michael: jim bullard, st.thanks for joining us on bloomberg television and radio. we will send it back to you in new york. alix: that was bloomberg's michael mckee speaking with jim bullard, st. louis fed president. that was a great interview. some of the highlights i thought was that he does not expect a speedy resolution to the trade war, and that is reflective of what we heard out of china. there are going to be new tariffs on u.s. goods coming in two trenches to hit autos, potentially tech. you saw swift reaction within the equities. s&p futures down 4/10 of 1%. money moving in now to the bond market. the dollar was the safe haven on the news, but now the dollar index is giving up some of its gains on the day, though still in positive territory. gold getting a bid. copper and oil totally falling out of bed. this is bloomberg. ♪ alix: china hits back, announcing retaliatory tariffs on $75 billion of u.s. goods, really rattling the market. the dollar losing some of its shine, but overall the stronger currenc

we are seeing headlines across the bloomberg from jim bullard. expectaying he does not trade uncertainty to dissipate quickly and that trade developments are tilling global investment and growth. seeingu.s., we are not yield curve intensifying so far. pointsas a few basis move. the fed cannot wrapped today today trade negotiations -- day todaytoday tod negotiations. larry summersry said u.s. calling china a minute he justified. manipulator -- a was not justified. >> china has been propping it up. if we let market forces operate, currency -- it would fall substantially. vonnie: with us is the voice of squawkrgs america's service, you should check it out. who sent the signal out and then walked it back 24 hours later, or is the u.s. saying if you are going to do that, we will call you a currency nippy later? -- manipulator? was a linearticipant in the sand. the pboc was going to defend and they had in the past and they went well past it. andnext day they came back china was trying to send the signal that they could play an aggressive game and are n

jim bullard wanting a robust debate on a 50 basis point cut at the next meeting. why is there so much disagreement? is it the data? >> i think there are two reasons. it is not new. the committee members have always disagreed. they feel more empowered to speak. if you are hearing what is going on inside the room more than what you are used to, that is part of the decision on the be.r on how imperial to it is easier to get an agreement when it is obvious what the macroeconomy is doing. ofn you are on the precipice a recession, nobody is going to get in the way of cutting rates. to slow in ame measured way, the chairperson can convince them to do that. did it.n and yellen when you get to an inflection point where maybe it is time to stop or ease more, and you have objectives,ferent the inflation goal relative to maximum employment, and what concerns do you have about financial stability? pitched all clearly big tent. he was talking to a lot of people in the room, people outside the room. one feature of trying to say something for everybody is nobody is going to be co

even though jim bullard saying the fed does not like the response, the market sure does.t do you make of that big sell down we saw this week? a buying opportunity or is it like catching a falling knife? erin: i think it is hard to go all in with the markets right now given the fact we are at the beginning of august. august tends to be a less liquid month for trading. you look at gold, you look at stocks, you look at bonds and they are up 14% year-to-date. people are sitting on pretty good gains already. funds have done decently well. at this point in time, market investors are going to be patient. they are not going to go all in into the month of august when it is really an illeiquid month. there is so much uncertainty that needs to be ironed out. whether or not president xi and president trump meet. whether or not trump decide to impose tariffs on europe. brexit. there are a lot of issues over the next quarter. i do think it pays right now to be patient, to be more defensive in positioning. to continue to be long duration and really pick your spots with respect to the ma

even as you have people like jim bullard saying we are watching the trade war, but we are being patientwhat is going on with the markets and the u.s. economy? >> i think people are the tradely concerned war could end up resulting in a recession. the manufacturing sector globally by some measures is already in contraction if you look at j.p. morgan's global purchasing index for manufacturing. it is in contraction. germany, industrial production down by the most in a decade. there are a lot of signs things are not going well. cuttingcentral banks three banks again just overnight. is legitimate concern this expansion could be coming to an end. i do not want to predict anything. that is what the market is telling us. amanda: look, the concern is, what happens -- the concern is, what happens if that happens. i was looking at a story on the bloomberg about danish mortgages basically add zero. maybe it was only a matter of time when you can borrow that easily, you pass on the low-cost borrowing. thinking smart people this goes on a long time. what do we make of that? >> we're looking at the bo

