WEBVTT - Stifel's Piegza Sees June Hike Likely If Data Supports (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleventh Rio to Washington,

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<v Speaker 1>d C. Bloomberg to Boston, Bloomberg Well Underis to San Francisco,

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<v Speaker 1>Bloomberg to the country, sees Exam General one and around

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<v Speaker 1>the globe the Bloomberg Radio plus appen Bloomberg got gone.

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<v Speaker 1>This is taking stock. I'm Kathleen Hayes. Along with pim Fox.

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<v Speaker 1>We see a sell off in the US Treasury market

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<v Speaker 1>after the Feder Reserve makes it pretty clear that they

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<v Speaker 1>are watching the data and looking to see if they

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<v Speaker 1>will warrant the next interest rate increase that they're meeting

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<v Speaker 1>in June PM. I think that significant. Is not like

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<v Speaker 1>the Fed is looking for reasons to slow down. It

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<v Speaker 1>looks like a number of members are ready to make

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<v Speaker 1>the move if the data supported and Lindsay pexa chief

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<v Speaker 1>Economists to stifle fixed income from Chicago, Will Pete joining

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<v Speaker 1>us coming up right now, Let's go to Charlie Pellett

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<v Speaker 1>and the Bloomberg news room for a Bloomberg business flag

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<v Speaker 1>and I thank you him, I thank you Kathleen. Since

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<v Speaker 1>our last duct optate, we now have Neztack turning Laura

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<v Speaker 1>so Badal the SMP nastac all trading down. This update

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<v Speaker 1>brought to you by Sector Spider et f S. Why

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<v Speaker 1>by a single stock when you can invest in the

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<v Speaker 1>entire sector of visits sector s p d r S

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<v Speaker 1>dot com or call one six sector e t F

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<v Speaker 1>if you're just joining us. We got minutes from the

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<v Speaker 1>Federal Reserve today, just about thirty one minutes ago, policy

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<v Speaker 1>makers signaling a willingness to raise borrowing costs in June.

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<v Speaker 1>The SMP five hundred index now lower after advancing seven

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<v Speaker 1>tenths of one percent. Stocks favored for high dividend payouts

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<v Speaker 1>fell as treasury yields spiked, banks rallying on the potential

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<v Speaker 1>for higher rates to boost profits. The tenure down twenty

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<v Speaker 1>six thirty seconds. Zeal one point eight six percent, most

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<v Speaker 1>Federal Reserve policy makers set in April, and interest rate

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<v Speaker 1>increase would be appropriate in June if the economy continued

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<v Speaker 1>to improve. Matt Bosler covers the Federal Reserve for Bloomberg

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<v Speaker 1>News sentence that ms out at me here is Several

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<v Speaker 1>participants were concerned that the incoming information might not provide

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<v Speaker 1>sufficiently clear signals to determine by mid June whether an

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<v Speaker 1>increase in the target range for the federal funds rate

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<v Speaker 1>would be warranted. So yes, they did say it was

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<v Speaker 1>likely if the economy did what they wanted, but it

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<v Speaker 1>sounds like several were concerned that they might not get

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<v Speaker 1>the info they needed. He was interviewed right here on

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<v Speaker 1>taking stock Gold downtounce now a drop there of one

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<v Speaker 1>point one percent to twelve sixty three. Crude oil giving

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<v Speaker 1>up earlier gains, down twenty cents the barrel now for

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<v Speaker 1>ten on West Texas Intermediate, a drop there of point

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<v Speaker 1>four percent. SMP again down eleven, a drop of six

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<v Speaker 1>tenths of one percent to thirty two on Wall Street.

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<v Speaker 1>Now a look at other news. Charlie, thank you from

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<v Speaker 1>the Bloomberg news room. I'm Mark Crumpton. This news update

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<v Speaker 1>is brought to you by a New Jersey Institute of Technology,

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<v Speaker 1>investing more than a hundred and ten million dollars a

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<v Speaker 1>Learn more at Stories of Innovation dot j I T

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<v Speaker 1>dot DU. It was a split decision Tuesday night for

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<v Speaker 1>Hillary Clinton and Bernie Sanders. The Vermont senator won the

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<v Speaker 1>Democratic presidential primary and Oregon, while Mrs Clinton claimed victory

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<v Speaker 1>in Kentucky. Sanders supporters like this woman in California, say

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<v Speaker 1>they'll continue to back him even when the delegate maths

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<v Speaker 1>suggests otherwise. I'm worried that a vote for her is

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<v Speaker 1>a vote for Trump, because in all the polls he's

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<v Speaker 1>been there. The next big tests are June seventh. There

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<v Speaker 1>will be primaries in California, New Jersey, and four other states.

