>> the difficulty for the fed is that they might need to raise interest rates cyclically. >> how high can they go in terms of rate hikes and not invert the yield curve? >> the yield curve in general is not giving a pure signal. >> the u.s. economy can withstand north of to prison interest rates just fine. >> you may well be lifting off he is no you might not think -- lifting off even though you might not think you are at maximum employment. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: the bank of england raises rates. it is a great surprise. the bank of england raises benchmark interest rate to a 0.25%. the wow from the economic theorist lisa abramowicz. flat outcome of the most extraordinary wednesday-thursday of what i have done bloomberg. the fed yesterday, the bank of england now. who knows what the ecb will do

in 45 minutes? lisa: jon ferro promised us a phone call if the bank of england raised rates, so we need to get jon ferro on the line with his sweatshirt or whatever it is he is wearing. we see the pound string thing after this decision, an 8-1 decision to raise benchmark interest rates. tom: of course, markets are reacting. we will go to george bory of wells fargo, but first, mark of ashworth on the turmoil. but we've got to go to caroline hyde. thrilled she is with us this morning. what this is interest rate increase mean for the people of the united kingdom? caroline: it means perhaps the bank of england isn't as fearful as anticipated.

governor bailey said he does not feel the impact of the latest variant will be that hurtful to the overall economy, but this means an awful lot for your mortgage interest rates, for your ability to be going out and spending. but the hawkish nature of this, the credibility of the bank of england being reduced. there was a 40% chance as priced in by the market that this might happen, but everyone felt there was no press conference. it just would not occur because they would not be able to explain themselves, though the boe saying u.k. inflation is likely to be around 6% in april. that is their focus, the prices being paid. may be a relief to see some hawkish nets from your everyday spender on the street. tom: not shocked is marcus ashworth, who thought long and hard about this very set of dynamics at the bank of england. describe the surprise in the

city this morning. marcus: i thought they might hike today. goldman sachs said it as well. it was a bit of a between cost because there's a bit of surprise that they have done it now, but at least you have done it. the inflation data and the labor market data is so strong, and the fed has given the green light. that is really what has happened here. the fed has cleared the path and the bank of england have said they've got to do is this -- they've got to do this. i don't think it makes any difference with rates. that is the standard. it mean if they do hike again in february, it is quite important because that means there won't be anymore qe. they have done it a month too late, but at least they will had

a little bit higher. lisa: they also cut their fourth-quarter gdp forecast for the united kingdom, highlighting this concern that they are hiking concern -- hiking into weakness. you see flatness in the twos and tens in the united kingdom. how concerned are people in britain that this is a policy error at a time when omicron is still cramping growth? marcus: pretty much zero. how long does this last? there is so much strength in the economy, like in the u.s., and so much strength on inflation. if people looking for job opportunities out there. there's plenty of slack. they need to take the move to handle inflation and future expectations on wages, and there's plenty of growth there.

at least they have done it. caroline: you say they can hold their had higher, but there is a communication problem going on. the fact that the most hawkish member said he thinks maybe they should stand pat because of the risk of omicron, everyone started to think we would hold flat for this month. was it the cpi reading that did it? was it the labor data? what do you think turned their attention to have this 8-1 reading? all of i -- this 8-1 reading? marcus: all of it. inflation hasn't reached 8%. we have been experiencing very strong inflation, and then unemployment, the labor market data showed there is no excuse anymore. when i say hold their had higher on communication, i mean just

off the floor. they really should be still fairly a same -- fairly ashamed of themselves. tom: marcus ashworth, always valuable. if you are just joining us, we move from the u.s. central my comments yesterday to the shock and awe of a bank of england righting the ship with a surprise move up. we see that movement in the market as well. u.s. rates higher, with sterling strength. the two-year u.s. yield, 0.6275%. lisa: we are seeing a global tightening cycle emerge from the federal reserve and the bank of england, and equity markets don't care. if anything, they are cheering this on. to me, that is a distinction from a lot of the discussion earlier in the year. tom: george bory joins us now. he is trying to place a

