Suspects in last octobers killing. A record 71 Million People have been displaced worldwide war, persecution, and other violence. U. N. Refugee agency said today that is an increase of more than 2 million. From a year earlier for the first time, venezuelans fleeing runaway inflation and clinical to hormone accounted for the asylumseekersof and 2018. Global news, 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Buy from bloomberg world headquarters, im taylor riggs. Tolive in toronto, welcome markets. Nejra here that taylor here the top stories we are following from around the world. Trump once one. Wall street banks point to a datadependent central bank. U. S. Equities are holding near highs. Global yields covered down near record lows as we count down to the fed. Crying foul. President trump is on the war path towards currency manipulation. How effective is it in improving an economy . We have an interview with the the most ceo about why he says low Interest Rates are the new normal. Lets get a quick check on the major averages. We are hovering near major highs. Nasdaq, the big tech stocks were leading yesterday. It looked like the underperformers were risk off as we await the decision. My story today is all about the bond market, 20 Straight Days of an inversion on the yield curve as we were talking about. And then of course, what it is doing if you come into my terminal. We are at a record low, negative interest yielding debt worldwide. About 12 and a half trillion dollars in negative debt outstanding. That surpasses a previous record we had in 2016 when the record was only 12. 2. We are going to think are you thank mario draghi and jay powell. Amanda one of the reasons Central Banks can remain so dovish is because there is this expectation that inflation will do the same. We have not seen tons of inflation. Take a look at this. We got a read on dpi data. Every of the eight components taking higher. You can see a divergence between the u. S. And canada. We are at 2. 4 from a. The u. S. In may was below 2 at one or nine. Benign. Still fairly it is enough to keep our central bank on its toes about how long it will stay on the sideline. One of the stories we are watching, trade remaining in focus. Ist is a report that apple at its largest it has asked its largest suppliers to take a look at the cost involved in shipping 30 of the supply chain production out of china. In terms of how they trade tensions play out, we have a major player saying, maybe they do not want to deal with it. This may have been the excuse they were looking for to make the move out of china. Taylor the big question for me, we spoke with john butler. He says it is all about the elasticity of how easy it is to be moving these supply chains to different countries. He says it will take at least two quarters. He imagines these discussions are not new but something apple has been considering for a while. Need at least two more quarters to see real changes in the location of the supply chain. Amanda it does not happen overnight. We have the president lashing out over currency concerns. We have been watching this story the last couple days. It is on the heels of the dovish ecb press conference. Trump tweeted, mario draghi Just Announced more stimulus could come, which brought the euro against the dollar. They have been getting away with this for years along with china and others. For more on this, we have shawn donnan. We already had a shot across the bow for from congress. Is this a new leg in the trade war . Hard to provet is currency manipulation. It is hard to show it helps on trade. Is this an excuse to open up a whole new arm of the trade war . That is a very good question. One of the things we need to keep in mind is that this administration has had a focus on currency and their impact on the trade balance. President trump, if you remember back in the 2016 election, was talking about chinas currency manipulation and saying he would declare china a currency manipulator on day one. Of his administration. That has not happened. What we have seen since then is a steady ramping up of policies related to currency. In the last month or so, we have seen a broader watchlist from treasury in its semiannual currency report. This Commerce Department proposal to give u. S. Companies in right to target products countries that are undervalued sorry, countries with undervalued currencies. That opens up a whole new tool for tariffs the president could use going forward. Currency is top of mind for the president. It is also part of his criticism for the fed that we have heard. He really wants to try and drive the dollar weaker. Taylor what have we learned from how the Trump Administration pressured china and the yuan about how they are folding that into the tweet this week about the euro, mario draghi, and germany . This has been that the rest of the world has been dragging the currency down for decades that they. Have benefited from that. Gets into the president s view that the u. S. Is the piggy bank of the world. He is the First American president to walk away from the strong dollar policy we have had over the last two decades. The big question is, how you get a movement in the currency if you are the Trump Administration. The only way he can do that is to jawbone and put some pressure on the fed to reduce rates and drive the dollar weaker. Taylor rates and currency dynamics always in focus with this administration. Facing pressure from wall street to washington, we are awaiting andfomcs latest decision fed chairman jay powells address. Rising expectations that the fed will hold Interest Rate steady while opening the door to a cut in the future. I want to welcome mark cabana. Ist i loved about your notes that you point out the mismatch between the markets, pricing in one to two cuts, and the dot plot, which shows the fed is on the hold. What are the mark the market is focused on downside risk. Downside risk from trade uncertainty. Downside risk from lowinflation. Downside risk from an economy that could be on the precipice of slowing. It is pressing in the fact that other global Central Banks have taken a more accommodative on terry policy. That has driven