>> over the next couple of months, we will see significantly stronger inflation. >> the consumer is still seeing spending in excess of what would be considered a normalized pace. >> this summer is going to be huge. people are going to spend, and the bounce back in oil demand is probably going to be significantly more than people are expecting. >> certainly some commodity prices are out of control. it is all most hyperbolic. >> supply is extremely low, inventories are low, and demand is roaring, so prices are stored

nearly volatile. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on radio, on television worldwide, we welcome you to "bloomberg surveillance." jason furman will join us later in the hour. alisha levine on the american regime change. it all centers around what every listener and viewer knows, prices are going up. jonathan: the cpi report just around the corner. the number year on year to look for, 3.6%. that is the estimate from our 2.6% previously. first of all, we look at the market reaction, and second, how the fed responds. vice chair clarida with a timely speech for 9:30 eastern. tom: you wonder how the language

is going to change from that. i love the tension we observed from kit juckes of socgen with the former president of the new york fed, and is a legitimate question about the rate of change. jonathan: bill dudley says the fed will keep rates unchanged for a long time. his argument, and i think it is fair to characterize it this way. kit pushes back against that because every decade we have seen, every single cycle with the exception of maybe one in the last few decades, tolerance for higher interest rates have declined. tom: it is a great chart from credit suisse from years ago of all of the inflation worries that have been out there, the inflationistas that have been out there. they have been wrong, but maybe now we see a different time.

i'm going to look at futures, a little bit soggy here, but i don't have the equity panic we had the last couple of days. nonetheless, dow -86, s&p -12. the vix does a little bit better. real yields unfocused. jonathan: let's talk about the bond market panic that lasted about five minutes on friday. right now, 1.61%. a high of 1.64% over the summer. i wonder how we will move around a print that comes in 27 minutes . tom: if we get above 2.3% or whatever, if we get a higher rate versus the rate of inflation, how do you think we will see this? jonathan: the intuitive move would be high yields reflecting that move in inflation.

from equity standpoint, you would expecting nasdaq to underperform. whether that move proportionally, symmetrically, i am not sure if there is a symmetric around that as well. there was a big downside surprised to generate bigger moves earlier. tom: i am going to go to the real economy like jason furman, job formation and that. you wonder if rising inflation finally helps people in a booming gdp economy. 25 minutes from now on the financial aspects and the asset aspects, and alisha levine of bny mellon, what is so important is looking almost on a strategic basis is where we are given this

rising inflation. you talk about a regime change in america. describe that. alicia: we think that with the new administration, it was really focused on, it was main street versus wall street. i think the policies that have flowed from the fiscal side to the monetary side really are creating that. as we set all morning, a little bit of inflation is quite positive for main street. you get higher wages, you get some pricing power, and in the real economy, that is not such a bad thing. it tends to be terrible for equity markets, particularly in the long-duration assets, as we have seen in the last couple of days, where the tantrum was really in the equity market and not the bond market. the equity market is telling you there are inflation fears all over the place for investors. we think there is a regime change, so higher growth, higher inflation.

that doesn't mean terrible inflation. it does mean that it is higher than it was in the post-financial crisis, and therefore, higher rates eventually. but right now we think it is sustainable. we don't think this is a sugar high. it is very clear. it is really a regime change. tom: you've got fancy degrees. you are expert at the mess medics of the financial system, and you and me started out dishwashing years and years ago. alicia: we did. tom: let's talk about the real-world effects of this inflation. in the old days, that meant rising wages. do you fold that into your strategy, or is this time different from when you were running at hobart? alicia: there's were great days, and actually, i didn't get paid at all, so yes, there's inflation for those jobs. but there's clearly supply constraint in the labor market as well, which is what we learned on friday. wages are going higher because

we don't have as much slack in the labor force overall. even if you strip out the extra unemployment benefits, which of course are a downward pressure on labor coming into the market, but if you think about the expedited retirement and the boomers, think about the fact that 2 million women have dropped out of the labor force probably because schools are not open, by the time those open, it has been 18 months that people are disassociated from the labor force. very hard to get back into the same job, so we think participation will be lower. wages will be higher. as we saw a jolt yesterday, there are 8.1 million jobs available, a sensibly the same number of jobs as those who do not have jobs today that did february 2020. there's a mismatch. there is a skills mismatch and a need to pay labor higher. i do think that the fiscal policy that has been enacted has conditioned people to want more

