the fed pushed back and fed on it. exacerbations in price action. this week was about the fed stepping away and if they hike at the end of next year which is crazy that we are still in the midst of a pandemic. i would say this is signs of a broken market emerging. the fed needs to step in, otherwise i think it is going to get worse. jonathan: it is hard to reconcile with the idea you have higher rates before you've priced in inflation can you reconcile those two things? mark: i agree that this is a bit of an unhealthy rate rise. it started out as a healthy rate move reflective of better inflation and growth expectations but grew to an unhealthy area. you can see it in the liquidity and exacerbations in moves. real questions about how is the fed going to handle this and what will they be looking for to bring them in to stop the move are what will they signal the outlook for monetary policy? we think the fed is really going to be challenged to talk about how the rise in interest rates is becoming unhealthy while communicating they have a better outloo

the fed is going to be. people let home, office, trading desk will either be longer-term which is what the fed is expecting and what is priced in the market. inflation expectations. the inconsistency between inflation expectations which have not done much, and rate hike expectations, which have. lisa: the rate hike expectations are derived from market moves resulting from distortions. there is a lot going on under the surface. it raises the question to me, at one point is fundamental data matter? we have a moving target. how many revisions have we seen the past month based on expectations from a month earlier? jonathan: this is about years, lisa. have a lot of fun with that. i made a trade several years ago and we revise it and re-revise it and re-revise it. we are up a point on the s&p 500. let's bring in chris harvey. great to catch up. your take on the price action the last 24 hours. chris: a lot of people worry interest rates are going up. that is not our concern. interest rates play a big part. we are w

the fed is now saying we need more, and i think they will have to be given more. caroline: talking about giving them more, we have seen global central banks respond to the yield update. we saw the rba in australia move and do more stimulus, basically. we saw the korean bank promise more and the ecb come out and say look, if we see yields back up that much more, we are worried about our long-term growth prospects. what do you think about the vet having to speak to this? jon: one of the interesting things we saw in the beginning of february that was one of the leading catalysts to this global fixed income move is that the rba went to a calendar guidance and said, we do not expect the outcomes that would warrant a rate increase. -- they will rely on the fed to reinforce their guidance for them. i think even on the calendar side, a lot of these central banks have a very heavy outcome based guidance, and markets are looking through it and saying, we think growth is going to be better than you do. i think that's leading to a lot of this friction where the market is sayi

go back to steve, who has probably mined a nugget from the fed's report there steve? >> yeah, three nuggets you can take them to the bank there, tyler the fed is saying it's likely to take time to achieve substantial further progress that's it is buzz phrase for when the fed might change the quantitative easing with the purchase that its making second, it will community indicate any changes to qe well in advance that's a big part of powell's policy finally, directly to what lindsey was talking about. it's important to distinguishes between changes in prices, and the fed sees though as two different things prices go up on a one-time basis. steve, thank you very much and thank you to lindsey and larry adam we appreciate your time today. >>> well, the gamestop saga won't stop it heads to washington tomorrow. that reddit user who goes by roaring kitty has just been sued we're going to go to kate rooney for more on that >> his legal name is keith gill, but most people know him as roaring kitty or deep effing value online he's been sued he's best known for youtube videos an

we have not heard it from the fed. lisa: how much is technical and will it be a self-correcting cycle of people try to get value out of bonds that have been perhaps oversold? kid dukes put out a note where he was staying there may or -- the cheapening of the believe the was curve predictor is unsustainable. that seems to be the view. jonathan: p jump at the longing? lisa: i have not gotten back messages. jonathan: i've not heard anything. joining us on politics and adc, emily wilkins. -- in d.c., emily wilkins. things changed the last 24 hours around minimum wage. emily: democrats are trying to get this package through as part of the larger seamless package. they're not using the normal process, they're using the special process a budget reconciliation -- but not everything can go through budget reconciliation. last at this in a promontory and ruled the dollar minimum wage hike cannot be in the bill. -- the $15 minimum wage hike cannot be under the bill. it does make it easier to pass the stingless at this point but pr

guy: what is the fed is wrong? the fed seems pretty country will. the chair seems pretty comfortable. there's an idea that they are ok being slightly behind the curve and letting the economy run a little hot. what happens if it runs too hot? where is that point, and how quickly do you think the fed could recover that ground were it to be lost? alan: it is an excellent question, and if somebody asks jay powell that, he is not going to answer that question, partly because he doesn't know for sure, and partly because he doesn't want to commit himself to something that is a hypothetical. my guess is that for a while, and for inflation -- for a while, if inflation gets above 25%, the fed will start getting a little nervous, but not do any thing about it. if it looks like it is going to stay there or go higher, then i think the fed will start acting to curb inflation. that means tightening money, and then you will really see more than a taper tantrum in that case. but it remains to be seen it will have that scenario. we need to remind everybody, and maybe

