♪ >> there's a big year which is high levels of inflation and potentially demand destruction. >> is adding fuel to an already well kindled inflation fire. >> it was always hard to get inflation calls right. it is even harder today. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: there is no diplomatic breakthrough. from new york city this morning, good morning. for our audience worldwide, live on tv and radio, alongside tom keene and lisa abramowicz, i'm jonathan ferro. futures down 0.9%. no breakthrough in turkey. tom: a breakdown in ukraine. i think as we look at ecb, we look at inflation, maybe we even chitchat, jean, the new slow out of ukraine has been absolutely

grim. the focus on the black sea, where putin wants a land bridge, but this is about the devastation and reaction to it. i will go to the shock of chelsea and prime minister johnson's actions. jonathan: let's compare and contrast the hope in markets about a better future yesterday with the brutal, tragic reality of what was happening on the ground in ukraine. tom: with tom mackenzie on the border of poland and 2.1 million and counting refugees, it is a movement. i'm not sure yet that it is a movement west. there seems to be real focus on the true adjacencies to russia. jonathan: chancellor scholz pleading with the russian leader to deliver an immediate cease-fire. lisa: everyone wants this to end , and yet we don't see any potential inroads there. if lavrov came out and said that cease fire talks were not on the

table, with the foreign minister of ukraine, the mutt where the purpose of these talks. because ultimately the cease-fire is the condition to start some of these for ukrainians. jonathan: i would encourage everyone to watch the news conference with the ukrainian foreign minister. you got the impression from that that his counterpart had no control, no authority whatsoever sitting across the other side of the table. lisa: he even said we hoped to arrange serious talks with ukraine's president. that means that these were not serious. i will point does vladimir putin have enough to go back to his people and say it was worth it to end this crisis without possibly allowing ukrainians demands amidst the quagmire at the moment? jonathan: the attention drifts slightly to 8:30 eastern time, when we get an ecb rate

decision. on the nasdaq, down 1.4%. a drift lower after a monster bounce yesterday on the s&p, the big move higher we have seen going back to june 2020. yields in a single basis point at 1.94% at tens. crude up 4%, $113.50. lisa: the emphasis really needs to be on the incredible volatility. yesterday's plunge the most since 2008. people cannot figure out how to understand the new regime we are in, how long this conflict is going to last, and how much that rearranges a lot of the commodities trade market. at 7:00 a.m. we get the ecb -- at 8:00 a.m. we get the ecb rate decision, followed by the press conference at 8:30. saying we are facing off pretty severe inflation. they lower the euro is, the more

expensive the imports, which adds to inflation or pressure. at 8:30 am, we get cpi for the month of february. the estimate ranges from a little bit lower to significant higher. how much does this give us a sense of the momentum heading into this oil shock, into this wj -- this wheat shock, into this aluminum shock? it is the pace at which they are moving up, nearly a dollar increase so far this year. the u.s. plan to sell $20 billion of three-year notes. i have been watching these options because how do you game out the next three decades if we can't even get a sense of what is going to happen in next the next -- in the next three days? do people see the shock as moving into a new regime of higher inflation, or do people talk about stagflation or a stagflationary type of win that

could lower growth? jonathan: two names i would like to look at. one in the premarket, one in germany. in the premarket, amazon popping higher off the back of the story yesterday afternoon that we will get a 20 for one stock split and a $10 billion buyback. that is off the highs overnight after the close yesterday. the other story is deutsche bank. i think this is phenomenal. to come out and say we will deliver a shareholder pay out of about 8 billion euros, that is the target, not necessarily a commitment, but the target is spread across 2021 through 22 any five. can you tell me -- through 2025. can you tell me how you can make that kind of commitment over the next few years? tom: what is important is if you are a book value of 0.3 five, which is basically deutsche bank flat on its back, those around

