>> chairman powell has one mission. that is to deal with inflation. >> the fed continues to be really focused on emerging data. >> the fed is trying to get the economy into a position where inflation comes down and then they will take a little -- they will take a break. >> a soft landing is actually still likely. announcer: this is bloomberg surveillance with jonathan ferro, tom keene, and lisa abramowicz. jonathon: good morning. this is bloomberg surveillance on bloomberg tv and radio.

markets unmoved on the tk. tom: what is it, 7 a.m. morning wall street time? will the bank of england intervened england intervene to protect sterling? it's not going to happen, but we are thinking about it. jonathon: can you imagine finishing the day with dollar-yen unchanged? tom: it is pretty elegant, that's all i can say. i did a fancy study that you can only do on the bloomberg terminal. we have an absolutely perfect 50% replacement strong in -- yen . jonathon: you can talk, but you have to talk about the underlying policy issues. lisa: how much also do they have

to embrace? they came out overnight, they reiterated their yield curve control, they have been buying bonds at an incredible pace, about 2 trillion yen worth of crab -- bonds. this is the interesting thing. semi five basis points. they are actually a negative rate for the first time in years. with what we saw, just based on this idea that it's not enough anymore -- tom: americans miss this completely. jonathon, explain the history of the swedish bank of being out front. it is a european thing that we don't study and it's a big deal. jonathon: the central bank out

with a 100 point basis hike. the s&p doing the same thing this morning. i wonder what that means to the governor and the bank of england. tom: bringing over lagarde and the weakness in the euro we saw yesterday, .985. this has been a hallmark of bloomberg surveillance too many years. we never spoke to rudy dornbusch, who died tragically so early. this stuff matters to our listeners and viewers. we are going to lead on it. jonathon: chairman powell talking problems. on the nasdaq, down about 0.25%. yield shaking higher by a basis point. 354 are the 10 year.

4.1% on a two-year yield. lisa: now, it's over to the bank of england and the rest of the world. it seems like overnight from the national bank, it is going to be hard to get a hawkish direction. i would argue it was not a 75 basis point rate hike. it was a change in the projection and outlook. at 7 a.m., the bank mainland has a very difficult situation. maybe 50 basis points, but markets seem to be thinking there could be some outside surprise. because of that incredible weakness we continue to see, this is between a rock and a hard place for governor bailey. they have one of the most difficult jobs. he has been out front and honest. how low are some of the projections for the economy in the years ahead? a: 30 am, initial jobless claims. i think we are going to take on

more and more importance. especially after we heard from fed chair jay powell yesterday. they want these rates up. the faster the unemployment rate goes up, and a perverse way, the better for risk assets. but it means the fed can back away from their aggressive rate hiking. so far, we have not seen that. we have seen unemployment claims really fall off. they actually have not, -- they actually have not gone up. this is actually becoming more and more important as well. the earnings from some of the bellwether companies. fedex and cosco reporting after the bell. fedex came out the report earlier, in the past couple of weeks, warning about some of the fast-moving macroeconomic backdrop. let's see what they put out there now. cosco similarly, especially with the margins story, who is coming to the store? are we seeing more wealthy individuals going to classically cost-cutting markets?

jonathon: george gonclaves is joining us now. let's reflect on the news conference. we believe the price to get inspected 2%? >> at a minimum, we are dealing with an uphill battle what is going on with the dollar globally and interest rates. i think we have not seen enough for the fed's liking. a decent amount posed with the move in the s&p. they are really going after demand to curtail inflation. it is a massive experiment. it is a credibility thing and they want to prove that they can corral inflation. they are going at it hard. they are going to have erased. the markets are ready for it, but i don't know if the other markets are ready for it. all the other central banks trying to tighten the same time. tom: i did a google search last

night. i was sort of stunned at how many items came up. what does the fed blank and how do they blank? >> i've been saying the same thing. i think with the brace and the market. even though we are seeing some pretty epic moves, it is utterly and functioning. until something breaks and we see that move, i think the basis points are well taken on the claims data. all of this stuff operates with a huge lag. i think the big problem we are facing, the challenge in the next three months to your end -- two year-end. they are massively frontloading. we only have a couple of meetings left. if they had given these s&p dots in june, we would have dismissed it. but after years of telling us to dismiss the dots, they are using

it for four died -- forward guidance. lisa: i to pick up on that point. epic moves going on right now, but things are not breaking. the market is still functioning. this goes to something the former fed vice is talking about. he is not looking at the market with something breaking. he is looking internationally, looking at risks, particularly with the strong dollar and what that is doing. where are the nodes of concern in your mind for something breaking? >> in general, small to medium-size enterprises with funding through their local jurisdictions. this is what all central banks are up against. i think it is really the small to midsize companies globally, with dollars that work through some sort of cross-border type of activity, you need those dollars to move everything along. tom: you represent a japanese

bank. it is completely inappropriate to ask you about yen intervention. >> [laughter] tom: i am not going to go there. but i am reading rudy dornbusch's 1980 paper, where he has drawn by hand at the desk of m.i.t.. are the rules of the game now the same as pre-plaza accord or post plaza accord? are they really the same now as they were in august of 1998? >> bottom line, the base feature for the markets, it is all about the rate of change. i think that is what the banks will really react to. it is interesting to see what will happen overnight, honestly. we could see the yen come back. with the past is proven to be true is that if it is a unilateral move by the bank, it usually does not work until there is a more coordinated effort.

usually, this doesn't stop them. it is all about the rate of change. i do think that it is going to take some time and it really comes back to the fed. i think that will take pressure off of all of these. jonathon: thank you for being a good sport. he basically talked about japan, too. thank you. lisa: the yen has been pumping up against that level or down against that level, if you want to talk about weakness versus the dollar. then, we heard japanese authorities come in and intervene. you have to wonder if that is now cap, 145. jonathon: -7/10 of 1% on that. the fed has become so enamored with forward gardens, their projections are no longer what they think, but what they think they need to signal. i think that last part is so important.

the projections are no longer what they think, but what they think they need to signal. there is a difference. tom: we talked about this yesterday, seeing the dots interpretation. it is a different. chart than any we have seen before. to me, it was almost barbell. the answers, nobody knows, including the people making the dots. jonathon: this is the challenge we have right now. the other way of putting this is that respectively, they do not want to see the financial conditions to achieve that. they are signaling we will be tighter for a whole lot longer. lisa: this is where the sort of psychological aspect of the market comes into play. i feel like everyone is trying to psychoanalyze the willingness of federal reserve testing. how will and will they be to double down on this when the rate actually starts to go up and it becomes a political issue? they are trying to signal. is it game theory or are they going to go through with it, even as we see that pain hit real individuals. jonathon: what did they say

yesterday? that seems to be the market right now. too close to each other. 35399. from new york, this is bloomberg. ♪ >> keeping up-to-date with news from around the world. with the first word, i am lisa mateo. in japan, the yen is stronger today after the country intervened in the foreign exchange market for the first time since 1998. the currency had weekend to -- following the bank of japan's decision to maintain ultra low interest rates. they yen has fallen about 20% this year. fed chair jerome powell david's clear signal that yes, we will tolerate a recession if it can regain control of inflation. they may raise interest rates by 75 basis points for the third time in a row. they also forecast that rates could be raised another 1.25

percentage points by the end of the year. two military veterans fighting for ukraine were among those released as part of a prisoner exchange brokered by saudi arabia and turkey. the two were captured in june. other foreign nationals were released, along with more than 200 ukrainians. ukraine released a you russian politician and 55 russian soldiers. liz truss has worked together to assist ukraine. the leaders said they would also discuss unresolved issues relating to post-brexit trade and irish border. the times says the latest proposal calls for an advisory business, a so-called bad bank to hold assets that will be wound down. credit suisse is trying to turn

itself around after a lot of scandals. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> please answer with a simple yes or no. does your bank have a policy defending it new gas and oil products, mr. diamond? >> absolutely not, and that will

be there road to help for america. >> everyone with a student loan has a bank account with your bank. they should probably take out their account and close their account. jonathon: i'm not sure that was the answer she was hoping for. lisa: [laughter] that was gold. she was like, everybody take their money out. that's what this is all about. jonathon: you have mr. jamie dimon willing to provide that answer. [crosstalking] tom: this is really important. he is the only one who steps up when it matters. jonathon: what did you make of that exchange yesterday? >> jamie dimon was the first one to step up and say that the u.s. needed a marshall plan for energy security. it is about energy security, inflation worries. remember, this is one of several moments that he had with lawmakers about energy policy.

he said the u.s. is not really getting this right. other lawmakers took different stances on this. you had kentucky's andy barr really urging the bank executive chairs to take a measured approach just to oil and gas, but coal companies in particular. the point he made was this, that investing in oil and gas can be good overall. he has made that point a couple of times before. what he is really worried about here is many countries moving into coal instead. it is a complicated issues. remember, he is nowhere near the only one. when you look at j.p. morgan's investors, they have taken a very similar approach. tom: i was standing on the sidewalk in davos and we had a raging debate about what big bankers should do to show what they do socially. a very famous american banker said to me, american bankers

have absolutely failed to sell what they do for the american public every day. would you say they have failed? sonali: it is complicated from where they are setting as well. there are different issues for different folks. tom: she is worried about getting reelected. sonali: what she has been focusing on is the health of her communities, where anthony barred his focused on the coal workers in his communities. it is very difficult for banks and investors to follow the rules. tom: remember we talked to brian in davos? we were not going to do economy 101, but what they were actually going to do. one was really and about the social contribution of bank of america to america. i think these guys, including mr. diamond, are reticent to sell their value every day. jonathon: a little worried about regulation. i would think more so about stock.

