>> it is hard to imagine we would see a quick v-shaped recovery. i think it is going to be slow. >> i think the data do suggest a upturn in the third quarter. >> they did what they had to do. [indiscernible] >> the choice between lives and livelihoods is a dilemma. the health and the economy go hand-in-hand. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene. it is "bloomberg surveillance." we welcome all of you across

this nation and worldwide, and on bloomberg television as well. thrilled you are wishes for a good conversation forward to this important statement by jay powell, an update on how the fed can help america. the backdrop this morning is wonderful. markets up. what is so important is you need to be advised. robert miller will join us of blackrock any moment, and we are thrilled to bring you raghuram rajan at the bottom of the hour for a must listen interview. jon ferro, against everything i is yesterdayters reaffirmed just in the last 60 minutes this up, up, up for the stock market. jonathan: with a defensive tilt to it. aroundfutures up by 0.8%. i didn't think we would see a day like we saw in the last 24 hours, where you could have a

down market and still see the likes of apple, amazon and facebook up about 3%. that is the regime we are in. they are the defensive names in 2020. apple with- tom: rumors, speculation of product announcements through this year, and one of those signals of corporate america, where life goes on. lisa abramowicz, you are going to be looking at the fed today what,h the prism of trillions of dollars of debt buildup. -- what will listen for will you listen for from chairman powell? lisa: defocus very much right now is on yield curve control. how much does the fed one to backstop yields where they are? interesting to see equity futures rallying and actually building on gain as we see bond yields falling, particularly on the long end. the 30 year and 10-year treasury

yield going lower. i wonder how much the action today is really baking in the support of the federal reserve, coming out and saying we have your back with respect to asset prices until this economy gets going again. tom: let's get right to our guest right now. bob miller is with us. i know bob miller has an entire bookshelf loaded with --. he's read all there is. it is like "game of thrones," folks. bob miller, you were at bank of america. you have been running the ship at blackrock pushing a decade as well. have you ever seen this environment for fixed income? is this new, uncharted territory through the fixed income market? bob: good morning, tom. it depends upon your time horizon. , we have entered a

new regime, but we haven't done this before in the united states. we have done it in other countries. i would argue we have crossed the rubicon with respect to cooperation,netary and there is no way to go back. the fed has essentially surrendered its balance sheet to treasury and will continue to do so in order to do its part to help underwrite a recovery of economic activity to full employment and the targeted inflation regime. but we have seen this before in the post world war period, in the decade-long explicit yield curve control where the fed effectively surrendered its balance sheet. i think that is the regime we are in for the foreseeable future. jonathan: what you just said is

so powerful, and you said it so dip a medically. y are very able. i am just trying to understand whether they formalize the effort not necessarily today, but in the coming meetings. expecting?u expect-bob: i don't clarity today. i think they are implicitly thatting levels of yield we just described. accommodative conditions. the 10 year rate is important to the mortgage market. so i don't think they are going to allow the term structure of rates to rise anyway that themes disruptive to

ability of good recovery, of a full recovery in unemployment. i think the very long end is tricky. it is harder to control. frankly, it doesn't matter as much to the mortgage pricing. i can definitely see some steepening, but instead of trying to pick a level for each point on the curve, i think the more important part of the discussion is to appreciate that the fed will do what is necessary, in our opinion. they will do what is necessary very accommodative domestic financial conditions for the foreseeable future. and if we end up in a situation where yields are rising for the right reason because economic strongly,s recurring the trend in inflation is back 2% -- towards 2% or

perhaps even above, if we are in that regime where a rise in yields is viewed as healthy and doesn't dampen financial that isns, then nirvana. that is the best outcome. if you are the fed, that is the outcome you are hoping for. for a lot of people right now, they might be screaming at the tv, screaming at the radio, wondering whether this is what the fed should actually be doing or not. for programs like this, i think we spent far much time on what the fed should or should not be doing. let's talk about what they are doing. if you have a price incentive buyer in your asset class, not just in sovereigns, can you talk about how the process has to change when you are thinking about entering these markets and you consider valuations?