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<v Speaker 1>Cybersecurity officials are sounding the alarm, warning lawmakers today that

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<v Speaker 1>hackers are becoming increasingly sophisticated. National Intelligence Director James Clapper

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<v Speaker 1>said one group in particular poses the biggest threat. EIS

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<v Speaker 1>is by far the most capable, most sophisticated user of

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<v Speaker 1>the cyber domain for lots of purposes, for command and control,

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<v Speaker 1>and of course our challenge there is the increasing trend

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<v Speaker 1>towards encryption, which is make it much more difficult from

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<v Speaker 1>a content standpoint to understand and have insight into their plotting.

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<v Speaker 1>It could be another tough commute this afternoon for Metro

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<v Speaker 1>North customers. The railroad says writers traveling into and out

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<v Speaker 1>of Grand Central could experience delays of up to eighty

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<v Speaker 1>minutes following yesterday's fire underneath the elevated tracks near One

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<v Speaker 1>Street Global News twenty four hours a day, powered by

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<v Speaker 1>our two hundred journalists in more than one hundred fifty

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<v Speaker 1>news bureaus around the world. From the Bloomberg News Room

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<v Speaker 1>by Mark Crumpton. Charlie, and we thank you. The losses

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<v Speaker 1>on Wall Street intensifying now the Dow down one hundred

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<v Speaker 1>one points, to drop there of six tenths of one percent.

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<v Speaker 1>The SMP five hundred indecks also declining six tenths of

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<v Speaker 1>one percent. Law now by eleven points, Tenure down thirty seconds,

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<v Speaker 1>l there one eight six percent. I'm Charlie Pellett, and

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<v Speaker 1>that's a Bloomberg Business flash. You're listening to Taking Stock

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<v Speaker 1>with Kathleen Hayes and Pim Fox on Bloomberg Radio. A

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<v Speaker 1>majority of Federal Reserve officials are they prepared to raise

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<v Speaker 1>the Central Banks benchmark interest rate in June as long

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<v Speaker 1>as the recovery remains on track. Let's find out more

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<v Speaker 1>from Lindsay Pieza, Chief Economists Defill Fixed Income, joining us

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<v Speaker 1>from Chicago. You can follow Lindsay at Lindsay PEXA on Twitter. Lindsay,

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<v Speaker 1>all right, so give us your thoughts on these uh

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<v Speaker 1>these results. These the release of the minutes and the

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<v Speaker 1>takeaway about June and potential rate increase, Yeah, they were

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<v Speaker 1>pretty exciting f o MC minutes. Now we know the

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<v Speaker 1>market has continuously discounted the possibility of an additional rate

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<v Speaker 1>increase until the end of the year. But as we

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<v Speaker 1>see in these April minutes, SET officials are increasingly optimistic

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<v Speaker 1>regarding not only the state of the U S economy

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<v Speaker 1>but their ability to continue to remove accommodation under these conditions.

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<v Speaker 1>So really a hawk ish stilt in the April minute

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<v Speaker 1>uh hawfice silt that has been affirmed by more decent

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<v Speaker 1>comments from individual BEETE officials talking about not only a

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<v Speaker 1>near term rate increase, but the possibility of many rate increases,

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<v Speaker 1>maybe two, maybe three, still within the bounds of twenties sixteen.

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<v Speaker 1>So certainly SET officials are well positioned at this point

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<v Speaker 1>to vote in favor of a near term rate increase,

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<v Speaker 1>potentially at the June meeting. But it all depends on

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<v Speaker 1>the underlying data. Now the set is set. We don't

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<v Speaker 1>need the economy to get back to strong. We don't

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<v Speaker 1>need solid or robust. We need modest or moderate growth.

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<v Speaker 1>But even getting back to a more moderate pace of

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<v Speaker 1>expansion from the current slow activity level will be a

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<v Speaker 1>sizeable challenge. Well, lindsay, Uh, you are in the camp

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<v Speaker 1>that has been more cautious on the economy, more concerned

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<v Speaker 1>about the economy. Are you concerned then that there's a body,

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<v Speaker 1>perhaps a majority on the f m C now that

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<v Speaker 1>see enough strength and um and not inflation, maybe far

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<v Speaker 1>from targ target, but moving in the right direction. And

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<v Speaker 1>the other thing they like to talk about. I think

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<v Speaker 1>John Williams of the San Francisco Fed stress this when

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<v Speaker 1>we spoke to him just a couple of weeks ago

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<v Speaker 1>in an interview. It's normalization, it's not tightening. You know.

