Fed Rate Cut in March in Doubt; High Tech Earnings Continue

Good morning.

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

It is a day after the Federal Reserve held interest rates steady steady for a fourth straight time. Now the focus continues to be on when the first rate cut will come from Jay Powell and company.

The FED chair all but took March off the board.

I don't think it's likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that's to be seen. So I wouldn't call you know when you say, when you ask me about in the near term, I'm hearing that as March, I would say, I don't think that's probably not the most likely case, or what we would call the base case.

Jay Powell acknowledged the dramatic inflation progress in recent months, but repeatedly emphasized the need to see more data confirming that downward trend.

Well, Nathan, reaction still pouring into Jay Powell's news conference. We got up with the black Rock managing director Jeffrey Rosenberg and former New York Fed President and current Bloomberg opinion columnist Bill Dudley.

I think that's the story, is it May as a June.

It's not March.

It's pushing back because they don't want to rush into a cutting cycle.

I think we could expect quantity of tightening tapering to happen sometime probably around the.

First half of this year.

If the inflation is continues along the same course for a few more months, then the Fed Reserve is certainly going to start to cut rates. They're just not absolutely confident that that's where we're going to be three or four months from now.

And that was Black Rock managing director Jeffrey Rosenberg and former New York Fed President Bill Dudley speaking to us after the FED decision. FED fund futures now have a March rate cut down to thirty eight percent.

And now Karen, it is the Bank of England's turn. The BOE is expected to leave its key lending rated a sixteen year high. We get more from Bloomberg's Lizzie Burden in London.

The other thing that I would watch though, is the guidance if they drop mentions of further tightening and this need to be restrictive for an extended period, that could be seen as veering away from the hawkish bias, and if they don't do that, it could be seen as the MPC giving market. It's a bit of a slap on the risk for getting ahead of themselves with the rate cook bets.

Bloomberg's Lizzie Burden says economists unanimously expect the UK's Central Bank to leave its key lending rate at five and a quarter percent.

Well, Nathan, it's also a very busy day for earnings in Europe, and let's stay in London and get the very latest from Bloomberg's creatygupda critty.

Yeah, Nathan, Karen's some pretty big moves here right here in London. Shell up over two percent after beating earnings estimates at three and a half billion dollars, buyback announcement helping that stock as well, not to mention outstanding trade in the gas market. Deutsche Bank on the other hand, higher and buy about four percent, the German lender saying it's cutting thirty five hundred jobs to focus there on profitability, but also a buyback six one hundred and seventy five

Critty, thank you. Back here in the US, it's another huge day for big tech earnings. Let's bring in John Tucker for a preview of that.

John and need to Apple, Amazon meta Platforms all reporting the updates. We'll get fresh insights on how the companies at the heart of the reason rally on Wall Street are matching up to lofty expectations. Apple has suffered five straight sales declines in a row. Analyst Dan Ives at Wedbush Securities is focusing on demand in China.

I think China's actually been relatively stable. I think that's going to be a breadth of fresh air from Cokin Cooper Tino on units on services.

Amazon dot COM's results will reveal how the online retailer perform during the holiday shopping season and how artificial intelligence is impacting demand for cloud computing at Facebook parent meta platforms may see a continued bounce back from a recovering ad market and cost cutting. John Tucker, Bloomberg Radio, All.

Right, John, thanks, So we continue to follow New York Community Bankcorp. Following yesterday's record plunge of thirty eight percent. The bank reported a surprise loss yesterday and slashed its dividend amid growing concerns over commercial property loans. Bloomberg Intelligence Senior banks analyst Herman Chan says the results are an outlier.

This seems more of a New York community specific issue of needing to shore up their balance sheet and facing a blip on their credit quality that they need to you know, and still some more confidence in the market.

And Bloomberg's Hermann Chan says Moodies may cut the bank's credit rating to junk. The stock is up almost one percent this morning.

Let's turn to policy news.

In Washington, Karen Key Republican senators are exploring dropping demands for new border restrictions and backing a standalone aid package for Ukraine and Israel.

Bloomberg Zed Baxter has the story.

Minority Leader Mitch McConnell says he and Majority Leader Chuck Schumer agreed.

Two friends in the middle of a huge fight Israel Ukraine, they need help.

We on a democratic side, are pursuing getting all of this done. Ukraine is humanitarian aid, Indo Pacific border together.

Getting it through the House will be another story. Ukraine is warning it is facing a critical shortage of artillery shells. Ed Baxter, Bloomberg.

Radio, all right and thanks.

Elsewhere on Capitol Hell, the CEOs of five social media giants got a grilling over their platforms impact on kids' mental health and sexual exploitation. Members of the Senate Judiciary Committee focused most of their attention on meta platforms. Republican Josh Holly had this to say to CEO Mark Zuckerberg.

Would you like now to apologize to the victims who have been harmed by your product?

Show them the pictures.

Would you like to apologize for what you've done to these good people?

At that point, Zuckerberg turned to families in the audience and apologize for what they've been through. The committee is looking for momentum on a bill that would target child's sexual exploitation online. Time now for look at some of the other stories making news around the world. For that, we're joined by Bloomberg's Amy Morris Samy, Good Morning, Good morning, Karen.

Was a rare bipartisan vote in the House, which has passed a seventy eight billion dollar business and child tax break bill that would provide a boon for US companies with large capital and domestic research expenditures. Republican Jason Smith of Missouri expressed his support.

