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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot Com, the radio, plus Globo Lab and on your radio.

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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters

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Speaker 1: on Catherine Cowdery And as you've been hearing, Federal Reserve

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Speaker 1: officials left interest rates on hold last month. Minutes of

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Speaker 1: that meetings show heightened uncertainties about the US labor market

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Speaker 1: and financial stability, and that threatened their outlook. The minutes

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Speaker 1: show FED policy makers thought it was prudent to wait

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Speaker 1: for the result of Britain's June twenty third referendum. Markets

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Speaker 1: were little changed after the release. The equities are advancing.

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Speaker 1: Cautious sentiment is easing amid speculation that the American economy

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Speaker 1: can weather the impact of the UK's decision to leave

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Speaker 1: the European Union. We check the markets every fiftwo minutes

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Speaker 1: throughout the trading day. Dow Industrial Average up twenty seven

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Speaker 1: points an eighth of a percent, trading at seventeen thousand,

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Speaker 1: eight hundred sixty nine S and P five foundered up

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Speaker 1: four points two tents of a percent to two thousand

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Speaker 1: ninety two. The NASDAC is up nineteen points four tens

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Speaker 1: of a percent at forty eight forty two. West Texas

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Speaker 1: intermediate crude oil up at nine cents of barrel. That's

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Speaker 1: a gain of two percent, trading at four spuckled of

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Speaker 1: eight dollars eighty cents announced to thirteen sixty seven fifty

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Speaker 1: and the tenure Treasury eight down one thirty seconds with

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Speaker 1: the yield of one point three eight percent. And that's

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Speaker 1: a Bloomberg business flash. This is taking stock with pin

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Speaker 1: Box and Kathleen Hayes on Bloomberg Radio. The feder Reserve

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Speaker 1: was stopped in its rate hiking path in mid June

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Speaker 1: by a job support that showed that maybe, just maybe

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Speaker 1: the US labor market has lost a lot of momentum,

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Speaker 1: and by their concern that the result of Britain's June

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Speaker 1: Brigit vote was too close to call, and it was

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Speaker 1: prudent to wait to see how those results would affect

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Speaker 1: global markets and there for the global economy. We're gonna

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Speaker 1: take them in depth. Look now at just this question

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Speaker 1: of what the FED is looking at and what it

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Speaker 1: means for the FED. Moving ahead with Joe Gannon. He

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Speaker 1: is a senior fellow at the Peterson Institute. He is

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Speaker 1: in charge of watching international finance, monetary policy, and trade.

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Speaker 1: He was at the US for the Reserve Board at

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Speaker 1: the Division of Monetary Affairs. He was also the head

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Speaker 1: of their division of International Finance. Joe, welcome back to

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Speaker 1: the show. Thanks good to be here. So these minutes

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Speaker 1: people watching to find out just what made that not

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Speaker 1: only decided not to hike its key rate, that wasn't

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Speaker 1: such a big question to to really kind of pull

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Speaker 1: back expectations on how many rate hikes are coming this year.

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Speaker 1: What leaps out at you from these minutes, Uh, well,

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Speaker 1: two things why. I was really surprised at how much

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Speaker 1: play they gave the the Brexit vote. It's mentioned at

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Speaker 1: least three times that I saw quickly in the document

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Speaker 1: as being a reason to delay. I wouldn't have expected

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Speaker 1: them to give so much prominence to that, but they did.

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Speaker 1: And the other thing was a lot of uncertainty about

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Speaker 1: what the May employment report um meant. Most people said, well,

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Speaker 1: we're not changing our forecast because of this one data point,

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Speaker 1: but it does make us nervous. That's what you saw

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Speaker 1: in the minutes. Joe, wondering if you could comment on

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Speaker 1: the potential of the US economy and whether that is

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Speaker 1: going through a secular or a cyclical change, because we

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Speaker 1: haven't seen the kind of growth in GDP that many

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Speaker 1: economists were expecting coming out of the recession. Yeah. Absolutely,

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Speaker 1: I think everyone's been surprised that growth has has come

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Speaker 1: in slower than we would have expected. And um, you know,

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Speaker 1: we just don't understand proctivity very well. I don't know

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Speaker 1: anyone who does. Um. Uh, it's hard. It's just impossible

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Speaker 1: to forecast. But the best guess is it's going to

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Speaker 1: stay low until it doesn't. And so I think the

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Speaker 1: best thing you can do is mark down your forecast.

