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tv   Bloomberg Markets Balance of Power  Bloomberg  September 26, 2017 1:00pm-2:00pm EDT

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market conditions, given that we do not fully understand how it came to be so modest in the first place. although the evidence is weak that inflation response to resource utilization, the risk is one that we cannot entirely dismiss. what are the policy implications of these uncertainties? for one, my colleagues and i must he ready to adjust our assessments of economic conditions and the outlook wh new data warrant it. in this spirit, fomc participants like private forecasters have reduced their estimates of the be sustainable unemployment rate up sharply over the past few years. in response to the continual flow of information about the always changing economy. to the extent these assessments change over time, so too will be out look and judgment about the
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appropriate stance of monetary policy. importantly, even if resource utilization is currently lower or if longerate, run inflation expectations are running at levels consistent with longer run pce price inflation somewhat below 2%, the fomc can still achieve its inflation goal. conditions, continuing to revise our assessments in response to incoming data, with a net -- would naturally result in a policy path that is somewhat easier than now anticipated. and appropriate course correction that would reflect our commitment to maximum employment and price stability. similar considerations apply to other important sources of uncertainty. such as the value of the neutral , that is the rate
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inflation-adjusted level of the funds rate consistent with keeping the economy operating on an even keel. estimates of this rates have declined considerably in recent years. by some estimates, the real neutral rate is currently close to zero. but the neutral rate changes over time as a result of interaction of moody forces, including demographics, productivity growth, fiscal policy, and the strength of global demand. so it is valued at any point in time cannot be estimated or projected with much precision. my fomc colleagues and i will therefore need to continue to reassess and revise our assessments of the neutral rate in response to incoming data and adjusting monetary policy accordingly. formulatedpolicy be in the face of such significant uncertainties? in my view, it strengthens the
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case for a gradual pace of adjustments. moving to toluca lake, risks over adjusting policy to head off projections that may not come to pass. a gradual approach is appropriate in light of subdued inflation and a load neutral real interest rate, which implies that the fomc will have only limited scope to cut the federal funds rate, should the economy be hit with an adverse shock. but we should also be wary of moving too gradually. run well continue to ahead of the lr run pacee estimate would be sufficient on average to provide jobs for new entrance to the labor force. thus, without further modest increases in the federal funds rate over time, there is a risk above the labor market could eventually become overheated,
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potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession. persistently easy monetary policy might also eventually lead to increased leverage or other developments with adverse implications from financial stability. for these reasons, and given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2%. to conclude, standard empirical analyses support the fomc's outlook that with gradual adjustment and monetary policy, inflation will stabilize at around the fomc's 2% objective over the next few years, accompanied by further strengthening in labor market conditions.
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the outlook is uncertain reflecting among other things, the inherent imprecision and our estimates of labor utilization, inflation expectations, and other factors. as a result, we will need to carefully monitor the incoming data and as warranted, adjust our assessments of the outlook and the appropriate stance of monetary policy. but in making these adjustments, our longer run a jet -- objectives will remain unchanged. namely to promote maximum employment and 2% inflation. thank you. [applause] >> thank you, janet for that meaty rep -- presentation. as i was listening, i was thinking how could there be any questions?
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do you have your question cards, please fill those out. while we are waiting for those, i want to ask, given the presentation on the inflation model and the reasonable expectation that the 2% inflation target would be achieved overtime, what would you need to see in the inflation data to diminish your confidence in that expectation that you would want to lower the expected path of the policy rate. chair yellen: i would just say we would be looking carefully at a whole range of data, both on inflation developments, but also on overall economic growth and the labor markets. so, as i indicated, i think my main message about what we have been seeing is that 2017, the shortfall inflation, is a mystery.
