♪ >> almost everything is told that we are in a regime shift. we are going to see growth decelerate. >> people get overwhelmed with information that they can't process, so they just go, you know what? risk off. >> it is probably not the optimum time to be overweight on risk. >> we are going to see acceleration in growth -- going to see deceleration in growth, that's for sure, but i think the consumer will stay quite resilient. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: the ecb 45 minutes away. good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene, i jonathan ferro, together this morning with -- i'm jonathan ferro, together this morning with kailey leinz. lisa back on monday. what a run we've had coming into

thursday. tom: buy the dip wins again. i've heard a lot of people recalibrating for caution. we hear about quality portfolios , being defensive, and after what we saw with texas instruments yesterday, you wonder how defensive goes in the next six weeks. jonathan: a bit disappointing on that front, but elsewhere, i think the pricing issue and how they handle the prices, they are seeing consumer price tolerance. that is critical. tom: i agree, but the word i love that you used is tidy. tidy to me means corporations are adapting to the cards they've been dealt, and that is what we are seeing on the bloomberg terminal right now. jonathan: and we are trying to adapt to what comes next in washington, d.c. at the start of the year, it was plain and obvious, more. now it is less of. kailey: as expected, chuck schumer losing a vote to open

debate around that bipartisan plan. it is not actually complete yet. we still don't have the pay fors, which is another thing this market has to consider. how are we going to pay for it? have we forgotten about the threat of higher taxes? jonathan: your equity market shaping up as follows this thursday morning. 43 minutes away from an ecb decision. equity futures higher by 0.2%. in the bond market, yields higher by a basis point to 1.30% on the u.s. 10 year. in foreign-exchange, euro-dollar $1.1792 going into that decision. kailey: remember when we were at $1.23? i wonder if that changes that equation for the euro. what is it going to look like now that we have an exactly 2% symmetric inflation target?

of course, christine lagarde will be taking the podium at 8:30 a.m. eastern time. at the same time we are going to get some important economic data in the u.s.. anyone in a jobless claims for last week coming through. a fresh pandemic low is what we are looking for. you were talking about the chip conversation with texas instruments. that guidance coming and a lot lighter than analysts anticipated. are they just being conservative , or is that sending a signal to the entire sector that demand is peaking now? if it is in overshoot, what is that going to mean for the profitability of some of these companies like intel, which we will get after the bell, along with snap and twitter? jonathan: just want to check in on didi in the premarket, down off the back of news from our team at bloomberg suggesting chinese regulators are seriously

considering perhaps unprecedented penalties for didi global after its controversial ipo last month. regulators seeing this particular company's decision to go public despite pushback from the side ride adminstration of china as a direct challenge to beijing's authority. that stock down by 1.9%. tom: you wonder how we bounce back to global wall street. it is going to be an interesting story. you mentioned united airlines. we mentioned southwest air earlier. it is down 20% capacity. to me, it is pretty good. i know the planes have been hammered here. aal is down a little bit fractionally. but given the natural disaster they were given, to be down 20% on capacity to me is not that bad. jonathan: fact that some of these airlines still exist is testament to the policy initiatives we've had over the last 18 months and some of the hard work these companies have done, too.

but largely because of the policy initiatives over the last 18 months. anyone that has flown domestically knows the planes are full, but the airports in many places, including jfk, are still pretty quiet. the capacity is not there. tom: really well said. they are managing it. international is a disaster come as we know. but the proof in the pudding is the airports. jonathan: whenever we travel together, i've noticed you stop off for a cup of tea and terminal five. tom: i pick up a tea, yes. jonathan: let's start things off with sean snyder -- with shawn snyder, citi head of investment strategy. what is the purchase -- process

