tv Whatd You Miss Bloomberg June 14, 2017 3:30pm-5:01pm EDT
the take away from the news briefing is perhaps she is not a stub this as -- dovish as she could be. saw with theat we data. i've never seen it before, the amount of detail, completely different with the basic idea that, the one phrase she said is that we have learned a lot in the meantime. this is a fed making it up as they go. any other dates and's i've been doing this, which goes back to hamilton, more than any time i have seen, they are making it up as they go. matt, tom just said he is making it up as they go along. how are they doing with improvisation. >> when i looked at the statement, they changed the
reference to the improvement we have seen in the labor market from just the past several months to the beginning of the year. they have done this before especially as they are winding down the bond program. if it does not satisfy what they're looking for, they will extend the time and looking for and since the beginning, the labor was great here and we will raise rates and continue to do so. >> we continue to shout out to someone 18 months ago. that was your colleague. 18 to 24 months ago, they move around a little bit, but the slow growth environment in retail sales, is there any a 3% gdp out there for morgan stanley? >> coming from the trump
administration, you will have to take at least half of one percentage off here that remains to be seen. >> one thing we know for certain is michael mckee is a low interest rate person. a follow-up question to the chair bordered on route and i couldn't believe you said it. translate that rest. what is a low interest rate person? >> were donald trump was coming from when he said that was you prefer lower rates because you think that does more for the economy. she put it in the context of the economic developments she has been share under and served on the fed under, where low interest-rate or testified. she did not talk about it in the longer term. i was slightly adjust what you said about making enough best signal along. it is more like the reasoning may be adjusted. shouldlieve inflation
respond to lower unemployment, it is alive, and that is why they are continuing with the same great path they have had. it has got to kick in at some point. all of the disinflation numbers are one offs and we will see inflation pick up at some point. we have got to be doing what we have doing all along. me, this is really important, folks, mike's observation that there is execution, dead on their plan, versus the underlying theory, it is original that we are dealing with right now. in life isy want maximum optimality. have a painted themselves into a corner with the detail on how they will unwind a balance sheet? onlyey haven't they could -- they could always change that met could perhaps speak to this with someone with a trading desk, they moved up the option
of something they could slide in in between interest-rate increases if they feel the time is not exactly right but they do not want to deviate from the path. ofy brought forward the idea normalizing the balance sheet from when we expected it and as she set close to the end, it could begin in the relatively near future. >> what does that mean? the next live meeting? >> to us, it means september. a language they used in the statement today, let us know it would take a lot for them to decide otherwise. evolvedas the economy in line with expectations, we are going forward with the balance sheet expectation plan. this is the same language they used all throughout 2014 as they were bringing down on purchases throughout the year, they used the same language. >> what do you think it would
take? >> they expect inflation to much higher through the end of the year, they now have the fed that unless theyflation this to see progress -- at point, to take a lot. >> the amphetamine mark it isn't going to be great from the unwinding of the balance sheet. to watch would like the yield curve flattening cometh that as watching paint try to you, that is probably what will happen to interest rates over the course of the tightening cycle. the market is telling you something clearly. saying maybe the fed should pay
little closer attention to the inflation data. this is something a little more serious. to hikeed continues interest rates while this is going on, the yield curve will -- >> we are back to eisenhower. this is one of the greatest chart. 10 year yields back 70 years. it goes back to early eisenhower just after truman. the low yields of the 1950's, up we go to voter inflation and we roll over with and great moderation. are we still in great moderation? >> absolutely. think the bull market continues until inflation tells us otherwise. what i heard early in the press conference was the idea that inflation is made up of one off things. i do not believe i have heard that through this chart. because --onalizing
where's my cell phone here? it is getting charged. my cell phone bill is lower and chair yellen will change her belief for the timeline of inflation. i do not i it for a minute. >> if we were talking one off, it would be a different story. if you really consider them to be one offs, they are still falling. >> this is critical. is chair yellen making policy off of the new theory at t-mobile? is that what it comes down to? ofshe is ignoring the policy everyone lowering their rates. she says the thing -- these things are not truly to inflation or disinflation. it is a new definition if you want. i go back to the core philosophy. wages.ld coach up
inflation will pick up and that is the firm belief. is the reason they are making policy choices. it is the reason they think rates will continue to rise over the next 18 months. >> they renew their position to the phillips curve. how breakevens are coming in a little bit, this is a five-year break even. the market is paying attention to the t-mobile cell phone you pay one price and get all the data you want. this recent weakness goes beyond weak cpi. what else does it reflect? >> when you look at the timing and breakeven inflation rates, it again after the march fomc meeting. the fed raised rates and tells us we will keep raising rates? the market is telling you this is not right time to raise rates. if the fed wants to continue to
do this, we will bring down expectations. tom cole and for everybody tomorrow morning, you need to steal this chart. if you are on global wall street, it is a killer chart that scarlet just all from matt. daniel curtis constructed this beauty for us. people,ant to dazzle this is for morgan stanley and you can do that. >> we are giving full credit, we are not stealing. we will have more with matt. .ere at morgan stanley michael mckee over at the fed, the international economics and policy correspondent will be with us as well. >> she will join us here. kathleen coming on the tactical application.
