Powell Signals Another Cut

Summary

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Balance of Power – "Powell Signals Another Cut"

Bloomberg | October 14, 2025
Hosts: Joe Mathieu, Kailey Leinz
Guests & Contributors: Molly Smith (Bloomberg Economics Editor), Rick Davis (Republican Strategist), Jeannie Shanz Zaino (Harvard Kennedy School), Michael McKee (Bloomberg Economics Correspondent), Ian Marlow (Bloomberg National Security Editor)

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Episode Overview

On this episode of Balance of Power, Bloomberg correspondents analyze key developments from Jay Powell’s latest speech, the market’s upbeat reaction, and the intricate challenges of the ongoing U.S. government shutdown. The panel delves into the Federal Reserve’s monetary policy outlook, roiling data uncertainties caused by the shutdown, congressional gridlock over government funding, and major foreign policy moves—specifically U.S. actions in Argentina and escalating interventions in Venezuela. Special guests offer real-time reporting and fresh analysis, capturing the high stakes and tensions in Washington and beyond.

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Key Discussion Points & Insights

1. Jay Powell’s Speech and Market Reaction

[00:49–03:12, 25:29–27:24]

• Powell’s Message:
  Fed Chair Jay Powell signals the central bank may soon pause its balance sheet runoff, citing “signs...that liquidity conditions are gradually tightening.”
  • "Our long stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserves conditions." — Powell (quoted at [02:19])
• Market Impact:
  The speech sparked a relief rally, with the S&P 500 and Dow reversing earlier losses.
• Key Analyst Take:
  Molly Smith: “Clearly the sign here is that...Powell still sees signs of weakening in the labor market and that's going to lend itself to another cut later this month.” ([03:12])

2. Monetary Policy in a Data Vacuum (Shutdown Effects)

[03:12–07:53, 09:59–10:47, 27:24–29:01]

• Shutdown Disrupts Fed’s Data:
  With the government shutdown entering its 14th day, public economic data is scarce, forcing the Fed and markets to rely heavily on private sector indicators.
  • “Powell did touch on...the lack of government data in the shutdown and talking about the abundance of labor market data, but not so much on the inflation side.” — Molly Smith ([03:12])
• Risks to CPI Reports:
  With BLS staff idle except for those prepping September's CPI, fresh October inflation data may be spotty or missing; “almost two thirds of the price collection just isn't happening right now.” — Molly Smith ([05:37])
  • Consequences: Potential for missing, delayed, or unreliable inflation data, leading to heightened uncertainty around future Fed meetings.
• Fed’s Dilemma:
  • “Do we get to a point where we're missing enough data that the Fed has to delay a meeting or issue a statement…?” — Joe Matthew ([06:21])
  • “I'm honestly not even sure if the Fed...can even do that...they have to work with what they've got.” — Molly Smith ([06:37])
• Private and Anecdotal Data:
  • The Beige Book takes on added significance as a key source of anecdotal economic intelligence.
    • “Beige Book is the Bible.” — Joe Matthew ([09:19])
    • “There are really fun snippets in there if you have the patience to go through all...12 Reserve Banks.” — Molly Smith ([09:20])
  • Labor market data is more robust compared to inflation data, thanks to alternative trackers.

3. The Ongoing Federal Government Shutdown: Political Maneuvering & Real-World Costs

[12:28–24:10]

• Congressional Gridlock:
  • The House and Senate remain deadlocked with alternating party bills failing, and Speaker Mike Johnson signals no negotiations until Democrats yield.
    • “‘We're barreling toward one of the longest shutdowns in American history.’” — Speaker Mike Johnson (quoted by Associated Press, [14:00])
• Mitigating Pain Points:
  • The administration moves to ensure continued pay for active-duty military, federal law enforcement, and WIC (Women, Infants, and Children) nutrition program to soften public impact, thus reducing immediate pressure to resolve the shutdown.
  • “They are taking active steps to remove all the pain that could get these sides together and talking by paying the troops, paying law enforcement, keeping WIC afloat.” — Jeannie Shanz Zaino ([16:07])
• Strategic Calculations:
  • Republicans argue the House has done its job by passing a “clean CR” (Continuing Resolution), blaming Democrats for the impasse.
    • “The House has done their job. They passed a clean CR. It’s exactly what we've done 100 times before.” — Rick Davis ([18:18])
  • Democrats counter that fundamental legislative responsibilities are being abdicated and decry the focus on non-domestic aid.
    • “What we should be fighting about is the fact that the branch of government that you speak or run is completely abandoned, its role as the first and most important branch of the greatest country in the world.” — Jeannie Shanz Zaino ([16:07])
  • Administration is accused of "bad counter programming" by announcing a $20 billion bailout for Argentina during the shutdown.
    • “$20 billion will pay those military guys for another month and a half. There's no rational explanation as to why this administration is...bail[ing] out Argentina.” — Rick Davis ([22:57])

