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tv   Bloomberg Markets  Bloomberg  April 21, 2022 1:00pm-2:00pm EDT

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economic aid to ukraine. the new round of support adds to $2.4 billion in u.s. aid already authorized for the fiscal year. much of the weaponry, 500 $1 million, will go toward arms. pres. biden: today i am announcing another 800 million dollars to further augment ukraine possibility to fight in the east. this includes heavy artillery weapons, dozens of howitzers and 144,000 rounds of ammunition. mark: the president also added that there is no evidence yet that mariupol has completely fallen. vladimir putin declared russia had seized the city, though his defense minister said or than 2000 opposing troops remain holed up in an industrial complex. mask mandates have returned to india's capital as co-the cases arise.
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the state government is also stepping up testing. the move comes following the detection of the highly transmissible xc variant in mumbai. india saw infections exceed 3000 cases each day this week. more than doubled from a week ago. hong kong beginning a slow path to normality as the worst covid outback wanes. -- outbreak wanes. gyms reopened, restaurants will open later and people can meet in larger groups. more restrictions will be eased in the next few months if new cases keep dwindling. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪
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>> 1:00 p.m. in new york. 1:00 a.m. hong kong. welcome to bloomberg markets. here are the top stories we are following from around the world. stocks erasing opening gains as selloffs and treasuries resumed. 11 basis points higher on the 10 year. all of the inflation debate rages on. has it piqued? the market does not think so. what do central banks do about it? we will find out as we bring you the latest on the imf spring meeting. christine lagarde and jerome powell set the stage in a few minutes. space x set to launch its startling about while here on earth, elon musk continuing his fight to take over twitter. this time actually finding financing. how does he make this work? we break it down. first, a quick check of the
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markets. stocks losing a lot of the opening momentum you had. s&p 500 down .5%. nasdaq underperforming. a lot of this has to do with the yield space. the 10 year yield seeing 10 basis points higher. it is all about the margin of the move when you talk about the yields, and the pain you are going to see in the stock market. when you see higher yields, you also see a higher dollar. we are also keeping an eye on the japanese yen which is weaker. we talk about what this means in a little bit. let's also break some news here. florida house clears the bill that could dissolve the disney district. this is important, the conflict has been going on. we are going to bring you what that all means for disney's bottom line. for now, doesn't look like a ton of movement. disney shares down about .9%, in line with the broader market. let's pivot to economic news. traders pricing in three
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half-point fed hikes as the bond selloff deepens and a 50 basis point -- rate hike. we are waiting on comments from jerome powell and christine lagarde. for now, let's talk about that pricing. for that, michael mckee. thank you for joining us. talk to us about this breaking news in terms of charles as a set to retire. what does this mean when it comes to the fed and their thinking? >> the chicago fed president turns 65 next year and is required by the fed to retire. he officially announced it today. this is no surprise. he has been one of the more dovish members of the committee in recent years. it will be interesting to see, when they get a replacement, how that person will line up given the situation with inflation. kriti: a lot of hawkish commentary coming out of the fed. three, half-point set -- rate
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hikes. getting our mind around 150 point basics -- basis hikes. >> it will be interesting to see if jay powell anything about that. you can see on the chart, the white line is the may meeting. they have two moves price didn't, which means the 50 basis point. the blue line is july. that is six moves. that means three in a row, 50 basis points. we get up to 10 for the end of the year. markets are buying what the fed is selling. most members of the committee who have been talking have said they expect to move quickly to get to neutral by the end of the year. the question is, what is neutral? 2% to 2.5%, according to most. but then jim bullard is saying it should be 3% to 3.5%. we will see whether the markets are on track to front run the fed. kriti: that is in addition to
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balance sheet reduction, right? which we know has been chairman powell's playbook, that he combines rate hikes with balance sheet reduction. if you are already looking at 50 basis point hikes, that is a hawkish move. >> the fed -- nobody else, really -- has an idea what is the impact going to be. they can quantify better the idea of adding to the balance sheet and how it pushes down on long rates but they are not sure the dynamics when you go the other direction. there are estimates from 25 basis points to 150 basis points. the fed is going to put it on automatic pilot and just watch what happens. just to see how much movement we get. if they get a lot, they may cut back on some of the quarter-point, 50 basis point moves that are right now being priced in. kriti: a lot of this has to do with the jobs market, right? recession odds at 35% over the next few years.