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inflation was, running just under 2%. core inflation. and then we had a string of several months in which inflation was unexpectedly low. is that inflation data in the coming months on a monthly basis will move up somewhat closer to where 2% -- to our 2% objective. remember, inflation data is very noisy month-to-month. too much, this is not in the weeds, but there is residual seasonality. >> yes there is. chair yellen: and inflation data that will tend to result, i believe, and lower inflation readings in the second half of the year. interpretation
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of monthly data difficult. finally, -- we have the devastating hurricanes that have reached -- rate so much havoc for families and communities and our country, and that may be pushing inflation up, at least for a couple of months. we have seen it has had an effect on gas prices. yes, we will be looking at inflation data very carefully and trying to see what it tells us. but, there is no easy read, i think. as all of you know, we look very carefully at a wide range of statistics. but, the data is noisy. it is not going to be a magic bullet that is going to tell us the answer we will be looking at it. let me just say, a string of itsually low numbers would
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is in the direction of making us worry more about inflation. but the labor market is also relevant. aboute been running at 175,000 jobs a month for this entire year, which is well above 120,000 pace that would be with a stable, say, unemployment rate or label utilization. we are on a path, intentionally so. this is consistent with the fomc's projection in which the labor market is getting tighter, unemployment is likely to drip, and you can see that and our level we below the think is a sustainable in the longer run, that is good. but is a force that will tend to push against inflation back to
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2%. but there are also risks of a significant inflation overshoot that could leave us behind the curve and having to tighten policy faster than would be ideal. we will also be looking at labor market data. for example, if it were surprising in terms of more strength than we had anticipated, that would tend to add a bit to the risks on the side of waiting too long. sorry, i cannot give you a clear answer. but those are some of the things we will be thinking about. >> staying on the topic of inflation, you mentioned that it would be dangerous to see a material decline in inflation expectations. do you view the possibility of an inflation overshoot as influencing the credibility of the 2% target? we think it is
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extremely important that the public understand that we have asymmetric inflation of jack should -- objective. we would like to be at 2%, but inflation is variable. sometimes inflation is going to be below 2%. sometimes it is going to be above 2%. identically about under shoots and overshoots of inflation. shoot, had an inland or it would not be a tragedy to see and overshoot. in fact, it is something we ought to expect. did change our statement of long-run goals where we articulated our inflation objective back in 2012. about two years ago, we added the word symmetric to the language about our inflation
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objective to emphasize 2% is not a ceiling. sometimes people think, we would anything upo have to 2% inflation, been anything above that is absolutely terrible. no, that is not right. 2% is our goal. it is symmetric. just as we do not want shortfalls, we do not want overshoots but regard them as the same. thank you. staying with inflation. should the fed differentiate a lack of inflation caused by positive supply shocks versus negative demand shocks? well, i guess my basic answer would be no. that we have the 2% inflation objective and even if low inflation is caused by supply shocks, whether back in the second half of the 1990's we had
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rise in productivity and other positive supply shocks. if it is caused by supply shocks, we should still want to get back to 2% inflation. part of the reason is that depending on the average level of nominal interest rates in an economy, it depends on the lot -- on the average level of inflation. lower inflation as an ongoing basis in our 2% we would see a correspondingly lower level of short-term interest rates. and that would be a dangerous phenomenon, especially in these times when the real neutral level of short-term interest rates is regarded as low. because if we were to experience a negative demand shock, the
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scope for easing monetary policy depends on the average level of short-term interest rates. of course, we have other tools that we deployed it we were faced with the so-called zero 2000 eight, back in when we were effectively lowered short-term rateso zero. e used asset puresthere are tooe used. but, nevertheless, reducing the scope for using our standard tools of monetary policy is not something i would like to see happen. and simply allowing for whatever reason inflation to chronically run below 2%, i think would be a bad idea. that is a good segue. given the number of questions i have seen in this stock, is the 2% inflation target too low?
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should it be higher? matterellen: this is a that quite a few academic and business economists are opining about. somethingay it is not that the fomc is currently --sidering, whether we have what we have on our agenda. the reason that this idea is getting so much attention is one that i think is important for the public to understand. suggeststhe evidence that not just in the united states, but globally, and i would say largely due to slow productivity growth which we have seen not just here but in a many parts of the world, as well as demographics, aging populations, it looks like in some sense the strength of underlying aggregate demand is weaker than it has been historically.