tom: good afternoon. we have been looking at these fed statements and an important press conference by chair yellen. we will finish up a conversation today. , at morganth us stanley and joining us from boston is the codirector of to first fix in, where she is also a bond fund manager. with us with the federal reserve is kluber's's international economic policy correspondent michael mckee. let me start with you. when the fed raised rates in march, we called it a dovish hike.
is this still dovish? she sounded a little more hawkish than people expected. >> i think she sounded moderate. everything was about being gradual, about moderate growth over the next few years. fed's -- setng the any expectations that they would veer off course from the very gradual move up in interest rates at the short end. >> so the market has a different opinion on this. where they were caught by surprise. is overnteresting thing , exactlyis expected what happens from 2004 2 2006. three quarters of the way through the cycle, between the overnight fed funds rate and the
two-year yield, this is exactly what is typical in the cycle. earlier thanpening usual but it is typical. tom: michael mckee, what did you learn? we threw it up earlier. what was the nuance that you saw? michael: no nuance except a 1/8 .f one percentage point move perhaps that is the key, that the fed is telling you it is on the course and sees the economy growing at a continuous 2% rate with unemployment falling and inflation rising and it is prudent for them to continue to raise rates. tom: you have once again done it as you did for years. the track record of your multisector fund is an act of god over the last 18 months. are you doing generating
total return in your multisector fund to put you in the 99th percentile? >> thank you. we are looking for where there is good value to generate that. it has been a fair amount of hard work. there is not one particular area that stands out. but if you look selectively across the credit markets, you could definitely find some spots. we obviously don't own treasuries mainly because there is a lot of risk there. i think the opportunities today are away from the u.s. emerging markets, local currency, and also emerging-market corporate i think have in very strong performers and actually look healthier than the u.s.
