Cousin will mama and Danny Blanchflower. I mentioned the risk on rally that we have seen, yes, it is sustainable but not when it comes to dollaryen. Jonathan futures positive for tents. Dax, the ftse 600 up. The bloomberg dollar index is down about 2 10 of 1 . Dollaryen on the back of the but thinly we rolled over, unchanged on the session. Market,ook at the bond twoyear yields up for basis points in japan at the frontend. They did not cut rates, they left them at 0. 1 0. 1 . Is moving away to target the shape of the yield curve going to do anything . Ingles in tokyo and Carl Riccadonna in new york getting us ready for the Federal Reserve policy decision. Want to begin with you, david walk me through what we got from the bank of japan, was it all style and no substance . Was widely considered a smart move because what they did was essentially took additional action without having to commit report explicitly commit to more stimulus and in the process they kept the door open for them to be able to buy more bonds between now and the next policy meeting if the need arises. You guys were talking about the yield curve control. We are calling it the curve like kuroda. That is a key take away from what they did, essentially this move away from having this rigid, specific target on how much they want to expand the money supply and focusing efforts on open Market Operations on controlling the yield curve. They are saying they are going to what most people are not really talking about is the fact that they might buy more bonds. Market participants in tokyo are now complaining that this might kill off the jade you be market. Jonathan the jg be market. Jonathan for the inflation target, looking at a big take away. Are they going to allow an overshoot of a target they cannot hit anyway . David there were two votes the tooke, one on policy place, one on Monetary Policy. It was a 81 vote, almost unanimous on trying to overshoot this 2 target so what they have essentially done is committed themselves to not only meeting the target but to basically keep on this path until inflation is stable above the 2 target. During the press conference he was asked to give a timeline. Giving anyned from specific timetable and he blamed other factors. He blamed other external factors on why they have not reached their target and he said if they did not have oil in the mix, they would have reached their target right now. They remain fully committed to reaching this target. Jonathan david ingles in tokyo. Carl riccadonna with us now. Alix hawkish hold seems to be the rhetoric rhetoric in the market. Carl that will look like the fed is not raising rates today because the data is not justifying the move at this point. The fed taking a different stance in past episodes where they have taken a bit of a dovish turn in not moving on rates or advancing the ball down the field in terms of policy normalization. He saw expectations of future rate hikes slide much further into the future. The fed wants to pay the expectations around december for rate increases so they will hold but will continue to make the case that policy normalization is coming sometime soon. Alix the big deal is the dot plot. We will get projections for 2019 as well. The whole median estimate comes below the 3 they have now and the other is the hawks are going to jawbone those dots higher to see more hikes later. Which one wins . Reconcile,ed has to initially they were saying for rate hikes this year and now we are likely getting just one. I think what they are going to do is maintain the pace of three ,5 basis point hikes per year and it is a phase shift lower across the board. Thisill see one rate hike year and three per year until we get to that neutral fed funds rate, which i think they will keep a 3 . From the fedtoric over the last six weeks has been very strenuous with the doves and the hawks. Will there be language to offset that dissent . Carl i think we will continue to see the sent for mr. George and that is likely to be repeated at the november meeting. They will likely be satisfied when the fed tightens at the december meeting. I think it is not so much dissenting views and chaos. I think there is rather a chorus 10 hours andre is tenorsnd baritones and altos and baritones. It is just sounding a little different from different members of the committee. Alix that uber hawks are bubbling of asset inflation. What we see anything in this statement reflecting the possibility of asset doubles . L i do not think they can they will put it in but we cannot rule it out as a topic of discussion at the press conference. Yellen could reflect similar views that keeping a great low for an extended time risks Financial Market distortions. A healthy economy is what is needed for the fed to take the next steps and were just not there yet. Alix Carl Riccadonna. Later today a special bloomberg ratet on the feds decision at 1 00 p. M. When we tie these decisions together at seems that it is the Monetary Base and the link with inflation and Inflation Expectations that cannot reconcile. Jonathan lets bring in kazuo momma. He joins us from tokyo. Great to have you on the program. We arer whether struggling to buy the bonds we need to buy, how do we communicate to the market that that is not what happening not what is happening. Have they shifted the goal post . Was sohink today they can have much more flexibility on the parties of the jg be. A very constructive step. Alix part of the rhetoric coming out of the market is they achieved no harm, but did the boj do anything else. What was your biggest take away . Actually, one very constructive step of the decision today is that they are trying to mitigate any possible side effects from the excessive flattening of the yield curve. Talks about the possible negative impact on the economy through the International Mediation and a negative impact on the sentiment of the household, because they are concerned about future income streams and Interest Rates. Is trying tooj minimize that side effect. Curve, the new framework is constructive in terms of maximizing the possible impact of Monetary Policy. Struggling to are hit an inflation target of 2 and they are now saying they are willing to overshoot the inflation target. What does that entail . How do they deliver what they want to do . I do not see how they can do it because they have not hit it in so many years. What do you think . , they analyzed through a comprehensive assessment what went wrong over the past three and half years and im sure they came to the conclusion that japans people, the expectations are formulated three backward looking formula. The boj decided to be more forceful in creating forwardlooking mechanisms in the minds of the people but i think i agree with you. It is very difficult, challenging situation in japan. Fact, i think the Consumer Sentiment has been Strong Enough so a marginal impact of the decision is still questionable. I think we have to look at the economy and peoples expectations. Kazuo momma is sticking with us. Coming up next, we will dig deeper into the boj shift on focus. Has the bank of japans policy reached the limits of its up, get aess . Later will be joining us. Up, new york city later Danny Blanchflower will be joining us. Alix this is bloomberg go. I am alix steel. Steepening the yield curve, the two results of the bank of japan today. As he with us in tokyo. Kazuko mommat with us in tokyo. The white lines are the big banks and that yellow line is when the boj went negative rates. Since then we have seen bank rough it ability with Inflation Expectations. Is the goal to help bank profitability, to help the transmission mechanism that will support higher inflation . Actually, this is the indication of the boj. The flattening yield curve was a concern for many people, particularly in the industry. [and discernible] [in discernible] there are some factors depressing the banks ability so some factors should be solved sometime in the future. [indiscernible] how much control do they actually have over the long end of the yield curve, considering that we have seen long alltime lows couple of months ago yet the boj has been tapering their purchases at the long end throughout much of this year. I much control do they have over the long end of the yield curve in japan . Actually that is going to be tested from now on. , there was an impact on longterm Interest Rates but at the same point they have been generally left to the market. From now on, boj is trying to control their 10 year bond yield more accurately in line more or less with the current level. Two new boj introduced that makes them able to control better the longterm Interest Rates. I think this is still testing time and there are going to be some kind of confusion in the first weeks but after that settles, i think the communication between the market and boj will be much more constructive and eventually they will have a better result on the longterm and. Alix can they actually control the fx . Take a look at dollaryen, yen deeply lower after the boj announcement but positive on the delay on the day. What is the relationship . Kazuo actually, it is hard to the exactly to analyze volatility of the Exchange Rate market. Actually, before the meeting there was some about the boj did not come up with anything in terms of the market decisions. Decisionlly, todays was very good in terms of the mitigating any possible side effects of the current Monetary Policy. I think markets generally welcomed the conclusion of todays meeting but at the same time, over time for an Exchange Bond more to do with the economic fundamentals and more a longterm view of the economy and conditions. I do not know how much impact Monetary Policy alone would have on the other International Markets. Jonathan we had a big move on dollaryen since governor corona came into office. As the has the importance of the fx channel diminished for the bank of japan . Ofy are weighing the risk what it means for financials versus what you would get for fx. Has the channel diminished . ,azuo actually, Exchange Rates it is generally important for small economies and large economies. It is difficult to predict the Exchange Rate. Generally speaking, other International Market conditions control the outcome of the market policy conditions. They have to use Exchange Rate policy as a tool. Exchanget importantly rate and other Financial Market and the caterers as well as other elements, not just Monetary Policy. Monetary policy in japan was affecting this Exchange Rate but at the same time there were more forces in the global Financial Market for the risk on mood. Policy was on the verge of tapering. Pinpointy difficult to the source of the effect on the foreign Exchange Rate. Alix you were at the boj for 35 years. You have decades of experience helping set Monetary Policy. If you were there today, what would be your biggest recommendation to boost expectations, get inflation to 2 , and help get a weaker yen . Actually, i do not know about the second part of the question how to get a weaker yen. I think the most important element in terms of creating more inflation pressure is the confidence of the people about the future economy. I do not believe anybody is saying that Monetary Policy is not enough. The money is already there and i think people are worried about income. This is an unusual situation from the market context. We are in an extremely accommodative position as far as financial conditions and what is ing in japan is how to terms of more investment, more risk pressure, more hiring, growth, and productivity, a much more tangible impact and more tangible element in the economy is something missing. , itink under the abenomics is going to be implemented in a more accelerated way and also impact on the private economy will definitely be felt. That will be the point where free,t Monetary Policy is affecting the overall economy. Jonathan it is great to have you with us on the program. It does feel like it is up to abe now. Coming up, much more on the bojs latest policy decision plus we will head for day two of the uns General Assembly debate where david westin will be speaking with Michael Bloomberg and penny pritzker. This is bloomberg. Onathan this is bloomberg go i am Jonathan Ferro live from new york city. Futures positive, risk on it seems. The dax up 1. 