♪ >> coming up on "bloomberg best," the stories that shaped the week in business around the world. words from the white house move markets as the president weighs in on fx and the fed. >> he is building a case and you are going to see it one tweet, one appearance at a time. >> it is all to set up a few big wins coming into the midterm elections. yvonne: drama from the courtroom set shock waves through washington. >> robert mueller has accomplished a lot. >> this makes the midterms a referendum on impeachment. look who is talking. negotiations on trade take more with and turns. >> i think all indications are

we are locked on for the next stage of this trade war. yvonne: earning season continues with another round of results. >> our expectation is the trade war will not have a direct impact on steel production in china. >> this gets us to $3 billion in the last three years returned to shareholders. yvonne: and central-bank leaders speak their mind at jackson hole. >> based on what i see today, i think two more rate hikes this year could be appropriate. >> the signal you take from the yield curve now is different than it has been in the past. >> we don't need to be accommodative. we should be moving to a neutral stance. yvonne: it is all straight ahead on "bloomberg best." hello, and welcome. i'm yvonne man. this is "bloomberg best." your weekly review of the most important analysis of bloomberg -- most important business news, analysis, and interviews on bloomberg television around the world. with world bankers meeting at

the jackson hole symposium, monetary policy was already on the agenda for investors this week. but on monday, remarks from donald trump put a new spin on the discussions. >> president trump, ramping up criticism of the federal reserve. in an interview with reuters the , president said he was not thrilled with jay powell's raising rates. bloomberg reported trump was complaining to wealthy donors at a hamptons fundraiser that powell has not been the chief he thought he would be. >> we heard complaints on twitter and through his economic advisers, larry kudlow, and others, peter navarro, that he does not like the rate hike path jerome powell has put the u.s. on. now these remarks behind closed , doors to a group of republican fundraisers become more personal. >> he is building a case, and you will see it one tweet, one appearance at a time. as he gets matter and madder.

we have seen this again and again, with one issue after another. once trump gets on an issue, he won't let it go. so i can almost guarantee we will hear more about trump criticizing jay powell. matt: president donald trump has accused china and the european union of manipulating their currencies as he tries to wrestle concessions from two of america's largest trading partners. there clear answer is that german or european government are not manipulating the currency. we have a situation that we have a huge trade surplus with the u.s., but on the other side, we have a deficit taking over in earnings from americans abroad into u.s. with that, this trade deficit is compensated. >> president trump's accusation that china and europe are manipulating their currencies may not have been a surprise. he has said similar things before.

but it did move the chinese yuan and euro higher against the dollar. did president trump accomplish what he wanted? >> maybe for a day or so. i think ultimately, fundamentals will revert and you will see dollar strength coming back through. >> this is all to bring people to the table to get things done ahead of midterm elections. everything he is doing, whether powell, trade, tariffs, it is to set up a few big wins coming into the midterm elections. >> just moments from now, the federal reserve is due to publish minutes from its july policy meeting, where officials raised the benchmark rate to the -- by a quarter point for the second time this year. >> many fed officials said at the last meeting it would likely soon be appropriate to raise interest rates again. that probably means the next meeting in september. a lot of confidence in the inflation outlook overall. you know, a lot of confidence that the inflation rate would stay near the 2% target and more confidence that wage growth may be soon picking up. some references to lag from low unemployment that have yet to filter through to the data.

that is another thing that kind of supports the outlook for them. trade was mentioned as a downside risk by all participants at the fomc meeting. however, the tone sounded less concerned than the meeting in june. >> it is all systems go for a quarter-point in september, likely a quarter-point in december and possibly one more in january before they pause and take a breath and say, where are we going vis-a-vis neutral? and the answer is, they are probably getting close by that point. >> it was, after all, a historic day yesterday, as two former aides of president trump, paul manafort and michael cohen, were both convicted of felonies within minutes of one another. mr. manafort was found guilty by a jury on eight of the 18 counts against him, including bank fraud and tax evasion. cohen, up here in new york

pled guilty to tax evasion and , campaign finance violations. >> if michael cohen can tell robert mueller, and in some ways, back that up, that donald trump knew about the hacking of democrats, that russians had any kind of role in that, he or his -- and more coordination than he or his people have said so far, then that probably would rise to an impeachable offense. but we are not there yet. >> right now, we have strong evidence. i think it is conclusive, but let's at least agreed it is strong, that donald trump knew that michael cohen was going to be advancing money on his behalf to hush up the relationships with these two women, and it had a political purpose to it, according to michael cohen's guilty plea. >> the first response from the president in west virginia had to do with his "still no russian collusion." that is the last stronghold they are holding out for,