4. International Policy Moves: Argentina and Venezuela

[00:49, 22:32–23:53, 29:01–33:14]

• Argentina Bailout:
  • U.S. supports a $20 billion “credit swap” (or “bailout”) for Argentina under President Javier Milei amid pushback over optics and priorities during the shutdown.
    • “I’m using the word bailout because that's what the smart analysis has called this.” — Joe Matthew ([22:32])
• Venezuela Strikes:
  • President Trump orders a lethal strike on a vessel in international waters off Venezuela, escalating anti-narcotics operations. Critics question legal authority and risks of expanding military engagement.
    • “According to him, all the power he wants. Then according to quite a lot of other people, he's acting illegally against people who are not armed combatants of a state with which the US is at war.” — Ian Marlow ([31:08])
    • Concern over possible expansion to mainland Venezuela, which would require congressional authorization.

5. Middle East Dealings: Hostage Release and Ceasefire Fragility

[33:14–37:38]

• Hostages and Ceasefire:
  President Trump claims success in hostages’ release from Gaza but stresses that not all remains have been returned, threatening renewed pressure if Hamas fails to comply.
  • “A big burden has been lifted, but the job is not done. The dead have not been returned as promised.” — President Trump statement (via Joe Matthew, [33:44])
• Regional Stakes:
  • Aid to Gaza linked to compliance with release of remains; Israel reduces aid as tensions rise.
  • The complexity and fragility of the ceasefire are a major concern, with all parties wary of renewed violence.
  • Prospects for a “two state solution” remain bleak; Israel's government and many in the Knesset firmly oppose it.
    • “The Israeli parliament condemned any attempt to go forward with this. They view it as rewarding Hamas for October.” — Ian Marlow ([36:00])
• Normalizing Arab-Israeli Relations:
  • Economic incentives for Arab states to normalize with Israel exist but are complicated by “long standing cultural issues.”

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Notable Quotes & Memorable Moments

• On Fed’s Policy Dilemma in a Data Vacuum:

  • "You go to war with the army you have." — Joe Matthew ([07:01])

• On Congressional Stalemate:

  • “Nobody that I know of on the Democratic or Republican side is fighting about paying the troops. What we should be fighting about is the fact that the branch of government that you speak or run is completely abandoned, its role as the first and most important branch of the greatest country in the world.” — Jeannie Shanz Zaino ([16:07])

• On Political Optics of Foreign Aid Amid Shutdown:

  • “It’s bad counter programming like none I’ve ever seen.” — Rick Davis, on the Argentina bailout ([22:57])

• On Dangerous Precedent of Venezuela Military Actions:

  • “Are we going to see it on...the Venezuelan mainland with attacks that might bring, you know, U.S. Air Force in contact with Venezuelan Air Force? We have no idea.” — Ian Marlow ([31:32])

• On the Mideast Ceasefire:

  • “This is everything you’re talking about are potential flashpoints that have long bedeviled any attempt to get this type of ceasefire.” — Ian Marlow ([35:01])

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Important Segment Timestamps

| Segment | Timestamps | |--------------------------------------------|---------------| | Powell’s speech reaction | 00:49–03:12 | | Fed & market outlook (w/ Molly Smith) | 03:12–10:47 | | Shutdown impact & data woes | 03:12–07:53 | | Congressional gridlock and funding debate | 12:28–24:10 | | Argentina bailout debate | 22:32–23:53 | | Powell’s press Q&A with Michael McKee | 25:29–29:01 | | U.S.-Venezuela naval strike discussion | 29:01–33:14 | | Middle East ceasefire and hostages | 33:14–37:38 |

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Summary Tone

The discussion is brisk, analytical, and often pointed, blending economic, political, and global perspectives with Bloomberg’s signature blend of market awareness and legislative analysis. Real-time developments and sharp exchanges reflect both urgency and deep frustration over the state of U.S. governance in the midst of mounting global challenges.

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Transcript

[Joe Matthew]

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[Podcast 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.

