>> 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 extra nearly interesting

thursday. much to talk about of a war in ukraine. grim news on the battlefield. diplomacy unclear, if not grim. i think we need to move away from that just for a second to the shock in frankfurt. jonathan: winding down qe, perhaps by q3, and introducing the prospect of an interest rate hike as well. dropping this pledge to end asset purchase program shortly before raising interest rates. the market is reading that potentially as an earlier hike from the ecb. i think that needs clarifying. look out for that emphasis from the ecb president. that is at the same time we get cpi in america. tom: failed diplomacy in turkey today. you wonder the press conference of the ecb if christine lagarde spins and everyone in europe was on the same page. jonathan: i wonder if they are on the same page in the governing council in the last couple of days. hopefully we get some insight on that. today, do we get an increase in

inflation forecasts and a decrease in growth forecasts? it is the cyclase neri winds that are a big concern right now freight -- the stagflationary winds that are a big concern for europe. tom: we don't talk about california and colorado with different inflation rates. we see that at 8:30 as well. lisa: it basically is leading to a change reaction function. you count on central banks remaining easy with their policy. that has shifted. we thought maybe the ecb would eventually -- would potentially keep that up given some of the slower growth expectations. not so much. what does that mean for how much pressure is on the fed? the roulette wheel in asia is the kospi. the roulette wheel in europe is the dax. jonathan: italian yields up 70 basis points to just north of 16. tom: what does that symbolize? jonathan: a bit of a problem if

it continues. that is for sure. this is why we said the ecb is stuck between a rock and a hard place. he want to lean into the inflation story. at the same time they got italy breathing down their neck as well. the italian bond market, that is a tough one to balance. that is the challenge for an ecb this year and beyond. tom: for all of you on radio and television, eight: 30 becomes eventful. michael gapen of barclays scheduled to be with us on american inflation, and then we go to our coverage of christine lagarde as well. a truncated data check today. a bounce off of the huge equity market yesterday. futures at -47. jonathan: futures down a little more than 1% on the s&p. your italian yield is climbing. so is he tenure in the u.s., a couple of basis points. crude up more than 3%. tom: daniel morris joins us, chief market strategist at bnp paribas asset management. we are thrilled he could join us off of what is an important ecb decision. what is the level of shock at

bnp paribas over this announcement from the ecb? daniel: the ecb traditionally has been quite cautious. you don't anticipate that changing given the environment. we think they are going to signal the end of the quantitative easing programs, changing the barometers that were made so they are still going to provide support. certainly try to talk on the market expectation for rate hikes this year. to the degree that they are able to provide as much stability for an environment that we appreciate is not particularly stable at all. jonathan: looking ahead, they dropped this pledge to end asset purchase program shortly before the rate hikes. the initial read was that meant an earlier interest rate hike, perhaps at the same time as dropping the asset purchase program in three q. do you think we might have misread that on the initial read? we will get some clarification in 25 minutes. daniel: of course, what you're

trying to assess is to what degree the central banks should change their original plans for the year, if at all. it is interesting if you look at the overnight index swaps, what those interest mints -- those instruments are, there's been volatility inevitably, but really the level is not fundamentally any different than it was three or four weeks ago. we appreciate we have more inflation, but we have slower growth, so what should they do in terms of policy rates? they have come to the conclusion that it really does not change anything. they will more or less be on the same path, highlighting caution, highlighting watchfulness, but otherwise we can still anticipate certainly in the u.s. and the euro zone as well to have in aggregate tighter monetary policy conditions. jonathan: just reading the statement. any adjustment to the key ecb rate will takes -- will take

place sometime after and will be gradual. we need to hear from the president herself and about when four minutes. lisa: especially because there were other tea leaves pointing to the same kind of hawkish tilt. i do wonder whether this is a substantial shift in light of the inflation. what does this mean from your perspective in terms of the reaction function of central banks? has it changed, where a crisis that causes a risk off moves is no longer met with central bank easing? daniel: that is i guess what is different this time. we have geopolitical events. this one is more challenging, clearly inflationary in a way that others are not. to some degree we lose the potential for this and from banks to ride to the rescue the way they have done so often in the past. so that is a dilemma, not only the dilemma they face, but the

