the dollar slumps to an 11 week low, and the bank of england sets policy to an unknown. a warm welcome to bloomberg daybreak on this thursday, february 2. i am jonathan ferro alongside david westin and alex deal -- alix steel. the fed rate remains unchanged. the bank of england's asset purchase program stays on hold at 435 billion pounds, and the corporate bond buying program, both of which are set to end at the end of this month, our 10 billion on target. sterling, a 2016 high coming into this decision and then the forecast drop. alix: for 2017, they raised their gdp forecast to 2%. originally they had seen 1.4%, and they raised their 2018 forecast to 1.6%.

-- theirinflation at cp outlook broadly unchanged in 2017. more of a transitory effect. jonathan: some of the monetary policy committee members are signaling increase on the inflation front. 1/10 to 1.2670. guy johnson and richard jones join us. coming into this, it was this concern about inflation, whether the bank of england would come out or hawkish. what is your read? guy: it is the idea that maybe the stronger gdp line will mean that the transitory effect that somehow takes acted, transitory costs may not actually be as transitory as they figured. the economy is stronger and as a result of which, maybe that

inflation will stick around and become not just a base effect story but something more meaningful. i think that is the way the market is taking a look at this, sterling bouncing around a little bit. inflation is going up in the u.k. the question is for how long? jonathan: the story of inflation from the bank of england is that it is transitory, we will look through it, but this stronger gdp rate makes it harder to tolerate above target cpi. this has been the conversation for the last couple of months. does that mean a shift in monetary policy or is this just mpc on hold taking note of what is happening? richard: i do not think the messaging is inconsistent with the boe staying on hold as before. they shifted to be neutral in november and i think it is a little bit too soon for them to shift that stance. there is still a lot of uncertainty that remains so they may change those forecasts again.

, thei think is interesting forecast for 2018 growth is lower than that in 2000 17, that will be something that will weigh on their mind. in theirell that previous forecast, 2018 was the worry spot -- we saw that in their previous forecast, 2018 was the worry spot. perhaps suggesting the weaker gdp is due to the higher inflation. the boe says a stronger gdp makes it harder to tolerate the above average -- above target cpi. they did see housing and consumer spending. jonathan: the other line that pops out to me as the bank of england's forecast at based on a rate hike fully priced in for 2019. as the month progress, will the conversation shift more toward a tightening, given what is happening on the growth side and the projections for inflation, or do we await a brexit plan and

the bank of england saying the monastery -- monetary policy for the unknown? guy: if i could answer that question smartly it would be fantastic. the trading many of floors and a bank of england, they are waiting and watching to see what the economic developments are because they are so tightly related to the political developments. we simply do not know what will happen. at the moment while the bank of england has a neutral by, the market is still at least pricing at high. or is a hike priced in rather than a cut. jonathan: cable dancing all over the place, now down about 2/10 of 1% on the session. looking at the pound against the dollar. richard jones, going into this news conference, what are the questions of governor carney and what are the questions that -- as he approaches that? richard: i think the market is

going to want some sort of gauge on what is that trade-off between inflation and economic headwinds that governor carney spoke about last month, and how does that trade-off play itself out. when does the shift from looking through inflation shift to actually inflation is a problem and we need to a dress it? , with relation to what the government is doing with brexit and the bank of england policy, they also have monetary policy they could enact , and i think that is the third arrow of theirs approaches -- those approaches. toy have shown a willingness act on the macro prudential side before and it may be something they will do as well. jonathan: thank you, guy johnson and richard jones. renewed and increased concern about inflation, the pound a little bit softer after digesting this, and gilt yields

down almost one basis point. for more on the decision and the brexit set to take place, we are joined with the president and ceo of evercore. you know europe as well as anybody else. the bank of england setting monetary policy to almost the unknown. what is your take about how things are progressing? the bank of england a surprised about how well the economy is still doing. >> remarkably, the economies are powering through an amazing amount of uncertainty. i cannot think of a more pet just challenging time to be a challenging time to be a monetary ahead of that central-bank. in the united states, you have the very uncertain fiscal situation, which could be quite a bit more stimulative than we have had historically. europe andall of certainly in britain you have the uncertainty of brexit, the

french elections, german elections. it is really a white canvas at the moment. a delicate time and at the same time we have an administration in the united states but some would argue at best does not care what happens in europe and at worst, wants to see the e.u.'s demise. what is your take on this? i personally think it is premature to reach any conclusions about what the policies of the new administration are here in the united states. you have a president who was elected without any historical views with respect to major foreign-policy issues, major domestic policy issues, and so in my view, his views are in formation, and i would not really take any particular pronouncement as being the gospel at this point. david: if you are an investment

banker and are dealing day in and day out with ceos and making deals. how does this affect them in the u.k.? certainly, from a pricing point of view due to the cheapness of the pound they are in fact more attractive. historically, acquisitions in britain might've been used as a gateway or launching pad for , ands to the entire e.u. that strategy clearly has been brought into question at this point in time, since we really have no idea how trade and passporting services will ultimately shake out. the nextich leads to question -- where does trade figure in more generally as you assess possible deals in the u.k. and more broadly? thatthat make a premium

can pay for domestic companies that are not dependent upon trade? ralph: i think in the market, companies that are domestic and our exporters are probably getting a little bit of a benefit at this moment, but here some headlines grabbing anecdotal things that have happened affecting individual companies. that profoundn change in policy that happens not only with the president but with congress. alix: what are your clients saying about europe? ralph: they are concerned about what brexit implies over the next five to 10 years for the strength and the togetherness of europe. alix: do you feel like somebody is being put on the sidelines

because of that, they do not want to pull the trigger quite yet? ralph: in terms of m&a, the things that support m&a are a strong equity market, strong credit markets with lots of credit availability, knowledge about the direction of the economy, and ceo confidence. all of those are present today. you cannot ignore the fact -- and so activity and deals that make sense so far, there has been no interruption in the consideration of those. though, isve to do, sit and say there is enormous uncertainty about policy in the u.s. there is enormous uncertainty about how brexit evolves. there is uncertainty about the french and german elections. i would say those conditions are absolutely in place today, but there is a lot of uncertainty that could derail them pretty

quickly. david: to follow up, i was talking with a prominent investor yesterday who just got back from europe, saying valuations are low but he sees 10 or 15 risks in europe all to the downside. he does not see any to the upside. do you agree? ralph: i think the risks in europe are asymmetric. they definitely are more to the downside than the upside, and i think that is true because of of general direction politics in europe. europelso true because as a general matter, has been far less aggressive about fixing its financial system. it is very hard to have a powerful economy with undercapitalized banks. 5% thisutsche bank off morning, had pretty rough earnings.

the idea is they have to erase ms capital it is putting their profitability in the long-term narrative. does that hurt or help your business? ralph: our business is doing reasonably well right now. just reported our earnings yesterday. fees, which is our biggest business, is up 27%. the rest of the world was flat for the year, so our market share among all firms large and small that are public gained 25%, which is a huge gain in a very competitive business. our market share among the independent firms that are just advisers gained by about 13% or 14%. what is going on, because of the distress in the larger institutions is all independent firms are benefiting and we are actually benefiting disproportionately compared to other independent firms. alix: is that bifurcated u.s.

and europe? youh: i think in europe have larger firms and longer standing firms like rothschild that are benefiting. kioskse newer so-called like ruby warshaw and visit hourly brothers who are also doing well. jonathan: he said the risk is predominantly to the downside but the data has been pretty surprising to the upside. some of the banks are struggling and may have to pull back. you see opportunities with that in mind? ralph: the businesses they are pulling back from we have no interest in. the businesses they are pulling back from our businesses where capital is put at risk, and that is the other end of the spectrum from our business. ours is a true client centered feed business. jonathan: looking at the , consumers are

skyhigh, businesses are skyhigh. we are trying to gauge whether that is transforming into activity, or if people are just more optimistic. uncertainty that i described does not turn out to think that that confidence will in fact translate to economic activity. but it is a little bit like having a big thundercloud over the economy, and you just do not know whether it is going to break and rain on us. whether it isr the health of financial institutions in europe. you are taking market share from the likes of deutsche bank. can europe have the type of economic growth that is good for you and everyone if you do not have robust financial institutions? ralph: i think that is probably the most important drag on european recovery, and if you think back to 2009 when

secretary geithner imposed the stress test on our banks, and our banks raised over $400 billion of common equity in the following 12 months. in europe, none of that happened. they basically called in our business, extend and depend -- pretend. you extend the loans and pretend they will be repaid. they have been doing that for 6, 7, 8 years. unicredit just did a big rights offering. let's not forget also that in europe, the banks are a much bigger part of the financial system than they are here in the united states. he did not have as big an alternative financial system in europe. undercapitalized banks who are not really open for business is a drag. david: you mentioned tim

geithner, if there were to be that kind of leadership in europe where would it come from? ralph: it would have to be a consensus of the ecb and central banks of the major countries. today, the german government has been willing to tolerate and undercapitalized deutsche bank. that was not the case in the united states. you with great to have us, ceo and president of evercore. we are still awaiting details on how the u.k. government plans to exit the european union. later on, michael fuchs will be with us to discuss brexit, trump , and the global rise in populism. as we count you down to the governor carney news conference in 14 minutes time, that is coming up. ♪

jonathan: the bank of england, that is the focus in about 12 minutes. the news conference will take place where governor carney and his team have left monetary policy on hold but have upgraded their gdp forecast for 2017. they indicated that some members are closer to their price tolerance limits, that is the takeaway for the moment. the news conference taking a test taking place in about 11 minutes. as far as global equities are concerned, futures are down about one quarter of 1%. if you look at the ftse 100, we are up by about 4/10 of 1%. the reaction in the fx market, cable rate 1.26 flat. a 2017 high, but sterling weakness geeking in. -- kicking in. david: we are going to turn from

