1 00:00:03,240 --> 00:00:06,640 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:06,680 --> 00:00:09,760 Speaker 1: dot com, the Radio plus Mobile Act and on your radio. 3 00:00:10,039 --> 00:00:14,280 Speaker 1: This is a Bloomberg Business flag from Bloomberg World Headquarters. 4 00:00:14,360 --> 00:00:18,440 Speaker 1: I'm Charlie Tellett. The DAL, the SMP, NASDAC all declining today. 5 00:00:18,480 --> 00:00:22,160 Speaker 1: This update brought to you by van Eck Vector's et fs. 6 00:00:22,160 --> 00:00:26,040 Speaker 1: Expect more from your muni's target tax exempt income by 7 00:00:26,120 --> 00:00:30,120 Speaker 1: maturity and credit quality, all with low cost ETFs. Visit 8 00:00:30,240 --> 00:00:35,280 Speaker 1: vanec dot com slash muti van eck access the opportunities. 9 00:00:35,920 --> 00:00:39,320 Speaker 1: SMP five hundred index sliding for a fifth day. The 10 00:00:39,520 --> 00:00:42,519 Speaker 1: SMP erasing gains that earlier are poised to be the 11 00:00:42,520 --> 00:00:45,360 Speaker 1: biggest in three weeks. Today it fell three points to 12 00:00:45,400 --> 00:00:47,680 Speaker 1: two thousand seventy want to drop of two tenths of 13 00:00:47,760 --> 00:00:51,080 Speaker 1: one percent. Nastack down eight also a drop of two 14 00:00:51,080 --> 00:00:54,280 Speaker 1: tenths of one percent. Dow Industrials down thirty four. That 15 00:00:54,400 --> 00:00:57,120 Speaker 1: to a drop of two tenths of one percent. Ten 16 00:00:57,200 --> 00:01:00,640 Speaker 1: year yield one point five seven percent up eleventh aready seconds, 17 00:01:00,640 --> 00:01:03,760 Speaker 1: Gold up six seventy the ounce again there of point 18 00:01:03,800 --> 00:01:08,800 Speaker 1: five percent. I'm Charlie Pellett. That's a Bloomberg Business flash. 19 00:01:09,080 --> 00:01:15,960 Speaker 1: The Brexit vote on Bloomberg Radio the Brexit vote June three. 20 00:01:16,120 --> 00:01:20,000 Speaker 1: Will voters in the United Kingdom will they decide to 21 00:01:20,120 --> 00:01:23,560 Speaker 1: leave the European Union or will they remain a member 22 00:01:23,640 --> 00:01:26,560 Speaker 1: of the EU and what effect will this have on 23 00:01:26,800 --> 00:01:30,800 Speaker 1: us policy? Let's find out more. We have vincent Reinhardt. 24 00:01:30,800 --> 00:01:34,959 Speaker 1: He is the chief economist of Standish Melon Asset Management. 25 00:01:35,280 --> 00:01:37,040 Speaker 1: He was also the former head of the Federal Reserves 26 00:01:37,120 --> 00:01:42,720 Speaker 1: Monetary Division, and previously he also served as the Secretary 27 00:01:42,760 --> 00:01:47,880 Speaker 1: and the economist of the Federal Open Market Committee. Vincent Reinhart, 28 00:01:47,880 --> 00:01:50,200 Speaker 1: thank you very much for being with us. Tell us 29 00:01:50,240 --> 00:01:56,120 Speaker 1: about your reaction to today's Federal Reserve statement and no 30 00:01:56,280 --> 00:01:59,720 Speaker 1: move in interest rates? Well, I mean this afternoon, this 31 00:02:00,000 --> 00:02:04,480 Speaker 1: the Reserve gave us a basically devish message, not so 32 00:02:04,560 --> 00:02:07,760 Speaker 1: much in the statement which was little changed, just marked 33 00:02:07,760 --> 00:02:11,760 Speaker 1: to market, but in terms of the characterization of their 34 00:02:11,800 --> 00:02:16,600 Speaker 1: future policy, the dots and the Jannet Ellen's press conference, 35 00:02:17,600 --> 00:02:22,040 Speaker 1: so in terms of let's just flush that out, because 36 00:02:22,080 --> 00:02:25,080 Speaker 1: you know, there's a slight downgrade to their gd GDP 37 00:02:25,160 --> 00:02:29,240 Speaker 1: forecast for this year, slight upgrade to their inflation forecast. 