louis fed president jim bullard keeping a close eye on the yield curve, telling bloomberg he is not shrugging off the inversion. have a recession prediction model, it will use the yield curve to predict that. our job is to get the yield inverted, soun- those recession models probably do not work anymore. testing interested in somebody stare about this time is different about the yield curve. does jim, how many times the fed have to cut to avoid a yield curve inversion? jim: it depends part of the curve you are talking about. lisa: let's say 2/10. >> 25. more than that, they would have to do 50 or more. lisa: luke? luke: at the moment, that is difficult to say. the market is really pricing in, moving toward recessionary probabilities being very high. what they do now may not change that yield curve move in the short-term. times if they cut four before the end of the year, we could still be inverted. because the market would panic, what does the fed know that we don't? lisa: luke is suggesting that markets are going to invert the yield curve regardless because people are feeling pessimistic abo

louis fed president jim bullard joining me here today. he's a voting member of the fomc and the first question, big question, where's the economy right now? are you worried about the volatility you're seeing? are you worried about the numbers that are coming in? >> well, we certainly pay attention to markets and all the data that comes in. i think we're in the middle of a global slowdown, and we're just going to have to assess how this is going to affect the u.s. economy. i think it's not surprising that it would feedback into equities because you've got a lot of these big companies have most of their profits coming from overseas. so it's not surprising to see volatile stock market here. and then in bonds, you've got a flight to safety going on that's probably driving our yield somewhat lower. >> you mentioned bonds yesterday, the inversion of the two-year and the ten-year yields. is that an indicator of a recession? many folks say it's an indicator 18 months down the road, we will see a recession. is that it, or has something changed in

louis fed president jim bullard keeping a close eye on the yield curve, telling bloomberg he is not shrugging the inversion. mr. bullard: if you have a recession prediction model, it will use the yield curve to predict that. our job is to get the yield curve to be un-inverted, so those recession probability models probably do not work anymore. i am not interested in testing somebody's theory about this time is different about the yield curve. lisa: jim, how many times does the fed have to cut to avoid a yield curve inversion? jim: depends on which part of the yield curve you are looking at. lisa: let's say 2/10. jim: 25. more than that, they would have to do 50 or more. lisa: luke? how much to avoid inversion in the 2/10? luke: at the moment, that is difficult to say. the market is really pricing in, moving toward recessionary probabilities being very high. what they do now may not change that yield curve move in the short-term. almost if they cut four times before the end of the year, we think we could be inverted because the market would then panic, what does the fed know that we don't? lis

louis fed president jim bullard wednesday. another rate decision this time from the rbi. from china. thursday, trade balance data from china. theay, pvi numbers from u.s., and gdp from the u.k. and japan. are oksana aronov, priya misra, and robert tipp. going into next week, what are you looking for? robert: we have had a rally and the markets will take a lot of supply in the refunding. it will be interesting, always a proof statement of how solid the putting on the market is on. we'll be watching to see that. the way we are going out today, the bund market, looks like at yield lows. the market is supported. i think we will have in august of indigestion. the market will be dealing with it will be trade and underscoring the case for lower yields in the u.s., compression of u.s. yields, which will be high relative to the rest of the world, toward global norms slowly. but volatile. priya: i'll be watching the nonmanufacturing ism, looking sign that the manufacturing slowdown is showing up in the services sector. fed speak, can they clarify the reaction function? if we stay h

