Transcripts For BLOOMBERG Bloomberg Surveillance 20170511

Keene in london. Tom not the chaos of yesterday. Still overnight the news flows. Historic. Stephanie baker will join us. Weve got a lot of good, thoughtful op eds, including one by Mike Bloomberg that will give some color to the emotion going on in the states. Markets are quite. Quiet. Governor carney has very stable markets. Guy he does. There are rumors doing the rounds that maybe we have got not one but two people voting for a rate hike. Tom dissenters. Guy well talk about that. Lets look at the volatility numbers. This is what were looking at. 79, alook at brent, 50. Lift in oil. Euro, little bit weaker dollar strength. Guy weve got some numbers coming out from the e. U. Inflation forecast. 2018, the headline rate. The ecbs target is at or near 2 . Its raising is 2017 euro area gdp forecast saying risks are more balance. Mirroring what we are getting from mariota draghi. He was riled in the netherlands. Next meetingin the to get to a much more neutral set of language. Tom certainly we are hearing this from our guests of the Economic Data detached from political gloom and uncertainty. Guy i dont know. If you take a look at the political gloom, has and that dissipates it a bit . With mr. Macron. People are talking about a more optimistic outlook. Tom very quickly, i want to look at sterling. Down we go. The blue circle of brexit. A 40 year perspective. Weak, weak sterling with a little bit of a bounce recently. Guy lets talk about what is happening with the u. K. Consumer. This is basically spending power and savings. This is savings line, which is collapsing in the u. K. And this is real income which has come down quite sharply. On some levels you have an inflation problem with some may take more seriously than others. Others will be concerned about the squeeze happening. It is a big part of the u. K. Economy and british workers are starting to feel it. Lets get to the bloomberg first word update. Republicans have closed ranks behind President Trump after his dismissal of fbi director james comey, rejecting calls for a special prosecutor to investigate russia. Meanwhile, attorney general Jeff Sessions and his deputies spent most of wednesday interview candidates to hold the job. Barclays ceo jeff saly has admitted his involvement in trying to root out a whistleblower was a mistake. His comments came after 84 of voters back to his reelection of the banks agm yesterday versus 99 last year. Staley spoke to erik schatzker. Some things going on an front of the chief executive officer of a bank with the complexity of barclays. There are decisions made every single day. A colleagueprotect who was a vulnerable from a malicious attack. But i should not have gotten involved as i did. That was a mistake. Fed president has called on his college to make three more hikes this year and shrink the Balance Sheet to avoid overheating the economy. He still expects the bumper growth. E opposition, the labour partys preelection pledges have been leaked. They include plans to re nationalize railways and Energy Companies. A spokesperson says they do not comment on leaks, and the manifesto will be finalized at a meeting on thursday. The European Commission has sent a letter to the u. S. Government regarding a possible ban of Electronic Devices on flights. They may announce a laptop ban on european flights this week. German business weekly says the European Commission expects an announcement in the coming days. Banned certain devices on flights originating from 10 middle east airports. Global news 24 hours a day powered by 2600 journalists in 120 countries. This is bloomberg. Tom that is outrageous. I am set up to watch 8 episodes of house was london. Ho usewives of london. Guy that is the reason enough for laptopa ban. It is being reported by the german presence thing something that could come in the next few days. Do you work on the plane . Tom i read. Its the only quiet time to read. Guy everybody is getting involved. I suspect the bloomberg audience and our guests are going to take its laptops and tablets. We use laptops tom it is little confusing. The thank of for finland expected to raise inflation forecast as the bank of england expected to raise inflation forecasts. The u. K. And brexit were enough to prevent the boe from increasing Interest Rates. What will happen with Michael Saunders . We are down at the bank of england ha l talk about forbes and saunde. Are we expecting unanimous decision today . Nejra you have hit the nail on the head. No change the policy expected. We are expecting an upgrade to the inflation forecast of 2017, lowersg the boe to growth projections by the big question is are we going to get more than one dissenter . Well probably get that one dissenter. As she broke ranks with her colleagues in march. Inflation is already above the boes target at 2. 3 . The question is, are we going to get someone else, perhaps Michael Saunders who has hinted he is moving towards her point of use as she dissented. Mccafferty has been counted on in the past provides that dissent. The consensus is for that vote to be 71. Why might we not get more than one dissenter . Yes, inflation is above target but how much of that is down to weaker sterling . Of course, we have had sterling rally so far this year. Its also that First Quarter gdp print, 0. 3 , worst in the year. The uncertainty of the u. K. Election and the twists and turns of brexit ahead. Guy looking forward to your coverage throughout the day. Joining us from outside the bank. Well bring your coverage of the bank policy decision, followed by Governor Carneys press conference 30 minutes later. You can follow the action on bloomberg. Select the bank event. Tom our guest is with blackrock as their chief investment strategist. Also joining us as well, richard jeffrey. Gentlemen, is there good or bad and inflation . We have two richards. Richard the i and richard the ii. Richard of casanov. That is so medieval. Bad inflationand for the United Kingdom . The issue fornk the bank of england at the moment is that inflation can create more inflation. Inflation to persist in the economy, you make the policy response, you tend to lose some control. That is the risk at the moment. There will be secondround effects coming through over the next 69 months. Tom richard the blackrock . Its above yorkshire. Richard we look at the rise of u. K. Inflation is being mainly transitory. A function of fall weve seen enough pound. The central bank has to be wary that a temporary rise in inflation turns into something more longlasting. All the evidence we are looking at right now tells us of a transitory move higher in inflation. Historic not just the data is getting softer but the forwardlooking data is starting to soften as well. We see that in survey data and we also see it in the big data and signals around consumer and corporate conference, which have all been gradually weakening over recent months and indicating growth over the next 12 months only just above 1 . That is an environment to which the bank of england is likely to be on hold not just for now but for some time. The i want to take us to work function on the bloomberg. Im going to switch this over to the United Kingdom. Were not pricing i in a rate hike until the back end of 20182019. Tom i did not know that. Guy 21 basis points. Run . E market wrong. J. Market Expectations are inaccurate to be frank. Ignore that, basically. I think you can ignore that. That markers to not see a rate increase coming through for the perceivable future. But that could turn on a sixpence. Pooree a couple of Inflation Numbers and those expectations can move forward. Id be wary of precisely taking that timing. Moreard t. were confident. Of course, things can change. In an environment of sustained anbal expansion, in environment where the u. K. Economy is seeing some weakness relative to what is going on in the rest of the world, we think that the most reasonable assumption is that the bank of england is likely to be on hold for some time. I think the future path will be highly data dependent but given what we can see today, i think an expectation of stable policy is the right one. Guy we will wrap it up and come back with plenty more to discuss, what is happening with the fed. Theyre going to stick around. Lets get the Bloomberg Business flash. Will gru chief executive not receive a bonus in the wake of the accounting scandal at the companys italian business. Its tried to rebuild confidence after the it regulators irregularities soft shares plunge saw shares plunge. You need to set an example. I signaled to the board in january when we announced the problems in italy, i felt it would be inappropriate to take a bonus if one was due. That is what you can see in todays announcement. Es has posted its first decline in five years as the low on economiesghed and terrorist attacks discourage people from traveling. Down 70 . The company also highlighted the strong dollar and trumps laptop ban as challenges. The u. S. May extend the ban to european flights this week. Incomeagricoles net almost quadruple thanks to our recovering european economy and surging fees. It also saw trading revenue jumped 17 with four and fixedincome, and creditrating. Credit trading. Snapchat missed. Earnings and user estimates. As the app faces a growing imitation from facebook. The ceo says he is comfortable with people copying his product. Deliver value to creativity. The bottom line is if you want to be a Creative Company you have got to get comfortable with and enjoy the fact that people are going to copy if you make great stuff. That is the Bloomberg Business flash. Tom it has been an extraordinary 48 hours in washington. Guy johnson and i yesterday, and not breaking and people were thinking about the future of politics and government and the United States of america. My major message this morning is the story something continues. Stephanie baker and kevin have been on this story 24 7. Stephanie enjoyed the distance across the pond. Suggest whatwould stuck out last night was a Washington Post announcement no surprise the Deputy Attorney aboutl ithought resigning. How close are we to the Deputy Attorney general resigning over these matters . I dont think we should be speculating about that. I agree. There were many people who were surprised there were not more resignations yesterday. And the timing of this remains very unclear why trump decided to move at this particular juncture. The optics of his meeting yesterday with the Russian Foreign minister and the Russian Ambassador is very unusual to say the least. Rov know, remember sergey lav has not been inside the white house since 2013, before the war in ukraine started. The Obama Administration had kept him at a distance, so the optics of President Trump welcoming the Russian Foreign minister in the ambassador into the white house within hours of him firing comey