do something they've never done before. >> inflation is likely to stabilize at high levels. >> we have to get past not only the tightening of central banks but the impact on growth on the others. >> the economy can continue to do quite well even as interest rates rise. >> this is "bloomberg surveillance" with tom keene jonathan ferro, and lisa abramowicz. jonathan: it is cpi wednesday. this is bloomberg surveillance. i am jonathan ferro. equity futures up 1%. the big one at 8:30. tom: the last time we were at this inflation level olivia newton john and "let's get physical, physical." we will find if we actually get physical on lower inflation. jonathan: if only you could see

bramo's face right now. what are we hoping for? hopefully peak inflation is behind us. core hopefully coming in, that is not the expectation. tom: we are down to the micro rollover of inflation. looking month over month. must watch, must listen for global wall street, culminated by william dudley later in the show. jonathan: bill dudley coming up. his view on how high do rates need to go on the federal reserve, probably higher. lisa: if that is the view how do we explain the rally we are seeing in treasuries, in equities? there are number of different expectations inflation will not come in as hot and i do not know if i buy that. i do not know if this is any sort of statement rather than a pause.

jonathan: do get the feel like the market is shifting attention away from inflation towards growth. mike wilson of morgan stanley say we are expecting decelerating earnings growth and we continue to believe the u.s. market is not priced for the slowdown in growth. lisa: that is beginning to be priced but you're not seeing it fully priced in. mike wilson would agree. even though spreads have widened they have not widened that much. how much are we moving to that kind of narrative and how much does that change if we see inflation pickup further than people expected? jonathan: freight line up on bloomberg surveillance. equities are elevated, up more than 1%. on the nasdaq up 1.3%. bouncing back for a second session. this gets my interest and i know it gets lisa's. yields lower for a third straight session. down to 2.9363.

3.20 is the high of the week. ever since we have hit that level we have backed away. lisa: which raises the question have we seen the peak in yields or is this a breather? are people trying to take off short positions ahead of the cpi print that could be softer than expected and could lead to a rally. we get that print at 8:30. the expectation is for it to cool slightly down to 8.1%. i am not just interested in the headline number. i want to see the underlying components. real wages could decline to some of the lowest levels in decades. i want to understand how this relationship works going forward in terms of how much momentum there is for the consumer. talking about the 10 year yield and how it has been declining. at 1:00 we will test of that.

the u.s. treasury is selling $36 billion in 10-year note. i know tom is watching that as he sings "let's get physical." where does that come from? tom: it was a hit. jonathan: there were other songs. tom: you should have seen my hair then. lisa: we get earnings from disney, rivian, and beyond meet. they are among the stocks that did amazing during the pandemic. now down 70% for rivian. beyond meat down more than 50%. disney more of a question with streaming but the meme stocks bank have had a massive retracing. jonathan: looking forward to your coverage on that through the day on bloomberg tv and bloomberg radio. i know you are focused on the difference between what wall street will trade on today and

what mainstreet feels. a big difference. when we start talking about core, who at their dinner table is talking about core inflation? tom: larry kudlow was big on this decades and decades ago and he was absolutely correct. it is a nominal statistic. phd's can go to cleveland. bill dudley, i think it is so important to get through this before we get to our good guest this morning. bill dudley focuses on what do you do when you get back to 4% inflation? even for percent could be an underestimate. the fed is still providing stimulus for the security which will take three to four years to wind down. this coindesk is a mistake -- this coyness is a mistake. it reinforces the chart

disconnect between fed officials commitment to curb inflation and our willingness to explain what that commitment will entail. jonathan: that is the issue at play. some people will think peak year-over-year inflation establishes a trend. for others, maybe we stay here. we plateau at a higher level. i think citigroup is on that page. i think that is what citi is looking for it which is why they see a more aggressive fed than others do. tom: 3% inflation is an academic discussion, think adam posen and olivier blanche are. 4% inflation, nobody the game think that is acceptable. jonathan: joining us is steve sosnick. how important is this number to you at 8:30 and what are you looking for? steve: good morning. i'm not going to deviate too