louis fed president jim bullard wednesday. another rate decision this time from the rbi.pmi from china. and we will hear from the chicago fed president charles evans on thursday. trade balance data from china. and on friday, ppi numbers from the u.s., and gdp from the u.k. and japan. with me are oksana aronov, priya misra, and robert tipp. robert, going into next week, what are you looking for? robert: we have had a rally and the markets will take a lot of supply in the refunding. that is going to be interesting. it is always kind of a proof statement of how solid the footing the market is on. we'll be watching to see that. the way we are going out today, the bund market, looks like at yield lows. it looks like the market is very well supported. i would guess that will have an august of indigestion. the market will be dealing with the pending trade and it will be underscoring the case for lower yields in the u.s., and compression of u.s. yields, which will be abnormally high relative to the rest of the world, toward global norms, you know, very slowly but volatile. priya:

joe: jim bullard set to speak in washington.disney reports third-quarter results after the bell. nextmberg technology" is in the u.s. this is bloomberg. ♪ ♪ chang in sanily francisco and this is "bloomberg technology." monday'sks lead selloff with chip stocks among the worst performers amid trade issues with china. apple looking particularly bruised. plus, policing the web. two devastating shootings over the weekend leave dozens debt. president trump calls

for people like jim bullard, it does.ecline are seeing is a in inflation expectations in part because the neutral rate has fallen and that has pulled down the fed funds rate, the effective rate. that is still above the overall yield curve. that gives the fed less room to work. problem for them going forward. did they give you any insight as to what other tools they might use other than rate cuts? ake: no, that is still discussion for another day. it is something that does get talked about here. is doing its review of its monetary policy framework. that is being discussed more in the abstract. they do have some room to cut rates. that is goingd, to be their primary tool. probably wouldn't see extraordinary policy unless we get into a recession. caroline: mike mckee, great job at jackson hole for us. thank you. rounding up the trade war, president trump bear down on china in a series of tweets after retaliatory tariffs. writing in part, our country has lost trillions of dollars with china. they've stolen our intellectual pr

jim bullard of see -- st. louis, a voter, had this to say.e thinks the yield curve is one of the big issues. >> you have a yield curve that is massively inverted. you have the funds rate as the highest point on a whole new curve. that doesn't make sense. we have to react to the fact there has been a downdraft in global yields area selina: in the interview -- in global yields. kathleen: in the interview, he thinks there could be a lively debate on the interest rate cut. it will be interesting to see what the other heads of the fed say when you step back. powell gave donald trump what donald trump has been saying the economy needs, opens the door to a rate cut, and's stock rally turns into a big stock decline. maybe the president is misunderstanding, goes ahead -- on the fed side. that is something the fed has to with. the more trump does that, the more they have to cut. who knows. paul: kathleen hays, thank you for joining us. still to come, greg sorry and joins us. he said trade is the most important factor in the markets for the next 12 mont

jim bullard had this to say. im: you have the yield curve massively inverted and the funds rate at the highest port on the yield curve. we have to react to the fact that there has been a downdraft in global yields. vonnie: loretta mester of cleveland was more cautious. loretta: i think patience is called for. i am not concerned we have been below target for a while. there are ways to explain that in how deep the recession was going forward and i think inflation is moving back a long path. vonnie: loretta mester of the cleveland fed. joining us from jackson hole is bloombergs matt bosler. clearly we knew there were dissenting voices with a variety of opinions on this particular fomc. today we heard the fed chair, jay powell, saying we would work to sustain the expansion. how can the fed keep working to sustain the expansion when president trump keeps throwing in grenades, the latest one saying there will be more retaliation on china this afternoon? matt: they may have to do more. the market reaction to the back-an

ladies and gentlemen, jim bullard. [applause] pres. bullard: gosh, what a great introduction. i think i will just sit down. [laughter] pres. bullard: because they can only be downhill -- downhill from here. i appreciate the opportunity to be here at the national press club and in front of the nec. i'm looking forward to hearing your comments on current monetary policy or whatever else you want to talk about, about the u.s. economy. i call this a seachange in u.s. monetary policy. hopefully i can convince you of the dramatic changes that have in 2019 withred respect to u.s. monetary policy above and far beyond the rate cut that we had last week. don't want to listen to the whole talk, you can just read the slide. [laughter] we madellard: significant changes in monetary policy of which many of you are aware. beginning in january of this year, those changes were made in anticipation of slower growth in the u.s. economy during 2019. which is materializing. i will talk about that during the talk here. but also, in anticipation of heightened uncertainty with respect to trade policy.