38 00:02:29,680 --> 00:02:32,359 Speaker 1: But it was the number of dots that are now 39 00:02:32,480 --> 00:02:36,000 Speaker 1: saying we only see one interest rate to increase this 40 00:02:36,040 --> 00:02:39,280 Speaker 1: year instead of two unless recall four was the forecast 41 00:02:39,320 --> 00:02:42,079 Speaker 1: the majority had in December. Right now, I think it's 42 00:02:42,120 --> 00:02:45,600 Speaker 1: significant in in two ways. They as you noted, they 43 00:02:45,600 --> 00:02:49,520 Speaker 1: didn't change their economic outlook really very much. What they 44 00:02:49,560 --> 00:02:52,400 Speaker 1: said is they need a lower path for policy in 45 00:02:52,560 --> 00:02:55,079 Speaker 1: order to get that outlook. I EI, there must be 46 00:02:55,320 --> 00:03:00,600 Speaker 1: more headwinds, and they've made a fundamental reassessment how much 47 00:03:00,639 --> 00:03:04,200 Speaker 1: they'll ultimately have to tighten. Uh So they moved it 48 00:03:04,240 --> 00:03:06,560 Speaker 1: at the front end of their great guidance and at 49 00:03:06,560 --> 00:03:09,600 Speaker 1: the back end of the great guidance. The second part 50 00:03:10,040 --> 00:03:14,560 Speaker 1: of their six policymakers saying they only see one one 51 00:03:14,600 --> 00:03:17,200 Speaker 1: tightening in two thousand and sixteen is that this is 52 00:03:17,240 --> 00:03:21,880 Speaker 1: a committee that doesn't follow the median voter theory. What 53 00:03:22,040 --> 00:03:25,239 Speaker 1: matters is a consensus, and it's hard to see how 54 00:03:25,280 --> 00:03:28,160 Speaker 1: six of them are going to get convinced over the 55 00:03:28,200 --> 00:03:32,000 Speaker 1: rest of the year to tighten more than once. Vincent Reinhardt, 56 00:03:32,000 --> 00:03:35,120 Speaker 1: turn your attention now to the United Kingdom and the 57 00:03:35,200 --> 00:03:40,280 Speaker 1: June referendum. First, what do you believe will happen? And 58 00:03:40,440 --> 00:03:44,720 Speaker 1: maybe give us two versions the scenarios based on your 59 00:03:45,480 --> 00:03:47,760 Speaker 1: sort of looking at the situation. I know that they were. 60 00:03:48,080 --> 00:03:50,520 Speaker 1: I was just looking. There were pictures today of a 61 00:03:50,600 --> 00:03:53,600 Speaker 1: flotilla of boats in the Thames. They call it the 62 00:03:54,120 --> 00:03:58,160 Speaker 1: Battle of the Thames, in which boats, UH, flotilla of 63 00:03:58,200 --> 00:04:02,280 Speaker 1: Scottish fisherman of were agitating for Britain to leave, and 64 00:04:02,320 --> 00:04:05,400 Speaker 1: they were met by dinghies and pleasure cruises, all supporting 65 00:04:05,800 --> 00:04:09,280 Speaker 1: remaining in the EU, sort of a reverse Dunkirk where 66 00:04:09,320 --> 00:04:13,280 Speaker 1: it was going away from Europe breather than going to it. 67 00:04:14,160 --> 00:04:16,280 Speaker 1: I think there's a couple of things to him about 68 00:04:16,400 --> 00:04:19,320 Speaker 1: about this. First, we know it's important for monetary policy, 69 00:04:19,680 --> 00:04:22,400 Speaker 1: because Jenny Ellen told us that this afternoon when she 70 00:04:22,520 --> 00:04:28,400 Speaker 1: said international considerations loomed large. Uh. The important things when 71 00:04:28,880 --> 00:04:32,320 Speaker 1: to remember is if the vote is to leave, we 72 00:04:32,360 --> 00:04:36,160 Speaker 1: don't know what Britain will leave too, because what it 73 00:04:36,240 --> 00:04:39,840 Speaker 1: does is open up two years worth of negotiations to 74 00:04:40,520 --> 00:04:46,839 Speaker 1: reconstruct the apparatus of the Common Market by bilateral trade relationships. 