the dollar drops and treasury jumps after janet yellen announces a rate hike. another block. stopping donald trump's revised travel ban as he prepares for budget cuts. the dutch prime minister's liberals hold off a challenge by the anti-islam freedom party. this is bloomberg surveillance. things to getion through in 2 hours of tv china, theng at netherlands, and of course, g-20. tom: chair yellen moved the market yesterday, and they continue to move this morning. francine: let's get to the bloomberg first word news. ra: a judge in hawaii slammed the travel ban for discriminating against muslims,

citing the president's words on the campaign trail. president trump is proposing budget cuts across the increase inor an defense spending. the state department would be cut by 28%. the environmental protection agency would be cut by 30%. the pentagon would be increased by 10%. lindsey graham caused the cuts dead on arrival. the spread of populism, giving win.'s party a big turning back a challenge by the anti-islam freedom party. wilders did worse than the polls .redicted he proposed blocking immigration by muslims. in asia the china central bank is in step with the federal reserve. the bank of china increased cost of borrowing in open market

operations and on medium-term lending. the central bank said the increases do not equate to interest-rate hikes. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. , this isa cehic bloomberg. equities, bonds, currencies, commodities, we saw great move off of the fed action, a more dovish tone. continuing on a more selective market. curve flattening and stays there. it was 124 down to 119. the difference between the 10-year and two-year. stronger mexican peso from. francine: i like the way that you showed the 2-10 spread. moving over financial markets, the dollar studying and

treasuries up after a 2 day surge. japan, 113.48. boj kept monetary policy unchanged with the yen edging a touch higher. tom: a chart we haven't used before. it is a little of scare, that goes to the heart of what we heard from chair yellen. we will show this many times. this is the wu gia index out of the atlanta fed. my pen.let me get the high yields, going down with a permanent and persistent yield. here is the average that chair yellen wants to get back to. we are nowhere near coming back now. getave a long way to go to back to what was once neutral into normal.

francine: i like your chart. what we do tolly impress tom keene on a thursday. this is what you have for 2017, purple or a 2018, blue. 2019, yellow. the longer around 3%. the longer run medium projection represents the neutral fed funds since 2012.ng shorter term projections in the next several meetings falling even more. this changed in december. it is nice to put it in context, what we heard from chair yellen. are you impressed? tom: very impressed. federal judges have stopped the president's revised 19-day travel banned from taking effect saying it discriminates against muslims. the president saying it makes

the nation look weak. here we have george magnets. -- george magness. we'regnificant is this? to read into if this weakens the if it means the institutions are strong. what it means for a future travel man. -- travel ban. >> it is a significant loss for president trump. he has wanted to be strong on border control. the travel ban was important. , he the first was blocked went back and decided to revise removing iraq and the exception for religious minorities to make it seem stronger on legal grounds. it has been blocked again.

a huge loss for him. this,he court looks at they are looking at the conversation surrounding it. the statements by stephen miller and others, that indicates that violate theas to establishment clause of the constitution that says you cannot give priority to any single religion. it is still interpreted as a ban.m now he will have to decide, does he let this go to the supreme court or walk back? this is a significant loss. he says this makes the country look weak. this makes donald trump look weak when he is facing attacks on multiple fronts. francine: what advice would he be getting from the republican party, or with a leading know because he would keep losing? leslie: there a lot of division. has been a ban that

supported broadly across the party. this has come out of donald trump, steve bannon, and those close to him and his political agenda. the justice department will be weighing what happens. will proceed unless he decides to withdraw the ban. tom: hawaii will go to the san court,co appeals washington state as well. help me with the phrase we heard from the president and his supporters, "we will take this all the way from the supreme court." what does that mean to our pro like you? leslie: donald trump was feeling a serious defeat. he has taken it very personally. he does not want to lose. letas made him say i will it run. if it goes to the appeals court, no,the appeals court says

this violates the constitution and does not have a strong national security justification, then he lets it go. court would have to decide if they would hear the case. he is looking for a win. the last time this ban was blocked, it took us a few days to see where he would come out. he had a measured approach. they did not release the second ban for two or three weeks. dead on arrival thursday. he has his budget out, which we see today or tomorrow. everyone, including republicans, are saying it is a political statement, but dead on arrival. you look at the new travel ban as having elements of dead on arrival? has elements of dead on arrival because the courts are looking at this in the round. if this was the first ban issued on its own it may have gotten

through. it is being looked at in the context of all the things that have been said. this is the same ban just revised. these are statements that have come out of the white house and the people surrounding donald trump. there are being taken into account. be veryface -- it will difficult to get this ban through. at thee: you look a lot american economy. is this distracting the president from focusing on tax cuts and getting jobs back to america? george: it is a political distraction, no question. one imagines as more people get confirmed in their senior positions that there should be some kind of delegation of .uthority the processes of government, one imagines, would happen in the normal way. the presentation of the budget

is one. like he says, it is a lot about political authority and if the president is made to look weak or not. it is important in the sense of the authority to which the white house can bring economic programs the congress here they will be a fight over the budget, and much else. francine: rex tillerson does his first visit abroad. how many questions will he get on budget, on trade, and the travel ban? leslie: the sad thing is we won't know as much as we would like. he has not taken the media. it is not clear what we will get back. even rex tillerson is not happy about the budget, because the state department is facing cuts. he pushed back quite hard, others have pushed back quite hard, but the military budget is going up. the budget that will be spent on softwe would think of as a

power, diplomacy and foreign aid, things essential to u.s. engagement in the world, will be cut. many people have come out against it. not only the secretary of state, but over 100 retired general signed a letter saying this was bad for america's engagement in the world. they will be pushback, and it will raise questions on his trip to asia, what will u.s. engagement look like going forward? francine: leslie vinjamuri and george magnus stay with us. coming up we will speak with the ceo.ra ceo -- algebras this is bloomberg. ♪

was a hike executed that was largely priced in over recent weeks. she confirmed the economy is moving along the trajectory the fed projected. if you look at the dot diagram, they are on that path. francine: that was the ubs group chairman, axel weber. we have more interviews from their later. he raised rates by a quarter of a percentage point. since thehike financial crisis. we are joined by george magnus and leslie vinjamuri.