we should work through to answer that question? shawn: you tend to see a small recovery in small caps very early in the cycle. as the cycle matures more into midcycle expansion, they don't perform quite as well. we actually like large caps a little bit better, together with delta variant spreading across some regions because we thing investors will go back and some of this groupings of technology names. we have an economy that is going to continue to grow, but the largest gains may be behind us. tom: i want to talk about your sustainable drivers. what should we expect? shawn: i think you're going to continue to see strong earnings growth. i do think if you look at value versus growth, i think you are gone to see much better earnings

coming out of the value companies. expectations for q2 is 154% eps and something like 54% for the technology space, for the growth companies in particular. you're going to get her beats i think -- get better beats think out of the value companies, but still strong eps growth for those technology names, even though maybe we are not using them quite as much as early in the pandemic. i think earnings look quite good. thus far beating expectations on earnings, and i think 72% beating on revenues, so pretty good earnings season. kailey: when you are looking at this equity market right now, is that what you are thinking about, the earnings story? the queues you might be getting from the bond market, is the bond market all that matters? shawn: no, we think we will see

upside revisions to earnings in that space and that will eventually drive a higher. but to say it is the only thing we are thinking about is probably not true. i think the delta variant is something we have to consider. bloomberg has an excellent vaccine tracker. they have some great quotes and stats, and the least wealthy nations have 2% of the vaccinations and 20% of the population, and you have the wealthier countries adding vaccinated at a pace that is 30 times faster than the least wealthy. so i do think it is very relevant, particularly in unvaccinated areas. so we need to keep an eye on that. i don't think it derails global growth, but maybe delays it in some regions, and it is something we have to keep an eye on. one of the things we are doing a from watching earnings is looking at dividend growers and the so-called dividend aristocrats, companies that are more stable in returning cash over time, and upgrading the quality of our portfolio.

jonathan: where are you finding them, the dividend aristocrats? where are they right now? shawn: in the u.s., but also oversees. if you look at u.k. equities, you have a significant discount and you also have a dividend yield on the hook to 100 of about 4.2% -- on the ftse 100 of about 4.2%. jonathan: shawn snyder of citi wealth management, thank you. some guidance possibly upgraded by president christine lagarde, and the news conference later. tom: the first time i saw ferro, i said, who is this guy with the british oxen on the lawn at frankfurt -- british accent on the lawn at frank for? jonathan: please proceed. tom: what do you expect today? it is a better press conference.

it has smarter questions. she's four miles away. they have podiums now. jonathan: they do have podiums. tom: who designed that? it looks like a daniel craig bond movie. jonathan: did you prefer the podium to the desk? i would love your view on that. tom: i prefer the desk to the podium. but what are you actually -- what do you actually expect the questions to center around? jonathan: i expect they will center around the pandemic emergency purchase program, how they defend it and what that transitions to. because this on the margin is just a very subtle change to their interpretation of inflation, to a little over 2%. that's not big. tom: what does the bundesbank think? jonathan: i think they will ask that. unanimity is going to be really important. the framework at the federal reserve, what that has achieved now i think is bound to happen

to pretty much everyone, and all we are really debating is when to start tapering or not. everyone is pretty on board with this new framework shift at the fed. when we talk about the federal reserve, we talk about a spectrum of doves at the federal reserve. the most dovish to the least dovish. at debates between doves and hawks has gone over at the fed. i think at the ecb to some extent, that still exists, and that is the conversation we will have a little later this morning. tom: i miss lisa so much because she would be talking about the pendulum of doom. jonathan: the pendulum of doves. i miss lisa, too. she's going to be back on monday. tom: so she says. [laughter] jonathan: do you think she's going to have another week off? tom: she's back in greece. jonathan: in greece again? tom: not in crete. jonathan: we advance seven points. through 1.3% on tens. i can confirm lisa should be

