Julia Coronado, president and founder at MacroPolicy Perspectives, Talks Fed Strategy

Summary

Bloomberg Talks: Julia Coronado, President and Founder at MacroPolicy Perspectives, on Fed Strategy
Date: November 28, 2025
Host: Tom Keene
Guest: Julia Coronado

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Episode Overview

This episode features a comprehensive discussion with Julia Coronado, a highly regarded economist and Fed watcher, about the current direction of U.S. monetary policy, the prospects for rate cuts in 2025, the health of the labor market, and regional economic dynamics—particularly between the U.S., Mexico, and Texas. Host Tom Keene leads the conversation, delving into the Federal Reserve's priorities, the interplay of inflation and unemployment, and the unique challenges facing Texas.

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Key Discussion Points & Insights

The Fed’s Rate Cut Trajectory: “Bimodal Possibilities”

[00:24–00:59]

• Tom Keene opens by referencing Julia Coronado's prior successful calls and asks whether markets are wrong to expect “one and done” for rate cuts.
• Julia Coronado outlines two scenarios for the Fed’s potential actions in 2025:
  • One rate cut if the economy stabilizes and AI-driven productivity holds up.
  • Multiple cuts if labor market weakness accelerates:

    “Either we're going to get one and done because things are stabilizing... or we're really starting... turning of the labor market and the Fed's going to have to cut not just to neutral, but through to neutral to an accommodation." – Julia Coronado [00:59]

Economic Growth Outlook: Structural and Policy Challenges

[01:38–03:16]

• Coronado forecasts strong Q3 growth but a “subdued” Q4, with consumer caution becoming more evident:

  “The consumer... people seem to be price sensitive, price conscious, budget conscious, not hunkered down in a corner, but not booming.” – Julia Coronado [02:00]

• She attributes lower projected growth to restrictive immigration policy limiting the labor supply, leading to slower wage and income growth:

  “No labor supply, no jobs, less growth in paychecks and income and a slower economy... a lower trend growth rate for the US.” – Julia Coronado [02:45]

The Fed's Balancing Act: Inflation vs. Unemployment

[03:16–04:46]

• Provided insight into internal Fed debates—19 committee members with divergent priorities.
• Despite inflation moderating, it remains sticky around 3%—higher than the Fed's 2% target—while unemployment has been rising in small increments:

  “Not that inflation’s getting out of control, but it’s going to get embedded... we’ll get stuck at 3 and not get to 2.” – Julia Coronado [03:56] “Usually when we see this kind of movement [in unemployment], we get a break higher... reach a tipping point, and all of a sudden we’re looking at a recession.” – Julia Coronado [04:38]

Regional Focus: US-Mexico Relations and Texas Economy

[04:48–06:37]

• Tom Keene asks about the impact of tariffs and trade policy on Mexico and the southern U.S.
• Coronado notes that US-Mexico trade tensions and restrictive policies hurt both economies, with Texas losing its historical economic edge:

  “The trade wars, the immigration policy, the frictions between the US And Mexico are not great for the Mexican economy and are not great for Texas, to be honest.” – Julia Coronado [05:47] “Texas is okay, but usually Texas is a bright shining star. ...the highway system here.” – Julia Coronado [05:57, 10:52]

Labor Market Thresholds: When Does the Fed Get Alarmed?

[06:37–08:21]

• The current unemployment rate is at 4.4%, above the Fed's longer-run estimate of 4.2%.
• Concerns intensify if rates rise above 4.5%, especially since wage growth is now below inflation:

  “When we saw the September labor report... the most important number is the unemployment rate. Forget payrolls... It went up and nobody expected it to go up. So that was the news... the Fed is a go and that looks to be where they’ve landed.” – Julia Coronado [08:10]

Real Wages and Fed Sensitivity

[07:48–08:21]

• Tom Keene challenges whether the Fed would ignore declining real wages.
• Coronado affirms that persisting labor market weakness will force the Fed to act:

  “If this continues, then the Fed will cut and it will cut ... in December for exactly that reason.” – Julia Coronado [08:21]

Local Color: Transportation Woes in Texas

[09:22–10:52]

• Lighter discussion on Texas traffic problems and the lack of public transport:

  “The traffic in Texas is terrible because we have no public transportation, we have no trains. It’s the thing I miss the most about New York.” – Julia Coronado [09:51]

• Ongoing infrastructure expansion is noted, but with a tilt towards highways, not public transport.

Closing: Texas Longhorns and Personal Notes

[11:10–11:28]

• Amid good-natured college football chat, Coronado reaffirms her Texas roots and Longhorn pride.