[Joe Matthew]

Here in a post Powell speech, World is feeling a lot better than it did this morning, although our realities regarding China trade and government shutdown have not changed. It is day 14 of the shutdown here Washington and we thank you for joining us on the Tuesday edition of Balance of Power here on Bloomberg TV and Radio as we welcome our global television audience to the conversation. I've got my eyes on the President's schedule today and I just want to mention quickly that we do expect to bring you into the Cabinet Room, if not the East Room, where the President is going to be spending some time a little bit later on. There's a Medal of Freedom ceremony set for this afternoon, but more immediately, Javier Milei, the President of Argentina is at the White House and we are standing by for his arrival here. With the President planning a bilateral lunch in the Cabinet Room, he may be spending some time talking before reporters. This was expected to open up to press. If it does, we'll bring you there for more with big questions about what's being framed as a credit swap, if you will, or a currency swap by the administration, others calling it a plain old bailout of Argentina. And we'll be hearing much more about that coming up later on. Right now, though, we do want to parse some of the words of the Fed chair, making investors feel better here on Wall street, clearly lifting spirits with regard to his view, speaking a bit earlier at the NAB conference. When it comes to balance sheet runoff, listen to what Powell said on Bloomberg. Our long stated plan is to stop.

[Ian Marlow]

Balance sheet runoff when reserves are somewhat.

[Joe Matthew]

Above the level we judge consistent with ample reserves conditions.

[Rick Davis]

We may approach that point in coming.

[Ian Marlow]

Months and we are closely monitoring a.

[Joe Matthew]

Wide range of indicators to inform this decision. Some signs have begun to emerge that liquidity conditions are gradually tightening, including a general firming of repo rates along with more noticeable but temporary pressures on selected dates, generating the headline on the terminal Powell says Fed may stop shrinking balance sheet in months ahead editing that for us. Molly Smith, Bloomberg economics editor, joins us now live from New York. Molly, it's great to have you. The economic signs are looming large here and it's interesting to watch the markets shake. Losses from earlier in term positive at least. The s and P500 now up 16 points. The Dow is positive and maybe the NASDAQ chips away at some of its losses as well. How should investors be reading this?

[Molly Smith]

I mean, clearly the sign here is that they're taking all this to mean that, you know, Powell still sees signs of weakening in the labor market and that's going to lend itself to another cut later this month is at least seems to be what the read through is coming through the markets here. And especially in the absence of really any other tangible government data to work with in this time, that's, you know, the, the biggest thing that you can hinge your hat on right now if that's when you're trying to make these calls. And Powell did touch on that, on the lack of government data in the shutdown and talking about the abundance of labor market data, but not so much on the inflation side. So and how we're all really looking at all the same private sector indicators right now while the government shutdown persists.

[Joe Matthew]

And that's probably not enough, right? Indeed, he said we're all looking at the same stuff and there are less good substitutes for government inflation data. We know BLS is bringing workers back in to crank out a CPI report before the next Fed meeting, but is that enough? Molly, what else does Powell need to get a clearer view?

[Molly Smith]

I mean, that's going to be it'll have to be enough, obviously, for the October meeting. And that doesn't change what would have otherwise been on the calendar for the October meeting. The real risk, though, for the inflation data that should be collected right now is that that isn't happening. The BLS workers that were called back were just to work on the September CPI data. So all of that had been collected by the time the government shutdown just hadn't been assembled in the form of that we usually see about two weeks later. So that's all they're working on right now. But otherwise all of the data collection that would be happening right now with hundreds of price collectors sent around the country collecting tens of thousands of quotes on prices for all these goods and services that we spend money on every day that isn't happening. So that's the real risk for the October CPI that would be due next month.

[Joe Matthew]

Well, and you've got a speaker of the House here, Molly, who says we could be heading for a record. The the budget chief at the White House, Russ Vogt on social media earlier, basically saying that we're ready for anything. OMB making every preparation to batten down the hatches and ride out the Democrats in proceedings. If this in fact goes on for weeks or months, do they retroactively accumulate that data or do we just have a gap in the story?

[Molly Smith]

There is a risk of there not being a report that that is a very real risk right now. There's some data that is comes from other sources that the BLS does compile every month. So they get, you know, prices on new and used cars from J.D. power. There are other measures for gas prices for prescription drugs. But otherwise the but the vast majority of this is coming from either personal visits to brick and mortar stores or calling these businesses on the phone, visiting their prices line. But it's happening by BLS staff. So that's where, you know, almost two thirds of the price collection just isn't happening right now. And that's a really a risk.

[Joe Matthew]

Do we get to a point where we're missing enough data that the Fed has to delay a meeting or issue a statement saying there there are not enough data to make a credible decision moving forward here on interest rates or on the economy?

[Molly Smith]

You know, that's a risk I haven't heard brought up before. And I'm honestly not even sure if the Fed, you know, legally or in their statutory powers can even do that. You know, they are set up to have eight meetings a year. They're spaced out roughly six weeks apart. So I think in that case it would just be, you know, they have to work with what they've got. But that is a good question to look further into.

