and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. ♪ ? of the blue bag maggots. i am not million. we have seen a rebound in stocks coming off the lows of the session. you see the s&p 500 down but only about .25%. nvidia had dragged it down but has now come back up. that chipmaker is seeing a little bit of respite from washington woes. the 10 year yield is coming off a little bit.

investors buy some of that, maybe a little bit of recession concerns although fed chair jay powell push those out a little bit. the dollar index is gaining 1232. 1233 right now. all the other central banks have currencies that are strong. it is not his fault that the yen is weak. still cannot make it. in terms stocks, several of the world's top central bankers at the new a recession as the most likely income of their policy tightening. i spoke at the ecb forum in portugal. >> we still have ground to cover them. policy is restrictive, but it

may not be restrictive enough. it has not been restrictive for long enough. >> we will decide on a meeting by meeting basis. >> underlying inflation, it is still a little bit lower than 2%. that is why we are keeping the policy unchanged at the moment. >> if our baseline stands, we know that we will likely hike again in july. >> we are going to move with a little bit more time in between them. >> we will do what is necessary. matt: let's get more on that fed speak and how to fetch the market with katie greifeld. katie: i want to think -- i want to focus on one thing that jerome powell said. powell today's said it could come at consecutive meetings.

he said this is not necessarily a pace where they go every other meeting. let's look at what markets actually expect. we have tightening until we get to terminal, so not quite two hikes, but traders have decided, ok, maybe we get more than one hike here. what is interesting about this chart behind me is, it seems like we are all on the same page when it comes to eight cuts. over 100 basis points of cuts priced into the market and that we are looking at six basis points. not quite there when it comes to price hiking, but traders have gotten the message. matt: come over here and join me. let's dig in more with the vice chair. he is now global economic advisor. thank you so much for joining us.

what was your take on jay powell at centrale? was he a little bit more hawkish than the market anticipated? >> just a touch. it has been a while. maybe just a touch, but market pricing did not really move that much. it was an excellent panel. i have seen a number of these in different formats. i thought it was a good session. maybe a little bit more hawkish, but i do not think a big mover of market today. matt: even though we have pushed out the cuts from this year on the bloomberg terminal, we still see cuts priced in, even though powell said at the last fed meeting that it would be years

before we saw cut. why does he want to push that narrative and why doesn't the market want to buy it? >> he indicated it could be several years before they predict inflation getting all the way down, but the projections themselves do have rate cuts for next year. the fed's rationale is that if they succeed and inflation falls, they can cut rates to keep real rates unchanged. i think there baseline do have some cuts for next year. the question is, markets have priced in more than the fed sees right now. cutie: this caught my eye on this topic. policies the u.s. getting core inflation by 2025. if you look, you see some cuts penciled in for next year. is there a situation where we

are not at percent yet, but the fed sees something and is willing to cut, even though we are not back to target? >> that is our baseline view at pimco. it is called the to point something destination. we can see them with inflation year falling below three. but in that context, inflation would have fallen substantially. we think it would match it needs in those circumstances. so yes, the fed will be like the ecb. but we could see cuts next year, if inflation remains above 2%. katie: on the topic of data-dependent see after the fed meeting, you made the point that, i really think for the

first time in a long time that the fed is data dependent. does that imply that they had not been? what has changed that now they are definitely data dependent? >> they risked falling behind the curve last year. under jay powell's leadership, he unified the committee to a very aggressive, steep liftoff path. i thought for most of last year, the focus was getting into restrictive territory. they were doing that for a pretty wide range of data. i think we would agree that rates are in restrictive territory. they have to keep in there for a while. for the first time in this cycle, i think there is some data dependence. the chair did not want to rule

out that they could pause future meetings, but more optionality now that we have seen in some time. matt: i wonder what you think of the impending recession. on the one hand, we are seeing strong economic surprises to the upside. look at the indicator and it has really spanked. on the other hand, we are seeing delinquency on car loans starting to ratchet higher. savings and bank balances coming down. what is your take on recession and when we are going to get it? >> there will at some point be a recession. economists are not good at a lot of things.

we are not good at forecasting recessions. it will probably be one of the most anticipated or forecast recessions in my professional career. our baseline view is that it does operate with a lag. we have seen a tightening by banks. the curve is inverted, so all the classic signals are flashing a recession later this year or next year. the labor market is traditionally an indicator. it is certainly lacking in this cycle. it would be great if we could get a soft landing. but we do think that altogether that a recession is more likely than not. katie: i was not expecting to ask you about artificial intelligence but he brought it up himself.

