>> we will go ret -- grow rapidly. the challenge for the fed to change its own forecast. >> the point is to get the economy growing faster. >> it's a chronic underperformance and value that we've had for years and years unwinding. >> the fed's job is to deal with monetary policy. we are hearing more and more with them dealing with income inequality. >> i think they want a slightly steeper curve, but not indefinitely higher. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning.

jonathan ferro, lisa abramowicz, and tom keene. lots of stories today. john, i have to go to the 10 year yield. the litmus paper for chairman powell through 1.67. jonathan: this is a new post pandemic i've. several weeks back the chairman said it was a statement of confidence that the yields were higher at the long end. the key when a session will be fascinating later this afternoon. tom: it's that forecast adjustment, michael mckee is in attendance. and against us as the atlantic divide as the vaccine disaster is discussed. it's tangible. tom: but -- lisa: but who are they blaming? are they saying the vaccine does not work well enough or that it has not ramped up production enough? the european union considering

emergency measures to ensure the vaccine supply. this comes at the same time as a slowdown in distribution of the astrazeneca vaccine despite dr. hama should all just saying they are wrong. tom: john, i need you to explain this. you have lead on this end it's not just the partition of europe and america, but of europe and the united kingdom. jonathan: nine to 10 months ago these negotiations started to rollout. what started is that the u.k. and the u.s. has secured these contracts earlier. they wanted to negotiate at the european level. it ended up taking longer. so what has happened? the astrazeneca story became the whipping child. the issue that i have now from the european leadership is that

there's very little time whatsoever that they are taking any responsibility for what's going on in europe. that nation, that continent, but the u.k.'s using that same vaccine. the divide could not be bigger. tom: bringing us back to bloomberg: surveillance. we do have a fed meeting looking at the forecasted debt, this comes back to a dollar resilient because europe, 50% is not in the game. jonathan: compared with happened six days ago, the gdp forecast has shifted.

this does not mean that it's drastically different -- and maybe a conversation about tighter monetary policy in the future. i know it is several years down the line. but this has repeated, can they even engineer a recovery that leads to higher interest rates? or do they fail at that again? tom: full disclosure, i agree with lisa, there's elements of an asset bubble. this is a serious matter with the monetary and fiscal dynamics. money has to find a place to go and it could be to selected asset surging. lisa: bubble is a trigger words and let's not use that but there is a question about bifurcation of assets growing, even with the rapid growth profile. this raises questions, the fed is trying to even out inequality between the wealthy and the less healthy. are they helping by exacerbating

asset price dislocations. tom: we will get on that, we have to do data, red and green on the equity spring -- screen. this is different from where was, this is a solid market. jonathan: down here at the bond market. read -- briefly at 1.67. the yields are higher by five basis points. this news conference this afternoon gets more and more interesting as the session gets older. 1.67 on the 10 year. tom: michael mckee working at his desk as we get to two :00. he has been with us now and has been wonderful on the person for quinn -- on the pacific rim. i want to go to your research, you assume a dovish outcome. what will be the market reaction to chairman powell who succeeds in an accommodative outcome?

michael: there's been a manic-depressive positioning story in the treasury market. three weeks ago, going into that very violent thursday when the 10 year yield shot up, you have very bullish positioning by your treasury futures. i think i'm a to a degree, that has reversed and there is some consensus that the ten-year is going up to 2% or beyond and the next several months. when you stand back and think about it, there's the december., and hikes being priced in. that's a big gap. either the fed has to cave, the market has to cave, or they both have to meet in the middle. as we get to the afternoon, one way to think about it is that

even if we do get this up, i would guess that powell will couch that with the most dovish language ever. i think the question for the bond market is, given that there has been a very clear transmission from the money market futures, which is pricing at core hikes, directly into the 10 year, there's no premium on top of that beyond the price in the 10 year treasury yield. is that already in there? i think the question it's down to is what kind of prose is coupled with giving you a hike in 23. i suspect he will lean heavily

