>> i think europe is falling into a recession. >> really, it is going to come down to do we see those hawkish comments. >> there is a very narrow path between the inflation problem and a growth problem.

>> i think you could see a bear market rally rather than a full on rally. >> this is "bloomberg surveillance." ♪ tom: good morning. on a most important consequential friday. matt miller in for jon ferro. the world will stop at 8:30. lisa: we get the cpi reading for the month of may. what otherwise is a dire picture of inflation that continues to persist outside 8% in the united states looking for some sort of easing when you take out energy and food. how much will the conversation be? can we strip out these key components? tom: this is the polarity that we see in this report today.

lisa: of the nation, whether it is the lockdowns reinstating themselves . if you can strip out some of that, what do you have underneath and how much does it matter? are we looking at airfares? . tom: president biden on his way to long beach. we're looking forward to where europe and america go with this inflation. matt miller has lived in europe. explain to me the difference between 6% inflation and 6% inflation in america. matt: clearly, in germany, they had already high gas prices.

here, that is a new thing for us to deal with. we have inventory issues here piling up as cathie wood told ed ludlow the other day. we could see goods prices here come down where they are not going to see that. tom: on a good -- goods dynamics, and that key core level many are talking about. i want to do a data check to get us started. the nasdaq with a little bit left. i don't want to put much to it because miller is with us and we have to bitcoin. 29,000 on bitcoin under the 30,000 level. oil does not give it up. i think that is an important

statistic this morning. dollar with some legitimate dollar strength or is it. euro weakness moments ago. we can report this. 1.5 096 and i really want to point out with a note yesterday looking for a while. for a while this morning, lisa abramowicz. lisa: interesting to see even after i somewhat hawkish statement from the ecb, even still, you are not seeing euro strength persist as the fed is expected to have to respond to what we get out. what the pros are looking for is a core cpi stripping our energy, food. the amount people are getting paid and how much cannot persist

before you start seeing it bleed into sentiment, bleed into what they actually end up buying. we do get a read on the latest sentiment from the university of michigan for the month of may. this is expected to continue to decline to the lowest we have seen back to 2011. this is what people are watching to determine if you see a loss and momentum of the consumer. tom: why don't you finish up with the president in long beach and that i want to talk to you about what we see in consumer expectations of inflation. lisa: president biden will be at the port of los angeles talking about inflation. that is one of the few things he can do to address this. supply chain issues and how they can possibly -- this is the issue for democrats. they say we can blame this

person and check. tom: futures at negative two. surely elevated through the week . 26.47. here is a chart that matters for me. this will affect all of our conversations. as lisa mentioned, it is about 8:30 this morning but also about the guesstimates of where we are heading. the in the red sea of michigan, expectations about five years, looking at additional five years out, back to where it was in 2006. this is extraordinary and a good lead-in to experience. our inflation expectations on anger? >> there certainly giving out

that people have expected that is not coming back anytime soon. generally, markets and people struggle between the idea that transitory means a few months and the permanence is much longer than that. i think people are becoming used to the idea but getting inflation back to 2% is not feasible in a single economic cycle given it is coming from somebody different angles or a series of waves washing across the shore, one after another after another. lisa: the ecb yesterday changed the dynamic, the tone for the federal reserve as we headed to this key cpi report. >> did they change the message? i think i made it clear and inflation with the central bank is more or less saying we have to get on with it. ecb is tied up into the sequencing and starting slowly and all the rest of it. the underlying message at one level was we have to get on with

this and nothing else matters. the second message which scared markets a little bit was we don't really have a plan to what to do if peripheral bonds beds -- spreads. matt: we have to get on with this next month. we have to get on with this at some point was what i heard. i think tied up is the right phrase to use for the european central bank because they cannot really get on with anything unless they blowout spreads. fragmentation was the word of the day yesterday and if they want to fight inflation, they are going to have to really hurt the peripheral countries. >> in a sense, -- so far, the interest rates that the governments in central europe are playing are not at all what they used to be. we know that the biggest buyer of peripheral debt in europe is walking away in two weeks time.

