112 points. we'll show you treasurys, the ten-year sitting at 4.436, the two-year at 4.737. make sure you join us tomorrow, one day before the big day. >> "squawk on the street" begins right now. ♪ global markets paying close attention to the ecb central banking summit in portugal. don't miss fed chair powell, ecb president lagarde and brazil's central bank chief. they're all with our own -- we like to say right here -- sara eisen who will be conducting the affairs for that conversation. welcome to "squawk on the street." i'm david faber with leslie

pickering. you can see we are looking for a down open at this point. we'll keep an eye on the bond market. we begin with the world's central bankers, gathering at the ecb annual forum. sara eisen will be moderating. it's a panel that has jay powell, christine lagarde, the governor of brazil's national bank. last year i think it was japan's national bank. this year brazil. we'll bring you live coverage of that event. >> does sara get to pick the extra central banker to bolt on? let's be honest, most of the questions are going to go to poum and to lagarde. didn't you want to add that to your trip? >> to central portugal? thankfully i was there about a year ago, so i did get to see it. i'm not the central banker

interviewer at this network. i think you knew that. >> a big fan of all areas in europe. >> i am indeed. >> good timing inflation coming in from the eurozone this morning, down from 2.6% in may. in line with expectations. service inflation ticking up to 4.1%. that's why the headlines crossing from the speech part of what laggard is saying, they're in no rush to cut interest rates. the similarities, unemployment remains low across europe, 6.4% which is very low for the eurozone, and also that service inflation remains sticky, similar to here. bomth of those factors suggesting no immediate need for a cut. the big difference from the u.s., they have already cut once, 3.715% in june. altogether you can see why lag lagarde's headline from her speech is we're not in a rush to

make an extra cut from here. >> how do you extrapolate that inflation data based on the actual activity of cutting? is there any way to draw a correlation there? >> there's one similar between the eurozone and the uk, which is that we're about six months behind the u.s., getting to those really attractive inflation receipt tinges a little later in the u.s. and probably will follow suit of the u.s., we'll see things tick up, not to the highs of 10%, 11% from 18-month ago, but will take up from here. the difference withthe ecb compared to both the u.k. and the u.s. is they did pull the trigger last month on a little bit of a cut when you did get those attractive readings. the question mark from here, which you have had from the last six months, the u.k. will have and the e cp, if you didn't cut much at all, when the readings were very low and falling, are

you really going to cut when they're tick back up again? that's why ex-mekations for the number of cuts has been pushed back so much. >> speaking of yields, we always keep a close eye on the ten-year. that has moved up a little bit. >> 20 basis points n two days or something? >> i don't know if you've been picking this up, leslie, in your calls, i have had people talking for the first time in a real way about the election. obviously following the debate performance by president biden and the growing belief that that has certainly made things easier perhaps for a trump victory and then looking at what that would look like in terms of potential for tariffs, significant trade restrictions, maybe even more tax cuts. nobody really talking about less spending in some ways. and so maybe that's playing out a bit in the bond market. unclear, and perhaps that is one of the reasons why we're at least seeing the futures under some pressure, this after what was not a bad day yesterday. >> that was exactly what i've

been picking up from the investor community, the real focus on the presidential election following the debate, what that means for the deficit in particular and what it means for the ten-year. i think that's partially responsible for that 20 basis point move we saw in just two days. the focus has been on what trump would mean for bond yields. there sdliernlts. the one certainty in the macro environment does seem to be that the election will encompass more spending. with all this talk about biden being the presumptive democratic no, ma'am neeshgs will they ultimately replace him, no one is talking about what all these potential replacements would mean for deficit spending. although presumably it's more of the same. all in all, regardless of the outcome, you're looking at a higher deficit and additional

spending. will fled would be a better person to speak on this, it's ubiquitous around the world with so many elections taking place and so much political uncertainty. i'm looking forward to lagarde's comments as it pertains to what's going on in europe? >> what i think is going to be interesting after all these elections, whether french next week, u.k. come friday, u.s. come november, is whether there's a reality check once we're out of campaign mode. no one is campaigning in this world today where politicians can get away with not necessarily nailing down exactly what their policies will be and they don't speak the truth all the time, no one is going to say i'm going to massively hike taxes and cut spending. there probably will be a bit of a reality check for all these countries in the coming years, whether it's forced upon them in the markets, as liz truss discovered. i think it goes straight to the

big elephant in the room on the markets and nvidia, is trade relations with china. there was a big difference when trump came in the first time where nobody had really talked about tariffs and being tough on china. whereas you could even argue the biden administration has been much tougher on china than trump was who was more talk and less action, and might things not necessarily's under donald trump but not get tighter still than they already are that equation at the moment is really helping nvidia. they've got the perfect scenario of demand is off the charts and supply is constrained in a way that, yeah, they're way ahead of the rest in terms of innovation. there's also protectionism on that particular sub sector like there's no tomorrow. it will be interesting to see if that changes in a way the market is not currently expecting. some people saying, oh, trump is also going to be tougher on china. i also think europe is interesting to watch on china, following the u.s.'s lead, could that ease a little bit. in terms of yesterday, david,

you said it wasn't a bad day yesterday. it was a real will i strong afternoon with no clear reason or catalyst why after a soft morning. another record close for the nasdaq. you get those when you're up and around these levels. but not something to sort of ignore altogether. >> no. back to the budget. it will be interesting to see if we continue to have some sort of focus on it on the bond markets. i guess interest costs exceeding those of allocations towards defense. >> i think we're already there, aren't we? >> we're very close. students of history will say there's always a bad sign for an empire. they'll go back to rome. >> empire is a good word to use. >> you guys had it as well. >> after the scotus decision yesterday. empire is a good word to use as we approach july fourth. interesting, though, in terms of the outlook on the debt, the u.s. is 38% of its debt pile coming up in the next three

years which is pretty high. again, it's not attractive on that measure. >> refinancing at a much higher rate. >> much higher. there might be a forced decision in terms of spending once we get past elections. >> we're already at a trillion dollars a year in debt payments. breaking news on tesla. let's get to phil lebeau. >> got the q2 delivery numbers for tesla. these are better-than-expected. remember the street was expecting about 436,000 vehicles delivered worldwide in the second quarter, tesla delivering 443,956 vehicles in the second quarter. 95% of them, as it usually is, model 3 and model y. this is much better than expected. production coming in at 411,000 vehicles, 410,831 to be exact. the reason you're seeing shares move higher, this is a better-than-expected number for the second quarter. earlier today we got tesla's

china numbers. that had a few people a little bit nervous. remember, china is the world's largest ev market and, therefore, you want to watch it closely because it's such a big part of tesla's overall sales around the world. in june, sales totaled 71,007 vehicles. in china, a little over 200,000 vehicles delivered. byd's q1 sales of electric vehicles -- not talking hybrids, pure electric vehicles, so you can compare with tesla. they came in at 426,000 vehicles. so tesla still remains number one worldwide. there you see vw, gm and geely as well. in terms of annual sales, it will be curious what analysts are expected for the full year, to theirest plate. now it's come down to 4.82 million vehicles expected to be delivered this year by tesla.

for a point of reference, it was 1.81 million last year. so essentially flat. do analysts now say, okay, maybe we're starting to see momentum here. maybe we raise the full-year delivery estimate. now as you take a look at shares of tesla, a couple of important dates to keep in mind. february -- i'm sorry. july 23rd after the bem, that's when we'll get the q2 results. we'll see what kind of impact pricing in china has had on those q2 results. then on august 8th, this is the one that so many are focused on. this is when elon musk -- he talks about the robotaxi. what's the plan? do they show us a vehicle? do they give us a timeline in terms of robotaxi being deployed. geo fenced areas all over the place. tons of questions surrounding what they're going to say about the robotaxi. that comes up on august 8th. for q2, better-than-expected deliveries from tesla. >> quickly, phil.