you will not survive, or those around you will not prosper, maybe i should say. so they are stunning headlines out three long years. have to be on a game three basis deutsche bank will dominate. that is the only thing i can understand. jonathan: that stock down a little more than 3% in frankfurt. we will catch up with guy i have the ecb decision and after it, and just around news conference. team coverage on ukraine starts now with bloomberg's jack fitzpatrick in washington, maria tadeo in paris. maria, the diplomatic effort this morning, has it failed? maria: it has in pretty much every way. when you look at the press conference from the russian foreign minister sergei lavrov, essentially it is the same narrative they had two weeks ago before the war started. he said there is no war. this was a preventative move. he also says ukraine is full of ultra nationalists and russia has liberated territories friendly to russia. he also repeated what has been

the new narrative from the kremlin over the past 48 hours, that ukraine was working on biological weapons. he says they have proof now, in fact that they have obtained from some of the territories that russia has liberated in ukraine. the united states says there were no biological weapons being worked on in the country. when you look at what the ukrainian foreign minister says, essentially nothing is moving for a very supple reason. demand that actually calls the shots is vladimir putin, and he is not engaging for the time being. lisa: how much pressure is mounting on the german government to change their stance when it comes to oil imports, when it comes to gas imports within russia? maria: as you know, today there is a meeting of european leaders being led by emmanuel macron,

was olaf scholz. but there will not be a full embargo of the european union when it comes to russian gas and oil. it is very limited. it is not going to happen by tomorrow. it is pretty clear now that europe, and particular countries like germany, have made it clear it is very difficult to switch from one to another. it is unrealistic. i keep being reminded of one set of figures. the european union says they need more time. tom: with the time we have, i have to speak to you of the shattered dreams of macron and this meeting at versailles. this was supposed to be an international victory lap amid an election for the gentleman from france. it is a tectonic change, to say the least. what do jack fitzpatrick and others listen for at versailles today? maria: it depends who you ask, but if you ask the french, they

won't tell you this is a bad thing for emmanuel macron. they will tell you the president is up in pretty much every poll. he is being presented now is the father of the nation. vladimir putin repeatedly -- but nonetheless for emmanuel macron, they feel that this is a good thing. he's on the phone with pretty much everyone and's leading international diplomacy, so they don't see this as a losing situation. lisa: tighten the screws, that is what the u.s. and europe is trying to do. what is next when it comes to further actions by the united states? jack: the white house has pumped the brakes a little bit on pushing more compared to the approach biden has already been pushed into taking come up blocking oil, gas, and coal

imports from russia. there was bipartisan agreement on including a measure in this bill to force his hand to permanently revoke russia's permanent trade status that would allow more tariffs on any russian exports, but that was removed from this bill just passed in the house at the request of the white house. so they are not seeking to do a lot more now, but there is bipartisan interest in potentially forcing the president's hand, whether it is on russia's trade status, the sale of gold out of russia. there's been a lot of talk on capitol hill on pushing for more and more while the white house has said let's leave a little bit more on the table. jonathan: good to catch up, as always. jack fitzpatrick and maria tadeo. a long list of sanctions to work for now, including a long list of oligarchs. that list now includes roman

abramowich, the owner of chelsea football club. going through the british reporting this morning, the amount of rules now that chelsea football club has to abide by because his assets have been present, it means he can't sell the club anymore. the sale is on hold. they can fulfill their existing fixtures for the rest of this season. the staff and players can be paid. but they can't sell new tickets. the merchandise shop has to be closed. from what i see in the reporting, there are limits on how much they can spend to attend away games as well. this is going to get really difficult for that massive football team out of the u.k.. tom: the players have to step on the field. you wonder how they will feel. jonathan: and how many will leave this summer. futures down 0.9% on the s&p. on the nasdaq, down 1.3%. from new york, cpi just around the corner. this is bloomberg. ♪