bob: i think one of the most important elements in fixed income -- important developments in fixed income is if we are right about treasury yields, they are going to be very low for the foreseeable future. the effectiveness of treasuries in your portfolio has been a dominant factor for portfolio construction and asset allocation for dictates -- for decades. a is the ability to produce positive return in a risk off environment that has declined substantially. the fed has effectively rendered the 5-year note at 38 basis respect,ith all do kind of useless for my portfolios. are not going to embrace negative interest rates, i do not think they will, or i think they will try everything else before they would attempt

negative interest rate policy, there is just so minimal upside. yes, treasuries are probably going to remain negatively correlated to equity prices. the effectiveness of that hedge has declined. mess -- thet importance of that question, it is considerably less effective then you have before, you have to underwrite the other assets to their own absolute valuation. you can no longer depend upon buying somewhat extensive assets . now you have to own the assets where they make sense on their own. if you take a look at high-yield bonds, you can question whether valuations make sense on their own. is what you are saying that fixed income is losing its purpose? why not just hold a portfolio of cash to offset any losses? bob: that is a great question.

i.e.an in that direction, having more equity than rate exposure in portfolios now. riederrd it from rick recently. that said, within the fixed income market, there are still pockets of opportunity, specifically in the place that the fed is not dominating. you have seen their activity only now starting in investment qualityedit, but higher has recovered substantially. in parts of the high-yield , there is still a real credit selection skill to generate alpha. aboutm quite constructive

the risk premia in the overall asset class. jonathan: really important conversation. our best to you and yours, and the whole of the team at blackrock. lisa validating tom keene's cash position of the last 100 years. i want to get to this equity market and talk about the bankruptcy stocks, which have become an asset class of their own. just a little bit of news on hertz. hertz received a notice on delisting from regulators, which is not surprising, considering the shares have gained 900% since filing for bankruptcy. why? your guess is as good as mine. that is pending resolution from the company.

stock down in the premarket. some people have actually been trying to trade this. the stock is down by just 5.5%. that has been incredible he volatile. from new york city, good morning to you all. this is "bloomberg surveillance ." we are live on bloomberg tv and bloomberg radio. ritika: with the first word news, i'm ritika gupta. the oecd warns that the global economy will slump 6% because of the coronavirus, and if there is a second wave, how could -- second wave, output could fall 7.6%. secretary of state mike pompeo is blasting hsbc for backing china's move to impose new security legislation in hong kong. pompeo accused the london-based bank of what he called china's coercive bully tactics against the u.k.. he said aging uses hsbc's

business in china as political leverage. the bank isn't commenting. beijing called the remarks there reminded and ridiculous. beijing's position is that hong kong's affairs are solely its own concern. angela merkel is facing growing pressure to get tough with russia's vladimir putin. the decision to withdraw almost 10,000 troops from germany was welcomed in moscow. the u.s. still hasn't officially notified berlin of the withdrawal. it would reduce the number of u.s. troops in germany by about 1/4. the u.s. navy is moving to ban public displays of the confederate battle flag from its ships and bases. that is the latest response to growing calls to address racism. a spokesman says the ban is meant to uphold the navy's core values. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta.

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has more cashry now than they had going into what will be the shortest recession in the history of the united states.

this is not your garden-variety recession. , because it is not your garden-variety response. jonathan: paul jones of the economic club of new york. he added that if there was a franchise for humble pie, that would be a mile-long to own that, because we've all had huge gulps of it. some legendary investors had to hold up their hands and say we missed it. tom: no question about it. i am glad you bring it up. you really have to bring it up, as you do gracefully, that this is a tough act. i can't tell you the price of being wrong in the market when you don't participate, and that is why people like old hooter tudor-- like paul jones and others. thosercelli is one of

helping us in this economy. what is the nuance, what is the distinction you will listen to from chairman powell today? : in a lot of ways, he has sort of preempted himself. what is he, speaking every day now? sorry, that was a bad economist joke. i think he speaks with such --gularity nowadays jonathan: do you want to start again? just started again. [laughter] tom p: there's nothing he could say that is going to surprise us. the fed is operating in real-time. they don't wait for a fomc programto layout a new or to upsize a program like they did the other day with the main street program. classically, they would have waited until a meeting to make that announcement.

