Fed Hawks Push Rate Hikes and BofA Job Cuts

wants to talk with she. China says US can't have dialogue while sharpening attacks. China claims victory over COVID Georgia grand jury, sites perjury, and Trump election probe. I'm at Baxter with Global News. That's all straight Ahead on Bloomberg Daybreak Asia, the business news you need to start your day, and just one fifteen minute podcast available on Apple, Spotify, the Bloomberg Business app, and everywhere you get your podcast. Good morning, I'm Brian Curtis and I'm do Chrisner. Here

are the stories we're following today. Let's get to the FED. Two of the FEDS most hawkish policymakers signaled they may favor returning to bigger interest rate hikes in the future. One was St. Louis FIT chief Jim Bullard. Bullard said he would not rule out supporting a half point right a rate hike in March, and he urged additional rate hikes to ensure that inflation returns to the FEDS two

percent target over time. I think we can lock in this disinflationary trend by continuing to have policy rate increases during even though the real economies looks like it's gonna continue to grow and the labor market broadly across the country looks like a remain strong. Separately, Cleveland FED Chief Loretta Mesters said that she saw a compelling case for rolling out another half point hike earlier this month. She made the point and that that would have brought the

top of the FEDS target range to five. Mester said the FED has to be prepared to increase rates if inflation remains stubbornly high and doug It's probably important to point out that neither Bullard nor Mester is a voting member this year. Good point. Let's take a closer look at that pp I dad to us producer prices rebounding in January by more than expected higher energy cost getting much of the blame. Overall, wholesale prices have generally been

cooling in recent months. That said, we know inflation appears to be a little more sticky than many had anticipated. Here's Bloomberg's Michael McKee. I think that was the big takeaway from the numbers that we've gotten this week. People thought, given what we saw in November and December, that prices would come down very quickly. They're coming down, but not very quickly goods prices. Remember, the story was that goods

prices were going away and services were the issue. One rise in goods prices in the pp I for final demand during the month of January, and services only up four tenths, so the opposite of what we were looking for Michael McKee. There Separately, we learned that weekly jobless claims were down last week, and that decline suggests the American and labor market does remain strong despite those higher interest rates. Brian, Yes, but then consider this Bank of

America planning to hand out some pink slips. Let's get the story from Bloomberg's and Kates. Bank of America will cut jobs in its investment bank. According to Bloomberg, the number of reductions, which are still being discussed, could affect less than two hundred bankers globally. It as a sign the finance industry will continue to pare down headcounts to contain costs prior to any meaningful rebound and deal making activity. The size of the layoffs have varied among financial giants.

City Group eliminated dozens of staffers last fall, while Goldman Sacks downsized by thirty positions in Washington and Kates Bloomberg Daybreak Asia. Tesla is in the news. The company is recalling more than three hundred sixty thousand full self drive US vehicles over some crash risk, but Elon Musk is objecting to the term recall. We have more from Bloomberg's

Denise Pellegrini. This includes some model SS and Model XS, some to twenty three Model threes and some three Model wise, all equipped with full self driving beta software are pending installation, and National Highway Traffic Safety Administration officials say the system may allow the vehicles to act unsafe around intersections, including

driving straight through intersections from a turnlane. The officials say Tesla did not concur with Nitza's concerns, but agreed to go forward with the recall out of an abundance of caution. Tesla is expected to issue an over the air software update by the middle of April. Denise Pellegrini Bloomberg Day Bracasia. China is said to be reviewing the recent deal between Ford and Cattle to ensure that no core technology is handed over to the US carmaker. That story from bloombergs

Yvon Man. The agreement would see Cattle's battery technology license for use in Ford's new Evy battery plant in southwest Michigan, but China is said to be concerned given the sensitivity of the deal and its implications for US China relations. Sources say the findings will be presented to the country's top leadership, with the time frame for that is not yet known. Chinese officials will also check that individuals sanctioned

by Beijing are not involved in the Ford Cattle project. Meantime, U S Senate Intelligence Chairman Mark Warner criticized Beijing scrutiny as quote ironic and hypocritical. In Hong Kong. I'm eva ma'am Bloomberg Day Break Asia. Until Bullard spoke, the market had actually kind of made its peace with this hot PPI data. And we see that because the spread between twos and tens had narrowed from nineties six basis points

right after the report to seventy six. That's a huge move now about seventy eight as it's steepened or widened out a little bit. What that might indicate is that the market is mindful of inflation being there and interest rates being there, but also that maybe there's a little bit of a less chance of recession because of some of this data. I think that's right. If you look at the New York Fed Business Leaders survey, it showed that conditions are expected to improve over the next six months.