better than expected by 4,000 or so. >> 8,000. >> talk me through the outlook. even with a better quarter, with perhaps things improving a little in the second half of the year, we're still stepping back talking about flat year-over-year. do people think that's a temporary -- >> if we come in at 1.82, it would be flat year-over-year, that is correct. >> whether it's 1.83 or 4, we're not talking about growth -- >> roughly speaking. >> do people think that's a one or two-year issue, or are they just happy to price in the stock where it is and being x growth? >> look, in terms of the stock, there's no way to tell exactly what the mindset is on the tesla investor because so many of them are trying to pivot to other focuses or other focal points in

terms of why they believe the stock is under valued. energy storage is a great example, as tesla continues to rapidly increase its energy storage deployments. people are saying that's what you should be focused on, not on vehicles. make no mistake, vehicle deliveries is still what people generally focus on when they're looking at tesla. to get back to your question, elon musk is pivoting as he mentioned at the end of q1 to a lower-priced model. how much lower priced will it be than the current model 3? that remains to be seen. what can they do? they seaid early next year, maye late this year, which no one is buying into, you'll see us produce and rom out a lower-priced model? are you tweaking the model 3? tesla knows the world is focused on a lower priced vehicle. they're not toke cussed on a

cyber truck. that's a niche vehicle. tesla spends so much time on the cyber truck when so much focus should have been, many believe, a lower-priced vehicle being developed. >> real quick, the byd numbers, give them to me again. those were worldwide? >> yeah, 426 for the second quarter. >> okay. >> that's pure electric vehicles, david. byd also makes a ton of hybrids. pure electric, 426. tesla, 444. >> got it. interesting. phil, thank you. coming up, paramount is this morning's top performer on the s&p 500. we'll give you the latest on that company. it's a saga. no doubt about it that. sara eisen's big interview from the ecb forum in portugal is coming up. >> i'm here in central portugal today for the annual ecb forum where i'm about to sit down on stage with the head of the federal reserve, the european central bank and the bank of

brazil. the key question on investors' minds, what does the policy path look like from here, now that inflation has come off the super high rates but not yet at desired targets? is it time for the central banks to start exiting the tight policy? we've seen all these central banks movingality different speeds. the question is what comes nt.ex we've got a lot to talk about. we'll bring it to you live on "squawk on the street."

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77% of the a shares. i can confirm as others have that they are talking to national amusement. the hope, as i understand stand it is, they can either make a decision in the relative near term as to whether they want to try to move forward and mount some sort of a bid that would probably have to exceed $2 billion. remember when skydance and red bird thought they had their deal, they were originally paying as much as -- i think it was 2.3 or more. got to look through my voluminous notes. they reduced it a bit. they didn't get there. that lady, shari redstone ultimately rejecting that transaction. particularly given so many of the different pressure she may be under and it may be under, what would diller do if he were to take over? anybody can guess. you could expect that once the deal closed, replace management. i think there is this general sense that an over-the-air

broadcast network such as cnbc is underutilized, still has more value. i was hearing that under the previous potential bids with skydance and red bird. so there's that. there's idea that you can get better at making successful programs and that helped. one thing you wouldn't get is synergy. there was some synergies of some kind with skydance being put into paramount. certainly one would imagine -- and this is not happening, the that if wbs discovery were to buy the whole thing, huge synergy. a company that many would say has been mismanaged for a long period of time, to get it back. that said, even with that so-called mismanagement, at least in the view of some, there is still viewed a great deal of value potentially there, but how you actually go about increasing that stock price. again, you're not talking about a premium here for this stock, the b shares, none. this is simply a control stake once again that would be purchased by an outsider. >> for redstone based on your

reporting, is it purely about price, or is she looking for kind of the next strategy -- >> she owns 33 million b shares. had it been my belief, she asked the special committee be formed to take a look at the skydance deal, in part because she seemed to support the plan for the best overall future health of the company that she is obviously the control shareholder in and her father created and put together. at this point it seems like she wants the biggest dollar she can get, is my sense. that said, mr. diller has a history with paramount. he competed with sharry's father to buy it and ultimately lost. first story i ever covered at cnbc, by the way, will fred. >> can we dig out the tapes? >> they were real tape. i think they got burned up somewhere. there are other things going on. the prospect of a trump

presidency, lack of potential m&a regulation that would along with that, allowing for a lot more consolidation, can't be underestimated in terms of what it would allow people to start thinking ability down. you have talks that cnbc reported on yesterday between wbs discovery and paramount about basically putting paramount plus into max, into hbo -- not called hbo. giving economic stake to paramount and having it be a global offering. so there's that as well. >> i was going to ask you a little bit about warner. clearly we don't know how close the diller deal is. the skydance deal got pretty close. where then was the trigger to bring in some of these more bigger traditional media players that we've always wondered, oh, they'll wait to see what's happening, but they won't want to miss out on one of these deals. >> i think if you're warner bros. discovery, it's the

antitrust concern. you're stilly not going -- you're going to fight a year and a half, watch a lot of that value start to evaporate over that period of time, so when you close the deal, the synergies available to you are no longer anywhere near what they were. i think that's the case for our parent company as well. these are tough deals to imagine doing -- that could change if we get a change in the administration. >> warner is restrictive for various reasons, not like they're soaring themselves. for comcast, our parent company, disney, netflix. this is kind of a drop in the ocean type deal. what's paramount's market cap right now? >> nothing. 7 bill. 17 billion in debt. >> can they take it on -- >> netflix certainly has been thought about, well, would they want to buy the studio if they could pry that out? that's why sony took a look and apollo, the studio. perhaps underestimating i think some would say, and certainly

mr. diller might even, that cnbc is being under valued in that. the skydance people believe that as well. >> how much of the messiness is deterring potential buyers as well, just given all the back and forth? at some point potential buyers might just say, look, i like the asset but i don't want to deal with -- >> no, especially with what happened last time in terms of the control shareholder at the last moment saying no to a deal she had supported more or less until the last couple weeks. people work months and months on something, you're right, leslie, that's got to be an issue. we'll keep an eye on shares of paramount. coming up, sarah buys en with a blockbuster panel at the ecb forum in portugal. >> hi, guys. i'm here in central portugal, the ecb annual forum is taking place. in just a few minutes, i'm going to be conducting this panel with the head of the federal reserve, chair powell, head of the ecb, christine lagarde, and the head

of the brazilian central bank, pridesent compose netto about where they are right now about the possible exit from very tight monetary policy. a lot to talk about moments away on "squawk on the street." we'll be right back.

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just a few moments from now, you can see they're setting up over there, the ecb forum in central portugal. if you've never been, a beautiful town, on the water. big castle up at the top. i think i've got the right place. >> bright colors, like the set there, the yellow and the blue and the red. >> sara eisen has been getting very familiar with it. this is another year where she'll be moderating a major panel discussion. fed chair powell, ecb president leg guard laggard and he who shall not be named, the governor of the central bank. >> they've picked beautiful places. jackson hole. >> jackson hole. key conversations in great

locations. >> geeky gone sayingses in great locations. >> that's how you bring people in. a geeky conversation like the new york city subway, you might not get as good a turnout. >> reminder, record close for the nasdaq. not out of nowhere. but quite tell think, extra one this year. today we'll see if that holds in light of a softer trade but more importantly yields ticking up again here. it feels like 4.5 is the real trigger on the ten-year that starts to spook markets. we're not back up at that level yet, but 20 basis points rise is nothing to overlook. i was looking at the notes overnight. l interesting period of time where at the top line of their raise note, they say this is a nervous raise. then there's all sorts of caveats in the opening page about why they're kind of doing it reluctantly.

that does sort of speak to the moment in time that we're getting to. [ cheers and applause ] [ bell ringing ]. >> the opening bell at the new york stock exchange. take a look at the realtime exchange. celebrating the recent listing, the nasdaq beam global, an ev charging company. i didn't mean to interrupt you. >> you said spacs, ev charming company. >> this is the spac, that's the ev charging company. spacs are still sort of with us. they didn't completely go away. >> vaguely. they're not near the way they were back then. >> no. there are different reporting

requirements at this point. you're not seeing any of those long-term free cash flow estimates that made absolutely no sense, but could be put into writing at least and help promote the stocks at the time. >> those were fun times. >> they were. >> speaking of the capital markets, we did get some interesting moves in the banks. >> the banks, a lot of smaller banks are topping the s&p, united community banks, a lot of the smaller banks up a percent or so as we take in the first minute or so of trading. >> raymond james upgrading comerica and first citizen bank shares. part of the thinking here, we also saw seaport research upgr upgr upgrading bank of america. >> the last decade at cnbc -- >> both of us trying to fill your shoes, david. >> i never considered myself a

