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tv   Bloomberg Markets Americas  Bloomberg  January 9, 2019 1:30pm-2:01pm EST

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government employees at a press briefing today in washington. >> the people to fear are the v.i.p.'s. the working people of our country are the back bone of our middle class, back bone of our democracy. unfortunately we are in a dark time for america's workers as government is shut down. t's a dark time. mark: senator schumer called for an end to the partial shut dunn by agreeing to legislation now and dealing separately with talks for an agreement over border security. meanwhile, the president said he thinks he and the democrats are getting closer to a deal to end the stalemate. the president said today the government shutdown could be, quote, a blessing in disguise because it could lead to a broader immigration deal. mr. trump spoke today in an oval office bill signing on anti-human trafficking legislation.
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deputy u.s. attorney general rod rosenstein a frequent target of the president's wrath were appointing special counsel robert mueller and defending hi russia probe is expected to lee his position soon. bloomberg has learned rosenstein will step could be after the president's nominee for attorney general is confirmed. barr has a senate confirmation hearing next week and could be in place at the justice department by february. ritish lawmakers have handed british prime minister theresa may her second defeat in two days. the house of commons has voted to take control of the timetable for what happens if parliament rejects the agreement with the european union. the government will now have only three days to come up with a plan b. the government priestly had 21 days to report back to parliament. lawmakers are due to vote on may's deal on tuesday and look likely to reject it. global news, 24 hours a day, on air and atticing to be on
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twitter. powered by more than 2,700 journalists and analysts in over 120 countries. i'm mark crumpton, this is bloomberg. ♪ >> live from bloomberg world headquarters in new york, i'm sherri ahn. >> and we're joined by our bloomberg and bloomberg/cnn audiences. let's get a look at the major arches here today. we're seeing trade talks confirmed to be on a more positive footing as they wrap up n beijing. s&p 500 tracking for plus 10% over the last 10 days, the best
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10 days in nine and a half years. one area we're watching is oil and nrning stocks. ymex almost 5% higher. chery: and we're keeping an eye on the -- shery: and we're keeping an eye on the dollar. the dollar tracked the approval ratings of president trump closely. as we have the government shutdown entering its 19th day, we're seeing the u.s. dollar and president trump's approval ratings under pressure. not to forget that what led to the recent weakness has been the comments by the head of the fed launching fed is not a particular trajectory for policy, that's hit the dollar. we have seen gold minnesota sachs recommend betting on the weaker dollar as well. all eyes on the federal reserve, we'll be releasing those minutes from their december meeting in
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just about half an hour. that was at a time when there was really increased market volatility. our international economics and policy correspondent michael mckee standing by with a voting member of the fmoc. mike? >> we are here with eric, the president of the boston federal reserve bank. thank you very much for joining us. i've got to start with jay powell, the -- friday he said with inflation pressures muted you can afford to be patient. you used the same word, patience, today. what does that translate to in terms of how long you would want to wait and you also said you want clarity on what's happening what is clarity to you? >> so we also have said data-dependent. i would add that to the list of buzzwords. by that, we're trying to get to the point where we're very consistent with our dual mandate. at a time when forecasts are telling us that more than likely
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we're not going to have a bad outcome, in fact we're probably going to have a reasonably good outcome in terms of the unemployment rate drifting down, real g.d.p. being relatively strong. at the same time the financial tai ta has come in much, much weaker. when we have these two differences, i think we need to get a little more understanding of why they're so different and my guess is that over time we're going to see that in 2019 the economy will be reasonably strong, the unemployment rate will continue to drift down from the 3.9% it is right now and the financial markets will recover. but i also realize that my forecasts can be quite wrong and that the financial markets have such a different view, at least until the last couple of days, it's been quite negative and quite volatile. so i have to take those financial market considerations into account. >> assuming we don't get some sort of weird outlier strength or weakness in the numbers, they come in about as forecast, how long is patience?