atlanta fed, i think it is 9.5% gdp. forget about this. the fed is locked in. jonathan: evan brown joining us now, ubs asset management ahead of multi-asset strategy. the fed is sticking with it. do you stick with it, too? stick with what is working? evan: we do right now. i really don't think you can question the fed's dovishness at this point. powell has made his legacy on this inflation overshoot. yes, we are going to get this base effect driven inflation pop in the spring, but that will be the moment for chair powell to say this is transitory, we are looking through it. the market may try to test a little bit. you may see some volatility on that front. but this fed is different, and we shouldn't try to fight the fed in this environment. tom: the research notes that we see here at "surveillance" are uncommonly strong this morning. the basic trend is higher gdp. does ubs look at that as a single point higher, or is it a rapid trend back to normality? evan: i think first of all, it is nominal gdp. when we are thinking about earnings, we are thinking about the

many advocated the fed take this step. but he says i think they have designs that go beyond climate change. creating a system whereby the government can use its financial pregtory power to direct the economy away from businesses an industries it disapproves of is very much the goal of many democrats in congress anti-administration. mr. chairman, that sounds like choke point to me. operation choke point that would put a dagger in the heart and to resurrect that, to use climate change as an excuse to go after businesses, we are doing legal business n. a legal way, producing products and services we need as an economy, is wrong. i'm just wondering where you stand on that. mr. chairman. chairman powell: soarry. -- sorry. first let me say the scenarios are completely from the stress tests. it's not the same thing at all. you really asked about a different question. which was -- give me two seconds. what was the question you did ask? mr. luke mitre: you are recognizing the choke points on business -- on banks that do not necessa

fed chair jay powell testifying on capitol hill. from new york city, this is bloomberg. ♪ jonathan: this is "bloomberg real yield." it is time for the final spread. you will hear from janet yellen on monday, then a ton of fed speakers through the week. fed chair jay powell testifies tuesday and wednesday. we have representatives planning to vote on president biden's fiscal stimulus package. back with us. let's go straight to the testimony with chairman powell. what are you looking for? >> more of the same. you know, i think that the fed consistently -- if there has ever been a time when there has been unanimity between all the different governors and fed presidents, it is now. they all seem to be singing the same tune. i think they will be focused on employment, inflation, and they are not going to really be focused on transient move in the stock market or the sort of selloff we have seen in the bond market. their focus is going to be fair and square on inflation and employment. jonathan: i sense you think there may be subtle shif

lewis: the fed is doing what it can. the fed cannot give people drops. the tools the fed has our macro in general where as the problems we have are much more narrow. fed officials have focused on fiscal policy. that is the right way to think about it. what the fed can do is not get in the way of that recovery and that is what they intend on doing. lisa: is the fed giving in out to congress to not take action, to not pass certain plans because people look at the stock market and say everything is fine? at what point does the fed effort end up hampering the recovery and a longer-term trajectory? lewis: i do not think the fed can think of this as three-dimensional chess vis-a-vis congress. they have certain tools, they have been given mandates, they need to exercise those. they have to leave it to others to make those political decisions about how to use tools for policy they do not control. it would be a mistake for the fed to try to think through and that kind of complicated way. tom: what is the exogenous shock you worry about. within the pantheon of gre

will markets be as patient as the fed? the fed is insisting they will be very patient. market may sew the seeds of their own destruction. at the moment, they are building and expeditions of strong growth and very accommodative policy for as long as possible. if they anticipate that the fed may taper sooner than expected, that causes a declining risky assets rather than forcing the fed to taper earlier. i think until the fed knows there has been a rebound in growth and the vaccinations have started to be rollout -- to be rolled out, and we haven't been set back by further mutations, we won't get action from tapering. we will be looking for tapering, but in the near term, that is when there could be this volatility, especially if we get these higher headline inflation prints. alix: even in breakevens in the u.s. or europe rising, i am looking at over 215% at this point. this is a rudimentary question, but at what point does it start to affect cash flow and earnings and valuations in the equity market? janet: yes, that is the question. i suppose that can be set against wha

it hasn't at all amounted to any kind of a threat to fed independence. it becomes much more important during times of crisis. in particular, in the global financial crisis the fed used our emergency 13 three lending authority to very successful effect and then dodd frank in the aftermath changed the law so that any facility started under that emergency lending authority . i think that's good government. that's basically putting the elected branch of the government in a position of accountability. in any case, it's the law. we worked very successfully under that new legal structure. as long as those powers are reserved for unusual circumstances like that, i don't really see affect -- a threat to fed independence. basically the idea that a central bank needs a degree of independence from the political process, from election cycles is very well understood and widely agreed to on both sides of the aisle. it's rare to find someone who doesn't actually get that. this doesn't mean the fed won't come under a lot of criticism during difficult economic times. ulti