tom: is janet yellen central banker to your international world? and you look at emerging markets, the great mystery to me is the strong mexican. what does that signal to someone like you? >> it tells me that capital this flowing into mexico and that there is some cash on the sideline. to bere do you want positioned when it comes to treasuries or asian bonds? matt: we like treasuries. which is great. i love this. matt disagrees. all of a sudden it is a good program. >> well, we're talking about treasuries versus wounds -- boones. we would disfavor them and jgb. there is yield spread going on there but we think capital will come into the u.s. in search of higher yields and if the that will continue to march forward
and hike interest rates during a low-inflation environment am i think investors will protest that. do you agree this will sustain as a low-inflation environment? >> i think the perfect storm is brewing out there. there are very good reasons why inflation should be picking up. partly what janet yellen was saying about wages potentially moving up, we have not seen it yet. clearly with the unemployment rate where it is, you should. also just infrastructure. you think about how old everything is and it is just a matter of time where the output gap, the capacity there really is not. >> interesting. michael mckee's 401k underperformed. you have got a question? do not think she was
talking about you being old in terms of infrastructure. we have the details of what they want to do. is the market going to be able to absorb what the fed is not buying? are we going to see a significant reaction in yields? >> well i think they have got an additional lever and they are telling us they are willing to use it. they are saying so with a focus on as it is needed. it should not overwhelm the market here at much of what they are saying is keeping the market very tame. that is the real problem. the markets are very complacent and way too tame. we get a surprise with the inflation numbers, the problem
boarduations across the are stretched. it is simply than a question of bond, that the low absolute yields and low coupons are pretty clearly going to generate negative returns as soon as the market grabs hold of that kind of pressure coming in. then it is watch out everywhere. >> i just wanted to point out to , i havent, volatility got a move index and the blue line is coming down as treasury yields come off. matt, what do you make of it? matt: the markets are forward-looking. that is asomething surprise. there was a little bit of change in surprises that were different than our expectations. of whatet is well aware is going on here. the more interesting part from my perspective of what the fed put out today was the admission
that in the case of the next downturn, they will go back to the balance sheet. they will probably cut to interest rates when they do that, but they will go back to the balance sheet at some point. tom: really suggesting the idea of a phillips curve. from where you sit, is the role still valid and are we going toward a rules-based fed? those are separate questions. it is hard to say if the rule would apply right now. if you plug in a current forecast coming you get a tailorable rate of about 4.2%. it is not appropriate for the economy it would seem. that does not mean we will not see a rule-based fed if the president does nominate the people that have been talked about. have aall of them
rules-based mentality parent might has been talking about it for years. could be asian -- an additional policymaking from a new fed in 2018. .> it all depends on the policy it depends on who will be the fed chair 2018, whether it would be janet yellen or not, she said she has not had a conversation about future plans. i want to get your final thoughts here on this fed day. >> i think interest rates are heading higher. with a veryut there quiet market this summer. there is volatility ahead. >> before we have to deal with the debt again. i understand why people think interest rates are low. i'm not sure why -- investor great treasury close to 2%. but investors are hesitant to
buy into the equity market at all-time highs. the fed is cautiously optimistic and investors will be cautiously forced into the markets. yields are probably not going much higher from here. >> all right. kathleen, codirector of diversified from boston and at the fed, michael mckee, thank you for everyone. on tv friday, the bloomberg real yield will be live from blackrock's trading floor in new york city. jonathan ferro will be sitting down with rick and jeff the firm has $5.4 trillion in asset a merger -- under management. they give us their perspective this week. well.the boj coming up as this friday etobicoke p.m. new york time in 5:00 p.m. in london. this is bloomberg. ♪
scarlet: i'm here with tom keene . we want some final thoughts. tom: the most important guy today for me is joe weisenthal. phd, the guy with a pink t-shirt is janet yellen's biggest headache. >> more than anything else, you presented as a joke, but i thought it was striking that at least two times, janet yellen brought up the disinflationary impulse coming out of the wireless industry. i do not know whether it is real or not, but it struck me that she clearly does not believe inflation will remain depressed and found a few compelling pieces of evidence in her view that this was not a permanent
state of affairs. >> i thought the questions were quite good heard what struck you in the room? what was one thing that stood out over that our, the 58 minutes? >> think she kept coming back to us the disinflationary impulse we have seen are transitory, one offs. they expect inflation to rise back to were the 2% target, which gives them a reason to keep going with the tightening path that they are on. that point was made over and over again. >> this will keep it deployed month-to-month. it is polarizing. >> it might -- my take away is that the fed has kept the 2018 rate projection intact. we don't know who is going to be in charge of the fed after 2018 p we do not know if it will be janet yellen. >> i agree with you it is coming up to us all of a sudden. >> we want to thank everyone for joining us.
