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Speaker 1: Bloomboo Business News twenty four hours a day. If Bloomberg

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Speaker 1: dot com, the radio plus mobile app and on your radio,

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Speaker 1: this is a Bloomberg business flash. Yeah, there's a Bloomberg

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Speaker 1: futures report. This warring thing draunted by Interactive Brokers and

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Speaker 1: CMME Group. If you're looking for global futures contracts with

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Speaker 1: low trading costs, look no further the Interactive Brokers. The

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Speaker 1: industry leader learned more at the Interactive Brokers dot com

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Speaker 1: slash c n A group look at the Fed funds

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Speaker 1: of futures now show the ods of the June rate

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Speaker 1: rise from the Fed have increased to thirty, the idea

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Speaker 1: of higher rates as soon as next month, also pushing

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Speaker 1: the dollar higher. Marianna Coasha Lakota, the former Minneapolis Fed president,

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Speaker 1: I told Bloomberg Surveillance this wearring central banks have something

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Speaker 1: of a communications problem. I think are conveying unfortunately, are

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Speaker 1: communicating a sense of powerlessness, and that feeds back on

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Speaker 1: itself to to generate uh lower old place expectations, lower

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Speaker 1: inflation now m best Buy falling at early trading after

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Speaker 1: forecasting second quarter profit that trailed to analysts estimates, also

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Speaker 1: announcing the departure of its CFO and Jess Daley, the

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Speaker 1: chief executive officer Barclays, says European investment banks are losing

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Speaker 1: control of their own markets to US rivals as they

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Speaker 1: shrink and struggle to make a profit at stock antecks,

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Speaker 1: futures rising before new home sales data that may show

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Speaker 1: an improving economy. We get those figures at ten o'clock

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Speaker 1: SMP futures right now up ten that our futures up

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Speaker 1: at futures up and we have date the markets free

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Speaker 1: every fifteen knots during the trading day. Right here on

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Speaker 1: Bloomberg Radio, Save Annance continues with Mike McKee and Tom Keane.

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Speaker 1: Thank you very much, John Tucker. We're continuing our look

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Speaker 1: and here on Bloomberg Ship ailance the Federal Reserve and

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Speaker 1: what it may or may not do next. And one

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Speaker 1: of the questions is how do they know what to do?

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Speaker 1: Dave Stockton was a guy who for years his job

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Speaker 1: was to figure that out for them. He was the

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Speaker 1: former director of the Division of Research and Statistics at

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Speaker 1: the Board of Governors, basically the chief economist for the FED.

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Speaker 1: Dave is now with the Peterson Institute for International economics, Dave,

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Speaker 1: can you make an economic case for the Fed to

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Speaker 1: raise rates now? UM? A lot of people are saying,

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Speaker 1: you know, we don't need to, but it's more of

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Speaker 1: a desire by the Fed to get off the zero bound,

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Speaker 1: basically get as far away from it as they as

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Speaker 1: they can at the moment. So I think the economic

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Speaker 1: case can be made for a rate hike UH at

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Speaker 1: least by by the end of the summer UM, on

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Speaker 1: the basis of an economy that continues to grow and

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Speaker 1: grow above trent. I know a lot of people were

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Speaker 1: concerned about the week first quarter, but I think things

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Speaker 1: are bouncing back here in the second quarter. UH. Employment

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Speaker 1: situations still looks strong, and despite that figure that most

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Speaker 1: people thought was kind of low, in a hundred and

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Speaker 1: sixty thousand last month, that actually twice what we need

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Speaker 1: to absorb the increase in the labor force. So we're

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Speaker 1: still growing above trend and unemployment rate that is likely

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Speaker 1: to drift lower, and we've seen I think some firming

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Speaker 1: of inflation in recent months, so I think the case

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Speaker 1: for some small further increase in rates is a reasonable

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Speaker 1: one at this point. Is that your base case at

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Speaker 1: this point that the said would go ahead. They at

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Speaker 1: least from the sound of things, they seem rather determined.