winky for joining us. what are you most surprised about. it seems like janet yellen is guiding the markets in a way that did not cause waves. the markets were expecting her to be more hawkish. >> the house was not overly surprised by the tone. 4 dotsket was geared for for 2018 in the event we got the goldilocks scenario. high currency bed in the dollar under pressure. it has set the stage for the fed to justify over the next 18 months what will be the factors that could drive those dots higher in 20 18. clarity on fiscal policy will be the key. francine: she is only looking at inflation. what surprised you the most at

the day that they are looking at? everyone has been focused on the business sentiment. the animal spirit. , thede of the labor market overall data has been weekend. that is a sign of what the market is focusing on. average earnings are weaker than expected. payroll reports on friday were not sufficient to lift the dollar. the focus will be on if we can see a sustainable rise in inflation to justify a more accelerated approach to the fed's tightening policy. tom: this goes to the work of ethan harris, yellen did not want to talk about economic growth and gdp, she wanted to talk about jobs. also, in inflation. what is the probability or likelihood of decent gdp?

we are going through a brexit in reverse scenario. referendum, the data held up well. here we have animal spirits rising significantly through elevated business confidence, but not translating into growth. the fed already said that. growth is at its weakest since 1983. that justifies the fed's more cautious stance in terms of tightening policy. it needs to see sustainable signs across the board that the economic trajectory is upward. tom: what data will you watch in coming weeks to begin to validate everyone's belief that there is a vector to higher interest rates? kamal: productivity, investment spending, components of gdp other than personal consumption

economy take the u.s. onto the next sustainable stage of growth. fiscal consumption, we are near full employment, it is what happens to the other components of gdp. business investment spending and productivity growth will be key. francine: thank you so much. g10 effects strategist from bank of america. jobanet yellen doing an ace in communication? she hiked, but saying there's a path for the rest of the year george:. that is fair. there is a lot of ambivalence about what the u.s. economy is at the moment. the before we know what fiscal policy will be. there are significant questions over how strong the labor market is.

we had employment data in the u.k. that showed record high employment rates in the united states, still off the bottom after the 2010 experience. as we just heard in the package, the gdp numbers, the now cast from the atlanta fed and the new york fed published shows that over the last few weeks there has been a bit of a setback. the atlanta fed said gdp is running less than 1% for the first quarter. there are other indicators that say it could be bigger. it is a confusing outlook. it is next. mixed.s i think the federal reserve and janet yellen are right to say that it is appropriate to be less a commoccomodate. policying monetary

doesn't belong at this stage. tom: we have to come back and talk to george magnus about this. it is always a surprise and extraordinary what we wis issued. we will come back. this is bloomberg. ♪

francine: bloomberg surveillance. hagueget straight to the in the netherlands.

voters have turned out in force to back pro-european parties with prime minister mark rutte beating off a challenge from the freedom party of geert wilders. what kind of coalition government will mark rutte have to form? >> he has a lot of work to do. he has spun this quite well so far. it looks like it could already be a center-right. that is along with the christian democrats, that will give him a small minority. -- francine: what does this mean for populism in europe in general? the issue is the turnout for the populist right, the right-wing populist in the

netherland, was 12% of the vote. 93% of the seats at the moment. firebreak.mini let's not get overly complacent. the dutch have put a stop to the lurch in the right, but marine le pen is a whole another kettle of fish. francine: what does it tell us about whether markets are jumping at shadows or not? what this isn't clear will mean in france. there has been speculation that what has been happening in the united states has dampened the move towards more populist sentiment in europe. we cannot be sure with the dutch elections will mean in france. it sends a signal to how important it is for voters to turn out. voters are very concerned to turn out in the dutch elections to make sure populism was contained. whether that will hold true in

france, it is hard to predict. it is a good sign from the point of view of containing that. tom: george magnus will continue with us in our next hour. we will move from george magnus press hooper on the conference from chair yellen. the fed out front and the audacity of raising rates even as existing gdp. in new york, it is spring with a wind that will be frigid. this is bloomberg. ♪ live-stream your favorite sport

at the airport. binge dvr'd shows while painting your toes. on demand laughs during long bubble baths. tv everywhere is awesome. the all-new xfinity stream app.

