Bloomberg Surveillance TV: June 25th, 2026

Summary

Bloomberg Surveillance TV: June 25th, 2026 — Episode Summary

Overview

This episode of Bloomberg Surveillance TV, hosted by Jonathan Ferro, Lisa Abramowicz, and Annmarie Horden, delivers the latest insights into financial markets, economics, and investment trends. The discussion centers on the sustained surge in AI-driven market dynamics, the evolving bottlenecks across the tech and data infrastructure supply chain, inflation concerns, Federal Reserve strategy shifts, and sector leadership in current market rallies. The episode features in-depth interviews with Sebastian Page (T. Rowe Price), Heath Terry (Citi), and Bill Dudley (former New York Fed President).

---

Key Discussion Points and Insights

1. The AI Boom: Bottlenecks, Margins, and Market Positions

Timestamps: 01:55–11:15, 13:28–18:42

• Market Surge on AI Tailwinds:

  • Stocks are rising sharply, notably following Micron's "blowout" earnings. AI is now impacting not just GPU suppliers but also downstream supply chain segments like cooling, electrification, and data center construction.
  • Sebastian Page (T. Rowe Price) shares his investment thesis: "We're invested in those bottlenecks ... it's a trade that has legs ... we're looking at $3 trillion by 2028." (02:17)

• Evolution of AI User Margins:

  • While capex and buildout costs climb, there are signs that AI adoption is beginning to boost user margins, though Page notes some projections remain "exaggerated." He emphasizes the need to monitor when efficiency gains truly flow to customers.

• Valuation and Allocation:

  • Valuations for US large cap growth have come down significantly, with the Russell 1000 Growth index at the lower end (22x PE, versus 30x in the last five years).
  • Page advocates a "barbell" approach: "We're long US large cap growth stocks ... you can also play [the bottlenecks] in small and mid cap." (04:09)

• Risks and Inflation:

  • Despite lower oil prices, inflation is described as an underestimated market risk. "The break even for the one year horizon is 1.7% and the one year inflation swap is 2.2% ... in my mind it's still an underestimated risk, especially for the next three to six months." (09:18)

Notable Quotes

• "As Buzz Lightyear said, 'to infinity and beyond.'" — Sebastian Page (01:55)
• "We're still scratching the surface on demand and usage of AI." — Sebastian Page (04:09)
• "Inflation right now is underestimated as a risk ... headline CPI is up 8% if you annualize it." — Sebastian Page (09:18)

---

2. AI Supply Chain: Enterprise Demand and Choke Points

Timestamps: 13:28–18:42

• Enterprise AI Demand—An Exponential Curve:

  • Heath Terry (Citi) highlights accelerating enterprise demand for AI infrastructure: "We've gone from 28% year over year growth in Q1 of last year to 141% in Q1 of this year ... that's the best proxy for what's happening in enterprise demand." (13:48)

• Differential Stock Performance:

  • Despite robust business returns for "hyperscalers" (large tech/cloud players), their equity performance is lackluster compared to hardware suppliers. "Micron with 85% margins ... market is not giving [hyperscalers] the kind of credit that they normally would." (14:22)
  • Terry explains a "gap" between up-front capex and when those investments begin to deliver measurable returns.

• Investment Perspective and Bottlenecks:

  • Citi's view: invest where the bottlenecks are, not with those spending the cash. New bottlenecks are emerging beyond memory (semiconductor equipment, interconnects, labor, and especially data center construction).
  • "You want to be where people are spending money, not necessarily with the people who are spending the money. ... The only thing that breaks in that is price." (18:00)

• Labor as a Choke Point:

  • Extreme competition both for AI researchers and for physical infrastructure builders: "There are very few people in the world that have the skills to be able to build at the level that these data centers require." (19:04)

Memorable Moments

• Lisa Abramowicz's sharp observation: "We've seen this rolling ball of cash ... everyone's looking for the choke points. The next place where you're going to see things just sort of shoot exponentially higher." (16:44)
• "Memory companies are not supposed to have 85% gross margins. Eventually that will settle out ... but we're a long way away from that happening." — John, Citi Analyst (18:43)

---

3. Federal Reserve Policy Revisions and Market Guidance

Timestamps: 23:19–29:55

• Fed Communication Strategy:

  • Bill Dudley critiques Chair Kevin Wash's new approach (less forward guidance, more reliance on market signals):
    • "I'm perfectly fine with getting rid of forward guidance, but ... not disclosing the monetary policy reaction function is a big mistake. ... Markets price to what they think the Fed will do. If the Fed's looking at the markets and the markets are looking at the Fed, how is policy actually set?" (23:45)
  • He distinguishes between forward guidance (explicit plans) and the "reaction function" (how the Fed would respond to new data), stating that clarity in the latter is essential for efficient policy transmission.