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is a lot ofy there intended savings relative to investment. that has pushed down the level of the equilibrium interest rate. in a world where equilibrium level of real interest rates are low, that is something that tends to mean the average level of short-term interest rates will be low. with higher inflation, you would be raising the average level of short-term interest rates .4 point. point for point. that is something that people argue could be accomplished. with a higher level of inflation i guess i would simply say that in analyzing that's, which i hope there will be research looking at it, we need to continue -- consider not only
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the benefits, but also the costs of a higher level of inflation. for a variety of reasons, higher signals, may distort may lead to more variable in volatile inflation, and impose costs on people who have a variety of reasons to take it into account and planning. it is not a straightforward decision. it is something the committee considered carefully years ago when we adopted 2%. but it would also need a serious reconsideration of cost and benefits. >> next question. it alludes to what may could be called a renewed global savings what that is holding down interest rates globally. that is perhaps also reflected in a narrow term premium. could you comment on what factors you think are causing
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the narrowness of the term premium, and how that may involve going forward? chair yellen: i guess partly the term premium -- you are talking about the united states or globally? >> the u.s.. chair yellen: we did estimate the term premiums are quite narrow. partly the fed large balance sheet was when we acquired those byets was an attempt removing duration from the markets and taking it on to our balance sheet. conscious reason for that was to drive down longer term interest rates by driving down term premium. you know, we are beginning, we have announced the beginning of a very gradual and cautious process of beginning to shrink
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our balance sheet again. but, believe that our balance sheet is exerting and will for some time some downward pressure. in addition, i think there are significant spillovers from globallyonetary policy into u.s. interest rates. purchases by the bank of japan, and the ecb, i think are impacting, making our yields look attractive in comparison with theirs. and during in capital closure the push goes down. >> related to that, what would you give us as a range of estimates as we run off, say, per hundred billion of treasury securities, how much upward pressure with that put on the term premium? chair yellen: i do not have $100 billion metric for you. say according to a
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a program ofudy, asset purchases may have lowered term premia or long-term interest rates by around 100 basis points. that does not mean that our shrinking of our balance sheet is going to raise them by 100 basis points. sheete thing, our balance is sure to end up while substantially smaller than it is now at around $4.5 trillion. it is likely it will almost surely end up substantially larger than it was before the financial crisis. there will be some upward pressure, i believe, on the term premium. i think it will be something gradual. and it will take placoverany many years. even by the time our balance
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size, theormalized in maturities of our balance sheet will probably remain longer than if we used to be for the financial crisis. i think there will be some upward pressure on term premiums as our balance sheet shrinks. but nothing like 100 -- nothing like the 100 basis points that i cited. >> plus question. -- last question. the monetary policy -- i will not use the term autopilot, but that is -- as boring as watching kenny -- paint dry, we have that taken care of. the policy rate normalization is expected to be reasonably predictable. do you think there are any downsides to that predictability and where their lessons to be drawn from the quarter-point increase meeting after meeting
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at the time when you first joined the board? other there any downsides to that degree in predictability? chair yellen: i want to be careful. i'm not sure that our path of rate increases will be predictable. the economy is capable of many surprises. we will calibrate monetary policy as i have tried to emphasize to unfolding developments in our reassessment of them. this is been a problem for us. -- for us, when we began to publish the committee's rate forecast, we thought that was something that was helpful. drew in the median and our so-called dot plot. we thought it would be helpful to the public in getting a sense of what the committee thought would be appropriate policy,
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given their view of how economic developments would unfold. i would characterize the path that you see now and have for a long time as a gradual path. but i want to emphasize, that path is subject to a great deal of uncertainty. stone,s nothing set in not for the committee as a whole, and not for any single individual who is writing down their forecast. we are all looking at incoming data. and revising our views. as i mentioned in the talk, i --iews, just over the last our views, just over the last several years, on the sustainable long run of unemployment has moved down considerably. the equilibrium real rate of interest, which is an important determinant of what that path looks like, it is also moved
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down considerably to we are not alone. professional forecasters like yourselves, you have also moved those estimates. there will be more surprises that the plot will move. there are all sorts of shocks to the economy when we started raising the federal funds rate in 2015. i believe our first thought plot suggested there were good -- there would be three or four increases that year. and there was one. in 2016, we again raised the funds rate once, although i believe at the beginning of the year the median suggested committee participants thought there would be four increases. i look back on that and i do not feel it was a mistake. i think monetary policy now, as well -- is well positioned their there were shocks. there were global shocks.
