>> a big change from the fed. >> fed definitely caught up with rate hikes for the next couple of years. >> i think the fed's forecasts are remarkably optimistic. >> rate hikes take a long time to impact the economy. >> all of these numbers are fantasyland. the unemployment rate is fantasyland. rated which inflation is going to come down is fantasyland. >> this is "bloomberg surveillance." jonathan: from new york city,

for our audience worldwide, good morning, good morning. this is "bloomberg surveillance." alongside tom keene and lisa abramowicz, i'm jonathan ferro. futures negative more than 2%. tk, the bank of england up next. tom: it is every central bank for themselves, and you wonder where the bank of japan slips into this. the news right now is so extraordinary that we need a stagger from the hawkish, bank by bank by bank. how did they deal with the oecd 2.8% global growth next year? is it a forced recession? is it a forced global slowdown? jonathan: what did scott minerd say yesterday? we saw it there in the opening part of this program, fantasyland again. he is not believing those forecasts and believe they could be worse. tom: mr. minerd has an opinion,

but more importantly we need to redux what bill said yesterday. the answer is the president of the new york fed, the esteemed william dudley, was scathing how this is a rose-colored view. jonathan: rates are going up. lisa, the market is doing the talking this morning. equities down, yields higher. lisa: the ecb is going to have to act, and that is the clear message we got. also the swiss national bank raised rates for the first time in 15 years. and not by 25 basis points, by 50 points. how much does this put pressure on the ecb saying, it is your turn. everybody except for the bank of japan is responding to this inflationary wave, youtube -- you do too. jonathan: we see a rally on friday, then i selloff the day after. it doesn't really add up, does it? lisa: yesterday's move didn't

really add up. there was nothing in the statement, nothing in the press that -- press conference to give risk assets a leg up. this is the fed saying we are willing to risk a recession in order to get inflation under control, and that is not a comforting message. jonathan: equity futures down around 2%. let's work through it for you. keeping a cosine what is happening in the bond market here. yields higher by 15 basis points. just yesterday reversed in many ways. the euro-dollar clinging to 1.04. >> now the bank of england is up. the expectation here is for them to move, possibly by half a percentage point. at the fifth consecutive meeting they will be raising rates at a time where they are raising rates into weakness. the pressure is on to raise rates, and i know you were

talking a lot about this, how there is a need to defend the strength of a currency, which is a complete reversal of what we have seen over the past few decades. what we are seeing today is the pound losing steam. we have seen that weakening versus the dollar. it is also weakening versus the swiss franc. again, it is a race to see tightening from the central bank in order to support the currencies. it is what you are seeing today with the pound losing versus the swiss franc. at a: 30 we get u.s. building permits and housing starts, as well as initial jobless claims. the unemployment rate in focus, given the fact we are at three point 6%, near a historic low. basically jay powell conceited yesterday, the employment -- the unemployment rate has to go up. the projection right now, four point 1% in 2024. perhaps that is fantasyland. right now this is the pain

point. how may people have to lose their jobs in order to get inflation under control? today olaf scholz, emmanuel macron, mario draghi all heading to ukraine for talks with the president there. this as natural gas prices surged again. how much can you get inflation under control when you have that geopolitical risk hanging out there? jonathan: europe has some money problems, lisa. thank you. elsa lignos joins us now, the head of strategy at rbc. do you think we might be in the foothills of a currency war? elsa: i would not call it a currency war, because what central banks are trying to achieve is very different. your currency strength can be a good thing in that it helps you target imported inflation. we think of currency wars as trying to artificially weaken your currency. jonathan: that's what i'm trying to get out. is this the last decade in reverse. is this a different kind of