maybe sonali would be hesitant to join it would jamie dimon in d.c. sonali: he talk not just about gilly trade issues, but for shrinking, which is what we knew they would do in the wake of a lot of regulatory issues and a tough economic environment. he was really chastised here for cutting jobs. i would have to say on the social front is that they were asked the cost of environmental social government standards here and jamie dimon also gave a more specific answer that tens of millions now, but hundreds of millions later. every bank did agree that the cost is going up for these banks. there is a cost. how much that cost will be, again, this is a global issue. remember, these hearings have only happened since 2019. there have been changes since the series -- hearings have happened. things may change a bit in the

wake of the midterms. some of the roddick you are seeing today may be very different in just six months from now. lisa: one things these big banks could do is rate deposits. this was a heated debate last night over the dinner table. why are you still earning zero on deposits with a two-year yield of 1%? sonali: he saw them being asked this yesterday. you see each bank ceo sitting there and saying yes, savings rates will go up. if you look at the national average, we are still looking at a 17 basis point return there. it is not a lot to your point, but remember, these banks are sitting with more than $6 trillion in excess liquidity. that was in the hundreds of billions. j.p. morgan alone has that much in excess. they are having the dual problem

of having a lot of savings and having trouble lending into a tough environment. to your point, that is the critical question here. lawmakers were very angry that rates were going up. jonathon: so excited for this. thank you. just unreal to 10 basis points. a scapegoat down in d.c., one of the bank ceos -- not the bank ceos, but fed chair jay powell right in the middle of that. another announced extreme interest rate hike. i was worried it would millions of americans out of work and i would say he is already on the path to doing so. tom: nobody has got a clue on this. i think everyone is flying blind on this. i am really glad you brought up senator warren's comments yesterday. i think the answer was gracious. we are trying to game out the power game. the weakest and toughest thing to game out as the job market.

i am looking at claims to fully employed americans. jonathon: i'm just going by the calendar. lisa, in early november, you get a fed decision, and within a week, you get the midterms. i just wonder what that final week of campaigning looks like if we get another 75 basis point interest rate hike. lisa: it's not really good idea to game out anything. right now, it is the fed's design to actually cause unemployment rates to go up, or at least to height great aggressively until they see the unemployment rate go up. this is becoming an increasing political issue. we have seen the fed have to support politicians for the first nine months of the year. but that was when inflation was the first and foremost concern. now, do we start talking about dual mandate? is this about messaging heading into those midterm elections, with the fed showing they will do what they need to do? jonathon: how do they communicate that? lisa: we saw this yesterday,

basically saying unless you have a stable price outlook, you are not going to have a stable and strong labor market. they are trying to telegraph this, that unless you have prices at 2% -- i think they asked a really good question. does the world stop at 3% inflation? why is 2% inflation the target? jonathon: we are going to get you going, tom. tom: don't get be going. i'm off tomorrow. lisa: so we can get him going all day. jonathon: futures not changing on the s&p. with from new york on the fx markets. ebrahim rahbari george is a just a moment. this is bloomberg. ♪

jonathon: equities just about positive. this is bloomberg. up 0.1% on the s&p. equities unchanged on the nasdaq. the bond market is absolutely phenomenal. five months ago in the 20's, something like 21 or 20 basis points. 4.1%. tom, we have ended the era of subzero rates.

the front end of the yield curve is adjusted big time. tom: there is an assumption that we will all die or fail or all of that. we have seen zombie companies that have had a gift or next number of years and will go under. everyone else, we have lived it before. we will move on and prosper. jonathon: -57 basis points. [crosstalking] going all the way back to the 80's, we haven't seen anything like this. lisa: this is going to be a recession, but what is the potential depth of one because of what the fed has to do on the front-end? it is hard to get my head around. some people are saying the world is going to collapse. [crosstalking] i love you both, but -- [crosstalking] tom: if you could see this, you

would see that she doesn't love us. jonathan, sterling, -- jonathon: i have no idea. if they win 100 with this rally or something, i don't know. tom: we are lucky. we have one of our bookers who is so good with the bank of japan. the bank said yes, they are going to intervene. we are meeting this morning with ebrahim rahbari, the head of foreign-exchange analysis. a great respect for all of you that do this day in and day out. i want to start with rudy dornbusch at m.i.t. in 1980. you and i read the paper five times. rudy dornbusch has a simple sentence. a complication arises from the link between balance of payments, money growth,

depreciation, and inflation. are we in a currency war? >> i would take it is great to be joining you on such a monumental day both first central banking and foreign-exchange bait i do think we are in what people refer to as a reverse currency work. the reason for that is because every central bank is competing with every other to break this inflation quickly. i think that is still the message. level of exchange rate or symptom of underlying illness is really we have very high inflation across the world. that is creating political pressure. tom: we can't talk about this on a thursday, but the plaza accord. the bottom line is, we are nowhere near plaza accord dynamics. yet, so many people want you to say -- save the day here. who is going to save the day in

our present currency wars? >> i don't think there is anybody to save the day. i think you are right on point there. in the end, it seems like the only currency that will sustainably when this is the dollar. again, in addition to inflation, the underlying dynamics globally is the scramble to find hesitations when they are trying to hide asset markets. that's another reason foreign-exchange is not focused. it's not what's going on between interest rates and countries, but markets more broadly. both equities and bonds continue to be under pressure. lisa: this raises the question of, when did something break? this could be the circuit breaker to the whole system. probably going to be reflecting in the currency market, based on the fact that some of these currencies are trading like bitcoin or penny stocks. where in the world are you looking for some sort of breakage, fisher? -- fizzy or --

and on >> they tend to be in baking markets. this is due to the lack of urgent concern around the world, therefore a lack of concern by world authorities to intervene. it the funding markets. the minister of finance knows that there was some evidence of speculation. we don't think that they are particularly moving, even though they have come down. we are still building toward a recession. lisa: when we are talking about drifting toward certain levels, it brings me to the yen. where talking about the potential for there to be a cap at 145. is that basically what the authorities over in japan set overnight? >> i think they were signaling, and certainly there was some advanced warning, so now we have

around 145. but i don't think we are speaking of a line in the sand. it sort of speaks to the lack of control over those foreign exchange rate movements. we know historically that for change to be effective, we need some commendation of monetary policy to align with these moves . we don't see that coming. that is where we think we will see the dollar yen at 145 or maybe 150 will be a more relevant level over time. tom: let me go with stanley fisher over here. i just looked and did a standard deviation study. it is from negative three standard deviations come at this morning up to plus three standard deviations. do you have confidence with the international monitoring find it to pick 4, 5, six troubled entities and help you? >> we do think we have these

tiny bank fund meetings and i think these discussions will be elevated. we do think it will be quite likely in the years to come, that culmination of slowing growth and ever tightening financial conditions probably will create quite a lot of pressure on countries that have seen in particular dollar-denominated debt rise in the market. tom: i am looking at this at the moment. let's bring it back to the majors and help us with the bank of england. 23 minutes? jonathon: 24 minutes. tom: we will go with three. what are we going to see from the governor this morning? i'm asking for a friend. >> we think the broader remains in tact. the bank of england is between a rock and a hard place. 50 basis points is below market

expectations. we should see the sterling weekend rodlike, not just for cable, but also gives the euro and other currency. should the heck -- should they hike by 35 basis points, we may see a positive reaction. over the past years, whenever we saw a hawkish intervention by the bank of a non-, it was extremely short-lived, so we don't think it will be a trend change. we think it will fall below 110 in the months to come, even against currencies like the euro. that will probably continue to weaken. jonathon: they wanted a stronger currency before the weaker one. let's reflect on the previous currency versus this one. durham of that line out of new zealand that they would turn up to a gunfight with ap shooter? is there anything in the armory of these central banks, given global dynamics at the moment? >> we don't think there is

anything narrow or specific that central banks could do. if they could bolster growth, because that is at the heart, and if they could create a stable and solid financial background, we think they are looking for safe places to hide. that is why not only the dollar is strong, but the swiss franc is strong as well. it comes to policy actions, i don't think the central banks that are under pressure have a whole lot offer. lisa: the cyclic everything we've just been saying, the dollar and how much further it has to go to strengthen amid the sea of potential recession and the rest of the world. what is your view? >> we have seen quite significant further. the main driver of dollar strength continues to be this global market environment, the tightening of financial conditions. we have quite a long way to go with what will be enforced by what the fed projects. we think for the dollar index, we should see it go above 115. we should see the euro-dollar,

even the dollar-yen, we still think that further upside needs to come. the turning point will be some culmination of one we are on the others of the global recession, certainly at a time when the fed looks to eat -- to ease those tightened conditions. jonathon: that might not be until the end of next year or the year after that. that is what the fed is trying to signal. maybe it is the last 10 years in reverse in so many ways, from qa to qt. taking it really, really high, taking a week currency and try to get a starker one. that last point is so, so hard to achieve. we have talked about this a million times. the bank of england came out with hundred basis points, you would have a divide in this program as to whether that would lead to stronger or weaker currency of sterling over the next couple of weeks. that is the conundrum and die limit for the central banks. lisa: hiking into weakness,