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i am not envisioning a predictable path, anything like that quarter-point meeting after meeting path. but i do think there are good reasons to think that even if not perfectly predictable, the path is likely to be gradual. one reason is that most estimate the equilibrium -- the equilibrium rate is low. that means that monetary prout -- policy, while currently accommodative and labor market continues to tighten, we have low inflation. we're not even -- we are below 2% in terms of inflation. left.not that much to get to a neutral stance it would require more tightening. but not in excess of amount.
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i gradual is reasonable. we are done. that will conclude our marks. thank you so much for being with us. [applause] janet yellen speaking at the conference in cleveland. taking questions from him. joining us from the meeting is the comic he. -- is michael mckee. you.e start with she started with gradualism. she ended with gradualism. ande was some introspection the speech today about the way the fed forecast looks at it. what did you hear from the fed chair today on inflation in particular? >> this was yellen for the defense. a lot of questions on wall street about with the decline we saw earlier this week. why they are continuing to raise rates and why their path calls for another rates move this year. she went right into it to her chu said this is a controversial topic.
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we do not necessarily understand at all. we may have made mistakes. let's listening to one of her opening lines. chair yellen: my colleagues and i may have misjudged the strength of the labor market, the degree to which longer run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation. >> then she went on to explain each one of those things, how they fed thinks about them. and then summed up by saying, basically, we may not understand it perfectly, but we have as good of an understanding as we are went to get. that is why our policy path is what it is. as you mentioned, she used the word gradual. here is janet on where the fed goes from here. moving toon: quickly, risks over adjusting policy, to head off a projected developments that may not come to pass. isradual approach
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appropriate in light of subdued inflation and a low neutral interest rate. which implies that the fomc will have only limited scope to cut the federal funds rate, should the econy be hit with an adverse shock. but we should also be wary of moving too gradually. and acknowledgment to the hawks that may be inflation could break out if the labor market continues to tighten and if we see the temporary affects of oil price shocks fade. janet yellen making the case for the fed to be on the course it is now, but saying they do not have the usual confidence they have had for years in how inflation works. shery: anything interesting that struck you from her comments? isit signals to me that she only paying lip service to the possibility that maybe we are seeing weaker inflation for other persistent reasons. she talked about the possibility
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, but she still is sticking to our cleaning -- clinging to the notions of transitory drivers of inflation. she talked about the trimmed it means, cpi for instance. i brought a chart here to show what that is looking like. we strip out these idiosyncratic factors and whatnot and use the trimmed it means that measure, we have a problem. if we go to the right-hand side of the chart, we can see the you haveeans cpi persistent weakness on the inflation front. i think the fact that we have missed the objective for so long over the course of the past eight years, they have to be cautious about saying, we are at four and a quarter. 4.5% on employment rate. we know the inflation is coming. it has not come to this point. after being wrong for a while, you have to reassess what is iving that. it was interesting to
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hear her say it is ok that inflation is overshooting that 2% target. isl: i don't know that it ok. as she highlighted in the speech, this does not give the fed a lot of leeway when the next shock hits the economy. presumably, next downturn will be something as severe as the housing. the fed will need ammunition when that kind -- time comes. i don't think she subscribes to the notion, nor do i, that the best thing to do is to raise rates. she has said time and time again in dovish philosophy, that the best insurance against having to cut rates is to keep them lower for longer now to let the economy overheat a bit. when we look at those inflation measures, we see that certainly we are not overheating. it is going to be a very challenging meeting in december if they want to push for a rate hike here there will only be, assuming we don't get new appointees to the fed, eight
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individuals who hold votes at that meeting. three of those already have expressed some real reserve -- reservations about tightening policy until we see inflation on the rebound. i don't know if we will see that given this blow to economic activity that we will see in q3. we saw it in in new home sales today. we're seeing it auto sales, resales, q3 will be a lousy quarter. at q4 will optimism be a rebound. we do not have the hard data, at least significant body of hard data by the time of that december meeting. david: michael, i want you to pick up on that. what we learned today. i want to quote from chris condon who was on the tliv blog, that yellen reese -- received a big standing ovation. it is a friendly audience for -- certainly the elephant in the room is she poked in the meeting today. everybody'sis not