75 00:04:47,040 --> 00:04:50,760 Speaker 1: So there's gonna be a lot of uncertainty, uh, in 76 00:04:50,800 --> 00:04:53,760 Speaker 1: the event of a leave vote. In the event of 77 00:04:53,760 --> 00:05:00,280 Speaker 1: a stay vote, markets have h not have increased, only 78 00:05:00,600 --> 00:05:02,800 Speaker 1: priced some of that autom market. So you're gonna get 79 00:05:02,800 --> 00:05:06,320 Speaker 1: a reaction either way if it's fifty fifty, which is 80 00:05:06,560 --> 00:05:09,480 Speaker 1: probably as good a way to guess right now as 81 00:05:09,520 --> 00:05:13,480 Speaker 1: any UH something happens in financial markets on the morning 82 00:05:13,480 --> 00:05:19,000 Speaker 1: of UH And of course Janet yellen first question at 83 00:05:19,000 --> 00:05:21,560 Speaker 1: the press conference right out of the gate, asked by 84 00:05:21,600 --> 00:05:23,560 Speaker 1: a reporter with a British accent, by the way, was 85 00:05:23,600 --> 00:05:25,599 Speaker 1: how much of it role did this play? And she 86 00:05:25,640 --> 00:05:28,240 Speaker 1: said very clearly that yes, it definitely played a role 87 00:05:28,279 --> 00:05:31,560 Speaker 1: in the decision to hold off on even considering seriously 88 00:05:32,200 --> 00:05:38,360 Speaker 1: another rate hike anytime soon. Um. But again, if if 89 00:05:38,400 --> 00:05:40,400 Speaker 1: that goes out of the way, okay, let's say there's 90 00:05:40,560 --> 00:05:43,440 Speaker 1: a stave vote. So now that you've limited that uncertainty, 91 00:05:43,480 --> 00:05:46,560 Speaker 1: if the next job's report is strong, because later in 92 00:05:46,640 --> 00:05:50,080 Speaker 1: the press conference she was asked about that, she said, well, 93 00:05:50,279 --> 00:05:54,000 Speaker 1: it's not impossible. Every meeting's live. I guess now you're 94 00:05:54,040 --> 00:05:56,760 Speaker 1: focused on the FED depends on your forecast for jobs 95 00:05:56,800 --> 00:06:00,200 Speaker 1: in particular economy More broadly, I would always hope the 96 00:06:00,200 --> 00:06:04,000 Speaker 1: forecast on the dependent on jobs in the economy. More 97 00:06:04,080 --> 00:06:06,840 Speaker 1: generally generally, I think there's sincere when they say all 98 00:06:06,839 --> 00:06:11,200 Speaker 1: decisions are data dependent and made meeting by meeting. Assuming 99 00:06:11,279 --> 00:06:15,480 Speaker 1: we get Brexit out of the way and the decision 100 00:06:15,520 --> 00:06:20,200 Speaker 1: doesn't Royal financial markets, the next big number will be employment. 101 00:06:20,480 --> 00:06:23,440 Speaker 1: But i've gotta you've gotta admit the way she answered 102 00:06:23,880 --> 00:06:28,080 Speaker 1: the question with the double negative, it's not impossible. Uh, 103 00:06:28,320 --> 00:06:31,599 Speaker 1: kind of made me think that the bar is pretty high. 104 00:06:31,960 --> 00:06:36,120 Speaker 1: Because what was significant about some of her Cherry Ellen's 105 00:06:36,720 --> 00:06:41,080 Speaker 1: remarks from the press conferences. She said she needed reassurance. 