♪ >> inflation is getting close to peeking. it doesn't mean it is going to go away overnight. >> we know that there are some secondhand effects on inflation. >> the game is to stop a wage five -- a wage spiral. if the fed wants to stop inflation, they should hike rates. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: cpi just around the corner, 30 minutes away. from new york city, good morning. for our audience worldwide, alongside lisa abramowicz, and jonathan ferro, together with

kailey leinz. your market up 0.3% on the s&p. your data just around the corner. lisa: you raised a quite question -- a great question. how does the market respond to a downside surprise? do they take back the rate hike bets or look past the data? jonathan: 6.8% the estimate. do they change anything for december? lisa: we basically heard from bonnie that there's nothing that can change her view because the trend has been established for the next six months. i do wonder if they suggest rents are surging more than people expected, if they suggest some of the sticky components are really robust, how much that changes the conversation. jonathan: 8:31, it is all we will be talking about for the rest of the day. what does that inflation number mean for the federal reserve? kailey: has the fed already made up its mind that it is going to accelerate the taper?

what does it mean when we look at the dot plot and the fed forecast, where rates will be beyond 2020 do -- beyond 2022? jonathan: if you are just tuning in, we are 28 mins away from the inflation report. this is a peloton free zone for the next hour. your equity market up 14. it is a p-free zone. that sounded terrible. [laughter] up a basis point on tens. crude up to 71. >> -- up to $71.61. this from bank of america, zero phobia. "history shows the markets can handle well telegraphed cycle. the real problem is when the fed moves rates above neutral. the risk is not that the fed hikes too soon. it is that it waits too long and has no choice but to slam on the brakes." lisa: one of the more

interesting ideas of the past couple of days. does the fed have the luxury to wait long enough? does the inflation push their hand and force them to raise rates sooner because they have to signal to investors, to consumers, that they are doing something to try to change the conversation? could that disrupt markets? i think that is one of the big questions of 2022. jonathan: let's turn to jim bianco, president of the younger research. what are you looking for -- of the young go research -- of bianco research. what are you looking for? jim: people are so built up on inflation. i expect it is not going to be much. let's back up a second and remember here, these inflation numbers, nearly a 7% handle, is way out of the park from what everybody thought we were going to see in the spring.

this is arguably one of the worst macro calls in history, that they have missed inflation so bad. the only saving grace is that the stock market has responded to it yet, but short rates are responding to it. they've got three rate hikes priced in for next year, possibly a force in the spring of 2023. when we talk about the bank of america call that may be the fed has to slam on the brakes, that is becoming more of a reality if you look at short-term interest rates, and that is going to be the biggest concern going into 2022. did we blow this inflation calls so bad that the fed has no choice but to slam on the brakes? that is what short rates might be counting on. lisa: we keep hearing strategist after strategist talking about the hump of inflation, how it is temporary, talking about their faith in the fed walking back slowly. when do we know that this trend has a longer-lasting tail? jim: i think it already does.

i think most people are arguing it incorrectly by saying that inflation will begin the next month or two. the question is how long is it going to take for inflation to get back under 2.5%. if you look at the oer, at least a year, if not two years, is where you're going to go before you actually see it come down a lot. i think more and more, the bond market is going to get more uncomfortable and inpatient with this. the other thing to keep in mind, i know a lot of people focus on the stock market while stocks are at all-time highs, and that is kind of the arbiter of every conversation, so it is not a problem. the last market to respond to all major turns has been the stock market. in 2001, the stock market was the last to move. in 2007, it was the last to move. in spring of 2020, the bond market was on fire, and the stock market did not pay attention to it, and then eventually, it did.

