>> the fed and powell in particular needs to get across the message the job is not yet done. >> it is not just about what the ecb or fed does, you have to take the capital markets, inflation premium. >> they gained a gain where the market desperately wants the fed to react. >> we are very much in the early days of recovering off of an extreme low. >> right now, central banks everywhere will take anything they can get. >> this is bloomberg surveillance with tom keene, and lisa abramowicz. jon: the week is dragging out.

first thing lisa said to me, taken ages just to get the friday. from new york city this morning, good morning. tower audience worldwide, this is "bloomberg surveillance" on tv and radio. futures down .1%. three days of losses into wednesday head of jackson hole. tom: it's a finely a quieter market here -- it is finally a quieter market here. there's a lot going on. to meet a headline is netherlands natural gas is not giving it up. to me that is a headline this morning. jon: did we get the appetizer for the next headline for nero kashkari of the minneapolis fed. he spoke. he said we are at high inflation, this is a completely unbalanced situation which means it is clear. he goes on to say we need to tighten monetary policy to bring things back into balance. he wants to go big. potentially another 75. tom: when you hear kashkari talk about that -- talk like that,

imagine what we hear from the people mike mckee will speak to in jackson hole. it is simple, forward guidance will be very forward as we wait for data-dependent speech. jon: do think it is too early for chairman powell to speak to a december mood with how much data will come in from now and then? lisa: let's say he does, how the markets moved ahead of the commitments against the hockessin -- that has been -- hawkish nest that has been the tone? it is pricing in a reaffirmed hawkishness on a fed. how does jay powell react to that given how it will have to take -- jon: we get another cvi report september 13 and i have to say, after the pmi yesterday, which were dreadful, not just in europe but in the united states, the takes on more importance two. lisa: also anecdotal information

like earnings from nordstrom showing even middle-class and upper-middle-class shoppers are starting to push back and be more discretionary and build up. how does this -- how much more does this lead to a disinflationary push that the fed will not be that hawkish? jon: a bit snooty this morning. futures down by two points. negative zero point 05% on the s&p 500. looking the bond market, yields unchanged. a lift over the last week. in the fx market, 9947, euro weakness returns, negative .25%. lisa: i keep thinking about the hawkish and as people expect from fed chair jay powell and wondering about the disinflationary trends that we continue to see in the data. you mentioned what we saw yesterday with some of the pmi's out of the u.s., also the housing market today, july

durable goods orders 8:30 a.m. and home sales at 10:00 a.m. and this comes after yesterday's home information that was dreadful. you are seeing activity fall off a cliff and the expectation is depending on sales to be the same. this is noisy information, really important, because yesterday is the number of activity, the number of sales completed really fell off a cliff but a lot of it had to do with homes that had not been completed yet. there's a lot of noise under the numbers. 1:00 p.m., the treasury is auctioning billions of dollars of five-year notes. yesterday was fascinating, the third worst going back to 2018. people don't want to bid on something that is trading like a penny stock which is basically the race market on the front end given all of the uncertainty around what the fed will do. i'm more interested in the five year yield, how much do people have conviction over the medium range of what the fed will do? where will they top with the fed funds rate? what will that mean for the economic outlook and inflation?

president biden is expected to announce student debt relief program. on one hand, he has people in his own camp saying it is not generous enough to propose $10,000 of debt relief for people with a certain income, others saying you will do this now at a time when we are worried about inflation? either way it is a controversial issue and one he plans to avail today. jon: policy is super complex and we will catch up with anne-marie later today. the drought you mentioned to start the week that you said you should -- we should focus on, china in the news. in a big way given their drought and the threat to high electric stations in the country. lisa: this is a global story. i have been tracking this globally. for china, the global drought, the decline in manufacturing leading to further supply chain disruption, they cannot catch a break. some people say this is potentially worse than the covid outbreak's have seen. we have to keep watching the

space and track how it is affecting not only china, germany, and the u.s. but also the developing world. jon: thank you for drawing our attention to that. i wish you could chairs up but our next guest calls for the rp cycle, kriti gupta -- jim caron at morgan stanley. what is the rp circle? jim: it means inflation, recession, and policy risk. what is unique about the cycle is recession risks and inflation risks are at odds with each other with respect to policy. when the fashion has to address recession risks, which is what i think we are in now, effectively what we have to see is easier policy. at the same time, if inflation is a problem, a probably have to address that too which means retired policy. both policy actions that are required to address the current problems we have today are at odds with each other. i think that is what is creating

a lot of confusion and a lot of volatility in the markets. as many people have been saying, the fed is trying to bring down inflation. that is certainly what they try to do. i think they can bring inflation down to 2.5 to 3%. the question is can they keep it there. willie policy rate move up towards 3.5% possibly 3.75%? will that be enough to keep inflation at their target or do they have to do more? i think that is what the markets are sensing much further down the road. tom: let's frame it around an index, bloomberg total return index. a barclays owned it for a wild. the corporate index, total return down 15%. that is a horrific bear market, once-in-a-lifetime for any listeners and viewers. we've got to bounce. do you assume we breach on price those new lows of june? do we have even greater losses of price index? jim: this is a good question and

this is what should be keeping people up at night because the effectively what has happened is a lot of the losses we have seen in credit has been because of interest rates rising. has not -- it has not been because spreads have widened. they have widened but they are not at a level that are ringing alarm bells. they are certainly wider but in the race market, it's created these losses. if we go into the downturn, and this is the risk, something more of a deeper slowdown, potentially a recession, something along those lines, that means default risks will rise and that will widen spreads even more. that will actually add to the losses of some of these products. so far, what the narrative is, if we have a recession, maybe we are in one right now, if we have one, essentially what we see is

a mild recession because the jobs market is strong. consumption will still be there. that means defaults don't rise as much and that keeps credit relatively well detained. this is also something that is concerning for the markets. lisa: i would love your take on the issue of the fed holding interest rates at 3.5%/3.75% for years. how does that change your default outlook over the next couple years? jim: i think it is very interesting. when i think about what the fed has told us since the june meeting they had, which is that they expect the policy rate to go to about three point 75%, they reiterated that in july. powell said the best outlook for the future policy is what we said in june. i think he will say that again friday. you talk about the fed being hawkish and they have been consistent to the messaging back in june. i tend to agree with what jan is saying, essentially if we get to

the 3.75% level, it does not make any sense that once they have inflation on the run to turnaround and go the other way. they have got to have policy that will keep inflation at their target, not just bring it down momentarily and have it rise back up. that is not a victory. victory is getting inflation to target and keeping it there. a could mean the fed does key policy rates as high as 3.5% to 3.75% for more extended period of time. that is why bond yields are rising in the back and the curve is starting to re-steepen or diss invert to some degree. jon: awesome to hear from you to kick off our coverage before heading out to jackson hole. jim caron there of morgan stanley. the pmi's for s&p global, the team here at bloomberg breaking this down. if you strip out the pandemic, that is the worst read we have had on that number going all the way back in dated to 2009.

will it be confirmed by the ism because it has been a diversions between those two things. i was surprised by how well we shook it up. lisa: especially since it is not just the manufacturing side which we have had for a while. it was also the services side even though we don't necessarily get headwinds from new covid rounds in the united states. what explains that if you are not seeing people go to as many restaurants and as many amusement parks as they previously did? if this is more evidence of the consumer reducing discretionary spending. jon: you know it will help out -- help out the hospitality business. lisa: yes i do. jon: you will be a busy man, won't you, tom? tom: we celebrate for you in jackson hole, eight degrees centigrade right now. jon: i'm familiar with that. tom: that's actually pretty warm. what is important is where we go. i think we have to go to

elinor's, a wonderful pub behind a liquor store in jackson and we can watch part of midlothian plays eric -- play zurich. jon: you go to the liquor store before the bar? tom: you go to the liquor store in the bar is in the back. jon: are you serious? tom: yeah. i think they look good against zurich. jon: all right, he is available on twitter in the middle of the night may be. check it out before gets deleted. [laughter] futures unchanged. this is bloomberg. ♪ ritika: keeping up-to-date from news from around the world, minneapolis fed president says it is clear the central bank needs to tighten monetary policy. in his speech, he said inflation is high in the fed should relax only when there is evidence it is on the way back down to 2%. u.s. consumer prices rose 8.5% in the 12 months through july.

it's the six-month anniversary of russia's invasion of ukraine and the war has fundamental assumptions against russians military and economy. analysts have been surprised moscow's better equipped army did not quickly dominate ukrainian forces. on the other hand, russia's economy is holding up better than expected despite sanctions imposed by the west. japan is planning a dramatic shift back to nuclear power more than a decade after the fukushima disaster including restarting a number of shutdown reactors and developing new plants in the next generation technology. japan is trying to resist more strains on the power grid. today, president biden makes its announcement on student debt relief some allies are likely disappointed. the president has been considering giving $10,000 per borrower and student debt while capping the income of 125,000 to $160,000.

global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪

>> with inflation this high, for

me, i'm in the mode of we need to err on getting inflation down and only relax when we see compelling evidence inflation is well on its way back down to 2%. jon: the federal reserve turned upside down, neel kashkari sounding hawkish and the kansas city fed sounding somehow dovish. does that make sense to you? lisa: unless you think one is being extreme on all ends depending on the moment and the extreme is not hawkish. jon: role virtual -- reversal. counting it down to the big speech in jackson hole, wyoming with chair powell on friday. futures 0.0 5% on the s&p 500. on the nasdaq 100, down by 0.06%. heels by almost out of basis point 3.0387%. we have talked about it many times, haven't we?

