Good morning. I'm Doug Krisner and I'm Brian Curtiz. Here are the stories we're following today. The FED raised interest rates to the highest level in twenty two years. The benchmark FED funds rate was lifted to five and a half percent from five and a quarter FED share at Jay Powell said that additional hikes will depend on incoming data.
We're going to be going meeting by meeting, and as we go into each meeting, we're going to be asking ourselves the same question. So we haven't made any decisions about any future meetings, including the pace at which we'd consider hiking, but we're going to be assessing the need for further tightening that may be appropriate. You read the
language to return inflation to two percent over time. It is certainly possible that we would raise funds again at the September meeting if the data warranted, and.
He also said that the future data could justify holding interest rates steady at that meeting. He said the FED would also take into account the cumulative tightening of monetary policy, and he added that the FMC will assess how the lags affect economic activity and inflation.
We heard from meta platforms after the bell, the company reported better than expected revenue for the second quarter, and it gave a rosy forecast for the current quarter, Meta saying that sales will be between thirty two to thirty four and a half billion. That's above analysts projections. It seems to be assigned. Meta is succeeding in migrating advertisers to its short form video service called Reels. Meta has been betting on Reels as a way of drawing more
attention to its social networks. Meta also recently introduced a competitor to Twitter. It's called Threads. The company is hoping it will boost business longer term. We heard from Scott Kessler earlier. He's at Third Bridge.
I think a lot of people are really interested to see progress when it comes to Reels and then monetization plans as it pertains to Threads. Particularly we're in the summer now, but soon enough, folks are going to be planning for the holiday shopping season. There's a great opportunity for Meta to do something with Threads along those lines.
There over at Third Bridge. By the way, Meta is also investing heavily in artificial intelligence, and it's using the technology to make recommendations for both content and advertising. The hope here is for both to be more tailored to the interest of users, and right now, if you look at Meta shares and late trading hire by nearly eight percent.
Brian the Pentagon is seeking new supply of a mineral that's used in semiconductors and military radar systems that would be denied by China. Let's get the story from Bloomberg's and Kates.
The Pentagon plans to issue a first time contract to US or Canadian companies by year end to recover gallium after China curbed exports this month. The Pentagon does not have reserves of gallium and wants to focus on recovering the mineral from existing waste streams of other products. Gallium is used in navy radar, on vessels for air and missile defense, and by the Army and Marines in ground based radar. In Washington and Kates Bloomberg Day Break Asia.
We go to Volkswagen next. The company is planning to envest seven hundred million US in the Chinese ev maker x Pong. We have more from Bloomberg's Juan Wong in Hong.
Kong Voltswagens that would jointly develop EVS in China with x Pong, and with the investment, it'll hold about a five percent stake in the Chinese company. Two new battery powered models are being planned. The first is due to arrive in twenty twenty six. Voltswagen's EV sales in China dipped in the first half of this year. In the market, the crew twenty percent in Hong Kong. I'm joined wog Bloomberg day Brikasia.
Meantime, the CEO of Stilantis, Carlos Tavares, says he is happy to be downsizing in China. He said Volkswagen, along with General Motors and other foreign car makers, are under pressure as local competitors slash prices.
Right, Yeah, not just the foreign makers, but listen to this one. China's everground NEV has reported eleven point seven billion dollars of losses that were accumulative over the past two years. Bloomberg's Bonnyao as the story from Hong Kong.
The EV unit suffered a NETLOK close to four billion dollars last year and nearly double that the year before. The company also warned of its ability to continue as a going concern. The Everground unit had initially aimed to take on Tesla and at one time had a greater market value than Ford Motor, but it was weepped up in a dead crisis that engulfed its parent. The company said it delivered about one thousand vehicles from October through May.
It was originally targeting one million units by the end of twenty twenty five. The company said it's negotiating with banks about renewing existing borrowings and corporate bonds that were mature by the end of the year. In Hong Kong, I'm Bonnie ol Bloomberg Day Break Asia.
I'm Brian Curtis here in Hong Kong along with Doug Krisner and our colleague Rishad Salama will join us in a few moments. So, Doug, just looking here at the FED decision today. I think the focus will switch pretty quickly to earnings. But anyway, from the meeting, it seems like the FED is just buying some time here, hoping or waiting to see if the data eventually backs up what most markets are assuming that the FED is getting pretty close to the end of the hiking cycle.