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Speaker 1: So um, my base case would be I think it's

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Speaker 1: a little less than fifty fifties that they'll move in June,

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Speaker 1: in part because with the British vote taking place just

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Speaker 1: a few days after the f MC meeting, I think

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Speaker 1: they might be reluctant to uh tighten into a period

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Speaker 1: of financial volatility. So I think they're likely to wait

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Speaker 1: until July, and assuming that Britain does not exit, they

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Speaker 1: have a stronger case I think, to do so then,

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Speaker 1: and probably a less risky situation by by the time

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Speaker 1: of their July meeting. Do you know, and I guess

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Speaker 1: you probably lectured on this at Yale in Trinity years ago,

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Speaker 1: what actual progress means? I mean, Mike and I are

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Speaker 1: still trying to figure out what a live meeting means

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Speaker 1: or a dead meeting, but I want to meeting. What

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Speaker 1: does actual progress mean, actually, Professor. So that's a good question,

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Speaker 1: and there's currently no no clear definition of what actual

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Speaker 1: progress would be, but I think I would charm it

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Speaker 1: at least in from the FENSE perspective at this point

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Speaker 1: on two dimensions. One, they want to continue to see

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Speaker 1: the labor market improved and take up some of the slack,

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Speaker 1: and they really want to be I think, reasonably confident

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Speaker 1: that inflation is firming up, and then they've seen some

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Speaker 1: actual progress I think on vote those dimensions. So I

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Speaker 1: think that's going to make uh, uh, make them more

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Speaker 1: interested in going ahead and starting this tightening process. And

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Speaker 1: in terms of hey, I attended a few dead meetings

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Speaker 1: in my time at them. Yeah, the ones if you

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Speaker 1: were just dreadfully boring. But I think, um, at this point, uh,

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Speaker 1: they will want to keep the option open moving in July,

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Speaker 1: and they've got the capability of making sure that the press,

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Speaker 1: the public market participants are ready for that. I think

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Speaker 1: they've already sort of prepped the battlefield, so to speak,

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Speaker 1: in terms of of making a move in July. And uh,

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Speaker 1: President Dudley certainly, I think, hinted at that fairly strongly. Um.

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Speaker 1: You know, I think my own view is that the FED,

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Speaker 1: it could make every meeting that make a more convincing

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Speaker 1: case that every meeting is lie by having a press

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Speaker 1: conference after every meeting. And I know, you know, early

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Speaker 1: on with some resistance of that at the FED, because

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Speaker 1: it much looked like it would be you know, so

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Speaker 1: much work and puts so much pressure on the on

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Speaker 1: the chair. But you know, Bernankee and Yellen, I think

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Speaker 1: have used those meetings of those press conferences quite effectively

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Speaker 1: to communicate FED policy. So, um, you know, I don't

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Speaker 1: think they're there yet, but that's probably where they should be. Well,

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Speaker 1: she always looks like she's having root canal when she's

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Speaker 1: talking to us those press conference is. Uh, but how

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Speaker 1: do you square her press conference after the April meeting

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Speaker 1: with the Fed minutes. She was very toughish in that meeting. Yeah,

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Speaker 1: so I think I was quite frankly surprised at the

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Speaker 1: hawkish tenor of the minutes. Uh. You know, I think

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Speaker 1: Cherry Yellen is probably to the dobish side of the

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Speaker 1: middle of that committee. Uh. And some of that press

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Speaker 1: conference sort of reflected that. Now. They've also, subsequent to

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Speaker 1: the meeting, gotten some stronger date economic data, at least

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Speaker 1: on on the spending side of things. So I think

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Speaker 1: that's probably given more um, you know, more impetus to

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Speaker 1: the centers who are ready to move. And I think

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Speaker 1: that's what we're that's what we've been hearing more recently.

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Speaker 1: Let's come back and I promise you will inflict you

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Speaker 1: with a discussion of negative industries. David Stockton with us

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Speaker 1: with the Peterson uh Institute, Michael saw adam posing, posing

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Speaker 1: for photo, opposing posing and photographs in China with Chinese

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Speaker 1: economic leadership. Peterson Institute is Internet smart man. They would

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Speaker 1: go to worldwide as well. Features up eleven down, features

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Speaker 1: up ninety. We need to get the markets open. We

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Speaker 1: will do that. Coast to coast. I'm Bloomberg Surveillance, but

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Speaker 1: kind of down to the opody Bell, brought to you

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Speaker 1: by the jeep Grand Cherokee, the most awarded suv ever.