xfinity. the future of awesome. tom: bloomberg surveillance after the fed, we are picking up the pieces. terrific news flow, including

the hawaii push back to the president on the travel ban. we will touch on that. right now, first word news. said heesident trump based the claims that president obama wiretapped trump tower on media reports. he is confident his claims will be vindicated. covers a lot of different things. i think you will find interesting items coming to the next two weeks. ofa: the republican chairman the house intelligence committee says there is no evidence that backed up president trump's claims. republican leaders looking to revise the obamacare replacement bill. revise asal is to penalty for those who go without coverage for 60 days. the house budget committee votes

today. in europe, reports that a package containing explosives germant to the finance minister. the package from greece was intercepted in the finance ministry's mailroom. it could have caused serious injury if opened. the paris accord, the international agreement of climate change. the mayor of paris is not concerned this could derail the progress. he spoke at a conference in new york. of course, i am listening to president trump's speeches. to words are not sufficient stop this process. it is a very important process agreed on in paris. that she is amused president trump said americans should not go to paris.

she said the number of americans going to paris has risen since the start of the year. this is bloomberg. francine: thank you. the bank of japan kept its monetary easing policy unchanged holding rates at unchanged levels. the decision came hours after a hike in the united states, increasing party divergence between the 2 central banks. we are joined by george magnus seijiro takeshita. not only did we have a hike from the fed, but raising borrowing costs which puts the boj in an awkward position. of the; that was one most asked questions, what are you going to do and how you cope

with external factors? the boj is taking a wait and see approach. they can see the changes taking place. one of the most frustrating things for the bank of japan is domestically japanese banks and corporate are not making its rate ofcomply with the wages, which was the scenario the boj had initially where they were having the recession come back on the back of it. japanese corporate's risk adverse characteristics are at full pace, especially with the possible turmoil. actually, boj, as you pointed out, is put to the corner as we speak. much more creative can governor kuroda get? last year he had negative rates after saying he would not go to negative rates, then he decided to cap at 10-year yields. seijiro: he probably feels the

ball should be in the court of the corporate side, not his side . he is not a magician that can bring out rabbits all the time. they pretend to have a deep pocket, it is not there as much as it used to bp or you can see the reaction of the financial market is showing signs that boj is running out of cars. -- of cards. willhort-termism in policy not help to make transitional changes in japan. the move has to come from the corporate side. toy have to take risks elevate itself to comply with innovative issues. unfortunately, considering the of individuals and corporate by the japanese, it is not happening as much as the boj wishes it to be. francine: will it go to 1% this

year? depends very much on external factors. we are seeing oil prices come back. maybe that will reach its point. the argument is what they really wanted to see was spending coming back. negotiation has risen for four years in a row, but the radar rise is declining. i ensure he is scratching his head -- im sure he is scratching his head. can he achieve 1%? possibly, but the process is more important. tom: history matters in economics. chair yellen was tentative about the set of rate rises against the idea of remorse in central banking, of getting it wrong. the japanese got it wrong in 2001. you can see in 2000 the japanese make an attempt at a rate rise,

then had to come back down to the zero-bound. how prevalent is that in central banking that today's central banking have a collective memory of 16 years ago? seijiro: your point is well taken to the extent that what is the effect of the financial policies that would impose to the minds of the japanese corporate? it is getting low. it is creating a lot of negativity. looking at holding from the japanese banks eight is low. regional banks are screaming their heads off. it is causing a lot of side effects more than anything else. thisnk that this, probably year, this will be very prevalent that there are a lot of side effects. we have to regress to the looking atism of

fiscal policy and structural transitional changes rather than short-term policies that the boj is constantly coming up with. tom: you in japan and george magnus in london, help me with the idea that a central bank can get in front of the debate. i would suggest that they have to wait for the economy to get going. is chair yellen creating a regional theory like the japanese tried to do in 2001 by raising rates too soon? i think there are qualitative differences, tom. i think japan, as we know, has been in almost -- has been almost a poster child for secular stagnation. the professor was correct. the issue is a huge corporate problem in japan where listed cash assets that

are equivalent to 40% of gdp. clearly, taking a different cash assets that are equivalent toapproach. they do not want to be as data-driven. as they have been since the financial crisis. almost trying to be preemptive by saying we can see what is happening in the economy, but we have reached our employment and inflation targets, therefore we can take a more structural approach to monetary policy. the proof of the pudding will be in the eating whether or not that proves to be right or not. what is happening in the first of quarter is a bit of an aberration. it is not the same in japan.

francine: do you think, given what george said, there is a chance the boj is overcome by events, i am thinking of trade wars or something more geopolitical. seijiro: it is one of the top agendas by the japanese. they are worried about the regression of the nightmare in 1980's and 1990's where it is a combination of the currency and the policy side that would hinder japanese exporters. any positive sign we have seen in the last few years is the weakening of the yen which increased the earnings capability of the exporters. some commodity prices as well. led by the exporters, which means it will he will see currency side and the turning around, that will be a negative scenario.

that is another reason why we have to peddle hard below the -- pedal hard below the waterline. francine: thank you so much, a professor at the university of shizuoka. if you have more questions, pull up bloomberg . you can see our charts. this is gdp figures and nominal growth. you can ask questions by going to the bottom of the screen. we will put your thoughts to our guests. this is in london, it is sunny. in new york, it is snowing. not far from the g-20, steve mnuchin meeting his counterparts for the first time. this is bloomberg. ♪

francine: bloomberg surveillance from london and new york. let's go to berlin. the u.s. treasury secretary steve mnuchin will meet with wolfgang schaeuble ahead of the g-20 conference. he rejected criticism that the german trade surplus is based on unfair advantages, saying it is based on competitive products. michael, it is great to have you on the program. willsteve mnuchin shows up he be on the offensive or the defensive? : the u.s. would like them to be on a charm offensive, but it will probably be