euro-dollar 9943, negative, a little more than .15% -- .25%. tom: i want to point out brent crude above one hunt dollars per barrel and a quiet day -- $100 per barrel and a quiet day. jon: good catch. opec-plus on the saudis pushing back against the price they thought was too low. let's call it $94.50 on w -- 9450 on wti as well. tom: you will be even more confused about this argument and debate about forgiveness of student loans. annmarie hordern is an expert on this, has studied and studied it. what fascinates me is i don't to know what the president's view is. i read an article, i read another one, i have all of these people jockeying around and it seems to me nobody actually knows what the president of the united states believes in.

what does he believe in? annmarie: he campaigned on getting rid of pretty much all of it for a number of individuals making less than $125,000. part of the reason why the white house has really played their cards close when it comes to this, which we have been expecting for months, is because there is really too big a dividing camp about how to approach loan forgiveness. you have progressive, the naacp talking about the fact it should be up to $50,000 with the white house likely coming out to forgive $10,000 with a cap of 100 when he $5,000, $150,000 for individual -- 120 $5,000, one hundred $50,000 for individuals. especially when it comes to paint on the moratorium on your debt, larry summers saying this is the worst idea the administration can enact and comes at a difficult time

because the biden administration wants to make sure they are especially getting out the youth vote ahead of the midterm elections and i can tell you from experience those individuals once a week at least are on the corner of pennsylvania avenue talking about and protesting the student loan issue but at the same time, they are dealing with high inflation. that is why the former treasury secretary says this could add to inflationary pressure. tom: 10,000 dollars on let's take new york university, the most expensive school on the planet, $77,632 per year, maybe there is something more, but the bottom line, they have been pushed aside. this is undergraduate and some people say even only state colleges would be involved as well. basically it is a final hope and am i right it has been narrowed down to next to nothing? annmarie: it continuously gets narrowed down but they are giving breathing room to trying to extend this mentor him --

this moratorium. one of the big issues looking at student debt forgiveness and data behind it, it is incredibly sad to pivot but hard to target, if you look at individuals who complete four bachelor degrees, there are millions out there who had not finished their college degree and are not making and not benefiting from the benefits you have in terms of pay and job and career progression you would have if you had that college degree are paying student loans without it. that is a large majority and of course there is the racial divide. by and large, individuals who get hit the worst on this are black students. tom: help me out here. just to pick a random school in england, all in, one is 32,000 u.s. dollars per year versus the idiots in america. translate this for me. jon: domestic i think is 9000

sterling for the year annually for fruition -- tuition. tom: you must think i'm nuts. jon: when i started it, i think it was $1000 per year, can you imagine? the more i spend looking at this, the more complicated it is. the number one statistic that will always get thrown around and this administration will struggle to hide from, the growing earnings gap between young college graduates and their counterparts without degrees. what to they say back to that? annmarie: it is very difficult because those without -- are you sing those without college degrees but spent time in college, is -- it is hard to target those versus those who spend i went and spent all this money on the college degrees and i am getting paid but i/o a ton of debt. maybe they're making about

150,000 dollars but living in extensive cities like new york or los angeles. and they are dealing with inflation. should they be exempt from this were not? it is a difficult one for the administration, which is why the administration has been playing their card incredibly close and they dragged their feet with coming out on a statement from this which we expect today. jon: looking for your coverage through today. annmarie ndc policy is complex. you will hear the republican talking points today and the talking points from the administration. i know you like me, the more time you spend looking at this, the more complex you realize things are. lisa: why now? especially if we are worried about inflation, why come out with a new relief program, especially when the labor force participation rate for people has fallen? even though people are not getting back into the labor market, you wonder why now. it seems this is something that could be addressed in many ways.

the timing, especially going on a platform of trying to reduce inflation, creates a lot of questions. jon: tom touched on a good point, college in america is a problem. you are subsidizing colleges here. tom: i was talking about this the other day and the bottom line is, if i could bring this up on air, i will, -- jon: he is upset. a lot of people are upset. tom: i don't want to be too frank, it is a total freak and scam. -- freaking scam. jon: with tom keene, lisa abramowicz, i'm jonathan ferro. this is bloomberg. ♪

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jon: losses on the s&p 500, small losses. i'd cant even know if you would call them that. features -0.02%, on the nasdaq down 0.05 percent. energy equities making a comeback, crude back through 100

as tom mentioned on brent. close to 95, pushing those levels into the 90's again on wti. here's the bond market story, focus on the front end of the yield curve into jackson hole, wyoming and the chairman powell speech. in and around 330, yields unchanged today. what kind of tenure response for incoming data? the pmi's yesterday, dreadful. we will talk to andrew hollenhorst in a moment. we want to finish on foreign exchange and get used to these levels because i'm still not used to these levels. 9936 on euro-dollar, 11785 against the u.s. dollar, a break of 118. tom: i would go pacific rim here. rename the, there is a chinese yuan, it is really up against new weakness. i think that bears watching into the weekend and the monday opening or sunday evening.

the thing that has not moved as we mentioned yesterday was dollar-yen. at the 136 level, you need to get to 100 3940, and we are not there yet. jon: i have a lean toward the single currency for that particular one. levels since we have not seen since 2002. gives you 90 of the strength we are seeing for the green this week. tom: we are committed to talk about economics. that has always been our lead story and as we prepare for jackson hole, we bring you the voices now. goldman sachs was with us yesterday. and when we are at jackson hole, we will have world-class coverage including voices from europe. right now, this is like bob dylan picking up an electric guitar at newport a few years ago. andrew hollenhorst as citigroup had the courage to come out early and say higher rates and everyone said you are nuts. now he is not nuts, everyone is showing the party.

reaffirm where mr. powell is going right now. give us that level we will see next year. andrew: i think we will be at 4% or above. policy is more about inflation than about rates. rates are following where inflation is going, where inflation has been. we are sitting at a percent to 9% inflation. i think underlying core measures of inflation are between 4% and 6%. at those levels, it is hard to think the policy rates are not going to get around 4% or above. tom: your colleagues in london quoted 18% on energy inflation i know will not get something inflammatory like that but is your headline to jackson hole we will be surprised how difficult it is to drop inflation down? andrew: i think there are elements of inflation we might see relief, commodity prices have moved lower, maybe we get relief in goods prices.

the core issue for the u.s. economy, tightening in the housing market, which is may be relieved by higher mortgage rates, but tighten it labor markets. so you look at the core measures and underlying inflation running four to six -- 4% to 6%, then we look at underlying wage growth, however you want to look at it, we see wage growth 5% plus. i think that is really the issue for the fed, a tight domestic labor market, a lot of inflationary pressure. i think we know from history that does prove difficult to bring down. you usually need a significant tightening of financial conditions, loosen labor market and bring inflationary pressure down. tom: tell me the risks around your view, 75 september, 4% fed funds by year-end, tilted to the downside and upside, fairly balanced. how does that developed -- how has that developed? andrew: he is trying to reassess

at one point we see more downside than upside risk to policy rates. the answer we come back with is there is still more upside. i think at the september fomc meeting we have had mixed data on some data on the activity, and it looked reassuring. if you look at 520,000 new jobs created, some data has been uneven. i think it is hard to parse the individual meetings. we think 75 in september. i think the higher conviction call is where they need to get to, how high they need to get, and remember, this is a market that is pricing in interest rate cuts in 2023 with the fed only getting to a level around maybe 3.5%, 375 basis points.

i think the fed maintains rates at a higher level for longer than that. lisa: analysts have been pushing back against this idea more, especially pointing to disinflationary aspects like for example used car sales or the inventories at retailers and markdowns they are planning for fall. there are all of these forces leading people to ratchet down how high they see inflation, ending the year. why do you disagree? why are you pushing back against that narrative? andrew: i think maybe we need new definitions of core inflation. those are out there if you look at the atlanta fed, they have a great dashboard of various metrics, mean inflation, price inflation, various labors of core inflation. the only thing core inflation would do is look at used car prices and something very specific and different going on with car prices. there would be a particular issue in the shortage of semiconductors that push up these prices, very

significantly. they are still extremely high and elevated. they are coming down from high levels so that is part of why we so the weaker core inflation print in the month of july, we may have a similar print in august. looking at the host cell used car prices, they come down again. they might end up coming through in august for inflation print but the minneapolis fed president last night was one of the biggest doves and now is one of the biggest talks, walking through the elements, probably knows a lot about the underlying inflationary trend around 4% to 6%. it comes back to the tight labor market, service providers in particular to their customers so that acceleration we have seen in wages, you probably see that in prices. we can accelerate on inflation even if let's say used car

prices come down. lisa: even with that, analysts are saying is no more likely the fed will raise rates to 3.5% and then hold it there for a while? be patient come wafer tightening to trickle out. why do you think they will be unable to do that or do think it is political pressure that if inflation remains high, they will have to appear to be taking a harder line? andrew: i don't think it is political pressure. i think it is fundamental economics, basic monetary theory, the idea you need to get real interest rates -- the nominal interest rates -- some measure of underlying inflation, back to a level that is at least positive. i think that is the minimum you need to get to bring inflation down. theoretical models suggest that but there is also the empirical fact and history on this that specifically you need to get the

nominal rate up to the rate of inflation. if you stop at 3.5%, in a world where inflation is running 4%, 5%, 6%, and on the headline a percent or 9%, that means you are heading significantly negative real rate of interest and that is really important because you are not going to slow down the economy by building that economy and showing individuals a negative real rate of interest. 3.5% potentially coming down lot faster than expensive -- than expected. i think the more likely scenario is inflation will be persistent. the fed has the ring and down so that means policy rates need to move above 4%. jon: we will catch up with a ton of fed officials at the end of the week. what would you like them to ask them? what are you focused on that needs to be answered? andrew: what i would love to hear, especially after the july