on the pros, given the newfound initiatives or cause i'm mandates. jonathan: let me jump in on the bond market, what's the monthly asset purchase of the federal reserve right now? how big? 120? let's talk about it. how do they justify carrying on that within a percent gdp growth into 22? michael: they had been vague about what their plans are and what their reaction will be with respect to asset purchases. i think that's by design. i think if they find that there's a lot of supply that becoming -- that comes on the market. if the financial conditions get crazy in the curve -- and the curve steepen's too much for the

wrong reasons. saying i'm going to step back and you see a replay of what you saw a couple of weeks back, that the tool that they can reemploy. i think the vein this -- the vein -- vainnness is by design. here we are at $7 trillion and counting. it's been a tool. it's hard to see the tapering conversation really come into the foreground anytime in the near future. lisa: quickly, when do you step in and start buying big tech? michael: i wrote a long note about valuation yesterday. but big tech has been out of favor. nobody seems to want it. having said that, if you put all of your cash into the ndx on

september 3, you would be up 12% through today. it has not been a horrible investment. that comes out to an amazing rally earlier last year and 2019. the question, when you think about big tech is really one of relative performance, not fear. my view is that the drama in the rates market and the correlations with tech being devalued, the drama of the bond market, i expect, will probably fade today. that provides a platform. but i think those big tech platforms probably will perform on the earnings season. that will help reassert that tech is not a bad investment, just not as fashionable when you are looking at 11% collective

gdp between this year and next. jonathan: we will talk about those earnings with you. it's good to see you. if you are just waking up, we need to reset, you're waking up late ahead of that federal reserve decision. the high today at one 67.44. -- right now, 242 and up for basis points through the nasdaq is lower by 1.2%. this sets us up for a fascinating, really interesting decision. there's a forecast and news conference with chairman powell. tom: i wonder if chairman powell will bring up what michael purves just said. he's looking out to earnings season. that means the growth of the american economy.

chairman powell has to verbalize that somehow, today. jonathan: here's a refresher, here's what they look like in the forecast three months ago. 4.2% for gdp growth in america in 2021. how stale is that? lisa: very stale. the question is, how much do they change it? jonathan: from new york city, good morning. i'm jonathan ferro, this is bloomberg. ♪ >> strong words from president biden about vladimir putin in an interview with abc news, the president calling him a killer, saying he would pay the price for alleged interference in the u.s. presidential election. the intelligence agency concluded that there were operations order to hurt president biden's chances shooting has left eight people

dead, many women of asian ascents pray there has been a recent -- a recent wave of attacks on asian americans that have coincided with the spread of the coronavirus. bmw is seeing a better-than-expected increase, the automaker is joining -- in targeting electric vehicle sales . bmw wants half of its sales to be electric by then. the company cannot rule out the possibility that semiconductor shortages will hurt production. >> so far we did not have any tech stoppage is. -- tech stoppages. this may not happen in the next couple of weeks or months, but we do have a balanced supply management. >> global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> the fed's challenges not just letting yields rise and letting the curve steepen infinitely.

they need to toggle, to allow long and yields to go up. then nudge the front end. if they're going to normalize rates, that's a combination of shifting the curve up across the curve. we are not at that point. jonathan: that's easier said than done. from new york city, good morning. alongside tom keene and lisa abramowicz, there's only one story, the story, it's in the bond market. here's the 10 year now. up by five basis points on the session. the yield -- we could talk about a 30 year yield briefly, it's a number we haven't seen since the end of 2019. we can talk about a 2-10 spread through 150. a steepness in the curve we have not seen since the middle of the last step a -- last decade. tom: these are trajectories we have seen and what mr. bory

said, he called a bond bear market. jonathan: we keep returning to the same question for the federal reserve and chairman powell, is he comfortable with what he sees? does this fed forecast above 2% inflation at any point over the next three years? do they put that in the forecast? tom: all of the focused is on economic growth, the inflation forecast will be part of that. right now we have a wonderful guest today -- we have a wonderful set of guests. henrietta is here, she's definitive on the committees in congress who propose and disclose legislation truly an expert on the outcome of our tax policy linked into our infrastructure bill. she joins us. we see a 1.5 trillion