ritika: keeping you up-to-date with news from around the world, with the first word, i'm ritika gupta. the latest attempt at diplomacy and the war in ukraine appears to have go nowhere. the foreign ministers of the who countries met in the first discussion since the war began. russia's foreign minister says it would continue attacks until its demands are met, and one of those demands is surrender. the u.k. has added seven more prominent russians to its sanctions list, including the owner of the chelsea football club roman abramowich. they face a full asset freeze and are prohibited from doing business with u.k. citizens or businesses. they moved of rails the plan to sell chelsea. the u.s. house has passed a spending bill that funds the u.s. government and provides $13.6 billion to respond to the war in ukraine. the money will help pay for weapons and aid to

ukraine. goldman sachs is out with a dismal forecast for the euro area economy in the second quarter. goldman expects economic output to shrink because of the war in ukraine. analysts say inflation is likely to climb towards an 8% handle. general electric reaffirmed its financial goals for this year despite volatile markets. ge says profit margins will expand, adjusted earnings will be a range outlined in january. ceo larry culp is preparing to split ge into three independent companies early next year. 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. ♪

♪ jonathan: happening right now, a news conference with vice president kamala harris and the polish president, happening in poland today. the diplomatic effort continues. tom: this is about jets, and overnight, i don't have the exact citation in front of me, basically the united states said we are not going to move jets around to assist ukraine. you've got to believe that was at the top of the pile of this

discussion. jonathan: what did you make of how publicly that diplomatic this cute -- diplomatic dispute played out? tom: i think it is an example of a fractured ally group with everybody trying to keep it together against one singular force, which is vladimir putin. that is what this comes down to. we have seen it many times in history. how do you offense against a singular force, the force we have seen in the last 24 hours in ukraine? this is spiraling. that's where we are this morning. jonathan: the vice president saying ongoing talks with poland about sanctions going forward. lisa: the fear right now is poking the bear a step too far. nobody wants to see much they are escalating the conflict because there is this potential for a conflagration of an even larger scale. this has the potential to really spiral downward, and no nation was to be responsible for that. that is what is playing out in

public. jonathan: is the dialogue working? is it making it better? there was a call this morning between chancellor scholz, president macron, and president putin. we had the readout from scholz's office. macron and scholz insisted in a negotiation has to come through ukraine, and they decided to stay close over the next few days. it fell on deaf ears. tom: aggie cantrell -- aggi cantrill leading our discussion of this over the past few days. jonathan: i think you can get an idea from those pictures as to what he said. tom: futures stable now. the vix backup from the big day we had yesterday. we are covering this with our team in europe, on the polish

border as well, but there are other issues going on, eluding the ecb and an important u.s. inflation report. i love in your note, you go to the heart of the matter. it could be now, it could be a late 30's in europe. how do you diversify amid war? lori: i think it is really challenging. i would just say this war is exacerbating trends we were already seeing. there were already concerns about growth. certainly omicron towards the beginning of this year put a bit of a damper on that. we were already seeing high inflation prints. those trends were already happening. one of the ways we are focusing on that is focusing less on the directional trade.

adding things like gold and even long bonds come along treasury bonds, to be able to upend any sort of tail risk event. lisa: we have seen these huge swings in markets. a lot of people should be did the gain we saw across equity assets, we talked to begin the smit managers. they all say they are sitting on their hands. who is trading amid any of this as a lot of the big players try to assess the landscape? lori: the fundament backdrop -- the fundament backdrop, while the growth story is slowing a bit, we are still expecting will above trend growth about 2%

above trend growth. with the pullback in the markets, they are actually pretty attractive entry points here. i guess the question is what is your timeframe because if your timeframe is a day, you can quickly reverse that move. if your timeframe is a bit longer, we know that wars, as terrible as they are, they tend to not impact the long-term trajectory. lisa: how do you even gauge the relevance of some of these numbers? lori: the delicate balancing act is the print today versus what does that imply about the future. in a perverse way, higher prints take a bit off of 2023. given that we are in a war scenario and a lot of these inflationary pressures are being exacerbated, we actually expect the fed to look through some of that a bit. in one sense, we think these

