3 10 of 1 . The dollar is on offer and the pound is overtaking the 130 level. We will try and see whether or not we are getting developments in the brexit story. Some suggest from the bbc that a deal has been done on the internal market bill that will tradingmps and crude higher as well. We saw Inventory Data a little bit early on. The fed is the main event. Alix but also, a vaccine. The official says that all americans may get a Covid Vaccine by april. The s p so far has no reaction and we are already off the lows of the session by. 3 . All americans may get a vaccine by april, unbelievable, if we can get it done and distributed. The fed has to take that into account as well. Joining us is randall kroszner. Always good to talk to you. I am trying to understand how the fed looks like a headline looks at a headline like vaccines and some Economic Data that is not terrible. Service sectors were not bad. We did not have a catastrophe because of no extra fiscal stimulus. How does it deal with that and also stay dovish . Prof. Kroszner it will take all of that into account, and the employment report earlier in the month was more positive than they had expected. You will see an upgrade and you will see, but lower unemployment rates at the end of the year and less sharp contraction over the year as a whole, which does not mean they will be changing their policy anytime soon, because i think they are thinking about the intermediate to longer run where a number of firms may go bankrupt and there still has to be a transition of people away from some of the sectors that will be shrinking in hospitality and transportation and other areas, so they will make it clear that they welcome the good nott run data, but that is changing their intermediate perspective that rates will stay low for a long time. Guy any signs that we could see dots moving higher. 2023,l get the update on we always get that in september the further out view of what is going to happen. Do you think anybody will be raising the dots or any chance that it goes higher . Prof. Kroszner for 2023 you will see more dots in positive territory and there were a couple of them from before, but those were the outliers. Forwill see a few more 2023, but that is so far off that it is hard to calibrate calibrate things that carefully. There are a few people who are moving up. That will lead for the next couple of years, but they were not inking about thinking about raising rates. Alix do you expect a Market Reaction if some dots move higher or do you think we are priced well . Prof. Kroszner i think we are reasonably priced, but there might be a reaction when the forecasts come out before the press conference, my guess is that jay will come and he fears that he might come into the markets by seeing some of the dots be up there. He will make it clear. Obviously got clarity on the new framework. There was some expectation that we would get more freight clarity as a result of what we will get today at the meeting. How much more clarity do you think we will get an exactly how the framework will operate . Prof. Kroszner not that much. My guess it was a have it was a heavy lift to get everyone on board with this flexible targeting framework, and probably different people have Different Things in mind. Since we have been below 2 , how much can we run above 2 . Can we run to 2. 5, three, or four . Three or above is off the table, but other people would be comfortable with that. Because there is not consensus, we will not get clarity. We are so far from 2 inflation we can put that discussion off. Alix what happens if we get some agreement on stimulus, House Republicans and amount democrats have been trying to plan a bill. Maybe we get something. What kind of impetus would that be for better growth and higher inflation . What is the speed through here . Prof. Kroszner the fed will welcome that. They do not want to be the only policy that is bearing the burden of any downside risk. Morewould prefer to have physical activity, so they would certainly welcome that. But, they have said with this framework that rather the anticipatory of inflation, which is the traditional framework when i was there a decade ago and had been there for decades, but as you see the influential potential for inflation coming, they will raise rates. They are going to wait to see actual inflation before they act. Does this mean they will act to late . It is possible. It means it is more likely they will get to a 2 target because they have been able to get there. Guy in terms of how the market should be thinking about events that could ultimately up end current pricing, how important do you think the fed is right now . In terms of the effect that it had, is the bulk of it there . Is the fiscal story much more important . I am wondering if we need to downgrade the feds importance from a market perspective right now. Prof. Kroszner it depends, as the fed if the fed does as the market expects, which is keep rates low for a long time, then you can put the fed on the back burner. If i am wrong about what the dot plot will look like and the and jay powell says that it looks like we will get fiscal stimulus, the markets will crater. The fed is important, but it will hopefully be more in the background because policy will be well articulated and understood that will be the base, and hopefully we will get more positive news on vaccines, unemployment, and good fiscal to try and make a good, long run adjustment. Kind of could get some selloff in the bond market when we talk about how that is the vaccine train, that is what is going to happen when we finally get a vaccine. What does that look like in the bond market and what does the fed tolerate . Prof. Kroszner with this new framework, they will be willing to tolerate more than in the past, so we are getting positive news and they will not say, we could really get to able period so we should go back down. Alix in terms of yields going higher, what will they be ok with with big moves . Bef. Kroszner they will fine with yields moving up if we see strong positive economic news. The reason they are moving up is because the economy is coming back strongly and they will hold their fire for a while. Unlike in the