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<v Speaker 1>Ester Georgia said that, does that concern you? It really

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<v Speaker 1>does concern me because typically when we talk about the

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<v Speaker 1>FED removing accommodation, So you're right, not yet tightening, but

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<v Speaker 1>but normalization, removing accommodative policy. The Fed weights until the

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<v Speaker 1>economy is on solid footing, strong footing. This time around,

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<v Speaker 1>they're raising rates in anticipation of improvement rather than realized improvement. So, yes,

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<v Speaker 1>we have seen continued hiring games near seventy consecutive months,

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<v Speaker 1>but the pace of hiring remains very modest without upward momentum.

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<v Speaker 1>In wages, business investment remains negative, the consumer remains under pressure,

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<v Speaker 1>so the state of the US economy is still very fragile. Now,

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<v Speaker 1>certainly we can sit down and argue with Set officials

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<v Speaker 1>regarding the consistent inaccuracy of their forecast, but I think

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<v Speaker 1>it raises a big red flag when we are basing

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<v Speaker 1>monetary policy on expectations alone, rather than waiting to see

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<v Speaker 1>that improvement filter through into the data. Lindsay. The President

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<v Speaker 1>of the Federal Reserve Bank of Minneapolis, Neil kush Kari,

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<v Speaker 1>previously has said that investors obsession with interest rates is

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<v Speaker 1>misguided and that they should be focused on more important

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<v Speaker 1>economic issues. What's your react? I think I think that's

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<v Speaker 1>exactly right. But I think the FED has no one

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<v Speaker 1>to blame but themselves. Uh. The constant will they won't

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<v Speaker 1>pay saga has been drawn out for years with the

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<v Speaker 1>market sitting on the edge of their seat, and had

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<v Speaker 1>the FED actually begun this normalization process back in two

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<v Speaker 1>thousand and eleven when they had a wide open window,

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<v Speaker 1>we certainly would be in a very different place this

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<v Speaker 1>time around. So I think the feed in good part

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<v Speaker 1>can be blamed for all of the hype surrounding even

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<v Speaker 1>basis point and great. Of course, as you pointed out,

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<v Speaker 1>what's significant here also, it's just not that it's one more.

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<v Speaker 1>It's a fact that Dennis Lockhart again told told us

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<v Speaker 1>that in an interview about three or four weeks ago

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<v Speaker 1>then and John Williams as well from the San Francisco

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<v Speaker 1>fat there's not just two interest rate increases. Maybe it's three. Right,

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<v Speaker 1>So this is I think what maybe the market starts

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<v Speaker 1>getting concerned about the FED is going to start normalizing,

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<v Speaker 1>raising rates, whatever you want to talk call it that

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<v Speaker 1>they are now on a path. And once the FED

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<v Speaker 1>gets on a path, I think there's still that that

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<v Speaker 1>idea looking at the past FED moves that the path continues. Now,

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<v Speaker 1>I think you're exactly right there walking a very fine line.

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<v Speaker 1>They're trying to convince the market that they will continue

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<v Speaker 1>along a very slow, tepid or quote gradual removal of accommodation,

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<v Speaker 1>but at the same time, by raising rates, each additional

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<v Speaker 1>hike makes the market more nervous that we will get

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<v Speaker 1>back to a two thousand and four style tightening cycle.

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<v Speaker 1>For the FED raised rates basis boids at every meeting.

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<v Speaker 1>So on the one hand, the FED is trying to communicate.

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<v Speaker 1>It's very a slow, tepid, still very accommodated level of policy,

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<v Speaker 1>but also moving closer and closer to a more normal level.

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<v Speaker 1>So it is a very delicate line, and the FED

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<v Speaker 1>is desperately trying to communicate to the market. And whether

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<v Speaker 1>we put the blame on the FED for the lack

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<v Speaker 1>of communication or simply on the market for the lack

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<v Speaker 1>of listening, I think there's a blame to go around

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<v Speaker 1>for both sides. Ten seconds, are you gonna? Are you do?

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<v Speaker 1>What is your view today? Hike in June? I think

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<v Speaker 1>they certainly are well positioned to go if the data

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<v Speaker 1>continues to improve, I think they're going to be hard

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<v Speaker 1>pressed to bypass June. However, the data disappoints and the

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<v Speaker 1>ongoing volatility surrounding the Brexit begins to wratch it up.

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<v Speaker 1>I think they have more than enough excuses to wait

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<v Speaker 1>until September. Lync PSA, thanks so much for joining us,

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<v Speaker 1>giving us you had another view on the FEDS Minutes

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<v Speaker 1>from their April twenty seven meeting. She's chief economist is

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<v Speaker 1>Stephen Nicholas and Company. Kathleen Hayes pim Fox taking Stock,

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<v Speaker 1>Bloomberg Radio, The FED in focus is brought to you

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