Getting out to 2021 and even trying to have our central bank centralbank measure 2022. Jonathan looking forward to that conversation in a couple of hours right here on bloomberg surveillance. Weve also got to talk about the projections. We have not had projections from the Federal Reserve since the summer of last year, and they were looking for 3. 5 unemployment in 2020, and gdp growth in and around 2 . Nobody saw the revisions that would have to be made just half a year later. Absolutely extraordinary. You see it within the economic at a have been talking about. As Olivier Blanchard mentioned in our show open, the challenge forward is on policy. I know you were long amazon and apple yesterday, driving forward the nasdaq. Was. Han i wish i not just yesterday, but through the year as well. Tremendous performance in this equity market. Who would have thought we would have the revisions we are about to get later, and this equity market would be higher versus where it was in december . Speaking of the data, 90 minutes away, a little more data. Lisa this is the focus for policymakers in th monetary, as well as fiscal side. Getting 8 30 am, we are Consumer Price index data. I am curious about whether we are getting the right kind of inflation. In other words, the necessities are going up in price. The food you buy, the homes you rent and buy. Is this the right kind of inflation . Ahead at 2 00 p. M. , we are getting the fomc statement, but before that, the Monthly Budget statement from the United States. The key event of the day, the fomc meeting. I am very curious to see what they have to say about yield curve control and how much of the treasury market the Federal Reserve lend up having to buy in order to peg. Jonathan will they give us a monthly rate . I imagine the dot plot is in play as well. How much does that come down from where it was at the turn of the year . I imagine considerably lower than where we were several months ago. Tom ive never been a big fan of the dot plots. Bullard used to put that one down below just to show his protest as well. I think one of the key questions over the next one to three years is when does the dot plot disappear. The whole world came down to the bullard dot eventually. Thats start the program with priya missouri with priya misra of td securities. Lets begin with what you are focused on and what you want to hear from that News Conference with chairman powell. Priya we are not looking for any specific odyssey action. We are not looking for Forward Guidance or a specific amount that they are going to be buying per month. I think what i will be focused on is the language. How does chair powell frame the outlook, framed the view . We had a pretty positive payroll number friday, but that was expected. When the economy reopens, youre likely to see much better data. We are reopening slowly, but are we reopening to a new normal . We just dont know this. Risks inthe cyclical the mediumterm are going to remain highly accommodative, and suggest that there might be more steps in the month ahead. We do expect them to undertake yield curve control. We expect them to be buying a lot more longer dated treasuries. I dont think now is the time to commit to that because of all of the uncertainty. I think we will see it in the dot plot and it would be the dot. St ever long run we dont have too many pandemics to look to, but i think inflation, even though there is talk about high inflation, i think that unlike a war, you look outside, there is still all that capacity. Theres a term in this amount of slack in the system. I think that will actually tell the market that the fed is likely to be accommodative for a long time. Jonathan it speaks to low inflation and low rates for a long time. I wonder if they can make it even simpler. Just a few months ago if you asked the Federal Reserve what their objective was, it would be extending the cycle. Can they Say Something like we need to get this economy back to precovid19 levels, and Monetary Policy will be loose into we get there . Priya i think they could. One form of strengthening Forward Guidance is to make it outcome based. But i think if we realize there could be a lot of structural damage to the economy, i think it gets a little harder for them to commit to precovid levels. The economy is growing at a trend, so are we getting back to precovid output levels or precovid trend levels . I think they would like to get to trend, but if theres a lot of structural damage, i think the fed will struggle to say we want to get back to that level, but say that we are not about to take the foot off the pedal. In fact, we might accelerate if we see these risks we talk about. We are not reopening to near normal, now they come in with more. Is trying toarket see how accommodative they will be, or are they ok with rates being higher. I think chair powell was pretty forceful in that they dont want much higher rates here. When we talk about getting back to precovid levels, we have already gotten there in terms of verse think in terms of reversing some of the losses. Theres sort of a feeling in the heads, i win, tails, i win because of the fed. Do you think this is correct, that basically this is the one tool the fed has come on they are going to double down on keep asset on keeping asset prices high . Priya great point. If you look at the market, you would almost say, what pandemic . I think the market is partly the fedng the fact that has said rates will be low for a long time. Think what we are all struggling with, and what nobody really knows, is what is the mediumterm. Has structural damage been done . I think Interest Rates are going to be low for a long time. Dbe could be the beat could be higher, but if companies are going bankrupt or businesses are getting impacted and we dont know enough on the fiscal front, this is where i expect chair powell to make another push for more