Transcripts For BLOOMBERG Bloomberg Go 20160602

And the problem with loose Monetary Policy. We will break down the ecb decision on rates, and the entire mario druggie News Conference draghi News Conference. We count down to the ecb decision. The opec meeting in vienna. Wall street awaits the latest jobs data. Kick it off, less than 45 minutes away from their decision. Lets check in with the team leader, i am told the News Coverage will be watched closely to get the forecast. Interesting,ing is whether there today, no fresh stimulus probably, likely to show the inflation has not changed since the last projections in march and that is something of a disappointment because the last forecast did not include the ramp up of monetary stimulus, extra bond buying, negative loans and another cut in Interest Rates. A signal the ecb is starting to struggle. It will always say it can do more but it wants governments to play their part in helping the euro recovery. Investors will look for more detail. Nots past june, 2016, i do have a date and size, any clues . Not likely to be a big part, not shown change the total buying, the ecb can spread his money more broadly although the volume will not change. That will be closely watched, investors want to know when the Program Kicks off or whether it has already and we will look for more details and bank vending programs and very closely at gjore president dra criticizes government for not pushing Structural Reforms. Time, theeciate your euro a little but stronger ahead of the decision. The decision from vienna where opecs meeting. What is your reporting about what opec is discussing and when the decision will come out . The decision could come out at any time. What the ministers want to be sure of, when they do make a decision, it is one that shows unity. They are well aware there are people were written off opec and whatever they do, they need to make sure they are all on the same page, whether they bring back the Production Targets they abandon at the last meeting in december. Their main way to influence oil prices they have been using for 35 years that they do not have no, or whether they finally point a new secretary appoint a new secretary general. If they fail to do any of that, that would be bad but they want to deliver something that shows they can decide some issue. Any past, saudi arabia the driver in the meetings, a shakeup in the oil industry, has that change these meetings . It just got loud. Irens] those are some sirens. That is because they know the open meeting will be explosive. Opec meeting will be flaws of. Explosive. He wants to repair relations with the other members of the group. The first amongst equals. The most powerful guide in the room but hein the cannot make decisions on his own. Then the saudis will not get anywhere. The other most important person is the Iranian Oil Minister, he has to win him over. He has failed to do that so far. The saudis are folding desk loading i talked to their minister and they said it is not important they do that but they would like to get that kind of agreement. The Iranian Oil Minister was saying we need individual country quotas. Potentially irreconcilable differences. Markey want to make their at this meeting and at this meeting edit opec, he has to bridge the differences, particularly with the iranians. Thank you, in a fairly noisy vienna. We will get more data ahead of tomorrows jobs reports, for more lets bring in a senior u. S. Economist. P and initiald jobless, what are you looking for . Analyst will be looking for the signs that steady growth in jobs continues. Consumerssential for to continue growing at a steady and be fede fed once the consumer to support growth this year and that will allow them to continue the rate hikes at the desired pace as they mentioned. Will probably see a rebound, a modest rebound because we saw a considerable decline in the previous month and the monthly volatility might suggest that we could see a modest rebound. Adp isory is a guide, not a good leading indicator in what we should see any jobs report tomorrow. Today is a prelude to tomorrows jobs report, what do you think the fed will be looking at and what could be the sign of trouble in the economy or real continued strength in the labor market . The fed will be looking at the underlying pace and job creation because tomorrows number might be affected by the rise rising strength in the isths of may and the fed very well aware of what was going on and they know the facts ls said weike, the b might have an impact of 35,000 jobs on the payrolls numbers. Mayistory is a guide, we see a bigger impact, something more than slowing from the three months moving average base and the previous three months, currently running at around 200,000 jobs. The fed will probably look through this number and look at the pacelying face and of wages. A big day today, potentially bigger tomorrow. Thank you. Now we look at the markets. Potentially a huge couple of days for the markets, this is how we trade, in asia, down, that down by two points risk off japan reflected in the fx market with the japanese yen stronger by half of 1 . Asia but things firmer in europe. The stock 600 led by the bank, struggling shrugging off todays losses. Brentity markets, rent going nowhere. Now at 49. 76. Crude going pretty much nowhere ahead of the opec decision. Lets look at stocks to watch. Apple sharesket, slightly lower after Goldman Sachs is trimmed estimates and its price target on lower smartphone growth, and list site a report calling for 5 growth in 2016, 4 in 2017 as compared to 10 in 2015, a big slide. The estimates are still above consensus enterprise target suggest the stocks could move higher by more than 25 , nonetheless shares lower on this apparent housekeeping at goldman. The airlines and the travel sector, a rough year for the u. S. Airlines with American Airlines and United Airlines down more than 20 on the year but today some of the european ,irlines, lufthansa, air france trading higher as an Industry Trade group saying 2016 mobile profit could be higher by 3. 1 2016, perhaps this will help the u. S. Airlines as the session opens today. Johnson johnson, shares higher by 10 on the year, unchanged in the premarket on the news that they are buying Vogue International 43 . 3 billion, a privately held company focused on fair and personal care products, the deal is set to close in the third quarter. An update on what is making headlights outside the business world. Tonie Hillary Clinton said unleash a major foreignpolicy attack on donald trump. She gives a speech in san diego to kathy likely republican president ial nominee as unqualified and dangerous. Has wants to fresh problems for the Affordable Care act, the Largest Health insurer in texas wants to raise its rates on individual policies by an average of nearly 60 , a new sign president obamas of care overhaul has not solved the price hike problem. Texas is not alone, citing financial losses, many insurers around the u. S. Are requesting bigger premium increases for 2017. British Labour Party Leader jeremy is warning a vote for the uk to leave the eu would threaten workers rights come he says regulations have entitled 26 million workers to 28 days of paid leave per year, delivered right for temporary and parttime employees, and 340,000 women the right to maternity was ait be Prime Minister questions in a tv special tonight, focusing on the economic dangers of drugs it while supporters brexit while supporters are focused on the threats from immigration. Corbin,this from jeremy a vote to leave means a conservative government would be in charge. They do not agree on everything. Overg up, the ecb on that, 30 minutes away from a Rate Decision, we will hear from the Central Bank President and see if there will be an increase in the euros on inflation forecast. Here for the flower previewing and reacting to all of the events this morning and later. He will join us to talk regulation, dodd frank, and much more. The ecb said to announce its key decision on Interest Rates at 7 45 eastern. Taking a look of his Morgan Stanley index, the market does not expect the ecb to move in the other direction for four years, no hike for four years. Joining us now is the Deutsche Bank international economist. Treading water, is that the News Conference . This report written by our team in london is a very good description of what is happening, they initiated a lot of ideas and have implemented some of them but some we do not know much about, treading water is the best way. We need to see more how things are working and hear more about the details. That chart, the idea we could be waiting for more years for rate hikes, inmate will be afte Mario Draghis term at the ecb ends, what does that mean for the ecb . Ultimately, a lot more work to do. Started hiking now, six months ago, now having a liger for or five years, stunning, a divergence between what the ecb and the Central Banks are doing. It is telling you that the situation is not good. It tells you that something needs to be done. What they have done, negative Interest Rates have not been helpful. How critical do you expect him to be, about a low growth environment, do you expect him we also need structural reform, there are limits to what he can do . With negative Interest Rates, not helping. Loan growth is to week. Is still weak. That is why the burden is so much more on the other parts. Negative Interest Rates are disintegrating the politicians to do the right thing on fiscal policy and structural policy, very counterproductive in terms of what you want to achieve to get the economy going faster. If there were Structural Reforms, where would they come from, member state or on the europewide level . The member state level. Since the ecb did negative Interest Rates, we have seen countermove that many governments have started to relax and say, now that the ecb is solving our problems, why should we do Structural Reforms, why do not we just let the ecb do the work. We need to see more of the structural reform side, also on the physical side because Economic Policy does three things, Monetary Policy, fiscal policy, we have only seen Monetary Policy for the last two years. What is happening is remarkable, japan, apple, you will see in at number 35 is the Swiss National bank, some Central Banks doing creative things, how big is is that buying corporate debt and on the margin, what does that do to help them reach their mandate . In some sense, Central Banks are getting more and more creative, more and more desperate and to try to help economies along and buying Corporate Bonds can help a little bit on the margin but we are getting to the bottom of the toolbox where we are scraping and saying, should we do this a little bit and some things very creative and have a small impact but to believe that this is a big bazooka that will solve all the problems would be misguided. He is sticking with us and will be back later. Coming up, he has been called the most powerful man in banking, he joins us to discuss banking regulation, monitor policy, and much more. In roughly 25 minutes, the latest Rate Decision from the ecb in vienna, will inflation forecast given outside surprise . 24 minutes away from an ecb decision. Futures in the United States stable, dow futures down by 12 points, snp futures down by a 10th of 1 . Switch of the board, the other asset classes, wti four days of losses, now five, 40. 98. Brent crude with a 50 handle. A stronger euro, one dollar . 