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>> welcome. >> we are counting down to the major market openings in asia. >> the top stories this hour, the bank of england seeing a selloff. >> recession fears continue to weigh on sentiments. the worst might be yet to come. >> more restrictive policies are needed to tame inflation. we speak to her life in just a moment. we are seeing an upside from u.s. futures.

not surprising given the comments. we have the dollar index strengthening. they are continuing the longest losing streak since april. they talked about really stabilizing the market. we are watching the market in china. we are watching inflation numbers. the index falling for a second session. we have seen a little bit more stability in u.k. assets. the bank of england being forced to extend these measures. in order to stabilize the market.

perhaps the boe would have to push back. they are pledging the quantitative easing will end this friday. global investors are very anxious about where this is going. >> talking about the u.k. assets in more detail. even with that level of intervention we are seeing the 30 year debt rising. this is a story still of the government. the shock of that deliberate tax cut package. the level of uncertainty we still have around the details. that could leave permanent scars on the market. the boe is really trying to calm the market. they said the emergency buying will end on friday.

we saw that reflected. new zealand has come online. we will be risk on throughout the session. not much to improve the picture. it is not just the boe coming into play. the imf warning that the worst is yet to come. the economy is going through a windshield. that is a very strong,. >> we keep talking about what we compare this to? some people say it is without precedent.

take a listen to what he had to say about china. >> i think the longer-term picture in china is still bright. i know the people and the culture. they have major issues now. >> perhaps we are seeing some economic data backing with the chinese government is trying to do in terms of supporting the economy. that was a key issue. you want to extend credit, but who is going to take it? covid zero policies are still in place. we see economic warnings and forecasts. the imf is cutting its forecast

for global growth next year. there is a 25% probability that growth will slow to less than 2% . the imf saying so many people will file recession. there is the risk of policy miscalculations. the imf sees greater risk from central banks doing too little rather than too much. they are still forecasting that inflation will remain high. we are talking about 8.8%. only slowing to 6.5% next year. and 4.1% by 2024. for more on this, let's go to our world economics policy editor. >> i want to welcome tv viewers and radio listeners from around the world. the fed president said a more

restrictive monetary policy is needed to cool things down. she is joining me now in the studio. great to have you here. i want to start with what you said today market participants are sure that the strong labor market is not cooling down. you said we cannot let inflation remain high. we need to keep it down quickly. >> i just want to make sure that we have all the data before i go into that meeting and hear what my colleagues are saying around the table. the real issue is we need to do more. we are not seeing inflation move back down. we need to see that. leaving inflation where it is,

and getting into the psyche of households. that has long-term negative connotations for the economy. we know it is time to continue on and persevere. we know we will have to keep it there for a time until we see inflation beginning to come back down. we want to make sure it is on a sustainable path. we are very much aligned in terms of where we think the policy needs to get to. >> after three or basis points of rate hikes, it seems like the terminal rate does not look like it will in that having to be higher than you thought. do you have any confidence now in that rate? >> we have to wait until we see

how the economy evolves. this is a process we will be going through. we want to get inflation on that task. labor markets continue to be very strong. we have seen some moderation. now we will calibrate going forward. right now the rate is just approaching neutral. we really need to get it above neutral for a time. we put out the dot plots that give our best estimate at the moment what the appropriate policy is. how quickly a supply picking up? that will be the job as we go forward in this challenging time. >> the idea is to move quickly.

and then see how that is affecting inflation. does this mean that once you get to that point when it is neutral that you are going to pause with the rate well below the rate of inflation? >> i think we will see inflation come down next year. when i'm thinking about how far above neutral rate we need to go, i do think we will have to be in restrictive territory. as inflation comes down, we were becoming more restrictive. i think the appropriate path is we continue to raise rates more. we get it up to that level. we are more positive. then we wait and assess the data coming in.

