>> good morning.

welcome to daybreak australia. i am heidi scott watson said. >> we are counting down to asia's major market open. >> i am kathleen hayes in jackson hole, wyoming for the fed annual policy retreat. now let's take a look at the top stories this error. stocks rising, investors shrugged off the hawkish talk. >> we speak live to adrian or who was among the first to tighten policy. >> plus, progress in talks between beijing and washington to avoid the delisting in chinese firms from new york. click let's get you a quick check on this as we continue that drumbeat awakening for the child. futures are pretty tepid at the

moment. all of this as we saw bond yields falling and investors waiting for that speech and just how hawkish will fed sharp -- fed chair powell be? volumes are seen very much below average in all major industry groups. we did see that higher training particularly when it came to material communications as well as tech. the dow added just about 1% there. watching new york crude as well. we are sitting at about $93. much uncertainty continues to way for both supply and demand when it comes to energy. let's look at how all this is setting up for this final friday session of the week. cracks yes. but another sector and focus. that is chinese companies that are listed in the u.s. because we saw that big jump you can see at the bottom of the screen and the golden dragon index.

up more than 6% now. we see the signs of progress between china and the u.s. to avert listings of more than 300 companies. we hear that accounting firms in china are telling firms that are listed in the u.s. to be prepared to bring their audit pages to hong kong for inspection by american authorities. you have to look over at the historical average. we are down more than 60% from the peak last year. let's look at how else we are setting up her asian trading this friday. we have futures looking a little bit muted for the start of trade here. all eyes very much on jackson hole this week. what are you hearing on the ground there, kathleen? >> the president of kansas city fed, this is her last time at jackson hole and she certainly has a lot of insight to share with us yesterday. even though there is no predetermined or even in her mind, decision yet about 50 or

75 at the meeting, she does agree that the fund rate might have to go higher than the fed expected. >> it is very important that we are clear on our communication about the destination we are headed. i think that destination is important. we have to slow down demand and bring inflation back to our target. >> i asked her about what we heard from john taylor just a couple of days ago on our show and we spoke about the need for the fed to aim even to 5% or higher on the funds rate. she agreed the funds rate to go higher than the 4% peak defense seems to be signaling for. the door is open. i think it is interesting. a lot of people put their foot down at 3.5 or four. after george has been one of them were major decision-makers here and is saying that if we

have to, we could. >> speaking of putting a foot down, we have been watching the previously. that is the economic drama playing out as we await to hear from fed chair powell. that will have an impact on emerging-market assets. we are seeing kind of an ease to the pbs eb ok with the people of weakness we are seeing. we have seen maybe a line in the sand. maybe there is a buyback against the strong dollar. the pbs he does actually want to slow the pace of u.s. appreciation. it really has accelerated the growth of versions between the pbmc and china and in particular, the u.s.. click let's introduce our guest. attending the 37th jackson hole meeting. let's bring an jason frankel --

jacob frankel. the former chairman of j.p. morgan international and former governor of the central bank of israel. right to have you back. people are putting a lot of weight on this speech. they want him to be clear about where they are going and where they are now. what is the challenge for jay powell? >> they want him to be clear today. there have been so many changes. now it is the time to reject clarity. we believe jay powell is perfectly capable of doing that. we expect them to do that.

before it is deeper in the economy. the challenge is to ensure it is not strangling itself in the broad area. the fed has been a little bit behind. they are committed to deal with the inflation. this is what they have done up to now. cracks in terms of where they

got in terms of participatory and transitory inflation, what happened there? is that something that jay powell has to address in his speech? >> i think that the focus on transitory has been important. we don't have this great flow of information. i think that the run of the federal reserve and the central bank is to ensure that shocks that can become our actually becoming temporary and the action of the fed can ensure this will happen. cracks one of the issues for jay powell and his colleagues is that marcus just don't seem to quite believe the fed is ready to do this. maybe bond yields rise but then they rally again.

is it a lack of credibility? is it bad communication? will it be harder to convince people they can get the job done now? >> we are in a very unique situation. they are all coming at the same time. we have the pandemic, we have supply chains, we have food. some things the fed can do very little about. the fed wants to be assured it does not create unhealthy credibility and unhealthy stability. the fed needs to be much more ahead of the curve. i would not worry about shooting to build up credibility and reduce the lagging behind of

what you have been because you have been a little bit lagging behind. this is the time to accelerate like in a convoy. you have to press on the gas, go to where you want to be and start improving at the pace that you want. this way we can ensure that next year, when we speak about inflation, the inflation that the fed prevented from spreading. >> how aggressive is to aggressive? we spoke with joseph. you actually exacerbate inflationary pressures if you move too long and too aggressive with this rate cutting cycle. -- rate hiking cycle. that this incentivizes you to stop the supply chain. do you think there is a good reason for that argument?

