it is a data dependent fed. janet yellen will wait until she sees inflation. fedex reports a first indicator of the summer american economy. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene joining me, vonnie quinn and brendan greeley. greece is sort of quiet today. brendan: except for the words being thrown back and forth. this debate has always been so politic. it has become personal recently in an entertaining way but possibly destructive. tom: let's get to top headlines to catch up on greece. he was vonnie quinn. vonnie: u.s. treasury secretary jack lew had a message for the prime minister of greece -- it is time to get serious. he told alexis tsipras he needs to find a compromise to unlock bailout funds. that was after tsipras went on a tirade against greece's

creditors. angela merkel says she will do whatever it takes to keep greece in the euro. now she says greece and its creditors have another chance at cutting a deal at a meeting tomorrow. angela merkel: that is why we have to focus on the finance ministers'meeting. whether they succeed by thursday, i cannot say now. vonnie: greece needs a deal by the end of the month. jean-claude juncker has a closed the -- has accused the greek government -- investors are waiting to hear what the fed says about the prospect of higher in just rates. janet yellen and other policymakers wrap up their two-day meeting today. the speculation is that the fed will raise rates in september. at two: 30 p.m. eastern, janet

yellen will hold a press conference you can watch here on bloomberg tv. republicans in congress are considering a new path for the contract trade bills. they are looking to add the proposal to an unrelated bill. the plan is designed to bypass house democrats, who refused to support a workers assistance plan attached to current legislation. fit bit prices at ipo today. at the high end of a new range $19 per share, fit it will be valued at about $3.9 billion. the company had one point -- in probe after ball, golden state has ended a 40-year drought to win their first nba title since 1975. under it would dollar and seth curry -- and steph curry each had 25. it would dollar was named --

andre iguodala. tom: what a dream series. it was really a dream series. brendan: i was watching the series and kept thinking that pro basketball is everything that it should be. tom: people said nbc was insane when they did this deal. they did $5.5 million. stunning. brendan: is that because of the chicago audience? had it been an expansion series, woodhead have been the same? tom: -- would it have been the same? tom: it is a mystery. brendan: no one knows yet that the women's national team won yesterday. vonnie noted this. tom: let's check bonds, currencies, commodities. still the tension in greece, the euro during nothing -- doing

nothing over the last few days. the dow recovers nicely. euro swiss caught my eye. here is something we never looked at before. this is the fed fund's target rate. it shows a percent change in the movement. here is volcker, the great moderation down, down 3% so in the target rate. desperation to provide accommodation in the lengths that bernanke and yellen have dealt with. brendan: there are other countries that have gets below that. we just cannot wrap our heads around dipping below that. tom: you are absolutely right, and the effect of this -- i go to denmark, of all places.

brendan: had we followed the rule, it would have followed -- it would have put as well below this. tom: the emotion that peter cook has to do with in washington -- it is fed day, and mr. cook has familiarized himself with all things dock plot. he is in washington. i know there was a thursday your jew new year in college where they said we will now study. plot charts. explained for mere mortals what a. plot is. peter: a. plot -- a dot plot -- they all get to weigh in and look ahead as to where rates will be on the calendar year. we will get a better sense when they release those forecasts ahead of her press conference. what the fed is thinking not only in the immediate future but beyond that as to how rates are going to move forward, the pace

of rate increases. she said it is going to be gradual. we will see if that is reflected. tom: will chair yellen speak of greece? peter: she will be asked about it no matter what. you will hear a reference, direct conference to -- direct comments to reporters about things overseas and financial stability. i do not think she will mention it directly unless she is asked about it, and she will be. she has to think about her answer. her message so far is that it would be very bad but will not have a direct effect on the u.s. economy. if she says some indifferent, people will notice. brendan: this is all about the press conference at 2:30. what are we going to look for in that press conference? peter: the word continues to be "data dependence." if she gives us anymore concrete

signal towards september at a rate increase, that would be newsworthy. i am not sure she's going to give that to us. she will say the fed is watching these numbers, they have seen improvement in the economy in some of the most recent data but i do not think she will give such a crystal clear signal because she cannot and i do not think she wants to. there has been so much focus on the june meeting. we have been waiting for it for months. now it is here and we will see if she points to a different meaning in the future. vonnie: janet yellen has said that she ignored the dot plot. peter: you get a better sense of where she is in the conversation, where the her colleagues are. there will be more convergence in this meeting of the numbers that are put out there. we are rating -- we are waiting for her to be specific about improvements to the dot plot. when ben bernanke was chair,

maybe put a beard on his dot. tom: peter cook, thank you so much. a confusing backdrop -- david wu is head of global rates and currencies as a bank of america merrill lynch. higher yields is the least of the fed's worries. wonderful to have you here with your synthesis on what is going on here. you and even harris both agree in the collegial argument of bank of america, merrill lynch. what did they get wrong? david: first of all, a lot of people who think the rates are heading of a higher ignore the global dimension of the fed hiking this time around. with the rest of the world -- with the dollar having surged over the past year and the u.s. economy feeling the impact of the stronger dollar, if the fed were to go on an aggressive

hike, they will be no u.s. manufacturing sector left. tom: the central bank has a dual mandate. this is one of the most famous charge we have ever done. it is a simple chart. one line is the unemployment rate, and the white line are people that have been out of work half a year or more. to the left of the red line 2000, is a normal american economy with people out of work not that long a time. things change. to me that is the arch conundrum janet yellen faces. david: it is incredible. i was in arkansas the last week to see walmart. there was discussion about the wage increase among others. people are also getting better quality jobs, despite the fact -- by the way, this morning, u.k., we saw a 2.6% increase in wage growth. the fed is saved so far by the

fact that the court tce remains depressed. obamacare is causing health care inflation, basically depressing this. that will not change until next year. vonnie: will the fomc become fluent? david: i think we are still in a data dependency mode. what is ironic is the market is now priced with a 100% chance there will be a hike in september. i cannot imagine she's going to do that today. i still expect the market will act off a little bit. brendan: there is a slide here, oil on the dollar, changes since the march fomc -- sorry, oil up, dollar down. what do you think that does with what is going on?