because mueller has accomplished a lot in just 15 months. it is quite extraordinary that they have a jury conviction within 15 months of the investigation starting. >> the question is, what is the implication for donald trump's presidency? to me, steve bannon had the best point. this does make the midterm elections a referendum on impeachment, because if democrats take the house, you can be sure there will be efforts to impeach the president. >> president trump has contradicted his former fixer and denied using campaign funds as hush money. he also told fox news that he only learned of the payments later on. >> the president continues to tweet. he said, for instance, that he wouldn't use -- anyone who needs a good lawyer, don't see mr. cohen. that kind of thing. so the drama continues to play out, but now it will play out more legally as well. >> the u.s. and china have revived long-stalled trade talks just before a fresh round of

tariffs is due to come into effect. >> we know the vice commerce minister of china will be meeting with his washington counterpart from the treasury department and his team. we know that some key areas of friction will be discussed at these meetings, including intellectual property transfer and the balance of trade that is a sticking point. we know we have heard of the u.s. side will be presenting their chinese counterparts with a new list of demands. of course this is all coming as , we expect the additional $16 billion of tariffs to be implemented in the next few hours and consultations in washington over the additional $200 billion worth of tariffs. >> we closely watched trade talks between the united states and china have wrapped up with no major progress. how significant is the breakdown of these talks? can we extrapolate and talk about $200 billion worth of additional tariffs being the next step? >> look, i think all the indications are that we are locked on for the next stage of this trade war. by all accounts, there was no meaningful breakthrough in

washington. there was not expected to be. but the mood music didn't point toward anything. in fact our colleagues said , there was a suggestion on the china side that talks will be -- all negotiation talks are parked until after the midterm elections. focus is shifting to the next round. $200 billion worth of goods the u.s. talked about. the question is how severe will , those duties be? 10%, 25%? what will be the final list? -- what will the final list of goods be? it seems we are continuing down this path of continuing trade war. >> fed chairman jay powell has given his first jackson hole address, indicating he will stay the course on rate hikes. as he put it, "there is good reason to expect this strong economic performance will continue. i believe this process of normalization remains appropriate." did anything surprise you in what the chairman had to say today? >> well he talked more about the , economy than people thought he might, but nothing new. -- but he did not say anything new. they are already calling this the goldilocks speech.

he presented it as a set of questions. one is, if the economy is strengthening, as the chairman said it is, then why isn't the fed tightening more aggressively to avoid the economy overheating? the other question is, if unemployment continues to fall and inflation doesn't continue to rise, why is the fed tightening as aggressively as it is, because they don't need to? and he said basically it is a matter of risk management. you want to steer down the middle and avoid the economy overheating, but avoid putting the brakes on, as well and therefore, he says the fed's gradual path of rate increases is pretty much what should be done. yvonne: still ahead as we review the week on "bloomberg best," ceo jeff stallman explains how tax reform and tariffs are connected. plus, we are at jackson hole, speaking with four fed presidents about monetary policy and the economy. >> there is no reason to challenge the yield curve at this time. there is no reason. yvonne: next, more of the week's

top business headlines. world leaders facing political pressure. australia's malcolm turnbull feels the heat in a leadership challenge. >> it really has been an extraordinary period of political turmoil. yvonne: this is bloomberg. ♪

yvonne: this is "bloomberg best." i am yvonne man. let's continue our global tour of the week's top stories. in greece, the government finally made an exit from its bailout program. >> greece's bailout program ends today, wrapping up a decade of crises that have transformed the country's economy and its people. how can you be sure greece won't be back in crisis? is genuine debt relief the only way to ensure that? >> you know, debt relief is

something that can be seductive, but has to be reimbursed. and this is just the taxpayers of other countries money. -- if you can convince the german people that they have to renounce something like 80 billion euros of debt on greece, then you are much stronger than i am. but there are now some short-term and medium-term measures that will alleviate a lot of that burden on greece, and i think we can say that it is on the right track. that is what was testified. francine: italy is pushing ahead with revoking the highway concessions in the wake of the deadly bridge collapse. that is despite an offer from the benetton-owned parent company of aid.