and to expect more. we just spent 850 billion dollars from january 1 in 2021 as the economy is reopening rightly into households, directly into bank accounts, and that was $600 billion last year when the economy was closed. we are expecting another $400 billion by early september. that is going to create upward pressure on wages. jonathan: what does that mean for margins, and what are the sectors you would avoid? alicia: i think the rotation that became apparent in the fall of last year still plays out. commodities, materials, industrials, financials and energy are really the sectors that benefit from higher inflation, and that is where we would be. very hard to ignore your profitable tech. the future is digital. you have to be there. we just think that sector probably underperforms a bit, and we do think that speculative

tech, those companies we know and love and are valued on revenue and not earnings, will really suffer here. we think it is a long-term secular change in which rates are going, yields are growing, and expectations are going. so the cyclical trade will have legs for longer. jonathan: we saw ton of companies raising prices. there's a nice debate playing out on the sell side at the moment on staples. btig on the one side, bmo on the other. where are you and the team on staples? alicia: i like staples because they have underperformed so woefully that it is not a bad place to come in. they do have pricing power. i think households are becoming conditioned to paying it because there is so much extra liquidity in the household sector. we are not getting pushback. therefore, those price changes will be sticky. if you add to that that the

sector has completely underperformed as the here and now looks better than worrying about the future three years from now, i think it is not a bad place to add the staples here. you want to add when it seems like the wrong thing to do. we've learned this. how many times do we have to get hit over the head? so i actually do like staples for that reason. i think this pricing power will be very sticky. when you raise wages, you don't lower them. when you raise prices, you don't lower them. jonathan: get comfortable feeling uncomfortable. that is a life lesson. thank you, alicia levine, bny mellon investment management. tom: frankly, that is a better number than an hour ago. we will see what happens here. i don't know what the equity markets are going to link in here. i want to do some housekeeping, and that is blackrock. i think this is really fascinating. they have improved -- they had

been approved for a license with the singapore sovereign wealth fund and a chinese massive bank to do wealth management in china. i believe out of hong kong. laurence fink commenting on that to "the financial times." that is one of those little tea leaves of life goes on. jonathan: granted a license by the china banking and insurance regulatory commission to start its asset management business in the nation. there you go. the company, 50.1% owned by blackrock. tom: it is just one of those whispers in the blur where we will look back in six months. jonathan: and let's be clear, the conversation we just had about markets is radically different to the conversation you will have on the very same theme with policymakers because they got to look at where this is going. it got to look at the moment and not just the destination. tom: disinflation is on all

prices, but boy does inflation hammer a huge part of america. jonathan: the report 18 minutes away. in new york city this morning, good morning. alongside tom keene, i'm jonathan ferro. equity futures on the s&p down 12. we declined zero point 3%. on radio, on tv, this is bloomberg. ♪ ritika: with first word news, i'm ritika gupta. colonial pipeline says it will know today whether it is safe to restart gasoline and diesel flows. they have been off-line since hackers targeted that pipeline last week. shortages have spread across the eastern u.s.

energy secretary jennifer granholm says even if it can restart today, it will take days to ramp up operations. israel stepped up attacks on the hamas-ruled gaza strip last night. cats were fired at central israel earlier today mobile is -- rockets were fired at central israel earlier today, while israeli airstrikes continued. donald trump's grip on the republican party will tighten today. house republicans are expect it to oust representative liz cheney from her leadership post. she has consistently rebutted the former president's false claims that the 2020 election was stolen. more fallout from that fight overfishing between the u.k. and france. french officials want to prevent british financial firms from gaining access to the european single market, trying to pressure the british government into honoring its post-brexit commitments on fishing rights.

