With noent negotiators deal chances rising. Another round of earnings reports sends signals about the global economy. Show me facing headwinds. Jayederal reserve chairman powell speaks at jackson hole. Of are at a sort we have to be careful not to ease too much when we do not have significant problems. Lower rates will stimulate our economy somewhat. I think we are where we need to be. It is all straight ahead on bloomberg best. Hello and welcome. I am rosalind chin. Bloomberg best. Lets start with a day by day look at the top headlines. On monday, markets responded positively to news that trade tensions. The Commerce Department announcing the u. S. Will review days soei waiver for 90 companies can continue to do business. They have 90 days for limited part of their business. This extends a reprieve. U. S. Customers of huawei, particularly those who run networks that depend on equipment. Headsetpliers of the business. Itsre looking at google and android software. This allows google to keep updating phones with security patches. Careful about over interpreting this. There is a crackdown happening. Addedpartment of commerce 46 new subsidiaries. Retrievea temporary for some u. S. Customers. Germany could spend 50 billion euros in an economic crisis. That is according to the finance minister, who has put a number on the stimulus. Fears of a recession pushing berlin to consider suspending its balanced policy. Have the firepower to use that money. We have been lowering our debt to below 60 . We heard recession is entirely feasible with a contraction any third order a possibility. Thed the government government does have the money. It is running a surplus. If it does decide to spending is needed, the cash can be found. Ministerly, the prime announced he is going to resign. Attacking the premier. Sitting next to him. Calling the decision to spark a political crisis care responsible. By personal ambition. He is going to resign in a couple of hours. He is going to hand his resignation to a president. This. Ow, he will start what next . There isave to see if a chance to form an alternative majority. If he does not see those chances, it will go to the next election. He will name a new Prime Minister. Form a government. The fivestar movement and the Democratic Party are holding talks over a possible coalition. What are the chances they Work Together . The idea is having a limited program focusing on areas where interests do meet. Ecology, civil rights. There is the possibility for common ground. It is a question whether they can bridge over differences. Befed unity appears to theing after the over gathering of policymakers in jackson hole. Some ripplesent through the bond markets. What did you take away . It appears to ratify what they did. If they want to do it again in september, the conditions they were talking about, uncertainty remainade issues, cautious. We dont know how they are going to react. Have been strong and so has retail spending. If inflation takes up, do they see to pause and wait and if something more is needed . That is a possibility. Friday get a better idea after jay powell speaks. China hits back at the u. S. With tariffs on 75 billion of imports. Take place in two stages. Echoing the tariffs on chinese imported goods. Are they spinning out of control . It is a measured response. Things aren of how escalating to read continuing the theme of the summer. Both sides keep slapping tariffs on each other. The heat is rising. We are counting down to those headlines from the Federal Reserve chair. About to give his speech behind closed the worst. Michael mckee has his speech. Chair is not go beyond his promise to act as appropriate, even though he says trade policy is a worrisome thing. Remarks, the most important effects are felt with uncertain lags, the committee must look through what must be passing developments and deal with things that we will act sustain thete to expansion. Does this meet the test of being dovish enough . Two major stories hitting the economy and markets. Jackson hole and trade. President trump saying he will respond to china slapping tariffs on u. S. Goods. Threatening the stability of markets. The only incumbent president s not getting reelected presided over reelections. He knows he has to rectify the situation. Things are weakening. He needs to do whatever he can to stimulate the economy. The president saying, my only biggern is who is the threat . He has made a calculation he is going to double down on attacks on attacks in Central Banks. I think the reaction has been instructive. You saw stocks fall after headlines china was going to retaliate and raise tariffs on u. S. Imports. After that, the speech, pledging toact as appropriate, enough push stocks up. President trump came out and gave us more trade development. Now the facts are back down. Trump said he is going to respond and he has. He says china and many other countries have been taking advantage of the u. S. In trade and much more. Our country has been losing hundreds of billions of dollars a year. Administrations have allowed china to get so far past, it has become a burden to the american taxpayer. Thisst balance relationship. China should not have put new tariffs on products, politically motivated. Goods beinglion of taxed at 25 will be taxed at 30 . The additional goods taxed at 10 will be taxed at 15 . Still ahead, as we review the busy much more from a week. The men and women who make Monetary Policy talk about the path ahead. And earnings reports making headlines. There was a flexible way we were able to use our cash. We were ready for whatever the world might throw at us. This is bloomberg best. Earnings season winds down, there is plenty to ponder. Lets begin with a round up of the key players in chinas tech sector. The Company Fights to maintain its position. Can we blame this on the trade war . They are facing headwinds in a number of macroeconomic fronts. Theiro get most of revenue from the lower margin sales. They are