which no central banker wants to be doing. you talk about how the past couple of decades in reverse, i wonder how hard it is for people to get their heads around that. there is sort of a stealth transitory that has been in markets and is getting beaten out of them. whether the fed is taking and what they emphasize yesterday, they are really serious. they are taking this seriously. they don't think it is just to fade naturally. it is a new environment that requires any response. has the market finally -- played press that in you? jonathon: this idea of a romance with the fed pivot, and chairman powell is coming out saying no, that is not happening. tom: i get the idea of the pivot, but is it just a five letter word for the word blank -- link? i agree it is off the unemployment rate. it seems to be very far away, as we heard from vice chairman

clarity yesterday. jonathon: a bank of england decision coming up in about 19 minutes. from new york, this is bloomberg. ♪ lisa: keeping up-to-date with news from around the world. with the first word, i am lisa mateo. for the first time since 1998, japan had intervened to prop up the yen. that follows the bank of japan's decision earlier in the day to peak with ultra low -- to stick with ultra low interest rates. the bank of england is set to raise interest rates to clampdown on inflation. economists are forecasting a half percentage point increase in the benchmark lending rates. so, investors see a strong chance of a full point hike. ukraine has seized dozens of russian forces fleeing the battlefield. that adds crucial weaponry at the time ukraine needs it. one person familiar with the

matter says around 200 tanks were captured, but there is no word on how many of those vehicles were damaged or destroyed. federal prosecutors in the case of documents taken from donald trump's florida estate. there were classified markings. the judges pause a ruling by a lower court judge that barred the use of those documents while a special master reviews the papers. meta-platforms has been sued for obscuring apple privacy rules. in a class-action lawsuit filed in san francisco federal court, two facebook users claim the company built a secret workaround to apples 2021 privacy rules and violated state and federal laws, limiting unauthorized collection of personal data. 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 lisa mateo. this is bloomberg. ♪

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>> we have got to get inflation behind us. i wish there were a painless way to do that. there isn't. we just moved, i think, to the very lowest level of what might be restrictive. certainly in my view and the view of the committee, there is a ways to go. jonathon: that's about as hawkish as it gets. chairman powell there, of the federal reserve. we have done a lot in the last six month, but there is more to come. lisa: apologies there, but one of the biggest issues for me jonathon: --

lisa: they seem to basically do away with a lot of the soft landing kind of discussions. jonathon: pulling which has changed in the last six months. that's for sure. it has changed in a big way. tom: it has. whole thing has changed. i thought it was absolute fascinating. we are so caught up in producing and all that, we did not even have time to realize the originality of what we heard yesterday. i like your idea. he basically repeated jackson hole, because optionality is gone. jonathon: there was a moment at the start of that, where he basically said to have a look at my speech. casey misunderstood what i'm about to say, he is probably going to lean on that for the rest of the year. tom: she asked rude questions. i don't know where she learned that. jonathon: probably from you at some point. tom: right now, 140 to 52 gives

us back a little bit of the interventional moment. right now, with jonathan ferro asking smart questions than me, we have jennifer mckeown. i was in london. the part of london i was in was boom obama -- boom boom boom. i did walk up highroad to go see tottenham play a football game, a soccer game. it was a little bit of a different england. just to start the basic conversation, because jonathon is better at this than me, how flat on its back economically is the united kingdom? >> it does look like the u.k. is in a recession and they certainly feel the difficulty on the street. it is pulling very much on the households, whereas some businesses and energy companies

may be benefiting from a high energy points. we've not seen these inflation rates for decades. jonathon: do you think any fiscal decisions made in the next 24 hours were public aid the bank of england's decision made in the next 10 minutes? >> absolute. i think it makes it a little easier for this price cap, which has already been announced. it would have been about 14.5%, reduced to 10%. what is going to be concerned about is the medium and longer-term inflation of the boom to demand. not only from the energy measures that we know about already, but from the tax cuts we think will come. lisa: just to build on that, how concerned are you about the independence of the bank of england if they have to go into political rhetoric, saying right now, for all intents and

purposes, especially with projections, how concerned are you about that? >> right now, i'm not particularly concerned. i think they are watching this very, very closely. i think it is likely to respond to this stimulus with more monetary tightening than it would otherwise have gone through with. we are now expecting a peak in rates, 4% by next year. i think it will do what it can to squash the demand related pressures. i am certainly concerned about talks of giving back a new mandate or reconsidering this mandate. that would be a really worrying development. lisa: a lot of discussion post fed yesterday was about what a circuit breaker was for them or even reverse them.

it really came down to the unemployment rate in addition to the inflation dates coming down well within that 2% target. do we have a sense of whether it is the same for the bank of england? >> yes, i think it is similar for all central banks, really. there are a lot of similarities to the u.n. the tightening of labor markets is a real issue. we have had people leave the labor market on long-term sick leave, which has made her significant labor shortages. we need to see how that progresses as people come back. we will see whether headline inflation comes down as sharply as we are hoping it will next year. at what level does it begin to unravel for sterling? it is an unfair question, i get that. but do you have in your head where sterling reaches a stress point? can you give me a statistic with four digits? >> no. [laughter] i don't know a particular number

in mind. but the government is really taking a gamble that the policies it is implementing are going to do something to boost growth stocks across the u.k. economy, make it look a lot better and maybe get some support for currency at the same time. there are some serious concerns about sustainability. tom: you mentioned martin more -- martin wolf of the ft. jonathon: it just raises the question to reverse the balance sheet, how complicated that is going to be. >> it is really complicated. we are looking for confirmation today. i think there will be very gradual reduction paid but it needs to stand ready to abandon those plans at a time when the government is presumably going

to be issuing a lot of debt as well. jonathon: a tough time for the u.k. jennifer, thank you. up 1% right now, about 330 on the 10 year. we have talked a lot about how policies used to complement one another, fiscal and monetary, totally in conflict right now. we will hear of a potential package announced from this government. you may potentially see qt from the bank of england. tom: nominal gdp set in u.s. dollars, basically the united kingdom with a boom a number of years ago, what you did in notting hill. but it has been flat on its back for 10 or so years. [crosstalking] i can barely or myself. jonathon: you have love this, haven't you?

tom: you have all these people away from where american tourists hang out. i can't imagine. jonathon: are you trying to make the moves, tom? tom: it is we. we have to pack up the grandma kim and move to london. jonathon: many grandma's are on board. tom: that bill is ready to go. [crosstalking] [laughter] jonathon:

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>> chairman powell has one mission. that is to deal with inflation. >> the fed continues to be really focused on the emerging data. >> the fed is trying to get the economy in a position where inflation comes down, then it can take its foot off the brake a little bit. >> a soft landing is actually still likely. announcer: this is bloomberg surveillance with tom keene, and lisa abramowicz. jonathon: live from new york

city, for our audience worldwide, good morning. this is bloomberg surveillance here comes another rate from the bank of the line. 1.75% cut to 50, on the interest rate from 1.75% to 2.5%. or 2.25%. forgive me. 175 to 225. a 50 basis point hike. lisa, clean this up. lisa: [laughter] part of this is my fault. you said right before the decision, what do you think? i said definitely 75 basis points. five voted for 50, 3 for 75, 2 for 100. this is fascinating at a time when people are trying to understand, is it good or is it bad for the currency for this banking lend to go harder? jonathon: i feel bad.

11286. we are now unchanged on this session on sterling's stock. tom: the challenge, as jonathan does, pretending to do it in real time. literally 40 headlines come out at once and they are scrolling by enabler. every once in a while, you see this headline and that, and you are off by a smidgen. i think it is always a challenging moment for the bank. the verbiage here will be fascinating. jonathon: guilt cells as well. that is october 3, so it is interesting to see what the outcome of that will be. lisa: obviously, a hawkish underwhelming hike. we look at how this is still off the earlier lows. i keep this is interesting. following nonetheless. this, to me, is telling. what you're doing is a disappointment. some people are hoping for a 75 point basis hike.

how do they deal with guilt cells -- guilt sales? jonathon: was a comment your take on the bank of england rate decision? >> the markets got it wrong. this is still the biggest hike since black wednesday 30 years ago. in terms of a split, you have 75 basis points and 25 basis points. the new member of the committee, she replaces michael saunders. you would not expect her to go to a hike. she is american and well aware of the international context and the impact of the fed on sterling. also interesting with what they nasi is the outlook for inflation. they were meant to give an

inflation forecast, but the outlook has changed so much because of the liz truss energy bailout. now, the bank of england says that inflation will be 10% in the following few months. i'm sure many headlines that were mentioned show this upward curve in inflation. you have higher rates for longer because it could overheat the economy down the line. tom: it is great to see the bank of england from the united states. do we know from these headlines what governor bailey thinks or do we have to wait for the press conference? >> we have got to wait for the press conference. have to say, i saw the governor earlier. he wasn't giving anything away. what we know is the bank is still saying it is going to act forcefully on inflation. markets would say this is actually costly on inflation. perhaps the bank of england

wanting to see what will come out tomorrow. the big question is, how much does the ftc know about whether there will be supply-side reforms announced to mari? -- tomorrow? jonathon: geoffrey yu joins us now. >> i think the market will just take it in stride. tomorrow is much more important compared to today. we are looking at inflationary impact there from energy support measures. we have national insurance cuts and any other form, and that's a different story. lisa: right now, do you see this as stemming from the decline, the pound resilience over the past 24 hours is going to stick do you think is just more weakness ahead? >> because of the upside inflation risk as acknowledged,

tomorrow, markets are going to be looking for fiscal credibility to back this up, being allowed to publish forecasts, casting a little bit of a shadow over things. he have minimum tax cuts, revenue generation. tom: so much of this is, do you have the luxury of economic growth? you can go country by country to this. does the united kingdom have the luxury of economic growth to do these different experiment see? >> growth can only be simulated by deregulation and knowing that fiscal burden on households and corporate. maybe it will begin the growth. tom: 2.5%. i'm not sure.