but instead they made the n on the day before -- made the announcement the day before. so i am not thinking there will be anything all that revealing. tom k: but brilliantly said about every day is a fed meeting. i think that captures what we have been living the past few months. what does that say about the dumb dots? i have heard you say that the dots are not efficacious. what do you learn from the dots today if every day is a fed meeting? tom p: i don't think there is much to be learned from the dots. everyone that does what i do is in the business of trying to find some nuance. even when i am writing my note on the fed, i will have to find some nuance. but at the end of the day, i think there's very little we will learn from the dots. i don't think there is any question that the fed does not want to adjust policy anytime soon.

irprise is relative, so wouldn't be the least bit ,urprised if in the 2022 dots you see some folks looking for a lift in funds. that wouldn't surprise me in the least. but i don't know if the market is totally brace for that. 2022 is anrecognize, attorney to from now, but i would not be the least bit surprised if the fed is acknowledging, which i think would be more than fair, that is rollout the next year or two, they are going to want to take back some accommodation. central: you know why bankers love forward geithner, because it binds the rest of the -- forward guidance, because it binds the rest of the committee. do you think chair powell is that kind of leader, that he will be looking to bind the committee the next 12 months, 24 months? tom p: i don't think there's any question about that. the whole question on forward guidance is now starting in earnest. at a minimum, we know that from

the fomc minutes. we have to keep in mind there's some good approaches to forward guidance and some really bad approaches to forward guidance. i would say a really bad approach is date based forward guidance. there is no way anyone can lay claim to, you know, in september of 2021, things are going to be better. i don't know why you would ever want to bind yourself by date based forward guidance. i am much more some but that it to data based forward guidance, even recognizing that there are some flaws with that. the fed had been talking about this idea that maybe the on employment rate is a pretty good metric for that. i think you have to tread carefully because as we all know , and we know this from the last couple of months, the un-limit rate can move in quirky ways -- the unemployment rate can move in quirky ways for reasons that are not always obvious. where are in i dynamic

all of a sudden, the backdrop is better and people are really feeling good about the backdrop, you can get massive flow into the labor force, which is a good thing. but guess what that would do? that would push the unemployment rate up. just given the way the mathworks. i think we would define that as a good increase, but that is why i say i think you have to be careful with the unemployment rate as a metric. so instead of choosing some point estimate, which i sincerely hope they wouldn't do, i think instead you would have to talk about it in some sort of trend like fashion. the data is what we are much more some pathetic to. lisa: when you try to find some nuance in the fed meeting later today with all of the other fellow economists, i wonder what you say about yield curve control given the fact that you have actually said i don't like it. it is redundant. what are you hoping they will say?

tom p: i was happy when the minutes came out and they said only a few of us are talking about this. it is brainerd and williams for sure, and some other person, whoever that may be. we know williams has a decent amount of inflows within the fed. the fact that there is only a few people saying it, the fact that one of the ms. williams -- one of them is williams suggests there is a real possibility you could see yield curve control gain some momentum internally. we know he is well-respected by powell. from our perspective, if i am going to simple if i a complex idea, yield curve control, if you are going to focus on the front end -- let's be clear, they couldn't target 10 year yields. it would be impossible for them. they would focus on one and two year maturities. the fed already owns the front end of the market thanks to fed funds. that is one of the things we

would define as the redundancy of yield curve control only going one and two years out. for people worried that the fed didn't seem to have a lot of control at the front end of the curve last year, that was for a very specific reason. it was because they kept on chopping reserves down more and more. we are now in a record level of reserves, at $3.2 trillion. the rationale for why the fed lost a bit of control in the front end of the market is simply not present at this point. so we just don't see the point. jonathan: it's got back out of control now i'm all the way up to three years. maybe they would like to see it out to five. more on this conversation. always great to have you. much more still to come on forward guidance. should it be date contingent estate contingent -- contingent or state contingent? we will check in with raghuram

rajan, the former r.b.i. governor, coming up on "bloomberg surveillance." with equity futures recovering from earlier this morning, this is bloomberg. ♪