david: i think the fact that oil is up somewhat obviously would suggest that headline inflation will start to turn higher in the second half of the year. then again, they are still focusing on core. core, the strong dollar has not had an impact on imported goods. all things being equal, i would imagine the dollar -- tom: is a strong dollar policy a friend to janet yellen? david: i do not think it is a friend or not, but stronger dollar makes it less necessary for the fed as much. in some sense you could argue it basically takes the pressure off the fed but it also makes it difficult for them to normalize interest rates. tom: david woo is with us. brendan? brendan: forget the dots, look at the body language janet yellen will speak today at 2:30

p.m. eastern. we will carry that. we are going to ask our twitter question of the day as well. what has changed since the last fed meeting? not much is the consensus right now. tell us what you are data dependent on. this is "bloomberg surveillance ." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." we are thrilled you are with us this morning. let's get to top headlines with vonnie quinn. vonnie: it is raining hard in central texas in the aftermath of tropical storm bill. streets were flooded and schools were closed after the storm made landfall near corpus christi. some areas are still recovering from deadly floods over memorial day weekend.

it is the first tropical storm to hit texas in seven years. the cartel says since the -- for the first time since 2010, opec nation took in $1 trillion less than last year in oil exports. security experts say this is not the first time sports team have hacked competitors, it is just the first time that one has been accused of it. the fbi is investigating whether the st. louis cardinals hacked into a houston astro's database. they are not saying anything else other than they are cooperating with the investigation. i would not either, i guess. tom: this will be interesting to see how this unfolds. brendan: of all the things to hack, why the astros? tom: maybe the yankees will be next. looking forward to "bloomberg surveillance." there is a lot going on.

greece will be one of our focus is in the hour. i cannot even spell it -- criminal asphyxiation came up yesterday. we are looking at an important chart, a stunning decline in r&d spending in the united states. and david woo of bank of america/merrill lynch will join us. brendan? brendan: fedex -- ftx is due to report in an hour. e-commerce is growing at 10% a year. analysts are excited to hear about the oldest and worst banal -- and most banal, cost-cutting. tom: dead on. gap this week.

brendan: i have an interesting e-mail from the coal sinclair -- from nicole sinclair. fred smith is the ceo of fedex. these calls are always interesting to see his perspective from the logistics and of the economy on what the economy looks like. tom: there it is, david woo from bank of america/merrill lynch. fedex is doing better than good. it is a bull market, but for labor it is not. you mentioned productivity being a conundrum. they cut costs. what does that do to productivity? how does that benefit america? david: the irony is they have been cutting costs. it is not just a u.s. phenomenon. production growth globally has been coming down. this is an issue that is coming up in a big way in the policy

circle in terms of how do you address that. this is assuming the fed is still hiking rates. tom: the heart of this is that fedex was a well-run company three years ago. they did not cut costs then. now they are coming in with a vengeance. brendan: now they are coming after the other new new, looking for regulatory approval to acquire another delivery company. amazon is considering crowd sourced delivery program. that to me is -- that is the real problem for fedex potentially long-term. if anyone can do it, amazon can pull that off. they would: absolutely. -- david: absolutely.

everybody is trying to find the data connection. we all know ups is barely going up this year. they are trying to basically borrow money to buy back stock's boost the aps. brendan: fedex is an amazing way to move things around if you own the airplanes, hire the workers, and owned the truck. what if you don't none of those things that's what if you do none of those things? david: if you look at the weekly railroad data, the lever not, there is no somewhat of any recovery going on in the u.s. right now. you look at the logistics of our economy, and it looks like we are in a 2% economy, consistent with the fed hike rate. tom: fedex out in the next hour as well. maybe we will see some layoffs there as well. coming up, an important conversation with james trina's.

the new news out of his nato. this is "bloomberg surveillance ." ♪

tom: good morning everyone. "bloomberg surveillance." every police officer of the new york police department is at yankee stadium. there is room in the mets have looked at the new york yankees computers, or something like that. brendan: could the mets pull that off? the viewers are scratching their heads. tom: there it is, a beautiful new york city this june morning. morning must-read. brendan: we go to tokyo for perspective on china.

brendan: david woo, when you look at that and think about china now, is it appropriate to think about china ex-asia? david: people want to -- right now china is the biggest stock market. you are talking about this msci change, you are talking about a change in emerging markets. i would think from that point of view, china has become important. what is interesting to me, in the last few months, even though the stock market in china has gone on a tear china is also decoupling from the rest of basically asia. i would argue that it is decoupling from the fundamentals

in china, too, because it is more of a bubble than anything else. brendan: william pesek said that the idea that china is on its own is a marketing tool. in the shanghai composite, is that marketing or reality? david: you think about shanghai most of the buyers are retail investors. as many as 60% of these people have not even finished high school. people are no longer buying these stocks with her savings but rather with increasingly borrowed money. a third have -- people are buying not only because they are cheap but because the stocks have been going up. that is the sign of a bubble. tom: with the compensating force that is asia currencies, are they in a currency war right now where will they be in a year? david: every central bank i saw they said it is too strong.