>> given the risk reward situation of the present, i think the greater risk is the fight against inflation. in fact, markets will welcome something that says i will ensure price stability. we are in an industry that is clearly below where it should be in the medium-term. i would not worry about the debate of have a percent, three quarters of a percent. remember, it is not only interest rates, we have had a very messy extension of the

better sheets of the federal reserve and central banks. we inherit a lot more. we can put all of this together. i think the balance of risk today is low inflation rather than less inflation. quickly have seen so much global growth, do we need to be concerned that the slower growth will be a global drag as well? quick strata is the most serious issue. the world can grow without pressure, the role for without china. we have seen the extraordinary havoc.

we can ensure the ongoing economic relationship is key. this is much lower. we need to make sure that the world is not aiding to this stress and making sure that china stays in that part of the world economic system. >> final question, can the federal reserve avoid recession? do we have to push so hard that that becomes likely? is that what they have to do question mark -- have to do? >> that is why the challenge is so big. the shock to the economy that creates downside risks, whether it is the energy, whether it is

the food or any of those things we are talking about, this is the slow down of recession. inflation will not end -- we will not solve the problem. inflation will only add to the challenge. if you flirt with inflation, you end up marrying it. we don't want to get married to the inflation. we need to ensure that the world's ability is maintained. quick thank you so much. always great when you join us at

the jackson lake lodge. no one wants to be in that kind of long and unhappy marriage. stay with us. more from our special coverage out of jackson hole. of course, the fed chairman jerome powell positive speech will be coming up in hong kong. thus, all the interviews we have , plenty more ahead. this is bloomberg. ♪

>> you are watching daybreak australia. i am sue keenan with the first word headlines. president biden will implement the listing of semiconductor -- semiconductor production. they are committed to making agencies -- helping agencies coordinate their efforts. a federal judge in florida with her to a redacted version of the

affidavit urgent former president donald trump's mar-a-lago home. the doj has not decided to file the document. to rush and i were president vladimir putin has increased numbers by 137,000. his decree did not say whether that would happen with a draft or more volunteer soldiers. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am sue keenan. this is bloomberg. >> thank you so much. u.s. tax rallied, bond yields falling with traders awaiting jay powell's keynote on how

hawkish the fed will be. how are u.s. equities performing ahead of the speech? is it all about jackson hole right now? >> the answer is more nuanced. we have the s&p 500 closing your session highs. the nasdaq also gained 1.7% and if you're wondering what is causing the strength of this rally, it is not all about the fed. we have chinese stocks rallying. that is because talks in the u.s. and china have commenced and that is about the delisting of chinese stocks in the u.s. stock exchange. this is the bit of hawkish veg but we have been hearing. >> when you look at the requirements of this, what other

factors are you looking at here? you mentioned the fed, what chair powell would say, the direction of the dollar and bond yield will be key as well. >> this is also the thing that people will look at, equities. an interesting note came out from facebook investment group. they said during the jackson hole conference, things have been modest before a more sustained rally. the conference doesn't seem to be talking about seasonality. it is really going to be a big day tomorrow and all of us in the newsroom will keep a close eye. the chinese stocks listed in the u.s. surged by the most in two months. talks of delisting, all it takes is a new york listed firm to raise new york officials to

inspect hong kong. let's bring in stephen engel. what is the latest? >> one analyst telling bloomberg this is a fascinating development if indeed it is true and confirmed and none of the parties have confirmed it. they have instructed the firms to bring the audit papers of the chinese listed companies as more than 200 of them that are potentially on the clock. take those audit papers to hong kong, here in hong kong, for u.s. officials to reportedly inspect the public county oversight board. the pta aop has declined to comment. the securities of exchange commission in the united states as well as the chinese securities regulatory commission have all not yet responded to a