be talking with a host of fed officials out here in jackson hole starting tomorrow morning with jim bullard. we will talk with robert kaplan, loretta mester, and patrick harker. we'll get a view from various regional feds about how the economy is doing in their area. i asked esther george about whether or not the former kansas city fed region was suffering, and she was saying they really don't see a lot of weakness at this point. , the minutes are one thing. basically, powell is having to speak for the committee. as you just highlighted, the committee is not on the same page. powell, when he speaks tomorrow, is going to be speaking for himself. how big do you think a gap there is in speaking for himself and speaking for the committee? michael: i think he's going to try very hard to at least show not much of a gap at all. the problem is if you start talking about the need for rate cuts, then you start to talk about an economy that is slowing, and it could become a warning from a fed president that snowballs into a self fulfilling prophecy. so he's got a tough job in explaining why the fed mi

last week, we had an exclusive interview with jim bullard, the st. louis federal reserve president, who advocated for rate cuts, more accommodation to get inflation back to their target range. esther george this morning hinting at the fact that maybe she would not support rate cuts going forward because the consumer spending and the reason that consumers have the money to spend. listen. >> the job market has been pretty strong. we have known for some time, though, because of demographics, there is a shrinking work force and that will slow down. we have seen a slowing in the manufacturing sector. the services sector continues to look like it's adding jobs at a pretty good pace. so certainly, job market is important to consumers. as we go forward. but i would not be surprised to see some slowing there, just from the demographics and the composition of that work force. reporter: saying they are still adding jobs. george also addressed the yield curve for me. as you know, it temporarily inverted and inverted again today. she is not concerned for many rea

louis fed president jim bullard, he said there will be some hardship to the united states but it is manageable. >> during the spring, there was a narrative that the u.s. and china were going to come to a deal within a matter of days or weeks and i think it's been a slow realization over the last three or four months that that really was not very realistic to think that you were going to be able to resolve these very deep issues between china and the united states in some kind of short document or easy negotiation. that is not the nature of these issues. so i definitely applaud the administration for taking on china on these issues. reporter: the market coming to that realization, may be settling in this might be a longer dispute. president trump said he will have a call with president xi soon, in his words, the chinese trade delegation expected to be in washington, d.c. at some point in september. the date, though, the exact date has not yet been announced. liz? liz: edward, we are getting headlines out of reuters. reuters just got an interview with loretta mester, the cleveland fed president,

that is why you see even doves like jim bullard, one of the first people to call for a rate cut, saying he is not ready to do 50 basis points. we are still set up for a rate cut, perhaps, but not as much as one as wall street might have hoped. caroline: we have also just got international geopolitics, something to the federal reserve is having to digest. i want to ring viewers breaking news out of rome. the italian president has been talking to reporters and saying that he is giving the party more time to form a new government. those talks that we might see the five-star part of the current coalition moving into a new coalition with the democratic party. this would mean it would push off the leak coming into control. the league is particularly anti-eu. of late, thebonds hope that we will see a new coalition when the league needs power. the italian president giving the key parties more time to form a new government. mike, we have heard from the federal reserve that many of the headwinds that they face are not actually of the u.s. making. they are global making. we saw that evident in the

shery: we were hearing from jim bullard talking about how the federal reserve cannot be reacting forif s threats every time something happened. how much is it about fiscal policy, as well as monetary policy? is theink fiscal policy way to go forward. monetary policy has become far too toxic. monetary policy drives a lot of income. monetary policy is driving a lot of inflation. it is quite ironic. theral banks are point monetary policy to get inflation, but they are getting disinflation. monetary policy is becoming toxic. fiscal policy should be taking the lead. the problem is everybody is still obsessed debt levels, that carrying capacity with the deficits. what is it one interest rate is zero? what is the value? fiscal policy should be the way forward. i think it will be sometime over the next several years. today, the politics don't say it is ready. yesterday is still carrying the burden. policy, terms of fiscal it is not particularly difficult to understand government's reluctance. in the case of new zealand, which in the early 1990's very nearly got into serious trouble at the ha

