gotten worse. >> the fed thinks it is going faster than sustainable but they don't want to overdo it. >> i think it is reasonable to expect that you could see an acceleration in the fed hiking cycle. >> the fed absolutely has to start hiking if not for any other reason than it needs to maintain some credibility. >> this is bloomberg surveillance, with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning. this is bloomberg surveillance come live on tv and radio. i am alongside tom and lisa abramowicz. what a day we've got lined up today. tom: it is a huge day beginning out of china and that fed meeting this afternoon. 9:00 will be something interesting to see as the gentleman from ukraine addresses congress. jonathan: no doubt he will get a

standing ovation at the end of it. there will be some asks in that address. i wonder if the white house will deliver them. tom: the asks have to do with allies and this is starkly different from the beginning of world war ii. we are distant, i think that is the reigning theory of the moment but something we will have to monitor. annmarie hordern with us. the fed meeting folds into it as well. jonathan: this is the elephant in the room for the fomc today. lisa: how long this conflict will persist and what the effect will be on commodities. how much of it is going to message around that whipsaw we saw and oil prices -- saw in oil prices. we are back to where we were before the conflict even started. jonathan: look at the whipsaw in chinese equities. government departments should quote, actively introduce policies that benefit markets. from china today.

lisa: i love this. plunge protection control back and forth and here is the support for markets. how much does this edify the feeling that china is the place for a lot of investors to go because their authority is moving in the opposite direction. jonathan: s&p 500 futures up 44 points. the nasdaq 100, 1.7%. looking at yields up a couple basis points. the last time the fed met, they closed at 115. tom: a sigh of relief and with a higher yield, you've got the curve steepening and it is modestly substantial. even the real yield, we will talk about this coming through the show.

-0.70 is a long way from 10 days ago. jonathan: your two year, 1.85. lisa: we are pricing in a lot of work for the fed to do today. i am watching a slew of economic data coming out of the united states, pointing to two sides of the same coin. how much to consumers keep spending when base costs are increasing to such a high degree? the expectation is pretty modest considering the fact that you are getting that bounce that was in january, and you've got people dealing with prices of gasoline rising to the highest level since 2008 and housing costs rising to the highest levels going back in history, most regions around the country and urban areas, a little bit slower to pick up and then we get that housing data at 10:00. how much is this crimping consumer's ability to go out and spend money?

president zelensky is going to congress and he is asking for more air support, possibly a no-fly zone. you are seeing more fractures in congress. certain republicans coming out and saying we need to do more and have a harder line when it comes to counter russia. the first rate hike is expected. in 2015 they began a rate hiking cycle they ended shortly after. tom was pointing out you are seeing this feeling in markets that they will have to raise their terminal rate much higher than they have in the past. i am watching this, seven rate by the end of this year. jonathan: tom, you get the statement and that is where the decision is. you get the summary of economic conditions. that is when the chairman gets

to choose what to emphasize and what to deemphasize. tom: we had a lesson on this with lagarde. ecb came out and you monitor them more than i do. lagarde walked it back through the press conference. jonathan: the forecast will be interesting. expected to cut the growth and then the dot plot. to lisa's point, if that gets a kick higher, if they choose to emphasize the dot plot or deemphasize the uncertainty. tom: look at the dot plot. jonathan: you want it gone. tom: it is not going to work. jonathan: you think they want to point out a forecast today? tom: i defer to mr. mckee on this. i think many people, solid phd's at the fed would kill to walk away from the silliness of the

dot plot. jonathan: special coverage of the fed on tv and radio coming up later. team coverage starts right now with annmarie hordern in washington. what are we looking for? anne-marie: it is going to be incredibly emotional, president zelensky hoping to move congress. when he spoke to european leaders, it was so emotional, his translator choked up. in canada he was trying to implore canadians, lawmakers to really feel and understand what is going on, on the ground in kyiv. he said could you imagine bombs going over vancouver? the issue is the administration does not want to do a no-fly zone.