long-term perspective on short-term motions, and we are thrilled he could be with us today. what is a bond investor to do? if i am in fixed income and i want a coupon, do i just assume yield up and price down? george: thank you. good morning. it is great to be on again. as lisa just mentioned, it is sort of opposite day and markets, it seems. as central banks around the world are trying to reestablish their credibility as inflation fighters, the playbook to fight inflation is pretty well understood. you tighten policy, you reduce liquidity in the system that slows growth, and inflation comes under control. a lot of that takes time and takes a lot of effort. what seems to have happened in the last day or so, the fed has

basically met market expectations. in doing that, nothing market seems to believe we are on course for a soft mandate. but the market knew what they wanted. the fed gave it to them. now all we need to do is sit back and we will see slower growth next year and moderating inflation. that is a very optimistic outlook. our view is that things are going to be a little more choppy than that. even powell acknowledged that this is a totally unique market, and they are going to watch the economy just like we will, and they are going to respond. they basically told us there forward guidance is going to be a little less clear going forward. to use that flightpath analogy, it is not so safe to move around the cabin. it might take a little bit more. there might be a little bit more volatility.

bond investors need to watch this very closely. it has been pretty benign and the bond market. in the bond market. tenure yields are up a little. they are probably going to go up a little more. curves could steepen a bit. we are now starting to play the expectation game. said hikes are now priced in. the long end has remained anchored. you have to reach for yield. lisa: this is a reason why you have seen such stability in the credit markets as well. spreads did not widen on the heels of this announcement, a more hawkish tilt from the federal reserve. this is the opposite of what happened in 2013. when our markets going to get a little more rattled? could that happen, or is there ultimate faith that fed chair jay powell will step in the moment there is turbulence and try to calm the waters by taking a step off the pedal? george: we think bonds are too sanguine here.

you should expect more volatility. the economic outcomes here are not quite as certain perhaps as the market expects. but the one thing that is certain is the economy is strong. inflation is running high. that's pretty good for corporations, so there's an argument as to why stock prices are at least holding, moving up a bit higher. but in the world of credit, credit base to extend come -- credit based fixed income, higher credit is a better environment. defaults should remain low as we move forward, and that is a healthy indication. you need the extra income. diversified sources of income are the best thing you can have any fixed income portfolio today , and you need that extra income. you may use it, but more importantly, you are looking for opportunities to reinvest the income. yields should go a bit higher. we need to invest in higher rates.

we want slightly shorter duration, and then liquidity. liquidity has been great for a long time, which is why risk premiums are so low. as liquidity starts to decline, we need to preserve that liquidity in portfolios. we need to technically move when the markets shift. all of these things come together in a fixed income portfolio, so we need to protect capital in a rising rate environment when the fed is giving a green light to start tightening policy, as you guys have mentioned. bank of england saw the green light. they moved. other banks around the world, they have moved. we are moving into regime of tighter monetary policy. the basic principle of don't fight the fed is something that people should adhere to. caroline: one taylor riggs teaches me day in and day out that it is about rate of change. we have seen significant rate of change in the united kingdom. yields spike higher across the

curve. you are seeing the short term. we have seen this bold steepening of the u.s. yield curve today. what rate of change, how much steeper could these yield curves become, and how quickly, from your perspective? george: i think the rate of change has to do with market expectations. one of the reasons the long end are remaining so well behaved is the market still sees very strong government in prevention -- government intervention, and the fed and other central bank's have indicated the pace at which they are going to change. the fed increase the rate of change, so there's always this tension between the market and policymakers as to where is the breaking point, and the market seems to be comfortable with the rate of change of the deceleration of qe and not to spooked that. if inflation remains much hotter than expected, i thought accelerate from here, that rate of change is ultimately going to

have it change. the rate of change of money coming into the market was like nothing we had ever experienced back in 2020. the money coming out of the market tends to be slow and steady until you reach that tipping point. the market is telling me we are far from that tipping point. there's a long runway ahead of us. but we are going to have to see. it does seem like it is more than 12 months away, but we are going to have to see. we think you should keep those seatbelts buckled, and keep shorter duration and lots of liquidity in your portfolio. tom: george bory with us from all spring, and thank you for the perspective. the dow up a hundred plus off the bottom -- up 800 plus from the powell bottom yesterday. lisa: you're just going to keep quoting the dow just because jon isn't here? tom: no, i got a call from mike

in brewster saying quote the dow more. just about to get on the golf, jon joins us. to me, what is so important here , and i have never seen this come of these three banks battling for credibility. what is the history of the bank of england's battle of credibility if they are a more fractious voting central bank? jonathan: i thought governor carney was the unreliable boyfriend. governor bailey has taken that one. that has to be one of the worst communicating central banks right now. we've got a new variant. they not willing to wait. the impetus has clearly shifted now to inflation fighting.