but 2.5% is the hope of the liz truss government. price that out from, let's say zero, out to 2.5. if they get a 1.25, does that help anybody? >> it will still be considered a live trend. but just having a growth number alone, i think that is something beijing is in the business of doing. [indiscernible] when we spoke last time, these are very on market things. that sets up uncertainty. how are you going to price to achieve that? it remains to be seen. tom: sterling right 11306. geoffrey yu, i have to ask you about yen, about the bank of japan on this historic day.

maybe it is sterilized, maybe it is not, who cares. maybe it is coordinator, maybe it is not, who cares. do you have any idea the impulse they use to make this intervention? i can't figure out how much of this they throw at the market to make for a momentary strong yen. >> they acted boldly. old is the keyword. $117 billion equivalent in november 2011. that was buying dollars, trying to weaken the yen. this is the other way around. it is asymmetric. i think we are talking mid-double digits. consistently, that will be interesting. i don't think it is court donated. they have opened the floodgates. i'm sure the bank of korea and authorities in thailand, taiwan for example, they may look at the snb.

will this signal a turn in the dollar led by central banks? lisa: this kind of rearranges things a little bit. i was asking this earlier how much money are japanese authorities spending to preserve the guild control, preserve something because against market that absolutely want to turn away? how much can they continue to do this kind of thing? to have enough money or will this become putatively costly? >> i believe $9 billion equivalent was spent earlier this week. it will be so much more efficient if they went?. we could see 135 very very quickly. the minister of finance pushing things along. at this point, still two things coming against each other. we are pushing at lower. that is going to be very expensive. jonathon: thank you.

geoffrey yu there. 225 on a bank of england rate. 175 previously. a 50.8 is hike. 113 on sterling. positive by about one third of 1%. the next event is a fiscal event for the u.k. tom: as you mentioned, this is a big deal. john, what do you look for tomorrow? jonathon: we could potentially get more tax cuts and spending. i also want details on the energy plan. we need a little bit of clarity around the consumer portion of this energy relief. we need a whole lot more for what it's going to happen to businesses. lisa: the bank of england saying to guarantee to cut inflation over five percentage points in 2023. it goes to this push-pull of on one hand, lower prices, but on the other, it allows people to start investing and other places.

i really find it interesting that the pound is strengthening on the back of this, because we actually saw an underwhelming decision based on a number of expectations. i wonder people are going to start saying less does more, if it means the economy can grow more later on. jonathon: the split was interesting. five officials wanted 50, 3 wanted 75, 1 wanted 25. wonder what that means for the next decision and the split then. tom: the jaime and olds the high ground on this. she is usually respected. her work at citibank, then onto the bank of england, for her to go to 75, it speaks volumes about where people like jeffrey you are. jonathon: the cio of morgan stanley wealth management will join us next hour. futures negative about 1/10 of 1%. from new york city, on radio and

as seen on tv, this is bloomberg surveillance. ♪ lisa: keeping you up-to-date with news from around the world. this is the first word and i'm lisa mateo. for the first time since 1998, japan has intervened to prop up the yen. that followed the bank of japan's earlier decision in the day to stick with its ultra low interest rates. the yen has fallen about 20% against the dollar this year. two american military veterans fighting for ukraine were among those released as part of a prisoner exchange brokered by saudi arabia and turkey. the two were captured in june. eight other foreign nationals were released, along with more than 200 ukrainians. ukraine freed a pro-kremlin. liz truss has promised work together to support ukraine.

the united nations general assembly, the two leaders said they would also discuss unresolved issues related to post-brexit trade and the irish border. bloomberg has learned that the security exchange commission has sent wall street for new owner flow deals. the practice can involve one brokerage routing retail stock to another firm for execution, rather than do an exchange. they say this is led to free trading. they question whether traders actually get the best price. this is part of an sec overhaul of stock trading rules. the holiday season is starting earlier this year at target. retail chain is pushing its holiday discounts into early october to try to recapture its momentum. meanwhile, target plans to how your -- plans to hire around 100,000 seasonal workers. earlier this week, walmart said it would scale back the number of holiday jobs. 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 lisa mateo. this is bloomberg. ♪

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>> time will tell if it is enough, but i do think today is an important move in the direction. as you mentioned a moment ago, they essentially got the effect of that, may in a more durable way putting a delay in rate hikes. jonathon: absolutely fantastic. that decision from the fed came out on the other side of a news conference, particularly when chairman powell wrapped things

up much earlier than i thought he would. i think the speech was about eight minutes long. the news conference stopped 20 in its early, something like that. tom: i think they get better as they go along. this guys getting more savvy. i think he is more taking charge of the moment. you and i were talking football while he was in the press conference. jonathon: lisa, almost on the same level as opec-plus. lisa: keep it short. [crosstalking] it makes it clear. if you need any guidance, just start the speech. jonathon: he struggled in news conferences, just in terms of interpretation of the market sometimes, just to see the nasdaq up 3% or 4% off the back of a fed decision. keep it tight and refer back to

well read material, which is essentially what he did. tom: they are data-dependent. that's all there is to it. right now, dr. fix. -- jack fitzpatrick joins us in washington. i want to open it up to the prime of the season. the leaves are changing in central park the browning of leaves is an american tradition. election nears. the economy is stupid. i don't buy it for a minute. it is about crime if you're on one side of the fence, it is about a different theme if you're on the other site. does inflation really, really matter in what we see november 8? >> it does. in this case, the slogan about the economy and its role in politics is at a pretty accurate one. it is not always the case, but that is the overriding theme. yes, the crime, the border, those are republican points of focus, but the economy and inflation is a major issue that

the republicans are running on. the democrats have felt the need to try to address their campaigning on what they have tried to do, the role of the tax and climate bills, reducing the deficit, the chips bill that should have somewhat of a disinflationary effect. it is limited what congress can do, but that is the topic of conversation as we get toward the midterms. tom: i know the report came out and shifted some seats yesterday. to guys like you, that is a big deal. we can identify the republican non-economy platforms. what are the democratic party talking points against crime and the rest of it at the republicans speak of? jack: on crime, you have seen the democrats move back toward the center, compared to that june 2020 conversation about defund the police. the president has talked about -- talked a lot about funding

for the police. on the microscale, the fact that they brought back earmarks, i think plays into that, because you have a number of democrats all over the country who have given a couple million dollars here, a couple million dollars they are for small town police radios, that kind of thing. that doesn't come across as a major thing, but it is something a lot of moderate democrats talk about, funding for local police. that basically is the democratic response. on the border issues, they have talked passed it a bit more. there haven't been major visits to the border by a bunch of democrats prayed that is a republican talking point that has a lot response. tom: lisa, the border is coming to martha's vineyard. that's what we're talking about. lisa: putting aside those highly political issues, i want to backtrack to the point of police radios for smaller police units. it goes into the larger issue of

democrats losing the rulebook. what is your view? jack: long-term, it has moved away, but the question is, how much can a chip into what has become a republican advantage? that kind of thing is the challenge. not only funding for police, but to what extent? i think the key question for democrats is, to what extent can they separate themselves from the big federal issues you heard an criticisms of the president, criticisms on the economy, and come back with issues? that's why it matters whether it is earmarked for small town police radios or they come and spend on wastewater. if you can make it almost seem like you are running for mayor rather than running on it big federal politics, that is something that helps the democrats running defense now.

you need to get to local issues. tom: lisa, mr, it comes from a livestock term where the ears of domestic animals were cut in specific ways so that farmers could distinguish their stock from others grazing on public land. gross. it is in earmark. [crosstalking] lisa: the farm journal. just to hear it, jack, and thinking about what you just said in this idea of trying to act like local politicians and run sort of local races. how much are we looking at a move away from saying the fed needs to do what it needs to do with inflation, and increasingly we need to get more jobs and better jobs, bring back jobs, that kind of talking point for the democrat party as they head into a much more perilous economic times? jack: they largely have not campaigned on either message of, on one hand, this is the fed's job, or even trying to say, look

at the flipside of the coin that jobs came back. there was a jobs recovery, so what they really have campaigned on is the limited opportunity they have had in congress to address inflation. the democrats are campaigning on the inflation reduction act, which may not be the most accurate name, but it reduced the deficit. on the chips bill, that kind of think that should have a disinflationary effect of some sort, to be honest, probably the role of the fed is downplayed on the campaign trail, even from democrats, because they at least have a couple of talking points on bills that theoretically would have a disinflationary impact. it is much more advantageous to talk about what you did do, even if it doesn't have a huge impact on inflation, rather than sort of shrug and say that that is up to the fed. the talking points are more on

what congress has managed to do, even if it may be fairly limited on inflation. jonathon: jack, thank you. jack fitzpatrick down idc i wonder how quickly this changes. this federal reserve is engineering a slowdown and set to lead higher unemployment. that is a feature of what they are trying to achieve. lisa: how much longer can all politicians on both sides of the aisle say the fed's to do, it is their job to bring inflation down? jonathon: futures at two tencent 1% on a 10-year. from new york on radio and as seen on tv, this is bloomberg. ♪