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♪ >> prices are extorted nearly

volatile. copper is headed that direction, with inventories declining quickly, whereas oil primarily is still very well supplied. opec is holding back capacity, so we are still trying to figure out what to do with all of those spare barrels. jonathan: that was princess go blanche, who made some headlines over at bank of america when we spoke with him. -- that was francisco blanch, who made some headlines over at bank of america when we spoke with him. take a listen to that conversation. alongside tom keene, i'm jonathan ferro. i've worked through the price action going into this cpi report 12 minutes away. futures down 11 on the s&p, down 0.3%. 4145 on the s&p 500. nasdaq futures just a little bit softer. loads unchanged on tends, 1.6065%. euro-dollar comes in about 0.25%. wti, $66.15.

we advance a little more than 1%. tom: jason furman with us for a lengthy conversation afterwards on energy, as we talked to francisco blanch, jeff currie at goldman sachs. his colleague in energy damien courvalin joins us now. let's talk about the game theory of the moment. berkley leads in game theory. what is the push-pull of oil right now, given the recovering super boom for the developed world? damien: hi everyone. i think the issue is still the excess inventory and access spare capacity. but in a matter of months, this will dramatically change. we are on the cusp of a meaningful increase in oil demand as the world reopens, and supply just won't be able to keep up, so inventories will draw down sharply. they are already mostly normalized, so we will have a tight physical market, and opec will need to bring barrels this

year and next year, erasing spare capacity. so the market has rallied somewhat your to date, but i think there's another meaningful leg higher here. tom: if you do a set of outcomes, you've got this scenario, these scenarios. give us not a single estimate of what brent crude will be at, but the set of choices you have over where brent crude is a year from now. damien: our forecast is $75. the risk surrounded, first and foremost, is vaccine inefficiency on new variants. that is an environment where the demand recovery is slower. you still get underinvestment on the supply side, but we see prices at about $70. the risks could also be that the demand recovery is even larger than we expect. we expect it to take quite some time to recover, em demand to be

more of a 2022 story. you could also see upside surprises and demand, at which point the's lack of spare capacity becomes quite problematic. iran is a bit of a swing factor. if iran is not back fully next year, we are talking $85 and above brent prices. in most of those cases, because we are seeing underinvestment, still seeing sequential demand recovery, next year's prices will be higher than today's spot price. jonathan: do you see discipline in the oil patch? damien: i think that is the important take away from the u.s. earnings releases just now. producers, pretty much all of them beat on revenues, yet none of them translate that and more spending. so with anything to my guidance a touch lower than we expected for production, so that discipline seems to be in place. equity investors are still reluctant to invest, but getting more comfortable. i think that is the right messaging for producers to stick to discipline and really create

shareholder values. what does that mean? opec doesn't have to fear that potential significant share ramp-up. that means the market normalizes spare capacity, and we see higher prices going forward. jonathan: at the epicenter of this call is the demand shock. u.n. jeff currie have been talking about this for a while. you are always talking about the character of the commodity market, the energy market, compared to equities, and why we can't price in this demand shock you expect right now. can you run us through that? damien:damien: let me give you one example. airline stocks in the u.s. are back to pre-covid level. jet demand in the u.s. is only halfway back to its pre-covid levels. the commodity has to reflect that. if jet prices had recovered, we would be swimming without the need to demand. so commodity markets are real assets, and a price today's mismatch between demand and supply. so demand rising next month is

very important to months rally in commodity prices, but you couldn't have tried not to months ago. i think that is a critical one -- tried that one two months ago. i think that is a critical one. it is lumber, steel, iron ore, corn, retail gasoline on the east coast. that is what the next few months in commodities or lightly to deliver. tom: shale and technology came to the rescue. i'm going to use a phrase i heard from lawrence kudlow a few years ago at bear stearns, which is focus on the lifting cost. is there something out there in technology to help us with the lifting cost out five years from now, or is the technology miracle over? damien: the easy gains are definitely behind us in terms of technology. producers are always investing further. generalization may be that next source of improvement. but keep in mind have also had very low activity until now, so

that has further depressed cost. ultimately, you underinvest in services and you get input cost inflation. second, and i think that is unique to shale and why shale was so different to other commodities, when you thought about cost, you also have to thing about financing cost. shale producers pretty much through 2017 benefited from very low cost of capital, whether it was on hot the high-yield debt side to come on the equity side, which meant that they are actually operating below their cost structure. opec was taking out the downside risk to oil prices, so you are further operating on a truncated perception of risk. that is over, and that is the key to shale going forward. sure, it is short cycle, but getting that external financing is much more expensive today, and after last year, you cannot really bank on opec always being there to support prices, so your

