♪ >> the fed has let a to that a lot of places don't have if they can be restrictive and let the economy really catch up. >> if financial conditions are easier, there's less easing for the fed to do. >> we want to cut rates but the data is not letting us. >> i think they should as a matter of long-term strategic policy move back to neutral rates because the economy doesn't need them to be tight. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: four months ago, it was a big deal and this will be the day the federal reserve has to reduce interest rate so here we are trying to work out when that will happen.

live from new york city this morning, good morning, good morning, for audience worldwide, this is bloomberg surveillance. the s&p 500 is a little bit softer coming off a two day winning streak. the data disrupted the storytelling at the end of last year. lisa: which is what i've read from pretty much every analyst. it will be a difficult fed meeting. do they publicly question their assumption of three great cuts at this meeting and will they publicly allow that maybe rates won't fall as they want in the next couple of years? jonathan: we've got to work through a statement, news conference and i will go straight to projections. trying to work out whether the two policymakers because that's all it will take to come up and make the meeting to cuts and not three and then it's up to chairman powell and the news conference, to shake the narrative. lisa: the two dots versus the three dots, it's exciting to talk about dots all day long. i'm curious beyond that and

beyond this year. if they start to pull back, how for rates can go and how much they can come down. that will be a revamp of what we saw in december. that's saying our to getting to neutral, may be premature. jonathan: i've asked the same question for about a month. chair powell lost confidence than gain confidence. wouldn't you suggest he should be losing a little bit of confidence right now? whether he shares that publicly is another story but based on the information, i wouldn't be looking at that and gaining confidence from what i've seen so far. lisa: the market is not gaining confidence, it's pushing rate -- it's pushing back on rate cuts pretty significantly. they might be saying neutral is 3.5%. we don't know if the fed will address this but it depends on financial conditions and how worried they are about a stock market that is at record highs, bond market that's held as benchmark rate climb.

the financial conditions question might be the most crucial one to understand their psychology and how much they think the market is getting away from what they are trying to do. jonathan: all-time highs in the s&p 500 going into a fed decision and whether it's an obsession about them reducing interest rates. equity futures are negative by 0.1%. on the s&p in the bond market as well, the 10 year treasury yields are lower by a single basis point. out of the 4.30's in the last hour. in the effects market, dollar is absently dominant in g10 over the last week. the fact of the matter is, this year is not strengthening, it is weakening, dollar-yen is $1.51. we've had some japanese yen weakness for a fifth -- for six today. lisa: we're about to touch the

weakest level going back to 1990. the euro is at a 16 year low. looking at these numbers and trying to figure out if this was what the bank of japan wanted or does this force their hand again and say is this necessary to have such a dovish tone while making a very incremental rate hike to zero? this will be a challenge for them because it imports the wrong kind of inflation. jonathan: coming up this hour, lots to discuss. the challenges facing mergers and acquisitions in washington and growing signs of weakness in the u.s. labor market. counting you down to the fed decision at 2 p.m. eastern time. it has been suggested it should act before it's too late. george is with us around the

table and it's fantastic to see you. the difference between what you think they should do and what they will do, why do you think they should be reducing interest rates right now? >> it's always about getting ahead of what lies down the road. they have a dual mandate and it's been the most challenging thing for the fed balancing between full employment and getting inflation under control which is been the primary focus the last two years. our concern and generals the longer they wait to slowly get us into normalizing rates, then see how the economy is handling it and we have a fiscal policy behind this. if they wait too long, they run the risk of a deceleration that becomes more protracted in the second half. jonathan: you say they should look through sticky inflation, the hotter than expected reads of the last month or so, why should they do that? >> we are concerned about the wage price spiral and that's been the case all along.

we're concerned these higher wages or the tightness in the labor market would result in higher inflation. a lot of this was supply chain disruptions, energy and things like that. if you are waiting on the wages side, there are signs and labor market that things are decelerating and wages are coming down. you run the risk if you wait too long then you start to hurt the jobs market. lisa: this is the tricky part. we've been waiting for the slow down and seeing signs of weakness for a full year now if not more. people have been waiting for this and i'm looking at the atlanta fed wage tracker. it's coming in at about 5%, well above where things would suggest. what gives you conviction this time is different and that weakness is more imminent than three or four years out? >> leading indicators like other reads will lead that index. six months down the road, that wage index can be 3.5 easily.

it's still a healthy number but it's the pace of deceleration there. it's a competition of jobs we are creating in the part-timers versus full-time and is been installing out of professional services primarily travel, leisure, hospitality, lower paying tight jobs and if those lose pricing power as well, they are the easiest ones to get laid off and that's the concern. we are hiring at a fast pace but if you miscalculate the landing, those jobs could be gone in a heartbeat. lisa: plies the balance of risk more important to focus on potential weakness in a labor market versus persistent inflation that doesn't seem to be going away? >> it's a balancing act, that's the whole point. if you don't get it right, you miscalculate on what happens on the back end of it, it will come down to a judgment call. it's not what they should do, it's what they will do them because they got inflation wrong

for so long and they were stuck with transitory inflation and that was the narrative, they will probably overstay their welcome that will cause problems later on. jonathan: what you believe now for listening to you is at the later they start, the more they will have to do down the road it's ultimately the earlier they go, the more likely inflation returns. which wins out on the fomc at today's meeting and the next several months? >> does the fed generate inflation? that's a philosophical question we have to ask. jonathan: do you believe they do? >> i think they believe they can influence financial conditions may have a strong effect on interest rates of course. the question is more about the fci channel. how quick will it translate into inflation? if you shift toward fci, it could be fleeting. markets were at the highs

yesterday but will they be there three months down the road? lisa: if financial conditions is a trying it -- is a financial mechanism of the federal reserve, shouldn't worry them that there mechanism is now functioning to bring down inflation? >> it's been delayed because it still lingering this year, fiscal policy is probably offset on the feds tightening. it's a pretty powerful move. if you translate the actual quantum of how much government spending we've had in the various government jobs which has kept the jobs market stronger than what it seems on the private side, if it wasn't for all that fiscal them fed policy would be more effective. lisa: it shocks me when we get person after person say that fiscal is still coming. we get news of another $20 billion going to an intel factory. there is so much money still getting ported to the industrial sector that a lot of people come on and say this is why we are bullish. we see the money and it's still

coming. we look at the savings accounts and they are flush with cash for consumers making money. how do you dismiss the fiscal in bus -- the fiscal impulse of that's fleeting? >> gets bifurcated within the stock market. you have a narrow set that's benefiting from this. it's bifurcated across u.s. households. the top 20% is holding half the economy up and can work until it doesn't. this is such a sensitive point and we are at the mercy of financial conditions and what are valuations? has a lot of this belief the money will keep coming in, what if it slows down? i'm a big believer in change. i doubt we beat that bogey from last year. from this point forward, it becomes a level playing field on fundamentals of fed policy versus fiscal policy and the true state of the economy. jonathan: we will get some

forecasts before you go. how would the bank of japan influence your thinking at the moment? what's going on there and why is it shaking up markets in a bigger way? >> they ended up with a dovish hike with a lot of concern that this would be the start of repatriation of money back to japan, the lack of sponsorship for the u.s. fixed income market. we take the other side which the japanese have been defensive during the last 18 months but in reality, this is a not -- this is not a consequential move. the boj almost needs the fed to ease now or soon because it will do a lot of the work for them but if not, you have a risk that the -- that this number is big for dollar-yen. if it keeps going, that's why treasuries are rallying. people are realizing there will be a need for fixed income in japan. my bias is that the market is

