Bloomberg Surveillance TV: Bullard, Barkin, and Mitsotakis on Economy, Tariffs, and Defense

Economic Outlook and Monetary Policy

• 💡 Core PCE came in at 0.2%, aligning with expectations, while personal income and spending showed stronger-than-expected growth.
• 📈 James Bullard believes the data supports a continued path of rate cuts, seeing the economy in good shape for the rest of the year and into 2026.
• 🎯 The Fed aims to bring core PCE down to 2% over the next two years, with a gradual approach rather than rapid overshoot.
• 🧐 President Barkin notes that while inflation isn't improving, unemployment is also moving in the right direction, suggesting limited downside risks.
• ⚠️ New tariffs are seen as a significant factor contributing to cost increases, though consumer pushback and productivity gains may mitigate broad inflationary impacts.

Federal Reserve Operations and Data Dependence

• 📉 A government shutdown could disrupt data releases like non-farm payrolls, posing a challenge for the data-dependent Fed, though it's considered manageable.
• 🧠 Bullard suggests it's a good time for the Fed to review its models and operational paradigms, potentially implementing parallel model processes.
• ⚖️ The debate around the neutral rate is ongoing, with the Richmond Fed's model indicating a relatively high neutral rate due to current economic signals.
• 🔄 Barkin emphasizes the need for adaptability in monetary policy, closely monitoring the balance between inflation and unemployment, and adjusting stance as new information emerges.

Geopolitics and European Defense

• 🇪🇺 Kyriakos Mitsotakis, Prime Minister of Greece, senses increased momentum for joint European borrowing to fund defense spending, with potential agreement from Germany.
• 🛡️ Priorities for this joint facility include missile defense and drone defense systems.
• 🇬🇷 Greece has achieved significant primary surpluses and is focused on cutting taxes for the middle class while ensuring fiscal discipline and economic growth.
• 🇫🇷 Mitsotakis expresses concern over the economic struggles in France and the potential for financial contagion, stressing the importance of core European economies performing well.
• 🤝 He advocates for a stronger European hat in decision-making, prioritizing collective European interests, especially for crucial projects like defense.

Banking and Economic Convergence

• 🏦 The potential for foreign bank investment in Greek banks, like UniCredit's stake in Alpha Bank, is viewed positively as a sign of confidence in the Greek economy.
• 🚀 Greece aims for qualitatively different growth focusing on investment, innovation, and exports to achieve wage convergence with Europe.
• 💰 The government plans to support disposable income through fiscally sustainable measures, anticipating strong performance and better days ahead for Greek citizens.