infrastructure bill. you don't mince words, we are going to see an additional deficit. how will the gop go for that? henrietta: thank you for having me. i think the republican conference will not go for that, but they would not go for it if it was a deficit offset either. i think senator cardin made it clear. this is a reconciliation bill. they will get 50 votes, kamala harris will break the tie. we have 70% odds that the bill will pass and it will be roughly 1.5 trillion dollars in deficit increases area i think investors need to prepare for a bump d -- a bumpy ride but i don't think tax increases passed with more than a 0% margin in the senate. lisa: we are watching yields creep higher, still historically low. this increases the cost of the

deficit. how closely do using washington, d.c. is watching the bond market now. henrietta: i think they have been watching very closely, i've been working with spoke -- folks on the banking committee to understand exactly the dynamic, specifically on the republican side. focused on what they could speak to on inflation. how they should measure their own expectations, i know they are concentrating on this acutely. and planning a messaging strategy against the forthcoming infrastructure package. they are happy to hit democrats if they raise taxes or increase deficits. so democrats see this as a no-win situation with republicans. they feel that lingering support for a one point $5 trillion deficit increase to mirror the 2017 tax cuts that the republicans past, and the two shied -- two sides are ships in

the night. they both care about are not impact the final outcome. jonathan: looking ahead to the midterms next year, what i'm trying to understand is where the emphasis is when talking about relief. when we spoke to the white house yesterday, they used the number of 110,000 talk about the middle class needing assistance to time trying to understand come is this really for the hardest hit or buying back the middle class, the suburbs going to the midterms? henrietta: i'm so glad you mention that. i think the midterms that the street has underappreciated and it has not cot non-. not only do they have to overcome the historical norms of the majority party losing seats for the midterms, but democrats have to get the turnout above and beyond what they would

otherwise need in an average election year just to maintain hold on the house and the senate. their focuses entirely on 2022. when you think about the margins they have, that they will somehow pass to trillion dollars in tax increases which will hit corporations paid we heard ford saying don't think about getting 21% on the corporate tax side. if democrats praise their midterm election which is what i have heard consistently, think that's the direction. deficit hikes. tom: you mentioned senator cardin, his worst nightmare is from new york down to baltimore, there's a bridge on i-83 which i guess is the worst bridge in maryland. does that garner votes? henrietta: i think there are

examples like that across the nation. earmarks are a hell of a drug area i'm so happy they are bringing it back because you could coerce votes from the moderate wing of the democrat party, kyrsten sinema, warner, kelly, mansion. that will be important district level spending. but there's also some republican support or less negative opposition bringing these earmarks back. i'm looking forward to see the legislation passed, this greases the wheels and i think that's the kind of bridge construction project that members would love to point to. tom: -- jonathan: stay close, i would love to catch up on china soon. henrietta, thank you. we are resetting as we count down to the federal reserve. this is what the bond market looks like. 167 on 30 years.

this is a number we have not seen. this spread is the widest we have seen, going all the way back to 2015. something interesting is happening. i would posit the following. i don't think there's a huge credibility question being asked of the fed. at the front end of the yield curve, we are still on twos. for inflation we are still seeing the fed become triple looking at the market. lisa: they are confirming with the fed is saying. if you look at 30 year yield expectations. they are the lowest they have ever been. this is the lowest it has been. the longer term or running back to this environment is very comfortable. jonathan: that's a story we have, we have an additional conversation about stimulus. tom: and we do have to mention

the a 44 roundabout. jonathan: stay safe because we call those the, because the roundabouts -- the kamikaze roundabouts. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. alongside tom keene and lisa abramowicz, i'm jonathan ferro. equity futures lower. bond yields higher. that's the story going into the fed. >> we are looking at housing starts this morning that are down by 10.3 percent. much worse than the 1.3 percent decline that was expected. that is not a surprise because the weather was awful in february. we are talking about people not being able to get to work at all. you are not going to be able to get to work outdoors building houses if you have that kind of weather. the surprise is in the building permits. building permits had been on a tear and they fall 10.4% for the

month of february. down to 1,682,000 annual rate. while you do get weather interruptions and things like that from the start side, the permit side had been really expanding because there's been a dearth of available properties for people to buy and one reason the housing market has slowed, we have seen interest rates go up a little bit. we have seen the national association of homebuilders confidence down a little bit. so higher mortgage rates are starting to dampen enthusiasm. refi's have really fallen off a cliff. they are down 39% year-over-year. tom: are you going to get three or four questions this afternoon at the press conference? >> i hope so. tom: michael mckee, thank you so much of course.