[Joe Matthew]

You go to war with the army you have when you heard Jay Powell talking about the job market. Molly, I wonder your thoughts on the next couple of months because the shutdown could change this dynamic where you've got federal workers who are furloughed at best. Furloughed, not getting paid until they're made whole later again, at best. The president has suggested that maybe all civilian federal workers not be repaid at the end of this. We just don't know. But also the layoffs now, we had 4,000 last week on top of the 250,000 retirements that are taking hold. And there could be other layoffs against the backdrop of mass deportations. You know, all these factors, Molly, could we end up putting these together in a couple of months. If this is a protracted shutdown, where it really is showing up in the numbers here, with Powell saying, I'm kind of amazed I haven't seen it already, what if it does start to show up? What state could the job market be in?

[Molly Smith]

I think, you know, immigration is going to be the much bigger factor here for the labor market than what happens in federal government employment. It's just naturally a much smaller slice of workers in the US and this is just really a key debate right now. There was a really interesting blog from an economist at the Dallas Fed recently that was just arguing that the slower rate of job growth that we're seeing isn't reason for concern. This is just the labor market adjusting to the fact that we don't have the same supply of immigrants that we used to, and that naturally, then the pace of job growth to keep the unemployment rate stable should be lower and that shouldn't be concerning. So that's one view. But a lot of what you hear from Fed speakers is there's trying to balance that with what actually is real softness in the labor market. And that's the distinction I think, that we're still kind of wrestling with.

[Joe Matthew]

You start to wonder if the Fed, which of course has its own funding, could start to perform its own research, or is private data the only way that they'll get a hold on this?

[Molly Smith]

Well, the Fed already, yeah, they, as you mentioned, they do their own research already through the reserve banks, through the Board of Governors. I mean, Powell did mention, you know, we're going to be looking for the Beige Book tomorrow, which generally is taken on more significance looking at some of the anecdotal evidence in the economy.

[Joe Matthew]

Beige Book is the Bible.

[Molly Smith]

Now, your words here, Joe, I mean, I like that, but it is a fun read. You know, sometimes there are really fun snippets in there if you have the patience to go through all the different 12 Reserve Banks and what's happening around the country. But, yeah, that'll be, I guess, the next data point, at least from the Fed, that we'll have to look forward to.

[Joe Matthew]

So exciting. We call it the Beige Book. Indeed. The COVID is beige. Someone like yourself, though, has to cover the data. That's your job. Molly Smith, you edit this data. You're up at 830 every morning waiting for this to hit it. In the meantime, what do you get your arms around if it's not the same stuff that Jay Powell is talking about?

[Molly Smith]

Yeah, I promise I'm not just sitting here twiddling my thumbs in the absence of. I know, coming out at 830 in the morning. We had a story out today that I edited that was talking about these risks to the October CPI and what that report might look like if we even get one, just because of all the data collection that hasn't been happening so far. We're looking at alternative measures of inflation, which Powell said there aren't a lot of them compared to the labor market, where there seem to be measures of job openings, of hiring, of, you know, all the of wage growth tracked by so many other companies. So that's great for the Fed to have all that on the labor market. It's just not the same on the inflation side. We get some other private sector looks at consumer spending too, but again, it's just not the same as the labor market data.

[Joe Matthew]

Well, she's our economic guru with or without the data on any given morning. Molly Smith, it's great to see you and great to talk this out. Bloomberg Economics Editor with us live from world headquarters in New York. We'll assemble our panel next as we wait for the President at the White House with President Milei. It's all ahead right here on Bloomberg. Stay with us On Balance of Power. We'll have much more coming up after this.

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[Podcast 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 Aut with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa.

[Joe Matthew]

Play Bloomberg 11:30, day 14 of the shutdown. There will be voting later on today. It's going to happen likely in the late edition of Balance of Power, but only on one of the cars, the Republican version, that which passed the House, the Democratic version is apparently now officially on ice, having failed in voting as well repeatedly in the Senate. Thanks for being with us here on the Tuesday edition of Balance of Power on Bloomberg TV and radio. Radio still in town while the House is out of session. Speaker Mike Johnson speaking earlier about some of the new levers that the administration is trying to pull to get pay to the military and some others. The Trump administration saying it's working on ways to get paychecks to federal law enforcement officers as well, similar to what the president ordered over the weekend for active duty military. But there's still a lot of gray on how this is going to work and whether it's in fact legal for the president to get that payment to the troops using unobligated funds, as they said from the last fiscal year. Here's Speaker Johnson speaking to this end earlier today.

[Rick Davis]

If the Democrats want to go to.

[Joe Matthew]

Court and challenge troops being paid, bring it.

[Ian Marlow]

Okay? I'm grateful for a commander in chief.

[Joe Matthew]

Who understands the priorities of the country, the necessity of national defense and the.