too smart for its own good and we priced in a rate cutting cycle multiple times now and the fed has yet to deliver. it might end up being very anti-climactic versus the boj. the fed eases and it's priced and in bonds don't move. jonathan: it's good to see you, really thoughtful. it's been five years since he sat around the table with us which is unbelievable. lisa: it's wonderful to have him. i love the way he thinks through thanks. this is that the date underpinning so much of the disagreement on wall street now. jonathan: i can't believe that dollar-yen is pushing $1.52. it's good to see you, george. let's get you an update on stories elsewhere. >> inflation in the u.k. falling more sharply than expected, going to the lowest level in 2.5 years. consumer price index rose 3.4%

in february from a year earlier. that is slower than the 4% the month before. economist say the data keeps the bank of england on track to reduce interest rates later this year. the texas migrant arrest law is back on hold. just hours after the law briefly went into effect, federal appeals court stepped in preventing texas from arresting and supporting migrants accused of entering the u.s. illegally. three-judge panel intervened after a series of back-and-forth court orders that saw the supreme court way in. the three-judge panel hits today. primary elections were held in arizona, florida, illinois, kansas and ohio yesterday area former president donald trump one all five republican primaries. president biden 14 democratic primaries after florida canceled its vote. he received 83-91% of the vote in kansas was the only state with an option or voters to

choose on the democratic ballot. that's your bloomberg brief. jonathan: thank you. up next, m&a roadblocks in washington. >> not everybody can fight through lawsuits with the time and effort. consolidation comes because you have to let capitalism run. jonathan: that conversation is up next. live from new york city, good morning. ♪

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and more in prospectus at invesco.com. >> today, the fed decides. >> they are scared stiff of getting this wrong. >> we are primed for the brick green light. >> trust bloomberg to bring of the fastest covers an exclusive analysis including jay powell's press conference. >> we are still seeing more good data. >> how dependable is the data? >> tune into bloomberg

surveillance the fed to size at 1:30 p.m. eastern. context changes everything. ♪ jonathan: it is fed decision day and equity futures on the s&p are just about negative by almost 0.1%. all-time highs of the close yesterday going into this decision later this afternoon. yields are little bit lower. this morning, m&a roadblocks in washington. >> we need to get this resolved. we need to get a more rational predictive outcome so people can take the risk of putting their company at risk for the sell side and not everybody has the staying power -- power to fight through lawsuits and time and effort and things like that. consolidation comes and you have to let capitalism run. jonathan: a number of deals facing pressure in washington including tieups between kroger and albertson's, capital one and

discover and u.s. steel and nippon steel. ed mills is with us in the studio in new york. i think this is an important point. how much distance is there between the two parties right now on this issue? >> when we look back at lena k ahn, when she was confirmed by the senate it was overwhelmingly bipartisan and she's the head of the ftc. the only thing that republicans didn't like was that she was put in charge as chair. when we look at donald trump, he ran as a populist. we have large antitrust activity in this country, we have major technological change, major income inequality and when there is populist politics, that will not change with the selection.

the focus will shift. it might become more transactional, more specific to what may be what donald trump likes or dislikes but it's not all clear after the election if he is elected. jonathan: the language both sides uses different ultimately, the state is getting bigger not smaller. is anyone arguing for small government in washington, d.c. anymore? >> no. what we are looking at is when you were in charge come you want to push your priorities. what we set an antitrust as we've had a seismic shift and a glacial pace. what we are seeing with a lot of these deals is the approval process is part of that glacial pace because getting anything done getting folks to the table and willing to put their companies at risk for that process is getting harder and harder. lisa: what's the new form of american capitalism at a time when you got antitrust issues getting enforced in deals not getting through and you get tons of money being poured into the

new national champions whether it's electric vehicle policies or whether it's these loans and other grants to the likes of intel because of some of the concerns around security? >> we've said the new change in policy is that technology is a national security assets we should look at some of the government funding for technology similar to a defense budget. we are trying to rebuild our industrial base in the united states. that was behind the inflation reduction act and that's behind the chips and science act and it was behind the bipartisan infrastructure bill. the dollar amount the government's are willing to put into different sectors and into different companies is all national security driven, even electric vehicles. we have fought wars free generation the middle east for access to oil and a lot of policymakers and a lot of policymakers in d.c. are saying if we shift toward an electric economy, we need to make sure that electric components in the eeev batteries are made in the united states versus a

politically vulnerable space. the fact that taiwan has the leading semiconductors, that's a geographically and geopolitical vulnerable space. investing in that is an investment in the defense budget and rebuilds the industrial base of the united states. lisa: some say they expect fiscal spending to stop. trying to pick national winners, how can fiscal spending stop? does it have to continue to support these industries? >> when we started this congress after republicans won a majority in the house of representatives, everyone thought we would get cuts. we are on the verge of finally passing an appropriation bill for this year. we will have flat for domestic, 3% up on defense, we could still do a defense supplemental. we have all of those bills i talked about just hitting the economy. on the chips and science act, we got awards for intel which is not exactly what they want. they want more. you will have a push for chips

act 2.0. the spigot in washington to supporting the economy and supporting a soft landing or no landing from economic perspective. jonathan: can we talk about how we got here and what this is in response to? some might argue it was in response to china and maybe china 2025 which was pretty bold and maybe brazen to say these are the industries we will dominate. some commentators have said they might have talked about made in china in 2025 of the cuban mexican in the plan. i've looked at the situation reflected how we used to look at things 10 or 20 years ago when people in the west said arrogantly and mistakenly believed china would become more like us in the west. it sounds like we are becoming more like china and it's looking more and more like china in the years to come. i'm not saying washington, d.c. is turning into the ccp but some might think that. i'm not saying that but i'm saying we're going down a path

we didn't think we be going down. >> i think it's more eyes wide open as it relates to china. i talk about the fact that for years, one of the conversation d.c. was you had to cheat -- tree 10 and a certain way that if you cause embarrassment and they lost face, that was the worst scenario. now we have policy that essentially punches them in the face and they are still talking to us. the conversation in d.c. has changed as well as the posture. the posture toward china has changed. what folks in the defense department and people i talked to were focused on was china 2027 was is when they want to have the military capability of an attack on taiwan if they wanted to. all of these tech restrictions are trying to push back that timeline, not giving them the semiconductors or the artificial intelligence that is necessary to pull off that attack if they wanted to do that. we don't think they are near that but it is all about

national security. what are the areas we still control as the united states government and as ever technological leadership in the unit states and how we can slow down china and what they want to do? lisa: is fighting china becoming china? is it essentially what we are seeing with the more focus on national champions and central planning? >> i think we do it differently. we don't have state owned enterprises. there is still a huge focus in washington, d.c. and the delay between the passage of the chips act and the passage of the ira in getting this money out is making sure there is some level of support for what's being done. they are prioritizing projects that could actually happen. back in the obama administration when there was the stimulus bill that subsidized solar and there was a lot of blowups there, that has changed the policy. we will save its right this time but there is at least a focus on the projects that actually can get done and actually be successful in hit project goals

by 2030 is a key component of the commerce department is doing. they get blamed for taking longer but hopefully they are doing it right. jonathan: i wonder where the market is pushing back against this stake but that seems to be happening in the auto industry. ev's are not taking off and away the administration would like. what can they do about that? >> what we are focused on with them is the fact that michigan is one of the key states. whoever wins michigan probably is president. you had an unprecedented act by president biden showing up on a picket line for the autoworkers. i think the next thing we will see is an aggressive fight against chinese made cars and where they are going in the world. that's the next trade fight that's coming here. we will see a focus not on ev's necessarily from china but there is a lot of excess capacity in china on internal combustion

engines. are they going to flood the market? will that be a challenge to detroit? that's what you will see in d.c. as a huge fight for the industry. jonathan: that fight picked up big time over the weekend with threats of 100% tariffs on chinese vehicles made in mexico. thank you so much for being with us. coming up, a stronger dollar and a much weaker japanese yen. that's next, this is bloomberg. ♪