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-- it is on everybody's mind. nobody has any real idea. i want to go back to something carl said about janet yellen being wrong for so long. the problem the fed has is they cannot come out and say our models do not work unless they have some other model. because none of policy is adrift. and wall street would go crazy. they do say -- they make a defensive because they do not have another idea about what is going to happen. at the same time, she has scope to do that because the fed has raised rates four times now. financial conditions are looser than they were when they began. there is no evidence that the fed tightening is hurting the economy. they might as well continue to what they think might be a neutral level. and see what happens along the way. they can adjust as necessary, if by december, the numbers are
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lousy, then they probably will not push for a rate move. david: carl, she talked about technology. what did you hear from her on that note? -- goings is signaling back to mike's point, i have bank works -- words for mike the models are wrong. but the coefficients need to be that isfor an economy now displaying the fact that we can run it leaner than the past without getting the inflation fallout and that gives the fed at luxury to move slower. they have to adapt to the environment. i suspect maybe we are trying to get the balance sheet unwind rolling to show that it has not been so disruptive that we can continue to raise rates as well. all before her term is up. we are rushingns policy for noneconomic reasons, which raises the risk of a policy mistake. david: carl riccadonna, thank you.
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michael mckee, bloomberg policy correspondent joining us from the confer in cleveld, ohio. markets react.he yields and u.s. doll -- dollars are paring back. let's get a check on the markets with julie hyman. julie: when it comes to stocks, there was not much reaction. we are seeing stocks bounce a little bit from the lows. still, off the highs they were at when they started traded. technology remains of the drivers seat, up 4/10 of 1%. you mentioned what happened in the bond market. i wanted to bring up the two year in particular. going see two year yields up, going into her speaking. we are not seeing a big move. it is only a two basis point move up. of september,th we have only seen yields fall on four separate sessions for the 2-year note. it really has been a move upward and yields over the course of
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september. it is not just the two year. we have seen a similar move in the 10 year as well. in the driversh seat, just as it was yesterday. we are seeing a bounce back. facebook, amazon, netflix, alphabet, all down sharply yesterday. all of them coming back today. although not as much. not recouping the loss we saw yesterday. take a look at the bloomberg. we have to look at the so-called thing stock. the s&p 500 down and orange. percentagewise, how the others have one -- done. google is the lavender color. facebook, yellow. apple in green. even with a little bit of rocking is, we have seen in their performances, they are still all out before -- outperforming on the her. something to keep in mind even as we lookat the recent tech weakness. a quick mov. although it is not a big one. this is a german company. it is not heavily traded in the u.s..
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take this chart with something with a grain of salt. we will see a robust reaction in german trading tomorrow. magenta, agreeing to pay more than $1.4 billion to resolve more than 100,000 cases. they were filed by farmers who claimed the company improperly its corn seed. they say a cause contamination of u.s. crops and a cut off of chinese imports. the settlement is according to people familiar with the deal. we saw a leg down when those headlines came out. keep an eye on this magenta share. shery: thank you. her much.y give president trump is expected to hold a news conference in spain. kevin cirilli will be occupying one of those seats and if you minutes. we will bring that conference to you live. this is bloomberg. ♪
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♪ david: this is "bloomberg markets: balance of power." us get a check of the headlines. mark crumpton has those. trump met with republicans and democrats from the house tax-writing committee on says he has plans wednesday on his tax overhaul proposal. president says he and congressional leaders will be releasing when he calls a comprehensive and detailed report that will offer a framework of his tax plan. mr. trump says the nation's texas service too complicated any plans to cut taxes quoting tremendously from the middle class. the spanish prime minister is meeting with president trump at the white house. the visit comes days before atonia's government tries to