high following the fed decision to raise rates. joe: if you are tuning in live on twitter, we want to welcome you. we begin with market minutes. stocks took a leg to lower as janet yellen began speaking, but then recovered off their lows. the dow closing at a record high. points,500 losing 2.5 the nasdaq losing .4%. the headline indices and not acting with too much of
volatility today. scarlet: i'm looking at the different sectors. you have defensive industries faring better. energy and materials, commodities doing badly. this is consistent with that idea they are a drag on why inflation has not really pick up the way that so many people expected. stocks were down 2.5% at one point. they have come off those lows. sincen had its worst day april, oil prices decline. h&r block climbing 8% after beath-quarter results estimates. president trump's effort to simplify the tax code could be a fly in the ointment going forward.
alexion pharmaceuticals up almost 10%. investors have reason to hope new management will stabilize the trouble drugmaker. biogen off by 3% for the same reason, losing that management. in terms of home builders, they finished higher by .9%. what was noticeable is the 10 year yield continues decline. jeffries noted that the housing sector should continue to improve. joe: let's look at the government bond market. we are looking at the two year yield. as we got immediately mediocre, unimpressive,
underwhelming inflation data. sales.etail 2:00, the fed statement came, not a lot of action, but then 0, janet yellen sounding hawkish in terms of her inclination. similar with the 10 year yield, the same drop in the morning, the pickup. it did not rise as much as the two-year, and you see that reflected in what is going on. this of the story of the 2-10 spread. we are at the lowest level since last summer, not too far from the lowest level post crisis. if it were to invert, that would be a sign of concern. something to watch as short-term
rates are rising faster than long-term rates. we saw a weaker dollar earlier on with softer inflation data, retail sales data. stronger, yen stronger, then janet yellen started speaking. we saw the gains for the commodities currencies soften a little bit. brazil was the strongest emerging-market gainer after that weaker than expected data. had lost some ground this afternoon as janet yellen was speaking. here.ities a story very good characterization
of the action. let's have a look at commodities. the big mover had nothing to do with the fed. that was crude oil. down nearly 4%. brent crude in a death cross. increase gasoline andntories, gold down, silver gaining. those are today's market minutes. "what'd you miss?" as we have been discussing, the fed forged on with an interest 25 basis points and maintaining a forecast for one more hike this year. the fed laying out its balance sheet roll up plan. economists it did not know
whether we would get details. stayed at three hikes this year. 2017 headline and core inflation estimates revised down a little the fed saying it is monitoring inflation developments closely. joining us now is a professor at princeton university. he was also the vice chairman of .he federal reserve thank you for joining us. what is your key takeaway? >> the little bit hawkish must come because everybody's expected 25 basis points from the somewhat greater detail about the balance sheet normalization that i and many
people were expecting. the fed indicated today the possibility -- actually, the thing that was striking was janet yellen dismissing some of these mediocre inflation prince and seemed inclined to see dismissingm, price depression. i would not be surprised. if you are chairman of the fed, you don't want to get on television and say i have no idea why the inflation rate is so low. that is a bad thing to say.
i certainly thought and think based on fundamentals that we should be seeing the gradual rise in inflation we were seeing up for well, but then stopped. i find it puzzling. there are these special factors that come and go, and when they go, inflation goes up. julia: is she right to hold that line in that case? >> you mean hold the line on interest rates? , and keep talking up the market in a sense, not reading more into a weaker than expected inflation print. is she right to say we will carry on here? >> i think so. with the fed is about is taking a little steam out of the balloon. ath the unemployment rate
4.3%, even though inflation is , they areanywhere worried about overheating in the economy. monetary policy come you have to be thinking over the next two years, so they want to let a little bit of the air out. got arkets are undoing bit, bond rates are going down lately, although that is a question of whether it is pessimism or optimism. the stock market is doing really well, so it is a delicate operation. it does not want to puncture the balloon. objective, but also slowed things just a little bit. if the markets are not cooperating, which they are not, it remains for janet yellen and her colleagues to stand firm and say this is what we are going to