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jonathan: but today winning streak on the s&p 500 with futures a little bit softer. it's coming off the back of all time highs at the close going into the federal reserve decision this afternoon. nasdaq futures are going absently nowhere. in the bond market, yields are dropping for the first time in about a week on the two year and the 10 year. down one basis this morning. still pretty close to the highs of the year on the two year yield and down about one basis point. lisa: where is the symmetry of risk today at the press -- at the press conference with the federal reserve. is it it piling in his people

realize this fed does want to hike. bank of america yesterday said it well and said if they move from three dots to two dots, you will see a sell off with 10 year yields rising. jonathan: what is the equity market telling the bond market? what are stocks telling bonds? lisa: that they probably need to be pricing in a hotter economy. this is where the collective web -- wisdom of crowds is telling the fed that your job is not done and we are concerned that maybe inflation could be running for hotter and longer. i wonder if the balance of risk for them really is to preserve some sort of sense there will be three rate cuts and we prioritize labor market ahead of the potential resurgence in inflation. jonathan: let's get to the wisdom of foreign exchange. the dollar is absently dominant, five days of dollar strength, the longest streak since september. dollar-yen, one dollar 51.72,

getting closer to $1.52. lisa: that's the weakest levels going back to 1990. is this what the bank of japan wanted? at what point will they rethink the dovish approach to otherwise superficial rate hikes. they have to be getting a little bit concerned. jonathan: we will talk about some of this in a moment. the top story today is the fed rate decision at 2 p.m. eastern with fed chair jay powell set to speak at 2:30 p.m. and rates are expected to remain on hold the fomc will release a new dot plot and projections. still expecting three cuts this year with a dovish chair powell despite a string of hotter than expected inflation prints since the last meeting. if you been missing the coverage over the last week on the dot plot, it will on the -- it will only take two officials of the federal reserve to come up and that will change the median. from three to 2.

is that a big deal given the direction of travel over the last few months? lisa: we are talking about eight of 19 fed officials. this is how closely people are scrutinizing this. they have two rate cuts priced in rather than three. if two more join that, then you have a baseline. i'm interested in the longer run and how they telegraphed a longer-term inflation expectation of longer-term rate expectations for next year in the year after. do they expect neutral not getting higher but not being able to cut is much longer-term? jonathan: do you think they will entertain that today at the news conference? lisa: nothing neutral rate but they have the statement of economic projections and they have to reassess whether the downgrade to the rate forecast back in december really was appropriate for it was premature. jonathan: it may be too soon to talk about reducing interest rates? lisa: the market is saying that but also that they cannot cut as much because the year-over-year

comps don't make it as easy for them for the beginning of next year. jonathan: inflation a little bit hotter let's turn to luxury names in europe plunging. gucci sales have dropped 20% in the asia-pacific region during the first quarter. the luxury group is attending to vital -- revitalize the gucci brand. the drop is set to wipe at a proximally 7.6 billion market value. the slump is weighing on competitors. luxury sales in china have cooled over the past year. gucci has its own problems but when a company comes out and says sales are down 20% in the asia-pacific region, that's where the likes of the competition is spooked. gucci is more hinged to the consumer. i was looking at this last night and wondering how isolated are they and how much is this a gucci problem and how much is this is a chinese consumer problem? how much is this the nationalist bent and people staying close to home and buying stuff there versus not having the means to

go out and spend? i don't know the answer. gucci has still 12 projects -- products. jonathan: they're trying to move from lowndes luxury to quiet luxury, good luck. lisa: it's known for luxury. jonathan: big belt buckles. lisa: if people don't want that, will they migrate to what someone else might wear? jonathan: gucci's got problems. tk is the luxury expert and he will tell you that gucci has had problems for a while. lisa: gucci is definitely the realm of tom keene rather than lisa abramowicz. jonathan: i will share more later. the faa wrapping up pressure on boeing in an interview with nbc news. the faa administrator said the

jet maker has no other option, they need to make safe airplanes where they will be capped at a production level that's not sustainable. last month, boeing was given 19 days to develop a plan to improve its culture and practices after a series of mishaps including a panel flying off a 737 max jet midflight. boeing is focused on taking action with transparency at every turn. the more transparence we get, the worse it looks. lisa: there are no proposed solutions. it seems they prioritized production after safety and you don't want to hear that. that's not helpful to the cause. when do we find out what that actually means in terms of the steps they can take to change something? jonathan: going down again in the premarket this morning. u.s. dollar is gaining ahead of today's fed decision and a hike from the bank of japan yesterday.

in the fx market with the japanese yen, dollar-yen breaking towards one dollar $.52 even with the first interest rate hike and 17 years. we are going to go back to 2007. what do you think is developing in japan? >> thanks for having me. it's been a while it's always a pleasure to be on the show. the bank of japan really held off this lift up because the two times they tried to hike they went back into recession. i can't blame them for being cautious. at this point, it seems to have engineered a successful exit. by successful, i mean inflation is around 2% give or take. more importantly, they been able to avoid disruptive moves in the market. disruptive would be a much stronger yen and sharply higher gdp yields.

with all the leaks, i to my had to them. they've avoided for now a sort of disruptive unwise moves. if they had to take a weaker yen over a stronger yen, they would probably take a weaker one. they can intervene and help maintain stable effects markets and that's what i think is being seen now and will be seen for the time being. jonathan: what is stable about the japanese at the moment? why wouldn't this concerned them? >> we've been around $1.50 for the past several months and we haven't had huge moves since the end of 2022 when the bank of japan last intervened. it's starts creeping up toward $1.55, the job situation comes first but up i would not look at intervention.

they are willing and able to undertake this. right now, the market is pricing in a very dovish bank of japan. that's the guidance they provided. they should remain accommodative for quite some time. the swaps market is pricing and 50 basis points over the next few years which seems to be low but that's what the market is going with. the bank of japan can change its guidance and puts them air on the m. they've been dealing with the week yen really for quite a while now. yes, the yellow lights are blinking but it's not really alarming at this point. lisa: there is the issue about the federal reserve and the meeting today and how much a hawkish tone could turbocharge the selloff in the yen. how high is the bar for that type of more protracted move? >> i think part of it was luck that they avoided this. the lift off came at a time when

the dollar was strong. we didn't see a huge jump in the yen. maybe people were looking at $1.35 but we are not seeing that. it's not a yen story at this point. it's really a dollar story. the u.s. economy remains head and shoulders above everyone else. the dollar remains supported by high interest rates. you're talking about fed expectations. i think it's higher for longer. i think we could get a hawkish shift in the dot plots whether it's in 2024 and year. the fed officials are pricing in 170 basis points of cuts through 2025 and given how strong the u.s. economy is, that seems overdone. most of the market has bought into the soft landing story. 175 seems very aggressive. i think there is room for this hawkish surprise. the only warning i have is i

never understood chair powell's pensive debt propensity to surprise the market with his dovish remarks during the press conference. i always hedge my bets. lisa: which of the risen why maybe -- which is the reason why people have been more bearish on the dollar. the positioning has been such that people are prepared for a greenback that is weakening, not strengthening. how off-site do some of those trades be if we get a hawkish tilt that maintains through the press conference with jay powell? >> back to the beginning of 2023 and 2024, consensus calls were for a weaker dollar whether it's because of a u.s. recession which is not happening or soft landing. it was predicated upon a dovish fed. we just haven't seen it. i think the market was pricing and 150 basis points of cuts at the beginning of this year starting in march. here we are two month later in that call has been wrong.