96. He has been called the most powerful man in banking, the Federal Reserve governor began his term in january of 2009 at the height of the financial crisis and has taken the lead in federal banking regulations. We are pleased to welcome him on bloomberg go and bloomberg radio. You have overseen a host of new regulations for the banks in the past seven years, where do we go from here, what is left to be done . Lot,we have been doing a both to implement dodd frank regulations and to put in place a new approach to supervision of the largest Financial Institutions of the country and we are at a point where it is appropriate to step back and ask ourselves, three questions, the setow effective has of regulations and supervisory innovations we have put in place been in achieving the goals of safe and sound banks, addressing the too big to fail problem and achieving Financial Stability more generally. Second, to what extent have the things that have been put in place created costs that are disproportionate to the amount of safety and soundness or Financial Stability we are buying. The first question is might we need to do more or Different Things . And might some of the things we did have gone too far . The third question, to what degree are potential risks migrating outside the regulated sectors . Those are the three questions we need to ask. At the fed, our division of Financial Stability is constantly monitoring the third that in the banks, supervision and regulations areas, increasing attention to the first two questions. Take the first one, where might you need to go further than you have gone so far . Dan good question. I amnk, at this juncture, confident that what we will be doing as part of our view of the stress test system that we have the poststress requirements for the amount of capital that banks need to have, even after absorbing the losses hypothesized in the stress scenario. Specifically, we talk a little bit about this on your program last november, i am quite confident this is the direction we are moving, specifically we will be requiring that, even after we take the stress losses into account, for the eight largest u. S. Institutions, they will need to have the straightforward minimum capital levels that all banks have to have, but also would have to be above the minimum capital plus, the capital surcharge we place on those eight institutions. There will be some offsets in other parts of the stress test. So that it will not be just a straight addition of the surcharge. , effectively, this will be a significant increase in capital. Why . For the same reason we put the surcharge is in place originally. We need to have these eight most systemically important institutions more resilient than other banks in the economy. You can have a smaller bank fail and the economy can absorb that. With the largest institutions, obviously, much more of a systemic risk. We need to achieve that and a post stress environment and a prestress environment. Scenarios are our in stress testing, we cannot anticipate all things that might happen. There is the unknown unknown. For that reason, we need to be humble about how we have predicted and make sure there is capital to absorb unanticipated types of losses. For a moment, you have a surcharge above what is required internationally in regular circumstances, you are talking about a surcharge under stress situations, would you anticipate it will be the same amount of surcharge or something less than what you require in normal circumstances . Dan i would anticipate the surcharge addition will be the same amount that is required on a ongoing basis. But, what people should not jump from the conclusion to the proposition that you should just take last years stress test and add the surcharge as a required amount of capital because we will be making some other adjustments in the stress test. There are some things put into the stress test over time that are quite conservative assumptions that were meant to of theto account some same factors, the fact we need more resiliency in the biggest institutions. Now we are doing that anymore explicit way, assuming we do go forward anymore explicit way, some of those things that we put in place before might be adjusted as well. Although there will be a significant increase, it will not be dollar for dollar. Ahead, as you expect to, what would be the timing on when this would take effect, in effect in time for the next round of stress tests . Not,i would suspect although we have not made a decision on that. I think it will probably be important for us to get a proposal out in enough time for institutions to begin planning for being increased surcharge. For example, as originally, with the stress test, we were facing phasing something zen and here they might be phased in but that has not been decided. Talking about the eight largest banks, we had the president from minneapolis on a while ago and he had some proposals or request about the too big to fail problem, i want to play a little bit of the sample you because we talked a bit about you. Frank was passed very quickly, they wanted to reform the system which i supported. More transformational measures were taken off the table like breaking up the banks or putting so much capital in the big banks that you turn them into utilities so they cannot fail. Another of other options. Here we are six or seven years later, and we have done some good come of the banks are safer, they have more capital and more liquidity but we are not taken the risk of a bailout of the table. Have you talked to them . I am looking forward to the feedback. You have not gotten it . Not yet. What is your reaction. During the financial crisis, after the financial crisis, an ongoing discussion big tossues around too fail and Financial Stabilitys and i think it is healthy to have that discussion. Those of us in the policymaking community should welcome ongoing discussions and evaluations. Also, i think we in the policymaking community have a responsibility to continue the path we have been on with his substantial increases in capital, substantial requirements on liquidity to make sure we do not get into situations. I think that it has what we have been doing. Think those of i us who have the responsibility it and puttingg capital rules in place, we need to do what we are doing, but always open to new ideas that seem to demand attention. By the way, we are waiting for the results of the test. Do you have any sense of when we will hear it . Later this month. Late this month. Thank you. Donor danking with tarullo. You are talking about trimming a bit. Lets talk about regional banks. Have you seen overregulation are . Recall,you probably couple years ago, i suggested that maybe the statutory threshold for what constituted systemically important banks that should be in the stress test was set low. It was 50 billion by statute. I thought 100 billion would be a better cut off. That is a decision for congress to make. What we have done as part of our review of the stress test within the fed in the last year, we have been talking to a lot of people, academics, market analysts, other colleagues in the government, banks themselves , we think we think the will make changes in how the regional banks, which is to say, banks you would recognize as traditional lending and deposit taking institutions. How they are treated in the nonquantitative side of the stress test. Audience, when we do the evaluation at the end which includes the stress test, we look to make sure the bank has enough capital in the post stress situation, but also to see whether their own internal Risk Management, risk assessment, and capital processes are at the level of sophistication and accuracy that we take are important for the most systemically important institutions. Knows, audience probably over the last years, we have been objected to a number of capital plans on the grounds of quantitative elements where we did not like them to see where they were. Has posed a particular challenge for some of the regional banks. As we get our evaluation, the conclusion we came to was that we can achieve what we need on Risk Management and Capital Planning with those regional banks at in the normal Supervisory Program that we have over the course of the year. So i think the direction in which we are moving is that for 250 that are under billion in assets, and are varied traditional banks, not that they cant have International Activities or capital marketr activities, but universal banks, the direction we are going to move is to take them out of the qualitative side of the stress test. And include them in the quantitative side. And i hope and expect that that will again, relieve a lot of the Compliance Costs that a lot of the smaller regional banks, and were quite burdensome, and from our point of view, relative what we got in terms of increased safety and size, that we needed with those banks, that are needed at the largest institutions. We are talking to daniel tarullo. Inthere a time frame in mind when this might happen . Dan i would hope we would have this change in effect for the next stress test, the one that will take place in 2017. On the banking regulation side, dan, what about the Community Banks . Is the regulation you want to trim back there . Again, i have suggested that if and as Congress Takes another look where they would like to make changes, it might be useful to exclude some of the Smaller Banks entirely from some regulation that have been put in place. What we come other regulators can do on our own, the substantial majority of Community Banks, those under 10 billion in assets, it is not a question of having enough capital. Precisely because many of them are not in public Capital Markets and need to keep their capital levels quite high. For many of them, the issue is the complexity of the reporting and calculations of capital ratios. I think that is the direction in which we would like to move in trying to release some of that. First thing i think we can do, and by we, the federal banking simplify the is to call reports, the reporting forms that Smaller Banks have to use. Important for the Smaller Banks. The second thing is i think we should be actively considering an overall simplified capital regime, but how they actually calculate their capital. We have been talking again with Smaller Banks, fellow regulators , to see if there is something that is consistent with the amendment that could apply to most of the Smaller Banks, and that would be safe and simpler. I hope we can move in that direction, but that is something we need to do together to make sure it is a win win situation. We are talking with Federal Reserve governor daniel tarullo. There seems to be a meeting you have coming up. Can you give us any insight of where the u. S. Economy is heading . Commentm not going to on the posture i would take at the next meeting, or indeed, any specific meeting. The most useful thing i can do is to suggest that there have been several ways in which, not as you listen to people talking about Monetary Policy generally, they are there are four ways of looking at it. There are those who basically say, we have to normalize. To get to some norm of Monetary Policy of Interest Rates. That is not convincing to me. I dont know how one thinks what normal is in a particular set of circumstances. It is not like the economy should be and 90. 