>> the consumer is not as resilient as they have been in the past and more sensitive to prices. >> stagflation is a condition for a growth recession. >> the world is changing, economic volatility is so much higher. >> completely away from inflation concerns. >> for most people, it looks and feels like a recession. >> this is "bloomberg surveillance," with tom keene, jonathan ferro and lisa abramowicz. jonathan: it is fed day. from new york city to our

audience worldwide, good morning, good morning, this is "bloomberg surveillance," alongside tom keene and lisa abramowicz, i am jonathan ferro. tom: yesterday was nuts and today was nutsier. i cannot convey the friends you see on the screen. it is at 2:30, chairman powell will try to maintain control of the dialogue. jonathan: expected to raise rates 75 basis points. what are you looking for? . tom: over at evercore, he said are we going to ca volker raj -- are we going to ca hawkish tilt? i wonder if he will surprise and walk away from that. jonathan: september feels like a

long time away at this point. lisa: the data is moving so quickly and these earnings have been inconsistent. not really showing a real picture that goes one way or the other. how much does the fed chair recognize some negative data we have seen? how much does he give a nod to that versus inflation is our number one concern? jonathan: we talked about the data point that is google ad revenue. resilience, not recession. that was true of microsoft and google. lisa: that seems to be the theme. even though they talk about caution, even though they both missed on a number of different items, both came out with projections that really defied some of the worst cases. tom: i was really upset about the gloom coverage. to me, they are doing fine.

what you did with foreign-exchange adjustments? . strong dollar affects -- so what? you move on. jonathan: there is more than just fx. read the microsoft press release. extended shutdowns in china. . the ongoing war in ukraine issues with russia, take your pick. tom: and the red sox are in last place. there are many issues out there. life goes on. these corporations are going to adjust. they come back. get over it and move on. lisa: there is this feeling, to me, that perhaps some of the bad news has been baked in. even with all the warning signs and you could have found pessimism, what does that say

about the market? tom: the middle-class class is flat on their back, the president will address that, we heard from former president trump yesterday. basically, they are killing it. jonathan: louis vuitton. futures, .9% on the s&p 500. the nasdaq 100 up 1.4%, a sigh of relief from google. you will be trouble today, aren't you? slightly stronger euro in the mix, .2%. lisa: today the main event is at 2:00 p.m., a rate decision followed by the 2:30 press conference with fed chair jay powell. guests include the former pimco chief executive officer and a bloomberg opinion columnist, bill dudley.

the chief economist, how much do we get a sense of what the fed needs to see to back away? is it weaker job numbers? weaker general data? we are already getting that. earnings continue, qualcomm, meta and ford motor after the bell. getting a sense of what we saw of alphabet and microsoft, the sigh of relief can continue. those shares have been doing better but throughout the year, they have been of estimated. qualcomm down 18%. i am interested in the housing data. what we have seen consistently is a real dramatic weakening, especially with the sales data we got with new sales plunging the lowest into years.

how quickly is this moving? it is moving so quickly that some people are estimating you could see a 15% to 20% price drop. at what point does that bleed into consumer confidence and have a website affect? -- whipsaw effect? tom: kailey cannot do the gloom like lisa. jonathan: i will do a price drop in new york anytime they are ready. tom: seriously, what was important was with building permits, multi family exploded higher than single-family. it signals it will be a renters 2023. jonathan: joining us is phil orlando. what are you looking for? philip: 75 basis points today. you talked about the importance

of the presser at 2:30. we are looking at jackson hole, that is one month, august 26. what that meeting does is it provides another look at the inflation data, particularly 9.1% nominal cpi number sitting at a 41-year high. by the time we get the jackson hole, the fed will have seen the july inflation data, and that will provide us with better guidance in terms of what will happen at the meeting and the november and december meetings to follow. does the fed stay uber aggressive in terms of withdrawing accommodation or do they downshift to something a little easier? that is a very much open question. tom: phil orlando, good morning to you. i noticed a handsome phil orlando about 1997, amid our