the disaster that left at least 43 people dead has led to a fight to salvage its lucrative tollroad investment and protect its fortune amid rising public anger. can the government revoke concessions or is this a lot of talking? >> if we look at the contract, it is a long process to revoke a concession. i was just reading that the concession lasts until 2038 for atlantia. it looks like the populist government is considering other ways. publica," to "la repu they are not trying to revoke the concessions. they may do a new low and a new law new law, and the new would overrule the concession. essentially, they are going to let the concession expire. it is still unclear if this is something that can be done on a constitutional basis in this country. >> venezuelan president nicolas maduro carried out one of the greatest currency devaluations in history over the weekend.

inflation is forecast to reach 1,000,000% this year. how bad is it? these measures are just drops in the bucket, right? >> essentially what he has done is recognize that the black market exchange rate was really setting the prices in the country, so they had this overvalued fisher rate and he has basically just let that go and every thing will be in line with where the black market was. but clearly, even as they explained, minimum wages will rise from about a dollar a month now to about $30. as more money is printed and the of play out, you know that minimum wage will likely be eaten into by the hyperinflation. bonnie: - vonnie: on the u.s. campaign trail, donald trump

promised america he would revive the dying coal industry. 19 months into the term, we have more details on the plan. the epa released its affordable clean energy. -- energy proposal. it will replace the obama era clean power plan. what is the plan? what is in it? >> the trump administration is proposing to replace the sweeping efforts to regulate greenhouse gas emissions from power plants that president barack obama put into place. the obama plan was expansive, it aimed to encourage renewable power and discourage the use of coal for generating electricity. the trump administration proposal that is being advanced today instead would basically set out modest equipment and efficiency upgrades that could be done at individual power plants and then give states broad latitude to decide what they want to require. it gives states more flexibility and it is a broad rewrite of the obama era initiative. >> election interference hasn't ended. microsoft said it detected and seized web domains created by cyberattackers linked to the russian military in a potential

attempt to manipulate and disrupt the u.s. midterm elections. >> what we are seeing now is a pattern that in many respects is similar to what we saw in the united states in 2016 when certain campaigns and political parties were attacked. it is similar to the pattern we saw in france in 2017, when we really saw every major candidate for the french presidency targeted. we are seeing it again. >> what this is a sign of is that 2018 is going to be very different likely than 2016, in that companies like microsoft and facebook and others are well attuned to the fact that if they don't pay enough attention to this, and if they don't squash some of these hacking attacks or block them before they happen, there are real consequences to that. there was a lot more attention on this issue. >> the u.s. is expected to impose new sanctions on russia today over the poisoning of a former agent in the united kingdom. the measures were announced this -- earlier this month, and are due to limit exports to russia

of u.s. goods on national security ground. with the pressure on moscow, how are investors in russia taking this? >> it has been a nervous couple of weeks for russian investors, but the ruble took a beating at the first wave of these sanctions earlier this month, started to be announced. now it is about at two-year lows. bond yields have spiked. fortunately for the russians, they have been planning this for a while. they have been under sanctions heavily since 2014, so they have been sort of battening down the financial hatches for a while. among the things they have been doing our reducing the budget deficit and new data out showing they are purchasing gold to build up their currency reserves. their gold holdings have been steadily increasing. >> the u.k. and the e.u. have said brexit talks will now be continuous. but the chief negotiator for brussels warned that the bloc had to be prepared for a new deal scenario and britain had to respect the single market. what is your take on u.k.

assets? is now a good time to go into them a little more or stay away until you find out what brexit actually means? >> it is quite a difficult time to take a strong deal on the -- strong view on u.k. assets because of brexit. it could be quite binary. i think the main way that would play out is through the currency. we have seen currency is most sensitive to the political machinations. and then in the equity markets, , it is real estate, financials that are the most exposed along with the domestic part, the ftse -- parts of the ftse 100. francine: saudi aramco is putting its ipo on hold to buy a strategic stake in the chemical giant. that is according to bloomberg sources who say aramco wrote to some of its advisors and asked them to suspend work for now. it doesn't mean the planned listing has been canceled. >> they are being shrewd in some respects, in that they had clearly worked on the ipo for a couple of years. there was a disconnect between what they thought it was worth

and what a lot of people in the market thought it was worth. yes that was dependent on oil , price and every thing else, but nonetheless, they wanted this money for the sovereign wealth fund and diversifying away from oil. by doing the deal, $70 billion from one state-owned company to another, but it allows aramco to go into the capital markets, raise this money through bonds. in the end, it will still end up with its cash. president-- vonnie: trump has gotten involved in a sensitive subject in south africa. he tweeted he is directing the secretary of state to investigate the south african government's plan to seize land from farmers without compensation. rand weakened. this tweet emanated after -- >> this tweet emanated after president trump saw a documentary on fox news. we have since had the international foreign affairs minister release a statement saying he will be engaging with the u.s. secretary of state