,onathan: from new york city this is "bloomberg surveillance." we are live on bloomberg tv and bloomberg radio. alongside tom keene i'm jonathan ferro together with lisa abramowicz counting you down to an opening bow and a federal reserve decision later this afternoon in washington, d.c. now positive nine on the s&p 500, up one third of 1%. yields creeping lower, the whole curve drops lower by a basis point. on the 10 year to .8%. the dollar weaker through the session. it stays that way against the euro. cable advancing .33%. tom: is fed day. we will talk to our esteemed guest about fed day. bookweek i will put out my

of the summer. one i will surprise on my linkedin. a wonderful book on international relations. the other one is a book last year that was extraordinarily on community. it is the book of the moment. us from rajan joins chicago. he is the author of the third pillar. we will get to that in a wide-ranging discussion. we have to talk about the federal reserve policy. i understand you have a little bit of reticence about that. of identifiable fault line our central bank policy is somehow, the there debt has to diminish. how will they do that? raghuram: they cannot do anything about it for now. what they have to do is support all markets.

the problem is when you support all markets, you're not letting the markets do their work. the question is when do you allow that to happen? take the highly indented which arelike hertz experiencing a revival without any debt restructuring. the question is when do we allow them to restructure their debt so they can emerge earlier from the crisis? that is a question the fed will have to grapple with. when does it allow the market to start opening on its own? tom: does the fed risk its independence? we had a conversation earlier today about how the fed came out in the 1940's in world war ii and basically had to nationalize the debt economy to allow the nation to recover. have agreat unseen we

fed that loses its independence at some point? raghuram: i hope not. but the forces that pushed for fed independence no longer operating. the big issue in the 1980's with was tackledflation by raising interest rates sky high. the reason for fed independence was inflation was the problem and making the fed independent of the government would allowed to operate and bring it down. today we no longer have an inflation problem. if anything it is a disinflation problem. for the fed is ,illing to support the economy the rationale for fed independence become less clear. my sense is it will reestablish itself again over the medium-term, but in the short term that rational is no longer stable. jonathan: this is the issue.

the perception of independence and central-bank independence. if the treasury and the fiscal policy side of things is going to work closer with monetary asicy in the year to come, they actively support issuance from government, how they maintain independence as both sides are working together to make sure we have the kind of treasury issuance we have had over the last months? raghuram: this is a big question. it has to work through institutional independence. let -- protecting the position of the fed chairman or the government to stay away from criticizing the fed for whatever it does her pushing for more overt activity. there has to be a discussion on equal terms between the treasury and the fed. they cannot be one side pushing the other. perceptions of fed independence. i think the fed is doing a fantastic job incorporating with everything it possibly could,

but there has to be a reciprocal arrangement from the government side to respect the independen ce. jonathan: i do not want to cause any dramatic headlines for you, but if we could lean on your experience at the r.b.i. and reflect on what is happening in develop central banks. you think they are taking on emerging-market characteristics, how the central banks are operating with fiscal authorities? raghuram: for sure. this was always an emerging-market problem. the central bank was under the thumb of the fiscal authorities and had to monetize the debt. in many countries we are in a similar situation with enormous amounts of debt having to be put out, and central banks taking it on the balance sheet. look at the fed balance sheet. trillionpanded to $7 in the basis of a few weeks. this looks a lot like monetization.

it is helpful in enabling the government to issue, but it has to be seen as temporary. that is what they have to make -- that is what they have to work hard on doing, ensuring their separation. to fed is doing it in order meet its mandate, not something forced on it. lisa: a lot of people do not see a path for the federal reserve to shrink its balance sheet at this point. it does not seem like there are hawks left in washington, d.c. what are the potential consequences? given what you were talking about with developing markets, there currency is the escape hatch. it depreciates versus other currencies on the balance gets out of whack. we are not seeing that, with the weakening of the dollar being attributed to risk on rather than a lack of credibility.

at what point is the currency back in play? raghuram: typically the central bank intermediation starts becoming more difficult when the to hold thewilling enormous quality of reserves pushed on their balance sheet. that means a strong economic recovery. reason central banks might find it hard to maintain a large balance sheet. neither thesis is currently a big issue. when they start becoming big issues, it is important the fed be able to shrink its balance sheet by selling assets back on the market. towill be reasonably easy sell assets back onto the market. between ar danger stronger fed and stronger inflation is probably stronger inflation. that is a risk over the medium-term.

