Fed Doesn't Need to Reduce Balance Sheet, Kocherlakota Says

of course on the Bloomberg. Let me bring in Michael Darden now, as I said, chief economist at mk M Partners, and let's start with that interview in the Wall Street Journal. There's been a series of these. He spoke to Fox Business yesterday. There was sort of an extended interview with The Financial Times a week ago as well. Tim me, this one had the greatest deal of substance, especially when it comes to the relationship with China and foreign exchange.

Let's start with with the dollar and what he declared in that interview. Michael is somebody who's an investor in economist. What did you make it? What he had to say? Well, right, well, that was unusual It's unusual for a president to UH to weigh in on the foreign exchange value of the dollar. Typically the Treasury does that, and ultimately the Federal Reserve

is the one that has the influence there. But where I'd like to take this is if President Trump really does believe that the dollar is too strong, that it's overvalued, what impact will that have on, you know, his selection to UH for future FED appointments. We have three open board seats on the FED that he can fill. He can also choose to replace FED chair Yelling and Vice

chair Fisher as their terms come up next year. The presumption is that, you know, the Trump administration would move towards a more hawk ish FED, but that doesn't really jibe with his stay eatements about the dollar being too strong. So maybe that that aspect of conventional wisdom will ultimately be turned on his head and we won't see a move to a more hawkish FED or something that came up earlier on TV. Maybe he ends up asking Yellen

to stay on. That would be a big shocker. It's not my call, but I think we need to at least, you know, put that out there. Just let me ask you about what this means in terms of process. Stephen manouch In, the Treasury Secretary, was traveling in Germany. He was going to the G seven Finance ministers meeting. In Our colleague Michael McKee asked him who speaks through the administration on currency and he said, in no inn certain terms,

it is the President who does. He also said, though we should stay tuned for this semi annual report from the Treasury Department on Foreign Exchange and currencies. We're looking ahead to that that's supposed to come out here with within the month. Uh, he's been preempted by the president. I mean, what is there going to be anything in that you'll be looking to or does this sort of

settle things? But the President said yesterday no, I think we you know, we know at this point that China will not be label the currency manipulator in the president's views on the dollar, or that he doesn't want it strengthening. He has a commitment to try to revive manufacturing and so you know, a rising or high dollar sort of is it is it headwind in in the face of that of that agenda. Um, so I don't you know, expect any any big surprises from the all right, Michael,

where would the next surprise come from. We've been pretty surprised right over last two weeks. Is that are we going to go back to talking about tax reform or will healthcare really take precedence. Well that's a great point. I mean, um, there was just a story out on on Bloomberg yesterday that had quoted the President saying we need to move healthcare reform before we do tax reform.

And the conventional wisdom after the A c A repeal and replace uh face planet was that, you know, we're going to move on to tax reform because that would be easier. The Treasury Secretary actually even made a statement similar to that. So now looks like, um, we might you know, might be looking at another attempt to to do healthcare reform before tax reform. And I think these

things are it's being demonstrated that much easier said than done. Um, just the you know, the riffs within the Republican Party itself within Congress, let alone the Senate are making sweeping changes quite difficult. But so, Michael, would he not go for an easy win? Doesn't does he need to prove that he has the party together and he has the backing and if that's the case. Why focus on healthcare and not focus on something easier to get through. Yeah,

that's a good point too. I mean I think ultimately, you know, the administration will be forced to go for quote unquote an easy win, meaning that the changes, whether it's regulation or taxation or healthcare, I think are going to be much more marginal. And you know, you could you could characterize that is quote unquote easy win. But sweeping changes they think are going to be very, very very difficult with the divisions uh in in Congress and the bar you know, thin majority in the U. S. Senate.

