At 10 00, we will get weekly crude inventory numbers from the u. S. Which are expected to drop. At 2 00, it will be the fed decision followed by Janet Yellens press conference 30 minutes later. We will bring you live coverage starting at 1 00 p. M. Today. First, we want to give you a preview of that decision. And so, we turn to mike mckee in washington. Mike, there is not much suspense on what they are going to do on the rate. What are we looking for . Mike it sounds like a cliche, but it is about what they do and not what they say. We will look at the soft patch to see why they need they feel the need to raise rates anyway. What are they going to say about unemployment . It is now below where they were projected in march. The cpi numbers could be very important, because they have to explain what is going on with inflation which has dropped off significantly. Is it going to continue to drop . If so, why do they think so . This all has to do with what wall street takes as its forecast. And move theher fed farther away from what wall street things will happen with Interest Rates over the next year. David single in on the economic outlook. They come out with this every time they make a decision, but for the most part it does not change very dramatically. Do we expect a bigger changes today given the Economic Data we have been seen . Been seeing . Not in thebly economic forecast. You may hear Something Different from the janet yellen when she speaks. People want to know why we are not generating inflation at this point. 49now we have g number which shows inflation starting to turn down again even as unemployment continues to fall. That is not supposed to happen according to the phillips curve, which is what they follow. How do they explain that . Jonathan you will be at the News Conference. What will be the first question for janet yellen . Mike people want to know why financial conditions are getting looser. Then beforeser now they started the tightening cycle. Does that mean they have to go faster to get where they want to be and avoid being behind the curve . That will be a key question for wall street going forward. Jonathan i want to bring in the chief equity strategist here. Doto stick with this you stick with this . There is no news as far as the rate, but Everyone Wants to know if september is more or less likely. If september is on or not on, but the fed is not going to answer that. Everyone will try to read between the lines on the issue. Jonathan it is difficult, mike. We want to know what kind of data they are looking at. We caught up with charles on the fed communications policy. Take a look at this. Thatat it really means is any datacan look at they want and decide if that is important to a policy and change their minds. I think it is important to be data dependent, but you need more information on how they are going to use that data and what data matters. Dependent,o be data do you see a hard ship from janet yellen to continue that line given that the data is softer . Use thaty not want to line. The fed does not want to raise rates. They believe wages have to accelerate at some point based on where on based on where employment is going. They want to get rates higher in case they need to react to a downturn in the economy. They do not want to use the Balance Sheet anymore to do that. Want to gett, they the Balance Sheet reduction underway. They would like to take advantage of the opportunity that they have. Has to september, that is where we have the possibility of a Government Shutdown in a debt ceiling fight, all kinds of things going on in the economy. A Government Shutdown and a debt ceiling fight, all things going on in the economy. David the Balance Sheet is another dimension to this decision. What is the likelihood they will take a pass on september in raising rates and instead focus on the Balance Sheet . Class i think this is a real challenge that investors have been figuring i think this is a real challenge that investors have in figuring this thing out. Move and, it is a fed therefore charging charting the course is we are in uncharted territory right now. We need the fed to give us more clarity on what it is. It includes the Balance Sheet, but we do not know how much. They really have a big communication issue. The more they can address this issue when is no what exactly we need to know what exactly we are looking at and be more steadfast than that, because they will otherwise confuse the markets and markets will not like that. David a lot of people in the markets are asking for that clarity. The only argument would be that they have not come to final decisions yet. They could give us broad outlines. They could codify what we already know which is that they will start by tapering their reinvestments. They could give us certainty on that and tell us maybe when they want to start without giving us all the operational details. They have said they would like to get that information out a couple of months before they begin, so that the markets can begin to price that in. That would in june, have everyone on wall street thinking they are going to start this in september. If they want to wait until september, it is more likely you will get the details in the september meeting. Jonathan with financial conditions quite easy, and the economy on stable footing, why would the fed not want to address the Balance Sheet issue sooner rather than later . Months andt a few financial conditions are weaker, they will lose their window. Is there something stopping them from getting on with this already . Te they think the fed funds ra is too low. They have said they would like to get it higher. They wantficials says to get it at least halfway to their terminal rate which is about 3 last check. Like to get closer to 1. 5 before they get underway with Balance Sheet normalization. If they could not started because the economy turned down, i do not think they would necessarily call that a bad thing. They do not want to use the Balance Sheet what they have started to wind it down. If they have not started yet, then it is probably ok. Can you fuld this into the bond market for me . We are more concerned with the longer end of the curve. It is to this issue of inflation. We were up at 2. 