fomc meeting, is some clarification of how fed officials think about the neutral rate of interest. we were talking about it with lisa, where do you need to get rates to to have zero effect on inflation and how much further do you think you need to move rates to bring down inflation? we see some of that in the summer of economic projection but we have also heard from chair powell the confusing statement that may be policy rates are in neutral now. i think it is hard to defend that position in a world where inflation is running much longer -- much stronger but i would like to hear clarity. jon: we are not laughing. andrew hollenhorst, as always, thank you. we have called out with mohamed el-erian who said the same thing. lisa: other people said yes inflation is high but it will come down dramatically. the two camps are getting more entrenched and it is hard to know what data is going to

change them. i want to see the research they present at this jackson hole symposium. where do they come out with supply chain disruptions and that has sorted a whole host of information we are getting. jon: speaking of disruption, the italian prime minister speaking in italy and these are the headlines. italy must never again be dependent on russian gas, not a surprise to read that. they can cut russian gas imports to zero from the follow 2024. do you hear with the belgian prime minister said recently? he said never mind a single winter, he was talking about maybe five or 10. this could go on for a long time. tom: you heard that from yen yesterday on inflation trend, and that is the core of the inflation, something mr. draghi knows well. i will not mince words. mario draghi will be missed at this jackson hole. jon: i agree with you. it would be nice to catch up

with him. tom: it would be an ad given the whole -- the whole for a guidance. jon: he is the king of that stuff. tom: he had clarity and intensity. lisa: he did at better, swagger. jon: i agree. futures down. [laughter] this is bloomberg. ♪ ritika: keeping up-to-date from news from around the world with the first word, i'm ritika gupta. is the six-month anniversary of the russian invasion. u.s. diplomats warned russia is preparing attacks on ukraine civilian infrastructure and government facilities in coming days. in the u.k., the favorite to be the next prime minister hinted at an emergency class of living boosts to the elderly. this trust would not go into detail about how she would help

households facing soaring energy bills but it would go to those on fixed incomes. one in six american homes, 20 million households, have fallen behind on their utility bills and face the possibility of a shut off. according to the national energy directors association, it is the worst crisis the group has ever documented. there has been a surge in electricity prices propelled by the soaring costs of natural gas. signaling and expansion of the government crackdown on misconduct that has so far put on the financial and tech sentiment. the property sectors already dealing with a crippling slowdown. shares of norstrom is falling, it cut its outlook for profit and sales. they say business has slowed as both demand and traffic are tapering off in july. investors have seen nordstrom

intubated by its catalyst. global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪

>> the market is betting that we will be sure throughout this entire winter. the market is short product, [indiscernible] jon: the president of the sure group, from new york city this morning, good morning. futures unchanged. on the nasdaq, down .1%. yields unchanged. atk stout drink. you know what i mean? .7% on crew. let's call it $.40.

brent crude $100 and almost of .7%. tom: after the show tomorrow, we will have to go to the pioneer grill which is 1950's thing and you will have to have a full wyoming. a full wyoming is something with stuff on top of it. jon: do you want to share with the stuff is? tom: it is like grits. cream you like cracker barrel kind of thing. it is a french restaurant. it is like the country benedict and they have huckleberry pancakes and i'm sure -- i don't know what their mimosa is. jon: who is responsible for supervising on the trip? tom: not me this year. -- trip? not me this year. tom: rachel from perdue -- jon: she is not here. you are on your own this time. let's see if you make it thursday morning. tom: let's migrate on an interesting day. to a gentleman with wonderful

performance on southside oil, he is a clear energy partner, and he is summoned with huge experience. i want to go back to your work on refining. this is something we have not addressed area lisa and john want to take a different tack but right now we have massive not in my back yard on refining. you wrote about this years ago. what do we do about not in my backyard if we need to take distillates to make stuff we need to use? >> i guess the interesting part has been since the pandemic you have seen 3 million barrels per day of global capacity closed down, so that has really impacted the market in total. within the united states, we can make a lot of product, but it is needed outside of the united states but product exports have been high too. tom: i look at where we are and

i like to take jerry nadler who just won a big election on the upper west side, if we would to take a windfarm or whatever, oil refinery or whatever on the upper west side in the hudson river, that would not go because it is not a my backyard. do we need to see a change to jumpstart refining to bring the price of oil down? jacques: it is a great question. i think we have seen the downstream and midstream where it is hard to get a lot of things built outside of texas and louisiana. those are two places you've got a better shot at getting assets built. lisa: given the demand that has increased dramatically not just from the united states were globally in the wake of the disruption with russia's invasion of ukraine, are investors getting more accepting of the idea of greater shale investment? i say this profitability in the u.s. is skyrocketing. jacques: that's a good point

because we have not seen that yet and i think that is kind of one of the key factors both within the shale and globally that energy investment is still well below where it was 10 years ago, so that is something that does not appear to be coming back and is limiting supply growth. lisa: what is behind that? the idea perhaps this will be short-lived in terms of the demand surge or is this in blue because the investment dollars are not there in the same way due to different esg constraints and different kinds of a feel among the endowments and other institutional investors? jacques: i think it's a combination of a lot of things. you definitely touched on one key point in terms of the investor appetite. so i just think too there's a lot of labor shortages, so even if companies did want to put more rates to work, there are not people to do it. lisa: what about the natural gas states in the united states?

? there's been a lot about the exporting center shut down that gave reprieve to gas prices in the u.s. because not as much is being exported to europe. it is supposed to come back online this fall. how significant of a player can the usb in staving off the deficits we are seeing over in europe to replacer what we see from russia? jacques: what we have seen is the u.s. is one of the major growth areas for liquefaction capacity. the issue is it takes time. within the u.s. and outside of the u.s., there is not much new capacity getting billed. this goes back to your fire point about investment. when investment dried up during the pandemic, it slowed down a lot of this new lng capacity. jon: it is good to hear from you. jacques rousseau of clearview energy partners. i have been distracted by cracker barrel, the restaurant you're trying to take me to. cheesecake/pancake

breakfast served with eggs and breakfast me. i have no idea what breakfast meat is. crisp and refreshing, now serving jack daniels cocktails. [laughter] is that breakfast? tom: first of all, this is not the pioneer grill which is fine cuisine. jon, what is great about the road trip you and i can take across the spina virginia down to nashville is the barrel to crack, there is a store in the front which you can decorate your walkup. after that, at 2:00 a.m., you go to shea waff. jon: i can't wait, i will record all of this. tom: it makes denny's -- jon: rachel is so happy she is not with us this year. [laughter] tom: this headline -- jon: this headlines crossed, i will get to it.

trade is pricing 1.0 -- one point of ecb hikes. what is interesting about this is the euro is weaker, it is not stronger. euro-dollar 99 point 19. -1.5 -- -.5 percent. we are pricing hikes but we are not getting traction for the stronger euro whatsoever. tom: let's go down to inflation-adjusted analysis. we have not talked about it in ages but the real yield, you will see that from jackson hole at noon. the 10 year real yield is 0.45% positive, that is not enough um ph to get this done. we need more umph. jon: do you think umph gets it done? i have no idea does. tom: my opinion, i am doubtful umpj gets it done because it is a modern vastly open economy.

what i'm more interested in and i'm not sure this will be interested -- be addressed [indiscernible] jon: would you like to translate umph? lisa: sure, it means umph. it stands on its own. i apologize to whoever it is. i'm talking about this being the ultimate point, how much power do rate hikes have in this modern environment and that is the key theme of this jackson hole environment. jon: we are down about .1% with tom keene and lisa abramowicz, i'm jonathan ferro. this is "bloomberg surveillance." umph umph. [laughter] stated -- stay tuned. if you're confused, there is more to come. this is bloomberg. ♪

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>> it's going to be sustained. it is the focus on trying to squeeze out inflation to the extent the fed can. >> shortages in housing, shortages in labor globally. >> we can't overestimate the vulnerability of the economy and corporate america. >> there's no victory from the federal reserve. they will tighten. >> the market is panicking about

what powell will say at jackson hole. >> this is "bloomberg surveillance." jonathan: special coverage this week, tk on "real yield," "wall street week." coverage of jackson hole, wyoming. i can't keep a straight face. good morning. this is "bloomberg surveillance," with tom keene and lisa abramowicz. futures down .1% on the s&p. before today, three days of losses. tom: three days of losses and a little bit of a snooze fest. we are waiting and the question is what are we waiting for? rbc capital markets, he cut his teeth on wage inflation and that's what's not going to be talked about at jackson hole, the labor economy, job economy

and inflation seeping into something like the 1970's. jonathan: we are waiting for the panel on friday and the payrolls on september 2, cpi september 13 and a meeting on september 21. the road to september 21 is a long one. tom: do we get forward guidance? there's a lot of different opinions about what we are going to hear. i want to listen to michael mckee. what is so important is what he doesn't say, what he will not address is the international economy. it is ugly in europe. jonathan: will he address this market? lisa: does he feel comfortable how much it has rallied? still hanging in. is this ok for him? will he go back to the line we heard last month that even though the market has rallied -- it has had enough to get it done or do we need something more hawkish to keep things where they are because people are expecting hawkish nests? jonathan: the ecb, looking for

another 50 basis points and maybe after that another 50. the euro is weaker. lisa: even a one percentage point increase in european rates is not enough to strengthen this europe which raises -- this euro which raises the theme we will hear, has monetary policy lost its potency in an era of supply chain disruption? how does the european project deal with that when inflation is becoming a spiral with the importation through a weaker euro? tom: the smartest app -- sai saw today, sir howard davies writing in the guardian. he will join us on friday. i'm thrilled about that, particularly with governor bailey attending jackson hole. tomorrow, 7:20 a.m. we are thrilled to bring seven feet tall grizzly 399. jonathan: 399 is the hiker.