currency war? with a different objective and not everyone can win? elsa: i guess the difference here is that we are not going to see active intervention, with one or two possible exceptions. we have talked a little bit about the bank of japan, but we are not going to see active intervention in order to generate a stronger currency. but we will see central banks taking into account the impact of policy on the currency and how they can generate that higher imported -- sorry, lower imported inflation. i would not call it a currency war because the currency is not going to be the main tool. where you are right, central banks are going to be formal comfortable looking for a stronger currency against their peers. tom: to borrow from the wonderful william rhodes, is this coordinated? is powell's message to the world or is the bond market central banker to the world? elsa: at the moment it feels

like global inflationary pressures have the upper hand, right? that is what we heard yesterday. in traditional times central bankers would focus on core inflation, because that is the best predict for future inflation. at the moment, the headline so high. we are seeing that feed into inflation expectations, and that is what has a central bankers worried. lisa: we are looking at a tightened will -- tightened race with inflationary input. to john's point, we are not necessarily going to get a currency war, but we will get pressure from central banks to raise rates simply to keep pace, to not increase the inflationary pressures in their economy. elsa: yeah, and i think that is what we saw this morning with the s&p. that is noticeable. the first time in 15 years they are raising rates. this is the central bank until very recently was trying to weaken the currency, really

targeting a much weaker currency over a very long period of time. here we have a central bank stepping away and not just hiking rates, but surprising markets with a larger than expected height that is a clear signal of intent. it does create some pressure, whether or not others will choose to follow. lisa: what do you expect the ecb will do in response to this, given the fact you are seeing tightening from even the swiss national bank? are they going to surprise to the upside and will that be positive or negative for the euro? elsa: they are in a really difficult spot, right? here is where you see the impact of making on a terry policy for such a disparate group of economies. because on the one hand they would like to go faster. they do have the same inflationary problems a lot of people do. if anything, commodity prices are much higher in europe. but at the same time as rates go up that is causing a lot of pressure on the periphery. so, yes, we heard that

extraordinary meeting yesterday, they promised to come up with some new talk. no details as of yet. i think the fact they are considering fragmentation will keep them near the back of the queue in terms of hiking rates. i have to say from a cyclical perspective, i would be more negative on the euro. tom: what does e.m. do here? the power of these economies, the sophistication of their financial systems -- forget about ecuador and bitcoin -- costa rica? i can't remember which one is based on bitcoin. that, el salvador. excuse me. what does e.m. do when the big boys are lifting rates? elsa: i think the hope for a lot of people was that if you are blind back a few weeks the narrative was you had temporary lockdowns in china, but you have the party congress in october, and markets are expecting there to be a big fiscal stimulus

delivered ahead of that. what we are seeing in practice is that covid policy is very difficult to execute. you will keep seeing is ongoing flareups and a new need for restrictions and lockdowns. i think with china someone on the sidelines that puts the rest of e.m. in a tricky position. we saw that with the bcb. they are looking to end their tightening cycle, but it is difficult to do when their currency is coming under pressure. jonathan: thank you. lisa, we have to realize some big issues. it is the last decade in reverse. we are trying to engineer stronger currencies after trying to engineer weaker ones for the last 10 years. and everybody's going to win that game. i think we are seeing that play out in foreign exchange right now. lisa: he said it yesterday when you said it was a race to the bottom and it was a much easier race when there was no inflation for the central banks. this is a very uncomfortable race. is it a race to tighten policy the most? what point is that going to be

negative for currencies? jonathan: central bankers don't like to talk about the affects channel, but you import so much inflation. the bank of england and focus later this morning. when you do that the fx channel is so important. remains to be seen is if the bank of england went with a bigger attack today, would it do damage to the currency? tom: this is important, folks. this is a cultural aspect and also a simple difference in these different economies. i totally agree that currency analysis here is important, but i would look at the magnitudes historically. as was alluded to yesterday in our conversations, we really have not seen a magnitude move in rates yet. we are hawkish. everybody is having to borrow from bart simpson, the economist, have a cow about it. we have barely begun to move. jonathan: another central bank