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Speaker 1: And that's what they're doing, marking down their forecast and

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Speaker 1: uh wondering, I guess how how much weight they're going

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Speaker 1: to be putting on the next job suport because you know,

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Speaker 1: Jennet Ellen said in her one of a recent testimonies,

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Speaker 1: you know we can't put too much emphasis on one number. Obviously,

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Speaker 1: if you look at a great chart, in fact, in

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Speaker 1: our UM story today by our FED reporters Steve Matthews, Uh,

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Speaker 1: looking at what we should be looking for the minutes,

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Speaker 1: and you can just see that it looks like a

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Speaker 1: downtrend in payrolls. Right, And this last bratchet down to

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Speaker 1: thirty eight thousand. That's a really small net gain in

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Speaker 1: new jobs. Could be an outlier, could be revised away,

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Speaker 1: but the Fed is clearly putting a lot of weight

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Speaker 1: on that number, even the Janet's Yellen said, don't yeah,

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Speaker 1: it's tough and never thing was. The unusual thing is

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Speaker 1: how steadily it had been up there in the two

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Speaker 1: dred thousand range for so long, for so steadily that that, um,

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Speaker 1: that was the surprise. I think if you look historically,

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Speaker 1: so we shouldn't be so surprised by some volatility in

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Speaker 1: that number. But it but it was more than just

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Speaker 1: a headline number. I mean, uh, you know, pieces of

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Speaker 1: the of the story also didn't look good in terms

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Speaker 1: of backward visions to previous months, in terms of people

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Speaker 1: who are involuntarily working part time I'd like to work

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Speaker 1: full time, things like that, you know, decline and participation.

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Speaker 1: So a lot of pieces of it that were unsettling,

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Speaker 1: not just the headline number. As far as their decision

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Speaker 1: making process goes, are they really data dependent or as

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Speaker 1: you say, are they just interpreting the data over several

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Speaker 1: years and trying to make sense of the economy. I

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Speaker 1: think that's the big thing that markets say that they're

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Speaker 1: not communicating very well. While I think it's it's easy

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Speaker 1: to communicate if you see a data release and you

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Speaker 1: can point to that. But in this case, despite the

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Speaker 1: June data release, I think they didn't change their forecast much.

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Speaker 1: What really is important is they're rethinking they're parameters of

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Speaker 1: the economy, in particular, what is the parctivity growth right

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Speaker 1: going to be going forward, and what does that mean

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Speaker 1: for the interest rate going forward? And they're marking that down,

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Speaker 1: both proctivity and interest rates down for the for the

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Speaker 1: medium term, longer term. And there how do you tell

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Speaker 1: the markets that you're changing your mind. I mean, it's

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Speaker 1: not about data you can point to in the past

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Speaker 1: few weeks. It's about your interpretation of data over the

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Speaker 1: past few years. And that's a harder story to explain

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Speaker 1: to markets. Well, Joe, why did you say that you're

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Speaker 1: surprised that they put so much emphasis on uncertainty over

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Speaker 1: Brexit as a reason to pause. Well, I guess I

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Speaker 1: was thinking before the meeting that it was unlikely that

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Speaker 1: there would be Brexit, and they don't tend to condition

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Speaker 1: their actions on sort of these kind of discrete events

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Speaker 1: that are possible but unlikely, things like the debt feeling

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Speaker 1: negotiations with Congress. You know, obviously if if if those

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Speaker 1: break broke down, the US defaultent's death, that it would

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Speaker 1: change it would be a hugely important for the Fed's policy.

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Speaker 1: But they view it as an unlikely thing and they're

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Speaker 1: not going to change policy in advance of that. Uh.

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Speaker 1: This I thought was something like that, albeit more likely

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Speaker 1: to happen, but still unlikely. Well it turned out to happen, so, uh,

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Speaker 1: maybe they were right, but I'm surprised that they It

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Speaker 1: just seemed like Britain is a small country. We don't

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Speaker 1: export much to it. Um. People were saying it wouldn't

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Speaker 1: affect you as a coonty, but more than a quarter

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Speaker 1: of a percentage point on growth if if, if it happened.

