mario draghi will deliver his assessment of the euro zone economy. the central bank is said to be ready to cut inflation forecasts. -- not stop lawmakers asking and it is election day in the u.k.. the country heads to the polls for the second time in two years. is gooddon, it afternoon and in new york, it is good morning. a huge thursday coming up. i am jonathan ferro alongside david westin and alix steel. alix: super thursday. the u.k. voting underway, and then at 7:45, we get the ecb rate decision. a cold and 30, the draghi news conference. 10:00 a.m. -- tech :00 a.m., the d.c. soap opera starts. former fbi director james coming will give his testimony in front of a congressional committee. david: live coverage starting at 9:40, including broadcasting on twitter.

we are discussing with joe manchin, the senator from west virginia. it is a big drama. jonathan as you know very well, there is a big question of whether it is drama or it really affects the world such as markets. jonathan: thank you very much. let's begin by getting a look at the markets. looking at futures, this morning. we go nowhere. up about a 10th of 1%. the euro a little bit weaker. treasuries on offer at the margin yields, creeping back off those 2017 lows. alix: i am taking a look at dollar-yen, a really interesting morning for that currency pair. exit from a monetary stimulus could be on the agenda at the boj. dollar caught a bid and now dollar-yen up on the day by 2/10 of 1%. definitely an interesting level to watch. the vix goes nowhere.

well,s where, -- gold as off by about two dollars. crude up by 5/10 of 1%. let's count down to one of the big events. less than an hour from now, we will hear from the european central bank's latest monetary policy decision. it is believed mario draghi will drop the phrase downside risk in his gross outlook. a word that is not been used by the central bank since august 20 11th. matt miller is joining me. what do we have to look for in a statement from mario draghi outside of rate policy and what they may or may not do with the bond by program? -- bond buy program? 90% of theast economists we surveyed expect that change.

no longer downside risk to growth, but a phrase that has not been used in six years. there could be a change to forward guidance. some economists have suggested that draghi may remove the word lower from his forward guidance for policy, saying he will just -- he could just keep monetary stimulus longer, pass the end of quantitative easing. he has not been able to get sustainable inflation up to a level where he wants it. 2% target is so far off that the ecb is possibly going to lower its outlook 21.5% for inflation, all the way out to 2019. jonathan: he has to now lets that the pickup in growth we have seen across the continent and i'm wondering how he does that and justify the need for 60 billion euros every single month of qe.

the problem he faces is the one that the boj and the fed faces as well. he is getting that growth. the final euro gdp number was 0.6% rather than the 0.5% we thought. growth is stronger than what the market is looking for. we have ae time, headline inflation number at 1.4% and a super court number well below 1%. he just can't get it up there because of the lack of wage growth and falling energy prices. that is how he will justify continued stimulus. jonathan: great to have you with us on the program. we will break down the decision with you. joining us now is vasileio gkionakis, unicredit research head. kate -- great to have you with us. also dean turner with ubs 12 management.

we could bring that quote up from the last meeting in april. rates toue to expect remain at present -- at pleasant or lower levels. well past the horizon of our net asset personages -- reduces. rates to : we are going to have aasileio drop in the rate easing bias. personally, i think it is unnecessary. priced, whenhat is i look at the market, i see bond yields marginally higher. i think you will have a dollar higher, however trade is generally higher. let's just make sure we put this in perspective. beenising euro-dollar has half because of the euro, half because of the weak dollar story. get what we are expecting, they drop in the ratings in

bias, i think the -- jonathan: no one really believes rates are going to go lower. why is it significant? dean: it has to do with timing and preparing the markets for an exit from qe. today's move should be the first step to removing the reference to lower as was pointed out. it is inconsequential. what we have to be worried about is if we don't get a change in communications, that could come as a surprise to the markets. jonathan: let's get the ecb economic assessment from the last year as well. a more balanced but still tilted to the downside. do you remove the downside language? we are trying to read tea leaves, here. what does it mean, vasileio? vasileio: in terms of likelihood, this is probably the most likely outcome, and the

sense that the downside risk will be removed. there is no point in shooting themselves in the foot. qe was there for a reason and there is no point in not accepting that reason has been achieved to a certain extent. this removal has been priced in by the markets. i don't expect any big reaction. jonathan: as we have sets over the language of the statement that is going to come when draghi delivers the news conference, he may also a that with a downgraded inflation forecast, as well. vasileio: i saw the news, yesterday. i am a bit puzzled in the sense that we saw the that with a dowd inflation headline suggesting the reduction all the way up to 2019 because of energy prices. really? seems -- i think on the -- they will have to

be revised down, which they may attribute to energy prices, which is no big surprise. if they hit toward revising inflation forecasts, not only because of the energy prices, but because of some other underlying factors, then that would be -- jonathan: what are you looking for? vasileio: improved balance of risk. draghi isink that going to strike a relatively neutral stance. if it comes along the lines of what we expect, i think europe is going to -- euro is going to grow a little higher. jonathan: when you listen to the president of the european central bank, they are not in a rush to remove accommodation. why is the market taking one line in a statement and jumping 18 months ahead?

we have the very mind that what we are seeing in terms of the economic data, the strength of the data we have seen is not consistent with the current policy stance. were to see that some of that language was toned down, then that would raise some questions. jonathan: we have seen this story in reverse. when he was 2011 focused on inflation. inflation was higher, output was lower and now you can turn the story on its head. does that have a bit of a problem? dean: clearly inflation is the key issue and we are expecting we will not see a significant change until the fall criteria that has been laid out has been met. inflation has to be durable and it must be more broad-based than it is, today. i think we are in a very different world than where we

are, today. in terms of the forecast as you mentioned, there will be some tweaks but we are talking basis points. it is not anything material. it is the overall trend that's important. andthan: vasileio gkionakis d turner -- and dean turner will be staying with us. alix: i am excited. inflation, that's all i looking forward to. 7:45, mario draghi speaking. 45 minutes later, don't miss it, you can watch it here on bloomberg. live from washington, london and new york, this is bloomberg. ♪

steel i am here with alix in new york and jonathan ferro in london. i am down here because of james comey's testimony expected at 10:00, today. we have just gotten released some excerpts from the vice-chairman, the ranking member of the intelligence committee, some excerpts of what he is going to say at this hearing. verylled comey's testimony disturbing. he says the special prosecutor has not worn off the committee on any issues, and he also says the testimony from james comey will show that president trump is violating what he calls post-watergate guidelines that try to preserve the independence of the fbi from the president. did get that prepare testimony yesterday from james comey.

he went through nine different instances where he had encounters with the president. in one of them, he specifically said the president said that the investigation into the russia issue was putting a cloud on the presidency and that he asked whether there was anything they could be done to help remedy that. joining us now is kevin cirilli, bloomberg's chief washington correspondent. what has been the reaction on capitol hill and at the white house? kevin: republicans feel this is not evidence of obstruction of justice. this is not clearing a legal hurdle for anyone to make any type of case that there was an obstruction of justice. the president had this assertion that they feel that this was a victory for them in terms of just what is on the testimony. clearly democrats disagree with this.

they're going to try to aggressively go after this white house in terms of trying to frame this as an argument of the president should not be meddling in any type of investigation, even if it doesn't mean that legal hurdle -- meet that legal hurdle of obstruction. david: is this a legal question or a political question? we do not indict presidents of the united states, anyway. even if he had committed a crime. how will this play politically? kevin: we were working on this and one of the things that all of our sources have told us is that this is so reminiscent of the campaign, when the president 's back was up against the wall. they tried to make it locker room talk and now you are hearing new york talk and that was the moment in this testimony with the president told former director comey to let it go with regards to the investigation of general flynn.

thanis very different asserting himself and saying stop any investigation. david: it is not a pretty picture that this testimony to -- paints. said the president said to him in a private meeting quote, i need loyalty, i expect loyalty. move,comey said i did not speak or change my facial expression during the awkward silence that all load. we simply looked at each other in silence. when you have the president of the united states one-on-one saying i wonder loyalty, there is a message there. kevin: what a well-written dramatic statement coming from former director comey. something that the president has consistently said in terms of a political culture that surrounds him. whether or not it is appropriate, we have house speaker paul ryan saying it is not.

all of that said, politically speaking, because there is not a legal argument, we were talking about this before the segment, this is not going to hurt him with his base. whether or not it hurts him with democrats and independents, that is where and why you are seeking the republican machine mobilize. they are working in tangent, right now. david: i saw a ad on local television from the committee to protect the president saying we have to rally for the president. kevin: game on, for them. david: we will turn to some of the legal aspects of this and bring in robert ray, a former whitewater independent cash -- whitewater independent counsel and a former federal prosecutor. thanks for being with us. let's focus on the law is supposed to the politics. -- as opposed to the politics. you read the comey testimony.

is there anything in that testimony that would lead you to believe there may have been a crime committed to the president -- by the president? former director comey may have felt uncomfortable and that it was an awkward moment as i'm sure it was does not mean that -- the same thing as saying it was obstruction and even responsible democrats are knowledge and the fact that they are not making a contention that this is obstruction or a impeachable offense. we will get beyond that fairly quickly. david: that leads us to the question of what is going on in the senate and the congress and what is going on with mr. mueller. what is the senate doing? what could come out of it if it is not a criminal violation? robert: it is a political moment and it comes in the context of an order, a porting -- appointing the special thestigator and

investigation is still directed to uncovering and determining whether or not there is any evidence of collusion at the trump campaign involving high-level individuals with the trump campaign. along the way, they are going to deal with things like michael flynn and whether or not he provided false statements to the fbi, whether or not that should be prosecuted. those are all matters that would be presumably within robert mueller's purview. there are legal aspects that will survive and continue, but the moment on capitol hill with jim comey's testimony is to present to the public what happened with regard to the encounters with the president and whether or not there is anything to be done about that. sense, it is a relatively recent development fullthey would not be a

some relationship between the fbi director and the president of the united states. the protocol with regard to contact by the white house, including the president to be run through the justice department at the level of the deputy attorney general is a recent development. a development that occur during the second bush administration -- occurred during the second bush administration. there has been much more direct contact in the current administration with president trump, for understandable reasons and in a political environment, it is understandable that the president of the united states would like the cloud removed of investigation that hangs over this administration. that if request something could be done to expedite things, that would be in the country's best interests. i happen to agree with that.