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a lot of it is based on the gap between open jobs and the actual unemployment rate. you have to move that closer and closer. the fed noticeably saying we are in a tight labor market. got initial jobless claims this morning, the survey was a 180,000. one more fun fact, i believe 1.8 open jobs for every american. every unemployed american. talk to us a little bit about the time span that these officials are looking at the close that gap. >> they don't know. it is based on the fact that a lot of people left the market and have not come back. a certain amount are people reaching retirement age, they have been falling out of the labor market for some time now. that is expected. do we see more people entering the labor market from other demographics? do we see retired people come back into the labor market? those are going to be interesting questions the fed
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does not have a great answer to. but they also argue yes, it is a tight labor market but if people start taking those jobs, if our raising of interest rates costs people jobs, there are jobs out there that can be filled. it is a less risky time to raise rates than in the past. one of the reasons, they say, they can do a soft landing. kriti: what does that do from the currency market? japan is dealing with currency weakness. will the boj intervene? as we see the fed fight inflation, but also with hawkish policy, you see the dollar get stronger. essentially pressuring currencies. the euro weakness, the yen weakness, can the fed actually do anything about this? >> it is not on their radar. they can't do anything about it. technically they could not raise rates and that would put downward pressure on the dollar. they are going to raise rates
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because they want to get rid of inflation and to deal with the dollar effects that will hurt exporters. there are lots of crosscurrents the fed can't do anything about. the dollar generally moves opposite of oil prices. oil prices are going to go up and that make cap some dollar move. it is a big problem for emerging markets. the fed can provide dollar swap lines but they are not going to make policy based on what is happening in other countries. kriti: talk about these exports. the u.s. is a major exporter of oil, natural gas, a variety of things. as you see european dependence on these commodities get removed from russia, the u.s. is going to be a key part of that, making up the gap. if you start to see larger or stronger dollar, but larger dependence on american goods, how do you square the two? >> it will be a function of how much you sell of what.
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one of the big things the u.s. exports is services. service prices are not going up as much. does that have impact on the dollar value? a lot of the goods we are going to be sending out or at -- agricultural, food and energy. those are bought up differently by the fed because they go up and down in price based on external factors. it is hard to say exactly how that will play out. there is so much uncertainty right now with covid in china, the ukraine war, they really don't have a good handle on exactly what is going to happen. they are making their best guess ideas. kriti: not too long ago, and arguably still is this comparison to -- we'll the fed ultimately become too hawkish and turn the u.s. into recession? it kind of feels like some of those fears have abated a little.
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the idea that perhaps the fed might actually just know what it is doing. we are going to talk about that more incoming days. perhaps in the spring meeting. we are going to that seminar right now featuring lagarde and jerome powell. >> it has been a haircut to growth projections. and it has been a rise in inflation numbers. certainly when we look at the risks, skewed to the downside of growth, so there might be more cuts to come. and to the upside for inflation. that is where we are and it is particularly saddening not only because of the destruction, not because of the devastation, which itself is a cause for huge concern, sympathy and support for the people of ukraine and blame for those who took the initiative of that unjustifiable invasion, but it is also causing
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harm throughout the world. predominantly in europe, but there will be ripple effects going way beyond europe. for the moment, geography plays a role and europe is literally next door. ukraine is one of us. taking this horrible hit, we are seeing refugees out of ukraine and into many european countries. we have two, by solidarity, do everything to support them. that is the situation we have at the moment in europe. it is particularly saddening to see the recovery that we are embarking on is being stalled to a certain degree by what is happening there. >> what if europe takes another step and does ban russian oil, gas and coal? >> let me first of all salute
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the sanctions that were decided on a global basis. sanctions against the oligarchs, against the family members and the people at the origin of this unjustifiable war. -- of about 80% of the banking sector of russia and the freezing of assets of the national central bank of russia, that could be identified outside russia. this bulk. five sets of sanctions decided one after the other, has clearly had a massive impact on russia. and will continue to have an impact. i think the more it is rolled out, the more impact it will have. obviously, the next question everyone is considering is, what happens with the oil on one hand and gas on the other? the issue of coal has been
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addressed by the europeans who decided to band coal out of russia. i think it is a process. i would not exclude there would be more decisions to come as it unfolds. >> chair powell, the u.s. has been a relative bright spot in the global economy. but, policies are changing to address inflation and there are concerns, globally about the tightening monetary policy. what is the u.s. outlook? how are you feeling right now about your claim that we are not heading toward recession? >> i would start by saying we are unified with allies around the world in opposition to the invasion of ukraine. and that human suffering that is going on there. while these economic matters are important, there are fundamental things at stake there. in terms of the u.s. economy, we are more remote from the immediate effects of the war,
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ng them over time and they will come in the form of upward pressure and a bit of downward pressure on output. but, the u.s. economy is performing very well. by most forecasts, we will have another strong ruth year. the labor market is extremely tight. historically so. to the point where really, there is an imbalance between supply and demand for workers. the big issue we are focused on is inflation, getting inflation back down to 2%. >> if we start to slow, will you stop tightening? even if inflation is still above target? >> first of all, you asked about a soft landing. basically, our goal is to use our tools to get demand and supply back in sync so that
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inflation moves down, and to do so without a slowdown that amounts to recession. that is our goal. i don't think you will hear anyone at the fed say that will be straightforward or easy. we are going to do our best to accomplish that. it is absolutely essential to restore price stability. without price stability, economies do not work. we need that to have a stronger labor market. we must do that. >> the market has three 50 point basis hikes. is that reasonable? >> i try not to comment on specifics. i will say this, at our last meeting, many on the committee thought it would be appropriate for there to be one or more 50 basis point hikes. >> are you one of those people? >> i don't disclose my own path.