is very troubling. Guy i want to take you back to the issue of timing and the memo that we has been used to justify what has happened here and how thismemo was, fits in with process. How are we beginning to understand how the lines of communication work, how that memo was generated and under whose kind of offices that memo was generated . Stephanie Rod Rosenstein wrote the memo. There were several congressmen and senators that questioned what was in it and that it looked a bit rushed. Mainly dianne feinstein. There is an internal investigation into comey actions arounds the Hillary Clinton email investigation. So, the question that many people are asking now is why didnt trump wait in till the investigation concluded so he had some sort of political cover tfor comeys firing . As i pointed out yesterday, trump and attorney general jeff meysons have praised co actions on that investigation repeatedly. Trump as recently as last week. So, you know, there are questions. Not many people are buying the fact that trump decided to fire comey over the clinton email investigation. Tom i want to turn to the senate. Ing up the oped in the Washington Post. A whole series of thoughts on what people with some experience are saying about that. Well identify their political persuasion. I would suggest that mr. Deon os isthe Washington Post someone has been a little bit more liberal. You dont have it. Into mitch mcconnell. Into the Senate Majority leader and he said when are you going to act . Stephanie there is a continuing investigation from the house and the Senate Intelligence committee. The problem is they are under resourced. However, it is pushing ahead. The Senate Intelligence committee subpoenaed records from former National Security advisor mike flint whynn who red to provide documentation. Many pushing ahead but people are pointed out that compared to the congressional investigation into benghazi, there are very under resourced and they need the fbi to provide them with all sorts of backup and documentation for them to proceed. Tom stephanie baker, thank you so much. Guy, this is amazing. We have to worry about the bank of england, the ecb, stuff going on in finance and yet there is this whole backgdrop. This will delay any and all legislation. Guy that is the point. I have been surprised that the markets have been as they have. That takes you back to whats in the prcice in terms of expectations. Message on thes stimulus. Why he thinks the time has not come to think about an exit. An interesting day in the netherlands yesterday for this man. This is bloomberg. [ guy 23 minutes past the hour. Mario draghi. Though i think you probably could apply this to a number of leaders right now. Draghis message yesterday he had an interesting day in front of the dutch parliament. He said the time had not yet come for officials to start thinking about an exit. Nevertheless, it is too early to declare success. Underlying inflation pressures continue to remain and have yet to show a convincing upward trend. The domestic drivers of inflation, meaning wages, are not yet responded to the recovery. Guy i suspect mario draghi was looking for the exit from the building yesterday. Our guests still with us. Is he going to change the light which . The language . T. there is strong motivation not to change. The Economic Data are certainly getting better. We are seeing that and the soft and the hard data. The inflation data which keeps the ecb on the sidelines for now, inflation meaning well importantly more Inflation Expectations very subdued. The ecb will be on hold for a while. Guy they presented him with a tulip. Just to make the point the bubbles can be blown. Is there a danger that the ecb is focusing too much on inflation . J. i think they have made huge policy mistakes. Were beginning to come to the conclusion that unconventional Monetary Policy has not achieved to achieve. Out i think the United States Federal Reserve is now beginning to do the right thing. I think in raising Interest Rates, economies will begin to normalize because the one thing, the one feature of western economies, all advanced economies which remains a huge problem, is a lack of productivity growth. The lack of productivity growth is at the core of the remaining problems we have. There is a challenge to companies coming through in the u. K. There is a challenge to the American Economy coming through from higher Monetary Policy. How do those economies react . That will be a stimulus to productivity growth and a stimulus to capital investment. We will see more normalization. But it is a problem for mario draghi. The most valuable tulip bulb was eated by mistake. Eaten by mistake. It was mistaken for an onion. Guy up next, well be talking about barclays. Guy you are watching bloomberg surveillance. Im in london and tom keene has the data we need. Tom is the macron honeymoon over . Guy i think it was over immediately. It extrapolated into the National Assembly vote. Tom on this may, what is at the 10th or 11th . Data check. The vix was 9, a little bit higher but really quite something. The one that really attracted this morning is dollaryen, 114. Macron. En since weve seen safe haven deteriorate overall. Guy lets talk about what is happening with the u. K. Im going to go to my eco screen. Tom brent crude elevated. Guy its set up as defaulting to france. Industrial production data coming from the u. K. 0. 5 . The 2. 8 number last time around, that aint good. The pound is a little softer but it has been a very tight range. If we see saunders go with four waiting for news out about macron. Lets get to the first word news update. Senate republicans have closed ranks behind the president after his dismissal of james comey, rejecting calls for a special prosecutor to investigate russias meddling in the election. Attorney general Jeff Sessions says that theey are interviewing candidates to hold the job. Boston fed president has called on his colleagues to make three more hikes this year and to start shaking the Balance Sheet after the next race to avoid overheating economy. Still expects above potential growth for the next. 12 months which will continue to bring on employment down that would represent an unsustainable overshooting pace, he says. To bank of england is likely revise higher its inflation outlook when it were delivers its review in a few hours. Analysts say the market will be more thano whether one of Voting Member will call for a rate increase. Coverage atyou full 12 p. M. London time followed by mark carneys press conference 30 minutes later. And sticking in the u. K. , the Opposition Labour Party preelection pledges have been leaked. Re include plans to nationalize railways and Energy Companies and the postal service. A spokesperson says they do not comment on leaks. The manifesto will be finalized at a meeting on thursday. And the u. S. May announce a laptop ban on european flights. The german business weekly says the European Commission expects an announcement in the coming days. In march u. S. Officials banned certain Electronic Devices on flights originating from 10 middle eastern air ports. This is bloomberg. Guy . Tom . Manufacturing data has led to the pound softening. 129. 18. The low 129. 05. Its not as if we are seeing a big move to the downside. We will wait and see what the bank has to say later on. 90872. These are not football scores. Has apologized to shareholders. Schatzker, hek admitted he made a mistake when he became involved. I respect the regulatory construct in the United Kingdom. I think the bank of and what, thinka, the fca, i executives should be held accountable. I think the Senior Management is a very important piece of right relation in the United Kingdom. You know, since ive got here, one of my goals was to be very transparent with regulators. In many ways, we are partners in trying to avoid the next financial crisis. A very constructive dialogue between barclays and the bank of england and the pra and the fca. That is very important to us. I respect the Regulatory Framework here. And lets see how this all plays out. The unthinkable happens and you are deemed unfit to run barclays, does the bank have a Succession Plan . Ive got the full support of the board. The shareholder vote today. Lets let it run its course. Erik what i cant understand and i speak for other people is what would motivate you to exercise bad judgment . Know, there are so many things going on in front of the chief executive officer of a bank with the complexity of barclays. There are decisions taken everything of a. Every single day. I thought i was trying to protect a colleague who was a vulnerable from a malicious attack. But i should not have gotten involved as i did in that was a mistake. Erik lets put it this way. Your friends, your colleagues know jes staley to be passionate but eventempered. Himselfson who prides on a high ethical standard and a High Standard of conduct, is that same jes staley also a person who is call it either a little bit vindictive, a little at times . Fula at no. Erik to what degree do you worry that your actions put a chill on the very people you need to come forward . Why would anybody pick up the phone and call the whistleblower line if there was not a guarantee of anonymity. Whistleblower rules are incredibly important for maintaining and regulating control of banks. Very important to people feel comfortable to contact the bank or the regulators with full protection to talk about conduct issues at barclays. Do everything we can to make sure, we have a very robust whistleblowing program. We are going to do everything we can to maintain the scale and depth of that program. All signs are that that there has been no change in eirik people are using it . You put safeguards in place. Have you put safeguards in place to make sure people feel comfortable . I dont want to get into the details of the process. Whistleblowing is very important to this bank. We respect it. Staley. We have seen that from a lot of bankers, stepping lightly through the discourse. Erik, where does barclays fit in in the next five years . Is it a too big to fail bank . In financiallyit into the United Kingdom Banking System . Erik in the United Kingdom Banking System, tom, it is a big bank. It has market share just like hsbc and lloyds. There is something more of a banking oligopoly here than there is in the United States. Is it too big to fail. Hard to say. If bank of america isnt too big to fail. There are those who do think it is too big to fail. Theyre trying to enter re introduce glasssteagall back in the United States. Barclays business in the u. S. Is the old lehman business. Tom kelly about his culture of london banking. Is he welcomed here tell me . Has he been greeted by the berkeley staff collegially . T would seem that way. What he succeeded in doing is taking a bank that had serious problem 18 months ago restructuring and putting most of those