directly, and also saying he has asked for the department to engage with the acting u.s. ambassador on this particular ly, to seek clarity, also saying that president trump's comments were unfortunate and probably misinformed. >> we are looking at pictures of the new australian government being sworn in. and of course, this comes as australian treasurer scott morrison will become the country's sixth prime minister in 11 years. morrison did win 45-40 over a -- right-wing populist peter dutton in a closed-door meeting of liberal lawmakers. that follows the ousting malcolm -- ousting of malcolm turnbull. what will change on the economic front from here? >> it is unlikely anything substantial will change under prime minister scott morrison. he was, since 2015, the finance chief. since 2007, we have had six changes of prime minister and since that date, no prime

minister has served a full term. the election cycle here is only three years compared with five , years in the u.k. it really has been an extraordinary period of political turmoil. ♪

yvonne: you are watching "bloomberg best." i am yvonne man. monetary policy hogged the spotlight this week. investors were keeping an eye on trade developments. ceo jeff solomon joined bloomberg markets for an exclusive interview and shared his view that trade policy and monetary policy are closely linked. jeff: if this administration believes we need to put america first from a trade standpoint. -- standpoint the easiest way to , bring partners to the table is threaten them.

that is what this administration does. tariffs is the best way to do that. you can see it this week. the chinese are negotiating, even though we have -- people are here, and they are negotiating. so how do you create -- tariffs in and of themselves can be an economic drag, so how do you create space in the u.s. economy to impose tariffs? well you pass a tax cut, and the , tax cut essentially creates the space for you to reimpose taxes in a different form to achieve an objective. and i don't think there were a lot of people talking about the tax cuts as a prelude or precursor to tariffs, but when you look at it, it makes total sense to me. we have created space -- the administration has created space to essentially move forward with tariffs without worrying about whether or not that was going to be a huge drag on the economy. >> with that being the case we , saw earnings leap because of the tax cut, stock prices leap because of the tax cut. does that mean it comes back down once the tariffs are put in motion or we go through the process of a gearing how

-- the painful process of figuring out how the different countries negotiate? >> we don't know enough about tariffs yet. this is an experiment and they have never been done before, so we don't know. the reality is, few of the tariffs have been implemented for a long enough time for us to actually see them. the ones that are implemented are relatively small and the net impact on the global economy or even the u.s. economy is minimus today.de if we going with the additional $200 billion -- will there be a knock on effect? the knock on effect is that consumers change buying patterns, prices change dramatically, that is when -- we end up in a different spot. that is what the markets would get concerned about. today, they don't seem terribly concerned about it and the economy seems to be humming along at a reasonable clip. yvonne: coming up on "bloomberg best," perspectives on the fed direct from fed presidents. conversations from jackson hole straight ahead. >> my own view is inflation will , keep going up because cyclical

, factors are very strong. yvonne: this is bloomberg. ♪

yvonne: you are watching "bloomberg best." i am yvonne man. let's resume our roundup of the week's top business headlines. we focus on company news and a

merger that added quite a bit of fizz to the beverage industry. >> pepsico agreed to buy soda stream for $3.2 billion. the beverage giant would gain the israeli company's technology for making soda at home. this amid rising concern about plastic waste. six months ago, pepsico could have bought this business for less money. what are they buying and why are they prepared to pay such a high price? >> they are buying a company that is growing by leaps and bounds. soda stream has gone from strength to strength with every quarterly report. having laid out a strategy i -- a couple years ago that i think really had its finger on the pulse, they made two changes about two years ago. one was to get out of the soda business, so it is a bit ironic they are being purchased by pepsi. the other was to focus on the -- was to push themselves as an environmental company, focusing on the fact you can reuse sodastream bottles many times.