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is it a quarter you wait to get an update? sit half a year? >> it'll be data dependent. i would expect as we get into the second quarter we'll have a lot more information about whether some of the concerns that seem to be embedded in the financial markets actually show through to the real data. my best guess is that we won't see that much of an impact and as we get into the second quarter it'll be clear that we're can'ting to grow at a little bit above 2% and that the unemployment rate is declining and hopefully the stock market and the bond market and other financial markets will reflect the fact that some of the tail risk they seem to be pricing as a possibly high probability turns out to be a much lower probability. mike: you didn't mention inflation there, is inflation going to be lower and why will that turn around -- turn around this year? it's .10% off, it's a lit bellow but we had a big decline
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in oil prices for the same reason we had the financial market movements. so my own view is that we're basically consistent with a 2% inflation rate right now. the forecast is that we'll probably be just a little bit below for the course of this year and probably over -- after this year we'll be ate ll bit bf that seems consistent with our 2% target. mike: given that, if it's at your mandate, why raise rates from here? >> it's not going to rise significantly if we do the right monetary policy. if we do the wrong monetary policy we could see increased inflation. and the second thing i would consider is what's happening with financial fragility more generally. one of the good aspects of having some of the volatility we're having in financial markets is both households and firms are thinking about risks. that's i think actually a positive for the long run development of the markets. we should worry about financial stability and we should worry
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about enflation. we frequently do not have an unemployment rate that gets as low as we currently are. and so the question is how sustainable will that be over the long term. we have seen wages going up. that's a very positive sign for individuals that are getting those higher wages. if the wages were to continue to go up much faster, then we'd have to star worrying if profit margins would be squeezed. we need to consider all those thing. my best guess is inflation will be quite well behaved and we'll have a monetary policy consistent with that. >> speaking of margins and prices going up you said last fall companies in the first district were reporting they could raise prices and were doing so. is that still happening? >> we are seeing price increases. we are seeing wage increases. the average hourly earning was 3.2%. that's much higher than it was a year or two ago. so we are seeing those wage pressures. it depends on the industry, how easy -- easily they can pass on any cost increases and firms being dislocated by
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international trade are facing somewhat different issues. i would say in yen that when i talk to labor intensive companies that are trying to raise wages to get the right numb of individuals into their organization, they are also having some price -- starting to uff move prices as well. >> you suggest if the data don't change you wouldn't be upset to leave rates at 2.5%. how far are from -- how far are we from your estimate of neutral? >> my estimate of neutral a roughly 3%. right now we have mildly accommodative monetary policy. the fed fund rate trading a lit bellow 2 1/2. we still have stimulative fiscal policy. that's one reason my expectation is a reasonable outcome over the course of the year. i think the household sector is well positioned to have strong consumption. i think we'll have good retail sales over the course, we haven't gotten all the data in from the end of the year and the holiday season but all the
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reports are it's pretty good. that's consistent with consumer confidence being high, the fact that more people are being employed, that housing prices have continued to go up and personal incomes rising. those are fact quors that make me more confident that we'll have a reasonably good outcome over the course of next year. mike: it doesn't sound like you think the december market forecast, the recession is anywhere close to reality but you do have a slowdown in europe. you've got a slowdown in china. the market volatility, the yield curve flattening. does it worry you that maybe markets are seeing something you may not be? >> the way i think about it is they may be pricing the risk a little bit more likely than i would expect. so if you look at both the forecast that are provide by the f.o.c. participants and summary of projections if you look at private forecasters, they're not seeing the risks that we're seeing in financial markets. i can tell a more dire story.