back on monday. this is bloomberg. ♪ leigh-ann: -- laura: with the first word news come on laura wright. president biden -- first word news, i'm laura wright. president biden told a town hall there will be near term inflation because the economy is still improving. still, he says that restaurants and others any hospitality industry take longer to recover because of hiring difficulties. senate republicans have blocked bait on the still unfinished infrastructure plan -- blocked debate on the still unfinished infrastructure plan. they struggle to complete details of the $759 billion package. moderate republicans say they still need more time to fill in the details. they say by early next week, there should be enough votes to bring up the proposal. even the most conservative

estimate, 1.3 million , could be more than double u.s. in india. they were derived from local government data. at&t posted second-quarter revenue and profit beat estimates. the company added more than 1.1 million wireless customers. analysts expected about 300,000. meanwhile, the warner media unit had a 31% increase in revenue. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm laura wright. this is bloomberg. ♪

sen. mcconnell: there's no outcome yet, no bipartisan agreement.

certainly nothing on which to vote. not yet. so obviously if the democratic leader tries to force a cloture vote on a bill that does not exist, it will fail. jonathan: that was the message from senate minority leader mitch mcconnell in washington, d.c. here in new york city, good morning to you all. alongside tom keene, i'm jonathan ferro, together this morning with kailey leinz. lisa back with us on monday. here's the price action going into that ecb rate decision in about 20 minutes. your equity market looks like this. update on the s&p, advancing almost 0.2%. yields higher by almost a full basis point, just through 1.30% earlier. 1.2983% now. euro-dollar unchanged at $1.1790 going into that ecb decision. the debate in europe different to the debate here. paul donovan of ubs, always a must-read with his daily update. here's two lines from him that get your attention.

"president biden said car prices were returning to pre-pandemic levels, which is not true. mitch mcconnell said inflation was driving the cost of everything through the roof which is not true." there's a lot of things happening on d.c. in this front does not true. tom: what is true is the 2022 primaries beckon. jonathan: yep. tom: i can't emphasize enough that they are already counting the of political shifts in the house and the senate, and that is what is true in washington as well. let's get an update on this from jack fitzpatrick with bloomberg government in washington. what are they going to do on a fractured house and a fractured senate today after what we have seen, the cacophony of the last 48 hours? what do you presume to see on this thursday? jack: on this thursday and in the next few days, there's going to be the recovery from the failed vote in the senate, the procedural vote on an

infrastructure deal that is not yet an entire deal. so we are watching meeting after meeting, particularly in the senate, to see if they can wrap up the details. it does look like we could have another vote early next week. mitt romney says monday or tuesday, there could be a deal ready to go. really, what is happening in washington now is just trying to finish up the very last details of how to pay for the infrastructure measures. also, they work short weeks typically in congress. tom: oh really? [laughter] this is a "surveillance" exclusive. the short week gets to the august recess. the majority leader wants to, what does he want to do, extend the short work week so they get to a shorter august recess? jack: it will very likely be a shorter august recess because of infrastructure, the slow develop

and's there, the slow progress on the budget plan to try to pass the $3.5 trillion bill without republican support, and also the debt limit is a strange one. i would point out the house right now is not even scheduled to come back until september 20 for their august recess. i don't know exactly when the debt limit deadline is going to be. it is probably more like october or november. that is combined with the fact that they need to fund the government by september. tom: what is sick to me is fitzpatrick says this with a straight face. [laughter] jonathan: the links of the recess down in washington, tom -- the links of the recess down in washington, tom. jack, get back to work. that's the message and a lot of the u.s. right now. get back to work on wall street. what do you make of the president's response? jack: on the ui stuff, i believe