i have never heard that before as a consistent message. they are going to want to wait it out until the imf has included in the sdr. this will be a huge deal when the default happens. brendan: we are going to talk about the other thing we talk about all the time greece. that is coming up next. nobody thinks it is his fault. we are live in athens to figure out what is going on there. ♪

tom: good morning, everyone. futures up 4. dow futures up 39. let's get to top headlines with vonnie quinn. vonnie: the u.s. treasury secretary is joining those

urging greece to come up with a solution that will unlock bailout funds. jack lew called the greek prime minister, alexis tsipras, and told him to get serious about reaching a compromise. that was after he accused the ecb of strangling greece. he also said the imf has criminal responsibility. now we focus on tomorrow's meeting of finance ministers. federal reserve policymakers are wrapping up a two day meeting and betting that the central bank will not raise interest rates until september at the earliest. investors will be looking for clues in the fed statement at janet yellen's press conference. that starts at 2:30 p.m. eastern time. a college student is accused of planning bombings in new york city on behalf of islamic state. federal authorities arrested a 20-year-old.

papers say he told the government informant of his plans. police say he was spotted twice on the george washington bridge acted suspiciously. the company's been off of alibaba -- spin off in the state in alibaba -- is on track. active technology conference in san francisco, myers says those changes should not have an impact. >> now the focus is on building blocks and larger strategic acquisitions. they basically not only come to the people, but they also come for the technology. vonnie: the spinoff will distribute shares in alibaba to yahoo! shareholders. in women's world cup soccer, the u.s. has advanced to the round of 16. amy scored just before the end of the first half, giving the u.s. a one-goal win over

nigeria. brendan: america is very good at these. she usually uses her head. she used her foot this time, but it worked. beautiful. look at that. it should have been a bigger win because players did not play as advertised. david woo, bank of america/ merrill lynch, is still with us not to talk soccer but to talk china. you were just in asia. we were talking about china a second ago. the chinese government, in order to hang on to this expansion, or at least limit the downside of it, has been expanding the money supply. how often can they go back to that well? david: not very much. the last five years, what do we know? when the fed did qe, the dollar

collapsed. when the ecb did qe, the euro collapsed. china is doing their own version, and they do not want currency to go down. the questioning in some sense is that two years ago when the new prime minister came into power they said we will keep the housing bubble under control because otherwise this will end badly. 18 months later, the housing bubble is still there. i think they are in a very weak position. tom: for americans it is not an exogenous shocks but certainly outside the realm on this fed day. another one is greece. what is your new new take with bank of america/merrill lynch -- has moving forward unraveled in the last two days? david: most people think there can only be one of two outcomes when it comes to greece.

either they will come to an agreement in the last minute or -- i think the first scenario is more likely, which is basically a gray area that they are basing post capital controls on default. tom: i will go with that. here's the rate of change. in the two year yield, we have gone from 22% to 32% in the last few days. -- from 20% to 30% in the last few days. i have not seen the -- i would suggest market vigilantes are betting something to happen soon. do you agree? david: yes, but i do not have to tell you, the past three days the euro has been trending like a big. the reason is because in the last five years the debt ceiling crisis, the first

european crisis people were shorted possible policymakers. this time around, the market is simply too afraid. the writing is on the wall that there is no agreement this time around. brendan: when you look at what policymakers are saying, are they acting rationally? david: i think they are relative to their own reaction function. the germans are acting rationally because they know the public is totally against any debt forgiveness. to some extent the greek government is also acting rationally because they think by acting the way they are, they might force the other guys to capitulate. this is why there is no agreement so far. it could be a default capital control but no exit. that will increase the leverage greece has. brendan: how does that work? no exit from the euro but

capital control? david: they are now running a budget surplus. if they do not pay interest on their debts, guess what -- they might be able to keep it going for a while. at this point it is about trying to gain an advantage. there is no question that greeks until now did not have any advantage, any leverage. by defaulting, they could gain an advantage. tom: there are two schools of thought here. there is a real knock-on effect here. one is this time is different, it will not be a big deal. my bloomberg screen tells me there is a contagion factor here. what have you learned about contagion in the past few days? this is with mr. tsipras speaking literally -- who is he going to tear apart today? vonnie: the governor of the bank

of greece is saying it must be averted. tom: i look at my screen and it says contagion there. david: i think there will be contagion. the european stock markets go up 10% today. the reason why, most investors are overweight on european equities. this will either reach a happy ending because they will come to an agreement, or they will leave the eurozone and it will be an exit. it is a protracted -- a projected -- a protracted, ugly divorce will force people to reassess. tom: do you see a jump condition of the euro towards parity or even through parity? david: i am definitely forecasting parity still. also ecb qe. we are only two months away from

july when the negative supply of the european government bought ecb -- tom: it is not equivalent. it is much more than what we saw in the fed. we will have david woo -- next time we will have david woo wound up more than he is. brendan: in the meantime, back here in the u.s., we are eating our seed corn, cutting back on a sick -- on basic research and develop. we will take a look at investment in r&d by the u.s. government. that is after the break. this is "bloomberg surveillance ." good morning.

tom: good morning, everyone. "bloomberg surveillance." futures are just quiet out there this morning. euro-dollar, 1.126 and76. brendan: a report titled "what keeps us awake at night," by joseph quinlan. here is what he points to. this is a drop in federally funded basic research.