[Ian Marlow]

Urgency that we all feel and have.

[Joe Matthew]

Voted for eight times.

[Ian Marlow]

Republicans have voted in Congress eight times.

[Joe Matthew]

Now between House and Senate to fund.

[Ian Marlow]

The troops and pay federal workers in all these essential jobs and agencies because.

[Joe Matthew]

We understand the necessity of that.

[Ian Marlow]

Meanwhile, the Democrats voted eight times to block their paychecks. I'm grateful we have a president who.

[Joe Matthew]

Is willing to step up and do the right thing. Speaker Johnson now floating the prospect, as I read in the Associated Press, of the longest ever shutdown, quote, we're barreling toward one of the longest shutdowns in American history, unquote, the Associated Press quoting him to say that he will not negotiate with Democrats until they hit pause on their health demands and reopen the government. Now that shift in rhetoric, the longest ever being matched by the White House with Russ Vote suggesting on social media that the OMB is making every preparation to batten down the hatches. The cliche that he grabs and ride out the Democrats intercedents, pay the troops, he says, pay law enforcement, continue the rifts and wait OMB making every preparation to bat down the hatches and ride out the Democrats. As I mentioned now we're in our third full workweek today here with no end in sight. And as I mentioned, there'll be an eighth vote on the Republican led stopgap funding Bill, if you're with us on Bloomberg TV or on YouTube, you see the tweet there, the post from the Office of Management and Budget. We assemble our panel for their take on this. And I will add that we do expect to hear from the president a bit later on today. He's going to be hosting President Javier Milei if he does arrive at the White House. He's late at this point. And there's also an event scheduled for later on in a ceremony honoring the late Charlie Kirk. Bloomberg Politics contributors Jeannie Shann Zaino and Rick Davis are with us. Jeanne is Democracy visiting fellow at Harvard Kennedy School's Ashe Center. Rick is our Republican strategist and partner at Stone Court Capitol. What do you make, Jeannie, of the shift? And I realize it's a nuance, but the shift in Republican rhetoric, not only will we not negotiate with Democrats until the government is reopened, but we're prepared for the longest ever shutdown time to batten down the hatches at the administration. Will Democrats be able to wait them out?

[Podcast Announcer]

Yeah, I think we're going to have to wait and see. The reality is it isn't a really important shift that you're talking about because we've heard it from both the speaker and we've heard it from the White House and we've heard it from the OMB director. And they are taking active steps to remove all the pain that could get these sides together and talking by paying the troop, paying law enforcement, keeping WIC afloat. And so what then are the pain points that will actually bring these two sides together? It's hard to see them coming down the pike anytime soon. That's distressing. And it's also distressing to listen to the speaker talk about the fact, you know, we welcome seeing you in court if you're going to be fighting against paying the troops. Nobody that I know of on the Democratic or Republican side is fighting about paying the troops. What we should be fighting about is the fact that the branch of government that you speak or run is completely abandoned, its role as the first and most important branch of the greatest country in the world. That is something worth fighting for. This money that we give in taxes goes to the first branch. They are the ones responsible for the power of the purse, as Alexander Hamilton like to say, and they are the ones that allocate the funds. So that is where we should be focusing our attention. Yes, pay the troops. But. But Speaker Johnson, get your branch of government open, for God's sakes.

[Joe Matthew]

Well, I think that remains a strategy, too. To keep the House out of session, even though there are a lot of makers, a lot of lawmakers still walking around town will be joined by one on the late edition of Balance of Power. But you mentioned Wick, Jeannie, I'm glad you said that, because this is the other way that the White House is preparing for the long term, the long haul, and as Jeannie said, removing a pain point. While we're at it, the administration ensuring the special Supplemental Nutrition Program for Women, Infants and Children known as WIC will continue to operate for the foreseeable future. Rick Davis, what do you make of this strategy, taking pressure points, pain points off the calendar and daring Democrats to go along?

[Rick Davis]

Look, I mean, this administration and the Republican leadership in Congress, they're not trying to punish the individuals who are, you know, government agencies working at government agencies supplying these important services. I mean, they do become part of the fodder in the debate. But what they're trying to do is get Democratic leader in the Senate. It's really a target of one Chuck Schumer to, to come to the table and pass a CR and frankly, de escalate this whole thing. I mean, Jeannie talks about, like, all these big issues about, you know, being the rightful place to, you know, initiate, you know, funding for the government in the House. House has done their job. They passed a clean CR. It's exactly what we've done 100 times before when we've had to do a CR. In fact, it's even easier than it's been in the past because we, you know, Republicans and Democrats, like, have always attached writers to make a point. And the reality is it's just the wrong fight for Schumer to fight. This administration's cagey, all right? They're going to, they're going to, you know, make sure that the wheel gets oiled so that it doesn't squeak too loudly. They can't, they can't afford. The one thing that could really upset the apple cart are TSA people not showing up for jobs, you know, saying that they're sick. Walkouts by air traffic controllers. We've seen already Austin's airport shut down because they didn't have enough air traffic controllers. I mean, those kinds of things are unavoidable. There's nothing the administration can do to patch that together. But they're not trying to make the military suffer. They're trying to make law enforcement suffer. They don't want the WIC program to go out of business. And so they're using extraordinary measures to try and make sure that doesn't happen while we wait around for Chuck Schumer to realize that a trillion dollars of additional spending is not going to happen.