potentially he can move some lawmakers to put pressure on the administration to get those polish jets over the border. tom: there are headlines coming in the atlantic and the united states and united kingdom but there is a stunning headline from japan, where they say they will strip russia of most favored nation status. that is not a small item involving japanese cars and trucks. is this a concerted effort i the president? anne-marie: -- by the president? anne-marie: it has been, by the president and nato allies to make sure that it is not just west, but they are including partners in asia. singapore was the first one to come out and get alongside the united states. it also means there is pressure growing on china, when you have other asian countries and leaders like japan, singapore, these hubs of trade and commerce also taking steps to make sure they isolate russia and president vladimir putin.

lisa: what is the latest when it comes to those meetings with european leaders and president zelensky, given the fact that they are heading into a war zone. >> they are now back home. the three prime ministers are now back in their respective countries. i have the opportunity to exchange quick brief messages with the slovenian prime minister. it was a risky move but they wanted to send a very political strong signal that this is where eastern european countries have to be, supporting ukraine, and repeating that the situation for journalists on the ground is very dangerous. what really has changed over the past 24 hours is the language coming out of ukraine, and in particular, zelensky. you could argue his government has had a major reality check when it comes to nato. they are not going to be able to

join the alliance. this opens up a whole space of negotiations with the russians. ukrainians have said we can talk about neutrality, but we need security guarantees. if there is no nato, they need other forms of guarantees and formats. that seems to be where the conversation is heading, away from nato and something more neutral with additional security guarantees. tom: of got 18 questions here and we will have the two of you through the morning. let me go to you with one simple question. have the russians eased up at all? maria: on the ground they haven't and we are seeing that reality really hitting in places like group all -- mariupol. it connects crummy to the donbass -- crimea to the donbass.

all of this in preparation for what could be the biggest attack on the ukrainian capital. when you look at the language, a lot of this will depend on ukraine but the reality is the russians say one thing but do the other. for the ukrainians, what matters is that cease-fire on the ground. jonathan: we will catch up with the both of you a little bit later, going into that address to congress by ukraine's president. futures up more than 1% on the s&p. a massive move in the chinese equity market. this line right here, government departments should quote, actively introduce policies to benefit market. this line coming out of china moments ago, a report citing the finance ministry, saying that china will not expand property tax trial this year. we are looking for a little bit more but they are looking to

support a market that has a bit of trouble. tom: i have the economy book at home, and it hasn't happened yet but liz economy is going to have the greatest call in the history of international relations. it bears close watching, the domestic issues of china. lisa: it really speaks to this uncomfortable balance they have, continuing their deleveraging trend, while also maintaining stability heading into a very important period. jonathan: it is fed decision day and we have a difficult decision. provide some forecasts and talk about the path forward. futures up 46 on the s&p. this is bloomberg. ♪ ritika: keeping you up-to-date

with news from around the world, with the "first word news, i am leigh-ann gerrans. stocks surged -- hong kong's gauge rose. china is trying to ease investor fear over the risk of property, internet companies. top economic leaders have said -- will grow appropriately. ukraine's president will deliver a virtual address to the u.s. congress today. he is excepted to plead for more aid. congress just passed a spending bill that includes billions for ukraine. the u.s. and nato are hesitating at another of zelensky's request, a no-fly zone over ukraine. british prime and astir boris johnson has begun a trip to lobby the united arab emirates and saudi arabia. he will try to persuade both

countries to ramp up oil production to ease prices on -- to ease pressure on prices. russia could be in default today. the need to make payments on their debt in dollars. 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 am leigh-ann gerrans. this is bloomberg. ♪

>> the president will travel to brussels, belgium where he will join an extraordinary nato summit on march 24. 's goal is to meet in person, face-to-face with his european counterparts and talk about and assess where we are at this point in the conflict. in terms of a meeting with president zelensky, we are finalizing the trip at this point. jonathan: looking forward to a meeting between the president of the unit it states and european allies next week. the story at the moment, futures

extending gains on the s&p and the nasdaq, up by almost 2%. this headline from the kremlin, a neutral ukraine, a possible compromise solution. discussing a sweden neutrality model for ukraine. two members of the eu who are not members of nato. that seems to be where we have a compromise, at least from the kremlin side. tom: these of the first legend met headlines i have seen and i link it directly to the financial side -- the financial screws being put on mr. putin. look at the wonderful nato document. austria coming out of world war ii, picking up the pieces of hitler's and sweden goes back to 1834 with their statement of neutrality. these are serious issues for these nations to say no we are neutral, may be ukraine finds a