they are trying to get smart about artificial intelligence and the fed is spending a lot of time on ai, but it is too early. i want to understand how they go about factoring it into their economic models. how do you go about that? >> at our forum, we devoted some aftershock economy. one of the potential disruptors is the rapid adoption of ai, and it is complex for the following reasons. if you talk to experts, you can see ai having a big impact on inflation. it could be disinflationary. you could see it having an impact on growth, so even if ai becomes a big deal, it is not clear if the net effect would be

to push up or push down neutral policy rate. they had to be commended for trying to get ahead of this. i would imagine that if you are looking at both sides of the coin, the potential for disinflation, in terms of labor cost reduction and growth. matt: in terms of inflation, what do you see as the main driver is right now? we see a sticky core around 5%. to be have supply constraints or is that the demand side that is the problem? >> i think the supply constraints. i do think the supply story is in the rearview mirror. quite frankly, there is more stickiness and inertia and inflation than i would hope for

would have expected a couple years ago. i do think that we are going to get some good news on were inflation because of the way that the statistical agencies calculate inflation, it is very much a rearview mirror approach. more high-frequency measures have turned. that is a big part of the price indexes. disinflation may turn into goods deflation because of supply conditions. i do think that we will begin to get some better news on inflation, but the fed does have a ways to go. the chair has mentioned that underlying inflation so that other measures are at least a point, maybe a point and a half higher than what they want them to be. they are trying to engineer this slowdown in growth.

to your question specifically, the supply drivers of inflation are no longer really a factor. katie, maybe it has been a little more sticky than expected and maybe we do not get back to target for two years. should the conversation be around how he more rate hikes we need versus how long the fed should be on pause? >> i think that is the way they are thinking about it from the chair comments today and certainly from speeches and commentary from other fed officials. the dallas fed president recently indicated that is exactly where i think the center of gravity is on the committee. he recognized that they have done a lot and they also recognize that monetary policy operates with a lag. it does make sense for them to slowdown the pace, but the bargain is to convince markets

that once they get to that restrictive level, whatever that is, that they definitely plan to keep rates there until they actually see demonstrable progress on underlying inflation. i do think that the discussion becomes less about how many more hikes and how long they will keep the policy rate in restrictive territory. matt: let me ask a markets question. for the past few weeks, we have seen the 10 year holding an eight 370 to 380 range. do you think it is time to start moving out on the curve? what do you think and what is your view of pimco? >> since last fall, in terms of duration, we really thought of it as election meeting in a range. we would get down to the 330 to three 40's that we are right in

the middle of the range. we do not think we have a strong view, either way. we think that market pricing is broadly shared. front end has moved around a lot. look at the yield. it is really eye-popping a lot of that reflected the aggressive rate hike cycle. also some increased volatility that appears to be narrowing. we are focused not so much on making a big bet on direction of rates, but making sure that we have portfolios that are resilient. for the first time in a long time, investors can have resilient portfolios with attractive yields. a lot of good opportunities right now. matt: richard and.

the anchor of real yield, you can catch on fridays. thank you for joining us. president biden is talking about biden-nomics. let's bring in laura. it does not really roll off the top -- roll off the tongue like reaganomics. it is a lot harder to laura: it most of the time a lot better than others, which is what he is encompassing a -- in bidenomics. he has done a bunch of different things to help the economy. last summer it was the inflation reduction act that had all the investments in green energy and the bill that deals with semiconductor investments.

he is seeing that these investments are popular. they do not really think of it and give him credit for it. this is him getting out there at the start of the election season saying, this is what i have done. a lot of these, will not see it until the next decade. there is going to be new, clean energy jobs. wait for it and be sure to give me, joe biden, credit for it. matt: what is he going to say about a recession? does he keep quiet about that and hope it does not happen until after the election? is it better to come before, so we can be getting out of it, by the time we go to the polls? laura: he thinks we may avoid a recession entirely.

that is the best case scenario. even if we are starting to come out of it by the time the election rolls around, that is a risky proposition for him. there is often a lag in what the indicators are. people are seeing that the stock market, if inflation continues to increase, biotin is much better off avoiding a recession. matt: laura davis, -- covers washington for us. if you want to watch biden's comments, you can find more on his program. thanks are a little bit lower ahead of the fed results for the annual bank stress tests. moving into a better area right now in terms of the markets. this is bloomberg.