mario draghi must be steering like how did this happen. tom: i want to go to your morning note in the observation that we are moving from a goods inflation over to service sector inflation. when you are an arsenal fan, you call the slice and pints just to make it more articulate. what is the quality of the inflation you will look for today? >> i'm looking to see how much of the stress we see in normal life is already coming through the system because this is waves of inflationary pressure. in europe, you see it clearly. everybody's happy going to pay a high price for an airline ticket, a very high price for a type of beer. go to the airport and get somewhere where it is consistently sunny. i expect to see that and also the bits of the cpi report i was not expecting.

ecb trying to feed through the effects that should prices affect car prices. i see lots and lots of bits of the u.s. cpi index showing up with pressure. lisa: what number do you think is really going to affect the dollar and how strong it can get versus other major currencies? >> today, if we got no further, i think that would be a cause of concern, but i think it would have to be very bad because the base affects for once are so friendly but it is the month on month change that is still alarming. what i would worry about is there has been a lot of people embracing the idea that this is the peak and everything is going to be better. this is the passing of one wave while another one arrives with a bit available in between.

these waves confide in you. tom: greatly appreciate it. what i think is so important is global wall street and the reality shown by the core expenses which are taken out, energy, rent, that is all and are -- anyone is talking about in america. lisa: i was looking at a study that showed that 40% of the budget of lower income americans now consists of paying an energy bill and paying for gas. but the budget has also been taken up increasingly by how much higher rents are, food costs, so that budget for disposal income, going out and having fun and buying things is shrinking and you are starting to see behaviors change. how does this show up in cpi given the fact this is definitely a very different story of the haves and have-nots? tom: and that chart of the negative wage growth we have

seen, the duration of the negative wage growth is tangible. that will be part of our analysis at 8:30. please stay with us on this most consequential day as we look at inflation and the future of price in america. futures at negative four. this is bloomberg. ritika: the biden administration is trying to overcome other logjam. he will visit the port of los angeles today. the white house is closely watching talks on a new union contract. a collapse wrist a work stoppage . u.s. lawmakers investigating losses at the right at the capital.

the panel open to public hearings with a prime presentation. general william barr said some of the false claims that trump has used publicly were complete nonsense. amazon plans to withdraw from a competition for one of the world's most popular sporting contests. the rights have been an estimated -- covid-19 cases continue to emerge. the flare is causing more disruption and triggering a renewed run for growth. just days after the city exited a shutdown, health officials are tempted to roll out any --

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>> january 6 and the lives -- lies the lead in the world is watching what we do here.

>> president trump summoned the mob, assembled the mob and lit the flame of this attack. tom: trump is in mississippi and cheney always of wyoming with this most important committee last night. whatever your politics, a nation either riveted on it or ignoring it. it was theater last night in america. joe mathieu has provided leadership on this. he joins us after his exhausting evening and the work through the day. i think for our international audience, you are going to give us an explainer. david brooks eludes to this, what next? one day after this committee, one week after this committee, what is the goal of washington? >> this is a great question. that was just the opening.

we have about a half dozen hearings scheduled. the first and last we understand as well. that hearing will be broadcast in prime time. a lot of people are trying to prejudge these hearings. donald trump himself yesterday with his own pre-battles calling this a political hoax. the david brooks column suggesting this is the wrong direction altogether and we should be investigating political violence in the country but we did hear and see some new things. some of it was very compelling particularly to hear from former high ranking trump officials speaking in their own words. bill barr, ivanka trump, jared kushner all it was trading they knew this was a fair election and that they actually told the president this. we have five more hearings. the committee says it intends to demonstrate the existing threat, not just about what happened january 6, although i will tell

