its policy decision with credibility on the line. italy inches forward to a populist government as silvio berlusconi dropped his opposition. china's cpi disappoints and the boj's corona warns of more -- david: coming out to a bank of england decisions. alix: no surprise, they wound up not hiking -- or they did hike rates? no, they did not hike rates. the vote was 7-2. inflationes see cooling faster to reach the 2% goal in two years. part of the rhetoric of why they were going to be hiking was because inflation was jumping further because of sterling weakening, and now they see a cooling faster than before. you have sterling paring some gains. david: first quarter gdp weakness was temporary.

they had some bad weather. alix: gilts rise, yields drop. we are joined by guy johnson. what are your takeaways? guy: the bank of england seems to be backing off. it is talking about the fact that while the gdp weakness we have seen is only temporary and expects that to be revised higher, it is talking about the fact that only limited tightening will be needed in the coming years, which explains what we are seeing with sterling. hold peoplehawkish were talking about but it is the secondary lines relating to how quickly inflation is coming back to target, and the story about what is going on broadly in the economy. they are talking about the fact that ongoing rate hikes needed to control inflation, but their

forecast is based on about three rate hikes over the next three years. that leaves us one more this year maybe, august or december. the rate path is not as steep as maybe the market was looking for , and this is dragging the story down when it comes to sterling. 7-2 is still the vote. the bank is basically buying a little bit of time. it will wait and see whether the data turns out to be temporary. it will downgrade the expectations on what the path of inflation will look like and it is coming down faster than anticipated, as a result of which it will not need as many rate hikes going forward. my sense is that maybe the bank is wait and see on what the data looks like from here. carney may be made the error of pre-committing too much and had to walk it back when the data softened up.

that this is an economy that will not need the kind of rate hikes that were priced in only a few weeks ago. david: you said maybe there is a little of overreaction. it seems to be the most exciting central bank because they got our hopes up. we were a 90% likelihood of a hike right now, so what is going on? part of the data more erratic in terms of the british economy than other developed economies? guy: i think the bank has been survived -- surprised by the way the data has come through and they are weaker than the bank anticipated. there is a desire -- and this is similar to the fed -- a desire of the bank to normalize rates. the mark carney school has been ise, we will do what the fed doing and look to normalize rates where is the ecb is hold off as long as we possibly can.

maybe we are starting to see that coming into force. alix: really appreciate your time today, guy johnson. stoneng dropped like a and you are buying in the gilt market -- gilt market. the u.k. money market is completely pricing out the bank of england rate hike. daniel: that is a little bit too pessimistic. this is one of the most data dependent central banks in the g10 with the sense that the market was fully priced for a hike a few weeks ago. the data did not bear out and they had to unwind it. the two hawks on the committee proved correct that this was weather-related. , 7-2. it would be 9-0 daniel: it shows the hawks can

look through the softness and view that is temporary. they are comfortable continuing tightening. it is a sign that for the hawkish members of the community -- committee, business goes on as it was going on. alix: what is the credibility? daniel: the credibility is good. alix: you think the boe's credibility as ok? daniel: they responded to new information and changed course. the fed has a tightening program in place and as long as the data meets minimum criteria, they will continue. the ecb is on hold for a long time. bank of england is right on the cusp of needing to continue or pause. you have got to expect them to be dynamic in their message. david: what is the connection between these decisions, the relative strength of the pound, and the trade flows? is it at all sensitive to what

is going on with the pound? needs: i think the pound a rate differentials to hold its own overtime. david: it got that over brexit. it came way down and built up and now it is coming back down. did they get more balance in their trade? daniel: today, you do not see the benefit of having a cheap currency showing up in the trade data. the reason models think sterling is cheap as they are telling you that the pound has are adjusted enough to correct an imbalance, and it is not showing up yet in the data. up -- i feelwind like the boe has credibility, but some of the data is good. the labor market seems ok. inflation is slightly above target. it is not about the data, it is about brexit. daniel: i think brexit is a factor that they think affects

investment in confidence, but as you saw in q4, the economy was going along fine. people are making business decisions and spending money, so they respond to that. they are in a position now where they need to come back and hike again because q1 was sort of an aberration. it was not really symptomatic of where the economy is. david: when you talk about brexit, you have to talk about politics. how does this affect theresa may? is this good news for her, does that help or politically? daniel: it helps that the economy is holding on an even keel. the last thing they would want to see is a direct hiking paths with no sensitivity to the data. data dependency make sense for everybody. alix: you are an investor. what do you do now? daniel: sterling could come

back. the dollar has had strength over the last month, which is probably running out of steam. sterling-usd can get back to 1.40 easily. that in theseen april numbers we have been getting, but things can change very quickly. , thank you. katze we are labeling it as a dovish hold on tliv. rates unchanged. they see the need for only they seeightening as inflation returning to 2% by the second quarter of 2020. they lowered their gdp forecast for this year. the question will be, how does mr. carney in a press conference leave optionality if the data winds up coming back up?

the minutes were more hawkish, janet yellen was more dovish. question over how is he spinning this thing. markets,general in the you are seeing pretty much flat in the u.s. in italy, you have a potential new government run by the populace and yet italian stocks are down just 1%. other asset classes, 10 year yields only up two basis points. you had a bigger selloff earlier in the session, but by the debt, why not? sterling moving well off of the lows of the session. crude still up on the day. david: let's find out what is going on outside the business world with kailey leinz. kailey: president trump has thanked kim jong-un for releasing three americans who were detained. he welcomed the men after they

flew on a military plane to join base andrews near washington. he was optimistic about the chances of a successful meeting with kim. >> i think we have a good chance of doing something very meaningful, and if anybody would have said that five years ago, 10 years ago, even a year ago, you would have said that is not possible. administration official says the president is leaning toward singapore for the site of the summit. hasl bank of scotland tentatively agreed to pay $4.9 billion to settle a long-running u.s. investigation into the sale of mortgage-backed securities before the 2008 financial crisis. it will make it easier for the bank to resume paying dividends. in malaysia, a stunning election result has a 92-year-old former premier returning to power. his opposition coalition doubt

premier reggie ray zack's eric --nt -- naji brays global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. alix: dovish hold by the boe. we will be seeing with the former boe official. ♪

alix: time now for bloomberg first take. we are joined by lisa abramowicz and cameron crise. ,ake a look at the bloomberg this is the 10 year spread between btp's and bunds.

