Bloomberg Surveillance Navigating the Fed's Dual Mandate
19 snips
Oct 21, 2025 
Dominic Konstam, Managing Director and Head of Macro Strategy at Mizuho Securities USA, shares valuable insights into Fed policy. He discusses the potential for aggressive cuts in interest rates, the intricate balance of inflation management, and the impact of tariffs on corporate margins. Konstam also highlights the risks of nonlinear debt crises and the role of AI in shifting labor demand. His analysis suggests that markets may be mispricing future Fed actions and inflation trends, making it a must-listen for those interested in economic forecasting.
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Discover Neutral Rate By Trial Policy
- Konstam notes uncertainty around the neutral rate but says policy can be discovered by cutting and observing outcomes.
- He emphasizes willingness to raise later as the mechanism to manage calibration risk.
Debt Service Can Turn Nonlinear Quickly
- Debt service dynamics are highly nonlinear and rising forward yields can produce sudden crises, as seen in examples like Japan and France.
- He warns the US could face similar risks if debt and yields are mismanaged.
Tariffs Are Dampening Consumption, Not Causing Recession
- Tariffs have reduced consumption a few hundred billion below trend but haven't triggered recession yet because firms absorb costs.
- Konstam sees tariffs effectively recapturing consumer stimulus that had boosted corporate margins during COVID.