problems behind the bank. He got rid of some businesses and european he is selling down africa, he cut costs, made the Balance Sheet look better. But thats just to get to this point. The bigger question confronting barclays and jes staley is how do you compete with jpmorgan and Goldman Sachs . Tom this is the key idea. Guy why is he in Investment Banking . In all seriousness, if you value the business, you trade on a higher metric then you do erik right. He would argue you need to be diversified because not all cycles and banking work in. Concert so, at the time, say the u. K. Consumer business might be weak, the Investment Banking business in the United States might be strong. At the time the investment perhapsbusinesses weak, the credit card business in germany or the payments business might be strong. He makes this argument for having a universal bank for the reasons you hear from other people the diversification lends itself to stability. Whereas if youre just a single silo player, you are subject to more of the cyclical vagaries and volatility you get in a civil business. Guy but the regulatory stuff is a little different. Erik the u. K. Regulators have addressed that with the ring fencing. That is different than the United States. That would be a forcible separation of wholesale banking from retail banking. Very different. Staley is hugely supportive of the ring fencing option not because he loves it but because it is, yes, because it makes the Banking System saver, but because in his mind, it is a better alternative to what they are talking about doing in the white house. Guy thank you very much, indeed. Erik schatzker. Richard jefferies and Richard Turnhill will be back in a moment. We need to talk about what is going on with it fed. The boston fed president calling for more hikes. Two to come . Tom he is on the shortlist for the fbi. Guy who isnt . This is bloomberg. In new york. You are watching bloomberg surveillance. The boston fed president has called on his colleagues to make three more hikes this year and to start tracking the Balance Sheet after the next raise to avoid overheating economy. Hawekkish. He expects about potential growth in the next 12 months that will bring unemployment down. He says that would represent an unsustainable overshooting pace , i. E. , the u. S. Economy is going about potential and they already have full employment. Lets get on with it folks. Fedard, turnhill, the seems to be on rails. The market does not believe it yet. The chart on the u. S. Two year started indicate that market is beginning to get there. The market still skeptical, though. Are going to you get two more hikes this year. What is more important is to take a longterm view. Will they hike in june . That looks the near certainty. It tells you in a state of economic expansion in the u. S. , level which the current of Interest Rates is inconsistent with that expansion and we will get gradual rate hikes. Tom richard jefferies, lets would conversation he suggest Richard Timberlake of the georgia that each and every central bank is expost. They wait to see the data to force them to become restrictive. Are we still in alan nelson is world . Richard j. if you look at the history over 30 years, you just see a litany of central bank errors. Errors that led to the depth of the financial crisis. You can go further back. I do not think there is any reason to believe that Central Banks are getting it right now. Ntz way out in front. Is he right in that hes trying to get out in front of data to come . I think he is right. The policy normalization process should have started much earlier in the cycle. Then we mightve had a more normal cycle. To something i said earlier it is all about productivity. It is not about headline gdp growth. It is all about productivity. That is the issue that Central Banks have a conundrum around. Growth is exceptionally low and has been throughout the past five years. Now, the issue here is that either centralbank policy has failed, ok, in terms of trying to revive productivity growth, or simply the wrong policy. I go for the latter. I think it is the wrong policy. Richard t. i do not think it is the Central Banks role to raise productivity. Guy i do not see any mandate. T. despite all the talk a year ago, what are we seeing . A self sustained economic suspension not just in the u. S. Self sustained economic expansion. Above trend growth, and rising wages. Yes, a low growth environment in part because of that low productivity rate, but self sustained expansion. And that is environment in which we will see the fed gradually raise Interest Rates, but one in which the end of that cycle is a long way in the future. We dont see it on the investment horizon. Despite the fact that we are 8 years into the cycle, investors are nervous that this is the wrong time to invest because we are 8 years in. The third longest cycle in history. If you look at it in terms of where we are in terms of growth, where we are in terms of productivity, actually, we are midcycle right now. There is no evidence we are late cycle. Slack still in the economy. Basis, look on a global quite a lot of evidence this is a cycle that could go on for many years to come. Richard j. it can. But for that to happen, productivity growth has to pick up. It is a selflimiting feature. You say theres slack. Markets are tight. Deutsche Bank publishing yesterday that Deutsche Banks optimism of a 3 American Economy. Now trumpian but getting there. A wide dispersion of opinions. Guy then we come back to comey. The ability to enact tax reform, does that matter . Or have the animal spirits being unleashed enough to take us where to we need to where we need to be . Thank you very much, indeed, for coming to see us. Were going to be speaking exclusively to charles evans, the bank of chicago president. You can catch up with that interview at 3 30 london time. U. S could announce it is extending a laptop ban to flights from europe. Were going to talk about what we know and dont know and what the impact of this could be. I suspect many of you expect spent a great deal of time on transatlantic flights. This is over. This is bloomberg. Good morning, everyone. Bloomberg surveillance. It has been in a survey 48 hours. We will speak to Mohamed Elerian two hours from now. Linkage between economics and the politics of the moment. Posted itsemirates first decline in annual profit for five years as the low oil price weighed on economies and terrorist attacks discourage people from. Traveling 70 ported net income down the company also mentioned the strong dollar and trumps laptop ban as challenges. Incomeagricoles net almost quadruple in the First Quarter thanks to a recovering european economy. It also saw trading revenue jumped 17 in a period with boy and activity in fixed income, foreignexchange and credit trading. Unicredit has reported firstquarter profit exceeding estimates following a 13 billion euro share sale. Net income more than doubled to 907 million euros. Thats the Bloomberg Business flash. Guy we have just been talking about productivity. The u. S. Is considering a ban on the use of laptops out of europe. The European Commission has written a letter seeking further information. Youre including tablets in hre, ereaders. 10ng carried on planes on airports across the middle east. , w talke about productivity. This is a productivity issue. Many people get on those plane. They use bloomberg. Fly get on lanplanes and across the atlantic. Fromi had a conversation Harvard University and he said logistics will be our downfall. Linkages of all our information, the assumption of the movement that we have within society is just something we take for granted. Heres one of the constraints. This is a huge deal for blackrock. A lot of your people, your younger people are working there tails off on these flights. A big deal for blackrock. Youve seen productivity growth fall over recent years. Part of that has been around increased regulation which is constraining growth. We have some hope to see supplyside refomr. Rm. Low growthare in a environment, one that we think is self sustained but very low growth. That keeps Central Banks very cautious. I think it is important to highlight a low growth environment is not necessarily one which is a poor one for investment. View, lowe the long growth environment, you are being paid to invest in risk assets, equities and european equities buyom would you airlines . Richard the areas that we prefer is financials in the u. S. Technology is where we see tremendous earnings growth. About theing more disruption around the technology sector. Some of the more cyclical sectors. To see has been great you. Thank you very much for seeing us at bloomberg. Iag down a touch this morning. The managing director and chief investment strategist at Blackrock Investment institute. Bloomberg surveillance continues. Two more hours to come. Great guests coming up. We will talk about mario draghi, the bank of england and talk about what is happening in washington. This is bloomberg. Tom after the tuesday afternoon massacre, call it the wednesday putin photo opportunity. Invited, American Press not. Could the Deputy Attorney general resign . Governor carney has an inflation problem. Election,and the snap good morning, everyone. Im tom in london. Guy johnson is in for francine lacqua. The bank of england, is it humdrum . As a memberecides of the Monetary Policy committee tom hes american . Guy we let them in. We are thinking about the immigration policy. Tom we saw sterling move a little bit. Guy a little bit. Lets get it bloomberg first word news update. White house is defending the decision to fire fbi director james comey. He committed said atrocities during last years investigation of Hillary Clinton z males. Senate emails. The Senate Republicans have closed ranks behind the president. North korea may be far from building the missile to hit the u. S. The pentagon says that kim jongil ands regime kim jong uns regime must overcome shortfalls to develop a longrange missile. In the u. K. , british Prime Minister theresa may is making security one of her focal points of the election campaign. That is in addition to the governments promised to me natos spending target of 2 gdp. Im taylor riggs. This is bloomberg. Tom thanks so much. Lets look at equities, bonds, currencies, commodities. The markets have been so dead. Futures, a little bit south. Off somes elevated Inventory Data yesterday. Next screen please. The vix with a nine handle. Oh, the humanity i did a safe haven set. Guy lets take a look at what is happening with the pound. And manufacturing data are shown to be week. We are trending down for the bottom of the week ranges. Draghi got amario little rattled yesterday. Tom im going to go short because guys chart is better than mine today. I never say that to francine. Weaker brexit. Loading the boat on sterling right at the bottom. Lets take you through what my chart is. This is basically the u. K. Consumer being absolutely crushed at the moment. Tom two years back . Guy a couple years back. The consumer getting stressed. That is real earnings. Inflation is elevated. Is that inflation causing what we are seeing at the moment . To your question tom three people on london radio drove off the road looking at that chart. Guy that is a good point to make. Detail, welain in will paint the picture. Professor, good morning. Does the bank have something to worry about here . Should they be doing anything . They should be doing nothing, literally nothing. Time for expansion anymore. We knew there would be volatility in Foreign Exchange markets in particular. They expressed their uncertainty about trump and his relationship with europe. There are too many things going on. The main thing is that the fundamentals of the economy are sound here and in europe. There is no inflationary bias in the economy whatsoever. If the pound goes down, prices go up, it will come the other way. It. Grin and bear that is where all this is leading to. Guy the fed is looking like it. S going to hike the europeans are looking like they are not going to do anything. Europe is back in terms of m a. Volumes are above 25 . 