dilemma all investors are facing now, where should they be allocated. tom: i want to go to the unspoken here. i'm going to give great credit to josie glick's at columbia university for talking about the growth rate. europe does not have the growth rate afforded in the united states of america. with this war and with the challenges of europe, if inflation is there, maybe inflation comes down. but with the ecb be really under pressure because they consider they may not have the growth rate to sustain their house of cards in debt? daniel: i think there's two things to keep in mind, at least in the short term. we look at even the ecb's own estimates and the impact on eurozone growth. it is likely it will be priced near where they are for the sustained period of time. we had instruments 0.4% lower

for gdp, and that is for a 10% increase in oil prices. when we had a 15% increase in oil prices. those are certainly factors. not so much good news, but at least mitigating the bad news is the fact that, coming out of the pandemic, rose expectations more or less globally are quite high for this year and quite solid for next year. if you get lowered growth in oil prices, it really should be absorbable in a way that could not go back to 2010, 2011. you saw that in the crisis and did end up with summer session, so we are in some crisis at the starting point because growth is already so strong, so we have a bit of room. lisa: have you rethought anything about your thesis for the rest of the year, considering that only the shock we are seeing on a humanitarian

and commodity markets level, but also in this dramatic shift of the central bank reaction function? daniel: in terms of fixed income, you really don't change all that much. we appreciate we've had this rally in real yield, but nonetheless, i would imagine most people do anticipate points where things end peacefully, but we will start going back up again. we can endlessly debate what the terminal rate is going to be, but it's gotta be higher than where we are. in addition we are expecting higher inflation then we had before, so all of that argues for higher nominal yield. i think on equities, fundamentally we still do have growth. it is going to be some damage to corporate profits without question because is what -- because of what is happening with energy prices, and your concern about consumer demand. so you do maybe change your sector allocation, and i think

inevitably you have to thing about your regional allocation, but it is perhaps a bit surprising how little it necessarily changes as far as your analyst changes. jonathan: daniel morris of bmp, thank you. the italian yield still up 16 basis points. the euro unchanged on the session. two stories here, a quicker wind down of the s&p purchase program . the third quarter, people were looking for that. the second issue, for a lot of people, including myself, the initial read of that line would mean that they would have an earlier interest rate hike. i'm not so sure that is the case. i think we've got to wait for the news conference with president lagarde in about 20 minutes. tom: i strongly agree with that. it is going to be fascinating what she says. unfortunately, we have headlines from ukraine. this is our chief

economic advisor. we need weapons, ammunition to pushback russia. i would say on the twittersphere, there's talk of fierce tank battles going on. we do not have those confirmed at bloomberg at this time. jonathan: and the , we need to complete bargo of energy purchases from russia. that line for europe -- and the next line, we need to complete an embargo of energy purchases from russia. that is the line for europe. u.s. cpi, we are looking for something close to 7.8%. yields are heading north, up to basis points on tens. equities south a little more than 1%. crude back at $112. from new york, 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 in the war in ukraine appears to have gone nowhere.

the foreign ministers of the who countries met in church he -- met in turkey, their first meeting since the war again. russia insisted it would continue its demands until accepts defeat. u.k. officials froze the assets of chelsea football club owner roman a berm whic that's roman abramowich. the u.s. house has passed a spending bill that will help pay for weapons and aid to ukraine pre-lawmakers from both parties expect more funding to eventually be needed. deutsche bank is promising to raise profitability and unlock billions in capital savings. the bank ceo says immediate

fallout from the war in ukraine has been contained, but it is harder to predict the impact of the aftershock. >> from a market risk perspective, we were defensively positioned and have managed quite well through these early days. but as you say, the second and third order impacts of this crisis are harder to judge. ritika: he spoke with bloomberg's guy johnson in frankfurt. general electric reaffirmed goals for this year despite volatile markets. ge says profit margins will expand, adjusted earnings will be in a range outlined in january. ceo larry culp is planning to split geo into three companies next year. i'm ritika gupta. this is bloomberg. ♪