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i just think it's less likely than it seems like financial markets are pricing it at this time. so my baseline expectation is that markets will reprice and reflect the fact that the economy is doing better over time. but there's risks. you have alluded to some of them. china is slowing down. their financial -- there are financial stability issues that i think are relevant in chi in terms of the leverage they have. they do have concerns about whether the slowdown will be more substantial. and they are engaged with the united states in trade negotiations that if they go poorly will have a much manufacturer dire outcome on their economy than our economy, and we will be impacted as well. those are real risks, i hope that we are able to solve some of those problems and the chinese government is able to make sure that china doesn't slow down much more than it already has. that's one of the risks that the market seems to be pricing as a priger -- higher probability than i am. mike: we're speaking with the boston fed president, let's
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switch to the balance sheet. big issue on wall street lately not so much because of the idea that you could or couldn't turn off the auto pilot as it were but the idea seems to be on trading desks that you are causing a liquidity shortage. what do you think of that? >> we're doing it -- our balance sheet is being reduced very gradually. it's not unexpected. we gave kind of the entire stream of how we were going to be reducing our balance sheet. so there shouldn't be much unexpected there. and it's at a tame when central banks in other parts of the world are expanding their balance sheet so both europe and japan are still ex-panning their balance sheet. so i'm not as certain that liquidity issues are as substantial as the market participants would highlight. and the fact that the way that you would normally think about how quantitative easing works would be in terms of rates. and if you were worried that we were reducing our balance sheet
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too quickly you'd be worried that interest rates were going up too much. that's not what we have recently seen. the treasury rate has gone from close to 3.25% down to 2.7%. that's a pretty substantial decline. that seems inconsistent with a liquidity problem. i'm not seeing banks talk about difficulty in providing liquidity and they're not talking about being awash in liquidity. i'm not hearing from consumers, there seems to be a significant change. i'm skeptical about, i think people are putting too much weight on our balance sheet at this point. i think there are probably other sources for what's going on in the market. mike: shifting gears a little bit, trump sweets, government shutdown, trade wars. is there a discernible im% on the national economy or the first district economy from the dysfunction in in washington? >> where i'd be looking first in consumer confidence and business investment. consumer confidence is still relatively high. if it were to decline
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substantially it would be an indication that consumers are more worried about the dysfunction going on in washington and possibly with a trade agreement. so far it's held up pretty well but we have to see over time whether consumers start getting concerned with all the volatility we've seen. i would say the business fixed investment has not been as strong as i might have anticipated given the tax cuts that accrued over a year ago. it does seem that some firms are pulling back, i think some of that is that they're seeing more risk than they might have seen before. >> what is c.b.o. telling you, that it is risk concern or do they have the capacity they need and just don't need to expand right now? >> i think it's more risk concern. it's concern about the supply disruptions. so we're a global economy. there are a lot of sources for the fwoods we bring into the united states and components for a lot of things we produce here in the united states. if that supply line gets
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disrupted, either because of a problem with china or a problem with trade more generally b it is very disruptive and difficult to substitute out. i think there's a lot more, that's not something we can model very well with statistics and we haven't had an experience of a widespread trade disruption in the recent history. so we can't model it well but i do think it's a real effect. when i talk to c.e.o.'s that's one of the concerns they have is that we're probably underestimating the amount of disruption that's occurring from the supply chain disruption. mike: one last quick question. if you look at the wirp function, taders see no up or down action this year but there's about an equal percentage who think there'll be a cut as an increase. is that a fair reading at this point? >> the financial markets are worried about a much worse income. the forecasters are expecting a much better outcome. i think we have a situation where if we get a much better outcome, the two increases that were occurring as the december
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meeting is probably right. if the markets are right it's possible we need to ease though that's not my view. mike: thank you very much for joining us here today. we'll send it back to you. amanda: thanks so much, mike mckee a great entire view. now, according to a new survey by blackberry, 0% of respond sents in canada and the u.k. and u.s. don't trust their device with personal day tafment how those numbers affect the smart we and other industries, have the president of blackberry. i want to start with your program, blackberry secure. you compare it to the intel inside branding, where you want to achieve the status where people will know it and know it means security. is that an apt comparison? >> obviously intel inside has
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been a lot more successful and we're early on so i hope blackberry secure will do it too. amanda: we're seen that you have a keen interest in the car market because security around self-driving cars, automation in cars, will b highly critical but you're there also at c.e.s. how brd can this get? how quickly could you penetrate other kinds of devices? >> car was the one we started first. we have a very good footprint in the auto industry. especially the so-call level three, four, and five cars. it's a natural next step for us. and the rest are going to be coming up strong also. we're working with amazon and the securing or prioritizing alexia speakers and obviously there's a special project enterprise issues. that's another example of what it could be really big. we're hopeful that it will. we had a couple of customers
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that signed up in designing i.o.t. base appliances already using our software. >> how does your recent acquisition of cyber security irm cling to this security for your business? >> it's a very good complementary move. at blackberry it's always about criptology and compliance. it's always been security for -- secure for that matter. the new threats have to be based on the new generation that use a.i. or artificial intelligence, it's about mathematical models of prediction. that's what they to best. they call themselveses the second generation of cyber security solutions with the signature base, so this is a new form. it fits into not only what we prvide to the government, the banks and regulations --
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regulated industry but also fits into auto industry or any i.o.t. industry by putting another layer of protection on top. we should get more safety in the car with this technology we're talking about. anda: when can we expect the mpact of that on blackberry? >> immediately they have a business which two year ago, a year ago, was $130 million in revenue. we will add that to our expanding revenue and cyber security. and obviously they're growing reasonably fast and very high growth company. that's number one. secondly, the synergy both in the mark and the synergy for the solution were probably going to be a year from the closing of the acquisition which we expect to be sometime in february.