45 , so it looks like we are catching up. People are going to buy a lot in europe. But we are seeing a lot now is that there are a lot more domestic deals happening in europe and in the u. K. , which helps volumes up. Tom that is the tactical spirit. We had wendy carlin. Professor, you are one of our of this strange thing called imperfect information. What is our imperfect information about brexit . No one knows what they are doing. Tom thank you. Now everything has to be on hold until the election. We know absolutely nothing about brexit. May how does Prime Minister or mr. Yogurt mouthing off junker mouthing off, how do they move forward in the bargaining . If you are an economist, it is bargaining, not negotiating. How do they do that with the imperfect information that is overwhelming them . The more reasonable approach is that you give in on one thing that the europeans want. It is the sort of Kitchen Table divorce. Tom i would not know anything about that. Who is he talking to here . Everything at the lawyers at the last day, in this case at the negotiators, you said this is the outcome. A lot of unknowns . And the market hates that. That is probably why the volumes in the u. K. Have come down. It now accounts for less than 20 . There has been a gradual shift downward. Pound does not make any difference. Does not make any difference. Flows. U buy is cash it does not make a difference. Tom it is always surprising, you have no idea what you are going to get. Is a Kitchen Table divorce. That would be a good thing. So farn i just say that the dinner conversations have not been going well. [laughter] , you are going to stick around. Both of you, we will carry on the conversation. Different angles, different subjects. Get the latest from the bank of england. The decision is due at 12 00. We are a couple hours away. Taylor this is bloomberg surveillance. Verizon appears to have won that bidding war for airwaves license holders. Verizon has agreed to buy the company for 3. 1 billion in stock. Shares of Straight Path have soared this year. Nissan is forecasting a drop in earnings for the coming fiscal year. The japanese automaker says operating profit will fall almost 8 due to a strong yen. Sales have risen 33 in six years. Shares of the parent of snapchat are plunging today. Snap added fewer users than expected in the First Quarter. It was the companys first report since going public. Snap has been hurt by facebook, which is copycat it virtually every feature. The involvement to root out a whistleblower was a mistake. The comments came after 84 of voters backed his reelection yesterday. Versus 99 last year. He is still there, is it going to continue . He spoke exclusively to erik schatzker. Whistleblower rules are incredibly important for maintaining and regulating control of banks. It is very important that people feel comfortable to contact the bank or the regulators with full protection to talk about conduct and we dobarclays everything we can to make sure, we have a very robust whistleblowing program. Guy that sounded like it was pretty well scripted, eric. He knows what hes got to say and that hes got to get past this. Are say it and move on, we going to change the culture here, that is what he is trying to indicate. How damaged has he been by this . Eric he would call it a selfinflicted wound. Has been hurt, he has been hurt by jeff staley. This issue is not over. Just because jeff staley was reelected to the board does not mean that the toothpaste is back in the two. Tube. The whistleblower case will hang over his head the next couple prahs while the fca and the investigate and there are u. S. Regulators looking at this as need to decide whether under the senior managers regime, just say really jeff staley remains fit to be the head of a british bank. Guy being treated differently of this is Brian Moynihan and bank of america . Eric no. The reason i say that is because john stumpf was ejected from wells fargo for failing to failingpeople well, to oversee managers who oversaw people who created fake accounts at wells fargo. Right . In order to generate the appearance of growth and get bigger bonuses. That is the antithesis of what is going on at barclays. Jes staleys under investigation because he tried to root out a whistleblower who had raised , acerns about an individual single individual, who jeff staley was trying to hire to be head of a group at barclays. I dont know how the situations could be more different. Staley is being treated differently, but for good reason. Tom thank you so much. Erik schatzker in london. Right now, an important conversation. Ell me about European Banking it has got to consolidate. There are too many banks. Everybody has the ghost in their ago from x numbers of year number of years ago. How do you avoid the disaster of belgian banking . M a has been very slow in banking the last couple years. We have been seeing early signs of this changing from the wellcapitalized decisions, banks have had good return on equity. There have been signs of a return to m a. When you look at the numbers, it has been very quiet for a few years, right . To used to be 400 billion 500 billion of m a and now there is less than 100 billion today. Guy why would you buy a European Bank right now . Tom good question. I think the economy in europe is getting much better. Guy what do you gain from it, though . Technology is changing, things are happening right now. Why do you invest your money in consolidating an industry . What do you gain in terms of the pickup . If you get bigger, you can regulated. You get people are looking at over your shoulders. What are the advantages . Think the banks are in a much better state today than they were a few years back, all of them, they have done such amazing work in terms of strengthening their core business. Tom a lot of the talk and coming up the french elections, you when i were talking about , when we lookon at the banking, is it becoming more angloamerican . Is this the watershed raising of capital or did they become more like the banks of london . I think it is difficult to argue that the american banks have grown in importance over the last four or five years relative to the European Banks. For the European Banks, there is a lot of room to play. There is a call from clients to work on European Banks. That is a tremendous opportunity. Guy we will hold it there. When we come back, we will continue the discussion. Coming up in the next hour, london traffic permitting, Mohamed Elerian will join us. This is bloomberg. 10 21 in london. There it is. There she is. The bank of england. We await the press conference. There are people be filling through the door on the right side of the screen. Our new headquarters is kind of where the camera is right now. That is one of the views we will get. We are going to be close. Spiritually and geographically. Tom there is a bus. Guy wellspotted. There is a conversation we need to have surrounding all of this. Professor, we were discussing the story surrounding m a in europe and the level of activity, Central Banks, what role have they played in sort of animal spirits in europe . The european economy, the soft data are pointing to some strong numbers at the moment. Would you describe that is animal spirits returning . Mario draghi is putting his hand up, is he right . He is right because that is the way it is going and that is the way it should be going. Once they decided this to be a single currency, there should be banking union. The 1990s was that they thought they only needed loose fiscal rules and they did not need the banking union. We obviously need both. The way it is done is not the right way. It is done with excessive reservation by the ecb to the systemic banks of europe. They are trying to make sure there is no shock that will unsettle the Banking System the way it did in 2012, but that restricts the operations of the banks visavis the real economy. They have the regulators questioning every single thing they do. They hesitate before going out. What we need now most of all in europe is investment and financing for investment and that has to come for the Banking System. Union,ave a banking recapitalization of banks, if we know the rules precisely, then banks will have more flexibility to work in their environment and businesses. It on mytrying to find bloomberg, but there is a talking aboutr on the fact that the ecb needs macro prudential tools, as well as complementary policies. The you get a sense that regulation is going to become , that the this point European Banking space is going to become more regulated . It seems there is more commonality now. Have we reached the high watermark or are we going to be seeing it going higher . It is going to have an impact on the business because of the impact it has on the equity markets. There is a very strong correlation between the equity market and m a. The m a cycle follows the equity cycle. If that has an impact on equity markets, m and day down for sure. Tom one final question and i dont want to get you in trouble with the general counsel at ubs, mr. Macron, how long is the honeymoon going to be . Long enough, i think. [laughter] tom three days or three years . Does he have time to work to establish the theory that we all learned over a very short timeframe . Yes, i think he does. Tom he is only going to come back if im in new york. Thank you so much. Thank you. Tom perspective on banking in europe. We are going to continue with a laureate. I promise i will ask him about job creation. That is what he is very, very good at. ,hen we talked to peter or zag maybe we will talk to him about that time he was in the oval