that is the appropriate meta--- amount of pushback that the president should be making and it is also appropriate for director comey to push back in making sure that the integrity of a ongoing investigation is protected and he certainly did not agree to go easy with mike flynn and that investigation is going to continue with the new fbi director and the special counsel. ,avid: you actually served investigating president clinton. explain the effect of the senate hearings on that independent investigation. i note that senator warren has gone out of his way to say that bob mueller has said don't worry about it, you can go into anything you want. what does that do if you are bob mueller? is there anything in the comey testimony that would say we need to look into the president? robert: i don't see it. i think mark warner acknowledges

that insofar as he is not commenting as other democrats have about whether or not impeachment proceedings should begin or whether or not the president obstructed justice, all he said was that he is disturbed and people can make up their own minds about whether or not they are disturbed. is that it'sn view much ado about nothing. the more important aspect of the investigation, which is what democrats recalling or and what the special counsel was important -- was appointed to do was investigate whether or not there was collusion by u.s. government officials or government officials to be an russian officials. -- or russian officials. in a political environment, it mueller iswhat bob suggesting is that there is nothing about director comey's testimony that would impair or impact the current investigation

before the special counsel's office which suggests that he has determined there was not -- that a of traction case would not lie. david: that is very interesting. thank you very much, robert ray. former whitewater independent counsel. alix: the market reaction, let's go to vasileio gkionakis of unicredit and dean turner of ubs will management. vasileio, should the markets be hedging, today? vasileio: it is difficult to tell. i'm saying this because i don't think the dollar has actually of theseot on the back specific developments. , a more a general issue generalized and broad-based issue with the way the u.s. administration is handling things. that definitely reflects as far as the fiscal stimulus is concerned, tax plans.

from that respect, unless we get something which is really bad on that front, i don't think it's going to be a make or break for the market, or the dollar, specifically. alix: in the testimony that the senate released, yesterday, donald was stressing that the pressure cloud was interfering with him doing his job. i heard that at least three times. is that what the markets should be focusing on? do we need to price out anything from d.c. until any kind of russia investigation is resolved? dean: that is probably the right course of action. as far as the markets are concerned, it is ultimately going to be about can trump get back on course with the economic program and as things currently stand, that does not look to be the case while we have this noise. jonathan: jonathan: -- jonathan:

the dollar rolling up throughout much of 2017. dean: that is a very good point. any expectations around trump have largely evaporated from the market. if we do get to a written -- get a return to a space of normality, there could be further upside. jonathan: e.m. ripped against the dollar, much of the g10 is ripped against the dollar. --there anything left in tc left in d.c. in terms of downside risk? dean: the dollar remains a good 10% overvalued. and -- the euro euro. is iaction to that would've expected the euro to be much higher, but it's not -- that is why it is creating a freeze. alix: great stuff.

we may have an answer sometime soon. vasileio gkionakis and dean turner, both of you are sticking with us. in the commodity markets, i wanted to point out what is happening with crude. it was up a little bit, earlier but now has rolled over. the weakest -- the weakness continues. $46. coming up, we will bring you ecb's policy decision, followed by mario draghi's news conference. just 45 minutes later. don't miss it, here on bloomberg. ♪

jonathan: from london, good afternoon. new york, good morning. along withan ferro david westin in washington and alix steel in new york. let's get you up to speed on the

market action ahead of the futures in the united states. marginally firmer. switch up the board. here is the state of play elsewhere. treasury yields grinding a little higher. 220 on a 10 year and the euro just a little bit softer as we approach that ecb decision. a news conference about 60 minutes from now. that is the story across assets. emma chandra can get you up to speed on what's making headlines outside the business world. emma: and the u.k., voting boating is underway in the country's second general election in just over two years. prime minister theresa may and the labor party leader are among those vying for members -- stay with bloomberg television for a one-hour special starting at 5:00 p.m. eastern time. we will have instant analysis

when the polls are published. it is the blockbuster congressional hearing washington has been waiting for. former fbi director james comey will hold testimony that president trump pressured him to lift what he called a cloud of the russian investigation. you can watch comey's testimony on bloomberg tv at 9:40 a.m. eastern time. the u.s. senate is considering whether to add strengthen sanctions against russia to a measure that would impose economic penalties against iran. the new penalties would punish russia for meddling in the u.s. election and its activities in the ukraine. global news, 20 four hours a day, powered by more than 2700 journalists and analysts in more than 100 -- and more than 120 countries. -- in more than 120 countries. jonathan: in many places, the

search for yield continues and according to one investor, the most attractive investment might be u.s. treasury's. -- treasuries. -- in comparison to the 10 transfer, the more attractive -- they are more attractive on a yield basis, but i would suggest that they are underlued, pricewise and yielding and investors should be cautious in terms of how much they want to own, in terms of relative cash. do think demand from china will be supportive of treasury yield. we continue to see strong demand from japan and europeans, who are looking at negative yields in their markets. that is one of the reasons we think although the u.s. economy is reasonably strong, it is exhibiting end of cycle behavior

to a degree and we think yields are going to remain relatively well contained. jonathan: we are still with dean turner of ubs wealth management and vasileio gkionakis of unicredit. had -- dean, how do you make sense of 220? dean: in our view, high-grade bonds across the board are not attractive at all. it is simple. we seem to be in a global economy that is strengthening. inflation is picking up and interest rates are moving in the wrong direction for bond investors. jonathan: vasileio, what do you think? seen --

that rage for yield is down in a lot of places. vasileio: for sure. as far as the euro surged -- eurozone is concerned, i think we are going to see a lot of demand and a lot of flows over the next couple of years and that is largely because there has been such an excessive pessimism to the eurozone, even pricing in the possibility of a and thatf the eurozone money that outflows without including the u.k. is going to start reversing. going back to the point about yields in the u.s., if we did not have the trump election and we stopped watching the market at the end of october and woke up today, the yields would still be up by a good 25 basis points. basically what is happening, i expect yields to grind higher. i think we are reverting to that normal pre-trump trade and we are seeing greater growth

prospects. we have that a rational -- we have that -- we had that irrational exuberance or whatever you wanted to call it. i think we are going to grind higher. alix: what is going to be fundamental when it comes to yield? we saw consumer credit rise the lowest since 2011. trump trade versus overseas buying like japan and china. can you help me understand yield? : i think the demand side is clearly what is driving the short-term. year progress through the and we start to see further evidence of strengthening in the global economic backdrop, as well as inflation picking up, ultimately that is going to make investors reassess how they are adapting their portfolios. we see very little value in holding too much exposure to assets which on a historical

basis look fundamentally unattractive. alix: vasileio, when you take a look at currency pairs and yield spreads, you have yield spreads in the u.s. and japan all owing to -- following dollar-yen. when it comes to the dollar -- the euro and euro-dollar, how does it translate to the currency market? euro-dollar far as and the relationship with rate spreads is concerned, the -- variousp has changes throughout the year. it really depends on what time horizon, but i will say this. if you look at it from a long-term perspective which is what i would like to do, if you look at the past 12, 15 years, what you are going to find out is that at the nominal level and at the real rate, euro-dollar is

still undervalued. it has not overshot as short-term is -- short-term relationships are showing. ask the question because the chinese come out and now we understand that they are backing the treasury market and buying bonds. treasuries, is it safe to say that a big bulk of the move we have seen has nothing to do with economic fundamentals and everything to do with a big buyer getting back into the market? dean: that is clearly a risk and not just china. we have to think of central banks across the west as well. european central banks are buying 60 billion in bonds every month. that is a source of demand that is compressing yield. until we get to the stage where it will happen one day, where we see balance sheets unwind in the future, perhaps until we see that point, we will not be

trading on fundamentals. jonathan: in terms of risk aversion, when you see new lows for 2017, does it shape your view that -- reshape a narrative that is not there? vasileio: not at this stage because even when yields were -- we had to move higher and then yields would move lower, risk assets were still performing quite ok with equities, especially in the eurozone. risk assets to fall from here, you need to cut less. it cannot simply be the correlation with yield. unless we start seeing immaterial slowdown, which i don't see materializing, i just don't see -- of course there will be black swans, but i am not bearish on risky assets. i feel few months ago,

like the catalyst was supposed to be the fed hiking three times throughout 2017. dean, what is your best case for the fed? our expectations in terms of the hikes has not changed. we still expect three hikes this year and three next year. certainly from what we have seen in the communications is that the u.s. economy warrants that degree of timing. i would not be getting overly optimistic as we could see more than that. jonathan: vasileio gkionakis of unicredit and dean turner of ubs wealth management will be staying with us as we count down that european central bank rate decision. full coverage right here on bloomberg, followed by president mario draghi's news conference at 8:30 eastern. 1:30 in london and 2:30 in frankfurt. this time in estonia. the ecb on tour. we will bring you pull coverage

on bloomberg tv. ♪

emma: this is bloomberg daybreak. coming up, democrat senator joe manchin joins us ahead of former fbi director james comey's congressional testimony. jonathan: from london, it is good afternoon and to new york, it is good morning. we are moments away from an ecb policy rate decision. euro-dollar a little bit softer. around the table with me for a quick look ahead, vasileio gkionakis of unicredit and dean turner of ubs wealth management. what are the specifics you are looking for? vasileio definitely the part of

the forward guidance -- vasileio : definitely the part of the forward guidance. we are confidence -- we are companies they will remain in reference to the low. of course, not the sequence per se, but we are well past the horizon of asset purchases, so that is by far the most important aspect. jonathan: dean? the markets will be looking out for the removal of the forward guidance. perhaps we could see some volatility in the currency markets. -- for an extended period of time? vasileio: i don't think this is what the market expects, which is why i think the euro could grind higher in case we have to drop. jonathan: how does that inform

your longer-term view? you can have half an hour. vasileio: the ecb will have to a knowledge the improvement in growth. at some point, that improvement is going to start manifesting into higher inflation at a gradual place. -- gradual pace. jonathan: is a getting harder to justify -40 basis points? dean: at this stage. let's not get carried away in terms of the inflation outlook. inflation is still going to be somewhere below target for the remainder of this year. we are certainly making enough progress that we can start to see a change in policy. jonathan: 33 seconds away from the decision. let's get you up to speed. futures are firmer in the u.s., about a 10th of 1%. here in europe, a decent tone as well.