Let's talk a bit about trade. It was on the agenda at that summit in mar Lago in Florida last week, the President talking with this Chinese counterpart a bit about it help us with the path forward. Here. A few days before that, you have the Secretary of Commerce, Wilbur Ross, saying that he's now embarking on a ninety day undertaking to to look at the bad trade deals. I suppose, looking at this on a company by company basis. What do you expect the result of that to be in

terms of what the administration does next? How do they leave things? I guess I'm asking in mar Lago. You know what what I'll be looking for is, I think what we need to focus on, or what markets care about, is we just need to avoid uh moving policy in an anti growth direction, meaning you know, you end up with a trade war you know, taking place, or a

move towards aggressively protectionist policies. A smooth holy two point oh, and that you know those risks look like, if anything, they've receded recently, which is, you know, which is a positive at the margin. But the idea that we can just go in and cookie cutter renegotiate quote unquote bad trade deals, I think is something of a myth um.

You know. The reality is we're probably not looking at sweeping changes there, and if there are sweeping changes, it would probably be to the negative side, and that's something we definitely want to avoid, you know. I I asked you about who. I was referencing the comment from Stephen Nuchambaut, who speaks for the Administration on currency when it comes to trade. Do we have a clear sense of that? I mentioned Secretary Commerce Will but Ross Robert Leitheiser, the

nominee to be US Trade Representative. His nomination still held up in Congress, and then Peter Navarro floating on the periphery as well, heading up this National Trade councils Uh, do you have a sense of who's speaking for the administration and how complicating is it to have these three people all fighting over this issue? Right? Well, it does,

you know, make for a bit of confusion. When you hear the President or you hear Mr. Navarro speak about trade, you definitely are getting you know, the populist, nationalist view um you know, more protectionist. But the other voices in Treasury at least seemed to be pushing the other way. So while that creates confusion, I also think it's an important firebreak against radical and potentially disruptive and damaging um, you know, policies in terms of moving towards aggressive trade

protectionism or some kind of a trade war. Michaels are danger And we've talked a little bit about this also on TV that if he doesn't get healthcare through, that, if he doesn't get tax reformed through then to get that easier when he goes back to you know, um tariffs, adjusted border tax or things like that, I think. So, I mean it's interesting if you if you look at the history of the president. You know, his views on

policies have evolved and changed over time. There's a lot of fluidity there, but on one specific issue, trade, going all the way back to the late eighties, I think he's run for president at least temporarily in every cycle going back to the late eighties, he's had this view of trade that's mercantilist, national a stick UH in zero sum and and so that is a concern at least for me, and I think it's a concern for markets

as well. Just about thirty seconds left will come back your Michael just a bit, But to what degree are you paying attention to Washington when when you look at investment at large, how big a role is Washington playing. Well, it's probably overstated. I mean, as we saw with the attempt UH with repeal and replaced, it didn't go anywhere. Very difficult to to get sweeping changes to take place.

That said, um there is a big focus on it, and certainly in the client meetings that I've been doing, we spend a lot of time talking about Washington, and then everybody complains that they're spending too much time talking about it and thinking about it. Um. So it's definitely topical. David Ger with Francine Lockwood Day. Tom Keane is on

vacation this week, back in the chair on Monday. This is Bloomber Surveillance on Bloomberg Grady, we're talking with Michael Darda of m CAM Partners is the chief economist there. And let's talk a little bit about the Fed. There's been so much attention being paid now to the balance sheet, the parlor game shifts that focus from from rating creases,

at at least partially to the balance sheet. Give us a sense of what you're thinking in light of what we've read from the minutes of the March meeting, and light of what we've heard from governors and presidents and

from from Cherry yelling herself. So my thinking is that it looks like the Fed is basically on this course of quarter to quarter you rate hikes twenty five basis points per quarter until or unless something goes wrong, or as you mentioned, until they decided to start drinking the balance sheet, and then um New York Fed President Dudley said recently that when they do begin that process, probably they'll pause on the rate hikes for a while just