• Inflation and Tightening Prospects:

  • Dudley views the current policy as too loose: "We've been at this level of rates or higher for three years and the economy is still at a 4.3% unemployment rate. ... [There's] no evidence that monetary policy is restrictive." (26:26)
  • Predicts that easing energy prices will help upcoming inflation prints, but sustained core inflation and easy financial conditions support the case for further tightening.

• Housing Market Dynamics:

  • High mortgage rates create "lock-in" effects, but Dudley argues supply-side reforms (zoning, land use) are more critical than modest rate changes for affordability.

• Institutional Change at the Fed:

  • Inertia is high but "best idea wins" culture can foster improvement if leadership and task forces deliver actionable changes. (29:13)

Notable Quotes

• "The Fed needs to do its job." — Bill Dudley (25:05)
• "If the markets don't understand what the Fed is doing, ... that's going to both slow down the transmission of monetary policy ... and make it less efficient." — Bill Dudley (23:45-24:51)

---

Important Timestamps and Segments

| Time | Segment | Content | |--------------|------------------------------------------------|-----------------------------------------------------------------------| | 01:55–11:15 | AI market rally and supply chain bottlenecks | Sebastian Page on investment themes, margins, and inflation risk | | 13:28–18:42 | Enterprise AI demand & supply chain analysis | Heath Terry (Citi) on enterprise demand, bottlenecks, and labor | | 23:19–29:55 | Fed policy, communication, and housing | Bill Dudley on Fed guidance, inflation, and institutional inertia |

---

Summary of Takeaways

• AI-Driven Market Leadership: Demand for advanced AI infrastructure is driving both tech stock outperformance and new supply chain constraints. Investors should focus not just on end-product leaders (hyperscalers), but on emerging bottlenecks in memory, connectivity, and labor.
• Inflation Remains a Key Risk: Despite a narrative of disinflation, seasoned investors and former policymakers warn that inflation is underestimated and the Fed may be too slow to tighten.
• Fed Uncertainty: Markets are struggling with reduced clarity from the Fed, as Chair Wash limits explicit forward guidance but fails to articulate a clear reaction function.
• Labor Choke Points: The competition for both AI researchers and skilled tradespeople is creating wage pressure and new bottlenecks for physical expansion.
• Valuation and Asset Allocation: Opportunities exist in both large-cap growth and underappreciated small/mid-caps that lie at the heart of supply chain bottlenecks.
• Housing Market Realities: Structural supply issues—not just rates—are hampering affordability and market fluidity.

---

Notable Quotes

• “We're invested in those bottlenecks ... it's a trade that has legs.”—Sebastian Page (02:17)
• “Inflation right now is underestimated as a risk ... headline CPI is up 8% if you annualize it.”—Sebastian Page (09:18)
• “We've gone from 28% year over year growth in Q1 of last year to 141% in Q1 of this year ... that's the best proxy for what's happening in enterprise demand.”—John, Citi Analyst (13:48)
• “You want to be where people are spending money, not necessarily with the people who are spending the money.”—John, Citi Analyst (18:00)
• “If the markets don't understand what the Fed is doing ... that's going to both slow down the transmission of monetary policy ... and make it less efficient.”—Bill Dudley (23:45-24:51)

---

Tone and Style

The tone of the episode is analytical, slightly bullish on next-generation tech, and skeptical regarding the market’s complacency on inflation. Guests speak candidly, often with a sense of urgency about both risks and opportunities.

---

This summary captures the essential topics, arguments, and voices from the June 25, 2026 episode of Bloomberg Surveillance TV—making it a valuable read for anyone seeking a nuanced overview of today’s financial and economic narratives, especially around AI, inflation, and monetary policy shifts.