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i think markets are processing what we are seeing. they are reacting appropriately, generally. the thing i want to say is we really are committed to using our tools to get to percent inflation back. i think if you look at the last tightening cycle which was a two year string of 25 basis point hikes from 2004 to 2006, inflation was a little over 3%. inflation is higher now and our policy rate is still more accommodative than it was then. it is appropriate to be moving quickly. i think there is something in the idea of front end loading. that points in the direction of 50 basis points being on the table. we make these decisions at the meeting, but i would say 50 basis points will be on the table. >> are you more worried about what fed chair powell is doing, or what we are seeing in china with aggressive lockdowns
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because of covid? as it relates to your region. >> the united states and china are the two biggest economies in the world. kriti: that was christine lagarde and jerome powell. we are going to bring you that conference as we learn more but for now, michael mckee is joining me. we heard comments about what jerome powell in particular said , that he supports moving more quickly and frontloading those hikes at a time the market is pricing in a three 50 basis point move. >> he did not endorse the move. he all but said they are going to do 50, then see what happens. but he did not push back against the idea either. i think the fed at this point is willing to let them go there. the markets will price in, and that may be -- that may have a slowing effect and they can take
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a look around once they get there. kriti: another thing that stood out is what president lagarde said. she said the european recovery stalled to a great degree. i do not think that comes a surprise, as the war in ukraine has more seriously hit europe and the u.s. i am wondering how long they can prolong that until they get hit hard. >> the longer the war goes, the worse it gets. particularly if they end up sanctioning russian oil and gas. so, there is talk they may do that once the french election is out of the way. if they do that, they are all but certainly signing themselves on to recession and then it becomes, what is the ecb going to do? you have seen markets pull forward the idea of a rate hike in july. and that they would take the deposit rate, which is currently -50, they would take that up to zero, or a little above by the end of the year.
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we would have significant tightening in both europe and the united states by then. kriti: what is interesting is the domino effect. oil and gas, if it gets embargoed, the french minister was moving for the -- very vocal about it. jp morgan on the back of that had the call that if indeed that happens, 185 dollar oil is on the table. that comes at the same time as covid lockdowns in china are ongoing. i am curious as to how that hits the u.s. economy in particular. on one hand, you have the supply chain effects as well as decreased demand from china. on the other hand, you have potentially $185 oil. talk to us about what the biggest factor is for the american economy. >> the lead factor is oil and energy. if we got $185 a barrel oil, you would probably see recession in the united states.
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the question is, do we get that much? a lot of analysts are worried about how europe would deal with an embargo. if they would do just certain products, or stretch it out over a period of time, say a four months decline, then jp morgan said the price would go to $185. where the red is, we do not know. at some point, it is going to hit u.s. factories, in terms of both energy consumption and raw materials consumption. that will slow the economy and if the fed is already raising interest rates, it is going to be a dilemma for them. you heard the moderator asking jay powell, do you keep going if you see the economy slow? he sort of pushed back and said, we will see. kriti: oil, gas and food prices. this will hit emerging markets
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far more quickly than the u.s.. it is april, it is planting season, specifically in ukraine and russia, which make up over 20 pipe -- 25% of the world's grain harvest. at the same time, food prices are at a record high, this coming from the yuan world food index. talk to us about the food story when you start to have that hit grocery bills. >> for the american consumer, more bad news. people are sensitive to food prices. they do not always get them right, but they have the impression the grocery bag they are bringing home at that price they pay it is lighter than they used to be because they cannot afford as much. one of the hard things to forecast is how crops are going to turn out this year. whether can turn around. we have a bad drought forecast for the united states this year. does that mean our yields are going to be down?
