about new chairman of the fed? relation between fed and treasury? any other part of the government. >> the current administration seems to be somewhat unorthodox, to put it nicely, so i mean, i don't know. it's hard to say. i mean, historically this notion of fed independence doesn't hold up. it just doesn't. yes, volcker comes along, does something different. okay. yes, there is sort of this aura of operational independence and a degree of operational independence. but, over the long haul, they're not independent. >> no. >> you remember what former fed chairman arthur burns said, which was we can't exercise our independence or else we might lose it. >> that's right. >> other -- before i give burt a second chance. other questions? >> okay. wait for the microphone. >> thank you. this comes back to the fed and new appointments to the board. ran randy quarrels has been confirmed to be vice chairman for supervision as a result, of course, of dodd/frank. what are your thoughts as to -- is there going to be an increased emphasis on supervision and how is

the fed wants to do three more next year. but the balance sheet rolloff, there is a cogent argument to be made that at quantity kay tough easing helped the economy and risk assets like the stock market. if you take it capitalization of the s & p 500, and the ecb and the bank of japan and the fed, it's almost a constant. puck make the argument the stock market has been propelled by quantitative easing. if it's taken away, it reduces that support and the fed is letting some of these bonds roll off. we'll see what this double barrel of conditions really does. so far we have seen the relationship between short rates and long rates has compressed from a very high number compared to 2-year to 10-year yields. now it's kinds of average. there is a theme you hear financial media report that the yield curve is flat and signaling a recession it's flatter than it was before. but it's at the 40-year average. to be signaling economic trouble you need the yield curve to come press further towards flat. we'll see if that happens with the fed

that's -- other points about new chairman of the fed, relation between fed and treasury or any other part of the government. >> the current administration seems to be somewhat unorthodox to put it nicely so it's hard to say, but historically this notion of fed independence doesn't hold up. it just doesn't. yes, volcker comes along and does something different, okay, and yes, there's this aura of operational independence, but over the long haul they're not independent. >> you remember what former fed chairman arthur burns said which was we can't exercise our independence or else we might lose it. >> that's right. >> before i give bert a second chance, other questions? okay. wait for the microphone. >> thank you. this comes back to the fed and new appointments to the board. randy coral has just been confirmed to be vice president of supervision. this is as a result of dodd-frank. what are your thoughts as to what -- is there going to be an increased emphasis on supervision and how is that going to interact with monetary policy now that supervision to some extent been elevated by virtue

willnk it is unlikely we get a really aggressive fed. that said, we have had this gap between what the market has been pricing at what the fed has been saying in its dots. with some of the new fed chair potential candidates coming in in, you will probably see a , narrowing of the gap. i don't think you will see wild actual differences in policy by the different fed potential chairs, but we will see a change in how the market reacts. lisa: bonnie, are there any countries that you are avoiding? bonnie: we're definitely selective. to mike's point, emerging markets is a market not a , monolith. you need to have an active manager to go through that. you don't want to have passive exposure. different countries have different risks. there is going to be geopolitical risk across the entire world, let alone emerging markets. but in terms of credit we do like we do like argentina, , brazil, india and indonesia. and some of that is based on the risks to china, for example. china, we are confident china can kind of continue to decelerate growth, but

this is the inflation-adjusted fed fund yield. stan fischer in the lower right corner, looks at an altar accommodative fed that will weigh down the zero mark. if chairman shows up tomorrow, where are we in the continuum from altra accommodative to something called normal? rachel: we will be normalizing and there is a temptation to continue to tighten. there is a recognition we are quite loose even though inflation is not yet present. i actually agree with my two co-panelists. tom: we have to stop the show, they all agree. we don't do that at bloomberg. we have to massively disagree. let me go to you, mark. you stated further this is a fed that will lead the market forward. where are we within the rates, even on the edge of normal? can i daresay it is 2019? mark: i think we are headed from zero to .5 percent, but this is really striking and brings up an interesting point. if you look at developed markets in the u.s., europe, japan, you have negative real yields out to 10 years in the case of u.k., europe, and japan. this is in shar

feel on have a strong who should be the next fed at the head -- head of the fed? >> i think it is more theater than reality. is thes like powell favorite for the trump administration to a point, which would be a continuity selection in the market would take it quite nicely. selected, slightly more hawkish, republican, which could lead to a view that rates could go higher quicker in the u.s. which would have an impact on the dollar. at this stage, at looks like powell is the favorite. haidi: how do you feel about this narrative of the synchronized global growth story? we have pmi from china and this week that should give us a better picture and neshek, but do you think it is a coherent recovery we are seeing? >> boring might be the word to use about markets. the world economy is going pretty well. at 3%, probably 2.8% next year, fairly solid across sectors. europe, we have always been fairly positive on europe going forward, 2.2% this year, similar next year. , managing stable itself extremely well, 6.5%. japan, shinzo abe elected, boj hard toation, so it is see ne