daily gloom, stocks for long-term. we are enjoying a doubt today at 32,000 plus or minus some gloom. there really is no other story, is there? phil: stocks historically go up into the right. the u.s. economy is the greatest economy in the world. corporate earnings are positive and stocks reflect corporate earnings. the longer-term story is still positive. we thought 2022 would be a difficult year because of inflation, policy, decline in earnings, price-earnings ratios and so far that is playing out in spades and we think there is more to that. lisa: we have seen so far, resilience. if you take a look at the overall averages, it has not been that great. how much do you get a positive

signal from the earnings we have seen so far? phil: i am disappointed in earnings, lisa. welcome back, by the way. lisa: thank you. phil: we were expecting a 4.5% number. earnings are down 3.5% so far. the downward guidance that walmart gave us yesterday, consistent with the downward guidance target gave us a month ago. the trends companies are talking about, too much inventory, margins are shrinking, commodity costs are up, worker productivity has not been this bad in something like 70 or 80 years. the near term trends are not good. third-quarter likely to be worse. we are struggling right now and stocks are trying to reprice themselves based on what should be lower corporate earnings estimates. jonathan: that was a

disappointing finish, i have to say. phil orlando. lisa: i thought it was great. jonathan: i am disappointed. lisa: [laughter] jonathan: looking at alphabet this morning, stocks up 3.7%. as lisa indicated, we will talk about facebook later. tomorrow, we will get amazon and apple. tom: there is a brass plaque on the ground in front of the liverpool station in lovely london near hotel. outside is where jon ferro and i stood in line to go to the mcdonald's at liverpool station. bbc justin, mcdonald's puts up the price of a cheeseburger in london for the first time in 14 years. this will be a more expensive lunch than. it will be years ago. jonathan: can i share with the audience what time that visit was? [laughter]

jonathan: the world's biggest consumer names with soaring price increases. tom: it is a discrimination of individual stocks. as i suggested yesterday, individual sectors. jonathan: looking forward to catching up with binky later. wage and pricing power, who has the pricing power? lisa: i am wondering if the types of names we are hearing are indicative of where we are in the cycle. coca-cola, mcdonald's, chipotle, the lower cost fast food types of places. how much are people ratcheting down in terms of how much they are spending and going more to these other places, giving them greater pricing power? this is something people are talking about. jonathan: futures up .9%. good morning to you all. if you are not enjoying this, i

am sorry. we have 10 more hours. lisa: [laughter] jonathan: looking for assistance and support. futures up .9% on the s&p. from new york, this is a bloomberg. ♪ ritika: keeping you up-to-date with news from around the world with the first rude news. the world reserve is expected to raise interest rates by another 75 basis points today. the central bank is likely to acknowledge there have been recent signs the economy is weakening. credit suisse has tapped a veteran bank to be its new chief exec -- chief executive officer. the swiss bank will conduct a

strategic review. >> we will turn our investment bank into a highly productive investment bank. this is work with progress. >> credit suisse posted a larger than expected second-quarter. president joe biden will speak with china's xi tomorrow. house speaker nancy pelosi said she will visit taiwan next month. beijing considers taiwan part of its territory. for the second night in a row, the two conservative candidates to succeed boris johnson had a televised debate. the talked about the economy and accused each other of policies that were morally wrong. the debate was cut short when

the presenter -- 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. ♪

>> we see there is urgency in

the economy right now between sentiment and spending behavior. we are motivated to try to bring prices down because it is hitting families. bringing gas prices down is an important part of trying to bring relief economically and in terms of consumer outlook. jonathan: yeah ministration is tying itself in knots. the national economic council director. from new york city this morning, tom keene, lisa abramowicz, jonathan ferro. futures up .9% on the s&p. nasdaq 100 futures up 1.4%. for once, no drama with the euro dollar. tom: i would still watch currency.