much from the economist estimates. i am not an economist so i will not play one on tv. i think it is right to think we are seeing a peak in inflation. remember inflation is a rise in prices. it does not mean we are seeing peak prices even if we see inflation abate and i think that gets lost sometimes. we focus on the headline number but do not necessarily realize it is a rate of change, not the price level. lisa: what is your expectation for how the market is positioned in terms of where the parameters of risk are? how much is the setting up for a rally or a selloff on a number that comes in line? steve: we have seen our customers being net buyers of their favorite stocks throughout this thing. there is a certain amount of good news baked into the cake. the question becomes how much is

a disappointment at this stage? if we are expecting eight and it comes in at 8.2% is that enough to get people crazy? either way we have abate number. i think the market is trying to find the level but it feels right among a lot of traders that if this number is a decent one they will try to pump in right after the number comes out. yesterday we had a false breakout on the open. today if you get a good economic number you should really get enthusiasm from people eager to pounce. lisa: everyone is expecting volatility. we have seen the expectations rise. how much is it underestimating the volatility versus an accurate representation considering the fact is well below recent highs? steve: there are different ways to break it out. i think in terms of historical

volatility, implied volatility, realized volatility. that is hollow volatility trader makes his money, between the three. the vix is a fluky calculation. if you use the rule of 16, which is take these volatility numbers and divide them by 16 and that is what the market is expecting on a daily basis, that is a 2% number. we have been moving to percent every day. if you want to think of the vix as being a fear gauge, it is not displaying the fear. if you want to think of the vix as a volatility measure, it is in the right place. we are that volatile right now. going forward the vix has backwardation. the outer on the vix is lower but it is hard to sustain the movement on a long-term basis. we are not seeing full panic.

this is what it is. jonathan: have to leave it there. wonderful to catch up. steve sosnick there. a bloomberg subscriber wrote in i was discussing headline and core cpi at the dinner table last night with my wife and children. that probably says more about bloomberg users the rest of the country but point taken. for a lot of people today at the kitchen table they will not be discussing where the core cpi print is and what wall street traded on off the back of that. it will be about where gas prices are right now, approaching $4.50. that is the fear a lot of people in this country and beyond half at the moment. tom: kriti gupta has done great research. the substitution from meet to check in is not funny -- from meat to chicken is not funny. this is not lisa abramowicz going to the grocery store and saying look at that.

people are struggling and making the substitution to cheap cuts of chicken to get away from what they are seeing at the meat counter. lisa: i love how tom projects is expensive for a to the grocery store. jonathan: that i always enjoy the director taking your shot and putting the bramo cam online. jonathan: i am not the one you will pinpoint -- lisa: i am not the one you will pinpoint. the president will be in illinois talking about the cost of food and the cost of the putin price hike. they are trying to label it that way. jonathan: 1:15 eastern time the president delivering remarks on putin's price hike. tom: that is today? i did not know that. he was on yesterday. jonathan: we go again. futures up .9% on the s&p.

the nasdaq up 1.1%. tom: i am trying to give you the inflation of bulbar, the inflation of another time. jonathan: you are taking us back. no one wants to go back there. this is bloomberg. ritika: keeping you up-to-date with news from around the world, i am ritika gupta. in baster's are waiting -- investors are waiting on today's report. cpi is expected to show inflation fell to 8.1%. the cpi comes out at 8:30. the u.s. house is approved of $40 billion emergency spending bill for ukraine. the measure pays for new weapons and provides economic and humanitarian assistance and is significantly larger than the $33 billion president biden asked for. the bill heads to the senate

where approval is likely next week. economist lisa cook will be the first black woman on the federal reserve board of governors. she one confirmation by the narrowest possible margin. the 51 to 50 vote required a tie-breaking appearance by vice president kamala harris. republicans questioned her qualifications. researchers in shanghai say the country faces a tsunami of proto-virus infections if the government reverses its covid zero policy. the vaccination campaign would be insufficient to prevent an omicron wave that would swamp hospitals. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> the first rate hike informed by the ecb forward guidance on the interest rates will take place sometime after the end of net asset purchases. i have been very clear that this could also include a period of only a few weeks. jonathan: christine lagarde looking forward to june 9, the next ecb meeting. we are, she is not. tom keene, lisa abramowicz, jonathan ferro. futures positive. on the nasdaq up 1.13. yield slow a third straight session. we had a little look at 3.20 earlier in the week.

