♪ taylor: let's look at how markets performed on the date. yesterday, we talked about 1.5 to 2% decline in all of that reverses. 1.5% gain on the s&p. on the tech index, despite yields climbing, take a look at the two year yield, up 70 basis points on the day the. the rate is higher because inflation is a huge problem. crude closes above $110, $111 a barrel. what is interesting is the markets have been uncertain. we are looking at a 25-basis point hike and a 50-basis point

hike. the market is showing it will be a 25-basis point move in march and we will see what happens after that. jay powell provided that today. what did you miss starts now. ♪ caroline: we are just two weeks away from the next fomc decision. today, as we heard from taylor, jay powell laying out the path that in his view holds .25% rate hike, explaining the economy is expanding. our triple take with the potential for possible stagflation and how businesses, especially small businesses, are handling the tight conditions in the labor market. we start with what powell said today. romaine: we got a lot out of him

today and he provided what investors should expect. listen to what he said. mr. powell: given the current situation, we need to move carefully. near term effects of the invasion of ukraine on the economy are uncertain. we will need to be nimble in responding to incoming data. i think it will be appropriate to rates our target range for the federal funds rate at the march meeting in a couple of weeks. i'm inclined to support a 25-basis point rate hike. to the extent inflation comes in higher or is more persistently high, we would be prepared to move more aggressively by raising the ffr more than 25 basis points. we will use our tools to add to financial stability, not to agree on certainty. taylor: those comments helped with the equity market. let's talk with cameron for more on the reaction.

was this sort of the calmest guidance the markets were looking for to make sure we were moving but not too quickly? cameron: yeah, i mean, i think that you can argue over the last few days, the market has been trading the fed views, per se. fixed income markets mostly driven by risk management and positioning considerations. it is a reminder, for sure, that the original, you know, view that tightening is coming and they will be going more quickly than they did the last time, is pretty much on track. the fact he kept the door open for an essential 50 basis point rise certainly suggests the more aggressive projections may be realistic. caroline: what do you make of what the stark market -- stock market said and the bond market on the other side? the correlation is coming

together. cameron: it is interesting. the story, starting about a year ago, really was a rise in correlation between stock and bond returns. the primary driver i think was inflation. inflation becomes paramount. bond market goes down. it sorta takes the stock market with it. what we have seen more recently -- and it may just be a temporary phenomenon driven by the war in ukraine -- is a reversion to what we call traditional relationship or the negative correlation between the returns. as you saw today, the bond market goes down in the stock market goes up, a classic risk rotation out of the safe asset into riskier assets. romaine: you know, when you look at where we are at now, it has been a dramatic date but it is kind of getting us back to the

point of where we were, i don't know, a couple of weeks ago. cameron: a couple of days ago, really. romaine: thank you -- a couple of days ago, and it is a blur. i wonder if it is here to kind of take it further, to push the yield up to 2% on the 10-year yield and stocks back to where they were in anticipation of what the fed will do. cameron: i mean, yeah, there is certainly a-- every chance we could see yields push on. i mean, i think the -- taking a step back, one of the things everyone needs to consider is trading conditions are terrible, not just in bonds and fixed income, but obviously also in stocks. there is very little trading liquidity available. it doesn't take much flow to push markets a long way. by definition, that is a riskier environment for trading and investing.

but as you know, we have got a cpi report due i think next week and listen, what is going on with commodity markets, there is every chance to get another egg number. -- big number. maybe that becomes the catalyst to recalibrate rate expectations even higher. even though we expect aggressive path for rates, the magnitude of tightening is still remarkably modest, priced by the market, giving given the last rate cycle, and particularly given the level of inflation. this time is different vis-a-vis last time and there could be a recalibration the market needs to sustain, accepting rates could go higher than currently priced. that would ultimately have repercussions for the equity market on the riskier side of the spectrum.

