Headquarters, i am francine lacqua. We will be joined by former bank and member of the institute for butrnational economics, first, the bank of japan has refrained after the economy shrank last quarter. Nearly one third of economists see the doj making moves by the end of next year. We are joined from tokyo with brett with the very latest, right, what is the likelihood of the move in october . Brett the likelihood is increasing. We have one third of economists saying that right now. As the governor pointed out today, the expectations are flat overall right now. Very much what is in focus also is the oil market. Reaching the inflation market is pretty much determined by how oil moves over the next several months. There are also some indicators in the local economy. Consumer spending has been quite weak. That seems to point to the possible need for more action. Francine bread, how much will they be looking out for the yen . It has climbed a bit today. Brett the boj has many options available at the moment as people look forward to what may happen on over 30. The possibility the bank could buy more government bonds, the bank could look towards others. There are quite a few options on how they can expand stimulus. We have to keep in mind not all economists see far ahead so soon, some look as far as april. Japan losing face in economics . This is a big financial experiment. Brett i do not think it is just jet, but it is certainly losing patience. At the average japanese, they are certainly finding things tough. Wages are not increasing as much as people need to. That is one reason consumers are not spending enough. On the other hand, we are seeing strength in markets. The stock market has done well. For the man or woman on the street and japan, things are not so great. Week, Consumer Spending is weak. Francine thank you, brett. Now lets bring in the president ,f the institute for economics the one and only. Great to have you on the program. The bank hear you on of japan. We are expecting more stimulus in october, should they have done something today . Guest i think people are expecting too much from the boj. The bank of japan really believes there has been abuzz. They have not met the 2 target, but i think your report understates how much there has been progress on the real side of the economy. Consumption continues to disappoint, that is true and a lot of the world. Wages disappoint, that is true and a lot of the world. , realou look at profits wages did rise this year. Pristine a touch . Guest yes, a touch. But the boj does not want to get ahead of itself. Christine you are quite confident this will work. When do the markets stop expecting too much . If there is a dichotomy between what they are doing and the market is doing, does not work. Lest we gotally, was speaking at a conference of economists. We will having a discussion i was leading on does the failure of the monetary expansion me for macroeconomics, because we all expected it to work. There is no question, if youre being honest, you have to be disappointed. Core inflation has not moved up. The big thing is, unlike with the central bank talks about, moving expectations ahead seems to be hard. The fed talks about anchoring expectations, raising expectations, but it looks more and more like that may be a Mistaken Point of view. You can only move the expectations if you move the real economy. To hisat gets you back markets. The markets have been ahead of the curve, now they are disappointed. The good news is, their disappointment may not mean that much. It may not be as big of a deal as we thought. The bad news is after this long may have some right to be disappointed. Francine at the overall markets, are we looking at a correction or is there underlying concern that we are touching or we are seeing the specter of the recession becoming more real . Adam posen you have conflict things stories. Japan, the United States, and parts of europe, you have very high profits. Like bobgh people schiller, the nobel laureate, say it looks like a bubble to him, the fact is you can make an argument that there will be some correction. On the other hand, there obviously is reinforcing feedback that everybody outside the u. S. Is knocking down. In the end, i think we will not have a recession. Some warn, we always listen. I may miss it will stop at the fact is, the u. S. Is not in bad shape. Europe, despite the tragedy in greece and the human tragedy, be Economic News will better. Japan is mediocre. I did time you put that altogether, it is a solid basis. This team so you do not worry about deflation . Adam not the way i once did. Japan showed us deflation is not quite as bad as we thought it was. I still think we should fight it, you do not want to be entrenched but i do not think it is a panic situation. Christine does it actually make a difference whether they hike . Adam good point. It is more psychological than not. It is about setting president and Getting Started if theres going to be a hike. If the u. S. Is anywhere like its normal shape, 25 point should not matter. Christine to the u. S. . Markets, emerging there are certain bond markets that are overbought and continue to be. The fact is, that is not the feds area. It ismajority of more important to get rid of the low confidence. I was in jackson hole, the story came out that the vast majority of bankers said, just get it over with. You are driving us crazy. Francine adam, thank you for joining us. We have plenty more to talk about. The you kate next. Also on the radar this tuesday morning, it Deutsche Bank. Talking about cutting jobs in addition to the 15,000 that will shed light selling some of its banks. This will mostly affect administrative and technology jobs. What some highlevel positions may also be eliminated. Meanwhile, 18 million paid to allegations. How it operated. More than 50pay million in fines in what would social d for Security Exchange commission. Primengly is sixth minister in eight years. Comes after the ouster of tony abbott following a late leadership challenge. And the brazilian finance minister has opposed a new round of spending cuts and tax increases designed to close the budget cap and protect brazil from