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how long does the war go on? ukrainian production, which is still planting, but it is difficult given the fact there is a war and there is still a lot of grain in the ukraine they can't get out that was harvested last year. there seems to be a good crop in south america, but china's crop is terrible. you are going to have to work all this into what demand is going to be and we are going to see higher prices. the real losers are going to be in the frontier markets where they do not have a lot of money to pay for food. they are going to require a lot of assistance from the united nations and other programs. that has not been talked about as much as the oil and gas situation in europe. kriti: when you talk about food prices, in particular, ukraine and inventories are building up, that is why the black sea is so crucial. the mariupol seaport is so
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crucial. at the same time, the united states, which is a food exporter i'm a but i wonder how much of that export business actually gets pulled back because of the food needs within the united states. we do not think of the united states as an export oriented economy, but i wonder if that part of the gdp sector is likely to get ramped up. >> you cannot turn around agriculture on a dime like you can with some manufactured products. we are waiting to see what the final planting numbers are going to be from the department of agriculture. which direction farmers are going to go. corners and demand from china, and now the president has allowed ethanol in the summertime, which means more corn demand. does more corn get planted, or does more crop get converted to biofuels? those things are going to determine exactly how it is going to impact us. kriti: the ethanol part is interesting.
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on one hand you have this climate agenda, but it is creating more pressure on corn. i'm curious what that means in regards to relationship building. chinese corn crop not doing so great emma but china has also ramped up corn purchases from the united states at a time when a lot of the trade war legacy still remains in the background. there are still tariffs on some of those purchases. talk to us about the dynamic between the united states and china and where things like corn and soybeans fall. >> it goes back to poly sigh 101 where they tell you nations do not have friends, they have interests. it will serve the united states to sell china as much corn as they can buy at the highest price, as long as it does not take away from american consumers. we do produce excess. we should be able to sell them corn, but we are selling all the corn we harvest.
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if it goes to china, it is not going to go somewhere else. maybe the rest of the world can make up some of that. do we want to take away from other buyers to give to china? that is a political question the president is going to have to weigh in on. we will see how our relationship with china develops, especially given the situation with russia and ukraine. kriti: historically, russia has also had a large wheat crop. but also in plaques -- impacts global food supply. when commodity training first came about with russia post soviet union, the idea was a lot of their trade or grains were exported and they didn't actually have any further core consumer. we are going to talk more about food prices, a very important part of the equation. for now, let's tune back into the special seminar. imf -- has to say. >> which will provide long-term
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maturity. finally financing the vulnerable countries -- a big boost. we signed up already $40 billion for it. so, one instrument that you should take pride of, when christine was the managing director of the imf, i remember you saying to us there has to be allocation of concessional finance linked to vulnerability. it has happened. let me take two more points, if i may. the first one is the issue of debt. in 2020, debt levels jumped, for understandable reasons. largest increase since the
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second world war in one year. 2021, it was easy. interest rates were low, access to finance independence for some , it was cheaper to pay for more debt in 2021 because of this drop in interest rates. 2022, different. in 2022, we have to brace for quite a number of low income countries, some middle income countries to hit the wall. we have to be honest, debt requires action that requires upfront action. do all you can do. match securities. if you have this message -- we have to help countries restructure debt early. if we don't, down the road this
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year, we may be in a very difficult place. you talked about the 50 basis points, just imagine what it means for emerging economies. yes, on top of it, there currency depreciates, which is possible. and capital starts -- the comfort of coming here to the united states. very important problem. the other one i want to touch on is climate change. it is not going away. on the contrary, it is getting worse. for some countries, this requires them to take measures to make their economies less vulnerable to these shocks and the rest of the world to provide them with the support that is necessary. -- cochairs the group of finance
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ministers that are wrestling with this issue. we have to come up with practical, effective schemes because if we don't it will be for these vulnerable countries, a >> since we are on the policy discussion, i want to dive into military we have two of the leag central bankers at the table. who is a tougher job -- this guy or the president? kristalina: they are both fully equipped to do their jobs, and as a result it is easy for both of them. >> i agree with that. >> you are dealing with sky high inflation rates as well. the highest in the euro zone. why are you not sounding as hawkish as chair powell when it
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comes to raising interest rates and tackling inflation? >> i am not a hawk or a dove. i don't carry an hour with me to remind myself that everything we decide has to be a concerted and coordinated decision. but i think you ask a really important question. i thank you for that. it is often the case that commentators, analyst, they will just put the two of us in the same bag, and i am very proud to be associated with jay powell, because i respect him greatly. but our economies have moved at a different pace. our inflation offered by different components, and as a result of that, our analysis of the routes and the consequences of inflation have to be different. me give you an example, and i will speak for europe, and i will let my colleague speak for
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his economy. given that we have both the objective of price stability, which is the driving compass for us, our inflation numbers are very high. you are right. 7.4 percent in march, and we will be more than double above the target at the end of the year. but when you try to understand what comprises that. i number, you see that almost 50% of it is energy prices. that is the supply shock. if i look at my core inflation, if you take out food, you take out energy, and we are down to 3%. it is north of my target, which is two. but it is more manageable, if i may. it is actually 2.9 percent, because that has been revised this morning.