Yeah, I think you're right the swaps market right now, indicating there's only a fifty percent probability of one more twenty five basis point hike between let's say now in the end of the year. And I thought one of the most hawkish things that I heard today Brian is Powell saying he doesn't see inflation returning to the Fed's two percent goal until twenty twenty five. That's a long time away.
Yeah, that's one of his theories, and that has been I think in the market. He's been pushing that line. There are plenty of FED policymakers though, that are looking
at possibly seeing some FED cuts next year. And it was also telling when he was asked the question about do you keep on hiking all the way down to two percent, and he more or less said no, and that getting that balance right is really what the sort of decision will be is when do they start adjusting as they see inflation coming down?
Yeah, and FED staff not predicting a recession at this point. That's a bit of a change. And so Powell seems to support the idea that the FED can be successful and engineering a soft landing.
Yeah, we've got Dennis Lockhart, the former president of the Fed Bank of Atlanta coming up to discuss this, and of course, as mentioned, the focus really will switch back to earnings quite aggressively during this very busy period, and we'll get you more on that all throughout the morning. Now it's time for Global news. US Secretary of State Anthony Blincoln is continuing to take aim at China's global ambitions. At Baxter has Global News from the nine to sixty news room in San Francisco.
Ed.
Yeah, right, Brian, He's the latest on Tonga and spoken very stern terms about Beijing's military and economic ambitions. There has been some, from our perspective, increasingly problematic behavior, including at the same time, the assertion of unlawful maritime claims. Lincoln says the Indo Pacific must stand up to the
blatant expansionism unexpected twists and turns. In the Hunter Biden tax trial, after an initial agreement with prosecutors to plead guilty to misdemeanor tax charges, the judge said she needed to look at how far ranging the deal was, with implication to gun charges that are still being investigated against Biden. Biden then came back to plead not guilty until the
deal can be more fully examined. White House Press Secretary Korean Jean Pierre says that the Biden administration estayed clear of the whole.
Proceeding Hunter Biden is a private citizen and this was a personal matter for him. As we have said, the President, the first Lady. They love their son and they support him as he continues to rebuild his life.
It might be noted the outstanding tax bill has already been paid, but the issue remains political. House Speaker Kevin McCarthy.
There shouldn't be two justice systems in America, and hopefully today that's what's being to do.
And Bloomberg's at Julie Fine with balance of powers, Joe Matthews says, useful for Republicans, evanence or.
Not, whatever they do, they get to keep the issue alive, and it's alive during a campaigns or not.
This is Washington City.
Yeah, so we're ready for another year. Taiwan's Foreign Minister Joseph Wu says China has been stepping up what he calls cognitive warfare leading up to the election. He says China is trying to influence people into thinking that the US is not trustworthy. Well, Wu sites. Conspiracy theory is that the US wants to ruin Taiwan's semiconductor industry. Wu tells Bloomberg China that China is trying to play a role in the election, and that quote, I think they
should try their own democratic elections inside China. As Senate Republican leader Mitch McConnell started a news conference at the Capitol Day, he abruptly stopped in frozen place for about twenty seconds. It's been good by Barzan cooperation and a strain of.
Now.
His aids led him away after about two twenty seconds, but he returned minutes later to say he was fine. His aides refused to answer questions. McConnell earlier this year suffered a concussion and a broken rib because of a fall at a fundraiser. He was off work for about a month. Global News powered by more than twenty seven hundred journalists and analysts in over one hundred twenty countries. In San Francisco, I'm Ed Baxter, and this is Bloomberg.
This is Bloomberg Daybreak Asia. I'm Brian Curtis here in Hong Kong, along with Rashad's Salamat in London and joining us now is Dennis Lockhart, former president of the Federal Reserve Bank of Atlanta, to take a closer look at the FED decision. Mister Lockhart, thanks very much for being with us. So a very highly anticipated result today, really not all that much new. What did you find the most telling in share palace comments?
I thought he he didn't tell us a lot new. Quite frankly, he repeated the mantra that we've heard many times before, and that is meeting by meeting, data dependent, no preordained or predetermined path or pace. This was to me, quite frankly a ho hum press conference and result of the meeting, the twenty five basis point move, as you pointed out, was very highly anticipated, and he kept his
options open. He really didn't commit or even give guidance as to what would happen at the September meeting or the October November meeting.
Mister Lockott, he has a lot to contend with in the sense he's got pressure from all different sides. What would you have said.
