[Music]
Live from Washington DC, this is Balance
of Power with Joe Matthew.
President Trump threatens to fire a top
official at the Federal Reserve
escalating a pressure campaign. Welcome
to the Friday edition of the fastest
show in politics. This is Balance Power
on Bloomberg television and radio. I'm
Tyler Kendall here in Washington
alongside Bloomberg's Michael Shepard.
Joe Matthew is off and all eyes are on
the Federal Reserve today. The White
House ramping up attacks against Fed
Governor Lisa Cook over allegations of
mortgage fraud. But our focus was
already on the central bank today as Fed
Chair Powell gave his highly anticipated
remarks at the annual economic symposium
out in Jackson Hole, Wyoming. We'll
bring you a live report from there. Our
very own Bloomberg's Michael McKe is on
the ground and we'll also have a
conversation with La Brainer, the former
director of the National Economic
Council. She joins us here in our studio
in just moments as Michael Shepard
traders are really adding to their bets
ahead of the next FOMC decision.
Well, they really are and and this has
been one of the strongest days for
markets in the past several months off
of this news on the Fed. But there's
other news that they've had to digest as
well, Tyler. We saw that uh Canada has
decided to pull back on some of its
retaliatory tariffs against the US over
some import levies that uh the governor
there in Ottawa had found objectionable.
Uh Canada was one of the few countries
that actually moved to retaliate against
some of these Trump tariffs. And so
we'll be looking to see more of the
choreography between Prime Minister Mark
Carney and of course President Donald
Trump in coming days. And naturally,
we're also going to want to get from
Wall Street a sense of how uh they are
digesting both the news from Canada and
from Jackson Hole. Uh we will go to
Bloomberg's Charlie Pellet, the voice of
Bloomberg radio, and the New York City
subway for the numbers. All right, thank
you very much, Michael Shepard. Here's
what's going on. Stocks very close to
session highs, all about Jackson Hole.
We'll take you there live in just a
moment with our Michael McKe. But the
Dow, the S&P, NASDAQ, all advancing
after Pal's remarks. You saw him on
Bloomberg television. And you heard him
on Bloomberg radio. S&P right now up 93
at 6464. That is a gain of 1.5%. Dow
industrials up 9001. That's an advance
of 2%. NASDAQ up 353 up 1.7%. Our MAG 7
index up 1.9%. Cannot ignore the Russell
2000 index. Big move there up 3.8%.
Dow transports taking part in the rally
surging 3.4%.
Your tenure at 4.25%. 25% with the
2-year currently yielding 3.68%.
Spot gold now up 1% 3372 the ounce. West
Texas Intermediate crude a little
changed up 7 cents a barrel 6359 that's
a gain of 1/10enth of 1%. Bitcoin now
surging by almost $4,000 a token up
3.5%. Bitcoin at 116,398.
As we have been reporting and as we
continue to cover, President Trump says
he will fire Lisa Cook from the Fed's
Board of Governors if she does not
resign her post over mortgage fraud
accusations from a top ally. And Nvidia
has instructed component suppliers
including Samsung Electronics and Amcore
Technology to stop production relating
to the H20 AI chip. This according to
the information citing sources Nvidia
shares today they are advancing up by
1.3%.
Nvidia very much a market focus next
week when it reports earnings. Recapping
stocks higher S&P up 1 and a.5% balance
of power continues right now. Back we go
to Washington once again. Your hosts
Michael Shepard and Tyler Kendall.
All right Charlie Peladin world
headquarters for us in New York. Thanks
so much. And today we're tracking our
top story. Federal Reserve Chair Jerome
Powell carefully opening the door to an
interest rate cut come September. He
gave what will be his last speech as
chair to the Kansas City Fed's annual
economic symposium earlier this morning
out in Jackson Hole, Wyoming. And Powell
pointed to rising risks for the labor
market even as concerns over inflation
remain.
The stability of the unemployment rate
and other labor market measures allows
us to proceed carefully as we consider
changes to our policy stance.
Nonetheless, with policy in restrictive
territory, the baseline outlook and the
shifting balance of risks may warrant
adjusting our policy stance.
There was a lot hanging over these
remarks from the path of rate cuts to
heightened pressure on the central bank
from the White House. And we want to get
into all of it with our very own
Bloomberg's Michael McKe. He's out there
in Jackson Hole, has been covering this
all week for us. He's our international
economics and policy correspondent.