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our inflation is fueled by a supply shock, which calls for a particular type of response, which brings together physical policies and monetary policy. obviously, we cannot operate at the same pace, the same sequence, using the same instrument, necessarily, when it is that kind of inflation that we are dealing with. it is much broader based than it was. it is much higher than our target. but it is supply driven, number one, and it needs to be addressed in a sequential, flexible, gradual way, which is what we are doing. we have started the journey back in december, we have reinforced that position in march, and we will have a new set of fresh data in june, which is when we have our next monetary policy governing council, at which
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point, we are going to determine when we stop the asset personages in the course of the third quarter, but when in the third quarter, is it going to be early, is going to be later, to be determined by the data that we receive, and that will lead us to assess whether or not an interest hike is needed, and at what point in time after the purchases have been concluded. >> you don't have that your mind that you will be raising interest rates in july? >> i have all of the steps and tools, all of the sequences in my mind. all of the time. i look at that all the time. the various indicators that are provided by the forecasters, by market analysts, by markets, by consumers. i the labor market, which informs us, because the second round inflation is one component that is critically important in
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order to determine whether inflation expectations are re-anchored at around 2%, or if they are at risk of de-anchoring. that is what is on my mind. >> they are moving up. >> to be fixated on a day, a time of day, does not make sense, because once we are data dependent, for goodness sake, let's wait until we have data, and then we move on to the side. we agreed on a sequence. we have to follow that sequence. we have a journey that we've embarked upon. >> what about inflation the united states. some are wondering if it is speak. do you think so? >> one of the great benefits is the chance to talk and collaborate, and all of our colleagues talk about these things, we find that inflation is really a global problem. it is everywhere. it is high in most places. but there are differences. there are certainly differences. in the united states, we have very strong growth. we have higher inflation. we have higher core inflation
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that in europe, for example. we also came into this. europe has struggled more than we have with low inflation for it well below target. we have a much lower policy rate. we have a different level of underlying inflation. there are differences. we all serve domestic mandates. in the case of the united states, we have had an expectation that inflation would peak around this time, and it would come down over the course of the rest of the year. to an extent, and further into thousand 23. these expectations have been disappointed in the past, so we are really wanting to see actual progress. it may be that the actual peak was in march, but we don't know. we are not going to count on it. we are no longer going to count on help from supply-side healing. we will -- if we get that, though be great. it would be enormously helpful in having a soft landing, but we are really going to be raising rates and getting expeditiously to levels that are more neutral.
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then, they are tight. a tightening policy. if that turns out to be appropriate, once we get there. >> but want to be hard to control inflation through tightening when a lot of it is coming from the fact that russia and ukraine are major exporters of so many commodities that we need? we don't know how long this war's going to go on. we don't know how long china is going to be seeing ruling shutdowns and more supply crunch. isn't it going to be harder than normal to get a handle on inflation through your policies? jay: we cannot affect supply-side issues. we cannot affect much food or energy prices in the near term. it matters what we do with our tools on demand. we have a job to do on demand. in the labor market, there are substantially more job openings than there are people who are unemployed, and if you take total employed people plus job openings, that his job demand labor prayed to be look at the size of the labor force, there are 5 million more demand and are supplied.