, if i am recalling correctly, the debate over unemployment in the ui unemployment insurance stuff has kind of stagnated. i am not sure if i am a member in the exact response -- if i remember the exact response you are referring to, but with 2022 in mind, there's a very partisan debate over the presence of the continued unemployment insurance payments and also the expectation that they are set to end in september anyway. i am not sure there was a significant response in my mind that you are referring to. jonathan: it is not exactly a stern defense of this administration's policies, is it? jack: no, democrats have kind of backed off of that for probably a month now. republicans have pushed and pushed and said we need to get people back to work. there are some democrats who

would like those payments, or are happy that those are still going out, but the president has said a few times now they are set to end in september. it is a debate that they don't really want to have. so it seems that i think for a few weeks, if not a month or more, the president's tone on that has consistently been, well, we don't need to fight over this anymore. it is ending in the relatively near future. kailey: there is still plenty they are fighting over. they haven't really figured out how they are going to pay for the 579 billion dollar bipartisan package, let alone the trillions out. what is on the table that they are now discussing? are we still talking about higher corporate taxes, or is that a discussion that died months ago? jack: that is on the table for what would be a partisan, credit bill, the reconciliation bill. tax increases are on the table. there is still the question of

whether they can wrangle the votes among democrats for that. but corporate tax increases, an increase on the highest individual tax rate mothers are on the table for the later bill. we have seen the conversation for this bipartisan infrastructure measure get much more gimmicky and less focused on actual tax increases. we have seen essentially bullet points for extending customs fees that were set to legally end, but probably weren't going to. this first bill that has bipartisan backing is not going to be tax increases. it is going to be legislative creativity, to call it entirely paid for. the next one is where you should keep an eye out for actual tax increases. jonathan: legislative creativity. we like that, jack. good to see you. it is the debate right now, inflation in america. higher prices, the higher cost of living. i do wonder whether it is the

debate of the moment in 12, 18 months as we get closer to those midterms. tom: the answer is we don't know. if it is a debate then, it is really important, but i would go, as we have heard from a number of guests, there's all different series of inflation to matter. one in your kitchen, tuition, service sector of the rest, rents. the other is the median statistic out of atlanta -- excuse me come out of cleveland. we will just have to see which way they go. the one thing they can agree on in washington, we are tea -65 minutes to jobless claims, t -19 hours, 42 minutes, 12 seconds to "ted lasso" tomorrow. jonathan: you are excited about this qamar into you? i was sinking about -- about this tomorrow, aren't you? i was thinking about just

skipping to season to. tom: i need you to watch season 1 -- to season two. tom: i needed to watch season one. kailey: watch the first season, jon. they are like family. you will understand. [laughter] jonathan: they are like family? are you ok? it's ok. this is bloomberg. ♪

♪ jonathan: live from new york city, for our audience worldwide, here's the price action this thursday, going into that ecb decision 15 minutes away. equity futures elevated over the past couple of days. we add some weight to the s&p, up 0.1%. into thursday, a two day gain, the biggest going back to the middle of may. for the russell, a gain of almost 5% over just two sessions after a pretty ugly couple of months. your russell this morning advancing a little more than 0.1%. the why is in the bond market. twos, tens, and 30's look like this this morning. your 10 year yield 1.2966%. had a little look north of 1.30% earlier today.

think about the range. we've gone from 1.1260% through 1.30% on pretty much nothing. this bond market with a life of its own, and it is driving the equity market in a big way. switch up the board and get to the bond market in europe. here's a line for you, target what you can control. the ecb is targeting 2% inflation. can they control inflation in europe? that debate is going to continue. this is something they can control because they have proven it again and again, the italian 10 year. we were north of 1% earlier in the year. we are back to 67 basis points. from a people, -- for many people, bmo alluding to this, it is about financial conditions and keeping them loose as we keep this recovery going in europe. tom: we are going to call that debit, but can -- that dovish,

what can frankfurt and madam lagarde control the dramatic fear of inflation? jonathan: that is the big test. take the inflation target from below 2% to close to 2%. tom: that a symmetric. jonathan: the real task now is for march next year. it is the flexibility involved in the pandemic emergency purchase program, with the e part being the key, emergency. once the emergency passes, can they keep on buying the periphery in large amounts if they have to? tom: right now we need to interrupt the program and go to an important "surveillance" special edition with kailey leinz. we've got to do this before romaine bostick. domino's in with earnings. they mention you in the press release. kailey: they should. domino's is one of my favorite forms of food. it could be its own food group for me. revenue, bottom-line line coming in above estimates. i would like to think i was a