the fed chair jay powell and the fed reserve to the rescue, and you are saying, brian, sef everything is in the red, yes, but the nasdaq was down 3.9% which is a massive move for tech, and not making light of it, but nasdaq is down 1.8%, and the markets are down from the lows and concerns about the rising rates and the bond market that is, and the jay powell says from our end, don't worry, the low rates for a long time. all right. moving on from the most important story of the generation which is ending the pandemic, and the nationwide vaccination efforts to the disruption in the weather of delivery of vaccinations. but at least 13% of americans have received their doses, and we need to focus at the adults over 18 who have gotten at least one shot is 64.1 million americans. and we go to meg tirrell. >> today, in front of the house committee, there were some updates in the written technology of the vaccine supplies and so we have moderna and pfizer saying that they are going to be doubling the u.s. supply to 40 million doses or more per month by april and pfizer is going to more than d

does the fed need to voice much when we have such a desperate search for yields? conor: nominal yields are tough to think about because they are still so historically low. to me, the real interest rate is more interesting because on the breakeven side, we have a five-year breakeven inflation expectation of around 2.3 percent right now, which is historically high for breakevens over the past decade. how i could those go in a world where we still believe the fed can anchor inflation at around 2%? and if we see real interest rates go up, that is where the economy could start to cool and will the fed deal with that? joe: remarkably, consensus going into 2021 was that the dollar would just continue to slide. it is actually up fairly substantially, particularly against developed dm currencies. could the dollar surprise everyone and maintain strength throughout the year even with that robust growth in the fed holding rates near zero? conor: outside the u.k., to give caroline credit, the u.s. is one of the best countries in the world when it comes to the pandemic vaccine

treasuries and deposits of the fed from their balance sheets. this was important in preserving bank liquidity during last spring's to cash and the fed can't go bankrupt and the treasury has never failed to meet its obligations. we all agree that the economy is still in need of fiscal and monetary support. the chairman himself said that banks should be doing more to help their workers and our broader society. but they can't do that when we're tieing their hands with excessive and challenging capital requirements. it would appear congress is going to create even more bottlenecks in our financial plumbing by flooding the economy with about $1.9 trillion in new money that banks will have to hold capital as soon as the treasury starts writing the checks. my question is would you agree that it makes sense to seriously consider extending the slr exclusion given the other measures the fed and congress are taking to facilitate our economy's recovery? >> so, i do think that the slr exclusion -- i know it expires at the end of march, and we actually haven'

the fed chair telling everyone the fed is still in line to keep stimulus going as long as the economy needs it. stocks turned around on that. what happened yesterday? stocks turned around. the fed does the inflation coming but it is going to be transitory because it will be based on supply-side shocks for commodities and things in short supply. then the economy will get going. there is not a problem. house members, depending on their political party, have pressed him on the question of whether or not they should put more stimulus into the economy and how much and where and he is completely declining to answer. they have tried every way possible and he is totally staying out of that today. nothing new from the chairman. he again said there are some assets that may be frothy but overall the economy is not overleveraged. the banking system is strong and we do not have a lot of problems no decisions on bank dividend payouts and the leverage ratio. more groundhog day than catwoman this time. guy: excellent. we never got to the bottom of the catwoman thing, anyway. we are looking for answer

william: number one, current fed policy is benefiting rich people more than poor people, so the fed is very aware of that and wants to make it clear that is not really the goal of the policy. the goal is not to make more wealthy those that are already wealthy. the second is the last cycle, the fed pushed the unemployment rate very low, so we can go further on the labor market than we thought. so they don't want to make the risk of being too cautious pushing the labor market because they think they can go further than they thought. jonathan: it makes you wonder what it will look like if they have to come in and hike sooner than people thought, too. that is bill dudley, former new york fed president. they are trying to address societal injustices, and equality. what happens if they have to step back in once again? tom: i think it is a theory well taken. i give the chicago fed a lot of leadership points on this. jon, you're absolutely right that it is all easy and comfortable given stability in policy, and the moment they have to get to the surgical nature, with jon, a real yield that is

i wish it was easy as straight optimism, but the market is pushing the fed, because the fed is allowing the market to do so, so it's not just about vaccines and faster economic growth and recovery. there is a chance the fed could be wrong. caroline: talk to us about that. larry summers has been saying the market is too hot, and economy too hot. can the fed that pushed into raising rates by market action? >> you know, it might be. this is what i am curious about and i wish someone would have asked john williams. what is the breaking point? what is the outline where they get too high, and they have to come in and do something for the market? watching the fed and how they react to markets over the years, i feel like they have a tendency to be more reactive than proactive. so no one knows. this is the problem. this isn't their priority. their priority is looking at that unemployment rate, real unemployment somewhere around 10%, so they have not given us a lot. there is an interesting piece by my colleague in london who talk to us strategist at mizuho, and he is saying the five year yield is