higher prints may mean that the fed actually does not have to respond because it is much more about the moment versus the longer-term and what they need to do longer-term to contain that inflationary pressure. jonathan: said decision next week. lori heinel, thank you. the real test in the summer or get the base effects start to kick in the opposite way to the way they kicked in last year. that is when we start to see just how much this story is going to fade. lisa: that was including what people thought would be a rolling over in gas prices, a rolling over in oil prices. people expect those base effects to include a disinflationary trend from those inputs. that has changed, and now we see rents accelerating. how much do you see a difference in the base effects that don't come through the way people thought? jonathan: a change in tone from the administration as well. secretary granholm, did you see those comments on oil producers? pleading with them to pump more. in fact, thanking them for their effort over the blast -- over

the last century or so to help this economy. tom: i've got to work delicately here because on twitter, there's a moment i had with the secretary a number of moments ago -- a number of months ago. it is just a clumsy moment into the great credit of the ministry and. they are trying to get a read on it amid war. the word i would use is clumsy. i don't mean that in a negative way. it is just a really clumsy moment for leadership in america. jonathan: i think your previous interview you are referring to was also clumsy, incredible clumsy for that matter. i think in many ways, it still haunts the administer agenus well. the about-face -- the administration as well. the about-face they have had to pull on crude and this energy transition. tom: i think everyone has been shattered here, republicans, democrats, equal opportunity. does the same thing happen in london with labour?

they are not making jokes about a gallon of gas. jonathan: no jokes to make about it. futures down on the s&p. on the nasdaq, down a little more than 1%. from new york, on tv and radio, this is bloomberg. ♪

♪ jonathan: we are looking for a diplomatic solution, and right now there is not one to be found. we had a news conference this morning from the ukrainian foreign minister, from the russian foreign minister, happening at the same time. no breakthrough. then chancellor scholz andy menu omciron -- and emmanuel macron pleading with putin for an immediate cease-fire. for the nasdaq 100, going back to march 2021. the nasdaq negative more than 1%. that is the story on the equity market. here's the bond market. twos very close to the highs of the year at 1.6821%. tens at 1.95%. the spread has got

tighter. it: 30 eastern, one hour from now, the estimate, 7.9%. the big games you know from this program looking for 8%. we will catch up with morgan stanley in just a moment. they are looking for an 8% handle in 60 minutes. we will bring you that report. let's finish on the ecb in europe or get thick about europe as follows. the ecb is stuck between a rock and a hard place. if they move away from doing anything anytime soon on interest rates, the euro is in trouble, and it has an inverse correlation with crude at the moment. that is the inflationary spiral deutsche bank are talking about. if they make a move to do something about it, lean the other way, raise interest rates may be at the back end of this year, all of a sudden italy might be in trouble. your italian 10 year at 1.70%. that is the problem for the ecb. this is a really fine line to try and walk through 2022. lisa: which is a reason why

people are looking to christine lagarde to give guidance on how much she is watching the euro versus concerns about keeping borrowing costs low on the periphery. if the euro keeps losing value, keeps depreciating versus the dollar and other currencies, how much do they exacerbate the inflationary pressures in the region? jonathan: brent crude, $116. print up more than 4%. that is the price action. single names this morning, we can say good morning to remain -- to romaine. romaine: keep an eye on the individual names, including amazon. we talk about the big tech companies who were in that four digit club with regards to their stock prices. you get a little bit of a pop here in the stock on this date, up about 5%. certainly keep an eye on that cpi data. that will probably be a much your driver for some of the stocks, to pending on whether that beats to the upside or disappoints to the downside. alibaba and a lot of the chinese adrs also moving lower on the back of a really wild day over

in hong kong. we saw the hang seng tech index up more than 4% on the day. relatively flat for most of those days. that volatility trickling over into the premarket session. paypal and some of the payment stocks which had a nice rebound pulling back just a little bit, and there are so a lot of concerns about international payment flows because of the war in ukraine. crowd strike higher on a beat and raise order. the software maker down about 1% . after the bell, we will get more earnings. rivian automotive come out less concerned about their earnings. tom: i expect more on the stock split tonight. there's a few of those to be had, i'm sure. we continue monitoring the flow of diplomacy and international relations and war out of ukraine. we touch on the news at hand in our world. seth carpenter joins us, chief