further downgrade. Capping the salaries of civil servants, trimming programs, and putting a limit on financial transactions. Now the frankfurt motor show. Carmakerse british first entree into the suv market. On sale next year for 38,000. Twitter question, what do you want to see from the frankfurt motor show. That. N tweet me about , two days away the feds big decision. Liftoff finally coming this week. We discussed that with adam posen coming up next. Francine welcome back to the pulse. In case you have not noticed, the u. S. Reserve has a crucial decision do. A reset for lift off. The president of the peterson for International Economics and adam posen is joined by simon kennedy. Thank you so much for joining us. We were talking before break, adam, about the fact that a lot of the emerging market leaders have been asking for a fed rate hike. At least it is done, we should move on. Do you think it should come this week . I expected to come this week, but i dont think it should come this week. As they close call, but i would put it at a 6570 likelihood. That makes me a liar because, again, it goes back to, do you believe the u. S. Economy is fundamentally ok . Then you will not see that much improvement in the labor force. I think that is where exactly the vast majority of voters are. The economy is not where it but theynce it to be, are not going to see this nonparticipation back into the labor force for. More. Ee there is forwardlooking thinking. The chairman made this clear at jackson hole. There is a case that could be made that you should wait until you see the whites of the eyes of inflation. I think a better way to put it, which is something someone said 25 years ago, if youve got no inflation risk, push as far as you can because inflation will not leap up on you. However, there is a 25year inflation theory that says you experimentrd to based on the 70s. I think it is legitimate to think that way. As a predictive matter, i expect them to think that way. Francine if you look at and experimentation given the turmoil we see in china, and we are looking at in many times this would not be the right time to experiment. It could be at them is right if the market just wants to get over it. Maybe the anticipation is worse than gratification. Dovishomplemented by a message in the press conference. They talk about waiting to see the results. Increase risk appetite. Those economies in europe and japan with a weaker he currency might get a lift upwards. Francine adam, what is the risk of reversal . 15 Central Banks . Adam 15 Central Banks tried a hike and pulled back. Is the the message opposite. Nothing terrible has happened to any of the ones who have rehearsed. Francine according to the fed . Adam exactly. Theres is a difference between making a forecast error and a regime arrow. Error. Nobody knows if they care about inflation or not, it sends the wrong message. There is no question this bed cares about the dual mandate, doesnt care about inflation, the margin. To me, they should not feel a reverse. It is better they should high, from their point of view, i am not advocating, it is a prediction. That are from their point of view they should hike and cut, especially if it is going to be some outside event like china that causes them to cut then hold off and be perceived as too late. Francine i dont know of the markets make that decision but it is adam to some extent, they want to do the right thing whether or like it. Arkets francine if you have a huge correction adam it yes, of course it does but it goes back to something simon said. I dont want to say so much dovish versus not as in the speech because it is impossible to believe them as being dovish as the current rate predictions are. But i cant imagine them saying we have a good path to go, we are not going to go that high. That is a good message. Is it not a level Playing Field . Im sure they are right about the currency laws that gets is running for our guns. There is some talk of currency wars, there is a concern out sort outt currency growth or shows markets and public you are doing something. A continued truce. Obviously, the g20 talking about evaluation. There is definitely concern out there. I think g20 deserve some credit, because they did move to something approximating a formal truce. About three years ago, the treasuryetary of the has been trying to get that to be a g20 agreement. Essentially, you got that. The risk is the prospects on the obama summit right now, two weeks away. 1. 5 weeks away. Not looking great. Could breakisk that up the currency issue because the chinese peoples banks, as simon said, has been leaning against the outflows. Stabilizing the currency. Isis a question whether that going to get caught up in some of the other u. S. China tensions. Francine thank you very much simon kennedy, bloombergs chief economic correspondent. We will be back. Wednesday night, the fed rate decision. We will join bloomberg for an hourlong conversation at 6 00 p. M. New york time, 11 00 p. M. In london. Stay up, it will be worth it. Cuttingbank could be 25 of its workforce according to a person familiar with the matter. More, let us get to nicholas reporter comfort. How does this fit in to what was set forth in july . When brian came along, on his first day he highlighted cost. He said this was going to be one of the areas he was really going with. Ht on and win other ceos of Deutsche Bank in the past have not gotten anywhere with them. It will stay the same. He was trying to do some kind of sustainable reduction in cost and to birth profitability and please shareholders. Rinsing nick, which departments will be hit and how will it be received by shareholders . we do not have the level of granularity we would like yet. Far, the cutst so will be focused on the back office. Facing areas of Deutsche Bank. However, we have heard from Deutsche Bank in the past they will be reducing assets. Those reductions in assets will come with a reduction in headcount as well. A close just under 1 yesterday. Down again today. It feels like, to me and to many analysts up there, that this is a positive in a forest of negative news. That we want to know more details to see how it will pan out and