to see how financial markets and liquidity conditions are developing. Uh So I think, you know, the dot plot gives us some sense of, you know, what the consensus view is on the FED in terms of prospective rate rises. So probably two more this year, but I wouldn't rule out for if the data stays decent. I think they're

going to continue to go a quarter to quarter. If we end up with you know, much weaker data or disruptive volatility, meaning to the extent that it looks like it might threaten the business cycle, they'll clearly, uh, they'll clearly stop. But I think, you know, the base case scenario is quarter by quarter rate hikes until they start to to to work on the balance sheet, probably later this year, early next year, so we proceed a pace. I wonder what would constitute an event big enough to

derail moving ahead in the way that they want to. Well, at least from my perspective, you know, I'll be watching three indicators. One is credit markets. So when the FED initially started the taper and then was talking up rate rises, we started to see a big move up in the dollar and then pressure on credit markets. The conventional wisdom, as we talked about on on TV, this morning was that it was just an oil market story, but we did see a slowdown in the business cycle in the US.

We had, um, you know, really from late fourteen into the middle of last year, pretty big deceleration in year over year nominal and even real GDP growth. So the conventional view was falling oil will boost growth, but in

fact that was not the case. Um, So I'll be watching credit markets very closely and inflation expectations, and then uh, some of the monetary aggregates that don't include access reserves, like M one money growth for example, that one weakened a lot coming into early last year and now recovered back into two recovery ranges. So if those indicators look healthy, then I don't think we need to worry about the FED either raising rates further or potentially shrinking the balance sheet.

If those indicators are rolling over, then we're gonna have to worry more. And then it's you know, there's some subjectivity in terms of what constitutes a material weakening, but I would just say a sustained, you know, adverse move in in any or all of those indicators, and I would become increasingly worried, worried, meaning Michael that they that it would actually stop the FED from hiking. What needs to happen for the Fed to actually say, you know

what one right hike if at all this year. Well, I think you'd need to see ongoing softness in the macro data. So there's some concern that Q one GDP looks weak. I think it's you know, we'll have to see what the numbers suggest and then whether there's a

bounce back in Q two. But the payroll figures, you know, we we got a disappointing report for March, but keep in mind that underlying organic labor for US growth is probably only k to k. And if it turns out that that headline number on payrolls, you know, you know, if it turns out that we either get upward revisions or we're bouncing back, the Fed's going to want to tighten further to to to temper that. So I think you'd need pretty weak data in a sustained fashion or

what looks like disruptive volatility shocks. Is that dollar strength. It could be, but I think it would be They're not going to react to the dollar, uh per se. But if the dollar is moving, cup bold with adverse moves, in credit markets and inflation expectations, then they will definitely take note. It took a while for them to wake up to that moving into two thousand sixteen, but they eventually did move to the sidelines, and that was ultimately

the right move. Uh. Conditions stabilized, and then the Fed was able to start raising rates late last year and was you know, and then followed up, um, you know, just recently. And those moves were not disruptive because they properly paused for a period of time, So no need to go there at this juncture. I don't think you know that you know that we're looking at those kinds of disruptions, so I think they'll be able to continue

with quarter to quarter moves. Alright. Michael donnan, thanks so much for joining us today both on radio and television. Great to see it once again. Michael Darta, Chief Economists with m k M Partners here in our eleven three our studios in New York. M Ken Leon, who was kind enough to join us on television earlier this morning as well as we got this JP Morgan earnings. And before we dig into the numbers and in specific here, Ken,

let me just ask you about broad themes. Friend and I were talking about the contrast here between equities trading and fixed income. What are you seeing shape up when you look at JP Morgan and you look at City this morning? The key is really in capital markets, where very strong for JP Morgan. It was mixed at best for City. UH. This may suggest the market share gains for JP Morgan, you know, obviously always near the top in terms of these league rankings for equity UH sixth