big factor. jonathan: does kailey leinz eat domino's? kailey: all the time. jonathan: i did not know this. tom: after is the same way. a little bit aged, i should say. jonathan: this shows off the rails, isn't it? we need to get some movers outside of domino's. tom: romain will save it. romaine: good morning. i think that is the sound of a lot of new york italians cringing here. let's look at the individual movers. we want to talk about what is going on in the chip sector because a lot of activity in the premarket around these names. texas instruments last night, it was pretty much saved by the pandemic. this was a company that had seen a retraction and revenue growth for seven straight quarters. then the pandemic hit, and all of a sudden it was hitting double-digit revenue growth for the last four quarters, including 41% in q2. but it got a barrage of questions on the conference call last night about whether there was some sort of peak here and

if things were going to revert back to the norm. the company didn't really seem to have an answer for that. they talked about how their backlog was relatively high. they talked about how their inventory was relatively low, and this would all work in their favor. analysts weren't really buying it. shares down about 4.5%. analysts expect this company to get back to sigil good is it growth -- back to single-digit growth as early as q4, maybe into negative territory next year. asml has also been posting double-digit growth. it says it can maintain it because it has a monopoly basically on these machines that make them. intel continued to post negative quarters on a revenue basis. that is expected to continue with a report earnings tonight after the bell. 6% drop in revenue growth after the bell -- in revenue growth.

they are much more focused on those data centers to get out in front of amd and other competitors, including nvidia. we heard from whirlpool last night. they said they were able to raise prices by about 12% in the most recent quarter. that helped them post earnings and eps that beat the average estimates out there. the shares only up fractionally in the premarket, but the company gave a relatively aggressive forecast. d.r. horton going in the opposite direction. a lot of concerns about a peak in the housing market. after the bell, we are going to get twitter earnings, as well as snap. tom: "the close," look for that this afternoon as well. we have been off the radar on this. it is good to do this 10 minutes before an ecb decision. i call it the trust market. zach griffiths is expert at this, wells fargo senior market strategist. we went up to $1 trillion overnight reserves. we came back. massive sigh of relief. in the last few days, up we go.

explain to our radio and television audience why i should care about overnight reserves. zach: well, i don't think you need to care that much because the facility at this point is doing what it needs to do. it is draining reserves from the system as we really have a financial system that is awash with cash. as treasuries drain down its general account of the fed, you still have the fed buying $120 billion per month. this is taken out of the system by having this reverse repo facility that is now more attractive at five basis points, so that is taking a little pressure off of bills and the ricoh market -- and the repo market. we do see that coming under more pressure as we have another debt ceiling episode coming up at the end of this month. but so far, the facility is taking on a ton of cash. it is working the way it is supposed to. we think that overall, that has

been an encouraging sign, given where we were with negative yields across the curve previously. the adjustment to the feds administered rate has taken some concern off of negative yields at the front end of the curve. jonathan: in about 10 minutes we will be knee-deep, up to our next maybe, with the ecb. next week is the federal reserve. how does the bond market move over the last couple of weeks change things for the federal reserve? zachary: i don't think it changes things too much. what we will be watching for is if the fed in any way changes its forecast with respect to asset purchases. chairman powell's testimony before congress remained resolutely dovish. . in his prepared remarks, he still said substantial further progress is a ways off. that is a key phrase we are keeping an ion to understand if the fed is really inching towards tapering asset purchases at some point. with the 10 year yield at 1.3%, it is a little bit easier to

