PIMCO's Tiffany Wilding Talks Chip Stocks, Consumer Sentiment

**SPEAKER_1** (0:02)
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**Tom Keene** (0:07)
Believe it or not, folks, I keep score when I'm rude and cut someone off because the president's talking to the media or whatever. Last time Tiffany Wilding was on for like a minute and 12 seconds. Going along here today with the Pacific Investment Management Company, their economist for all of North America, Tiffany Wilding. Tiffany, what are you thinking about for the Pimco manager brief on Monday morning? What's the thing that matters right now?

**Tiffany Wilding** (0:37)
Well, I think we're clearly focused on how Federal Reserve official communication is evolving. Obviously, we're also very focused on the data.
I think there's an interesting bifurcation that's happened. Because on the one hand, Federal Reserve officials appear to be setting markets up for potential rate hikes if inflation doesn't start to moderate here. On the other hand, we got good news on the inflation data this week, both the CPI and the PPI coming in under expectations. In our own forecast is that you will see some moderation in core inflation, which is the important one for the Fed. But I've been saying this even on this program with you, Tom, that you have to keep in mind that headline inflation, unless we're going back to pre-war levels on commodity prices, headline inflation is actually likely going to dip below 2% next year.
All of that suggests to us that we have a Fed on hold, but nevertheless, officials are certainly preparing the markets for a couple of potential heights.

**Tom Keene** (1:41)
So the first derivative of inflation is coming down. There's a lot of people that agree with what Tiffany just said there. Are we going to see lower prices or dare I say even, are we going to see level prices as we go along in time?

**Tiffany Wilding** (1:56)
Well, we've already seen the national average retail gasoline price come down off of its recent peak. Now, over the last few days, it's up again as the Middle East conflict has kind of flared up. But we are down off of the wartime peak levels. We're also seeing some various food prices that are actually falling.
But in general, when we say inflation is coming down, that is the price change. And so, we're not expecting overall inflation in the United States to dip in the negative territory, go into deflation. But we do think moderate inflation is a completely reasonable outlook to have.

**Tom Keene** (2:34)
I mean, Tiffany gets everything. She's at a restaurant seven days a week. What's the grocery shoppin look like at the Sassower house?

**Damian Sassower** (2:41)
Tiffany, I have to ask you this. Obviously, you were watching, I was watching Cameron Morse's testimony to Congress this week, and some of the questionings, specifically the questionings I saw from Senator Warren regarding $100 million payments or some craziness. I mean, is there any validity to that? I mean, is she just kind of muckraking? I mean, what's going on underneath the surface here in terms of the Senate's real acceptance of the new Fed Chairman?

**Tiffany Wilding** (3:07)
Well, certainly, Senator Warren will have her piece to say.
And certainly, there could be some more that comes out on that. But I think what we're focused on, at least, is what sort of signals is Chair Warsh sending in terms of how he's going to conduct monetary policy. And I think the biggest emphasis that's come out since he's become chair is that he's very focused on price stability. And I think that's very consistent with the other communication that we've seen from other officials to say that if you're not getting inflation that's moderating, that the Federal Reserve is prepared to act. I think that this is a good focus to have in terms of the markets, anchoring longer term inflation expectations or ensuring that they're anchored with this commitment to act if inflation doesn't moderate as we all expect, should actually keep longer dated interest rates anchored, right? Because you don't have inflation risk premiums that are getting priced into the long end of the interest rate curve. So, everything that we've heard from Warsh in terms of his commitment to price stability, we actually think is a good thing for the bond market. Now of course, there will be other questions that senators have, we'll continue to watch that as well.

**Damian Sassower** (4:25)
And Tiffany, what about the size of the Fed's balance sheet? I know we didn't really get into the thick of it during the testimony, but did you get any takeaways on that and where that's headed?

**Tiffany Wilding** (4:34)
Well, I think this is now an open question. So the Fed stopped its so-called QT program, quantitative tightening, where it gradually reduces its balance sheet. At the end of last year, because we saw front-end interest rates, overnight rates and things like that start to increase to suggest that reserves were coming more scarce.