United states and weak business in fixed investment. I sit at the time we should do modest limited adjustment to the fed funds rate. The other thing i was worried about is the curve was inverted and i felt it would be much better if we had an upwardly sloping curve. To me, the curve is a symptom that maybe our adjustments were about right it was not intended to solve these issues but intended to adjust policy in light of these issues. I think the curve being upwardly sloping tells me we are in the right place. Want to move on to the consumer because the fed is putting so much impact on the consumer. Beenl sales have decelerating. A november number was half of what the Consensus Forecast was. Our Bloomberg Economics team expected holiday sales to come in at a gain of 3. 4 , the second weakest of the cycle. What if your main engine of growth is starting to run out of gas . That weakbeen worried Business Investment and weak manufacturing would seep into other parts of the economy. We have not seen that yet. Month, any given Consumer Spending is a little bit weaker, there is no doubt that they are in utter shape and we have a tighter jobs market and there is no evidence that the jobs market is doing anything other than getting better. Thats something changes causes the employment picture to change, the consumer will be solid. I am telling you they have the capacity to spend. I think that is a pretty good underpinning. The policyr side of coin is inflation. He would have to see persistently rising inflation to get on board with a rate hike. What is your position . A situationeen in where we have been able to run a very tight labor force without inflation taking off. We have had muted inflation. Fomc, igreat about the will be looking at what attentional growth does, i will be looking at what the trends are in the labor market. And in addition, i will be looking at our target. I will be looking at a range of factors and also Financial Stability issues and weighing whether some action is appropriate. That was dallas fed president Robert Kaplan speaking to kathleen hays. He is a Voting Member of the fomc for the year 2020 coming up in just two days. The Central Banks are facing a moment of calm and liberty economics does not see the next downturn coming in and Bloomberg Economics does not see the next downturn coming. Bloomberg expects cuts in markets and more reliance on fiscal policy. Ratecould the longer environment leave Central Banks without the answers . Discuss, analyst david powell. Morning doess expect a cut from the fed in 2020, as well as the ecb. Do you agree . David that is not in our forecast. We look for the ecb to remain on hold in 2020. We also look for the fed to be on hold after three cuts we saw last year. Withheme last year, Central Banks to adjust the economy, but those trade tensions will be dialed down a little bit. That has to be one of the dominant themes for 2020. What were they in 2019 that you expect to carry through . David really, it will be a focus on how this conflict between the u. S. And china carries out. The trade war spilling over to europe. Donald trump had threatened european automakers, which never materialized. All of this had an effect on uncertainty. For the Trump Administration to be focused on november and not want to have a negative impact on the economy through additional tensions with china and other trading partners. Is it going to act as a model for others, in your expectation . David probably not. The change is not an improvement in economic indicators. Banks have been very vocal in their opposition. When we look elsewhere, we do not expect that to happen. The ecb has expressed some criticism, but they seem to be quite adamant that it doesnt look like it is about to budge on that one. The bank of japan, it does not seem to be in any way signaling monetary tightening. Sweden is going to be a solo case of exiting the negative Interest Rate policy. What are your expectations for the bank of england and andrew bailing . David probably going to be on hold in 2020. There is a lot going on still in , even ifwith brexit the eu leaves even if the u. K. Leaves the eu at the end of january, there still this a deadline of the end of the year for a trade deal with the eu. There is still plenty of reason to remain on hold as that transition takes place. Matt thanks so much for joining us. Appreciate your time early in the morning. This close to new years eve. Economist euro area david powell. Lets get our Bloomberg Business flash. Over itsis handing first china built cars. It is a milestone for the company after an accelerated push. Cars are going to local employees. Work will have to pay about if million to its coceos fired or leave the company. Ae equity passage comes with 300 billion tender offer by softbank. A lot of turnover among Senior Management. Morgan haves and jp ortedly found a way goldman, total returns. They have lower Capital Requirements than regular trades. Jp morgan has encouraged clients deals. Sponsored matt thank you very much. Coming up, golden parachutes. Turns year for wework into a massive severance package. We will look at the potential cost of a highlevel exodus. Isember, Bloomberg Radio live on your mobile device or on digital if you were in the london area. This is bloomberg. Welcome back to Bloomberg Markets. This is the european open. We are currently less than 24 hours a day. Were looking at some red arrows there in terms of futures. It will be a very Light Trading day today and tomorrow. A gold end of the year rally is gaining ground even as investors target risk assets, including equities. Again as funds plowed more money into bully on backed Exchange Traded funds. Georgette boele is still with us, senior fx and Precious Metals