get away from liftoff. it is 15 basis points. liftoff is one thing. how far do they want to take it? it got to wait for this idea, and it is painfully scary to hike interest rates and do liftoff, but look at what is happening in markets. sterling is up 0.8%. two central banks talking about hiking interest rates, talking about tightening, and all i can see and financial conditions is just loose. tom: we have a private equity guy running the central bank of the united states. i say that with a respectful manner of jerome powell, who has the vice chair of the fed. mr. bailey is identified as a technocrat of the bank of england within esteemed history degree from cambridge. who is his richard clarida?

caroline: governor bailey doesn't -- jonathan: governor bailey doesn't have one. last month we did not expect a hike. we didn't get one. this market was looking for a boost of 15 basis points coming into this, but economists were pretty divided. the guidance has been terrible. the communication has been really poor. we've got think about liftoff. what is the direction of travel? how far are they willing to push this? lisa: jonathan ferro made a promise to me. you said years over, if the bank of england raises rates, you could get a phoner. we are getting a phoner. so now, do you retract the idea of the year is over? caroline: the year -- jonathan: the year was over yesterday still. i'm not getting excited about a 15 basis point move in the bank of england.

take a look at where you are now and where you were at october. less than 20 basis points south of that. in england, it matters because mortgages will go up. if you have a variable rate mortgage, by 15 rate points or so. it is very different facing down higher prices, but it is 15 basis points. i want to understand what is the destination of travel, get a speed of how they are moving. if that is having credibility over inflation fighting, if it is just the beginning of something really big, and i don't know if it is just yet. lisa: our viewer rights in end has come a what color is his sweatshirt? jonathan: i am in a white polo hoodie and i think i look like a sheep at the moment.

[laughter] what are they called? what is that photo? i'm looking at that photo. tom: tell your pilot to take 624 out of cedar bro. you will do better on your trip across the pond. [laughter] jonathan: love you all. tom: i need to recap here and do an important data check. the basic idea is simple. it is a unique thursday with claims coming up at 8:30. before that, the ecb. . lisa, do you agree it is a changed ecb after what we have seen? lisa: not necessarily because they have been the outlier. they have been the transitory ones in the group. the federal reserve allowed them to go a little bit more so just

now. the bank of england is not necessarily going to give us some hawkish surprise. however, it does raise the meaning of transitory for christine lagarde. tom: the vix is a major story coming into about a november 19 level, 18.48 on the two-year yield, a 1.45% to year. the curve and the dna mix -- and the dynamics show us the shock of jerome powell yesterday and they changed bond market now. dollar less nuanced, with yen well over $1.14, and mr. erdogan scheduled to speak in turkey here. we are trying to get video of that right now. this was a shockingly lower lira, 15.44, weaker rapidly through the 14 level and onto 15.

in washington, mario parker joins us right now. he leads all of our political coverage in washington, and we have a moment of silence for him as he does this horrific job right now. the jumble into holidays in washington is always there. there's a rush. what is different this year about the rush, the body language to get christmas eve? mario: the difference this year is just the internal fighting between the democrats. it has been persistent for most of this year. we have seen the latest chapter yesterday with prospects for the biden administration's build back a better agenda looking pretty grim, at the least, given some of the opposition from senator joe manchin, a story we have seen for most of this year play out. caroline: it now feels as though it is unlikely to get across the board when it comes to build back better.

