You are seeing the 10year yield around 2 . We will have plenty more on that and we had now to to the aspen festival and colorado where Michael Mckee is speaking exclusively with Federal Reserve bank of San Francisco president mary daly. Michael thank you. We do welcome mary daly to our live broadcast on Bloomberg Television worldwide from aspen. It is a nice place to be. Indeed. Market has priced more than a100 percent chance of a fed rate cut. Can you ignore that, can you ignore what the market is telling you . The markets are trying to figure out what the reaction function of the fed is and i think on the heels of the press conference, we had a good indication and i agree that we had six weeks of data that looks different than may. We had softer readings on jobstion, i one softer report and headwinds blowing our way. In a look for the next six weeks of data and seeing if that six weeks was transitory or if it really sticks is where i am. I think the markets are trying to figure that out as well. Bullying thethey fed into a rate cut . Not see it that way. We had data, the six weeks that gave us a little bit of pause, and we are looking and seeing if those data persist and if they are going to slow the economy and a meaningful way so we can achieve our dual mandates. Powell saidirman that Consumer Spending is holding up well but business spending has fallen on the uncertainty of trade policy. How does Monetary Policy address that . No one seems to be complaining about the cost of capital. Accommodate the economy we were thinking that it would come into a sustainable pace, that would gradually lift up inflation and the ongoing jobs market. With the data, it looks like the momentum, we still have as Consumer Spending, but now, the headwinds are blowing against the momentum and Monetary Policy being more accommodative with stimulate both consumers and businesses. Michael how. Consumers are spending, businesses do not want to spend. Response tos the the sense that the economy is going to slow to a sustainable pace or it is going to falter. That mood shift can be very much supported by the actions of Monetary Policy. But also, i am not convinced that this is a dove response, so they might pause on marginal products if the risks seems to great. Michael to what extent do you hope if you do a rate cut that it would weaken the dollar, help exporters, and boost inflation a little . Mary the dollar is the treasurys responsibilities when we are making our judgments, we are thinking of inflation mandate and full employment mandate. The dollar is one of the financial variables we track but we do not think of it as an outcome of our policy, but largely input of our policy. Michael it would likely go down . Mary it depends on a variety of other factors. The dollar fluctuates on issues related to geopolitical issues, debt ceilings, etc. Theory would tell you but that is not what you would think necessarily could happen. Michael if you do a rate cut on july 31, how do you think about the debate of whether it should be 50 basis or 25 basis points or the new theory that it is better to take stronger action earlier . Mary that is a theory that is not as noon new as it seems, but that is a theory that came out of the research after the Great Recession and the recovery. Using your tools early and maintaining yourself away from the zero low balance is important. That will depend on a lot of how the data comes in. Weakening that, that would call for different action. Early from my perspective to know whether we should use the tool at all and what magnitude we should apply. The other issue for the fed is low inflation and the idea of a rate cut that my address that. I am wondering whether that would work. You had zero rates for seven years and could not get inflation sustainably 50 percent. The 25 or 50 basis point cut in the fed funds target according to your models bring up inflation . Mary sure. Think that viewers do not remember and it is easy to forget is that inflation was coming up. Our accommodative Monetary Policy and diminishment of labor market slackened global slacker, economic slack in our economy was gradually lifting inflation out. The question, can we still do that with our toolkit and i believe we can. I am very focused on inflation that falls to a shortfall that is persistent below our target. Depend on isat we Inflation Expectations being anchored and for that to occur, we have to deliver on the goals set. Michael it looks like inflation was becoming unanchored in the markets until the last meeting. Do you feel like to keep Inflation Expectations anchored you need to cut . Mary i am not a proponent that Inflation Expectations have drifted. I see the indication that it is getting untethered. I am supportive of putting that and our objective function that we achieve both sides of our mandate. We focus a lot on the full employment mandate, but we also need to focus on the inflation part of the mandate, especially in a world where lowinflation is going to be the most likely outcome for a long time. Michael you are running down your Balance Sheet until the and of september. If you were to cut on july 31, do you have to change that timetable . The Balance Sheet ratio is still up for discussion, but that is a part