that is an overnight rate for --ks to part cash at the fed park cash at the fed. where is not only above many other overnight rates are, it is above many other, what we would call safe assets, what those rates are. you can look at one month treasuries, you can look at fremont treasuries, you can go up to a year, to get close. you can get look at a one month cd rate. i am not just try to hide the early portion of the crisis, if you look at other cd rates. forcally, what you see is, fed hasre time that the been paying interest on excess reserves, it has been doing so with themarket rate, very narrow exception of when the policy was first implemented. it has been paying on an overnight rate relative to longer-term, safe assets. so, the idea that it would not make any difference is a little fishy if you just think about it in terms of what they are paying relative to what else you could get in the market. the fed has been doing a lot of things. two of the bigger things are the repo program and the interest on reserves. all of that is in the face of the qe programs tha

it will be interesting to see the closer we get this new fed chair, a new fed vice chair, three more seats on the board of the extent to which president trump is going to be able to change the complexion and the fed. body. it is a the fed chair leads it. we will see what happens this week. who are you guys betting on? that is my secret, kathleen, and i am sure it is yousef's as well. [laughter] kathleen hays. let us have a look at how all of this is working out and dovetailing into markets. let us get a bloomberg markets macro strategist, mark cudmore in singapore. absolutely. these risk events mean this week that there is a -- it does not matter who the fed chair is. the fact is that there is a premium price for the rate curve for there being john taylor as a pick. the whole point is even if john taylor is picked, he is probably a hawkish choice. that means the kursk should probably flatten as investors would fear that perhaps his hiking might be premature. even if john taylor is trump nominee, you could actually see initial headline initial headl, you could see the 10 year yield fa

he really pushes the fed certitude. the market is greatly overestimating the votes and the commitment to hiking at the fomc, and then he turns within his research note and says the next inflation print has to deliver the bounceback to normal inflation. how urgent is it within the fed linkage into the real yield market to finally see actual inflation data, as mark mentions? jim: there was a lot of long-term secular headwinds to sustainable inflation. inflation is definitely picking up and i agree with mark's point. it makes a lot of sense and gives the fed confidence with regards to where we are, the underlying economy, the labor markets, that they can reduce their balance sheet. that being said, there is a lot of aggregate debt in the system that will put long-term headwind on to inflation. i still think they will reduce their balance sheet and hike, but at a moderate pace relative to the underlying economy. tom: this is an important part chart. i am looking at the ferro bloomberg terminal to make us wiser, and i want t

this is the inflation-adjusted fed fund yield. stan fischer in the lower right corner, looks at an altar accommodative fed that will weigh down the zero mark. if chairman shows up tomorrow, where are we in the continuum from altra accommodative to something called normal? rachel: we will be normalizing and there is a temptation to continue to tighten. there is a recognition we are quite loose even though inflation is not yet present. i actually agree with my two co-panelists. tom: we have to stop the show, they all agree. we don't do that at bloomberg. we have to massively disagree. let me go to you, mark. you stated further this is a fed that will lead the market forward. where are we within the rates, even on the edge of normal? can i daresay it is 2019? mark: i think we are headed from zero to .5 percent, but this is really striking and brings up an interesting point. if you look at developed markets in the u.s., europe japan, you , have negative real yields out to 10 years in the case of u.k., europe, and japan. this is in sha

looking at the situation, we barely discussed fed chair janet yellen staying on as fed chair in the previous segment. why? bob: i think her time has come and gone. i think she did well in the aftermath of the financial crisis, helping to continue bernanke's policies. i think the administration feels they need a breath of fresh air to come in, particularly if they're trying to pull the rest of the republicans along with them, and also trying to bring the rest of congress with them. jonathan: for me, i thought she signed her resignation letter off the back of the jackson hole speech where she defended the regulatory regime. you put the emphasis on deregulation. is that ultimately what could the resignation letter as well? mike: i think so. she has pushed back pretty hard on trump's emphasis on deregulating the banks. in her defense, that is the right move. one of the best things that has happened in this cycle with the regulatory push back is the fact that banks are in as good as financial shape as they have never been in our career. bob: but not extending credit. that is the one problem. it i

