even brainard and some of these other dovish numbers look like they are getting cold feet.nflation is rolling over, didn't you look at city surprise, that's rolling over heart. guest: at what point do they get cold feet? not with a $4.5 trillion balance sheet. they be a year from now. we should all hope they get a fund rate to 1.5 to 2%. jonathan: kathleen? guest: my question is, what are they tightening for? it seems to be for the labor market. but nobody is talking about is inflation. they don't think it exists and yet, every day that goes by, we get more and more risk of inflation eating up. guest: they are trying to normalize, right? surely a minus one and two -1.5 is nowhere near neutral. looks somewhere that normal or at least neutral, then you see what happens. she also talked about the term premium and said it's the foreign money that goes into the u.s. market. jonathan: let's talk about global reflation. the last time we had this face-off between the bull and the bear, you brought up chinese ppi. as the reflation story, it's not just reflation in the u.s., in china

i think you want to go back to lael brainard's speech she gave the other day where she acknowledged wee had some decent employment numbers over the course of the past year or two. the unemployment rate has grandson 10% to 4.4, but the missing link and what everyone should be focusing on in today's report beyond the headline is the wage number. because if you're asking how could it possibly be we're churning out numbers to close to 200,000 at unemployment, and the 2.2% with no more qe and a threat that we will start to see the fed tinker with the balance sheet in the other direction, how is that possible, because we haven't seen much wage growth this cycle at all. lael brainard talking about the breakdown in the phillips curve tradeoff between mroiremploymen inflation. >> if you are expecting this cycle to turn in a more negative way, give us two data points you're watching as leading indicators, if jobs is not that. >> the flattening yield curve is certainly something that i've always paid attention to. from an economic standpoint, focus on autos. when autos peak, four out of the last

listen to brainard. she laid out a clear and precise path for fed tightening.hen i look at maker initial conditions, it shows that the fed has raised rates three times, financial conditions have actually eased quite a bit. this suggests they are falling behind. remember, they stopped raising rates, stopped qe because financial conditions had tightened. now that they are going the other way, it is more than offset. kathleen: it is not tightening, it is just less accommodative. bob: true. they have miles to go. if i were the fed, go every other meeting until you get to 2%. that is the zero real rate. wait there. jonathan: you said the signal is they are not going quick enough, and 30's,ok at to send 30' but you are saying maybe they are going to fast. michael: we are still short the project. they still have this 2% dot. it looks like they are adamant to rate hikes. some of these more dovish members are getting cold feet. you look at the surprise index, that is rolling over heart. bob: at what point do they get cold feet? not a three quarters of a percent. maybe a

i think governor brainard's comments are important.ee declineybe -- three months of decline so i'm not sure this is a done deal for either bank. 2014, governor carney delivered a speech during the summer and talked about interest rates. quite a lot of people would have said the bank of england would have raised interest rates first. wirp on bloomberg has been enhanced. market still expect the ecb to raise rates before march of next year which is still before the bank of england. jonathan: coming up, apple recorded's biggest drop in nearly seven weeks friday and is no sign of relief. coming up, we will talk about why there is a neutral at 9:00 later,stern time and where there is the most upside around the world. beautifuld the world, new york, summer has arrived. futures are softer. you are watching bloomberg. ♪ bloomberg is daybreak. coming up tomorrow, a conversation with germany's finance minister. that's at 7:00 a.m. new york time. ♪ from leader to laggard, technology sold off in a big way friday leaving -- leading the nasdaq to its

lael brainard said if inflation doesn't pick up, they may have to change their course.on for four rate hikes. -- williams calling for forming rate hikes. what is going on? william: the growth data is ok. we are seeing that coming in. the beige book is talking about it. you are not seen much evidence of checkout inflation through the pc data was pretty soft. now, there is transitory factors in there, but generally, the headline inflation recorded a was not forcing the fed or the bond market to do anything to wild. intermediate price pressures are picking up. you look at ppi and put prices and they show that price pressures should be picking up. you mentioned the beige book, and there is a dimension of labor shortages which are multiplying in that book. the prospect of more wage pressure should be coming through. matt: but it should hit? william: it should at some stage. matt: to be fair, we have 2.5% wage inflation, stronger than we see here. william: there are other factors going on. i think the point, you know, you would make is that the u.s. economy looks ready to han

the odds of the notember hike, the market expecting anything after june, likehat does echo things brainardt of the rational moving ahead, not falling behind the curve. thisat seems like the case week, but what does this mean for the bond market rally? is it really going to be over? >> terrific story on the bloomberg today about bond market doomsayers saying the end coming. inflation, let's go to a chart, , a near-term look. you can see that range established between the the 10 yearne, now is below that 50 day moving average, a steady decline in the 10 year yield, and that is one reason why strategists and economists say this has got to turn around, and when it does, it could be violent. they still see it happening this year. >> what does it mean for other central banks? the bank of canada looking like they are ready to pave it. they got pounded by oil prices in 2014 and the economy has turned around and the senior deputy governor today talked about reassessing monetary policy and seeing if all the stimulus is needed as the economy's recovery looks broader. we just heard from the ecb inflat

i think about the doctor up in brainard, minnesota, who for so long, yes, he could look at x-rays in the hospital, but he couldn't look at them in his home, if he had some emergency and wanted to talk to someone when he got home that evening. he had to go to the mcdonald's parking lot to be able to do that. or the student at one of our reservations who got wifi in his house and looked out the window and all of a sudden there are all of these kids doing homework in his front -- front yard. that's just not right. rural america, rural americans deserve equal facilitying so they can launch businesses or just skype with their friends. this is about making sure that budget works for all americans that it leaves no one behind. sadly, these cuts are specifically targeted at rural america. that's why we're going to fight to make sure and hopefully on a bipartisan basis with our colleagues on the republican side that we produce a budget that's fair to everyone. thank you, mr. president. i yield the floor. mr. flake: mr. president? the presiding officer: the senator from arizona. mr. flake: mr.

jonathan: governor brainard earlier this week with a speech about navigating the signals between thete and inflation. looking at wages, we are getting different signals. we dropped to 4.3%. wages come in at 2.5%. if you are governor brainerd going into this meeting, are you rethinking things on the margin? >> i am not sure you are rethinking things on this report. i think you are rethinking about the impression that -- inflation data. alix: why is june a given if this is a weaker report? for think they set us up june. the expectations of the market are locked in for june. we know that would like to go twice more this year. they aren general looking for the weakness to be transitory. they have said that before. they think they will come out strong in q2. i think the fed would like to go and this will not hold them off. alix: the 10-year broke low the 200-day moving average. you were right. it broke above at the election. that tends to show significant moves on yields. we were both right. jonathan: omar sharif will be sticking with us. we will have an exclusive interview with david ein