risks are higher in your cost of capital is higher. it changes the reaction function of shale, creating this tighter market going forward. jonathan: could to see you. let's get you back soon. on crude, brent out $69.33. what was that vehicle again, tom? course -- cooors -- coors 32? tom: this was prohibition, like if you were 21, you could drink real beer. but if you were younger, you weren't response but enough. it was called 32 beer, which is a percentage about the hall. this was in vietnam, we had 18-year-olds on aircraft carriers in harm's way. it was ridiculous. you learned something today. [laughter] jonathan: that's why i asked. thank you.

the cpi report in america just around the corner. tom: michael mckee is the only one of the building who knows what coors 32 is. jonathan: your equity market down 0.3% at 4143. on radio, on tv, cpi next. this is bloomberg. ♪

jonathan: down 131%. your bond market unchanged. it is 8:30 eastern. here is mike mckee as we wait for the numbers. michael: this is the inflation you're looking for and it comes in hotter than anticipated. cpi a month over month basis up .8%. the forecast was for a .2% gain. that pushes the your average year cpi to a 4.2%. that is much faster than the 2.6% we saw in march and the 3.6% that was anticipated. let's take a look at the core rate, up .9%. there is the one that will worry wall street.

the forecast was for .3%. is three times the amount in march. we are up to 3% on the poor. the estimate, 2.3%. i'm sure you want to look at the market reaction. i will look at the breakdown of the cpi. jonathan: i will look at the price action right now. the nasdaq down hard, off 1.6%. the s&p in 1.1%. an upside surprise, it is going to hit the nasdaq harder. yields higher. on a five year, up two basis points. on the 10 about two basis points as well. basically unchanged on twos. it is an upside surprise. high-yield through the belly of the curve. we will have this conversation in just a moment. the nasdaq lower come the s&p 500 lower. tom: i want to stay on the markets.

i would point out this is different than jobs friday. we saw a market adjustment jobs friday and a quick recalculation based on that historic report. this is a reset we are seeing right now. jonathan: before we get to levels, relative to what we expected, it is positive or negative surprise that matters to markets. we had an upside surprise on inflation and a downside surprise on some of the data. that is not the greatest mix for risk assets. tom: still following us, the dow near 200 points. michael mckee, what is your observation. michael: we are looking at energy prices. they are down on the month. overall energy down .1. motor fuel down 1.3%. gasoline down 1.4%. it is not the kind of gasoline story a lot of people thought it might be. where we are seeing increases is an apparel, up .3%.

new vehicles up .5%. use vehicles come up 10%. tom: your report is used cars up 10%. michael: you can go sell that old sliver you've been driving around in. we also get a little bit of inflation in shelter as rent prices go up. 8.4% increase in shelter. -- a .4% in shelter. apparel up .3%. tom: with this higher inflation, the real wage goes down. we see that on the bloomberg terminal. can you ascertain with the economic data what wages are doing? michael: it is hard because we have all of the base effect mixed up in all of this and last year's impact. i will have to take it apart a little bit more to figure out exactly what is happening.

real average earnings on a year-over-year basis, weekly earnings down 1.4%. average hourly earnings down 3.7% when you account for inflation. tom: markets deteriorate further. jonathan: another big miss for the economic to unity. the median estimate -- for the economic community. we have a move lower. the nasdaq 100 still down 1.4%. on the s&p 500, off .9%. let's get through the bond market. we have an initial break higher in treasury yields. it has not stop that hard. your 10 year yield a basis point. they are not major moves in the bond market. let's be clear about that. focusing on the nominal yield, the 10 year is up about a basis point, call it two. the five-year is up three. tom: in the yield space, i will go back to real yield, where you

have a less negative real yield. we will recalibrate through this. i am not sure what we recalibrate to other than the observation, which our listeners and viewers know. there is inflation. jonathan: this market is having a very different conversation than the conversation academics and policymakers have. and 25 minutes time, do you think the script has changed for vice chair clarity of? -- for richard clarida? tom: he has to address it. jonathan: you think anything has changed substantially for the vice chair of the federal reserve? nasdaq gets hit hardest. in the bond market, if you would told me we would have an upside surprise this big i would've expected a bigger move than the one we have on this grade. tom: 1.64 on tens. the two-year, 1.15. right now, an extensive conversation with jason furman of harvard university and his public service to the nation