why? lisa: this is stunning there is not a bigger reaction because people would have said this is one of the worst case scenarios to come out of the election in italy. the movement has backed away some from their anti-euro rhetoric. policies that will inflate the deficit and not necessarily curb the pension problem, those will not happen until later so kick the can and keep on keeping on. david: silvio berlusconi will not be part of the government. lisa: it probably will have a moderating effect because he is backing this. david: the number two story is the bank of england and the british pound. there was a plummet after brexit that built its way back up and it is coming back down as economic numbers are disappointing. cameron: it is knows prize they did not move. it is probably -- it is no

surprise they did not move. q1 was lousy. the run rate of the economic indicators is not particularly good. i think you can blame a lot of the inflation impulse in the u.k. over the last year or so to the post brexit decline in sterling. what i look at for underlying u.k. inflation is services inflation. services inflation tends to run quite a bit above goods services -- goods inflation. fairlys been running steadily at around 2.5%, below the longer-term average. it calls into question the viewpoint of some of the boe hawks that the capacity of the economy has shrunk. i would expect to see services inflation running a lot hotter than it is and that is an argument for policy caution rather than aggression. clearly, the bank of england is moving a little bit in that

direction. weid: another piece of data get today is cpi numbers in the united states. we will have to look at ppi. china, compares ppi in europe, and the united states. , because theesting red one is china. andblue one is the eurozone the yellow one is u.s. ppi. it looks like china is leading us. cameron: that is kind of historically the case insofar as china make so many goods, not only final goods but inputs into stuff that the u.s. makes. -- has the global inflation cycle peaked? the fact that oil is above $70

even on a wti basis is an argument against that. you could argue that would lead to chinese ppi turning back up because they are sensitive to commodity prices. does the opposite of inflation become globalized? lisa: another way of looking at this is china's growth cooling? they are trying to make it cool by reducing leverage and how does that factor into the global growth and global inflation picture? that is one big question underlying the market moves. alix: what do you expect cpi today? cameron: i have got no edge. i think the consensus of 2.5% on headline and 2.2% on core is probably, it seems reasonable. maybe there is a little downside risk encore, given the hotels -- hotels sideen the

of ppi was weak. that is a contributor to core cpi last month. against that, there is a revision to how they are calculating physician services costs that should bump things up. awould go personally with .17%, .15% on monthly core, which put you where the consensus is. alix: we are where we are. lisa abramowicz and cameron crise, thank you both. more on the boe's hawkish or dovish hold. ,e will speak with paul tucker former deputy boe governor. this is bloomberg. ♪

alix: what is moving? cable and gilt. yields moving lower. if you have a dovish or hawkish hold from the boe, we are trying to sort that out.

nejra cehic is outside the bank of england. what is the question for the press when mark carney speaks? there will be many questions, because it covers a bit of a surprise -- comes as a bit of a surprise of the dovish hold. some people were thinking we might get more of a balanced vote. the comments coming through on inflation, the fact that they see it cooling faster to rich the 2% target in two years and there will only be moderate tightening over the forecast period. that theid things softness in the first quarter was perhaps only temporary. it will be interesting to see whether mark carney tries to balance that and put a hawkish spin in the news conference. one of the questions i would do theyask is what think will cause inflation to

come down to target? is it all to do with sterling or are there other factors? that might mean something about their inflation outlook and how they will look at tightening in the year ahead. the markets seem to have priced out a hike in 2019 so they are seeing this as dovish. david: we are going to welcome paul tucker. mr. tucker is a senior fellow at the harvard business school and author of "unelected power." welcome. take your book, fascinating book, about the divorce between political influence in central banks, and apply it to the decision today. was this decision from the bank of england strictly data dependent and independent of political considerations, or do politics enter into that? paul: i doubt whether politics entered into it. it looked like a regular

decision. one of the striking things about it is your reporters have been emphasizing the 7-2 vote. arehe u.k., the two described as a minority vote. this is a committee that liberates and has a free vote. that is the strength of that system. these decisions of the central banks have real effects on real people in the real world. should it be entirely the board? should they take into account brexit and the effect on the u.k. economy and people? paul: they should not take account of politics in terms of favoring one side or the other. of course they will have to make judgments on the effect of political developments on the outlook but the critical question they face is not about politics. it is, why does the economy need interest rates that are so low

when it is doing quite well? deepers to do with the question we find on both sides of the atlantic, what is the underlying rate of productivity growth? how dynamic are our economies today? the fed, the ecb, the bank of england, swiss national bank, they cannot fix the underlying dynamism of the economy. , a seniorew sentance economist at price white-hot -- rice waterhouse cooper tweeted above target inflation, and lowest unemployment rate for 43 years. a failure for monetary policy strategy and leadership. paul: i think andrew used to be on the mpc a few years ago. dynamism or lack of it cannot be attributed to central banks. this is a deeper challenge that we all face, and larry summers

has talked about this, do we face a problem of secular's star stagnation or is this something we come off of as we gradually come off of the crisis? we do not know very much yet about what the underlying economy looks like. alix: you support three rate hikes over three years? paul: i think this business, rather like the dots in the u.s., will do two or three or four. they cannot know with any confidence. the great strength of the system on both sides of the atlantic's they have numerous meetings a year. it is what economists would call an error correction. if they make a mistake this month, or if the fed makes a mistake next month, they can

correct it later in the year. the markets will be volatile and get excited, but they should not be too concerned about that. david: we have not been able to get the productivity of -- up. in the united states and in the u.k., is it the central bank's job to protect us from the bad effects of that? and the risk of not having any weapons, any ammunition for the next downturn? paul: what is their job? stability, stability. stability in the value of money and inflation, stability in the core banking system. that is what they do and what they should stick to. a market economy will thrive or not thrive on that base. david: are we getting stability now? we had the likelihood of a 90% chance of a rate hike. it has turned around almost on a dime.

paul: i think the markets will focus on that. what was important is inflation is projected to come back to around 2% in two years time, and that is their target, a target chosen by politicians. the objective is set by the politicians and the central bank pursues the objectives. alix: do you want to change jobs for 2019? paul: i want to sell this book. david: we are working on that. paul: the big question for me is, is there a second book in me that will engage me and be as rewarding for me as this will be? alix: go back to the boe and write a book after that. i am trying to ask if you would all -- if you would at all consider -- paul: it completely consumes you, writing a book. it took me about three and a half years. i am having great fun marketing

it, and that is enough. david:'s they were to call you up about what characteristics they should be -- if they were to call you up about what characteristics they should be looking for, for their new governor? paul: the key thing for any of the central banks, functions on banking stability and monetary stability, they have to have a team of people interested in truly committed to both. david: is it required to have experience in central banking or for example, mr. powell comes from the business community? before worked with jay he was chair powell, and he was serious about that role. that is a strength in the appointment. alix: also a characteristic of mr. powell and his fed is rolling back regulations at the , in particular for

medium-sized banks, should there be somebody who leads the boe who should be on those? paul: if they roll it back for the big banks, that would be a mistake. rolling it back for the community banks is a fine and sensible thing to do. the problem with this area, it is so technical they can wait till from outside whether they are surreptitiously softening the requirements on the big banks? that would be a grave mistake and really sad, because people in this country and around the world are still suffering from the last crisis. the last crisis could have been avoided if we were tougher on the banks in the run up to it. alix: paul tucker, it was a real pleasure to spend some time with you. we are looking for that second book. three and a half years, that is quite a long time. ,s we head into the boe meeting

sterling dropping like a stone, down 2/10 of 1%. go by the gilt market, that is after much conversation what is being perceived as a dovish hold from the bank of england. we want to go to the bank of england live where governor mark is about to begin his news conference. or he is thinking about it. >> i think that's mark carney coming into those seats. there he comes. >> will he be able to hold up credibility and keep his >> the more guidance that he gives, the more he has to correct it. the more we have to talk about the unreliable boyfriend scenario, which we talked about many times before. let's listen in. >> on my left is the deputy governor of markets in banking, dave ramstad.