2. Capturing the boj debate, dollaryen, 101. 44. A stronger japanese yen perhaps off the back of the fact that andtive rates did not move no signal that that is where they are going. Alix is the fed more important than the boj . The second u. S. Africa Business Forum is being hosted in new york city. More than 200 global ceos are there and so is our david westin with some special guest. David thank you so much. We are at the plaza hotel for the business form and we are joined by penny pritzker, the secretary of commerce and Michael Bloomberg, known as the Majority Shareholder and founder of bloomberg tv. Michael the boss. David and threetime mayor of new york. This is the 2016 version of this forum and i want to talk about this year and 2014. What were your original goals in bringing together this partnership, public and private partnership to convene these World Leaders . Penny bloomberg philanthropy has been a great partner. Is to deepen the economic ties between the United States and africa. Africangether about 46 leaders with over 200 ceos from africa and the United States so we can do more business, build a Greater Network and greater relationships. When we did the first one, we believed, both of us that if you put people together then good things will happen. There is enormous demand for us to keep it up and do it again. David how do you measure success for Something Like this . Michael i think number one, getting people to talk to each other keeps the peace. Introducing businesses to opportunities and letting them make contacts is great for america because we sell our products to africa and buy Raw Materials from africa. An awful lot of american jobs are dependent on us reaching out and trading across the world. Africa has 1. 2 billion people but and in arms landmass. You can put india, china, and north america together and that is the landmass of africa. This is a market of the future. David what is the potential growth in africa as you look forward . Penny yesterday we were focused on three sectors. We brought together five heads of east african countries. We talked about travel and tourism, enormous opportunities in both americans going there and east africans coming to the United States. We were working on agribusiness. As the mayor said, 50 of the underdeveloped world land in the world is in africa. Third is the infrastructure, enormous infrastructure needs, particularly region of all withnal so you can connect where agribusiness is driving driving, or so you can get tourists around different part of the continent. Lots of opportunity. David the u. S. Is not the only country interested in commerce with africa. Where are we in that competitive race . Penny we are continuing to grow our footprint so you see trade growing, nonpetroleum trade. Petroleum is down. We just have to keep growing deeper economic ties and what is critical is our private sector. It is important to get the heads of state with the private sector together because at the end of the day the United States economic relationship is expressed through the private sector. The awareness of global ceos of the opportunity and what hurdles are there to getting increased commerce . Michael they understand the market. Business people are not political. They look at the numbers and say, 1. 2 billion people, we can sell, we can buy. They understand what has to be done. The problem is always making contact. You could say, they can pick up airplane. Or get on an they can come here and meet a lot of people and once you start the dialogue, you do not have a substantive conversation but i am going to call you and the call will go through and im going to come visit you. You will schedule time and make a presentation, and it works both ways. African Companies Want to sell to america and vice versa. That is what trade is all about. Trade n eyes global trade. Ize global stop that is to build more markets and we have to be able to sell our goods and services. ,hat is why ttp is so important why the xm bank is so important. All of these things create jobs for americans. David about ttp, you wrote thaty strongly about recently. Tell us why that is so critical. Michael you will find all these Asian Countries signing trade deals with china and we will be left out of that market. It is half the people in the world in asia. You cannot not do business that if we have our hands tied for lack of contact or treaties, it does not bode well for america. It is easy to stand up and blame global trade for everything. Truth of the matter is we have to trade. If we are going to create jobs for americans over here, have to sell our products over there and have good bargains for our consumers. We have to be able to trade and buy things from overseas. The fly in the ointment is technology, which will be the spoils for those with a better education so we need to go back and work on our education system. Make upiness we do can for the technological destruction and job loss. Penny two reasons we have to do ttp, our ability to sell goods around the world is really critical. Ttp gives us market access. The second is strategic. It is important america leads. We have to set the rules of global trade. It is going to go on whether we are participating are not and it is up to the United States to lead. We have made a deal with 11 countries, fastestgrowing economies in the world and fastestgrowing marketplace. Now we have to take advantage of it. David the question is, is it dead . Enny it is not dead i think it is absolutely possible to get done and the president has been a leader on this. He has been working with congress. All of us have been working with various members in the senate and house about the importance we are hoping to demonstrate within their district, the jobs dependent. No, it is not dead. Michael let me phrase it this way it is politically expedient to latch onto something and say global trade is bad without defining what global trade is. What i tried to say in an oped i wrote, the elected officials who do this are going to be responsible for lack of jobs down the road if they do not do this. My hope is that they will come to understand that. The politics change during a lameduck session so they can say, i will bite the bullet and vote for something that may not be popular today but will be the right thing to do, and i will have the next few years to convince the public that that was the correct decision. Being in office for 12 years, the public is smarter than people give them credit for. It is a handful of people that get interviewed. Person in america understands we are a world power and have responsibilities, and wants to build a better world for their kids and grandkids even if there is shortterm pain and suffering. I have always had great confidence in the greatest country in the world. People come here and there is a reason for that. I think Winston Churchill once said, you can always depend on america to do the right thing but only after exhausting all other possibilities. Running out ofre those possibilities and in a lameduck session we will get things done. David given the fact that the two principle president ial candidates have come out against ttp, isa lameduck best a lameduck measure the best way . Penny the only chance. David the commodities prices have changed since 2014. Is it a harder job this year than in 2014 . Mean is thatt does governments across africa have woken up to the fact that they have to diversify their economies and that is one of the factors we will talk about, economic regionalization. Any to Work Together and build infrastructure so what are smaller countries and markets can be attractive to investment. Too it means they have got diversify away from being commodity dependent, and they did not have to do that before because there their coffers were full. Now they have recognized the importance of diversification. Michael you have to understand these markets are cyclical. At 23 at oil was few months ago and now it is at 43. We want to have the relationship so we can sell them stuff and that is why a conference like this penny deserves all the credit. Two years ago, and now again, you and the president. This is something, the kind of investment that you have to make , and the payback will not be decades from now. It will be in the much nearer term. Commodities have started to come back and is markets go up and down there are beneficiaries and lose ears but nobody stays on the same side for too long. Itx it is about penny is about sustained engagement. We did the first one and African Leaders came to us and said, we want to do it again. It is important that we continue and keep up the momentum, build the network and relationship. That is how more business and trade and Job Opportunities come. David this is president obamas last year in august in office. Is there going to be another one of these two years from now . Penny i certainly hope so but that is beyond my term and my being in this job. I bet if you ask the people in this room, they want that because it helps them with the momentum of their deals. We announced over 9 billion worth of deals today and a lot of impetus comes from this big event. It helps move government. Bloomberg philanthropy has done a lot of things around the world, in the United States and around the world. Why was this a priority for you and bloomberg philanthropy . Michael we are trying to work on things that other people are not. Most philanthropys do not think about encouraging Business Activity but that is the best thing you can do for people to give them jobs, and the ability to move up the economic ladder. Commerce does that. Also, some of the things in africa, they are relatively easy to work on. Smoking