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jonathan: equities a bit lower, rolling over here. the nasdaq 100, down .5%. negative on the russell .4%. also in the bond market, you know the theme, don't you? yields higher. on the two-year by six basis points. sit on that for a minute. 4.11 percent on the two-year,

when we were treading 12 months ago at something like 20 basis points, tom. at the start of the year, just a monster change. everything has to reprice off of that. tom: i agree with that. they reprice off of short-term paper. jon, important research coming out of history made today by the bank of japan. george sarah bellows -- george sarah bellows models out something in the order of 1% of reserves were used on this intervention. far more importantly, this is what it is about my -- about, credibility. i love what jeff said earlier. this is asymmetric to the reverse currency war. this is a nation that wants to strengthen their currency. that is way harder to do than

weaken your currency. jonathan: whistling in the wind, tom. they have the fx reserves, but they need the underlying policy to shift. the fed is going hard, and this is why twos/tens is shaping up as follows. lisa: i'm looking at the two tens. jonathan: take a look at sterling too. two year bond yield up 13 basis points. there is big changes all around at the front end of the curve and really shaking things up in the fx market. lisa: this yield curve inversion is not doing any favors to any of the banks. possibly the reason why people are not getting more income when it comes to their deposits. in particular when it comes to european banks we have been talking about credit suisse. i did not make any recommendations during the break, but we did hear the financial times reporting that they are considering a plan to break the bank up into three different units, including a bad bank, and selling off structured

finance units in the united states, potentially cutting thousands of jobs. this is all speculation. shares lower by about 1%. year-to-date it has been a more punitive kind of path. what you bank interestingly is up 5.5% today in a tale of two banks that were once lumped together. bloomberg is reporting they are potentially going to put out revenue guidance at the upper end, that they are doing better than they had previously expected. year-to-date both have suffered dramatically in line with the banks, and possibly much more for -- much more so for credit suisse suffered a 20% decline so far this year. deutsche bank down a little bit or than 30%, but how much more is there? tom, you have been talking about credit suisse. how much is there a remedy here? or is this going to be a slow bleed? it seems like the financial times reporting they are going to have some sort of pretty

major restructuring. tom: this is the zombieness, lisa. it is about physics. these are important statements. is credit suisse a zombie institution? i don't mean to be rude, but that is the question. lisa: they are trying to isolate some of their zombie, or devalued assets, in a bank so they can save parts that are functioning. tom: let's cut to the chase now. again, yield is on -- yield is an equivalent. the bloomberg total return u.s. aggregate index is back to where it was on price in early 2019. ed al-hussainy is senior interest-rate strategist at columbia threadneedle. eddie, good morning, and thank you so much for joining us again. what is the ramification for retail and institutional

non-spread investors to see the bond price in the u.s. back to the spring up to 2019? ed: on a return basis this has been an exceptionally painful year. if you are exposed to interest-rate durations. from two perspectives, one, yields have increased from exceptionally low levels. but also the correlation of rates to risk has turned positive. so you are not able to offset the negative return, the duration, with positive return in risk assets. it has been an exceptionally painful period. jonathan: tell me about international bond notes and bills. you have currency to play with they are. are you looking completely domestic at columbia threadneedle, or are there opportunities in the international carnage? ed: we are looking across the board. do your point, the bank of

england, the fed, the european central bank obviously the bank of japan are at different stages in the policy normalization process. the fed being most aggressive, but the bank of england and ecb catching up, and obviously the bank of japan has continued to ease. i think that creates interesting opportunities in the rate space in fx. the dollar continues to dominate. but in the rate space as the fed gets more aggressive and as the inflation problem in the u.s. -- and in some ways it is more intractable than in the u.k. and europe -- relative value in u.s. rates, in my mind, is becoming more attractive versus the u.k. hand core european rates. lisa: you are saying you would be going into 10 year treasuries right now? ed: yeah, and, again, we have been a little bit early in this

view, but as the fed continues to regain that credibility in the front end and bring forward the probability of recession, the long end should naturally be a safe haven and more attractive place to be. what we don't know is, what is the final destination with the terminal right? we think we have a decent amount priced in, in terms of where that could go. slightly north of 4.5% year but that should create value in the long and. we are not quite there in the u.k. and europe yet. lisa: preeminent or said we seem to be getting close to peak rates in the ten-year yields that she is starting to see attractive business there. how much does this give you confidence to go further down the risk spectrum, to risk credit, other aspects of corporate debt where it does not seem like the credit risk is that massive but you are getting more significant yield? ed: we have liked the front and

as a short maturity investment grade debt. again, in the background corporate balance sheets remain healthy. they continue to do leverage in the investment space. investment-grade debt benefits from the treasury rates rising north of 4% on the two-year notes, and, of course, spreads being exceptionally volatile this year. so getting both a spread kicker and that high starting level of yields. tom: the spread kicker was such a great band. i'm looking at the u.s. aggregate total return index. it is a five-deviation move looking on a 30 year disinflation trend. critically we move from plus-three standard deviations. we have had a seven or eight

standard deviation move in your bond world. how do you make it back? in equities you grow revenues. how do you make back these losses in bonds? ed: i think income is going to be the key component. we will claw back. this process will take some time, no doubt given the drawdown this year. forward-looking income right now is looking pretty good. again, look at real rates. 10 year real yields are north of 10%. nominal rates are quite elevated as well. the expected income going forward is quite attractive, and i think that is going to be a much bigger component of total return from here than it was several years ago. jonathan: wonderful to get your thoughts today. ed al-hussainy of columbia threadneedle investments. i'm sorry we keep missing your in new york when we are in london. euro swissie, tom, this is a two

percentage point move against the swiss franc in the euro's favor after a 75 basis point hike from the swiss national bank. tom: this is exactly what jeff was talking about. it is asymmetric. i did a comparative standard deviation study. you can do this on the bloomberg terminal in seconds. the move on a standard deviation basis is more substantial than the attempt by the bank of japan to strengthen yen. that is the asymmetry. jonathan: is this what happened, lisa, when you do not deliver a 100 basis point hike and you only go 75? it is a major move. lisa: and yet we are not necessarily seeing the same kind of weakening in the pound, even though they did not come in on the more hawkish side with respect to their rate hike. you saw the swedish central bank, and with a 100 basis point hike and the currency still sold

off. try to make sense of this in terms of how you respond to different central-bank parameters. very difficult. jonathan: i'm looking at yet crosses on the bloomberg. change the base currency to the yen and you get a decent picture of things. feeding into everything. against the swiss franc it is a three percentage point move. tom: what does the aussie-yen look like? jonathan: we want me to have a look at aussie-yen right now? i will do that for you. a move of 1.4% in the yen's favor. tom: as we say, equities, bonds, currencies, and commodities linked together. somehow swiss franc movement links into apple computer. jonathan: futures down on the s&p. you might have to explain that one later, tom. yields higher by a couple of basis points. those were the days when the central bank wanted a week

currency, would buy foreign stocks. tom, all of that crazy is, no more -- craziness, no more. tom: it is a start time. looking at the screen getting scale here is tough to do. it has changed, big time. jonathan: from new york, this is bloomberg. >> keeping you up-to-date with the first word, i'm lisa mateo. policymakers at the bank of england have voted to raise its benchmark interest rate by half a percentage point. three of the nine members wanted a 75 basis point hike. they could build up expectations for a bigger rate increase later this year. bloomberg has learned ukraine has seized dozens of tanks left by russian forces fleeing the battlefield. that adds weaponry at a time crane needs it. one person familiar with the matter says around 200 tanks were captured, but there is no word on how many of those were damaged or destroyed. shares of robinhood are surging. brooke has learned the

securities and exchange commission will stop short of banning payment for order flow, a major source of revenue for the brokerage. the decision is a win for brokerages that get paid for processing rights. goldman sachs has cut hits 2023 economic growth forecast for china. the firm predicts beijing will stick to its tough covid zero restrictions through at least the first quarter of next year. goldman says china's gdp will increase 4.5%, down from a previous projection of 5.3%. amazon has lost a bid to exclude jeff bezos from having to testify in a federal trade commission probe. the company filed a petition last month arguing that the agency's information and interviewer west's work unduly burdensome. chief executive officer andy jassy was also included. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries.

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>> with respect to the expectation that inflation will fall, and will fall quite dramatically with what is priced into that dot plot to those meeting estimates, the market is there. but it is important to remember that the fomc's projections can be wrong. the market can be wrong. jonathan: just a fantastic lineup yesterday. get to everyone's contributions. scott minerd at guggenheim. of course, richard clarida. just a fantastic lineup yesterday. thanks to all involved.

futures down on the s&p 500. a lot of southside research coming through. pal and the committee planned to move nominal rates above underlying inflation, resulting in millions of new unemployed individuals to relieve inflationary pressures. this is not a positive scenario for risk. tom: a spike up to 30 during the carnage yesterday, but we come back down and we will have to see what -- how equities play out. we go to britain, and what jon knows, and i got lost in the streets. you go out -- i can't pronounce them right -- go beyond the bank of england come out past that pub where i have a beverage of my choice, and you end up in the world of david blanchflower. i believe it is called aldgate. you end up in a different london than the fancy stuff we are talking about everyday. jonathan: danny, it is fantastic to catch up.