6 degrees. The other approach says we are in a period of secular stagnation, excessively high savingsandloan investment, keeping Interest Rates low for bury long. As i think there are important insights, i dont think at this juncture it is the basis for policymaking. That really leaves us with trying to be more sensitive to the data as it affects our outlook on an ongoing basis. There is a little nuance and how people think about things. Some have said, look, we are close to full employment, why not raise rates unless there is a reason not to . Lets do it gradually in order to avoid problems with inflation later on. Approach, which i have been a little more inclined towards, is to say, you know, it is not clear what phone employment is. We are in a Global Environment that is not inflationary. We could perhaps get more employment and some higher wages, which would be particularly useful on the margins of the labor force. It is still a question of being datasensitive and gradual. Where there isnt an affirmative reason to move . There are datadependent approaches. Given where we are in the economy, we will move into the june meeting and those thereafter asking ourselves those questions. There will be in that for question on a referendum on the u. K. Will that be a factor in the decision that you make as part of that . Personally, from looking at our statements over the course of the last couple of years, when there are background factors not within the u. S. Economy that could have some impact, i personally have taken them into account. With brexit, there is uncertainty. Thee is uncertainty about results, obviously, but there is uncertainty as to what would of a remaine case vote in markets. Circumstances, it is a factor i would consider. At hise thing you look Financial Stability. Is it a Financial Stability concern, or a growth concern . Which one is it as far as the referendum and the u. K. As far as you are concerned . Dan it is more of a question of Immediate Impact on markets. Obviously, there are implications for growth over time, that is something that would affect our ongoing Monetary Policy. But i need in terms of the upcoming meeting to the degree, it is a factor. As a factor taking into account what would happen in Financial Markets in the immediate aftermath of the vote. Governor, when you look at the labor market ahead of tomorrows jobs data, what are you looking at that part of the economy proving stronger . Can we expect that number to fall . And what should people look at in terms of wages as well . Dan i think it is difficult to know in real time where full employment is. Statutory mandate is to achieve maximum employment that is consistent with price stability. To, wageve alluded growth over the past few years has not been moving in the direction that you might expect where we are at full employment. Think we need to continue, and i will survey be quite sensitive to developments in price inflation, which can be , at thisby wages juncture, i dont think you have seen that degree of tightness in the labor market. That is what i was saying earlier. There is a possibility of getting more employment and higher wages. Again, i want to emphasize that what i characterize as a second and third perspective on Monetary Policy, both are premised on gradual increases in the federal funds rate, which would maintain some substantial accommodations over the continuing periods of time looking into the future. One last question there is a lot of discussion on whether we asked to much of the Central Banks, including the fed, as opposed of expecting more physical activity and reform. Do you feel too much pressure has been put on Monetary Policy at this point . Present and at all. Is, Central Banks david, at present and all periods, Central Banks need to take into we need to take structural circumstances, productivity, performance as a given in the sense that we have to make decisions aced on decisions based on background. That is certainly how i approach each of our meetings. We might wish that things were going differently in other parts of the economy. But, our responsibility and our authority is to make Monetary Policy. We have to make the best Monetary Policy began given those things that are not in our control. Much dan, thank you so for sharing so much of your time. That is Federal Reserve governor dan tarullo. Jon we are counting down to the ec be Rate Decision. Back with us is the Deutsche Bank chief economist. You cannot separate what the fed may or may not do what the ecb may or may not be. The fx market is the most important thing and is certainly important to both Central Banks. Absolutely. What is stunning is the dollar stopped depreciating the spite fact we have had strong divergence. The report issue is the ecb is several years for hiking rates. The dollar is not appreciating, at least not for the last several months. Jon seems like a juvenile argument. If the fx market the thing that stops the fed from hiking the rate . There has been a dance from the dollar going up, then the dollar goes down. We do believe that the info is shrinking. We will get in a situation where the Economic Data is moving in the right direction. We do believe the will see the rate hike. Jon let me bring it to you the refinancing rates staying unchanged. 0 . The deposit facility rate has got a lot of attention. It remains unchanged and 40 basis points. The marginal lending facility, staying unchanged at 0. 25 . In line, i imagine what many people expect, that expect to be unchanged. The euro is softer. Lets switch up the board. News conference with mario draghi about 45 minutes away life and in full right here on bloomberg television. Got the date, june 8 will be the day. Before today, what we knew is that it would be june 2016. Onnow know it will start june 8. We also know that on june 22, they will conduct that first caltro. , rates unchanged. On june 8, we start making Corporate Bond purchases. Expect 20 of questions in the news. I am pleased to say we can go over to the city of london were mark martin is standing by. Marked, unchanged and policy. Mark you said it. That bond buying Program Kicks off june 8. You want more flesh on the bone, how much is the ecb going to buy each month . Suggesting when it is up and running, between 5 billion euros and 10 billion euros. One, it will begin later in june as expected. We need a bit more detail. Paying paid to land money. Roughly 45ence in minutes, mario draghi, of course, will push governments to do more on structural reform and loosen fiscal policy is able. We could have something significant happening. Economic forecasts have been cut by the ecb for the better part of the year. Today, we may get an upgrade for gdp for this year and inflation forecast. S. That signifies a turnaround. Reinstate the waiver for greek assets to be eligible as collateral . Will the ecb start buying greek assets . Probably not. But it could be reinstated. Day on thexciting announcement front, but we are looking forward to the press conference in 45 minutes. Jon mark martin, always looking forward to the news pressed for the press. At 111. 91. Targeted longerterm refinancing operations over in the ecb. Came the sheer, the deadline program. The other, with targeted longterm refinancing operation could have a negative Interest Rate. That notat many many people have talked about. David they have a specific feature that could hopefully incentivize. At the end above all this, is to get more long growth and get banks to lend more. On the margin, this may be helpful with the negative Interest Rates to get lending growth going again. It is still there be slow, which is why the ecb is pushing on this. Unfortunately, it is not going to be a panacea for the euro. On the margin, it might be helpful. Liking this comment. European companies you have one what to if one week to get your bond sales going. How much further detail are we going to expect out of the press conference in addition to the data . Thing is interesting, a lot of people have in asking the will be, which sectors benefiting . Then you start looking at what sectors have high credit rating, low credit rating. These are things that are important, but that is not how we should be spending our time. This will require a lot of manhours compared to what you get out of it from a macroeconomic perspective. It is a vary Important Development that they announced it is a very Important Development that they announced june 8. Jon what would you be asking mario draghi today . Why are we not seeing more action and more pressure on the politicians to do their things . Why is all the burden on you . And you reached the limit what can be done for Monetary Policy . It is completely misguided that we only look at Monetary Policy. There are so many other things that can be done. Tech redesigning your instructor structure. If you get an optimal design, you get more out of it from an economic perspective. Down up next, winding what is been an eventful first hour. And to see how the currency market is faring over the ecbs announcement. David this is bloomberg. Im david westin. Lets give final thoughts on torsten slok. Buying core bonds. Are we addressing a real need . Is there a demand for this credit that is not been supplied . Torsten the general thinking of the ecb and the fed that continues to be, lets ease financial conditions. You look around in markets and say, how do we ease financial conditions within the Legal Framework and whether its apply . Can we ease financial conditions going into certain Financial Markets . That is what they are trying to achieve. David our corporations having a hard time borrowing right now . Fear have been round numbers there have been round numbers for several years. It is true there is a mismatch between the idea you can continue to ease conditions because the willing this to borrow and the need to borrow are significant. We need the government to step up and do more. What is going to be the likelihood of saying that getting through this and past we have seen to tackle things like a more optimal and more efficient structure . Role to is it the ecbs reduce unemployment . If the government wants to lower unemployment, why do lower tax incentives . If you give money to companies for doing that, they can take their money elsewhere. It is a vary unpleasant discussion it is a very unpleasant discussion for most politicians to make to take. People foridies to studying. Outside ofompletely the ecb board room. Those things can still be done if that is what you are trying to achieve. , thank youten slok for spending this hour with us. Jon i great first hour. We are 34 minutes away from the ecb News Conference. It is all about opec and the ecb. Decides to keep the Stimulus Program unchanged and began buying Corporate Bond this is next week. He will head to Mario Draghis News Conference 34 minutes from now. Jon we will look ahead to tomorrows jobs reports. With the fed have the strength they need to raise rates in a few weeks time . Saudi arabia considering a surprise deal with opec members. Canada minister makepeace within the group . David welcome to the second hour of bloomberg. Thingsnot expect to be to be changing. Buying Corporate Bonds as soon as next week . Did that surprise you . When instead of the Purchase Program, the week they will be in the market buying corporate debt. We do not know how much. Junee will try to gauge how big the ecbs appetite will be. , we can still get the updates too. Lesson 30 minutes, we will be heading to vienna to bring you Mario Draghis News Conference from start to finish. Lets go to jonathan another look at the markets. Jon futures are stable, negative down by 19 points. Up ain europe, gains quarter of 1 . The dax dipping into negative territory. This is how we trade 29 minutes away, unchanged. At dollars yen, 108. It is a stronger japanese yen on the session. Treasury yields lower on the 10 several basis points. Of an opecflat ahead decision. A quick look at the stoxx to watch with abigail doolittle. Johnson johnson on the news that the company is company. E korean it focuses on hair care and personal care. The deal is set to close in the third quarter. Shares of Johnson Johnson are higher. Trading lower in the premarket oracle that and ask oracle accountant says she was told to cook the books. Svetlana is claiming she was told to add more in accrual to cloud revenue. Analystysts says an says he is not aware of it. Oracle denying it saying allegations of a disgruntled employee. Alibaba, there are two sides to a market. That japansarply softbank was selling 7. 9 billion. Today, one of the largest sovereign funds is buying 1 billion in those shares. Shares are slightly higher and that is double the announcement from yesterday. Internet Software Company is plunging in premarket. Their First Quarter billings missed estimates sharply. A big mess. There is a high bearish investors may be pleased by this. Jon thank you so much, abigail. 