forecasting higher on employment. that is an on -- that is uncomfortable for any bank to have to do. lisa: what did bill dudley say? still fantasyland. jonathan: bill minard said the same thing. i'm jonathan ferro. if you're not british and you don't get that joke, google it. futures down 2% on the s&p. this is bloomberg. ♪ ritika: keep you up-to-date with news from around the world, and ritika gupta. leaders of germany, france, and italy are in kyiv today for talks with volodymyr zelenskyy. they travel together by overnight train in a show of solidarity for zelenskyy and his government. the trip comes ahead of an expected recommendation from the european commission that ukraine be granted candidacy to join the eu. nato members are looking for

germany -- to germany for cues about how to boost the alliance's defenses against russia. germany has been identifying units that can be deployed to lithuania and placing key equipment ahead of time. the house committee investigating the january 6 insurrection at the u.s. capitol will focus today on the pressure donald trump put on vice president mike pence to block congressional -- the panel will hear that trump was repeatedly warned his plans were illegal. the hearing may include testimony from trump aide's that when trump learned those invading the capital were calling for pence's lynching, that he "deserved it, anthony fauci has tested positive for

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>> i do not expect moves of this size to be common. from the perspective of today, either a 50 basis point or 75 basis points increase seems most

likely at our next meeting. jonathan: that seemed to be enough to be -- to lift this equity market, it just did not last long. tom: how about that rally? jonathan: we are down 2% on s&p 500 futures. the nasdaq abound -- down about 2.5%. the president wrote a letter to some of the big oil players, the white house did. exxon snapped back. going to give you some of the numbers exxon delivered. we kept investing even during the pandemic, when we lost more than $20 billion. i wanted to emphasize that. and make all these points about investing in america, etc., then they have some tips for policy at the end. the letter concludes by saying, longer-term government could promote investment through clear and consistent policy. tom, a bit of a snap back from exxon yesterday. tom: and it is really off the

radar this morning. brent crude down to 118. within all of this battle over commodities and particularly hydrocarbons -- i saw jeff curry with us earlier this morning. jon, european night gas speaks volumes. it is not out until february 24, but day by day there is a different hydrocarbon to get your attention. jonathan: the news from gazprom yesterday, maybe restraining some of the supply in europe. my gumby had -- might not be a massive story right now, to be a bigger one further down the road. tom: right now we are going to digress. this is a story that i think internationally needs to be told. should nixon was buried in 1967. there was a small matter of a war in vietnam, and resurrected his political career with a war on crime. and it worked. jack fitzpatrick -- jack fitzpatrick joins us now with a formula that was shocking on

tuesday. jack, this is from brownsville to corpus christi texas, and on the grave of lbj, the arch texas democrat, the republicans are winning. and i would suggest, winning big . worried about crime, worried about the border, just worried about getting that hispanic and black vote they are not supposed to get. this is a seismic change for american politics, isn't it? jack: it represents a lot of significant things that look very bad for democrats. this special election that went to mara florez unexpectedly, the republican who won the special election. there is still going to be a competition in november, because this is replacing someone who steps down, but it shows you that democrats on one hand have not necessarily put a ton of effort into a state like texas, despite maybe their dreams of turning that lou presidentially

someday. two, they already knew they had bigger problems than they initially thought with hispanic voters at large, especially looking to florida. more conservative cubans. what, you know, they cannot lean back on some opposition to donald trump now that he is not president. the border wall debate is not in the news cycle, it is not an issue right now, and it raises questions about what kind of demographics the democratic party may have taken for granted for a long time that they have not organized around and sent a message directly to in recent years. tom: i am absolutely fascinated at how president biden -- let's assume for the sake of discussion he is a one term president -- how does he lead his democratic party back to the assumption of hispanic and black ownership? they are leaving in droves.