you that the revelation of this meeting on december 18 in which donald trump, rudy giuliani, sidney powell and michael flynn were all in the room prompting between inviting people to come to washington on january 6 when he said it is going to be wild. they say that was the beginning of what was the coordination. tom: to look forward again, what is the legal outcome of what you just said? what is the next one week out, one month out after the election in november of what those people set in the room or is it just theater? >> a lot of this is going to be theater and a lot of people may not believe what they are hearing. a lot of people have prejudge this. whether or not they accomplished their goals is a question as we start these hearings. they have conducted over 1000 interviews and so it is difficult to tell exactly what they are going to roll out and what they will demonstrate as a present threat against the

electoral system here. liz cheney, who we heard from extensively along with a couple of witnesses were giving us a taste. the question you are asking brings us to the department of justice. will they refer people for criminal charges after these subpoenas have been handed out? and that remains unclear. lisa: how much is this all aimed at energizing the base heading into the midterms? >> a lot of the timing probably is and they also have to remember with regard to midterms, they have to get this done. the minute republicans take the majority in the house, assuming that happens and republicans will have their own report on january 6. you can expect this whole thing to go in reverse and they have promised to issue subpoenas to democrats as well. this committee will be dissolved as soon as republicans take the -- take control if that happens. matt: i feel like they might be wasting time. i am as concerned as anybody else in the intellectual league.

i am paying as close attention to this as anyone else but half of the country does not care at all. half of the country was one -- was watching the rangers game. >> but that does not mean this is not an important exercise. matt: but it is so partisan. >> an attack on the capital is going to be fairly partisan. and when you look at the images last night, to think about the attacks these law enforcement officers endured, never mind the attempted attack on our electoral system, it is pretty hard to turn away as a journalist. tom: we have the mayor of bolton, mississippi, liz cheney as opinion out of the trump side , this is not the watergate hearings. you're not old enough to remember that. why is this distinctive from the one hearing we all remember, the watergate hearings? >> we have to remind ourselves that there are two republicans on this panel.

i know matt said this is partisan and that is what the republican line is because the minority leader in the house, kevin mccarthy did not get the opportunity to appoint his own people here. liz cheney and adam kinzinger are republicans and you have a bipartisan at least in terms of the committee. whether or not this captures the american people to the extent that watergate did, we are in a very different media landscape and a very different political environment now. tom: get a 20 minute surveillance nap. lisa, i want to bring it right back to the inflation report. on my screen, what matters is curve flattening. it was tangible yesterday. lisa: and it continues today. the idea is the report will force the fed's hand to go harder and faster against

inflation and this really does elbow to the political discussion as well. this is the key issue. this is what is going to drive people literally and metaphorically to the election booth for the midterm elections. how does that rearrange things, what can this administration do to alleviate some of these pressures? tom: we now have a moment of silence here worldwide for matt miller's paid in euros. matt: i'm the only one here without a cfa so i cannot wait to ask william lee is a weaker currency good for an economy or stronger? tom: that is the question of the weekend. a plus there. what do you think for germany and finland, is a weak euro good? matt: on the one hand, they can sell more of their stuff. in germany, it is an export oriented economy so that is good

for growth but on the other hand, a lot more inflation. when you're paying more to import goods and there is higher demand for the exports. tom: i want to point out the key distinction i have seen which is our prism of japan which is the export of toyota's and toshiba's is a little bit different. your observation as we go two hours out? lisa: you mentioned japan. they are trying to jawbone a little bit of a strength. two hours with this inflation rate, how much does this change the narrative with how sticky this inflation is? tom: yen right now, 133. at 8:30 on inflation, this is bloomberg. ♪

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lisa: two hours to go from a most important data point of the week. this is bloomberg surveillance. right now, we are looking at a bit of a turn. interesting to see, the s&p is down, nasdaq is up. this is a new trend as people rethink what is possibly a safe

trade and what is possibly not. s&p basically down only .2%. yesterday, we saw strength come into play as people start to think about slower growth and not just rate hikes and what that will do to the big tech complex you see to your yields going up. this is yield curve flattening, what you were talking about is people expect to have to respond , it is likely to be quite hot. over the longer-term, we are still going to see that low growth reality. the 30 year yield continuing to fade out. yields lower after a really solid option yesterday. tom: the distance here of 3.1 percent. you really wonder how that bleeds into the housing market and mortgage industry. lisa: perhaps mortgages are not going to come in quickly but i do take your point that perhaps we are going to see some relief