106 00:06:41,360 --> 00:06:44,960 Speaker 1: She the committee needed to know that to be confident 107 00:06:45,000 --> 00:06:48,480 Speaker 1: about the outlook. One data point doesn't do that for you. 108 00:06:49,200 --> 00:06:51,720 Speaker 1: So yes, I think there is a strong enough employment 109 00:06:51,760 --> 00:06:55,680 Speaker 1: report that would get them get tightening back on the 110 00:06:55,720 --> 00:07:00,600 Speaker 1: table in July. That's probably a one in four chance, um. 111 00:07:01,400 --> 00:07:03,919 Speaker 1: But the plain fact is if they don't tighten in July, 112 00:07:04,560 --> 00:07:06,919 Speaker 1: they will probably only tightened once this year, and that 113 00:07:06,960 --> 00:07:11,080 Speaker 1: would be in December. If they're not confident how market 114 00:07:11,240 --> 00:07:14,920 Speaker 1: takes their the reaction to reacts to their policy action, 115 00:07:15,280 --> 00:07:19,000 Speaker 1: They're not gonna want to do two tightenings in relatively 116 00:07:19,080 --> 00:07:23,600 Speaker 1: quick succession. Vincent Reinhardt, as the chief economist of Standish 117 00:07:23,840 --> 00:07:30,320 Speaker 1: Melon Asset Management, what are you telling your salesforce, your customers, 118 00:07:30,400 --> 00:07:34,040 Speaker 1: your clients about Brexit? Because I'm looking, for example, at 119 00:07:34,040 --> 00:07:37,280 Speaker 1: the dividend yield of the foot see one index stock index, 120 00:07:37,520 --> 00:07:42,360 Speaker 1: it's over four and a half per cent. Is investing 121 00:07:42,480 --> 00:07:48,679 Speaker 1: in Britain a bullish call for you? So right now, UH, 122 00:07:48,720 --> 00:07:51,520 Speaker 1: it is a risky call because if it is about 123 00:07:51,600 --> 00:07:55,960 Speaker 1: you know, fifty fifty UH stay versus is leave, you 124 00:07:56,000 --> 00:07:59,440 Speaker 1: know there'll be a response in markets. You also would 125 00:07:59,520 --> 00:08:04,800 Speaker 1: suspect that the response will be asymmetric i e. UH. 126 00:08:04,880 --> 00:08:09,000 Speaker 1: If the decision is to stay H then that gets 127 00:08:09,040 --> 00:08:12,760 Speaker 1: priced out of markets and the adjustment can be pretty 128 00:08:12,800 --> 00:08:17,160 Speaker 1: quick in orderly. But if the vote is to leave, 129 00:08:17,520 --> 00:08:21,360 Speaker 1: then it opens up just a world of uncertainty, and 130 00:08:21,400 --> 00:08:27,040 Speaker 1: it also sets a precedent for other European UH actors 131 00:08:27,680 --> 00:08:34,400 Speaker 1: to really question the integrity of the European Union. And 132 00:08:34,600 --> 00:08:39,480 Speaker 1: also remember London is a financial center, UH, lots of 133 00:08:39,679 --> 00:08:43,600 Speaker 1: cross border claims. In an uncertain environment, they'll probably be 134 00:08:43,640 --> 00:08:47,760 Speaker 1: some withdrawal from risk taking. So UH, the first thing 135 00:08:47,800 --> 00:08:51,400 Speaker 1: to recognize is there's risks either way, but the risks 136 00:08:51,400 --> 00:08:56,160 Speaker 1: are not not symmetric. UH. Risk on is gonna be 137 00:08:56,400 --> 00:08:59,920 Speaker 1: a lot less significant for asset prices than if it's 138 00:09:00,040 --> 00:09:03,920 Speaker 1: risk off. You know, UH, FED meeting is behind us 139 00:09:04,000 --> 00:09:07,480 Speaker 1: two more central bank policy shoes to drop, Vince, as 140 00:09:07,520 --> 00:09:09,240 Speaker 1: you well know, because the Bank of Japan has been 141 00:09:09,280 --> 00:09:11,000 Speaker 1: