It's going to be an uphill battle to convince the fed to cut rates: Apollo Global’s Torsten Slok

WILL COME DOWN. FED IS MODESTLY RESTRICTIVE RIGHT NOW BUT WANTS TO TAKE A PAUSE HERE.

>> ALL RIGHT STEVE, THANK YOU, STEVE LIESMAN PLEASURE. RIGHT

OVER THERE. LET'S CONTINUE THE CONVERSATION RIGHT HERE WITH TOURISTS AND SLOK. HE'S CHIEF

ECONOMIST AT APOLLO GLOBAL MANAGEMENT. YOU HAVE A FAVORITE

MANAGEMENT. YOU HAVE A FAVORITE IN THAT FED RACE, BY THE WAY.

>> WELL SO I DON'T HAVE A PERSONAL FAVORITE. BUT I THINK

PERSONAL FAVORITE. BUT I THINK IT'S CLEAR THAT THE MARKET IS TRYING TO CHEW HARD ON WHICH OF THESE CANDIDATES WILL HAVE IMPLICATIONS FOR WHAT'S HAPPENING ESPECIALLY OF COURSE, IN RATES. WHAT THE

CONCLUSION, OF COURSE, HERE IS THAT IT ALL BECOMES ABOUT CAN THE NEW FED CHAIR PERSUADE THE FOMC MEMBERS ABOUT WHATEVER HIS VIEW MIGHT BE IN THIS CASE, IF THE NEW FED CHAIR WANTS TO CUT INTEREST RATES, THERE ARE 12

VOTING MEMBERS. THE NEW FED

VOTING MEMBERS. THE NEW FED CHAIR NEEDS TO COME IN AND CONVINCE EVERYONE ELSE WHY IT'S A GOOD IDEA TO CUT INTEREST RATES. AS WE KNOW FROM THE

RATES. AS WE KNOW FROM THE SILENT DISSENTS, AS WE KNOW FROM JEFF SMITH FROM KANSAS CITY FED, IT'S GOING TO BE QUITE AN UPHILL BATTLE TO CONVINCE AT LEAST WHERE WE STAND RIGHT NOW, THE REST OF THE FOMC TO CUT RATES IN THE CURRENT ENVIRONMENT.

>> IT WOULD BE AN UPHILL BATTLE TO CONVINCE YOU TO CUT RATES TO BOORSTIN IF YOU WERE ON THAT COMMITTEE. WHY?

COMMITTEE. WHY?

>> BECAUSE I THINK THAT THE TAILWINDS THAT ARE BUILDING ARE BECOMING STRONGER AND STRONGER HERE IN 2026. LAST YEAR WAS A STORY OF HEADWINDS TO THE ECONOMY COMING FROM TRADE WAR, IMMIGRATION RESTRICTIONS AND STUDENT LOAN PAYMENTS RESTARTING THIS EPISODE WE'RE GOING INTO 2026 WILL HAVE

TAILWINDS FROM THE ONE BIG BEAUTIFUL BILL. WE'LL ALSO HAVE

BEAUTIFUL BILL. WE'LL ALSO HAVE TAILWINDS FROM THE OTHER PRICES.

WE'LL ALSO HAVE TAILWINDS FROM THE DOLLAR HAVING GONE DOWN. SO

WE'RE ABOUT TO SEE A NIKE SWOOSH WHERE GROWTH IS GOING TO ACCELERATE. THIS IS THE

ACCELERATE. THIS IS THE CONSENSUS EXPECTATION. THAT'S

CONSENSUS EXPECTATION. THAT'S THE FED'S EXPECTATION. THAT'S

OUR EXPECTATION. SO THE GROWTH WILL GET BIGGER AND BIGGER AS WE GO THROUGH THIS YEAR. AND AS

A RESULT WHEN INFLATION IS STILL ALREADY CLOSE TO 3%, THE RISK TO INFLATION STILL CONTINUE TO BE QUITE MEANINGFUL.

SO THE BOTTOM LINE IS I WOULD BE VERY RELUCTANT WITH CUTTING INTEREST RATES IN AN ENVIRONMENT WHERE WE HAVE AN ECONOMY THAT'S BEGINNING TO ACCELERATE, IN PARTICULAR BECAUSE OF THE TAILWIND COMING FROM THE ONE BIG, BEAUTIFUL BILL.

>> BUT WHAT ABOUT THE RISK?