Mike, let's just start with a recap from
what we heard from the Fed chair. What
sort of signals did we get out of him
today?
Well, basically by saying that the Fed
uh is it's okay to adjust policy. He
told the markets that they are betting
correctly. The Fed is on track to cut
rates in September. That's a bit of a
surprise. The feeling was he would keep
his options more open. But uh for some
reason the Fed has decided that the
threat of uh unemployment rising and uh
people losing their jobs is greater than
the threat of inflation for the time
being. And so they are on a path to cut
in September. They could change their
mind, but right now that's a pretty open
suggestion that that's what they're
going to do. It be pretty hard to walk
that back. Uh their view is apparently
that uh it is going to be a rough time
for the labor market with hiring really
slowing down but tariff inflation only
slowly going into the economy.
Mike, we've had a lot overshadowing the
Fed as we headed into the Jackson Hole
Symposium. And that of course has been
the saga of Lisa Cook and the pressure
from the president himself on her to
resign and today he escalated that by uh
threatening to fire her if she didn't
leave voluntarily. Uh have we heard from
her today or from the Fed on this? And
let me also ask Mike, what sort of
signal did Jerome Powell send about Fed
independence during his remarks?
Well, I can tell you Lisa Cook is here.
She arrived this morning and she
attended the first opening session. She
got a round of applause when she walked
in. Uh and the then the question becomes
uh what happens next in her case. uh
that has been a distraction for the Fed,
but it now could rise above that and
become more of a problem uh if indeed
the president does follow through with
his threat to try to fire her because
that would trigger a legal battle
between the Fed and the administration.
And we're not sure how all that would
play out and we're not sure how the Fed
would react. I know that Donald Trump is
about ready to have reporters into the
Oval Office and uh he always makes
remarks so I'm sure he'll be asked about
that. we may get some more guidance on
what he's thinking. Uh the Fed is not
talking about it. They, as I said,
consider this a distraction and they
said they don't want to get into a tit
for tat back and forth. But at this
point, uh we're just waiting to see what
happens with that. Powell didn't send a
major signal today uh because he didn't
talk about Fed independence. Also a bit
of a surprise. But uh the other issue is
what is the Fed's future? What is Jay
Powell's future? So far, no word from
the president.
And uh Mike, as you are talking,
reporters have been let in at the White
House. Nothing yet here when it comes to
the Fed, but we can break at least one
headline. President Trump saying that
the World Cup draw will be at the
Kennedy Center on December 5th. There
you see him there. Uh if you're joining
us on Bloomberg TV talking inside the
Oval Office. Uh Mike, just one more
question for you to put a finer point on
this conversation when it comes to the
future of Fed independence. And I know
we talk about this a lot, but it's
because it's a big focus here in
Washington, and that is those legal
questions around whether or not the
president could remove a Fed official.
What do we know about what my
understanding is a very high legal bar
if there were to be a removal? And of
course, uh, these allegations against
Lisa Cook at this point are just that
they are allegations.
Oh, looks like uh we might have lost
Michael McKe there, but of course we
thank him as always for joining and for
his coverage. But to continue this
conversation and perhaps we will pick up
right there. We are lucky to be joined
now by Lao Brainer, the former director
of the National Economic Council under
the Biden administration, also former
vice chair of the Federal Reserve. She's
a distinguished fellow at the Georgetown
Center for Financial Markets and
Policies. Uh Leo, thank you so much for
being there. Can we just pick up this
conversation at this point when it does
come to Fed independence and what risks
you see as we watch this pressure
campaign from the White House ramp up?
Absolutely. Well, I think that uh first
what Jay Powell said today should have
been music to the president's ears. He
essentially, that was a very dovish set
of remarks where he essentially said
that he also viewed the risks to the
labor market as the greater set of
risks, saw inflation uh rising perhaps
more slowly over time and opened the
door I think very uh very clearly for a
cut in December which is exactly uh what
the president has been pushing so hard
for. So it was a dovish set of remarks
and it really went uh quite far in the
direction of confirming there would be a
cut in September. Of course we have two
more important pieces of data that could
go in the other direction but he did not
qualify his uh remarks very much. So I
think the question uh that you're
raising about uh the Fed's independence
is very important. Uh the president
looks to be getting what he wants in
terms of the path of rate cuts coming
down over time reflecting what's going
on in the economy. And it's
counterproductive
uh I think to uh suggest uh that this
should be done due to political uh
pressure as opposed to simply following
the statutory mandate of the Federal
Reserve.