[Joe Matthew]

Jeannie the CDC has now rescinded the majority of its layoffs that were announced on Friday. Remembering Russ Vote went Forward with about 4,000 RIFs. At least we heard the number. 4,000. It's really hard to know if 4,000 people in fact were contacted and discussed. The CDC says they were errors had to rehire people. The administration for Strategic Preparedness and Response, however, is still seriously affected. According to the Washington Post, the AP says layoffs decimated the Education Department offices hit by reductions in force this weekend include those that oversee civil rights, grant funding and special education. Are Democrats sure they want to keep doing this?

[Podcast Announcer]

So far they are sticking with it. And you know, we have a president who has just come back from the Middle east where he has prided himself on being the great deal maker and that he did make a great deal over there, at least so far we have a ceasefire. He should be able to use those skills at home. And instead today, what is he doing? He is greeting his dear friend, the president of Argentina. So the United states can give $20 billion of taxpayer money to Argentina and now Rick is talking about the fact they want to get Chuck Schumer back. Well, what about helping the people in the United States who are both been laid off, both under doge and during the shutdown, which is an excuse for more federal layoffs. And also all of the people who are millions by any estimation, just ask Marjorie Taylor Greene, who are going to lose their health care as a result. Instead, this person who ran for office promising to make America great and America first, is giving his dear libertarian conservative president of Argentina a $20 billion investment from US funds even though Brooke Rollins and others from, you know, looking at the soybean issue have said this is a mistake. And so I'm not sure this is about, you know, wanting to pay the troops. I don't know anybody in the Democratic side who doesn't want to pay the troops or keep WIC going. But we should be investing in the American people. The government should be open and they should be doing the work they have to do.

[Joe Matthew]

Well, I'll bite on this because I've certainly heard this from a number of Democrats. And Rick, I don't know your thoughts on the optics here. The president with a $20 billion bailout contingent upon the election result in Argentina. I'm using the word bailout because that's what the smart analysis has called this. How do you justify writing a check like that with the government closed, snap benefits set to run out?

[Rick Davis]

Yeah, it's a bailout. If it looks like a duck and it wild like a duck, it's a duck. And, and, and so like this is counter programming like none I've ever seen. Right. You know, you're trying to talk about how you're tightening your belt and you're using taxpayer funds to, you know, do this kind of stuff. $20 billion will pay those military guys for another month and a half. So there's no, there's no rational explanation as to why this administration is taking this time to bail out Argentina. It's never worked in the past. It's not going to work this time. I get that. You know, Secretary Besson has friends who are involved in economy there and you know, they want to see Milei get reelected and that's coming up. And you know, he just got waxed in the Buenos Aires province by the Pernistas. So yeah, bad counter programming.

[Joe Matthew]

Bad counter programming says Republican Rick Davis. Of course, Democrat Jeannie Shan Zaino with great analysis as well. Many thanks to both of you for our panel. Stay with us. On balance of power. We'll have much more coming up after this.

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[Podcast 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 Back.

[Joe Matthew]

To our careful what you ask for market Here with Jay Powell speaking earlier. We brought you the conversation live from Philadelphia at the national association of Business Economics, generating a heck of a lot of headlines, including just what the market wants to hear when it comes to interest rate cuts. But when you add it up, it's not a very good narrative. Labor market perceptions remain on a downward trajectory, he said. Therefore we have the idea of an economy that will allow lower interest rates, if not demand them, ending balance sheet runoff in the coming months. Labor market showing pretty significant downside risks. Not exactly an economy that's booming. Michael McKee is actually there. He was in the room for this nape conversation and joins us now live on Bloomberg TV and Radio. Should we be careful what we're asking for here, Michael, what happens after you get a couple of interest rate cuts? Where will the economy be then?

