Debt-Limit Talks to Intensify; Musk's Advertising Shift

From the Bloomberg Interactive Brokers Studios. This is Bloomberg day Break for Wednesday, May seventeen.

Coming up today, Debt ceiling talks could get more intense. With just fifteen days till potential defaults.

President Biden cuts short his overseas trip to focus on negotiations.

The Fed pause, debate heats up, and.

Elon Musk may turn to advertising to sell more Tesla's New.

York City is looking at standalone school gyms to house migrants. Plus a major ruling in North Carolina on an abortion band. I'm Michael Barr.

More ahead, I'm John Stanshdaron Sports Another Aaron Judge, Homer to Yankee Wain.

Another loss for the Mets. The Nuggets took Game one from the Lakers.

That's all straight ahead on Bloomberg day Break, The Business News You need to sturn your day in just one fifteen minute podcast each morning on Apples, Spotify, the Bloomberg Business app, and everywhere you get your podcasts.

Good morning, I'm Nathan.

Hager and I'm Karen Moscow. Here are the stories we're following today, Karen.

Debt ceiling talks in Washington are about to get more intense. The earliest state for a possible government default is now just fifteen days away, and President Biden and House Speaker Kevin McCarthy have agreed to keep talking. They'll have a smaller group of negotiators in the room to try to reach a deal. The President is sounding cautiously optimistic.

Well, there's still work to do, but I made it clear to the Speaker and others that will speak regularly over the next several days, and the staff's going to continue meeting daily to make sure we do not default.

And Speaker McCarthy says it is possible a deal can get done by the end of the week.

It's not that.

Difficult to get to an agreement when you think about limits. Save grow the bill we passed, We raise the debt ceiling, we cap future spendings.

So far, there's one thing both sides agree on. They say default is not well.

As talks drag on, Nathan, the President is shortening his trip Overseas to focus on negotiations.

I'm cutting my trip short. I'm postponing the Australia Portional trip, and I've tripped my stop in Papua New Guinea in order to be back for the final negotiations with congressional leaders.

President Biden had hoped to use those stops to counter Shounas influence in the Asia Pacific region. The White House says it looks forward to finding another way to engage with those countries in the coming year.

Well.

Meantime, Karen, a potential GOP presidential contenders, weighing in on monetary policy. Former Vice President Mike Pence is calling for an end to the Fed's dual mandate. He says the central Bank should focus only on fighting inflation and leave job creation to Congress and the President. Pence tells Bloomberg the FED should return to its historic mission of ensuring sound monetary policy.

Meantime, Nathan, the debate on what the FED should do right now appears to be heating up, and we get the details from Bloomberg's John Tucker.

John and Karen. Investors bet the FED will pause their cycle of inter straight hikes next month, but the officials who make the decision sound more on the fence. We spoke with Richmond FED President Tom Barkin.

Put me down as tracking the information, tracking the death sailing, tracking credit tightening, and we'll make a call when we get.

Closer to the meeting at the same time, the Chicago Fed President, Austin Gulesby says it's too premature to talk about cutting rates. He tells Bloomberg decision makers need more data and more time.

Inflation is down and continues to make progress. It's not as fast as we wanted it to or we expected it to be, and therein lies the that's the note of the of the issue of can you get it down more without starting a recession?

Gulesby says, when you have financial stress like the bank turmoil plus big rate increases that take a while to have their full impact, you want to take those into account when you're looking to land the plane. Barking and Gulesby spoke to Bloomberg at a Fence symposium in Florida. I'm John Tucker, Bloomberg Daybreak.

Okay, John, thanks and stay tuned for more from Austin Golesby. Will bring you our interview with the Chicago Fed president coming up shortly on Bloomberg Day Break.

Well, we moved to corporate news now. Nathan and Elon Musk is poised to make another strategy shift at Tesla, and now he's eying an advertising strategy to sell more cars, and Bloomberg's Ed Baxter has the details.

Musk says Tesla will dabble in some advertisements. This is a major departure for the twenty year old company. At the annual shareholders meeting, he said, quote, we'll try a little advertising and see how it goes. Tesla has prided itself on word of mouth and not needed the cost of advertising, Musk says, now it is worth a try. He says he's already tipped a toe in the water on Twitter, and also the move is not fully formed strategy, but a bit of a foot on the accelerator, if

Okay, Ed, Thanks so.