Director Brainard, you have also sat in
that room as a member of the Federal
Open Market Committee as Fed vice chair
previously. Uh describe the challenge in
balancing that dual mandate, especially
at a moment like this when the economy
is facing some strains that it really
hasn't faced in more than a century
really. Uh and we're talking about
tariffs and how those are affecting the
whole outlook on inflation. We heard uh
the Fed chair talk about how the impact
of those tariffs on prices might be
momentary, but he did hold out the
possibility that they might be more
lasting. What is your view on the impact
of prices and how is the central bank
balancing all that as it also looks at
the labor market? Well, I think uh this
is a very tricky juncture for the
Federal Reserve because it is
responsible for keeping inflation low
and keeping the economy at maximum
employment. And when you see the large
increases in tariffs, going from 2% to
17% on average in a short period of
time, that puts upward pressure on
prices and downward pressure on hiring
and the labor market. That's a
stagflationary shock, which is the most
difficult kind of shock for the Federal
Reserve to handle. And they're trying to
tell the public, the markets, exactly
how they're weighing those risks. Up
until now, we've heard a lot more about
risks to inflation. Today, what we heard
at Jackson Hole was the chair
articulating how important it was to get
out ahead of the potential recessionary
risk from a weakening labor market.
We also heard uh Jerome Powell really
highlight this idea of tighter
immigration policy and how that is
impacting the labor market. And I'm
curious to dovetail this with the
conversation we're having about tariffs
as these companies are trying to absorb
perhaps the higher costs. Are they also
going to have to face higher labor
costs?
Well, you're exactly right that not only
have the tariffs created that kind of
stagflationary shock, but into that mix
is a much uh smaller uh inflow into the
labor supply. And so it's very hard for
the Federal Reserve uh to read the labor
market right now. Unemployment hasn't
budged. It hasn't gone up, but the rate
of job creation has come down
dramatically. And so they are trying to
gauge is that because we have so many
fewer people coming into the labor
market because immigration has
essentially stopped or uh is the labor
market weakening uh which will of course
uh lead to an increase in the
unemployment rate and unemployment tends
to rise very quickly when it does start
rising which is what the chair said in
his speech today which is why I think
they are quite cautious about what's
going on in the labor market. Uh,
Director Brandon, uh, we also wanted to
ask you about economic policy more
broadly and do you see an endgame in the
tariffs uh, that the president has been
un unrolling and what is the lasting
impact in terms of US global economic
relations with trading partners and
allies and adversaries alike.
So I think this question about is this
the endgame is so important for
businesses who are making these hiring
decisions. They're making sourcing
decisions. They are making pricing
decisions. And what they want more than
anything, which I think we all hear, is
certainty. They want to know that the
tariff uh structure is going to
essentially be completed at some point.
Um and that will allow them to uh
basically change their supply chains and
their hiring. uh and hopefully uh you
won't see an ongoing increase in
inflation. But if tariffs keep changing,
keep ratcheting up, that will both make
employers more cautious about hiring and
it could feed into inflation for longer.
And of course with respect to the
international environment I think trade
partners are asking to what extent can I
really count on the US to be a reliable
international partner if the US keeps
changing tariff rates unilaterally based
not only on trade considerations but in
some countries cases non economic
reasons.
Uh to follow on that what is the impact
on the role of the dollar as the world's
reserve currency? Do we see that at risk
at all from this approach that the
president is taking with trade in other
areas?