18 minutes ago, ecb left off the rates unchanged and set a june 8 start date to begin its Corporate Bond Purchase Program. Is an Oppenheimer Funds portfolio manager. What interests me, they are going to be buying any primary market, not a secondary market. What does that mean for price formation over in europe . It off as another perspective of how much entered parents of how much interference the ecb will have in general bond markets. Could be more trickier pricing. Depending on the size, more willingness to price out private investors. The Corporate Bond market is not that large. At that pace, you may actually want to force private investors to look for other opportunities, which means you kick in the euro channel again indirectly. We know that was not the stated objective when this was launched. Is creditbjective easing. The unintended consequence could still be welcomed. David do you want to be the one buying your issuance, or do you not care . They are issuing a lot. [laughter] do care, and a sense, they do not care. Is whatg conditions matters. They are attractive, you try to get your financing, so, no. You want to rely part of the policy here is not only the portfolio channel in the credit easing, but there is the uncertainty. The central bank is here to do whatever it takes. Rely onthey want to doing the right thing. He has a vary tricky road to walk. Things are on track. The stimulus is working. But also keeping open the option of further policy measures. Terms howct in easy easygoing to walk that road again . Steady as you go, waitandsee approach, nothing changed. They want to strike the balance of showing that they are factoring the effect of the package for the first time. You want to demonstrate on one hand that it is having the right effect. Andwant to show that growth projections are moving in the right direction. On the other hand, how are you going to massage the risks to the forecast . To startre going thinking, ok, when are we going to do tapering . It is not openended. The dates we have in mind is the last states and the markets will price in all of that. Well, he wants to maintain rates. I expect he will raise the message firmly that it is still openended and rates will remain low, or even lower for an extended. Of time custody he has given us. I think it will massage that risk beingwith cautious with risk. Statement where they laid out the details of the Corporate Program the hero system will conduct appropriate credit risk in Due Diligence procedures on an ongoing basis. We got used to centralbank buying and holding. We dont know what it looks like out there in markets where it markets when Central Banks are doing Due Diligence. Could we be seeing the ecb selling in the upcoming years . He is implying. It is tricky. They have the ability of being less pricesensitive. Make sure any selling operation will take place under smooth circumstances. Due diligence really means they are going to be selective and getting in in the first place. Turnoverg to minimize in their portfolio. Lets not forget, this is one musthave line when the ecb enters in private issuers. They have to show a certain degree of credit risk awareness. David some people will be ing particularly particular attention and athens. Do you expect that to change to greek debt . There are two fronts were greece is important. Idea is including creek debt as part of the qe program. David why not . Too soon. Full analysise and that has not been published yet. Where we may have news on greek debt is on the waiver for the ratings. That would make the dead andible for collateral liquidity operations. I think either way is not a big game changer. That announcement is likely to come soon anyway. That is what i would expect some news today. You expect any surprise on the upside possible with growth or inflation weather they will move the forecast . Showing,important and hey, we are doing the right thing. Qe one. S upsetting some are printing better numbers than expected. For this year and next on the growth side, an improvement on 10 basis points. 2018, things can smooth out once again. 10 basis points as well, or maybe nothing. 1. 5 this year. 1. 7 next. In 2018. 018 1. 8 jon looking at euro zone debt. Buying themok at for the capital gain or more appreciation on the front and . The frontend . Get involved in that we are not involved in the eurozone bond market. And not in the negative yield space. E had been active on and off that is where the attractiveness is. As long as a policy works, we look for higheryielding opportunities elsewhere. Not in the eurozone. But to go back to your point about inflation combined with what is happening in oil markets, that is where we will see higher revisions. Off 20 basis points, not iny because of the policy the wrong direction, but we have had an impressive rise in oil prices. Again, the affected maybe 20 basis points increasing the forecast for this year and next. These effects are temporary. Higher oil rides in to save mario draghi. It Oppenheimer Fund manager. Please stay with us. David we will break the u. S. May employment numbers. Could it pump fed to raise rates . In less than 20 minutes, back in began with ecb president mario draghi. We will bring that to you live from start to finish. Tomorrow is jobs day. Find out what the data means for a june rate hike. Go coming up next. Jon this is bloomberg. Im jonathan ferro. Ahead of the open, 50 minutes away from the cash open in new york. Futures negative. Down by 2 10 of a percent. Over in europe, up a 10th of 1 . Dax down by two tents of 1 . A News Conference of the ecb underway breaking soon. Congratulations to the economist. Median estimates with 173. 173. L number comes in at the adp employment change, 173 back in line with the survey. The previous number, 156 revised higher. The Research Institute saying the u. S. Added 173,000 jobs in the month of may beating the estimate. David, paperless friday. David time to turn domestic after that conversation. Turned a. One more data point for the fed as a going to the meetings. What do make of these data points . We have put little to no emphasis on any given month on how we haveially small magnitude surprises. Thatthis number shows is everything is as planned. The fed still has its case for strict interpretation of the mandate. That strict interpretation of the mandate is our doing for a rate hike. She is being more and more kind of a loan within the fed, where you start factoring in with a managementght, risk external conditions have improved with dollar weakness, higher oil prices, more stable credit market. So david china not been the problem it was a month ago. That is a good point. The commodities spread, the dollar. The fed on the Risk Management site has morrow to hike Risk Management side has more room to hike. Now they have another window of opportunity to do a small hike and maybe massage the statement to raise rates. Hikes will be gradual. I think july, at this point, is already is very, very likely. Still have the referendum, breaks it is a possibility, further turmoil in china, a political election that can weigh on consumers as a feel uncomfortable about spending with the unknown ahead. We also have a u. S. Economy that does show some weakness in parts of it, particularly on the manufacturing side. How do they box themselves in with this summer hike . Is there something you think can disrupt the pattern that is emergency emerging in the road ahead . Emerging according to the district interpretation of the mandate, they want to move forward. We share your concerns and feel this would be one step closer to what would be a policy mistake. If you are factoring in global conditions, not the strict interpretation of the mandate, it does not seem to me that this is a world that needs higher policy anywhere. The global Deflationary Forces are in place despite what oil prices are doing. That is just base effects. The deleveraging we are seeing is buried clear and will provide forces to the fed. Headwinds, you know, to the fed Going Forward. Jon just to jump in. That Treasury Curve pushed higher in the last couple of weeks but started to flatten again. Since 2007, in the low 90s. My question is what is the message in the curve . Is it a reflection of a Global Economy going nowhere fast . It is both. The fed is being price three clearly what the curve, the twoyear part of the curve. But the tens and 30s are reflecting more debt and discretionary pressures and structural headwinds. How is the fed going to react to the weakness in the pockets of the u. S. Economy . They will be playing pingpong with the markets. The markets will tell the fed if the policy mistake is imminent or not. In januaryt we had and february. The market reacted to the statement from fisher about many more rate hikes coming. The market said, we dont think the economy is ready for that. It is really an ongoing message. The fed is boxed with the market. It is a barely difficult situation to be entangled. David oppenheimer portfolio funds managers thing with us. The other big event is the other situation. What will be the fallout if opec is not able to restore unity . It will bring you all the latest on i am megan murphy. It is time to head to vienna where opec members are discussing targets. Something they failed to do at their last meeting in april. Opec members had a lengthy record to exceeding their target. Coldng us now is my until ryan. Are we going to get some sort of deal . It is anybodys guess. At a minimum, they will come out and try to show unity. People will be watching for two things one, where they able to reinstate this Production Target the abandoned at the last meeting . That is a fundamental tool that opec is used to influence prices for the last 35 years. A lot of countries would like to see that brought back. If they are unable to do that, that is a bad sign. They want to appoint a new secretarygeneral. They have been bickering about who should get that over the last four years. They fail to do that, a lot of observers are going to be looking at what happened at the meeting and writing more opec obituaries, fairly or unfairly. Megan this meeting does not appear to be as snoozy. What is the state of play there . Is an interesting first move from a brand oil minister or a brent oil minister. It is part of his effort to repair relations. December, the abandoned Production Targets. But after doha, gathered for what they thought would be and oecd looked to freeze production, and then the saudis pulled the plug at the last minute unexpectedly for most people. It is anybodys guess as to whether they can do this. What i will say is what we are hearing is that they could reinvent the Production Target coming up with a band. At the less meaning when they had a Production Target, it was 30 million barrels. They could come out and say, we are happy with anything from 31 to 33. That might make it easier for the countries to compromise. The real question is, is that something the Iranian Oil Minister can agree on . When i interviewed him, he said, i want to see individual country quotas. Other than that, he does not want a production ceiling. Megan thank you so much. Day withs a big initial jobless claims a few minutes away and a News Conference with mario draghi. You on thewill put News Conference right now. What would you ask president draghi . The question that will irritate him and he will not answer it, which is, again, if he is willing to provide a little more detail to finance ministers around the eurozone on which fiscal policies are needed. Jon president mario draghi starting a little earlier indiana. They did this a couple of times a year. This time, they are in vienna. All hotels sold out in the enough for opec. A hotel so doubt it began in vienna for opec. It is a game often played. What it means, alessio, i really dont know. [laughter] mario draghi has the same time on. In terms of policy, do you think they will get a grilling if they dont devise projections for inflation . They are way off target. We had a truck that said it could be four or five years before they hike Interest Rates. That is what they have to communicate. The only way this policy works toyou are really committed go low for long. Otherwise, the mechanism is interrupted. Jon president draghi is sitting aside mario draghi, speaking now. Congrats to our our staff for the Excellent Organization of the council. We will report on the outcome of our meeting. Based on our regulatory and Monetary Analysis, we decided to keep the key ecb Interest Rates unchanged. We continue to expect them to remain at present, or lower levels for an extended period of time and well past the horizon of our net asset purchases. Monetary no standard policy measures, we confirm the monthly asset purchases of 18 billion euros are intended to run until the end of march 2017 or beyond, if necessary. Case, before the council sees assisting judgment in the path of inflation consistent with its inflation aim. On the eighth of june, we will start making purchases under our corporate sppor Purchase Program, see csppp. 