The phillips card phillips curve tradeoff does not exist anymore. That is news breaking. She got it right. He confirmed the phillips curve is dead. The fed is going to lower Interest Rates because we are growing rapidly without any inflation. I look forward to supplyside discussions. Larry kudlow also tried to diffuse work tried to diffuse rumors the president wants to replace fed chair Jerome Powell. Unemployment ratings have fallen to a new low. An employment rate among people eligible for benefits held at 1. 2 . 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. Im Mark Crumpton. This is bloomberg. Life from bloomberg World Headquarters in new york, im shery ahn. Alix live in toronto, i am amber. But them to bloomberg markets. We are joined by our bloomberg and vmm and bloomberg audiences. Hear the stories we are following from around the world. Is wrappingy powell up a second day of testimony on capitol hill with the market rallying in hopes of a rate cut later this month. We will be alive from the allen and Company Conference in sun valley, idaho. Nhlng up, an interview with commissioner, gary bettman. The white house abandoning a plan to eliminate drug price rebate. Before we get all of that, lets check on the major averages did we will start with the s p, dow, and nasdaq. The s p 500 being coy about its commitment to finish at 3000. It has retreated at certain points. The Dow Jones Industrial average a little mortified bashar little more decisive. The Dow Jones Industrial average a little more decisive. Were looking at the highest yield in about a month. As Jerome Powells center stage for the market, the market is betting we are going to be getting a rate cut. One of the regions he is testifying this is low inflation expectations. We have seen that. You could view the market as justifying the fed rate cut. The fact that the rate cut chatter has been around for several months, reflation expectations remain subdued, perhaps the market is not convinced the rate cuts will do anything to move the needle on inflation. Sheri also the economic numbers we are seeing recently. We continue to see Economic Data around the world disappoint. You are taking a look at the city index. You can see that globally and here within the united states, though surprises have been to the downside. We have seen some more negative pmis coming around the world. Not surprising that Goldman Sachs is saying investors should hold treasuries for now but be prepared for the day later this year when cash will be king. The topic of was discussion for chairman powells testimony. That was not the only thing lawmakers pressed the chairman on. Members of the Senate Banking committee pushed powell on the phillips curve and whether the tradeoff between unemployment and inflation held true for the u. S. Economy. The neutral Interest Rate is lower than what we had thought. We are learning the natural rate of unemployment is lower than we thought. Monetary policy has not been as accommodating as we thought. We are learning all of those things. At the end of the day, there has to be a connection. Low unemployment will drive wages up. Higher wages will drive inflation. We have not reached that point. The connection between the two is quite small. Sheri joining us now is senior u. S. Economist for Bloomberg Economics and brett ryan, senior u. S. Economist for deutsche bank. Welcome to the show. Everything that chairman powell said seemed to support a rate cut for july. Let me ask you about the rate going forward. Basishe bank expects 75 point cut this year. Limber economics, 50 basis point. I will let you guys Bloomberg Economics, 50 basis point. Some inflation on the core front. We saw a 0. 3 increase on core inflation, which is the first 0. 3 increase since january 2018. Chairmany, it supports powells previous remarks were he said, some of the slowdown might be transitory. , and also in the fed the speakersaw saying maybe it is not so transitory. Sheri and then you get the inflation numbers. Our view is that inflation will continue to firm as the year progresses. Maybe not as rapidly as some would expect. It will nonetheless continue farming. That supports our view they will limit rate cuts at two this year. Sheri can you still defend 75 basis points this year . Brett we can still defend the. I agree, it is going to be a meeting by meeting basis for the fed. The inflation rates did see a reversal of some of the weakness that had been in the categories previously. We are still at 2. 1 yearoveryear to be consistent with the feds goal, it would be 2. 3 . That is in the context of amazing on the core inflight context of missing on the core inflation rate. For policymakers who have been concerned about persistent misses, on the backdrop of a slowing economy, they are going to err on the side of caution from a Risk Management perspective. It is going to be an interesting next five to six months. Sheri do you find that the messaging from the fed has been inconsistent on inflation, which previously had been described as transitory . Now, we talking about prolonged reason for inflation. Previously, Jerome Powell had been focused on the domestic economy did not factor in what was going on outside the world. We learned that is one of the Major Regions the rate cut is on for the end of the month. How would you characterize for guidance and Guiding Light at the fed . In his latest testimony, he added onto the narrative that the latest data have not changed their overall