statistically it is a refuted bowl. jack: you know, some of this it is a patchwork. you say that democrats are struggling with hispanic voters, that is such a broad group that it is difficult to point to a reason. one of the bigger reasons -- and maybe this is more of a florida issue than a texas issue in this one special election, but it does largely come down to economic views, at least in some cases. if you are running on a weak economy, you can lose a lot of voters who you may have taken for granted in recent years. you are also right to raise the crime issue. that affects them in many places around the country. biden has probably dragged the democratic party back toward the center in how they talk about police, but it is still a tough issue and it is going to be a

tough series of midterms. tom: jon, i can't say enough about, for a certain vintage this vote tuesday was absolutely stunning, on the texas-gulf of mexico border. it is once-in-a-lifetime kind of vote. jonathan: jack fitzpatrick. tc -- takei, i was seeing the same thing. things heading in the wrong direction for this president on a series of issues. lisa: how does this present lead with respect to getting black votes? how does he lead of so many people are saying he is going to be a one term president? not long ago the expectation for a recession this year was no. now it is something like 70%. so how does he lead when so many people are saying he is inevitably going to be a one term president? jonathan: when you see slightly constructive people turn quite negative on the outlook, that is

what gets my attention. to hear from neil. yesterday, here from him and raise questions about where the fed was heading in a not very constructive way. to hear from wells fargo, they put out this note, indications that inflation is becoming more entrenched in the u.s. economy has caused the federal reserve to become even more hawkish. we judge the recession next year is more likely than not. this is what this market has been adjusting to now. for weeks if not months. lisa: that no cop my attention as well, because they expected a soft landing just a week ago. how much does the fed respond to that by saying, you know what? maybe you are right, but we have to get inflation under control. to me the biggest take away is not the stock market rally or bond market rally. it was not really coherent with the message from the news conference. they are willing to risk recession.

in the story. jonathan: there will never talk about that opening and they will never forecasted either. i don't think we can complain too much about that. effective the matter is, for a lot of people their view on the fed has changed. they have had to change the timeline. think they have had to change the destination as well, the peak, and what that is going to mean. tom: this -- i took some shade yesterday from people thinking i'm overanalyzing two-part inflation. there is a path from 9% to whatever percent, and that is the move from that lower percent down to two or 3%. ellen zentner looking for vectors right now. jonathan: futures on the s&p negative little more than 2%. yields fighting back, up 15 basis points. heard on radio, seen on tv, this is "bloomberg surveillance." ♪

jonathan: equity futures this morning, good morning on tv and radio, we look like this. your negative by more than 2% on the s&p 500. taking back yesterday's rally.

this federal reserve with an outlook that includes higher interest rates. they hope, lower inflation, but also higher unemployment. for some that is fantasyland. that is the equities market. we looked like this on to, tens, and 30's. up today by 15 basis points. look out, germany, too. the bond market breaking out. -- tom: this is wicked important, folks. you look at the levels, and germany, italy, today speaks volumes. italy has not given it up. it is near 4%. jonathan: that spread was inside 100 basis point/two. back through 200 over the last couple of weeks. tom: there is way too much spread analysis and not enough level analysis now. jonathan: tom, i'm with you.

we have to for the center the fx market too. the swiss national bank out with a rate hike. you are swiss, one to watch. euro-dollar another one. if we are importing a lot of inflation, we have a problem in the fx channel for europe. the bank of england is up next. we are down about .2%. in an ideal world you would engineer a stronger currency to attack some of that imported inflation. say in an ideal world, because i'm not sure many people are convinced that if you get a big prize from the bank of england today that you actually get there, a stronger currency and a response to that. it is very much up for debate. tom: i want you to inform us. you have been in the room. i perceive the bank of england as a more fractious institution. is bailey alone today for a committee or -- or is he

speaking thinking of the prime minister under siege. jonathan: i will say this. whenever a leader of a central bank speaks in a news conference, they have to try and reflect the consensus that exists on the committee. the problem is that an institution like the bank of england right now, there are so many different views it is hard to form a consensus and then represent that live on that is the challenge for governor bailey today. how much dissent do we start to see around this bank of england? let's not forget, i thought it was interesting yesterday we had