of the ample reserve strategy of running it down. In my judgment, it does not counteract or contradict policy. Michael you do not think there is a tension of running down the Balance Sheet which in theory raises rates and tightens policy a little bit then cutting rates . Mary this has been well announced so many of the effects of the Balance Sheet runoff to ample reserves is already in the markets. The policy stands, most Market Participants know the fed funds rate is the primary device of our policy stance, so i am not worried is as others are. Michael after policy pivoted early january, how do you respond to the view that there is a powell put in the market and you can be pitched to a rate move . Mary it is interesting. I do not read january as a policy pivoted. That is how i interpreted it. I would suggest the following, i have the same exact reaction function that i had in november, september, october, december the what changed was the inputs. We were trying to sort out the mood and the data. When they started to correlate and it looks like we were getting slowing, and the headwinds were increasing, then we respond appropriately. Ofo not buy into the premise the policy decisions being taken reactioned on market because that is not factored in as my main reason. I look at markets to see what information they are giving us, but there are many other variables. Michael our markets wrong are markets wrong to price in as much of a rate cut . Mary i try not to comment on the markets being right or wrong. What i do know is they are trying to figure things out. To fed is often trying figure out how they read the uncertainty. When you look at Market Participants, some are more optimistic that the uncertainties will dissipate and the economy will regain footing, and others already priced in recession risks. Everyone is trying to interpret the incoming data and forecast what they think is going to happen. From my own perspective, i am just looking carefully for those pieces of information and helping them readying them to help me for my decision for july. Michael what is your position of how trade war tariffs are affecting the National Economy . Mary if we add up all of the details, what we find is a modest impact on inflation. And a modest impact on growth. The larger impact on inflation. When we look at the actual data, we are not seeing much sassthrough of the tariff all prices onto businesses or consumers. Stockpile people goods and services, but we have not seen it slow the economy as of yet. The main factor in my judgment is uncertainty is the headwind. Not the actual trade situation. That could change if the trade situation resolves or becomes worse, but right now, it is the uncertainty holding back the economy. Yourel what are ceos in district telling you about plans Going Forward . Mary they say they are not tabling any plans for regular growth opportunities. But they are on the margin tabling on the margin projects for a while until they see this uncertainty resolve. They are not in a grossrisk mindset. Certaintyn a growth mindset. Michael it has been reported that the president is thinking of demoting jay powell, but letting him serve on the board of governors what would your reaction to that be . Mary i am staying out of the legalities because i am not a lawyer. The most important reason we are not in that is because the fed is an independent organization and when we walk through those doors at the fomc, people put their political views aside, whatever they have, and we talk about the data, the evidence, the models, and how best to achieve our dual mandate and sustain the expansion. It is a world where the first and only priority we have is how to best serve the american people. Michael is the president did that, jay powell could still serve as chairman of the open market committee, would you support him . Mary again, i am not speculating or thinking about those types of things. When we go into the room, it is an open debate and open discussion where everyone is an equal. I think of it as a democracy of ideals and interpretation. There is really not this hierarchy, it is an open discussion and we have that, and we are all coming together to try to do what is right for the american people. Saidel the president has he will nominate new members to the board of governors after this g20 meeting. How important do you think would be for him to appoint a woman . Mary i think diversity in general is important, and i would like to go beyond gender. We have racial adversity, ethnic diversity, racial ethnic diversity, and diversity of backgrounds. I come from a different kind of socioeconomic situation and i think that bring something to the table. I think we should expand the sense of what we mean by diversity and really focus on having a diversity of thought because if you are going to do a democracy of ideas, should have diversity around the table. Michael do you think the fed is diverse enough now . Mary no. No institution focused on finance is as economic as it should be. Ideas,represent by the the people you serve. I think if we dig deeply into or n shallowly and to the into the branches of government that utilize those types of individuals, you will see we are not as diverse as we would like to