strategist. I know you have a bullish outlook on gold, but you want to wait for a pullback before you get in, is that right . Georgette that is correct. Longerterm, everything looks bullish for gold. At the end of next year, much higher gold prices. Positioning,t speculative positioning, they are really, really high. The only thing is, when you get a pullback, it can be a quite nasty one. I prefer to wait. Thatould have expected towards the end of the year. You see now some optimism building. The correction will probably, a the bit later because usually at the start of the year , it is picking up the same theme is the end of last year. Quite an optimistic wave. Probably the first two weeks continuing. Stretched, ition would be very careful. That is, for me, the main reason to just wait and see. We are getting a viewer writing and asking how much higher do you expect gold to go. I also wonder what your assumptions there are based on an terms of the support for the precious metal . Support forhe main gold is that we have more bonds and negative yielding territory. Also, Central Banks, so Monetary Policy easing. If theyame time, even were to stop for the moment, we wont see any higher rates in the near term either. General a positive for gold. A most important driver in terms of what does the dollar do. If you take those factors together, you should see higher gold prices next year. The only thing is, it could be people are running after it a bit too soon. You get the creator you get the correction when no one is expecting it. I was worried, we need to have some sort of healthy correction more than we have so far. Georgette, it has been great having you this morning. Senior fx ande, Precious Metals strategist. A story you need to know about today comes out of wework. It will have to pay millions to its cochief executives who just got into that position, if they are fired or leave. Annmarie hordern is here with more. What are we talking about in terms of size and how this would work . Million is how much they would have to pay out cochief executives were fired or leave the country leave the company. This is a report in the financial times. Financial times is citing a number of documents. The report says wework may continue to experience a significant amount of Senior Management turnover. We are talking about some ifious golden parachutes they were to leave. Matt i guess that is what happens when you sign on as coceos, you want to get the golden parachutes. Annmarie hordern covering that story. Coming up, turning bullish on the euro. We will get your morning call on a new wave of optimism on what has been a truly sleepy bear. That is next. This is bloomberg. Welcome back to Bloomberg Markets. 10 minutes to go until the open of equity cash trading across europe. Remember, a relatively light session today. Lets get the bloomberg first word news from laura wright in london. s economy setng to contract and the Fourth Quarter after six months of violent unrest. The secretary said that given the current situation, it is inevitable that lower growth will continue. On u. S. Launched airstrikes five bases used by iranbacked militants. The moves coming after repeated attacks on coalition troops. Secretary of state mike pompeo called the response decisive. They are not ruling out further action in the region. In australia, thousands evacuated across the southeast. Temperatures hitting 40 degrees celsius, closing sections of the highway. They are warning conditions are the worst in a decade. At least nine people have been killed and hundreds of homes destroyed. Day onnews 24 hours a air and on quick take by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Matt thanks very much. Laura wright in london with your first word news. China is scrapping its benchmark rate for lending into china. The pboc has ordered lenders to stop using the rate through moving while gradually existing loans to a new rate. Joining us to talk further about this is the current bloomberg chief asia economics correspondent. Thisto us first about how is going to work and then about the significance of the move. I think you set it up pretty well. Rate, thenchmark government obviously meant there was a lot of bureaucracy and politics involved. This move to a market rate set by banks would speed up the process, make the adjustments more timely, more expedient when the economy needs them. And i suppose there would be an element of transparency as well. Tona on its gradual Path Financial liberalization. Markets have a bigger say in the value of the currency in recent years, for example. Move in a very modest terms of the difference between the benchmark rate and the underlying rate at the moment. Mean what is it going to for the economy . We did see chinese equity indexes rally on the move. Enda it should suggest cheaper borrowing costs, it should suggest that banks have to bring down borrowing costs. The Bigger Picture to remember, it is only one reform in an economy that is still dominated by statecontrolled banks and statecontrolled companies. You can say, clearly there is another wind by the liberal side of things are the reformers, and after pushing away, the Petroleum Benchmark rate, you have to look at the underlying customers and act as an all of this would mostly be taking control of the banks and the enterprises. The net effect for the economy has been a marginal positive for growth. In the bigger scheme of things, there is a way to go yet to keep pace with the overall level of development. Matt what are Economists Outlook for the chinese economy in 2020 . What kind of growth and inflation are they looking at . As you probably picked up on yourself recently, something about stabilization. A rocky 2019. With a trade war, there is a