Transcript

[CBOE Announcer]

Looking for more investing options? Meet cboe, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX Options, CBO can help you trade in any market environment. There are risks associated with CBOE Company products. Review the disclosures and disclaimers at cboe.com usdisclaimers introducing B of A Rewards A

[Bank of America Announcer]

new way to reward your every ambition it all starts with a Bank of America checking account and grows from there. You get cash back deals on brands you know and love, plus a credit card rewards bonus, helping you earn more rewards on things you buy every day. Join B of A Rewards today for rewards tailored to your lifestyle. What would you like the power to do? Bank of America Open or enroll your [e-mail] bfarewards bank of America Corporation all rights reserved.

[Microsoft Representative]

Okay, before we get into it, little side note for the IT leaders listening in. I was reading up on a Microsoft Commission survey the other day and learned that teams using Windows 11 Pro PCs report 62% fewer security incidents compared to Windows 10 PCs, including three times fewer firmware attacks. Pretty significant. With security built in, you'll have AI ready IT that sets you up for operational efficiency as well as long term resilience. Upgrade to Windows 11 Pro at Windows means business.com

[Lisa Abramowicz]

Bloomberg Audio Studios podcasts Radio News.

[Jonathan Ferro]

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro along with Lisa Abramowicz and Annmarie Horden. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business app, we begin

[Sebastian Page]

this out with stocks pushing higher following a boost from Micron's blowout earnings report. Sebastian Page of T. Rowe Price Writing AI is an expanding theme from GPUs to other bottlenecks along the data center supply chain. As Buzz Lightyear said, to infinity and beyond. Sebastian joins us now for more Seb welcome back to the program buddy. You just saying stay on, grip tight, keep running this fall.

John, when I wrote my notes, I didn't think you'd pick up on the Buzz Lightyear quote. I'm going to be honest. We we have an expanding trade from bottlenecks to, you know, more and more bottlenecks. You're looking at cooling and electrification at aerospace, gas mines. We're invested in those bottlenecks. We think it's a Trade that has legs. Look the build out. A lot of people mentioned those forecasts on your show but we're looking at 3 trillion by 2028. So it's a trade and it's going to continue to go in my mind. The key question right now is when is this going to show in AI users margins? Now we have 300 analysts on our platform. I read their notes but now I use AI to read their notes and I ask AI, where are we seeing companies in our own proprietary research that are increasing their margins because they're using AI Now I've seen estimates out there John that are I think exaggerated but anecdotally we're starting to see this as well in the users of AI. This will be the next leg. So I think the technology revolution will continue. I'm conscious as I say this I sound a little bit like Dan Ives, but yeah this we're long US large

cap growth stocks so I'll push back just a little bit and I'll give you the alternative view on things where the economics of all of this get a little bit complicated. So the cost to build our capacity is increasing. We can see that evidenced by some of the margins at some of these companies. At a time when the end user demand is getting a little bit fragile with regards to pricing overall and they're rationing spending on AI, how's that going to make sense going forward? What do we need to rationalize here?

Look, as long as the products keep improving and they are, there is tremendous demand for it. It looks to me like we're still scratching the surface on demand and usage of AI. And by the way John, I completely take the point that this spending is gigantic and free cash flows are coming down really fast for a lot of the hyperscalers. But you know, if you think about it, the price earnings on the Russell 1000 growth we were in the 30 range. We peaked at 30 several times over the last five years, John. We're at 22. So there is, you know, trust the market. There is an adjustment here that's been made. You know this is, this is in the bottom for Russell 1000 growth valuation. This is in the bottom 30% of 10 year range. You can also play bottlenecks by the way in other areas. You can also play them in small and mid cap which were long too. We have this barbell between us large cap growth and small and mid cap. We're talking about the golden component. Once you have a component that becomes a part, just a bottleneck, a part of that electrification Power supply, data center, whatever it is, your company stock goes vertical. Also emerging markets, a lot of people mention this on surveillance. Emerging markets are becoming part of raid. So yeah, I mean it's not, it's, it's, it's a position you need to balance. You need to diversify the risk in the portfolio. For example, I still think there's inflation risk in the portfolio and at some point that becomes part of the, you know, supplying the energy to AI that becomes part of the, the picture.

[Lisa Abramowicz]

We'll pick up on that in just one second. Sab, you're talking about trying to race to find the next bottleneck where you can see stocks go vertical akin to what we're seeing with Micron this morning. I just wonder if people truly are understanding or if it's a healthy technical to just have a rolling ball of cash on. On the other hand, people are chasing who has pricing power. On the other hand, Google shares down 8% this month. Microsoft poised for its worst monthly loss going back to 2008 of 19% losses. The payers of this bill are getting penalized. At what point is that a warning sign?