♪ >> we tried to do the sanctions where the oil and gas flows would be less effective so that

it impacts russia and not in the united states. clearly this concerns in the market when we have roughly 3 million barrels that are off-line, and that has driven the prices higher. jonathan: that was the senior energy security advisor at the u.s. state department. good morning. we are 12 men it's away from cpi in america. the ecb rate decision hind us. in front of us, a new conference with president lagarde. no diplomatic breakthrough in talks between the ukrainian foreign minister and the russian foreign minister. for the ecb, and earlier wind down of the asset purchase program now expected in q3. italian yields higher, closer to 1.90%. the euro initially spiked, now negative again on the session,

110.74. tom: gold up $24, $2012. not back to the angst of a couple of days ago, but a churning tape right now. we will keep our eyes on the headlines of ukraine, russia, and all of continental europe. michael gapen joins us, chief u.s. economist at barclays, and his tour of duty at the international monetary fund is noted. i want to talk about the second derivative of inflation from the rate of change we are all living, personified by the cleveland median, out to .8 standard deviations. it is on the edge we have never seen this. what kind of report will we never see in 12 minutes? michael: well, it could be a really interesting part of this report. we all expect the headline to be driven by energy, gas, food

prices, everything we have been discussing and you have been discussing on your show in recent weeks. if there is any indication that goods prices are starting to roll over, there are signs used car prices could be falling in the month ahead and even this month might be falling. so we could see a bit of a dichotomy here. the anticipated decline in goods prices we have all been waiting for perhaps might show up in this report, but would be completely overwhelmed by what we would be seeing at the headline level from energy and gas. tom: let's go inside those trends. what inside the report will give you the best indication of america's inflation trend? michael: i would say, i would point to the service. we all expect for goods prices to moderate. so the underlying trend we still

think in the long run will be driven by the services component. shelter, rent, as we have been discussing for some time. a lot of upward pressure there as well. underlying inflation over the long run in the u.s. is about services, less about energy, less about goods, so if you can strip things away and think inflation should be moving lower over time, where it might settle in, you would want to focus on services. jonathan: bill dudley came on this program a few months ago and said the fed forecasts were in fantasyland. this is the forecast for growth in 2022, 4%. for core pce, 2.7%. is that fantasyland? michael: the fed forecasts always assume policy support works. the growth forecasts have been too optimistic. when they were at 4%, we were at

2.9%, and now we are at 2.6%. you were on was my good friend seth carpenter. they have been revising their growth down four basis points. so that for percent number has to come down a lot, for a variety of reasons. they got to bring that inflation number higher just because of where spot inflation is. i still think the outlook will be a goldilocks soft landing forecast. the fed kind of has to forecast that. i think some reckoning here in the data will mean big changes in their outlook. lisa: this assumes that their policy recalibration's will work. do you think that is in question? michael: yes, i do. it is not necessarily a direct criticism of the fed. i would just say that the fed, as you will know, focuses on things like core, and it is a recognition that there are some prices that are set in markets

that are largely beyond their control. we have been getting movements in those prices recently, and we are all constantly revising our forecasts higher and saying the peak is coming this month, it is getting pushed out. so i think the ability for central banks to control inflation in this environment without generating a substantial contraction in demand is certainly in question. lisa: you talked about they are assuming this goldilocks soft landing kind about -- kind of outlook. given the speed of increase we have seen in cpi and other inflationary inputs, do you think a soft landing is possible at all? michael: i do think it is possible, and i would still say it is probable, but the odds of that come down. you mentioned the speed of the move in inflation -- or in the move of prices, and in this case energy. that is important. some of the work we have done is