at the heart of these decisions, what do these decisions mean for everyday americans when citi are saying millions are going to end up unemployed. his higher unemployment a price worth paying to get inflation down? danny: no. we have a lot of evidence. the central bank knows how important inflation is. there is a huge body of literature i've contributed to, and we look at, what is the impact on the country's well-being? get percentage point rise in unemployment compared to a 1% rise in inflation? the answer is clear, between five and 10 times worth -- worse. a new paper says the rise in unemployment is 10 times worse than the problem they are trying to solve. you started this thing out -- i have been talking about the woman. what i mean by that is, the bank of england in the city of london, one mile away is the

mile-end road, where the two worlds collide. the question is, what is going on that is going to help the bankers and the folks we talked to, and the woman riding the bus on the mile-end road? the answer, it seems to me, is we are seeing disaster coming. we are seeing rises in interest rates in the u.k. when the bank of england talks about slowing demand, the bank of england forecast before the rate rise says there is a high probability of deflation and output will fall over the next three years. so what are they trying to do about a problem that is not about demand-driven inflation? you guys talk about this all the time, but there is so little dissent, the story at the ecb, the story at the fed. we have to do thing about inflation, we have to raise rates, but this is going to crash the economy and it will all be much worse. tom: professor blanchflower, i

stood at the bottom of our building here in new york with tim geithner, and geithner are brilliantly laid out that they need to extend the x axis and use time to heal the wounds. are these central banks that are panicking because they refused to extend time, to extend the x axis, to diffuse inflationary impulse? danny: that's absolutely right. the thing that strikes me as interesting is central bankers seem to want to respond to every piece of minutia that comes in every day. their job is to focus on what inflation is going to be in two years time. but if that causes problems, there is no reason you shouldn't say, let's let inflation come back to target in three years or four years. that is allowed. the thing to do is see if this

temporary shock dissipates. so you could sit there and say, a sensible path would be to sit and wait and watch. but where is your dissenting voices? i have no precedent to this, and the danger is that the soft landings are not going to come. the forecast yesterday from the fed said output is going to be fined, output is going to rise, and raising rates to 4.5%, no worry. that is not going to happen. lisa: are there any circumstances under which you would argue for raising rates? danny: of course, obviously. absolutely. lisa: so, what are the scenarios that will cause you to say that is an important condition? danny: that is a stupid question, in a way. but we have seen since 2008 is the mother of all shocks. we have seen a negative shocked output in 2007-2008, which you have to counter.

so now we have our giant shocks, from covid and from the war. we don't know how it is going to recover. so why would i want to delay the market and punch demand before i really know what is coming? they clearly don't, so under these circumstances supply-driven shop that essentially is going to drop out in the united states and u.k. will see very low inflation by june. one off big numbers that we saw, i would not have voted for rate rises, because of the large negative shock and the debate over the last decade is about the scale of that negative shock. danny: danny, it may be a stupid question, and yet some people might be wondering that, because they are looking at cpi and saying, why wouldn't you want to raise rates? danny: it is clear why you wouldn't.

lisa: what data point would you be watching to prove your point every week? danny: let's just go with the claim that the fed has made and the claim i make. what you have got his couple of one-off events that are driving the base effect. you have inflation at zero and 0.1 in the last two months. if you take 2012 and 2019 and imposed those inflation shocks over the next few months, inflation gets to 1% by june. if you go back to july 2008, inflation was 5.6%. it was -2% a year later. everything has been driven by the base effects, so i would be watching and raising. jonathan: david blanchflower, thank you, sir. that was a phenomenal question, by the way, brammo. i've just never heard danny ask for a rate hike, so i was interested too. thank you. to lisa as well, to tom keene.

from me, i'm going to get a wisdom tooth removed now, tom. so you are flying solo. tom: i just opened my monthly statement and that austrian i bought, remember the end of 2020? jonathan: how is that going? tom: i'm down 65%. lisa: i remember. tom: i'm down 65% on that puppy. jonathan: futures, tom. get in touch with me in an hour and see if i'm ok. on the nasdaq we are down. from new york, this is bloomberg. ♪

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>> the fomc is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done. bucks need to do a session to

bring inflation down. >> it is important to remember that the fomc's projection can be wrong. the market can be wrong. >> time will tell if it is enough. >> this is blue -- this is "bloomberg surveillance." tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene. jon ferro out seeing dr. do you floss. very important moment for him, and he has our thoughts and prayers. lisa abramowicz and myself will get you through this truly historic day after the fed meeting. lisa, just to generalize for radio and tv, powell acted, many respond. lisa: not just with respect to markets, but central bankers around the world. i he would just add a time when the dollar is ascendant, when you have a federal reserve that is going to keep hiking? this is going to offer a

conundrum for central banks globally. tom: it is. of course, the intervention in japan is historic. i love, moments ago in evans with an exceptionally thoughtful note at meddling. he frames it back at 1998, right back to 2011, in that there is more work to be done. not only in intervention, but this crazy yield policy they have. lisa: how far can they go with this? what is the note you are pointing out? tom: 1% of the reserves is the working number right now. lisa: that is what they used to create a floor for the valuation versus the dollar for yen. how much longer can they go and what happens to markets? do you get that breaking point? that is one of the key questions going forward. when do some of this market activity become unruly? when is it something that has to be, i guess, addressed deco --

addressed? tom: what to do with your assets, your money forward? lisa, help me with the data check. the vix went above 30 and pulled right back into 27.68. the dow, still above 30,000. did not get to the 29,000 level. what do you see in bonds this morning? lisa: a front end that will not quit. 4.11 percent on that. also on the currency space. this goes to the scene we have been talking about. how do the other central banks respond to this? the swiss national bank rosa rates -- rosa rates and left the negative you -- negative yield regime. the currency is rising. what is the path ahead in this currency war to get a stronger currency at a time when nobody

wants anything other than the dollar? tom: with those keeping score, the swiss went one way, the japanese went another way. maybe that is called a currency war, lisa? lisa: a very different one than the ones we are used to. tom: that is important. as jeff said earlier, it is asymmetric, to say the least. we need to solve the carnage in your portfolio. lisa shalett with you, chief investment manager at morgan stanley. are we rebalancing, lisa? are we readjusting? what are we doing amid the carnage? lisa s.: our advice to our clients is certainly that we should be rebalancing here. what we have said is, this is a time for active risk management, and what we mean by that is taking a maximum level of diversification. that means diversification bisectors, diversification by

technical factors, diversification by region, and i know it is not popular right now to speak about american investors owning non-u.s. stocks, given relative outperformance over the last decade, but we think what is going on in the currency market is material and that this divergence ultimately will reverse and there is going to be some catch up. we are recommending active management, diversification, and things of that nature. tom: i'm really looking forward to speaking with you, because i want to talk about this strange scale. at fidelity he said, look, i care about your 47th stock pick not your number one. there seems to be so little to choose from. how do you get scale or

diversification within u.s. equities if you only have so many good ideas? lisa s.: well, i actually might push back on that. i think underneath the surface of the s&p 500 index and the nasdaq we are finding real opportunities. there has been carnage in this market. we know in small and mid-cap land there has been carnage. we know there is a host of sectors that have sold off aggressively, including things like homebuilders. again, contrary and perhaps, but where a lot of the bad news or likely news is discounted. so we think there are things to accumulate out there if you are willing to do the fundamental work. if -- one of the challenges for investors is the last 13 years

has been dominated by a handful of stocks in the u.s. with the growth orientation in the communications sector. people didn't have to do much work because they could buy the index and get the job done. this is going to require homework navigating in these markets, and this is when active managers actually, you know, for good or bad, earn their fees. we think that is the place to be. lisa a.: does that mean you think the headline figure for the s&p could trace sideways for years? lisa s.: i do. i am more in that camp. one of the things that has continued to surprise me is the extent to which equity investors have been willing to hold forward multiples that were holding in the face of decade-high interest rates. we know mathematically and fundamentally that the movement

in interest rates higher should equate to lower price-earnings ratios. and, yes, have we pressed down a bit from where we were in january as the fed funds rate has gone from zero to three? yes, we have some, but you know we are also in the camp that the current figures in terms of estimates for forward consensus earnings estimates for 2022 for-year, and 2023, probably remain too high. especially if we are in this state -- in this debate about recession. the current pricing in markets may suggest a sub-17 forward multiple. if you adjust those earnings down we might be back at 17.5, 18 times forward. this market has more work to do in terms of "eating real."

-- "getting real." lisa a.: it sounds like in your scenario big tech cannot be it anymore. lisa s.: big tech is going to have to consolidate, and i think they're going to have to have a come to jesus moment that says these are great companies, but they are no longer great stocks, because everyone knows the stories, and expectations are extraordinarily high. the reality is, they operate in the whole global world. the global world is slowing. the u.s. dollar is immaterial headwind. inflation and cost pressures are realities for them. new leadership from where we sit is likely to come from different areas. areas like health care, areas like energy and industrials that may benefit from some of the infrastructure and capital spending we think is going to occur. tom: lisa, i'm thinking of

andrew mellon on transactions and combinations. are we at a point where the zombies roll up? are we finally at a point where the real interest rate market, which was a gift zombies had for 17 years, is this the point where the zombies and? lisa s.: i love what you are saying, tom. i do think that is going to be the next phase here. where the cost of capital does start to pinch. i do think those that have strategic capital to deploy are going to be able to go out and acquire some capabilities. at the same time i think some of those zombies are going to go by the wayside and, you know, start to not be able to get financing. tom: got to leave it there. lisa shalett, think you some much. with morgan stanley wealth management. you think about the zombies,

lisa. it was a russian song. i cannot remember which album it was on, but i'm going to say forward i mull over this. all of a sudden the g is back in physics. the risk-free rate. all of these zombies disappear in one way or another. lisa a.: i'm going to have the cranberries song in my head for the rest of the day. on this question of financing, lisa shalett pointed to this, it is going to be more difficult to find financing in an era of interest rates and credit risk. this goes back to the point of jp morgan asset management. this is actually a huge argument within his team. do you by yields that look good at 8% all in or do you wait for them to become 12%, because suddenly people are not going to finance those zombies? tom: that is called doing an

austrian debt. [laughter] lisa a.: you are still burned from that, huh? tom: sterling on the edge of hunched. coming up, abby joseph cohen. lisa m.: keeping up-to-date with news from around the world, i'm lisa mateo. policymakers at the bank of england have voted to raise market interest rates by half a percentage point. three of the nine members want today 75-basis point height. they could build expectations for a bigger rate increase later this year. the first time since 1990 eight japan has intervened to prop up the yen. the bank of japan's decision to stick with its ultra low interest rates. again had fallen about 20% against the dollar this year. two american military veterans fighting for ukraine were among those released as part of a prisoner exchange brokered by saudi arabia and turkey.

the two were captured in june. eight other foreign nationals were released, with more than -- along with 200 ukrainians. shares of robinhood are surging. bloomberg has learned the securities and exchange commission will stop short of banning payment for order flow. that is a major source of revenue for the brokerage. the decision is a win for brokerages that get paid for processing rights. holiday season is starting earlier at target. the retail chain is pushing holiday discounts into early october. they are trying to recapture momentum. meanwhile, target plans to hire 100,000 seasonal workers. that is similar to last year's amount. earlier this week walmart said it would scale back on the number of holiday jobs. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg.