the repricing still has room to go. i'm one of the latecomers to soft landing. i've always been skeptical but i think it's happening. it's happened once or twice in my career. it's like a unicorn, it's rare but i think we've seen it unfold. if this proves to be the case, 175 basis points rate cuts by end of next year just seems too much. today will be very keep but it depends on the dollar -- on the data. the data remain firm. the market remains strong, we are seeing some signs of softening but not enough to get us concerned. for now, it's steady as she goes. i think europe has its problems, japan is one of the reasons they've been cautious is that the japanese economy hit a soft patch. awful stuff coming out of china

so the u.s. is the driver of global growth now and that's why the dollar remains attractive. jonathan: great to catch up with you. the dollar stronger for a fifth consecutive session. to take a step back, we did the same thing about 40 minutes ago -- this march meeting is a very different march meeting to the one people expected about three months ago. lisa: this will be one that has to address data that has not cooperated and has not given them more comfort in a market that's moved away from the fed even though it's adapting to what the fed projected back in december. it's accelerating past that. it's suggesting that maybe the paradigm has shifted. jonathan: 2:00 p.m., the fed decision this afternoon. here is your bloomberg brief. >> the ecb is likely to cut rates in june according to president christine lagarde. beyond that, she said they are not able to commit to a future path. speaking in frankfurt this morning, she said our decisions

will have to remain data dependent and meeting by meeting , responding to new information as it comes in. samsung shares posted their biggest gain in more than six months after a backing by nvidia. the ceo reportedly said he plans to use samsung as a supplier of high been with memory chips. nvidia unveiled its next generation of ai hardware called blackwell in a conference in california earlier this week. intel is in line to receive nearly $20 billion in grants and loans from the u.s. to build semiconductor plants. this marks the largest award yet ever by the white house to bring chips manufacturing back to america. the word comes amid an ambitious turnaround plan for the company under their ceo. that's your bloomberg brief. jonathan: thank you. intel up by a little more than 3% this morning. up next, decision day for the fed -- >> grates at some boy should --

at some point should move lower. lack of competent is when does the window open? >> if you can't justify a cut by june, you might not have a leg to stand on to cut until early next year. jonathan: that conversation is next. from new york city, this is bloomberg. ♪

jonathan: live from new york city, welcome to the program. the s&p 500 is slightly softer, not even lower by 0.1%. backing away a little bit from the highs of the year. decision day for the fed today. >> rates at some point should move lower. the lack of confidence is about when does the window open, when does the data tell them it's ok to start? there's a little uncertainty

about when to start but i think the confidence of the overall disinflation trend is there. >> if you can't justify a cut by june, you might not have a leg to stand on to start cutting until early next year. that might be a reason to get going now unless you are really comfortable starting next month. jonathan: the fed rate decision is coming at 2 p.m. eastern time. we expect the fed to hold great steady but predicting 75 basis points rate cuts this year. frances donald writes this -- francis is with us around the table, good morning. >> good morning. jonathan: the beginning of this year, you said pick your poison, either the data is better and we have rate cuts or it gets worse and we have to look at a soft

landing. >> when we wrote that khmer view was one of those things will happen which is the data will not soft and and the inflation will not come down enough, we will have to price of what was at the time almost six rate cuts going down to around 3 and later this year is the second part which we still believe the data will deteriorate in such a way where we end up with later rate cuts but faster as the soft landing narrative starts to disperse. we still have a few more months ahead of that. two things can be true the same time. we can believe recession risk is currently higher than price but not quite time to trade that story yet. jonathan: what are you looking for with the fed the most? >> i don't know because it's not clear what the decision-making function at the federal reserve's right now. what i'm looking for today is give me your numbers, tell me the data you're looking at. are you looking at super core inflation which is way too hot or are you playing with the numbers because we can all do that? can you do cpi, x shelter and

get down to 1.8%? there is all manner of data to argue in any direction right now. i can make a case for the doves or the hawks but i want to know what case is jay powell going to build? lisa: people are expecting that dovish pickup that happens in the press conference. what about the asymmetry of risk and why some people think it's important to cut rates now because the downside is nonlinear and could happen quickly. what's your view on that? >> we are going through forecast review is most economist to every few months and we see the data floating around 0%. slightly below and slightly above depending how the consumer moves. the two things that keep me up at night is that the average time from the first rate hike to the full impact on the economy is two years. that's today. the window for these challenges

for recession calls to close is not behind us, it's ahead of us. the second thing is this non-linearity. when things break in the economy , they don't break slowly and they don't break in straight lines. some of the weakness we are seeing in the job market is worth keeping our eye on. rehiring activity is on quite a bit. there's a significant amount of survey data saying we are not as excited about jobs and there is still 2 million job openings relative to the amount of workers looking for jobs. when i start to see a little bit of softness and labor, there is a thought that when this breaks, it won't be slow and steady. lisa: is this time different? they are pumping up against some of the restriction the fed is trying to put in the market. >> fiscal is a huge part of the story and has complicated the last few years, no question. procyclical fiscal spending is not part of the economist handbook. we did not learn that in her

text books when we went to school and labor shortages and the new supply-side driven world which makes inflation and growth less interest rate sensitive. these are things that are different but maybe i am old-fashioned. i cannot get away from the idea that when money costs more, you borrow less. when you lose your job, you don't spend as much money. these are truisms that i think will still persist. therefore we end up in a situation where i have mollified or reduce the impact of rate hikes in my forecast but i cannot escape the idea that there are some things that will always be true. higher rates slow economies. jonathan: you wear two hats. markets are at all-time highs, does that influence any of the thinking at the federal reserve? >> back in the fall, chair powell was all about financial conditions and then when he pivoted in december, that didn't seem to matter as much anymore. i'm looking for two things today, will he talk about financial conditions? how does he see that and i want to know what their 2025 and 2026

outlook looks like. there is so much focus on two or three hikes this year. for most of our funds, two or three through september will not make a difference. what makes a big difference is is this a 1995 easing single -- cycle or going for two or 300 basis points and it will be more important in 2025 and 2026 than some of the minutia around when they start. jonathan: one analyst said how the federal reserve wanted to cut interest rates. listening to you, it sounds like you think chairman powell is constantly moving the goal post because he wants to reduce interest rates? >> it's entirely possible because we all have the same data. they would also be aware of things like the labor market still breaking linearly. there are higher rates that hurt the economy. if they want to bring down real rates and stick a landing, they probably have to start sooner

than later. inflation has been uncomfortable the last two months, it looks like of commodity prices don't decline, we will not get the next wave down unless you see weakness in the job market. i think what worries him is if he has to go back to where he was at jackson hole in 2022 and break the labor market to get inflation down to 2% or do i want to stick the landing? i think it's this bias within him. is he ok to allow a recession or not that's probably more important. lisa: do you buy stocks? >> i think you by select stocks and you speak to your equity stock pickers who can find good companies that navigate this type of environment. on balance, i like fixed income more in this market. a lot of people talk about the bank of japan and it was significant because the bulk of my career has been trying to convince people that fixed income is an important part of your allocation. that was difficult in a negative rates environment. now we are at a tipping point

where you can see the benefits of fixed income in terms of potential price returns and income returns. that story has become more interesting to me. lisa: if the yen weakens consistently, will buyers flood back to the u.s. credit market? >> it's a possibility but credit makes me nervous as we head into what i think is a high recession price. jonathan: it's a pretty fascinating fed decision and very different to the fed decision we thought we would get three or four months ago when march was the date, that was the spot they would reduce interest rates. >> i remember it because i didn't think the data would deteriorate. if you look back over history, when the fed has paused for pivoted, we've seen a significant amount of volatility in fixed income around that time. big bets at this moment historically have not been a great idea. most importantly, we've got to know what the fed's

decision-making function is. you can build your own and build a function for the federal reserve. we've got to know what he's watching and the most important thing today is give me some data points, give me some insight into that and then we can build out a better forecast for the fed for the rest of this year. jonathan: we are not asking for much, jay.this was brilliant, thank you. blackrock is coming up and michael sheppard and the commodity market and the change we've seen in crude lately. lisa: i'm going to go home and say we are not going to build a bear but we are going to build a fed function and the kids will be excited. jonathan: we will all be building fed models. lisa: i will report back tomorrow. jonathan: from new york city, this is bloomberg. ♪