announce a reduction in asset purchases perhaps then when it was at 1.75% at the end of q1. so overall, i think perhaps the taper is a little bit easier for the market to digest. perhaps concerns about tightening financial conditions too much have been taken off the table. on balance perhaps, it helps with the taper announcement, but it remains to be seen, and they have been moving towards it very gradually. jonathan: there's a believe that the federal reserve chairman is in the drivers seat here. not exact a misplaced. we have seen that again and again over the years. but i rumor the bank of england governor mervyn king towards the end of his tenure pushing for more qe and getting voted down. it has happened. i just wonder, that divide between the federal reserve chairman and the hawks in the fed presidents, how big is that divide right now? is it building toward the hawkish side? zachary: i think right now, the

divide is fairly small, and with respect to perhaps those policymakers that disagree with the core of this, they may be a little bit less willing to challenge considering that chairman powell has broad support for another term, and that could be supportive for the core initiative of remaining dovish, embracing this new longer run framework of flexible average inflation targeting, and really just institutionalizing a more dovish stance longer run towards monetary policy. kailey: jon asked you how the fed is likely to react to the moves in the bond market. i am wondering how the bond market is lightly to react for many moves we are seeing in the fed. do you thing that is what we are seeing -- do you thing that is the catalyst for what we are seeing in the bond market, or is it some thing else entirely? zachary: i would see the -- i would say the more recent move

is something else entirely. as you have seen searches shoot up, you have seen a big downdraft in real yields. the 10 year real yield back around -1%. so i think a lot of what you have seen recently has been a risk off shift that we generally think is overdone at this point. we don't expect the recent increase in cases to result in the same type of broad restrictions that we saw last year, and we don't expect it to really stem this economic recovery that we are looking for , or at least in the u.s., so we think that they recent move is overdone. you will have a push higher for the remainder of the year which but to really get immaterial boost, you need to have the fed more on board with a taper, perhaps sooner than the market is anticipating at this point. jonathan: zach, it is good to see you. we are pushing forward to an ecb decision just moments away. zach griffiths, wells fargo senior market strategist. the words of francine lacqua just a couple of weeks ago, this

is what ecb president christine lagarde had to say. " forward guidance will be revisited." i will guess we are going to find out. tom: the press conference, it is a joke, but it is not. jon has been in the press conference. the ecb press conference is way sharper than the fed press conference. it is like a room full of michael mckees. it is going to be interesting. jonathan: i like that you have done this and not me. you are talking about the quality of the ecb press conference. tom: it is not going to be a snooze fest. jonathan: i hope not. tom keene, jonathan ferro, kailey leinz this morning. lisa back with us on monday. the s a b .1% -- the s&p advancing 0.1%. the ecb decision moments away. this is bloomberg. laura: with the first word news, i'm laura wright.

it is almost as if the pandemic and long tariffs between the u.s. and china never happened. the two countries are shifting against each other at the past a space in years. china is buying more of american farm goods and u.s. imports are described as being through the roof, but the trade deficit hasn't shrunk, and there haven't been negotiations over other economic issues. china is pushing back against the world health organization's call for another probe in the coronavirus' origin. the who was to know if the virus could have leaked from a chinese lab. beijing says there's no evidence for that theory and it defies common sense. fed chair jerome powell has broad support for his renomination among top white house advisers. still, the decision is expected later this year and has not been put in front of president biden yet. powell was appointed by president trump. his term expires in february. wildfires on the west coast are

leading to smoky skies in the east. strong winds blew smoke from california, oregon, and montana over new york, new jersey, and pennsylvania. people with asthma and other illnesses were told to avoid the outdoors. it is said that travel demand is bouncing back. american is raising its hiring plan for pilots by 50% through the end of 2022. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm laura wright. this is bloomberg. ♪ >> september and october are likely to be very rough this