a .97 handle, that stronger swiss franc, it is an interesting currency. jonathan: the story is not over for europe by any stretch. i think that will become base case quickly. tom: there is a photograph of dwight david eisenhower walking and it is a diplomatic eisenhower. nelson rockefeller attended the funeral. i believe in the middle 1970's. it was a moment my grandparents talked about in 1943 where she spoke before congress. it was a statement on the independence of taiwan. annmarie hordern joins us now, our bloomberg washington correspondent, on a minor affair

that i do not think is minor. the speaker of the house, am i correct, will visit taiwan? annmarie: you are not correct that we do not have a firm confirmation that she will make the stop to taiwan but she is planning a trip to asia early august. she is making preparation to stop in japan. they will talk about security concerns. there has not been an announcement on the taiwan trip but it seems that is. the direction of travel she was supposed to go in april but she got covid. it has become a difficult moment. the president was very direct, saying the military saying it is not a good time to visit taiwan. she is being pushed to go by her republican colleagues. kevin mccarthy said we should make it a bipartisan trip. china said they are strongly against it and making preparations for it. tom: is this ad hoc?

is this her alone planning this trip? annmarie: we do not know who she would be traveling with but she would be the most senior member going. it is a speaker pelosi trip to asia. jonathan: how does this cat up the call with the president of the united states and -- how does this set up the call with the president of the u.s. and xi ? annmarie: this is something that will irk g jinping. there could be a lot of deflection about taiwan because of the pressure xi is under at home. look at the news out of china. there is a district off of wuhan, one million people locked down. they have not moved on from march 2020 and the rest of the world has. it has crippled their economy. individuals coming out of

college have limited job prospects. it sets up a lot of tension for the call on thursday. it is happening tomorrow. the other big topic will be tariffs, something -- lisa: how do we dovetail a hard-line message nancy pelosi is trying to send with rolling back tariffs from the trump era? annmarie: we do not know if they will rollback those tariffs. they have been debating it for months. there are a number of factors at play as the president make this decision. they said they will use any tool in the toolbox to bring down inflation. the second is the national security team. you have those in the trade world that say we should not give china an inch. the third is the union, the labor unions. they do not want tariffs lifted on china. this is a president who talks

about and constantly speaks to labor unions. it is a difficult moment for them to decide on what to do with the tariffs but it is something xi wants to see out of washington. jonathan: will we hear from secretary yellen? annmarie: we will. i imagine she will explain what a recession is to the american people. yesterday, brian said consecutive quarters with negative growth is not a technical recession. i would like to hear what the treasury secretary has to say. jonathan: looking forward to it. looking forward to catching up with andrew hollenhorst. they really are tying themselves in knots. lisa: they are trying themselves -- they are tying themselves in knots repeatedly. he has been coming out with the same message again and again. we can pinpoint what it is. it is not working.

the "r" word is still very much prevalent in peoples psyches. it is bringing down consumer confidence. jonathan: it is a positive statistic. there are a number of banks. tom: how come when i throw my hands up, you do not say anything? jonathan: lisa is more emphatic about throwing her hands up. who are you apologizing to? tom: roman. i am looking forward to andrew hollenhorst. this is must, must, must-listen. a 5% terminal rate. that was stunning. jonathan: 4%, 75 basis points. he had changed to 100 and then flipped it back to 75.

the nasdaq 100 up by 1.4%. the earnings when it came to alphabet and google ad revenue, resilient. tom: at least we are not conflating it with shop. jonathan: if you are looking from resilience and defensiveness from microsoft, i think that is what you got from the numbers yesterday which might have given you more confidence. tom: microsoft, they are struggling. the free cash flow model, $67 billion. they are struggling. jonathan: i knew you would be on a rant about this today, i knew it. it is fed decision day. from new york, this is bloomberg. ♪