so that ugly white line there -- you see the moon shop there on the left all the way down to 4%. human if we are looking at absolute dollars, they have flattened in the last decade as well. we are looking at -- the problem is, we do not know what we are losing when we get this. what federal dollars fund in research is a basic step that has no commercial application whatsoever? things like the arpanet. tom: i am not next burton on this, but all bundled in, it is almost any -- i am not an expert on this, but all bundled in, it is almost an anti-science washington. brendan: this is something the corporations do as well. if you need to make your numbers look good -- and that has been the mood in washington for a longer time -- it is not necessarily anti-science, it is

what can we get rid of right now? david woo, does this worry you? david: it does. we were talking about a slowdown in production earlier. if you are not putting money into research and of element, productivity growth of the future will be lower. that is the environment we could be heading toward. brendan: the argument is when you have federally funded research it crowds out private research. is there a role for both? david: if you look at a lot of other countries -- basically some of these asian economies -- there is a case to be made that basically the government has a role to fund for the economy what others would not have done on their own. tom: should we fear the technological advancement of china, or are they so small for -- david: there is no patent

protection in china. from that point of view, there is very little tendency to innovate. they are good at copping things to make them small fine-tuning, but i do not think china is developing technologically as a threat to the u.s. brendan: you copy things, we copy things from the u.k. we suddenly became interested in patent protection in the 19th century when we suddenly started inventing things. david: the danger is if the u.s. were to stop innovating, and china keeps copying, eventually the u.s. will lose its advantage. tom: we have photographs right now. vonnie: it is time for top photos making news today. never three, the only new york state license plate/wall street

-- the seller bought the plates when they became available in the can 76. he was working at ef hutton at the time and put them on a 1976 chrysler cordoba. brendan: brendan: i love that. vonnie: tom, are you going to put it on your dashnash? tom: it is not like a nash thing. brendan: i love that in 1976 he put it on his chrysler and worked at ef hutton. they were simpler times. vonnie: brock holds became the first red sox player in years -- he hit a single in the first a double in the second, a triple in the third. tom: it is fun, and it is all they have to talk about now. what a disappointment. vonnie: i am so sorry.

brendan: the control room wants me to point out that they are still in last place. tom: full disclosure -- folks, i predicted this. vonnie: you are jinxing it. tom: in april. vonnie: the statue of liberty arrived in new york harbor june 17 1885 130 years ago today. it arrived to great fanfare and was greeted by grover cleveland. 350 pieces were packed into 200 cases, sent from france to new york. imagine receiving 200 cases. tom: let's turn to the question of the day. we had a huge response yesterday, and we thank you for that. what has changed since the last

fed meeting? that is a loaded question. we have the yellen press conference this afternoon. what has changed since the last fed meeting. stay with us. from new york city, this is "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." let's get to top headlines with vonnie quinn. vonnie: engineers are investigating the deadly balcony collapse in california, trying to determine why it broke away from the fifth floor of a berkeley apartment building. six people were killed, seven were hurt. the building is nine years old. the city's weight-bearing code has been raised. the wall street journal says in the last few months, several networks have moved shows from netflix to who live -- to hulu. hulu has been making deals with original shows. births to teenagers hit a historic low. births rose overall by 1% in

virtually every racial and ethnic group. we expect to hear more babies crying, tom. tom: why are you looking at me? brendan: i did what i could to hold up the stats for the last five years. tom: you did a great job, very successful. looking ahead to the next hour -- peter cook will brief us. moving on to greece, the challenges there -- a very important conversation, a front and center conversation in new york city. we know nationwide as well rent or buy is always a big decision. there is another raging debate right now. there is a group that flat out disagrees and the debate over inflation -- it is an interesting mix of fed policy and the nation's productivity. you throw in a currency move --

you may want to add in a strong dollar as well. david woo is with us from bank of america/merrill lynch. very good at summarizing these trends. david: it has gone away. i think right now people are starting to focus more on the labor market angle of future inflation, meaning we are starting to see wages going up labor costs going up, production going down. tom: the eci, one measurement of wages, has a new movement up is that i momentum or a recurrence equation to that where once it gets going, it gets going? david: it certainly does, especially given the fact that it is happening against the backdrop that the volunteer quit rate has gone up 1.9 percent, the highest since 2006.

when people are quitting her job at that rate, they have another job lined up or they think it will be easy to find another job. all this suggests the labor market is tightening. brendan: the quick weigh -- the quit rate is rising. part-time for economic reasons is bit down a little bit but this version is way down since the last two cycles. david: discouragement is more important. the fact that people are having more babies. having a baby is like buying a house. it is a long-term investment. you have to be secure about -- tom: really? there is a "surveillance" exclusive -- children are a long-term investment. brendan: do we know cyclically

what baby volume says about the economy? is it in fact a measure of hope? david: i would like to think that is the case. especially because we know that college is so expensive. i think people having children, they have to be more optimistic about the future. tom: let's bring it back to the fed today. the swirl of stuff they have to look at -- do they have to bank much information? -- do they have too much information? david: i don't think anybody in the studio knows right now. their dependency -- they do not know. that is what it means because they are helpful of their forecast economy. vonnie: they have to bring down their forecasts, though, because that is relatively expected. david: that is true. vonnie: are we going to reach

the 3% growth rate in the second half of the year? david: in our central scenario, yes. they are not spending on gasoline, but that is contingent on this. tom: you live on airplanes. i want to squeeze this in here. what did you learn in asia the last time you were there? what was the anecdote that caught your attention last year? david: across asia and everywhere, sentiment was downbeat. from china to india to singapore to hong kong, people are feeling that. tom: so lagarde's new mediocre works. can we stay immune from that? david: europe is busy rolling over, and let's not forget -- german exports to china is 3% of gdp. russia is already slowing. german exports to russia is down this year.

from that point of view, it will be difficult. brendan: you guys are making stuff up about the fed. "entry into motherhood in sweden." here it is. we find that first birthrates rose and fell in step with employment rates come especially strong for young women. vonnie: sweden is a particular case, though. especially when it comes to having 80's. brendan: and the idea that you can be a mother and get back into the workforce. tom: when does the fed raise rates? david: i think it is going to be september. if greece were to blow up and the euro dollar to parity by september and china were to devalue, i do not see the fed doing that in september. it is highly conditional. tom: we are going to continue this discussion in the next hour as well on this fed day. coverage on bloomberg television and radio through the day.