if you are looking for the stock market to be the leading indicator of when the inflation problem is going to be, you are looking in the wrong place. i think you've got to look at the bond market. these rising short rates and the flattening yield curve, which is also a very worrying sign, is suggesting the fed is going to make a policy mistake. usually the fed raises rates until they break something, and the flattening yield curve is suggesting it won't take much to break something. maybe just a move to 1%. lisa: let's talk about the ash kailey: -- kailey: let's talk about the efficacy of fed action. a lot of people say it is going to ease up early in 2022. you think that is wrong, yet the fed is not in a position to do anything about supply-side driven inflation, so where does that leave us? jim: i think in second place of the bad calls for this year is the call that the supply chain will fix itself magically. if you look at what is been happening with the supply chain, they are just playing games with the numbers, moving ships 150 miles offshore to say that the

backlog is coming down, but it is not. it is the worst it has ever been. the fed can't print ships. what we also have his tremendous demand. we have record demand for durable goods and retail sales right now. if the fed wants to raise rates, they could help ring the inflation picture back into line by helping to cool off the demand side of the equation. it is not just supply causing this inflation problem. it is supply and record demand at the same time. the fed can do some thing about demand if they wanted to. jonathan: there has been a bigger conversation recently on this program and elsewhere about the sequencing. if it is the straight transition from tapering, straight over to rate hikes, this balance ash rate hikes, does that -- rate hikes, does balance sheet reduction come into this? jim: i don't think they are ready for balance sheet reduction come at -- reduction, but they will probably be done by march. the market is pricing in a 40%

chance that the first rate hike will be in march and a 60% chance it is going to be in may. i know most of the consensus is not there yet. when you talk about sequencing, we are going to speed up the paper so it can open up the door for the first rate hike to be in march, and that will set the stage for at least three rate hikes in 2022 and may be a force in the spring of 2023, and then we will have to see if that is too much for the economy to handle. like i said, i think the flattening yield curve is worried that it might be too much. lisa: you said the bond market is going to get more uncomfortable. what does that look like? jim: if you look at measures of liquidity in the bond market, it has been bad since the spring of 2020. you are seeing lots of jarring and erratic moves in the bond market. 10 year yield earlier this week shot up 20 basis points before it backed off a little bit. the 2-year note has 50 basis

point moves in a day. the illiquidity in the bond market is growing, and it is going to be more problematic as the biggest player in the bond market, the federal reserve, continues to exit. jonathan: just quickly, a 6% or 7% handle at 8:30? jim: probably a 7% handle, but it is so close with the consensus right now. jonathan: jim bianco there. looking ahead to 6.8%. that is your median estimate. suggest and we could get close, 7% on average through q1 of next year. just imagine how uncomfortable that could be. lisa: i love jim's perspective, coming out and saying this is so vastly higher than what people were expecting six months ago. this is a huge policy misstep, and just understanding beach gentry of inflation, and app people have not shifted from

their overarching thesis. this is at a time when people are still trading on the faith that it will come down next year. jonathan: mohamed el-erian called this one of the worst calls from the federal reserve on of -- federal reserve on inflation in decades. what are they going to do about it? lisa: do they continue to believe it will remedy itself? what jim bianco was talking about is absolutely correct. when you look belief -- look beneath the numbers, it is unclear whether things are getting better. that is the main feature in these expectations for a waning pace of inflation next year. jonathan: not just what are you going to do about it, what does that do about anything? kailey: what is the efficacy of any policy tightening if what you are responding to is the fact that there is a backup in ships at the port of los angeles? the fed can't print ships. the fed can do something about demand, reducing that demand which is what is causing supply

to backup in the first base. what does that mean for trajectory if you are starting to put a damper on consumption and demand for goods? jonathan: here's the set up. mike mckee will take a look at that for you. then we will catch up with oxford economics' chief market economist. up 14 on the s&p 500. yields higher by a basis point on tens. lisa: tom keene writing banners on his day off. he just tweeted, "looking around the corner to the hump of inflation." jonathan: is that right? lisa: he's looking around the corner. jonathan: do you think tom might be a bit bored/hung over? [laughter] lisa: i will let you make those assumptions. i think he just once to keep up with us. jonathan: up 14 on the s&p, advancing 0.3%.