past where they moved up the short rates, they will say, let us let the economy run a little hot for a while, and they will hold back their fire. Howd does what the fed is doing impact other central banks. Do you think the ecb will go down the same road, is as the model or benchmark . Prof. Kroszner the fed has more flexibility because the fed imposed the 2 target on itself. The ecb, bank of england and other central banks, that comes from the chancellor of the exchequer and the european parliament, so they do not have as much flexibility to change their target. They can talk about it in a different way. Like the ecb says that there mandate is to have inflation at or slightly below 2 . They do not have the same flexibility to say we will tolerate inflation going longer. What they can say is that we can wait until we get to 2 before acting, and i think you will start to hear more discussions like that, but you cannot fundamentally change the framework like the feds dead did, because that is not up to the central bank. Expect fromo you the boe . Prof. Kroszner i think we will not get any big announcements i do not think they will go negative or announce anymore asset purchases. The economy is doing ok. They are going to be very much like we were discussing, the u. S. Trying to see what the fiscal package will look like. The furlough schemes and things that have kept unemployment rates relatively low are likely to expire in the next few months. There is a lot of discussion about alternatives and they will be focused on that. I do not think they will move now, but they will see what the likely outcome events is and they will decide if they need to go negative or do something more. Guy we will leave it there. We always appreciate your time. We have the fed special coming up a little bit later, in terms of what is happening in the u. K. , mark carney will join the pinto advisory board. Boris johnson says he does not want a Second National lockdown. Fed coverage coming up letter, plenty later, plenty of it. 7 00 p. M. London. This is bloomberg. Guy Boris Johnson is testifying in front of the Parliament Liaison committee, the focus largely on testing, though Boris Johnson saying is saying that he will do everything he can to avoid a lockdown saying that the financial consequences will be disastrous. In terms of what that means for the bank of england, it does fairly complicate things, not only do we have the virus to contend with, but there is also the brexit story that needs to be factor in. Peter schaffrik joining us now. Peter, over the last few weeks, the front end of the u. K. Curve is starting to price in a greater possibility that the u. K. Cuts rates. That is as a result of the fractious relationship andloping between the e. U. The withdrawal of the latter. Is there a serious risk that the u. K. Could go negative. I do we do indeed, and not think the pricing is right because they have not made enough room for that eventuality. We do think and the bank has made it clear that the first port of call will be more qe, so we think this will happen in november this year. When everything comes to a head and we have probably more covid pressure and more brexit and the unemployment rates and the labor market, we do think there is a serious chance or risk that the bank will go negative. You can talk about the implementation thereof, but the market has not made room for that possibility. Alix let us talk about the implementation. Peter there are plenty of things to consider. Move negativeo and market will not price off of the bank rate, and there is a chance they might move into a different rate. There is a funding scheme rate, the equivalent we have seen with the ecb. We think ultimately they will do both, so we think the pricing is going in the right direction. You can think about some other lessons they could have learned from the ecb in particular what other European Central banks, for instance about the split bank rank rate where some of the reserve can be enumerated and the proportion that will be at the lower bank rate. All of these things are important, but the key fact remains, the Economic Conditions warrants a negative bankrate. Deal,f we get a skinny and people do believe that Boris Johnsons decision to push forward with the markets early is designed as a negotiating tactic, if we get a stick a skinny deal, will that be enough to prevent the bank from cutting, or is the economic trajectory has such that the bank will do it anyway. Peter we think the trajectory is not looking good to begin with, because they you just used the word skinny, but we have the choice between a no deal or a hard deal. No matter how much you slice and dice it, we are one million miles away from what we were looking at 12 or nine months ago, when we were looking at comprehensive deals especially a new look at the description of what the banks give about their expectations or the implicit explicit deal expectations. It is a comprehensive deal and i think we will get anything but. Alix when you take a look at Boris Johnson speaking out, can any of this be bailed out by some kind of stimulus from the u. K. Government, can the boe get some bailout for its heavy lifting . Peter it will certainly get some kind of for still physical response. I know that is not the question you are directly asking, but there is a decent chance that in response to the covid situation that we get more physical response as well, particularly because that the furlough scheme is set to run out and we heard rumblings that they will put something in place, whatever that is. The fact remains, and the access from this transition. Transition period will be a hard event that needs adjusting to, despite anything that the government puts in place, we reckon that it will be a negative impact on the u. K. Economy. Guy Boris Johnson being on thened by laborers brexit story. Boris johnson is saying that the u. K. Would impose reciprocal tariffs and threatening formidable tariffs against the e. U. In events of no deal. How acrimonious could it become . At the moment, it is a hard deal or no deal. Are we beginning to talk about the fact that this could become antagonistic were it to become antagonistic and the e. U. And