request for comment but this would be a major development, obviously for these companies that are on the clock to meet a congressionally mandated deadline of 2024 for them to open up their audit books, otherwise, face delisting. that has kept a caps on chinese listed shares. it sent them down over the last year because of all this uncertainty. several big as always have already announced their plan to delist like china life, center tech and petro china. we have already seen alibaba move its secondary primary listing to here in hong kong, perhaps as a bit of a hedge in case they are indeed eventually kicked off the nyse. this would be a major development, a major development for here in hong kong. if the two sides do meet here

and the chinese sides open up their audit books to those adrs. >> a very big development indeed . that is stephen engel. you can get a full look at the roundup of stories you need to know to get your day going in today's addition of daybreak. you can also customize your settings so you only get news on the industries and as such you really care about.

>> a quick check of the latest business pledge headlines. they have been ordered to hand more information to elon musk. this is the journal information about not thousand accounts surveyed last year. they denied access.

this is part of the legal fight to make elon musk complete his $44 billion acquisition. peloton suffered its first stock drop in four months. there are revenue up to $644 million. the outlook followed a similarly dire fourth quarter when sales plunged to 28%. a loss of 1.2 million is about four times bigger than a year earlier. taking a look ahead at the day. we will get a read on new zealand's consumer confidence. also watching them lowering their forecast fund by 25 new zealand cents on the back of global demand and inflation and earnings season continues in full swing in australia. the net profit beating estimates, net income was 1.2% lower year-over-year. income there falling 59%.

and don't miss our exclusive interview with the ceo to break down those earnings at 10 past 2:00 p.m. if you're watching from sydney. the new zealand central bank remains at the front of the global path when it comes to tightening slight inflation. we will go straight to the source next. that is right, governor adrian or is joining us right from jackson hole. this is bloomberg. ♪ hi, my name's steve. i lost 138 pounds on golo and i kept it off. so with other diets, you just feel like you're muscling your way through it. the reason why i like golo is plain and simple, it was easy. i didn't have to grit my teeth and do a diet. golo's a lifestyle change and you make the change and it stays off. golo's changed my life in so many ways. i sleep better, i eat better.

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>> welcome back. i'm kathleen hayes in jackson hole. now we would like to welcome our bloomberg radio listeners. new zealand's reserve bank was one of the first to begin raising rage and its aggressive tightening cycle is being watched by his global peers as they also battle inflation with unusually large rate hikes. we are delighted to be joined by adrian or. thank you for coming all the way from new zealand to join me for this interview. i want to start by asking you about the last meeting. you are tilting toward higher rates. you are signaling there is more to go. how aggressive do you think you might have to be? it seems like you are seeing the doors open.

>> we are going back to the position where we can be more data-driven again. we knew we had to slow the economy and be at 3% or plus. there will be another couple of rate hikes but then we have to get in a position where we can be data-driven and get back to our normal position of watching, worrying and waiting. we are looking for significant signals of inflation expectations. we are seeing the beginning of that. i do feel confident we are on top of it. we don't need to be cautious or chasing inflation all the way down. we are watching this feeding

into inflation expectations. quite the consumer is one of the big drivers of any economy. we saw the retail sales for new zealand, the yearly rates negative for the second quarter in a row. we just saw the first quarter of gdp a little bit negative. recent spending is pretty important. the technical recession -- >> we know that we wanted technical recession. we need a very low consumption. the outlook is almost flat for real consumption. for us to see retail sales come off like that, it is not a surprise. it is a good signal that terry policy is biting, that we are

doing our work. there are many other things driving the gdp figure. tourism is coming back into the market. the country has reopened. the construction activity is very strong. consumers will take a significant part of the round on the slow down because this mostly bites on domestic spending. quite a big question for all central bankers is are you willing to push that heart? what if you are heading into recession? is that a necessary evil? >> slower growth is a necessary position. the potential growth is a positive rate.