path. jonathan: the headlines from russia, from the foreign minister, ukraine's neutral status is under serious discussion. we've heard this a few times over the last week. lisa: we've heard a more constructive tone from the ukrainians. there seems to be some progress with the russian delegates, which makes you feel like there is something going on and maybe that is the reason for this more positive tone. jonathan: a small list off the back of this. tom: i'm going to say there is a lift. we will keep our eye on the market. john still foods from oppenheimer and company. thrilled that we can join us. through the pandemic, you have been the optimistic one. the glass is more than half full. sustain that this morning. john: thanks for having me on the show. i've got to say, all eyes on the

fed for 2:00. it is the start of a new hike cycle, apparently. that is my bloomberg ai, sorry about that. tom: let's stop the show. this is the window into what adults do in the real world. he is using every tool bloomberg has so he can day trade in front of his clients. i'm kidding of course. john: we are looking for the fed to raise. 25 bips. if they do 50, i think the market can throw a steady tantrum, being ungrateful for that. the market was looking for 50 bips originally. 25 looks like it is going to be about it with all that is going on in ukraine, in china with covid and the general difficulty

with the global supply chain. the fed has been aided and abetted by the global situation and this should start off modestly and sensitively. lisa: we are looking at a market that is pricing in several rate hikes, and i will let you listen to the ai that is probably telling you the same thing. is that realistic given the fact that people are concerned about a consumer slow down in spending? john: the consumer has lost some momentum in terms of settlement, but there -- but they are still shopping. i don't like to go against the u.s. consumer because they downgrade what they are shopping for. the consumer is more sophisticated than he and she have ever been before. lisa: they might be more sophisticated but does it change

your view of markets, does it change your optimism? is that basically your base case and that you think there is enough resilience to get past that and still have a soft landing? john: we've got enough resilience for a soft landing. we could have some bumping is here, -- some bumpyness here. it will be very much helped by the slowing that is coming through the system based on what is going on around the globe. the frothiness has been taken out of the equity market, the bond market. things are much healthier than they were just three months ago. jonathan: always great to catch up with you. john from oppenheimer. the equity market has a lift in europe. looking at brent, we dive lower.

down 1.5%. tom, i will give you the headline from about 10 minutes ago. you -- a neutral ukraine with its own army as a possible compromise. one of the headlines from the kremlin. tom: the answer seriously is a print of -- brent of 97.0. i can give you the exact time on that. jonathan: discussing the sweden neutrality model for ukraine and i will go back to what they foreign minister said earlier this morning, that ukraine's neutral status is under serious discussion. lisa: this builds on what we heard of ukraine that talks are more realistic with russia. both sides, we have to hear from both sides. there is a lot of messaging and propaganda. both sides seem to be coming out and suggesting there is progress

and the hope is, let it happen before this escalates into something bigger. jonathan: something we have done time and time again, comparing the rhetoric, the dialogue with the action we are seeing on the ground. tom: my amateur take on this, and we will get great perspective on this, is this is the idea that the financial pros are telling us these financial constraints against mr. putin are tangible and real, and the political pros are telling us you always need to give the idiot a way out. in this case the idiot is mr. putin, and to save face he needs a way out. lisa: to your point, the images we see every single day coming from kyiv, all of these images of people who are trying to leave, who think they have humanitarian passages and then they get shot at, it really raises questions about who you can trust. jonathan: the market is trying to live in the future. futures up 1.3 on the s&p. the news out from the kremlin

supportive of this market. you've got a lift across the board. from new york city, this is bloomberg.

jonathan: moments ago, the kremlin coming out and saying a neutral ukraine is a compromise option. is that with the current leadership or new leadership? not just from the russian side but the interpretation of that line from ukraine. futures get a lift this morning. the nasdaq up 1.83%. the euro is up off the back of some comments from china. they want to actively support this market. all government departments should actively support this market. i think everybody heard the message loud and clear. the move of 9% on the hang seng. the cfi up 3.1%. a lift in the u.s. as well. let's look at twos, tens and