it is inflation day in america. this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. the biden administration is seeking to downplay inflation ahead of a data release that is sure to show a surge in consumer prices. the white house says the consumer price index won't reflect some price movements in gasoline and natural gas prices. according to a bloomberg survey of economists, the cpi probably increased 6.8% from a year ago. the number is out not long from now at 8:30 a.m. new york time. president biden has assured ukraine of the u.s. support in its standoff with russia. the u.s. leader pledged not to hold talks about ukraine's future without its representatives at the table. president biden also told nato allies in eastern europe he had not made any concessions during a video call with russian leader vladimir putin. it is a legal blow to a man who has spent almost a decade fighting attempts to remove him from britain.

judges in the u.k. have granted a u.s. request to extradite wikileaks founder julian assange. he has been imprisoned in the ecuadorian embassy imprisoned or in the ecuadorian embassy -- imprisoned or in the ecuadorian embassy. shares of royal dutch shell -- shell argues it will allow it to boost returns while shifting to clean energy. the dual listing structure has set share buybacks in the netherlands, but not in the u.k. 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 ritika gupta. this is bloomberg. ♪

>> what we have done up till now is marveled at how can the stock market be doing so well when

there are so many issues in the economy and the economy is still struggling in so many ways. i think next year, that attitude may change towards why is the stock market struggling when the economy is doing so well. jonathan: jim paulsen of leuthold weeden capital management. the opposite of what we saw in 2020, when the economy was bad in the market was great. jim is saying the economy could be good, but the market could be troublesome. mike mckee will join us on some of the inflation calls you need to look for. let's get to the price action briefly. your equity market is positive going into this cpi print, advancing zero point 3% on the s&p 500. yields up a basis point on tens. crude up to $71.69. the inflation data 12 minutes away. mckee joins us now. what is your focus this morning? michael: we are going to want to see how that is constructed. where do the inflation numbers come from?

what things are increasing in price, and are a lot more of them increasing in price? the white house has a new conference -- the white house had a news conference yesterday in which it made the case that this does not include some of the prices we have seen, but it is a political question of what if you get 6.8%, the highest since 1982, and a question of what happens with the fed if we get a number significant lay higher than that. orchids are currently priced at 6.8% -- markets are currently priced at 6.8%. lisa: you talk about the oil price declines that will not necessarily be incorporated. however, we have seen a rebound over the past couple of weeks, some of the biggest increases going back three months. how much does that undermine the argument that we will see some sort of deflating of this high read we are going to get pretty soon? michael: you have to realize that if oil was at a high-level

and went down for a little bit and then back up again, it is not going to be the kind of entries -- kind of increase we signed to the winter last year into the summer, were you get a 50% increase, but it won't contribute as much to cpi. people do pay attention to gasoline prices because they see those everyday when they fill up their cars. that is the kind of number you're going to want to look at if you are on the political side, or if you are the fed trying to sell the idea that the economy is in good shape. we will have to wait and see how it plays out with energy as we go into 2022 and opec puts more oil into the market. lisa: we were to speaking with jim bianco, and he said this inflation read highlights how lebron -- how wrong so many economists got it with with back to how long and how high inflation would go. when you speak with economists, especially at the federal reserve or elsewhere, how much

do they feel like maybe their assumption, their faith in the trajectory is wrong? michael: they have a lot of humility about this. i think the unfair part of jim's comment is we never had a global pandemic in the age of economic statistics. they did not have the cpi and the pce indexes during the 1918 spanish flu. so there are no models that really tell us what is going to happen. it is a unique event worldwide that drives prices and a lot of different areas. it is very hard to understand or model what is going to happen. so the fed definitely has a lot of humility about this. the other thing i would say, and i don't want to sound like the defense attorney for jay powell, but the fed only makes its forecasts four times a year, whereas the market economists make their forecasts daily. so the fed may be behind the curve, but in part, that is a question of timing. kailey: this may just inform the