Wal Musk may change the way he sells cars, he is not changing stands when it comes to working from home and Bloomberg.

Steve Rappaport joins us with more on that.

Steve, Good morning, Nathan. In Karen Elon, Musk continues his crusade against the virtual commute, telling CNBC it's not just bad for productivity, it's also morally wrong.

You're going to make the people who make your food that gets delivered that they can't work from home.

You know, for the people that come fix your house, they can't work from home, but you can.

Does that seem Marley Wright.

Musk, speaking after Tesla's annual shareholder meeting, also lambasted tech workers as the laptop class living in La La Land, live in New York. I'm Steve Rappaport Bloomberg Daybreak.

All right, Steve, thanks well. In banking news this morning, we're seeing the former CEO of First Republic Bank blaming others for his company's collapse and prepared testimony to be delivered to a House committee hearing. Michael Roefler said his bank's collapse was due to contagion from other regional bank failures. Jpmoregan agreed to buy First Republic earlier this month, after it became the second largest bank failure in US history.

And in Europe.

Karen UBS estimates the nearly thirty five billion dollar gain as a result of its emergency takeover of Credit Suisse. At the same time, the Swiss bank warns it faces billions in potential legal and regulatory costs from the acquisition. UBS stands to benefit from the combined firm's negative goodwill.

And straight ahead.

We have your latest local headlines, plus a check of sports.

And this is Bloomberg.

I'm how to take a look at some of the other stories making news in New York and around the world.

For that, we are joined by Bloomberg's Michael Barr. Good morning, Michael, Good morning, Nathan.

New York City is looking it up to twenty schools with standalone gyms to house migrants. Mayor Eric Adams told Fox five about sixty five thousand asylum seekers have come through the city so far, including forty two hundred last week alone.

I'm really calling on all of us who take notice that this is going to impact every city service that we deliver to the people of this city.

And it's just wrong.

A New York City should not be carrying a burden of a national problem.

Mayor Adams and the city expects as may the fifteen buses this weekend. Today is sentencing day for the ices inspired terrorists who carried out a deadly attack with the truck in New York City. The jury deadlocked on the death penalty, so Saifulu Saipov will be sentenced to life in prison for killing eight people when he sped down a bike path in a rented truck. North Carolina enacted

This bill represents consensus position of North Carolina's citizens, the vast majority of whom support limitations to abortion after twelve weeks.

This abortion right supporter was also in a rally.

These legislators are arrogant, shortsighted, ignorant, oh unkind.

Infuriates.

The new ban from twenty weeks has exceptions like medical emergencies, cases of rape and incest. Tuesday was primary day in some states. Voters in Philadelphia have chosen Scherrell Parker as the Democratic nominee for mayor. Parker, who got the most votes at thirty three percent, will go up against Republican

Thanks Michael, I'm now for the Bloomberg Sports Up Day, brought to you by Tri State Outy.

Good morning, John's stashout.

Good morning Nathan.

There was much discussion about Aaron Judge's eighth inning home run Monday in Toronto. Cameras caught his eye drifting to the Yankee dugout during the at bat, speculation that the Yanks may have been relaying signs to him. Judge clearly unhappy with the accusation. He came up last night. This was also eighth inning.

Swinging a high drive center field. It is deep here by are looking back looking up it. He's got a home run off the batter's eye. Aaron Judge is gone yard. He says, hey, look at me now, two run shut. Yankees take the lead. They're in front five to three, and they.

Beat the Blue Jays six to three.

Call on wfan Judge is hitting now five home runs the last four games. The win went to Ryan Weber's getting seven outs out of the bullpen. Yanks had to replace Domingo Herman starting the fourth inning because umpires injected him. The ump later said Herman's hand was so sticky he had trouble removing it from his own palm. Herman likely hit it for a ten game suspension for the Mets, their sixteenth lost the last twenty two games Tampa Bay one,

Gave up six runs in five innings.

NBA Playoffs, Denver won Game one for the Lakers, one thirty two one twenty.

Six for Nikoliokuds thirty four.

Points, twenty one rebounds, fourteen assists. The San Antonios first won the draft lottery and the prize that comes with it. Victor wembin Yama, the seven foot four inch nineteen year old Frenchman, the best NBA prospect since Lebron James, two days after he lost a Game seven for the tenth time.