call it positive 48 points higher. there is the action in the bond market, treasuries pretty stable, yields grinding higher. 2017e just off the low for and the euro-dollar, softer going in. as we look out for the ecb decision to drop and it drops right now, leaving rates unchanged. 0.25% on a marginal lending facility and -40 basis points, the big story. it is the forward guidance around rates. the ecb rates at a present level for an extended period of time. they drop the reference two or lower. the admits guidance that interest rates might be cut again. rates unchanged, but it was always about the border -- forward guidance. the previous line said rates will remain at present or lower levels for an extended period.

this time they omit the guidance that interest rates might be cut again. the ecb stands ready to increase size duration of qe if needed and the ecb will run qe until inflation has substantially adjusted. the ecb has dropped the reference to lower rates in their forward guidance. looking at reactions in the dollar, -- in the market, euro-dollar grinding slightly higher. we just got the intraday price of the euro. off by about a quarter of 1%. a marginal push higher. let's get reaction with vasileio real quickly. it was your-based cake -- case over unicredit. vasileio: there was no justification for the ecb to keep on holding into the possibility of lower rates because nobody believed it would manifest. reaction,f the market i think it is marginally positive, the euro, on the face of it.

i think the market would definitely wait until the press conference because draghi has demonstrated that he has the ability to talk one way or the other and affect the market. as i said, i think marginally positive on the surface. i would not get too excited because i have to bear in mind that we have an extended long euro positioning in the speculative market, especially the change. but notly positive, hugely. jonathan: dean, the question mark around rates is still not answered. the ecb continuing to buy 60 but in euros through the end of this -- through the end of december. that guidance is going to remain. are they going to have to do something or communicate something? expectation is the september 7 meeting is going to be the crucial meeting. at that point, we expect to hear a change in communication on qe.

our expectation is they will announce we will start to see a reduction in the qe program beginning in 2018. now is mattining us miller who will be in front of mario draghi. rates unchanged, but it was never about rates are qe, it was about forward guidance. they omit the line that rates could be cut further. i don't believe there is anyone in the market in london, wall street or frankfurt that believed rates were going to be cut again anytime soon. how does this set up in terms of forward guidance going through 17. 18? matt: it is very interesting that they omitted that because not everybody was watching -- that was watching expected them to drop the or lower part of that statement. they expected them to drop growth and put in balance as we have been talking about, but also the fact that they continue to reserve the

right to extend qe. that is not a game changer. nobody expected them to drop it at the end of december, but draghi has been saying that in press conferences as well. right to kindhe of go bigger on qe, but not lower on rates. it is really interesting and it is their answer to the conundrum they have. growth continues to increase. another measure of that with the first quarter of the ecb. this first quarter of the eurozone, and yet they cannot get inflation sustainably after target. we had a 2% reading that dropped to 1.4% and that was only the headline number. very interesting. jonathan: vasileio, fast-forward to the news conference. you have the forward guidance on rates and now we will get the risk assessment on the economy.

can you assume based on this change that we move to a balanced view of the eurozone economy? :asileio i think it -- vasileio i think it is a fair assessment. we are talking about the balance of risks to growth, not the balance of risk to inflation. the ecb will continue to highlight that inflation dynamics remain subdued. as far as the balance of risks to growth is concerned, i don't know, it would be like they are blind if they did not acknowledge the balance of risks to growth. jonathan: matt miller, we will let you run into that news conference. great to have you with us. vasileio gkionakis and dean turner will be sticking with us. ecb leaving the policy unchanged but missing that line that rates could be cut further. we will bring you further reaction and county down to that news conference. do you have a question for draghi, -- do you have a question for draghi? send it to matt miller. we will have a one-hour u.k.

election special at 5:00 p.m. new york time. full analysis of the exit poll. alongside myself will be guy johnson. that program later today. you are watching bloomberg tv. ♪

jonathan: this is bloomberg daybreak. let's get you up to speed on that ecb decision. rates unchanged, euro-dollar popping off the back of forward guidance. the ecb admits that line that interest rates might be cut again. we now trade on the session, despite off the back of the decision, you don't see on the screen right now. if you were in the room, what is the one question you have to the big man in estonia, vasileio gkionakis? vasileio: that is a interesting question. i would like to know if we get

the updated projections and they point to a deceleration in inflation, as far as the ecb projections are concerned, i would like to know the underlying reason for the lowering of projections. if they justified based on energy prices, i would not be worried. jonathan: dean, same question to you. dean: i would like to get a better handle on how the governing council is -- the hawks are having their voices heard to a much greater extent. it would be good to get an insight into how that is playing out because that is what is going to determine the path of future policy. jonathan: the idea that qe needs to end for a period of time before they do something on

rates, is that somewhere the hawks have a bit of room to push? vasileio: that could be the case. judging from draghi's speeches and his responses to the questions he has had, he has a pretty strong view on that and i think it would not make much a sense that much since to reverse that. it could be the hawks make that case for them, but i really doubt that we are going to see a reversal of sequence. jonathan: do you think of the argument is alive and well? -- do you think the argument is alive and well? dean: it is whether or not it actually transpires into action. jonathan: do you think it will, ever, given that the argument seems to be won by mario draghi. vasileio: about inflation, you mean. jonathan: not inflation, but you look at the backdrop of the european economy and he takes a lot of the applause for it.

vasileio: and rightfully so, i might add. i think there is a balance of risks. think one hand, i really the monetary policy needs to start stepping back, gradually so as to push the politicians to start making structural reforms. one thing i would mention, inflation is not a eurozone phenomenon. jonathan: he is good at blaming local factors. vasileio gkionakis of unicredit, great to have you with us. dean turner of ubs wealth management, as well. full coverage right here on bloomberg. ♪

♪ jonathan: the ecb close-out further rate cuts and assign it

is moving closer to an exit from its stimulus program. the news conference as 30 minutes away. election day in the u.k.. the country had to the polls for the second time in two years. from london, new york, abc, good morning and good afternoon. "bloomberg daybreak" with a big there's a coming up. alix: 10:00 p.m., pulls of the closing in london. ben 8:30 a young eastern, the ecb will discuss their monetary policy. and then the d.c. soap opera directorth former fbi james comey beginning testimony in front of the intelligence committee. david: i am wanting for that special bloomberg coverage of comey's testimony coming up at

9:40. that will be on bloomberg television of evil streaming it live on twitter. guestsgreat lineup of coming up -- we have a great lineup of guess coming up. we have joe manchin will be listening to mr. comey enron osco, former fbi assistant director. jonathan: david westin, thank you. this thursday, futures unchanged. a marginal move higher about a 10th of 1%. easing.dropping john a third of 1%. 29 minutes from a news conference. we await the risk assessment around the euro zone economy. 45.51. alix: after that tremendous 5% slide we saw yesterday, we will discuss that.

dollar yen up on the day. there were reports of the doj could talk about exiting from stimulus. vix slightly higher, but flat. oil, my favorite, down 1/10 of 1%. david: thank you. testimony is ad recollection of his conversations with the president under siege. the russianescribed investigation of the cloud and his ability to act on behalf of the country. he said he had nothing to do with russian and a not been involved with -- in russia and always assumed he was being recorded. he asked what he could do to lift the cloud. joining me is kevin cirilli joining me from capitol hill. -- joining us from capitol hill.

how was the reaction on capitol hill? kevin: it is incredibly busy as all lawmakers are awaiting the first testimony from now former fbi director james comey set to begin at 9:40. clearly, there are questions facing mr. comey as well as the administration, but republicans seem to be behind the white house at least for right now. yesterday, i spoke to lindsey in southrepublican carolina that said he is backing the white house and criticize him or comey -- criticized former director comey seeing you can defend the white house, but still be advocating for tough regulations and sanctions against russia. that is what senator graham is doing as well as senator mccain. clearly, as it moves forward beyond today, it is not going to just be about whether or not the president meddled into any type of investigation because republicans are saying there is no president right now --

suggestt right now to there was any of section. but they can hold the position of defending the president while disagreeing with him on russian sanctions. david: if there was any concern about the president going soft on russia, that may be less likely, but the people want to know is can the congress get this behind them and get back to things like tax reform, remember that? remember health care? can we get back to those things? [laughter] david: they are said to have a vote that would dismantle the 2010.doc --dodd-frank. tomorrow, the house freedom caucus is set to unveil a set of principles for tax reform. this is an opening bid from their standpoint to negotiate with the white house with house

speaker paul ryan on a set of principles for tax reform. yesterday, i spoke with a chairman and i asked him, the house is likely going to pass dodd-frank field today, what is that mean to you? yesterday will it through his committee in the senate. they have towas get through flood insurance, housing reform, and yes, they do have to get through russia sanctions for enron that moved to their committee. russia impacting financial service policy as we speak. david: i am not sure how encouraging that is, but thank you, kevin. [laughter] whip through's some of the market reactions ahead of jean comey's testimony. islondon alongside me blackrock's chief analyst. i haven't really interesting conversations about the kobe testimony.