22nd of june, we will can does the new aspect of targeted longterm refinancing operations. Further information on implementation aspects of the cspp will be released after the press conference on the ecbs website. The comprehensive package of the seizure taken in early march underpins the momentum of the euro areas economic recovery low butrces levels close to 2 . Our measures continue to to ease the cost of credit and but close to a pierce. In particular, our measures to ease the cost of credit and contribute to a and credit g creation. He economic recovery is gradually proceeding. Dditional stimulus beyond the impetus already taken into ccount is expected from the Monetary Policy measures still and will emented contribute to further rebalancing the risk to the growth and inflation. Is he current context, it rucial to ensure the very low inflation environment does not in second enched round effects on wage and price setting. The governing council will closely monitor the evolution of the outlook for price stability nd if warranted to achieve its objective, will act by using all instruments available within its mandate. Let me now explain hour assessment in greater detail the Economic Analysis. Area real gdp increased by on quarter. N the First Quarter of 2016 after 0. 3 in the last quarter 2015. Growth continues to be supported by domestic demand while being exports. By weak the latest data point to ongoing in the Second Quarter though possibly at a lower rate the First Quarter. Expect the d, we economic recovery to proceed at but steady pace. Remains demand supported by the pass through of Monetary Policy measures to the real economic. Conditions nancial nd improvements in corporate profitability continue to investment. Scened economic gains and still relatively low oil rices provide additional upport for household real disposable income and private consumption. Fiscal stance e n the euro area is slightly expansionary. However, the economic recovery continues to be ampened by subdued Growth Prospects in emerging markets, the Necessary Balance sheet of stments in a number sectors, and a sluggish pace of of structure reforms. Broadly ook is reflected in the june, 2016 euro systems staff Macro Economic euro area for the which foresee annual real gdp 1. 6 in 2016 and 1. 7 in 2017 and 2018. Ompared with march, 2016 ecb staff Macro Economic projections, the outlook for been revisedth has remained 6 and has 2017 and nchanged for 2018. To the euro area Growth Outlook remain tilted to side, but the balance backsk has improved on the of the Monetary Policy measures in n and the stimulus still the pipeline. Continue to ks relate to developments in the lobal economy, to the upcoming british referendum, and to other geopolitical risks. Its estimated euro area annual icb inflation in may 2016 was 0. 1 and up in april mainly reflecting Higher Energy Services Price inflation. The business on of current futures prices for inflation rates are likely to remain very low or negative the next few months before second half ofhe 2016. Owing to base effects in the annual race of energy prices. Supported by our Monetary Policy and the expected conomic recovery, inflation rates should recover further in 2018. Nd his broad pattern is also reflected in the june 2016 euro ystems staff Macro Economic projections for the euro area annual hicb 0. 2 in 2016, 1. 3 1. 6 in 2018. March, rison with the 2016 ecb staff Macro Economic projections, the outlook for icb inflation has been revised slightly up for 2016 reflecting and t oil price increases 2017 emained unchanged for and 2018. Urning to the monetary m3 ysis, broad money continued to grow in a robust april of 2016 with its annual rate of growth standing 4. 6 after 5 in march. Months, annual growth in m3 is mainly supported by its most liquid components aggregaterow monetary and one growing at an annual in april after 10. 1 in march. Dynamics follow the path of since recovery observed year. Eginning of the growing 2 in april, 2016 1. 1 in march. Evelopments in loans to Enterprises Continue to reflect relationship with the business cycle, risk, and the adjustment of financial and nonfinancial sector balance sheets. Loans ual growth rate of to households remained broadly in april after 1. 6 in march. Monetary policy measures in lace since june, 2014 have clearly improved borrowing conditions for firms and households as well as credit flows across the euro area. The comprehensive package of new Monetary Policy measures adopted in march this year underpins the upturn in loan growth, hereby supporting the recovery of the real economy. Check of the ross outcome of the Economic Analysis with the signals coming from the Monetary Analysis confirm the eed to preserve an appropriate degree of monetary accomodation order to secure the return of inflation rates towards levels below but close to 2 delay. Undue Monetary Policy is focused on stability overce the medium term. And its economic stance supports economic activity. Emphasized repeatedly by the overning council and as a gain strongly equalled in both european and International Policy discussions. Reap the full benefits from our monetary measures, other policy reas must contribute much more decisively both at the national and at european levels. Structural policies are given continued high structural unemployment and low growth in the euro area. Reforms are necessary n all euro area countries although specific reform needs individual s economies. Should stage, the focus be on actions to raise improve the and Business Environment including he provision of inadequate Public Infrastructure which are investment andse boost job creation. The enhancement of current including initiatives the extension of the plan and markets on the Capital Union will also contribute objective. To this he swift and effective implementation of Structural Reforms in line with the countrys specific ecommendations recently published by the european ommission will only lead to higher sustainable economic area. In the euro should strive for a more growthfriendly fiscal policies. Disposal for your questions. Two questions. I ight have missed it, but did not hear just now whether ou expressed the view on whether the risk to inflation re now broadly balanced or tilted to the down side. Whether thats changed. Know . You please let us and my second question is at the meeting, f your april you said that there was no yet on onive evidence whether theres second round effects. Thenondering whether since youve seen substantial evidence pointing in either direction. Thank you very much. Thank you. To the first question, ill basically reading again what is in the introductory statement. Additional stimulus beyond the already taken into ccount is expected from the Monetary Policy measures still namely the ented cspp. And will contribute to further rebalancing the risk to the growth and inflation. In other words, what we are is that we have this systems projections and whats called the probability 2017 and 18 years has shifted slightly upward. It is. Is what its not nothing dramatic. On the second point, no. Second round en effects. In the he same time, idst of what one would qualify as good news as far as growth concerned, we are substantial pressures on wage and price with the chanisms possible exception of germany. It goes without saying that the remains council watchful and alert to the second round y stimulus effect and stands ready to act using all the instruments mandate. Ts i have another question on your forecast. Expecting ng youre more stimulus as you implement the measures. Now looking at the full cast at the end of the forecast horizon. Inflation side, theyre the same. On the gdp side, theyre even worse. So im wondering, can you only ustain the very gradual recovery at the sluggish growth pace that youve described with everincreasing timulus in which case are you prepared to keep that going as indefinitely, or is the fact that your growth and forecasts havent improved since the march measures . Is that a sign that basically additional easing will not e effective and essentially be pointless . Is that underlining your call for Structural Reforms in a way which case why are you saying youre going to do more and more if you know its not going to difference . That would be my first question. And the second one is on greece. You discussed reinstating the waiver on greek debt. Havent, then i would be interested to know what it is for. E waiting thank you. No, we first question, think our measures make a lot of difference and have made a lot difference in the sense of being very effective. Presence of a pace of Structural Reforms which faster. Its pretty clear that in the resence of a faster pace of Structural Reforms, our measures would be showing their positive faster. But even in absence, they have been effective. See that basically the has been age instrumental in avoiding a evere deterioration of financial conditions after the end of ces around the year. Isnt growth which really i wouldnt use the word sluggish after the First Quarter data. Maybe the Second Quarter will produce absolutely lower figures. Kind of see the full impact of the measures that march and ided in that will have to be implemented june. I two measures that mentioned before. Now, on the rebalancing of risk picture, on the waiver, we had a presentation. Had no decision. He governing council acknowledged the significant progress made in the last few months which led to the of the euro group on the 24th of may. It was based on the positive assessment by the institutions adopted bycy package the greek authorities. Package sets now the basis for the completion of the review under the same program. Uro group has asked the institutions to verify the of prior actions mou. The supplementary nce prior actions will be implemented, the governing council will take a decision statement of the waiver. Thank you. In o two meetings happening vienna. One epc and the other is opec. We have a ing decision. The Opec Committee has not supply a new oil agreement. Wci down for a fifth straight now. Ion vienna he situation in and opec. Ill hand you back to the news president mario draghi. Give us a better idea medium term . Hese well, weve discussed this since i would say the beginning of the existence of the ecb are se our objectives term. Ed over the medium medium term, the length of the term depends on the nature size of ock and on the the shock. Size of le, given the the shock that we had with the aftermath risis, the we are repieced we had, seeing that the medium term for inflation to our objective of an inflation rate below 2 is long and has been long. We continue saying that