thesis more that inflation is hotter and lasting for longer than previously expected, but doesn't the fed already know that to some extent? does the number today change the equation for wednesday at all? michael: no, it probably doesn't. the fed does know that. they were discussing the possibility of higher numbers, and we got the october number after that meeting, and they saw the big increase. that is when they started talking about moving up the taper, making it faster. so the fed is aware of it and they have already incorporated it into their policymaking. it is only a question of at what level do interest rates even out for the time being. that is going to be partly a function for the next week of what we get today, and then obviously what the fed tells us next wednesday. kailey: i know tom keene is not here, so i will try my best to channel him. he talks about how we should not be looking at the core metric where you strip out food and energy costs. that is what the american population feels. i wonder how that is going to translate into not just the cpi

print, but also the consumer confidence data we are going to get later this morning. michael: we probably will see a hit to consumer confidence because of inflation. that is what has happened the last couple of months. the people who put those surveys together tell us that is the number one response from people when they are asked what they don't like about the economy right now. the issue is for whom we are speaking. if we are talking about joe biden, the white house, democratic numbers of congress, high inflation, bad news. people do pay more at the gas pump, pay more in the grocery store, and they are holding it to the politicians in power at the time. the fed does not really care whose fault it is. they just have to deal with the aftermath. so they are going to look through these numbers because they know that oil prices aren't going to keep going up at the same rate, so inflation will slow in that area. they want to find out what other areas will be affected. they have to figure out how they can impact that with higher interest rates. jonathan: we keep getting

questions about the sequencing of the effort from the federal reserve. is this coming up in your conversations as well? michael: the fed has made it clear they are not going to increase rates until they are done with the taper. the question for next wednesday is how fast do they taper. the bet if that they are going to double the rate, doing $15 billion a month now. if they go to 30, they finish in march. they will have a much better read on how long inflation is going to be staying high. if we do see commodity prices come down, it may start to diminish just a little bit by then. but if it is still high, they know they will have to go faster and everybody will start to reprice the markets -- reprice in the markets. jonathan: thinking about rate hikes increasingly over the past couple of months. the numbers will drop about five and a half minutes from now. 6.8% is the number we are looking for, your median estimate. some numbers north of 7%. lisa: one strategist in chicago

pointing out that a miss will be considered in the market even if we get a 6.8 percent read. that will be considered low for bond markets, where the whisper seems to be a bit higher than the 6.8% level. jonathan: it is in line down high surprise this morning? kailey: what is a downside surprise when we have a 6% handle? it is still really hot inflation, the kind of which we have not seen in decades. so does even a downside surprise move the needle at all? jonathan: we will look at the market reaction, get to michael mckee, and then get to the head of u.s. financial market economies -- financial market economists. your s&p on the week, potentially the biggest week of gains going back to february. advancing 0.3% on the s&p. there is some dollar strength out there. euro-dollar -0.2%. yields are higher on the long end by just about a basis point on tends to 1.56 60%.

on twos, 0.713%. from new york city, for our audience worldwide, alongside kailey leinz and lisa abramowicz, i'm jonathan ferro. your inflation data is up next. this is bloomberg. ♪

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jonathan: your inflation data in america seconds away. good morning. for our audience worldwide, yields higher going up two basis points to 71 basis points. on tens we are at 1.50. michael: it comes out a little bit worse than economists had forecast. .8% rise in the month over month headlines the guy which takes us doing any of rate of 6.8% -- to an annual rate of 6.8%. on a core basis we are spot on. .5% increase per month over month and it takes us to 4.9% on a year-over-year basis. taking a look at the biggest

items and the biggest movers, food was up .7%, that is lower than .9% last month. food at home, .8%. maybe you see a little bit of a change in food. gasoline is up next .1%, which is the same as last month. no change in gasoline prices. apparel prices up 1.3%. this is something to watch out for. because of supply shortages though not be as many sales into the holiday season. people like to wait until the last minute to buy stuff that goes on sale. cars up 2.5%, that is the same as the prior month. we are seeing that come back as an issue. everybody has been following the home prices. rent up .4% and owners equivalent up .4%.