we are going to focus on fed -- the fed and trumps push for tax reform. changes in the tax code could only happen in 2018. and the challenges ahead for the aussie prime minister. this is bloomberg. ♪ i'm in sydney. betty: and i am in new york. you are watching "daybreak: australia," investors are waiting for announcements from the fed, and boj this week. we have a jobs report on friday, also president trump and his trip to asia, before which we will expect to know who the next fed chair will be. it will be a week for the markets. strap your seatbelt on. let's get more analysis from washington with peterson .nstitute for international thank you for joining us. it will be a busy week this week. let's first tackle tax reform. the house ways and means committee will be putting out some of the details on tax reform on their budget this week. what do you expect out of the committee, and do you think it will give any cut of momentum to getting tax reform done by december 31? about how lowdea do they want to take the corporate tax rate, and more importantly, wh

a fed chair. although that could create market volatility, it won't necessarily affect the decision-making. it looks like jerome powell might be the leading horse in this race. he is an established name. he is governor on the fed now. that would be something the be at alluld not surprised by. even if there were a wildcard , that might not make that much of a difference. david: exactly, we have been told that the fed is data dependent. we will get more job numbers this friday, is it pushing us in the dirt -- in the direction of three hikes next year? >> yes, i think the data has been constructive toward a december hike and three hikes next year. the key thing is inflation for the fed and we keep seeing misses on inflation and whether or not this new fed board compilation believes we will see 3% inflation within the medium term. thank you both. breaking news a few moments ago, paul manafort and his business partner are the first people charged in the broad investigation into russian meddling with yo

fed does. a couple of tightening's around march or june. then, all bets are off because of the tax cut front. where they have degrees of freedom, i think the answer is in regulation. big banksu treat the as monopolies or try to split them up or just control them by means of capital ratios. that is where powell will have a lot to add. , do you want to ask you agree that whoever leads the fed next is going to be yellen's said? what does that mean for the 10 year yield, particularly given how highly correlated dollar-yen is to those rates? think it basically follows the dovish fed, yes. we are 13 years into this cycle of fed that is prepared to support the market. the reason why we are caught in this loop is precisely because the fed has proved itself so sensitive to market downsides. do i think that will change -- no, absolutely not. the interesting bit is the widening of the balance sheets. the way it has been downplayed by yellen and others in the fed. hasas been the thing that driven markets f

looking at the situation, we barely discussed fed chair janet yellen staying on as fed chair in the previous segment. why? bob: i think her time has come and gone. i think she did well in the aftermath of the financial crisis helping to continue , bernanke's policies. i think the administration feels they need a breath of fresh air to come in particularly if , they're trying to pull the rest of the republicans along with them, and also trying to bring the rest of congress with them. jonathan: for me i thought she , signed a resignation letter off the back of the jackson hole speech which she defended the regulatory regime. you put the emphasis on deregulation. is that ultimately what could sign a resignation letter as well? mike: i think so. she has pushed back pretty hard on trump's emphasis on deregulating the banks. in her defense, that is the right move. one of the best things that has happened in this cycle of the regulatory push back is the fact that banks are in as good as financial shape as they have never been in our career. bob: but not extending credit. that is the one problem. it

we think the investor community is having given the fed. we use the word "transitory" to describe the lack of inflation since about 2013. the market is interpreting that. particularly some of the comments from the fed governors earlier in the week about that particular word. there is a bit of wrangling going on with exactly how much longer we are going to wait before the word "transitory" is removed and the word "structural" comes in. we think the flattening of the curve reflects the market, foretelling to the fed their -- there are structural underpinnings you need to ignore knowledge. but gdp in the u.s., consumer spending, it has been very strong. we think it was probably an upside case to be made for inflation to accelerate in the next 12 months. lisa: bonnie, who matters more? the ecb or the fed at this point? bonnie: when you talk about quantitative easing, the ecb. the fed has already communicated what they are going to do to the balance sheet. they have been transparent about it. we know it will be very gradual. so there is not a lo

we barely discussed fed chair janet yellen staying on his fed chair in the previous segment. why? bob: i think her time has come and gone. i think she did well in the aftermath of the financial crisis, helping to continue bernanke's policies. i think the administration feels the need of, breath of fresh air to come in particularly if they're trying to pull the republicans along with them and trying to bring the rest of congress with them. signed a i thought she resignation letter off the back of the jackson hole speech which he defended the regulatory regime. is that ultimately look at sign a resignation letter as well/ michael: i think so. she pushed back against trump's emphasis on deregulating the banks. in her defense that is the right move. one of the best things that is happened in the cycle with the regulatory pushback has been the fact that banks are in as good as financial shape as they have never been in our career. bob: but not extending credit. it is true the regulation has done a lot of very good things. has it gone too far? where is the extension of the credit? why a