[Michael McKee]

Well, as the old saying is, Joe, what do you mean we? It's all dependent on where you sit. If you're the president of the United States, yes, you want interest rate cuts, but do you want them because the economy is failing? No, you probably don't want that either. Really. What happened today is Jay Powell gave his version of the Hippocratic oath first do no harm. The Fed blackout starts this weekend. They're not going to be talking until the next meeting. It was his last chance to let markets know what they're going to do and without saying we're going to cut. He used the same arguments that he made after the last cut to suggest that that's what's coming. The markets have priced in a 25 basis point cut and he did nothing to dissuade them from that by talking about the fact that the labor market seems to be more of a danger to the economy at this point than the rising inflation rate. Although he did say tariffs are pushing up inflation some.

[Joe Matthew]

We heard from the Fed chair on the lack of data in Washington right now. It's day 14 of our shutdown. Michael McKee says we're all looking at the same non government labor data. So it's your guess is as good as his apparently. And there are less good substitutes for government inflation data. How hungry are they for news at the Fed?

[Michael McKee]

Well, they're definitely hungry for news, especially for something to hang a decision on. I mean, they have 500 PhD economists working there with an awful lot of data that comes in from all over and they're able to put together a pretty good view of what's going on in the economy. But the American public and the people on Wall street don't see all that data. So it's very helpful to them if they have the jobs report, which they're not going to have, if they have the CPI report, which they are going to have to be able to use those to talk about what's going on. Now, the thing that is capturing a lot more attention at the Fed than perhaps it has on Wall street yet is we're halfway through almost the month of October and they collect the data for the CPI through the entire month. So the percentage of responses they're going to get in terms of all the CPI categories for October is going to be much lower. So when we get to the middle of November and they're trying to figure out what to do at the December meeting, are they going to have an inflation report to rely on? And of course, their PC report uses inputs from the CPI and PI, which aren't being collected right now. So they may be flying a little bit more blind when they get past this next meeting.

[Joe Matthew]

Remarkable moment that we're in once again, Michael McKee. Great to have you with us, Michael, at the NAB conference in Philadelphia where we heard from Jay Powell a bit earlier today. And we're balancing a couple of stories. If you're just joining us on Bloomberg, president of Argentina has arrived at the White House and it does appear that we're going to be hearing from Javier Milei and President Trump at some point. They have taken what was a closed press event and apparently opened it. And I'm mentioning that because we are looking at a shot coming from the White House. Now. If they bring you into the room, we'll bring you with the cameras as I'm joined now by Ian Marlow, Bloomberg's national security editor, with a couple of important stories to talk about. It's not just Argentina, it's China that is moving stocks, at least was moving stocks before Jay Powell gave investors a reason to start buying the dip here with big concerns about trade and the tit for tat that will apparently walk us right up to the meeting between President Trump and Xi Jinping a couple of weeks from now. I will mention as well, we've just heard from the president. It's a good thing that he Ian, is with us. They have blown up another boat off the coast of Venezuela. This just hit truth Social as I was speaking, Donald Trump writing under my standing authorities as commander in chief. This morning the secretary of War ordered a lethal kinetic strike on a vessel affiliated with a designated terrorist organization conducting NEO trafficking in the US southcom area of responsibility just off the coast of Venezuela he says intelligence confirmed that the vessel was trafficking narcotics, was transiting along a known route. The strike was conducted in international waters. Six male narco terrorists, he says aboard the vessel were killed, no US Forces harmed. And there is a video attached, as we have seen the first four now five times. Ian Marlow is with us and we have plenty to talk about. As it turns out today, we can pick our. Our areas. And I'll start off with coast of Venezuela. There are big questions about whether these strikes are legal and whether Congress will move ahead. It's been a failed effort so far with a War Powers Act. What authority does the president have to blow up these ships in international waters?

[Ian Marlow]

Yeah, according to him, all the power he wants. Then according to quite a lot of other people, he's acting illegally against people who are not armed combatants of a state with which the US Is at war. And I think that's one of the main things here. That's why you've seen Congress move. I think there's also been a lot in the air about whether he will go beyond these strikes on boats.

[Joe Matthew]

Regime change.

[Ian Marlow]

Exactly. To something like that, or to strikes on the Venezuelan mainland as well. I mean, he's long alleged. Marco Rubio has long alleged that Maduro is part of this narco terrorist network.

[Joe Matthew]

Yes.

[Ian Marlow]

And drug traffickers, terrorists, they're one in the same. They all deserve to be taken out. So we're seeing this in international waters now. Are we going to see it on. On the Venezuelan mainland with attacks that might bring, you know, U.S. air Force in. In contact with Venezuelan Air Force. We, we have no idea what we are. But that's something that I think a lot of people are looking for, whether they're going to expand this based on things Trump himself and people in his administration have said.

[Joe Matthew]

We did see them scramble jets at one point to buzz some of our ships with. We've still got a flotilla off the course of the coast of Venezuela, essentially. So big questions that would require technically an act of Congress to be attacking cartels on the ground in another sovereign nation.