sense that the external environment for china will improve. Then the big question becomes, around theep growth 6 level next year or will they let it slip under 6 . No details on what they agreed on that in march. I think most economists would say that it will be broadly stabilization but slower pace growth as expected and china continues to grind lower. Given what is happening on the credit market side at the moment, and a lot of people would say that its important for development and would put a ce it is certainly ody is calling a return to by all accounts, no sign of a crisis. Matt thank you so much for joining us, enda curran, bloombergs chief asia economics correspondent, talking about the move by the pboc. After two years of setbacks, the euro is enjoying a wave of investor optimism as 2019 draws to a close. We will tell you what analysts are forecasting. We are going to bring in Annmarie Hordern. What can you tell us . Annmarie what they are forecasting in 2020 is that the euro is really going to take the cake. Take a look at the calls right now. 2020, 1. 15 on of the eurodollar. Right now, we are below 1. 12. Matt coming up the market open. This is bloomberg. Matt a minute away from the open of cash equities trading. Headlines. Ur the pboc takes another step toward opening up its financial system. Tesla delivers the first cars built in a shanghai plant as elon musk accelerates has pushed into the worlds biggest auto market. President trump facing criticism for naming the alleged whistleblower. Lets get to Annmarie Hordern for your european open. Are seeing red arrows acrosstheboard ahead of the European Market open. European equity futures are higher. Then trading today ahead of the new year holiday. We have just gotten to 8 00 here in the city of london. Lets look at how the European Markets are opening. Look at the bloomberg dollar index. The dollar has been weaker against major peers. That day of declines on dollar. Here we are seeing all of red. The german dax today will be closing a little bit early. Lets look at what is going on today. Health care firmly in the red. We are seeing a lot more red than green on the screen. I am wondering if oil and gas stocks will get a lift. Commodities are on a tear. Very much a risk off day today. What do you see for individual movers . Matt we see more down than up. 191 gainers. I am not sure if this is in prep for new years eve. Those two companies will probably be selling a lot of their product. This looks like we are getting luxury. And Consumer Staples are rising. On the downside, you see drugmakers and oil producers. European markets in general are opening up lower. It is great to have you with us. We appreciate you spending the time. What do you think about the year that was in the unit we can expect in 2020 . Change frommajor 2018. Avoidg challenge was to losing money. Year of very positive returns. Having said that, 2019 has been a bit of a diversions between individual markets. Compare brazil with chile. The broad equity indices have brought broad returns. The computer index is up 50 this year. A big divergence there. Matt coming onto 2020, what does that mean for next year . Been theg theme 19 has major divergence of Financial Assets and the real economy. Had economicave growth. Corporate earnings numbers have been lackluster. I think that divergence in 2020 will change. We are not going to have a recession in 2020. But only a modest uplifting growth. We can quantify that by region. Chinese growth will probably generate 5 gdp. We will have convergence with the real economy doing slightly better. Where do you think we will see the biggest gains . And the biggest problems . Our theareas to watch impact of social unrest on economies and markets. We have seen that particularly this year in hong kong. If you look at the chinese the hang seng has seen major underperformance. The social unrest in chile has been a major factor. That is one risk factor to watch. The other risk area to watch as areas of high levels of debt and the potential for increased defaults. I think pboc will manage this well. There are sectors of the Chinese Market that need to be monitored carefully. I think we could see some problems. Those are the primary risk factors. I do think 20 20 is going to be characterized by a rotation out of cyclical Growth Stocks and into value defensive sectors and particularly sectors which pay high dividends. I do think you will see that rotation out of the sectors that have done spectacularly this year. Matt we will keep you with us. We have a lot more to talk about. Up next, made in china. Tesla delivers its first cars built in a shanghai plant. We will look at the Auto Industry next. This is bloomberg. Matt welcome back. This is the european open. 10 minutes into the session. We are looking at losses across the European Equity index. The Bloomberg Business flash. The italian eyewear giant is working to recover. The scandal is reuniting concerns about how it is run. We work will have to pay 17 its founders if they are fired. 3 millionad of a tender. To facemay continue turnover. Getting. K. , farmers are almost 3 billion pounds. This is to ensure that they receive the same funding next year that they got from eu subsidies. That is your Bloomberg Business flash. Matt thank you very much. Its firstdelivered chinese built cars, a milestone for eli mosques company. They accelerate a push into the largest Vehicle Market. Beijing raised its 2025 sales targets. Before we focus in on china, what do you think about the auto market in general . I have not been very positive on it. I think it saw a number of challenges. Disruptionhallenges to the auto market. There was a move to other vehicles. We go through that type of destruction. Still having to d