Worth noting, we had some equally data in the last 10 minutes or so and the numbers, monthonmonth, Industrial Production there falling 7. 5 . That was worse than what economists had been expecting. There could be the production hold, daihatsu over the course of january, suddenly being into those numbers, because we saw that fall in production. They could be perhaps a shorterterm lip. Yearonyear actually the reading was betterthanexpected. Retail sales as well out, those numbers better than what economists had surveyed or what had been forecasted both yearonyear and the monthonmonth readings good for a brighter but for the japanese yen, we continue to hold around the 150 mark. It has not budged for several days now. This is the state of play for japan. Lets roll over and look at how korea is coming online today. A bit of weakness again, but fairly muted. As well, the dynamic here is what we had in wall street overnight, more weakness creeping through, but that countdown to the core pce reading, we have seen those inflationary pressures picking up again in u. S. Economy. Haidi yes, its really out of the volatility going into this last leg of the cycle, right, what that holds true for so many central banks, many of them taking leadership from the said. Take a look at the weakness across the australian session. 0. 3 lower. Some selling in financials, the Mining Sector isnt doing terribly well either. Really tracking the decline we saw through the u. S. Session. We are seeing kiwi stocks also a bit on the backside. Look at the aussie dollar, pretty steady, 0. 6495. The dollar index is going sideways at the moment. A bit of weakness either kiwi dollar in the kiwi dollar. Governor odor that the cash rate governor orr says the cash rate has to stay steady. They decided to hold. Also watching oil markets in particular. A bit more downside there, just over 78 a barrel for new york food. For extending the decline from that we saw the build and inventory. Nationwide u. S. Stockpiles rising by 4. 2 bloomberg was last week. Also watching the Expert Mission of opec members to agree on output policy soon. And a lot of focus on the treasury market. Looking at the question whether yields have peaked for the year. The final court ced data before the march fomc meeting will be key. It is forecast for a slightly higher number monthonmonth. Do we finally see upper alignment of the rate markets with the fed dot plots, for pricing in potentially three rate cuts this year . Lets get more insight on this with our chief graves, and mliv contributor chief rates correspondent and mliv contributor garth odonnell. Have we stabilized or peaked . Garfield i think rates could go higher this year. Even if the pce data comes into the soft side, they are a whole range of other risks going forward, in particular if we got a somewhat soft pce print, we already have strong cpr and jobs data recently. Said officials were emphasizing the idea that they need to see a series of data that can give them confidence that they are underway and they are not about to be too calendardriven, they will be data driven. With that, speaking of data, you have got pce and then well get the next jobs reading. We get a whole slew of purchasing manager indexes and similar gauges designed to take the temperature of various parts of the economy, both output and in particular what price pressures are doing. And you have fed chair [laughs] jay powell appearing before Congress Next week after which the fed goes into a quiet period before the next fed meeting. So all the way through their, especially because the fed meeting will be updated. Lot, you have a range of updated dot plot, you have a range of risk factors that could provide the potential for a pop if we do get some data or some fedspeak that sounds the hawkish pivot we also could get higher yields if once were past the monthend rebalancing, equity start to shift higher. If there is strong for Risk Appetite, it also becomes hard to see a topping for yields yet. Annabelle equities pushing higher, garfield, given the moves we are seeing, we have seen it first off a bit in the last few sessions with but how durable and how strong do you think the rally has, or is it a fragile is it pretty fragile still . Garfield it is still pretty strong. To some extent it is i have often been skeptical of equity moves, but part of the difficulty of being skeptical about this one is that earnings have been strong, the economy has made strong. There were some wobbles within the gdp data that cannot overnight, but Consumer Spending was betterthanexpected. There is that. There is also the Financial Condition situation. Interestingly i was looking at Goldman Sachs has indexes on Financial Conditions for europe and for the u. S. U. S. Financial conditions are somewhat loose, whereas europes are fairly tight, even though the ecbs cash rate is nowhere near as high as the feds. So you have a range of factors that are saying that there is no smoking gun for equities to turn around and move lower. They are definitely becoming more vulnerable, more exposed. There is talk of the equity premiums, equity risk premium becoming too compressed. So with all of that, you have to be apprehensive. That you might mistime things. All the same, equities look, at the moment, like they have the momentum. And so far in the last few months, momentum has been a Winning Strategy especially in japan, but not only in japan. So there is a good chance equities will keep moving higher unless we get the sort of serious set of bad data that would mean the fed is going to cut so never than later. Annabelle we have seen some momentum and a bit of a rally in bitcoin. We have been discussing this morning the reasons for that. Supply and demand dynamics, leverage creeping back into the sector. But i am curious, bitcoin and crypto overall makeup such a small percentage of institutional investments. Do you think we are likely to see any sort of pivot or change here . Garfield i actually think