driving forward the intellect at the press conference. he made his name at goldman sachs with a strange phrase called mortgage equity withdrawal. he figured out the flows of our housing market long ago and far away in a boom. he is the goldman sachs chief economist and head of global economics. i need to go to you on this boom economy you and i have never seen. how do you perceive at goldman sachs that 8% gdp fades away. will it be abrupt or will it be far more gradual and prosperous than we can imagine? >> the it percent forecast is for the fourth quarter number in 2021 and that's the way the fed looks at these numbers as well. we think they will obviously upgrade their forecast shortly

as well. and our forecast, 2021, very rapid recovery. we've never seen these kinds of growth rates. afterwards i think the economy is going to be much closer to full employment by late this year early next year. in 2022, 23, we will see meaningful deceleration. maybe three instead of eight. but with an unemployment rate that is 4% in our forecast and employment rates that have mostly recovered the big slot. lisa: to build on what tom is talking about, this idea of faster and hotter boom but of much quicker cycle. what is the anatomy of an economy like that given the fact that markets and frankly economies often don't move in

straight lines? there can be acceleration and boasts with how asset prices are. what do you foresee over the next few years as we get back to this lowflation normal? >> we will see a very frontloaded recovery and then something that is more similar to the growth rates we had pre-pandemic with potential growth in the 2% range, maybe a little bit below 2%. but that's not really the constraint at the moment because we still have a lot of spare capacity in the economy. there could be future shocks of course post pandemic. there will be future shocks post pandemic. in the near term it's really about making up the lost rounds from the shock of 2020 and i think we are well-positioned for that. jonathan: the decision on the summary of economic projections, are you forecasting above target

inflation at above 2% in the next three years at some point in this sep that comes out a little bit later? >> yes. we do expect the 2023 number to go up one tent. we think 2.0 goes to 2.1%. it could even go to 2.2%, but i would be very surprised if it stayed at 2. that is also going to be a reason to show one hike by the end of 2023. i'm focusing on the medium projection here and of course it's going to be a range of different views that will take some time to figure out exactly what it means. in the first instance markets are going to be focused on the medians. jonathan: so core pce -- than

the news conference. how do you think the chairman shakes the narrative coming off the back of those forecasts? >> i don't think the story from powell is going to be all that different from what he said a couple of weeks ago in the wall street journal interview, where he basically didn't want to provide calendar guidance for either tapering or rate hikes because the committee has decided to phrase all this -- he did use quite a lot of calendar like language about tapering. he said there would be plenty of -- before they would start to taper. to me that says tapering in the next couple of quarters is very unlikely. late this year is a possibility but our guest would be early 2022. lisa: what would you have to see to change your forecast for

longer-term inflation when you've got the likes of ray dalio coming out saying cash is trash and longer-term bonds are going to be worthless in the face of acceleration? >> i think there are a number of things to watch. our baseline scenario is that inflation goes up substantially in the short term, driven by the big declines of early 2020. then it comes back down and then after that we see sort of a gradual acceleration. a little above 2% by 2023 and somewhere in the 2.25% range, maybe a little above. if you had a sharp increase in inflation expectations that would certainly be a warning sign. probably something that would have to be visible in a number of indicators, not just breakevens in the bond market or

household expectations but a combination of that. if you had a really big overheating of the economy with employment rates that are far beyond the cyclical highs that we've seen in the past couple of decades, then you'd be more worried. in our forecast we basically see the sizable current output gap being filled in. tom: exactly. >> beyond normal but not dramatically. tom: you are reading my mind exactly. is there a complete underestimation of the elasticity of supplies coming on? you get a boom economy, the animal spirits pickup. the out put cap closes up and that's a good and normal thing. right? >> yes. absolutely. that's a good and normal thing