Each of these policies will help American businesses grow, create jobs, and sharpen their competitive advantage against China.

The measure now heads to the Senate, where Republicans are pushing back against a provision that allows some people with no taxable income to collect the child tax credit. Senate majority leader Chuck Schumer says they're working on a deal.

I support the tax bill, as I've stated before, I'm working with Senator Widen to figure out the best way forward.

Whitehouse says if it passes the Senate, the President will sign it. Negotiations are advancing for an agreement to pause the Israel Hamas war and free civilian hostages captured by Hamas. Sources tell Bloomberg that conversations are still in the early stages and a breakthrough is not expected in the coming days, but the proposal, which would mount to the longest pause and the biggest hostage release since the war began October seventh, has a realistic chance of success and could lead to

This is something we monitor very closely all the time, and we take all these threats seriously.

You have to, Kirby says, one element of critical infrastructure in the United States is a free and fair election. No matter how fast technology changes, AM radio has remained a reliable tool for spreading information. Sean Voskell of the American Association of Retired Persons says there are still plenty of technology deserts.

Many people don't have the high speed Internet yet, so they rely on their AM radio to get through information.

The carmakers are considering removing free AM radio, replacing it with streaming and subscription services that would require fees. FEMA, though, says getting free, reliable information in times of emergency is crucial. Global news twenty four hours a day and whenever you want it with Bloomberg News now, I Ami Morris in, this is Bloomberg.

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John Ken, the news coach of the Seattle Seahawks, is half the age of the guy he's replacing. Pete Carroll, departed at the age of seventy two. Mike McDonald replaces him. He's thirty six, becomes the youngest coach in the NFL. He comes Baltimore, where he was the defensive coordinator. The only NFL team yet to hire a new coach, the

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Good morning. I'm Nathan Hager.

Not so fast on rate cuts, It seems to be the message Jaypowllin company wanted to deliver to markets. After holding interest rates steady at the Federal Reserves First Policy Meeting of twenty twenty four, we.

Believe that our policy rate is likely at its peak for this titaning cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.

When that point will be, that's the question. For more on the Fed decision, we're joined by Bloomberg opinion columnist Marcus Ashworth. So, Marcus, do we need to start thinking about May rather than March?

No, I think we still have to expect that a move could come in March. It's two more CPI numbers obviously, payrolls times two as well, So I think the chances are less that there will be a March rate cut obviously they quite clearly say it's not their base case, but they were very careful not to rule it out.

So it's data dependent.

The FED has made is ready and unclear that they will be cutting rates this year. Does it really matter they kind of cutch him in March rather than May. Probably not in the greatest scheme of things. They're taking the time right. So if the numbers come in much weaker, bear in my big CPI revision on February ninth or so. I think they'll be a payroll revis at the start of the year as well.

If either of those come in, you know.

Dramatically changed and weaker, then I think March will come back onto the agenda. So yeah, probably may, but hey could still be much.

Well, what do you think is the risk that we do see major revisions to that inflation data that's coming up.

Big, and I think that's why Walla has flagged it up. The revisions were quite sharply down last year. Doesn't mean it'll be followed through again, but I think the chances are.

Reasonable that they are, particularly.

If you look at the pc D edge and the GDP report, it's running around two CPI is a full percentage point higher.

Something's out of whack there.

Things are always slightly out of whack, but just a bit more out of whack than usual. So the chances are that that gap narrows is reasonably high, I think, and that will only make it more prevalent on the FED to start thinking, well, they've done their job. Inflation has been beaten. Yes, the economy is strong. It needs to be strong, but that doesn't mean that they have to, you know, keep rates clearly too strong.

Than they need to be.

So you put that into the equation and maybe we get an earlier rate cut. But you know, I think the Fed's very content to take its time over this, and I think that you know clearly there's shelter problems, and the problems pompartn you. But then we know shelter as a component in CPI is very much lagging, and when any of that turns, which looks like it has, that will push CPI down substantially over the next year or two anyway, So we don't want to get a situation we get close to deflation.

What do you think of there's a risk of a problem if the Fed does keep interest rates high for too long.

Well, I mean, look, we just saw with New York Community Bank or I mean, you know there is there some nasty stuff in the commercial real estate. Also Japanese Bank and Azora gets covered by New York not a part of the US commercial property.

So there are you know, we saw the.

Silicon Valley shakeout last year and the common problems as the signature obviously is feeding through to the old Community Bank corps. But I mean, you know this is an issue. There's no necessary, real need, I think, to make interest rates pain any more than it's it needs to be.

It's done its job.

It's fed through, and I think you know transitory is now two or three years a definition rather than a year. But certainly I think we've see most effects Pytrough. So the Fed's got it under control. Very impressive behavior from power. I wish the same could be said of the British Central Bag, but that's another story.

Now let's get to that story in our last minute here. Do you think the Bank of England's going to follow the Fed's lead when it comes to pushing back at great cut expectations?

We do have about a minute left.

Yeah, they definitely will push back. A question is how much they'll push back.

They need more time, and we have a higher wage problem in the UK. It's residual, it's sticky, it is feeding through. We are have beaten inflation, it's just not showing up quite as evidently as is in the States.

It will do.

I don't think there's any any real outline now in the UK inflation terms. But you know, central banks are paid to be cautious and drag the heels. That's exactly what banking is going to do. What we want to see is that there were three Hawks voting for another rate hike last time, madness. I think let's see at least one or two of those chase the minor go back into a neutral stance, and possibly one will vote.

For a rape cup.

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

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