the fed is the alter-ego of the treasury. head of research at the atlanta fed he's laid it out. the congress doesn't make money from the fed. it's an expense. and a sea of pb too, by the way. so, yes. >> that's changed by mortgages, chris. 1.8 trillion of mortgage. sgl we're subsidizing. other points about new chairman of the fed, relation between fed and treasury and any other part of the government? >> the current administration seems to be unorthodox to put it nicely. it's hard to say but -- i mean historically this notion of fed independence doesn't hold up. i mean it just doesn't. yes, walker comes along and does something different and yes, there's this aura of operational independence and a degree of operational independence. but over the long haul they're not independent. >> you remember what former fed chairman arthur burn said which is we can't exercise our independence otherwise we might lose it. before i give a second chance, other questions. okay. bate for the microphone. >> birdie again. this comes back to the fed and new appointments to the board. just been confir

it's one thing when you talk about the fed when you're not in the fed. when you are the chair and running things, maybe it's different. i think there's a lot of unknowns right now. david: i wonder if there's one other thing that should feel the checklist and that is the size of the balance sheet ultimately. we tend to think of this in terms of months or a year or two. the next fed chair will be there for a long time. there may be a very substantial difference of opinion of where that balance sheet should end up, which could make a real difference for equity markets and other markets. , we are at $20ly trillion in the major central banks balance sheets. this is a huge order of magnitude. we are talking about some central banks being as large as their gdp. in japan and switzerland, the central bank is close to the size of the economy. we need to have a normalization and policy rates because that helps banks to lend to the real economy and also the balance sheet to leave some room for expansion if there's a next crisis. what happens during the crisis is tha

with the nomination of the next fed chair and of course the fed meeting. the b.o.e. meets this week. this is bloomberg. who knew that phones would start doing everything? entertaining us, getting us back on track, and finding us dates. phones really have changed. so why hasn't the way we pay for them? introducing xfinity mobile. you only pay for data and can easily switch between pay per gig and unlimited. no one else lets you do that. see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. live from london, this is the european close. stocks finishing higher up for a third consecutive day. that is october the third after rising for the six week last week. oil and gas, telecom leading the advance. eight -- hsbc is bearing fruit, driving its third consecutive increase in quarterly revenue. goal of our hands over the reins. a share lower. coming in 6% higher than analysts had expected. instead of looking at the spanish-german ten-year, let's look at the italian-

for fed independence. he said john taylor would be his pick. taylor is likely to be much better equipped to deal with the questions i was considering in terms of what we do. i am supportive of the john. that is not to say the other candidates cannot do a good job. but given my criteria about what leads tos needed, it picking john. interesting, at a time when the ecb announces a dovish taper, the boj to meet asked week, so much time and attention and focus being put on the race for the fed chair? donald will make the announcement by november 3. maybe he will wait to when janet yellen steps down next thursday. betty: my favorite line is, he could change his mind. we don't know where he is going to lean on that one. kathleen hays is staying on top of that for us. investors are betting a number of central banks may need to follow the fed and their western counterparts thanks to booming exports. let's bring in and occur in joining us right now. story, seen this growth in particular when it comes to investor ban

the fed is calling for three. if we keep getting three handles on gdp and unemployment at 4.2%, three or more could be on the table. we have no idea because we have no idea who will be on the fed and where the economy is going. interesting 2018. vonnie: thanks to our roundtable -- michael mckee, and barry bannister, chief equity strategist at stifel necklace. mark: we have breaking news on breaking -- on catalonia's independence. maria, let's start with you. cattle and lawmakers voting for votedtle and lawmakers for independence in the pot -- defiance of spain. what happens now question mark maria -- now? the catalan regional governor is still inside. the last half-hour has been chaotic it we saw the secret ballot take place in the new republic announced. there are people outside here who are celebrating, happy about the news here, but of course a focus point is now moving to my drink. the senate has approved the measures, and madrid will take control of the region. the question is what will happen inside here. th

now half of that came before the fed minutes, half came afterwards it wasn't like the fed minutes were particularly dovish, ongoing discussion of the lack of inflation which we'll get a pointer on with ppi today and cpi tomorrow but today we're seeing a fraction of weakness of the dollar against the yen no move for the euro and the pound. gold prices for you, down 0.4% yesterday. they're up to 1,298. bitcoin crossed above the 5,000 level, up 6%, 5,111, we will hear today from the man today who thinks it's a fraud, jamie dimon. >> ken rogoff just wrote on project syndicate, crypt to foofoo crypto fools gold, the price of bitcoin. it's a topic among the finance ministers. >> a wide topic. >> after christine lagarde said last week it's too expensive but there's some legitimacy there, shemerging markets where it could be a technology >> it's the technology that put support behind the bitcoin, but it's the legal or sovereign backing that people take issue with we will discuss that later on today's wall street agenda weekly jobless claims and the september producer price indecember at 8:00 a