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Notable Quotes & Timestamps

• “It’s one or the other. It feels like to me...” – Julia Coronado [00:59]
• “No labor supply, no jobs, less growth in paychecks and income and a slower economy.” – Julia Coronado [02:45]
• “Consumers are getting gloomy about the labor market. ...wage growth decelerating below the rate of inflation.” – Julia Coronado [07:23]
• “If this labor market problem keeps creeping, creeping in and cracks deepening, of course the Fed is going to pay attention to that.” – Julia Coronado [08:18]
• "The traffic in Texas is terrible because we have no public transportation, we have no trains." – Julia Coronado [09:51]

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Important Segments & Timestamps

• 00:24 – Discussion opens on Fed rate cut expectations
• 01:38 – Coronado’s US GDP forecasts and labor supply discussion
• 03:16 – The Fed’s inflation vs. unemployment dilemma
• 04:48 – US-Mexico economic ties and effects of tariffs
• 06:37 – Unemployment rate concerns, wage growth trends
• 07:48 – The significance of real wages and Fed policy sensitivity
• 09:22 – Texas infrastructure and daily life observations
• 11:10 – Personal/cultural close with Texas Longhorns segment

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Tone & Style

• Throughout, the conversation balances technical macroeconomic analysis with approachable explanations and playful regional color, especially evident in Tom Keene’s questioning and banter.
• Julia Coronado’s responses are candid, nuanced, and delivered with the authority of a seasoned Fed watcher comfortable communicating to both professionals and the broader public.

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Summary prepared for those seeking a comprehensive yet accessible understanding of the episode without listening.

Transcript

[Indiana University Announcer]

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[Tom Keene]

Now, I'm really anticipating this. With the Dow up 100 points, Julia Coronado was iconic at BNP Paribas during the crash where she said, no, GDP isn't going to be as good as it's going to be. She nailed that call. Now with Macro Policy Perspectives, one of our most astute Fed watchers as well, Julia is the next thing we're going to get wrong. The certitude that it's one and done on a rate cut and what we really need to think about is sequential rate cuts into next year.

[Julia Coronado]

Well, Tom, I think actually the possibilities are fairly bimodal. So if you look at the market and what it's priced for, it's priced for several rate cuts next year. But I think either we're going to get one and done because things are stabilizing and growth is going to be okay and the AI story has enough legs to power the economy, or we're really starting, you know, we're in the early game, turning of the labor market and the Fed's going to have to cut not just to neutral, but through to neutral to an accommodation. So it's one or the other. It feels like to me you're so.

[Tom Keene]

Good at gaming GDP, my head is spinning. Paul Sweeney's head is spinning over nominal GDP. I got a 4% Atlanta GDP. Now maybe it's 3.8%. I got half of America flat on their back. What is the Coronado call for 2026 real and nominal GDP.

[Julia Coronado]

So first, if we start with the second half of this year, we have a read on Q3, and by all indications it's very solid. But early indications are Q4 is that it's kind of squishy. The consumer auto sales have dropped. I'm not sure what Dana told you on the holiday season, but people seem to be price sensitive, price conscious, budget conscious, not hunkered down in a corner, but not booming. And so I think we're going to see strong, Q3, subdued Q4. On average, we'll see an economy that is downshifted from last year on balance, in 2025. And one of the reasons this is happening is structural. We've chosen a restrictive immigration policy that means basically no labor supply. So no labor supply, no jobs, less growth in paychecks and income and a slower economy. And I think that that will prevail into 2026. A lower trend growth rate for the US even assuming some solid productivity tailwinds, you're still looking at growth with a one handle, maybe a low two handle, not a three handle.

[Interviewer]

Julia, so what do you think is receiving the priority from the Federal Reserve these days, the labor market, the inflation environment here? Is there one thing that's front and center for the Fed here today?

[Julia Coronado]

Well, it depends on who you ask, doesn't it? So there are a lot of people. There's 19 people on the committee, and they all have very different views of the world. It looks like the leadership chair Powell, President Williams are coalescing around one more rate cut this year, an insurance rate cut, because you're highlighting the tension they face. You've got inflation that's not soaring or even necessarily accelerating in a meaningful way like we saw in the pandemic, but it's too high. It's running it closer to 3% than 2%, and it's not making any progress. And we don't expect any progress in the foreseeable future, or at least not next year. Not much progress given the tariffs are still coming through. And that's a worry. Not. Not that inflation's getting out of control, but it's going to get embedded in the economy and people's behavior and people's psychology, and we'll get stuck at 3 and not get to 2. On the other hand, the unemployment rate's been creeping higher by a tenth each of the last four months. Usually when we see this kind of movement, we get a break higher in the unemployment rate, the labor market cracks, we reach a tipping point, and all of a sudden we're looking at a recession.

[Tom Keene]

Can we do a Friday audible?

[Interviewer]

Sure.

[Tom Keene]

On television, on radio worldwide with Julia Coronado. A surveillance audible. Okay, Julia, you're defined a Dallas Fed. Dallas Fed owns the southern border. I am as guilty as anyone of ignoring Mexico and focusing on Canada because they need the Montreal Canadiens to find an enforcer. Julia, help me with Mexico and the tariff. What's the dynamic right now with Mexico given tariffs?