♪

>> in order to punish huishan on a -- we should not turn a blind eye to propagandists who justify

aggression, but apply restrictions against them. that is the punishment for lying. tom: let's get out front. in 2022, let's suggest he could be men of the year for time magazine. mr. zelenskyy of ukraine. ukraine has had a momentous 14 days in their war with mr. putin. abramowitz and tom keene in new york. lisa, how about that traffic we have all seen with thousands the sending for the united nations general assembly meetings and much more? for more importantly, there is a migration in october to the meeting of the international monetary fund in washington. someone who knows this schedule is the -- is serhiy nikolaychuk of the national bank of ukraine. we are glad for you to join us today and made a terrible war. i need you to go to a simple

anecdote of kyiv. you were educated in kyiv, you have seen the transformation over 20 years. how does he have the cover back to what you knew when you were younger? how do you see that happening? serhiy: he have changed dramatically over the last 20 years. before the war it looked like normal european city, capital of a european country. normally he was able to enjoy the restaurants, clubs, shopping malls, and so on. kyiv changed sizable since the beginning of the war. kyiv was completely empty in march, april. so now life is recovering. tom: coming back? serhiy: coming back. you feel the consequences of the war on each step. tom: the international monetary

fund has a few distractions away from your war. it is your unique message to the international monetary fund as you cry for help? what is the distinction you say versus all of the other headaches they have around the world? serhiy: definitely ukraine needs support from the international monetary fund. we are grateful for the international monetary fund for providing us $1.4 billion at the beginning of the war, but so far we need more, and we are ready to engage into full-fledged program. so mainly focus our force in order to launch the eff program of the large-scale, and therefore fully functional and ready to negotiate and discuss the policies in order to launch such a program. lisa: we have been talking about

central right bank decisions over the past week, and we have gotten a lot of them in the past when he four hours. he recently kept the rate unchanged. do you even have monetary policy and try to keep him normal -- keeping normal since in the face of such incredible destruction and day-to-day commerce? it becomes sort of not really a main future. serhiy: definitely. our approach to the monetary policy change since the beginning of the war, before the work we relied on the targeting framework similar to many other central banks all around the world. but in the year of the war we moved to another set up. we started to heavily rely on the ability of the change rate. we supported our actions on a fixed market with tough capital controls and some adjustment.

when we keep the interest rate stable at 10% in early june, we raised it to 25% in order to help ourselves to maintain the stability of the exchange rate. our last two monetary decisions were to keep this interest rate at 5%. at the same time, as you mentioned, we struggled to improve the monetary transmission, which was not good before the war, and certainly it is even worse since the beginning of the war. so far we see that our decisions, they are translating to the banking rates more or less as we expected, and we hope tighter monetary conditions will

help us to stabilize the exchange rate. lisa: but will it take on the physical side? you were talking about the imf a. how much would you need and how long would it take overall to rebuild the economy in a way you could go back to something more kenton normalcy? serhiy: thank you speaking, the losses from the war are tremendous. that relates both to whether we have a huge margin cap, to whether we help finance from the central bank side. this year we already provided more than $10 billion to provide for central needs. at the same time, that puts sizable pressure on this market. tom: you are running out of time here, governor, so i'm being rude, ukraine has had a courageous two weeks. news flow has been

extraordinarily good on the military front. what do you need from the allies right now. what do you need from mr. biden right now? serhiy: i think we need the continuation of the support on both the military front and also financial aid. so we proved to the whole world we may win, and we hope with continuation of the support from the democratic world you will achieve the victory as soon as possible. tom: thank you so much for joining us at bloomberg today. serhiy nikolaychuk from the national bank of ukraine. really an extraordinary set of meetings, lisa, i'm going to call it post-pandemic. lisa: it is interesting to see the consecutive rate hikes and who can out-hike the next in order to get some sort of stability in the currency. it is interesting, this conversation we are having

highlights fiscal and monetary. for so many years monetary to president, and now fiscal is offset and they are not in sync and it's going to become a political issue. tom: it is a new experiment. certainly, folks, you have seen that in the last few days. if you are just joining us, the bank of england with a modest surprise, 50 basis points, not 75. equity markets, quiescent. dow futures, up 80 points. that is a good point to speak. to abby joseph cohen in this historic 2022, the professor from columbia business school. this is bloomberg. ♪

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tom: bloomberg surveillance on this thursday. yesterday, wednesday, the federal reserve, we go but right back to the news that matters, and that is the state of the labor economy. michael mckee, what are you seeing this morning? mike: the fed raised rates because the labor market is tight, and the labor market is still tight.

213,000, that is the same as last month, unrevised. it does tell you that we are seeing a very strong labor market still, and a chance for people to get jobs, even if they have lost their job, because continuing claims continue to fall. these are two weeks behind, so the week before last, it doesn't show you that this is an incredibly strong labor market. at least, it is showing no signs of cracking on the letting people go front. there was obviously a big exchange between the chairman and me yesterday, and the chairman and others, about unemployment and how high they are willing to let it go. right now it does not seem to be a problem. tom: is the phillips curve in order right now? that did not come up yesterday, but i thought there was a nuance

of questions, starting with nonlinear items early in the conversations, and over to your rudeness later made for an interesting press conference. is the theory we grew up with, the phillips curve, is it in place? mike: it is still there, but is being overlooked at this point. there is a big debate about whether or not it holds. it was before the pandemic, because the fed viewed it as extremely flat, but right now because of the fact the labor market has been -- the labor force has been so small, it is kind of hard to tell. not enough people going back to work and an awful lot of job openings. that should not happen. usually if you have that many job openings it lures people back to work. they are looking more at the absolute numbers, and, of course, as we pointed out yesterday, these are all backwards-looking. job's claims are pretty contemporaneous. they do show people are still on the job. tom: mike mckee, thank you so

much here with mixed futures on the screen. how do we know it was a historic day of japanese intervention? abby joseph cohen, professor at columbia business school, a modest career at goldman sachs as well. q. so much for joining us here. keep us informed on the underlying mathematics of these equity markets. abby joseph cohen, suddenly the sharpe ratio matters. i guess beta matters again, but outside of beta we have the risk-free rate, and it has returned with a vengeance. are we revisiting the sharpe ratio? are we back to the articles you wrote for the cfa years ago? abby: tom, wonderful question, and i'm going to respond by giving a bit of a prologue, which is that many models are broken, have been broken during

this period of time, because they typically respond to cyclical phenomenon. for example, your question to michael before about the phillips curve reality is, there are so many structural changes in the economy and markets as well that a lot of those models simply have not applied. some of them are coming back in force. the phillips curve had no way in this model to reflect the fact there was a pandemic that we have had this generational shift in labor force participation, by which i mean the baby boomers are now stepping out of the labor force. the other thing, of course, is that we have had a four-year deceleration, if you will, in terms of immigrants coming into the united states. over the prior decade immigrants filled 60% to 65% in the increase in employment in the united states. there are a lot of things that

are different. keep in mind this weird 20 to 30-year period in which interest rates were extraordinarily low, and to your points real rates reached negative levels, something we have never seen before. i, for one -- i am now answering your question -- i'm happy to see the fed is focused on making sure that real rates are in fact positive, and does the market believe them? and the reality is we -- we now have a flat to inverted yield curve, which suggests on the investors are giving the fed credence and credibility in terms of believing the fed policy will have efficacy. lisa: are you saying that stockmarkets are not accurately reflecting the fact that inflation would be higher and would remain higher even after this cycle collapsed if the fed were not to keep rates at a much

higher level than they had been? abby: another very good question. let me talk about what happened yesterday in response. that is, the equity market did not know what to do. first it was up, then it was down, there was really erratic behavior because, to your point, equity investors are really confused. because there is this pyongyang --yi -- yin-yang. i think we are now at a point where even the significant rises in interest rates and yields across the yield curve since the beginning of the year, the equity market is now focused much less on inflation and yields than it is on earnings. there is a lot of confusion. investors are not sure how this is going to play out. for the rest of the year, let

alone 2023. we see, for example, that there are ongoing's job -- ongoing adjustments to the forecast. we are starting at record profit margins. it is not as if profit margins are low. the s&p 500 is in excess of 20%. if there is ongoing profit margin squeeze i think the impact overall is not dramatic. the impact, however, in individual sectors, may be significant. lisa: you see the possibility of a lost decade, given the fact we are trying to re-normalize some of the financial decision of the economy? abby: you mean a lost decade in gdp? lisa: profits. in a lot of the things people harken back to the 70 -- the 1970's about? abby: if you look at the valuation of the u.s. equity market, and some other markets as well, at the end of 2021

there were record-high levels in terms of where we were on percentiles. most every valuation model was between the 95th and 99th percentile, indicating overvaluation. unless you believe the dream scenario of extremely low interest rates and strong profit growth would continue uninterrupted. so where are we now? the valuations are roughly at average levels. the s&p 500 pe, for example, is about 16 times earnings. and given where we are, even with the rise in interest rates, that is not a bad place to be. we talk about the lost decade, let's talk about two different phases. we have now had a 20% correction in share prices from record high levels and record high valuations. can we get back that 20%? i don't think that happens over the next several months.