office with the russian press. Im kidding. Thats coming up later today on bloomberg. Stay with us. Worldwide from a beautiful london, spectacular london. Surveillance. We will look at washington, but right now we look at the Early Morning in new york city. Maybe we are looking south. In the far distance, in the distance south of new york city, is a washington in turmoil. We will address that. Particularly into our next hour. We say good morning from london. Im tom keene. Guy johnson in for francine lacqua. Right now, you need an update, i need an update. Our first word news. Administrationmp is searching for a replacement for fired fbi director james comey. Several highranking Agency Officials will be interviewed. The shockwaves are still being felt. According to the Washington Post, Deputy Attorney general threatened to resign as the white house described him as the prime mover of the decision to fire james comey. The Senate Intelligence committee is making it clear that the bipartisan investigation into russian influence of the investigation will continue. The panel has subpoenaed documents from michael flynn. Flynn has refused to turn over the papers and is seeking immunity from prosecution. Airlines in europe are bracing for the u. S. Government to expand the ban on laptops and large Electronic Devices being brought on planes. In march, the u. S. A said laptops would not be allowed on flights from 10 airports, including those in the uae, saudi arabia, and turkey because of fears they could be used to hide a bomb. Ultra wealthy investors are facing the prospect of lower returns according to a new report from kkr. The firm warns that returns could fall to 5. 3 percent historically. Kkr says wealthy investors must find new ways to harness complexity. Global news 24 hours per day powered by more than 2600 journalists. This is bloomberg. Guy thank you very much indeed. The bank of england is expected to raise its inflation forecast and lower growth predictions. The new policy prediction is due out in about 90 minutes. They believe the risks posed by brexit will keep the bank of england from raising Interest Rates. Jra is outside the bank. Walk me through what we think the number is going to be. Nejra at the moment, the market , the consensus the economy is for 71. The big question is about the hawkish dissension. No change to policy expected, but a lowering of the growth projection. We could get one dissension and it is most likely most likely to be Kristin Forbes, who program who broke rank earlier. Tom as Governor Carney going to get out the quill and right and inflation letter to the chancellor of the exchequer . Nejra that is a good question, tom. We are at 2. 3 , above target already. Hear about that and the expectations are that he might be a little careful in how he phrases things. He might not want to disrupt the markets. Growth, 0. 3 . Lso subdued wage growth the twists and turns of brexit. The consensus is for no change and perhaps one hawkish dissension. Take a look at mpc data. Those Market Expectations of a rate hike pushed away out until late 2018 from mid2018 back in march. Guy i spent my morning trying to deal with the data. It is a complicated process. You can kind of figure out a rough guide on that on your bloomberg. London school of economics professor still joining us. We are also joined by the former bank of england mpc member. I cant use the bloomberg terminal on my airplane flight. It is going to be 72 hours. Tom is going to be missing it. Good morning, andrew. 81, 72 . I would not be surprised if it is 80. I dont think charlotte is going to be voting. Lets pass on that. I think Kristin Forbes may withdraw her vote if the economy softens. We may see Michael Saunders not coming forward, as he has indicated. The mpc has been incredibly timid. They have missed many opportunities which they could have taken to raise Interest Rates. They should have been looking across the atlantic to the fed, taking a bit of a lead from the fed. We cut Interest Rates. I was on the mpc to deal with an emergency. That emergency past seven or eight years ago. We are still stuck with incredibly low Interest Rates. The data are coming through. Im going to go to my screen. This is not soft data. It is beginning to roll over. You have an id number beginning to come down pretty rapidly at the moment. The data for the u. K. Are not exactly looking that rosie at the moment. The consumer is being squeezed. This is real income, the savings rate. If you look at the chart of the opportunities that were think todayis why i the mpc is going to be very timid. Bankers tom professor, your work is flatout iconic. The society of job creation, is a bank of england truly endogenous or are they outside the debate of job creation . It is something of import to the u. S. , but your work everywhere has an effect every day. Do we really matter what the Central Banks think about that thing of creating jobs . Certainly, the central bank does influence job creation through the general macro environment and expectations about the future. Interestion involves rates as a cost to the Company Creating the jobs. Where the Interest Rates are going to be influences the job creation of the company. Central banks generally art bigger influence on job creation. Tom linking your work to the , areof Governor Carney those links broken now. That is the big risk it is the big thing that happens in the financial crisis. We are not seeing investment coming back so low. The Interest Rates we are having now are not the Interest Rates of an economy, of the u. S. Economy. Look at investment. It is now too low. It is not the time to be raising Interest Rates because in the longer term, they have to be higher. It is time not to introduce another variable, another uncertainty. Tom you dont agree . You are over there squirming. I think this is not the ideal time to raise Interest Rates. I agree with chris. I think we have passed through three years when there have been very good times to raise Interest Rates. The challenge is not what they do today, but it is going to be there record over the last 34 years of not taking the opportunity of the u. K. Economy growing guy . Is it behind the curve or not behind the curve . They are behind the curve. In my view, yes. Tom the you agree, professor . Should have raised them by now. You should look to the future. If i compare Interest Rates now with five years from now, we are going to be somewhere else. Now, do think where we are i think we are at the right Interest Rates now given the state of investment coming given the state of expectations and given inflationary we had a blip because of the depreciation of the pound because of brexit. It had nothing to do with the low Interest Rates. Back from thetep daytoday volatility, what i would do now is to tell the government, you had lots of chances to borrow at low Interest Rates, you can borrow at 0 . Invest in infrastructure, thelt the investment productivity, which has been so slow. Then the bank of england can raise Interest Rates. This new activity that will be going on in Real Investment markets. W gentleman guy , we have to leave it there. Professor, thank you very much. Tom he survived him. I feel very distinguished. Guy we have some pictures coming to us right now. This is going to be resonating in washington. Angela merkel, the nato secretarygeneral speaking live talking about the very subject that is so important to where we go next in washington and in berlin and paris. An important guaranty of transatlantic security according to merkel. This is bloomberg. Washington, the capital still standing. We say good morning. Extraordinary 40 eight hours in the history of the United States of america. Controversy swirls in washington. Let me read a morning mustread. This is a Bloomberg News article that is surreal. Russians released photos of the president greeting the foreign minister and Russian Ambassador, who has been the center of injury, reporters were ushered into the oval office, they found mr. Trump sitting with the former secretary of state. If this was some fencing european u. K. Movie with gary oldman, you could not make this up. What was your reaction . I was shocked. I was like, is that Henry Kissinger sitting there next to him . The optics are very troubling, that he welcomed Sergey Lavrov for the first time in the oval office since 2013. They have been eager to get in for a meeting for years, had been pushed out, the door shut because of russian actions in eastern came ukraine. We have a photo op whereby only Russian Media is allowed in. It does not make any sense. Tom let me ask an open and , where are then adults this morning in the white house . Tillerson was very busy. Mattis. Where are the adults in the oval office . Tillerson was there for the meeting with Sergey Lavrov. Many state department posts remain unfilled. Trump is behind in terms of appointments. They dont have a lot of backup on diplomatic visits like this. This did not follow protocol. Guy they dont care about the optics . Who is crafting this decisionmaking process . I dont think they are aware of the optics of it. You saw that with the mess that followed james comeys firing. They did not have a replacement. They saw it on a news report. The rolled up various people to try to his thin the decision in the right way. They did not have a plan clearly in place. Guy amazing stuff. Where does it go from here . Are they in crisis mode . Is that the sense we are getting of what is going on at the white house right now . Is it business as normal . Aboutst trying to think how the decisionmaking process is going to work its way through from here. Their big challenge now is to get through a replacement for james comey that enjoys support on both sides of the aisle. That is going to be really hard. Tom im going to switch to one of the tea leaves. Lets focus right now. Where are the resignations . Where are the resignations . Have you been surprised that we have not seen people that would say to the president , just say no . I am surprised, but what is more surprising is that republicans in congress have backed him. They have closed ranks and they have supported his decision. You only have a handful or less on the republican side of the aisle who have called for a special prosecutor to be appointed. I think the lingering issue now will be if they dont appoint a special prosecutor, this will be perceived by many as an attempt by the white house to cover up something in the russia investigation. Guy thank you very much indeed. Great coverage coming out of bloomberg. All this week, bloomberg technologys life. A conversation. Look for that conversation at 5 00 p. M. In new york. This is bloomberg. Taylor lets get to the Bloomberg Business flash. Boeing has temporarily suspended test flight of its 7 37 737 jet. There is a problem with the manufacturing area of the engine. The worlds biggest Longhaul Airline