outlook. The g20 meeting showed us a detente in trade disputes. It did not give us resolution. President ancisco fed and mayor daley noted that the uncertainty of itself is going to be a drag on Business Investment over the back half of the year. We have already seen a slowdown in the trend. Risk as it could tip over into a retracted slowdown. On the inflation front, it is difficult. There are transitory factors. They are looking at it from a broader context of a policy strategy review where a lot of the feedback from the fed events has been, the risk to running a tighter labor market are less than they were in previous decades. The phillips curve relationship has been different over the past 20 years. In that context, from their perspective, running policy a little looser than what they normally would do carries little risk of inflation on anchoring to the upside. Amber what do you think could be the biggest upside risk that could prove your forecast is accurate, that we get rate cuts, but perhaps not as severe . It is not that inconsistent. The clear message is, they are doing it as Risk Management thing, not to boost inflation. Spur economic growth. They are doing it to reassure the markets they are listening to what they are saying. Whether they end up doing two or three cuts does not matter much. Policy remains accommodative. Economic growth will continue at the same pace. By the end of the year, if uncertainties remain, in terms of trade tensions or whatever else we might see, like in terms of debt ceiling and all of the things, we will probably see further accommodation later on this year. Shery the insurance cut idea. When it comes to 25 basis points, it seems reasonable. Even jean bullard said that 50 basis point could be overdone. Is there a big argument for a big cut in the initial easing process, especially when youre in a low rate environment and you want the firepower in the beginning before you hit the lower zero point. The argument for a larger front larger upfront easing is when you are facing a negative shock. You want to go big early if you are facing a clear negative shock that is a threat to the economy. This is more of an big essential threat. And uncertainty of an existential threat. The data are still mixed. In that environment, you go slowly on a meeting by meeting basis. Therefore, we agree with bullard. Letsaluate in reevaluate in september. If you have not had a clear improvement in the data, the manufacturing and global data, you go again in 25. You have to set a benchmark in your forecast for how the data develop through year end for the markets to judge whether you can cut again in december. Notion to gonable slowly. You are not facing a clear negative shock. Amber thank you so much for your insight. That is brett ryan from deutsche bank. Thank you. We are going to take a quick break. When become back, the blues may have one this years stanley cup. We are going to hear from the nfl commissioner himself, gary bettman. This is bloomberg. Shery this is bloomberg markets. Im shery ahn in new york. Amber the allen and Company Conference is underway in sun valley. It is a hotbed for hockey. Ed hammond, is on the ground with top executives in the sport. Thank you so much. I am joined by gary bettman, the commissioner of the nfl. Thank you for joining us. Gary great to be here. You have been coming here around 20 years. Youre the longest any commissioner of any pro sports league. What is the biggest change you have seen in the media landscape . Gary the opportunities to connect with our fans in new and different ways. New technologies, digital platforms, social media. With millennials and generation zs focusing on sports differently, we have to make sure we are connecting with our fans on their terms. Going to become a relevant question in the next couple of years. What is the play . If you do have a direct consumer bid come in at a better rate, is at the best option . Gary i think it is most important that you connect with your fans and that you reach them in the broadest possible ways. Maybe that is multiple carriers, multiple platforms. At the same time, you want to maximize the value. It is a balancing act. That is something we will focus on over the next year. Ed what does that look like . Gary it is a model where you can schedule games in a way, nationally, because most of our games are televised locally. Minus playoffs or games. What you want to do is make sure you are maximizing your marquee matchups. Your marquee event. You want to make sure they are being covered appropriately. That they are being promoted in a firstclass way. We have been very fortunate that nbc has been our partner on cable and over the air. They have been a great partner for the last decade. E do direct to consumer nhl. Tv is streamed by Disney Streaming services. That was originally banned text, through major league baseball. We have tried to make sure we are touching all the bases. That continues to evolve. Ed and issue on the horizon is collective Bargaining Agreement coming up. Where are the players and owners most aligned at the moment . Gary we all believe the game has been growing. We have a 5050 partnership with our players. The collective Bargaining Agreement has this season and two more coming up. We and the Players Association each have a reopener. Our relationship is cordial, professional. It may be the most cooperative that has been in my tenure. Thelets talk also about concussion in the sport. Much more awareness