we can have positive economic growth. the single biggest capacity globally is the shortage of labor. if we could make the supply side of the economy quicker. we can't. >> are you willing? if you have to push that heart? quick pushing that hard will take most countries around the world to zero around the globe. it is likely that some countries will be putting two negative quarters of growth specifically for new zealand at this point, we don't see that. her predictions at the moment are going ahead on pretty anemic economic growth because of what they are doing. because there is some criticism

that you are actually just incentivizing the sort of investment needed to solve those supply-side issues. monetary policy is a very blunt instrument. is that for the arrest? are you balancing and looking at the necessary evils or the best of the evils you have to choose from? >> i think we are. the single biggest problem that can happen for any economy is high and variable inflation. the central bank does not have credibility to control inflation. you can't have that without low and stable inflation. that is a primary target number one. the second part is on the supply side, this would and very strong. the construction is going through a record time of investment. i saw one local bank in new

zealand talking about a certain supply of housing by this time next year. this is an believable deficit to a surplus now. the government has a significant investment portfolio ahead of itself like most countries, infrastructure is post-world war ii. there is necessary unglamorous infrastructure, health, education, all the utilities. the government has been waiting for a quiet time so they don't crowd out private sector investment. and also, whilst construction will slow, the board export sector has been very strong and the investment there in terms of trade, the regional parts of new zealand have done very well over the past few years. >> do you worry a bit more about the weakness from china? not just the stabilization measures that we are seeing.

they actually normalize lower growth and lower demand >> in her predictions, we see the labor markets employment growth remains positive but we see unemployment rising. we are seeing the labor force is coming back up, our borders are reopening. our next immigration will be positive so there will be a lot of supply-side impetus to the economy. that has been very weak. we need the investment. we need to be doing the same thing in better terms, operating smarter. there is a lot of incentive there to invest. the last two years, living in a locked down, i was say the advantages of technology really have come hi. new zealand showing it can still sell to the road even without leaving home. a lot of adaptation is happening.

i think we are in a pretty strong position. we are getting on top of the inflation demon. these things are more balanced. >> the federal reserve, the doors open, what does this mean for the markets, the bond spreads, the yield spread, the exchange rates? >> in my position, we have a floating currency. it will absorb a lot of the differences. the drive back toward the u.s. dollar, it has put capital

outflows. the stronger the u.s. dollar, the heart of the interest rates. the more they have to intervene to manage your exchange rate. the impact was almost second vote for us. that is more about the impact on major trading partners. hong kong, a region of the world. when you are lifting interest rates to maintain your exchange rate, that puts a lot of pressure on foreign reserves. the exchange rate will impact point quickly on the cpi prices immediately.

>> how can that be the neutral rate if your year-over-year cpi is running at 3%. it seems pretty negative on the real side. >> what we are talking about is a neutral rate equilibrium. a neutral interest rate of 23% is still the because you're only talking real growth of one to 2% inflation. you can say that is a particularly aggressive neutral interest rate but with current cpi and interest rates, the current interest rate that people are seeing is negative in

real terms. >> the response to the pandemic started as a fear of breaching deflation. would you say that central bankers feel more comfortable in inflation than the risk of deflation? >> great question. the central bank has had far much more experience dealing with inflation. pricing from high inflation to low inflation. the official cash rates are all positive nominal terms. we know a lot about that. we know how to manage that challenge, reducing demand through higher interest rates. the governor of the bank of japan is with us. they have been many decades

where you are trying to increase the nominal rate of inflation to something above zero. that is an incredibly difficult task. that is with monetary policy tools that are limited. you have to be thinking quick creatively as they head over decades in japan to get small positive inflation. it is almost like a voucher system. here is your voucher, if you don't spend it within the year, it is not worth it anymore. we always talked about the least risk to us, that we'd be slightly higher inflation. -- that would be slightly higher inflation. we believe we are largely at the peak of inflation. >> the rbc was the first major central bank -- rbz was the

first major central bank to cut rates. yet, you are getting a lot of pushback, a lot of questioning, a lot of criticism. how do you respond to them? are central banks being expected to do more question mark people taking this as an exact science rather than something you have to try to do in steps? what do you think about this after surging inflation? >> central banks need to be very open and willing to show all of their workings of how they get to where they are and what they are trying to achieve. the hardest thing for a central bank is to explain to the public what you cannot achieve. we cannot expand your labor force, we can't print people. we can't make your health kit --

we can make your health system better. we can educate your children but a lot of the public says you are part of the government, you should be achieving those things. we are victims of our own position of being out there in the public as a regular feature on economic news and announcements. we are targeting consumer processes. people think you have targeted that. continued communication, willingness to explain in ways other than just financial markets understand. that is a nontrivial challenge. communicating and being transparent. inflation is too high. it has been ugly for the last two years.