emirates has posted its first decline in five years. That is your Bloomberg Business flash. Guy thank you very much indeed. We are back with the former bank of england mpc member. Is sterling at about the right price . I think sterling is below its longterm value. Given the fact that the bank of following the fed. The euro is rounded out its longterm value we have seen since 2008. I would expect the pound to rise and some of the brexit uncertainty changes and when Monetary Policy changes. Guy the irony here is fairly thick. You think the european economy is going to give the u. K. Economy boost . Benefiti think we will of a we are benefiting from the fact that the european economy is doing reasonably well. People are factoring in an uncertainty about our relationship with europe, so we dont know what that relationship is going to be with europe. The european economy is improving. Is not necessarily going to have the same relationship with europe. Tom i want to give you a chance to defend yourself. You and paul krugman have been going back and forth. A broader theory of Forward Guidance. As Forward Guidance worked out . No, i think it has been a failure in the u. K. The bank of england spent three years talking up the prospect of Interest Rate rises coming along and what did they do . They cut Interest Rates. On that basic measure do you do it you said you are going to do . Tom it goes back to what we talked about, can you get out front of the debate . I dont see any research that shows anything. Every Central Bank Goes after the fact. You should trust with central bankers do, not what they say. I think the fed have led the way. They have gradually raised Interest Rates and they have edged Interest Rates up consistently. They have been consistent in their actions. Actions speak louder than words. I think even if Interest Rates go up in the u. K. For the u. S. , it is still a very low level historical standards. Im not about being restricted to the economy. Guy is it a terrible forecaster of economics and where the british economy goes . I think theres is a bigger problem with central bankers. Since the financial crisis, theyve gone down into the bunker, theyve gone down into the trenches, they have been very reluctant to make the move out of this ferry emergency Interest Rates that we put in place in 20082009. 2017 will be the 10th anniversary of the first tremors of the financial crisis. If we cant gradually edge Interest Rates up at that point, im not sure what we can do. Tom the bunker of the bank of england like the churchill war rooms. They can have a map room with fancy charts. Could you see it now . The tourists would lineup. They would queue. The bank of england room, where the mpc meets, using pictures of it, it is not quite a bunker, but its got a picture of Montagu Norman on the wall. He looks down on the mpc. The bank of england governor from the 1930s. Tom weve got to go. Thank you so much for joining us, andrew sentance. Coming up, a conversation on unknown unknowns. Mohamed elerian is in london. That is next. This is bloomberg. Tom after the tuesday afternoon massacre, call it the wednesday putin photo opportunity. The president and the ambassador hold hands in the oval office. Russian press invited, American Press not. What can thursday bring . In london, note will will be needed. Governor carney as an inflation process. Elerianour, mohamed on President Trumps unknown unknowns. Good morning, everyone. This is bloomberg surveillance. Im tom keene with guy johnson. An hour away from bank of england. Guy ive been corrected. I need to get that out there. Mass will be slightly different. Tom but is it a divided bank . Guy i would say probably not. Otherr or not we see things, we will see. Tom a lot of other themes. Dr. Elerian will give us wisdom. To new york city, our first word news. The white the u. S. , house is defending the decision to fire fbi director james comey. A spokeswoman said he committed atrocities during last years investigation of hillary trumpns emails and said had considered firing comey since he was elected. Senate republicans have joined ranks behind trump. North korea still may be far off from building a missile that can hit the u. S. The pentagon says that kim jong overcomeme must shortfalls in developing a longrange missile. Is the Defense Intelligence agency will testify on north korea and other threats at a senate hearing. In the u. K. , Prime Minister theresa is making security one of her focal point of her election campaign, pledging to boost the British Defense budget , in addition to the governments process to meet natos spending target of 2 of gdp. Im taylor riggs, this is bloomberg. Taylor, thanks. Equities, bonds, currencies, commodities quickly. Markets are dead in the water. Crude. Let me do the second screen. Safe haven currencies showing a sigh of relief. About the talk british pound, which has not felt like a safe haven the. We are awaiting news from the bank of england. That is where we stand on eurodollar. Mario draghi got a little bit of a grilling yesterday. European stocks going sideways. Tom the bloomberg right now. Sterling has been in a longterm depreciation back 40 years. A leg down off the blue circle. A little bounce up. A little bit of carneylike perspective. Guy carneylike perspective. Lets take you to my bloomberg. This is what is happening with the savings rate. That is the white line. This is what is happening with real earnings. Real earnings are going down pretty fast. Is that going to be enough to keep the bank of england where it is right now . And where it is for quite some time to come . Tom this is a joy. Doesly, Mohamed Elerian not join us early in the morning because he is getting his beautyrest in california. We have a substantial conversation this morning. He is that pimco and is at allianz. We take for granted the publishing. How do you produce so much copy . Thatis the pixie dust allows you to get so much opinion and editing out the door . Mohamed it is simple, tom. There is so much going on. Ride from starbucks to airplanes, there is so much going on. It is a fascinating time. Cambridge to the library, nobody in there was talking about the vix or volatility and yet there are times in our history where you get this quiet. Greenspan would call it the quiet since quiessence. Mohamed i think the market is comfortable with three things. The Central Banks ability to repress volatility. That growth is going to stay relatively stable. That there is a lot of liquidity on the sideline. When you put the three things together, the markets are willing to put aside Everything Else that is going on in the world and there is a lot going on in the world. Tom lets bring up the chart. The battle of midway is over on the left. Im kidding. It is truly unprecedented, isnt it . Mohamed it is encouraging people to take a lot more risk than they should and understandably so. Markets are going to be that calm, you should leverage your positions. If you leverage your positions, the more that markets are calm. The problem is that we get to a Tipping Point. The longer the Tipping Point is viewed to be further away, the longer this continues. Do you think there is a justified presence, that there is cause for concern, that Central Banks are creating bubbles . Mohamed i think not my intent, but by the way they operate, but that Central Banks are creating , yes. Essive risktaking they hope it will be validated by an including fundamentals. If the other policymakers do not respond, we are going to see that asset prices have been decoupled. Qe is a bridge to something that is an act of faith. Guy what happens if the other side does not respond . Mohamed then asset values will revert back to fundamentals. Guy do you see any evidence that the other side is responding . Mohamed in the United States, there has clearly been intent. Guy yes. Mohamed tax reform, deregulation, infrastructure. Can they get it through congress . It is important to ask that question in this political environment. In the u. K. , you are also seeing a lot of intent. Europe is the big question. To theorygot to get because we have so much to get to. You talk a lot about unknown unknowns. I go back to peter bernsteins against the gods. Our audience, what is an unknown unknown . Mohamed it is some sort of gray or black swan. Something that people do not even have on the radar screen and therefore cannot attach risks to it. It is unusual uncertainty. That had Marine Le Pen won, that would have been a black swan. Tom can an unknown unknown the optimism . Mohamed absolutely. Absolutely it can be optimism. Tom dr. Elerian is with us. I never see him. This is a joy. Guy im fascinated that he writes on airplanes and a wonder of that is going to become problematic. Tom the best thing about london is we are getting we are new york jetsfree. Guy we are going to continue the conversation. Vote, so thes not masses going to be a little bit different. We are 51 minutes away from the decision coming out of the bank. We will cover it. This is bloomberg. Taylor lets get the Bloomberg Business flash. Theon appears to have won bidding more verizon appears to have one the bidding war won the bidding war for Straight Path. Shares were Straight Path have soared more than six times this year. Is forecasting a surprise drop in earnings for the coming fiscal year. The japanese automaker says operating profit will fall almost 8 due to a stronger yen. Nissans new ceo is taking over a Company Whose sales have risen 33 in six years. Shares of the parent of snapchat are plunging today. Thanadded fewer users projected in the First Quarter. Facebook,een hurt by who has copied virtually every feature of snapchat. But its begin in washington. Mohamed elerian in washington. We need to go to saint cirili, who has worked so hard in washington. We need to go to a morning mustread from the Washington Post. It was a scathing essay. With theilli, help us mood this morning in washington, what is the level of crisis . Kevin lawmakers are still searching for answers for the timing of why President Trump decided to fire now former fbi director james comey and quite candidly the explanations they gave yesterday were not really all that clear and that means that the investigations, not only in the intelligence community, but now the fbi director who met with President Trump yesterday, and also the Senate Intelligence committee, which will have a hearing later today and next week, mr. Comey will meet with them. Tom who is playing hr haldeman . Up to link this to nixonian times, but who is advising the president stepbystep . Kevin there seems to be continued division. Enter mccabe will be testifying later today in congress at about 10 00 a. M. He is the current fbi director. The big question is whether this will put the administrations legislative priorities in danger. Guy what is the mood in the press room like . The u. S. Press were