income Underwriting, etcetera. UH. City trading also in areas related to equities was okay, but it seems that the year over year comparisons for City UM were at best okay. Uh. They did a beat in terms of the dollar star ten last year UM, but we really don't see across the board the same strength that we've seen in JP Morgan's results today. How much of a surprise was it to you when you got the read unfixed income trading from from JP Morgan again beating estimates with some some

significance there. How big a surprise was that to you? The first quarter is typically the strongest quarter for fixed income trading, and then in an arising rate environment and a little bit more of risk taking by let's call it institutional clients. All of this led to very strong results. We also got an indication of this really from the monthly market exchange data that we get. Can talk to

me a little bit about city groups. So we're just getting the story generating the most revenue from fixed income trading in three years. Are you concerned that they won't be able to keep it up? It's likely that for this year that we will see flat up single digit for fixed income trading. UM. A lot relates to investor confidence, risk taking, and a fixed income trading along with equities,

really have not seen a lot of volatility. Volatility tends to initially be good for trading revenue like fixed income, and then it creates a kind of a pocket where UH investors are on the sidelines. City group to consumer bank of revenue increasing one percent, that's actually a touch below what analysts were expecting. UM is that they're kind of a keyless. Hell yeah, that's right. So I don't think it speaks to the economy the confidence of you know,

the consumer UM. You know, when you look at the products related to consumer lending, UM, you know, I would want to see numbers like, you know, three four percent growth, and it was only one percent for City. You know, City doesn't have the breaths of franchise and the mestic consumer banking. They are very strong in credit cards though, where the deficits as you see them when you look at these two earnings reports, where the problem of spots

that that stand out to you. The problem spots really relate to UM as the last question with the consumer confidence, confidence from the CEOs for M and A mergers and acquisitions was actually down year over year, but it was made up by strong debt inequity underwriting, particularly I p O s like Snap in the first quarter where JP Morton was Elite, City was in it as well, So that's one year. A second area would be related to UM anything on as it speaks to the business climate

and regulation. Right now, it's it's pretty much business as usual UM Again, it may not be in the results, but on expectations that in a Trump administration and pro business over the course of two thousands seventeen, we're going to see some easing on some of the guidelines, whether it be Dodge Frank or some of the agencies in terms of how they interpret bank regulation. We'll talk with ken Ley on a c f R A here as we get results from a city and Wells got results

a little earlier this morning from JP Morgan. Just to get everyone up to speed on where things stand. We're going through those rings reports now JP Morgan starting its call with reporters. That's just under Wayne again. You can follow along at t L I V go on the BLOOMBERGAINSI listened to us here. Can you mentioned looking ahead to what may or may not happen out of Washington? How important to banks to the bank's bottom line is some sort of reform of financial regulation in the US.

So the managements, uh, you know are very conservative, they're kind of living with the condition of Dodge Frank Um. I think it gets into some of the areas or or or products that they can get involved in with a little bit more risk taking. No one's going to remove capital requirements or put the banks who are the country at risk, um, but it's more on the edge of that ability to maybe enable them to take capital and put it, in a principle UM, into a little

bit of risk your areas to get higher returns. I don't think it's the return of prompt trading UM. That's not going to happen. But um, I think the mandate from the Trump administration, both for the SEC, perhaps with the appointments over the next eighteen months with the Federal Reserve, is more of a accommodative environment. Four banks. We have

about thirty seconds here before we'll go to break. We'll come back with you in just a little bit here, but let me ask you Ken, what we learned from Jamie Diamond this morning in terms of his outlook on the economy. We had his letter to shareholders at last week or the week before, it's all the fog, I can't remember which. But what do we learned today about the economy? Yeah, so, especially in the meat and potato areas of banking, which is consumer bank landing, and also business,

particularly small uh business US. It's very good. We're seeing up up indicators for employment. We're seeing consumer is still confident, which means that the housing market is still very good, and consumer loans including auto loans, are are good as well. Can we haven't talked about Wells Fargo. We approach those earnings a little bit differently. Friend and I were discussing before we went to you on the phone. Obviously there's this fake account scandal still looming. When is this bank