cessation, traffic fatalities as countries go from butter cycles bicycles to motorcycles to automobiles. Training people. Bloomberg has a program to train journalists throughout africa so they can record better information and more accurate reporting. Everybody benefits from that. This organization of 80 odd cities around the world, paris,ly the mayor of the citys Work Together on climate change. Change, it was the hottest year on record and may be the hottest year in thousands of years. There is research that the north pole will be free of ice by 2020. There is something go on. Big swaths of america have trees that are all dead. Maine, nothing in the chesapeake bay. The air moving as the waters warm up. Africa is a big part of the solution the cousin they have a number of trees that help clean the air, and they have the same kind of problems. Houseive in a oneroom with a kerosene lamp. The fumes are killing them. One of the things bloomberg philanthropy is doing, we built a solar powered lamp. Simple things you can do to make peoples lives better. David a lot has been done but a lot left to do. Penny pritzker and Michael Bloomberg. Alix thank you so much, david. Here is what you need to know at this hour. Ne down, one to go the bank of japan refraining from moving deeper into negative Interest Rate territory, shifting the focus to controlling the yield curve. Interest rateits decision in about six and a half hours from now so while almost all economists expect the fed to hold off raising rates, investors will be looking for signals regarding the timing. Voters are narrowly supporting Hillary Clinton in another sign of how the 2016 president ial race is fracturing traditional voting blocs. 46 to beat donald trump 40 2 among likely voters with an annual Household Income of 100,000 or more. That is what you need to know. We are still looking at markets. Session,e highs of the the risk on continuing slightly. Jonathan futures positive, up 4 10 of 1 . The s p 500, a rally in europe. The ftse up by one third. The fx market capturing some of the boj story as dollaryen higher. With ahow we trade now stronger japanese yen. Q e infinity, maybe but they cannot get the japanese yen weaker off of what they announced today. 47. T inching back toward the story in the bond market, twoyear yields positive for basis points on the session. We are inching very slowly toward positive territory, still deep in the negative space. Have they given up the gain on negative rates on the front end . Going to have the option to go to 20 or have we moved away from that . Alix they say that as their next tool. The takeaway is shifting the framework to target the yield curve. Think of it as qe with yield curve control. You buy more shorting government bonds and less longterm bonds. That is already happening. The weekly average of purchases by the boj has been more on the fiveyear range rather than on the longerterm range. Much more fiveyear buying, a little more 10 year, decline in 20 year and 30 year. Joining us is danny blanche for our Danny Blanchflower. He joins us from hanover, new hampshire. It is sort of like the boj is already doing what they laid out to do so what is the longterm effect going to be . Danny not much. This is clearly not a bazooka. I actually went back yesterday 1931eread the paper from where they talk about the long dragging conditions of semislump. This is where we are, Central Banks trying to push things forward. Cannot do that enough on their own so this is fiddling at the edges. The question is where are the fiscal authorities . Keynes made it clear that what is missing is investment so the Central Banks have been the only show in town for about eight years. Now we are waiting to hear from the other partner, if you like, because this has not done very much. It disappointed the market and we are talking about perhaps the fed raising the rates. We are hopefully going to see in the next year or two the fiscal authorities stepping up and taking some of the pressure away from the boj, the fed, and the bank of it england. Bank of england. Jonathan i feel like going back to bed. The big question this morning i want to explore, it applies to a lot of Central Banks struggling to get to their inflation target. If you struggle to get to two and overshoot, how does that help you . Danny that is the credibility problem and that is why we are fiddling at the edges. There is no inflation, you cannot create any. I guess you are trying to say that if we get to two, we will not tighten things off. As you say, where is the inflation . Go to europe and look at the data. 12 European Countries and deflation. Everybody trying to get into positive territory. 2 looks utterly impossible. We will get a nice burst of inflation coming from Rising Oil Prices and that is where we are. There is not any inflation. Monetary and fiscal policy is too tight, dampening down on inflation. Saysome members of the fed we should raise rates to lower inflation even further despite the fact that in the u. S. It has been below the target for 51 months in a row. Wage growth and inflation, where are you . Slow Economic Growth. Alix at things like where they get it is it is stuck in the banks. They are trying to get banks more profitable, forcing them to lend which means Inflation Expectations can move higher. Has that been the missing transmission mechanism in japan and the u. S. . It has obviously been a missing transition transmission mechanism but what have we heard that will change it . There is nothing here that suggests things are going to change. That is why i said at the beginning, it is not clear that anything the Central Banks can do to fundamentally change that. Hence why everybody seems to be saying you have to start to try to put investment things in the economy and move things forward because it does not look like Central Banks have the ability to change that position that the economies are stuck in. Long dragging conditions and a semislump, that is where we are. Jonathan on the output gap specifically, if it stays wide is the economy permanently damaged and are we witnessing that . What does it mean for the future . Obviously, the issue is the damage that has been done permanent and sort of irredeemable, and permanently structural, i do not think it is. I think much of this is cyclical. I think much of what the fed has been talking to is completely wrong. They think that employment rate is permanently lower and i think that is nonsense. You are right, the danger is if you leave resources unused as time goes on, the chances they are going to be used again or even up to snuff that they are viable again, the longer you leave it the longer you worry the resources cannot be used. These are cyclical effects, not currently permanently structural. If you leave economies at the low level of activity the danger is that you have lost them forever. Alix it looks like we are going to see a hawkish hold at the fed. What is the key statement that you will be looking for that will tell you that is the case . Danny i want them to say that they are watching the data. Is a bigo precommit mistake. Rateommitting to a increase and december 2015 was a major macro error so i want them to say they are going to watch the data and do whatever it takes. Unfortunately, the markets do not think the fed will move. The fed has a major credibility problem because each time these hawkish president speak, the markets do not believe them. I hope to see that they are going to be watching the data and that will be the dominant thing that comes out. To say we precommit and want to raise rates seems to be nonsense given the actual data. Jonathan the fed is going to mark down to blanche flour. Danny blanche flour, great to have you danny blanche flour blanchflower great to have you. Alix we will head back to the plaza hotel where Francine Lacqua will sit down with bob diamond. More from the uns General Assembly debate when we return. This is bloomberg. Jonathan this is bloomberg , i am Jonathan Ferro. Catch coverage of the feds decision today at 1 00. Alix bloomberg philanthropy and the u. S. Department of congress are hosting the second u. S. Africa is this form. More than 200 global ceos are there and so is Francine Lacqua with another local got special guest. Diamond, he is bob thank you so much for joining us. You have been going through a tough time. This is because the african story is taking a little bit of back step. What grade would you give atlas . Bob the team has executed unbelievably. When we began this venture i think we raised equity in december 2013. By the time we closed our first deal in august 2014 the headwinds had started and currencies were weakening against the dollar. Chinese investment was slowing, maybe retracing. I think one of the most important things was the impact on european banks. European banks have provided over 50 of trade finance for Subsaharan Africa and today it is almost zero. Banks,a withdrawal of weaker currencies, headwinds from the commodities cycle and yet this team has acquired eight banks in seven countries, all operating and profitable for the year. Francine your share price reflects that and when you speak to investors, they worry because they want atlas bigger and you may not get in acquisition that you really wanted, or clays business. Where do you go barclays business . Where do you go . There were two bank deals done and africa the entire year and both were done by atlas. One was the second bank and rwanda that is operating as one bank. The other was the bank in zambia. We did two deals in the First Six Months of this year. It has been very hard and the team has probably worked harder than they imagined, but the opportunities in Subsaharan Africa today are better than two years ago or three years ago. Our medium to longterm view is absolutely rocksolid. Francine optimistic. Talk to me about european banks, is there anything to be optimistic about . The share prices are under so much pressure. Bob in atlas of merging capital we are looking for opportunities to invest in european banks. We have signed one deal that has not closed and are looking at a number of others so we think it is an opportunity. Two thoughts i have, one is, why eight years after the financial crisis are we seeing Legal Provisions and credit provisions that have to do with a financial crisis happening today . European banks have kicked the can down the road for six to eight years and i think we are getting close to capitulation. The question is how are we going to resolve the nonperforming loans on the Balance Sheets of italy and greece and other countries . It is a little bit of inside baseball. I know you are a big baseball fan. Francine big. Bob if you look at the situation in italy, the government would like to do a good bank, bad bank. In order to do that the ecb rules are an automatic banking. For the poppa larrys, many of the debt holders are the depositors so they are looking for an exemption from that rule and i think they will get it. Francine you think