we were promised new feats on the federal reserve, looking for new voting rights. where does the attention turn if we cannot get an agreement with joe manchin? mario: we expect some of those nominations for the fed seats, jen psaki has said, before the end of this year, so that is less than two weeks or so out now, given the christmas holiday again between. yesterday, the democrats tried to pivot to voting rights, which has been a key issue for the base, but even with that, we saw kyrsten sinema, arizona senator who has also taken up a lot of headlines this year with concerns to joe biden's agenda, she splashed some cold water even on that effort, saying she wasn't sure whether she still wants to maintain the filibuster. caroline: with the tilt from the

u.s. taking on inflation, does any of that change the rhetoric we get out of joe manchin? he was very much focusing on the price pressure for the consumer. mario: in some ways, it reaffirms senator manchin's concerns. he had been arguing for months that inflation would rise, he had concerns about the spending package. and when the fed comes out yesterday, hawkish or dovish, essentially in inflation fighting mode, that reaffirms joe manchin's stance. lisa: every morning i wait for an email from our desk looking at the calendar for the president, and every day i am surprised at what is on it because it seems a little bit

outside of the conversation that is being adam washington, d.c.. today it actually has to do with the pandemic, and that is where i want to go as we head into the final months and after we saw the thanksgiving surge and deal with omicron, how much is he going to act at a time when this is incredibly socially unpopular and people are exhausted from the pandemic? mario: this is among the president's toughest challenges. he can't bring the coronavirus pandemic to heal. it has been surging in the omicron variant. it puts atlanta in a trichet biz vision -- it puts the administration in a tricky position. others around the world are frustrated from this pandemic, so it puts him in another position where he takes on

political tax, that he is getting too preachy. if it means he has not been able to unify the country he campaigned on. tom: thank you so much. dr. el-erian tweeting, "the bank of england just announced a 25 basis point hike. this poly five move reinforces my view among the central banks. they have been ahead in understand the inflation dynamics and their implications for policy." lisa: this speaks to his point that the fed is far behind the curve and needs to hurry up because of the different dictionary impulse. the market doesn't seem to buy it if you look at inflation

expectations and bond yields. why? i've not heard a real rise and other than perhaps the market just doesn't buy it still, that we are seeing some sort of new inflation paralleled right now. . caroline: in america, there is a -- tom: in america, there is a boom economy. we've got huge inflation. it is china like. is it the same in britain? caroline: i think where the boom like expectation comes in and where we see a mirroring is in the neighbor market. that is perhaps what the worst of where their focus was. retail price inflation above 7%. i'm seeing empty bars, shops that are not running flat out, but certainly seeing a lot of amazon boxes, so e-commerce is where it is going to be for the

next perfect. tom: coming up, seth carpenter will join us, global chief economist at morgan stanley. ellen zentner is clear, look for an inflation calling in the next year. this is bloomberg. ♪

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♪ tom: "bloomberg surveillance." truly an historic wednesday-thursday bank combination. we are thrilled you join us on radio and television. seth carpenter is going to join us in a moment. really looking forward to the nuances he sees, his economic team at morgan stanley. romaine bostick told me this morning dow points up 220 three points. 800 points off the bottom. first, listen to that out of you -- the data view in london. abigail: basically, -- caroline: basically, chair powell schooling the likes of andrew bailey as to how to get communication right from the central bank. s&p 500 futures up on the guidance that they can indeed

engineers and sort of soft landing, taco inflation front and center, but managed to keep the economy grinding higher. the stoxx 600 kind of on a catch up after yesterday's move in the united states. we had a bit of a lackluster trust -- lackluster trade yesterday. a pound, the biggest move since july. here, andrew bailey has once again wrongfooted the market. goldman sachs thought there was an outside chance to get a rate hike. we get it today. just to the tune of a small move, but nevertheless, that spike to the pound higher. the vix currently stays lower by some 4%. let's look at how the bond move has been interpreted. we see the u.s. dial back. we had money moving into the u.s. treasury market. now we see the flattening in the two-year in sympathy with what is happening in the two-year guild. we were seeing in a basis point

move in terms of two-year on the u.k. curve. we think tenure yields spike higher by seven basis points as we see the bank of england decide they need to tackle inflation, tackle real income, rather than worry about omicron. we look ahead to the ecb. what now for madam lagarde? where did she go in terms of offering more flexibility? now i am very pleased to go to my usual afternoon husband that i share with taylor riggs. romaine bostick, my coanchor on "the close" joining us. romaine: here stateside, it was all about the shock out of the fed yesterday. what was more shocking other than the lack of movement in yields was the bid that come into technology stocks. that looks like it is going to continue. apple shares leading the pack in terms of significance, up about 0.7%. now all the talk will be do we