are you interested in it? absolutely. is it significant to markets? that is where i see a real division. >> focusing on the market application, the question is how big and how long of a distraction is it going to be from pressing forward the pro growth and progress form agenda of the white house. if it is a small destruction come i think you are going to see bond markets reacting and regain some optimism, not saying higher growth expectations. if serious stuff is unveiled, people will get more gloomy. jonathan: what does that say about the d.c. agenda, fiscal policy, think the market wants? people will watch testimony to try to gauge as to when it will come. >> that is right. for most of the year, the dollar has been weakening against all major currencies. due to the disappointment at the rate of change of the pace of these reforms coming through. there is very little on the

moment -- at the moment on the table. we have to get past this. this idea of a cloudy over the president is out there right now. we need to let the market have an opportunity to look at the issues instead of being accessed with politics. but the dollar will struggle. jonathan: given where market prices are, isabel, across access -- across assets, where is the replace? in treasuries, they are looking to value whether they are currently priced. of what we have seen, is that totally independent of what is happening in the sea? >> of course not. if you look a bond markets, growth expectations are quite depressed. it is a very low bar, but that means you don't need a whole lot to be -- to meet that low expectation. basis been trading on the of the macro fundamentals. by and large, the economy

remains strong. and so, if you get a next to politicalthout any intervention, things are looking constructive. have seen a lot of economists say we are not factored any fiscal policy out of d.c., but these investigations could go on for years. the robert mueller investigation will not be over all of a sudden in september. have you priced out anything from d.c. in the forecast? yyen.had a $107 we're not expecting much in our forecast. the problem is even if we get through this without an impeachment, what is becoming clear is republicans -- if you are divided on this issue are many other issues -- that is a whereissonant environment

the idea was your three areas of government -- the house, the senate, the president on the same direction achieving a lot of things in a relatively short time. again, we can avoid impeachment, but that does not mean we go back to the view that the market had back then. alix: let's say impeachment is a low bar. [laughter] alix: if you take a look --you mentioned equities pricing better fundamentals, but i don't buy it. investors look at the exact same data. how do you view u.s. growth? growth as being above trend. in thes a bit of noise data and the quarterly gdp or inflation data, but we see the midcycle very robust, kind of growth path. can we see the expansion having quite a a lot of runway.

even if you get additional stimulus, so much the better, but without that, very constructive on the u.s. economy right now. jonathan: do you want to say the ?x -- the smart money >> fx is a relative game. if i am saying the dollar yen goes down is because japan is doing quite well at this time. what is going on with the ecb's decision, europe is looking better than it has before. it is about if the u.s. stands relative to the changes in the rest of the world. that does not mean stocks have to do badly in the u.s., but you can different -- differentiate between the two disappeared jonathan: coming up, we count you down to the presidential --county down to the mario

draghi news conference. we will bring you president draghi's news conference at 8:30 easter, 1:30 right here in london. you are watching bloomberg tv.

alix: welcome to super thursday on bloomberg. i'm alix steel alongside jonathan ferro and david westin. i am want to talk about oil. i am all by myself. david: but you have it under control, so that is good. [laughter] alix: let's talk about oil. oil is falling out of bed by

extending its declines after a 5%, yesterday. here is what happen yesterday. this is u.s. crude and product supply advertise levels since 2008. take a look at the terminal. that is what caused a steep slide in oil. is bloomberg's chief energy correspondent. the move yesterday, the velocity of them move was quite surprising because i thought the longs for shaping out. >> it was a big surprise. the market was looking for a another draw. we're a massive, massive increase as you rightly pointed out. there was a lot of increasing u.s. petroleum inventory since october 2008. and got the market completely ground footed. it was giving another reason of

competition that believe the market is rebalanced. opec is failing the trying to bring supply demand to balance. alix: they say the u.s. will be the reason of competition that believe the last rebalance. let's take a look at tightening inventories in other areas. does that bullish stance still hold? >> it does not hold because that is been the argument since january. after six months of repeating the excuses, the market is rebalancing elsewhere, but we are not seeing it. the market is really growing on a global basis, but we have built $600 billion of barrels of stocks and it will take an enormous amount of time to bring it down. tryinge, the market is to lower the growth of shale. if oil prices were to remain a $50, shale would grow by one million barrels. today, if it $45 does not slowdown, that is a story of growth in 2018.

alix: i want to point to the opec deal because what we saw yesterday was a flood of iraqi oil coming into the u.s. despite saudi imports coming down. and then we got were that iran to asia --ply of oil i'm sorry, a rack did that -- iraq did that. we saw significant drop in saudi arabia's supplies on a weekly basis. next week will probably be reversed. certainly, there is a trend here. even if you assume that some of states washe united just noise, we have seen a growing trend of iraqi crude arriving in the u.s. the conversations that will be needed to solve the problem.

it is on the interest of every other country to bring supplies and the u.s. to bring stocks down. so far, iraq is not helping. alix: great to get your perspective shared joining us on the phone is -- president. he taught me everything i own -- i know. yet.cannot buy it there's too much pessimism in the market. if i wanted to go aggressive and i wanted some position, i might go with oil. the pessimism is so huge. we have an enormous extension of opec cuts and we have precious coming into the deal, which should have been insanely bullish for the oil markets. have a one-off deal you never seen before, that kind of a compliance between the russians and opec. instead, we have a market that has dropped. we have seen three moves by the trump administration, all of which should have been positive

for energy, but in fact, has been interpreted negatively. climate change in the selling of the spr and obviously the dismantling of a lot of regulation controlling fracking it is nothing of the epa. all of this should have been positive for oil, but it has been interpreted in a negative way. right now, the negativity is really overwhelming the market, despite the fundamentals, i disagree with javier. i don't think they will get one million barrels of shale, not at these prices. but for right now, the negativity is controlling the market. alix: what is interesting is you have geopolitical risk that is very real. blaming --ve iran for the terrorist attacks. how do you understand the geopolitical risk? you should have a $15 balance higher.

why don't we have that? thehen i first came into market, had a mentor who told me when a market is bearish, all news is bearish. that is what is going on. are we getting rebalancing? yes. his production rolling over into the major shale plays? yes. are we getting compliance? yes. every starting to see these production numbers come down and to see the rebalancing going forward? i will give you a mirror image , and 2014, we saw stockpiles going up by 1.5 million barrels a day every day and we saw it or two years, and nobody thought that those stockpile increases were going to be -- were going to convert into an oil market that collapsed. now we have stockpiles continuing coming down and nobody believes that goldman sachs and morgan stanley just changed their outlook for 2018 a 2019. nobody believes that will ever make a fundamental difference in force well to go up but it has

to. for right now, the negativity is controlling everything. sachs, morgandman stanley -- you name it. thank you so much for joining me. coming up in 10 minutes time, more reaction to the ecb's decision in the mario draghi news conference -- all eyes and years on the balance of risk. this is bloomberg. ♪

♪ jonathan: from london, new york, and washington, i'm jonathan ferro alongside alix steel and david westin. you are watching "bloomberg daybreak." ahead of that ecb news conference in 7.5 minutes, futures are -- 0.05 on the dow. ftse is softer.

if you switch up the boards, here is the play out. treasury yields higher by two basis point that to 20 on a u.s. 10 year. euro-dollar softer by a quarter of 1%. up 1.1229. a sign that it is moving closer from an exit from a stimulus program expecting the interest rates to remain at the present levels for an extended. of time -- for an extended period of time, dropping. paul.g us is it is a slight change in the language. how significant is this? : it does suggest that the next thing that mario draghi will say is that the risks are balanced. expecting economic

projections from the ecb. we understand that will be a downgrade to the inflation outlook. that gives mario draghi ammunition to say inflation is a mandate. economy is doing fine in terms of growth. fine in terms of inflation, therefore, we have to keep pumping and stimulus for now. jonathan: talk market participants. one believed rates will because lower then here. -- iuggle to record file struggle to reconcile that on the same day, downgrade the inflation forecast as well. how did he do those two think at the same time? [laughter] paul: that is one thing we want to hear from him. but you have heard something of a convergence in the economy that growth is picking up. numbers were revised up earlier today, which settled the

decision for the ecb, yet wages are not picking up. underlying inflation is still about 1%. the line from the ecb is likely to be monetary stimulus is doing all of this at the moment. it is not yet sustained. therefore, we need time. how much time he is going to need is something that people will be looking from him today. usually when these compasses are in frankfurt, what is the one question we really need to get across the data president draghi? >> quite simply, when are you going to decide that you are going to what he down stimulus? they might not get that. they mean i get that until later in the year in september later. jonathan: paul, appreciate your time. a busy day for the team in frankfurt.

-- let's begin with you and talk about the next move. at the end of the year, the guidance so far is it is $60 billion. when dothey need -- they need to tweak guidance? bethey expect september to where they want guidance to come through. you get the hint that a ghost to september, that would be a negative given how the market is positioned. the market is long of the euro. think dragging this out is something the market won't like and will push the euro lower near-term. we see it is a buying opportunity.

jonathan: isabel, what is your base case for now? >> in terms of inflation? jonathan: in terms of qe? >> people expect --we fully expect the growth outlook will be revised and the inflation outlook will be kept the same a revised slightly downward. what that means is we are going to see an ecb that it is in no hurry to unwind the current stimulus and will want to see a sustained improvement in underlying inflation. they are not seeing that right now. that is important to note in the change we are seeing already in the guidance. it is signaling something important about the preference for an instrument. we still haven't easing bias as far as qe goes with the language supportshould condition are not be consistent with our goals, we are prepared to do more, do bigger, and do longer.

what closes the door to is using the depository rate cutting further. there are a lot of people on the governing council who do not like this negative rate. jonathan: forgive me, but i do wonder when the seat think story comes back into question, the idea that they do not look at rates until well after kiwi is finished. is that a story for the backend of this year or not at all? remainsng as his focus on inflation being low, that pushes back that debate in my view. in the same way you are seen in the u.s., too, but obviously we are ahead in the growth cycle and the policy cycle. and yet, these debates took a long time to unfold in the u.s.. that will be the same casing europe as well. it will be a slow go. jonathan: the story of the last

few months -- over on wall street are over here in london, what is the path of least resistance for the euro-dollar? the overwhelming majority would say it is higher. is it still higher at 112, 113? >> it is long-term risk because of the euro being higher. if something materializes from the meeting that disappoint the positions -- that is been the case of the fx market. positions get built up in the g10 and that get unwound -- and then get unwound. i can imagine that'll happen again. beckett take the position that down to p1 11, 110. diversion, the policy story that everyone is focusing on -- that is not disappearing. given the valuation of the currency in the trade. thank you very much

for joining us. the ecb news conference is about to begin. on your screen is mario draghi, leaving rates unchanged across the board. significantly, dropping the easing. the other rates guidance on the european central bank. we would like to get the ecb's economic assessment and where this man is economy is going. we'll listen now on with president draghi. gentlemen, we are very pleased to welcome you to the press conference. i would like to thank governor hansen for his kind hospitality and gratitude. for the excellent organization of today's meeting of the governing council. we will now report on the

outcome of our meeting. regular, economic monetary analysis, the key ecb interest rates unchanged. atexpect them to remain their present levels for an instant period of time, and well past the horizon of net asset purchases. regarding the measures, we confirm that the neck asset purchases at the current monthly pace of 60 billion euros are intended to run a to the end of december 2017, or beyond if necessary. and in any case, until the governing council sees a sustained adjustment in the part of inflation consistent with its inflation aim. purchases will be made

alongside me investments of the principal payments from mature securities purchased under the asset purchase program. measuresary policy have continued to preserve the very favorable financing conditions that are necessary to secure the sustained convergence of inflation rates towards levels below, but close to 2% over the medium term. the information that has become available since our last monetary policy meeting in late april confirms a stronger momentum in the euro area economy, which is protected to expand at a somewhat faster pace than previously expected. risk to thethat the growth outlook are now broadly balanced. at the same time, the economic translatehas yet to

into stronger inflation dynamics. so far, measures of underlying inflation continue to remain subdued. a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to build up and support headline inflation in the medium-term. if the outlook becomes less favorable, or a financial conditions become inconsistent with the progress towards a sustained adjustment, we stand ready to increase our asset purchase our asset program in terms of size or duration. let me explain our assessment of greater detail, starting with economic analysis.