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matt: this is bloomberg markets and it is time for the wall street be. we are about to get the banking stress test results. the spring -- let's bring back katie greifeld about what to expect. katie: behind me we have the baseline scenario that the fed has lined out. unemployment rises to 5%. home prices come up a little bit and you get a little bit of a detraction in real gdp and equities flat. that is the baseline that these banks are being tested for. let's talk about the adverse scenario because it is pretty traumatic. it is much more dramatic. equities are going to fall much more and he will see

unemployment rise much higher. what is interesting is for the first time in 2023, there will be an exploratory measure that is to try to address what we saw in march. we had the financial system coming under pressure and it seemed like big banks were not equipped to handle it, so the stress test has become more of a lift with some measures added. matt: stay with us as we bring in advisor barry knapp. very, thank you for coming on the program. what is your take on these banking stress tests? it seems like the big banks sale right through them, so why do we care? barry: the missing scenario is a continued version of the yield curve and a broader economic

credit crunch. i think the banks have a pretty toxic mix of policy coming at them right now. treasury issuances are towards the front end, contributing to this yield curve inversion. fed policy, passive qt and active rate is also exacerbating that. the potential to raise capital levels would also potentially impair bank profitability to the point where return on equity would fall below 10%, grant was for much of the 2010s, more of the 1950's and that would impair credit growth on a long-term basis, prevent banks from building equity. i think the banks are in a much more precarious spot than the fed knows. this severe economic outcome,

there is very low-cut it risk in the banking sector. this is about them owning high-quality assets at the wrong price, buying 10 year or five year treasuries at 1% throughout 2021 and the duration of this match. that is really acute for small community banks that do not hedge duration. matt: they listen to fed warnings. 31. very: that is a different scenario and they got their money because of laws in bank regulatory policy that ended the exemption for cash and treasuries. they were turning away deposit and the money went to silicon valley bank. the money went there. there is a real problem that the fed will have to resolve,

changing treasury through issuance or cutting front end rate. it is not an easy problem to solve and this stress test. we might see some evidence of them licking their wounds. they will try to be unduly harsh. katie: when you think about the case, it was treasuries that brought them down. when you think about what is being modeled for these stress tests, with that have been captured? barry: no, and that is the point. they have the policy made going back to zero. the real adverse scenario is the fed cannot get inflation under control besides that they need to get to two right away. he does not think that will happen until 2025, which i view

as a very positive development. but if the fed becomes intense, taking the front rate to six, there is no alternative other than to shrink assets. that is the lifeline of credit that we have the least amount of information about. matt: if i look at the graph, you can see that the rally in the broader markets has been driven by consumer discretionary and telecoms. but financials are coming up. barry: i see them plunging right now. the risk is not mitigated. matt: great to have you in the studio. barry knapp and karen greifeld

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matt: let's get a quick check on the market. the s&p climbs back towards unchanged territory. down by .1%. we have been up and down. we are in the middle. the 10 year yield is a little bit off. 370 117 -- 3.7117. we kind of knew that, but hearing a come out of his mouth on this day is what moved the

market a little bit. rising to 1232 and 1233. still under 70 there'll for intermediate trading. in terms of some individual movers in this market, general mills is off this morning after the food producer gave annual guidance that suggests price hikes will no longer make up for slowing sales as shoppers cut back on spending. snowflake jumping in the wake of an analyst event. detailing new products and affirming a revenue target. analysts were positive in the stock, adding about $5 billion to the cap. you are with the ceo of ai company right now. join us. jon: we have been at the collision conference and downtown toronto this week.

there are a lot of people from the tech community and the focus has largely been on aia and i -- ai startups. thank you very much for joining us. you had a business that is trying to help ceos make better decisions with ai. can you explain that? >> that is correct. it help ceos make better decisions by combining the most important areas of their business, hr and finance. anyone who has worked in a large organization knows that the hr team speaks french, the finance team speaks german. we do and instant translation between the two, so they can work together and make great decisions. jon: you guys have had some thumbs up by big players. there is a lot of doctors who are interested in this business

case, but let's get back to it. what are some ways you can make a better business because of that? >> the business cycles were annual. you had annual output. you have a lot of changes in the economy, local changes, so the plan you make is out of date by the time the pencils are put down. we use ai to adapt to every plan so that the leadership team has everything they need to adjust automatically and forecast what that decision will do to their business. jon: we have heard about a lot of job losses because of worries about the economy. can this technology give a ceo better in say about whether or not you cut jobs, whether or not it was the right or wrong thing

to do? >> that is a great question. it is like driving a car, but you only get to look at this pedometer every two to three minutes. you are speeding and then you have to suddenly slow down. it takes a long time to react. they end up hiring a lot of people very quickly. what you want to do is stay away from medic gross and manic downside. you want to adjust and make small changes. that is what we do without making -- doing any actual work. jon: we have seen some well-known tech leaders but i think there are more than -- there are many startups as well. because we hear about the hype every day in the stock market,