that is a building problem going forward in the future. jonathan, going back to london, bad news, airline prices up 4.7%. we had seen declines. jonathan: try booking a flight for the holidays right now. those prices are insane. the move in the price action, treated as a downside surprised. yields higher again by about one basis point, let's call it 70 on two. 10-year changed -- unchanged on the session. equities firmer. s&p 500 futures 6.8% year-over-year. lisa: the amazing aspect is 6.8% is being treated is being treated as already baked into the pricing and is in line with what was expected, people can move forward with their bets on stronger equities and this will fade into next year. jonathan: we move forward to

talk about the federal reserve. year over after that one. december 15. plug this data into that meeting. michael: i think it goes straight into their models the weather have already set it up. we had some declines in energy prices that were also expected. they can see things leveling off , but because we have a wide range of goods going up in price they will probably continue to accelerate their taper. there may be a debate over how much per month, but i do not think this will change the fed view. the interesting thing for the political view, real average hourly earnings down 1.9%. that is telling you your earnings are going up but not keeping up with inflation. that is a political problem for the white house. lisa: perhaps a political problem, but the reaction in

equities, does this give the fed confidence to be more aggressive and actually go through with the rate hikes the baked into the market? michael: i think it is too early for that and you get a knee-jerk reaction after you get an economic release. people have to parse this and figure out what it means but my guess is the initial look, people are saying that is what we expected, so we will go back to trade it in the way we did the last couple of days because there is a lot of new information that will change her view of what happens with the. -- with the fed. jonathan: yields lower by a basis point on tens. on two, unchanged. the s&p 500 up .7%. kailey: you are seeing adjustments in swaps for what the fed rate hike path will look back -- will look like in 2022. slipping just a little bit. a great hot take, "traders may

interpret these figures as to not forcing the fed hands into tightening any more than its hand was already forced a couple of minutes ago." jonathan: 6.8% is your headline read. the head you a financial -- the head u.s. financial analyst at oxford financial joins us now. kathy: it did come in a touch higher than expected. does it change things materially? i think it keeps pressure on the federal reserve. this a difficult spot for them were seeing inflation run above what they expected and are some signs it would get easy and the headline number going forward is energy prices. up almost 5% year-over-year. jonathan: how much can it rot -- lisa: how much gave rise and how

much you needed to fall for the fed to look like things are under control. kathleen: our view is it will continue to stay hot and sticky through the first quarter and you will not get reprieve until the second quarter. even then it will remain elevated. i think if you see moderation, the year on year rate with of gap down, then the fed can take a little comfort and maybe wait. it will be difficult because we are seeing fed members become more worried about inflation and less so about the labor market. lisa: what you think is appropriate if it does remain hot and sticky through the first quarter, what is appropriate in terms of fed action. kathleen: we think they need to be patient. you are seeing growth likely to decelerate. fourth-quarter it is nearly 8%.

don't forget we have this upsurge in bed, which will hurt the -- in covid, which will hurt the economy. if inflation comes down it should give the fed patients. we still see sam -- we still see them raising rates no later than september of this year. kailey: will we see material wage inflation to keep up with the inflation we are seeing? kathleen: that is the critical point to focus on. if you start to see wages rise because workers say we are paying a lot more for items and goods and services and we need higher wages, and if companies accommodate that, then we get into the wage spiral that everyone is concerned about. we are not quite at that point stop we have to wait and see the data. indications are the labor force participation rate is rising.

people are being pulled back into the labor force. if supply comes down that helps temper some of the wage gains. kailey: i've spoken to other economists and i say how can consumption be hanging in there when consumers are faced with this kind of inflation is that there is a ton of savings that have been built up. those are starting to be drawn down. is there risk inflation persists beyond where those savings will last and we start to see a serious hit consumption? kathleen: that's right. most of the $2 trillion of savings is viewed to high income households. this will wear down the propensity for consumers to spend and that should help put the brakes on patient. -- on inflation. jonathan: are you confident enough to say this is as bad as it gets? kathleen: we think it gets a