the ceo, danny birnbaum correctly grasped health and , environmentalism were going to be major trends with consumers, and i think that is what pepsico is buying here. >> alibaba shares higher, in premarket trading. the company did report an earnings miss, but revenue surging by 61%. how do you interpret the earnings miss versus the increase in revenue? >> this is generally a good earnings report, in line with revenue, but 61% growth from last year. what peopleeally are going to be counted on, or counting on. the eps miss is mostly due to do due to a big valuation gain for one of their subsidiaries, ant financial. stripping that out, their earnings were pretty much in line with investors expectations and what people were counting on alibaba for. make no mistake, alibaba is

still spending quite a bit and , that will take a hit for profits. >> xiaomi has delivered a 60% revenue jump in quarterly profit in its latest financial reports, and the chinese smartphone made gains overseas while fending off a challenge from rivals. i guess the ipo is overshadowed. do the results make up for that? >> likely, i do not think they do. there is a big growth in revenue. this is a company that is growing quickly. what you need to do is go through the line. on the bottom line net income , was awesome, but a one-time gain because they revalued the ipo. b shares through the this is really an accounting thing. gross margin shrank two percentage points. look really nice topline numbers that make the company look good. but profitability is not as strong as it should be. >> the increase in protectionism is hurting economic growth and

raising the price of goods, and also expecting consumers to push back as they become aware of the true economic cost. for now, however, ceo andrew mackenzie does not see a slowdown for bhp in china. -- especially in china. >> obviously, the concerns we have looking forward is if protectionism does take hold, it will have a dampening effect on the global economy. that will ultimately affect the -- affect bhp. but we do expect china will mitigate some of the impact it faces. of course we don't just sell to , china. it will do more to stimulate domestic demand. and as we have been reading this week it will work harder to , encourage exporters. from what i learned from talking to trade ministers around the world, a lot of countries want to trade more with each other. -- with each other, now that it looks like the u.s. wants to trade less with them. but we worry about protectionism

generally because it is bad for global growth and the economy. >> fortescue metals with a slide in profit to $878 million when it reported monday. >> the trade tensions, the trade uncertainties -- how much if at all does that weigh into what your industry is contending with at the moment? >> china produces 50% of global steel. of that, only about 1% is directly exported to the united states. now there is some steel exported , to other countries that may end up ultimately in the u.s., but most of the steel produced in china is consumed domestically. china is also very focused on the belt and road initiative. that provides additional stimulus. our expectation is that the trade war will not have a direct impact on steel production in china. having said that history has , demonstrated that protracted periods of trade protectionism are not good for global growth. francine: the world's largest wealth fund producing 8% in the second quarter and faces growing challenges.

-- challenges to his global investment model. norway's $1 trillion fund posted and boosted by stock investments and decreased exposure to emerging markets and china. despite the fund's aim to divest oil and gas stocks it was those sectors that fueled positive returns. >> it was the broad gains in the u.s. stock markets helped the -- that helped the fund in the second quarter, as well as european shares. it suffered declines in emerging markets, as well as in china. that is interesting because it has been expanding in emerging markets and china. they mentioned that stocks gained despite increased fears of rising protectionism. and it is a real threat to the fund, because it's sort of -- it has a global philosophy to invest across the world. ie: mixed -- vonnni picture for retail earnings today, shares of tjx gaining. kohl's, the results were

good, but shares are trading down because they are almost double from where they were last year. investors have probably built in higher expectations. four -- for tjx, 7% was just fantastic. that comp is on top of a two-year stack of low to mid single digits. no one had expected that. even the highest estimate was under that. the strength there is really the reason for this movement we are seeing in the shares today. >> target and lowe's reporting better than estimated earnings. shares of target surging in premarket while lowe's is trading lower. target, really impressive numbers on the same store sales front, 6.5% gain. the best growth for the company in 13 years. is it a one-off? >> i don't think so. and i think that is because we have seen them building towards this for some time now. they have been remodeling their stores, making them have better lighting, better displays, and they are getting 2% to 4% lift in sales where

they have done that. that is paying off. their e-commerce operation is improving too. >> qantas is this year's best performing airline stock, but shares are down by the most in a year despite posting record annual profits. the carrier is planning to return as much as 500 million aussie dollars to shareholders. this includes a higher than expected dividend and another stock buyback. >> we look at the cash flow position of the company, and it generated $3.4 billion of operating cash flows, spend $2 billion on new product and aircraft, but that gives us a very strong net free cash flow, and that is why you have got confidence in our distribution back to shareholders. this now gets us to $3 billion in the last three years returned to shareholders. after we do this buyback, we will have bought back 26% percent of our stock. -- 26% of our stock. that shows you how effective the

buybacks and the increase in earnings per share have been for shareholders. ♪

>> i don't think the data are disappointing. although there are some slight fluctuations, the fundamentals are sound. based on our judgment, the economy is operating steadily with some improvement, and that condition has not changed. >> the data does suggest a -- that we are seeing a gradual slowdown. if that is the case, when does that slowdown bottom out, do you think? >> the goal we set is for china's gdp to grow by around 6.5%. but in the first half of this year, we have realized a growth of 6.8%, which is a lot higher than our original target.