europe to the united states. with us israel schloss time, ,vercore -- ralph schlosstein with evercore. you have worked in senior positions in washington and wall street. how is it changing your business , and as you sit down with clients, how is it changing right now what you are doing? ralph: there is a great thing on wall street, by the rumors, sell the news. things get updated very quickly in the markets, and my own personal view is we have seen trumpak of the initial euphoria. i actually thought this would happen. i happened to be in britain when the election occurred, and our chief economist with in japan. he called me at 5:00 a.m. in britain and said, futures are

down 900 points on the dow. what do i say to these 300 investors i'm about to speak to you in 30 minutes? i said, if you want to be controversial, tell them i bynesday evening -- wednesday evening the dow and s&p will be up. the reason i said that -- and i went on to explain -- if you say what is going to happen in the first year of trump, significantly less regulation, corporate tax cut, and an infrastructure spending program, those are all very stimulative to the economy and important to markets. i think the markets have now discounted that. so now we are at a point where those things have to be delivered, number one, and number two, if they are not, or if there is other uncertainties created by the new administration, which i think is a high risk, then i think we may

wind up with some weakness. david: you were clearly right in buying the dow where you write in saying in the first year we will have corporate tax return -- reform, infrastructure? ralph: i think deregulation is a given because i think we will see very little in terms of additions to regulations, and a lot of pulling back. i think corporate tax reform could happen. i think there is a pretty broad consensus in the congress and the president to have lower rates and a broader base to make the country more competitive. infrastructure i think is more complicated. alix: that is what the markets want, tax reform, a stimulus package, they want that infrastructure and deregulation. what we have been hearing for the last 11 days is trade, -- immigration, and obamacare.

how long does the list of potential negatives way over the market? ralph: the first 10 days we have had i would call it government by tweet. i think at some point we are going to get into real public policy, and then we are going to learn as i said earlier, a lot more about what this president intends to do and is passionate about. -- i said thise to investors in early january -- anybody who stands up in front of anyone and says they have a pretty clear view of what is going to happen in this administration is going to drown in their own hubris, in my view. alix: part of that is what will happen with the dollar. a lot of policies are dollars drawn but the verbal intervention is dollar week. janus capital weighed in. >> i think the dollar is a concern. it is the global currency

basically to the extent that if the dollar strengthens, not only are u.s. companies affected to the negative but the global marketplace and global countries are affected too. of dollarsrillions of u.s. denominated debt, so a strong dollar is basically a threat to global growth and u.s. growth. alix: do you agree with that? ralph: i do. he is a pretty savvy investor. alix: do you think we will see the end of a strong dollar policy we have seen forever? ralph: i do not think the policy is a strong dollar policy. i think that strength in the dollar is an effect of a collection of policies, one of which is clearly that our monetary policy is ahead of the rest of the world, and is going to have a somewhat tightening impact, which strengthens the currency. istainly, the noise on trade

, favors a stronger dollar. and our economy is stronger. gaze what ising to possibility -- policy and what is noise, we can talk about stronger dollar policy but is it even a policy? is a sidehink it effect of both monetary and fiscal policy. jonathan: is the government seemingly unwillingly -- unwilling to step in over the past decades? if they have made a shift and the strong dollar is the consequence, is it a lot of noise when the president talks about manipulation of currency, is that just noise or do you say that is something i need to pay attention to? ,alph: i have been for decades and have had a very large trade deficit. there are a lot of things you can grab at to blame for that.

comforting from a u.s. perspective is currency manipulation, not that they are outcompeting us. they are doing it with a cheap currency. that is, to me, a canard. jonathan: ralph schlosstein, ceo and president of evercore. live and complete coverage of the bank of england governor mark carney's news conference, following decision to leave their monetary policy unchanged, and the details of accelerating u.k. inflation and the mp's tolerance of it. from new york, this is bloomberg. ♪

jonathan: from new york city for our viewers worldwide, this is bloomberg. i am jonathan ferro hunting you down to a news conference from the bank of england.

the dollar is weaker, but look at the cable rate. we printed 1.27 earlier and we are at session lows now, 1.2588, down by about one half of 1%. monetary policy unchanged as 0.25%ed, rates on hold at , the asset purchase program on hold. 2% fromcasts raised to 1.5%. 2018 to 1.6% this is 1.5% previously. -- makingdp make it it harder to tolerate cpi. we can listen in. >> good afternoon. the biggest determinant of the uk's medium-term prosperity will be its relationship with the e.u. and reforms it catalyzes.

will have ases significant bearing on inflation of the course of the next few years. market participants views will influence asset prices, particularly the exchange rate. firms' assessments will affect their investments. household confidence in the economic situation will determine their spending, and with time, the uk's economy supply will be affected by a new set of trading relationships with the e.u. and other countries. emphasized that the effects of the process of leaving the e.u. on inflation would be the product of its impact on demand supply and the exchange rate. it has consistently stressed that as a result, the implications for monetary policy would not be automatic. during these exceptional circumstances, the mpc is required to balance a period of above target inflation with a period of weaker growth. the primary objective of

monetary policy remains inflation control, meaning any overshoot of inflation above target can only be temporary in nature and limited in scope. clearh, the mpc has been that it's tolerance for above target inflation is limited. today's decision reflects the committee's updated assessment of those forces and limits. the committee has unanimously confirmed that the current monetary policy stance remains appropriate, but it has also made important revisions to its forecast and highlighted some of the key judgments underlying it. resilient remained since the referendum, with the u.k. posting the fastest rate in the g7 last year. growth is expected to be stronger, with the economy 2017ted to expand by 2% in and more than three quarters of

orercent thereafter -- around one and three quarters of a percent thereafter. outputll leave the u.k. over 1% higher of the last three years than we expected in november. the stronger outlook is the running of four factors. in descending order, the chancellor's autumn statement eased fiscal policy over the coming years, and this explains about half of the forecast upgrade. the outlook for the global economy is firmer, reflecting an easing of fiscal policy in other major economies together with improvement and financial conditions and business confidence, particularly the united states. that explains more than one quarter of the upgrade. financial conditions in the u.k. remain supportive, underpinned by falling rates and lower credit spreads. moreover, domestic credit conditions are accommodated,

competitiony strong and consumer credit markets and historically low mortgage rates. in part this represents the bank of england's policy, chas lowered the uncertainty on activity. november, case in there are few signs that households are cutting spending ahead of the -- household that picking up. adjust theirs spending and expectations of future income will be important determinants of the outlook. stronger projection does not mean the referendum is without consequence. uncertainty over future arrangements is weighing on business investment, which has been flat since the end of 2015. this investment is expected to be around a quarter lower than projected prior to the

referendum, with material consequences for productivity, wages, and income. the level of gdp is still expected to be one and a half percent lower in two years time than we projected in may, despite substantial easing of monetary macro prudential and fiscal policies. are alreadyrkets pricing in a material adjustment to the uk's economic prospects, as evidenced by the sharp fall in sterling. markets are valley wing today with a expect to be necessary tomorrow. adjustment to real incomes as the u.k. moves to its new trading arrangements. betweenexpects pressure relative strengths and market pessimism to be resolved over the course of this year. turning to inflation, having risen markedly from around zero in 2015, the mpc still expects cbi inflation to be back around 2% in the data for this month,

for february. this largely reflects external factors. fast falls in energy, food, and imported food prices began dropping out of the annual comparison. inflation is expected to increase further, peaking around 2.8% at the start of 2018 before gradually falling back to 2.4%. these overshoots are entirely because of sterling's fall, which itself is a product of the market view of the consequences of brexit. consistent with this, longer-term measures in inflation expectations have risen last year from very low levels, to stabilize around historically average doubles and remain well anchored. the outlook for inflation in this forecast depends importantly on the path for the mpcwhich is why undertakes regular detailed assessments of these prospects.

of suchlatest assessment is incorporated in today's projections. following a long of consistently overestimating wage growth, the mpc has upgraded its view of the natural rate of unemployment. we now judge the rate of unemployment the economy can achieve will be inconsistent with sustained wage growth to be around 4.5%, down from 5% previously. as a result, the stronger outlook for demand is in large part matched by an increase in the economy's estimated supply capacity, and the net impact is broadly neutral. consequence, when taken together with the 3% appreciation of sterling since our last forecast and the gently rising path for interest rates implied by market yields, the projection for inflation and the trade-off that the committee faces are both little changed relative to november.

decision, the policy monetary policy cannot prevent either any structural adjustments that are necessary as the u.k. moves to new trading arrangements, or any consequences of those adjustments for real incomes. in the shorter term specifically, attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and even weaker income growth. in such exceptional circumstances, the mpc specifies it must now it's the speed with which it attends this intense to return inflation -- intense to return inflation to normal. at its february meeting the mpc in and honestly judged they would seek to return inflation to target over a longer term than usual, and the current monetary stance -- monetary policy stance remains stable.

as the committee has noted, there are limits to the extent at which above target inflation can be tolerated. theprojections defined in february report and continued suitability of the policy stance depend crucially on three judgments. first, the lower level of sterling continues to boost consumer prices broadly as expected and without adverse consequences for inflation expectations further ahead. secondly, regular pay growth does indeed remain modest, consistent with the committee's updated assessment of the degree of slack in the labor market, ratesird, the hitherto slow as income gains we can. in judging the appropriate policy stance, the committee will be monitoring closely the incoming evidence regarding these and other factors. a spending growth slows more

abruptly than expected, expect monetary policy to be loosened. if pay growth picks up by more than anticipated, monetary policy may need to be tightened to a greater degree than implied by current market yields. more generally, monetary policy can respond in either direction by changes to the economic outlook as they unfold to return sustainable inflation to target. following the referendum, the bank eased macro prudential and military policies in order to support households and businesses during a period of initial uncertainty and eventual adjustment to the country's new relationship with the e.u. that is working. the availability of credit is up , and some of the impact of uncertainty on households and businesses has been mitigated. the brexit journey is really just beginning. while the direction of travel is clear there will be twists and turns. whatever happens, on a terry

policy will be set to return inflation sustainably to target while supporting the necessary adjustments in the economy. the mbc remained its policy stance. circumstances warrant change -- if circumstances warrant change, we will act. we will be pleased to take your questions. us your name and organization represent, and keep to one question? governor, back in august the forecast for gdp for this year was 0.8%. now it is being forecast at 2%. that is a really hefty adjustment. what went wrong with your initial forecast? around,ney: i turned it and say what went right?