it was always going to be the cost. >> bringing on people, that would be quik-trip. -- quiet a trip -- quite a trip. >> thank you so much. covering a wide frame of topics for us today. >> let's get you the first word news with sue keenan. >> thank you. two key members appointed in different directions in the first half, added to the debate on the health of the economy. inflation decreased between april and june. the growth domestic income rose by about 1.5%. they calculate all income generated from producing goods answer. consumer spending is resilient even among slow down.

beijing and washington are said to have made progress in talks to avoid the listing chinese companies from u.s. stock exchanges. about 250 chinese companies face at 2024 deadline. >> the former prime minister has been granted preemptive bail. they have been drawn huge crowds since being ousted from power in april's no-confidence vote. and know that djokovic says he will compete in the upcoming u.s. open. it is a decision that means the former world number one could

miss these rankings. there is no vaccine mandate for those that want to attend the tournament. >> i am sue keenan, this is bloomberg. >> you can hear more from the days big newsmakers, get in-depth analysis. we are broadcasting to you live from our studio in hong kong. more ahead, this is bloomberg.

>> here at jackson hole, kansas city's fed president, esther george is underlined the importance of clear communication in the battle against inflation. here is what she told us. >> the chairman will begin -- will deliver the opening remarks. i can't tell you what is in there. i will tell you from my own perspective that it is very important that we are clear in our communication about the destination we are headed. i think that destination is important. we have to get interest rates

higher, slow down demand and bring inflation back to our target over some time. >> are you willing to keep hiking rates if you see an employment rising? are you willing to stay on that path if inflation is still too high? >> i think we have to buy mandate bring that inflation right down. the unemployment rate is running low. i think what most people believe is a natural rate of unemployment. by bringing demand down, they should begin to see the labor market loosen up a bit. i think we are seeing early signs of that consumption, some of that demand leveling off but you are not seeing the inflation data yet. it is very broad-based. >> the general consensus is you raise rates to a restricted

level and you leave them there for a while rather than start bring them back down again so what is your level and how long do you think they would have to stay there? >> i think knowing the exact level, the exact number is really going to be a process. i cannot tell you where we are today. we still have high inflation. i think it tells us we have more room to go. that we would bring those rates down quickly. you could be over 4%. i don't think that is out of the question. you won't know that until you be able -- until you're able to watch the data signs. >> the old adage was don't fight the fed. why do you think the markets are fighting the fed now? and not listening to what you have been saying about how serious you are about taking on

inflation? >> i don't know what drives the markets. i would not be well-positioned to say that. it is important for our communications to be clear because we want our financial communications to tighten. i think it puts a premium on being clear in our communication, having resolved toward the end game here and the end game is to bring inflation back to our 2% target. that is challenging. we are coming off an unprecedented time. i think the economy is still sorting itself out. we have global factors to take into that. there is a lot to think about. i am for a are thinking about that. >> that was esther george.

>> there is a lot coming through from our well-known markets. he has been quiet critical in the past. the fed has not really addressed inflation in a committed fashion. it is interesting what we just heard their about the fact communication. they have also failed in that area as well as in analysis so take a look at what he told bloomberg television earlier. >> i know what they should do. they should not blink. i think it is very difficult to call this fed. this fed has failed at analysis, validate forecast, failed at communication. it is very difficult to say with this fed is going to do. it is easier to say what it should do but harder to say what it is going to do. this is the disconnect you have been talking about between the markets on the fed. >> that will be the kind of

question everyone is hoping to hear jay powell address more clearly. that big speech tomorrow morning in jackson hole. esther george like other investors is warning that when we start that quantitative tighten, it is going to accelerate and that will also affect the pace, the degree of monetary policy tightening. request that is right. it is something that is starting to turn now. bridgewater associates say we could see up to 25% jump in asset prices. because of the impact of higher rates, we will see economic

growth going down. if you are expecting any big moves, think again. this is the six to nine month horizon. >> we will get a lot more market analysis and continue to count down to all of this at jackson hole. this is bloomberg. ♪

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