do. that's the point. so far financial conditions have been easing. she was asked this in the press conference come how closely they watch financial conditions. she said we don't, and sure they do. >> there are too many things you could think by that. i'd like to use the word listen rather than watch. the fed is watching the markets. they are watching it carefully and assiduously because that is the way they do their work. they said they will make a monetary policy decision, but the markets determine the economy. they will not let the markets dictate to the fed. julia: really? >> that is a good attitude to take. julia: does she really have that
attitude? it seems they are watching the market closely and are fearful to not to stabilize it. >> they don't want to destabilize it. they are trying to dutch the markets -- nudge the markets in the direction that is favorable to the fed. what would that mean? i would not say crash the stock market. get bond rates going up revenue and going down. of the the announcement balance sheet policy which came faster than i was expecting is a step in that direction. get the markets thinking that the fed will be throwing mbs out thered sooner than the markets thought. joe: thank you very much. coming up, other central
scheduled for tomorrow. four others transferred to the hospital. a second congressman sustained minor injuries and was also transported by a medic unit. that congressman was not identified. as aunman was identified 66-year-old james hodgkinson. the white house to congress, reaction was swift. >> everyone who serves in our nation's capital is here because above all they love our country. >> again, it is in the family. it is an injury in the family. >> we are united in our shock, anguish, an attack on one of us is an attack on all of us. >> meantime, bernie sanders says he was informed that the shooter
apparently volunteered on his presidential campaign. sanders released a statement that reads in part "i am sickened by this despicable act. let me be as clear as i can be come a violence of any kind is unacceptable in our society and i condemn this action in the strongest possible terms." is activelyunced it investigating hodgkinson. of its employees opened fire at a san francisco package delivery facility today, killing three coworkers then himself as officers closed in. san francisco police say two other people were wounded. authorities have not determine a motive for that shooting. london police say the death toll in that massive apartment tower fire has risen to 12 and is expected to rise. injured, several
hospitalized in critical condition. the fire broke out at the 20 story tower shortly after midnight. saidsses and survivors they banged on windows and scream for help. the justice department special counsel met today in a secure room with richard burr and mark warner. they reportedly discuss the investigation into russian interference and last year's presidential election. in a statement, the senator say the statement was constructive to meet withard the house intelligence committee this week or next. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. julia: "what'd you miss?"
twist and turns as janet yellen spoke at the fed press conference. the dollar spot index erasing that weakerollowing than expected cpi retail sales data, then taking up as janet yellen spoke. great to have you on the show. on whyto pick up inflation is doing what it is doing and how you forecast in that environment. you know what is going on? >> i was a forecaster at the fed. not a very good forecaster. what the market is looking at with respect to the most recent round of bad data is there is not a china issue, not an , and on market issue
the inflation side, unemployment is low. janet yellen's cited some special factors, but you always have something and there seems to be no reason. i think the market would have at 6%,re comprehending 6.5%, but why banged the drum so much that things are going to go back. was saying there is no basis for that. shape of credibility at risk by saying it is transitory? >> two years ago, they look like , thenere going to hike
their two-day event happened and they backed off. right now they are determined to be steady as they go and tell the evidence is overwhelming that they have to go the other way. when inflation was deviating in one direction or transitorythey say -- the fact they can't identify what that underlying factor is, does that point to something more structural or calling into question the models that are being used here? >> it does raise the possibility that is the case. data is weak and then comes back, but when there is no sharp event or move in the data telling you it is something more structural than that. u pickup when pack
inflation is low. whenages are disappointing headline inflation is kind of high. julia: goldman sachs put out a note debunking the myth and inflation. overwhelming. what does it take for the fed to say we can't hold the line here and have a problem in terms of the weakening data? >> i think claims have been important. you can always look at initial claims and say it is still coming down. if they began to reinforce each other in the wrong direction, or if some of the survey data that everyone keeps pointing to that remains fairly strong, if that turns around, then the fed would