it will be fixed . Bob i think the other thing we should think about in terms of the big picture is the two too big to fail, the reaction to everything that happens is still buffer upon buffer upon buffer. Capital, separation of risk upon deposits, so we need to look at the opportunity at the Smaller Banks and mediumsized banks. Diamond, former barclays ceo now at atlas. Jonathan coming up next, stephen englander, michelle. Eyer, and adam posen from new york city as we count you down to a fed decision, this is bloomberg. Japan shift stimulus to progress in the yoke as the governor wants to strengthen his commitment stoking inflation and jonathan welcome to the second hour of bloomberg. We are live from bloombergs headquarters in new york city. There is extra yield curve control out of japan. A lot of it is marketing. It sounds like they were marketing something they were already doing. Commerzbank said that boj was a disappointment because they did not look at why measures did not work so far. That is what the market is grappling with. David it seems it would help the banks but not much else. Our indepth coverage of the boj and the fed will continue later in this hour. We will look at the reversal in the yen and debate how the fed could impact the u. S. Dollar later today. It is notity markets, affecting much. 1 3 of 1 . Yields are rising in japan on the front and. We stay at negative rates but the big question is where is the floor . That overill examine the next few hours. Target is announcing a new 5 billion dollar Share Repurchase program and its up by 1 as a result. Go around the world and follow our top story of the day. We are getting ready for the fed policy decision later today. Up, what wereking the specifics we learned overnight in the boj . There are two stories here. Hand, they have given up on the idea of a timeframe for hitting 8 inflation target and lost credibility over that. On the other hand, they are talking about taking enough measures to make sure they overshoot 2 . Its a bit of a shift on the inflation target. About targeting the yield talk of a want to take pressure off the banks and investors suffering from low yields. Its a big step toward concessions toward the banks. Today has been mixed signals and perhaps disappointment that they have not taken many steps to stimulate price pressure. Its more of a at on the back for themselves that things are going smoothly. Unicredit came out with a note saying any sort of decline use saw in the yen was speculative shorts. The yen moved higher. Talk about what happened in the fx market. The yen was weakening at the beginning and that was mission comingished but now back, lets see what janet yellen does and that will probably be the biggest driver for the yen. Examining whaten matters more for fx . Is it the fed or the boj . David we will find out because the fed goes next. We will be joined by carlriccadonna. What does the fed have to do to get away from next signals and can it without doing anything . Signals from bank of japan but you can see the Market Reaction which despite their efforts, it was not effective but the day is not over because the hawkish leaning fed could be the perfect antidote for the Japanese Central bank. I think thats what we will here today. I dont think they will move on Interest Rates but they will to thehawkish tilt assessment in the policy statement and the Janet Yellen Press Conference thereby leaning toward a rate increase later this year. Is it possible we are focused too much on december and not the coming years . The up session in the markets is when the fed will go next. Thats why there is so much focus on the december meeting where odds are hovering around 50 for a rate increase. They will be focused around the dot plot today. Assuming we move in december, we are in the pattern of 25 basis points per year but why should we expect a different outcome Going Forward . Why should we trust the fed predictions for future years . I believe the answer lies in the fact that we are getting close to full employment which is something that janet yellen will address today and the economy close to full employment will generate more wage pressures that will provide firmer backing to Consumer Spending and potentially a faster Economic Growth as a result. Later today, special report on the feds Rate Decision and that will start at 1 00 p. M. Eastern time. I know we will all be watching. We are looking at the bank of japan decision and we want to bring in our roundtable. The boj, its always dangerous to judge a policy decision. What was your biggest take away from what you have seen from them . What we haveey did been encouraging them to do which is to recognize that japan is at full employment and they dont have a demand problem, a nominal inflation problem in the best way to deal with that given their structure is too steep and the yield curve. The best way they have done that is to do a reverse twist and thereby put a cap on Interest Rates. Rightly said, this will be judged not by the intraday movements by but by what happens in the coming weeks and months. The weird part for me is that they set the Interest Rate cap so low on the 10 year at zero and that raises the likelihood they will do more negative rates where i wouldve hoped they would have set the cap much higher. Jonathan they experimented with but onceeat britain you go beyond 10 years, how much control does the boj have as the boj have over that . Its a question of what they are willing to do to get the control. Its entirely feasible for a central bank to aggressively by lots of stuff and affect the price of securities. That does not affect the underlying longterm interest economy. The whole real if anything, it might create a wedge. The bank ofof japan, especially given where the currency is to keep buying bonds as much as they need to is pretty high. The by theve seen dip mentality and even with the yield curve steepening, there was strong investor demand. Did change that Investment Strategy for bond buyers . No, i think not. Attention to steepening the yield curve was made in consideration of the stress of the financial industry. Japanese bank lending margins are among the lowest in the developed world. The move to negative Interest Rates was putting more pressure on those. In addition, the Insurance Industry in japan really only came out of their crisis, the banks of the crisis in the early and mid90s but the Insurance Company came out of their crisis in the first decade of this century. They have only been in the black sense 2013. Here is veryove helpful to the financial industry and i have a feeling thats what was driving this. David is this going to have a favorable effect of getting inflation up . Thats a good question. I think the direct affect on insurance is correct. Fair to the bank of japan, i dont think its solely motivated by helping out the financial system. They are trying to raise inflation. For helps provide room additional fiscal policy and for the expectation Going Forward and that fiscal policy will continue to be accommodated. I wish they had set a higher rate target for their cap on the to try but they can try to nudge the economy this way or that way and this is a nudge toward higher inflation. The three biggest banks in japan have bigger margin interest lines. Yearhite year is 10 Inflation Expectations in the yellow is negative rates. You can see the relationship. Is this enough . Will this post Inflation Expectations . This is the 100 trillion yen question. Why hasnt inflation appeared in japan yet in spite of the heroic efforts of the central bank deserveswho i think gold stars. Hearf the issues i often from bank of japan staff as well as the corporate side visit is that in the first year of abenomics they said we beat deflation. Group ofalking about a people who have not seen sustained Economic Growth or Interest Rate increases or stock price increases in a quarter of a century. There was a lot of applause for the end of deflation but none for the concept of positive inflation. I think the central bank did not do a good job in explaining why 2 and why positive inflation at all . There is a mental resistance from consumers who have not seen real wage growth keep faced whichdaily living costs are dependent on imports and without weaker yen and stagnant wage growth, they feel they are experiencing inflation. Alix i will delve into that throughout the hour. Thank you both. Jonathan coming up, much more on the boj with yield curve controls. The yen is jumping to a onemonth high. Er will england reveal why investors are leery. This is bloomberg. Jonathan this is bloomberg. Emma terrorism charges up and filed against a man accused of setting up bombs in new york and new jersey. The criminal complaint says he planned the attacks for months. They say he praised Osama Bin Laden in a journal and wrote that he thought the sound of bombs would be hurt in the street and was captured in a police. With in charlotte, north carolina, protest erected after police shot and killed the black man after an officer opened fire because a man had a gun. Members of the mans family says he was not armed. And upset threw rocks police vehicles. 12 officers were injured. For the second time in two weeks, it was u. S. Show at forcing that north korea. 1 bombers flew over and tensions are rising in the region. North korea tested its Biggest Nuclear warhead earlier this month. David still this is adam posen in washington and alicia agama. She is a Senior Business advisor. Lets not just talk about the bank of japan but the fed this afternoon. There is increasing the system even janet and yellen about sending mixed signals and not really knowing where we are headed. Is that fair and what can she do to correct that . Think its fair but unimportant. Moderncontext of economic history at the amount of uncertainty about the fed people are feeling now is tiny compared to the past. The fed is far more transparent and the actual room of their maneuvers is limited and everyone knows what the direction is and the bond market volatility is very low. Basically, its true their communication has gotten noisy. It was a little weird to see things going on before and after Janet Yellens speech. Its not good but its also not important. Everyone talks about uncertainty. If the rate hike is in this in december instead of september and it has been clear for weeks, then its not a big deal. If governor king in the bank of england was there and you are giving speeches, how would he have handled that and how should janet yellen handle this as well . , there is an issue and i was speaking out when i was at bank of england. We actually did coordinate better. We had a system where there was not more than one of us speaking in any given week. If the governor was speaking one week, we all shut up before and after and never responded to his comments. I must admit that i am confused by what the many members of the Federal Reserve open Market Committee think they are doing with the amount of talking they