not just the backward looking data but the information we are getting from the street. real consumers and real households. how they are thinking about the economy. >> 40 basis points. you have gotten to a negative rate. >> we look at the underlying measures in terms of the median

cpi inflation, the trending and cpi. those will give us the core measures. they will give us an idea where patient is going. the gap is reflective of the wait for the components. but they are all telling us right now that inflation is high. it is likely to remain high for some time. >> you have to get the funds rate at least in neutral is not positive territory before you can say we can stop now and look around and see the impact on the economy. >> my evaluation is that it is appropriate policy. we will need to have a positive rate. we need to keep going a little bit so we get to that point. at that point you assess conditions. it will really be dependent on how that abates at how quickly

the dates. that will guide our policy going forward. we still have to bring rates up. we have not gone into that. >> another topic was this question of the market. you said you see no evidence of that functioning. a lot of participants say they do. if this worsens and it looks like it is starting to grow, would you consider slowing down the ballot sheet runoff. >> we have to be always looking at whether there is an orderly market we take appropriate

actions. right now there are stresses on a lot of financial markets. as we are raising rates, it is very appropriate. we know there could be fragility and some of the markets. >> is slowing down the balance sheet runoff a tool? >> it depends on where the fragility would come from. we do not want to presuppose where it would happen. in order to be able to assess the appropriate action. right now markets are functioning. we responded to some things happening in the you a. markets are working. people are able to trade. we do not have a market function issue in the current time.

>> would this be an instance where maybe you would consider giving a little bit more support to the mortgage market. it has borne a lot of the bronze about. and actually slowing down the runoff in the balance sheets. >> we set out our plan for the balance sheets well in advance of the plan. we are letting it run off. mortgages are longer-term. they are going to runoff much more slowly than the treasuries. we want to have a plan. the markets have understood the plan.

we are going to try to get our rate calibrated to make sure that asian is on a downward path. i don't see any need at the moment to adjust that. there is a lot of benefit to leaving that man in ways. >> i want to look at it globally. the dollar is such a factor right now in the local market. strong dollar is a threat to other economies. what does it take for other countries problems to become spillover into the u.s.? >> when we are setting our policy, our land is maximum employment. but we do not operate in a vacuum. we are part of a global economy rate when we change our policy

or other countries change their policy, there can be in effect on the u.s. economy. the dollar affects the terms of trade. our lens has to be the domestic economy. but we have to realize that what happens abroad can affect the u.s. economy. >> we know it can. the imf is very concerned about the global economy. but we do not hear that from the fed. we don't hear any affect during. i know you are concerned about the global economy. but at what point are you concerned that it is maybe something you would have to adjust? >> i would frame it differently. i would say what happens abroad can affect u.s. economy.

see output and employment and inflation moving differently from what can happen, then we would maybe have to adjust our policy. the lens is what is the effect on macro employment? >> you are saying you would have to see something so dramatic that it is really affecting the bond markets or there is some kind of people in emerging markets. is that something that that would finally have to look at? >> it does affect our policy in the sense that it affects our outlook for the economy. growth of fraud is falling. what happens abroad can affect our economy. we have to be very attuned to that. when that happens, that is the

lens we look at. we saw a market dysfunction in the beginning of the pandemic. we address that was about market functioning. >> before i let you go i have to ask you the big question, what were wrong at the fed? inflation got way out of control. this was the last thing any of you wanted to happen. what would you say went wrong? >> i think we thought that the supply chain issues would be resolved sooner than they were. many firms we talked to expect of the same thing. that was part of the issue. i think because usually when there is a supply shock, the

appropriate thing to do is not to react to it. transitory inflation was away of saying we had taken the supply side. it was also supported by extraordinary levels of monetary policy. that created a demand imbalance. that was something we did not see until later. >> you could do it over, what would you do differently? >> we would've raised interest rates sooner and we would've stopped buying bonds sooner. >> thank you for joining me today. i know you have a very busy day. we really appreciate it. that was the cleveland fed president. >> we do have an alert on the bloomberg right now. intel is planning a major reduction in headcount.

the layoffs will be announced as early as this month. the company planning to make the move around the same time as its third curve quarter -- third quarter earnings report. we have learned that the cuts will be companywide but they will focus on sales and marketing. they could see a 20% reduction. intel making thousands of cuts. take a look at u.s. markets right now. we are seeing futures rebounded slightly in the asian session. we had a choppy trading session. the treasury yields rally. we have two more to come.

this is numbered. ♪

♪ >> let's take a look at the moves we are seeing in australia and new zealand. standing gains.

government bonds are extending that job up. at least 2.5% compared to the recent cash trade targets. she is giving a speech here. added investment conference in sydney. really seeking more clarity. we have seen that same estimate. we are seeing a market reaction at the moment. we saw huge moves in bonds.