it is hard to know what is real and what is not. can you give us an idea of how your business is growing? >> if you take a and apply it to anything, there is value to it. if you look at something that happens in the business before ai, you are able to create a lot of value by creating time saved and money saved. i think the cases that win are the ones where builders are trying to aligned to something that is already happening in the world. we are now in the consumer era. now, every person has experienced a and had a chance to be valid by the magic. nelly will see exponential changes happening. as long as they can attach to something that is meaningful to the business.

jon: do you want to attract more investors to continue to grow? >> what we're doing is building awareness about our product. we are uncovering more and more things. investors help us move faster. jon: the other big theme is privacy or moving too fast on aia. we spoke with the industry minister. there was a push to put some laws in place. the balancing act is, we are trying to build this business and lock into this opportunity around ai. does government regulation hurt your opportunity, or does it help to level the playing field?

>> the answer is yes, but they are absolutely necessary and we need a lot of them. at the same time, we do not want to regulate the software. we can build great software while protecting data. they do not have to be mutually exclusive. there are the academics, the builders and consumers. they are all talking about very different things and if we were to talk to them at their own level, they would agree that we need a little more regulation and data privacy. data breaches are not good no matter what happens. jon: almost out of time. he mentioned how they move very quickly depending on what the trend is. >> i am so focused on my own company that i barely have time to look up. jon: that is a good answer. we appreciate it.

one of the many stories being told here. coming up, we will talk to one of the players in the industry that has been doing research for more than a decade. we will speak to colin murdoch, next. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ )

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matt: this is bloomberg markets and time for our stock of the hour. nvidia fell on concerns about washington preventing the chipmaker from selling some of its products into one of its biggest markets, china.

the u.s. could close loopholes in the cell of artificial intelligence chips to china, citing people familiar with the matter. they turned around a bid after saying export controls would have the greatest impact on nvidia but the company can effectively manage through this risk. black rock the world's largest asset manager published a bullish call picking up companies with asset or data with high potential for automation. the stock has taken a leg lower in trading and is down 1.5%. obviously, a huge drag on the s&p. jon: matt, the numbers on the china exposure, at least for the data center revenue, that is a sizable chunk of is this.

the cfo saying they will be watching very closely to see how this plays out. it is a complicated story, not only because of geopolitical tensions, but also because which one of these is about making money. they have operated for years. google deep mine is a research arm within the larger organization with the goal of using ai to tackle climate change and curing cancer. we spoke with the chief officer. here is more on that interview. quest we take careful steps. it is an extremely powerful technology. we have been thinking about this from the beginning. we have to make sure that as we do our work we take the right steps.

we are involving the right people. >> on the regulatory front, we actually just spoke to the minister in canada who has legislation on the table to try to have some sort of regulation around ai, and i wonder how you think about the right regulation or working with different governments on regulation. >> we think about working across the globe. we think about the most effective regulation. regulation that allows innovation and allows for breakthroughs but also mitigates potential risks. jon: colin murdoch there from the google deep mine team. they will see if they can work on these longer-term issues and see if they can implement it into what some of the alphabet team is working on.

the bigger story that most investors and consumers are talking about these days. matt: it will be fascinating to see them discover the killer app for artificial intelligence. we have already heard so much from microsoft and openai. i am joined by the leader of canada's new democratic party. somewhat of a kingmaker in the country to the north, and we will get his take on how justin trudeau is doing. this is bloomberg. ♪

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matt: this is bloomberg markets. canada is the fastest growing economy after the u.s. in the g7 this year.

it will probably repeat that performance in 2024. a recent column points out that canada has seen unprecedented population growth, record low unemployment and the most diversified -- here in new york today to discuss the economy and inflation, he joins me here in our studio. great to have you here. thank you for coming to visit. you are sheared to talk with some tanks and with some diplomats about inflation and how to better deal with the problem. >> one of the big concerns, one of the things that we are feeling is the squeeze of the cost of living crisis. they are struggling with paying their rent or their mortgage. a lot of the moves that are being made by the bank of

canada, we are seeing increased interest rates. mortgage payments are going up and people are feeling even more squeezed. we are looking for ways to tackle what people are ignoring, the profit side. many economists are coming to the conclusion that companies are making record profits while people are struggling. that is one of the problems driving up the rate of living. matt: a very populist way of looking at it. you have really boosted your flow of immigration. it is not something that a lot of americans have been calling for. justin trudeau has made bold moves to make it happen in canada. that is great for strengthening your labor force, that may that also adds pressure, upward pressure on inflation. does that concern you? >> when we welcome new canadians, it is nice to find consensus across the platform.