banking reporter. but we did not have one for many years. >> mr. m&a. >> yes, for many years. we used to have much more free reign. now it's sara eisen and everybody else. >> and this is, by the way, the seaport upgrade on bank of america has a similar feel to the lori cav sin any upgrade. i look at all of this, having not looked at it super closely, although even though it's not my beat anymore, i find it hard not to read everything that comes across in london about the u.s. banks. the bank rate is up to 40 bucks, it got down to 25. they aren't cheap stocks. >> the big reason they had such an overhang especially last year and early last year is because of the balance sheet issue and the underwater securities. investors were punishing the stock as a result of that. some of the thinking is coming around to this idea that they're

working through the balance sheet issues. you see a rolloff every quarter in their earnings report. it becomes less and less of a problem depending on where rates are, of course. the lower they get, the better that is. at the same time, according to seaport, they could be benefiting from some nii tailwinds, net interest income tailwinds. that's the lone profitability network that we talk about all the time. a lot of investors are expecting an inflection point especially for those banks not tilted toward -- >> not as concerned about some of the long-dated assets on the balance sheet which, of course, during the banking crisis -- okay. it's starting. let's go to portugal and sara eisen. >> our host from the european central bank and president campos neto from brazil. this time last year when we were all talking, you guys were in the sort of final processof

hiking rates. fast forward one year, and now it's interesting. while i'm going to miss the governor and his jokes, we've got three great panelists here going at different speeds, i would say, when it comes to reversing that course. so we'd love to open it up, president lagarde, with you, where are you in this process? you cut in june, so now what? >> well, it's been a journey. you can't just say, oh, we cut in june. it's coming on the back of a period of hikes which was unprecedented facing shocks that i tried to describe yesterday over dinner and followed by a period during which we held rates untouched and during which we are -- we were restrictive enough to actually see our

medium-term target reach 2% which is our objective. most recently we have seen in our round of projections which are really important, september, december, march and june, we've seen that 2% target with an oscillation of 0.1 about it at the last quarter of 2025. so it's on that basis and the basis of what i'm happy to describe as a three-reg reaction function and all the underlying data and information that feeds thor three legs that we decided to do a 25 basis point cut. in the same breath of air, i also said it was not a narrow process, not a predetermined path that we were embarking upon, but a step that would be followed by further review of data, further understanding of

where our three-leg reaction function would be. so that's pretty much where we are. i would simply maybe at that we are very add danced in that disinflationary path, and we are in that sort of slow recovery which came about during the first quarter and which we hope will persevere. >> sounds like you're setting up if market for a pause, is that right? >> i'm not setting it up anything for anyone. i think it's important to look under the skin of the economy and see where it's heading and appreciating what our reaction function is and how we're likely to decide. >> chair powell, you have also been on a journey, have been on hold since last july and not cut rates like the ecb in june.

>> sitting here last year, there was a lot we didn't know, and we didn't know that we were just about to embark on a period of seven months of much lower inflation readings. we didn't realize the second half of last year was going to be an extraordinary year from a growth standpoint and the standpoint of the labor market. things worked out from the second half of last year in a remarkable way. as you know, in the first quarter of this year we continued to have solid half in the first half, solid growth in a labor market that's still strong, although we've seen a continued rebalancing, and inflation, after pausing in the first quarter, now shows signs of resuming its disinflationary trend. it's a little bit of a different journey. where that leaves us is, we've made quite a bit of progress in bringing inflation down toward market. we want the process to continue. i think the last reading and the one before -- inflation, and the one before to a less ser extent

do suggest we're getting back on a disinflationary path. we want to be more confident that inflation is moving sustainably down toward 2% before we start the process of redu reducing our policy -- loosening policy. that's what we've said. what we'd like to see is more data like we've seen recently. we'd like to see the labor market remain strong. we said if we saw it unexpectedly weakening, that also could call for a reaction. >> how much more confident do you want to be. pce number, 2.6, that wasn't too bad that we got last week. >> that's right. 12-month basis, 2.6 for both headline core and inflation. in headline, 7.1 to 2.6. yes, we've made a lot of progress. we want to understand that the

levels that we're seeing are a true reading on what is actually happening with underlying inflation. as we were saying at the last part of last year, people were saying you need to declare victory. this is over. then we had a quarter of inflation which was well above 3%. we want to be more con fconfide. we have the ability to take our time and get this right. that's what we're planning to do. >> so september? >> i'm not going to be landing on any specific dates here today. let me also say we're well aware that, if we go too soon, that we could undo the good work we've done in bringing down inflation. if we go too late, we could unnecessarily undermine the recovery and expansion. so we're aware we have two-sided risks now, more so than a year ago. i would say risks are coming much more into balance. >> president campos, you've been cutting rates for much of the

last year and have recently paused. why? what are you going to do next? >> so if we go back a little bit, brazil was one of the first countries to hike rates. i think because you had a different call on the dynamics of inflation, both locally and globally. i think now to be correct, and at some point in time we started the easing cycle. throughout this process of easing, we've seen that inflation has converged. we have some of the problems that are common to countries which is labor markets are st strong. there are two points of attention. one is labor markets that are strong, will that mean inflation in the service side. even though we haven't seen that yet, what we try to do is try to

estimate what would be the components of labor in every service so we can anticipate if that were to happen. we haven't seen it, but we think it's -- there is somewhat of a correlation when you look at the margin. so most recently we decided to pause. that had to do not only with the current numbers and with the suspicion that we had service inflation that could peak at some point in time and also because food prices were going back up a little bit. i also think that's not only happening in brazil, it's going to happen in some other places, too. but also has to do with a lot of noises that we had. so we decided to interrupt the cycle. more recently we have had a selloff in some of the emerging market countries. brazil was more affected. i think this has to do much more with noises that were created than the fundamentals. the noises are related to two

channels. one is the expectation on the path of fiscal policy. the other is the expectation on the future of monetary policy. so when you have these two at the same time, it created uncertainty enough that for us we needed to interrupt and see how we can fix that channel and how we can communicate better so we can eliminate those noises, because there's a big discon netflix with the current data, both fiscal and inflection data. what happened in brazil, expectations started to turn even though the current data is coming as expected. >> you're talking about the fall in the stock market and the real recently when you talk about the markets. >> but for us what matters is how this gets into our reaction function. i'm talking about -- we had somewhat of a steepening of the curve. expected inflation, both implied

from the markets and expected from the surveys, those have gone up. >> president lagarde, you have described the path to 2% as bumpy. we got an inflation report in the eurozone this morning, 2.5%, not too bad. but core was high and services still above 4%. what is keeping prices so sticky? >> well, first of all, we had, as you said, a number that was lower than last month. so we said it was bumpy. it's proving heading in the right direction for the in indicator that we use which is hicp to measure inflation and set our target. so that's good. but we still believe it's likely to be a bumpy road until the end of 2024, but we still have target at the end -- in the second half of 2025 on the basis of our projections and the baseline is unequivocal on that

fr front. you are correct that services has president budged. services is at 4.1 if i remember from the numbers that we got this morning. and obviously we are very attentive to the components and what is behind services. the real issue is to understand whether those are -- this is caused by sort of permanent changes or whether it is also a fact tour of the lag effect from other components which are finding their way more slowly and gradually into services. the jury is out into exactly what it is. the truth of the matter is we do have a service numbers that's gone slightly up in the recent month and now staying at this 4.1 percentage point. obviously we don't need to have services up 2%, because manufacturing goods are below

2%, and at the end of the day is going to be a balance between goods and services and it depends on the weight of those within the index. but we have to look really what is behind it. what's behind it is a lot of wages. services has a very high component of labor. wages also suffer from the lag impact of the labor system that we have in europe where clearly bargaining agreement on are negotiated not only on an annual basis, but sometimes a triannual basis in other countries. so you have this catchup effect. for those people whose renegotiation took place early this year, they had not had a negotiation of wages in the last three years. in the meantime inflation went up and the real wages went down. so there is an element of catchup. we really need to really unpack all that to get to the root

causes of inflation behind services. so we will be -- we'll continue to look at that. we need data. it applies to wages, applies to profit. we are seeing profit gradually declining compared to the height where they were at the end of '22. but we need to see those profits absorbing the wage cost increases to make sure that the second round effect is out of the window and services are also going to be on a decline path as well. the services is the difficult one. >> i was going to pose that taylor swift is touring europe this summer. there tends to be an inflation effect in services. am i right, chair powell? we saw it last year, didn't we? >> it's not just taylor swift. others have come as well. >> i don't know. i saw her as wembley and there was a lot of spending going on. how do you look at the services, the stickiness of the services

inflation and how tied it is to wages which have been rising. >> famously services inflation is stickier and 235i78 mousily it's hit to wages. look at the u.s. labor market. we've seen a pretty substantial move to better balance than a couple years ago when labor was at an extreme shortage. what you see now is an unemployment rate moving back up toward a more sustainable level. we see wage increases moving back down toward a sustainable level of wage increases, inflation and productivity. and you see vacancies to unemployment ratio coming back to where it was prepandemic and so many other measures i could mention. so that's what we're seeing. so the labor market -- wage increases are still a bit above where they would wind up in equilibrium. nonetheless, you can see the labor market is cooling off, appropriately so.