what went right first was policy actions that were taken by the policy actions taken by the chancellor and government, both of which provide support into 2017. this,would not overstate but our sense in terms of the transmission of the macro prudential measures, the lowering of the countercyclical buffer, and the monetary policy measures we took his they have had more traction than we would have expected at the time. you could say we should have anticipated it, but they had more of an impact -- impact then we figured. the global economy has been stronger and that helps support growth in 2017. i think the thing that we missed is the strength of consumer spending, and consumer confidence associated with that. that was present and has been present all the way through this

process, so after an initial level in terms of consumer andeys, confidence surveys other initial indicators in the immediate aftermath of the referendum bounced back pretty quickly. you do not see it in the data and in the activity of consumers. consumers have not been affected by any of the associated uncertainty around brexit. is to a large degree understandable. up,labor market is holding wages are growing roughly the same rate, modestly, but roughly the same rate as in the past in part because of our actions. it is available and cheap if needed. now, that dynamic will start to be tested as this year progresses, the consumer dynamical start to be tested as real incomes move from growing

closer to 3% to growing closer to 0%, if our forecast is broadly correct. and the question will be, with what speed do consumers adjust their spending this year? in this forecast, in the very near term this quarter we actually anticipate less of an adjustment than we had in november. the bigger news to the forecast as you progress to 2017, is world,l, is better better fiscal and financial conditions which make a difference. that is the delta. >> governor, you have spoken risk and one way to control it is interest rates.

lots of people will have mortgages and will be considering a house purchase this year. can you tell them, compared to the last inflation report, is there more of a risk of an interest rate rise then there is of a further interest rate cut? gov. carney: well, the first thing, we have just taken the decision and have not changed interest rates, so that is the most concrete thing we can say. we can see scenarios in either direction. i gave an example of perhaps we could have a sharper adjustment of consumer spending. i would note our forecast has a quite sharp for the reduction in the savings rate of consumers, which is necessary to report the consumer spending we have in it -- support the consumer spending we had in it. we have made some important assessments and judgment in this forecast, one of which relates to the degree of excess capacity in the economy, or the slack in

the labor market. we think that the economy can run with a lower rate of unemployment. more people can be in work without us having to adjust policy. now, that is a judgment. it is based on a lot of analysis, a series of over estimations of wages that we have made over the last several years. much about find out the accuracy of that if the economy continues to grow roughly at rates similar. if we do see a situation where there is faster growth in wages than we anticipate, or that spending does not decelerate later in the year as that real income squeeze comes, or some combination of those, one could anticipate there would be an adjustment of interest rates, an

increase in interest rates. that is not a signal, that is laying out some of the factors that would influence it. one of the differences between , to ad november is that very gentle degree the market has started to build in some interest rate, increase in interest rates over the next few years. of course we have conditioned our forecast on that so when we talk about policy could go in either direction, it is either direction relative to the market curve, if you will, or path of interest rates. jonathan: two events taking place in the united kingdom. the brexit secretary is making a statement on brexit as the government publish its -- publishes it 75 page paper. let's go back to the news

conference. >> reasonable people can disagree about both the judgments on demand and supply. you have nine reasonable people on your committee who have come to exactly the same judgment. does this where you? gov. carney: two things, not an unimportant deal and the other part of the puzzle, or equation is there has been some appreciation of sterling, 3% appreciation of sterling. there also has been some, the market path has some increase in interest rates, both of which help ensure a similar trade-off between the two. in terms of, there is a range of you on the committee on both the strength of demand and the degree of slack. and the risks around the trade-off that we are striking. in other words, those risks

around the trade-off relate to buy large the risks around the economic forecast. one can paint the picture where the economy has more momentum or less, or the labor market has more or less slack. but the balance of judgment is that the stands is appropriate. no, it does not worry me because these are judgments that are, we have come to on the basis of vigorous debate. issues. analysis of the view, both of a the main forces acting on the economy, the framework for analyzing those, the trade-off we are broadly trying to strike, and those opinions will evolve

with time. it is reasonable to expect that different people will come to different conclusions at different times. as the economy moves forward and the degree of uncertainty reduces. just because we agreed today, does not mean we would agree at the next meeting or subsequent meetings. that is the way it works. news. to some people perhaps the most alarming chart would be on page 36, the savings ratio. are you and the bank really relaxed about the savings ratio going down to the lowest levels on record, and given that you dropped interest rates to the lowest levels since 1694, are you not in some way part of that complicit or responsible? gov. carney: distinguish between the savings ratio and consumer

borrowing, and certainly the adjustments to macro prudential policy, capital rules, and adjustments to monetary policy encourage borrowing. out ofho are saving less income are making a judgment about their future incomes, in the simplest terms, and may have a more positive view of their future incomes. time will tell whether those views of future incomes come to pass. i think what i would say about the savings ratio, our view is that we view this as plausible. on current trends. it does show that there are two cited risk around our forecast for household spending. it certainly, one could see scenarios where because of shocks or just because of, for

other reasons where people decide not collectively to draw savings down to the same extent, which would mean slower growth, or slack in the economy, and have implications for at least domestically generated inflation. in terms of, i want to say a word on household borrowing. we look at this from an institutional perspective. we start from the very basic premise, any time you see a credit aggregate grow rapidly or accelerate, you should dig into it and trying to understand better the dynamics behind it, how long it will persist, is it sustainable. the pickup and consumer credit, unsecured consumer credit which i would conclude does include auto -- i would include auto.

we would include auto leases, that falls into that camp and it falls into the camp initially of the sbc and pra. it,mpc takes interest into because what it may say about the pace of consumption going forward. sbcou can expect that the are taking a look at underwriting standards and the sustainability, all of the things we should be doing and have been doing in the stress test. just to put those numbers into on the most expansive definition, the increase in consumer borrowing would contribute about 1/10, up to 1/10 of the increase in consumption so it is something but not everything.

this is not a debt fueled consumer expansion we are dealing with. we should notmean focus on the issue more probably with our institutional responsibility, but the bigger ,icture is where you start around household' willingness to draw down savings during a period where real incomes are being squeezed. the last thing i will say is that one of the reasons why they might want to do that is that we are going through a period for a few years where we have higher inflation because of pass-through of a weaker exchange rate. too will pass so households make take a decision to look through that, but it is a big judgment. >> governor, theresa may has

laid out some more clarity on her position for negotiations with europe. i just wondered whether, obviously this has serious economic implications in terms of membership to the single market, and i wondered how that position may affect your forecast and whether that has been factored in already. gov. carney: the short answer is we have not changed our judgment for the purposes of this forecast, about the long-term restingplace for our relationships with your and other potential trading partners. the reason we have not is a couple fold. the first, the prime minister laid out really a range of potential alternatives. at one end of the spectrum is a walkaway position equivalent to a wto type of position, and the other end of the spectrum was an ambitious, bold, comprehensive

trading arrangement with europe, and also not being in the customs union will have customs union like characteristics potentially. that is a wide range, and it would be false precision for us to try to narrow that gap before the negotiations even begin. on top of that, as you are well aware, the country has begun initial exploratory discussions with a range of other countries about potential new trading arrangements to follow after the exit from the e.u., which gets me to my next point. the bigger impact of all of these is offstage, if you will, from this forecast. in other words, to actually take effect in all likelihood, not certainty, beyond the forecast horizon. and the effect on supply

particularly is predominantly determined, at least in the 'udgment that we make, by firms changes in response. at least the uncertainty around us potential arrangements, has a pretty material impact on investment. it is about one quarter lower than it would have been according to our may forecast. that has some impact on productivity, some impact on the capacity in the economy, and therefore on inflation, but those are dwarfed by the ultimate impact on the economy, the ultimate deals that are struck. it would be false precision to refine it, is our judgment. i suspect that will continue to

be our judgment as the negotiations progress over the coming years, because one thing about trade deals as they are never agreed until everything is a great. it is not clear we will be that much better informed on the final outcome. and the key judgments we will have to make is about the scale of business reactions to those possibilities, and what it means particularly for productivity and also for hiring. governor, this week we had a rather unprecedented intervention from president trump's economic advisor which moved the currency market. i wonder if you could reflect on whether it is becoming more difficult to be a central banker when political commentary is becoming more and more influential and unpredictable,

and specifically whether you think it is right for politicians to criticize the government's currency policies. well, let me see how i can get out of that. that in manysay is respects, we are coming to the last seconds of the central bankers' 15 minutes of fame, it is a good thing because we are moving more -- in this forecast in my opening comments i mentioned fiscal policy a couple of times. for the u.k., a noticeable increase to growth. in other economies, a rotation to fiscal policy. that is a more balanced policy mix. structural policy is becoming more important, trade policy

obviously important here and elsewhere. just in general that is a much better balance then to use the overused phrase, the only game in town being central banks and monetary policy. this is positive so i'm not going to quibble about specific inments at specific times, what is a generally positive direction of travel. mpc, our job the is to take other policies as given and optimize around those, or respond to those policies, and that is what we will do whether it is u.k. policy or policy of our major trading partners. three things happening in the united kingdom -- two things happening in the united kingdom. one is the news conference and doesther is in the state

in parliament where david davis as iting a statement published its brexit plan. are looking to reach a reciprocal deal with their , the earliesters opportunity for e.u. citizens' rights to remain. we are going to cross back over to the news conference. living standards start to be eroded in the next years, isn't it likely they will try to push up rages as they are in the u.s.? gov. carney: it is certainly possible and the question is whether that is the most likely scenario. i will say a couple of things specifically on how we made our judgments on the labor market. we have been looking quite hard at the wage puzzle in the u.k., and we have examined a series of

candidate explanations which helped explain part of it but never the whole. the composition of the labor force was one element. the impact of inflation wasctations on wages another element, but even controlling for these factors we had big so-called wage residuals . if you took our forecast in 2015 and 2016, they overestimated by 1% to one and a half percent. these are big differences, that is part of how we got to the judgment. where wage pressure is, and there is a variety of -- for variety, of surveys on that, we feel comfortable as a central expectation.