the fed chair -- if the fed chair is indeed the biggest political spot, why not bring up something that opens debate? a legal studies professor at you says it is good to bring up a way for the public to weigh in. he says this is exactly what accountability looks like. toit so bad in that context have the president asking senators for a show of hands on who they favor or turning the question around saying who would you like? great,yler: open debate is but it has not been an intellectual open debate. friendly, there are a lot of the decisions the fed takes that are highly technocratic, involve high levels of expertise. the same is true of other regulators. we do not, in fact, make those democratic. they are open for debate, but you do not get a better outcome by having the public scrutinize every monetary policy decision. julia: breathing a bit hysterical here? -- are we looking a bit hysterical here? what happens within the fed when they are units that established th who the next leader would be? why are we assuming the drama that donald trump has created before hand actually continues a

what does the fed do? they try to fix the price of the world's reserve currency, which is the most complicated price it could possibly be. you almost always know that they are doing it wrong. maybe directionally -- i think they often look to market signals. they follow markets instead of leading markets in some areas. i think the job is impossible. the other thing is that it's a huge bureaucracy with hundreds of phd's who all have groupthink. having dealt with the fed and the banking business for a long time, i think it's really difficul to move that organization and it's also constrained at least in theory by number of lost. aws. jonathan: my question was when to be expected to your nomination to the fed board? there's an opening on the fed board for you. given your background in banking, and your thoughts that you are describing right now could be quite valuable. would you rule out that position as well? john: not necessarily. it would depend on the whole and whether you believe you could impact policy.

trump taking his fed chair. the fed, boj meeting this week. what does this mean for the yield differential when it comes to the u.s. 10 year? jgb's?jgb's -- versus the lateeen since summer the widening of that yield cap has been -- and has been a beneficiary environment. we've seen a little bit come off , but still quite intact leading up to the boj meeting. signal forbe a good the nikkei 225 although we did break that streak. we are still holding on to those twenty-year highs. >> indeed. monetary policy has been good for the nikkei 225. it is interesting to see this yield gap. oft to me is more a function the boj than the fed and how active for aggressive they will be in hiking rates come although we are above that level on the 10 year of 2.4%. will will see if the boj be cutting their inflation forecast for the near term. let's look at the market open with sophie kamaruddin. sophie: it is a heavy central-bank week for the boj, the fed. the focus on earnings. we have chinese pmi. inflation from south korea, indonesia, and thailand on deck. ja

turning to this week's wall street agenda, it's all about jobs, and the fed. the fomc kicks offa two-day policy meeting tomorrow, a rate decision on wednesday, also on wednesday adp employment data, followed by weekly jobless claims on thursday and the october jobs report on friday. on the earnings report results from under armour, pfizer, facebook and apple >>> investigations looking into russian interference with the 2016 presidential election are expected to announce at least one indictment today the u.s. official with firsthand knowledge of the process confirms to nbc news that the office of special counsel robert muleler issue that indictment at some point today the charges and the target are not known at this time president trump repeated denied any collusion with russia took place during the election and calls the probe a witch hunt >>> new poll numbers show the president's approval rate something at his lowest level since he took office the poll finds only 38% approve of mr. trump's performance >>> president trump will announce his pick for the next fe

the fed is on a hiking path. inflation is -- >> she continued emergency policies eight years into a recovery from the event. it took her two years before she decided to -- >> wouldn't the dovishness mean she's doing it because inflation is not a big deal? this fed is hiking when inflation is low >> she changed her tune in the last six months. >> i think they should do jobs is low inflation bad i don't think we understand -- with the way tech makes everything cheaper and amazon makes everything cheaper and walmart -- i don't even believe the nominal numbers. >> it should just be about jobs. wlofrnlgts do >> what do you think, the next fed claire. >> chair >> we have a populist president so warsh >> coming up, we will talk ads did you see the president's cup? the founder of wheels up, when you put your stuff in a luggage thing in newark airport, you stare at a wheels up ad. the company has news about a big round of funding details next it's what this country is made of. but right now, our bond is fraying. how do we

president trump has a short list for the fed. janet yellen will not stay but harry cohn will not get the job. this is "bloomberg markets. ♪ rishaad: what a day it was tuesday, especially in hong kong. up 18 points. key drivers include those shares, particularly the banks. nearly 8%. other banks rising between 5% and 6% apiece. showing a shares and what is going on with them. what we have is this trajectory coming through from january. the only way is up. this is for 2025. falling into place for the index to make a solid start for this quarter. china is low at that bank reserve ratio. we have that stronger pmi number as well. generally hitting headlines. kong may have to delillo market holidays riyadh it may look like the -- holidays. it looks like the bulls are firmly in position. this could be the next fed chair. kathleen hays joins us. kathleen, who made the list? kathleen: it is not that the names are new created it is important. bloomberg news brexit fact -- breaks the fact that they are bringing out a short list. said just