we want reach this objective without undue delay and then we say that act if needed. To f we were to see an unwanted tightening in the finance conditions which would alter the outlook for inflation. A would act if we were to see persistence of second round effects. Which would entranche the intots of Lower Oil Prices the wage and price setting mechanisms. Ecb ur other question, the is ready for any outcome. Of course. And ill say it again the u. K. And europe and euro zone are mutually beneficial. Ecb has a view, the u. K. The european in unionbecause the european ould benefit from its permanence. You. K one question is a quick follow on question from your on greece. How soon could the governing a decision after immediate or would it require meeting . Olicy for a second question, i would bit about the forecast, the figure for the seems to produce quite a lot of enthusiasm. The first igure for quarter seemed to produce quite lot of enthusiasm among economists that were now seeing a turning point, strong domestic by nd was being joined stronger figures on investment euro e recovery in the zone was strengthening. It doesnt seem youre entirely convinced by that. With that in mind, is it a sible for you to maybe say little bit about what the forecasts say about what happens and other lation demand . Rs of underlying thank you. On greece, it will require another policy meeting. What the esmto see decide. Directors will on the other question, indeed, quarter good first figure for gdp. We expect the recovery to perhaps a slower pace in the Second Quarter but good figure. We have a headline inflation which is what is in the forecast prices. Of oil at the same time core inflation came out weaker in the first this year. This is because of what i said before. Namely that we dont see with possible exception of germany any substantial pressure price wage and mechanisms. The ould also consider price is also because of price normal commodity price. Has to be taken into account. The final ng to be say . No. Youve acknowledged the base affects of oil in the second half of this year. The rally in the oil price weve seen. And the impact of the stimulus announced back in march. Still have a gap relative to target over the forecast horizon. Can i just confirm that you acknowledge that it seems like horizon king over that more stimulus will be needed. Is that the message youre point over at which the horizon will you look to program e end of the and when will stimulus be needed. Question is over nonperforming loans when it was up the ecbs fast coming with a plan to address legacy nonperforming loans. The works . Ll in can you give me any sense of when youre going to come up with something . Thank you. Thank you. On the second question, i will ask the Vice President to on the mpls. Divided our work. Somehow. Question, i think right now ive said we have to focus on implementation. Focus on the effects of the measures that weve taken. Seen the mass probability of risk has shifted upward dramatic s not a effect. All. Yes. What is being prepared by the is of course supervisory action. Both in quantitative terms but qualitative terms what re the nature of the different types of mpls that exist in the banks. Also examine the best ractices in all member countries because as you know european regime provisioning he systems to prepare write ups for the mpls. Now a home it will home ish plans to homogeneous which of course will take some time. Well, ill answer the first of the first question. Just to give you an idea. The forecast that were are the product of a process coming from the national Central Banks. Have our forecast of two types. Twice a year its our own twice a year its done by the national Central Banks. Greater knowledge of their economies or at least more detailed knowledge on their economies. So that is also something to be kept in mind. Now, there are many other ways your question can be answered. Let me also say that our decisionmaking process is based wisdom of all ve the national Central Banks and ecb. There isnt one brain in basically decides everything. The floor. Give over i can immediately follow this. F course we have the role of participation in forming of is just y which we have it today. Council. Governing this, of course, national Central Banks and a number of other activities, one that we are involved in payment services. Payments in austria via in large extent go ahs yon central break. Role is our role with ustrian central g break. Another role is our role with supervision. Nking 129 cb does it with the banks directly with joint including teams experts from the national Central Banks and for the less banks its directly done by the national Central Banks. The e heavily involved in financial statistics and of course the technical side of policy that means execution of Monetary Policy, banks really can get to the loans given by the ecb. This is also on the national level. O i think whatever time you spend thinking about it for the pretty sure s, im there will be a National Central bank. Interview, im e sure the Austrian Central Bank ill celebrate its 300th birthday and i expect that at this time it will be a lady of the who is head bank. Al president , ive got one question. Worried thatetting your 0 Interest Rate policy is ausing imbalances and bubbles in certain areas of the economy . Well, let me this is a asked severali am times very often because clearly a concern. Concern. H like it was a its been a concern for seven, in t years for the savers the United States, the united japan. , and it should be say that the low are a symptom of a weak economy. Is an omy where there xcess of savings overinvestments. Nd it should be said that the low Interest Rates or 0 Interest Rates or negative Interest Rates the right Monetary Policy in order to restore strengthen recovery. Briefly, for tomorrow to be low today. Ecb hast me add that the mandate to as a deliver price stability defined which rate of inflation is close to but below 2 . Nd has to use all the instruments that are necessary that mandate. Mr. President , why in your pinion the euro is not weakening anymore even if the probably serve is expected to tighten in the next months . Is there a sort of agreement authorities in for not strengthening the dollar too much . The second question is about the report of the five president s. O you think that it is still realistic today having the political condition probably changed . Thank you. Ou know, we dont comment directly on Exchange Rates. We say the Exchange Rate is not target. And its not. However, we say the exchange ate is also important for growth and price stability. So the Exchange Rate is the several factors. One of which is the different euro zone at the pathmy has in the recovery economies. Ct to other that is something we want to keep in mind and that will elicit in the future in the coming months monetary tend to certainly converge, possibly diverge. Thats something we also want to mind. N with other geens owe political risks. Answer. D to give one its not a question you should me. Ress to its a political question. Ones who best will who are in the best assess the realism propositions, of their plans. Basically say if the Monetary Union remains remains fragile. Vulnerable, vulnerable to shocks of economic nature, of political nature, and in so being, it wont be a factor that will help the return of confidence in the eurozone and therefore a faster recovery stronger growth. Euro zone. At the hat the reports bottom say. Zone. Thats what the reports at the bottom say. You. K theres a discussion going on n germany in the last months about the abligaments of cash. Comes a discussion that up every time theres something hat has nothing to do with it like the 500 Euro Bank Note question. Many say this is the end of cash. Economistu also as an think about this cash is freedom germany . On in i just would abstain from commenting about the general we are whether substituting the 500 with the the 200s. F been confusion. Thank you. Thank you. The inflation forecast. Inflation to still be significantly below target by 2018. Hat will be six years of sub target inflation. You given able are that outlook with qe ending in ten months . Am i right in thinking that youre saying unless something the meantime youre the y to let it expire at end of march . Answering the first question, ill in a sense restate what i said before. Focus on the implementation of the measuresal packages of that weve decided in march but a o i think we decided significant package at the beginning of december, the effects of which we are seeing continue seeing in the coming months. This is just this june Macro Economic snapshot ofs just a how we see things now but we the full effect of whats been decided before and the effect thats been implemented yet. Quite clear, however, that to act, andhesitate that is the meaning of the introductory e statement that contains the undue delay. And this drives me to the second second to answer the question you asked. The Purchase Program is smoothly. There are lots of there are conversations in the market limits that this program may meet with. Not seeing were really any difficulty. Liquidity. E the Program Continues to proceed smoothly. Ut in the case we were to face limits the program the design enough rogram contains flexibility so that we can way thate program in a and meet the desired size we have given in the previous that we ple evidence ready to g, able, and so. The convergence report is out next week. Countries, most of the countries have agreed by reaty to join nobody seems really close. Do you think anyone will join the euro again and what will for that to n happen . Countries that dont joined the euro have should acknowledge very ignificant progress in stabilizing and consolidating budgets, stabilizing growth and economic g the right policies and often very significant Structural Reforms these countries. We have to is that judge all these issues in perspective really. Have to give ourselves time and if you look at the for fall of the euro bramante the poll of the euro barometer, it shows these citizens in these countries are joining the r of euro. Mr. President , my question is to the decade of low Interest Rates and ultra easy policy has been a long time that the rates are very low signals to giving markets that they are going to low for a long period of time. So in this environment, lets the posters lose their patience and start to withdraw bringing their loan deposits far above 100 banks fully dependent on money from ecb. Are there any contingency plans scenario. Also your mandate is clear. 2 inflation target is very clear. But there are calls especially recently ank of japan that might be thinking of 1 sing their target to inflation. What are your thoughts about this . Would that be possible for the uropean central bank to revise their official target . Thank you. Thank you. To your first question, we withdrawing nce of of deposits from the banking system. Actually have opposing evidence from Central Banks of countries where Interest Rates became more negative than are in the eurozone. Experience any withdrawal of deposits from the banking system. Also, again, we should not forget the experience of other countries like the United States which they had zero Interest Rates for i dont remember or eight s seven years. We started se, declining, decreasing interest in november 2011. But still at a fairly high level. So our experience is much more that. Ed with on your second question thats today, ked several times why dont you revise the inflation target. Of there are two schools thought. Some people say we should revise accept the simply fact that well never reach 2 0. We should take 1 or and some say oh, they should have revised it upward and go to or 4 so this way youll that you ectations will go up with your policies. Now, the ecb position has been revising contrary to the inflation rate objective either way. The reasons are different in different cases. The revision upward frankly would test seriously our credibility because people would actually say how come you want to go to 3 when youre not even 1. 