more about the speed of the move in the oil prices than the level. what tends to happen in cases where gasoline prices shoot higher in a very short period of time, consumers don't know what to do, so they pause. they stop buying durables, the most sensitive part of consumer spending. if you look at history, it will say when the three month annualized change in cpi exceeds 9%, we tend to get major pullbacks in durable spending. that happened in the 1990 gulf war. obviously, because of that in the current situation, and following hurricane katrina. so major disruptions to oil, a sharp rise in prices, consumers tend to pull back discreetly on durables goods purchases. jonathan: stick with us, michael gapen of barclays, into cpi at about five minutes. the estimate, 7.9 percent.

jp morgan at 8%. morgan stanley at 8%. the median forecast, 7.9%. before we focus on cpi and in ecb news conference, moments ago, a member of the european commission, mary paul -- mario paul -- mariupol is under siege. tom: i am going to suggest that that is news 12 hours old. you wonder what will be the new grimness of this day. we are seven hours away, 3:00 p.m.-ish in ukraine, and i wonder where the news is going. an important note that is heated at this ecb. he says it is a signal to the fed that they've got to stop with the market friendly tone and confront the moment. jonathan: we are moments away from cpi in america. the estimate is 7.9%. shortly thereafter, we will hear

from ecb president christine lagarde. going into that, italian 10 year yields higher by 21 basis points. the euro now unchanged at 110 point 79. crude at $113 70 five cents. a really interesting, important moment for global markets, coming up next on bloomberg. ♪

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jonathan: inflation in america, the data seconds away. futures -1% on the s&p, on the nasdaq down 1.4%. 1.70 2% on the two year yield. there is the print. here is michael mckee. michael: economists were spot on with their forecast. inflation rises .8% and that puts it at 7.9% on an annual basis, which is exactly what was forecast. it is the highest and's january of 1992 -- it is the highest since january 1982. what happened then? a record for the fastest patrick

in hockey history? the core goes up which push us 6.4% year-over-year. in a sense economists have this right. the problem is this is all february data in the war in ukraine did not start until february 24. it does not encompass most of that. looking at the biggest movers in the index, gasoline is what we wanted to check because that is what really made a difference the last time. i did not have that one in front of me yet. this is not coming up as the right number. here we go. the gasoline price index goes up -- goes up by 6.6%. gasoline a major contributor to this and that was before the war.

food prices up 1%. that is also a major increase. those are the categories americans pay the most attention to. used cars is something everybody watches and it looks like used cars at this point down .2%. i'm not sure -- that is the first time in the data i have in front of me we have seen used cars drop. maybe some of the temporary things people have been talking about are starting to come through but on the others we have the big push in the headline. the other thing i want to mention, services up .5%. that does suggest we are seeing some service price pressures. the covid lockdowns start to end. jonathan: dig through the data and look at the price action on two, back down to 1.70. in line, but in line at 7.9%.

given gas prices in march, this is not said to fade quickly anytime soon. tom: this is a fed that is data-dependent and they will need more data off of this. it is not a time for job, but to frame it as -- this is not a time for jokes but this is an inflation report back to let's get physical by olivia newton john. this is a generational report and will have a generational impact. jonathan: christine lagarde just wafted through with her opening statement. before we turn to her, michael gapen, you have had time to pour through this, your takeaway? michael g.: it is probably the first time in two years we have talked when we have a forecast spot on will stop your main point was this is a report that

came in before the recent conflict. the contours were as we had expected. we were looking for gas up 7%. very much in line with what michael had reported. food prices up strongly. this is where the new impulse is coming from. from a moment we have a reprieve. let's see if that continues. if it does it will provide an offset from headline laois and, but inflation -- from headline inflation, but inflation is not likely to come down. we need to see how long the conflict plays out and how disruptive the sanctions regime is. lisa: the reaction in markets is not that significant. people were prepared for this because you and others got it spot on. how much does that tell you about how much or how little people are pricing in 7.9% given where yields are? michael g.: it is a difficult situation to be a bond trader.