part of that coverage is the foreign exchange markets. sterling at 1.57. that is a stronger sterling over the last number of days. we will enjoy another hour of "bloomberg surveillance." good morning. ♪

tom: lagarde in silence.

the international monetary fund has criminal responsibility. greece is stable and fragile. it is fed day. janet wellen -- janet yellen will wait and wait until she sees inflation. looking forward. this is "bloomberg surveillance." we're live from our world headquarters in new york. tsipras just speaking in grace 15 minutes ago. brendan: what we are looking for is how serious these acquisitions go. the more he speaks, the more friends he loses. he lost the imf and he is losing the eu. tom: government will say big no if no viable agreement. in des moines for me -- brendan:

for me the most fascinating thing is we all have started saying capital control. tom: did you see the headlines? you are dead on. let's catch up on the other top headlines. here is vonnie quinn. vonnie: the greek prime minister insisting that his proposals meet the demands of the creditors. outdoor -- afterwards he says that greece is a sovereign state and the government has a mandate. angela merkel says greece and its creditors will get a chance to make a deal when they meet tomorrow. >> that is why we have to fully focus on the finance ministers meeting. it is possible that the three institutions should try to achieve a new agreement. whether they can achieve by thursday, i cannot say. vonnie: greece could miss its

payment at by the end of the month. investors are waiting to hear what the fed says about higher interest rates. fed chair janet yellen and other policymakers wrap up their meetings this afternoon. features traders are betting the central bank will keep its interest rate at near zero. at 2:30 eastern, janet yellen will hold a press conference. republicans in congress are considering a new for the fast track trade bill. they want to revise the trade agenda by adding a proposal to an unrelated bill. they are planning to bypass houston the kratz. -- house democrats. strong demand has led this company to boost the size. at the high end of the new range, $19 per share valued at

$4 billion. the maker of the wearable devices is profitable. for the first time in four years, the golden state warrior's are on top of the basketball world. they had an a point victory over the cavaliers last night. steph curry scored 25. and it would i'll a -- and igu odala was named most audible player. brendan: i'm looking at our day about the viewing. highest rated ever on abc through all five games. tom: a $2 billion transaction and allergen will buy a fascinating company, 106 employees in westlake village california. it is a small transaction but the rate of change gets your attention. 20 to 60 to 75.

very quickly, waiting on the fed, oil is a little bit elevated. let's go to the fed. that means a conversation with peter cook who has familiarized himself. peter what do you hope to get out of the press conference that we will see? guest: i think janet yellen will be pressed on whether or not she feels they need to hold their fire. maybe december and maybe 2016. the thing i am most interested in is what she has to say about the outside rusher from madame lagarde and others suggesting the fed needs to hold the fire in 2016. what weight is she giving to those calls, giving her close relation -- given her close

relationship with christine lagarde. tom: mr. wu was with us earlier talking about the asia slowdown. you wonder how the international economies will hold into the fed debate. guest: they are not supposed to, directly but you know that greece will be part of the conversation today. you have to touch on it in some form or fashion. not just the situation, but as we said, what is happening in emerging economies, the pressure she feels outside the economy to be very careful. she has been hearing it from abroad, and washington did she will have to touch on it. the extent to which she ignores it will be telling as well. brendan: i want to talk about the pressure from capitol hill. they made noises about stronger

oversight. as the fed shocked that off of its shoulder? guest: the fed has been able to avoid any direct conversation. what is coming out of the senate banking committee is not nearly what was first feared when this congress came into session. the fed feels like it has dodged a bullet. there is still room for mischief on capitol hill in the eyes of the federal reserve. there are worries about fed independence. it is on their radar screen but the more immediate challenge is the economy and their decision on liftoff. congress is further down. tom: it will be to wait and then wait some more. that is the comfort zone of each central-bank going back to the beginning of economic time. no value to getting in front of a recovery.

no surprise, here is a surveillance exclusive coral is with us from bloomberg intelligence. what do we get out of these acclaimed dot plot changes? guest: this is something the fed has been very focused on. the start date doesn't really matter. tom: the dot plot shows the difference. guest: it is all anonymous and would have to make a best guess, but a good way to strip out the fringe on the committee is to look at the median dot that will most likely remain and territories with increases in september. brendan: here is something that i want to understand. we go through the cycle where

the markets as we do not know and they say, so june? and the fed says, we don't really know. has that sunk in or is the market still looking for hidden clues? guest: market will be looking for those hidden clues but they are really the fed interpretation of economic data. the dot plot i don't think we'll move that much today but one of the things that will change is the 2015 gdp forecast. the fed is saying to hit 2.5% given the lousy economy, we have to go 3.5% in each of the next three quarters. tom: what is important is that you have not had the dreaded s word. slack. here is a great chart of slack in the economy. in the old days people got jobs

quickly when they were unemployed. boy has that changed. economic blather around the reality that half of america is flat on its back. guest: it we are not seeing significant wage inflation yet it is still above the neutral rate. you keep your foot on the gas pedal. that is in the dot plot with a late start and a slow trajectory. we are going to be slower in this cycle then passed cycles. there are two critical keys. number one, all the economic data and the data dependency. they have successfully convinced the market that this will be a rip roaring tightening cycle. if the fed has the sense that

the market will price in a continued string of rate increases, they will hold off. vonnie: will she respond to christine lagarde? guest: i think she will say in truth fed fashion, we appreciate your insight. brendan: as all sense of decorum broken down? at 2:30, janet yellen will speak. pay attention to what she says. the twitter question of the day, what has changed since the last fed meeting? good morning.

tom: good morning everyone. brandon, help me out with the headlines. just a long is really picking up the heat. brendan: in a completely abstract sense is is much more fun than the last greek crisis. if a country leaves the eurozone, the debt remains. tom: we were prepared for eventualities which was the capital control, you heard.