about that. How do you deal with that without making the sport to soft sport too soft and friendly . Gary safety is paramount to us. We have been very focused on diagnosing concussions and return to play decisions after there has been appropriate treatment. And, that science and medicine continues to evolve. Eed it is not a question of trying to legislate . Gary the game is physical. It is as fast and skillful as it has been. You want to strike the right balance. Our competitive balance is extorted near. May be the best in all of the sports. Any team has an opportunity to make the playoffs. Anything can happen. When youth about last season, the st. Louis blues had the worst record in the league. Then they go on to win the playoffs and the stanley cup. News onave had a lot of womens sports. It has been overshadowed by questions about equal pay. We are here in sun valley, the biggest commissioners of all the major leaks. What is the conversation about improving the quality . That equality . Gary we very much focus on womens hockey and the development at the Grassroots Level and through the colleges. You have a relationship with Hockey Canada and usa hockey. We have been supportive of the womens teams. Leagues one professional that plans on operating a season. We are watching very closely what goes on. In terms of supporting the womens game, we have been involved, including having a couple of the women players play or participate at the Skills Competition at our allstar game in san jose last january. Ed thank you for joining me. Shery ed hammond joining us from sun valley. Coming up next, markets are recalibrating their bets on pharmacy benefit managers. After the white house abandoned the push to end rebates. Another group could find itself under scrutiny. We will explain. This is bloomberg. Amber this is bloomberg markets. Shery shares of cbs and unitedhealth rallying today after the white house announced it was pulling the plug on a plan to end rebates paid to pharmacy benefit managers. The reversal could increase scrutiny of drugmakers. Here with more on the story is the Bloomberg Health policy and bloomberg reporter, and at a. This is headed toward the president ial election. What happened . The plan that the administration wanted to put forward, which would have gotten rid of the pharmacy benefit manager rebates, also would have increased premiums for many embedded for Many Medicare beneficiaries across the board. It would have maybe saved some money out of pocket for some of the seniors, but not nearly as many as premiums would have gone out for. That is a risky calculation to make when youre heading into an election year. Amber the reaction has been pretty clear. The pharmacy benefit managers are rallying while the drugmakers are selling off. Their argument is, there rebates distort the market and keep prices artificially higher than they have to be. It sounds like the market thanks this is going to put the onus on the drugmakers themselves to cut prices. Anna i think that is right. Pointing President Trump and members of congress to pharmacy benefit managers and these rebates was a tactic the pharmaceutical industry was using to take the heat off of themselves. Now that that has been cast aside, theyre going to be where the administration looks to make some of these cuts and keep the promise to bring down drug prices. Certainly a lot of policies on the line are going to hit them harder than this one would have. Not we have even heard the president alluding to plans to link the cost of programs to europe. He says, stop subsidizing other countries that have very low prices because they are set by the government. The pharmaceutical industry says they need to pay for innovations somehow. Essentially, President Trump thinks americans are the ones who are paying for it. What he wants to do is set prices here based on the prices that are much cheaper in other countries. What he has talked about is something he called a favored nations because. We do not know a favored nations clause. That could come out very soon. He said to look for something on drug pricing within the next week. Shery could the Drug Companies point to the fight that that there have been egregious increases in prices . The increases were halted a year ago, but those were picking up again. That is not something they will be able to point to. They are taking those increases again. Amber thank you so much. Thank you for joining us on bloomberg markets. A quick reminder that you can catch all of her interviews on the bloomberg with the function tv. This is bloomberg. Mark i am Mark Crumpton with first word news. Louisiana Governor John Bel Edwards has declared a state of emergency. Much of the gulf coast is bracing for nowtropical storm barry. It could make landfall as a hurricane this weekend. Offshore Gas Production has been halted for the storm. Worsening flooding in new orleans is causing almost a billion dollars in damage. A European Union delegation traveled to khartoum today to meet with sudans top leaders. Sudans traditional military council is preparing to finalize a powersharing deal with the prodemocracy movement. Our message from the European Union is very clear we support democracy, justice, freedom in this country, and were delighted that sudan is taking the way towards this international and universal values. Mark the Eu Delegation is also to meet with the sudanese opposition, the forces for freedom and change, and with African Union and ethiopian