part of it is housing. there is not enough housing being built. how do we build more homes that people can afford? how do we build more mental and places that people can buy? it is something that i am fighting to make sure that people have a place to call home. jon: the inflation story is a complicated one, whether it is canada or the u.s. because we can look at what central banks are doing, but there are oftentimes economists referencing spending levels as well. the imf recommended that canada could benefit from having a school anchor. so what, in your conversations or think tanks are you finding when it comes to spending and the issue of inflation right now? >> there is a contribution, but from different groups that we

have met with, it is a small number. some of them are a global phenomenon that we cannot control, like the war in ukraine, but some of what we were faced with out of covid, there were some supply chain issues, but the other issue that is being highlighted, that we can do something about that has largely been ignored is the degree inflation portion, where we are seeing record profits being made by companies and people are at a record level of challenge when it comes to affording things in canada like groceries, going to the grocery store and whiten purchase one week and then the next week, it is something that you cannot afford. when it comes to rent and mortgage as well. there are areas that we can tackle and a lot of the focus is on how do we access the excess profits that are driving up the cost of living? jon: you are raising some

interesting points. there is growth for the canadian economy. much of that coming from our integration policy, but to your point about affordability. the challenge has been our productivity overall. i am joining you from a big conference my people are talking about new ideas. what is the recipe for more productivity for canada? >> that is an issue that canada has faced. we have anchors in terms of our overall country, if you assess how our banking system is set up. one of the challenges we have had is absolutely productivity. we need to make sure we are training people for opportunities in the future, that we look at the challenges and opportunities presented, but also looking at the opportunity, as we train our workforce and

get into the jobs of the future. we are making a lot of investments in cleantech. we need to make sure that we are training workers. it needs to flow directly to people. we can increase productivity and create good opportunities, and have good opportunities to capture what is in front of us. you have propped up the government until 2025, giving you one of the most important seats at the table. what do you hope to get out of that? >> using that position to bring in a lot of stuff. we are investing in cleantech. we require companies to make sure that there are good jobs with good wages. investments are not just being made without any guarantee of benefit to workers or the people. we are working on giving people a little bit of a break.

we have fought for a dental program that will cover almost 9 million people. free dental care for those with a certain income threshold. they're looking at ways to give people a break and how they can get much-needed relief in a time of inflationary and a living crisis. they're making investments for a good future economically. matt: so you think it is -- the bank is continuing to hike rates. do you think that is the right policy? how does that sit with you, the incredible rise of rates, not just from the bank of canada but banks around the world? questionnaire really concerned with it. there is a feeling of pressure. many people who took out mortgages when the rates were low couple years ago are faced with some thousands of dollars of increased payments per month. imagine a working family trying

to come up with another $2000 to pay their mortgage. it is really tough. here seeing that approach has not been very effective because many causes of inflation have no relevance to rates set in canada or other countries around the world. we are seeing it as that approach alone cannot be the right approach when it is not bringing down inflation in a meaningful way. we are looking at things other countries have done, discouraging gouging that is happening. inflation is a cover to bring in higher prices and higher profits. we need more competition in canada when it comes to groceries. we have a lot of concentration in three companies that own the majority of grocery stores in canada. matt: don't higher prices bring in competitors? ? people are faced with the most

challenges ever to buy groceries , there is something there that does not sit well with people and we have to change that. jon: in our final moments, you probably saw those headlines about the federal government's plan to tap into some of those potential workers in the u.s. right now who might be out of work because of some of the recent layoffs with the opportunity to come to canada and join. what did you think about that? ? welcoming to people. we want people to come to canada and find a place to build and grow a family and contribute economically. please, consider us because we have a lot to offer. we have a great health care system, good stability, and we look forward to building a better economy where people can afford a good life, home and the

fundamentals of their lives. matt: thank you for joining us. the leader of that party in canada. i am matt miller. this is bloomberg. ♪ (announcer) enough with the calorie counting, carb cutting, diet fatigue, and stress.

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romaine: the reluctance of o'reilly -- of a rally. romaine bostick if you off to the close. driving quarter and rotations and out of stocks here. as we get to the final couple days of the first half of 2023. carnival and tesla in the discretionary sector and pioneer and comical on the energy names. you have materials in this -- and consumer staples. ♪ ♪