i'm told she's fully integrated into the design. lisa: jon is not kidding. he does not want to eat on set. tom: i agree with jon. lisa: no huckleberries. tom: no huckleberry pancakes. lisa: milk in my coffee. jonathan: cracker barrel after "the open." tom: there is doors and i don't even want to go in because i fall asleep. mckie goes in. the doors burst open and outcomes bill and bauder. -- will and bauder. he is furious about whatever the debate is and next to him is the acclaimed six and a half foot, seven foot risley bear in a cage in the lobby -- grizzly bear in a cage in the lobby. grizzly 399, look for that. jonathan: futures down two

points on the s&p 500. he so upset about that. the nasdaq down 14 points, a little more than .1%. yields unchanged at 3.046. the fx marco, euro weaker by one half a percent. lisa: keeping my eye on that. we can talk more about grizzly bears. today we get july pending home sales. how much do we see an ongoing softening in the home sales activity especially because we've seen levels we've not seen since the financial crisis? 15 years ago, how much does this portend price declines and how much is it simply a softening in the activity in the wake of some of the increases in mortgages? 1:00 p.m., the treasury will sell $1 billion of five-year notes. -- was one of the worst we've seen in the past four years.

how much was not that repeated in the 5-year note given the push and pull over how long the red dot the fed will have to keep the rate high? president biden is expected to detail his plans for student debt relief. how much do you actually get for relieving $10,000 for certain eligible individuals? how do they roll this out at a time of disagreement within their party and concerns about inflation? jonathan: sometimes controversial, the big policy effort in d.c. i want to catch up with lori heinel. i've got to say this, we've been building up jackson hole and chairman powell speak. i wonder if it is like it was 12 months ago, very academic. do you expect the same? lori: we don't expect the same academic tone. last year the fed was off its mark. they thought inflation would be transitory and they were much more dovish against the backdrop

that was increasingly inflationary. this time they've got to be more front footed and address what's happening in the marketplace, focus on data dependency and be committed to the hawkish rates set forward. tom: i look at this as a seesaw and a seesaw is the risk of a slowdown in growth and maybe there is in there as well dynamics of a labor economy. the fed is debating inflation but what we are worried about in europe and here is a slowdown economic growth and the labor economy. do they give chairman powell support in this speech? lori: we are very concerned about that as well. we see continuing to be hawkish is not the right posture because we are starting to see signs that the rate hikes have taken root. whether it is economic slowdown or interest rates, but as you

know the labor markets have been persistently strong. that gives the fed cover to focus on the inflation headline numbers while not being too concerned about labor. we think that's a dangerous posture. lisa: let's say jay powell says exactly what you said. we don't want to go too far before seeing the ramifications of what we've done. if the market rips, it is the rally incredible, will it be against them? lori: it would have to be a lot more than that because the other concern is they can be viewed as waffling too much. one of the great things about the fed chairman history as there has been a lot of credibility. they've been consistent. they can be very fearful about seeming to ignore the data, especially the data that's important to them, that some type of acknowledgment that while they still remain very hawkish and focused on the short-term pressures, that they

are going to continue to watch for signs that some of their moves are starting to take root. lisa: you just said something i am mulling over. they've built up credibility about their data dependency. i think there's a lot of questions around their credibility, which data they care about, whether they are using the data points they want to to confirm the message they want to send out. what the counter argument? lori: i have thought about it a lot and i'm talking about the early days of the fed posture and up until a year ago they seemed to track that carefully. last year they got it wrong so now they are behind and the question is can they get back on side? they don't want to be seen as abandoning data dependency. jonathan: lori heinel, thank you. lisa, what do you think about it? inflation is 8.5%. how could they be dovish with

8.5%? the problem the chairman has had is every time he speaks, every time we get a news conference, this market has decided that a turn is about to come, the pivot is around the corner. lisa: we showed a lot of sarcasm around the pivot that wasn't, at the fed didn't create a huge tone. -- huge change in tone. they had -- they did perhaps recognize they have to wait and be prudent and not tighten before they see the ramifications of policy. that could be considered dovish given a .5% inflation. that is a push-pull. how do they still seem like they are aware of all sides? jonathan: do you still call neel kashkari a hawk? tom: i did not. he has been a good friend of the show but i never thought i would see the shift. i have huge trouble with the

word "pivot," whether it was president biden pivoting to the pacific. it is a marketing phrase, an image phrase to describe a sarcastic process where you have mysterious abilities to make a turn at some point, whether it is red sox baseball, the tots, whatever. pivot is baloney. that's all there is to it. jonathan: that's it. tom: baloney, john, is an american food meet. i'm not sure if you are familiar. jonathan: no idea. i am familiar. it is a process the way you go from 75 to 50 to 25. that's what a lot of people are still looking for. yesterday goldman said a shift down to 50 and 25 and maybe stop at 3.5% and sit there for two years. lisa: we heard some pushback saying perhaps you have to go for -- further. andrew hollenhorst saying people

don't understand the neutral rate and it is much higher. jonathan: baloney, it tastes good? tom: with olives and mentos it is awesome. -- to mentos it is -- pimemntos. jonathan: i had to change my flight with united, smaller layover, cheap on a day off. debt -- i will be babysitting tk. futures unchanged on the s&p. tom will arrive in jackson hole, wyoming. i'm not responsible for him tonight. or whether he shows up. tom: 50/50. ritika: keeping you up-to-date, i am ritika gupta. the six-month anniversary of russia's invasion of ukraine and the war has fundamental assumptions about russia's economy. there was surprise russia did

not quickly dominate, however russia's holding up better than expected despite sanctions from the west. in june, a record, the u.k. imported no fuel from russia. the ambition to phase out all purchases of natural gas and oil from russia following the invasion of ukraine, russia has been the supplier of oil. -- won't be influenced by the fed to make large interest rate increases to fight and -- to fight inflation. >> we don't see the need to undertake aggressive rate hikes every meeting because thailand is different from industrial countries. we will calibrate a response so we will be data driven. ritika: thailand could raise interest rates a quarter-point for the first time since 2019. global news 24 hours a day, on air and bloomberg quicktake,

powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> i think a year from now, two years from now, inflation will

be much lower because some drivers, commodity prices are clear. the sector in general, i think that will come off a lot. jonathan: absolute clinic yesterday with the chief economist at goldman sachs, that interview on bloomberg.com and the terminal. good morning with tom keene and lisa abramowicz, i am jonathan ferro. futures unchanged on the s&p. the nasdaq ready much unchanged. equities doing ok, the bond market not doing much. euro weaker again by one third of 1%. stay focused on this, crude making a comeback close to 95. 94.73. more than 1%. tom: i did a moving average study and we are above one of the key moving averages. we just slid up quietly. it bears watching. a lot of the news flow including the iranian talks which are supporting as well.

we've got a great lineup for jackson hole. i was talking to annmarie hordern and she said you got to get to the heart and soul of jackson hole. one of the things about the lodge is the famed grizzly bear which the thing is ginormous. here is transitory the griz on the left and chairman bernanke on the right. jonathan: i'm sure mike mckee was there. tom: i comes this. jonathan: he did a great package where he went around jackson hole with tourists and if they had ever heard of chairman ben bernanke. tom: for those of you on radio, it is a glare -- a bear in a glass cage dead and bernanke was reported to be alive. you are right about the bear danger, it is not funny. jonathan: lisa thinks we are

ridiculous. lisa is going hiking. tom: the grizzlies are like moose. when you see them the first time, it is not disney. it is not disneyland. speaking of disneyland, annmarie hordern is in washington. [laughter] lisa: did she run awry -- runaway? tom: the never never land of washington. cut to the chase, the democrats are doing better. is it just because of the roe v. wade bait or is something else going on? annmarie: a lot of mickey mouse. when you look at the races overnight and you talk about democrats doing better and maybe roe v. wade, you have to look at this 19th congressional district in new york which pat ryan -- tom: above the hudson river. annmarie: pat ryan was able to pick up. this is a swing district.

they voted for the former president trump in 2016 and voted for biden, bush, and obama. what happened with pat ryan is he focused squarely on abortion rights and roe v. wade and what you have from this challenger is talking about overarching issues with the nation over wide of inflation and crime. it shows this swing as well as what happened in kansas a few weeks back, it is very much so a live debate that democrats will really campaign on. tom: we've been watching wild kingdom getting jon ferro ready for the grizz in wyoming. what's your take on the tuesday primaries? we didn't have cheney. annmarie: one would be the pat ryan abortion is resonating swing voters. that is important for democrats to take away and republicans do know this is something they need

to work on in terms of massaging their message with voters in swing districts. it is all eyes on florida. obviously, the big ticket will be the governor's race but desantis has all this money and really you have mr. chris behind him in terms of being the underdog. what is more interesting is the senate race, marco rubio versus congresswoman val demings. in one recent poll, she was actually ahead. this is something, again, abortion, she will take to the voters in florida. lisa: i want to stick on the governor race because charlie crist, the former governor, won the primary and he is going up on the democratic ticket against the incumbent who is also potentially a presidential candidate. can you talk about the fundraising aspect, how that potentially could shape this debate and shape this race in a way that goes far beyond just a

local election? annmarie: it's certainly gone far beyond that because you are ready have governor desantis out and about in places like arizona helping some of the republican hopefuls there trying to get ahead. he already has taken on nationwide performance unpopularity in the republican party. you look at the polls, former president trump is ahead if there was a gop ticket 2024, but second, and with a tonda of cash is governor desantis. his cash is very different from the former president's. he is getting big checks from the likes of karen griffin and paul tudor jones, as many move their spaces to florida where the former president has more of a grassroot, a few dollars here and there. that's something desantis would have to look for in 2024.