taylor: you talk about financial conditions. i'm curious what the world -- in negative territory, that which is classic safe haven, is that an outlook on slower growth on the horizon, a loosening of financial conditions? cameron: by definition, it is a loosening of financial conditions. i think it was driven to some extent by safe haven flows and also flows into inflation breakevens. romaine: always great to catch up with you. helping us kick off today's conversation. we will continue the conversation with anna wong, former economist of the federal reserve board and the council of economic advisers. she now works for us, bloomberg economics chief u.s. economist. let's talk about what powell said with a lot of people focusing on the comments about 25 basis point hike, the idea we

will not get 50 basis point. is that what you heard? anna: what i heard is a more dovish powell. even though he kept open the option of potentially a 50-basis point hike in multiple meetings even, what he is saying that i heard is that ukraine and russia player parody -- play a pretty big role in the current policy thinking and because of the high uncertainty, the central bank wouldn't not want to add uncertainty. any large size hike or anything that is not well-communicated ahead of time, those options won't -- they'll be likely heard of, that type of move. yeah, i think overall, this address to us that the number of every crisis here would be consistent with 4-5% than 6-7%.

caroline: how important is fed chair powell's view on what the rate hikes should be vis-a-vis the rest of the fomc? you have other k-fed speakers and i think of voting and nonvoting members. when you have james bolick calling for rapid withdrawal of policy accommodations and charles evans saying the policy is currently wrongheaded. is it right to see these in march? anna: it is very interesting. i think the fomc is showing the public what is happening within the committee. most -- the three most important voices on the fomc is powell's, john williams, and leo bernard. that is the troika of the fomc. all three of them are of the camp that is more gradualist and do it slowly and steadily. they believe, even with the current energy shock, oil pr ices going to $120, that is

still a textbook transitory shock. they should be looking through that, especially since john williams published notes saying that shows household inflation expectations or anger. if that is what he thinks, that he will be pushing to look through that rg price shock, and of course powell and branhard both came from international backgrounds, so those pay a lot of attention to the ukraine-russia situation. taylor: what would you need to see to clarify stagflation or no t? anna: yeah, so for stagflation to happen, we need to see strong weakening of domestic growth, right now, domestic data shows a very sttrong fundamentals. the only bad thing seems to be consumer sentiment. sometimes, sentiments don't

translate into actual declines or slow down. particularly, the bad sentiment data seems to be along political lines and not across the board. i think the domestic data shows a strong fundamentals and for stagflation to happen, i think we will have to see that households are holding back in consuming and europe is in recession. caroline: did you don't anticipate up that all. when you look at crude prices and what we are paying at the plant -- pump for gasoline, prices in restaurants in the grocery stores, even for things like clothes, they can all be essentials we need. you don't think that will have a material effect on sentiment? anna: i do think that right now at this moment, we are not in stagflationary world right now but whether there is a risk of stagflation, maybe in the second half of -- or next year, i think that for the fed to look through

a high inflation right now, it would create a real risk of expectations, of inflation, of anchoring, and therefore, the fed will have to hike more aggressively next year. my own view is that if the fed looks through the prices this year, they will be definitely way behind the curve and next year they will have to do multiple hikes in order to catch up and that would bring the economy into recession and that would be stagflationary. caroline: remind us how global the perspective is that the fed right now, they come from a global background. how much are you looking at what other central banks are doing? you had the ecb looking conscious -- cautious around rate hikes looking at the australian. 10 year yield rising. many thought the bank of australia would go harder and faster. does it matter what other banks are doing? anna: usually, the fed is ahead

of other central banks with a hiking site show -- cycle. it is you -- unusual the fed is behind but deftly, their communicating with central banks and look out for financial stability risk. powell mentioned a cyberattack is high on the fed's list of to-watch. in fact, last year, powell said that -- a year or two ago, he said that cyberattacks could be the risk to bring a market collapse, fi some--if somebody attacks a payment system in the u.s.. i'm sure they are talking to central banks to look out for funding risks, to safeguard any disruptions to the financial markets. caroline: bloomberg economics chief u.s. economist. thank you for the time. inflation, supply chain disruptions, shortages and labor.

they are really affecting small business owners. optimistic about the future. we will talk about all of that with the chief economist at the national federation of independent business. that is next in this is bloomberg. ♪