the u. K. View each other as enemies on either side of the channel, and there is a tariff conflict, how much damage could that do . Are we pricing in the worst case scenario, or given the language, we need to price in more . Peter i certainly do not think we are pricing in a worstcase samaria we are pricing in a bad scenario. You can always come up with one that is worse. Am one you are describing, i not very optimistic that we get a very good deal together, that i do not want to go that far because we also have to keep in mind that the two sides negotiate and that is a positive, and in this crucial phase u. K. Government has made it clear that they believe that only a very hard negotiating official will ultimately win. It does not surprise me that we hear Something Like this from johnson in that case. Ultimately, i think we will talk again after the 15th of october and we will see what is coming out of the government circles then. Guy the pound has thus far represented the pressure release valve in this process, and if we were to see maybe a very hard brexit, we could certainly see sir sterling sinking substantially. What impacts what that have elsewhere in the economy, what it provide relief . What impact would it have in terms of the rates markets . What effect would substantially lower sterling have . Peter if we take a step back and take it in turns. The most direct impact is likely going to be on inflation. We have seen that before and it will happen again through import prices, and that is not necessarily good inflation in the bank has made it clear in previous instances that it is willing to look through those, and it depends on the rest of the Economic Situation at the time, but it is fair to say that in this environment, the Economic Conditions will be poor and the inflation will be high in the bank is likely to not ignore it, but throw that away. Is, providing a stimulus to the is whether or not it provides a stimulus to the economy but we have yet to see a historic contest context that has a stimulus effects. I do not think that, given that environment with supply chains in jeopardy will be stressed and the drop in sterling would lift many there. I think in economic circumstances, i do not think we get much support from a weaker the question is whether the bank would use that as an excuse to not cut rates. But we do not think this will not be the case either. Wouldhat perspective, we see the bank moving in the direction i out lied outlined earlier. Alix Boris Johnson the internal market will protects against bad faith. They say they are not negotiating in good faith on northern ireland. Guy absolutely, and you come back to what lara was saying earlier on, suggesting the deal may have been done with tory rebels. You look at the body language, that is hillary on the screen. Looking a little bit more confidence in turn confident of the bodyerms language but he is moving on to the front foot in terms of language when it comes to negotiation with the e. U. More to follow. Boris johnson will continue to take questions as he testifies. You see a wide shot there. Onwill get more thoughts what is happening in the e. U. Today on the green bond issuance plan. We will talk more about that. This is bloomberg. Pm johnson anybody who needs advice needs to know what to do. We have a website set up for the purpose and a huge program of engagement is going on. I believe that we will get through in the course of alix we are waiting for snowflake to open in the u. S. , indicated to open as high as 200 25. Scarlet fu has the details. That would be a pop of 87 . We will see how that did spread bid spread looks like. This is the largest ipo. Snowflake is seen as a legitimate competitor to amazon. A lot of people are excited to see how it does and a lot of early investors are backing the company. The latest at how financing around that played out was back in february, and that round valued snowflake at 12. 4 billion. Rick sharga hathaway each Berkshire Hathaway committed 250 million dollars. They committed to buying 400 shares as well. We will keep and i on the price their an eye on the prize there. Guy the european closes coming up next. This is bloomberg. So youre a small business, or a big one. You were thriving, but then. Oh. Ah. Okay. Plan, pivot. How do you bounce back . You dont, you bounce forward, with serious and reliable internet. Powered by the largest gig Speed Network in america. But is it secure . Sure its secure. And even if the power goes down, your connection doesnt. So how do i do this . You dont do this. We do this, together. Bounce forward, with comcast business. Lookentertainmentour experience xfinity x1. Its the easiest way to watch live tv and all your favorite streaming apps. Plus, x1 also includes peacock premium at no extra cost. This baby is the total package. It streams exclusive originals, the full peacock movie library, complete collections of iconic tv shows, and more. Yup, the best really did get better. Magnificent. Xfinity x1 just got even better, with peacock premium included at no additional cost. No strings attached. Guy stocks finishing the day in europe, 30 seconds to go until the end of regular trading. Lets show you the tight session we are having in europe. Equities going nowhere. Today no exception. Up. 4 . Understandable prefed. We will get volatility as a result of the fed. People not expecting it but keep an eye on those. In the currency market, we are seeing a little but of action, certainly in the pound. Orest johnson giving testimony today. Tomorrow we have a bank of england rate decision. A focus on whether the bank of england will be forced to cut rates as a result of not only the economic trajectory generated by covid, but also what is happening with the potential for the hard brexit. Will be back with peter in just a moment. Eurodollar flat. Look at the pound. 1. 2995. The pound popping higher. Big factor as well with what is happening. The pound is gaining against the euro and against the u. S. Dollar. Asymmetrical move. In terms of what we are seeing in individual equity markets, you can see the stronger pound generating a lower ftse, down. The dax and the cac 40 relatively flat as we approach the end of t