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Speaker 1: The Grand Cherokee continues to raise the bar with its

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Speaker 1: luxurious interior and legendary four by four capability. Drive on

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Speaker 1: at your local jew dealer today broadcasting live to New York,

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Speaker 1: Bloomberg eleventh to Washington, d C. Bloomberg to Boston, Bloomberg

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Speaker 1: twelve unders to San Francisco, Bloomberg nine to the country.

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Speaker 1: She is exam Channel one ninety and around the globe

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Speaker 1: the Bloomberg Radio, Plust and Bloomberg dot Com. This is

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Speaker 1: Bloomberg Surveillance and good morning. I'm John Tucker at the

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Speaker 1: opening bell this morning. Bloomberg Surveillance along with Tom Keene

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Speaker 1: and Michael McKee. And as we check right now the markets,

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Speaker 1: they are rising down Jones and Duster lverage in the

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Speaker 1: Yearland going up fifty nine points, SMP five hundred right

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Speaker 1: now is up about nine points. That's a rise of

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Speaker 1: for tens of a percent, and as that Composite index

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Speaker 1: is up to twenty seven points right now among the

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Speaker 1: stocks of Moving on Corporate News, we have the best

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Speaker 1: buy efforts at cfoh is the announced it was leaving

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Speaker 1: and also Earning's mists to midst for the second quarter.

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Speaker 1: As the arning season draws to a close, Alts have

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Speaker 1: actually moderated their predictions for a decline in the first

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Speaker 1: quarter profits to seven point two percent from a ten percent.

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Speaker 1: Among stocks moving on Corporate News, told brothers, uh, that's

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Speaker 1: so rising after the biggest who has luxury home build

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Speaker 1: to report a fiscal second quarter earnings that beat expectations

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Speaker 1: once again, the down showns and Destrial right now up

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Speaker 1: ninety three points, and that is the opening bell reports

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Speaker 1: Michael and Tom thinks so much are opening bell with

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Speaker 1: the points seventeen thousand, five nine three, the vics fifteen

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Speaker 1: point four four The opening Bell it's brought you by

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Speaker 1: se I imagine when investment management and asset management servicing

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Speaker 1: is unconstrained by infrastructure. See how SEIS Global Operating Platform

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Speaker 1: can be your catalyst for business expansion at s e

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Speaker 1: i C dot com slash imagine s e i C

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Speaker 1: dot com slash imagine. Michael, I just want to point

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Speaker 1: out some of the here. You just mentioned the doubt.

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Speaker 1: Now it's a hundred seven points and uh SMP is

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Speaker 1: up eleven points, both of them, about six tents of

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Speaker 1: eight percent this other day, when the dollar is rising

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Speaker 1: because we're told people are beginning to accept the idea

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Speaker 1: that the FED is going to raise interest rates in

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Speaker 1: June or July. Look at the two years. We're talking

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Speaker 1: with Dave Stockton, who's now at the Peterson Institute, but

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Speaker 1: the former director of research for the Federal Reserve that

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Speaker 1: Dave of the big concern for the Fed in January

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Speaker 1: was the externalities that what was happening overseas and the

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Speaker 1: volatility in the financial markets. We don't seem to be

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Speaker 1: getting the same sort of reaction in the markets now

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Speaker 1: that we had in January to the idea of further

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Speaker 1: FED activity. So I think back in January. That was

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Speaker 1: a combination of factors. One obviously was FED tightening itself

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Speaker 1: in the prospect of more That is, the FED was

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Speaker 1: telling the markets at that time to expect four rate

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Speaker 1: increases over the course of two thousand sixteen. The Feds

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Speaker 1: looking considerably less aggressive now. But also I think there

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Speaker 1: were amplified concerns both about the global economy and the

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Speaker 1: domestic economy and just how weak things are. I think

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Speaker 1: those concerns have abated somewhat. I don't think we're out

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Speaker 1: of the woods on the on the global economy, and

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Speaker 1: as I said earlier, I think of the U S

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Speaker 1: economy is looking you know, reasonably strong. So I think, uh,

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Speaker 1: you know, markets, uh, I think they're going to be

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Speaker 1: able to digest some for their rate hikes. There the

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Speaker 1: FED is gonna be in a situation I think, you know,

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Speaker 1: tightening is never going to be a smooth process. Uh.