brendan: three months ago they were being very quite and now they admit there is one. tom: let's bring it over to something smart this is the acclaimed clive cook. i thought that this was exceptionally current. will the next greek government the anymore pliable? will the accuracy and provocation of tsipras a poor excuse for european policy. he puts it right back on just blew. >> these have a real problem, not with greece and yanis there are pockets -- varoufakis, but it they are frustrated. i completely agree with clive, that varoufakis and tsipras started with a strong position

but have negotiated a way. tom: i have to go back to your princeton background. i'm chicken. how does a game of chicken and away from what we know? guest: the game of chicken doesn't and by putting your turn signal on and slowing down to the side of the road. it is getting heated as we enter the 11th hour. this is not surprising and as you highlighted, maybe the debt is retained as you move outside the eurozone, unless you decide not to pay it. the debt stays until you decide not to play it -- pay it. brendan: it only takes one side to default. it is not at agreement. vonnie: greece cannot take

anymore for the moment. he has given a list to the austrian chancellor. guest: austerity is over who -- herbert hoover style economics. i am not surprised he is taking this stance and the key is that most greeks wouldn't stay in the eurozone. brendan: buy or rent? that is all we discuss in new york city.

tom: breaking news. headlines out of europe. brendan greeley, a program is a program. your conversation with mr. schaeuble. brendan: the greek parliament as to give a vote of confidence to tsipras and the german parliament to sign off. mr. tsipras was speaking just now and said there are reparations for german failure of talks. when i talked to him two months

ago that was not the case. he said you plan for every eventuality and now he has gotten rid of all of that. tom: a program is a program which means we have to get today. vonnie: streets were flooded and schools were closed. it is now raining in areas still recovering from plugs over memorial day weekend. the first tropical storm to hit texas in seven years. you figure how low oil prices are hitting opec. the took in less than a trillion dollars from oil exports. they fell 11% compared to 2000 -- 2016. donald trump should not expect a campaign contribution from singer neil young and here is why. >> ♪

vonnie: that is young's classic song, rocking in the free world. neil young's manager says the trump campaign was not authorized to use it. he supports bernie sanders. tom: when our politicians going to learn? brendan: we have this argument all the time and there is never a resolution. it is exactly like when ronald reagan used "warned in the usa." -- "born in the usa." bruce springsteen said he did not approve and number two, that is a darkly cynical song about the usa. so is the young song. is trump the only one not in on the joke? tom: i guess so. let's move on -- how about real estate? real estate is local. calculations very from city to

city and they will take on a new meeting if you can buy and there is nothing to rent. with us is johnson miller. chief executive officer of all things appraisal. let's look at a great chart. i will put out on radio one of the great constants which is the amount of home that you can buy with your income. what is different this time? why is rent difficult? guest: i am on a five-year role of this, but it is really credit. credit is acting up the organic process of renters becoming buyers. we are seeing that in the city for sure. over the last 38 months out of the last 48, rent rises areas -- rises. at a rate of 45%.

it is the same in almost every metro area. houses work as credit nationally and you're seeing the same behavior everywhere. that is white we are having this supportability discussion, it is a post financial crisis credit condition driving this behavior. brendan: i read a compelling argument that the business cycle really affects new household formations. when you get a job you start your own household and get a cable subscription. buying is all about credit. is that something you watch? the overhang of student loan debt? guest: i have several children with loan debt living at home. it is the same story. the irony of all of this as it applies to new york city is, we are seeing very strong job

growth but we cannot house the people that we are trying to fill these positions. it is a real problem for the city and the reason why the administration is grappling with how to fix it is it seems to be the number one priority. brendan: shortly you paid off your student debt and bought a house? guest: i did that as soon as possible. but part of the problem is story and the other part is supplied. there is little supply of new construction available because there has been a dearth of new construction. limited supply and burgeoning demand simple economics. prices are increasing areas we see home price appreciation. people are first -- forced into the rental market. brendan: what about existing homes? guest: existing home inventory

after bottoming in 2013 is slipping. the big reason is that if you have a home and low equity, you don't qualify for the next transaction. you will not list your home. the people who are not impacted cannot find what they want to buy and you double down on the problem. guest: here is the beauty of a free market economy. rent prices are increasing and this encourages builders to make more inventory. we saw that yesterday in permit figures supply is on the cusp of increasing. guest: but we are building the wrong stuff. if you look at a market like new york, you are seeing this skew. you are not seeing the middle class. brendan: i have to jump in.

we are running out of time. keep on rocking in the free world. we are going to russia next. good morning. ♪

tom: good morning everyone. our coverage on bloomberg television and radio coming to the 2:00 hour. go to the terminal and look at a crazy chart. i did this for carl riccadonna. we have been here forever areas.

back here in 1980. it is a long chart. it shows percentage change. it shows the movement of the target rate. we come here to 3%, here is a message -- massive percentage change lunch -- lunch. here is the duration of the move. guest: this is the great victory of the fed over inflation. the greenspan era which was initiated i paul volcker and now the neutral funds rate is drifting lower. tom: this isn't in the textbook. good morning dr. blinder, if you are watching. it is not in his text look. guest: i don't recall that it was, that the point is we are a

more mature economy that grows at a slower pace and has a lower inherent inflation rate and the neutral policy is lower. in recent years it was somewhere around 4.25% and it is probably 3.5% now. but we are well below the neutral rate. tom: one more quick question. the nehru rate. that is another debate as well. guest: full employment in the economy. you can never know it once you have gone through it. tom: there is a debate about that. let's go to federal express right now. those earnings and revenues. vonnie: earnings adjusted to $2.66, which was on this. but the 2016 guidance between $10.50 and $11.10.