Doc Rivers fired by the Philadelphia seventy six ers. John Stash Edward Bloomberg.

Sports Live from coast to coast, from New York to San Francisco, Boston to one nationwide on Siriusxam, the Bloomberg Business Appen Bloomberg dot Com.

This is Bloomberg Daybreak. Good morning, I'm Nathan Hager. Starting to feel like crunch time in Washington, d C. With the possible default deadline for the US government now as soon.

As fifteen days away.

House Speaker Kevin McCarthy has said past meetings but the White House haven't gone anywhere.

Now, he says, he sees a hint of progress.

This one was a little more productive. We're a long way apart, but what changed in this meeting was the President has now selected two people from his administration to directly negotiate with us.

That was Speaker McCarthy after yesterday's White House talks with President Biden and other congressional leaders for more. We were joined once again by Julie Norman, co director of the Center for US Politics at University College London.

Juliet's great to speak with you.

As always, it seemed like both sides made it seem like it was a pretty big deal that they've got a narrower set of negotiators for the debt sealing talks.

Is this a big deal?

Well, there was definitely more of a sense of optimism coming out of yesterday's meeting from the congressional leaders who are part of that, and that is a definite change in tone from where things started over a week ago, where I think things are going to start getting difficult. Now is the deal that's starting to take shape that we're getting some hints of how that is going to be received by members of both parties who are going to act to vote on this in both the Senate

What provisions are you looking at that might have the most difficulty on Capitol Hill.

Yeah, so the main sticking point will likely be increasing work requirements for different kinds of aid, for a medicaid for snaps sometimes known as food stamps, and for other assistance to needy family. So this is an area that Republicans really want to see a budget decrease and to see stricter requirements. Many progressive Democrats are digging in and

Sure, are they the kind of Are they the kind of negotiations that could lead to the possibility that we get something like a short term debt seiling increase to allow for those differences to be hashed out later. I mean, that's something that both McCarthy and Biden have said they don't want to have a short term debt sailing increase exactly.

And so this is one of the tricky things right now is that some of the budget talks that are being discussed, I think in good faith by both sides, would usually need more time to actually figure out the details of what they would look like, especially these things that are going to have direct impacts on a lot

It's pretty notable as well that President Biden is going to be cutting the Australia and Papua New Guinea portion of his seven day overseas trip short to focus on these negotiations. What's the potential geopolitical impact there for not visiting those countries.

Yeah, so it's definitely unfortunate. I mean, it is notable and right I think that Biden is still attending the G seven, which is in Japan, notably this year Obviously, one of the big long term foreign policy challenges for the US and for Biden is the Pacific is China in particular, and that's going to be a big part

You said it's a loss for Australia and Papua New Guinea, is it a gain for China.

Potentially, Yes, I mean I think China and as well as Russia. I mean, they would probably like nothing more than to see this debts somethly thing blow up for the US to have a default. I think they will paint it as look, how much the US is in trouble. They can't even keep their own you know, government going their own budget together, so they will usually likely pounce on things like this and make a story out of it.

Yeah, it looks like we could potentially see the President with his mind on both sides of the Pacific as the debt ceiling fight goes on, and of course building up these relationships at the G seven in Japan.

As always great to get your thoughts. Thanks again for being with us.

Julie Norman, co director of the Center for US Politics at University College London with us this morning. Now let's turn our attention from the debt limit to monetary policy. In Washington at the Federal Reserve, some officials are signaling they'll take a pause when it comes to rate hikes, but they're not committing to one. Chicago Fed President Austin Goldsby discussed inflation and the impact of rates with Bloomberg's Michael McKee late yesterday.

Let's listen to that conversation.

Now, you've told people that you're a little nervous about where we are after five hundred basis points of increases, and you'd like to see how the economy is going to evolve, which everybody is sort of taking. As you're suggesting a pause in June, what would it take to get you to go the other way? Inflation is still high? Would it take much to convince you to vote for another rate increase.

I don't get into the hypothetical, and I haven't committed or decided anything. I think it's a mistake for us to commit our our decisions weeks before the meeting when

I think the good news is you've seen some.

Of the froth taken. The froth off in the labor markets. We've so far been doing pretty well that job vacancies are coming down without the unemployment rate going up. And the overriding goal is let's get the inflation back to target without generating recession. That's what I want, and that's kind of the FED mission.