global economist at morgan stanley. i've got eight ways to go, but i'm going to go back to your days at princeton, when you are forced to listen to alan blinder, a great friend of the program. i think he is in his 400 sedition of his classic economics -- for hundreds -- 400th edition of his classic economics textbook. a paper on understanding alan greenspan's calculus. the one word is measured. in a war, can a central bank afford to be measured as alan greenspan chose to lead with? seth: it is a great question, and good that you mentioned alan blinder. he's part of the reason i became a macro economist. i had him first semester, first year of graduate school. i think the answer in the short run is yes. in some sense, it is probably what they have to do. if you take a look at the fed right now, this adverse shock,

even if we put aside the horrible toll, there's a clear adverse price shock to the developed economy. i can hear you. jonathan: we can still hear you. carry on. seth: your control room broken. jonathan: they just one to do chat, they were so fascinated with what you had to say. [laughter] carry on. seth: it is probably going to have an adverse effect on real growth in the united states. right now, the fed thinks it is growing faster than is sustainable, but they don't want to overdo it. knowing where that line is between doing enough to slow the economy and doing so much that you overdo it is very murky, so i think they have to go the initial step of 25 basis points. after that, it remains open. jonathan: how relevant is the fed at this point?

i ask because at the pace of increase we have seen in gasoline prices, the pace of the increase in a wide swath of commodities is leaving a lot of people trying to assess the damage. have they gotten away from the fed regardless of what they say or do? seth: not necessarily. the challenge, of course, is what is going to be the lasting effect of the oil prices. i think in the previous segment, you pointed out that people were looking for the base effects and inflation to come off partly because they were thinking gas prices would be rolling over and rolling out of the calculus. that has clearly changed. as we revise our inpatient forecasts across the globe, it is not only raised to a higher level. it is also pushed out the timeline, so that matters a lot. it makes it harder for central banks to know exactly where the underlying run rate of inflation is going to be. but nevertheless, i think the fed sees it very clearly that now they want to get going.

where they end up i think very much depends on how this whole worth and invasion of ukraine plays out over time. jonathan: i want to understand from your perspective how this inflation story hits consumption. to what degree it weighs on discretionary spending of the american consumer. seth: we have definitely been looking at that as a key part of that analysis, to think about the income distribution in the united states. the higher prices do not hit american consumers equally. if you are in the lower fifth of the income distribution, you have 10% of your discretionary income going to energy. that is going to be a really painful hit to the pocketbook for a lot of americans at the lower end of the income distribution. i think that matters a lot. tom: when you look at the lower end of the distribution, it comes down to public policy amid crisis. would you look for an activist policy by the biden administration, including some sort of rebate on high gas

inflation? seth: i have complete confidence that they are focused in washington on trying to assess what it is they can do. to say the least, politics right now is difficult given where inflation is. we have seen those policies and other countries. europe clearly comes to mind. i very strongly suspect they are trying to figure out what is it they can do. on the one hand, that gives relief to american consumers, but on the other hand, does not exacerbate the inflationary situation. lisa: there's a theory out there that the higher prices will bring more people into the labor market, that we will see the participation rate go materially higher, and that that will actually bring down inflation because the pool of labor will grow. do you subscribe to this theory? seth: i don't know that i am a big fan of that being driven just by the inflation, but what we can see, especially if you look at prime age labor force participation, that has been trending up over the past year