the one piece of information i will give you on the other side to balance it, and i would not overweight this, our surveys wage -- i would not overweight that because that is only a subset of the market. it has been a pretty good indicator in the past, but of course any time something is a good indicator in the past and you mention it at one of these press conferences, it is by definition no longer relevant. we will stop doing that survey from now on. we are picking up -- we are not picking up a lot of that yet, and so i think the point, and i on thess to ben specifics, but the point we were trying to make, we will be looking quite closely at what happens to regular pay because we have made this big judgment.

if a world transpires like you are suggesting, that will have could well have implications for the stance of policy. how did we get there? >> i do not have much more to add. is main piece of evidence the relatively subdued wage growth over a number of years. we have talked about this as a committee as long as four or five years ago, tension specifically the possibility of a lower equilibrium rate a year or so ago, and again last may. now that we do these regular, annual assessments we have the opportunity to look at it more in-depth. you are right, the main piece of evidence which suggests risk in our view in the direction you indicated, and the level of vacancies, this is a chart showing those, we think that

these mitigated somewhat, and we will go into the technicalities about demographics in the labor forces including a gradual increase in average educational attainment. the real reason is the low, or lower level of wage growth and we forecast. reference to ath point you made about rising inflation of the response to that, that is clearly a risk although this is a slightly different situation from one in which the inflation is domestically generated. if you get a rise in prices, the benefit of which goes to british firms, they can afford to pay higher wages. in 2009,ase, as it was it's import prices that are going up. the benefit of that does not go to british firms, and indeed if you look at the survey of the

asians to which the governor referred, they do site that is one of the factors. they say we simply cannot afford to compensate everybody for the rise in import prices. risks around this and that is widely flag it is one of our key judgments. there was a range of views on the committee about how low this number should be, and it is a pretty important judgment. i think the risks on both sides say we will be watching pay growth, notably regular pay growth, the underlying rate of pay growth very closely over the next couple of months. we do expect an acceleration, but not by that much. governor, you have conceded the main reason, dominant reason why the banks' forecasts were

wrong was because they did not foresee the consumer carrying on spending after the brexit vote. how worried are you about the banks' misjudgment about consumer psychology in that way? this means that you should have a fundamental revisit of the banks' models? most people after getting a big call like that wrong would naturally be nervous about the next call they have to make. how nervous are you? gov. carney: i am not. summer think the -- last we were in pretty exceptional circumstances. a big decision had been taken, did not yet have a clear course for how to implement the decision from the government. the government was just being formed. business sharp fall in

and consumer confidence on any survey, on any measure. and it was -- and you have a sharp fall in financial market measures as well. ofthe unidirectional view the near term, in terms of survey measures, there were people who had different views but if you had any sort of aggregate measure whether it was surveys, asset prices, said the same thing. , and on topuestion of that and understanding there would the a period of adjustment that necessarily would happen, and that in and of itself would be likely to weigh on demand as businesses had to hesitate in terms of investment, something we are seeing, and could have effects. the judgment of the committee, which has re-met for exactly

such circumstances, that we should think about balancing the trade-off, took the judgment which in retrospect we think is correct because we have just confirmed the policy stance even after having very welcome news in terms of the strength of the consumer, and improved global economy, a fiscal response from the government. we still have the same policy stance, so it is hard to sit here and say, we should not have done that. it, and i'mdoing not going to overstate the case but there is a case that we economyupport the during an important time, and very importantly given the way monetary policy transmit or the economy, we will help support the economy as the squeeze starts to come in.

the squeeze on real incomes, starts to calm in this year and in this yearcome and next year. a degree of uncertainty about the ultimate outcome is elevated because it will be in the middle of negotiations, and so businesses may be hesitating. we are seeing some evidence of that. it is entirely understandable. support fored that that period of time. and we can always adjust holocene from the position, but from theust policy position but we would be adjusting from a position of strength where the economy has grown, more people are in work and getting paid more. bet is a far better place to . the last point here, which is very important to stress, is that we are going to go, we are

just starting this period and we think this month will be the month inflation gets back to target, 2%. it would only be there briefly because it is going to go above target. it is going above target because the exchange rate has fallen 18%. it predominant reason why has fallen 18% is because we are going through this process of leaving the european union. that is the market's judgment at present of the appropriate level of the exchange rate given that process. the market will constantly revise its judgment, and in all likelihood -- i should not , but certainly circumstances where better arrangement struck with europe, better arrangements struck with other countries the adjustment par says nusra road. the exchange rate -- adjustment rate moves forward. but given that judgment of the

market, given the real change change, thateal fundamental change that is in prospect we took a decision to help support the necessary adjustment during that, and it is still valid today because we have just confirmed the appropriateness of the stance. we have laid out potential conditions around how we might, if we had to change what would be particularly informative for that? about the forecast last year, unfortunately we did not need only the experience of the second half of last year. forecasting is a hazardous business when you have done it as long as we have. i would make a distinction, however, just because you raised the question of models, between economic models which we use for

forecasting over the medium-term , and the stuff we use for more short-term forecasting, which is very different. it is based on the survey measures because they generally have a reasonable correlation with subsequent moves and output . those felt extremely steeply in july, as steeply if not more so than anything we saw in the financial crisis. that was overwhelmingly the reason for the downgrading growth we made, and other forecasters, almost all made a more aggressive downgrade. a few forecasting a contraction in gdp last year, we aimed off but we did not aim off by enough. in the forecast, we thought if we were to get severe weakening, how would it happen? you fit bits of demand into it, but we do not use economic

models to forecast in the near term and/or do forecasters. those surveys bounced back, and looking backwards it looks like consumer spending, strong consumer spending growth surprised us most relative to the forecast. they were extremely volatile. and we take a look at the forecast regularly, the forecast performance. we are doing another annual assessment in may, at which point we will probably look again at the statistical evidence regarding the links between the survey and the output. sued champ from the telegraph, just a follow up on your comments on consumer debt, he said this was not a debt fueled consumer expansion and you outlined the reasons why. on the other hand, one of your scenarios is that consumers

continue to buy things on credit. you sit -- you said at a recent -- what with that big call involved, and is this ultimately a question for the fpc and not the mpc? gov. carney: i think from a first order, yes, it is an fpc or pra call. i think from the first dance, is is to ensurestance whether it is mortgage underwriting, commercial real estate underwriting, or underwriting of consumer credit if the standards have been appropriate, and if they aren't, that they be maintained. pra is something that the regularly reviews, and from time to time can do see maddie reviews of such issues. from an fpc perspective, it is

on a longer time horizon. if that first point is satisfied and you are confident that the financial institutions are adequately capitalized against , both because of capital and underwriting standards, then the question becomes, is the economy growing bigger and bigger group of people who are heavily indebted whenwill face real trouble the interest rate cycle turns, and as a consequence of that amplify the business cycle so be cycle.monetary policy it becomes an issue for the mpc as part of a variety of indicators and drivers, or supports, to broader consumer behavior, as part of broader aggregate demand relative to supply and inflation.

it, bute we care about it starts earlier up the chain. , would suggest at this stage it is more of an issue for the pra and fpc than the mpc. there have been a number of questions quite rightly about household spending, the track of spending relative to savings, the risk on the upside and downside to that. we have been seeing upside gave your since august. -- upside spending since august. it could go the other way which is why we are flagging this as a key judgment. jonathan: we are going to step away from the bank of england's news conference as they wrap up their february inflation report. you can have full coverage of that on live go. raised todp forecast 2%, key rates and monetary policy unchanged.

it is that raising of the gdp forecast that according to the bank of england makes it harder to tar -- tolerate higher than average cpi. heading toward the houses of parliament, the brexit secretary david davis presenting the brexit paper. that, 75 pages along on financial services, seeking the freest financial services trade agreement with the european union. the u.k. is looking for a reciprocal deal with their european partners. i want to get you up to this dish up to speed on the market action. -- up to speed on the market action. futures are down on the s&p and dow. if you switch out the board, the action in the fx market, a weaker dollar as we slide to an 11 week low. everything in the g 10 space

with the exception of the pound, a weaker pound at 1.2551. i want to cross over to the bank of england just outside on threadneedle street. nejra cehic is with us. the tolerance for inflation, are we reaching the limit of that? that awe certainly heard number of members of the mdc were increasingly concerned about above target inflation, but what was interesting in the forecast was yes, we got the upgraded forecast gdp for this year, but the forecast for inflation remaining largely unchanged. i think the reaction in sterling says it all. we wereto this meeting seeing sterling rallying and if anything, there were questions over whether we would see a hawkish tone struck by mark carney. that has not happened today.