we're watching it very car carefully. it doesn't look like it's heating up or presenting a big problem for inflation going forward. indeed, it looks like it's doing just what you would want it to do, which is to cool off over time not quickly, not suddenly, not steeply. it's kind of what we've been hoping to see and have been seeing. services generally are, they're such a mixed bag, particularly non-housing services are a mixed bag. some of what you're seeing is catch-up inflation from inflationary pressures that happened earlier. that's true with insurance. also true with housing services inflation where you've got some pent-up rent increases that have to work their way off. it turns out it takes more than one year for that to happen. it takes several years. we see all that in train and we don't see ourselves getting back to 2% inflation this year or next year. maybe late next year or in the year after. but the main thing is, we're making real progress. >> can you keep cutting, president lagarde, if he keeps

holding? does it make it harder? >> look, i'm going to give you the conventional response because that's the conventional question you ask me. we do take into account the spill-over impact of whatever is decided by other esteemed colleagues. obviously my esteemed friend, chair powell, is one of those. so we take that into account, but we also determine monetary policy on the basis of what we see in our economy, and we look at the data that we get, the impact that multiple factors have on our economies and its numbers. >> does it matter for you, president campos, what the fed does next? >> i think it matters to an extent. but i think there is one point that is worth mentioning which is more recently we've seen a selloff in some of the yen.

especially the yen that were more like the best cases for investment. you see that this is being explained with local. when you have a lot of selloffs in local markets explained by local news, you have to ask the right now, but definitely what we see now, is there is more of a lot of the emerging markets countries and it was very synchronized at the long end of the curve and that correlation broke. we've seen the last couple weeks even though the 10-year yield is more or less stable, even actually going a little bit lower we saw a bit of a selloff in emerging markets. that has to do with the fact that as you go for longer, with higher rates and much higher debt, you start extracting from the market and eventually you are reprising that liquidity. it could just be a temporary

adjustment in the end or you could -- it could be the beginning of a more profound movement. we need to wait and see. the correlation between the u.s. treasury and some has been broken in the last couple weeks and we should pay attention to that. >> what about the fundamentals in the emerging markets. the economy seems to have done better than previously. why do you think that is and does it condition? >> most have done a better job or at least an equal job in terms of anticipating the process and starting the hiking process. also in the fiscal part on average, emerging markets tend to spend 10% of gdp facing the pandemic. tlids also this thing which didn't happen in the past buying in the pandemic spending and

when you look at the post-pandemic emerging markets continues it's not the case of every country but continues to do better. that also changed the dynamics. one of the things i think in the central bank and maturities of the central banks have gained in the emerging markets proved to be very useful during this process of the pandemic. >> i mean, all of your economies did better than expected with the interest rate hikes, wouldn't you say, chair powell? >> yes. yes, i think particularly, yeah. i mean, many, many forecasters had a recession in 2023 which not only turned out to be wrong in the case of the u.s., we had in excess of 3% growth. >> you still see policy as restrictive? >> yes, we do. >> how restrictive. >> so that's kind of an empirical question. i guess i would say if you look at we do think policy is restrictive and we think that's appropriate. i think if you look at the labor market in particular you're

seeing demand for labor dp gradually come down in the form of job openings and softening of unemployment in the jobs, demand coming down. you see the effects of high interest rates in the housing market and some other interest rate sensitive things. you see that. and i think, you know, i do think that restrictive policy is working hand in hand with this broad supply side recovery we've had, where we've seen the unwinding of the shortages and bottlenecks from the pandemic. we've also seen a recovery in labor force participation among prime age individuals in the u.s. and then some immigration which has also been a positive supply shock. we've seen those things work together to give us significant declines in inflation. at the same time we have a strong labor market and growth. this was a -- it was a great outcome for the people we serve and it's one that we want to do everything we can to foster. >> why not cut rates to protect

it? >> it's what i said earlier. >> is it -- sorry. i'll rephrase. is it a bigger risk that you cut prematurely and inflation stays sticky or wait too long and the economy loses more momentum? >> you know, that isthe question, and so -- and our answer to the -- our answer to the question is, we serve a dual mandate right. these two things are embody in that mandate. the risk on the inflation side is that you move too quickly, inflation comes back, and we didn't really solve the problem. and we have to goback in and that would be very disruptive to the economy. so the other risk is that we wait too long. the labor market softens too much and we lose the expansion. so needless to say, we don't want to do that earth -- either. we have to balance those two. given the strength in the u.s. economy we can approach that question carefully, but as i

said earlier, though, you see a year or so ago we were talking about inflation and our framework called for us to focus on the mandate that is further from the goal. that's not -- they've come back much closer into balance and a good way to see it is the beverage curve analysis that everybody talks about and looks at. we come straight down the beverage curve, but you're really getting to that place relative to job openings and hiring rates where traditionally the beverage curve has flattened which means -- which would mean higher unemployment as a result of further declines in job openings. you can't know that with precision, but it's very much understood which us we have two-sided risks and we have to manage them? what about the recovery in the eurozone, president lagarde? it's been pretty resilient, especially on the unemployment front. how confident do you feel in sticking the soft landing? >> well, we reached a level of confidence back in june when we

decided to actually cut rates by 25 basis points. as i said in the opening remarks, it is not something that isn't taken for granted, isn't given, and we're going to reexamine each and every step of the way whether that confidence is actually continuously reinforced in order to continue on that path. it's -- i mean the remarks by chair powell, made me really reinforce my point about data because we are navigating in this universe of one risk versus the other, but where data is so important, and data is so important because we proceed always with the burden of the lag of time, whether it's the impact of our policy decisions, whether it's the impact of wages, whether it's the sort of on time data or not, all of that has to be taken into account and analyzed in details, so that we

can feel really confident that we can go forward. >> at the same time there are also political risks. certainly they're front and center. it was nice of the authority to makes elections all happy this week, certainly in france and england. president lagarde, is there anything that ecb can do to shield the rest of the eurozone from feeling any negative impact from a divided government in france or from whatever the result is of the french election in a negative way? >> i thank you so much for your question. >> it can't be a surprise. >> i'm not going to comment on the political situation of any of the member states, particularly those that are facing elections at the moment. but, you know, obviously, the european central bank has to do what it has to do. our mandate is price stability. price stability is, obviously, relying on financial stability and we are attentive to that

base this is poart of our job ad we will continue to do so? does the rise in french bond yields look worrisome at all? >> these are the things that we monitor. this is part of the job. it's not particularly at this point in time, we do that all the time and we are very attentive. >> you have fought hard for the central bank's independence in brazil and yet now you are the subject of many attacks from president lula, and i'm wondering how you're dealing with that? >> attacks on me? >> no. president campos, attacks from president lula? i think he called you an adversary and enemy? >> yes. well, i think as a central banker we have to get away from the political arena and try to go on with the technical job. i think what we did, i think, is living proof that everything was

done was very technical. so during the elections in which lula was elected, the incumbent president in his last year of mandate, we increased rates in a cycle that went from 2% to 13.75%. that's the biggest increase in rates in an election year in the history of any emerging markets. so if that is not a proof that you are independent, and you acted autonomously, it's difficult to find another example like that. i think all this narrative that the central bank has been political, i think we have to get away from that and explain what we're doing. i think what we're doing has been very technical. the last decision was unanimous and we have four members on the board that were chosen by the current president and i think what we need to separate it, what is the political narrative and what is the technical job we need to do.