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we have a demand and supply imbalance in the labor market. and elsewhere in the economy, it is clear. it comes from a number of things cup --,, including prices. we can fix supply-side problems. >> do you need the stock market to be lower? jay: i would never point to one particular price or asset or class of assets, but generally the way our assets were, it controls one overnight rate, plus the balance sheet has some effect, but those effects are broader financial conditions, and they include asset prices, credit availability, all kinds of financial conditions. the financial conditions at the end have been the real economy. we monitor financial conditions. there are really two steps there, and one of the many, there are many different combinations that are possible of financial conditions, and we have seen some tightening from our rate increases, and that is
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to be expected. >> some people have an idea that you need to shock the market to really start to see more of an impact. when it comes to putting pressure on demand, and on inflation for it is that something you would subscribe to? christine: we need to communicate with as much clarity as possible as to what we analyze, what we see, what timing we have. and what journey we are embarking on. roast of it is not an issue of tightening. we look at the real rate, it is an issue of normalizing monetary policy. and using the tools that we have, i think the added dimension that europe has is that it is a monetary union with the complexity of a monetary union where you have 19 different fiscal policies. 19 different treasuries, and that makes my job just a little bit more complicated. >> you also have the euro.
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and because of that, it is weakening substantially. is it is a getting to we? christine: we don't target any exchange rate. it has an impact on inflation. but we do not target any exchange rate. >> and want to move it to the fiscal side of things. we've done monetary policy. as you look at the appropriate policies right now, it is a little tricky because normally the imf would advocate for fiscal stimulus. a weakening global economy cannot do that, now, we had such a strong inflationary environment. how are you thinking of the sort of policy to insulate your economy from some of these issues? >> first we are not starting from the favorables of two years. that is the widening deficit and debt for all countries in the world. that is one thing. second, with the interest rate inflation and this, the cost of --.
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>> we heard from the ecb president and of course from jay powell over at the federal reserve. what really caught my eye of the headlines is that the imf director is talking about having to help nations restructure their debt. at the same time, you have lagarde and powell really talking about the pain in the market. inflation more than double the target at year end -- that is according to the ecb president, talking about european areas and u.s. economies moving at a very different pace. a sentiment that was echoed by chairman powell as well. a spring in a bloomberg report to digest these headlines. the biggest part that stood out to me was the e.m. part of it. the idea that we are dealing with inflation and the eu, and the united states. but inflation was already a much bigger issue in the emerging markets than has been for some of these developed economies. talk about the currency part of that equation, and these debt restructurings that the imf director is saying we might have to see.
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>> the majority of the emerging market debt has been popular for quite some time. even before the financial crisis. the emerging market was initially -- issuing debt in dollars. big businesses been going on in the u.s. dollar. pretty much over the last three years. the higher the dow you value, the weaker of those emerging markets. the higher of the debt repayments as they have to convert their currencies to dollars to meet those debts. the strong dollar has deftly been a headache for emerging markets currencies. there also commodity exporters. as things slow down during the pandemic, demand also ways on their economy. it contributes to inflation. the debt restructuring for the imf is like the uber bookie. they'll get paid, so they are going to restructure the debt to make sure they essentially get
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paid, whether it takes longer or rates have to be modified, but they are going to do everything they can to make sure that that is repaid, and the e.m. countries don't fall into default. kriti: it is interesting to me what christine lagarde said. if you look at the markets, the 120 level is very sensitive, and we are talking about currency week this with the japanese yen, as well. really, reaction to the dollar. what has been the develop economy side of this? vincent: let's start with the end. there are two components going on. yields, and yield spread differential -- i want to just mentioned to people that there is a 10 year with rates and traders as people look at as a two-year. the two-year spread widens with the dollar. that makes the dollar more attractive. it weakens the end, and that is what is happening now. the other side of the story is
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the large oil importer. with a big spike we've seen in oil prices, that hurts their economy, and it weakens it also. with the euro, it is a double-edged sword. you have europe being the redheaded stepchild to the dollar and the situation going for the ukraine, is the u.s. was going at a higher pace, and our pandemic levels were increasing in your. they had started interest yet, and with war on the border, it doesn't make europe an attractive place to be, select has impacted the euro. sterling is down as well. but not to the state effect. kriti: stick with us. i want to bring michael mckee and into this conversation. i think one of the hallmarks of the euro zone prices in 2011 was the amount of austerity that a lot of european nations had. you can say they have that say must arity this time around.