trying to expand into businesses like selling ads. We have not seen sales take off enough to offset sales and other areas. Investors have not seen a lot of promise in new areas. The connected device unit did you grow. Biggest searched engine and china baidu beat rivals estimates there putting out. Where were the bright spots . Basically numbers offered some reassurance, at least for now. Grow business. To sendoff essentially a challenge from upandcoming rivals. Also, existing incumbents like tencent. The worlds biggest miner warned growth in china and trade tensions are keys to prices. To aboosted their pay off record. With our strong balance sheet, the way we are able to use our cash, we are ready for whatever the world might throw at us. Cashn throw off a lot more and an upturn. Is the dividend sustainable . Have a progressive dividend. It to a flexible dividend. Is based on a ratio of 50 . It will go up and down depending on how markets perform. It is one of the tools we have for choppy waters. That is why we are comfortable paying this. Are australias biggest gold producer. They reported fullyear earnings up 22 , 561 million. A record output. Our priority is to get the best shareholder returns. We focus on where we can add strength in m a. At new projects. Also, returning shareholder funds to the shareholder. We increased our dividends by 19 . Our methodology has stood up well over the last five years. We intend to continue the focus we have had. Company came out with earnings, giving the green light to a 700 million expansion. That is in ohio. Posted underlying profits, 900 66 million. Australian. Million australian dollars. There is concern about a and europe, no question we are seeing some softenings. The economy is still ok. Automobile construction remains strong. We have seen some price softening. The chinese economy is strong. Australia, softening in residential activity. Just a moderate softening. From High Historical levels. The markets are ok. T. J. Maxx reporting earnings. There may be more retail woes aheaes ahead. Are quarter, inventories building up and they are not selling as much merchandise. The real trouble spot was home goods. Said not great merchandise selection. The good news is, because of the way that inventory model works, they turn it quickly. When they lawn land on the wrong product, they are able to turn it quickly. In sales. We do see some early promise from this new initiative. Accepting returns of amazon purchases. Forhows the importance stores thinking creatively. They are something of a leader. At target, a record. Old feeling that back. Third quarter they have done exceptionally well. Comps up 3. 4 . Traffic higher. To ceo, turnaround hoping they have brought brands into the target stores, across different sections. Apparel, furniture. Consumers liking that. The delivery strategy, really working to bring down margins and drive more traffic. The turnaround showing up in a big way. Lets have a look at qantas. The company says the Leisure Travel market has weekend. Weekend. Lower profit. Byyou have seen demands drop 10 . Further weakness . How long will that continue . We have the flexibility of moving to slightly smaller aircraft. Same product, less. We are going to do that over the next few months. Anticipations this will continue for the next few months. Bloomberg s. K to bloomberg best. On monday, President Donald Trump urge the central bank to cut Interest Rates by 100 basis points, saying such a cut would aid the global economy. Boston fed president was one of two members who voted against the cut in july. He explained this in an exclusive interview. It was tied to the fact Economic Conditions are still pretty good. Inflation is a little bit low. Take out some of the outliers, it is closer to 2 . Was you have to be careful not to ease too much when you do not have significant problems. The issue is not to do something that affects the Exchange Rate read we are supposed to vocus in on limit and inflation. Easing. E costs to what is the cost . There are several costs. Buy houseseople to and cars earlier than they otherwise would read you make an investment now because Interest Rates are temporarily low. You make expenditures you might not otherwise have made. When we lower Interest Rates, we make the cost of debt lower. Re morelds and firms likely to be leveraged. We have to think about the financials debility characteristics. Want households and firms to be leveraged. As you look ahead to the september meeting, the question of cutting rates again, it will be on the table. Are you watching the consumer closely as something that would tilt you not forward waiting to see but sane, no, i am on board . Watching a number of things. Consumer confidence is weaker. That is something i am paying attention to. The retail number was strong. We will have enough consumption it is going to bolster gdp. Im going to Pay Attention to concerns. Brexit coming up in october. There are problems that could spill over. Plenty of things to be worried about. I think we cannot be determining Monetary Policy too far in advance. Forecasters expect reasonable growth. Yes, bond rates are low but it is reflective of the global conditions. Im not saying there are not circumstances where i would be willing to ees. I want evidence we are going into something that is more of a slowdown. If im growing at 2 , im not as worried. Best,ing up on bloomberg more conversations with top fed officials. Jackson hole was buzzing. And members share perspectives on the policy debate. Parks we have to be uber dative attendant datadependent now. You are watching bloomberg best. This week, the Federal Reserve bank of kansas city hosted its annual Economic Policy symposium in phoenix, jackson hole, wyoming. It was challenges for Monetary Policy and bloomberg was there to discuss those very challenges with several Central Bank President s, beginning with esther george, the head of the kansas city sector. As i look at where the economy