year. maybe a pullback of 15% or slightly more. but once the dodgers are at the opening game of the world series, i think you will be able to buy. jonathan: if only it was that easy. that was scott minerd, guggenheim partners global chief investment officer. the call always makes the headline. before you get into the joking us of it, the call always makes the headline. why september and october? and what this scott minerd know that we don't about september and october? zachary: scott -- tom: scott has been a piñata recently. some people taking real shots at him. this is a call. everyone knows october has a certain history to it. i will go with that. but i just want to state, this is an outlier call versus a lot of fancy people on wall street. jonathan: and let me be clear, the call might be right. the call might be wrong. i am far more interested in the process behind the call. september and october is

absolutely critical as far as the economic data is concerned. kids are set to go back to school and the additional ui ends as well. everyone will be laser focused on what that data looks like. tom: we talked about this yesterday, q4 gdp, and frankly a first look into 2022. i don't know what that information is going to be yet. jonathan: we will get a first look at the ecb decision any moment now, usually a little after 45 after the hour. there we go. unchanged at the ecb. shocker. -0.5% on the deposit facility right. rates unchanged. we are looking for the guidance. we expect a rates to be unchanged. there we go. tom, you've just got to wait. the pepp will run through at least march 2022. that is the original guidance. they have affirmed the size of the end, purchase program at 1.8 5 trillion. the app will continue at a

monthly pace of 20 billion. they will reinvest maturing pepp bonds at least through the end of 2023. the outlook from here well below target at the ecb. pepp to run significantly faster than at the start of the year. we have heard that from the ecb throughout this year, particularly when we saw a rates at the italian 10 year go back through 1%. the euro so far just slightly negative off the back of this, coming in about 0.1%. app to end shortly before the ecb starts raising key rates. that headline we have seen before. they will purchase pepp fleck simply, according -- pepp flexibly, according to market conditions. euro-dollar basically unchanged. i am going to work through these headlines. you work through these markets. tom:tom: there's a lot of adverbs there.

explain the directional tendency of the adverbs in your free time. the 10 year yield in the united states gives a full 1.30%. a higher yield, futures churning. i don't have the italian bond up on my screen like jon. i can't get that on my screen. jonathan: gbtptr10. tom: of course. 2023 is the headline to me. jonathan: do a survey. ask ecb economists, ask any ecb water, do they think rates -- ecb water, do they think rates -- ecb watcher, do they think rates will rise by the end of the cycle? they will say no. the conversation in europe will be very different compared to the conversation in the united states. tom: i agree with that. again, we've got other central banks maybe with a little more enthusiasm to be less

accommodative. but i'm sorry, jon. everybody is making it up as they go, and i would suggest madame lagarde will have to say that today in the press conference. jonathan: there you go. rates at the present level or lower until the poor casts -- until the forecasts show some progress. tom: that is a substantial further headline. jonathan: let me give you some of the forecasts, just to give you some detail. the forecasts right now at the ecb, working through the bloomberg here, so bear with me, 1.9% on cpi, 1.5% for 2022, for 2023, 1.4%. we need to see further progress before we have a conversation about raising interest rates. this market wants to know what happens beyond pepp, beyond the emergency. what happens with all of that fleck's ability, that is what that flexibility, that is what we want to see -- that flexibility, that is what we want to see. tom: the word must is important.

price outlook must reach 2% well ahead of forecast horizons. on that, the euro springs higher. a stronger euro. jonathan: stronger euro off the back of this, on dollar $.1830, up by a little more than 1% -- $1.1830, up by a little more than 0.1%. president lagarde said this would be an important meeting. forward guidance will be revisited. i think she will get a lot of questions at that news conference in frankfurt. tom: right now we must go to a james at this, who is listening -- to james athey, who is listening to our analysis with aberdeen standard. do you really care when you invest? do you really invest off of what "central headlines say -- off of what "central headlines say --

off of what central bank headlines say? james: not really what headlines say. you can't invest in markets without considering to a pretty significant degree what "central's are up to. but i agree with you -- pretty significant degree what central banks are up to. but i agree with you. jonathan: do you think they are stuck down here for the whole of the cycle? james: and beyond. the problem is it is trying to use cyclical policy to deal with massive structural issues. there's is no economic theory that says monetary policy has anything more than procyclical effects. -- more than temporal effects. it brings forward demand from the future today. it does not create demand