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Speaker 1: So it just seemed like it was a small thing

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Speaker 1: to worry to put so much effort on. We're going

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Speaker 1: to continue the conversation with Joseph Gannon. He is the

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Speaker 1: Senior Fellow for the Peterson Institute for International Economics, based

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Speaker 1: in Washington, d C. Of course, home to Bloomberg one

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Speaker 1: and one oh five point seven h D two. You're

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Speaker 1: listening to taking Stock and This is Bloomberg taking a

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Speaker 1: look at central banks around the world, and not only

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Speaker 1: in the United States. We're going to take a look

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Speaker 1: at the u K. The probability of a ray cut

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Speaker 1: in less than two weeks is now up to seventy

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Speaker 1: broadcasting live to New York, Bloomberg eleven, Brio to Washington,

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Speaker 1: d C, Bloomberg to Boston, Bloomberg, Well under It, to

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Speaker 1: San Francisco Bloomberg nine to the Country, Shoes at Them,

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Speaker 1: General one ninety and around the globe the Bloomberg Radio

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Speaker 1: plus Appen, Bloomberg dot Com. This is taking stock. I'm

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Speaker 1: Kathleen Hayes along with PM Fox. It's not just the

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Speaker 1: uncertainty and the aftermath of the Briggs vote that's weighing

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Speaker 1: on the feder Reserve and central banks around the world.

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Speaker 1: It's plunging bond yields as well. The European Central Bank

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Speaker 1: is having to buy more, maybe lower quality bonds. What

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Speaker 1: is this going to mean for central bank moves ahead.

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Speaker 1: We're going to find out as we continue our conversation

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Speaker 1: with joe Gannon from the Peterson Institute. PM. Yes, but

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Speaker 1: right now, let's go to Katherine Cowdy in the Bloomberg

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Speaker 1: news room, Katherine, thank you, Pamlasco main higher after minutes

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Speaker 1: from the Federal Reserves Dune meeting did little to alter perceptions,

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Speaker 1: but the timing of higher interest rates. Concerned that fallout

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Speaker 1: from the Brexit vote may spread beyond the UK, drove

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Speaker 1: demand for hans. At their June meeting, several FED officials

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Speaker 1: lowered their expectations for the number of times they'll increase

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Speaker 1: rates this year. The gains in the US today are

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Speaker 1: interrupting a sell off in global share sparked by sparked

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Speaker 1: by Brexit concerns. Charles to Foe is chief investment advisor

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Speaker 1: at International Value Advisors. Most stocks and bonds around the

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Speaker 1: world still trade at nosebleed valuation levels. Well, to be

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Speaker 1: more polite, there are price for profession and I think

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Speaker 1: we're reminded by by Brexit, which was someone unexpected, that

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Speaker 1: uncertainty is part of the investment landscape. We check the

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Speaker 1: market SAVY for two minutes throughout the trading day that

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Speaker 1: industrial leverage is up forty two points at quarter percent

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Speaker 1: trading at seventeen thousand, eight hundred eighty three smps. I've

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Speaker 1: hundred up six points a third of our percent at

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Speaker 1: two thousand, ninety four, the nastact is hired by twenty

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Speaker 1: four points a half a percent. Trading at six West

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Speaker 1: Texas Cinemedia. Crude oil up seventy six cents a barrel

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Speaker 1: one point six percent to forty seven thirty eight about

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Speaker 1: gold is up eight dollars thirty cents announced at thirteen

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Speaker 1: sixty seven. Tenure Treasury down one thirty second with the

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Speaker 1: yield of one point three eight percent. Among today's top

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Speaker 1: business stories, two more UK property funds have halted withdrawals

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Speaker 1: in the wake of Britain's Britain's decision to leave the

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Speaker 1: European Union, and that brings a total number to five.

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Speaker 1: Henderson Global Investors in Columbia Threadneial Investments have suspended trading

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Speaker 1: in at least six point nine billion dollars of property funds.

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Speaker 1: CBS is planning to file to take its radio division

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Speaker 1: public by the end of the month. It's a sign

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Speaker 1: that CBS has been unable to find a buyer willing

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Speaker 1: to pay the right price. Now, let's get an update

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Speaker 1: of some of the other stories were following on Bloomberg Radio.

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Speaker 1: Thank you Katherine from the Bloomberg News room. I'm Ramie

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Speaker 1: in a cent Cio. President Obama said today he will

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Speaker 1: slow down the US troop withdrawal from Afghanistan. Even as

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Speaker 1: we've meamed maintained a relentless case against the who are

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Speaker 1: threatening US. We are no longer engaged in a major

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Speaker 1: round war in Afghanistan. The President says he would draw

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Speaker 1: down troops to eight four hundred from the original plan

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Speaker 1: of fifty five hundred. Their strong reaction from HOW Speaker

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Speaker 1: Paul Ryan after an FBI recommendation that no criminal charges

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Speaker 1: be filed against Hillary Clinton in connection with her use

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Speaker 1: of a private email server when she was a Secretary

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Speaker 1: of State. I think um the d N I Clapper

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Speaker 1: should should should deny Hillary Clinton access to classified information

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Speaker 1: during this campaign, given how she so recklessly handled classified information,

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Speaker 1: Ryan said, the presumptive Democratic presidential nominee quote clearly lives

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Speaker 1: above the law. IBI Director James Commey will appear before

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Speaker 1: the House Oversight Committee tomorrow to testify on the recommendation.