some dissent from someone who traditionally, esther george, who would be considered a fed hall. -- fed hall. i know it wasn't a big story, but it is something we could talk about. tom: we are scheduled to have worked first with her, where i will have a full wyoming. jonathan: at the end of august. tom: at the end of august. let's slide over to the equity markets. andrew slimmon joins us. someone who was in equities, someone who connitay long and optimistic, exce maybe he is not. come on, and. there is blood on the streets. do you load the boat here? andrew: i think there is an opportunity coming. i just think it is too early. regardless of the economy my view was the stock market has a hard time with the 10 year where it is, given the multiple that remains on the market. until we get resolution in terms of interest rates and inflation, i just think it is too early to get aggressive. but it is out there, it is just too early. tom: what is the lesson on use of cash? we saw de shaw go after fedex. saw target with a big dividend increase as well. how does use of cash change even the gloom that is out there?

andrew: it is interesting you are seeing come -- companies increase stock buybacks. you are seeing insider buying, so i think there is some reasonable belief the collapse and earnings will not be there. that is a lot to do, frankly, with inflation. bunnies can pass on their inflationary costs to the consumer. the question becomes, will they be able to maintain the margins or pushback before their costs come down? right now that has not happened. so companies feel good about their business and they are raising dividends, buying back stocks. that is what is happening now. we have not seen the collapse in margins. lisa: let's say we do get a continued selloff, as many people expect as the real yield

in the united states resets to levels we have not seen since 2018 and earlier, depending on which measure look at. when are we there? when you start saying we have baked in the pain, let's go? andrew: i think first of all, timing. it would be nice to be later into the summer, because i expect another 75 basis points increase will cause further catharsis. it would be nice when you guys are having your burger in wyoming or whatever you said if the fed were to ease up. i think that is timing first. number one is, where is the market going? if it gets down 16 times forward earnings, if we start to see 14 times, in the mid three thousands, i think that would be helpful. or if you saw a rates back off to closer to 3%, which is clearly not happening today. we are starting to see some inflationary inputs weaken, but certainly not oil.

there are too many things driven by oral prices, so inflation backed off, rates back off, the market comes down to a multiple that is more reasonable. i think those are the two scenarios. i suspect all of that will happen going into the summer. lisa: what does it mean to remain defensive when you have to be fully invested? andrew: yeah, for me, i think we want -- so, number one is, what is amazing is what is working you today? energy, utilities, defensive stocks. those are late cycle stocks. the market has told you that we are into a slowdown. the way you position is make sure that you are -- your beta is not above the market, make sure you have defensive stocks in energy.

the however is, the early cycle is a consumer cycle. those have been absolutely crushed. there are a ton of opportunities in human -- consumer stocks. when the consumer sentiment is at an all-time low, you have to stand up and say the rate of change at some point is going to be positive, and i think those of the types of stocks you want to prepare, do the analysis on, because i think that is the next, what i will call the next pitch is to move into more of these early cycle stocks. i just think it is too early. jonathan: are you saying might be time to think about fading some of the energy moves then? andrew: yes. so, here is what is interesting. the utility sector through may had i performed the s&p you today. utilities are fading, so they have faded going into june.

i just wonder whether we are going to look back and say, we were in a recession. we are already in a recession. the playbook with say then, you want to start to fade the late cycle. if you tell me, jon, that recession is end of the year or next year, then it is too early to sell energy, it is too early to reduce to defensive. if you are telling me it is happening, then i want to get -- i want to start to fade those. i know that is prefers. jonathan: if if we were in a recession, what kind of recession would you be expecting? that word gets thrown around all the time. andrew: well, what we are getting. the problem with a deep recession right now, right now, is you are not getting the fundamental drop-off that the big earnings destruction.