are doing. I was not on. Tv when i was a Voting Member of the banking committee. Of the fomcbers doing those appearances, i dont understand. Let me ask about which message we are getting in which one matters. What about the message about where we are next year and the year after . The radar fort on bank of japan, i think one of was arprises was that it surprise. In the most recent speeches by the Central Bank Governor and his deputies, there was a laying out what the options would be instead of a big surprise we had in january with negative Interest Rates. From looking at the governors statements, and the next move will be toward lower negative Interest Rates. The choice between continued asset purchases and negative Interest Rates, the damaging effects of asset purchases are greater than another move to negative Interest Rate policies. The distortions in the bank of japan are obvious in the call market and the spot market and Regional Bank lending and some of the asset bubbles. Much fornk you very sticking with us. With no hike expected, will be thicken with the u. S. Fed and will it be about fiscal stimulus . Michelle meyer will weigh in later. This is bloomberg. Alix this is bloomberg. Fedovered the boj and the and the potential Monetary Policy and that leaves fiscal policy not only in japan but the u. S. Some say it Trump Presidency could unleash a stimulus the likes of you have not seen next year. Thats a fair hope or worry because it would be a tax cut funded stimulus and not sustainable. The question is what happens if congress . Does he have coattails to maintain a republican majority in the senate . Im hopeful not. The idea thatess, its fiscal stimulus that will have to come to the rescue to help the output gap and increase productivity and inflation, is that the conclusion . G20 and g7 have been arguing for this forever. Committed they will expand their budgets this coming year. Germany and france are likely to do so and the u. S. Is the odd one out. That would be too bad for the u. S. And the rest of the world. David we keep talking about fiscal stimulus but if it doesnt happen, what are the consequences . We actually know there is good reason for this to happen. If it doesnt happen, you will see bigger currency moves. Is itst we are making happening pretty much everywhere in the gseven and china and the question is the u. S. Funded or aonsibly smart one focused on Infrastructure Investments . Alix good stuff. David thanks for being with us. Up, the yen paring losses from earlier today and now at a one month high despite the boj efforts. Will join user next. This is bloomberg. Jonathan lets get up to speed on the markets. The dax is of one percentage in germany. , thetory in the fx market dollaryard trades at a 100 handle and the yen is stronger. That could be a boj disappointment in the short term. The bond market has a 2year note yield higher on a japanese twoyear. Japanese yen points toward a market that got the message from the boj. Banks in japan got the message from the boj seeing a risk on rally. The index had its best day since the end of july on the nikkei 500. Stocks hit their lows in mid february. Japanese banks have been getting a boost in the steeper yield curve. It could help them with the the boost in the yield curve. The other part of what the boj wants to do is switch how they , less of the nikkei and more of the topics. Softbank is up by about two and 9 . Topex index. In theory, the boj will be buying more of this stop good its the opposite problem for fast retailing. It is a huge contributor to the nikkei. That explains why you so a huge dropoff in the stock and it was to around session highs. The government owns about half of fast retailing. Goes isis stock dictated by the boj and that is the trickle down in the market from the boj to japanese banks and the individual stocks in japan. Lets get an update on headlines outside the business world. The new Bloomberg Politics poll may sound an alarm for donald trump. Offails to dominate a group voters that traditionally support republicans. Hillary clinton is narrowly leading in him with over 100,000. The terrorist in new york and new jersey praised Osama Bin Laden. Charged in theen weekend bombings in new york and new jersey. The criminal complaint said he conducted a dry run days before he exploded the bombs. He was captured after a shootout with police. The white house is charging that either russian or syrian warplanes attacked a humanitarian convoy in syria killed. People were it was another damaging blow to a shaky ceasefire in the kremlin has denied responsibility. Alix we will hear what you banks are looking at today. The main focus of the dollaryen with the yen rising. This is a chart that governor coroda does not want to see. What happened with the dollaryen . You have to look at what the boj did not do. Qe or cut theo base rate. If all you are doing is putting and 10 yearrve yields were close to zero, it implies they would kick them at zero and that was not much of a surprise or benefit. Overall, the key thing is that the market continues to see this fear on the part of the boj is cutting the base rate into more of negative territory. As long as they see that come i think they will jonathan take dollaryen lower. Jonathan there was an adjustment earlier this year from the boj. Are we starting to see that because they cannot influence the currency . Are they moving away from looking for a week or japanese yen . To weaken thelove end of the forces that would , you have to be sure you can compensate the banks. Those were the big victims of the first move into negative rates. Even with the rally we see, theres they are still 22 lower than beginning of the year. Its a very delicate operation. I dont think they have the confidence to manage it. Has that bank of japan finally establish that it cannot weaken the yen. A strengthening said would the yen. Weaken they know what they have to do to weaken the yen. Its not the most straightforward thing. Its easy for a central bank to control Interest Rates but harder for them to control equity prices. They are reluctant to take the chance that they have another january disaster. Alix what does this mean for the fed . What will happen to the dollar today . Some think the dollar is undervalued and there is more upside than downside and the other side is we have had a 20 dollar rally since 2014 and we are over done. Which school of thought are you . More leaning toward the second but what we have seen from the boj and ecb since beginning of the year is they have underdone expectations. The market expected them to these more and they have not. The fed is the opposite. The market has expected them to hike and they havent. I think that pattern will continue. Question is what they will do for the longerterm if they bring the median estimate slower. If they do, what can support a dollar rally . Think the dollar will have a hard time rallying today even if they try to do the hawkish hold. Decemberhave the price to net 65 and there are lots of things that can between now and december whether its a china crisis or European Crisis or brexit crisis. To convince the market that is the right percentage when they have decided not to move today will be hard. I think there is an issue longerterm with the dot. 3 for them below majority of the fomc means they dont think the real rate of interest is lower or you dont think you will hit your inflation target of 2 . Conveyg that, they would longterm dovishness in the market. Jonathan so the fed would be doing market to market. Wire they behind the curve . What will dominate market moves now is how the market perceives them relative to december. With . 65 priced into december, if you dont move, that with 65 priced into december, if you dont move, that will have an impact. It sounds like what you are saying is there will not be a real move unless the fed takes action on Interest Rates rather than talking about it. Talk will not move the dollar. I think thats fair. Their ability to move the market , comingy did last year in a couple of months time, thats less because the market has been disappointed several times with that kind of language this year. If they move, the market will react. If we get good data, they will price in more than 65 but we have three months and the data has been soft. The if there is a risk of fed sending more dovish, what is the fx reaction to that . I think it will be muted. Will rally and the dollar will probably fall a little against europe. Here, whatt past will mitigate the rally is the focus on the election. Of concern that john the donald trump is close enough and the negative Interest Rates overseas. I think we will have a bit of a dollar rally but once get toward have action, we will risk a rally with dollar weakness but shifting toward the election, we will see that unwind. We are talking about a spot market. The volatility market is historical. As we approach the election, think we will see more concern about the good side and volatility will pick up. Jonathan thank you so much. Coming up, with no fed rate hike expected, will the dot plot thicken . From new york city, this is bloomberg. Alix this is bloomberg. Coverage of the fed decision this afternoon starting at 1 00 p. M. In new york. Emma the Postal Savings Bank of china is on the verge of the worlds biggest ipo this year. Will raise 7k billion in hong kong and shares will be sold below the midpoint range would forgive the bank a larger market value than Deutsche Bank. Have now rode with the release of its latest model s. Cording to analysis ih the iphone seven would have cost more to make because of its greater Storage Options and more advanced a. Iphone sales make up 2 3 of apple revenue. Holiday sales in the u. S. Will rise about 4 and the big change will be getting a smaller piece of that. There is a report that says consumers are increasingly , goinggifts at retailers away from places like walmart. Jonathan thank you. September, 2013 and the rates read zero and the fed was optimistic that by yearend 2016 would be near 15 . Once by 25aised basis points so when they economictheir predictions, we now look at that with michelle meyer. The dotscare about when they get it wrong again and again . You are right that the fed has proven to be too optimistic and they have put in place of forecast for the economy continues to recover and they are not accounting for any potential shock and the trajectory of Interest Rates reflects that. They all this provides a lower and flatten the curve and reacted to the current conditions. You are right to be skeptical. Where i think its useful as to show the direction of the revision and how much they flatten the curve and how much they are buying into the idea of a lower longterm rate and a more shallow cycle so thats relevant for the market. The nearterm dots of matter. How many rate heights do they for the next six months to one year. We were told of the beginning of this year that we are to expect four. I wonder what is going on in the