the guidance is good and we will get more on that in an hour's time. at 3% miss their on earnings and we are also getting capital spending at or $.6 billion or the year. tom: i love how they say it is a transformative year. anytime i see that word -- transformative. transformmitting our way through. vonnie: other top heads, the greek prime minister insisting that his budget proposal meets the demands of creditors. afterward he said that greece is a sovereign state and the government has a mandate and tsipras says the european neighbors must find a political solution. jim o'neill says a deal can

still be reached. he talked about it with charlie rose. >> it is a game of chicken. i have assumed all along that at the last moment there will be some kind of deal. right now that seems an outrageous thing to say. vonnie: greece could miss payments on the debt if there is no deal by the end of the month. futures traders are betting that policymakers won't raise interest rates until september at the earliest. janet yellen's news conference this afternoon right here live on bloomberg television. a takeover to tell you about this morning in the drug sector. the deal is worth about $2.1 billion.

the deal is expected to boost business in facial treatments. it is the nation's fifth biggest arm a cynical company by market value. the u.s. women's soccer team is winning for the world cup. they advanced to the round of 16 with a 1-0 victory over algeria. the americans must wait to find out who they will play in the knockout stage of the tour in the. best tournament. tom: who is the other big team? vonnie: germany. brendan: they crushed ivory coast in their first game, 10-0. we are a perennial power and women soccer the way we are not in men's soccer. tom: german headlines -- rather greece headlines. moving the market slightly. oil gives it up or do want to

point out the good yen at 1.2387. a weaker japanese yen this morning and other than that range bound markets across all with the greece market headlines. on this fed day, maybe it is time to take a pre-fourth of july pod. we are distracted by greece. best free fourth of july pause. the benefits of the recovery are going to a relatively few weather on an income or wealth basis. carl riccadonna, the chief economist at bloomberg intelligence maybe a step back on our two or three america's. let's start with an america not

participating. there is a new america we can learn about that is not in the game there you does janet yellen have a mandate? guest: she absolutely has a mandate. the labor participation rate has picked up in the last two employment parts. in her mind she has argued that this is a cyclical problem. she can hold her foot on the gas pedal to bring the marginal workers back in. tom: she is seeing better science. -- signs. the arch issue is if they go labor centric in their policy does that change independence going back to 1951? is this a less independent set on this fed day than the time of greenspan? guest: it is not less

independent but it is a fed completely sensitive to congress and that is why they have to be very clear that they are focused on the dual mandate and are not delaying rate increases to help emerging market and they have to keep their dual mandate firmly in the crosshairs. brendan: one of the things that we have looked at is the development of the labor market conditions index. that is a clear signal that this is something important enough to innovate around it. the last cycle was not great. guest: we are moving in the right direction that we are not there yet and that is why they don't have policy fed at the neutral rate, instead we are still at zero. even if we are raising rates we still basically have the economy at full throttle. 3.5% is a reasonable estimate.

the natural growth rate has slowed as much as economists have predicted. we have a prepared economy still licking its wounds from the financial crisis and i suspect that as we realized we see a lot of those dropouts reentering. that sluggish 2% rate that has really prevailed for the last six years. brendan: carl riccadonna, still rocking it in the free world. tom: it is a bellwether for where our nominal gdp -- it is a little soggy. vonnie: continued moderate economic growth. it wasn't too optimistic. guest: the economy stalled in

the first quarter. i don't want to, specifically on fedex but these bellwether types of injuries are not going to do well. tom: can you get out over 4% nominal gdp? guest: i think we can get there in the latter half of the year. moving back toward 10%. vonnie: better than delivery at the moment. better than good it is assuming $1.7 billion worth of cost cutting. tom: we have been focused on greece and all that, but i inc. it is company after company that we are seeing as well. the market really has a fed day to it. it is really turned it down even with the greece headlines. what is new on grace? -- greece? brendan: same comments from

before. tom: stay with us. futures at negative two.

tom: good morning everyone areas

-- everyone. brendan: eric from market makers's onset. as long as i have known him he has had a job own on his wrist. despite what we say about jawbone and apple will 85% of the tracker market. guest: it is an amazing company and looks amazing now. and so much demand for their stock that they have raised the pre-offering deal and they will raise almost $350 million at the high end of the range. it will be worth almost $4 billion. it boggles the mind. we're talking about unsophisticated stuff. there is a bluetooth connection, but all it really does is count your steps and tell you sort of how well you slept.

vonnie: one of the barriers to entry is 85% of a tiny market. what is the future for fitness companies? guest: people seem to the into the idea of tracking fitness, the question is how much more sophisticated they can become and accurate at the same time. the apple watch for that matter is that it is pretty difficult to take the heart rate on your wrist. there is an optical sensor and it is not very good. it is fine if you're sleeping or sitting at your desk but try to do something active and all of a sudden it is very inaccurate. every company that sells sportswear is trying to get into this. they love the 175% year over year revenue growth.

it is not a brand-new company. >> fitbit started as a very simple thing that you click your waistband. these are other wearables. garman has a wearable. skullcandy on your head. i did some research recently and it bit was reviewed the highest among the affordable wearables because it was so simple. it works. how do they avoid becoming blackberry which was tied to a device people no longer want? guest: it has to become a smarter device and that is where the jury is out there in apple is a luxury company and a software company. this isn't really software. i am having trouble seeing how it becomes that much more sophisticated and useful overtime. i am ready to be allowed --

wowerd. brendan: there is a line of surveillance that the last thing we want is to tell us how little we are sleeping. mark wallace knows a ton about this company. coming up on "market makers." this is still "surveillance."

tom: let's get right to brendan greeley on greece. brendan: headlines coming fast. the eurogroup will have to sign off on any decisions. we cannot make a last-minute deal. yesterday, tsipras told his own parliament that the imf there's terminal responsibility for greece. there is news from the greek parliament as we speak. reporter: the situation from athens looks pretty bleak. no closer to an agreement than four months ago. the bailout expires in 13 days from now.