we look for the florida race, potentially you will see democrats really want to focus on mr. crist, congressman, former republican governor looking for his job back because he has said in his speech if we stop this man here than 2024 is over. jonathan: a difficult moment in this country for many people, annmarie hordern in d.c. from "businessweek," we all need to read it, called "a tsunami of shutoffs." some 20 million households across the country, about one in six american homes have fallen behind on utility bills. according to the national energy assistance directors association it is the worst crisis the group has ever documented. we've been talking about falling gasoline prices in america. gas prices, we've been discussing the last couple days have been soaring and so have electricity prices. tom: i'm sure chairman powell

will address this. you can make a case at the lower quintile or decile that it is ok because they are waiting on the fancy people but it is the lower middle class, that is absolutely crushed in the slow down going on now. some would say not only two by three america's. jonathan: one in six american homes fallen behind on utility bills. lisa: it just shows the pain some of these gas prices and electricity prices, and it will only get worse as time goes on given the other inflationary pressures. jonathan: futures unchanged on the s&p 500. coming up, subadra rajappa of socgen. this is bloomberg. ♪

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jonathan: live from new york city, good morning. equity futures almost totally unchanged. positive about .05%. of the nasdaq 100 0.4% we caught

up with andrew horst of citigroup. he is looking for 75 basis point rate hike next -- this september at the next fed meeting. going into the bond market, 2, 10, and 30. a lift in yields a few months ago. they're in mind the highs of the year on june 14. we are still off those levels. we are getting quickly higher on the german two year year. your german two year year, around 1.23 in june, july 28 we moved 25 basis points on the german two year. now 92 basis points. factoring in more ecb rate

hikes. tom: is it ecb rate hikes or the shock over the level of inflation? jonathan: i think it is a bit of both. one leads to another. we are expecting the ecb to hike another 12 basis points. yields up on the german two year. you've not seen your strength, you've seen your weakness. euro-dollar .90 930 -- euro-dollar .9930. it is fascinating. tom: ecb's september 8, right? jonathan: let's get you some stocks to watch. lisa, walk us through it. lisa: really interesting stories under the hood that are not that interesting. nordstrom down nearly 13%. they reported earnings after the valve and they were dreadful -- after the bell and they were dreadful.

the full-year forecast flew in the face of expectations that wealthier households were sticking in better than others. they will be cutting a lot of the prices on their inventories. we also saw this disinflationary trend with toll brothers, saying its sales declined by 60%. these are high end homebuyers moving away from committing to orders ahead of what they see as persistently higher mortgage rates. petco health and wellness reports any minute. those shares are down 7% and we are expecting some sense of whether people are willing to shell out for their pets even amid some of the higher base costs they are facing. yesterday there was a concern about a risk of a case against twitter with the former chief security officers saying their work lapses in securities. those shares moving.

i am watching to see whether they respond. salesforce expected to report earnings. this comes as we get a question round software. how much can people buy in the face of weakness. nvidia said to report earnings. how much do we see persistent weakness in the chip sector? how much does this portend a slow down in the apples of the world, which have been bulletproof considering the lack of demand the chipmakers have been talking about. tom: the chipmakers have been separate but all of a sudden they are not separate. right now in the bond analysis, subadra rajappa joins us. i am fascinated by something off the radar, which is the real yield has not moved given inflation that is out there, given the idea we may have higher interest rates. are you surprised the 10 year real yield is positive .46?

shouldn't it be higher? subadra: i think what we have seen in the last weeks is exactly what we saw ahead of the june fomc meeting. the move higher in 10-year gilts is mostly because of a sharp rise in inflation expectations. this is not just a u.s. phenomenon. you are seeing inflation expectation rise meaningfully across the globe, especially europe and the u.k. and you see breakevens in the u.s. are also starting to widen in tandem with what you are seeing globally. the market is starting to price in the potential for inflation to remain consistently high over the long run, which is a paradigm shift. the last couple of months the market was giving the fed a lot of credibility in being able to bring down inflation expectations. tom: a delicate question.

his chairman powell losing credibility because the united kingdom and continental europe are falling apart? subadra: i think it is making the fed's job a lot harder because there are a lot of externalities they have to factor in. they have to take into account what will happen in china. there is a meaningful slowdown in growth. what is happening in europe with the potential for a winter that will be very rough and much higher inflation in europe. in some respects the remit for the fed, not just the u.s., but also what is happening globally. globally inflation is a big concern. they will have to factor that in with how they look at markets in the u.s.. you look at recession probability, they are rising a lot faster in europe and in the u.k. you have a contraction next year. those are the kinds of things

chair powell has to weigh in to the equation for what he does with the u.s. as far as policy is concerned, in addition to what we are seeing in the data in the u.s. and the inflation trajectory in the u.s.. jonathan: what does president lagarde do with this as a backdrop? they have a really tough hand. what did they do? subadra: it is really tough. they are behind the fed in raising rates and trying to play catch-up in the next ecb meeting. markets are pricing in 1.25% of hikes by the end of this year. they will have to deliver a much more aggressive path of rate hikes. you pointed out earlier that as we are raising rates the currency will continue to weaken because of the backdrop on recession and a meaningful slowdown in growth in the risks

associated with the war in ukraine. it is a complicated optimization function for the ecb because it is not just about inflation, it is about externalities. lisa: in united states there is a huge debate brewing about whether the fed can raise rates to a certain level or whether they have to raise rates to a more punitive level. we have heard that even this morning. we heard this from andrew hallman horst saying we have to go much further than that. where do you stand? subadra: i think the market is extraordinarily efficiently priced in for what the fed said they will do. i think the fed funds rate gets to around 3.25% and perhaps 3.5% to 3.75% by next year. this whole argument they should

hike well beyond 4% and then that is the only way they will be able to raise inflation does not make sense. if they do that there is the potential things break. the economy in the u.s. is brittle. if they tighten policy aggressively, there is a greater risk we could go into a much deeper recession. in which case they will cut rates and pivot a lot faster. keep rates steady and invest much better outcomes to get above 3.5%. lisa: i want to get your sense of where you think inflation will end the year in the united states? subadra: that is a tough one. the trajectory is for inflation to continue to gradually decline , but the majority of the declines we will see will be not

so much this year. what the fed will be looking to see is if we see inflation starting to trend lower month after month. jonathan: thank you. a difficult time for europe and the ecb. we will hear from jay powell on friday. in some ways it is not about how high rates go. i would be far more interested to know about if we get to the end of the year and rates are still rising and unemployment has started to climb, that will give you a decent idea of where this economy will be. lisa: qt has not happened. we have seen the balance sheet stay around where it has been. it is going to decline more rapidly in september. how much do we get some indication from jackson hole there are limits to the balance sheet involvement they want to cap wear those balance sheets end up and how does that factor into the restrictions we see in

policy? jonathan: that is what is interesting about the citigroup call. what about the over light the balance sheet reduction? the number is $1 trillion over 12 months. tom: you said by year end. year end is approaching rapidly. jonathan: four months away. tom: some of these calls by year end, that is tomorrow in fed speak. by year end means when the bears hibernate. they will not be hibernating in jackson hole. out of the deep surveillance archives, this photo from michael mckee from five or six years ago. we are making jokes about it. this is there 399. -- this is bear 399. that is ben and jerome and paul. tom: what is something good to

know, when we begin our broadcast at 3:00 tomorrow -- jonathan: where is janet? lisa: she is the mama. jonathan: model hiker, lisa. tom: do know what they love? they love marmite. you will be out there with your marmite and toasted cheese and bearsmart.com says this is a risk. jonathan: i do not know what website you are on. bearsmart.com. everyone at home now working out if that is a real website. this is bloomberg. ritika: keeping you up-to-date with news from around the world. the u.s. will mark the ukrainian independence day by giving the

country another $3 billion in weapons. u.s. diplomats have warned russia is preparing an attack on ukraine civilian infrastructure and government facilities in coming days. about what in six american homes and 20 million households have fallen behind on their utility bills. according to the national energy assistance directors association, it is the worst crisis the group has ever documented. there has been a big surge in those electricity prices propelled by the soaring costs of natural gas. the favorite to be the next prime minister has hinted at an emergency cost-of-living boost for the elderly. liz truss would not go into detail, but she jested -- she suggested it would go to those with fixed incomes. -- of the industrial software designer. before today shares have fallen 40% in london over last year.

global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

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>> we are seeing food crunches happening despite the war in ukraine, which has put a lot of upward pressure on food prices. we are hearing from ceos they will continue to push through higher costs for food. that will be a pressure the fed does not have much control over. jonathan: a lot of things they did not have much control over. that was dana peterson. michael mckee with some advice, you just need to be faster than tom. that is what he said. [laughter] tom: he has said that before.