the fed will have a little bit of time to adjust. the structure i mentioned before where they are -- where they have all the steps. i'm not sure that's appropriate for a situation where things are moving fast, much faster than you would see. jonathan: always great to have you on the program. stephen stanley, here's which want to think about. what's the biggest risk. we get this big upgraded forecast to the federal reserve. or the downside risk we get that upgraded forecast and they start to gravitate higher. >> a minute of microanalysis looking at hospitalizations, looking at better numbers. a match on 65th and they are micro-analyzing their ability to put tables inside in their restaurants and the owner said we are adding two tables this week and the city is allowing them to go to 35% occupancy. those of the micro decisions and up folding into our world. jonathan: did you get a free drink to shout them out? tom: i got free drinks. lisa: with his combat pay. jonathan: there's got to be a story there somewhere. tom did not watch the t

and the fed's own data spell out the problem. i think you were just talking about it you know, the top 1% of families last year received 20% of all the income in this country and you think that's not good for our economic growth overall, is that fair >> well, i would say that the stagnation of incomes in the lower income area and also the low mobility that we've seen, those to me are the two most important things that i focus on when i talk about inequality a. nation of incomes and low mobility. >> we are talking here income and equality how much people earn each year to pay the rent and put food on the table. inequality shows up in wealth, which is what families build over time, money in the bank, home, stock, wealth and equality is even more extreme in our nation than income equality. who ill the top 1% of families a tiny slice bought 20% of all the income earned last year. the top 1% held 33% of the tota wealth in this nation. now this pandemic is making inequality worse unemployment as you just noted is now at about 20% or th

that was the last fed meeting. if anybody doesn't think that jay powell and company are uber to the 50 million power dovish, that chart say it. they may not want to raise rates, but they aren't necessarily the only voices to be heard investors have something to say about that look at 30-year bonds. they are over one-year high yield now going 13 months. let's look at the nod. notes over bond. notes over bond at a five-year wide that tells me everything we've been seeing with rates will most likely continue. and if you look at tens minus bunds, it's at a four-year bide. we're leaving europe in the dust with respect to rates and that's significant. especially considering we're spending the most. we want to spend another 1 $.9 trillion do we need it? the markets are augering a different scenario than the political side if we look at what's going on in bunds, the last time they were positive, they tested 29 base points in the middle of 2019 we're coming up quickly. and jgb, the least negative since november of 2018 and

in the fed has shifted as well. you have to put all of that together when you think about historical parallels. lisa: and when you think about that we don't understand inflation and people think it will never pick up like it did in the 1970's and now people are thinking this is different. jonathan: coming up, chetan ahya . and bloomberg real yield at 1:00 p.m. 25 minutes on fixed income. looking forward with some actual real yield negative at 68 basis point. this is bl jonathan: a lot of economic data for america. from new york city this morning, good morning. alongside lisa abramowicz, i'm jonathan ferro. here is your data. michael: this is where we get the january numbers on inflation and we are just getting them now from the bureau of bpce index -- from the bureau. bpce index puts the year-over-year rate -- and put it over 1%. if you are making it trade, you have a ways to go. the core rate which everyone has been following, 2/10 more than had been forecasted for the core deflator on a year-over-year basis of jus

steve, thank you it's good to hear from you after we heard from the fed chair today. let's kick this around, guys josh, what are we to make after we've witnessed technology biggest two-day decline since september and the nasdaq below the high since november. i could go through a list of big-name stocks down sharply over the last week what do we do? >> i just think you're in this situation where a lot of people got on to one side of the boat, and i think we have a lot of different trades that all at once are really one big trade and i've written about this extensively on the blog over the last couple of weeks it looks more freprescient than really happens all toward the same con scept where there wouldn't be cash flow, and you don't have to worry about current earnings and all you have to worry about the addressable market and the market share that you attain and turning on the profit spigot five years from now, ten years from now that worked last year when the fed took it to zero, but we have an economy that's growing and we have people going back to work and we have

the message from the fed chair, fairly consistent. not much in the way of any comment at all on the proposed stimulus package congress is considering. he was asked as many ways as it is possible to ask about that and in every instance he said i am not going to talk about it, it is up to you. he would not touch that. the one area that did keep coming up and still keeps coming up is a decision the fed has to make at the end of march about the supplementary leverage ratio, how much the banks have to hold against their assets and when the crisis began the fed exempted reserves from that ratio. that goes until the end of march. a lot of senators are asking on behalf of the banks, are you going to continue that exemption? the idea was to make more loans without having it count against their leverage ratio. we have not made a decision on that yet. guy: let's pick it up there. michael will be sticking with us throughout the hearing and updating us and also hopefully getting to the bottom of the catwoman thing. trying to find an answer later o