on my right, deputy governor for monetary policy [indiscernible] right, themmediate deputy governor mark carney. ofk: an ongoing tightening monetary policy over the next few years would be appropriate to return inflation sustainably to its 2% target. the garden -- that guidance was given on the economy evolving broadly with the inflation report projections. since then, the economy hasn't fulfilled those conditions. growth at not .1% was much weaker and inflation at 2.5% in march was much lower than we had projected in february. the key question is whether this will prove temporary or persistent. first quarter, due to weather or climate. the central assessment is that it largely reflects the former

and that the underlying pace of growth remains more resilient than the headline data suggests. adverse weather hit construction particularly badly and weighed on activity more broadly as people struggle to work and make it into the shops. in contrast, the labor market has remained reassuringly strong. in the three months of february, employment rose more than we had projected and the unemployment rate fell to more than 2%, a touch below the npc's estimate of the natural rate. private sector wages had picked up. positive, job to job flows are back to the precrisis averages and there is widespread evidence in the employment survey of a tightening labor market. the overall economic climate in the u.k. looks little changed thus far. in particular, we have long demandt a rotation in

towards net trade and business investment and away from household consumption. this is what has happened and we expect it to continue. u.k. exporters remain in a sweet spot sterling down 15% in anticipation of a brexit that has not yet happened. particularly with a new transition agreement that extends unfettered access to eu markets before the end of 2020. the european and global economies are growing faster than trend and are projected to remain robust over the forecast. as a consequence, net trade is expected to continue supporting u.k. growth over the next few years. turning to business investment, evidence from the bank decision-maker panel and our direct contacts across the country indicate that the drag from brexit uncertainty, while persisting, has not intensified. with continued support from

strong sterling demand, limited spare capacity, the relatively high rates of return on capital finance,ow cost of business investment is expected to continue to expand at a moderate annual rate of 4% over the forecast. the consumer side, though there has been some reduction in the household savings rate, this has been far from a debt fueled consumption boom. rather, household spending has probably track income and employment growth. there is somewhat greater to theinty though near-term momentum and consumption spending given the recent weakness in consumer credit and housing market, with the possibility that households could to save rather than spend as the income recovers. on balance, with the real income squeeze coming to an end and the adverse weather behind us, consumption growth is projected to recover with rates broadly in line with the subdued pace of

real income growth. let's put that in some context. the mpc is expecting household consumption to grow over the next few years at about half the rate higher to the referendum and nearly one third of the rates prior to the global financial crisis. overall the climate is one of modest demand growth with a combination of some solid growth in net trade and business investment, offsetting more subdued growth and household spending. these judgments leave the latest projections broadly similar to those published three months ago. particularly gdp growth is projected to pick up after the weak first-quarter two annual rates of 1.34% -- 1.75% over the d.recast perio such modest growth by historical

standards is still likely to be sufficient to exceed the expected 1.5% average annual supplyin the economy capacity. the diminished rate of supply ofwth reflects the climate the past few years, with the shallowest investment recovery in half a century and a modest productivity growth. with very little spare capacity remaining in the economy and with growth in demand outpacing that of supply, a small margin of excess demand is expected to emerge by early 2020. as a consequence, domestic inflationary pressures are expected to continue to build gradually to rates consistent with the 2% inflation target. offsetting the waning contribution from income prices so that inflation falls back over the year to settle at the of 2020. by the middle let me expand on that for a moment.

although cpi inflation has fallen back by more than we had expected by the time of the february report, the shortfall, largely reflected lower-than-expected inflation rates across a range of important intensive cpi components. it's followed less than the mpc had expected, with pastor from sterling world export prices currently running at around 50% rather than the anticipated 60%. , all ofous projections that gap between 50% and 60% was projected to be made up over the course of the forecast period. with more signs that that isn't happening, the mpc judges that about half of that short although come through. in contrast to the external side, domestic inflationary pressures have been

strengthening as we anticipated. as we had projected in february, regular pay growth has risen to just under percent. unit labor cost growth has firmed over the past couple of orders, two rates consistent with a 2% inflation target. measures of domestically generated inflation have also moved closer to the target consistent rate. policy, in the exceptional circumstances prevailing since the referendum, for thehas set policy speed at which inflation returns to target and the support that monetary policy provides to jobs and activity. the policy is working. employment is at a record high. import place inflation is fading. real wages are rising and the inflationary pressures are gradually building to rates consist with the inflation target. study of georgian of black the last in the active excess demand

havethe forecast period reduced to the degree to which is appropriate to accommodate an extended period of inflation above target. as a consequence, the mp's began to remove some of the stimulus that monetary policy has been providing in november. at the may meeting, the majority of the committee judged it was appropriate for monetary policy. the mpc judges that an ongoing modest tightening of monetary policy over the forecast period will the appropriate to return inflation sustainably to its target at a conventional horizon. was the case before, that judgment relies on the economic data being broadly consistent and ase mpc's projection

has long been the case, the mpc expects that future increases in bank rate are likely to be at a gradual pace then to a limited extent. the storms of february and march have given way to sunnier skies and the economic outlook for the u.k. remains clouded by brexit uncertainties. despite the welcome agreement on a transition, the terms on which the u.k. will trade with eu be on that remain to be determined. as negotiations progress this year, the medium-term economic climate will become clearer. as it does, households, businesses, and financial markets will adjust. the mpc will monitor these adjustments and closely reactive really to ensure that inflation returns sustainably to the 2% target consistent with the agreement. with that, we would be pleased to take your questions.