drop the confetti on a $3 trillion market cap. nvidia up 2% in the premarket. a lot of the chip stocks that started to get sold last month are really getting a bid. keep in mind when you talk about performance in the markets this year, there's still 16 days left in the year, as well as 11 trading days. chip stocks are your leader here , even within the s&p 500, among the 24 subgroups. tesla back about 1000. flip up the board. there are a few stories that have nothing to do with the fed and the macro picture here. at&t getting an upgrade over at morgan stanley to overweight. those shares higher in the premarket. fiscal fourth-quarter earnings were phenomenal. revenue growth above 20%, and they are guiding right now for the full fiscal year of 2022 of about 19% to 22%.

lynn nard ashley nard -- leonard -- lemon are -- lemnar down 6% in the premarket. this is the story we heard from homebuilders, the demand was there, but some of those inflationary pressures, the high cost is hurting demand. they said contracts were well below what the street was looking for. this is definitely a story to keep an ion as we move into 2022. tom: thank you so much. it has been a fascinating set of conversations. we now move to seth carpenter, chief global economist at gold -- at morgan stanley. i want to push against those in the zeitgeist. i think priya misra of td securities make clear rising inflations, but if it ebbs, it

will not dissuade the central bank. the brilliant note from your colleague ellen center overnight , who stood her ground and said inflation will cool in february or march of next year. what does jerome powell do if we see a cooling inflation? seth: the real answer, it depends on how much it is cooling. you will start to see it in q1 and more in q2, but just coming down is in going to be enough. when i took the change in paul's rhetoric to mean is that he still cares a lot about the trajectory of inflation, but he also cares about the level now and started talking about price stability being the past two full employment. he said they would hike even before they got to full employment if inflation was too high, so now we are looking at not just the need for inflation

to come down, but also with that level is going to look like. lisa: i would love your sense of what happened yesterday from the federal reserve that may be unwarranted if you see a cooling off in inflation. we saw stocks rally, bonds rally, everything rally, and people said why. one theory is because jerome powell basically said they would not hold any purchases right away because they did not want to disrupt markets. it would be too difficult to observe area is this tacit admission that the markets are an incredible call on anything they do and they will not do anything to roil valuations? seth: i don't think it is quite as strong as that. powell was clear they weren't intending to disrupt markets. i think there's probably a slightly more fundamental version of things the home

market started to think the fed was going to turn hawkish. market pricing for rate hikes, there is still material probability as soon as march. the turn to hawkish and assessing was not a surprised. the relief perhaps implied. i think there was a part of the market that was worried they'd be even more hawkish than they were, so put together the fact that they were not going to try to disrupt markets and the fact that some people were relieved that they weren't more hawkish, and you get the price action. lisa: how much can we convene in terms of the market narrative, particularly from the bond market? it is not signaling any inflation whatsoever, and doesn't see what the fed is seeing in terms of something new . seth: i think that is the tricky part. tom mentioned ellen zentner.

i will highlight matterhorn bok and his team. in terms of how big balance sheets still are, that's got to be weighing on the long end of the curve. over time, as the fed keeps hiking rates and would like to signal a discussion about balance sheet runoff, presumably the long end starts to go up from here, but they have been very vocal that the provision is weighing on the long end. caroline: you have spent 15 years at the fed, and i am interesting, -- and i am interested, many writers saying there's never been such a signal from the yield curve. we cannot hike into flattened yield curve expectations. we heard from jay powell saying we are focused on maximum employment, stability and not on some models how much do they care are not -- yield curve or

not? seth: one of my colleagues said once that the fed is a range of people not agreeing on the color of an orange. the market chatter then was about the flattening of the yield curve, and they were members of the committee said they would not vote for a rate hikes that would flatten convert the curve. others were willing to just keep hiking along with it. what i heard from powell yesterday is he pointed to strong job growth, strong gdp growth still above potential, and inflation running well above target and as a backdrop for an economy that he thinks kindle -- he things can handle more normalization a policy. tom: there's a good guy named blinder who has done pretty good in economics. one of blinder's acclaimed quotes is you know inflation is not a problem when people stop