is, it is not yet time, im not ready to provide more accommodation to the economy without seeing an outlook that suggests the economy is getting weaker here. You are an advocate of raising rates to get ahead of inflation. If you were not ready to cut rates, are you happy with where rates are, given that inflation is lower than anticipated . Would you be happy to leave them at this level for quite some time . I think that is going to be a process of have the economy unfolds. Where rates are right now relative to the Unemployment Rate and inflation suggest we are at a sort of equilibrium and i would be happy to leave rates here, absence some weakness or strengthening that would cause me to think rates should be somewhere else. Where would you put the neutral rate right now relative to where you are . Are you tight . Are you loose . The of . How do you see it . I would judge policy to be a neutral or even accommodative. If you think about where real Interest Rates are relative to the rate of inflation and where the fed funds rate is we are operating close to zero. I cant believe that is tight in any sense for the economy right now. How much accommodation does the economy need . I like to think about the mid90s example in the 98 example. I know some of your viewers werent paying attention to Financial Markets at that time, but if you look at that, the fed was worried about the asian currency crisis, very similar to today, lowered the policy rate by about 75 basis points. The u. S. Economy actually powered through that whole episode and the committee took those insurance cuts away later. I think thats a great baseline idea about where we are looking out now with a global trade war, Global Manufacturing and contraction, and possible spillover to the u. S. You want to ensure the economy gets that and stays out of trouble. So you think 75 basis points, stopping at this point . Thats what they did in 1990s. I dont know where we will end that you havehink the yield curve that is massively inverted and you have the funds rate as the very highest point on the whole curve. A downdraft in global yields. What is it you are insuring against question mark there doesnt seem to be a demand problem, there doesnt seem to be a cost of credit problem. Credit is the cost of problem and i dont think theres a resolution likely anytime soon. The trade war is triggering other actions around the world, other countries thinking about reevaluation of their own trade , they could easily feedback to the u. S. Thats not my base case. How does Monetary Policy do that . Lower rates will stimulate the economy somewhat compared to what they would be otherwise, and that would help us power through the churning waters of the trade war. The disagreement within the fed i think is much more about how to manage the risk and the way i see the u. S. Economy is that the u. S. Consumer is strong. If the u. S. Consumer stays strong we will not have a downturn. The issue is manufacturing is weak, Global Growth is decelerating, and if those intensify, that is going to seep into the rest of the economy. The consumer will be the last thing to go and what im concerned about is if those negatives intensify you could have a negative jobs report in the next x number of months, and then you will see weakness in the consumer. If we wait to see that, we have waited too long. Im very openminded and constructive that we mean aid to make a policy adjustment but im keeping an open mind and they havent made a decision yet. How big a policy adjustment in the long run do you think we need . His july 31 press conference, said midcourse correction, yet wall street is pricing in a rate cut cycle. Ive been very open about saying unless i see meaningful further weakness, i view the adjustments needed as tactical. They should be unlimited, i donted, modest, and see this as the end of a rate cutting cycle. I think it is very important we watch the data. If we were ever data dependent before, we have to be uber data dependent now, reacting to what is happening in the economy, not just as changes in sentiment, because uncertainty causes people to be concerned about whats going forward, but are they actually making decisions based on that uncertainty . In that case we might have to move. What our business is telling you . Do they say things have gotten worse, that they might be seeing a step down because of the impact of whats going on . I every Business Contact talked to always mentions trade policy uncertainty, and the tariffs as being something that theres a concern of. The majority of the firms i talked to still say they are on their plan for investment for the year, they are still certainly seen tight labor markets, trying to increase wages to attract workers. The larger firms that have more multinational connections are affected by both the slowdown in Global Growth and the trade policy uncertainty and they are reassessing their plans. It is sort of a mixed picture but i would say we have exposure to manufacturing and freetrade that has been more robust and able to respond pretty well to this uncertainty. They are very concerned about it and we have the next potential leg of the expansion on the consumer side. I think that could be a catalyst for changes and plans. But we havent seen it yet and i would like to wait until we get more information on how they are reacting, responding in advance. I think right now we are where we need to be. That said, there are clearly downside risks. I think we would have to act as appropriate if those come to fruition, or even look like they are coming to fruition. The biggest concern i have right now is that when you talk to business leaders, nobody i talked to says the cost of capital is inhibiting Business Investment. That has been the drag on the economy, not the consumer. The consumer has been the hero. If that is true, and Business Investment is not being held back by the cost of capital, thats reducing Interest Rates which have no effect. Whats holdi