increased byl gdp 0.6% quarter on quarter and the first quarter of 2017. quarter5% in the last of 2016. notably survey results continue to point to solid, broad-based growth in the period ahead. the passer of our monetary policy managers has facilitated the deleveraging process and should continue to support domestic demand. recoveryular, the investment continues to benefit from very favorable financing conditions and improvements in corporate off at ability. employment gains, which are also benefiting from past labor market reforms, are supporting

real disposable income and private consumption. iseover, the global recovery increasingly supporting trade and euro area exports. however, economic growth to bects continue dampened by a sluggish pace implementation of structural reforms, product markets, and by remaining balance sheet adjustments in a number of sectors, notwithstanding ongoing improvements. this assessment is probably reflected in the june 2017 euro projections for the euro area, finalized in late may, which are conditional on the full implementation of all monetary policy measures. annualrojections foresee

and gdp increasing by 1.9 1.7 by 1.8 and 2018 and by in 2019. 2017, ecbith march macroeconomic projections, the outlook for real gdp growth has been revised upwards over the projection horizon. area are around euro broadly balanced. on the one hand, the cyclical momentum increases the chances of a stronger-than-expected economic upswing. on the other hand, downside risks relating to predominantly global factors continue to exist. estimates, euro area annual inflation was 1.4%

in may following 1.9% in april, and 1.5% in march. as expected, the recent volatility in inflation rates was mainly due to energy prices and temporary increases in services prices over the easteer period. futures pricesn for oil, headline inflation is likely to remain around current levels in the coming months. at the same time, measures of underlying inflation remain low and have yet to show convincing unutilizedpickup, as resources are waiting on domestic price and wage information. underlying inflation is expected

to rise only gradually over the medium-term, supported by our monetary policy measures, the continued economic expansion, and the corresponding, gradual absorption of economic slack. this assessment is also probably reflected in the june 2017 euro systems macroeconomic projections for the euro area, inflationsee annual at 1.5% in 2017 emma 1.3% in 2018, 1.6% in 2019. projections -- the outlook for headline inflation has been revised downwards, mainly reflecting lower oil prices.

turning to the monetary analysis, broad money m3 continues to expand at a robust pace with an annual rate of 2017, of 4.9% since april after 5.3% in march. as in previous months, annual growth in m3 was mainly supported by its most liquid components within narrow aggregate m1 expanding at an after 9.1% of 2.1% in march. growthovery in loan observed since the beginning of 2014 is proceeding. the annual growth rate of loans to financial corporations increased to 2.4% in april of 2017 from 2.3% in the previous month.

while the annual growth rate of loans to households remains april, the.4% in pass-through of the monetary policy measures put in place continues to14 significantly support borrowing conditions for firms and households, access to financing, notably for small and medium-sized enterprises, enhanced credit flows across the euro area. up, a crosschecked of the outcome of the economic analysis with the signals coming from the monetary analysis can terms the need for continued them a very substantial degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to 2%. reap the full

benefit from monetary policy measures, other policy areas must contribute much more the size to strengthen economic growth. implementation of structural reforms needs to be substantially stepped up to increase resilience, reduce structural unemployment, and boost productivity and potential output growth. -- regardings fiscal policies, all countries will benefit from intensifying efforts towards achieving a more growth-from a composition of public finances. transparent and consistent implementation of the stability of growth and of the macroeconomic imbalances procedural with time and across countries, remains essential to bolster the resilience of the euro area economy, and we are now at your disposal for questions.

thank you very much. connect from cnbc. changesg the two big beeneen -- has that decided on a unanimous basis, so everyone was behind it? and if you are saying inflation is around 1.6% for 2019, how and thens expected efficient forecast because you are saying the asset purchase program might end this year, or may go through to next year, but of an effect is in that forecast for 2018 in 2019? thank you very much. pres. draghi: thank you.

basically, i did not hear any dissenting voice by any governing council member with thatct to the proposals have been gestated -- that up in just stated. -- we designed our objective -- defined our objective, the global convergence towards an inflation rate that is close to 2%. this convergence is predicated on the very substantial amount of monetary accommodation that i mentioned, and it is predicated on that. that is what it is in the projections, and that is what it is in the program. thank you.

>> from reuters. my question is regarding -- could the ecb react quickly to the bank of -- on a quickly it was to be sold. are you reviewing the case given the bank was sold a little less of a year ago? pres. draghi: we never, on individual institutions. but what i can say -- we are concerned. we can only appreciate the time the actions of the esm. if the vice president has a comment, i will give him the floor, but as you know, we do not comment on individual institutions. the ecbs a decision of at state-based -- it was a

decision of the ecb at stake. it was related to liquidity problems. it was not a matter of assessing the developments of the solvency , but the liquidity issue. 32,s stated in article number 34, item c, the fact that unable aretion is there are facts that show that debt is about to become enabled to satisfy his debts and liabilities. that is the reason for the declaration of an institution failing are likely to fail. declaration,r the the process was given to the single resolution mechanism in

charge of the resolution. our role was just the declaration. >> mr. trump a, a lot of people are going to take the tweaking to be forward guidance as a sign that a decision on tapering will wouldn september and market watchers be right, that we will get a decision on tapering and what happens to qe in september? and one of the heads of the national central banks has dealt about whether the european central bank can hit its inflation target. we have seen downgrades to the inflation projection, but at the same time, there is a commitment to a lower rate.

given that, should markets share the same doubts that you cannot hit your inflation target? thank you. pres. draghi: the first question was not discussed. question, you are asking me many questions. word -- all, third down the down word in inflation, as a matter of fact, very little has changed regarding inflation. it was 1.9% in april if i remember. we all remember the serious concerns, if not the outcries with inflation going up too much. and it ist is 1.4% almost entirely driven by the price of oil and food. from that viewpoint, nothing has changed in substantial terms.

what needs to be explained, however, if the flat and low profile of the underlying is -- that- that needs to be explained. that has to do mostly with the subdued wage -- nominal wage growth. , and somemany reasons may be more important than others, it is hard to say, but basically, the reasons that are behind this are structural changes that have taken place, one of them is the backward as ang of nominal wages sort of reference of inflation, looking at low inflation rates, but you are other reasons. all of this recovery is happening with a very strong creation of new jobs. so, there is a very

significant increase in the labor force, labor participation. at the same time, we have many of these new jobs are so-called low-quality abouthere we are talking temporary employment, we're talking about part-time employment. there are many so much so that the ecb, the recent paper has aveloped some measures of broader concept of unemployment, which is broader. it may well be that it is lowering the growth of nominal wages as well. more generally, structural reforms that have taken place are good for growth certainly, and a good ultimately, the

medium long-term for employment, making the markets more flexible, especially the labor market more flexible. they tend to produce a lower growth and nominal wages. thinkl of this makes us that some changes in the structure have taken place, however -- first thing is we need to be patient. weneed to be patient because know the labor market slack is tightening, the outlook gap is closing. we do all of these factors in their affects- will fade away in a job quality will improve and talk productivity will increase. the second point is that first of all, we need to be patient. second is we need to be confident.

i we look at the uncertainty mention of inflation, we see two phenomenon. the first is that -- risk -- deflation risks have disappeared. they are not there any longer. that is why we removed one of theeasing biases, which was inflation path. we also see that the uncertainty about the path of inflation has decreased. closedthe output gap was and the employment rate will go down, we are becoming more confident that the inflation path will converge towards our objective in a durable way. that, i come to the other part of your question -- we need to be persistent. so, we need to continue to accompany the recovery with our

monetary policy. we will continue with our purchases and the introductory statement is quite clear to confirm our neck asset purchase purchase thatet will run until the end of andmber of 2017 or beyond, until the council sees the path of adjustment consists in what -- consistent with its inflation aim. purchasesy the net will be made a longtime investments with the principal payments from which are securities purchased under the asset purchase program. in just a little later on, we say that a very substantial degree of monetary accommodation is still needed if the outcome ifome less favorable, or

financial conditions become inconsistent with further progress, we stand ready to increase our asset purchase program in terms of size and or duration. line -- theom governing council trusts the strength and the power of our purchase program. and that is it. i think i have responded to all of your questions. >> do you think lorene a natural rate forecast could force -- do you think lowering the financial could -- beyond the end of easing. pres. draghi: no. no. nothing substantial has happened to inflation other than changes in the oil price and the price

of food. -- i think it was well said by governor hansen this morning -- if we compare inflation now with inflation in december, and we see underlying inflation is the so at theafter year, same time, since with stronger in the inflation convergence, and we see the rates of inflation have definitely disappeared, we felt confident in removing the biasest rate, the easing as far as the interest rate is concerned. >> alexander with bloomberg news. haveresident, did you during the meeting any discussion about policy normalization, or is this

discussion still to be had in the future and light of the current inflation outlook and inflation projections? my second question is you have removed the fiscal easing bias on rates. you say that you are still ready to increase the size and duration of qe. under what conditions would you do that? extension --ed an what is warrant a condition of qe? pres. draghi: thank you. you asked if normalization is being discussed. the answer is no. of course, there are one or two council members -- one of two council members observed that we had to think in perspective to the link between the asset purchase program and the inflation convergence. two, if iwere

remember, two observations of this nature, but there were no normalization, as you mentioned. about why went was left the other bias, the easing bias. first of all, the two are very different. the first is an expectation that interest rates will remain at present are lower levels. if you ask me now, what do you expect? information current , i don't expect lowering interest rates. me, but in case things were to worsen, are you ready to lower interest rates? the answer is yes. is the reaction

function. it does say if things were to turn less favorable, and stop for a moment, if things were to turn less favorable, there are a set offunction. contingencies that are more benign than the tail risk contingencies in the expectation. as such, it is still there to. -- as such, it is still there. if things are less favorable, we are ready to expand. that is the answer. thank you. >> i have a question about -- -- my was --ators why was that not a stock option? as to thecio:

declaration that the bank was likely to fail because it was a ,ank run and an liquidity issue was sufficient. the matter went to the single resolution mechanism. the deciding board s of therm. the srm is the mechanism for supervision. after the declaration went to board toution, to the take the decision about resolutions. , we had noeclaration interference with the subsequent decisions. that belongs completely to the srp, not to the srm or ecb.