little worse. we do not see that peeking, especially the poor, until maybe -- especially the core, until maybe february. i look at the numbers. court goods, 9.4% year-over-year. for services, 3.4% -- core services, 3.4%. jonathan: kathleen bostjancic on the breakdown. lisa, look at s&p 500 futures. lisa: basically in line with what people were hoping for and this is part of the playbook into next year. i want to go back to the idea that going forward we should look for a fed willing to be patient. i wonder what holding rates this low does to bring people into a labor market versus how it signals to people that it is ok for inflation to run at the doubles for a longer time -- at

these levels for a longer time. that is getting waited more heavily to the inflation side. jonathan: next up, chairman powell. kailey: the question is did anything we saw this morning change his outlook for the rest of the central bank in terms of whether guidance will look like? came in right in line, maybe not. jonathan: will have the conversation on the open. mohamed el-erian, columnist and queens college president. kate moore blackrock, david kelly, erin browne, a monster lineup into the next hour. we will catch up with the outgoing ceo and incoming ceo of southwest. i know you want to talk about what they have to discuss in this labor market. lisa: the idea that they cannot hire people but they cannot keep people in their seats. attrition has been a big thing. brian moynihan was talking about that with david westin.

how much does this disrupt service? you can tell us about this after your experience going back to london. how much is their problem with airline services given they cannot people back into seats? jonathan: think i've given you idea of how i feel about this. lisa: i think you need to elaborate about travel. jonathan: i will not call out the other airlines. gary kelly coming up later. kailey, that airline, some of the worst hiring conditions they've ever seen. kailey: that goes to show the peculiar nature of this labor market. the jobs are there. where are the people? jonathan: inflation data coming in basically in line. from new york, this is bloomberg. ritika: the coronavirus crisis is threatening the holiday season in the u.s.

the number of cases and hospital admissions are rising and most victims have not been vaccinated. there are shortages of beds and staff to care for patients. in 12 days in washington, d.c. the seven day average has climbed at least 50% from two weeks ago. it london the financial district may become a ghost town. major banks have started telling thousands of employees to work from home following the new guidance from british government. hsbc and deutsche bank are among the firms reducing the number of people in the office. finland has agreed to buy lockheed martin's s 35 fighter jets. the fighters will replace warplanes key to defending the country's border with russia. lockheed b. bowing and manufacturers front -- lockheed beat out boeing and manufacturers from sweden and france.

broadcom said it would buy back $10 billion worth of stocks -- a shortage of cream cheese in the u.s. hasn't bagel shops and bakeries rambling for supplies. it is being blamed on a cyberattack on the biggest cheese manufacturer in the country. schreiber foods in wisconsin was closed for days in october after hackers compromised distribution centers. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> record demand for durable

goods and retail sales right now. if the fed wants to raise rates, they could bring the inflation picture back into line by helping to pull off the demand side of the ration. it is not just apply causing this problem, it is supply and record demand at the same time. the fed can do something about demand if they wanted to. lisa: this was jim bianco earlier this morning ahead of the cpi print smack in line with expectations. you are seeing a bit of a bounce after the initial decline in two year yields. you see a little bit of a rolling over in the s&p, but barely. still up .7%. part of the inflation read has been supply chain disruption. very difficult to understand when they will abate. how much has the decreased number of ports -- number of ships given us confidence this

has been easy. ed ludlow has been checking out all of the ships and tried to understand what it is like on the ground. thank you for being with us. is the supply chain disruption at the port of l.a. getting better or worse? ed: it is not getting better. whether it is getting worse we will ask key players later in the day. the data shows we are start record levels of disruption. there 97 ships, not just behind me, but further out in the pacific, miles out because they cannot get a holding birth, than there is a wait time. the average wait time to find a berth is three weeks. you look at the cpi print, what strikes you is the persistence of inflation. you thinkable for the november print, those who were arguing inflation was transitory, especially within the fed, they

did so on the grounds the supply constraints were temporary. nothing the data we are seeing suggesting it is improving or it is in the right trajectory. lisa: can you give a sense of what steps have been taken and what needs to be taken given your reporting on the ground? ed: i do not know if you can see behind me but this port is open 20 47, we are told. there's not much going on. my camera guy and i are the only ones here for several hours. last night if you went on any of the highways or freeways, there were hundreds of trucks carrying single containers. our own bloomberg intelligence politics have run the numbers. just because the ports said we have run 24/7, it is not a fix because you need enough truck drivers, you need the longshoreman to work the trips -- to work the ships, and we hear all of those moving parts are not working in synchronization. kailey: does it come down to a