30's in the bond market. twos with 115 when the fed last met at the close. look at where twos are now. 1.85. twos are basically where the tens where the last time the fed met. tom: that is a nice way of putting it where you have different maturities with an equivalency of yield. on china, and i think this is a headline beneath the radar, which shows a different tack. speaking at great length in japan, the prime minister. japan will quote, and virus because i emergency nationwide -- virus quasi-emergency nationwide. jonathan: as you point out, not from china. i wonder how much the lockdowns

have hit crude, as much as these talks have on ukraine. tom: this goes to this phrase. clearly we are modeling out as i said time and time again, the idea that the measurement of growth coming from demand is structured from higher oil is tangible. jonathan: last time the fed met, down 70 basis points. in and around 30. a big change, a flatter curve. tom: we will leave it there on a busy newsday. the vix, distant from 35. lauren summers was with us the other day. the secretary of treasury from harvard university and he wrote a blistering essay today in the washington post. we will begin with ellen zentner from morgan stanley.

the magnitude is operating with an inappropriate and dangerous framework. there can be no reliable progress against inflation without substantial increases in real interest rates, which means temporary increases in unemployment. ellen, you know the word magnitude is used differently by people like summers. how hard is it right now to gauge the magnitude of? this moment -- of this moment? ellen: the how much-iveness, i love it. it is easy to get on the train of saying the fed is behind the curve. there are folks on the fomc that would agree they are probably behind the curve. there are enough risks in the

economy, still and with renewed geopolitical concerns, that it does make sense to start off with a 25 basis point hike. you don't want to add to the volatility already in the markets. we will see that chair powell will leave the door open. markets know they can go in bigger increments at any time but to say that the fed is operating under the wrong framework is inconsistent with what we have heard from the fed. it was pretty quickly that they abandoned the new framework when they went to focusing on inflation. i don't think they are operating under that old framework, the 2019 or 2020 framework. tom: zentner pushing back against summers. i want to go back to the reaction functions of the fed. can we have any predictable reaction functions, given the mix of economic data, the

dynamics of the american system? are we literally flying blind out of this pandemic with the overlay of war in ukraine? ellen: flying blind is a good way to put it. i think under this environment, it is absolutely appropriate to be high volatility to continue. -- appropriate to expect high volatility to continue. policymakers will have to make decisions rates on the data they have in hand and where they think it is likely going. when you are following financial conditions closely and when those are being impacted, not just by your own communication but by external sources, it is out of your control and you just have to watch and take it step-by-step, feel your way in the sand. that is what the fed is going to be doing.

i think chair powell will underscore that in his q&a session today, and that means markets will have to really be nimble as the fed is going to be nimble, that you could see 25 basis points, but what we do know is they are hiking. the hiking cycle has begun and there is a lot of room for them to get far in rate hikes, without impacting the economy. i think that is what is most understood -- most misunderstood by the market. lisa: let's put some numbers on that. you expect we will end the year of 2023 with a base fed funds rate of 2.625%, well above where the 10 year and 30 year are. you expect quantitative tightening of purchases of bonds and the shrinking of the balance sheet to begin in may. here is what i'm struggling with. if this is actually going to be

effective fed tightening, why will that not translate to a slower growth paradigm that could potentially slow the trajectory of the rate hikes? ellen: it is a great question. here is the part of summers' op- ed i do agree with. he is laying out the way that the fed can't. there other job is to raise the on employment rate. that is part of their job, they have to create slack and to create slack, you have to slow the economy. we do have the economy slowing and we are taking the growth forecast down for this year, but the economy is still growing well beyond its potential which is the 1.8% range, and so you are still going to put downward pressure on the unemployment rate. at the very least toward the end of the year, we should start to

see the unemployment rate flattened out. if it does not, you could see unemployment rate in the high twos and that means the fed still has a lot more to do. in order to slow the economy and help inflation cool, they're going to have to half -- going to have to hike. you all mentioned the market is expecting seven rate hikes this year. we are expecting 6.25 basis point equivalent. it is in 2023 we expect additional hikes to get in that range of 2.5% or 2.75%. this economy is less sensitive to higher interest rates, and so the fed is going to have to hike further in order to slow the economy enough and raise the unemployment rate enough. jonathan: we have to leave it there. ellen zentner, thank you. from ukraine, only the ukrainian