he has very much maintained this neutral stance, and if you are in the markets looking for any signal on future direction of policy, you probably did not get that. mark carney said it one point very clearly, this is not a signal, when outlining some of the issues that might lead to a rate rise. the big surprise really was that inflation outlook not changed for 2017. alix: i am taking a look at the probability for the united kingdom, and now we do not have a 50% chance of a rate hike until 2018. mark barnett -- mark carney brought them a little bit of -- brought them a little bit of moving room, suggesting there is more slack and wages will not pick up. nejra: that slack question was interesting, and it has been addressed in the news conference. we heard there were differing

views on the level of slack in the economy, the natural rate of employment, with the takeaway was that employment could fall further without being in upside risk to inflation. that was one of the things talked about in the conference, and also brexit of course was addressed as well. carney's main point was, we are at the beginning of this brexit journey. there will be many twists and turns and there is a lot of uncertainty ahead. one thing that surprised the committee was the resilience of consumers since the u.k. voted to leave the e.u. david: mark carney may not have told us where he is going but he told us where to look for indications. he emphasized consumer spending and whether income would hold up or not is key to where he is headed. nejra: exactly, and that is something the bank of england will be keeping a very close eye on. they are clearly watching the

markets, because one thing mark carney said is these forecast were also taking into account the market expectations they have seen up until here. of course store lang dish sterling plays an important role -- sterling plays an important role. since the last meeting in november, we have seen cable at least stabilize somewhat, the pound against the dollar. in theng that i noticed blog i was reading as i was listening to a press conference, jeff black, one of our reporters saying carney almost stopped short of saying he is expecting the sterling rate to pick up. jonathan: nejra cehic from outside the bank of england, the take away after the decision to vote to leave from the e.u. is that we would have a fall in the pound and the bank of england would take a leaf out of the mervyn king playbook, leave inflation hot.

how hot is that? mervyn king had almost 5% in his tolerance was not tested. david: in fairness, we have had the markets show so much resilience to so much shock, and what you are seeing is, it is not that bad. right now it looks pretty strong. there is currently this neutral stance that rates could go higher or lower, but real incomes will be squeezed by higher inflation. u.k.'sto bring in reporter in london, a 75 page brexit paper, if you want detail will you be disappointed? >> it pretty much follows the 12 points theresa may set out in her brexit speech last month. there are a couple of points that provided a little bit more detail, and reiterate that slightly threatening tone she had, particularly toward the end of her speech.

on financial markets, the government will seek the freest possible trade and financial markets with europe but also says "it is in the interest of the u.k. and e.u. that this should continue to avoid market have got ton." you remember that three quarters of currency in training and interest rate derivative trading happens in london. that is the u.k. saying, you need us as much as we need you. alix: they echoed that when it came to those citizens of the e.u. living in the u.k. and vice versa. what did they say? >> that is one point that could be joint -- quite troublesome for the government because a lot of labour and tory mps have demanded clarity. they are seeking to push the claim -- the blame to the e.u. this also concerns many u.k. residents in europe. , and also u.k. nationals.

what they have said is we want to bring you clarity. yet,e not able to do so however david davis in parliament set about 10 years of thinksinutes ago that he this is a done deal and some sort of reciprocity would be possible. jonathan: the demand for the brexit paper ahead of the vote and triggering of article 50 was not from the public or investors in the city of london. it was largely from the opposition, and the opposition within her own party. will they be satisfied with what they read this morning? >> in a way that does not matter so much. what is important is that the page has been published. this may seem like a procedural step for a layman, but what that does is provide a parliamentary document that aims set out in paper, and it is a reference port mp's can go back to -- reference point mp's can go back

to as they debate negotiation. jonathan: thank you very much. the u.k. government publishing at 75 page white paper. what better than to have someone from the german government sitting around the table and helping us go through things one by one? david: we can do that. jonathan: coming up, michael cb you deputy's leader to discuss brexit, trump, and the global rise of populism. all that and more coming up in new york city. for our viewers worldwide, this is bloomberg. ♪

jonathan: from new york city, this is bloomberg daybreak. let's get a check of the markets. futures are negative, down a quarter of 1% on the s&p.

the u.k., outperformance coming from the ftse 100, no doubt helped by what is happening in the fx market. as we get some more data, on the united states. alix: more data on jobs. lower than estimate, the week before revised, up slightly, but continuing improvement in the labor market is a theme we have seen after that keller adp number. non-productivity also rising. adp number.t killer non-productivity also rising. productivity picking up due to labor costs coming down slightly in terms of estimates. squeezing, productivity rising, labor improving, those

are three things we will be hearing from tomorrow's jobs report. 175,000 for the month of january would be up from december. full coverage on bloomberg. we get to the topic of brexit. the u.k. publishing a 75 page brexit paper to discuss -- paper. to discuss, joining me is the democratic union deputy leader. we get to take the 75 pages and take them point by point and negotiate with you. >> how much time do you have? jonathan: we will start with financial services. in our new strategic partnership agreement, we will be the freest possible trade of financial services between the u.k. and eu member states. what is the chance of that happening? issue, we have

four freedoms in europe and one is freedom of labor movement, freedom of good movement and services movement -- goods movement and services movement. nonean have all four or and that is one of the problems we have with the u.k. i wish that they would stay in and make an exit out of a brexit. they want toing have some kind of cherry picking and it will not work. jonathan: do you appreciate the risk from the european side that if the city of london becomes a financial center, there are systemic financial risks for europe? michael: i don't think so. europe is strong enough as its own. i believe europe can handle this. -- foreignor sure is ands have to think it over

move forward to any european country. , anthan: one of the issues appreciation and that means funding costs from many european companies and governments as well could actually rise. michael: at the end of the day, it will be the same. so much competition going on, we are positive there is no big rise. alix: the other concern is that the infrastructure is not set up in those dizzy -- in those cities like dublin. you would not be able to have the smoothness that you did, before. long would that take? would there be some kind of adjustment period? what would germany need to do to make that work? michael: the negotiations will only start in march if they are doing article 50 and that is the

periodnd nothing is in a of two years, going to happen, so they have two years to adjust to whatever is necessary. competition is going on, which is good for the banks, at the end of the day, we will find fair solutions. alix: on the one hand, it could create huge opportunities will stop how are you going to beat paris and have more frank's -- have more banks come to frankfurt? michael: frankfurt is cheaper than paris. housing is cheaper, real estate is better. infrastructure is fantastic. the future ecb and capital of frankfurt is having the eba which is an authority that is still in london, but the eba has to move out of london

and is going to be close to the ecb, which is normal and necessary. there are a lot of advantages for frankfurt. of frankfurtmayor and doing advertising, but it is a great city. david: the underlying theory behind the european union was free trade was a good thing for both sides. you will not have all of it, anymore, but will it be germany's gold to preserve as much of that with the u.k. as possible, whether it is financial services, customs, people moving back and forth because it would benefit germany? michael: you will see 3.1 million europeans out of any european country living in the u.k., at the moment. are these people moving out? do they need to? they have jobs and they create jobs. we have a lot of german

companies working in the u.k. having a big plant over there and they are producing a car called mini. i am sure it is familiar with you in the states. it is made in england and assembled in england. there is a lot of bilateral trade and i think the u.k. cannot just stop it. david: similarly there are many britons living on the continent. working out reciprocal arrangements so britons who live on the continent can continue to live there and emily, europeans living in the u.k. could continue to live there. michael: that is ok. the free movement of labor means every european has the right, even if they are not living in the u.k. at the moment, to work in the u.k., in the future. theresa may does not want that, at all.

the negotiations have not really started, because they can't. a lot of people are asking how ugly they can get. path traveled often is to punish a country that has not followed the rules. that the uk'sse to be punished michael:? we don't want to punish the u.k. -- punish? michael: we don't want to punish the u.k. there will not be a second referendum, but on the other hand, if we start to allow one country to have special treatments, then everybody will say they want to have this or this. the whole thing will fall apart. jonathan: it starts the argument why wouldn't you seek to punish the u.k. to set an example for others who might want to do the

same? michael: it is not punishing, but we have four freedoms and these are sticking out, together. alix: because you are seeing populism crop up in places like france, do you need to set a harder line to ward off that kind of behavior and rhetoric? we have a lot of discussions going on in europe, in france in particular, you mentioned the pen -- we have elections in germany, in september, coming up and how strong they will be, it is a good question. the first election, this year and there are some right-wing movements in order to avoid -- europe to make sure that

is standing together and doing a good job, together and in particular, i must say looking into the friend situation -- the france situation, it is necessary that we stay together because an individual country in europe is too small. together, andks speaks with one voice, then it is easier for us to negotiate. alix: a perfect segue to what we are talking about in the next segment. great to have you with us, michael fuchs. coming up, we talk about the rise of global populism and president trump. how do you do that with a president trump with -- with a president trump in the white house? we will break it down. this is bloomberg. ♪

emma: this is bloomberg daybreak. --ing up in the next hour, on global political uncertainty. david: this is bloomberg. germany is one of the staunchest allies and biggest trading partners that the u.s. has, since final trump's election, this important relationship has been put under a harsh spotlight, first under the harsh -- first by president trump and

just this week, when peter navarro gave an interview to the financial times saying quote, a big obstacle to the european proposed trade deal is germany, which continues to exploit other countries in the u.k. -- in the eu with an employee -- implicit deutsche mark that is grossly undervalued. michael fuchs is still with us. from yourp-to-date, point of view, from berlin, where does the relationship stand? michael: you have to know, germany has always been the country saying that the european central bank has to be as independent as possible. we don't want to have influence on banks. , there habit of germany is no influence of anyone in the government on the ecb and the ecb is the one responsible the currency.