Interest Rates to historically low levels in europe. There is spillover from that back into the u. S. Those are the types of things the market is focused on. I am not sure the fed is going to validate a lot of the concerns the market has, at least in the meeting conclusion we are going to learn about in 30 minutes. Taylor who is right . Is the data really that bad . I am getting mixed reports. I know Morgan Stanley had a report out. Who was right . Mark it is a mixed picture. What the fed is going to want to do today is trying to buy themselves a little more time to get a clearer sense for how the data is evolving. We know inflation is low. We know the last employment report was soft. By and large, the employment side of the economy has done well. The consumer is strong. Businesses are becoming a bit more cautious. They are not signaling they are going to cut back production meaningfully. The market on the back of the is expecting we are going to hear more dovish comments from the fed later today. We believe the fed will have some optionality for lower rates later in this year, perhaps in july. They are not yet going to be able to walk through the door or make that decision they need to lower rates yet because they want to gather more data. Week with the g20, they wanted to see what the outcome with that is before determining whether or not to lower rates. Taylor we have these trillions of dollars of negative debt the question would be, how much of the investment represents a bet on rates going materially lower and how much is it a flight to safety echo do you think it would be a huge swath of the market cut off if the rates do not do what they expect . Mark i think a lot of that will depend on the Economic Outlook. Trade is a key piece in that. The market is showing material Downside Risks you do not get in an amiable trade resolution. Things continue to get worse. That weighs on the Global Economic outlook. If there is a surprise next week at the g20 or a trade resolution that happens in the next few months as opposed to in the next six to 12 months, you could see some of that fear priced out of the market. You could see rates rise a bit to reflect better economic and growth expectations. The question is, does the fed cut or do other Central Banks become easier before we see that resolution . It remains in the hands of the Trump Administration as to when they want to finalize the deal with china or if such a deal is available for them to take. The relative strength of economies, it has been a surprising turn for many of the worlds Central Banks. Mark carney and london saying we are ready to move if necessary. Are they overshooting . Mark certainly the markets are thinking there will be even more stimulus from Monetary Policy setters. I think what the fed and other global Central Banks want to do is get a broader assessment of data to determine whether or not easing is truly necessary or not. Today, we think the fed will change the language from referencing a patients overall stance on Interest Rates. Saying that they are monitoring delivered televisual have special coverage as usual of the fed decision in tournament from now. Weighs inceo of bmo on the conversation. This is bloomberg. Taylor visit bloomberg markets. Im taylor riggs in new york. Amanda im amanda lange in toronto. Low Interest Rates and lowinflation may be the new normal according to the ceo of bmo. He told me investor should be prepared for rates to stay lower for longer. Is possible lower is the new normal. Used two ready for and an environment that has both low rates and lowinflation. It is not true there is no inflation. There is inflation, depending on where you live geographically and which and whether you look at consumer or import cost. You can see one and a half. In canada, closer to 2 . There is a reasonable amount of inflation in the market, perhaps in the u. S. , we can we could use more from a policy perspective. At the same time, you have to get used to a low rate environment. We have had movements that have been on the surface and the macro level that would appear quite volatile over the last two years. When you trended over time, you step back and look at it with a lot more aperture. You can come to the conclusion we are in a low for long environment from a rates perspective and inflation perspective. Where we are now, i think it is reasonable. One of the places were somewhat say canadian tanks need to adjust back to normal are loan losses. Is there an argument that you need to be more aggressive . I do not think you ought to become more aggressive as a matter of policy. I will wake up one day and say i have a different view on the environment than i did yesterday. Therefore, lets make a decision we are going to carve out more and put it basket and say we are going to set that aside. What you do is you spend time with the models and with the people who are experts around the models. Risk people, business people, economists. What we do is develop a point of view on probabilities of many events. Other be recessions or tell risk or the different differentiation between the books over time. You come to a fundamental view as to what the right set aside is. It is not prudent in my mind to wake up and say er in a brandnew world. It goes through a rigorous process. Amanda in the makes, Household Indebtedness in canada is flight as a key concern. Pretty hot in is part its in pockets of this country. Are you in the camp that more needs to be done to cool it . If you go back a yearandahalf ago, we had a lot of change. We had rate increases. Had be 20 coming into play. B20 sure there is volatility. House markets Housing Market broadly. Lastu look at the yearandahalf, we have not had any big policy moves. We have entered relative stability. We will have movements over time, but the fundamental supply and demand that should drive a stable market is much more present today than it was a year and a half ago when we had intervention to stabilize the market. We are always appropriately concerned about the Housing Markets in canada. At this point in time, we are a lot more unbalanced than we were at that point in time. I think we are in good shape. Amanda