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Speaker 1: Tennessee Senator Bob Corker has taken himself out of consideration

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Speaker 1: to be Donald Trump's running mate. That's according to The

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Speaker 1: Washington Post, which says Corker in Trump of the decision yesterday.

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Speaker 1: Corker appeared with Trump at a rally last night in

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Speaker 1: North Carolina, and new casting has been announced for the

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Speaker 1: leading players of the smash Broadway Hit Hamilton's Tony Award

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Speaker 1: nominee Brandon Victor Dixon will replace Leslie Odom Jr. As

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Speaker 1: Aaron Burr on Broadway. Dixon takes over in mid August.

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Speaker 1: Global News twenty four hours a day, powered by more

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Speaker 1: than twenty journalists and analysts in more than one twenty

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Speaker 1: countries from the Bloomberg News Room. I am Ramy in Essencio.

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Speaker 1: Thank you. Now, let's get a quick update of the

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Speaker 1: equity bench marks down. Industrial averages up forty points at

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Speaker 1: seventeen thousand, eight hundred eighty smp F I founded up

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Speaker 1: six points at two thousand ninety four. The NAZAC is

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Speaker 1: up twenty four points at six. And that's a Bloomberg

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Speaker 1: business flash. This is taking stock The FED in Focus

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Speaker 1: on Bloombird Radio. The FED in Focus. I'm pim Fox.

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Speaker 1: My co host Kathleen Hayes, our guest Joseph Kanyon, Senior

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Speaker 1: Fellow Peterson Institute for International Economics, joining us from Washington,

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Speaker 1: d C. Previously, he helped edit the minutes of the

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Speaker 1: Federal Reserve Open Market Committee meeting for almost two years

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Speaker 1: as a Fed economist, uh joke, Joseph Canyon, the pound,

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Speaker 1: the pound, sterling, the trades. Right now one twenty nine nineteen,

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Speaker 1: Japan's twenty year bond yield has turned negative. UK property

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Speaker 1: funds have suspended trading people can no longer sell out

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Speaker 1: of those investments. If someone was to ask you, how

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Speaker 1: do you describe the world's economic picture today, what do

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Speaker 1: you tell them? Well? Two things. One is the Brexit

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Speaker 1: shock is real. I think we shouldn't overstate it, but

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Speaker 1: if you live in the United Kingdom, you're going to

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Speaker 1: feel it. And certainly London property is precisely where I

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Speaker 1: would think you get some of the biggest hits, because

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Speaker 1: there's a risk that if you own London property, you

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Speaker 1: won't be part of Europe anymore and you will lose

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Speaker 1: some of the benefits, uh that London has and being

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Speaker 1: within Europe and being a financial center. So I think

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Speaker 1: that's understandable. But the other big news to today is

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Speaker 1: how low interest rates are everywhere. I think that is

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Speaker 1: shocking and I wouldn't have I think there's been a

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Speaker 1: long term trend to lower interest rates went back over

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Speaker 1: thirty years, but how it's gone farther than I would

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Speaker 1: have ever guessed. Well, to a certain extentio, it seems

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Speaker 1: you could argue that federal reserve policy, Bank of Japan policy,

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Speaker 1: ECB policy buying lots of bonds are largely responsible for this,

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Speaker 1: or to it to a very important degree, because obviously

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Speaker 1: yields were falling long before the Brexit impact, which accelerated

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Speaker 1: this trend. Bank of Japan is a clear example. The

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Speaker 1: yend Act actually has gotten very strong because it's sent

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Speaker 1: you know, it's cut money in Japan, it's put risk off, etcetera.

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Speaker 1: Have the central banks maybe aired in not understanding what

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Speaker 1: they were leashing? Uh So, I wouldn't say so, because

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Speaker 1: I think the central banks are responding to market forces.

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Speaker 1: I think, um, they are seeing weak grow oath and

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Speaker 1: inflation below their targets, and the textbook response is to

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Speaker 1: have lower interest rates, and ultimately, if they get the

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Speaker 1: economy recovery again, then they can raise rates back to normal.