defensive. some are calling it the g19 versus 1. trumpe not happy with the administration, particularly the rhetoric on trade. this is an export dependent company. they're wondering what they're talking about when they accuse the germans of manipulating their currency for trade game. as a member of the eurozone they do not have control over the currency. they say it is our dollar and our problem, because it is the trump rhetoric raising the dollar, not that the euro over the yen is falling, creating imbalances. francine: what does he hope to accomplish in berlin? michael: it is not clear what he than making friends or dialing down the rhetoric. he comes with a message that the

u.s. will not tolerate competitive devaluation. had that in their communique for years. it is not clear he could walk out saying he convinced anyone, other than what he can say is that i convinced people from not not liking us as much. tom: the king of austerity is the trump administration. they are announcing major budget cuts, they will spend it on defense, x years out. is steve mnuchin the king of austerity in front of the brandenburg gate? michael: they're not proposing cutting the total level of spending, just what they will spend on. they will raise the defense budget. the kings of austerity are the germans, who imposed it as a policy on europe. it will be interesting how the rest of europe is feeling about that.

there is a general view that we are getting to the point where countries should spend four, raise their deficits, and get global growth going. that is a message all members of the g-20 have signed on to. tom: heaven for bid anyone to talk about policies. give us an update on russian sanctions. they have to be discussed for at least five minutes, right? for the it is better foreign ministers who will meet later. the finance ministers try to keep it to currencies and trade. the centerpiece subject is not normally on their agenda. an because it has such outside impact on the world economy, they will talk about it front and center. francine: michael mckee, our correspondent covering the g-20 with steve mnuchin. george magnus is still with us. i do not know if germany and the

u.s. can find common ground when it comes to china. germans,ell, for the china is everything went it -- when it comes to trade. german exports to china surpassed german exports to france. the germans have a lively interest in the status quo, as do the chinese. it is probable the german and chinese position on trade, trade rules, wto, is more of a sense of alignment between either of them and the united states. we have interesting meetings coming up. trump andl see donald washington tomorrow. there is a suggestion that ping will see donald trump in florida in early april. trade will be an issue for both

of them because of the u.s. president. francine: do you worry about the u.s. economy because they raised borrowing costs with the fed. that is the message investors are taking away, that the economy is pretty stable. george: the economy is pretty stable. it was and a valid of the surese leadership to make that nothing would go wrong in china in the economy of 2017 a cousin of the significance of the congress at the end of the year where xi jinping has personal objectives to achieve. andeconomy is very stable, will likely continue that way. capital controls were introduced in november and december of last year have abated outflows. no one should think the people's bank of china is doing a major tightening job. , i'm notor this year

particularly worried about what is going on in the economy. tom: let's talk about the hallmark issue of the day, when does the central bank act. the market reaction and chair -- chairmments yellen's comments. the former chairman of president obama's council of economic advisers from the peterman institute. this is bloomberg. ♪

tom: bloomberg surveillance. francine lacqua in london. tom keene in new york. how linked are the central banks, how coordinated i central banks right now? george: do they talk to each other? all the time. in anyy coordinated material fashion, not at all. the federal reserve is on the

land. the bank of england, bank of japan, european central bank are pursuing their own agendas and have their own -- they are all following different forms of qe, which the federal reserve has already left behind. i do not think that we can think that there is any kind of real coordination, but there are different stages of what we say normalization. are normalizing, but in "the wall street journal" there is a chart showing the hopes of normalization. why is this time different? states the and nine it is a real-time laboratory experiment if normalization is realistic. no one knows is even trying to normalize at this juncture. why is it different? for all the reasons that i'm sure we have a hearst many

times. the aftermath of the biggest secularl crisis ever, stagnation, savings over investment, there are many reasons why the expansion since 2010 does not fit the script we have had since the end of the second world war. cross our fingers and hope that maybe the united states is actually gradually beginning to normalize slowly, but the data points are still contentious. francine: guess where steve mnuchin is this morning. downing street. he said please to welcome steve mnuchin to downing street. we will continue to work closely together driving forward an ambitious agenda. how many questions will be on pound/dollar currency, how much on special trade, how much steve mnuchin saying why did you have

to reverse part of that legit? they will have a lot to talk about in terms of the brexit. the treasury secretary will presumably have a lot of questions about that, and vice versa. philip hammond will want to know about the treasury's economic program, border adjustment tax, that kind of thing. this is not a policy meeting. i do not think anything of material consequence will come out of it. will diveg up, we into a discussion about where is the united states of america's federal reserve system. we will bring you peter hooper from deutsche bank and his optimistic assessment of where gdp is going. a agrees that there could be

fate of rising interest rates to a good and better american economy. there is pushback on what we saw yesterday from a dovish fed and the idea in the bond market of lower interest rates. economic data to come. sarah -- davide serra will join us as well. springyork city, it is a day, but it is brisk. stay with us. this is bloomberg. ♪

quiet winter's

morning, gdp has a noisy imitator. janet yellen begins the path to higher rates, will economic growth follow? the noise from amsterdam. populism voted down decisively. in hawaii, a judge says no to president trump's travel ban. back to the same appeals court in san francisco as before. in new york, tom keene. francine lacqua. manus cranny seeing history in the netherlands yesterday? francine: history in the netherlands and a sigh of relief in the market. touch liberals defeated geert wilders. it has a little implication for the french elections coming up. tom: angela merkel had her