russell 3000, the copper gold ratio, some still going up, some going down. you are looking at all different asset classes, not just fx, so where do you see the postelection optimism most intact? what trends do you see strongest? >> where investors see a story they can understand and extrapolate is the equity market. until now, it has been robust because the view is trump can obamate and reverse what was doing, probably good for equity markets. i think the fiscal story which was dominant november, december, january has disappeared and has taken the dollar story with it. the other story that is interesting but under examined
is the rest of the world continues to do well. everyone thinks china will fall over and yet it continues to be robust, so i think we are coming to a point where we focus more on what is happening outside the u.s. won to show you a chart of emerging market currency index and emerging-market stocks. look at that. rise was on the weaker u.s. .ata when you look at a chart like is gettinging merck excited about lower for longer, is there an opportunity here or do we worry about risk asset? >> if you think the risks are waser than chairman yellen laying out, then gm does look
attractive because it will mean that the program the fed has outlined of tightening on the short end and the long and with balance sheet reductions is unlikely to be obtained. some of the growth abroad is exogenous. it is not just the fed. you have seen changes of government and things have turned out to be stronger than expected six months ago. scarlet: has emerging markets gotten extended? >> not yet. we will watch when it does, if it does. thank you for joining us. >> my pleasure. coming up, we had to washington for the latest on today's issuing -- shooting. an update from washington. this is bloomberg. ♪
>> it is time now for first word news. the fbi has taken over the investigation into the shooting for an annual charity congressional baseball game. louisiana wasof among those wounded when a gunman opened fire at a baseball field in arlington, virginia this morning. flakea jennifer jeff describes seeing steve cohen least lying on the ground. >> when we heard the shooter was and, i ran low out to steve started putting pressure on the then we did that
until the medics arrived. congressman scalise remains in critical condition. is identified as 66 are old james hodgkinson and were shot and killed by capitol police. congresswoman gabby giffords released a statement following you serveting, "if the institution of congress, you are connected to your colleagues, current and former come by a shared sense of service to ideals far greater than yourself. the shooting is an attack on all who served in all blueprint is a paid in our democracy." a different shooting left six people dead including a member of her staff. president trump amending his travel ban to adjust to arguments being made at the u.s. supreme court.
is considering whether to revive the band which would suspend entry into the u.s. by people from six mostly muslim nations. under the and men men, the 90 day band won't start until court orders currently blocking it are lifted. thousands of syrian refugees returning home for a visit during the muslim holy month of ramadan after turkey temporarily open border crossings. turkey has taken in more than 3 million syrian refugees since the start of their country simple or more than six years ago. the official border crossings were shut and 2015 to prevent a spillover of the conflict and stem the flood of refugees. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: let's get a recap of today's market action. stocks sagging lower, except for
the dow. , but the action classes wheresset we saw the dollar is raise most of its losses, soft inflation, retail sales numbers, a shock and when janet yellen begins speaking at the news briefing, she sounded more hawkish than some anticipated, so that undid earlier trades. joe: today's a shooting at a congressional practice field left steve scalise and four others injured. the shooter, 66-year-old james hodgkinson, was to claire dead. everyone who serves in our nations capital is here because the ball call they love our country -- because above all,
they love our country. >> it is an injury in the family. >> we are united in our shock, anguish. an attack on one of us is an attack on all of us. joe: for the latest, let's bring in our national political reporter from our d.c. bureau. today's events have any impact on the security protocols for congress? that is a discussion that will be ongoing. lindsay grande suggested there may be some security changes in the future, but at the end of the day, congressman are well protective and security protocols remain strong and there is no cause for concern.
members had a briefing earlier today and some of those issues came up, but the remarkable thing is that outside the capitol complex, lawmakers tend not to have protection with them and less they are high-ranking individuals. scarlet: today was not a normal day in washington even as the federal reserve concluded its two-day meeting, but to what extent do we know whether things will go back to normal tomorrow? the game they were practicing for still slated to take place? >> it is slated to continue. members are taking this in stride saying it will be an event not only for charity as it was initially intended to be but they were on of the victims of today shooting in that event as well, so it will happen.