>> as always, can you please give us your name and the organization you represent. please keep to one question each for the first round. ed, and then jill. ed: ed conway, sky news. governor, in the markets there is still some confusion and consternation about how people can prejudge what decision this is going to make. can you be clear about the rationale that was going on in this decision? you have talked in the past about people meeting to focus on the data, but then this really week you said the first quarter ts might have overstated the contraction. tould they be trying prejudge your judgment on the data question mark of people getting confused about that? firstfirst thing -- mark:

thing, the people we speak to first and foremost our households and businesses across the country. recentlook at the most the lloyds cfo survey, a survey of the meetings that we do with businesses and meet with consumer groups across the country, the expectation of those individuals, more than three quarters of those, individuals or businesses is that interest rates are going to go up, likely to go up at some point over the course of the next year, probably a couple of times over the course of the next year, year and a half. in a position where they can plan accordingly for that possibility. there don't think it's a guarantee, they think it's a likelihood. meet with households and businesses as you do, you would know that they think that we will react accordingly to the underlying conditions in the economy. the first point is, who do we speak to first? the people that we serve, households and businesses. the second is that the judgment

about the stance of policy to get into the technicals relates to the balance of supply and demand in this economy. now, we have been is near as we can be, i think, about where we think the rate of supply growth is in the economy. we have given a finger for the national rate of unemployment, we update that once he year, we updated it to 4.25%. we give the view on the rate of potential growth and the speed 1.5% of the economy, about . and we have also given a view about the overall level of lack, which as of today we view as very limited in the economy. -- which oneion is can prejudge, one can have an opinion on, but one can't prejudge how fast this economy is going to grow relative to that speed limit? you cannot guarantee an outcome for economic growth. it's affected by a variety of

factors but internal and external. -- both external and internal. but you can make a judgment that if the economy is growing faster than the speed limit, it's likely, certainly our view, that domestic he generated pressures will continue to pick up. consistent with that's, some withdrawal of monetary stimulus would be required. now, people in the financial markets, there's a lot of people in financial markets who will have a range of views about the likelihood of that. the european economy. their view of the animal spirits of businesses. potentially their views of lightly up -- likely outcomes of brexit negotiations. potentially all of the above. but if they can review of where they think the economy is going, updating that view and what it informs, they can then make a judgment about what they are likely to do. now, last word on this --

probably not the last word but the last word in response to you. in terms of the decision at the meeting, we had data come in lower than our expectations. there was some stronger data, but on balance was mixed and weaker and certainly the hard data was lower than expectations. in a world where you are looking , youadual rate increases sit down and you say i think the most likely thing is that the underlying momentum in the economy is still there, above that modest hurdle that i speed limithe 1.5% of the economy. we think it is still there, that's the view of the committee as a whole and that's within our projection. but what is the sensible thing to do? do you act now or do you wait to see evidence that that momentum is reasserted? the judgment of the committee, of the majority of the committee

, easy way to see evidence of the reassertion. now, the market, and those who follow closely what we do, can make their own judgment about how likely that is. they will update those views as information comes in. for households and businesses focused on other things, they have a think what we know as of now the general orientation that we are confirming today that interest rates are likely to go at a gradual pace and they should plan accordingly. >> perhaps an elaboration on the 12 --on, as of mark: sorry, having trouble hearing you. >> um -- david: if you shout it out, i will repeat it, how mark: -- if you shout it -- mark: if you

shout it out, i will repeat it, a ratehat? jill: increase altogether has been projected. are you happy with that, having the inflation of work? does it come across, for lack of a better term, as a hawkish hold? premiserst of all, the your question, i'm not sure that's right. i'm afraid to challenge. >> meaning a 100% price? 85% by november? first we speak to households and businesses in the country, but we also pay attention to the financial markets and i know were the ois is before i walk in here. look. question, the core which is sensible policy. i won't repeat the answer i just gave. the view of the committee as a whole is that we think that

momentum in the economy is going to reassert. now, this is not an economy ,hat's growing at robust rates but we are expecting it to reassert at rates stronger than the rate of growth of the supply capacity of the economy. that will continue to build domestically generated inflation, which will be increasingly important to the inflation profile as imported inflation from the past depreciation of sterling comes off. again, between now and the next the junebetween meeting in august and on through the year, there will be a series of data, a series of things that will happen in the global economy. people will have to update their views on the likelihood that the economy will evolve in that direction. our view, sitting here today, is

that there are reasons to think it will reassert. others can have a different view and they can trade or investor running the. thingswe are right, if transpire in that direction, then the expectations of households and businesses in this country, for some a modest adjustment of interest rates, will be adjusted. all -- kumal. you that thed are tag of unreliable boyfriend sticks? they took a clear signal that interest rates were going to rise more quickly and to a greater extent than previously thought. they will say no, interest rate rises are now off for a longer period this year. can the audiences you are so keen to speak to trust what you say about whether interest rates are going to go up?

more importantly, when is that going to happen? mark: first off, the households and businesses the we speak you don't trade short sterling, ok? they are not fixated on whether we raise interest rates. on may 10, at the end of june, or in august. they want to know, first and foremost what they want to know is the general orientation of the economy. that's what they want to know when we go around the come -- the country and speak to them. completely understandable. issues andundamental that's the first and foremost thing they want to understand. they second thing they want to understand, still, is is the financial system healthy? is it in a good position for the potential shocks we could get from the variety of headlines on ?our network geopolitical issues, european issues, etc.

the third thing is, what's going to happen to interest rates? orientationgeneral of policy, that the interest rates are likely to go up, they do know that, they do have that sense. sloughs of surveys and meetings tell us that. but, they also expect that if the situation changes, they expect is not to be on some preset course. they expect us to be prudent on -- prudent, not passive. if the situation is appropriate, we will take in the just policy. say that the only people who throw that term at me are in his room. so now everyone else can throw it at me when i go out of this room.

>> [inaudible] news.l four i should say., >> you are trying to give clear guidance, but it ends up seeing confusing. unreliable boyfriend aside, wise the bank of england struggling so much to help consumers to understand what's coming? or du think that you are doing a good job at communication? look, i think that in terms of the overall guidance we have given, the first was, if you go back five years ago, we are not trigger-happy on interest rates just because the recovery has finally started. it finally started in 2013. we will not instantly raise interest rates. we will wait until we see progress before we even think about it. that message, you can debate how much of an effect it had, but it in terms of people

spending, the housing market and other factors. tosequent to that we tried get across something that is now absolutely conventional wisdom, which is that longer-term interest rates are going to be lower for much longer than anyone had thought. we started talking about that in 2013 and we have talked about it consistently. i know you are bored with it, but it's important and people are making decisions on the basis of that and i think that now as you look back over the course of the last several years, that has been right. it is part of the reason, not the sole reason, but it's part of the reason why we have the employment and growth outcomes and the inflation outcomes that we have. it's been necessary. we still think it's appropriate. it's useful information for people to have that perspective. i do think that the committee does think that it is still usable and is informed by

discussions with businesses and households across the country, it's useful to give an orientation on policy. the u.k. economy, i will finish with this, we are in a different place, not surprisingly. it's a reason why we have an independent central bank. we are not in the same place as has a lot oftill spare capacity and a financial sector that is only recently recovered from the crisis. in the economy in terms of the labor market, there are not big investors and it's in a different place from europe. we are also in a different place in the united states. which also doesn't have a major trade setup. it has some trade discussions, but not on the same order of magnitude or timeframe, or

materiality by any stretch of the imagination. austerity, expansion, you have to set policy to the circumstance here. in terms of it getting through to those making economic decisions in the country, it does. >> chris? chris: chris jones, financial times." one of the reasons people might be confused about the fact is that you have said today that q1 , anerratic as an outlier important slowdown is temporary, and you also said that the economic momentum is the same that you thought it was in

february. and yet the path of interest rates that we are guiding on is significantly lower. february you said that everything is the same, being hawkish, saying that the financial markets were not expecting sufficient interest rate rises and now you are basically saying that it's ok. this is why people are confused. could you clarify that esha mark mark: ok, so there's a couple of important things embedded in the question. then i will come back to the first. what we said in february was a market message and it was a market message relative to november. , the market curve that we use for the november forecast had to bang increases over the course of three. what we said in february relative you needed it sooner and more.