on the nasdaq, up a little more than 10%. yields up about one basis point. tom: major shout out to the federal government in the park ranger systems of jackson hole. yellowstone park. a ranger told me there is more wildlife now in the valley and there were at the time of the indians in the 19th century. jonathan: that is amazing. tom: futures up six. we are moving off the snooze fest. helping us with that is kriti gupta with an important chart. kriti: we want to focus in on what dana peterson was just talking about, food prices in the context of the war with ukraine. we are looking at a chart of the bloomberg cranes index. you see the massive surgeon prices in february, than the

course of the war itself. you saw the surge in prices given the breadbasket of the world, that supplies coming offline. fast-forward to june which sees prices make a round trip it was staying down for a while. recession fears, stronger dollar, some was a question of the weather. an uptrend as you have the likes of romania, india, even the united states not able to make up some of that lost supply in a way the market was pricing before. i think that is the key point of this chart. tom: very important. thank you so much. we have lots going on. michael joins us. he has been talking about what we've been saying about jackson hole. this is the acclaimed bear camera. we want to get this up if we can. the dead of night of alaska.

this will be like what we see tomorrow. we do not have that. jonathan: such a great run-up everyone is so disappointed. tom: it is the pitch black you and i will see tomorrow. lisa will be inside. lisa: i am not scared of bears. this is illuminating. you guys are scared of bears. it tells me a lot. tom: we are also frightened about the commodity business. michael is the expert on this at rabobank. thank you for joining us as we moved to wyoming. as we fly to wyoming we fly across levels of drought. cotton down 20%. it speaks to global food shortages. how bad is it? michael: it is pretty bad. the u.s. is largely the world's food reserve.

when it starts to see issues that has ramifications for everybody. as we heard early on the segment, we have seen a pullback in prices. we are still seeing -- the u.s. drought is not welcome at a time where global reserves are very low. jonathan: -- lisa: i have been focused on the farm tour going on in the united states to try to gauge how well some of these crops are doing in light of the extreme weather. it is all over the place. some places are facing drought. some extreme rain. how has the farm tour yielded information in terms of how much the u.s. can support the rest of the world? michael: i have had the pleasure of growing on the crop tour in

the past and what they are seeing is variable yields, which is not what you want when the world is sitting on historically low reserves. this is a time when the world is at its most plentiful in terms of an annual crop. the harvest is when you should see pressure in terms of prices and it is worrying if you start to see prices driving up at a time you have your harvest on the horizon. it implies prices will be higher for longer. lisa: what does this mean? does this mean prices will go up a little bit? that certain regions will not have the same supplies of corn they were expecting? translate this three months forward. michael: is actually -- what you're going to see is low supply providing foundational support for higher prices. we are not going to see prices skyrocketing because the

consumer behavior has already changed. that applies to a lot of areas like food and energy products. aaa is looking at gasoline in the united states and calling consumption covid like. what we are seeing is demand contraction, in particular in corn, which is not seen demand contract in a decade. we are seeing consumer -- everybody starts shifting their consumption patterns. we are worried about consumers changing their behaviors. jonathan: we need to catch up again soon. michael magdovitz of rabobank. lisa, you started the conversation night just went through a range of stories. india may import wheat.

china and those power cuts, we know because of the drought and what could happen to hydroelectricity. rice at risk because of extreme drought and it summer in china. dry cornfields in the united states is something you started the conversation with. a big issue. lisa: adding insult to issue with supply chain disruptions causing disruption to the world's food supply and not just energy supply. how much of an untold story is this as we go into the fall and winter of discontent. tom: i am smack dab in my bloomberg launchpad of energy and currencies. i have rice, corn, and wheat. they have not moved yet. but when i watch more than any of them is u.s. rice. it is different than thai rice, but we have been very lucky in that rice has not moved. jonathan: you heard michael.

the consumer pushback is already starting. tom: there is no question about that. the video is ready to go. this gives us a whisper of where we will be tomorrow. this is the acclaimed bear cam in alaska. you cannot see anything. you will not see anything when the bear comes up behind you. this is the bear cam in alaska and it is as dark as it will be tomorrow. jonathan: where is lisa? tom: lisa is inside. lisa: i am not scared. bears do not scare me. [laughter] jonathan: this is bloomberg. ♪

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>> i think the rally has gotten

ahead of itself. >> the global economy is going through a downshift. >> there is not an acute pocket of stress in a specific sector. >> we have a large gap between jobs and workers. >> inflation is going to come down. whether it will get as quickly as the fed would like to see back to their target or not, i think it will get there. >> this is bloomberg surveillance with tom keene, jonathan ferro come in lisa abramowicz. tom: good morning. on radio, on television, getting ready for a speech by the chairman of the federal reserve system and he does it with a global slowdown in america going this way or that way. which is it? jonathan: the wrong way right now. flow in beijing, throwing frankfurt, throw in london. that is problematic for this federal reserve. one thing we started with this week is whether chairman powell

would attempt to talk about some of the weakness abroad. tom: it has been underplayed, and visiting will be the governor of the bank of england, andrew bailey. what does he want to hear from jerome powell? jonathan: what he wants to hear and what he will hear are two different things. right now the ecb and the bank of england he to weak dollar and a stronger domestic currency but they cannot buy one. look at how rate pricing has change for the ecb and look at what is happened with the currency. we have had the yield move from the front end of the german curve by a lot. it has tripled. the euro is weaker. that is a big problem for the ecb as they looked to hike 50 basis points. tom: we could have a grizzly accord instead of a plasm court, and accord to bring the dollar down. i do not hear that happening, but of all of the markets moving , strong dollar is front and center. jonathan: euro-dollar .9929.

it takes getting used to but maybe we need to get used to it. tom: at jackson hole there will be a debate about two america. jonathan mentioned the article about people behind in america who cannot pay their bill. lisa: one of the themes is the limitations of monetary policy. they might've had a broader mandate before inflation. now they are trying to fight inflation that has a multifaceted cause, whether supply chain disruption, the increase in wages, distortions from the pandemic come at the same time you see a recovery happening. how they speak about where they look at other policy to bridge gaps they cannot fill anymore with monetary policy. tom: we make jokes about the toxic brew. we have ignored the equity market. the dow near 33,000. the toxic brew of what chairman

powell says and what it will mean for the stock market. jonathan: three days of losses into today. a low bit of positivity this morning. up .2% on the s&p, on the nasdaq up to percent. down one basis point to -- something you lead with this morning, crude 95 on wti, 94.86. tom: dollar-yen is not moving. it will be fascinating to see what the yen does. we mentioned the toxic brew that lisa spoke of. someone has written that up. joseph quinlan's chief investor of market strategy at merrill bank. you speak of a toxic trifecta that chairman powell faces. what are the three items of your toxic trifecta?

joseph: rarely have you seen china, the u.s., and the europe be in this toxic brew. in the u.s. it is inflation. in china it is the zero covid policy that has flatlined the economy and in europe the energy crisis and the war. rarely are all three in sync. we are on the cusp or we are in a global recession. tom: i look at the global recession. we see that with china. can we bring the two america? joe: our colleagues are looking for a shallow recession in the next couple of quarters. technically we are already there. we are already talking recession. u.s. recessions are not uncommon

and when we come out of recession the economy is typically stronger. the week go by the wayside and the strong get stronger and that is very important for clients to realize. recessions are not uncommon and when we come out the economy has former footing. jonathan: what is fang 2.0? joe: is a play on hard assets and hard politics -- hard power. it is fuel, it is agriculture, it is aerospace and defense, it is nuclear renewables, and it is about the hard assets in this world we live in and that is where we have been hiding out. it has been working well. lisa: do you think it continue to work well? we have heard about people pulling back on the oil story as we see fear procession percolating around the world. you think that is still in play? joe: we did see a pullback in

commodity prices in july and august. when you look around the world at the electric vehicle revolution, it is very mineral and fossil fuel intensive. one thing we are not talking about is resource protectionism. we think fang 2.0 has some legs. lisa: as you look at the overall sentiment, do you think people are overly bullish were overly bearish? people attribute the recent pullback to this belief from some the fed will be hawkish. do you think there is some sort of balance that is off skew? joe: i think there was at the rally in june and july. we were rallying here in july and august but global growth is cratering. the markets have stepped back and said the global backdrop is more challenging than people realize.

if you look at the u.s. relative to the rest of the world we will come out of these this -- this down torn faster than others who are more dynamic. if you want to allocate capital, it is more towards the u.s. and the rest of the world. the rest of the world, they are putting their money into u.s. assets. jonathan: i often think what is the montage we can make in 12 months that make people look silly, i wonder fit is a montage of people saying the consumer is strong. data after data point suggests they are not. we put out a story on the 20 million across the country, one in six american homes, who have fallen behind on their utility bills. we have one association calling this the worst crisis the group has documented. do you think we will be able to say the consumer is strong given the kind of dynamics you are talking about. when you hear people say the recession will be short and shallow and the consumer is strong, what is the risk to that

view? joe: the only good news is employment. you're right in the sense in the real terms the consumer is falling behind. they are reaching for their credit card. the optimism, the spending, buying lower-priced goods, that will continue. the consumer is still struggling . jonathan: you expect unemployment climbing by the end of the year? joe: no. i think it will be spotty. 3.5%. may be a backup slightly but the job market is very robust. every small business worker we speak to cannot find a worker and that is a big issue. they are willing to pay. that gives the consumer hope to hang in there. jonathan: thank you.

appreciate the context and perspective. there is a data point for everyone. payrolls a few fridays ago. tremendous. lisa: joe quinlan saying hiring is incredibly robust. a block the new york fed puts out research talking about the main drivers of inflation being wage inflation as well as supply chain disruptions. if you look at both of those they are still going strong. if you look at disinflationary -- in particular having to do with wages and attracting labor is still a significant concern. as the labor market strong or are consumers falling behind on their bills? tom: labor is a lagging indicator. i am glad you brought that up with joe quinlan. the idea that he said the unemployment rate is not going to move. his jerome powell going to

guesstimate that tomorrow? this is how hot it is with all of the uncertainty. can you imagine if unemployment stays below 4.2%? jonathan: i am with you. what he can do is establish a reaction function. if unemployment is not climbing in inflation is still sticky, this is the fed still hiking. is that fair? tom: it is fair but i love what jan hatzius said yesterday that we need to start driving the length of time. the media and a lot of the punditry do not want to do that. they want to look out one month, one meeting, two meetings. what if you want to look out 10 meetings? that is where you go back to job analysis, wage inflation analysis, and also economic growth. jonathan: this is the story we might hear more about in the coming days. hold for how long?