thear as changes to congressional schedule, we know the house has changed its schedule. speechese only those we heard earlier from paul ryan and nancy pelosi. the will be no votes in the house on friday. they canceled those. the senate seems to be proceeding as it was initially before the shooting. julia: what are people saying in d.c. about this? the suspect involved allegedly asked whether or not those that were playing the baseball game were republicans or democrats. there are suggestions his social media profile was particularly anti-republican. we aredering if what saying? abouty have not spoken the motive, but case on social media postings, this does appear
to be a figure on the political left. know leaders in congress are not politicizing this, there are those on the french you want to politicize this and i suspect it will continue as it does every time there is a tragedy of this sort. congressional leaders are not doing that and hopefully that will continue. there is a lot of talk about diving down the rhetoric -- and dialing down the rhetoric. there is always a fear that he did up rhetoric and lead people to do crazy things like this, so that will be part of the conversation going forward. it was six years ago when a congresswoman were shot in the head. that did not change the debate surrounding gun laws at all. it is unlikely this will, but at the very least, there will be at the bait about it. the house was supposed to vote on a measure introduced by a republican congressman to ease restrictions on silencer
guns. julia: could you give us some perspective here? in the u.k., we have seen violence towards politicians. just how rare is this? you mentioned one case in particular. >> it is certainly rare. it is not unheard of. somewhere over 90 americans get shot every day according to statistics from the brady campaign which works to prevent gun violence. lifeiolence is a fact of in the united states in a way that the rest of the world is shocked and appalled at. that is something that many lawmakers view as a cost of the freedoms in the second amendment , so to the extent there will be any fundamental change around that, it is unlikely an event like this will change that. the secondish amendment to much to make a major change to reduce the
hawkish than expected. the feds this say about the siding to maintain maximum optionality by not changing the forecast. downplayed the decline in core inflation so that came across hawkish. investors are still thinking untilhey will wait december to raise rates a third time, so this chart shows the odds of december versus september rate hike. dropped a lot. december picked up a little bit. the odds of the september hike had been above december odds since the march fomc meeting. we have not seen those december odds and jump above september odds since 2016. this is a significant shift and startedthe fed will get
with the balance sheet unwind as soon as september. wait to see how that goes, then rates at third time in december if the inflation outlook picks up. surprise from yellen, the inclination to see through inflation indicating another hike this year. is basically market-based measures of whether we will see inflation go down or up. what are the instruments here and what is it telling us? the fed is targeting 2% inflation, so were looking at options that pay out if inflation is under 1.5% or above 2.5% over the next five years. you have .5% on either side of the target. after the inflation data this morning, these options suggest that inflation is twice as
likely to end up below 1.5% and above 2.5%. back the way it was in 2015 and 2016 when oil was crashing. still lower, but not in the fed's preferred direction. matt: that's right. if you go slightly more likely below target to twice as likely all of a sudden in the span of a month, maybe that is something you would find concerning come but they don't see too concerned about it. julia: we have been talking conditions and i would argue they are loosening, but weaker inflation and raising rates, real rates are coming back to neutral from negative territory, and that's the chart you will be talking about. >> this is the most interesting thing we have seen over the last few months. the white line shows the real federal funds rate, so adjusted for inflation. fundsd has raised the fed raised twice this year, 50 basis
points of tightening, but the core inflation rate has also dropped, so they have gotten 100 basis points of tightening in real terms. the blue line is the estimate of the real rate of interest. they have close that gap quickly. janet yellen said policy is a , so if they do another rate hike, they might be back at neutral, and that is it. joe: great chart. , thank you very much. julia: treasury secretary steven onchin spoke to charlie rose inflation and regulation for smaller banks. this is bloomberg. ♪
scarlet: the white house as federal agencies to remove obstacles to of apprenticeship programs as part of the effort to improve workforce development. this week's workforce development week. president was supposed to hold an event at the department of labor that was canceled, but there were meetings held at the white house. >> there were. by thatovershadowed tragedy at the baseball field, the congressional baseball field , but top ceos still gathered for a meeting led by first daughter yvonne co. ivanka trump, gary cohn also
at this meeting. an hearing they could had announcement and directive coming from the white house regarding apprenticeship programs tomorrow. you the ceoay for who works in the keystone pipeline and the electrical industry field and what he had to say following the meeting of the white house. these apprenticeship programs are created through business working with government, so it is public-private initiatives focusing on the skills needed by each industry working with the bor to makeof la sure those skills match the demand not only here, but coming in the future. >> all of this really got started on the campaign trail trump put out this
initiative and several months top ceos gathered at the white house along with wilbur ross to discuss it. the first daughter then i am told from a source close to the situation convened a meeting of her own and took some input from angela merkel. according togain policy. workers,d skilled workers who have more than a high school diploma and can get vocational training, so we are doing apprenticeships and comeng, tooling, mechanics as a people can earn a good living, get a two-year degree, work for companies like ours and have the ability to get that degree debt and have the skills. the white house will formally unveiled directives.