5 . O reach way, each y the evision in both sides on both sides undermines the credibility of the central bank for different reasons. Ofundermines the credibility the central bank. Effect by itself would in sothe risk premium and doing it would increase real rates. St it would go against the bjective that we have of price stability but also against restoring growth. Case of accepting lower inflation target, this effect would be immediate. An immediate increase in real Interest Rates. A refore, we would have further drag on the recovery and the return to inflation. Many other re are easons why in the late 90s all Central Banks or major monetary olicy jurisdictions decided that 2 was the right objective target. Right we discussed these reasons on many occasions. Monetary so in the union where you have to have flexibility in the Exchange Rate you have to ave adjustment in wages and prices so you need a certain ushion for carrying out these adjustments. O the reasons for keeping this objective are overwhelming, and both directions. Allow me to get you up to speed on opecs meeting. We learned earlier there was no greement on a new oil supply target. Indonesian m the that opec did not a problem of course that the political side doesnt help by Structural Reforms and so on. The governing council have any idea how such a process of reforms generated by the political side could be on the move. That you get help to get inflation back on track. Thank you. Thank you. Said before, we hould carry out the right Monetary Policy according to our mandate regardless of whether put in al reforms are place or not because we have our because ultimately lets never forget the in rience the chairman had the early late 70s, early 80s. In all, inflation is a monetary phenomenon. What makes a big difference, structural that if reforms are in place the time hat it takes to reach this objective is shorter, smaller. Us, it would be perhaps out of our actually decide which are the right structural country. For each but its quite clear that each agenda of an Structural Reforms of those apt to that are more their countries growth to esoreing competitiveness restoring competitiveness especially in the products and services markets. Very, very important. Heres also one other side to your question. Whether monetary policies you but you may have imemployed it. Hether Monetary Policy removes the incentive to carry out Structural Reforms, weve on many occasions and by and large, we wouldnt agree this. As a matter of fact, we see the things at complementary and the incentive to undertake come ural reform should from other considerations. Like, for example, a very high rate in one country should be an incentive ufficient to undertake the necessary Structural Reforms much more than high interest the Financial Markets. Thank you. And our last question. You. Hank mr. President , speaking of policy reforms, which eforms must be implemented particularly in austria . Thank you. Thank you very much. Its the countrys the countries themselves have best knowledge, the best competence to decide which tructural reforms should be implemented and, therefore, im giving the floor to the governor to answer this question. Well, what i would say to follow your lead, i think that careful to e very stick to the filter of monetary to take caree have of. So i do not think that the is such that we should develop specific ideas structural ties and reforms. But i think from what we have general Structural Reforms both in labor markets and the Product Markets. There are studies by especially the imf where there is a certain sequencing. In certain circumstances, abor market reforms might have priorities and other ircumstances, Product Market reforms. F i may say so, mr. President , we at the governing council are discuss this in more detail. Very much. U thank you. That wraps things up over at the ecb News Conference in vienna. Two meetings in vienna. Speed e to get you up to on the ecb. Rates remain unchanged. Qe 80 billion euros every single month. Is when the corporate begin. Ying program will as for the forecast, the staff projections over at the ecb go 2016 gdp revised previously. 1. 4 2017 unchanged. Lower to ed a little 1. 7 . 2016 revised to 0. 2 and 2017, 2018 inflation outlook left relatively unchanged. Hats the situation in the outlook for the ecb. The balance of risk has improved though the risk still tilted to the downside. Youre up to speed. Thats the situation. Markets. E futures in the United States about 4 minutes away from the negative. Dow markets down. The board and well go meeting. Pec crude low. Yields still ticking lower. That is unchanged at 1 1182. Oppenheimers york. Olio manager in new projections inflation just 1. 6 2018. In would you take that with you, the fact were just still rojecting that all the way out to 18 . I think thats the main message. From the balance that we were he ng to understand i think took the dovish tilt. He chose the i want to send a message, revise higher inflation and growth for today and the ncertainty persistency of these moves is so im not tell, going to signal anything. Remain although because of our package, theyre somewhat improved. Fine balance ry but to me the message is dovish than i expected. E ts going probably be more concerning for the fed than the ecb. Ecb has their path. No change on their side. Its the fed that i think from policy Risk Management standpoint. Reason alone july makes more sense than june. Him to weigh ect in . Very weighed in, in a moderate fashion i think. You would expect him to provide a pro eu statement. You to the to take other meeting in vienna where we can listen to the press over at opec. A listen to the saudi oil minister. Im not going to step into the shot. To the saudi oil minister. We didnt catch much of that. That is of course the saudi oil inister appointed just one month ago. Really presiding over this meeting. Hes not the secretarygeneral the most powerful individual in the room. He suggested he wanted to ceiling a production reinstate it after they abandoned it at the last meeting. Did not happen. Many see that as a sign of weakness. Keep in mind thats the one opec has been using the last 35 years to influence prices. He could not get agreement on getting back. New hing agreed on was the secretarygeneral. Thats a positive. Theyve been bickering over who that post for four years now. On the d thats whole, kick the can down the comes to policy. Reconvene later in the year with a new secretarygeneral and of this e unity out organization. I have one question for you. We did not expect there was but in be a deal today terms of the relevancy of opec, to further s done damage its credibility Going Forward . Mean, there was never a chance that opec was going to cut production at this meeting. Order to cut production, you have to have the architecture in place to do tools. The thats the production ceiling, the Production Target. It. Ever you want to call cap. Its a signal of weakness. I think some people will see this as a shortcoming. Thats perhaps why we saw the on the back ofll the meeting because we didnt get that Production Target. Get at least did a new secretarygeneral. Theyre going to put a brave face on things here and say positive. Were Going Forward. Were unable to agree on this years but weve done it today and at least were able to agree on something. Meeting wraps up. Thank you very much, ryan. About 40 seconds into the session here in new york city. Allow me to get you up to speed. On the marginally lower dow down by about a quarter of 1 . About a ones down by quarter of 1 . S p 500 down by about a half a percent. A big move right there wti crude at 48. 17. Meetings and two whats happened at opec, it just seems over the last six weeks, formarket has done the work them. There was the big disappointment doha, no output deal. To they in a comfort zone so speak . To the point of what does opec represent, i think over really lowered the expectations going into all these meetings. Yes, it looksove, large but its in line really oil. Daily volatility for i think there was a very heavy positioning short positioning in is being unwound. You have seen the growth china andspecially in asia. So the balance of risk is really shifting commodities. We saw him again saying the downsider risk is tilting still to the downside. Managed to get across the communication he needed when we look ahead to 22nd that things are recovering but that we still ahead . Rocky path basically really hes communicating the perspective of a policy maker which is what do you want me to report in only three months. Big packages in the last year but they all take a long time to play out. Es basically said were sitting here and most of the package that we have announced be deployed. T to so im not really going to update. Any meaningful so the ecb president has just wrapped up his News Conference. Wrapped up as well. Guest ring in another rom london, pimko chief investment officer. My first question, weve come out of a News Conference. I just wonder how much work purchases in the in stment grade sector over urope, pimko has actually been doing this. So the market moves in the past have tended to become after rumors of ement on the announcement before the actual buying starts. The significant move in european credit. Positions ubstantial there. I think at this point we would neutral. Y probably see the u. S. As a bit of a better option there. Going to have the bond buying program. Theres a potential for yields more. E down a bit talk to me about the function of markets. Interests me because theyll be buying in primary and secondary markets. Lift the lid on that market and me through the mechanics of that. Does that complicate things . I think it does complicate things in the sense youve got a large noneconomic actor present market a little bit like china say in u. S. Treasury. Youre going to have the big ecb buyer. The credit markets are not all and are not going to be able to do enough in terms of makes ry so i guess it sense for them to do primary as well. Ut its going to have implications. One thing we always focus on is new issue that the reissuance isrime acceptable given that liquidity very good these days. About is theurious transmission mechanism here. We have more players potentially bidding for these bonds. That will affect yields. How does that turn into actual investing money . Corporations investing money . How does that have an economic just a s opposed to Financial Markets effect . Question. A very good the ecb has announced a bunch of ew initiatives but as your previous conversation had, they have not changed their medium term inflation forecast. Theres a question about effectiveness. The idea would be a couple of things. Firstly, you by bringing down the yield on safer assets, you investors to move into more risky assets. Indicates ond thing in the periphery you have the potential to Lower Borrowing hopefully this would filter through say to Small Businesses borrowing or bank in the periphery countries. But in terms of the impact on were not going o hold our breathe for really big impact there. Specifically do you see anything in the data suggesting getting problem with growth going in europe is the small and medium businesses credit . Et access to so theres a questioning of supply and demand. The nk a large part of issue is on the demand side. In the say if you look whole the ecbs program has been of helpful in terms stabilizing Inflation Expectations and has helped down borrowing costs in the periphery for government and businesses. Positives ot of there. But were getting to the point f radically diminishing effectiveness of these interventions. Hey did a program on covered