talking about it. when do we stop talking about inflation? seth: i think that is probably some time off because for the regular person, they don't look at the cpi index and annualize it. they ask, am i paying more to put gas in my gas tank? mi paying more to buy food at the grocery store? we easily see inflation itself come down a great deal, but price levels being high, especially for the ones for consumers, is going to be a long time that the discussion is in the air. tom: thank you very much. we are minutes away from the ecb decision, widely understood not to be news breaking what we saw with bank of england. but we do have a moment here as well. it is as you syncretic -- it is

idiosyncratic, but maybe not. it is the unraveling of the turkish economy. i don't know what to make of that banner. lisa: basically, there are a series of economic measures erdogan is putting out there, and terms of raising the min wage for next year. this comes as people's money is worth less and less and has appreciated dramatically over the years. this is a run on the banks come on the nation's currency supply when you look at how much you have seen this. what erdogan is doing is lobbying for his job, and i think that is how you have to see this. tom: we see lera unravel. for those of you on radio, just know that it is a day by day unraveling. the chart is exceptionally elegant and well behaved, and it behaves today and goes out to an

ever weaker turkish lira by 5%. what i find fascinating is the change of erdogan over 17 years. i never would have thought this sitting at the ritz-carlton in istanbul 17 years ago. caroline: it was a couple of years ago that we started to move the market when we understood this new focus of erdogan, the fact that he did want to cut rates in the pace of inflation. this whole seismic focus of him as a leader in the political interference we continue to see as we see the ushered in of the governor. tom: we will continue to monitor that. dow futures up to 19. in the yield space, 1.45 percent on the 10 year. so much quiescent. oil, 74 dollars $.23 on brent. coming up, jenny -- coming

up, janet mui. good morning. ♪ laura: we will hear from the european central bank a few minutes from now. the ecb is set to unveil a gradual withdrawal from its extreme there he stimulus. -- from its extraordinary stimulus. in turkey, the central bank says it is ramping up a cycle of interest rate cuts, but first it cut its one-week we prorate -- one-week repo rate in support of monetary policy. that sent the turkish lira falling against the dollar over concerns on inflation. apple pushing back its return to office deadline because it a

surge in coronavirus cases. now apple says corporate workers will be brought back at a date yet to be determined. the timeline has already been pushed back several times. a bill aimed at punishing china over its treatment of uighur muslims has run into a roadblock in the u.s. senate. a democratic senator is blocking the measure over unreleased just like in. senator ron wyden wants to add an extension of the child tax credit. republican marco rubio says he will try to pass the bill again today. the social media platform that helps fuel this year's stock frenzy is going public. reddit has filed for an ipo in a funding round last summer, valued at $10 billion. reddit says it has more than 50 million daily users. 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.

♪ ♪ tom: an extraordinary thursday. we welcome all of you around the world and across america, on bloomberg radio and bloomberg television. it is a central bank frenzy. in moments, we get the ecb out with an unchanged idea. you and jon are much better than that. -- much better at that than i am. they will be at a moderately slower pace. lisa: this is not a surprise in not necessarily willing to gun it was was back to its ppp.

they did say net buying will end in march. this is as expected. the key will be how much they adjust their tools to buy ongoing assets going word after march -- going forward after march. also interesting to see whether they are going to change the story around inflation. we have seen a very changed story from the federal reserve and the bank of england. tom: we look at the bloomberg, which is world-class, and the answer is that headlines look different because draghi allowed them to put a timeline on it. they've got pepp out to the end of 2024. i love the idea of the headlines that they need to wait for 2% inflation. lisa: they said inflation may moderately exceed the goal for in transitory period.