going to get beyond it? We saw the claw backs just a couple of days ago of John Stump's pay package. How desperate is this bank to get beyond it? And what's it going to happen? Well, it really starts with the senior management, and even in today's earnings release there's a tone of talking about um, you know, culture and doing right for the customer. Uh in the earnings release, um you know? With that, Uh, it also ties to how they measure performance for employees, particularly those you know

who are at the bank branches, et cetera. So all this is part of rebuilding their brand. It's going to take some time. The results are okay, they're not great, but this is more of a traditional commercial lending bank than one like JP Morgan, which is global and all respects for the capital markets and investment banking. Can we talk at some length on this show about the European banks and you look at Credit Squeez, you look at

Deutsche Bank. You've got chief executives who have big plans to turn those banks around, turn them into new entities. What's that? What's the Jamie Diamond or uh, what's Mr Corbat thinking he looks overseas to Europe and thinks about the role that he could play in rejiggering or reinventing

banks here based in the US. I think we're what we're gonna hear from Jamie Diamond and JP Morgan at a thirty on the call is going to be that, you know, their rankings in Europe in particular is number one or two, and they are taking market share as some of the major European bank whether it be Deutsche Bank, credit Swists, Ubs, etcetera, continue to be shifting away from the investment banking capital market areas well sometimes a little bit of riskier and trading to the more conservative wealth

management areas. Can you're breaking my heart? I'm in London. Is some European CEO at some point going to say enough is enough for is it regulation? That they'll say, well, the U S is deregulating or making their banks jobs easier, We're going to do the same. Yeah. So it's almost like a two tier issue as it relates to the UK and Europe. Of course with Brexit, um and where employees are going to be working under the new regimes. But um, you know, I think part of what we're

seeing in Europe. You know, the economies are coming back, businesses getting better, um. But the strategies for the large banks seems to be a lot more conservative than before um. And then given you know some of the leading US banks JP, Morgan City, you know they're in a position just to gain share because they fixed some of those

problems a little bit earlier. Do we are we expecting consolidation or some of the U s banks because you guys are so much stronger, although price the book it was looking a lot more expensive than the European banks. Can we expect some of the big US majors to come in Europe and buy things. It's a very good question, and I would say probably not. I mean, when you look at unless there's some unusual situation um, But generally um.

You know, I think most of the major US banks have ground, have feet on the ground, if you will, in terms of a presence um um and both traditional investment banking and lending. I'm wondering here is we look at to what may or may not happen and watch you Just to reprise that in the last few seconds that we we have with you here on on surveillance. Uh, there's a great way. Uh. We know what regulatory reform lawmakers may be considering, whether it's going to be something

that's going to come out of Congress. What what banks are agitating for. We talked about regulation and reform, regulation with a with a broad brush. What's likely to happen, what's likely to make the biggest difference to these banks. Well, you know, banks come in all different sizes, and I think, um, for most banks in the US, it's trying to get out of a lot of the restrictions from Dodd Frank

just because they're so small. When you're talking about the larger global banks as we are today, um, it's it's really more fine tuning. They are still going to be bound by Dodd Frank, by a lot of the capital ratios. And where there's some wiggle room, it might be in some areas where they want to get into perhaps some trading products or businesses, but not in any big strokes.

So I think generally when we think of deregulation, it's it's going to be to give something more for the smaller banks, and I think that's part of the mandate from the Trump administration. All Kelly on. Thanks so much for joining us today both on Bloombergs. Valance on radio and television. Ken leyon of CF are joining us on our phone lines. Brought you by Bank of America, Mary Lynch. Dedicated to bringing our clients insights and solutions to meet

the challenges of a transforming world. That's the power of global connections. Mary Lynch. Pierce Federan Smith Incorporated, Member s I p C. He was for six years the President and CEO of the Federal Reserve Bank of Minneapolis. He's not the Line McKenzie, Professor of economics at the University of Rochester. Marianna Kutcha Lakota is also, I should point out, a columnist for Bloomberg View and he joins us on