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open ballot stations f an illegal up down vote on independence. it is the biggest challenge that -- of the country's constitution in three decades. and puerto rico, is the sixth the day with no power. hurricane maria devastated the islands power grid during the hottest season of the year. crews have begun to work on the island's electricity system. more than a half of puerto rico's powers may be down and at least 90% of its distribution lines damaged or destroyed. officials say it could be weeks if not months before full-service is restored. basketball coaches from arizona, auburn, the university of southern california and among 10state were people arrested on federal corruption charges after they were caught taking thousands of dollars in bribes to steer nba college stars and financial advisors. , bribingese men
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coaches was a business investment. they knew that the corrupt coaches, in return for bribes, would pressure the players to use their services. they also knew that if and when those young players turned pro, that would mean big bucks for them. those charged include chuck person, who played 13 seasons in the nba and the director of global marketing at adidas. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. david: thank you very much, mark. there is a joint news conference happening any moment with the president of the united states, the prime minister of spain. we will have that live. let's go to madrid, take advantage of our global reach to talk to our reporter. let's talk about the domestic situation in spain. what is the prime minister
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looking forward to this weekend? whole point.e president trump and at home, he faces a huge crisis. it boils down to the illegal referendum of his plan to go ahead on sunday. the catalonia government assessed this vote will happen. the central government is cracking down on this and try for the vote to not go ahead. he will not be participating in a summit to the is traveling back to madrid and he wants to tackle this hands-on. shery: the key question is, will the vote go on ahead? we have been hearing about these mayors, potentially being jailed and the government acting to stop this from happening. key questiohe agn, i was in barcelona. the people in barcelona were convinced that the vote will happen.
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sources close to the government image read say this will not happen for two bank reasons. they do not have the money to set it up. a tale of two stories over this vote. very disputed. we do not know what will happen on sunday, to be honest. david: from an economic perspective, what are we seeing? what has the reaction been to this vote taken place or not? >> that is a key question. right now it is a very muted reaction. you have to look at that. for a lot of investors, there was a referendum. 2015, catalonia, framing an election as a referendum and nothing happened. very strong fundamentals from spain. investors feeling fatigue. however, that could change. we could be seeing complacency if this does not work out well. we see unexpected events take
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place on monday. we will have to wait to see what happens if the vote goes ahead and what that means for the central government. shery: when it comes to that referendum, and everything that is going on in the country, how can we expect to be economy to be affected there, when it comes to this press conference with president trump? what message will that send if president trump backs the central government and the government of mariano rivera i? question. a great the central government in madrid, they would love for president trump to say in the u.s., we want a strong united spain. this is not a topic that is on the agenda. that is the message that madrid would love to hear. in terms of the economy. very strong fundamentals. lots of job creation. it is hard to say if this will take a big part in the third quarter.
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it is 7 million people who work there. home to big companies. it is something to watch out for. david: thank you very much. she is a bloomberg's economic reporter. shery: as we await to the joint news conference, there is a lot going on in washington. the latest republican attempt to repeal and replace obamacare is dead. overhaul efforts seem to be on the horizon, all while tensions in north korea remain high. for the latest, let's bring in a andl kapur, bill ferries, kevin cirilli. kevin, let's start with you. you are awaiting that press conference. a lot happening. we will probably focus on domestic issues to what are we expecting to hear? kevin: clearly a lot of questions the president could face, including the tax policy proposal. we are expecting new details that could be released tonight or tomorrow. president meeting with a bipartisan group of members from
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the house. as reportsit comes suggest he could raise the rates on low income americans from 10 to 12% -- 10% to 12%. th wld likely get other productions id actions. he could face questions on how much of a tax cut it will give to corporations been -- versus those low income americans. he is facing scrutiny regarding his response to the growing concerns surrounding puerto rico. he will visit puerto rico on tuesday. then the nfl controversy. david: he met with members of at house, republican members the white house. they spoke about 45 -- for about 45 -- four belford if administered what was the message coming out of that? kevin brady instrumental in the drafting of legislation after we get this proposal tomorrow. kevin: they want to wink or graham cassidy dead.
