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Speaker 1: Good morning. I'm Doug Krisner and I'm Brian Curtiz. Here

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Speaker 1: are the stories we're following today. The FED raised interest

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Speaker 1: rates to the highest level in twenty two years. The

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Speaker 1: benchmark FED funds rate was lifted to five and a

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Speaker 1: half percent from five and a quarter FED share at

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Speaker 1: Jay Powell said that additional hikes will depend on incoming data.

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Speaker 2: We're going to be going meeting by meeting, and as

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Speaker 2: we go into each meeting, we're going to be asking

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Speaker 2: ourselves the same question. So we haven't made any decisions

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Speaker 2: about any future meetings, including the pace at which we'd

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Speaker 2: consider hiking, but we're going to be assessing the need

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Speaker 2: for further tightening that may be appropriate. You read the

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Speaker 2: language to return inflation to two percent over time. It

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Speaker 2: is certainly possible that we would raise funds again at

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Speaker 2: the September meeting if the data warranted, and.

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Speaker 1: He also said that the future data could justify holding

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Speaker 1: interest rates steady at that meeting. He said the FED

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Speaker 1: would also take into account the cumulative tightening of monetary policy,

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Speaker 1: and he added that the FMC will assess how the

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Speaker 1: lags affect economic activity and inflation.

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Speaker 3: We heard from meta platforms after the bell, the company

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Speaker 3: reported better than expected revenue for the second quarter, and

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Speaker 3: it gave a rosy forecast for the current quarter, Meta

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Speaker 3: saying that sales will be between thirty two to thirty

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Speaker 3: four and a half billion. That's above analysts projections. It

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Speaker 3: seems to be assigned. Meta is succeeding in migrating advertisers

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Speaker 3: to its short form video service called Reels. Meta has

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Speaker 3: been betting on Reels as a way of drawing more

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Speaker 3: attention to its social networks. Meta also recently introduced a

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Speaker 3: competitor to Twitter. It's called Threads. The company is hoping

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Speaker 3: it will boost business longer term. We heard from Scott

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Speaker 3: Kessler earlier. He's at Third Bridge.

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Speaker 4: I think a lot of people are really interested to

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Speaker 4: see progress when it comes to Reels and then monetization

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Speaker 4: plans as it pertains to Threads. Particularly we're in the

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Speaker 4: summer now, but soon enough, folks are going to be

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Speaker 4: planning for the holiday shopping season. There's a great opportunity

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Speaker 4: for Meta to do something with Threads along those lines.

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Speaker 3: There over at Third Bridge. By the way, Meta is

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Speaker 3: also investing heavily in artificial intelligence, and it's using the

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Speaker 3: technology to make recommendations for both content and advertising. The

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Speaker 3: hope here is for both to be more tailored to

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Speaker 3: the interest of users, and right now, if you look

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Speaker 3: at Meta shares and late trading hire by nearly eight percent.

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Speaker 1: Brian the Pentagon is seeking new supply of a mineral

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Speaker 1: that's used in semiconductors and military radar systems that would

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Speaker 1: be denied by China. Let's get the story from Bloomberg's

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Speaker 1: and Kates.

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Speaker 5: The Pentagon plans to issue a first time contract to

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Speaker 5: US or Canadian companies by year end to recover gallium

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Speaker 5: after China curbed exports this month. The Pentagon does not

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Speaker 5: have reserves of gallium and wants to focus on recovering

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Speaker 5: the mineral from existing waste streams of other products. Gallium

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Speaker 5: is used in navy radar, on vessels for air and

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Speaker 5: missile defense, and by the Army and Marines in ground

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Speaker 5: based radar. In Washington and Kates Bloomberg Day Break Asia.

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Speaker 3: We go to Volkswagen next. The company is planning to

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Speaker 3: envest seven hundred million US in the Chinese ev maker

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Speaker 3: x Pong. We have more from Bloomberg's Juan Wong in Hong.