i think history will tell and time will tell that job was done in the best we could do with the data we had at hand and was in the most technical way and it was done in a group of people that actually analyzed all the data and worked very judiciously to be able to get to the conclusions that we did. >> chair powell, do you have any advice for him? you've been through some attacks from leaders? >> i have no advice. i will say to put it in my words, you know, we've been given this great responsibility and great powers, and really important that we get it right, and we've been told to stay out of politics and just do your job. do your job. and that's what we do. we don't try to get involved in issues that are not our issues, and in particular, we -- we're just focused on our goals and getting through that. if we do that and do it well, i will say in the united states

there's very broad support for an independent fed in both political parties on both sides of capitol hill and everywhere. i don't think that that's really in question, as long as we just are seen to be doing our job and staying on task at all times. >> can i say something? >> yes, please. >> i think that there are countries where governors do exactly what chair powell said and yet, get blamed, criticized, and i think for some it takes courage to do the job in addition to being a good, excellent technical expert. >> but i do wonder if you're concerned, because your term ends, president campos, at the end of the year, and it doesn't seem like president lula will reappoint you. dow worry of the independence of the central bank. >> first, i was never up for reappointment regardless of who won the elections and i've said that from the very beginning.

when i helped designed the independence law, i actually tried not to have the reappointment possibility in the law and for me the reason was, i didn't want the president of the central bank at any circumstance to have any incentive to bend his knee in order to have any kind of re-election. we need to make that very clear. secondly, there is actually a risk premium now in the curve, and i think it has been elevated in the last couple weeks. as to uncertainty of what happens when the next leadership or the next team takes place, but this in brazil is done very slowly because the central -- because the president can change two directors every year and we have eight directors plus the president, so right now we have four directors appointed by the current government and the last decision, monetary decision, was unanimous.

what we did in the last decisions proved that group is very cohesive in trying to find the technical solution for the country. so i understand there is a risk premium and there is this uncertainty, but i think the group that we have, which is composed of eight directors plus a governor, voted unanimously understanding that that was the best for the country at the time and so i think i understand that there is a risk premium, but i think with time that risk premium will tend to decrease. >> there are concerns in the united states about that independence if president trump gets elected, there have been reports that he's looking at that issue. obviously, you've been subject of attacks before. what is your level of concern about that? >> i am not focused on that at all. that's not just a talking point. i really think that we just keep doing our jobs. the u.s. economy, we have 4% unemployment, growing at 2%, inflation at 2.6%. let's do our jobs. history will judge.

i think if we can keep things on that path, that's what i'm focused on. that's the only thing i'm focused on. as i mentioned i do think support for the fed's independence is very high where it really matters on capitol hill in both political parties among the leaders and most of the following, and, so i worry about getting the job right, that's what i worry about. >> i know you guys don't want to touch politics, but president lagarde, it does bring into focus the foreign policies, right. we heard president campos say it. there are concerns about the deficits in france if the far right should win. there are concerns in the united states about the deficits. i do wonder if you have something to say or warn on the fiscal front as it relates to making your inflation fight harder? >> well fiscal matters enormously, true, and it matters in two different ways from my perspective. it matters from a sort of conjunk turl type of way and

thank goodness the european authorities have agreed on the fiscal governance that will take over after the growth and stability factors when replaced, has been suspended and now completely replaced, there is a framework within which members of the european union have to operate, have to control the direction of the debt, have to make sure that it is sustainable going forward through the efforts that they deploy, and have to keep their deficit on watch. with enough flexibility, and that's the second part of fiscal spending i'm concerned about with sufficient focus on productivity, on growth, of investment that will be conducive to both, and my hope is that in addition to operating within the european fiscal framework, which has been agreed by all european members, in

addition to that, countries will actually look at the structural changes that they have to either continue to have in the arsenal of tools, but also, remain strong and, you know, thrive in those changing circumstances and transformations that we have talked about. >> i know you're allergic to

foreign policy, chair powell, but i have heard you talk about the unsustainable debt burden in the united states but there has been a selloff? treasuries after increasing odds that president trump might be re-elected and a sweep of either party. doesn't that make you nervous when it comes to the progress you've had on inflation if we see more expansionary foreign policy and more deficit, bigger deficits and debt loads? >> i'm going to give you the traditional answer to some extent. foreign policy is a job for elect the people. we're not a job for elected people. we don't comment on it in advance of a presidential election. we're not commenting on anyone's policies one way or the other. i will say more broadly the united states is running a deficit at a time when at full employment and the level of debt that we have is not

unsustainable. the path we are on is unsustainable. that's noncontroversial. i would have thought that this is something that should be a top level issue and you hear this from elected officials, but it should be a focus, how do we get back to a sustainable path. you can't run these kinds of deficits in good fiscal economic times for long. i can't speak to the time but in the longer run you have to do something sooner or later and sooner better than later. >> let's do a basic exercise. if you look at the total combine of sovereign debt, that's 64% of the total global debt. that in it terms of costing that servicing that debt, it went from 1.1 or 1.2% before the pandemic to around 3% right now. you add 25% of gdp to that debt

which was the cost of facing the pandemic. so we have a much higher debt and a much, much higher cost of service to debt, so i think there was an aspicture globally that is the extraction of liquidity that cumulative will have an effect in the market that sometimes is not pricing correctly. if you think about what we have to do right now, we have to pay for the cost of the transfer programs we did. we need to pay for the cost of the green transition, which is somewhat expensive. we need to pay for the cost of the fragmentation, which you look at the surveys and costly for companies and governments. we need to pay for the cost of the low-income countries that spend very little during the pandemic and now need support. we need to pay for the cost of demographics. there is a surge in consumption of energy that needs to be paid because of innovation. we have a lot of bills to pay. a lot of bills to pay. we have the highest level of

debt we've had in the long time. i think sometimes i stop and think, it's time for us globally to think about a way to get to some kind of stable trajectory of the debt in the next couple years. it's not one country or the other. something yes need to do collectively. the global debt is high and going to start taking a lot of liquidity from the markets. the ones that will feel the effect are not the defense or emerging market economies, the low income countries are feeling that effect already. >> you think the market is mispricing this risk? >> i think the market was mispricing the fact that if you have higher rates for longer, the effect from extraction liquidity, depending on how much long longer you're going to have higher rates the risk is higher than what the market is price sflg i want to ask you about china. you have a pretty good view. it's such a big trading partner for you.

what's going on there? how much is china's economy slowing? >> i am not sure i'm very equipped to tell you what's happening in china. i can tell you it's important for a lot of emerging markets economies, it's important for brazil, we are very big exporter of food items and iron ore. china is a big trade partner with brazil, and it has been for while. in with regards of the government, it's important to understand that that is a very -- the one thing we look from looking from far away, we're trying to see what is the policy china is doing. what is the focus and what is the impact that this new policy will have for us? because we export mainly food items and iron ore we don't see that as a big threat. i think some other countries that have a different understanding of what this impact will be. >> yeah. there's also trade bearriers going up, tariffs, in our

election, we're talking about potentially more tariffs. are you seeing that in terms of growth and inflationary impact? >> well, we're not seeing yet more tariffs than what had been decided back eight years ago and which was consistently maintained later on in relation to certain products, so that for the moment is stable. what is not stable at all is the number of protective measures. occasionally noncompliance with wto rules, the level of disputes that are brought before the w.t.o., which is not in a position to resolve them because they are not equipped with the dispute resolution mechanism and magistrates have not been appointed to that effect, we've had more than 3,000 trade protective measures decided in the last two years and that is like five times what is the

normal average of measures that are decided. so that's a concern. it's a concern because trade has been fueling growth and because europe at large is not a small open economy, it's a large open economy, and trade restrictions are going to affect europe much more so than other countries that operate without this degree of opening and vulnerability in a way. the second reason i'm concerned about it is that typically, trade is conducive to innovation. innovation is necessary for productivity. i think that the combination of reduced trade on growth and the impact of trade on the comes aty to innovate and improve sdm capacity to innovate and improve capacity, is one for europe we have to address very forcefully if we want to win this battle of productivity. it's not independent from inflation. i'm not getting away from my

topic, but it's one that is clearly a concern on the horizon. >> it could be inflationary, 10% across-the-board tariffs inflationary? >> of course i'm not going to be scoring any potential political proposals which have been talked about. it's not our job to do that. also, almost anything affects the economy. trade affects the economy, immigration, energy, policy. those are not our jobs. we do maximum employment, price stability. in our political economy we stay out of that. >> right. but it has implications for price stability, surely, and maximum employment? >> again, we're not looking to be -- this is exactly what we're not looking to do which is become players on issues like tariffs. i mean because it affects -- literally everything. all these things affect inflation and jobs, but notwithstanding that, there are others in the elected government who are responsible for trade policy. we don't comment that's all?