the greek prime minister said that the government is ready to say the big no to an agreement which would not be in line with the election promises to end austerity. failure to strike a deal in the next week would mean we are heading toward the biggest default in the history of capitalism. the big deal is this time it is not private investors. brendan: from where you sit in athens, our people in greece repaired to give the big no? reporter: greece public opinion is exhausted and divided. most of the greek population once it to remain in the euro area, but the government says people also want to put an end to austerity. it is not prepared to blink at creditors demands for more cuts.

as to whether the government would call a referendum and ask to decide whether to agree to a new bailout attached to more austerity, mr. tsipras said, he has no intention to do so and it would be the government which would make the decision. brendan: the headlines there are coming quickly from brussels berlin and athens. vonnie: let's get to some of our top headlines. engineers are investigating the deadly balcony collapse in california. trying to figure out why it look away from the fifth four. six people were killed, seven seriously hurt. most of the victims were visiting college students from ireland. an official says that the weight-bearing codes have been raised since then.

the report has found that the united food and commercial workers. it says that nearly all of walmarts overseas assets are five subsidiaries in the netherlands. walmart says the report is designed to mislead. a new report says that hundreds of over cars are being taken off new york city street. the new york post says it is part of a larger crackdown on illegal activity. livery drivers are allowed to make pickups but may not be hailed by writers on the streets. -- riders on the street. brendan: i quote, this is like playing with fire at a gas station. about moving heavy grade weapons into europe. nobody knows what this means better than admiral servetus.

once he was nato's allied supreme commander in europe. he joins us on the phone. russia is shocked and offended. is it worth worrying about? guest: i don't think that it is. these actions are not terribly provocative. they are a logical step. continuing on the ukraine. it started when russia invaded the ukraine and annexed crimea. that has made the eastern nations the baltic states and poland nervous about russia. therefore we are putting equipment there in case we have to respond. it is a way to reassure the nato allies, is not terribly provocative and is the log -- logical next step to putin. brendan: the biggest concern right now are the baltic states where there are russian minorities, how much danger given the fight are they

actually in? guest: i don't think they are insignificant danger of an actual invasion. it is highly unlikely that russia would try to take on the nato alliance by crossing the border with armor or troops. it is possible that we could see cyber attacks. we could see some kind of insurgency trying to propel the russian minority to do ask of defamation or difficulty. i don't think there is an enormous risk of russian invasion. if you talk to the baltics, they feel it. they were part of the soviet union that was under russian domination for centuries. brendan: in 1997, russia signed an agreement with nato. no troops east of germany. he held to it until last year. is that agreement worth worrying about anymore? guest: that agreement was about permanently assigned troops.

that is talking about putting actual people sleeping overnight in those countries. this is moving equipment. there is plenty of room in that agreement for what we are doing. brendan: we have charlie rose interviewing vladimir putin on friday. he says only an insane person can imagine that russia would suddenly attacked nato. is this insane behavior? guest: it is behavior that reflects the historical sensibilities of particularly the baltic states, but also poland. i don't think poland was expecting the invasion from stalin before world war ii or the one from germany. i think that nations defend themselves. they are part of an alliance and they have the right expect that alliance to support them. what i think insane is the way

putin is talking about nuclear weapons. he has made several references to people forgetting that russia is a nuclear armed state. if anyone is ratcheting up tension, it is russia. tom: how can the united states assist russia with turmoil. whether it is finances or the geopolitics, how does the u.s. project a cogent policy? guest: we have to first and foremost rely on a nato alliance. the command structure in place. all of the meetings and summits that go along with it. nato itself is the transatlantic plank. it is the economic piece of this. politically we have to be engaged in the consonant

leaning in and acting as part of the g7. we need to put more emphasis on that ukrainian situation. brendan: admiral james servetus and the supreme allied commander of nato in europe. my agenda today is greece. we have been saying for four months that greece is running out of time and cash. that is actually happening now. vonnie: my agenda today is the fomc. 2:30 p.m. will be the press conference. will janet yellen say anything about raising rates and give us any more clues? tom: my agenda is the attention to brett wallace with "market makers" this morning. i cannot convey to those a bit younger how odd it is that this is a big deal.

there was a time that this would not even have been on the radar. the new ipo market is a private market. vonnie: this company of all companies going public. so many are saying private. tom: i would like to know the preferred share cash out. brendan: i think it is so interesting when we talk technology companies, we talk google and apple. it came out with google glass, people didn't like it and it was socially awkward. the fitbit is a very simple device. they are getting it right through simplicity. 85% of the market. i was shocked. vonnie: it will be interesting to see who buys into this. tom: i am fascinated that we are making this big a deal about a tiny ipo. it shows how odd and rare they have become. there used to be 20 per week. that was a different time. carl riccadonna thank you so

much. as we continue fed day coverage on louvered television and radio. stay with us. ♪

announcer: live from bloomberg headquarters in new york. this is "market makers," with erik schatzker and stephanie ruhle. stephanie: good morning. this is "market makers" that anytime at 8:00 a.m.

i am stephanie ruhle. erik: i am erik schatzker and it is that time. 2:00 p.m. eastern time it is coming and janet yellen will be holding a news conference at 2:30. a super important day. you will be able to watch that news conference live on bloomberg television and it is super important, not because the fed will raise rates, there is a slim chance of that happening but because we will get a statement which gives us a chance to gauge the fed's feeling on the economy and janet yellen's comments will give us a better sense, one would hope, about the direction of rates and the pace at which the fed will raise. stephanie: i thought it was because has a new haircut -- because erik has been you haircut and is that a new suit? erik: recent but not new. stephanie: catherine mann is from the organization with economic cooperation and