legalalking about competencies and we had to be very formal in these matters, as you fully understand. legally, our competence was just to declare that the bank was failing or likely to fail for liquidity reasons. all the rest was not legally with us. >> hello. i have two questions, one is local. deficit,try with low we have no government bonds. politicians are complaining that estonia is missing out from this

central-bank stimulus. qe. how would you respond to such interpretation of qe? the second question is about reform, the european commission has tabled the discussion for the reform of eurozone. are discussing about euro zone finance ministers and eurozone parliament. you wrote that we should not scare or confuse the are discust euro zone finance public with such discussions but concentrate instead on critical minimums that is necessary to make the eurozone function better. how would you define this critical minimum and what is this critical minimum on member state levels? thank you. pres. draghi: i would defer to governor hansen and add something at the end.

of capitalan issue mobility and we get this question all the time. we used the principle of connected vessels, a common financial market and therefore changes that take place in one jurisdiction spill over to the whole eurozone. while it is true that we do not -- a lotct purchases of direct purchases, most of the credits are linked to your of war and that is not set in this country but more broadly in the euro area and the transmission mechanism works but from different channels. one of the signs may be, right now we have the highest inflation rate in the euro area. sense, it is working but through different channels. tom: i want --pres. draghi: estonia being such an open economy, benefits sense, it is t through different especially from the positive effects that qe has in the rest of the eurozone as well. thank you.

on your second question, we had to -- the experience over the last few years shows that the economic and monetary union is -- with many benefits that has brought to the eurozone, is also fragile. it is fragile for various reasons, one because it is incomplete. that is the consideration that is at the basis for the work, theys recent published a paper with different , before thed commission paper, we had the fed president report where there was a blueprint for guidance. with two horizons, one shorter-term where there are certain measures, certain decisions that can be taken,

especially as far as completing the banking union is concerned. then we have a medium to long-term horizon where new changes in economic and monetary union could be introduced but they do require a more extensive change in our treaties -- treaty foundations. guess thismed -- i is to be welcomed, the new work on strengthening the monetary union, especially having in mind that we need to remind -- repair the fragility's that appeared in the last few years in the union. what we talkiscuss about, but this is a broader discussion not finish, just the beginning of a broader discussion. thank you. tom from the wall street journal. what you set about removing the race -- rates means that this

was not a first small step away from a stimulus, a first step towards the exit as it may be interpreted. the second question was on how constrained the ecb will likely be on implementing qe next year. do you see problems, and how flexible could the parameters of qe be? pres. draghi: on the first question, we removed the interest rate bias because the tail race on the future path of inflation had disappeared. that is to say that deflation risks have definitely gone away. -- the deposit facility rate could go lower, the possibility predicated on the strengthening of these tail

risks. said, that does not imply anything as far as a reaction function, the answer is no, if things turned out in a way that the risks were to reappear, we would be ready to lower rates. explanation. on the second point, the program is running smoothly. as far as the future, the problem has enough flexibility and we will look at that when the time comes, if need be. in the meantime, the council members reiterated their confidence in the strength of the program and the power of the program. as you see from the introductory statement, they confirmed the program and the forward guidance associated with that. thank you.

tony from lott republic of the given that the ecb is exiting slowly a store narrative measures, and you think this may be a challenge for some countries that have a big debt, like italy, given that the are facing a time of political uncertainty or instability? my second question goes to the risk, is there a risk of a scarcity of german bonds in the markets? pres. draghi: with respect to the second question, i answered most a similar question a moment ago, the program is running now smoothly and when and if we base that problem, we will use the flexibility the program has. .hat is the present situation the governing council members

reiterated their confidence in the power of the program as it stands today. the second -- the other question, the first question, first, we have a mandate, our mandate is specified in terms of price stability. not specified in government budget support or other considerations. it has been said that we -- savers have been affected to the program, banks have been affected by our program, profitability for banks, and now government budget. alwaysre always, countries that anticipate, countries that lack the kind -- lag behind. our program has in mind price stability. countries which

have a week budget position -- weak budget position and low growth, and lack of structural reforms, they will be more affected than others by a possible increase in interest rates. this is no discovery. the key thing is to process its eight growth, -- recessive take growth -- recessive take -- resu growth. >> in your introductory theement, you mentioned sustained return of inflation just by close to 2%, is it -- what is the merit of this dropping without undue delay? pres. draghi: purely formal.

, sincere broad question much attention has been given on the assessment regarding the risks surrounding the growth, a economy growth. in the past, until the end of 2014, the governing council communicated on its view regarding the medium-term outlook for price development. the risk regarding this medium-term outlook. is this something the ecb could emphasize? risk ofan aspect -- the the medium-term price stability, which everything depends on. why is this communications disappeared and now or in the future, time to reactivate it? have araghi: we did not

discussion on when and if to reactivate but it is a talk which sometimes resurfaces in our discussions. andas raised this morning in other meetings in the past. we are reflecting on it. reason too specific have it introduced again. we are reflecting on it, and for the sake of symmetry with growth and with the growth of output path. thank you. >> mr. craig? you.ank meth conditions should be before the ecb could stop a heart stirring -- offering next ordinary -- extraordinary measures? pres. draghi: the answer is

defined in our objective. we have to be confident that the convergingate is towards our objective of an inflation rate which is close but below 2%. it is a self sustained convergence. in other words, it is doable but it will stay there, once we withdrawal the monetary policy support. >> i am from german television. i would like to touch on the preconditions you mentioned early this year, are necessary in order to get back to a normal monetary policy. if i look at the revised inflation outlook, which is less favorable than the last one, what is the expectation, will we

see a time going back to a normal monetary situation? this,ly, if we look at and we see that the economy picks up significantly in some time,ies, and at the same we have the effect that headline inflation is not picking up as we perhaps would have expected. don't we have to start thinking target, it is still the appropriate one? pres. draghi: the four conditions, they are in the definition of our objective. which is a durable, celts the thing convergence of the rate inflation towards an inflation rate of close but below 2%. that stays there. that is our objective. not employment, not growth. stronger thee

recovery is, this driver is the decline in the unemployment rate and the more confident we become as we did today, the convergence is on its way to become satisfied, the conditions i mentioned in this definition. the second point about inflation. changed as far as inflation is concerned. there will be -- in the coming way, they the significant amount of volatility because of oil prices and food prices. the underlying inflation is basically staying what it is today. now, based on the current information come is the -- flatlow -- current across time.

>> we will have to close early for logistical reasons. the last question to the media from our host country. >> economy has started to improve. or in spitee of qe of qe? thank you. pres. draghi: it is because of qe. we are here because of that. qe has supported the recovery throughout. let me give you a few numbers to answer your question more fully. i just said that growth has been just revised from 0.5% to 0.6%

in the first quarter. the annual growth for this year will be projected to be 2%, rather than 1.9%. ,f you look at indexes, the pmi and index we used to assess the state of the economy, now at the highest level since april of 2011. index ismic sentiment close to the level in 2007, which is an all-time high. the unemployment at 9.2%, the lowest since march of 2009. with all the qualifications i made about a broader concept of unemployment, that is one of the reasons we do not see much growth in nominal wages. have been created in the eurozone in the last 3.5 years.

more jobs than anywhere else in the world, i think, certainly more than the united states. the risk of deflation has dissipated. the recovery is proceeding based on consumption and investment and consumption and investment are growing because of qe. because, but also qe interest rates are low, labor income has increased, wealth, household wealth has increased. financing conditions remain extremely favorable. this is essentially because of qe. and the pass-through over monetary policy decisions has probably never been so effective , as effective as it is today. this is leading to lower lending closer spreads across the eurozone, closer spreads across sectors, and between different companies. i have said in the introductory

e's aret that the s and benefiting greatly from this qe policy. i think i have answered fully your question. thank you. >> thank you very much. >> that wraps up the ecb news conference with mario draghi in estonia. rates unchanged, monetary policy unchanged, forward guidance, the .asing is removed on rates the definition of the story is that the tail risk of deflation has largely effectively been removed. therefore, you do not have to promise low rates or lower for the foreseeable future. the euro dollar moved slightly higher and we rolled over again as the patient mario draghi came into his own. the ecb upgraded the growth forecast, but downgraded the inflation forecast.

