Warsh Boosts Rate Hold Expectations; Midterm Debates Ramp Up Nationwide

0:02 Bloomberg Audio Studios, podcasts, radio, news. Good morning, I'm Karen Moscow.

0:12 And I'm Alexis Christophorus. Here are the stories we're following today.

0:17 Well, we begin in Bangkok here, Alexis, where Fed Chair Kevin Warsh spoke at the International Monetary Fund's annual meetings. In a moderated discussion early this morning, Warsh made no remarks on monetary policy or his outlook for the U.S. economy, apart from reiterating the Fed's commitment to price stability.

0:36 At the Federal Reserve, we made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.

0:43 I don't prejudge meetings.

0:45 I don't believe in saying now what I might do at the meetings that we have in the balance of this year.

0:53 But that was the situation.

0:54 You just disappointed half of the audience or more.

0:56 They can all turn it off.

0:59 It's a new chapter at the Fed, and we're not in that business anymore.

1:02 And rate hike bets fell during Fed Chair Warsh's remarks.

1:06 Warsh also talked.

1:07 About how global economic activity is flowing through the U.S.

1:11 What are we seeing in the global economy as it affects the U.S.? I would say broadly over the month or so that's transpired since then, the world has broadly conformed to our expectations. We'll be meeting a couple more times this year, and that will be the crystallizing moment. But right now, we have structural growth. We have an investment surge. It's not hitting every country at the same element, but in the United States, we're having a massive investment surge.

1:42 Fed Chair Kevin Warsh also called AI a major boost to productivity in his comments at the IMF annual meeting.

1:49 And Karen Fed Chair Warsh's task force on productivity and jobs will hold a field hearing in San Francisco next month. Warsh saying the task force will, quote, wrestle with issues including the economic impact of artificial intelligence. Earlier this summer, Warsh established five task forces of outside experts that will study key areas of monetary policymaking.

2:11 Meanwhile, in Washington, Alexis, news from another task force. President Trump's AI task force will commission a report on technology risks. The Super Intelligence Force task force agreed to address risks related to cybersecurity, biosecurity, and model control and accountability as fears rise over the potential dangers posed by the technology.

2:31 The task force will commission a report to evaluate concerns and develop protocols and mechanisms for labs to provide early warnings and and systemized notifications to the government.

2:42 Now to a tragic story in Oregon. Authorities say a 16-year-old opened fire at an elementary school in Bend, Oregon, killing children and a teacher. Here's Bloomberg's Matt Piper.

2:51 Police say a 16-year-old used a gun to break through locked school doors. Bend Police Chief Mike Krantz.

2:57 The deceased at the scene include three children, ages 5, 8, and 11.

3:03 And one teacher.

3:04 The shooter is also dead, shot, police say, by a community member who ran into the school when they realized what was happening. Investigators say they do not know if the attacker knew anyone at the school or if they were a former student. Matt Piper, Bloomberg Radio.

3:18 All right, Matt, thank you. And of course, we'll continue to bring you the latest developments on that story as they become available. We want to turn now to politics and the midterm elections, which are just a few weeks away. A key debate took place in Alaska last night between Republican Senator Dan Sullivan and Democratic challenger Mary Patola. Sullivan emphasized his differences from President Trump just days after the president rallied for his reelection in the state. He says he opposed Trump's proposal to allow Russia to sell diesel in the international market.

3:48 I put a statement out opposing it. I don't think it's a good idea at all. I just led the effort on the Russian Sanctions Act that passed the Congress. So I'm opposed to that.

4:00 Meanwhile, Democrat Mary Patola aimed to portray Sullivan as part of the Washington establishment. Prices are too high for hardworking Alaskans and DC politicians are waging forever wars that are skyrocketing our costs. Democrat Mary Patola has consistently pulled narrowly ahead of incumbent Republican Senator Dan Sullivan in a race that could decide control of the Senate.

4:22 And Karen, we saw another key Senate debate a long way from Alaska last night in Maine, where incumbent Senator Susan Collins faced off with Democratic challenger Troy Jackson. Collins aimed to highlight her independent record as a longtime Republican senator.

4:36 At one point, I had organized people to vote against Secretary Hegseth.

4:43 At one point in the debate, a protester interrupted and yelled at Senator Collins about the environmental impact of data centers. It led to a viral exchange between Jackson and Collins.

4:53 So this is obviously one of Troy's supporters.

4:56 Oh, shut up. I didn't know that kid.

5:00 Democratic challenger Troy Jackson and Maine Republican Senator Susan Collins are within the margin of error in recent polling.

5:07 In Massachusetts, Alexis, it was the second and final debate between the two gubernatorial candidates. Governor Maura Healey and Republican challenger Mike Minogue traded competing claims about taxes, energy costs, and government accountability. Healey and Minogue have one of their clearest splits on abortion, and it was on full display when moderators presented by a consortium of media outlets asked the candidates whether they would support an effort to repeal a law that makes it easier for a woman to receive the procedure later in pregnancy.

5:39 I trust women. I trust women and their doctors. Mike Minogue doesn't. Mike Minogue doesn't. There's only one of us here who will protect women's access to health care. I will protect women's access to health care in Massachusetts.

5:53 Mike Minogue won't.

5:54 To say that I don't respect women is a cheap shot.

5:58 You're better than that.

5:58 And let's make sure we talk about the issues.

6:00 And again, this is what politicians do.

6:03 They want us to take extreme positions.

6:05 They want us to hate each other.

6:06 I see people as neighbors and we can solve problems together.

6:11 And Governor Healey holds a commanding lead in September polls from Mass Inc. Polling and the University of New Hampshire Survey Center. Healey led both polls with more than 50 percent of the total vote, while Minogue garnered less than 40 percent of support from respondents.

6:25 Turning now to the latest developments in the war in Ukraine, a senior U.S. official says President Trump did not order any limitations on Ukraine's access to SpaceX's Starshield satellite technology. It follows accusations from Ukraine's President Zelensky that restricted access led to civilian deaths. Zelensky spoke earlier about the war and Ukraine's need for energy assistance.

6:47 And really, our agenda is energy needs. This is point number one. And of course, we want to end this war as quick as possible. We don't see now signals from Russian side that they are ready for this, to end this war.

7:03 That's why we have to prepare for the winter.

7:05 Ukrainian President Volodymyr Zelensky was speaking at the EU Leaders Summit in Brussels.

7:11 Now to the latest on the war in Iran, Alexis. President Trump declined to rule out using the mother of all bombs on Iran after the U.S. midterm elections in an interview with the Newsmax last night.

7:22 The mother of all bombs is not nuclear.

7:24 Okay, not tactical nuclear?

7:26 No, no, it's not.

7:26 Nuclear at all.

7:27 This is just an extremely large bomb. It's like a tiny nuclear bomb. But the mother of all bombs is one big bomb, but it's not nuclear. No, I wouldn't use nuclear. We don't have to. We're the greatest nuclear power.

7:39 In the world.

7:40 We have more in nuclear than Russia. Russia's second, China's third. And China's way behind, but they'll catch us within five years, which is, you know, the whole thing is a shame because I'd love to denuclearize if possible.

7:53 And President Trump mentioned the U.S. is weighing a future strike against Iran's pickaxe mountain and its tunnel complex. And when asked if he trusted Israeli Prime Minister Benjamin Netanyahu, the president said, quote, I don't trust anyone.

8:06 Well, elsewhere in geopolitics, Taiwan is preparing to tighten export controls on AI chips. That's what its economy minister is telling Bloomberg. Restricted AI hardware shipments to China would become a criminal offense under the planned measures. The controls would bring Taiwan's rules more closely in line with U.S.

8:23 Restrictions.

8:24 This move comes as Washington steps up efforts to curb chip smuggling in China.

8:29 Alexis, President Trump's midterm campaign blitz arrives in Georgia for a rally with top Republican candidates Matt Collins and Rick Jackson. Trump's strategy is part of the White House effort to boost Republican enthusiasm in the election, and the rally comes as Republican candidates in Georgia, a critical battleground state, need to appeal to more than just Trump supporters to defeat their Democratic opponents.

8:51 Well, Karen, CoreWeave's credit risk has now climbed to a new record as the AI cloud company's high-yield bonds extend their declines. Let's get the very latest now from Bloomberg's John Tucker.

9:01 Good morning, John.

9:02 And Alexa's market's now pricing in more than a 60% chance of default by the Livingston, New Jersey-based company within five years. Shares of the AI cloud computing provider slumping 15% Wednesday before rebounding slightly yesterday. Its debt due in 2032 was quoted at about 78 cents on the dollar, a precipitous drop that Elon Musk flagged with a yikes on his social media platform. And the pressure comes as Bloomberg has calculated that the company's three co-founders have sold $ 3. 3 billion of shares since its IPO. The company says the founders remain major shareholders and their stock sales were pre-scheduled and fully disclosed. I'm John Tucker, Bloomberg Radio.

9:48 Coming up on 511 on Wall Street, time now for a look at some of the other stories making news in New York and around the world. For that, we're joined by Bloomberg's Michael Barr. Good morning, Michael.

9:57 Good morning, Alexis. White House Press Secretary Katie Zinke. who President Trump described as an attorney, acknowledges she never passed the California bar exam. Zachariah spoke to Fox News and Sean Hannity.