it happened to be more or less consistent with where the market curve have been moving. moving toward three rate increases and the mindset of the committee was moving in that direction. meeting, wento this might you can't i apologize for being technical. we use the 15 day average. it's mechanical, as you know. it has increases over the next three years. so, it's interesting, in effect, it's -- but why is inflation coming back to targets sooner than they had expected before our perspective and it's not

we haveof the week q1 accumulated evidence on the .astor from sterling we are not going to get as much of that pass through into import prices as we previously have. which i made in the report. that is why inflation comes back to 2% in two years time. we get a shallower path of a imported inflation. will -- unit labor costs and other indicators have come in line with what's not slightly firmer.

given what's happened on the external side, that combined with the week of first quarter , it makesrst-quarter sense to step back and say, ok, we think that momentum will be reestablished, what is the evidence of that? >> in february you said you thought monetary policy would have to be tightened earlier. >> i will give you another question. it's a curve versus curve point. it's really technical, i apologize, but in february talking on a curve in november now, thetwo increases

used it in the may report with three. >> you don't think that your message has been diluted? mark: our core message, sorry, is that we think that there needs to be an ongoing ,ithdrawal of monetary stimulus provided the economy turns out as we project. if that's a gentle pace it's limited into gradual moves. what has changed since tells you something about profile, profile of inflation. we think that there are some idiosyncratic and erratic factors there that will go away

and we have seen other things that suggest that the momentum is going to reassert. but in the judgment of the going to, likee everyone else, watch for that to fill in. >> my extra question is -- mark: i thought that was your extra question. [laughter] >> is another possibility that inflation is lower than expected and the economy is softer than expected? wages are becoming less strongly expected. allare predicating almost of the need for tightening on the basis that the labor market is very tight, but actually wage pressure, given that, is actually remarkably muted. total pay actually fell in the latest. isn't there a possibility that wage sentiment and pay will actually fall back towards 2% and earned inflation falls back towards 2%? mark: the first thing, on pay, the main element or distraction,

if you will, in the most recent labor force survey is the bonus component. if you look at regular pay, we look at regular pay. bonuses will go up and down, so we don't get overly fixated on them. regular pay was in line with our expectations, as was private sector regular pay higher than what it's worth. climate thing about the of the economy of the labor market. where productivity growth has been running at half to three quarters of 1%, it will go up in the forecast, it's very, very difficult to see average wages going back to the same levels

when the economy had productivity growth of 2.5% to 2.75%. when you have pay growth in the 3% running with productivity in the 1.25%, that is unit labor crossed -- labor cost growth with underlying pressure from the domestic side that is consistent with a 2% target. -- detailed a bit in the report, not a bit of the merkel perfect they are not old enough. >> today's inflation report suggest there may be three

rises. what should households be expecting? i know we have discussed this a bit already, but the confusion between what was being said then and what is said today -- >> the problem with asking the same question is you get the same answer. the view of households, the view that we saw that were surveyed, the view of businesses is that they expect interest rates to go up at some point next year and go up by two increases over the next year to 18 months. slight differences between households and businesses. fair assumption for him to make? mark: we will see. in terms of the support that the bank is providing to we had very,

accommodative monetary policy robust,ector that is well-capitalized, ready to lend a lot of liquidity and withstand as weretty severe shocks, have demonstrated over the last few stress tests. we foot our bit of the conditions in place on the come back, but there are some big, big decisions being taken and other forces and we will see how those land. reuters. castle, from what's the biggest challenge for your successor? will brexit be the biggest challenge? i won't comment on the first part, the biggest challenge opportunity for the country is the brexit negotiations. that's not news. but sometimes stating the

obvious is useful. >> phil, then david. >> you talk often about rate rises being gradual and limited. i just wondered why qe is not a part of this formulation. obviously, it's a gradual and limited approach to tightening, running off to mature, it doesn't even seem to be discussed. i was wondering if you could expand on why not. giventhe committee has past guidance on qe and preference, and expressed preference that bank rate would , thee marginal rate marginal tool, sorry, for affecting marginal policy, having enough room to move the bank rate in either direction,

as the inflation target required. now, in due course we will revisit that, that's a big signal, by the way, but in due course we will revisit that and think it through. -- itk that we also take would be prudent and appropriate carefulknow, take observation of the quantitative tightening that the fed has embarked on and the impact of .hat in making those judgments i will leave it at that. it's a fair question. we are not ignoring it. but the stance, if it were being actively discussed, would be in the middle. times." smith, "sunday as a positive you mentioned the march agreement on the transition towards exiting the eu. even the state of the breck that

negotiations, do you think that agreement was 100% secure? are you certain there will be a transition? or is it just an assumption? mark: it's an assumption. i will make a couple of comments. first, it's an assumption, you get a yes no question as opposed to a guarantee. what's important for the forecast is how, obviously, particular businesses react to things like the transition agreement. at this stage we haven't yet seen a material change in business investment because of .he transition agreement but it has only been a month, effectively, so as not surprising. we would be looking for that and provide some upside risk, if i can put it that way, to the business investment profile in

the forecast, but we haven't locked it in. the third comment i would make his back the first assumption versus certainty. it is an agreement that has been made by 28 has of government. yes, there are execution issues around it. ultimately it requires parliamentary approvals. but the political will is very clearly there. also, there are a series of issues, which is not why the agreement is made, for the financial sector, there's a series of issues in the financial sector that would definitely benefit from the additional time and provide added incentives, whatever happens with the in-state negotiations, if i can put it that way, and added incentive for the eu 27 to ensure that there is a transition period. >> tim?