by about 1%. we see that cyclical pattern in the labor force participation in every cycle, so i have every confidence that labor force participation is going to continue to grow, but for me that is primarily a cyclical phenomenon. what i am thinking about with these high oil prices, and this is something you all touched on in the segment before i was on, is what happens to oil production in the united states. we have seen when oil prices collapsed, we saw a production collapse in the united states. oil prices rose again. we saw a decrease in production. this time is a little bit different. oil companies are a bit more careful about what they are doing with their cash flow, but as you mentioned, the administration has been talking to energy companies. energy companies have given some indication they will try to ramp up some of that production. so in an interesting, counterintuitive way, there is short run potential stimulus for the heil run testy higher run oil prices through extra production in the united states. jonathan: the control room wants

to know if the payroll print is as bad as it gets at 8:30 eastern time. [laughter] seth: fingers crossed, i hope so, sincerely. i think the wildcard is going to be what goes on with oil, but when it comes to core, we are thinking we are around the peak and hopefully things start to come off from here. jonathan: you are a good sport. thank you. looking for that number to come in at 7.9%. the headline number year-over-year. ex-food and energy, six .9%. still a punchy number. tom: long ago and far away, i had a wonderful talk with one lawrence kudlow about this. the conceit of economics, of giving rise inflation to ignore, core inflation that every single listener and viewer has to pay. i got a couple of emails on this this morning. dr. carpenter is the real deal, let me be honest about that.

i don't question his focus on core or trimmed, on dallas or cleveland. i am just saying not one single person watching or listening buys it. jonathan: i know. i don't know why policy makers have to do it, but i totally believe you. if you are sitting at the gas pump, watching prices go up, and an economist tells us we strip that out, and this is why, it doesn't matter. lisa: there was a survey of the american psychology association that stressed in america -- that stress in america is really high. i know it sounds kind of esoteric, but it feeds into sentiment and consumer spending. it speaks to a moment of crisis after crisis. jonathan: on top of things, as always, as you would expect. tom: you and i are focused on decimal points and she is actually looking at what matters. jonathan: futures down 0.9% on the s&p, the nasdaq down 1.3%. euro-dollar going into this. your ecb decision is moments away. this is bloomberg.

♪ ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. the russian army's unexpected struggles in ukraine a raising questions about just how good it is. vladimir putin's troops have been bogged down and have failed to control of key cities. reports of portrait morale -- of poor troop morale have echoed. the u.s. sends a signal that both parties want punishment for russia for the invasion of ukraine. by an overwhelming majority, lawmakers approved legislation barring u.s. imports of russian oil. the vote came a day after president biden used an executive order to ban russian crude imports. bloomberg has learned the biden administration may impose sanctions on russian state owned atomic energy company rossa tom, a delicate target because its

subsidiaries account for about 35% of global uranium a richmond -- uranium enrichment. the ceo of the bank of new york mellon is retiring after almost three years. the bank announced that todd gibbons would be replaced by the vice chair. bny mellon is the world's largest custody bank that performs services for money managers and financial firms. 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. ♪ ♪ >> if putin is not stopped in ukraine, there will be terrible implications for european and

global security. we must go further and faster in our response. we must double down on our sanctions. that includes a full swiss ban and the g7 ending its use of russian oil and gas. jonathan: list trus -- liz truss, the u.k. foreign minister. we get a decision from the ecb forget would you like to whip through the price action? futures down 0.9% on the s&p. looking at the euro, uighur going into this one. euro-dollar looking like this, -- looking up the euro, weaker going into this one. euro-dollar looking like this. this inverse correlation between crude and the euro has developed. that is a problem for the europeans. crude at 113.25, up a little

more than 4% this morning. the ecb has a very fine line to walk. lisa: it needs to hope support the recovery, particularly in the periphery, while also not encouraging inflation to go further that week euro. jonathan: typically we have to wait a couple of moments for an ecb decision. it rarely comes out of exactly 45 minutes past the hour. then we will go past the headlines. we will try to get an outlook from president lagarde. president lagarde i think is in a tough position right now to communicate the year ahead. the marginal lending facility unchanged at 25 basis points. the depot rate at -50 basis points. the ecb saying he russia invasion is a watershed moment for europe. net buying under the pandemic program will end in march. we will ensure smooth liquidity conditions for you daily rates unchanged, and they will reinvest maturing pepp bonds at least through the end of 2024.