[Sebastian Page]

I mean it is absolutely Lisa, you have winners and losers and this is why skilled active management and fundamental research is working here. You're going to have software companies that are going to be disrupted but you're going to have companies that I think increasingly the next leg of this is along the bottlenecks to eventually the handoff to the users that are going to create real efficiency. I see it in our company we're creating efficiency, we're improving our processes. It's really that that's going to be the next leg and that's what is going to keep it going. And again I go back to the fact that it's not, you know, a lot of this increase in leverage and borrowing and decrease in free cash flow margins, a lot of it has been adjusted in the price 22 relative to the 30 range in prior episodes over the last five years I think is pretty good for Russell 1000 growth.

[Lisa Abramowicz]

So could you justify the investment in further AI if the borrowing costs were higher in the face of inflation, in the face of some of this acceleration that we're seeing in other components and price components that everyone's trying to chase.

[Sebastian Page]

Well, the reality is that this 3 trillion is spending. A lot of it is generating it generated by companies that still have a ton of cash. I don't like the comparisons to the dot com bubble, but we're nowhere near the level of corporate leverage in aggregate that we had. So yes, there is some borrowing, but if you look at the metrics by historical standards, it's not, it's not a very high level level of leverage by historical standards. And there is tremendous capital that's available as we're seeing with IPOs. And you know, those debt issuance. I think there is, there is demand for the end product. At the end of the day, that's what really matters. People want to use it. There are billions of users already. They're just scratching the surface. I'm doing roundtables with investors and I realize a lot of them, my peers, a lot of them are just starting. It makes me happy because I feel like we're really ahead in how we're using agents and so on in our investment process. But also it makes me think that as long as the demand for the end product is there, people are willing to pay for it. We'll go through ups and downs. We'll go through episodes where tokens get more expensive and people go to cheaper models and so on. But the trend is our friend here. 3 trillion spending by 28 again. Lisa, I didn't think I'd come in this morning and sound like Dan Ives, but we do have a long position in US large cap growth and you know, we do believe in the bottlenecks and the expansion of that trade.

[Annmarie Horden]

You also are concerned that even with oil prices becoming lower that you actually think there's still a lot of inflation baked into the system. Is the Fed potentially having to maybe hike going to be an issue for where you see the market going and your Dan Ives bullishness this morning?

[Sebastian Page]

Yeah, look, Marie, if we had like 25 basis points, 50 basis points of hikes, I don't think that's a big issue for markets. I do think generally though, inflation right now is underestimated as a risk. You had the Torsten Slok quote earlier. I would argue that he's right. I would agree with that. Yes. Oil prices are coming back down really quickly. My view is that there's pent up inflation. There are lots of lags in inflation data and in inflation itself. We have from fertilizer to food, from freight and insurance to transportation to industrial production to the final goods, from fiscal stimulus to demand. There's lots of lags that are working their way through. By the way, the last three months on a rolling basis, the headline CPI is up 8% if you annualize it, you're not supposed to analyze three months. You know, it's noisy data, but still 8%. But the shelter for the last three months is 4.8%. There's also a lagged effect here with prior rental increases. Now put all of this in context of the fact that the break even for the one year horizon is 1.7% and the one year inflation swap is 2.2%. So in my mind it's still an underestimated risk, especially for the next three to six months. In the long run, yeah, we'll normalize, but I think the market is underpricing the inflation risk. I guess we have a print this morning. We'll see. I watch Surveillance often with a 12 or 24 hour lag and I always I'm mindful that some people come in and make forecasts a few minutes before the data release. I'm not going to make that. I'm not going to. I'm not going to do that this morning. It's always interesting to listen to it after the fact when you know what happened. But as a general trend, I'm not talking necessarily PC, maybe 4% this morning, but as a general trend, the inflation here is underestimated by the market based on the pricing you see in break evens and inflation swap.

[Jonathan Ferro]

Stay with us. More Bloomberg Surveillance coming up after this.

[CBOE Announcer]

When your options are limited so your opportunities at cboe, the global exchange that pioneered options trading, we offer more ways to move with the market from VIX and SPX options to global market data solutions. CBOE helps investors diversify, manage risk and stay ahead of whatever the market does. Next life is better with options. Your investments could be too. There are risks associated with CBOE Company products. Review the disclosures and [e-mail] USDISCLAIMERS so

[IBM Announcer]

there's a lot of noise about AI. But time's too tight for more promises, so let's talk about results. At IBM we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM and Pause really quick.