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Speaker 1: But they keep being surprised that what they think are

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Speaker 1: lower rates are not really doing the job. And the

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Speaker 1: answer I think is that the economy needs rates lower

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Speaker 1: than people thought if no one wants to spend, everyone

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Speaker 1: wants to save. Okay, so if everyone wants to spend,

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Speaker 1: will it be increased spending in the United Kingdom in

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Speaker 1: order to accommodate Brexit and indeed increased spending in the

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Speaker 1: European Union in order to deal with what has really

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Speaker 1: never happened before, a country exiting the European Union. Yeah,

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Speaker 1: that's it's hard to know, but I think the thing

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Speaker 1: is people are afraid of spending right now. That's the

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Speaker 1: problem in the in the phase of the Brexit uncertainty,

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Speaker 1: but even the bigger changes we've seen beyond that, people

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Speaker 1: are holding back. They're they're worried about their retirement, they're

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Speaker 1: saving more. The businesses are holding back on investment because

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Speaker 1: they're unsure. I think this has has been a problem

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Speaker 1: for central banks is what how do they get those

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Speaker 1: pocketbooks open again? So financial stability is certainly one of

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Speaker 1: the federal reserves, every central banks responsibility, right up there

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Speaker 1: with you know, containing inflation and looking at jobs. Uh.

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Speaker 1: For the u K. This is has been obviously Mark

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Speaker 1: Arney's big challenge right now. He spoke for the third

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Speaker 1: time in twelve days, basically since the Brexit vote markets

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Speaker 1: pricing in two rate cuts. Uh, what do you see

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Speaker 1: for for the for the Bank of England and will

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Speaker 1: will will this have any linkages? Are spill over to

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Speaker 1: the Fed and others? Well? I think Carney's signaled that

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Speaker 1: he probably would be cunning rates or doing something to

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Speaker 1: stimulate because the UK looks like it's going to be

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Speaker 1: heading into a mild recession. Uh, that sounds appropriate. I

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Speaker 1: think they're the experts on how big and how bad

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Speaker 1: the recession will be and what the right response will

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Speaker 1: be is I think it will have spillovers. It already is,

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Speaker 1: and mean that the dollar was gone up since the

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Speaker 1: Brexit vote, and that holds US economy back, and we'll

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Speaker 1: have a mild recession UK that also holds US caught

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Speaker 1: me back. I think we won't be getting any rate

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Speaker 1: hikes in the US this year, That's my call. Can

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Speaker 1: you comment on the Italian and European banking situation currently,

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Speaker 1: because of course you've been following what's going on with

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Speaker 1: the shares of Italy's Banca Monte di Pasci d Sienna.

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Speaker 1: They've gone down forty pent in ten days. Yes, Um,

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Speaker 1: that's a surprisingly large reaction to the Brexit voter and

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Speaker 1: it's a little puzzling, but it it. It does suggest

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Speaker 1: that the weak link in European banking is in Italy.

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Speaker 1: Um and I'm not quite I don't quite get the

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Speaker 1: magnitude of the link with Brexit, but it seems it

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Speaker 1: seems to be there, so I'm not follow I don't

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Speaker 1: fully get it, but it seems to have shined a

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Speaker 1: spotlight on if there's weaknesses in the euro Area UH

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Speaker 1: in Europe and Union European Union generally, that makes it

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Speaker 1: harder for the Europeans to deal with Italian banking. Joe,

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Speaker 1: I just want to understore something. I want to make

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Speaker 1: sure I heard you say correctly that you do not

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Speaker 1: see an interest rate hike by the Federals of this year.

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Speaker 1: I do not see an entry hike. No, especially if

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Speaker 1: if the forecast for Brexit, of a mild recession in

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Speaker 1: the UK with some spillovers to the US, and the

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Speaker 1: pound stays where it is, the dollar stays high, There'll

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Speaker 1: be no rate hike this year. Next year, Oh hopefully,

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Speaker 1: I mean, yeah, Okay, I wouldn't. I wouldn't bet the

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Speaker 1: farm on it. Well, he wouldn't bet the farm on it. Pim.

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Speaker 1: I di that just left me speechless for a minute.

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Speaker 1: Joe Daniel, and thank you so very much for joining

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Speaker 1: it as he's a senior fellow at the Peter Institute

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Speaker 1: for International Economics. He was formerly with the FEDZ Division

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Speaker 1: of Monetary Affairs and ran their International Finance division. No

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Speaker 1: rate hick this year, Maybe not next year either. Wow.

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Speaker 1: Kathleen Hayes and Pim Fox and this is Bloomberg. The

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Speaker 1: feed in Focus is brought to you by Willoughby since

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