and there can be too much of a good thing of course. that's always a possibility you have to consider. in our forecast it's not too much of a good thing. it is a good thing. i also think you make a good point about the potential for supply to prove to be a little bit stronger. so far the supply-side information we've gotten during the pandemic has been better than most people would have expected a year ago or nine months ago. jonathan: help michael mckee out. the question for the chairman. what is it right now, top-of-the-line for the team at goldman? >> i think asking about the threshold for rate hikes in terms of where pce inflation is is going to be the biggest question.

even more so on where rate hikes as a function of where the inflation numbers are. so if you've had 2.0 for core pce and the hike, that would be viewed as very hawkish. you have two point two or 2.3% for core pce and the hike, that would actually be pretty dovish. i think getting into that relationship is going to be important. tom: i've got to get the hot sea is like going. jonathan: great to catch up. we want do it again. tom: there is some important stuff there. this word threshold mathematically is really important. jonathan: is it coming off?

tom: we should do this right now. jonathan: are you going to do the fed special like this? one button or two? lisa: one button with no tie? tom: i'm doing my coat won't button look. jonathan: can i tease my show now? coming up on the program, jp morgan chief investment officer to talk about how the fed will respond and about this market. here we are talking about the difference between the 2% pce forecast and a 2.2% pce forecast and that will really determine whether this market sees this as dovish or hawkish coming out the other side. tom: i would love your thoughts on this. what yana says about supply coming on is a big deal.

lisa: did you get your supply -- your ties on already? jonathan: you want to swap? alongside tom keene and lisa abramowicz on jonathan ferro. i need a mirror. skills with tom keene. >> former president trump's net worth has fallen according to the bloomberg billionaires index. the pandemic he promised would disappear is hammering his own company and the riot that got him impeached is wounding his brand. commercial real estate accounts for three quarters of his fortune and few industries have been hit as hard in the last year.

mitch mcconnell says there's no chance republicans would support tax hikes to pay for president biden's infrastructure plan. he predicts democrats will use the process known as reconciliation to get a tax hike through with a simple majority. that was the same process used to win package -- passage of the stimulus package. europe's hospitality industry has gotten a gloom so the new normal. european union's executive arm has come out with a plan to reduce restrictions on travel. digital certificates would offer proof that people were vaccinated, recovered or recently tested negative. angela merkel's advisories have cut the growth forecast. they say europe's economy will expand by 3.1% this year. they also say the recovery could be jeopardized by a jump in coronavirus infections. the international energy agency

says oil markets are not on the verge of a new price super cycle. all rallied to a 14 month high last week. saudi arabia and its allies plan to keep a tight grip on the out put. global news 24 hours a day. this is bloomberg.

>> it's incredibly disheartening because honestly it causes death.

people not doing the right thing, not getting their mom or elderly father vaccinated. we will lose more people. we are losing more people. tom: melinda gates of the bill and melinda gates foundation speaking on where we are. this was with emily chang. part of our equality summit. it's a very interesting lineup. look for that coming up through the day at bloomberg. right now on the science at hand , kevin cap has invested in -- he is celebrating science at its best. that would be trying to find a vaccine like we knew as kids. a single shot effort and something in the realm of temperatures that are normal unlike what we've had with

pfizer or moderna. i want you to go into one vignette you can give us of what they do at your acclaimed lab. what is the science in the lab that gets you to a wonderful press release? >> great to be here. thank you. it really is very exciting to see what's come out of the lab in terms of the vaccine that we now call the j&j vaccine. people think this just happened in the last two months. this is based on years, in fact decades of work. work first in vaccines to be made for hiv and then for ebola and the zika virus. we are building off of decades of work and science. tom: do you have any understanding if we will need vaccines down the road after

pfizer and after modernity? do you assume a one-year shelflife, a five-year shelf life? where are we in that continuum? >> i think it's almost certain that we are going to need additional booster shots. it's what we know from vaccines for other diseases that you increase the efficacy if you continue to give booster shots and we also know that a fair number of people are working on tweaking those vaccines to deal with variance as they come up. the good news is we can do that fairly quickly. lisa: it's not just the vaccine itself and the medical response to this pandemic in a biopharmaceutical way, but also in a clinical way and the complex ecosystem that you recently described in a paper of the u.s. health care system was really tested by this pandemic.

