Bloomberg Surveillance Sep 21, 2026
With James Egelhof, Chief US Economist at BNP Paribas
Four things are pushing the US economy along at once, on James Egelhof's count: monetary policy, fiscal policy, the wealth effect from the equity rally, and AI investment demand. All four are stimulative, and he expects all four to keep going.
Most forecasters read last week's Federal Reserve hike as the start of a squeeze. Egelhof read it as confirmation that the expansion is safe, and his worry runs the other way — that the Fed will not do enough, not that it will do too much.
"We think the Fed's rate hike last week was really good news. It shows that the Fed is embracing this optimistic narrative."
Egelhof is BNP Paribas' chief US economist, and his clients include the data-center and hyperscaler borrowers whose plans the rate path is supposed to be constraining. He came into the studio with two more hikes on his forecast and an argument for why there could be more.
The full segment is covered here so you can skip it.
Here are the 7 calls that matter.
Key Takeaways
Four stimulative forces are running at once — monetary, fiscal, the equity wealth effect and AI investment
His Fed path is a hike in December and one in January, with the risks skewed toward a longer and stronger cycle
Five years of high inflation have built inertia, which he says the Fed may have to push into rather than wait out
The risk that worries him is an imbalance the Fed reacts to late, then over-corrects — that is what produces recessions
Hyperscaler clients are not changing plans because rates went up; they pulled issuance forward instead
A higher neutral rate is the point, not a detour: "If you want 90s type growth, you might have to have 90s type rates"
He is not convinced the K-shaped economy is new — the inequality is real, the novelty is not
1. Four Stimulative Forces
Asked what he sees in the US economy, Egelhof gave a list rather than a view, and the list is the whole argument.
Everything is pushing the same way
We think it's benefiting from stimulative monetary policy, stimulative fiscal policy, stimulative wealth effects from all the equity rally.
James Egelhof
He added AI's effect on investment demand as the fourth, and said BNP Paribas has been optimistic on the US all year and expects that to continue.
Why last week's hike was good news to him
We think the Fed's rate hike last week was really good news. It shows that the Fed is embracing this optimistic narrative.
James Egelhof
His evidence for the change in tone was the press conference, where Warsh used the word optimism. The read he takes from that is a central bank willing to use its tools to keep the expansion healthy and balanced, rather than one trying to slow anything down.
2. Two More Hikes, Maybe 3
The host put Austan Goolsbee's comment that morning — that the road to 2% inflation may not be painless — to him, alongside a week of Fed speakers and his own note suggesting an October hike could be added.
Egelhof agreed with Goolsbee's framing and did not move the forecast. What he moved was the skew.
The path, and which way it could break
We have one in December, one in January. We think the risks are to a more concerted, a longer and a stronger tightening cycle, just because the growth impulse in the economy is so strong, because inflation has gotten a little bit sticky, and because it's important to build credibility.
James Egelhof
His conclusion is that beating inflation is harder than the Fed has assumed over the past several years, and possibly harder than it assumes now.
3. Inflation's Inertia
The hosts brought the question down to street level: WTI crude at or near $100 a barrel, and what that does to underlying inflation.
The oil price the segment was working from
we've got WTI crude oil at or near 100 bucks a barrel.
Bloomberg Surveillance
Egelhof's answer started with the people who pay the most for it.
Diesel is where it bites first
Look, and it's worse if you're a truck driver.
James Egelhof
He put diesel at $6.57 a gallon and named further energy price rises as a live risk, while arguing the economy has been resilient to them so far and is in good shape now. His model of US inflation is not really about energy, though.
Inflation as momentum, not as a shock
We think ultimately inflation in the US is driven by momentum. And so we've had now over five years of high inflation, including the big surge in inflation during the pandemic reopening. We think it's just accumulated inertia.
James Egelhof
That is what makes him think the Fed's patience may be the mistake.
The hope that may not work
The Fed's been hoping that inflation would just sort of peter out by itself without the need for having to push back on the labor market. And that might not work. The Fed's coming to terms with that.
James Egelhof
4. The Biggest Risk Is a Jolt
Asked for the biggest risk to his own call, Egelhof described the shape of the failure rather than naming an event.