the fed's going to watch it. if there's a big selloff either in bonlds or stocks, it's going to prompt the fed to take some action to have more orderly distribution, but this idea, i don't know, i picked it up years ago, this idea when it comes to stocks of strong hands you have a different environment where certainly for some group of folks, you know, one and a half percent is an attractive yield. i look at the idea that if yields go to 2%, the real yield is still zero. you're telling me the stock market with the kind of boom that we're expected to have can't prosper and do well with a 2% yield on a 10-year? if that's true i'm not sure you have a competent view on earnings in corporate america. >> jeff, you're -- go ahead, b.k. >> to the contrary i think at 2%, particularly if the fed pegs it there, the stock market will boom i just think it's this intermediary period. >> yeah. agreed >> jeff, you're vigorously nodding your head to steve's comment. >> yeah, i was it's what i was talking about a the beginning to

the fed clearly wants to see asset prices remain high. if equity markets do take a hit, would that be a catalyst for the fed to step back in? emily: i don't know that the fed would mind if a little bit of froth was let out from the equity markets. it is funny the way this conversation has changed over the past couple of weeks. before, we were worried about valuations getting egregious here, about froth developing in the markets. now we are worried about this five or six day correction and equity markets, which is still very modest. so i think the fed would be ok if we saw a little bit of that valuation relief come out of the valve here as we head forward, as that concern may be to fade away little bit. alix: i have to wonder how much more upside in yield can move really price and here -- can we really price and here? if that's what this is, there has to come a point where the market can price anymore in, right? zach: that's right. we think we are around the seventh ray delaying -- seventh or eighth inning of this rate move. we think we co

congress and the fed took unprecedented and decisive action. the fed lowered interest rates. and helped facilitate market function through a variety of programs that were funded through congressional legislation and we in congress passed over $4 trillion in relief over five overwhelmingly bipartisan bills. we are nothing like in the situation we were in last spring. today the unemployment rate is 6.3% about where it was in july of 2014. 18 states have unemployment rates below 5%. the average household is in a better financial position today than it was in before the pandemic. personal savings rates are up. consumer credit is down by over $100 billion. there is no question there are some subsets of our economy and society that have been hit much harder than others. but in the aggregate, the fact that americans have more disposable income now than before the crisis. congress is in deliberations to spend another $1.9 trillion with universal payments to people who never had as much income as they do to entities that have a state and local governments which in the aggregate have t

does and what other people might like the fed to do. >> very important. i agree, peter >> since you brought up the issue of transparency, i would love to ask a question about that the most thing i can speak of is ray gallegos with every conversation recorded and that transof transparency i wonder, when talking to federal reserve governors, if the transparency rules have gone too far to make it hard for them to have informal meetings among themselves do you think in some dimensions we have gone too far in requires transparency that would make it hard for the fed to have private conversations? >> i guess i would say it this way. there are some aspects of the transparency scheme broadly that are -- that if i had a blank speed of paper i wouldn't deal with it that way so that's not great. actually we have a waiver of that during the accuse phase of the crisis we got a legal waiver in the first c.a.r.e.s. act so i do think that that is challenging, you know, if for the six governors to have lunch together we have to be super careful. but -- but i will say that

fed chair. what do you think about that? do you think this will mean we will have continued collaboration, higher collaboration then we have had historically -- than we have had historically? conduct collaboration threaten independence? -- could that collaboration threaten independence? or could janet yellen protect the fed, if there's any political pressure? mr. powell: i guess i could start with the fact that these are long time institutional relationships. we have different authorities in different roles. i would say institutionally, there's great respect for those different tuitions on both sides. that is a different state of affairs. in addition, it is the case fis ministries and central banks have ongoing communication and in some cases collaboration, in particular circumstances come around the world -- circumstances, around the world in particular circumstances. it is not any kind of a threat to fed independence. it becomes more important during times of crisis. in particular, the fed use

tom: how will the fed respond at 1.20%? subadra: i don't think they are going to be concerned if the fundamentals warrant a rise in yields. we saw us get to 1.17% this year , a rising real yields which is what we saw this year, it is sort of a healthy reflation trade. i think the fed is not going to be very concerned. i think they are much more concerned about dramatic moves higher or lower in yields. that is going to disrupt the risky assets and general conditions. jonathan: great to catch up. nailed the estimate of this bond market last year. great to catch up. subadra rajappa of socgen. later, cleveland fed president loretta mester be catching up with the audience about what is going on, and dallas fed president robert kaplan as well. tom: are you telling me the fed is not going to start affecting messages in their speeches? jonathan: if we get a 1.1 percent tenure because we reopen this economy -- a one point 2% -- a 1.2% 10 year because we reopen this economy? tom: they are going to say one sentence, and all of a sudde