understood. so back to your job, then, there is the debate -- among the fed and other central bankers, about where policy rates are going, are starred, the neutral rate, what that rate should look like and whether it's different after covid. what do you think? >> can we go back to trade? >> sure. please. >> so our star. i guess i would start by saying that the thing that we write down as part of our summary of economic projections and the thing that economies mean is a longer run concept. it's the rate of interest that would hold the economy at equilibrium at a time of stable prices and maximum -- and not hitting the economy. the first thing to say is that when we're sitting in the board room in washington thinking about whether our policy rate is the appropriate rate for this

economy right now, we're not battling over long run what our star is. that is an economy still recovering from the pandemic. and so many forces are pushing it this way and that way and there's really not a lot of precedence, so it's a very challenging time. it's not -- the question, the our star question is a really interesting question, and that is are we going to go back to the very low levels of neutral rates that we had in the recovery of the global financial crisis or are we going to go part of the way back from today's high rates to that, intuitively most people think we won't go back to the very low rates that we saw, you know, during the global financial crisis recovery period, but we don't really know. i mean, those -- the neutral rate has moved around, we think, by slow moving, longer run forces, demographics, technology, productivity over time, all of those things, move on -- move it around. ultimately they balance between

savings and investment. so it's a great conversation to have, but honestly, when we're looking at policy in the board room, it's how is our -- how is our policy affecting today's economy and do we think we're getting the results that we want? you know, by and large, in a world where this isn't a world of precision, we think we are. we're getting a gradually cooling economy, gradually cooling labor market, progress on inflation, 4% unemployment, 2% growth, we're getting kind of what we would want to have and so that's -- and i worry that some people, no one in this room, but some people think that the our star debate is a thing that dictates our assessment of how restrictive policy is. it's really not. >> i think -- >> unless you think that the long run rate is the same as today's rate. >> i think investors are trying to figure out where you're going to end up and what the policy path looks like once you start cutting rates, and it becomes important then. >> i agree. what will we discover to be find it empirically discover it to

be. i think there's a debate going on. there are people who feel very strongly it hasn't changed, and it has changed and ult little it's unknowable. it does matter for the longer run. it matters for where rates will settle out. it doesn't matter much for policy decisions today the ones we're making. >> we want to know if there are ten cuts coming or 15 cuts. do you think president campos it's changed post-covid? >> our star story for emerging markets countries is different. if you look at if you had a table of countries of latin america, you would find that at least the models internally used by their own central banks, in? case our star going higher in brazil 3 to 4 and a half but in some cases going lower. what is the short-term view and long-term view as chairman jay

described. and i think for us it's more like trying to understand what is the structure or reason for the neutral rate in brazil to be so high, 4.5%, is really high, and i think a lot of it has a lot of structural elements from the past, but it has intensified during the pandemic. and you could go and talk about the amount of subsidized credit and talk about the tra jek tour of the debt. when you look at productivity there's one thing not a lot of people talk about talk about in the need for raising money, sometimes the adjustment is done on the revenue side. when you do that just on the revenue side if you look at what's been done in emerging markets countries and some advanced economies, you tend to go back and cut more than labor. if you tax more capital than labor and this has been happening for a while globally especially in emerging markets, then you introduce another

element that will bring productivity lower, so when you look at the causes of the neutral rate to be so high structurally, that's what we need to work on. brazil has done a lot of reforms. we have done reforms. if you compare to other countries, brazil was able to do reforms in the middle of the pandemic, we're doing a tax reform, we did a labor reform all in the middle of the pandemic but still when you look at the efficiency of what was done, the end result seems to be that our structure rates is due to our neutral rate, our star too high, and i think we need to go on and talk about what are the reforms that are needed in the medium term to make sure we have a structure rate and a neutral rate lower than we have right now. >> the lagarde, do you see a world where we get back to near zero interest rates absent a crisis? >> do i think we're heading towards that? that's -- in my view at this point in time, it's very unlikely, but it's not something that i would want to pass

judgment on. what i can tell you is that when we start having that conversation that chair powell described perfectly well and that i would completely subscribe to, i would be relieved because it would mean that we are getting closer to where we need to be. it would mean that we do not have any shock suffered by the economy nor on the immediate horizon so that would be good news. we are certainly not at this stage and this is not the work we do when we set our policies going forward. >> one thing that's been moving fast and has the potential to impact economies is generative ai and i know we started talking about it a little bit here on stage last year. it was early. but things have moved, president lagarde. how are you thinking about any impact on growth or productivity or inflation of what's happening in technology? >> sara, that's a subject for which we another hour because there's so many questions about it. number one, there has to be some

regulatory framework within which ai and agenerative ai in particular, especially in the hands of a small ollie gople of companies is organized to protect a number of rights and protection of citizens. that's -- i would start from that, which is not where we are for the moment, although there are attempts to organize in a better way as was the case with internet on a global basis the use of generative ai. point number two, i will let roberto talk to that point because he's more of an expert than i am. the question of how much energy is used nofrds to test large language models is something that is not often on the -- in discussion and yet it matters enormously. third, the impact that ai will have on growth, on inflation, on productivity, i think is yet to

be determined. i think most people would agree that it will have an impact throughout the ladder of jobs. in most segments of the economy. in areas where mechanical developments have not historically affected jobs in particular, and it will require significant amount of training and constant upskilling of people so that they can adjust to artificial intelligence, use it, and not be victims of it. i would add to that, that i think we at the ecb are using artificial intelligence, try to do it in a safe environment, without being hostage to those companies that wroo would like to have access to the most private of our data. it does require a cautious management and enough control without, you know, preventing the innovation and the creativity that people can apply

in the use of these tools. >> you use it in models. how do you use it? >> we use it in models. we use it -- whenever we need a lot of language mining, and whether it's structured or unstructured data for that matter, we use it and we are constantly pushing the frontiers of that. as i said cautiously we need to put data and we need to make sure there is enough human judgment involved in the process of this use of artificial intelligence so that we're not either hostage to the mechanics itself. >> do you think that fears over generative ai, chair powell, rendering certain jobs or industries obsolete or legit and is there anything the central bank can do? >> i don't think we know. so, so you see this massive investment boom and you see, you know, serious people in the

private sector and the public sector there's a sense of something big coming here. you know, it feels like what that will be it will eliminate some jobs, create in new jobs and the question really is for many people who will -- would augment their labor and make them more productive or eliminate their job. i just don't think we know that. it's too early to say. there's not a lot of the central bank can do about that. this isa job for -- we can supervise our financial institutions and things like that to make sure they understand what they're doing with all kinds of different technology, but also, like everybody else, we're, you know, meeting with all the experts and asking ourselves what will be the effects on productivity and inflation and growth and will it be displacing and if so of whom. one thought it will be more people doing white collar jobs writing press releases, things like that. we don't know. it's something we're investing a

lot of time and effort. we're not using generative ai. we're carefully looking at that. other forms of earlier forms of ai arein fairly common use in american business and i believe we use some of that. >> what about you? i know you're focused on the energy needs as well. >> well, first, i think when you look at the surveys that we have, and we have plenty now on the use of ai on companies, what you have in terms of empirical evidence to date is companies who use ai to enhance existing labor have had better results than companies that have replaced labor for ai. that's something that we know. it doesn't mean that some jobs won't be replaced by others, as it was said, but i think what we need to understand is, what we are seeing basically is an increase in the ability of processing data and storing data. it's basically computer power and the ability to store data and that's very energy

consuming. you have a couple of dimensions you need to look at, privacy, where is the limit, and what is the -- using this once it becomes a global instrument, what is the tax on know my of using this. you could be talking about data centers put in countries that have chip energy to produce services for countries that have more expensive energy. so once you start crossing the frontiers think about how you're going to do this movement globally i think there are a lot of consequences and one of which i think is you're going to have unequal growth between the countries more on the edge of producing this technology than the countries that are not and the energy consumption will be unequal. i think globally we need to look at how we're going to connect the dot and create a tax on know my for the development to be sustainable. >> in the minutes we have left.

i want to do a quick lightening round of questions. mainly we've been -- we talked about opportunities, we talked about economies, what about the biggest risk facing your economies? i do wonder if they're the same or different? chair powell was the biggest thing facing the u.s. economy right now? >> i said cyber risk to that because it's, you know, we know how to deal with credit risk and lots of kinds of risk, market dysfunction, things like that, but we haven't had a big successful cyberattack on a market utility or bank and that's the kind of thing which i think is the stuff of lying awake at night. i would also today, though, honestly, really, it is just the balance that we talked about, getting the balance on monetary policy right during this critical period. that's really what i think about in the wee hours. >> president lagarde. >> same thing.