excluded yesterday. Kevin yes, well not good, not good at all. To the it speaks volumes toughness, so to speak, of the foreign minister of russia, that there would not allowed to be u. S. Reporters, i guess he is not tough enough to hear questions shouted at him in the oval office or in the white house. Tom 20 seconds. That, how big a deal as it trump is fighting a war with the navy . Kevin i think stay tuned is what i will say. How about that . Tom thank you so much, kevin. With us, Mohamed Elerian in london. I want to go back to your work on game theory. Defined how other models of game theory are different than trumps game of chicken . Mohamed you had it earlier when you were talking about what is happening with brexit is how the different parties position themselves and to what extent are they willing to bluff in order to get outcomes they want . That is really critical. What you dont have both in the u. S. And in britain is what i call a coordinated game. Tom within the coordinated game, where a speaker ryan and the Senate Majority leader . Mohamed they are still on the same side, but they need a lot more people on that. The main question for the runway forabout the tax reform. To what extent will this delay tax reform and will it change content . That depends entirely on congress. Keep an eye on how Congress Response and whether the republicans can hold it together over the next few weeks. Guy getting out from under the politics,washington how does the rest of america view what is happening here and doesnt have a meaningful effect on their ability to do business . Can we just but washington to one side and assume the u. S. Economy is going to crack on and keep doing what it is doing . Mohamed if anything, sentiment has shot up ahead of what is happening on the ground. The iron he and we could talk about the whole show talking about disconnects between soft data and hard data. Is responding enthusiastically to what they see as an endogenous political disruption that breaks gridlock. Hard data is stuck and people are starting to worry that hard data may slip. Guy what do you think is going on here . Are people looking at this and saying, my sense of optimism is rising, but when it comes to making decisions i start getting a little risktakingancial is responding enthusiastically. Why . Because people believe they can change their mind tomorrow. Guy ok, yes. Mohamed begin onyx is different. If you are investing in new equipment and a new plants, you cant change your mind tomorrow. Is notc risktaking responded yet. Grossour colleague, mr. Would suggest financial repression is going to go on forever. Is that what we are waiting for, normalization . Mohamed i think we are seeing Central Banks reacting to markets to leading markets. , a traditional dove comes out and says three more hikes this year. The market is nowhere near three more hikes. Tom are you near that . Mohamed in total, i think three is reasonable. To the extent of the balance of risk, i see more rather than less. Tom fascinating. Mohamed i think the market has been conditioned to pull down the fed. The market has not quite realized that in two weeks it changed the probability of a 90 . From under 30 to over it has not quite realized that we are entering a new paradigm of central bank activism. , aslet me just say interesting as the fed is, it is issues palin comparison with the ecb was stuck with Forward Guidance that no longer makes sense and the bank of england who has to do with the uncertainty of brexit and the worst thing that Central Banks have to face, inflationary tendencies. Tom lets come back. Look for his workout on bloomberg view. Coming up, experience on the diplomacy of the United Kingdom. We will do that in a bit. Dont forget, and 40some minutes, the bank of england. On radio and television, this is bloomberg surveillance. Good morning. Guy 27 minutes until the bank of england announces its rate decision. Im guy johnson alongside tom keene. Lets get to the morning must listen. The barclays ceo who spoke to erik schatzker. It was an exclusive interview. He said he values the oversight from banking regulators. Executives should be held accountable. Managerthe senior regulation is an important piece of regulation and the United Kingdom. Since i got here, one of my goals was to be very transparent with regulators. In many ways, we are partners in trying to avoid the next financial crisis. There is a very constructive dialogue between barclays and the pra and the sca and the bank of england that is very important to us. I respect the Regulatory Framework year and lets just see how this all plays out. Guy just staley speaking with erik schatzker. We are back with Mohamed Elerian. Good idea . I dont know enough to tell you if it is a good idea or not. I understand where there is an inclination to go there. I think i Capital Requirements is a good idea. I think treating the balance a goodtransparently is idea. The next step, i would have to look a lot more at the details of what would be proposed. Guy are we fighting the last battle . Mohamed to the extent that risk is migrated. If i look at where the possible source of the next crisis would come from, it is not the banks. Guy funny you should say that. There have been comments made about the fact that the ecb needs more macro regulation ability, the ability to oversee the shadow banking sector. They are aware of it, they just dont have the ability to target it. Mohamed they are very much behind. The extent to which risk is not just migrated to nonbanks, it has morphed in the bronx says that process. If you are worried about in the process. If you are worried about it, it is going to be more likely to be in the nonbanks. Tom i thought we got rid of shadow banking . Nonbanks, there is a mystery there. Mohamed it is simple. Vacuums and finance are very profitable. To the extent that you limit and constrain the banks, somebody going to fill the space. Tom i strongly agree with that statement. But they filling it with a leveraged position where leverage is the enemy . Mohamed tom yes, absolutely. He sounds like Michael Spence. Mohamed that is the nicest compliment you ever given me. What can i say . Help me there with professor spences wonderful analysis of type one and type two risks, being aware of the things you cant observe. What is the unknowable within your leverage shadow banking . Mohamed the biggest unknowable is the delusion of liquidity, that you have people who promise overnight liquidity that have taken quite a liquid position, particularly lending to various entities and that as long as the decline,tinues to should the liquidity be tested, it is not as deep. Tom ive got to squeeze the thin. What is your thermostat to measure this liquidity . Mohamed i look at did office spreads a highyield bonds as being very indicative of where we are. Tom so oldfashioned. Mohamed i know it is oldfashioned, but i think it is a good indicator. Tom Mohamed Elerian. Bonds being the oldfashioned indicator. Zag from the London School of economics. Always interesting to talk to peter. Tom no surprise. Taylor the Trump Administration is now searching for the replacement for james comey. Several highranking Agency Officials will be interviewed. The shockwaves from the firings are still being felt. According to the Washington Post, Rod Rosenstein threatened to resign after the white house described him as the prime mover of the decision to fire comey. The Justice Department is not commenting. Melo, the Senate Intelligence committee as big a clear that the bipartisan investigation intosian and good russian influence will continue. Michael flynn has refused to turn over the papers and is seeking immunity from prosecution. Airlines in europe are bracing for the u. S. Government to laptops on ban on airplanes. The band will include a european countries. March, the u. S. Decided those airplanes would not be allowed from the uae and turkey. Investors arelthy facing the prospect of a lower return. That is according to kkr. Fall from 9. 3 to 5. 3 , historically. They are finding new ways to seeess that if they want to indices in the next five years. Trump says he may release his tax returns but not until he is out of office. In it and to be economist, the president says no one cares about his tax returns except for reporters but he may make them public because they showed the they show he did a good job. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. I am taylor riggs. This is bloomberg. A guy 28 minutes until the bank of england releases its latest decision on Interest Rates. We do have a busy morning. We get a super we get a press conference from mark carney. The number of dissenters will be part of the conversation. The mathematics are little bit different this time around. Id they . Around. Arnot arent they . Ra the inflation forecast is expected to be raised. The Market Attention is really on whether we are going to get one dissension or two dissensions on the hawkish side. There is a consensus view that we will get a 71 vote to keep policy unchanged. Expected is largely to be of her other colleagues in march, fighting the outlook for inflation. Boeation is 2. 3 above the target. But the argument for getting the policy on hold, we had heard quarter we had third data. Consumers are feeling the pinch of brexit. And with sterling, we have seen higher cable so far this year. Sterling has been rising. Yesterday we saw a push towards 130 for the First Time Since september. Guy is the mpc credibility in question here . Termsnt done anything in of raising rates for quite some time. There is a question now surrounding the ability to enact policy. It cut rates. That. Ny question is there a question about the ability to actually have a really you economy now. Is there a question about the ability to have a realistic view now . Nejra that is an important question. Was criticized for reacting to critically and strongly after brexit because the economy has not shown some of the negative signals that people were expecting. Straight after brexit. Since then, we did have the First Quarter gross number. A year. Est in and also, we did have the impact on the consumer. So perhaps now there is more. Rgument for the dovish hike credibility is a question and it might be one reason why mark carney sticks with the central view when he speaks later today. The ahead of the election. Tom thank you so much. This is a wonderful moment for bloomberg surveillance. With this is Mohamed Elerian. Who started at canterbury cathedral. Major worked with john and baroness thatcher. Wonderful to have you with us today. I have been dying to ask you this question. What would baroness thatcher think of rights it . Speak oft think and her beyond the grave but she never would have permitted a referendum. She regarded referendums as evil. She thought it was the duty of parliament to decide these matters so she would not have had a referendum. She