now, what scares me is you are starting to see some of these issues like the swiss bank raising rates. my contention has always been, ultimately, unfortunately something breaks and a dead body floats to the surface. that is the kind of things that makes bombs in a recession. right now as we said, if it is going to be a shallow recession because we have not had the drop-off in fundamentals to the magnitude of a deeper recession. jonathan: andrew slimmon, as always, good to catch up with you. from morgan stanley investment management. tk, a lot to think about. tom: in the energy front is front and center, certainly politically. i would not only take the -- i thought your recession comments were dead on. i would take the recession comment and split the gdp equation, the domestic equation, and the foreign input equation,

and wonder if you are going to have a two-part dynamic and you get a negative print on recession, you get the gloom, but you get it with a pretty good american economy while we import so much stuff that it drives us into some form of growthy recession. there is courses that are taught like this. i think northwestern has the best source, robert gordon, where you have a growth recession and you also have a bramo recession. jonathan: if you get that you do not want to be in energy. i'm not sure you want to be anywhere invested in this market. lisa: you just hide under the blanket? [laughter] everyone just basically under the covers? hiding? i hope this is actually going to be a shallow recession. in the news conference yesterday the lack of control jay powell seem to have and feel like he

had over inflation, the lack of control and inside considering the events we saw in europe, as well as china. that is going to be the determining factor. jonathan: i can't wait to get excited every two weeks now. is that the data point now? the university of michigan? lisa: the number could be huge to bearish. jonathan: if that is the number we have to watch, if that is what the fed responds to come up and i guess it is important. futures down 2.4%. we will do extended programming for you, mitch, next week when i'm not here. tom: i love the show. jonathan: he liked that, tom? [laughter] this is bloomberg. ♪ ritika: keeping you up-to-date with news from around the world, heinrich group. the leaders of germany, france, and italy are in kyiv today.

they travel together by overnight train in a show of solidarity for civil and ski. the trip comes ahead of a recommendation friday from the european commission that ukraine be granted candidate status join the eu. russia and china are giving deferring accounts of president jinping's birthday call with vladimir. the kremlin says the two men discussed military ties. china says xi called for economic stability and may no mention of military ties or increasing trade. european gas prices are soaring as moscow tightens its squeeze on crucial gas flows to the continent. germany exports productions to the nord stream pipeline, challenging gazprom's claim that it was due to technical issues. for month europe has seen supply cuts in retaliation for sanctions against moscow. 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.

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>> this is a very soft learning -- soft landing kind of forecast 2.4% neutral is only if inflation is at 2%. if inflation is higher, the neutral is higher. i think the forecast is still remarkably optimistic. jonathan: that was ill dudley, the former new york fed president making that point following the news conference with chairman powell yesterday. this morning we give back what we got from yesterday. equities down by 2.4% on the

s&p. yields higher by 15 or 16 basis points. have seen this a few times with the fed now. a big rally on the day, then we fainted in the days afterwards and hard. this headline just across the terminal that i think will interest you and others. the italian energy country said gazprom is only providing 65% of the state gas. this is going to become a problem if it continues into winter. tom: it is. this bike up here, i looked at it briefly, what is it, netherlands? jonathan: seen as the benchmark, sure. tom: it is as grim as 2026, but it is getting there rapidly. it is june, it is warm in 90 days, 100 days it is not, is it? jonathan: and the rates are going up. eventually the ecb soon. inflation is too high. people are getting squeezed. tom: i'm going to get one question on britain before --

with kallum pickering before jonathan picks up his expertise. this governor bailey have a true wage spiral that chairman powell does not? kallum: the risks point that way. a job opening for every unemployed worker in the private sector seems to be playing -- paying out a bonus in order to incentivize higher and keep i. you are pushing a percent year-over-year, it is totally unsustainable for an -- an economy like the u.k. it is inconceivable. jonathan: i want to talk about the currency off the back of this central-bank decision. you have a pretty original view of why we are down. i have been asking whether an interest rate hike from the boe today of 50 basis points with damage this currency.