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>> federal focus is going to be what to they want to do with the setting of interest rate policy? how much do they want to keep rates at current levels. >> we know march is off the table. may is off the table. will be talking about cutting rates in the summer. >> the median stays at three cuts. >> i think the fed is seeing enough that we'll get them to a cut in june. >> the baseline remains two or

three cuts starting in june. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: this year has already turned a lot of calls upside down. live from new york city, good morning, good morning. equities just a touch softer on the s&p 500. coming into wednesday at all-time highs going into a fit decision with credit spreads tight and yields just off the highs for 2024 on a two year and a 10 year. we just caught up with frances donald. she put it broccoli. -- she put it bluntly. chairman powell, tell us what you are looking at. lisa: which data are they watching? will we be focusing on the university of michigan sentiment survey or will would be focusing on jolts and quit numbers? which data will they massage to give a view that could be dovish or hawkish? jonathan: how dependable is that

economic data? think about the payrolls report. you look at february and you start to look at the labor market in different ways. you can pick your basket of goods and services until whatever story you want to tell. what is the bias of this federal reserve? lisa: can they justify it given the fact that we have seen hot print after hot print when it comes to inflation? that is why people are watching and francis put this really well . if they move it down to two rate cuts for this year that indicates a more hawkish tone, but also 2025, 2026, are they seeing their ability to cut rates that significantly crimped by the fact inflation is stickier than they expected. jonathan: have to try to call the fed and work out what the market will do. if you call things correctly so far this year i'm not sure you

have gotten two. even as we prize out federal reserve interest rate cuts. another great example. getting the market call right. bank of japan. made the call this year we would get the first interest rate hike since 2007. would you have the japanese yen as the worst-performing currency ? lisa: potentially the weakest going back to 1990 versus the dollar. you look at the weakness in the yen. is it a function of japan? or is a function of king dollar and the idea the u.s. strength has been exceptional? do your point about getting the market call right the narratives are mind spinning. do you listen to jay powell? these are the polar aspects of this market. you focus on technological advancement or fiscal spending

or you focus on a federal reserve that is playing catch-up with all of these metrics. jonathan: the last 12 months better off following jensen than jay powell based on what nvidia has done. dollar-yen, seven days of weakness. the broader price action elsewhere. equities unchanged. precisely unchanged. yields are down one basis point on the 10 year. in foreign-exchange the dollar stronger against everything in g10 through much of this morning. euro-dollar 108 -- 1.0 843. coming up, wait leo blackrock, greg peters -- wei li blackrock, greg peters and nadya martin wigan. s&p 500 back to another all-time high ahead of today's fit decision. wei li a blackrock writing "we

think upbeat sentiment can persist. we lean into the ai theme aztec drives corporate earnings growth. we see fed policy rate staying higher as inflation settles closer to 3%." wei li is with us now. i want to go straight to that inflation call. essentially what you're looking for is inflation down a bit more , than back up towards the end of the year. are we seeing that pickup ahead of schedule? wei: that is possible. i would note the inflation upside surprises came from different sources. the january print was because of poor service and the february print was driven by hotter than expected goods inflationary pressures. i think the jury is still out in terms of if we are seeing the trough of this inflation roller coaster.

our view is there is room for goods deflation to bring inflation down further. when that runs its course, which is more likely later this year rather than now, service starts to dominate and that is when wage pressure pushes inflation higher in the trend is settling around 3% rather than 2%. the roller coaster is for later this year rather than right now. right now i think the bar is pretty high for markets to abandon this narrative of disinflation which is why we are stable risk sentiment and stable -- jonathan: how do you think that will influence the thinking of chairman powell in today's news conference? wei: it will be a very balanced press conference, and a very balanced fomc. they will emphasize data dependency and try to strike a balance tone.

last meeting they talked about a sticky last mile. i am very curious in terms of how they speak to the recent upside surprises in inflation print. i'm also curious if they will revise growth higher, inflation higher. they will start discussing the fed balance sheets. we are expecting the dot median to stay at three cuts which is in line with our expectation at the beginning of the year. markets finally moving closer to that. lisa: what duration of bonds do you feel is most vulnerable given where pricing is and given what you expect to transpire with inflation later this year? wei: we have a preference for the short end of the curve and also the belly of the curve. there is a steepening view over the longer-term and there is more of a fiscal story.

if you look at the fiscal deficit in the u.s., late 2022 we are looking at 3.5% and now we are getting to 8% and that cost is increasing, expected to increase even more. higher rates for longer. all of that points to higher rates, especially for the long end of the curve. when that kicks in, when the repricing because of concern around fiscal dynamics and that serviceability, that is key, which is why our conviction on the long end of the curve is stronger over a strategic horizon then over a tactical horizon of six to 12 months. lisa: are stocks vulnerable to a hawkish surprise from the fed or they operating on a different set of rules that hinge on different factors? wei: you asked a question, jay

powell versus jensen and that is what stockmarkets markets are trying to figure out. we have had hawkish repricing of the fed. seven cuts at the beginning of the year to now just three cuts. markets are very resilient. the s&p is up close to 9%. equal weight s&p close to 5%. this is not a market caving in under hawkish repricing pressure and the reconciliation or a factor is the strong earnings and a lot of the earnings are being heavy lifters by the ai theme, which is why we are positive on the u.s. equity market because earnings are coming in strong and beating expectations. we lean into ai because that is where most of the earnings momentum is coming from. lisa: do you think calls for some sort of broadening out in

the rally are premature because the gains are still concentrated , not just with the magnificent four or three or whatever have gotten it down to, but only the company that are most leverage to immediate benefits from some of this technology? wei: i think there is room for the s&p to broaden out from the concentrated leadership we saw from the most part of last year. that can also be thanks to ai. as we think about sectors like health care and industrials starting to adopt ai into a greater sale, the leaders within those sectors are able to broaden the gap versus the rest of the peers. they have the economy of scale. they have data to play with. we can cai broadening at -- we can see ai broadening out the rally.