lisa: from a labor market standpoint, how much is it transformed as a participation rate falls? what are we talking about the unemployment rate in a -- jonathan: we will talk with the fx and macro strategist from ubs. futures up. stronger equity market bouncing back. a small bounce after three days of losses. this is bloomberg. ritika: keeping you up-to-date with news from around the world with the first word, i am ritika gupta. president biden says he is proud to announce the u.s. is giving almost $3 billion more in weapons to ukraine. it comes on the day the u.s. -- ukraine celebrates its independence in six months after russia invaded. the u.k. imported no fuel from russia. the british government achieved its ambition.

russia has been the uk's largest supplier of refined oil. japan is planning a dramatic shift back to nuclear power more than a decade after the disaster. that includes restarting a number of reactors and developing new plans using next generation technologies. japan is trying to avoid more strains on power grids that have buckled under heavy demands this summer. today president biden will make his long-awaited announcement on student debt relief. some of his allies are likely to be disappointed. the president has been considering forgiving $10,000 per borrower in debt relief. advocates eight the debt relief should be hired to help lower income students. bloomberg has learned scheider electric may buyout minority owners. scheider already owns 40%.

global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> like in a greek tragedy

there's not that much they can do. destiny is approaching. the economy is weak. when they talk about supply chain disruptions, they are not able to heat their homes. that really weighs on sentiment in the euro. jonathan: the euro weaker again this morning. that was a brilliant steven englander. a weaker euro and a stronger dollar. equities advancing .3%. euro-dollar negative one third of 1%. yields not giving me much. 3% on the 10 year. crude climbing. we are up .9% higher. tom: the music we just heard on radio and television, soothing music. it is the dance of the grizzlies from 1910. jonathan: that is not what it is

called. tom: i was told that by our music advisor. right now we turn to an important discussion on jackson hole. we are not in plaza accord tension but nevertheless maybe the unspoken grizzly bear. ubs fx and macro strategist goings us. should they be speaking about a too strong dollar jackson hole? vasily: they can be speaking about many things. the rd is the u.s. should be fairly happy with a strong dollar to the extent it helps bring inflation under control or stop this is one time in history when a lot of countries would want a stronger currency, not a weaker currency. this is the time in history where stronger currency will help the fight against inflation

but only the u.s. is getting it. i do not think this will be the primary topic. it is all about volatility, unless those moves become extremely violent and volatile and become the g20 approach the currency markets. i do not think this will be the dominant topic. tom: if it is not a smooth curve, what is the level of euro? common numbers we look at where it breaks or it cracks. do you have a level in your head? vasili: when we have thought about the scenarios in europe, if you get to the worst case scenario, where gas supplies are cut off completely, it is completely conceivable that the euro reaches 95 or even 90. it will be hard to get there without a significant change in

the market catalysts. right now the with euro trades, it is important to understand it is a summer sentiment trade. that can get us to 99, can get us to 98, but you need a new catalyst. those catalyst surround some of your european risks to get us to much lower levels. jonathan: is it in the destiny of the ecb, do they have it within their hands to do something about this or is it out of their hands? vasili: this is an interesting time where the pricing for the ecb keeps going up. if you look at the september meeting we are pricing and the probability they will go more than 50 basis points and from the market perspective this makes sense because inflation keeps pushing higher. it makes sense to frontload. your hiking into a slowing economy so the more you do now

them at less you'll have to do later on. it is a bit of help to the euro and this is the peculiarity of the currency markets. relationships work until they do not. rates keep going higher, yields keep going higher. the market does not believe hiking into the slowing economy helps the currency. when we have full liquidity in september, if the ecb is more hawkish, it could help them to fall into the euro. it is certainly not helping to the extent it would have been a normal time. what would help the euro is some kind of major shift in sentiment surrounding gas supplies and energy. jonathan: you have to make a call on vladimir putin, ultimately, this war with ukraine to make a call on the euro. lisa: i wonder if the euro were to go down to 90, if there were a cut off, when does it become an existential threat?

at what point does it decimate an economy already reeling in the face of a lot of inflationary pressures? jonathan: you think week denomination risk returns? vasili: i stink -- i think we are still pretty far from that. the problem with european debt crisis originally before mario draghi was there was no real backstop. the backdrop was all of the piecemeal fiscal solutions. there was never an ecb backstop. now there is an ecb backstop. that makes a big difference. if you look at the cross assets, fx is probably where it has been priced in. european equities are probably second and then the corporate -- i think you will see some of the risk premiums being priced more

aggressively across different asset markets and not just the euro. jonathan: short-term weaker euro , longer-term your more constructive? vasili: we are more constructive. let's look at the broader picture. i know jackson hole is coming. you should be longer dollar when the economy is slowing. this should be a relatively shallow recession. there will be a turning point in that cyclical turn will coincide with some dollar read this from very expensive levels. a good friend of the show -- jonathan: a good friend of the show over the years. thank you. looking for more constructive you on the euro towards the end of the year. tom: and we heard that from steven englander as well. if i do a bunch of fancy technical, i want to make this

clear, we are not at the angst of the plaza accord. we are nowhere near the plaza accord of the early 1980's when you look at the math except we have china. what you do if you get china from 6.87 out to seven or through seven yuan. jonathan: not a million miles away. that could be around the corner. it is not about forecasting the ecb rates, it is about forecasting gas prices. lisa: you said it really well? are we betting on vladimir putin when it comes to the euro and with that how do you have any conviction? tom: michael mckee just email me and said to be bear aware. your phones on the set in jackson hole. dangerous. ♪

jonathan: a little bit of economic data in just a moment. equity poop -- equity futures positive .2%. on the s&p we advance on the nasdaq. yields unchanged. 8% on a 10 year. euro-dollar deeply negative.

.9931. we have to catch up with michael mckee in jackson hole. before we get to the data we have to see the hat. is this what tk will wear later this week? michael: we will bring it out for you in the open. that is a tease ahead for all of your viewers. jonathan: looking forward to that. tom: it says kenny chesney. just go. michael: we are back here in jackson hole getting ready for the economic symposium with some disappointing economic news. durable goods in flat for the month. the expectation was for a .8% gain after a .2% revised higher in june. x transportation is up just .3%. that is better than anticipated but below what we saw last month. this is your basic what goes

into gdp spending kind of stuff that is up .4%. it was up .9% in june. a backup in business spending. a backup in business spending. it might be concerning because of the pmi we saw yesterday that showed a collapse in manufacturing during august. i do not know if this is a harbinger or not. capital goods and durable goods are very volatile but it is not the best possible boost to start this week. tom: one question, the idea this will change the guesstimate of third-quarter. how does durable goods fit into that? michael: it goes into the calculation but it is so early in the quarter. these are july numbers. it will not make a big difference at this point. the consensus is around 1.3% for the third quarter, which is better than we saw in the first

half of the year but we will need a lot more data to get a real handle on where we are. jonathan: a big disappointment -- a bit of a disappointment on the data front. looking forward to catching up with you later and looking forward to catching up with michael in person tomorrow morning. tom: it will lead our coverage with regional fed presidents. interesting to see what james bullard says. a most eventful half hour. we bring this to you commercial free. later on we will think of julian robinson. we will talk on wall street. right now tom purcell he joins us, chief u.s. economist at rbc capital. i want to dovetail with another shop. this came out from goldman sachs . in equity strategist posits good markets -- because of declining inflation. u.n. rbc capital markets

perceived declining inflation? tom p.: we do. we think inflation will slope and you start to see slowing around the turn of the year at the core level. headlight is a different animal. we will see what happens with energy prices. our house call is they will be on the rise. we think they will wind up slowing down before the end of the year. you have to go through one more month of unfavorable comp. we think there is price pressure that we are starting to see the downward price pressure. it is not going to be a notable way but you will start to see things slow even as early as the end of the year, and as we roll into next year, i think it is reasonable to think for inflation could surprise people to the downside. there's a lot of price pressure in the pipeline. is downward price pressure in

the pipeline and we think that will hold up. lisa: others say we will look at wages and how much they are increasing, look at some of these secure elements, look at food, look at gas. how do you factor those things in and when you start to think i am wrong in the fed does need to go further than some people think? tom p.: this is a great question and i think it is important. i can see a plausible scenario where headline prices remain at stable and high levels if you do get this drift higher from an energy price perspective and food prices continue to remain low. we are seeing signs food prices are slowing down. let's say that does happen. you can see a scenario work for prices slow. there is a tricky spot for the

fed will not -- tricky spot for the fed. they cannot control food or energy prices. it will be a question of what about inflation expectations? if inflation expectation arising at a pace the fed cannot control, the fed needs to make more of a distinction in that regard. the fed and others are focused on the poor -- on the core. they got up into this loop where they only talked about how high prices. i think that will haunt them if you do not see headline prices flow with poor -- with core. lisa: let's say the fed comes out with this nuanced message of inflationary push getting wind next year. if they say that doesn't the market rip? financial conditions will move against them, especially