Well, it's kind of a very important
point. Uh, one of the great privileges
of having the dollar be dominant is that
it costs the US government a lot less to
borrow um to service its debt than it
would uh if we didn't have that dollar
privilege. And so at a time when uh the
national debt is projected to go up
three to four trillion dollars, uh the
fact uh that we are playing fast and
loose uh with the dollar I think does
raise some questions about whether we
might lose that advantage in terms of
our borrowing costs and that hasn't
happened yet. The dollar has weakened a
great deal. But when you see a tax on
the independence of the Federal Reserve,
it really does raise some questions
about whether investors are going to
want to continue to be as
disproportionately invested in dollar
assets, treasury securities as they have
historically. In the final minutes that
we have with you, I wanted to pull on
some of your expertise from working in
the Biden White House. And I wanted to
ask you about the more hands-on
industrial policy that we've seen from
this White House when it comes to a
potential government equity stake in
Intel uh the so-called golden share uh
in the Nepon Steel Deal. How are you
viewing what seems to be a shift in in
the public private partnership? And a
lot of this is because the
administration is trying to bolster that
domestic manufacturing. That's one of
those reasons underpinning their tariff
plans. How do you view this strategy by
them that uh they're saying needs to
happen in order to reach these goals
that they've set out? Well, let me just
say I do think um that in order to
compete with China, which engages in a
lot of industrial policy, that it has
been important for the United States,
for instance, to provide investment
incentives for advanced manufacturing of
chips here in America. It's great that
we now have TSMC manufacturing the most
advanced chips because of the Chips and
Science Act, but we should compete with
China based on our dynamic private
sector. We should not be emulating
China's state capitalism. And when I
hear about these moves to take ownership
stakes in some of America's most
important and dynamic businesses, it
really troubles me uh that we would be
upsetting that balance. It's one thing
to support the private sector. It's
another thing to be moving into a kind
of state capitalist model, which I I do
not support.
Well, in the 30 seconds we have left,
let's drill down into that. Is this a
proper use of CHIPS act money then to do
what the president is deliberating on
doing that is to take the Intel stake?
Yeah. So I think I don't uh know exactly
the the legalities of um the stakes but
I just think it's bad policy. I don't
think the US government should be uh a
shareholder uh in these companies. I
think we should support private sector
investment, support Intel and TSMC's and
others ability to compete with China so
we can have the most advanced
semiconductors here in the US. But
moving to state capitalism is something
that really uh troubles me.
All right, La Brainard, we were lucky to
have you here on this important Fed day.
former director of the National Economic
Council under the Biden administration,
former vice chair of the Federal
Reserve, and distinguished fellow at the
Georgetown Center for Financial Markets
and Policy. Thank you for being here.
We'll continue this conversation on
Balanced Power, plus the latest on
tariffs with Canada. Stick with us. This
is Bloomberg.
More news coming in from the White
House. We had heard the president
earlier say that the World Cup draw
would be held at the Kennedy Center, but
now we are hearing him talk about
perhaps expanding his efforts to toughen
policing by sending federal assistance
including perhaps troops to other cities
and those include the Democratic
bastions of New York and Chicago that
could be coming next. And of course, we
don't have very many details beyond
that, but we are looking to see what
else the president may have in store for
us, Tyler. Right. Exactly. We'll
continue to monitor this and if you're
joining us on Bloomberg television, you
would have just seen there, President
Trump in the Oval Office addressing
reporters. We'll bring you headlines as
they come in. And another headline that
we did get today here has to do with
tariffs. A big story that we track all
the time at Bloomberg, including this
one that has to do with one of our
largest trading partners, and that is
Canada. Canada will remove its
retaliatory tariffs on a long list of US
products that comply with the existing
North American trade deal that's in
place seeking to lower tensions with the
White House. Now, this was first
reported by Bloomberg News and we're
lucky to have that reporter on the by
line of that story with us now. That's
Brian Platt. He's a Bloomberg Canada
government reporter. He joins us now
from Ottawa. Brian, it's good to see you
and thanks for being here. Can you just
uh give us some context here? Was this
move expected and which goods does it uh
apply to?
So yeah, to give a a very brief history
of this. This is a big climb down for
Canada. When Donald Trump's second term
started, Justin Trudeau was still
Canadian prime minister and Trudeau
believed in retaliation and so to go
dollar for dollar retaliation. And so
when when Trump first imposed the
fentinol related tariffs on Canada, uh
Trudeau hit back with a big list of
tariffs on American goods. So that was
things like Florida orange juice and
Harley-Davidson motorcycles and Kentucky
bourbon. Canada was really the only
country in the world that hit back as
hard as as uh Trump hit Canada when it
or hit the country when it comes to
tariffs. And Carney took over as prime
minister in April, but those tariffs
have remained ever since. And what our
sourcing tells us is that White House
officials have made it clear to Mark
Carney's government that if they wanted
to get to any kind of trade talks on
steel and autos and some of these
sectoral tariffs, that initial list of
tariffs that Trudeau brought in needed
to go away. And so that's what Carney
announced today. He said they're they're
they're dropping all of those counter
tariffs if the goods comply with the
with the USMCA. And uh so it you know
the idea here is that that's going to
pave the way for Canada and the US to
start talking about steel and autos.