be. Michael your official biography highlights your use of social media. There is some body else that uses social media, too. I know you say when you go into the room, politics does not matter. But does the president s attacks on the fed make it harder for you to do your job . Do you get a different kind of pushback now . Mary when i am out in the community, i do not people are not perceiving that we are at war with the president or there are attacks. What they are perceiving is that there is a difference of opinion and views, and it gives me an opportunity to talk about what the fed dies and why independence has been historically important, and why we think it is important Going Forward. The doors and we debate on what is best for everyone we are serving. If you do not think we are coming up with outcomes that serve you, that is why we are on a fed listening tour. My door is always open. Communicate with me and i am there to listen. I want us to be a Community Engaged bank and fed because we need to get this information out on the table. This agreement is not a bad thing, it is a good thing. Having open conversations after the disagreement is essential. Michael we will not get out your phone number, but we will tell people to look you up. Mary thank you. [laughter] michael mary daly, president of the San Francisco fed. Thank you for joining us. Shery Michael Mckee, thank you for that interview with the fed president mary daly. We have breaking news. We are hearing President Trump say that he is asking lawyers if they can delay the u. S. Census, just tweeted saying, it seems totally ridiculous that are cannot governments ask a basic question of citizenship in a very detailed census for 2020. This coming after the Supreme Court blocked the 2020s senses Citizenship Question 2020 census Citizenship Question. Now President Trump saying that he is asking lawyers if they can actually delay the census. Lets continue our discussion on the fed and other policy issues. We have heard from mary daly saying she is not seen much passthrough on t ariffs, and joining us now is a Bloomberg Economic chief, carl. Great to have you with us. Mary says she does not see january as a policy pivots, but in our view, the fed turned very dovish after the huge market selloff. The pivots may be even an understatement with the courts reversal that happened. The fed responded to a howling with several more rate increases to an extended pause and the now to signaling rate cuts. Pivots, thee were a experience over the last six months from december to present was in fact a policy pivot. I would push back on that point, but what i thought was also interesting in the discussion with Michael Mckee was the notion of how much and whether they would even need to move at the july meeting. She said she was not sure of the magnitude or if the tool would even need to be used at all. If we look back to the dot plot of 2019 from the last fomc meeting, there is one. Signaling a 25 basis point this year. Her dot, and she is not a voter this year, so if the take that into context, but this is just another signal from the fed. They do not want to markets to get greedy and look for 50 basis meetinguts at a single so this is being debated. With the fed funds rate, the , that does at 250 not give the fed a lot to cut in the next downturn. Some have said that we may already be in recession, but this is not the case considering the health we are seeing in the Consumer Spending. Amanda definitely seems to be an outlier base that tariffs are not going to have a major effect on price or inflation. Downturn,the data all sort of to cool down expectations of big cuts, but what i did find in a purist view is that she did say that they still have the tools left to think to create inflation. Concern is growing as you start to get more and more cuts under their belt. What do you make of that comment . Carl; right. Carl right. She thinks it will have some meaningful impact on economic prospects and inflation. I am not so sure given how far the market has moved in the current environment that really the fed delivering on that is going to pull rates down much further. This is the case of the markets bullying the fed into easier policy, although the fed is not really pushing back too hard against that. The fed is getting pushed along, but not resisting that. It means additional policy easing i dont think will really change the landscape. That is elective in the feds forecast, the gdp forecast. Upward revision for next year. That is hardly a big response or a response that would move the needle on the inflation landscape. The one thing she might be partyg, and this is fed line is the night any significance of Monetary Policy impact on the u. S. Dollar. Certainly and a freely Floating Exchange rate, Monetary Policy absolutely does matter. The fed always backs out to this boilerplate language of that is the treasurys domain. It may be but the fed has a very significant finger on the scale impacting how that plays out. Riccadonna, thank you for that. We have breaking news at the moment. The white house developing a plan to cut taxes by indexing Capital Gains to inflation. That is according to people familiar with the matter. We have now seen the latest fiscal 2020ng, budget as