not a risk today. lisa: i was reading column you wrote where you are arguing for federal governments as well as monetary policymakers to withdraw some support now. is that an accurate reflection of your stance? raghuram: i am not saying withdraw support. what i am saying is as we go forward, we have to change the narrative from this is about a couple of months of support to the economy as we deal with the pandemic, and then things come back. that was the narrative when we started the fight in march. now it is becoming clearer this will be a drawnout battle, and some sectors of the economy will take years to come back. some sectors will have to transform themselves. what i am saying is as we go , we have to -- do we still have to support hertz and

carnival, or should they restructure the debt and change their business models they can deal with the emerging economy? when do we start moving support to enabling transformation rather than preserving the economy as is? towe go forward, we have move from preservation to transformation. one final question. i must turn back to the third pillar and your primal scream for community in america. chicago withkend, the gang warfare was a war zone. we have protests from sea to shining sea in america. your book is a book of optimism, but talk about the intractable inability for america to find community. how do we find the third pillar? raghuram: great question.

if you look at what the pandemic has done, it has exacerbated every division we had, whether it is on the basis of race, on the basis of education, we are sitting working at home, others are on the front line dealing with the pandemic or serving people in stores. the issue is how do we bring the country together in a stronger way? i believe we have to look at disadvantaged communities, we have to look at communities that have fallen behind, and we have to ensure we provide the people , stronger sense of empowerment but also greater capabilities and the new economy we are creating. that requires work from the bottom up. this is a lot of work. it requires a transformation of

our economy. in the long run, this will be the way we get sustainable growth, not through more and more debt, but through stronger growth. that is what the book is about. jonathan: professor, a powerful conversation. we appreciate your time and look forward to getting you back soon. that is professor raghuram rajan . on enabling transformation, capitalism and whether central-bank efforts have delayed that, maybe inadvertently. those are the negative consequences we have to discuss and may the months and years to come. inflation out about 10 minutes ago. what is the read? lisa: it came in lower than expected. .1% versuscontract the expectation for it being flat. interesting to see the dynamics.

while a lot of prices declining across the board, food increased significantly. we have to dig further into some of these reports. jonathan: much more still to come live on bloomberg tv and radio. i'mgside tom keene, jonathan ferro together with lisa abramowicz. equity futures positive eight. this is bloomberg. ritika: with the first word news, i am ritika gupta. senate republicans are drafting their proposal for reforming police practices. ofincludes increased use body cameras and enacting the first federal anti-lynching law. house democrats have already come out with their proposal. they wanted to make easier to sue and prosecute police accused of wrongdoing. all of this comes in response to the killing of george floyd in minneapolis. u.s. authorities are investigating a vast hacking scheme traced india. stealolves attempts to

confidential communications from journalists, short-sellers, and an advocacy group fighting climate change. was anthe beneficiaries embattled german tech firm. the company says it has not been in touch with any hacker groups. longestn, the countries running true crime murder mystery has come to an end. authorities have named the person they say killed prime minister all off palmer. they say the assassin killed himself two decades ago. the murders bond all sorts of investigations and conspiracy theories. the prosecution says the evidence is overwhelming. starbucks is warning it will take a big hit from the coronavirus pandemic. the world's biggest chain of coffee shops sees its third-quarter revenue declining by as much as three point $2 billion.

global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> the central banks did what they had to do. they are not trying to make life nice for the government. they are trying to pull the economy up.

olivier blanche are supporting some of the decisions made of last several weeks. from new york city, good morning to you all. alongside tom keene, i'm jonathan ferro with lisa abramowicz. this is "bloomberg surveillance." in the next hour on bloomberg tv we will catch up with a critic of the federals to reserve -- of the federal reserve, jim bianco who brings up good hearts law -- when a measure becomes a target it ceases to be a good measure and this whole market has become a target in the last months. tom: it will be interesting to see. has written brilliantly on controversial research where we are right now. that will be most interesting. it has been an extraordinary day for bloomberg surveillance and a wonderful conversation,