bitcoins continuing decline, that underscores the idea that Risk Appetite momentum is still fairly strong. I think some of what is going on in the last couple of days is a rebalancing very strong month of equities, very weak month for bonds, so you have some of those flows shifting around from that you also have the lack of immediate equity triggers. Meantime, bitcoin has the supply and demand dynamics, it just fits that general zeitgeist of things are doing well. Doing betterthanexpected. If you remember, part of the reason when we entered this year, bonds have done badly because we entered the year with people saying the fed was going to cut six or seven times this year. That underscored a lot of Economic Risks because the fed had hiked rates so much and have them so high. What do you know, the economy has done just fine so far, with yields at those levels with rates at those levels, so i think this is something of a relief rally for risk assets, because the economy is remaining strong. Annabelle garfield, bloombergs chief rates correspondent and embed contributor Garfield Reynolds there. You can get more on the days trading on our mliv blog, on bloomberg at mliv. You can get a market rundown in one click, and there is commentary and analysis from bloombergs expert editors, so you can find out what is affecting your investments right now. Up next, we speak first with the rb of the governor about why he is softening threats of further rate hikes this year, and what he thinks they might start cutting. Adrian orr joins us live, next. This is bloomberg. Thanks to avalara, we can calculate sales tax automatically. Avalarahhhhhh what if tax rates change . Ahhhhhh filing sales tax returns . Ahhhhhh business license guidance . Ahhhhhh crossborder sales . Ahhhhhh item classification . Ahhhhhh does it connect with acc. . Ahhhhhh ahhhhhh ahhhhhh annabelle we are just 15 minutes into the session so far, for japan and korea. This board puts it in perspective. A lot of red across the screen. The declines go far are still fairly rangebound but we are seeing weakness creeping through. The focus really is coming down to the feds preferred inflation gauge that is due thursday and thats going to help of course identify the path forward for Interest Rates given we have seen some signals creeping into the market of more resurgent inflation. Just about 15 minutes into the session, weakness for the nikkei the kospi for the nikkei and the kospi. What else we are tracking is what is happening in the cryptos face permit bitcoin has been one of the big movers over the past few days and crypto stocks generally have been one of the sectors to watch. Again, its the focus on the side and of other central banks, including the rbnz. Haidi yes, it was a bit of a surprise i think for some marketwatchers yesterday that they did hold, keeping rates unchanged. Softening the threat of a further hike also. The policy statement remaining somewhat hawkish, but much less so than investors had been looking for. Joining us out of wellington is the rbnz governor, adrian orr. Always a pleasure to have you here on bloomberg. People were surprised because there was speculation there could be another hike. You said it had been discussed. Talk us through the reasoning as to why you didnt go yesterday. Governor orr the data, i think, is really the story. We have been very pleased with the last 18 months or so, the economy has panned out broadly as anticipated and we have not had to change our economic productions or views much at all, to be honest. But markets the challenge for us, we had between november and our Monetary Policy statement yesterday, a lot of confirmation that inflation is continuing to decline. Inflation expectations are better anchored and we are achieving our targets with pretty minimum disruption to the broader labor markets. We retain a restrictive position. But at the moment, we have confidence that patience will see us through. Haidi was there a sense that it would have been also risky to raise rates as the economy is slowing, or does that not weighing the reasoning as much as a single mandate, and is there a sense. Com april, do you think the do you think morales to be done to look at a longterm neutral rate to not be running while Still Standing still, in a sense . Governor orr with the official cash rate at 5. 5 , we believe that is well above any estimate of the neutral rate. We are unambiguously in a restrictive monetary position. Yes, there is always a risk of overdoing it. This is why patience is critical. When you are sitting in a position where you are confident and being restrictive and confident the economy and the Monetary Policy transmission is working as anticipated, then have patience and that is what we are perfecting. Last november, inflation was still printing higher, expectations were higher. Our projections were the same, but it is much nicer to have more data and more confirmation and so thats what we reflected. Our forward outlook is balanced the risks, around inflation. What has not been balanced is our ability to them upside inflation surprises. That is where the asymmetry is. At 4. 7 percent, aiming for 2 , you dont want upside surprises. Haidi patience is the mantra, i am getting. That is maybe one of the things that the markets and investors are not terribly good at. He even said this morning that you see the cash rate staying at 5. 