it is unclear whether they will need congressional approval. i am hearing the higher education reauthorization act could be expanded to include these programs as well as vocational training. willingthe white house to advocate for any money behind this? it seems like they advocate for things, but when budget priorities come out, it is usually cut. is there any spending that will be dedicated to these programs? >> i asked several sources working on this that very question. i am hearing, several republican proposals in congress could be added to the budgetary the business sector is not holding its breath for congressional support. we know how slow congress moves. hoping athey are directive from the white house could spur initiatives between the private sector and the government sector, that
public-private partnership that will ultimately lead to more expansion in vocational and apprenticeship-style programs. thank you so much. lots of those private-public partnerships coming into play here. if it the question is will take off like a rocket. "what'd you miss?" said the consumer financial protection bureau needs oversight. speaking to charlie rose, he talked about the importance of oversight. >> there should be a board that oversees the consumer protection bureau, very similar to the fed and the fdic, or the head of the agency should be basically be able to be removed at will by the president, and those are the two checks. the other thing is we think the funding should not be a blank check from the fed.
we think the funding should go through congressional review and approval. isia: he also said he focused on driving growth in community banks and they should not undergo the same stress tests as their biggest peers. >> what are the recommendations andend make to drive growth community banks? if you look at the u.s. banking --tem, 50% of the assets what we want to make sure is that we unlock the burdensome regulation on those banks of bacon make sure they are lending in their communities too small and medium-size businesses. people are saying unemployment is low, the markets and thereot, and why, have been no crises since 2008, why do we need to fix it if it isn't broken?
>> for a lot of people come the system is working, but there are a one-off a lot of people that the system isn't working for. lowough we have unemployment, there are people who have left the labor force because they can't find jobs and a lot of people who for the last 10 years have not seen wage are focused onwe creating sustained economic growth of 3% or higher, getting the economy back to where we think it is, and that is a combination of tax reform, regulatory relief, and trade. there has to be balance between protecting taxpayers and lifting regulations so that it will enhance growth, how do you find that balance? >> that is what this assignment has been all about. sessions.ld listening this is not just about the treasury department printing an academic study. we have gone out to 18 different groups, many with 50-1 hundred
people here, take in written comments, went out to consumer advocates, regional banks, all the regulators, and we try to come back with recommendations where we balance while making sure we never put the tax payers at risk and make sure our banking system can be especially that small and medium-size businesses have the proper access to capital. that was steve mnuchin. you can watch the full interview tonight. needcoming up, which you to know for tomorrow's trading day. this is bloomberg. ♪
high. bes wish national bank will announcing is decision at 3:30. joe: the boe an announcement at 7:00 a.m. some interesting tension between mark carney and the boe. julia: a rock and a hard place once again. earnings before the bell tomorrow. scarlet: that does it for "what'd you miss?" julia: we continue with special coverage of nintendo's e3 presentation. joe: have a great evening. this is bloomberg. ♪
critical condition after a gunman opened fire as republicans practice for the annual congressional baseball game. a second congressman sustained minor injuries. was james hodgkinson from illinois. capitol police. a gunman who opened fire at a ups in san francisco was an employee according to local police who say three employees were killed before the shooter killed himself. police say he was armed with an assault pistol. president trump amended his travel ban to address arguments being made that it would expire today. the 90 day band won't start until court orders blocking it are lifted. in london the death toll from the massive apartment tower fire is up to 12.