SORRY, CARL, OF, OF OF OF EMPLOYMENT. I MEAN WE'VE BEEN

EMPLOYMENT. I MEAN WE'VE BEEN SEEING NUMBERS WE HAVE NOT SEEN IN QUITE SOME TIME. I THINK

WE'RE AT FOUR YEAR HIGHS AT LEAST. ISN'T THAT A CONCERN TO

LEAST. ISN'T THAT A CONCERN TO YOU? AND WE HAVEN'T EVEN

YOU? AND WE HAVEN'T EVEN STARTED TO TALK ABOUT THE IMPACT OF AI THAT MAY REALLY COME TO THE FORE IN 2026.

>> WELL, ONE VERY IMPORTANT REASON WHY JOB GROWTH HAS SLOWED IN THE LAST SIX MONTHS IS BECAUSE IMMIGRATION HAS SLOWED THE LAST SEVERAL YEARS.

NET IMMIGRATION INTO THE US WAS AROUND 3 MILLION EVERY YEAR.

THE CBO IS NOW FORECASTING THAT THERE WILL BE AROUND 500,000 IN THE NEXT TWO YEARS. SO IN OTHER WORDS, WE'RE SEEING A FAIRLY SHARP SLOWDOWN. AND AS A RESULT,

SHARP SLOWDOWN. AND AS A RESULT, THE DALLAS FED HAS CALCULATED THAT THE NEW EQUILIBRIUM RATE FOR NONFARM PAYROLLS, WHICH USED TO BE 200,000 JOBS CREATED EVERY MONTH, IS NOW DOWN TO 30,000 JOBS EVERY MONTH. SO A

VERY IMPORTANT REASON WHY JOB GROWTH HAS SLOWED IS INDEED BECAUSE IMMIGRATION HAS SLOWED SO MUCH.

>> YOU DID WRITE THIS WEEK THAT THE FED'S BIGGEST RISK FOR NEXT YEAR IS STAGFLATION.

>> I STILL THINK THAT STAGFLATION IS A RISK BECAUSE THERE'S STILL SOME HEADWINDS COMING, ESPECIALLY IF AI DOES NOT DELIVER. THERE'S A LOT OF

NOT DELIVER. THERE'S A LOT OF THINGS RIDING ON AI CONTINUING IN 2026. THE DATA CENTER

IN 2026. THE DATA CENTER BUILDOUT, OF COURSE, HAS ADDED TO GDP GROWTH. AND WE HAVE ALSO SEEN WHEN STOCK PRICES GO UP, THAT CONSUMER SPENDING, ESPECIALLY FOR THE UPPER END OF THE K IN THE K-SHAPED OUTLOOK, CONTINUE TO STILL BE VERY

STRONG. BUT IF AI DOES NOT

STRONG. BUT IF AI DOES NOT DELIVER ON EARNINGS, ESPECIALLY ALSO IF WE BEGIN TO SEE A SLOWDOWN IN CAPEX SPENDING ON THE DATA CENTER FRONT GOING FORWARD INTO THE NEXT SEVERAL YEARS, THAT WILL INDEED BEGIN TO RAISE SOME RISKS ABOUT

DOWNSIDE TO GROWTH COMING FROM THE NUMBER ONE RISK, NAMELY AI.

>> BUT IT WOULDN'T TAKE PRICES DOWN WITH IT.

>> NO, BECAUSE AI ON ITS OWN IS ONLY ABOUT IF YOU THINK ABOUT DATA CENTER CONSTRUCTION, THERE'S ONLY ABOUT 4% OF GDP.

SO THAT'S WHY, GIVEN 60% OF GDP IS SERVICES, AND WE HAVE NOW HAD THE SERVICE SECTOR, INFLATION HAS BEEN RELATIVELY STABLE. YES, IT'S TRUE THAT

STABLE. YES, IT'S TRUE THAT RENTS ARE PULLING LOWER, BUT ISM SERVICES PRICES PAID HAS REALLY BEEN GOING UP. SO

THERE'S A LOT OF DIFFERENT FORCES IN INFLATION. AND THE

DATA HERE THAT CAME OUT THIS WEEK WAS SOMEWHAT CONFUSING TO BE HONEST. BUT THE BOTTOM LINE

BE HONEST. BUT THE BOTTOM LINE IS, IN THE NEXT SIX MONTHS, AND ESPECIALLY WHEN WE GET TO APRIL, WE'LL BEGIN TO SEE SOME FAIRLY MEANINGFUL RISKS THAT INFLATION IS STILL GOING TO BE ELEVATED.

AND THAT'S EXACTLY WHY THE FOMC MEMBERS ARE SO SPLIT ON THIS ISSUE. WHAT SHOULD WE DO IN AN

ISSUE. WHAT SHOULD WE DO IN AN ENVIRONMENT WHERE, YES, MAYBE THE LABOR MARKET IS A BIT WEAKER BECAUSE OF LABOR DEMAND, BUT GIVEN INFLATION IS STILL VERY STICKY AND NOW IS AT RISK