that is one way it can broaden out. the other way it can broaden out is a wild swing of labor pricing. we are talking about three cuts. at the peak hawkish moment of october markets were still looking at two cuts. we are seeing a wide range of rate repricing, which is also evidence of the elevated volatility. there is no telling if we could see a swing back up this rate repricing and what that tactical momentum plays out that could benefit the broader market beyond the ai concentrated theme. that is so short-term because we have seen a wild swing within short periods of time, that is not something we are positioning investment around but we acknowledge this can swing within the short time. annmarie: i know your over -- jonathan: i know your overweight u.s. equities but also a

sprinkle of japanese stocks. the nikkei is up almost 25%. can you tell me how the bank of japan is relevant to that decision? wei: it is the prerequisite on which the micro story can play out, which is our expectation and rationale behind our japanese call. we upgraded japan twice last year and we continue to like it at this juncture even as it crossed the all-time high from 1989. yesterday was a key event to watch. if they are very hawkish, viewing inflation as a problem, i would be somewhat concerned with our japan call. frankly they hiked rates for the first time in 17 years but they hiked it in the most dovish way possible. they normally dropped the yield curve control but they are still saying in case of a rapid rise in long-term yields they would

make meaningful adjustments. if that is not the definition of wait-and-see i do not know what is. they are very supportive and accommodative and that takes away from micro developments to continue to be reflected. jonathan: thank you. we have been asking the question where does it leave the call and japanese stocks if the yen starts to strengthen? we should have been asking where does it leave the call if the yen continues weakening? we have had several days of japanese -- we have had several days of yen weakness. long magnificent seven, most crowded trade, 58%. short chinese equities, 14%. long japan equities, 13%. not as crowded as i felt based on that. lisa: based on the fact that people come on and we challenge

them to that idea, everyone is long japanese equities. it has reached a record high for the first time since 1989. not as if we have a long way to go with certain companies, toyota included. jonathan: things have been changing there for a while. the nikkei up close to 20%. here is your bloomberg brief. yahaira: israeli prime minister bennett should been net yahoo! is set to speak with senate republic -- prime minister benjamin netanyahu is said to speak with senate republicans days after chuck schumer called for elections to replace benjamin netanyahu. israel and u.s. democrats are seeing a growing rift over israel's need to enter the gaza city of rafah, with benjamin netanyahu saying he sees no way to destroy hamas without invading the city. inflation in the u.k. falling more sharply than expected, pulling to the lowest level in 2.5 years.

the consumer price index rose from a year earlier. that is slower than the 4% pays the month before. economists say the data keeps the bank of england on track to reduce interest rates later this year. caring shares are plunging -- kering shares are plunging. the company warns shares of gucci will drop. the company is struggling to keep up with rivals like lvmh and hermes as luxury sales have pulled, especially in china. jonathan: up next, will the federal reserve open the door to higher bond yields? >> they only show two cuts for this year. we think you will see the curve flattening. if they see three cuts the two will probably rally. jonathan: that conversation is up next. ♪

jonathan: stocks turning positive in the last couple of minutes by not even .1%. all-time highs on the s&p coming into a federal reserve that will not cut interest rates in the minds of pre-much everybody forecast. yields lower by a single basis

point. opening the door to higher bond yields. >> they only show two cuts for this year so they take out one cut. we think the two year will selloff. we think you'll see the dollar rally and we think you will see risk assets take it on the chin. if they show three cuts as they had in december, we think the two year will probably rally five basis points and you will see the dollar weaken. jonathan: bond traders stepping up beds against treasuries, positioning themselves for a hawkish message from jay powell. greg peters writing "we are still in the strategic by zone for bonds. yields on investment grade indices are comparable to year end 2022 levels and central banks are in all likelihood done raising interest rates." break is with us now. let's ghost -- greg is with us now.

let's go straight to the treasury market. back near 4.70 on the front end of the curve. is that a buy for you? greg: i think we are in the zone. whether rates rally or not misses the point. it is about the yield you receive. as a fixed income investor at these yield levels it is a very attractive proposition. our tagline for the year is yield is destiny. i think you win having the yield income in the door and if there is a blip in the economy you finally have the protective measure of owning duration. i will not say it is a win-win but it is an attractive investment indeed. jonathan: how do you convince people who say i get all that but i think yields are going up, crude cutting close to $90 again, i think i should wait, i think i can get an extra 20 basis points further down the

road. what you say? greg: timing the market is quite challenging. where we are from a starting point matters a lot. the breakeven of the yields moving higher is quite attractive as well. you will never time it. at the end of the day that is a very attractive investment. you have the protective characteristics of fixed income if and when the economy does roll over. lisa: yield is destiny, i want to make a t-shirt that says that. you talk about the possibility later this year of a taper tantrum with a negative ratings development. how does that negative side of things feature into yield is destiny when you're talking to clients? greg: that is a risk factor, no doubt about it. i want to be open and honest.

we have a tremendous amount of supply hitting the system. there is such a focus on fed policy. i do believe markets were leaning the other way, really embracing rate cuts too early. i think we are in a much more natural state today than where we were at the start of the year. it is a risk. want to be eyes wide open to those risks. it is so much funding of the deficit. you have to be focused on that potential problem. lisa: it is the reason why we focus on options. i want to go back to the idea that it's like an attractive buy. does the fed matter to you? does anything the fed says today going to shift that few one way or the other because the market is moving away from the fed and the fed is following it? greg: i think there is way too much focus on the fed.

at the end of the day it is about the data. the data matters. the markets were so obsessed with rate cuts. the only way the risk markets could do better is if the fed cut rates. it is about the data. the underlying data is strong. i would focus on labor markets 10 times over the fed. i think there is something to do focusing on jay powell and the fed. at the end of the day it is labor. jonathan: can we finish on the bank of japan? i want to talk about the boj. it is the last anchor around the neck of the global fixed income market be lifted. we've seen the fed shift. when you think about not just the next five minutes, the next six to 12 months, the next 10 years, what are we going to look like compared to what we did look like over the previous decade or so? greg: you could see the

situation where japan rises from the ashes, finally. what we got yesterday out of the boj is moving policy out of negative territory but that's it. you are continuing to see a week yan -- your continued to see a weak yen. you will see flows into japan. there is all this talk around equity markets in japan. most equity markets have shied away because it has been two decades of disappointments. this is an early stage of movement in japanese markets and what you will see is this much lower rate regime relative to anywhere else in the world and i think that will fuel fdi and push that market higher. jonathan: japanese investors had to look for income elsewhere. certain european markets are vulnerable.

i'm trying to work out how the flows will develop. how do you anticipate that will happen? greg: on the margin you will see that pullback. very much on the margin. look at the interest rate differentials. if you look at yields in japan relative to anywhere else or most jurisdictions outside of japan, there is a significant pickup. i do not see a fundamental shift. there is a natural bias. that is more on the risk equity side than on the fixed income side. on the margin, yes. i do not think it is anything dramatic. jonathan: greg peters of pgim fixed income. a bit of a clinic on fixed income. jan hatzius of goldman sachs coming on to anticipate the federal reserve. we will be talking about the fed. to greg's point, this year, gdp,

nominal gdp better-than-expected. equities have been listening to that noise and ignoring the bond market. the bond market would've been better off watching the data and spending less time trying to guess the fed. lisa: the data they are watching is interesting. greg talking about labor markets. you watch the quits rates, to watch the nonfarm payrolls numbers? jonathan: up next come intel winning $20 billion in awards for chip grants and a program designed to reinvigorate the domestic industry. that conversation up next. intel up 3%. ♪