So that's on the growth side, but we still have to very much focus on the inflation narrative here. A separate survey from the Philly Fed shows that businesses are expecting the price of their goods their own goods to rise next year at a rate of around four and a half percent. Now that is going to make the FEDS job even more difficult because it's clear, and I think Mike McKee alluded to this inflation we know, is

very very sticky. We may have seen the peak, but it's not clear that we're going to see a meaningful decline in the rate of inflation. Certainly we're along ways away from that two percent target. Well, yeah, but let's not forget you remember we had pp I up between eleven and twelve percent year on year, and now it's it's up six percent year on year from this data. But admittedly worry so that goods prices rose as much as they did in that pp I report. Al Right,

it's time now for Global news. US President Joe Biden is seeking to cool off tensions with China, saying he intends to talk with China's president shi Jinping. Head Baxter has Global News in the nine News room in San Francisco. Yeah, those are the major points, Brian. This is a speech to the nation, Biden says. Analysis to now is that

the latest three objects shot down. These three objects were most likely balloons tied to private companies, recreation or research institutions studying whether or conducting other scientific research, and not spying. The president says there are not more balloons than in the past. About the tweaking of systems have allowed them to be detected. Now, he says he's taking steps to

improve detection even further. We'll update the rules and regulations for launching and maintaining unmanned objects in the skies above the United States of America. And then more bluntly, make no mistake. If any object presents a three to the safety security American people, I will take it down, and says it points to a better need for communication. Our diplomats will be engaging further, and I will remain in

communication with President she Now. Bloomberg's Joe Matthews says that may take some further diplomacy, whether the president gets a meeting with President she back on the calendar. It's probably going to take a little bit of time here. Speeches like today, though, addresses like today, the language he chose will help, and that we're looking specifically at one Chinese by balloon that was shot down, not necessarily a much more broad sort of surveillance effort that included these other

unidentified objects now running alongside this. Today, China has announced trade and investment sanctions on Lockheed Martin and Raathon for selling weapons to Taiwan, but Bloomberg's U s national Security Team. Later, Nick Waddam says, it has a very strange dynamic. It's really interesting because I think it's actually bringing the heat down by announcing some largely symbolic measure. So you have

China sanctioning Lockheed and raytheon. But these two US defense contractors don't do any business really in China anyhow, They've been sanctioned before. Meanwhile, whether the meeting between US Secretary of State Anthony B. Lincoln and China Forger Minister Wang Yi is still an open question, and China is questioning whether the US genuinely seeks to repair the damage done over the balloon dispute. Says it could jeopardize any further talk.

Says the US cannot ask for communication and dialogue on one hand, while sharpening differences on the other. It says the balloon saga test US sincerity and capability to properly handle crises. Divisive decisive victory over COVID, that's what some of China's leadership is saying. They cite the declining death toll.

It says adjustments to China's COVID policy since November have been totally right, and they say the public would agree the lack of data released outside China makes it hard for the Globe to verify any statements, and the Georgia Grand Jury investigating the election interference by Donald Trump and allies says it belies perjury or believes perjury was committed by one or more of the witnesses, and concluded there

was no widespread election fraud as claimed by Trump. Global News powered by more than twenty seven hundred journalists and analysts over one twenty countries. In San Francisco, I'm at Baxter and this is Bloomberg. This is Bloomberg day Break Asia. I'm Brian Curtis along with Richard Salamat. We're here in Hong Kong, and we say good morning to Burns McKinney, our guest, senior portfolio manager at n f J Investment Group.