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jonathan: so far, so good this morning. i was characterizing our relationship so far this morning. the nasdaq 100 up 1.4%. two names you need to know,

microsoft and alphabet, they look resilient. resilient keeps to be the word i am hearing again and again. microsoft up 3.85%. yields have come in. two year back to 3%, 10% sub 2.8%. the equity market bottomed the day after the last fed meeting and we have picked up speed. i think this is important. the more the market believes the fed will reverse course, the less effective it will be in moderating inflation and the more the fed will have to raise interest rates. tom: it will be interesting. we will dive into our fed coverage. andrew hollenhorst is really out front and has been saying the fed is behind, let's go. andrew, the financial times with

an absolute tour de force, she said the phillips curve does not work, standard ucla economics does not work. core inflation is due to demand. there is no increase in the unemployment rate that would produce microchips for new cars and china's lockdowns, defeat leading recruitin -- vladimir putin. andrew: i think it is a very difficult situation for the fed and the economy. it might be true that a lot of what has going on with inflation is due to issues on the supply-side but it is always supply and demand together. those two forces have worked together. if you cannot create more semi conductors, if you cannot fill

more autos, the only way to bring down prices is to dampen demand. it is not an outcome anyone is pleased are dealing with. standard macroeconomics. i am surprised with the economists coming out and saying there is nothing the fed can do. tom: if we get to a hollenho rst 4%, a stunning essay up to 5%, was -- what does that due to to the inflation rate? does that drive us back to john taylor's 2%? does it get us back to a taylor 2% organist halfway back? andrew: i am vaguely aware of that school. the issue here is you get interest rates higher, you

tighten financial conditions, slow down the economy and you see how powerful the relationship is. that is what we do not have a good sense of. the curve does not function the way it used to. if the phillips curve -- it could be hard to bring inflation back down to 2%. tom: we did this as a video for this afternoon. get one of the interns on it. get the intern from ucla to make the video of what he just said. jonathan: how will chairman powell navigate some of the stuff? how do you expect them to acknowledge some of the weaker data points we have already seen? andrew: tomorrow, we might

getq2 gdp, it could be slightly positive, it could be negative. on friday, we will get the employment cost index which will probably show strong wage pressure. we have an inflation situation that looks more problematic. you have growth that is slowing. it goes back to what we were talking about initially. it is painful to bring inflation down once you have too high inflation. i do not think he will completely stick to the hawkish message from june. peak hawkish notice from june. i think there will be acknowledgment of the data from june that could be dovish. jonathan: let's talk about the dovish detailer. do you think the easing of financial conditions will become

problematic? andrew: i think that is what the fed is trying to figure out fed really, it takes time for the financial conditions to work their way into the economy, slow down demand and eventually affect inflation. the idea you will see financial conditions tighten and in the next report have an effect, -- if financial conditions have eased when they tightened before, it is a reason for the fed to take a breather at this meeting and not push further in the hawkish direction. eventually, they will need to what i do not think they will be particular concern that financial conditions have eased since the last meeting. lisa: it is difficult for the fed at a time when people cannot predict the future and people are split on where it is going.

understanding the parameters of risk. is the risk of them tightening too quickly now and having to cut rates bigger or smaller than slowly and steadily raising rates? it seems to be underpinning a big debate the market has weighted in on, they will cut rates next year and it will be beneficial for markets. andrew: markets are thinking the fed will have some kind of pivot. i do not think we will see the pivot from the fed. we have to think about the fed's reaction function. if i take chair powell seriously, the rhetoric was inflation is the number one issue this fed is trying to address and that powell is willing to do the difficult thing like the former chair did to bring inflation down. it is that commitment to bringing inflation down the does bring it down. this is a fed that is not

committed to bring down inflation, it could pivot to a more dovish policy before you brought inflation down. that is a real issue for the fed . the need to get ahead of that. do they do that at this meeting? do they wait for jackson hole? that is where the tactics come in. lisa: this is hinged on the belief that seems to be the consensus in markets, that the bigger risk is the fed not raising rates quickly enough and allowing expectations to come unhinged. evercore said it is the opposite, it is the bigger risk. if the fed raises too quickly and has to cut next year, it will cause inflations expectations -- andrew: the risk of the fed is not hiking fast enough. if you do not hike fast enough, you get higher inflation that becomes embedded in the economy and becomes that much more