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i am curious is cushioning or prolonging the blow to the economy when you see u.s. stimulus getting pared back. mike: europeans did not start their fiscal assistance until last year, late last year. it was timed to go out a little bit later, and they had to get through the entire european union, so it is just hitting out. it has been having an effect, particularly in italy. we are seeing stronger with the we might have otherwise seen, and they are seeing unemployment rates lower than they might've otherwise seen. how it is going to play out over the longer-term, their costs are going to be very high for the ukraine war. especially over countries that are taking refugees. where they go from here? as christine lagarde said, fiscal agents in her portfolio
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may all do different things. how's germany going to spend? or they going to raise the fed spending as they say they will, will they take the debt make -- right off? kriti: do you think we might see a repeat of the crisis? with the financial crisis, it was the remnant of the housing crash. it had a rippling effect. could we see a rippling effect or evidence of the recession and the damage the recession did of 2020 still sticking around in the euro zone, taking out the russian equation for a moment? we are dealing with the legacy of the 2020 damage. mike: they are dealing with that legacy, and i would never say never, but the systems have changed a lot. they put a lot into place. monetary transactions could be used in an emergency.
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they weren't there before. so, the european -- i don't want to use the bazooka analogy, but the idea that the systems are there to backstop may keep the markets from pushing anybody into trouble print right now, it does look like anybody is in trouble, but it certainly would be true that some of these countries could violate the domestic treaty debt limits because they are stuck with all of these refugees and the money they are spending in the ukraine. kriti: what happens if they violate those treaties? mike: it depends how they do it and over what. of time, and what they think about it, because it comes down to the eu and the euro zone countries can decide to penalize a country and take away some of their eight and some of the central a that goes to them. in this case, that is not going to be likely. they may put a band-aid on it and say we are going to look the other way. given the situation. kriti: let me bring you back in
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here because it feels like the united states on a really large wall of worry that exists here when it comes to europe, to emerging markets, it a symbol that the eye states is insulated in a lot of ways. that make a bit of treasury a no-brainer? vincent: the bid on the dollar is a no-brainer. obviously with the situation going on with the fed, we had powell making a comment that is probably not a good time to be in the bond market. he is obviously implying that as the rate hikes come, there will be lower bond prices. i'm not sure we are quite there on fixed income, but a lot of folks are calling deals for treasury markets, and they are going ahead with the fed would be. we have swaps markets that are 50 basis point rate hikes for the next three, so good 100 basis points higher. clearly, you see that, and you will seal higher -- you will see
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higher yields. kriti: let's talk about the carry trade. another no-brainer trade was as we saw these emerging markets thiel with inflation, much much faster, you saw a lot of strength and the peso, love strengthen the reality -- a lot of strength in the real. talk about the carry trade now, if it even exists. vincent: the more obvious trade is the yen trade. it is --. kriti: welcome back to the answer because i'm very interested, but let's hop into the imf seminar and talk about the euro part of the equation grid let's listen in to christine lagarde. christine: to be stopped, you are completely right. the consequences of the war, when you look at afghanistan, that is another place where clearly the consequences of years of wars are hurting people
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and women more than anything else. >> a jew and to respond to the question? -- did you want to respond to that question? kristalina: the main question was to help domestic policy corrections for countries that are undermining opportunities to grow and create employment. today, what we are saying is that we live in a world in which there are exhaustion is shocks -- xo gina shocks -- exogenous shocks for countries where on their own, they cannot handle it. the question in front of us is how do we recognize that it is not bad government. it is not bad policy. it is a climate shortcut, a pandemic, a war that is
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radically impacting a country, and what is the role of these institutions to be a corrective force in that regard? during our meetings, this issue of what is the role of the imf in a world of multiple shocks, some of which are because of the evil of men, some of which are because of mother nature. but they are devastating countries to appoint in which --. kriti: we are listening to the imf spring seminar. we have jay powell, christine lagarde, and other world leaders. now, let's do -- tune into the spacex launch. romans from now, the spacex falcon 9 rocket is scheduled to
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launch. its mission -- to carry 53 satellites into orbit. joining us from san francisco, ed ludlow. 53 into orbit. what does that mean? >> it takes the orbital consolation above 2200 breed we are really close to countdown, so what we have a listen in and make sure the sequence goes is an. -- as planned. >> 10, 9, 8, 7, 6, 5, 4, 3, 2, 1. ignition. lift off. chamber pressure will be nominal.