where yields are is consistent with medium-term expectations inflation will be back at levels that were are more comfortable with. that is an assumption the market is making in one of the reasons they're doing is because of what the ecb has said this morning. inflation is high but we will do what we need to do to bring that down and that is why long end yields are where they are. tom: i have hinged on this report for four or six weeks. how does this change the question you would give chairman powell on march 16? michael g.: the question i would give him is beyond this. the question i would give him is about how do you conduct monetary policy in an environment where the inflation metric is largely beyond your control and uncertainty has been rising? the answer to that is tread

carefully. sitting on the sideline is not an option. they have to move. when you are in an environment where you do not know exactly what your policy move will bring, you have to go cautiously. jonathan: michael gapen of barclays. the forecast pouring out. gdp for 2022, 3.7% versus 4.2%. the gdp forecast for 2022 gets a cut and 2023 gets a cut. inflation at 5.1% for 2022. 2023 lifted to 2.1% versus 1.8%. there is a lift to the inflation outlook and a cut to the gdp outlook. let's head over to frankfurt, germany and listen into president lagarde. pres. lagarde: it is likely

inflation will stabilize at its 2% target over the medium-term. in alternative scenarios for the economic and financial impact of the war, which will be published together with the projections on our website, economic activity could be dampened significantly by a steeper rise in energy and commodity prices and a more severe drag on trade and sentiment. inflation could be considerably higher in the near term. however, in all scenarios, inflation is still expected to decrease progressively and settle at levels around 2% inflation target in 2024. based on our updated assessments and taking into account the uncertain environment, the governing council today revised

the purchase schedule for each asset purchase program for the coming months. monthly net purchases under the app will amount to 40 billion in april, 30 billion in may, and 20 billion in june. the calibration of net purchases for the third quarter will be data-dependent and reflect our evolving assessment of the outlook. if the incoming data supports the expectation that the medium-term inflation outlook will not weekend, even after the end of our net asset purchases, the governing council will conclude at purchases under the app in the third quarter. if the medium-term inflation outlook changes and if financing

conditions become inconsistent with further progress towards our 2% target, we stand ready to revise our schedules from said purchases in terms of size and duration. any adjustments to the key ecb interest rates will take place sometime after the end of our net purchases under the app and will be gradual. the path for the key ecb interest rates continue to be determined by the governing councils forward guidance and by its strategic commitment to stabilize inflation at 2% over the medium-term. accordingly, the governing council expects the key ecb rate to remain at their present levels until it sees inflation

reaching 2% ahead of the end of its projection horizon and durably for the rest of the projection horizon and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium-term. we also confirmed our other policy measures as detailed in the press release published today at 1:45. i will now outlined in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions. the economy grew 5.3% in 2021, with gdp returning to its pre-pandemic level at the end of 2021.

however, growth slowed to 0.3% in the final quarter of 2021 and is expected to remain weak during the first quarter of 2022. the prospects for the economy will depend on the course of the russia-ukraine war and the impact of economic and financial sanctions and other measures. at the same time, other headwinds to growth are now waiting. in the baseline of the staff projections, the euro area economy should still grow robustly in 2022, but the pace will be slower than was expected before the outbreak of the war. measures to contain the spread of the omicron coronavirus variant have had a milder impact than during the previous waves

and are now being lifted. the supply disruptions caused by the pandemic also show signs of easing. the impact of the massive energy price shock on people and businesses may be partly cushioned by drawing on savings of accumulated during the pandemic and by compensatory fiscal measures. in the medium-term, according to staff projections, growth will be driven by robust domestic demand supported by a stronger labor market. with more people in jobs, households should earn higher incomes and spend more. the global recovery in the ongoing fiscal and monetary policy support, are also contributing to this with outlook. fiscal and monetary's of work remains critical, especially in