i think it is fair to say that growth of 6.5% is a very rapid speed in the world. among major economic powers, only india can beat that. we will continue to aim to achieve these growth targets, but in my personal opinion, this year's full-year growth may even surpass the government target. yvonne: that was tom mackenzie's exclusive interview with the head of china's national bureau of statistics, who says he expects the country to exceed its growth target this year despite the threat of a trade war. time now to revisit the wide open spaces of jackson hole , where financial leaders gathered this week at the annual economic symposium, sponsored by the role -- federal bank of kansas city. bloomberg spoke with top officials from the u.s. central bank, starting with the kansas city fed president, esther george. esther: i agree the economy is doing well, and based on what i

see today, i think two more rate hikes could be appropriate, but i am mindful that at each -- that is not a commitment. at each meeting you have to reassess and understand what are you seeing in the data, what are you hearing from your constituents, and make the decision at that time so hopefully everything holds together as we get to the end of the year. >> would you say the committee is coalesced around that view? is that a strong consensus? esther: if you look at the dot plot, which the committee puts out, the minutes, the statement, it would suggest there is a degree of consensus around the state of the economy, but within that committee, you will get differences on how many rate hikes are appropriate at this stage. >> earlier, i heard you were worried about the pace of growth and inflation picking up concern that fed policy might have to move faster. is that what you are expressing now, or do you think this will have to pick up more in 2019? esther: based on what we see today, i don't think the performance of the economy and

-- the economy that we have seen and the way inflation has performed has argued for going faster or fundamentally changing the course. but i think an upside risk would be that we have procyclical fiscal policy happening at the time we have accommodative monetary policy, so we have to watch that risk. see how that unfolds. >> when you think about dots, have you penciled in a number of rate hikes for 2019 yet? esther: i am obligated to pencil in rate hikes, but whether those come about, it is hard, as you know. i can see maybe the next quarter, the next two. looking at 2019 will be a function of whether this economy continues to perform. >> do you have an estimate you would like to share with us? esther: i can see getting somewhere in the neighborhood of a 3% neutral rate, which is how i think about the long run neutral rate, would suggest we need to make several more moves next year. >> you don't get the impression there is any kind of change afoot for the open market committee and the rate path they

are on? >> markets are putting high probability on september. you can poll the other members of the committee as well as i can. there certainly seems to be sentiment to go in that direction. >> would you expect forward guidance to drop out of the statement that rates are accommodative and will stay that way? >> that is an interesting issue. i think we will have to wrestle with that one. from my point of view, i would rather not be calling rates accommodative. -- accommodative right now. i think the whole structure of rates is lower, and therefore i think we are at neutral or very close to neutral right now. >> you and other members have said we would not intentionally invert the yield curve, what are -- but are you smart enough? do you have enough insight into the markets to know whether you would do that? james: here is what i think about this issue. i was around in 2000. we played it wrong.

i was around in 2006, the yield curve was inverted and we played it wrong. this time i want to take the signal seriously even though when you look at the models, it does not fit into the models the way we would like. but i think you have to take it seriously as a signal. what i think about this is, there is no reason to challenge the yield curve at this time. there is no reason. in other circumstances -- if inflation was higher and heading higher, then i might say we are taking some recession risk, but i'm willing to trade that off. it looks like inflation is getting out of control -- we are not in that situation today. inflation is low and stable and barely up to target, just barely getting to target today. so we don't need to challenge. we don't need to be preemptive on the yield curve. >> you are about 100 basis points below where the median terminal rate would be based on your latest forecast. so if you're going to keep raising rates and the yield curve is flat, does that suggest markets are not getting the message or they fundamentally disagree with your assessment of

the economy? >> i think the yield curve is certainly something we look at, the slope of the yield curve. there are reasons to think that it may not be signaling the same as in the past. as you know, an inverted curve is usually correlated with an economy going into a recession, but there is reason that the long end is depressed for other reasons. in particular, demand for safe assets. flight to quality into the u.s. treasury market. and also, qe around the world. a lot of central banks have used the long end. in the u.s., we did. we bought long-term assets, and that put downward pressure on the long end, so this signal from the yield curve now is different than it has been in the past. >> you mention qe. at the last fed meeting, you had a staff presentation on monetary policy tools. and the conclusion of the staff was, we are going to get to the