spent her whole time to keep britain in europe and to change europe to make it a better institution. Roper agrees with you on the idea of a 5050 vote. The answer is, it is here. A partition between the heart and soft brexit . Clearre cannot be a dividing line. But there are shades here. Shades of different colors. Get a strongey majority in the election then there will be more flexibility to deal with the Political Base in europe. And she doesnt need to demonstrate that she goes for a hard brexit. When i thinkian about how it was framed initially, it was framed as hard versus soft. At that will be wrong. Fast. Slow versus the timetable is a difficult one. There other elections. We just had the british one. Until they all have been held, it is hard to see any progress. The negotiation is about britain leaving the eu which has to be done in two years. Thatesnt say what follows has to be done. So expect what you would get not allowing ourselves to be rushed. Do we have the skill set . Charles yes, we do. This is not great magic. It is about lawyers and people with the amount of experience. We do have good people with that experience. Was thinkingg i about with the special night for france, populism defeat. Is it all clear . Elerian i dont think populism has been defeated. As if it has, the mainstream parties would have been in the second round. We do have an antiestablishment outcome but a different type. And a centrist was able to establish himself as the outsider. That is the major take away from france. Andcan be nonmainstream centrist at the same time. Tom what you make of the conservatives. Those were dark days for you. You are better at the map then i am. Charles they didnt win in glasgow. Tom im american, help me. If you read the opinion polls, you would have to say that it does seem clear that the tories are having considerable sus having considerable success so far. I was in scotland and i felt that the mood was different. It doesnt feel as established as it was a year ago. Guy does europe have a chance to fix itself now . The u. K. Is out of the way. A germanacron and chancellor, angela merkel, she is proeurope. Is this a moment in time when europe can deliver progress in a way that it hasnt been able to because the brits are out of the way . Mohamed want to get out of the german election, france and germany will play an active role in the quarter. Over the longterm, person exiting may be a benefit to the other members. Britain was never interested in the ever closer union. It was interested in a free trade zone. Guy to think the germans are interested in the ever closer union . Mohamed i do. I think it interesting perspective in general is the extent to which left parties, which you would think would thrive in an environment where there is a reduction to nonexistent gross it isnt just about the labour party. It is about the democrats. Why is that happening . You would expect the leftleaning parties to do better. Expectations are often skewed. I dont think written has been the obstacle in europe. I think britain has been the main voice for reform. It is a great pity in that sense that we are leaving because i think we could have achieved more. So i certainly dont agree with that. Although, yes, from the european point of view, it , igood news that macron won dont think the difficulties of the closer union has gone away at all. I dont think the germans have the slightest intention of going down to a single european budget or euro bonds or anything of that sort. Spendshe rest of europe german savings. They would be mad to agree to that. Guy and mario draghi did face eye toch party to see eye with the dutch party. We will be back with Mohamed Elerian and charles powell. Stay with bloomberg for the latest from the bank of england. The decision in 17 minutes time now. Were going to see that dropping and you can follow it a number of ways on Bloomberg Television and also on your bloomberg oh. This is bloomberg. Guy welcome. This is a bloomberg surveillance. Coming up shortly is bloomberg daybreak. We get Mohamed Elerian and you get danny. Jonathan you know when a guy and you dontt, get an invite . Im jealous i am not in london. Danny blanchflower will be coming up to respond to whatever the content may be. Kristen ford steps down in june. The growth figures have not downturned in the way that they have figured at the bank of england. And inflation does continue to spike higher. To what extent are they still tolerant of that back up in inflation . And on the margin, they will be encouraged by their stance given the soft data weve seen over the past few weeks. Jonathan ferro, thank you so much. With us is Mohamed Elerian and charles powell. I must rip of the script and speak to you of the moment in washington. Not so much what baroness thatcher with think or trump. Have you ever observed this moment in washington within your decades of work . Charles i served in the British Embassy in washington during the second nixon administration. Tom can you make parallels to watergate . I can, yes. Certainly the mood. The scandalized reactions to what nixon was doing and the whole story leading up to the impeachment and him standing down. Tom i mentioned mr. Ruckelshaus who took a resignation. What is the power of resignation within the executive ranch . You have had to hand those two Prime Ministers. What is the power of a resignation . Charles resignation can play a significant role. We think of jeffrey house. He was probably close to the end of his career but nevertheless, that dramatic short speech essentially toppled her. But you have a couple of resignations. Guy do you think times are changing . Its a just that if youre a politician, and you ignore what is going on, it goes away because the new cycle has changed. Sitting tight seems to be the new resignation . Be true in aay president ial system but i dont think it is possible in the british system. The british Prime Minister is in front of the house of commons twice a week and is under enormous pressure. I dont think you could ignore anything like that. You have to fight for months to get yourself out of a hole if you had a scandal. Westland, people dont remember now but it preoccupied action for three months. Trump certainly seems to be able to ignore these things. And to proceed with contradictory statements without any particular problem. Maybe that is a feature of the first year of the administration at it may get better later but for now, he seems to be able to get away with it. If you wear a republican senator, what would you do today . I would still be supporting trump because i would think that was essential with Congressional Elections and i think it will be seen as in it would be seen unpopular in the country to have elected someone as he is in six months. Is, in someing political systems that is possible. Putin could get away with a scandal for as long as he likes. But no european Prime Minister can. Tom this has been wonderful. Thank you so much. Us. Les powell has been with we continue with Mohamed Elerian. Breaking news here. Verizon is agreed to take out Straight Path. Verizon has been a little bit busy over the last few months trying to move beyond the phone hookup in your house. From london, this is bloomberg. Tom bloomberg surveillance. Is at the bank of england. We will have the announcement here in seven minutes. We are going over to bloomberg radio. Build ugly has important hasents on bill dudley comments on the Balance Sheet. We see that from the resident of new york. He also talks about trade as well. That is the single best chart with Mohamed Elerian. This is almost my chart of the year last year. This is imf trade, the rate of growth. And we are back a little where we were in the late 1980s. Of the tradeof all has been heartbreaking. How do we get out of this . Through better domestic policies. Secondly, through better global coordination. I think we will see that chart turnaround. If you look at the highfrequency indicators, it suggests that this chart is turning around. But critical to this element isnt just a mystic policies but whether we get Global Politics operation. Tom from the washington consensus to a multilateral psychology is that gone . Mohamed i think it is under enormous pressure. Britainrica first or first, dominating over the understanding that we live in a shared neighborhood. And it cant be a good house if the neighborhood is challenged. As we see in the case of the u. S. Im less optimistic about what will happen on trade. I dont think that is where the problem will come from. Guy p e globalization few years ago . Is that where it was . Is that right . Mohamed globalization is evolving. If you look at the globalization of data, we are progressing quickly. The type of globalization we are looking at is different. That is important for the companies to realize. There are three trends that are defining what is going on. Mobility, big data and Artificial Intelligence. Tom i dont mean to interrupt. Does David Ricardo still work. . 1812 David Ricardo still work, given Artificial Intelligence . Mohamed yes. It breaks down barriers even more quickly and effectively, which allows technological leap rocking. Which is critical to understand what is going on in the world. And second, the challenge to regulators. You leaders have to play catchup. And companies who never used to be systemically important are systemically important. Tom can you promise me that the next time youre in new york, you will get up early and join us with Michael Spence . You are on speaking terms . Are, absolutely. We are good friends. Nejraith guy johnson and cehic, the bank of england announcement. A little bit of tension there. Not all of that much is going on. There we are with the safe haven currency look. Guy johnson, a lot is going on here. What is the key idea with the bank of england . Guy what is the inflation projections and who is prepared to sit tight and who is not . The bank carney with of england rate decision. People say you will not see a letter to the chancellor. New york, we miss you. There we are, a view out to where the new york jets actually, the new york jets play in new jersey. I dont get it. Mohamed elerian will explain that. Jonathan Governor Carney stares down the political unknown. It is decision day for the bank of england. Barclays boss needs 18 months to complete the turnaround. To bloomberg. Aks and d. C. Is distracted. Publicans insist they will plow ahead with tax reform despite the white house drama. This is bloomberg daybreak. David westin. Lets go to guy johnson in the city. Guy the bank of england is saying that they may need tighter policy for the yield curve. Get on it, get on it. It doesnt offer any policy guidance coming through. What it does indicate the tightening that may be needed. Havemember that they do that number at the moment. Hobbes is not voting. That is not going to happen. The message is clear