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Speaker 6: Kong Voltswagens that would jointly develop EVS in China with

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Speaker 6: x Pong, and with the investment, it'll hold about a

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Speaker 6: five percent stake in the Chinese company. Two new battery

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Speaker 6: powered models are being planned. The first is due to

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Speaker 6: arrive in twenty twenty six. Voltswagen's EV sales in China

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Speaker 6: dipped in the first half of this year. In the market,

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Speaker 6: the crew twenty percent in Hong Kong. I'm joined wog

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Speaker 6: Bloomberg day Brikasia.

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Speaker 3: Meantime, the CEO of Stilantis, Carlos Tavares, says he is

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Speaker 3: happy to be downsizing in China. He said Volkswagen, along

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Speaker 3: with General Motors and other foreign car makers, are under

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Speaker 3: pressure as local competitors slash prices.

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Speaker 1: Right, Yeah, not just the foreign makers, but listen to

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Speaker 1: this one. China's everground NEV has reported eleven point seven

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Speaker 1: billion dollars of losses that were accumulative over the past

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Speaker 1: two years. Bloomberg's Bonnyao as the story from Hong Kong.

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Speaker 7: The EV unit suffered a NETLOK close to four billion

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Speaker 7: dollars last year and nearly double that the year before.

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Speaker 7: The company also warned of its ability to continue as

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Speaker 7: a going concern. The Everground unit had initially aimed to

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Speaker 7: take on Tesla and at one time had a greater

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Speaker 7: market value than Ford Motor, but it was weepped up

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Speaker 7: in a dead crisis that engulfed its parent. The company

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Speaker 7: said it delivered about one thousand vehicles from October through May.

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Speaker 7: It was originally targeting one million units by the end

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Speaker 7: of twenty twenty five. The company said it's negotiating with

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Speaker 7: banks about renewing existing borrowings and corporate bonds that were

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Speaker 7: mature by the end of the year. In Hong Kong,

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Speaker 7: I'm Bonnie ol Bloomberg Day Break Asia.

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Speaker 1: I'm Brian Curtis here in Hong Kong along with Doug

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Speaker 1: Krisner and our colleague Rishad Salama will join us in

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Speaker 1: a few moments. So, Doug, just looking here at the

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Speaker 1: FED decision today. I think the focus will switch pretty

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Speaker 1: quickly to earnings. But anyway, from the meeting, it seems

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Speaker 1: like the FED is just buying some time here, hoping

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Speaker 1: or waiting to see if the data eventually backs up

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Speaker 1: what most markets are assuming that the FED is getting

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Speaker 1: pretty close to the end of the hiking cycle.

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Speaker 3: Yeah, I think you're right the swaps market right now,

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Speaker 3: indicating there's only a fifty percent probability of one more

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Speaker 3: twenty five basis point hike between let's say now in

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Speaker 3: the end of the year. And I thought one of

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Speaker 3: the most hawkish things that I heard today Brian is

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Speaker 3: Powell saying he doesn't see inflation returning to the Fed's

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Speaker 3: two percent goal until twenty twenty five. That's a long

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Speaker 3: time away.

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Speaker 1: Yeah, that's one of his theories, and that has been

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Speaker 1: I think in the market. He's been pushing that line.

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Speaker 1: There are plenty of FED policymakers though, that are looking

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Speaker 1: at possibly seeing some FED cuts next year. And it

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Speaker 1: was also telling when he was asked the question about

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Speaker 1: do you keep on hiking all the way down to

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Speaker 1: two percent, and he more or less said no, and

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Speaker 1: that getting that balance right is really what the sort

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Speaker 1: of decision will be is when do they start adjusting

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Speaker 1: as they see inflation coming down?

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Speaker 3: Yeah, and FED staff not predicting a recession at this point.

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Speaker 3: That's a bit of a change. And so Powell seems

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Speaker 3: to support the idea that the FED can be successful

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Speaker 3: and engineering a soft landing.

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Speaker 1: Yeah, we've got Dennis Lockhart, the former president of the

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Speaker 1: Fed Bank of Atlanta coming up to discuss this, and

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Speaker 1: of course, as mentioned, the focus really will switch back

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Speaker 1: to earnings quite aggressively during this very busy period, and

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Speaker 1: we'll get you more on that all throughout the morning.