the fed has two big hats. one is monetary policy, and the other is overseeing regulatory banks and maintaining financial stability. this is another part of the picture to watch. rishaad: kathleen hays, still to come, will be joined by the chief finance officer of southeast asia's third-largest bank. giving his analyst for 2021. juliette: our market coverage continues. asia's hermann lee is up next en later will be joined by omar slim. here is a look on how equities are doing what the final day of february with big losses. and they came off of bigger losses of the day, now down. asia is still on track for a fixed monthly gain. the dow jones index up about 4.7%. plenty more ahead as we do see this bond rout affect equities. this is bloomberg. ♪ ♪ >> this is the bond market essentially telling us that they boom is coming in real growth in the country, and we are not priced properly in the market. >> we are selling off because of optimism from growth. i do not think it is concerned about inflation as much as c

it impacted fed accounting services, including retail cash and the fed wire, where banking transfer money electronically between themselves unclear what the overall impact has been, but it did not appear to suggest there were systemic concerns, especially since they believe the system is currently being restored the fed acknowledging that payment deadlines are impacted, and will communicate remade -- remediation efforts. >> the natural question here, steve, is there is no evidence it was an outside hack, et fed apparently going out of its way to say it was an internal error, an operational error, which sounds like somebody got fat fingers. >> tile her, i think you're absolutely correct to note the comments by the fed is they are not suggesting this is an outside problem, this is a problem that originated inside the fed. it looks to be something connected with the richmond fed. >> all right steve, thank you very much steve liesman. >>> the dow right now up about 400 points, gaining throughout the session and busting through old highs. disney is one of the stocks helping, hitting a new high

course the fed speak is intended to keep animal spirits alive and just keep consuming keep buying so this is revealing the true state and that's that's what people are concerned about who are in the exorbitant privileged class right wave christine legarde mean what you said because he's offering an escape valve yes right so what musk is doing he's a scaping these negative interest rates the 0 percent interest rates by buying because the same thing that michael saylor who kicked off the trend in the c.e.o. suites of corporate america and the fact is as we've been saying now for 10 years or more that capital full always flow to where it gets the best return that's a law of nature. just like the sun rises in the east capital will go where it's treated best what we have the last 25 years or so is collusion on the global central bank level who kept interest rates low and offer no competing rates anywhere else in the world and nomi prins writes about this in her brilliant book collusion but because it came around and offered the scape valve and now there's no putting the genie back in the

the fed has put so much pushback. we will not step in, allow forces to take hold, allow the trend to persist for a little bit. tom: what is so important, there is not a single reaction function -- i am going to go to howard ward and that brilliant conversation yesterday -- the application and mystery of the new technology on all we talk about on radio and tv every day. jon: the underlying inflation dynamic is one part of it, but great -- great story buried. it is the asset purchase program we don't have the guidance still, and i think it is needle in a way every time they speak. mr. dudley, the former new york fed president put out his piece on bloomberg opinion and he is raising questions everyone is asking -- the risk -- the probability -- if the probability materializes, and most people believe the fed won't react with short-term bursts of inflation. tom: with respect for your concern, we make jokes about inflation spiral -- we usually don't do that on radio or tv, but when we have a simulcast, we're all deflation

janet yellen was the fed chair and is obviously deeply familiar with the fed board. i would guess that she is talking to the chairman pretty much every day. what happened during the crisis in 2008 and 2009 is that the fed worked hour-by-hour with treasury and the bush and obama administrations to grapple with the crisis. i bet that's happening again. obviously, when we are talking about spending many trillions of dollars, that has huge implications for the fed. i am guessing there is a lot of work being done. alix: on a procedural basis, the house will pass today. then what happens? the senate is still going over some of these red lines? matt: the house votes today. there will be changes likely in the senate bill, so it has to ping-pong back and forth. in the old days they would have a conference committee where senators and house members from relevant committees would hammer out the details and bring identical bills back to the two chambers. those are remnants of the past, unfortunately. now they ping-pong bills back and forth. it will pass the house, though to the

the question is is the fed going to stay dovish? richard clarida is that we will do 5 billion in treasuries, $40 billion in multiples throughout the end of this year. if we have three strong quarters of growth, the fed could bring to the table sometime in the second half of this year. lisa: one thing you did show well at deutsche bank was put out charts showing the divide in the labor market between the haves and the have-nots. at apollo, there is the question when does this divide affect markets, which has been relatively divorced and moving on very different factors because they are dominated by the bigger, more resilient companies. when does it become a real problem you have a two track economy? torsten: i know. it is a k-shaped recovery and this is creating issues with leverage in companies that have earnings, not only because of covid but have not had earnings for three years in a row. what this is also opening up is a number of unintended consequences of the quick reaction the fed has during this crisis. normally a recession c