>> really? cyber risk? >> i think -- i'm saying that touching word, and i wish, yeah, because it's one, if you ask the financial sector, if you ask banks with which we are -- interact a lot, sometimes much to the chagrin but eventually to the satisfaction in the long run, i'm sure, because we supervi supervise them carefully, typically that's a risk they flag as one of their top priority risk and on which i think we need to constantly improve the level of coordination first, second, thirpds line of defense and best way to respond to those. now clearly i'm concerned as a person more than as president of the ecb, about the backlash that there is against the fight against climate change and some would argue that it has nothing to do with central banking but i would contend that this is

actually not the case. it does have ramification impact that we should be mindful about, but it's a risk that is there and that will come to haunt us if we don't do much about it. >> i thought you were going to say geopolitical risk. that's there facing europe? >> geopolitical risks as defined by -- earlier on? >> we heard a lot about geopolitical risks. >> it's there. it's just on the doorstep of europe. when you look at this horrible war against ukraine, it's a major risk which is out there and which is hurting those on the ground and the neighboring countries in particular. >> what's your biggest risk? >> if you look at what markets priced today, probably at risk for part of -- especially for

brazil the conclusion would clearly be the main risk is fiscal. but i think that comes and goes and has to do with growth and productivity and a lot of things. i think there's one other risk that i see and it's not very tangible, which is the polarization that we live today. if we think about the amount of time we spend on some social issues that are connected to polarization, and there are not that meaningful to produce the well being of the society i worry a lot about that. >> yeah. so if we're sitting here on stage in one year from now, which we hopefully are, the inflation rate in the u.s. will be? >> mid to low 2s. >> that's kind of where -- we're mid 2s now. >> we have one month at 2.6 and, you know, we had a brief visit to the low 2s at the end, i mean

sustainably durbly underlying inflation between 2 and 2.5. that would be a great outcome. >> headline pce. >> yeah. >> president lagarde one year from now? >> low 2s. we are at 2.5 latest ragdeadingd as i said bumpy on the way ahead. low 2s. >> you've been closer to 4%, president campos. where do you think you are in a year from now? >> i won't be in the central bank a year from now, but -- >> we already established that. >> but i think that the work that's being done is technical. i'm confident we'll continue to be that way. i think when you look at expected inflation today, i think it has a disconnect with the current inflation, and it has a disconnect with the fundamentals that we have in brazil, so i'm confident that the future inflation will be lower than the expected inflation. in other words, what the market

is pricing today, it's not in sync with the reality. >> what about the unemployment rate? we're going full dot plot here. >> yeah. >>, you know, i would be happy if it were right where it is now. that would be a good outcome plus or minus a couple tenths. >> is that likely? it's starting to rise. >> it's moved up from 3.4. we touched 3.4. 4 is sill a low level. it's been a long time -- the last time we were at 4 or below this long i was a teenager. long time ago. >> also unemployment rate in europe has been, what, healthy. >> historically low and i hope it stays there a year from now. >> what's the unemployment rate in brazil? >> close to 7% now which is very low when you look at our history. i think probably we'll go up a little bit but not too much. but i think what we need to look at the participation rate.

we just published a studio y th shows the transfer programs have an impact in the participation rate. our participation rate was down and recovering a little bit at the margin and i think it would be very important to understand what is the dynamics of the participation rate going further? >> finally chair powell, were you a two cut dot are one cut dot for 2024? >> no comment. >> thank you very much all of you for participating. i tried. >> all right. that was our sara eisen, of course, conducting that more than an hour long interview with the heads of three central banks. i like that brazilian guy. >> he was great. >> yeah. very interesting comments. obviously, some of the keys, though, and what the market would certainly be focused on were from powell and lagarde.

powell in particular, of course, some of the money quotes, you know, and again not -- not differing too much from what we've heard previously from the fed chair, but we always want to monitor any changes in his language in terms of inflation. take a listen in terms of what he had to say about the progress that has taken place thus far and where he sees things. >> we've made quite a bit of progress in bringing inflation back down to our target while the labor market has remained strong and growth has continued, we want that process to continue. i think the last reading and the one before it inflation to a lesser extent, do suggest that we are getting back on a disinflationary path and we want to be more confident that inflation is moving sustainably down towards 2% before we start the process of reducing our policies of loosening policy. >> sara did ask ifat the end as well where do you see things in

year? >> he didn't see things different that much, into the lower 2s. >> mid to low 2s. i want to come back to, when you pair that with what we said earlier similar in theme to the clip we played, before the next cut we want to be confident of getting inflation back to 2%. now he probably meant there close to 2%. he probably meant low 2s. he did say outright 2%. if your prediction is mid 2s that's not suggesting you're going to have many cuts in the time in between. again, as you're saying, david, he needed to straddle everything throughout and there was another question which did implip a cut could be coming in september. >> yeah. >> and sara followed up with the question one in september, and he said no comment. there was a lot for each side to draw from. you come back to the point if your prediction is mid 2s this time next year and your target is 2%, you're not going to have a whole host of cuts between now

and then. >> he did say in terms of 2%, he doesn't see that happening at any point this year and doesn't really see it happening at any point next year. potentially the end of next year and then we're looking at 2026 for the 2% target, which begs the question, is confident that you're getting to the 2% target enough or do you need to hit it to get the cuts? sara asked about rate cuts and a timeline, and he declined whether to say september was on the table or not. i think this kind of mindset of do you need to see the 2% or be confident that you will ultimately get there is a key question. >> the other point as well before we get to the other clips he also said, a factor that could lead to that set of rate cuts, if unemployment ticked up a bad reason to get to it, but interesting little discussion on that at the end, and he seemed relaxed about it getting to a 4 handle. >> yes.

>> but i wonder what the trigger would be for a rate cut from it ticking up further from here. >> yeah. >> a broad range in discussion. got to some questions about productivity gains as a result of generative ai. it was interesting. >> in trade. >> interesting hearing from them. nobody really wanted to touch politics, of course. not unexpectedly? if we can tee up that clip i thought that part was really interesting, though. the very fact he even needed to address not wanting to be political. the guys will tell us if we get it ready that clip, but he was saying, we just need to do our job. i mean, we should pause and just reflect on that, that this is even a talking point at a central bank forum. i mean, three years ago, five, six, seven years ago it wouldn't come up, and he felt necessary to say we have to do our job. that answer included we have to keep going as we're growing around 2%, inflation in the mid to high 2s. it's not an inspiring job to deliver on. it's not going to take us out of this debt conundrum that we've

got. sara kept pointing to the job in and of itself is devoid of politics and you need to focus on the job. the job is increasingly being encroached on by politics when you take into consideration things like the deficit, things like trade. i thought president lagarde had really good comments about how trade impacts innovation and innovation impacts productivity and you need productivity or you want productivity in order to bring down inflation. therefore it's cyclical as it pertains to their job. protectionism, deglobalization, compose had interesting comments with regard to the debt levels and what it means for emerging markets. >> i did. it was akin to what we were discussing towards the top of the show towards interest costs but his comments as well. also want to get to jim boller joining us former st. louis fed president, dean of purdue's university business school. good to see you. give me your take first off sort of anything that stood out in terms of the comments you heard from the participants?