there it is. they are still using the word transitory. tom: caroline hyde, a stronger euro and the last two days. caroline: as they come out and say the ecb will boost the purchase program they currently have to the face of 40 billion euros in the second quarter. we are slowly but surely getting a slight recalibration from europe in terms of how far they want to support the overall market, support the overall asset price inflation, support the fact that inflation is running hot here, too. cpi is less. german electricity prices today, still metal lagarde having to focus on inflation and withdraw a little bit of stimulus in terms of bond buying. tom: jon emails in and says you've got to quote the italian bond. i wouldn't know an italian bond fit hit me over the head. lisa: the reason why it is

important, jon would agree, is because the key issue is whether they are trying to control spreads on the periphery. this is a key mistake christine lagarde made. how much are they going to continue to offer support to some of the weaker european economies which have really been propped up by some of this bond buying? right now, we are not seeing anything run away. we are seeing yields across the entire continent tick upward, but it isn't out of control. how much does that change in the press conference? tom: capri is 4400 miles from peterborough. i think he's got to stop once or twice. do you think so? lisa: maybe we will dissect this at another time. i think right now, we can move on. tom: janet mui is with us to help sort all this out. metal guard speaking -- madame lagarde speaking here in a bit.

janet was mu and often -- with brewin dolphin trying to sort all of this out. what does it mean in terms of investment? janet: thanks for having me. what we think is that central banks have extraordinary support for the markets. we are seeing progress in the labor market and a very strong rebound in activity. i think central banks are doing the right thing. the investment strategy, we think they are knowledge and the recovery is good, so as a result, we still believe that going into 2020, we are in a positive macroenvironment. we still think it is going to moderate in the second half. tom: you've got bulletproof

academics. i don't know why she did this. it must've been a lonely life. janet mui did it, metrics, which is -- did econometrics, which is its own pain. are they walking into lesser degrees of freedom are increasing their optionality? janet: i think central banks are being reactive, which is good. i think this is one of the reasons why markets reacted quite dovish shall he. if you look at the dot plot, there are rate hikes by the end of 2023, but there is still much . so if inflation does start to moderate like central bank's are

expecting, we may expect some turn in the policy direction in the later part of next year. at least they can communicate that back to the markets. if inflation persists for the rest of the supply chain, the optionality diminishes. lisa: there's a theory in market cannot lift their foot off the pedal to quickly for fear of torpedoing an entire market baked on these very low benchmark discount rates. can you look at bond yields where they are and count on the remaining so for the foreseeable future? janet: it is interesting how it has been quite apparent how there's been a shift in the policy outlook, but if you look

at the longer stage bond yields, they are still pretty much at low levels, less than 1.5%. but we don't think we would be hannah have to deteriorate -- to deter the current market rally. there is still a lot of demand for investors, and jay powell mentioned that they are still higher. essentially we are talking about going back to the normal growth rate by 2023. that was the risk of markets

thinking there would be a slowdown coming in the future. so the longer-term yields would remain relatively low compared to the previous cycle. these are very accommodative financial conditions based on these interest rates. caroline: what then of the haven of big tech or not? talk to us about asset location as we see the european central bank tried to hold her hand in a step-by-step process of them showing back? what then of whether or not we should be buying technology anymore? janet: that is a great question. we think there will be high

volatility because when we have this shift in central bank policy, the market will navigate it with a little more volatility. in terms of technology, we still like the u.s. in our over allocation. we think it is harder to discriminate with stocks out there. you want good balance sheet potential, so it was relying on that. that is why we saw it big tech update. tom: thank you very much. there are any number of stories that allude back always to the conversation of our good guests. there was william dudley yesterday, the former president

of the new york fed, on his present academic focus, which is bitcoin. dudley was mesmerizing and saying he was focused on, as is professor rogoff at harvard. lisa says i'm waiting for the regulators to step in, and in russia, they stepped in. lisa: they did say they might restrict purchases of crypto assets as a result of some of the concerns they have with respect to the fraud and ongoing issues than that. russia may say that crypto band may apply to new purchases. we do see gary gensler trying to get on it, but there is such a push against it. weiss, innovation -- why stymie innovation? tom: maybe this is a precursor

to 2022. bitcoin loses the bid a little bit, off 0.9%. claims in america. mike will show up. this is bloomberg. ♪

>> the market is welcoming the fed to move. >> the bond market is a lot smarter than the equity market. >> the equity market is a much better value. >> we think there's more room to go on multiple contraction. >> this has not been a valuation expansion story. it has been in earnings led market. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. lisa: central banks turn hawkish, or try to, but markets are not getting the memo. good morning. this is "bloomberg surveillance" on bloomberg radio and