have you ever seen the fed, what do you make of the fed, because i don't think any of us ever seen it, to hillary's point earlier they have become so ambitious, right? they want to address things like income inequality. they want to fix the wrongs of yesteryear. they want to change policy, many wonder a, can they pull off, b should they be trying? >> charles, the answer, to that question is quite straightforward, they don't have the proper tools to handle income inequality. but somehow that has become an important issue to address. the people groups, better equipped to handle income inequality is congress. you could easily make the argument over the last 20 years income inequality has deteriorated, congress has stood by, not done much about it. so that is bringing the federal reserve in. but they don't have those proper equipment. charles: right. >> to give you a silly example, if you have a fire in a building and you start to use little kitchen fire extinguisher to put out the fire, that will not get the job done but you want to do something until the fire trucks arrived. maybe if th

piegza: the fed keeps an eye on all. when it needs justification to why they see stable or lower-than-expected inflation, it will be looking at -- even though consumers may feel price increases a bit more, even though we might see supply chain disruption, a higher ppi. tom: in every economic textbook, the markets are chapter 23 and you forget about them because you have to go to a party thursday night. or the markets right now associated with your economics or are they de-linked? dr. piegza: the market is showing stronger expectations than what the underlying structural data indicates print the data suggests it is far from coming out of the woods. the market suggests recovery is right around the corner. there is a sizable gap and downside risk based on where the market is pricing and expectations for a near-term return to normal and sustainable upward momentum in terms of gdp. lisa: the idea of how much to follow data when it is backward looking. we are expecting a seismic shift when people get inoculated and can go out

i have heard fed speaker after fed speaker talk about this. is the fed trying to put itself in a position where it does not make the same mistake as last time where it front ran a paper in the market priced it instantly? is the fed going to wait until right at the last minute before it starts talking about the need for changing policy? and is actively dynamic for the market to deal with this time around? >> it is 100% different dynamic for the market to deal with as the fed has change the parameters around how they view inflation. they want to see their 2% target, but they see that is asymmetric. they will let the inflation target be exceeded for an extended period of time because we have spent so much time below target. their mandate is really a single mandate and that is to get people back to work. we still have half of the people that have lost their jobs because of the pandemic not back in the workforce. they are going to let the inflation run north of 2%. we will likely see and extend a period of time when the fed does not focus on inflat

we are speaking to kansas city fed president esther george. president george, i want to start with the jackson hole symposium. it has been more than 30 years now. there was a point in the last several years when you as president of the kansas city fed decided, there are some women here every year that we need more women. what motivated you at that point? esther: kathleen, the jackson hole program has been a their important program because it focuses on broad issues that affect central banking and monetary policy debates globally as you know. when more than a decade ago, we began to look at the program and who was presenting, who would bring views to these important issues we were talking about, we began to identify the need to address some diversity. again, diversity of views and the people that are on that program, e central to understanding -- essential to understanding. we began to look at who are the people on the program who should not be. women for example in the economics profession that could bring insights to the topics we were discus

here is the thing, can the fed do this? if so, what are the risks that will come along, danielle with this new mandate? essentially they were saying in the past, if there was 5% unemployment, you stripped out white unemployment, it would be significantly higher for other pockets of our society. so this time around they will make sure everyone has full employment. that certainly means perhaps inflation at 2 1/2, 3%. >> well, charles, i mean the way you just described the situation in of itself is inherently conflicting. trying to get inflation up, trying to get households cost of living up, that doesn't help them at all and the fed is limited inherently limited because they don't only have some tools in their tool box. right now what they have got is the ability to run the printing press in the background. the transmission mechanism, the way we see fed policy manifest is in the stock markets. it's in people taking risk but do have access and who have ownership of homes and of stocks. charles: right. >> that currently it is s

the soon when the fed also again has to has to show their cards. that i think it will be very interesting to see if they were be able to men effect another bluff because at the end of the day last month it was a bluff they weren't able to mount normalize. the rule have to try to to commence their midst meant community that they are doing something i think but it's very very difficult because the action really counts because of that that situation so let's see what kind of rabbit that will try to brew of of the at this time well why did gold investors even listen to the fed you know the picket lumber had a new all time high in a 1000 coppers screaming to the upside oil's birmingham they don't they don't seem to look at what the fed's doing they they just hide because they know inflation is going well i think the traditional gold investors do not listen to the said because they are convinced they don't need to be coincident in moss well i think the marginal side of gold is actually probably the institutional investor in the united states still in the

at a certain point the fed will step in. jonathan: of all the speeches and talks from the federal reserve, take a look at governor brainard's speech on employment, really worth the read. what a show we've got lined up today. world bank president, that coming up. futures down not even a single point. yields are higher. and tom hasn't slept. this is bloomberg. ♪ s bloomberg. ♪ >> with the first word news, i'm karina mitchell. public health experts in new study finds immunizations could end the pandemic. the study published revealed the pfizer biontech vaccine was overwhelmingly effective against the virus. researchers followed nearly 1.2 million people in israel. questions are being raised about infrastructure americans rely on to process payments. federal reserve systems that exhume millions of financial functions were disrupted. it appears to have been some sort of internal glitch. the system processes everything from payroll to enter buying transfers. president biden is directing his staff to address the shortfall of se