on the long and as people calibrate the growth perspective not only in the u.s. but globally. i think this is fascinating giving the hawkish message out of the ecb. what has done to the euro? not much. euro down from the 107 level we saw yesterday. the dollar continuing to gain strength because people are expecting the fed to have to go aggressively against some of the inflationary headlines regardless of what the drivers are even if they are food. tom: thank you so much. some real action here out of the bank of russia which may be has been the one stable institutional platform in russia at war. it is very simple here. they migrate on their rates. it is the annual inflation right now. 14% to 17% in the year following

2023. we will continue to follow that story. what is important now is the view on american inflation. matt miller asked a really intelligent question, is a weak currency good or bad for your economy? let's start with the dollar ascended and resilient. it is the dollar to strong as we go into this key report? >> the strengthen the dollar is telling you the u.s. is a very attractive place for global investors. a lot of money is flowing in because this is the place where investment takes place and innovation takes place but in terms of inflation, it certainly seems inflation in the strong dollar is one of the things capping. for europe and asia, for sure,

it is going to be a weakening currency helping their exports but if you are ecb, you are concerned about inflation. that is the last thing you want to see is the weakening euro. in mixed message depending on what your objectives are. tom: you are an expert on the cultural treatment of price change, the panic, we all know the cliche of wheelbarrows in germany, but far more than that, explain the cultural divide of inflation on the pacific rim versus inflation fears in america. >> here in the u.s., we have not had inflation for almost a generation and have forgotten what inflation does and i think what you see in asia where you see runs on currencies, crisis with weakening currencies and exchange rates feeding the inflation in asia, the one thing they don't want is inflation and you can see a much stronger kind of defense being put up. here in the u.s., the fed has

got to regain its credibility that it is serious about inflation fighting because in march, when it came out with this test, lowering inflation without any change in the unemployment rate, it really lost it in the markets were pricing in rates of over 3.5%. right now, the fed has got this hawkish talk. for currencies, the speed matters. the reason why lagarde has had almost the opposite effect on the euro is that she has given the impression they are going to take their time raising interest rates in europe whereas in the u.s., it is a clear statement from the feds, we are going up and going fast. lisa: how much did china change that narrative single-handedly because of the lockdowns, the slow down there, because of the

increased supply chain disruptions that lead to high prices and slower growth for the u.s. and europe? >> china change the picture in the sense that we have a much longer lasting and persistent inflation then we would have had in the past. it looks like given the zero-tolerance policies president she has put in place in china, it is unlikely the supply chain is going to come back anytime soon. the fed has got one objective in mind which is regardless of where supply is, it has to bring demand down to where we can integrate supply and demand. that makes the fed's job even harder because a lot of the things they cannot control are pushing prices up and you have to be much more serious about how impactful that is. we don't just have one policy tool, we have two of them. we have a balance sheet and the fed has not emphasized enough how strategic that tool is in being able to dream liquidity from the very hot sectors like

housing and cars and be able to may become tour -- contour the trajectory of holding back demands. lisa: what you decide is deeply uncomfortable, that they have to reduce demand in order to offset the dearth of supply because of supply chain disruption. this leads to a deceleration that is bigger than it otherwise would be because of the supply chain disruptions. how high do you see on a planet having to go in order to achieve this dampening of demand to bring supply and demand better into balance? >> i think most economists believe the phillips curve is dead and anyone who relies on a to try to gauge the amount of unemployment you need to get this inflation going to be wrong but i think one of the things we have to do is target inflation itself regardless of where the unemployment rate is going. that is where the fed is essentially saying we are going to gaze softest -- sawfish