5 through the course of this year. The markets are still pricing in two rate cuts. Do you want to give a message to investors, to the markets . Governor orr you know, be careful. The Interest Rates at a restrictive level. Engage with the brain before you overindulge in debt. If you are holding that debt with a view that Interest Rates have to go lower, that is your risk, that is not our risk. Our risk is to make sure that inflation hits its target. Annabelle what is the risk though you are seeing of holding rates for perhaps too long . Governor orr at this point, low. In the sense that the economy is strong. We are talking about Economic Growth picking up from here over the calendar year. We are talking about employment growth remaining strong. We do see unemployment rising somewhat, but other than that, Household Income has been very strong. There is a significant Government Investment need. There is a lot of drivers of Economic Activity and wages trying to moderate the demandside and we are just trying to moderate the demandside to match the supply capacity. At the moment, the risks are balanced. Annabelle one of the factors that have played into the supply demand dynamics has been immigration, we have seen a big spike in migration into new zealand permit to look at that more from the reinflationary effect from that channel, or was it more the disinflationary effect . Governor orr great question. Not all migrants are the same and not all migration carried is the same. We had a 2 increase in our population similar to a study and canada. It arrived at a time when there was enormous vacancies people just couldnt find labor. So it has been a net positive on the supply capacity for the country, the potential growth rate, and at the same time, it has moderated wage demands. In that sense, it has been useful for Monetary Policy, relieving some of the pressure. Of course, there are now more people in the country and they want dwelling and they will be spending. So it is holding up at some degree, total spending in the country. Per capita spending is falling, but aggregate spending has been held up by the larger population. The real pressure we see is actually in the dwelling market, not house prices, but rentals, places to live. We are still in that really tough position from it we just need more homes and houses. More dwelling. Haidi haidi do you think that rapid upswing in migration could fade but he quickly . Does that take the pressure off rentals . Governor orr you know, we just dont try to predict. We make basic assumptions for immigration, back to some longterm normal standard. Why . Because no one controls net migration. People can come and go as they like netizens. I think the pressure will remain on rent for quite some time. Building activities actually slowing at record levels at a time when the population has increased. So that rental challenge will be there, that rental price challenge, for some time to come. Haidi the drop in inflation has been pretty rapid, 4. 7 at the end of last year to 2. 5 at the end of this year, do you continue to have confidence that the last leg of this cycle will be quite as effective in terms of Monetary Policy settings . There is concerns about the stickiness of inflation, then you overlay some of the geopolitical and potential obliging issues we might encounter this year. s that our risk for the rbnz . Governor orr it is a risk. I dont think its a new or different risks, however, and we have been doing a lot of work to see if the monetary transmission mechanism has changed at all, how impactful our Interest Rates on that domestic homegrown insulation. All of our work says it is business as usual. We just have to be patient. Of course you mentioned the potential supplyside or relative price risks, they are always going to exist. For example, we are talking about being inside the inflation target band in the second half of this year, below 3 , and then at 2 of the same time the following year, what is holding this up . We have had to make assumptions around relative price pressures, including shipping costs as an example. But the quarrel of Monetary Policy is working, we have always been battered by various price shocks. Annabelle i think that goes back to your point about the ability two weather upside surprises to inflation. The risk of those really comes down to new zealand being a major commodity exporter. But what challenges are you most concerned by presently . Governor orr domestically, i think the challenge is, i dont want to sound too benign, but the risks are pretty well understood. Nothing is kind of on the horizon. If anything they are more global , the geopolitical risks, the challenge to trade, accustomed to trade. China demand, you know, the main risks were talked about, some to the upside and some to the downside. Trade we have done reasonably well over the last few months. The export sector is feeling a little bit better about things. So really if we can ride out the next 12 months, its a pretty positive environment. Annabelle the other thing that could perhaps become an inflation risk comes from the weak currency and the new Zealand Dollar is weaker at the moment. Whether that is inflationary depends on what that Weaker Exchange rate is reflecting. Do you think the current levels of the kiwi dollar can be explained . Governor orr yes, its a great way you phrased it. We dont have any unnecessary for large, unexplained components to our tradeweighted Exchange Rate and likewise relative crosses. They have been reflecting many of the standard ways you might try to model a fair value for an Exchange Rate within the zone of confidence around that. The currency markets, touch wood, have been very well behaved over recent times, so, you say we are kind of weak. Yes, we are lower than we just were permitted is not necessarily weakness reflecting a lot of economic fundamentals. Haidi there seems to be perhaps more preparedness across other major central banks, the fed has started talking about easing, perhaps the rba. Despite being one of the first at the start of the cycle, could the rbnz be one of the last was mike are you comfortable with that in terms of that initially then giving some strength to the currency and reducing the risk of inflation . Governor orr yes. All i can really say is the data will tell. You have to play the hand in front of us. We are incredibly transparent. We put that projection out. We are subject to no future economic shocks, subject to the economy behaving broadly as expected. We do have an ezine of Interest Rates easing of Interest Rates, just