6 on a 10 year bond yields. We are now at about 2. 2 . That should be a disappointment considering the economy has lost its verb. The question is the broader yield and much less the short and as an equity investor. Of thewhat do you make fact that inflation seems to be tapering off rather than growing at this point . Waste pressure does not seem to be there like they thought it would be. Mike it is not following the script. Script. Ips curve how much lower to the have to go beyond 3. 4 for it to happen . People on wall street want to know. The fed keeps saying it will happen. The disinflation we are seeing, people want to know it is transitory. How long can they keep that up . You will likely hear janet yellen talk about that today. Report withweek job hundred 38,000 jobs, but i think with 138 thousand jobs, but i think a big part of that story is that even though the demand for the labor is there, there is not as many people to put to work. Ple have been on in on have gone on and on about measuring unemployment, but the labor market is behaving as if it is tight. My take is that you are going to see this inflation pick up, but it is not going to do it slowly. We are going to wake up and it will be a bit higher, and the fed will be in an uncomfortable position behind the curve. I think people are going to miss as a sign jobs report of weakness when it could be something very different. We are neard the end of a cycle comparatively. That is why the fed looks past the job creation numbers and at the unemployment rate. They are wondering how much lower it could go. Mike, thank you for joining us from washington. Jonathan, think you for joining us as well. Live from new york, this is bloomberg. David this is bloomberg. I am david westin. Attorney general Jeff Sessions testified before the Senate Intelligence committee. Mr. Sessions was adamant that he did not know anything about any alleged collusion between the Trump Campaign and the russian government. The suggestion that i participated in any collusion with the russian government to , which i havetry fought 35 years to honor, to undermine the integrity of our credit process, it is an appalling lie. The assertion that i did not answer the question honestly at my confirmation hearing, that is false. Decidedlyre was a different tone to this testimony. Democrats really went after the attorney general. At that it was interesting in a sense of how folks are reacting. Democrats are i think it is interesting in a sense of how people are reacting. Democrats are naturally unhappy. He did not comment about private conversations he had with the president , but he did not say that was executive privilege. He is just trying to keep those conversations between them. Republicans are saying that this was a hearing that was largely nothing, that no new details emerged. This is very much going to continue regarding the russian probe even as the administration wants to pay that to the to pivot to other things such as the Apprenticeship Program they will announce today. David perhaps what is most important for Financial Markets and businesses is what Steve Mnuchin was testifying about in front of the senate budgetary committee. Here thatt a plan markets reacted to. I totally agree with you. Policy is very important. Yesterday, i interviewed david purdue about that committee hearing. He said he has been anticipating new executive orders or new directives coming from the treasury department. Of weeksnly a couple on capital requirements. The treasury secretary releasing the report earlier this week calling for more regulatory policies. D regulatory policies deregulatory policies. Right now, he has not put on putank reform doddfrank reform on his schedule yet. Things are moving slowly in the senate. A very slow timeline written out in the senate for deregulatory policy. David so jonathan, that is all true about doddfrank and congress. Still, it is true an interesting what still, it is interesting with Steven Mnuchin said they could do it without congress. Jonathan the markets tried to dismiss the drama out of d. C. Jeffery gardner lack has taken an exception. If you are a traitor or expect or speculator, i think you should get into cash today. Literally today. Byrteries are now clogged secularory forces withs, which when combined low negative yielding safe assets, promised to stunt u. S. And Global Growth far below historical norms. Do you agree with any of that . I think the richest asset is cash. The idea there is a lot of risk out there, we are at the end of a multidecade buildup of debt. If you ask me what is the preferred asset class in that environment with outstanding debt, it is probably bonds. I do not think people are realizing that inflation was running for to close to target, so that means in the United States that the shape of the yield curve is the same. The cash is burning relative to inflation. We have had a good rally in treasuries. There is room for consolidation, but i think you are in an environment that is still a ways off from the next recession, probably a ways off from the next crisis. We should still be extending on the yield curve into the credit sectors and stock market. Jonathan in terms of the treasuries being down when you hear a lot of people talk, these levels sound quite abnormal. But they have become quite normal, havent they . Yes, the inflation rates are going to go up. It strikes me that this is a world with a lot of excess supply. People are still waiting for which is to catch on for wages to catch on. The Central Banks are really acting as if there inflation targets are ceiling in terms of their behavior. David what is the risk of the fed overreacting . At think they are trying to es, so that in hik the next recession it can simply cut rates. The idea of what