Federal Reserve. It seems that it is excuse after excuse and nothing comes out of it. Excuses and i colored risk management. The fed is dealing with a great degree of uncertainty and they dont have metric risks and i think they bought into this idea that the risk is that they hike to quickly because they see better labor market data. Does that tighten conditions too much . I think they have to account for all of the economics. When they have a sign of uncertainty or a shock or a problem in the u. S. In order Global Economy, their tendency is to delay. David so there is a lot of uncertainty. Is there a point where they admit that there is a lot of uncertainty . Should they admit that we just dont know . Thehere any sentiment in fed to change the way they do this . The short answer is not really. You had the lord who came out and had a different approach with said we you had bullard who said we had to we have to accept the new regime. They are under the impression that Monetary Policy still works and they can do things to support the economy. Looking even at the bank of japan on whether their policies are effective, they will keep trying. My favorite chart is the u. S. National Interest Rate. Does that go lower . If that happens today, how are we going to get a sustained bounce in the dollar . That is a very good question. Is one of the big challenges that as we continue declinewer and ceos globally lower come i think that makes it difficult. You have to think of the Exchange Rate of the dollar and not just in terms of the fed but also what are other Central Banks doing . The general view should be that the dollars on a stronger trend because you have the fed engaged in making cycle and presumably will continue. The fact that you have this compression globally the Interest Rates makes it harder to see big sustained moves and currency. They hiked one time and they keep talking about it but is it too fair they are in a making cycle . Its not fair. They are talking about a normalization process and thats a big distinction. What is normalization . Of that look like anymore . Alix 3 and thats probably coming down. We dont know what normal is but the fed is trying to calibrate policy based on what they think the equilibrium of the fed funds rate is. Theyre cute get below the short term rate and will move the fed funds rate higher but they intentionally want to keep it below equilibrium. That means they can make the case that things are, and they are normalizing their policy higher rather than and gauging in a tightening cycle so thats an important distinction. Jonathan thank you. David donald trump appears to voters as someone who has made a lot of money but two other high income voters sign the donald trump or Hillary Clinton . That poll is next. This is bloomberg. David higher income voters are now early supporting the democratic nominee after decades what the gop. According to a poll out now, 46 of those voters support Hillary Clinton and only 42 person 42 are with donald trump and they are surprisingly important to electing the next president. In the last election, 28 of mitt romneys part came from this. For more, we go to megan murphy. What struck you most about this poll . The advantage she is holding in what is a traditionally republican block. They have voted for republican candidates back to 1996 and into the 70s and 80s. As you said, this is a significant block that went for mitt romney. The group we are coming out is overincome with households 100,000 so the threshold is not exceedingly high. It shows that these traditional voting blocs are still very splintered in this election. We have a different alignment and we have seen. And then we have seen. The lasting back to election, it ends up mitt romney had a 10 advantage over barack obama. If we have donald trump behind Hillary Clinton, he has to make that up or find it somewhere else. Toand his strategy has been make it somewhere else and he is targeting white workingclass people who are significantly below that income level. Ints an advantage battleground states like ohio. We will see how he does in pennsylvania and florida. It shows how the perceived mistakes he has made and how it has hurt him and they cannot get behind his vision for the country. If and when they think he would be better for investments, they hold investments in the stock market, his message in other areas outside jobs and the economy as well as preventing this block from getting behind him. David he has an advantage of this group of high income people with respect to what would happen to their investments. What is that tell his campaign about the message he should be getting out . Clearly, this group wants to see what he says on jobs and the economy. People believe he will be better for jobs and better for Small Business and better for the economy. On other outside that like where he stands on taxes which is fascinating. There is a preponderance of people who support Hillary Clintons idea for tax reform. There are things she would do that they would find more favorable so in these to be clear on tax policy and drive home what he will do on job creation. This is the group that will be hit the hardest under Hillary Clinton tax proposals. Know what the donald trump plan is on taxes . He has outlined a fairly broad plan which is like paul ryans. In speeches now on the economy, he makes a big and how he will lower everybodys taxes. We seem to see a split among voters between what they think Hillary Clinton will have and how favorable it will be to their own household. David thank you. Jonathan coming up next, the Deutsche Bank managing director from new york city and in the fx market, dollaryen the 100 and session lows are down by one full percentage point. We will count you down to the cache open in new york with futures positive across the board. Minutes awayare 30 from you bell in new york city. The enthusiasm around the boj but it went down. Look, we were you around the highs of the session at 8 00 but then we lost steam following the dollaryen lower. The moves in the fx market are indicative of whats going on here. Alix this is the thematic issue that nothing the boj does can do anything in the short term. Reluctance may be go deeper. Alix in commodities, the risk on thin content continues with wti. Crude oil is moving on its on but gold is showing the risk off rally the fed is coming up this afternoon. Were still up in europe by 2 10 of 1 . How much more resistance will we see in u. S. Stocks. Fedex came out with earnings yesterday. Thats a0 per share so beat for estimates. Carmax is down over 6 . The whisper number was higher. Exxon was down about 1 yesterday and now its rising premarket. Is joining an accounting probe on her right down issue. Why didnt they write down assets due to the fact that oil prices slid so much. Microsoft shares are higher in the market is the company has stated a 40 billion buyback and have raised their dividends. Investors liked the supportive Adobe Systems is up as well. Thirdquarterat estimates and raise the Fourth Quarter view above the street earnings. Strengthen the cloud is what is driving these results. Alix thank you so much. I woke up this morning with a risk on rally in europe so what happened . Mark were still up with stocks. The german yield initially rose and then fell and its flat now. Investors are posing the question could other central follow the boj trying to steep in the yield curve . The yield fell three days before today. It rose to the highest level next last tuesday. The banks love what they hear from the boj announcement. Barclays is up by 3 today joined by hsbc. Of the fair in the uk is down by 33 . They said profit will be affected by setbacks at home. The probability of a cut this year in the uk is 18 this year and 26 in december. Economists say there will be a cut. They say there will be a cut this year. Maybe but for the bond toward a boj is tilted what it calls yield curve control. The bias in the market in terms of perfection is an allowance for longerterm yields to come up a little bit. Jgbs have been lower. If they allow the long end of japan to sell off will the others follow . Can you get he yield curve d couple from a global bond market . Thats a great question and we have the man to address it. This is Michael Collins from prudential fixed income. You are investing pension funds. How do you invest in his global bond market . What the bank of japan did overnight was to suck the volatility out of the 10year part of the curve. They are trying to get the long end to elevate. Insurance companies Pension Plans that we manage and banks will go out and buy the long bond because it looks cheap now. We think the curve has steep and a lot and is priced in. Trying to buy him a rumor and sell on the news. David in the recent past, there has been high correlation between the jgb and other bonds. Manage money for Insurance Companies and Pension Plans that we also manage money for nonus investors. Japanese are investors are looking at the investment is being stuck at zero but we have a value opportunity. Nightse dont spend a spend enough time talking about what it means for Risk Appetite . How do you get yields . Lower for longer means the reach for yield will continue in the fed will be stuck in a low rate. The tenure will be stuck and range bound. To reach soes investors will go on the curve globally. I think globally, things continue to flatten. What does it mean related to credit risk . Were at a record level in u. S. A debt and earnings . Does that worry you about credit risk . If you take all of the big, Largecap Companies that have access to the global county markets, those companies on average have levered up significantly. A huge part of the u. S. Economy are the banks and consumers as Smaller Companies and they have not levered up. That creates relative value opportunity. All the bigight high quality Industrial Companies and overweight on the parts of the economy that have the levered. It tell you about developed of nursing emerging markets . To you go toward the emerging markets . Think the world will gravitate toward them. We have a sense that there is a bottoming out happening in emerging markets. Currencies of god in christ and the rates are really high and they are starting to attract capital flows again which will give their Central Banks some capacity to lower rates. Are at the beginning of possibly a selffulfilling Virtuous Cycle in emerging markets i think money will continue to flow in there and get the yields and spreads lower as well. What does the issuance of bonds look like for beginning of the year . We are underweight because the supply is unending. The net supply has been zero or negative. We like the assetbacked world in the fun market. Although bonds that were issued last a goat being towed are being dragged down. Given that its lower for longer, that must be a part put a pressure on fees so will you move more toward passive . Laborpartment of resolution is pushing people into the lowest fees share classes