Burns we asked this question a few times yesterday, but it's perhaps even more relevant today given the comments from Esther and Bullard might have fed Move fifty at the March meeting. It's it's always a possibility, but I think one of the things that investors have to you have to look at context and not just what is being said, but also who's speaking and Buller Buller Semester have always kind of been the hawks the FED, and you know, when you have a committee like that, someone's going to

play bad cop. And you know, we've you know, we've been saying that if there's really any risk of a surprise coming out of the last meeting as well as post CPI report, is that that they would have someone come in and talk firm and you know, and hawkishly, just really to drive home the point that you know that even the POWE has been trying to make that that he believes the greatest policy here would be to repeat the stop and go policy you had in the

nineteen seventies and announcing mission accomplished a bit prematurely. And you know what's been happening time and time again is that, you know, during his press conference Powell says these things, and the markets here what they want to and so you know, periodically you do have some of these FED presidents come in and actually, you know, again, just try to drive home that hawkish point. Bens, Is it possible? I mean, the thing is, everything looks a bit strange.

We seem to be working off different paradigms in terms of the economy and the medicine may not be working in quite the traditional way. Is it possible that they could bring down inflation with that actually slowing down growth in a meaningful way. Yeah, the FED doesn't have a great track record for it, but it's absolutely possible. I think for starters, you know, you have to bear in mind the you know, the Phillips curve that the FED dustin to rely upon really hasn't been all that effectual

for most of this really most of the century. And you know, I think that you know, as far as inflation coming down, I mean a lot of you know, some of the recent points just this week have been a little warmer than expected um, but the downtrend remains intact, and in many ways it seems that the FED is probably already done much of the hard work to get

inflation down. I think the you know, really the biggest driver at all, you know, coming from a macro perspective, is there's a really strong correlation between the money supply growth M two and what inflation does about twelve to fifteen months down the road. And if you look at you know that you know, my supply growth peaked in early one, sure enough, you know, as just like clockwork. You saw inflation princes peak in about in the middle

of twenty two. And if you look at what that money supply growth is doing now, you actually saw, you know, last month it actually plunged to the greatest degree we've seen since nineteen fifty nine. And so you know, you start looking forward in many ways suggests that you know, this is already baked in. I think that you know, it's clearly going to be coming down a lot more

quickly than investors think later this year. It's like there's a delay in the lagged effect, almost the sort of point that the lag effect is tired, because you know, it doesn't seem to be having a huge impact. And as you say, that's alongside higher rates q T n M two dropping. Yeah, absolutely, And you know with now with respect to doing that without you know, you basically suggested, you know, being able to pull it off without you know,

causing recession. Um, you know, it's also instructive to note that you know that that goes against the FEDS track record. I believe that you know, the last fourteen tightening cycles, eleven of those have led to recessions. So if you kind of I like to think of it in terms of a baseball player that's basically batting about two hundred, which is not really necessarily or you want to be

if you're a betting man. Yeah, I mean, it does seem as though, you know, we could be returning to sort of a Freedman type economics here, looking Milton Freeman, we soon be talking about non accelerating of unemployment. But you know, they tend to overshoot rates tender overshoot on the upside and well under shoot on the downside. That that's the thing. Yeah, that and and that's that's that's what tends to happen. And you do have that that

degree in every cycle. I mean, that's generally the reason why we do have an economic cycle is that most trends tend to overshoot. Now that said, I think that what investors really should be focused on is even if we do go into recession, how soon would that be and how deep would it be? And you know, in the near term. They're definitely are factors that are working in the you know, investors in the economy's favor, namely

being that that um, you know, jobs remain tight. I mean, not only do you have record low unemployment, but you also have UM one point seven at one point eight job openings per filer for unemployment, isn't You've got consumers still sitting on a decent amount of cash as well, And so yeah, there's definitely a lot to actually support the economy, even if we do drift it into a recession um later this year early next year. This is Bloomberg Daybreak Asia, your morning brief on the stories making

news from Hong Kong to Singapore and Wall Street. Look for us on your podcast feed every day, on Apple, Spotify, and anywhere else you get your podcast. You can also listen live each day on Bloomberg eleven three oh in New York, Bloomberg in Washington, Bloomberg one oh six one in Boston, and Bloomberg nine sixty in San Francisco. Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty plus.

Listen coast to coast on the Bloomberg Business app, Sirius XM Channel one nineteen, the I Heart Radio app, and on Bloomberg dot Com. I'm Bryan Curtis and I'm Doug Prisoner. Join us again tomorrow for all the news you need to start your day right here on bloom Day Bracasia mm hm