is in the plot at the end of this year, that you are going to execute the hikes and get to a neutral level, it is really not growing at that impressive of a rate. I do not think that makes sense. I think you will get the rate hikes from them. The big risk is going to be next year. You make youro investments today given your analysis . Fax i think the biggest question is going to be where this cash and up at the end of next year. Moderateeither have growth and inflation or lower growth and inflation. Jonathan given how high credit spreads are, are you nervous about that . Sure, but it tends to spread wide and rapidly in a crisis. They then narrow rapidly towards the mean, and they continue to get tighter. Things going on here one, people have not been in the markets for half a generation, let alone a generation, have seen how tight spreads can get. In the past, we have seen yields get significantly higher. You need to get paid for your credit risk, do not get me wrong. Very low levela of yields, and i think there is a lot of latitude for people to keep seeking that or some time. Jonathan we have listened to bill gross talk about scary markets many times, but we have carried on going tighter. Why is this year any different . The skepticism is kind of music to our years. If you have everyone to our ears. Board,have everyone on then that is kind of a sign. People are looking for a recession when it frankly the normal excesses are not there. David lets look at another possible opportunity or risk, that is china. There was some data that came out of china the other day. Earlier today, frank and analyst told bloomberg hes concerned about services inc. In services in connection with the internet. They have now taken at about 20 of the total Internet Usage in the world. This is where we are looking. The thankful thing is that the chinese internet companies, the bigger ones, are making money. That is a big change from a we had in 2000. So, that is where we are looking. We are looking at the servers the servicebased economy. David so, we have two different views of china. What do you make of china . China is a important. It has been the single biggest driver of world growth in recent years. The trend there is towards moderation. People are concerned about a crash on the financial side. I think you have to hand it to them, it has been amazing how long the growth has gone on. It has defined the skeptics. The rate of debt extension is incredibly high in china. So, some moderation appears inevitable. Is the moderating part of growth. Rich, andery capital as the markets open up, i think we will continue to see chinese investors diversifying. There flows will be an important part of global investing. Jonathan what is the recipe for the reflation trade . They say a big dose of chinese reflation. A you still identify china as positive ingredient when it comes to inflation trade reflation trade . X i think you will see commodities like i think the commodities are looking softer. They are kind of rolling over. Things like copper jonathan is it more than just a supply issue . With the copper bounce, it could be just the temporary disruptions there. Generally speaking, there was a huge wave to increase supply on the commodity side. We will likely have 20 of commodities around for a while. I think the reflation trade have plenty of commodities around for a while. I think the reflation trade will keep going higher. Think the 265 level was very attractive. I think we are probably around neutral levels right now. We will stay tuned and keep an open mind. I do not talk too much about current positioning on portfolios, but i think the problem people have is coming in hearing the comments today, the is, in hearing the comments today, the longterm david the long end of the curve, if it went up, what would drive it up . I think a very dovish head at the fed might create some expectations for higher growth. The other is that the administration seems very concerned with pushing out treasuries. Possibly going out further in terms of what treasury insurance. That could create some pressure. Jonathan thank you for joining us. Coming up, an allstar lineup to talk about the upcoming that decision. Fed decision. That will kick off at 1 00 p. M. Eastern time. With futures city, firmer, you are watching liberty tv. Bloomberg tv. Jonathan from new york city, you are watching bloomberg daybreak. Lets get you up to speed on the markets open. Futures are positive by about 0. 2 . They are also up on both the doubt and s p 500. The dow and s p 500. Technology is where the outperformance is for the last couple of days. We are seeing some stabilization. We are up 14 on the dax we are up 1 on the dax in germany. Beforein the 10 year that said decision as a rate hike is expected. The euro is in little bit softer. Some marginal strength in the pound against the dollar. As get you caught up on first word news. Left get you caught lets get you caught up on the first word news. A lawsuit filed against President Trump saying that he is filing the constitution by accepting foreign money through his business empire. In london, Authorities Say at least six people have been killed in a fire that engulfed a 24 story apartment building. They say that the debt told is going to rise. Survivors who escaped from the tower said they heard residents screaming for help, and that some of the residents jumped from their apartments. Many have been taken to local hospitals, and several are in critical condition. There are reports that President Trump has delivered a surprising condemnation of the Health Care Bill passed by republicans earlier in the year. They told republican senators and the bill is mean, that he wants them to come up with a bill that is more generous. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. I am and that chandra. Chandra. I am emma this is bloomberg. Jonathan the wage on u. K. Households intensifies. We are seeing further pressure on theresa may after an election cost the conservative party i