including professor rajan moments ago. you heard from olivier blanchard yesterday. it is now time to turn the equivalent in new york city real estate. some people do real estate and go on with their lives. in others, it becomes a part of the fabric of the community. william rudin has done that. onhas been hugely upfront the development of real estate in new york city that has a social good and the social fabric. we are thrilled to bring him to you as new york city reopens. thank you for being with us today. what has the last few weeks been like for you, your properties, and the people within those properties. william: first of all, thank you and the rest of the team for having me on. professor rajan talked about the community and you mentioned at. and what we work on

is creating communities and trying to bring people together. through aly have gone very difficult period of time, and the last couple of weeks there been dramatic changes in the way people look forward and try to bring our communities together. that is critical. our city is so diverse. that is our strength. how do we bring people together? you cannot do that working from home. some of your other speakers have talked about that. you had to be working in your office, working together. i talk about collaboration, community connectivity. that is what we have to keep doing to move forward our economy. phase one opened up the other day in new york. we had almost 800,000 people

using the subway. the governor and the mayor have done an incredible job. at the peak, several thousand people a day getting sick. tom: as i mentioned, i do not mean to interrupt, but just because of time, what i find so important is hope. we have to develop a hope of the people, maybe they are not protesting, maybe they are not looting, but they have lost hope over the last number of years, not about the pandemic. they have lost hope in development. how do we jumpstart that hope within the greater new york city region? william: the first step is opening phase one, and then a couple of weeks opening phase two, getting our city back and the economy moving again. the construction cranes are

working, the men and women on the sites are back to work, almost 400,000 people. that is a sign of hope. we need to have signs that give us guidance that things will get better. you are seeing legislation in new york state yesterday in terms of changes in policing. we have to work together with communities and create that are police policies where people feel confident about their and we have to create economic opportunity for all spectrums of our population. we will do that, and we will seek new york city at the forefront of job creation, dealing with issues from racial injustice to affordable housing to education. that is what we do. we have come back before from major tragic events and work together.

this is an entrepreneurial spirit. you talk about hope. we have come back from the early 1990's -- in lower manhattan you had 30% vacancy. we converted offices to residential. we created tax incentives for companies to move downtown. now you have 70,000 people living in lower manhattan. , after sandyback we came back. lisa: let's talk about the hope versus the here and now. as you own 17 office buildings throughout the city, what is the demand like right now for the office space? william: when the city and country went on pause, things slow down. police was signed two weeks ago by tictoc in times square for 230,000 feet. over a thousand people will move

into an office building on 42nd street. that is a sign things will turn around. we are working on different deals. i know a lot of my colleagues are working on things. things got put on pause, but as soon as we start opening up the economy, i think you will start seeing activity, leasing, both commercial and residential, and people starting to come back into the city. tom: we have to leave it there. william rudin, thanks much for the update on the spirit of new york city and with the many properties he has built, particularly his historic effort in battery park after 9/11. spirit ofdin on the new york. the spirit today has to be the fed meeting. there is no question about that. there will be a statement, then we will move on, and there will be questions. the question i will listen for more than anything is the view

out of 2022. lisa: and what kind of guidance they give in terms of the data they are looking for to adjust monetary policy. right now the readthrough and stocks is up. although we are seeing the defensiveness lead. by defensive psy meteor pods sitting under your couch -- by defensive i mean the air pods under your couch. defensive is apple. of: we need an entire brace house.s at the keene dow futures up 43, they lag on a percentage basis. the s&p 500. almost a 1% move on the nasdaq futures, up 91 points. that is a history ordinary statistic -- that is a next-door an era statistic. extraordinary

statistic. at 2:00, scarlet fu leads our fed coverage. stern as well. this is bloomberg. ♪ you doing okay?

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our audience worldwide, good morning, good morning. "the countdown to the open starts right now." 30 minutes away from the opening bell. let's begin with the issue. the federal reserve decision just around the corner and the market waiting for guidance. should not expect much today. >> with the forward guidance we have given already, it is not necessary to do something to emphasize the forward guidance. >> we think they will continue their dovish stance. >> i do not expect the fed to back off. >> if anything they woke knowledge maybe things can be lifted -- >> we will employ those tools as powerfully as we can to support the economy. >> i do not know if the fed ammunition is limitless. >> we crossed a lot of redlines that had not been crossed before. >> we are in new territory. jonathan: