'Bloomberg Surveillance Simulcast' (06/22/23)
>> THE FED HAS BEEN TRYING TO TALK THIS MARKET DOWN AND IN THE END, THE EQUITY MARKET HAS IGNORED IT. >> FOR AND SECTORS ARE PERFORMING IN DIFFERENT WAYS. >> THE MARKET HAS GOTTEN MORE SELECTIVE. >> THE ECONOMY IS LESS INTEREST RATE SENSITIVE THAN WE THOUGHT. >> EVERY INDICATOR OF A RECESSION IS FLUSHING DEEPLY RED.
>> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. TOM: GOOD MORNING, IT IS BANK OF ENGLAND DAY. WE WILL DECLARE VICTORY WITH A SMART SET OF GUESTS ACROSS THIS MORNING. WE DON'T HAVE GOVERNOR BAILEY WITH US, BUT IF WE DID, IT WOULD BE INTERESTING. LISA: ESPECIALLY BECAUSE MARKETS ARE PRICING IN 6% RATES FOR THE BANK OF ENGLAND BY DECEMBER. THIS IS SOMETHING PEOPLE HAD
NOT EXPECTED AND THIS ALMOST GUARANTEES A RECESSION. THE QUESTION IS, IS THAT INEVITABILITY ANYWAY AND A QUESTION OF HOW MUCH THEY CAN MODERATE THE INFLATION IN THE PROCESS. TOM: ADAM POSEN OF THE PETERSON INSTITUTE TAKING THE HIGH GROUND ON THE TELEGRAPH. I'M GOING TO GO BEYOND THE
BANNER. HE SAYS THE UNITED KINGDOM NEEDS 6.5% RATES, MAKES IT CLEAR THAT MAYBE EVEN HIGHER THAN THAT. SAY GOOD MORNING, JONATHAN FERRO ON ASSIGNMENT. LISA: ON OCCASION. -- VACATION.
TOM: A DIFFERENT EYELID, IT IS VERY NICE. NOT WITH US WHICH MAKES US LESSER DISEASE VERY GOOD AT THE BANK OF ENGLAND WHILE HIS AMERICANS TRY TO KEEP UP. LISA: THE APPETIZER IS SHOCKING. WHAT WE GOT FROM THE SWISS
NATIONAL BANK, A SURPRISE RATE HIKE, THE NORWEGIAN CENTRAL BANK SAYING MORE IS NEEDED. IT HAWKISH TONE ACROSS THE BOARD AND IT RAISES THE QUESTION, WHAT ARE CENTRAL BANKERS STILL GETTING WRONG? TOM: IT MAKES IT IMPORTANT. YOU DON'T SEE IT IN THE HEADLINES IN FINANCIAL MEDIA THIS MORNING BUT THERE IS TERRIFIC ATTENTION -- TENSION THERE. THANK YOU FOR POINTING THIS OUT ON TWITTER, TWO-YEAR, 10 YEAR YIELD, WE ARE NOW THROUGH 100 BASIS POINTS THAT HAPPENED A COUPLE OF HOURS AGO. LET'S TAKE A MOMENT OF SILENCE FOR PRIYA MISRA. IRA JERSEY ALSO QUITE GOOD. LISA: THIS IS THE KEY QUESTION.
IS THE STOCK MARKET WAKING UP TO WHAT THE REIT'S MARKET HAS BEEN SAYING FOR A LONG TIME? YOU DID NOT SEE A BIG MOVE IN RATES, YOU DID SEE THE THIRD STRAIGHT DAILY DECLINE IN TECH STOCKS IN THE NASDAQ SECTOR. TOM: I USE A TRADING ENVELOPE, PA FUNCTION, WHICH SETS UP THE STANDARD SHOULD MOVEMENT IN A SERIES -- DEVIATION MOVEMENT IN A SERIES. I'M LOOKING HERE FROM TWO STATED DEVIATIONS, WE HAVE COME BACK, THE TWO SWEET, A LITTLE GLOOM. LISA: LET'S CORRECT THE RECORD.
I WAS NOT SAYING THIS IS THE END ALL BE ALL A WE WILL GET THIS CRASH. I'M SAYING THERE IS A BIGGER REACTION IN EQUITIES AND BONDS. ARE EQUITIES COMING TO THE REALIZATION, TRYING TO GRAPPLE WITH THE IMPLICATION OF HIGHER RATES FOR LONGER WHICH IS WHAT THE FED AND OTHER CENTRAL BANKS ARE SAYING. TOM: LISA HAS AN IMPORTANT BRIEF COMING UP IN 10 MINUTES. COMING, THE FRENCH FINANCE
MINISTER AND MR. EMMANUEL MACRON WITH AN ANNOUNCEMENT HARRIS AND FRANCINE LACQUA WITH A CONVERSATION WITH BRUNO LE MAIRE. LISA: IF THINGS HOLD, WE ARE SEEING A 4TH STREET -- FOURTH STRAIGHT DAY, THE LONGEST STREAK GOING BACK TO MAY.
THIS COMES AS TO YOUR YIELDS ARE AROUND THE HIGHEST IN THE U.K., GOING BACK TO 2008. 6% U.K. RATES BY THE END OF THIS YEAR. IT SEEMS TRICKY. IN TERMS OF THE ECONOMIC DATA, 8:30 A.M. JOBLESS CLAIMS, THE CURRENT ACCOUNT BALANCE, 10:00 A.M. U.S. EXISTING HOME SALES,
INTERESTING GIVEN THE RESILIENCE IN THE SECTOR. JOBLESS CLAIMS TICKING UP. IS THIS ENOUGH TO GIVE PEOPLE CONFIDENCE THE LABOR MARKET IS LISTENING TO THE DEGREE THEY WANT TO SEE IT? LISA: -- YOU HEARD FROM ALTON GOOLSBY SURPRISINGLY HAWKISH, A CLOSE CALL NOT TO HIKE RATES AND FED CHAIR JAY POWELL BASICALLY TOWING THE LINE WITH A LITTLE MORE OF A HAWKISH TONE. TOM: WE HAVE A BUSY TOP OF THE HOUR.
WE HAVE THE FACES OF THE FED SPEAKING TODAY. FOR ALL OF YOU WORLDWIDE, THIS IS THE AMERICAN DIFFERENCE WITHIN THE FEDERAL RESERVE SYSTEM. EACH OF THESE PEOPLE IS HIGHLY UNIQUE. TO MASTER, THE MATHEMATICIAN AND BARKAN WHO IS OUTSTANDING A BUSINESS PROCESS, TWO IDEAS. WE'RE WAITING FOR BRUNO LE MAIRE, JOINING US FOR A BRIEF WITH FRANKLIN MUTUAL. KATRINA, ARE THE INTEREST RATES GOING TO DRIVE HIGHER? KATRINA: YOU ALREADY HAVE THE IMPLICATION FROM POWELL THAT WE'VE GOT AT LEAST ANOTHER TWO RATE HIKES BEFORE THE END OF THE YEAR. I THINK WE NEED TO TRUST THE
FED. YOU TALKED BUT HOW SMART THE PEOPLE IN THE ROOM ARE AND IF THEY ARE INDICATING THIS IS JUST A PAUSE AND IT WAS DONE ON THE MARGIN, YOU GOT ANOTHER TWO RATE HIKES COMING. LISA: THE BONDS OF CHRIST IN MORE HAWKISH CENTRAL BANKS. STOCKS SEEM TO BE WAKING UP, WHAT IS YOUR VIEW OF? KATRINA: THERE HAS BEEN AN AI TREND WHICH IS DEFLATIONARY. IT IS REPLACING A CERTAIN AMOUNT OF FUNCTIONALITY THAT WAS DONE BY HUMANS OFTEN WITH TECHNOLOGY. YOU GOT A DEFLATIONARY TREND, THE PERFORMANCE AND THE EQUITY MARKETS, ON THE BOND SIDE YOU'VE GOT A LOT OF FEAR BECAUSE THE FED CONTINUES TO HIKE.
THEY HIKING BECAUSE WE KEEP SEEING -- I THINK THE EQUITY MARKET IS BEING RATIONAL. WE HAVE SEEN IN THE LAST COUPLE OF DAYS THAT SELLOFF, AND IS AFFECTING THE INTEREST RATE TOOLS NEAR THE BACK END OF THE TECH COMPANY EARNINGS. LISA: SO YOU DON'T THINK IT IS -- HAS LEGS. AND YOU MIGHT LEAN INTO THE IDEA THAT SECTORS ACT AS A HAVEN GIVEN THAT THERE ARE DIFFERENT FACTORS UNDERPINNING SOME OF THE RALLY. IS THAT CORRECT? KATRINA: IF YOU LOOK AT WHAT IS DRIVING IT, WE DON'T HAVE A LOT OF BREATH IN THE S&P RALLY. THERE IS A BIG MOVE IN STOCKS
BUT IF I LOOK AT DIFFERENT MARKETS, JAPAN, THE EUROPEAN EQUITY MARKET, THE EUROPEAN EQUITY MARKET FACING THE SAME RATE HIKE CYCLE BUT YOU DON'T HAVE THAT LACK OF BREADTH AND THE MARKET IS STILL HOLDING UP WELL. THE ECONOMY IS JUST NOT THIS INTEREST RATE SENSITIVE AS IT HAS BEEN IN THE PAST. WE ALSO NEED TO THINK ABOUT IN TERMS OF WHAT THE ABSOLUTE RATES ARE. A LOT OF PEOPLE ARE FOCUSED ON THE RATE OF CHANGE. THE LEVEL OF INTEREST RATES
THAT WE ARE TALKING IS A LEVEL THAT IS MANAGEABLE FOR COMPANIES. THAT IS WHAT WE NEED TO FOCUS ON. MANAGEABLE INTEREST RATES ON A TREND PEOPLE CAN PREDICT. TOM: I WOULD SUGGEST THERE IS A TREND OF STASIS, HEALING, A LITTLE PRICE UP AND YIELD DOWN.
WHAT HAPPENS WITH THE BLOOMBERG TOTAL RETURN INDEX, GLOBAL, U.S.? WHERE PRICE GIVES WAY? WHAT WILL BE THE BEHAVIOR RESPONSE IF WE GET PRICE DOWN, YIELD UP? KATRINA: IF WE LOOK AT WHAT IS HAPPENING WITH YIELDS, WE ARE USING YIELDS AND ALL OF THE CENTRAL BANKS TO FIGHT INFLATION. GOT TO SEE SOME ABATING OF THAT. YOU HAVE SHOWED THE CHART EARLIER. WE ARE STARTING TO SEE A TICK UP IN THE INITIAL JOBLESS CLAIMS. THAT IS THE OTHER FACTOR THE FED IS WATCHING. BUT EVERYBODY THAT WE TALK TO
YOU, PARTICULARLY AROUND THE MANUFACTURING ECONOMY, WHICH IS THE ENGINE OF THIS ECONOMY AND WHAT IS BEING REASSURED IN THE UNITED STATES, IS HOLDING ON TO IT. THEY'RE LOOKING AT THIS TO TRAIN THE NEXT GENERATION. AS LONG AS WE CONTINUE TO HAVE THE LABOR MARKET STRONG, THE FED CAN KEEP RAISING RATES TO FIGHT INFLATION WITHOUT CAUSING A SIGNIFICANT DEEP RECESSION. MAYBE WE HAVE A SMALL CORRECTION BUT I DON'T THINK WE ARE LOOKING AT HAVING A DEEP RECESSION HERE. TOM: THANK YOU, KATRINA DUDLEY FROM FRANKLIN MUTUAL SHARES. THIS IS A JOY. FOR AMERICA AND SUMMER, IT IS
WHERE WE ARE HEADING. WITHOUT QUESTION, EVERYONE I TALK TO, THERE IS ONLY ONE ESTIMATION. --DESTINATION. IT IS PARIS. IT IS STUNNING TO SEE THE NUMBER OF PEOPLE MIGRATING TO FRANCE, LEADING THE WAY IS FRANCINE LACQUA FROM LONDON AND THE CONFERENCE OF EMMANUEL MACRON ON THE CLIMATE AND FUNDING FOR POOR NATIONS. SHE IS IN CONVERSATION WITH THE TOUR DIRECTOR FOR PARIS, TELLING US ABOUT THE HIGHLIGHTS, BRUNO LE FRANCINE: YOU COULD NOT BE MORE RIGHT. EVERYONE IS HERE IN PARIS. TALKING ABOUT FINANCE
SUSTAINABILITY AND HOW TO TACKLE POVERTY WHICH IS SPEARHEADED BY THE PRESIDENT OF FRANCE BUT ALSO THERE WAS FASHION WEEK AND IT DOES SEEM LIKE EVERY AMERICAN AT NOON -- EUROPE HAS DECIDED TO DESCENDED ON PARIS. PARIS IS BUZZING. IT IS RAINING TODAY BUT IT IS BACK WITH A VENGEANCE. WHAT ARE YOU TRYING TO ACHIEVE AT THIS CONFERENCE? MONEY TRANSFER, DEBT FORGIVENESS OR KEEPING THE MOMENTUM? BRUNO: TO KEEP THE MOMENTUM AND HAVE NEW ARCHITECTURE FOR THE POLISH COUNTRIES OF THE WORLD. BACK HOME WE DON'T WANT THE COUNTRIES TO BE CONFRONTED WITH A CHOICE BETWEEN FIGHTING AGAINST EXTREME POVERTY AND FIGHTING AGAINST CLIMATE CHANGE. WE WANT TO PROVIDE ALL OF THE FINANCIAL MEANS FOR THOSE COUNTRIES TO BE EFFICIENT IN THE FIGHT AGAINST POVERTY AND THE FIGHT AGAINST CLIMATE CHANGE. THIS IS THE KEY POINT OF THE
SUMMIT AND I THINK THE KEY POINT WOULD BE NEW ARCHITECTURE FOR THE 21ST CENTURY. FRANCINE: ARE YOU FRUSTRATED THAT IT IS TAKING THIS MUCH TIME? WE NOT -- WE HAVE NOT SEEN CHINESE OFFICIALS AND U.S. OFFICIALS TALKING ABOUT THESE ISSUES BUT YOU HAVE PUSHED VOTING RIGHTS IN THE IMF. HOW IS THAT GOING? BRUNO: WE ARE TOTALLY DETERMINED TO HAVE A FINAL POSITIVE OUTCOME FOR THE SUMMIT. I THINK WE ARE MOVING IN THE RIGHT DIRECTION AS FAR AS THE DEBT RESTRUCTURING IS CONCERNED.
WE WANT TO MOVE FASTER, QUICKER. WE COULD HAVE A POSITIVE OUTCOME AS FAR AS ZAMBIA AND SRI LANKA IS CONCERNED. TO HAVE THE CHINESE PRIME MINISTER HERE IN PARIS TODAY TALKING WITH THE HEAD OF STATES, THIS IS A VERY POSITIVE OUTCOME. WE HAVE A NEW PRESIDENT OF THE
WORLD BANK AND WE ARE DEFINING A NEW ORDER, PROVIDING MONEY FOR THE POLISH COUNTRIES. THINGS ARE MOVING IN THE RIGHT DIRECTION AND THE FINAL OUTCOME SHOULD BE POSITIVE. FRANCINE: IN THE CORRIDORS THEY TALK ABOUT TRADE, THE FACT THAT SECRETARY BLINKEN WAS IN CHINA, THE FACT THAT WE HAVE PRESIDENT XI -- WHAT DOES THIS MEAN FOR GLOBAL GROWTH? BRUNO: IT IS GOOD NEWS BECAUSE WE WANT TO IMPROVE THE RELATIONSHIP BETWEEN THE THREE CONTINENTS, CHINA, THE U.S., EUROPE. WE ARE DETERMINED TO DEFEND
THEIR OWN ECONOMIC INTERESTS IN EUROPE. WHICH IS NOW AT THE CORE OF THE FUTURE HAS BEEN DEFINED BY PRESIDENT MACRON. WE WANT TO DEFEND TECHNOLOGICAL ASSETS AND ECONOMIC INTEREST WHILE TALKING WITH CHINA BEING AWARE THERE IS A NECESSITY TO HAVE THE TOOLS TO DEFEND ECONOMIC INTERESTS. >> THE ECONOMY IS EXTREMELY COMPLEX. WE NEED TO ATTRACT IN EUROPE AND IN FRANCE SPECIFICALLY MORE.
>> WE ARE OPEN TO CHINESE INVESTMENTS IN FRANCE. WE HAD YESTERDAY A VERY FRUITFUL DISCUSSION BETWEEN THE PRIME MINISTER OF THE CHINESE REPUBLIC AND WE MADE VERY CLEAR THAT THERE IS ANY WILLINGNESS TO INVEST MORE IN FRANCE AND EUROPE FOR INSTANCE ON THE EEEV'S IN THE BATTERIES. FRANCINE: WE HAVE A LOT OF U.S. VIEWERS AT THIS TIME IN THE DAY. WOULD THEY WORRY THAT INVESTMENT THAT COULD HAVE GONE TO THE U.S. IS GOING ELSEWHERE INCLUDING EUROPE? BRUNO: IT MEANS A LOT OF NEW INVESTMENTS IN BATTERIES AND EV'S. THERE IS A PLACE FOR EVERYBODY. WE SHOULD BE CAUTIOUS IN THE WAY WE ARE DEFENDING TECHNOLOGICAL ASSETS OR KEY TECHNOLOGIES.
THE FIGHT AGAINST CLIMATE CHANGE WILL PAY THE WAY -- PAVE THE WAY FOR NEW INVESTMENTS AND INNOVATIONS. WE HAD FRUITFUL TALKS AND CONSTRUCTIVE TALKS BETWEEN THE U.S., OF THE EU AND CHINA. HOW DIFFICULT IS IT -- FRANCINE: INFLATION OF COURSES GOING UP WHICH LEADS TO HIGHER INTEREST RATES. AT THE SAME TIME YOU NEED TO DEAL WITH THIS BECAUSE OF FUTURE DEFICITS. BRUNO: FINE TUNING I WOULD SAY. TO BRING THE PRICES DOWN. THE NEW HAVE TO TAKE INTO
ACCOUNT THE NECESSITY TO COME BACK TO SOME PUBLIC FINANCES. I JUST ANNOUNCED LAST MONDAY WE WOULD CUT IN PUBLIC BY 10 MILLION EUROS BY THE NEXT 2024. COMING BACK TO SOME FINANCES AND STICK TO THE PATH OF REFORM WHICH IS TWO KEY REFORMS. REFORMING THE MARKET AND PENSION REFORM.
FRANCINE: DO YOU NOT WORRY INTEREST RATE HIKES WILL BE SO SEVERE THEY'D HAVE TO PUT THEM INTO A RECESSION TO ACHIEVE THEIR TARGET? BRUNO: IF YOU WANT TO AVOID RECESSION YOU HAVE TO FIND THE RIGHT BALANCE BETWEEN PRIVATE AND PUBLIC FINANCES AND KEEPING A HIGH LEVEL OF INVESTMENTS IN THE FIGHT AGAINST CLIMATE CHANGE. SINCE WE HAVE -- THIS BALANCE WE WANT TO PRESERVE. WE ARE IN THE PROCESS OF DEFINING THE NEW RULES FOR EUROPEAN COUNTRIES. WE WANT THOSE NEW RULES TO KEEP
THE RIGHT BALANCE BETWEEN INVESTMENTS AND SOME PUBLIC FINANCES. WE NEED FLEXIBILITY OF COURSE, WE NEED COUNTRIES TO OF I'D -- TO ABIDE BY THE RULES. THE KEY FACTORS TO KEEP A HIGH LEVEL OF INVESTMENTS IN INNOVATION. >> THANK YOU FOR JOINING US. WITH THAT I WILL HAND IT BACK TO YOU.
TOM: WE WISH WE WERE HERE. FRANCINE LACK WHILE -- FRANCINE LACQUA WITH BRUNO. IT'S NOT OFTEN A FINANCE MINISTER MAKES A SPLASH THAT HE'S MAKING. THE FRENCH IS LACKING. LISA: I WILL SAY -- I WONDER IF PARIS WILL BECOME THE NEW WALL STREET. TOM:
THAT'S A LOADED QUESTION. THERE'S MOMENTUM HAPPENING FROM LONDON. THAT'S THE IMMEDIACY. WE DO A DATA CHECK TOWARDS THE BANK OF ENGLAND AS LISA MENTIONED. EQUITIES A LITTLE LIGHT. I'M GOING TO GO TO THE YIELD A ALL START WITH A HEADLINE 99 BASIS POINTS.
MASSIVE AND CURVE INVERSION A NUMBER OF MONTHS AGO. YIELDS CREEP UP. LISA: THAT'S THAT YIELD CURVE INVERSION YOU'RE SEEING THE TWO YEAR YIELD AT THE HIGHEST LEVEL GOING BACK TO MARCH 9 RIGHT BEFORE THE BANKING CRISIS. FED CHAIR JAY POWELL IS CORRECT SO FAR THAT INFLATION EXPECTATIONS OVER THE LONGER TERM ARE CONTROLLED. WHEN DOES THAT CHANGE. WHEN WE SEE THESE UPSIDES TO
INFLATION. WHEN DO WE SEE THAT LONGER END CREEP HIGHER? TOM: THERE'S WORRY ABOUT ECONOMIC SLOWDOWN AND THAT'S A DYNAMIC WE FACE HERE FROM THE GOVERNOR OF THE BANK OF ENGLAND HERE IN A BIT. I ALSO NOTE THIS IS THE DAY THE CURRENCY MARKET AGAIN TO ADJUST. FOR WAKING UP IN AMERICA, THREE BANKS ACTING TODAY.
TO BORROW FROM PETER HOOPER THIS WAS HAWKISH OUT OF OSLO. LISA: IT WAS CLEAR WITH WHAT WE GOT FROM LAST WEEK FROM THE FEDERAL RESERVE. 3.7 5% IS THE NEW RATE. THEY ARE FURTHER BEHIND THE UNITED STATES. STILL, INFLATION IS A PROBLEM. IT IS NOT ABATING AND THAT IS THE THEME. TOM: THE CURRENCY MARKET BREAKS. YEN GIVES AWAY. EURO, 110 PRINT. LOOKING AT STRONGER EURO.
CONFIRMED THROUGH STERLING. THIS ARGUMENT ABOUT 25 OR 50 BASIS POINTS. SO MUCH OF THE STORY OF EUROPE AND WHAT WE WILL SEE FROM GOVERNOR BAILEY IN 39 MINUTES IS ABOUT ENERGY. AND MAYBE THE BETTER TONE OF WEST TEXAS INTERMEDIATE. BUT FAR MORE -- OLGA IS THE DEPUTY DIRECTOR EUROPEAN ENERGY SECURITY. THANK YOU FOR BEING SO PATIENT WITH US. WITH THE FRENCH FINANCE MINISTER INTO THE SHOW AS WELL.
HOW MUCH IS THE WAR IN UKRAINE, THE GEOGRAPHY OF THE DAM BREAK, HOW MUCH IS THIS AFFECTING CONTINENTAL AND UNITED KINGDOM OIL PRICES? >> WHAT HAPPENS IN UKRAINE DOES NOT STAY IN UKRAINE. ANY KIND OF INSTABILITY PARTICULARLY THE HORRENDOUS COST OF THE WAR WILL HAVE GLOBAL IMPLICATIONS ON PRICES SO NOT JUST IN EUROPE BUT THE RISKS AND UNCERTAINTY AROUND UPCOMING WINTER. IT'S HARD TO PINPOINT EXACT PERCENTAGE POINT LINK BUT I WOULD SAY ANYTHING THAT'S HAPPENING RIGHT NOW IN THE REGION AND HOW WELL EUROPE IS PREPARING FOR POTENTIAL SHORTAGES AND OTHER UNEXPECTED EVENTS WILL DIRECTLY IMPACT THE FUTURES. >> DO WE SEE A SHIFT IN TERMS OF DIVERSIFICATION OF ENERGY SOURCES BASED ON WHAT WE'VE SEEN WITH RUSSIA? OLGA: GREAT PROGRESS MADE ON COAL AND OIL, NATURAL GAS. A LOT OF THE QUESTIONS ARE AROUND HOW PERMANENT THAT DIVERSIFICATION IS.
AS OF RIGHT NOW THERE ARE NO SANCTIONS ON RUSSIAN NATURAL GAS COMING INTO EUROPE. RUSSIA SANCTIONED ITSELF IN TERMS OF EXPORTS. THERE ARE SOME EXEMPTIONS. THERE'S SOME GAS GOING INTO EUROPE THROUGH UKRAINE AND TURKEY MUCH SMALLER QUANTITY. THE QUESTION IS HOW DO WE ENSURE THAT THE SUPPLY SECURITY IS PERMANENT AND THAT ENOUGH PROJECTS, ONLINE. HERE SEE THE PIPELINE FOR THE NEXT 10 YEARS BUT HOW DO WE ENSURE -- A LOT OF THOSE ARE TIED TO LONG-TERM CONTRACTS.
THAT WILL BE IMPORTANT TO MAKE SURE THAT GETS REPLACED. NATURAL GAS GETS REPLACED PERMANENTLY. LISA: YOU MENTIONED: OTHER SOURCES, WE JUST HEARD FRANCINE LACQUA SPEAKING WITH AIR FRANCE FINANCE MINISTER ABOUT CLIMATE CHANGE. HOW'S THE FIGHT TO FIGHT
CLIMATE ENDED, OR BEEN POSTPONED AS PEOPLE LOOK TO ENERGY SECURITY FIRST AND FOREMOST? HAS BEEN LESS DISCUSSION ABOUT THAT AND MORE AROUND THE IMMEDIACY OF FUELING THE HOMES AND CARS, BUSINESSES OF THE EUROPEAN REGION? OLGA: WE LOOK AT THE CONVERSATION DIFFERENTLY. YOU DON'T HAVE TO PICK ONE OR THE OTHER, YOU DON'T HAVE TO JUST TO SAY WE WILL FOCUS JUST ON CLIMATE, OR ENERGY SECURITY. THE TWO ARE NOW PERMANENTLY INJURED -- INTERTWINED. SO WE HAVE TO FIGURE OUT HOW TO DO BOTH. A LOT OF THE SOLUTIONS CONTRIBUTE TO BOTH OF THESE
AREAS. THERE ARE SOLUTIONS SUCH AS HEAT PUMPS THAT PROVIDE FOR MORE EFFICIENT WAYS TO MANAGE YOUR OWN TEMPERATURES. THEY CONTRIBUTE TO DECARBONIZATION AND LESS RELIANCE ON ENERGY THAT THEY NEED TO USE AT HOME. CLEAN ENERGY PRODUCTION AT HOME
ONCE AGAIN IS LESS THE RELIANCE ON ENERGY IMPORTS INTO THE COUNTRY, BUT THERE ARE OTHER SUPPLY-CHAIN CONSTRAINTS. BUT THERE IS A ROBUST BUILDOUT OF CLEAN ENERGY SOURCES AND MAKING SURE THOSE OF CHAINS ARE DIVERSIFIED SO THEY DON'T FACE THE SAME PROBLEM AS WITH THE RELIANCE. TOM: OLGA KHAKOVA, THANK YOU. IT SEEMS LIKE TWO WORLDS,
CHEAPER OIL, WE ARE CELEBRATING $71 AND $.46 A BARREL. THERE IS A UNIQUE AMERICAN THING, WE HAD MADISON AVENUE COMPLETE AND CLOGGED. WE NEED FIFTH AVENUE AS YESTERDAY JAMMED, FROM 102 ALL THE WAY TO 40TH STREET. IT WAS LIKE BEFORE THE PANDEMIC. LISA: ONE OF THE MOST CONFUSING MOMENTS I CAN IMAGINE IN THE FOSSIL FUEL SPACE. IN PART BECAUSE CHINA HAS SHIFTED TO ELECTRIC VEHICLES.
THE POTENTIAL DEMAND HAS SHIFTED IN TERMS OF TRANSPORTATION VERSUS USAGE OF FOSSIL FUELS. AND AROUND THE WORLD, THAT SHIFT IS UNCERTAIN IN TERMS OF HOW MUCH IT IS TAKING DEMAND AWAY FROM THE OIL SPACE. TOM: THERE IS HUGE MARKET TENSION WITH CURRENCIES ON THE MOVE AND NEW INVERSION. MARK CHANDLER ON SHORT NOTICE SCHEDULED TO JOIN US IN 20 MINUTES, 645 TIME.
LEADING US ON BOE WITH HIS FOREIGN-EXCHANGE EXPERTISE. AND HE MINCES NO WORDS, HIGHER FOR LONGER IS THE SHIFT FOR THE GENTLEMAN. LISA: WE HAVE SEEN THAT ACROSS-THE-BOARD IN TERMS OF RHETORIC OUT OF THE CENTRAL BANKS OF EUROPE ABOUT AS WELL AS JAY POWELL, HE DOUBLED DOWN YESTERDAY AND WE WILL HEAR IT AGAIN TODAY. TOM:
FUTURES AT NEGATIVE NINE, WE ARE INTERESTED IN BONDS AND FOREIGN-EXCHANGE. AT 8:30, MARIA TADEO IN CONVERSATION WITH THE PRIME TOM: BLOOMBERG SURVEILLANCE. GOOD MORNING. THE NEXT 30 MINUTES WILL BE WORTH WATCHING IF YOU ARE PART OF GLOBAL WALL STREET. ALSO TO STRAIGHTEN OUT MY BOW TIME FOR REVIEW--RADIO. SIMON FRENCH WILL JOIN US IN MOMENTS AND MARK TAYLOR WILL JOIN US ON THE ASTROLOGY OF THE MOMENT. AND WE MOVE ON TO BAILEY OF THE BANK OF ENGLAND AT 7:00. CHANDLER, FRENCH AND BAILEY,
LOOKING FORWARD TO THAT IN 30 MINUTES, GETTING OUT TO A MYSTERIOUS BANK OF ENGLAND MEETING. WHAT IS THE BIGGEST MYSTERY? LISA: HOW MUCH THEY CAN HIKE BEFORE THEY TORPEDO THE ECONOMY. THE 25 OR 50 WILL BE INTERESTING, BUT ARE THEY GOING TO FOLLOW UP WITH A 50 OR 25 BASIS POINT HIKE? WHAT IS THE THRESHOLD, GIVEN THE INFLATION, IT IS MUCH HIGHER THAN EXPECTED. TOM: I'M GOING TO PICK ON EURO 110.06. GLASS -- 1.1006. WHAT ELSE DO YOU SEE? LISA: I'M LOOKING AT THE POUND AND MAKING IT WEAKER. IF YOU LOOK AT THE POUND VERSUS
THE EURO, THAT IS WHAT I'M WATCHING. IT HAS BEEN FADING. THE QUESTION IS AT WHAT POINT DOES PROTECT OVERTAKE THE EXPECTATION FOR FROM THE RATE HIKES? TOM: STERLING DOLLAR IS CALLED CABLE, EURO STERLING FRANCINE LACQUA CALLS IT PHARAOH, GUSH FERRAGAMO -- FERRAGAMO. LISA: WITHIN A HALF AN HOUR BEFORE THE DECISION. THIS IS THE CONCERN, HOT INFLATION MAY FORCE IT TO END UP WITH A BASIS POINT HIKE. IT MAY BE ANOTHER PUSH FOR THE PAIN, WHERE LUCK LIKELY TO ENGINEER A HARD LANDING. WE DO NOT SEE A 50 BASIS POINT OR 75 BASIS POINT MOVE THIS WEEK AS THE LEAST BAD. THIS IS THE TENSION.
IF YOU FRONTLOAD THE HIKES AND INDUCE SOME SORT OF RECESSION, DO YOU ALLOW IT TO BE SHORTER OR ARE YOU INDUCING PAIN THAT MIGHT OTHERWISE BE AVOIDED? TOM: 27 MINUTES AWAY FROM THIS BANK OF ENGLAND READING, SIMON FRENCH, CHIEF ECONOMIST. 25 OR 50 BASIS POINT? SIMON: 25 FOR MAY BUT I WOULD ASSOCIATE MYSELF WITH THE COMMENT THERE IS NO EASY AND NO GOOD DECISION THE BANK OF ENGLAND HAS TO MAKE IN 20 MINUTES TIME. TOM: IT IS SIMPLE, AS THIS A Y OR X AXIS STUDY? ADAM POSEN FROM THE TELEGRAPH TALKING ABOUT 6.5%, THAT GAVE ME A Y AXIS MOVE. OR IS IT ABOUT THE X-AXIS MOVING OUT IN TIME? SIMON: I THINK IT IS MORE AND ACCESS ACCESS MOVING OUT IN TIME. I TRIED TO DO MY HOMEWORK AHEAD OF THIS. I KNOW YOU WANT YOUR HISTORICAL
REFERENCE POINTS. AND THERE WAS A PAPERBACK IN 2000, THE AMERICAN ECONOMIC JOURNAL ABOUT CENTRAL-BANK CREDIBILITY, WHY DO WE NEEDED AND HOW DO WE GET IT? THE BANK OF ENGLAND UNFORTUNATELY -- BECAUSE IT HAS GOT THE MARKET TO WHERE IT IS TODAY? Y -- IT FINDS ITSELF WITH A MARKET SPLIT TODAY ON WHAT TO EXPECT. WHICH IS WHERE IT KNOWN CENTRAL BANK EVER WANTS TO BE. THAT CREDIBILITY POINT ELIMINATES THE POINT THAT THE BANK COULD PAUSE TODAY AND FOLLOW THE FED. THE KEY TRANSMISSION, THIS IS TO LISA'S POINT ABOUT WHAT THIS DOES TO THE ECONOMIC CYCLE, WE KNOW THAT ONLY ABOUT A QUARTER OF THE RATE HIKE IMPACT IMPULSE HAS PASSED THROUGH INTO THE REAL ECONOMY SO FAR. THEY SHOULD BE ABLE TO FALL BACK AND SAY WE HAVE DONE 440 BASIS POINTS OF HIKES, WE STILL SEE THREE CORNERS OF THAT TOO, AND THEY REFINANCING CYCLE BUT THEY HAVE NOT GOT THE CREDIBILITY. LISA:
IT SEEMS THAT PEOPLE WERE TALKING ABOUT INDUCING A HARD LANDING TO MAKE THE TIMEFRAME LESS LONG AND PAINFUL OVERALL. IS THAT STILL IN THE ZEITGEIST OR PEOPLE MOVING ONTO THE HOPE OF A SOFT LANDING THAT SEEMS TO HAVE OVERTAKEN MOST POLICYMAKERS IN THE U.S.? SIMON: I DON'T EVER SEE -- MAYBE BECAUSE MY BACKGROUND AS A LABOR MARKET ECONOMIST -- IS WHAT A HARD LANDING, EVEN IF YOU ENGINEER PHASE, BEST ENGINEER IT, PRESENTS A LONG-TERM OUTCOME. THIS IS THE IMPACT OF LABOR LOSING ITS ATTACHMENT WITH THE LABOR MARKET. WE SAW BOTH SIDES OF THE ATLANTIC, THE IMPACT OF THE PANDEMIC ON PEOPLE REMOVING -- BEING WERE MOVED FROM THEIR PLACE OF WORK, THEIR PROFESSION.
IT HAS A IS GOING IMPACT IN TERMS OF LABOR MARKET TRENDS GROWTH. YOUR QUESTION LINKS NICELY WITH TOM'S FIRST ONE. LET'S TRY AND ELONGATE THIS THROUGH A COMBINATION OF EXPLAIN THE TRANSMISSION MECHANISM, RATHER THAN GOING QUICKLY. POTENTIALLY AMPLIFYING OF SCARRING. LISA: I'M THINKING ABOUT THE COMMENTS IN A BLOOMBERG OPINION PACE, THE U.K. INDUCING CREDIT IN THE INFLATION BUT IT IS A WARNING TO THE REST OF THE WORLD, EUROPE. DO YOU SEE IT IS THE SAME,
THERE ARE UNIQUE FEATURES OF INFLATION BUT THAT IS SOMETHING YOU ARE SEEING IN PLACES LIKE NORWAY, ITALY, SPAIN AND THAT CENTRAL BANKERS CANNOT IGNORE? SIMON: THAT IS RIGHT. THEY DECOMPOSE THE U.K. INFLATION PICTURE. AND WHY THE SPREAD BETWEEN THE HEADLINE AND THE GT AVERAGE, IT IS ALMOST ENTIRELY THE CONVERSATION OF THE ENERGY MARKET AND THE OUTSIZED IMPACT OF EUROPEAN GAS PRICES, WHICH TOOK THEIR CUE FROM THE WAR IN UKRAINE.
BUT TO THE POINT ON NOT JUST IN PORTABLE CROSS-BORDER'S -- IT IS SUCH A MOVEMENT. WE ARE GOING TO GET THAT -- Q1, 2023. IT IS NOT THE HISTORY OF INFLATION AND I DON'T THINK IT WILL BE DIFFERENT IN THIS CYCLE. TOM: I LOOK AT WHERE WE ARE AND THE ANSWER IS WE END UP EMBEDDING IN THE CASE OF AMERICA THE BIDEN STIMULUS INTO OUR PRICES AND A PERMANENT LEVEL, PERMANENT LIFT IN INFLATION. IS THAT WHAT WE HAVE WROUGHT, WHERE WE ARE RATIONALIZING OUT WITHIN THE MARKETS IN QUARTER TO QUARTER, CENTRAL BANK MEETING TO CENTRAL BANK MEETING? THAT WE ARE EMBEDDING IN A HIGHER ONE-OFF LEVEL OF PRICES? SIMON: I THINK WE ARE. WHENEVER ONE THINKS OF THE
STRATEGIC NARRATIVE AROUND THE INFLATION REDUCTION ACT, THE REALITY IS YOU ARE TRANSMITTING ECONOMIC OUTPUT AND ACTIVITY, FROM GEOGRAPHIES WHERE THE PRICE POINT IS MORE COMPETITIVE TO A PRICE POINT THAT IS HIGHER AND LESS COMPETITIVE. MERCHAN REASONS. ONE OF THE PRIVILEGES, I DON'T HAVE TO GET BACK IN A POLITICAL DEBATE. FROM AN ECONOMIC STANDPOINT, WE ARE EMBEDDING A PRICE POINT FROM EVERY GEOGRAPHY, TAKING CONTROL OF THE SUPPLY CHAINS, THERE ARE STRONG SHE TEACHES REASONS, LET'S NOT PRETEND IT IS NOT DOING A SUSTAINED ELEVATED MOVE IN THE PRICE LEVEL. TOM: WE WELCOME ALL OF YOU ON BLOOMBERG RADIO AND TELEVISION. WE ARE 20 MINUTES OR SO AWAY FROM AN IMPORTANT ANCHOR ENGLAND -- SHOCK FROM NORWAY AND SWITZERLAND.
FUTURES -12, YIELDS ARE HIGHER, DOLLAR WEAKER. LISA: TO BRING YOU UP TO SPEED, FIRST WE HAVE THE SWISS NATIONAL BANK RAISING RATES BY 25 BASIS POINTS, THE NORWEGIAN CENTRAL BANK COMING OUT WITH A SURPRISE RATE HIKE. NOW WE ARE 22 MINUTES AWAY FROM THE BANK OF ENGLAND.
AS WE MOVE FORWARD, DO WE HAVE A BETTER SENSE OF WHAT WE ARE GOING TO? IS THIS GOING TO BE THE LOW RATE REGIME THAT WE KNEW WHEN WE GET INFLATION UNDER CONTROL, OR IS IT APPARENT THIS IS A NEW PARADIGM AND ONE THAT WILL HAVE GREATER IMPLICATIONS FOR ASSETS AROUND THE WORLD? SIMON: I DON'T THINK WE SEE A REVERSION BACK TO THE PRE-COVID LEVEL OF MONETARY POLICY. THE LAST OF MY WAS ON THE SHOW, IT WAS SHORTLY AFTER THE IMF PUBLISHED A BLOG SHOWING SOME OF THE STRUCTURAL DRIVERS AS TO WHY WE MAY SEE ATAC ACT TOWARD OUR START BEING LOWER THAN THE TERMINAL. I THINK YOU SEE SOMETHING OF ATAC BACK. ONE THING I SAID WHEN I WAS APPRAISING THAT RESEARCH BLOG IS THERE WERE BIG DECISIONS ON TRADE, PROTECTION AND THE LENGTH OF GLOBAL SUPPLY CHAINS, WHICH ARE GOING TO FRAME A LOT OF THAT MEDIUM-TERM, LONG-TERM OUTLOOK AND THEY ARE BY NO MEANS PREDETERMINED. THE POLITICAL RHETORIC I SEE SEES THAT REINFORCING THOSE SUPPLY CHAINS, ELEVATING THE PRICE LEVEL AND IT DOES MOVE HIGHER. LISA: I HAVE TO ASK HOW MUCH YOU ARE STUDYING ARTIFICIAL INTELLIGENCE IN TERMS OF PRODUCTIVITY, OFFSETTING SOME OF THE FRICTIONS WE WILL SEE CONTINUE IN THE SUPPLY CHAIN IN THE WORKFORCE? SIMON: I AM STUDYING IT.
I DON'T PREPARE -- PROFESS TO BE AN EXPERT. A LOT OF ECONOMISTS REINVENT THEMSELVES AS EPIDEMIOLOGISTS OR MORE DURING BREXIT. I DON'T WANT TO PRETEND I AM NOW AN AI EXPERT.
BUT THERE ARE DECENT -- IN TERMS OF POTENTIAL, AND ALLOWING A REPRO FILING OF ACTIVITY AWAY FROM REPETITIVE ACTIVITIES INTO MORE VALUE-ADDED. IT IS A STRONG EMPIRICAL BASIS. THE PROBLEM IS SOMETIMES, ACTORS IN THE MARKET, INCLUDING GOVERNMENT ACTORS HAVE A GOOD IDEA. WE HAVE GRADE PRODUCTIVITY ESTIMATES.
AND IT IS INTEGRATED INTO THE ECONOMY. TOM: BEFORE THE BANK OF ENGLAND READING, WE HAVE MORE WEIGHT IN THE FED BECAUSE WE ARE BASED IN AMERICA, BUT THIS IS AN IMPORTANT MEETING. MICRO DATA, I DID NOT KNOW THIS, NORWAY IS A LOT ABOUT SALMON.
HAVE A BEVERAGE AND SALMON AND CRACKERS. YOUR FAMILIAR. NORWAY SALMON UP 26% FROM THE BEGINNING OF THE PANDEMIC. YOU THINK ABOUT THE SMALLER NATION, NORWAY, FAR LESS PEOPLE THAN WHAT WE PERCEIVE. THE INFLATION IS TANGIBLE AND THAT IS WHY THEY HAVE TO ACT. LISA: YOU SEE THIS IN THE HOUSING MARKET, PEOPLE SAYING IT IS MORE CONCERNING AND SCANDINAVIAN COUNTRIES HAVE SEEN REAL PRICE INFLATION.
IT IS IDIOSYNCRATIC, BUT THIS NATION, AT WHAT POINT DO YOU START PUTTING IT TOGETHER? AT SOME POINT YOU HAVE TO WONDER WHAT ARE WE MISSING? TOM: I TAKE YOUR POINT. WE TAKE THE IDIOSYNCRASY, SOME STABILITY FOR MR. SIMS ACT -- STABILITY THERE. IT ALL COALESCED INTO WHAT ADAM POSEN WAS TALKING ABOUT IN THE TELEGRAPH, A HIGHER SET OF INFLATION. LISA:
HAVE YOU HAD SOME NORWEGIAN DELICACIES? TOM: SOME OF IT AT GUNPOINT. LISA: MOVING ON. ONE THING THAT IS DIFFERENT ABOUT THE U.S. IS THAT FISCAL IMPULSE IS LESS CLEAR. THAT IS ALSO WHAT WE ARE
LOOKING FOR AS WE TALK ABOUT THE RECOVERY IN UKRAINE. STARTING TO GET WITHDRAWN TO THE STUDENT LOAN REFERRALS. DO YOU STILL HAVE THE FISCAL IN THE MONETARY SIDE? TOM: I DID NOT LISTEN TO WHAT YOU SAID BECAUSE I WAS IMAGINING THE NORWEGIAN FINANCE MINISTER. SENDING TEAM SURVEILLANCE. ONE OF THOSE WOODEN BOXES OF SALMON. LISA:
AND THE BERRIES, THAT IS MORE SWEDISH. I LIVED IN NORTH DAKOTA. OF COURSE. TOM: THAT WILL DO IT. TAKING IN THAT SCANDINAVIAN VIEW, THAT IS A VIEW OF INFLATION. WE WILL HEAR IT FROM THE BANK
OF ENGLAND, GOVERNOR BAILEY WILL NOT DECLARE VICTORY TODAY. >> I AM MONITORING CAREFULLY THE POSSIBILITY OF ADDITIONAL TIGHTENING FROM THE BEGINNING -- BANKING SECTOR WITH RESPECT TO CREDIT. THERE IS THE DOWNSIDE WITH THE ECONOMY AND I'M WATCHING IT CAREFULLY. TOM: I AM THINKING ABOUT THE LOX AND BAGELS FROM LISA.
AN INTERESTING CONVERSATION WITH THE GOVERNOR OF THE FEDERAL RESERVE, VERY MUCH THOUGHT TO BE THE NEXT VICE CHAIRMAN, PHILIP JEFFERSON. INTERESTING TO SEE. AS LISETTE MENTIONED, A SET OF FED SPEAKERS, THIS IS AFTER WHAT WE ARE GOING TO SEE HERE IN 14 MINUTES. THE FED SPEAKER SAID THEY COULD ADD VALUE TO THE LENGTH.
LISA: JAY POWELL SET ALMOST ALL FED MEMBERS WANTED TO RAISE RATES FURTHER AND THOUGHT THAT WOULD BE NECESSARY AT THE END OF THE YEAR. RAPHAEL BOSTIC SEEMED TO WANT TO KEEP THINGS ON HOLD. -- TOM: AN IMPORTANT MEETING, I WISH JONATHAN FERRO WAS HERE. HE DOESN'T BETTER. BUT HE WILL BE AN INTERESTING MEETING TO SAY THE LEAST. WHAT IS IMPORTANT ABOUT IT IS THE LINKAGE OF EQUITIES AND BONDS, CURRENCIES, COMMODITIES. MARK CHANDLER JOINS.
HE IS TRULY THE EXPERT ON THE FOREIGN EXCHANGE. WHAT DOES STERLING DO HERE? A NEW RESILIENT, STRONGER STERLING. WHAT IS YOUR CALL OFF OF THIS MEETING? MARC: I THINK THE BANK OF ENGLAND DILUTED EIGHT WHEN HE FIVE BASIS POINT RATE HIKE, SHOWING THE SELLOFF. IT IS PRICING ABOUT A ONE IN THREE CHANCE OF A 50 BASIS POINT HIKE. LIKE NORWAY DELIVERED, I THINK THAT REAL ISSUE HERE IS THE TRADE-OFF. NOT SO MUCH THE TRADE-OFF AS FAR AS 25 AND 50.
BUT HIGHER THAN EXPECTED INFLATION. THE PERSPECTIVE THAT A RECESSION IS WORTH THE RISK OF GETTING INFLATION UNDER CONTROL. IT IS THE KEY TRADE-OFF. I THINK THE BANK OF ENGLAND IS COMMITTED TO LOWER INFLATION AND THEY ARE WILLING TO RISK THE RECESSION TO DO SO. LISA:
THERE IS TENSION ABOUT WHETHER FURTHER RATE MEAN STRONGER CURRENCY OR WHETHER IT INCURS PAIN ON THE ECONOMY THAT ACTUALLY INFERS WEAKNESS. WHEN TO BE CROSSED THAT THRESHOLD AND HOW IS THAT BALANCE CHANGING AS WE HEAD CLOSER TO A TIPPING POINT IN THE U.K.? MARC: WE SEE THIS IN THE YEN. IT IS THE UNDERPERFORMER,
PARTLY BECAUSE THIS IS A QUESTION OF MONETARY POLICY DIVERGENCE. LAST WEEK WHEN THE FEDERAL RESERVE SAID THE MEDIAN. POINT OF THE FTSE BASE -- 50 BASIS POINT HIKE, THE MARKET BELIEVES IT. THE DOLLAR HAS WEAKENED. WE GOT THE EURO ABOVE 110, FOR THE FIRST TIME IN A MONTH, WE'VE GOT THE CANADIAN DOLLAR.
IT IS AFFECTING THE EURO. THE MARKET IS DOWN. A FEW WEEKS AGO IT WAS PRICING AND CUTS FROM THE FEDERAL RESERVE. NOW THE FEDERAL RESERVE SAYS 50 BASIS POINTS. THE MARKET IS SAYING UNLIKELY. I THINK THE DOLLAR SUFFERED FOR THAT. I THINK RATE HIKES ARE -- DON'T NECESSARILY MEAN A STRONGER CURRENCY. THE MARKETS ARE CONFIDENT IN
THE CENTRAL BANK FORECAST. TOM: WE TALKED ABOUT THIS. THE WHOLE MOVE FOR BANKS IS LESS THE LEVEL IN THE MOVE UP AND DOWN. THEY WILL GO OUT LONGER. FRAMED LONGER FOR THE CENTRAL BANKS. ARE THEY GOING TO HOLD RATES WHERE THEY ARE A LITTLE HIGHER FOR QUARTERS, OR DO THEY GO INTO 2024? MARC: IT IS AN IMPORTANT ISSUE. WHETHER YOU ARE LOOKING AT THE
FEDERAL RESERVE, THE ECB, CANADA, AUSTRALIA, WE ARE AT THE TAIL END OF THE TIGHTENING CYCLE. MANY OF US INCLUDING MYSELF -- IT LOOKS LIKE THEY'RE GOING TO EXTEND INTO LATER THIS YEAR. DEPENDING ON WHAT THEY DO TODAY, THE MARKET IS PRICING IN RATE HIKES INTO EARLY NEXT YEAR. BUT WHEN YOU THINK ABOUT THE BANK OF ENGLAND OR NORWAY, THERE IS TIGHTENING BEFORE THE FEDERAL RESERVE AND MANY PEOPLE ARE CRITICAL AS IT WAS SLOW OUT OF THE BOX.
HERE ARE TWO CENTRAL BANKS RAISING RATES BEFORE THE FEDERAL RESERVE AND HAVING -- CAN RAISE RATES MORE AGGRESSIVELY NOW BECAUSE INFLATION IS HIGHER. THERE ARE NEW CYCLICAL HIGHS INCORPORATES. WE KNOW THE U.S. RATE IS SLIPPING. THE HEADLINE RATE IS FASTER THAN THE COURT RATE. THEY WERE TALKING ABOUT A FEW
MORE MONTHS OF TIGHTENING. THE BANK OF ENGLAND IS THE EXCEPTION AND THE BANK OF JAPAN THE EXCEPTION ON THE OTHER HAND, BEING VERY SLOW. TOM: MARC CHANDLER, BRIEFING US BEFORE THE BANK OF ENGLAND MEETING EIGHT MINUTES AWAY. WE REPORTED ON THE MIDYEAR OUTLOOK FOR THE TEAM AT JP MORGAN.
THEY DON'T MINCE WORDS, THEY ARE LOOKING FOR A GDP SLOWDOWN. OF ON RADIO AND TV, THE UNITED STATES DOWN .8% FROM 1.5% POTENTIAL GDP. THEY LOOK FOR A Q4 OF 0.7. THE SAME IDEA IN THE UNITED KINGDOM. CHINA, 5.8%. THEY SAY DISINFLATION WILL BE INCOMPLETE.
THAT PERFECTLY ENCAPSULATES THE FRUSTRATIONS WE SEE OVER THE LAST 24 HOURS WITH NORWAY, SWITZERLAND AND WHAT WE WILL SEE IN EIGHT MINUTES WITH THE BANK OF ENGLAND. LISA: WHAT DOES THIS MEAN FOR MARKETS? THEY TALK ABOUT THE FRUSTRATING READTHROUGH THAT HAS NOT BEEN LOGICAL. TALK ABOUT HOW VOLATILITY IS ABNORMALLY LOW GIVEN THESE CROSSWINDS AND THE LIKELY HIGHER INFLATIONARY OUTLOOK.
THEY DON'T NECESSARILY SEE A MASSIVE SURGE IN THE VIX BECAUSE THERE ARE TECHNICAL PRESSURES. ONGOING, THERE IS A KEY QUESTION AND AS I DIG THROUGH I WANT TO HEAR WHAT THEY HAVE TO SAY. OUR TECH STOCKS THE NEW SAFETY PLAYS IN A HIGHER INFLATIONARY ENVIRONMENT? THIS IS THE ODDITY OF THE PAST COUPLE OF WEEKS THAT IS TURNING ON THE HEAD THE LOGIC HEADING INTO THIS YEAR. DOES THIS HAVE A NEW PROMISE WITH AI? TOM: YOU ARE BUSTING MY CHOPS WITH THIS. BUT FROM THE JP MORGAN MAJOR
OUTLOOK, THEY GO FROM 44.10 TO 4400 DOWN 5%. IT IS PULLING INTO THE EQUITY MARKET. I DON'T HAVE IT IN FRONT OF ME, BUT IT WAS ALMOST A CENTRE TENDENCY. DO YOU I'M OFF?
LISA: IT IS ALMOST BEARISH, THE SEACHANGE WAS BEYOND. IT MEANS POTENTIALLY SHIFTS IN LEADERSHIP. TOM: A PREVIEW ON THE BANK OF ENGLAND. DURING US WITH HER PERSPECTIVE, SHE HAS BEEN STUDYING THE MAKEUP OF THIS COMMITTEE, IS LIZZY BURDEN. I LOOK AT THE TELEGRAPH AND
ADAM POSEN TAKING THE HEADLINES THIS MORNING, LOOKING FOR A FIX .5% LEVEL. THAT SPEAKS TO THE ODDITY OF YOUR BANK TAKING IN THOSE PESKY FOREIGNERS. HIS CATHERINE MAN THE HUBER HAWK BETWEEN 25 AND 50 BASIS POINTS? LIZZIE: SHE MIGHT BE JOINED BY JONATHAN HASKELL. HE HAS BEEN HAWKISH. SOME ECONOMISTS ARE SEEING A THREE-WAY VOTE SPLIT. AT THE DOVISH END, THEY ARE CONSTANTLY EMPHASIZING THIS LAG IN MONETARY TRANSMISSION. AS YOU KNOW, WHEN THERE IS NO PRESS CONFERENCE OR A FORECAST, SOMETIMES THE BANK TRIES TO COMMIT A GET ITS MESSAGING THROUGH THE SPLIT. LOOK OUT FOR THAT. TOM: THANK YOU. WE WILL LOOK TO SPEAK TO YOU IN
MINUTES ABOUT THE BANK OF ENGLAND. FUTURES DOWN 13 AS WELL. THE TWO'S TENSE SPREAD, 99 BASIS POINTS, IT DID BREACH 100 BASIS POINTS EARLIER THIS MORNING. LISA: I'M WATCHING TWO-YEAR YIELDS IN
THE UNITED KINGDOM, HOVERING AROUND THE LEVELS THEY WERE HEADING INTO AND OUT OF THE 2008 FINANCIAL CRISIS. 5.05 PERCENT FOR THE TWO-YEAR YEAR AND COULD THAT GO HIGHER IF THE GAMING OUT OF 6% RATES IN THE UNITED KINGDOM HAS THIS MEETING? TOM: JONATHAN FERRO GETS THIS BETTER THAN YOU WHAT IDEA BUT WE CAN LOOK FOR THE FRACTIONS VERSUS THE QUIET FROM JEROME POWELL.
LISA: IT IS NEEDED GIVEN THE UNCERTAINTY OF ANY GOOD DECISION. YOU'VE HEARD THAT FROM SIMON FRENCH AND MANY OTHERS, THERE IS NOT A GOOD OPTION TODAY. YOUR HIKING INTO WEAKNESS. DO YOU WANT TO REPEAT THE
STRENGTH QUICKER TO GET INFLATION UNDER CONTROL? TOM: IT WILL BE INTERESTING TO SEE THE TWO YEAR YIELD, 4.75%. 10 YEAR YIELD, 3.75%. NOT HISTORIC, BUT ROUNDED UP, 100 BASIS POINT CURVE INVERSION RIGHT NOW. DOLLAR WEAKER, 127 .86, AN IMPORTANT DECISION BY THE BANK OF ENGLAND IS THEY SEE RECORD HIGH CORE INFLATION. ♪ >> THE FED HAS BEEN TRYING TO TALK THE MARKET DOWN AND HAS DIVERTED.
>> THE MARKET HAS GOTTEN MORE AND MORE SELECTIVE. >> THE ECONOMY IS A LOT LESS INTEREST RATE SENSITIVE FAMILY THOUGHT. >> THIS IS -- SENSITIVE THAN WE THOUGHT.
>> THIS IS BLOOMBERG SURVEILLANCE. TOM: GOOD MORNING. WE ARE HERE WITH A HISTORIC MOMENT ON THE INDEPENDENCE AND CERTAINTY ON THE BANK OF ENGLAND THAT GO AGAINST CONSENSUS AND RAISE RATES 50 BASIS POINTS. YOU SEE IT IMMEDIATELY IN STERLING 127 UP TO 128 6 -- 12826. LISA: GROWING IN THE THIRD QUARTER
HOW IS THIS MATCH WITH MORE AGGRESSIVE RATE HIKES. THIS IS A TIME WHERE THE MAJORITY OF COMMENTATORS THOUGHT IT WOULD BE A 25 BASIS POINT HIKE. THEY TOOK A PAGE FROM NORWEGIAN CENTRAL BANK AND WENT 50. TOM: THAT'S AN IMPORTANT POINT. THE OSCILLATION OF THE SWISS AND WHAT WE SEE IN THE BANK OF ENGLAND.
AND THEY ARE SAYING WE NEED TO ACT. LISA: INFLATION WILL FALL SIGNIFICANTLY THIS YEAR, BUT THEY SAY THAT FURTHER TIGHTENING WE NEEDED IF SIGNS OF INFLATION PERSIST. AND THE ONGOING FEELING THAT THERE IS SOME -- NOBODY ON THE COMMITTEE THOUGHT IT WAS IMPORTANT TO KEEP RATES WHERE THEY WERE RATHER THAN NOT RAISE AT ALL. THAT GIVES YOU A SENSE OF HIGH YIELDS FOR LONGER. TOM: RIGHT NOW I WANT TO LOOK AT THE SINGLE PHRASE. EACH HAS THEIR OWN SET OF HEADLINES.
EURO TYING -- HERE ARE SOME COMMENTARY FROM GOVERNOR BAILEY. IT IS A TIGHT LABOR MARKET. OVER THE LAST 18 MONTHS THAT IS WHAT CENTRAL BANKS HAVE GOTTEN. LISA: WHAT YOU SEE IN THE U.K.
IS WAGE INCREASES ABOVE WHAT WE SEE IN THE U.S. I WAS READING ABOUT THIS AND I'M SURE THAT LIZZIE COULD CORRECT ME BUT IT IS ABOVE WHAT WE SEE IN THE U.S. AT A 6% RATE. AND IT BRINGS IN THE QUESTION OF WAGE PRICE SPIRAL. WHEN YOU SEE THIS SINCE ACROSS THE NATION. I DID NOT KNOW WHAT THEY CAN DO WITH THAT.
HOW -- IS THIS STRUCTURAL? TOM: TO GIVE US PERSPECTIVE WE BRING IN LIZZY BURDEN. ARE YOU SHOCKED BY THIS? LIZZIE: I WAS. MANY SAID THAT IF THEY WENT 50 OF WOULD FREAK OF PANIC BUT THEY DID IT ANYWAY. THEY ARE HIKING ANYWAY WHEN
THEY HAVE BEEN REPEATEDLY EMPHASIZING THE LAG IN TRANSMISSION. IT FOLLOWS THE OTHER CENTRAL BANK THIS MORNING. THERE TRYING TO GET A GRIP ON LAOIS AND AFTER THE COURT -- GRIP ON INFLATION AFTER THE CORE SURPRISE. THE RISK BECOMES ABOUT
RECESSION. BLOOMBERG ECONOMICS RESEARCH SHOWS THAT IF RATE GET TO 6% YOU WOULD SEE A RECESSION U.K.. RISHI SUNAK HAS THE NUMBER ONE PRIORITY TO FIGHT INFLATION, BUT IF IT TAKES A RECESSION IS THAT, ONE OF HIS OTHER PRIORITIES IS ROWING THE ECONOMY -- GROWING THE ECONOMY. BEING ABLE TO DELIVER ON BOTH OF THEM IS LOOKING MORE DOUBTFUL. CHESSER JIMMY HURT -- JEREMY HUNT -- CHANCELLOR JEREMY HUNT NEEDS TO DO MORE TO HELP PEOPLE. AND HE DOES NOT WANT TO GO
AGAINST THE BANK OF ENGLAND. LISA: THERE'S CONFUSION AND THE FORECASTS WE SEE WITH THEM BECAUSE THEY SEE STAGNATION IN THE U.K. IN THE SECOND ORDER BUT A REBOUND IN THE NEXT QUARTER. DOES THAT RESOUND WITH THE
POTENTIALLY 6% RATES AS SOON AS DECEMBER? LIZZY: IF YOU LOOK AT THE SH OK SHOCKED TERMINAL -- SHOCK ON THE TERMINAL, WE HAVE A LONG HIKE TODAY AND I EXPECT MARKETS TO BE PRESSING IN AN EVEN HIGHER RATE. THEY SEE 6.2 5%. YOU CAN EXPECT THOSE TO GO UP. TOM: IF THE MEETINGS HAVE A WONDERFUL PANEL AND THEY ARE VISITING THE BANK OF ENGLAND, FROM WHERE YOU SIT IN STUDY AND THIS EVERY DAY, IS THIS A HAWKISH OR DOVISH BECKONING? LIZZY: WHEN THERE IS NOT A PRESS CONFERENCE THAT CAN COMMUNICATE ITS MESSAGING AND FUTURE PATH THROUGH THIS. IT SEEMS TO ME THAT THE BANK IS TRYING TO COMMUNICATE THIS IS A HAWKISH -- THEY ARE BEING HAWKISH THROUGH THIS. THE FACT THAT OF THEM HAVE GONE FOR A HOLD IS A SIGNAL.
BUT MEGAN GREENE WILL REPLACE A FORMER EMPLOYEE AND SHE HAS BEEN MAKING HAWKISH NOISE. PERHAPS WE WILL SEE MORE HAWKISH AND IS IN AUGUST. TOM: I WOULD SUGGEST THAT SHE IS NOT MAKING HAWKISH NOISES -- LIZZY JOINING US THIS MORNING. AND A HISTORIC MOMENT. NO OTHER WAY TO DO. AS A SIDE SHOW TURKISH CENTRAL BANK SAYS THAT THEY WILL BE TIGHTENING.
MIRA MOVES TO -- THE CURRENCY MOVES LOWER ON THE DAY. RIGHT NOW ON THIS STORY, IN AMERICA, WE HAVE DETERIORATION OF USURERS OF THE BANK OF ENGLAND ANNOUNCEMENT FRACTIONALLY LOOKING TOWARD A HAWKISH TONE FROM THE AMERICAN CENTRAL BANK. WE HAVE JAY POWELL AGAIN TODAY. LISA: YES, 10:00 A.M.. TOM:
SWITZERLAND -- I AM DOING WELL THIS MORNING. SWITZERLAND, NORWAY, AND THE UNITED KING THEM. -- UNITED KINGDOM. AND NOW AND NOW SREEKALA JOINS US. IS IT A HAWKISH TONE IN EUROPE? >> I THINK IT CLEARLY IS FROM THE U.K. AND NORWAY AS WELL.
THEY WERE RUNNING INTO THIS. AND THEY HAVE HAD IN 10 DEBATE THERE WERE QUESTIONS ABOUT WHETHER THIS WOULD BE A 25 OR 50 BASIS POINTS FROM THE BANK OF ENGLAND BUT CLEARLY THIS IS A SURPRISE. RUNNING THROUGH THE STATEMENTS, THEIR REASONS ARE VERY CLEAR. THIS IS SOMETHING THAT HAS BEEN SIGNALED IN SPEECHES FOR QUITE SOME TIME. IT IS OR SERVICES IN NATION THAT IS STRONG -- POOR SERVICES INFLATION THAT IS STRONG.
-- WHO CORE SERVICES INFLATION THAT IS STRONG. WHEN YOU LOOK AT THE MARKET WITH THE INFLATION NUMBER IS STANDING OUT WITH THE WAGE PRESSURES THAT IT HAS. YOU MAY SEE A BIT OF A STABILIZATION OR ROLLOVER IF YOU LOOK AT ANOTHER EUROPEAN COUNTRY IN THE FED. BUT THE U.K. STANDS OUT FROM THE CORE SERVICES AND WAGE ANGLE. LISA: WE ARE WATCHING THE POUND STRENGTHEN IN RESPONSE TO THIS. THIS IS DEPARTURE FROM WHAT WE SAW FROM THE LIZ TRUSS ERA. HOW MUCH IS THIS A POSITIVE
THAT PEOPLE BELIEVE THEY CAN WITHSTAND -- THAT THEY HAVE CONFIDENCE THAT YOU CAN FIGHT INFLATION WITHOUT CREATING A DEEP RECESSION? SREE I THINK THAT WILL BE VERY CHALLENGING -- SREE: I THINK THAT WILL BE VERY CHALLENGING TO BE HONEST. THE MARKETS WERE LOOKING FOR 6% OF BELIEVE. THIS TRIGGERS THE ECONOMY. WHAT WE SEE IS THAT FRAGILE CONDITIONS HAVE TIGHTENED SIGNIFICANTLY. THERE IS FURTHER TO GO, BUT 6% WOULD BE TRICKLING -- TRIGGERING A RECESSION MORE THAN ECONOMISTS ARE FORECASTING. THERE'S A NUMBER OF DIFFERENT
COUNTRIES WHERE A SOFT LANDING IS DIFFICULT AND UNEMPLOYMENT RATES WILL START TO MOVE HIGHER. THE TIGHTNESS IN THE LABOR MARKET IS WORRYING AND THAT THE MORE THE RECESSION IS DELAYED SEE SEVERE IN TERMS OF RATE HIKES LATER NEXT YEAR. TOM: INFORM OUR AMERICAN AUDIENCE, WE UNDERSTAND THE DYNAMIC OF A FULLY EMPLOYED OHIO OR KANSAS VERSUS CHALLENGING CITY UNEMPLOYMENT RATES FOR AMERICA. THE PERCEPTION WE HAVE IS LONDON LOOMING, THE SOUTH BLOOMING. I AM STRUCK WITH THE UNEMPLOYMENT IN NORTHEAST SCOTLAND. HOW AND EVEN IS THIS DELIGHT -- DEBATE ON MONETARY POLICY IN THE U.K.? HOW MUCH OF THE U.K.
IS TRULY IN A RECESSION RIGHT NOW? SREE: I THINK THERE'S A REGIONAL ISSUE AND IT NEEDS TO BE MEASURED TO REALLY ADDRESS. FROM A MONETARY POLICY PERSPECTIVE, THE BANK OF ENGLAND AND WHAT IS HAPPENING TO THEIR AGGREGATE INFLATION RATES, WHAT IS THEIR TARGET AND HOW TO GET BACK TO THE TARGET. THE REGIONAL DIVERGENCE IS VERY DIFFICULT TO LOOK AT WITHOUT PHYSICAL MEASURES AND LESSEES ON THE ISSUES. IF WE THINK ABOUT WHAT HAPPENS IN TERMS OF A RECESSION, WE ARE NOT IN A RECESSION YET. WE SEE WEAKNESS IN DATA BUT Q2 WE HAVE STRIKE ACTION, HEALTHCARE SERVICES, AND EXTRA BANK HOLIDAY FOR THE SPORT -- KING'S CORONATION.
THIS WILL LEAD TO SOME INACTIVITY BUT NOT A RECESSION YET. WHAT THE BANK OF ENGLAND IS FOR THE ECONOMY TO ALSO THE IMBALANCE IS THAT ARE DRIVING INFLATION -- IMBALANCES THAT ARE DRIVING INFLATION EASE. WHERE IN NOT SEEING THAT YET. TOM: THANK YOU SO MUCH. THAT IS A TRULY HISTORIC MOMENT FOR THE UNITED KINGDOM.
STARTING 1.2827 -- AND IT IS DOWN .3%. LISA: IF YOU'RE JOINING THE PROGRAM RIGHT NOW WE ARE TAUGHT ABOUT HOW HOT-ISH THE RALLY HAS BEEN AND IT GAINS STEAM AND WILL CONTINUE TO. IT GOES AGAINST THE ETHOS LOOKING BACKWARDS.
THIS IS THE HIGHEST ONE IN 2021 -- SINCE 2021. AND IN THE PAST IT SPIRALED OUT OF CONTROL AND IN THE -- PERHAPS THEY ARE SAYING RATES WILL RISE 15% FROM 8.5%. TOM: THIS IS A CHANGING OF THE GUARD FOR THEM. IT IS WHAT I WOULD CALL EARLY ERDOGAN. THE RECENT AIR ONE AS BEEN GEOPOLITICAL.
A HUGE DISTRACTION OF WHERE THEY ARE WITH THE WAR IN UKRAINE. YOU WONDER IF THIS IS A NEW ONE PERSONIFIED BY SIM SET, THE NEW FINANCE MINISTER, USUALLY RESPECTED IN THE FINANCIAL COMMUNITY. AND THE CENTRAL BANK MAKING -- A SPLASH HERE. FIRST OF ALL I THINK A ROAD TRIP, BUT -- IT CAN BE FOOD OR A TRIP AS WELL. LISA: I THINK YOU'RE SPOT ON ABOUT
THAT. GOLDMAN SACHS, FIRST REPUBLIC COMAS PRINCETON HEADING OVER THERE. -- PRINCETON, HEADING OVER >> WE NEVER USED THE WORD PAUSE AND I WOULD NOT USE IT HERE TODAY. WE AGREED TO MAINTAIN THE RATE AT THE MEETING. ALMOST EVERY SINGLE OF THE 16-18 PARTICIPANTS ON THE FOMC WROTE DOWN THEY BELIEVE IT WOULD BE APPROPRIATE TO RAISE RATES TWICE THIS YEAR.
THAT IS PRETTY GOOD GUESS OF WHAT WILL HAPPEN THE ECONOMY FORMS AS EXPECTED. TOM: THE CHAIRMAN OF THE FED RESERVES IN THE LAST 24 HOURS BEFORE ACTIONS I SWITZERLAND AND NORWAY AND NOW ACTION BY THE UNITED KINGDOM TO GET THEIR HANDS ON INFLATION. RIPPING UP THE SCRIPT THIS MORNING FOR BLOOMBERG SURVEILLANCE. THIS IS A LOT GOING ON TO SAY THE LEAST. WE UPDATED ALL THE BREAK WITH RAMEAU LOOKING AT CABLE. CABLES STRONGER THAN WOULD EXPECT.
HIGHER INTEREST RATES AND MORE TRACTION. MONEY COMES IN DIVINE MERCHANDISE FOR THE FAMILY ON THE NEXT TRIP TO LONDON. AND THEN WE ARE AT 1.2761.
LISA: IT IS SOBERING BECAUSE IT MEANS THAT PEOPLE ARE LOOKING AT A RATE HIKE AS HURTING THE ECONOMY. AND NOT LOOKING AT THE LONG-TERM PROSPECTS FOR THE UNITED KINGDOM READ THIS IS NOT WHAT THE CENTRAL BANK WANTS TO SEE. IT HIGHLIGHTS IS THIS NECESSARY OF A SOLUTION? TOM: OUTFRONT THIS MORNING -- HE TALKED ABOUT THE GOOD, BAD, AND THE STERLING. HE SAID IF YOU RAISE RATES IT IS GOOD FOR YOUR CURRENCY UNTIL IT IS NOT, YJUCKES.
LISA: SLOWER GROWTH IS BAD FOR OUR CURRENT WITH THE TAKEOVER OF HAWKISH THIS. THEN THE BANKS HAVE TO HIKE INTO WE THIS -- WEAKNESS. TOM: MAYBE THAT IS SOME OF THE RECESSION SLOW DOWN AND OUT THERE WITH THE DOLLAR WEAKER. WE ARE MONITORING STERLING CLOSELY. IT IS A POLITICAL DISCUSSION ALWAYS. WE SPEAK WITH RESEARCH PARTNER AT STRATEGIC AS.
LISA WANTS TO GOES TO ISSUES AND I'M GOING TO GO SIMPLE. INFLATION. IN WORLD IS INFLATION WHAT IS THE PRICE OF A GALLON OF GAS? DAN: IN POLITICS THAT'S EXACTLY WHAT IT IS. INFLATION EXPECTATIONS ARE COMING DOWN MARGINALLY TRACKING WITH THE PRICE OF GASOLINE. BUT GENERALLY YOU SEE A DRAMATIC DECLINE IN THE UNITED DATE.
WE WILL LIKELY END JUNE MOVING FROM 5% TO 3%. IT IS AN DOWN AND IT SHOWS THERE IS PROGRESS BEING MADE ON NATION. THAT IS WHY THE CENTRAL BANKS AROUND THE WORLD CONTINUE TO TIGHTEN, BUT WE HAVE A MONEY'S BY CONTRACTING FOR THE FIRST TIME SINCE 1940. IT IS RAISING ECONOMIC RISKS WHICH WE ARE STARTING TO SEE. TOM: POLITICIANS ARE AWARE OF THOSE ECONOMIC RISKS. WHEN A LOOK AT KANSAS OR OHIO I AM LOOKING AT 2%.
IT DOES NOT SOUND LIKE A RECESSION. DAN: I THINK THERE IS SOME HOPE THAT YOU CAN ACTUALLY GET INFLATION DOWN AND EMPLOYMENT REMAIN STRONG. BUT THE POINT IS WITH A BIG LIQUIDITY DRAIN, WE DRAINED ABOUT $80 MILLION IN THE QUIDDITY THE LAST THREE DAYS. THAT'S WHY WE SEE A ROTATION IN THE EQUITY MARKET AND VOLATILITY BUILDING. YOU HAVE SLOWER GROWTH, LESS LIQUIDITY, AND TIGHTER CREDIT.
THIS IS WHAT IS COMING OUT OF THIS. THE BANKS ARE TIGHTENING CREDIT AND THAT STARTS TO AFFECT JOBS. IN THE SECOND HAVE OF YOUR POLITICIANS THE CAN DO THAT AT 40% BUT THERE IS NO FOCUS ON INFLATION. LISA: WHAT ARE THE UNDERAPPRECIATED RISK OF THE PAST 12 MONTHS? YOU'VE GOTTEN SOME INCREASING FUNDING FROM THE FEDERAL GOVERNMENT. AT THE SAME TIME, THE OTHER HAND IS FIGHTING INFLATION. THAT WILL CHANGE IN OCTOBER.
THERE'S A LOT OF PEOPLE FOCUS ON THE FACT THAT THEY WILL HAVE TO PAY THEIR STUDENT LOANS FOR THE FIRST TIME IN YEARS. THIS HITS DISPOSABLE SPENDING AND INCOME SIGNIFICANTLY. HOUSING FORGET IS THAT? -- HOW SIGNIFICANT IS THAT? DAN: I THINK IT STARTED THIS WEEK WHERE THE TGA IS NO LONGER OFFSETTING QT.
IT IS THE FIRST WEEK WE HAVE QT POSTING THE DEBT CEILING. DRAINAGE IS STARTING. AND THE STUDENT LOAN PAYMENTS ARE COMING AGAIN. IT IS LIKELY IN THE NEXT COUPLE DAYS THE SUPREME COURT WILL RULE OUT PRESIDENT BIDEN'S STUDENT FORGIVENESS PLAN. THEN YOU WILL HAVE STUDENT LOAN PAYMENTS COMING IN.
THAT IS A .3% OF A GDP DRAG. IT IS NOT VIEWED AS INSIGNIFICANT. WE SUGGEST THE PRESIDENT WILL PUT FORWARD A PLAN TO DO INCOME DRIVEN REPAYMENT AFTER THE SUPREME COURT RULING TO TRY TO OFFSET SOME OF THE DRAG FROM STUDENT LOANS BEING DEFERRED. STUDENTS WITH STUDENT LOANS
HAVE NOT BEEN ABLE TO -- HAD TO MAKE PAYMENTS FOR ALMOST THREE YEARS. THEY ALLOCATED THAT TWO OTHER SPENDING AND ONCE THEY START TO COME IN THEY WILL REVERT THE FUNDING BACK INTO LOANS. THE FEE HAS DROPPED DRAMATICALLY SINCE THE DEBT CEILING DEAL. LISA: I WAS READING YOUR REPORT ABOUT THIS LAST NIGHT WITH MORGAN STANLEY, THEY THINK THIS IS ABOUT 200 OR $300 OR BORROWER.
THERE'S MILLIONS OF OUR HOURS WITH THESE FORBEARANCE. HOW MUCH WILL THIS ACCELERATE THE DECLINE OF THE ELATION OR IS THIS SOMETHING THAT IS CORRECT FEEL THAT PEOPLE ARE CLINGING TO WITH THE HOPE THAT IT WILL THIS INFLATE THINGS FASTER? DAN: IT WILL HAVE MORE IMPACT ON GROWTH THAN IN NATION. THE 16 MONTHLY BETWEEN SUPPLY AND CPI HAS BEEN NEGATIVE FOR A WHILE. INFLATION LOW COME DOWN. IT SLOWS THE CONSUMER DOWN. THEY KEY ISSUE WILL BE WHETHER JOBS GET TO HOLD UP. IF JOBS HOLD UP IT IS MANAGEABLE, BUT IF YOU HAVE A DRAG ON THE CONSUMER HITTING WHILE JOBS ARE SLOWING IT WILL MATTER. THE KEY IS TO WATCH FOR THE
SURVEY AND THE PAYROLL REPORTS BECAUSE OF THE CREDIT IS TIGHTENING AT BANKS, THAT WILL SHOW UP IN THE BUSINESS SECTOR AND THAT IS WHAT REFLECTS THE HOUSEHOLD SURVEY. TOM: WHAT WE ARE CONCERNED ABOUT IS WE NEED TO KNOW -- IN WASHINGTON DAN CLIFTON STAY WITH US. WILEY NICKEL CONFERENCE MEANT -- CONGRESSMAN -- AN OUTLANDISH QUESTION TO THE CHAIRMAN AND HE IS AN OBAMA GUY AND ALL OF THAT. YOU KNOW HE HAS JERRY GARCIA NAILED DOWN.
>> I WAS EXCITED TO SEE YOU WERE THE MOST RECENT DEAD AND COMPANY. WE WERE NOT HERE. HOW WAS THE SHOW? DID YOU LIKE IT? >> IT WAS TERRIFIC WHAT CAN I SAY? I HAVE BEEN A FAN FOR 50 YEARS. TOM: I CAN SEE HIM AS A YOUNG LAD BUYING THE WHITE CASSETTE TAPES WE USE TO BUY. THIS IS THE TALK OF THE FINANCIAL COMMUNITY. ARE YOU A DEADHEAD AND CAN -- DRIVE FORWARD THAT HEAD OF DEAD AND COMPANY THE NATION'S MONETARY: SEE? DAN: ABSOLUTELY WE BELIEVE THAT RATE INCREASES -- WILL HELP GENERATE THE T-BILLS. IT IS A CLUMSY DISCUSSION AS
YOU SAW YESTERDAY AND WITH THE PRESS CONFERENCE. IF YOU THINK YOU WILL RAISE TWO TIMES, WHY ARE YOU DOING NOW? IF THE FED RATE GOES UP THE REVERSE RATE GO -- WILL GO UP AND AND IF SO THE LESS MONEY WILL COME OUT ABOUT. IF IT IS NOT COMING OUT OF REVERSED REPOSE IT IS COMING OUT OF BANK RECOVERIES. SO IT IS PRESSURE ON THE
BANKING SECTOR. THAT IS THE KEY ISSUE IN THESE ARTICLES. LIQUIDITY IS NOT BEING SUCKED UP. TOM: WE HAVE TO LEAVE IT THERE.
THANK YOU, DAN. AND WE THINK FOR THE -- THANK TOM: BLOOMBERG SURVEILLANCE. SURVEILLANCE CORRECTION. I THOUGHT THERE WAS A BAILEY PRESS CONFERENCE.
BUT I WAS TOLD I WRONG. I ASSUMED THAT THEY WOULD MEET LIKE EVERYBODY ELSE. LISA: THE FED NEEDS TO GIVE LESSONS TO THEM. TOM: WE WILL HAVE TO SEE. GOOD THINKING ON SHARING CHAIRMAN COWLES THOUGHT ON DEAD IN -- CHAIRMAN POWELL THOUGHT ON DEAD AND COMPANY EARLIER. STERLING ON A .5 PERCENTAGE POINT LIVED. AND THEN THEY ARE WORRIED ABOUT SLOWING DOWN AREA OF WHAT IS IMPORTANT IS THAT ROCHESTER IS NOW CONSIDERING THE FED. LISA:
THE INFLATION STORY IS STICKY. THE WAGE PRESSURE IS SIGNIFICANT AND IT WILL BE VERY CONCERNING AT A TIME WHERE THEY ARE FIGHTING OFF A DOWNTURN. HERE IS THE TENSION. HAVE WE SHIFTED TO THE POINT WHERE THE POTENTIAL FOR SLOWER GROWTH OFFSET RATE HIKES IN THE CURRENCY SPACE AND STARTS TO ATTRACT POTENTIAL INVESTORS. TOM:
THE STORY WE ARE WATCHING IN TURKEY, IT IS NOT WORKING. THAT'S ALL THERE IS TO IT. THERE IS CONCERNED WITH WHAT THE CENTRAL BANK HAS DONE. THEY ACTED OFF OF THE HUGE DIFFICULTIES IN TURKEY. WE WILL DO MORE RESEARCH ON THAT BECAUSE AT THE MOMENT WE HAVE THE RIGHT GUEST FOR THAT MOMENT. THE DOW FUTURES -116. THE TWO YEAR YIELD 4.74%. I GUESS IT IS A RECESSION BUT
YOU DO NOT KNOW IT IN THE HOMES BASED. -- SPACE. LISA: THAT IS WHAT I AM SHOCKED BY. KB HOME CAME OUT WITH NUMBERS THAT WERE STRONG YESTERDAY AND THE SHARES ARE BLOOMBERG TODAY. 2.5% LOWER AREA I REALLY CANNOT EXPLAIN IT. PERHAPS THE BRIEF RESPITE WILL MOVE INTO SOMETHING OF A HIGHER RATE AND WEAKER HOUSING MARKET.