[Microsoft Representative]

Wanted to also mention that not only is Windows 11 Pro designed to help unlock operational efficiency and build long term advantage for your business, it can seriously level up your team's productivity. And since I know you all love stats, guess what? I got Microsoft commissioned stats. Compared to Windows 10 PCs, Windows 11 Pro users reported on average 50% faster workflows and collaboration, 42% faster completion of demanding workloads and on average 61% longer battery life. Windows 11 Pro chip to cloud security is designed to help employees stay protected and uninterrupted at the office, at home, the coffee shop, wherever they work. Speaking of uninterrupted, you IT managers are

[John (Citi Analyst)]

gonna love this one.

[Microsoft Representative]

The Microsoft Commission survey also reported Windows 11 Pro PCs having a 62% drop in security incidents compared to Windows 10 PCs. Because Windows means business, upgrade to Windows 11 Pro at windows means business.com.

[Sebastian Page]

Micron shares surging on its blockbuster forecast. Heath Terry of Citi recently search writing the health of the trade will continue to be defined by the irresistible force of enterprise demand meeting the immovable object of inference, capacity. He's joins us now for more. Heath, good morning. Good to see you.

[John (Citi Analyst)]

Good morning.

[Sebastian Page]

Let's pick up on that enterprise demand. Just how robust is that right now?

[John (Citi Analyst)]

Look, it's, it's incredibly robust. We'll get Q2 numbers in a few weeks. But if you look at what we've seen over the last, the last few quarters, We've gone from 28% year over year growth in Q1 of last year to 33% in Q2Q to 53% in Q3 to 91% to 141% in Q1 of this year. Like that kind of bend in the S curve that we're, that we're seeing here and we believe it's going to accelerate again in Q2. That's the best proxy for what's happening in enterprise demand. And anybody who works at a Fortune 500 type company that is pushing this into production can tell you they're seeing it in real time.

[Sebastian Page]

There is a rush to build out capacity to meet all this demand. Some companies are benefiting more than Others. Micron with 85% margins. Other companies that are doing a lot of the spending right now being punished. The stocks are being punished. This is a thing we keep bringing up just that changes the trajectory for spending.

[John (Citi Analyst)]

Look, no, I mean, not anytime soon because the companies are getting real returns on this. The market right now is not giving the companies that are spending on this the hyperscalers the kind of credit that they normally would for a couple of different reasons. But the biggest one is there is this gap between when you have to start spending and building all of this out and when you actually start seeing the returns on it. If you look at cash return on cash invested, which we believe is sort of the best gauge of the returns that they're actually generating on this, the Hyperscalers are generating 29% returns on this investment. Very stable. It was 29% in Q1, it's 29% in Q4. If you have the ability to borrow at 6% or to issue at equity and get a 29% return on it, you're supposed to do that regardless of what your stock price is doing. And while the stock prices aren't doing what Micron stock price is doing, they're hanging in there enough that investors haven't rejected this. Right. Google issued $85 billion worth of equities. The market didn't really blink just to

[Lisa Abramowicz]

build on the what John is talking about. Maybe people are still lending and they're still able to raise cash. Nonetheless, it's getting a little bit, bit hairy for the likes of Microsoft down 18% for this worst monthly performance going back to 2008, you see Oracle down more than 30%. Are we starting to see the beginnings of investor pushback that maybe hasn't put teeth in this trade by withdrawing cash, but certainly has put a little bit of notice around that capital?

[John (Citi Analyst)]

Well, the thing that we have to remember, particularly when it comes to Microsoft and Oracle, is those are both software companies. Look at everything else in software and what those stocks have done. The market's not responding negatively to the acceleration in growth that you're seeing at Azure, the returns you're seeing in Azure. It's responding to the other 70% of Microsoft's business that is software. It's responding to the biggest part of Oracle's business, which is software. And so I think that if anything, should encourage more investment in this area, particularly as we start to see the acceleration in Azure revenues through the end, through the end of this year, which we believe the market will respond positively to.

