1 00:00:03,120 --> 00:00:06,519 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:06,559 --> 00:00:09,640 Speaker 1: dot Com, the radio, plus Globo Land and on your radio. 3 00:00:09,920 --> 00:00:13,920 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters. 4 00:00:13,920 --> 00:00:17,080 Speaker 1: I'm Katherine Cowdery. The global rally continues on Wall Street, 5 00:00:17,239 --> 00:00:19,840 Speaker 1: where the SMP five Foundered is posting its strongest two 6 00:00:19,880 --> 00:00:22,799 Speaker 1: day climb in four months. Tension is easing over the 7 00:00:22,840 --> 00:00:26,120 Speaker 1: impact of a UK exit from the European Union. Energy 8 00:00:26,120 --> 00:00:28,760 Speaker 1: shares around pace for their best two days since January. 9 00:00:28,840 --> 00:00:31,480 Speaker 1: Is crude oil games with Chevron up two point eight 10 00:00:31,520 --> 00:00:34,600 Speaker 1: percent at Goldman Sachs basket of the most shortage shares 11 00:00:34,640 --> 00:00:37,160 Speaker 1: in the Russell three thousand is seeing its biggest surge 12 00:00:37,240 --> 00:00:40,880 Speaker 1: since who jacon marks every fifteen minutes throughout the trading 13 00:00:40,960 --> 00:00:44,200 Speaker 1: day on Bloomberg Radio. Dal Industrial leverage up two hundred 14 00:00:44,280 --> 00:00:46,959 Speaker 1: fifty four points one and a half percent, trading at 15 00:00:46,960 --> 00:00:50,519 Speaker 1: seventeen thousand, six hundred sixty three. SMP five foundered up 16 00:00:50,560 --> 00:00:52,640 Speaker 1: thirty two points to one point six percent at two 17 00:00:52,680 --> 00:00:55,760 Speaker 1: thousand sixty seven. The NASDAC is hired by eighty five 18 00:00:55,800 --> 00:00:58,800 Speaker 1: points one point eight percent, trading at forty seven seventy six. 19 00:00:59,200 --> 00:01:01,680 Speaker 1: West Texas Center Media crude oil up at dollar seventy 20 00:01:01,760 --> 00:01:05,000 Speaker 1: four a barrel three point six percent at sixty spot 21 00:01:05,040 --> 00:01:10,080 Speaker 1: coled up nine dollars announced at ten year treasury unchanged 22 00:01:10,080 --> 00:01:13,120 Speaker 1: with the yield of one point of forty six sixty three. 23 00:01:13,360 --> 00:01:15,880 Speaker 1: And that's a Bloomberg Business flash show where you Kathleen 24 00:01:17,080 --> 00:01:20,640 Speaker 1: Bloomberg jaking stock to the Fed in the focus. Interest 25 00:01:20,720 --> 00:01:23,520 Speaker 1: rates start to row for where the economy is going. 26 00:01:23,560 --> 00:01:26,000 Speaker 1: The question is how much higher should it be FED 27 00:01:26,080 --> 00:01:29,840 Speaker 1: to increase the fasset? Yes, and in doing so it 28 00:01:29,959 --> 00:01:34,400 Speaker 1: has increased its liability. Keeping interest rates at zero for 29 00:01:34,520 --> 00:01:37,440 Speaker 1: a long time is not going to cause emploation to 30 00:01:37,440 --> 00:01:40,520 Speaker 1: go up. It's very controversial. I think what we need 31 00:01:40,560 --> 00:01:42,080 Speaker 1: to do is find a way for the FED to 32 00:01:42,160 --> 00:01:45,000 Speaker 1: integrate its policy and think more about its impact on 33 00:01:45,040 --> 00:01:50,560 Speaker 1: the world. The Fed in focus on Bloomberg Radio, forget December, 34 00:01:50,680 --> 00:01:55,000 Speaker 1: forget next year. The Fed's done hiking until eighteen. So 35 00:01:55,280 --> 00:01:58,200 Speaker 1: reads the headline on a terrific story on the bloom 36 00:01:58,320 --> 00:02:02,160 Speaker 1: Bloomberg Today and on Bloomberg Dot Calm by Liz Copple McCormick. 