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♪ jonathan: all-time highs on the s&p 500 going to reserve decision later on this afternoon positive by 0.0 6%, up by a quarter of 1% on the nasdaq 100. plenty of headlines, the two-year, 10 year repricing higher. down a single basis point on a 10 year maturity. on the two-year, a wonderful time on the trading floor with bank of america and the team just yesterday. thank you a lot to everyone who reached out. a lot of those interviews you can find online. and the point that mark made this an interesting one, that

may be the smooth inequities opens the door for yields to go higher because you are not getting pushback at all. lisa: it is not just equities, it is also risk asset within the credit markets. high-yield bond spreads are now the tightest. the lowest going back to january of 2022. this is not a concern about credit risk, so it raises the question, why can't about borrowing costco a whole lot higher with an economy that still is chugging along? jonathan: spreads are tight, stocks are at all-time highs. frances donald is with us about 40 minutes ago. she was saying the chairman needs to tell us what he is actually looking at and we need to work out whether the financial conditions are relative -- relevant or not. lisa: is it or isn't it just finger in the wind? a lot of people think it is and it is basically pick your own data indicated that is going to paint a story that feels good at that moment. if there is a shift, how do they communicate it? jonathan: does the yen weakness

matter? let's turn to foreign-exchange. the dollar-yen right now, seven days of yen weakness. we've not seen a streak like that since august of 2023. back to close to 152. again, breaking out by another 0.6% or so off the back of a rate hike by the bank of japan. this isn't going to be a problem for the boj, they will be comfortable with this. so let's wait and see what headlines we get from japanese officials. let's see how many of those we get in the next couple of weeks. lisa: for japan, their symmetry of risk if they want more inflation. this is why i think the hand will be called potentially a little bit more if jerome powell today has a hawkish message. if the fed is concerned about inflation and wants to raise rates, that could potentially cause more capital flows into the u.s. away from japan leading to the yen to weaken to a point where the bank of japan has to

pay attention, and that might be the worst risk case for some of the officials that might be whispering off the record to some people who are reporters. jonathan: potentially maybe at some point in the future again. those of you familiar with foreign-exchange, you know a 3% move in foreign-exchange is not the same as equities. that is a big move. counting down to the fed decision at 2:00 p.m. eastern time, the central bank expected to keep rates on hold for a fixed-rate meeting with investors looking for clues on the fed's rate cut timeline. pal saying the fed was not far from the level of confidence needed on inflation to ", but harder than expected inflation prints reinforcing the case of caution here going into this. this is what it is going to be about, that confidence line. how does he phrase the level of competency has now relative to where he was at the start of the year? lisa: number one, how much do they revise upward the benchmark rate forecast for 20 25 and

2026? i want to see that. and number two, how much does he pushback or even address the financial conditions question. if he doesn't, that would be so dovish, basically saying we don't care about how much they rally. if he does, it indicates maybe they are getting a little bit more nervous that the market is moving in the opposite direction. >> he will get the statement and the summary. 30 minutes later you will hear from the chairman himself. jp morgan lifting its quarterly dividend by 9.5 percent following record annual profit and regulators signaling they may rethink proposals for tighter capital requirements. second time in the past year the bank has used its quarterly payout. in the announcement, jamie dimon did not provide a reason for the increase. you will hear from him april 12. that is when earnings season starts to kick off and can we just reflect on what we heard from --? the point on m&a i think we have to keep revisiting, the fact of the matter is they are

struggling to convince the banking universe, struggling to get vince clients to enter into conversations about deals because even if you agree to a price, agree to the terms, you could be left hanging out to drive to the next 12 months and washington, d.c. throwing mud at you. do you want to go through that as a large company? lisa: what does a banking executive do with the behemoth that is washington, d.c.? do you keep going down in lobbying? because you can't fight against that if deals might not be approved. well, how do you argue to your clients this is a good deal to transact in because you may have some legal fees, but this is not a good case for them to be making. jonathan: you can make a great case and then you are dissuading for a tweet from senator warren and others to sort of pylon. she's got company in the republican party now. lisa: the key question for me is how much will there be some sort of surge in m&a post-election? four not, if at mel's is right and the policies in either can't

seem to be more or less similar to one another. jonathan: let's stick with policy down in washington. shares of intel rising after the company wins almost $20 billion in incentives to expand its semiconductor factories. the commerce department looks to reinvigorate america's domestic chip industry and reverse a production shift toward asia, the investment in intel is a key part of the plan to have the u.s. produce 1/5 of the world abeyance logic chips by the end of the decade. michael shepard joins us now for more on the story. the money we are finally starting to learn how big these numbers are going to be and who is going to receive them. how big is this going to be? >> this particular war that we are seeing today is significant. it is the first to go out for advanced chipmaking. they already doled out a few packages for older generation semiconductors, but this would go to the good stuff. this would go to what the u.s. is really trying to regain and maintain an edge on, and that is

the most sophisticated ships that are out there. the money will go to both production but also to some research and development. it is concentrated in arizona and president biden is going to be out there later today to make the announcement in roughly the 1:00 for 2:00 p.m. our our time. lisa: i do have to ask what he was talking about, the idea that some of the defense spending in the united states is being shifted to technology investments, because this is the new front for the cold war internationally. how much is that happening, how much of the defense budget, and where is it going with the tech world? >> this is a great question because our reporters have been tracking that over the years and have seen an increase in investment in technology. not only in the technology that makes the pentagon go from day to day, but really the technology that will power weapons systems and things like that, power how troops are used data deployed and some of the

thinking. we had a terrific piece maybe a week or two ago by teresa manson who looked at the use of ai in warfare and how we are even seeing it deployed on the battlefield today in relation. jonathan: can we talk about the chips act? can you tell me the terms that you have to follow to receive this money? clearly that is not free. what do they have to do to attract that kind of capital? >> that is a great question. basically what they are looking for is the companies have to show what they are going to do with it. they are quiet in terms of what they're saying publicly, how the money will be deployed in each individual project and each individual phase, and for now they are at least giving on a per luminary basis access to much larger pots and then working with the department on an individual basis, how will they use the facilities they are developing? remember, intel is looking for

this big footprint in arizona. part of it will be what it will look like in terms of creation of jobs and being able to sustain those jobs. the other part will be on the technology side, how good will attack actually be and what sort of a leap in generation will begin to see? jonathan: this is something we should have been doing maybe a decade ago when china was talking about made in china 2025. how many years to we have to wait? >> we are seeing the companies already starting to break ground and make moves. arizona is one place they are investing, ohio is another. but it will take some time to actually bear fruit on these investments. it takes an enormous event of capital and a lot of time to build one of these factories and actually get it up and running. it requires a lot of people. and taiwan in particular is one place where they had had this

mission to build up their semiconductor manufacturing base and taiwan semiconductor manufacturing company is one of the world's leaders just because they have made this concerted and decades-long investment in this area. lisa: but to that point, how much is this trying to replace taiwan as the center of chip production? >> it's a good question. when we speak to taiwanese officials around town and elsewhere, they do bristle at the idea that the u.s. might be trying to elbow them out. from the u.s. standpoint, it is a little bit less than that and a little bit more of altering what we have talked about -- bolstering we have talked about in this venue, that economic security. they want -- don't want to see all of our semiconductor capabilities in manufacturing housed offshore. they are concerned that heaven forbid, if china makes good on some sort of plan to move on taiwan militarily, what would

happen to the u.s. access to chips, never mind all the other fallout from a military conflict. so there is that. and then there was also just the question of the u.s. has long been a pioneering champion in this area for decades with the military and space programs in the 60's and 70's. one of the pillars of his five nymex program, -- bidenomnics program, they have really been pushing to bring some of that back here. lisa:lisa: i just have to wonder about the analog history writing. how much is this a redux of oppenheimer and the whole manhattan project and putting tons of money into it to see what they can come out? is this basically a similar other technologically-focused kind of transition where they are trying to funnel as much money into that to beat in the cyber race with some of the other big powers? >> there is an analogy to the idea of the initiative.