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Speaker 1: Now it's time for Global news. US Secretary of State

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Speaker 1: Anthony Blincoln is continuing to take aim at China's global ambitions.

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Speaker 1: At Baxter has Global News from the nine to sixty

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Speaker 1: news room in San Francisco.

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Speaker 4: Ed.

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Speaker 8: Yeah, right, Brian, He's the latest on Tonga and spoken

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Speaker 8: very stern terms about Beijing's military and economic ambitions. There

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Speaker 8: has been some, from our perspective, increasingly problematic behavior, including

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Speaker 8: at the same time, the assertion of unlawful maritime claims.

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Speaker 8: Lincoln says the Indo Pacific must stand up to the

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Speaker 8: blatant expansionism unexpected twists and turns. In the Hunter Biden

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Speaker 8: tax trial, after an initial agreement with prosecutors to plead

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Speaker 8: guilty to misdemeanor tax charges, the judge said she needed

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Speaker 8: to look at how far ranging the deal was, with

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Speaker 8: implication to gun charges that are still being investigated against Biden.

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Speaker 8: Biden then came back to plead not guilty until the

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Speaker 8: deal can be more fully examined. White House Press Secretary

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Speaker 8: Korean Jean Pierre says that the Biden administration estayed clear

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Speaker 8: of the whole.

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Speaker 9: Proceeding Hunter Biden is a private citizen and this was

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Speaker 9: a personal matter for him. As we have said, the President,

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Speaker 9: the first Lady. They love their son and they support

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Speaker 9: him as he continues to rebuild his life.

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Speaker 8: It might be noted the outstanding tax bill has already

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Speaker 8: been paid, but the issue remains political. House Speaker Kevin McCarthy.

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Speaker 1: There shouldn't be two justice systems in America, and hopefully

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Speaker 1: today that's what's being to do.

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Speaker 8: And Bloomberg's at Julie Fine with balance of powers, Joe

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Speaker 8: Matthews says, useful for Republicans, evanence or.

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Speaker 9: Not, whatever they do, they get to keep the issue alive,

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Speaker 9: and it's alive during a campaigns or not.

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Speaker 7: This is Washington City.

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Speaker 8: Yeah, so we're ready for another year. Taiwan's Foreign Minister

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Speaker 8: Joseph Wu says China has been stepping up what he

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Speaker 8: calls cognitive warfare leading up to the election. He says

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Speaker 8: China is trying to influence people into thinking that the

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Speaker 8: US is not trustworthy. Well, Wu sites. Conspiracy theory is

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Speaker 8: that the US wants to ruin Taiwan's semiconductor industry. Wu

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Speaker 8: tells Bloomberg China that China is trying to play a

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Speaker 8: role in the election, and that quote, I think they

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Speaker 8: should try their own democratic elections inside China. As Senate

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Speaker 8: Republican leader Mitch McConnell started a news conference at the

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Speaker 8: Capitol Day, he abruptly stopped in frozen place for about

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Speaker 8: twenty seconds. It's been good by Barzan cooperation and a

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Speaker 8: strain of.

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Speaker 1: Now.

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Speaker 8: His aids led him away after about two twenty seconds,

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Speaker 8: but he returned minutes later to say he was fine.

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Speaker 8: His aides refused to answer questions. McConnell earlier this year

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Speaker 8: suffered a concussion and a broken rib because of a

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Speaker 8: fall at a fundraiser. He was off work for about

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Speaker 8: a month. Global News powered by more than twenty seven

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Speaker 8: hundred journalists and analysts in over one hundred twenty countries.

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Speaker 8: In San Francisco, I'm Ed Baxter, and this is Bloomberg.