hsbc publishing seconds ago. steve major and the team making a move on the bond yield forecast. we just raised forecasts -- 10 year yields raised 50 basis points. they raised their bund yield forecast to 1%. just out from hsbc and the team. tom: that is important because it shows the difference transatlantic and the challenge christine lagarde has. the 1% statistic gets made. on the tenure german we are there. jonathan: i'm not suggesting everyone is thinking this, but some people will be looking at where gilts printed earlier this week, the move we have had since , and the fact along time bond bull like hsbc has push their forecast up and wondered

programs like this and say may 3 .20 was it. lisa: i think the fact that a major bond bull is capitulating and saying we will not get back to 1% which were some of the ideas floating around as recently as six months ago is telling. it shows people are expecting inflation to be longer and have a more prolonged feel in this economy including another massive bond bull raising concerns about them longer-term inflation outlook. jonathan: i repeat something i've said a few times. anytime we try to establish a narrative around the bond market you get punched in the face by at. tom: we will report to you what the experts say. we do not have a narrative on what yields will do. she watches the narrative in washington. annmarie hordern joins us now. you are too young to remember olivia newton john "let's get physical." the president does and remembers the politics of the time and place which is the repeat show on inflation we will see. what is ron klain doing? what is the white house doing? you have the president come out

clumsy two days in a row on inflation. annmarie: the president said at the top of his speech yesterday i will give a speech on inflation and will likely not be my last one. he will talk about it again today in illinois talking to farmers. his chief of staff ron klain and the strategy you can see in the tone and the shift when the president is talking about price hikes, it is no longer about his policies that he thinks could help, even if it is not in the short term, to reduce the inflationary impact on american families. now they are taking aim at the republican party. the president said yesterday i will show you two paths. one is my plan and one is the ultra maga, and taking aim at the plants some of these republicans say the u.s. should be going towards. tom: let's assume there is no plan executed because of an election year. what is the distinctive feature of the biden plan? annmarie: it is the build back better policy they are just changing in terms of pr that are no longer about build back better but are now about lowering the cost for the future. the president did hint and opened the door to something that could have more of an immediate impact on inflation if you talk to economists. this was not news. secretary ellen has said this before. most recently in an interview with bloomberg. this was if you are going to remove the tariffs on china, the peterson institute said that will bring down inflation 1.4%. there are more immediate effects the administration can do and they are discussing them but

they have not pulled the trigger. lisa: meanwhile we are looking at esg getting a lot of blowback in the face of high gas prices from the likes of ike parents talking about wanting to rein in -- of mike pence talking about wanting to rein in esg because of a lack of investment in fossil fuels. how much is this a talking point that is gaining steam on the right? annmarie: i think this has been a talking point on the right for months. coming out of the pandemic they talk about the fact that even during the pandemic it was the republicans who wanted to fill out the spr to make sure they were keeping a robust american fossil fuel industry. this has been an issue for the right and it continues to be. i asked the president yesterday why he is not telling consumers to not go to the gas pump and take public transportation. he is someone who is a trained guy and he said his plan,

although the long-term plan, is this move away from fossil fuels and a greener and electrification of this grid. that will not solve the inflationary pressures of another record day of higher gasoline prices and not solve the problems before november. jonathan: we all know the prudent price hike talk is garbage for a lot of -- the putin price talk -- price hike talk is garbage for a lot of people. the democrats are trying to take the words of senator rick scott and say that is what that party stands for. when republican leadership try to get hold of that narrative themselves? annmarie: it is a great question because we have seen the likes of senator mitch mcconnell distance himself from that economic plan from senator rick scott. you've seen the democrats take hold of that and paint that as this is the republican party now and the ultra maga has absolute control.

that is a fight that has been going on since former president trump left the white house. we are seeing it play every day in primaries across the country. on the putin price hike, i will say for a lot of people they think it is just a pr stunt. it is fair to say that taking out russia, a massive producer of fossil fuels, of commodities, of wheat is making the inflationary impact we had before this war much harder. right now, especially in the gasoline market, it is a refinery capacity issue, it is not the top price oil issue. when you take out russia, that is almost 2 million barrels of refined product you just shoot -- you just stripped away from market immediately. jonathan: great to catch up down in d.c. vladimir putin exacerbating the existing trend. politics does not do nuance very well. tom: weed up -- wheat up 35%.