>> thank you. ,"m wallace, of "the telegraph your table on page nine shows --erest rates that was mark carney with some mike issues that they have been having. if you want to check out the news briefing that continues, check out the live go on your terminal. a lot of those questions were all about communications, subtle ways of asking about credibility overall. the first question, things are getting confusing, but mark carney didn't want to bite, sounded like you wanted to use some optionality and the key question was if the first order growth was going to continue or rebound. he also said that people should expect a reit -- rate rise.

early 2018 the slowdown in the first quarter as temporary. from thet anything last 40 minutes? >> you know, alix, i got a sense of fatigue from mark carney in this news conference. with all the focus much more on the question of communication thanf, rather communicating what's going to happen in terms of the future path of rates. as you see, -- as you say, he seemed to not want to be tied down on the timing. but they are obsessed with whether the next rate hike is coming in gillette -- june, july, august, and the general path of rates. we didn't get a lot of clarity, really, in terms of guidance at all. that said, the things that seem

to be showing up in the market, the initial reaction is that they are taking this as a bit of a dovish hold, but some interpreting of what mark carney is saying was hawkish, saying that they were willing to look through the first quarter softness in terms of the growth and in terms of inflation getting more quickly to the 2% target in two years, saying that they are seeing less of a pass-through for the weaker prices. you: did you get a sense of -- of if he was able to maintain a hawkish or a dovish hold? he wants to keep optionality but can't look through the date he yet. >> you know, i think you hit the nail on the head in terms of the optionality. that was the sense i got from this news conference as well. even when one of the reporters said to him -- look, it sounds to us like you are trying to sound hawkish, but the market is taking this as dovish, he said

no, the market is not pricing out a rate hike for 2018 thousand 18. 85% probability is not pricing it out. you got a sense that he was trying to maintain optionality and that the core message was that it was ongoing withdrawal of monetary stimulus, limited and gradual kept coming up, not wanting to be tied down on exactly when the hikes were going to come. he did point to brexit as well and said that the economic outlook could be clouded by brexit uncertainty. guess what? came upliable boyfriend again. he said the only people who call him and unreliable boyfriend are in this room, which by the way, is not quite right, it came from a u.k. lawmaker rather than journalist. alix: accurate, i was owing to make that point, too. thank you ray much, nejra: nejra: -- thank you very much, .ejra

a lot of buying is pumping into the market. joining us now is megan green. i don't know if you heard, but when our reporter brought up the fact that markets had priced out rates, he came down pretty hard on her, but let me show you what she's talking about, which is accurate, the market implied probability of a rate hike has been product -- priced out for the year. is this the right one? >> i think it is right that the market based probability has come down. every economic indicator in the u.k. has rolled over except for the employment data, which by the way is a lagging indicator. we will have to wait for that. anyone who thinks that we released need to see significant rate hikes or more than one this year is looking at the employment data and noting that we have real wage growth in the u.k. now, so there has been in a

way that there hasn't in the u.s. and the developed world. pressures, maybe there should be fundamental upward pressure on inflation. maybe the face of england should be hawkish. offsetting that is the growth outlook that teams pretty weak. "another poor decision by the mpc, despite nine years of economic recovery, keeping rates at the same, with the lowest unemployment rate in 23 years, a failure of monetary policy, strategy, and leadership. that's pretty unfair. a lot of this depreciation has fallen out from a year-by-year comparison, so we are seeing inflation slow in the u.k., which should continue offsetting pressures. but they are not run away.

we finally have real wage growth as opposed to contraction, it's not something the bank of england needs to be worried about or feel like they have to quick get in front of. u.k., between protecting their inflation mandate and trying to protect the growth outlook, they have always aired on the side of growth. the rate hike that we already diverge from that and actually support inflation and i think that probably they will air on the side of growth. on the side of growth. alix: global synchronized growth recovery will offset the brexit risk. does that thesis still hold six months later? megan: i think the global think are nice recovery will hold. we have already seen it hit its peak, so it should hold for the next year or two. a lot of that will depend on the choreography of brexit. it could be a blip.

it is likely to be a significant drag on growth. the bank of england's probably right to air on the side of protecting growth rather than on the side of protecting growth rather than inflation. even though most central banks are looking at growth targets for their mandates, they recognize in the developed world that on average they cut rates by 500 basis and no one has room to do that. the bank of england stocks so that when the downturn comes, they need something. if they can justify another one this year, they will go ahead and do it. well, coming up, market unfriendly risks in italy, but no one seems to really care. it's the widest level since march. more on italian politics and why we are not seeing steve are selling. -- steeper selling. this is bloomberg. ♪

in the bond market, it's all about buying, unless you are looking at italian bonds. just three basis points as the country is inching towards forming a populist government. silvio berlusconi dropping his opposition and giving the green light. our rome euro chief joins us now. what happened over the last 12 hours? hello, yes. what happened berlusconi basically said it's ok for the way half central right. the white of the last two months of negotiations is that the five-star only wanted to form an alliance with the central right. berlusconi finally said that we , but they areo willing to support single things notgovernment may or may

want to pass in government. they are breaking off but it is not a complete break. they opened the way for an alliance and now the two countries are -- two parties are talking. alix: a nonpartisan figure possible as prime minister. what is the timeline and the implication? we just got a statement from them saying that things are going really well. that it will be either one of the two ringleaders because otherwise one or the other will be upset. looks like they really are going to form a government and it will be necessary for the president to nominate someone else. they have asked for more time so the timeline has moved forward to monday. they will have all weekend to discuss seats, basically, and policy and they will have to tell the president what they want to do on monday. alix: alessandra, thank you ray much. megan green is still with me --

greene is still with me. i'm surprised, when you come inside of the bloomberg here, is this the appropriate risk pricing? is.n: i don't think that it i would say that the markets have gotten pretty accustomed to political instability in italy, so they are sort of taking this with a grain of salt. if you look at some of the policies that the five-star movement are supporting, though, a big one is to roll back some of the pension reforms implemented in 2011. if you do that sustainability for italy with and out -- with and without those reforms, it looks fundamentally different. you could argue that the debt word and was sustainable with the pension reforms, but it absolutely is not without them. if they put together this government, they have an agreement on rolling back pension reforms. there are other measures saying they may be blowing out the budget deficit. that could work if you have had

a savvy italian government willing to be involved. both of the parties are deeply anti-european. it is not an immediate risk for italy, but further down the line there burden will become unsustainable. burden will become unsustainable. in terms of the anti-europe movement, will we be talking about italy leaving the eu? alessandra: i think -- megan: i think that if we see the italian government clash with brussels, they could be seen calls for the suggestion that they are better off outside the common currency. we could see that return. but even if we didn't, if it blows out the deficit and sees the debt written continue to rise, investors at some point are going to stage an investor

strike and there is a solution to that erie of the ecb will say it is fine, we will give them the bailout program funded by the ecb, but the italian politicians i have spoken with say they would never except that conditionality. alix: no one ever once it. alessandra: it comes with strict -- megan: it comes with strict conditions. they rejected it in 2012 and we could expect that to happen again. there is a cognitive distance between rome and frankfurt in particular. italian yields are really just going one direction. the: alix: -- alix: question being, what does mario draghi do? how does this affect median return? megan: he was only in place for so long -- alix: someone else's problem? [laughter] .egan: yes

italy benefits massively from the bond buying that will be wound down, probably by the end of this year. ends draghi's term tomorrow and we don't know who will replace him. it might be a northern european representative, more hawkish, which is bad for italy, which will be facing more funding stress by then. if i'm just looking at the indicatesd, what appropriate funding stress? it's a good question, this is well outside most investor's timeframe. that,in the year after maybe then investors will start to realize that italy is implementing all the wrong oh want is ahat you fiscally responsible italy. as the fifth largest debt burden in the world, including emerging

markets, italy already has a massive debt burden and they are going to blow it out even further. to catch up with you on this. coming up, the latest round of inflation data is on deck. in the market, we did not get the three handle on the 10 year option. would yields be even higher if you didn't have some kind of dollar, a bias? the touch weaker, still pretty strong. this is bloomberg. ♪

is "bloomberg daybreak," i'm alix steel. equity futures are up modestly. over and the u.k. as well, sterling takes a leg lower.