model with security guarantees will work. moments ago, the kremlin mentioned and austria-sweden model. proposing the ukraine -- proposing ukraine becoming a neutral country. the response we got from an advisor to the ukrainian president moments ago, commenting on those talks, only a ukrainian model with security guarantees will work. tom: security guarantees a can go with but the distance of the craney and model, i would suggest is not only about land that was taken in the perception of ukraine but also the land that recently has been taken in the perception of ukraine. lisa mentioned the harbor of the headlines and the images seen overnight, particularly from the black sea and such. this is more complex than just headlines. jonathan: we did have an encouraging line from president zelensky who said russia's positions sound more

realistic. lisa: perhaps there is something to the rhetoric out of the kremlin because you are hearing it also from the ukrainians. i wonder how we get to some kind of peace when you have the buildup of nato troops in eastern europe, a very changed trust and outlook for russia. how do we get them back into the financial system? if they create tenuous peace -- there are 70 questions about this resolution, even if they both agree to some framework. jonathan: futures are up positive this morning. crude it does roll over on brent and wti. we are negative about a third of 1%. all of this, still ahead of an address by ukraine's leader to congress this morning. tom: absolutely extraordinary, what we are going to see. i think the moment, let me bring this up. i've been working on the look back.

in 1941, this is seared into the memory of my parents. 19 days after pearl harbor, winston churchill showed up in washington. everybody should read this. it has been proved that pestilence may break out in the old world which carries their destructive ravages into the new world from which the new world cannot escape. the chance has passed, it is going. are we there now? jonathan: the address to congress, two hours and 20 minutes away. for coverage on bloomberg tv and radio. this is bloomberg. ♪ leigh-ann: keeping you up-to-date with news from around the "first word news," i am

leigh-ann gerrans. the kremlin is hinting at possible progress in peace talks with ukraine. a russian spokesperson says a ukrainian proposal could become a neutral country but retained its own armed forces, viewed as a certain kind of compromise. talks between the two sides are underway. several hours from now, cranes president will deliver a virtual address to the u.s. congress. china denies it new about the invasion of ukraine in advance. the chinese ambassador to the u.s. said had beijing known about russia's plan, they would have tried to prevent it. he said assertions that china technically supported the war is disinformation. the slump in oil prices, new york futures rose. there are so concerned that disruptions to oil flows will squeeze and already tighter market. south korea says north korea's latest missile tests appears to

have failed. that comes days after kim jong-un said they were planning to fire their first icbm in five years. the south korean military says the missile launch seems to have failed shortly after lunch. the ceo of delta airlines says as far as the travel industry is concerned, the coronavirus pandemic is effectively over. he said the north atlantic market has been swamped with bookings. 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 am leigh-ann gerrans. this is bloomberg. ♪

>> the crisis is hitting the eu economy, just when an expansion

was gaining momentum after the covid-19 crisis. our fundamentals are solid, so we will be able to restart. jonathan: a crisis on top of another crisis. the vice president at the eu commission this morning. futures up one point 3% on the s&p, the nasdaq up 1.9%. the frankfurt stock exchange, the dax 60 benchmark, up by 3% so far. this as russia says ukraine becoming a neutral country retaining its own armed forces could be quote, viewed as a certain kind of compromise. i cannot speak to the action on the ground but the talks are seemingly moving in the right direction. tom: at least there are talks. the conflict cities are noted, including what happens as you pick up pieces in ukraine. we are nowhere near that point. 9:00 this morning, the speech

from the president of ukraine to the congress of the united states. we pulled away from covid coverage and we really have the loss of not speaking every day with the senior scholar at johns hopkins center for health security. we get an update and very much china update but i've got to talk to you about this odd word, endemic. it seems like countries and cultures and institutions are struggling with something you have identified, which is this pandemic has become an endemic moment. what is next in our endemic pandemic? >> what is next is trying to develop a system that is sustainable and will be able to handle covid-19 the way we handle other respiratory viruses like influenza, and we don't see hospitals go into crisis because we have so much of immunity in the population and so much access to drugs and antibodies.