positive take on it. terrific news flow. here is in the chandra. have two federal judges locked the president trump travel ban before it could be enforced. in hawaii and maryland they muslims.he ban against the judge in hawaii cited donald have's words on the campaign trail. president trump without the thee the ruling all way to the supreme court. historic budget cuts across the government for an increase in defense spending. the state department cut by 20%, the environmental protection agency cut by 30%. the pentagon would be increased by 10%. senator graham called the budget dead on arrival. such voters through a line in the sand over the spread of populism giving the liberal in the parliamentary

election. other pro-european parties turned away a challenge from the freedom party of geert wilders. he did worse in the polls than predicted. he proposed leaving the eu, blocking touch of voters, and blocking immigration five muslims. i was after the fed raised interest rates, the people's bank of china increased borrowing costs and open market operations and on the medium-term lending facility. open market increases do not necessarily equate to interest rate hikes. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. tom: after the bounce off of a more dovish chair, we will see record highs in many equities indices. nymex crude, american crude, moving from 47 to a 49 level.

peso stronger versus the dollar. francine: dollar steady after the losses yesterday. it is all about the fed raising rates, but not accelerating the timeline for future tightening. 113.39. tom: let's go to our washington correspondent. i want to get to the budget and the dead on arrival sentiment. let's start with the travel ban. why's it different to the appeals court in san francisco than the last time around? kevin: administration officials would argue it is more moderate. i'm not sure the critics would argue that.

it was expected it would face backlash. several have come out against it, joining hawaii in repealing it. constitutional experts across the board, several who were critical of the first travel ban, have argued this is more in line with the constitution. tom: what is the timeline? kevin: we'll have to go into next week, unless they speed up the process for tomorrow. francine: what is the president's thinking? that i will not get it through, i will back down? or is this all consuming? kevin: the administration is ready for battle. they feel this was crafted in a way more in line with the constitution. it is part of a trend out of the administration focusing on

national security and immigration, both of which are heject in the blueprint announced last night in nashville, tennessee and will be formally unveiled this morning. francine: we understand that president trump wants to fund defense with huge cuts across the government. what department will suffer the most? kevin: this is a topline budget proposal that will set the blueprint for the remainder of the fiscal year as lawmakers gear up to have their budget negotiations. a $54 million increase for national security while cutting key funds at several agencies, including the state department and environmental protection agency. i spoke with several sources. there wasdisappointed

a lack of outreach from the administration. they said this is a scarce budget without much detail. tom: thank you. from washington this morning. we are advantaged down peter hooper from deutsche bank. the comments of chair yellen yesterday. we will dive into the central bank discussion with michael mckee joining from berlin. chart.p a this is to the noisy gdp comment yesterday. we are all fat and happy, then gdp sub 2% forsh a huge time. get to that we will above 2.8% gdp, above 3%.

with government spending assisting us? peter: not if you look at the immediate budget numbers. we are expected to see an increase in infrastructure spending, a public-private partnership. we are looking at significant cuts in spending. the trump administration will have a challenge giving significant fiscal stimulus, keeping the budget deficit from widening too much. my sense is the bigger factor driving growth up will be animal spirits. spirits, and what we witness yesterday, chair yellen cannot assume anything from congress. that is a mandate she has. peter: she said as much. their forecast didn't change. they are still expecting 2.1% growth. she said we don't have the luxury of making assumptions of

what will happen on fiscal policy, if the animal spirits fasterld up and sustain growth. the fed is in wait and see mode. they want to see what is happening on capitol hill. francine: is janet yellen right when she says gdp is noisy? is she right focusing so much on inflation and less on gdp? peter: given that the fed is where it wants to be on the ,abor market, full employment gdp is noisy. it bounces around. we are there on the activity side. the labor market, full employment. how much does it inflation overshoot? the fed statement talked about

that we are there on inflation as well. we shift was no longer expect inflation to rise to target, but we expect it to remain where it is, close to target. you look at the numbers we got recently, cpi 2.7% year-over-year. on that basis we may he slightly above target. the fed is saying that they have asymmetrical target. the reason they are focusing on inflation as they have achieved where they want to be on the labor market. the question is, how much do we allow the market to overshoot? francine: coming up on bloomberg surveillance we speak to davide algebris investment ceo. we ask about political security and the president's meeting with angela merkel tomorrow. this is bloomberg. ♪

another rate hike. it is largely priced in. the fed indicated we will see rate hikes next year. there is questions if they will accelerate that, but i don't think that is likely. see more moves by the fed, but they would be accommodative. they have no reason to be in a hurry. axel weber speaking to us at the g-20 conference about the fed's rate hikes. moving smoothly because it is germany that is dealing with it in terms of organization. we are joined from that

conference. davide is a friend of the show and the ceo of algebris investments. i don't know if i should ask you about brexit. what are people most talking about where you are at g-20? well,: i cannot hear you could you say it again? francine: what are people at g-20 most talking about? central-bank policy or populism? key at thehink the everyone has been acknowledging the processes made by the world. had ay theme is you billion people that came out of severe poverty over the last 10 years.