well. We had seen that this was a move that would largely benefit the wealthy and may be in a way that bypasses congress. We are hearing from sources that the white house is developing a plan to cut taxes by indexing Capital Gains to inflation. Amanda meanwhile, the Bloomberg Players Technology summit is underway in San Francisco, bringing together some of the biggest names in sports, business, and tech. Players use it as a chance to reflect. We are joined by nba allstar for Golden State Warriors, andre igadola. Thank you for being with us. Andre thank you for having me. Amanda has someone who lives in toronto, i was not cheering for the Golden State Warriors, but the fans were the real winners. One of the questions is what your future with the warriors looks like. Andre i have a year left on my contract and there is a lot of movements that are going to occur within the next week. We will see what happens and the future still looks bright for the Golden State Warriors and its far as i am a part of it, i am looking forward to it. To ask you one of the key issues and these finals was people calling it truth tour, andre, is the treatment of kevin durant and his injury. Was there enough care taken of that injury and of you in the past . Andre most definitely. That has always been the case. I have always reiterated that we have the best Training Staff in sports, and historically, we have had that while i have been with the organization. Always confident. My statement was more the mindset the athlete has in terms of a lot of noise that goes on with injuries and how that can have an effect on the mentality of a player and his safety going out there. As far as our organization, we have always been on the same page and we always know that that west hands are in the best hands on we go out there. Improvementse seen and tracking players house. How do you see this playing out . Players health. How do you see this playing out . Andre injuries are going to always happen in sports. We put our bodies on the line every game, so they are going to happen. You are seeing less and less of them with the technology we have today. You have people coming back from a career ending injury. One point, it was the meniscus, it was the quads that she could not come back and now you see guys come back within a year. Coming back to peak potentials and they are extending careers as well. Technology has played a big part in that. The way the organizations are caring about our players, the way that our league and our unions are. Shery any concerns on the negative impact of the technology whether it is commercial sale of the data and being used for illegal Sports Betting . Legal Sports Betting . Andre that is interesting. I am glad you brought up that point. How that data goes into Sports Betting, and they want all of the information given to everyone. I think you always have to treat the game with sensitivity. There is sports and then there is business and the two have to be combined or else we would not be blessed with some of the financial side of things, but you do not want the business to outweigh the game. You do not want to change the game solely for business purposes. You have to have a special care for the game. One place that you might say that is coming up a little bit with your team moving from oakland to San Francisco. There was a concern for the postseason tickets, of fans being priced out. Where is the balance between those two things . Owners and teams want to make money but you want to keep it accessible. Andre i try to have a great understanding for both sides and being an investor, i have an understanding that you have the fighting sherry responsibility to appease shareholders, and at the same time you have the fiduciary response ability to appease shareholders, and the same time, interact with the fans. Whoar it a lot about people truly love the game and they have not been able to get to the games. We do have a few things in there where we have tickets allotted for organizations to get kids into games, but that is something we will continue to work on. Shery we have to leave it there, thank you. From new york and toronto, this is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Wireless Network store. Its a look what your wifi can do now store. A get your questions answered by awesome experts store. Its a now theres one store that connects your life like never before store. The xfinity store is here. And its simple, easy, awesome. I am Mark Crumpton with bloomberg word news. The Supreme Court today ruled against the trump administrations proposal to add a citizens question to the 2020 census. The explanation for adding the question was inadequate is what the high court said. President trump called the move quote, ridiculous. Japan for then g20 summit. He is expected to discuss the president s move to terminate Indias Special trade status. Today the president will also meet with german chancellor and japanese Prime Minister shinzo abe. After twodied extraction areas caved in at a glencore cobalts mine in the democratic republic of congo. The company says the workers quote, entered the mind without theirssion and put lives at risk by trespassing on the industrial site. Is facingstern europe a recordbreaking heatwave