many countries have struggled to get there because they have different levels of immunity in the population, but that is the ultimate destiny of this virus. there will always be a baseline number of cases, hospitalizations and deaths that it won't have the same ability that it had to put the health care system into crisis. tom: the governor hopeful in new york with details on the state of new york. you know the state of the united states. do we have any true understanding of the vaccination statistics of china? >> what we know is that in china, they have varying vaccination rates. in hong kong it is not so high. in other provinces, it is higher. many high-risk individuals have foregone vaccinations. in the united states, one of the things that has happened is we have very high vaccination rates in elderly individuals in those

with high risk conditions. that is a much more beneficial place to be than to have your high-risk population not vaccinated, and those who are vaccinated use the vaccination that was not as good. china has put themselves in a position where they don't have their highest risk population vaccinated. they have distressed of -- they have distrust of the population, who badmouthed the mrna vaccines from the beginning. they are resorting back to those drew: nguyen authoritarian lockdowns they did in the past but they didn't do anything for all those years. why don't they have hospital capacity? lisa: there have been some reports that about half of the population in hong kong has been infected with covid at some point. how long would it take before there is enough collective

immunity from experiencing the virus that it could push them out of this a bit faster? >> omicron goes in these cycles of about two months or so. if hong kong has lockdown policies, many of those people will not get infected. you don't have population immunity. omicron might give you population immunity at a great cost, especially if your high-risk population is not vaccinated. i think they are in a situation of their own doing and there is not an easy way out of this besides using targeted public health interventions, looking at activities that spread the infection versus those that don't and encouraging much more vaccinations. lisa: you talked about the two month rolling trend of omicron. we are in a city right now wear masks are optional in most places and you see that trend around the united states and many parts of europe. how long before we have to start

wearing masks again if we get these sort of upticks in new variants? >> we will get upticks but whether or not mask policies come back is questionable. i don't know that that is going to be the case in places where you have high levels of population immunity so you don't see cases turning into hospitalizations. the focus in the united states has been less on cases then on severe cases -- than on severe cases. if we see an uptick in ba2, if it is not translating to more hospitalizations, public health authorities will be reticent to recommend masks. they may say this is something you should do but i don't think it is going to be something you must do because of where we are in terms of taming the virus. jonathan: it's been too long, i guess that is a good thing overall but we miss you. thank you. more detail from the european banks. sao paulo saying exposure --

lisa: how do they calculate this? what does exposure mean? does it just mean exposure to russian businesses or individuals, or is it also the companies that do business with them? companies affected by gas prices? all of these different vagaries playing in. jonathan: the conversation today, the fact that we have two interest payments due on russian sovereign debt. $117 million worth in dollars. tom: i'm glad you bring this up. what i would look at here is the broad set of affairs, not just those interest payments in rubles but it did -- but a better rule for mr. putin, nowhere near preinvasion numbers. whether it is the jokes of oligarchs in boats in the mediterranean, this seems to have a tangible effect and may

be an action point. jonathan: did they try -- do they try and pay in local currency, what constitutes as default? quote, the payment in local currency of russia's bond coupons if it were to occur would constitute a sovereign default on expiring 30 day grace period. lisa: i think it seems like other rating agencies probably would take a similar tact. what if they did pay in dollars but the payments didn't actually get to the bondholders because of the sanctions? there are so many issues in trying to get this done. jonathan: they are saying they can't pay it because they have been sanctioned and cannot access reserves. lisa: didn't they also banned payments of coupons? jonathan: this is not about ability to pay, its about willingness to pay or the fact of the can't pay even though they want to. it is ridiculous. tom: i think it is what it is.

there is great uncertainty and it will be an eventful day to say the least. we have to get to thursday. jonathan: the s&p up by 1.26%. from new york, this is bloomberg. ♪

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>> the fed has a job to do. it is risk managing inflation from well above target. >> they are trying to fight inflation, and inflation has gotten worse, seemingly. >> it is growing faster than sustainable, but they do not want to overdo it. >> reasonable to expect -- expect an acceleration in the fed hiking cycle. >> the fed has to start hiking for credibility. >> this is bloomberg surveillance with tom keene, jonathan ferro, lisa abramowicz. jonathan: from new york city, worldwide, good morning. this is bloomberg surveillance live on tv and radio. alongside tom keene and lisa abramowicz, i am jonathan ferro. what a morning. tom: a really full morning, and it is all serious. all that is going