return rising inflation rates whatever it takes to get it down. lisa: what level do you see as being likely to achieve that? >> at least another percentage point. there is a misnomer that the unemployment rate is the key guide. right now, chair powell is looking at the level of vacancies. in a way that is a mistake because there is -- in the labor market. the pace of hiring has not picked up because the firms are trying to find better qualified workers and that is really the key. i think that is the message that has not been talked about is the unemployment rate itself is the bad guy but the worst guy is the level of vacancy. matt: i wonder what your view is on what washington can do as we are approaching the midterms. it seems like a biden administration has packed the

fed in saying they are the only ones that can deal with this but obviously, policies, regulations have also led to this inflation. what can washington do? what do you expect? >> you are absolutely right. the one thing president biden can do is reverse his policies on oil and drilling here in the u.s. if we we were to turn on keystone and the ability of companies to reestablish u.s. oil and energy independence, we would be much better off. we were producing about 13 million barrels a day of oil a day and right now, we are down to something like 10 or 11. that missing oil is what is contributing to a lot of the high-priced at the gas pumps we are seeing and we were to produce u.s. oil at the same level that we were several years ago, the world itself would be much better off. tom: thank you so much.

i want to get out front of this. it is remarkable how dr. lee's conversation dovetails with what we hear from krishna jp morgan that is simply about bringing on investment and bringing on supply at least as a test of the surging gasoline prices. lisa: and we heard that in davos. there been such a focus on investing in greener types of fuel, but now, there is a different dynamic. people were discussing the need for fossil fuels in that transition. how do you invest in both, how do you get production in the short term if over the long-term, you are hoping to phase it out. how do you create the right incentives for fossil fuel companies part of that incentive? that is a longer-term issue. tom: lisa has got the hummer h2. lisa: i'm operating on fumes. tom: nothing like what matt

miller has in the driveway which is four pieces of metal. do you see demand destruction out there yet where a gallon of gas is or is it above six dollars? matt: what we are seeing is consumers filling up with less gas more often. every time they go, instead of filling up the whole tank, maybe you put in half a tank hoping prices come down next time you need to go. tom: or maybe you just can't afford it. and matt, there is a thing this week, the charge card usage in america truly, without exaggeration, is a moonshot. matt: more people putting gas on credit. if you have a ford f1 50 raptor with a 36 gallon tank, you are going to need to do that.

tom: lisa's take is only 32 gallons. she is like the bw rabbit. tom: a lot of conversation today. coming up, she wrote saudi ink. president biden and riyadh. we speak with ellen wald of the atlantic council. stay with us. ♪ ritika: keeping you up-to-date with news from around the world. ukraine must clench a new loan program. according to the country's financial chief as efforts to fight off russia affect the budget. early talks from my new eight packets are underway. jfk is hoping to deliver the

first vaccine. the for drugmakers show positive results and plans to follow regulators in the second half of this year. it is a boost to jfk after it fell behind in the race to develop the covid vaccine. there are still questions about exactly how the covid virus started. researchers say more information is needed to look into the possibility an incident wasn't the initial source great advisors say they also need to study of a market that has been identified as another source. hong kong stocks are already rebounding and a possible visit by the chinese president could provide even more by momentum. there are growing signs he will join a july 1 -- as well as celebrate 25 years of chinese rule.

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>> inflation is being driven by energy. these oil prices are going to be at $120 a barrel or higher. tom: good morning. the national economist at wells fargo barely describes the brilliance of the conversation yesterday. he was absolutely dead on. matthew miller in for jon ferro today on this most important inflation day. less than two hours away from can i say the most important

report we have seen in ages? lisa: this is key to see the deceleration everyone is expecting and the underlying nonenergy and nonfood components. are they really decelerating in terms of how much prices are rising or are we starting to see ongoing strength at the prospect of stickier inflation? tom: i cannot say enough about her book, it is a window into the layers of the family. the heritage of the family. most important, the new family. i guess mr. biden will visit riyadh. it is not formally announced yet, but there it is. when he visits, can there be a belief that saudi arabia can adjust the price of a gallon of gas in america? >> i think if you have that belief still, you need to re-examine your belief system because saudi arabia does not have the ability to change the