whether it sticks in the end. nicholas, thank you so much. That was nicholas comfort in frankfurt. Than 200 new car models are making their debut. International car models are trying manufacturers are trying to outdo each other. Here is our reporter on the prospects for International Car sales. He began to ask whether now was the right time to begin production in china. I can understand the growth of the china market can be frustrating for companies and china. All opportunity. Firsts going to be our festivity facility. Local facility. We have a 20 million car market in front of us. It is a source of joy, not worry. What about brazil . Brazil is a source of worry. Market down 20 , by the end of the year where forecasting a 25 decrease. Unfortunately, were going to have a couple of years. Reporter 2017 . More . Theos that will depend on decision made. In order to get brazil back on track. The potential of the country is still here. Reporter another decision we are looking for is what the Federal Reserve my do this week. Are you concerned about what it might do . Carlos you know, that is a big question. I am not so worried, because i have the impression it is already anticipated by the market. Now or threepens months time the road or six months down the road, there is so much from the world market at this point in time. The growth , if there isconomy any reaction, it is going to be mild. I am talking about the u. S. Now. The United States might be much bigger than that, but in the u. S. I think it is strong. Price. Most of it is next year, for example, for 2016, we are seeing strong growth in the car market in the u. S. Between 1 2 . Reporter one final question, are you concerned about what the Federal Reserve rate might do outside of the u. S. . Where will it have the most impact . Arlos emerging market. A lot of emerging markets are struggling. Uncertainty around the Interest Rate in the United States. I think that will be an impact on the emerging market. This impact is even bigger because of the problem the emerging markets are facing. Christine hans joins us live from the event. What else did he have to say . Hans he talked about the market in russia where he expected it to turn down. He is not overly optimistic. He is looking potentially for some state support in russia to boost auto sale in the low to mid markets. Some very interesting commentary from carlos gone there. Gohn there. He is not worried about the sedan market. He is expecting it to sell well. At thenchor gets a car auto show. Maine is, you get a silver city and boring, but only to contrast with your sparkling personality. Manus cranny. Christine i will let him know. You will be so happy when he comes back from holiday. To see what i get. I am concerned, scared, and excited. Twitterng us to today question. What do you want to see at the frankfurt motor show . Some very strange cars being chosen for anchors. We will find out more after the short break. You can follow us on twitter. Adam posen is back from the peterson institute. The u. K. Returning to zero in august driven down by the cost of fuel and clothing. A measure of core prices also easing. Core price exclude volatile food and energy costs. Consumer prices unchanged in august compared with a year earlier. The figure in line with economists on a bloomberg survey. Core inflation excludes food and volatile energy. From 1. 2 . What does this tell us about the path of u. K. Interest rates . Mark carney, the governor said the time for a rate hike is approaching. We have had more bullish comments in recent days. Committee members seem to be on the hawkish side. It was minus 0. 1 in april. It is a long way away from its 2 target which the bank of england does say it is confident in reaching in the two to three year horizon. Francine . Francine thank you. Adam, what do you make of this inflation . Zero as expected . The bank of england still expects it to inch higher in one or two quarters. Adam the thing about the bank of england is we have the rivers of blood fan charts. This doesnt change maybe the median forecast but it should have already happened. It has to move down the downside risk. Widen the fan chart at the bottom. Youre seeing this nonpickup in wages pretty much the same as everywhere else. Much more vulnerable to the immigration problem. And to china. Because of this talk, they have talked up the pound. I dont know why they are so intent on moving. It is not clear that the u. K. Is doing that much better than everybody else and has that much lower inflation risk. This is not the u. S. And then the second point ises not clear that two years from now they are going to be on batter path, particularly if the currently elected government chooses to pursue the Fiscal Consolidation they claim they are going to per sue. I dont understand why they are talking up the pound and a rate increase. Francine at the moment markets are pricing october 2016. Should Governor Carney try and talk down the pound . Adam people are going to complain about my saying this of all people, but i think in yen the m. P. C. Should talk less. Because they are making too many specific promises. It is not they are debating the economics out in public. There are too many people including the governor saying we are going to do a raise. We think were going to lean this way or that way. That is creating noise. This is the nth time we have seen them say were going raise. Or put a calendar date almost on it and then pull back. If they want to talk, talk about sources of inflation, member forbes, forbes sort of did that recently and came out specifically in terms of rate hike. Stop talking so much about the rates. Francine corbin was elected the leader of the labour party. Is it dangerous he is not market friendly . He is not a moderate. Can he influence the referendum . Adam it is the e. U. Referendum. The brexit risk. Even if you believe the labor party comes to its senses and changes leadership before the next election, the potential referendum on the e. U. Membership is in the next two years. One stepped down from the front bench because he could at best get lukewarm reassurances from leader corbin on the e. U. Demonstrated this is not a labor g