[Julia Coronado]

Well, you know, Mexico had been poised to be a beneficiary from this friend Shoring or these re globalizations or globalizations in the sense that it's, you know, right next door. It's one of our largest trading partners. But the Trump administration has, you know, gone after our closest trading partners, Canada and Mexico, you know, really kind of trying to ensure that some of that, that channeling of trade by Chinese companies through Mexico doesn't sort of sneak in the door. But of course that leaves Mexico really struggling. Mexico's doing okay, but they just put out their growth forecast and it's pretty subdued for next year. So the trade wars, the immigration policy, the frictions between the US And Mexico are not great for the Mexican economy and are not great for Texas, to be honest. Texas is okay, but usually Texas is a bright shining star. I'm living here in Austin, and the Texas economy, it's okay, but it's not the bright shining spot it used to be. Because all of these things, the trade wars, the immigration policy, really do hit Texas hard too.

[Interviewer]

Interesting. We talking about the unemployment rate? It's at 4.4%, I believe, right here. Is there a number, Julia, where the Fed just says, oh boy, we've got a labor problem?

[Julia Coronado]

Well, I think, you know, we're above their longer run estimate of 4.2%. I think once we start heading north of four and a half. And it's not just the level. The level matters. So I think we're at a level that's a little worrisome. When we were saw the unemployment rate rising last summer, we were rising from such a low level that it was kind of hard to worry too much about it. Right? We were going from 3.4 to the low fours. That was sort of more of a normalization in conditions than a weakening. Now we're at the low fours, we're at sort of neutral or longer run, and we're rising from here to a labor market that's clearly loosening. If you look at like say the conference board survey of consumers. Consumers are getting gloomy about the labor market. If you look at nominal wage growth, the indeed wage tracker is what we have in a most timely basis, showing wage growth decelerating below the rate of inflation.

[Tom Keene]

The.

[Julia Coronado]

These are indications that the labor market is not just balanced, but weak.

[Tom Keene]

She's got me going here. Tom Purcell is over at pjm. You know, even in the cold weather, he takes the Hinckley picnic boat, does he, down the Hudson river to go to PJIM in Jersey City? Okay, you just said it, Julia. The real wage is flatlining, declining, however you want to describe it as well, you're telling me the Fed is going to look at that and ignore it to worry about inflation dynamics? I don't buy it for a minute.

[Julia Coronado]

No, no, and you shouldn't. Because if this continues, then the Fed will cut and it will cut in. It's poised to cut in December for exactly that reason. When we saw the September labor report, we said, going in, the most important number is the unemployment rate. Forget payrolls, they're overstated, they haven't been benchmarked, blah, blah, blah. Seasonal noise. Look at the unemployment rate. And it went up and nobody expected it to go up. So that was the news. The news was the labor market is weakening, the Fed is a go and that looks to be where they've landed. And yeah, I think, Tom, that the trick is the committee is in such a hawkish mood because the GDP tracking is so strong and the economy seems basically okay. The stock market's at the highs, so what's the big deal? Meanwhile, I've got an inflation problem. But if this labor market problem keeps creeping, creeping in and cracks deepening, of course the Fed is going to pay attention to that.

[Tom Keene]

Dow up 91. John from Coventry emails insist on the Dow. I said no, I'm going to quote the Dow up 93 points right now. Julia Coronado with us. Julia, everybody wants to know this and this is great work off Axios and the Texas Adam Transportation Institute. Julia, the traffic in Austin, brutal. The traffic in Houston, the traffic in Texas. Why is Texas as great Mecca if you can't turn left at 4pm?

[Julia Coronado]

The traffic in Texas is terrible because we have no public transportation, we have no trains. It's the thing I miss the most about New York is the ability to skip traffic and get on the subway or get on the Metro north and go home.

[Tom Keene]

So, yeah, what are you going to do about it? You've been shortlisted for all sorts of wonderful Washington titles. What is the entrepreneurial GOP spirit of Texas going to do with that gridlock?

[Julia Coronado]

I don't know. You know, we, we did pass the. The Austin area did pass a big bond that does build in some public transportation. It broadens what is now a very limited train system. But being Texas, we also are just kind of expanding the highway yet again. So if you come down to Texas, Tom, you can choose many multiple lane highways to get around on. It's really something, the highway system here.

[Tom Keene]

Julie, the only reason we had you on was Hullabadoo Canuck. Canuck. Today, 7:30pm yeah. The number 16 Texas Longhorns. Yep. Greet the number 3 Fighting Texas Aggies.

[Bloomberg Audio Studios Announcer]

Wow.

[Tom Keene]

Of College Station. Julia, are you going?

[Julia Coronado]

I am not going to the game. No, no, no, no, no. But I am a Longhorn. Tom, as you know, we have not had the season we had hoped for, but you know, we had a great last game and hopefully that momentum continues.

[Tom Keene]

Into this one very good for Jess Met Station Exactly. We say good morning as well. Julia. Next time I'll have you on an economics instead of long orange. Dr. Dr. Coronado, thank you so much. Important comments there on the Fed Old.

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