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Speaker 1: This is Bloomberg Daybreak Asia. I'm Brian Curtis here in

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Speaker 1: Hong Kong, along with Rashad's Salamat in London and joining

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Speaker 1: us now is Dennis Lockhart, former president of the Federal

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Speaker 1: Reserve Bank of Atlanta, to take a closer look at

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Speaker 1: the FED decision. Mister Lockhart, thanks very much for being

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Speaker 1: with us. So a very highly anticipated result today, really

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Speaker 1: not all that much new. What did you find the

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Speaker 1: most telling in share palace comments?

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Speaker 10: I thought he he didn't tell us a lot new.

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Speaker 10: Quite frankly, he repeated the mantra that we've heard many

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Speaker 10: times before, and that is meeting by meeting, data dependent,

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Speaker 10: no preordained or predetermined path or pace. This was to me,

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Speaker 10: quite frankly a ho hum press conference and result of

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Speaker 10: the meeting, the twenty five basis point move, as you

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Speaker 10: pointed out, was very highly anticipated, and he kept his

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Speaker 10: options open. He really didn't commit or even give guidance

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Speaker 10: as to what would happen at the September meeting or

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Speaker 10: the October November meeting.

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Speaker 11: Mister Lockott, he has a lot to contend with in

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Speaker 11: the sense he's got pressure from all different sides. What

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Speaker 11: would you have said.

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Speaker 10: Well, let me throw j. Powell a bouquet. I think

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Speaker 10: he speaks in simple and straightforward terms of very pragmatic

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Speaker 10: kind of tone to what he has to say it's

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Speaker 10: not technical. He doesn't sound all that much like a

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Speaker 10: central banker, and I thought he communicated well the situation

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Speaker 10: they're in, and that is that they've had some encouraging

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Speaker 10: inflation data, but relatively recently, and it's not enough to

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Speaker 10: bank on, and they are simply going to proceed and

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Speaker 10: let the data tell them what the situation is. He

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Speaker 10: did point out in the press conference that they will

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Speaker 10: receive a number of reports between today and the September meeting,

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Speaker 10: which will mean they'll have a little bit more of

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Speaker 10: a rich set of data to look at, and that

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Speaker 10: could help them determine what they want to do either

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Speaker 10: at that meeting or at the October November meeting.

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Speaker 1: In some ways, it's actually very convenient that they've got

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Speaker 1: eight weeks here. Normally they have six weeks in between meeting,

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Speaker 1: but this one stretches on a little bit and it

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Speaker 1: gives them a lot more data to look at. The

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Speaker 1: comment that I made to my colleague Doug Prisner earlier

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Speaker 1: was that it would seem that the Fed assumes it's

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Speaker 1: going to get data that will back up what both

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Speaker 1: the bond and stock market seem to be anticipating, and

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Speaker 1: that is that they're getting pretty close to the end

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Speaker 1: of the hiking cycle.

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Speaker 10: Yes, but I think, as you pointed out earlier in

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Speaker 10: the early part of the program, and this was to

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Speaker 10: some extent news I think are a little bit surprising.

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Speaker 10: He said that their current projection suggests that they're not

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Speaker 10: going to reach the target until twenty twenty five, and

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Speaker 10: that could therefore spell a fall all of twenty twenty

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Speaker 10: four with rates remaining at their current level or higher.

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Speaker 10: So that was a little bit of an insight into

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Speaker 10: their thinking. The other thing that I thought was important

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Speaker 10: in the chair pal's commentary was that he emphasized that

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Speaker 10: they're not going to necessarily wait for a final outcome.

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Speaker 10: In other words, hitting two percent the ultimate target, they

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Speaker 10: are going to anticipate. They're going to be looking forward

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Speaker 10: and either pausing or even conceivably cutting in anticipation that.

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Speaker 1: Yeah, yeah, that's what I think comment I thought, That's

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Speaker 1: why I tried to say to Doug. I don't think

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Speaker 1: it came out quite as intended, but you know, the

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Speaker 1: FED he mentioned that they are not going to hike

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Speaker 1: interest rates all the way up until you get to

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Speaker 1: the target, because at some point you see that the

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Speaker 1: process is there and you know, if you go all

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Speaker 1: the way to two percent, that you will have gone

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Speaker 1: too far. And he said that in the meeting. So

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Speaker 1: the inflation getting to two percent will happen after the FED,

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Speaker 1: well after the FED stops hiking rates. And I think

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Speaker 1: he did put that pretty well in the in the briefing.