our phone line. Great to have you with us, and I know Francy Lackwell eager to to jump in here with some questions. Francy, Yeah, thank you so much. Mr Cantarlo Code. A great pleasure to have you, because this is the day after the interview that we've all read where President Trump for the first time is hinting that he's open to keeping Janet Yellen at the helm of the Fed. Will he well? Thanks First of all, thanks

for all for having me on. Uh. You know, I don't know for sure what President Trump will do, but I was very heartened by his comments about Cherry Yellen. I think that, uh, it shows that he's thinking about that job in the right way, which is, you know, Cherry Yellen has done what she is supposed to do is chair of the Fed, which is to keep unemployment low and to uh have inflation be close to target.

That's what you're looking for in terms of what the chair is supposed to be achieving in their in their job. And so I think it's going to be very hard for for President Trump to to find find good reasons for to say that the Chair has not been able to doing her job right. And he also said that he likes low interest rate policies. Right. This is again a reversal to what he's said in the past. But have you ever met a president that didn't like low

and was right policy? Well, there there's some true to that, although I think that um. Actually, if you track what President Trump is said in the past of monetary policy, UM, he has said, uh sometimes something extremely hawkish, expressed uh expressed positive sentiments where it's gold standard I think on

on on an occasion. On the other hand, he's also in the past expressed um recognition for why low interest rates are valuable for business in terms of being able to and and in terms of being able to stimulate growth in demand. So um, you know, I think yesterday we heard the doubbish President Trump. We might hear from the hawkish President Trump down the road as well. Um, But certainly, if you have a pro growth agenda, as the President has has voiced, low low interest rates, you're

gonna be your friend there. And the challenge for the Fed is, Look, they're they're not about keeping in strates low. Their trying. Their job is to keep inflation at target and keep employment at matt at maxim And they have to us any will I know, UM not paying attention what the presidents preferences are on this on this matter? Did they have to? I mean, I think of what he said yesterday. I think about this ongoing debate in

Washington about the prospects for for a fiscal stimulus. Uh did what he said yesterday give them any more grounds to debate this? Um? You know? And when they next meet, say in Washington, Well, you know, I think a big question for the FED is not so much the President's preferences for low interest rates, but rather, um are they how likely is physical stimulus? And then what is that? What is that physical stimulus going to mean for the

for the economy UM in terms of inflationary pressures? And I guess you could say the president as comment yesterday meets uh infrastructure UM made it clearer. The administration still very very much pro infrastructure UM. But beyond that, you know, it's really everything that the President says is really trying to They're trying to filter into what's the outlook for the economy. What's the outlook for inflation, employment going to be? UM?

I personally, you know if I, if I still on the committee, wouldn't take too much from one interview along those lines. Let me ask you about the balance sheet. The FED weighing what to do with this four point five trillion dollar balance sheet. The debate now seeming to center on whether or not the FED can effectively unwind that balance sheet while continuing to raise rates. What's your I've used the analogy can the Fed walk and chew gum at the same time? How difficult is it going

to be for the Fed to do both. Yeah. First of all, um, there's really no need and I certainly said this when I was a committee member, I can I can say it now again. There's really no reason for the FED to reduce the balance sheet. It can uh continue the tight economic conditions as needed with the current size of the balance sheet. UM, so there's really

no no need for it to h to reduce about sheet. Eventually, the number as the economy continues to grow and it is a long ways off thenment of access reserves that the banking system has or returned to um pre pre crisis levels just because of growth in the economy. So there's no real reason for why the FIT has to reduce the balance sheet. With that said, there's a lot of discussions, as you and your listeners have heard about the whether or not the FED will change its reinvestment policy.