What an economist is actually scared of
if you're an economist and you're worried about the risk, you're mostly worried about some kind of imbalance.
James Egelhof
The imbalance he had in mind for most of this year was a Fed that did not act, an economy that overheated, an unemployment rate that fell too far — and then a central bank forced into an excessive response.
And the mechanism that turns that into a recession
And when you start seeing these big amplifying moves, that's when you worry about something having a recession.
James Egelhof
A Fed responding on time reduces that risk, which is why he reads the current path as stabilizing. What is left on his list is the war, and one thing about AI.
The AI risk is sentiment, not spending
We also think that AI is primarily driven by optimism right now. That's fine. That's a normal part of this phase of the technology cycle.
James Egelhof
If something takes that optimism about commercialization away, he said, that could be a problem. His verdict on the set as a whole was that the risks are manageable right now.
5. The K Is Not New
On the consumer, the host's framing was the K-shaped economy, with the upper half driving the bus. Egelhof would not fully accept the premise.
His pushback on the K
There is wealth and income inequality in this country, but that's not new.
James Egelhof
He accepts that the stock market's gains accrue to more affluent households, but says the effect appears to be working through to the rest of the economy. The condition he attaches is employment.
What the consumer call actually rests on
so long as people have a job, they're comfortable that their job's going to be stable and the market remains resilient, we think the consumer will remain resilient as well.
James Egelhof
6. AI Capex Won't Blink
The question from the desk was whether AI companies tapping the debt markets pull back as the hiking cycle proceeds, and what that would do to growth. Egelhof answered it from his client conversations.
What the borrowers are telling him
what I'm hearing is that people are very optimistic on the demand for compute, on the commercial demand for AI applications.
James Egelhof
Rates are going up and they can see it; the response over the past few months has been to get ahead of it with supply and issuance rather than to cut the plans.
His conclusion on the cycle's rate sensitivity
that that's not going to derail their plans. So ultimately, we think that the AI cycle is robust to this.
James Egelhof
Which loops back into his Fed view, by way of a quote from a Fed chairman of the 1950s and 60s.
If nobody chills out, the Fed has to push harder
if the Fed's objective actually is to sort of take a little bit of the punch bowl away, sort of the old William McChesney Martin quote, that they may have to take a little bit more of the punch bowl away to get people to chill out a little bit.
James Egelhof
7. 90s Growth, 90s Rates
Tom Keene asked whether a 10-year Treasury yield near 4.95% to 5% is the new normal, and whether that is acceptable.
The question from the desk
The 10-year Treasury yield, 4.95%, 5%. Is that kind of the new normal? And is that OK?
Bloomberg Surveillance
Egelhof's answer is that the level follows from the growth rate, and the growth rate is the thing that has changed.
A higher neutral rate is the consequence of high growth
our view for a while has been that we are going into a period of prolonged high growth. And that means that the neutral rate, the rate that the Fed has to maintain on average over time, is going to be higher.
James Egelhof
The version that fits on a card
If you want 90s type growth, you might have to have 90s type rates.
James Egelhof
He says some of that is being priced already, and that his buy-side clients have started asking where the 10-year and the 30-year belong in a world of high productivity growth. He allows room for a rally — Fed credibility and any stabilization in the war would both help the 10-year — but not a return to a much lower level of rates.
Bonus Insights
A computer scientist doing macro
The hosts noted his undergraduate degree in computer science from Cornell and a graduate business degree in Chicago, and asked whether he liked math.
I do like math, but I find in this job I'm mostly reading Truth Social at times.
James Egelhof
He added that it is not always helpful, and that he aspires to it being useful.
Egelhof's bottom line is that the US expansion is intact and self-reinforcing, that inflation's stickiness is inertia rather than an energy shock, and that the rate environment people are calling restrictive is what high growth costs.
Products, Companies & Tools Mentioned
Federal Reserve (Hiked 25bps last week; Egelhof reads Warsh's use of the word optimism as the Fed endorsing the expansion rather than fighting it)
BNP Paribas (His employer, whose US call has been optimistic all year and whose clients include hyperscaler and data-center borrowers)
Truth Social (What a computer-science graduate says he actually spends his day reading)
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