Brian uh before we get back into Canada
and US trade relations, we do want to
break in with a little bit of news uh a
scoop coming in now that the Trump
administration and Intel Corp. are
poised to announce details uh later
today of an agreement that would give
the US government an equity stake in the
iconic American chip maker. The exact
details and timing of this announcement
today of course are unclear but uh
Bloomberg has previously reported that a
stake of up to 10% have been considered
and that of course would make the US
government the largest shareholder in
Intel. something we'll be watching
through the rest of the program. But
Brian, we want to bring it back to the
whole question of Canada and its
relationship with the US when it comes
to trade. How significant a breakthrough
is this and what does it set up as a
next step in terms of discussions with
the US on trade? And this includes the
USMCA.
Yeah, I mean that's like the big next
step here is the the USMCA talks which
uh there's a joint review that's due to
to be completed by next summer and and
we'll get in that process will start
pretty soon. So that's reviewing the
entire free trade deal between Canada
and the US and Mexico from you know in
terms of how big of a breakthrough is
this? That's the biggest question right
now because the US did not give up
anything here. Canada gave up its
counter tariffs. Um the US did not give
anything. The idea is that this was kind
of an olive branch to to restart trade
talks in full. Carney is going to be
under a lot of pressure now to get to
some kind of deal with Trump. Uh
otherwise, Canada just keeps giving
things up. I mean, this is not the first
time Carney has sort of uh given up some
concessions to Trump. Carney's going to
be under a lot of domestic political
pressure now to show some results in
exchange for this. So, we'll see where
those talks go.
And uh Brian, can you also just give us
a little bit more details here when it
comes to those sector specific tariffs
and why these have perhaps uh when it
comes to steel, aluminum, autos, why
there have been perhaps more sticking
points with these negotiations compared
to the tariffs that we saw implemented
uh much earlier this year around uh the
fentanyl and the border concerns when it
comes to Canada.
Yeah. The the thing to understand about
these this existing situation is that a
lot of the trade between Kenda and the
US right now is tariff-free because the
U Trump has given an exemption if it's
covered under the USMCA. Steel and
aluminum in particular are two really
big exceptions. Canada exports a ton of
steel and aluminum to the US. They're
biggest supplier of both. Aluminum in
particular, I mean there's no other
country that comes close to the amount
that Canada exports to the US. Trump's
50% tariff is hammering the Canadian
industries. Like there's steel mills
that are built all along the the
southern border of the of Canada with
the US who export a ton of their
production normally to the US and that
ex those exports are basically halted
right now because of the 50% tariff that
Trump has in place. So Canada's under a
Carney Mark Carney is under a lot of
pressure to try to get some deal done on
steel and aluminum in particular. And so
I think that's the the biggest thing
that Carney hopes to get to out of the
announcement today is to somehow get
some kind of deal done with Trump on
steel and aluminum and get those metals
uh shipping over the border again.
All right, Brian Platt, Bloomberg,
Canada government reporter. We thank you
so much for all of your reporting. And
to extend the conversation, we're going
to bring in our signature political
panel. We're joined again for hour two
of balance power by Jeannie Shanzeno,
democracy visiting fellow at Harvard
Kennedy School's Ash Center and
Democratic strategist alongside Ashley
Davis, partner at S3 Group and
Republican strategist. Ashley, let me
start with you and let's pick up on
tariffs because we've gotten quite a few
headlines when it comes to tariffs this
week, including the US and the European
Union putting pen to paper, starting to
get a little bit more details when it
comes to these trade deals. But at this
point, a lot of them are frameworks. How
are you viewing the White House's
strategy so far when it does come to
tariffs and they really dominate the
headlines?