-- looking for germany to set the up in as the key grown the room. to make sure the benefits of the world are achieved as a whole over the last 20 years continue going forward. been a big relief since the dutch election. one of the key comments was that in the last couple of years there has been a fear that populism could rise in europe. so far the only populism has been in the u.k. and the u.s. and has not attacked the continent. francine: how much focus was on janet yellen and what the fed

will do next? putting the dots and backtracking in our view made a mistake. employment,from the , andllocation of capital as a result they will be on a path because of imbalances across the u.s. and global economy. it is a change in monetary stance. we think eventually the ecb next year will follow suit. i think we will do that, probably, that the french presidential election will macron as the winner. this will be a grand confidence on france and germany getting

monetary reform and fiscal standing, allowing ecb to come out from negative rates sometime in 2018. tom: help me with the sequence of rate rises on the way. axel weber commented on that. the divergence of yields across the atlantic. can chair yellen raise rates in this record divergence we are seeing? davide: they can. remember, think about the sequencing. americative easing in started five years before europe. of 30% of equivalent gdp. in europe we are five years behind and 20% of gdp. quantitative easing is an antibiotic that you need to take

the same amount at the same time. europe will lag by a couple of years the normalization of interest policy. in my view, that is inevitable. it is positive. in europe we have extraordinary negative rates. atthe ecb today you get 99.6 year end. sometime in the next year, maybe this year, negative and rates go to zero. that will confirm that having zero monetary policy is recommended, but not negative. tom: thank you. peter hooper is with us from deutsche bank. what is interesting is that constraints that maybe chair yellen has.

her best outcome is a better gdp, fully employed america. or two.t that in a year there are constraints. andsome from other nations their challenges with their own great distortion? peter: the biggest constraint is the risk of the fed tightening to quickly will upset the apple cart. today's election results in the netherlands helps. tom: absolutely. ater: you are looking at global economy that is picking up. looking at developed economies we thought would be at risk for a fed tightening, but the flows are continuing to go in. so far, so good.

tom: does deutsche bank believe that we will escape negative interest rates in the vicinity of the near future? peter: i think his prescription of a 2-year lag is not a bad guess. the ecb following on the heels of the fed normalizing. maybe even slightly shorter. negative interest rates is not the norm. low equilibrium real interest for ahave been here while. it is easier to get to negative. i am optimistic the supply side of the economy will be growing faster, raising potential growth, equilibrium real interest, making it more difficult. tom: a case of optimism from the american central bank as well. we will continue with dr. hoover. on the conversation

press conference yesterday. chairman of, the the president's economic advisers. a wonderful guest to talk about this debate. this is bloomberg. ♪

utte hasn't gotten rid of me. i will be here if they need me for whatever negotiation. he won't be rid of me just yet.

people.have more i hope 20 people form a strong opposition against the cabinet and make it difficult for them every day. francine: voters in the utterland have backed r beating off a challenge from the freedom party of wilders. what was the most surprising thing about yesterday's votes? : liberalism trumped right wing populism aggressively. this is the man on the front page. this is the man we believe will try to form a government. third time lucky. lovely picture. g waiting to be called upon to form a government. it could be 200 days.

the surprise is that everything is on the table. you could have a liberal right-wing coalition. the green party leader, 30 years old, ambition to be prime minister, you could have a left-leaning coalition as well. tom: there are not as many do you in france, how translate 20 plus parties in the netherlands to four or five in france? 13 partiese will be in the parliament buildings behind me. i question if we can take this break from populism and roll it forward into france. i think it is a quantum jump. there's something different about this election. it is a rejection of right-wing populism. dealing with there

is left-wing populism. another world order. any of these have problems in the united states. manus cranny from the hague. we will continue with peter hooper. richard haass will continue this discussion on the political economics on the continent of ofope in the 7:00 hour bloomberg television and bloomberg radio. in berlin.el mckee here is a beautiful london this morning. ♪

>> looking at gorgeous pictures of brandenburg gate. we are waiting on the treasury

secretary of the united states meeting shortly in downing street where he met with philip hammond to make his way to berlin. and then on to the g-20. we will get a full briefing shortly. first, let's get to first word news with emma chandra. >> in the u.s. president trump claims thates president obama wire trap -- wiretap trump tower on media reports. >> the video are talked about the fact that it was". that wiretap covers a lot of different things. i think you could find some very differencing findings coming into the forefront over the next two weeks. >> the republican chairman of the committee has not found any evidence to back up president trump's claims. republican leaders in congress are looking at ways to revise their obamacare replacement will.

one proposal, get rid of a provision that would require insurers to charge a 30% penalty to customers who go without coverage for 63 days. moderates and conservatives have criticized the measure. the budget committee votes today. in europe, reports that a package containing explosives was sent to the german finance minister. it was sent from greece and intercepted in the finance ministers mailroom. the package could have caused serious injuries if opened. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. tom: it was a boring press conference yesterday. i was dozing off. and then hayes spoke up with a sharp, pointed, lengthy question to chair yellen about not just inflation but jobs, but how about economic growth? here is chair yellen on gdp. -- gdp is a noisy

indicator. if one averages through several quarters i would describe our economy as one that has been anding around 2% per year as you can see from our we expect to continue over the next couple of years. tom: absolutely fascinating. with us is peter hooper of deutsche bank. joining us from berlin, michael who has seen plenty of these as well. let's start with the idea, why doesn't the fed actually look at gdp instead of their tool mandate of jobs and price change? that they don't look at gdp, it is that they look at gdp as an underpinning of the other two aspects of their mandate. growing -- andis appears to be growing at a solid pace -- then they have faith

that the number of jobs will continue to go up and the unemployment rate will continue to go down. that would eventually raise inflationary pressures but gdp itself goes up and down. for the last how many years have we seen first quarter coming slowly over the course of the year? we average out to about 2%. tom: ambrose evans pritchard wrote this in the telegraph, including the comment indicated by kathleen hays. it is good to be to peter hooper about this. the fed raises interest rates. "our highly levered financial system is like a truck load of nitroglycerin on a bumpy road." thank you bill gross for appearing with us yesterday. it suggests a combined tightening so far. that is the equivalent of 13 rate rises. gdp is a pretty noisy indicator.