on the other hand, it is a question of values and competitiveness. germany is pretty competitive in the eu, in the eurozone and that is one of the reasons we have such a great surplus. we do not have a surplus with all countries. david: but a healthy one with the u.s., and with the new president, it is clear he is picking down a list of countries that are a trade deficit. put that competitiveness you at vulnerability to trade sanctions from the new president? michael: the new president has to recognize that germany is much stronger in the u.s. than vice versa. we have a lot of companies working in the u.s. look at the big car manufacturers. example, they are

the biggest exporter of cars from the u.s. into europe. from your point of view, is part of the problem educating or even spending that the new president understanding that the jobs he wants in the u.s. may lie with german companies? michael: i do not dare to educate a new president. there is quite a lot of bilateral discussions going on and foreign ministers in washington have to find ways to ideass or discover common and we both need each other. many cars and the states have spare parts in german cars.

after thet inauguration, you had trump saying the eu is basically a vehicle for germany. he predicted the eu's possible disintegration and other members would leave as well. i noticed you laugh and say we are important to each other, but that is not the rhetoric we are getting out of the white house. michael: the eu is necessary for each and every individual country in the eu. alix: how would you make that point to the head of states when you have officials like navarro and trump arguing against that? michael: they may argue, but the situation is a different one. the eu zone has different values and some countries have a trade surplus and some don't. at the end of the day, it is going to balance each other and we have each other, in europe. greece.what we do with

greece would be out of the euro, immediately if we did not have a lot of help. jonathan: some people argue that would be better for greece and at the bigger -- biggest winner out of -- out of the eurozone has been germany. unfortunately for the 58% of our exports are going into the eurozone, not to other countries. 42% go to other countries such as china and the u.s. it is not only that we are strong in this field, but we are strong in other countries. fuchs, joiningel with -- staying with us. coming up, deutsche bank shares tumbling, the stock recording its worst day in four months. we spoke with the cfo a little bit earlier and we will bring you that. that is next and this is bloomberg. ♪

jonathan: a bank that has dominated the news flow for the last couple of months, deutsche bank with shares falling the most in four months after earnings missed estimates. matt miller joint -- spoke with the cfo and joins us now. seems to be the push back over the last 12 months. the market still does not buy it. matt: know, and the shares are getting punished in frankfurt. it should be said they are still up 75% since the bottom, last year. i spoke with marcus schenck and this is what he had to tell me. marcus: we never ruled out any instrument in our toolbox, the primary tool we want to use is organically generate profit and with that, capital.

well inexecuted quite the last 18 months, which will free up capital. or if we see value, we could in principle also deploy the tool of raising equity. we have made it very clear where the focus is. if there is any change to that, you are the first i will let no. -- let know. matt: he has raised the possibility of an equity sale, saying for now they do not need it and that deutsche bank is heading back toward profitability after the massive loss in the fourth quarter and all of 2016. the ceo came out and said they will make a profit in a year. it's the bond trading or the bank that a lot of people focus on when they have problems. it has been where the

outperformance has been. what about that particular part? matt: it should be said that not only did they miss expectations, we are looking for a 35% growth and fixed income trading, but they actually missed competition in the u.s. by even more, because we have seen 43% on average from the top five banks in the u.s. the problems, they told me was they have so many issues from fordoj and the initial ask $14 billion to the mirror trading issues in the last quarter that it has eroded confidence for institutional investors. they have higher funding costs which has price to them out of the market, so it really hurt them and he told me that it was the worst quarter they had in 10 years. they do say they are aiming to come back and they say president trump's policies in the first couple of months have really

helped them on the market side. they have not had any issues regarding the travel ban. although they embrace diversity and inclusion as part of the deutsche bank dna. they have not had any issues with their own employees having trouble troubling. jonathan: matt miller, great work. the stock down by about 6%. michael fuchs is still with us. september of last year, deutsche bank crashing, a lot of people nervous about germany's largest bank. how nervous for you? michael: not too much. we trust that deutsche bank at the end of the day is going to make it. the ratio has rose to 11.9%, which is a good sign. there is enough capital available and i am positive that deutsche bank is coming out of this situation, pretty soon.

jonathan: one of your biggest companies within germany, the very existence at the mercy of authorities in another jurisdiction within the u.s. do you think those authorities are going to be a whole lot tougher on companies from germany? michael: i'm pretty sure that we do a better job than we did. they have made mistakes, and they have been punished. one of the big companies, volkswagen, they were very much punished. all the other hand, they are very strong and they are a world leading company as far as car sales. for the first time, they beat even toyota. -- the german government missed an opportunity to recapitalize deutsche bank, early on the way that the united states did. that is pretty much received

wisdom on this side of the atlantic that the german government missed an opportunity to clean up those balance sheets. what is your response? michael: we don't like it. germany wants to stay out of the business side. our government wants to stay out of the business side and it is a good point. we don't want to recapitalize, they have to do it by themselves. ratio is notity too bad. it is better than ever before. it looks like it rose by itself and if they can do it themselves, it is much better than if the government is stepping in. jonathan: to wrap things up, the question i asked earlier, this a administration does not care as much about the european project. tell me who you are meeting in the u.s. and what your response

would be to those that don't care about the future of the european union. michael: it is necessary that we stick together, because we have so many risks in the world. you can see all the terrorist attacks. we even had one in germany prior to christmas. in more countries that are close together and fighting this risk, patrolling this risk, then it is necessary that the united states and europe are partners. jonathan: michael fuchs, thank you very much for your time. counting down to the market open, next. this is bloomberg. ♪

jonathan: welcome to dupe -- bloomberg daybreak.

30 minutes away from the opening bell. the market looking like this. we broke a four-day slide on the s&p 500. down a third of 1% on the s&p 500 and the dow. the ftse up 41 points. sterling weakness, the bank of england on hold. the neutral stance remains, but we roll over on the pound. elsewhere, it is a weaker dollar story. we have to talk about facebook, crushing when it comes to earnings. some of these numbers are huge. earnings were 7% among -- above consensus. revenue grew 31%. daily active users was up 18% year on year. more people checking facebook everyday and more people doing

it on their phones. mobile ads making up 84% of total advertising. facebook warning of potential slower growing in 2017, but those numbers coming in strong. taking a look at mead johnson. getting effort -- surprise bid for $16.7 billion. a potential bidder had been nestle or grupo danone. issues as wet watch into the open. ralph lauren -- stefan larsson who came to run the kind -- company is now leaving. he came from old navy and was supposed to be focused store and help ralph lauren turn it off around, but now he is leaving. this is overshadowing a quarter that was not that bad.

the third quarter topped estimates. washington has been largely focused on capitol hill and the confirmation hearings for president trump's pack --. kevin cirilli joins us now from capitol hill and it is not to be is a product that a lot of democrats are resisting these picks, but now we are seeing republicans showing weakness in supporting the president. take us through what is going on with the education secretary. kevin: this caught republicans and the trump administration by surprise when two top republicans came out against betsy devos, president trump's pick for the secretary of education. the white house is saying that all the republicans will stick together, but clearly if they get one more republican to break away, this felt a lot of trouble and not only only -- not only for betsy devos, but others --

other nominations as well. david: take us through the politics. why would some republicans vote against the president on this pick? kevin: i spoke with a senior aide to a republican senator who said that right now, the political capital that the president is using is holding strong, but that it will not hold strong for every single member of congress simply because a lot of these more moderate members of congress, particularly coming from states where folks are thrilled that president trump won the white house. president trump has yet to fully utilize his congressional outreach operation. yesterday, boris epstein, one of the senior communication strategist at the white house was on capitol hill with former senator kelly ayotte of new hampshire, working with lawmakers to introduce judge for in the judge gorsuch

hope to keep everyone in line. david: is this where the relatively low or modest approval ratings for the president start to hurt him on capitol hill? kevin: yes, particularly when you take a step back and look at the past week. starting over the weekend with those immigration executive orders, and then continuing into what many of capitol hill calling successful rollout, but the uncertainty surrounding the strategy. we are heading into next week where repealing parts of obamacare will be a focus. behind the scenes, the republican operation apparatus is up to get the tax reform. republicans are worried that the uncertainty and political risk could hurt their efforts to work in tangent to accomplish key policy goals despite having the majority. david: thank you so much.

jonathan: sticking with president trump. earlier, we spoke with the ceo and the core and he gave investors this morning. >> there is a great saying on wall street. b the rumor and sell the newsuy --buy the rumor and sell the news. seenrsonal view is we have trumpak of the initial euphoria. is then: joining us now ceo and cio of valeant. -- i'm so bullish i feel uncomfortable. do you feel the same way? >> i feel uncomfortable that other people are feeling bullish. i agree that we have had a lot of speculation about trump, and

much of it still needs to play out. political uncertainty as we are westly seeing, within the alliance, that is not good for the markets. deglobalization with trade barriers and tariffs and the like. that will put pressure on margins and it will increase prices for consumers. that will be bad, and the long-term and putting pressure on corporations to relocate into the united states where it is more expensive to produce is not going to be good for profits. i don't think the environment has improved. i think we're going to see a lot of volatility. jonathan: let's talk about what you expect. expecting -- what we see on the screen almost daily is the meeting with ceos, being told to relocate, being told to hire in this country.

that is what got the president elected. do you expect a capitalist side to come around, as well? >> in what sense? jonathan: regulations to be cut, as he said they would be. >> perhaps. butn't want to speculate, one needs to look at what is not being potentially said, but what is being done. alix: is there is a short-term, long-term trade to be made or is that done? they ran really far on the pro-energy potential policies. oil is not high enough for them to make the kind of money investors want them to. can you play that dynamic? >> i think so. one has to look at the u.s. being alone, at the moment. the rest of the world seems to hold to this notion that the climate change is not a hoax invented by scientists but is reality and therefore country such as germany and australia

and the u.k., efforts to defaults allies will continue in the long-term and that cannot be good for the energy sector. alix: can you explain what a short-term, long-term trade would be? i think volatility is the key , and that can be in pretty much every sector. particularly, currencies. in the absence of global coordination, a lot of the adjustment in the global macroeconomic environment will take place with currencies. we have at 30 years of currency stability and we can play that. we can play volatility in futures and options. we can take out protection when we think the vix is too low. clearly would think volatility is going to go up. -- we think volatility is going up. the dividend story is par for everyone's course.