it conducts app at a pace of 40 billion euros per month in april. they announce a faster widening down of the asset purchase program. they conduct app at a pace of 30 billion euros a month in may. that is the headline i see right now at the moment, announcing a faster winding down of the asset purchase program, which in a way gives them the flexibility to raise interest rates if they need to at some point. off the back of this, the euro firmer, positive at 110.87. the ecb saying they will take whatever action is needed to fulfill their mandate. just a little bit a lien into the inflation print recently. tom: let's compare and contrast their mandate, starting with fractious europe versus the fed's mandate. these are different mandates, aren't they? jonathan: the calibration of bond buying in the third quarter will be data-dependent.

any rate adjustment will be gradual. what has happened in this meeting today? because there is a shift at this ecb that some people thought was off the table given what has taken place in russia. i want to get straight to guy johnson and get his views from frankfurt, germany. you've heard the headlines. your thoughts? guy: the euro zone faces two problems. it has a growth shock caused by ukraine and in inflation stock caused by able to do a factors, including ukraine. but the supply chain and all kind of other things into the mix there. take a look at the five year five-year the last few days. they have gone through 2%. that is a key indicator for the ecb. german breakevens that records. i amply should -- i appreciate that german inflation has been higher over history, but since breakevens have existed, they have never been this high. as you discussed, it's mandate is inflation. what is happening here is the ecb is going to focus on the

inflation side and it is going to leave the growth shock to the fiscal side. the ecb can do very little about the supply side stock. there's not much they can do about this oil shock. so effectively they have to leave it to the fiscal authorities to be able to manage that. we are already starting to see that happening. i would look to both sides for more action on that front. from the ecb's point of view, they are way off target in terms of the inflation narrative. i'm looking forward to seeing the projections in terms of how they see inflation coming down. the ecb is still transitory, but it looks like transitory is going to be pushed back a little bit, and they have to deal with this problem. it looks like they have decided to deal with it may be a little earlier than the market was anticipating. jonathan: i am looking forward to the growth outlook as well in about 42 minutes. looking at the price action, front end of the italian curve, btp's now up nine basis points on the italian two-year. the euro very briefly punching through 111, right now 110.98.

this idea that they may end the asset purchase program in the third quarter, would you stress this is about optionality or setting the path forward to go ahead and raise interest rates before year end? guy: i think there's probably a little bit of both, but bloomberg has been talking to various numbers of the governing council over the last few days and weeks on and off the record. the objective is to end the extra ordinary monetary policy we have seen over the last few years. they are heading towards the exit on that front. it was always a question of pacing and calibrating. i think what is being made clear today is that that is very much the focus. we are on track to deliver that. i think the timeline is a little more advanced then people would have anticipated. so i think there probably is some optionality. they laid out quite quickly the way that they are going to be tapering off of the adp program, which i think is interesting. they are trying to be as transparent as they can at this point.

i think given the geopolitical backdrop, that is quite hard. but i think there's more transparency than i would have anticipated. there's more clarity than i would haven't has abated in the way this is going to work. but rolloff the qe program and when it comes to rates, start to lift those higher. jonathan: looking forward to catching up a little bit later. there is an additional headline here that i think is important. let's think it through. the app could end in the third quarter, the asset purchase program. there was a pledge to end app shortly before raising interest rates. they have now dropped that pledge to end the asset purchase program shortly before an interest rate hike. that gives you the opportunity, if indeed you want to take it, to end qe in q3 and raise interest rates at the same time. tom: i think it is the start up for what we are going to see on march 14 as well, but what i am going to listen for from lagarde

is the country or regional parts of europe discussion. she's got to give color to that. you see it within the inflation disparity. we don't talk about the inflation of california and the inflation of colorado. guess what? spain, 5.5%. sweden, 3.2%. that is the tension of this announcement. jonathan: the two-year yield in italy up 12 basis points. lisa: this is a lot more hawkish people expected. it is clear they are worried about inflation and they are going to target that ahead of providing more relief in the face of this ukrainian crisis. yields across the world, this is about 10 year yields shooting higher as well. tom: nick bennenbroek joins us of wells fargo. what does it do to euro? nick: we could get up to 111,