with the council of economic advisors. wonderful to have you with us at this moment. you will tell me as a public policy type we need to see more data, we need to see two or three months data. does president biden or others wait for the data or must they adjust to this report? jason: the main people who need to adjust to this report adjust to the jobs report we got last year is the federal reserve. the other part of it is looking at what we can do in our economy to address the biggest thing we have, which is the constraints on supply. we need more supply. shots and arms are doing a lot. my guess is a lot more people are working in make that an april. if you take this plus the jobs report on friday plus the totality of the data, we have at their -- we have a very different picture of the economy that a lot of people. tom: it is a different picture

of the economy. vice chairman clara will speak in 24 minutes. does he adjust? is there one word or one sentence that will begin a tone of a federal reserve shifting their language? jason: i don't know. they're very big on this being transitory. a lot of this is transitory. we saw 10% increase in the used cars and trucks market in april. tom: i do not want to interrupt you. i am looking at rentals in new york city that are not transitory. as michael just mentioned, higher rents are real, not transitory. jason: i agree. i think your best guess has to be this is not entirely transitory. the fed and others have rested a lot on inflation expectations being anchored. this is the type of thing that will start to move those inflation expectations. i think the problem is you can

point to transitory things. to rip those out and added what we know of how much demand we have in our economy, how little supply we have, i think this bears -- the way people are thinking about the economy. jonathan: what you think that means for the relief package we passed a couple of months ago when larry summers and others, including olivier blanche are said it was too big for the moment, you think this is evidence of that? jason: it is too big for the moment. i do not know any economist that was recommending something the size of what was done. the question is how big the downside was. i would not lead to a judgment yet on the basis of april. this is one months data. the data are obviously extremely noisy. we knew when the economy reopened their would be all sorts of patches along the way. rough patches along the way. i think there is a certain amount of that logic.

let's try to do what we can to make it not true. i would make larry's prediction not true. we increased labor supply in the fed does little more cautious to keep inflation anchored. jonathan: guy get your thoughts on what happened friday when we saw the big -- can i get your thoughts on what happened friday when we saw the big miss? arguably, as you point out we saw adjustment in wages already and we could see more in months to come. some governors have decided they need to move the additional ui. you think that is the right decision to fill that gap? jason: the big miss on friday was wages. the expectation for wages was 0.0%. the actual number was 0.7%. even that number understated what happened. the real number is probably more

like 0.9%. either way, that is the fastest wage growth since 1980. you are not looking at one isolated data point. this is everywhere around us. if i were in a state with a 3.5% unemployment rate, i would be thinking seriously about whether paying people more to not work then to work was a good thing to continue doing. jonathan: loss for words. are you an agreement of places like arkansas, south carolina, montana. jason: it depends where you are in the virus, where you are in your unemployment rate. by june or july or august of this year, i do not think we need the same ui system we had in january. in january made sense. 3000 people were dying a day. we did not want to give people

an option other than work and support them in that option. in an increasingly hot labor market for a lot of states, it may not make sense. it may not make sense in the same way. i think they should be taking a hard look at that. tom: i just did a study, thank you jonathan for sending that out. i did a standard deviation study on a monthly basis of core cpi back to the time of paul volcker. may be around 1990, i can find a jump condition in core cpi like we see now. we do interview after interview where experts like you say it is about the jump we see in inflation. right now we are seeing a jump i would suggest is near original. how do we respond to that? jason: the economy will do weird things. we saw a collapse that was

historic last year in prices. we are seeing -- some of what we are seeing now is the unwinding of that. some of what we are seeing is different sectors come back. i would not leap all the way to where we are not worried about inflation, now we are worried about hyperinflation. it is 0.9 from now on. what i'm saying is a recalibration of these discount the data a lot because of the weirdness, do not discount the data all the way. jonathan: let's recap the data. jason, stay close. the s&p 500 to decline on the back of that upside surprise. we are down .7%. the nasdaq rocketing lower, and then bouncing back a little bit. still -1.3%. in the bond market you would expect a selloff, you got one. yields higher. tom: you are dead on. you are dead on on the 10 year