this difficult geopolitical situation. inflation increased to 5.8% in february from 5.1% in january. they expect it to rise further in the near term. energy prices, which surged 31.7% in february, continue to be the main reason for this high rate of an asian and are also pushing up prices across many other sectors. food prices have also increased, owing to seasonal factors, elevated transportation cost, the higher price of fertilizers. and a -- energy costs have ribbon further in recent weeks and there will be further pressure on food and commodity prices owing to the war in ukraine. price rises have become more

widespread. most measures of underlying and patient have risen over recent months to levels above 2%. however, it is uncertain how persistent arise in these indicators will be given the role of temporary endemic related factors in the indirect effects of higher energy prices. market-based indicators suggest that energy prices will stay high for longer than previously expected, but will moderate over the course of the projection horizon. price pressures stemming from global supply bottlenecks should also subside.

-- even though labor shortages are affecting more and more sectors, wage growth remains muted overall. over time come the return of the economy to full capacity should support somewhat faster growth in wages. various measures of longer-term inflation expectations derived from financial markets and surveys stand at around 2%. these factors will also contribute further to underlying inflation and will help headline inflation to settle durably at our 2% target. the risks to the economic outlook have increased substantially with the russian invasion of ukraine and are tilted to the downside. risks relating to the pandemic have declined, but the war in

ukraine may have a stronger effect on economic sentiment and could worsen supply-side constraints again. persistently high energy cost, together with a loss of confidence, could drive down demand more than expected and constrained consumption and investment. the same factors are risks to the outlook for inflation, which are on the upside in the near term. the war in ukraine is a substantial upside risk, especially to energy prices. if price pressures feedthrough into higher than anticipated wage rises or if there are adverse supply-side implications , inflation could also turn out to be higher over the medium-term. however, if demand were to

weaken over the medium-term, this could also lower pressures on prices. the russian invasion of ukraine has caused stage of volatility in financial markets. following the outbreak of the war, risk free market interest rates have partially reversed. the increase observed since our february being and equity prices have fallen. financial sanctions against russia, including the exclusion of some russian banks, have so far not caused severe strain in money markets or liquidity shortages in the euro area banking system. bank balance sheets remain healthy overall owing to robust capital positions and fewer

nonperforming loans. banks are now as profitable as they were before the pandemic. bank lending rates for firms have increased somewhat, while lending rates for household mortgages remain steady at historically low levels. lending flows to firms have declined after increasing strongly in the last quarter of 2021. lending to households is holding up, especially for house purchases. summing up, the russian invasion of ukraine will negatively affect the euro area economy and has significantly increased uncertainty. if the baseline of the staff projections materializes, the economy should continue to

rebound thanks to the declining impact of the pandemic and the prospect of solid domestic demand and strong labor markets. fiscal measures, including at the e.u. level, would also help to shield the economy. based on our updated assessment of the inflation outlook, and taking into account the uncertain environment, we revised our schedule for asset purchases over the coming months and confirmed all of our other policy measures. we are very attentive to the prevailing uncertainties. calibration of our policies will remain data dependent and reflect our evolving assessment of the outlook. we stand ready to adjust all of our instruments to ensure inflation stabilizes at our 2%

target over the medium-term. we are now ready to take your questions. >> thank you. today the first question goes to caroline of bloomberg news. >> good afternoon, president lagarde. my first question is a lot of the recent communication from the ecb has been about how supply driven the current inflation and core inflation surge is. how much agreement was there in the governing council about accelerating the pace of normalization? secondly, your new guidance, interest rates will follow sometime after on buying hands, so does that mean we are back to excluding rate hikes later this year, or how does that square with the significantly higher inflation projections you just presented? pres. lagarde: thank you very much for your three questions.

first of all, in terms of the governing council, we had very intense discussions about the current economic situation, about the outlook, about the uncertainty, and as with most institutions, communities, families, the war of russia against ukraine has overshadowed a lot of those discussions. there were different views around the table in all directions, but after those good discussions, there was a determination by all governing council members to rally the proposal that was put together by the executive board presented by our chief economist.