zero lower bound again sometime in the next decade. they aren't sure how much qe or forward guidance will help get off zero. does that worry you? >> i think qe was successful in terms of putting lower accommodation into the economy. it is one of the tools we have. forward guidance is another tool that we have. and i think this discussion was an important one to have so we are prepared. there is reason to believe that longer-term interest rates are going to be lower in the future for demographic reasons and because of demand for safe assets, so it is good for the fed to have these discussions to be prepared. we do have tools that we can use at the lower bound. >> do you have enough confidence in them, that they were? or do you need to find another arrow for the quiver? loretta: >> we are always looking at our monetary policy framework. that is something we will have a discussion about in the future. that is part of prudent planning for the future. >> the fed had three main concerns, not concerns in the

sense of imminent problems for the economy, but things you are watching. emerging markets is a big one. i wonder how do you approach , this? what is your feeling about the fed's responsibility for what happens in emerging markets, given the dollar's role as the reserve currency and the outsized effect you have on other people? loretta congress has given us : our mandate, and of course it is centered on the domestic economy. but we are in a global economy, so the feedback affects of other markets and countries on the u.s. economy is something we must take into account when we are doing u.s. monetary policy. so again, you know, at this point, we don't anticipate there will be big feedbacks, but we have seen financial markets can propagate shocks from one economy to another, so something -- so it is certainly something we will be monitoring. >> one of the arguments around the table is that inflation is

roughly at your target, but not moving up fast. you have been advocating continuing with the path you are on, but why do you need to do that if inflation is not breaking out? robert: so our measure at the , dallas fed is the trend mean, which is a core inflation measure. it x's out extreme moves to the upside and downside. we see that 2% by the end of this year, and even strengthening. here is what is going on. there are two conflicting factors. one is the cyclical factors. we have a tight labor market, higher input costs, tariffs, maybe transitory factors. but there is no question cyclical factors are pushing prices upward and having inflation. there are structural factors, going the other way -- globalization, automation, people replaced by technology -- and so my own view is inflation will keep moving up. cyclical factors are strong. i don't think it will run away

from us, but the balance we are trying to tread at the fed, and what i am trying to tread is you , want to move gradually. you don't want to move so slowly that inflation and the cyclical forces get ahead of themselves and get ahead of us and we have , to play catch-up, in which case we would have to raise rates more quickly, and that typically leads to more bad outcomes. in particular, recession. so what we are trying to do is raise gradually, and that is the reason why i have been advocating let's keep moving. , the other reason is we are meeting our dual mandate objectives, our full employment objective -- as you said, inflation is around 2%. in that context, we don't need to be accommodative. we should be moving to a neutral stance. me,neutral would mean, for three or four increases, to get somewhere in the neighborhood of 3.25%, maybe 2.5%,

a little bit more. and that is the primary reason why i have been advocating we should keep gradually raising the fed funds rate. ♪

>> we can go to the bloomberg and go to the factors moving the market. value stocks continued to be absolutely hammered in europe. three month target price change doing well. eps revisions doing well. so you are being rewarded if you are delivering but the value , stocks are being crucified at the moment. >> there are about -- yvonne: there are about 30,000 functions on the bloomberg, and we enjoy showing you our favorites. maybe they will become your favorites. here is a function you will find useful, quic , where you can get context and insight into timely topics.

>> hurricanes, typhoons, tropical cyclones. whatever you call them in your part of the world, they are getting more intense, and the water they bring is likely to cause bigger losses of property and life in the future. >> a good example of what the future may hold was hurricane party last year, that hit the brand-newea, and set rainfall records all across texas. that set rainfall records for the u.s. >> some areas get 50 inches of rain. >> in a warmer atmosphere, the the atmosphere carries more moisture, so the chances are the storms will get 10% to 50% rainier. >> while the storms are known for wind and rain, the storms do the bulk of their damage through the storm surge the walls of , water they bulldoze onto coastal land. but that has not scared people away from shores. just the opposite. >> more people are living your the coast than ever before. if you are to draw a circle around the areas that were the most likely to hit with the

hurricane or tropical storm, that would be the gulf coast. >> the gulf coast has seen its population surge 25% in 16 years. this trend is concerning, and it is costly not just for the homeowner, but government and taxpayer. >> you own a piece of land on the beach and have a beautiful view. i own it and want to do whatever i want. the government, on the other hand -- they are the ones that will have to send in the fire department, police department, helicopter, whatever to rescue you when things go wrong, so they want a say in things. on top of that, you have insurance issues. you know in the u.s., flood , insurance is a government-subsidized program. so people who don't live near the shore are the fact of defec facto, through their tax dollars, subsidizing the people who do live new the shore. >> policies cost half of the true market rate, but relocating families is also expensive and will cost the u.s. government $48 million to relocate two dozen families in louisiana. that is why some are harnessing