a loaf of bread in britain up 9% from the beginning of the pandemic. jonathan: futures up 9%. inflation data two hours away. ♪

jonathan: elevated again on the 1% on the nasdaq 100. everything could change. take a look at the bond market. yields are lower. we backed away ever since. a little bit earlier this morning, about 20 minutes ago. that is up 50 data points. it is starting to boost their outlook. yields are starting to move the other way, just a little bit for now.

stay very open-minded. >> there are world-class charts this morning. it comes right over to the yield might get, which is hoping. jonathan: i'm just trying to make notes about what is happening. let's talk about this. you take the real yield. let's take the 10 year breakeven. here is that chart on the far right.

>> it confirms the fear of a gross slowdown. we will find out which is the more predominant pressure. >> this is something that give america was talking about. >> working our way through the year with all of these dynamics moving. some get the dynamics of the economic system. elsa is that head, but what a terrific cv of work for the european institutions. when you look at tom's work on

inflation, how does that fold over into dollar dynamics and the foreign exchange market in general? >> that is a really interesting question. what we saw in april was a use -- a big u.s. dollar move. it caught a lot of people by surprise. the court was more surprised for the dollar bears out there. inflation is critical, going forward. we could see a little bit of relief. tom: it is not stanley fischer. as you know, the inflation and back into the foreign-exchange system. can you play euro and dollar,

and estimate that huge difference between the central bank of america and the central bank of europe? >> it has been a driver from the start of the year and potentially more to come. we started the year with a longer term outlook. we have revised it lower. a big level there, but mindful of the risks around that. the growth outlook looks a lot weaker than it did at the start of the year. when my let's of terms, there is still a u.s. outperforming story. we will see how long that lasts. >> one is the trigger when we

have christine lagarde saying that they might start raising me in a couple of weeks? >> absolutely. economists are completely on board with that view. i think the key is that the farther you get along the rate hike cycle, the more the static rate starts to matter. the yield differential emerges. for me, the biggest risk is not the ecb starting to hike. it is something that causes the market out price. >> how disruptive is it to the euro and emerging-market to have a dollar that continues to strengthen, that has the slowdown that is less productive

up until now? >> they have come a long way. clearly, they still have that, but what is concerning at the moment is the slowdown that we are witnessing. there is a temporary pause. there are plenty of signs that it is something much deeply rooted than that. that is what we are watching at the moment. >> a wonderful distinction between two giants. let's go back to irving fisher. we threw a flood of money at it and we are living the consequences.

>> to be a talking a lot about the fed and what going to do. the last time, lisa made a great point about the balance sheet reduction that we are going to see and the fact that we are so used to seeing expansion that it is a market environment that many are not accustomed to. >> how has that not been manifested yet? what have we not seen in terms of consequences when it comes to the unwind? >> i think we are starting to see signs. you and i were questioning why it had not really happened yet and here we are.

it seems to be a parallel move. it might be a different story, but for now, we are left with the fact that there is a selloff. >> a final question. there is a debate about where japan intervenes and where nations intervene. we saw india touch upon this the other day. does the bank of japan intervene at 135 or 140 and set off a global intervention? >> my colleague had some really great work from this. putting that around 35% at the moment. i do not think they would have the result of reversing the yen weakness, but rather smoothing it.

it is more about the pace. jonathan: great to get your thoughts. you are on top of it every step of the way. for many people, it was about that, but it was also about the balance sheet. lisa: i have seen a site plan, but the emphasis needs to be on site. it has gone down marginally. this is from last week to the previous read. i'm trying to understand when we see the material change that could trigger a greater response. this is unprecedented. jonathan: why wait until june? for others it was about the signal. why wait until june? lisa: why not send a sign to wall street and say, we think we

need to stop. we do not need to wait until this random date that does not matter. jonathan: looking for a parody. they are exposed to to be oath things more than the u.s. the russia and ukraine conflict and china's lockdowns. tom: with all of this, the lockdown in china is the huge elephant in the room. can you imagine the difference in the debate that we are having, if we have it ease up? it would be a completely different discussion.