It would be the sort of the first step. I think the important thing for the FED is not to think about the balance sheet is some separate object off on the side, but rather as part of a collective package of stimulus. So if you're going to start halting reinvestments, for example, that's got to mean that you're going to be raising rates more slowly. If because you're ultimate objective is to be achieving UM inflation of two percent and

maximum employment. If you're if you're halting reinvestments, that's going to be tightening policies through your balance sheet, and then you're going to want to keep rates lower than you would otherwise. Right, So what is the one key data point that actually you would be looking at at this point to give us clues on policy timing. Well, you know, I think that from the FEDS point of view. So I'll talk first from the FENS point of you, and then I'll give a couple of my own thoughts. I

think the FED is continue to watch unemployment. I think that they are, you know, Chair set earlier this week that unemployment was now lower than what the Committee as a whole sauce is stainable for the long run. Uh, That's something I've concerned. If you want to listen to FED speakers, and they're not going to be happy with that stain continue be true for for for over an

extended period um. And that's why I think and I think they worry that if they don't continue to tighten gradually, they're gonna have to type very rapidly at some point and cause a reception. My own view is an unemployment is not a a great metric for the health of the lab market. Right now, we really continue to be watching employment. The big question is, you know, how can you bring in people off the sidelines back into the

workforce without generating undue wage pressures and inflationary pressures. We've seen it had so much success in the last three or four years, and that to mention, I would really like to see the FIT continue to keep stimulus in place, be very patient about raising rates in order to to to to stimulate demand, bringing more workers who are currently people who would work who are currently not in the

labor force. UM. I think you can do that without generating wage or inflationary pressures right in the little time we have left. Can I ask about the overseas market. We're seeing about three trillion dollars of negative yielding government bonds have turned, you know, turning positive in recent months.

What does that mean for treasury buying? You know, I think the treasury market continues to be um one of the most liquid in the in the world, and so I think what that means is that individual price movements doesn't don't have really big effects on on the state of demand for for treasuries. UM, I think we can be pretty comfortable and continue to be offertable that treasuries

are are just uh. If one kind of buyer steps away from the market, there's another buyer who's gonna be willing to step in at a price that's very close to what that previous buyer was paying. So I don't, I don't. I don't see these these moves as being very material at this point. I great to speak with you, as always, darting to Cutch Lacoda, the former president and CEO of the federaltor Bank of Minneapolis, now the Line mckenzy, Professor of Economics at the University of Rochester. I've been

looking forward to this interview all day. We're now joined by the Minister of State for Petroleum Resources of Nigeria. He is one Emmanuel eBay Cachichool and Minister you join us from A One Studios in Washington. I remember a great interview that you gave me here in London. And of course one of your strongest points, apart from being a great analyst, is also having a wonderful Twitter page. Why reach everyone to go and follow you, sir on there you're in d c um actually meeting with the

excell and CEO. Will you be talking about opaque or investments lively investments. We've already had that meeting meeting to place in Dallas yesterday and we focused on my on my own side, I focused on trying to see what we needed to do to remove all about restrictions there

to enable ex A Mobile invest more in Nigeria. On their own side, they also went through the processes and the concerns that they have as the available funds for investments are tightening by the day and so countries have got to compete for this, and so they laid out what their concerns were in the fiscal areas and the and the policy areas and what we needed to do

to get a big portion of that pie. Minister on a larger scale, how can Nigeria secure the necessary investment to boost out as long as, for example, the oil producing Delta region remains unsafe, well, I wouldn't use the word and safe is actually becoming safe over the last three months. Who haven't had an incident. We're beginning to engage them a lot more deeply a multi militancer issues.

Our production is beginning to go wepinion to address model, systemic and fiscal issues that have been in the systems, physical and policy issues. Recently renegotiated the areas of debt and debted necessary oil companies whatever us experience work that a five year programming. How to pay for that work like a new process of cash call payments. So we're taking polishly the issues that we needed to take on.