>> no i don't think these were surprising comments. i think both christine lagarde and jay powell wanted to reiterate that they're in wait and see mode, they want more confidence on inflation outcomes in particular before they move ahead with easing program and i think they mostly accomplished that. i think there were som we can talk about here, though, about some of the comments and you twice have brought some up. >> one of the things i want to ask about, jim, clearly powell and the others say we don't want to get involved in the politics, we're going to do our job, but at the same time, a very common theme not just in this panel but comments from jerome powell in recent months is the fiscal path is unsustainable, and he said those words implicitly again now. is that in itself get involved in the politics? >> yeah. i think that's been a refrain of fed chairs for a long time and

nothing is different today except the problem is worse. i think both political parties have decided or members of those parties have decided that they can't win an election by campaigning on fiscal recty today and that's very unfortunate for the country. i don't know how we're going to recover this. however i have empathized in many different for rums that divided government is a real possibility here and i think markets are betting on divided government. and that would help you because a sweep by either side would lead to more spending. >> we actually have a segment from earlier with powell addressing staying out of the politics. let's take a listen. r. we've been given this great responsibility and great powers and really important that we get it right, and we've been told to stay out of politics and just do your job. do your job. that's what we do. we don't try to get involved in

issues that are no, not our issues and in particular, we -- we're just focused on our dpools and getting through that. if we do that and do it well, i will say in the united states there's very broad support for an independent fed in both political parties on both sides of capitol hill and everywhere. i don't think that that's really in question, as long as we just are seen to be doing our job and staying on task at all times. >> jim, how far do you think he'll take that? will he not want to even show a suggestion that they're getting political and thus wait until after the election or not? >> you mean for the september decision or other decisions before the election. >> exactly. >> i think that the committee would feel confident to move making an ordinary policy move with the data in hand and i don't think anybody in the political world would worry

about that. so i think, you know, if you look at the history the fed has been willing to move during an election cycle so i think that's a definite possibility. but, you know, to get to a september move they're going to have to see, you know, continued good data on inflation so that they can be confident to make that first move. i think just the notion that somebody is going to win an election because the fed did something in september, i don't think that's -- i don't think that's how american politics works. i don't think that's where the median voter is. they're thinking about a host of much broader issues than a tactical move by the central bank. >> and while they were on stage, the job openings data the jolts came out, showing quite the resiliency in the jobs market, with i kind of, you know, dots this idea that the labor market remains strong.

how do you think that plays a role in some of the discussion they were having with regard to the ability to orchestrate this very gradual slowdown in inflation while keeping the economy on a stable path? >> yeah. it certainly suggests that labor market remains relatively strong. one statistic i've been looking at which no one looks at is the year over year non-farm payroll growth, so a year ago if we were sitting here that number would have been 2.5% growth over the previous -- from the previous year. right now it's 1.75%. it's basically a declining sloping line if you look at the picture. you know, that kind of gives you the sense that there is slowdown, but the chair does a great job in saying that that's not really slowdown. that's normalizing the jobs market and the vacancies to employment ratio at one time was

two in the u.s., two jobs for every unemployed worker now down to 1.2, that's still a high number actually, but it's about the same it was prepandemic, so still a good jobs market, that means that the committee doesn't have to worry too much about that side of the mandate. they can worry mostly about the inflation side. for your group here the main issue for the fed is, i think, we were sitting here last year at this time with 200 basis points higher of inflation that we have today. if you thought the policy rate was right, when inflation, core pce inflation on a 12-month basis was closer to 5%, how can you claim that the policy rate is still okay today, with, you know, with 200 basis points left? you're only 60 basis points from the inflation target. so it seems to me like the fed, it needs an opportunity here to

get going on its easing program and we'll see if that happens. >> jim, good place to end it, at least for now. always appreciate your time. thank you. >> okay. thank you. >> next hour "money movers" we'll take you back live to sintra in portugal for a major interview with chicago fed president austan goolsbee his reaction to powell and how many rate cuts he expects for the second half of the year. coming up at the top of the next hour. we'll be right back here on "squawk on the street" in a couple minutes. don't go anywhere. >> we want to be more confident that inflation is moving sustainably down towards 2% before we start the process of reducing our policies of loosening policy. that's what we've seen and what we would like to see is more data like what we've been seeing recently. we'd also like to see the labor market remain strong. if we saw the labor market unexctlypeed weakening that is also something that could call

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if we saw the labor market

most recently we have seen in a round of projections which are really important, september, december, march and june we've seen that 2% target with 0.1 abt it, at the last quarter of 2025. so, it's on that basis and on the basis of what i'm happy to describe as the three-leg reaction function, and all the underlying data and information that feeds those three legs that we decided to do a 25-basis-points cut. >> let's continue the conversation with the former institute of international finance ceo charles, now advisory partner and chair of partners group. also the author of the book "euroshock." great to have you with us. let's start with the implications from christine

lagarde there. did you get the feeling that for this year, this calendar year, it's kind of one ask done from the ecb? >> well, i think so much depends upon how the economic and political circumstances in europe play out over the next few months. we had a period of extraordinary political uncertainty in france today. i was a little bit surprised that this didn't arise -- i thought leslie did a great job of trying to pull them out of politics. i understand why they want to stay out of it. but the reality is that as we sit here today, no one quite knows where these french elections are going to leave france. we know we have a europe that desperately needs some new leadership, some fresh leadership. it's not necessarily getting it out of germany. i think that the ecb may well be in a position to consider a second cut later in the year. >> just touch on that political

situation for us briefly. is the risk attached to france at the moment overlooked and u.s. markets? particularly, i guess we'd be talking about bond markets and the possibility of global rates rising, if there's some kind of massive political scare? >> well, i think the risk was real. i think i was a little surprised yesterday to see the markets actually rally somewhat on the notion of a split government there in france, because i think the risks are quite real. you've got a left wing group of parties and leaders who are determined to take fiscal measures, which seem to expand the budget, and you've got right wing leaders who are also, for different reasons, likely to propose measures that expand spending. france can ill-afford that at this point. they're already running at 5.5% fiscal deficit. this past week, as we know,

brussels placed them in excessive deficit procedure, which means they're under scrutiny and they need to bring their deficit back. and their debt is already quite high, well over 100% of gdp. i think these risks are being underestimated right now. we've lived through as he pointed out in the book i put out, we lived through the stress on the eurozone 10suggesting wen a moment like that today, but i am suggesting the lack of attention by political leaders in the west, in particular in the u.s. and a few european countries to deficits and debt, does worry me because we know how stress can work in markets, we know rating agencies will only tolerate this for so long. and i think france is at a crucial point, not just politically but economically. >> charles, just bring it back.

we have 30 seconds left to the u.s. if jerome powell is right that we might be at mid 2% inflation this time next year and no significant rise in unemployment, how many rate cuts will we get between now and then? >> good question. i suspect there's room for two rate cuts. i think if we can demonstrate, if the fed can feel comfortable they've stabilized and we're not hit with another spike in rates, which is a risk, i think there's room for two rate cuts. but i do think we have to recognize there are still persistent elements of inflationary pressure, as we know, particularly in the services sector, certain segments of the labor market. and the geopolitical uncertainties here are vast right now, which could add further pressures to commodity prices. even though, as we see things today, there may be room for two cuts, i wouldn't be at all surprised to see a reduction in september if the numbers are

reasonably good in the next two months. but i think that the uncertainties beyond that make it very unclear. and i think that persistent pressures are going to remain. >> we're out of time now, charles, thanks for joining us. >> great seeing you. great seeing you. tesla shares surging on q2 deliveries. shares up nearly 9%. our phil lebeau has more on that. >> leslie, they're higher because these were better than expected numbers. take a look at q2 deliveries from tesla, 443,956 vehicles delivered. that is still down 4.8% compared to the second quarter of last year but better than the street was expecting at 436. it is the second straight year-over-year quarterly drop in deliveries for tesla. for the first half the company has delivered over 825,000 vehicles. what does that mean for full-year deliveries? if they're going to hit the estimate of 1.82 million, they

got to deliver a million vehicles in the second half of this year. a lot of that will depend on what happens in china. and the june china sales numbers for tesla, they were not good. they came out this morning, the government in china releasing them, tesla june, china sales down 24.2%. remember, china's 46% of tesla's global sales. june or july 23rd, guys, after the bell, so two weeks from now, that's when we will be getting their -- three weeks from now, full-year delivery or q2 numbers, financials from tesla at that time. guys, back to you. >> phil, clearly there's a belief in the marketplace there's some momentum being created here, i guess, correct? >> yes, yes. there is that belief that's out there. it's a bit of a relief rally. look, a lot of people were saying, we might come in at 815,000 -- or 415,000 vehicles delivered. 444 is much better than that. >> yeah.

phil, thank you. that's one of the other stories of the day there. of course, if you include the recent award that was approved by shareholders in terms of stock to elon musk, one has to assume, his net worth is soaring yet again. perhaps he's number one. i'll leave that to robert frank, though. we'll leave our market coverage to wilfred and mike santoli for the hour.

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good tuesday morning. welcome to "money movers." i'm wilfred frost with mike santoli. chicago fed president austan goolsbee is moments away as we hear from jerome powell and christine lagarde. we discuss the likelihood of any deal for the struggling streamer this hour. later, tesla sales fall for the second straight quarter despite deliveries beat. why the stock is surging. we'll have that story. stocks right now steady at the index level. once again, market rotating around as bond yields decline. ten-year treasury down to