10:09 I graduated Pepperdine, got married in the same week, and we had all intent to move out to China. I had already preregistered for the bar exam, and during— basically during the summer, I knew I would be living in China, and the results of the bar were inconsequential, and I sat for it because I didn't want to have a withdrawal.

10:31 and then I moved over to China and where I did get a job in an international practice of a Chinese law firm.

10:38 Zachariah says that she was advised she could call herself a lawyer but not an attorney. Vice President J.D. Vance says that anybody who is selling access to the White House should suffer consequences. Vance spoke with CBS Evening News anchor Tony Duckerville.

10:54 First of all, somebody selling access to the White House, that's disgusting and despicable and they should suffer consequences.

10:58 What I'm saying.

10:59 Is I want to make those judgments based on the facts and not based on a random news media report that I read.

11:06 Fair enough.

11:06 So when the facts are being investigated, Let's say in January, if there's a Democratic-controlled Congress, will you comply and honor subpoenas?

11:15 Of course. Of course I will. Look, I mean, we follow the law. I follow the law.

11:21 Vance spoke during a one-hour town hall in Michigan that is set to air on Saturday evening, less than three weeks before the midterm elections. The ICE agent in Houston who struck a man with an SUV last weekend is said to be on leave. The man hit, Miguel Parra Hernandez, is an undocumented immigrant from Mexico living and working in the U.S. for 30 years. Parra Hernandez, who is 48, has had surgery for a broken leg. Global News, 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg.

11:54 Thanks, Michael.

11:54 Time now for our Bloomberg Sports Update. And for that, we bring in John Stashower.

11:59 Thanks, Karen.

12:00 Wins last night for the Brewers and Broncos. For Milwaukee, a come-from-behind 6-4 win over the Dodgers to complete an NLCS sweep. Dodgers led 4-0 after a showy Otani three-run homer, but they failed to score after the second inning. The World Series begins next Friday in Milwaukee. They'll face Cleveland or Tampa Bay. The Guardians won game 3-3-2. lead the series 2-1 with game four tonight. That win for Denver came in overtime. The Broncos intercepted Seattle's Sam Darnold. Will Lutz kicked the game-winning field goal. The Broncos won 17-14.

12:29 That's your Bloomberg Sports Update.

12:33 Stay with us. More from Bloomberg Daybreak coming up after this.

12:41 Coast to Coast on Bloomberg Radio.

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12:45 And around the world on Bloomberg.com and the Bloomberg Business App.

12:49 This is Bloomberg Daybreak.

12:52 And looking outside the window, that is the metaphor Fed Chair Kevin Warsh brought to the IMF's annual summit in Bangkok. He says rather than look to the past or make predictions about the future, he wants to look out the window at each Fed meeting and see the economy in the present. Warsh was speaking to the IMF head, Kristalina Georgieva, about the global economy, AI, and productivity. Let's take a listen.

13:15 20 years ago at meetings like this, we'd talk about secular stagnation.

13:19 Boy, that seems, I don't know if it was as.

13:23 Inaccurate then as it seems now, but right now we have structural growth.

13:28 We have an investment surge.

13:30 It's not hitting every country at the same element, but in the United States, We're having a massive investment surge, and it makes me think, Kristalina, the idea of secular stagnation suggested that that was somehow inevitable. There was nothing policymakers like you and me.

13:46 Could do about it.

13:47 If we learned anything since my last time sitting in a post like this and now, there's a lot we.

13:53 Can do about it. Policy matters. The investment surge isn't by accident.

13:57 It's because of the consequence of good policy, both macroeconomic policy, but also, as you've heard about in the last week or two from new Nobel Prize winners, the micro foundations. And decent macro policy and strong micro foundations can lead to an investment surge. It's probably the most important thing that's happening in the global economy on the upside. Mm-hmm.

14:19 But to be balanced, as we central bankers have to be, I came out of meetings here yesterday and today, and it's hard to be in a discussion with central bankers and not compare notes and hear the same thing about the surge in prices.

14:34 It obviously affects each of us differently.

14:38 At the Federal Reserve, we made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago. I don't prejudge meetings. I don't believe in saying now what I might do at the meetings that we have in the balance of this year, but that was the situation.

14:56 You just disappointed half of the audience or more.

14:58 They can all turn it off.

15:01 It's a new chapter at the Fed, and we're not in that business anymore.

15:04 But we can go in any direction you'd like. Well, this is a very good direction.

15:08 So we talk about the, you're right to say, we look out of.

15:12 The window, and what we see is an economy that in some places is booming.

15:19 It is being.

15:21 Dragged upward, mostly by enthusiasm about AI. But then you go into other places and other factors, especially the impact of war, is dragging economies down. One thing that is happening everywhere, whether your economy is going up or it's going down, is the stubborn inflation, price pressures that are coming from everywhere. And one of the sources.