112 today. as you pointed out -- lisa: you said it is a significant surprise. what are you thinking in terms of the recalibration of the ecb response function to the inflation we are seeing, as well as the ukrainian more? that's the ukrainian war -- the ukrainian war? nick: they were stuck between a rock and a hard place. we looked for accelerated tapering probably in the -- probably quicker than we had anticipated. i think they are still on track to raise rates in december of this year, and really, looking at inflation numbers in the euro zone, they will probably get as far as 6.5% or 7%. really, don't look that much of a choice than to respond to those inflation pressures. jonathan: if they start to hike,

is there a benefit to saying we need to get away from negative rates and get back to zero? nick: i don't think will be -- i don't think they will be quite as precise. if they wanted to, it probably means they would wait a while longer. i think it will be more generic, to say this was a normalization of monetary policy, and markets will very much interpret that as saying they are not worried for anything after that. tom: tom is -- jonathan: tom is looking for the outlook. are we going to see inflation forecasts up and forecasts for gdp down? is that what we see in 40 minutes? nick: i think very much so.

our own forecasts, we are looking at 3.8% growth in the euro zone this year, but our system for reviewing is pretty much everyone else's, and that goes down by 0.5% to 0.75% based on everything that is going on. not only have you had those unhelpful base effect from early last year, now you have the surge in oil prices as well, so a sharply higher inflation forecast. jonathan: fantastic. nick bennenbroek there of wells fargo. i think this could be interesting. when they dropped the pledge to end the asset purchase program shortly before an interest rate hike, does that mean they can hike rates earlier or later? i wonder how they use that little clause as an opportunity may be to emphasize that they will be data-dependent, and we just don't know, but the goal is to get out of asset purchases like you three. tom: this is not the gnomes of

zurich, but i wonder, was at the gnomes of the bundesbank speaking this morning? jonathan: i wonder what happened that meeting. i also wonder how much clarity we will get in the news conference. overwhelmingly, the consensus view was that they would have to take a step back from any kind of plan to raise interest rates and wind down qe anytime soon, based on the events in russia. but the inflation story, we are close to 6% in europe now. it is a problem. tom: for the two of you, this is never boring. this was not a walk. it is amazing to see. jonathan: 8:30, and 35 minutes, we will get cpi. then we get a news conference with president lagarde. in that conference, we get the outlook, some of the forecast. all of that happening now. lisa: what central bank so trying to do is maximize flex ability, which gives markets very little guide to go on. the fed put, the ecb put. can we say officially it is dead? jonathan: the italian two-year

yield up 14 basis points on the year now. your euro dollars, 111. look out for the banks, look out for the outlook in europe. from new york, this is bloomberg. ♪ >> welcome to a special bnp paribas open update from bloomberg. allison riske got off to the perfect start as she took out her compatriot in straight sets. after taking the opener to love, the u.s. fed cup star posed out the win after an hour on court. >> not only is she a good tennis player, she's a great person, and i love the way she carries herself on the court, so only good things to come from. we are friends with pretty much everyone, so it is challenging, but i am thrilled to get through, and so happy to be playing back here at indian wells. >> later, australia's pilot of

the ottovich -- australia's ajla tomljanovich. don't forget, tennis channel live kicks off our extensive daily live coverage from the fifth major. it all starts at 10:00 a.m. i'm johnny radius -- johnny ray diaz. ♪

>> i think things will stay volatile from here, and it is difficult to see a short-term stock out. >> investors have to be cautious with this ever increasing trend of higher prices. >> for all of that volatility we are actually not in that different of a place. >> there is opportunity being created here. >> if people believe they can still grow next year, the market is going to recover handsomely from these levels. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene. an