[Podcast Announcer]

Right.

[Michael McKee]

Yeah.

[Ian Marlow]

I mean, we've seen airstrikes, say, for example, in Iran where we. Back where the US Backed Israel's attacks there with the big bunker buster bombs. You know, I think people in Congress would certainly say, Democrats would certainly say you need some authorization from Congress. Trump has shown he's willing to go forward with a lot of things without Congress. And Congress is not always willing to, you know, come back and formally kind of reprimand and ask that they be taken into consideration. So we'll see, I think. And it'll be interesting to see if Venezuelan strikes continue. I mean, it's interesting that they're continuing, but still with boats, because that's something that he's already done numerous times before, that's for sure. We'll see whether it kind of escalates from there.

[Joe Matthew]

We heard from the president on Truth Social as well about his trip to the Middle east yesterday and the release of hostages. Writing in Mostly caps, all 20 hostages are back and feeling good, as can be expected, he writes, a big burden has been lifted, but the job is not done. The dead have not been returned as promised. Phase two begins right now. President djt, presumably he wrote that if he signed it, what happens if remains are not returned? Hamas has said they cannot locate them all.

[Ian Marlow]

We're seeing that already today there was some breaking news moving, suggesting that Israel is halving the amount of aid it's putting into the Palestinian enclave right now because of the delay in returning the bodies of the hostages. Obviously, this is a highly emotive issue in Israel, and this is a sign of exactly how cool, complicated this deal was. I think a lot of people were surprised that the deal came together kind of as quickly as it did in the end and that Hamas agreed to release the living hostages. I think there's a lot of people. We have some stories now on the wire from correspondents suggesting that this is the moment that a lot of countries in the region are viewing with anxiety. They don't want this deal to fall apart. They don't want another cycle of violence beginning again in Gaza as Israel and Hamas start to feud and bicker over the the details here, you know.

[Joe Matthew]

Sure.

[Ian Marlow]

The number of bodies, exactly where Israeli troops retreat to things like that.

[Joe Matthew]

Well, this is a pretty delicate moment we're in. And we were discussing yesterday what will be required in terms of dismantling the tunnel network underneath Gaza. And if Hamas police are on the streets, you're going to have IDF forces sharing blocks with them. How does that remain a ceasefire?

[Ian Marlow]

This is everything you're talking about are potential flashpoints that have long bedeviled any attempt to get this type of ceasefire. These were the deals, I think, to some degree that the Biden administration was trying to hash out in advance. And it was so difficult to get buy in on some of those, that there was never any deal. Right. And so the Trump administration has pushed forward very quickly to the hostage part, which was always the main part. But now come the details. These were the things that, you know, where there was a lot of disagreement.

[Joe Matthew]

On as we move, assuming we move into phase two in any concerted form, there's going to be a real conversation about who governs Gaza now. There's this temporary authority, of course, and that has yet to be fulfilled. This Board of Peace has yet to be named, from what I understand. But the idea of a two state solution is not embraced by all the parties who signed off on this, is it?

[Ian Marlow]

No. And that's putting it mildly. I mean, the Israeli parliament condemned any attempt to go forward with this. They view it as rewarding Hamas for October.

[Joe Matthew]

We heard El Sisi on a microphone in front of the president endorse that idea yesterday. How do we get around that?

[Ian Marlow]

I think you've got. But that is what the region views as a solution to this. And historically the US has also viewed that as a solution. But historically also the US and Israel have been very fast, close allies. And so it is a difficult thing to bridge. And I think probably an attempt will be to bridge it with vague enough language, a vague enough timeline that you can appease regional actors and potentially the Palestinians with a process that moves it forward, but in Israel's view probably doesn't move it forward enough or moves it forward in a way where Israel can maybe pull the plug on it. Sure, if they don't want it.

[Joe Matthew]

You've been covering this for years by way of your beat on diplomacy on the State Department. You've traveled with multiple secretaries of state into the region. Is the narrative correct that Israel's neighbors want to do business, that there is an economic incentive to normalize trade ties with Israel, that there is in fact opportunity there, or is that being overblown here in the United States?

[Ian Marlow]

I think it's there. It's true in that there is an undercurrent of a lot of regional leaders wanting to do business with a dynamic economy. But there are these long standing cultural issues that for them, with their own population.

[Joe Matthew]

Yeah.

[Ian Marlow]

Gets in the way of them signing those kind of deals.

[Joe Matthew]

We need to keep talking about this with the help of Ian Marlow. I thank you, Ian, for the insights as always. I'm Joe Matthew in Washington. 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 [e-mail].

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