mario draghi said the underlying inflation story has not changed and needs to be durable and self sustained. now, it is not. yields on the german 10 year are lower this session by two basis points. board, thech the equity market, bonds are big and the euro is softer, equities largely unchanged. it was bank stocks that underperformed as the decision came out. the news conference continued. the risk assessment around the economy brought balance, the forward guidance on rates dropped the easing bias, was that your best case coming in and how significant is it coming out of it? >> the objective was to begin the early stages of the next days of this monetary policy cycle by highlighting the

successes. there would be through -- the growth outlook now balanced, no longer with downside risks. the removal of the need of further easing at this stage. but, the inflation story is complicated matters -- past, located matters, three months ago, we would've expected that june would have been a time to signal some tapering but the inflation forecast do not allow that at this stage. he went at length at discussing at the core level, nominal wage growth is is actually zero, despite a drop in the unemployment rate, 5 million jobs created, he is highlighted, i do not want to say deflationary forces but lack of inflation would prevent the outlook for an inflation rise to be really sustained. deflationary risks have dissipated but not

disappeared. that highlight what is on their mind at the moment. >> inflation forecast in 2018, people talking about the following numbers, one and three, 1.3%, can you explain this in the eurozone, a cut from 1.6% from next year through energy prices alone? >> by and large, yes, as well as some of the forecast errors to the more immediate readings. these types of effects are fairly common in the near term forecast. then you get the usual convergence to the long-term horizon. i would not worry too much about that but, if the drop in energy and food prices were to continue , and if we saw some softening in global economic activity, and other words, risks he highlighted, that 1.3% number

looks more important. if we fast-forward six months from now. >> we have one out of the way on super thursday, awaiting for polls to close in london at 10:00 p.m. and former fbi director james comey to testify before the senate intelligence committee. a live shot of the room and special coverage starting at 9:00 40 -- 9:40 eastern this morning and in the market, all about the ecb, when you look at expectations for rate hikes, that was the third quarter of 2018, that is what the consensus was rallying around, is that way off the table, how far does it get pushed out? >> we have to push it out and focus first on the transition to tapering and how that will work out, given the technical details . it is way premature to talk about a rate hike. 2018 also looks like a stretch. let's see the fed template, how much time passed and tapering to rate increases.

we are warring about it too early. >> are we at central-bank convergence or do virgins, i do not have any -- devergence? i do not have clarity after this conference. >> you would argue that, at the moment, in terms of innovation, obviously the fed is in a cycle and the ecb is in and easing cycle at the latest innovations with respect to that, they are converging in a sense that there has been -- on the fed and ecb side, and acknowledgment that the inflation story is losing some momentum. can we talk about a convergence in the sense that both central banks go really more into a wait and see mode? the tightening cycle of the fed, the momentum, we should question how far they can push it for the remainder of the year as most of the kristi noem -- fiscal reflationary story has not played out.

just now relying on earnings growth and asset prices continuing to go up. the story is becoming more and. -- mixed. >> someone saying converging diverging, that wraps up all we have seen. looking at the story in europe and across the world, all eyes on european risk assets, people wanting to get in in a significant way. gone, dove that long gone you like what you heard over the last 60 minutes? >> very much so. it provides a case for the european growth story to continue for european assets to continue outperforming primarily equities. also, with the ecb, no rush to push and strategy. you are creating a good environment for spread products and emerging markets, local

debt, affects kerry, general global credit. you are in an environment where low volatility and income is some themes to focus on, especially if the global growth feature begins to lose some momentum which we begin to see. theanking within europe's big story, backstopped rolling over as this conference continued an early in the week we learned that santander needs to take over banco popular. do look at that story as a negative or positive, because it was such an isolated one that did not bleed through and affect the periphery in a way that it would have several years ago. one, is more of a negative the story in and of itself is a reminder that the european banking system is still very

fragile. again, something to put into context of why this monetary policy strategy has to be very gradual. and also, an example of why this monetary policy easing strategy is having difficulties in gaining traction. the broken transmission mechanism. key for this whole strategy to work, you need credit creation and it is a reminder we are under weak footing. 's.an enormous rallies in btp allegedlye election is off the table. is italy no longer a risk factor? >> it is an on and off switch. from a structural story, debt sustainability dynamics and political risk, it is still a risk factor, also because how

important it is within the eurozone. the timing of when the next election is is the short-term risk factor. at the end of the day, do not forget the elections will take place no matter what. early next year, somewhere between february and may. the pushing of the electoral reform could have created the possibility of an election in october. it is a time switch of when the risk factor plays out. ingreat to have you with us the countdown to the opening bell in the united states, with oppenheimer. the opening bell four minutes away with futures debt flat on a big thursday, from london, new york, washington, d.c. you are watching bloomberg tv. ♪

♪ jonathan: from london and new york, you are watching bloomberg there break, i am jonathan ferro . on the dow anded

the s&p 500 several points away from another all-time high to close yesterday. price action muted with the exception of the nasdaq which has record after record throughout much of this year with tech heavy index supported by big bank stocks. in the treasury market, yields are high by a single basis point. the level significant, very a u.s. 10017 lows on year and the dollar is a firmer story, up 2/10 of 1%, flattered by the euro weakness post mario draghi. rolls over, down six cents of 1%. $45.41. the cash open, 33 seconds and coming here it is with alix steel. the lastontinuation of few weeks with the s&p around record highs and another record high for the nasdaq at 2/10 of

1% higher and the dow jones unchanged. back then you rally without energy and financials, the answer is you can rally with tech which is what we have seen drive this rally. individual names, tech some of the highlights. alibaba of over 12% with a lifetime highs sales topping estimates, forecasting revenue growth 49% -- a big bidching because of that and shareholders voting on $4.5 billion sale to verizon today. nordstrom of over 15%, we got news the nordstrom family have created a group to the about taking the company private and macy's, kohl's, dillard's, jcpenney are rising on that news. you are having this record rally in the nasdaq with the dow flat but oil getting really beat up, now down almost 6% in just two days. this is the inventory number

yesterday and this is news that iraq selling oil to asia for less than it did before. a really negative sentiment, putrid sentiment of what energy aspects of and that dynamic is a new market but analysts relatively optimistic on the actual underlying equities. a different board, price targets for energy companies in the s&p and all of the other -- other rise in energy a 24% equity prices in the next 12 ,onths, versus financial firms 12%, or consumer discretionary at 8%. even utilities barely coming in at 2%. on the one hand, prices getting hammered but analyst relatively optimistic on share appreciation, which one will give first and what is the implication for the overall market? jonathan: good question, thank you. two or three minutes into the session but big things in the diary on thursday,

one down and two to go, and ecb rate decision. outside of u.k. election is this , and washington, d.c., the room where the former fbi director james comey will testify at the top of the hour. we will cover that live on bloomberg tv in its entirety. experienced the big three throughout thursday, talk to me about this event, script the washington, d.c. noise and theater, market participants, why -- is this a market event for you as a market participant? >> not really come in and of itself, this is not. the -- what is behind it could be further delays behind meaningful progress in corporate reform agenda we have been waiting for. we have seen this on this front

with asset prices -- some asset prices suffering one another's. others.than equity markets have gone up. for certain markets, it has been a market event. the lack of progress and the way this may feed into the context. we believe that it may postpone and a potential progress on corporate tax reform, just a distraction potentially for the rest of this year. jonathan: let's talk about the pessimism compared and relative to what is in the price currently. the market across asset classes, fx, fixed income, fading the washington, d.c. story. bank stocks since march, looking at the 10 year, isolate the 219 onround that -- 218,

a u.s. tenure, is there more upside risk depending on what may or may not happen in washington, d.c., given how they removed from the tenure story throughout much of this year? >> an excellent question and one we have been debating in the last few days. in my opinion, at this point in 10 year yields, we have downside risk. if you look at the chart in and of itself, the chart does not tell you the full story but we were at 180 postelection and the were abouty -- rates the anticipation of the reflation trade which has not happened. you could say that by that analysis, you have a risk to go down back to those levels. other fundamentals of played out and the global economy has worked out better. but the inflation story is starting to look very weak. if we begin to see some very early signs that, nothing

concerning, but growth momentum is stabilizing, somewhat slowing . if you begin to see some data out of china, as they always managed to in it -- a six-month acceleration or tightening or deleveraging plan, the data in the u.s., the soft data has come back down to the hard data, no pickup in hard data. if you have negative data surprises on the growth side and negative data surprises on the inflation side with some risks building, in my opinion, treasuries have downside risk in terms of yields. the question is -- how much support a seller, such as the federal reserve, with their plan to unwind the balance sheet, how much support may that provide? on, iere to put a view would think that here treasuries have some -- yields have a downside risk. jonathan: great to have you with

us. thank you for joining us. six or seven minutes through the session, muted ahead of what could be a risk event but a best best base case, not much of one for him. dovish mario draghi, seven minutes into the equity session, if you want muted price action, ring up the equity board, we go nowhere on the dow and s&p 500. dead flat on that testimony from the former fbi director, james comey. coming up, we will bring you special coverage of that testimony right here through the whole entire testimony. from new york, london, and washington, d.c., you are watching bloomberg tv. ♪

>> all eyes turned to d.c., james comey's turn to justify and a 20 minutes he will address the senate intelligence committee. in his prepared opening remarks come he recounts the president's lift ther loyalty and cloud the investigation has caps off is a minister asian. the president's lawyer says the president is vindicated by the testimony as the political divide deepens in washington. welcome to this bloomberg news special report, i am david .estin live in washington let's welcome all of our bloomberg television viewers and viewers on twitter where we will be streaming live. bloomberg terminal users and

follow the action using the function live go on the bloomberg. in itsring will come entirety over the next two hours and we will bring it to you along with expert analysis. gura. to bring in david this is a dramatic moment, maybe historic. how did we get here? david" goes back to the campaign, what role -- role russia may have played in the election. his testimony starts with a transition between november and when the president was inaugurated. on january 6, comey says he and the president-elect met in new tok city and two things note, comey says he made donald trump aware of an intelligence assessment and told the president-elect that he was not the subject of a counterintelligence probe. this is what the president has maintained been a few weeks

later, according to comey, a dinner at the white house where president trump said he needed and expected loyalty. he promised the president honest immortal nine interactions between james comey and president trump as national security adviser michael flynn attracted scrutiny for conversations with he had to the russian ambassador to the u.s. president trump told james comey that he hoped he could let it go and james comey said he could .ot give him that pledge according to james comey come on march 30, the president called him and said the investigation was a cloud and paring his ability to act on behalf of the country and emphasized he had nothing to do with russia and in his last interaction with president trump on april 11, the president called james comey and was fired from the job on may 9, a tuesday, he found out second hand come in california speaking to agents of the fbi.