it takes a balanced approach. it delivers on the mandate we have, which is price stability in the face of what we are seeing. your second question relates to accelerating normalization. that was not the decision that was made today. the decision that was made was to progress step-by-step, to acknowledge the added uncertainty we are facing, and to therefore have added optionality's so we can, in all circumstances, respond in an agile way. you will have noted that our decision in relation to asset purchases under the app is

conditional, and clearly states that we have a declining pace of purchase for q2, and that for q3 if the outlook for medium-term inflation is confirmed by the data, you will end asset purchases. if on the other hand the data, which are critically important because we are data-dependent in our decisions, do not support this medium-term outlook as we see it now, then we indicate clearly in the monetary policy statement i have just read that the governing council stands ready to revise, both in terms of timeline and in terms of volume, it's purchases. it is a conditional provision that you see in our decision.

we are not in any way accelerating. this was a line with our december meeting, with our february meeting and press conference, and what we are doing is confirming our step-by-step approach, our maximum optionality in the face of maximum uncertainty, but also delivering on our mandate which is price stability. the medium-term inflation outlook, both in the baseline delivered by staff and in the scenarios you will see tomorrow in detail, which are all the worsening of the situation. there is no positive and negative, they are both more negative. but in all of those baseline scenarios, the medium-term inflation outlook arrives at

target. in terms of optionality, i would be happy to expand a little bit because this is clearly what has guided us. added uncertainty, added optionality. what are we doing? we are clearly identifying the pace. we are procuring his situation where we can decide sometime after net asset purchases what decision we should make in relation to rates. in terms of timeline, we are also saying we will indeed asset purchases under those data i have just described in the course of q3. q3 is three months. we try to have as much optionality in order to deal with the situation.

i've underlined in my response to you sometime after, which is a substitute to shortly before, and obviously sometime after is an open time horizon which will be data-dependent. the occurrence of which will be data-dependent. i think that was your third question i think i have explained it with this response. >> the next question is for cnbc. please. >> thank you very much for taking my question. i would like to ask you a question. most of your watchers were completely convinced you're going to pause and not change anything because of that heightened uncertainty. perhaps you could elaborate on

your thinking in the governing council on the issue to reduce the pace of app, why didn't you wait another month? and that i would like to go back to the rate question. sometime after 10 could mean anything. i would like to bring you back to that question whether you see the rate hike. thank you very much. pres. lagarde: thank you for your question. i will have difficulty addressing your second question because i do not know what is my dominant scenario. we have a baseline and two scenarios, one is first and one is severe. you have all of the details of those scenarios tomorrow. suffice to say watchers are not

those who make governing council decisions. it is the governing council, 25 sensible people around the table , who look at what the mandate is, what the projections deliver, what the medium-term outlook for inflation looks like , what the risks are, what the uncertainty is common on the basis of all of that, you trying to deliver a predictable course while being very cautious. that is what we did. doing what you have to do should be the predictable thing. adding uncertainty to an uncertain situation would not have been the right answer. you are coming back to this

sometime after. we came from shortly before because it addressed one end of the spectrum relative to the others. there was the time it takes to purchase assets relative to the time when interest rates could be hiked and it did say shortly before. there was an assumption there were not be such a long time between net asset purchases with stocks there would be a rate hike. it was decided, and we debated that, to replace it with sometime after, and that respects the sequencing we have, which is net asset purchases, and the governing council looks at all the data to determine whether it is time to hike rates

or not. clearly sometime after is all-encompassing. it can be the week after, but it can be months later. by that i think we want to indicate that the time horizon is not what is going to matter most. it is the data that will support the decision that is made by the governing council to assess medium-term inflation outlook and whether a rate hike is warranted. you will have noted that we have removed the bias we had bite illuminated lower in relation to her interest rates. >> the next question is for reuters.