mrs. yellen said that when taxed by kathleen hays on this point. they got going on gdp. we get to be certain 2.8 or 3% gdp? what did chair yellen see that others don't? >> kathleen's question, a very good one, was preference to -- prefaced with the observation that less than 1% is pretty low. now, this number is uncertain. look at the new york fed's now cast. it is above 3%. this is a huge gap. the new york fed disagrees with the atlanta fed. why is this? the atlanta fed is looking at hard data. the new york fed is looking at the survey data. look at the isn for manufacturing and

nonmanufacturing and it is almost off the charts. it has been lined with more than 3% growth now. there is some disagreement. tom: dr. hooper, to get this started, the idea of ben bernanke, anna schwartz, milton freeman, did you ever see this debate in fed history or is this original territory that chair yellen is on? a we are coming out of historical. for the fed. zero interest at the zero bound. a vastly expanded balance sheet. this is an unusual situation, no question. growth is at a historic low from a supply-side standpoint but they are seeing potential growth dropping this low so the challenge is getting things going. yesterday,entioned this depends on more than just what the fed is doing.

it depends on getting some policies through congress, getting the administration going on policies that are going to raise the supply side of the economy, getting growth back to normal. if we get back to you -- i know we were watching the fed coverage yesterday, did fed chair yellen strike the right tone? >> she did, although a little bit too much fed speak. for the average person to comprehend why the fed was raising rates, it is basically what they are saying is we have reached a level of economic activity that is sustainable and we could raise rates because we don't want that to lead to inflation. the talk of noisy gdp may is not theple and it chains, what happened in december versus what happened in march. we have now gotten to a sustainable level of activity that should stay about the same. that is what the fed is arguing.

now the question is how do you raise that the on where it is? that would be the realm of fiscal policy. that is going to be a topic for the g-20 ministers. how do you harness fiscal policy? francine: how does the fed you productivity? confusion as why it went away. are easy tos understand, the idea that the labor force is shrinking and we are getting much more automation , but we should be seeing more productivity growth. why has that not happened? perhaps the key will be in how the administration in the u.s. crafts any kind of fiscal package, something designed to raise productivity rather than just spend money and raise growth in the short run but not over the long term? francine: do you expect the u.s. to start normalizing to the levels we have seen in the past or do we see this puzzle in the works for quite some time?

>> i think productivity is kicking up. i am optimistic that we will get some policies that are going to be stimulating and the increase in sentiment we have seen in the business sector is helping to bring that about. if i could come back to one quick point, what yellen said yesterday was that the equilibrium is close to zero. that is because productivity growth is very low. even at zero, that means that equilibrium nominal rate is 2%. we are still noticeably below that. we are at full employment, inflation is where we want to see it, the fed is still being stimulative and this is why we are raising rates. tom: michael, dr. hooper's comment is that the fed has room to move. in defense of chair yellen, if there is one or two increases that is a lot different than 5, 6, 8.

within your reading, how many rate increases of comfort does she have before she really begins to infringe on the american economy? is going to take, as peter says, maybe another full 100 basis points to get to a neutral rate. long before that, the markets will start to react. you will start to see some pressure on the economy. year thatoves this the fed has put in. there is no question of what happens in 2018 and there, i think the markets are reading too much into what the fed is saying. there is a very good chance that we will see an almost completely new fed board next year. how do you figure on what they would do? that is the on me. if yellen and fisher go and we lose to reload let -- and we lose next month, we have a new

chair, a new vice chair and new board members. all bets are off. michael mckee, safe travels. tom: g-20 meetings in berlin. we will continue with peter hooper with more talk on banking and maybe talk about the american economy. coming up on bloomberg radio, we talk a little bit, honored to bring you built about her. -- bill m bauder. beautiful new york this morning. this is bloomberg. ♪

tom: i am so central-banked out.

let's talk about something stable like twitter. what a disaster. this looks like brian wieser's checkbook when it comes to new york. the man snap hates, the man twitter hates, and you are wearing a facebook tie this morning. i'm on the radio yesterday. themberg surveillance with hall of famer from the baltimore who saysnd doug katz he is acquiring shares of twitter. right now i am on hold. they are there and there is ball but-- there is value there it might help if they had a full-time ceo because one day they will be an important enough company to warrant full-time attention. but there is something there. they have commercialized and it

sets an interesting contrast. snap is so much earlier and yet the valuation gap is amazing. tom: help me here, in the time we've got, the base is when mark zuckerberg will buy snap at a $14 target and by twitter. does facebook need to buy these companies? >> i don't know there is reason to believe facebook would buy them. barrel most too late to be bought by facebook. facebook would rather buy something like a platform that is still evolving and developing. the hasn't set a commercial pass. tom: what is the commercial path of twitter? >> advertising. tom: i don't see them. >> i get enough of them. francine: i do too. >> we are still seeing revenue coming into twitter. it is a real business.

