Americans. And so I think working people are really being squeezed now. They're being squeezed on both ends by a faltering labor market and rising prices. And those consumer goods prices and things like groceries and housing costs, those are a big, big part of the typical family's budget. Less so the kind of folks who are seeing those asset prices appreciate and seeing their wealth go up.
- [38:13]
Joe
Great to have with us, Kitty. Just to be clear, you're expecting a quarter point tomorrow, right?
- [38:17]
Kitty Richards
That's what the markets seem to be predicting.
- [38:19]
Joe
Great to think you've been coming back for two years. It's wonderful, as always, to spend time with Kitty Richards, Senior Strategic Adviser, Groundwork Collaborative, former Treasury official in the Biden Administration. Keep this conversation in mind right around this time tomorrow as we're waiting for the headlines to roll on interest rates and waiting for the news conference to begin. We'll have special Fed coverage 1:30pm Eastern time right here on Bloomberg TV and radio. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already. Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington, D.C. at noontime eastern@bloomberg.com.
- [38:58]
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