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amanda: we heard from the company licensed to make the hand held devices still branned blackberry, that they're not handset, lease a 5g so where does blackberry stand with respect to 5 it is g, can you offer the same security? >> yes. on the 5g we're working with providers of the equipment, all the auto industry players that provide 5g based solutions. there was a lot of debate about whether it's cellular or special messaging. we actually provide solutions for both. in the safety and security side. so we're very comfortable in where we sit right now. s we do do that. amanda: when is your rough timeline to get involved in this
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business? >> it's a clarification. t.c. which is a licensee of ours won't release a 5g phone in 2019. we'll be releasing 5g compatible software sluelings from the auto side of the equation as well as the mobile side of they have equation on the software side and security side. we will have 5g based, or 5g compatible solutions in 2019 but more on the security side and software side. amanda: thank you so much for your time. blackberry c.e.o. john chen, speaking to us from the c.e.s. event. later we'll hear from nick fauks, the vice president of search and google assistant at 5:00 p.m. new york on "bloomberg technology." coming up, the v.o.c. waves a white flag on 2019 rate hikes plus a preview of f-1. this is bloomberg. ♪
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amanda: this is "bloomberg markets. shery: joining us with what to watch for in the minutes coming out at the top of the hour is geena. this is a time when the fed raised rates for the fourth time in 2018 at a time when the markets were pretty volatile. what should we be watching for in the minutes? >> even more than the fact that they raised rates they did so unanimously. no one voted against the decision at a time when marks are pretty volatile and also at a time when president trump was being vocal about criticizing the fed. i think it's going to be interesting to see whether there were cracks under what was a broadly united front in this decision. was there discussion happening under the surface we couldn't see in the statement. that's what people are going to be watching for. shery: one reason we'll be
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watching, we have newly conflicted sentiments coming out of the fed. is this where we see if the argues were there already? >> absolutely. one thing to watch for is further gradual. a lot of people thought the fed would remove those words from the statement last month and they can't. i think there's a question about whether the committee unanimously thinks that we are actually in for additional rate hikes going forward or whether there's a big contingent of the committee that thinks we have one more or two more or maybe no more. i think that's a thing to keep an eye on as we see the minutes come out. shery: we have seen so many fed officials come out and say a fed pause could be warranted. >> absolutely. we see markets and economies thinking a pause is not just warranted but likely. we'll see if that sentiment was boiling up under the surface in these minutes and what the balance of risks were and what
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they're watching. one thing i'll be watching is inflation applications and how they talk about these. amanda: thank you so much. just a quick reminder, bloomberg users can interact with the charts you're seeing with gtg go on your terminals and see theage sits behind the charts. coming up, we have the fed minutes full of analysis and there'll be plenty of charts you can gasp on g.t.g. go, from toronto and new york this is bloomberg. ♪
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shery: in moments, the federal reserve will publish the minutes of their december meeting where they hiked rates despite plunging stocks and pressure from president trash.
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caroline: let's get a quick check of the markets. ahead of all this it's been a story of dollar weakness. see how the dollar performs. we're seeing still money moving into the bond market, we saw that 10-year auction, still looking at lackluster demand on one basis point. >> now that we have the minutes out the main headline i see is fed officials saw the extent and timing of future rate increases as less clear. many of the officials thought the central bank could be patient on further rate hikes. a little nuance here as we reflect back on what was that 25 basis point increase and what was taken very bearishly by a lot of investors was going to continue on its balance sheet on auto pilot. i believe those were the exact words, auto pilot which caught a lot of investors' attention here. the fed discussed reserve option, including the


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