get more from our equities reporter. what are we seeing when it comes to markets? >> a lot of her statements echoed what we have heard from others recently. they are going to remain data pendant. inflation still remains pretty elevated in their eyes. we will get the ppi numbers. even once the fed gets to a restrictive type of level, they will stay there for some time. there will not be had to bid for the broader global market. that is the most crucial thing.

it is expected to fall to about 4/10 of a percent. tomorrow we will actually get those ppi numbers. we will see what that means for the corporate market. investors should keep their eyes on that for tomorrow. >> you mentioned the inflation numbers. there is -5% downside. >> it happened again today. goldman sachs, you can find that in the terminal. earlier in the u.s. session we saw markets on the rebound.

that was the lowest level this year with a bell for the s&p 500. you could see some of that rally was actually because of support going up. a lot of traders got burned. the s&p 500 fell more than 4% that day. they were basically trying to change up their position. >> does august inflation numbers did not sit well with investors. we have plenty more to come. this is bloomberg. ♪

♪ >> the bank of england

governor has warned fund managers that they have until the end of this week. he says the temporary intervention will in on friday despite calls to extend the program. >> we will be out by the end of this week. you have three days left. part of the essence of financial stability is temporary. >> the u.k. is set to declare china and official threat. she released a strategic review of the policy.

she says china's leadership is using technology. beijing ramps up investments. aggregate financing came to about ford $19 billion. both figures were higher than expected. they are supporting the faltering economy. nasa has successfully changed the path of an asteroid. the probe slammed into the asteroid two weeks ago to determine whether its trajectory could be altered. the asteroid moved far more than anticipated.

global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. >> the imf is warning of a worsening outlook for the global economy. we knew that leaders are concerned about this. what are the types of growth scenarios they are looking at right now? >> the message they delivered in the world economic outlook this morning is that the worst is yet to come for the world economy. that is a bit of a shock for an economy that has been through the roller coaster it has been on in the last couple of years.

the message from the imf is that global growth is in a precarious place. about a third of the world's economy is expected to contract in 2023. for hundreds of millions of people, it will feel like a recession because of prices and inflation and the higher cost of living. >> is that why it seems like the imf is putting more emphasis on the risk of doing too little? >> absolutely. the message here is that while there may be a risk to the economy from tightening to aggressively, the greater risk is tightening not enough. and that central-bank credibility is put at risk. inflation will remain high and we will take or drastic measures down the line to eventually gain

control of the -- inflation. >> we also see the imf considering was going on in the u.k.. what, warning a rehearing from the boe? >> the message we have seen from the last couple of days for the u.k. as well as for the world is that monetary policy and fiscal policy needs to be working together. he said you cannot have two different drivers at the wheel. you have to have both of these forces working in tandem in order to guide the ship of the national economy.

>> the long-term investment picture remains bright. he talked about the challenges and the investment prospects. >> there is a lot of uncertainty and a lot of problem's. some of them could be temporary. some of them could be long-term. there is a debt crisis that in my opinion has been allowed to go too far into the bones of the economy. it is affecting financial institutions. real estate is 25% of their economy.

there is a question of are they still in favor of free enterprise and the market system? there is a lot of confusion around that. they don't want to mess with the system very much. they want to break up these large companies. demographics is particularly important in china. as well as the one child policy. the family takes care of the family. the tradition is that the children take care of the adults

in old age. they do not have a pension system. with the one child policy, the husband-and-wife have older parents that they have to take care of. so you have a number of these problems. you have a climate problem and a water problem in china. china has a lot of those problems. the real question, we all can have problems. but the real question is where is that? we will learn more about that based on who is appointed to what jobs. if they continue to do the things that raise activity and so on, we will learn more. as far as investment in china, if you take certain industries,

you have to have a certain amount in china. i think the longer-term picture in china is still good. i know the people and the culture. but they have major issues now. >> there is a punch of fresh pressure. they face a capital shortfall. the u.s. senate and justice department is looking to if they are helping people of they taxes. >> this is not the first time they have faced this issue. the bank admitted wrongdoing.

they admitted to tackling a going forward. the u.s. justice department and a senate worry. the justice department is checking into if the bank helped those with south american passports. they claimed hundreds of millions of dollars. bankers blew the whistle. they were actually down in the latest session. european stocks closed higher. the bank did admit helping certain clients evade taxes. they pledged going forward that they would report any and all attempts. they said they put in major structures so this kind of thing would not happen.