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>> as you can see on your screen and you heard by the cheers of folks with me here at mission control, falcon 9 has suspects fully -- successfully lifted off varying are 53 -- carrying our 53 satellites. ed: that falcon 9 booster with a payload on top of it which is satellites will hit the max cu e. you can hear it now. >> i'm curious. >> that is what we call a gravity charge. ed: what just happened, i'm sorry to jump back in, that is the moment of maximum aerodynamic pressure on the overall spacecraft as it travels through the thickest part of earth's atmosphere, and it is
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throttling upright. each of those engines creates huge force. 1.7 million pounds of force by all nine engines to get it through our atmosphere and into orbit. kriti: talk about the mission here. ed: we associate spacex with a business of just basking -- blasting things into space. human beings, the space station, or generally speaking, carrying nonhuman payloads which are often satellites. star link is a spacex space-based internet service. it orbits earth and designs itself to connect regions of the planet that are more remote, where traditional broadband just isn't possible. right now, the constellation is at around 2200 satellites. not all of those are operational. each time they launch a mission like this successfully, it becomes a step closer to their eventual goal, which is a massive constellation of 30,000
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satellites to really boost the potential internet service, globally. kriti: 30,000 satellites. talk to us about the competitive landscape because i believe we seen a story about more more people getting involved in this particular trait. what is spacex's role when it comes to the other peers it is dealing with. ed: what you saw for a tv audience was on the left-hand side of the screen, the first stage booster separating from the second stage, which is still caring the payload. what you are seeing right now in real time, the right-hand side of the screen, the nose or the habs, separating from the front of the craft, and revealed what it is carrying, which is the starling system. the context you are looking for is space axes a limit on the amount of money it can make from the launch business. simply blasting into orbit, low earth are high orbit, even beyond that has a limit.
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it is around $3 billion a year. star link, which has hardware around 549 dollars for the receiver the thieves on earth, and the subscription component. $110 per month, that is a much bigger market potential. spacex could be a $30 billion business, annually, over the next five years. kriti: where does the u.s. government fall into this picture? international space station, nasa, talk about the dynamic there. ed: spacex is the provider of choice to nasa, whether dissenting human beings to earth from the space station and returning them safely, or simply servicing the international space station through cargo flights. it's cadence and reasonability and reliability are frankly just greater than other contractors are a ruth -- are able to provide. they provide it a much lower price point because their system is reasonable. we think about some of that,
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some of the competitors, for example. boeing, they are all dealing with different challenges, but the principle one is that the economics are different. the costs are much higher because the systems are not reusable. just letting the clock run a low bit. we are about five minutes into the mission. everything is going pretty to plan. what you see on the left-hand side of your screen is the aft fan on the bottom of the booster. using air resistance, physics, to slow down the booster as it gets nearer to earth's gravitational field -- on the right-hand side, you see the single merlin engine continuing to place the payload and to orbital trajectory. romaine: romaine bostick,
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jumping in here. i was paying attention to jay powell and christine lagarde in washington, but as we watch the spacex rocket up here hovering above the earth, what is next, as we look at these pictures? what are we expecting to see next? ed: in about two and a half minutes time, the exciting part, which is your favorite, mind too, that booster on the left-hand side of the screen, for audience, is, of course, it is going to land on a drone ship in the middle of the atlantic. the joan -- the drone ship's name is just read the instructions. that is symbolic of spacex. the readability. it will be a half an hour or so before spacex starts to unleash this advice. romaine: maybe they should rename it 50 basis points. we heard jay powell
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50 basis points. you have james bullard in princeton. he is still advocating for basis points. if you get back here, here, we know that spacex has a lot of success in getting this thing to land on that target in the earth on land. what is been the success rate on the percentage basis. >> very high. very high. >> to put in context, if this goes to plan, it will be the 148 launch. it's re-flown boosters successfully 87 times. the proportion is high and it with each mission. >> talk about the relenting. game changing of reusable boosters. you know the terminology better than i do, but the economics behind that. why do so important. -- why is it so important? ed: this is kerosene, they have
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an oxidizer, highly pressurized liquid oxygen. biting being able to use the hardware, and having to do minimal refurbishment with the panels, the economics completely change because you don't have to put a capital investment into making a new rocket each time. that is what the legacy players have an issue with. they are also getting better in terms of their manufacturing efficiency. spacex is super proud in the rate it is able to manufacture components. this is a supply chain issue as well. they are facing inflation at higher costs, they have raised prices. they raise prices across the spacex offering grid particularly on the starling hardware that as users 20 to access the internet. kriti: what is next for spacex. this is one of two we have covered in the last month or so. we have several more coming. what can we expect for the rest of 2022 and beyond? >> what we are seeing on screen is the booster

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