Well, let me throw j. Powell a bouquet. I think he speaks in simple and straightforward terms of very pragmatic kind of tone to what he has to say it's not technical. He doesn't sound all that much like a central banker, and I thought he communicated well the situation they're in, and that is that they've had some encouraging inflation data, but relatively recently, and it's not enough to bank on, and they are simply going to proceed and
let the data tell them what the situation is. He did point out in the press conference that they will receive a number of reports between today and the September meeting, which will mean they'll have a little bit more of a rich set of data to look at, and that could help them determine what they want to do either at that meeting or at the October November meeting.
In some ways, it's actually very convenient that they've got eight weeks here. Normally they have six weeks in between meeting, but this one stretches on a little bit and it gives them a lot more data to look at. The comment that I made to my colleague Doug Prisner earlier was that it would seem that the Fed assumes it's going to get data that will back up what both the bond and stock market seem to be anticipating, and that is that they're getting pretty close to the end of the hiking cycle.
Yes, but I think, as you pointed out earlier in the early part of the program, and this was to some extent news I think are a little bit surprising. He said that their current projection suggests that they're not going to reach the target until twenty twenty five, and that could therefore spell a fall all of twenty twenty four with rates remaining at their current level or higher. So that was a little bit of an insight into
their thinking. The other thing that I thought was important in the chair pal's commentary was that he emphasized that they're not going to necessarily wait for a final outcome. In other words, hitting two percent the ultimate target, they are going to anticipate. They're going to be looking forward and either pausing or even conceivably cutting in anticipation that.
Yeah, yeah, that's what I think comment I thought, That's why I tried to say to Doug. I don't think it came out quite as intended, but you know, the FED he mentioned that they are not going to hike interest rates all the way up until you get to the target, because at some point you see that the process is there and you know, if you go all the way to two percent, that you will have gone too far. And he said that in the meeting. So the inflation getting to two percent will happen after the FED,
well after the FED stops hiking rates. And I think he did put that pretty well in the in the briefing.
Yeah, but it does. It does beg the question how will they become convinced that the path is pretty certain to two percent? And again, I think sometimes the markets look at a shorter list of criteria than the FED does. I think the FED is going to look for a series of consistent disinflationary reports that are bringing the year over year as well as other measures of inflation down toward target. And you know, no anomalous reports, but clearly
month after month progress. And that suggested me take some time before they are that convinced.
Look, and why is the whole medicine taking so long to actually act? I mean, this seems to be much longer than it would do normally. That's one part of my question. And you know, just going to and I don't want to be flippant here, but you know, we could see that we're going through a disinflationary moment, could it be disinflationary in a transient senses it were.
Yes, I mean there has been the fear of transient disinflation or transitory disinflation using the T word that everybody wanted to distance themselves from a year or so ago. That a sort of false dawn from a point of view of disinflation. You can't rule that out because there can be global shocks that affect prices, and some of the prices in particularly energy and food, are terribly important to the ultimate inflation result. So you really can't rule that out. The go great, I'm sorry.
Well, I was going to say. Another interesting line was that he's still pretty confident that they can pull off a so called soft landing. And he was asked by one of the participants about what the staff's view was, and he said, well, the staff, you know, is very different from the FOMC policymakers, but they too now are not calling for recession. So that was pretty interesting.
Yeah, that is interesting because we don't see necessarily right away, we see in the minutes three weeks from now what the staff projection is. And in the last two meetings, I believe the staff have actually projected or forecast a mild recession later this year, and that is that was not aligned with what the chair was saying or what most of the FMC members were saying. Apparently they've pulled back on that. The staff is pulled back on that aswer.
The first part of my question is why is it taking so long to see the effects of tighter monetary policy? It seems unusual.
Well, I think we first we have a resilient economy. That's the term that's used so often, meaning that there's quite a bit of strength. And the most important factor in my mind is that we were in a full full employment state with the demand for labor exceeding the supply of labor, and therefore workers have confidence in their
earnings outlook and their employ their employment prospects. That then leads to pretty good consumer activity because they spend money when they're sure of their future employment, and the consumer activity drives the US economy. So those factors, I think,
why do we have that set of circumstances. Partly it was the conditions coming out of COVID, and then the consumers themselves were helped by fiscal policy, probably some savings during the period as well, and so we have this unusual labor market that we have not seen before recent years, in which almost anyone who wants a job in America can find one.
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