Well, you said that you almost dissented at the last meeting, but you were persuaded to go along.

Was it a close call? I didn't say that I almost dissented.

They someone asked me, was it a close call?

And I said yes.

I think I can't speak for anybody else, but for me, I felt it was a close call. Two meetings ago, the data had come in was looking pretty hot. We hadn't had any financial stresses, and the argument for the improved let's call it the improved economic outlook in the SEP was making people a little anxious on the side of how much inflation might might still be stored in there. Then one meeting ago before this past meeting, we got

Now you've seen more slowing coming in.

You've seen even numbers that were relatively strong, like retail sales, they were lower than expected. And if in nominal terms, retail sales were up for tenths of a percent, but inflation was up four tenths of a percent, it's worth remembering, you know that what actually matters is the real economy.

When the FED raises interest rates, banks always tighten their credit standards and loan demand goes down. So are you or the people in your district seeing something worse than what ordinarily would have happened.

That's that's an important point to make.

That one of the mechanisms a monetary policy when you raise the interest rate is lending standards go up.

It's harder, it's harder to get credit. Businesses choose not to borrow as much because borrowing is more expensive.

That's the key, that's the fundamental question is is there a reason to think that the financial can additions are tighter than just what the interest rate says. In previous times of bank stress, they definitely have been, And if you look at the Senior Lending Officer Opinion survey put out by the FED as rates went up, you did see tightening before there ever was the bank stress. But we definitely need to get a handle on how much

Got to take that into account.

Well, speaking of the work, you guys are focused entirely on inflation and bringing it down, but we haven't seen a lot of movement after a quick drop from nine to a round five, we haven't seen a lot of movement in inflation. Are you convinced that you've put enough restraint on the economy.

I don't know if we've put enough restraint. That's what we got to watch.

Inflation is down and continues to make progress. It's not as fast as we wanted it to or we expected it to be, and therein lies. That's the note of the issue of can you get it down more without starting a recession?

Because we have a.

Dual landing, we got to look at employment and inflation by law, both not just one. I think you've seen goods prices already come down as we shift back to spending our money on services. Housing inflation hasn't come down yet, but we expect it to because of the components, it kind of moves with a lag. And then this question of services has been more persistent than we thought it would be. But you've seen sprices coming down in that

Well, your background suggests that you care a lot about employment, and obviously it is one of the mandates, as you mentioned, do you think that the data that we're seeing now and you could include retail sales today industrial production, suggests that the soft landing scenario is any stronger than it had been.

So any more likely mean more strong.

Yeah, I'm definitely hopeful in that there are one group that looks at the labor market and that its prized measure of tightness is the vacancies to unemployment ratio, and that ratio hit record highs and it's come down a lot.

It's still the level is still higher than it was before, but.

It's come down in a way that hasn't tanked the labor market.

The danger, of course, is.

If you get a recession and you try to land the plane nose down.

Tends to be that the labor markets, when they deteriorate, they deteriorate rapidly. The unemployment rate goes way up.

You see layoffs, and everybody's trying to avoid that if at all possible.

You probably would see if you looked at a spread that you're but you've been put by Wall Street on the sort of the dubbish side at this point, whatever a dove means these days, what would you say to the idea of rate cuts in the sense that Wall Street is already thinking that you're probably going to have to do that.

But yeah, look like the thing is, I've said the very first speech that I gave is when I took over in Chicago, emphasize I'm not a fan of setting monetary policy based on what the market says, or try to predict how the market's going to react. I think the overwhelming thing that the Fed's got to do is pursue the dual mandate. It's about the real economy. It's about inflation, which is too high, but at least we're making progress, and is about the employment mandate, where the

Be saying, even for the next meeting, are we going to pause, are we going to raise? Are we going to cut? We got to get as much data.

As we can, and it hooves us at a moment where we followed the strangest business cycle in history with one of the strangest credit conditions that we've.

Seen in decades.

We got to look at a lot more measures than just unemployment, inflation, and wages in the kind of the conventional box of numbers that we looked at in the well you get.

Your next meeting is June fourteenth. The next CPI report is June thirteenth. Can we call you up in the Fed meeting room and ask you what you think? Austin Goilsby, thanks very much for joining us today, the President of the Chicago Federal Reserve.

This is Bloomberg Daybreak Today, your morning brief on the stories making news from Wall Street to Washington and beyond.

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