in the zeitgeist? absolutely. we will know it in time. i think he has been brilliant on this. you know what? it is pretty grim, but things can change. jonathan: futures going into the equity market with a little bit of a lift. yields again by six basis points. a lift on crude up more than 3%. from new york city for our audience worldwide, a beautiful new york once again. can we say that summer is slowly coming in? lisa: slowly. jonathan: that is what we want to see. this is bloomberg. ♪

>> keeping you up-to-date with news around the world. less than two hours from now, we will get the latest inflation figures. it has slowed to 8.1% year-over-year. some of that decreased due to adjusting gasoline prices. inflation in china rose faster than expected last month. a percent in april, up from a month ago. european central bank president joining a growing crowd of policymakers signaling a move on interest rates as soon as july. the first rate hike in more than a decade may happen a week after bond buying in. -- ends.

ukraine and russia clash over natural gas. a dispute that is disrupting supplies. ukraine blames the actions of russian troops. global management is in talks about preferred financing for elon musk's proposed takeover. it is being arranged by morgan stanley. there is skepticism. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ ries. this is bloomberg. ♪

>> but i'm going to do -- it

seems about right's me in the second half of the year. if we do not have it, we might have to speed up. it will be done more than what we might be predicting. jonathan: they just want to get through the summit and reassess the whole thing. from new york city this morning, good morning. that is an hour and 42 minutes away. a little bit more. the nasdaq 100 is up a little bit more so. we are down six or seven basis points. that was the cleveland fed president. we have a labor market that is so overstimulated. a market where you can pull back a lot of demand and it would actually be a good thing. tom: extraordinary from an

official. many disagree with that. i understand the economics of it. for most americans, job and job demand is a very good thing. jonathan: we seem to be having a very different discussion. we will be talking about peak inflation. just two different worlds. tom: it is no different than any other nation. jonathan: we have to think about the present. tom: the really hard stuff is

looking at june and july. senior and u.s. economist. a midyear outlook. what is the distinctive feature of your crystal ball on june 30? >> there is certainly a lot of moving pieces in the outlook. thank you for having me on. when we talk about the broader outlook, there was growth from where we were in the year. we saw a real growth this year. in the latest outlook, we have cut it to 2%.

the consumer is growing a little bit stronger. that is point number one. point number two is, on a year-over-year basis, numbers we get later this morning will show inflation. how do we see that evolve, going forward? tom: we do not have to bore people within, but is the inflation dynamic -- is it within the system, or is it shockingly -- >> it is a little bit of both. the supply chain disruptions i an important factor driving inflation higher.

it is creating what is potentially another hump in goods prices. that is the and dodging his part to a strong -- that is the part. tom: this idea of inflation embedded in the system has built up the greatest fear. lisa: i want to focus on the component. if you reduce the opportunities, it would be a good thing.

>> the labor market plays into how confident they are. it could enter into consumer confidence in an important way. it is impacting some more than others. there was a great speech about this a couple weeks ago. we really have to slice and dice . what they are saying is that we have to create some slack and reduce demand. lisa: this is to prevent some of

the lowest income, the lewis society getting shafted in terms of what the incomes are. >> we may have to see some further slowing of the economy. there may be some economic pain in order to bring down inflation. in our forecast, inflation comes down by next year without recession. if we can avoid this pain, we

are not all the way back to 2%, but you get into a sweet spot. it allows moderate inflation with respect to 2%. jonathan: i know how much work goes into this. enjoy. just going through that, it is that stood out to me. trying to slow growth. something to think about tom: following on from that, the rest go towards to percent inflation out there, somewhere.

that is the raging debate. bill is taking a very conventional approach. jonathan: this is bloomberg. ♪

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>> the fed is pretty much setting the tone. >> the fed is trying to do something that they have never done before. >> we have to get past, not only the tightening of central banks but the impact on growth on the others. >> they can continue to do really well, i think. jonathan: good morning. this is surveillance live. futures are up by 10%. tom: there will be some other data but it is the macro data that we are looking at.