that was our conversation with darrell white, bmos ceo. Up, germaning powells conference. Will be live with the latest. This is bloomberg. Taylor this is bloomberg markets. Im taylor riggs in new york. Amanda im amanda lange in toronto. It is time for the Bloomberg Business flash. A look at some of the biggest stories. Bloomberg has learned and will motors wants to hire more temporary workers. The United Auto Workers likely not to cooperate. Overnion remains unhappy plans to close four factories in the u. S. And issue likely to cast a shadow when the groups work to create a new contract. Growth,aris area American Airlines has ordered 50 of the longrange versions of the a320 one. American is expected to use the planes to a place its fleet of boeing 757s. Facebook is not rushing into the launch of libra, its new cryptocurrency. The chief operating officer spoke to bloomberg in france. We have a lot of people we work with. We need to talk to people, meet with people, and that is what we are doing. We are then going to lunch. House Financial Services chairman seen waters is urging facebook to halt work on libra. She says regulators need to take a closer look. That is your Bloomberg Business flash. Taylor as we know, the fomc decision is moments away. Went to get an update with the chief u. S. Economist for bloombergs economics. How would this be different from previous insurance cuts barring we do get one later this year . Do not think it is coming today. The Economic Data is looking relatively decent. We had a wobble in the payroll numbers. Consumerthe last spending tells us economy could eke out a 2 growth. That begs the question, the difference between the current environment if we go down the route of insurance cuts, Economic Conditions are not particularly different. If we look at the setting of Interest Rates, real fed funds were above the rate of growth in 1995 and 1998. If you do not want to cause a re a recession or start or sharp slowdown, it is time to cut. The fed did that. If you look at the present environment, the real fed funds rate is well below the pace of growth in the economy. The real difference between now and those prior episodes is a much more accommodative stance of fed funds. Amanda one of the things were looking for is more patience to come out of the statement. What of what is the reaction if the fed stays in . Do not look for patients. Look for patients to be gone. Remains, and that would be a hawkish surprise from the fed, the signals are are they are resistant. The market would be caught off guard. It is a broadbased view that it would be replaced with something more akin to watchful or vigilant. Taylor we cannot cut our way to inflation. Why are we doing it . That is an interesting question. We are well off the mark on inflation. If the fed is cutting, it is more an attempt to add some steepness to the yield curve, which would be positive for the financial sector. If it is positive for the financial sector, credit extension environment, that should be good for the economy as well. The real risk is the ongoing appreciation of the tradeweighted dollar. Been as strong as it has at any point over the last 30 years. That is a major deflationary force. It also is a break on the economy. The fed has to be thinking about what they can do. Paul volcker broke the back of inflation. Jay powell needs to break the back of the strong dollar. Taylor we will be hearing that moments away. That was our u. S. Economist for bloomberg chief economics. Lets look at how markets are faring as we await the fomc decision. These are patient markets. We are mostly unchanged. The 10 year yield hovering above to 10. This is bloomberg. I am here with tom keene. We are waiting the fourth and was consequential fed decision of 2019 due out in just minutes. After that, chairman powell will host a News Conference where his every word will be scrutinized for how the central bank will proceed in the coming months. The fedexd meetings rest on a simple idea, which is do no harm. Tom lets get a data check. Jeffrey rosenberg with us to get started. The doubt 10, yield, as taylor just mentioned, 2. 09. I am watching yen. Yen has been a focal point over the last eight hours. Lets move to the next screen. We need two screens on said day. Fed day. Scarlet, because of the chase here, i am watching curve flattening over the last 24 hours. Really over the later part of the week. Scarlet yeah. Lets bring in jeff rosenberg, blackrocks senior fixedincome manager. He is a regular here. There is going to be an fomc statement at 2 00 p. M. What part will you focus on . And the answer cannot be all of it. Jeff i think it will be more the press conference in terms of how to see answer the tough questions . It will be an interesting week for the fed some of the politics, the treats, tweets, and draghi as well, the flattening, the ecb clearly signaling policy. Tom the president said yesterday granting down to a twoyear, and all of a sudden, trade, on himself. Jeffrey everybody is waiting for the g20 meeting, and even the fed my think you will have a hard time threading the needle are, but the markets clearly looking for the trade issue, and it is really a lot of contingency on dust regulator . Does it get worse does trade get better . Does it get worse . Scarlet how about this the most controversial so far . Jeffrey fair enough. Scarlet no one wants to get ahead of the fed before the announcement comes out, especially when it is a big one. S p a little change right now, 2. 10 . R yield at dollar currently weaker, and of course looking at nymex crude, this is to the low 50, and that is exactly where we find ourselves right now. Lets go to michael mckee. Michael the fed does not cut rates, but they come close. Jim bullock of st. Louis voted to cut today. Committee, twohe rate cuts, 50 basis point is appropriate by the end of next year. Uncertainties about the outlook have increased the mother statement says. In light of these uncertainties in muted inflation pressures, the committee will closely monitor the applications of incoming Economic Outlook and will act as appropriate to sustain the expansion. While there grows forecast is not while their