price of a gallon of gas like that unless they do something so incredibly drastic. at this point, even with demand the way it is and other producers falling off a cliff, even if saudi arabia put another 2 million barrels a day in oil on the market, i don't think you would even see that much of a drop in u.s. gasoline prices. tom: the hope and prayer here is a redux of opec one, opec two 1986. there was that moment in 1986 where oil cratered. can we relive that? >> we could and we almost relive that in march of 2020 when just as global oil demand was cratering, russia and saudi arabia both kind of opened their caps. we saw in april and may of that year an incredible amount of oil

flooding the market and crashing prices. i don't think we are likely to see that unless there is some sort of major shock to the global economy that causes demand to crater. at this point, we are so tight and there is enough russian oil that has been off the market, there is a question about whether it is coming back or not. i think it is coming back a little bit more than people think but still, demand is so high and with china reopening and demand expected to go up, it seems like there really is not enough oil in production now in the world to get these prices down significantly and then when you throw in the situation in ukraine and russia, it is just a recipe for prices to keep rising. lisa: the people who say this is a policy error and we should have been investing more in fossil fuels, if there were some

sort of change in policy that would encourage more investment, how long would it take before those barrels would actually come online to ramp up production? >> it would definitely take some time. we are not saudi arabia, we don't just have capacity that can come online that quickly. it is not as slow as it would take another areas because there are shale oil resources that can come online within a month, two months, three months, things like that. longer-term, we would need a lot of investment in big long-term projects say in the gulf of mexico and other areas that could pump a substantial amount of oil that would bring down prices in the long run. matt: why would those executives want to do that kind of investment? they have been vilified by not only visit ministration but by the u.s. congress. why make that kind of long-term

investment one you know that policies and regulations can change on a dime against you? >> precisely. the question if you are and oil and gas executive and are responsible for making decisions about the health of the company returning value to your shareholders, of course you are not going to want to make any of these long-term investments because you are concerned that any project you invest in could either get shut down by government regulations and you would is going to have to spend a huge amount of more money to comply, that uncertainty i think is really keeping production from increasing. lisa: on the flipside, how much cannot nobles start to offset fossil fuel usage in a way that is more material in the near term and frankly expedite that transition. >> i don't want to be a downer about wind and solar because i think they are great technologies and are improving all the time, but if you look at

the amount of energy you get from renewable energy and compare it to the natural energy you get from breaking down a hydrocarbon, you just cannot compare it. you need so much more of these are noble sources in order to compensate for hydrocarbon. we are at a point where energy use is still increasing. all of the road nobles online are helping to create an offset that demand. tom: very quickly here, the moving average of inflation tells me that when we get up to $140 a barrel, things change. how will our behavior change if we see brent move 124 up to 140? >> you know what? if you had asked me a month ago if we would get there, i would say 140 is a long way off. now, it does not seem so far away.

i think if we hit 140 brent, we are definitely going to see a lot of people and businesses making decisions to maybe cut back on production. we are already seeing businesses that depend on petroleum products -- lisa lululemon say they were raising the prices of products because they are made from petroleum and petroleum -- so it is not just relying on energy, but every system that uses oil products. tom: thank you for that brief on oil. lisa, good news, the price of tanning has been rocksolid. on the inflation report this morning, i am sorry. i have to go topline because a gallon of gas and rent, homeownership, higher mortgage rate, title and, topline. >> especially because it could crimp demand and is already on

the margins. we are hearing about that for other goods because disposable income, if you take out rent and oil and gas, starts to look smaller and smaller. there was an economist at the university of california at berkeley who calculated in the short-term a 10% rise in gas prices leads to a 2% to 3% decline in consumption. at what point do we start to see an acceleration in people deciding certain travel time? tom: it is going to be interesting to see. coming up on a new our -- conversation on inflation. its ramifications on the american economy. stay with us. this is bloomberg. ♪

>> i think europe is falling into a recession. it is tightening the central bank for the first time in a long time. >> do we see those hawkish comments? >> there is a narrow problem between an inflation problem and a growth problem. >> i think you could see a bear market rally.