paymenthat is the down that the trump administration could make that would persuade you that they will deliver on their promises? is it tax reform? is it infrastructure spending customer -- infrastructure spending? they got back to engaging with the national -- international order and rather than try to set allies against each other, start to cooperate again, because right now, the u.s. is going in the other direction. david: that is awfully difficult for this new president, politically. he ran on a platform that essentially said i will not do that. he has to do something politically that will play to his base. are the things like the regulation or corporate tax reform, or is that them enough? >> maybe enough for the electorate, let's examine these claims. they say we want mexico to pay for the border wall.

how do we do that? by putting on tariffs. who will that hurt? u.s. corporations and u.s. consumers who will pay higher prices for these prices that for these products. who is paying for this wall? i don't know how long that will work out before somebody wakes up to the truth. david: undress will be staying will be-- andreas staying with us. discussed the fed and the economic impact of president trump, next. this is bloomberg. ♪

david: this is bloomberg.

we are showing you a live shot of president trump appearing at the washington hilton in washington, d.c. this is an annual ritual. in the markets, we are watching the dollar weaker against all other currencies except for the pound. the fed signaling it is in no rush to raise interest rates. according to bill gross, resident from's policies could feel a strong currency and that is what he is worried about. -- president trump's policies could field a strong currency and that is what he is worried about. the global marketplace and global countries are affected, because they have trillions of dollars of u.s. the nominative debt, so a strong dollar is basically a threat to global growth. joining us is -- alix: joining us is andreas utermann and jason

furman. good to see you on this different job you have here. what do you think about what bill gross said? that ifhere is no doubt what you are talking about is fiscal stimulus, hawkish on monetary policy, terrace and border adjustment, every one of those is going to help strengthen the dollar, and a stronger dollar is going to raise our trade deficit and create a challenge for manufacturing, so there is a real tension. of trump's policies about strengthening the dollar and making it harder for manufacturers. interventionbal

from peter navarro and him is unlike anything we have seen in a long time. typically, you get a weaker dollar. which one do you see winning out? jason: i don't know. it is not entirely clear how it is going to work itself out. i am a little more skeptical that we will see a large fiscal stimulus. i am uncertain about what we are going to see in terms of tariffs and border adjustment and the like. it seems like the market has moved a little bit away from believing those types of policies are going to happen and a little more toward believing some of the talk about the weaker dollar. at the end of the day, it is the policies that matter and what we see on fiscal is really going to affect things much more than any of the words we are dealing with, this week. david: andreas, let's assume that some of it will happen.

we have never seen fiscal stimulus tax on the end of the business cycle. what would that mean if it does happen? andreas: it would mean a continuation of the cycle. would beith jason, it a much stronger dollar, because currency moves heavily responded to interest rate differentials. the central banks that went into qe first half weaker currencies and the ones coming out first half stronger currencies. that will be the case for the u.s. dollar, as well. as long as the fed remains independent and can pursue its policy independently from political interference, but i think it will leverage a stronger dollar. david: jason, same question. what would youn, project as to what would happen? i am still pretty unsure,

so i don't want to overstate my confidence. if we had a large degree of fiscal right now, it would take some of the pressure off monetary policy, all financial markets and that would not be such a bad thing. if it raised medium and long-term deficit, that harm would outweigh any short run benefit we would get into the fiscal expansion targeted high income households, it would be low income banks in the german economy and go against what we should be accomplishing as a society. infrastructure would be better because it would expand the productive capacity of our economy. i have not seen a plan put forward by the administration to put new federal dollars into infrastructure spending. jonathan: we spent 17 minutes talking about risk and downside risk, but the markets have been outperforming. risk assets have been outperforming. a --ifficult is it to put

put together a portfolio, right now? andreas: it is tricky. if finance has taught you anything, it would be diversification. todayon one single story is more dangerous than at any time, previously. when he to be very diversified. look at the liquids and try to pick up some liquidity and some term. why not go into emerging markets, debt, currency. diversification is the key, to try to get through this whole ability. jonathan: you mentioned over the last couple of months, nothing has changed, but the data remains.-- has your portfolio changed? andreas: over the last three months, we have become more neutral.

we are concerned about the fact that volatility implied by the vix appears to low relative to the risks we have seen emanate. i would not agree with you in that nothing has changed. political risk has increased significantly and the market risk should increase and it has not been priced in. jason, the first friday of each month, you join us outside the white house and we talk to you a certain way because you are an insider. you are an outsider, now and now we get to play a game. yours.e to give us jobs in the00 unemployment rate goes back. jonathan: barman in the game. alix: that is a prediction. andrea zuckerman -- andrea

zuckerman -- andrea scooter mann, thankdreas uter you so much. this is bloomberg. ♪

alix: one stock we are watching and of the open, ralph lauren. the ceo calling it quit -- quits. news of the departure caused a selloff in the company, pre-selloff -- premarket. what happened? >> that is still to be determined. they were pretty open, saying they think we need to turn around this company, we just disagree on how. the -- that weic

got was they agreed on changes, but not on the phasing. to me, it means the founder was , waseady to part ways, yet not ready to hand over control of his company to somebody else who he may not have agreed with on a creative direction. alix: the quarter was not that terrible. does that mean we are setting up 2017 for not a great year? ,> they were doing pretty well the past year or so, the results were kind of what people were expecting. leave, it larsson to was not a your plan is not working for us type of decision. this was a big shock. anathan: you have to find replacement and given what is happening here and a lot of people have been watching, who would want this job after they have seen this guy leave so quickly? >> or you don't find a

replacement and ralph lauren takes over for another year or two. before stefan larsson came on, his son, david lauren who held a leadership role for some time, would be the one to take the reins. when stefan larsson came over, they thought that is not bode well for david lauren, so maybe he can come back and make an appearance. you are right, who wants to take over when stefan larsson could not even do it? david: is in the question whether ralph lauren, the brand celebrates ralph lauren the person? it would not be the first time a brand identified well with a person -- can it succeed him as a practical matter?

>> there are changes stefan larsson brought in that will help the company. closing stores, getting close to market, and i think ralph lauren the person is really good at and has need -- made a name for the creative side. it will be good for him to take over and bring that company to the direction he sees. what does this mean for this company who has not managed to do it with him, and the past? david: how critical is the switch to digital? >> it is very critical for the company. it will be make or break. alix: where does larsson go now? >> he got pretty well compensated, he left with $10 million. he is good for the next couple of years. he is only 41 years old, he has a big future ahead of him. jonathan: shelly banjo, thank you very much.

ralph lauren stock is one to watch. up next, we have the market open. on offer, down by 2/10 of 1% on the s&p 500. big, yields lower by three basis points. in the fx market, a larger, weaker dollar story. the dollar rolls over. it is the pound that is the exception to the rule. down by a tenths of 1%. the market opened in new york is next. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg daybreak. moments away from the opening bell. futures are negative. down 42 on the dow. we did snap that four-day slight.

we are looking like we will roll over, and the open. the bell rings in new york. 23 hours away from payrolls, treasuries -- it is a weaker dollar story, broadly with the exception of that currency pair. it is a weaker pound story. alix: a little negativity spreading over u.s. markets. the s&p off by four and the nasdaq opening lower by 2/10 of 1%. this is the worst stretch for stocks since before the election, but we still have yet to have a 1% close on the downside since december 7. some of are up 5%, so the underlying fundamentals coming in more positive. that macro confusion still raining on markets. we are watching automakers and auto parts. delphi up by 4%.

it had earnings beat and new technology for self driving cars. story --, a different auto leave -- autoliv, a different story. it'll reinvest more money into self driving an electric technology. we want to throw into has luck, because it is fun -- into that who want to throw in has luck, because it's fun -- in tesla, because it's fun. this comes to us from credit suisse. there is a correlation between when we reach neighbor, that full employment and stock. the red line is the foreign have percent unemployment rate. the blue line is the s&p. when you wind up having unemployment rates going to the to 100 basis points below that full employment level, you tend

to get a negative return for the s&p over the next year about half the time. these two peaks really show that, here. happened incurrence the mid to thousands. the question is, are we beating on that door, now? unemployment rate coming in at 4.7%. profit margins start to get squeezed as wages rise and you have the fed in a technique -- tightening cycle. a day away from payrolls. bloomberg, weon turn the conversation to a portfolio manager from portland, oregon. great to have you with us. the game we used to play was payrolls would come out and if they were good, it was a good

news, bad news scenario. the game has changed, now, somewhat. how is that to your benefit as you set up this fund, looking at stocks the way you do? >> that is a good question. think thei conversation about wages and the payroll report, wage pressure that could come from that and obviously profit margin pressure, from our perspective, that is something we are by capable of dealing with and i think our companies are well positioned to handle. when you are looking at the quality businesses that we look at, companies with high return on capital, very consistent management ability and strategy, when you have wage pressure, when you have the need to continue to gain productivity to offset that see you can maintain your profit margins, frankly a strong business is better positioned to do that.

somebody who has pricing power in the marketplace, market leadership where they actually have the ability to control that cost better. that bodes well for those kinds of businesses, even though it might be harder to find quality employees. you might have to pay them more. the other thing that is different is while the full employment number might exist, there is still a bit of underemployment and perhaps people that could still come into the workforce in different places than where they are, now that could offset some of that pressure as we go forward. jonathan: i am interested in how you look at these companies and how they -- their balance sheet. are you looking at the companies that have already made the investments over the last five years, are they the companies that will do well in the coming five? it is a hallmark of one of

the mini -- it is one of the many hallmarks we look at -- it is one of the hallmarks we look at in many of the businesses. they continue to invest in cap ask, opportunistically. do it because it is a use of cash, they will do it because they have strategic intent. freese they have enough cash, they can take care of dividends, share buybacks pursue strategic acquisitions and do all those things concurrently. when you can do that, you think -- we think you have a better opportunity to produce consistent return which creates business value and that is what the stock markets like to see. as you seek out and invest in these companies, i wonder if your criteria has shifted with the trump administration. tother they are vulnerable trade issues and also a strong dollar. have you shifted your criteria? eric: we really have not.