[Lisa Abramowicz]

We've seen this rolling ball of cash and as we heard from Sebastian Page earlier, everyone's looking for the choke points. The next place where you're going to see things just sort of shoot exponentially higher. Because of this insatiable demand and a limited supply after memory, what's next? I mean, do you have your eye on kind of those choke points?

[John (Citi Analyst)]

I mean, we do. I mean the choke points sort of exist throughout the supply chain right now. Memory is obviously the biggest one. Anthropic told you that very loudly a few weeks ago when they raised their, their most recent round. They had the opportunity to, to choose strategic partners. They could have picked anyone they wanted. They chose three Samsung, Micron and Hynix. And so like if anyone who's surprised by what's happening with Micron today and what's been happening with high bandwidth memory didn't pay attention to what Anthropic told them. The next point after that is it's an interconnect. It's in storage, it's in labor in a very big way. And of course it's in power. We've been talking about that for so long. It's also because of what you see with Micron, it's very much in semicap equipment because we do have to make more memory, we do have to make more chips, we need more compute, we need more storage and memory.

[Annmarie Horden]

Do you think some of these companies along the supply chain, we could potentially see these issues emerge later in the year or next year as they build this out, are undervalued right now?

[John (Citi Analyst)]

Well, I mean, so we've been saying this like from maybe we started Citi a year ago. We. The first thing that we said is you want to be where the bottlenecks are. And that has continued to be the case and we sort of stuck with that. You have. This is where pricing goes. You were talking about sort of the underperformance of the hyperscalers. You want to be where people are spending money, not necessarily with the people who are spending the money. And so that's going to continue to be the case. We would argue it's not even so much undervalued. It's just estimates are too low, consensus numbers aren't high enough. Because the amount of infrastructure that is going to get built, the amount of pricing increases that you're going to see that, you know, irresistible demand, immovable supply, the only thing that breaks in that is price.

[Bill Dudley]

Price.

[John (Citi Analyst)]

You saw it in the micron number, 85% gross margins. Memory companies are not supposed to have 85% gross margins. Eventually that will settle out because that's what cyclicals do. But we're a long way away from that happening.

[Lisa Abramowicz]

You said that one of the choke points was in labor. Are you talking about Jonas Adler? Are you talking about Dave, who constructs some of what we're seeing with the hyperscaler buildings?

[John (Citi Analyst)]

So it's certainly both. There is not a lot of talent out there that has the capability of advancing these models the way that level of sort of the Jonas Adlers of the world do.

[Unidentified Speaker (possibly a guest or caller)]

I have no idea.

[John (Citi Analyst)]

But I mean, if you have an. If you, if you look at some of the stuff that was announced last summer, right, When Meadow was doing these deals, right, Anthropic is doing these deals now. Meadow was doing them last summer it was six. And in some cases, you know, I mean it was, it was, it was very large sort of, you know, in some cases billion dollar kind of pay packages over multi, multi years. And when you look at sort of the acquisition hires that many companies have done, it falls into that hundreds of millions and beyond kind of level. That said, what I was referring to is, is very much it's the electricians, the plumbers, the construction people that actually have to build these data centers. There are very few people in the world that have the skills to be able to to build at the level that these data centers require. And those people are in massive demand right now and deservedly they're getting paid a lot more to stay with us.

[Jonathan Ferro]

More Bloomberg surveillance coming up after this.

[Microsoft Representative]

And pause really quick. Wanted to also mention that not Only is Windows 11 Pro designed to help unlock operational efficiency and build long term advantage for your business, it can seriously level up your team's productivity. And since I know you all love stats, guess what I got Microsoft commissioned Stats Compared to Windows 10 PCs, Windows 11 Pro users reported on average 50% faster workflows and collaboration, 42% faster completion of demanding workloads, and on average 61% longer battery life. Windows 11 Pro chip to Cloud security is designed to help employees stay protected and uninterrupted at the office, at home, the coffee shop, wherever they work. Speaking of uninterrupted, you IT managers are

[John (Citi Analyst)]

going to love this one.

[Microsoft Representative]

The Microsoft Commission survey also reported Windows 11 Pro PCs having a 62% drop in security incidents compared to Windows 10 PCs. Because Windows means Business upgrade to Windows 11 Pro at windows means business.com support

[Public.com Announcer]

for the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public

[Bill Dudley]

Investing Brokerage Services by Open to the Public Investing Inc.