bonds, abs, i dont think they positive rticular impact. The Corporate Bond program is to obvious this is going have huge impacts but portfolio in und and the transmission the periphery countries would be the two hopes that they would in addition to the overall impact trying to stabilize expectations. Headlines crossing right now. Cb to publish a list of their holdings on a weekly basis and also saying theyre not required event ofoldings in the down grades. Now to that point, how much time you spent at pimco really looking at this the due of gence on holdings purchases. Have you looked at that and are thoughts about whether they could become they may ot have a trigger but do you anticipate a central bank that could sell some of those purchases down the road . Will try to k they differential le Market Impact on different securities. Theyre going to take a broad approach, theyre not going to be picking credits. Set. Will do the broad it seems unlikely they will be in theto trade including event of down grades. They have a lot of competency in sovereign or banking system. They dont have the big teams to research so i think theyre going to be doing amething a bit like mimicking passive investor. They will try and keep the pretty uniform. There will be opportunities toes rade around it im sure but we dont really have enough information on how theyre going to do stuff id say to have a of positions on now other than fact that credit markets, markets have t benefitted from the decline in of the Anticipation Program but dont necessarily continue. T to turn to what you just called the radically iminishing effectiveness of policy and the exhaustion of Monetary Policy. To big of a threat is this Global Growth and the sustainability of a recovery not nly in the u. S. And europe but globally . Its very significant. Weve just had our secular forum. It once a year to look at over the next three to five years. Central bank effectiveness is a key theme. So we think we have stability in of the Global Outlook but its not very secure. Through ve a muddle type of baseline but this is where weve been for the past few years. Continuation of weakish growth nd below target inflation gradually rising. The problem is its been bank ated on big central interventions, blowing up of balance sheets, qe, negative rates, the european case all these interventions have brought growth, 1 type inflation. So theres a question of declining effectiveness. Question of how markets are priced given these isks of declining effectiveness. And also if we get a recession which is perfectly plausible the next three to five years theres a real question in erms of how policy makers can respond. Theyre pretty exhausted in terms of Central Bank Interventions in the event of a in the eurozone so to to get a be difficult policy response on the monetary side. Is it actually possible that the kind of boost in productivity wed need to see to have a surprise on the upside risks on the downside . Productivity has been very everywhere pretty much in world. Veloped productivity is one of the hardest things to forecast but evidence to see much of improving productivity or terms of overall demand growth. But it could happen tuberculosis i guess it would not be a huge surprise. Right tail urce of positive risk there. Tail her call it right risk or inflation risk that we ocused on with all the Central Bank Interventions with japan pretty close to helicopter of more e possibility unorthodox interventions over the next few years, the central getting more up inflation than theyre anticipating being above target. Our central case but its one of the things well look to ensure against in terms portfolios. More likely in the English Speaking world though compared eurozone. Andrew balls of pimco. The outlook is stable but its secure. More with andrew balls coming up on bloomberg go. 11 minutes into the second. Equities here in the united slightly to the downside. More go next. Little later today on bloomberg television, u. S. Secretary. Youll want to tune in for that. Lets go now to abigail doolittle. After boosting the nasdaq the most yesterday today we have the costco. F just a ke this could be bit of housekeeping and clean john, from Goldman Sachs. Opec wrapping things up in vienna. Agreed upon. Get a slight disappointment for some people because there was some the siasm built up about potential for a deal to be struck. Moving crude down by onefourth percentage point. Wti at 48 and around 0. 30. Thats the situation in the market. Ty lets take things back to fixed income. The worlds rting economy is stable but not secure. Reading have to say through this report i was struck by a cautious tone. In there the one line about capital preservation. I just wonder how you can preserve capital and get some of return in this market. In the conversations you guys were having over the last few months, what did you come up with . Whats the strategy . Is a cautious tone. I think we mentioned in the little bit els a like the pre 2008 period where back then it banking system, the big impact there in terms of volatility, and spreads were very tight. Back then, we reduced risk. Necessarily know whats going to happen of course but it says proven to reduce risk. Today its not shadow banks but Central Banks whose marginal setters are impacting markets based upon fundamentals. We think its a the baseline is okay. Probably more of the same. Makes sense to be a bit more cautious in terms portfolios. For example, look for Higher Quality credit positions. Positions where its really predicated on central bank intervention. Good asset coverage, securities. Ont go for the highest yielding instruments necessarily. A more cautious approach. And then be ready. Periods of volatility to benefit from volatility if we can find assets over time and more prices. Ve in this challenging time, does it make sense to consider in ng up some liquidity order to have some return and stability . We think, yes. You can have identifiable premiums or complexity premiums sometimes for more complicated assets. O we think you get paid reasonably for doing that. Particularly in portfolios where permanent capital lock ups over time. Ou can harvest liquidity premium and thats an attractive thing to do. We ur fixed income products can do that as well but we want risk and less liquid exposures, for example, eurozone given the combination of the difficult risk which are certainly not generous. Im going to put up the Treasury Curve on screen for you. You look at it every morning. You wont need to see it. The Treasury Curve is flat. Lifted higher across the whole curve over the last couple of were back to those 2007 levels. Telling er what is it you and how do you expect the shape of that curve to evolve in the coming year . Well, youve had the signal from the Federal Reserve in of action inlihood the coming months. So thats contributed to this recent move. We do think that there is some a couple of things. The potential s for the front end over time to the in a bit more from Federal Reserve. More next year than this year. There for potential the front end of the curve to flatten. The level er time at of yields that we have now across the term, across the term tructure, we would see the asymmetric risk yield across the so we need to guard gainst that for our clients in portfolios given the starting point. We could have a repricing over time. Particularly on some better economic news. But in the short term, theres for the tial we think fed to price reprice the curve more the significantly than weve seen so far. Pimco. Ew balls of thank you very much. Coming up we take you to the two meetings in vienna and bring details and also wrap up. Welcome back. Opec has failed to agree on any targets sending crude prices lower this morning. Manage to appoint a new secretarygeneral. Now froms on the phone petrie. Is tom how do you think the market is going to react in how theyre at this meeting . It will be interesting. He last time after doha as negative as the headlines sounded, oil migrated higher. Time around i think it will back off. T already has since the announcement. The nonannouncements if you will. A major bt well have downward push because it really working. Rces are were getting a decline in nonopec thats out there. Evidence is generally accumulating in favor of that or two. Exception and so, you know, i think this s the opportunity for the saudis to continue their confrontation with iran over the issues of market share. Priority for eal them. O i didnt expect this to be much better than this. If wed had any kind of an thought it would be tacit and not very effective and ctually i think the saudis really saw it as an opportunity message ate the doha which is were going to let Market Forces work and they have been. Tom. Tom. Market forces are working. Is. Nder whether opec at this point does opec do anything other than elect its own secretarygeneral . Seems to be the only thing they do. Im sorry . Say at the end . Seems the only thing opec accomplishes the choosing a new secretarygeneral. Right. It demonstrates the relative tav irrelevance of opec. Make sure to tune in tomorrow. Payrolls friday. Well have full coverage of the u. S. Jobs report. Will be joining us at 8 30 a. M. Eastern time. Ery pleased to say we can go over to vienna now in austria with the an who is nigerian oil minister. Ryan . Thats right. The nigerian oil minister. We have 30 seconds, sir. Success . Meeting a the oil price fell on the back of it. Were going to blow the ommercial break so we can listen to you. Absolutely. A hink it was a first time yuan identified unified position. Ore words on building relationships and less about prices. So the relationship improved as a result of this . Substantially. The oil price fell because people were anticipating that the ss equals reinstating Production Target which we didnt get. Yes. Well, i think Going Forward, sided going to long ts not going to be were going to look at transforming the market to do the right thing and give us a fair price. Hopefully opec comes up with a number. You mentioned fair price. You e market thinks that now think that opec now thinks 50 is a fair price for a barrel of oil. Is that not the case . Not at all. Why not introduce the Production Target . We should be able to end the year at about 60. Target. Till the but rather than use numbers were going to use strategies engagements. Were going to use market mechanisms. Ultimately no matter what we do even if we keep pulling it out keep market it will catching up with us. Take me inside the discussion about a Production Target. Saudis talked about floating the idea. We know iran was against it. Robust conversation about that . We did not spend a lot of time on ceiling. Want a y said we dont ceiling. Minutes on y few issue. Speaking of mutual cooperation, you agreed on a secretarygeneral. Yes. What do you think is going to change at opec under his leadership . Suddenly Market Driven and relationship. Opec as long as opec has been. Do you think he can heal the caused that have been by some of the disagreements over the last year and a half . I think so. To the good walk divide. More importantly i want to be there to help him. Ultimately their relationship is key to make this work. Reason why oil prices climbed have been disruptioned supply. 300 was taken of back in august. Provided we dont have much and with the issues, a lot needed to engage. Technology. Production so we lessen the cost of production. To e high prices we have get investors to the point it is so busy forhe journalists. That is it for bloomberg. Thank you very much. Bloomberg markets is next. Betty welcome to bloomberg markets. I am betty liu. Mark this is bloomberg betty, lets start with the markets. We are 19 minutes away from the close of the thursday session. Draghis News Conference is finished. Opec is finished as well. A big day in vienna. Unchanged, slightly lower by about a 20