and Asset Classes and i there is ae bad idea there you on the table are many Different Things going on there not fully understood and theres a lot of opportunity across the curve in the process. Re u david dont miss our special coverage of the fed decision later today starting at 1 00 p. M. Lets go to news outside the business world. Politics paul offers a new warning for donald who is among votersminate with Household Income budgets of 100,000. Hillary clinton has him back. It was he u. S. Show of force aimed at north korea. Flew over north korea. Korea tested its Biggest Nuclear warhead ever earlier this month and british lawmakers it will be that difficult to defeat islamic state. They said a ground strategy will need to distro federalists district federalists. David coming up, the yen japans after the bank of said it would adopt a more flexible approach to stimulus so what does it tell us about their central bank . An interview you dont want to miss later today. The european commissioner for at 12 30 p. M. Here on bloomberg. Jonathan two big Central Bank Decisions are in focus. Yield curve control does not buy you a week or yen. Percentagey one full point. Percentage point. Al and ruskin is with us from Deutsche Bank. What is your take away from the boj . I think its balance. Thats not what they want to the emphasis on packers targeting and less emphasis on quantitative targeting means there is less from a quantitative side toward driving portfolios into riskier assets and those assets moving abroad. You dont get the portfolio affect anymore. It looks like we have a floor at the front and. Is that the story . Way, i think that has already happened because of the impact you saw from negative rates before. This is perhaps in the works. Also say that the depressing nature of these and the rates market will probably depress the fx market a little bit. The yieldave seen curve steep and in japan but also in the u. S. We have not seen currencies moved to the yield curve at all. We are were responding to changes in more than Monetary Policy, its a change in philosophy and could impact other Central Banks. Youve got to look at this in a longerterm basis. It will be driven by factors other than yen rates. It used to be Inflation Expectations. Will this affect Inflation Expectations . The boj has isof they have just stabilize the yield curve where it is more or less. I think the actual impact in terms of Inflation Expectations should be limited initially. Over time, that could change. If they are anchoring rates at the wrong rate, they could drive up inflation rates and that changes the picture. Right now, its more of the status quo. Stanley wrote a lot about this. Jonathan have they answered the duration question . Boj wouldd the struggle to continue at the current purchase rate every month for longer. The ecb face the same question. They have given themselves a backdoor to the fed to be tapering. Its another reason why the yen has been stronger. In some ways its an elegant solution to the problem. You said euro dollar is on for the tightest annual trading range ever since 1999 . It looks like that. Eurodollar the moving toward 1. 05 but we need the fed to kick into gear. The signals they give us about september is a no go but november we are in the election it looks like the signal will be december finally. Is stability good for the Global Economy on a net basis . I think the real economy tends to like financials step sector stability. Can you borrow on stability . You will find that the boj should not intervene or support the gigi b market. The boj might have to jgb a tangle. That becomes a destabilizing force. How would you play the currency going into the fed decision . It should be a long dollar from here. There was a small probability the fed comes up with what would be a major surprise. More of theits same. Earlier today, what you see is what you get with markets ultimately disappointed in the boj decision. Great to have you with us. Alix the viacom interim president will be leaving the company. It says it will be reducing its dividend payout to . 20 per share. Its also ending its processes of seeking out minority investor stakes in paramount. This is not a surprise . Alix the fallout continues from the insider drama. Coming up, we are nine minutes away from the opening bell. S p futures are up six points. This is bloomberg. Alix oil is in focus, up by about 2 . This is a vessel taking oil from libya over to italy and greece. Leftthe first time it has the port in a long time. Of oil781,000 barrels and libya has boosted production within 70 and this encompasses the bears part of what is happening in the oil community. The bullish part is the weaker dollar into the inventory numbers we will get later today. What is the shortterm trade . We could get some bullish numbers if the api is any indication. What is your trade . I think everybody was surprised with how much of a draw we saw in the api data. This could be the third week in a row. The market yesterday had interesting price action as the october contracts fell off the border and september moved higher and on the heels of the api, we heard we saw a move through certain levels and could to and could set up a run 46 in the near term. Our customers are very flexible and shortterm we are bullish we have a longterm bearish of view. Opec the map shows me that keeps reducing nigeria and libya is picking back up. Libya picked up and nigeria is trailing. We are looking at the opec meeting next week. The peopleme with prepare for the fed meeting, take risk off the table. There is a risk. We do not believe there will be a freeze but this is a trade to buy the rumor and sell the fact. Jonathan the opening bell is coming up. Futures are marginally positive and equities are off the high in london and frankfurt. The boj makes a move and the yen strengthens. The open is under four minutes away. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Jonathan from new york city. This is bloomberg. Counting you down to the market open. Lets get you up to speed. Futures former up. 4 on the s p 500 and the dow. The ftses trading higher in london. The dax is up 62. You heard the bell ringing in new york. The yen is stronger. Move, yields the curve control, they call it. Getting the fx market to go the way you wanted and a weaker yen is not what they have today. Doing what itr has done all year stable. Some people would call it boring. Ields are up one basis point 20 seconds into the cash open. Lets go to alix steel. Alix a similar story to what we saw in europe. A little bit of risk on. Up seven points, this is exactly the level where we were at thursdays close last week. So it highlights the lack of move that we have seen recently despite the 1 move we saw in the beginning of last week. Markets are in a tight range. Individual names to watch out for microsoft leading the pack with a 40 million stock buyback and raising the quarterly dividend. Fedex earnings coming in better than estimated. Going to set a record and raise prices again. Also they said the ground shipping rose as well. Tend to be thought of as a good proxy for the economy. Check out adobe, also up. Andgrowth in Digital Media 30 rise in the cloud booking. And viacom, the breaking news in 20 minutes, cutting the dividend to preserve cash amid falling revenue and the interim ceo will be leaving the company. Fire come saying they will have debt market at some point. The chart of the day is, what matters more, the said or the boj . This is the dollaryen with a correlation and a 10 year yield. This is versus the japanese yield curve. And this is the correlation. , andare moving in lockstep in terms of the u. S. Yield and dollaryen, the correlation is. 5 versus the japanese curve which is. 27. We talked all week about the boj but in actuality what moves the yen is the fed and that moves us ahead to what we see from janet yellen at 2 00 p. M. Today. In thelets bring dollaryen is about the front and of the treasury curve. It is all about what happens at the front end with rates here. Is that the story for the rest of the year . Not necessarily. I think if the dollaryen moves below key levels and stays there then you have the basis for activities that effectively it will be a selffulfilling cycle. So i think the payment story is still part of the angle. As opposed to the boj rates. Day guidethe decision for you, what are you telling clients right now . There have been several months callrways, as some people it. What are you expecting . Most people would say, the truly exceptional with a 12 probability of a 25 b hike today , it would be truly exceptional for the fed to go ahead and tighten. The fed doesnt actually have to have probability that or usual ranges may be up 60 70 . They could surprise the market and that would not be a bad ring. The market is being babysat, effectively. That 12 is a little low for me. So what kind of rate turns the dollar higher . Above 1 , that would take the u. S. Into the realm of the high yield and it would be sufficient to propel us to new highs with broader indicators. I would say at least 5 . But if it revises lower and we get Economic Projections , longerterml rate it is still lower for longer . Alan what you have here is a cycle where the market will quickly switch. Quicklyet will very switch towards the u. S. Election. The u. S. Election will be a big deal and we will focus a lot on fiscal policy and on what it means for Monetary Policy. And it will be complementary to multiple fed rate hikes in 2017 were you have the story for a stronger dollar in 2017. David we are all trying to figure out what the fed will do in coming months and years. Do currently markets give you a better read . They are very liquid. Alan to the point that the w. A. R. P market i know that our money market guys are 40 basis points, that tends to give you lower basis points them the bloomberg indicator. Fed finds werer pointing towards 12 probability, so somewhat lower than what you guys have. But i dont think that changes. Alix it is still far from 50 . [laughter] and i dont think before and Exchange Market has any different read. Alix what is the risk that inflation would wind picking up and Growth Continues to slow . What is the play out in that scenario . Alan inflation rising and growth slowing . So a stagflation every story, in a way. Look, i think the inflation side , clearly it would be seen as a lagging indicator to some extent and the fed would do a balancing act to say, is growth slowing enough so that the inflation rise is temporary . If it is seen is temporary then you dont respond but if on the other hand, you think it is becoming entrenched in Inflation Expectations, then the fed has to respond. And that is the kind of scenario when you get into a recession playing out 12 months later. David we had Alan Greenspan on this program last month and he was worried about exactly this scenario. He said stagflation is coming and he said when the money supply is growing faster than productivity is increasing, you