37 00:02:02,280 --> 00:02:05,320 Speaker 1: She specializes in the bond market. And Matt Bosler, who 38 00:02:05,440 --> 00:02:08,880 Speaker 1: is part of our feder Reserve Reporting team here in 39 00:02:08,919 --> 00:02:13,040 Speaker 1: New York is not hiking rates enough. Should the Fed 40 00:02:13,160 --> 00:02:15,800 Speaker 1: even be cutting them as well? Let's put this question 41 00:02:15,840 --> 00:02:19,840 Speaker 1: to our next guest, now, Rihanna, Culture Lakota joins us now. 42 00:02:19,960 --> 00:02:24,880 Speaker 1: He is the former head of the Minneapolis feder Reserve Bank. 43 00:02:24,919 --> 00:02:28,800 Speaker 1: He's a bloomberg of you, calumnus, and he's going to 44 00:02:29,040 --> 00:02:32,760 Speaker 1: explain his latest column to us. Now. Rihanna, welcome back. Yeah, 45 00:02:32,760 --> 00:02:34,480 Speaker 1: thanks for Kathleen. It's my pleasure to be with you. 46 00:02:35,919 --> 00:02:38,639 Speaker 1: So let's start with Brexit, because we've got the stock 47 00:02:38,680 --> 00:02:40,840 Speaker 1: market up for three days in a row. People, the 48 00:02:40,880 --> 00:02:43,480 Speaker 1: markets need to be shaking this off. If Brexit is 49 00:02:43,520 --> 00:02:46,280 Speaker 1: one of the reasons why the Fed should be more stimulative, 50 00:02:46,680 --> 00:02:49,560 Speaker 1: not high grades, maybe cut them, maybe go to negative rates, 51 00:02:49,560 --> 00:02:52,000 Speaker 1: as you argued in this in this great piece, is 52 00:02:52,000 --> 00:02:55,799 Speaker 1: it really so necessary? Now? You know, I think that's 53 00:02:55,800 --> 00:03:00,359 Speaker 1: a great question. But I saw Brexit as um merely 54 00:03:00,440 --> 00:03:05,560 Speaker 1: just one example of a large more uncertainties that are 55 00:03:05,600 --> 00:03:08,320 Speaker 1: facing the United States economy as we move forward the 56 00:03:08,400 --> 00:03:12,360 Speaker 1: next three or four years. Um. You know, I think 57 00:03:12,400 --> 00:03:17,840 Speaker 1: that how the negotiations unfold, how um uh, Europe and 58 00:03:17,960 --> 00:03:21,640 Speaker 1: Britain engaging each other, um over the next two three 59 00:03:21,760 --> 00:03:24,080 Speaker 1: years as they as they talk about what brexits going 60 00:03:24,160 --> 00:03:26,000 Speaker 1: to actually mean. I think there's gonna be a lot 61 00:03:26,040 --> 00:03:28,880 Speaker 1: of uncertainties associated with that, both for the UK economy 62 00:03:29,320 --> 00:03:32,360 Speaker 1: and perhaps even more meaningfully for the for the European economy. 63 00:03:32,400 --> 00:03:34,239 Speaker 1: But there's other questions that are on the table as well, 64 00:03:34,400 --> 00:03:39,840 Speaker 1: questions about about China, about emerging markets. All those uncertainties 65 00:03:40,120 --> 00:03:43,200 Speaker 1: UM mean that I think the FETCH should really be 66 00:03:43,080 --> 00:03:46,320 Speaker 1: best served by UH. That combined with the fact I 67 00:03:46,320 --> 00:03:48,720 Speaker 1: should say that the FET faces some constraints in terms 68 00:03:48,720 --> 00:03:51,200 Speaker 1: of ability to react to those kinds of contingencies if 69 00:03:51,200 --> 00:03:54,320 Speaker 1: they do emerge, UH means that the FETCH betaing at 70 00:03:54,400 --> 00:03:57,160 Speaker 1: some insurance today by UM at their next meeting, by 71 00:03:57,160 --> 00:04:02,400 Speaker 1: cutting raids when what's the likelihood of that. We got 72 00:04:02,400 --> 00:04:05,720 Speaker 1: the consumer spending numbers the strongest two months since two 73 00:04:05,760 --> 00:04:08,360 Speaker 1: thousand nine. Now, granted that their key inflation games, that 74 00:04:08,480 --> 00:04:11,560 Speaker 1: PC deflator year over a year went from one point 75 00:04:11,560 --> 00:04:14,080 Speaker 1: oh to point nine, so it's even further away from 76 00:04:14,080 --> 00:04:18,160 Speaker 1: the FEDS two percent target. I didn't the UH, So 77 00:04:18,520 --> 00:04:20,479 Speaker 1: I've been discovering with what I would refer the FED 78 00:04:20,560 --> 00:04:25,240 Speaker 1: to do UM that I I don't anticipate that is 79 00:04:25,279 --> 00:04:27,840 Speaker 1: pretty to be too likely on the FENS agenda and 80 00:04:27,920 --> 00:04:30,039 Speaker 1: in July. That is, I don't anticipate that they would 81 00:04:30,080 --> 00:04:34,400 Speaker 1: be thinking about cutting rates in July. I've been disappointed. 82 00:04:34,440 --> 00:04:38,800 Speaker 1: I have to say, to what extent um the increase 83 00:04:38,839 --> 00:04:42,839 Speaker 1: in December is treated as a given um in in 84 00:04:42,880 --> 00:04:46,440 Speaker 1: feder Reserve communications. I I think that that makes it 85 00:04:46,560 --> 00:04:49,000 Speaker 1: much harder to raise rates if you treat every move 86 00:04:49,040 --> 00:04:54,640 Speaker 1: you've made as being something that's semi semi permanent nature um. 87 00:04:54,760 --> 00:04:57,440 Speaker 1: Because if you if you ever raise rates, that means 88 00:04:57,480 --> 00:05:00,680 Speaker 1: that you're stuck with it, and then that means you're 89 00:05:00,680 --> 00:05:03,160 Speaker 1: gonna have to be very deliberative about any process of 90 00:05:03,240 --> 00:05:05,760 Speaker 1: raising rates. But I actually think they get there faster 91 00:05:05,880 --> 00:05:08,760 Speaker 1: if they were more willing to cut and uh. But 92 00:05:09,120 --> 00:05:11,840 Speaker 1: everything we've heard from them is that what they're thinking 93 00:05:11,880 --> 00:05:14,840 Speaker 1: about is as the most stimulaive policy they can think 94 00:05:14,880 --> 00:05:18,440 Speaker 1: of is not is uh. At least we've heard so 95 00:05:18,480 --> 00:05:21,480 Speaker 1: far is simply standing paths. I want you to elaborate 96 00:05:21,480 --> 00:05:23,480 Speaker 1: on that point, because you state that in your latest piece, 97 00:05:23,480 --> 00:05:25,640 Speaker 1: but it's something you have written and talked about more extensively, 98 00:05:25,640 --> 00:05:28,840 Speaker 1: because I think maybe just people don't quite hear what 99 00:05:28,880 --> 00:05:30,840 Speaker 1: you're saying, which is, if you really want to start 100 00:05:31,200 --> 00:05:34,280 Speaker 1: hiking rates, FED get the economy going and get in 101 00:05:34,320 --> 00:05:36,480 Speaker 1: a position where it needs to have rate hikes. And 102 00:05:36,560 --> 00:05:38,440 Speaker 1: it's not a big question, but you you're saying, you 103 00:05:38,480 --> 00:05:42,640 Speaker 1: can't do that unless you ease and stimulate more first. Yeah, 104 00:05:42,720 --> 00:05:46,200 Speaker 1: I think that if we ease further now, and we 105 00:05:46,320 --> 00:05:50,400 Speaker 1: and the FED was actually clearer about the package of 106 00:05:50,440 --> 00:05:54,520 Speaker 1: tools that has this available in in the case of 107 00:05:54,520 --> 00:05:59,440 Speaker 1: of adverse shocks, I think that businesses and households we 108 00:05:59,600 --> 