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Speaker 10: Yeah, but it does. It does beg the question how

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Speaker 10: will they become convinced that the path is pretty certain

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Speaker 10: to two percent? And again, I think sometimes the markets

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Speaker 10: look at a shorter list of criteria than the FED does.

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Speaker 10: I think the FED is going to look for a

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Speaker 10: series of consistent disinflationary reports that are bringing the year

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Speaker 10: over year as well as other measures of inflation down

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Speaker 10: toward target. And you know, no anomalous reports, but clearly

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Speaker 10: month after month progress. And that suggested me take some

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Speaker 10: time before they are that convinced.

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Speaker 11: Look, and why is the whole medicine taking so long

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Speaker 11: to actually act? I mean, this seems to be much

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Speaker 11: longer than it would do normally. That's one part of

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Speaker 11: my question. And you know, just going to and I

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Speaker 11: don't want to be flippant here, but you know, we

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Speaker 11: could see that we're going through a disinflationary moment, could

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Speaker 11: it be disinflationary in a transient senses it were.

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Speaker 10: Yes, I mean there has been the fear of transient

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Speaker 10: disinflation or transitory disinflation using the T word that everybody

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Speaker 10: wanted to distance themselves from a year or so ago.

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Speaker 10: That a sort of false dawn from a point of

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Speaker 10: view of disinflation. You can't rule that out because there

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Speaker 10: can be global shocks that affect prices, and some of

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Speaker 10: the prices in particularly energy and food, are terribly important

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Speaker 10: to the ultimate inflation result. So you really can't rule

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Speaker 10: that out. The go great, I'm sorry.

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Speaker 1: Well, I was going to say. Another interesting line was

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Speaker 1: that he's still pretty confident that they can pull off

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Speaker 1: a so called soft landing. And he was asked by

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Speaker 1: one of the participants about what the staff's view was,

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Speaker 1: and he said, well, the staff, you know, is very

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Speaker 1: different from the FOMC policymakers, but they too now are

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Speaker 1: not calling for recession. So that was pretty interesting.

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Speaker 10: Yeah, that is interesting because we don't see necessarily right away,

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Speaker 10: we see in the minutes three weeks from now what

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Speaker 10: the staff projection is. And in the last two meetings,

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Speaker 10: I believe the staff have actually projected or forecast a

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Speaker 10: mild recession later this year, and that is that was

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Speaker 10: not aligned with what the chair was saying or what

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Speaker 10: most of the FMC members were saying. Apparently they've pulled

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Speaker 10: back on that. The staff is pulled back on that aswer.

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Speaker 11: The first part of my question is why is it

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Speaker 11: taking so long to see the effects of tighter monetary policy?

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Speaker 11: It seems unusual.

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Speaker 10: Well, I think we first we have a resilient economy.

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Speaker 10: That's the term that's used so often, meaning that there's

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Speaker 10: quite a bit of strength. And the most important factor

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Speaker 10: in my mind is that we were in a full

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Speaker 10: full employment state with the demand for labor exceeding the

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Speaker 10: supply of labor, and therefore workers have confidence in their

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Speaker 10: earnings outlook and their employ their employment prospects. That then

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Speaker 10: leads to pretty good consumer activity because they spend money

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Speaker 10: when they're sure of their future employment, and the consumer

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Speaker 10: activity drives the US economy. So those factors, I think,

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Speaker 10: why do we have that set of circumstances. Partly it

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Speaker 10: was the conditions coming out of COVID, and then the

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Speaker 10: consumers themselves were helped by fiscal policy, probably some savings

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Speaker 10: during the period as well, and so we have this

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Speaker 10: unusual labor market that we have not seen before recent years,

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Speaker 10: in which almost anyone who wants a job in America

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Speaker 10: can find one.

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