over the next few quarters i think the economy will slow, earnings growth will slow. i think it is possible we could see higher equity prices. i pegged that along the same lines of the growth in earnings, which is probably 5% to 10% over the next few months. tom: a few years ago you wrote an iconic paper. he mentioned a strategist i used to talk to named aristotle. aristotle never saw a bond market with yields up, price down, and the mosses we have seen over the last year and a half. how did bond investors recover given this historic coat -- historic carnage? abby: the damage has been much more dramatic in the bond market, and in some ways the overvaluation was much more extreme. we had central banks around the world who kept interest rates nominally at extremely low levels, and real yields are low in many countries. two thirds of major economies --

not the u.s., but two thirds of economies had negative real yields. the damage we have seen in the bond market, i think it was expected when we look at government bonds. the damage in the credit markets is something we have not yet seen, because a lot of those are illiquid securities. i think we are going to see more damage ahead. but for the average investor who is willing to die, for example, an individual bond and now can get a 4% yield, depending upon the maturity they are willing to take on, that is something that is one of the best opportunities in 20 years. tom:. good. are you liking teaching? this is a whole different act for you. do you throw chalk at people? abby: i do not, because we use whiteboards. i'm loving it, tom. it is a great opportunity for me

to be involved in the next generation. tom: wonderful. you look tanned and rested. abby joseph cohen, professor at columbia business school. thank you so much for joining us. i think it is fascinating to talk to her with her equity credit. i think it is tangible. lisa: i think she said there were some opportunities that may be the best in 20 years, though she did seem to suggest the credit market has not fully priced in this pain. we are going to be talking about that coming up. jonathan: tuesday 10 spread, -53 basis points. we are looking at the screen saying not never, but we have never seen this kind of move in bonds. you hear people like abby joseph cohen saying, let's go. this is the time to act. lisa: the last time we saw an inversion like this was 1981, of this magnitude. and are we heading back to that era?

that is a pretty significant question, and one that will frame the next. tom: we are frozen. i'm looking at triple levers all-cash and ongoing, ♪ let it go ♪ this is bloomberg. lisa m.: keeping up-to-date with news from around the world, i'm lisa mateo. the bank of england has delivered a second-straight half-point hike. it was a split decision. three have the nine policymakers voted for a bigger rate hike. the boe also endorsed plans to start reducing government bond holdings built up since the financial crisis over a decade ago. bloomberg has learned ukraine has seized dozens of tanks left by russian forces fling the battlefield. that adds crucial weaponry at a time ukraine needs it. one person familiar with the matter says around 200 tanks were captured, but there is no word on how many of those were damaged or destroyed. a big sale for airbus, and a

blow to boeing. unit of china's southern airline has agreed to buy 40 airbus neo's. the deal is $4.9 billion. the actual price will be lower after discounts. the planes will be delivered in 2024. boeing has historically counted china southern as its biggest customer. softbank group has slashed the of hotels on its book as it heads to an ipo. the once-highflying indian startup was valued at 10 billion dollars in 2019. softbank has cut its valuation to $2.7 billion. in manhattan the rental market ended its streak of record-setting prices in august. appointment leases were at the median price of $4100, down from july's all-time high. that is according to miller samuel. the august median was up 17% from three years ago. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than

2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> the reality is, we take a mild recession today and eradicate inflation now, because we know the mistakes of the past. that doesn't mean they will not make a new set of mistakes. which is what i'm worried about. tom: it is thursday. diane swonk, chief quantum asked -- diane swonk, chief economist of kpmg during -- kpmg. just lights out of their interpretation. we look forward to rejecting that early november. right now -- and i'm doing this for global wall street -- is a clinic. ira jersey, long ago and far away, work for global wall street. he wrote the kind of notes where you would get angry at him

because they were eight pages and you had to read every line, because they were loaded with intelligence about stuff you flunked in bond exams. the teacher joins us this morning, running all of our interest rate strategy at bloomberg intelligence. i want to have a clinic right now on this strange word, liquidity. in the old days it was commercial paper. there was a wonderment of understanding. it was like a mary poppins movie. great. it has all been blown up. how do you measure liquidity in the fixed-income space in 2023? ira: there is a couple of different ways we look at liquidity. one is obviously simple, like the offer between those people looking to buy, those people looking to sell, how wide is that? how do marketmakers make those markets? that has gotten wider, particularly since the federal reserve backed off of its bond-buying program.

and then second -- and i think this is important, and this is that plumbing you are talking about -- that is the repurchase market. how do levered investors, investors buying bonds with leverage, how do they get leverage, and at what price do they get it? they do that through the repurchase market through treasuries, securities, and a few other bond markets as well. that market has not grown much at all, while the treasury market is four times larger than it was before the global financial crisis. we were looking on an environment where it is harder to get as much leverage as you use to. because of that, let's say the pipe is the same size but there is a lot more water trying to get to that pipe, and that is the problem right now. tom: should we be concerned about this plumbing? there is a doom crew you and -- you have pushed against every day, a doom crew that is going to write plumbing is fractured

or rusty or broken in the banking, fixed-income space. is it? ira: i think it is, in some ways. part of this has to do with the regulatory environment that shifted a decade ago in response to the financial crisis. banks and dealers now have to hold a lot more capital, even against their treasury securities. if they are not supposed to have credit risk, why did they have to hold credit against it? this is why a lot of regulators -- the federal reserve, the acc -- are pushing toward things like central hub securities. theoretically and the hope is by having central clearing of treasury securities it will just make things flow a little bit easier, people will not have to worry about if they are going to be delivered a bond or not and if people are going to fail in executing that transaction and clearing it. there are positives from trying to do that, but i think the bigger issue is the amount of leverage in the system versus

the size of the market. i think that is probably the bigger issue for why you are seeing moves of 10, 15, 20 basis points some days on very little market news. tom: we harken back, particularly this week, to 1998. part of it was, it was not transparent. there were unknown unknowns. do we have a knowledge of the liquidity of the american finance system, or are there unknown unknowns out there, shadows, if you will? ira: there probably are unknown unknowns, and that is scary. if there were known unknowns, we would at least have a clue as to what we should be looking at, but we don't. you know, there is always potential -- potentially factors that could play into the financial markets. we had that significant 15-minute 50-basis point rally in treasury securities in 2015 that is still kind of baffling.

there has not been any great explanation for why that happened. there are certainly risks to the financial system, but the treasury market in general is still one of the most liquid markets we have. you can get off a significant size without moving the market very much. but it is still, because of the size of it, there is still a lot more liquidity then there was four or five years ago. tom: completely unfair question, but it is unfair thursday -- in japan the calculation is 1% of reserves were spent today in this strengthening of japanese yen. how much reserves can any given nation use before it becomes painful? is it distant for a wealthy japan, or is it too close? ira: in the case of japan they have so many reserves vis-a-vis

what they are trying to do that they can go very far. remember, central banks in particular can lever themselves by basically printing money, right? have the ability to potentially go the other way. i don't think the bank of japan's problem right now is things like interest rate differentials. the fact they did not hike today, but they did intervene in the fx market, is a significantly different than if they had raised interest rates above zero, which they still have not done. i think japan is in a more unique situation than, say, europe. europe will eventually catch up to the u.s.. the way i see this playing out is, the u.s. is going to stop hiking somewhere in 2023. whether that is 4% or 4.5%. eventually the european central bank and bank of england are going to catch up. you're going to see a turn in some of the currency markets, and it is a matter of timing as opposed to what the path

ultimately will be. tom: what is your new research with your team on jerome powell's balance sheet? was there something new to qt after the events yesterday? ira: no, it was a still very much as we expected. they are going to let the balance sheet run off under the current system, probably through the end of the year, reevaluate maybe in december, definitely in january, then decide on what they're going to do in the future. i don't think they're going to increase the treasury runoff, what i do think that it is possible they can decide at some point to start selling mortgage backed securities. that is not eminent. that is probably not anything you were going to see before february or march, it is something to keep on your radar. if the federal reserve wants to run off its portfolio faster that is probably the only realistic way they are going to do that. tom: an experiment in progress, to say the least. ira jersey, a clinic on

liquidity. next time we will do solvency. it is so much. if you want to flunk a fixed test, try to define solvency versus liquidity. adults like ira can do it. me, not so much. let's do data check. the vix at 27.29. spiked yesterday. abramowitz moved to market forward 27.29 on the vix. the dow up. did not make 29,000. we do have a standard & poor's 500 for jon ferro. futures up 11. stay with us. this is bloomberg. ♪

>> i've been told the show will not start until i say good morning, good morning. so, good morning, good morning. right now, looking at a market with directions on the way. the countdown to the open starts right now. announcer: everything you need to get start best get started for -- get set for the start of u.s. trading. ♪ lisa: let's begin with the big issue. another hawkish message. >>