speak right which tries to obfuscate and of course the fed speak is intended to keep animal spirits alive and just keep consuming keep buying so this is revealing the true state and that's that's what people are concerned about who are in the exorbitant privileged class right way of christine legarde mean what you said is offering an escape valve yes right so. so what moscow is doing he's a scaping these negative interest rates the 0 percent interest rates by buying because the same thing as michael saylor who kicked off the trend in the c.e.o. suites of corporate america and the fact is as we've been saying now for 10 years or more that capital will always flow to where it gets the best return that's a law of nature. just like the sun rises in the east capital will go where it's treated best what we have the last 25 years or so is collusion on the global central bank level who kept interest rates low and offer no competing rates anywhere else in the world and nomi prins writes about this in her brilliant book collusion but because it came around and offered the scape valve and now

you have a lot of fed speak. it culminates thursday with the fed chair in advance of payrolls friday. how do they finesse the message at this point? if they do not reference it, the market is going to see that as being a tacit recognition that yields continue to decline. how do they deliver a message that may be does not alter the direction but alters the delta? james: that is very difficult, i think. the intention of their policy is to create this bullish sentiment, these animal spirits, this higher inflation growth forecast and expectation. that is what they are trying to do and engender. it is complicated. i do not really think words would be sufficient. if the market is running with a 12% growth forecast, i do not think the fed's message is going to stop somebody wanting a 10 year treasury. to me, they will become more aggressive and i think have to act only when we get some serious, more serious across markets. it is going to be difficult to see financial conditions materially tightening if credit spreads ar

for the fed. if you dial back to what happened in february last year, the markets rallied big-time. it took an entire month for the fed to come in and act with emergency rate cuts. the boot is a on th -- on the other foot. the market is saying we don't need the rates to be solo for longer given the turnaround in the economy. we do not need rates to be solo. therefore -- so low. they are not going to react for a long while. the markets have taken it on themselves to do the job of the central banks. anna: whenever things move quickly, you always look for who is going to be hurt. this certainly has been a very pasty move. i have been reading about convexity events, forced sellers and treasury market -- in the treasury market. now having to unwind those. is that a substantial part of the story or is that just a sort of a sideshow? ven: i would say it is somewhere in between. i do think that it is a contributive factor to the selloff. i do not think it is an essential part of the selloff, primarily bec

the fed is willing to let it run. they want to see it be sustained before they start to communicate. annmarie: a wrap up of our top guests on the inflation debate. i want to get to the latest on the power crisis gripping the southern united states. the blackrock ceo weighed in on that, saying the u.s. cannot solely rely on written global -- on renewables without a national grid. >> we are going to be living with hydrocarbons. i think the experience in texas is a good example. we cannot be solely dependent on renewables until we have a national power grid. annmarie: the blackouts that plunged millions of texans into chaos in the midst of an historic cold last are easing, but the crisis continues. about 350 thousand homes are reportedly without electricity. four of the largest refineries in the state are experiencing widespread damage from the deep-freeze. we go to houston now with our reporter. rachel, very good to see you. i think this is the first take you have had power since the start of this week. this has been go

the fed is not going to act. we're going to look past it right now and sayreflation, andg to keep going and going and then in the second half of the year i think it will probably be a problem. it's not an immediate problem for the markets. i don't think that rising rates, you know, this week, next week into the summer is going to necessarily be a problem for the market they'll find a way to look past it but as we continue on and that base effect that everybody's looking for doesn't go away, and that's what i think happens, then i think it becomes a problem after that >> hey, jim, so what about the credit side of this story? because junk bonds and junk issuance and the concerns we had about essentially a triple b minus tranche two years ago taking the world into a credit crisis is now only more of a bubble is this part of the same sequence of events that just doesn't really have to be an issue until we get into the fourth quarter or is this something that actually could be a risk, and there could be some type of a

the fed knows uptake was low. janet yellen hinted as much saying they are going to find measures to target small and midsize companies. when we look at what the fed is going to do, we think they are going to welcome inflation. certainly above that 2% mark, which still remains elusive at this point. we are unlikely to see inflation actually materialize. anna: where does this lead for stock markets and the record levels of stocks we see at the moment? what are the signals you are looking out for that would trigger a correction? research by jp morgan talked about the correlations between stocks and bonds, and you see that surge, that can suggest we are going to see correction. what are you hearing in response to this question of the day? >> certainly that is the case. another correlation to watch as the dollar against the s&p 500. if we see the dollar becoming bid again and more of that positioning squeeze, that does tend to deter further upside in terms of the s&p 500. it is important to watch credit spreads. those