the difference is that they are trying to be much more targeted and focused and they are really trying to bring in a range of people to the congress department and other agencies to make sure that it is overseen properly with the financial side and also on the technological side. one of the other differences i think we also see is that the money actually has a limit. there's $39 billion in grants and another $79 billion in loans and other guarantees for this program, and if you talk to the intel ceo who is spearheading this vague effort to revitalize the company and move it forward, he says the u.s. will very likely need a chips act too. this investment is really a drop in the bucket compared to another hundred have done with their manufacturing bases. places like taiwan, japan and south korea that have the

tradition of industrial policy and investment. jonathan: i'm shocked that he things they should be another act, absolutely shocked. i don't think pat has ever sounded pessimistic about anything ever. remember catching up with him a few weeks ago? lisa: i'm just waiting for his scarf to actually be a qr code. he is so optimistic and i understand why. of course he's going to say we need more, and can make the argument, of course is going to say that. this is my shocked face. jonathan: intel receiving a .5 billion dollars in grants, as much as $11 billion in loans to help fund the expansion of a semiconductor factory. those federal funds expected to begin flowing by the end of 2024. that stock is higher by close to 4% in the premarket through this morning. here is your bloomberg brief. >> president joe biden and former president donald trump

swept up more delegates yesterday as they set their sights on a rematch in november. trump winning all five of publican primaries with 75-81% support, biden woody four democratic primaries after florida canceled its vote. he received 83-91% of the vote. kansas was the only state with a none of the above option on the democratic alec it is up 10%. the texas migrant arrest law is back on hold. just hours after the law briefly took effect, a federal appeals court stepped in, venting texas from arresting it deporting migrants accused of entering the u.s. illegally. a three-judge panel intervened after a series of act and forth rulings that saw the supreme court weighing in. that three-judge panel is today. michael dell is unloading shares of his namesake computer company for the first time in nearly three years. dell is cashing in as stocks soar on optimism over ai. for the past two weeks the

founder and ceo has been selling on a near daily basis, offloading about $465 million of shares. he still owns about half of the texas-based company. jonathan: thank you. up next, crude oil. that is next, this is bloomberg. that is next, this is bloomberg.

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♪ jonathan: equities on the s&p posited by close to 0.1% and counting you down to the opening bell. 90 minutes away, a couple of hours away. equity futures doing ok. 66 on the u.s. 10 year. over the last week, under surveillance this morning, crude oil breaking out. >> the consensus range is 70-90. do you really want to be sure to dollars $.50 from here? probably not.

i think we are going to see it well outside of that range. i'm not sure how high we go, it is not my job anymore these days, but the risk is clearly the upside and the main point is i want to be long and the rest of the commodity complex. jonathan: it's fantastic see jeff curry with a new seat. lisa: we have to get him back in and talking about why so many people are bullish because if you look at investors, they are not making calls on exactly where the oil prices going to go but they are mostly all bullish. jonathan: he's going to offer a price target, surely. lisa: he will have one, but it is not his job to get pilloried for being wrong. jonathan: i love jeff. if you are listening, it will be good to catch up soon. the outlook for the crude market. we need to get straight to this breakout we are seeing. over the last couple of weeks, getting close to 90 again. what is behind this breakout?

we've been talking about why it hasn't happened for months and then just like that, it starts to happen. >> first of all, we haven't had inventories building in q1 so all the market banners find this inventories that were supposed to come. number two, and this is something he touches on, it is the whole complex breaking out in terms of commodities. the goldman sachs commodities index, everything is moving up. copper, natural gas. and when we look at that $90 range, if we get become breaking out higher then you get those passive investors buying oil right now that are a little bit short right now. they could be long oil but short in the index. as this commodity and that becomes more popular, you get that passive money in which then propels the fundamentals to where we see them going. which is a much tighter market this time. jonathan: he talked about copper. copper close to nine k this morning.

i think we broke through that level in the last week or so. are those stories different, or do they point to the same theme? is that about supply and maybe not about demand? >> it is especially about supply, but we have been waiting on selling capital for a long time. the energy transition story is very important in terms of copper demand. it has been viewed quite negatively because of the situation in china, but we need to think about infrastructure buildout. not only completely -- completing a house at the last leg of that side of things. when you look at the oil side, demand continues to be strong. you expect to see growth in oil demand, but this is where we expect things to be higher year-over-year because we need to restock on that side, and that requires more crude to run more refineries.

lisa: how much is some of the reporting out of ukraine and russia affecting the price moves given the fact that ukraine is successfully targeting a number of different russian sites including refineries? >> this is a real game changer at the market starts to understand we are entering perhaps the next phase in the war. ukraine is using ukraine- designed drones to target specific refineries. hundreds of miles within russia. that means they can take out refinery units as they wish. already, we have the impact right now in russia of around 850-900,000 barrels per day of refinery outages. that includes refinery maintenance. around 500 to 600 are because of what has been hit. when you take that out of the refinery complex globally, when russia is already limiting exports of refined products, you have to look at where is the refining capacity in the world? and that is in china.

in q2, china only has 300,000 barrels per day of spare capacity because of maintenance, so that means and everyone comes back from maintenance in june and july, they are going to ramp really hard in terms of what they need to run. and this is where we think opec will have to change their strategy because all of that has to happen at once. otherwise we have no gasoline for the summer. lisa: we seem gasoline prices already higher in the united states right now, about $3.51, the highest going that months. looking right now i the highest since october 2023, how high could it go given the blockade in the refinery process globally? >> well, i mean, we are traders, right? there is no peak number, it is that demand-destructive number. but it depends what the u.s. decides to do about the situation, right?

worst-case scenario that we have russian refineries continued to get struck through q2, ones that have already been struck can't come back online, we didn't have a situation where russia is importing gasoline or trying to import gasoline, what can nato do? they can just blockade that. that is where we can have a limit on that gasoline price increase because then russia is not trying to take in product that is available for the rest of the world even if nato were to do that, we still see upside to gasoline prices from where we are now, especially because the u.s. economy is looking quite all right. jonathan: can we wrap things up with what you said about opec? you said opec will have to do something, what did you mean by that? >> it is not only they can bring back barrels in q3, they will be compelled to bring back barrels in q3 to prevent the market from hitting a demand-destructive number in terms of refined product. we expect in june for refineries

to ramp up and that will probably promote a little bit of cheating within the groups so come the meeting they will decide with the market as it looks now that they need to bring back at least 500,000 barrels per day of production, maybe up to one million. jonathan: you said q3. there is an interesting thing happening in q4, the u.s. election. you remember the midterms, not my phrase, someone else's. but there was big pressure on the saudi's to increase output because it was believed that the president wanted lower oil prices going into the midterm elections. i just wonder if it is in their own interest politically to do what you are suggesting they would need to do in q3. how will the politics plaintiff that decision? >> the biden administration will push this and the chinese will need it as well. it is both sides of their consumer pool. so it just makes sense. lisa: honestly to me this is just fascinating.

i wonder how much this is going to cap prices. is this a cap to have high prices could go? >> it is a solution that doesn't solve the tightness is in that refinery sector. but it will help ease things. we can actually get through the summer. jonathan: appreciate your perspective on this. while we are seeing commodities, what is behind it, supply side story and perhaps why opec will need to act in q3. but the politics of acting in q3 going into q4 is less obvious. it is hard to read the tea leaves on this one going into the end of the year. lisa: you think opec-plus is going to want to get to the u.s.? jonathan: we are talking about saudi arabia. all i can do is lean on the experience of what we saw going into the midterms and there is some real tension between this administration and the saudi arabia kingdom. i just wonder if that tension is going to be there in quite the same way in a few time.

lisa: especially if they support one candidate more than the other and they want to put their thumb on the scale because this is one of the cleanest ways to do so considering that when oil prices tend to be higher and gas prices are higher, people tend to feel worse and that affects elections. jonathan: it will he part of the calculation conversation, let's put it that way. china needs it, too, and maybe that is the thing that tips the scale if it needs to happen. crude is a difficult thing to forecast. if you want to make a full of someone, ask them where they think crude is going to be in three months time and they will probably look a full. lisa: the u.s.'s swing factor is shifting and the story is shifting beyond that and i think that is something significant. jonathan: up next we will catch up with steve major of hsbc, jon of goldman sachs and david of ubs.

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♪ >> the fed has latitude that a lot of places don't have. >> if financial conditions are easier, there is less easing for the fed to do. >> we want to cut rates. the