Bloomberg Surveillance TV: September 10th, 2026

SPEAKER_1 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Jonathan Ferro (0:11)

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro, along with Lisa Abramowitz and Annmarie Hordern. 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 9 a.m. 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.

Mike Reid of RBC joining us around the table. Mike, good morning.

Mike Reid (0:39)

Good morning.

Jonathan Ferro (0:39)

Just look at those prices this morning, never mind the data, because the data is going to follow this ultimately. 106 almost on Brent, triple digits on WTI. How squeezed, how cornered is this Fed into next week?

Mike Reid (0:50)

This is a tough spot for the Fed.

We're talking about energy prices. That's the number one concern. Let's not forget, we still have tariffs on the table, which are adding pressure, that's showing up in PPI. And ultimately, this is going to pass through from PPI into CPI.

Jonathan Ferro (1:05)

Rather like the ECB, you hike once. What do you signal beyond that? What can you signal beyond that?

Mike Reid (1:12)

One hike we just don't think would be enough in this case. If you really want to start to bring down the demand side of the inflationary pressures, it's going to take more than 25 basis points of hikes.

The way we're looking at it is if the Fed were to go, you have to think about the labor market right now, which has really shown signs of reversing from that weakness last year when they had those insurance cuts. So at a minimum, they should be putting at least three cuts back in if their belief is the labor market's fine and this inflationary pressure continues.

Lisa Abramowicz (1:43)

Usually people take a look at higher oil prices as a stagflationary shock, where in the short term it raises inflation, but in the long term it can potentially lower inflation because of the suppression of growth. And yet we're seeing yields across the board rise almost in tandem. Does that make sense to you?

Mike Reid (2:00)

I think you have a lot of cross currents going on. And when you think about the demand side, there's certainly a tailwind coming from this, you know, we'll call it the government transfer aging of the population segment. There are things that folks, especially here in the US, will continue to buy.

And a lot of that comes from Social Security, Medicare, Medicaid.

And in particular, when you think about Medicare, all of these programs are adjusted for inflation, Social Security income is adjusted for inflation. So it's really inflation protected. What's that doing? That is adding to the deficit. And so when you're thinking about the long end of the curve, you know, that's where a lot of this pressure is coming from, the realization that this is not a problem that is easily solved.

Lisa Abramowicz (2:49)

Can you give us a sense of the evolution of your own thinking about whether rate hikes are necessary and how many are necessary and how quickly it's been evolving as the personnel have changed and as the data have changed as well?

Mike Reid (3:01)

I mean, look, right now our base case is that the Fed remains on hold. And a big part of that is when you look at the economy, you know, I just mentioned that the kind of older cohort, you do have a younger cohort, a lower income cohort that is feeling pain already, even before this energy shock. They're disproportionately feeling the inflation shock.

When you look at non-mortgage personal interest payments as a share of disposable personal income, it's about 2.5%. That has not seen significant improvement over the last year or two. And that's concerning. That's even with hikes. So what that says to us is you have a very large share of the consumer base that is relying on credit. And if you start hiking with a blunt tool, that is going to impact those folks, again, disproportionately. So there's a risk that you could really crush demand in a consumer base that is already feeling this pain. And at the same time, you have this retiree population that has very little exposure to debt, in many ways could benefit from rate hikes through interest income.

So it's a really difficult situation to figure out which part of that K you really want to support.

Annmarie Hordern (4:15)

At what point do you think you would have to change your thinking? What would you need to see and be like, they're going to go and they're going to hike?