[Sebastian Page]

Member FINRA and SIPC Advisory Services by Public Advisors LLC SEC registered advisor complete

[4imprint Announcer]

disclosures [e-mail] disclosures whether you're planning a big tech event, launching a new campaign or just stocking up on team gear, finding the right promotional products makes all the difference. 4imprint offers thousands of options from on trend apparel and premium drinkware to tech totes and giveaways so you can find the right fit for any audience purpose or budget. You can customize it all. Your logo, your message, your look and many items come with no setup charge to help you save. And if you're really watching the bottom line, you'll find standout choices at every price point so you can make a real impact while staying on budget. Plus you'll get expert help, fast turnaround times and their 360 degree guarantee so you can be four imprint certain your order will arrive on time and look exactly right. Whatever your goal, 4imprint makes it easy to find your perfect promo match. Explore the possibilities [e-mail] for Imprint for certain.

[Sebastian Page]

Chair Kevin Wash making changes at the Central Bank Limited Forward guidance, creating task forces and putting even more weight on signals from financial markets. The former New York Fed President Bill Dudley Wang in writing this A fresh look is appropriate, but this needs to be done with greater care than Wash has shown to date. Bill joins us now for more, but welcome to the show. It's nice to reflect on these kind of things with you, so thanks for being with us. What are you reflecting on right now? What are you concerned about as this comes together?

[Bill Dudley]

Well, what I'm concerned about is that I'm perfectly fine with getting rid of forward guidance, but what I'm concerned about is, which is not disclosing what his monetary policy reaction function is. In other words, how would the Fed adjust policy as the economic environment changes? And I think that's a big mistake. The idea that you can rely on financial markets to tell you what you should do in terms of monetary policy. That won't work because markets price to what they think the Fed will do. So if the Fed's looking at the markets and the markets are looking at the Fed, how is policy actually set? It's really important in the United States that markets understand how the Fed is going to react because monetary policy works mainly through financial conditions. The effect of short term rates on bonds, stocks, credit spreads, the dollar. So if the markets don't understand what the Fed is doing, those markets aren't going to be priced appropriately relative to what The Fed is actually going to do, and that's going to both slow down the transmission of monetary policy to the real economy, but it's also going to make it less, you know, less, less efficient. So it seems to me like you got to provide more guidance about how you're actually going to react if things evolve differently than you anticipate to your

[Sebastian Page]

point, but I think you're picking up on attention we all witnessed in the news conference. He seemed to find difficult to separate forward guidance from communicating, articulating a reaction function. Where do you think that came from? Why is that difficult, do you think it's straightforward?

[Bill Dudley]

I think it's straightforward. I mean, I think Ford guidance is really basically saying, here's what we expect to do next. The monetary policy reaction function isn't about what we're going to do next, it's about how we would react to different sorts of incoming information. So I think he needs to distinguish between those two things. Right now, I don't really understand how he, how he expects to set monetary policy. The job of monetary policy is the, the Fed's job, not the market job. And so the Fed needs to do its job.

[Lisa Abramowicz]

Part of his argument, perhaps just being generous, might be that there are task forces for that, and essentially they have to understand what data they're looking at before they understand exactly how they should react. Do you buy that argument?

[Bill Dudley]

Well, obviously it makes sense to take a fresh look at what data is available, but at the end of the day, these task forces have a finite life. I mean, the Fed is basically, obviously got to conduct monetary policy not just over the next six months, but over the next number of years. So I think the reliance on task forces, maybe it buys him some time to think about what he really wants to do. But at the end of the day, these task forces are not a replacement for the Fed communicating about how it's going to act as economic conditions change.

[Lisa Abramowicz]

Right now, Bill, when you take a look at the inflation rate, when you take a look at the oil input, but also the broadening as we're seeing it in core psychiatric, which we're going to get in about nine minutes time, do you think it is appropriate for them to hike at least once, if not twice or three times this year?

[Bill Dudley]

Well, I think that the case for monetary policy becoming a bit tighter is pretty, pretty compelling to me for two reasons. Number one, we've been at this level of rates or higher for three years and the economy is still at a 4.3% unemployment rate. So what's the evidence that monetary policy is restrictive. And second, financial conditions are really accommodating. The board has a model of financial conditions and right now it shows the impulse to growth over the next year is over 1% positive on GDP growth. That's the highest since late 2001, early 2022. So I think that easy financial conditions, no evidence that monetary policy is restrictive at a time that you've missed your target for more than five years does create a strong argument for, for tightening monetary policy. I'm aligned with, you know, Alberto Musil and Lori Logan, but what, what, what I think doesn't really matter. It's really what Kevin Wash is ultimately going to do. One thing that's going to help a little bit in his, you know, giving him a little bit more time is this is probably the really last bad headline inflation report we're going to have for a while because with the decline in oil prices, when we get the inflation data for June, headline inflation at both the CPI and PC level is going to decline quite significantly.