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the sources i am speaking with and financial services telling me that perhaps permanent tax cuts seemingly would be the best case scenario as of now. i spoke with two senior aides, who tell me that the republican retreat they are anticipating for officials to give a presentation of sorts on this tax policy proposal. just like the health-care debate, despite the treasury department telling me they help to correct course on the mistakes made on the health care debate, this is going to be a very tough political battle. shery: psy hell, we are talking about tax reform now. 50know that about more than republicans come from districts that use the state tax reduction. we are hearing from some of saying there is tax reform. how does this public is the outlook for a tax legislation this fall? sahil: this is a one big revenue raiser that republicans have targeted to the extent the leadership has agreed on going after deductions and loopholes.
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this is a state and local tax reduction rate. aboutts the government $1.3 trillion per year. it is concentrated in blue states like california and new york aew jersey. reere are lots and lots of blicans in the house that -- thate average rates make above average use of these deductions and their districts. there are many complicating factors. we do not know the details yet. they can change. what we are hearing from lobbyists who are familiar with the discussions is the president will try to lower the top rate from 39.6 to 39%. a corporate rate of 20%. the president has called for 15%. it is not clear. rates of 25%.ss dangerousminefield, and political terms of the dumbest got -- democrats will say they are a giveaway to the wealthy. this is the republicans last
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chance of getting something this year after the failure of obamacare repeal. subjects. me shift yesterday morning we heard from the foreign minister from north korea saying his interpretation of what president trump had to say would panama to a declaration of war. here we are a day later. how is that reverberating through the doors of power in washington? bill: there was an effort by the white house and other trump administration officials to downplay that statement by the north koreans that there was essentially a declaration of war . frankly, the north koreans have used that language before. it is not the first time we have heard that. it is the first time we have heard among the most recent tensions. red flags. we had an interesting development today on the hill where the chairman of the joint chief said the u.s. has not detected any change in north korean force posture, which is an important sign. it does not appear that north korea is mobilizing or moving forces around to prepare for
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some kind of larger attack. i think it is the second day re. are srting to see a effort to ratchet down those tensions. shery: kevin, bill just mentioned north korean tensions. a bit of a distraction when it comes to domestic issues pretty much health care. of course graham hat -- graham-cassidy belt seems to be dead. did you hear anything about holding the vote despite the fact that they do not have the vote so they can go on the record and say, yes, we voted on the graham cassidy and we voted yes, this has been an effort to repeal obamacare for seven years? kevin: we heard from the president this morning in which he criticized members of his own party. most notably alluding to john mccain, the republican who came out against graham-cassidy. he went so far as to call them "so-called republicans." the president eager to pass a reform on health care policy
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proposals. graham-cassidy is essentially dead on arrival at this point. back to north korea, i would just make the point that this president -- we have not seen much in investor community responded to the back-and-forth rhetoric. we have seen some spikes in the political volatility index with regards to what north koreans use of their launches as well as tests. i think more broadly speaking, the chinese role in that clearly shaping a bit of the foreign policy we have seen with their action with their central bank in the past couple of days. david: kevin's the white house. we are waiting for the president of the united states. that conference spent -- scheduled to begin at any moment. il, let me turn to you. the senator of tennessee working with the washington state. patty murray on bipartisan legislation on health care. are we seeing that gain traction as we move past or seem to be
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moving past this last piece of health care legislation? sahil: it was gaining track and -- traction. the politics inside the republican party were doing anything that preserved the aca or seen as protect -- protecting the law. we have learned that from this latest repeal effort. those two word negotiating. patty murrahad made a coon in terms of state flexibilityin a attempt to keep those negotiations going because she was worried they would be subtle. they did not work. alexander said they were not reaching consensus and they had to move off. i spoke to patty murray member of her party leadership who invited them back to the table said, let's start the discussion. the longer we wait the more time we waste, the more likely premiums will go up. it remains to be seen. it is a work in progress. my guess is a lot will change in
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the republican party before they can vote en masse in the house and senate and especially the house. shery: we did get that congressional budget office report on the impact of graham-cassidy. how did that affect the momentum of the bill, and what does it show for the future of the bipartisan effort you mentioned? sahil: the bill is dead. it has fewer than 50 votes. there are three hard-nosed -- hard no's. what we heard from the scores is that it would save $133 billion over 10 years. was not able to measure the impact on premiums or coverage. they were working on a short timeframe. there is a september 30 timeframe to get this done or give up. what republicans are trying to do is to use the fiscal 28 reconciliation vehicle to do tax reform as well as health care. it could be complicated to
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combine those things. it is hard to do one at a time. some are saying combining the two of them could endanger tax form. it is show they are not willing -- it is showing they are not willing to give up. david: we are seeing principles taking their seat. eric on moving from his seat. there he is. now seated. bill, let me turn to you. we were talking to maria about the political act up for the spanish prime minister. he has been in town for over a day. he has his foreign minister with him. what have become her stations been like between the spanish government and members of the state department? i think this is an alliance that the administration wants to sustain and keep strong. it is an important nato ally. that is obviously a key issue for president trump. it is a country that has supported the u.s. strongly when it comes to things like north korea sanctions and the iran missile deal.