I'LL KEEP AN EYE ON THIS. BOEING SHARES ALSO LOWER BY 3.4%. THERE IS A POTENTIAL STRIKE ON THE BIGGEST SUPPLIER AREA UNION WORKERS VOTED TO HAVE A STRIKE.
THIS IS SOMETHING WE SEE AROUND THE WORLD WITH THE LABOR PUSHBACK OF RAISING PRICES. NVIDIA SHARES UP 194% THIS YEAR. RIGHT NOW TAKING A BREATHER. TESLA SHARES UP 110% SO FAR THIS YEAR LOWERED BY 3% AS WHETHER PEOPLE THINK IT HAS GONE TOO FAR TOO FAST. TOM:
AND WITH TURKEY WE HAVE TO STAY WITH THAT. THE TURKISH LEADER IN ALL YOUR OF THE HOLOCENE REACHES -- TURKISH LEADER WE SEE THEM AT 2%. LISA: TO UNDERSTAND THE CONFUSION OF THE MARKET RESPONSE WE HAVE GLOBAL CURRENCIES DIRECTOR AND INTEREST RATE STRATEGIST AT MCCOURY -- MACQUARIE FUTURES USA JOINING US. THIERRY:
IT'S GOING TO TAKE A WHILE FOR CENTRAL BANK TO GAIN THE CREDIBILITY OF THE MARKET. THE MARKET WILL BE DOUBTERS. WHEN YOU HAVE A CENTRAL -- SITUATION LIKE THIS IT IS IMPORTANT FOR THE CENTRAL BANK TO DO MORE THAN THE MARKET EXPECTS. I WANT TO MAKE THE CASE THAT IN THE EMERGING TARGETS TRYING TO TACKLE THE NATION STORY -- THE INFLATION STORY EARLY ON HAS HAD SUCCESS. BRAZIL IS ON THE VERGE OF CUTTING RATES IN AUGUST OR SEPTEMBER. THEY WERE AGGRESSIVE IN HIKING RATES IN THE INFLATION MOVE AND THEY WILL BE EARLY CUTTING RATE MOVING DOWN. TURKEY IS AN EXCEPTION. LISA: IT IS PILING ON THE HAWKISH TALK WE HAVE HEARD FROM CENTRAL BANKS AROUND THE WORLD TODAY. AS THE BANK OF ENGLAND LOST
CREDIBILITY? DAN: I THINK IT DID BUT THAT'S -- THIERRY: I THINK IT DID BUT I THINK THAT'S WHY THEY HAD TO RAISE BY 50 BASIS POINTS. THE RATES DID NOT SIGNAL A HIKE OF 50 BASIS POINTS FOR THE INFLATION PRINT WHERE YOU CAN MAKE THE CASE THAT THE BANK OF ENGLAND MADE AN EIGHT -- A MISTAKE. THEY THOUGHT IT WOULD BE A 3% AND A CAYMAN -- CAME IN CLOSER TO 9%. I THINK THAT IS WHY IT HAPPENED. TOM: ALAN SHORTS IS HERE WITH US AS WELL.
YOU HAVE SEEN AS SO MANY TIMES BEFORE. HOW DO YOU RATIONALIZE IT IS TO RODDICK STORIES BACK TO THE CENTRAL BANK WORLD OF JEROME POWELL? HOW DO YOU LEAK IT -- LINK HIS ACTIONS TO WHAT WE ARE SEEING? >> WE HAVE TO BE CAUTIOUS TO ASSUME THAT WHAT HE WILL DO WILL BE OVERLY DEPENDENT. THIS SITUATION IN THE U.S. IS NOW THE SITUATION IN THE DAY -- THE U.K..
THERE'S NOT AS MUCH LABOR STRENGTHEN THE U.S. I KNOW THAT THE HEADLINES SHOW WE CAN MEASURE THIS, BUT THE PEAK IN EMPLOYMENT HAS DIED OFF SINCE LAST SUMMER. WE ARE SEEING A LOT OF LABOR ACTIVISM NOW AND CONCESSION BY PRIVATE EQUITY. AS A RESULT, THE U.K. AND EUROPE ARE DELAYED WITH THEIR ABILITY TO FIGHT INFLATION AND BRING IT DOWN. WHEN YOU LOOK AT THE INDICATION OF INFLATION IN THE U.S. THEY ARE COMING DOWN AND FASTER THAN EUROPE.
THE ATLANTA FED PRINCIPAL -- FLEXIBLE PRICE INDEX IS POINTING DOWN FOR THE U.S. AND POWELL MENTIONED THIS IN HIS TESTIMONY YESTERDAY, ON THE BACK HAVE YEAR YOU WILL SEE THIS STICKINESS THAT WE ARE SEEING WITH INFLATION AND WE WILL SEE THE INFLATION INDEX RECEIVED. I THINK THE MARKET UNDERSTANDS THAT -- THE INFLATION INDEX COME DOWN. I THINK THE MARKET UNDERSTANDS THAT AND KNOWS THE FED WILL COME TO AN END WITH RATE HIKES BUT IT DOES NOT SEE THAT WITH THE U.K. TOM: THEY CALL OUR INFLATION PATH INCOME LATE BUT ONE OF THE GREAT STUDIES HAS TO BE THE GREATER NUMBER OF LESSER COUNTRIES REALLY STRUGGLING AS YOU MENTIONED. IS IMF GOING TO COME TO A RESCUE OR HAS IT LOST CREDIBILITY WHEN WE TALK ABOUT THE BANK OF ENGLAND? THIERRY: IF YOU MEAN REGARD TO THE DEBT LOAD AND EMERGING MARGIN.
YEAH, I DO NOT THINK YOU WILL SEE THAT HAPPEN IN LESS -- UNLESS THE COUNTRY ADOPTS A MORE AGGRESSIVE APPROACH TO THE POLICY AGENDA. THE IDEAS NOT TO BAILOUT COUNTRIES THAT HAVE A MISTAKES IN THEIR POLITICAL AND POLICY AGENDA OVER THE LAST FEW YEARS. IT WILL BAILOUT COUNTRIES THAT IT CAN IMPOSE AN AGREEABLE BASE AND MONETARY RESPONSIBILITY.
LISA: THERE SEEMS TO BE A REAL DIFFERENCE BETWEEN THE PATIENT DATA IN THE U.S. AND EUROPE. YOU WERE TALKING ABOUT THE LABOR DYNAMIC IN PARTICULAR. A NUMBER OF CENTRAL BANKS HAVE FALLS FOR OUR TRYING TO END NOW THEY GO BACK AND HIKING AGAIN. THIS IS WHAT PEOPLE DO NOT WANT TO SEE. WHAT GIVES YOU CONFIDENCE THAT THE U.S.
WILL NOT BE IN THE EXACT SAME POSITION? THE HOUSING MARKET HAS SHOWN INCREDIBLE RESILIENCE ALONG WITH OTHERS. THIERRY: GREAT QUESTIONS. LET ME START BY SAYING THE WAY THE PRICE INDEX IS COMPUTED AND CALCULATED, IT HAS INHERENT STICKINESS IN IT. 40 OR 50% ALL OF THE PRICES OF THAT ARE COMPUTED. TO GET A GOOD DENSE OF WHAT RACES ARE DOING, YOU CAN OBSERVE IT IN THE MARKET LACE. YOU HAVE -- MARKETPLACE.
YOU HAVE TO LOOK AT NARROWER INDICES. BUT WE DO THAT WE SEE A LOT MORE DISINFLATION ALREADY. PREPARE FOR THE ATLANTA FED INDEX. THE CLASS OF -- FLEXIBLE BASKET VERSUS THE STICKY BASKET. THERE'S A LOT OF DIVERSION IN THE LAST FEW MONTHS. LISA: WHAT IS THE POTENTIAL SHOCK TO THE RATES IT THIS IS REVERSED? IF IT DOES REMAIN STICKY IN THE U.S.
AND THE LOWS THE EUROPEAN STORY HERE IN BUDDY YOU THINK WILL HAPPEN? THIERRY: WE COULD SEE SHORT-TERM RATES GO UP AS WELL. BUT TO THE EXTENT OF THAT -- WE -- IT WILL BE BECAUSE INFLATION GOES UP. AS THE INFLATION EXPECTATION GOES UP AND NOT BECAUSE REAL RATES GO UP BUT THAT WILL EFFECTIVELY BE THE RESULT. INFLATION BREAKEVENS GO UP
WHICH DRAGS HIGHER THE TEEN YIELD. TOM: WERE LOOKING AT MONETARY POLICY IN THE INTEREST OF CHAIRMAN POWELL. I CAN'T BELIEVE IS BEEN 27 YEARS SINCE HE DIED, BUT YOU SAW THE DEAD WHEN THE DEAD AND WE ARE TALKING ABOUT DEAD AND COMPANY NOW.
THIS IS BEEN A STRONG -- LONG AND UNIQUE INFLATION. THIS IS ORIGINAL ISN'T IT? THIERRY: SO FAR THE FED RESERVE THE MISTAKE OF INCHING TOO MUCH MONEY AT A TIME WHERE THEY FELT THE PANDEMIC NOT IN. THEY TOOK THE VIEW THAT THE POSSIBILITY OF IT NOT ENDING AND SAID THEY ERRED ON THE SIDE OF INFLATION. -- IF YOU LOOK AT MONETARY BALANCES IN THE U.S., THEY ARE AT TREND LEVEL.
THEY WENT 10-15% ABOVE THE TREND AND THEY HAVE COME BACK DOWN TO THE TREND. THAT IS A STRONG SUGGESTION THAT THE INFLATION THAT THE CENTRAL BANKS HAVE CREATED IS NO LONGER MANIFESTING. TOM: -- DEAD AND COMPANY. HE SAID HE STOOD FOR SIX HOURS. THAT IS ON THE EDGE OF SPRINGSTEEN. LISA: [LAUGHTER] EVIDENTLY THEY USED TO HAVE MORE -- LONGER CONCERTS. TOM:
I'M A LITTLE BIT OLDER. THANK YOU FOR JOINING US TODAY WITH THE CHALLENGES WE SEE IN TURKEY TODAY. NUMBERS ARE DOWN .3% ON THE S 500 A. LISA: IT IS A CREDIBILITY GAP AND ONCE YOU LOSE YOUR RED ABILITY IT IS DIFFICULT TO TAKE IT BACK. IT RAISES MORE QUESTIONS THAN IT DOES GIVE ANSWERS. TOM:
WE WILL SUMMARIZE THAT AS WE MOVE THROUGH THE MORNING AND ORTON CONVERSATION WITH PRIME MINISTER OF UKRAINE COMING UP AT 8:00 OUR. HE STARTED WITH SWITZERLAND NORWAY WITH WHAT WE SAY ARE SHOCK IN IS IN INTEREST RATES. AS LIZZIE SAID, NO ONE WAS CALLING THE 50 BASIS POINT.
LISA: IT WAS A SURPRISE, NOT THE CONSENSUS. THEN THEY TALKED ABOUT MOVING FORWARD IN SUBSEQUENT READINGS. AND BANK OF TURKEY MOVING RATES AS WELL. I COULD LEAVE DIFFERENT STORY BUT JUMPING ON THE TRAIN DO WE SEE A DIFFERENT STORY AND IF SO WILL THIS BE ENOUGH TO CURTAIL THE INFLATION AND WAGE DYNAMICS. AND NOT RAISE GROWTH TO A DEGREE THAT YOU SCARE AWAY IN ESTHER'S. TOM: -- INVESTORS.
TOM: DR. WISEMAN NAILED THIS ABOUT THE LABOR DIFFERENTIALS AND THE CHANGES IN NEGOTIATION --
2023-06-27 14:52