considering the expectations for a hawkish read from jay powell. tom p.: that is fair in the medium-term but there are a lot of challenges in the backdrop. i know people who keep latching onto the idea that the pin report showed acceleration in jobs data. i get it, but does it make sense? we heard tom saying labor is a lagging indicator and he is 100% right. people seem to lose that narrative. let's talk about the exhilaration in jobs which people are still talking about two weeks after the report. jobless claims are up. even if you make an adjustment for the seasonal factor, they are up 30% from the lows. that has stayed consistent with potential job losses shortly thereafter. also we coincide with countless companies talking about laying people off. the ism, all of the labor

indicators are below breakevens. the labor differential from the conference board is now starting to roll over. hours worked are sliding. it is actually taking average weekly earnings within. the cherry on top of all of that is volume of spending is slowing. i do not know what more people need to see to know the things this wishy year that appreciated . tom: -- housing is approaching what he calls a tailspin. is the norm in shock at the end of the year does that fold over the rent dynamics which is flat or even stabilized? tom p.: it is easy to say housing is in a recession right now. i do not think that is a heroic

call him anyway. most people are prone to appreciate that. i think prices will start to fall, outright decline. i think that could happen before the end of the year. these things take time. i've been chuckling, macro is such a focus and maybe these are conversations we should have been having with people over the couple of decades i have been doing this. these things take time to develop. if it is already in front of you , housing is falling into recession, the consumer is slowing. by then it is too late. we are talking about things that take time to develop it seems clear we are moving in that direction. jonathan: some of these things are the objectives. i wonder when we get to that more problematic phase and how high the hurdle is, not for the

fed to cut, but for the fed to pause? tom p.: i agree with that. our view is the fed stops by the end of the year. you are at 3.50 and the hiking cycle will be done. get policy into somewhat restrictive territory. let that marinade and we will be in fine shape next year. if we make a mistake, things will slow. the real risk is the fed does not unhitch its wagon from headline prices and they keep going. these guys are going to jackson hole. i'm sorry i did not go to jackson hole. i heard a bear creeping ground behind you. where i live in westchester there are bears everywhere. tom: they are not grizzlies.

tom p.: i will have you up for drinks and we will talk about bears. i think the one thing that is really compelling and the thing i think we need to hold the fed to the fire on is what they need from inflation. if you're waiting for inflation get to 2% -- i do not think that is what they are going to do. i think they know better. if i'm wrong and they keep hiking rates, the hiking cycle will go on for meaningfully longer than anyone appreciates and the recession will be meaningfully different. jonathan: tom purcelli of rbc capital markets. welcome back anytime. coming up on "the open," bob michele of jp morgan together with mike wilson of morgan stanley. we will speak to them for about 30 minutes and then will catch up with julie beale around the

opening i think mike wilson will have different opinions to the analysts you mentioned. tom: it will be more than interesting. we will listen for michael wilson with jon ferro. jonathan: i will see you at laguardia. tom: are you with me? i did not know they allowed us to do that. anthony from sparta emailed me. maybe he wants me to get on a different plane. jonathan: right now we will continue. douglas kass scheduled to join us, but right now an important essay on goldman sachs. i will come to the force of your essay on consumer banking at goldman sachs. is this marcus by david solomon?

how much is is leader attached to his consumer projects. >> this is a fed project he has embraced and he wants to go the course. questions have been raised since the implementation of the strategy. we are top euro for billion dollars towards the end of the year. as you do not see a turnaround anytime soon, patienv will start -- patience will start to wear thin. you are seeing that in delaying the launch of the checking account which is being delayed and one of the issues the u.s. has been hit by. tom: the heart and soul of this comic goldman sachs has always been firm in the partnership debate. is everyone on the same page is

this a heated debate in the firm. everyone is on the same page with respect to consumer. questions will be asked like is the lagging stopped. where they too reliant on their core watching -- you're losing a lot of money and you still have to wait quite a bit longer to get to the david solomon i told you so moment. lisa: goldman sachs bit a very public foray into the consumer banking sector. a lot of people were wondering how it would transform the bank. at what point is this because of

competition that what point is this because of something similar to the moment that they tried to get into consumer banking -- they have hopes to breakeven by this year. that is not happening. it does not look like that will happen data. they were concerned about all these numbers in the early years they were learning -- they wanted to make sure they were held accountable and the market that they recognize the losses of front and knowledge -- it becomes a sore point and that is why i say it is not just the fact we are heading into a challenging economy or into a difficult market for consumers, it is also to do with the execution of this unit inside the firm that is north --

lisa: to elaborate on this, people will take this news they are delaying the rollout of checking accounts, or does this mean for other big banks in terms of consumer units, given how much we try to expand. are you saying this is an idiosyncratic story of arab -- or are you saying this is something we might see the notes of in other big investment banks? >> but that we have seen with bigger consumer banks is any issues they have with one segment of the market they are able to offset -- the fact you are in a rising rate environment means you are a big bank happy with the increasing rate interest income. basic and adjusted or does skill levels to make sure no one stands -- it is very much a show

me story right now. because there is so much focus on where costs are going in that business, i think we need to thread the needle. tom: u.n. jenny kill it at the bottom of this essay and talking about it takes $500 to account. even to that they lose 15% of their accounts. why do they want to compete with fortress diamond workers moynihan? >> goldman has always had this thing. you cannot just go there and offer lending products without building relationship with the consumer.

truth be told, even if you have to think about public products, the house has become good at targeting consumers -- you do not have to rely on a huge profile to achieve that. for goldman you have to spend something like $500 for customers to open a jump of a are aiming to have billions of dollars, that is costing more than not in is one of the reasons leadership is thinking and praying things over right now. tom: congratulations on driving the story forward. an important essay on goldman sachs. lisa, before we get to doug kass, is this an experiment in progress. lisa: especially because it was such a sharp departure from what goldman sachs bread-and-butter has been. to be pulling back on this with

capital markets falling raises questions about what the forecasts of wall street will be like, not the specific story, but a notable moment in the rising rates environment and why banks may or may not benefit. tom: i wanted to talk to one person yesterday. dr. cass, a million years ago when julian robertson said i'm going to go to kidder p and he was restless. doug kass, how restless was the giant those many years ago. my first job on wall street was a 10th hanover square as a housing analyst. julie has small office just like

me. would -- he was working out of the new york city office of webster management -- that was out of boston and headed by a guy called jared curtis. with me where does joe kids my age was an older marketing guy, at least he seemed older. his son peter wood tear around to be the number one team in tennis. we probably chatted five times a day. i wanted to manage money. i remember he was kind enough to sponsor me for admission to the princeton club of new york rear -- a year after we met. i also remember in the beginning he forgot my name all the time. he called me tiger. i would later find out he called everyone tiger. for that reason -- for that

reason he made it fun. i was there for a year or so and i will frame its analytical intensity. at the time i was the housing analyst and i wrote and i wrote in extent of 75 pages of industry review on a hot group in the market, mobile home and recreational vehicle industry. not surprisingly i was negative on the group and recommending short sale -- i remember his intensity bringing sandwiches for lunch, plop them in my office. that is his analyst in two other analysts. they were bullish to debate me continuously and he ended up selling the stocks on my advice and the stocks plummeted.

from there on he respected me and he remembered my name. tom: so much is about what sebastian mallaby wrote about, is about the charity of jose and everything he did to new york. how did he get from the office next to what sebastian mallaby wrote in that book. how did he make the jump to a hedge fund? doug: the key to his success, and it is something standard truck and miller always reminds me of, mae west had this line that too much of a good thing can be wonderful. julian made big bets after doing comprehensive and exhaustive analysis and research. that is the answer. he believed in his analysis and put his money where his mouth

was and had an uncommon ability to find talent. but all of us he was -- one of his disciples famously blew up archegos, so that was a blemish. lisa: i'm speaking about the legacy of someone who redefined many ways people believed in the hedge fund industry. what you think is legacy, edition. of the tiger dropsy help support, what is his impact on the business of hedge funds? doug: i think as a humanist's legacy was done making all of that money. it became $22 billion by 1998. i think he demonstrated his philosophy and charity and

philanthropic endeavors to his disciple mandel. tom: we are out of time. doug kass, thank you so much. we have to get set for tomorrow as well. this is an unusual jackson hole. lisa: especially because we have reset our expectations for monetary policy and it is right you and jonathan have been speaking all morning about the euro. it shows to support the economy in traditional ways to a stronger currency. right now we are seeing the euro continued to deteriorate well below parity. how much does is create a friction at jackson hole. also should enable of these ecb speaking as well. tom: i wanted christine lagarde

but it will be interesting to see him as well. inflation is something chariman powell has to watch every tick of the way. lisa: the other thing will be the neutral rate. we have heard a lot about that there show. an agreement of how -- the headline shows around 8.5%. is it ok to go to 3.5% and stay there? can they stay there in good conscious it is much stickier. tom: let's finish with the spreads coming in on bonds. doesn't the spread have to deteriorate to single -- to signal the angst that is out there? lisa: if credit is a leading indicator is not indicating significant pain. there are a lot of issues. how you forecast a recession

time when you're not seeing it in the anecdotal data. that has been challenging for investors. tom: we are off to wyoming. i hope you will join us. it wonderful set of guests all led by michael mckee with his careful analysis of the chairman speech. friday morning with the two our time delay. lisa warned me on the break i had to get up early, which i did not know stop lisa: we will hopefully get to you depending on whether we can get you out of the grill. tom: red and green on the screen right now. yields are little bit higher. 3.34% on the two year yield. we will see you in wyoming tomorrow. ♪

jonathan: the countdown to the open starts right now. ♪ >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: we begin with the big issue.

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