[Annmarie Horden]

But what about the housing market? Isn't it still fair to say what we have is highly restrictive for housing?

[Bill Dudley]

Well, I think housing is not doing well for, for a couple of reasons. The main reason, though is lack of demand because we don't have any labor force growth. So if you don't have labor force growth, you don't have household formation. If you don't have household formation, you don't have a lot of demand for houses. There's also an affordability issue in terms of what, you know, what level of income you have to, to achieve to be able to buy a house. But I don't think, you know, you look at mortgage rates. Are mortgage rates particularly high? I mean, they're high relative to the last 15 years or so. But if you go back prior to the great financial crisis, you know, mortgage rates in the 6 and a half percent range, no one would view that as particularly high.

[Annmarie Horden]

Well, it is high though, if you're sitting on a 3% rate and you refuse to move because then it doesn't offer up a lot more housing for everyone else.

[Bill Dudley]

Well, there is a lock in effects and people are, you know, deciding not to move because they don't want to lose the advantage of those very low mortgage rates. But if they move, they're demanding another house. So I'm not sure that, you know, that really is going to have a big effect on housing affordability. The big, big question, I think for housing affordability is what can you do about zoning? What can you do about land? Use to basically allow more homes to actually be produced. Increasing the supply of housing would then weigh on housing prices and that would make housing more affordable. But I don't think it's really a big interest rate problem.

[Sebastian Page]

Frankly though, just a final thread, few questions just on this institution. You've worked at it a long time from your position at the New York Fed, going down to Washington on so many occasions. How easy is it to change this institution?

[Bill Dudley]

Well, there's certainly a lot of inertia in the sense that you have staff that are going to be there a lot longer than Kevin Wash is going to be there for you example. And the staff has a lot of pride in their their work and deservedly so because they have a tremendous amount of expertise. But you can definitely move things if you have a better mousetrap. When I went, when I went down to the near Fed after the first day, when the second day I was president of New York Fed, I basically said my mantra is best idea wins. The best idea that people come up with should actually dominate regardless of where it comes from. And I think the board staff, the staffs of the Federal Reserve banks really subscribe to that. So if Kevin Wash and the task forces come up with better ideas, I think those best ideas will actually win.

[Jonathan Ferro]

This is the Bloomberg Surveillance Podcast bringing you the best in markets, economics and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from 6am to 9am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business app.

[IBM Announcer]

Ryan Reynolds here from Mint Mobile with a message for everyone paying Big Wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying. No judgments. But that's weird. Okay, one judgment anyway. Give it a try. @mintmobile.com Switch upfront payment of $45 for

[Sebastian Page]

3 month plan equivalent to $15 per

[Lisa Abramowicz]

month required int first 3 months only

[Annmarie Horden]

then full price plan options available, taxes and fees extra.

[Sebastian Page]

See full [e-mail] this is Malcolm Glaubel

[Malcolm Glaubel]

from Medal of Stories of Courage. This episode is brought to you by Navy Federal Credit Union. At Navy Federal, they want you to know that if you need a positive sign towards achieving your goal of home ownership, this is it. Because even though today's housing market can seem discouraging, the Home Buyer's Choice Loan offers members down payment options as low as 0% with no required Private mortgage insurance. Look for your sign today. Navy Federal Credit Union Navy Federal is insured by NCUA Equal Housing Lender Terms and conditions apply. Loans subject to approval and eligibility requirements. Learn more@navy federal.org Zerodown we learned how

[Unidentified Speaker (possibly a guest or caller)]

to love dogs from the dogs that loved us and waited for us to get home from school. They were the dogs that raised us. We returned the love with Pedigree Dog Food. It was good then. It's better now. For 40 years, pedigree has been bringing out the goodness in dogs. Every bowl serves up 100% of the nutrition your dog needs. Supporting six health essentials. That's the pedigree goodness promise. Pedigree Good then, better now.