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Speaker 1: And if they move in June and July, I think

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Speaker 1: they're going to pull forward, you know, maybe more tightening

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Speaker 1: than would normally be expected, as markets revised their expectations

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Speaker 1: about not just the current uh UM level of rates,

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Speaker 1: but the rate level of raids going forward. And I

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Speaker 1: think that's gonna, you know, produce more tightening, maybe more

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Speaker 1: tightening the side will expect even at that time. Uh,

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Speaker 1: and that's going to cause them to then be on pause,

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Speaker 1: I think to the end of the year. Well, one

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Speaker 1: of the questions that Bill Dudley was asked the other

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Speaker 1: day it was how do you deal with the fact

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Speaker 1: that if you raise rates you're going to see a

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Speaker 1: tightening of financial conditions, dollar rise, etcetera. And he kind

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Speaker 1: of looked at the question and said, that's the point, right, Well,

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Speaker 1: I think that's the point. The issue is sort of

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Speaker 1: calibrating that. And I think what they saw in after

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Speaker 1: their December meeting was that they got more tightening than

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Speaker 1: they were expecting for that five basis point increase. And Uh,

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Speaker 1: that's the issue is getting just the right amount, not

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Speaker 1: too much and not too little. Can they be led

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Speaker 1: around by the markets? Don't they have to at some

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Speaker 1: point just risk market reaction otherwise they're gonna be stuck

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Speaker 1: unable to move forever. Yes, I think you could kind

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Speaker 1: of take a look at the last couple of months,

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Speaker 1: and especially in the wake of the of the most

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Speaker 1: recent minutes, Uh, is the Fed not necessarily feeling like

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Speaker 1: they're you know, completely hamstrung by markets that aren't expecting

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Speaker 1: an increase, and through their communication begin to prepare the

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Speaker 1: markets or revived at the markets to revise their expectations.

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Speaker 1: But they can't be uh can't ignore market expectations either,

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Speaker 1: And um, you know, I think uh, until those minutes, uh,

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Speaker 1: they were looking at a situation where the surprise of

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Speaker 1: the markets would have been so large that they would

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Speaker 1: have gotten a lot more volatility than they wanted to.

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Speaker 1: Now they're probably in a little more comfortable, a little

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Speaker 1: more comfortable position. And that's the combination of both the

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Speaker 1: improving tender of the data and their communications and their

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Speaker 1: indication of a willingness to go ahead and move And

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Speaker 1: what are their degrees of freedom right now? I mean,

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Speaker 1: you've always brought a statistical vent to this. There's a theory,

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Speaker 1: there's a whole belief out there. I'm particularly among FED

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Speaker 1: critics that there they they've left orthodox theory and they're

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Speaker 1: flying by the seat of their pants. Do you have

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Speaker 1: a degree of confidence or a confidence in their wiggle

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Speaker 1: room to move forward? What's what's the confidence they can

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Speaker 1: get this done? So? I think the confidence that they

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Speaker 1: can get it done is going to depend largely on

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Speaker 1: the data evolving in a way that they're currently expecting.

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Speaker 1: If the data confirm that, in fact, the economy is

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Speaker 1: improving and that uh uh, some increase in interest rates

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Speaker 1: is needed in order to respond to both an improving

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Speaker 1: economy and some increase in inflation back towards their objective,

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Speaker 1: then they that gives them the wiggle room. If the

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Speaker 1: data aren't confirming that, then obviously I think in some

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Speaker 1: sense they're going to be stocked, and they should be. Uh. So,

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Speaker 1: I think it's really driven more, and it should be

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Speaker 1: driven more by economic conditions and not necessarily by just

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Speaker 1: some desire on the part of the FED to normalize rates.

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Speaker 1: I think, you know, as I listened to the FED

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Speaker 1: communications late last year, it sounded to me like they

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Speaker 1: just wanted to start raising rates and to get things normalized.