i think the problem is they tried to expand to other segments of advertisers that they weren't otherwise seeing revenue from. right now, large brands are spending money on facebook. -- sorry, twitter. i think that is sticky to a degree. they had a problem that they were chasing anybody who would spend a dime on them and they are taking it up without having the metrics to justify retaining the spend. that is the spend that they lost. as they start to mature they stop seeing that bright shiny object. that is why we are seeing no growth at this point in time. francine: update me on snap. is it working? tom keene still doesn't know how to use snap. what is a feature? >> what about snap? francine: what is the future? >> snap is still evolving as a business. as a platform for certain

segments of advertisers it is a meaningful opportunity to reach consumers. but it is not for every advertiser. francine: but is it really worth $20 billion. the media says if it was really worth it, the markets think it is worth 28 billion >> i have a $10 price target at -- million that's a 16 tom: does the bank or do market ipo right? on the surface it looks like the bankers did fine. but did they create a public service for the finance community by having snap enjoy losses for the suckers of the top including me loaded the boat at 29? >> it depends on whose perspective you are looking at it from. they did a wonderful job from the perspective of the issue. they maximized the capital they could generate. that has problems because snaps

credibility may be challenged if they can't grow into the implicit expectations that are required to justify valuation. i don't know how you get there. i don't know if anybody could plausibly get to the valuation. tom: this is a breath of fresh air, we didn't talk central banking for four minutes. it was great, brian wieser, thank you. on tv , here is where you can get all of these smart charts with peter hooper and brian wieser on twitter. tv -- here is peter hooper, securities analyst at deutsche bank. you can pop over to the twitter chart. here is brian wieser. it is a beautiful function. stay with us with peter hooper. this is bloomberg. ♪

>> the>> dollar is weak or off chair yellen. you don't see that in the 48 but the euro starts out with a netherlands affect as well. stronger, theo

stronger mexican peso, 19.5. that is a huge deal. francine: coming up shortly, bloomberg daybreak: americas with david westin, jonathan ferro and alix steel. i know you have some great interviews coming up. david: we've got a lot to cover, but we are going to focus on this so-called skinny budget. richard haass from the council on foreign relations. you might think that is off point but he wrote a book on how we should be allocating our funds and he called for the state department to be cut by a third under this budget. and jason furman, most recently an adviser to president obama on the economic situation and we will talk about the so-called skinny budget. tom: what was it like seeing the trump phenomenon, the trump entourage and the president himself yesterday?

david: we see it on tv and it does not begin to tell the story. there is a huge group of autoworkers from the uaw. they were getting time off with full pay to be there. they waited for hours and they love this president. he thanked michigan for giving him the victory and he was very poised, very articulate, very charismatic. tom: looking forward to it, particularly the comments with dr. fuhrman. with peter hooper, we have a global perspective with deutsche bank. i believe the bank of england has a small meeting coming up in our. this is the charts, the massive yellen carney divergence. here are yields within the united kingdom and the united states. we go back to john major on the left in 1992 with brief moments and the u.k. was supposed to be a higher yield and it was not. here we have a massive divergence in yields. what does that signal for the bank of england?

>> it is a refresher on rates, but at this point, they are going to be cautious. our expectation is we will not see any moves. they will stay neutral for the time being. on the one side, and improving europe, maybe some budget issues, but on the other side, i had of brexit, my sense is they will want to be on the sidelines. francine: there was this saga we covered on surveillance extensively two days ago. mark carney has now lost his deputy governor because of a scandal. does that hurt his own credibility? >> i think mark carney carries a lot of personal credibility, obviously, which did not help. but i don't see it making a major change in the bank of england policy. >> do you worry about inflation in the u.k. -- tom had an inflation chart?

>> inflation has been running a bit above target but at the same time, growth is starting to slow. this is a delicate balance for the bank. >> it is philosophical thursday. that is what you do when it is cold in new york. is a given rate of inflation the same in one country as it is in another country or is there cultural or societal difference in inflation between the united kingdom and the netherlands? or the united kingdom and the united states? >> there are national afferences but there is also surprising degree of correlation across countries during this region, a very low inflation period. central banks have been very successful at anchoring inflation expectations at a low level. is driven by global commodity prices but also by the fact that central banks have been acting more or less in concert.

francine: on your optimism with chair yellen, we were dazzled by alan muskie yesterday. your call of sterling is outlandish. it is very non-uber like. it is a weaker sterling, i believe through 110. that is an extraordinary call. >> allen has been making some good calls. sterling is going to be under a lot of pressure with what happens on this brexit process. as the fed continues to move. francine: what is your biggest concern about europe? >>?t brexit or the eurozone the bigger concern, i think, the risk to the global economy is the politics we have coming up. the french elections are still an issue. yesterdays outcome in the netherlands certainly helps but that is my bigger concern. gdp noisy?

>> yes. if lots which quarter to quarter, no question. tom: there is the final word on chair yellen's comment yesterday. the question is well. we appreciate that. he will be with us on bloomberg surveillance on radio with david gura. we have a special treat to have will about her on. -- willim buiter on.

jon: the trump administration lays out a budget with that cuts

to the state department and new resources to fund the fed. the fed anticipates a rate hike. chair yellen says her trigger finger might be getting a little itchy and a setback for populism in the netherlands. the euro slides and the france bond gains. good morning to our viewers worldwide. welcome on this thursday, march 16. i am jonathan ferro alongside alix steel and david westin. walk us through what a skinny budget is. david: we got a look at it. a huge shift for things like epa and state department. these are more radical. it seems like a political document fundamentally. a of republicans say it is that on arrival. .lix: you were there but a lot of what they are cutting is what the rust belt council on. the rust belt voted for president tr