lot oft few weeks, a negotiation and the question is -- where will james comey be called to testify and he seems to have wanted to do it in open session and expressed throughout the process that he has done in concert with robert mueller, the special counsel looking into the matters. >> quite remarkable. a lot to be asking questions about that in the hearings about up -- come- to compe up. how are they reacting in the white house? >> the white house's initial reaction yesterday afternoon when we first saw jim comey's prepared statement, was one of jubilation, incredible relief that james comey has put in writing for the record that he didn't tell president trump on three occasions that the president himself was not a target of a counterintelligence investigation. there was no open

counterintelligence investigation against president trump at the time. that either means there is smoke but no fire and this is over and today is just drama or may mean something entirely differently, that, just because president trump was not the focus of an investigation himself, there were many other people around him in this campaign who were. the white house is seizing on that bit of good news to try to say, nothing else here and this is over with. as we know, it is just beginning with a lot of questions back-and-forth. all accounts my had planned this morning to watch this hearing, about to begin with top aides and his lawyers. not expected to tweet, although, as we know, his plans sometimes change. >> for our audience, we are looking at the hearing room for this hearing with james comey. this is an the heart of the senate office building, not

seeing the white marble, that is in the heart, a newer building on capitol hill. as they are gathering for the hearings which are slated to start at 10:00 in the morning. , what the on the spot you expect to come out of the republicans and democrats? >> democrats will be quick to note how thoroughly james comey took notes during the meetings, republicans will seize on the fact that he did not go public with this sooner than he did. >> let's go to capitol hill are we are minutes away from the beginning of james comey's testimony and let's go to a member of the senate intelligence committee, joe manchin of west virginia. thank you for joining us. -- as youte question go into the hearing, if this is a successful hearing, what will come out? what is a win from your point of view as a senator on the committee? >> i am not looking for wins, we are looking for the facts.

if james comey would like to say why he thought he got fired, that mattel is a lot. why didn't he act upon information he felt uncomfortable, he documented everything. what was the purpose of that? to file it? or to act on it in an investigation? a lot needs to be known and whether we get that out of an open hearing or go into closed hearings later this afternoon. simply, is this a legal issue from your point of view as a senator on the committee, or a political one? robert mueller will conduct his own legal investigation. is this a matter of law or politics? >> we like to get past the politics but nothing gets past the politics in washington, everything politically driven. this is not a witchhunt and should not be a partisan type of a movement, whether republican or democrat.

this committee stands heads about any committee that has this jurisdiction. we will come to the conclusion and have an answer. we will have to sign off on a report and once we get all the facts. i will not sign it unless we know that we have i'm turned every stone and give confidence to the american people that we have done our jobs. they want to know was the president and bought and how he was involved, did he know anything or direct people? were other people involved workload -- personal or political gain? robert mueller will take it from the legal and, the constitution, if there were any criminal violations or otherwise. >> you heard yesterday some -- from dan coats and the head of the nsa, how did those hearings yesterday and form what you will ask today with the hearing with james comey? they did not hear much and were frustrating, you could hear by the tone that everybody was upset. i said, would you come to a

classified -- highly classified secure hearing with the intelligence committee and answer the questions we are asking. andsaid yes -- two said yes the other said no because of the investigation by robert mueller. we want to make sure that mr. rogers gets in and secretary coats comes into the classifieds so we can ask questions. >> how important is a public following a closed one? >> there will be a lot of answers we will not get today and we understand that because some of it could be very classified and lead to an investigation that is already ongoing. when we are into a highly classified meeting, we can ask those questions and if kept within the confines -- it is kept within the confines of the committee and our staff which is

how we will make the final decision. >> as a senator, what sort of reputation does james comey have with you? not the first time he has appeared before congress, he has a track record. is the senate inclined to give him credence? >> the senate will ask him point ready tou are editorialize before the election what you thought, no wrongdoing. you editorialize what you thought they had done wrong. then you got involved and came back and thought you had to clarify that. there was more information you needed to investigate and you came back to say we have investigated it over the weekend and nothing more. he was inclined to get very involved than but then had meetings after the election on the transition and things changed. he documented and put it away. why was he not inclined to act more at that time? >> very interesting questions. >> a lot going on. >> we want to thank you, i know

you have to go to the hearing but thank you very senator joe manchin of west virginia. whatever happens today, the white house has to move the agenda forward, despite the investigations. dean's burlington has been there , serving in the clinton and obama administered -- administration and now runs sperling economic strategies and joins us in washington. getting into the politics, although hard to avoid , what is it like being in a white house trying to move forward on policy matters and that the same time investigations going on. >> we are in a much better situation and somewhat in a worse situation, a worse situation because the other party controls both houses of government. legislation is difficult. republicans control both branches, talking about clinton administration. administration, they do control both branches. none of this has to be an

obstacle. honestly, the biggest challenge they are having is that they are stuck between the political fame of not doing their political promises and the -- pain of not doing their promises and you are seeing that on health care. doy are afraid to not anything on health care and yet almost every plan they put forward as 70% disapproval. that is more their problem. we advantage we have is that were a pretty united white house and we had worked together and passed a lot of legislation. here, you have problems, a white house that is very openly suspicious of each other, power grabs at the top. not particularly disciplined. [laughter] >> you are a supporter of hillary clinton. does it suck all of the energy out of washington? apart from the merits, congress is distracted, you cannot get to tax reform and infrastructure,

not health care? >> that would be true if you had a divided government. i think that, when you have united government like they have , it does not have to be the block. i really think that their biggest challenge is the substance of what they are doing, and their ability to get through reconciliation and pass it. it sucks of the oxygen and the president's numbers going lower makes it harder for him to twist that last arm. to me, it is less distraction and more dealing with some of their promises are unpopular and the president may not have the same ability to twist arms in his first year that sometimes a first year of bush or clinton had when they needed that last extra vote. >> i note the white house is trying to create a war room, working with zero public and party, how much is that model on

what we saw when genes furling -- gene sperling was in the white house? of thetical casualties trunk white house -- katie walsh and mike, the former communications director, coordinating this effort in a combination with republican pac,nal committee, super the combination of questioning james comey's credentials and -- fair accuracy but didn't hypocrisy for zaza for democrats against him when he was making life hard for hillary clinton and now think he is the greatest thing since sliced bread. this is a combination of them reaching a conclusion better for outside surrogates to make the negative case and to try to keep the president and the team on a positive forward driving. proving more difficult than they wanted. >> are we seeing maybe early

indications, have not heard much from the president on twitter recently. >> almost 10:00 a.m. and not heard anything since yesterday. it was a concerted effort, not just from his legal team but several of his friends in the business community. they have been either urging him to lay off twitter entirely or, if you feel like you need to be something, run it past a couple people on your team. have a short cooling-off period may be a good idea. he is on track so far, but we have seen him go off track. >> what does the president have planned today? he will be listening and paying attention to what will be set on capitol hill, what is on his agenda today? >> his public schedule is very clear, allowing him to watch as much of this as he wants to. around noon, he will a leave for

a midday speech to a faith group, ralph reed's group and we expect him to make remarks. we do not expect them to be about this hearing but there will be some a liberation, something about faith or believing in your principles. this message of infrastructure the white house has been seeking to promote all week, his plans are to meet with a group of governors and mayors on the infrastructure theme. while this hearing is very much on his mind, an effort to show the public he can still do other things. in an me put you impossible situation and advise president trump. what you say, you have both houses, get this passed u s fast as possible? what we callll him president clinton, tell your policy team you are not spending one second on this and you focus

, we have a small group to deal with it. i think he has to show greater discipline because if you are waking up in the white house and a tweet about the mayor of london, everybody is human, no way does that not distract. he has to be much more principled not to just not distract from the public message , but he needs to show that they can have a more disciplined white house and that a few people are dealing with the problems and the core policy team strategy legislative team is dealing with their legislative tasks only and that is what president clinton did. i would advise him to do that but he personally has to lead with that discipline from the top. >> let's talk about the policy team at the white house. maybe there is dissension at the white house but you have a strong team when it comes to your home base, economics. gary cohen, wilbur ross, steven mnuchin, they seem to be on the same page. >> when i look at the white house, i think that gary cohen

has hired a professional staff and has the capacity. i think that people in the media, friends i know, say they have never seen things like the fight at the top of the white house. the degree people get on the phone and off the record. they bash the other most powerful people in the white house, that kind of divide is not something i was dealing with when we had troubles in the clinton white house. we were a more united group and that made it easier to function. i think everybody knows that it is quite transparent, perhaps president bush encourages it, a power struggle at the top. that is tough when you are at the white house, mostly you have a chief of staff any chief strategist of us are that everybody rallies around, not having them at work with each other. >> how difficult is it to deal with the ambiguity of the

timeline, senator manchin saying it is early, you are in the white house tried to ignore capitol hill. >> i think what is bothering them, they are probably reacting like everybody else is. they see a president who seems very word -- worried about when testifying. testifying, a president whose unpredictable. that is different when something happen and there is a strategy. they wake up every day scared of what will come out next and what he will do next. that has to create a much more difficult environment. not saying we did not go to difficulties in the clinton administration but not wide and unpredictable as what they face right now. >> thank you very much. good to have you here. as we watched the hearing room, still gathering, we see a few senators. towards the time of the hearing.

what are you expecting? >> the degree to which james comey will change from what he laid out in the prepared remarks he made yesterday afternoon. reporting he will expand on what he put out in the seven pages yesterday. we will look for heated exchanges, looking for senator manchin, and other senators eager to hear from james comey about the roles he played. >> margaret, you have been talking about the operation in the white house to deal with this but after the testimony, whatever it is, do we expect surrogates -- do we know who they will be? >> we expect surrogates to come out and it will be everyone you can imagine, from republican lawmakers to campaign officials for the president, sitting governors, sitting republican officials who are friends and advisers of him, to businesspeople who serve those functions and the visors -- as

advisers/ a the legal team for the president put out a brief statement yesterday. it felt totally indicated by comey's prepared statements. that could've been a much more rebuttal ifetailed the statement had gone differently. >> this is an interesting moment. going up to shake cans with dianne feinstein. the former u.s. attorney for the southern district who thought he had his job. he claimed the president said he would keep his job, who he got rid of. sorry to interrupt. role ofe ask about the private counsel is playing. how big a role is he playing in this white house? >> they were down