Absolutely. And I and obviously it it
dominates some of the market
conversations as well. But I think that
especially with Canada, this has been
something that there's been no movement
and a lot of rhetoric. And I think the
fact of what Carney did, obviously there
was a really really bad relationship
between Trudeau and Trump. So when
Carney won and when since he's come in
there has been an effort to kind of stop
that the rhetoric between the two
leaders but Canada taking away these
secondary tariffs so to speak or I think
that it is something that will really
help the overall negotiations exactly as
Brian said there was no movement
obviously there were bigger deals with
the EU China we still haven't figured
out India um but I think the more that
these frameworks are at least discussed
It takes the pressure out of the
balloon, so to speak, but the frameworks
are really going to what's matter at the
end of the day.
All right. Well, we're going to have to
pause this conversation because we do
want to bring our viewers and listeners
some breaking news. President Trump is
taking questions in the Oval Office from
reporters. Let's listen in. President
Trump speaking in the Oval Office,
taking questions from reporters on a
range of topics, including one redhead
that hit the Bloomberg terminal.
President Trump saying that Intel has
agreed to give the US a 10% equity
stake, appearing to confirm a Bloomberg
News scoop on this story. We are waiting
for additional details. We will bring
you a couple other headlines that came
out from the president, notably when it
comes to the war in Ukraine. President
Trump reiterated that he's going to give
Vladimir Putin a couple of weeks to come
to the negotiating table and then we'll
make a decision on what to do. He
outlined that could look like a few
different things. He threatened
sanctions as well as additional tariffs,
but then floated that maybe the US would
do nothing, saying that he will say,
quote, "It's your fight." We also heard
him touch on another story we're
following today when it comes to
tariffs, saying that he will have
another call with the Canadian Prime
Minister Mark Carney after Canada moved
today to drop retalatory tariffs against
the US and what was widely seen as a
peace offering perhaps to the White
House as they try to negotiate down
their tariff levies. But Michael
Shepard, really the big news here on
Intel, giving us some insight into his
thinking here when it comes to the US
potentially taking this equity stake.
And Tyler, he was moving very clearly to
take credit for this idea of an equity
stake. and he when asked by reporters
about the discussions with Intel
described his meeting with the CEO Lip
Bhutan whose name he did not utter. Uh
but he did talk at length about how the
two men had met, how he had gone into
the meeting even with some suspicion of
the CEO based on some earlier reporting
that had emerged from Senate
Intelligence Committee Chair Tom Cotton.
But somehow the intel chief had won him
over and that the idea for a US stake of
up to 10% in the company had originated
with Trump
because this was a pretty big reversal
in just the matter of days. Right. We
had heard from President Trump posting
on Truth Social potentially calling for
his ouster and now we have this deal
emerging. What do we know about the
timeline here and when we could actually
get some firmer details about what we're
about to see? Well, we're waiting to see
what exactly will unfold next and that
is the nitty-gritty and the details and
what will appear in the paperwork where
the deal is actually described. Then the
president is describing what he calls
these restrictive covenants and he is
trying to make sure that not only the
arrangement with Intel but the one he
has also uh set up with Nvidia where the
company will give uh the US government a
15% cut of any sales of AI chips to
China. Uh these are the kinds of chips
that the administration had initially
tried to forbid from being sold in China
back in April, but reverse course under
pressure from another bigname tech CEO.
And that of course is Jensen Wong, who
Trump also name dropped during his
appearance here. And overall, this is
just an example, Tyler, of the kind of
hands-on uh corporate and industrial
policy that we're seeing. and it's one
we heard his former vice president in a
conversation with us yesterday, Mike
Pence, express some objections to. He
thinks that it's not a good idea for the
US to be taking these stakes and being
so interventionist in corporate affairs.
And we just heard uh former national uh
economic council director under
President Joe Biden, La Brainard,
express those same reservations.
Right. Exactly. And you could catch that
conversation on the Bloomberg terminal
or on Bloomberg.com. We'll continue
covering all of these stories here on
Bloomberg. And as we say goodbye to this
edition of Balance of Power, we do want
to say a very special hello to a very
lucky baby out there, our very own Kaye
Lines. Welcome to healthy and beautiful
baby boy earlier this year. As we end
the program, we want to send a big
congratulations from our Bloomberg
family to Kaylee, who we miss but are so
excited for as she starts this new
chapter. Bloomberg Business Week Daily
is up next. I'm Tyler Kendall alongside
Bloomberg's Michael Shepard here in
Washington. Stick with us.