they are cooperating fully with authorities. >> what about the potential shortfall? what are we hearing about the money crunch >> there has been a big pile of problems for credit suisse. analysts are questioning if the bank needs to do a capital raise. how much it needs to shore up. we are hearing from goldman that it could do that in 2024. they could be $4 billion in the hole after doing a major restructuring. the new ceo planning to come out with a restructuring plan later this month. they said they need $9 billion to get on the right path in the coming years.

there could be some radical changes like spinning off some units. the stock did rise in the latest session. raising capital is one option. they prefer not to do that. the share prices now at a record low. they have had a lot of volatility they have faced. they want to reach stable ground . >> a former trader at hsbc saying he was fired. he was a director in 2021. he said junior traders were told

to always prioritize the bank. he heard one trader saying he was buying u.s. securities in front of a client. they said they take the claim seriously. >> coming up, we are reporting live from the australia and new zealand investment conference. a talk with the ceo is next. this is bloomberg. ♪

>> the cleveland fed president just minutes ago. she set the fed got off to a slow start inviting inflation. let's get into the details. he also got into value investing and where that is going.

>> that is right. it was quite a wide-ranging conversation. he did not really mince his words. another high profile criticism of the fed policy. there are inflation problems in the economy. as a result that created a big asset bubble. it was around the timing of jay powell's reappointment as fed chair. he did not recognize the issues around hi cdi. at least one senator did oppose's reappointment on the basis that he was being slow to act. he said there is an enormous number of companies miss value

today. he said that is because of the changes in the industry dynamics. he said they are inexperienced or otherwise they are moving completely out of the market. i don't know that it ever comes back. there have been serious changes to the market structure. pretty much all of our investors have been put out of that. >> she spoke with us as well. she says the fund has been a poster child for that. >> that is right. a pretty interesting topic for this interview.

she vented her frustration this weekend in an open letter to the fed. it was criticizing whether they are making policy missteps here. in terms of what we see in the war in ukraine and other factors. they are really looking for safety in passing the benchmark. this is what she told us about it. we have so many more problems now. the invasion of ukraine. there are very short-term time horizons.

algorithms are dominating the market. >> let's take a look at how asian futures are trading at the moment. they are under pressure right now. this after the aussie experience. that is really weighing on investor sentiment. futures are pointing slightly higher. we have south korean and japanese stocks playing catch-up after a long weekend. really now they are trading at a higher level. there could potentially be more intervention coming from authorities there. >> the treasurer of australia says he expects to avoid a recession in the country.

domestic conditions will shield the economy from international risk. business conditions are continuing to strengthen. we keep talking about this. he said he expects a comparison to the 1970's. when you speak to clients incorporate, what is the mood? >> the mood here in australia is still pretty good. yes there is the issue of confidence. you can see clientele becoming more defensive. they are looking for businesses that have pricing power. foreign investors are still interested in australia. perhaps that is what he was referring to.

pressure on wages have been quite contained. in terms of trade, australia is pretty set. >> it sounds like you are confident. what about the rest of the world? >> obviously it is an unprecedented time. there are a number of variables. i think central banks have been very determined. they have announced that they are willing to do that for market strength. i think the message is clear. >> your business with the global strategic rebound, what areas of

expansion are you focusing on in australia? >> you mentioned the divestment of our consumer business. i think now we are focusing on the institution of investors. we see ourselves as a provider of infrastructure. for long-term businesses. those are areas we are invested in massively. >> what gives you a competitive edge? >> we have a range of products and services.

as super funds go into those investments. we have services. we have businesses that we can deploy. we have transactions in those markets. i think we are in a great position to cover all of that. >> obviously a lot of your big clients are here. they have to transition into financing. how will that work? >> you mentioned a transition. it is about helping our clients transition.

within the climate change conundrum. we are investing and picking up specific advisory groups. even in australia, we had him at our conference talking about replacement energysolutions. investment is going into that area in australia. >> really great having you on with us. we do have lots more to come. this is bloomberg. ♪

>> take a look at how currencies are trading at the moment. we are seeing that haven move. the aussie holding steady. we are seeing the kiwi with a little bit of an upside. even the british pound is gaining a little bit. we will hear exclusively from the ceo. this is bloomberg. ♪

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