difficult to bring it down and you might need a higher unemployment rate to bring it down. the right thing to do is address inflation had on. this is a lesson from the 1970's. we had various scenarios where fed officials thought the economy had slowed down enough, took their foot off of the gas pedal or the brake in terms of the economy and you saw inflation pick up and become more and more embedded. jonathan: quickly, is it the final 75 basis point hike of this cycle? andrew: i do not think so. i think we will see strong enough inflation for them to go 75 again in september. jonathan: wow. andrew: if you look at where the fed wants to get to, i think it is significantly higher. jonathan: interesting. andrew, interesting to catch up. that september call is where the

tension is. a good friend of this program said this coming into today. the fed is boxed into a 75 basis point hike. things will change by september, he says, chair powell cannot claim victory. tom: that was brilliant with andrew. he is a very different yale economist. the attachment here, yes, they will raise rates, and then what? both of them are saying they are restricted from crushing this economy in their own ways. jonathan: do you think there is some politics baked into the analysis? tom: there always is. jonathan: senator warren was doing the same thing in the wall street journal. tom: i think it is naive to think there is not. i will be honest, the british do

this way better than the americans. in britain, there is an overt politics with the bank of england discussion, including a foreigner sitting on the board, which is really cool. we do not do that. we are like, there are no politics involved. maloney. -- baloney. jonathan: i'm not sure anyone believes that. lisa: the politics are very much there. there is this idea that it is worse to torpedo economic growth by raising rates too quickly versus there is a risk of not going hard enough and allowing inflation expectations. these are the two camps battling it out at a time to feels unprecedented. jonathan: the political environment in washington around this fed will get much harder when the data shows more weakness.

it introduces this bigger called in september. the braver decision is in september. lisa: they have to make the argument about entrenched inflation because there will be weakness. jonathan: we start to see weakness in the labor market. that is when the big challenge comes about for this fed. from new york city this morning, good morning, this is "bloomberg surveillance." ♪ leigh-ann: keeping you up-to-date with news from around the rock with the first word news, i am leigh-ann gerrans. bloomberg has learned the justice department is using a grand jury to investigate efforts by former president donald trump and his aides to overturn the election. the focus is on fake electors. no comment from the trump camp. bloomberg has learned chuck schumer has told he does not think there are enough votes in

the senate to pass a big tech antitrust bill. the bill's cosponsors have maintained there are enough votes for passage. mercedes-benz has raised its outlook thanks to resilient slaes of -- sales of high-priced models. we spoke with the mercedes ceo. >> we are watching inflation. we are watching central banks' reaction to the inflation with interest hikes. something we have to be mindful about. we have not seen any reduction in demand for mercedes. demand for us, currently, is strong but it is something you have to have in mind and see how things develop into next year. leigh-ann: meanwhile, mercedes says 7% in the second quarter because of a lack of chips and

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>> a lot of the challenges we have now is that the federal reserve's monetary policy is late in the face of tremendous fiscal stimulus. they should have began's drinking -- they should have started shrinking the balance sheet. jonathan: the congressman from arkansas. from new york city, good morning. looking forward to fed coverage, it begins around 1:30. the decision at 2:00. at 2:30, we will hear from chairman powell futures up 19%

on the s&p 100. numbers from microsoft and alphabet, those two names of 3%. i will not call facebook meta. no. yields down a basis point. 10 year, 279.59. tom: it has been a wonderful show so far this morning. i cannot say enough about the quality of conversation, discourse we will have with our fed show this afternoon. what we do is when required, we rip up the script. we will do that now with a clinic on the toughest political environment in america. rhode island, the knives are