-- some cities and countries defend against storm surge. -- some cities and countries are harnessing technology to defend against storm surge. tokyo built a massive, underground diversion facility. new york is planning a system of walls and levies to prevent damage from future storms. there is no time to waste as climate change is supercharging storms on earth. -- supercharging the strongest storms on earth. >> china has faced a series of health scandals over the past decades. among the list of tainted goods were toothpaste, pet food, fish, toys, milk powder, blood thinners, cooking oil, pork, and most recently vaccines. where the authorities used to downplay scandals and sweep them under the rug, this vaccine scare shows how much things have changed, and the reason why. the chinese have turned to social media. and the government is responding. parents are expressing anger on social media after drug regulators found a health care company produced 250,000 low- quality vaccines.

-- vaccines for infants. the shots, which are compulsory in china, were supposed to protect kids from diphtheria, whooping cough, and tetanus. >> it is fair to say it happens -- that producing low-quality product happens in many other countries too. the difference is, in china due to the large population, every problem gets amplified. >> data for rabies vaccines were also found to have been fabricated. some parents even ticketed government offices, and many flew to hong kong for foreign-made shots. the government had no choice but to address the public outcry. >> i think we are seeing a tipping point now where social media is becoming more influential than traditional news outlets. the government cannot control social media like they could with traditional media, so they are having to address those issues like never before. >> in a rare reaction to public outcry, president xi jinping personally called the vaccine scandal shocking, and vaccine

maker executives were detained within 48 hours after the initial clamor on social media. >> due to the rapid growth of users on social media and increasing numbers of bloggers, news and views can spread more quickly. the government's response recently was more timely than ever, an investigation and punishment were more effective. >> critics say the health crises have stemmed from lax regulations and light punishments. >> in our current vaccine crisis, for example, for the affected vaccines, they only got a fine of $440,000 in u.s. dollars which is pretty low. and so if the country lacks regulation and punishment for violation of the rules is low, it is a very big temptation for local makers to use low-cost materials, even bad quality products to sell and make a huge profit. >> the inadequacy of regulations stems from government efforts to

coddle domestic companies in an effort to help them grow. on top of that, important medicines and vaccines commonplace around the world have long been unavailable because of an arduous drug approval system. chinese companies had to repeat all drug trials for imported medicines to get them signed off on in china. this protected local drugmakers. but in october 2017, the country's regulator abolished this rule. >> by introducing competitors into the market, that will raise the bar in terms of quality, and social media will continue to act as regulators. ♪ >> are screens disrupting childhood? in short yes, but it is , complicated. the average age for a first smart phone is 10. half of american and british kids have social media accounts by the age of 12.

smartphone-wielding teens and preteens are glued to their phones, often using social media to share sensitive data about themselves during working through an already tough time in puberty or adolescence. there are worries that screen time can be addictive, and researchers say it can lead to bullying and depression. a recent survey reported 22% of of 8-year-old to 17-year-olds said they had been bullied online. but there is a flipside to this. >> there is certainly evidence to suggest kids can use their smart phone for up to two hours a day. if you spend your time showing positive information on social media, you can make people happy. i am the tech editor for europe at bloomberg. just like anything. if you have a drink with your friends, it is great. if you'd carry on drinking for 12 hours, not so great. it is the responsibility of parents to manage that. certainly, many parents want to throw the phone in the rubbish bin and make kids play outside. >> parents aren't the only ones sounding alarm bells.

a group of pediatric and mental health experts are lobbying facebook to discontinue a -- discontinue messenger kids, a version of its messenger app for children ages six years old to 12 years old. most platforms have age restrictions, but it's honor -- but the honor system is impossible to enforce. after pleas from shareholders, to reduce device addiction, apple recently unveiled a new feature to help people take control of their habits. >> we know this is something that can help families achieve the right balance for them. >> meanwhile, experts still can't agree as to how serious a threat this all is. >> most of the evidence is new on whether social media is a good thing or bad thing. you have got to remember that snapchat was only found in 2011. we all know how long it takes academics to come to a conclusion. >> like it or not, social media and screens are here to stay, putting concerned parents in a difficult bind, letting children too young to use technology and social media run amock, or risk isolating them from their peers. yvonne: you can also find them

at bloomberg.com along with the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. thanks for watching. i am yvonne man. this is bloomberg. ♪ retail.

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