what are some of the lessons that you think we could apply to have a stronger more robust health care system? >> i would hope that we've learned how little we knew and know about what's coming and that we've learned a little bit more about how quickly we need to be able to adapt. so i would say in essence humility is a good lesson to learn for the medical community. beyond that, i think in part because of our comfortably familiar metrics and dashboards which were designed to handle old challenges that we were used to, we really didn't accurately forecast the magnitude of the problem. and even more importantly, we didn't forecast where those problems were likely to be the worst. and we've got to build new models and engage new voices and engage diverse thinkers on our team so that we don't repeat

those problems. lisa: there's also a question about the efficacy and the speed at which we've been able to distribute the vaccines. what do you make of the idea that we didn't have a clear-cut national strategy at the outset, we are sort of cobbling one together. what is your sense of how effectively we are doing this? >> that's a pretty accurate description, that we did not have a nationally guided program in this country to effectively roll things out. let's start with what went well. it's astonishing how quickly a vaccine was developed and i don't think we should gloss over that. i think of this in three phases. the first phase was when the vaccine was available and there were a fair number of challenges around getting it out and there was a feeling that we were holding onto a large amount of vaccine but not getting them in

people's arms. we are now in the phase where we are getting it out quickly but there's just not enough vaccine. i would suggest that in the next three to six weeks we are going to move beyond that phase and the question will not be about is there enough vaccine. the question will be more focused on why do we have this vaccine but the people that most need it are not coming in getting it. the conversation itself i think is going to change. tom: thank you so much. too short a visit today. we thank him for his attendance. we've got to go back to the fed meeting. changed dynamics since we began the simulcast. lisa: 30 year yields shooting to the highest levels that we've seen since 2019. will the fed welcome this? on one hand they want a steeper

yield curve. i think we can't emphasize this enough. the pace might be concerning to them if it leads to some pause, some caution in lending when it comes to people going out and deploying their cash. i'm not sure it has reached that point yet. tom: frankly onto june 16 we are really going to begin to see data about a booming economy. we are really not there yet. to me they have to see the actual gdp data before they react. they've just got to wait. lisa: they can't leave forecasts where they are. how to date due inflation forecast upwards while also talking about hiking the rates. tom: i'm sorry, they are an incremental institution. you've got to believe their

unspoken game plan is to do it over to three meetings. lisa: if you take a look at the economic surprise index, we saw the biggest downward economic surprise and the biggest upward economic surprise in history. the fed has to figure out what to do. tom: as i mentioned with the former governor of the fed, we go back the last natural disaster, let's call it world war ii. inflation of 14% in 1947. and then five years later we are in two-year outright deflation where inflation got down to 1%. we have seen this before and the institutions get through it lisa: younger people don't see inflation. older people are more likely to think that inflation is a real risk. tom: young people don't see tuition pills.

older people do see tuition bills. that could be the correlation there. we have so much to talk about. esther sharp at wells fargo with david westin at 12:00. stay with us. futures red and green. this is bloomberg.

♪ jonathan: 1.67.

from new york city for our audience worldwide, good morning. your 10 year yield, 1.67 and up five basis points on the session. we begin with the big issue. market securing up for chairman powell. >> 21 is the year of patients for the fed. >> chairman powell has been very clear. >> despite the fact that rates have increased. >> the inflation debate. >> we have seen armageddon last year. >> things are getting better. >> the economy does not need financial conditions to be as accommodative. >> what happens with the dot plot? >> the steepening yield curve. >> what does the fed do with their expectations for the for -- for the first rate hike? jonathan: let's bring in the bloomberg