00:06:02,160 Speaker 1: feel a for spending now, and that would get the 109 00:06:02,200 --> 00:06:07,039 Speaker 1: economy going again. Um. But beyond that, I think I 110 00:06:07,120 --> 00:06:09,599 Speaker 1: think right now that the FIT has been communicating that 111 00:06:10,440 --> 00:06:13,039 Speaker 1: every interest rate hike that they're going to think about 112 00:06:13,320 --> 00:06:15,960 Speaker 1: is going to be semi permanent. Nature will take it 113 00:06:16,000 --> 00:06:18,880 Speaker 1: a very extreme event to move away from that. Any 114 00:06:18,960 --> 00:06:21,720 Speaker 1: If you think about any decision you want to make, 115 00:06:22,000 --> 00:06:24,359 Speaker 1: if you're free to change it, you're going to be 116 00:06:24,360 --> 00:06:26,200 Speaker 1: more likely to make it. If you're free to If 117 00:06:26,200 --> 00:06:28,920 Speaker 1: it's stuck forever, you're not able to do it, then 118 00:06:29,000 --> 00:06:32,039 Speaker 1: you're so. And I think it's been a problem for 119 00:06:32,080 --> 00:06:34,560 Speaker 1: the FED that they've been communiating that that move we 120 00:06:34,640 --> 00:06:37,560 Speaker 1: made in December. That's stuck. We're never gonna undo it. 121 00:06:37,760 --> 00:06:41,200 Speaker 1: Um bari cataph last. When I go shopping, I only 122 00:06:41,200 --> 00:06:46,080 Speaker 1: buy from stores. Will let me return things, should be 123 00:06:46,080 --> 00:06:48,880 Speaker 1: able to say myself. Great example, real quick though, Jeroan 124 00:06:48,880 --> 00:06:51,840 Speaker 1: Paul fedboard governor is looking at financial conditions tightening, saying 125 00:06:51,880 --> 00:06:53,960 Speaker 1: that's now a big, big part of how that FED 126 00:06:54,000 --> 00:06:55,880 Speaker 1: makes a decision. Will that maybe help the move toward 127 00:06:55,920 --> 00:06:59,640 Speaker 1: a rate cut? I was writing, what you say, financial 128 00:06:59,640 --> 00:07:03,080 Speaker 1: condition and tightening bigger part of the equation for the FED. 129 00:07:04,320 --> 00:07:07,600 Speaker 1: I think that the financial conditions are certainly something their 130 00:07:07,640 --> 00:07:12,320 Speaker 1: continued track by ster Dudley uh thinks about talks about 131 00:07:12,320 --> 00:07:19,160 Speaker 1: that a fair amount. And again, what we've heard from 132 00:07:19,200 --> 00:07:23,120 Speaker 1: them is that that's gonna make them less likely to 133 00:07:23,200 --> 00:07:25,760 Speaker 1: raise rates. I haven't heard anything that indicates that they're 134 00:07:25,760 --> 00:07:27,800 Speaker 1: gonna that's gonna make them like that. He cut as 135 00:07:27,800 --> 00:07:31,160 Speaker 1: sooner July Now, Riana cultural Lakota, thank you so very 136 00:07:31,240 --> 00:07:33,280 Speaker 1: much for joining me today. He's form ahead of the 137 00:07:33,280 --> 00:07:36,360 Speaker 1: Federal Reserve Bank of Minneapolis. He's a Lionel W. Mackenzie 138 00:07:36,360 --> 00:07:39,400 Speaker 1: professor of economics at the University of Rochester and of 139 00:07:39,440 --> 00:07:42,360 Speaker 1: Bloomberg gew columns. This is taking stock on Bloomberg Radio. 140 00:07:46,360 --> 00:07:50,160 Speaker 1: The third year Treasury bond continues to rally. The yield 141 00:07:50,280 --> 00:07:52,960 Speaker 1: is down to two point to six percent. How low 142 00:07:53,160 --> 00:07:55,960 Speaker 1: can it go? Kevin get us from Raymond James up 143 00:07:55,960 --> 00:07:57,160 Speaker 1: next to Bloomberg Radio.