is somethingllar for can be problematic global companies, but the reality is they have been dealing with a strong dollar for quite a number of years. that is not something that is new and currency is about whether it is translational or more on the transaction basis. if it is translation, that is more accounting than anything else, and i think these companies are well-positioned to have diverse businesses that allow them to go to the currency issues. the other one you mentioned, if you could repeat it for me. david: trade. stillon trade, we are pretty much in the rhetoric versus reality phase of the trump administration. there is a lot to digest, but our companies are going to still be very well-positioned because they are not necessarily doing import-export work.

it is more that they are selling. they are selling to consumers in other economies and other geographies, and they are doing it with products and services that are based or made in those other geographies as well. the trade issue we are hearing about is not necessarily the same impact for companies doing what they are doing versus companies that are doing a lot of import-export work. alix: you have to tell us what those companies are. take the sectors of stock you like, right now. eric: we like a company called waters in health care. they make liquid chromatography systems and mastec trumpeter systems -- and mass spectrometer systems. if you think about pharmaceutical compounds, there is a quality control aspect of their business that has to be consistently applied.

that chromatography system to ensure the quality control is and it has does service contracts and consumables, so there is an annuity to that once the equipment is in place. they are a technology leader and they have been doing very well for some time. they had that a nice job of having mid-single digit revenue growth and low double-digit earnings growth for the last couple of years. they are geographically diverse with 70% of the revenue coming from overseas. there is a good sense in pharmaceutical. water treatment, beverage manufacturing. another one would be ecolab. they make chemical solvents that are used in test and cleaning and sanitizing. really something that is a low-cost part of the system, but very much something that has to be part of the business. alix: great to get your perspective, iq so much.

a portfolio manager at jensen quality management -- thank you so much. a portfolio manager at jensen quality management. the chart that i have on this the story behind facebook, that white line, revenue per user, continuing to climb. you also have daily active users, that blue line moving higher and monthly active users moving higher. can this unbelievable chart with these numbers coming from facebook continue in the next few years? the near termt in and facebook itself has said that. they expect revenue growth to slow down in the second half of this year and their expenses are going to go up. that means the incredible property -- profitability of this company is going to be pitched, a little bit. alix: 84% of their ad revenue

now comes from mobile. is there more of the pie, or will we see a shift in who is winning that game? >> it will be fascinating to watch this fight between the television industry and companies like facebook and google. facebook already captures a significant share of ad revenue in the u.s., digital at revenue along with google the issue for them is going to be to keep growing, they need to find new sources of ad revenue and the biggest pile of money is the $200 billion spent globally in television commercials. facebook will want a chunk of that. david: we are fascinated with google versus facebook, but what about snapchat? snapchat is the one that is coming up really fast. google and facebook have dominated digital advertising and along comes snapchat which we expect to file their ipo paperwork any minute.

snapchat is still small and i think there are many open questions about how big can get in terms of user numbers and how much the ad model can scale. is this going to be a multibillion dollar ad company as facebook? let's talk about one of the challenges for this platform. twitter, it is the harassment that takes place. on facebook, it is fake news that has become a big deal, lately. not affecting them, materially, but how much of a concern is it? >> it is a concern and it was interesting to hear mark zuckerberg tackle the fake news question, directly. it is clearly an issue that is bad for facebook, reputational he and the issue is we have not seen it show up in the numbers, but to people tune up facebook because they perceive it just to

be flooded with garbage, that they do not want to look at? david: thank you, so much. up, the ranking member of the foreign relations committee will be with us. senator ben cardin of maryland. this is bloomberg. ♪

emma: this is bloomberg daybreak. more from deutsche bank cfo, marcus schenck coming up at 10:15 a.m. eastern time.

david: this is bloomberg. for many of -- for many, the of the -- for many changes president trump wants to bring about, the congress will be a key part. joining us now is the senior senator from maryland, ben cardin. he is sitting on the senate finance committee. he will be in the center of a host of important issues ranging from taxation to our relation with countries like mexico and russia. thank you so much for being with us. let's start with that taxation issue. you are going to be involved in this. where are the democrats, right now on income tax reform? ben: both democrats and republicans agree that tax structure is not competitive, particularly as it relates to

business taxes. we are not competitive in the global marketplace. we can be competitive. our problem is that income taxes are not border adjusted, we have higher income tax rates both on the business and individual side than the industrial nations of the world that we compete with, and we do not use a national consumption tax. republicans are looking at a proposal to try to make the income tax into a consumption tax. i have a direct proposal that would change our tax code and allow us to use a progressive consumption tax to reduce our corporate and personal income tax rates. jonathan: you -- david: you have been out front on that consumption tax. we have seen a lot of democrats say no. is this something you can get to yes on? can you get around to some sort of border adjustment tax? yes, we haveer is

to get there, that it has to be a transparent, open process. we have to make sure we have the revenue to pay for our government so we don't go further into debt. the proposals we have seen from the republicans will add to the debt. my proposal is revenue neutral, and that we will raise revenue and it will not come from middle income families, it will be about adjusting our taxes to a more progressive use of consumption taxes. david: from what you just said, do i and that whatever form there is, it needs to be revenue neutral? ben: absolutely. it we cannot add to the -- we cannot add to the deficit. one of the challenges we have is that the people who estimate our revenues don't get it right, sometimes and then may project we raise less revenue than we actually raise. my proposal would rebate those extra taxes back to the

taxpayers of this country. on the other side, republicans are talking about having a tax cut and saying it raises revenue. if it does not raise the revenue, we are in deeper debt. we must make sure we have it fair on both sides, that we don't overtax the taxpayers, but that we do not increase the deficit. alix: how long would this take? ben: it will take time. there is no meeting of the lines between the trump administration and leaders of congress. there is a disagreement between democrats and republicans on the overall budget. it is tough to talk about tax reform if you don't have an agreed budget. i hope we will see that type of compromise take place in washington. democrats and republicans are anxious for that to happen. if we can agree on a budget, we have a greater chance to agree on tax reform. david: moving over to your hat as ranking member on the foreign relations committee. travel banabout that

from muslim countries. ceos,rd from a number of really complaining about this. is it likely that congress will get involved in this, directly? with ahope we do resolution to repeal the executive order. there is no justification for it. it does not make us safer, in fact it puts us at greater risk. americans traveling abroad are being used as recruitment. it is hurting american businesses. we have heard from businesses in maryland about some other people not being able to travel to the united states. we have heard from our academic centers that they are concerned that it is affecting their students. of course it has a negative impact on america's image, globally. the king, i met with of jordan and he talked about the impact it is having on his region.

it is wrong, congress needs to weigh in and make sure it is repealed, because it looks like president trump is not interested in modifying this executive order accepted perhaps make it even more dangerous to american security. david: thank you so much for spending time with us. senator ben cardin of maryland. jonathan: coming up next, bloomberg markets with mark barton and vonnie quinn. mark: who better to talk us through super thursday then danny blanchflower. he will look back at the boj. we speak to house speaker paul ryan, today and congressional leaders, talking trump and brexit and the upcoming election.

we talked to the belgian soon to be -- the elgin ceo, soon to be. the big debate is stagflation versus deflation. a busy show, see you in 10 minutes. jonathan: i want to know what danny blanchflower thinks of that rate hike. looking forward to the program. friday, payrolls day in the and estates -- in the united states. we will bring you pull coverage of that report and reaction from bill gross. that is 8:00 eastern time. 21 minutes into the session, we are down on the market. this is bloomberg. ♪

david: this is bloomberg. we have a few takeaways from today's show. we thought we would have an american give you a british one and a briton give you a american one. alix: when mark carney was asked about what the verbal intervention from donald trump and peter navarro meant for central bankers, this is what he had to say. mark: cash alix: i was interesting because for two years, i feel like every investor would pour over everything janet yellen -- that the head of the central bank would say and now they kind of put that aside and you have your twitter feed up and that is much more important. jonathan: these guys have wanted to be boring for plenty of time. the focus is no longer on moreary policy, and a lot

will we might get in terms of fiscal stimulus. those if you have one of jobs, you want to make a difference and they have been making a difference. jonathan: talking about someone who has moved to jobs. jason furman, he was on this if payroll support was good, he would pay him -- had himself on the back. if payroll support was bad, he would blame the other side. the whiteoutside house, payroll is tomorrow, we got into play jobs guesses. jobs and the0 unemployment rate going back to 4.6%. jonathan: the inauguration was at the back end of the month. i am interested to get his job guess for february when it is no longer the obama payrolls report. david: also a long-term view. we have to look at 6, 8, 9 months.

how does that feed into the labor force participation rate. i'm looking forward to the data dropping it 8:30. 8:30.pping at minutes into the session, we look like this. down on the margin by a 10th of 1% on the dow. treasuries are down three basis points, the dollar actually weaker. bloomberg markets is up next. ♪

♪ vonnie: it is 10:00 in new york and 11:00 p.m. in hong kong. i am vonnie quinn. mark: i am mark barton. welcome to "bloomberg markets." ♪

we will take it from new york to london and cover stories from washington to frankfurt, we are following stories from bloomberg and around the world. the bank of england upgrading their forecast, but the pound is complete as brexit concerns hang like a cloud. we get analysis from the mark carney news conference. today,nd the decision how will this impact markets going forward? and we look at credit suisse. vonnie: in finance, deutsche bank shares are tumbling. this is taking a backseat to financial woes. on theirrom the cfo an