joe: should the fed not be hiking right now? if you are the fed chair? hiking would not be right now. i think the fed is trying to normalize and that version of normality when out the window, 10 years ago. julia: talking about changing political dynamics in the age of trump. from new york, this is bloomberg. ♪ scarlet: "what'd you miss?" isublican senator bob corker in open opposition to the president, calling the white house and adult day care center and worrying the president could lead us to world war iii. paule back with krugman, nobel prize-winning economist. joe: corker said there are a lot of people in his caucus, who feel the same what he does. but none have called out trump, to the same degree. paul: it is about their political careers. attention toaying this stuff for a long time, and i read a lot. today's republican legislators, people in the senate, and more so in the house, they grew up in an era of a monolithic, very tightly organized republican party. the ours not people -- these are not people who courageously staked out a position that

a lot of support for a fed rate hike. u.s. dollar, see how it is reacting to hawkish comments from the fed. it is rising to a two-month high, treasuries dipping. it is going to be the case for the higher rates. you look at the one chart, you can see it has come off the bottom. let's talk about bonds, particularly puerto rican bonds. the president talking about how, given the tragedy in puerto rico and hurricane relief, the debt would have to be wiped clean. let's go to g #btv 3010. these are puerto rican bonds. you can see they have slid dramatically as investors figure out how they will get paid back. see if you can see where on this chart this happens. they say we are probably going to have to wipe the debt clean, a lot of people bailing out, a difficult situation. seeminglyt is it endorsing a type of debt relief that is unprecedented. you look at market movers, netflix up in a big way as they raise a popular u.s. plan by $10. pay plan killing it. this, and many said they would ideally use it as their preferred plan. fedex,

how does the fed push those expectations? what more should or could you do to push the expectations up? question,his is a big it comes down to really, how are we talking about meeting our policy objectives? i think we need to be basing our decisions on outcome based monetary policy. we need to be very clear and telling everybody we are supposed to be supporting full employment and price stability. the unemployment rate is quite low at 4.2%. i think wage growth could be stronger. stronger wage growth would reinforce the idea better. getting inflation up to 2% is very important. moving expectations up, were willing to go above 2% if that actually happens because we have a symmetric inflation objective. i think we should be willing to push inflation above 2%. just like we've spent a lot of time below 2%. manus: can i push a little harder on that? hot chicagoing style? is it the ability to let it run, let it breathe? charles: i don't think we should fear 2.5% inflation. if we get to 2.5%, it's not inconsistent with a symmetric 2%

the fed is -- decide is responsible for low inflation? does the fed chief need an answer? janet yellen basically admitted -- >> this is her famous mystery. this is critical for financial markets. -- thest domino break low vix, equities, credit spreads being tight -- if you look at the expectation -- if you are on your bloomberg screen, type bcfc the quarterly profile, you can tell the core pce -- the quarterly profile today, it is expected to be 1.5, the next several quarters. this is the annual. terminal enthusiast. -- only 1.7 in the second quarter of next year. this tells you that if this consensus forecast is right, you will also have a relatively dovish fit. they do not need to hike rates. absolutely, the thing you discuss every day -- why is inflation so low? will the consensus forecast continue? those inputs turn out to be extremely -- julia: at one point, you have to have a region. joe: republicans for a year said they were going to repeal obamacare, got into office, and the constraints of having power prevented them from doing that. i wonder if there is a sim

we think the investor community is having given the fed. we use the word "transitory" to describe the lack of inflation since about 2013. the market is interpreting that. particularly some of the comments from the fed governors earlier in the week about that particular word. there is a bit of wrangling going on with exactly how much longer we are going to wait before the word "transitory" is removed and the word "structural" comes in. we think the flattening of the curve reflects the market, foretelling to the fed that there are structural underpinnings you need to ignore knowledge. but gdp in the u.s., consumer spending, it has been very strong. we think it was probably an upside case to be made for inflation to accelerate in the next 12 months. lisa: bonnie, who matters more? the ecb or the fed at this point? bonnie: when you talk about quantitative easing, the ecb. the fed has already communicated what they are going to do to the balance sheet. they have been transparent about it. we know it will be very gradual. so there is not a lot of

race for the next fed chair. what is the latest? mosteen: one of the interesting stories from our bloomberg news team is the white house is looking for a fed chief who will be willing to revisit all of those regulations that were passed during the crisis, during the recession to make banks safer, make investors a safer, make consumers safer. but also on friday, the treasury department put out a 220 page document looking at plans for easing some of the rules on stocks, bonds and derivatives. it seems a lot of it is not so much like making eggs riskier or -- making banks riskier, i think a lot of people on wall street will support. they say the white house is clear, they want a fed chair with policy experienced and strong leadership skills. let's listen to what the bond king said about who he wants to see as the next fed chair. >> i knew him for three years, he is a brilliant man, he has ideas that are little bit different other central bankers. he looks at the market a little bit different from a structural standp