through the cycle. so the ecb is really trapped. it's job at the moment seems to be keeping markets from pricing in a more terrible future and hoping that the politicians can get their act together. jonathan: i am just working through this statement right now, trying to find the big change, and i got to be honest with you, it feels like a bunch of tweaks around the margins as far as forward guidance is concerned. the ecb is going to be well aware, they want to understand what happens after the emergency ends. what happens with pepp, what happens to all of that flexibility, and do the hawks pullback enough that beyond the crisis, we lose some plus ability. are you hearing -- some flexibility. are you hearing anything about that this morning? james: the market doesn't really care about the underlying economic reality. market wants certainty -- the market wants certainty around asset purchases because it makes

an environment in which you can disregard actual fundamental risk and valuation on the basis that the central bank has your back. that is what the market would like to see. the ecb governing council has significant disagreements amongst its members, such that there may come a time in the future when that disagreement does impinge on their policies. i just don't think we are there yet because we are still relatively early in the european recovery, and there are threats to that recovery already emerging. i am of a mind to quote the bee gees or boys own. jonathan: i don't think tom will know who boys own are. he will know the bee gees. do you know who they are? tom: now. -- no. kailey: i am going to plead the fifth on whether i know that is. tom: just have another piece of

domino's. [laughter] kailey: i want to know when you think the market is going to get some answers. i was speaking with an economist at barclays saying this meeting was maybe overhyped. yes, we would get some tweaks around the margins, but the real answer to what the markets are looking for is not coming until september or december. when do you expect us to have a clue what the post pep world -- the post-pepp world is going to look like? james: that is really difficult. it will depend on economic outcomes, what is happening outside the euro zone is much as what is happening in the euro zone. i don't expect any material shift in the structural outlook, but bond markets are highly correlated, so in this world where the ecb is managing monetary conditions, whatever that actually means, there is always the real danger that tightening from the federal reserve can lead to an unwarranted tightening from the ecb, and that will seek to offset at almost regardless of

the domestic economic data. that is to say, the way that central banks run their mandates, they are not really too concerned until they get to the steady-state, the noncelebrity testing on accelerating inflation. then they care about -- the nonaccelerating inflation. and they care about policy. the ecb, until he gets there, it is not going to want to tighten policy, and may have to loosen policy to offset a tightening coming externally. jonathan: when you watch this news conference in 35 minutes? -- will you watch this news conference in 35 minutes? james: i've got a meeting, unfortunately. jonathan: of course. [laughter] just want to work through this statement. just under the header, monetary policy decisions. the ecb expects rates to remain at current levels until it sees inflation reaching 2%, well

ahead of its projection horizon. it judges the realized progress in the underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term. this here, "the amount of heavy lifting that must -- this next line here, the amount of heavy lifting that must've been done at the ecb, that gives you an idea of how tough it still is to work at the ecb because i imagine there was a little but of pushback over just that little line, that they would except a little bit of an overshooting of the target, so long as it has the t-word attached to it. tom: you are better at this than i am. steve dramatic sponsor head of the bundesbank, the new challenge of the lower bound. that seems -- the dramatic head

of the euro bank, the new challenge of the lower bound. why am i craving domino's now? domino's on the mind because of kailey leinz. do you think christine lagarde has ever had domino's? jonathan: i doubt it, tom. this is bloomberg. ♪

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>> almost everything has told us we are in a regime shift. we are going to see growth decelerate and inflation decelerate. >> it is a pause as opposed to a transition. >> people get overwhelmed with information they can't process, so they go, you know what? risk off. >> it is probably not the optimum time to be overweight on risk. >> we are going to decelerate for sure, but i think the consumer will stay resilient. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. donovan pharaoh, lisa