So I think the climate is getting better. Clearly for countries who have been very stable in these sort of areas and the Gulf countries, we need to We have some catching up to do. We need to run fairly fast to be able to catch up with the getting our environments saying and clean and clear and inviting for investors. Ministers, Since you're meeting the excellent CEO, I want to talk a little bit more about some of the oil majors

in Nigeria. For example, has filed corruption charges against Shell but also any for allegedly paying bribes to secure and oil block. What's going to be the next step in that process. Well, I've tried to distinguish between the issues of criminality involved and it's is essential that for transparency purposes, we deal with those those issues, and like you know, our present is very full postal and anti massive anti

corruption drive to clean up this system. So that's welcome, but that's not taking away the advantage of the big fields bankers outwe or part of postuantities blocks. So what I've said is we're going to put it into different dimensions once save the existing deals so that that way at least we can continue a massive investment and growth that we're trying to send the oil or area on on this field. This field is going to train relattle

of our funder a thousand barrels into the system. But then we need to go back and look at the transaction itself. And frankly, if of a billion dollars of split as bribes to individuals and which whichever way, then that is money belonging to the government that was under the table, and we need to find a wealth sitting down with the oil community to get better attempts and get back some of that money back on back on the table. Ministo the i A today said global oil

inventory is probably increased in the first quarter. However, they also said that OPEX implementation is near perfect. Do you expect OPEC to extend production cuts into the second half. I'm not sure we have an alternative. We've got to um that is what has kept the markets table at the sort of over fifty dollar price bar barrel that would send over the last one one and a half months. So we need to oversustain that when that ends in June. We need to condue some monitor and ensure that the

efficiency is absolute efficiency in terms of compliant. But more important than that, we need to begin to collaboratively bringing other players who have so far not participated. US is a big issue because the SOFA not being very willing to have conversations on this, and in any case, the shell production US is throwing quite some numbers back into the field and so complicating the dynamics of of monitoring.

But ultimately, and one of those who optimistic that somewhere down the road everybody else Russia, the US and the Restidan and we're sitting need for a very stable oil market about for cons in mesself, for producers, but with Nigeria actually joined the others in cutting production. If the deal is extended for the moment, you're actually exempt from having to cut. This was because of the unique issues

were having the Niger delta area. Where my anticipation is that if all things been equal, if the infrastructure has repaired and all that, somewhere around the October November time frame, U see us back into proper production numbers. And once we do that, then when we're obviously willing to join and join the courts. We're a very strong member of Wookpack and would let us support to pack. Minister. Talking to me a little bit more about your your trip to Texas. So you when do you leave DC to

go there? No, I already I came from Texas, just come back right. Yes, the trip was largely I've been going around most of the chairman suits in most of the major oil companies that did he and I about a month ago. I have just an exam mobile. I been doing Chevron during the otic next month and I have I'm lined up to do this smpthing for TOTALA for Shell that the whole idea is live. Whatever the local manager policies, Let's talk to the big players. Let's

stalk to the guys who make the decision. See what it is we need to do, See what the perception of the policies that I'm putting in place are see what areas of collaboration we can do and ensure that we're getting a big piece of that that investment, and how I'm challenging them to stop looking at Nagera just in terms of crude or your production, but also to diversify their businesses. What was the one thing that surprised you the most in Texas um one. I won't call

it a surprise. I've been a member of that team. Like you know, I worked for the mobile phone nearly fifteen systein years of my career before I left to this job, so I could predictably tell where they will stand.

Where do they stand? The need for firmer policies, need for transparency to continue in the way we're doing it, a need for great better fiscal conditions and neblet and continue to put some of the investment funds that they have towards Niger than towards other other developing competent nations. But more more important and more more full courses is the finified that as far as consent invest in Nigeria,

we'll skip the Nigose. Yes, thank you so much. It's always a great pleasure to speak to the Minister of States for Petroleum and Resources of Nigeria. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio, brought you by Bank of America Mary Lynch.

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