alix: which in essence, you could make the argument that this is what fed president jim bullard is referencing. he says he doesn't want to cut rates because they have already accounted for trade. --id: we've taken caracalla we've taken care of that, i didn't have to worry about every up and down in trade negotiations. >> the nature of the war is that you have tit-for-tat going on all the time. it is not reasonable for monetary policy to respond to all of these threats and counter threats. we've already taken that into account. trade regime uncertainty is high , and we are putting that into the monetary policy calculus. alix: then you have a three month tenure curve that doesn't want to listen -- three-month-10 year curve that doesn't want to listen. david: i don't think markets believe him. alix: it is an extraordinary day shaking out. equities continue to climb. we are seeing some followthrough buying, watching some moving averages. in asset classes, it is a really unbelievable day. money flooding into all bonds. europe.ves over in almost -60 basis points in the tenure german bund yield. amaz

tomorrow we will speak with jim bullard of st.who is favor of a never cut, but not 50 basis -- of another cut, but not 50 basis points. we will talk with loretta mester, patrick harker, and rob kaplan. luke: that's a lot of fed speak. you mentioned a lot of it comes from the reserve presidents rather than the board itself. it made the rounds last week that jay powell basically put a gag order on federal reserve speakers. do you know anything about that? is there any truth to something like that? michael: the theory behind that was that the fed was attracting so much negative attention from donald trump that it would be better if they weren't out in public speaking, and just kept a low profile. i've checked into that story and i can tell you it is categorically not true. luke: steve, from a portfolio manager's view, looking at the fed, i believe you are so pretty bullish for the outlook, yet you've been lightening up on stock exposure since the end of may. can you talk about what's driven you to do that? does the fed play in at all

. >> then jim bullard, a voter on the committee, saying, you know, this time shouldn't be different withld curve and i'm worried what it's signalling and i think we should get ahead of it. >> that's the path out of this argument, isn't it you could say the economy is performing well. we don't see a need for a rescue of the u.s. economy. because the yield curve is set up in this particular way, it's very con speckious we have to ease for that reason. that does not mean we think the economy is in trouble. there is a path rhetorically through that opening. >> he already went down the risk management we want to keep this expansion alive if he is going to go down that path it would suggest he should keep cutting interest rates on a deterioration of global growth. >> maybe he echoes bullard who says the u.s. is at the high end of the curve and we are missing our inflation target if we hit it, we can always take it back. >> easier, not very high at the moment. >> right so it's coming up after the break. when we come back what the fed chair will say in his much anticipated speech at jackson hole

i think the inversion matters and jim bullard is one of the guys that pushed that pretty hard but again, i'll go back to my first set of statements. i think this bond market wasn't meant to be here this is a heck of a rally. it has gotten a lot of people forced in. one thing i didn't mention in the last little blush -- blurb which is mortgage convexing but when we see refinances and mortgages people have to buy more duration so this information and we're trying to glean information from the bond market for the stock market to say recession is coming, the curve is in verting and the fed needs to react watch the positions. it is august liquidity is not great this is actually as i've been recommending to our clients who kind of participated in the strength of the stock market and the bond market for the start of the year, this is not a bad time to be on the side lines and i think we'll get better information from the bond market in the coming weeks as people come back. i'm not at all convinced that we have big recession risks on the horizon. i'm also not at all convinced this curve is tell