economy or the fed. is because the fed -- the markets have under press -- under price the fed dots. the more hawkish fair chairperson coming in, there was vulnerability and so you are seeing differentials work in favor of the dollar versus the euro, versus the commodity bloc currencies. this is a temporary move and it has been prompted by the vulnerability of dollars short. tom: very good. stephen gallo. our -- hour.0 vince reinhardt joining us. withe that, nathan sheets page and fixed income. from guy johnson's london, look at that. gorgeous weather in mayfair. this is bloomberg. ♪ taylor: this is "bloomberg surveillance." let's get to bloomberg business flash. there are reports that cvs is in talks with aetna for $66 billion. the talks may not lead to a deal but the ceos are said to have met. edna says it doesn't comment on rumors or speculation. ubs has increased a key measure of financial strength. it rose to 13.7% in the third quarter after surprise drop in the previous three months. ubs continues to focus on wealth management and added $2.4 billion of new money. -- 18% jump

warsh would bring controversial opinions to the fed. >> food to the fed, you guys are really on top of it. >> people talking about kevin warsh would be to the fed what betsy devos is to the department of education or scott pruitt to the epa, an agency head in direct contradiction with the administration warsh reported as being a top candidate. >> changes are in order in how the fed organizes itself, conducts its business and deliberates policy choices the existing governing structure enforces a group think and places the fed at considerable institutional risk when the next crisis strikes and makes the next crisis more likely to be harmful. >> here's an encapsulation of some of the thoughts from kevin warsh. one is the fed should have exited low rates and the big balance sheets long ago. he focuses too much on decimal points when it comes to inflation ranges and he wants the fed to focus on whole numbers and less on the latest economic data and market reactions. critics point out he's fond of blasting the fed and short on how many he would fix it he's been criticized by several economis

the fed is taking advantage of the good times to normalize policies and the fed is also content about asset prices. if they stay behind the curve for too long, the fed's credibility will be at risk. francine: patrick, we have had these conversations in the past, saying, the market is wrong, look at the dots. but the market has been right. >> i don't think so, they will hike three times this year. we are now at the point where we are at 75% to 80% pricing in the third one. i think the fed has been right and the market has been wrong this year. the market is still overestimating how low the bar is for the fed to be hiking. they don't have a way to fight the recession with rates as low as they are. for me, the most important part will be about how much discussion was around the elevating of assets. i think this is a warning the fed is putting that as part of their hiking plan and one of the measures they will be considering. francine: patrick, talk to me about this chart, which tracks the federal funds rate with the treasury 10 year yields. yeared funds peak with 10 yields. what does thi

rishaad: will the fed go in december? >> i don't know. one of the things that i try to do in advising my colleagues is let the data tell me what the marketplace is. , there is the storms a lot of noise in the data that will come out. one thing i will try to do is go into the field and talk to people in my district and get a sense of how disruptive it has been and draw a conclusion about what i think they should do in terms of monetary policy. thei: i want to go back to inflation conundrum, that global central banks in the midst of this almost existential crisis working out where the inflation is. that inflatione doesn't matter anymore and that perhaps inflation targeting is no longer the most relevant way for central banks to set policy? would you agree with that argument? >> i am not there yet. there is more to learn about what is happening in terms of inflation dynamics. inflation is starting to pick up across the world. i was in singapore, and they were reporting they are starting to see more positive inflation. toill be keeping an eye

finding the fed chair trump style the u.s. president builds up suspension who he'll choose to head the federal reserve that as three of trump's former campaign aides are charged in the f.b.i.'s russia investigation also on the program catching carbon scientists remove carbon dioxide from the atmosphere and lock it back into the earth and how a shortage of butter is taking a toll on francis signature pastry. this is a business i'm crystal kober welcome becoming u.s. president hasn't dampened to donald trump's penchant for drama for weeks he has been trying to build up suspense about who'll hear will pick for the head of the federal reserve trump himself said the current fed chair janet yellen is among those considered but he has not been a fan of janet yellen despite the praise she has received from many sides. there's no business like show business they say but what about the business of running the world's biggest economy it's a blurry ninety washington u.s. president donald trump clearly hasn't forgotten the tricks of the tr