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it comes with this context of the regional referendum and that does complicate things a little bit for the u.s. it probably prefer it to take place in another time. this is a president that basically supported the u.k. brexit vote, but then has since put in these situations where it is more opera to support regional movements. you also have the issue with the vote we have seen, but the u.s. has come out publicly against. it puts it in a complicated position. shery: how does this set in the context of president trump pushing for more defense spending from their european partners bill? bill: that will be something the president wants to talk about a bit in terms of getting spain and all european nato members up to the 2% of gdp threshold that they are committed to through
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the nato charter. i think at this point, five nations meet that threshold. trump took office vowing to get that fixed. he says money is pouring in at this point. we have seen countries trying to -- he entered -- and rap duo. the president of the unites walking with his counterpart. thank you very much, everyone. it often in. i'm greatly honored to welcome president mariano rivera a. of the spain. it is a great honor to have you at the white house. thank you very much. concluded a very productive conversation on a andial range of economic security issues. before we begin, i would like to take a moment to send america's hearts and prayers to the people of puerto rico and the u.s. virgin islands. both have been devastated, and i
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mean absolutely devastated, by hurricane maria. we are doing everything in our power to help the hard-hit , puertof both places rico and the virgin islands. a massive effort is underway and we have been really treated very very nicely by the governor and by everybody else. they know how hard we are working and what a good job we are doing. as we speak, fema, are great first responders, and all available federal resources including the military, are being marshaled to save lives, protect families, and begin a long and very, very difficult restoration process. i have directed all relevant departments and agencies to assist in the response and recovery effort. just toldr reseller me this morning, the entire is doing greatce
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work in puerto rico. i appreciated him saying it. he is saying it to anybody that will listen. our team has been incredible after having gone through texas and in florida -- and then florida with other stops alo e way. he further went on, he said through the trump administration 's leadership, the relationship between fema and my team is very, very strong. i will be going to perrigo on rico on-- to puerto tuesday. i will also be going to the u.s. virgin islands. our nation has been tested by the distro give norse -- destructive force of no mother nature. we will respond with a mightier force. the resolve of the american people. texas, louisiana, and florida are in really good shape and moving along well. we thank all of the first responders and volunteers who have risked airlines, that is what they did. they risked their lives. while of those impacted by the trouble, and these oracle --
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horrible hurricanes that of affected and impacted our country, i think you. the recovery process will be a very difficult one. we will get through this and we will get through it together. we will be stronger. we will be bigger. we will be better. thank you, very much. the united states and spain are great friends and close allies. our bonds go back many centuries. our schools teach american children about spain's history of exploration. our museum treasure beautiful yoursh works of art and country's contributions to architecture, music, and film are admired all over the world. admired -- a greatly admired country. the deep relationship between our two people is a strong foundation for lasting
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cooperation. on behalf of thamerican people, i want to express our support and extend our prayers to all of those affected by the vile terror attack in spain last month. i want to assure the people of spain that america stands with you in confronting this evil that threatens all of humanity. we will continue to deny the terrorists their funding, their territory, and any form of support for their wicked ideology. in this common fight, america spain'sappreciates contribution to the coalition to defeat isis. spanish troops and police have trained more than 30,000 members of the iraqi security forces. we also thank the spanish people for being such gracious hosts to the american service members stationed at spanish bas

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