yield. the 10 year yield has not moved at all. it is well contained. jonathan: 1.64%. the lows of friday, 1.46. a huge bounce off the back of that. the recent range, 1.74 the close in march. off that. two basis points higher on the day. michael mckee, the data comes in. another monster miss on wall street. michael: yes. i will give all of my compatriots on wall street up past. jonathan: i would expect that. michael: it is very hard to do when you have this base effect changes. we are looking for things like men's apparel up 1.3% during the month. a year ago it was up just 1%. there is no real change. how do you know what is going to happen? apparel overall is up 3%. it was up 1.9% last year.

you think things will go one way and they end up going another. jonathan: with the data this volatile, i think it raises questions about markets and how you trade the incoming data. how sensitive will markets be to incoming data? tom: we heard that from dr. fuhrman. i am really taken, given the natural disaster of the pandemic, i get the original now already -- i get the originality of it. core cpi the jump is way up to standard deviation on a monthly basis. that is an enormous move. jonathan: before i have to run, how do think the meeting at the white house changes later between the big four and the president of the united states on this inflation data? every economist will talk about it only being one data point. that is the data point the republicans will be talking about all day going into that meeting in the white house

later. tom: the meeting is there, it is a political discussion. it will be emotional. i am more interested in people like jason furman, and i would go to the vice chairman, particularly if he does q&a. that will be fascinating. jonathan: we get the q&a in about 15 minutes. jason, your view on how the federal reserve will talk about this when we hear from the vice chair? what would you anticipate them to say off the back of this data? jason: we expect them to make very little in the way of adjustments. i would expect them to emphasize the transitory from the targets of this like used cars. i would love to see them tilt towards concern about inflation, but i think they will be doing more to explain this away than express any concerns. jonathan: i have to run. i will catch up with krishna memani later and then subadra

rajappa as well in about 15 minutes. tom: that dialogue will continue through the morning. if you're joining us, a shock in inflation. because of this report, we had eight or nine things to speak with jason furman about, always interesting, but we have to stay on price change. jason furman, let's do a history lesson of the shop. i went back to 1990. neil dutta talks about the biggest one-month gain since june of 2009. take us back to the 1960's and robert samuelson at the washington post has written about this, the time of walter haller. what did they do in the 1960's about the nation shock and should we use that as a template? jason: first of all, they did a lot of emphasizing on one-time

factors and micro stories. this segment is doing this, that segment is doing that. they missed the bigger macro forces, what was going on with fiscal and monetary policy. the number one is look at the macro. do not try to explain away each one of the micro. lesson two, it took years and years of a policy change to get us to the place we were at in the late 60's. we had just been through a freakish pandemic, we have just been through a highly unusual period of policy. i do not think there is been a huge regime change. i think we will go back to the old regime and there should stay under control as a result. we need to get back to little bit more of the older regime. tom: we certainly heard that from jan hatzius yesterday. i look at what wages will do. there is the phrase from ancient history.

"the cost push inflation." i do not observe that anywhere. are we going to redux the 1960's where we have to whip inflation now? jason: we just saw that in april wages were up about .7%, depending on how you look the number. pricing up by that same amount. we do not want to read too much into any one data point, but unless people start heading back to work in bigger numbers, we will have concerns. that should happen no later than september, when unemployment insurance expires. it needs to happen. jonathan: jason furman, thank you so much. harvard university and the peterson institute as well. on the bond market, i thought

jon ferro was dead on about 1.64%, rounded up 1.65%. a three basis point move. it seems contained. ira jersey is our expert on bloomberg indulgence on the dynamics of full faith and credit. jason, what does it say no that the 10 year seem somewhat -- what does it signal -- ira, what does it signal that the 10 year seem somewhat contained? ira: i think it is contained because everyone knows this number will be volatile. it was how big was the bounce back going to be given the base effect? when you look at the dynamics of what is causing that three basis point selloff in the 10 year, it is coming mostly from breakevens. mainly people thinking inflation will be higher. now approaching 2.6% inflation expectations over the next 10 years. that would be not unprecedented