fed. what are you hearing? jay: this would probably be aj powell fed. it suggests one of the things that is in attribute of powell, he looks like a central banker. trump likes those things. you could probably say maybe powell. terms of his experience on the board, regulatory overview, which is to pull back from the regulations of dodd-frank, he fits what the trump administration seems to be looking for. alex is what about the relationship between the fed and the treasury? mike: it has been generally good. ruben, theays of bob sort of thing that bill clinton adopted. this suggests may be steve mnuchin thinks he has a good relationship with powell. does mnuchin think he can influence powell in the fed. the economy starts to grow fast and inflation picks up, how hard will the fed lean against them? that has to be a consideration. said pull back a little bit. trump does not talk about pulling back a little bit. who isooking for someone a little more of a hothead than jerome powell? he is open

the short list for the next fed chair reaches the president's desk. warsh, yellen, cohn, and powell are all in the running. and the divide between madrid and barcelona continues to grow, sending spanish funds lower and much lower. we begin with a big issue, wage growth surging. robert stan on the fed's next move. >> this is confirmation we are getting real wage growth. >> 2.9% wage growth is the headline. >> i think that is good for american workers. >> looking at the wage growth, and you are looking at the unemployment number, which is the bright news here. >> remember, janet yellen said in a healthy labor market wage growth is between 3% and 4%. so we are just about there. >> as long as wages begin to rise towards 3%, they certainly are. and i think the fed is a slamdunk in terms of raising rates in december. >> this confirms a story that has been permeating the market. the data is strong enough and the fed has said they will tighten, therefore december is pretty much in the bag. >> i think people will rightly interpret that the fed can move. they w

fed. he joins us from new hampshire. it's crucial for the fed chair to be an effective leader and have a high degree of common sense. does that rule any of the candidates out? >> i think the key point to make is that it's definitely pointing toward the case for reappointing janet yellen as chair. has a solid- she record, anyone who knows her thinks of her as someone with superb common sense. she is an exceptional leader, she has built consensus at the fed. they have many top decisions to make over the years, she has consistently built strong consensus. not always in and it does unanimity, but a consensus around the key decision. joe: something that i am curious thet, talk about institutional constraints of the federal reserve and the difficulty it is to change the policy inertia that has been set. it's not janet yellen is renominated, but someone else, how hard would it be to take the fed in a new direction? >> the federal reserve act established by congress has been in place for a long ti

trump is said to announce the fed chair pick next week. the story on the board is where treasuries have been this yield. yields grinding higher this week. levels we have not seen since march of this year earlier this week. we traded at 294. on the u.s. 30 year. those colors are confusing. still ahead, the final spread. the u.k.'s unreliable boyfriend, the bank of england's mark carney. this is bloomberg real yield. ♪ ♪ jonathan: i am jonathan ferro. this is "bloomberg real yield." time now for the final spread. coming up over the next week, a trio of central bank decisions from the bank of japan, bank of england and the fed. plus, the u.s. jobs report and president trump's trip to asia. it is widely expected his fed chair decision will be known by then. still with me around the table, kathleen gaffney, joern wasmund and jack flaherty. jack, you mentioned the u.k. the bank of england in focus, potentially the first rate hike in over a decade. i looked at some u.k. retail sales figures that came out and they dropped off a cliff. i looked

the short list for the next fed chair reaches the president's desk. warsh, yellen, cohn, and powell are all in the running. and the divide between madrid and barcelona continues to grow, sending spanish funds lower and much lower. we begin with a big issue, wage growth surging. robert stan on the fed's next move. >> this is confirmation we are getting real wage growth. >> 2.9% wage growth is the headline. >> i think that is good for american workers. >> looking at the wage growth, you are looking at the unemployment number, which is the bright news here. >> remember, janet yellen said in a healthy labor market wage growth is between 3% and 4%. so we are just about there. >> as long as wages begin to rise towards 3%, they certainly are. and i think the fed is a slamdunk in terms of raising rates in december. >> this confirms a story that has been permeating the market. the data is strong enough and the fed has said they will tighten, therefore december is pretty much in the bag. >> i think people will rightly interpret that the fed can move. they will

the race for the fed chair. the president is set to announce a fed chair pick next week, that's according to dow jones. trump is said to announce the fed chair pick next week. the story on the board is where treasuries have been this yield. levels we have not seen since march of this year earlier this week. we tried it 294. -- we traded at 294. still ahead, the final spread. the u.k.'s unreliable boyfriend, the bank of england's mark carney. this is bloomberg real yield. ♪ ♪ i am jonathan ferro. this is bloomberg real yield. coming up over the next week, a trio of central bank decisions from the bank of japan, england and the fed. the u.s. jobs report and president trump's trip to asia. it is expected his fed chair decision will be known by then. kathleen gaffney, joern wasmund and jack flaherty. jack, you mentioned the u.k. the bank of england did focus the first rate hike it over a decade. i looked at some u.k. retail sales figures that came out and they dropped off a cliff. likeked at gdp, it was 0.4% bet