out, always. there are three republicans, otherwise it is a democratic war zone. . wendy schiller is a professor at brown university. she carried the train at the brown university commencement. speaker pelosi said to the liberals of brown university, hold onto your hope. right now, speaker pelosi, a tough girl out of baltimore, has to survive taiwan. how does she do that? wendy: she navigates it the way she tries to navigate everything else. she tries to say something not very inflammatory. there is pressure for the speaker to break from biden symbolically. this might not be the best thing for american foreign policy. essentially from now until november, increased separation between the democrats who are

out and about and the president of the united states. with his approval rating, you have to cut the cord. this is a very public way of cutting the cord. tom: let's cut to the chase. here is the angle. the president is a fossil, i am a fossil and speaker pelosi is a fossil at 82. was she fragile when she visited brown and can she be strong when she visits taiwan? wendy: she was not the least bit fragile. she went up and down hills in heels i was not wearing. she is tough and energetic. you are raising an incredibly important point about politics in america. not even young people, not even 20-year-olds but 40-year-olds, they see 80-year-olds. it is one thing to see your parents, it is another to see

our grandparents and your great uncles and aunts running the country. it contributes to the divide in the future in the leadership of the country. there is too big of a generational divide for the people who have the power and the vast amount of people living under the power. lisa: at the beginning, you said this is a public way for nancy pelosi to create a divide with this current sitting president and that will be a theme among democrats because of his approval rating. how much does that undermine any ability he has heading into this call tomorrow with xi to make bold moves internationally or nationally ahead of elections? wendy: the u.s. has its economic power. i know the economy is struggling but we always have that on the table. you do not walk into a room with no leverage. to say we will pass legislation or to say he can get congress to

do something, that is not credible. lisa: we are looking at it economic backdrop. tomorrow, janet yellen will give a speech after we get the gdp numbers that could point to a technical recession. what you think about the messaging about whatever session is, what it is not a technical versus real? wendy: i think voters care about how much it costs to fill the gas tank and if they can go on vacation and filling up grocery bags. consistently elite messaging and conversation seems to be further away from what people are experiencing. what you define as a recession or not, it is more expensive for me to do things and i am more about my job. that is what matters to me. jonathan: thank you. wendy schiller of brown university. we heard a lot in the last few days if you are explaining, you are losing, and they are doing a lot of explaining.

to a lot of people, it already feels like we are in a recession. lisa: they are in a tricky spot. they seem to be scrambling and they have been for the past few months. we heard that with the gas prices messaging. they have declining gas prices, it is a perilous message to connect yourself to. i do wonder, though, if they say this is not a technical recession, it is a stronger economy if they are basically telling the fed to go ahead and kill it, raise rates as much as you can. jonathan: we are still adding 200,000, 250,000, 300,000 jobs every month. what we are focusing on is if the week this we are starting to identify, reflected in falling commodity prices because demand is coming off, whether that starts to bleed into the labor market. does it start to bleed out into

overall job cuts? tom: we are not there in the job market. we need to see that with the labor reports at the beginning of each month. the first week of august will be interesting. what it about stew is the percent of your paycheck that is going to things inflated. for a huge body of the middle class, that was a chunk that was painful before but now it is evermore painful. it has gone from 40% to 60% of a given paycheck, that is unacceptable. jonathan: low income groups, 10% of their monthly spending is now going on gas and gas alone. tom: food with all the substitution, mcdonald's. to me, i mentioned this earlier, next year is the year of debate about rent, multi family and the housing crisis in this country.

we are focused on three zip codes in new york. i have not been to your zip code in three years. jonathan: i saw you there a couple months ago. tom: do not ruin the image. coast-to-coast, rent is what it is all about. jonathan: it is crushing. it speaks to the stickiness of inflation. it speaks to a federal reserve -- tom: with the hollenhorst, you go from 9% to 1%. 5% is not acceptable. jonathan: futures higher by .9%. from new york, this is bloomberg. ♪

>> the consumer is not as resilient as they have been in the past and that more sensitive to prices. >> stagflation is a precondition for a growth inflation. >> the world is changing. economic volatility is so much higher now. >> the market shifted completely away from inflation concerns to recession concerns. >> for most people, it looks and feels like a recession