fiscal stimulus. I dont think you will bring out stability as a reason for them to cut back on accommodation because you would get a pretty big impact on the economy to , andn the Recovery Process that is really the worst outcome. But i do think the stock market is pricing in getting back to normal, and that is really what we struggle with. Weve got a hat trick of sophisticates in the , and that would be you, lisa abramowicz, and the host of real yield, jon ferro. Is the real action talk, or is the fed action actual, tangible action . What part of where they are now are they . Are they all talk and promise, or is it what they are actually doing now . Priya they have done a lot. I dont think we should forget how much they did in march. I would not discount to the action part. Rates down toe zero. And Forward Guidance is a powerful tool. The fed discovered that if you tell the market you are not hiking for a long time, that can keep rates low and help asset prices. So i think they continue to use that as a tool. Talk is powerful. The dot plot is one form of. Ommunication as well talks can really only anchor the front end. Be watchingrtainly for how chair powell frames the qe program. Is it just market functioning . If that is the case, the treasury market is functioning just fine. I dont think that is the right policy. So the action will be needed and the fed every week does buy treasuries. I think they can buy as much as is needed on the curve, but we want to hear some talk on the long end. I think suggesting that we dont want longerterm rates rising will tell us that the fed will buy as much as needed to keep that long end anchored until we know the economy can handle higher. Brilliant work as always. Always enjoy catching up with. Ou Forward Guidance is the big issue right now, and also the objective of Monetary Policy. You and i discussed it yesterday, the idea that they can say this is just about market functioning. They have gone way beyond just market functioning. The market functioning is just fine. What does the next phase of policy look like . That is the question for today. This is verytom similar to the financial crisis. Markets function through all of this, and markets are clearly voting for some form of recovery. I dont know how the fed dovetails with that. I would sit rest they are going to remain calm and cautious today, even as they play with the dots. Jonathan i would agree with that. Will kitchenr, we dutta of renaissance macro. That is coming up, with futures turning just about positive on the equities. Ritika with the first word news, im ritika gupta. Globald warns the economy will slump 6 this year because of coronavirus, and if there is a second wave, output could fall 7. 6 . They also warned that withdrawing support for business and workers now could make the economic and social damage even worse. Secretary of state mike pompeo is blasting hsbc for impose chinas move to new rules and hong kong. Hsbcs beijing uses business in china as political leverage. The bank isnt commenting. Chinas Foreign Ministry called pompeos remarks narrowminded and ridiculous. Chinas position is that hong kongs affairs are sold the its concern. Angela merkel is facing growing pressure to get tough with russias vladimir putin. The president s decision to withdraw almost 10,000 troops from germany was welcomed in moscow. The u. S. Still hasnt officially notified berlin of the withdrawal. The move would reduce the number of u. S. Troops in germany by about 1 4. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Out the time to worry about inflation. Right now you throw everything youve got at the virus. You hit it, you kill it. You win the war against the virus. Youpharaoh everything throw everything in terms of finance, and terms of budget resources, entered the Health Resources because the sooner you beat the virus, the less expensive the recovery will be. Jonathan and how they threw everything at it in the last few months. From new york city this morning, good morning. Alongside tom keene, im Jonathan Ferro, together with lisa abramowicz. This is bloomberg surveillance , live on bloomberg tv and bloomberg radio. Your markets shaping up as follows. In the equity market, we advance to points on the s p 500, up by about 0. 2 . Outside of that, the bond market , treasury yields coming down three basis points on the 10 year. Just a little bit of curve flattening. Yields lower in the last 24 hours after the back 24 hours off the back of some real steep. Just to get you up to speed on the weaker dollar story, weaker against everything in g10, with the euro advancing with again advancing once again and a Federal Reserve decision later out of d. C. Tom that was the most fired up i have ever seen him as we talked about mexico, latin and south america absolutely crushed by the pandemic. It has been extremely difficult and south america particularly in south america, particularly chile. We need to talk to an optimist. Neil dutta has been more optimistic about the American Consumer in any when we speak to, and he joins us. We had a great jobs report, a huge surprise. Tomorrow will show continuing improvement from the horror we are living through. Already going to do the same dance with gdp . Are we going to underestimate the ability to recover, and are we going to hear that from the fed today . Neil i think yes and no. I do think the consensus is a little bit too negative at this point on the secondquarter growth numbers. You look at the atlanta fed as an example. I think it is tracking 50 annualized for the second quarter. But we already know that in may, taking the input from the , it went upumbers , which means it would take a lot to see that kind of about 68 in may, which means it would take a lot to see that kind of number. We will get more information on that as the weeks go by. Fed, there is absolutely no reason whatsoever for them to