15:58 Of course, it's the energy shock in the Middle East and the energy shock from war. But one of the sources is this investment enthusiasm about AI. So my question is, from a monetary policy perspective, how should we think about the impact of AI in the short.

16:21 Term, in the long term?

16:24 Is there anything that we are paying too little attention? It should be paying more attention today.

16:32 So it's a great question. A couple things. First, Chris Lee, you pronounce it A-I.

16:37 In the U.S., we now pronounce it S-I, just so you know.

16:42 So it's probably.

16:44 Can I say potato, potato?

16:47 That's right. It was just a....

16:49 I don't know how that's going to translate for the countries around the world with teams of folks. I'd say the advent of this new technology is probably the most consequential.

17:00 Change to the U.S.

17:02 And the global economy in my lifetime to this point.

17:06 So I take it seriously, but as a.

17:08 Central banker, also soberly, responsibly.

17:13 I'd say it's going to do several things.

17:14 First, It's obviously hitting the demand side of the economy before it's going to hit the supply side of the economy.

17:22 So if you're a central.

17:23 Banker and you're in the business of trying to ensure stable prices and full employment, you've got to recognize this.

17:28 As a shock.

17:30 But it's a positive supply shock in the medium term.

17:33 I do fundamentally believe that.

17:36 But on the path to that positive supply shock, we're seeing increases in aggregate demand.

17:41 It just is what it is. But I think of this shock differently than those other shocks you talked about, shocks of war and military conflict and the rest.

17:50 This one, there really is, I think, a huge benefit to the global economy, to the U.S.

17:56 Economy over the horizon.

17:57 And that's Fed Chair Kevin Warsh speaking to Kristalina Gorgieva, the managing director of the IMF. We want to get more on Warsh's appearance. We're going to speak with Lisa Abramowitz, host of Bloomberg Surveillance on Bloomberg Television. And Lisa is covering the meeting in Bangkok. Lisa, good morning. Thanks so much for being here. Hey, let's begin with your takeaway from what you heard from Kevin Warsh.

18:19 That he didn't want to say anything.

18:20 I mean, look, the takeaway is he's not going to really comment on Fed policy. And that is what people were interested in hearing, especially after the hotter than expected CPI and PPI reports.

18:30 In the United States.

18:31 So full stop, people were looking for some sort of commentary about whether more removal of accommodation, the removal of a dose of accommodation, to use his words, was warranted. That said, he also talked in general terms about some of these broad frameworks that he has referenced before. And he talked about the task forces, in particular, the one tied to artificial intelligence. I've been saying this, and I do think that it's relevant. He kind of was chief diplomat for the United States this particular trip, even though he is the head of the Central Bank, just because he was the top-ranking U.S.

19:04 Official to be here. Scott Besson did not come.

19:08 He would have been the top-ranking official as Treasury Secretary and would have had much more of a policy role. So it's interesting to hear him, Fed Chair Warsh, talk about this. some of the policies in the U.S. that have been pro-growth from that vantage point. But we didn't learn anything particularly new other than this is someone who clearly wants to be on a global stage talking to people and working in coordination amid what he said was a positive global tightening cycle.

19:36 Well, was there anything you wanted to hear from any of the other speakers that we heard at the IMF, including Bank of England Governor Andrew Bailey, for example?

19:43 Yeah, I think that it has been a really fraught exercise for a lot of the central bankers in Europe in particular, where the European central bankers talked about not seeing a broadening out in the inflationary pressures beyond gas prices, beyond energy costs. They're between a rock and a hard place.

20:00 At this meeting, I feel like Europeans have kind of been on the back foot and have had to justify their plans, their proposals. And honestly, a lot of people have been asking, how is this region going to attract capital? So you could feel that tension underpinning some of their comments. The idea of saying we're not going to torpedo growth and we are going to be aware and combating inflation.

20:22 It's an uneasy mix and you could feel that in some of their comments.

20:26 And were there more comments about artificial intelligence as well? Because that really seemed to be a focus for Warsh.

20:31 Yeah, I mean, I think this was a meeting where the two-sided risk of AI was very present. And there is a real skepticism right now about how much efficiency there will be. I mean, granted, people do believe it's real. People do believe that it will be adopted. But there is concern about the total amount of debt being sold, about all of the IPOs and different types of share sales that are on deck. So that concern was also in tandem with the enthusiasm.

21:00 Six months ago, it would have been much more of.

21:02 The enthusiasm and less of that sense of restraint.

21:05 And that was really my takeaway there.

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21:56 And I'm Alexis Christophorus. Join us again tomorrow morning for all the news you need to start your day, right here on Bloomberg Daybreak.