louis federal reserve president jim bullard saying the fed does not need to pile on rate cuts, but additional policy action may be desirable. steve liesman is looking at whether the market is getting ahead of itself in terms of expectations for fed easing. a lot of comments from president bullard today, steve. >> yeah, sara. to answer your question, i think it might be best with where the markets priced and whether it's in loin with what the fed is saying and has said recently pretty big change in the wake of all this currency action 74% chance of a probability of a rate cut in september. also another one in december and then toying with the idea of that third rate cut come january, 48% probability but all of that may be too aggressive or at least be priced with more certainty than the fed seems to have. the fed gave that cut last time, future cuts may be based more on economic data, specifically whether or not the tariff issues weaken the economy there's some sympathy of letting u.s. rates align better with lower global rates now the fed will be concerned by the way of training the market to

alix: which in essence, you could make the argument that this is what fed president jim bullard is referencing

jim bullard, st.eserve president. >> you're sticking around, steve, i think joining us for reaction to mr. bullard's comments on the economy trade and more managing director of institutional services and cnbc contributor michael gapon, chief u.s. economist at barclays, steve liesman continues here were you able to hear most of that >> yes, i did. >> any surprises >> no. in fact, jim and i have a pretty similar view of the world. in some ways that's not surprising head of research at st. louis fed taught me in graduate school. we have similar thought processes there. i agree with what he said. i think we're likely to see a series of cuts here that bring the fed funds rate below where long-term rates are trading. i agree with him that it's probably more than one to two. and i think we are in an environment where global yields are quite low. and the due to weakness mainly outside the u.s. but we have to respond to that. we may prefer not to, but i think it's the insurance that we need to take out more th

from jackson hole the next couple days we will be talking to patrick harker and robert kaplan and jim bullard meser and later on friday afternoon we will talk to mark carney, the governor bank of gland >> steve, in terms of what esther said, you think obviously you brought up the agriculture component of her district and how important that is there. >> reporter: right. >> every day we are trying to figure out is there a recession around the curve, around the corner, is the inverted yield curvaling something? what would you say her response to that with the understanding that she's got a specialized pocket view of the economy in her district ro so, i mean she is not running for the hills so to speak because of the inverted yield curve. as you hear the next part, she sees different factors that might be influencing why the yield curve. i asked her, you are saying things are different this time she says, yes, things could be different. she talks about the large plans sheet. you have to hand it to esther george, she has been consistent and she was a hawk in the obama administration and she is a h

louis federal president jims buames bullard s was premature to decide on rate cuts.t's why there's stkittishnes as well. neil: the president says we are the ones in the stronger position and china needs a deal much more than we do. that's in the eye of the beholder. susan li is with us with john lonski and deion, let me get your sense of where we see this going. the president is more or less saying, not commenting on goldman sachs' prediction, we don't get a deal at all before the 2020 election but he can wait it out and if it comes to that, fine. what do you think? >> it's not just goldman sachs. goldman sachs was the latest to say this but you have s&p saying this a couple weeks ago, you had i believe moody's said this as well. you've got a number of investment managers, ratings agencies, all kinds of market watchers, saying we don't think there will be a deal this year. there might not be a deal before the election in 2020. people have seemed to come around to this reality we are locked in for a trade war. that really seems like what china is saying. they look to

bullard is really a man who embodies the best of our field. one of the joys of doing this is not just introduce the speaker but to think about what makes a person unique. jim has used economic theory, high-level economic theory to powerfully propel the thinking of the federal reserve forward in a way that will benefit all americans, that is benefiting all-americans. at the same time he's very much in trickle and a man of his community. a man of the people who are affected by his policies. he is the president and ceo of the st. louis federal reserve. he received the federal reserve eighth district including activities at st. louis headquarters and its branches in little rock, arkansas, louisville, kentucky and memphis, tennessee. i didn't realize it had that many branches. noted economist and scholar every time he publishes a paper, thinking of the fomc moves forward. early in his tenure and the possibility of a japanese style, and argued for something that may seem like common sense, fomc deliberation shouldn't be on the calendar but by data. during the financial crisis he advocated for inflation targeting, something that may have saved a lot of us, an act