some people have that view. you think it is about something else. kallum: i don't think it is about monetary policy. i do think it is about fundamentals. the u.k. is average as an advanced economy. we have the boris factor. he so him weakened considerably once the u.k. voted to leave the eu. but we did not see is as the economy are performed expectations, we saw them move sideways due to brexit. my hunch is that if the conservatives were to replace him with pretty much anyone else or if the conservatives were to lose an election, then what we would see is sterling move. the markets were considered the u.k. fundamentals and broader political risks are actually boring, i have to say. jonathan: forgive me for asking what might sound like a stupid

question, but why would they diminish regardless of who is in control? kallum: that is a good question. boris johnson unfortunately is like a man struggling two horses that are going in opposite directions. there are sectors of his party that want different economic factors. that cannot be reconciled. what boris johnson seems to do is you -- nominally unite his party which are hard-core brexiteers, which i doubt very much. once johnson is out of the way what you will find is the party will have to decide which economic direction and wants to go. once it does that the device of using brexit to unite his party is no longer necessary, then you don't worry so much about an eu trade war. we would not worry about consequences for northern ireland. he would be less concerned about

scottish independence, because that seems to be a function of what you see in brexit. lisa: if the bank of england does not have a lot of control over the currency, and they don't have control over inflation because that has to do with brexit and the cost of energy, and the global inflationary pressures, how do they decide how to act? how much do they raise rates? how did they use rates as a tool amid futility? kallum: the thing the bank of england needs to emphasize -- and it is difficult in this environment -- is that even though the economy seems to be moving sideways, in nominal terms things are quite strong. it is surprising just how much households seem to be holding the nose and spinning aggressively. you have a nominal adjustment upwards in price and wages. the challenge the bank of england has is, upon realizing they made a policy mistake last year by overstimulating, the risks archaic.

the hard choice is not between some kind of recovery and recession, what kind of recession we will get. so what i see from the bank of england, also within the central banks, is this risk of near-term recession. if you have that you get inflation, you start good fundamentals and you get the business cycle unfolding. if you don't fix the inflation now and it gets worse, then recession has to be even bigger in order to recalibrate and recondition inflation expectations. you always choose the politics which enjoys the lowest output, even of the risks seem to be accumulating. lisa: about six minutes to go but -- before that decision. what are you hoping they do? kallum: i'm hoping they go for 50 basis points and signal they will remain aggressive until they see with confidence inflation start to roll over and inflation expectations fall to a

level that is more consistent with their inflation targets in the long run. unfortunately we do not have the tools that can eliminate economic pain as this process continues. what we will do is, by bringing inflation expectations down and inflation down now, realize the potential pain that could come through in unemployment later on. jonathan: thank you. kallum pickering of berenberg with interesting perspective on sterling right now. he said, the npc has not raised rates by more than .25% in its history. a .5% rise today would be the biggest since 1989. that would be a clear signal. anything less, tom, his words, would signal a week policy response. that is one view from somebody who is pretty hawkish back in his days on the bank of england. tom: we are all addicted to back

is, fitting online and getting measured, measured, measured. i don't understand why a bank cannot say 75 beats, then we will be data-dependent and see what happens. maybe that is what chairman powell are alluding to. jonathan: they are stuck in the last 10 years, just trying to get out of this mode. tom: that worked out. jonathan: look at the ecb. tom: forward guidance was dead the day it came out. jonathan: i think it is effective if you want to commit to lower rates in the future, but that works if you have inflation you think is too low. lisa, it does not work when inflation is too high. that movement from the ecb is already gone. the bank of england set to go again. tom: we need team coverage in london. jonathan: right. lisa, you signing off on any of this? [laughter] lisa: i have a lot to say, but we have five seconds. [laughter] jonathan: this is bloomberg. ♪

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>> a big change from the fed. >> the fed definitely caught up with the market pricing of rate hikes. >> i think the fed's forecasts are remarkably optimistic. >> rate hikes take a long time to impact the economy. >> all of these numbers they throughout our fantasyland.