but you have to go back to the early 1990's to get that kind of year on year inflation for several years. i think the market is pricing for this, they're pricing more. we are probably nearing fully priced at some point in the near future. tom: i was doing a chart on the bloomberg as you were speaking of the yield of the 10 year back to 1990. i ran the regression. we have broken out a little bit. can you say we have broken the great disinflation, the great moderation? ira: i do not know if we have broken the great moderation, but i think long-term downtrend is probably over. we have leached the lower bound. at this point will be searching within this cycle for what might be the longer term 10 to 20 year pop in yields, which is probably below 4%. i do not think we will see any kind of inflation or growth or dynamics that are going to pause

treasury yields to go above 4% unless we do something silly like talk about not paying our bills, with some kind of default probability. otherwise we are contained in terms of yield. i want to bring up a little fact. bacon prices were up 10% as month year on year. egg were down 9%. do not worry about the price of your breakfast. tom: ira jersey, too short a visit. he will write on what we see from vice chairman clarinet. michael mckee is doing what he does best, diving into what is a wide set of data. what sticks out? you mentioned used cars. michael: a lot of it seems to be the reopening prices. we are looking at things like used cars up 10%. car-rental up 10.1%. airfares up 10.2%.

lodging, hotels and motels, 7.6%. you can see were some of the price pressures are coming from. these are people who had no business for the past year and their prices are firming up a little bit. televisions were up 3.1% as the simulcast starts to come together with everybody. to follow on ira jersey, did not worry about breakfast. he is right about the numbers. do worry about your next trip to fenway. hotdog prices are up 2.7%. that is a large gain. sporting event tickets up 10.1%. tom: all of that is wisdom and it is affecting all of our viewers and listeners. to me the salient point is do a leads like richard clarida digest that data and understand the effect on the public, or my going to get a columbia university dissertation from the professor today? jonathan: they understand. -- michael: they understand.

remember he wrote his speech before the numbers came out. tom: they have to adjust. michael: is sitting down with ellen. tom: she will grill him. michael: i think jason is right. there is no advantage to the fed panicking or saying anything beyond this is transitory. they have to take apart the numbers. there are base effect. we have to see what happens from here on. we see these prices continue to rise. tom: i know we are running out of time. this is critical. if prices go up a big amount and they go level, is that something the fed adjusts to? we all get rising and lowering, but what if we get pandemic up and then a leveling of the price level for your two? -- for a year or two. michael: that is fine with the fed. they wanted inflation to rise a little bit above 2% for the next

year or so. then to settle in at 2%. if they get something like that that is exactly -- tom: can they control it? michael: they cannot control it. as greenspan once said using monetary policy to do this is like operating on someone with the next -- with an ax. they will aim to do their best with accurate this is not change the narrative for the fed. let's take apart, let's look at univision components, let's figure out will airfares -- let's look at the individual components. will airfares rise? tom: that is my point. we are out of time. michael mckee will drive for the conversation with various parties including jonathan ferro throughout the morning. to bring you up-to-date, jobs day with all of the focus, it is a historic jobs day, this is an extraordinary statement on price change. this goes back to arthur burns

and moves that were not measured where there was a real ability to control inflation. i'm not suggesting we are there, but certainly we see a jump on core inflation. i cannot find an analog back to 1990. i love what neil dutta points out as of left we have not seen -- of a lift we have not seen since 2009. you heard jason furman push that aside, as jan hatzius did yesterday, and said transitory seems to be the word of the moment. what is not transitory is our need to do a data check s&p futures native 29, dow futures native 200, now -117. the market moderates. fixed 23.06 -- vix 23.06. the bond market, we have a 1.65 print. we had a higher guilt and that have an ever higher yield. i am waiting for $70 on brent

crude. we are not there yet. so much to talk about. stay with us through the morning on bloomberg radio and bloomberg television. good morning. ♪

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set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: it is cpi wednesday. from new york city for our audience worldwide, good morning, good morning. the countdown to the opening bell starts right now. your equity market down 27 on the s&p. more fuel for the inflation debate. joining us is socgen's subadra rajappa and krishna memani. subadra, your reaction. subadra: we got the triple whammy of data points that could increase cpi. higher commodity prices across the board as well as some of the supply chain disruption starting to show up in the data