having a two day meeting and we're going to get 142 00:09:11,000 --> 00:09:13,079 Speaker 1: the results just an hours ahead of us, and then 143 00:09:13,559 --> 00:09:16,480 Speaker 1: keep going around the world. Bank of England is is 144 00:09:16,520 --> 00:09:20,080 Speaker 1: having a policy decision today as well. What's important to 145 00:09:20,160 --> 00:09:22,240 Speaker 1: be watching out of those decisions and what are you 146 00:09:22,320 --> 00:09:24,840 Speaker 1: looking for? Well, first thing to remember is Kennet Yellen 147 00:09:24,960 --> 00:09:28,679 Speaker 1: made their life harder. Uh. If the Fed had tightened, 148 00:09:28,760 --> 00:09:32,520 Speaker 1: you probably would have associated orally signaled a willingness to titans, 149 00:09:32,559 --> 00:09:36,440 Speaker 1: say in July, you would have expected some dollar appreciation. 150 00:09:36,800 --> 00:09:40,960 Speaker 1: But from the perspective of government or Kuroda or government 151 00:09:41,080 --> 00:09:44,280 Speaker 1: or Governor Kearney, that would have been a welcome using 152 00:09:44,360 --> 00:09:48,720 Speaker 1: of financial conditions in the form of some some currency depreciation. 153 00:09:49,440 --> 00:09:52,560 Speaker 1: Now they've got to do the work for themselves. I 154 00:09:52,600 --> 00:09:56,560 Speaker 1: think the more important actor, obviously is the Bank of Japan, 155 00:09:57,120 --> 00:10:01,040 Speaker 1: because if Janet Yellen was al then to move in 156 00:10:01,080 --> 00:10:04,200 Speaker 1: advance the UK referendum, I'm pretty sure Mark Karney has 157 00:10:04,240 --> 00:10:07,280 Speaker 1: been will be reluctant to move uh, and he's already 158 00:10:07,320 --> 00:10:11,080 Speaker 1: told us that. UH. For Governor Corota, the issue is 159 00:10:11,559 --> 00:10:16,240 Speaker 1: what form of additional policy stimulus h does he have. 160 00:10:16,840 --> 00:10:21,079 Speaker 1: The reaction to making the deposit rate negative has been 161 00:10:21,160 --> 00:10:25,960 Speaker 1: very adverse. It's been associated with some um technical difficulties 162 00:10:25,960 --> 00:10:30,440 Speaker 1: in markets, and so his actions will probably be in 163 00:10:30,559 --> 00:10:34,280 Speaker 1: terms of the scale and scope of his quantitative using purchases. 164 00:10:34,640 --> 00:10:39,480 Speaker 1: But it's probably not something that happens tonight. Alright, Vince Rhinhart, 165 00:10:39,480 --> 00:10:41,520 Speaker 1: thank you so very much for joining us. OK, thank 166 00:10:41,559 --> 00:10:45,079 Speaker 1: thanks for having me. Vince is chief economist at Standish 167 00:10:45,120 --> 00:10:49,600 Speaker 1: Melon Asset Management in Boston. He's a former fedeficial, former 168 00:10:49,600 --> 00:10:52,440 Speaker 1: head of the feder Reserves, a monetary division, and he 169 00:10:52,600 --> 00:10:55,960 Speaker 1: says that the FED was definitely devished, and I appreciate 170 00:10:56,000 --> 00:10:58,920 Speaker 1: what he said about the FED by not signaling any 171 00:10:58,960 --> 00:11:02,440 Speaker 1: tightening anytime soon and weakening the dollar make the job 172 00:11:02,640 --> 00:11:04,680 Speaker 1: harder for the Bank of Japan and harder for the 173 00:11:04,720 --> 00:11:07,120 Speaker 1: Bank of England as they hold and wrap up their 174 00:11:07,240 --> 00:11:10,480 Speaker 1: policy meetings. Just ahead, Kathleen Hayes and Pim Foxes is 175 00:11:10,559 --> 00:11:11,920 Speaker 1: taking stock on liber Radio.