a populist government in italy? no worries. other asset classes, a by the bond kind of story. the italian btp is up two basis points, not much of a selloff continuing that light of with somerisks missing those estimates and in a month on month perspective, cpi came in at 21%. disappointing on the margins. cpi month on month, up 1/10 of 1%, year on year, up 2.1%. david? more or less consistent with the numbers. they have initial jobless claims that are down a little bit, not a big change.

the real average weekly earnings year-over-year, last month it was four .9%. it catches my eye at least. alix: moore buying is coming and the bonds, yields are down three basis points. it's on the belly of the curve, that's where you are seeing is the most. taking a quick look at the equity markets to see the reaction there, we are's up, but modestly. greene, wherean is that inflation? megan: it's a great question and i'm with you, i'm not really seeing it. there are legitimate inflation concerns in terms of commodity prices and a stimulus coming down the line, but there are a whole bunch of structural ends , like a lack of wage growth, for example.

for a number of reasons. we have had these positive supply-side shocks to the economy. the tax bill be regulation with a negative demand-side shock on the economy in terms of accommodation, it's all disinflationary. blowing outt we are the deficit with the tax bill and the spending bill, the huge debt overhang that we have should put down pressure on growth and inflation over the medium to long-term. -- david: we are putting $1.5 trillion into the economy, we are into it always. when are we going to see that show up somewhere? megan: 1.5 or 10 years, that will be split up. i would be much more worried about the spending bill, $350 billion over two years, and half of that goes to defense spending, which doesn't even factor into core calculations

that the fed is looking at. only half of that will feature. that should put upward pressure on inflation. i'm not denying the inflationary pressures. my call for this year is not this inflation or deflation, it's a mild acceleration of deflation. but the late cycle surge that we are used to seeing, i'm not dying that we are seeing signs of it or that we will for a while. the late stage of this business cycle is likely to last for a long time. david: i'm curious about capital investment productivity. megan: we are seeing a slight uptick in the spending. for those excited about it after bill, firmsthe tax were saying it was forced on their list of priorities, so we are not seeing a huge surge in spending there and we should not expect a productivity growth surge either. so great to catch up with you, megan. in the market we are waiting on

the biggest ipo trade of the year. selling shares at $20 for fees, below the high and of the range. joining us now, robert santangelo. credit suisse worked on the access options. cannot speak with us until it starts trading, but nonetheless, thank you for coming. if you cannot talk specifically about the deal, what did you learn about where the market is? robert: let's talk about where the market is. there's been a lot of ipo supply over the last several weeks and months. been been very well absorbed in the markets. i think that when you look at the components of that and what has gone well is the technology offerings that have had a real scarcity of supply over several years. looking through the market, you are seeing various degrees of

price discipline. david: i will give your to bring alternatives. one, the -- volatility. increased volatility is not a .riend of ipos and live cash that they have to put somewhere. volatility has come down. it has been on a downward trend. supportive of the ipo market. if you look at inflows on mutual funds, they have been quite modest over the last two months, whereas they were strong in the first portion of the year. what you are seeing is that the broad market, the people looking at the calendars, a lot of that product has been technology driven from the calendar. alix: going forward, where will we be seeing the secondaries? robert: you have seen that in the utility sector, a real departure from the past equity and equity like securities are

approaching $10 billion this year, probably exceeding the last two years to three years combined. that may be counterintuitive, utilities underperforming pretty meaningfully since december. they were obviously on the back, on the losing side of tax reform and on the losing side of rate increases. the market has priced in the need for equity and the actions are generally getting done very well. alix: thinking about the quality of the companies, are these the big guys with killer balance sheets? smaller players with more risk? thert: tax reform of corporate level has had a lot of winners. on the utility cited has increased the need for equities, counterintuitively. you are seeing very high quality issuers come to market that have underperformed by 12% to 15% over the course of six months. and you are seeing a more than ample am appetite -- ample

appetite. that appetites coming from? a change in the capital structure? or are they actually growing their balance sheet? robert: i would say it is a, nation of both. in the first instance, it's a replacement of capital for, you know, to compensate for reduced earnings from tax reform. utilities actually earn less post-tax reform. they have been reimbursed for taxes they are not paying. it's ironic, but they are actually earning less. moving to oil, you and i talked oil all the time. rent moving to 80, really? i have to explain this chart. this is basically a brent crude swap backing up, so now you have all of them passed 2022 past 60. we haven't seen that since 2016.

robert: last time we were here we talk about the market queuing on the curve in terms of pricing the equities and you are seeing a sizable move across the middle of the curve with stock prices moving up as a result. in the short-term, oil will be driven by headlines. it will be driven more by geopolitical factors than fundamental factors. that said, i think you have got the stoxx pricing in a large amount of backwardation in the curve. over time it should perform well. alix: what does that mean for the ipo market and secondary market? is it hard to ipo now because in the middle of the curve you need to rate? robert: one of the drivers has been capital discipline.

, think that what you will see you won't see a huge influx of ipo's because i think the general sentiment on the buy capitalmoderating investment being the right thing. that said, at these levels you will see a reopening a much more significant way of follow-on activity with ipo activity through the balance. david: who's going through the capital markets? the smaller players or the big players? playersit's the smaller in oil and gas, people with highly economic assets where the infusion of capital and accelerate the growth. feel how certain do you ceos are right now? the new york fed had a cool piece out saying that the implied move in brent has been from headlines, others have been from supply and demand. how do they make is this decisions off of that?

robert: i think that, you know, you are at people budgeting $50, $55, six dollars, something well below the front end. i don't think that these sizable moves in the immediate term shift capital investment. i do think that the u.s., these us more companies raising capital, it's an interesting opportunity because i think the aggregate scale doesn't sway the market so there is an opportunity i think to invest in some smaller companies that can grow without changing the balance of some high and demand areas robert: interesting to -- areas. -- high demand. alix: interesting take. my other show, "bloomberg commodities edge," i will be speaking to the manager for sugar and ethanol. it will be iran, all day, know-how. exciting.ill be right now we want to get an

update on what's making headlines outside the business world. >> president trump has thanked kim jong-un for releasing three americans detained there. the president welcomed the men earlier today after they flew on a military to joint base andrews . he was optimistic about the chance for a successful meeting with kim. >> we have a good chance of doing something meaningful and if anyone said that a year ago you would have said it possible. >> an administration official says the president and towards singapore of the summit. israel and iran, closer to full-blown conflict. israel struck most of the iranian military facilities in syria overnight. israel said that it attacked after iranian forces fired missiles at the iranian held

section of the galle and heights. premier,-old former poised to return to power, he's demanding to form a new government. his opposition government dealt a shocking defeat. he was prime minister from 1981 to 2003, defecting to year zero, calling the candidate a thief during the campaign. this is bloomberg. ♪ global news, 24 hours a day, powered by 2700 journalists and analysts in over 120 countries. -- alix: inflation misses, here in the u.s.. cpi coming in weaker than estimated. a dollar moves at lower, vying coming into the yield on the 10 year moving substantially lower. stirling is interesting, we are now flat, out weighing the dovish hold from the bank of england governor, mark carney. s&p futures, no surprise.