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Speaker 1: Uh and their default was action and only at the

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Speaker 1: data came in weaker would they stop. And that's of

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Speaker 1: course exactly what happened. And now I think through the

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Speaker 1: spring we saw just the opposite, a situation where their

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Speaker 1: default was in action unless the data caused them to move.

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Speaker 1: And now I think, uh, they're seeing that and they're

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Speaker 1: feeling more comfortable with the prospects of tightening. David thinking

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Speaker 1: so much. David Stockton with Peterson Institute, with a chat

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Speaker 1: on the parlor game. You know, I think of Brexit

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Speaker 1: and b Remain and Mike, it's almost like fed fed fed,

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Speaker 1: sick and fed main. I mean, I mean, it's it's

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Speaker 1: to me almost a sillier discus. Well, they need to

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Speaker 1: make light of it, but yeah, to me, it's just

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Speaker 1: the parlor game. Michael Bard, do you have an opinion

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Speaker 1: on the fete in June or July? Everyone else does.

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Speaker 1: Mine is just as good as everybody there. We go

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Speaker 1: very good. What's a year one guest? Well, what we

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Speaker 1: seem that what we seem to have now, Tom is

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Speaker 1: a lot of disagreement, you know, half of the kind

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Speaker 1: of lining up on the side of raise rates, half

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Speaker 1: lighting up on the side of they shouldn't raise rates.

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Speaker 1: But everybody agreed they're going to whether they should or not.

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Speaker 1: Everybody seems to think that differ to, among others, the

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Speaker 1: good President of the New York Fat Mr Dudley, that

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Speaker 1: they have to see what the data is. I would

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Speaker 1: agree with you, Mike. The jobs report seems to be

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Speaker 1: pretty important. June three, but they've got to see the

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Speaker 1: data come in right before they make a decision. Make

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Speaker 1: it like in the next day or two. This is

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Speaker 1: an employee that they are not waiting for data to

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Speaker 1: tell them whether to raise rates or not. They're waiting

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Speaker 1: for data to tell them not to kind of course,

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Speaker 1: to do it. Massive type two constructs that could include Brexit.

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Speaker 1: But to your yield point nine ones seven six, to

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Speaker 1: your yield point nine two percent, that's a higher yield

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Speaker 1: This morning, this hour, survellance quantity by Volvo Cars, White Planes.

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Speaker 1: Visit Volvo Cars, White Planes dot com. Here's Michael bar

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Speaker 1: with headlines My Tom, thank you very much. A senior

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Speaker 1: Egyptian forensics official is telling Associated Press human remains that

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Speaker 1: have been recovered from the crash site have burns on

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Speaker 1: them and are very tiny, suggesting that an explosion may

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Speaker 1: have taken place on board egypt Air flight eight oh four. However,

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Speaker 1: Middle East News Agency disputes the report, and aviation consultants

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Speaker 1: Steve Gannard says it is too early to jump to conclusions.

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Speaker 1: I would actually suggest that that what he's drawing his

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Speaker 1: conclusion thought would suggest the opposite, and that is a

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Speaker 1: high speed water impact Egypt air Flight eight oh four,

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Speaker 1: with sixty six people on board, was flying from Paris

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Speaker 1: to Cairo, and it crashed into the Mediterranean. Democratic presidential

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Speaker 1: candidate Bernie Sanders says he is disappointed but not surprised

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Speaker 1: by what he calls Hillary Clinton's unwillingness to debate ahead

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Speaker 1: of the June seventh California primary. Sanders describes it as

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Speaker 1: the largest and most important primary and the presidential nominating process.

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Speaker 1: Clinton turned down the Fox News invitation to debate Sanders

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Speaker 1: ahead of that primary. Clinton spoke to him and says

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Speaker 1: the campaign feels it's more important to campaign and meet

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Speaker 1: directly with voters in the state. It may not be

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Speaker 1: much of a mystery, but today Washington State voters will

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Speaker 1: head to the polls for their Republican primary. Donald Trump

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Speaker 1: has a clear field Global News twenty four hours a day,

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Speaker 1: powered by our hundred journalists more than a hundred fifty

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Speaker 1: news bureaus around the world. Michael Barr, Mike, Tom Michael,

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Speaker 1: thanks so much. Marking on a tear up A hundred

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Speaker 1: and fifty point seventeen six four for Michael McKee and

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