personnel issue? they're just not enough people? ed: it is the question of the day. all other the different parts of the port complex point the finger to one another. the port of l.a. would say there are not enough truck drivers. the truck association would say there not enough trailers, we do not have enough physical vehicles to move them. then it comes back to the other part of the equation, demand. there are reasons this place is emblematic of the global economy. they are struggling with congestion but the demand is so elevated. they describe it as 10 lanes of traffic trying to fit into five lanes of berth propped up by stimulus and recovering labor market. the demand seems to be staying. kailey: you talk about vaccines. let's talk about covid-19. ports in china can be entirely

shut down due to one positive base. where is the issue stemming from when we think about shipping flows around the globe? ed: for bloomberg subscribers, go to the terminal and read brendan murray's column. it sounds simple to say out loud , but covid means shut down. if workers get sick they cannot turn up here or in any of the other mega ports in mainland china. they have to put in place restrictions that impact workflows and that has been the story. that is why they're concern about omicron because a new wave of inflections -- of infections which are down the rate -- would slow down the rate they can put a container on a truck and send it away. lisa: you get a sense that when the pandemic is truly over things will go back to normal on their own? ed: the underlying problem is that these ports were built in an era where there was not

e-commerce, there was not demand fluctuation like we see today. we have a reprieve from tom keene, but just in case i prepped my history notes. lisa: he is washing. -- he is watching. ed: there are underlying issues and that is why you see ports shout to the white house that further investment is needed in technology and innovation so if we do see more demand throughout this pandemic. lisa: we will allow you to come back and give all of that history when tom keene is here. ed ludlow on the port of l.a.. you can check it out at 11:30, the interview with the chief executive officer of the port of los angeles talking about some of the measures that have been taken, what needs to happen, and whether some of it is getting better. fascinating giving the fact this is getting baked into a lot of the assumptions of the temporary

inflation or the inflation that will eventually abate at some point next year. kailey: whatever you want to call it. the question is not whether it gets better but the pace at which it gets better. even if the logjam starts to clear up that does not mean we will go back to east supply chains. it is about truck drivers having enough personnel, it goes on and on. it is a question how much and how quickly that will abate and what does the federal reserve do about it? lisa: a lot of questions. we are about half an hour away from the open. what will you be watching as the market parses through the data? kailey: i will watch out to see if it will be a strong day for risk assets. right now we are seeing futures around session highs. before we got the print it was a downside surprise. what kind of a world are we living in where 6.8% rpg keen?

lisa: a world that has been -- that is the point of the likes of mohamed el-erian when they look at the fact people are still buying things, they are still going forward and yet they have had the fed put behind them at all times, even as there has been negative connotations. my fundamental question is at what point will equity markets wake up to three rate hikes, two rate hikes next year or whatever ends up happening and how we see that already baked in? kailey: you have to see the bond market wake up to that first. as long as yields stay low -- we just got 6.8% on inflation and are looking it does get a three rate hikes and star get a 10 year yield sub 1.50. lisa: coming up, jonathan ferro will talk about the labor market. gary kelly, german ngo executive officer of southwest, along with

the company's incoming chief executive officer talking about the labor shortages posing some of the biggest risks to their business. we have heard this across the board. from new york city, this is lisa abramowicz, kailey leinz, bloomberg surveillance. ♪

jonathan: file this under things you thought you would never say. inflation in at 6.8% and the equity market rallies. that is this morning for you.

the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: from new york, we begin with the big issue. over to you chair powell. >> fed chair powell. >> it has to be the fed. >> it does raise the stakes for the december meeting. >> the fed is behind the curve. >> if how decides to speed up the pace of tapering. >> the extent to which powell elaborates on this. >> the added rhetoric may be the big surprise. >> may be getting hawkish when