♪ taylor: [applause] romaine: today's triple take is focused on the fed. jay powell on the hill today, giving testimony, annual testimony, and before his comments, we got data showing u.s. companies added more jobs in february than forecast. the growth was not seen broad-based. taylor: the large employers are certainly gaining ground, but

the small businesses are the ones that were really hurt. i will bring you a quote from the chief economist of adp, saying large companies were well poised to compete last month but you have small companies struggling to keep pace with wages and benefits needed to attract a limited pool of qualified workers. they don't have the size and scale to compete. caroline: i thing about supply chain headaches when they will be outbid and outdone with those with bigger orders to place. romaine: i think it's understated. we focus on publicly traded corporations and big employers, but we forget how many small businesses. they are the lifeblood. without them, you would not have those community here. caroline: let's get an insight to someone who speaks about this day and a day out. let's bring the chief economist at national federation of independent businesses. the number of small business

owners citing inflation is their biggest problem is up the highest level since 1981. unsurprising as we see levels inflation at the highest in years. talk to us about the impact it has had on a business owner, how they managed to weather the supply chain issue and indeed inflation headaches with labor and cost input. bill: yes, well, not very well, as you might imagine. inflation, back years back, in our question about "most important business problem" would get 2-3% of the vote. now it is 25%. the only thing rated higher is the availability of qualified workers as one of the top problems. inflation is number two. to individual consumers, it is difficult, to say the least. their prices are of course going

up internally and now we -- see the higher prices are around 60%, the highest number we have seen since the days of volcker at the fed. romaine: looking forward, did they see the trend continuing? while they have to raise wages continually to get people employed and raise prices to compensate for higher input costs? bill: we will choose all of the above. they tell us they plan on raising prices. they expect to raise prices over the next few quarters. that kind of builds in. they are raisin wages at 49-year historical rates. we haven't see a high percentage of our owners raising wages in forever so they are raising compensation to attract and keep the workers they have. they clearly are passing costs

on in the form of higher prices. taylor: with limited access to funds, big businesses can access public capital markets and public debt markets. where do they pick and choose what they cut back on and where to move forward? romaine: of course -- bill: competitions with big companies has always been an issue. as big as it might seem, firms are doing very different things. geographic locations count, so think of all the communities out there in the u.s., small cities and so on, where big firms do not operate. may an occasional walmart. you know, those are different labor markets out there. they are not competing most of those. of course, when the big firms say they want a $15 minimum wage, that creates difficulties for small firms to say the least.

caroline: i like that taylor mentioned access to financing capital as well. when you are lacking optimism, you are not willing to borrow in the same way and scale up to invest and grow. how is access to borrowing? what is it like to get yourself a new loan in regions. bill: we didn't ask about credit availability, whether it is easier or harder or rather or not they have all the credit they wanted and deserved. that's at a record low, down 2%, only 2%, say i didn't get all the credit. i should've had or wanted. . that's pretty low. it was higher a few years ago when the economy was a little bit different. ao eifh--so right now, they are not having trouble but if you ask what they see on the most recent low, the average rate they are paying today is the lowest in 48 years. we have been collecting the

data. you know, they are really not complaining about credit avail ability. they can get it in the price is as low as they have ever seen it. taylor: that always comes back down to the federal reserve as well, making sure they have access to capital and keeping rates low. really appreciate it. bill dunkelberg, nfib, chief economist. we will be back with our final take next. this is bloomberg. ♪

♪ ♪ romaine: time for our final take. you're looking at what jay

powell had to say today. he seems to think the economy is strong enough to ask -- withstand rate hikes. taylor: we talked about was a dovish or hawkish? it calmed the market. we are going to move forward. rates are moving higher. economic uncertainty is manageable. that was the key takeaway away for the equity markets. caroline: the bond market sees the rates going ever higher. we are going to see that as global movement as well. will we see tones coming from the ecb, the bank of canada, more hawkish than many anticipated? romaine: do know what else is interesting? you always get that wrong. taylor: do we have a new show? caroline: is this going to be a transitory change? romaine: it will be immediate starting monday. caroline: come monday. look at this. we thank you very much indeed. taylor: two-year yields over

there, you guys. look at those lines. romaine: 4:30, new york times. we have these issues every day, affecting the economy, markets, and everything. caroline: three acres, three takes, but right now, "bloombe rg technology". this is bloomberg. ♪

this is "bloomberg technology" with emily chang. emily: i am emily chang in san francisco. isolating putin and his allies. the doj task force will track the use of crypto to evade sanctions along