where's the inflation and the take? that's the question. david: coming up, three american detainees return from north korea overnight with the president sounding optimistic about our with kim jong-un. we will talk about this with rob portman, coming up next. this is bloomberg. ♪

," this is "bloomberg daybreak and coming up later today on "rumored markets," the goldman sachs cohead of investment banking. david: mike pompeo, secretary of

state, coming home in the middle korea,night from north bringing home the americans who were imprisoned there. a few minutes ago i spoke rob portman, who sits on the foreign relations committee, about the latest developments. >> i was delighted to see them off the lane and honor their and soil. to see their smiling faces was wonderful. it was difficult for a number of us who have been so involved in trying to get auto warm beer -- otto warmbier back. unfortunately he came back in a vegetative state and had been so for about 16 months. we were not told that during our discussions with the north koreans. this goes to both the opaque nature of the regime and the evil nature of that regime. so, we are delighted that izaak answer back and we wish that some of things had been different two years ago, 18

months ago, that we would have had a different result. what has changed is that there is now a direct dialogue between the two countries. i have called for such a dialogue, saying it is believed that the north korean regime should be given any credit for releasing hostages, because they never should have been taken in the first place. of the nuclear weapons and the means to deliver it was necessary to have direct communication. that could have made a difference. now we have that and it is making a difference. something else that has changed is that the trump administration, both through diplomacy -- what i mean my that is getting the rest of the world, the united nation's sanctions, in particular, focused on north korea, and ,etting the north koreans know

, they need tocise stretch the muscles. those things, and the willingness to demonstrate that we have the military force to use if necessary, has made a big difference. david: looking forward to the summit, does this experience give you a path forward for the president to make progress in the summit? as you say, you dealt with note korea -- north korea. are you seeing hope towards a complete process? trust the verify. every administration over the past four years has tried this with north korea. once they are not maintained so, i think you

have to be careful and i think it is necessary to have the indication directly and have the opportunity to talk about. my understanding is that these are ongoing and that's a very good neighbors. to have china very involved, because ultimately the implementation of any kind of agreement will depend in part on being engaged. i know that that is an ongoing discussion with china that is very important as well. david: we also have the issue in iran. how might one issue affects the other? to holdwe had a deal

things off, but the concern is and the u.s. you to sit to >> isreements with them an interesting situation, isn't it? the majority of the members of congress voted against the agreement when given the most did not do so talking about. has volatile is a big issue with and it may be flawed, including the verification and sunset. [no audio] david: what we heard was part of my conversation with rob portman, of ohio. let's get to the bloomberg

business flash. >> the royal bank of scotland paytentatively agreed to $4.9 billion towards an investigation into the sale of organs backed securities before the financial crisis. the settlement will make it easier to the bank to reduce dividends after a decade. u.s. penalties are having a huge impact on the second-largest telecom equipment maker. they have suspended major activities after the u.s. cripple its ability to purchase technology. they still want to resolve a seven year long case. in china, the former chairman of anbang insurance has been sentenced for masterminding a 10 billion dollar fraud. sealing the downfall of the bangaker, who brought on -- anbang global recognition. the chinese government seize control of them in february and injected $9.5 billion of capital

to bolster sovereignty. alix: thank you so much. what i'm watching is yields in the dollar. we get the dovish hold, mark ,arney spent his time defending and what happens the sterling? pretty much nothing. atsaw the core cpi coming in two point 1%. cars and airfares, declined. over inflation as a conversation, retreating from the market. david: the data is not that strong. weak.rribly you are seeing the buying coming in across the curve, which is interesting, we have an option coming in later. the conversation yesterday is will we see a three handle on the 10 year option? we didn't make it and it was fine. it was a completely fine auction. i wonder how much higher yields

would the if we didn't have some kind of safe haven read. i'm interested to see after this reading the kind of demand the 30 year draws in. is about saying my goodness, it affect, but then it doesn't we worry about foreign hires, but so far it's held up pretty well, which is good, it keeps the borrowing costs down and we are borrowing a lot of money. off ofnflation coming the expected high, that might continue as well. the break even is rolling over, the 210 is flatter, nonetheless pricing out potential invitation over the curve in the market. it's good up to a point as long as it doesn't interfere with global synchronized growth. i'm actually watching mr. cohen. the story gets harder and harder to track.

we have got a korean air's ace company, at&t over here, retaining him or large sums of money. insight intowas an the administration. the swiss company said no, he's going to tell this out with pharmaceuticals. the korean company said it's a local tax issue. he's quite the expert in a lot of different things. alix: it my question, is this something nefarious or just really good marketing? companies get snookered and you realize you have nothing to say. david: it certainly raises questions and mr. mueller is already knows russian about what these companies thought they would get for the money? if there wasn't a quid pro quo, if you cannot find that money was paid, that's not bribery. disclose did not

lobbying. there may be allegations that he misrepresented he's doing to the bank. that's what he's doing to the bank. the other question, how is the stormy daniels lawyer coming up with all this information? who is paying these bills? alix: what are you hearing? there's a lot of speculation that someone from the left is funding all of this. it's very detailed. treasuryare watching auctions, inflation, d.c. drama and michael allen. a really interesting session seems to be developing, -- michael:. a really interesting session seems to be developing -- michael cohen. a really interesting session seems to be developing. up 1/10 of 1%. because of that dovish hold.

stirling is lower, better for the ftse. italian equities are in their, down 1%, with a populist government potentially in italy, selling 1%, not that bad. yields at one point were higher by six basis points, now they are up to bank as they by the dip and come in. david: you know what must be hard? silvio berlusconi. the one thing that we know is that those numbers, he won't be part of it. maybe that is what the market is reacting to. right?right? -- alix: and sure. coming up on "bloomberg markets: the open," this is bloomberg. ♪

>> from new york city. i'm jonathan. this is the countdown to the open.

>> coming up, the u.s. dollar turning lower after u.s. inflation per april comes in a little lighter than expected. crews rallying expecting gains to three years high -- three-year highs. a populist government in italy. in the markets. 30 minutes away from the opening. the fx market, one dollar weaker. euro-dollar. factory, 119. yields high by four basis points. the u.s. cpi rising less than four counts in april. reacting to the report and lack of consumer price inflation. >> there are legitimate inflation concerns.