sound upbeat. Is low. N Risk Management suggests you take a more cautious approach. You err on the side of doing more. While we have seen some signs of improvement, the fed is not even close to declaring victory. I think what we are going to see today is them continuing to signal that they are going to anchor the front end of the yield curve and keep rates low for a long while. Jonathan how comfortable do you think they are with what is happening further out on the curve come on the 10 year and 30 year, relative to where yields were . Do you think they are comfortable with that . Neil i think so. If you look at the minutes, there doesnt seem to be much support on the committee , and this is a consensusbuilding institution, there doesnt seem to be much support for targeting Interest Rates 10 years out the curve. Blogu look at bernankes post on targeting Interest Rates, essentially they said they were going to go two to three years out. I think longterm Interest Rates have picked up a little bit, and the reason is because growth expectations have picked up a little bit because the data has improved. It is not immediately clear to me that that is something they need to be concerned about. Of course, they are looking at broad financial conditions. Even as longerterm Interest Rates have picked up, the dollar has come in substantially. It has almost looked where it was precrisis. We know highyield cdx has come in quite a bit. Commercial paper spreads have normalized. So i think the fed is looking at longterm Interest Rates, broader financial conditions, and i think broader financial conditions are conducive to growth. And tom were talking about this earlier. We have gone way beyond market dysfunction at this point. It is the fed propping up asset prices, keeping a lid on yields. How much is this the main driver of the rally we are seeing that is broadening out, and how much are traders counting on this behavior continuing, of the fed propping up asset prices, to continue making bets on, say, the russell 2000 . Neil i definitely think the fed has your back, but we also know Monetary Policy cant permanently inflate the level of asset prices. We talk about the equity markets and the economy and financial conditions. Obviously there is a circular feedback loop between all of these things. A Strong Economy means better financial conditions, so on and so forth. But if you look at when the market bottomed, at least equities, it basically coincided with a turn in the economy to to three weeks later, which is what you would expect to see. Of course the economy is better than it was. Look at Mortgage Applications today, up double digits yearoveryear. Diane forr home homebuying demand is up 13 year on year. That is activity. See motor gasoline up. Certain industries are hearing they are sharp are seeing very sharp recoveries. Other industries or not. But i think the economy is in a much better place. Right now, everyone is talking about secondorder effects from potential bleeding and state and local governments, but there are second mortar there are as well,der effects and i think people need to keep that in mind. I think the recovery in the economy and the recovery in markets are frankly telling you the same thing. Jonathan youve been brilliant over the last month, and we really appreciate your guidance. A more constructive view has certainly paid dividends in this market and beyond. Tom keene, we have had some positive surprises from a range of industries. We had guidance for macys, guidance from american airlines, guidance from the retail wings of big wall street institutions suggesting it is reopening, delivering some positive upside to prices. Tom theres all these indicators. I will give you one indicator in the flight path of laguardia. I had three planes go by last night for the first time in ages , landing in laguardia. That is a good sign. Jonathan i got to say, plain watching might be your thing, tom. Trainspotting is a big thing in the u. K. I think that would suit you well. This is bloomberg surveillance , live on bloomberg tv and radio. When you say what youre in the mood for, the xfinity voice remote will find exactly that. Happy stuff. If the groups happy, im happy. You can even say a famous movie quote and it will know the right movie. Thatll do, donkey youre expecting prince charming . You can learn something new any time. Education. And if youre not sure what youre looking for, say. Surprise me. Just ask what can i say . To find more of what you love with the xfinity voice remote. Jonathan from new york city, this is bloomberg surveillance. We are live on bloomberg tv and radio. Alongside tom keene, im Jonathan Ferro, together with lisa abramowicz. Two hours away from the opening bell, good morning to you all. Equity futures basically unchanged, down a single point on the s p 500. We had pause on this equity market rally we hit pause on this equity market rally. The yield curve was steeper into the close on friday. It flattened going into the Federal Reserve decision. Twostens coming down to about 60 basis points. That is the spread between the twoyear and the 10 year. Your yield coming down three basis points in this session to just south of 0. 8 on the 10 year yield. One theme that does continue this morning is a weaker dollar against the bulk of g10. Euro advancing several tenths of 1 . That is a stronger euro and weaker dollar going into that decision and jay powell News Conference just around the corner. Tom i am glad you mentioned euro. I was looking at that to go through 1. 14. Making it very clear at Deutsche Bank that we see weaker dollar. He even framed out in one part of the conversation a 1. 20 euro. Can you imagine the challenges for Christine Lagarde . I am not saying he predicted that, but he framed out how you get there. Weve got wonderful guests coming up, including alan blinder on our fed show with scarlet fu