will have inflation and he doesnt see growth coming. Is that an outlier view . Alan i think a stagflation is an outlier view at this point. How you get to that if inflation is higher than expected then it is not that hard to get to stagflation because growth is, at best, running at 2 . So you are on the cusp where growth could be week. So the surprise has to come from the inflation side. Will ask him because Alan Greenspan will be on the program tomorrow. Question to you, alan ruskin, is as follows. Did a tweet storm. Whyeasons why they fed the fed shouldnt hike. And one is that if we go into a recession they will not have the tools to respond. Is that where the fed is at . We wont get to 250 basis points . Arguei think you could this two ways. The alternative argument is that we need to raise rates so we can cut them at some point. That doesnt work too well if while you are raising rates you are driving yourself into a recession but if the economy is Strong Enough, you are giving yourself some latitude to cut rates. Now, regardless of that it is probably true that the fed cannot raise rates enough in the growthnough to offset slowdown. So we will be back into the unorthodox policy realm if we do move into a recession. It will not be a rate cutting story. Up, who arep this you watching today . Alan you probably want the e. M. And Commodity Prices they would be responses but if the fed does as probability suggests, i think it will be a down response and they will get on to bigger things. Mondays debate is big. David great having you here this morning, alan ruskin, thank you so much for being here. Dont miss our special coverage of the fed decision starting today at 1 00 p. M. Eastern. Coming up, john stumpf was grilled yesterday in washington demanding to pay back money. At how hard is it for banks to claw back money . This is bloomberg. Alix i am alix steel here in the hewlettpackard enterprise greenroom. Coming up, the european commissioner for competition. Do not miss that interview. Jonathan from new york city, this is bloomberg. Stocks are positive in new york. The s p 500 up nine points. Nasdaq wherehe Abigail Doolittle is standing by with the movers. Abigail after yesterdays biotech rally, we have remnants of the rally with trading higher here on the open. This, after gaining 13 yesterday. The fuel for that rally yesterday was monday. There was a lot of talk on the street that it will be taken out for its cancer drug. The shares were upgraded to an outperform from a neutral. Also higher on the open is Adobe Systems. This after they beat fiscal thirdquarter estimates. It looks like the companys cloudbased substance products are driving me strength. Lots of analysts have raised price targets and on average, most analysts see more than 10 upside potential for shares of Adobe Systems. David thank you. Wells fargo shares are down today after john stumpf testified in front of the Congress Banking committee. Let a chorus of criticism from lawmakers, and she encouraged him to resign in a heated exchange. Since this massive, years long scam came to light, you have said repeatedly i am accountable. Have you resigned . No i have not. Nickel you returned one of any money taken during that scam . I i will take that as a no. Im not asking about regional managers. I am asking about people who lead the Community Banking decision who oversaw the fraud or the compliance decision to make sure that the bank complied with the law. Did you fire any of those people . Evidently, your definition of accountable is to push the blame to low level employees who dont have the money for a fancy pr firm to defend themselves. Less leadership. Do you know how much the value of your stock went up while this scam was going on . It is all in the public filing. It is, because i looked it up. The share price during this time went up by about 30 which comes million in than 200 gains, all for you, personally. You should resign. You should get back the money you took wally the scam was going on. Should be criminally investigated by both the department of justice and the securities and exchange commission. You squeeze your employees to the breaking point so they would cheat customers and you could drive up the value of your stock , and put hundreds of millions of dollars in your own pocket. And when it all blew up, you kept your job. You kept your multimillion dollar bonuses. And you and on television to blame thousands of 12 and hour employees who were just trying to meet cross sale quotas that made you rich. Onid now, for the latest wells fargo we are joined by laura keller. And by caleb melby. You, laura. With that was a brutal exchange. Is that a fair portrayal of yesterday . As you said, a Real Exchange there between john stumpf and elizabeth warren. This wasnt the only exchange, there were many from democrats across the aisle and really, what they hit on every time, every question was really about accountability. They were asking have you fired anyone . Have you clawed back . Are you going to do that . Said the boarde will decide those things. Puzzle for me the in that point. There is still a lot of questions about governance. He is chairman and ceo. He is the chairman on the board. And for Board Directors that ive sat in on the meetings, the chairman has a powerful position. This isnt just asking the board what he wants to do. Is he showing he will take a leadership position on the board . No. A definitively. It was asked in the hearing. It was pointed out that he is the member of the board and you lead the board. He waffled on those things but essentially he deferred to that each time. He said he does not want to prejudice the process they will go through. Thed specifically on clawback issue, we heard a little bit of that they are. In reading the Bloomberg News reporting, i learned something i didnt know. Happens if there has to be a restatement of the financials, where did they get that idea . Caleb the idea generally is to go back into the egg accounts and brokerage accounts and get stocks and bonuses that were invested years ago it almost always involves a messy legal battle. So they save that for the worst possible scenarios. And when you look at wells fargo thatack policy, they save for what they consider to be the worst scenario, which is when they have to tell shareholders, sorry. We gave you materially wrong financial information. David it is hard to square that with statements we hear from john stumpf and other ceos that the most important thing is the reputation and integrity. And then they say no, we wont give the money back unless it is key to the bottom line there is a tension there, isnt there . There is. Real moral outrage from the senators rather than the policies and chains of accountabilities and governance that the bank has set up to deal with these things. David so what happens next for wells fargo . Now we go on . A houseo, we have hearing coming up as well and interviews with four other executives. This will continue to go on and perhaps maybe he will be better prepared . Theysts we talked to said questions were already out there and he should have had answers. He should have known that these are the things that people want answers on. And maybe you could have delivered more believability on the idea that he is taking care of it. David so it is not over yet. Ofnk you very much to tale melby and laura keller, bloomberg spanking and wall street reporter. Jonathan coming up at the top of the hour, bloomberg markets. , what isinn joins us coming up on the show . At the hotele live where we are putting the spotlight on economies in africa. Breen together leaders from africa and private enterprise in the u. S. Really an amazing summit and will really speaking to some of the leaders. Including jay ireland. Talking about how he intends to grow the business in africa and the difficulties and financing. Be speakingalso a giant conglomerate in africa. And also the president of her wanda. Jonathan looking forward to the program. Alix make sure to tune in to dday coverage of the Rate Decision beginning at 1 00 play. M. In new york. This is bloomberg. Alix in a few hours well get the Federal Reserve Rate Decision. No rate hike is expected that Janet Yellens remarks could shed light on what the central bank may do. Joining us for more is Erik Schatzker joining us from washington. Lets talk about the possibility the dovish talk rhetoric over the last few weeks has been unbelievable and little. It were cominutes of the last meetings show hardening divisions among fed officials. Clearly the majority prepared to ant that there was increasingly vocal group that advocated for a rate increase back in july. And that was before we saw the strong july job numbers. Out, iten, as you point has become increasingly clear who the people in the second camp are. Esther georgiou has voted three times this year to raise rates. Vote on those occasions. We heard from Eric Rosengren and loretto mester and maybe even bill dudley might be inclined to raise rates. Have seen disappointing economic reports since august so who knows. We dont know what the fed will do but perhaps the most interesting outcome of todays vote would be a decision not to raise rates, no sign as to what the fed might do in december but a divided said, 73 or 64 vote raises huge questions and introduces massive uncertainty for policy Going Forward and it raises questions about the leadership that janet is bringing to the Federal Reserve. Alix it also brings in questions to the statement, that perhaps there will be more dovish talk in the statement. And that of verbiage is key. Erik yes. Important will be Janet Yellens introductory remarks at the press conference which begins at 2 30. If the fed doesnt move, she will have a lot of explaining to do. She will have to outline what has changed since last december when the fed saw 100 basis points of said rate increases this year. So far, not one. Alix that was Erik Schatzker, joining us. Be sure to tune into our special coverage beginning at 1 00 p. M. Eastern. We need a countdown clock. David tomorrow we will have Alan Greenspan and the black rock chairman. To look forward to equities are positive across the board. And in europe across the board. , the yen is stronger. The dollaryen is coming off session lows. Approaching a Federal Reserve decision and full coverage right here. This is bloomberg. Vonnie it is 10 00 a. M. In new york. I am at the plaza hotel. Mark welcome to bloomberg markets. This is bloomberg. Mark we are going to take you from washington to malan. Theill get stories out of wall street, uk and africa in the next hour. Vonnie the reason im at the plaza hotel is the u. S. Africa business for him. We will be speaking with leaders countries in africa. A wonderful spotlight on partnership and it is being run in conjunction with the u. S. Commerce department. We will hopefully be speaking with the president of rwanda. Decision day for the Federal Reserve, the hike chance
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